The Power of SCIENCE AND NATURE - Smartfish Nutrition€¦ · Smartfish develops nutritional products. Our omega-3-enhanced nutritional drinks and emulsions help the body absorb and

ANNUAL REPORT 2019

The Power of SCIENCE AND NATURE

Content

ABOUT SMARTFISH03. Welcome to Smartfish

04. Smartfish Core Technology

06. Words from the CEO

07. The Year in Brief

08. Our Purpose,Vision,Mission and Strategies

10. Medical Nutrition - Market

12. Smartfish Medical Nutrition – Therapeutic Areas

14. Consumer Health - Market

16. Smartfish Consumer Health - Applications

18. Clinical Research & Patents

20. Sustainability

21. Organisation & Operations

FINANCIAL INFORMATION22. The board

23. The management

24. Directors’ Report

26. Consolidated Statement of Comprehensive Income

27. Consolidated Statement of Financial Position

28. Consolidated Statement of Changes in Equity

29. Consolidated Statement of Cash Flow

30. Notes

48. Parent Company Statement of Comprehensive Income

49. Parent Company Statement of Financial Position

50. Parent Company Statement of Changes in Equity

51. Parent Company Statement of Cash Flow

52. Notes

57. Independent Auditor’s Report

2 Smartfish Annual Report 2019

Welcome to Smartfish

Smartfish – the Power of Science

and NatureThrough dedication to research and development of advanced nutritionsolutions,Smartfishwantstoenableyoutobethebestyoucanbe,whetheryouareapatientfightingalife-threatening

diseaseoraprofessionalathletepursuingyourdreams.

Smartfish develops nutritional products. Our omega-3 -enhanced nutritional drinks and emulsions help the body absorb and use essential nutrients. Smartfish’s emulsion technology protects the omega-3 enabling creation of tasty, smoothie-like products. All our products are based on fish oil sourced from Norway.

Smartfish’s primary focus is medical nutrition, which helps malnourished patients to improve their nutritional status. Other product areas are ensuring:

• Sports nutrition – for both professional and amateur athletes. • Healthygrowing – for children to obtain an optimal nutritional foundation for

healthy growing. • Healthyageing– for the elderly population seeking an active and healthy life

while ageing. • Metabolichealth – for people with or at risk of metabolic syndrome.

All our products are based on scientific evidence and our novel technology plat-form. Smartfish actively works to limit its environmental impact through sustain-able use of resources, production, packaging and transport.

Smartfish Annual Report 2019 3


SmartfishCoreTechnology

Smartfish CoreTechnology


TheSmartfishtechnologyplatform delivers omega-3 enriched nutri-tional drinks with superior taste and health benefits. Our technology is

patented and supported by rigorous science.

The fundamental characteristics of our fruit-based emulsion tech-nology are the extraordinary ability to distribute and integrate vital

health-promoting ingredients in the human body and the potentiating biological and clinical effect of the nutrients when the individual nutri-

ents are assembled in the Smartfish emulsion.

Medical Nutrition

The Smartfish medical nutrition products help people with cancer or COPD with pre-cachexia or cachexia to improve their nutritional status.

OUR PRODUCTS

THE SMARTFISH FORMULA

Smartfish has managed to create a superior formula for patients and healthy individuals in need of nutrients. Our drinks contain a high dose of ultra-fresh, oxidation-protected, pure fish oil. The combination of omega-3, with additional condition specific ingredients such as whey protein, vitamin D, and antioxidant-rich juice create one palatable nutrition drink. Some of the benefits of the ingredients are:

• Thebeneficial effects of omega-3 are well-documented. Its anti-in-flammatory properties together with anti- catabolic effects contribute to its efficacy in patients with cachexia. Published data on omega-3 show effects on various cancers, metabolic diseases and COPD.

• Proteins are the building blocks in muscle anabolism and are therefo-re important in any condition where muscle wasting is a part of the disease.

• Vitamin D and antioxidants have shown to have anti-inflammatory properties, also in cases of COPD and other inflam-matory diseases.


SmartfishCoreTechnology


Easytolike – tasty, stable formulation with fresh taste of fruits and berries

Evidence-based – the health benefits are

supported by rigorous science

High dose of ultra-fresh, oxidation- protected, pure fish oil

Consumer Health

Our nutritional solutions and emulsions may improve quality of life, metabolism, brain and muscle function to people in need of improved nutritional intake.

SMARTFISH R&D ACTIVITY

39Publications,abstracts & pos-ters presented at scientific confe-rences

37Clinical trialsin total

13Ongoing Clinical trials

8Unique product formulations currently in pilot markets

32Patents 9 Patent groups

THE ADVANTAGES OF SMARTFISH

EasytolikeThe Smartfish juice-based drinks have a excellent taste and smoothie-like texture. The drinks are based on a tasty, stable formulation with fresh taste of fruits and berries. Our emulsions protect the important fatty acids from the fish oil from oxidation and create a base for highly accepted drinks. We altogether avoid artificial sweeteners, artificial colours and preservatives.

Evidence-basedOur products are clinically tested, and all health benefit claims for Smartfish pro-ducts are supported by rigorous science. Positive effects on cachexia have been demonstrated in randomized, double-blin-ded clinical trials of patients with Cancer and Chronic Obstructive Pulmonary Disease (COPD).

Highdoseofultra-fresh,oxidation-protected,purefishoilOur patented technology secures a high dose, superior distribution and integra-tion of omega-3 in the body and creates health benefits. The synergistic effects of the formulation make the ingredients work better together and contribute to impro-ved efficacy.


Words from the CEO

Ramping up for GlobalRollout

AddressingagrowingmarketAs prosperity and life expectancy are in-creasing across the world, the burden of chronic illness such as cancer and lung diseases is also rapidly increasing. At the same time, the growing awareness of and interest in nutritional solutions to health issues drive demand for medical nutrition solutions for these chronic di-seases. In 2019 ASPEN (American Socie-ty for Parenteral and Enteral Nutrition) conducted a Value Project with the con-clusion that nutrition has a beneficial im-pact on health care costs. We have good reasons to believe that this will further accelerate the growth of evidence-based nutrition solutions in the future. Smart-fish is well positioned to capitalize on this growth.

There is also a growing interest among healthy people to sustain their wellbeing and among athletes to en-hance their performance through effec-tive nutritional solutions guaranteed free from banned substances. Smartfish products and technology offer solutions to these unmet needs as well.

Our purpose: “Enabling you to be the best you can be, whether you are a pa-

tient fighting a life-threatening disease or a professional athlete pursuing your dreams” is more relevant than ever.

A strong foundation for future growthOur patented emulsion technology platform and omega-3-enhanced nutri-tional drinks are at the core of our bu-siness. We have a unique combination of great-tasting products supported by intellectual property and patents. Our products are documented in preclini-cal- and clinical studies. Our nutrition products have a demonstrated ability to distribute and integrate vital health promoting ingredients into the human body. From its inception in 2001, Smart-fish technology has attracted interest from the research community. Studies validating our technology have been performed with the involvement of more than 50 universities and hospital institutions. Taken together with our clinical studies and patents, this builds a strong proprietary scientific founda-tion which we will continue to develop.

With the strategic partnership agreements with B. Braun and Jacobson Pharma in place, Smartfish has built a robust commercial platform for future growth. Thanks to a great collaboration with our partners, our product formulas and regulatory dossiers were up-dated to meet local require-ments in 2019, and we are now ready for roll-out.

Roll-outofourmedicalnutritionandconsumer health portfolios in 2020 With two strong commercial agreements in place and finetuned product formula-tions supported by regulatory dossiers we are ready to start the international expan-sion of our medical nutrition and consum-er health portfolios. Local regulatory ap-provals for Remune were secured by our partner B. Braun in 6 countries by the end of the year clearing the path for planned launch activities. Progress has also been made within consumer health where Ja-cobson Pharma initiated a test market for Reflect in HK. Recharge Whey Protein (sports recovery) and Recharge Fuel (in-creased glycogen storage) were shipped for the launch in Taiwan serving as a step-ping-stone for our biggest planned con-sumer health launch in China.

Expanding international cooperation During 2019 Smartfish has also initiated a new development cooperation with a major global nutrition player and ini-tiated discussions with others which lay the ground for long-term growth beyond our current focus areas. This validates Smartfish’s vision: Become the


Words from the CEO

preferred go-to partner for advanced evidenced-based nutrition solution.

Validation of our cachexia products We are very pleased with the highly en-couraging results of our randomized, double-blinded, controlled pilot trial in patients with non-small-cell lung cancer (NSCLC) which was published in Nu-trition and Cancer in July 2019 and then subsequently presented at the annual congress for the European Society for Parenteral and Enteral Nutrition (ESPEN) in Krakow in September 2019. Positive results from the first Smartfish clinical trial for COPD showed important im-provements in quality of life. The results were published in 2018 in the Journal of Cachexia, Sarcopenia and Muscle (JCSM). The publication was one of the journal s most downloaded article in 2018.

New share issue In parallel to the operational activities, the company has successfully secured a private placement. Jacobson Phar-ma, Smartfish’s strategic partner for the consumer health business in Greater Chi-na, took a leading share of the private pla-


2019THE YEAR IN BRIEFMedicalNutritionreadyforglobalroll-out• Cancerstudy published: The second of

the company’s two self-financed clini-cal trials, which focuses on lung cancer patients showing unwanted weight loss/cachexia, reported good results was published in July in the Journal of Nutrition and Cancer.

• Regulatory Master Dossier for global Remune roll-out completed and prod-uct formula adjusted to meet multiple local market needs securing production efficiencies.

• B. Braun preparations for country roll-out well under way. Participation with B.Braun at ESPEN (European Society for Parenteral and Enteral Nutrition ) in Krakow, as the starting point for B.Brauns launch of our product Remune TM.

cement and as such validates the plans for Smartfish’s expansion in the region.

Building the team In order to deliver on our ambitious growth objectives, we are in the process of strengthening our team. In January 2019, PhD Johan Olson joined Smartfish as Manager Regulatory Affairs, Quality Assurance/Quality Control and Product Development. Johan brings with him an extensive experience and deep expe-rience in regulatory, QA/QC as well as product development. Together with his strong functional expertise and can-do attitude, Johan is a perfect fit for Smart-fish’s growth ambitions. In April 2019 Kamilla Hassander joined the company as CFO. Kamilla has a unique combina-tion of broad financial experience, com-mercial instinct and strong leadership skills. Her experience from small start-ups to big blue-chip companies is a per-fect fit for the next phase of Smartfish development. On September 1st, Mozh-gan Dorkhan joined Smartfish as Chief Scientific Officer. Mozhgan comes from a position as Senior Global Medical Di-rector at Novo Nordisk AS and has pre-

viously worked as Medical Advisor at Eli Lilly. Mozhgan also brings with her ex-perience as a Specialist Physician at Skå-ne University Hospital, Malmö Sweden. She holds a PhD and M.D from Lund University, Sweden where she is Associ-ate Professor. Mozhgan is also the author or co-author of close to 30 publications.

Dedication to succeed I would like to thank everyone who has contributed to the development of Smartfish. This includes our highly-skil-led, experienced and dedicated staff, our scientific partners, and our professional partners in manufacturing, marketing and distribution. I would also like to thank our shareholders for their patien-ce and support throughout the years. Their commitment and backing are crucial to our success. Finally, I would like to stress the value of our Board of Directors and Advisory Board. They both consist of highly competent people with a drive to guide Smartfish in the right direction, helping to open doors and build relationships that would not be possible otherwise.

Geir HarstadCEO

Major Progress for Consumer Health • Launch preparations well under

way through Jacobson Pharma in greater China. Launch includes Reflect, Recharge Whey Protein and Recharge Fuel.

• Development agreement with global nutrition player – validates Smartfish’s vision: Become the preferred go-to partner for advanced evidenced-based nutrition solutions.

Strengthenedcompany• Strengthened Management Team in

place with new CFO, CSO and Head of regulatory, product development and QA.

• New share issue: The company has successfully secured new equity of NOK 80 million via private placement and the conversion of two convertible loans.

Events after the end of thefinancialyear• InJanuary2020 the Corona virus

started spreading. Smartfish is closely monitoring the situation and has taken measures to handle the situation as well as possible. If the pandemic lasts for a prolonged period with corresponding impact of the world economy, it will impact the Company negatively.

• In April 2020 warrants were executed and Smartfish received NOK 12.9 million in new equity.

Purpose, Vision, Mission & Strategies

PURPOSE

Enabling you to be the best you can be, whether you are a patient fighting a life-

threatening disease or a professional athlete pursuing your dreams

OUR VISION

Become the preferred go-to partner for advanced evidence-based nutrition solutions

MISSION

To develop great tasting functional emulsions providing superior delivery of essential fatty

acids and nutrients

Our Purpose,Vision, Mission and Strategies

UTKAST


STRATEGIES Smartfish is dedicated to research and the development of advanced nutrition solutions. Our strategy is to grow glo-bally with a small, effective and agile organisation in strategic collaborations with leading R&D, manufacturing and distribution partners.

R&D, IP and product formulation and development Smartfish focuses on the research and de-velopment of our products, including the discovery, pre-clinical and clinical work and active management of intellectual property rights. We own our technology platform, which is protected by patents and backed by clinical studies that de-monstrate the efficacy of our products.

Validation Smartfish is actively engaged in the va-lidation part of the process – the clinical trials, the master dossier, regulatory compliance and quality documenta-tion. Validation has been performed to-gether with universities and institutions through scientific trials, where Smart-fish has provided the nutrition drinks. Over the years, 37 clinical studies have been conducted involving Smartfish products. (Read more about this under ‘Clinical research and patents’)

Manufacturing Our manufacturing is managed by li-censed, leading food-producing part-ners in close cooperation with Smart-fish. Smartfish keeps a tight control of

Our Purpose,Vision, Mission and Strategies

UTKAST

SmartfishCoreFocus

R&D VALIDATION MANUFACT-URING

SALES & MARKETING

BUSINESS MODELSmartfish develops nu-trition solutions based on our unique and patented emulsion technology. We have an international network of partners in research, production and distribution of our products, which is key to our success and future growth. Commercial Partner Focus

key ingredient sourcing and product quality, as well as the structure, quality and design of the packaging.

MarketingandsalesSmartfish products are sold and marke-ted by leading distribution partners in their respective fields. With the global, regional and local presence of our part-ners, we can leverage our position and increase the speed of transition of our products from development to market.

Business Model Smartfish develops nutrition solutions based on our unique and patented emulsion technology. We have an international network of part-ners in research, production and distri-bution of our products, which is key to our success and future growth.


MedicalNutrition-Market

TheMarketfor Medical Nutrition

Themedicalnutritionfieldanditsevidence-based approach to nutrition development is at the crossroads of theconsumerhealthandpharmaindustries.Anumberof

globaltrendsdriveindustrygrowth.

Cachexiaoccursinapproximately50%ofallcancerpatients.Uptakeofnutritionisessentialtothesuccessof

treatment.


MedicalNutrition-Market

“Medical nutrition therapy” (MNT) is the use of specific nutrition services for the nutritional management of pa-tients suffering from disease-related malnutrition, illness, injury or condi-tion. It involves the assessment of the nutritional status of the patient and the relevant nutritional intervention treat-ment, which includes nutrition therapy, counselling, and the use of specialized nutrition supplements.

