Electromagnetic Geoservices ASA

Annual Report (ESEF) • Apr 25, 2022

ELECTROMAGNETIC GEOSERVICES ASA 5967007LIEEXZXI7OG55 2021-01-01 2021-12-31 5967007LIEEXZXI7OG55 2020-01-01 2020-12-31 5967007LIEEXZXI7OG55 2021-12-31 5967007LIEEXZXI7OG55 2020-12-31 5967007LIEEXZXI7OG55 2019-12-31 5967007LIEEXZXI7OG55 2020-01-01 2020-12-31 emgs:ShareCapitalSharePremiumAndOtherPaidInEquityMember 5967007LIEEXZXI7OG55 2020-01-01 2020-12-31 ifrs-full:OtherReservesMember 5967007LIEEXZXI7OG55 2020-01-01 2020-12-31 ifrs-full:RetainedEarningsMember 5967007LIEEXZXI7OG55 2021-01-01 2021-12-31 emgs:ShareCapitalSharePremiumAndOtherPaidInEquityMember 5967007LIEEXZXI7OG55 2021-01-01 2021-12-31 ifrs-full:OtherReservesMember 5967007LIEEXZXI7OG55 2021-01-01 2021-12-31 ifrs-full:RetainedEarningsMember 5967007LIEEXZXI7OG55 2019-12-31 emgs:ShareCapitalSharePremiumAndOtherPaidInEquityMember 5967007LIEEXZXI7OG55 2019-12-31 ifrs-full:OtherReservesMember 5967007LIEEXZXI7OG55 2019-12-31 ifrs-full:RetainedEarningsMember 5967007LIEEXZXI7OG55 2020-12-31 emgs:ShareCapitalSharePremiumAndOtherPaidInEquityMember 5967007LIEEXZXI7OG55 2020-12-31 ifrs-full:OtherReservesMember 5967007LIEEXZXI7OG55 2020-12-31 ifrs-full:RetainedEarningsMember 5967007LIEEXZXI7OG55 2021-12-31 emgs:ShareCapitalSharePremiumAndOtherPaidInEquityMember 5967007LIEEXZXI7OG55 2021-12-31 ifrs-full:OtherReservesMember 5967007LIEEXZXI7OG55 2021-12-31 ifrs-full:RetainedEarningsMember iso4217:USD iso4217:USD xbrli:shares EMGS ANNU AL REPOR T 202 1 . 2 3 EMGS technology 9 Board of Directors 11 Board of Directors ’ Rep ort 21 Responsibility Sta tement 22 Report on Corporat e Gover nance 31 Report on Sustainab ility and CSR 35 Determination of Salar y State ment 38 Financial Statements EMGS Group 76 Financial Statements EMGS AS A 96 Auditor ’ s Report f or 2021 3 EMGS technolo gy . The electromagnet ic ( EM) technology used by EMGS in its survey p rojects can be divide d into two disti n ct methods: controlled-source electromagnetic (CSEM) surveying and magnetotellur ic (MT) surveying. EMGS continues to develop and improve its acquisition hardware, proces sing software and its inter p retation w or kflow s. These i nnovations further enhan c e the value of EMGS te c hnology to our c lients. CSEM (Controlled- So urce Electr omagnetic) When performing a CSE M survey, a powerful horizontal electric dipo le source is towed abo ve the seafloor while a seri es of receivers are placed on the seabed . The dipole source tra nsmits a low-frequency electromagnetic signal into the sub surface underneath the seafloor. The resistivity of the formations under the seafloor defines the way in which the electromagn etic energy transmitted by th e dipole propagates through the sub surface. High resis tivity is an ind icator of a poss ible hydrocarbon-filled reservo ir. Multi-component r eceivers that have been p laced on the se abed for th e s urvey m easure the electro magnetic energy that has propagated through the subs urface and the sea. The i nformation from these receivers is processed and inverted to produce a 3D resistiv ity image of the su rvey area. EMGS ty pically deploy s grids of receivers in o rder to acqu ire full-azimuth surveys . This type of survey p rovides o ptimal imaging of the subsu rface. CSEM data is a valuable supp lement to information on s tructure and depos ition of sediments p rovided by seismic. By comb ining both datas ets (CSEM and s eismic) , and an y oth er complementary subsurface information that is available, the accuracy and efficien cy of oil & gas exploration can be improv ed , In add ition, CSEM data can provide information of the shallow s ubsurface resistiv ity which is important in marine mineral exploration , an d could also prov e to be valu able in offshore wind turbin e and cable p lacement and a range o f other geotechnical application s . , EMGS has developed a workflow that allows companies to easily integrate CSEM in formation with seismic data and embed the integrated interpr etation in to their p rospect evaluation work. This workflow, the E MGS ’ Exploration Solutio n, includes a wide range of analys is includ ing; resistivity attribute a naly sis (similar to working w ith seismic attributes ), anomaly identification and delineation , anomaly significan ce tests, s ensitiv ity assessment for d epth in tervals of inter est, correlatio n of anomalies to s eismic observat ions such as con formance to structure, s eismic DHI an d seismic indicato rs of lithological resistors. The resulting integrated interpretation is us ed to establish the likelihood of a p rospect being hydrocarb on charge d and the size/area of a possible hydrocarbon accu mulation. Extensions to the workflow are available that add ress subs urface questions specific to field ap praisal, s uch as estimating pay d istribution and interp reting the hy drocarbon -water conta ct , both of which can further refi ne a company’s as sessment of the pros pect(s) and therefore improve the understan ding of the prospectivity of the s urvey area prior to tak ing further steps in th e exploration process . 4 The EMGS’ Exploration Solution workflow transfo rms CSEM data into information for improved e xploration dec ision -making MT (Magnetot elluric) Similar to CSEM surveyin g, the MT techniq ue generates ins ight into th e subsurface by imaging s ubsurface resis tivity. Marine MT surveys map subsurface r esistivity var iations by measuring natu rally occurring electro magnetic signals o n the seabed. These signals ar e ge nerated by the interactio ns of solar wind with the Ear th’s magnetic field, which, when strong, are known as ge omagn etic storms. The MT signals are of very low frequency, which offers e xcellent depth penetration. The unique design and sensitivity of the EMGS seabed receivers enable EMGS to efficiently acquire high quality MT data as part of a CSEM survey wh en the con trolled-source is in active. The low -frequency, dee p -s ensing nature of MT surveyin g makes the technique valuab le for imaging and interpre ting re gional geology. MT su rveys hav e been found most useful in s alt and b asalt settin gs where the flanks and/or the b ase are poorly define d . MT measu rements, therefore, form a useful complement to seismic techniques, par ticularly in settings where high-impedan ce volcanic rocks or salt make th e imaging and in terpretation of seismic challenging. Application of EM technology The services offered by EMGS are us ed in all stages of the offshore exploration an d development cycle. Applicatio ns of EMGS’ technology includ e evaluat ing regional prosp ectivity, ranking of identified pro spects and appraisal of discoveries. 5 Figure 1: CSEM acquisition equipment Regional Prospecti v ity At the early s tages of the explora tion and production pro cess, oil and gas companies use EM services to evaluate whether an offshore acreage is viable for commercial production of hydro carbons. EM s urv eys are con ducted before li censing decisions are made in order to better understand the acreage value, as well as p rioritization of potential leads and prospects that may have been mapped with seismic. EM may also be used to de-risk new and unproven pla ys and generate new le ad s and prospects . Adopting EM early in the exploration cycle helps oil and gas companies focus their investments on the most valuable acreage. Prospect Ranking and Portfolio Polarisation When a pros pect is identified from seismic information, EM surveys can help operators reduce uncertainties in the probability of success and expected hydrocarbon volume, resulting in a more r eliable economic evaluat ion of the prospect. Using EM to ran k pros pects redu ces the risk of drilling dry wells , while increasing the economic success of exploration projects. Used on a portfolio of existing prospects EM can p olarise the prosp ect portfolio and highlight th e p rospects with the largest volume potential and the highest chance of succ ess. Through better targeting of exploration drilling activity, the use of EM su rveys can als o help to diminish t he overall environmental impact of an exp loration p roject. Field Appraisal Once a discov ery is made, EM su rveys can be u sed to ascertain a f ield’s commercial viab ility and aid in d evelopment planning by improv ing reservoir delineation (i.e. the size an d shape o f the reservoir). EM can also assist in the optimal placement of subsequent development wells and reduce the number of appraisal wells that would typically be required for field delineation and reservoir characterisation , can result in a positive impact on a project’s financial outcome and reducing its environmental footprint. EM source towed above seabed Integrated interpretation of seismic and EM improves exploration performance by reducing uncertainties EM receivers dropped on the seabed in a grid 6 Potential New Appli cation Areas EMGS’ core technology , o riginally developed for th e o il and gas industry , can be adapted to new applicat ion areas such as marine min eral exploratio n, gas hydrate mapping, geotechnical and s hallow h azard investigations, and the location of subsea cables. It is the company ’s goal to develop these new busin ess fields building on i ts world-renowned exp ertise in marine EM technology. Marine minerals The electrificati o n o f society is an i mportant part of the energy transition. In its “net zero 2050” scenario, Net Zero by 2050 A Roadmap for the Global Ene r gy Sector (2021), the International Energy Association (IEA) forecast s a m ore than si xfo ld increase in the demand for minerals that are key compo nents in the electrification supply chain, such as lithium, copper, and cobalt. Currently, these minerals are mined onshore, but it is expe cted that mineral dep o sits o n or b eneath the sea floor, called “ m arine minerals ,” are lik ely to play an important r o le in meeting this demand in the coming years and decade s . The marine mineral industry is currently in its infancy. The International Seabed Authority (ISA) has granted several concessions in international waters, and Norway is planning a concession round likely to start in 2024. There are already several Norwe gian and international companies evaluating a possible participation in the upcoming concessi on ro und in Norwa y . There are three m ain categ o ries of marine miner als: nodules, crusts, and Seafloor Massi ve Sulfides (SMS). Mo st of the marine mineral depo sits discovered to date are at the seabed in u ltra -deep waters. Within the Norweg ian Exc lusive Economic Zone (EEZ) both crusts and SMSs have been discovered in the area of the m id-Atlantic spreading ridg e. SMS deposits are created by volcanic activi ty . Marine life thrives while the system is volcanically active. Only SMS deposits tha t have c eased to be volcanicall y acti v e (i.e. , extinct) ar e considered for comm ercial exploitation. The mineral content of these extinct SMS deposits vary in both mineral content and v olume, and only a few of the many extinct SMS deposits are expected to have v aluable metallic minerals in large enough quantities to be of commercial interest for o ffshore mineral excavation. Therefore, geophysical techniques are important in order to cost-effectiv ely search for and identify potential SMS prospects for sampling, drilling and eventual excavation. Electromagnetic systems are ex pected to play a significant role in the exploration and appraisal of marine minerals, and can be an important part of the geophysical too lbox. T owards thi s end , but also f or ot her applications, EMGS is developing a deep-towed EM streamer solution for efficient m apping of seabed geology at, and near, the seabed . It will be possible to use the towed system o n a stand-alone basis or together with EM seabed nodes, Autonomous Underwater Vehicles (AUV), as well as with acoustic surveying methods such as high resolution seismi c and mul ti -beam ec hosounder bathymetry. Offshore wind The offshore wind industry is rapidly growing. Govern m ents around the world are looking for new areas suited for wind farm developments and new concession rounds are being planned, particu larly as energ y transition and sustainability are acceleratin g in importance, and climb ing to the top of the investment agenda in many countries across the globe . The geoscience industry is playing an increasing ly important role by delivering geoph y sical and geological data to service this industr y . Currently, ther e is an emphasis on ac o ustic measurements such as seismic and multi- beam echo sounder bathymetry to map the seabed prior t o the engineering and installation phases of wind farm developments. EMGS believes that EM data co uld add valuab le insight to the investment-decision stages of this industry, as we ll as great er cost-efficiency and a reduced environ m ental impac t, through our towed EM system. 7 Development of EM tec hno l ogy Development o f marine E M equipment In 2017, EMGS com mercialised the De epBlue so urce system, whi ch is the most p owerful deep -to wed EM source in the industry. The DeepBlu e sou rce sys tem consis ts o f a topside un it, slip ring, umbilical, sub -sea unit an d an tenna. In addition, the onbo ard handling equipment was up graded to meet the comme rcia l require ments f or marine operation. All of these improvements to the system enable a higher source curr ent output, wider frequency band and increased operational flexibility. The D eepBlue increases the depth of investigation below the seabed to depths well beyo nd the cap abilities of conv entional source systems. In addition, it also increases imaging confidence and resolution for targets that can already be detected with the conventional sou rce system. The DeepBlue can operate in water depth s up to 4,000 m etres. Following the commercialisation of the DeepBlue, the first survey was perf ormed in J uly 2017. Th e DeepBlue has bee n used actively since th at time , particularly for mature basin s urveys in the North Sea, N orwegian Sea and th e Gulf of Mexico. All data acquired with Dee p Blue to date confirms the ability to increase sensitivity and resolution through a combination of higher source output, increased frequency bandwidth and better accu racy, whi ch allo ws to image deeper and s maller targets. As a result, DeepBlue increases th e add ressable market for frontier explora tion as well as opens new markets for EM such as n ear-field exploration a nd appraisal. Figure 2 : Deep Blue subsea “towfish” ready for deployment 8 Figure 3 : Deep Blue subsea “towfish” Software devel o pment EMGS offers workstation and high -performance compu ting software for all sta ges of a n EM project: feasib ility studies, survey planning, processing, m o delling, inversion and interpretation. EMGS software is available for licensin g to customers. The latest TTI 3D Gauss-Newton inversion introduced in 2020 has become a standard part o f EMGS ’ off ering for imaging CSEM data. This s oftware defines a s tep-change in image quality for data acquired in areas with stru ctural complexity an d steep dips. The i mprovemen t in imag e quality directly eq uates to reduced s ubsurface uncertainty and higher value of information derived from CSEM data. EMGS software allows customers to take full control of their electromagnetic data by generating h igh quality inversion images, allowing for new interpr etation insight s and updatin g existin g p rospect evaluations and prioritisat ion. Software development d uring 20 21 was focu sed on advancing th e rock physics modelling as well as improv ing quantitative interpretation capabilities, specifically with regard to descri bing stacked and segmented reservoirs. These innov ations were the result of e xp erience gain ed in customer projects related to gas field ap praisal , and i s a testament to EMGS’ drive to wards keeping our technological ad vantage . North Sea multi-client example of the imaging improvement from the latest TTI 3D Gauss-Newton inversion (left) when compared to non -TTI inversion (right): A good well match and geologically meaningful m odel is achieved with the new TTI software. 9 Board of Direct ors . Frederik W. Mohn, Chair man of the Board Frederik W. Mohn is the sole owner an d managing director of the Company’s second largest shareholder Perestroika, a Norwegian investm ent company with investments in oil and gas, shipping, in frastructure, real estate d evelopment and finan cial services . Frederik was prev iously Chairman of the Board of Son ga Offshore SE and currently is a member of the Boa rd of Directors of Transocean Ltd. Petteri Soininen, B oard member Petteri Soininen is Partn er at Redwhe el and Co-Head of th e Redwh eel Eu ropean Focus Fund. He has served as member of th e Supervisory Board of AMG Advan ced Metallurgical Group N.V and worked as strategy consultan t with The Boston Con sulting Gro up (BCG) in E urope and th e US. He has 20 + years of experience in collaborating with top managem ent to design and implement change programs includ ing major transformations to deliver sustainable sh areholder value. Petteri holds a MSc (with d istinction) in I ndustrial Engineering from th e Helsinki Universit y of Technology and is a Finn ish citizen. Beatriz Malo de M olina, Board member Beatriz Malo de Molina has h eld various management and ad visory positions in Norway and internationally, in cluding CFO of Agilyx AS, Head of M&A at Orkla ASA, Kistefos Private Equity, McKinsey & Co., GoldmanSachs & Co. and E Y. Beatriz currently chairs the board of Crux AS, and Dynea AS, both p rivately -held companies, and is a member of the board of Nel ASA and Horisont Energi AS . Beatriz is Founder and b oard m ember of th e Oslo Philanthropic Exchange, a foundation promoting more efficiency in capital ra ising for charities and NGOs. Beatriz is a Span ish citizen and resides in Norway. Beatriz gradu ated summa cum lau de and Phi Beta Kappa from Georgetown Univ ersity in Washington, D.C., and holds a Master’s Degree in Philosophy from the University of Oslo’s Facu lty of Law. 10 Mimi Berdal, Board member Mimi Berdal ru ns an independent corporate cou nseling an d investment bu siness. She holds a Cand. Jur. (law) degre e from the University of Oslo . Mimi Berdal is also a member of the Board of Directors of th e listed companies Goodtech ASA (Chairman) and Nors k Titanium AS, in ad dition to Freyr Batt ery SA (listed NYSE). Jørgen Westad, Board member Jørgen Westad is Executiv e Director of Siem Industries S.A. He is also a Director of Deusa GmbH and BSR Holdings Ltd. Prior to joining the Siem Grou p in 2015, he was CFO of a privately -held ship ping compan y as well as a commercial and investment ban ker at Hambros Bank Ltd and Bankers Trust Com p any. He holds a BE ng in Naval Architecture an d Shipbuildin g and an MSc in Manage ment Studies. Jørgen is a No rwegian citizen and resident in Luxembourg. 11 B o a r d o f Di r e c t o r s ’ R e p o r t . 2021 marked the first full year of op eration for a streamline d EMGS, with a more f lexible cost base. While vessel utilisati on in 2021 improved significantly compared to 2020, 32% vs 12%, further improvements to vessel u tilisation remain one of EMGS’ main focus areas. Despite low utilis at ion, EMGS operated profitably for the year, generating a N et Income of USD 4 . 9 millio n , compared to a loss of USD 23.4 milli on for the pri or year. In a ddition, EMGS made significant progress towards a strengthened balance sheet with reduced debt levels. In 2021, the Comp any c ompleted two separate voluntary bond buy - backs. Both b ond buy-backs were done at 75 p er cent of par, and h ad a n ominal value of USD 4.0 m illion each for a combined total repurchase of USD 8.0 million in nominal values. Conseq uently, EMGS reduce d its outsta nding interest-bearing debt by approximately 25 per cent during the year. Though equity remains negative, it improved significantly dur in g the year. 2021 continued to be a challenging year given a significantly reduced employee base, the ongoing negative impact of the Covid- 19 p andemic on b usiness developm ent globally and i n the workp lace generally, as well as entering the year wi th a vessel that had been in warm stack for an extended period. N everthele ss , through the dedication, hard work and professionalism of empl oyees and contractors alike, 2021 was an operational success for EMG S . The Company completed three campaigns in Mexico, Southeast Asia and N or way, all of which were completed on schedule, wit hout materia l cost overruns, and provided a high-quality end prod uct to our customers. During 2022 , EMGS is focused on continuing to b uild upon the progress made in 2021. Our aim is to continue to repair the balance sheet via profitable op erations. EMGS is reliant upon securing addi tional backlog and multi-client sales in 2022 to achieve these goals. The challenging geop olitical environment, and any ongoing Covid -19 effects, wi ll be important risk factors that could affe c t operating perf ormance during the year . About EMGS Vision, Values and Strat egy Electromagnetic Geoservic es ASA (“EMGS” or the “Company”), with its s ubsidiaries (together, th e “Group”), is the global leader in electromagn etic (“EM”) s urveying technology in the offshore oil and ga s exploration in dustry. EMGS’ vis ion is to make EM an integral part of the E&P workflow and make E M as fully adopt ed as seismic. By providing EM da ta inte grated with other subsurfac e mea surement , we enable our custom ers to reduce u ncertainty and therefore increase success in t heir exploratio n and de velopment programmes. EMGS’ cor e v alues ar e: In tegrity , Com mitment, Innovation and Qu ality. These value s form an integral part of our 12 organisation an d operations and are included as a topic in the Co mpany’s an nual employee app raisal process . EMGS is constantly working to deliver the best q uality p roduct to its customers. The Company ’s technology is developed on an ongoing bas is to improv e quality and efficiency, as well as to broad en the scope of ap plication and ad dressable markets . EMGS also places a high priority on interacting with its cus tomers, to assist in ensuring that the full value of th e Company’s service is captured by our customers. The in tegration of EM method s into exploration w o rkflows provides oil and gas com panies with an improv ed de-risking and appraisal tool when compared to using seismic exploration techniques alone. The use of EM data is complementa ry to t he use of s eismic d ata, as it provides oil compan ies with mor e information about the subs urface. Inte grating the us e of EM data into the explora tion w ork flow reduces exploration risk through a better un derstanding of a reservoir’s charge, seal an d volume estimates. This data can als o serve to decrease the environmental impact of a particu lar project, sin ce better targeting of drilling activities c an s erve to reduce the total number of wells d rilled into the seab ed. EMGS r emains a glob al leader in the planning, acquisition, processing, mod elling, int erpretation an d in tegration of EM d ata. The Compan y has extensive e xperience, well-es tablished proprietary routines and leading -edge processing, modelling an d inversion so ftware. EMGS has cond ucted ov er 90 0 s urveys across most major mature and frontier bas ins in the world in water d epths ranging from 20 to 3,600 m etres for more than 150 customers. Part of EMGS’ strategy is to undertake a mix of pro prietary an d multi -client projects with a flexible and scala ble operating model. This will be enabled by maintaining an asset -light operating model, including char tering vessels from third -party vessel owning companies. The Group shall undertake a mix of proprietary contract work an d multi -client projects. The International Oil Compan ies (IOCs ) part of th e Company’s market is becoming more focused on the multi -cli ent business model. T he Company’ s key Nation al Oil Company (N OCs) customers’ p referred business model continues t o be pro prietary work arrangements. The flexibility and scalability of the bus iness model comes mainly from the following tw o arran gements: the ch artering of vessels and the ability to u ndertake a combination of contra ct work and multi -client projects. EMGS had, as of 31 Dec ember 2021, one vessel on charter, the Atlantic Guardian, owned by the North Sea Shipping Group. EMGS’ stron g focus on cost optimisat ion and control continues. Through cos t discipline and efficiency gains , th e product offered to the market by th e Company remains on the cutting edge of, and market leade r within, EM techn ology and can improve an already attractive valu e proposition of the products and services offered to the market year -over-year. EMGS was listed on t he Oslo Stock E xchange in March 2007. EM technology The E M technology used by EMGS in its EM survey projects can be divid ed into two distinct methods: three-dimensional full azimuth controlled-sou rce EM (3D CSEM) s urveying and magnetotelluric (MT) surveying. For more information on the different methods, pleas e see the separ ate section in th e annual report, EMGS Techno logy . Important events in 2021 Multi-client inves tments Since 2008, EMGS has invested in its multi - client data libr ary. The Company’ s multi -client busines s has become an increasingly importa nt part of the ov erall business , both in terms of revenu es an d in terms o f marketing v alue as the Company can more freely share 3D CSEM successes with its existing and new custo mers. The multi -client busin ess model is well suited for p artnerships with seismic p layers an d au thorities and redu ces the unit cos t of EM d ata f or the industry. In 20 21, the revenues fro m multi-cli ent sales amounted to 55 % of total revenues, u p from 31 % in 20 20 . 13 EMGS key multi-cli ent libraries At the end of 2021 , the Group’s most important multi -client libraries are in the following countries/basins: Norway, Mexico (G ulf o f Mexico), the US Gulf of Mexico, Brazil and Canada. The total carrying value of the library was USD 2.4 million at the end of 2021. The major ity of th e carrying value of th e multi- client library is related to the library in Norway. Norway The Group has acquired approximately 90,000 s quare kilometres of 3D CSEM data in Norway, of which approximately 70,000 s quare kilometres is in the Barents Sea. The Barents Sea has proven to b e a very important s howcase a s EMGS h as been able to successfully demonstrate its value in the d e -risking the process of exploratio n and project appraisal. In 202 1 , the Company acqu ired data on two multi -client pro jects in Norway , both in the North Sea. In 2021, multi-client revenu es in N orway amounted to USD 6.1 million. Mexico In 2016, EMGS acq uired the ri ghts to license 16,000 s quare kilometres of 3D CSEM data to th e indu stry from th e Comisió n Nacional Hidrobarburos (CNH ), the regulator in Mexico. The d ata w as originally acquired by the Compan y on a pro prietary basis. After reprocess ing the data, the data has been made available for sale t o the industry. In 2021, EMGS acquired a fu lly prefund ed multi -client survey in Mexico, recognis ing USD 7.2 million in r evenue. US Gulf of Mexico EMGS completed its first commercial multi-client p roject in the US Gulf of Mexico in 2014. In total, EMGS h as acquired approximately 14,500 sq uare kilometr es of 3D CSEM data i n this b asin. Brazil EMGS acquired 12,000 s quare kilometres of multi-cl ient 3D CSEM dat a in Brazil between 2011 an d 2013. In 2021, multi-client revenu es in Brazil amou nt to USD 2.6 millio n. Canada EMGS completed a multi-client project in Canada in 2014, including approximately 2,500 square kilometres of 3D CSEM data. The surv ey targeted the Flemish Pas s Basin, where ma jor oil discoveries h ave been made. Sales and customers The Group ’s revenues in creased 16% fro m USD 24 .9 million in 20 20 to USD 28.9 million in 2021. Sales were dominate d by a prefunded multi -client survey in Me xico , a prefunded multi-client survey in Nor way, a p roprietary survey in Southeast Asia and a large multi-client late s ale in Brazil. The EMGS sales and bus iness development organisation is head quartered in Oslo, and well repres ented globally with sales offices in Houston , Mexico City and Braz il. In addition, EMGS has a network of busin ess partners serv ing key local markets. The organisation consists of commercial sales, technical adv isors and explora tion advisors. Other important events Bond buy -back In 2021, EMGS completed t wo s eparate bond buy -backs. On 19 July 202 1 , t he Compan y reso lved to repurchase 4 0,000 bon ds with an aggregate n ominal value of USD 4.0 million at 75 percent of par. On 23 December 2021, the Compan y resolved to complete an additional repurchase of 40,000 bonds with an aggregate nominal value of USD 4. 0 million at 75 p ercent of p ar. Impairment of funds held in Accendo Banco S.A. On 7 October 2021, the Compan y anno unced that the banking regulators in Mexico had revoked Accendo Banco S.A.’s banking license an d initiated a liquidation process of the bank. The Compan y had deposits of approximately USD 2.1 million in Accendo Banco S.A. The Company impaired USD 1.9 million, which is the full a mount deposited with Accendo Banco S.A. 14 less the fund s received fro m the Mexi can Bank Savings Pro tection Fund. EMG S continues to be a creditor to Accendo Banco S.A. and is activ ely pursuing any dis bursements of remaining a mounts , to the extent that any are made. Extraordinary General Meetin g At th e extraord inary general meeting held 25 Nov ember 202 1, Frederik W. Moh n was elected as the Compan y’s new Chairman of the Board and Be atriz Malo de Molina was elected as a new Board member. Events after the bal ance sheet date Extension of Senior Unsecured Co nvertible Bonds 2018/20 23 On 9 February 2022 , Nordic Tru stee AS, as tru stee o f E MGS03, notified the Compan y that the bon dholder’s resolu tion to extend the maturity date by 24 months and increase th e interest margin by 100 bps from 5.5 to 6.5 per cent over the applicable reference rate was resolv ed and ad opted. As a re sult, the maturity date for EMGS’ outstand ing convertible bonds is extended from May 202 3 to May 2025. Additional multi-cli ent late sales On 4 March 202 2, E MGS anno unced that the Company had secured app roximately USD 2.8 million in revenue from late sales and a chan ge of control event related to t he multi -client librar y in Norway. Factors affecting the results of operations The Group ’s operational re sults depend on several factors, where the most important o nes are con sidered to be: d emand for EM services, fleet status and vessel utilisation, the charter terms of the Co mpany’s vessel , and the cost of the e mploy ee base. Demand for EM ser v ices The Company h as two main sources of revenue: pro prietary con tract sales and multi -client sales. In ad dition, the Company receives some revenu e related to consultancy, processing services an d software s ales. These revenues ar e presented as contract sales. For more information on the different rev enue sources, pleas e see the notes to t he financial statements . The overall demand for EMGS’ services is dependent, in large part, on offshore oil an d gas E&P b udgets. Fleet status and utilis ation As per the end of 202 1, the Compan y chartered one v essel, the Atlantic Guard ian. At the end of the reporting period, the Atlantic Guardian has a firm charter agree m ent u ntil 20 October 2022, w ith an option to the Company to extend the charter p eriod. The Atlantic Guardian operated over th e course of 202 1 in Mexico, Southeast Asia and Norway. The Atlantic Guard ian was warm stacked in Norway in mid -November 2021 . In total, E MGS recorded a total of 1 0.9 v essel months in 2021, an average of 2.7 per quarter, compared with 18 . 