BADGER

EXPLORER

Annual Report 2009

Badger Explorer Group 2009
3

03 Contents
05 The future is getting closer - Message from the CEO
07 The Board of Directors' report 2009
14 Responsibility statement
15 The Board of Directors 2009
16 Corporate governance policy
21 Compensation statement
23 Income Statement - Badger Explorer Group
24 Statement of financial position - Badger Explorer Group
26 Statement of comprehensive income - Badger Explorer Group
26 Statement of change in equity - Badger Explorer Group
27 Statement of cash flow - Badger Explorer Group
28 Notes - Badger Explorer Group
55 Income Statement - Badger Explorer ASA
56 Statement of financial position - Badger Explorer ASA
58 Statement of change in equity - Badger Explorer ASA
59 Statement of cash flow - Badger Explorer ASA
60 Notes - Badger Explorer ASA
73 Auditor's Report for 2009
74 Management 2009

Badger Explorer Group 2009 - Message from the CEO

The future is getting closer

Dear fellow shareholders,

2009 was another very exciting year for the Badger Explorer project. All though the progress of the full scale testing of the Badger Explorer tool has suffered from a very harsh winter, we have made substantial progress in the development and qualification of the technology. There is still a considerable amount of work to be done before a commercial product can be launched, but we are gradually getting a clearer picture of the challenges ahead of us.

We have continued the close cooperation with our partners ExxonMobil, Shell and Statoll. The partner support of the Badger Explorer development program will continue to be important as we move into the pre-commercial phase of the development. In return for an increased and extensive contribution, our partners will, through the extended partner agreements, be awarded the first right of refusals for the full Badger Explorer ASA operational capacity at market price for the first three years of commercial service. This cannot be regarded as anything but a firm belief in our technology.

Throughout 2009 Badger Explorer ASA established several very important co-operation agreements with key technology providers in order to secure the rights to essential down-hole technologies and logging sensors.

The co-operation with Calidus Engineering Ltd. has provided valuable support in the design and manufacturing of vital parts of the Badger Explorer prototype and after an extensive search we managed to find a suitable location for the self-burial test.

Late 2009, and as a part of the preparations for the self-burial test, the entire Badger Explorer prototype tool was tested as one fully integrated unit. This was an important achievement for the project team.

The slowdown of the global economy, which started in 2008, and continued through 2009, has clearly illustrated how important the Oil and Gas industry is. An oil price of USD 140 pr. bbl in 2008 was one direct important reason for this. Today the oil companies reluctance to invest in new acreage and to invest in expensive increased oil and gas recovery projects are due to the struggle of finding cost efficient solutions. Yet, the world is totally dependant on the oil, which is considered to be "the blood stream of the world economy". The consequences of slowing down the exploration activities today will escalate to even worse economic scenarios in the near future. To cope with the increasing demand for energy in the world, more oil and gas reserves has to be found and better utilized to keep the energy prices at a manageable level. The Badger Explorer concept will provide considerable cost savings in this regard and hence our value proposition is further confirmed and strengthened.

The Badger Explorer technology will greatly enhance the exploration processes and the mapping of additional reserves in existing fields. Compared with traditional exploration activities our technology does not represent any threat to the environment and as far as the safety aspects are concerned the Badger operations will be far superior to conventional drilling operations. In addition the total power consumption from a Badger Explorer exploration well

is estimated to be less than 1% of a conventional exploration well.

Looking at the Badger Explorer project going forward, our plan is to complete the self-burial test during the spring of 2010. Furthermore it is our goal to have a commercial service ready by late 2011, which is a very ambitious target and technological challenges still remains.

In parallel with the prototype testing we are in the design phase of the next generation tool, the Demo125 version, with higher temperature and operating specifications. This tool will provide the basis for future commercial services.

As the officer in charge, it is with great pleasure I observe how dedicated the people working with the Badger Explorer development are. Enthusiasm and staying power is essential when solving the challenges arising. Constantly seeking solutions and test these out in a safe and efficient manner is our every day life. This development is not trivial and we are achieving unique results. It is therefore a true privilege to head such a team and I am proud to announce another year without any accidents.

Badger Explorer ASA is in a strong position both financially and operationally for reaching its objectives for 2010 and ahead. Steady technological progress is the company's main focus. I therefore look forward to the project's continuation with great optimism, but at the same time, I am humble towards the tasks at hand. It is however inspiring to know that a successful Badger Explorer will have significant impact to the global Oil and Gas industry.

Sincerely

Kjell Erik Drexdal
President & CEO

Badger Explorer Group 2009 - The Board of Directors' report
7

The Board of Directors' report 2009

The Company's main objective is to develop the "Badger Explorer", a revolutionary new method to identify Oil & Gas reservoirs at substantially lower costs and with less complexity than utilizing a traditional drilling rig. Compared to the existing exploration methods the Badger Explorer will also lower the risk of negative environmental impact and greatly reduce the disturbances associated with traditional exploration activities.

Badger Explorer ASA has made steady and significant progress throughout 2009. The activities related to the completion of the prototype phase have clearly been the major focus of the Company last year. The Company will consider a successful self burial of the prototype version of the Badger Explorer (Demo50 version 2) a proof of the patented concept and will mark a major milestone in the Company's history. Following a successful burial test the pre-commercial phase will commence and the Company's industry client partners ExxonMobil, Shell and Statoil will define their detailed contributions.

The severe cold weather experienced this last winter has influenced and slowed down the progress of the self burial test. However the Company is optimistic regarding the outcome of the self burial test and the completion of the prototype phase.

Badger Explorer ASA has retained its strong financial position. Combined with the strengthened organization and the extended client partner agreements, the Company is in a favourable position for reaching its main objective for 2010 and 2011.

Major improvements on the Badger Explorer prototype tool, the Demo50 version 2, have been implemented last year. During the current extensive test program a variety of rock samples with different geological structures have been utilized and valuable experience has been gained. Advanced modelling of the tool's operations and its efficiency is under constant development to support and analyse the physical tests.

Late 2009 the Company selected a suitable test site in Eastern Norway and since the end of October testing has been ongoing at the site.

The organization is determined to take full advantage of the valuable results gained in 2009 in order to continuously address the remaining technical challenges and improve the technical solutions related to the Demo125 version (the "Badger Explorer Demonstrator") to be developed in the pre-commercial phase.

The Demo125 development program is well under way and several solutions and functions of the current version of the tool will be used in the pre-commercial version. Some parts of the tool will be redesigned and further developed as a result of the experiences, results and learning from the prototype phase.

In August 2009 the Company secured access to state-of-the-art sensors and logging tools to be supplied by two highly qualified international vendors.

Brief history

Badger Explorer ASA was established in June 2003 and listed on the Oslo Stock Exchange (Oslo Axess list) in June 2007. Equity amounting to MNOK 235 has been raised through separate share issues in 2005 and 2007.

The Research Council of Norway (RCN) has participated in funding the initial part of the prototype project through its Petromaks program. The oil companies ExxonMobil, Shell and Statoil are active sponsors and industry client partners. The joint partner agreement was extended in 2008, committing to additional and extensive support by the partners in the pre-commercial phase.

Badger Explorer Group 2009 - The Board of Directors' report
Badger Explorer Group 2009 - The Board of Directors' report

In return, the partners will receive first right of refusal to buy the Company's full manufacturing capacity during the first three years of BXPL commercial operations.

The initial R&D phase took place between 1999 and 2004. The prototype development phase started in 2005. The Company regards a successful self burial of the Demo50 version 2 as proof of the patented concept and as the completion of the current prototype phase. In parallel preparations for the next version of the tool, the Demo125 has commenced.

Operations during 2009

The Board of Directors considers 2009 as a strong and eventful year for the Company.

The main project activities performed during 2009 specifically include:

Conceptual engineering involving the identification of alternative solutions for the Badger Explorer in order to meet operational constraints
Design of full scale main system functions and testing those in appropriate test cells reproducing subsurface conditions
Development and testing of alternative technologies for drilling, separation and transport functions
Integration of selected design solutions and full scale testing as a continuous process
Full scale testing of a remotely computer controlled Badger Explorer prototype.

The progress achieved in the development of the Demo50 version 2 has been extensive and has brought the Company closer to finalizing the prototype phase.

Arrangements have been made to prepare for the upcoming pre-commercial phase. The organization is strengthened and the collaboration with suppliers of logging systems has commenced. A detailed plan for this next phase is currently being developed. This includes technical and financial partner support, contributions from vendors and increased public funding.

For 2010/2011 the Company aims to build a higher specification prototype of the tool, the Demo125 version, which will be able to reach significant subterranean depths, thus providing basis for a commercial service.

It is evident through the support and statements given by the client partners that the Badger Explorer is considered a potential "game changer" within the field of exploration for hydrocarbon reservoirs. Yet, the groundbreaking nature of the Badger Explorer concept inheres that one has to overcome significant technological challenges. Even if the development is in line with the overall plan, important functions will still need to be improved further and retested. It is part of the nature of a development project that solutions for numerous functions of the tool have to be invented by the Company, its partners and suppliers.

The project team has concentrated on constructing test cells and experimental apparatus that can be used to further investigate the functions required for the tool. The need to obtain new knowledge requires manpower with a high level of competence. Internal resources have performed more development work resulting in a unique Company competence and enhancement of BXPL's own expertise. The cooperation with the three above mentioned oil companies is working well and will be further developed during 2010.

The Company has produced a highly advanced prototype robotic system, the Demo50 version 2 unit, which will be utilized as a Down-Hole Laboratory for further testing of improved design solutions. Additionally the technological solutions specifically developed for the Badger Explorer project may also be used for other industrial applications.

Badger Explorer ASA's goal is to offer a commercial service by late 2011. The Company and its partners acknowledge that this is an ambitious target. However, with a competent and flexible organization and a robust financial position, the Company retains this goal.

The Company has succeeded in retaining its strong financial position minimizing the financial risk and keeping costs down.

The Board of Directors and the management are satisfied with the achievements of 2009 and believe that a solid foundation has been developed to achieve the Company's defined goals.

Board of Directors

The Board of Directors consists of five members, three male and two female.

During the financial year 2009 nine board meetings have taken place. The Board organized its work through three different committees that have been appointed.

Compensation Committee:
Rolf E. Ahlqvist and Tone Kväle
Audit Committee:
Rolf E. Ahlqvist and Tone Kväle
Strategy Committee:
Rolf E. Ahlqvist, Christian Bull
Eriksson and Kristine Holm

The Board conducts an annual evaluation of their joint work.

A Nomination Committee has been appointed reporting to the General Meeting. The search for candidates regarding positions on the Board of Directors and on the Nomination Committee has been comprehensive and several candidates have been evaluated.

The Board of Directors emphasizes that their work has been performed in accordance with its own and the Company's goals as well as the established Norwegian Code of Practice for Corporate Governance.

Badger Plasma Technology AS

The Plasma Channel Drilling project is a spin-off of the Badger Explorer development program. A study supported by the Research Council of Norway, Shell and Statoil, was performed and completed by summer 2008.

There is a possibility of introducing specific down-hole plasma based services to the Oil & Gas market. Yet, before doing so, additional intellectual property rights must be secured and a long-term business plan developed.

Based on results of the Plasma Channel Drilling project and identified business opportunities the Company has concluded that holding onto the Strathclyde license is of negligible value and the cost of the license can not be defended. Hence the license agreement has been terminated.

As of 01.06.2008 the CEO of Badger Explorer ASA, Mr. Kjell Erik Drevdal, is acting CEO of the subsidiary. The activity level within the subsidiary has been low during 2009 due to the focus on the development of Badger Explorer.

Calidus Engineering Ltd. (UK)

In November 2007 Badger Explorer ASA acquired 50% of Calidus Engineering Ltd. (Calidus), Cornwall, UK, at a total price of MNOK 8.5. See also note 17 and 18.

Calidus employs 27 multi-disciplined specialists within high-temperature systems and has an in-house machine shop for designing and building prototypes and components. Calidus is a well-reputed supplier to the geothermal energy and Oil & Gas industry.

Because of Calidus' competency and capabilities their contribution to the Badger Explorer development program has turned out to be of significance. Vital electronic and hydraulic units for the Demo50 were developed at Calidus. Its contributions during the pre-commercial phase are expected to increase.

Calidus has a strong financial position with a turnover of MNOK 16.9 in 2009 (MNOK 12.4 in 2008) and a net result after tax of MNOK 3.1 (MNOK 2.3 in 2008). In 2009 47% of their turnover was related to the Badger Explorer development program. The equity ratio is 91.5%, compared to 81% a year ago. The cash-position is strong. Turnover and net result are expected to grow further in 2010.

Accounting policies

The consolidated financial statements of Badger Explorer ASA and all its subsidiaries (the Group) have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU as of 31.12.2009.

Accounts and balance sheet

The Board states that the annual accounts represent a true and fair view on the Company's financial position at the turn of the year. According to the Accounting Act § 3-3a the Board of Directors confirms that the requirements for continued operation of the business are fulfilled and that the annual accounts are prepared on this presumption.

The reason for this presumption is the positive progress of the development project, the extended partner agreements as well as the Company's strong financial position and the market's development.

Financial status

The Badger Explorer Group consists of the Parent Company Badger Explorer ASA, the wholly owned subsidiary Badger Plasma Technology AS and 50% of Calidus Engineering Ltd.

The annual result in the Parent Company is MNOK -14 174 and EBIT is MNOK -20 225. The annual result for the Group is MNOK -12 730 and EBIT MNOK -16 832. Net financial items as of 31.12.2009 are MNOK 6 050 for the Parent Company and MNOK 5 909 for the Group. Tax expenses for the Group amount to MNOK 235. The total equity is MNOK 196.3 for the Parent Company and MNOK 200.5 for the Group which gives an equity ratio of 93.3% for the Parent Company and 91.1% for the Group. Recorded share capital equals MNOK 2 305. The liquidity including bank bonds as of 31.12.2009 is MNOK 133.1 for the Parent Company and MNOK 141.1 for the Group. Net capitalised development costs are MNOK 28 417 for the Parent Company and MNOK 28 584 for the Group. The Group figures appear through gross development costs of MNOK 30 561 less received public grants from the Research Council of Norway and pledged tax

Badger Explorer Group 2009 - The Board of Directors' report
Badger Explorer Group 2009 - The Board of Directors' report

reduction from Skattefunn amounting to kNOK 1 977.

Personnel and organization

The number of permanent employees was increased by three throughout 2009 and increased by five since 2008. The Company's staff is highly qualified. As of 1Q 2010 the Company's staff consists of 20 employees, 19 full-time employed and one on a 50% basis.

Through separate agreements and via cooperating companies and various suppliers additionally 30 people are involved in the Group's development project.

The Board would like to thank the employees of Badger Explorer Group for their efforts and contributions to the strong progress for the Company during 2009.

Equal opportunities and fair treatment of personnel

As of 31.12.2009 Badger Explorer ASA had 20 permanent employees of whom 4 are female. Calidus Engineering Ltd. had 27 employees, 25 male and 2 female.

In order to succeed the Company is dependant upon engaging the best competence available. Hence competence must be sourced when obtainable without preference for gender, race, religion, political and/or sexual predilection. However the Company emphasizes the importance of a balance and distribution of gender, equal compensation for similar work and equal opportunities for everyone in the development and running of the Company. The staff is multinational representing five nationalities.

Safety, health and working environment

The Board of Directors actively supports the efforts of ensuring that safety, health and the environment are handled in a manner that promotes considerable job satisfaction and a good working environment. The work environment is considered to be healthy and the absence due to sickness leave was at 2.7% (equals 119 working days) in 2009 compared to 1.4% in 2008. The Company's target regarding work related injuries and accidents has been achieved both in 2009 and 2008 as neither injuries nor accidents have been reported.

External environment

The Company does not pollute the external environment. When completed the Badger Explorer tool will introduce to the market a revolutionary new method for identifying Oil & Gas resources at substantially lower risk for environmental pollution. The tool will also reduce disturbances associated with traditional exploration activities and will have environmental benefits in remote and sensitive areas like Northern Norway and Alaska.

The Board has the responsibility for the Group's impact on the environment. It's the responsibility of the Company's management to set and follow up environmental goals, as well as for compliance with legislation and regulations.

Corporate governance and shareholder policy

Badger Explorer ASA has a long-term shareholder policy to maximize the shareholders' return on investments over time through a combination of dividends and increase in the share price/value. There is one share class and each share carries one vote at the General Meeting.

As a public limited company listed on the Oslo Stock Exchange quarterly reports are published for owners, the stock exchange and the market. In addition a number of notifications on various subjects have been issued and published during the year.

Sound corporate governance generates growth and long-term assets to benefit shareholders, employees and other stakeholders. Therefore the Board continuously strives towards building confidence in the Company through recommended corporate governance-, accounting- and Oslo Stock Exchange standards. The Board of Directors puts a lot of effort in transparency and openness, equal treatment of all shareholders, competence in the Company's governing bodies, independent auditors as well as that the information distributed by the Company reflects a correct description of the Company's status and operations.

The Board aims to assure that the Company operates with enough cash equivalents and equity to support the Company's strategy, goals and risk management at all times and that the management of the Company is conducted according to good and sound business practices.

Badger Explorer ASA had 733 shareholders as of 31.12.2009. The number of outstanding shares amounts to 18 439 040, each share having a nominal value of NOK 0.125. At the beginning of 2009 the BXPL share price was at NOK 7.60; on the last trading day of 2009 the share price was at NOK 20. All members of Management as well as all employees have been granted share options equivalent to 406 750 shares. See also note 6 and note 12.

The three largest shareholders are Convexa Capital IV AS, Credit Suisse Securities (USA) LLC(client account), Bank of New York Mellon SA/NV (client account) holding respectively 17.4%, 14.6% and 5.0% of the number of outstanding shares. As of 31.12.2009 the twenty largest shareholders held 72.8% of the shares. Shareholders domiciled outside Norway held 34% of the total number of shares.