The global medical nutrition industry is a €10-billion industry. As the various positive effects of medical nutrition so-lutions are becoming more evident, the industry is developing fast. Also, there is a strong trend towards tailor made nutritional solutions. As a result, the market for medical nutrition shows an annual growth rate of 6.4%.*

There are several other underlying driv-ing forces behind the strong growth:

• aglobally ageing population • rising awareness about health and

nutrition • the rising incidence of chronic dise-

ases requiring nutritional support • investment in R&D and an increa-

sing preference for clinical evidence • strong growth in emerging markets • opportunity for reimbursement

in western countries when strong clinical evidence is available

• the tradition and willingness in the Asian markets to pay for such products out of pocket.

SmartfishtargetscachexiapatientsSmartfish’s RemuneTM is a Food for Spe-cial Medical Purposes (FSMP) specifical-ly formulated to address the underlying mechanism of action in cachexia. We have an evidence-based strategy cur-rently focusing on the unmet medical needs of pre-cachexia and cachexia indi-cations in oncology and COPD.

Malnutrition in chronic diseases,

such as COPD and cancer, strongly con-tributes to increased health care costs, partly because of the rapid increase in chronic lifestyle diseases and in age- related diseases world-wide. Many hospitalised patients are malnourished. Hence, governments promote and/or reimburse medical nutrition to reduce complications and hospital bedtime.

Smartfish has entered into a global distribution agreement with B. Braun for Remune to Cancer Cachexia patients. B.Braun is a privately owned German company with 64,600 employees in sub-sidiaries in 60+ countries and presence in many more. B. Braun is among the world leaders in infusions liquids, hospital supply for intensive care units and med-ical nutrition delivered parenterally and through tube feeding. Remune is planned rolled out in multiple countries in Europe, Asia, Latin America and Oceania from 2020, and is designated to be a key prod-uct in the company’s growth in the seg-ment of oral nutrition supplements.

Cancer Cachexia Cachexia occurs in approximately 30–50% of all cancer patients, depending on type and stage (up to 86% of advanced cancer patients), creating approximately a three million annual incident patient population in the US, Europe, and Japan. No effective disease- modifying thera-pies have been developed to prevent or hamper the progression of cachexia.

COPD CachexiaWorldwide, more than 210 million people suffer from COPD, of which an estimated 5–15% also suffer from cachexia. There is a strong need for alternative nutritional products that preserve these patients’ functions (en-durance, strength etc.), body weight and muscle mass as pulmonologists currently lack tailored solutions for treating cachexia.

* Source: Transparency Market Research “Global Medical Nutrition Market, 2018”.

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Smartfish is part of the medical nutrition industry. Our validated nutrition solutions target cancer and COPD-related pre- cachexia and cachexia.

Pharma

Medical Nutrition

Consumer Health

Food

MEDICAL NUTRITION INDUSTRY


Smartfish Medical Nutrition -TherapeuticAreas

The Smartfish medical nutrition products target cancer or COPD patients with pre-cachexia or cachexia to improve their nutritional status. Our aim is that RemuneTM becomes the nutrition product of choice for these patients.

Nutritional management of cachexia with food alone has until now shown little effect. With clinical data indicat-ing that Smartfish formulations could positively influence important under-lying mechanisms of cachexia such as insulin resistance, inflammation and anorexia, we decided to invest in devel-oping Remune, a product specifically for management of cachexia.

Medical nutrition for patients with CachexiaandPre-CachexiaSmartfish medical nutrition products improve the situation for patients with pre-cachexia or cachexia by increasing the uptake of nutrition, hampering the progression of pre-cachexia or cachexia, or alleviating symptoms.

Our product Remune is a high qual-ity oral nutritional supplement, with carefully selected ingredients to target the underlying mechanisms of cachex-ia; anorexia, inflammation and insu-lin resistance. The key ingredients of Remune are the marine omega-3 fatty acids, EPA and DHA, vitamin D and whey protein.

The marine omega-3 fatty acids EPA and DHA have anti- inflammatory properties and can positively affect the inflammation associated with can-cer and cachexia. EPA and DHA influ-ence muscle protein synthesis and a weight-retaining effect has been shown in cancer and cachexia patients. This

leads to beneficial effects on the weight loss and muscle deterioration associat-ed with cachexia. In cancer patients, the marine fatty acids have shown anti-tu-mor properties and beneficial effects on overall treatment outcome.

Cancer Cachexia Medical nutrition plays an important role in the nutritional management of cancer patients as it both maintains the health as well as secures continuity in the cancer treatment. Also, the abili-ty to enhance a patient’s tolerability of chemotherapy may increase the effective ness of the therapy itself.

Smartfish’s Remune addresses these troublesome and underserved compli-cations of cancer. In 2019, the results of Smartfish study1 on Remune’s effect in cancer patients with pre-cachexia or cachexia were published, demonstrating:

• Remune is safe and well tolerated in patients with non-small-cell lung can-cer receiving first-line chemotherapy

• Adverse events were less and reported in fewer patients (compared to control group)

• Positive trends in inflammatory markers

• Dailywalking distance showed numerical improvement

• Handgrip strength showed numeri-cal improvement

Interestingly, exploratory analysis of this pilot trial data demonstrated sig-nificant improvement in survival and function measures (in press). These trends for improved clinical outcomes warrant further investigation.

COPD Cachexia With its clinical evidence Smartfish Remune offers a valid option for nutri-tional management of COPD patients with cachexia. The study2 conducted on Smartfish Remune in COPD patients with cachexia during 2017, generated the following results:

• Remune is safe and well tolerated in patients with COPD

• 6-minutewalkingtest showed significant improvement in dyspnea and fatigue

• Significantimprovement in activity related Quality of Life (QoL)

• Improvedblood pressure and meta-bolic markers

• Positive trends in inflammatory markers

1. Calder, P.C., et al., Targeted medical nutrition for cachexia in chronic obstructive pulmonary disease: a randomized, controlled trial. J Cachexia Sarcopenia Muscle, 2018. 9(1): p. 28-40.

2. Laviano, A., et al., Safety and Tolerability of Targeted Medical Nutrition for Cachexia in Non-Small-Cell Lung Cancer: A Randomized, Double-Blind, Controlled Pilot Trial. Nutr Cancer, 2019: p. 1-12.


MedicalNutrition-TherapeuticAreas

Cachexia treatment guidelines

Thefirstadvice to fight cachexia is to eat normal, healthy food. If this does not help, standard oral nutritional support (ONS) – often milk-like – is normally recom-mended. However, many cancer patients find milk-like products difficult to drink, and compliance is a problem.

The next step to help the patient gain weight and reverse the cachexia is “Targeted Oral Nutri-tional Support” (e.g. Smartfish’s products). If this fails, tube feed-ing will be necessary but only for a limited period of time. It is preferable to convert the patient back to oral nutritional support as quickly as possible. The final option is intravenous feeding (IV). Again, a swift conversion back to oral nutrition is desirable.

Trials in COPD and cancer patients with cachexia demon-strate that Smartfish Remune (Targeted Oral Nutritional Support) has positive effect on laboratory and function mea-sures. These results indicate that Smartfish Remune can be an important part of the nutritional management of these patients to enhance quality of life and improve outcomes.

Cachexia is a complex wasting syndrome, associated with an underly-ing illness causing ongoing muscle loss and is known to have a negative impact on clinical outcomes in patients with cancer and several other chronic diseases. A range of diseases can cause cachexia, most com-monly cancer, congestive heart failure, chronic obstructive pulmonary disease, chronic kidney disease and AIDS. Cachexia is associated with increased mortality and poor quality of life.


MedicalNutrition-TherapeuticAreas

ConsumerHealth-Market

Theconsumerhealthindustryisgrowing,fueledbydemandfromanageingpopulation,health-focused

consumers,andgrowingwealthinemergingmarkets.


Consumer Health Market

ConsumerHealth-Market

The consumer health market we ad-dress includes sports nutrition, both for professionals and amateur athletes, healthy growing – giving children the best possible nu tritious prerequisites to develop in early age, as well as healthy ageing – being able to stay active for a healthier and higher quality of life in the old age, and metabolic health (in-cluding obesity and anorexia).

Consumer health covers a wide range of categories and products, none of which are generally reimbursed by healthcare systems. Smartfish nutrition solutions currently target four different segments in the consumer health market:

• sports nutrition – addressing professional and amateur athletes’ need for improved recovery and performance

• healthygrowing – giving children an optimal nutritional foundation for healthy growing

• healthyageing– providing the elderly population the opportunity to have an active and healthy life

• metabolichealth – addressing me-tabolic syndrome and people at risk of type II diabetes and cardiovascular diseases

MarkettrendsA number of strong trends drive de-mand for consumer health products:

• arapidlygrowing awareness of the role of nutrition in sports performan-ce and recovery for both professional and amateur athletes.

• aglobaltrendof ageing populations • fallingbirthratesand increased

attention being paid to children’s health

• increasinglycompetitive schools and workplaces, with greater consci-ousness of brain health for children

• theAsianmarket’s increasing wealth and strong tradition of nutri-tion in disease management and out of-pocket purchases combined with an increased demand for European and American products

In addition, food scandals, climate change and easier access to information and dissemination of news have in-creased the requirements for account-ability and the demand for clinically documented, healthy, and sustainable products.

SmartfishconsumerhealthmarketstrategyStrategic partnering with leading com-panies in food and consumer health is at the heart of Smartfish’s consumer health strategy. With selected part-ners, we strive for deeper penetration of existing markets, as well as rapid geographical expansion. Together with our partners, we also develop new products that target specific indications with broad potential.

Smartfish currently has a product development agreement with one of the top ten global nutrition companies. Also, Smartfish recently signed a new distribution agreement with Jacobson Pharma for the marketing of our con-sumer health products in Greater China; in 2019, Smartfish products for sports, healthy ageing, metabolic health and child supplements will be launched in China, Taiwan, Hong Kong and Macau.

* Source Technavio market research. **Euromonitor 2015

ASIAN MARKET The Asian market is estimat-ed to be worth €35 billion.

GLOBAL MARKETThe global consumer health market is estimated to be worth €235 billion and is growing at a rate of 7.5%*.

SPORTS NUTRITION MARKET The global sports nutrition market is a subset of the global consumer health market and is estimated at €10 billion, with a CAGR of 9%**.


ConsumerHealth-Applications

Smartfish Consumer Health Applications

Based on our proprietary juice-based emulsion technology, Smartfish has developed a number of different nutri-tional applications that target different consumer segments:

Sports nutrition – for both professional and amateur athletes.

Training and competing strain the muscles in the body and break them down. In order to avoid damage and in-jury, the muscles must recover between workouts. With careful management of food, drink, sleep and rest, the muscles will need less time to recover.

The Smartfish RECHARGE series is a product range designed to speed up recovery after strenuous exercise. Recharge is clinically proven to enhan-ce recovery and performance through well-understood mechanisms and it is currently used by top athletes across the professional and amateur spheres*. All Smartfish sport products are Infor-med Sports® certified and guaranteed free from WADA (World Anti-Doping Agency) banned substances.

Healthygrowing– for children to ob-tain an optimal nutritional foundation for healthy growing.

Parents want their children to be hap-py, build social networks and succeed in school. Today, stress, pressure and die-tary deficiencies contribute to children and adolescents experiencing attention problems or anti-social behaviour. Whi-le more than 50 million young people are affected globally*, the market for preventive solutions is far greater.

Smartfish nutritional drink POWERUP contains a formulation for children with sub-optimal diets. It im-proves attention and reduces aggres-sion. The drink has a fruity flavor and a smoothie-like texture, features that have been proven to be well accepted by children in Europe, USA and Asia.

Healthyageing – for the elderly popu-lation seeking an active and healthy life while ageing.

A natural part of ageing is reduced cognitive functions, muscle strength and immune function. Brain and muscle degeneration develop in a per-son over decades. An important aspect for slowing down the process, is opti-mal nutrition that addresses the under-lying nutritional imbalances.

Our product REFLECT is a healthy ageing formulation specifically designed to improve immune function, cognitive function and muscle strength. Results have shown improved handgrip strength and balance, reducing the risk of falling.

Metabolichealth– for people with or at risk of metabolic syndrome.

Metabolic syndrome is a risk factor for diabetes and cardiovascular disease. These conditions are characterised by high blood pressure, high triglyceride levels and high blood sugar levels.

Smartfish offers a potent health drink, RESOLVE, which is developed to ad-dress nutritional deficiencies associated with low-grade inflammation, insulin resistance and metabolic aberrations.

*Black, K.E., et al., Adding omega-3 fatty acids to a protein-based supplement during pre-season training results in reduced muscle soreness and the better maintenance of explosive power in professional Rugby Union players. Eur J Sport Sci, 2018. 18(10): p. 1357-1367. Philpott, J.D., et al., Adding Fish Oil to Whey Protein, Leucine, and Carbohydrate Over a Six-Week Supplementation Period Attenuates Muscle Soreness Following Eccentric Exercise in Competitive Soccer Players. Int J Sport Nutr Exerc Metab, 2018. 28(1): p. 26-36. Walshe, I., et al., Substrate Metabolism At Rest And During Steady-state Cycling Following Four Weeks Of N-3 Pufa Supplementation.: 265 Board #102 June 1, 11: 00 AM - 12: 30 PM. Vol. 48. 2016. 62.

Our nutritional solutions and emulsions offer better quality of life and other health benefits to healthy

people in need of improved nutritional intake.


ConsumerHealth-Applications

Recharge High Protein is a juice-based recovery drink used in

connection with physical training, for improved muscle recovery.

Recharge Fuel is suitable for athletes with an extraordinary need of supple-

mentation of DHA and EPA and as a daily supplement in connection with

physical training

Recharge Omega 3 is a nutritional drink with oxidation-protected marine ome-ga 3 DHA and EPA fatty acids. It benefits

active people of all ages. .

Resolve is a juice-based drink with high levels of omega 3, vitamin D, whey protein, beta-glucans and polyphenols. It is food intended for individuals at risk of metabolic syndrome, diabetes and

cardiovascular disease.

Reflect is a juice-based drink with high levels of omega-3, vitamin D and

whey protein. It is a food intended for individuals at risk of age-related

functional decline.


TheSmartfish CreamyEmulsion con-tains 530 mg Omega-3 in each sachet. With its delicate creamlike texture and pleasant taste, it is appreciated by kids

of all ages.

Clinical Research &IntellectualProperty

In recent years, Smartfish has not only con-ducted clinical trials of highest standards within focus area of cachexia, but also sup-ported several Investigator Sponsored Stud-ies (ISS) within our focus- and adjacent ar-eas. Going forward we aim to strengthen the documentation of our products within our focus areas through collaborative clinical tri-als globally as well as continuing to support ISS in areas of focus of our R&D strategy.

Through the collaborative projects, we have also recognized that our products and our small, highly skilled organisation, ap-peals to researchers around the world and their study subjects.