0 ves sel months in 20 20 and an average of 4.5 per q uarter in 20 20 . The Compan y had a vessel utilisation of 32% in 2021 , up fr om 12 % in 20 20 . EMGS’ ability to optimise the performance of its vessels through maximising commercial utilisation and minimising u npaid activities are key factors for the Group’s longer -term operating p erformance. Technical d owntime, steaming time bet ween surveys and u np aid stand by time all negatively affect the Grou p’s operating results . Seasonality Adverse weather conditions , including ice an d winter conditions offshore, can result in lost time wh en vessels are forced to remain in dry do ck, relocate and/or reduce act ivity. In ad dition, the Group’s operational results fluctuate from quarte r to quarter because of o il and gas companies’ s pending p atterns and /or as related t o licensing round s in Norway and abroad. 15 Currency fluctuations Currency transaction exposure occurs to some extent during the ordinar y course of business and when the relevant exchange rates chan ge between th e date of a transact ion and the date of the final p ayment for the transaction. The Group records such ga ins or losses in th e financial income and exp enses line item of its cons olidated income sta tement. Financial statements Going concern The Group h as prepared its financial statements u nder the g oing concern as sumption, and the Board confirms in acco rdance with Section 3-3a of the Norw egian Accoun ting Act that the goin g concern ass umption is applicable. The Gro up’s reported results, its business s trategy, its current budgets and financing, as well as its lon g -term strategic forecasts provide the basis for the going con cern assu mption. S ee also “Liqu idity risk” be low for m or e information about the going concern assu mption. The Group ’s equity and liquidity have both improved significantly as compared to last year. While improved, the equity remains negative at USD 2.5 million at year end 2021 (from negative USD 7.4 million at y ear end 2020) . The cash position on 31 December 2021 was USD 9.9 million compar ed to USD 4.2 million at the end of 2020. As further described under Risks and uncertainty factors, the Company’s outstandin g convertible bond s and its bank facilities contain financial covenants requiring that the Compan y has a minimum of US D 2.5 million in free cash and / or cash equivalents . The goin g concern as sumption is d ependent on s ecuring additional backlog for H2 20 22 as well as securing additio nal late sales or some combinat ion thereof. The Company’s equity amounted to negative NOK 95 .4 million as of 31 December 202 1, down from n egative NOK 87 .2 million at the end of 20 20 . The Board of Directors is taking steps to ad dress the negative equity and are considering a number of alternatives in this regard. Should these steps fail to materiali se in a time ly manner, the going concern assumption is at risk. The Board con tinuously ass esses the cap ital and liquidity situ ation. In addition, the Board closely monitors the operating cos t base as well as encourages management to look for opportunities to enter new markets such as marine minerals an d offshore wind . None of the Compan y’s d ebt is pas t due and the Company d oes not expect to breach the financial covenan ts of the convertible bond lo an in the next 12 month s. Results of operations The year ending 31 December 2021 is compared in the s ection below with th e year ending 31 Dec ember 20 20 . The Group p repares its accou nts in accordan ce with International Financial Re p orting Standard s (“IFRS”), as adopted by the European Union . References to N otes refer to Notes to t he Con solidated Finan cial Statements. Revenues and op erating expens es In 2021, the Group record ed revenues of USD 2 8.9 million, up 16 % from U SD 24 .9 million in 20 20 . Contra ct sales and other revenue ended at USD 12.9 million, while multi-client sales totalled USD 15 .9. million. USD 10 .2 m illion was re corded as pre- funding m u lti-client revenues an d USD 5.8 million w as record ed as late sales multi-client revenues. In 20 20 , USD 17 .1 million was recorded as con tract sales, while multi-client sales to talled USD 7.8 million. This means that sales from the multi -client projects accoun ted for 55 % of t he revenues in 202 1, compared with 31 % in 2 0 20 . The increase in revenues from 20 20 to 2021 is mainly explained by the higher vessel utilisation in 2021 as compared with 2020. Charter hire, fuel and cre w expenses ended at USD 3.5 millio n, down 41 % from USD 5.9 million re ported in 20 20 . The Group capitalised USD 1.4 million in multi-client expenses in 2021, compared to USD 0. 6 million in multi-cli ent during 20 20 . Employee expenses amounte d to USD 3.0 million in 2021, down 69 % from th e USD 9.8 million as reported in 20 20 A more detailed overview of the Group’s employee expenses can be found in Note 8. The number of e mploy ees remained unchanged at 17 from the beginnin g of 2021 to the end of 2021 . 16 Other operating expenses amoun ted to USD 3. 0 million in 2021 , in line with USD 3.1 million in 20 20 . A more detailed overview of the Group’ s other operatin g expenses can b e found in No te 9. Depreciation and amortis ation Depreciation and ord inary amortisation totalled USD 4. 2 million in 2021, down from U SD 4.5 million in 20 20 . Mu lti-client amortisation amou nted to USD 2.5 million in 2021 , down f ro m USD 4.1 million recorded in 20 20 . The Company uses straight -line amort isation for its completed multi -clie nt projects, ass igned over the useful lifetime of four years. The amortisation is then dis tributed evenly, independently of sales d uring the period. As a result of implementing IFR S 15, the Group started to capitalise multi-client projects with only one customer that were previously expensed as incurred (converted contracts). For these, the full amortisation of the book value is now recorded at th e point in time when the revenues are recognised at d elivery to th e customer. No impairments of long -term assets were made in 2021 . In 2020, the Group recorded imp airments of lo ng -term assets of a total of USD 7.4 million . In 2021, depreciation of right of use a ssets amoun ted to USD 3.5 million, compared with USD 7. 9 million in 202 0. Financial items and res ult for the year before and after taxes Interest expens es ended at USD 2.9 million in 2021, a decrease from USD 4.1 million in 20 20 . EMGS recorded a loss on net foreign currency of USD 290 th ousand in 202 1 compared with a gain of USD 25 thousan d in 20 20 . The Group recorded a gain of USD 2.0 million on the repurc hase of bon ds with a nominal v alue of USD 8.0 million in 2021. The bonds were repurchas ed at 75 p er cent of par. In September o f 2021, M exican bank regulators revoked Accendo Banco S.A.’s ban king license and initiated a liquidation process o f the ban k. The Grou p had d eposits with Accendo of approximately USD 2.1 million. The Group was entitl ed to receive approximate ly USD 135 th ousand from the Mexican Savings Pro tection Fu nd. An impairment of the deposits in the Accendo account, less the USD 135 th ousand (which was received on [date]), was mad e in 2 021 in the amount of USD 1.9 million. Net financial items ended at negative USD 3.9 million in 2021, a d ecrease from USD 5. 0 million in 20 20 . For 2021, EMGS recorded a profit befor e income taxes of USD 5.3 million, compared with a los s before income taxes of USD 22 .7 million in 20 20 . Income tax expenses of U SD 0. 4 million were recorded in 2021, co mpared with USD 0.7 million in 20 20 . EMGS reported a net profit of USD 4.9 million for 20 21 , up from a net los s of USD 23 .4 million for 20 20 . Cash flow and balance sheet Cash flow from op erating, investing a nd financing act ivities For 2021, net cas h flow from o perating activ ities was positive USD 23 .6 million, compared with negative USD 1.9 million in 2020 . EMGS applied USD 2. 7 mill ion in investing activities in 202 1. The inv estments con sist of USD 0. 1 million in property, plant and equ ipment and USD 2.7 million in multi-client inves tments. In 20 20 , cas h ap plied in investin g activities amounted to USD 1.8 m il lion. The investments consisted of USD 0.6 million in property, plant and equipment and USD 1. 1 m illion in multi- client investments. Cash flow from financial activ ities ended at negative USD 15 .2 m illion in 2021. The cash flow from financial activities in 2021 includes financial lease liabilities USD 6.2 mil lion, convertib le b ond repurchas e of USD 6.0 million, interest lease liabilities USD 0.8 million and USD 2.3 million in interest payments. In 20 20 , cash flow from financial activ ities ended at negative USD 11.9 million. Th e cash flow from finan cial activiti es in 2020 includes finan cial lease liabili ties USD 8.0 million, inter est leas e liabilities USD 1.1 million and USD 3.0 million in in terest payments. 17 In s ummary, cash increas ed by USD 5.7 million in 2021 . As of 31 December 2021, ca sh and cash equivalents to talled USD 9.9 million. Financial position EMGS total assets amoun ted to USD 40 .2 million as of 31 December 202 1, down from USD 54 .3 million as of 31 Dec ember 2020 . The carrying value of the Gro up’s mu lti -client library was USD 2.4 million at the end of 20 21 , a n increas e of USD 0.2 mi llion since the end of 20 20 . Total borrowings were US D 31 .1 million at the end o f 2021, down from 43.8 million at t he end of 20 20 . Liquidity requirements a nd financing facilities The Group’s need for liquidity fluctuates from quarter to q uarter depending on reven ues, cap ital expenditures, vess el operations and cash balan ce. The Company’s conv ertible bond con tains a finan cial cov enant requiring free cash and cash equivalents of at leas t USD 2.5 million. As of 31 December 2021, the free cash and cash equivalents totalled USD 9.9 million . EMGS’ management follows the Company’s liquidity risk closely, includin g weekly updates of the Group’s sales forecast and vessel schedule, in addition to a correspon ding update of the cos t and free cash forecas t. As per 31 December 2021, EMGS has one listed convertible b ond with a carrying value of USD 24 .3 million and non-curr ent lease liabilities of USD 0.5 million a nd current lease liab ilities of USD 6.2 m illion. Research and develop ment To mainta in its stro ng p osition within the EM market, EMGS has invested significant time and resources in research and development (“R&D”) over several years. The industry in which E MGS operates is h ighly technical and the re q uirements for the acquisition a nd processing of EM dat a evolve continu ousl y. As a result of th e in dustry downturn and the decision to move to a low -cost setup in 2020, EM GS found it necessary to significantly reduce its investments in R&D. The reduction is likely to h ave limited revenue impact in the s hort term, as th e Company maintains its stro ng techno logical position. EMGS expects to in crease R&D investments in 2022 compared with the level in 2021. In 2021, EMGS did not incur R&D related costs . The R&D related costs were USD 1.7 mil lion in 20 20 . Wher e pos sible, the Company seeks to offset internal R& D costs b y industry funding and p artnerships. In accordance with IFRS, the G roup capitalised USD 0.2 million of its employee costs in 20 20 as development. T h e G ro up did not capitalise an y employee costs in 2021. Allocation of Net Income The Board of Directors p roposes that t he net income of EMGS, the par ent company, s hall be attributed to Other equity NOK 13 .7 million Net income/(loss) a llocated NOK 13 .7 million Distributable equity as of 31 December 202 1 was NOK 0. 18 Financial risk The Group’s p rincipal financial liab ilities are trade and other payables and loans an d borrowings. Th e Group has various financial assets such as trad e receivables, cash and s hort -term deposit which arise directl y from its op erations. The Group is exposed to market risk, credit risk and liquidity ris k. The Group’s man agement and Board review an d agree policies for managin g each of these risks which ar e summarised below. For furth er details s ee Note 3 to the financial statements. Market risk Market risk is the risk that the fair valu e o f futu re cash flows of a financial instrumen t will fluctuate be cause of changes in market prices. Market prices comprise two types of ris k for the Group: interest rate risk and currency risk. Financial instruments affected by market risk includ e bonds, loans , and borrowings Available For Sale ( AFS ) investments. Pleas e s ee sensitivity a nalysis in Note 3. i) Interest rate risk Interest rate risk is the risk that the fair valu e of future cash flows of a financial instrument will fluctuate becaus e of c han ges in market interest rates. The Group has limited e xp osure to interest rate risk, as this is primarily only related to the Gro u p’s long-term convertible bond of USD 24 . 3 million with floatin g interest rate ( 3-month LIBOR + 5.5%). Subs equent to an extension of the conv ertible bond by 24 months in February 2022, t he new floating intere st rate is 3-month LIBOR + 6.5 %. ii) Foreign currency risk Foreign currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctu ate because o f changes in foreign exchange rates. The Grou p operates internationally and therefore has exposure to foreign e xch ange risk arising from transaction s executed in oth er currencies than the functio nal currency of each company . EMGS ASA has USD as functional currency, so the foreign curren cy risk is primarily with respect to N OK in EMGS ASA. For 2021, approximately 91 % of the Group’s sales revenues were denominated in USD, whils t app roximately 70 % of the costs were denominated in U SD. Foreign exchange risk arises fr om future commercial transact ions, recognised a s as sets and liabilities. The Group ’s e xposure to foreign currency changes o n equity and for all o ther currencies is not material. Liquidity risk Liquidity risk is the ris k that the Company will not hav e sufficie n t liquidity to be able to meet its financial obligations. EMGS’ sources of liquidity include cash balances, cash flow from operations, borrowings , existing and new b ank facilities and further debt and eq uity issues. It is th e Company’s objective to b alance these sou rces of liquidity. The Company’s conv ertible bond contains a financial covenant requiring free cas h and cash equ ivalents of at least USD 2.5 million. As of 31 December 2021, the free cash and cash equivalents totalled USD 9.9 million . EMGS’ management follows the Company’s liq uidity risk closely . The financial liabilities with maturity less th an one year will be settled thro ugh cash flow from operating activities in 202 2. Based on current risk- weighted forecas ts an d information, management con siders the liquid ity throu ghout 202 2 sufficient to cover both the Group’ s net current l iab ilities per 31 December 2021 and estimated cas h n eeds in 2022. Credit risk Credit risk is th e risk that a counterparty will not meet its obligations un der a financial instru ment or customer con tract, leading to a financial loss. The Group is exposed to credit risk from its op erating activities (primarily for trade receivables and cash and cash equivalents , but als o from banking in foreign jurisdictions ). See Note 20 for the aging analysis of trade receivables and N ote 4 for additional information regard ing t he Accendo Bank ban kruptcy . In 2021, the Company implemented a new Cash repatr iation and risk management sta ndard , which formalises and streamlines certain mitigat ing measures u ndertaken by EMGS to reduce risk related t o banking in foreign jurisdictions . EMGS’ clients are major internation al, nat ional and independent oil and gas companies, mos tly with good credit s tandings and histo ries. 19 Occasionally, a smaller oil and gas company may be on the client list . In these cases, caution is cond ucted in the credit evaluation. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable bala nces are monitored on an ongoin g basis. Corporate governance EMGS is committed to good corporate gov ernance. EMGS’ corp orate governance prin ciples are based on equ al treatment of all shareholders , mainta ining open and reliable lines of co mmunication with sharehold ers and other stakeholders, h aving a Board that is auton omous and independent of th e executive manage ment and ensu ring a clear division o f res ponsibility between the Board an d the executive manage ment. The Co mpany produces a comprehensive annual statement o n corp orate gov ernance as part o f its annual repo rt. Electromagnetic Geoservices ASA h olds a Directors and Officers Liability Insuran ce on behalf of the Board of Directors and executive man agement. For furth er d etails, please see the section tit led Corporate Governance in this annual report. The informat ion is als o available on the Compan y’s homepage. CSR, working environment, discrimination and external environment EMGS has adopted a policy and a standard for sustain ability and corp orate social responsibility (“CSR”). The principles in the policy cover areas related to labour rights , anti-corruption, environment and human rights. All work in the Group related to sustainability and corporate social respon sibility (together “the CSR work”) is bas ed on the CSR policy and th e standard. As the Company is a Norwegian pub lic limited compan y lis ted on the Oslo Stock exchange, it complies with Section 3 -3c of the Norwegian Accounting Ac t in respect o f corporate social resp onsibility. The Company p roduces an a nnual sta tement on its CS R work, including information abou t the working environment in th e Group, equ al opp ortunities and dis crimination s tatement, th e external environment and human rights. For further details, please see the section t itled Sus tainability and Corp orate Social Respons ibility in this annual repo rt. The information is a lso available on th e Company’s homepage. Company outlook EMGS is dependent on the underlying value of th e commodities its technology is used to detect, wheth er oil, gas or m a rine minerals. While there are als o o ther factors that affect the demand for CSEM, high oil an d gas prices do tend to positively impact demand. Althou gh the Company does n ot undertake an ind ependent an alysis of expected future oil and gas price levels, the Company notes that th ere are s everal factors which cou ld suggest that the cu rrent strong price environ ment will persist for s ome tim e, including the geopolitica l considerations such as s ecurity an d energy independence considerati ons in the aftermath of Russia’s invasion of Ukraine, or th e inclusion of gas , under certain criter ia, as env ironmentally su stainable in the EU Taxonomy Regulat ions. In 2022, the Compan y is depe ndent upon b uilding backlog for th e Atla ntic Guardian to be e xe cuted in H2 2022, as well as securing addition al late sales . The Compan y contin ues to have a stron g focus on keeping operational costs as low as possib le and taking adv antage of a more flexible business mod el. The Atlantic Guar dian will remain warm stacked u ntil sufficient work is secured to justify mobilising the vessel. The Co mpany anticipates taking th e vessel out of warm stack in Q2 2022, but as of end Q1 2022, sufficient backlog has not yet been secured. In the longer ter m, the Co mpan y believes that its unique CSEM technology could play an important role in the explora tion for marin e min erals of fshore Norway and intern ationally. CSEM technology is ab le to detect the p resence of marine mineral deposits (primarily Seafloor Massiv e Sulphides) and EMGS believes th at it will als o be ab le to estimate the mineral con tent of such depos its. The Compan y is undertaking early -stage initiativ es to pos ition itself in this future market. 20 The Company managed to secure a two-year extension of the USD 32.5 million con vertible bond to May 2025. The Company was also able to reduce the total ou tstandin g amount of the conv ertible bon d by USD 8 million to USD 24.5 million. Th e bond buy-back was made at 75 per cent o f par. The Co mpany maintains its cutting-edge technological position in the EM market an d is well po sitioned to be able to capitalise on the expected u pturn in t he market with a more s treamlined and efficient org anisat ion. Oslo, 20 April 2022 Board of Directo rs and CEO of E lectromagne tic Geoservices ASA Sign. 21 Responsibility St atement . Today the Board of Directors and the Chief Executive Officer reviewed and approved the Board of Directors’ Report and the consolidated and s eparated annu al financial statements for Electromagnetic Geoservices ASA (“EMGS” or th e “Co mpany”) for the year ended 31 De cember 202 1. EMGS’ consolidated financial statements have been prepared in accord ance with IFRSs and IFRICs as adopted by the EU and additional dis closure requirements in the Nor wegian Accoun ting Act. The separate financial statements for the Com pa ny have b een prepared in accordan ce with Norwegian Accounting Act and Norwegian accountin g sta ndards. The Board o f Directors’ report is in a ccordan ce with the require ments in the N orwegian Accounting Act and No rwegian accountin g standard no 16. To the best of ou r knowledge: . The consolidated an d separate annual financial statements for 202 1 have been prepar ed in accord ance with applicable financial reportin g sta ndards. . The consolidated an d separate annual financial statements giv e a true and fair v iew of the assets, lia bilities, financial position and profit/(loss ) as a whole as of 31 December 202 1 for the Group a nd the Compan y. . The Board of Directors’ r eport for the G roup and the Company in cludes a fair review of - The development and performance of the b usiness a nd the position o f the Group and the Company. - The principal risks a nd uncertainties th e Group and th e Company face. Oslo, 20 April 2022 Board of Directo rs and CEO of Electro magnetic Geoser vices ASA Sign. 22 Report on Corporate G overnance . EMGS is committed to healthy corporate governance practices which strengthen and maintains confidence in the Company, thereby contributing to op timal long-term value creation for shareholders and oth er stakeholders. Th e objective of corpor ate governance is to regulate the division of roles between shareholders, th e Board and executive mana gement more comprehe n sively than is re quired by legislation. EMGS’ principles for corp orate governan ce are based on the following elem ents: • All shareholders are treated e qually • EMGS will prov ide open, reliable and relevant communication to sh areholders, governmental bodies and th e public about the Compan y’s activities and its corporate governan ce commitment • EMGS’ Board is fully independent from the Co mpany’s exec utive management • EMGS pays particular atten tion to ensu ring that there are no conflicts of interest between the in terests of its shareholders, th e members of its Board and its executive man agement • EMGS will ensure a clear d ivision of resp onsibility b etween the Board and the executive m anagement 1. Implementation and reporting on corporate governance Implementation and r eporting The bo ard of directors (the “Board”) o f E lectromagnetic G eoservices ASA (the “Company” or “EMGS”) is committed to maintaining a high standard of corp orate governan ce, in line with both Norwegian and international best practice s tandards. In additio n to maintaining a high standard of corp orate governan ce, the Board and the executive manage ment of the Company carry o ut, on an annual basis, a comprehens ive review and evalu at ion o f its principles for corporate governan ce and the implementation of these. This report (th e “Report” ) summarises the Co mpany’s corporate gov ernance work a nd compliance with applicab le requirements and fulfils th e Company ’s reportin g obligation s un der ap plicable law and oth er legal frameworks. EMGS is a Norwegian-registered public limited liability co mpan y, with its shares listed on th e Oslo Stock Exchange ( Oslo Børs ). The Norwegian Accoun ting Act Se ctio n 3-3b, w h ich th e Company is subject to , sets out certain corporate governance rel ated information which is to be dis closed an d reported on through the iss uance of an annual reporting d ocument. This Rep ort meets the requirements provided by th e Accounting Act. The Accoun ting Act is availa ble on www.lo vdata.n o. Furthermore, the Continuing Obligations of Stock Exchan ge Listed Companies (th e “OSE Continuin g Obligations”) issu ed by the Oslo Stock Exchange requires listed compan ies to publish an annu al statement o f their practice related to their policy on corporate governan ce. In ad dition to s etting out certain minimu m requirements for such r eporting (equivalent t o those under th e Accounting Act), th e OSE Continu ing Obligation s requ ires that the Company re ports on its complian ce with th e recommendations of the Norwegian Cod e o f Pra ctice for Corpora te Gov ernance (the “Code”) publis hed by the Norwegian Corporate Governanc e Board . Both th e OSE Continuin g Ob ligations and the Code require that an explanat ion is provid ed where a company h as chos en an alternative approach to specific recommendation s in the Code (i.e. , a “comply or expl ain” basis). EMGS complies with the current Code, issued on 14 October 20 21 . The Company provides a report o n its principles for corporate governan ce in its annual report and on it s website, www.emgs.com. E MGS’ objec tive is to comply with all s ections of the Code, but th e Company may deviat e from principles in the Code if required for sp ecial purp oses. 23 The OSE continuing Ob ligations are available on www.oslob ors.no, and t he Code is a vailable on www.nues.n o. This Report sets o ut how the Code is accom modated through the financial year 202 1. Values and guidelin es for busin ess ethics and c o rporate social re sponsibility EMGS has a set o f clearly defined core values: Integrity, C ommitment, Innovat ion and Quality. The values are operationalised in E MGS’ daily operation s and management, including in o ur approach to corporate go vernance. The Board recognis es that confidence in EMGS as a company and in its business activities is ess ential for the Company’s continuing competitiveness. Therefore, EMGS is co mmitted to trans parency and openn ess about its management s ystems and pro cedures. This strengthens value creation, builds internal and external confidence an d promotes an ethical and sustainable app roach to business. The Board has, in close cooperation with the Company’s executiv e manag ement, es tablished a compr ehensive framewo rk of guidance d ocuments. The core element and top -tier in this framework are the Com pany’s po licy documents , which include th e Compan y’s e thics policy, the corp orate s ocial resp onsibility policy (see also separate report in the annual repor t) and th e health, safety and env ironment policy . Other core guidan ce documents include the Compan y’s Code of Cond uct Standard and th e EMGS Sustainability and Corp orate Social Respons ibility Standard. These p olicies an d stand ards are evaluated and updated on a regular bas is. The Company h as adopted a program me for corporate social respon sibility, including an a nti-corruption compliance programme incorp orating mandat ory training of all employees . EMGS’ website provides mor e in formation about th e Company’s bus iness activities, policies and s tandards. 2. Business EMGS is the mark et leader in contro lled-source e lectromag netic (CSEM) imaging. Pursuan t to Section 3 of the Compa ny’s Articles of Association , the Company’s purpose is as follows: “The Compan y's activity is to engage, by itself or through proprietary intere sts in o ther com panies, in the prospecting for hydrocarbon de posits in connectio n with the exploration, development and prod uction of hydrocarbons.” The Company h as clear obje ctives an d strategies for its busin ess within the s cope of the d efinition of the busin ess purpo se in its Articles of As sociation. The Board of Directors ’ report in the Company’ s an nual report includ es a description of the Company’s objectives and principal s trategies accord ing to th e bus iness activities clause from th e Articl es of Associ ation. The Artic les are ava ilab le at the Company’s homepage, www. emgs.com. 3. Equity and dividends Equity and share capital As of 31 December 2021, t he EMGS Group had a combined equity of negative USD 2.5 mil lion, representing an equity ratio of negative 6.3 %. The Board’s ass essment of the Company’s eq uity pos ition is set out in the Board of Director’s Report. The Company’s registered share capital is N OK 130,969,690 divided into 130,969,690 shares each having a par value of NOK 1. Dividends The Company h as at present no intention to pay divid ends. The Board will establish a dividend policy when relevan t. The Compan y’s objective is to ge n erate a long -term return for its s hareholders through di vid ends and increas es in the share price that are, at least, in line with the return a vailable on s imilar investment opportunities of comparable risk. 24 Authorisations to incr ease share capital and t o acquire own shar es At the Annual General Meeting (AGM) held on 21 May 202 1, the Board was authoris ed to increase the s hare capital of the Company b y up to NOK 26 ,193, 968 (being 20% of the registered share cap ital of the Company) th rough one or more s hare issues. Further details are set out in the resolu tion b y the AGM that states, amongst others, th at the authorisat ion may be utilised in conn ection with potential tra nsaction / M& A activity, an d/or to finance g enera l corporate p urposes. The Board was als o given an authorisat ion to increase the share capital b y up to NOK 9, 822,726 to be utilised for ful filling the Company’s obligation s towards holders of options, should su ch options be exercised. All options ar e bas ed on the Employee Option Program me. The two authorisations are valid until the next AG M of the Compan y, but in no event beyond 30 June 202 2. As of 31 December 2021, the Board had not used thes e authorisations. 