Tekna Holding ASA

Tekna Holding ASA - 549300B8BGP6YLHH0K80 - 2023 549300B8BGP6YLHH0K80 2022-01-01 2022-12-31 549300B8BGP6YLHH0K80 2022-12-31 549300B8BGP6YLHH0K80 2021-12-31 549300B8BGP6YLHH0K80 2021-01-01 2021-12-31 549300B8BGP6YLHH0K80 2022-01-01 2022-12-31 tek:ShareCapitalAndSharePremiumMember 549300B8BGP6YLHH0K80 2022-01-01 2022-12-31 ifrs-full:OtherReservesMember 549300B8BGP6YLHH0K80 2022-01-01 2022-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 549300B8BGP6YLHH0K80 2022-01-01 2022-12-31 ifrs-full:NoncontrollingInterestsMember 549300B8BGP6YLHH0K80 2021-12-31 tek:ShareCapitalAndSharePremiumMember 549300B8BGP6YLHH0K80 2021-12-31 ifrs-full:OtherReservesMember 549300B8BGP6YLHH0K80 2021-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 549300B8BGP6YLHH0K80 2021-12-31 ifrs-full:NoncontrollingInterestsMember 549300B8BGP6YLHH0K80 2021-01-01 2021-12-31 tek:ShareCapitalAndSharePremiumMember 549300B8BGP6YLHH0K80 2021-01-01 2021-12-31 ifrs-full:OtherReservesMember 549300B8BGP6YLHH0K80 2021-01-01 2021-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 549300B8BGP6YLHH0K80 2021-01-01 2021-12-31 ifrs-full:NoncontrollingInterestsMember 549300B8BGP6YLHH0K80 2020-12-31 tek:ShareCapitalAndSharePremiumMember 549300B8BGP6YLHH0K80 2020-12-31 ifrs-full:OtherReservesMember 549300B8BGP6YLHH0K80 2020-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 549300B8BGP6YLHH0K80 2020-12-31 ifrs-full:NoncontrollingInterestsMember 549300B8BGP6YLHH0K80 2020-12-31 549300B8BGP6YLHH0K80 2022-12-31 tek:ShareCapitalAndSharePremiumMember 549300B8BGP6YLHH0K80 2022-12-31 ifrs-full:OtherReservesMember 549300B8BGP6YLHH0K80 2022-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 549300B8BGP6YLHH0K80 2022-12-31 ifrs-full:NoncontrollingInterestsMemberiso4217:CAD iso4217:CADxbrli:shares Annual report 2022 Every particle counts... Sustainability report Financial Statements Auditors report Contact Information Corporate Governance report CONTENTS ANNUAL REPORT 2022 This is Tekna Shareholder information Board of Directors ’ report 2022 CEO letter Board and Management | 2 Advancing the world one particle at a time … The magic of Tekna originates in the strong drive of its employees to do better. Better for an earth that is damaged and in desperate need of a green transition. At Tekna we make tiny particles of advanced materials that enable this transition. It is through the transformation of the metal supply chain in additive manufacturing, and enabling electrifi- cation through the miniaturization of microelectronic components as well as improving the characteristics of a lithium-ion battery that these tiny particles become magical. And so does the plasma technology that produces them. Photo credit: Microsoft Sustainability report Financial Statements Auditors report Contact Information Corporate Governance report CONTENTS ANNUAL REPORT 2022 This is Tekna Shareholder information Board of Directors ’ report 2022 CEO letter Board and Management | 3 Corporate Governance Report Contents What is plasma? . .......................... 4 About Tekna .................................. 6 Key figures at a glance ............... 7 Highlights and important milestones in 2022 ....................... 8 Climate footprint .......................... 9 CEO letter ...................................... 10 Board of Directors and Executive Leadership .................. 12 Shareholder Information ........... 15 Business and Location ............... 17 Market sectors .............................. 17 Important events in 2022 .......... 18 Financial review ............................ 18 Risk factors and risk management ................................ 19 Research and development .... 20 People and organisation .......... 20 Activities on gender equality and non-discrimination ............ 20 Environmental, Social, Governance .................................. 20 Subsequent events, Going concern and Outlook ................ 22 Statement from the Board of Directors ........................................ 23 Index .............................................. 25 Consolidated Income statement ...................... 26 Other comprehensive Income .. 26 Balance sheet .............................. 27 Changes in equity ...................... 28 Cash flow ...................................... 29 Notes ...................................... 30-49 Parent company Income statement ...................... 50 Other comprehensive Income 50 Balance sheet .............................. 51 Changes in equity ...................... 52 Cash flow ...................................... 53 Notes ..................................... 54-58 ... 59 Implementation and reporting on corporate governance ....... 63 The business ................................ 63 Equity and dividends ................ 64 Equal treatment of share- holders and transactions with close associates ........................ 64 Shares and negotiability .......... 64 General meetings ...................... 64 The nomination committee .... 65 Board of Directors: composition and independence .................... 65 Work of the Board of Directors ....................................... 66 Risk Management and Internal Control .......................................... 66 Board remuneration ................. 67 Remuneration for executive personnel ..................................... 67 Information and communication ........................... 67 Take-over situations .................. 67 Auditor .......................................... 68 This is Tekna ................................ 70 Executive introduction .......... 71 Highlights 2022 ..................... 74 Climate footprint ................... 75 Key indicators ......................... 76 Sustainability journey ........... 77 Material topics ............................ 79 Stakeholders ......................... 79 Materiality analyses .............. 81 Value chain ............................ 82 Focus Areas ................................. 83 Enabling customer ’ s impact ... 84 Circular and sustainable production ............................. 86 Resilient and responsible supply chain .......................... 88 Great place to work ............ 89 Ethical business conduct .... 91 Restatements and Assurances . 92 Appendix ...................................... 93 A: Materiality analysis ............... 94 B: Sustainability Roadmap ....... 95 C: Abbreviations ........................ 101 This is Tekna Board of Directors ’ report 2022 Financial Statements Auditors report Sustainability Report Links to separately released reporting Note: these links lead to websites. Corporate Governance Report 2022 Human Rights and Transparency Act Report 2022 Remuneration report 2022 GRI Report 2022 Carbon Accounting Report 2022 EU taxonomy Progress Report 2022 TCFD Progress Report 2021 (update expected in 2023) UN Global Compact CoP (report due June 2023) Tip If you want to return to this index page, press this icon on the top left corner. THIS IS TEKNA ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 4 For most people, matter surrounding us in everyday life is composed of solids, liquids, or gases. But there is a fourth state of matter: plasma. Plasma may be less known, but you observe it on a reg- ular basis without even realizing it. Every time you see lightning, electric sparks, fluorescent or Northern lights, or even when you gaze at the stars, you are experienc- ing illuminated matter in the plasma state. As much as 99.99 per cent of the visible universe is plasma. “ Plasma is an ionized gas, which means that sufficient energy is provided to free electrons from atoms or mol- ecules and to allow both species – ions and free elec- trons – to coexist. This electron “ sea ” allows matter in the plasma state to conduct electricity, somewhat like a conductive metal. This is one of the properties that makes plasma so radically different from their gaseous counterpart, ” explains Richard Dolbec, Program Director Emerging Technologies at Tekna. Plasma can also be a chemically reactive environment. Take nitrogen, a gas considered as inert under normal conditions. Once ionized in a plasma, nitrogen ions be- come reactive species that can react and change the nature of elements, forming a metal nitride, for instance. “ Plasma can reach temperatures of about 10,000 de- grees Celsius, equal to the temperature at the surface of the sun, and way beyond the hottest flame resulting from fuel combustion, which burns at approximately 3000 degrees Celsius, ” says Dolbec. This is Tekna (continued) Plasma: The fourth state of matter “ Plasma can reach temperatures of about 10,000 degrees Celsius, equal to the temperature at the surface of the sun, and way beyond the hottest flame resulting from fuel com- bustion, which burns at approximately 3000 degrees Celsius ” Richard Dolbec Program Director Emerging Technologies at Tekna Artificial plasma can be generated in several different ways, but based on a common principle: there must be energy input to produce and sustain it. In fluorescent light bulbs for example, the tube contains a small bit of mercury and an inert gas (typically argon) kept under very low pressure. Electricity flows through the tube when the light is turned on. The electricity acts as an energy source and charges up (or ionizes) the gas. This charging and exciting of the atoms creates glowing plasma inside the bulb, a cold plasma made to emit light we can see. “ This is clearly different from the proprietary plasma core technology developed by Tekna where the heat from the plasma is used for melting and even evaporat- ing metals, aiming at producing advanced metallic pow- ders. Tekna has developed a plasma torch technology that generates plasma by induction with power levels of 400 kW and capable of withstanding temperatures above 10,000 degrees Celsius. Next generation will be engineered to reach up to 2 MW – that is two millions of Watts, ” says Nicolas Dignard, CTO Plasma Systems. The Tekna torch consists of a coil wrapped around a confinement chamber through which a gas mixture continuously flows. The coil applies a strong radio- frequency electric fields inside the chamber and thanks to the conductive nature of the plasma, electric energy from the coil is converted into thermal energy in the gas. “ By mastering this very hot environment, Tekna has de- veloped the best powders for additive manufacturing, can produce nanopowders used in microelectronics and energy storage, and can also be used for testing materi- als used in supersonic conditions, ” says Richard Dolbec. THIS IS TEKNA ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 5 What is plasma? ............................ 