Risk considerations

For a company that is dependent on groundbreaking technological development it is of the utmost importance to continuously analyze the

risks and manage them in a professional manner. The Company continuously works to reduce all risk elements which could influence the Company's success through steady progress in the development project and through securing competence, skills and capacities, and through financing and robust partnerships.

The extended partner agreements, signed by the Company's industry client partners in 2008, must be regarded as a major risk reducing external effort. In addition further efforts, strategic acquisitions and partnerships are being evaluated on a continuous basis.

The Company is focusing on the following risk elements:

Technology/Badger Explorer:

The development work has been complex and time consuming. The time schedule estimates a commercial service to be launched 12-18 months after a successful self burial test. However, there is risk tied to the fact that the development of a commercial version of the Badger Explorer could be more extensive than planned and that this could result in a more time consuming development of the services to be provided by Badger Explorer ASA. The extended agreements with the client partners imply comprehensive development support and this has to be regarded as risk reducing in its nature.

The secured access to high quality sensors and logging tools is regarded as a major step forward in the development of a commercial tool. State-of-the-art technology is offered in combination with communication systems and software for underground analysis. Adjustments are expected in order to custom design the sensors and logging system to fit the commercial version of the Badger Explorer tool.

Progress:

Today, no competitors to the Badger Explorer and its future closed cavity operations have been identified. However, these could appear and the time for the market introduction of the tool will be of vital importance for the market positioning and the profit potential of the technology. Simultaneously, it is necessary to spend the time needed to develop robust solutions and not compromise on quality and reliability.

The market:

There has been some uncertainty within the Oil & Gas market during parts of 2009 but the activity level certainly increases. Through the extended partner agreements the Company's client partners have secured first right of refusal to buy the full manufacturing capacity of Badger Explorer at marked price for a period of three years from the time of commercialization. The agreements secure market introduction and the Company has potential customers for its products, which again reduces the market risk.

Furthermore the risk related to the development phase has been somewhat reduced during the last year as a consequence of the general downturn in all markets that has lead to shorter delivery times and more competitive pricing.

The Company's business is considered to be so robust that even a drop in the rig rates should not considerably influence BXPL's competitiveness. Market awareness and attention indicates high interest in the Badger Explorer closed cavity concept.

Competence and resources:

The development of the Badger Explorer requires access to top competence in a large number of different technical fields. In spite of improvements of the labour market, it remains a challenge to recruit individuals with the right competence. But the Company and its subsidiary have been able to recruit several highly qualified employees during the last year.

Moving towards the pre-commercial phase it will be of high importance to widen and increase the contributions from the Company's three client partners both within product design and development and within the operational field.

The Company's agreements with the providers of state-of-the-art sensors and logging tools will be vital both for keeping the overall schedule and to secure components and services of the very best quality. The efforts to secure skilled employees and long-term agreements with various vendors will continue.

Badger Explorer Group 2009 - The Board of Directors' report
Badger Explorer Group 2009 - The Board of Directors' report

Authorities' permission:

When introducing new concepts, with considerable challenges and new routines, the authorities will require extensive and convincing qualifications that demonstrate satisfactory operational safety. The Company is working actively within this field and has already opened a dialogue with relevant governmental bodies and authorities.

Environmental aspects:

The Badger Explorer technology is a non-polluting alternative to explore for hydrocarbons. Sustainable environmental solutions and efforts to conserve the environment are the basis for the Company's business concepts. The non-polluting services Badger Explorer ASA offers should be a strong incentive for the authorities, professional players within the industry and other stakeholders to have the technology commercialized. Hence, all these groups will have a common interest in Badger Explorer being realized and introduced to the market as soon as possible.

Currency exchange risk:

As a result of acquiring 50% of the shares in Calidus Engineering Ltd. in the UK, the Group's balance sheet can be affected up to a certain extent by fluctuations in the GBP/NOK exchange rate. The Group has a limited number of other transactions in foreign currency which consequently gives a low currency risk. When commercial operations in larger scale commence a currency policy will be introduced.

Interest rate risk:

The Company's cash position is held in Norwegian short term rated bank bonds and deposited in two Norwegian banks at NIBOR plus contracts. The Company has no interest bearing debt. Thus the interest risk in the Company is limited. However, all money markets including the Norwegian have experienced reduction of interest rates during 2009; consequently the gained interest income was at a lower level in 2009 then in 2008.

Credit risk on accounts receivable:

The transactions are based on short term credit whereas the Company is exposed to limited credit risk. The Company has not experienced losses on receivables.

Calidus Engineering Ltd., the 50% owned entity, invoices a limited number of large international customers in Pound Sterling and Euro. The credit risk on receivables in Calidus is therefore regarded to be limited.

Liquidity risk:

The Company has a very solid liquidity situation and consider the liquidity risk for the next couple of years to be nonexistent at the current cash burning rate.

Allocation of the 2009 result

The Board of Directors recommends that the Badger Explorer ASA's annual result for 2009 totalling of kNOK 14 174 is transferred to uncovered losses.

Significant events after 31 December 2009

The Board of Directors is not aware of any major events with significant influence on the Company having taken place since 31 December 2009.

Outlook

The Company's Board of Directors evaluates the risk factors described above as manageable. The main risk is tied to the technological development and its progress.

The development tasks are demanding and shall be met with an attitude of great respect. Cooperation with top expertise within the Oil & Gas industry will support the development. In this respect the client partner agreements with ExxonMobil, Shell and Statoil are of vital importance. The Board of Directors is optimistic that the Company will be able to overcome identified obstacles. The development program will continue throughout 2010.

The Board regards that a successful self burial of the Badger Explorer Demo50 version 2 will strengthen the trust in BXPL that the Company will deliver future commercial services to the market.

The 2009 results of the Badger Explorer development program have brought the Company closer to its goal of supplying a commercial service to its partners and the international Oil & Gas market.

A highly advanced prototype robotic system has been developed and successfully tested in 2009, which provides a unique platform for qualifying the complex design solutions required to implement a Badger Explorer commercial service.

A considerable volume of new knowledge and technology, with ground breaking potential, representing a significant value, has been developed. These efforts are expected to continue in 2010 and onwards.

Badger Explorer ASA has developed into a technology company with multi-discipline research and engineering resources of high quality. The Company expects that many of the technological solutions developed specifically for the Badger Explorer tool also can be applied for other industrial applications.

The scope of the pre-commercial development work in 2010/2011 comprises further development of the Demo125 tool to include a Down Hole Laboratory, test-facilities, demonstrators and test versions including logging packages. The objective for this part of the overall development is, together with the client partners, to build a higher specification tool in order to be able to reach significant subterranean depth and provide the basis for a future commercial service.

Calidus Engineering Ltd., 50% owned by Badger Explorer ASA, is expected to continue its growth. Deliveries to Badger Explorer ASA will increase. Turnover, net result and number of employees are expected to grow in 2010.

Badger Explorer ASA experiences strong partner support and has a strong cash position. The cash spending policy is rigid. The Badger Explorer team is dedicated and optimistic which in total enables the Company, uninterrupted, to progress with its development program.

Compared to previous years the activity level during 2010 is budgeted to accelerate and is planned to be supported through the Company's client partners and public funding.

The Board sees a substantial potential for the Company's products and services.

The Board is therefore positive regarding the future of the Company. This applies both to the pre-commercial phase through 2010 and 2011 and also to the commercial phase to follow.

Stavanger, 23 March 2010
The Board of Directors
Badger Explorer ASA

Badger Explorer Group 2009 - Responsibility statement

Badger Explorer Group 2009 - The Board of Directors 2009

Responsibility statement

The Board of Directors and the CEO confirm that, to the best of their knowledge, the condensed set of financial statements for 2009 which have been prepared in accordance with IAS 34, give a true and fair view on the Group's consolidated assets, liabilities, financial position and results of the operations during the period. The Board of Directors and the CEO confirm that, to the best of their knowledge, the Board of Directors' report includes a fair overview on the development, results and position of the Company and the Group, including information about risks and uncertainty factors that can influence the Company's progress.

Steranger, 22 March 2010
The Board of Directors
Badger Explorer ASA

The Board of Directors 2009

1. Rolf E. Ahlqvist

Chairman of the Board

Mr. Ahlqvist is educated at the University of Göteborg in Business and Economics. He has extensive experience from 30 years working in the Oil and Gas industry through marine, offshore and steel companies, including as CEO at Scana Industries ASA, Sales & marketing Director at Rosenberg Verft and Business Manager at Aker Offshore and Aker Stord. Mr. Ahlqvist became partner and chairman of Procom Venture AS in 2002. He is also board member of GS-Hydro Norge AS and a number of other Nordic companies. He has in depth experience in establishing companies, creating growth, implementing strategy plans and re-structuring and evaluating companies.

2. Bjørge Gretland

Director

Mr. Gretland holds a Master of Economics and a Dr. Oecon (PhD) within strategy and finance from Norwegian School of Economics and Business Administration (NHH) and was a Research Scholar at Standford University from 1989 - 1991. Mr. Gretland is the founder and managing partner of Convexa Capital, a group of venture capital funds focusing on disruptive technologies within solar energy, oil technology and IT/ Telecom. Since 1997, he has founded 13 venture capital funds (of which 11 are Convexa funds). Mr. Gretland has broad experience from venture capital, M&As and investment banking and is board director of several Norwegian and

3. Kristine Holm

Director

Ms. Holm is a graduate geologist from the University of Bergen. Ms. Holm holds the position as Deputy Manager for North Sea Business Unit in Total E&P Norge. She is also a board director of TOTAL E&P Norge. She was previously Manager for the North Sea Department within the Geoscience division at Total E&P Norge, Exploration area manager in TOTAL E&P Norge and Exploration Area manager in TotalFinaElf Exploration Norge. She has extensive experience after having worked for more than 25 years in the Oil & Gas industry, including various positions within geology in Elf Petroleum Norge and the Elf Group's Technical and Research Center in France.

4. Christian Bull Eriksson

Director

Mr. Bull Eriksson holds a MSc from HTNU Norway. Mr. Bull Eriksson is currently the chairman of the Board and Managing Director of IK Group AS. He has extensive experience from the Oil & Gas industry and has held a number of executive positions in the Oil & Gas industry, including Managing Director of PSI (2002-2006) and CEO of Smedvig ASA (1999-2002). Other board positions include Director in Multi Phase Meters (MPM) and Vertech Offshore AS.

5. Tone Kvåle

Director

Ms. Kvåle holds a BSc degree in business administration from The College of Harstad, Norway. Ms. Kvåle is currently the CFO of NorDiag ASA, Oslo, Norway. She has 13 years of experience from the biotechnology industry (Dynal Biotech 1995 - 2005) (Invitrogen Corporation 2005 - 2006), and she also has extensive experience from accounting, finance and the IR field within listed companies, and in particular from companies being in the product development and growth phase.

Badger Explorer Group 2009 - Corporate governance policy
Badger Explorer Group 2009 - Corporate governance policy

Corporate governance policy

Adopted by the Board of Directors on 23 March 2010

Introduction

Corporate Governance in general regulates the responsibilities between the executive personnel, the Board of Directors and the shareholders of Badger Explorer ASA.

Badger Explorer ASA ("BXPL" or "Company") is a Norwegian public limited company which shares are listed at the Oslo Børs/Oslo Stock Exchange (Oslo Axess list) and it is therefore subject to the corporate governance requirements set out in the Norwegian Code of Practice for Corporate Governance. BXPL applies the Norwegian Code of Practice for Corporate Governance dated 21 October 2009. If BXPL does not fully comply with the recommendations it will be explained why.

Furthermore Oslo Børs/Oslo Stock Exchange prescribes that companies listed on the Oslo Børs/Oslo Stock Exchange must publish a report in their annual report on the company's corporate governance.

The aim is to have systems for communication, monitoring, accountability and incentives that also enhance and thereby maximise the market value, corporate profit, long-term health, continuity and overall success of the business of the Badger Group (Badger Explorer ASA and its subsidiary Badger Plasma Technology AS and partly owned Calidus Engineering Ltd.) but also strengthen the confidence of shareholders in the Company.

1. Reporting on Corporate Governance

The Board of Directors at Badger Explorer ASA has approved this Corporate Governance Policy. The Company's Policy on Corporate Governance can also be found on its website (www.bxpl.com) and are included in the annual report.

Company's basic corporate values and its ethical guidelines are incorporated in the Company's Management System Manuel.

2. Business

BXPL is developing a revolutionary drilling device for collection and analysis of data with regard to mapping and exploration of hydro carbon deposits within the oil and gas industry, invest in and develop technology used for drilling, well service and maintenance globally within the Oil and Gas Industry, as well as investments in securities, participation in other companies and activities related thereto.

The Company's objectives and strategies are described in the Annual Report.

3. Equity and Dividends

The development of the Company's equity up to 31 December 2009 can be found in the "Statement of change in equity" in the financial statements of the annual report.

Badger Explorer ASA holds a strong financial position and its development program is considered fully financed up to the commercial launch of Badger Explorer services.

BXPL's dividend policy aims to yield a competitive return of invested capital to the shareholders through a combination of dividends and share price development. Because of the Company's development, acquisitive and organic growth strategy no dividend has yet been proposed.

On 24 April 2009 the Annual General Meeting ("AGM") passed two Board authorisations.

The first mandate grants the Board of Directors the possibility to increase the Company's share capital with up to NOK 116,429 through the issuance of up to 931,432 shares of nominal value NOK 0.125. It may be used to issue shares to employees, Directors and others connected with the Company as a part of the Company's share incentive scheme. The shareholder's preferential rights according to the Public Limited Liability Companies Act section 10-4 may be waived. Share issues may also be made against contributions in kind.

The second proxy authorizes the Board of Directors to increase the Company's share capital with up to NOK 225,488 through the issuance of up to 1,803,904 shares of nominal value NOK 0.125 to existing shareholders and external investors in connection with Company's expansion, development and/or strategic acquisition. The shareholder's preferential rights according to the Public Limited Liability Companies Act section 10-4 may be waived. Share issues may also be made against contributions in kind. The authorisation is also valid in the event of a merger in accordance with the Public Limited Liability Companies Act Section 13-5, and may also be used when the company has agreed payment in shares in connection with an acquisition etc.

Both Board authorisations are not valid longer than until 30 June 2010.

4. Equal Treatment of Shareholders and Transactions with Close Associates

BXPL has one class of shares and is dedicated to apply equal treatment to all shareholders.

In the event of any transaction that is not immaterial between the Company (or another Badger Group company) and a shareholder of the Company, Director or member of executive personnel (or related parties to such persons) the Board will arrange for a valuation to be obtained from an independent third party.

As a general rule, a transaction will be considered to be material if the consideration paid by the Company exceeds 5% of paid in equity of the Company at the time of the transaction, following which said transaction shall also be approved by the shareholders in a General Meeting ("GM"), to the extent required by the Norwegian Public Limited Liability Companies Act § 3-B.

The Directors and the executive personnel shall notify the Board if any of them have any material direct or indirect interest in any transaction entered into by BXPL.

Divergence from the Norwegian Code of Practice for Corporate Governance:

The shareholders' pre-emptive rights are exempted because the Company wishes to be able to (i) use share issues in conjunction with implementation of share incentive schemes for its employees etc and (ii) issue shares towards certain specifically chosen institutional investors or others if required or desired in conjunction with the Company's expansion, development and/or strategic acquisitions.

5. Freely Negotiable Shares

All shares are freely negotiable without any form of restriction on the negotiability.

6. General Meetings ("GM")

The shareholders exercise the highest authority in BXPL through GMs.

The Annual General Meeting of BXPL will be held each year prior to the end of June. The AGM shall approve the annual accounts and annual report as well as the distribution of dividend, and otherwise make such resolutions as required under the Corporate Governance Policy and the applicable law.

The Board shall publish notices of GMs and any supporting material, such as the agenda, recommendations of the Nomination Committee, the information about the shareholder's right to propose resolutions in respect of matters to be dealt with by the General Meeting and other documents as set out in the Byelaws of the Company no later than 21 days prior to the day of the GM on the Company's website (www.bxpl.com). The Board will also ensure that the distributed notice and all supporting material are sufficiently detailed and comprehensive. The Board will make reasonable endeavours to enable as many shareholders as possible to attend.

The notice shall also include information on the procedure of representation through proxy as well as a proxy that allows giving separate voting instructions for each matter to be considered by the General Meeting and for each candidate nominated for election. The Company will nominate a person who will be available to vote on the shareholder's behalf if the shareholder has not appointed a person to vote as his/her proxy. Every document will be available for downloading on the Company's website (www.bxpl.com) at least three weeks before each GM.

The Board shall make such notices of General Meetings and the relevant supporting material available through the notification system of Oslo Børs/Oslo Stock Exchange and on the Company's website no later than 21 days prior to the day of the GM. Every shareholder has the right to put matters on the agenda of a General Meeting along with a proposed resolution within the statutory timeframe.

The shareholders may be asked to notify their attendance prior to the GM. The deadline for the notification of attendance for the AGM will be as close to the meeting as possible. Shareholders who are unable to attend may vote by proxy. A proxy form shall be attached to the notice of the GM.

The GM's chairman shall be independent. The Company's Board as well as the chairman of the GM shall take all necessary steps to ensure that the shareholders vote separately for each candidate nominated for a corporate body.

BXPL will publish the minutes of GMs (alternatively only such resolutions that were not made in accordance with the proposals made in the notice to the GM) through the notification system of Oslo Børs/Oslo Stock Exchange and on its website no later than 15 days after a GM has been held as well as keeping them available for inspection in the Company's offices.

The Board may convene an extraordinary GM whenever it deems necessary or when otherwise legally required. BXPL's auditor and any shareholder or group of shareholders representing no less than 5% of the issued and outstanding share capital of BXPL may require that the Board convenes an extraordinary GM.