4. Equal treatment of shareholders and transactions with close associates Equal treatment Equal treatment of shareholders is an importa nt principle for corporate governance in EMGS. Th e Company has one class of shares, an d any purchases or sales o f own shares a re carried out over th e stock ex change. The Articles of Asso ciation do not impos e any restrictions on voting rights . All shares have equal rights . Pursuant to the Norwegian Public Limited Liability Compan ies Act, existing shareholders have pre -emption rights in connection with share ca pital increas es and issu ance of fin ancial instru ments which gran t the holder a right to have new shares issued. Ho wever, th is right can be waiv ed from time - to -ti me b y a qualified majority of th e s hareholders. When proposing to the shareholders to resolve s uch a waiver, the Board s hall explain the rationale for s uch a waiver. Where a share capital in crease is resolved by the Board in accordance with an auth orisation b y the general meeting o f th e Company, the p re-emption right m ay only b e set aside where th is has b een pre-approved b y the shareholders as part of the issuance of the authorisation. Where the Board resolves to carry out an increase in the share capital and waive the p re - emption rights of the existing sharehold ers on the basis of such an authoris ation granted to the Boa rd, an explanat ion will normally be pub licly disclosed in a s tock exchange anno uncement issued in co nnection with the in crease of the capital. The Board of E MGS will waive th e pre -emption of e xisting sharehold ers in connection with any share capita l increases to meet the Company’s obligations t owards holders of optio ns if and when su ch options are exercis ed. Transactions with cl ose associates In the event of any material transaction between th e Company and its sh areholders, a shareholder’s parent Company, members of the Board, memb ers of the executive person nel o r clos e as sociates of any such parties, the Board will, as a general rule, arrange fo r a valuation by an independ ent third party. EMGS has implemented procedures for the Board, th e board committees an d the executive person nel to ensure th at an y conflicts of interest conn ected to agreements entered into by the Company are reported to the full Board. 5. Freely negotiable shares The shares in E MGS are freely negotiab le and the Articles of Association do not contain any restriction s on negotiab ility. EMGS is listed on t he Oslo Stock E xchange, and t he Company works a ctively to attract the i nterest of n ew shareholders. 6. General meetings General Meeting s General m eetings are th e Company’s ultimate corp orate bod y. E MGS encourages all shareholders to p articipate in general meetings. The Board endeav ours to o rganise the general meetings to ens ure that as many shar eholders as possible may exercise their rights by participat ing, and that such meetings are an effective forum for t he views of shareho lders and the Board. 25 Preparation for th e Annual General Meeting ( AGM) The AGM is normally held in J une each year, and in any case no later than 30 June, which is the latest dat e permitted under applicable law. The 2021 AGM was held on 21 May 202 1. The 2022 AGM is scheduled t o be held on 21 Ju ne 202 2. The n otices calling the general mee tin gs are made available on the Company’s website and sent to shareholders in the f o rm requested in their VPS accou nt, in each event no la ter than three weeks prior to the meeting. According to article 8 o f the Company’s registered Articles of Ass ociation an d provided th at the sh areholders may participate in general meetings electronically, ref. articl e 9 in th e articles, the A GM may , with the majority required to amend the Articles of Association and with effect un til the next AGM, de cide that the notices calling Extraordin ary General Meetings shall be s ent no later than two weeks be fore th e date o f th e meeting. This alternativ e was u sed to call for the Extraordinary General Meetin g h eld on 25 November 202 1 . Shareholders who wish to take p art in a general meeting must give notice to th e Company by the date stated in the n otice of meeting, which date mus t be at least two business day s before the general meeting. Each shar e carries one vote in the Compan y's general meetin gs. Article 10 of the Articles of Association stipulates that the sup porting d ocuments dealing with matters to b e considered by the AGM can be made avail able on the Compan y’s website rather than being s ent to shareho lders directly. How ever, shareholders are s till entitled to receive the docum ents by pos t upon request. The calling n otice to the gen eral meeting along with a for m for appointing a proxy and su fficiently detailed supporting information, including p roposals for resolutions and comments on matters where no resolution is propos ed, are dis closed on the Company’s website. Resolutio ns and supportin g information ar e s ufficiently detailed and comprehensiv e to enable shareholders to form a view on matters on the agenda to be cons idered in the meeting. The Company will make appropriate arrangements for the general meeting to vote separat ely on each candidate n ominated for the Company’s corporate bodies. As a routine, th e financial calendar for the coming year is pub lished no lat er than 31 December as a stock exchange announcement, and it is also made available on t he Company ’s website. Participation in gen eral meetings Shareholders who do n ot at tend the general meeting may be represented an d ex ercise th eir voting righ ts by way of a proxy. A person will be nominated to be av ailable to vote as a p roxy on behalf o f sharehold ers. Proxy forms will enab le the proxy holder to cast v otes for each item on the agenda separately. The final d eadline for sh areholders to give no ti ce o f their intention to attend the meeting or to v ote by proxy will be set in the notice for the meeting. According to articl e 9 of th e Articles of As sociation, the Bo ard may decide that the shar eholders can participat e in the general meeting b y m ean of a n electronic aid, including th at they may exercise th eir rights a s sharehold ers electronically. The Chairman of th e Board , t h e CEO, th e CFO and the auditor will be present at the AGM. Other board members will, if possible, att end the general meetings. Ag enda and conduct of the AGM The Board decides th e agenda for th e AGM. The main agenda items are determined by the requirements of th e Public Limited Liability Compan ies Act. The Code stipulates that th e Board sh ould have arran gements to ensu re an independ ent Chairman for th e general meeti ngs. The Company has evaluated the recommendation but decided that it was in the interest of the Company and the shareholders th at the general meeting held in 2021 was chaired by the Chairman o f the Board. The AGM minutes are p ublish ed by the is suance of a stock exchange an nouncement and are also made availab le on the Company’s h omepage. 7. Nomination Committee EMGS has a N omination Committee el ected by th e A GM. A ccording to articl e 1 1 in the C ompany’s Articles of As sociatio n, the committee s hall consis t of 2 to 3 m embers who shall b e el ected b y the AGM for a p eriod of 2 y ears, unless th e AGM decides a shorter p eriod. 26 At the Extraord inary General Meeting held o n 25 November 2021, in which Fred erik W. Moh n replaced the previous Chairman of the Co mpany, Ch ristos Makry giannis replaced Fred erik W. Mohn as a Memb er of the Nomination Com mittee. As per 31 December 202 1, the N omination Com mittee cons isted of two members; • Kristian Siem (Chairperso n) • Christos Makr ygiannis The Nomination Committee has refrained from ac cepting a fee for th eir work on the N omination Co mmittee. The Nomination Committee proposes candidates for election to the Board and for the remuneration of the members of the Board. Also, the Nomination Committ ee propo ses candidates for election to the Nomin ation Committee and suggest s changes to the man date or guidelines of the N omination Co mmittee. EMGS’ Nomination C ommittee is in contact with shareholders, the Board and the Company’s executive management when searching for candid ates for election to the Board . The recommendat ion to the AGM relating to th e el ection s hould be availa ble in time to be sent with the no tice call ing the meeting, so that the shareholders hav e the opp ortunity to su bmi t their views on the recommendation to the Nomination Committee ahead of the mee t ing. Further details are set out in article 11 of the Articl es of Association and in the guidelines for the nomination comm ittee, which were ap proved by t he AGM in 2012. 8. Board: composition and independence The composition o f the Bo ard EMGS does not h ave a corporate ass embly. According to article 5 in the Company ’s Articles of As sociation, the Board s hall con sist of 3 – 11 board memb ers. At the end of 2021 , EMGS’ Board consis ted of five directors. Two of th e directors are female and three are male. The sharehold er-elected members represent varied an d b road exp erience from r elevant indu stries and areas of s peciality, and th e members bring experiences from b oth No rwegian and international companies. An y proposal for the election of shareholder-elected b oard members are made with a view to ens ure that the Board can attend to th e shareholders’ common inte rest an d the Compan y’s need for competence, capacity and diversity . Also, the Board sho uld fun ction well as a collegial body. The Chair man o f the Board i s elected by th e general meeting. As of 31 December 2021, t he Board consisted o f the following directors: • Frederik W. Mohn, Chairman • Beatriz Malo de Molina • Mimi Berdal • Jørgen Westad • Petteri Soininen Independence of the Board The Board does not include any members fro m the Compan y’s executive managem ent. Two of the five sh areholder- elected board members are cons idered independent of th e Company’s material business associations and major sharehold ers. The th ree memb ers that are not considered ind ependent are related to one of each of the Company’s three larges t shareholders and hold the majority of the con vertible bond . As the majority of the members of the Board ar e not considered independent, the Company deviates from the Code on this point. However, the Company b elieves th at this deviation is in t h e interest of b oth E MGS and its stakeh olders, including other shareholders, as it allows for short lines of comm u nication between the Company and its largest shareholders as well as significant experience an d competenc e to th e Board which the Compan y may not be able to retain without these directors. 27 9. The work of the Board The Board’s duties and responsibilities The Boa rd h as the ultimate responsib ility for the man agement o f the Company and for supervising its day - to -day management and activities in ge n eral. T h is includes developing the Company’s strategy a nd monitoring its implementation. In add ition, the Board exercises su pervision respo nsibilities to ensure th at the Compan y manages its business and as sets and carries ou t risk man agement in a prud ent and satis factory manner. The Board is re sponsib le for the appointment of the CEO. The Board has an annu al plan for its work. Mandate for the B o ard In accord ance with the p rovisions of Norwegian compan y law, the terms of reference for the Boa rd are set o ut in a formal mandate that includ es specific rules and guidelines on the work of the Board and decision making. The Chairman of the Board is responsible for ensuring that the work of the Board is carried out in an effective and proper manner in accordance with legislation. Mandate for the C EO The Board issues a mandate for the work of the CEO. There is a clear division of responsibilities between the Boa rd and the CEO. The CEO is respon sible for th e operational manageme nt of the Company . Financial reporting The Board receives p eriodic reports on the Compan y’s commercial and financial status. The Com p any follows the timetable laid down by t he Oslo Stock E xchange for the pu blication of interim and annual repo rts. Board meetings The Board holds regular meetings an d a s trategy meeting each y ear. Extraordinary Board meetings are h eld as and when required, to consider matters that cannot wait until the n ext re gular meeting. In ad dition , the Board has appointed three sub-committees composed of board members to work on matters in these areas. The Board has establis hed and stipulated instructions for these committees. Audit Committe e The Audit Committee is appoi n ted by the Board. Its main respons ibilities are to supervise the Company ’s systems for internal control, to ens ure that the auditor is independent and ass ist the Board with oversight. Th e Audit Com mittee has revie wed the procedures for ris k management and financial con trols for the major areas of the Comp any’s bus iness activities. The Audit Committee receive s repo rts on th e work o f the external aud itor and th e results of the audit. Also, the Audit Committee meets regularly wi th the au ditor where no member of the execu tive management is p resent. As per 31 December 202 1, the A udit Committee cons isted of the following: • Beatriz Malo de Molina , Chairman • Petteri Soininen Compensation C ommittee The Compensation Committee makes proposals to the Board on the em p loyment terms, as well as conditions and total remuneration of the CEO and other executive person nel. As per 31 December 202 1, the Co mpensation Committee con sisted of th e following: • Frederik W. Mohn, Ch airm an • Beatriz Malo de Molina • Mimi Berdal • Jørgen Westad • Petteri Soininen 28 Strategy Committ ee A Strategy Committee was es tablish ed by the Board o n 11 February 2015. The Strategy Committee shall con tribute t o the Company’s s trategy development. The committee consis ts of the following: • Frederik W. Mohn, Chairman • Beatriz Malo de Molina • Mimi Berdal • Jørgen Westad • Petteri Soininen Annual evaluati o n The Board’s working methods and interactio ns are subject to annual revis ion. 10. Risk management and internal control The Board ensures that the Company has sound risk management and an intern al control system that is approp riate to its activities. The risk man agement an d internal control systems in E MGS are bas ed on its corp orate valu es, ethics guidelines and principles for s ustainability and corporate social responsibility (“ CSR ”). The Board reviews the Co mpany’s internal control sys tem and the main areas of ris k annually . EMGS’ management condu cts day - to -day follow-up of financial management and reporting. Management reports to the Audit Committee, which conducts a review of the qu arterly and ann ual reports before pu blication. The Audit Committee inquires into the integrity of EMGS’ accoun ts , a lso in its interaction s with the independ ent auditor . It also inquiries into, on behalf of the Board, issues related to finan cial review and internal control, and the external aud it of EMGS’ accounts. The Board ensures t hat EMGS is cap able of produ cing reliable ann ual reports and th at the external auditor’s recommendations are given thorough co nsideration. A d escription of the Compan y’s financial risk management objectiv es and policies are included in Note 3 to t h e financial accounts. 11. Remuneration for the Board The AGM decid es the remunera tion paid to members of the Board an nually. T he Nomination Comm itt ee prepar es pro posals for the AGM regarding r emuneration for Board me mb ers. The remuneration of the Board reflects the Board’s responsibility, expertise and time comm itment, and the complexity of the Compan y’s activities. The Code re commends that remuneration of the Board should n ot be linked to the Company’s performance an d, further, that the Company should not grant o ptions to members of its Board. None of the shareholder -elected bo ard members are engaged b y the Company in any other role (e.g. , as con sultant) tha n that as Board members. Details on the remuneration t o the Board can b e found in notes t o the financial sta tements of the Company. 12. Remuneration of the executive personnel The Board determines salary and oth er remuneration systems for key managem en t perso nnel pursuant to the p rovisions of the Norwegian Pu blic Li mited Lia bility Compan ies A ct. The CEO’ s employ ment conditions and remuneration are determined by th e Board and are presented to the AGM. The Board annually evalu ates salary an d o ther remuner ation for the CEO. Details on the rem u neration to the Company’s executive personnel are included in notes to the f in ancial statements of the Compan y. The guidelines of the remuner ation system for th e executive person nel is determined by th e Board and is presented t o the AGM th rough a declaration on principles for managem ent remuneration, which is requir ed by law. This d eclaration is also included in the Compan y’s annual report. 29 Performance-related remuneration of the executive personnel is linked to valu e creation for shareholders o r the Com p any’s performance over time. The p erformance -related r emuneration to the executive personnel is subject to a n absolute limit. The Board believes th at the salary levels of executiv e personn el should be competitive. In accordance with th e public limited liability co mpanies act (ASAL §6 - 16 ), a remuneration report will be mad e available on www.emgs.com p rior to the AGM to b e held on 21 Jun e 2022. 13. Information and communications EMGS maintain s regular dial ogue with analys ts and in vestors. The Company considers it very important to inform shareholders an d investors about the Compan y’s commercial an d financial performance. The Company strives to continuously publish all relevant information to the market in a timely, eff ectiv e and non - discriminatory manner. All stock exchange announ cements are made availab le both on the Company ’s website and o n the Oslo Stock Exchan ge news website at www.newsw eb.no, an d are also d istributed to news a gencies (via Hugin). Financial reports EMGS publishes its pro visional annu al accounts as soon as p ossible after the end of each finan cial year. Th e complete ann ual report and accoun ts are made av ailable to sharehold ers no lat er than three weeks prior to th e AGM an d no later th an by the end of April, as required by th e Securities Trading Act (s ection 5 -5 (1)). Quarterly reports are nor mally pub lished within six weeks following the end of the qua rter, exc ept for the report for th e second quarter which is normally p ublished aro und seven weeks following the end o f the quarter. The Company’s financial calen dar for the co ming year is pub lished no later t han 31 D ecember in accordan ce with the ru les of the Os lo Stock Exchange. The financial calendar is av ailable on th e Company’s website and on th e Oslo Stock Exchan ge website. EMGS holds re cord ed web-ba sed presentation s in connection with the publication of its interim results. These presentations revie w the pub lished resu lts, market conditions and the Company’ s future pros pects. The presenta tions ar e given by the CEO and/or the CFO an d are distributed by webcast so that any one can f ollow the presentation. Quarterly reports, presentation material an d web casts are all a vailable on the Company’s website. Other market inf o rmation In addition to the dialogue between the shareholders in the general meeting, the Board aspires to mainta in contact with shareholders throughout th e y ear. If pos sibly in relation t o the q uarterly p resentations and the par ticipation in seminars mainly aimed at investo rs. This conta ct is coordinat ed between the Chairman of the Boar d, the CEO and/or the CFO. The Compan y has a policy identifying the positions entitled to speak on behalf of the Company on various sub jects , and w ho should communicate with the media, inv estors an d investment bankers. 14. Takeovers The Boa rd end orses the r ecommendation of the Code for corporate governanc e on ta keover bid s. EMGS’ Articles of Associa tion d o not contain a ny restrictions, limitation s or defence mechanisms on acquiring t he Company’s s hares. In accordance with th e Securities Trading Act an d the Code, th e Board has a dopted guidelines for pos sible takeovers. In the event of a tak eover bid, the Board will, in a ccordance with its o verall responsibility for corp orate governance, a ct for the benefit of all Company shareholders. The Board will not seek to hinder or obstruct takeover bids for EMGS’ activities or shares, un less the interests of th e Company’s s hareholders s o warrants. If an offer is mad e for E MGS’ shares, the Boa rd will normally bo th make a recommendat ion on whether th e shar eholders should accept th e offer and arrange a v aluation from an independent expert. 30 15. Auditor The external auditor presents an annual plan to the Audit Committee covering the main features for carrying out the audit. The external auditor presents the result of the audit to the Au dit Committee and the Board in the meeting dealing with the annual fi nan cial s tatements, includ ing p resenting an y material chan ges in the Company ’s accoun ting p rinciples and significant acco unting es timates, an d reportin g any material matters on which there has been dis agreement betw een th e external auditor an d EMGS’ execut iv e management. The external au ditor annu ally presents internal control weaknesses and improvement opportunities to the Audit Committee and, when appropriate, to the Board. The Board holds a meeting with the au ditor at least once a year wher e no member o f the executive manage ment is present. The Board h as ad opted instructions as to the executiv e personnel’s access to the use of the external auditor for services other than auditing. The external auditor provides an ov erview o f his remun eration divided int o fee paid for audit work and any fees paid for other specific as signments, which are pres ented at the Annual General Meeting. This is als o included in the annual report. The external auditor has given the Board a writt en notification confirming that the req uirements for in dependence are satisfied. Oslo, 20 April 2022 Board of Directo rs and CEO of Electro magnetic Geoser vices ASA Sign. 31 R e p o r t o n S u s t a i n a b i l i t y a nd C o r p o r a t e S o c i a l R e s p o n s i b i l i t y . Introduction This report from the Board of Directors (the “Board”) of Electromagnetic G eoservices ASA (“EMGS” or “the Company”) describes EMGS’ p rinciples, e f forts, measu res and res ults relat ed to su stainability and corporate social respons ibility (“CS R ”) in the year of 2021. The report is based on the pr in ciples in EMGS’ policy for sustainability and corporate social responsib ility and the EMG S sustainability an d corporate social responsib ility standard (together, the “CSR Po licy Doc uments”). These principles cover th e areas labour rights, anti -corruption, the environment an d h uman rights. The CSR Po licy Documents applies to both national and international operations. It is the intention of EMGS that the Company ’s efforts within (i) working environ ment issues, includi ng safety measures, (ii) anti-corruption procedures and training, and (iii) the culture encouraged from our employees through the CSR Policy Documents shall contribute to improved understanding for h uman rights, working ethics, work environ ment, health, sa fety and environ mental impact. The work related to s ustainability an d CSR (together “the CSR work ”) in EMGS is bas ed on the core v alues of the Comp any: • Integrity in all our relation ships We earn trust through demonstrating integrity. We dare to challenge, and we are honest. Our honesty benefits all our relationship s. • Commitment to value creation We are strong believers in the value our techn ology creates for both customers and shareholders. We go the extra mile. • Innovation in p roducts and serv ices We set the stage for th e future of the ind ustry. We a re passionate abou t developing what our customers n eed. • Quality in every step We care about our p eople, our custo mers and our d eliveries. We don’t compromise on safety or on qu ality. This report covers CSR work related to EMGS with its subsidiaries (together, th e “Group” ) in 202 1. The r eport is primarily bas ed on feedback from man agement in the Grou p and various internal committees, reporti ng systems and reports . Throughout 2021, as in previous years, CSR iss ues were discuss ed in management meetings an d by the Board. This report includ es an in troduction to the abovementioned principles, the EMGS commitment, implem entation an d actions as well as the measures and outcome specific for 20 2 1 . The CSR policy is a vailable on the Company’s homepage www.e mgs.com . 32 Statement on CSR work 2021 All work in the Group related to CSR is based on the CSR Policy Documents. Below is an o verview of th e p rinciples, as well as a description of how the Company reports issues relate to CSR, and measures taken und er each of the main CSR principles. Quality, Health, Se curity, Safety and Environ ment In 2021, the general objectives for Quality, Health, Security, Safety and Environ ment (QHSSE) were me t. Several areas of improvement were identi fied during th e cou rse of 20 21, as is natural given the nature of CSR compliance. The Compan y’s five-year trailing QHSSE s tatistics are in line with it s peers. EMGS complies with the h ighest standards from IOGP, the International Association of Oil and Gas Pro ducers, as w ell as with specific QHSSE requ irements from cu stomers and au thorities. QHSSE performance is reviewed o n a regular bas is with the Board an d management team . Labour rights EMGS adheres to the follow ing principles for lab our rights: • Freedom of associatio n and right to collective b argaining; • No forced and compu lsory l abour; • No child labou r; and • No discrimination The working environment an d the employees As of 31 Decemb er 2021, the E MGS Group had 17 employees, of which four work in T rondheim, Norway, nin e at the regio nal office in Oslo, No rway , three offshore and one in Mexico City, Mexico . EMGS ta kes a proactive approach to the welfare and safety of its employees and has in itia ted a number of measures to keep short -and long-term sick leave amon gst th e employe e group at current low levels. The Compan y exper i enced n o los t time injury events in 2021. Equal opportunities and discrimination statemen t EMGS’ 17 employees repr esent four d ifferent nationalities with d ifferent cultures. EMGS h as defined and implemented guidelin es to protect against gender discrimina tion. At the end o f 20 21 , two of the Group’s 17 employees, or 12 %, were f emale, which is the s ame as compared to male/female ratio as of 31 December 20 20 . The Group will con tinue to prioritis e its goa l of improving the current imbalance by activ ely following a recruiting strategy to this effect. EMGS recognis es th at the average compensation f o r its female employees is lowe r than the average workforce figure. This can be explained by a high degree of repr esentation of males at manage ment level and among the techn ical professionals. As per 31 December 2021 , the executive m an agement team consisted of three person s, w h ereof all are male . The Discrimination Act’s objective is to promote gender equa lity , ensure equal opportunities and rights, and to pre vent discrimination due to ethnicity, national origin, descent, s kin colour, language, religion and faith. The Group is actively a nd systematically working to enc ourage the Act’s p urpose with in its bus iness. The activities include recruiting, remuneration , working cond itions, promotion, development opportunities and protection against harassment. These are issues of importance for EMGS’ worki ng environment, as the Group has employees from fou r nation s with a various languages, cultures, ethnicities, religions and faiths . The Grou p’s aim is to have a workplace w ith no discrimination due to reduced functional a b ility. There fore, EMGS is actively working to design and implement th e p hysical conditio ns of its workplaces s o that as many people as pos sible can utilize the variou s fun ctions. For emp loyees or new applicants wit h reduced functional ability, ind ividual arrangements are m ade concerning workp lace and respons ibilities. For offshore work, the Group h as limited p ossibilities for offering work to employees with reduced fun ctional ab ility. 33 Working environment m easures EMGS management encoura ges and facilitates close dialo gue between management a nd employees, and between th e different departments within the Group. Some of the action s to facilitate dialogue are through weekly meetings held with all employees . Office inspections a re carried out on a regular bas is to capture potential working env ironment hazard s. The Maritim e La bour Convention , MLC 2006 was imple mented in August 2013 and the Norwegian law implementing this convention, the Ship worker Act, was implemented on th e same d ay. By the end of 2019, th e MLC 2006 had be en ratified by 94 countries. EMGS’ worki ng environ ment and terms w ere already in line w ith th e MLC 2006 and the Sh ipworker Act requirements before its imple mentation. Anti-Corruption Corruption undermines all sound business activities and free competition. Business shou ld work aga inst corruption in all its forms, includ ing extortion and bribery. EMGS has a zero-tole ra nce policy with respect to corruption in all its forms, including bribery and facilitation payments. Adherence to this princi ple is a b asic and fundamental requirement for all contractors and suppliers. The Group and all o f its employees s hall at all time s adhere to all ap plicable legislation related to b ribery and anti -corruption , and as a minimum always to the prov isions of the FCPA, the UK B ribery Act and t he Norwegian penal code. The Compan y has over the years giv en significant attention to th e Company’ s active pursuit to prevent corruption and bribery. EMGS has sev eral policies and standar ds related to its anti -corruption compliance pro gram me , including b ut not limited t o the E thics Policy and Code of Conduct as well as an anti -corruption complian ce train ing p rogram me . Th e trainin g is a combination of web bas ed and more in -depth train ing in meetings. The Group has esta blished a whistle -blower procedure in line with best practice in dustry standards and all applicable regulations. EMGS encourages an d su pports employees who report dilemmas an d incidents in relation to attempted and /or actual corruption, bribery and/or fraud to management ( “whistle blowers”). The Comp any has not received an y reports from employees related t o anti-corru ption du ring 2021. EMGS continues to h ave a high priority on the Company’s compliance work. External environm ent EMGS is of th e opinion that a more sys temat ic use of its EM d ata in offshore oil explorati on will reduce th e environmental footprint of oil exploration activities by among oth er things reducing the number of dry or non -comme rcial wells being drilled before finding an d appraising hy drocarbon reserv o irs. EMGS is committed to act responsib ly an d in full tra nsparency to monitor and reduce its environmental impact and continually improve the overa ll environmental performanc e of its services. This is an integral and fundamental part of EMGS business stra tegy, operating methods and technology development i mplemented through EMGS’ QHSSE Po licy, Environmental Stan dard and Environ mental Management Plan . EMGS is tracking its environmental footprint on each survey an d identifyin g and monitoring the main waste streams including hazar dous waste. The technology EMGS u ses supports the Compan y’s env ironmental ambitions. The an chors used to keep receivers in place are made from an eco-friend ly compou nd which dissolves in th e months after the receivers are released, th us the anchors do not harm the environmen t. This means that th e an chors are reduced to disaggregat ed s and after a survey, leav ing no discernible survey foo tprint and no h azard to subs ea operations or fishing. 