4 About Tekna .................................. 6 Key figures at a glance ............... 7 Highlights and important milestones in 2022 ....................... 8 Climate footprint .......................... 9 CEO letter ..................................... 10 Board of Directors and Executive Leadership ................. 12 Shareholder Information .......... 15 | 5 Introducing Tekna This is Tekna THIS IS TEKNA ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 6 About Tekna Tekna is a global leader in the development, manufacturing and sales of advanced micron and nano powders as well as plasma process solutions. Since we started in 1990, Tekna has developed a unique and pro- prietary plasma technology platform for manufacturing micro and nano sized powders for a range of industries. Our business model relies on two revenue streams, both with synergistic effects: • Development and sale of plasma systems: We develop and sell plasma systems customized for the purpose of research and development. • Development and sale of advanced powders: We develop and operate our own proprietary plasma processes to produce and sell spherical powders and nano powders. Tekna ’ s is developing the position of its advanced materials in three multi-billion-dollar market verticals. Tekna is headquartered in Québec, Canada, and has additional offices in France, China, Korea, USA, and seven distributors oper- ating globally (Europe, Asia and North America). Additive Manufacturing: Currently our fastest growing segment. Tekna enjoys an esti- mated 19 per cent market share, up by 6 per cent on main selling products. This global market is on track to outperform, in terms of growth, traditional machining due to improved environmental efficiency, for instance through resource efficiency and speed of availability of parts. Microelectronics: We aim to secure industrial scale supply to global tier 1 cus- tomers in the microelectronics industry. Nano powders below 100 nm are expected to become the new industry standard for high-end MLCC devices, and Tekna is one of only three pro- ducers that can deliver this. Energy Storage: Tekna has developed and pa- tented its industrial process to produce high purity spherical silicon nano powder. Nano sili- con used in rechargeable bat- teries could provide electric ve- hicles with 60 per cent more distance travelled on a single charge. Important industries for our powders are: batteries, elec- tronics, medical, automotive, aerospace and satellites. Systems | PlasmaSonic: In the systems business we launched the PlasmaSonic Prod- uct line. This wind tunnel simu- lates hypersonic conditions to enable research for for instance space tourism. Founded in 1990 Tekna Holding ASA listed in OSLO 2022 Aspiration 2030 Headquartered in Sherbrooke, QC, Canada 216 employees 90 active patents 3 manufacturing and research centers 7 subsidiaries 1 joint venture carbon neutral THIS IS TEKNA ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 7 This is Tekna (continued) Revenue distribution Business segments Key financial figures in CAD million 2022 2021 Revenues (CAD million) 26.9 26.8 Adjusted EBITDA (CAD million) -12.8 -4.6 EBITDA -16.7 -8.7 Net profit / loss -22.5 -14.1 Cash balance 11.4 38.6 Employees 216 204 Additive Materials: Micron-sized powder materials including titanium-, aluminum-, and nickel alloys, tungsten and tantalum. Microelectronics: Nano-sized Nickel (sample sales) Key figures at a glance Global revenues 26.9 MCAD 29% 71% Advanced Materials Geography Asia / Rest of world Europe 36% 40% 24% North America Systems | PlasmaSonic 1 Plasma systems, PlasmaSonic wind tunnel After service and spare parts Customer segments 10% Medical Implants 35% Aerospace 3D Machine OEM 2 20% 35% Other 1: Includes after service and spare parts. 2: OEM stands for Original Equipment Manufacturer. Revenues 26.9 M CAD vs 26.8 M CAD in 2021. The Additive material sales grew by 7%, despite capacity constraints in production. Order backlog 25.0 M CAD vs 15.3 M CAD in 2021. This is a 64% increase providing great momentum going into the new year. Adj. EBITDA -12.8 M CAD vs – 4.6 M CAD in 2021. Tekna has taken immediate and important steps towards improving profitability and cash position . THIS IS TEKNA ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 8 This is Tekna (continued) Highlights and important milestones in 2022 Uplisting to Oslo Stock Exchange In 2021 Tekna Holding listed on the Euronext Growth list in Oslo (Norway) and in 2022 it converted its listing to the main list. Photo credit: Oslo Børs Record order for PlasmaSonic system The order signed in November 2022 with a contract value in excess of 9 million CAD is the largest single order in the history of the company. PlasmaSonic system set up for testing at Tekna plant First Sustainability report In 2022, Tekna published its first sustainability report, reporting on the ESG strategy and progress made up to 2021. In this annual report you find the update for 2022. ISO13485 and ISO17025 Tekna achieved ISO 13485:2016 certification for its Additive Materials division. This certifi- cation establishes that the processes Tekna uses to manufacture its commercial powders meet the highest global standards for medi- cal products. It also successfully accredited its Tekna Plasma Systems laboratory for ISO 17025:2017 which certifies the analytical ser- vices in competence of testing and calibra- tion. These certifications add to our quality accreditations: ISO9001:2008 and AS9100D. Tekna employee working in the Tekna laboratory Productivity increase in Additive Materials Tekna has put a tremendous effort into increasing the output for the additive materials production. With the aim to reach 70% improvement a milestone of 40% was reached by year-end. + 40% Pilot production lines for new materials Tekna has successfully set up two pilot production lines. For nickel nano production in Micro -electronics the capacity is 6 tons. For Energy Storage a sili- con-nano pilot line has been developed to produce samples. + 2 Record order backlog The order backlog amounted to 25 million CAD at the close of the year. This is nearly as high as Tekna ’ s total revenue in 2022. The Tekna team has achieved some remarkable results in 2022. Most of these successes and achievements are enablers for our 2023 growth plan. THIS IS TEKNA ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 9 link Carbon Accounting Report 2022 Tekna ’ s climate footprint Tekna ’ s climate footprint at diﬀerent stages of the value chain (GHG protocol 1 | in tCO2e) Energy intensity per kg metal powder produced Ahead of a full Life Cycle Assessment Tekna wants to provide insights in improvements we are achieving in the energy intensity of our highest selling materials. Performance vs baseline FY19 Direct electricity within Tekna | Ti64 and AlSiMg | in kWh per kg Our capacity improvement program increases the productivity of the plasma atomization systems, ie higher output for the same energy. However, the test- ing to achieve the improvements has impacted our energy intensity in 2022. FY19: 16.3 kWh/kg FY22: 13.1 kWh/kg baseline -20x% (vs FY19) FY21: 12.0 kWh/kg 4 -26% (vs FY19) 1 Historical data should not change, but we always revise historical figures if data quality or science has improved. 2: Included only hazardous waste in 2021. 3: Employee Commute not included in 2021. 4: Restated 2022, see Sustainability Report 2022 on restatements. Categories to be included for Customers: Downstream transportation and distribution and Processing of sold product Categories to be included for End-users & End-of-life: Use of sold products and End- of-life treatment Complete baseline estimations for upstream emissions (scope 3) expected in 2023. Suppliers & Resources Tekna Operations Customers End-users & End-of-life Baseline estimations for downstream emissions (scope 3) expected latest in 2024. For a full breakdown of the climate footprint accounting, scope 1, 2 and 3 emissions, read the 2022 Carbon Accounting report. Other categories to be included for Suppliers & Resources: Purchased goods and services, Capital goods, and Upstream transportation and distribution -50 % Target for 2030 Reduce in absolute terms compared to baseline year under development under development Fuel– and energy-related activities (scope 3) 391 385 FY22 FY21 baseline -2% (vs FY21) under development Production (scope 1 + scope 2) Employees (business travel + daily commute 3 - scope 3) Waste 2 (scope 3) 619 4 619 402 19 baseline FY22 FY22 FY22 FY21 FY21 FY21 baseline baseline 0% (vs FY21) Tekna is well on its way to having a thorough understanding of the emissions they directly influ- ence. The focus today is on improving our under- standing of up- and downstream emissions so we can establish an ambitious and achievable target for that scope. Our emissions reduction plan is evolving and maturing with the im- proved awareness of our climate footprint across the value chain. Tekna has set a 50% reduction target on scope 1 and 2 ahead of for- mally subscribing to the Science-Based Targets initiative. This is Tekna (continued) CEO LETTER ANNUAL REPORT 2022 | 10 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 “ Tekna built a best-in-class reputation with the breadth and quality of its product portfolio as well as with the implementation of dependable infrastructures that are further strengthened year after year. ” CEO letter 2022 I am pleased to present Tekna's annual report for 2022. It was a dynamic year for Tekna, marked by the uplisting of the company to the main list on the Oslo Stock Exchange, several major contracts awarded and further confirmation of the leading position we are developing in the market. We are thrilled to report that our backlog of orders has increased by 64% to CAD 25 million, with CAD 14 million of those orders being in additive materials. This is the largest backlog we have