**Page 1 Q2 2023**
**Page 2 Q2 2023**
# **Contents**
| About Xplora | 4 |
|------------------------------------------|----|
| Highlights | 5 |
| Key Figures | 6 |
| Letter from the CEO | 8 |
| Our Business | 9 |
| Product Offering | 11 |
| Sales and Development Strategy | 14 |
| Board of Directors' Report | 16 |
| Corporate Governance | 23 |
| Sustainability and Social Responsibility | 26 |
| Members of the Board | 30 |
| Management | 31 |
| Xplora Technologies Group | 33 |
| Income statement | 33 |
| Balance Sheet | 34 |
| Statement of Cash flows | 36 |
| Notes | 39 |
| Xplora Technologies AS | 53 |
| Income statement | 53 |
| Balance Sheet | 54 |
| Statement of Cash flows | 56 |
| Notes | 59 |
| Audit Report | 74 |
**Page 3 Q2 2023**
# <span id="page-3-0"></span>**About Xplora**
**Xplora was founded with the mission of giving children a safe onboarding to digital life and encouraging a better balance between screen time and physical activity.**
Xplora's broad portfolio of connected products and services allows people to connect with their loved ones, and children to experience how their everyday activities can make a positive change in the world. Building on our success in the kids' market, Xplora is now expanding its reach into the senior segment. Complimenting this expansion, our SaaS division is enhancing our offerings with SIM – and software services for both B2B and B2C markets, broadening our reach and diversifying our impact.
Headquartered in Oslo, Xplora has offices in four Nordic countries, Germany, Spain, the US, and the UK, where our engineering team is based. The Company has Mobile Service Provider operations in 9 markets. Xplora has several major innovations in the child smartwatch category, including the launch of the world's first eSIM product for children and its activity platform logic converting steps to awards.
> **Our vision is to enable children around the world to experience how their everyday activities can make a positive change to the world.**
**FAST FACTS** (end of 2023)
**subscriptions**
**467k smartwatches sold in 2023**
**MSP In 9 markets**
**111 FTE**
# <span id="page-4-0"></span>**Highlights**
# **Q1 2023**
Increased the mobile subscription prices by an average of 7%, enhancing average revenue per subscriber, ensuring financial health, and facilitating the continued innovation of high-quality products while remaining affordable.
Introduced the revamped Xplora activity platform, leading to over 20% of new connectivity customers opting for premium services.
Identified cost savingopportunities up to NOK 11.1m, projected to be realized progressively through 2023.
Established a new centralized marketing team structure focused on local marketing growth, cuttingedge campaign creation, and cost efficiency.
## **Q2 2023**
Completed the initial phase with the Company's European master distributor, resulting in a one-time revenue boost of NOK 30m. Enhancements to the agreement are aimed at improving financial flexibility through product financing and expanded factoring
agreements, boosting cash flow to NOK 99.3m
Published its Annual Transparency Report, emphasizing human rights and working conditions in compliance with the Norwegian Transparency Act.
Reduced operational costs as a percentage of revenue to 38%, down from 54% in Q2 2022
Implemented a hedging program using three-month put options to manage EUR/USD exposure, minimizing financial risk and securing favourable exchange rates.
# **Q3 2023**
Entered into revenue share agreements with OneCall (Telia), Elisa, and Troomi, enhancing device sales and securing additional revenue streams. As part of the agreements, Troomi committed to purchasing 10k units annually, and OneCall ran a major TV campaign to increase brand awareness.
Secured a significant order from Curry's, a British retail giant, marking Xplora's entry into the UK physical retail market.
Consolidated financial services with DNB, including the transfer of the NOK 100m financing facility.
Established two new divisions; SaaS and Senior, focusing on selling SIM- and software services to new and existing B2B partners and creating products and services tailored for seniors.
# **Q4 2023**
Entered another new Nordic Telco revenue share agreement, marking Xplora's fourth revenueshare agreement.
Outsourced part of the customer support function to improve operational flexibility and meet customer needs, while maintain high service standards through the third-party customer support provider.
Completed the exercise of contractual subscription rights, raising NOK 17.5m in equity, subsequently recorded as paid nonregistered equity in 2023.
Implemented a service fee for users choosing alternate connectivity providers, aiming to recover revenue, and maintaining service quality.
# <span id="page-5-0"></span>**Key Figures**
| Amount in NOK millions | 2023 | 2022 |
|------------------------------|-------|-------|
| | | |
| Device revenue | 476.6 | 346.9 |
| Service revenue | 210.2 | 152.3 |
| Total revenue | 689.1 | 502.0 |
| Growth y/y | 37% | 16% |
| Gross profit | 332.3 | 237.0 |
| Gross margin | 48% | 47% |
| EBITDA | 33.7 | -33.5 |
| Operating Profit/ (Loss) | -22.8 | -84.7 |
| Net Profit/ (Loss) | -21.4 | -74.4 |
| Subscriptions (k) | 256.8 | 156.9 |
| Shares outstanding (million) | 41.7 | 41.7 |
| Share price (NOK) | 14.0 | 9.9 |
| Market capitalization | 581.1 | 412.4 |
Page 7 Annual Report 2023
# <span id="page-7-0"></span>**Letter from the CEO**
**2023 marks a transformative year for Xplora. We successfully strengthened our financial foundation, ending the year with an EBITDA of NOK 34m – a strong turnaround of NOK 67m from a challenging 2022. This year, our focus has been on expanding our market presence in our nine core markets, enhancing our service offerings, and strengthening our operational capabilities to ensure sustainable growth and profitability. Now, we set our sight on 2024 and the exciting opportunities ahead.**
In 2023, Xplora exceeded its strategic objectives, setting a strong foundation for sustained growth and profitability across our nine core markets. By placing a sharp focus on product innovation, operational efficiency, and strategic market expansion, we have delivered on the targets set for the year. We saw an increase in both device sales and average selling prices (ASP), indicating a successful shift to our next-generation products. This transition, coupled with a strong increase in subscription sales, culminating in a 257k subscription base, highlights our market strength.
Financially, 2023 was a remarkable turnaround from a previous EBITDA shortfall to a positive outcome of NOK 34m, a strong NOK 67m y/y turnaround. This achievement was supported by total revenue reaching NOK 689m, a 37% growth driven by strong device and subscription sales. Our proactive approach to currency hedging, along with optimizing our financial services, has been crucial in stabilizing our financial performance. Attentive cost management, operational efficiency initiatives, and leveraging supply chain financing for funding portions of our product purchases have guarded against market fluctuations and enhanced financial predictability, enabling us to end the year with a robust cash position of NOK 137m.
Operationally, there has been several strategic initiatives such as the implementation of a Master Distribution Agreement (MDA) in Europe, new revenue-sharing agreements with multiple telecommunication companies and enhancements to our e-commerce processes. These initiatives not only streamlined our operations, but also strengthened our financial health.
As we turn the page to 2024, Xplora is positioned to capitalize on emerging market opportunities, particularly within our newly established Senior and SaaS divisions. These new divisions represent areas of growth, aligning with broader industry shifts towards digital solutions for an aging population and the demand for B2B SIM- and software services. Our entry into these markets is not just an expansion, but a strategic move to address untapped needs, levering our technological expertise and innovation capabilities.
As we advance, our focus sharpens on expanding these new divisions in addition to our existing operation while maintaining our progress in operational and financial excellence. Our strategic initiatives, both financially and operationally, have set a solid foundation for sustained growth and enhanced shareholder value. With a clear vision for the future and a dedicated team, we are gearing up for what promises to be an exciting year ahead for Xplora.
Sten Kirkbak
# <span id="page-8-0"></span>**Our Business**
Xplora is an information technology company which develops and offers wearable smart devices, connectivity (mobile subscriptions) and value-added services through its premium subscription. The Company was established in 2016, is headquartered in Oslo, Norway with offices in London, Hamburg, Madrid, Stockholm, Copenhagen, Espoo, New York and Trondheim.
The Company's products and services are offered in 9 key markets through online channels, a wide retail network and 15 telecom partners.
Xplora strives to give children a safe onboarding to the digital world and a better balance between screen time and physical activity by offering innovative smart devices and services for kids and families. Xplora's vision is to enable children around the world to experience how their everyday activities can make a positive change to the world.
# **GROUP ORGANIZATION**
Xplora Technologies AS, the parent company of the Group, conducts its operations from its offices in Oslo and Trondheim, Norway. The Company's headquarter in Oslo accommodate the Group's finance, marketing, operations, and support functions. Meanwhile, the Trondheim office is responsible for global and national marketing campaigns.
Xplora Technologies Ltd serves as Xplora's engineering and development hub which works together with Xplora's external South Korean development team. Xplora's UK operations also handle sales and marketing in the UK market.
Xplora Technologies Deutschland GmbH (a German limited liability company), Xplora Technologies SL (a Spanish limited liability company), Xplora Technologies Inc (a Delaware corporation) and Xplora Technologies SAS (a French limited liability company), all handle sales, marketing, operations, and support functions in their respective local markets.
Xplora Mobile Holding AS is the parent company of Xplora Mobile AS and Xplora Mobile Denmark ApS (a Danish limited liability company). Both companies handle sales, logistics, marketing, operations, and support functions in their respective markets. Xplora Mobile AS is the parent company of Xplora Mobile AB (a Swedish limited liability company) and Xplora Mobile Oy (a Finnish limited liability company), having the same functions in their respective markets.
All subsidiaries in the group are 100% owned.
# <span id="page-10-0"></span>**Product Offering**
Xplora's business model of operating both as a smartwatch vendor and a mobile virtual network operator (MVNO) – a company that offers mobile services without owning the physical network infrastructure – offers unique opportunities in terms of product bundling, retail offerings and pricing options that are difficult for competitors to replicate.
The company's main revenue drivers are:
- **Devices**: Sales of devices, such as connected and nonconnected smartwatches.
- **Services**: Recurring revenues from sale of subscriptions and value-added services (VAS).
Subscriptions encompass connectivity plans (mobile subscriptions), premium services, telco operator revenue share, and service fees for Xplora smartwatches without Xplora mobile subscriptions (Nordics).
Both business segments target business-to consumer sales through a variety of sales channels and markets in addition to business-to-business sales through licensing models.
# **XPLORA DEVICES**
Xplora's device strategy has been key to secure a wide distribution footprint, build the Xplora brand, build an ecosystem of partners and demonstrate the service functionality. The Xplora Device Platform consists of connected wearable products as well as non-connected wearables. The Group's product strategy is to provide premium and entry level products in the connected category, and to drive activity on the platform through an offering of nonconnected wearables with an attractive price point. A broad product portfolio is an important element in Xplora's distribution strategy, building brand awareness and securing visibility.
As of 2023, Xplora has launched nine devices, and plans to introduce additional models in 2024. The company's legacy offerings include models such as X5Play, X5Play eSIM, XGO2 and XMOVE, alongside more recent offerings like X6Play and XGO3 from 2022.
Xplora has scheduled the launch of its in-house developed watch, the X6 Pro, for 2024, and plans to introduce an Amazon exclusive brand watch, Kidzi, to the market.
Xplora watches are specifically designed for children aged 4-10, prioritising ease of use and durability to withstand rough handling. In early 2024, Xplora plans to improve both the XGO3 and the X6Play models.
Additionally, in Q4 2023, the company started to develop a smartwatch tailored for the senior market. Based on the X6 Pro, the watch contains some new features specifically developed for the seniors' market segment. With testing of the watch starting in early 2024 the company expect that the senior watch will be brought on the market in 2024.
# **XPLORA SERVICES**
The Xplora Services consists of connectivity services (mobile subscriptions) and value-added services through the Xplora activity platform, in the form of a premium subscription. Growing the recurring revenue base and securing full commercial control of the connectivity value chain are key objective in the Company's core markets. As of 31 December 2023, Xplora had a total subscription base of 257k subscriptions. Distributed on connectivity subscribers (205k), Premium subscribers (42k), telco revenue share (9k) and service fee (1k).
## **Connectivity (mobile subscriptions)**
Xplora operates its mobile connectivity services in its 9 core markets. That is, four Nordic countries, Germany, UK, Spain, France and the USA.
For its connectivity services Xplora use Telenor's network in Norway, Sweden and Denmark and Elisa's network in Finland, Telekom Deutschland in Germany, Alai Secure in Spain, Transatel in France and IQ Mobile in the UK, all through long-term service provider and Mobile Virtual Network Operator (MVNO) contracts. In the USA Xplora have a wholesale agreement with AT&T, allowing Xplora to operate as a Mobile Service Provider.
Xplora has secured a strong market position in the Nordics. In Norway, where the Company has the longest track record, close to 1 in 5 children in the age 4-10 are using an Xplora smartwatch with a connectivity subscription from Xplora. In Sweden Xplora has reached a penetration rate of 5%, with 6% in the Finnish market. Xplora has been in Denmark for three years and reached a penetration exceeding 4%. The Company applies the same go to market strategy in all markets. Sweden, Finland, and Denmark penetration growth trends are similar to the penetration growth experienced in Norway previously.
The US and German markets, where connectivity was launched in late 2022, experienced the largest growth in subscriptions in Q4 2023. UK was launched at the same time but have grown a bit slower than the two, however the Company still see the growth potential as in the other two markets. Subscriptions in Spain and France was launched in 2023, and growth in percentage have been strong.
## **Xplora premium services**
Xplora's premium services gives the user a broader access to the Xplora Activity Platform than what the customer gets with a regular connectivity plan. This service is a value-added service platform that addresses two key concerns among families: a high and growing screen time and physical inactivity among children.
The platform connects with the Xplora devices and converts physical activity collected from smart devices to Xplora coins, Xplora's own digital reward points. Xplora coins may be used for children to engage digital content, play mini games under screen time control and purchase products as well as make donations on the activity platform.
The Xplora activity platform is clearly differentiated from other legacy social networking services which often are based on text, image, or video. In contrast, the activity platform service leverages activity and location data from smart devices to create new ways to help users to engage and interact with each other.
By rewarding kids for their physical activity, Xplora encourages kids to explore the world while offering safety for both the kids and parents. Going forward Xplora will be continuing to build on its premium services, offering a wider selection of curated content, video and education-based activity tools allowing children to further have Fun, Learn and Play in a controlled environment.
## **Revenue share**
New for 2023 is that Xplora have made several strategic revenue sharing agreements with wellknown Telecommunication companies (Telcos). Revenue sharing agreements are beneficial for Xplora in selling devices and providing an additional service revenue stream. The agreements also secure new customers to the telcos and boost their revenue, leading to a mutually beneficial proposition.
These agreements also increase brand awareness as they include commitments from the telcos about device purchases and marketing campaigns.
In 2023, Xplora have reached revenue sharing agreements with Troomi Wireless inc. in the US, Elisa in Finland, OneCall in Norway and an undisclosed Nordic Telco, marking Xplora's fourth revenue-share agreement.
Going forward Xplora will continue to explore the possibilities for more revenue share agreements in the nine core markets of operations.
# **Service fee**
Late in the second half of 2023, Xplora introduced its fourth service revenue stream, the service fee. First rolled out in the Nordic markets, the fee is put on activated Xplora watches who have opted for an alternate SIM provider. The service fee was introduced to cover certain costs that is a part of the watch even without a subscription. These costs relate to the parent app functions, for example messaging, phone, pictures, and tracking/map services.
The Service fee ensures that the company gain the full value of its service offerings across all customer segments as well as it allows the company to maintain and develop the high-quality service its users expect.
Going into 2024 Xplora plan to extend this fee structure to more markets, expecting a positive impact on revenue without compromising customer satisfaction.
# <span id="page-13-0"></span>**Sales and Development Strategy**
In 2023, Xplora continued to grow in the markets with its mobile connectivity (MVNO) business. In Q4 2023 USA and Germany were the two markets with the highest net growth in mobile connectivity. Drawing on past experiences and utilizing a refined strategy focus, the Company seek to strengthen its foothold in its current markets, while optimizing profitability and enhancing overall market position.
Xplora's go-to-market strategy was designed to maximize market penetration and establish a strong foothold across all distribution channels. The strategy is phased, beginning with an initial focus on online stores such as Amazon, which allows the Company to test the market and gain valuable visibility. From there, the Company prioritize building relationships with retail channel partners to expand its reach and accessibility, before ultimately pursuing partnerships with telecom operators – a significant distribution channel that offers vast market potential. In 2023 Xplora entered into a set of agreements with Telecommunication companies (Telcos) that gives Xplora a recurring service revenue share when the Xplora smartwatch is used with the Telco's SIM card. Through maintaining this approach and leveraging the valuable insight and experiences gained, Xplora have established a
strong foundation for growth and development in its existing markets. This has been demonstrated through 2023 where the Company see growth across new markets like the US, the UK, Finland, and Denmark.
Amazon sales continued to grow and surpassed 100k smartwatches in 2023. Xplora SIM cards were introduced successfully with Amazon sales during the year.
As of 2023 Xplora is present through online, retail and telecom channels across 9 key markets in Europe and North America. In addition, the Company sells its products in selected markets, primarily through Amazon. The level of development varies between the different markets. In the Norwegian market, where Xplora is present since 2017, the Company has a wide distribution network through all major retail chains in the country, in addition to a well-positioned Xplora webstore. This has resulted in a high market penetration, estimated at +20% of the target population, kids aged 4-10. In the US, Xplora's distribution set-up has significantly improved throughout 2023, with partnerships established with major retailers such as Amazon, Walmart, Bestbuy and SamsClub. These collaborations have allowed Xplora to reach a broader customer base and strengthen its market position in the US.
# **MARKET STAGES**
# **RETAIL DISTRIBUTION PARTNERS**
Retail partners are important to Xplora to drive volumes, build market presence, expand geographic coverage through widespread retail outlets and to build brand recognition. Sales through retail partners may be through a combination of physical retail outlets and online sales channels. Many of the Company's retail partners display products in outlets, giving consumers the ability to test and physically evaluate Xplora's products. The Company has a wide distribution network, online and in-store across its major markets.
# **TELECOM OPERATOR CUSTOMERS**
Xplora has successfully completed homologation tests and entered into distribution agreements with 15 telecom operators. These include Telekom (DE), Vodafone (DE), Telefonica (DE), EE (UK), Elisa (FI), DNA (FI), Telia (SE), 3 (SE), Elisa (Estonia), OneCall (NO), Swisscom (CH), Magenta (AT), Yettel (HU), Vodafone (HU) and Troomi (USA).
# **CUSTOMER SUCCESS**
Xplora's customer success team is the heart of the Company's operations. Xplora operates in a market where its customers expect fast and prompt service and response to their support inquiries. The Company's overall goal is to create a customer experience and journey that is indifferent to the customer's geographic origin and to meet its customers on the platform they wish to communicate.
Throughout 2023, the Company's focus within customer success has been on improving its CRM system's capabilities by modernizing the help center and FQAs, streamlining customer inquiries with web forms, and enhancing chatbot interactions with AI technology. A key strategic shift in 2023 was the decision to outsource parts of the Company's customer support team, while ensuring service excellence led by an inhouse customer support leadership team and a Nordic team of specialists. This approach has significantly enhanced operational flexibility, allowing quick adaptation to seasonal demands, while maintaining high service standards through close collaboration with the third-party provider. Focused on agility and leveraging external expertise for support, this move enables Xplora to concentrate on its core competencies and innovation.
Reflecting on 2023, Xplora had a total of 593,003 global inquiries, with the Company's chatbot successfully responding to 48%. This is a significant increase from 2022 where the chatbot was able to respond to 34% of all global inquiries, demonstrating the effectiveness of the customer success team's efforts in advancing chatbot functionality and improving response time. In addition, the continuous work on streamlining the Company's CRM system has enabled Xplora to further improve its efficiency and deliver an enhanced customer experience.
Key KPIs driving the customer success teams include customer response time, solution time and customer experience.
# <span id="page-15-0"></span>**Board of Directors' Report**
In 2023, Xplora laid the foundation for growth and scalability. By utilizing the investments in the product portfolio made in 2022, Xplora was able to focus more on operational efficiency and growth in its nine core markets. The Company has new revenuesharing agreements with multiple Telcos, alongside implementing effective cost-cutting and efficiency measures. Another important initiative has been to improve working capital management, by implementing a Master Distribution Agreement (MDA) in Europe and utilizing supply chain financing for funding portions of product purchases. Employing hedging instruments to balance currency risk, stabilize costs have enhanced financial predictability. These initiatives turned a negative NOK 33.5m EBITDA in 2022 to positive NOK 33.7m this year, while also ending the year with a solid cash balance of NOK 137.4m.