34 Human Rights Principles related to Human Right s: • Support and respect the protection of hu man rights; and • Make sure not to be complicit in human r ights abuses. Human rights abuses shall not o ccur at EMGS. It is the intention of EMGS that the working env ironment effort, including safety measures, the an ti- co rruption p rocedures and training as well as th e attitude encouraged from the Co mpany’s employees shall contribu te to improved understand ing for human rights , working ethics and a cleaner environ ment in the areas of the world wher e the Group o perates. The reputation of th e Company is created b y the collective conduct of each individual employee. The employees are obligated to s tudy th e EMGS p olicies, including but not limited to Ethics Policy and Cod e of Conduct and perfor m their du ties accordingly. On an operating level, E MGS seeks to ens ure that there is a goo d working environm ent without discrimination of an y k ind in th e Group. The m an agers handle all minor issu es related to h uman rights. If/w h en there are is sues of broader magnitude, HR, legal and the E thics Committee are invo lved. No claim regarding Human Ri ghts h as been reported to the HR, QHSE or Legal in 20 21. Oslo, 20 April 2022 Board of Directo rs and CEO of Electro magnetic Geoser vices ASA Sign. 35 Determination o f Salary Statement . Th e follo wing s tatement has b een prepared by the Board of Directors of Electromagn etic Geoservices AS A (“E MGS” or the “Company”) and outlin es th e main principles for th e curr ent renumeration policy , bu t does not constitute the official accepted guidelines. The official guidelines made in accordance with section 6-16a of th e Norwegian Pu blic Limited Liability Companies Act was accepted by the 2021 AGM an d is published on www.emgs.com . The Board ’s Senior Executiv e Remuneration R eport for 202 1 wil l b e availa ble in the 2022 AGM Calling Notic e and on www.emgs.co m following AGM on 21 June 2022. 1. Main principles for determination of management remuneration The objective of the Compan y’s compensation p olicy for the executive management (“Management” ), is to attract an d retain the bes t leadership capabilities available to lead and develop the Compan y and th us maximise sharehold er and stakeholder v alue. The com pensat ion is based both on a non - variable element (“Base S alary”) and variable elements s uch as bonus, stock options and variable sp ecial p ayments (“Variable Compensat ion”, and, together with Bas e Salary , “Overall Compensation”). For the CEO, the compensa tion level is determined by t he Board of directors without involvement from th e CEO. For other members of Management, compensation is d etermined by the Board based on recomm endations from, and discussions with, the CEO. The Base Salary shall be competit ive to local market le vels and is determined by the manager’s skills and level of responsibility in th e organis ation. The Bas e Salary is d etermined by us ing indu stry benchmarks with local relev ance for similar roles. The Variable Compens ation, su ch as bo nus es, is applied using Company performance an d individual performance. Long term incentiv es, such as stock option p lan, are applied by as sessing the criticality of the role to the Compan y, an d as an instrument to retain crit ical skills in th e Company. When determining comp ensation for the CEO and other members of Managem ent, the Boar d takes into consideration not only in dustry b enchmarks and individ ual p erformance, but also the av erage compensati on level for all other employe es of the Company. 2. Salaries and remuneration 2.1 Base Salary The Management’s fixed an nual salary is defined as the Base s alary and is sub ject to annual review. 2.2 Performance Bonus The Co mpany has a performa nce b onus program me link ed to ann ual performance. The objectiv e of the program me is to compensate individu als bas ed on the achievement of Company objectives as well as pers onal performance. The objectiv es of the Company are estab lished by th e Board of Directors. All e mployees of EM GS ASA received a on etime bonu s in 2021, in the equivalent amoun t, conditional u pon the su ccessful completion of certain o perational objectives. 36 Management has a bonus p otential of up to 40% of Bas e Salary, and th e rates are specified in the indiv idual employment agreements. A Bonus pro gram me is established a s a general program me for all employees with a bonus p otential of 10 – 40% of Annual Base Salary. 2.3 Share Option Progra m me Management particip ates in the Company’s Stock Option Plan which is used to attract an d retain employees. The programme was estab lished with the aim to p rovide a lon g -term incentive. For new grants, the minimum exercise price is set at fair market v alue at th e date of grant. The v esting of su ch options take s place over a four-year p eriod from the dat e of the grant. Any new grants under th e share optio n programm e will be d etermined by the Board based on authoris ation from the annual general meeting (as d escribed directly below). The Co mpany’s s hare option progr amme is based on an authoris ation from the annual general meeting of the Co mpany . The authorisation was renewed for a period of t wo years at the annual general meeting in 20 21 and is th us sub ject to renewal at th e 202 3 annual general m eeting. The authoris ation, which covers all employ ees an d not on ly management, is limited to a maximum of 9,8 22,726 optio ns over a two -year p eriod. The total number of outstanding options (for all e mploy ees and not only management) under the share option programme as of 31 December 202 1 was 1 68 , 75 0. 2.4 Pension plan Management participates in t h e Company ´s general collective pension plan. The Company has defined contribution pension plans, and th e plan applicable in N orway involves a contrib ution level of 5% of Base Salary from 0 G up to 7.1 G and 15% of Base Salary from 7.1 G up 12 G, where G is the base amount (Folketrygdens grunn beløp) that equals NOK 10 6 3 99 as of 31 December 2021 . The Company d oes not offer any t op - up pension plan for Management. 2.5 Benefits in kind Management participates in the Compan y’s ordinary benefits in kind schemes (i.e. telep hone expenses, laptop and free broadband conn ection and use). The Board may, on a case - by -case basis and based on their own discretion, award other reasonable an d benefits in kin d provided tha t such benefits do not d eviate from what is ge n erally acce pted in the N orwegian market. 2.6 Severance plan As is customary in the Norwe gian market, th e CEO has, in his employm ent agreement, agreed th at he may b e termin ated at the discretion of the Board (i.e. termination at will). In t he event of such terminat ion , the CEO is entitled to severance pay equal to 12 month s’ Base Salary. No oth er memb ers of Management hav e any agreements to receive Bas e s alary and benefits beyond th e statutory notice p eriod. Agreements may be signed regarding severance pay for other members of general manag ement to attend to the Company's needs at all tim es to ensure that the selection of managers is in commensu ration with the Company's needs. Pu rsuant to the Working En vironment Act, such agreements may not have a binding effe ct on general management other than the CEO. 3 . Management salaries and remuneration in subsidiaries of EMGS Companies within the E MGS grou p are to follow the main p rinciples of th e Company’s man agerial salary policy as described in section 1. It is an ambition of the Company to globally coo rdinate the wage policy a nd the plans u sed for variable compensation throughou t the EMGS Group. 37 4. Review of the executive management remuneration policy that has been carried out in the financial year 2021 The remuneration policies s et out in the declaration o n determination of salary a nd other compensation t o the Management for 2021 were followed in a ll respects . All employees o f EMGS ASA receive d a bonus, in the equivalent amount, conditio nal upon the successful co mpletion of certain o perational objectives. All employe es also received a onetime bonus of N OK 10 thousan d in December 2021 as a result of the significan t efforts of employe es in the su ccessful achievement of profit able operation s during t he year. Oslo, 20 April 2022 Frederik W. Moh n for and on be half of the Board of Director s of Electrom agnetic Geoservices ASA Sign. 38 F i n a n c i a l s t a t e m e n t s . E M G S G r o u p 39 Consolidated I ncome Statement . Am oun ts i n USD 1 0 00 No te 2021 2020 Oper at ing r even u es Cont ract s a les 6 7,634 11,503 M ulti-cl ient pr e-fund i ng 6, 16 10,151 3,229 M ulti-cl ient la te s al es 6, 16 5,785 4,542 Other reven ue 6, 25 5,304 5,642 Tot al rev enu es 28,874 24,916 Oper at ing expen ses Chart er hire, fuel a nd crew expenses 7 3,502 5,924 Em ployee expen s es 8 3,012 9,818 Depr eci ation and o rdin a ry am ort is ation 16, 17 4,207 4,462 Depr eci ation r i g ht -of-us e a s s ets 27 3,524 7,856 M ulti-cl ient amo rtisa tion 16 2,457 4,077 Im pairm ent of lon g -term as s ets 16, 17, 27 0 7,439 Other oper a ting expenses 9, 10 2,964 3,067 Tot al op erat in g expenses 19,665 42,644 Oper at ing p r ofit /(lo ss ) 9,209 -17,728 Financ ial inc ome and expenses Int erest i ncom e 11 28 208 Int erest expense 11 -2,925 -4,105 Int erest expense lea s e li abili ties 27 -762 -1,111 Im pairm ent financial as s ets 4 -1,920 0 Net g ai ns/(l oss es ) of fi nancial a s s ets a nd lia bilities 23 2,000 -3 Net for ei g n cur ren c y incom e/(los s ) 11 -290 25 Net fin an cial it ems -3,869 -4,987 Inco me/(loss) befo re inc ome ta xes 5,339 -22,715 Inco me tax expense 12 417 671 Inco me/(loss) for t he y ear 4,922 -23,385 Basic in co me/(loss) per shar e in USD 31 0.04 -0.18 Dilut ed in co me/(loss) per shar e (EP S ) in USD 31 0.04 -0.18 40 Consolidated St atement of Other Compre hensive Income . The items recorded in Oth er comprehensive incom e/(loss) do not have any tax effect in 20 21 o r 20 20 . 1 Ja nu a r y - 3 1 Decembe r Am oun ts i 000n USD 1 No te 2021 2020 Inco me/(loss) for th e y ear 4,922 -23,385 Other c o mprehensive income to be re classified to p rofit or loss in sub sequent periods (n et of tax): Exchange differences on tr a nsl ation of for ei g n op eratio ns -25 -13 Oth er co mpr ehen sive in co me/(loss) -25 -13 Tot al co mpr ehensive in co me/(loss) for th e y ear 4,897 -23,398 41 Consolidated St atement of Financial Posit ion . Osl o, 20 Apri l 2 022 Boa rd o f Di rec tors and CEO of Elec tro magn etic Geos erv ices AS A Si gn. Sh a re capital , s hare pr emium a nd oth er paid-in equity 14 71,490 71,490 As of 31 Decembe r Am oun ts i n USD 1 0 00 No te 2021 2020 AS SE TS No n -cu rr ent assets M ulti-c li ent l ibr a ry 16 2,412 2,209 Other intangible a s s ets 16 422 939 Pr oper ty, plant a nd equip men t 17 12,747 16,374 Ri ght-o f -use as s ets 27 4,465 8,246 Financial l eas e receivables 18 72 141 Ass ets un der con s tr uction 17 3 3 Tot al no n -cu r ren t assets 20,121 27,911 Curren t assets Sp a re par ts , fuel, a ncho rs and batt eries 19 3,813 4,726 Trade r ec eiva bles 20 1,267 6,246 Other receivables 18 3,759 3,142 Financial l eas e receivables 18 68 68 Ca s h and ca s h equivalent s 21 9,855 4,179 Res tricted ca s h 21 1,278 7,995 Tot al cu rr en t assets 20,041 26,357 Tot al assets 40,162 54,269 EQUITY Capital an d r eserves at t rib u tab le to equ it y h old ers Other reserves -1,570 -1,544 Retained earnings -72,433 -77,361 Tot al equ it y -2,514 -7,417 LIABILITIES No n -cu rr ent liab ilit ies Pr ovis ions 25 4,812 9,625 Bor row ings 23,27 24,295 31,816 No n-cur rent lea s i ng l ia bili ties 23,27 522 6,501 Tot al no n -cu r ren t liab ilit ies 29,629 47,942 Curren t lia bili ties Trade payables 24 1,981 1,461 Curr ent tax li abil ities 12 3,376 4,035 Other s ho rt ter m lia bili ties 26 1,451 2,774 Curr ent l eas i ng li abili ties 23,27 6,239 5,474 Tot al cu rr en t liab ilit ies 13,048 13,744 Tot al liab ilit ies 42,677 61,686 Tot al equ it y an d lia bilit ies 40,162 54,269 42 Consolidated St atement of Cash Flows . 1 Ja n ua r y - 31 Decembe r Am oun ts i 00n USD 1 0 No te 2021 2020 Net cash flow fr om op era tin g a ct iv iti es Inco me/ ( los s ) befo re i nco me taxes 5,339 -22,715 Ad justmen ts fo r: Tot a l taxes paid -1,076 -453 Depr eci ation and or dinary amo rt i s a tion 16, 17 4,207 4,462 Depr eci ation r i g ht -of-use a s s ets 27 4,751 8,362 M ulti-cl ient amo rt i s a tion 16 2,457 4,077 Im pairm ent of ot her lon g ter m a s s ets 16, 17 0 7,439 Cos t of s hare-b a s ed paym ent 6 10 Change in tr a de receivables 4,979 17,257 Change in i nven to ries 913 3,536 Change in tr a de payables 520 -6,793 Change in oth er wo rk i ng c apital 55 -21,611 Finan c e i ncom e 11 -2,028 -208 Finan c e c ost 3,498 4,787 Net cash flow fr om op era tin g a ct iv iti es 23,621 -1,850 Investin g a ct iv ities: Pu rchas e of pr oper ty, plant and equ i pm ent 17 -90 -620 Inv es tm ent in m ulti-cli ent li br a ry 16 -2,659 -1,134 Cas h u sed i n in vestin g ac t iv ities -2,749 -1,754 Financ ial act iv it ies: Finan c ia l l eas e pr i ncipal 23 -6,206 -8,043 Int erest l eas e l ia bili ties 27 -762 -1,111 Repaym ent /s ettlem ent of loan 23 -6,000 0 Int erests paid 11 -2,257 -3,001 Int erests r ec eived 11 28 208 Cas h u sed i n/p r ov id ed b y fin anc ial act iv it ies -15,197 -11,947 Net ch an ge in c ash 5,676 -15,552 Ca s h bala nce begi nn i ng of per iod 4,179 19,731 Ca s h bala nce end of per iod 9,855 4,179 Net ch an ge in c ash 5,676 -15,552 43 Consolidated St atement of Changes in E quity . A mounts i n 00 USD 1 0 Not e Sha r e ca pi ta l , s ha r e pr em i um a nd o the r pa i d -i n-equi ty Other r eserv es Re ta i ned ear ni n gs Total e quit y Balan ce as of 1 Jan ua ry 2020 71,490 -1,531 -53,986 15,971 Inco m e/(l oss ) for th e year 0 0 -23,385 -23,385 Other c om p reh ens i ve incom e 0 -13 0 -13 Tot al c omp r ehen sive in c o me 0 -13 -23,385 -23,398 Cos t of s hare-b a s d paym ent s 0 0 10 10 Balan ce as of 31 Decemb er 2020 71,490 -1,544 -77,361 -7,417 Inco m e/(l oss ) for th e year 0 0 4,922 4,922 Other c om p reh ens i ve incom e 0 -25 0 -25 Tot al c omp r ehen sive in c o me 0 -25 4,922 4,897 Cos t of s hare-b a s d paym ent s 0 0 6 6 Balan ce as of 31 Decemb er 2021 71,490 -1,570 -72,433 -2,514 44 Notes . Note 1 – Corporate information Ele ctro mag netic Geos ervi ces ASA (EM GS/t he Co mpan y) and its su bsi diar ies (to get her th e Gro up) use EM, a pa ten ted el ectr omag net ic surv ey m eth od, t o fi nd h ydroc arb on s in off shor e re ser voir s. Th e C omp any’ s se rvice s he lp o il and gas com panie s to impr ove their ex plora tio n suc cess rate s. The Gro up has sub sidi arie s in Norw ay, Aust rali a, Bra zil, USA , Mex ico , Mal aysi a, C ana da a nd t he U nit ed K ingd om. The Com pany is a publ ic limi ted lia bil ity comp any inc orpo rate d and dom icil ed in Norw ay wi th sh ares and bo nds tha t are pub lic ly tra ded. The ad dres s of its re gist ered off ice is K are nsly st a llè 4, 0278 Osl o, N orw ay. The se co nsoli dat ed fi nanc ial sta teme nts ha ve be en ap prov ed fo r iss ue by th e Boa rd of D ire ctor s and t he C hief E xecu tive O ffi ce r on 20 Apr il 202 2 . Note 2 – Summa ry of significant a ccounting policies 2. Summary of sign ificant accounting policies The principal accountin g policies applied in th e preparation of these consolida ted financial statements are set out below. These policies hav e been consistently applied to a ll the years presented, un less otherwise sta ted. 2.1 Basis of prepara tion The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the Europ ean Union (E U). IFRS as adopted by the EU differ in certain respec ts from IFRS as issued by the Internat ional Accoun ting Standards Board (IASB). References to IFRS hereafter should be construed as references to IFRS as a dopted by the EU. The preparation of financial st at ements in conformity with IFRS requires the use of certain critical accounting estimat es. It also requires management to exercise its judgment in the process o f applying th e Company’s accou nting policies. The areas involving a higher degree of jud gment or complexity, or areas where assumptions and estimates are significant to the consolidated fin ancial statements a re disclosed in N ote 4. The conso lidated f in ancial s tatements have been prepared on a historical cost basis . T h e cons olidated f in ancial s tatements are presented in US dollars and all v alues are round ed to the nearest thousan d exce pt when o therwise indicated. The consolidated finan cial statements provide compar ative information in res pect of the previous p eriod. In addition , the Group presents an additional statement of financial positio n at the beginning of the earliest period presented when there is a retrosp ective application of an accou nting policy. 2.2 Basis of c onso lidation The consolidated financial statements in corporate th e financial sta tements of EMGS and entities controlled by E MGS (subsidiaries). Control is achieved when th e Group is exposed, or h as rights, to var iable returns from its involvement with the investee and h as the ability to a ffect those returns th rough its power over the inv estee. Specifically, the Group co ntrols an in vestee if and on ly if the Group has: - Power over the investee (i. e. existing righ ts that give it th e current ab ility to direct the relevant activities of the investee) - Exposure, o r rights, to variable returns from its involvemen t with the investee - The ability to us e its power over the investee to aff ect its return s 45 Generally, there is a presumption that a majority of voting rights re sults in control. To s upport this presumption and wh en the Group has less than a majority of the votin g or similar rights of an inv estee, the Grou p cons iders all relevant facts and circumstances in a ssessing whether it has power over an in vestee, including: - The contractual agre ement(s) with t he other vote ho lders of the investee - Rights arising from o ther contractual ar rangements - The Group’s votin g rights and potential v oting rights The Group re-assess es whether or not it controls an investee if facts and circumsta nces indicate that there are changes to one or more of th e three elements of con trol. Con solidation of a subs idiary begins when the Grou p obta ins control over the subsidiary and ceases when the Group loses control of the s ubsidiary. Ass ets, liabilities, income and exp enses of a subsidiary acqu ired o r disposed d uring the year are included in the conso lidated financial statements f rom the date th e Group gains con trol until th e date the Group ceas es to control t he subs idiary. All intra-group balances, income and expenses and unrealised gains and losses resulting from intra -group transact ions are eliminated in full. The financial statements of the subs idiaries are prepared for the same re porting period as the parent company, using consistent accou nting policies. 2.3 Business combin atio ns and good will a) Business co mbinations and goodwill Business combinations are accoun ted for using the acquis ition method . The cost of an acquis ition is measured as the aggregate of th e consid eration transferred, which is measured at acq uisition date fair v alue , an d th e amount of any non - controlling interest in the acquiree. For each b usiness combination, the Group elects whether to measure the n on - controlling interests in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related cos ts incurred are expens ed and includ ed in other op erating expenses . When the Group acqu ires a bu siness, it asses ses the financial as sets and liab ilities assumed for ap propriate clas sification and designatio n in accordance with the con tractual terms, economic circu mstances an d pertinent conditions as at the acquisition d ate. Goodwill is initially meas ured at cost, being the exces s of th e aggregate of the consideration tran sferred and the amount recognised for non-controlling interest over the net identifiable as sets acquired and liabilities assumed. If this consideration is lower than the f air valu e of the n et assets of the s ubsidiary acquired, the difference is reco gnised in prof it or loss. After initial recognition, goodwi ll is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acq uired in a bus iness combination is, from the acquisition date, allocated to each of the Group’s cash -generating units th at are expected to ben efit from the combination, irrespective of whether the as sets or liabilities of the acquiree ar e assigned to those units. b) Joint operatio n A joint operation is a j oint arrangement whereby the parties th at have joint control of the arrangem ent have righ ts to th e assets, and ob ligations for the liabilities, relating to the arrangement. The Group recognises in relation to its interest in a joint operation: its assets, in cluding its share of any ass ets held jointly; its liab ilities, incl u ding its sh are o f a ny liab ilities incurred join tly; its revenue fr om sale of its share of the output o f the joint op eration; its share of the revenue from t he sale of the outpu t by the joint operation; an d its expens es, including its share of an y expenses incu rred jointly. 2.4 Current versus n on-current classification The Group presents assets and liabilities in statement of financial position based on current/non -current classification. An asset is classified as current when it is: - Expected to be realised o r intended to be s old or consumed in n ormal operating cycle - Held primarily for the purp ose of trading - Expected to be realised with in twelve months after the reportin g period, or 46 - Cash or cash equivalent unless r estricted from being excha nged or u sed to settle a liability for at least twelve months after the reporting period All other assets a re classified as n on -current. A liability is current when: - It is expected to be s ettled in normal operatin g cycle - It is held primarily for th e purpose o f trading - It is due to be settled within twelve month s after the repor ting period, or - There is no unconditional right to defer the s ettlement o f t he liability for at leas t twelv e month s after the r eporting period The Group classifies all oth er liabilities as non -current. 2.5 Foreign curr encies a) Functional an d presentation currency The financial statements of each entity within the Group reflect tra nsactions recorded in the currency o f th e economic environment in which it operates (th e functional currency). The functional currency of th e Company is US Dollars (USD). The consolida ted financial statements are presented in USD which is the Group 's presentation cu rrency. For each entity, in the Group determines the functional currency and item s includ ed in the financ ial statements of each entit y are measured using th at functional currency. b) Transactions and balances Transactions in foreign currencies are initially recorded by the Group’s entities at their respective functional currency s p o t rate on the date the tr ans action first q ualifies for recognition. Monetary as sets and liabilities deno minated in foreign currencies are translated at the functional currency s pot rate at the reporting date. All d ifferences are record ed in profit and loss . Non-monetary items that are measured in terms of historical cos ts in a foreign currency are tran slated using the exch ange rates on the dates of the initial tran sactions. Non -monetary items measured at fair value in a foreign currency are translated using the exchan ge rates on the date when the fair value is determined. The gain or loss arising on tra nslation of non -monetary items measu red at fair valu e is treated in line with the recognition o f th e gain or loss on the ch ange in fair value of the item. c) Group companies The resu lts and financial po sition of Group companies (no ne of which has th e currency of a hyperinflation ary economy) that h ave a functional currency different from the presenta tion currency are tran slated into th e presentatio n currency as follows: (i) Assets an d liabilities for e ach balance s heet presented ar e tra nslated on the rate of exchan ge ruling at the reporting date. (ii) Revenues an d expens es for each income statement presented ar e trans lated at average exchange rate for the period. However, i f this average is n ot a reasonab le approximation o f the cumulativ e effect on the rat es prevailing on t he actual trans action dat es, revenues and e xp enses are tra nslated using the foreign e x change rates on the specific transact ion date. All resulting exchange dif ferences are recognis ed in other c omprehensive incom e. 2.6 Revenue fro m contract s w ith customers Revenue from contracts with cus tomers is recognised when control of the goods and s ervices are tran sferred to the customer at an amoun t that re fle cts the consideration to w hich th e Company expects the be entitled in exchange for those goods or s ervices. The disclosu res of significant accoun ting ju dgements, estimates and assumptions relating to revenue from contracts with 47 customers ar e provid ed in Note 4 . Revenue is shown net of withh olding an d v alue -added taxes. Revenue is recognised as follows: a) Proprietary contra ct sales The Group performs E M services u nder contract for a specific custo mer, whereby t he EM data is owned by th e customer. The Group recognises con tract revenues (whether priced as Lump Sum, Day Rate or Unit Price) o ver time. Progress is measured in a mann er generally con sistent with th e physical progress on t he project. Mobilisation Fees Revenues for mobilisation are us ually contracted with th e customer and should cover the vessel ’ s tra nsit to t h e survey area. Revenu es and costs related to mobilisation are def erred and recognis ed over the acquisition period (which is the time from the firs t receiver is d ropped to th e las t retrieval) of the contra ct, using th e p ercentage of co mpletion metho d. The deferral of mobilisat ion costs can only begin after a n a greement has b een signed b etween EMGS and the client. Until a contract is s igned, costs are expensed as incurred. b) Sales of multi-client libr ary dat a Pre -funding agreemen ts Multi-client licensing sales made prior to commencement of acquisition for a p roject and licensing sales while the projec ts are in progress , are p resented as pre-funding revenues. The advan tages for p re-funding customers are generally the possibility t o influence the project spec ifications, early a ccess to a cquired data, and discounted prices. The Group recognises pre-fund ed revenue at t he point in t ime when data is made accessible to th e customer . Late sales Customers ar e granted a license from the Grou p which entitles th em to access a s pecific part of the multi -client data library. The license payment is fixed and is required when the license is gran ted. The late sale revenue is recognised when a valid licensin g agreement is s igned, and the multi-client libra ry data is made accessible to the cu stomer. Uplift Uplift revenu es can arise if a customer that has alread y bought a license for E M dat a, is awarded acreage cover ed by the data bough t. Uplift revenue is r ecognised when th e customer is a warded the acreage. Contract b alances Contract assets A contract asset is the right to cons ideration in exchange for goods or services transferred to the cu stomer. If the Group is transferring goods or services to a custo mer before the customer pays consideration or before payment is due, a contract asset is recognis ed for the earned cons ideration that is condition al. Trade receivables A receivable represents the Group ’s right to an amount of consideration th at is uncondition al (i.e., only the passage of time is required before pay ment of the cons ideration is due). Contract liabilities A contract liability is t he obligation to transfer goods or services to a customer for which the Group has rece iv ed consideration (or an amount of consid eration is due) from the cus tomer. If a customer pays consideration b efore the Group transfers goods or s eries to the custo mer, a contra ct liability is re cognis ed when th e payment is mad e, or the payment is due (whichever is earlier) . Contract liabilities are recognised as revenue when the Group performs under the contract. Significant financing compon ent The Group has received fundin g from third parties building the next generation EM equ ipment. There is a significan t financing compo nent for th ese con tracts considering the l ength of time betw een the parties’ payment and the beneficial period. As such , inte rest cos ts are calculated on this contr act liability record ed as pro vision in the balance s heet. The interest ra te is commensurate with the rate that would be reflected in a separ ate financing transaction b etween the G ro up and the parties at contract incep tion. 48 2.7 Government gran ts Government grants are recognised where there is reasonab le assu rance that the grant will be received, an d all attached conditions will be complied with. When the grant relates to an expense it em, it is recognised as income on a s ystematic basis over the periods that th e related costs, for which it i s intended to compensate, are e xp ensed. When the grant relates to an asset, it is recorded as a reduction o f the asset u p to the amount that covers the cost price. When the Group receives grants of non -monetary assets, the asset and the grant ar e recorded at nominal amounts and released to profit or loss o ver the expected useful life in a pattern of consumption o f the benefit of the u nderlying asset by equal an nual instalments . EMGS received USD 200 thousan d as part of th e Norwegian Business Compensation Scheme in 2020. The Company did not apply for, nor receive compensation under the Norwegian Bu siness Compens ation Scheme in 2021. 