ever had for both of our current segments and it provides a solid foundation go- ing into 2023. At Tekna, we are committed to sustainability, and we are pleased to report that our energy intensity per kg produced is 20% better than the 2019 baseline and will continue to improve in 2023. We have committed to ambitious targets and have a plan to deliver on these. We have also signed the UN Global Compact in 2022, showing our commitment to this area. Our vision is to help change the world, one particle at a time. Our sales team did a fantastic job of getting back on the road after nearly 3-years of covid-related lockdowns. Our customers have gone through their own challenges, and we would like to praise their loyalty and commitment to Tekna. We are working closely with our custom- ers every day to ensure that we continue to meet their needs. The year was also marked by the invasion of Ukraine. Tekna has op- erations neither in Ukraine nor in Russia, but a tragedy of such mag- nitude affects us all. Our thoughts are with the millions of innocent civilians affected by this devastating conflict. Global leadership in advanced materials Tekna has been a global leader in advanced materials since 1990, renowned for providing leading edge products to a diverse set of world-class clients worldwide. Tekna's operations are driven by global megatrends, including space exploration and tourism, deglobaliza- tion, climate change, digitalization, connectivity, and demography. Our technology and product portfolio are relevant in the market, with additive materials and systems generating revenues today and micro- electronics and energy storage developing to follow. Tekna built a best-in-class reputation with the breadth and quality of its product portfolio as well as with the implementation of dependa- ble infrastructures that are further strengthened year after year. Based on our global sales, distribution and warehousing network, our quality certifications for aerospace, medical and laboratory facilities, our world class IT infrastructures or our governance and management policies, Tekna customers rely on us for delivering quality material, on time, every time. An exciting position to be in Luc Dionne, CEO Tekna Holding ASA CEO LETTER ANNUAL REPORT 2022 | 11 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 Outlook One top priority in 2022 was improving production capacity to meet the growing demand for additive materials, and we will continue this effort to support the increased sales volumes we see and expect. We will also explore the significant potential in microelectronics while carefully managing cash flow and resources. Accelerating the path towards profitable operation is another focus area, and we have implemented measures that will deliver year-over- year operating cost reduction. We have taken actions to improve profitability while preserving a sound cash position. At the same time, we are investing to increase production capacity for additive materials by accelerating the manufacturing of three new production units, which are set to come online in 2023. We have also secured a CAD 25 million loan facility from Arendals Fossekompani ASA (AFK) and identified and started implementing actions to improve operational excellence through overhead cost reduction, strict CAPEX priorities, right-sizing the organization, and strategic focus on near-term reve- nue opportunities. Finally, I want to thank our employees, customers, and investors for their continued support. We welcome our new hires who arrived dur- ing the year, and recognize how privileged we are to have their talent and skills on board. With our strong order backlog, we expect operat- ing revenues and margins to increase during 2023, and we are confi- dent that we will deliver value to our shareholders in the years to come. Sincerely, Luc Dionne CEO, Tekna Holding ASA Additive Manufacturing (3D Printing) Additive materials represent our largest business segment, generating nearly 75% of total revenues this year. More than 80% of these reve- nues are from recurring customers. We manufacture fine metal pow- ders used in various applications such as additive manufacturing. The aerospace industry accounts for a third of our additive materials de- liveries, with another third going to additive manufacturing machine manufacturers. The remaining balance is split between medical appli- cations, consumer electronics, and the automotive industry. We have secured long-term supply agreements with blue-chip customers such as Airbus, delivering hundreds of tons of quality powders in highly regulated industries. Thanks to our mass customization strategy that allows us to tailor products to specific customer requirements, our metal powders have captured the high-value market, and we are proud to say that more and more customers are turning to Tekna for their additive material needs. Throughout 2022, Tekna continued experiencing rising de- mand in this segment, further improving the company ’ s position in this market. Despite capacity constraints in the production, sales continued to grow during the year. Tekna sold out all its production capacity for prime products in additive materials in 2022, and the key to develop- ing sales further is to continue to work with increasing the production capacity. Significant new orders were signed in 2022, indicating that the market is dynamic and shifting from technology validation to scale production with blanket orders and long-term supply agree- ments. The magnitude of our backlog speaks for itself, and we expect sales to grow into the new year. Strong demand and high order intake have made capacity expansion a key priority. The additive material capacity increase program made steady progress throughout the year, both through increasing the machine performance and planning for additional machines. Increas- ing capacity will translate into higher material availability, shorter de- livery lead-times and increased sales. Rebound in the systems market Our plasma systems segment has two main product lines: the R&D plasma systems and the PlasmaSonic solutions. These machines are typically sold to government and academic institutions for research and development purposes. Two years ago, we introduced the Plas- maSonic solution product line, making us the only company in the world offering a comprehensive portfolio of plasma-based turnkey solutions that allow the reproduction, measurement, and characteri- zation of materials exposed to hypersonic flight and orbital space conditions. After several years of slow growth in orders, Tekna saw the market for systems rebound in 2022 with several contracts awarded in the sec- ond half of the year. We are experiencing a strong pipeline of poten- tial orders in PlasmaSonic systems, and we have further reinforced the sales team with a dedicated office in the US. This segment represents great potential in the coming years, especially for PlasmaSonic solu- tions. Microelectronics In addition to our success in additive manufacturing, we are also making strides in microelectronics. Tekna ’ s nickel nano powder is a key material for the manufacturing of high-end multi-layer ceramic capacitors (MLCC). The same way we have proceeded in 3D printing, we are collaborat- ing closely with the industry leaders, by pairing our product with their processes to meet the global trend of higher performance MLCC de- vices. Our nickel nano pilot line came into operation during the year. Tekna will align the scale-up of production to match customer demand. CEO letter (continued) link Luc Dionne > LinkedIn BOARD AND MANAGEMENT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 12 Board of Directors and Executive Leadership Dag Teigland 1 (1966) Chair (2022) Torkil S. Mogstad (1958) Director and member of the audit committee (2021) Barbara Thierart- Perrin (1977) Director | Independent (2022) Anne Lise Meyer (1968) Director and Chair of the audit committee | Independent (2022) Shares per 31.12.2022: 52000 Shares per 31.12.2022: 52125 Shares per 31.12.2022: 0 Shares per 31.12.2022: 0 Dag Teigland is CEO of Jor- danes. He is a seasoned executive with broad inter- national experience, includ- ing in the global metal in- dustry. He has previously held executive management positions in Elkem and been CEO of Holta Invest and Tinfos. Mr. Teigland is also a board room veteran, serving as member and chair of the Board of Directors of several Norwegian and international companies. He holds a bachelor ’ s degree in finance, an MBA from IESE and AMP from Harvard Business School. Torkil Mogstad is Executive Vice President at Arendals Fossekompani ASA since 2015. He has previously held several executive manage- ment positions, including CEO at Markedskraft ASA, Director at Icon Medialab Norge AS and Engagement Manager at McKinsey & Company. He started his career in R&D at McDonnell Douglas Aerospace (now Boeing) in the US. Mr. Mogstad holds several Directorships including AFK Property AS (chair), NSSL- Global Ltd. and Alytic AS. He holds a M.Sc. from NTNU, a SM from MIT and an MBA from the Norwegian School of Management. Barbara Thierart-Perrin is President of Northvolt Systems, a European suppli- er of sustainable, high- quality lithium-ion battery cells and systems with mini- mal CO2 footprint. An engi- neer by education, Ms Thier- art-Perrin has two decades of experience from the auto- motive industry, holding senior management posi- tions with Groupe Renault and Nissan Motor Corpora- tion. She has been based in France, Japan and Sweden, held business P&L responsi- bility, led global teams and worked extensively in corpo- rate social responsibility. Anne Lise Meyer is an expe- rienced CEO, chair and board member, with more than 20 years of experience from several management positions. Meyer was previ- ously the CEO of the invest- ment firm Hamang AS, CEO of the Gillette Group Norway and has held several leading positions with Hewlett- Packard and Netcom (now Telia). Ms. Meyer holds sev- eral Directorships, both as chair and member of the Board of Directors of Bertel O. Steen Kapital, Pancom AS, and Sissener AS. Meyer holds a Bachelor of Man- agement from the Norwe- gian School of Manage- ment. Attended board meetings: 5 Attended board meetings: 13 Attended board