The Annual General Meeting for the fiscal year 2008 was held on 24 April 2009 in Stavanger where 37.33% of all shares were represented.

An Extraordinary General Meeting was held on 17 December 2009 in Stavanger where 56.57% of all shares were represented.

Divergence from the Norwegian Code of Practice for Corporate Governance:

The Norwegian Code of Practice for Corporate Governance demands that the Board of Directors as a whole, the members of the Nomination Committee and the auditor are present at the General Meetings. BXPL considers it to be sufficient that only the chairman of the Board of Directors and the Auditor attend the GMs.

7. Nomination Committee

BXPL's Nomination Committee consists of two to three members, the majority of which shall be independent of the Board of Directors and the Company's

Badger Explorer Group 2009 - Corporate governance policy
Badger Explorer Group 2009 - Corporate governance policy

executive personnel. No more than one member of the Board of Directors shall be member of the Nomination Committee, and should not offer himself for re-election. The members of the Nomination Committee are elected by the shareholders in a GM for a period of no longer than two years.

The Nomination Committee makes recommendations to the GM on the appointment and termination of Directors. The composition of the Board of Directors should reflect considerations regarding the provisions of the Company's Corporate Governance Policy, commitment to shareholder return, independence and experience in the relevant sectors (technology and business development, financing and accounting, disclosure and regulatory, etc).

The Nomination Committee's recommendations shall include information on the proposed Directors, in particular each person's age, education, business experience, term of appointment to the Board (if applicable), any assignments (other than the proposed Directorship) for the Company and material appointments with other companies and organisations. In the event of recommendation to re-elect current Directors, the recommendation may refer to information included in the annual report of the Company.

The Nomination Committee shall elect its own chairman according to the Company's Articles of Association.

Meetings of the Nomination Committee shall be convened when deemed necessary by any of its members in order for it to adequately fulfil its assigned duties. Notice of a meeting shall be sent out by the chairman of the Nomination Committee not later than one week prior to the meeting, unless all members approve a shorter notice period.

The Company will on its website provide information on the membership of the Committee and any deadlines for submitting proposals to the Nomination Committee.

The Nomination Committee consists of:

Marcus Hansson, chairman (elected until AGM in 2011)
Knut Åm (re-elected until AGM in 2010)
Rolf E. Ahlqvist (re-elected AGM in 2010)

Marcus Hansson and Knut Åm are considered independent of the Board of Directors.

Divergence from the Norwegian Code of Practice for Corporate Governance:

The Company's Articles of Association regulate the election of the chairman of the Nomination Committee. According to § 6 of the Articles of Association of Badger Explorer ASA the Nomination Committee elects its own chairman.

Board of Directors: Composition and Independence

BXPL shall be headed by a Board with collective responsibility for the success of the Company and the Badger Group.

The Board of Directors shall have between four and eight Directors according to § 5 of BXPL's Article of Association. Currently the Board consists of five Directors who have all been elected by the shareholders and are not representatives of BXPL's executive personnel. The members of the Board of Directors are elected for a period of two years.

The members of the Board of Directors are:

Rolf E. Ahlqvist, chairman (elected until AGM in 2011)
Christian Bull Eriksson (elected until AGM in 2010)
Bjarge Gretland (elected until AGM in 2011)
Kristine Holm (re-elected until AGM in 2010)
Tone Kvåle (elected until AGM in 2011)

Mr. Ahlqvist was elected as chairman of the Board of Directors by the AGM held 24 April 2009.

All members of the Company's Board of Directors are considered independent according to the Norwegian Code of Practice for Corporate Governance.

Rolf E. Ahlqvist owns through Ahlqvist Invest AS 465,407 shares, which represents a total of 2.52 % as of 23 March 2010.

Christian Bull Eriksson owns through Chevni AS 6000 shares, which represent a total of 0.03% as of 23 March 2010.

Bjarge Gretland owns through Convexa Capital IV AS and Convexa AS 3,414,780 shares, which represents a total of 18.52 % as of 23 March 2010.

Kristine Holm owns through Invest OK AS 15,000 shares, which represents a total of 0.08 % as of 23 March 2010.

Tone Kvåle owns 5000 shares which represents a total of 0.03 % as of 23 March 2010.

Divergence from the Norwegian Code of Practice for Corporate Governance:

A corporate assembly has not been elected since the Company employees less than 200 people.

The Work of the Board of Directors

The Board shall ensure that the Company is well organised and that operations are carried out in accordance with applicable laws and regulations, in accordance with the objects of BXPL as specified its Articles of Association and guidelines given by the shareholders through resolutions in GMs.

BXPL's Board of Directors has the ultimately responsibility for inter alia the Company's executive personnel and the supervision of its activities but also for the Company's budgets and strategic planning. The Board of Directors produces an annual plan of its work.

To fulfil its duties and responsibilities it is ensured that the Board has full access to the Company's relevant information. The Board shall also investigate such matters as for example obtaining advice, opinions and reports from third party advisors as it deems necessary in order to carry out its responsibilities.

The "Rules of Procedure for the Board of Directors of Badger Explorer ASA and the Relation to CEO" were approved by the Board on 23 March 2010 and were implemented.

The Board's work is organised through three different committees:

Compensation Committee
Strategy Committee
Audit Committee

The Board of Directors evaluates its own performance and expertise once a year.

The Board of Directors held 9 ordinary Board meetings. No extraordinary Board meetings were called.

Risk Management and Internal Control

BXPL has implemented internal control and risk management systems which include the Company's core values and ethical guideline to strengthen the organisation.

The Board of Directors carries out an annual review of the control and risk management systems and the Company's most important areas of exposure to risk.

Remuneration of the Board of Directors

The remuneration of the members of the Board of Directors reflects the Board's responsibilities, expertise, the committed time and the complexity of the Company's activities.

The Board Members' remuneration (form and amount) will be reviewed annually by the Nomination Committee and it is not linked to the Company's performance. It is the Nomination Committee's responsibility to prepare a proposal for the Annual General Meeting regarding the above mentioned remuneration.

Remuneration of the Executive Personnel

The Board of Director establishes as required by law guidelines for the remuneration of the members of the executive personnel. The AGM will vote on these guidelines which help ensure convergence of the financial interest of the executive personnel and the shareholders.

The guidelines for remuneration of the executive personnel are published in the Annual Report 2008 on page 16 and in note 6.

The executive personnel's holdings of shares and share options are the following as of 23 March 2010:

Kjell Erik Drevdal (CEO) holds 232,600 shares, 10,000 of these through 5K International AS. The shares owned by the Company's CEO represent a total of 1.26% of the Company. Mr. Drevdal has been granted 75,000 share options which may be exercised within 36 months from the time of issue in September 2009 and can be exercised only in tranches, at the earliest 12 months subsequent to the time of issue and thereafter at up to 4 occasions during each year, between 3 and 10 days after presentation of the Company's quarterly results.

Gunnar Dolven (CFO) holds 1.64% of the Company (equals 301,872 shares) through Dalvin Rådgivning AS. Mr. Dolven has been granted 25,000 share options which may be exercised within 36 months from the time of issue in September 2009 and can be exercised only in tranches, at the earliest 12 months subsequent to the time of issue and thereafter at up to 4 occasions during each year, between 3 and 10 days after presentation of the Company's quarterly results.

Hege Furland (Manager HR, Economy & Administration) holds 2,858 shares which represent a total of 0.01% of the Company. Mrs. Furland has been granted 25,000 share options which may be exercised within 36 months from the time of issue in September 2009 and can be exercised only in tranches, at the earliest 12 months subsequent to the time of issue and thereafter at up to 4 occasions during each year, between 3 and 10 days after presentation of the Company's quarterly results.

Dave Gardner (Chief Project Manager) has been granted 60,000 share options which may be exercised within 36 months from the time of issue in September 2009 and can be exercised only in tranches, at the earliest 12 months subsequent to the time of issue and thereafter at up to 4 occasions during each year, between 3 and 10 days after presentation of the Company's quarterly results.

Badger Explorer Group 2009 - Corporate governance policy
Badger Explorer Group 2009 - Compensation statement

Kjell Markman (Sr. VP Business Dev. & Strategy) holds 1.24% of the Company (equals 229,422 shares). Mr. Markman has been granted 25,000 share options which may be exercised within 36 months from the time of issue in September 2009 and can be exercised only in tranches, at the earliest 12 months subsequent to the time of issue and thereafter at up to 4 occasions during each year, between 3 and 10 days after presentation of the Company's quarterly results.

Erling A. Woods (CTO) holds 1000 shares, which represents 0.005% of the Company. Mr. Woods has been granted 25,000 share options which may be exercised within 36 months from the time of issue in September 2009 and can be exercised only in tranches, at the earliest 12 months subsequent to the time of issue and thereafter at up to 4 occasions during each year, between 3 and 10 days after presentation of the Company's quarterly results.

13. Information and Communications

BXPL provides its shareholders, Oslo Børs/Oslo Stock Exchange and the financial markets generally (through Oslo Børs'/Oslo Stock Exchange's Distribution Network) with timely and accurate information. Such information takes the form of annual reports, quarterly interim reports, press releases, stock exchange notifications and investor presentations, as applicable. It seeks to clarify its long-term potential, including its strategy, value drivers and risk factors. The Company maintains an open and proactive investor relations policy, a best-practice website and gives presentations regularly in connection with annual and interim results in Oslo and Stavanger/Norway and London/UK.

The Company's current financial calendar with dates of important events like the Annual General Meeting, publishing of quarterly reports and its presentations etc are accessible for all shareholders on www.osloaxess.no and on the Company's website. (www.bxpl.com)

Generally, BXPL, as a company listed on Oslo Børs/Oslo Stock Exchange, discloses all required information as defined by law. Certain resolutions and circumstances will in any event be disclosed, including but not limited to Board and GM resolutions regarding dividends, mergers/de-mergers or changes in share capital, issue of warrants, issue of convertible or other loans, any changes in the rights vested in the shares of the Company (or other financial instruments issued by BXPL) and all agreements of material importance that are entered into between the Company and a shareholder, member of the executive personnel, or related parties thereof, or any other company in the Badger Group.

An announcement informing on BXPL's share capital and number of votes related thereto shall be made by the end of each month during which changes to any of these have occurred.

It is important to BXPL to disclose all material information to all recipients equally in terms of timing and content.

14. Takeovers

The Company has not implemented any specific guidelines for how to act in the event of a takeover bid.

Divergence from the Norwegian Code of Practice for Corporate Governance:

The Company has not yet attached importance to guidelines in case of a takeover. A bid will be dealt with by the Board of Directors and based on their recommendation the shareholders' approval will be requested.

15. Auditor

Under Norwegian law the auditor of the Company (the "Auditor") is elected by the shareholders in a GM. The current Auditor serves until a new auditor has been elected.

The Auditor participates in meeting(s) of the Board that deal with the annual accounts as well as the General Meetings. At these meetings, the Auditor reviews any variations in the accounting principals applied, comments on material accounting estimates and issues of special interest to the Auditor, including possible disagreements between the Auditor and the management.

At least once a year the Auditor and the Board of Directors meet without any members of the Company's executive personnel present.

The Auditor presents annually to the Audit Committee the main features of its plan for the audit of the Company to the Board, as well as a review of the Company's internal control procedures.

The remuneration of the Auditor and all details regarding the fees of the audit work and other specific assignments are presented at the AGM.

The Company's auditor has to annually submit a written confirmation that the Auditor still continues to satisfy with the requirements for independence.

Board Statement on Principles of Compensation of Members of Management - Badger Explorer ASA

The Board of Directors of Badger Explorer ASA ("BXPL" or "Company") has prepared this statement on principles of compensation of the Company's management ("Management") for the fiscal year 2010 in accordance with the Public Limited Liability Companies Act § 6 - 16a. This statement will be presented to the AGM on 21 April 2010 for approval.

The statement's main principle regarding the compensation of the Company's Management is to offer competitive terms in an overall perspective, taking into account the base salary, payments in kind as well as bonuses and pension plans to avoid substantial turnarounds in the Management. The Company shall offer salary levels that reflect the average salary levels in comparable Norwegian companies.

For the fiscal year 2010 the determination of salaries and additional compensation to the Company's Management will be decided in accordance with the above noted main principle and is further detailed as follows:

The base salary for each member of the Company's Management shall be competitive and based on the individual's experience, responsibilities as well as the achieved results.
The salaries and other benefits shall be annual adjusted.
In addition to their base salary the Company's Management may receive a bonus. If a bonus scheme is implemented the assessment criteria will be divided into parts where one part will be based on the Company's performance and the other part will be based on the individual performance.

The targets to be reached by the CEO are to be determined by the Company's Board of Directors. The CEO decides on the relevant targets for the other members of Management, based on principles defined by BXPL's Board of Directors.

The Company's Management will receive payment in kind such as paid newspaper subscriptions, cell phones and payment of IT and telecommunication expenses.

Badger Explorer ASA has not implemented any scheme for fixed car allowance or Company cars.

All members of Badger Explorer ASA's Management were awarded share options in the Company amounting to all together 235,000 share options.

The options can be exercised within 36 months as of September 2009 and can be exercised only in tranches, at the earliest 12 months subsequent to the time of issue and thereafter at up to 4 occasions during each year, between 3 and 10 days after presentation of the Company's quarterly results.

Upon exercise of the options, the option holder shall pay to the Company a price of NOK 10.00 per option share. If on the exercise day the market price of the BXPL shares is exceeding NOK 50 the exercise price shall be increased by an amount equivalent to 8% of the marked price deducting NOK 50.

All members of the Company's Management are party to the defined contribution pension scheme established by BXPL for all its employees. The scheme is deposit based and maximized to a percentage of 12G. The retirement age for all employees including the Company's Management is 67 years.
The CEO is entitled to three months' severance pay in case of termination of employment by the Company after a notice period of three months.

The Company has not implemented any form of variable compensation or special benefits other than the above mentioned arrangement.

The compensation of the Company's Management for 2009 was in line with the rules for the fiscal year 2009. For further information on such compensation please see note 6 in BXPL's Annual Report for 2009.

The Board of Directors of Badger Explorer ASA

23 March 2010

Title and Name	Amount of Share Options
CEO Kjell Erik Drevdal	75,000
Chief Project Manager Dave Gardner	60,000
CFO Gunnar Dolven	25,000
CTO Erling A. Woods	25,000
Sr. VP Business Dev. & Strategy Kjell Markman	25,000
Manager Economy & Administration Hege Furland	25,000

Badger Explorer Group 2009 - Income statement 23

Income statement - Badger Explorer Group

All figures in NOK

	Note	2009	2008
REVENUES
Other income		8 977 649	7 362 625
Public grants	2	1 977 003	2 624 355
Capitalised public grants	9	-1 977 003	-2 624 355
Total revenues		8 977 649	7 362 625
OPERATING EXPENSES
Cost of goods sold	19	2 639 408	1 185 613
External services for dev. project		20 766 818	17 255 235
Salary	6,19	19 915 191	15 481 786
Depreciation	7	1 147 596	1 151 655
Other operating expenses	19	11 902 275	8 983 729
Capitalised development cost	9	-30 561 242	-24 696 273
Total operating expenses		25 810 046	19 361 746
EBIT		-16 832 397	-11 999 122
Financial income	3	6 186 850	12 117 472
Financial expenses	3	277 886	491 880
Net financial items		5 908 964	11 625 592
EBT		-10 923 433	-373 530
Tax	4	-235 007	-208 320
Net profit (loss)		-11 158 439	-581 850
Profit (loss) attributable to non-controlling interest		1 572 054	1 134 399
Profit (loss) attributable to equity holders of the parent	5	-12 730 493	-1 716 249
Earnings per share	5	-0,69	-0,09
Earnings per share diluted	5	-0,69	-0,09

Badger Explorer Group 2009 - Statement of financial position
Badger Explorer Group 2009 - Statement of financial position

Statement of financial position - Badger Explorer Group

All figures in NOK

ASSETS	Note	2009	2008
NON-CURRENT ASSETS
Capitalised development costs	9	64 010 480	35 426 241
Patent rights	9	386 668	386 668
Goodwill	9	5 709 840	6 202 563
Total intangible assets		70 106 987	42 015 472
Machinery, fixtures, etc.	7	3 333 191	3 425 554
Total tangible assets		3 333 191	3 425 554
Bank bonds	15	0	39 372 895
Total financial assets		0	39 372 895
TOTAL NON-CURRENT ASSETS		73 440 178	84 813 921
CURRENT ASSETS
Inventory	8	854 407	355 158
Accounts receivable	10,15	1 520 288	1 802 089
Other receivable	10,15	3 114 620	6 388 569
Total receivable		4 634 908	8 190 658
Bank bonds	15	33 781 615	0
Total current financial assets		33 781 615	0
Cash and cash equivalents	11	107 315 911	137 572 827
TOTAL CURRENT ASSETS		146 586 841	146 118 643
TOTAL ASSETS		220 027 019	230 932 563
EQUITY AND LIABILITIES	Note	2009	2008
---	---	---	---
EQUITY
Share capital	12	2 304 880	2 304 880
Share premium reserve		217 099 786	217 099 786
Other paid in equity		945 870	262 112
Total paid in equity		220 350 536	219 666 778
Foreign currency translation reserve		-2 306 218	-1 157 569
Accumulated loss		-22 192 860	-9 462 367
Total equity attributable to equity holders of parent		-24 499 078	-10 619 936
Non-controlling interest	17	4 684 949	3 112 897
TOTAL EQUITY		200 536 408	212 159 739
LIABILITIES
Capitalised grants	14	13 855 200	13 855 200
Total long term liabilities		13 855 200	13 855 200
Accounts payable	13	3 375 906	2 499 968
Public duties payables		222 432	387 602
Taxes payable	4	202 181	202 416
Other short term liabilities		1 834 893	1 827 638
Total short term liabilities		5 635 412	4 917 624
TOTAL LIABILITIES		19 490 612	18 772 824
TOTAL EQUITY AND LIABILITIES		220 027 019	230 932 563