2.8 Property, plant and equipment Property, plant and equipment are stated at historical cost less accumulated depreciation and an y accu mulated impairment losses . Historical cost includes costs directly attributab le to the acquisition of the item. Cos ts are included in the as set’s carry ing amount or recognised as a separate asset, if appropriate, only when it is pro bable that future economic benefits ass ociated with the i tem will flow to th e Group a nd th e cost of the item can b e meas ured reliably. Costs of all repairs and main tenance are expens ed as incurred. Depreciation on assets is calcu lated using the s traight -line method. The as sets are depreciated over th eir estimated us eful life, as follows: Useful life: Machinery and equ ipment 3 - 8 years Cluster ** 5 years Hardware equipment and furnitu re 3 - 5 years Machinery and equipment are mainly placed onboard the vessel. Parts of the equipment are under water durin g operation and h ave a shorter useful life. ** A cluster consists of IT equipment comprising o f large number of p rocessors for d oing advan ced data processing. The as sets’ residual values, useful lives, an d method of depreciation are reviewed at e ach balance s heet date and adjusted if app ropriate. I f an asset’s carrying amount is greater than its estimated recoverable amount, the a s set i s imm ediat ely written down to the recovera ble amount (No te 2.12). Assets under con struction are carried at cos t, less accu mulated impairment. Depreciatio n commences when the asset is ready for its inten ded use. An item of p roperty, plant and equipment an d a n y significan t part initially recognised is derecognised upon d isposal or when no future economic b enefits are exp ected from its u se or dis posal. Any gain or loss arising on derecognition of t he asset (calculated as th e difference between the net disposal proceeds an d the carrying amount of the asset) is included in the statement of profit or los s when the a sset is derecognis ed. 2.9 Leases The Group ass esses at th e contract inception whether a co ntract is , or contains, a leas e. That is, if th e contract conve ys the right to contro l the use of an identified as set for a period of time in exchan ge for cons ideration. Group as a lessee The Group app lies a single rec ognition and measurement a pproach for all leases, except for s hort -ter m leases and leases of low -value as sets. The Group recognises l ease liab ilities to make le as e pay ments and righ t - of -use as sets representing the right to use th e underlying assets. 49 a) Right- of -use ass ets The Group recognises right- of -use assets at the commencement date of the lease (i.e., the date the underlying asset is available f o r us e). Right - of -use assets are me as ured at cost, le s s any accumulated depreciation and impairment los ses, and adjusted for an y remeasurem ent of lease liabiliti es. The cost of right - of -use assets includ es the amount of lease liabilities recognised, initial direct costs incurred, and le as e payments made at or before the commencement dat e less any lease incentives received. Right- of -use ass ets are depreciated on a straight -line bas is over the shorter of the lease term and the estimated useful lives of th e ass ets. If ownership of the leased asset transfers to the Group at the end of th e lease term or the cos t reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life o f th e asset. The right - of -us e as sets are also subject to impairment. b) Lease liabilities At the commencement d ate of the lease, t he Group recognis es lease liabilities measu red at th e present value of lease p ayments to be made over the lease term. The lease payments include fixed payments les s any lease incentives receivable, variable lease pay ments that depend on an index or a ra te, and amounts exp ected to b e paid under residual value guarantees. The lease pay ments also includ e the exercise price of a purchas e option reaso nably certain to b e exercised by the Group and p ayments of p enalties for terminat ing the lease, if the lease term reflects the Group exercising the option to terminate. Variable lease pay ments th at do not d epend on an in dex or a rate are recognised as expenses in the period in which the event or conditio n that triggers th e payment occurs. In calculatin g the p resent valu e of lease payments , the Group us es its incremental borrowing ra te at th e le ase commencement date because the interest rate i mplicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the acc retion of interest and redu ced for th e lease pay ments made. In addition, th e carry ing amount o f l ease liabilities is remeasured if there is a mod ification, a change in th e l ease term, a change in the leas e p ayments (e.g., ch anges to fut ure payments resulting from a change in an ind ex or rate us ed to determine such lease p ayments) o r a change in th e as sessment of an op tion to purch ase the underlying asset. c ) Short-term leases a nd leases of low-value a ssets The Group applies the s hort-t erm leas e reco gnition exemption to its short -term leases of machinery and equipment (i.e ., those leases that hav e a lease term of 12 month s or less from th e commencement date and d o not con tain a purchase option). It also applies the lease of low -value assets recognition exemption to leases of office equipment that are considered to be low value. Leas e pay ments on s hort -term leases and leases of low-value assets are recognised as expense on a straight -line basis over the lease term. 2.10 Intangible ass et s Intangible assets acq uired separately are measu red on initial recognition at cost. The cost of in tangible as sets acq uired in a business combination is fair value as at th e date of acq uisition. Following initial recognition, intangible assets are carr ied at cost less any accumulated amortis ation and a ny accumulated impairment losses. The useful lives of intangible a ss ets are assessed to be either finite or indefinite. Intangible as sets with finite u seful lives are a mortised o ver the useful economic life and as sess ed for impairment whenever there is an indication th at th e intan gible as set may be impaired. The amortisation period an d m eth od ar e reviewed at least every financial year end. Intangible ass ets with indefinite us eful lives are not amortis ed, but are teste d for impairment an nually, either in dividually or at the cash -generating unit level. a) Patents Patents h ave a finite us eful li fe and are recorded at his torical cos t less accumulated am ortisation and any accumulated impairment los ses. Amortisation is calc ulated using th e straight -line meth od to allocate th e cost of pat ents ov er their estimated useful lives (10 -15 years ). Administrative cos ts associated with patents are expens ed as incu rred. b) Computer softwar e The cost of acqu ired computer software lice n s es is capitalised b ased on t h e expenses i ncu rred to acquire and bring the specific software to u se. These costs a re amortised over the estimated u seful life (3 year s). 50 The costs o f design of software interfaces, installing, testing, creating system and u s er docu mentation, defining u ser reports and d ata conversion are capitalised t ogether with the s oftware cost. These costs are directly relate d to developin g the software application for the Group’s use. Costs associated with maintaining computer software are expensed as incurred. Costs directly associated with the production of identifiable and unique software prod ucts controlled by the Group, which are expected to generate economic b enefits in excess of cost (beyond one year) are recognised as in tangible assets. Direct costs includ e s oftware development employee costs an d an appro priate portion of relevant ov erheads. Computer software developm ent costs recognised as as sets are amortised o ver their estimat ed useful life, not to exceed three year s. c) Research and developm ent costs Research costs are expensed as incurred. Development ex penditure o n indiv idual p rojects is recognised as an in tangible asset when the Group can demonstra te: - The technical feasib ility of completing th e intangible ass ets so th at it will be available for u se or sale - Its intention t o complete and its ability t o use or sell the asset - How the asset will generat e future economic b enefits - The availability of resou rces to complete the ass et - The ability to measure reliabl y the expenditu re during development Following initial recognition of the developm ent expenditure as a n asset, the asset is carried at co st less any a ccumulated amortisation and accu mulated impairment los ses. Amortis at ion o f the asset begins when development is complete an d the asset is availa ble for use. It is a mortised over the period of expected future b enefit (normally 3 years ). During the period of d evelopment, th e asset is tested for impairment ann ually. Contributions from extern al cu stomers an d govern ment gran t in the d evelopment stage are re corded as a reduction of the intangible ass et up to the amount that covers t he cost price. Any surplus is recorded as revenues. d) Multi-client library The multi-client library con sists of surv eys of electromagnetic dat a. The s urveys can be li censed to customers on a n on - exclusive bas is. Directly attrib utable cos ts associated with th e productio n an d developm ent of multi -c lient proje cts s uch as acquis ition costs, process ing costs, and direct p roject costs are cap italised. A multi -client project is cons idered co mplete when all co mponents or processes asso ciated with the acquisition and processing of th e dat a are finished, and all components of the data have been properl y stored an d made ready for delivery to customers. After a project is completed, a straight -line amortisation i s ap plied. The straight -line amortisation is as signed ov er the useful life, which is set at four years. T h e straight -line amortisation is distributed evenly throu gh the financial year independently of s ales during the quarters . 2.11 Inventories Inventories are valued at the lower o f cost or net realisab le v alue. Cost is determined using the first -in, first-out (FIFO) method. Net realisable value is the estimated selling price in the ordinary course of b usiness, less estimated costs of completion and the estimated costs necessary t o make the sale. The Group’s invento ry consis ts primarily of equipment comp onents and par ts, anchors, batteries, and fuel. 2.12 Impairmen t of non-financial assets The Group as sesses, at each reportin g date, wheth er there i s an in dication that an asset may be impaired. I f any indication exists, o r when annual impairment testing for an ass et is required, such as for goodwill an d intan gible ass ets with infinite useful life, the Group estimat es the ass et’s recoverable amount. An asset’s recoverable amount is the higher of an asse t’ s or cash- generating unit’s (CGU) fair value le s s costs of disposal and its value in u s e. Recoverable amount is determined for an in dividual asset, unless the asset does not generate cash i nflows th at are largely independent o f those from other asse ts 51 or groups of assets. When the carry ing amount o f an ass et or CGU exceeds its recoverabl e amount, the as set is cons idered impaired and is written d own to its recov erable amount. In assessing valu e in use, the estimated future cash flows are discou nted to their present value using a pre -tax discount rate that reflects current m ar ket assessments of the time value of money and the risks specific to the as set. In determining fair value less costs of d isposal, re cent market transactions are taken into account. If no such transaction can be identified, an approp riate valuation model is applied. The Group bases it s impairment calculat ion on budget an d forecast calculation s. Non-financial assets, other than goodwill previously impaired, are reviewed at each reporting date for possible reversal of the previou sly record ed impairment. A previou sly recogn ised impairment loss is reversed only if there has been a change in the estimates used to det ermine th e asset’s recoverable amount since the las t impair ment loss was reco gnised. If t hat is the case, the carrying amou nt of th e asset is increased to its recoverable amoun t. That in creased amount cannot exceed the carrying amount that would have been determin ed, net of depreciation , had no impairment los s been recogni sed for the asset in p rior periods. 2.13 Financial instru ments A financial instrument is any con tract that gives rise to a financial ass et of one entity and a financial liability or equity instrument of anoth er entity. a) Financial ass ets Initial recognition and measurement Financial assets are class if ie d, at initia l recognition, as s ubsequently measured at amortis ed cost, fair valu e through oth er comprehensive income (O CI), an d fair value thro ugh profit or loss. The classification of financial assets at initia l recognition depends on the financial asset’s contractual cash flow characteristics and th e Grou p’s busines s model for managing th em. With th e exception of trade receivables th at do not contain a significant financing component, the Group in itially measures a finan cial as set at its fair v alue plus tran saction costs. Trade receivables that do n ot contain a significant finan cing component are meas ured at th e transaction price. Subsequent m easurement For purposes of subsequent measurements , financial ass ets are classified in fou r categories: - financial assets at amortised cost (debt instruments) - financial assets at fair valu e through OCI with recycling o f cumulative gains a nd losses (debt in struments) - financial as sets d esignated at fair valu e through OCI with n o recycling o f cumul ative gain s an d loss es upon derecognition (equity ins truments) - financial assets at fair valu e through profit or los s Financial assets at amortised cost is th e most relevant to the Group. The Group measures financial ass ets at amortised cost if both o f the following conditio ns are met: - the finan cial as set is held wi thin a business model w ith t he objective to h old financial assets in order to collect contractual cas h flows, and - the contra ctual terms of the financial asset give rise on s pecified dates to cas h flows that ar e solely payments of principal and in terest on the principal a mount ou tstanding Financial assets at amortised cost are s ubsequently measured usin g the effective interest (EIR) method a nd are subject to impairment. Gains and loss es are recognised in pro fit o r loss when th e asset is derecognised, mod ified or impaired. The Group’s financial a ssets at amortis ed cost includes tra de receivables. The Group does not have an y financial as sets measured at fair value th rough OCI, financial ass ets designated at fair value through OCI, or financial ass ets at fair value throu gh profit or loss. Derecognition A financial asset is derecognised when the rights to receive cas h flows from the as set have expired; or th e Group h as 52 transferred its rights to receive cash flows from the ass et or has as sumed an ob ligation to pay the received cash flows in full without ma terial delay to third party u nder a “pass - through” arrangement; and either (i) the Group has trans ferred substantially all the risks and rewards of th e ass et, or (ii) the Group has neither transferred nor retained s ubstantially all the risks an d rewards relating to th e ass et, but has transferred con trol of the ass et. Impairment of financ ial assets For trade receivab les, the Gr oup ap plied a simplified app roach in calculating expected credit loss es (ECL ). The Group recognises a los s allowance based on lifetim e E CLs at ea ch reporting date. This is b ased on the h istorical credit los s experience, adjusted for forward -looking factors specific to th e debtors and the economic environment , see Note 3 b). b) Financial liabilities Initial recognition and measurement Financial liab ilities are clas sified, at initia l recognition, as financial liabilities at fair value th rough profit or loss, loans and borrowings, pay ables, or as derivatives d esignated as hedging instruments in a n effective hedge, as a ppropriate. All financial liabilities are r ecognised initially at fair value and, in the cas e of loans and borrowings an d pay ables, n et of directly attributab le transaction costs . The Group’s financial liab ilities includ e trade and oth er payables, loans and bo rrowings . Subsequent measurement The measurement of finan cial liabilities d epends on th eir classification, as described below: Financial liabilities a t fair value through p rofit or loss Financial liabilities at fair value through profit or loss include financial liabilities held for tradin g and financial liabilities designated upo n initial recognition a t fair value through profit or loss. This category in cludes derivative finan cial instru ments entered into b y the Group that are not designa ted as hedging instruments i n hedge relationship s as defined by IFRS 9. Financial liabilities a t amortised co st (loan s and borrowings) This is the category most relevan t to the Group. After initial recognition, in terest -bea ring loan s an d borrowings are subsequently me asured at amortised cost using the E IR method. Gains and losses are recognised in p rofit or loss when the liabilities are derecognis ed as well as th rough the EIR amortisation p rocess. The EIR amortization is included as fin ance costs in the statement of profit or loss . This category app lies to interest -bearing loans an d borrowings. Convertible bond The con vertible bond is separated in to a liability and an equity component. On issuance of the convertible bon d, the fair value o f the liability compon ent is determined using a market rate for equivalent non -convertible instrument. T h is amount is class ified as a f in ancial lia bili ty me as ured at amortised costs (net of tra nsaction co s ts) u n til it is extinguis hed on conversion or redemption. The remaind er of th e proce eds is allocated to the conv ersion option that is recognised and included in equity. Trans action costs are dedu cted fr om equity. The carrying amount of th e conversion option is not remeasured in sub sequent years. Trans action costs are apportioned between the liabil ity an d equity components of the convertible bond, based on the allocation of proceeds to th e liab ility and e quity components when the instrument is initially recognised. Derecognition A financial liability is derecognis ed when the obligation u nder the liab ility is dis charged, cancelled or expires. When an existing financial liability is replaced by another from the same lender on s ubstan tially different terms, or th e terms of an existing liability are substantially modified, this is treat ed as derecognition of th e original liability and recognition of a new liability. The difference in t he respectiv e carrying amounts is recognis ed in the income s tatement. 2.14 Taxes a) Current income tax Current income tax as sets and liabilities for th e current and p rior period s are measu red us ing the amount expected to be 53 recovered from or paid to the taxation au thorities. The tax rates and tax laws used to compute the amoun t are those that are enacted or sub stantively enacted at the reporting dat e in the countries where the Group operates and generat e s taxable income. Current income tax relating to items recognised directly in equity is recognised in equity and not in the income statement. Management periodically evalu ates positions taken in the ta x returns with respect to s ituations in which applicab le tax regulations are su bject to interpretation and estab lishes provisions where app ropriate. b) Deferred tax Deferred tax is pro vided for us ing the liability method on temporary differences b etween the tax b ases of assets and liabilities and their carr ying amounts in the consolida ted financial statements. Deferred tax is d etermined u sing tax rates (and laws) that have been enacted or s ubstan tially enacted on the balance s heet date and are exp ected to app ly when the related deferred tax ass et is realised or the deferred t ax liability is s ettled. Deferred tax ass ets are recognised to the extent that it is probable that futu re taxab le profit will be availab le against which the temporary differences can be utilised. Deferred ta x is provid ed on t emporary differenc es arising on investments in subsid iaries, except where th e ti ming of the reversal of the te mporary diff erence is controlled by th e Grou p an d it is probab le that the temporary difference will n ot reverse in the foreseeable fut ure. Deferred tax relating to ite ms recognised directly in eq uity is recognised in equity an d not in the income statement. c) Sales tax Expenses an d assets are recognised n et of the amount of sales tax, except: - When the s ales tax incurred on a purchase of ass ets or services is not recoverable fro m the taxation authority , in which case, the sales ta x is recognised as part of the cost of acqu isition of th e ass et o r as part of the expens e item, as applicable - When receivables and p ayables are stated with the amount of s ales tax in cluded The net amou nt of sales tax recov erable f rom, or payable to, th e ta xation authority is included as part of receivables or payables in t he statement of financial p osition. 2.15 Employee benefit s a) Pension ob ligations The Compan y operate s a defined contribution plan. The net pens ion cos t for the period is presented as an employee expense. b) Share-based p ayments The Group operates an e q uity-settled, share-based compensation plan. T h e cost of equity -settled transactions with employees is measured by reference to th e fair value at the date o n which they are granted. The fair v alue is determined by an external v aluation expert using a n appropriate pricing model, furth er details are given in Note 1 5. The cost of equity -settled tra nsaction s is recognised in Employ ee expenses , together with a correspon ding increase in equity, o ver the period in which the performance and /or service con ditions are fulfilled, ending on the dat e on which the relevant employees be come fu lly entitled to the a ward (the vesting d ate). The cu mulative expens e recognised for equity - settled trans actions at each repo rting date u ntil the vestin g dat e reflects the extent to which the vestin g period has expire d and the Group 's best estimate of the number of equity instruments that will ultimately v est. The income statement charge or credit for a period represents the moveme n t in cumulative expense recognis ed as at the beginn ing and end of that period. When option s ar e exe rcised, the proceeds received net of any dir ectly attrib utable trans action costs are credited to share capita l (nominal value) and s hare premium. Social security ta x on share-based compensation is recorded as a liability and recognised o ver the estimated option period. The social security tax is ca lculated using the appropriate tax rate on th e difference between market price and the ex ercise price on the measure ment date. 54 c) Bonus plan s The Group recognises a provision for bonus expenses where con tractually obliged or where there is a past practice th at has created a con structive ob ligation. 2.16 Provisions Provisions are recognised when th e Group has a present o b ligation as a result of a past event, it is probab le that an outflow of resources embodying economic benef its will be requ ired to settle the obligation and a r eliable estimate can be made of the amount of the ob ligation. 2.17 Cash and short-t erm deposits Cash an d sh ort-term depos its in th e statement of financial position and consolida ted statement of cash flows compris e cash at banks and o n han d and s hort-term highly liquid deposits with a maturity of three months or less, that are readily convertible to a kn own amoun t of cash and subject to an insignifican t risk of chan ges in value. 2.18 Changes in acc ounting policies and disclosures The accounting principles adopted are con sistent with th ose of the previous y ear. 2.19 Standard s and interpretations issued, but not yet adopted The finan cial statem ents h ave been prepared based on standard s effective for the year ending 31 Decemb er 2021. IASB has iss ued standards/amendments to standar ds that are not y et effective . The Group does not expect these standards/amendments to hav e an impact on th e Gro up’s financial p osition, p erformance, pres entation and/or disclosures. The Group plans to implement the new standards, amendments and interpretations when they are effective and approved by EU. Note 3 – Financial ri sk management objectives and policies The Group ’s principal finan cial liabilities comprise trade an d other pay ables and loans and bo rrowings. Payments related to EMGS’s Senior Unsecur ed Convertible Bond 2018/ 2023 are p aid qu arterly and are interest only. Th e main purpos e of these financial lia bilities is to finance for the Group’s operation s. The Group has various finan cial assets such as trade receivables, cash an d short -term deposit which derive directly from its operations. The Group is expos ed to ma rket risk, credit risk and liquidity ris k. The Group's execut ive management o versees th e management of these risks. The Board of Directors reviews and agrees p olicies for managing each of these risks which are summarised below. The Group d id n ot apply h edge accounting in 202 1 or 2020 . a) Market risk Market risk is th e risk that the fair value of future cas h flows of a financial instru ment will fluctuate becaus e of changes i n market prices. Market prices comprise two types o f risk for the Group: in terest rate risk and currency ri sk. The sensitivity analy sis in the following sections relate to th e positio n as of 31 Dece mber 20 21 and 2020 . The s ensitivity analysis has been prepared on th e b asis that the amount of n et d ebt and the portion of financial instruments in foreign currencies are al l consta nt. The analys is excludes the impact of mov ements in market v ariables on the carrying valu e of pension, pro visions and on the non -financial ass ets and liabilities of fore ign operations . The sensitiv ity of the relevant income statement item is the effect of the assumed changes in respective market risk. This is based o n the financial assets and financial liabilities held as o f 31 December 20 21 and 2020 . i) Interest rate risk Interest rate risk is th e risk that the fair v alue of future cas h flows of a financial instrument will fluctu ate because of c han ges 55 in market interest rates. The Group's exposu re to the risk of chan ges in market int erest rates relates primarily to t he Group's long-ter m loan with float ing interest rate. With all other variables held c onstan t , a reasonably possible increase in LIBOR o f 1 % will increas e th e Grou p's an nual net interest expense on th e long-term loa n by a pproximately 32 5 as of 31 Dece mber 2021 ( 20 20 : 31 7 ). ii) Foreign currency risk Foreign currency risk is the risk that the fair valu e of future cash flows of a finan cial instrument will fluctu ate because o f changes in foreign exchange rates. The Grou p operates internationa lly and therefore ha s exp osure to foreign exchan ge risk arising from trans actions executed in o ther currencies than th e fun ctional currency of each compan y. EMGS ASA has USD as functional currency, hence the for eign currency risk is primarily with respect to NOK in E MGS ASA. Approximat ely 91 % of the Group’s sales are denominated in USD, whilst app roximately 70 % o f costs a re denominated in USD in 202 1 . Foreign exchange risk arises from future com mercial transaction s, recognised as assets and liabilities. The follo wing table summarises th e sensitivity to a reasonably po ssible ch ange in the NOK exchange rate, with all oth er variables held constant, of the Group’s profit before tax (due to changes in the f air value of monetary as sets and liabilities). The Group's exposure to forei gn currency ch anges on equ ity and for all other currencies is n ot material. b) Credit risk The Group is exposed to credit risk from its operating activities (primarily for trade rece iv ables and cash and cash equivalents). See Note 2 0 for aging an alysis of tra de receivables. i) Trade receivables The Group trades with recognised, creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are s ubject to credit verification procedures. In ad dition, receivable b alances are monitored on an ongoing basis. The requirement for an i mpairment charge is analy sed at each reportin g date on an individual bas is for each customer. For trade receivables, the Gro up app lied a simplified approach in ca lculating expected credit losses (ECL). The Grou p recognises a loss allowance bas ed on expected credit los ses at each reportin g date. This is b ased on the his torical credit loss experience, adjus ted for forward -looking factors s pecific to the debto rs and the economic environ ment , s ee Note 2.13 a) . The maximum expos ure to cr edit ris k at the repor ting date is the carry ing valu e o f each clas s of financial ass ets. With respect to cr edit risk arisin g from the other financial ass ets of the Group su ch as cash and cash equivalents, the Group’s exposure to credit risk aris es from default of the cou nter party, with maximum exposu re equal to the carrying amount of these ins truments. c) Liquidity risk Liquidity risk is the risk that the Company will not have s ufficient liquidity to be able to m eet its financial ob l igations. EMGS’ sources of liquidity include cash balances, cash flow from operations, borrowings, it’s existing and new bank facilities and further debt and eq uity issues. It is th e Company’s objective to b alance these sou rces of liquidity. The Group ’s convertible bond contains a finan cial cov enant requiring free cash an d cash equiv alents of at least USD 2 .5 million. As of 31 D ecember 20 21, th e free cash and cash equivalents t otaled USD 9.9 milli on . E MGS’ management follo ws the Group ’s liq uidity risk clos ely. The financial liabilities with maturity less than one year will be settled through cash flow from op erating activities in 2022. A mounts i n USD 1 00 0 In c reas e/ decr eas e i n NOK r a te Ef fect on incom e/(l oss ) befo re t a x 2021 +20% 25 - -20% 25 2020 +20% 70 -20% 70 - 56 While EMGS is still working on s ecuring meanin gful backlog, the flexible operating cost base allows EMGS to significantly reduce costs d uring periods of vessel warm s tack. Management considers the liquidity throughout 202 2 sufficient to cover both the Group ’s net current liabilities per 31 De cember 20 21 an d estimated cas h-need in 202 2. The table below summarises the mat urity p rofile of the Group’s financial liabilities 31 December based on contra ctual payments. See Note 23 for financial liab ilities. Electromagnetic Geoservices ASA Senior Unsecured Con vertible Bonds 2018/2023 with a current outstanding amou nt of USD 24 .5 million con tains a finan cial covenan t requiring free cas h an d cas h equ ivalents of at least USD 2.5 million . In addition, t he bond agreemen t restricts the Compan y 's ability, among other things, to sell multi -client library, declare or make any dividend payments, incur add itional indebtedness , change our b usiness, an d enter speculative financial derivative agreements. i) Capital management For th e purp ose o f the Group's cap ital managem ent, capital includes equity attributable to the equity h older of the parent. The pri mary objective o f th e Group’s cap ital management is to ensure healthy capita l ratios to s upport its business and ma ximise shareholder v alue. In order to achieve this overall ob jective, the Group's capital management, amongs t other th ings, aims to ensure that it meets finan cial covenan ts attached to the interest -bearing loans and b orrowings th at d efine capital structu re requirements. Breaches in meeting th e financial covenan ts would permit the lend ers to immediately call loans and borrowings. There have b een no breaches in the financial covenants of any interest-bearing loans and borrowings in the current period. The Group manages its cap ital structure and ad justs it considering changes in economic conditions . To maintain or adjust the capital stru cture, the Group may r efinance its debt, issue new sh ares or sell assets . Note 4 – Signifi can t accounti ng estimates, judgements and assu m ptions The preparation of the Group’s financial statements requires management to mak e estimates, judgements and assumption s that affect the reported amounts of revenues, expenses , assets and liabiliti es. Uncertainty ab out these assumption s and estimates could result in outcomes that could requ ire a material adjustment to th e carrying amount of the assets or liab ilities affected in the future periods . Estimates and judgements are con tinually evaluat ed a nd are based on historical experie n ce and other factors, including exp ectations of futu re events that are believed to be reas onable under the circumstances. 