Fjord Defence Group ASA

Annual Report • Mar 30, 2023

Untitled 2022 Annual Report 2 Contents 1 Board of Directors report 3 1.1. Responsibility statement 15 2 Environment, Social and Governance reporting (ESG) 16 3 Corporate governance 21 4 Transparency Act 32 5 Consolidated financial statement Carbon Transition Group 35 5.1. Consolidated statement of comprehensive income 35 5.2. Consolidated statement of financial position 36 5.3. Consolidated statement of financial position 37 5.4. Consolidated statement of change in equity 38 5.5. Consolidated statement of cash flow 39 5.6. Notes to the consolidated financial statement 40 6 Financial statement Carbon Transition ASA 76 6.1. Statement of comprehensive income 76 6.2. Statement of financial position 77 6.3. Statement of financial position 78 6.4. Statement of changes in equity 79 6.5. Statement of cash flow 80 6.6. Notes to the financial statements 81 7 Auditors report 95 3 1 Board of Directors report Operations and location Carbon Group comprises Carbon Transition ASA (referred to as the “Company” or the “Parent”) and its subsidiaries (together referred to as the “Group” or “Carbon”). Carbon Transition ASA is a public limited investment company incorporated in Norway. The Company is listed on EURONEXT EXPAND OSLO and traded under the ticker CARBN. The Company’s registered main office is at Askekroken 11, 0277 Oslo, Norway. Carbon Transition ASA has international liability insurance for the Board of Directors and management. The insurance coverage is up to MNOK 50 per year for total revenue of MNOK 612 and applies to the Parent company including subsidiaries. The Group’s business model is an investment company. Carbon comprises an OBN multi-client company and an investment arm. The Group may invest broadly in listed companies as well as companies expected to be listed in the near term. Carbon has a legacy seismic business operating under the name Axxis Geo Solutions. Under Axxis Geo Solutions, the Company manages a seismic OBN multi-client data library with assets in Norway and Egypt. The ocean-bottom seismic contract node on a rope business was divested in March 2022 through an earnout agreement with Magseis Fairfield. Under the agreement, Carbon Transition received USD 0.5 million at closing and will receive earnout payments of up to a maximum of USD 12.0 million over the next three years, based on the use of the equipment. There is a minimum payment in year three of USD 1.5 million, subject to certain milestones. During 2022, the Company reported multi-client late sales of USD 5.7 million and USD 5.5 million in 2021. The seismic multi-client data business model is frequently the preferred way to access seismic data for petroleum exploration and production (E&P) companies. The seismic data is licensed by E&P companies to assist in the discovery and development of petroleum resources. The Group’s return on investment from its multi-client library is seen through the life span of the data; from its early stage with revenues coming from the pre-funding by E&P companies during the execution of the program, through subsequent late sales after the seismic images are processed and available. The Group’s multi-client data is targeting near-field exploration, where production infrastructure is in place and where E&P companies need high-quality seismic data to unlock existing and new resources. In these production fields, oil and gas can be developed with lower cost, environmental impact and emissions. 4 In 2022, our multi-client business line, Axxis Multi Client, announced several milestones, such as the announcement of the Axxis/CGG reprocessing project and a significant late sale to existing client with a set of future milestone payments. Carbon expects these agreements to provide significant cashflow for the company going forward. The Axxis/CGG project will provide a steady quarterly revenue stream, and the milestone payments will follow the slightly lumpy nature of multi-client late sales revenues. With a sustained high oil price (in the range $75-85 per barrel of oil equivalent), it is expected that both Norway and Egypt will continue to be considered highly attractive for new exploration expenditures by the E&P companies. The Group expects the investment growth in exploration and development in our core areas to be durable and reinforced by the long-term demand outlook and supportive commodity prices. The Group invested USD 2.0 million (NOK 20.0 million) in Dolphin Drilling AS in September 2022. The Group acquired 1,714,568 shares at a price of USD 1.17 per share. The shares of Dolphin Drilling were listed on NOTC in Oslo and were moved to Euronext Growth in October 2022. The closing share price at the end of December 2022 was NOK 12.898, which values the Group’s investment at USD 2.2 million (NOK 22.1 million). The Group participated with USD 4.7 million (NOK 40.0 million) in CO2 Capsol AS’ equity private placement in October 2021. The Group acquired 3,636,363 shares at a price of NOK 11.00 per share. The shares of CO2 Capsol were listed on Euronext Growth in Oslo in December 2021. The closing share price at the end of December 2022 was NOK 11.50, which values the Group’s investment at USD 4.2 million (NOK 41.8 million). In August 2021, the Group invested approximately USD 1.7 million (NOK 15.2 million) to acquire 100,000 shares in the Series B equity private placement in the UK-based company, Power by Britishvolt Limited. In addition, Carbon Transition secured an option to acquire an additional 100,000 shares at the same price per share This option is valid until, and must be exercised in conjunction with, an initial public offering of the company. The Group’s entry price into Britishvolt as well as the exercise price on the Group’s Britishvolt options was GBP 12.68 per share. The Group is currently valuing Britishvolt at GBP 0.0 per share which is based on the fact that the Company is under administration. The estimated fair value of the Group’s investment in Power by Britishvolt Limited is USD zero (NOK zero) at the end of December 2022. The Group participated in Arbaflame AS’ convertible bond offering in July 2021, with a total investment of USD 3.4 million (NOK 30.0 million). In December 2021, the convertible bonds were converted to 3,920,294 common shares in the company. 5 Arbaflame had an equity private placement in November 2022 at NOK 0.83 per share and the Group use this value. Based on this valuation, the estimated fair value of the Group’s investment in Arbaflame was USD 0.3 million (NOK 3.3 million) at the end of December 2022. Total initial invested capital was USD 11.9 million. The fair value of the total investments was USD 6.8 million (NOK 67.2 million) at the end of December 2022. Comments related to the financial statements The consolidated financial statements are prepared in accordance with International Financial Reporting Standards («IFRS») as adopted by the European Union («EU»). The notes are an integral part of the consolidated financial statements. The consolidated financial statements have been prepared on a historical cost basis. The financial statements of the subsidiaries have been prepared for the same reporting year as the Company, using consistent accounting policies. The consolidated financial statements are presented in thousands of USD. Presentation and functional currency The Group presents its consolidated financial reports in USD. The Functional currency for the Group is USD. Foreign Currency Transactions in foreign currencies are translated to USD using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities in non- functional currencies are translated into functional currency spot rate of exchange ruling at the date of the balance sheet. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in non-functional currencies are recognized in the income statement. Changes in accounting principles The Company has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective. Several amendments and interpretations apply for the first time in 2022, but do not have an impact on the consolidated financial statement. Consolidated statement of comprehensive income Revenue 6 The 2022 Group’s revenues of USD 7.3 million are lower than the previous year’s revenues of USD 15.8 million. The 2022 revenues are late sales from multi-client Utsira project in the North Sea and Gulf of Suez project. The revenues for 2021 are mainly based on one exclusive node seismic contract in the UK of USD 9.0 million and late sales of USD 5.5 million from the multi-client Utsira project in the North Sea. Changes in fair value for investments Change in fair value for investment in 2022 was a loss of USD 13.4 million compared to a gain of USD 8.4 million in 2021. During 2022, the investment in Britishvolt has been written down to zero with USD 4.6 million, investment in Arbaflame has been written down with USD 3.1 million and listed companies have had negative market change of USD 5.7 million (CO2 Capsol AS and Dolphin Drilling AS). Other gains and losses Other gains in 2022 were USD 0.7 million compared to zero in 2021. The net gain is from the sales of the seismic node business to Magseis Fairfield in March 2022. Operational cost The 2022 Group’s cost of sales (COS) amounted to USD 0.4 million compared to USD 10.4 million during the same period in 2021. The COS in 2022 reflects zero operation and downscaling and sale of the seismic node business, remaining is data processing and storage of remaining equipment. The COS in 2021 is mainly related to the UK project of USD 8.3 million and USD 1.9 million to warm stack/idle project. Selling, general and administrative expenses The 2022 Group’s personnel expenses and other operating expenses amounted to USD 2.4 million compared to USD 6.6 million during the same period of last year. The reduction in 2022 is a result of downscaling of the seismic node business and downscaling of personnel. Various consultants fee was USD 2.3 million and remuneration for downsizing was 0.8 million in 2021. Depreciation of tangible assets The 2022 Group’s depreciation and write downs of equipment were USD 0.6 million compared to USD 7.0 million in 2021. During 2022, the node seismic business was sold. There were no new investments in equipment in 2022 or 2021. During 2021, the vessel Neptune Naiad was sold with a net loss of USD 3.5 million. Amortization of intangible assets 7 The straight-line amortization of the Utsira multi-client survey was changed from 4 to 10 years from 1 January 2022, which gave 8.5 years remaining amortization. The Group’s multi-client data in Gulf of Suez was finalized with processing in Q3 2022 and started amortization. The straight-line amortization of the Gulf of Suez multi-client survey is 4 years. The straight-line amortization of multi-client was USD 3.9 million for 2022 compared to USD 7.3 million for 2021. Impairment and write-up (reverse of impairment) No impairment charges have been made in 2022 of the Utsira multi-client survey or the Gulf of Suez multi-client survey in Egypt. During the first quarter of 2022, the Group reversed a portion of the 2019 and 2020 impairment and increased the Utsira survey carrying value with USD 5.6 million based on expectation for future late sales. Further, in the fourth quarter of 2022, the Group made a write-up of USD 7 million which is reversal of previous impairment, a portion of the 2019 and 2020 impairment. The increased value of the Utsira survey is based on expectation for future late sales for the new reprocessing project of Utsira. Amortization of the reprocessing of Utsira will start amortization over 7.5 years from January 2023 with USD 233 thousand per quarter. Financial items Net financial expense was USD 98 thousand in 2022 compared to net financial income of USD 21.2 million in 2021. During 2022, financial expenses and currency exchange loss was offset by financial income. The Company completed a successful reconstruction during 2021. The financial income was mainly due to restructuring gain of USD 24.7 million during 2021, offset by financial expense and currency exchange loss of USD 3.4. Income tax (expense) The corporate income tax in Norway is 22% in 2022. Income tax revenue of USD 1.7 million compared to income tax expense of USD 0.2 million for 2021. The tax revenue in 2022 of USD 1.4 million is related to currency exchange rate of EGP in taxes in Egypt calculated into USD and refund from operations in India with USD 0.3 million. The tax expense for 2021 was related to UK, US and Egypt. The Company has no deferred tax assets booked as of 31 December 2022. Tax loss carried forwards for 31 December 2022 is estimated at USD 43 million. 8 Profit for the period For 2022, the Group had a profit of USD 1.4 million compared to a profit of USD 13.9 million for the same period in 2021. Consolidated statement of financial position As of 31 December 2022, the Company had total assets of USD 52.8 million, compared to total assets of USD 54.8 million as of 31 December 2021. Total non-current assets of USD 47.3 million as of 31 December 2022 compared to USD 50.5 million as of 31 December 2021. This is attributed to multi-client library net adding USD 8.6 million and financial assets adding USD 3.0 million offset by net decrease in investment during 2022 of USD 11.4 million and a decrease of USD 3.4 million in fixed assets which includes the sale of the node business. There was no new investment or disposal in 2022. Total current assets increased from USD 4.2 million as of 31 December 2021 to USD 5.4 million as of 31 December 2022. The increase is driven by an increase in other current assets receivable of USD 3.0 million related to Utsira late sales, offset by reduction in cash by USD 1.8 million. The Company’s cash balance ended at USD 2.2 million on 31 December 2022. The Group’s equity was USD 47.7 million at the end of December 2022, representing a net increase of USD 0.9 million compared to 31 December 2021. The Group purchased its own shares of USD 0.5 million. In 2021, the Company completed the reconstruction in June and issued new shares valued at USD 5.1 million. Further the same year, a private placement and related repair offering in June and July of USD 19.6 million and in October an equity private placement of USD 3.2 million. The equity ratio is 90.3% as of 31 December 2022 compared to 85.3% as of 31 December 2021. Total non-current liabilities reduced from USD 0.9 million as of 31 December 2021 to zero as of 31 December 2022, following the full repayment of the company’s TGS loan during the first quarter of 2022. Total current liabilities reduced from USD 7.2 million as of 31 December 2021 to USD 5.1 million as of 31 December 2022. Taxes payables is related to corporate tax in Egypt of USD 2.3 million which has not been settled. Additionally, other current liabilities decreased by USD 1.7 million in 2022. Other current liabilities include project related accruals for taxes in Egypt of USD 2.1 million. The Group’s accrual for the Egyptian tax including corporate tax is uncertain and is not settled as of December 2022. Consolidated statement of cash flow The Group’s cash flow from operating activities in 2022 was positive of USD 1.1 million compared to negative USD 9.6 million in the same period in 2021, mainly due to the Groups legal reconstruction process. 9 The Group’s cash flow from investment activities in 2022 was negative USD 2.0 million. USD 2.0 million due to the investment in Dolphin Drilling and USD 0.5 million for investment in own shares during the quarter offset by USD 0.5 million received from sale of the node business, compared to negative of USD 9.9 million in the same period for 2021 due to investments. The Group’s cash flow from financing activities in 2022 was negative USD 1.0 million compared to positive USD 17.6 million in the same period in 2021. Repayment of the TGS loan during the first nine months of 2022 was USD 0.9 million. Cash outflow from financing activities for the same period of 2021 is mainly from new equity due to the Groups legal reconstruction process of USD 21.6 million offset by repayment of debt by USD 2.4 million and interest paid of USD 1.6 million. 10 Parent company Carbon Transition ASA is the parent company of the Group. In 2022, Carbon Transition ASA reported a profit after tax of USD 3.8 million compared to a profit after tax of USD 7.9 million in 2021. The decrease this year is significantly impacted by the reversal of intercompany receivables net of USD 11.7 million. Further write-down of shares in subsidiaries in 2022 with 5.1 million. Last year the profit was mainly due to gain from the restructuring of USD 24.1 million. At year-end 2022, Carbon Transition ASA had total assets of USD 48.9 million compared to USD 45.4 million at the end of 2021. The increase is mainly due to increase in investment in shares net of USD 20.9 million and increase in financial asset adding USD 3.0 million due to the earn-out model, offset by reduction in intercompany receivables of USD 14.1 million and reduction of fixed assets by USD 3.4 million due to sale of the node equipment business. The bank ended with USD 0.9 million, down from USD 3.7 million last year. As of 31 December 2022, Carbon Transition ASA has a total positive equity of USD 42.6 million, compared to a positive equity of USD 44.1 million at the end of 2021. The equity ratio ended at 87.2% as of December 2022 from 97.0% at the end of 2021.Total current liabilities has increased from USD 1.4 million as of December 2021 to USD 6.3 million as of December 2022 mainly due to year-end group contribution to and from the subsidiary Carbon Transition Investment AS net of USD 4.8 million. 11 Going concern In accordance with the Accounting Act § 3-3a, we confirm that the financial statements have been prepared under the assumption of going concern. The board of directors and management believe that the Company has sufficient working capital for continued operation. Risk factors The Group is exposed to risk factors including, but not limited to, the factors described below. The Group’s risk factors are described in more detail in note 15. Market risk The Group is exposed to market specific and general economic cycles and macro- economic fluctuations, since changes in the general economic situation affect the demand for products and services provided by companies the Group invests in. The performance of the Axxis Geo Solutions is dependent on production and development spending by oil and gas companies. Historically, in times of low oil prices, demand for seismic data has been significantly reduced. The Group is also exposed to share price changes in listed investment or changes and fluctuations in estimated equity value for non-listed investments. There is also a risk that the companies that are invested in will need further capital in order to obtain profitability, and that such capital will be subject to reduced pricing for various reasons compared to the current level of pricing. Credit risk The Group is faced with credit risk in terms of deposits with banks as well as receivables due from counterparts. The Group may also invest in financial credit instruments and may in such instances assume credit risk. Delayed or loss of payments from these parties may adversely impair the Group's liquidity. The concentration of the Group’s customers in the oil and gas industry may impact the Group's overall exposure to credit risk. The Group evaluates the credit quality of its counterparts to minimize the risk of payment delinquency, but no assurance can be given that the Group will be able to avoid this risk. During 2022, the Group did not experience any material receivables losses. Liquidity risk Liquidity risk is the risk that the Group is not able to meet its payment obligations. The Group is dependent on liquidity from its investments, access to long-term funding and timely payments receivable from customers. There can be no assurance that available funding sources are accessible when needed nor can there be any assurance that the Group will be able to raise new equity or access alternative sources of funds should this be required. The Group continuously monitors its cash receipts and payment obligations to ensure sufficient liquidity to meet operational needs. 