Stavanger, 23 March 2010

Badger Explorer Group 2009 - Statement of change in equity
Badger Explorer Group 2009 - Statement of cash flow

Statement of comprehensive income - Badger Explorer Group

All figures in NOK

Total comprehensive income	2009	2008
Profit (loss) for the year	-11 158 439	-581 850
Other comprehensive income
Translation differences	-1 148 649	-733 976
Total comprehensive income for the year, net of tax	-12 307 088	-1 315 826
Distribution of total comprehensive income	2 009	2 008
---	---	---
Equity holders of the parent	-13 879 142	-2 450 225
Non-controlling interest	1 572 054	1 134 399
	-12 307 088	-1 315 826

Statement of change in equity - Badger Explorer Group

All figures in NOK

Note	Share capital	Share premium reserve	Other paid in equity	Trans-lation diff.	Acc. loss	Non-controlling interest	Total equity
Equity per 01.01.2008	2 304 880	217 099 786	127 182	-423 593	-7 746 117	1 978 496	213 340 634
Profit (loss) for the year					-1 716 249	1 134 399	-581 850
Translation differences				-733 976			-733 976
Total comprehensive income				-733 976	-1 716 249	1 134 399	-1 315 826
Employee options	6		134 930				134 930
Equity per 31.12.2008	2 304 880	217 099 786	262 112	-1 157 569	-9 462 367	3 112 897	212 159 739
Profit (loss) for the year					-12 730 493	1 572 054	-11 158 439
Translation differences				-1 148 649			-1 148 649
Total comprehensive income				-1 148 649	-12 730 493	1 572 054	-12 307 088
Employee options	6		683 758				683 758
Equity per 31.12.2009	2 304 880	217 099 786	945 870	-2 306 218	-22 192 860	4 684 950	200 536 408

Statement of cash flow - Badger Explorer Group

All figures in NOK

Note	2009	2008
Cash flow from operational activities
Contributions from operations	-16 808 103	-12 055 256
Change in accounts receivable and accounts payables	1 157 739	1 582 415
Change in other receivables and payables	4 188 602	-2 575 264
Net cash flow from operating activities	A	-11 461 763
Cash flow from investment activities
Investment in fixed asset	7	-1 055 232
Investment in bank bonds	15	5 591 280
Capitalisation of development cost	9	-30 561 242
Net cash flow from investment activities	B	-26 025 195
Cash flow from financing activities
Public grants	1 977 003	2 624 355
Other changes in long term receivables and payables	0	3 458 400
Interest paid	-277 886	-491 880
Interest received	6 186 850	12 117 472
Net cash flow from financing activities	C	7 885 967
Total net changes in cash flow	A+B+C	-29 600 991
Net foreign translation differences		-655 925
Cash and cash equivalents at beginning of period		137 572 827
Cash and cash equivalents at end of period		107 315 911
Net result		-12 730 493
Employee options	6	683 758
Depreciation	7	1 147 596
Financial income		-6 186 850
Financial expenses		277 886
Total contributions from operations		-16 808 103

Badger Explorer Group 2009 - Notes
Badger Explorer Group 2009 - Notes

Note 1 Accounting policies

Badger Explorer ASA is a public limited company registered in Norway and listed on the Oslo Stock Exchange (Oslo Axess list). The Company's head office is located at Jättävägveien 7 - Building C, 4020 Stavanger, Norway.

The consolidated financial statement of Badger Explorer ASA and all its subsidiaries (the Group) has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU as of 31.12.2009.

The financial statement has been prepared on an historical cost basis.

1.1 Consolidation

The consolidated financial statement comprises the financial statement of Badger Explorer ASA and its subsidiaries as of 31.12 each year.

Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases, see note 17.

The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.

All Intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transaction are eliminated in full.

Non-controlling interests represent the portion of profit or loss and net assets not held by the Group and are presented separately in the income statement and within equity in the consolidated balance sheet, separately from parent shareholders' equity. Acquisitions of non-controlling interests are accounted for by using the parent entity extension method, whereby, the difference between the consideration and the book value of the share of the net assets acquired is recognised in goodwill.

Business combinations were accounted for using the purchase method. Transaction costs directly attributable to the acquisition formed part of the acquisition costs. The non-controlling interest (formerly known as minority interest) was measured at the proportional share of the acquiree's indentifiable net assets.

1.2 Currency

Translation differences are taken to profit or loss. Transaction in foreign currencies are initially recorded in the functional currency rate quoted at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency exchange rate at the balance sheet date. Non monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in foreign currency are translated using the exchange rates at the balance sheet date.

The Group's consolidated financial statements are presented in NOK. Income statement in foreign subsidiaries are translated into NOK using the average exchange rate for the period (month). Assets and liabilities in foreign subsidiaries, including goodwill and adjustments of fair value of identifiable assets and liabilities arising on the acquisition of subsidiaries are translated into NOK using exchange rate at the balance sheet date. The exchange differences arising from the translation are recognised directly as other comprehensive income in equity.

1.3 Comparatives

Where necessary comparative figures have been adjusted to conform to changes in presentation in the current year.

Note 1 Accounting policies (continues)

1.4 Financial assets

Initial recognition

Financial assets within the scope of IAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, available-for-sale financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial assets at initial recognition. Financial assets are recognised initially at fair value plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. The Group's financial assets include, in addition to cash and cash equivalents, trade and other receivables and other liabilities, bank bonds classified as loans and receivables.

Subsequent measurement

The subsequent measurement of financial assets depends on their classification. The Group has bank bonds that are classified as "loans and receivables" under IAS 39.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such financial assets are carried at amortised cost using the effective interest rate method. Gains and losses are recognised in the consolidated income statement when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

1.5 Inventory

Inventory is valued at the lower of cost and net realisable value.

Cost incurred in bringing raw materials to its present location and condition are accounted for by purchase cost on a first in, first out basis.

Cost incurred in bringing finished goods and work in progress to its present location and condition are accounted for by cost of direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity but excluding borrowing costs.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated cost of completion and the estimated cost necessary to make the sale.

1.6 Cash and cash equivalents

Cash includes cash in hand and at bank. Cash equivalents are short-term liquid investments that can be converted into cash within three months and to a known amount, and which contains insignificant risk elements.

1.7 Accounts receivable

Accounts receivable are recognised in the balance sheet at nominal value less provisions for doubtful debts.

1.8 Fixed assets

Fixed assets are carried at cost less accumulated depreciations and impairment losses. When fixed assets are sold or disposed of, the gross carrying amount and accumulated depreciation are derecognised, and any gain or loss on the sale or disposal is recognised in the income statement.

Badger Explorer Group: 2009 - Notes
Badger Explorer Group: 2009 - Notes

Note 1 Accounting policies (continues)

The gross carrying amount of fixed assets is the purchased price, including duties/taxes and direct acquisition costs relating to making the asset ready for use. Subsequent costs, such as repair and maintenance costs, are normally recognised in profit or loss as incurred. When increased future economic benefits as a result of repair/maintenance work can be proven, such costs will be recognised in the balance sheet as additional to fixed assets.

Depreciation is calculated using the straight-line method over the following periods:

Machinery and equipment: 10 - 15 years

Fixtures, fittings and vehicles: 3 - 10 years

Both the depreciation period and depreciation method and the residual value of fixed assets are evaluated annually.

1.9 Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is fair value as of the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is reflected in profit or loss the year the expenditure has incurred.

Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life is reviewed at least at the end of each financial year. Changes in the expected useful life or the expected pattern of consumption of the future economic benefits embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, and are treated as change in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in profit or loss.

Intangible assets are capitalised if it is probable that the expected future financial benefits referred to the asset will accrue to the Group, and that the cost can be calculated in a reliable matter.

Intangible assets with indefinite useful lives are tested for impairment annually at the cash generating unit level. Such intangibles are not amortised. The useful life of an intangible asset with an indefinite life is reviewed annually to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is made on a prospective basis.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is derecognised.

Patents and licences

Amount paid for patents and licences are activated. Depreciation is recognised in the balance sheet and depreciated using the straight-line method over the expected useful life. The expected useful life of patents and licences varies from 5 to 10 years.

Research and development

Costs relating to research are expensed as incurred. Costs relating to development are recognised in the income statement the year the cost has incurred unless the following criteria are met in full:

the product or the process is clearly defined and the cost elements can be identified and measured reliably
the technical solution for the product has been demonstrated
the product or the process will be sold or used in the Group's operations

Note 1 Accounting policies (continues)

the asset will generate future financial benefits
sufficient technical, financial and other recourses for completing the project are present

When all above listed criteria are fulfilled, capitalisation of expenses related to the development commences. Costs that have been charged as expenses in previous accounting periods are not recognised in the balance sheet.

Following initial recognition of the development expenditure as an asset, the cost model is applied requiring the asset to be carried at cost less any accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins when development is complete and the asset is available for use. It is amortised for the period of expected future benefit. During the period of development, the asset is tested for impairment annually.

Recoverable amount of development cost will be estimated when there is an indication of drop in value.

Goodwill

The Group assesses whether there are any indicators that goodwill is impaired at each reporting date. Goodwill is tested for impairment, annually and when circumstances indicate that the carrying value may be impaired.

Impairment of goodwill is determined by assessing the recoverable amount of the cash-generating units, to which the goodwill relates. Where the recoverable amount of the cash-generating units is less than their carrying amount an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods. The Group performs an annual impairment test of goodwill as of 31.12.

1.10 Provisions

An provision is recognised in the balance sheet when the Group has a liability (legal or self-imposed) as a consequence of a past event, it is likely (more likely than not) that a financial settlement will follow this liability and the amount can be calculated reliable. If the effect is substantial, the provision is calculated by discounting expected future cash flow at a discount rate before tax which reflects the markets pricing of time value of money and, if relevant, risks specifically related to the liability.

1.11 Principles for revenue recognition

Revenue is recognised when it is probable that transactions will generate future economic benefits that will accrue to the Group and the size of the amount can be reliably estimated. Sales revenues are presented net of value added tax and discounts.

Revenue from the sale of goods is recognised when the significant risk and rewards of ownership of the goods have passed to the buyer, usually at delivery of the goods.

Revenue from sale of engineering services is recognised on a monthly basis based on completed monthly time sheets completed by the employee at the rate agreed with the customer.

Interest income is recognised in the income statement based on the effective interest method as they are earned.

1.12 Public grants

Public grants are recognised where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. When the grants relate to an expense item, it is recognised as income over the period necessary to match the grant on a systematic basis to the cost it intends to compensate. Where the costs are related to a development project and capitalised, the belonging grants are capitalised together with the cost.

Badger Explorer Group 2009 - Notes
Badger Explorer Group 2009 - Notes

Note 1 Accounting policies (continues)

All public grants received to date are related to development projects and capitalised.

Where the grants relate to an asset, it is recognised as deferred income and released to income in equal annual amounts over the expected useful life of the related assets.

Contribution from partners are recognised in the balance sheet as long term liabilities as the contributions are subject to repayment. Ref. note 14.

Where the Group receives non-monetary grants, the assets and the grants are recorded at nominal amounts and released to profit and loss over the expected useful life of the relevant assets by equal annual instalments.

1.13 Income tax

The tax expense consists of the tax payable and changes to deferred tax. Deferred tax/tax assets are calculated on all taxable temporary differences on assets and liabilities.

Deferred income tax liabilities are recognised for all taxable temporary differences except

(i) where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss

(ii) in respect of taxable temporary differences are associated with investments in subsidiaries, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax and deferred tax assets are recognised at their nominal value and classified as non-current asset investments (long term liabilities) in the balance sheet.

Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.

The tax payable and deferred tax are recognised directly as other comprehensive income in equity to the extent that they relate to factors that are recognised directly as other comprehensive income in equity.

1.14 Contingent liabilities and assets

Contingent liabilities are defined as

(i) possible obligations resulting from past events whose existence depends on future events.

(ii) obligations that are not recognised because it is not probable that they will lead to an outflow of resources.

(iii) obligations that cannot be measured with sufficient reliability.

Contingent liabilities are not recognised in the annual financial statements. Significant contingent liabilities are stated, with the exception of contingent liabilities where the probability of the liability occurring is remote.

A contingent asset is not recognised in the annual financial statements, but is stated if there is a certain level of probability that a benefit will accrue to the Group.

Note 1 Accounting policies (continues)

1.15 Events after the balance sheet date

New information on the Group's positions at the balance sheet date is taken into account in the annual financial statements. Events after the balance sheet date that do not affect the Group's position at the balance sheet date but affect the Group's position in the future are stated if significant.

1.16 Use of estimates when preparing the annual financial statements.

The preparation of the Group's financial statements requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment of the carrying amount of the asset or liability affected in the future.

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment of the carrying amounts of assets and liabilities within the next financial year are discussed below.

The Group assesses whether there are any indicators of impairment for all non-financial assets at each reporting date. Goodwill and other indefinite life intangibles are tested for impairment annually and at other times when such indicators exist. The Group's impairment test for goodwill and intangible assets with indefinite useful lives is based on value in use calculations that use a discounted cash flow model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the asset base of the cash generating unit being tested.

The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes. The key assumptions used to determine the recoverable amount for the different cash generating units, including a sensitivity analysis, are further explained in note 18. Other non-financial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable. This is especially relevant to capitalised development costs, with a book value of MHOK 64.0 at 31.12.2009, see note 9.

1.17 Leasing

Finance leases

Leases where the Group takes over the main part of the risk and return related to the ownership of the asset are classified as finance leases. At commencement of the lease period finance leases are calculated to an amount corresponding to real value of lowest lease present value, whichever is the lowest, less accumulated depreciations and devaluations. When calculating the present value of the lease the implicit interest cost of the lease is used when it can be determined. If it cannot be determined, the Group's marginal borrowing rate in market is used. Direct costs relating to the lease are included in the asset's cost price.

The depreciation period is consistent with equivalent assets that are owned by the Group. If it is not certain that the Group will take over the asset when the lease expires, the asset is depreciated over the lease's term or the depreciation period for equivalent assets owned by the Group, whichever is the shorter.

Operating leases

Leases for which most of the risk rests with the other contracting party are classified as operating leases. Lease payment are classified as operating costs and recognised in the income statement during the contract period.

Badger Explorer Group 2009 - Notes
Badger Explorer Group 2009 - Notes

Note 1 Accounting policies (continues)

1.18 Share options

The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair value requires determining the most appropriate valuation model for a grant of equity instruments, which is dependent on the terms and conditions of the grant. This also requires determining the most appropriate inputs to the valuation model including the expected life of the option, volatility and dividend yield and making assumptions about them. The assumptions and models used are disclosed further below and in note 6.

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled. The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. The income statement expense or credit for a period represents the movement in cumulative expense recognised as the beginning and end of that period.

No expense is recognised for awards that do not ultimately vest, except for equity-settled transactions where vesting is conditional upon a market or non-vesting condition, which are treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.

Where the terms of an equity-settled transaction award are modified, the minimum expense recognised is the expense as if the terms had not been modified, if the original terms of the award are met. An additional expense is recognised for any modification that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee as measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. This includes any award where non-vesting conditions within the control of either the entity or the employee are not met. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph. All cancellations of equity-settled transaction awards are treated equally.

1.19 Impairment of assets

The Group assesses whether there are any indicators of impairment for all assets at each reporting date.

An assessment of impairment losses on assets is made when there is an indication of a fall in value. If an asset's carrying amount is higher than the asset's recoverable amount, an impairment loss will be recognised in the income statement. The recoverable amount is the higher of the fair value less costs to sell and the discounted cash flow from continued use. The fair value less costs to sell is the amount that can be obtained from a sale to an independent third party minus the sales costs. The recoverable amount is determined separately for all assets but, if this is impossible, it is determined together with the entity to which the assets belong.

Impairment losses recognised in the income statements of previous periods are reversed when there is information that the need for the impairment loss no longer exists or is not as great as it was. However, no reversal takes place if the reversal leads to the carrying amount exceeding what the carrying amount would have been if normal depreciation periods had been used.

1.20 Cash flow statement

The cash flow statement is prepared in accordance with the indirect method and based upon IAS 7.

1.21 Costs related to equity transactions

Costs directly related to equity transactions are recognised directly on the equity after deduction of tax.

Note 1 Accounting policies (continues)

1.22 Future changes in accounting policies

The following standards and interpretations have been published, but are not effective and have not been implemented in the annual accounts for 2009.

The Group does not expect that implementation of the above listed changes will have a material effect on the financial statement of the Group on the date of implementation.

Amendments to IFRS 2 Share-based Payments - Group Cash-settled Share-based payment Transactions

The amendment to IFRS 2 provides more guidance on the accounting for group cash-settled share-based payment transactions. In addition, the definition of share based payment is somewhat modified. This amendment supersedes IFRIC 8 and IFRIC 11. This amendment is effective for annual periods beginning on or after 1.1.2010, but the amendment is not yet approved by the EU. The Group expects to apply the amendment as of 01.01.2010.

IFRS 3 (revised) Business Combinations

Compared to the existing IFRS 3, the revised IFRS 3 incorporates certain amendments and clarifications related to the use of the purchase method. This includes issues such as goodwill in business combinations achieved in stages, non-controlling interests and contingent considerations. Transactions costs other than share and debt issuance costs will be expensed as incurred. IFRS 3 (R) is effective for annual periods beginning on or after 01.07.2009. The Group expects to implement IFRS 3 (R) as of 01.01.2010.

IFRS 9 Financial Instruments

IFRS 9 replaces the classification and measurement rules in IAS 39 Financial Instruments- Recognition and measurement for financial instruments. According to IFRS 9 financial assets with basic loan features shall be measured at amortised cost, unless one opts to measure these assets at fair value. All other financial assets shall be measured at fair value.