meetings: 8 Attended board meetings: 7 In the process of uplisting from Euronext Growth to the Oslo Stock Exchange the Board of Directors of Tekna Holding ASA has welcomed three new members improving in value, through knowledge, network, independence and diversity. An audit committee was also established. In autumn 2022 Dag Teigland was elected Chair taking the reigns from Morten Henriksen, who resigned early 2023. Responsibilities of the Board of Directors In accordance with Norwegian law, the Board of Directors (“ BoD ”) is responsible for, among other things, supervis- ing the general and day-to-day management of the Company ’ s business, ensuring proper organization, preparing plans and budgets for its activities, ensuring that the Company ’ s activities, accounts and asset man- agement are subject to adequate controls and undertak- ing investigations necessary to perform its duties. Members of the Board of Directors 1: Mr. Teigland is engaged by Arendals Fossekompani as a senior business advisor with a special focus on Tekna and, as such, is not to be considered as an independent Chair of the Board. BOARD AND MANAGEMENT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 13 The Tekna group Executive Leadership Team (“ ELT ”) consists of seven executives with extensive experience from relevant industries. One additional member (f) joined for legal affairs and corporate secretary. A new CFO, Espen Schie (m), has joined the company in January 2023. Serge Blackburn, former CFO, remains with the executive leadership team in an advisory role until the end of 2023. Members of executive leadership team own shares in Tekna Holding Canada Inc., a subsidiary of Tekna Holding ASA. Refer to the Prospectus published in 2022, section 11.3.3 for more details. Luc Dionne Chief Executive Officer (2021 / 2014) Shares per 31.12.2022: 0 1 Shares per 31.12.2022: 0 Shares per 31.12.2022: 0 1 Luc Dionne has been the CEO of Tekna Holding Can- ada and its global subsidiar- ies since 2014 and was ap- pointed CEO of Tekna Hold- ing ASA in 2021. Mr. Dionne has extensive experience from various Directorships and executive management positions in advanced mate- rials research, aerospace, microelectronics and de- fense. Mr. Dionne served on the Canadian government stra- tegic table for advanced manufacturing and was awarded the Technology Innovation Award from Polytechnic Engineering School. Espen Schie took over the CFO position of the Tekna group in early 2023. Mr. Schie brings long-term fi- nancial management experi- ence and comes from the role as Vice President of Finance & Controlling at Arendals Fossekompani ASA (“ AFK ”), Tekna ’ s largest shareholder. Mr. Schie has held several different roles at AFK, was previously CFO at EFD Induction Group and holds a double master ’ s degree in finance from No- va School of Business and Economics (Portugal) and Fundação Getulio Vargas São Paulo School of Eco- nomics (Brazil). Serge Blackburn has been the CFO of Tekna since January 2017. Chartered Professional Accountant since 1993, he has over 25 years of experience in vari- ous management and fi- nance positions for manu- facturing companies. Prior to joining Tekna, he held a position of Vice-President Finance and Investments in Innovatech Sud du Québec, a position of CFO in Plas- tube Inc and as the Corpo- rate controller for Jyco Seal- ing Technologies Corp. and Thona Inc. He serves as a member of the executive committee in Imphytek Powders SAS. Espen Schie Chief Financial Oficer (2023) Serge Blackburn Senior Financial advisor (former CFO) (2017) Sophie Burgaud VP Legal Affairs and Corporate Secretary (2022) Shares per 31.12.2022: 0 Sophie Burgaud joined Tekna in 2022 as VP Legal Affairs and Corporate Secre- tary. She has more than 20 years of experience in busi- ness law in various jurisdic- tions around the globe. Within her different roles, Sophie has a wide variety of experience in relation to commercial, corporate and litigation matters for public companies and highly regu- lated financial and insurance companies. Prior to joining Tekna, she worked for Co- geco, Desjardins, Intact, Gildan and BCF, a law firm. Sophie holds a Master in Contract Law and was ad- mitted to the Paris and Quebec Bar. 1: Members of ELT own shares in Tekna Holding Canada Inc., a subsidiary of Tekna Holding ASA. Board of Directors and Executive Leadership (continued) link Prospectus Members of the Executive Leadership Team (Section continues on the next page.) BOARD AND MANAGEMENT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 14 Rémy Pontone VP Sales and Marketing (2016) Etienne Villeneuve VP Operations (2021) Arina van Oost VP Corporate Strategic Dev. and Innovation (2020) Shares per 31.12.2022: 0 1 Shares per 31.12.2022: 0 1 Shares per 31.12.2022: 0 1 Rémy Pontone has been the Vice President Sales & Mar- keting since Mars 2016; prior to this he held various man- agement positions in sales, business development and product management. Ré- my Pontone has 25 years ’ experience in management, sales, marketing and prod- uct development. Prior to joining Tekna he held sever- al int. management and sales positions in five differ- ent countries for Johnson Matthey and research and development center of Saint Gobain. Mr. Pontone is graduated engineer in ma- terial science and chemical engineering. Etienne Villeneuve currently holds the position of Vice President Operations at Tekna. He has 19 years of experience in several execu- tive management positions, including Vice President Operations at Groupe Pari- ma, Head of Operations and Technical Services at Nep- tune Wellness Solutions, Operations and Continuous Improvement Director at Conagra Foods. He has experience from several Quality Regulated Business- es like Pharmaceutical and Technologies. He currently serves as a Vice-President of the Board of Directors for Sherbrooke Innopole. Arina van Oost joined Tekna early 2020 as VP Corporate and Strategic Development & Innovation. ESG, IR and Corporate Communication are part of her portfolio. She has held several executive positions at ThyssenKrupp (“ TK ”), including VP GM of its Canadian Aerospace division and Global Head of Marketing and Sales of their Access Solutions division. Further roles included Man- aging Director in UK, Spain, and Netherlands for compa- nies of TK Elevator. She holds an eMBA from ESMT and a BSc in Interna- tional Management. Members of the Executive Leadership Team (continued) 1: Members of executive Management own shares in Tekna Holding Canada Inc., a subsidiary of Board of Directors and Executive Leadership (continued) ANNUAL REPORT 2022 | 15 SHAREHOLDER INFORMATION Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 Tekna Holding (“ Company ”) aims to be an attrac- tive investment for shareholders, delivering a competitive return through sustained and accelerated growth. The Company's share capital as of 31 December 2021 was NOK 250,454,692 divided into 125,227,346 shares, each with a nominal value of NOK 2.00. The share capital has remained unchanged throughout 2022. In February 2022, Arendals Fossekompani ASA (AFK) allocated shares of Tekna as dividend-in-kind to AFK shareholders to facilitate an up- listing of the Tekna share. The number of shares distributed was 10,953,557, reducing the AFK shareholding from 79.9 percent to 71.1 percent. The Company's shares are registered in book-entry form with the Norwegian Central Securities Depository under ISIN NO 001 0951577. The account operator of the Company's share register is DNB Bank ASA. Uplisting to Oslo Stock Exchange An extraordinary general meeting was held in March 2022, which resolved to convert Tekna Holding into a public limited liability com- pany (ASA). The name of the Company was consequently changed to Tekna Holding ASA. Also, as preparation for the uplisting and for the Company to satisfy the requirements set out in the Norwegian Public Limited Liability Act, an additional independent Board member, Anne Lise Meyer, was elected at an extraordinary general meeting in May 2022. As part of the Company ’ s work to further advance good corporate governance, the Board of Directors subsequently appointed Anne Lise Meyer as the Chair and Torkil Mogstad as a member of the newly formed Audit Committee. The Tekna share was listed on Oslo Børs, the main list at the Oslo Stock Exchange, on 1 July 2022. Shareholder structure As of 31 December 2022, Tekna had 4825 shareholders, up from 790 at the end of 2021. Arendals Fossekompani ASA remained the Com- pany ’ s largest shareholder, owning 71.1 percent of the shares. No oth- er shareholder held more than five percent while four shareholders held more than two percent. Share price and market valuation On 31 December 2022, the closing share price was NOK 5.90 per share, corresponding to a market capitalization of NOK 739 million. The closing share price on 31 December 2021 was NOK 34.70. Option schemes As of 31 December 2022, there were no outstanding options, war- rants or loans giving the right to require the Company to issue shares. Current Authorizations During the 2022 Annual General Meeting (“ AGM ”) the Board of Di- rectors of the Company received the authorization to increase the share capital and to acquire shares of the company. The authoriza- tions remain in force until the AGM of 2023, but in no event later than 30 June 2023. Link to AGM minutes: www.tekna.com/investors Investor Relations Tekna wishes to maintain open communications with its sharehold- ers and other stakeholders. Shareholders and stakeholders are kept informed by announcements to the Oslo stock exchange and press releases. Please refer to the investor relations section of the Tekna website for further information, including contact details: www.tekna.com/ investors or contact [email protected]. This is Tekna (continued) Upcoming events 3 May 2023 Annual General Meeting 4 May 2023 Report for Q1 2023 24/25 May 2023 Roadshow in Oslo, Norway Photo credit: Oslo Børs link Tekna.com/investors Shareholder information link AGM minutes ANNUAL REPORT 2022 | 16 BOARD OF DIRECTORS ’ REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 Business and Location .............. 17 Market sectors ............................. 17 Important events in 2022 ......... 18 Financial review ........................... 