12 Foreign exchange risk The Group’ presents its consolidated financial report in USD, the functional currency for the Company and all subsidiaries. Currency exchange rates fluctuate for several reasons, including international balance of payments, economic and financial conditions, government intervention, speculation, and other factors. The Group is primarily exposed to USD, NOK and GBP, and fluctuations in foreign exchange rates may therefore impact earnings. The Group has not established hedging arrangements to mitigate the possible adverse effects of this exposure. Climate risk The Group is exposed to climate-related risks primarily associated with its legacy business. This business may face reduced customer demand as a result of a growing focus on more environmentally attractive alternatives. Given the strong demand for oil and gas, the Group does not evaluate this risk as high in the coming year. This business may also be exposed to increasingly stringent environmental regulations. In light of the growing focus on energy security, the Group does not evaluate this to be a high risk in the coming year. The Group is not invested in exploration and production companies. However, its investments in the oil and gas sector are contributing to the production of carbon emissions and the related effects on the environment. This could potentially be a risk for the Group’s reputation in the investment community. The Group considers this to be a low risk in the coming year. The Group also invests in companies which may be negatively impacted by increasingly stringent environmental regulations. The Group evaluates this risk prior to making any investment decision. However, increasing environmental regulations may have a significant adverse effect on the investment portfolio. The Group may invest in companies which will need additional financing. To the extent such financing were not to be available, these investments may be significantly impacted. Other business risk Risk related to cyber criminality is increasing globally. This threat is relevant for all devices connected to the internet. In order to protect the Group’s assets and intellectual property, additional precautions and procedures have been implemented. The Group has taken steps to identify ongoing malicious activities and increase employee awareness of cyber threats. Despite these efforts, no guarantee can be made against potential future cyber-attacks and any such attack could materially impact the Group’s business and financial position. The Group business is subject to laws and regulations in various jurisdictions. Changes in or violations of such laws or regulations may adversely affect the Group's 13 business and profitability. The Group invests in financial and managerial resources to maintain compliance with these laws and regulations, and failure to do so could result in fines or penalties, enforcement actions, claims for personal injury or property damages, or obligations to investigate and remediate damages. The Group's multi-client business relies on a period of exclusivity in controlling the distribution of the acquired data through licenses to customers. The exclusivity period granted by local authorities can typically be 10 years. Any change in the duration of such exclusivity may have a negative impact on the Company's revenues and may cause impairment of remaining book values. The current conflict in Ukraine may have significant impact on prices of natural recourses as well as global capital markets. The recent oil price increase may have an impact on multi-client late sales. The volatility in the capital markets may have an impact on the Company’s share price and the valuation of the Group’s investments. Research and development The Group does no material research and development activity. Allocation of Net Profit (loss) The Board of Directors has proposed the profit for the Company of USD 38.8 million to be attributed to other equity. The Company’s equity as of December 31, 2022, was USD 82.4 million. Outlook We expect oil and gas prices to remain relatively high in the foreseeable future. Improved profitability in the energy sector is expected to result in increased capital investment by the oil majors and the larger independents. Additionally, historical underinvestment in exploration and development is driving the need for investment. For 2023, capital investment by the oil majors is significantly increased. We expect the Group’s multi-client library to benefit from this market dynamic. Market volatility is expected to remain high, and this poses a risk for the investment portfolio. In light of the market uncertainty, we believe it is prudent to take a cautious approach to making additional investments. However, we will continue to evaluate new investment opportunities in line with our broader strategic focus. Events after the reporting period On 17 January 2023, the Group announced a new Utsira multi-client late sale of USD 0.5 million (net to the Carbon Transition). 14 Oslo, 30 March 2023 The Board of Directors and CEO of Carbon Transition ASA Nina Skage Ketil Skorstad Torstein Sanness Chair Director Director Nils Haugestad Interim CEO 15 1.1. Responsibility statement Confirmation from the Board of Directors and general manager The Board of Directors and the CEO of Carbon Transition ASA have today considered and approved the annual report and financial statements for the 2022 calendar year ended on December 31, 2022. We confirm, to the best of our knowledge, that: • The 2022 financial statements for the Group and Parent company have been prepared in accordance with all applicable accounting standards. • The information provided gives a true and fair view of the Group’s and Parent company’s assets, liabilities, financial position and results. • The Board of Directors report provides a true and fair overview of the development, performance and financial position of Carbon Transition ASA and the Group together with a description of the principal risks and uncertainties that they face. Oslo, 30 March 2023 The Board of Directors and CEO of Carbon Transition ASA Nina Skage Ketil Skorstad Torstein Sanness Chair Director Director Nils Haugestad Interim CEO 16 2 Environment, Social and Governance reporting (ESG) The Group’s business model is an investment company. Carbon comprises an OBN multi-client company and an investment arm. The Group may invest broadly in listed companies as well as companies expected to be listed in the near term. Carbon has a legacy seismic business operating under the name Axxis Geo Solutions. Under Axxis Geo Solutions, the Company manages a seismic OBN multi-client data library with assets in Norway and Egypt. Axxis Geo Solutions is considered a passive investment of the Company. There have not been any operations in 2022 since the Group sold its seismic node on a rope business to Magseis Fairfield ASA in March 2022. As a result, the Group’s ESG focus is largely targeting Carbon Transition’s investment business. The Group is exposed to climate-related risks primarily associated with its legacy business as well as investments. These businesses may face reduced customer demand as a result of a growing focus on more environmentally attractive alternatives. Given the strong demand for oil and gas, the Group does not evaluate this risk as high in the coming year. These businesses may also be exposed to increasingly stringent environmental regulations. In light of the growing focus on energy security, the Group does not evaluate this to be a high risk in the coming year. The Group is not invested in exploration and production companies. However, its investments in the oil and gas sector are contributing to the production of carbon emissions and the related effects on the environment. This could potentially be a risk for the Group’s reputation in the investment community. The Group considers this to be a low risk in the coming year. 17 Stakeholders Materiality assessment overview Environmental The Group is committed to protecting people and the environment. As stewards of the environment, it is the collective responsibility of the Group and our people to protect the environments that we work in. The Group’s intent is to conduct our business in harmony with the environment and to minimize any impact our business may have. The Group has implemented a series of performance indicators which we believe will ensure our focus on environment, social and governance factors. These performance indicators are in line with the guidelines put in place by the board of directors. Management’s performance evaluation will in part be based on meeting targets for these indicators. The indicators will be presented under each belonging chapter below, first indicators are for environmental. Employees Investors Customers Suppliers Community Key topics * Engagement, commitments * Climate, environmental impact Training * ESG risks, opportunities * Corporate governance * Main business drivers * Climate environmental protection Human rights and decent working conditions * Climate environmental protection Human rights and decent working conditions Climate envorironmental impact * Anti-corruption * Human rights and labor regulations Channels and activity * Management communication * Anti-corruption course * Corporate policies for health and safety, ethics and social responsibility * Annual report, quarterly reports * Company presentations * Press releases * Investor meetings * Customer meetings * Regular dialogues * Compliance with transparency act of supply chain * Company presentations Strategic topics Strategic ambition Material topics What the topic covers Why the topic is material Topic boundary Enviromental Decarbonization and green growth Partly invest in companies which contribute to reduction of carbon emissions Decarbonization and green investments Reduce, reuse and recycle to minimize rescource use Pollution, stronger envirommental focus, requirements and regulations CT Group, customers, suppliers and partners Social Health and safety, equality and diversity Engaging and safe workplace with no harm to the employees Human rights and employment condition, equality and diversity Investing in human capital. Respect and protcection of human rights. Respect and protection of equal opportunities. To meet current and future demand for empoloyees. To acctract the best talent. Respect and protection of working conditions, equal treatment and non-discrimination practices. CT group, customers, suppliers and partners Governance Compliance and supply chain Be a responsible, trusted and compliant value chain partner. Compliance, supply chain management, responsible owenership Anti-corruption, supplier monitorinig, sustainable investments and active ESG ownership Eliminate corruption in the value chain and support fair trade. ESG evaluation of suppliers and investment portfolio CT group, customers, suppliers and partners 18 The Group measures three indicators with respect to Carbon Transition financial investments. • To the extent the investment relates to the energy transition sector, the investment should generally contribute significantly to the reduction in carbon emissions and/or the development of green technology. • Investment companies should have reasonable environment, social and governance guidelines in place. • Appropriate corporate governance policies should have been implemented. Target 2022 Result 2022 Target 2023 To the extent the investment relates to the energy transition sector, the investment should generally contribute significantly to the reduction in carbon emissions and/or the development of green technology. N/A Maintain 2022 target Investment companies should have reasonable environment, social and governance guidelines in place. 100% Maintain 2022 target Appropriate corporate governance policies should have been implemented. 100% Maintain 2022 target Result for 2022 The Group had one new investment in 2022, Dolphin Drilling AS, where the investment fulfilled the last two targets. The first target is not applicable as the investment does not relate to the energy transition sector. Social People The Group is committed to ensuring a safe and respectful working environment for its employees. The health and wellbeing of our people is the key to the Company’s success. Equality applies to all practices and guidelines relating to the recruitment process and hiring of all workers. We respect and protect the fundamental human and workers’ rights in a manner consistent with laws and regulations. The Group promotes a healthy workplace by prohibiting discrimination due to gender, race, age, ethnicity, disability, sexual orientation, or religion and provides fair compensation for employees’ work. Respect for the individual is a cornerstone of the Group’s operation. The total number of permanent employees in the Group was four at the end of 2022, compared to nine at the end of 2021. The Group employed two women and two men in 2022 and three women and six men in 2021. One employee was on parental leave both in 2022 and in 2021. The Group has no one part-time employee at 50% from August 2022. 19 The Board of Directors consists of three members at the end of 2022, one woman and two men. At the end of 2021, the board consisted also of one woman and two men and. There have not been any significant personnel injuries or accidents in the current or prior year. In 2021 the average sick day percentage for the work force was 0.6 percent. The average sick day percentage for the work force was zero in 2021. The following indicators are applied to evaluate the Group’s effectiveness in managing its people. • The Group targets absence due to illness of less than 2%. • All recruitment processes and hiring decisions need to be based on the Group’s standards for equal treatment. Target 2022 Result 2022 Target 2023 The Group targets absence due to illness of less than 2%. Maintain 2022 target All recruitment processes and hiring decisions need to be based on the Group’s standards for equal treatment. N/A Maintain 2022 target Result for 2022 The Group fulfilled the target for illness in 2022, with 0.6 %. The second target is not applicable since there has not been any new hiring in 2022. Governance Corporate governance The board and management have an annual review of the Group’s principles of corporate governance. In this review, the Group clarifies the division of roles between shareholders, the board and management. A review of these principles and how the Group has aligned itself is described in a separate section in the annual report, in accordance with the Accounting Act § 3-3 b regarding corporate governance. The Company has adopted ethical guidelines for the Group. The purpose of the guidelines is to create a healthy corporate culture and preserve the Group's integrity by helping employees to set a high standard of good business practice. Furthermore, the guidelines are intended as a tool for self-evaluation and for the development of the Group's identity. Corruption The Group is committed to prevent bribery, illegal influence, fraud and money laundering. The Group achieves this through committing to operating all activities within the spirit and letter of laws and regulations that govern our businesses and 20 employees. Employees must exercise the highest level of integrity, ethics and objectivity in any actions and relationships which may affect the Group. Employees must not misuse their authority or influence of their positions in these relationships. The Group shall strive for a clear culture of openness around all matters regarding customer care, relationship building, sponsorship, gifts, representation, travel, etc The following indicators are applied to evaluate the Group’s effectiveness in managing its corporate governance and corruption. • All employees should complete an anti-corruption course not less than once per year. • All employees should confirm reading the corporate policies: Health and safety, Ethics and Social responsibility. Target 2022 Result 2022 Target 2023 All employees should complete an anti- corruption course not less than once per year. 100% Maintain 2022 target All employees should confirm reading the corporate policies: Health and safety, Ethics and Social responsibility. 100% Maintain 2022 target Result for 2022 All employees completed both targets in 2022. 21 3 Corporate governance CORPORATE GOVERNANCE POLICY Adopted by the Board of Directors on 30 March 2023 SCOPE AND APPLICABILITY OF THE POLICY These Corporate Governance Policies (the "Policies") have been adopted by the Board of Directors (the "Board") of Carbon Transition ASA (the "Company") to express the corporate governance principles by which the Company conducts its business. The Policies apply to the Company and its consolidated subsidiaries (together the "Group") and will be evaluated by the Board and the Company's executive management (the "Management") annually. The Company is incorporated in Norway in accordance with the Norwegian Public Limited Liability Companies Act of 13 June 1997 no. 45 (the "NPLCA") and is subject to Norwegian law. Hence, the reporting requirements on corporate governance set forth in Section 3-3b of the Norwegian Accounting Act of 17 June 1998 no. 56 (the "Norwegian Accounting Act") and the Norwegian Code of Practice for Corporate Governance issued by the Norwegian Corporate Governance Board on 14 October 2021, as amended from time to time (the "NUES Code"), apply to the Company. As the Company's shares are listed on Euronext Expand Oslo, the Company is also subject to the Norwegian Securities Trading Act of 29 June 2007 no. 75 (the "NSTA") and the continuing obligations of stock exchange listed companies issued by the EURONEXT EXPAND OSLO (the "Continuing Obligations"). These Policies are secondary to provisions set out in law, in regulations made pursuant to law, and in the Company's articles of association (the "Articles of Association"). These Policies shall apply until the Board decides otherwise. MAIN OBJECTIVES FOR THE COMPANY'S CORPORATE GOVERNANCE The Board shall ensure that the Company has good corporate governance to, inter alia, support achievement of the Company's core objectives on behalf of its shareholders and to create a strong, sustainable company. The Board believes that good corporate governance involves openness and a trustful cooperation between the shareholders, the Board and the Management, employees, customers, suppliers, public authorities and society in general. The Company endorses the NUES Code. The NUES Code is based on a "comply or explain" principle, which involves that listed companies must comply with the NUES Code or explain why an alternative approach has been chosen. The Company will comply with the NUES Code, and any deviations will be listed below. 22 The Company's corporate governance policies are based on the following main objectives: a. Open, reliable, and relevant communication with the outside world regarding the Company's business and matters related to corporate governance b. Equal treatment of the Company's shareholders c. Independence between the Board, the Management and the shareholders in order to avoid conflicts of interests d. A clear division of work between the Board and the Management and the shareholders e. Good control and corporate governance mechanisms in order to achieve predictability and reduce the level of risks for shareholders and stakeholders. In addition to these Policies, the Company has adopted the following internal manuals: A Code of Conduct for Business, Ethics and Corporate Social Responsibility Instructions to the Board, and Instructions to the Chief Executive Officer ("CEO"). The above-mentioned internal manuals form an integral part of the Company's corporate governance policies. THE BUSINESS OF THE COMPANY The operations of the Company shall be in compliance with the business objective as set forth in § 3 of the Articles of Association, which reads as follows: "Carbon Transition is an investment company with a strategy to invest in companies and technologies which contribute to significant reductions of carbon emissions. The Company may also invest more broadly in the energy transition space. In addition, the Company has a legacy seismic business operating under the name Axxis Geo Solutions. Axxis Geo Solutions manages a seismic multi-client data library." The Board will at the Annual General Meeting 25 May 2023 propose new business objective set forth in § 3 of the Articles of Association, which will reads as follows: "Carbon Transition is an investment company. The Company comprises an OBN multi-client company and an investment arm. The company may invest broadly in listed companies as well as companies expected to be listed in the near term.” The Board shall define clear objectives, strategies, and risk profiles for the Company's business activities such that the Company creates value for shareholders in a sustainable manner. When carrying out this work, the Board shall take into account financial, social and environmental considerations. The Company shall have Policies for how it integrates the interests of the society at large into the value creation, please refer to the Code of Conduct for Ethics, Health and Safety and Corporate Social Responsibility. The Board shall at least on an annual basis evaluate targets, strategies and risk profiles. 