IFRS 9 is effective for annual periods beginning on or after 1.1.2013, but the standard is not yet approved by the EU. The Group expects to apply IFRS 9 as of 01.01.2013.

IAS 24 (revised) Related Party Disclosures

The revised IAS 24 clarifies and simplifies the definition of a related party, compared to the current IAS 24. The revised standard also provides some relief for government-related entities to disclose details of all transactions with other government-related entities (as well as with the government itself). IAS 24 (R) is effective for annual periods beginning on or after 01.01.2011, but the revised standard is not yet approved by the EU. The Group expects to implement IAS 24 (R) as of 01.01.2011.

IAS 27 (revised) Consolidated and Separate Financial Statements

The revised IAS 27 provides more guidance on accounting for changes in ownership interest in a subsidiary and the disposal of a subsidiary, compared to the current IAS 27. According to the revised standard the entity measures the interest retained in a former subsidiary at fair value upon loss of control of the subsidiary, and the corresponding gain or loss is recognised through profit and loss. The revised standard also includes a change in the requirements relating to the allocation of losses in a loss-making subsidiary. IAS 27 (R) requires total comprehensive income to be allocated between the controlling and the non-controlling party, even if this results in the non-controlling interest having a deficit balance. IAS 27 (R) is effective for annual periods beginning on or after 1.7.2009. The Group plans to implement IAS 27 (R) as of 01.01.2010.

1.23 Future changes in accounting policies - not relevant for the Group

The following standards and interpretations have been published, but are not effective, have not been implemented in the annual accounts for 2009 and are not relevant for the Group's operation.

Amendment to IAS 32 - Financial Instruments: Presentation - Classification of Rights Issues

Amendment to IAS 39 - Financial instruments: Recognition and measurement - Eligible Hedged Items

Badger Explorer Group 2009 - Notes
Badger Explorer Group 2009 - Notes

Note 1 Accounting policies (continues)

Amendment to IFRIC 14 IAS 19 The Limit on a Defined Benefit Asset, Minimum Finding Requirements and their Interaction - Prepayment of a Minimum funding Requirement

IFRIC 15 Agreements for the construction of real estate

IFRIC 16 Hedges of a net investment in a foreign operation

IFRIC 17 Distributions of non-cash assets to owners

IFRIC 18 Transfers of Assets from Customers

IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments

Note 2 Public grants and development costs

The Group has previously received public grants from the Research Council of Norway and has been pledged grants from Skattefunn for the Badger Explorer development project in Badger Explorer ASA and the Plasma Channel Drilling project in Badger Plasma Technology AS. In 2009 the Badger Explorer development project has been pledged grants from Skattefunn. All development costs in the Badger Explorer Group are related to these projects and all costs and related public grants are capitalised except of NOK 5 441 347 related to a IFRS restriction on capitalisation of own personnel cost.

Note 3 Financial items

(All figures in NOK)

	2009	2008
Interest income bank bonds	2 280 783	229 983
Interest income other	3 152 119	11 881 332
Return on sales of bank bonds	687 020	-56 455
Interest expenses	11 088	30 694
Other financial expenses	209 114	371 358
Agio	66 928	62 611
Disagio	57 685	89 828
Net financial items	5 908 964	11 625 592

Note 4 Tax

(All figures in NOK)

Income tax expense	2009	2008
Payable tax	235 007	208 320
Changes in deferred tax	-	-
Total tax expense	235 007	208 320

Note 4 Tax (continues)

(All figures in NOK)

Summary of temporary differences:

Fixed assets	557 428	463 314
Loss carried forward	-36 168 428	-25 285 082
Total	-35 611 000	-24 821 768
Deferred tax asset	-9 971 080	-6 950 095
---	---	---

Balance sheet

Deferred tax asset	2009	2008
Loss carried forward	10 127 160	7 079 823
Fixed assets	-156 080	-129 728
Total deferred tax asset	9 971 080	6 950 095
Valuation allowance	-9 971 080	-6 950 095
---	---	---
Total deferred tax asset recognised in the balance sheet statement	-	-

Deferred tax asset is not recognised in the balance sheet as the Group is in a development phase and is currently generating losses.

Losses carried forward per 31.12.09 is due as follows:	2009	2008
Unlimited carrying forward	36 168 428	25 285 082
Explanation of why tax cost does not amount to 28% of earnings before tax:	2009	2008
---	---	---
28 % tax of earnings before tax	-3 058 561	-104 588
Permanent differences *)	37 576	27 996
Changes in deferred tax asset not recognised in the balance sheet.	3 020 985	76 592
Payable tax on taxable income in UK	235 007	208 320
Calculated tax cost	235 007	208 320
Effective tax rate **)	-2,2 %	-55,8 %
---	---	---

) Includes emission costs and non-deductible costs such as entertainment and non-taxable share dividends.
**Tax cost compared to earnings before tax.

The tax expense is related to tax on the profit in Calidus Engineering Ltd.

38 Badger Explorer Group: 2009 - Notes
Badger Explorer Group 2009 - Notes

Note 5 Earnings per share

(All figures in NOK)

Basic earnings per share are calculated by dividing net profit for the year attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share are calculated by dividing the net profit attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

Options awarded to employees at the end of 2006 and mid 2007 are waived and not included in the calculation of diluted earnings per share. The effect of the new awarded options to employees at mid September 2009 are included in the calculation of diluted earnings per share.

	2009	2008
Profit (loss) attributable to equity holders of the Company	-12 730 493	-1 716 249
Weighted average outstanding ordinary shares	18 439 040	18 439 040
Effect of dilution - share options	25 079	51 699
Average outstanding diluted shares	18 464 119	18 490 739
Earnings per share	2009	2008
Ordinary	-0,69	-0,09
Diluted	-0,69	-0,09
Salary and wages	2009	2008
Salaries and vacation pay	14 867 387	11 882 029
Employers' national insurance contributions	2 252 603	1 877 012
Other benefits	2 795 202	1 722 745
Total	19 915 191	15 481 786
The average number of employees in full time equivalent	40	33

The above table does not reflect salaries and wages that have been capitalised as part of the development costs. Reallocation of elimination has effected the Salary and vacation pay for 2008. Ref. note 19.

Pensions

The pension scheme in Badger Explorer ASA and Badger Plasma Technology are defined contribution plans where agreed contributions are expensed as paid. Contribution comprising between 4% and 7% of an employee's salary is added to the pension plan. The Group has no further commitments towards pensions when the agreed contributions are paid. The Group's contribution costs are charged to the income statement in the year in which the contribution applies. The scheme fulfils the requirements in the law for obliged pension (OTP).

Note 6 Salaries, other benefits, number of employees

(All figures in NOK)

	2009	2008
Contribution expensed during the year	549 608	462 921
	2009
Remuneration to members of Management	Salary	Other Benefits
Chief Executive Officer (CEO)	1 455 906	14 596
Chief Financial Officer (CFO)	1 503 499	14 658
Chief Technology Officer (CTO)	1 275 122	14 583
Chief Project Manager (CPM)	1 172 491	12 574
Sr. Vice President Business Dev. & Strategy	469 067	3 761
Manager HR, Economy and Adm.	614 225	6 321
	2008
Remuneration to members of Management	Salary	Other Benefits
Chief Executive Officer (CEO)	1 212 847	13 809
Chief Financial Officer (CFO)	1 389 500	13 871
Chief Technology Officer (CTO)	1 108 922	13 798
Chief Project Manager (CPM)	1 067 544	11 788
Sr. Vice President Business Dev. & Strategy	N/A
Manager HR, Economy and Adm.	557 081	5 413

The CEO is entitled to three months severance pay in case of termination of employment by the Company after a notice period of three months.

In 2009 the Management of Badger Explorer ASA consists of CEO, CFO, CTO, CPM, Sr. Vice President Business Dev. & Strategy and Mangager HR, Economy and Adm. Sr. Vice President Business Dev. & Strategy was employed on 01.10.2009.

The 20 000 options granted to CPM in 2006 were replaced with new options during 2009. The new option program is effective as of 15.09.2009 and 75 000 share options have been granted to CEO, 25 000 share options to CFO, 25 000 share options to CTO, 60 000 share options to CPM, 25 000 share options to Sr. Vice President Business Dev. & Strategy and 25 000 share options to Manager HR, Economy and Adm. The options entitle purchase of shares during a 3.2 yer period until 15.11.2012. The strike price is NOK 10. The options were "in the money" per 31.12.2009.

Badger Explorer Group 2009 - Notes
Badger Explorer Group 2009 - Notes

Note 6 Salaries, other benefits, number of employees (continues)

(All figures in NOK)
Remuneration to the Board of Directors	2009	2008
Knut Åm - Chairman & Nomination Committee (2009), Director & Nom. Committee(2008)	160 000	120 000
Rolf E. Ahlqvist - Nomination Committee (2009), Chairman (2008)	15 000	150 000
Bjørge Gretland - Director	-	100 000
Kristine Holm - Director	100 000	100 000
Christian Bull Eriksson - Director	100 000	-
Kristiane Cook Bulukin - Director	100 000	100 000
Geir Worum - Director	100 000	-
Jørn M. Bergeland - Director	-	25 000
Kåre Netland - Director	-	100 000
Rolf Norås Pettersen - Nomination Committee	10 000	20 000
Stig Hetlevik - Nomination Committee	-	20 000
Total remuneration	585 000	735 000

Remuneration to Board of Directors for 2009 was approved by the Annual General Meeting in 2009 and is divided by NOK 150.000 to the Chairman of the Board, by NOK 100.000 to each Board Director, by NOK 15.000 to the chairman of the Nomination Committee and by NOK 10.000 to each the member of Nomination Committee.

Auditors fee	2009	2008
Audit fees	280 960	240 000
Assurance services	32 805	46 660
Other assistance	44 600	33 500
Total*	358 365	320 160

*All services in 2008 and 2009 are recognised as expenses.
All fees excluding VAT.

Employee options

In 3Q 2009 a new option program was established replacing options granted in 2006 and 2007. All employees in Badger Explorer ASA have been allocated options. Outstanding options of 31.12.2009 were 406 750. Fair value of the options is calculated at the time of grant and will be recognized over the corresponding vesting period of the options. One third of the option can be exercised after one year, a third of the option can be exercised after two years and a third can be exercised after three years. The exercise of options can be postponed but not past the contractual life of 3.2 years. No options were exercised during 2009.

Note 6 Salaries, other benefits, number of employees (continues)

Summary of outstanding options:	2009	2008
Outstanding options 01.01	76 000	76 000
Granted options	406 750	-
Exercised options	-	-
Terminated	76 000	-
Expired options	0	0
Outstanding options 31.12	406 750	76 000
Whereas fully earned	-	-
Charged against the Income statement:	683 758	134 930
Charged against the Income statement - Employers' national insurance contr.:	103 726	-

Fair value of the options is estimated based on the Black and Scholes option pricing model.

The calculations are based on the following assumptions:

The weighted average fair value of the options granted during the period is set to NOK 6,48 taking into account the slightly reduced cost by the termination of 76 000 old options. The strike price is set to NOK 10 as agreed in the option agreements and the share price is set to NOK 12,20. The weighted average expected volatility is set to 87,56% (83,67 - 93,85%). Expected share dividend is set to 0. The weighted average risk free interest rate is set to 2,86% (2,47% - 3,18%). The options' weighted average expected lifetime is 2,4 years (1,5 - 3,2 years). The options were "in the money" per 31.12.2009.

The Board of Directors holds an authorisation to issue shares in the Company resolved by the Annual General Meeting of the Company held on 24.4.2009. The authorisation is provided until 30.6.2010 in respect of increase in the Company's share capital with up to NOK 116.429 by way of issuance of up to 931 432 shares in connection with the Company's share incentive scheme.

Implemented remuneration policy for members of Management for 2009.

The main principle of compensation of members of Management of the Group was to offer moderate terms in an overall perspective, taking into account salary, in kind benefits, bonus payments and pension plan in order to retain existing management within the Group. Members of Management has been granted a total of 235 000 share options which may be exercised within 15.11.2012. The fixed salaries have been competitive and based on the individual's experience, responsibilities and the achieved results. In addition to the base salary, members of Management were party to the general pension scheme established by the Parent Company for all employees. The scheme is deposit based maximised to a percentage of 12G. The retirement age for members of Management is 67 years. Upon termination of employment by the Parent Company the CEO is entitled to three months severance pay.

Guidelines for 2010

The Board of Directors has prepared a statement on principles of compensation of members of Management for 2010, included as an attachment to the Board of Directors report. The main principle of compensation of members of Management is to offer competitive terms in an overall perspective, taking into account salary, in kind benefits, bonuses and pension plan in order to retain existing members of Management within the Group. The fixed salary shall be competitive and based on the individual's experience, responsibilities and achieved results. In addition to their base salary members of Management may earn the right to bonus payments. The amount of such a bonus payment will partly depend on personally achieved results within the area of responsibility and partly be dependant upon the result of the Group. The Board of Directors will present this statement to the Annual General Meeting of the Company in accordance with the Public Limited Liability Companies Act §6-16a.

Badger Explorer Group' 2009 - Notes
Badger Explorer Group' 2009 - Notes

Note 7 Tangible fixed assets
| (All figures in NOK) | | | |
| --- | --- | --- | --- |
| Badger Explorer Group | maneuver, fixtures, etc. | Total 2009 | Total 2008 |
| Cost price 1.1 | 5 448 837 | 5 448 837 | 3 597 245 |
| Additions | 1 055 232 | 1 055 232 | 1 851 592 |
| Cost price 31.12 | 6 504 070 | 6 504 070 | 5 448 837 |
| Accumulated depreciations 31.12 | -3 170 879 | -3 170 879 | -2 023 284 |
| Booked value 31.12. | 3 333 191 | 3 333 191 | 3 425 554 |
| Depreciations | | -1 147 596 | -1 151 655 |
| Depreciation rate %: | | 33% | 33% |
| Economic life (years): | | 3 | 3 |
| Depreciation method: | | straight line | straight line |

The depreciation period and method are assessed each year to ensure that the method and period used harmonize with the financial realities of the non-current asset. The same applies to the scrap value.

The Company has entered into operating leases for offices and other equipment. The cost is as follows

Operating leasing cost	Total 2009	Total 2008
Operational leasing cost	95 571	52 203
Car leasing cost	105 472	25 779
Rent cost on buildings	2 140 020	1 297 841
Total	2 341 063	1 375 823

The future minimum rents related to non-cancellable leases fall due as follows for the Company:

	Within 1 year	1-5 years	After 5 years
Operational leasing cost	69 840	63 908	-
Car leasing cost	9 000	-	-
Rent cost on buildings	2 370 600	5 089 019	-
Total	2 449 440	5 152 928	-

The lease agreement for the main office (headquarter) has been entered into for a period of 5 years. This agreement expires on 31.05.2013 and includes an option to extend the agreement for 5 years with the same conditions. A lease agreement for additional office and workshop has been entered into for a period of 1 year and expires on 31.12.2010. A lease agreement for 2 copy machines has been entered into for a period of 3 years and expires on 30.06.2011.

Note 8 Inventory
| (All figures in NOK) | | |
| --- | --- | --- |
| | 2009 | 2008 |
| Work in progress | 805 816 | 306 567 |
| Finished goods | 48 591 | 48 591 |
| Total | 854 407 | 355 158 |

All inventories are valued at cost. No write-down for obsolete.

Note 9 Intangible assets
| (All figures in NOK) | | | |
| --- | --- | --- | --- |
| Badger Explorer Group has recognised the following intangible assets in the balance sheet (including internal built up assets such as development costs). | | | |
| 2009 | Patents* | Development costs | Goodwill Total |
| Cost price 1.1 | 400 000 | 35 426 241 | 6 202 563 |
| Additions | | 30 561 242 | |
| Translation difference | | | -492 724 |
| Public grants | | -1 977 003 | |
| Cost price 31.12 | 400 000 | 64 010 480 | 5 709 840 |
| Accumulated depreciations 31.12 | 13 332 | | 13 332 |
| Booked value 31.12. | 386 668 | 64 010 480 | 5 709 840 |
| 2008 | | | |
| Cost price 1.1 | 400 000 | 13 354 322 | 6 624 810 |
| Additions | | 24 696 273 | |
| Acquisition Calidus Engineering Ltd. | | | -422 247 |
| Public grants | | -2 624 355 | - |
| Cost price 31.12 | 400 000 | 35 426 241 | 6 202 563 |
| Accumulated depreciations 31.12 | 13 332 | | 13 332 |
| Booked value 31.12. | 386 668 | 35 426 241 | 6 202 563 |
| | | | 2009 |
| Depreciation | | | - |

The patent applies to the Badger Explorer technology and has a validity of 20 years from date it was granted. Depreciation will commence when the technology creates revenue.

Badger Explorer Group 2009 - Notes
Badger Explorer Group 2009 - Notes

Note 10 Accounts receivable
(All figures in NOK)

	2009	2008
Accounts receivable	1 520 288	1 802 089
Other receivables	3 114 620	6 388 569
Total	4 634 908	8 190 658

No provision for bad debts has been recognised. Other receivables are mainly related to public grants.

For age distribution of accounts receivables see note 15.

Note 11 Cash and cash equivalents
(All figures in NOK)

	2009	2008
Cash at bank	107 315 911	137 572 827
Restricted bank deposits	983 692	712 065

Note 12 Share capital, share premium account, numbers of shares, shareholders etc.
(All figures in NOK)

Number of shares	2009	2008
01.01.	18 439 040	18 439 040
Split of share		-
Capital increase		-
31.12.	18 439 040	18 439 040

Nominal value per share is NOK 0,125.