SmartfishclinicalstudiesSmartfish has completed two clinical trials in individuals with Non-Small Cell Lung Cancer (NSCLC) and Chronic Obstructive Pulmonary Disease (COPD) to document the safety and tolerability of RemuneTM for nutritional management of cachexia and pre-cachexia. Both studies were designed according to high pharma standards and clinical practice.

• Double-blinded, randomized – i.e. no one participating in the study (Smartfish personnel, Clinical Research Organiza-tion personnel, doctors and patients) knew what treatment each patient received until the study was completed and randomization broken.

• Placebo-controlled, compared with an isocaloric drink, i.e. a drink having same energy content as Remune – important to prove that the kind of nutrients mat-ter – not only calories.

• Registered at clinicaltrials.gov • Conducted according to Good Clinical

Practice • Publishedin peer reviewed scientific

journals in 2018 and 2019

Cancer trial The cancer pilot study results showed that patients treated with RemuneTM ex-perienced fewer adverse events than the comparator group, including fewer cases of neutropenia. Interestingly, explorato-ry analyses demonstrated significant im-provement in survival after one-year follow up as well as improved function measures. These data are very encouraging and war-rant further investigation in larger settings.

COPD trial The major results from the COPD study were significant improvement in dyspnea and fatigue. In addition, an improved blood pressure was noted. This can be of impor-tance as many COPD patients also suffer from cardiovascular comorbidities and are overweight. One of the mechanisms behind this may be a reduction in inflammation.

Investigator Sponsored Studies: One of the studies that concluded during 2019 in-vestigated the effect of preconception dieta-ry supplement in assisted reproduction in a randomized, double-blinded controlled study. The study results were published in Fertility and Sterility and demonstrated that a short period of dietary supplementa-tion alters the rate of embryo cleavage.

PATENTS COVERING BOTH INDICATIONS AND PRODUCTS Smartfish holds several patents within various indications, such as cancer and inflammation. In addition, we have pa-tents protecting the composition of the products, which prevent the exact formu-lation from being copied. These patents in combination with our clinical data give us an excellent base for cooperation with both researchers, manufacturing-, and commercial partners. It is the combination of the studies and patents which prove our value and uniqueness within our industry.

Clinical Research and Patents


Smartfish R&D activityhas resulted in:

39Publications,abstracts & posters presented at scien-tific conferences

37Clinical trials in total

13Ongoing Clinical trials

8Unique product formulations current-ly in pilot markets

32Patents9 Patent groups

Clinical Research and Patents

PARTNER CLINICAL STUDIES37 clinical studies have been conducted by our network of partners that see potential of our patented emulsion technology. In these cases, Smartfish have supplied the products. Some of the most important trials are:

CHILD ATTENTION AND AGGRESSION:

Study number Title Product Author (s) Reference

ISS-B001 Reduction in behavior problems with omega-3 supple-mentation in children aged 8-16 years: a randomized, double-blind, placebo-controlled, stratified, paral-lel-group trial.

Powerup Raine A, Portnoy J, Liu J, Mahoomed T, Hibbeln JR.

J Child Psychol Psychiatry. 2015 May;56(5):509-20.

ISS-B004 Nutritional supplementation to reduce child aggression: a randomized, stratified, single-blind, factorial trial

Powerup Raine A, Liu J, Portnoy J, Hibbeln JR, Soyfer L, Ho R, Richmond TS

J Child Psychol Psychiatry. 2016 Sep;57(9):1038-46.

ISS-B012 Omega-3 supplementation, child antisocial behavior, and psychopathic personality: a randomized, double-blind, placebo-controlled, stratifed, parallel group trial

Raine A, Fung A, Gao Y, Lee T.

Eur Child Adolesc Psychiatry. 2020 Mar 28. doi: 10.1007/s00787-020-01513-8. Online ahead of print.

HEALTHY AGEING


ISS-B010 ω -3 Supplementation increases amyloid-b phagocy-tosis and resolvin D1 in patients with minor cognitive impairment

Nutrifriend 2000Res

Fiala M, Halder R, Sagong B, Ross O, Sayre J, Porter V and Bredesen D.

The FASEB Journal 2015 vol. 29 no. 7 2681-2689

ISS-B010 Specialized Pro-Resolving Mediators from omega-3 Fatty Acids Improve Amyloid-Phagocytosis and Regulate In-flammation in Patients with Minor Cognitive Impairment

Nutrifriend 2000Res

Fiala M, Terrando N, Dalli J.

J Alzheimers Dis. 2015 Sep 9; 48(2):293-301

ISS-B009 Effects of a Six-Month Multi-Ingredient Nutrition Supple-ment Intervention of omega-3 Polyunsaturated Fatty Ac-ids, vitamin D, Resveratrol, and Whey Protein on Cognitive Function in Older Adults: A Randomised, Double-Blind, Controlled Trial

Nutrifriend 3000Res

C. Moran, A. Scotto di Palumbo, J. Bramham, A. Mo-ran1, B. Rooney, G. De Vito, B. Egan

J Prev Alzheimers Dis. 2018;5(3):175-183

SPORTS RECOVERY


ISS-S002 Adding Fish Oil to Whey Protein, Leucine, andCarbohydrate Over a Six-Week Supplementation PeriodAttenuates Muscle Soreness Following EccentricExercise in Competitive Soccer Players

Recharge High Protein

Philpott J, Don-nelly C, Walshe I, MacKin ley E, Dick J, D. Stuart, Tipton K, and Witard O.

International Journal of Sport Nutrition and Exercise Metabolism, 2018, 28, 26-36

ISS-S007 Adding omega-3 fatty acids to a protein-based sup-plement during pre-season training results in reduced muscle soreness and the bettermaintenance of explosive power in professional Rugby Union players

Recharge High Protein

Black KE, Witard OC, Baker D, Healey P, Lewis V, Tavares F, Chris-tensen S, Pease T, Smith B.

Eur J Sport Sci. 2018 Nov;18(10): 1357 1367


FERTILITY


ISS-G002 Effect of a 6-week ‘‘Mediterranean’’ dietary i nterven-tion on in vitro human embryo development: the Preconception Dietary Supplements in Assisted Repro-duction double-blinded randomizedcontrolled trial

Kermack A, Lowen P, Wellstead S, Fisk H, Montag M, Cheong Y, Os-mond C, Hough-ton F, Calder P, and Macklon N

Fertil Steril. 2020 Feb;113(2):260-269.

Sustainability

SustainableSmartfishFundamentals

Smartfish is committed to reducing harm to the environment and aim-ing for outstanding natural resource efficiency in our business activi-

ties. Smartfish actively works to limit our environmental impact through sustainable use of resources, production, packaging, and transport.

SustainablesourcingThe fish oil used in Smartfish’s products is from wild catch from clean Norwe-gian waters. Fish stocks along the Nor-wegian coast are plentiful and carefully managed. Smartfish cares about mini-mizing waste, making sure that the fish meat is used for food. Every day during the fishing season the fish is delivered to selected stations nearby and is carefully cleaned and sta-bilized.

Natural ingredientsSmartfish aims to use natural ingredi-ents only. The definition of “natural” is changing over time and may differ from country to country.

EnvironmentallyfriendlypackagingThe packaging used for all Smartfish products is recyclable paper cartons produced from sustainably managed

forests. The Tetra Pak packaging is recyclable and has a low carbon foot-print1.

The square shape of the packaging enables efficient storage and shipment of the products, with a minimum of dead space. In addition, the packaging pro-vides the product with excellent shelf stability, which prevents food waste.

RiskmitigationSmartfish is a small company and has therefore developed a solid risk mitiga-tion strategy. It includes all aspects of the business, from raw material sourcing to manufacturing and organizational structure.

The company has a set of standard op-erating procedures that include raw ma-terial control, microbiological analy sis of every production batch, and guidelines and mechanisms for the management of product safety, storage, and transport.

CERTIFICATIONSAll Smartfish drink products are halal- certified, and all sports nutrition products are Informed Sports certified and free from substances banned by the World Anti-Doping Agency (WADA).

1. Carbon footprint Tetra Pak: https://www.tetrapak.com/sustainability/environmental-impact/a-value-chain-approach/carton-co2e-footprint


Organisation & Operations

Smartfish’s strategy is to grow globally with a small, effective, and agile organization in strategic relationships with leading

R&D, production and distribution partners.

Today, the Smartfish staff consists of a small group of highly skilled people with ample experience from the life sci-ence business and nutrition industry. Smartfish is a know-how and compe-tence company. In order to deliver on our ambitious growth objectives, we have strengthened our scientific, com-mercial and operational teams in 2019.

SmartfishofficesOur head office is located in Norway, at the Oslo Science Park, in inspiring and energising surroundings, well suited to our needs. We also have an office in the Medicon Village Innovation Centre in Lund, Sweden.

Research and developmentResearch and development are at the core of Smartfish. We collaborate with a network of scientific partners from around 50 universities and research hospitals, from which we draw import-ant know-how and insights.

Manufacturing, sales and distributionIn production, marketing and sales, we work in close partnership with leading companies in their respective areas.

Smartfish has a well-established relationship of strategic cooperation

with a qualified and knowledgeable Nordic food producer with flexible operations. Part of our development work is also performed in cooperation with this production partner. The co-operation includes a commitment to expanding production capacity was increased during 2019 to match the growth of our business. Besides this, we have a manufacturing arrangement with a separate Nordic producer for our creamy emulsion product range.

We sell our products through market-ing and distribution partners in five dif-ferent markets, extending from Norway all the way to Hong Kong. In 2018 and early 2019, we established two strategic partnerships with leading players within the medical nutrition field and the con-sumer health field to expand the global marketing and sale of our products.

BoardandAdvisoryBoardThe Smartfish Board of Directors is very active and supports the company with in-depth knowledge in our field. Furthermore, our Scientific Advisory Board consists of world-leading special-ists in cachexia and medical nutrition, providing scientific advice and exper-tise to Smartfish’s research and devel-opment activities.

Organisation and Production

Nutrition for children

Nutrition for athletes

Nutrition for cachexia

Results from first Smartfish financed Cachexia clinical trial published. Two Sports Nutrition trials on muscle recovery published

2017

Industrifonden invests in Smartfish. Launch of Cachexia strategy and relaunch of Sport strategy

2013

Investinor invests in Smartfish. First in vitro results on inflam-mation, muscle and cancer cells

2011-12

Launch of Nutrifriend – medical nutrition product range

2011

Focus shifting to medical nu-trition. First human safety and bioavailability trial published in British Journal of Nutrition

2010

First juice-based drink for children launched (Awarded Anuga Innovation Prize – best new product)

First product (sachets) launched. First patent and first drink patent

2007

2004-5

Founded in Norway2001


HISTORY

2018

New CEO, Geir Harstad, on board. Signing Strategic Partnerships with B. Braun for international expansion of our medical nutrition portfolio and Jacobson Pharma for our consumer health portfolio in greater China.

2019

Results from Smartfish Cancer study published in Nutrition and Cancer. Participation with B. Braun at ESPEN. Successful private placement carried out, onboarding Jacob-son Pharma as a key shareholder. Development agreement with global nutrition player signed.


The Board

The Board

Benedicte FossumChairperson of the Board / Board member since 2011

Born in 1962Other significant board assignments: , Foinco AS (styremedlem), Credo Invest 8 (sty-remedlem), Mittas AS (styreleder), Alliero ASExperience: Professional Board Member and investor through family office Foinco AS1). Holds a degree in Veterinary Medicine. Exten-sive management experience, i.e. through her time in Pharmaq, where she was a co-founder and held the position as Director of Strategic Dev’t, Legal Affairs and M&A. Previ-ous experience from Alpharma Inc.and the Norwegian Medicines Agency2)Holding in Smartfish: 444.585 shares through Mittas AS

Ronny VikdalBoard member since 2011 (Investinor)

Born in 1972Other significant board assignments: Board member - Cryogenetics AS, Havgul Clean Energy AS, Keep-it Technologies AS, Memory AS, Planktonic AS.Experience: Investment manager at Norwe-gian venture capital fund Investinor where he i.a. focuses on the marine ingredients industry. Previous experience as i.a. CFO and Business Development at Norway Royal Salmon, Man-ager at KPMG, Bank Manager at Sparebank 1 Midt Norge, as well as Financial Analyst at First Securities, Midt-Norge Fonds and SR-FondsHolding in Smartfish: 0

Jonas JendiBoard member since 2019 (Industrifonden)

Born in 1970Other significant board assignments: Smart-fish AB (Board member), Airsonett Holding AB (Board member), Avidicare Holding AB (Board member)Experience: Investment manager at Nordic venture capital fund Industrifonden, where he is focused on the life science sector. Previous experience as CEO of Cogmed, an evidence based start-up company focused on cogni-tive training, and from the Boston Consulting Group. Recent experience as independent board member, angel investor and equity analystHolding in Smartfish: 0

Iacob MathiesenBoard member since 2016

Born in 1966Other significant board assignments: Oncosec Immunotherapies (Scientific Advi-sory Board)Experience: PhD in Neurobiology from Univ. of Oslo. Significant experience related to commercialisation and fundraising of early stage companies, i.a. as cofounder and CEO of Inovio, an electroporation technology com-pany which was later sold to Genetronics Inc and Otivio ASHolding in Smartfish: 177.160 shares

Karin MeyerBoard member since 2017

Born in 1966Other significant board assignments: Läke-medelsakademin i Stockholm (Chairman of the Board), Stiftelsen NEPI (Board member),Kårhuset Pharmen AB (Board member), Stiftelsen Uppsala Monitoring Centre (Board member)Experience: Swedish Pharmaceutical Society and Swedish Academy for Pharmaceutical Science. Holds a MSc in Pharmacy and a PhD in Pharmacology. Significant experience from pharmaceutical development, primarily with-in early phase development from AstraZeneca and QuintilesHolding in Smartfish: 0


Management

Geir HarstadCEO Smartfish AS & ABChairman of the board in Smartfish AB since 2018

Born in 1963Other significant board assignments: Smartfish ABExperience: International experience from the medical nutrition, food supplements, sports nutrition and FMCG industries, of which the last 20 years in Senior Executive positions in global blue-chip companies such as Novartis, Nestle & P&G, but also mid-sized and start-up companiesHolding in Smartfish: 50.506 shares

Jens NordahlVice President Sales & Marketing since 2007

Born in 1966Other significant board assignments: Interesse AS Experience: Previous experience as CEO of Smartfish, Partner of Brandforce, GM at Focus Group, co-founder and Partner at Media Hlp, VP Sales & Marketing at Santa Monica Europe and Nike Bauer HockeyHolding in Smartfish: 90.319 shares via Interesse AS

Mozhgan DorkhanCSO since 2019

Born in 1970Other significant board assignments: Vibro-Sense Dynamics AB, Member of the Steering Board All New Diabetics in Scandinavia, Lund University Diabetes CentreExperience: MD, PhD, Specialist in Internal Medicine/Diabetes & Endocrinology, Associate Professor in Lund University. Previous expe-rience as Senior Global Medical Director at Novo Nordisk AS Holding in Smartfish: 0

Kamilla HassanderCFO since 2019

Born in 1971Other significant board assignments: Smartfish ABExperience: Previous experience as Board Member, CEO and CFO at Avensia Innovation, Director Business Partnering, Director Cash Management and Financial Manager at Tryg Forsikring, and Senior Consultant at SJRHolding in Smartfish: 56.819 shares

Johan OlssonRegulatory Affairs since 2019

Born in 1969 Other significant board assignments: -Experience: Holds a Msc in Agriculture with a major in food science and a PhD in Food Microbiology. Previously experience as CEO of Foodfiles and scientific advisor at TFS – Trial Form Support. Significant experience from medical food development, such as clinical trials of foodstuffs and regulatory affairs.Holding in Smartfish: 0

The report was prepared during ongoing Corona pandemic and quarantine regulations with the team working from home. Pictures are taken in Teams.