23 Deviation from the code of Practice: None EQUITY AND DIVIDENDS Equity The Board shall ensure that the Company's capital structure is in line with its goals, strategy and risk profiles, and in accordance with the applicable laws and regulations. Dividends The Board proposes any distribution of dividends to the general meeting. The general meeting determines any distribution of dividends in accordance with Section 8-1 and Section 8-2 of the NPLCA. The grounds for any proposal to authorize the Board to approve the distribution of dividend shall be explained. The Board shall establish a clear and predictable dividend policy, which shall be available on the Company's website. The Board will consider share repurchase if more attractive for our shareholders. Annual General Meeting in May 2022 approved repurchase of own shares. Board authorizations Any proposed authorizations to the Board to increase the Company's share capital shall be restricted to defined purposes and shall be dealt with as separate agenda items at the general meeting. Board authorizations shall be limited in time to the date of the next annual general meeting, and in any event to 30 June the same year. This also applies to any authorization to the Board for the Company to purchase own shares. Deviation from the code of Practice: None EQUAL TREATMENT OF SHAREHOLDERS AND TRANSACTIONS WITH CLOSE ASSOCIATES Equal treatment of shareholders All shareholders shall be treated on an equal basis, unless there is a just cause for treating them differently in accordance with applicable laws and regulations. In the event of an increase in share capital of the Company through issuance of new shares, a decision to waive the existing shareholders' pre-emptive rights to subscribe for shares shall be justified. If the Board resolves to issue new shares and waive the pre- emptive rights of existing shareholders pursuant to a Board authorization granted by the general meeting, the justification shall be publicly disclosed in a stock exchange announcement issued in connection with the shares issue. The reasons for any deviation from equal treatment of all shareholders in capital transactions will be included in the stock exchange announcement made in connection with the transaction. 24 Any transactions carried out by the Company in the Company's own shares shall be carried out through the EURONEXT EXPAND OSLO and in any case at prevailing stock exchange prices. In the event that there is limited liquidity in the Company's shares, the Company shall consider other ways to ensure equal treatment of shareholders. Any transactions in own shares will be evaluated in relation to the rules on the duty of disclosure, as well as in relation to the prohibition against illegal insider trading and market manipulation, the requirement for equal treatment of all shareholders, and the prohibition of unreasonable business methods. Transactions with close associates Any transactions, agreements or arrangements between the Company and shareholders; a shareholder's parent company; members of the Management or close associates of any such parties, may only be entered into as part of the ordinary course of business and on arm's length market terms. All such transactions shall where relevantly comply with the procedures set out in the NPLCA. The Board shall obtain an independent third-party evaluation, unless the transaction, agreement or arrangement in question is considered to be immaterial or covered by the provisions of section 3-16 of the NPLCA. Deviation from the code of Practice: None SHARES AND NEGOTIABILITY There shall be no limitation with respect to any party's ability to own, trade or vote for the Company's shares. The Articles of Association contain no restrictions on negotiability of the shares. Deviation from the code of Practice: None GENERAL MEETINGS Exercise of rights The Board shall ensure that the Company's shareholders can participate at general meetings. This shall be facilitated by the following: • the Board shall ensure that the Company's shareholders can participate in the general meeting • The proposed resolutions and any supporting documents shall be sufficiently detailed, comprehensive, and specific allowing shareholders to understand and form a view on all matters to be considered • The deadline for shareholders to give notice of their attendance at the general meeting shall be no later than two business days prior to the date of the general meeting in accordance with the Articles of Association • Shareholders who cannot attend the meeting in person will be given the opportunity to vote. The Company will design the form for the appointment 25 of a proxy to make voting on each individual matter possible and should nominate a person who can act as a proxy for shareholders • The Board and the chair of the general meeting shall ensure that the shareholders are able to vote separately on each individual matter, including on each individual candidate nominated for election to the Board and other corporate bodies (if applicable) • The Chair of the Board shall be present at general meetings, as well as the auditor should be present at general meetings where matters of relevance for such committees/persons are on the agenda, and • The Board shall make arrangements to ensure that the chair of the general meeting is independent. Participation without being present Shareholders who are unable to attend the general meeting shall according to the Company's articles of association shall be given the opportunity to vote in writing and/or vote electronically in a period before the general meeting in accordance with the NPLCA Section 5-8. Furthermore, shareholders who are unable to attend the general meeting in person shall be given the opportunity to vote by proxy. In this respect, the Company shall: • Provide information in the notice to the general meeting on the procedure for attending by proxy • Nominate a person who can act as a proxy for shareholders and • Prepare a proxy form, which shall, insofar as possible, be set up so that it is possible to vote on each individual item on the agenda and candidates that are nominated for election. Deviation from the code of Practice: None NOMINATION COMMITTEE The Articles of Association of the Company require it to have a Nomination Committee. The Nomination Committee shall consist of up to 3 members elected by a Shareholders Meeting for a period of up to 2 years at the time, unless the Shareholders Meeting decides a shorter period. The Nomination Committee shall make recommendation and prepare proposals to the Shareholders Meeting for: • Election of members of the Board of Directors and remuneration of the Directors and any Board Committees • Election of the Nomination Committee and remuneration of the Nomination committee The proposals shall be made available no later than 21 days prior to the Shareholders' Meeting. 26 The Nomination Committee shall meet at least annually with the Board of Directors, the executive management, and the CEO, and shall consult with selected shareholders to ensure that the Nomination Committee have their support. Deviation from the code of Practice: None BOARD COMPOSITION AND INDEPENDENCY The Board shall be composed in a way that it can (i) attend to the common interests of all shareholders and meet the Company's need for expertise, capacity and diversity and (ii) act independently of special interests. The majority of the shareholder-elected Board members shall be independent of the Management and significant business contacts. At least two of the members of the Board shall be independent of the Company's major shareholder(s). For the purposes of these Policies, a major shareholder shall mean a shareholder who owns or controls more than 10% of the Company's shares or votes, and independence shall entail that there are no circumstances or relations that may be expected to be able to influence an independent assessment of the person in question. The Board shall not include members of the Management. The Chair of the Board is elected by the general meeting. The term of office for members of the Board shall not be longer than two years at a time. Members of the Board may be re-elected. The Company's annual report shall provide information regarding the expertise of the members of the Board, as well as information on their history of attendance at board meetings. Further, the annual report shall identify the members of the Board that are considered to be independent. Members of the Board are encouraged to own shares in the Company. Deviation from the code of Practice: None THE WORK OF THE BOARD General The Board has implemented instructions for the Board and the Management, focusing on determining a clear allocation of internal responsibilities and duties. The respective objectives, responsibilities and functions of the Board and the CEO shall be in compliance with rules and standards applicable to the Company and are described in the Company's "Instructions for the Board" and "Instructions for the CEO". The Board shall ensure that the members of the Board and the members of the Management make the Board aware of any material interests that they may have in matters to be considered by the Board. The Board's consideration of matters of a material character in which the Chair of the Board is, or has been, personally involved, shall be chaired by another member of the Board to ensure a more independent consideration of the matter in question. 27 In 2022, there were 14 board meetings where the following was participating; Gisle Grønlie 6 of 7 meetings Nina Skage 13 of 14 meetings Torstein Sanness 12 of 14 meetings Ketil Skorstad 4 of 7 meetings (personal deputy was attending 1 of the missing meeting) Board committees The Board has an audit committee (the "Audit Committee"), which is a working committee for the Board, preparing matters and acting in an advisory capacity. The duties, tasks and composition of the Audit Committee shall be in compliance with the NCPLA. In particular, the Audit Committee shall act as a preparatory body and support the Board in the exercise of its responsibility relating to financial reporting, auditing, internal controls, compliance with ethical Policy such as Environmental, Social and Governance ("ESG"). . The members of the Audit Committee are elected by and amongst the members of the Board for a term of up to two years. The entire Board shall not act as the Company's Audit Committee. At least one member of the Audit Committee should be competent in respect of finance and audit, and the majority of the members should be independent of the Company. The mandate of the Audit Committee is subject to annual revision. The Company has not appointed a remuneration committee. A remuneration committee has not been deemed to be of importance by the Board. The Board has decided to maintain a simple and cost-effective governance structure. The Board will determine the remuneration and compensation scheme of the Company in accordance with applicable law. The Board shall provide details in the annual report of the Audit Committee and any other board committees, if appointed. Deviation from the code of Practice: None RISK MANAGEMENT AND INTERNAL CONTROL The Board shall ensure that the Company has sound internal control and systems for risk management that are appropriate in relation to the extent and nature of the Group's business activities. The Board shall carry out an annual review of the Group's most important areas of exposure to risk and its internal control measures. The review shall pay particular attention to: • Changes relative to previous years' reports in respect of the nature and extent of material risks and the Company's ability to cope with changes in its business and external changes 28 • The extent and quality of the Management's routine monitoring of risks and the internal control system and, where relevant, the work of the internal control function • The extent and frequency of the Management’s reporting to the Board on the results of such monitoring, and whether this reporting makes it possible for the Board to carry out an overall evaluation of the internal control situation in the Group and how risks are being managed • Events of material shortcomings or weaknesses in internal control that come to light during the course of the year which have, could have, or may have had a significant effect on the Group’s financial results or financial standing and • How well the Company’s external reporting process functions. Based on the instructions by the Board, the CEO shall implement internal control measures and propose the same to the Board. The CEO shall effectuate internal control measures on the basis of the instructions by the Board and report the results to the Board annually in accordance with the Board’s annual plan. The report to the Board shall provide a balanced presentation of all material risks and how such risks are handled through the internal control measures of the Company. The main areas of internal control related to financial reporting shall be described and included in the corporate governance report or in the annual report to be prepared by the Board pursuant to Section 3-3b of the Norwegian Accounting Act and the Continuing Obligations. This account should include sufficient and properly structured information to make it possible for shareholders to understand how the Company's internal control system is organized. The account should address the main areas of internal control related to financial reporting. This includes the control of environment, risk evaluation, control activities, information and communication and follow-ups. Deviation from the code of Practice: None BOARD REMUNERATION The remuneration to the members of the Board shall be determined by the annual general meeting each year. The Board's remuneration shall reflect the Board's responsibility, expertise, use of time and the complexity of the Company's business activities. Remuneration shall not be dependent on or linked to the Company's performance. If any Board member has received remuneration above the standard Board member fee, this shall be specified in the annual report. Deviation from the code of Practice: The Company has granted options to the Board of Directors in 2021. 29 EXECUTIVES REMUNERATION The Company has prepared a policy for determining remuneration to the CEO and other executive members in accordance with Section 6-16a of the NPLCA, which is considered to be clear and easily understandable. The Policy shall, at all times, support prevailing strategy, long-term interests, financial sustainability and values of the Company. The total remuneration to the CEO and other executive members consists of basic salary (main element), benefits in kind, variable salary, pension, and insurance schemes. Performance-related remuneration to the executive members in the form of share options, bonus programs or similar shall be linked to value creation for shareholders or the Company's profit over time. Such arrangements, including warrants and share option arrangements, shall incentivize performance and be based on quantifiable factors that the executive member in question may influence. Such performance- related remuneration will ordinarily be subject to an absolute limit. The Board prepares Policy for the remuneration of executive members. Such Policy shall include the main principles for the Company's remuneration policy and shall contribute to aligning the interests of the shareholders and the executive members. These Policies shall be communicated to the annual general meeting, and it shall be clearly stated which aspects of the Policies that are advisory and which, if any, are binding. The general meeting shall vote separately on each of these aspects of the Policy. Deviation from the code of Practice: None INFORMATION AND COMMUNICATIONS Financial reporting and communication The Company's financial statements are prepared in accordance with International Financial Reporting Standards (IFRS). Reporting must fulfil statutory requirements and provide sufficient information to allow the Company's stakeholders to form as accurate a picture of the business as possible. The Company shall report in accordance with the provisions of the NSTA, as well as the requirements pursuant to the Continuing Obligations. The Company shall at all times provide its shareholders, Euronext Expand Oslo and the financial market in general with timely and precise information. Such information will be given in the form of annual reports, quarterly reports, press releases, stock exchange announcements and investor presentations. The Company's report on corporate social responsibility shall be integrated in the annual report. The Board has established Policy for the Company's reporting of financial and other information. 30 The Company shall each year publish a financial calendar with details of the dates of important events such as the general meeting, publication of interim reports, open presentations, and payment of the dividend. The Board has adopted routines for, inter alia and the handling of inside information. Information to the Company's shareholders In addition to the Board's dialogue with the Company's shareholders at general meetings, the Board should make suitable arrangements for shareholders to communicate with the Company at other times in order to facilitate an understanding of which matters affecting the Company from time to time and which are of particular concern to the Company's shareholders. Communication with the shareholders should always be in compliance with the provisions of applicable laws and regulations and in consideration of the principles of transparency and equal treatment of the Company's shareholders. Information to the Company's shareholders shall be published at the Company's website at the same time as it is sent to the shareholders. Deviation from the code of Practice: None TAKE-OVERS Although it is recommended by the NUES Code, the Board has not established separate Policy on how to respond in the event of a take-over bid, but will comply with the following principles should such event occur: In the event of a take-over bid, the Board shall ensure that a. shareholders in the Company are treated equally b. shareholders are given sufficient information and time to form a view of the offer c. the Group's business activities are not disrupted unnecessarily d. the bid is not hindered or obstructed by the Board unless there are reasons to do and that e. in case the bid is made for the Company's shares, no authorizations or resolutions are exercised or made by the Board with the intention to obstruct the take-over bid unless this is approved by the general meeting subsequent to the announcement of the bid. With respect to any agreements entered into by the Company and a bidder, the following principles shall apply: a. An agreement limiting the Company's ability to arrange other bids for the Company's shares shall only be entered into if it is self-evident that such agreement is in the Company and the shareholders' common interest. This shall also apply to any agreement on financial compensation to the bidder if the bid does not proceed. Any financial compensation should be limited to the cost the bidder has incurred in making the bid. b. An agreement that is material to the market's evaluation of the bid shall be disclosed no later than at the same time as the announcement that the bid will be made is published. 