Note 12 Share capital, share premium account, numbers of shares, shareholders etc. (continues)
(All figures in NOK)

As of 31.12.2009, the 20 largest shareholders were:	No. of shares	% share
CONVEXA CAPITAL IV AS	3 200 780	17,4 %
CREDIT SUISSE SECURITIES (USA) LLC	2 694 997	14,6 %
BANK OF NEW YORK MELLON SA/NV	922 409	5,0 %
ODIN OFFSHORE	900 000	4,9 %
IRIS-FORSKNINGSINVEST AS	827 946	4,5 %
SIX SIS AG 25PCT	659 259	3,6 %
HOLBERG NORDEN	562 134	3,0 %
BANK OF NEW YORK MELLON SA/NV	493 500	2,7 %
AHLQVIST INVEST AS	465 407	2,5 %
CREDIT SUISSE SECURITIES	405 239	2,2 %
DALVIN RÄDGIVNING AS	301 872	1,6 %
ANØY INVEST DA	248 800	1,3 %
KNUT ÅM	242 600	1,3 %
HOLBERG NORGE	236 866	1,3 %
KJELL ERIK DREVDAL	222 600	1,2 %
CSV II AS	214 000	1,2 %
MP PENSJON	213 200	1,2 %
SIGMUND STOKKA	210 290	1,1 %
J.P. MORGAN BANK LUXEMBOURG S.A	206 000	1,1 %
THE NORTHERN TRUST CO.	200 000	1,1 %
20 largest shareholders	13 427 899	72,8 %
713 other shareholders	5 011 141	27,2 %
Total of 733 shareholders	18 439 040	100 %

All shares have equal voting rights.

The Board of Directors holds an authorisation to issue shares in the Company resolved by the Annual General Meeting of the Company held on 24.04.2009. The authorisation is provided for a one-year period in respect of increase in the Company's share capital with up to NOK 225 488 by way of issuance of up to 1 803 904 shares. This authorisation may be used to issue shares to existing shareholders and new investors against contribution in cash or in kind, and also in mergers.

Note 13 Related-party transactions
(All figures in NOK)

Transactions with shareholders	2009	2008
Accounts payable*	310 530	205 941
Purchased services*	7 984 565	5 777 591

*The Company has purchased engineering- and production services from Calidus Engineering Ltd. in which Badger Explorer ASA owns 50% and Nigel Halladay owns 50% of the shares. Nigel Halladay also owns 43 000 shares in Badger Explorer ASA.

Badger Explorer Group 2009 - Notes
Badger Explorer Group 2009 - Notes

Note 13 Related-party transactions (continues)

(All figures in NOK)

All purchased services from Calidus Engineering Ltd. in 2009 are related to the development project.

All transactions between Calidus Engineering Ltd. and Badger Explorer ASA are eliminated in Badger Explorer Group.

Shares held by members of the Board of Directors and members of Management	2009	2008
Convexa Capital IV AS (Bjørge Gretland)	3 200 780	3 300 780
Ahlqvist Invest AS (Rolf E. Ahlqvist)	465 407	447 407
Dalvin Rådgivning (CFO - Gunnar Dalven)	301 872	301 872
J.P. Morgan Bank Luxembourg S.A (Sr. VP Bus. Dev. & Strategy - Kjell Markman)	149 222	-
CEO - Kjell Erik Drevdal	222 600	222 600
Convexa AS (Bjørge Gretland)	100 000	-
Nilsholmen Investering AS (Sr. VP Bus. Dev. & Strategy - Kjell Markman)	-	149 222
Nilsholmen AS (Sr. VP Bus. Dev. & Strategy - Kjell Markman)	80 200	80 200
Invest OK AS (Kristine Holm)	15 000	15 000
5K International (CEO - Kjell Erik Drevdal)	10 000	-
Chevni AS (Christian Bull Eriksson)	6 000	6 000
Tone Kvåle	5 000	-
Mng. HR, Economy & Adm. - Hege Furland	2 858	2 858
CTO - Erling Woods	1 000	1 000
Ordinary shares	4 559 939	4 526 939
% of total shares	24,7 %	24,6 %

Note 14 Conditional commitments

(All figures in NOK)

Contribution recognised in the balance sheet

The Group has received contributions from the partners amounting to NOK 13 855 200 whereas all were received prior to 2009. These contributions shall be repaid to the partners by paying 5% of all technology related sales in the future. This royalty is limited to a total of 150% of received contribution. The contributions have not been recognised as income.

Note 15 Financial risk and Financial assets

(All figures in NOK)

Foreign currency risk

As a result of the acquisition of 50% of the shares in Calidus Engineering Ltd. in UK, the Group's balance sheet can be affected up to a certain extent by the fluctuations in the GBP/NOK exchange rates. The Group has a very limited number of other transactions in foreign currency which consequently gives a very low currency risk.

Note 15 Financial risk and Financial assets (continues)

(All figures in NOK)

Interest rate risk

The Group does not have any interest-bearing debt. The bank bonds and bank deposits are exposed to changes in market interest rate and this change will affect the financial income and the return on cash. However this interest risk is considered to be low.

Credit risk

The Group trades only with recognised, creditworthy third parties. It is the Group's policy that all customers that wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group's exposure to bad debts is not significant. The Group has not experienced any losses on accounts receivable during the last 2 years.

All bank bonds are invested in Norwegian banks which are considered to have a good solidity. All cash in the Company is deposited and distributed between two Norwegian banks which are considered to be a risk reducing initiative.

Liquidity risk

The Group has a very solid liquidity situation and consider the liquidity risk for the next couple of years to be non-existing at current cash burning rate.

Capital management

The primary focus of the Group's capital management is to ensure that it maintains a healthy capital ratio in order to support its business. The Company's cash position of MNOK 99.4 is deposited in Norwegian banks at NIBOR plus contracts. In addition MNOK 33.8 are invested in Norwegian senior bank bonds, due January 2010. The capital risk is related to allocation of funds at any time. Allocations/deposits are only done with Norwegian rated banks (deposits or senior bonds). The Group aims to earn interests equivalent to the market rate at any time, plus aiming to make deposits with banks with limited credit risk. Investments in bonds are done on such a short notice, that the Company can choose to hold the bonds until they are due, thus reducing the market risk and securing that the nominal value will be kept.

Fair value

The fair value of bank bonds is determined using assessment value for each bank bond per 31.12.

Set out below is a comparison by category of carrying amounts and fair values of all of the Group's financial instruments.

	2009		2008
	Book value	Fair value	Book value	Fair value
Bank bonds	33 781 615	34 091 000	39 372 895	39 300 650
Cash	107 315 911	107 315 911	137 572 827	137 572 827
Current receivables	4 634 908	4 634 908	8 190 658	8 190 658
Trade and other payables	5 635 412	5 635 412	4 917 624	4 917 624

Badger Explorer Group' 2009 - Notes
Badger Explorer Group' 2009 - Notes

Note 15. Financial risk and Financial assets (continues)

(All figures in NOK)

Age distribution of receivable

AS at 31 December, the ageing analysis of receivables is as follows:

	Neither past
	Total	due nor impaired	<30 days	Past due but not impaired
				30-60 days	60-90 days	90-120 days	>120 days
2009	4 634 908	4 570 343	13 236	663	34 646	-299	16 319
2008	8 190 658	7 866 886	129 965	185 507	8 622	-323	0

Financial assets

The Group holds bonds in 6 Norwegian banks which are carried at amortised cost.

Specification of bank bonds per 31.12.2009	Sale date	3 month NIBOR 3 month NIBOR + margin per + margin next
		31.12.2009	period	Nominal amount
	06.01.2010	2,17%	2,17%	3 000 000
	06.01.2010	2,39%	2,39%	4 000 000
	07.01.2010	2,35%	2,35%	5 000 000
	06.01.2010	2,36%	2,60%	5 000 000
	06.01.2010	5,00%	5,00%	7 000 000
	06.01.2010	2,19%	2,19%	10 000 000
				34 000 000
Specification of bank bonds per 31.12.2008	Due date	3 month NIBOR 3 month NIBOR + margin per + margin next
		31.12.2008	period	Nominal amount
	23.11.2010	6,16%	3,75%	3 000 000
	01.11.2010	7,10%	4,17%	4 000 000
	12.10.2010	7,24%	4,18%	5 000 000
	18.10.2010	6,84%	3,86%	3 000 000
	15.10.2010	7,64%	3,87%	5 000 000
	21.01.2011	6,82%	4,05%	5 000 000
	24.09.2010	7,16%	4,21%	7 500 000
	18.10.2010	8,41%	5,31%	7 500 000
				40 000 000
		2009	2008
Interest income from bank bonds		2 280 783	229 983

Note 16. Segment reporting

(All figures in NOK)

The table below shows the segments of which the Management is reporting to the Board of Directors. The segments are the main projects, engineering and other activities (mainly administration).

The column "Badger Explorer" includes all transaction related to the development of the Badger Explorer tool. The column "Badger Plasma" includes all transaction related to the development of the Plasma Channel Drilling technology. The column "Engineering" corresponds to Calidus and the column "other" includes all administration support and other costs not allocated directly to any of the other segments. All office equipment and cash in the Norwegian companies are included in this column.

Capital expenditure are net after public grants.

2009 Business segments	Badger Explorer	Badger Plasma	Engineering	Other	Elimination	Total
Revenue
Third party	1 977 003	0	8 888 829	88 821	0	10 954 652
Inter-segment	0	0	8 005 419	7 644	-8 013 063	0
Capitalisation	-1 977 003	0	0	0	0	-1 977 003
Total revenue	0	0	16 894 247	96 465	-8 013 063	8 977 649
Results
Depreciation	0	0	336 925	810 671	0	1 147 596
Segment expenses	35 834 874	167 716	12 781 313	14 250 119	-7 810 328	55 223 693
Capitalisation of expenses	-30 393 527	-167 716	0	0	0	-30 561 242
EBIT	-5 441 347	0	3 776 009	-14 964 325	-202 735	-16 832 397
Net financial items	0	0	-396 896	6 103 126	202 735	5 908 964
EBT	-5 441 347	0	3 379 114	-8 861 199	0	-10 923 433
Tax	0	0	-235 007	0	0	-235 007
Net profit (loss)	-5 441 347	0	3 144 107	-8 861 199	0	-11 158 439
Profit (loss) attributable to non-controlling interest	0	0	1 572 054	0	0	1 572 054
Segment profit (loss)	-5 441 347	0	1 572 053	-8 861 199	0	-12 730 493
Total assets	60 088 039	5 899 441	18 093 747	142 456 002	-6 510 211	220 027 019
Total liabilities	11 116 264	4 975 200	781 171	2 928 506	-310 530	19 490 612
Capital expenditure	28 416 524	167 716	491 391	563 842	0	29 639 472

Badger Explorer Group: 2009 - Notes
Badger Explorer Group: 2009 - Notes

Note 16 Segment reporting (continues)
(All figures in NOK)

2009
Geographical segments Norway UK Elimination Total

Total revenue	96 465	16 894 247	-8 013 063	8 977 649
Total assets	208 443 482	18 093 747	-6 510 211	220 027 019
Total liabilities	19 019 971	781 171	-310 530	19 490 612
Capital expenditure	29 148 081	491 391	0	29 639 472

2008 Badger Badger
Business segments Explorer Plasma Engineering Other Elimination Total

Revenue
Third party	1 353 499	1 270 856	6 686 481	676 143	0	9 986 979
Inter-segment	0	0	5 748 598	1 341 114	-7 089 712	0
Capitalisation	-1 353 499	-1 270 856	0	0	0	-2 624 355
Total revenue	0	0	12 435 079	2 017 257	-7 089 712	7 362 625

Results

Depreciation	0	0	343 758	807 898	0	1 151 655
Segment expenses	24 934 288	3 895 895	9 349 011	11 816 881	-7 089 712	42 906 364
Capitalisation of expenses	-20 800 378	-3 895 895	0	0	0	-24 696 273
EBIT	-4 133 910	0	2 742 310	-10 607 522	0	-11 999 122
Net financial items	0	0	-265 192	11 890 784	0	11 625 592
EBT	-4 133 910	0	2 477 118	1 283 262	0	-373 530
Tax	0	0	-208 320	0	0	-208 320
Net profit (loss)	-4 133 910	0	2 268 798	1 283 262	0	-581 850
Profit (loss) attributable to non-controlling interest	0	0	1 134 399	0	0	1 134 399
Segment profit (loss)	-4 133 910	0	1 134 399	1 283 262	0	-1 716 249
Total assets	30 690 859	6 748 219	16 174 180	185 402 213	-8 082 910	230 932 562
Total liabilities	10 788 307	4 255 200	1 559 158	4 546 110	-2 375 953	18 772 822
Capital expenditure	19 446 879	2 625 039	441 185	1 410 409	0	23 923 512

Note 16 Segment reporting (continues)
(All figures in NOK)

2008
Geographical segments Norway UK Elimination Total

Total revenue	2 017 257	12 435 079	-7 089 712	7 362 625
Total assets	222 841 292	16 174 180	-8 082 910	230 932 562
Total liabilities	19 589 617	1 559 158	-2 375 953	18 772 822
Capital expenditure	23 482 327	441 185	0	23 923 512

Note 17 Subsidiaries
(All figures in NOK)

Badger Plasma Technology AS
Badger Plasma Technology AS is a private limited company registered in Norway and has its head office located at Jättävägveien 7 - Building C, 4020 Stavanger, Norway. Badger Plasma Technology AS was established on the 5.3.2007 in order to increase focus and activity level of the development and commercialisation of the Plasma Channel Drilling technology. All historic investments, public grants and capitalised grants related to the Plasma Channel Drilling (PCD) project and related administration costs have been transferred from Badger Explorer ASA to Badger Plasma Technology AS and are recognized on the accounts receivables in Badger Explorer ASA's Statement of Financial Position and on the accounts payable in Badger Plasma Technology AS's Statement of Financial Position. The activity level in Badger Plasma Technology AS has been low during 2009 due to high focus on the Badger Explorer project.

Transactions with Badger Plasma Technology AS

Transactions 01.01.2008	2 635 559
Payment of historic development costs, PCD	-600 000
Transfer of development costs, PCD	144 606
Transaction 31.12.2008	2 180 165
Payment of development costs, PCD	-144 606
Transfer of development costs, PCD	324
Transaction 31.12.2009	2 035 883

Badger Explorer ASA owns 100% of the shares in Badger Plasma Technology AS.

All shares have equal voting rights.

Calidus Engineering Ltd.
At the end of November 2007, Badger Explorer ASA acquired 50% of the shares in Calidus Engineering Ltd., a UK based engineering company. Calidus Engineering Ltd. is a private limited company registered in UK and has its office located at Unit 7A, Tregoniggie Industrial Estate, Falmouth, Cornwall TR11 4SN, UK. The parties have agreed upon an acquisition model in which Badger Explorer ASA gradually will acquire 100% of Calidus Engineering Ltd. until 2013. Badger Explorer ASA has initially acquired 50% of Calidus Engineering Ltd. through a combined purchase of outstanding shares and a share issue. Another 25% can be acquired in 2011, and the remaining 25% in 2013.

Badger Explorer Group 2009 - Notes

Note 17 Subsidiaries

(All figures in NOK)

All shares in Calidus Engineering Ltd. have equal voting rights.

Since 01.12.2007 Calidus Engineering Ltd. is consolidated with a 50% non-controlling interest.

Note 18 - Impairment testing of Goodwill

(All figures in NOK)

Goodwill acquired through business combinations have been allocated to one cash-generating unit for impairment testing, which is equal to the acquired entity Calidus Engineering Ltd. (Calidus).

	2009	2008
Carrying amount of goodwill allocated to the cash-generating unit	5 709 840	6 202 563

Calidus Engineering Ltd.

The recoverable amount of Calidus has been determined based on a value-in-use calculation using cash flow projections from financial budgets approved by the management of Calidus covering a five-year period. The discount rate applied to cash flow projections is 9.3% and cash flows beyond the 5-year period are extrapolated using a average 2.5% growth rate. The carrying amount has been adjusted with the GBP currency per 31.12.2009.

Key assumptions used in value-in-use calculations

The calculation of value-in-use for Calidus is most sensitive to the following assumptions:

Operating margin
Discount rates after tax and
Growth rate used to extrapolate cash flows beyond the budget period.

Operating margin is set to 17% for the whole period, which is lower than the actual operating margin of Calidus in 2009 of approx. 20%.

Discount rates reflect the current market assessment of the risks specific to each cash generating unit. The discount rate was estimated based on the average percentage of a weighted average cost of capital for the industry. This rate was further adjusted to reflect the market assessment of any risk specific to Calidus for which future estimates of cash-flows have not been adjusted.

Growth rate estimates - The rate of 2.5% is based on expected growth in the Engineering business.

Sensitivity to changes in assumptions

With regard to the assessment of value-in-use of Calidus, the management believes that no reasonably possible change in any of the above key assumptions would cause the carrying value of the unit to materially exceed its recoverable amount.