18 Risk factors and risk management ............................... 19 Research and development .... 20 People and organisation .......... 20 Activities on gender equality and non-discrimination ............ 20 Environmental, Social, Governance .................................. 20 Subsequent events, Going concern and Outlook ................ 22 Statement from the Board of Directors ........................................ 23 | 16 Board of Directors ’ report 2022 Board of Directors ’ report 2022 ANNUAL REPORT 2022 | 17 BOARD OF DIRECTORS ’ REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 Board of Directors ’ report 2022 Market sectors Tekna currently has two reporting lines: • Advanced Materials comprised of business segments: Additive Manufacturing and developing businesses Microelectronics and Energy Storage. • Systems comprised of PlasmaSonic, R&D/academic research plasma systems and other systems related income. Advanced Materials Revenues in Advanced Materials increased by 8 per cent to CAD 18.9 million (CAD 17.5 million in 2021). This represented 70 per cent of the Group ’ s revenues. Throughout 2022, Tekna continued experiencing rising demand for its materials for Additive Manufacturing, further confirming the company ’ s position in this market. Despite capacity constraints in the production, sales continued to grow during the year. Significant new orders have been signed in 2022, indicating that the market dynamics is shifting towards larger and open orders, and long-term supply agreements. Tekna is also developing in the Microelectronics and Energy Storage segments. Additive Manufacturing along with these two segments follows global game changing megatrends and represent major growth opportunities. Systems Tekna has seen the Systems market rebound with several contracts awarded during the year. In October, an order in excess of CAD 9 million was confirmed to deliver PlasmaSonic equipment to a leading aerospace original equipment manufacturer, with delivery planned for early 2024. In January 2023, two more plasma system sales valued at CAD 1.6 million for delivery by end of 2023 were announced. Revenues in the system segment remained affected by covid related restrictions throughout the year. The year ended at CAD 6.2 million in revenues, compared to CAD 7.9 million in 2021. Business and location Tekna is a world-leading provider of advanced materials to industry. Tekna produces high purity, micron and nano-sized metal powders for applications such as 3D printing in the aerospace, medical and automotive sectors, as well as optimized induction plasma systems for industrial research and production. With its unique, IP-protected, green plasma technology, the company is well-positioned in the growing market for advanced nanomaterials within the electronics and batteries industries. Building on 30 years of delivering excellence, Tekna is a global player recognized for its quality products and its commitment to its large base of multinational blue-chip customers. Tekna ’ s powder products increase productivity and enable more effi- cient use of materials, reducing the footprint of its value chain. The Group currently operates four main business units: Additive Manufacturing, Microelectronics, Energy Storage and Systems (incl. PlasmaSonic ). Tekna uses proprietary technology to produce and sell spherical pow- ders and nano powders, where Additive Manufacturing serves the aerospace, medical and automotive sectors, Microelectronics will serve consumer electronics, autonomous vehicles, 5G and IoT, and Energy Storage aims to serve the electric vehicles, consumer electron- ics and electric grid sectors. The Group develops and operates its own plasma systems and sells customized plasma systems for re- search applications. In the PlasmaSonic business, a subsegment of Systems, it sells wind tunnel solutions for the simulation of hypersonic and orbital flight conditions. Tekna Holding ASA, a Norwegian public limited liability company, is listed on Oslo Stock Exchange. The Group is headquartered in Sher- brooke, Canada, with subsidiaries and teams based across six offices in Canada (2), France, USA, China and South Korea. All amounts in this document refer to the consolidated financial statements for the Group, unless otherwise stated. The financial statements cover the period from January 1, 2022 to December 31, 2022. Tekna Holding (“ Tekna ” or “ company ”) reported revenues of CAD 26.9 million in 2022, on the same level as the year before despite challenges related to supply chain disruptions and capacity constraints in production. The company secured significant new orders during the year, for both Systems and Additive Manufacturing, indicating a positive shift in the market. This is reflected in the total order backlog of CAD 25.0 million at the end of 2022, a strong 64% increase compared to the previous year. Costs associated with capacity expansion in production and R&D initiatives impacted profitability negatively. The company successfully uplisted to the main list on Oslo Stock Exchange and obtained two ISO certifications . ANNUAL REPORT 2022 | 18 BOARD OF DIRECTORS ’ REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 ISO certification Tekna achieved ISO 13485:2016 certification for its Additive Materials division in 2022. This certification establishes that the processes Tekna uses to manufacture its commercial powders meet the highest global standards for medical products. It also successfully accredited its Tekna Plasma Systems laboratory for ISO 17025:2017 which certifies the analytical services in competence of testing and calibration. Financial review The Board of Directors believes that the annual financial statements provide a true and fair view of the net assets, financial position and result of Tekna Holding ASA for the year. The company ’ s consolidat- ed financial statements are presented in compliance with International Financial Reporting Standards (IFRS) as adopted by the EU, and the reporting currency is Canadian dollars (CAD). Profit and loss Revenue was CAD 26.9 million, similar to CAD 26.8 million in 2021, which represents stable total revenue for the company. EBITDA was negative CAD 16.7 million compared to negative CAD 8.7 million in 2021. Adjusted EBITDA net of non-recurring charges was negative CAD 12.8 million compared to negative CAD 4.6 million in 2021. Tekna had a loss for the period of CAD 22.5 million, compared to a loss of CAD 14.1 million in 2021. Earnings per share were negative CAD 0.17, compared to negative CAD 0.14 in 2021. Important events in 2022 Uplisting on Oslo Børs July 1 st , Tekna Holding was uplisted to the main list on Oslo Stock Exchange. This further increases the company ’ s visibility in the marketplace and cements its position as a global provider of ad- vanced material solutions. In connection with the uplisting, Barbara Thierart-Perrin and Anne Lise Meyer were elected new independent Board members and an audit committee was established. This se- cures a highly competent Board with broad and complementary ex- perience and representation. Capacity upgrade program Strong demand and high order intake have made capacity expansion a key priority for the company. The additive material capacity increase program has made good progress throughout 2022 despite unfore- seen technical challenges. The program aims to increase the machine ’ s performance and to expand with additional machines. Increasing capacity will translate into higher material availability, shorter delivery lead-times and increased sales. The targeted 70% production output increase is expected to be reached in early 2023. Microelectronics nickel nano pilot line in operation Tekna ’ s Nickel nano powder is a key material for the manufacturing of high-end Multi-Layer Ceramic Capacitors (MLCC) and the company ’ s strategic development initiatives with customers continued in 2022. Tekna ’ s nickel nano pilot line came into operation during the year. The scale-up of production will be phased to certification by and demand from customers. Silicon nano pilot line created within energy storage Global Lithium-ion battery growth is driving the demand for silicon materials. Demand for silicon nano composite is forecasted to grow tenfold by 2030. In 2022, Tekna has implemented a nano-silicon plasma machine, produced samples and continued the dialogue with strategic partners within energy storage. However, until concrete interest from customers Tekna will prioritize the significant opportuni- ties within additive manufacturing and microelectronics over the potential within energy storage. USA systems sales oﬀice establishment Tekna ’ s Systems business rebounded in 2022 after several years of slow growth in orders. The company is experiencing a strong pipeline of potential orders in PlasmaSonic systems and in 2022 the company reinforced the sales team with a dedicated office in the US. This mar- ket represents great potential in the coming years, especially for PlasmaSonic. Profitability measures and segment focus areas Tekna has taken important and immediate steps towards improving profitability and cash position in 2023. A roadmap to profitability has been drawn up, emphasizing operational excellence, right-sizing of the organization, strict prioritization of R&D efforts towards Additive materials and Microelectronics and a strategic focus on near term revenue opportunities. First Sustainability report published Tekna ’ s powder products increase productivity and enable more efficient use of materials, thereby paving the way towards a more resilient supply chain. In 2022 Tekna published its first ESG report meeting many of the GRI requirements. Tekna has also started the process of reporting on climate-related risk and EU taxonomy. In 2022 Tekna also became a signatory of the UN Global Compact. Board of Directors ’ report (continued) ANNUAL REPORT 2022 | 19 BOARD OF DIRECTORS ’ REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 have taken place in the fourth quarter of 2022 and a ruling is expected in the second half of 2023. If the dispute is not resolved in favor of Tekna Plasma Systems Inc., there is a risk that the Group's production and sales of titanium powder in Canada may be restricted, which could have a negative