31 c. Any transaction that de facto is a disposal of the Company's activities shall be decided by the general meeting. If an offer is made for the Company's shares, the Board shall issue a statement recommending its shareholders to accept or decline the offer. The Board's statement shall make it clear whether the views expressed are unanimous, and if such is not the case, explain the basis on which specific members of the Board have excluded themselves from the statement. The Board shall ensure that an explained valuation of the offer is prepared by an independent expert, which shall be disclosed no later than at the time of the disclosure of the Board’s statement. Deviation from the code of Practice: None AUDITOR The Board shall ensure that the auditor annually submits the main features of the plan for the audit of the Company to the Audit Committee. The auditor shall participate in Board meetings dealing with the annual accounts, where it shall a. report on any material changes in the Company's accounting principles and key aspects of the audit b. comment on any material estimated accounting figures and c. report all material matters on which there has been disagreement between the auditor and the Management (if any). The Audit committee shall at least once a year review the Company's internal control procedures with the auditor, including identified weaknesses by the auditor and proposals for improvements. Deviation from the code of Practice: None 32 4 Transparency Act This statement represents Carbon Transition due diligence pursuant to section 5 in the Norwegian Act related to enterprises’ transparency and work on fundamental human rights and decent working conditions (Transparency Act). The transparency Act entered into force on 1 July 2022. The reporting period covered in this report is from 1 January 2022 to 31 December 2022. There is a general desire for more transparency regarding the production of goods and the provision of services, especially relating to how businesses respect fundamental human rights and decent working conditions. It is hoped that the Act will lead to improvements in these areas and that the information available will allow consumers to make more informed choices. Operations and locations Carbon Transition ASA is a public limited investment company. The Company’s registered main office is at Askekroken 11, 0277 Oslo, Norway. Carbon comprises an OBN multi-client company and an investment arm. The Company may invest broadly in listed companies as well as companies expected to be listed in the near term. Carbon has a legacy seismic business operating under the name Axxis Geo Solutions. Under Axxis Geo Solutions, the Company manages a seismic OBN multi-client data library with assets in Norway and Egypt. The Company makes investment decision based on Board of Directors (BoD) resolutions according to the Group’s corporate governance. The Group’s investment strategy is reviewed together with the BoD and is executed by the management team. Responsibility The BoD is responsible for the Company’s implementation of applicable laws and regulations, including the Transparency Act. All employees in Carbon Transition ASA have a responsibility to protect human rights and decent working conditions. If Carbon causes, contributes to or is linked to adverse impacts on human rights, the Company will take necessary steps to cease, prevent and/or mitigate the adverse impacts. Vendors of Carbon There are two categories of vendors; 33 1) Vendors with a material value chain and subcontractors 2) Vendors without a material value chain and primarily delivering their own services or goods, not relying in a significant way on subcontractors In 2022 Carbon categories their vendors as follows: a) vendors from Axxis multi-client business b) vendors from the investment business c) vendors from being a listed company and general office services A. Vendors from Axxis muti-client business Carbon did not have new multi-client project or any processing in 2022. The Utsira survey was finalized in 2020. The Gulf of Suez survey in Egypt was finalized in Q3 2022, but the reprocessing was performed by the Company’s business partner, Schlumberger. Schlumberger is following their own transparency requirements and Carbon did therefore not do any further due diligence on this vendor. The multi-client data is stored electronically and the vendor providing this service does not significantly rely on third parties for data storage. B. Vendors from the investment business The investment in 2022 was in a listed company at Euronext Oslo. C. Vendors from being a listed company and general office services The vendors for the Group are only business partners, as they are not generally dependent on sub-contractors in delivering their services. The Group works with a number of business partners which generally provide consulting services, IT solutions, office services, insurance, pension, capital markets and other services. After the review of the Group’s three categories of vendors the Group classified all their vendors as business partners. These business partners are evaluated as low risk in accordance with the evaluation criteria outlined in the table below. In 2022, the Group had 53 vendors which were evaluated according to the following criteria; Provision of services Services from vendors in Norway Services from vendorsers in EU/EA Services from vendorss in US Services from vendors in Egypt Production of goods from Norway Production of goods from EU Production of goods from US Production of goods from Egypt Delivered in Norway, EU/EA or low- cost country Delivered in EU/EA, US or low-cost country Delivered in US, EU/EA or low-cost country Delivered in Egypt or low- cost country Production of goods 34 To determine potential adverse impacts on human rights and decent working conditions a combination of the following factors was evaluated; vendors locations and country of origin, industry of the vendor, the spend values, knowledge of the vendor and web search. All vendors were then evaluated according to low, medium or high risk for both human rights violation and breach of working conditions. Result for 2022 evaluation After review of the 53 vendors, 4 of the vendors in Egypt ended on medium risk due to locations and country of origin. Following further investigation of these vendors through web searches and knowledge of worldwide consulting services, the Group assessed the risk as acceptable for all four vendors in Egypt. Consequence if negative risk by any of the vendors If there had been any negative risk on any vendor after the assessment, the Group would have tried to change to a “green vendor”, if possible. If it would have been difficult to change and use another vendor, the Group would have contacted the vendor for more information about the vendor’s actions to avoid human rights violation and avoid breach of working conditions in their company. Based on this review, a conclusion would have been made. Going forward The Group intends to continue its vendor evaluation policies in line with the structure highlighted above. The Group performs periodic evaluations to make sure its vendors have an acceptable status. All new vendors will be separately evaluated. The Company recognizes that risk of adverse impact on human rights cannot categorically be ignored based on the above risk-reducing factors alone, and therefore considers regular risk assessment and continuous monitoring to be important to prevent, detect and respond to potential adverse impacts on human rights. 35 5 Consolidated financial statement Carbon Transition Group 5.1. Consolidated statement of comprehensive income USD thousands Note 2022 2021 Revenue 3,4 7 258 15 816 Changes in fair value of investments (loss) 3,12 (13 447) 8 404 Other gains (losses) 3,4 666 - Cost of sales 5 (399) (10 381) Selling, general and administrative expenses 3,20 (2 417) (6 633) Amortization multi-client 11 (3 983) (7 312) Write-up multi-client (reversal of impairment) 11 12 618 - Depreciation & impairment 10 (559) (7 029) Operating profit (loss) (EBIT) (264) (7 136) Gain on debt restructuring 2.3 - 24 667 Financial income 6 51 2 Financial expenses 6 (81) (2 610) Currency exchange gain (loss) 6 (69) (836) Profit (loss) before tax (362) 14 087 Income tax (expense) 7 1 758 (152) Profit (loss) for the period 1 396 13 935 Currency translation adjustments - - Other comprehensive income (loss) for the period - - Total comprehensive income (loss) for the period 1 396 13 935 Earnings (loss) per share Basic earnings per ordinary share 0.01 0.11 Diluted earnings per ordinary share 0.01 0.11 36 5.2. Consolidated statement of financial position USD thousands Assets Note 31.12.2022 31.12.2021 Non-current assets Multi-client library 11 37 491 28 856 Property, plant and equipment 10 - 3 423 Investments 12 6 821 18 268 Financial assets 15 3 029 - Total non-current assets 47 342 50 548 Current assets Other current assets 9 3 238 222 Bank deposits, cash in hand 8 2 197 4 005 Total current assets 5 435 4 227 Total assets 52 777 54 775 37 5.3. Consolidated statement of financial position Oslo, 30 March 2023 The Board of Directors and CEO of Carbon Transition ASA Gisle Grønlie Nina Skage Torstein Sanness Chairman Director Director Nils Haugestad Interim CEO USD thousands Equity and Liabilities Note 31.12.2022 31.12.2021 Equity Share capital and other paid in capital 18 79 909 79 909 Own shares 18 (489) - Other reserves (31 769) (33 200) Total equity 47 652 46 709 Non current liabilities Interest bearing debt 13 - 896 Total non current liabilities - 896 Current liabilities Trade payables 15 88 333 Taxes payables 2 282 2 362 Other current liabilities 17 2 755 4 475 Total current liabilities 5 125 7 170 Total liabilities 5 125 8 065 Total equity and liabilities 52 777 54 775 38 5.4. Consolidated statement of change in equity USD thousands Share capital Additional paid-in capital Own shares Accumulated earnings Other equity/ Share based programme Total equity Balance as of 01.01.2022 28 739 51 170 - (33 611) 411 46 709 Profit (loss) for the period 1 396 1 396 Other comprehensive income (loss) - - Purchase own shares (489) 24 (464) Share based payment 11 11 Balance as of 31.12.2022 28 739 51 170 (489) (32 191) 422 47 652 USD thousands Share capital Additional paid-in capital Own shares Accumulated earnings Other equity/ Share based programme Total equity Balance as of 01.01.2021 840 38 453 - (47 546) 400 (7 852) Profit (loss) for the period 13 935 13 935 Other comprehensive income (loss) - - New shares issued - cash settled 22 800 961 23 760 Cost for new shares issued (2 163) (2 163) Capital increase - debt conversion 5 099 13 920 - 19 019 Share based payment 11 11 Balance as of 31.12.2021 28 739 51 170 - (33 611) 411 46 709 39 5.5. Consolidated statement of cash flow USD thousands Note 2022 2021 Cash flow from operating activities Profit (loss) before tax (362) 14 087 Taxes refund (paid) 264 (147) Depreciation, amortization and net impairment 10,11 (8 076) 14 341 Changes in fair value for investments 3 13 447 (8 404) Changes in other gains and losses 3 (666) - Gain reconstruction - (24 667) Currency (gain)/loss without cash flow effects 0 (67) Interest expense 6 69 1 730 Share based payment cost 21 11 11 Reconstruction payments - (5 077) Other working capital changes (3 576) (1 451) Net cash from operating activities 1 112 (9 645) Cash flow from investing activities Disposal of property, plant and equipment 4 500 - Cash received/paid from investments (2 000) (9 864) Net cash flow from investment activities (1 500) (9 864) Cash flow from financing activities Repayment of interest-bearing debt 13 (896) (2 295) Payment of lease liabilities (recognized under IFRS 16) 13 - (73) Net proceeds from new equity - 21 597 Investment in own shares 18 (464) - Interest paid lease liabilities - (1) Interest paid (59) (1 587) Net cash flow from financial activities (1 419) 17 641 Net change in cash and cash equivalents (1 807) (1 868) Cash and cash equivalents balance 01.01 8 4 005 5 873 Cash and cash equivalents balance 31.12 8 2 197 4 005 40 5.6. Notes to the consolidated financial statement Note 1 General information about the Company and basis for presentation General information Carbon Group comprises Carbon Transition ASA (referred to as the “Company” or the “Parent”) and its subsidiaries (together referred to as the “Group” or “Carbon”). Carbon Transition ASA is a public limited investment company incorporated in Norway. The Company is listed on EURONEXT EXPAND OSLO and traded under the ticker CARBN. The Company’s registered main office is at Askekroken 11, 0277 Oslo, Norway. . Carbon Transition is an investment company. Carbon comprises an OBN multi-client company and an investment arm. The Group may invest broadly in listed companies as well as companies expected to be listed in the near term. Carbon has a legacy seismic business operating under the name Axxis Geo Solutions. Under Axxis Geo Solutions, the Company manages a seismic OBN multi-client data library with assets in Norway and Egypt. Basis of Preparation The consolidated financial statements are prepared in accordance with International Financial Reporting Standards («IFRS») as adopted by the European Union (“EU”), their interpretations adopted by the International Accounting Standards Board (IASB) and the additional requirements of the Norwegian Accounting Act as of 31 December 2021. The notes are an integral part of the consolidated financial statements. The consolidated financial statements have been prepared on a historical cost basis, except for certain financial assets financial instruments that have been measured at fair value. The financial statements of the subsidiaries have been prepared for the same reporting year as the Company, using consistent accounting policies. The consolidated financial statements are presented in thousands of USD. The consolidated financial statements of the Group were authorized by the Board of Directors on 30 March 2023. The consolidated financial statements will be presented for approval at the Annual General Meeting on 24 May 2023. Until this date the Board of Directors has the authority to amend the financial statements. In accordance with the Accounting Act § 3-3a, we confirm that the financial statements have been prepared under the assumption of going concern. The board of directors and management believe that the Company has sufficient working capital for continued operation. 41 Note 2.0 Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements comprise the Company and its subsidiaries. Subsidiaries are all entities over which the Company has control. Assets, liabilities, income, and expenses of a subsidiary acquired or disposed of during the year are included in the income statement from the date the Company gains control until the date the Company ceases to control the subsidiary. All intra-group assets and liabilities, equity, income, expenses, and cash flows relating to transactions between members of the Group are eliminated in full consolidation. Presentation and functional currency The Group presents its consolidated financial reports in USD. The Functional currency is USD for the Group and its subsidiaries. Foreign Currency Transactions in foreign currencies are translated using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities in non-functional currencies are translated into functional currency spot rate of exchange ruling at the date of the balance sheet. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in non-functional currencies are recognized in the income statement. Revenue recognition Within the seismic segment the company previously operated two business models. In 2022 all revenue relates to multi-client late sales. In 2021 the company earned revenue from both multi-client late sales and contract seismic surveys. For accounting policy information for contract seismic surveys, see the annual report for 2021. Multi-client revenue (late sales) Multi-client is the granting of licenses to the Group’s multi-client library. In the contracts the customer gets a non-exclusive right to use the data from a specific survey. The company owns multi-client libraries together with other parties, and are entitled to a defined portion of future revenues, 42 The license payment is fixed and is required when the license is granted. The late sale revenue is recognized when a valid licensing agreement is signed, and the multi-client library data made accessible to the customer. Investment in financial assets at fair value through profit or loss Financial assets at fair value through profit and loss for the Group are equity instruments and convertible loan. Financial assets are classified at initial recognition, and subsequently measured at amortized cost, fair value through other comprehensive income (OCI), or at fair value through profit or loss, whereas the latter acquired principally for the purpose of generating a profit from fluctuation in prices is the most crucial for the Group. The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for managing them. The Group indulges in investment in financial assets as part of its core business. The Group’s non-current financial investments are characterized in addition to the Groups intention of sale, that this sale could typically be expected to occur within a two-year time frame. The non-current financial investments are therefore treated at fair value through profit or loss. All such instruments are classified as non-current financial investments, unless the Group exercises significant influence on the investment, in which case the investment will be classified as associate. Current investments are considered part of a held for trading portfolio if they are acquired for the purpose of selling or repurchasing in the near term. These investments are subsequently measured at fair value in the statement of financial position with net changes in fair value recognized in the statement of profit and loss. Investments subsequently measured at fair value over profit and loss in accordance with the fair value hierarchy: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). Level 3: Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs). Net unrealized and realized gain/losses on the portfolio of investments is classified as operating income, while net unrealized and realized losses is classified as operating expenses. 43 In cases where an investment changes classification between associate and non- current financial investment either way, the investment is derecognized and recognized in its new classification based on its fair value as of time of derecognition/recognition. The highest level achievable according to the IFRS fair- value hierarchy will be applied. Property, plant and equipment Property, plant, and equipment are stated at historical cost less accumulated depreciation and any accumulated impairment loss. The Group sold all of their seismic node equipment in March 2022. Leases The Company has elected to apply the recognition exemption to lease contracts with a duration of less than 12 months, or that relate to assets with an underlying low value. Lease payments associated with short-term leases and leases of low-value assets are expensed on a straight-line basis. Other short-term leases less than 12 months and payments of these leases are charged to the income statement on a straight-line basis over the period of the lease. Intangible assets Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. Intangible assets with defined useful lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and method are reviewed at least every financial year end. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period. 44 Multi-client library The multi-client library consists of geophysical data to be licensed to customers on a non-exclusive basis. Directly attributable costs associated with the production and development of multi-client projects such as data acquisition and processing, and direct project costs are capitalized. Cost directly attributable to data acquisition and processing include vessel costs, payroll and related costs for crew, project management, agent, other related project costs, hardware/software costs and mobilization costs when relocating a vessel to the survey areas. The multi-client library are amortized from the date the processed data are ready to be transferred to customers, using straight line amortization. Each project is evaluated individually for lifetime and the estimates are revised at least annually. Before the library is completed, the Group test for impairment at least annually. To ensure that value in use above net book value, the Group will perform an additional impairment test after each significant sale is recognized, as each customer will only acquire the full data-set once. Taxes a) Current income tax Current income tax assets and liabilities for the current and prior periods are measured using the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date in the countries where the Group operates and generates taxable income. Withholding taxes are included in the tax expense to the extent that a tax credit is available in the income tax in the home state. Current income tax relating to items recognized directly in equity or other comprehensive is recognized in equity or other comprehensive income and not in the income statement. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate. b) Deferred tax Deferred tax is provided for using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted on the balance sheet date and are expected to apply when the related deferred tax asset is realized, or the deferred tax liability is settled. Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. 45 Deferred tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax relating to items recognized directly in equity is recognized in equity and not in the income statement. Employee benefits - Pension obligations The Company operates a defined contribution plan. The net pension cost for the period is presented as an employee expense in the line selling, general and administrative cost (SG&A). Share based payment The Group has an option plan for employees and one member of the Board. The fair value of options granted under the plan is recognized as an employee benefit expense with a corresponding increase in equity. The total expense is recognized over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the Group revises its estimates of the number of options that are expected to vest, based on the non-market vesting and service conditions. It recognizes the impact of the revision to original estimates, if any, in profit and loss, with a corresponding adjustment to equity. Provisions Provisions are recognized when the Group has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Trade receivables Trade receivables sale of goods and services are held to collect contractual cash flows. They are initially recognized at the transaction price from sale of goods or services and are subsequent measured with a provision for expected credit loss. Impairment losses are measured at lifetime expected credit losses in accordance with IFRS 9. The Group’s impairment model for trade receivable, contract assets and other current assets is a simplified approach based on lifetime expected credit losses (ECL). Impairment is based on an estimate of the probability of default for the financial assets reflecting an unbiased amount determined by evaluating a range of possible outcomes; the time value of money and reasonable available information related to past events, current conditions, and forecasts of future economic conditions. 