# **Financial review**
The following financial review is based on the consolidated financial statements of Xplora Technologies AS and its subsidiaries (the Group). The statements have been prepared in accordance with the Norwegian Accounting Act. In the view of the Board of Directors, the income statement, changes in equity and cash flow, the statement of financial position and the accompanying notes provide satisfactory information about the operations, financial results and position of the group and the parent company for the year 2023 and at 31 December 2023. Consolidated numbers from 2022 is also included for the purpose of comparison.
Group revenues for Xplora Technologies reached NOK 689.1m in 2023, a 37% growth from NOK 502.0m in 2022. Device revenue ended at NOK 476.6m compared to NOK 346.9m in 2022, while recurring service revenues amounted to NOK 210.2m, up 38% y/y, representing 31% of group revenues. Xplora exited 2023 with 257k subscriptions, up 64% y/y from 157k subscriptions at the end of 2022.
As a result of the introduction of the Master Distributor agreement (MDA) for Europe in 2023, device revenue will be generated from fewer legal entities going forward, and as such Xplora will
provide data from end-user activations on a country level, rather than revenue.
In 2023 there was 445K end-user watch activations, equivalent to a 24% growth from 358K in 2022. Germany was the biggest contributor with 226K activations. Norway saw a total of 52K activations in 2023, followed by Sweden with 40K and Finland with 21K activations. The US, Spain and Denmark all had 16K end-user activations throughout 2023. Where US saw the highest percentage growth in activations with a 112% growth compared to 2022.
For recurring service revenue, the top three countries were Norway with NOK 110.9m, Sweden with NOK 49.2m and Finland with NOK 23.2m. Top three represented 87% of total service revenue in 2023, compared to 94% in 2022, which is a result of the focus on growing service revenue outside the Nordics. This will continue to be a focus in 2024.
Gross profit for the year came in at NOK 332.3m, up 40% from NOK 237.0m in 2022. Gross margin increased to 48% in 2023 compared to 47% in 2022. Gross margin per revenue line was 33% for device revenue and 83% on service revenue in 2023. This is compared to 32% and 83%, respectively, in 2022.
Operating cost amounted to NOK 298.6m in 2023, up 10% from NOK 270.6m in 2022. However, as a percentage of revenue, operating costs has decreased from 54% in 2022 to 43% in 2023, in line with the stated target of a 10 percentage point (pp) decrease in operational costs. Salary and employee expenses ended at NOK 113.3m in 2023, including bonus accruals and management incentive programs, up from NOK 85.7m in 2022. Marketing expenses amounted to NOK 72.1m in 2023, down 14% from NOK 83.6m. Other operating costs ended at NOK 113.2m in 2023 compared to NOK 101.2m NOK in 2022.
EBITDA amounted to NOK 33.7m (EBITDA margin of 5%) in 2023, a NOK 67.2m improvement from negative NOK 33.5m in 2022. Depreciation, amortization, and write-downs were NOK 56.5m in 2023, up from NOK 51.2m in 2022. Operating profit ended at negative NOK 22.8m in 2023, a NOK 61.9m improvement from negative NOK 84.7m in 2022. Profit before tax ended at negative NOK 29.6m in 2023, up from negative NOK 85.0m in 2022. Net profit ended at negative NOK 21.4m in 2023.
# **Cash flow**
The group's operating activities generated a net cash inflow of NOK 60.3m in 2023, compared to a NOK 56.6m outflow in 2022. Key drivers for the turnaround in cash flow was a reduction in working capital of NOK 33.4m, generated by higher sales volumes and using financing agreements, and the NOK 55.4m improvement in profit before tax from 2022 to 2023.
Investing activities generated a net cash outflow of NOK 22.8m in 2023, which consists of capital expenditures to product- and platform development. In 2022 net cash outflows from investing activities were NOK 58.1m of which NOK 20.0m was an earnout from the Xplora Mobile acquisition.
Financial activities generated a net inflow of NOK 49.6m in 2023. This compares to a net inflow of NOK 25.4m in 2022. The company increased net debt by NOK 31.6m and NOK 17.5m in equity.
In 2023, the amount of cash increased by NOK 87.0m. It started at NOK 50.4m at the beginning of the year and ended at NOK 137.4m by the end. In 2022, the cash balance decreased by NOK 89.3m.
# **Financial position**
At the end of 2023, Xplora Technologies Group had total assets of NOK 546.8m, compared to NOK 507.9m at year-end 2022. Xplora have continued its efforts to reduce accounts receivable. As such, the increase in total assets comes as a result of the increase in cash and cash equivalents.
Group equity at year-end 2023 amounted to NOK 337.8m, with an equity ratio of 62%, compared to NOK 350.6m and a 69% equity ratio at year-end 2022.
Interest-bearing debt increased to NOK 69.9m at the end of 2023, up from NOK 38.3m in 2022. The debt consists of a loan from Innovasjon Norge and supply chain financing.
Cash and equivalents stood at NOK 137.4m at year end 2023 for a net cash balance of NOK 67.5m, compared to NOK 12.0m in 2022. Accounts payable increased to NOK 47.4m in 2023, up from NOK 41.2m in 2022. Other short-term debt, totalling NOK 91.7m in 2023, includes accruals and deferred income.
Accounts receivable decreased to NOK 38.8m in 2023, down from NOK 43.5m in 2022. Inventories increased to NOK 108.0m in 2023, up from NOK 96.4m in 2022. Total non-current assets were NOK 226.0m at the end of 2023, compared to NOK 243.3m in 2022, due to amortization of goodwill and customer contracts.
Goodwill amounted to NOK 138.2m in 2023, while the value of remaining customer contracts was reduced from NOK 41.5m at the end of 2022 to NOK 23.0m exiting 2023. Capitalized development costs increased to NOK 45.8m at year-end 2023, up from NOK 39.9m in 2022.
The Board of Directors believes that the group possesses adequate funds to address Xplora's financing needs for further growth over the next 12 months.
# **Xplora Technologies AS (parent)**
The parent company reported revenues of NOK 386.1m in 2023 from NOK 254.1m in 2022. Operating results for the year were negative NOK 49.0m, up from negative NOK 84.6m in 2022. Income from subsidiaries was NOK 56.0m in 2023, contributing to a financial income of NOK 102.0m, which offset by NOK 54.7m in financial expenses resulted in pre-tax loss of NOK 1.7m in 2023. This compares to pretax earnings of negative NOK 47.5m in 2022. Xplora Technologies AS total assets for 2023 were NOK 635.2m, compared to NOK 600.8m in 2022. The increase is driven by investment in intangible assets. Loans to group companies increased from NOK 163.7m in 2022 to NOK 216.6m in 2023. Cash balance ended at NOK 51.2m at the end of 2023 with interestbearing debt at NOK 14.6m. The parent company equity increased from NOK 441.3m in 2022 to NOK 450.3m in 2023.
# **Shares and dividends**
Xplora has one class of shares. At year-end 2023 there were 41,656,619 shares outstanding in the company. All shares are listed and freely traded on Euronext Growth under value of Xplora shares is NOK 0.004
The market valuation of Xplora on 31 December 2023 was NOK 581.1m.
At the end of 2023 the company had 1,182 shareholders, compared to 1,319 shareholders at the end of 2022. The proportion of shares held by foreign investors went down slightly from 7.7% at the end of 2022, to 5.2% at the end of 2023.
The highest closing price during 2023 was NOK 17.05, and the lowest closing price was NOK 6.42. The share
price at the last trading day in 2023 was NOK 14.0, compared to year-end 2022 share price at NOK 9.9, a 41% increase. For comparison, the Oslo Stock Exchange Benchmark Index OSEBX increased 10% during 2023.
Given Xplora Technologies' stage of development and significant organic and strategic growth opportunities the Board of Directors does not recommend a dividend for the year 2023.
At the Annual General Meeting on 16 May 2023 the Board of Directors was granted the following authorizations valid until the general meeting in 2024, or to 30 June 2024 at the latest:
Authorization for buyback of shares with par value up to NOK 16,662.648, for use in acquisitions, mergers, de-mergers or other transactions, compensation programs or to amortize treasury shares. As of 31 December 2023, the authorization has not been used.
Authorization to issue new shares, in one or more trenches, up to a total of NOK 30,000, for use in connection with capital raises to finance the Company's operations, strengthen the Company's equity, securing a sound liquidity, for use in compensation programs as well as to achieve strategic and commercial goals. On 21 December 2023, the Board of Directors exercised its authorization to increase the Company's share capital from NOK 166,626.48 to NOK 176,626.48, an increase of NOK 10,000. This increase was facilitated through the issuance of 2,500,000 new shares, each with a par value of NOK 0.004, allocated to key investors in recognition for loan guarantees provided in 2019 and 2020. Please see note 16 for more information.
# **Top 20 Shareholders**
The 20 largest investors in Xplora Technologies AS held 65.6% of outstanding shares per 31 December 2023. This compares to 63.3% at yearend in 2022. Please see note 11 Share capital and shareholder information under the consolidated accounts for further details.
# **Outlook**
The Board of Directors has an optimistic view of the prospects for Xplora. The company is a leader in a growing industry. Opportunities have been identified along several verticals, including smartwatch and IoT device sales, subscription services and valueadded services, driving both direct and licensing revenue streams. Over the coming years, market reports indicate that the kid's wearable industry is expected to grow by a CAGR of 15%.
Capital expenditures in 2024 are expected to be more modest than in 2023, and between NOK 15-20m.
Xplora aims to scale the nine key markets where it offers product and service bundles, and to streamline and improve its operations, thereby driving profitability and a more robust financial position. The Company will also increase activities in its two new divisions: Senior and SaaS. Although these divisions are unlikely to generate notable profits in 2024, Xplora is committed to laying a strong foundation for added growth and the Company will be looking for proof of concept in both divisions.
The forward-looking statements made above are, by their nature, subject to significant risks and uncertainties because they relate to events and depend on circumstances that are expected to occur in the future. They are in no way guarantees of future performance. While the statements reflect the current views and expectations of Xplora based on information currently available to it, they are subject to a wide range of assumptions, in addition to risks and uncertainties that may be outside of the Company's and its directors' control. Neither the Company nor its directors can provide any assurance that the assumptions underlying such forward-looking statements are free from errors nor accept any responsibility for the future accuracy of the opinions expressed herein, or the actual occurrence of the forecasted developments. Actual results could differ materially from those expressed or implied in forwardlooking statements. Any forward-looking statements are based only on conditions as of the date on which they are made and the Board are under no obligation to update or alter such forward-looking statements whether as a result of new information, future events or otherwise.
## **Going concern**
In accordance with the Norwegian Accounting Act Section 3-3a, the Board of Directors confirm that the conditions for continued operations are present and that the annual report has been prepared under the assumption of going concern. This assumption is based on forecasts for 2024 as well as the Company's longterm strategic outlook.
## **Risk Management**
The Board of Directors remains committed to implementing measures to ensure comprehensive risk management across all aspects of the group. Recognizing that effective risk management is crucial for long-term value creation for shareholders, employees, and other stakeholders, the company has taken significant steps in recent years. In 2021, Xplora established an Audit Committee, followed by the formation of an HR department, and hiring a Head of People and Organization in 2022. These enhancements are complemented by targeted internal assessments, including risk evaluations at the employee and executive levels, to ensure that the Company's strategies address both broad and specific organizational risks effectively.
Xplora faces several risk areas, including market and competition risk, operational risk, geopolitical risk, climate-related risk, financial risk, and cybersecurity risk. Both the Board of Directors and management diligently monitor the group's risk exposure and continuously strive to enhance internal control processes. The group adopts a proactive approach to risk management, wherein an annual risk assessment and mitigation plan is presented and discussed with the Board to address emerging challenges effectively.
## **Directors and Officers Insurance**
Xplora and all subsidiaries are covered by a director- and officers liability insurance. The insurance indemnifies directors and officers (management) for defence costs and potential legal liability arising out of claims made against them while serving on a board of directors and or as officers. The insurance policy is issued by a reputable, specialized insurer with appropriate ratings. The insured value is EUR 10m.
# **Operational risk**
Operational risk relates to the risk of lost sales, reduced profitability, and loss as a result of changes in Xplora's competitive position. Xplora operates in a rapidly developing market in the early stage of development, and future development of the market could change. Factors which can impact the competitive position include, but are not limited to, increased competition, new entrants, access to production capacity and access to necessary components, pressure on market prices, access to distribution channels, and future demand and supply factors. Depending on developments, these factors
can have a negative impact on the company's results and financial position and may cause deviation to current plans and expectations.
# **Geopolitical ri**s**k**s
Operating across multiple markets, Xplora is subject to geopolitical risk and instability, both existing and potentially merging in different regions worldwide. In a proactive effort to manage these concerns, the company carefully tracks the concentration of geopolitical risks and implements diversification strategies to reduce potential exposures that can have a substantial impact on the Company's financial results. Through vigilance and adaptability, the company is committed to mitigating any negative consequences arising from geopolitical uncertainties.
# **Climate-related risk**s
Climate-related risk include physical risk and transition risk. Physical risk refers to the impact of climate change, while transition risk refers to the transition towards a greener economy.
Physical risks may, both direct and indirect, affect Xplora's financial performance through supply chain and production disruptions. This includes risks related to raw material scarcity from severe weather, logistical challenges due to frequent natural disasters, and fluctuations in energy costs. These risks can inflate costs, delay production, and raise operational expenses, impacting overall business continuity. Transitioning towards a greener economy may involve changes in government policies, technological development, and customer demands. These include risk related to consumer preferences toward reducing environmental harm, adapting to stringent environmental regulations that could impose additional operational costs, and navigating the reputational and legal challenges if the Company does adapt its sustainability strategies to meet market expectations.
Xplora seeks to mitigate these risks by actively implement and plan different strategies, such as enhancing sustainable packaging and optimizing return processes, which more effectively can facilitate the refurbishment, resale, or recycling of products, rather than discarding them.
# **Financial risk**
Xplora Technologies has a centralized finance function with overall responsibility for accounting, cash management, capital management, financing arrangements and management of the group's financial risk factors. The group also fulfils certain financial functions through services provided by local accounting partners for its subsidiaries.
Xplora is exposed to credit risk related to counterparty default on contractual agreements and trade, and other current receivables. The Company has policies and procedures to ensure that sales are made to customers with appropriate credit profiles within defined limits. The company has taken a loss provision of NOK 2.0m for bad debt in 2023, less than 0.5% of total revenue.
Xplora has a NOK 100m financing facility, which has introduced more floating interest rates. As a result, the interest rate structure of the Company's debt has shifted from mainly consisting of fixed rates. Now, the majority of the Group's interest bearing debt consists of floating rates, increasing exposure to interest rate fluctuation.
Xplora has procurement and sales in different countries with different functional currencies and is as such exposed to currency risk associated with movement in Norwegian krone (NOK) against other relevant currencies, primarily US Dollar (USD), Euro (EUR), Swedish krona (SEK) and British Pound Sterling (GBP). As the Company buys its goods in USD and sells the majority of its products in the European market, the group initiated a program to hedge part of its EUR/USD exposure in 2023 to mitigate risk associated with currency fluctuations.
Xplora is also exposed to liquidity risk, which arises from the possibility of failing to fulfil financial obligations. To counteract this risk, the Company regularly monitors both forecasted and actual cash flows, alongside aligning the maturity of its assets and liabilities.
# **Cyber risk**
Cyber risk means any risk of financial loss, disruption, or damage to the reputation of an organization from a failure of its information technology systems due to internal or external factors. In an increasingly digital world, the risk of attacks on digital systems and infrastructure is increasing. Some cyber threats include ransomware, phishing, data leakage and hacking.
Cyber risks are becoming increasingly complex and challenging. Xplora conducts security penetration testing of its platforms for good practice and to mitigate risk. Every week a security scanning service conducts a security assessment for Xplora.
Xplora regularly partners with cyber security experts to perform penetration tests to seek out vulnerabilities. The reports from the penetration tests help to build the Company's long-term strategy on cyber security. Xplora has a Data Protection Officer to ensure compliance and to manage any inconsistencies or breaches. Xplora has in place Cyber Response Insurance.
#### **Transparency Act**
The Transparency Act was entered into force on 1 July 2022. The purpose of the act is to promote businesses' respect for fundamental human rights and decent working conditions and ensure the public's access to information. Xplora is committed to its efforts to ensure that human rights and decent working conditions are respected in its supply chain and within its operations. The Company acknowledge that this commitment requires ongoing efforts and continuous improvement implementing measures to achieve the ambitions set by the company.
Xplora's Annual Transparency Report 2022 outlines the company's obligations to account for the due diligence assessments conducted by the company. The report describes measures that have been assessed and implemented to reduce the risk of activities having adverse impacts on fundamental human rights and decent working conditions. A new report will be published on June 30, 2024, and will be available along with previous editions on the Company's webpage.
Xplora's guidelines on how the Company embed their work on human rights and decent working conditions is available on the Company's webpages. The procedure outlines the work that needs to be carried out to meet the requirements set out in the Transparency Act.
The Company has established a grievance mechanism for reporting potential adverse impacts related to human rights and decent working conditions. Requests for information and reports can be made through established communication channels, with responses provided within three weeks. All relevant details are available on the Company's webpages.
## **Working environment and employees**
The board remains attentive to employee matters, actively monitoring the company's work environment and ensuring gender equality. No specific programs have been identified as necessary to address equal opportunities or other matters. For further detailed information about Xplora's employees, the board refers to the Employee section of the Social and Social Responsibility chapter of this report.
# **ENVIRONMENTAL ACTION**
In line with Xplora's vision of empowering children globally to effect positive change through everyday activities, the company emphasized sustainability and social impact in 2023 through its operations, community initiatives and the Play for Good initiative.
For more information about Xplora's work on environment and social actions the board refers to the environment section of the Social and Social Responsibility chapter of this report.
# **EVENTS AFTER THE BALANCE SHEET DATE**
On January 2, 2024, Xplora announced the completion of a share capital increase, registered with the Norwegian Register of Business Enterprises. Following the Board of Director's resolution, based on the authorization from the Annual General Meeting on May 16, 2023, the new share capital is NOK 176,626.48, with 44,156,620 shares at a par value of NOK 0.004 each, where
each share carries one vote. The contractual subscription rights were exercised and paid in 2023, recorded as paid non-registered equity. Gross proceeds from the capital increase were NOK 17.5m. After this exercise there are no more contractual subscription rights, excluding employee options.
On April 2, 2024, Xplora entered into a new sales agreement with Freenet AG, a German telecom and digital service provider. The Xplora Premium Service will be bundled as an add-on service with Freenet's mobile subscription. This agreement expands Xplora's Premium Service platform in the German market and adds a new recurring service revenue stream. Xplora has received an initial purchase order of more than NOK 30 mill (30,000 smartwatches), to be delivered over the next 12 months.
# **STATEMENT OF THE BOARD OF DIRECTORS**
The board confirms to the best of its knowledge that the financial statements for the Company for 2023 and the comparable numbers for 2022 have been prepared in accordance with applicable accounting standards, and that the information provided in the financial statements gives a true and fair view of the Company's assets, liabilities, financial position and financial performance as a whole, and that the Board of Directors' Report gives a true and fair overview of the Company's development, profit and financial position, together with a description of the principal risks and uncertainties that they face.
The Board of Xplora Technologies AS Oslo, 25th of April 2024
**Tore Engebretsen** *Chairman of the Board*
(sign.) (sign.) (sign.) **Harald Fredrik Hodne Ulltveit-Moe** *Member of the Board*
**Bjørn Christian Eide** *Member of the Board*
(sign.) (sign.) (sign.)
**Kari Bech-Moen** *Member of the Board* **Ingrid Elvira Leisner** *Member of the Board*
**Sten Kirkbak** *CEO*
# **XPLORA ORGANIZATION STRUCTURE**
# <span id="page-22-0"></span>**Corporate Governance**
Xplora considers good corporate governance to be important for a robust organization, value creation, trustworthiness with all its stakeholders, and access to capital. Xplora endorses the Norwegian Code of Practice for Corporate Governance, NUES, updated on 14 October 2021 despite not being subject to NUES.