4.1 Estimates and assumptions The Group makes estimates and assumptions con cerning the futu re. Th e resulting accounting estimates could deviate from the actual results. The es timates and assu mptions that have a significant risk of caus ing a m at erial adjustment to the carrying amounts of assets and liabilities with in the next fin ancial year are discu ss ed b elow. A mounts i n USD 1 0 0 0 On d em and Les s th a n 3 m on th s 3 to 6 m o n th s 6 m on th s to 1 year 1 to 2 year s 2 to 5 year s > 5 year s Tot a l Ye ar en d ed 31 Decemb er 2021 In ter es t bear i ng l oans a nd b o rr ow ings 0 411 411 822 25,322 0 0 26,96 6 Tr a de a nd ot her payables 0 3,00 4 289 3,5 15 0 0 0 6,808 Oth er fi nan c ia l li a bili ties 0 1,86 0 1,906 2,47 4 522 0 0 6,761 Ye ar en d ed 31 Decemb er 2020 In ter es t bear i ng l oans a nd b o rr ow ings 0 472 472 944 1,88 7 33,459 0 37,23 4 Tr a de a nd ot her payables 0 2,70 8 314 5,3 39 0 0 0 8,361 Oth er fi nan c ia l li a bili ties 0 679 1,480 3,442 6,10 0 274 0 11,976 57 Impairment of non- financial a ssets An impairment exists when the carrying value of an as set or cash generating unit exceeds its recoverable amoun t, which is the higher of its fair value less costs of dispos al and its value in use. The valu e in use cal culat ion is based on a dis counted cash flow (DCF) model. The cash flows ar e derived fro m th e financial budget approved by th e management and do n ot include restru cturing act ivities that the Grou p is not yet committ ed to or significant future investm ents that will enhance th e asset’s performance of t he cash generating unit being (CGU) tested. Th e recoverab le amount is sensitive to the discount rate used for the DCF model as well as th e expected futu re cash -inflows and the growth rate used for extrapolation purposes. These e s timates are m o st relevant to the multi- client library an d DeepBlue (see description u nder Assets under con struction below) recognised b y the Group . The key assumptions used to d etermine the recoverable amount, includ ing a sensitivity analys is, are disclosed and furth er explained in Note 16. DeepBlue At least annually, management forecasts future cash flows from the Join t In d ustry Project ( “the DeepBlue ”). T he DeepBlue is the Next Generation EM eq u ipment. The project has been o n -going s ince 20 12 . E MGS performed its first commercial survey with the DeepBlue equipment in 2017. T he net carr ying valu e of th e DeepBlue as of 31 December 20 21 of 11 414 ( 2020 : 15 0 00 ) has been recorded as prop erty, plant and equipment. The partner con tributions with a total value of 4 812 as of 31 December 2 021 ( 2020 : 9 625 ) are recorded as contract liability . In estimating future cash flows, future market demand and addition al expenses to operate the v essel are ta ken in to account . Becaus e the inherent difficulty in estimating these factors, it is possib le that future cash flows from th ese activities will not b e sufficient to recover the existi ng carry ing valu e of the DeepBlue. S ee Note 17 for more details regarding the impairment test. Impairment of financial as sets In September 20 21, Mexican bank regulato rs revoked Accend o Banco S.A.’s banking lic ense and initiated a liquidation process of the bank. EMGS had deposits with Accendo of approximately USD 2.1 million. E MGS was entitled to receive approximately USD 135 thou sand from the Mexican Bank Savings Protection Fund. An im p airment of the depos its in the Accendo account, less th e U SD 135 thous and, was made a t the end of the third qu arter 2021 in th e amount o f USD 1.9 million. A reliable recovery estimate is n ot po ssible at this time, s o no adju stment to the impairment has b een ma de subsequent to the end of 2021 . Delayed revenue recognition In the fourth q uarter of 2021, EMGS elected to delay recognition of USD 0.8 million in uplift revenu e as a cons equence of a dispute with a customer, for which E MGS cannot reliably estimate t he outcome. Taxes Uncertainties exist with respect to the interpretation of complex tax regulations, changes in tax laws, and the amou nt and timing of futu re taxable income. The Group is subject to income taxes in several ju risdictions. Given the wide range of international business relationships, differences aris ing between the act ual resu lts an d the assu mptions made, or future changes in su ch as sumptions, could necess itate future adju st ments to tax income and expense alread y r ecorded. The Group establish es provisions, bas ed on reason able estimates, for pos sible consequences of aud it by the tax authorities of the respective countries in wh ich it operates. The a mount of such prov isions is based on several factors, s uch as the experience of previous tax audits and differing interpretation s of tax regulations by the taxable entity and the responsible tax au thority. Such differences in interpretation may arise for a wide variety of iss ues depe nding on the cond itions prevailing in the respective domicile of the Group companies . EMGS has USD 1.5 million included as a rece iv able based on prepaid taxes in M alaysia related to a 2019 s urvey. Deferred tax assets are recognised for unused tax lo s ses to the extent that it is probable that taxab le profit will be availab le against which the loss es can be utilis ed. Significant management judgement is required to determine th e amou nt of deferred tax assets th at can be recognised, bas ed upon the like ly timing and the lev el of future taxable pro fits together with future tax plan ning strategies. Unrecognised tax ass ets as of 31 December 20 21 ar e 89 058 ( 2020 : 90 569 ). Useful lives of the Group’s property, p lant and equipment, a nd intangible a ssets The Group’s management determines the e s timated useful lives and related depreciation and amortisation charges for its 58 property, plant, and equipment an d in tangible assets. This es timate could change s ignificantly as a result of technical innovations and incr eased competition . When remaining useful lives o f ass ets are det ermined to be too high, management will make ap propriate estimat e revis ions and ad just depreciation charges pros pectively. Items determined to be technically obsolete or which hav e been abando n ed will be written off completely. 4.2 Judgement In the process of ap plying the Group's accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the conso lidated finan cial statements: Revenue recognition IFRS 15 requires entities to exe rcis e ju dgement taking into consideration all the rele vant facts and circumstances when applying each s tep of the model to contracts with their customers. The Group u ses the percentage o f completion meth od in accoun ting for its proprietary contract s, as the revenu e shou ld be recognised ov er time by meas uring th e progre ss towards complete satis faction of the performance obligatio n. Progress is measured in a manner generally cons istent with the physical progress on the project. Use of the percentage of completion method requires the Group to estimate the services performed to date as a proportion of the total services to be perfor med. The proportion of services performed to total servic es to be performed can d iffer from management’ s estimates, influencing the amount of revenue recognis ed in the period. Determining the lease term of contracts with renewal option s – Group a s lessee The Group deter mines the le ase term as th e non -cancella ble term of the l ease, together with an y periods cov ered by an option to extend the lease if it is reas onably certain to be exercised. The Group has lease contra cts for o ne vessel that includes extension options. The Group ap plies judgement in evaluation whether it is reasonably certain whether or not to exercise the option to renew th e lease. That is, it con siders all relevant factors th at create an economic inc entive for it to exercise the renewal. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control a nd affects its ability to exercise or not to exercise the option t o renew . The rene wal periods f or the vessel Atlan tic Guardian are not included as part of the lease term as these are not re as onably certain to be exercised. Refer to Note 27 for infor mation on leases. Development costs Development costs are capitalised in accord ance with accounting policy in Note 2.10 c). Initial cap italisation of costs is based on management’s ju dgement that technological and economic feas ibility is confirmed, usually when a p roduct development project h as reached a defined mil estone according to estab lished project manag e ment model. As of 31 December 2021, the carry ing amoun t of capitalised development cos ts is 419 ( 2020 : 9 35 ). 4. 3 Liquidity and G oing Concern Assumption The Group has prepared its financial sta tements under the going con cern ass umption, and the Board confirms in accordance with Section 3 -3a of th e Norwegian Accoun ting Act th at the goin g concern as sumption is applicable. The Group’s reported results, its bu siness s trategy, it s current budgets and financing, as well as its long-term strategic forecasts provide th e bas is for the goin g concern ass umption. See als o “Liqu idity risk” above for more information ab out the goi ng concern assu mption. The Group is operating with negative equity, an d with limited liquidity. The cash position as of 31 December 2021 was USD 9.9 m illion. As further described under Risks an d un certainty factors , t h e Compan y’s outstanding convertible b ond and its bank facilities contain finan cial covenan ts requirin g that the Compan y has a minimum of USD 2.5 m illion in free cash and / or cash equivalents. The going concern as sumption is d ependent on, amongs t other things, s ecuring backlog in H2 2022 . As of 31 December 2021, the carrying value of the Group’s equity was negative USD 2.5 million, up from negative USD 7.4 million at the end of 20 20 . Th e free cash bala nce at the end of 202 1 was U SD 9.9 million. 59 The Compan y’s equity amounted to negativ e N OK 95 .4 million as of 31 December 202 1, down from N OK 87 .2 million at the end of 20 20 . The Board of Directo rs are taking steps to address the negative equity an d are considering a n umber of alternatives in this regard . Sh ould these steps fail to mate rialize in a timely manner, th e going concern ass umption is at risk. Note 5 – Shared reve nue The Gr o up has entered several coop eration agreements regarding E M multi-clien t surveys in th e Barent s Sea, Gulf of Mexico and Brazil . Th e cooperation agreements are joint o perations. EMGS has received funding and/or seismic data against a revenue share on prefunding , late sales and uplift revenues . EMGS has provided the vessel, performed the data acq uisition and finally pro vide d the data proces sing services. The acquired dat a remains the prop erty of EMGS. When EMGS licenses d ata to custo mers in areas sub ject to revenue sharing, the Group invoices and collects pay ments from the customers for th e entire sales amount. The related accounts receivable is presented gros s, while the p ortion due to the partner up on collection from the cus tomer is present ed as a s hort -term liability. EMGS' s hare of the revenue from the sale of multi -client library with cooperation agreements in 20 21 is 3 0 37 ( 2020 : 1 016 ). Note 6 – Segme n t For management purpos es, the Group is organ ised into one reportable segment. The Group offers E M services, and the sale contracts a nd costs are incurred worldwid e. The Group uses a patented electro magnetic s urvey method to find hydrocarbons in offshore reservoirs. The Group ’s services help oil and gas companies to improve their exploratio n success rat es. Management monitors th e operating result o f th e single reportable segment for the purpos e of making decision s about resource allocation an d performance asses sment. No op erating s egments hav e been aggregated to for m the above reportable o perating s egment. The customers are international oil compan ies and th e risk and pro fitability a re similar in the different geog raphical areas. The Group's property, plant and equipment are mainly the survey equipment on the vessels. As the surveys are executed worldwide, the Group is not able to allocate an y assets to different geograph ical ar eas. EMGS' rev enu e shar e Mult i-c lien t surv ey Brazil 2013 95 % Ba r ents Sea 2013 70 % Ba r ents Sea 2014 50 % Gu l f of M exi co 2014 90 % Ba r ents Sea 2015 50 % Ba r ents Sea 2016 50 % Ba r ents Sea 2017 50 % 60 Geographic infor mation Revenues from external cus tomers: The revenue information a bove is bas ed on the location o f the survey. T wo external customers amou nted to 10% or more of the Group's total revenues in 20 21 (one single external customer in 2020 ). Total revenues fro m th ese customers were in 20 21 7 278 and 7 190 (for 2020 : 8 040 ). Note 7 – Charter hire, fu el and crew expenses Note 8 – Employee expenses The average number of full -time equiv alents was 15.5 in 20 21 ( 20 20 : 72 ). The average number of full -time equ ivalents in management was 3 in 202 1 ( 2020 : 3.75 ). See Note 6 in the Financial Statements o f EMGS ASA for Ex ecutive Manage ment and Board o f Directors remuneration. A mounts i n USD 1 0 00 2021 2020 Eur op e, Midd le Ea s t and Afr ic a 0 2 ,155 No rw ay 11,4 66 14,4 21 No rt h and So uth Am erica 10,1 48 8,26 8 Asi a a nd the Pacifi c O cean 7,26 1 73 Tot al 28,875 24,916 A mounts i n USD 1 00 0 2021 2020 Chart er hir e and cr ew expenses 658 456 Fu el 1,847 1,848 Agent fee 0 0 With ho l din g tax cost 261 -161 Ca pitali s a tio n of mu lti-c li ent cos ts -1,431 -62 9 Other exter nal s er vic es 2,166 2,262 Obs olete inven to ry 0 2,148 Tot al c har t er hir e, fu el and cr ew expen ses 3,502 5,924 A mounts i n USD 1 0 0 0 2021 2020 Emp loy ee expenses Sala r i es 2,453 7,730 So ci a l s ec ur ity tax 247 892 Pen s ion c osts ( No te 22) 189 514 Other paym ent s 118 672 Cos t of s hare bas ed paym ent (No te 15) 6 10 Tot al emp loy ee expenses 3,012 9,818 Compen sation o f k ey man ag ement p erson nel o f t h e Gr ou p Sala r y 720 944 Bon us paid in the year 43 0 Sh a r e op tion s 2 2 Pen s ion ben ef its 42 42 Other benefits 5 19 Tot al man ag ement remu n erat io n 812 1,007 61 Note 9 – Other o p erating expen ses The fees to auditor are for the Group included su bsidiaries, and do not includ e VAT. Note 10 – Resear ch and developme nt costs Research and d evelopment co sts consist of 0 ( 2020 : 1 688) charged to the incom e statement as part of operating expens es. Employee costs cap italised as development amoun ted to 0 ( 2020 : 170 ). Note 11 – Fina n cial items The exchange rate e ffects in 2 021 and 20 20 are mainly related to accounts rece iv ables and trade payab les in NOK in EMG S ASA, and accoun ts receivables and trade payables in N OK or other currencies than USD in other group co mpanies. The Interest paid under Financial Activ ities in the Consolidated Sta tement of Cas h Flows in cludes the Interest expense on the partner contribution of the DeepBlue source in the amount of USD 491 as well as the cash paid related to interest and fees on the convertib le bond USD 1 766. A mounts i n USD 1 0 0 0 2021 2020 Off ic e ren tal and ho us i ng ex pen s es 320 266 Consum ables a nd m a inten a nce 250 420 Consultancy fees * 1,727 1,461 Travel expenses 50 220 Insur a nce 428 243 M a r keting 34 66 Other op erating ex pen s es 155 389 Tot al o t h er op er at in g expen ses 2,964 3,067 * Fees t o aud it o r in c lud ed in c on sult an c y fees: St a tu to ry aud i t s ervices 110 97 Fu rt her as s ur a nce s er vic es 20 54 Ta x a dvis or y s ervices 5 93 Tot al fees t o au d it or 135 244 A mounts i n USD 1 0 0 0 2021 2020 Financ ial in co me: Int erest i nco me o n s ho rt ter m bank dep os its 28 208 Gains /(l oss es ) of fi nancial as s ets and li abili ties 2,000 0 Tot al fin an cial in c ome 2,028 208 Financ ial expen ses : Int erest expense on fi nan c ia l l ea s es a nd bank bo rr ow i ngs 762 1,111 Int erest expense on bo nd s 2,306 2,793 Int erest expense par tner c on tr i bu tion DeepBlue s ou rce 491 830 Fo reign exc han ge l oss es related to l oans and r ec eivables 290 -21 Fo reign exc han ge l oss es related to l ia bili ties a t am or tis ed cos t 0 0 Finan c ia l c osts r epaym ent of bo nd 0 0 Im pairm en t f inancia l a s s es t 1,920 0 Other fi nancia l expen s es 127 482 Tot al fin an cial expen ses 5,897 5,195 Net fina nc ial it ems -3, 869 -4, 987 62 Note 1 2 – Income tax expense The expense/(benefit) for income ta xes from continuing operations differs f ro m the amount computed when apply ing the Norwegian statuto ry tax rate to income/(loss) befor e taxes as the result of th e following: The curr ent tax liabiliti es in 2 021 of USD 3 376 mainly con sist o f accru als for taxes relat ed to operations in Brazil , do wn from USD 4 035 in 2020. Note 13 – Deferred t ax Deferred tax assets are recognis ed only to th e extent th at the realisation of the related tax benefit th rough the future taxable profits is probable. Unused tax los ses are generated in Brazil, Norway, Mexico, Malaysia and the US. It can be carried forward indefinitely in Brazil, Mexico, Norway an d Malaysia whils t in the US it can be carried for ward in 20 years. A mounts i n USD 1 00 0 2021 2020 Change i n defer r ed tax a s s et 0 0 Cur ren t tax 417 671 Tot al inc o me tax expense 417 671 A mounts i n USD 1 00 0 2021 2020 Inco m e/(L oss ) befor e tax 5,339 -22,715 Tax a t th e do m es tic r a te of 22% 1,175 -4,997 No n-d edu c tible expen s es 336 -29 Change in no n reco g nis ed defer red tax as s et -1,511 5,026 Effec t o f c hange i n tax rate 0 0 Effec t o f c hange i n ac cou nt i ng pr inciples 0 0 Fo reign incom e taxes 417 671 Tot al t ax ch ar g e 417 671 A mounts i n USD 1 0 0 0 2021 2020 Deferred t axes d etail ed: Pr op ert y, plant and equ i pm en t 262 1,074 Inv ent or y 0 0 Accr ued for eig n incom e taxes -743 -888 Loss ca r ried for war d -88,577 - 90,75 5 Tot al d eferred tax (a ss et)/ liab ilit y -89,0 58 -90,5 69 No n -rec og n ised d eferr ed t ax ass et s 89,058 90,569 Net deferr ed t ax asse t 0 0 63 Note 14 – Share ca p ital, share premium and other pai d in capita l The Board is gran ted auth orisation to increase the sh are capital by 36,016,664 shares so the total authoris ed number of ordinary shares is 1 66 986 3 54 ( 2020 : 1 53 889 385) with a p ar value of USD 0.11 (NOK 1) per sh are. Total number of shares as of 31 December 2 021 is 130 969 690 ( 2020 : 130 969 690 ). All issu ed shares are d enominated in NOK an d fully paid. The largest shareho lders as of 31 Decemb er 20 21: Note 15 – Share ba sed payment transactio n s Share options a re granted to employees. In 2021 n o options were granted to the Co mpany’s employ ees. The expense recognised for employee services during the year is: The vesting period is the period during which the conditions to obtain the right to e xer cise are to be satisfied. The options granted vest as follows: • 25% on the on e-year anniv ersary of the Grant Date • 2 5% on the two -year annivers ary of the Grant Date • 2 5% on the thre e-year anniversary o f the Grant Date A mounts i n USD 1 00 0 (exc e pt numbe r of s ha r e s ) Nu m ber of s har es Ord i nar y s har e capital Sh are pr em i um Other paid-in capital Tot al At 1 Janu ary 2020 130,969,690 15,285 0 56,206 71,490 0 At 31 December 2020 130,969,690 15,285 0 56,206 71,490 At 1 Janu ary 2021 130,969,690 15,285 0 56,206 71,490 0 At 31 December 2021 130,969,690 15,285 0 56,206 71,490 Nu m ber of or din a ry s hares Per centage Siem Inves tm en ts SA R L 31,32 7,467 23 .92% PERESTRO IKA AS 29,45 2,795 22 .49% M or g an Stanley & C o. LL C 25,89 1,805 19 .77% SP O R TSM AGA SINET AS 3,398 ,211 2.59 % RAGE,PER EGIL 1,50 0,000 1.15 % FOLKESETH,LIV GRET E 860,1 25 0.66% RYGG,JAN WIGGO 789,0 25 0.60% NORDNET L IVSF O RSIKRIN G AS 778,8 58 0.59% NÆ R INGS L IVETS HO VEDO R GAN ISAS JON 766,19 0 0.59% No rd net B ank AB 7 20,270 0 .55% HAA V HO LDING AS 700,0 00 0.53% KRISTIA N FALNES AS 650,0 00 0.50% No rd ea B ank Ab p 573,9 78 0.44% JAG L AND,ERIK SM ITH 550,00 0 0.42% KONGS RUD,R UN E JAC OB 507,8 37 0.39% Dans ke B ank A/S 475,0 69 0 .36% ØVER LAND,JA RL E 457,0 39 0.35% EIKA NGER INVEST AS 448,0 00 0.34% Other 31,12 3,021 23 .76% Tot al 130,969,690 100% A mounts i n USD 1 0 00 2021 2020 Expe nse a r i s i ng fro m s har e based paym ent tr ans action s 6 10 64 • 2 5% on the four -year anniversary of the Gran t Date The Grant expires two years following the Vesting Date. A condition to hold options within the Compan y is con tinued employment. The expected volatility reflects the assumption that th e historical v olatility is indicative of future trends, which may not b e actual outcome. The Group has n o legal or constru ctive obligation to repurchase or settle the optio ns in ca sh. The cost of the option s is calculated b ased on t he Black Scholes option p ricing model. The following table lists the inputs to the model used for the plan for the option granted du ring the year ended 31 December 20 21: Expected volatility was d etermined bas ed on his toric volatility on comparable listed comp anies. Movements in th e num ber of share options outstanding and their related weight ed average exercise p rices are as follo ws: Share options o utstanding at the end o f the year have th e fo llowing expiry date an d exercise prices: The w eighted average remain ing contra ctual life for th e s hare op tions outstan ding as of 31 December 20 2 1 is 2.55 years ( 2020 : 3.6 years ). No options were granted in 2021. The weight ed average fair v alue of o ptions granted du ring the year 2020 was USD 0.14 . 2021 2021 Expect ed vo l atil ity 86% 86% Ri s k free int erest rat e 1.28 % 1.2 8% Expect ed l ife of op tio ns (year s ) 3.5 3.5 Weight ed a ver ag e s har e pr ice (USD) 2.14 2.14 Aver age exe r cis e price in U SD per share Opt ions Aver age exe r cis e price in U SD per share Opt ions At 1 Ja nu ary 0.25 187,5 00 36.09 4 6,250 Gr a nt ed 0.00 0 0.25 1,512 ,500 Exercis ed 0.00 0 0 0 Rel eas ed 0.00 0 0 0 Fo rfeited 0.25 -18,7 50 0.65 -1,3 71,250 Expir ed 0.00 0 0.00 0 At 31 December 0.2 5 168,750 0.25 187,500 Exercisable at 31 Dec ember 0 .25 168,750 0.25 187,500 2020 2021 2021 In USD per s hare Opt i on s 2023 0.25 42,1 88 2024 0.25 42,1 88 2025 0.25 42,1 88 2026 0.25 42,1 88 168,7 50 65 Note 16 – Inta n gible assets Asset Estimated usefu l life Patents 10 – 15 years Software and licenses 3 years Lease agreements 2.5 – 3.5 years Multi-client library 4 years Impairment of multi-client li brary The Group perfor ms impairm ent tests when t here are ind icators o f impairment at l east o nce a year. The Group con siders the relationship between th e total revenue forecast an d the book valu e of ea ch multi -cli ent project wh en reviewing for indicators of impairment, hen ce the b ook value of the multi -client projects is highly influenced by the future sales forecasts . The Group did not record impairments of the multi -client library in 2021, but did impair USD 844 thousan d in 2020 . The impairment test was done for each multi-cli ent project individ ually. The net present value of the future sales for each project was compared to t he book valu e of the project. When calculatin g the net present v alue of future sales, a discount rate of 15% was used. A 1 % increas e in the discount rate would hav e reduced the total net present valu e of futu re sales by USD 54 thousand , but it would not have resulted in an impairment in 20 21 . Multi-client revenue recogn ised in 20 21 amounted to 15 936 ( 2020 : 7 770 ). A mounts i n USD 1 00 0 So ft ware an d licen ses Pat en t s Mult i-c lient libr ary Tot al Year en ded 31 December 2020 Openin g ca rr ying va lue 945 676 5,9 96 7,617 Ad dition s 0 0 1,1 35 1,135 Transferr ed fro m as s ets un der constr uction to i nt a ngible as s ets 587 0 0 587 Am or tis ation char g e -593 -137 -4,077 -4,80 7 Im pairm ent 0 -540 -844 -1,384 Closing car ry in g v alu e 939 0 2,210 3,148 At 31 December 2020 Accum ulated cos t 17,366 3,6 67 157,63 8 178,671 Accum ulated a m or tis a tion and imp ai rm ent -16,427 -3,667 -155,42 8 -175,52 3 Net car ry in g v alu e 939 0 2,210 3,148 Year en ded 31 December 2021 Openin g ca rr ying va lue 939 0 2,21 0 3,148 Ad dition s 0 0 2,6 59 2,659 Am or tis ation char g e -517 0 -2,457 - 2,974 Im pairm ent 0 0 0 0 Closing car ry in g v alu e 422 0 2,412 2,834 At 31 December 2021 Accum ulated cos t 17,366 3,6 67 160,29 7 181,331 Accum ulated a m or tis a tion and imp ai rm ent -16,944 -3,667 -157,88 5 -178,49 7 Net car ry in g v alu e 422 0 2,412 2,834 66 Note 17 – P ro perty, plant and eq u ipment and assets u nder construction Asset Estimated usefu l life Machinery and equ ipment 3 – 8 years Hardware and furnitu re 3 - 5 years Cluster 5 y ears Assets under cons truction Assets under constru ction are in ternal cap ital expenditu re projects that are not completed. These proje cts are mainly development and production of acquisition the EM equipment, including receivers, the source and the navigation system. In 2020 , EMGS recorded an impairment of USD 569 thousan d which relates to hardware development cost th at will not be commercialized du e to the cost cu tting measures implemented in 2020 . No imp airment was recorded in 2021. The DeepBlue EMGS has been working on a Joint Industry Project (“th e DeepBlue ”), sup ported by Shell and E quinor, for developing the Next Generation EM equipment. The ben efit of using the DeepBlue equipm ent is deep er penetration and s ignificantly improved imaging at increas ed bu rial depth s. The improved imaging leads to improved confidence and enhan ced interpretation pos sibilities. T he p roject commenced 2012 and the prototy pe equipment was compl eted in 2017 with it s first commercial survey summer 2017 . The carrying value o f the De epBlue equipm ent as of 31 December 202 1 was 11 414 thousand ( 2020 : 15 000 th ousand ). See Note 25 for funding from th e DeepBlu e partners recorded as a contract liability . Impairment test of the DeepBlue The Group performs impair ment tests when ther e are indicators of impairment and at least o nce a year. The Group considers th e relationship between the total revenue f o recas t and th e total carrying valu e of the D eepBlue when reviewing for indicators of impa irment. A mounts i n USD 1 0 0 0 Mach in ery and equ ip ment Hard ware an d fur nit u r e Cluster To t al A ss et s un d er co n stru ct io n Year en ded 31 Decemb er 2020 Openin g ca rr ying va lue 24,61 7 39 -32 24,624 1,023 Ad dition s 159 163 138 460 159 Accum u l a ted cos ts on dis posa ls 0 -78 0 -78 - 23 Tran s ferr ed fro m as s ets un der con s tr uctio n to PPE 0 0 0 0 0 Tran s ferr ed fro m as s ets un der con s tr uctio n to i nt a ngible as s ets 0 0 0 0 -587 Depr eci ation char g e -3,667 -35 -27 - 3,728 0 Accum u l a ted dep recia tion on dis po s a l s 0 78 0 78 0 Im pairm ent -4,981 0 0 -4,981 -569 Closing car r yin g va lue 16,128 168 79 16,374 3 At 31 Decemb er 2020 Accum u l a ted cos t 153,0 78 21,998 1 2,513 187,588 3,127 Accum u l a ted amo rt i s a tion a nd i m pairm ent -136,95 1 - 21,831 -12,434 -171,21 6 - 3,124 Net car r yin g va lue 16,128 168 79 16,374 3 Year en ded 31 Decemb er 2021 Openin g ca rr ying va lue 16,12 8 168 79 16,374 3 Ad dition s 69 21 0 90 0 Accum u l a ted cos ts on dis posa ls 0 0 0 0 0 Tran s ferr ed fro m as s ets un der con s tr uctio n to PPE 0 0 0 0 0 Tran s ferr ed fro m as s ets un der con s tr uctio n to i nt a ngible as s ets 0 0 0 0 0 Depr eci ation char g e -3,677 -67 28 -3,716 0 Accum u l a ted dep recia tion on dis po s a l s 0 0 0 0 0 Im pairm ent 0 0 0 0 0 Closing car r yin g va lue 12,520 121 107 12,748 3 At 31 Decemb er 2021 Accum u l a ted cos t 153,1 47 22,019 1 2,513 187,678 3,127 Accum u l a ted amo rt i s a tion a nd i m pairm ent -140,62 8 - 21,899 -12,405 -174,93 2 - 3,124 Net car r yin g va lue 12,520 121 107 12,748 3 67 No impairment was made to th e DeepBlue equip ment set in 2021. During 2020, it was d etermined th at an impairmen t of the DeepBlue equipment set was required given th e downtu rn in the market. The DeepBlue equipment set was impaired in the amount of USD 4 981 t h ousand . The recov erable amou nt used in the impairment test was determined based on cash flow projections from the 202 2 budget and assumptions regarding additional revenue stream from the DeepBlue equipment. The discou nt rate ap plied to cash flow pro jections was 12 % . The Company used the best estimate of additio nal revenu e stream from the De epBlue equipment co mpared with the conventional equip ment as revenu e forecast in the impairment model. The DeepBlue o pens a new market for the Group as it increases th e wat