Management


Directors’ Report

Directors’ Report

OperationsSmartfish achieved a significant mile-stone for global sales of its products towards the end of 2018. Two major agreements were signed; a distribu-tion agreement with B.Braun, a partner for medical nutrition products and an agreement with Jacobson Pharma, a regional partner distributing a number of consumer health products in greater China. Global expansion and launch of products have thus been the focus for the Smartfish group in 2019.

Smartfish study in Non-Small Cell Lung Cancer patients suffering from pre-cachexia and cachexia was pub-lished in Nutrition and Cancer on July 10th 2019 and presented at the ESPEN congress in Krakow on September 2nd.

Sales and earningsTotal revenues amounted to NOK 16.8 million (NOK 18.2 million) and include development projects, grants and dis-tributed up-front payments for a licens-ing agreement of NOK 4.8 million.

The Group s ordinary sales revenue for 2019 amounted to NOK 8.8 million (NOK 16.8 million). The drop in sales is mostly due to a political decision to overhaul the Greek reimbursement system (the “blue prescription regula-tion”). The changes were abrupt and led to an immediate halt in the sales of many medical nutrition products. The new reimbursement system has been in place since July 2019, but the new re-imbursement list is not expected to be implemented before Q3, 2020.

Financial position and cash flowThe Group s cash and cash equiva-lents amounted to NOK 40.2 million (11,5 million) at the end of 2019. In July Smartfish received 40 MNOK in a pri-vate placement. In connection with this share issue, both of the parent compa-ny’s convertible loans were converted to equity. A total of NOK 80 million in equity was thus received, securing the long-term growth of the business.

The Group s cash flow from operat-ing activities in 2019 is NOK -31.1 (-14.2) million. Cash flow from changes in working capital amounted to NOK -13.4 (-2.0) million.

Investments, depreciation and amortisation Depreciation of property, plant and equipment during the period was NOK 0.2 (0.0) million. The amount has been impacted by the transition to IFRS 16.

Items affecting comparabilityCosts in relation to the two convertible loans, have affected the finance costs with NOK 1.9 million in 2018 and NOK 4.1 million in 2019. These costs are con-sidered to be non-recurring items and therefore affects comparability.

Seasonal variationsSmartfish s sales are mainly through distributors who combine small orders into large shipment orders to lower the cost of shipping. Since Smartfish recog-nises income at a specific point in time, when the orders are being shipped,

recognition can fall on either side of the year ending.

Research, development and intangible assetsSmartfish’s technology and brands are protected through patents and trademark registration in numerous countries. Smartfish will continue its research and development activities, while the commercialisation of its prod-ucts is handled through partnerships with leading international companies. Direct costs linked to research and de-velopment in 2019 amounted to NOK 8.5 million compared to NOK 7.8 mil-lion in 2018.

In 2019, as a result of commercialisa-tion, Smartfish has recognised part of the cost for development as an asset, amounting to NOK 0.7 million (0.0).

Risk factorsTo be able to market and sell these prod-ucts Smartfish is dependent on approv-al of its medical nutrition products by relevant regulatory authorities in indi-vidual countries Such approval is sub-ject to political and regulatory risks.

There are no guarantees of progress and successful outcome of the re-search and development programs for established and new products. In ad-dition, there is a risk that applications for patents will not be granted, or that Smartfish’s proprietary technology will become public knowledge.

Smartfish faces competition from a number of global players in all the busi-

Smartfish is a trusted research and development partner for large nutritional companies all over the world. The patented Smartfish emulsion encapsulates omega-3 fatty acids and other nutrients into tasty juice drink. The unique emulsion differentiates Smartfish´s nutritional products from standard fish oil supplements as it protects omega-3 fatty acids from oxidising and thereby preserving their beneficial effects. Smartfish´s products are clinically tested and address both specific medical needs and consumer demands. B.Braun is the major international distributor of Smartfish´ products within medical nutrition and Jacobson Pharma are launching the consumer portfolio in greater China. Smartfish is located in Oslo, Norway, and in Lund, Sweden with Investinor (Norway) and Industrifonden (Sweden) are the main shareholders.


Directors’ Report

Oslo, 31 December 2019 / 27 May 2020

Directors’ report is signed electronically

Benedicte FossumChairman of the Board

Jonas JendiBoard Member

Ronny VikdalBoard Member

Karin MeyerBoard Member

Iacob Mathiesen Board Member

Geir Harstad CEO

ness areas in which it operates. Smart-fish being a small Group with limited operational history increases the risk. The Group currently produces a low volume of products, and challenges re-lated to IT, purchasing, production and deliveries cannot be excluded when vol-umes increase. Moreover, Smartfish is dependent on third parties for the pro-duction of its products. Smartfish will remain dependent on its commercial partners for sales success in the future.Smartfish has a lean organisation and execution of the Group’s strategy makes it important to retain key competence. There is thus an element of risk linked to Smartfish’s capacity to recruit and retain key personnel. The Group is also exposed to currency risk, primarily in SEK and EUR.

Working environment and the external environmentSmartfish has an ongoing ESG assess-ment program (Environment, Social, Governance). Different stakeholders are interviewed and risks are being assessed and mitigated. The working environment is considered good and the nature of the Group business does not generate pollution or emissions that

may have a harmful impact on the ex-ternal environment.

In 2019 Smartfish started working with UNs’ sustainability development goals and has defined three goals where Smartfish operations have direct influ-ence; 3: Good health and well-being, 12: Responsible consumption and produc-tion and 13: Climate action.

Employees At the end of 2019, Smartfish employed ten people full time, of whom six at the head office in Oslo, Norway. At the turn of the year, the employees jointly held options for 870,000 shares.

The organisation consists of four women and six men, and thus presents an even gender balance. Absence due to illness was lower in 2019, 3.4%, com-pared to 2018, 6.5%.

Parent CompanyThe main operations of the Group are performed by the parent company Smartfish AS. Revenues for the Parent Company amounted to NOK 16.7 (18.2) million. Operating profit/loss was NOK -27.2 (25.5) million. Net financial items amounted to NOK -5.1 (-2.0) million. Profit/loss before taxes was NOK -32.8

(27.5) million. The Board proposes to transfer the deficit to uncovered losses. Cash and cash equivalents at the end of the period amounted to NOK 38.9 (11.2) million. Equity at the end of the period amounted to NOK 36.0 (-12.6) million.

Events after the end of the financial yearAs of the date of this report, the coro-na virus pandemic has had significant negative impact on the global economy. Smartfish is closely monitoring the situ-ation and has taken measures to handle the situation as well as possible. There is a considerable risk that the timing of new product launches and sales in gen-eral will be negatively affected. If the pandemic lasts for a prolonged period with corresponding impact of the world economy, it could over time become more difficult to obtain funding at sat-isfying terms.

Warrants with an expiration date in 2020 were issued in 2017. In April 2020 most of the warrants were executed and Smartfish received 12.9 million NOK in new equity. Subsequent to the end of the financial year, no other events have taken place of significance to the sub-mission of the annual accounts.


Consolidated Statement of Comprehensive Income

Consolidated Statement of Comprehensive IncomeTNOK Note 2019 2018

Revenue from contracts with customers 4 8 824 16 785Other operating income 5 7 979 1 414

Total revenue and other income 16 803 18 199

Cost of goods sold 18 -6 371 -10 391Salary and personnel costs 6,7 -14 770 -15 606Other operating expenses 8 -22 612 -17 535Depreciation and amortisation 14,15,16 -690 -50

Operating profit -27 640 -25 381

Finance income 9 127 175Finance costs 9 -5 239 -2 143

Profit /(Loss) before tax -32 752 -27 350Income tax expense 10 -14 -44

Profit /(Loss) for the year -32 766 -27 394

Other comprehensive income that may be reclassified to profit or loss in subsequent periods (next of tax)

5 -1

Total comprehensive income for the period -32 760 -27 395

Attributable to:Equity holders of the parent company -32 760 -27 395

Earnings per share: Note 2019 2018

- Basic, earnings per share, NOK 11 -1,63 -1,51 - Diluted, earnings per share, NOK 11 -1,63 -1,51


Consolidated Statement of Financial Position

Consolidated Statement of Financial PositionTNOK Note 2019-12-31 2018-12-31

ASSETSNon-current assets Property, plant and equipment 14 134 108Intangible assets 15 730 0Right-of-use-assets 16 1 574 0Total non-current assets 2 439 108Current assets Inventories 18 1 847 2 077Trade receivables 4,17,19 16 956 3 059Other receivables 5 421 137Prepayments 258 299Other current assets 5 1 315 100Cash and short term deposits 17,20 40 159 11 528Total current assets 60 957 17 200TOTAL ASSETS 63 396 17 308

EQUITY AND LIABILITIESEquity Paid in capitalIssued capital 21 2 239 1 820Share premium 21 286 195 203 610Other paid in capital 6 084 4 416Total paid in capital 294 518 209 846Other equity Other reserves 7 2Other equity -258 464 -222 369Total other equity -258 459 -222 367Total equity 36 060 -12 522Non-current liabilities Contact liabilities 4,23 15 160 3 868Lease liabilities 17,25 1 504 0Total non-current liabilities 16 664 3 868Current liabilities Interest bearing loans 17,22 0 16 908Trade and other payables 17 2 539 2 315Contract liabilities 4,23 3 031 1 959Current liabilities 24 5 102 4 781Total current liabilities 10 672 25 962Total liabilities 27 336 29 830TOTAL EQUITY AND LIABILITIES 63 396 17 308

Oslo, 31 December 2019 / 27 May 2019Annual report is signed electronically






Geir Harstad CEO


Consolidated Statement of Changes in Equity

Consolidated Statement of Changes in Equity

TNOK NoteIssued

capitalShare

premium

Other paid in capital

Other reserves

Other equity Total

Opening balance 2018-01-01 1 815 203 031 2 307 3 -194 975 12 179Comprehensive income for the year -1 -27 394 -27 395New share issue 21 5 580 585Cost of share based payments 7, 21 2 109 2 109Closing balance 2018-12-31 1 820 203 610 4 416 2 -222 369 -12 522

Opening balance 2019-01-01 1 820 203 610 4 416 2 -222 369 -12 522Comprehensive income for the year 5 -32 766 -32 760New share issue 21 419 82 585 -3 329 79 676Cost of share based payments 7, 21 1 666 1 666Closing balance 2019-12-31 2 239 286 195 6 084 7 -258 464 36 060


Consolidated Statement of Cash Flow

Consolidated Statement of Cash FlowTNOK Note 2019 2018

Cash flow from operating activitiesProfit/loss before tax -32 766 -27 350Depreciation 14,16 690 50Equity option expense-no-cash items 1 680 2 109Change in working capital -1 3 442 -1 978Increase in contract liabilities 12 365 5 827Changes in other current/non current assets and liabilities 351 7 167Net cash flow from operating activities -31 122 -14 175

Cash flow from investing activitiesInvestment in equipment 14,16 -2 394 -25Acquisition of intangible assets 15 -730 -Proceeds from sale of property, plant and equipment 101 -Net cash flow used in investing activities -3 023 -25

Cash flow from financing activitiesProceed from issue of shared capital 79 676 585Proceeds from borrowings 26 098 15 000Amortisation of debt -43 005 -294Net cash flow from financing activities 62 769 15 291

Net currency translation effect 7 -1Net increase/decrease in cash and cash equivalents 28 624 1 089Cash and cash equivalents at beginning of period 11 528 10 439Cash and cash equivalents at end of period 40 159 11 528


Notes

Notes to the Consolidated Financial Statements Group

NOTE 1. CORPORATE INFORMATION

The Smartfish Group consist of Smartfish AS and its subsid-iary Smartfish AB and Smartfish Sport AS (collectively, the Group). Smartfish AS is a privately held company domiciled in Norway and the registered office is located at Forskning-sparken / Oslo Innovation Center in Oslo.

The Group is principally engaged in tasty and clinically proven nutrition products. The Smartfish technology plat-form delivers omega-3-enriched nutritional drinks with su-perior taste and health benefits. The technology is support-ed by rigorous science and Smartfish has proved the unique properties of its emulsion technology through many clinical trials and studies.

The Groups, as well as the Parent Company’s, consolidated statement of profit and loss, consolidated statement of com-prehensive income and consolidated statement of financial position were authorised for issue in accordance with a reso-lution by the Board of Directors on 27th of May.

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES

Basis of preparationThe Group and the Company’s annual accounts are prepared in accordance with International Financial Reporting Stand-ards (IFRS) as specified by the International Accounting Standards Board and implemented by the EU as per 31 De-cember 2019 requirements in the Norwegian Accounting act.

Basis of consolidationThe consolidated financial statements incorporate the re-sults of the Parent Company and the subsidiaries. The Par-ent Company’s functional currency is NOK, which is also the presentation currency for the Parent and the Group. The consolidated financial statements have been prepared under the going concern assumption. Unless otherwise stated, as-sets and liabilities have been measured at historic cost. The income statement is presented by nature of expense.

Assets and liabilities of foreign operations are translated into NOK at the rate of exchange prevailing at the reporting date. Their statements of profit or loss are translated at ex-change rates prevailing at the dates of the transactions. The exchange differences arising on translation for consolidation

are recognized in OCI. On disposal of a foreign operation, the component of OCI relating to that foreign operation is reclas-sified to profit or loss.

The consolidated accounts include the overall financial re-sults and position when the Parent Company Smartfish AS, the fully owned subsidiary Smartfish AB and the dormant Norwegian company Smartfish Sport AS are presented as a single economic entity. The subsidiaries are fully consolidat-ed. The consolidated financial statements are prepared us-ing uniform accounting policies for similar transactions and events under similar circumstances. Intercompany transac-tions and balances, including internal profits and unrealized gains and losses, are eliminated. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

Changes in accounting policiesi) Changes in accounting policies entered into force during 2019. On 1 January 2019 the new leasing standard, IFRS 16 Leases, entered into force. IFRS 16 stipulates that all leases shall be reported in the balance sheet. Smartfish has therefore reviewed all of its leases. The carrying amounts on all assets and liabilities has increased. There has also been an impact on the income statement and on financing activities in the cash flow statement. This new standard is based on the view that the lessee is entitled to use an asset for a specific period of time, along with the obligation to pay for that right. Smart-fish has chosen to use the modified retrospective approach when implementing IFRS16. For information on how this im-pacts the Group, please see Note 28. Other amendments and interpretations may apply for the first time in 2019 but are not considered to have any material impact on the Group s financial statement.ii) Standards and interpretations issued but not yet effected.Certain new standards and amendments to standards and interpretations are effected for annual periods beginning on or after 1 January 2020. None of these are expected to have a significant impact.