A fundamental principle of Xplora's corporate governance is to help build trust and confidence in the company, drive more efficient decision making and make communication between shareholders, the Board of Directors and management more transparent. These principles do not replace or set aside the importance of building a strong, positive, and healthy corporate culture throughout the company, but rather act as a framework or fundament in good decision making.
Xplora is a Norwegian public limited liability company listed on Euronext Growth Oslo and bases its corporate governance structure on Norwegian legislation and recommended guidelines. As a listed company, Xplora must comply with applicable provisions of the Norwegian Securities Trading Act, and EU Market Abuse Regulation (MAR), the Continuing obligations for companies listed on Oslo Børs Euronext Growth, the Norwegian Private Limited Liability Companies Act and all other applicable laws and regulations.
# **GENERAL MEETING**
Xplora seeks to ensure that all shareholders are able to exercise their rights by participating in general meetings, and that the general meeting is an effective meeting place for shareholders and the board of directors. The General Meeting is the highest decisionmaking authority of the Company. All shareholders of the Company are entitled to attend and vote at general meetings and to table draft resolutions for items to be included on the agenda for a general meeting. The general meeting will normally be held each year by the end of June, with notice of the event and documents available on the company website no later than 14 days before the annual general meeting. Shareholders may participate and vote, in person or by proxy, as long as they are registered with the Norwegian Registry of Securities (VPS).
In 2023 Xplora held its annual general meeting 16 May 2023 with 22,98% of voting capital represented. The next general meeting is scheduled for 16 May 2024.
# **THE WORK OF THE BOARD OF DIRECTORS**
Pursuant to Article 5 of the Articles of Association, the Board of Directors shall consist of up to seven members. The current Board of Directors consists of five members, two women and three men, as further set out in the next section. All members are elected for a term of two years and may be re-elected.
In accordance with Norwegian law, the Board of Directors is responsible for, among other things, supervising the general and day-to-day management of the Company's business. This includes ensuring proper organization, preparing plans and budgets for its activities ensuring that the Company's activities, accounts, and assets management are subject to adequate controls and undertaking investigations necessary to perform its duties.
# **Audit Committee**
The Board of Directors established an audit committee in 2021 as a sub-committee of the Board of Directors. Its overall purpose and objective are to act as a prepreparatory and advisory body in connection with the Board's supervisory role with respect to financial reporting, external audit, risk management and other assigned tasks. The Committee consists of Board members Ingrid Elvira Leisner and Bjørn Christian Eide. The committee members are appointed for a period of two years.
For information on board remuneration, please refer to note 3 in the financial statements.
## **People and organization Committee**
Xplora established a People and organization Committee, previously called HR Committee, consisting of two board members in 2022 as a subcommittee of the Board of Directors. The People and organization Committee is established to ensure that the organization is following local, state, and federal laws and certain best practices relating to its employees and creating an attractive environment for current and prospective employees. The Committee consists of Board members Kari Bech-Moen and Ingrid Elvira Leisner. The committee members are appointed for a period of two years.
For information on board remuneration, please refer to note 3 in the financial statements.
# **Management**
Management is responsible for the day-to-day management of the Company's operations in accordance with Norwegian law and instructions set out by the Board of Directors. Among other responsibilities, the Company's Chief Executive Officer (the "CEO"), is responsible for keeping the Company's accounts in accordance with existing Norwegian legislation and regulations and for managing the Company's assets in a responsible manner.
# **Employee safety**
Xplora seeks to ensure the health and safety of all employees and has established a health and safety policy. The Company complies with relevant local health and safety laws, regulations, and best practices to provide and maintain a healthy and safe working environment. The parameters of compliance can differ due to variations in the laws, regulations, and practices in the countries in which Xplora Technologies conducts business.
For further detailed information about Xplora's employees, see the Employee Section of the Social and Social Responsibility chapter of this report.
# **Whistleblowing policy**
Xplora has a whistleblowing policy aimed at encouraging a culture of transparency and openness. This policy enables the reporting of censurable conditions, empowering staff to internally communicate any concerns about wrongdoing within the company. By fostering an environment where employees feel supported in speaking up, Xplora can take appropriate actions and implement necessary measures to address these issues. The company differentiate between two distinct approaches for reporting issues: Grievance reporting and Whistleblowing.
Grievance reporting is intended for situations where an employee has personally been mistreated. This could involve a breach of employment rights, bullying, or harassment, with the object of obtaining redress or justice for the individual affected.
Whistleblowing, on the other hand, is aimed at bringing attention to concerns about potential danger or illegal activities that impact others, such as customers, the public, the environment, or the company. In these
instances, the individual raising the concern is often not directly affected by the issue.
In 2023, there have been zero Whistleblowing reports and three grievance reports which were resolved according to company policy.
# **Code of Ethics and Business Conduct**
Xplora has built a strong reputation for integrity and honesty in every facet of its business. The Code of Ethics and Business Conduct provides guidance for carrying out employee responsibilities on behalf of Xplora, fostering an environment of mutual trust and respect, continuing to build on the Company's reputation for integrity, and observing the highest standards of ethical conduct.
The Code is designed to promote honest, ethical, and lawful conduct by all employees, managers, and directors of Xplora Technologies AS and all subsidiaries and controlled entities. Independent contractors, consultants, agents, and sales representatives who represent Xplora are expected to apply the same high standards while working for Xplora.
The Code of Ethics is inspired by Company's values as well as the principles of the "Universal Declaration of Human Rights" and the Organization for Economic Co-operation and Development guidelines for multinational enterprises.
## **Communication and Investor Relations**
Xplora Technologies is committed to providing its shareholders with precise and relevant information to ensure that the company's share price reflects its true value and prospects. Xplora upholds the equal treatment of shareholders and potential investors.
Xplora has implemented a process for handling of sensitive information to ensure that the Company, its employees, and representatives fulfil their obligations regarding the handling and publication of sensitive information.
Xplora has prepared insider trading regulations to ensure trading in the company's shares by board members, executives and employees is conducted in accordance with applicable laws, regulations, and company policy.
Xplora's financial calendar, press releases and stock exchange notices are published on Oslo Børs
NewsWeb and is available on the Company's investor page on www.xplora.com/investors.
IR activities are conducted by the IR team, which includes the CFO, the CEO, and the Chairman of the Board as well as other personnel appointed by the team. Only members of the IR team shall act as spokespersons. Xplora has implemented an IR Policy as a basis for its IR work.
Throughout the year, Xplora actively engaged with shareholders through investor conferences, a capital markets day and meetings organized by leading investment banks, in addition to direct engagement activities. The company's Investor Relations (IR) team continued communication efforts through recorded webcasts and other outreach initiatives, including market updates. Going forward, Xplora is committed to enhancing stakeholder communication through a dedicated PR and IR strategy.
## **Takeovers**
Xplora operates in a dynamic market with many different stakeholders, and consolidation is to be expected among different industry players. This could also include Xplora. The Board of Directors will not hinder or obstruct any takeover bid for the company's operations or shares. In the event of a bid on the company's shares or operations the Board of Directors will seek to comply with recommendations in the Code of Practice in addition to complying with all relevant legislation and regulation. The company's Board of Directors and management will endeavour to ensure equal treatment of all shareholders in such matters. Following a bid on the company's shares the Board of Directors will obtain a valuation from at least one independent expert. On this basis, the Board will make a recommendation as to whether the shareholders should accept the bid. The Board of Directors will ensure that all shareholders are given information and sufficient time to evaluate the bid. There are no other written guidelines for procedures to be followed in the event of a takeover bid.
### **Auditors**
Xplora's auditor is BDO AS. The partners of BDO AS are members of The Norwegian Institute of Public Accountants (Nw.: "Den Norske Revisorforeningen"). BDO AS has been the Company's independent auditor since 5 November 2020. The auditors provide a statement each year confirming their independence. At each year's annual general meeting, the Board of Directors discloses the fees paid to the auditors.
# <span id="page-25-0"></span>**Sustainability and Social Responsibility**
# **Environment**
At Xplora our vision is to enable children around the world to experience how their everyday activities can make a positive change in the world. We feel inspired to be a part of a movement that encourages a healthier and more socially engaged lifestyle. That's why our mission drives us to find new ways to keep kids and families active and form healthy and sustainable habits through wholesome experiences in this evolving digital world. Xplora is dedicated to contributing to United Nations' (UN) efforts to reach a more sustainable future, both regarding our own impact as well as the positive impact our growing community of Xplora customers may generate.
# **How we are developing and executing our ESG strategy**
- 1. **Top-down approach.** The board and management are fully behind the company's vision to enable children's activity around the world to make a positive change to the world.
- 2. **Global partners.** We focus on entering into global partnerships and integrations with some of the leading organizations promoting sustainability, such as UNICEF, United Nations and United Cities.
- 3. **Execution.** With our activity platform we have been able to develop a highly scalable and measurable tool for executing sustainability goals, all triggered by the users' activity level.
- 4. **Operations.** Xplora continuously strives to improve efficiency of our operations and reduce our carbon footprint.
- 5. **Reporting.** Either Xplora as a business, or our partners licensing our platform, can precisely measure the impact of each of the projects. Since our platform has two dimensions, we can report on the impact from the steps (input) and the sustainability projects executed (output). Combined, the impacts will trigger several of the Sustainable Development Goals (SDGs).
Xplora will in 2024 continue improving ESG practices across all areas of the business. The company will focus on the work with developing and training the employees, integrating ESG processes and systems to improve the ESG performance and enhancing better reporting routines. Xplora recognizes the importance of maintaining robust ESG practices and transparent communication in our future reports. This approach will enable us to maintain our commitment to uphold a responsible and sustainable business practice and contribute to making a positive impact on the environment, society, and the stakeholders.
# **Why this is important for Xplora as a business**
- **Brand and Trust**. A successful business requires a trusted brand. Our ESG strategy helps us reach our vision to enable children's activity to change the world. We move from words to actions. Taking care of the future, environment, and sustainability, is more relevant and important for our target groups than ever before.
- **Efficient Marketing.** Because of its relevance to the target group, we see up to X3 better ROI on marketing campaigns related to our SDG campaigns VS traditional marketing and sales campaigns.
- **Important for retail, telcos and distributors.** We are expecting around 70% of the sales in the industry to come from retailers and telcos. They require all partners to have a clear and measurable ESG strategy in order to become a preferred partner.
- **Becoming a one-stop-shop.** Because of the increasing focus on ESG in general, businesses worldwide are to some degree struggling to implement or find easy to execute and measurable strategies. Global companies can use our activity platform to transform their employees and/or end consumers' daily activity to convert to SDGs. This provides us with a great opportunity to inorganically grow our user base and brand recognition.
# **XPLORA ENVIRONMENTAL POLICY**
Xplora is conscious of its responsibility regarding the environment and has established an environmental policy. Xplora's objective is to contribute to a more sustainable future for generations to come. Xplora believes that corporate responsibility goes beyond the company's proprietary borders and therefore every effort will be made to conserve resources throughout the company's operations. Xplora complies with existing environmental regulations and strives to reduce its environmental footprint by promoting sustainable operations and initiatives. Moreover, Xplora supports the UN sustainable development goals (SDGs).
Xplora's core mission is to educate and incentivize children in the value of being physically active and raise environmental awareness. All the children that own an Xplora watch, and their parents, can engage together in several activity campaigns where their physical steps are converted into Xplora coins. These coins can be used on the Xplora Activity Platform for various features, such as auctions and games. The platform also features educational adventures that encourages environmental awareness. It is clearly documented that this incentive model inspires our customers to be substantially more physically active. Short term increased physical activity has a positive effect on individual physical and mental health, and longer term it contributes to improved public health and as a result public savings.
Xplora actively supports community initiatives. In 2023, the Company extended its partnership with One Tree Planted, planting a tree for every watch sold in the US during April 2023. Additionality, Xplora collaborated with the Childhood Cancer Foundation, raising awareness and funds for childhood cancer research on International Childhood Cancer Day through a campaign that matched customer donations. Xplora remains dedicated to identifying and pursuing further initiatives that supports the UN sustainable development goals.
# **OPERATIONS**
With a global and rapidly growing business model Xplora faces a wide range of stakeholders with different needs and requirements. We value feedback from all stakeholders and take suggestions into account when reviewing our sustainability issues and their impact on our business.
Xplora has a strong focus on sustainability in its operations. The Company is committed to continuously improving its packaging solutions, now utilizing nearly 100% recycled materials. In 2023, Xplora launched a specific project to further optimizing its return processes. This initiative aims to enhance the refurbishment, resale, or recycling of products, contributing to a reduction in resource waste and a decrease in environmental impact.
Xplora became a member of Sedex in 2021. Sedex is a membership organization that provides one of the world's leading online platforms for companies to manage and improve working conditions in global supply chains. Sedex provides practical tools, services, and a community network to help companies improve their responsible and sustainable business practices, and source responsibly. In 2021 and 2022, Xplora conducted several audits within our supply chain. Additional audits are scheduled to be conducted in 2024.
# **PLAY FOR GOOD®**
We all need to take part in creating a better and more sustainable future. No one is more aware of this than the future generation which Xplora seeks to engage. Xplora will bring ESG strategies one step forward, from keynotes to actions through various partnerships using our activity platform. Play for Good represents our collective commitment to giving back, promising to enrich the world our kids play in. Play for Good is our initiative to teach children how small contributions to good causes can have a strong impact on the world.
Play for Good campaigns can address a number of different good causes, including charities, equality programs, environmental programs and other sustainability projects.
When combining activity campaigns with charities, Xplora creates inspiring synergies between public health, public awareness for the selected charity partners, and the donated money naturally makes a direct difference. We documented a clear growth in participation and activity when connecting a charity to the activity campaign. It is clear that when children learn that they can help other children in less fortunate circumstances, the engagement grows substantially.
# **Social**
# **EMPLOYEES**
The workforce is the foundation upon which Xplora builds its accomplishments. The company strives to establish a working environment that promotes mutual respect, where individuals feel comfortable sharing, can challenge each other's ideas, and where equal opportunities are available to all. Xplora recognizes the importance of its employees as the driving force behind its success and aims to cultivate a collaborative and inclusive culture that encourages open communication and fosters innovation.
At the end of 2023 Xplora had 121 employees, where 51% were women and 49% were men. This compares to 54% women and 46% men in 2022. 44% of Xplora's management were women at the end of 2023. The company's workforce consists of 19 nationalities across North America, Europe, Asia, and Africa. At the end of 2023 55 employees worked in Norway, 11 in Sweden, 5 in Denmark, 7 in Finland, 28 in UK, 1 in Spain, 10 in Germany and 4 in the US.
As the Company have continued to grow, there is a constant need to attract new talent and nurture the skills of existing employees. Yearly personal evaluation meetings are conducted to facilitate feedback and aid in the development of individual career goals, allowing employees to maximize their skills and potential.
#### **Table 1 – employee diversity and composition of BoD by gender**
| Diversity | 2023 |
|--------------------------------|------|
| Women in BoD | 40% |
| Women in manager positions | 44% |
| Women in non-manager positions | 53% |
| Women among all employees | 51% |
| | |
Xplora is dedicated to creating a work environment that is fair and inclusive for all employees, regardless of gender. The Company recognizes the importance of equal pay for equal work and offers competitive wages that are in line with industry standards. To ensure transparency and fairness in its pay structure, Xplora's management and Board of Directors oversee and monitor its compensation schemes. Salaries are determined on an individual basis, considering factors such as the level of responsibility, qualifications, experience, tasks, and performance of each position holder.
Table 2 illustrates a variation in salaries between women and men, especially between women and men in manager positions. Although women make up half of the manager positions, the top management of the company mainly consist of male employees.
"All employees" refer to the employees in manager and non-manager positions summarized, and the discrepancies in compensation between male and female employees across various categories can be attributed to factors such as tenure, seniority, and differing responsibilities associated with their respective positions.
#### **Table 2**
| Pay-ratio | 2023 |
|----------------------------------------------------|------|
| Pay-ratio women to men in manager<br>positions | 74% |
| Pay-ratio women to men in non<br>manager positions | 86% |
| Pay-ratio women to men for all<br>employees | 83% |
Each year Xplora carries out an annual performance review for all employees, aiming at evaluating individual performance. To compliment this approach, weekly anonymous surveys are administrated through an employee feedback system, Winning Temp. The system offers valuable insights and fosters a deeper understanding of the company's workplace dynamics. Xplora's comprehensive performance assessment strategy aligns with its commitment to employee development and organizational growth, allowing for the analysis of findings and the implementation of measures to ensure an optimal work environment. In addition, Xplora has a Work Environment Committee, consisting of employees in various positions. The committee is dedicated to maintaining good processes within the company and collaborates closely with the management to identify and implement solutions that contribute to a more positive and productive work environment.
The use of both annual and weekly assessments, in addition to the insight from the Work Environment Committee helps to ensure that feedback is timely, actionable, and relevant, further supporting the
company's focus on continuous improvement. The findings from this work are presented to the management each month. This approach reinforces Xplora's commitment to transparency and inclusivity, giving each employee a voice in shaping the company's future.
In 2023, Xplora conducted a comprehensive organizational risk assessment, engaging stakeholders from all departments. This initiative is a central part of the Company's broader risk management strategy, which addresses various risk areas including market, operational, geopolitical, climate-related, and cybersecurity risks. By engaging a third party to conduct employee surveys, a CEO assessment, and workshops throughout the organization, Xplora focuses on identifying areas for improvement and enhancing the work environment. These internal assessments align with Xplora's annual risk assessment and mitigation plan, which is presented to and discussed with the Board of Directors to address emerging challenges effectively. The Company ensures follow-up by concentrating on the implemented actions and areas for improvement, with a new assessment scheduled for autumn 2024.
#### **Table 3**
| Performance appraisals | 2023 |
|---------------------------------|------|
| Employee performance appraisals | 96% |
Xplora is a dynamic and rapidly growing company that has experienced substantial expansion in recent years. With a strong focus on operational efficiency, the Company has strategically streamlined its resource utilization. In 2023, new hires represented 12% of Xplora's workforce as of December 31, a decrease from a 38% increase in 2022, reflecting a more measured and strategic utilization to support sustainable growth. In a key strategic move, Xplora outsourced parts of its customer support team to enhance operational flexibility by allowing quick adaptation to seasonal demand, while maintaining high service standards through close collaboration with a third-party customer support provider. This outsourcing is balanced by a strong in-house team that includes a leadership group and a Nordic team of specialists. This allows Xplora to better focus its core competencies and drive innovation.
**Table 4**
| Turnover and retention | 2023 | |
|-----------------------------------|------|-----|
| | # | % |
| Total number of new employees | 14 | 12% |
| Total number of employee turnover | 27 | 21% |
The health and safety of Xplora's employees is of great importance. The company complies with relevant local health and safety laws, regulations, and best practices in the countries where it operates. Xplora is proud to maintain a low injury rate, with no workrelated injuries reported in 2023. Absence rate (sick leave) increased to 4.4% in 2023 (table 5), compared to 3.0% in 2022. The working environment at Xplora is considered good, and the company remains devoted to continual efforts to improve it further, ensuring a safe and healthy workplace for all employees.
#### **Table 5**
| Health and safety | 2023 | |
|-------------------------|------|--|
| Injury rate | 0% | |
| Lost day rate | 0% | |
| Absence rate | 4.4% | |
| Work related fatalities | 0% | |
| | | |
Xplora is committed to continuously adapting to the evolving needs and preferences of its employees. As part of this commitment, Xplora has upheld the Home Office Policy introduced in 2022, allowing employees to benefit from a flexible work environment. The company places great value on fostering a healthy work-life balance, understanding its significance in employee wellbeing. By actively listening to employee feedback and responding accordingly, Xplora takes a proactive position in supporting its workforce's wellbeing and bolstering its capacity to attract and retain top-tier talent.
# <span id="page-29-0"></span>**Members of the Board**
# **TORE ENGEBRETSEN**
## **Chairman**
Tore Engebretsen is the owner of Passesta AS, an investment company with a focus on technologyoriented investments. Tore holds several board and chairman positions in a variety of companies such as Media Network Services AS and Squarehead Technology AS. He is previously founder and CEO of VMETRO ASA, an OSE listed technology company, and previously served as chairman of Elliptic Laboratories AS and Nordic Semiconductor ASA, also listed on the OSE. Tore holds a Cand. Real. From the University of Oslo in theoretical physics.