Note 19 Reallocation of elimination

(All figures in NOK)

Intercompany sales and purchases have previously been eliminated towards salary and other operating expenses. Elimination is now changed to reflect the material consumption by eliminating these costs towards Cost of Goods sold (COGS). This reallocation does not effect the Group's financial position. The reallocation effect is:

Effect for 2008

Salary	Other Opr. Exp.	COGS
1 193 098	147 462	-1 340 559

Badger Explorer ASA 2009 - Income statement 55

Income statement - Badger Explorer ASA

All figures in NOK

	Note	2009	2008
REVENUES
Other income		96 465	1 450 602
Public grants	2	1 977 003	1 353 499
Capitalised public grants	2,9	-1 977 003	-1 353 499
Total revenues		96 465	1 450 602
OPERATING EXPENSES
External services for dev. project		20 599 102	13 359 340
Salary	6	19 483 457	14 743 723
Depreciation	7,9	802 362	798 833
Other operating expenses		9 829 588	7 562 060
Capitalised development cost	2,9	-30 393 527	-20 800 378
Total operating expenses		20 320 983	15 663 579
EBIT		-20 224 518	-14 212 977
Financial income	3	6 118 940	11 810 336
Financial expences	3	68 772	90 947
Net financial items		6 050 168	11 719 390
EBT		-14 174 350	-2 493 588
Tax	4	0	0
Net profit (loss)	5	-14 174 350	-2 493 588
Allocation
Retained earnings		-14 174 350	-2 493 588
Total allocation		-14 174 350	-2 493 588
Earnings per share	5	-0,77	-0,14
Earnings per share diluted		-0,77	-0,14

56 Badger Explorer ASA 2009 - Statement of financial position
57 Badger Explorer ASA 2009 - Statement of financial position

Statement of financial position - Badger Explorer ASA

All figures in NOK

ASSETS	Note	2009	2008
NON-CURRENT ASSETS
Development costs	2,9	58 111 038	29 694 515
Patent rights	9	386 668	386 668
Total intangible assets		58 497 706	30 081 183
Machinery, fixtures, etc.	7	1 556 258	1 794 778
Total tangible assets		1 556 258	1 794 778
Investment in subsidiaries	16	11 909 521	11 909 521
Bank bonds	15	0	39 372 895
Total financial assets		11 909 521	51 282 416
TOTAL NON-CURRENT ASSETS		71 963 485	83 158 377
CURRENT ASSETS
Inventory	8	48 591	48 591
Accounts receivable	10,15,16	2 052 201	2 180 150
Other receivable	10,15	3 114 621	5 713 355
Total receivable		5 166 822	7 893 505
Bank bonds	15	33 781 615	0
Total current financial assets		33 781 615	0
Cash and cash equivalents	11	99 360 907	131 400 892
TOTAL CURRENT ASSETS		138 357 935	139 342 988
TOTAL ASSETS		210 321 421	222 501 365
EQUITY AND LIABILITIES	Note	2009	2008
---	---	---	---
EQUITY
Share capital	12	2 304 880	2 304 880
Share premium reserve		217 099 786	217 099 786
Other paid in equity	6	945 870	262 112
Total paid in equity		220 350 536	219 666 778
Accumulated loss		-24 073 881	-9 899 531
Total retained earnings		-24 073 881	-9 899 531
TOTAL EQUITY		196 276 655	209 767 247
LIABILITIES
Capitalised grants	14	8 880 000	8 880 000
Total long term liabilities		8 880 000	8 880 000
Accounts payable	13,16	3 522 113	2 216 574
Public duties payables		17 453	427 888
Other short term liabilities		1 625 200	1 209 656
Total short term liabilities		5 164 766	3 854 118
TOTAL LIABILITIES		14 044 766	12 734 118
TOTAL EQUITY AND LIABILITIES		210 321 421	222 501 365

Stavanger, 23 March 2010

Badger Explorer ASA 2009 - Statement of change in equity
Badger Explorer ASA 2009 - Statement of cash flow

Statement of change in equity - Badger Explorer ASA

All figures in NOK

	Share capital	Share premium reserve	Other paid in equity	Acc. loss	Total equity
Equity per 01.01.2008	2 304 880	217 099 786	127 182	-7 405 943	212 125 905
Profit (loss) for the year				-2 493 588	-2 493 588
Employee options			134 930		134 930
Equity per 31.12.2008	2 304 880	217 099 786	262 112	-9 899 531	209 767 247
Profit (loss) for the year				-14 174 350	-14 174 350
Employee options			683 758		683 758
Equity per 31.12.2009	2 304 880	217 099 786	945 870	-24 073 881	196 276 655

Statement of cash flow - Badger Explorer ASA

All figures in NOK

	2009	2008
Cash flow from operational activities
Contributions from operations	-18 738 398	-13 279 214
Change in accounts receivable and accounts payable	1 433 488	2 147 738
Change in other receivables and payables	2 603 843	-4 610 252
Net cash flow from operating activities	A	-14 701 067
Cash flow from investment activities
Investment in fixed asset	-563 843	-1 410 409
Investment in bank bonds	5 591 280	-39 372 895
Capitalisation of development cost	-30 393 527	-20 800 378
Net cash flow from investment activities	B	-25 366 090
Cash flow from financing activities
Public grants	1 977 003	1 353 499
Other changes in long term receivables and payables		1 800 000
Interest paid	-68 772	-90 947
Interest received	6 118 940	11 810 336
Net cash flow from financing activities	C	8 027 171
Total net changes in cash flow	A+B+C	-32 039 986
Cash and cash equivalents at beginning of period		131 400 892
Cash and cash equivalents at end of period		99 360 907
Net result	-14 174 350	-2 493 588
Employee options	683 758	134 930
Depreciation	802 362	798 833
Financial income	-6 118 940	-11 810 336
Financial expenses	68 772	90 947
Total contributions from operations	-18 738 398	-13 279 214

Badger Explorer ASA 2009 - Notes
Badger Explorer ASA 2009 - Notes

Note 1 Accounting Policies

Badger Explorer ASA is a public limited company registered in Norway and listed on the Oslo Stock Exchange (Oslo Axess list). The Company's head office is located at Jättvägveien 7 - Building C, 4020 Stavanger, Norway.

The financial statement of Badger Explorer ASA has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU as of 31.12.09.

The financial statement has been prepared on an historical cost basis.

1.1 Investment in subsidiaries

Investments in subsidiaries are accounted in accordance with the cost method.

1.2 Other accounting policies

The financial statement for the Company has been prepared in accordance with the principles used for the Badger Explorer Group (the Group). Reference is thus made to the accounting policies 1.1 - 1.23 of the Group.

Note 2 Public grants and development costs

The Company has received public grants from the Research Council of Norway in previous years and has also been pledged grants from Skattefunn for the Badger Explorer development project in 2009. All development costs in Badger Explorer ASA are related to this project and all costs and related public grants are capitalised except for NOK 5 441 347 related to a IFRS restriction on capitalisation of own personnel cost.

Note 3 Financial items

(All figures in NOK)

	2009	2008
Interest income bank bonds	2 298 505	245 598
Interest income other	3 066 488	11 558 582
Return on sales of bank bonds	687 020	-56 455
Other interest expenses	11 088	1 119
Agio	66 928	62 611
Disagio	57 685	89 828
Net financial items	6 050 168	11 719 390

Note 4 Tax

(All figures in NOK)

Income tax expense	2009	2008
Payable tax	0	0
Changes in deferred tax	0	0
Total tax expense	0	0

Note 4 Tax (continues)

(All figures in NOK)

Calculation of basis for tax

Earnings before tax	-14 174 350	-2 493 588
Permanent differences *)	146 070	109 333
Changes in temporary differences	14 028 280	2 384 255
Total basis for tax	0	0

Summary of temporary differences:

Fixed assets	-134 790	-116 878
Loss carried forward	-40 620 531	-26 610 163
Total	-40 755 321	-26 727 041

Deferred tax asset

Deferred tax asset	-11 411 490	-7 483 572

Balance sheet

Deferred tax asset	2009	2008
Fixed assets	37 741	32 726
Loss carried forward	11 373 749	7 450 846
Total deferred tax asset	11 411 490	7 483 572
Valuation allowance	-11 411 490	-7 483 572
---	---	---
Total deferred tax asset recognised in the balance sheet statement	0	0

Deferred tax asset is not recognised in the balance sheet as the Company is in a development phase and is currently generating losses.

Losses carried forward per 31.12.09 is due as follows:

	2009	2008
Unlimited carrying forward	40 620 531	26 610 163

Explanation of why tax cost does not amount to 28% of earnings before tax:

	2009	2008
28 % tax of earnings before tax	-3 968 818	-698 205
Permanent differences *)	40 900	30 613
Changes in deferred tax asset not recognised in the balance sheet.	3 927 918	667 591
Calculated tax cost	0	0

Effective tax rate **)

0,0% 0,0%

*) Includes emission costs and non-deductible costs such as entertainment and non-taxable share dividends.

**) Tax cost compared to earnings before tax.

Badger Explorer ASA 2009 - Notes
Badger Explorer ASA 2009 - Notes

Note 5 Earnings per share

(All figures in NOK)

	2009	2008
Profit (loss) attributable to equity holders of the Company	-14 174 350	-2 493 588
Weighted average outstanding ordinary shares	18 439 040	18 439 040
Effect of dilution - share options	25 079	51 699
Average outstanding diluted shares	18 464 119	18 490 739
Earnings per share	2009	2008
Ordinary	-0,77	-0,14
Diluted	-0,77	-0,14
Salary and wages	2009	2008
Salaries and vacation pay	14 435 653	11 270 830
Employers' national insurance contributions	2 252 603	1 778 194
Other benefits	2 795 202	1 694 698
Total	19 483 457	14 743 723

The average number of employees in full time equivalent

Pensions

The pension scheme in Badger Explorer ASA is defined contribution plans where agreed contributions are expensed as paid. Contribution comprising between 4% and 7% of an employee's salary is added to the pension plan. The Company has no further commitments towards pensions when the agreed contributions are paid. The Company's contribution costs are charged to the income statement in the year in which the contribution applies. The scheme fulfils the requirements of the law for obliged pension (OTP).

Note 6 Salaries, other benefits, number of employees (continues)

(All figures in NOK)	2009	2008
Contribution expensed during the year	549 608	442 082

2009

Remuneration to members of Management	Salary	Other Benefits	scheme costs
Chief Executive Officer (CEO)	1 455 906	14 596	44 373
Chief Financial Officer (CFO)	1 503 499	14 658	44 373
Chief Technology Officer (CTO)	1 275 122	14 583	44 373
Chief Project Manager (CPM)	1 172 491	12 574	44 373
Sr. Vice President Business Dev. & Strategy	469 067	3 761	11 673
Manager HR, Economy and Adm.	469 067	3 761	11 673
	614 225	6 321	34 779

Note 6 Salaries, other benefits, number of employees (continues)

(All figures in NOK)
Remuneration to members of Management	2008
	Salary	Other Benefits	Pension	scheme costs
Chief Executive Officer (CEO)	1 212 847	13 809		42 848
Chief Financial Officer (CFO)	1 389 500	13 871		42 847
Chief Technology Officer (CTO)	1 108 922	13 798		42 847
Chief Project Manager (CPM)	1 067 544	11 788		42 847
Sr. Vice President Business Dev. & Strategy	N/A
Manager HR, Economy and Adm.	557 081	5 413		23 472

The CEO is entitled to three months severance pay in case of termination of employment by the Company after a notice period of three months.

The 20 000 options granted to CPM in 2006 were replaced with new options during 2009. The new option program is effective as of 15.09.2009 and 75 000 shares options have been granted to CEO, 25 000 share options to CFO, 25 000 share options to CTO, 60 000 share options to CPM, 25 000 share options to Sr. Vice President Business Dev. & Strategy and 25 000 share options to Manager HR, Economy and Adm. The options entitle purchase of shares during a 3.2 yer period until 15.11.2012. The strike price is NOK 10. The options were "in the money" per 31.12.2009.

Remuneration to the Board of Directors	2009	2008
Knut Åm - Chairman & Nom. Committee (2009), Director & Nom. Committee (2008)	160 000	120 000
Rolf E. Ahlqvist - Nomination Committee (2009), Chairman (2008)	15 000	150 000
Bjørge Grelland - Director	-	100 000
Kristine Holm - Director	100 000	100 000
Christian Bull Eriksson - Director	100 000	-
Kristiane Cook Bulukin - Director	100 000	100 000
Geir Worum - Director	100 000	-
Jørn M. Bergeland - Director	-	25 000
Kåre Netland - Director	-	100 000
Rolf Norås Pettersen - Nomination Committee	10 000	20 000
Stig Hetlevik - Nomination Committee	-	20 000
Total remuneration	585 000	735 000

Auditors fee	2009	2008
Audit fees	260 960	220 000
Assurance services	32 805	46 660
Other assistance	26 100	15 000
Total*	319 865	281 660

*All services in 2008 and 2009 are recognised as expenses.

All fees excluding VAT.

Badger Explorer ASA 2009 - Notes
Badger Explorer ASA 2009 - Notes

Note 6 Salaries, other benefits, number of employees (continues)

(All figures in NOK)

Employee options

Summary of outstanding options:	2009	2008
Outstanding options 01.01	76 000	76 000
Granted options	406 750	-
Exercised options	-	-
Terminated	76 000	-
Expired options	-	-
Outstanding options 31.12	406 750	76 000
Whereas fully earned	-	-
Charged against the Income Statement:	683 758	134 930
Charged against the Income statement - Employers' national insurance contr.:	103 726

Fair value of the options is estimated based on the Black and Scholes option pricing model.

The calculation is based on the following assumptions:

The weighted average fair value of the options granted during the period is set to NOK 6.48 taking into account the slightly reduced cost by the termination of 76 000 old options. The strike price is set to NOK 10 as agreed in the option agreements and the share price is set to NOK 12,20. The weighted average expected volatility is set to 87,56% (83,67 - 93,85%). Expected share dividend is set to 0. The weighted average risk free interest rate is set to 2,86% (2,47% - 3,18%). The options' weighted average expected lifetime is 2,4 years (1,5 - 3,2 years). The options were "in the money" per 31.12.2009.

Implemented remuneration policy for members of Management for 2009.

The main principle of compensation of members of Management of the Company was to offer moderate terms in an overall perspective, taking into account salary, in kind benefits, bonus payments and pension plan in order to retain existing management within the Company. Members of Management has been granted a total of 235 000 share options which may be exercised within 15.11.2012. The fixed salaries have been competitive and based on the individual's experience, responsibilities and the achieved results. In addition to the base salary, members of Management were party to the general pension scheme established by the Company for all employees. The scheme is deposit based maximised to a percentage of 12G. The retirement age for members of Management is 67 years. Upon termination of employment by the Company the CEO is entitled to three months severance pay.

Guidelines for 2010

The Board of Directors has prepared a statement on principles of compensation of members of Management for 2010, included as an attachment to the Board of Directors report. The main principle of compensation of members of Management is to offer competitive terms in an overall perspective, taking into account salary, in kind benefits, bonuses and pension plan in order to retain existing members of Management within the Company. The fixed salary shall be competitive and based on the individual's experience, responsibilities and achieved results. In addition to their base salary members of Management may earn the right to bonus payments. The amount of such a bonus payment will partly depend on personally achieved results within the area of responsibility and partly be dependant upon the result of the Company. The Board of Directors will present this statement to the Annual General Meeting in accordance with the Public Limited Liability Companies Act §6-16a.

Note 7 Tangible fixed assets

(All figures in NOK)

Badger Explorer ASA	Machinery, fixtures, etc.	Total 2009	Total 2008
Cost price 1.1	3 446 962	3 446 962	2 036 553
Additions	563 842	563 842	1 410 409
Cost price 31.12	4 010 804	4 010 804	3 446 962
Accumulated depreciations 31.12	-2 454 546	-2 454 546	-1 652 184
Booked value 31.12.	1 556 258	1 556 258	1 794 778
Depreciations		-802 362	-798 833
Depreciation rate %:		33%	33%
Economic life:		3	3
Depreciation method:		straight line	straight line

The Company has entered into operating leases for offices and other equipment. The cost is as follows

Operating leasing cost	Total 2009	Total 2008
Operational leasing cost	95 571	52 203
Car leasing cost	105 472	25 779
Rent cost on buildings	2 140 020	1 326 278
Total	2 341 063	1 404 260

The future minimum rents related to non-cancellable leases fall due as follows for the Company:

	Within 1 year	1-5 years	After 5 years
Operational leasing cost	69 840	63 908	-
Car leasing cost	9 000	-	-
Rent cost on buildings	2 370 600	5 089 019	-
Total	2 449 440	5 152 928	-

Note 8 Inventory

(All figures in NOK)

	2009	2008
Work in progress
Finished goods	48 591	48 591
Total	48 591	48 591

All inventories are valued at cost. No write-down for obsolete

66 Badger Explorer ASA 2009 - Notes
Badger Explorer ASA 2009 - Notes

Note 9 Intangible assets

(All figures in NOK)

Badger Explorer ASA has recognised the following intangible assets in the balance sheet (including internal built up assets such as development costs).

Badger Explorer ASA	Patents*	Development costs 2009	Total
Cost price 1.1	400 000	29 694 515	30 094 515
Additions		30 393 527	30 393 527
Public grants		-1 977 003	-1 977 003
Cost price 31.12	400 000	58 111 038	58 511 038
Accumulated depreciations 31.12	13 332		13 332
Booked value 31.12.	386 668	58 111 038	58 497 706
Badger Explorer ASA	2008
---	---	---
Cost price 1.1	400 000	10 247 636
Additions		20 800 378
Public grants		-1 353 499
Cost price 31.12	400 000	29 694 515
Accumulated depreciations 31.12	13 332	30 094 515
Booked value 31.12.	386 668	29 694 515

The patent applies to the Badger Explorer technology and has a validity of 20 years from date it was granted. Depreciation will commence when the technology creates revenue.

Note 10 Accounts receivable

(All figures in NOK)

	2009	2008
Accounts receivable	2 052 201	2 180 150
Other receivables	3 114 621	5 713 355
Total	5 166 822	7 893 505

No provision for bad debts has been recognised. Other receivables are mainly related to public grants.

For age distribution of accounts receivables see note 15.

Note 11 Cash and cash equivalents

(All figures in NOK)

	2009	2008
Cash at bank	99 360 907	131 400 892
Restricted bank deposits	983 692	712 065

Note 12 Share capital, share premium account, numbers of shares, shareholders etc..

(All figures in NOK)

Number of shares	2009	2008
1.1.	18 439 040	18 439 040
Split of share
Capital increase
31.12.	18 439 040	18 439 040

Nominal value per share is NOK 0,125.