Summary of significant accounting policiesSegment reportingSince Smartfish’s equity instruments are not traded in a pub-lic market IFRS 8 Operating segments is not applied.

Statement of cash flowsCash flow statements have been prepared using the indirect method.


Notes

Foreign currency transactions and balance sheet itemsTransactions in foreign currencies are initially recorded by the Group’s entities at their respective functional currency spot rates at the date the transaction first qualifies for recogni-tion. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. Differences arising on set-tlement or translation of monetary items are recognized in profit or loss.

Revenue from contracts with customersRevenue from contracts with customers is recognized at the point in time when control of the goods or services is trans-ferred to the customer. Transfer of control is assessed as hav-ing been transferred when any of the following five indicators have been fulfilled; when there is an unconditional obligation to pay, a legal ownership right, physical possession, transfer of significant risks and benefits, or when the good has been accepted.

If the contract includes a right of return, instead of reve-nue, the Group recognizes a refund liability for goods that are expected to be returned. A right of return asset, and the corresponding adjustment to cost of sales, is also recognized for the right to recover products from a customer.

The recognized amount reflects the consideration that the Group expects to be entitled in exchange for those goods or services.

The Group considers whether there are other promises in the contract that are separate performance obligations and where this implies that a portion of the transaction price needs to be allocated (e.g., warranties, customer loyalty points). In determining the transaction price, the Group considers the effects of variable consideration, the existence of significant financing components, non-cash consideration, and consider-ation payable to the customer, if any. A repayment liability for expected returns is recognized as an adjustment to revenue.

Operations are primarily sale of goods, where revenue is recognised at a specific point in time.

Sales to distributorsThe revenue from sales to distributors is recognised at the transaction price and at the point of time that the distribu-tor obtains control as defined in IFRS 15. Most goods are sold INCOTERMS ex-works, which means it is the point of time when the goods have been delivered at the manufacturer’s warehouse.

As a main rule there are no significant financing elements.In certain instances, Smartfish receives early payments

from customers. When it is assessed that this represents payment for future goods or services, the amount is only recognized as revenue when the control of the products is transferred to the customer. If the conclusion is that such ear-ly payment represents payment for a separate performance obligation, the amount is recognized when the obligation is satisfied.

Sales to professional sports clubsSmartfish sells products to professional sport clubs for con-sideration in cash, in kind or a combination. The consider-ation in kind consist of advertising and publicity activities. The value of the non-cash consideration is valued at the fair value of the goods that are given up. Smartfish recognizes revenue when the delivery of the products, the performance obligation, is made.

Direct sales to consumers (web-shop sales)Revenue is recognized at the transaction price when the goods leave the Smartfish warehouse.

Sales for research project purposesFrom time to time Smartfish provides products for research projects. Revenue is recognized when products are delivered (performance obligation satisfied) at the agreed cash price.

Government grants Government grants are disclosed under revenue as other operating income. Government grants are recognized where the grant has been awarded and there is reasonable assur-ance that the conditions will be complied with and the grant will be received. When the grant relates to an expense item, it is recognized as income over the periods that the costs for which it is intended to compensate are expensed.

To the extent that Smartfish recognizes development costs in the balance sheet, the government grants related to these assets shall be separated and presented as deferred income (liability). The deferred income will be recognized as revenue in line with the depreciation of the investment.

TaxesTax reported in profit or loss includes both current tax and deferred tax.

Current tax is tax that is paid or refunded for the current year. It also includes adjustments to current tax that are at-tributable to prior periods. Current income tax relating to items recognized directly in equity is recognized in equity and not in the statement of profit or loss.

Deferred tax liabilities are recognized for all taxable tempo-rary differences. Deferred tax assets are recognized for all de-ductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary dif-ferences, and the carry forward of unused tax credits and un-used tax losses can be utilized. Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss. Deferred tax items are recognized in correlation to the underlying transaction either in OCI or directly in equity

Current versus non-current classification The Group presents assets and liabilities in statement of finan-cial position based on a current/non-current classification.

An asset is current when it is expected to be realized or in-tended to sold or consumed in the normal operating cycle held


Notes

primarily for the purpose of trading, expected to be realized within twelve months after the reporting period or if it is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the re-porting period. All other assets are classified as non-current.

A liability is current when it is expected to be settled in the normal operating cycle, it is held primarily for the pur-pose of trading, or there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. The Group classifies all other liabilities as non-current. Deferred tax assets and liabilities are classified as non-current assets and liabilities.

Fair value measurementA fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by its best use or by selling it to another market par-ticipant that would put the asset in its best use. The valuation techniques seek appropriate and sufficient data, categorize the use of relevant observable inputs and categorize the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy below, based on the lowest level that is significant to the fair value measurement as a whole: • Level 1 — Quoted (unadjusted) market prices in active mar-

kets for identical assets or liabilities• Level 2 — Valuation techniques where input that is signifi-

cant to the fair value measurement is directly or indirectly observable

• Level 3 — Valuation techniques where input that is signifi-cant to the fair value measurement is unobservable

Financial instrument – general Financial assets and liabilities are recognized in the state-ment of financial position when The Company becomes par-ty to the instrument’s contractual terms. A financial asset is derecognized from the statement of financial position when the rights in the contract are realized, mature, or when The Company loses control over them. A financial liability is derecognized from the statement of financial position when the stated obligations in the contract have been fulfilled. Sub-sequent measurement of financial assets and liabilities is de-scribed below.

Classification and valuation All financial instruments reported in the balance sheet must be classified in different measurement categories. Measure-ment of financial instruments is based on this classification. Classification of a financial instrument is based on the Group’s business model (the objective for holding the financial asset) along with the financial asset’s contractual cash flows. The categories of financial assets are: • Financial assets measured at amortized cost • Financial assets measured at fair value via other compre-

hensive income • Financial assets measured at fair value via profit or loss

Financial liabilities are measured at amortized cost or fair value via profit or loss.

Receivables Receivables, including accounts receivable, are measured at amortized cost. IFRS 9 requires that a loss allowance is set up for expected credit losses. Allowance for credit losses is based on historical data adjusted for forward-looking factors specif-ic to the debtors and the economic environment.

Any impairment of receivables is recognized in operating costs. The Group applies the simplified approach that is al-lowed in IFRS 9 regarding accounts receivable and contract assets when calculating the reserve for expected credit losses.

Liabilities Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.

The measurement of financial liabilities, subsequent to ini-tial recognition, depends on their classification. When a loan is issued, it must be classified either as a liability (debt) or equity. Compound instruments contains both equity and lia-bility components. The classification has an immediate effect on the entity’s reported results and financial position, deter-mined by IAS 32 which uses principles-based definitions of a financial liability and of equity.

Cash and short-term depositsCash and short-term deposits are recognized at amortized cost. Cash at banks and on hand and short-term deposits with a maturity of three months or less are assessed to be subject to an insignificant risk of changes in value.

Accounts payable – tradeAccounts payable are recognized at amortized cost when the invoice has been received.

Liabilities to credit institutions Liabilities to credit institutions are initially recognized at fair value, less transaction costs. Afterwards, they are recognized at amortized cost. Liabilities to credit institutions are classi-fied as current or non-current interest-bearing liabilities in the balance sheet.

Convertible loanThe Group has issued a convertible loan whereby, in the event of a private placement, they are obliged to issue a variable number of shares at the same share price as in the private placement, less 15%. The conversion right (derivative) is there-fore recognized as a liability instrument and not an equity instrument. At initial recognition the entire compound in-strument is measured at fair value through profit or loss. The hybrid instrument is revalued on a quarterly basis through financial income or expense in the profit or loss statement.


Impairment of financial assets The Group applies the simplified approach that is allowed in IFRS 9 regarding accounts receivable and contract assets when calculating the reserve for expected credit losses. This approach requires recognition of a reserve for expected cred-it losses on accounts receivable and contract assets over the entire remaining life of the asset. An impairment loss is rec-ognized for the amount that the asset’s carrying amount ex-ceeds its recoverable amount, which is fair value less selling expenses or value-in-use, whichever is higher.

Intangible assetsIntangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of ac-quisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accu-mulated impairment losses. Internally generated intangibles, excluding capitalized development costs, are not capitalized and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred.

Research and development costsResearch costs are expensed as incurred. Development ex-penditures on an individual project are recognized as an in-tangible asset when the Group can demonstrate:• The technical feasibility of completing the intangible asset

so that the asset will be available for use or sale • Its intention to complete and its ability and intention to use

or sell the asset• How the asset will generate future economic benefits• The availability of resources to complete the asset• The ability to measure reliably the expenditure during de-

velopment.

Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortization and accumulated impairment losses. Amortiza-tion of the asset begins when development is complete, and the asset is available for use. It is amortized over the period of expected future benefit. Amortization is recorded in cost of sales. During the period of development, the asset is tested for impairment annually.

Impairment of non-financial assetsThe Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is re-quired, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s fair value less costs of disposal and its value in use. The recov-erable amount is determined for an individual asset, unless the asset is dependent on other assets or groups of assets to generate cash. When the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

Property, plant and equipmentPlant and equipment are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of replacing part of the plant and equipment if the recognition criteria are met. When signifi-cant parts of plant and equipment are required to be replaced at intervals, the Group depreciates them separately based on their specific useful lives. All other repair and maintenance costs are recognized in profit or loss as incurred.

Depreciation is calculated on a straight-line basis over the es-timated useful lives of the assets, as follows: • Machinery and equipment 10 years• Data equipment 3 years• Fixtures and fittings 3 to 10 years

An item of property, plant and equipment and any signifi-cant part initially recognized is derecognized upon disposal, at the date the recipient obtains control or when no future economic benefits are expected from its use. Any gain or loss arising from derecognition of the asset, calculated as the dif-ference between the net disposal proceeds and the carrying amount of the asset, is included in the statement of profit or loss when the asset is derecognized.

LeasesThe determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset (or assets) and the arrangement conveys a right to use the asset (or assets), even if that asset is (or those assets are) not explicitly specified in an arrangement.

Group as a lesseeLeases are capitalized at the commencement of the lease at the inception date fair value of the leased property or, if low-er, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and re-duction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized in finance costs in the statement of profit or loss.

A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.

The Group has decided to use the exemptions regarding leases for which the underlying asset is of low value or short term leases. These assets have therefore not been recognised as Leases in accordance wit IFRS 16.

Group as a lessorThe Group do not act as a lessor.

Notes


InventoriesInventories are valued at the lower of cost and net realizable value. Costs incurred in bringing each product to its present location and condition are accounted for, as follows: • Raw materials: purchase cost on a first-in/first-out basis • Finished goods and work in progress: cost of direct mate-

rials, manufacturing costs from third party supplier and warehouse costs. For finished goods in stock in Norway, the value of the goods includes transportation and duties.

Net realizable value is the estimated selling price in the or-dinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

Provisions, contingent liabilities and contingent assetsProvisions are recognized when the Group has a present ob-ligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the statement of profit or loss net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discount-ing is used, the increase in the provision due to the passage of time is recognized as a finance cost.

A contingent liability/asset is a possible liability/asset re-sulting from past events and which only can be ascertained when one or more uncertain future events occur that are not within The Company’s control. No liability/ asset is reported if the likelihood is very low that an outflow of resources will result from existing obligations.

Pensions and other post-employment benefitsPension plansThe Company is required to have an occupational pension scheme in accordance with the Norwegian law on required occupational pension (“lov om obligatorisk tjenestepensjon”), for its employees in Norway. The Company’s pension arrange-ments fulfill the requirements of the law. The Norwegian em-ployees are covered by The Company’s defined contribution scheme. Contribution to the pension scheme is expensed. The Group also has a defined contribution arrangement for its em-ployees in Sweden.

Share-based paymentsGroup management team receive remuneration in the form of share-based payments, whereby employees render services as consideration for equity instruments.

Short-term employee benefits Salary and remuneration, along with the associated social se-curity contributions are expensed at the rate earned by the employee.

Variable salary Accruals are made on an ongoing basis for variable salary in accordance with the economic substance of the agreement.

Equity-settled transactions The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an ap-propriate valuation model. The calculated cost is recognized in employee benefits expense, together with a corresponding increase in equity (other capital reserves), over the period in which the service and, where applicable, the performance conditions are fulfilled (the vesting period). The fair value of the options is not changed after grant date.

The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instru-ments that will ultimately vest. The expense or credit in the statement of profit or loss for a period represents the move-ment in cumulative expense recognized as at the beginning and end of that period.

Service (employment) and non-market performance condi-tions are not taken into account when determining the fair value of the awards at the grant date, but the likelihood of the conditions being met is assessed as part of the Group’s best estimate of the number of equity instruments that will ultimately vest. Smartfish`s current option plan has a service condition, whereby the employee needs to be employed in the vesting and exercise periods. There are no other market or non-market performance conditions.

No expense is recognized for awards that do not ultimately vest where non-market performance and/or service condi-tions have not been met. Where awards include a market or non-vesting condition, the transactions are treated as vested irrespective of whether the market or non-vesting condition is satisfied, provided that all other performance and/or ser-vice conditions are satisfied.

When the terms of an equity-settled award are modified, the minimum expense recognized is the fair value at grant date of the unmodified award. This is provided that the orig-inal vesting terms of the award were met. An additional ex-pense, measured as at the date of modification, is recognized for any modification that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee. Where an award is cancelled by Smartfish or by the award holder, any remaining element of the fair value of the award is expensed immediately through profit or loss.

The dilutive effect of outstanding options is reflected as ad-ditional share dilution in the computation of diluted earnings per share.

Parent Company accounting policiesThe financial statements of Smartfish AS are prepared in ac-cordance with simplified IFRS pursuant to the Norwegian Accounting Act §3-9 and regulations regarding simplified application of IFRS issued by the Norwegian Ministry of Fi-nance on 3 November 2014.

Notes


The presentation currency of Smartfish AS is NOK, consist-ent with the presentation currency for the Group financial statements and with The Company’s functional currency. The Parent Company apply the same accounting policies as the Group.

NOTE 3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES

The preparation of the Group’s consolidated financial state-ments requires management to make judgements, estimates and assumptions that affect the reported amounts of reve-nues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Un-certainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carry-ing amount of assets or liabilities affected in future periods.

The key assumptions and sources of estimation uncertain-ty, that have a significant risk of causing a material adjust-ment to the carrying amounts of assets and liabilities within the next financial year, are described below. The key assump-tions and estimates were based on parameters available when the consolidated financial statements were prepared. Cir-cumstances having effect on future development may change beyond the control of the Group. Such changes are reflected in the assumptions as and when they occur.

Intangible assets- development costsIAS 38 prescribes certain criterions to decide when Smartfish is obliged to capitalise development costs. When operation-alising these criterions Smartfish had made judgements that currently has resulted in capitalisation of development costs for the first time in 2019. In earlier year assessment concluded that the criterions were not satisfied, and therefore no capital-isation of development costs was made.

Revenue from contracts with customersUp-front paymentsWhen assessing whether up- front payments in new distri-bution contracts represents consideration for future goods or services, Smartfish interprets the contract and other relevant factors to reach a conclusion. This judgement impacts the tim-ing and value of the corresponding revenue.