46 The Group uses an impairment model with the following characteristics: The receivables are organized based on the credit risk of the customers. The primary portfolio is the receivables where invoicing is done to customers with a high credit rating, typically large listed or state-owned oil companies. This portfolio has a low risk of default and therefore no impairment loss is initially recognized based on the expectation of all the accounts being paid. Further, an individual assessment is performed on specific customer receivables, typically if a customer is in known financial distress or has declared bankruptcy. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision. Financial liabilities Financial liabilities represent a contractual obligation to deliver cash in the future. Financial liabilities, except for derivatives, are initially recognized at fair value net of transaction costs directly attributable to the transaction and are subsequently measured at amortized cost. Financial liabilities are derecognized when the obligation is discharged through payment or when the Group is legally released from the primary responsibility for the liability. Financial instruments at amortized cost Financial assets and liabilities in this category are initially recognized as fair value, and subsequently carried at amortized cost, using the effective interest method less any allowance for impairment. This category includes accounts receivable, accounts payable and loans and other borrowings. Cash flow statement The cash flow statement is presented using the indirect method. Cash and cash equivalents Cash and cash equivalents include cash at hand, deposits held at call with banks with original maturities of three months or less. 47 Note 2.1 New Financial Reporting Standards Certain new accounting standards, amendments to accounting standards and interpretations have been published that are not mandatory for 31 December 2022 reporting periods and have not been adopted early by the group. These standards, amendments or interpretations are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions. Note 2.2 Key accounting estimates and judgement The Group makes estimates and assumptions concerning the future. The resulting accounting estimates could deviate from the actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year are discussed below. Fair value measurement of financial assets When the fair values of financial assets and financial liabilities recorded in the statement of financial position cannot be measured based on quoted prices in active markets, their fair value is measured using various valuation techniques. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions relating to these factors could affect the reported fair value of financial instruments. Market price changes may occur that could negatively impact the fair value of investments after year end. Impairment of intangible assets The Group uses the discounted cash flow method to estimate the present value of the multi-client library, project Utsira incl the reprocessing and project Egypt, based on expectations of future multi-client late sales according to the cash flow prognosis used by management for 2022. There are two uncertainties when it comes to the timing of the late sales and also the size of the lates sales. The management has weighted these uncertainly with probability in their discounted cash flow calculations. The WACC used in the calculation is comparable to peers. The IFRS value of multi-client survey Utsira was not impaired in 2022 or 2021. However, in March 2022 the Group’s Norwegian multi-client library in the North-Sea, Utsira was written up (reversal of a portion of the 2019 and 2020 impairment), which increased the value with USD 5.6 million based on expectation for future late sales. Further in December 2022, due to a new reprocessing agreement of the Utsira survey 48 was written up (reversal of a portion of the 2019 and 2020 impairment) with USD 7.0 million based on expectation for future late. Note 2.3 Court protected reconstruction in 2021 The Company filed for court protected reconstruction on 16 February 2021. This filing provided protection from bankruptcy and allowed for continued operation under court protection. A reconstruction plan was subsequently put forth, whereafter 106 out of 110 creditors voted in favor of the plan by the deadline of 27 April 2021. In nominal amounts, this represented in excess of 98% of claims eligible to vote. In addition, the Group obtained acceptance for voluntary debt settlement from the major creditors in the Group companies in the US and Egypt. On 30 April 2021, the District Court of Ringerike, Asker and Bærum confirmed the reconstruction proposal, subject to an appeal period which expired 1 June 2021. An Extraordinary General Meeting on 21 May approved, subject to the reconstruction proposal and the forced debt settlement becoming legally binding, that the Company pay approximately USD 6 million in cash and issue approximately 424 million shares to its creditors (the "Conversion Shares"). The court ruling became legally binding on 1 June 2021 and the Company paid and settled all Conversion Shares in June 2021. As a part of the reconstruction, creditors were paid cash dividends or debt was converted to equity. The gain of USD 18.2 million is from the creditors with cash dividends where the remaining amount was booked as gain on debt forgiveness The other gain of USD 6.5 million is from creditors with debt converted to equity and afterwards fair value adjustment to the share price the day the debt was converted at NOK 0.373 per share, compared to share price of NOK 0.50 offered in the converting settlement. Both these transactions resulted in a total net gain of USD 24.7 million in the statement of comprehensive income. Equity and Liabilities Cash Payments Gain on Debt Forgiveness Equity Conversion Gain on equity conversion Capital Increase Net effect Equity Share capital and other paid in capital - - 25 495 (6 476) 15 547 34 566 Other reserves - 18 172 - 6 476 - 24 648 Total equity - 18 172 25 495 - 15 547 59 214 Liabilities Interest bearing debt current (2 888) (13 029) (19 017) - - (34 934) Trade payables (908) (4 631) (5 446) - - (10 985) Other current liabilities (1 215) (532) (1 032) - - (2 779) Total liabilities (5 011) (18 192) (25 495) - - (48 698) Gain from reconstruction in income statement 18 191 6 476 24 667 49 Note 3 Segment reporting The Group operates two segments, Axxis and Investments, based on the two different revenue streams. The Group has a legacy seismic business operating under the name Axxis Geo Solutions, with a multi-client data library. The investment segment was new from 2021. The Group has a strategy to invest in listed companies as well as companies expected to be listed in the near term. Investments must meet the criteria for risk and return set by the board of directors. The segment reporting is based on the same accounting principles as the financial statements. Operating expenses are allocated to the segments based on the use of resources and assets. Unallocated items include revenue and expenses related to salaries for office personnel and other office expenses. Share based payment cost and capitalized cost of obtaining contracts has not been allocated to segments. The ocean-bottom seismic contract node on a rope business was divested in March 2022 through an earnout agreement with Magseis Fairfield. USD thousands Segment reporting Unallocated Total Axxis Investment Income statement 2022 2022 2022 2022 Total revenue 7 258 - - 7 258 Changes in fair value of investments - (13 447) - (13 447) Other gains (losses) 666 - - 666 Cost of sales (399) - - (399) Selling, general and administrative expenses (413) (6) (1 998) (2 417) Amortization multi-client (3 983) - - (3 983) Write-up multi-client (reversal of impairment) 12 618 - - 12 618 Depreciation & impairment (548) - (11) (559) Operating profit (loss) (EBIT) Segment 15 198 (13 453) (2 009) (264) 50 The geographical split is based on where the multi-client late sales occur. Vessel and equipment are only utilized in the Axxis segment, and the major part of depreciation relates to this segment. USD thousands Segment reporting Unallocated Total Axxis Investment Geographical markets 2022 2022 2022 2022 Norway 6 328 - - 6 328 Egypt 1 596 - - 1 596 Total revenue 7 924 - - 7 924 USD thousands Segment reporting Unallocated Total Axxis Investment Major customers 2022 2022 2022 2022 Customer 1 2 522 - - 2 522 Customer 2 1 764 - - 1 764 Customer 3 1 596 - - 1 596 Customer 4 1 368 - - 1 368 Total revenue 7 250 - - 7 250 USD thousands Segment reporting Unallocated Total Axxis Investment Income statement 2021 2021 2021 2021 Total revenue 15 816 - - 15 816 Changes in fair value of investments - 8 404 - 8 404 Cost of sales (10 381) - - (10 381) Selling, general and administrative expenses (909) (4) (5 720) (6 633) Amortization multi-client (7 312) - - (7 312) Depreciation & impairment (6 965) - (64) (7 029) Operating profit (loss) (EBIT) Segment (9 751) 8 400 (5 785) (7 136) USD thousands Segment reporting Unallocated Total Axxis Investment Geographical markets 2021 2021 2021 2021 Norway 5 669 - - 5 669 UK 8 983 - - 8 983 Total revenue 14 653 - - 14 653 51 The geographical split is based on where the seismic surveys have been performed and the late sales occur. Note 4 Revenue and cost from contract with clients The ocean-bottom seismic contract node on a rope business was divested in March 2022 through an earnout agreement with Magseis Fairfield. The net gain is from the sales of the seismic node business to Magseis Fairfield. Under the agreement, Carbon Transition received USD 0.5 million at closing and will receive earnout payments of up to a maximum of USD 12.0 million over the next three years, based on the use of the equipment. There is a minimum payment in year three of USD 1.5 million, subject to certain milestones. As basis for the gain calculation, the Group has estimated total revenues, and the resulting payments to Carbon, for the three year period. The Group has used a probability weighted cash flow and discounted with a WACC of 9.15%.Two scenarios have been calculated as high and as low scenario. The NPV per 31.12.2022 is just above the low case of USD 3.0 million. This NPV has been offset by the sales net book value of the nodes sold at the time of divestment with a loss of USD 2.3 million, which resulted in a gain of USD 0.7 million. USD thousands Segment reporting Unallocated Total Axxis Investment Major customers 2021 2021 2021 2021 Customer 1 8 983 - - 8 983 Customer 2 2 124 - - 2 124 Customer 3 2 042 - - 2 042 Customer 4 1 369 - - 1 369 Total revenue 14 519 - - 14 519 USD thousands Axxis Investment Total Income statement 2022 2022 2022 Other income 8 - 8 Multi-client projects late sales 7 250 - 7 250 Total revenue from contracts with customers 7 258 - 7 258 At a point in time 7 258 - 7 258 Total revenues from contracts with customers 7 258 - 7 258 USD thousands Axxis Investment Total Other gains (losses) 2022 2022 2022 Sale of node assets - earnout model 666 - 666 Total gain (losses) 666 - 666 52 Cost to fulfill contracts and cost to obtain contracts Assets related to cost to fulfill and cost to obtain contracts is presented as other current assets in the balance. USD thousands Axxis Investment Total Income statement 2021 2021 2021 Contracts for seismic acquisition 9 117 - 9 117 Multi-client projects pre-funding - - - Multi-client projects late sales 5 535 - 5 535 Total revenue from contracts with customers 14 653 - 14 653 At a point in time 5 535 - 5 535 Over time 9 117 - 9 117 Total revenues from contracts with customers 14 653 - 14 653 USD thousands Axxis Investment Total Other income 2021 2021 2021 Covid-19 compensation 1 163 - 1 163 Total other income 1 163 - 1 163 USD thousands Axxis Investment Total Income statement 2021 2021 2021 Contract assets Assets recognized for cost to fulfill a contract in the balance 01.01.21 - - - Assets recognized for costs to fulfill a contract (mobilization costs) 1 938 - 1 938 Amortization of assets recognized for cost to fulfill a contract (mobilization costs) (1 938) - (1 938) Total contract assets - - - 53 Note 5 Cost of sales Note 6 Financial items USD thousands Cost of sales 2022 2021 Vessel cost (1) (3 786) Crew & project management (216) (2 165) Seismic, source and node equipment (56) (3 618) Agent related expenses (127) (1 632) Mobilization amortization - (1 938) Mobilization cost capitalized - 1 938 Reversal of cost previous period - 821 Total cost of sales (399) (10 381) USD thousands Gain on debt restructuring 2022 2021 Gain on debt restructuring - 24 062 Total gain on restructuring - 24 062 Financial income 2022 2021 Interest income 7 2 Other financial income 45 - Total financial income 51 2 Financial expenses 2022 2021 Interest expense (69) (1 483) Interest expense suppliers - (246) Other financial expenses (12) (880) Total financial expenses (81) (2 610) Currency exchange gain (loss) 2022 2021 Exchange gains 1 404 1 928 Exchange losses (1 472) (2 765) Total exchange gain (loss) (69) (836) 54 Note 7 Tax Changes from previous year is related to change in accrual for corporate income tax in Egypt, where the taxes have not been settled. Per December 2022 the management evaluated the deferred tax assets to be uncertain when to be utilized. The same evaluation was performed per December 2021. USD thousands 2022 2021 Specification of tax expense (income) for the year Current income tax (including withholding tax) - 90 Change in deferred tax - - Changes from previous years (1 758) 62 Total tax expense (income) (1 758) 152 Reconciliation of actual against expected tax expense (income) at the income tax rate of 22% Profit (loss) before tax (362) 14 087 22% tax (80) 3 099 Tax effect from: Non taxable income - restructuring - 152 Withholding tax and corporate tax abroad 83 246 Permanent differences (1 519) (1 909) Currency effect (708) (424) Difference in tax rate in foreign activities 5 (8) Changes from previous years (1 758) Not booked deferred tax asset 2 219 (1 004) Calculated tax expense (income) (1 758) 152 Effective tax rate for the Company 485,37 (1,08) USD thousands 31.12.2022 31.12.2021 Temporary differences Non current assets (6 387) (6 044) Trade receivables - - Other accruals - - Financial lease - - Accumulated loss carried forward (42 780) (57 223) Temporary differences at 31.12. (49 167) (63 267) Deferred tax assets (liabilities) 10 817 13 919 55 The loss carried forward is in Norway and there are no time limits for use of the losses. Note 8 Bank deposits, cash in hand Restricted bank deposits relate to employee withholding tax. These deposits are subject to regulatory restrictions and are therefore not available for general use by the entities within the Group. The account can be used to settle employee withholding tax. Note 9 Other current assets USD thousands 31.12.2022 31.12.2021 Bank deposits 2 156 3 919 Restricted bank deposits 42 86 Total bank deposits 2 197 4 005 USD thousands 31.12.2022 31.12.2021 Prepayments 82 197 Accrued income 3 153 - Other current receivables 3 25 Total other current assets 3 238 222 56 Note 10 Property, plant and equipment Vessel Seismic and node equipment Projects in progress Computer equipment Lease asset Total tangible assets USD thousands 2022 Cost at 01.01.22 - 11 388 - 364 305 12 057 Additions - - - - - - Disposal - (10 000) - - - (10 000) Cost at 31.12.22 - 1 388 - 364 305 2 057 Accumulated depreciation 01.01.22 (0) (7 976) - (353) (305) (8 633) Depreciation - (548) - (11) - (560) Disposal (0) 7 136 - - - 7 136 Accumulated depreciation at 31.12.22 (0) (1 388) - (364) (305) (2 057) Carrying amount at 01.01.22 (0) 3 412 - 11 0 3 423 Carrying amount at 31.12.22 (0) 0 - (0) 0 (0) Economic lifetime 3-10 years 3-5 years 3-10 years 2-5 years Vessel Seismic and node equipment Projects in progress Computer equipment Lease asset Total tangible assets USD thousands 2021 Cost at 01.01.21 8 171 17 372 29 364 489 26 425 Additions - - - - - - Disposal (5 459) (5 171) (29) - (184) (10 843) Impairment (2 711) (813) - - - (3 524) Cost at 31.12.21 - 11 388 - 364 305 12 057 Accumulated depreciation 01.01.21 (4 717) (9 259) - (235) (420) (14 631) Depreciation (351) (2 967) - (117) (69) (3 505) Disposal 5 067 4 251 - - 184 9 502 Impairment - - - - - - Accumulated depreciation at 31.12.21 (0) (7 976) - (353) (305) (8 633) Carrying amount at 01.01.21 3 454 8 114 29 128 69 11 794 Carrying amount at 31.12.21 (0) 3 412 - 11 0 3 423 Economic lifetime 3-10 years 3-5 years 3-10 years 2-5 years 57 The climate risk for stranded equipment is evaluated as low, since the Group has sold the node seismic equipment in March 2022. The book value of assets is zero at the end of 2022. Note 11 Intangible assets In March 2022 the Group's Norwegian multi-client library Utsira in the North Sea was written up (reversal of a portion of the 2019 and 2020 impairment), which increased the value with USD 5.6 million based on expectation for future late sales. In December 2022, a reprocessing agreement for the Utsira project was signed with reprocessing from CGG and with pre-funding from two major oil companies. Due to this new reprocessing agreement the Utsira was written up (reversal of a portion of the 2019 and 2020 impairment) with USD 7.0 million based on expectation for future late sales. Fair value less cost of disposal is used to determine this amount. Fair value less costs to sell is the arm's length sale price between knowledgeable willing parties less costs of disposal. The value in use of an asset is the expected future cash flows that the asset in its current condition will produce, discounted to present value using an appropriate discount rate. The Group used the same discounted rate as the WACC in the fair value calculation of 10.10%. The company has no fully amortized intangible assets that are still in use per 31 December 2022. TGS had a pledge as collateral in the multi-client project Utsira in 2021 until March 2022 when the interest-bearing debt to TGS was repaid. The Group's Egyptian multi-client library in the Suez has a cap of late sales and deviate from the WACC used for Utsira. The multi-client segment consists of multiple seismic data surveys that comprise the segment. As of 31 December 2022, the Group owns two multiclient surveys, each considered a separate CGU and impairment tested separately. USD thousands 31.12.2022 31.12.2021 Cost as of 01.01 92 881 92 881 Capitalized costs - - Cost as of 31.12 92 881 92 881 Accumulated amortization and impairment as of 01.01 (64 025) (56 713) Amortization for the period (3 983) (7 312) Write-up (reversal of impairment) 12 618 - Accumulated amortization and impairment as of 31.12 (55 390) (64 025) Carrying value at 01.01 28 856 36 168 Carrying value at 31.12 37 491 28 856 58 The multi-client survey of Utsira has so far been amortized from the date the processed data was ready to be transferred to customers in Q3 2020 with a lifetime of 4 years. From January 2022 the lifetime was changed from 4 to 10 years, with the remaining year of 8.5 from January 2022. The multi-client survey in Egypt finalized processing per September 2022, and amortization started in Q3 2022 with a lifetime of 4 years. According to IFRS the multi-client library should be tested for impairment if the circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. The Group performs quarterly testing for impairment where the sales estimate is updated for each quarterly evaluation. The industry is known for uncertainty of when the late sales will happen, rather than the size of the late sales. For financial purposes the Group used sales estimates weighted in addition to worst, low, mid and high probability where the next two years was estimated in detail. The WACC used for calculated NPV (Net Present Value) of Utsira is 10,10 % similar to comparable companies. Together, the weighted sales expectations and the WACC comprise the key input factors to the Group's impairment testing of multi-client library. WACC used for MCL Egypt is 12.44% due to higher country risk. A decrease in the company's sales expectations exceeding 1,5% would result in an impairment in the multi-client library. Similarly, an increase in WACC to 10,7% would result in an impairment in the multi-client library. The Group does not consider climate risk to have a significant impact on the estimates for the multi-client values per December 2022. 