As of 31.12.2009, the 20 largest shareholders were:	No. of shares	% share
CONVEXA CAPITAL IV AS	3 200 780	17,4 %
CREDIT SUISSE SECURITIES (USA) LLC	2 694 997	14,6 %
BANK OF NEW YORK MELLON SA/NV	922 409	5,0 %
ODIN OFFSHORE	900 000	4,9 %
IRIS-FORSKNINGSINVEST AS	827 946	4,5 %
SIX SIS AG 25PCT	659 259	3,6 %
HOLBERG NORDEN	562 134	3,0 %
BANK OF NEW YORK MELLON SA/NV	493 500	2,7 %
ANLQVIST INVEST AS	465 407	2,5 %
CREDIT SUISSE SECURITIES	405 239	2,2 %
DALVIN RÄDGIVNING AS	301 872	1,6 %
ANBY INVEST DA	248 800	1,3 %
KNUT ÄM	242 600	1,3 %
HOLBERG NORGE	236 866	1,3 %
KJELL ERIK DREVDAL	222 600	1,2 %
CSV II AS	214 000	1,2 %
MP PENSJON	213 200	1,2 %
SIGMUND STOKKA	210 290	1,1 %
J.P. MORGAN BANK LUXEMBOURG S.A	206 000	1,1 %
THE NORTHERN TRUST CO.	200 000	1,1 %
20 largest shareholders	13 427 899	72,8 %
713 other shareholders	5 011 141	27,2 %
Total of 733 shareholder	18 439 040	100,0 %

All shares have equal voting rights.

The Board of Directors holds an authorisation to issue shares in the Company resolved by the Annual General Meeting of the Company held on 24.4.2009. The authorisation is provided for a one-year period in respect of increase in the Company's share capital with up to NOK 225 488 by way of issuance of up to 1 803 904 shares. This authorisation may be used to issue shares to existing shareholders and new investors against contribution in cash or in kind, and also in mergers.

Badger Explorer ASA 2009 - Notes
Badger Explorer ASA 2009 - Notes

Note 13 Related-party transactions
(All figures in NOK)

Transactions with shareholders	2009	2008
Accounts payable*	310 530	205 941
Purchased services*	7 984 565	5 777 591

*The Company has purchased engineering- and production services from Calidus Engineering Ltd. in which Badger Explorer ASA owns 50 % and Nigal Hallady owns 50 % of the shares. Nigel Hallady also owns 43 000 shares in Badger Explorer ASA.

All purchased services from Calidus Engineering Ltd. in 2009 are related to the development project.

Shares held by members of the Board of Directors and members of Management	2009	2008
Convexa Capital IV AS (Bjørge Gretland)	3 200 780	3 300 780
Ahlqvist Invest AS (Rolf E. Ahlqvist)	465 407	447 407
Dalvin Rådgivning (CFO - Gunnar Dolven)	301 872	301 872
J.P. Morgan Bank Luxembourg S.A (Sr. VP Bus. Dev. & Strategy - Kjell Markman)	149 222	-
CEO - Kjell Erik Drevdal	222 600	222 600
Convexa AS (Bjørge Gretland)	100 000	-
Nilsholmen Investering AS (Sr. VP Bus. Dev. & Strategy - Kjell Markman)	-	149 222
Nilsholmen AS (Sr. VP Bus. Dev. & Strategy - Kjell Markman)	80 200	80 200
Invest OK AS (Kristine Holm)	15 000	15 000
5K International (CEO - Kjell Erik Drevdal)	10 000	-
Chevni AS (Christian Bull Eriksson)	6 000	6 000
Tone Kvale	5 000	-
Mng. HR, Economy & Adm. - Hege Furland	2 858	2 858
CTO - Erling Woods	1 000	1 000
Ordinary shares	4 559 939	4 526 939
% of total shares	24,7 %	24,6 %

Note 14 Conditional commitments
(All figures in NOK)

Contribution recognised in the balance sheet

The Company has received contributions from the partners amounting to a total of NOK 8 880 000 whereas all were received prior to 2009. These contributions shall be repaid to the partners by paying 5% of all technology related sales in the future. This royalty is limited to 150% of received contribution. The contribution has not been recognised as income.

Note 15 Financial risks and Financial assets
(All figures in NOK)

Foreign currency risk

The Company has a very limited number of transactions in foreign currency which consequently gives a very low currency risk.

Note 15 Financial risks and Financial assets (continues)
(All figures in NOK)

Interest rate risk

The Company does not have any interest-bearing debt. The bank bonds and bank deposits are exposed to changes in market interest rate and this change will affect the financial income and the return on cash. However this interest risk is considered to be low.

Credit risk

The Company trades only with recognised, creditworthy third parties. It is the Company's policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Company's exposure to bad debts is not significant. The Company has not experienced any losses on accounts receivable during the last 2 years. All bank bonds are invested in Norwegian banks which are considered to have a good solidity. All cash in the Company is deposited and distributed between two Norwegian banks which is considered to be a risk reducing initiative.

Liquidity risk

The Company has a very solid liquidity situation and considers the liquidity risk for the next couple of years to be non-existing at current cash burning rate.

Capital management

The primary focus of the Company's capital management is to ensure that it maintains a healthy capital ratio in order to support its business. The Company's cash position of MNOK 99.4 is deposited in Norwegian banks at NIBOR plus contracts. In addition MNOK 33.8 are invested in Norwegian senior bank bonds, due early 2010. The capital risk is related to allocation of funds at any time. Allocations/deposits are only done with Norwegian rated banks (deposits or senior bonds), the Company aims to earn interests equivalent to the market rate at any time, plus aiming to make deposits with banks with limited credit risk. Investments in bonds are done on such a short notice, that the Company can choose to hold the bonds until they are due, thus reducing the market risk and securing that the nominal value will be kept.

Fair value

The fair value of bank bonds is determined using assessment value for each bank bond per 31.12.

Set out below is a comparison by category of carrying amounts and fair values of all of the Company's financial instruments.

	2009		2008
	Book value	Fair value	Book value	Fair value
Bank bonds	33 781 615	34 091 000	39 372 895	39 300 650
Cash	99 360 907	99 360 907	131 400 892	131 400 892
Current receivables	5 166 822	5 166 822	7 893 505	7 893 505
Trade and other payables	5 164 766	5 164 766	3 854 118	3 854 118

Age distribution of accounts receivable

As of 31.12, the ageing analysis of trade receivables is as follows:

	Total	Neither past due nor impaired
2009	5 166 822	5 150 504
2008	7 893 505	7 893 505

Badger Explorer ASA 2009 - Notes
Badger Explorer ASA 2009 - Notes

Note 15 Financial risks and Financial assets (continues)

(All figures in NOK)

	Past due but not impaired
	<30 days	30-60 days	60-90 days	>90days
2009	0	0	0	16 319
2008	0	0	0	0

Financial assets

The Company holds bonds in 6 Norwegian banks which are carried at amortised cost.

Specification of bank bonds per 31.12.2009	Sale date	3 month NIBOR + margin per 31.12.2009	3 month NIBOR + margin next period	Nominal	Amount
	06.01.2010	2,17 %	2,17 %		3 000 000
	06.01.2010	2,39 %	2,39 %		4 000 000
	07.01.2010	2,35 %	2,35 %		5 000 000
	06.01.2010	2,36 %	2,60 %		5 000 000
	06.01.2010	5,00 %	5,00 %		7 000 000
	06.01.2010	2,19 %	2,19 %		10 000 000
					34 000 000
Specification of bank bonds per 31.12.2008	Due date	3 month NIBOR + margin per 31.12.2008	3 month NIBOR + margin next period	Nominal	Amount
---	---	---	---	---	---
	23.11.2010	6,16 %	3,75 %		3 000 000
	01.11.2010	7,10 %	4,17 %		4 000 000
	12.10.2010	7,24 %	4,18 %		5 000 000
	18.10.2010	6,84 %	3,86 %		3 000 000
	15.10.2010	7,64 %	3,87 %		5 000 000
	21.01.2011	6,82 %	4,05 %		5 000 000
	24.09.2010	7,16 %	4,21 %		7 500 000
	18.10.2010	8,41 %	5,31 %		7 500 000
					33 000 000
			2009		2008
Interest income from bank bonds			2 280 783		229 983

Note 16 Subsidiaries

(All figures in NOK)

Badger Plasma Technology AS

Badger Plasma Technology AS is a private limited Company registered in Norway and has its head office located at Jättävägveien 7 - Building C, 4020 Stavanger, Norway. Badger Plasma Technology AS was established on the 5.3.2007 in order to increase focus and activity level of the development and commercialisation of the Plasma Channel technology. All historic investments, public grants and capitalised grants related to the Plasma Channel Drilling (PCD) project and related administration costs have been transferred from Badger Explorer ASA to Badger Plasma Technology and are recognized on the accounts receivables in the Balance sheet.

Transactions with Badger Plasma Technology AS

Transactions 01.01.2008	2 635 559
Payment of historic development costs, PCD	-600 000
Transfer of development costs, PCD	144 606
Transaction 31.12.2008	2 180 165
Payment of transfer development costs, PCD	-144 606
Transfer of development costs, PCD	324
Transaction 31.12.2009	2 035 882

Badger Explorer ASA ows 100 % of the shares in Badger Plasma Technology AS.

All shares in Badger Plasma Technology AS as have equal voting rights.

Calidus Engineering Ltd.

At the end of November 2007, Badger Explorer ASA acquired 50 % of the shares in Calidus Engineering Ltd., a UK based engineering company. Calidus Engineering Ltd., is a private limited company registered in UK and has its office located at Unit 7A Tregoniggie Industrial Estate, Falmouth, Cornwall TR11 4SN, UK. The parties have agreed upon an acquisition model in which Badger Explorer ASA gradually will acquire 100% of Calidus Engineering Ltd. by 2013. Badger Explorer ASA has initially acquire 50% of the company through a combined purchase of outstanding shares and a share issue. Another 25% can be acquired in 2011, and the remaining 25 % in 2013.

All shares in Calidus Engineering Ltd. have equal voting rights.

Transactions with Calidus Engineering Ltd.	2009	2008
Accounts payable from purchase from Calidus Engineering Ltd.	310 530	205 941
Total	310 530	205 941

ERNST & YOUNG

Statsautoriserte revisorer
Ernst & Young AS
Vessiotrien 11 Forus, ND-4313 Sandnes
Postboks 5015, ND-4000 Stavanger
Foretaksregisteret: NO 978 389 387 MVA
Tlf.: +47 31 70 60 00
Fax: +47 31 70 66 01
www.ey.no
Medlemmer av Den norske Revisorforening

To the Annual Shareholders' Meeting of Badger Explorer ASA

Auditor's report for 2009

We have audited the annual financial statements of Badger Explorer ASA as of 31 December 2009, showing a loss of NOK 14 174 350 for the Parent Company and a loss of NOK 12 730 493 for the Group. We have also audited the information in the Directors' report concerning the financial statements, the going concern assumption, and the proposal for the coverage of the loss. The financial statements comprise the financial statements for the Parent Company and the Group. The financial statements of the Parent Company comprise the balance sheet, the statements of income, comprehensive income, cash flows and changes in equity as well as the accompanying notes. The financial statements of the Group comprise the consolidated balance sheet, the statements of income, comprehensive income, cash flows and changes in equity as well as the accompanying notes. IFRSs as adopted by the EU have been applied in the preparation of the financial statements of the Parent Company and the Group. These financial statements and the Directors' report are the responsibility of the Company's Board of Directors and Chief Executive Officer. Our responsibility is to express an opinion on these financial statements and on other information according to the requirements of the Norwegian Act on Auditing and Auditors.

We conducted our audit in accordance with laws, regulations and auditing standards and practices generally accepted in Norway, including the auditing standards adopted by the Norwegian Institute of Public Accountants. These auditing standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. To the extent required by law and auditing standards, an audit also comprises a review of the management of the company's financial affairs and its accounting and internal control systems. We believe that our audit provides a reasonable basis for our opinion.

In our opinion,

the financial statements of the Parent Company and the Group are prepared in accordance with laws and regulations and present fairly, in all material respects, the financial position of the Company and the Group as of 31 December 2009, and the results of its operations, cash flows and changes in equity for the year then ended, in accordance with IFRSs as adopted by the EU
the Company's management has fulfilled its duty to properly record and document the Company's accounting information as required by law and bookkeeping practice generally accepted in Norway
the information in the Directors' report concerning the financial statements, the going concern assumption, and the proposal for the coverage of the loss is consistent with the financial statements and complies with law and regulations.

Stavanger, 23 March 2010
ERNST & YOUNG AS
Nicolai Homme
State Authorised Public Accountant (Norway)
(sign.)
Note: The translation to English has been prepared for information purposes only.

Badger Explorer ASA 2009
Auditor's report for 2009

Badger Explorer ASA 2009 - Management

Management

1. Kjell Erik Drevdal

President and CEO

Mr. Drevdal holds a petroleum engineering B.Sc degree from the University of Stavanger. Mr. Drevdal has more than 25 years experience in the international Oil & Gas industry, the last 15 years in different managerial positions including as VP Business Development (Prosafe Drilling Services), Manager Sales and Marketing (National Oilwell Hitec products), Engineering Manager - Drilling, Completion and Well Intervention Technology (Statoil ASA), Drilling Operations Supervisor and Drilling Advisor (Statoil ASA - Gullfaks operations). He has also been a board member of Hitec Products Drilling Services (2004 - 2006).

2. Gunnar Dolven

CFO

Mr. Dolven holds an MBA in Corporate Finance from the Norwegian School of Economics & Business Administration (NHH), Bergen, Norway, and a M.Sc. in applied mathematics from the same institution. He has more than 20 years managerial experience in the finance industry and the Oil & Gas industry; including as COO and CEO of SpareBank1 and Sr. Vice President/Director of group planning in Statoil. He has extensive experience as board member and chairman from several companies.

3. Kjell Markman

Sr. VP Business Dev. & Strategy

Mr. Markman holds a MSc in Mechanical Engineering from the Norwegian University of Science and Technology (NTNU), Trondheim, Norway. With 30 years in the oil business he has extensive experience from various positions within several major oil companies as well as large suppliers and service companies delivering goods and services to the Oil & Gas industry. Mr. Markman has held senior management positions in companies like Baker Hughes Integ, National Oilwell, Hitec and Statoil.

4. Dave Gardner

Chief Project Manager

Mr. Gardner holds a B.Sc. (Hons) in Aeronautical & Astronautical Engineering from the University of Southampton, England. He has broad experience from 25 years in the Oil & Gas industry on an international level and has held various technical and administrative positions including: Field Engineer (Schlumberger), Reservoir Engineer (Elf Aquitaine), Technical Manager (European Logging Services), Vise President (Aker Maritime Well Services), Research Director & Vice President (IRIS - Rogaland Research) and as Managing Director for Altinex Reservoir Technology.

5. Hege Furland

Manager Economy & Administration

Ms. Furland has more than 20 years of experience from working with finance, personnel and administration and has extensive experience from developing, establishing and managing companies functions and systems within these disciplines. Former experience includes Norferm AS as Administration Manager and Smedvig Offshore as Contract and Market coordinator.

6. Erling Woods

CTO

Mr. Woods holds PhD and M.Sc degrees in Engineering Cybernetics from NTNU, Norway. He has more than 20 years experience in research and management of advanced industrial innovation activities. Former experience includes SINTEF as Research Scientist and Research Manager, Kongsberg Defense and Aerospace as Techn. Director and VP for Simulation and Training. Most recently he was VP of global R&D for Laerdal Medical AS. He has extensive experience managing multidisciplinary development activities.

Badger Explorer ASA
Org.nr. 985 955 107 MVA

Visiting address: Jättåvågvn. 7, 4020 Stavanger, Norway
Postal address: P.O. Box 130, 4065 Stavanger, Norway
Switchboard: +47 52 97 45 00
Fax: +47 52 97 45 01

http://www.bxpl.com

AI assistant

Hunter Group ASA — Annual Report 2009

3626_rns_2010-03-30_02999545-99e8-4c02-bb9f-3640bee931ae.pdf

BADGER

Contents

The future is getting closer

The Board of Directors' report 2009

Brief history

Operations during 2009

Board of Directors

Badger Plasma Technology AS

Calidus Engineering Ltd. (UK)

Accounting policies

Accounts and balance sheet

Financial status

Personnel and organization

Equal opportunities and fair treatment of personnel

Safety, health and working environment

External environment

Corporate governance and shareholder policy

Risk considerations

Technology/Badger Explorer:

Progress:

The market:

Competence and resources:

Authorities' permission:

Environmental aspects:

Currency exchange risk:

Interest rate risk:

Credit risk on accounts receivable:

Liquidity risk:

Allocation of the 2009 result

Significant events after 31 December 2009

Outlook

Responsibility statement

The Board of Directors 2009

1. Rolf E. Ahlqvist

2. Bjørge Gretland

3. Kristine Holm

4. Christian Bull Eriksson

5. Tone Kvåle

Corporate governance policy

Introduction

1. Reporting on Corporate Governance

2. Business

3. Equity and Dividends

4. Equal Treatment of Shareholders and Transactions with Close Associates

Divergence from the Norwegian Code of Practice for Corporate Governance:

5. Freely Negotiable Shares

6. General Meetings ("GM")

Divergence from the Norwegian Code of Practice for Corporate Governance:

7. Nomination Committee

13. Information and Communications

14. Takeovers

15. Auditor

Board Statement on Principles of Compensation of Members of Management - Badger Explorer ASA

Income statement - Badger Explorer Group

Statement of financial position - Badger Explorer Group

Statement of comprehensive income - Badger Explorer Group

Statement of change in equity - Badger Explorer Group

Statement of cash flow - Badger Explorer Group

Note 1 Accounting policies

1.1 Consolidation

1.2 Currency

1.3 Comparatives

Note 1 Accounting policies (continues)

1.4 Financial assets

Initial recognition

Subsequent measurement

Loans and receivables

1.5 Inventory

1.6 Cash and cash equivalents

1.7 Accounts receivable

1.8 Fixed assets

Note 1 Accounting policies (continues)

1.9 Intangible assets

Patents and licences

Research and development

Note 1 Accounting policies (continues)

Goodwill

Hunter Group ASA Annual Report 2009