Fair value of consideration in kindWhen Smartfish categorize revenue for consideration in kind the value of the consideration is estimated as being equal to the fair value of the goods sold. The measurement of the value of the consideration (marketing and publicity) is highly un-certain. The revenue may therefore be significantly higher or lower than what has been recognized.

Share-based paymentEstimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires finding of the most ap-propriate inputs to the valuation model including the value of the share at grant date, the expected life of the share option or appreciation right, volatility and dividend yield. The Group uses a Black & Scholes Merton valuation for the equity-based share-option plans. The fact that the shares are not listed or otherwise traded increases the uncertainty of the valuation and the set of possible outcomes.

NOTE 4. REVENUE FROM CONTRACTS WITH CUSTOMERS

Disaggregated revenue information The Group’s revenue from contracts with customers has been disaggregated and presented in the tables below:

Categorization of contracts with customers, TNOK 2019 2018

SegmentsMedical Nutrition 2 870 9 322 Consumer Health 5 311 4 209 Other revenue 643 3 255 Total 8 824 16 785

Geographical regionEurope 6 864 12 636 Asia 1 934 4 149Other 26 0 Total 8 824 16 785

Goods transferred at a specific point in time 8 824 16 785 Total 8 824 16 785

Summary of contract balances

Contract balances, TNOK 2019-12-31 2018-12-31

Accounts receivable (note 19) 16 956 3 059Contract liabilities (note 23) -18 191 -5 827

Accounts receivable are non-interest-bearing and the typical-ly fall due for payment 30 days after the performance obliga-tion has been fulfilled. Contract liabilities are mainly up-front payments from distributors. The table below shows revenue during the year that is attributable to contract liabilities:

Notes


Contract liabilities, TNOK 2019-12-31 2018-12-31

Opening balance contract liabilities -5 827 0Amount recognized as revenue during the period and which was included in the balance for contract liabilities at the beginning of the year 4 017 0Additional advances -16 381 -5 827 Closing balance, contract liabilities -18 191 -5 827

Contract liabilities, TNOK 2019-12-31 2018-12-31

Within one year 3 031 1 959 More than one year 15 160 3 868

Performance obligationsInformation related to the Group s performance obligations and related revenue recognition is summarised below.:

DistributorsSmartfish has distribution agreements with partners in spe-cific geographic markets. Revenue from contracts with the distributors is recognized at the point of time when control of the goods or services are transferred to the customer at an amount that reflects the consideration which the Group ex-pects to be entitled in exchange for those goods or services.

Sales to professional sports clubsSmartfish sells products to professional sport clubs for con-sideration in cash, in kind or a combination. The consider-ation in kind consist of advertising and publicity activities. The value of the non-cash consideration is valued at the fair value of the goods given up. Smartfish recognize revenue when its performance obligation, to deliver the products, is satisfied.

Products are sold ex works and there are no significant financing component. Expected payment is within 30 days. Historically there has been very limited and no material re-turns. The estimated return is therefore set to zero. In the event of a Serious Adverse Event regarding product quality, it is Smartfish s obligations to recover recall expenses. Smart-fish has included such risk in its resurance coverage. Accord-ingly Smartfish has recorded not to reduce the transaction price/revenue in its estimate of the variable element of the revenue.

Direct sales to consumers (web-shop sales) Revenue is recognized at the transaction price when the goods leave Smartfish warehouse. There is no right of return other than in the event of a quality complaint. Smartfish has no historical experience of such events. There is therefore no estimated reduction in transaction price for return.

NOTE 5. OTHER OPERATING INCOME

TNOK 2019 2018

Development projects and upfront payments 4 954 0Government grants recognised in profit and loss 3 024 1 414Other operating income 7 979 1 414

Government grants have been received from Norges For-skningsråd. In 2018 this was related to the Nano 2021 pro-gramme. For 2019, Smartfish also anticipates to receive funds from Norges Forskningsråd through the Skattefunn scheme. All conditions and contingencies attached to the grants have been fullfilled.

NOTE 6. SALARY AND PERSONNEL EXPENSE AND MANAGEMENT REMUNERATION

TNOK 2019 2018

Salaries and holiday pay 7 001 8 622Employer tax 2 574 1 623Pension costs defined contribution plans (Note 19) 1 367 773Share-based payment (Note 6) 1 666 2 109Bonuses 1 294 1 442Board remuneration 654 800Other personnel costs 213 236Total salaries and personnel expense 14 770 15 606

Full-time equivalent employees 10 9

Notes


TNOKBoard

remuneration Salary BonusBenefits

in kind Pension

costTotal

remuneration

Management -Geir Harstad (CEO) - 1 556 480 479 2 515

Members of the BoardBenedicte H. Fossum (Chairperson) 250 250 Karin Judith Meyer (Member) 100 100 Jonas Jendi/Industrifonden (Member)* 50 50 Ronny Vikdal (Member) 50 50 Iacob Mathiesen (Member) 100 100 Total remuneration 550 1 556 480 - 479 3 065

* Jonas Jendi did not receive Directors’ remuneration, but Industrifonden receives a remuneration of NOK 50.000 (excl. VAT.) for making a Board member available for the Company.

Notes

The CEO in Smartfish AS is formally employed in Smartfish AB.The Group management received bonus according to the

established bonus programme which is based on company development and individual goal achievements.

The Group management takes part in the general pension scheme of The Company as described in note 24. The CEO has a separate pension plan whereby The Company pays 30% of his salary, excluding bonus, in the defined contribution plan.

The CEO has an agreement whereby his is entitled to a compensation after termination of employment before retire-

ment that equals 100% of salary for eight months. There are no similar agreements with other members of management or Board of Directors.

No loans or guarantees have been given to Group manage-ment or members of the Board.

The Group management and 2 other employees have dur-ing the year been granted share options. The share option plan is further presented on note 7. Below is an overview of share options for Management and Directors:

Number of options

Opening balance Granted Forfeited Exercised Ending balance

Management and directorsGeir Harstad 450 000 450 000 Total 450 000 450 000

For information regarding options, please refer to note 7.

Shares held by Group Management and board members:

Benedicte Fossum (Chair person) 444 585 Indirectly through Mittas AS Iacob Mathiesen (Board member) 177 160 Geir Harstad (CEO) 50 506

Total 672 251


NOTE 7. SHARE OPTION PLAN

The Company has a share-based option plan for employees in management positions. As at 31.12.2018, 4 employees were included in the option plan. The options plan for the CEO is vested over a period of 2,5 years related to service. Thereafter, the options may be exercised over a period of 2 years. The remaining options are renewed from an earlier programme, are fully vested at the balance sheet date and may be exer-cised until end 2022, provided the optionee is still employed by The Company. Most of the earlier plans have had similar conditions as the current plan for the CEO. The plans will be settled in shares.

The fair value of the options is set on the grant date and ex-pensed over the vesting period.

Expense recognised, TNOK 2019 2018

Expense arising from equity-settled share-based payment transactions 1 666 2 109

Overview of outstanding options 2019 2018

Outstanding options 1.1 906 000 989 471Options granted 200 000 906 000Options forfeited -236 000 -989 471Options exercised 0 0Options expired 0 0Outstanding options 31.12 870 000 906 000Of which exercisable 220 000 456 000

The outstanding options are subject to the following condi-tions:

2019 2018

Expiry date

Average strike price

Number of share options

Average strike price

Number of share options

2020 12,93 456 000 12,93 456 0002021 - - - -2022 12,93 450 000 12,93 450 0002023 19,76 200 000 - -

870 000 906 000

The fair value of the options has been calculated using Black & Scholes option-pricing model. The average fair value of the options granted in 2019 is NOK 8.01 (2018: NOK 7,49).

Notes

The calculations are based on the following assumptions:

Share price on the grant dateThe share is not listed and there have been limited share transactions. The value of the share at grant dates has there-fore been estimated based on internal discounted cash flows.

The strike price per optionThe strike price per option for options outstanding as per 31.12.2019 is for the CEO, totalling 450 000 options, is divided into three parts, whereby 1/3 is the same as the share price in the last capital increase in Smartfish and the subsequent 2/3 have increased strike prices reflecting value increase over the vesting period.

VolatilitySince the share has not been traded there are no observable historical volatility data. Smartfish has used the implicit vol-atility from the internal valuations at different points in time as basis for the expected volatility used in the option valua-tion. The expected volatility has been stipulated to 60 %.

The term of the optionIt is assumed that 85 % of the employees will exercise the op-tions once they are exercisable. The options are expected to have a lifetime of between 90% and 100% of the maximum lifetime.

DividendThe estimated dividend per share is NOK 0 per annum.

Risk-free interest rateThe risk-free interest rate is set equal to the interest rate on government bonds during the term of the option.


NOTE 8. OTHER OPERATING EXPENSES

Other operating expenses, TNOK 2019 2018

Freight costs -284 -715 Research and development -8 478 -7 327 Sales and marketing -2 586 -1 804 Storage and rental -1 417 -1 351 Travel costs -1 419 -987 Consultancy fees -7 033 -4 526 Other operating costs -1 395 -825 Total operating expenses -22 612 -17 535

Specification auditor’s fee 2019 2018

Statutory audit -376 -195Other non-assurance services -266 -111Tax consultant services -12 -8Total -654 -314

NOTE 9. FINANCE COST, FINANCE INCOME AND OTHER INCOME

Finance income, TNOK 2019 2018

Interest income 14 18Foreign exchange gains 113 157Total financial income 127 175

Finance expenses, TNOK 2019 2018

Interest on interest bearing liabilities -4 187 -1 137Fair value increase convertible loan -784 -783Foreign exchange losses -8 -221Other financial expenses -8 -2Total financial expenses -5 239 -2 143

Notes

NOTE 10. TAX

Income tax expense, TNOK 2019 2018

Current tax:Tax payable -14 -44Deferred tax:Changes in deferred tax 0 0Tax expense -14 -44

A reconciliation of the effective tax rate and the tax rate in Smartfish AS` s country of registration (Norway):

TNOK 2019 2018

Pre-tax profit -32 752 -27 350Income taxes calculated at (22% ) 7 201 6 284Adjustment in respect of current income tax of previous years 0 0Changes in unrecognised deferred tax asset -7 046 -3 418Non-deductible share option expense 0 -485Tax incentive- R&D 204 0Other non-deductible expenses -374 -5Effect of other tax rates in subsidiaries 0 2Effect of change in tax rate 0 -2 421Tax expense -14 -44

Deferred tax and deferred tax assets, TNOK

Consolidated financial position

2019-12-31 2018-12-31

Deferred tax assetsProperty, plant and equipment 7 3Right-of-use-assets -15Inventory 0 98Accounts receivables 213 2Tax losses carried forward 55 955 5 202Deferred income 4 002 815Convertible Loan 0 172Deferred tax assets 60 161 53 292

Deferred tax liabilities 0 0

Net deferred tax assets 60 161 53 292Valuation allowance -60 161 -53 292Deferred tax asset/liability in the consolidated financial position 0 0


The Group offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.

The Group s tax loss carry-forward is deductible against future taxable losses. Due the recent history of losses, IFRS does not allow recognition of a tax assets to represent the val-ue of such possible utilisation. The Group has a total tax loss carried forward of MNOK 254 as at 31 December 2019 (2018: MNOK 237) with no expiry date.

NOTE 11. EARNINGS PER SHARE

Basic earnings per share is calculated using earnings attrib-utable to the Parent Company’s shareholders divided by the average number of ordinary shares during the period. Diluted earnings per share is calculated using earnings at-tributable to the Parent Company’s shareholders divided by the average number of ordinary shares during the period, ad-justed for the effect of the share-option plans based on the av-erage share price during the period. If the share price is lower than the subscription price, there will be no dilutive effect.

Profit (loss) attributed to ordinary shareholders, TNOK 2019 2018

Profit (loss) attributed to the Parent Company's shareholders as per the income statement -32 766 -27 394Total -32 766 -27 394

Average number of shares, TNOK 2019 2018

Weighted average number of shares during the period 20 049 589 18 162 797 Effect of dilution from share-option plans 0 0Weighted average number of shares during the period after dilution 20 049 589 18 162 797

NOTE 12. GROUP INFORMATION

The consolidated financial statements comprise the Parent Company Smartfish AS, 983 032 958, and the subsidiaries Smartfish Sport AS and Smartfish AB.

Share of equity

Share of vot-ing power

Number of shares

Carrying amount

Smartfish AB 100% 100% 100 55Smartfish Sport AS 100% 100% 100 0Total 55

CINRegistered office Equity

Profit (loss)

Smartfish AB 556950-8848 Stockholm 229 31Smartfish Sport AS 918 410 554 Oslo -56 -19

NOTE 13. MEASURED AT FAIR VALUE

The following table shows the Group’s fair value hierarchy for assets and liabilities.

Convertible loan The hybrid instrument has been designated at fair value through profit or loss under IFRS 9 (4.2.2). The instrument is revalued at the end of the reporting periods and the fair value adjustment is recognized in profit or loss.

2019-12-31

Level 1 Level 2 Level 3

Financial liabilities, TNOK

quoted prices

directly or indirectly

observable inputs

non- observable

inputs

Convertible loan 0 0 0Total 0 0 0

2018-12-31

Level 1 Level 2 Level 3


quoted prices

directly or indirectly

observable inputs

non- observable

inputs

Convertible loan 0 0 16 908Total 0 0 16 908

Notes


NOTE 14. PROPERTY, PLANT AND EQUIPMENT

TNOK

Plant and ma-

chineryEquip-

ment

Fixtures and

fittings Total

Opening carrying amount 2018 35 20 78 133

Financial year 2018Opening cost 251 285 328 864Acquisitions for the year 0 25 0 25Closing accumulated cost 251 310 328 890

Opening depreciation -216 -265 -250 -731Depreciation and im-pairment for the year -5 -12 -33 -50Closing accumulated depreciation -221 -277 -283 -781


Opening depreciation -221 -277 -283 -781Depreciation and im-pairment for the year -10 -24 -33 -67Closing accumulated depreciation -231 -301 -316 -848

Closing carrying amount 2019 20 103 12 134

NOTE 15. INTANGIBLE ASSETS

TNOKDevelopment

costs Total

Financial year 2019CostAt 1 January 2019 0 0Additions - internally developed 730 730Closing accumulated cost 730 730

Amortisation and impairmentAt 1 January 0 0Amortisation 0 0Closing accumulated amortisation and impairment 0 0

Closing carrying amount 2019 730 730

NOTE 16. RIGHT-OF-USE-ASSETS

TNOKProperty, plant

and machinery Total

Financial year 2019CostAt 1 January 2019 0 0Revised accounting policies 1 607 1 607Additions 590 590Closing accumulated cost 2 197 2 197

Amortisation and impairment1 January 2019 0 0Amortisation -623 -623Closing accumulated amortisation and impairment -623 -623


Notes


NOTE 17. FINANCIAL ASSETS AND LIABILITIES

2019-12-31 2018-12-31

Financial assets, TNOK

Carrying amount

Fair Value

Carrying amount

Fair Value

Trade receivable 16 956 16 956 3 059 3 059Cash and cash equivalents 40 159 40 159 11 528 11 528Total 57 115 57 115 14 587 14 587

Financial liabilitiesSmartfish financial liabilities have all been classified and measured at amortized cost or fair value. The convertible loan is carried at fair value (through profit or loss). After initial recognition, the liability is reported at amortized cost until it is converted or matures.