effect on the Group's business opera- tions consisting of relocation to ensure business continuity and the Group's financial position. The Group's business is subject to price and exchange rate risk. There is no guarantee that the Group will be able to obtain the expected prices for its metal powders and plasma systems, and any change in the market conditions, including in the global technology and powder markets or in a specific regional and/or end markets in which the Group operates, could lead to lower sales prices or volumes of the Group's products and systems. The most material climate risks in the short and medium term are physical risks in the supply chain and in Tekna ’ s own operations. There is a risk of extreme weather events impacting Chinese suppliers and their ability to supply Tekna with titanium and nickel. Also, higher temperatures put the health and safety of suppliers ’ workers in China at risk. Physical climate risks might also impact goods transportation. In the medium and long term, physical risks might impact where the company considers establishing new production locations. A more detailed description is to be found in the Sustainability report includ- ed in that annual report and available on the company ’ s website from 11 April. For a full overview of the potential risks and uncertainties relating to the Company ’ s business and the industry in which it operates, please refer to Tekna ’ s Listing Prospectus on Oslo Stock Exchange, dated 30 June 2022. Cash flow Net cash from operating activities was negative CAD 19.9 million, compared to negative CAD 13.9 million in 2021, with higher operating costs and non-recurring charges being the main contributors. Net cash used for investing activities was CAD 7 million, compared to CAD 28.4 million in 2021. Net cash from financing activities was nega- tive CAD 0.2 million and is mainly related to changes in debts and loans. Cash and cash equivalents at year-end were CAD 11.4 million, compared to CAD 38.6 at the end of 2021. Financial position Tekna ’ s financial position at the end of the year showed a long-term debt/equity ratio of 0.10, compared to 0.05 at the end of 2021. Inter- est-bearing debt was CAD 2.4 million at year-end, while the cash position was CAD 11.4 million and total assets were CAD 75.5 million. Total equity as of 31 December 2022 amounted to CAD 53.4 million. The financial risk is moderated by a loan facility with Arendals Fosse- kompani ASA (“ AFK") and low other debt. The credit risk is regarded as low, given that most customers are large multinational companies. According to section 3-3 of the Norwegian Accounting Act, we confirm that the consolidated financial statements and the financial statements of the parent company have been prepared based on the going concern assumption, and that it is appropriate to make that assumption. Tekna Holding ASA The parent company Tekna Holding ASA is a holding company, with limited activity and a few corporate functions. Profit for the year was negative CAD 320.1 million, compared to CAD 0.3 million in 2021. The negative result of the year was due to an impairment of the value of Tekna Holdings Canada Inc. This impairment has no effect on the group consolidated financial statements. Risk factors and risk management Tekna ’ s Board of Directors is ultimately responsible for the govern- ance of risk management. Tekna's Executive Leadership Team report- ing to the CEO is responsible for implementing and overseeing the application of efficient risk management processes. The employees of the Company are expected to follow the requirements defined in the Company's policies. Tekna ’ s Board of Directors and Executive Leadership Team conduct risk assessments related to various dimensions and aspects of opera- tions to verify that adequate risk management systems are in place. As a globally operating organization, Tekna is exposed to risk scenari- os ranging from controllable risks, such as raw material price fluctua- tion, currency fluctuation, market changes, competition or fuel price volatility, to uncontrollable ones such as natural disasters. Supply chain disruptions in terms of lead times and shortages can have a significant impact on the company ’ s business and financial perfor- mance. Labour shortages in the markets where Tekna operates can lead to challenges in retaining and recruiting talent. This could lead to in- creased pressure on the remaining workforce translating into unfilled client orders, declining competitiveness, a deteriorating product/ service quality and eventually a slower growth rate. The Company's subsidiary and the operating company of the Group, Tekna Plasma Systems Inc., is currently involved in a dispute with AP&C Advanced Powders & Coatings Inc. regarding competing patent rights for the production of titanium powder in Canada, and more precisely to a specific patent which is part of the same patent type as one of the Group's significant patents. Court proceedings Board of Directors ’ report (continued) ANNUAL REPORT 2022 | 20 BOARD OF DIRECTORS ’ REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 Quebec (Canada) has strong legislation on discriminatory harassment in the workplace. In 2021 Tekna implemented its Supplier Code of Conduct and in 2022 the Employee Code of Conduct. Both Codes clearly reject any form of discrimination and emphasize the im- portance of respect and civility. It also includes a clear process for reporting and dealing with inappropriate behavior. The Executive Leadership Team has five male and two female members. The Board of Directors has two male members and two female members. Refer to the GRI report 2022 on the website for further statistical mapping on gender equality (www.tekna.com/esg). Environmental, Social, Governance Tekna has prepared a separate report in accordance with Section 3-3 of the Norwegian Accounting Act regarding corporate social respon- sibility. The report is included in the annual report that will be availa- ble on the company ’ s website from 11 April. The report describes Tekna ’ s performance in areas defined to be of importance to the company. It states the company ’ s goals and targets going forward, and how the company will measure its impact. On the basis of an internal materiality assessment Tekna identified five over- arching sustainability topics which the report addresses: ethical busi- ness conduct, a great place to work, a responsible and resilient supply chain, strive for circular and sustainable production, and enabling customers ’ positive impact. Together these five topics form the Tekna framework. The report also addresses external reporting frameworks, such as UN Global Compact (UNGC), EU Taxonomy, Taskforce on Research and development Investments in research and development (R&D) has been an important part of Tekna ’ s strategy to develop new and innovative solutions and is expected to remain an important part of the compa- ny ’ s strategy going forward. Tekna has a long-term ambition to invest significantly in R&D. The company ’ s investment in R&D is critical to its near- and long-term goals and today represents 10.2 per cent of its total revenue. In the mid-term, as revenues will be increasing, Tekna expects that this ratio will be at, or around, 5 per cent. People and organization The competence of our employees represents a major asset and competitive advantage for Tekna. At the end of 2022, the Group employed a total of 216 people. The number of employees were divided across locations as follows: Norway: 0 (0) Canada: 179 (173) France: 31 (26) China: 4 (3) Korea: 2 (2) USA: 0 There were no serious work-related accidents and one lost time injury in 2022. Sick leave was 2.62% per cent in 2022, compared to 2.0 per cent in 2021. Activities on gender equality and non- discrimination Tekna is committed to ensuring that people with different back- grounds, irrespective of ethnicity, gender, religion, sexual orientation or age, have the same opportunities for work and career develop- ment at Tekna. Women represented 25 per cent of the Tekna work- force in 2022. Out of 42 managers (managers with employees report- ing to them) 24 per cent were female. Tekna aspires to substantially increase the share of female employees and is working through the employee life cycle to see where measures could be implemented to enhance diversity across the organization. To date, Tekna ’ s workforce comprises 22 different nationalities, of which 142 are Canadian and 74 are non-Canadian employees. Tekna has developed and transitioned its workers compensation system to ensure equality, based on an objective job evaluation method that positions employees on the relative value of their jobs. This system is compliant with the legal requirements prescribed by the Commission for labor standards, pay equity and occupational health and safety (CNESST) of the Province of Quebec. Therefore, the average pay for men and women vary due to differences in job cate- gories and years of service, not because of gender. No gender-based differences exist with regard to working hour regulations or the design of workplaces. The Remuneration policy on determination of salary and other remu- neration for leading persons was approved by the Extraordinary Gen- eral Meeting in October 2022 and a full disclosure can be found in the separate Remuneration report. Guidelines for remuneration of leading persons are available in the Corporate Governance Policy on the company ’ s website. Board of Directors ’ report (continued) link Remuneration guidelines link ESG-related reports ANNUAL REPORT 2022 | 21 BOARD OF DIRECTORS ’ REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 working conditions are a concern to us. The renewal audit with both suppliers is in progress as this report is being written. We have addressed the issue of tantalum and tungsten, sometimes conflict minerals, by asking our suppliers to certify the provenance of the material. In addition to ensuring Occupational health and safety Tekna respects the freedom of association and does not accept any form of forced labor, child labor or work-related discrimination. Reference is made to Sustainability and Governance documents available at www.tekna.com. Governance Tekna ’ s Board of Directors has the