er dept h f rom 3 000 metr es as th e lim it o n th e conv entional source to 4 500 metres on the D eepBlu e source. The discount rate used in the net present value calcu lation was based on the specific circums tances of the Group and was derived from its weight ed av erage cost of capita l (WACC). The WACC took both debt and equity into account. The cos t o f equity was derived from the expected return on investmen t by the Group's investo rs. The cost of d ebt was based on the interest-bearing borrow ings the Group is obliged to service. The beta fact or was in line with the in dustry beta. Sensitivity analysis fo r key assump tions The table below sh ows how the recoverable a mount of US D 590 132 o f the DeepBlue wi ll be affected by chan ges in the various assumptions, given that th e remainder of the assumption s are consta nt as of 31 December 2021: Note 18 - Othe r receivables The Compan y, at the end of 2020, entered into an agreeme nt to subleas e one of our offices for th e re mainder of the office lease. The present valu e of th e sub lease is recognized as a Financial lease re ceivable an d as of 31 Dec ember 20 21 is sp lit between current USD 68 a nd non -current USD 72 . Note 19 – Spare part s, fuel, anchors and batteries No impairments were made in 2021 or 2020 related to spare parts, fuel anch ors and batteries. A mounts i n USD 1 0 0 0 C h an g e in rec ov er able amou n t Dis cou nt r a te 1% i ncr ea s e -297 1% decreas e 311 Dayr a te 20% incr ea s e 4,366 20% d ec r ea s e -4,366 Nu m ber o f s ur vey days per year 33% incr ea s e 3,523 33% d ec r ea s e -3,523 A mounts i n USD 1 0 00 2021 2020 Pr epaym en ts 1,70 2 1,7 52 Recei vables VAT and taxes 1,83 0 1,0 99 Oth er receivables 227 292 Tot al ot h er r eceivab les 3,759 3,142 A mounts i n USD 1 0 00 2021 2020 Equ i pm ent com p on ents and par ts, at c ost 3,0 78 3,54 5 An cho rs a nd batt eries, a t cost 603 891 Fu el, a t cost 133 289 Tot al S par e p ar ts, fuel, an ch or s an d b att er ies 3,813 4,726 68 Note 20 – Trade recei vables Trade receivables are non -interest bearing and the payment terms are generally net 30 days . Fair value of the receivab les approximates t he nominal valu es, less prov ision for doubtful receivables. Generally, the Group trades with recognised, creditworthy cus tomers. The customers are usually large oil companies with an approp riate credit history. Only in a few insta nces, serv ices are performed for small er companies with limited credit h istory. Per 31 December 20 21 EMGS d id not fi nd it necessary to make a provision for doubtful trade receivables ( 2020 : 48 ). As of 31 December 202 1, t he aging an alysis of tra de receivables is as follows : Note 21 – C ash and cash equivale nts Cash earns in terest at floating rates based on daily b ank deposit rates . Restricted cash cons ists of USD 1.3 million held in restricted accounts as security against guarantees is sued as well as employee taxes withheld . Note 22 – Employee benefit obligations The Compan y is required to hav e an occup ational pension plan in accord ance with the Norwegian law on requi red occupational pension ("lov om obligatoris k tjenes tepensjo n"). The Company's pen sion arrangements fulfill the requirements of the law. In 202 1 , t he defined contribu tion plan involved a con tribution level of 5 % of Base Salary from 0 to 7.1 G and 15 % of Base Salary from 7.1 up t o 12 G, wher e G is the National In surance basic amount (Folketry gdens grunnb eløp). G equals to NOK 10 6 3 99 as of 31 D ecember 20 21. The Companys co ntribution to th e Norwegian defined con tribution plan for the year ended 31 Decemb er 20 2 1 wa s 175 ( 2020 : 405 ). As of 31 December 20 21, there wer e 16 employees co vered by the defined contributio n pension plan ( 20 20 : 17 ). Defined contributi o n schemes Employees not eligible for coverage under th e defined contribution plan applicab le in Norway are elig ible to participate in A mounts i n USD 1 0 00 2021 2020 Accou nt s receivable 821 6,1 99 Accr ued rev enu es 446 95 Im paired receivable 0 -48 Tot al t rad e receiv ab les 1,267 6,246 A mounts i n USD 1 00 0 Total N ot Due < 30 30 - 60 days 60 - 90 days 90 - 120 days > 120 821 810 0 0 0 0 11 A mounts i n USD 1 0 00 2021 2020 Ca s h 9,85 5 4,179 Res tr i cted ca s h 1,27 8 7,995 Tot al cash and cash equ iv alent s 11, 133 12, 175 69 other Compan y p ension schemes or to receive a pension compens ation. All the s chemes are considered defined contribution plans. For s ome of the s chemes, subject to s tatutory limitations, employees may make volun tary contributions in addition to the Company’s contributions . Total p ension sch eme con tribu tions made by the Co mpany in 20 21 was 189 ( 20 20 : 514 ). Note 23 – Fina n cial liabilities USD 32.5 million c o nvertible bond On 9 May 201 8, E MGS secured a USD 3 2. 5 million con vertible b ond bearing an interest at 3 months LIBOR + 5.50% p .a . The loan can at any time be con verted into common shares in E MGS at th e conversion price of USD 0.42677 until the maturity date on 9 May 2023 . The U SD 3 2.5 million convertib le bo nd can be s een as a contract s ettled b y an entity by delivering a fixed amoun t of i ts own equity instruments in exchange for a fixed amount of foreign currency. The economic components of this convertible bond are: (a) A liab ility. On issuance of the convertible bond , the fair value of the liab ility component was determined us ing a market rate for an equiv alent non -conv ertible b ond; and clas sified as a financial liability measured at amort ised cost (n et of transaction co sts) until it is extinguished on co nversion or redemption. (b) An equity component. The residu al o f th e pro ceeds was allocated to the conv ersion option th at was recognised in shareholders’ equ ity. At inception, the value of th e liability component was estimated to USD 30.2 million. Amortised cost as 31 December 20 21 was USD 24 .3 million including two s eparate b ond buy -backs with a comb ined nominal value o f USD 8 million ( 2020 : U SD 31. 8 million). The equity comp onent, the carrying amount of th e conversion option, was estimated to USD 1.9 million at inception and is not remeasured in sub sequent periods. The con vertible bond conta ins financial cov enants requiring free cas h and cas h equivalents of at leas t USD 2.5 million. In addition, the b ond agreement has restrictions regarding the Company's ability to sell the multi - client library, declare or make dividend pay ments, incur additional indebtedness, change its business or enter into speculative fi nancial derivative agreements. As of 31 December 202 1, the free cash and cash equivalents to taled USD 9.9 million ( 2020 : US D 4.2 million). The convertible bond is unsecured. Lease liabilities The Group h as lease contracts for various items of IT- equi pment, offices and vessels. The Group’s obligations under its leases are secured by the lessor’s t itle to the leased as sets, see N ote 27. The exposure of th e Group’s borro wings to interest r ate c hanges related to floating rat e obligat ions an d th e contractu al repricing dates of thos e obligations a t the balance sheet dates are as follows: A mounts i n USD 1 0 0 0 In ter es t rat e M a tu rity 2021 2020 No n -cu r ren t US D 32.5 m i ll ion con ver tible bo nd 3 m on th LIBO R + 5.50% 5/ 9/2023 24 ,295 31,81 6 Lea s e li a bilites 4.0-8.1 % 2-3 years 522 6,50 1 24,817 38,317 C u r ren t Lea s e li a bilites 4.0-8.1 % U p to 1 year 6 ,239 5 ,474 6,239 5,474 Tot al fin an cial liab ilit ies 31,056 43,791 70 The maturity of non -current bo rrowings is as follo ws: The carrying amounts a nd fair valu e of the no n-current borro wings are as follows: The Company p erformed two separate bon d buy -backs , both with a n ominal value of USD 4 mill ion each. The fair valu e is set to equal th e carrying value in 2021 and 2020. The carrying amount of th e Group’s borrowings are as follows: The liabilities arisin g from financing act ivities are as follows: The effective interest rates at the balance s heet date were as follows: Fair values The fair value h ierarchy disclos es how fair v alue is determined for financial instruments recorded at fair value in the A mounts i n USD 1 00 0 2021 2020 6 m on th s or l es s 31,0 56 43,7 91 6-12 m on th s 0 0 1-5 year s 0 0 Over 5 years 0 0 Tot al 31,056 43,791 A mounts i n USD 1 0 00 2021 2020 1-3 year s 24,8 17 38,317 4-5 year s 0 0 Over 5 years 0 0 Tot al 24,817 38,317 A mounts i n USD 1 0 00 2021 2020 US D 32. 5 m il li on c on ver tib l e bo nd 24,2 95 31,8 16 Leas ing l ia bilities 6,7 61 11,97 5 Ca r ry i ng a m ou nt s A mounts i n USD 1 0 00 2021 2020 US D den om inated 30,251 42,6 97 NOK d eno min a ted 805 1,08 0 Oth er 0 14 Tot al 31,056 43,791 Ca s h flows Closing Cur rency New Lea s es & M odifica tion s Finan c ia l Gain Finan c ia l lea s e lia bili ties Cur rent inter es t bearin g loans 0 0 0 0 0 0 Cur rent lea s e l ia bili ties 5,474 0 901 0 -136 6,239 No n-cur ren t i nt ers t bear i ng l oans 31,816 479 0 -2,00 0 -6,000 24,295 No n-cur ren t l eas e l iabli ties 6 ,501 0 92 0 -6,071 522 Tot al 43,791 479 993 -2,000 -12,206 31,056 Am ounts i n USD 1 0 00 Openin g No n- ca s h changes 2021 2020 US D 32.5 m i ll ion con ver tible bo nd 6.88 % 7.37% Leas ing li abili ties 4.18% 7 .11% 71 consolidated finan cial statement. Level 1: quoted prices (un adjusted) in active markets for ide ntical ass ets and liabilities. Level 2: assets and liabilities whose valu es a re based on quoted prices in markets that a re not activ e or mode l inputs t hat are observable either directly or indirectly. Level 3: techniques for which all inp uts which have a significant effect on the recorded fair value th at is not based on observable market d ata. The carry ing amounts of cash an d cash equivalent s, res tricted cash, trade receivables, oth er receivables, trade pay ables and other short-term liabilities approximate their resp ective fair values becaus e of short maturities of those ins tr uments . Note 24 – Trade paya bles Trade pay ables are generally no n-interest bearing and the payment terns are net 30 days. Fair value of the payables equals the nominal value o f 1 981 ( 20 20 : 1 461 ). Note 25 – P ro visions The Group recognises a contract liability for prepayments from Shell and Equino r in a joint industry project (th e DeepBlue ) . EMGS, Shell an d Equinor decided to collaborate o n the development, cons truction, and testing of an advanced marine electromagnetic acquis ition system. The p rototype of the new source was completed in 2017 . The contra ct liability was previously recognised as revenue over an eight -year period, which is the same as the depreciation period f o r the DeepBlue source ass et. In 2019, Shell, E quinor and EMGS signed a n amendment to th e initial agreem ent, which chan ged the liabilit y’s revenue recognition period fr om eight to four years starting from 1 Jan uary 2019. The Group has record ed 4 812 as prov ision for DeepBlue prepay ments per 31 Dece mber 20 21 ( 20 20 : 9 625 ). The prepayments from Shell a nd E quinor hav e been recorded at fair valu e, and the differ ence between th e fair value a nd the nominal amount of th e consid eration was recognised as interest. This interest expense is recorded aga inst revenues. Total interest expense r ecorded in 20 21 was 491 ( 2020 : 830). Note 26 – Other s h ort-term liabi lities Accrued expenses are g enerally on 30 days payment terms. Note 27 – Le ases The Group h as lease contracts for various items of IT- equi pment, offices and vessels. The Group’s obligations under its leases are secured by the lessor’s tit le to the leased asse ts. Some of th e leas e con tracts include extension optio ns. See Note 4 for information on ext ension o ptions. The Grou p also h as certain leas es with lease terms o f 12 months or less and leases of office equipment with low value. The Group applies th e “short - term lease” and “lease of low - value a ssets” recognition exemptions for these leases. Set out below are the carryin g amou nts of right - of -use as sets an d leas e liabilities recognised and the movements during the period: A mounts i n USD 1 00 0 2021 2020 Accr ued expen s es 584 987 Ho l i day p a y 261 224 So ci al s ecur i ty taxes and ot her pu blic du ties 258 202 Oth er s ho rt ter m li a bilities 347 1,361 Tot al ot h er shor t t er m liab ilit ies 1,451 2,774 72 The maturity analys is of the lea se liabilities is d isclosed below: The following amounts are recognised in profit or loss : The Group had total cash outflows for leas es of 6, 968 in 202 1. The futu re cas h outflows relating to leases that have not yet commenced are disclos ed in Note 29. Depreciation o f right -of us e a ssets as p resented in the Con solida ted Income Statement USD 3 524 is net of depreciati on capitalised as multi-client ex pense as op posed to the Con solidated Statement of Cas h Flows, in which the gross depreciation of USD 4 751 is in cluded in op erating activities and USD 1 228 is included in in vesting activities . Note 28 - Conti ngencies The Group has con tingent liabilities in respect of guarante es and matters arisin g in the ordinar y course of business. It is not anticipated t hat any material liabilities will aris e from th e contingent liabilities. The Group has giv en guarantees in t he ordinary cou rse of business t o third parties as specified below: Guarantees on o ffice premis es are v alid as long as the contracts are active. All guaran tees are secured by bank guarantees. Note 29 - Commit ments Lease commitments : The Group has leas e agreements o n IT -equipment, offices an d vessels. The future aggregate minimu m lease payments u nder non -cancellable l eases are as follows: Lease liabil ities Inter est expense on lease liabil itiles Am oun ts i n USD 1 00 0 Ve ssel leases Office leases IT equ ipmen t Tot al Tot al As at 1 Januar y 2021 7,629 213 404 8,246 11,975 Ad dition s 0 0 0 0 0 Depr eci ation expense -3,223 -18 4 - 117 -3,5 24 0 Depr eci ation ca pitali s ed as mu lti-c li ent expen s es -1,228 0 0 -1,228 0 Im pairm ent /M odifica tion 578 414 -22 971 993 Int erest expense 0 0 0 0 0 Paym ent s 0 0 0 0 -6,206 -762 As at 31 Decemb er 2021 3,757 443 265 4,465 6,762 -762 Righ t -of-u se ass et s A mounts i n USD 1 00 0 2021 2020 Lease agr eement s – min imu m lease p ay ment s: No la ter than 1 year 6,506 6,302 Aft er 1 year and n o m or e th a n 5 years 550 6,66 8 Aft er m or e th a n 5 years 0 0 Tot al min imum lease pa ymen ts 7,056 12,970 Fu tu re finance c har g es on l eas es -295 -995 Pr esent v alu e o f lease ag r eement s 6,761 11,975 A mounts i n USD 1 0 00 2021 Dep reciation exp ens e of r i g ht -of-u s e as s ets 3,524 In ter es t expen s e on l eas e li abili ties 762 Tot al amo un ts r ecog nised in pr ofit o r lo ss 4,2 86 A mounts i n USD 1 0 00 2021 2020 Gu a r a nt ees on cl ient c o nt r a cts 594 7,330 Oth er g uar antee s /collater a l 267 547 Tot al gu ar ant ees 861 7,877 73 Contract terms on renewal of the leases are to be n egotiated at or before th e expiry of the contracts . The vessel contrac t ha s renewal options o f different durations. Note 30 – Le gal claims EMGS is involved in the following legal pro cesses: EMGS is engaged in s everal tax discussion s with the Brazilian internal revenue s ervice. These d iscussions are related to two main categories of claims by the IRS; (i) a n on -approval by the IRS of certain tax o ffset requests by E MGS related to a credit of Social Contribution on Net Profits (all as p rov ided for und er Braz ilian law); and (ii) pay ment of an administrative penalty fee of 50% ov er a previously disputed tax credit claim. EMGS dispu tes all of the claims received fro m the IRS and has initiated a dministrative proceedings in Bra zil to that eff ect. While EMGS vie ws a negative ou tcome as unlikely, s h ould EMGS ultimately be unsuccessful in disputin g these claims, the aggregate potentia l ad ditional tax liability amoun ts to approximately USD 2 43 thousan d (exclusiv e of interest and p enalties). Note 31 – Earni n gs/(loss) per s h are Basic earnings/(loss ) p er s hare is calculated by div iding net p rofit attributable to o rdinary equity holders of the Company by the weighted average num ber of ordinary shares ou tstanding during the year. The Company h as one category o f dilutive potentia l ordinary shares: s hare options. Note 32 – Related pa rty transactions The following ta ble provid es the amounts paid on trans actions that have been entered into with related parties for the relevant financial year: In 2019, the Group secured a new gu arantee facility (th e "New Facility") that has a maximum limit of USD 7 .5 million and is limited in scop e to providing certain performance and warranty guarantees required u nder the multi - y ear acquis ition contract with Pem ex. The New Facility was prov ided by the Company's existing bank. At the tim e of establishment and during 2019, the Ne w Facility w as fully guaranteed by Siem Europe S à r.l., Perestroika AS and RWC European Focus Master A mounts i n USD 1 0 00 2021 2020 No l ater th a n 1 year 6 ,478 6,3 02 Aft er 1 year a nd no m or e th a n 5 year s 563 6,6 68 Tot al op erat in g lease co mmitment s 7,0 41 12,9 70 A mounts i n USD 1 0 0 0 2021 2020 Inco m e/(l oss ) attr ibu table to equ ity ho lder s of the Com pan y 4,922 - 23,38 5 Basic ear nin g s per shar e 0.0 4 -0.18 Dilut ed ear nin g s per share 0.0 4 -0.18 Weighted aver a g e num b er of or din a ry s hares for th e pu rp ose of bas i c earn i ngs per s har e (tho usa nd s ) 130,97 0 1 30,970 Effec t o f dil ut i ve po ten tia l s hares: Sh are op tion s 0 0 Weighted aver a g e num b er of or din a ry s hares for th e pu rp ose of diluted ea rn ings per s har e (th ousa nd s ) 1 30,97 0 1 30,970 A mounts i n USD 1 0 00 2021 2020 Siem Eur op e S.A. R .L. 2,3 50 68 Per es tr oika AS 2,35 0 69 RWC Eur op ea n Fo cus Mas ter Inc. 1 ,215 34 Tot al 5,915 170 74 Inc. (the "Shareholder Guarantors"). The shareholder guarantees were replac ed b y a p ledged cash depot (the "Pledged Depot") which served as security for the New Guarantee. A cou nter guaran tee agre ement enter ed into between EMGS and the Shareholder Guaran tors regulates th e Co mpany's obligations toward s the Sh areholder Guarantors in connection with the New facility. The Gro up paid the Shareholder Guaranto rs a gu arantee commission of 8% p.a. of the guaran teed amount , 1.5% p.a. for such parts of the New Guar antee which were covered by the Pledged Depot, an d to 0% as the Shareholder Guaran tors were released form their obligation s to wards th e ban k. The Pledged Depot was fully replac ed as of May 2020. In 2021, the Com p any performed two separate bond buy-backs with a to tal combined nominal value of USD 8 million. The bonds were repurchased at 75% of par. The total p aid to related p arties as part of th e bond buy -back program was USD 5.9 million. Note 33 – Invest m ent in subsi d iaries The Grou p consolidates Electromagnetic G eoservices Malaysia Sdn Bhd and emgs Shipp ing Mexico S. de R.L. de C. V. at 100 % as the Company h as contro l over these companies. The Group has sta rted the process of voluntary winding up of emgs Asia Pacific Sdn Bh d , emgs Labuan Ltd., emgs Asia Pacific Labuan Ltd ., Electromagnetic Geoservices Mala ysia Sdn Bh d. Side agreements s how that EMGS has all the rights a nd obligations of 100 % owne rship. Am oun ts i n USD 1 00 0 Compan y S ha re own ership / vo t ing rig ht s 2021 S ha re own ership / vo t ing rig ht s 2020 Equ it y 31 December 2021 Equ it y 31 December 2020 Loc at ion Sea B ed Logg ing - D ata St orage Com pany AS 100% 100% 28 4 Tro ndh eim, No rw a y em g s Am ericas 1 AS 100% 100% 12,44 0 11,938 Tro ndh ei m , Nor way CSEM Pr od uction AS 100% 100% 13 -2 Tro ndh eim, No rw a y EM M ulti-cl ient AS 100% 100% 1,225 905 Tr on dheim , Nor way EMG S Gl ob a l AS 100% 100% 6,28 8 1,254 Tro nd heim, No rw a y em g s Am ericas Inc 100% 100% -945 -854 Dela war e, USA em g s Sh i pp i ng M exi co S. de R .L. de C .V. 99% /100% 99% /100% 104 1,59 3 Col. Del Val le, Mexico em g s Sea B ed Logg ing Mexico S.A . de C .V. 100% 100% -2,518 -4,119 Col. Del Val le, Mexico em g s Ser vic es Mexico S.A. de C.V. 99% 99% 380 235 Col. Del Val le, Mexico Elec tr om ag netic Geos erv i ces C anada Inc 100% 100% -1,011 -824 Britis h Colum bia, Ca nada Ser vici os Geologicos E lec tr om ag neticos do Bras il Ltda 100% 100% -51,122 -53,1 11 Rio de Ja neir o, B rasi l EMG S Sur veys AS 100% 100% 7,339 7,341 Tro ndh ei m , No rway Elec tr om ag netic Geos erv i ces UK Ltd 100% 100% 4,114 4,154 Lon don , UK Elec tr om ag netic Geos erv i ces Malays i a Sd n B hd 1% /100% 1% /100% 810 811 Ku a la L um pu r, Malays ia em g s Asi a Pac ifi c Sd n B hd 100% 100% 472 531 Ku a la L um pu r, Malays ia em g s La bu a n Ltd 100% 100% -21 -21 Labuan, M a la ys ia em g s Asi a Pac ifi c La bu a n Ltd 100% 100% -149 -149 La bu a n, Malays ia em g s Au s tr a li a Pty Ltd 100% 100% 96 102 Pert h, Austr al ia 75 Note 34 – Events afte r the reporting perio d Extension of maturit y date In February 2022 , b ondholders’ res olution to ; a) extend t he maturity dat e by 24 months (Ma y 2023 to May 202 5); and b) increase the interest margin by 100 b ps from 5.5 to 6.5 percent ov er th e applicable reference rate was resolv ed and adopted for FRN E lectromagnetic Geos ervices ASA Senior U nsecured Co nvertib le Bonds 2018/2023 . Multi-client late sales In March 202 2 , Electromagnetic Geoservices ASA secured USD 2.8 million in revenue from late sales and a change of control event related to it s existing multi -client library in N orway. Multi-client re v enue In March 202 2 , Electro magnetic Geoservices ASA secured ap proximately USD 1 million in uplift revenue related to its existing multi-client library in Norway. Pre-funded multi-client revenue In April 202 2 , Electromagnetic Ge o services ASA secured approximately USD 1 million in pr e-funding for 3D CSEM survey in Norway. Ukraine Electromagnetic Geos ervices ASA does n ot expect to be n egatively impacted by the war in Ukraine. 76 F i n a n c i a l s t a t e m e n t s . E M G S A S A 77 Income Stat ement . A mounts i n NOK 1 0 0 0 No te 2021 2020 Op erat in g r ev enu es Cont ract s a les 1, 11 75,85 9 44,518 M ulti-cl ient s a les 1, 11 66,36 2 123,6 70 Other reven ue 1, 11 45,51 4 45,980 Tot al o p erat in g r ev enu es 187,735 214,168 Op erat in g expen ses Chart er hir e, fuel and crew expenses 4 66,49 2 104,0 01 Em ploy ee expenses 5, 6 26,38 5 78,667 Depr eci ation a nd or dinar y a m or tis a tion 7 26,18 3 26,558 M ulti-cl ient am or tis ation 7 10,88 8 33,748 Im pairm en t of l on g -ter m as s ets 7 0 7 0,199 Other op erating ex pen s es 4, 22 26,14 3 31,003 Tot al o p erat in g expen ses 156,091 344,177 Op erat in g in c ome 31,643 -130,0 09 Financ ial in co me an d expen ses Finan c ia l i nco me 16 - 885 77,012 Finan c ia l expense 16 -16,940 -40,892 Net fina nc ial it ems -17,825 36,120 Inco me/(lo ss ) b efor e in c ome t ax 13,818 -93,8 89 Inco m e tax expen s e 8 78 7,136 Inco me/(lo ss ) for t he y ear 13,741 -1 01,0 25 78 Balance Sheet . A s o f 3 1 De c em b er A mounts i n NOK 1 00 0 N ot e 2021 2020 AS S ETS No n -c u rr en t ass et s M ulti-cl ient li br ary 7 20,52 5 18,23 0 Other i nt a ngible a s s ets 7 3,676 8,11 6 Pr o per ty, plant a nd equ ipm ent 7, 9 82,62 1 103,81 9 As s ets un der c on s tr u c tion 7 0 0 In ves tm ents i n s ub s i diaries 10 50,56 0 1,091 Tot a l n o n -c u rr en t a ss ets 157,382 131,256 C u r r ent ass et s Sp are par ts , fuel, ancho rs a nd batt er i es 3 23,46 5 31,44 4 Trad e receivables 9, 11, 12 11 ,153 10 ,085 Rec eivables g r ou p c om panies 12, 23 0 29,976 Other receivables 18 17,80 4 18,10 1 C as h and c as h equ i val ent s 28,31 9 16,30 2 Res tr ic ted ca s h 13 8,914 67,95 6 Tot a l c u r ren t ass et s 89,654 173,864 Tot a l a ss et s 247,036 305,119 79 Balance Sheet . Oslo, 20 April 20 22 Board of Directo rs and CEO of Electromagnetic Ge oservices ASA Sign. A s o f 3 1 De c em b er A mounts i n NOK 1 00 0 No te 2021 2020 EQUI TY P aid -in -c ap it al Sh are ca pital 14, 15 130,9 70 130,97 0 Sh are pr em ium 14, 15 0 0 Other paid-in-ca pital 1 4, 15 41 5,621 415 ,568 Tot a l p aid -i n- cap it al 546,591 546,538 Retain ed earn in g s Other equ i ty 15 -642,031 -633,749 Tot a l r et ain ed ear n in g s -642,031 -633,74 9 Tot a l eq u it y -95,441 -87,212 LIABILITIES No n -c u rr en t liab ilit ies Pr o vi s i on s 19 42,418 82,17 2 Bor r ow i ngs 7, 17 214,14 8 271,629 No n-cu rr ent lea s ing l i abil ities 17 1,178 2,879 Tot a l n o n -c u rr en t li abi lit ies 257,744 356,681 C u r r ent liab ilit ies Trad e payables 16,46 8 11,31 7 Payable g ro up com p a nies 23 55,38 7 0 C ur r ent tax li a bili ties 8 2,818 8 ,113 Pu blic taxes a nd du ties payable 20 2,160 1 ,476 Other s ho r t ter m l ia bili ties 21 6,485 12,91 2 C ur r ent l eas i ng l i abil ities 17 1,414 1,83 2 Tot a l c u r ren t liab ilit ies 84,732 35,650 Tot a l li ab ilit ies 342,477 392,331 Tot a l eq u it y an d lia bi lit ies 247,036 305,119 80 Cash Flow State men t . 1 Ja nua r y - 3 1 Decembe r A mounts i n NOK 1 0 0 0 2021 2020 A) Cas h flow fro m o per at in g ac t iv iti es Fu nd s s ou rced fro m o per a tion s *) 54,05 5 56,580 Changes i n inven tor ies , a cc ou nt s receivable a nd ac cou nts payables 97,426 136,416 Other c hanges in wo rk i ng ca pital -62,6 18 -110,786 Net ca sh flo w fro m o p era tin g act iv it ies 88,863 82,211 B) Cash flo w fro m in v estin g ac t iv it ies Pu rch a s e of pr op ert y, plant a nd equ i pm en t -761 -11,221 Inv es tm en t i n m ulti-cl ient li br ary -13,183 -11,11 3 Inv es tm en t i n s ub s i diaries -49,4 69 0 Net ca sh flo w fro m i nv estin g ac t iv it ies -63,413 -22,3 34 C) C ash flo w fr o m fin an ci al a ct iv it ies Repaym ent /s ettlem ent of loan -53,582 0 Paym ent of i nt eres ts on l oans -16,774 -20,5 69 Finan c ia l l eas e paym en ts -2,119 -1,510 Net ca sh flo w fro m fin an c ial act iv it ies -72,47 5 -22,079 A+B+C) N et c h ang e in c ash an d c ash eq u iv alen ts -47,025 37,797 Ca s h a nd ca s h equ ival ent s as 01.01 84,25 8 46,461 Cas h an d cash eq uiv al ent s as 31.12 37,233 84,258 Calculat io n o f cash an d c ash equ iv alen t s Ca s h a nd ca s h equ ival ent s 28 ,319 16,302 Res tr ic ted ca s h 8,914 67,9 56 Cas h an d cash eq uiv al ent s 31.1 2 37,233 84,258 *) Calcu lat io n o f fu n d s sour ced fro m o p era tio n s Inco m e/(l oss ) befo re incom e tax 13,81 8 -93,889 Depr eci ation a nd amo rt is a tio n 37,28 7 60,306 Inco m e tax expen s e -78 - 7,136 Im pairm en t of l on g -ter m as s ets 0 70,199 Am o rt i s a tion of inter es t 20,88 7 27,100 Finan c ia l g a in on rep a ym ent of bo nd -17 ,861 0 54,055 56,580 81 Notes . Accounting Principle s The finan cial s tatements have been prepared in accordance with the Norwegian Accounting Act and generally accepted accounting principles in Norway. Use of estimates The man agement has used estimates and assumptions that have had an im p act on ass ets, liabilities, income, expenses and information on po tential liabilities in accord ance with gener ally accepted accoun ting principles in Norway. Business combin atio ns Business combination s are accounted for u sing the acquisition method. The cost of an acquisition is measured as the aggregate of the cons ideration transferred, measured at acquisition date fair value. Acquisition costs i ncurred are expensed and included in other operating expenses. When the Co mpany acq uires a busines s, it as sesses the f inan cial assets and liabilities assumed f o r appropriat e classificatio n and d esignation in accordance with the contra ctual terms , economic circumstan ces and pertinent conditions as at the acquisition d ate. Revenue recogniti on Revenue from contracts w ith cus tomers is recogn ised when control of the goods and s ervices are tran sferred to the customer at an amount that ref le cts the consideration to which the Company expects to be entit led in exchange for those goods or s ervices. Revenue is recognised as follows: a) Proprietary contra ct sales EMGS perfor ms EM services under contra ct for a specific cu stomer, whereby the EM data is owned b y the customer. The Company recognis es contract revenues (whether p riced as Lump Su m, Day Rate or U nit P rice) over time. Progress is measured in a mann er generally consis tent with the ph ysical progress on the pro ject. Mobilisation Fees Revenues for mobilisation are us ually contracted with the cus tomer and should cover t h e vessel’s transit to t h e actual area. Revenu es and costs related to mobilisation ar e deferred and recognised over the acquisition period (which is th e time from the firs t receiver is d ropped to th e las t retrieval) of the contra ct, using th e p ercentage o f completion method. The deferral of mob ilisation c osts can only begin after an agreement h as been signed b etween EM GS and the client. Until a contract is s igned, costs are expensed as incurred. b) Sales of multi-client libr ary dat a Pre -funding agreemen ts Sales made p rior to commencement of acquisition for a project and sales w h ile the projects are in progress, are p resented as p re-funding revenues. The advanta ges for pre -funding cus tomers are generally the possibility to influence the project specifications, early a ccess to a cquired data, and discoun ted prices. The Company recognises pre-fun ded revenue at the point in time when data is made acces sible to the cus tomer. 