2019-12-31 2018-12-31


Carrying amount

Fair Value

Carrying amount

Fair Value

Trade payable 2 539 2 539 2 315 2 315Leasing liability 1 504 1 504 0 0Convertible loan 0 0 16 908 16 908Total 4 043 4 043 19 223 19 223

Notes

All financial instruments reported in the balance sheet have been classified in different measurement categories.

Fair value does not deviate significantly from nominal val-ue, which means that amortized cost is approximately the same as fair value. Because of their short duration, accounts receivable and other similar receivables have been measured at the nominal amount.

Accounts payable, and other current claims have also been measured at the nominal amount, due to their short duration. The table below shows the fair values compared to the car-rying amounts for other financial liabilities. For the Group’s interest-bearing loan, fair value has been calculated using the effective interest method.

Financial assetsSmartfish has the following financial assets, all of which have been classified and measured at amortized cost: The Group only classifies its financial assets as assets measured at am-ortized cost when the following conditions have been met: • The asset is included in a business model, where the goal is

to collect contractual cash flows and • The contractual terms give rise to, at specific times, cash

flows that only consist of principle and interest on the out-standing amount of capital.

The financial liabilities have the following maturities:

Maturity financial liabilities, TNOK 2019-12-31 < 3 months 3 - 12 months 1 - 5 years > 5 years Total

Trade payable 2 539 2 335 204 0 0 2 539Leasing liability 1 504 204 596 703 0 1 504Total 4 043 2 539 800 703 0 4 043

Maturity financial liabilities, TNOK 2018-12-31 < 3 months 3 - 12 months 1 - 5 years > 5 years Total

Trade payable 2 315 2 236 79 0 0 2 315Interest-bearing loans 16 908 0 16 908 0 0 16 908Total 19 223 2 236 16 987 0 0 19 223

Reconciliation of changes in liabilities arising from financing activities:

TNOK 2019-01-01Cash flows

Fair value changes 2019-12-31

Interest-bearing loans 0 0 0 0Convertible loan 0 0 0 0

TNOK 2018-01-01Cash flows

Fair value changes 2018-12-31

Interest-bearing loans 294 -294 0 0Convertible loan 0 -15 000 -1 908 -16 908


RisksMarket riskMarket risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three main types of risk: currency risk, interest rate risk, and other price risk, such as equity price, commodity and regulatory risk. Financial in-struments affected by market risk include loans and borrow-ings, deposits and debt.

Foreign currency riskForeign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the Group’s operating activities (when revenue or expense is de-nominated in a foreign currency). The foreign currency im-pact on the Group’s profit before tax is due to changes in the fair value of monetary assets and liabilities. At current, the Group does not actively hedge its foreign currency exposure. Most fixed costs in the Group are in NOK, variable costs are in NOK and SEK and revenues in NOK and EUR.

Foreign currency sensitivityThe following tables demonstrate the Groups sensitivity to a reasonably possible change in Euro and SEK exchange rates, with all other variables held constant. The Group’s exposure to foreign currency changes for all other currencies is immaterial.

Effect on profit before tax, TNOK

2019 2018

Change in currency rate +5% -5% +5% -5%

CHF 57 -57DKK 3 -3EUR 121 -121 143 -143GBP 3 -3HKD 762 -762SEK -35 35 -50 50

Interest rate riskInterest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group s main exposure to interest rate risk is related to the convertible loan which has a fixed interest. The exposure is limited due to its short term.

Commodity price riskThe Group is affected by the price volatility of certain com-modities. Its operating activities require the ongoing pur-chase and supply of fish oil and other raw materials as well as finished products and are exposed to changes in their prices. Apart from sourcing from more than one supplier for certain raw materials, the general policy of the Group is not to hedge commodity risk exposure.

Notes

Other market riskThe Group’s revenues are exposed to regulatory and reim-bursement risk in markets where it operates. Medical nutri-tion requires regulatory approval for each individual market and the Group is exposed to changes in rules and regula-tions in each market and general treatment guidelines for each medical indication. The effects of this risk are reduced through strong scientific documentation and sales in several geographies.

Liquidity riskLiquidity risk is the risk that the Group will not be able to meet obligations associated with financial liabilities when due. The Group manages its liquidity through constant sur-veillance of cash balances and monthly cash flow forecasts.

Credit riskCredit risk is the risk that a counterparty will not meet its ob-ligations under a financial instrument or customer contract, leading to a financial loss. The Group is primarily exposed to credit risk from its trade receivables. A provision is made for expected credit losses based on past experience and for-ward-looking information”. Historically these financial losses have been minimal. The Group has actively sought contracts with prepayments of long-term contracts to reduce credit risk.

The credit risk exposure on the Group’s trade receivables is illustrated with the ageing analysis provided in note 19.

NOTE 18. INVENTORIES

TNOK 2019-12-31 2018-12-31

Raw materials 892 533Finished goods 429 1 146Goods for resale 525 399Total 1 847 2 077

Write-downs of inventories, mainly obsolete products made for clinical studies, at TNOK 472 (TNOK 184) have been rec-ognized as cost of goods sold.

Cost of goods sold specified, TNOK 2019 2018

Cost of raw materials and goods for resale 5 125 10 295Change in inventory of finished goods 1 246 95Total cost of goods sold 6 371 10 391


Notes

NOTE 19. ACCOUNTS RECEIVABLES AND OTHER RECEIVABLES

In December a large invoice for up-front payment was issued. A tenth of this invoice was recognised a income in 2019 and the rest will be distributed in the coming years.

Accounts receivable, TNOK 2019-12-31 2018-12-31

Accounts receivables from external customers 17 922 3 066Provision for doubtful debts -966 -7Total 16 956 3 059

Accounts receivables are non-interest-bearing and payment terms are typically 30-60 days. See below for an ageing analy-sis of receivables from customers.

TNOK Total < 30 days 30-90 days > 90 days

2019-12-31 17 922 16 807 1 043 72

2018-12-31 3 066 2 786 86 194

The Group applies the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of the lifetime expected loss provision for all account receivables. Allowance for expected credit loss is estimated based on historical data and ratings as well as forward-look-ing information. In 2019 9% are direct sales to customers where ageing of receivables is used to determine lifetime ex-pected credit losses. All other receivables are assessed sepa-rately in determining expected loss.

Provision for doubtful debts, TNOK 2019-12-31 2018-12-31

Opening amount -7 -26Provision for bad debt losses for the year -966 -7Confirmed bad debt losses 7 26Total -966 -7

Other receivables

Other receivable, TNOK 2019-12-31 2018-12-31

Government Grants Forskningsrådet/Nano 2021 421 137Total 421 137

NOTE 20. CASH AND SHORT TERM DEPOSITS

TNOK 2019-12-31 2018-12-31

Cash 9 9Short-term bank deposits- restricted 1) 188 382Short-term bank deposits- unrestricted 39 963 11 137Cash and cash equivalents in the balance sheet 40 159 11 528 1) The funds are restricted deposits for employee withholding tax.

There are no other restrictions on the bank deposits.

NOTE 21. SHARE CAPITAL AND OTHER CONTRIBUTED CAPITAL

The Parent Company’s share capital consists solely of fully paid shares. All issued shares have equal voting rights and the right to receive dividend. The preference shares have cer-tain liquidation rights, having a first right to aggregated pro-ceeds from liquidation or exit or other distribution from The Company.

2019-12-31 2018-12-31

Ordinary shares, nominal value NOK 0,10 2 316 063 2 316 063Preference shares, nominal value NOK 0,10 20 081 301 15 880 625Total number of shares 22 397 364 18 196 688

Notes


Options plan The Company has recognized other equity of TNOK 1 666 NOK (TNOK 4 416 in 2018). This is related to the share option plan for management described in Note 7.

All issued shares have equal voting rights and the right to receive dividend. The preference shares have certain liquida-tion rights.

Convertible loanSee note 22 regarding terms and conditions for the convert-ible loan.

NOTE 22. INTEREST-BEARING LOANS

Carrying amount

TNOKMaturity

date 2019-12-31 2018-12-31

UnsecuredConvertible Loan 1) 2019-03-31 0 16 908Total unsecured loans 0 16 908Total long-term loans 0 01st year’s principal repay-ments on long-term loans 0 16 908Total long-term loans excluding the 1st year’s principal repayments 0 0

1) See description of terms and conditions below.

See Note 17 for description of interest rate risk.

Convertible loanOn 5 April 2018 signed a convertible loan agreement with existing shareholders in the aggregate amount of NOK 15 000 000. The loan is convertible into preference A - shares of the parent entity, at the option of the holder, or repayable on 31 March 2019. The loan was converted 2019 at 19,76 NOK per share. The hybrid instrument has been designated at fair value through profit or loss under IFRS 9 (4.2.2). The instru-ment is revalued at the end of the reporting periods and the fair value adjustment is recognized in profit or loss.

Changes to share capital and share premium:

No. of shares Share capital TNOK Share premium TNOK

TNOK 2019 2018 2019 2018 2019 2018

Ordinary shares Issued and fully paid 1 January 2 316 063 2 316 063 232 232 23 442 23 442Issued new share capital 0 0 0 0 0 031 December 2 316 063 2 316 063 232 232 23 442 23 442

Preference shares Issued and fully paid 1 January 15 880 625 15 829 509 1 588 1 583 180 168 179 588Issued new share capital 4 200 676 51 116 419 5 82 585 58031 December 20 081 301 15 880 625 2 008 1 588 262 753 180 168Total 22 397 364 18 196 688 2 239 1 820 286 195 203 610

Notes


NOTE 23. CONTRACT LIABILITIES

TNOK 2019-12-31 2018-12-31

Up-front payment -distribution contracts 18 191 5 827Total contract liabilities 18 191 5 827 Management expects that TNOK 3 031 of the transaction price allocated to the unsatisfied contracts as of 31 December 2019 will be recognized as revenue and cost reduction in 2020.

NOTE 24. PENSIONS

The Company is required to have an occupational pension scheme in accordance with the Norwegian law on required occupational pension (”lov om obligatorisk tjenestepensjon”), for its employees in Norway. The Company’s defined contri-bution pension arrangements fulfil the requirements of the law.

For its employees in Sweden the Group has a defined con-tribution arrangement.

TNOK 2019 2018

Yearly pension contribution expense 1 365 773

NOTE 25. LEASES

The carried amount of leased assets is attributable to the fol-lowing asset classes.

Property, plant and equipment

TNOK 2019-01-01 2019-12-31

Premises 1 607 1 574Total 1 607 1 574

The change in lease liabilities is attributable to:

2019-12-31

Effect on financial leases, TNOKClosing

balance

Opening balance lease liability as per IFRS 16 1 607New agreements 590Accrued interest 89PaymentsLease liability at the end of the period -782

1 504

NOTE 26. EVENTS AFTER THE BALANCE SHEET DATE

In January 2020 the Coronavirus started spreading and as of the date of this report had a significant negative impact of the global economy. Smartfish is closely monitoring the situ-ation and has taken measures to handle the situation as well as possible. It is a risk for, sales and timing of new product launches being negatively affected. If the pandemic lasts for a prolonged period with corresponding impact of the world economy, it could impact the Company negatively through lower earnings, increased counterparty risk and more diffi-culties in obtaining funding at satisfying terms.

Subsequent to the end of the financial year, no other events have taken place of significance to the submission of the an-nual accounts.


New IFRIC InterpretationsOn 1 of January 2019 IFRIC 23 Uncertainty over income tax treatments entered into force. The new IFRIC deals with how tax law applies to a particular transaction or circumstance, and whether a taxation authority will accept a company s tax treatment. The Group has not assessed the IFRIC to not have significant impact.

New or revised reporting standardsThere are no other new or revised IFRS reporting standards or IFRIC Interpretations, not yet entered into force, that is deemed to have significant impact on the Group.

Effects on Financial leasesSee also note 16 Right-of-use assets, note 17 Financial assets and liabilities and note 25 Leases.

2018-12-31 2019-01-01

Effect on financial leases, TNOK

Closing balance

Effect of IFRS 16

Estimated opening balance

Property, plant and equipment 0 1607 1607Leasing liability, long term 0 879 879Leasing liability, short term 0 728 728

Notes

NOTE 27. RELATED PARTY DISCLOSURE

See note 6 for more information on remuneration to manage-ment and the board. The Group has no other material related party transactions or balances in 2019 and 2018.

NOTE 28. NEW REPORTING STANDARDS THAT HAVE NOT YET ENTER INTO FORCE

i) Changes in accounting policies entered into force during 2019. On 1 January 2019 the new leasing standard, IFRS 16 Leases, entered into force. IFRS 16 stipulates that all leases shall be reported in the balance sheet. Smartfish has therefore reviewed all of its leases. The carrying amounts on all assets and liabilities has increased. There has also been an impact on the income statement and on financing activities in the cash flow statement. This new standard is based on the view that the lessee is entitled to use an asset for a specific period of time, along with the obligation to pay for that right. Smart-fish has chosen to use the modified retrospective approach when implementing IFRS16. For information on how this im-pacts the Group, please see Note 28. Other amendments and interpretations may apply for the first time in 2019 but are not considered to have any material impact on the Group s financial statement.ii) Standards and interpretations issued but not yet effected.Certain new standards and amendments to standards and interpretations are effected for annual periods beginning on or after 1 January 2020. None of these are expected to have a significant impact.