overall responsibility for ensuring that the company has a high standard of corporate governance. The Company ’ s corporate governance model is designed to provide a foundation for long-term value creation and to ensure good control. The Board has adopted a corporate governance policy to safeguard the interests of the company ’ s owners, employees and other stake- holders. The policy describes the company ’ s main principles for corporate governance and addresses the framework of guidelines and principles regulating the interaction between the company ’ s shareholders, the Board of Directors, the CEO and the Executive Leadership Team. These principles and associated rules and practices are intended to increase predictability and transparency, and thus reduce uncertainties related to the business. The company follows the Norwegian Code of Practice for Corporate Governance. The compa- ny ’ s practice is largely in accordance with these recommendations. Reference is made to the Corporate Governance Report, which is included in the annual report and will be published on the company ’ s website on 11 April. Climate-related Financial Disclosures (TCFD) and the Science-Based Targets initiative (SBTi) . Tekna sets high ethical standards, and communication with the out- side world is to be open, clear and honest. The company is responsi- ble for ensuring safe and good workplaces in the local communities where it is present. Tekna seeks to create value for society, customers, employees and shareholders. Environment Tekna ’ s environmental impact is two-fold. Tekna has a positive envi- ronmental impact through developing products which enable a green transition. Tekna produces metal powders for Additive Manufacturing (“ AM ”) that significantly reduce the metal consumption in product manufacturing processes downstream. In the application of AM parts in aeroplanes and vehicles parts are usually lighter and therefore more energy efficient (less weight, less fuel consumption). On the other hand, the company also has an environmental impact from internal business operations such as emissions from employee com- mutes, business travels, energy consumption at the company ’ s loca- tions and waste generation. Tekna started climate accounting in 2019 and is continuing to gain insights on its footprint, particularly for up- and downstream GHG emissions (scope 3). For scope 1 and 2 Tekna has already committed to an absolute reduction of 50% by 2030 over 2021. The carbon ac- counting was updated in 2022 using CEMAsys ’ digital solution, and a full overview can be found in the separate Carbon Accounting report on the company ’ s website. The activities covered by the environmental permit as delivered by the Quebec Ministry of Environment, are metallic powders manufac- turing and induction plasma systems and auxiliary manufacturing. The manufacturing of both metallic powders and induction plasma systems has relatively low environmental risks. Hazardous waste, mostly from R&D, is stored and treated according to regulations, air emissions are purified when needed, and wastewater is treated before being disposed of. There are low CO2 emissions in our production process. The production of Nickel nano powder is in the industrialization phase, and risk analyses and mitigating measures are being put in place as the team proceeds in this project. Social The Norwegian Transparency Act went into effect in July 2022. Tekna is following the obligations related to this law and will report accord- ingly. The report will be published on the website of the company: www.tekna.com/esg. Tekna takes its social responsibility seriously and continues to embed human rights into company-wide governance and compliance programs. Both Employee and Supplier code of conduct addressing the topic are in place. Tekna is working to ensure compliance with fundamental human rights and acceptable working conditions in our supply chains and with their business partners. To further enhance our Supplier assessments, we have signed a collaboration with Fact- lines AS. Now that travelling is less restricted supplier audits have slowly recommenced. With suppliers we mitigated (potential) adverse impacts. 80 per cent of Tekna ’ s global spend comes from suppliers based in the EU or NA, which we deem well-governed by legal standards. Of the remaining 20 per cent, approximately 15 per cent is spend on a key raw material, i.e. titanium, supplied by two previously audited manufacturers in China. Both are well-established and delivering regularly to western industries. Stringent Covid lock downs, availability of vaccination and Board of Directors ’ report (continued) ANNUAL REPORT 2022 | 22 BOARD OF DIRECTORS ’ REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 To increase additive manufacturing powder capacity, Tekna is improv- ing its machine performance and increasing the number of production machines with three new machines in 2023. With the expected increase in capacity, the company will be better equipped to meet rising demand, shorten delivery lead times, and boost sales. The Systems business is rebounding, and Tekna has a strong pipeline of potential orders. To capitalize on the growth potential in the US market, the company is reinforcing its sales team. In microelectronics, Tekna continues to qualify with customers, and it has initiated discus- sions with partners in Asia to manufacture nickel-nano powder. The company has also explored opportunities within energy storage but will remain focused on its existing operating segments for the time being. Tekna's roadmap to profitability includes a focus on operational excel- lence, right-sizing the organization, and prioritizing R&D efforts to- wards additive manufacturing and microelectronics. The company will remain strategic in its approach to near-term revenue opportunities. Tekna has established itself as a technology leader in today ’ s global markets The current environment is characterized by economic uncer- tainty, geopolitical instability, and an increasing demand for sustainable solutions. The company ’ s strategy, technology, and products have gained significant relevance in these markets, as its customers are in- creasingly transitioning towards new technology, moving manufactur- ing closer to markets, and considering more sustainable production processes. Tekna remains committed to addressing these market needs and is poised for continued growth in the coming years. Finally, the Board would like to express its gratitude to all of Tekna's employees for their dedication and contributions to the company's growth and success. On 10 March 2022 the general assembly of Tekna passed the resolu- tion to convert Tekna Holding AS into a public limited company (ASA). Tekna Holding ASA is organized under Norwegian law with a governance structure based on Norwegian corporate law and other regulatory requirements. In 2022 Tekna expanded its executive team to include a VP for legal affairs. Currently, Tekna has four Board members, none of whom are members of the company ’ s management. Two Board members are independent of company management and significant business part- ners. Two Board members, including its Chair Dag Teigland elected in 2022, have an affiliation with Arendals Fossekompani ASA, Tekna ’ s main shareholder. An Audit Committee was established consisting of one dependent and one independent Board member. Tekna is in the process of creating a Nomination Committee. The Board members and the CEO are covered by liability insurance. The policy has worldwide coverage, and in addition to financial loss, it provides cover for aggravated, punitive and exemplary damages imposed on the insured, where these are insurable by law. The company ’ s shares are freely transferable and are not subject to ownership restrictions pursuant to law, licensing conditions, articles of association or similar restrictions. Subsequent events, Going concern and Outlook Subsequent events Arendals Fossekompani ASA, Tekna ’ s majority shareholder, and Tekna have signed an agreement for a CAD 25 million loan facility. Early January, Espen Schie joined the company as Chief Financial Of- ficer, taking over the reigns from Serge Blackburn who will remain on as Senior Advisor until at least the end of 2023. Morten Henriksen, former Chair of the Board of Tekna Holding ASA resigned his position of Board member on 18 January 2023 in prepa- ration for a new position outside Arendals Fossekompani ASA. Going concern There have been no events to date in 2023, other than the loan agreement, that significantly affect the result for 2022 or valuation of the company ’ s assets and liabilities at the balance sheet date. The Board confirms that the conditions for the going concern assumption have been satisfied and that the financial statements for 2022 have been prepared on the basis of this assumption. Outlook In 2023, Tekna anticipates continued growth in its operating revenues and margins, driven by a strong order backlog and an increase in production capacity. The company remains committed to expanding its additive materials segment, which continues to be a fast-growing market with significant revenue potential. Tekna will also be prioritiz- ing opportunities in microelectronics and leveraging its strong posi- tion in the market to drive growth. Board of Directors ’ report (continued) ANNUAL REPORT 2022 | 23 BOARD OF DIRECTORS ’ REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 Dag Teigland Chair of the Board Torkil Sigurd Mogstad Member of the Board Barbara Thierart-Perrin Member of the Board Anne Lise Meyer Member of the Board Luc Dionne CEO We hereby confirm that, to the best of our knowledge, the consoli- dated annual financial statements for 1 January to 31 December 2022 have been prepared in accordance with applicable accounting standards and that the information in the financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the company. We confirm that the financial statements give an accurate and fair view of the development, profit and position of the company, as well as a description of the principal risks and uncertainties it is facing. Arendal, 10 April 2023 The Board of Directors and CEO Tekna Holding ASA This document was electronically signed. Declaration by the Board of Directors and CEO As a company, we hold the power to make decisions and we have chosen to prioritise a more sustainable future Board of Directors ’ report (continued) ANNUAL REPORT 2022 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR ’ S REPORT Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 24 Index ............................................... 