# **HARALD FREDRIK H. ULLTVEIT-MOE**
## **Board Member**
Harald Fredrik H. Ulltveit-Moe is an investor and medical doctor and specialist in ophthalmology. He is the founder and managing director of Øyelegeklinikken AS, a specialist eye clinic based in Trondheim, Norway. His investment firm Harmonium Invest invests in a broad range of businesses. Harald holds an M.D. degree from the University of Oslo.
# **KARI BECH-MOEN**
# **Board Member and member of the People & organization Committee**
Ms. Bech-Moen has served on the Board of Xplora since June 2021. Ms. Bech-Moen's directorships include current board positions for Huma AS, Conexus AS, Smart Cylinders AS, Diversity Index AS, Seema AS. Ms Bech-Moen has more than 20 years of management experience from tech startups to corporate executive positions. She has in recent years worked as Executive VP, Head of People at DNB, and has 12 years of experience from Telenor with various executive positions. She was the CEO and founder of FamWeek. Kari holds an MSc from London School of Economics and Political Science and is a Siviløkonom from Handelshøyskolen BI.
# **BJØRN CHRISTIAN EIDE**
# **Board Member and member of the Audit Committee**
Bjørn Christian Eide is an investor and finance professional that has more than 20 years of experience from finance, business operations, and accounting. He recently relocated back to Norway after more than 10 years in various roles at Microsoft around the world. Bjørn currently serves as a board member and Co-Chief Investment Officer of Esmar AS, a shareholder in Xplora. He holds a Siviløkonom degree from Norwegian School of Economics (NHH).
# **INGRID ELVIRA LEISNER**
# **Board Member and member of the Audit- and the People & organization Committee**
Ms Leisner has served on the Board of Xplora since June 2021. She has extensive experience from serving as a board member in companies listed on the Oslo Stock Exchange. She is currently serving on the board of Norwegian Air Shuttle ASA, Maritime and Merchant Bank ASA, Techstep ASA and Elliptic Labs ASA. Ms Leisner is Chair of the Audit Committee in several of the companies where she serves as Board Member. She holds a Bachelor of Business Administration (Siviløkonom) from the University of Texas.
# <span id="page-30-0"></span>**Management**
# **STEN KIRKBAK**
# **Founder and CEO**
Sten Kirkbak has more than 25 years of extensive experience from the telecommunications and technology sectors, holding both executive positions and as a founder of multiple start-ups. Prior to Xplora, Sten was the founder and chief creative officer of FiLIP Technologies and CEO of Black Moose Brand Agency. Additionally, he has held various roles at KPNQwest and Telenor Telehuset. Sten holds multiple patents in the technology and wearable space as well as PR and marketing awards for launching technology products in Europe and US.
# **KNUT STÅLEN**
# **CFO**
Knut Stålen has been CFO of Xplora since August 2023. He has a solid background with 30 years of experience in the software and technology industry, particularly with global scale-ups. Throughout his career, he has served as CFO in several publicly listed technologies companies. Previous employers include Next Biometrics ASA, Trolltech ASA and Mamut ASA. Knut holds a finance and marketing degree from BI Norwegian Business School.
# **KRISTIN HELLEBUST**
# **CLO**
Kristin Hellebust has extensive experience within the media- & entertainment industry as well as with technology management. She is the cofounder and CEO of Nordisk Film Shortcut with prior equivalent experience from Storm Studios. Furthermore, Kristin has practiced for several years as a lawyer in the law firm Selmer. Kristin has also served as board member for multiple private as well as publicly listed companies, including Hunter Group ASA, Arribatec ASA and Saga Tankers ASA. She holds a Cand. Jur. from the University of Oslo, Executive Master program in Financial Strategy from BI as well as Executive MBA from Norwegian School of Economics (NHH) in Bergen.
# **KJETIL FENNEFOSS**
# **COO**
Kjetil Fennefoss has been with Xplora since 2017 serving as a Managing Director for Xplora Mobile AS and currently in the role as COO. He has previously worked internationally for many years as a Group Director with Millicom in Dubai, Group Director in VEON in The Netherlands and as a Vice President for Telenor in various markets. Kjetil has also served as a Managing Director for Ingram Micro AS, Telenor Telehuset AS, MobilDatakjeden AS and United Distribution Business Ltd. in Thailand. He holds a MSc (Siviløkonom) from University of Mannheim, Germany and Executive Management Program from London School of Business and Finance.
# **SANGHYO KIM**
# **CTO**
Sanghyo Kim has more than 25 years of experience from the telecommunications and value-added service industry holding several roles within sales, business development and product marketing. Prior to joining Xplora as CTO, Sanghyo served as an independent business development consultant, head of business development and product marketing after various senior roles at RealNetworks. Sanghyo holds a degree in Computer Science from Changwon National University, South Korea.
# **ANJA VON LOM**
# **VP PRODUCT MARKETING**
Anja von Lom joined Xplora in 2017 as a PR & Marketing Consultant for Germany, effectively establishing the brand in the DACH region. With 23 years of expertise in media, marketing, and PR, she previously founded and led a PR agency for approximately 10 years, focusing on promoting emerging fashion labels. Anja has also contributed her skills to renowned media houses like Condé Nast, as well as prestigious fashion brands such as Chanel and Céline.
# **JONAS RINGSTAD**
## **EVP SaaS division**
Jonas has been with Xplora for 2.5 years, holding positions as Finance Director, interim CFO, and now EVP of the SaaS division. Before joining Xplora, Jonas worked with M&A processes for KPMG and risk analysis for NBIM in New York. He is experienced in financial planning and analysis and has broad experience from several start-ups. Jonas holds a degree in finance from BI Norwegian Business School.
# **SVENN JARLE SIMONSEN**
# **EVP Senior division**
Since 2015, Svenn Jarle Simonsen has been a part of Xplora, first as the Chief Operations Officer for Xplora Mobile AS, and now in the position of EVP Senior division. Prior to Xplora Svenn Jarle was COO with the fitness brand ELIXIA for seventeen years.
# **JASON PYNE**
### **EVP Kids division**
Joining Xplora in 2022 following a career in media and technology, Jason has more than 30 years' experience working in media, advertising, digital marketing, and technology, working for and with some of the largest regional and national newspaper organizations worldwide. Holding various senior and leadership positions, he has been instrumental in the development of brand products as well as audience and market growth. Originally from a design background, Jason has evolved through his many experiences to gain end to end business management functions.
# <span id="page-32-1"></span><span id="page-32-0"></span>**Xplora Technologies Group INCOME STATEMENT**
| Amounts in NOK 1000<br>Note | 2023 | 2022 |
|---------------------------------------|----------|----------|
| | | |
| REVENUE | | |
| 2<br>Sales revenue | 689,099 | 501,976 |
| Revenue | 689,099 | 501,976 |
| | | |
| OPERATING EXPENSES | | |
| Cost of sales | -356,785 | -264,963 |
| 3<br>Payroll expenses | -113,349 | -85,728 |
| 4, 5<br>Depreciation and amortization | -56,518 | -49,358 |
| Write-downs | - | -1,830 |
| Marketing expenses | -72,106 | -83,619 |
| Other operating expenses | -113,191 | -101,215 |
| Total operating expenses | -711,948 | -586,714 |
| | | |
| OPERATING PROFIT / (LOSS) | -22,849 | -84,738 |
| | | |
| FINANCIAL INCOME AND EXPENSES | | |
| 6<br>Other finance income | 51,615 | 34,432 |
| 6<br>Other finance expenses | -58,386 | -34,677 |
| Net finance | -6,771 | -245 |
| | | |
| PROFIT / (LOSS) BEFORE INCOME TAX | -29,620 | -84,983 |
| | | |
| 7<br>Income tax expenses | -8,260 | -10,589 |
| | | |
| NET PROFIT / (LOSS) | -21,360 | -74,394 |
| | | |
| Attributable to: | | |
| | | |
| Other equity | -21,360 | -74,394 |
| Total | -21,360 | -74,394 |
# <span id="page-33-0"></span>**BALANCE SHEET**
| Amounts in NOK 1000 | Note | 31.12.2023 | 31.12.2022 |
|--------------------------------|------|------------|------------|
| | | | |
| NON-CURRENT ASSETS | | | |
| | | | |
| Intangible assets | | | |
| Research and development | 4 | 45,794 | 39,945 |
| Deferred tax asset | 7 | 10,947 | 1,033 |
| Goodwill | 4 | 138,167 | 154,705 |
| Customer contracts | 4 | 23,044 | 41,479 |
| Total intangible assets | | 217,952 | 237,162 |
| | | | |
| Tangible assets | | | |
| Property, plant, and equipment | 5 | 1,456 | 1,976 |
| Total tangible assets | | 1,456 | 1,976 |
| | | | |
| Financial assets | | | |
| Other receivables | 13 | 6,577 | 4,188 |
| Total financial assets | | 6,577 | 4,188 |
| | | | |
| Total non-current assets | | 225,985 | 243,326 |
| | | | |
| CURRENT ASSETS | | | |
| Inventories | 9 | 107,998 | 96,350 |
| | | | |
| Receivables | | | |
| Accounts receivables | | 38,760 | 43,521 |
| Other receivables | | 36,672 | 74,337 |
| Total receivables | | 75,432 | 117,858 |
| | | | |
| Cash and cash equivalents | 10 | 137,433 | 50,409 |
| | | | |
| Total current assets | | 320,863 | 264,617 |
| | | | |
| TOTAL ASSETS | | 546,848 | 507,943 |
| Amounts in NOK 1000<br>Note | 31.12.2023 | 31.12.2022 |
|---------------------------------------------|------------|------------|
| EQUITY | | |
| | | |
| Owners' equity | | |
| 11, 12<br>Share capital | 167 | 167 |
| 12<br>Share premium | 317,021 | 347,313 |
| 12<br>Other paid-in capital | 20,606 | 3,106 |
| Total owners' equity | 337,793 | 350,585 |
| | | |
| Total equity | 337,793 | 350,585 |
| | | |
| LIABILITIES | | |
| | | |
| Provisions | | |
| Deferred tax liability | - | - |
| Total provisions | - | - |
| | | |
| Other non-current liabilities | | |
| 13<br>Liabilities to financial institutions | 14,583 | 22,917 |
| Total non-current liabilities | 14,583 | 22,917 |
| | | |
| Current liabilities | | |
| 13<br>Liabilities to financial institutions | 55,303 | 15,396 |
| Accounts payable | 47,423 | 41,238 |
| Public duties payable | 5,006 | 5,052 |
| 7, 15<br>Other current liabilities | 86,740 | 72,755 |
| Total current liabilities | 194,471 | 134,441 |
| | | |
| Total Liabilities | 209,055 | 157,358 |
| | | |
| TOTAL EQUITY AND LIABILITIES | 546,848 | 507,943 |
# The Board of Xplora Technologies AS Oslo, 25th of April 2024
| | (sign. | | |
|--|--------|--|--|
| | | | |
**Tore Engebretsen** *Chairman of the Board*
(sign.) (sign.) (sign.) **Harald Fredrik Hodne Ulltveit-Moe** *Member of the Board*
**Bjørn Christian Eide**
*Member of the Board*
**Kari Bech-Moen** *Member of the Board*
(sign.) (sign.) (sign.)
*Member of the Board*
**Ingrid Elvira Leisner**
**Sten Kirkbak**
*CEO*
# <span id="page-35-0"></span>**STATEMENT OF CASH FLOWS**
| Amounts in NOK 1000<br>Note | 2023 | 2022 |
|-------------------------------------------------|---------|---------|
| | | |
| Cash flow from operating activities | | |
| Profit/ (loss) before income taxes | -29,620 | -84,983 |
| Income tax payable | -1,654 | -2,400 |
| 4, 5<br>Depreciation and amortization expenses | 56,518 | 51,188 |
| 9<br>Change in inventories | -11,648 | -13,871 |
| Change in accounts receivable | 4,761 | 34,812 |
| Change in accounts payable | 6,185 | 5,134 |
| Currency effects | -2,163 | 557 |
| 3, 18<br>Share based compensation | 4,499 | 2,689 |
| 3<br>Settlement of options | -6,609 | - |
| Changes in other accruals | 39,985 | -49,772 |
| Net cash flow from operating activities | 60,254 | -56,646 |
| | | |
| Cash flow from investing activities | | |
| | | |
| 4, 5<br>Purchase of intangible and fixed assets | -22,787 | -38,139 |
| Purchase of shares and investments | - | -20,000 |
| Net cash flow from investing activities | -22,787 | -58,139 |
| | | |
| Cash flow from financing activities | | |
| | | |
| 13<br>Payments on long-term debt | -8,333 | -6,933 |
| 13<br>Cash inflows from short-term debt | 39,907 | 15,391 |
| 12<br>Proceeds from issue of share capital | 17,500 | 16,500 |
| 18<br>Recognized cost on subscription rights | 485 | 485 |
| Net cash flow from financing activities | 49,558 | 25,443 |
| | | |
| Net change in cash and cash equivalents | 87,025 | -89,342 |
| Cash and cash equivalents at 01.01 | 50,409 | 139,751 |
| Cash and cash equivalents at 31.12 | 137,433 | 50,409 |
#### **ACCOUNTING PRINCIPLES**
The consolidated financial statements have been prepared in accordance with the Norwegian Accounting Act and generally accepted accounting principles in Norway.
#### **Use of estimates**
The preparation of accounts in accordance with the Accounting Act requires the use of estimates. It also requires Group management to exercise judgment in applying the Group's accounting policies. The areas where significant judgments and estimates have been made in preparing the financial statements and their effect are disclosed in the notes.
#### **Consolidation**
Subsidiaries are all entities (including special purpose entities) over which the group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity. The group also assesses the existence of control where it does not have more than 50% of the voting power but is able to govern the financial and operating policies by virtue of de-facto control. De facto control may arise in circumstances where the size of the group's voting rights relative to the size and dispersion of holdings of other shareholders give the group the power to govern the financial and operating policies, etc.
Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases.
The group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree, and the equity interests issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.
#### **Revenue**
Income from the sale of goods and services are recognized as fair value, net after deduction of VAT, returns, discounts and reductions.
#### **Revenue from sale of goods**
Revenue from the sale of goods is recognized in the income statement when both risk and control have been passed on to the buyer. The risk being the asset's profit and loss potential, whilst control is defined as having both the decision-making rights as well as the jurisdiction. Normally this will be when the goods are delivered to the customer. Historical data is applied to estimate and make provisions for quantity discount and returns at the date of sales.
#### **Revenue from sale of services**
Revenues from sale of services relate to connectivity plans (mobile subscriptions), premium services, telco operator revenue share, and service fees for Xplora smartwatches without Xplora mobile subscriptions (Nordics). Revenues for services are recognized when the services are performed, and the company has a right to payment for the performed service. Subscription fees are recognized over the subscription period.
#### **Discounts and marketing contribution**
Payments and price reduction included in the initial sales agreement are presented as a reduction of sales revenues. Marketing contributions to customers agreed not included in the initial sales
agreement are treated as marketing expenses and included in the line "Other operating expenses" in the income statement.
#### **Share-based payments**
The group/company has established equity-settled, share-based compensation plans, under which the entity receives services from employees as consideration for equity instruments (options) in the parent company. The fair value of the employee services received in exchange for the grant of the options is recognized as an expense over the vesting period. The total amount to be expensed is determined by reference to the fair value of the options granted at the grant date.
The social security contributions payable in connection with the grant of the share options are considered an integral part of the grant itself, and the charge will be treated as a cash-settled transaction.
#### **Classification of balance sheet items**
Assets intended for long term ownership or use are classified as fixed assets. Assets relating to the operating cycle have been classified as current assets. Other receivables are classified as current assets if they are to be repaid within one year after the transaction date. Similar criteria apply to liabilities. The first year's instalment on long-term liabilities and long-term receivables are, however, not classified as short-term liabilities and current assets.
#### **Intangible assets**
R&D expenses are taken into the balance sheet providing a future financial benefit relating to the development of an identifiable intangible asset can be identified and the expenses can be reliably measured. Otherwise, such expenses are expensed as and when incurred. Capitalized R&D expenses are depreciated on a straightline basis over the asset's expected useful life.
#### **Tangible assets**
Tangible fixed assets are capitalized and depreciated linearly over the expected useful economic life of the assets. When the depreciation plan is changed, the effect is distributed over the remaining depreciation periods. Maintenance of operating equipment is expensed on an ongoing basis.
Upgrades or improvements are added to the acquisition cost of the asset and depreciated in line with the asset. The difference between maintenance and upgrade / improvement is assessed based on the condition of the asset when purchased. Plots and land are not depreciated.
#### **Impairment of intangible and tangible assets**
Impairment tests are carried out if there is indication that the carrying amount of an asset exceeds the estimated recoverable amount. The test is performed on the lowest level of fixed assets at which independent ingoing cashflows can be identified. If the carrying amount is higher than both the fair value less cost to sell and the value in use (net present value of future use/ownership), the asset is written down to the highest of fair value less cost to sell and the value in use.
Previous impairment charges, except write-down of goodwill, are reversed in later periods if the conditions causing the write-down are no longer present.
#### **Inventory**
The inventory of purchased goods is valued at the lower of cost according to the FIFO principle and net sales value.
#### **Receivables**
Accounts receivable and other receivables are recorded in the balance sheet at face value after deduction of provisions for expected loss. Provisions for losses are made on the basis of individual assessments of the individual receivables.
Additionally, for accounts receivable, an unspecified provision is made to cover expected losses.
#### **Pensions**
The pension schemes are financed through payments to insurance companies.
#### **Defined contribution plan**
With a defined contribution plan the company pays contributions to an insurance company. After the contribution has been made the company has no further commitment to pay. The contribution is recognized as payroll expenses. Prepaid contributions are reflected as an asset (pension fund) to the degree the contribution can be refunded or will reduce future payments.
#### **Tax**
The tax charge in the income statement includes both payable taxes for the period and changes in deferred tax. Deferred tax is calculated with the tax rate applicable in each country the Group companies is situated in, on the basis of the temporary differences that exist between accounting and tax values, as well as any possible taxable loss carried forwards at the end of the accounting year. Tax enhancing or tax reducing temporary differences, which are reversed or may be reversed in the same period, have been offset and netted. Deferred tax on excess values relating to acquisitions of subsidiaries will not be equalized.
The disclosure of deferred tax benefits on net tax reducing differences which have not been eliminated, and tax losses varied forward losses, is based on estimated future earnings. Deferred tax and tax benefits which may be shown in the balance sheet are presented next.
#### **Foreign currencies**
Assets and liabilities in foreign currencies are valued at the exchange rate at the end of the accounting year. Agio gains and losses relating to sales and purchases of goods in foreign currencies are recognized as operating income and cost of goods sold.
Currency effects relating to intercompany transactions are recognized directly against the Group's equity in the consolidated statements.
#### **Warranties, guarantee commitments/complaints and service**
Provision for warranties and service work for completed projects / sales is recorded at the expected cost of such work. The estimate is based on historical figures for service and warranty repairs. The amount is recorded under other current liabilities and is recognized in the income statement on a straight-line basis over the warranty and service period.
#### **Cash Flow statement**
The cash flow statement has been prepared according to the indirect method. Cash and cash equivalents include cash and bank deposits.
# <span id="page-38-0"></span>**NOTES**
# **NOTE 2 REVENUES**
## **PER SEGMENT**
| Amounts in NOK 1000 | 2023 | 2022 |
|-------------------------|---------|---------|
| | | |
| Device revenue | 476,579 | 346,881 |
| Service revenue | 210,248 | 152,269 |
| Other revenue | 2,272 | 2,826 |
| Total | 689,099 | 501,976 |
| | | |
| | | |
| Geographical allocation | | |
| Amounts in NOK 1000 | | |
| | | |
| Germany | 222,418 | 170,600 |
| Sweden | 160,890 | 49,413 |
| Norway | 132,287 | 177,145 |
| Great Britain | 93,186 | 60,123 |
| USA | 27,242 | 12,151 |
| Finland | 25,251 | 19,469 |
| Denmark | 19,705 | 8,525 |
| Spain | 7,628 | 4,458 |
| France | 490 | 92 |
| Total | 689,099 | 501,976 |
From 2023, geographical allocation is based on the legal entities in which the revenue is recognized.