59 Note 12 Investments CO2 Capsol AS The investment in CO2 Capsol is valued based on Level 1 inputs, quoted prices in active markets. Year-end closing price was NOK 11.50 (NOK 24.795 in 2021) per share. The Group held 3,636,363 shares with a total value of USD 41.8 million (USD 10.3 million). The valuation of traded shares is based on quoted prices in active markets. Market price changes subsequent to year end may have a significant impact on the overall fair value of investments. Sensitivity: A 5% and 10% increase in CO2 Capsol stock price is equal to an increase of USD 212 thousand and USD 511 thousand in value, respectively. Likewise, a 5% and 10% decrease in stock price in CO2 Capsol is equal to a decrease of USD 212 thousand and USD 511 thousand, respectively. Dolphin Drilling AS The investment in Dolphin Drilling AS is valued based on Level 1 inputs, quoted prices in active markets. Year-end closing price was NOK 12.868 per share. The Group held 1.714.568 shares with a total value of USD 2.2 million. The valuation of traded shares is based on quoted prices in active markets. Market price changes subsequent to year end may have a significant impact on the overall fair value of investments. Sensitivity: A 5% and 10% increase in Dolphin Drilling stock price is equal to an increase of USD 112 thousand and USD 225 thousand in value, respectively. USD thousands Non-current assets 31.12.2022 31.12.2021 Listed securities CO2 Capsol AS 4 246 10 228 Dolphin Drilling AS 2 245 - Listed securities 6 491 10 228 Unlisted securities Arbaflame AS 330 3 403 Power By BritishVolt Limited - Common shares - 3 175 - Options - 1 462 - 4 637 Unlisted securities 330 8 040 Total non-current assets 6 821 18 268 60 Likewise, a 5% and 10% decrease in stock price in Dolpin Drilling is equal to a decrease of USD USD 112 thousand and USD 225 thousand, respectively. Power By BritishVolt Limited The investment in Britishvolt is measured based on Level 3 inputs. The company is not listed, and the management has based fair value on analysis from financial advisors and information from the company. The Group is currently valuing Britishvolt at GBP 0.0 per share, which is based on the fact that the Company is under administration. The estimated fair value of the Group’s investment in Power by Britishvolt Limited is USD zero (NOK zero) at the end of December 2022 No sensitivity is prepared for Britishvolt since the value is written down to zero as of December 2022. Arbaflame AS The investment in Arbaflame is measured based on level 3 inputs. The company is not listed, and management has therefore evaluated all available information and news from the company after the investment was made. Arbaflame had an equity private placement in November 2022 at NOK 0.83 per share and the Group use this value. Based on this valuation, the estimated fair value of the Group’s investment in Arbaflame was USD 0.3 million (NOK 3.3 million) at the end of December 2022. Sensitivity: A 5% and 10% increase in Arbaflame stock price is equal to an increase of USD 17 thousand and USD 33 thousand in value, respectively. Likewise, a 5% and 10% decrease in stock price in Arbaflame is equal to a decrease of USD 17 thousand and USD 33 thousand, respectively. The Group does not consider climate risk to have a significant impact on the estimates for the fair value of investments per December 2022. Note 13 Interest bearing debt and cash flow information USD 896 725 Nibor + 10% Term Loan (TGS) The TGS loan was fully repaid during the first quarter of 2022 and the security at the same time was resolved. The TGS loan was classified as non-current liabilities as of 31 December 2021. The TGS loan was secured by the Utsira multi-client survey as well as the shares in the company Axxis Multi Client AS. 61 * Mainly related to debt forgiveness related to the reconstruction process. Note 14 Financial risk management The Group changed name to Carbon Transition ASA during 2021 following the restructuring in June 2021. The Group has a legacy seismic business operating under the name Axxis Geo Solutions, with a multi-client data library. The investment segment was new from 2021. The Group has a strategy to invest in listed companies as well as companies expected to be listed in the near term. Investments must meet the criteria for risk and return set by the board of directors. The Group is exposed to market specific and general economic cycles and macro- economic fluctuations, since changes in the general economic situation affect the demand for products and services provided by companies the Group invests in. The performance of the business operating under the name Axxis Geo Solutions is also dependent on production and development spending by oil and gas companies. Historically, in times of low oil prices, demand for seismic data has been significantly reduced. Capital Management Liabilities arising from financing activities USD thousands Interest bearing debt Lease liabilities Total 01.01.2022 896 - 896 Repayment of interest-bearing debt (896) - (896) Payment of lease liabilities - - Other - - - Reclassification - - - 31.12.2022 - - - Liabilities arising from financing activities USD thousands Interest bearing debt Lease liabilities Total 01.01.2021 33 906 73 33 979 Repayment of interest-bearing debt (2 295) - (2 295) Payment of lease liabilities (73) Other (30 716) - (30 716) Reclassification - - - 31.12.2021 896 - 896 62 For the Group’s capital management, capital includes issued capital, share premium and all other equity reserves attributable to the equity holders of the parent. The Group manages its capital structure and adjusts considering changes in economic conditions. To maintain or adjust the capital structure, the Group may return capital to shareholders, issue new shares, repay or issue new debt. The Group’s capital management, among other things, aims to ensure that it fulfils if any borrowings that define capital structure requirements. Any breaches in meeting the financial terms if any would permit the borrower to immediately call borrowings. Market risk - price risk For information regarding market risk- price risk see note 12. Financing risk The Group fully repaid the TGS loan during 2022 and ended in December 2022 with zero external debt. During 2021 the Company successfully completed a legal court reconstruction and almost all debt was settled. There was only debt to TGS in the Group per year-end 2021. The purpose of these financial instruments was to ensure that the Group has financial flexibility for investments that were necessary for the Group's operations. In addition, the Group has items such as trade receivables, trade payables etc. which is directly related regular business operations. The Group does not use financial instruments for hedging purposes. Risk management procedures have been established by the Board and handled by the CFO. The Group is exposed to financial risk linked to interest rate risk, liquidity risk, currency risk and credit risk. The Group's management has a continuous assessment to identify and evaluate financial risks and sets guidelines for how to handle them. The Group does not have any financial derivatives in 2022 or 2021. (i) Credit risk Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Group is mainly exposed to credit risk related to trade receivables and other current receivables. The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. Current and expected future customers are oil and gas companies with sound credit ratings. Also, for other companies in the industry, historic credit losses have been negligible. Because the expected credit loss has been negligible. Because the expected credit loss is a clearly immaterial amount, no provision has been made. 63 Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the group, and a failure to make contractual payments for a period of greater than 120 days past due without special agreement in advance. Impairment losses on trade receivables are presented as net impairment losses within operating profit. Subsequent recoveries of amounts previously written off are credited against the same line item. All trade receivable was fully paid during 2022 and 2021, and therefore no provision for losses. (ii) Market risk - interest rate The Group does not use financial instruments to hedge interest rate risk. Trade and other receivables and trade and other payables are interest free and with a term of less than one year, so there is no significant interest rate risk associated with these financial assets and liabilities. The Group has no debt as per December 2022. The Group's sensitivity to potential changes in interest rates with an increase in 50 basis points would increase interest expense for 2021 with USD 38 thousands. (iii) Liquidity risk Liquidity risk is the risk that the Company is not able to meet its payment obligations. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. The Group's strategy for managing liquidity risk is to always have sufficient liquidity in order to meet its financial liabilities at maturity, both under normal and exceptional circumstances, without risking unacceptable losses or at the expense of the Groups reputation. The Group may need access to long-term funding. There can be no assurance that available funding sources are accessible when needed nor can there be any assurance that the Group will be able to raise new equity on favorable terms and in amounts necessary to conduct its on-going and future operations, should this be required. Furthermore, there can be no assurance that the Group will be able to obtain additional shareholder funding. Failure to access necessary liquidity could require the Group to scale back its operations or could have other materially adverse consequences for its business and its ability to meet its obligations. The table below provides an overview of the maturity profile of all financial liabilities. For bank loans the stated amount includes estimated interest payments. In cases where the counterparty may claim earlier redemption, the amount is placed in the earliest period and the payment may be required from the counterparty. 64 (iv) Market risk - foreign exchange rates The Group operates internationally and is exposed to foreign exchange risk, primarily from the NOK and EGP. Foreign exchange risk arises from future commercial transactions and recognized assets and liabilities denominated in a currency that is not the functional currency of the relevant group entity. The Group is exposed to currency risk as a large part of the group’s expenses are denominated in NOK. Profit after tax for the Group is also affected by changes in exchange rates, as expenses and payables are converted to USD. The NOK denominated payables are expected to be repaid with receipts from US dollar denominated sales. The foreign currency exposure of these loans has not been hedged. The table below shows the Group's sensitivity to potential changes in exchange rates. The calculation considers the currency translation of all consolidated foreign subsidiaries. The calculation in the table shows the effect on consolidated profit / loss on the average exchange rate. The Groups operations in foreign countries expose it to risks related to foreign currency movements. Currency exchange rates fluctuate due to several factors, and these include international balance of payments, economic and financial conditions, government intervention, speculation, and other factors. Changes in currency exchange rates relative to the USD may affect the USD valued assets and liabilities of the Group – primarily the tax exposure in USD and NOK. Changes in currency may 2022 Remaining Term USD thousands 0-3 months 3-6 months 6-9 months 9-12 months 1-2 years Total Trade payables 88 - - - - 88 Other current liabilities 634 - - 4 403 - 5 037 Total 723 - - 4 403 - 5 125 USD thousands Change in exchange rate USD/NOK Effect on profit before tax Effect on OCI 2022 + 10 % (21) - - 10 % 25 - 2021 + 10 % 1 486 - - 10 % (1 816) - 65 also affect the Group’s local expenses when operating abroad. The Group’s expenses are primarily in USD and NOK. As such, the Group’s earnings are exposed to fluctuations in the foreign currency market. Note 15 Categories of financial instruments The Group's exposure to various risks associated with financial instruments is discussed in note 14 Financial risk management. The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of financial assets mentioned above. Fair value Due to the short-term nature of bank deposits, cash in hand, trade receivables and other current receivables, their carrying amount is considered to be the same as their fair value. Interest bearing loans are recognized initially at fair value less transaction costs. The TGS loan was settled during the first quarter of 2022. Subsequent to initial recognition, interest bearing loans are measured at amortized cost using the effective interest method. Gains and losses are recognized in the consolidated statements of profit or loss when the liabilities are derecognized as well as through the amortization process. The carrying value of borrowing is less amortized cost. The carrying amount of trade and other payables is considered to be approximately the same as their fair values, due to their short-term nature. Due to the court reconstruction in June 2021 all interest-bearing debt except the TGS loan was settled during 2021. USD thousands ASSETS 31.12.2022 31.12.2021 Financial assets at amortized cost Bank deposits, cash in hand 2 197 4 005 Financial assets at fair value through profit and loss Investments 6 821 18 268 Financial assets 3 029 - Total financial assets 12 048 22 273 LIABILITIES 31.12.2022 31.12.2021 Financial liabilities at amortized cost Interest-bearing non-current liabilities - 896 Trade payables 88 333 Other current liabilities 5 037 6 837 Total financial liabilities 5 125 8 065 66 Financial assets are from the ocean-bottom seismic contract node on a rope business that was divested in March 2022 through an earnout agreement with Magseis Fairfield. Under the agreement, Carbon Transition received USD 0.5 million at closing and will receive earnout payments of up to a maximum of USD 12.0 million over the next three years, based on the use of the equipment. There is a minimum payment in year three of USD 1.5 million, subject to certain milestones. This is level 3-inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs). An entity shall include in the transaction price some or all of an amount of variable consideration estimated only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The Group used best estimates and discounted to net present value. As basis for the gain calculation, the Group has estimated total revenues, and the resulting payments to Carbon, for the three year period. The group has used a probability weighted cash flow and discounted with a WACC of 9.15%.. Two scenarios have been calculated as high and as low scenario. The NPV per 31.12.2022 of USD 3.0 million is just above the low case. The Group does not hold any financial derivatives. Note 16 Leases and commitments Leases For the Group only office rental comes under the classification of leases. As of 31 December 2022, and 2021, the Group has no lease liabilities. The reason is that the commitment related to office rent expires in September 2023. Commitments: As of December 2022, the Group had commitments related to office rent for the Oslo office until September 2023. As of December 2021, the Group had commitments related to office rent for the Oslo Office until September 2022 and for the Houston office until April 2022. The cost for short term leases of office rent for 2022 was USD 0.1 million and USD 0.1 million for 2021. The cost for short term leases of seismic equipment was zero in 2022 and USD 2.4 million in 2021. The cost for short-term leases of vessels was zero in 2022 and USD 2.8 million in 2021. 67 Note 17 Other current liabilities * These taxes payables are related to Egyptian taxes for withholding and crew related tax originally in EGP. The Group expects the Egyptian tax to be reduced, but since the taxes is not settled as of December 2022, the Group has decided to keep same tax level in EGP as for 2021. However, due to currency exchange development in Egypt EGP vs USD, the amount in USD is reduced. Note 18 Share capital and shareholder information The Company has one class of shares, all shares provide equal rights, including the right to any dividends in line with 2021. Each of the shares carries one vote in line with 2021. Carbon Transition ASA has in September 2022 purchased own share with 5 263 157 shares at USD 0.5 million. The subsidiaries directly or indirectly do not own shares or treasury shares in the Company. Paid/proposed dividend The board has decided not to propose any dividend for 2022 or 2021. USD thousands 31.12.2022 31.12.2021 Holiday pay owed 68 146 Egyptian tax * 2 121 3 923 Other accrued costs 127 672 VAT settlement 440 (267) Total other current liabilities 2 755 4 475 The Company's share capital per 31.12.2022 include the following: Number of shares Share Capital in NOK Par Value per share Ordinary shares (one share = one vote) 239 760 117 239 760 117 1,00 Changes in number of shares Shares Number of shares 01.01.2022 239 760 117 Own shares 31.12.2022 5 263 157 Number of shares 31.12.2022 234 496 960 68 The major shareholders in Carbon Transition ASA 31 December 2022 were as follows: Shareholders Total shares Ownership share Voting share INVESTERINGSFONDET VIKING AS 28 000 000 11,7% 11,7% TIGERSTADEN AS 16 250 000 6,8% 6,8% F2 FUNDS AS 11 848 719 4,9% 4,9% ALDEN AS 11 265 384 4,7% 4,7% F1 FUNDS AS 10 642 170 4,4% 4,4% DNB BANK ASA 9 300 000 3,9% 3,9% BECK ASSET MANAGEMENT AS 9 012 307 3,8% 3,8% GINNY INVEST AS 7 250 230 3,0% 3,0% BALLISTA AS 6 323 231 2,6% 2,6% URTIVEN AS 6 300 000 2,6% 2,6% Q CAPITAL AS 5 869 230 2,4% 2,4% PHILIP HOLDING AS 5 750 230 2,4% 2,4% CARBON TRANSITION ASA 5 263 157 2,2% 2,2% REDBACK AS 5 000 000 2,1% 2,1% TTC INVEST AS 4 000 000 1,7% 1,7% Nordnet Bank AB 3 472 800 1,4% 1,4% SIX SIS AG 3 451 756 1,4% 1,4% LIVERMORE INVEST AS 3 092 249 1,3% 1,3% KING KONG INVEST AS 3 000 000 1,3% 1,3% NORDNET LIVSFORSIKRING AS 2 975 849 1,2% 1,2% Total 20 largest shareholders 158 067 312 65,9% 65,9% Total other shareholders 81 692 805 34,1% 34,1% Total number of shares 239 760 117 100,0% 100,0% 69 The major shareholders in Carbon Transition ASA 31 December 2021 were as follows: Shares owned or controlled by members of the Board of Directors, Chief Executive Officer and Other Executive Officers 31 December 2022 were as follows: Share and options owned by management 31 December 2022 were as follows: Shareholders Total shares Ownership share Voting share INVESTERINGSFONDET VIKING AS 28 000 000 11,7% 11,7% MIDDELBORG INVEST AS 14 538 461 6,1% 6,1% TIGERSTADEN AS 13 760 459 5,7% 5,7% ALDEN AS 11 265 384 4,7% 4,7% SPAREBANK 1 MARKETS AS 11 180 000 4,7% 4,7% F2 FUNDS AS 9 250 000 3,9% 3,9% BECK ASSET MANAGEMENT AS 9 012 307 3,8% 3,8% F1 FUNDS AS 8 427 223 3,5% 3,5% URTIVEN AS 8 230 770 3,4% 3,4% GINNY INVEST AS 6 250 230 2,6% 2,6% DNB BANK ASA 6 225 280 2,6% 2,6% PHILIP HOLDING AS 5 750 230 2,4% 2,4% Q CAPITAL AS 5 619 230 2,3% 2,3% REDBACK AS 5 000 000 2,1% 2,1% TTC INVEST AS 4 000 000 1,7% 1,7% Nordnet Bank AB 3 758 002 1,6% 1,6% LIVERMORE INVEST AS 3 079 615 1,3% 1,3% Skandinaviska Enskilda Banken AB 2 500 000 1,0% 1,0% NORDNET LIVSFORSIKRING AS 2 089 077 0,9% 0,9% CITADELL AS 2 000 000 0,8% 0,8% Total 20 largest shareholders 159 936 268 66,7% 66,7% Total other shareholders 79 823 849 33,3% 33,3% Total number of shares 239 760 117 100,0% 100,0% Board of Directors Position Total shares Ownership share Voting share Number of options Torstein Sanness Board member 285 000 0,0 % 0,0 % 800 000 Executive management Position Number of shares Number of options Nils Haugestad Interim CEO and CFO (Interim CEO from 9.12.2021) Interim CEO and CFO - - 70 Shares owned or controlled by members of the Board of Directors, Chief Executive Officer and Other Executive Officers 31 December 2021 were as follows: Share and options owned by management 31 December 2021 were as follows: Note 19 Related parties The ultimate Parent of the Group is Carbon Transition ASA. The Group transactions and balances with other Group companies in 2022 were related to consultancy fees from companies representing some of the largest shareholders. There were no transactions with related parties in 2021. Transactions with related parties USD thousands 2022 2021 Consultancy services: Citadell AS controlled by Fredrik Sneve 68 - Middelborg AS controlled by Lars Eriksen 70 - Balances with related parties USD thousands 31.12.2022 31.12.2021 Account payables / Other current liabilities: Citadell AS 5 30 Middelborg AS 5 26 Board of Directors Position Total shares Ownership share Voting share Number of options Gisle Grønlie Chairman 134 000 0,0 % 0,0 % 800 000 Torstein Sanness Board member 285 000 0,0 % 0,0 % 800 000 Executive management Position Number of shares Number of options Nils Haugestad Interim CEO and CFO (Interim CEO from 9.12.2021) Interim CEO and CFO - - Richard Dunlop EVP Operations 14 423 10 640 71 As of 1st July 2021, an agreement related to consultancy services was entered with Citadell AS and Middelborg AS representing some of the largest shareholders of the Parent company, in addition to participate in the nomination committee from 23 June 2021. The payment related the consultancy services started in 2022. The agreement to deliver consultancy services with these companies was cancelled by end of January 2023. Note 20 Personnel expenses and board remunerations The Group has a defined contribution pension plan. The contribution plan is a retirement plan in which the Group pays fixed contributions to a separate legal entity. The Group has no further payment obligations once these contributions have been paid. Contributions are booked as cost on an ongoing basis. The Group meets the requirements for occupational pension scheme under the Act on Obligatory Occupational Pensions. The contribution pension scheme in Norway meets the legal requirements. The Group has not granted any loan or collateral to the Chair of the Board or other related parties. For detailed information about executive officers and board of Directors compensation, see the remuneration report 2022. USD thousands 2022 2021 Wages and salaries 842 2 462 Social Security costs 176 340 Pension costs 89 150 Other remuneration 34 539 Share based payment expense (refer to note 21) 11 11 Refund salary (20) (33) Total personnel expense 1 132 3 469 Number of man-years at 31.12 2022 2021 Group companies in Norway 3,5 7 Group companies abroad 0 2 Key management personnel compensation USD thousands 2022 2021 Base salary 337 1 223 Pension 19 60 Other Benefits 12 34 Number of options held - 10 640 72 See note 18 for shares held by the executive officers and Board of Directors. Note 21 Share based payments programs The Group has a share-based payment scheme for employees and one member of the Board. The options granted gives the holder right to purchase a defined number of shares at a predetermined price if the vesting conditions are met. The exercise price has been set to fair value of the shares at grant date. Set out below are summaries of options granted under the scheme: Share options outstanding at the end of the year have the following expiry date: 2022 2021 Average exercise price per share option (NOK) Number of options Average exercise price per share option (NOK) Number of options As at 01.01 3,4538 1 625 667 10,1400 405 079 Granted during the year - - 1,8000 1 600 000 Adjusted during the year - - 106,5452 (231 012) Terminated during the year 4,2227 (822 867) 9,2401 (148 400) As at 31.12 2,6657 802 800 3,4538 1 625 667 Vested 31.12 3,4260 402 800 106,5450 25 667 Exercisable 31.12 402 800 25 667 2022 2021 Share based payment cost (revenue) recognized in the period USD thousand 10 11 73 The exercise price for the grants was fair value at the grant date. The options can be exercised by buying shares as settlement where one options give right to one share. For the 2021 grant, 25% of the options will be vested 30.03.2022, 30.09.22, 30.03.2023 and 30.09.2023. The fair value at grant date was 0.22 NOK/option. The fair value has been estimated using the Black-Scholes option pricing model. When calculating fair value at grant date, the Group has assumed a volatility of 47.31% from comparable peers in the oil and gas services for both grants, 0 expected dividends, and a risk-free interest rate of 1,011% for the 2021 grant. Note 22 Auditors fee USD thousands Expensed audit fee (excluding VAT) 2022 2021 Statutory audit 128 260 Tax advice (incl. technical assistance with tax return) 63 8 Other attestation services 28 30 Total auditors fee 219 299 Grant date Expiry date Exercise price Share options 31 December 2022 Share options 31 December 2021 30.09.2021 30.09.2028 1,70 400 000 800 000 30.09.2021 30.09.2028 1,90 400 000 800 000 15.09.2017 15.09.2022 69,61 - 12 600 27.09.2018 27.09.2023 112,75 - 10 267 01.05.2019 01.05.2024 250,00 2 800 2 800 Total number of options 802 800 1 625 667 Outstanding instruments overview Strike Price Number of instruments Weighted Average remaining contractual life Weighted Average Strike Price Vested instruments 31.12.2021 Weighted Average Strike Price Outstanding instruments Vested instruments 1,70 400 000 4,50 1,70 400 000 1,70 1,90 400 000 5,50 1,90 - - 250,00 2 800 2,09 250,00 2 800 250,00 802 800 402 800 74 The auditor of the Group and the Norwegian entities is PricewaterhouseCoopers (PwC). Ernst & Young Egypt (EY) is the auditor for the subsidiary Axxis Geo Solutions Egypt LLC. Note 23 Subsidiaries and associated companies The Group comprise of the same legal entities as of 31 December 2022. * Axxis Production AS owns 99% and Axxis Geo Solutions ASA owns 1% of the shares in the company. Subsidiary of Carbon Transition ASA: Jurisdiction Voting rights % Neptune Seismic AS Norway 100% Axxis Geo Solution Inc. USA 100% Axxis Multi Client AS Norway 100% Axxis Production AS Norway 100% Carbon Transition Investment AS Norway 100% Axxis Geo Solutions Egypt LLC Egypt 100% 75 Note 24 Earnings per shares Basic earnings per share is calculated by dividing the net profit or loss attributable to shareholders of the Parent by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share include the weighted average number for ordinary shares that would be issued on the conversion of all the diluted potential ordinary shares into ordinary shares. The options described in note 21, are not included in the number of dilutive shares for 2022 or 2021 due to the options is out of money. Note 25 Climate risk The Group does face risks related to both transition risk (market-related, technological, and changes in regulatory requirements), and in physical risk (extreme weather) as a result of climate change. The risks are assessed to be a medium to long term risk. For consolidated accounts for fiscal year 2022, climate related considerations did not materially affect the Group’s estimates and assumptions. Note 26 Events after reporting period On 17 January 2023, the Group announced a new Utsira multi-client late sale of USD 0.5 million (net to the Carbon Transition). Basic earnings (loss) per weighted average number of shares 2022 2021 Profit (loss) attributable to the ordinary equity holders of the company 1 396 13 935 Average number of outstanding shares 234 496 960 131 501 057 Basic earnings (loss) per weighted average share (USD) 0,01 0,11 Diluted earnings (loss) per share 2022 2021 Profit (loss) attributable to the ordinary equity holders of the company 1 396 13 935 Average number of outstanding shares 234 496 960 131 501 057 Diluted earnings (loss) per share (USD) 0,01 0,11 76 6 Financial statement Carbon Transition ASA 6.1. Statement of comprehensive income USD thousands Note 2022 2021 Revenue 2 153 3 764 Other income 2 - 1 163 Other gains (losses) 2 666 - Cost of sales 3 208 (1 038) Personnel expenses 4 (957) (2 991) Other operating expenses (1 486) (4 089) Depreciation 5 (549) (6 907) Reversal of impairment intercompany expenses 11 682 - Operating profit (loss) (EBIT) 9 716 (10 097) Gain on debt restructuring 7 - 24 062 Financial income 7 9 12 Financial expenses 7 (5 109) (4 464) Currency exchange gain (loss) 7 (849) (1 575) Profit (loss) before tax 3 767 7 937 Income tax (expense) 8 - - Profit (loss) for the period 3 767 7 937 Currency translation adjustments - - Other comprehensive income (loss) for the period - - Total comprehensive income (loss) for the period 3 767 7 937 77 6.2. Statement of financial position USD thousands Assets Note 31.12.2022 31.12.2021 Non-current assets Deferred tax asset 8 - - Vessel, equipment and maintenance 5 - 3 413 Investment in subsidiaries 9 30 322 9 456 Non current receivables group companies 6 - 5 Financial assets 10 3 029 - Total non-current assets 33 351 12 875 Current assets Receivables from group companies 6 14 507 28 627 Other current assets 11 108 184 Bank deposits, cash in hand 10,12 912 3 732 Total current assets 15 526 32 543 Total assets 48 877 45 418 78 6.3. Statement of financial position Oslo, 30 March 2023 The Board of Directors and CEO of Carbon Transition ASA Gisle Grønlie Nina Skage Torstein Sanness Chairman Director Director Nils Haugestad Interim CEO USD thousands Equity and Liabilities Note 31.12.2022 31.12.2021 Equity Share capital 13 28 739 28 739 Additional paid-in capital 51 171 51 171 Own shares (489) - Total paid-in capital 79 422 79 910 Accumulated earnings and other equity (36 812) (35 852) Total Equity 42 609 44 057 Current liabilities Trade payables 77 141 Liabilities to group companies 6 6 001 399 Other current liabilities 14 190 821 Total current liabilities 6 269 1 361 Total equity and liabilities 48 877 45 418 79 6.4. Statement of changes in equity USD thousands Share capital Additional paid-in capital Own shares Accumulated earnings Total equity Balance as of 01.01.2022 28 739 51 171 - (35 852) 44 057 Profit (loss) for the period 3 767 3 767 Other comprehensive income (loss) - - Purchase own shares (489) 24 (464) Group contribution to and from subsidiary (4 762) (4 762) Share based payment 11 11 Balance as of 31.12.2022 28 739 51 171 (489) (36 812) 42 609 USD thousands Share capital Additional paid-in capital Own shares Accumulated earnings Total equity Balance as of 01.01.2021 840 38 453 - (43 800) (4 507) Profit (loss) for the period 7 937 7 937 Other comprehensive income (loss) - - New shares issued - cash settled 22 800 961 23 760 Cost for new shares issued (2 163) (2 163) Capital increase - debt conversion 5 099 13 920 19 019 Share based payment 11 11 Balance as of 31.12.2021 28 739 51 171 - (35 852) 44 057 80 6.5. Statement of cash flow * The investment was transferred in 2021 to Carbon Transition Investment AS USD thousands Note 2022 2021 Cash flow from operating activities Profit before tax 3 767 7 937 Taxes refund (paid) - - Depreciation 5 549 9 787 Reversal of impairment intercompany expenses 6 (11 682) - Write-down subsidiaries 7 5 106 - Changes in other gains and losses 2 (666) - Gain reconstruction 2,3 - (24 062) Currency (gain)/loss without cash flow effects 0 63 Interest expense 7 0 718 Share based payment cost 17 11 11 Other working capital changes 59 (1 133) Net cash from operating activities (2 855) (6 679) Cash flow from investing activities Disposal of property, plant and equipment 2,10 500 - Investment in financial instruments * - (9 345) Net cash flow from investment activities 500 (9 345) Cash flow from financing activities Repayment of interest-bearing debt 19 - (1 295) Payment of lease liabilities (recognized under IFRS 16) 19 - (23) Net proceeds from new equity - 21 597 Investment in own shares (464) - Interest paid lease liabilities - (0) Interest paid 7 (0) (718) Net cash flow from financial activities (464) 19 562 Net change in cash and cash equivalents (2 820) 3 537 Cash and cash equivalents balance 01.01 12 3 732 194 Cash and cash equivalents balance 31.12 12 912 3 732 81 6.6. Notes to the financial statements Note 1 General information about the Company and basis for presentation General information Carbon Transition ASA is a public limited listed company incorporated in Norway. The Company is listed on EURONEXT EXPAND OSLO and traded under the ticker CARBN. The Company’s registered office is at Askekroken 11, 0277 Oslo, Norway. Carbon Transition is an investment company. Carbon comprises an OBN multi-client company and an investment arm. Carbon may invest broadly in listed companies as well as companies expected to be listed in the near term. Carbon has a legacy seismic business operating under the name Axxis Geo Solutions. Under Axxis Geo Solutions, the Company manages a seismic OBN multi-client data library with assets in Norway and Egypt. The Company’s financial statements are prepared in accordance with International Financial Reporting Standards («IFRS») as adopted by the European Union (“EU”), their interpretations adopted by the International Accounting Standards Board (IASB) and the additional requirements of the Norwegian Accounting Act as of 31 December 2021. The notes are an integral part of the Company’s financial statements. The Company’s financial statements have been prepared on a historical cost basis, except for certain financial assets financial instruments that have been measured at fair value. The Company’s financial statements are presented in thousands of USD. Further, the Company applies the same accounting policies as described in note 1 and 2 in the notes to the consolidated financial statements where relevant, except that unrealized foreign exchange gain (loss) on non-current intercompany loans is recognized in the statements of profit and loss. Shares in subsidiaries (see note 9) are presented at cost less impairment. Impairment is recognized based upon the carrying value of the individual shares and net intercompany receivables in the subsidiaries less the estimated recoverable amount (based on discounted estimated future cash flows). If estimated recoverable amounts increase, impairment charges are reversed accordingly. There is no fixed plan for repayment of long-term intercompany receivables and payables. Changes in accounting principles 82 The Company has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective. Several amendments and interpretations apply for the first time in 2022, but do not have an impact on the Company’s financial statements. Key accounting estimates and judgement The Company makes estimates and assumptions concerning the future. The resulting accounting estimates could deviate from the actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year are discussed below. Revenue recognition 2021 The Company uses the percentage of completion method in accounting for revenue for contract seismic surveys. Progress is measured in a manner generally consistent with the physical progress on the project. Use of the percentage of completion method requires the Company to estimate the services performed to date as a proportion of the total service to be performed. The proportion of services performed to total services to be performed can differ from management’s estimate, influencing the amount of revenue recognized in the period. Note 2 Revenue and cost from contract with clients Revenue of USD 0.2 million in 2022 partly relates to intercompany invoices to Axxis Geo Solutions Inc for compensation for the node business, and partly from the close- down of the subsidiary PT Axxis Geo Solutions in Indonesia (reversal of accruals). Other gains (losses) include the ocean-bottom seismic contract node on a rope business, which was divested in March 2022 through an earnout agreement with Magseis Fairfield. The net gain of USD 0,7 million is from the sales of the seismic node business to Magseis Fairfield. Under the agreement, Carbon Transition received USD 0.5 million at closing and will receive earnout payments of up to a maximum of USD 12.0 million over the next three years, based on the use of the equipment. There is a minimum payment in year three of USD 1.5 million, subject to certain milestones. Revenue of USD 3.8 million in 2021 mainly relates intercompany revenues for reimbursement of cost according to transfer pricing agreement. Other revenue of USD 1.2 million in 2021 is related to Covid-19 compensation. 83 Note 3 Cost of sales Note 4 Personnel expenses and board remunerations The Company has a defined contribution pension plan. The contribution plan is a retirement plan in which the Company pays fixed contributions to a separate legal entity. The Company has no further payment obligations once these contributions have been paid. Contributions are booked as cost on an ongoing basis. The Company meets the requirements for occupational pension scheme under the Act on Obligatory Occupational Pensions. The contribution pension scheme in Norway meets the legal requirements. The Company has not granted any loan or collateral to the Chair of the Board or other related parties. Key management personnel compensation USD thousands Cost of sales 2022 2021 Vessel cost - (220) Crew & project management 22 (262) Seismic, source and node equipment (9) (280) Agent related expenses (117) (276) Withholding tax refund 312 - Total operating expenses 208 (1 038) USD thousands 2022 2021 Wages and salaries 695 2 100 Social Security costs 165 318 Pension costs 89 150 Other remuneration 17 445 Share based payment expense (refer to note 21 Group) 11 11 Refund salary (20) (33) Total personnel expense 957 2 991 Number of man-years at 31.12 2022 2021 Companies in Norway 3,5 7 USD thousands 2022 2021 Base salary 249 1 031 Pension 19 60 Other Benefits 2 7 Number of options held - - 84 For detailed information of executive officers and board of Directors compensation, see the remuneration report 2022. See note 18 for the Group for shares held by the executive officers and Board of Directors. Note 5 Property, plant and equipment USD thousands Vessel Seismic and node equipment Projects in progress Computer equipment Lease asset Total tangible assets 2022 Cost at 01.01.22 - 11 388 - 196 - 11 584 Additions - - - - - - Disposal - (10 000) - - - (10 000) Cost at 31.12.22 - 1 388 - 196 - 1 584 Accumulated depreciation 01.01.22 - (7 976) - (195) - (8 170) Depreciation - (548) - (1) - (549) Disposal - 7 136 - - - 7 136 Accumulated depreciation at 31.12.22 - (1 388) - (196) - (1 584) Carrying amount at 01.01.22 - 3 412 - 1 - 3 413 Carrying amount at 31.12.22 - (0) - - - (0) Economic lifetime 3-10 years 3-5 years 3-10 years 2-5 years 85 The climate risk for stranded equipment is evaluated as low since the Company has sold the node seismic equipment in March 2022. The book value of assets is zero at the end of 2022. Note 6 Related parties intercompany USD thousands Vessel Seismic and node equipment Projects in progress Computer equipment Lease asset Total tangible assets 2021 Cost at 01.01.21 8 171 17 372 29 196 184 25 952 Additions - - - - - - Disposal (8 171) (5 984) (29) - (184) (14 368) Cost at 31.12.21 - 11 388 - 196 - 11 584 Accumulated depreciation 01.01.21 (4 717) (9 259) - (153) (162) (14 290) Depreciation (351) (2 967) - (42) (22) (3 383) Disposal 5 067 4 251 - - 184 9 502 Accumulated depreciation at 31.12.21 (0) (7 976) - (195) - (8 170) Carrying amount at 01.01.21 3 454 8 114 29 43 22 11 662 Carrying amount at 31.12.21 (0) 3 412 - 1 - 3 413 Economic lifetime 3-10 years 3-5 years 3-10 years 2-5 years USD thousands Non-current receivables group companies 31.12.2022 31.12.2021 Carbon Transtion Investment AS - 5 Total non-current receivables group companies - 5 86 For more information on related parties see note 19 for the Group. * Prior years impairment of intercompany receivables to Axxis Multi Client AS have during 2022 been net reversed by USD 11.7 million and presented as a gain in the statement of comprehensive income. USD thousands Current receivables group companies 31.12.2022 31.12.2021 Axxis Multi Client AS * - 14 314 Axxis Production AS 11 878 12 358 Axxis Geo Solutions Egypt LLC 395 1 411 PT Axxis Geo Solutions - 305 Carbon Transition Investment AS 2 223 235 Neptune Seismic AS 11 5 Total receivables group companies 14 507 28 627 USD thousands Current liabilities group companies 31.12.2022 31.12.2021 Carbon Transition Investment AS 4 762 - Axxis Multi Client AS 1 214 - Axxis Geo Solutions Inc. 25 141 PT Axxis Geo Solutions - 257 Total liabilites group companies 6 001 399 USD thousands Revenue from group companies 2022 2021 Axxis Geo Solutions Inc. 96 236 Axxis Multi Client AS - 692 Axxis Production AS - 2 832 PT Axxis Geo Solutions 52 - Total revenue group companies 148 3 760 87 For more information on related parties related to other than group companies see note 19 for the Group. Note 7 Financial items USD thousands Gain on debt restructuring 2022 2021 Gain on debt restructuring - 24 062 Total gain on restructuring - 24 062 Financial income 2022 2021 Interest income 4 1 Other financial income 5 - Group contribution (from subsidiary) - 11 Total financial income 9 12 Financial expenses 2022 2021 Interest expense (0) (486) Interest expense suppliers - (231) Other financial expenses (3) (866) Write-down shares in subsidiaries (5 106) (2 881) Total financial expenses (5 109) (4 464) Currency exchange gain (loss) 2022 2021 Exchange gains 406 842 Exchange losses (1 255) (2 418) Total currency exchange gain (loss) (849) (1 575) USD thousands Cost from group companies 2022 2021 Axxis Geo Solutions Inc. 445 1 360 Total cost group companies 445 1 360 USD thousands Revenue from investment in subsidiaries 2022 2021 Group contribution correction Axxis Production AS - (224) Group contribution from Carbon Transition AS - 235 Total revenue from investment in subsidiaries - 11 88 Note 8 Tax Deferred tax assets are not recognized per December 2022. The management evaluated the deferred tax assets to be uncertain