82 Late sales Customers are granted a lic ense from the Co mpany which entitles th em to access a s pecific part of the multi -client d ata library. The license payment is fixed and is required when the license is gran ted. The late sale revenue is recognised when a valid licensing a greement is signed, a nd the multi -client libra ry data is made access ible to the customer . Uplift Uplift revenu es can arise if a customer that has alread y bought a license for E M dat a, is awarded acreage cover ed by the data bough t. Uplift revenue is recognised when t he custom er is awarded the acreag e. Contract balances: Contract assets A contra ct as set is th e right to consideratio n in exchange for goods or services transferred to the customer. If the Co mpany performs by transferring good s or services to a customer before th e custom er pays cons ideration or before pay ment is due, a contract asset is recognis ed for the earned cons ideration that is con ditional. Trade receivables A receivable represents t he Company’ s right to an amount of consideration that is u nconditional (i.e., only t he passage o f time is required before pay ment of the cons i deration is due). Contract liabilities A contract liability is the obligation to transfer good s or services to a customer for which the Company has received consideration (or an amount of consid eration is due) from the cus tomer. If a customer pay s consideratio n before the Company transfers good s or series to the cus tomer, a con tract liability is recognised when the payment is mad e, o r the payment is due (which ever is earlier). Contract liab ilities are reco gnised as revenue when the Compan y performs und er the contract. Significant financing comp onen t The Co mpany has received fu nding from third parties b uilding the next generation EM equipment. There is a s ignificant financing compo nent for th ese con tracts considering the l ength of tim e betw een th e parties’ payment and the beneficial period. As su ch, in terest cos ts are calculated o n this contr act liability record ed as pro vision in the balance s heet. The interest rate is commensurate with the rate that would be reflected in a separ ate financing transact ion between th e Company and t he parties at cont ract inception . Balance sheet classif ication Current as sets and sho rt term liabilities consis t of receivables and payab les due within one year, an d items related to the inventory cycle. Other b alance sheet items are c lassified as fixed as sets / long t erm liabilities. Current assets a re valued at the lower of cos t and fair v alue. Short term liabilities a re recognised at n ominal value. Fixed assets are v alued at cost, less depreciation and impairment losses . Long term liabil ities are recognised at nomin al value. Subsidiaries Subsidiaries are valued at cost in the Company's accounts. The investments are v alued at th e cos t of acquiring shares in the subsidiary or joint venture, p rovided that no write down is requ ired. A write down to fair value will be carried out if t he reduction in v alue is caused by circumstances which may not be regarded as incidental and deemed necess ary by generally accepted accou nting principles. Write downs will b e rev ersed when the caus e of the initial write down is no longer presen t. 83 Foreign currency translation Transactions in foreign curren cy are trans lated at the rate ap plicable on the tran saction date. Monetary items in a for eign currency are translat ed into NOK using the exchan ge rate applicable on the balance s heet date. Non -monetary items that are measured at their histo rical price expr essed in a foreign currency are translated in to NOK using th e exchange rate applicable on the tra nsaction date. Non -monetary items that are measured at th eir fair value expressed in a fore ign currency are translated at the exchange rate applicable on the balance sheet date. Changes to exchange rates are recognised in the income sta tement as they occur during the accounting p eriod. Property, plant and equipment Property, plant and equipment are capitalised and depreciated linearly over the estimated useful life. Significan t fixed assets which con sist of substantial components with dissimilar economic life hav e been unb undled; depreciation of each component is based on the economic life of the componen t. Cos ts for maintenan ce are expensed as incu rred, whereas costs for improvin g and upgrading property, plant and equipment ar e added to the acquisition cost and depreciated with the related asset. If carryin g value of a non -current ass et exceeds the estimated recov erable amou nt, the as set is written down to the recoverable amoun t. The recoverab le amou nt is the greater of the net realisable valu e an d v alue in use. In assessin g value in use, the discounted estimated future cash flows from t he asset are us ed. Research and develop ment Development costs are capital ised provid ed that a future ec onomic benefit as sociated with development of th e intangible asset can be established an d costs can be measured reliably. Otherwise, the costs are expensed as incurred. Capita l ised development costs a re amortised linearly over its us eful life. Research costs are expens ed as they a re incurred. Multi-client librar y The multi-client library cons ists of surv eys of electromagnetic dat a. The s urveys can be li censed to customers on a no n- exclusive basis. Directly attributable costs associated with the production and development of multi -client projects such as acquis ition costs, processing costs , and direct project cos ts are capitalis ed. A multi-client project is con sidered complet e when all components or processes ass ociated with the acquis ition and processing of th e dat a are finished, and all components of the data have been p roperly s tored and made ready for delivery to customers. After a project is completed, a stra ight-line amortis ation is applied. The stra ight-line a mortisation is assigned ov er the useful life, which is set at four years. T h e straight -line amortisation is distributed evenly through th e financial year independently of s ales during the quarters . Leased assets Leases that provide EMGS with substantia lly all the rights and obligations of owners hip ar e accoun ted for as finance leases. Such leases are valu ed at the present value o f minimum lea se payment and recorded as as sets und er tangible assets . The assets are subsequently depreciated, and the re lated liabilities a re reduced by t he amoun t of the lease p ayments less t he effective interest expense. Other leas es are accounted fo r as operating leases with le ase pay ments recognised as an expense over the lease ter m. Inventories Inventories are valued at the lower of cost or net selling price. The selling price is the estimated selling price in the cas e of ordinary operations minus the es timated completion, marketing and distribution costs. The cos t is arrived at usi ng t h e FIFO m ethod and includ es the costs in curred in acquiring the goods and the costs of b ringing th e goo ds to their current state and locat ion. 84 Trade and other rec eivables Trade receivables and other current receivables are recorded in the balance s heet at nominal value less provisions for doubtful accou nts. Provisions for doubtfu l accounts a re based on an in dividual assessment of th e different receivables. Income tax Tax expenses in the profit and loss accounts comprise of both tax pay able for th e accounting period and changes in deferred tax. Deferred tax/tax assets are calculated o n all differences between the book value and tax value of assets and liabilities. Deferred tax is calculat ed at 22 percent on th e basis of existing temporary d ifferences and the tax effect of tax losses carried forward. Temporary differences, both positive and ne gative, that will reverse with in the same period, are recorded net. Deferred tax ass ets ar e record ed in the balance sheet when it is more likely than not t h at the tax assets will be utilised. Taxes payable and deferred taxes a re recognised directly in equity to th e extent that they relate to equity transaction s. Share based paym ents Options for employees are valued at the fair valu e of the o ption at the time the option plan is adopted. The Black -Scholes model is used for valu ation of options . The cos t of the opt ions is allocated ov er the period during which the employe es ea rn the right to receive su ch op tions . This arrangement is presented as oth er paid -in capital in the balance sheet. Provisions are made for the social security ta xes related to th e share option plan , which are related to the difference between the issu e price and the market price o f the share at year -end, on the bas is of the vesting p eriod of the program. Provisions Provisions are recognis ed when the Company has a present obligation as a result of a past event, where it is probable that an outflow of resources embod ying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of th e obligation . Provisions for los s on contracts are recognised when it is clear that t he contract will result in a loss . The ca lculat ion is made by comparing th e contracted revenues to the expect ed direct operating c osts for the contract period. Cash flow statement The cash flow sta tement is presented using the indirect method . Cash an d cash equ ivalents include cash and bank dep os its. Note 1 – Operating r evenues 15 053 of the 187 735 in total operating revenues in 2021, was intercompan y revenues (20 20 : 50 780 ). The Company con sists of on e bus iness area only. EMGS op erates glob ally. Note 2 – Share d revenue The Compan y has since 2013 entered several coo peration agreements regarding E M multi-cli ent s urveys in th e Barents Sea and Brazil. EMGS has received funding and/or seismic data against a revenue share on prefunding , late sales and uplift revenues . A mounts i n NOK 1 0 0 0 2021 2020 Regio ns No rw ay 98,37 3 129,536 Eur op e, M i dd l e Ea s t a nd Afr ic a 194 22,03 2 No rt h and So ut h Am erica 25,688 61,039 Asi a and th e Pac ifi c Oc ean 63 ,479 1,560 Tot al 187,735 214,168 85 EMGS has provided the vessel, p erformed the dat a acquisition and finally provide d the data proces sing services. The acquired dat a remains the prop erty of EMGS. When EMGS licens es data to customers in areas su bject to revenu e sharing, th e Company in voices and collects payments from the customers for th e entire sales amount. The related accounts receivable is presented gross, w h ile the portion due to the partner up on collection from the cus tomer, is presen ted as a s hort-term liability. EMGS' share of the rev enue fro m the sale of multi -client library with cooperation agreements in 20 21 is 3 465 (20 20 : 10 225 ). Note 3 – Spare parts, fuel, anchors and batteries Note 4 – Operating le ases Note 5 – P ensions The Co mpany is required to have an occupational pens ion p lan in accordance w ith the Norwegian law on re quired occupational pens ion ("lov om obligatorisk tjen estepensjo n"). The Company 's pension arrangements ful fill the requirements of the law. In 2021, the pension plan involved a contrib ution level of 5 % of Base Salary fro m 0 to 7. 1 G and 15 % of Base Salary from 7.1 up to 12 G, where G is the N ational Ins urance basic amount (Folketrygd ens grunnb eløp) . G is equ al to NOK 106 3 99 as of 31 December 202 1. The Co mpanys con tribution to the Norwegian defined contrib ution plan for the year ended 31 Decemb er 20 21 is 1 477 (20 20 : 2 786 ). As of 31 December 2021 , th ere are 15.5 employees covered by th e defined contribution pens ion plan (20 20 : 19 ). EMGS' rev enu e share Mult i-c lien t sur vey Brazil 2013 95% Ba r ents Sea 2013 70% Ba r ents Sea 2014 50% Ba r ents Sea 2015 50% Ba r ents Sea 2016 50% Ba r ents Sea 2017 50% A mounts i n NOK 1 0 00 2021 2020 Inven t or y t yp e Equ i pm ent, com p on ents and part s 16,7 29 21,0 42 An cho rs a nd batt eries 5,311 7,60 7 Fu el 1,425 2,795 Tot al 23,465 31,444 A mounts i n NOK 1 0 00 2021 2020 Oper atin g leases r ecog n ised as expense in t he per iod Chart er hire 38,78 8 63,4 13 Offi ce pr em is es 5,260 6,119 Tot al 44 ,047 69,5 31 86 Note 6 – Remune ration The average number of e mployees du ring 20 21 was 15.5. Executive Manageme nt remuneration Other benefits include el ectronic communicatio n, group life insura nce and h ealth insurance. Remuneration P olicy All members of the Executiv e Management Group have fixed s alaries. In a ddition to the fixed salary, a bonus plan is in place. The bonus system is bas ed on a combination of fulfillment of E MGS´s goals an d individu al goals. The Executive Manag ement Group is incl uded in the Company´s ordinary pension plan. There are no other v ariable elements in cluded in th e remuneration for the Executive Man agement Grou p. Board of Directo rs remuneration The amounts listed u nder Directors fee have b een expensed and paid in 2 021. Share base payment The Company h as an option program (more details abo ut the program is presented in no te 15 for the Group). The Company u ses Black Scholes mod el to estimate the val ue of the option s. A mounts i n NOK 1 00 0 2021 2020 Emplo y ee expenses : Salaries and bo nu s 21,7 97 62,572 Payr oll tax 1,97 3 7,610 Pen s i on costs 1,577 2,92 0 Oth er ben efi ts 1,039 5,565 Tot al 26,385 78,667 Am ounts i n NOK 1 0 0 0 Salarie s Bonus Share options Pe nsi on ben ef i t Other bene f i ts To tal remunera tion Execut ive Manag ement Bjørn Petter Lindhom 2021 2,4 14 126 5 123 14 2 ,68 2 Knut Ande rs E i mstad, CFO 2021 1 ,67 5 126 5 122 14 1 , 94 3 Dag Hel l and-Hansen, Global EA / P resi de nt EM E A 2021 2,2 62 126 5 126 14 2 ,53 3 Tot al 6,351 379 14 371 43 7,158 A mounts i n NOK 1 00 0 Direct o rs fee Boar d o f Dir ect o rs Fr edr ik W. Mo hn C hairm an of th e Board 25.11 .-31-12. 0 Silje Au g us tson Chai r man of th e B oar d 2 1.05.-02.1 1. 0 M i m i B er dal Chai r man of th e B oar d/Bo a rd m em ber 01.01 .-31.12. 220 Bea tr iz Malo de M olina Boar d mem ber 25.11.-31 .12. 0 Pet ter i Soin i nen Boar d mem ber 21.05.-31 .12. 0 Jø rgen Wes tad Board mem b er 0 1.01.-31.1 2. 0 Øyvind Gr ea ker Bjør nd a l Boar d mem ber 01.01.-21 .05. 124 344 87 B – average exercis e price for number of options by 31 December 20 21 . Loans and guarantees No loans or loa n guarantees hav e been granted to the Exe cutive Management of th e Boar d of Directors or oth er related parties. Auditor expense Note 7 – Tangi b le and intangible assets Depreciation/amortisat ion of fixed assets is calculated u sing the straight -line m ethod. The registered patents rights relate to electromagn etic surveys (E M). The DeepBlue EMGS has been working on a Joint Industry Project (“th e DeepBlue ”), sup ported by Shell and E quinor, for developing the Next Generation EM equipment. The ben efit of using the DeepBlue equipm ent is deep er penetration and s ignificantly improved imaging at increas ed bu rial d epths. The improv ed imaging leads to improved confidence and enhan ced interpretation poss ibilities. T he p roject commenced 2012 and the prototy pe equipment was compl eted in 2017 with it s first commercial survey summer 2017 . The carrying value o f the DeepBlu e equipment as of 31 December 2021 was 67 710 A mounts i n NOK 1 00 0 Nu m ber of op tio ns OB Fo rfeit ed op tio ns Gr a nt ed op tio ns Nu m ber of op tio ns CB Weighted aver a g e excercis e pr i ce B Weighted aver a g e r emainin g con tr a ctu a l l ife Execut iv e Man agemen t Bjør n Pet ter Li nd ho m 12,5 00 0 0 12,5 00 2.1 7 2.60 Kn ut An der s Ei m s tad 12,5 00 0 0 12,5 00 2.1 7 2.60 Dag Hell and - Hansen 12,5 00 0 0 12,5 00 2.1 7 2.60 A mounts i n NOK 1 0 00 2021 2020 Au dit o r expenses St atut or y audit s ervices (excl VAT) 726 675 Tax a dv i s or y s ervices (excl VAT) 166 436 Fu rt her a s s ur ance s ervices (excl VAT) 42 213 Tot al 934 1,324 Am oun ts i n NOK 1 00 0 P ro p ert y , plan t an d equ ipmen t P at ent s S oft war e licen ses etc . Mu lt i-clien t libr ary To t al A ss et s un d er co nstr u ct ion Acqu is ition cos t at 1 Januar y 2021 1,128,7 72 26,41 5 105,342 70 1,310 1 ,961,839 24,906 Ad j ustm ent o f open ing val ue 0 0 0 0 0 0 Transferr ed fro m as s ets un der constr uction to int a ngible as s ets 0 0 0 0 0 0 Pu rchas es 761 0 0 13,1 83 13,944 0 Dis po s a ls 0 0 0 0 0 0 Ac qu isitio n co st at 31 Dec ember 2021 1,129,533 26,415 105,342 714,493 1,975,783 24,906 Accum ulated depr ecia tion 1 Ja nu a ry 2021 (Res tated ) 1,024,8 92 26,41 5 97,226 6 83,081 1,831,61 4 24,906 Depr eci ation/ a m ort is ation for the year 21,743 0 4,440 10,888 37,071 0 Transferr ed fro m as s ets un der constr uction to intangible a s s ets 0 0 0 0 0 0 Dis po s a ls 0 0 0 0 0 0 Im pairm ent 0 0 0 0 0 0 Ac cu mulat ed d ep rec iatio n 31 December 2021 1,046,635 26,415 101,666 693,969 1,868,685 24,906 Net car ry in g v alue 82,897 0 3,676 20,525 107,098 0 Depr eci ation r a te (%) 13-33 7-10 33 25 *Se e cha n ge s i n a cc ou nti ng po l i c y un der notes 88 (20 20 : 74 436 ) (more details about the DeepBlue in presented in n ote 17 for the Group) . T h e carrying valu e of the DeepBlue equipment as presented in note 17 for th e Group is USD 11 414 thous and. See Note 19 for funding from th e DeepBlue partn ers recorded a s a contract liability . Assets under cons truction Assets un der construction are intern al capital expenditu re projects t hat are not completed . These projects are mainly development and pro duction of acquisition equipment, but also interpretation an d modelling software. Finance leases Finance leases are capitalis ed at th e lease’s commencement at the lower of the present v alue and cos t. The leasing contracts h ave a duration o f 5 years and the as set will be depreciated over a 3 -5 -year period. The terms of the agre ements are 3 mon th NIBOR + 1.11% a nd 1.40%. A mounts i n NOK 1 00 0 2021 2020 Ca pitalis ed in th e bala nce s heet 31 Decemb er 5,62 4 5,631 Accum ula ted dep reciation -3,36 5 -2,171 Net car ry in g v alu e 2,259 3,460 Depr ecia tion 1,1 92 344 A mounts i n NOK 1 0 00 2021 2020 Spe cif i ca ti on of R &D e x pe ns e s Exte rnal ex pe nse s 0 616 - M ateri als 0 421 Inte rnal hours 0 11 ,56 9 Tota l 0 1 1,3 74 A mounts i n NOK 1 00 0 No minal Present No minal Present valu e v alue v alu e val ue Leas es du e wit hin 12 m on ths 1 261 1 178 1 975 1 832 Leas es du e wit hin th e next 13-60 m on th s 3 029 1 414 3 029 2 879 Remainin g d ebt on leasing co n tr ac ts 31 Decemb er 4 290 2 592 5 005 4 711 2021 2020 89 Note 8 – Inco me taxes Current tax liabilities are relat ed to operation s abroad . Accrued year end is 2 818 (2020 8 113) Note 9 – Collate rals There are no long -term liabilities d ue in more than five years from 31 De cember 202 1 or 31 December 20 20 . A moun ts i n NOK 1 00 0 2021 2020 Tax ba se specificat io n Pr ofit befo re tax 13,818 -93,889 Per m a nen t differen c es 18,8 15 -61,921 Changes i n tem po r ary differen c es -19,193 22,4 00 Rec ieved gro up con tr i bu tion 0 22,022 Tax expense a br oad , paid 0 0 Taxable pr o fit (t h is year ta x base) 13,440 -111,3 88 Tax l oss es ca rr ied for ward -13,440 111,38 8 Taxable pr o fit (t h is year ta x base) 0 0 Inco me t ax expen ses : No n-cr editable for eig n i nco me taxes 78 7,13 6 Tot al in co me ta x expense 78 7,136 Tempo ra ry differ enc es Fixed as s ets -55,975 -69,471 Accou nt s r ec eiva ble 0 0 Inv ento r y 0 0 Pr ov i s i on s tax l ia bili ty a br oad 9,997 4,299 Other a cc r ual s - 40,559 -35,527 Tax l oss es ca rr ied for ward -1,528,425 -1,525,0 86 Tot al t empo r ary d ifferen ces -1,614 ,962 -1,625,78 5 No n -r eco gn ised d eferred ta x ass et -355,2 92 -357,67 3 No n-cr editable for eig n i nco me tax i s related to Malays i a . No n -r eco gn ised d eferred ta x ass et A moun ts i n NOK 1 00 0 T ax ba se 2 2% t ax Explan at io n wh y t h e t ax is n o t 22% o f in c ome b efor e t ax 22% tax of i ncom e befo re tax 13,81 8 3,040 Per m a nen t differen c e 18,815 4,139 Change i n defer r ed tax a s s ets, no t reco gnis ed -10,82 3 -2,381 Cor rectio n of err or s i n pr eviou s years 213 47 Rever s ed g r oup con tr i bu tion pr eviou s year s -22,022 -4,845 Effec t of tax on gro up c on tr ibut i on 0 Calculat ed t ax 0 Effect iv e t ax r at e in % 0% A mounts i n NOK 1 0 00 2021 2020 Pled g ed ass ets: Tr a de r ec eivables 13,287 8,93 3 Ass ets held un der f inance lea s es 3,1 70 4,3 62 Tot al car ry in g v alu e o f p ledg ed ass et s 16,458 13,295 90 Note 10 – Invest m ent in subsi d iaries Note 11 – On -g oing projects Part of trade receivables that are recogn ised in 20 21, but not invoiced per 31 December 2021 amounts to 3 928 (20 20 : 0). Deferred revenue as o f 31 December 20 21 amoun ts to 1 286 (20 20 : 2 433 ). The Company d oes not expect an y loss on con tracts in 20 21. Note 12 – Receiva b les The Company h as no accounts receivables with due dates la ter than 12 month s. There has not been mad e any provis ion for loss on external receivables per 31 December 20 21 (20 20 : 0 ). Note 13 – Bank de posits Restricted cash as of 31 December 202 1 : A mounts i n NOK 1 0 0 0 Profit /L oss 20 2 1 L oca t ion Sea B ed Logg i ng - Da ta St or a g e C om pan y AS 100% 0 -18 163 Tr on dh eim, No rw ay EM GS Am ericas 1 AS 100% 0 2,658 271 Tro ndh eim, No rw ay CSEM Pr od uctio n AS 100% 118 -14 112 Tr on dheim , Nor way EM Mu lti-c li ent AS 100% 0 2,507 10,461 Tr ond heim , No rw a y EM GS Gl ob al AS 100% 49,586 - 97 53,745 Tr on dheim , Nor way EM GS Sur vey s AS 100% 0 -18 1,141 Tro nd heim , No rw a y EM GS Ship ping M ex ic o S. d e R .L de C .V. 99% 0 -12,66 5 920 Col. Del Va ll e, M exi co EM GS Sea Bed L ogg ing M exic o S.A . de C .V. 100% 0 13,924 -22,195 Col. Del Va ll e, M exi co Ser vicos Geologic os El ectro m a gneticos Do B raz il L TD A 99% 0 17,110 -450,6 02 R io de Janeiro , Brazil Elec tr om ag net i c Geoservices M al ays i a Sdn B hd 1% 0 0 7,143 Ku a la L um pu r, M a la ys ia em g s As ia Paci fi c Sd n Bhd 100% 856 -51 1 4,161 Ku a la L um pu r, M al a ys ia EM GS L abuan L td 100% 0 0 -1 89 La bu a n, M a la ys i a EM GS As i a Paci fi c La bu a n Ltd 100% 0 0 -1,314 L abuan , Malays i a em g s Au s tr a li a Pty L td 100% 0 -50 847 Per th , Au s tr a li a Tot al 50,560 22,826 -395,335 Ne t ca r r ying v alue sha r e s in subsi diaries Equi t y 3 1 Decem be r 2 0 2 1 Sha r e owne r ship/ Vot ing rights A mounts i n NOK 1 0 00 2021 2020 Res t r ict ed cash Gu a r a nt ees 7,66 8 66,865 Em ploy ee tax 1,24 6 1,091 Tot al 8,9 14 67,9 56 91 Note 14 – Share ca p ital and Sha reholder information The tota l authorised nu mber of ordinary s hares is 166 986 3 54 as of 3 1 December 202 1 (20 20 : 153 889 385 ) with a par value of NOK 1 p er share. All iss ued shares are denominat ed in NOK and fu lly paid. The largest shareho lders as of 31 Decemb er 20 21: Note 15 – Equity Nu m ber of or din a ry s hares Per centage Siem Inves tm en ts SA R L 3 1,327,467 23.92 % PERESTRO IKA AS 29,45 2,795 22.49% M or g an Stanley & C o. LL C 25,891,80 5 19.7 7% SP O R TSM AGA SINET AS 3,398,21 1 2.59% RAGE,PER EGIL 1,500,000 1.15% FOLKESETH,LIV GRET E 86 0,125 0.66% RYGG,JAN WIGGO 789 ,025 0.60% NORDNET L IVSF O RSIKRIN G AS 7 78,858 0.59% NÆ R INGS L IVETS HO VEDO R GAN ISAS JON 766,1 90 0.59 % No rd net B ank AB 720,27 0 0.55% HAA V HO LDING AS 700,0 00 0.53 % KRISTIA N FALNES AS 650,0 00 0.50 % No rd ea B ank Ab p 573 ,978 0.44% JAG L AND,ERIK SM ITH 550,000 0.42% KONGS RUD,R UN E JAC OB 507,83 7 0.39 % Dans ke B ank A/S 475,0 69 0.36 % ØVER LAND,JA RL E 457,0 39 0.35 % EIKA NGER INVEST AS 44 8,000 0.34% Other 31,12 3,021 23.76% Tot al 130,969,690 100% Am ounts i n NOK 1 0 00 Sha re c apital Sha re premium Other paid-in ca pital Ava i lable -f or- sale reserve Act uarial gains/ (l osses) Other e quity (uncovered loss) Tot al At 31 Dec em ber 2020 130,9 70 0 413,5 17 2,05 0 13,377 -64 7,126 -87,212 Gr oup con trib ution changed in 2020 0 0 0 0 0 -22,022 -22,02 2 At 1 Ja nu a ry 2021 130,9 70 0 413,5 17 2,05 0 13,377 -66 9,148 -109,23 4 Other tran s actions 0 0 53 0 0 53 Inco me for the year 0 0 0 0 0 13,741 13,741 At 31 Decemb er 2021 130,970 0 413,570 2,050 13,377 -655,40 7 -95, 441 92 Note 16 – Fina n cial items Note 17 – Fina n cial liabilities USD 32.5 million c o nvertible bond On 9 May 2018, EMG S secured a USD 3 2. 5 million convertible b ond bearing an interest at 3 month s LIBOR + 5.50% p .a . The loan can at any time be con verted into common shares in EMGS at the con version price of NOK 3. 76 (USD 0.42677) until the maturity d ate on 9 May 2023 . The U SD 32. 5 million con vertible bond can b e s een as a contract settled by an entity by delivering a fixed amount o f its own equity instruments in exchange for a fixed amount of foreign currency. The economic components of this convertible bond are: (a) A liab ility. On issu ance of the convertible b ond, the fair value of th e liability component was d etermined using a m ar ket rate for an equivalent non-conv ertible bond ; and classified as a financial liability measured at amortised cost (net of transaction co sts) until it is extinguish ed on conv ers ion or redemption. (b) An equity component. The residu al o f th e pro ceeds was allocated to the conv ersion option th at was recognised in shareholders’ equ ity. At inception, the value of the liability compon ent was estimated to NOK 246.4 million , and amortised cos t as o f 31 December 2021 was NOK 2 14 .1 million (20 20 : NOK 271.6 million). The equity component, th e carrying amount of the conversion op tion, was estimated to NOK 15.8 million at inception and is n ot remeasured in s ubsequent periods. Two separate bon d repurchases, at a 75 per cent discount, were completed in 2021 wit h a combined nominal v alue of NOK 71.4 million. The con vertible bond conta ins financial covenants requiring free cash and cash equivalents of at least USD 2.5 million on group le v el. In addition, the bond agreem ent has restrictio ns regarding the Company's abi lity to sell the multi -client library, declare or make dividend payments, incur addition al indebtedness, change its b usiness o r enter into s peculative financial derivative agreements. As of 31 De c ember 2021, the free cash and cash equivalents of the Group totalled USD 9. 9 million. The convertible bond is unsecured. A mounts i n NOK 1 0 0 0 2021 2020 Financ ial in co me: Gr ou p c on tr ibut i on 0 22,120 Int erest i nco me s ub s idia r i es 0 0 Int erest i nco me o n s ho rt ter m bank dep os its 19 1,866 Net for eig n exc hange g a ins 0 16,346 Gain on b ond bu y back 17,86 1 0 Net g ai ns of fi nancia l a s s ets 0 36,680 Tot al 17,880 77,012 Financ ial expen ses : Int erest expense s ubsi diaries 0 2,599 Int erest expense 24 ,241 34,535 Net for eig n exc hange l oss 3 0 Net los s on fi nancial as s ets and li abil ities 10,42 7 0 Finan c ia l expenses rep a ym ent of bo nd l oan 0 0 Other fi nancia l expen s es 1,033 3,758 Tot al fin an cial 35,705 40,892 Net fina nc ial it ems -17, 825 36,120 93 Lease liabilities The finance lease liab ilities relate to certain prop erty, plant and equ ipment and ar e capitalised leases for finan cial report ing purposes. The related leased property, p lant and equipment s erve as the collateral un der such leases . Note 18 – Other re ceivables Note 19 – P ro visions The Company recognises a contract liability for prepayments from Shell and Equinor in a joint ind ustry project (the DeepBlue). EMGS, Shell and Equinor decided to collaborate on the development, construction , and testing of an advanced marine electro magnetic acq uisitio n s ystem. T h e proto type of the new source w as completed in 2017. The contract liability was previously recognised as rev enue over an eight -year period, which is th e same as the depreciation period for the DeepBlue so urce ass et. In 2019, Shell, Equ inor and EMGS si gned an amendm ent to the initial agreement, which changed the liability’s revenu e recognition period from eight to four years sta rt ing from 1 Jan uary 2019. The Company has recorde d 4 2 418 as provis ion for DeepBlu e prepayments p er 31 December 20 21 (20 20 : 82 172). The prepayments from Sh ell and E quinor have been recorded a t fair value, and the difference between the fair value a nd the nominal amount of th e consid eration was recognised as interest. This inter est expense is recorded against revenue s. Total interest expense r ecorded in 20 21 was 4 216 (20 20 : 6 763 ). Note 20 – P u blic taxes an d duties payable A mounts i n NOK 1 00 0 Int erest rate M atur ity 2021 2020 No n -cu r ren t US D 32.5 m i ll ion con ver tible bon d 3 m on th LIBO R + 5.50% 5/ 9/2023 214,1 48 271,6 29 Lea s e li abil ites 4.0-8. 1% 2-4 years 1,414 2,879 Tot al 215,561 274,508 Curren t Lea s e li abil ites 4.0-8. 1% Up to 1 year 1,178 1,832 Tot al 1,178 1,832 Tot al fin anc ial liab ilit ies 216,740 276,340 A mounts i n NOK 1 00 0 2021 2020 Ot her r eceiv ables Pr epaid expen s es 3,544 4,188 VAT 1,44 5 795 With ho lding tax 12,8 15 12,413 Oth er 0 706 Tot al 17,804 18,101 A mounts i n NOK 1 00 0 2021 2020 Pu b lic t axes an d d ut ies p ayab le Em ploy ee taxes w ith held 1,23 1 617 Em ploy m ent t a x 930 859 Tax for ei gn em ploy ees 0 0 Oth er 0 0 Tot al 2,160 1,476 94 Note 21 – Other c u rrent liabilitie s Note 22 – Other o p erating ex p enses Note 23 – Related pa rties Sales and pu rchases of services, receivable and liabilities: receivables a nd liabilities are s how on a net bas is. In 2021, the Company a ccru ed for los s on group compan y receivables with 10 427 (20 20 accrued : 36 680) A mounts i n NOK 1 00 0 2021 2020 Ot her c u rr ent liab ilit ies Pr ov i s i on for oner o us con tr a ct 0 0 Accr ued ho li day pay 2,148 1,757 Accr ued s al a r i es 0 0 Deferr ed r evenu es 1 ,286 2,433 Accr ued s har ed rev enues 664 1,292 Accr ued vess el expen s es 1,220 6,123 Other l ia bili ties 1,167 1,30 9 Tot al 6,485 12,913 A mounts i n NOK 1 00 0 2021 2020 Ot her o p erat in g expen ses Rent a l a nd ho us ing expen s es 6,645 7,570 Consum ables and m ai nt enance 2,132 3,368 Consultancy fee 11,924 9,647 Travel expen s es 279 1,400 Insur ance 3,615 1,607 M a r keting 276 571 Int er c om p a ny expenses 0 4,169 Other op eratin g expen s es 1,2 73 2,672 Tot al 26,143 31,003 Am oun ts i n NOK 1 00 0 Liab ilit ies Receiv ab les Pu rc h ase S ales Liabi lities Receiv ables P u rc hase Sales Related p ar ties Sea Bed L ogg ing - D ata St orage C om pany AS 0 0 0 0 0 0 0 0 em g s Am ericas 1 AS 13 0 0 0 0 0 0 0 CSEM Pr od uction AS 0 0 0 0 0 0 0 0 EM M ulti-cl ient AS 11,674 0 0 0 11 ,356 0 0 0 em g s Global AS 9,079 0 0 0 8,704 0 0 0 em g s Am ericas 1 AS Mexican B r anch 0 0 0 0 0 0 0 0 em g s Am ericas Inc 0 0 0 0 0 0 1 3,047 0 EMG S Shipp i ng Mexico S. de R.L de C .V. 636 0 0 0 0 5 0,160 0 -5,033 EMG S Sea Bed L oggi ng M exi co S.A. de C.V. 0 9,997 0 -15,053 0 31 0 - 44,825 EMG S Sevices Mexico S.A d e C .V 0 0 0 0 0 0 0 0 Elec tr om ag netic Geos erv i ces C anada Inc 0 0 0 0 0 0 0 0 Ser vicos Geologic os El ectr om a g. Do B r azil LT DA 0 0 0 0 0 0 0 0 EMG S Sur veys AS 0 0 0 0 0 0 0 0 EMG S UK Ltd 34,744 0 0 0 34 ,511 0 139 0 Elec tr om ag netic Geos erv i ces Malays ia Sd n B hd 1,160 0 0 0 1,123 0 0 0 em g s Asi a Paci fi c Sdn B hd 8,029 0 0 0 3,682 0 0 -922 em g s La bu a n Ltd 49 0 0 0 48 0 0 0 EMG S AP La buan Ltd 0 0 0 0 0 1 0 0 65,384 9,997 0 -15,053 59,423 50,192 13,186 -50, 780 Acc u mulat ed p ro vi sion for lo ss related par ti es 385,100 374,674 2020 2021 95 Note 24 – Events after the reporting perio d Extension of maturit y date In February 2022 , b ondholders’ res olution to ; a) extend the maturity d ate by 24 months (May 2023 to May 202 5); and b) increase the interest margin by 100 b ps from 5.5 to 6.5 percent ov er th e applicable reference rate was resolv ed and adopted for FRN E lectromagnetic G eoservices ASA Senior Unsecured Conv ertible Bonds 2018/2023. Multi-client late sales In March 202 2 , Electromagnetic Geoservices ASA secured USD 2.8 million in revenue from late sales and a ch ange of control event related to it s existing multi -client library in N orway. Multi-client re v enue In March 202 2 , Electro magnetic Geoservices ASA secured ap proximately USD 1 million in upl ift revenu e relat ed to its existing multi-client library in Norway. Pre-funded multi-client revenue In April 202 2 , Electromagnetic Ge o services ASA secured ap proximately USD 1 million in pre -funding for 3D CSEM survey in Norway. Ukraine Electromagnetic Geos ervices ASA does n ot expect to be n egatively impacted by the war in Ukraine. 96 A u d i t o r ’ s r e p o r t . 202 1 97 98 99 100 101 102 E M G S A S A K a r e n s l y s t A l l é 4 , 4 t h f l o o r N - 0 2 7 8 O s l o N o r w a y