#### **NOTE 3 SALARY AND PERSONELL COSTS, NUMBER OF EMPLOYEES, LOANS TO EMPLOYEES AND AUDITOR'S FEE**
| Amounts in NOK 1000 | 2023 | 2022 |
|------------------------|---------|--------|
| | | |
| Salaries/Wages | 93,929 | 73,132 |
| Social security fees | 14,370 | 9,103 |
| Pension expenses | 3,850 | 2,965 |
| Team cost subsidiaries | - | - |
| Other benefits | 1,199 | 528 |
| Total | 113,349 | 85,728 |
| | | |
#### **Included in the above**
| Share-based compensation | 4,499 | 2,286 |
|--------------------------------------------------------|-------|---------|
| Social security provision for share-based compensation | 1,076 | (6,043) |
| Total | 5,575 | (3,757) |
| | | |
| Average full-time employees | 111.0 | 114.0 |
### **2023**
#### **Amounts in NOK 1000**
| Management remuneration | Salary | Board<br>remuneration | Bonus | Pension costs | Other benefits | Total |
|-----------------------------------|--------|-----------------------|-------|---------------|----------------|-------|
| | | | | | | |
| Chief executive officer | 2,725 | - | - | 71 | 2 | 2,799 |
| | | | | | | |
| Board of Directors: | | | | | | |
| Chairman Tore Engebretsen | | 155 | | | | 155 |
| Harald Fredrik Hodne Ulltveit-Moe | | 155 | | | | 155 |
| Bjørn Christian Eide | | 235 | | | | 235 |
| Torkil Munkhaugen ** | | 155 | | | | 155 |
| Kari Bech-Moen * | | 155 | | | | 155 |
| Ingrid Elvira Leisner | | 235 | | | | 235 |
| Total | 2,725 | 1,090 | 0 | 71 | 2 | 3,889 |
The table reflects actual payments in the respective year. Bonus is paid to the employee the year after it is earned. As there were no bonuses in 2022, there were no bonus payments in 2023. For 2023, the CEO earned a total of NOK 0.6m in bonus. The bonus will be paid in 2024.
\* Board member Kari Bech-Moen has in addition delivered services to Xplora Technologies AS for NOK 0.5m in 2023 and NOK 1.05m in 2022. This is billed through her company B-Effective AS.
\*\* Board Member Torkil Munkhaugen resigned from the BOD in May 2023
## **2022**
#### **Amounts in NOK 1000**
| Management remuneration | Salary | Board<br>remuneration | Bonus* | Pension costs | Other benefits | Total |
|-----------------------------------|--------|-----------------------|--------|---------------|----------------|-------|
| Chief executive officer | 2,583 | | 1,214 | 66 | 4 | 3,868 |
| Board of Directors: | | | | | | |
| Chairman Tore Engebretsen | | 150 | | | | 150 |
| Harald Fredrik Hodne Ulltveit-Moe | | 150 | | | | 150 |
| Bjørn Christian Eide | | 230 | | | | 230 |
| Torkil Munkhaugen | | 150 | | | | 150 |
| Kari Bech-Moen ** | | 150 | | | | 150 |
| Ingrid Elvira Leisner | | 230 | | | | 230 |
| Total | 2,583 | 1,060 | 1,214 | 66 | 4 | 4,928 |
#### \*Bonus for 2021
\*\* Board member Kari Bech-Moen has in addition delivered services to Xplora Technologies AS for NOK 0.5m in 2023 and NOK 1.05m in 2022. This is billed through her company B-Effective AS.
#### **CEO**
Employee bonus program: The CEO participates in the Company's current bonus scheme for the employee group which the Employee is a part of.
Management Incentive Program: The CEO also participates in the management incentive program as adopted by the board. For further details, see below.
On certain terms, the CEO is entitled to a severance payment equal to 9 months of salary which begins after the end of a 6 month notice period.
In 2023, the CEO exercised a total of 974,025 options. The CEO will receive a payment from the company of NOK 6.3m for these options. The payment will be executed in 2024.
#### **Options to leading employees**
During the year, seven employees have been granted options for the company's shares. Below is an overview of the Group Management's share options:
| Management | Opening Balance | Exercised options | Granted Options | Ending balance |
|-----------------|-----------------|-------------------|-----------------|----------------|
| CEO | 1,298,700 | (974,025) | 225,325 | 550,000 |
| Director | 250,000 | - | 125,000 | 375,000 |
| Director | 608,750 | (608,750) | 375,000 | 375,000 |
| Director | - | - | 275,000 | 275,000 |
| Director | 250,000 | - | - | 250,000 |
| EVP | 81,167 | - | 143,833 | 225,000 |
| EVP | - | - | 225,000 | 225,000 |
| EVP | - | - | 225,000 | 225,000 |
| Total | 2,488,617 | (1,582,775) | 1,594,158 | 2,500,000 |
| | | - | - | - |
| Former Director | 811,666 | (811,666) | | - |
| Total | 3,300,283 | (2,394,441) | 1,594,158 | 2,500,000 |
The exercised options in 2023 had a strike price of NOK 7 per share. The exercise will in total be a NOK 11.8m cash payment, where NOK 5.5m was paid in 2023 and the remining NOK 6.3m will be paid in 2024.
The balance of the 2.5m outstanding options is distributed with the following exercise price and dates:
| Expiration date | 30.06.2024 | 30.06.2025 | 31.12.2025 | 05.11.2029 |
|-----------------|------------|------------|------------|------------|
| Options | 324,675 | 456,167 | 125,000 | 1,594,158 |
| Exercise price | 14.7008 | 7.00 | 7.00 | 14.90 |
| Fully earned | 30.06.2023 | 30.06.2024 | 31.12.2024 | 05.11.2026 |
All options issued before 2023 can be exercised two years after they have been granted and for one subsequent year. The exercise requires continued employment in the company two years after the grant date.
A new option-based incentive program has been established in 2023. On 06.11.2023 a total of 1,594,158 options were granted to primary insiders with an exercise price of NOK 14.90 per share, VWAP last 30 days. 1/3 of the granted options will be earned after 1, 2, and 3 years respectively, with the options expiring after 6 years.
Total options outstanding cannot surpass 7.5% of the total number of shares outstanding in the company.
#### **OTP (Statutory occupational pension)**
The company is required to have a pension scheme in accordance with the Norwegian law on required occupational pension ("lov om obligatorisk tjenestepensjon"). The company's pension scheme meets the requirements of this law.
#### **Auditor**
Specification of auditor's fee:
| Amounts in NOK 1000 | 2023 | 2022 |
|----------------------|-------|-------|
| | | |
| Statutory audit fee | 2,902 | 2,729 |
| Total fee to auditor | 2,902 | 2,729 |
VAT is not included in the fee specified above.
#### **Loans and guarantees to management and shareholders etc.**
Loans/guarantees have not been granted to the shareholders, the General Manager and the Chairman of the Board, neither employees or related parties of management.
#### **NOTE 4 INTANGIBLE ASSETS**
| | | Customer | Research and<br>development | |
|-------------------------------------------------|----------|-----------|-----------------------------|----------|
| Amounts in NOK 1000 | Goodwill | Contracts | cost | Total |
| | | | | |
| Acquisition cost at 01.01.23 | 190,575 | 73,740 | 62,021 | 326,336 |
| Additions | | | 22,545 | 22,545 |
| Disposals | | | | |
| Acquisition cost at 31.12.23 | 190,575 | 73,740 | 84,566 | 348,881 |
| | | | | |
| Accumulated amortization/impairment at 31.12.23 | -52,408 | -50,696 | -38,772 | -141,876 |
| Reversed impairments 31.12.23 | | | | |
| Net carrying value at 31.12.23 | 138,167 | 23,044 | 45,794 | 207,005 |
| | | | | |
| Amortization for the year | -19,592 | -18,435 | -17,419 | |
| Impairment loss for the year | - | - | - | |
| Useful economic life | 10 years | 4 years | 4 years | |
| Amortization plan | Linear | Linear | Linear | |
### **NOTE 5 TANGIBLE ASSETS**
| Amounts in NOK 1000 | | | |
|-------------------------------------------------|-----|---------------|--------|
| | | Machinery and | |
| Property, plant, and equipment | Art | equipment | Total |
| | | | |
| Acquisition cost at 01.01.23 | 50 | 2,793 | 2,843 |
| Additions | | 267 | 267 |
| Disposals | | | - |
| Acquisition cost at 31.12.23 | 50 | 3,060 | 3,110 |
| | | | |
| Accumulated amortization/impairment at 31.12.23 | | -1,654 | -1,654 |
| Reversed impairments 31.12.23 | | | |
| Net carrying value at 31.12.23 | 50 | 1,406 | 1,456 |
| | | | |
| Depreciation/impairment for the year | | -1,071 | |
| Useful economic life | | 3/5 years | |
| Amortization plan | | Linear | |
#### **NOTE 6 FINANCE INCOME AND EXPENSES**
Amounts in NOK 1000
| Finance Income | 2023 | 2022 |
|-----------------------|--------|--------|
| | | |
| Other interest income | 606 | 70 |
| Other finance income | 2 | 2 |
| Exchange gain (Agio) | 51,007 | 34,360 |
| Total finance income | 51,615 | 34,432 |
| Finance expenses | 2023 | 2022 |
|---------------------------------|---------|---------|
| | | |
| Other interest expenses | -9,245 | -1,721 |
| Exchange loss (Disagio) | -44,656 | -32,472 |
| Other finance cost | -4,485 | -485 |
| Total finance expenses | -58,386 | -34,677 |
| | | |
| | 2023 | 2022 |
| Net finance income and expenses | -6,771 | -245 |
### **NOTE 7 INCOME TAXES**
#### Amounts in NOK 1000
| Income tax expense | 2023 | 2022 |
|---------------------------------------------|--------|---------|
| | | |
| Tax payable | 2,171 | 2,281 |
| Correction of tax payable from prior period | -517 | 517 |
| Changes in deferred tax | -9,914 | -13,387 |
| Effect of changes in tax rate | - | - |
| Total income tax expense | -8,260 | -10,589 |
| | | |
| Tax base calculation | | |
|-----------------------------------|---------|---------|
| | | |
| Profit before income tax | -29,620 | -84,983 |
| Permanent differences *) | 16,042 | 496 |
| Change in temporary differences | 23,235 | -5,798 |
| | | |
| Tax Base | 9,657 | -90,285 |
| | | |
| Payable tax in the balance sheet | | |
| Payable tax on this year's profit | 2,171 | 2,281 |
#### Amounts in NOK 1000
| Temporary differences: | 2023 | 2022 | Change in<br>difference |
|----------------------------------------------|----------|----------|-------------------------|
| | | | |
| Intangible assets | 23,044 | 41,479 | -18,435 |
| Tangible assets | -290 | 2,303 | -2,593 |
| Accounts receivable | -2,553 | -1,748 | -805 |
| Other differences | -1,274 | -1,589 | 315 |
| Provisions | -5,418 | -3,701 | -1,717 |
| Corrections | - | - | - |
| Total | 13,509 | 36,744 | -23,235 |
| | | | |
| Accumulated loss to be brought forward * | -155,036 | -154,034 | -1,002 |
| Not included in the deferred tax calculation | 87,734 | 112,595 | -24,861 |
| Basis for calculation of deferred tax asset | -53,793 | -4,695 | -49,098 |
| | | | |
| Deferred tax liability (asset) | 10,947 | 1,033 | 9,914 |
\* Tax loss carried forward from prior period has been based on new tax returns submitted for prior periods.
## Page 44 Annual Report 2023
#### **Explanation as of why the current year's tax expense is not 22% of the profit before tax:**
| Amounts in NOK 1000 | 2023 |
|---------------------------------------|---------|
| | |
| Profit before tax | -29,620 |
| 22% taxes on profit before tax | -6,516 |
| Adjustment to tax paid prior period | -517 |
| Amortization of goodwill | 4,310 |
| Other differences | 714 |
| Tax effect of share-based payment | -1,489 |
| Other non deductable expenses | 708 |
| Change in deferred tax not recognized | -5,469 |
| Calculated income tax expense | -8,260 |
| | |
| Effective tax rate in % ** | 27.9 % |
Permanent differences consist of non-deductible costs, for instance entertainment, and deduction of the share of profits of associates. (The share of profits of associates are deducted since tax has already been assessed in the individual financial statements)
\*\* Tax expense in percentage of profit before tax
#### **NOTE 8 INVESTMENTS IN SUBSIDIARIES**
#### Amounts in NOK 1000 **Xplora Technologies AS (Parent)**
| Xplora Technologies AS (Parent) | | | | Cost | | |
|---------------------------------|------------|-------------|-----------------------------|-----------------|--------------------------------|--------------------------|
| Subsidiaries | Location | Established | Ownership/<br>voting rights | price<br>shares | Net profit/ loss<br>31.12.2023 | Equity per<br>31.12.2023 |
| Xplora Technologies GMBH | Hamburg | 15.08.2017 | 100% | 236 | 4,415 | 9,324 |
| Xplora Technologies LTD | London | 13.07.2017 | 100% | 1 | 5,794 | -14,954 |
| Xplora Technologies SL | Madrid | 05.12.2018 | 100% | 34 | -1,528 | -22,132 |
| Xplora Technologies Inc | Dower, DE | 13.02.2020 | 100% | 0 | -1,133 | -4,317 |
| Xplora Technologies SAS | Paris | 22.07.2022 | 100% | 0 | -56 | -62 |
| Xplora Mobile Holding AS* | Oslo | 24.01.2019 | 100% | 241,662 | 495 | 69,302 |
| | | | | | | |
| | | | | | | |
| Xplora Mobile AS | Oslo | 29.10.2014 | 100% | 55,010 | 43,957 | 16,045 |
| Xplora Mobile AB | Sollentuna | 03.11.2015 | 100% | 53 | 6,668 | 18,112 |
| Xplora Mobile OY | Espoo | 05.04.2019 | 100% | 24 | 3,963 | 5,970 |
| Xplora Technologies APS | Copenhagen | 04.05.2020 | 100% | 60 | 1,223 | -5,292 |
\*Acquisition date 01.04.2021
#### **Audit exemption Xplora Technologies GmbH**
Xplora Technologies AS, the parent company of Xplora Technologies GmbH takes over the responsibility for the liabilities of the subsidiary and the subsidiary is exempted from the audit, from the obligation to prepare the management report and from publishing of own financial statements in the German Federal Gazette.
### **NOTE 9 INVENTORIES**
| Amounts in NOK 1000 | 2023 | 2022 |
|---------------------|---------|--------|
| | | |
| Goods for resale | 107,998 | 96,350 |
| Total | 107,998 | 96,350 |
| The group's inventories consist of finished goods in its entirely | 31.12.23 | 31.12.22 |
|-------------------------------------------------------------------|----------|----------|
| Inventories Xplora AS (Norway) | 46,733 | 37,575 |
| Inventories Xplora GMBH (Germany) | 11,271 | 7,793 |
| Inventories Xplora SL (Spain) | 675 | 734 |
| Inventories Xplora LTD (GB) | 19,263 | 17,597 |
| Inventories Xplora Inc (USA) | 22,143 | 21,473 |
| Inventories Xplora SAS (France) | 149 | 89 |
| Inventories Xplora Mobile AS (Norway) | 4,188 | 8,423 |
| Inventories Xplora Mobile AB (Sweden) | 4,644 | 3,963 |
| Inventories Xplora Technologies APS (Denmark) | 406 | 225 |
| Total inventories | 109,471 | 97,872 |
| Elimination margin in stock | -1,334 | -1,403 |
| Provision for damaged goods | -139 | -119 |
| Total | 107,998 | 96,350 |
#### **NOTE 10 BANK DEPOSITS**
| Amounts in NOK 1000 | 2023 | 2022 |
|---------------------------------------------------------------|---------|--------|
| | | |
| Employees tax deduction, deposited in a separate bank account | 3,138 | 1,841 |
| Deutsche Telekom funding account | 5,137 | 5,016 |
| Other bank deposits and cash | 129,159 | 43,552 |
| Total bank deposit and cash | 137,433 | 50,409 |
| Overdraft account | - | - |
| Total liquid assets | 137,433 | 50,409 |
Within the 'total bank deposit and cash', the entire employee tax deduction and NOK 5.0m allocated from the Deutsche Telekom funding represent restricted cash. Total restricted cash equals NOK 8.1m.
Xplora have a financing facility with DNB consisting of a NOK 90m supply-chain financing agreement and a NOK 10m revolving credit facility. The supply chain financing will optimize Xplora's working capital in the period from procurement of goods through sales, often up to six months, thus better matching payment schedules between suppliers and customers.
### **NOTE 11 SHARE CAPITAL AND SHAREHOLDER INFORMATION**
| Share capital | Number of<br>shares | Face value | Book value |
|-----------------|---------------------|------------|------------|
| Ordinary shares | 41,656,619 | 0.004 | 166 626.48 |
| Total | 41,656,619 | | 166 626.48 |
#### **SHAREHOLDERS AS OF 31.12.2023**
| Shareholder | Shares | Ownership | Voting rights<br>interest |
|--------------------------------|------------|-----------|---------------------------|
| Passesta AS | 5,603,342 | 13.5% | 13.5% |
| Eden AS | 2,240,125 | 5.4% | 5.4% |
| Harmonium Invest AS | 2,150,625 | 5.2% | 5.2% |
| S. Munkhaugen AS | 1,991,325 | 4.8% | 4.8% |
| MP Pensjon PK | 1,907,165 | 4.6% | 4.6% |
| Vinterstua AS | 1,381,406 | 3.3% | 3.3% |
| Fougner Invest AS | 1,338,344 | 3.2% | 3.2% |
| MK Capital AS | 1,320,325 | 3.2% | 3.2% |
| Commerzbank Aktiengesellschaft | 1,124,519 | 2.7% | 2.7% |
| Skattum Invest AS | 1,124,355 | 2.7% | 2.7% |
| Esmar AS | 1,092,576 | 2.6% | 2.6% |
| Kirkbak Holding AS | 1,076,750 | 2.6% | 2.6% |
| Nordnet Livsforsikring AS | 886,871 | 2.1% | 2.1% |
| Arepo AS | 840,000 | 2.0% | 2.0% |
| Camelback Holding AS | 754,000 | 1.8% | 1.8% |
| Thunderstorm Invest AS | 592,337 | 1.4% | 1.4% |
| Clearstream Banking S.A. | 511,840 | 1.2% | 1.2% |
| Torsen Tankers & Towers AS | 477,174 | 1.1% | 1.1% |
| August Industrier AS | 450,000 | 1.1% | 1.1% |
| Alden AS | 450,000 | 1.1% | 1.1% |
| Top 20 Shareholders | 27,313,079 | 65.6% | 65.6% |
| Other | 14,343,540 | 34.4% | 34.4% |
| Total Shares Outstanding | 41,656,619 | 100% | 100% |
\*As of January 2, 2024, Xplora completed a share capital increase, resulting in a new share capital of NOK 176,626.48, divided into 44,156,620 shares. For more information, please refer to Note 16.
#### **Shares held by Board members and CEO**
| Name | Role | Shareholder | No of shares | Ownership |
|-----------------------------------|----------|-------------------------|--------------|-----------|
| Tore Engebretsen | Chairman | Passesta AS | 5,603,342 | 100% |
| Harald Fredrik Hodne Ulltveit-Moe | Director | Harmonium Invest AS | 2,150,625 | 100% |
| Bjørn Christian Eide | Director | ESMAR AS | 1,092,576 | 45% |
| Kari Bech-Moen | Director | M-Effective Holding AS | 6,000 | 100% |
| Ingrid Elvira Leisner | Director | Duo Jag AS | 25,000 | 50% |
| Sten Kirkbak | CEO | MK Capital AS | 1,320,325 | 50% |
| Sten Kirkbak | CEO | Kirkbak Holding AS | 1,076,750 | 100% |
| Sten Kirkbak | CEO | EF Investigo Holding AS | 402,100 | 15.40% |
| | | | | |
| Torkil Munkhaugen * | Director | S. MUNKHAUGEN AS | 1,991,325 | 33% |
\*Torkil Munkhaugen resigned from the Board of Directors on 16 May 2023.