Parent Company Statement of Comprehensive Income

Parent Company Statement of Comprehensive Income TNOK Note 2019 2018

Revenue from contracts with customers 8 694 16 791Other operating income P2 7 979 1 414Total revenue and other income 16 673 18 205

Cost of goods sold -5 960 -10 298Salary and personnel costs P3 -7 742 -11 422Other operating expenses P4 -30 122 -21 977Depreciation and amortisation P6,P8 -564 -50Operating profit -27 151 -25 541

Finance income 127 175Finance costs -5 207 -2 143Profit /(Loss) before tax -32 795 -27 509Income tax expense P5 0 0Profit /(Loss) for the year -32 795 -27 509

Other comprehensive income for the year 0 0Total comprehensive income for the year -32 795 -27 509


Parent Company Statement of Financial Position

Parent Company Statement of Financial PositionTNOK Note 2019-12-31 2018-12-31

ASSETSNon-current assets Property, plant & equipment P6 94 108Intangible assets P7 730 0Right-of-use-assets P8 825 0Shares in subsidiaries P13 55 55Non-current financial assets P13 19 0Total non-current assets 1 723 163Current assets Inventories 1 847 2 077Trade receivable 16 964 3 056Other receivables P9 496 137Prepayments 250 859Other current assets P9 925 0Cash and short term deposits P10 38 901 11 218Total current assets 59 385 17 347TOTAL ASSETS 61 108 17 510EQUITY AND LIABILITIESEquity P11Issued capital 2 239 1 820Share premium 286 195 203 610Other paid in capital 6 084 4 416Total paid in capital 294 518 209 846Other equity -258 557 -222 437Total other equity -258 557 -222 437Total equity 35 960 -12 592Non-current liabilities Contract liabilities 15 160 3 868Lease liabilities 770 0Current liabilities 15 930 3 868Interest-bearing loans P12 0 16 908Trade and other payables P9 3 185 4 801Contract liabilities 3 031 1 959Other current liabilities 2 999 2 567Total current liabilities 9 216 26 235Total liabilities 25 146 30 102TOTAL EQUITY AND LIABILITIES 61 108 17 510

Oslo, 31 December 2019 / 27 May 2019Annual report is signed electronically






Geir Harstad CEO


Parent Company Statement of Changes in Equity

Parent Company Statement of Changes in Equity

TNOK NoteIssued

capitalShare

premium

Other paid in capital

Other equity Total

Opening balance 2018-01-01 1 815 203 031 2 307 -194 929 12 223Comprehensive income for the year -27 509 -27 509New share issue P11 5 580 585Cost of share-based payments P11 2 109 2 109Closing balance 2018-12-31 1 820 203 610 4 416 -222 437 -12 592

Opening balance 2019-01-01 1 820 203 610 4 416 -222 437 -12 592Comprehensive income for the year -32 795 -32 795New share issue P11 419 82 585 -3 329 79 676Cost of share-based payments P11 1 666 1 666Closing balance 2019-12-31 2 239 286 195 6 084 -258 557 35 960


Parent Company Statement of Cash Flow

Parent Company Statement of Cash Flow TNOK Note 2019 2018

Cash flow from operating activitiesProfit before tax -32 795 -27 509Depreciation P8 564 50Impairment - 30Equity option expense-no cash effect 1 666 2 109Change in working capital -15 203 -155Increase in contract liabilities 12 365 5 827Changes in other current/non-current assets and liabilities 419 3 601Net cash flow from operating activities -32 983 -16 047

Cash flows from investing activitiesInvestment in equipment P6 -1 374 -25Aquisition of Intangible assets P7 -730 0Net cash flow used in investing activities -2 105 -25

Cash flows from financing activitiesProceeds from issue of share capital 79 676 585Proceeds from borrowings 26 098 16 908Repayment of loan -43 005 -294Net cash flow from financing activities 62 769 17 198

Net increase/(decrease) in cash and cash equivalents 27 681 1 126Cash and cash equivalents at beginning of period 11 218 10 092Cash and cash equivalents at end of period 38 901 11 218


Notes

Notes to the Parent Company Financial Statements

NOTE P1. PARENT COMPANY ACCOUNTING POLICIES

The financial statements of Smartfish AS are prepared in ac-cordance with simplified IFRS pursuant to the Norwegian Accounting Act §3-9 and regulations regarding simplified application of IFRS issued by the Norwegian Ministry of Fi-nance on 3 November 2014. Smartfish has opted to use the following:- IFRS 1 and 7 previous deemed cost for investments in sub-sidiaries.- IAS 10, 12 and 13 any dividends to holders of equity instru-ments or group contributions after the reporting period will be recognised in accordance with “Regnskapsloven”.- IAS 16, 43 the same principles for part of an item that shall be depreciated has been used in the parent company’s state-ment as well as in the consolidated statement of the financial position.

Accounting policies applied to subsidiariesSubsidiaries are recognised as deemed cost unless the as-set may be impaired. When the carrying amount of an asset exceeds its recoverable amount, the asset is considered im-paired and is written down to its recoverable amount.

Presentation currencyThe presentation currency of Smartfish AS is NOK, consist-ent with the presentation currency for the Group financial statements and with The Company’s functional currency. The Parent Company apply the same accounting policies as the Group.

NOTE P2. OTHER OPERATING INCOME

TNOK 2019 2018

Development projects & up-front payments 4 954 -

Government grants recognised in profit and loss 3 024 1 414

Other operating income 7 979 1 414

Government grants have been received from Norges For-skningsråd. In 2018 this was related to the Nano 2021 pro-gramme. For 2019, Smartfish expects to receive funds from Norges Forskingsråd through the Skattefunn scheme. All conditions and contingencies attached to the grants have been fulfilled.

NOTE P3. SALARY AND PERSONNEL EXPENSE AND MANAGEMENT REMUNERATION

TNOK 2019 2018

Salaries and holiday pay 3 866 6 266Employer tax 725 1 152Pension costs defined contribution plans (Note 25) 223 274Share-based payment (Note 7) 1 666 2 109Bonuses 495 683Board remuneration 654 800Other personnel costs 112 137Total salaries and personnel expense 7 742 11 422

Full-time equivalent employees 10 8

See also note 7 regarding information on CEO.


NOTE P4. OTHER OPERATING EXPENSES

Specification auditor’s fee 2019 2018

Statutory audit -332 -177Other non-assurance services -250 -111Tax consultant services -12 -8Total -594 -296

NOTE P5. TAX

Income tax expense, TNOK 2019 2018

Current tax:Tax payable 0 0Deferred tax:Changes in deferred tax 0 0Tax expense 0 0

TNOK 2019 2018

Pre-tax profit -32 795 -27 509Income taxes calculated at (23% / 24%) 7 215 6 327Changes in unrecognised deferred tax asset -7 047 -3 420Non-deductible share option expense -367 -485Tax incentive- R&D 204 0Other non-deductible expenses -4 -1Effect of change in tax rate 0 -2 421Tax expense 0 0

Deferred tax and deferred tax assets, TNOK

Consolidated financial position

2019 2018

Deferred tax assetsProperty, plant and equipment 7 3Right-of-use assets -12 0Inventory 0 98Accounts receivables 213 2Tax losses carried forward 55 951 52 197Deferred income 4 002 815Convertible Loan 0 172Deferred tax assets 60 161 53 287

Deferred tax liabilities 0 0

NOTE P6. PROPERTY, PLANT AND EQUIPMENT

TNOK

Plant and ma-

chineryEquip-

ment

Fixtures and

fittings Total

Opening carrying amount 2018 35 20 78 133


Opening depreciation -216 -265 -250 -731Depreciation and impairment for the year -5 -12 -33 -50Closing accumulated depreciation -221 -277 -283 -781


Opening depreciation -221 -277 -283 -781Depreciation and impairment for the year -10 -19 -33 -62Closing accumulated depreciation -231 -296 -316 -843


Notes


Notes

NOTE P7. INTANGIBLE ASSETS

TNOKDevelopment

costs Total

Financial year 2019CostAt 1 January 2019Additions - Internally developed 730 730Closing accumulated cost 730 730

Amortisation and impairmentAt 1 January 2019 0 0Amortisation 0 0Closing accumulated amortisation and impairment 0 0


NOTE P8. RIGHT-OF-USE-ASSETS

TNOKProperty, plant

and machinery Total

Financial year 2019CostAt 1 January 2019 0 0Revised accounting policies 1 227 1 227Additions 99 99Closing accumulated cost 1 326 1 326

Amortisation and impairment1 January 2019 0 0Amortisation -501 -501Closing accumulated amortisation and impairment -501 -501


NOTE P9. TRANSACTIONS WITH RELATED PARTIES

Recivables intra-group, TNOK 2019-12-31 2018-12-31

Prepayments 0 6Other receivables 8 0Total 8 6

Payables intra-group, TNOK 2019-12-31 2018-12-31

Account payables -824 -2 567Total -824 -2 567

NOTE P10. CASH AND SHORT TERM DEPOSITS

TNOK 2019-12-31 2018-12-31

Cash 9 9Short term bank deposits- restricted 1) 188 382Short-term bank deposits- unrestricted 38 706 10 827Cash and cash equivalents in the balance sheet 38 901 11 218 1) The funds are restricted deposits for employee withholding tax.

There are no other restrictions on the bank deposits.

NOTE P11. SHARE CAPITAL

The Parent Company’s share capital consists solely of fully paid shares. All issued shares have equal voting rights and the right to receive dividend. The preference shares have cer-tain liquidation rights, having a first right to aggregated pro-ceeds from liquidation or exit or other distribution from The Company.

2019-12-31 2018-12-31

Ordinary shares, nominal value NOK 0,10 2 316 063 2 316 063Preference shares, nominal value NOK 0,10 20 081 301 15 880 625Total number of shares 22 397 364 18 196 688

Notes


Changes to share capital and share premium:

No. of shares Share capital TNOK Share premium TNOK

Financial liabilities, TNOK 2019 2018 2019 2018 2019 2018

Ordinary shares Issued and fully paid 1 January 2 316 063 2 316 063 232 232 23 442 23 442Share options exercised Issued new share capital 0 0 0 0 0 0Transaction cost31 December 2 316 063 2 316 063 232 232 23 442 23 442

Preference shares Issued and fully paid 1 January 15 880 625 15 829 509 1 588 1 583 180 168 179 588Issued new share capital 4 200 676 51 116 20 5 82 585 58031 December 20 081 301 15 880 625 2 008 1 588 262 753 180 168Total 22 397 364 18 196 688 2 239 1 820 286 195 203 610

Options plan The Company has recognised other equity of TNOK 1 666 (TNOK 4 416 in 2018). This is related to the share option plan for the management described in note 7. All issued shares have equal voting rights and the right to receive dividend. The preference shares have certain liquidation rights, having a first right to aggregated proceeds from liquidation or exit or other distribution from the Company.

Convertible loanSee Note P12 regarding terms and conditions for the convert-ible loan.

NOTE P12. INTEREST-BEARING LOANS

Carrying amount

TNOKMaturity

date 2019-12-31 2018-12-31

UnsecuredConvertible Loan 1) 2019-03-31 0 16 908Total unsecured loans 0 16 908Total long-term loans 0 01st year’s principal repay-ments on long-term loans 0 16 908Total long-term loans excluding the 1st year’s principal repayments 0 0

1) See detailed description of terms and conditions below

See Note 17 for description of interest rate risk

Convertible loanOn 5 April 2018 signed a convertible loan agreement with existing shareholders in the aggregate amount of NOK 15 000 000. The loan is convertible into preference A - shares of the parent entity, at the option of the holder, or repayable on 31 March 2019. The loan was converted 2019 at 19,76 NOK per share. The hybrid instrument has been designated at fair value through profit or loss under IFRS 9 (4.2.2). The instru-ment is revalued at the end of the reporting periods and the fair value adjustment is recognized in profit or loss.

Notes


NOTE P13. GROUP INFORMATION

The Parent Company holds shares in the following subsidi-aries:

Share of equity

Share of voting power

Number of shares

Carrying amount

Smartfish AB 100% 100% 100 55Smartfish Sport AS 100% 100% 100 0Total 55

CINRegistered office Equity

Profit (loss)

Smartfish AB 556950-8848 Stockholm 229 31Smartfish Sport AS 918 410 554 Oslo -56 -19

NOTE P14. EVENTS AFTER THE BALANCE SHEET DATE

In January 2020 the Coronavirus started spreading and as of the date of this report had significant negative impact of the global economy. Smartfish is closely monitoring the situ-ation and has taken measures to handle the situation as well as possible. It is a risk for, sales and timing of new product launches being negatively affected. If the pandemic lasts for a prolonged period with corresponding impact of the world economy, it could impact the Company negatively through lower earnings, increased counterparty risk and more diffi-culties in obtaining funding at satisfying terms.

Subsequent to the end of the financial year, no other events have taken place of significance to the submission of the an-nual accounts.


Independent Auditor’s Report


REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS

OpinionWe have audited the financial statements of Smartfish AS comprising the financial statements of the parent company and the Group. The financial statements of the parent com-pany comprise the statement of financial position as at 31 December 2019 , the statements of comprehensive income, cash flows and changes in equity for the year then ended and notes to the financial statements, including a summary of significant accounting policies. The consolidated financial statements comprise the statement of financial position as at 31 December 2019 , the statements of comprehensive income, cash flows and changes in equity for the year then ended and notes to the financial statements, including a summary of sig-nificant accounting policies.

In our opinion,

the financial statements are prepared in accordance with the law and regulations

the financial statements present fairly, in all material respects, the financial position of the parent company as at 31 December 201 9 , and of its financial performance and its cash flows for the year then ended in accordance with the Norwegian Accounting Act and accounting standards and practices generally accepted in Norway

the consolidated financial statements present fairly, in all material respects the financial position of the Group as at 31 December 201 9 and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU

Basis for opinionWe conducted our audit in accordance with laws, regulations, and auditing standards and practices generally accepted in Norway, including International Standards on Auditing (ISAs). Our responsibilities under those standards are fur-ther described in the Auditor’s responsibilities for the audit of t he financial statements section of our report. We are inde-pendent of the Company and the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in Norway, and we have fulfilled our ethical responsibilities as required by law and regulations. We have also complied with our other ethical obligations in accordance with these requirements. We believe that the au-dit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Other informationOther information consists of the information included in the Company’s annual report other than the financial statements and our auditor’s report thereon. The Board of Directors and Chief Executive Officer (management) are 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 do-ing so, consider 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 con-clude that there is a material misstatement of this other infor-mation, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of management for the financial statementsManagement is responsible for the preparation and fair pres-entation of these financial statements in accordance with the Norwegian Accounting Act and accounting standards and practices generally accepted in Norway for the financial statements of the parent company and International Financial Reporting Standards as adopted by the EU for the financial statements of the Group, and for such internal control as man-agement 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 re-sponsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to go-ing concern and using the going concern basis of accounting, unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statementsOur objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from ma-terial misstatement, whether due to fraud or error, and to is-sue 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 ex-

To the Annual Shareholders’ Meeting of Smartfish AS



pected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with law, regulations and generally accepted auditing principles in Norway, including ISAs, we exercise professional judgment and maintain profes-sional 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 ap-propriate 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, misrep-resentations, or the override of internal control;

obtain an understanding of internal control relevant to the audit in order to design audit procedures that are ap-propriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Compa-ny’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 signifi-cant doubt on the Company’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 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 pres-entation;

obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activ-ities within the Group to express an opinion on the con-solidated 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 those charged with governance re-garding, among other matters, the planned scope and timing of the audit and significant audit findings, including any sig-nificant deficiencies in internal control that we identify dur-ing our audit.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

Opinion on the Board of Directors’ reportBased on our audit of the financial statements as described above, it is our opinion that the information presented in the Board of Directors’ report concerning the financial state-ments, the going concern assumption and proposal for the allocation of the result is consistent with the financial state-ments and complies with the law and regulations.

Opinion on registration and documentationBased on our audit of the financial statements as described above, and control procedures we have considered necessary in accordance with the International Standard on Assurance Engagements (ISAE) 3000, «Assurance Engagements Other than Audits or Reviews of Historical Financial Information», it is our opinion that management has fulfilled its duty to en-sure that the Company’s accounting information is properly recorded and documented as required by law and bookkeep-ing standards and practices accepted in Norway.

Oslo, xx June 2020 ERNST & YOUNG AS

Independent auditor’s report is signed electronically

Jon - Michael GrefsrødState Authorised Public Accountant (Norway)


TEXT AND PRODUCTION: Smartfish in collaboration with Oxenstierna & Partners.

Main officeForskningsparken / Oslo Innovation CenterGaustadalléen 210349 Oslo, Norge+47 22 51 98 80

SwedenSmartfish ABMedicon VillageScheeletorget 1SE-223 63 Lund, Sweden

E-mail [email protected]

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