when to be utilized in the future. This evaluation is performed yearly. There is no time limit for use of loss carried forward in Norway. USD thousands 2022 2021 Specification of tax expense (income) for the year Current income tax (including withholding tax) - - Change in deferred tax - - Total tax expense (income) - - Reconciliation of actual against expected tax expense (income) at the income tax rate of 22% Profit (loss) before tax 3 767 7 937 22% tax 829 1 746 Tax effect from: Withholding tax abroad - - Permanent differences 6 696 696 Not booked deferred tax assets (7 820) (1 633) Currency effect 285 (809) Receive Group contribution 10 Calculated tax expense (income) (0) - Effective tax rate for the Company (0.0) - USD thousands 31.12.2022 31.12.2021 Temporary differences Non current assets (5 002) (4 109) Accruals (1 385) (41 580) Gain/loss account (2) (1 934) Accumulated loss carried forward (8 551) (8 783) Temporary differences at 31.12. (14 940) (56 408) Deferred tax assets (liabilities) 3 287 12 410 89 Note 9 Subsidiaries and associated companies Carbon Transition ASA (CT ASA) comprise of the following legal entities as at 31 December 2022 * Axxis Geo Solutions Egypt LLC is owned by Axxis Production AS 99% and Carbon Transition ASA by 1% of the shares. The Company holds 100 percent of all shares (except Axxis Geo Solution Egypt LLC as mentioned above) and all voting rights for its subsidiaries. The main change from 2021 is conversion of intercompany receivables to shares in subsidiaries in Axxis Multi Client AS, as of year-end the shares has partly been written down. Further write-down was partly performed in Carbon Transition Investment AS, fully write-down of the shares in Axxis Production AS and Axxis Geo Solution Inc was performed. In addition, the subsidiary Axxis Geo Solutions PT was finally closed during 2022.Carbon Transition ASA (CT ASA) comprise of the following legal entities as of 31 December 2021 USD thousands Subsidiary of Carbon Transition ASA: Jurisdiction Total Equity Net Income/ (loss) Carrying value Neptune Seismic AS Norway (13) (4) - Axxis Geo Solution Inc. USA 25 (118) - Axxis Multi Client AS Norway 32 827 15 399 25 971 Axxis Production AS Norway (9 550) 367 - Carbon Transition Investment AS Norway 9 361 (13 437) 4 351 Axxis Geo Solutions Egypt LLC Egypt 3 713 500 1 Total 36 364 2 707 30 322 USD thousands Subsidiary of Carbon Transition ASA: Jurisdiction Total Equity Net Income/ (loss) Carrying value Neptune Seismic AS Norway (9) (5) - Axxis Geo Solution Inc. USA 17 (20) 100 Axxis Geo Solutions PT Indonesia 427 (7) - Axxis Multi Client AS Norway (38 543) (3 448) - Axxis Production AS Norway (8 512) (8 112) 6 Carbon Transition Investment AS Norway 18 471 9 122 9 351 Axxis Geo Solutions Egypt LLC* Egypt 3 951 (865) 1 Total (24 198) (3 334) 9 456 90 * The formal shareholdings in Axxis Geo Solutions PT are 49 %. The Group has control of operating decisions and is exposed to 100 % of variability of the company’s results through a shareholder agreement. Because of this, no non-controlling interest has been recognized in the financial statements. ** Axxis Geo Solutions Egypt LLC is owned by Axxis Production AS 99% and Carbon Transition ASA by 1% of the shares. The Company holds 100 percent of all shares (except Axxis Geo Solution PT and Axxis Geo Solution Egypt LLC as mentioned above) and all voting rights for its subsidiaries. Note 10 Categories of financial instruments Carbon Transition ASA exposure to various risks associated with the financial instruments is discussed in note 15 Financial risk management. The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of financial assets mentioned above. Transaction price Financial assets is from the ocean-bottom seismic contract node on a rope business was divested in March 2022 through an earnout agreement with Magseis Fairfield. Under the agreement, Carbon Transition received USD 0.5 million at closing and will receive earnout payments of up to a maximum of USD 12.0 million over the next three years, based on the use of the equipment. There is a minimum payment in year three of USD 1.5 million, subject to certain milestones. An entity shall include in the transaction price some or all of an amount of variable consideration estimated only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the USD thousands Financial assets at amortized cost 31.12.2022 31.12.2021 ASSETS Financial assets 3 029 - Cash and cash equivalents 912 3 732 Total financial assets 3 941 3 732 Financial liabilities at amortized cost 31.12.2022 31.12.2021 LIABILITIES Trade payables 77 141 Other current liabilities 190 821 Total financial liabilities 267 962 91 variable consideration is subsequently resolved. the Group used best estimates and discounted to net present value. Note 11 Other current assets Note 12 Bank deposits, cash in hand Restricted bank deposits relate to employee withholding tax. These deposits are subject to regulatory restrictions and are therefore not available for general use by the Company. The account is used to settle employee withholding tax. Note 13 Share capital and shareholder information Please see note 18 in the Group for more information. Note 14 Other current liabilities USD thousands 31.12.2022 31.12.2021 Prepayments 56 145 VAT settlement 51 39 Total other current assets 108 184 USD thousands 31.12.2022 31.12.2021 Bank deposits 870 3 646 Restricted bank deposits 42 86 Total bank deposits 912 3 732 USD thousands 31.12.2022 31.12.2021 Holiday pay owed 77 167 Other accrued costs 113 654 Total other current liabilities 190 821 92 Note 15 Financial risk management Capital Management – see note 14 in the Group for more information Financing risk – see note 14 in the Group for more information (i) Credit risk– see note 14 in the Group for more information (ii) Market risk - interest rate– see note 14 in the Group for more information (iii) Liquidity risk Liquidity risk is the risk that the Company is not able to meet its payment obligations. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. The Company's strategy for managing liquidity risk is to always have sufficient liquidity in order to meet its financial liabilities at maturity, both under normal and exceptional circumstances, without risking unacceptable losses or at the expense of the Company`s reputation. The Company may need access to long-term funding. There can be no assurance that available funding sources are accessible when needed nor can there be any assurance that the Company will be able to raise new equity on favorable terms and in amounts necessary to conduct its on-going and future operations, should this be required. Furthermore, there can be no assurance that the Company will be able to obtain additional shareholder funding. Failure to access necessary liquidity could require the Company to scale back its business or could have other materially adverse consequences for its business and its ability to meet its obligations. The table below provides an overview of the maturity profile of all financial liabilities. For bank loans the stated amount includes estimated interest payments. In cases where the counterparty may claim earlier redemption, the amount is placed in the earliest period and the payment may be required from the counterparty. 2022 Remaining Term USD thousands 0-3 months 3-6 months 6-9 months 9-12 months 1-2 years Total Trade payables 77 - - - - 77 Other current liabilities 190 - - - - 190 Total 267 - - - - 267 93 (iv) Market risk - foreign exchange rates The Company operates internationally and is exposed to foreign exchange risk, primarily the NOK. Foreign exchange risk arises from future commercial transactions and recognized assets and liabilities denominated in a currency that is not the functional currency of the relevant Company entity. The Company is exposed to currency risk as some parts of the Company’s expenses are denominated in NOK. Profit after tax for the Company is also affected by changes in exchange rates, as expenses and payables are converted to USD. The NOK denominated payables are expected to be repaid with receipts from US dollar denominated sales. The foreign currency exposure of these loans has not been hedged. The table below shows the Company's sensitivity to potential changes in exchange rates. Then the calculation in the table below shows the effect on profit / loss on the average exchange rate. Note 16 Auditors fee The auditor of the Company is PricewaterhouseCoopers (PwC). Note 17 Share based payments programs Please see note 21 in the Group for more information. USD thousands Change in exchange rate USD/NOK Effect on profit before tax Effect on OCI 2022 + 10 % (193) - - 10 % 236 - 2021 + 10 % 722 - - 10 % (882) - USD thousands Expensed audit fee (excluding VAT) 2022 2021 Statutory audit 74 174 Tax advice (incl. technical assistance with tax return) 4 7 Other attestation services 28 19 Total auditors fee 105 200 94 Note 18 Commitments As of December 2022, the Group had commitments related to office rent for the Oslo office until September 2023. As of December 2021, the Company had commitments related to office rent for the Oslo office until September 2022. The cost for short term leases of office rent for 2022 was USD 0.1 million and USD 0.1 million for 2021. The cost for short-term leases of seismic equipment was zero in 2022 and USD 0.2 million in 2021. Note 19 Interest bearing debt and cash flow information There was no interest-bearing debt as of 31 December 2022 or as of 31 December 2021. All loans were settled because of the legal court reconstruction in 2021. * Mainly related to debt forgiveness related to the reconstruction process. Note 20 Events after reporting period See note 26 in the Group for more information. Liabilities arising from financing activities USD thousands Interest bearing debt Lease liabilities Total 01.01.2022 - - - Liabilities arising from financing activities USD thousands Interest bearing debt Lease liabilities Total 01.01.2021 33 905 24 33 929 Repayment of interest-bearing debt (1 295) - (1 295) Payment of lease liabilities (24) Other (32 610) (32 610) 31.12.2021 - - - PricewaterhouseCoopers AS, Dronning Eufemias gate 71, Postboks 748 Sentrum, NO-0106 Oslo T: 02316, org. no.: 987 009 713 MVA, www.pwc.no Statsautoriserte revisorer, medlemmer av Den norske Revisorforening og autorisert regnskapsførerselskap To the General Meeting of Carbon Transition ASA Independent Auditor’s Report Report on the Audit of the Financial Statements Opinion We have audited the financial statements of Carbon Transition ASA, which comprise: • the financial statements of the parent company Carbon Transition ASA (the Company), which comprise the statement of financial position as at 31 December 2022, the statement of comprehensive income, statement of changes in equity and statement of cash flow for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and • the consolidated financial statements of Carbon Transition ASA and its subsidiaries (the Group), which comprise the consolidated statement of financial position as at 31 December 2022, the consolidated statement of comprehensive income, the consolidated statement of change in equity and the consolidated statement of cash flow for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion • the financial statements comply with applicable statutory requirements, • the financial statements give a true and fair view of the financial position of the Company as at 31 December 2022, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU, and • the consolidated financial statements give a true and fair view of the financial position of the Group as at 31 December 2022, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU. Our opinion is consistent with our additional report to the Audit Committee. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company and the Group as required by relevant laws and regulations in Norway and the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. To the best of our knowledge and belief, no prohibited non-audit services referred to in the Audit Regulation (537/2014) Article 5.1 have been provided. We have been the auditor of the Company for 2 years from the election by the general meeting of the shareholders on 23 June 2021 for the accounting year 2021. 7 Auditors report 2 / 5 Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. The Group’s business activities are largely unchanged compared to last year. We have not identified regulatory changes, transactions or other event that qualified as new Key Audit Matters for our audit of the 2022 financial statements. Furthermore, Valuation of multi-client library and Valuation of investments have the same characteristics and risks as in the prior year, and therefore continues to be an area of focus this year. Key Audit Matters How our audit addressed the Key Audit Matter Valuation of multi-client library Valyation of multi-client library has been an area of focus as it accounts for approximately 70% of the Group’ total assets per 31 December 2022. Management applied judgment in determining whether the carrying amount of the multi-client library exceeded the recoverable amount. Specifically, judgement was applied when determining assumptions such as expected discounted future cash flows. Furthermore, there is an inherent uncertainty in forecasting future sales of the multi-client library which is impacted by factors such as: the overall exploration and production spending within the oil and gas industry, interest in specific regions, whether licenses to perform exploration in the various regions exist or will be awarded in the future and other factors. Even small changes in assumptions, including the discount rate, may impact the value of the multi-client library. We refer to note 11, where management explains how the multi-client libraries are valued under IAS 36 and IAS 38. We obtained and gained an understanding of management’s impairment assessment related to the multi-client library. We evaluated management’s assessment of impairment indicators and management’s estimates related to sales forecasts. Our audit procedures included inquiries and evaluations of management and senior sales personnel’s assumptions regarding the current market, licensing rounds and exploration activities. This included inspection of supporting documentation, assessing the basis for key assumptions, and testing of the key assumptions. We found no significant deviations. Furthermore, we evaluated and found that the valuation method applied was reasonable. We assessed the discount rate by comparing key components used with external market data, as well as comparing the overall level with discount rates used by other companies within the industry. We considered that the discount rates were within an appropriate range. We also tested mathematical accuracy of the fair value less cost of disposal calculations by recalculating the fair value less cost of disposal model. We found the assessment to be mathematically accurate. We evaluated the disclosures in note 11 and found them to appropriately describe the assessment of carrying value of the multi-client libraries. 3 / 5 Valuation of investments Valuation of investments has been an area of focus as the investments account for approximately 13% of the Group’s total assets per 31 December 2022. Some of the investments are unlisted and valuated with use of unobservable inputs and classified as level 3 in the fair value hierarchy. A certain degree of judgement is applied in determining the assumptions that market participants would use when observable market pricing data is not available. We refer to note 12, where management explains their valuation techniques and assumptions used in the model to determine fair value per 31 December 2022. We evaluated management’s valuation processes. Our audit procedures included inquiries, inspection of supporting documentation, assessing the basis for key assumptions, and testing the key assumptions. We found that management’s processes and their assessment to be reasonable. We evaluated management’s assumptions through comparing the data they used to observable inputs in external markets where such data was available, and to other internal data where we deemed those as reliable audit evidence. We evaluated the disclosures in note 12 and found that the disclosure appropriately describes the valuation of the investments. Other Information The Board of Directors and the Managing Director (management) are responsible for the information in the Board of Directors’ report and the other information accompanying the financial statements. The other information comprises information in the annual report, but does not include the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the information in the Board of Directors’ report nor the other information accompanying the financial statements. In connection with our audit of the financial statements, our responsibility is to read the Board of Directors’ report and the other information accompanying the financial statements. The purpose is to consider if there is material inconsistency between the Board of Directors’ report and the other information accompanying the financial statements and the financial statements or our knowledge obtained in the audit, or whether the Board of Directors’ report and the other information accompanying the financial statements otherwise appear to be materially misstated. We are required to report if there is a material misstatement in the Board of Directors’ report or the other information accompanying the financial statements. We have nothing to report in this regard. Based on our knowledge obtained in the audit, it is our opinion that the Board of Directors’ report • is consistent with the financial statements and • contains the information required by applicable statutory requirements. Our opinion on the Board of Director’s report applies correspondingly to the statements on Corporate Governance and Corporate Social Responsibility. Responsibilities of Management for the Financial Statements Management is responsible for the preparation of financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the EU, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. 4 / 5 In preparing the financial statements, management is responsible for assessing the Company’s and the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: • identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error. We design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's and the Group's internal control. • evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's and the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company and the Group to cease to continue as a going concern. • evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves a true and fair view. • obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. 5 / 5 We communicate with the Board of Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the Audit Committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the Board of Directors, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on Other Legal and Regulatory Requirements Report on Compliance with Requirement on European Single Electronic Format (ESEF) Opinion As part of the audit of the financial statements of Carbon Transition ASA, we have performed an assurance engagement to obtain reasonable assurance about whether the financial statements included in the annual report, with the file name Carbon TransitionASA-2022-12-31-en, have been prepared, in all material respects, in compliance with the requirements of the Commission Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regulation) and regulation pursuant to Section 5-5 of the Norwegian Securities Trading Act, which includes requirements related to the preparation of the annual report in XHTML format, and iXBRL tagging of the consolidated financial statements. In our opinion, the financial statements, included in the annual report, have been prepared, in all material respects, in compliance with the ESEF regulation. Management’s Responsibilities Management is responsible for the preparation of the annual report in compliance with the ESEF regulation. This responsibility comprises an adequate process and such internal control as management determines is necessary. Auditor’s Responsibilities For a description of the auditor’s responsibilities when performing an assurance engagement of the ESEF reporting, see: https://revisorforeningen.no/revisjonsberetninger Oslo, 30 March 2023 PricewaterhouseCoopers AS Martin Alexandersen State Authorised Public Accountant (This document is signed electronically) Signers: Name This document package contains: - Closing page (this page) - The original document(s) - The electronic signatures. These are not visible in the document, but are electronically integrated. This le is sealed with a digital signature. The seal is a guarantee for the authenticity of the document. 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