## Page 47 Annual Report 2023
#### **Options and rights outstanding**
There are a total of 2 500 000 options as of 31 December 2023, where:
| Holder | Type | Number |
|---------------------------------|---------------------|-----------|
| Guarantors for IN and SMN loans | Subscription rights | 0 |
| Management incentive program | Option | 2,500,000 |
| Total | | 2,500,000 |
In return for guaranteeing for the loan financing in 2019 and 2020, the company issued independent subscription rights to Skadi AS, Harmonium Invest AS, Hering AS and Torsen Tankers & Towers AS (collectively the "Subscribers"). The remaining subscription rights were exercised and paid in 2023 before the 2023 December expiry. Recorded as non-registered equity, 2.5m new shares were issued January 2, 2024. After the exercise there are no more contractual subscription rights.
Please refer to Note 3 for more information about the management incentive program.
#### **NOTE 12 EQUITY**
| | | | Other paid-up | |
|------------------------------|---------------|---------------|---------------|--------------|
| Amounts in NOK '1000 | Share capital | Share premium | equity | Total equity |
| | | | | |
| Equity at 01.01.2023 | 167 | 347,313 | 3,106 | 350,585 |
| Proceeds from share issue | - | - | - | - |
| Paid not registered capital | - | - | 17,500 | 17,500 |
| Foreign currency translation | - | -2,163 | - | -2,163 |
| Option program * | - | 4,984 | - | 4,984 |
| Settlement of options ** | - | -11,753 | - | -11,753 |
| Net profit as of 31.12.2023 | - | -21,360 | - | -21,360 |
| As of 31.12.2023 | 167 | 317,021 | 20,606 | 337,793 |
\*For more information on the option program, please refer to Note 18.
\*\*For more information on the settlement of options, please refer to Note 3.
#### **NOTE 13 LIABILITIES AND RECEIVABLES**
#### Amounts in NOK 1000
| Long term receivables | 2023 | 2022 |
|-----------------------------------------------------|--------|---------|
| Other long-term receivables | 6,577 | 4,188 |
| | | |
| Long term liabilities | | |
| Liabilities to Innovasjon Norge | 14,583 | 22,917 |
| Total | 14,583 | 22,917 |
| | | |
| Short term liabilities | | |
| Liabilities to supply chain financing facilitators* | 55,303 | 13,146 |
| Liabilities to financial institutions | - | 2,250 |
| Total | 55,303 | 15,396 |
| | | |
| Secured debts | 69,886 | 38,313 |
| | | |
| Pledged assets: | | |
| Accounts receivable | 669 | 61,712 |
| Inventories | 46,733 | 45,998 |
| Tangible assets | 528 | 748 |
| Total | 47,929 | 108,458 |
\*Supply chain financing facilitators are Nordea and DNB. As of 31.12.2023, the liability is distributed as follows: NOK 50.3m in Nordea and NOK 5.0m in DNB.
Innovasjon Norge has registered a mortgage on Xplora Technologies AS of MNOK 25 in the Personal Property Register as of 31.12.23 related to the abovementioned long-term debt.
#### **The mortgage/guarantee is distributed as follows:**
| Inventories | 25 MNOK |
|---------------------|---------|
| Accounts receivable | 25 MNOK |
| Plant and equipment | 25 MNOK |
\*See note 18 for subscription rights issued to lender in conjunction with the loan.
DNB has registered a mortgage on Xplora Technologies AS of MNOK 150 in the Personal Property Register as of 31.12.23 related to the abovementioned long-term debt.
#### **The mortgage/guarantee is distributed as follows:**
| Inventories | 150 MNOK |
|---------------------|----------|
| Accounts receivable | 150 MNOK |
| Plant and equipment | 150 MNOK |
Nordea has registered a mortgage on Xplora Technologies AS of MNOK 150 in the Personal Property Register as of 31.12.23 related to the abovementioned long-term debt. In 2023, Xplora transferred its NOK 100m financing facility from Nordea to DNB. This obligation will cease in connection with the termination of the agreement with Nordea on July 1, 2024.
#### **The mortgage/guarantee is distributed as follows:**
| Inventories | 150 MNOK |
|---------------------|----------|
| Accounts receivable | 150 MNOK |
| Plant and equipment | 150 MNOK |
Pareto has registered a mortgage on Xplora Mobile AS of MNOK 1000 in the Personal Property Register as of 31.12.23 related to the abovementioned long-term debt.
#### **The mortgage/guarantee is distributed as follows:**
| Inventories | 1000 MNOK |
|---------------------|-----------|
| Accounts receivable | 1000 MNOK |
| Plant and equipment | 1000 MNOK |
#### **NOTE 14 RENTAL AGREEMENTS AND LEASING**
#### **Yearly lease of operational lease agreements (NOK)**
| Lease object | 2023 | 2024 | 2025 | 2026 | 2027 |
|---------------------------------------|------------|------------|-----------|-----------|-----------|
| | | | | | |
| Land, buildings and other real estate | 10,996,396 | 10,569,780 | 7,805,926 | 7,108,871 | 2,133,959 |
| Equipment, fixtures, and fittings | 389,503 | 368,360 | 234,321 | 78,888 | - |
| Other rentals | 632,861 | 396,091 | 239,154 | 41,045 | - |
| Total | 12,018,759 | 11,334,231 | 8,279,401 | 7,228,804 | 2,133,959 |
The 2023 column displays the total lease payments that were actually paid in 2023.
For 2024-2027 the following applies:
The table shows the payment profile of the group's leases, based on the remining agreed lease periods per 31.12.23. The table does not take into account the potential renewals of expiring agreements.
## **NOTE 15 PROVISIONS FOR LIABILITIES AND CHARGES**
| Other current liabilities | 2023 | 2022 |
|---------------------------|--------|--------|
| | | |
| Short term debt | 42,092 | 27,211 |
| Provisions * | 11,059 | 16,608 |
| Deferred Income | 33,589 | 28,936 |
| Total | 86,740 | 72,755 |
\*For a more detailed breakdown of the provisions, see table below:
| Provisions | Social security<br>contributions on<br>share options | Provision for<br>warranties | Refund<br>liabilities | Other<br>provision | Total |
|--------------------------------------|------------------------------------------------------|-----------------------------|-----------------------|--------------------|--------|
| Balance sheet as at 1 January 2023 | 1,520 | 5,167 | 4,831 | 5,090 | 16,608 |
| Additions in 2023 | 53 | - | - | - | 53 |
| Provisions reversed 2023 | - | (188) | (324) | (5,090) | -5,601 |
| Amounts utilised 2023 | - | - | - | - | 0 |
| Balance sheet as at 31 December 2023 | 1,572 | 4,979 | 4,507 | - | 11,059 |
| Current | 1,572 | 4,979 | 4,507 | - | 11,059 |
#### **Social security contributions on share options**
The provision for social security contributions on share options is calculated based on the number of options outstanding at the reporting date that are expected to be exercised. The provision is based on market price of the shares at the reporting date which is the best estimate of the market price at the date of exercise.
#### **Provision for warranties**
A provision is recognized for expected warranty claims on product sold during the year, based on past experience of the level of repairs and returns. It is expected that these cost will be incurred in the financial year. Assumptions used to calculated the provision for warranties were based on current information available about returns based on the warranty period for all products sold.
#### **Refund liabilities**
A provision is recognized for expected returns on consumers sales where there is a right of return. The provision is based on past experience of the level of returns.
#### **Deferred income**
Deferred income is customer prepayment of subscriptions and represent cash received that will be recognized as revenue when delivered during the subscription period.
#### **Other provision**
Other provision relates contracts regulations regarding previous events where it is probable (more likely than not) that a financial settlement will take place as a result of this obligation and the size of the amount can be measured reliably.
#### **Guarantee provision**
Germany has a two-year warranty period for products purchased from Xplora. Within a year any defects are presumed to exist at the time of delivery unless proven otherwise by Xplora. This presumption extends the burden of proof from six to twelve months, however, for purchases made before January 1, 2022, the period remains six months.
Spain has a three-year warranty period for hardware and 10 years for parts.
The United States and Canada have a one-year warranty period for direct purchases from Xplora.
All other countries have a two-year warranty period for direct purchases from Xplora.
#### **NOTE 16 EVENTS AFTER THE REPORTING PERIOD**
On January 2, 2024, Xplora announced the completion of a share capital increase, registered with the Norwegian Register of Business Enterprises. Following the Board of Director's resolution, based on the authorization from the Annual General Meeting on May 16, 2023, the new share capital is NOK 176,626.48, with 44,156,620 shares at a par value of NOK 0.004 each, where each share carries one vote. The contractual subscription rights were exercised and paid in 2023, recorded as paid non-registered equity. Gross proceeds from the capital increase were NOK 17.5m. After this exercise there are no more contractual subscription rights, excluding employee options.
On April 2, 2024, Xplora entered into a new sales agreement with Freenet AG, a German telecom and digital service provider. The Xplora Premium Service will be bundled as an add-on service with Freenet's mobile subscription. This agreement expands Xplora's Premium Service platform in the German market and adds a new recurring service revenue stream. Xplora has received an initial purchase order of more than NOK 30 mill (30,000 smartwatches), to be delivered over the next 12 months.
#### **NOTE 17 FINANCIAL MARKET RISK**
#### **Interest rate risk**
Interest rate risk in the short- and medium-term occurs as a result of fluctuations in the floating market interest rates on company debts. The company is exposed to LIBOR on its supply chain financing facility.
#### **Currency risk**
Currency fluctuations represent both a direct and an indirect financial risk for the company, as the Company buys its goods in USD, and sells the majority of its products in the European market. The Company also reports its earnings and financial information in NOK. Recognizing the importance of mitigating these risks, at the end of Q2 2023, the Company initiated a program to hedge part of its EUR/USD exposure.
#### **Credit risk**
The company is exposed to credit risk related to counterparty default on contractual agreements, trade, and other current receivables. The Company has policies and procedures to ensure that sales are made to customers with appropriate credit profiles within defined limits. The Company further complements these internal controls with a factoring agreement related to device sales. This approach mitigates the risk of counterparty default and enables a more stable financial environment.
#### **Liquidity risk**
Liquidity risk is characterized by the potential risk of not being able to meet financial obligations. The company regularly monitors both forecasted and actual cash flows, alongside aligning the maturity of its assets and liabilities.
#### **NOTE 18 SHARE-BASED PAYMENTS**
#### **Agreements and principles:**
Outstanding warrants and options include:
- Surety agreements with shareholders
- Option program for current management
- Share based payment to advisors to the Board of Directors
#### **1. Surety agreements with shareholders**
As remuneration for guaranteeing for loan financing, the company had issued a stand-alone basis of subscription rights to the guarantors. All guarantors of the loans exercised their right within the expiry date of 31 December 2023. Total subscription amount of NOK 17.5m was paid within 31 December 2023 and was booked as paid in 'not registered equity'. The 2,500,000 new shares from this subscription were registered on 2 January 2024.
A total of NOK 484,637 has been recognized in 2023 as a cost for Innovasjon Norge surety agreement.
#### **2. Management Incentive Program**
| | 2023 | 2022 |
|--------------------------------------------|------------|-------------|
| Outstanding at the beginning of the period | 3,300,283 | 2,191,525 |
| Exercised / Settlement | -2,394,441 | - |
| Forfeited | - | - |
| Granted | 1,594,158 | 1,108,758 |
| Total options | 2,500,000 | 3,300,283 |
| Vested Closing Balance | 788,148 | 2,705,858 |
| | | |
| Share-based compensation | 4,499,469 | 2,285,630 |
| Social security provision | 1,075,956 | -6,042,710 |
| Option program expensed for the year (NOK) | 5,575,425 | (3,757,079) |
Specifications of options held by the executive management as of 31 December 2022 is disclosed in Note 3.
The board of directors of Xplora Technologies AS ("Xplora Technologies" or the "Company") resolved on 20 August 2020 to implement a share option program for management of the Company, for the fiscal years 2020-2022. At a meeting of the board of directors of the Company on 2 June 2022 it was resolved to extend the program for a fourth year. A new option-based incentive program has been established in 2023.
Total options outstanding cannot surpass 7.5% of the total number of shares outstanding in the company.
A total of NOK 5.6m has been recognized in 2023 (NOK 4.5m is the expensed value of options and NOK 1.1m is employer's contribution based on market value). The valuation of the options is done by the use of a Black-Scholes model; however, the company applies different scenarios to account for early exercise behavior for ESOP.
A new option-based incentive program has been established in 2023. On 06.11.2023 a total of 1,594,158 options were granted to primary insiders with an exercise price of NOK 14.90 per share, VWAP last 30 days. 1/3 of the granted options will be earned after 1, 2, and 3 years respectively, with the options expiring after 6 years. The fair value at grant date of options is calculated to 6.16 in trance 1, 6.92 in trance 2 and 7.49 in trance 3. The calculation has been performed using Black-Scholes with a volatility of 60%. The total value of options granted amounts to NOK 10.9m.
Total options outstanding cannot surpass 7.5% of the total number of shares outstanding in the company.
# <span id="page-52-1"></span><span id="page-52-0"></span>**Xplora Technologies AS INCOME STATEMENT**
| Amounts in NOK 1000 | Note | 2023 | 2022 |
|----------------------------------------|-------|----------|----------|
| | | | |
| REVENUE | | | |
| Sales revenue | 2, 16 | 386,147 | 254,088 |
| Revenue | | 386,147 | 254,088 |
| | | | |
| OPERATING EXPENSES | | | |
| Cost of sales | | -279,370 | -193,582 |
| Payroll expenses | 3 | -83,507 | -52,224 |
| Depreciation and amortization | 4, 5 | -14,640 | -8,500 |
| Write-downs | | - | -1,830 |
| Other operating expenses | | -57,638 | -82,514 |
| Total operating expenses | | -435,154 | -338,650 |
| | | | |
| OPERATING PROFIT / (LOSS) | | -49,007 | -84,562 |
| | | | |
| FINANCIAL INCOME AND EXPENSES | | | |
| Income from investment in subsidiaries | 6 | 56,046 | 36,874 |
| Interest income from group companies | 6 | 9,378 | 5,892 |
| Other finance income | 6 | 36,526 | 25,279 |
| Interest paid to group companies | 6 | -13,185 | -3,692 |
| Other finance expenses | 6 | -41,498 | -27,259 |
| Net finance | | 47,267 | 37,094 |
| | | | |
| PROFIT / (LOSS) BEFORE INCOME TAX | | -1,741 | -47,468 |
| | | | |
| Income tax expenses | 7 | - | - |
| | | | |
| NET PROFIT / (LOSS) | | -1,741 | -47,468 |
| | | | |
| Attributable to: | | | |
| | | | |
| Other equity | | -1,741 | -47,468 |
| Total | | -1,741 | -47,468 |
# **Xplora Technologies AS**
# <span id="page-53-0"></span>**BALANCE SHEET**
| Amounts in NOK 1000 | Note | 31.12.2023 | 31.12.2022 |
|----------------------------------|------|------------|------------|
| | | | |
| NON-CURRENT ASSETS | | | |
| | | | |
| Intangible assets | 4 | | |
| Research and development | | 41,221 | 34,967 |
| Total intangible assets | | 41,221 | 34,967 |
| Tangible assets | | | |
| Property, plant, and equipment | 5 | 528 | 729 |
| Total tangible assets | | 528 | 729 |
| | | | |
| Financial assets | | | |
| Loans to group companies | 8 | 216,598 | 163,654 |
| Investments in subsidiaries | 9 | 241,933 | 241,933 |
| Other receivables | 14 | 3,382 | 3,382 |
| Total financial assets | | 461,913 | 408,970 |
| | | | |
| Total non-current assets | | 503,661 | 444,666 |
| | | | |
| CURRENT ASSETS | | | |
| Inventories | 10 | 46,733 | 37,575 |
| | | | |
| Receivables | | | |
| Accounts receivables | | 669 | 30,711 |
| Other receivables | | 32,960 | 60,054 |
| Receivables from group companies | | - | - |
| Total receivables | | 33,628 | 90,765 |
| | | | |
| Cash and cash equivalents | 11 | 51,204 | 27,762 |
| | | | |
| Total current assets | | 131,566 | 156,103 |
| | | | |
| TOTAL ASSETS | | 635,227 | 600,769 |
| Amounts in NOK 1000<br>Note | 31.12.2023 | 31.12.2022 |
|---------------------------------------------|------------|------------|
| | | |
| EQUITY | | |
| | | |
| Owners' equity<br>12, 13 | | |
| Share capital<br>13 | 167 | 167 |
| Share premium<br>13 | 429,521 | 438,031 |
| Other paid-in capital | 20,606 | 3,106 |
| Total owners' equity | 450,293 | 441,303 |
| Total equity | 450,293 | 441,303 |
| | | |
| LIABILITIES | | |
| | | |
| Provisions | | |
| 7<br>Deferred tax liability | - | - |
| Total provisions | - | - |
| | | |
| Other non-current liabilities | | |
| 8<br>Other long-term group liabilities | 44,678 | 75,342 |
| 14<br>Liabilities to financial institutions | 14,583 | 22,917 |
| Total non-current liabilities | 59,261 | 98,259 |
| | | |
| Current liabilities | | |
| 14<br>Liabilities to financial institutions | 55,303 | 13,146 |
| Accounts payable | 31,496 | 26,761 |
| Public duties payable | 6,507 | 4,137 |
| 17<br>Other current liabilities | 32,366 | 17,163 |
| Total current liabilities | 125,673 | 61,207 |
| | | |
| Total Liabilities | 184,934 | 159,466 |
| | | |
| TOTAL EQUITY AND LIABILITIES | 635,227 | 600,769 |
| | | |
The Board of Xplora Technologies AS Oslo, 25th of April 2024
**Tore Engebretsen** *Chairman of the Board*
(sign.) (sign.) (sign.) **Harald Fredrik Hodne Ulltveit-Moe** *Member of the Board*
**Bjørn Christian Eide** *Member of the Board*
**Kari Bech-Moen** *Member of the Board*
(sign.) (sign.) (sign.) **Ingrid Elvira Leisner** *Member of the Board*
**Sten Kirkbak** *CEO*
# <span id="page-55-0"></span>**Xplora Technologies AS STATEMENT OF CASH FLOWS**
| Amounts in NOK 1000 | Note | 2023 | 2022 |
|--------------------------------------------------------------|-------|----------|----------|
| | | | |
| Cash flow from operating activities | | | |
| | | | |
| Profit/ (loss) before income taxes | | -1,741 | -47,468 |
| Income tax payable | | - | - |
| Depreciation and amortization expenses | 4, 5 | 14,640 | 10,316 |
| Consolidated contribution recognized in the income statement | | - | - |
| Change in inventories | 10 | -9,157 | -18,703 |
| Change in accounts receivable | | 30,042 | -50,445 |
| Change in accounts payable | | 4,735 | 1,605 |
| Currency effects | | - | - |
| Share based compensation | 3, 20 | 4,499 | 2,689 |
| Settlement of options | | -6,609 | - |
| Changes in other accruals | | 39,523 | -23,045 |
| Net cash flow from operating activities | | 75,933 | -125,051 |
| | | | |
| Cash flow from investing activities | | | |
| | | | |
| Purchase of intangible and fixed assets | 4, 5 | -20,692 | -32,687 |
| Purchase of shares and investments | | - | -20,000 |
| Change in loans between group entities | 8 | -83,608 | 126,086 |
| Net cash flow from investing activities | | -104,299 | 73,399 |
| | | | |
| Cash flow from financing activities | | | |
| | | | |
| Payments on long-term debt | 14 | -8,333 | -2,083 |
| Cash inflows from short-term debt | 14 | 42,157 | 13,146 |
| 12, 13, 18<br>Proceeds from issue of share capital | | 17,500 | 16,500 |
| Recognized cost on subscription rights | 20 | 485 | 485 |
| Net cash flow from financing activities | | 51,808 | 28,048 |
| | | | |
| Net change in cash and cash equivalents | | 23,442 | -23,604 |
| Cash and cash equivalents at 01.01 | | 27,762 | 51,366 |
| Cash and cash equivalents at 31.12 | 11 | 51,204 | 27,762 |
### **ACCOUNTING PRINCIPLES**
The parent financial statements have been prepared in accordance with the Norwegian Accounting Act and generally accepted accounting principles in Norway.
#### **Use of estimates**
The preparation of accounts in accordance with the Accounting Act requires the use of estimates. It also requires Group management to exercise judgment in applying the Group's accounting policies. The areas where significant judgments and estimates have been made in preparing the financial statements and their effect are disclosed in the notes.
#### **Revenue**
Income from the sale of goods and services are recognized as fair value, net after deduction of VAT, returns, discounts and reductions.
#### **Revenue from sale of goods**
Revenue from the sale of goods is recognized in the income statement when both risk and control have been passed on to the buyer. The risk being the asset's profit and loss potential, whilst control is defined as having both the decision-making rights as well as the jurisdiction. Normally this will be when the goods are delivered to the customer. Historical data is applied to estimate and make provisions for quantity discount and returns at the date of sales.
#### **Revenue from sale of services**
In the parent company, revenue from sales of services primarily consists of intercompany transactions within the group.
Revenues for services are recognized when the services are performed, and the company has a right to payment for the performed service. Subscription fees are recognized over the subscription period.
#### **Discounts and marketing contribution**
Payments and price reduction included in the initial sales agreement are presented as a reduction of sales revenues. Marketing contributions to customers agreed not included in the initial sales agreement are treated as marketing expenses and included in the line "Other operating expenses" in the income statement.
#### **Share-based payments**
The group/company has established equity-settled, share-based compensation plans, under which the entity receives services from employees as consideration for equity instruments (options) in the parent company. The fair value of the employee services received in exchange for the grant of the options is recognized as an expense over the vesting period. The total amount to be expensed is determined by reference to the fair value of the options granted at the grant date.
The social security contributions payable in connection with the grant of the share options are considered an integral part of the grant itself, and the charge will be treated as a cash-settled transaction.
#### **Classification of balance sheet items**
Assets intended for long term ownership or use are classified as fixed assets. Assets relating to the operating cycle have been classified as current assets. Other receivables are classified as current assets if they are to be repaid within one year after the transaction date. Similar criteria apply to liabilities. The first year's instalment on long-term liabilities and long-term receivables are, however, not classified as short-term liabilities and current assets.
#### **Intangible assets**
R&D expenses are taken into the balance sheet providing a future financial benefit relating to the development of an identifiable intangible asset can be identified and the expenses can be reliably measured. Otherwise, such expenses are expensed as and when incurred. Capitalized R&D expenses are depreciated on a straightline basis over the asset's expected useful life.
#### **Tangible assets**
Tangible fixed assets are capitalized and depreciated linearly over the expected useful economic life of the assets. When the depreciation plan is changed, the effect is distributed over the remaining depreciation periods. Maintenance of operating equipment is expensed on an ongoing basis.
Upgrades or improvements are added to the acquisition cost of the asset and depreciated in line with the asset. The difference between maintenance and upgrade / improvement is assessed based on the condition of the asset when purchased. Plots and land are not depreciated.
#### **Impairment of intangible and tangible assets**
Impairment tests are carried out if there is indication that the carrying amount of an asset exceeds the estimated recoverable amount. The test is performed on the lowest level of fixed assets at which independent ingoing cashflows can be identified. If the carrying amount is higher than both the fair value less cost to sell and the value in use (net present value of future use/ownership), the asset is written down to the highest of fair value less cost to sell and the value in use.
Previous impairment charges, except write-down of goodwill, are reversed in later periods if the conditions causing the write-down are no longer present.
#### **Investments in other companies**
The cost method is applied to investments in other companies, included for investment in subsidiaries in the parents separate financial statement. The cost price is increased when funds are added through capital increases or when group contributions are made to subsidiaries. Dividends received are initially taken to income. Dividends exceeding the portion of retained equity after the purchase are reflected as a reduction in purchase cost. Dividend/group contribution from subsidiaries are reflected in the same year as the subsidiary makes a provision for the amount. Dividends from other companies are reflected as financial income when it has been approved.
#### **Inventory**
The inventory of purchased goods is valued at the lower of cost according to the FIFO principle and net sales value.
#### **Receivables**
Accounts receivable and other receivables are recorded in the balance sheet at face value after deduction of provisions for expected loss. Provisions for losses are made on the basis of individual assessments of the individual receivables.
Additionally, for accounts receivable, an unspecified provision is made to cover expected losses.
#### **Pensions**
The pension schemes are financed through payments to insurance companies.
#### **Defined contribution plan**
With a defined contribution plan the company pays contributions to an insurance company. After the contribution has been made the company has no further commitment to pay. The contribution is recognized as payroll expenses. Prepaid contributions are reflected as an asset (pension fund) to the degree the contribution can be refunded or will reduce future payments.
#### **Tax**
The tax charge in the income statement includes both payable taxes for the period and changes in deferred tax. Deferred tax is calculated with the tax rate applicable in each country the Group companies is situated in, on the basis of the temporary differences that exist between accounting and tax values, as well as any possible taxable loss carried forwards at the end of the accounting year. Tax enhancing or tax reducing temporary differences, which are reversed or may be reversed in the same period, have been offset and netted. Deferred tax on excess values relating to acquisitions of subsidiaries will not be equalized.
The disclosure of deferred tax benefits on net tax reducing differences which have not been eliminated, and tax losses varied forward losses, is based on estimated future earnings. Deferred tax and tax benefits which may be shown in the balance sheet are presented next.
#### **Foreign currencies**
Assets and liabilities in foreign currencies are valued at the exchange rate at the end of the accounting year. Agio gains and losses relating to sales and purchases of goods in foreign currencies are recognized as operating income and cost of goods sold.
#### **Warranties, guarantee commitments/complaints and service**
Provision for warranties and service work for completed projects / sales is recorded at the expected cost of such work. The estimate is based on historical figures for service and warranty repairs. The amount is recorded under other current liabilities and is recognized in the income statement on a straight-line basis over the warranty and service period.
#### **Cash Flow statement**
The cash flow statement has been prepared according to the indirect method. Cash and cash equivalents include cash and bank deposits.
# <span id="page-58-0"></span>**NOTES**
# **NOTE 2 REVENUES**
### **PER SEGMENT**
| Amounts in NOK 1000 | 2023 | 2022 |
|-------------------------|---------|---------|
| | | |
| Device revenue | 315,690 | 210,646 |
| Service revenue | 70,561 | 43,356 |
| Other revenue | (104) | 86 |
| Total | 386,147 | 254,088 |
| | | |
| | | |
| Geographical allocation | | |
| Amounts in NOK 1000 | | |
| | | |
| Germany | 198,867 | 120,153 |
| Sweden | 81,097 | 9,297 |
| Norway | 22,937 | 66,211 |
| Great Britain | 49,433 | 28,100 |
| USA | 18,593 | 21,829 |
| Finland | 3,542 | 1,607 |
| Denmark | 2,881 | 273 |
| Spain | 8,233 | 6,618 |
| France | 564 | - |
| Total | 386,147 | 254,088 |
Geographic allocation in the parent company illustrates the location of intercompany transactions within the group.
#### **NOTE 3 SALARY AND PERSONELL COSTS, NUMBER OF EMPLOYEES, LOANS TO EMPLOYEES AND AUDITOR'S FEE**
| Amounts in NOK 1000 | 2023 | 2022 |
|---------------------------|--------|---------|
| | | |
| Salaries/Wages | 43,550 | 37,365 |
| Social security fees | 7,702 | 5,948 |
| Pension expenses | 2,117 | 1,898 |
| Team cost subsidiaries | 19,756 | 6,525 |
| Other benefits | 10,382 | 488 |
| Total | 83,507 | 52,224 |
| | | |
| Included in the above: | | |
| Share-based compensation | 4,499 | 2,286 |
| Social security provision | 1,076 | (6,043) |
| Share-based compensation | 5,575 | (3,757) |
| | | |
Average full-time employees **68.8 53.3**
#### **2023**
#### **Amounts in NOK 1000**
| Management remuneration | Salary | Board<br>remuneration | Bonus | Pension costs | Other benefits | Total |
|-----------------------------------|--------|-----------------------|-------|---------------|----------------|-------|
| | | | | | | |
| Chief executive officer | 2,725 | - | - | 71 | 2 | 2,799 |
| Board of Directors: | | | | | | |
| Chairman Tore Engebretsen | | 155 | | | | 155 |
| Harald Fredrik Hodne Ulltveit-Moe | | 155 | | | | 155 |
| Bjørn Christian Eide | | 235 | | | | 235 |
| Torkil Munkhaugen ** | | 155 | | | | 155 |
| Kari Bech-Moen * | | 155 | | | | 155 |
| Ingrid Elvira Leisner | | 235 | | | | 235 |
| Total | 2,725 | 1,090 | 0 | 71 | 2 | 3,889 |
The table reflects actual payments in the respective year. Bonus is paid to the employee the year after it's earned. As there were no bonus earned in 2022, there were no bonus payments in 2023. For 2023, the CEO earned a total of NOK 0.6m in bonus. The bonus will be paid in 2024.
\* Board member Kari Bech-Moen has in addition delivered services to Xplora Technologies AS for NOK 0.5m in 2023 and NOK 1.05m in 2022. This is billed through her company B-Effective AS.
\*\* Board Member Torkil Munkhaugen resigned from the BOD in May 2023
## **2022**
#### **Amounts in NOK 1000**
| Management remuneration | Salary | Board<br>remuneration | Bonus* | Pension costs | Other benefits | Total |
|-----------------------------------|--------|-----------------------|--------|---------------|----------------|-------|
| Chief executive officer | 2,583 | | 1,214 | 66 | 4 | 3,868 |
| Board of Directors: | | | | | | |
| Chairman Tore Engebretsen | | 150 | | | | 150 |
| Harald Fredrik Hodne Ulltveit-Moe | | 150 | | | | 150 |
| Bjørn Christian Eide | | 230 | | | | 230 |
| Torkil Munkhaugen | | 150 | | | | 150 |
| Kari Bech-Moen ** | | 150 | | | | 150 |
| Ingrid Elvira Leisner | | 230 | | | | 230 |
| Total | 2,583 | 1,060 | 1,214 | 66 | 4 | 4,928 |
#### \*Bonus for 2021
\* Board member Kari Bech-Moen has in addition delivered services to Xplora Technologies AS for NOK 0.5m in 2023 and NOK 1.05m in 2022. This is billed through her company B-Effective AS.
#### **CEO**
Employee bonus program: The CEO participates in the Company's current bonus scheme for the employee group which the Employee is a part of.
Management Incentive Program: The CEO also participates in the management incentive program as adopted by the board. For further details, see below.
On certain terms, the CEO is entitled to a severance payment equal to 9 months of salary which begins after the end of a 6 month notice period.
In 2023, the CEO exercised a total of 974,025 options. The CEO will receive a payment from the company of NOK 6.3m for these options. The payment will be executed in 2024.
#### **Options to leading employees**
During the year, seven employees have been granted options for the company's shares. Below is an overview of the Group Management's share options:
| Management | Opening Balance | Exercised options | Granted Options | Ending balance |
|-----------------|-----------------|-------------------|-----------------|----------------|
| CEO | 1,298,700 | (974,025) | 225,325 | 550,000 |
| Director | 250,000 | - | 125,000 | 375,000 |
| Director | 608,750 | (608,750) | 375,000 | 375,000 |
| Director | - | - | 275,000 | 275,000 |
| Director | 250,000 | - | - | 250,000 |
| EVP | 81,167 | - | 143,833 | 225,000 |
| EVP | - | - | 225,000 | 225,000 |
| EVP | - | - | 225,000 | 225,000 |
| Total | 2,488,617 | (1,582,775) | 1,594,158 | 2,500,000 |
| | | - | - | - |
| Former Director | 811,666 | (811,666) | | - |
| Total | 3,300,283 | (2,394,441) | 1,594,158 | 2,500,000 |
The exercised option in 2023 had a strike price of NOK 7 per share. The exercise will in total be a NOK 11.8m cash payment, where NOK 5.5m was paid in 2023 and the remining NOK 6.3m will be paid in 2024.
The balance of the 2.5 M outstanding options is distributed with the following exercise price and dates:
| Expiration date | 30.06.2024 | 30.06.2025 | 31.12.2025 | 05.11.2029 |
|-----------------|------------|------------|------------|------------|
| Options | 324,675 | 456,167 | 125,000 | 1,594,158 |
| Exercise price | 14.7008 | 7.00 | 7.00 | 14.90 |
| Fully earned | 30.06.2023 | 30.06.2024 | 31.12.2024 | 05.11.2026 |
All options issued before 2023 can be exercised two years after they have been granted and for one subsequent year. The exercise requires continued employment in the company two years after the grant date.
A new option-based incentive program has been established in 2023. On 06.11.2023 a total of 1,594,158 options were granted to primary insiders with an exercise price of NOK 14.90 per share, VWAP last 30 days. 1/3 of the granted options will be earned after 1, 2, and 3 years respectively, with the options expiring after 6 years.
Total options outstanding cannot surpass 7.5% of the total number of shares outstanding in the company.
#### **OTP (Statutory occupational pension)**
The company is required to have a pension scheme in accordance with the Norwegian law on required occupational pension ("lov om obligatorisk tjenestepensjon"). The company's pension scheme meets the requirements of this law.
#### **Auditor**
Specification of auditor's fee:
| Amounts in NOK 1000 | 2023 | 2022 |
|----------------------|-------|-------|
| | | |
| Statutory audit fee | 1,827 | 1,730 |
| Total fee to auditor | 1,827 | 1,730 |
VAT is not included in the fee specified above.
#### **Loans and guarantees to management and shareholders etc.**
Loans/guarantees have not been granted to the shareholders, the General Manager and the Chairman of the Board, neither employees or related parties of management.
#### **NOTE 4 INTANGIBLE ASSETS**
Amounts in NOK 1000
| | Research and<br>development cost | Total |
|-------------------------------------------------|----------------------------------|----------|
| | | |
| Acquisition cost at 01.01.23 | 48,054 | 48,054 |
| Additions | 20,589 | 20,589 |
| Disposals | - | - |
| Acquisition cost at 31.12.23 | 68,643 | 68,643 |
| | | |
| Accumulated amortization/impairment at 31.12.23 | - 27,423 | - 27,423 |
| Reversed impairments 31.12.23 | | |
| Net carrying value at 31.12.23 | 41,221 | 41,221 |
| | | |
| Depreciation/impairment for the year | -14,336 | |
| Useful economic life | 4 years | |
| Amortization plan | Linear | |
### **NOTE 5 TANGIBLE ASSETS**
| Amounts in NOK 1000 | | | |
|-------------------------------------------------|-----|---------------|-------|
| | | Machinery and | |
| Property, plant, and equipment | Art | equipment | Total |
| | | | |
| Acquisition cost at 01.01.23 | 50 | 1,020 | 1,070 |
| Additions | | 102 | 102 |
| Disposals | | | - |
| Acquisition cost at 31.12.23 | 50 | 1,122 | 1,172 |
| | | | |
| Accumulated amortization/impairment at 31.12.23 | | -644 | -644 |
| Reversed impairments 31.12.23 | | | |
| Net carrying value at 31.12.23 | 50 | 478 | 528 |
| | | | |
| Depreciation/impairment for the year | | -304 | |
| Useful economic life | | 3/5 years | |
| Amortization plan | | Linear | |
| | | | |
#### **NOTE 6 FINANCE INCOME AND EXPENSES**
Amounts in NOK 1000
| Finance Income | 2023 | 2022 |
|----------------------------------------|---------|--------|
| | | |
| Income from investment in subsidiaries | 56,046 | 36,874 |
| Income from group companies | 9,378 | 5,892 |
| Other interest income | 369 | 18 |
| Other finance income | 3 | 2 |
| Exchange gain (Agio) | 36,155 | 25,259 |
| Total finance income | 101,951 | 68,045 |
| Finance expenses | | |
|----------------------------------------|---------|---------|
| | | |
| Interest expenses from group companies | -3,522 | -2,712 |
| Other interest expenses | -9,664 | -980 |
| Exchange loss (Disagio) | -40,861 | -26,774 |
| Other finance cost | -637 | -485 |
| Total finance expenses | -54,684 | -30,951 |
| Net finance income and expenses | 47,267 | 37,094 |
|---------------------------------|--------|--------|
#### **NOTE 7 INCOME TAXES**
#### Amounts in NOK 1000
| Income tax expense | 2023 | 2022 |
|-----------------------------------------|---------|---------|
| Tax Base Calculation | | |
| Profit before income tax | -1,741 | -47,468 |
| Permanent differences *) | -3,549 | -2,003 |
| Adjustment to prior year taxable income | - | - |
| Change in temporary differences | -6,640 | -7,001 |
| Tax Base | -11,930 | -56,472 |
| | | |
| Payable tax in the balance sheet | | |
| Payable tax on this years profit | - | - |
| Total payable tax in the balance sheet | - | - |
#### Amounts in NOK 1000
| Temporary differences: | 2023 | 2022 | Change in<br>difference |
|----------------------------------------------|---------|---------|-------------------------|
| | | | |
| | | | |
| Tangible assets | -267 | 45 | -312 |
| Accounts receivable | -452 | -452 | - |
| Provisions | -2,018 | -9,944 | 7,927 |
| Other differences | - | - | - |
| Total | -2,737 | -10,352 | 7,615 |
| | | | |
| Accumulated loss to be brought forward * | -91,752 | -79,822 | -11,930 |
| Not included in the deferred tax calculation | 94,489 | 90,174 | 4,315 |
| Basis for calculation of deferred tax asset | - | - | - |
| | | | |
| Deferred tax liability (asset) | - | - | - |
\* Tax loss carried forward from prior period has been based on new tax returns submitted for prior periods.
#### **Explanation as of why the current year's tax expense is not 22% of the profit before tax:**
| Amounts in NOK 1000 | 2023 |
|---------------------------------------|--------|
| | |
| Profit before tax | -1,741 |
| 22% taxes on profit before tax | -383 |
| Income from subsidiaries | 484 |
| Tax effect of share-based payment | -1,489 |
| Other non deductable expenses | 224 |
| Change in deferred tax not recognized | 1,164 |
| Calculated income tax expense | - |
| | |
| Effective tax rate in % ** | 0.0 % |
\* Permanent differences consist of non-deductible costs, for instance entertainment, and deduction of the share of profits of associates. (The share of profits of associates are deducted since tax has already been assessed in the individual financial statements)
\*\* Tax expense in percentage of profit before tax
#### **NOTE 8 INTERCOMPANY BALANCES WITH GROUP COMPANIES AND ASSOCIATES**
| Amounts in NOK 1000 | | |
|------------------------------------------|---------|---------|
| Receivables from group companies (loans) | 2023 | 2022 |
| | | |
| Xplora Technologies LTD | 11,227 | - |
| Xplora Technologies GmbH | 72,763 | 68,585 |
| Xplora Technologies SL | 40,497 | 32,352 |
| Xplora Technologies Inc | 32,541 | 24,897 |
| Xplora Mobile AS *) | 57,577 | 36,874 |
| Xplora Technologies SAS | 1,993 | 946 |
| Total | 216,598 | 163,654 |
| *) group contribution | | |
| | | |
| Loans from group companies | | |
| | | |
| Xplora Technologies LTD | - | 19,656 |
| Xplora Mobile AB | 41,927 | 5,068 |
| Xplora Mobile OY | 1,683 | 4,506 |
| Xplora Mobile AS | - | 46,097 |
| Xplora Technologies APS | 1,068 | 14 |
| Total | 44,678 | 75,342 |
| | | |
| Accounts receivable group companies | 2023 | 2022 |
| | | |
| Xplora Mobile AB | 224 | 3,005 |
| Xplora Mobile OY | 49 | 459 |
| Xplora Mobile AS | | 25,402 |
| Xplora Technologies APS | 49 | 409 |
| Total | 322 | 29,276 |
| | | |
| Accounts payable group companies | | |
| Xplora Mobile AS | - | 3,176 |
| Total | - | 3,176 |
#### **NOTE 9 INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES**
| Amounts in NOK 1000 | | | | | | |
|---------------------------------|------------|-------------|---------------|---------|------------------|------------|
| Xplora Technologies AS (Parent) | | | | Cost | | |
| | | | Ownership/ | price | Net profit/ loss | Equity per |
| Subsidiaries | Location | Established | voting rights | shares | 31.12.2023 | 31.12.2023 |
| Xplora Technologies GMBH | Hamburg | 15.08.2017 | 100% | 236 | 4,415 | 9,324 |
| Xplora Technologies LTD | London | 13.07.2017 | 100% | 1 | 5,794 | -14,954 |
| Xplora Technologies SL | Madrid | 05.12.2018 | 100% | 34 | -1,528 | -22,132 |
| Xplora Technologies Inc | Dower, DE | 13.02.2020 | 100% | 0 | -1,133 | -4,317 |
| Xplora Technologies SAS | Paris | 22.07.2022 | 100% | 0 | -56 | -62 |
| Xplora Mobile Holding AS* | Oslo | 24.01.2019 | 100% | 241,662 | 495 | 69,302 |
| | | | | | | |
| | | | | | | |
| Xplora Mobile AS | Oslo | 29.10.2014 | 100% | 55,010 | 43,957 | 16,045 |
| Xplora Mobile AB | Sollentuna | 03.11.2015 | 100% | 53 | 6,668 | 18,112 |
| Xplora Mobile OY | Espoo | 05.04.2019 | 100% | 24 | 3,963 | 5,970 |
| Xplora Technologies APS | Copenhagen | 04.05.2020 | 100% | 60 | 1,223 | -5,292 |
\*Acquisition date 01.04.2021
#### **Audit exemption Xplora Technologies GmbH**
Xplora Technologies AS, the parent company of Xplora Technologies GmbH takes over the responsibility for the liabilities of the subsidiary and the subsidiary is exempted from the audit, from the obligation to prepare the management report and from publishing of own financial statements in the German Federal Gazette.
#### **NOTE 10 INVENTORIES**
| Amounts in NOK 1000 | 2023 | 2022 |
|---------------------|--------|--------|
| | | |
| Goods for resale | 46,733 | 37,575 |
| Total | 46,733 | 37,575 |
#### **NOTE 11 BANK DEPOSITS**
| Amounts in NOK 1000 | 2023 | 2022 |
|---------------------------------------------------------------|--------|--------|
| | | |
| Employees tax deduction, deposited in a separate bank account | 3,138 | 1,773 |
| Deutsche Telekom funding account | 5,137 | 5,016 |
| Other bank deposits and cash | 42,930 | 20,974 |
| Total bank deposit and cash | 51,204 | 27,762 |
| Overdraft account | - | - |
| Total liquid assets | 51,204 | 27,762 |
Within the 'total bank deposit and cash', the entire employee tax deduction and NOK 5.0m allocated from the Deutsche Telekom funding represent restricted cash. Total restricted cash equals NOK 8.1m.
Xplora have a financing facility with DNB consisting of a NOK 90m supply-chain financing agreement and a NOK 10m revolving credit facility. The supply chain financing will optimize Xplora's working capital in the period from procurement of goods through sales, often up to six months, thus better matching payment schedules between suppliers and customers.
### **NOTE 12 SHARE CAPITAL AND SHAREHOLDER INFORMATION**
| Share capital | Number of<br>shares | Face value | Book value |
|-----------------|---------------------|------------|------------|
| Ordinary shares | 41,656,619 | 0.004 | 166 626.48 |
| Total | 41,656,619 | | 166 626.48 |
#### **SHAREHOLDERS AS OF 31.12.2023**
| Shareholder | Shares | Ownership | Voting rights<br>interest |
|--------------------------------|------------|-----------|---------------------------|
| Passesta AS | 5,603,342 | 13.5% | 13.5% |
| Eden AS | 2,240,125 | 5.4% | 5.4% |
| Harmonium Invest AS | 2,150,625 | 5.2% | 5.2% |
| S. Munkhaugen AS | 1,991,325 | 4.8% | 4.8% |
| MP Pensjon PK | 1,907,165 | 4.6% | 4.6% |
| Vinterstua AS | 1,381,406 | 3.3% | 3.3% |
| Fougner Invest AS | 1,338,344 | 3.2% | 3.2% |
| MK Capital AS | 1,320,325 | 3.2% | 3.2% |
| Commerzbank Aktiengesellschaft | 1,124,519 | 2.7% | 2.7% |
| Skattum Invest AS | 1,124,355 | 2.7% | 2.7% |
| Esmar AS | 1,092,576 | 2.6% | 2.6% |
| Kirkbak Holding AS | 1,076,750 | 2.6% | 2.6% |
| Nordnet Livsforsikring AS | 886,871 | 2.1% | 2.1% |
| Arepo AS | 840,000 | 2.0% | 2.0% |
| Camelback Holding AS | 754,000 | 1.8% | 1.8% |
| Thunderstorm Invest AS | 592,337 | 1.4% | 1.4% |
| Clearstream Banking S.A. | 511,840 | 1.2% | 1.2% |
| Torsen Tankers & Towers AS | 477,174 | 1.1% | 1.1% |
| August Industrier AS | 450,000 | 1.1% | 1.1% |
| Alden AS | 450,000 | 1.1% | 1.1% |
| Top 20 Shareholders | 27,313,079 | 65.6% | 65.6% |
| Other | 14,343,540 | 34.4% | 34.4% |
| Total Shares Outstanding | 41,656,619 | 100% | 100% |
\*As of January 2, 2024, Xplora completed a share capital increase, resulting in a new share capital of NOK 176,626.48, divided into 44,156,620 shares. For more information, please refer to Note 18.
#### **Shares held by Board members and CEO**
| Name | Role | Shareholder | No of shares | Ownership |
|-----------------------------------|----------|-------------------------|--------------|-----------|
| Tore Engebretsen | Chairman | Passesta AS | 5,603,342 | 100% |
| Harald Fredrik Hodne Ulltveit-Moe | Director | Harmonium Invest AS | 2,150,625 | 100% |
| Bjørn Christian Eide | Director | ESMAR AS | 1,092,576 | 45% |
| Kari Bech-Moen | Director | M-Effective Holding AS | 6,000 | 100% |
| Ingrid Elvira Leisner | Director | Duo Jag AS | 25,000 | 50% |
| Sten Kirkbak | CEO | MK Capital AS | 1,320,325 | 50% |
| Sten Kirkbak | CEO | Kirkbak Holding AS | 1,076,750 | 100% |
| Sten Kirkbak | CEO | EF Investigo Holding AS | 402,100 | 15.40% |
| | | | | |
| Torkil Munkhaugen * | Director | S. MUNKHAUGEN AS | 1,991,325 | 33% |
\*Torkil Munkhaugen resigned from the Board of Directors on 16 May 2023.
#### **Options and rights outstanding**
There are a total of 2 500 000 options as of 31 December 2023, where:
| Holder | Type | Number |
|---------------------------------|---------------------|-----------|
| Guarantors for IN and SMN loans | Subscription rights | 0 |
| Management incentive program | Option | 2,500,000 |
| Total | | 2,500,000 |
In return for guaranteeing for the loan financing in 2019 and 2020, the company issued independent subscription rights to Skadi AS, Harmonium Invest AS, Hering AS and Torsen Tankers & Towers AS (collectively the "Subscribers"). The remaining subscription rights were exercised and paid in 2023 before the 2023 December expiry. Recorded as non-registered equity, 2.5m new shares were issued January 2, 2024. After the exercise there are no more contractual subscription rights.
Please refer to Note 3 for more information about the management incentive program.
#### **NOTE 13 EQUITY**
| | | | Other paid-up | |
|-----------------------------|---------------|---------------|---------------|--------------|
| Amounts in NOK '1000 | Share capital | Share premium | equity | Total equity |
| | | | | |
| Equity at 01.01.2023 | 167 | 438,031 | 3,106 | 441,303 |
| Proceeds from share issue | - | - | - | - |
| Paid not registered capital | - | - | 17,500 | 17,500 |
| Option program * | - | 4,984 | - | 4,984 |
| Settlement of options ** | - | -11,753 | - | -11,753 |
| Net profit as of 31.12.2023 | - | -1,741 | - | -1,741 |
| As of 31.12.2023 | 167 | 429,521 | 20,606 | 450,293 |
\*For more information on the option program, please refer to Note 18.
\*\*For more information on the settlement of options, please refer to Note 3.
#### **NOTE 14 LIABILITIES AND RECEIVABLES**
Amounts in NOK 1000
| Long term receivables | 2023 | 2022 |
|-----------------------------------------------------|--------|--------|
| Other long-term receivables | 3,382 | 3,382 |
| | | |
| Long term liabilities | | |
| Liabilities to Innovasjon Norge | 14,583 | 22,917 |
| Total | 14,583 | 22,917 |
| | | |
| Short term liabilities | | |
| Liabilities to supply chain financing facilitators* | 55,303 | 13,146 |
| Liabilities to financial institutions | - | - |
| Total | 55,303 | 13,146 |
| | | |
| Secured debts | 69,886 | 36,063 |
| | | |
| Pledged assets: | | |
| Accounts receivable | 669 | 30,711 |
| Inventories | 46,733 | 37,575 |
| Tangible assets | 528 | 729 |
| Total | 47,929 | 69,015 |
\*Supply chain financing facilitators are Nordea and DNB. As of 31.12.2023, the liability is distributed as follows: NOK 50.3m in Nordea and NOK 5.0m in DNB.
Innovasjon Norge has registered a mortgage on Xplora Technologies AS of MNOK 25 in the Personal Property Register as of 31.12.23 related to the abovementioned long-term debt.
#### **The mortgage/guarantee is distributed as follows:**
| Inventories | 25 MNOK |
|---------------------|---------|
| Accounts receivable | 25 MNOK |
| Plant and equipment | 25 MNOK |
\*See note 20 for subscription rights issued to lender in conjunction with the loan.
DNB has registered a mortgage on Xplora Technologies AS of MNOK 150 in the Personal Property Register as of 31.12.23 related to the abovementioned long-term debt.
#### **The mortgage/guarantee is distributed as follows:**
| Inventories | 150 MNOK |
|---------------------|----------|
| Accounts receivable | 150 MNOK |
| Plant and equipment | 150 MNOK |
Nordea has registered a mortgage on Xplora Technologies AS of MNOK 150 in the Personal Property Register as of 31.12.23 related to the abovementioned long-term debt. In 2023, Xplora transferred its NOK 100m financing facility from Nordea to DNB. This obligation will cease in connection with the termination of the agreement with Nordea on July 1, 2024.
#### **The mortgage/guarantee is distributed as follows:**
| Inventories | 150 MNOK |
|---------------------|----------|
| Accounts receivable | 150 MNOK |
| Plant and equipment | 150 MNOK |
Pareto has registered a mortgage on Xplora Mobile AS of MNOK 1000 in the Personal Property Register as of 31.12.23 related to the abovementioned long-term debt.
#### **The mortgage/guarantee is distributed as follows:**
| Inventories | 1000 MNOK |
|---------------------|-----------|
| Accounts receivable | 1000 MNOK |
| Plant and equipment | 1000 MNOK |
#### **NOTE 15 RENTAL AGREEMENTS AND LEASING**
#### **Yearly lease of operational lease agreements (NOK)**
| Lease object | 2023 | 2024 | 2025 | 2026 | 2027 |
|---------------------------------------|-----------|-----------|-----------|-----------|-----------|
| | | | | | |
| Land, buildings and other real estate | 8,006,676 | 6,994,894 | 6,962,800 | 6,698,482 | 2,133,959 |
| Equipment, fixtures, and fittings | 389,503 | 232,001 | 234,321 | 78,888 | |
| Other rentals | 86,738 | | | | |
| Total | 8,482,917 | 7,226,895 | 7,197,121 | 6,777,370 | 2,133,959 |
The 2023 column displays the total lease payments that were actually paid in 2023.
For 2024-2027 the following applies:
The table shows the payment profile of the group's leases, based on the remining agreed lease periods per 31.12.23.
The table does not take into account the potential renewals of expiring agreements.
#### **NOTE 16 TRANSACTIONS WITH SUBSIDIARIES**
#### Transactions with subsidiaries
The Company has various transactions with subsidiaries. All the transactions have been carried out as part of the ordinary transfer pricing policy. The most significant transactions are as follows:
a) Purchase of goods for sale
b) Sale of goods and services for operations
Balances of loans and claims with group companies are specified in Note 8.
#### Amounts in NOK 1000
| Purchase of goods and services | 2023 | 2022 |
|--------------------------------|---------|---------|
| Goods | 5,782 | 8,389 |
| Services | 53,543 | 1,990 |
| Total | 59,325 | 10,379 |
| | | |
| Sale of goods and service | | |
| Goods | 313,984 | 207,687 |
| Services | 68,100 | 42,322 |
| Total | 382,084 | 250,009 |
| Transactions with subsidiaries | | | 2023 | 2022 |
|--------------------------------|---------|--------------------------|---------|---------|
| Xplora Technologies AS | sale to | Xplora Mobile AS | 20,690 | 62,179 |
| Xplora Technologies AS | sale to | Xplora Mobile AB | 81,073 | 9,297 |
| Xplora Technologies AS | sale to | Xplora Mobile OY | 3,542 | 1,607 |
| Xplora Technologies AS | sale to | Xplora Technologies APS | 2,881 | 273 |
| Xplora Technologies AS | sale to | Xplora Technologies GmbH | 197,076 | 119,993 |
| Xplora Technologies AS | sale to | Xplora Technologies Ltd | 49,433 | 28,100 |
| Xplora Technologies AS | sale to | Xplora Technologies Inc | 18,593 | 21,829 |
| Xplora Technologies AS | sale to | Xplora Technologies SL | 8,233 | 6,618 |
| Xplora Technologies AS | sale to | Xplora Technologies SAS | 564 | 113 |
| | | | | |
| Xplora Mobile AS | sale to | Xplora Technologies AS | 398 | 1,780 |
| Xplora Technologies Ltd | sale to | Xplora Technologies AS | 37,425 | 1,894 |
| Xplora Technologies GmbH | sale to | Xplora Technologies AS | 3,530 | 6,496 |
| Xplora Technologies SL | sale to | Xplora Technologies AS | 2,593 | 211 |
| Xplora Technologies SAS | sale to | Xplora Technologies AS | 899 | - |
| Xplora Technologies lnc | sale to | Xplora Technologies AS | 14,426 | - |
#### **NOTE 17 PROVISIONS FOR LIABILITIES AND CHARGES**
| Other current liabilities | 2023 | 2022 |
|---------------------------|--------|--------|
| | | |
| Short term debt | 30,794 | 10,553 |
| Provisions | 1,572 | 6,610 |
| Total | 32,366 | 17,163 |
#### **Guarantee provision**
Germany has a two-year warranty period for products purchased from Xplora. Within a year any defects are presumed to exist at the time of delivery unless proven otherwise by Xplora. This presumption extends the burden of proof from six to twelve months, however, for purchases made before January 1, 2022, the period remains six months.
Spain has a three-year warranty period for hardware and 10 years for parts.
The United States and Canada have a one-year warranty period for direct purchases from Xplora.
All other countries have a two-year warranty period for direct purchases from Xplora.
### **NOTE 18 EVENTS AFTER THE REPORTING PERIOD**
On January 2, 2024, Xplora announced the completion of a share capital increase, registered with the Norwegian Register of Business Enterprises. Following the Board of Director's resolution, based on the authorization from the Annual General Meeting on May 16, 2023, the new share capital is NOK 176,626.48, with 44,156,620 shares at a par value of NOK 0.004 each, where each share carries one vote. The contractual subscription rights were exercised and paid in 2023, recorded as paid non-registered equity. Gross proceeds from the capital increase were NOK 17.5m. After this exercise there are no more contractual subscription rights, excluding employee options.
On April 2, 2024, Xplora entered into a new sales agreement with Freenet AG, a German telecom and digital service provider. The Xplora Premium Service will be bundled as an add-on service with Freenet's mobile subscription. This agreement expands Xplora's Premium Service platform in the German market and adds a new recurring service revenue stream. Xplora has received an initial purchase order of more than NOK 30 mill (30,000 smartwatches), to be delivered over the next 12 months.
### **NOTE 19 FINANCIAL MARKET RISK**
#### **Interest rate risk**
Interest rate risk in the short- and medium-term occurs as a result of fluctuations in the floating market interest rates on company debts. The company is exposed to LIBOR on its supply chain financing facility.
#### **Currency risk**
Currency fluctuations represent both a direct and an indirect financial risk for the company, as the Company buys its goods in USD, and sells the majority of its products in the European market. The Company also reports its earnings and financial information in NOK. Recognizing the importance of mitigating these risks, at the end of Q2 2023, the Company initiated a program to hedge part of its EUR/USD exposure.
#### **Credit risk**
The company is exposed to credit risk related to counterparty default on contractual agreements, trade, and other current receivables. The Company has policies and procedures to ensure that sales are made to customers with appropriate credit profiles within defined limits. The Company further complements these internal controls with a factoring agreement related to device sales. This approach mitigates the risk of counterparty default and enables a more stable financial environment.
#### **Liquidity risk**
Liquidity risk is characterized by the potential risk of not being able to meet financial obligations. The company regularly monitors both forecasted and actual cash flows, alongside aligning the maturity of its assets and liabilities.
#### **NOTE 20 SHARE-BASED PAYMENTS**
#### **Agreements and principles:**
Outstanding warrants and options include:
- Surety agreements with shareholders
- Option program for current management
- Share based payment to advisors to the Board of Directors
#### **1. Surety agreements with shareholders**
As remuneration for guaranteeing for loan financing, the company had issued a stand-alone basis of subscription rights to the guarantors. All guarantors of the loans exercised their right within the expiry date of 31 December 2023. Total subscription amount of NOK 17.5m was paid within 31 December 2023 and was booked as paid in 'not registered equity'. The 2,500,000 new shares from this subscription were registered on 2 January 2024.
A total of NOK 484,637 has been recognized in 2023 as a cost for Innovasjon Norge surety agreement.
#### **2. Management Incentive Program**
| | 2023 | 2022 |
|--------------------------------------------------------|------------|------------|
| Outstanding at the beginning of the period | 3,300,283 | 2,191,525 |
| Exercised / Settlement | -2,394,441 | - |
| Forfeited | - | - |
| Granted | 1,594,158 | 1,108,758 |
| Total options | 2,500,000 | 3,300,283 |
| Vested Closing Balance | 788,148 | 2,705,858 |
| | | |
| Share-based compensation | 4,499,469 | 2,285,630 |
| Social security provision for share based compensation | 1,075,956 | -6,042,710 |
| Option program expensed for the year (NOK) | 5,575,425 | -3,757,079 |
Specifications of options held by the executive management as of 31 December 2022 is disclosed in Note 3.
The board of directors of Xplora Technologies AS ("Xplora Technologies" or the "Company") resolved on 20 August 2020 to implement a share option program for management of the Company, for the fiscal years 2020-2022. At a meeting of the board of directors of the Company on 2 June 2022 it was resolved to extend the program for a fourth year. A new option-based incentive program has been established in 2023.
Total options outstanding cannot surpass 7.5% of the total number of shares outstanding in the company.
A total of NOK 5.6m has been recognized in 2023 (NOK 4.5m is the expensed value of options and NOK 1.1m is employer's contribution based on market value). The valuation of the options is done by the use of a Black-Scholes model; however, the company applies different scenarios to account for early exercise behavior for ESOP.
A new option-based incentive program has been established in 2023. On 06.11.2023 a total of 1,594,158 options were granted to primary insiders with an exercise price of NOK 14.90 per share, VWAP last 30 days. 1/3 of the granted options will be earned after 1, 2, and 3 years respectively, with the options expiring after 6 years. The fair value at grant date of options is calculated to 6.16 in trance 1, 6.92 in trance 2 and 7.49 in trance 3. The calculation has been performed using Black-Scholes with a volatility of 60%. The total value of options granted amounts to NOK 10.9m.
Total options outstanding cannot surpass 7.5% of the total number of shares outstanding in the company.
# <span id="page-73-0"></span>**Audit Report**
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**CEO** Sten Kirkbak +47 922 03 710 [sten.kirkbak@xplora.com](mailto:sten.kirkbak@xplora.com)
#### **CFO**
Knut Stålen +47 920 43 458 [knut.stalen@xplora.com](mailto:knut.stalen@xplora.com)
Xplora Technologies AS Nedre Slottsgate 8 0157 Oslo Norway
xplora.com xplora.com/investor
Page 77 Annual Report 2023