25 Consolidated Income statement ...................... 26 Other comprehensive Income 26 Balance sheet .............................. 27 Changes in equity ...................... 28 Cash flow ...................................... 29 Notes ....................................... 30-49 Parent company Income statement ...................... 50 Other comprehensive Income...50 Balance sheet .............................. 51 Changes in equity ...................... 52 Cash flow ...................................... 53 Notes ..................................... 54-58 Independent Auditor ’ s report ............................................. 59 | 24 Financial Statements Financial Statements Consolidated & Parent Independent Auditor ’ s report ANNUAL REPORT 2022 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR ’ S REPORT Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 25 Consolidated Financial Statements Income statement ......................................................................................... 26 Other comprehensive income .................................................................. 26 Balance sheet ................................................................................................. 27 Changes in equity ......................................................................................... 28 Cash flow ......................................................................................................... 29 Notes to the Consolidated Financial Statements Organization and accounting principles ................................................ 30 Note 2 Research and Development ........................................................ 36 Note 3 Revenue from contracts with customers ................................. 36 Note 4 Other income ................................................................................. 37 Note 5 Remuneration and employee benefits ..................................... 37 Note 6 Other operating expenses ........................................................... 37 Note 7 Income tax ........................................................................................ 38 Note 8 Inventories ........................................................................................ 39 Note 9 Trade and other receivables ....................................................... 39 Note 10 Cash and cash equivalents ......................................................... 40 Note 11 Property, plant and equipment ................................................. 40 Note 12 Intangible assets ............................................................................. 41 Note 13 Non-current receivables .............................................................. 41 Note 14 Leases ............................................................................................... 42 Note 15 Trade payables and other current liabilities ......................... 42 Note 16 Financial risk and financial instruments .................................. 43 Note 17 Borrowings ...................................................................................... 45 Note 18 Finance items ................................................................................. 46 Note 19 Share information ......................................................................... 46 Note 20 Earnings per share ....................................................................... 46 Note 21 Investment in joint ventures ...................................................... 46 Note 22 Subsidiaries .................................................................................... 48 Note 23 Related parties .............................................................................. 48 Note 24 Contingent liabilities .................................................................... 49 Note 25 Subsequent events ..................................................................... 49 Index Parent Financial Statements Income statement .......................................................................................... 50 Other comprehensive income ................................................................... 50 Balance sheet .................................................................................................. 51 Changes in equity .......................................................................................... 52 Cash flow .......................................................................................................... 53 Notes to the Parent Financial Statements Accounting principles ................................................................................... 54 Note 2 Remuneration and employee benefits ..................................... 55 Note 3 Other expenses .............................................................................. 55 Note 4 Tax ....................................................................................................... 56 Note 5 Investments in subsidiaries ........................................................... 56 Note 6 Cash and cash equivalents ........................................................... 57 Note 7 Intercompany balances and transactions ................................ 57 Note 8 Financial items .................................................................................. 57 Note 9 Financial risk ...................................................................................... 57 Note 10 Share capital and shareholder information ........................... 58 Note 11 Subsequent events ......................................................................... 58 Index Tip If you want to return to this financial index page, press this icon at the cen- ter bottom of a financial the page. ANNUAL REPORT 2022 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR ’ S REPORT Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 26 Consolidated Financial Statements Income Statement Other Comprehensive Income Amounts in CAD 1000 Note FY 2022 FY 2021 Items that may be reclassified to statement of income Exchange differences on translation of foreign operations -178 6 Items that may be reclassified to statement of income -178 6 Items that will not be reclassified to statement of income Exchange differences on translation of foreign operations - -6,207 Items that will not be reclassified to statement of income - -6,207 Other comprehensive income/(loss) for the period, net of tax -178 -6,201 Total comprehensive income/(loss) for the period -22,696 -20,288 Attributable to equity holders of the company -21,876 -19,802 Attributable to non-controlling interests -820 -486 Amounts in CAD 1000 Note FY 2022 FY 2021 Revenues 3 26,889 26,810 Other income 4 767 486 Materials and consumables used 17,540 14,893 Employee benefit expenses 5 16,009 12,733 Other operating expenses 6 10,835 8,401 EBITDA -16,727 -8,731 Depreciation and amortisation 11.12 3,978 3,742 Net operating income/(loss) -20,706 -12,473 Share of net income (loss) from associated companies and joint ventures 21 -1,510 -1,472 Finance income 18 144 400 Finance costs 18 332 656 Profit/(loss) before income tax -22,404 -14,201 Income tax expense 7 114 -114 Profit/(loss) for the period -22,517 -14,087 Attributable to equity holders of the company -21,688 -13,601 Attributable to non-controlling interests -829 -486 Basic earnings per share 20 -0.17 -0.14 Diluted earnings per share 20 -0.17 -0.14 ANNUAL REPORT 2022 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR ’ S REPORT Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 27 Consolidated Financial Statements (continued) Balance sheet Amounts in CAD 1000 Note 31.12.2022 31.12.2021 Non-current assets Property, plant and equipment 11 19,240 16,573 Intangible assets 12 8,537 9,217 Associated companies and joint ventures 21 579 1,231 Non-current receivables 13 5,339 5,598 Deferred tax assets 7 - - Total non-current assets 33,696 32,619 Current assets Inventories 8 20,592 14,415 Contract assets 3 167 1,039 Trade and other receivables 9 7,880 5,680 Cash and cash equivalents 10 11,364 38,649 Total current assets 40,003 59,783 Total assets 73,699 92,402 Amounts in CAD 1000 Note 31.12.2022 31.12.2021 Equity Share capital and share premium 19 494,956 494,956 Other reserves -440,934 -419,058 Capital and reserves attributable to holders of the company 54,022 75,899 Non-controlling interests -609 211 Total equity 53,413 76,109 Non-current liabilities Borrowings 17 4,119 3,778 Lease liabilities 14 1,161 227 Deferred tax liabilities 7 - - Total non-current liabilities 5,280 4,005 Current liabilities Bank loan 16 1,197 3,733 Lease liabilities 14 459 235 Trade and other payables 15 7,852 4,772 Contract liabilities 3 2,647 1,473 Provision for warranties 130 130 Other current liabilities 15 2,189 1,744 Borrowings short-term portion 17 532 200 Total current liabilities 15,006 12,288 Total liabilities and equity 73,699 92,402 Dag Teigland Chair of the Board Torkil Sigurd Mogstad Member of the Board Barbara Thierart-Perrin Member of the Board Anne Lise Meyer Member of the Board Luc Dionne CEO Arendal, 10 April .2023 The Board of Directors and CEO of Tekna Holding ASA This document was electronically signed. ANNUAL REPORT 2022 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR ’ S REPORT Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 28 Changes in Equity Consolidated Financial Statements (continued) Amounts in CAD 1000 Share capital and share premium Other reserves Total Non- controlling interests Total equity Balance at 1 January 2021 14 18,525 18,539 - 18,539 Profit/(loss) for the period - -13,601 -13,601 -486 -14,087 Other comprehensive income/(loss) - -6,201 -6,201 - -6,201 Share capital increase Arendals Fossekompani 394,898 -417,781 -22,883 697 -22,186 Issue of ordinary shares for cash 100,044 - 100,044 - 100,044 Balance at 31 December 2021 494,956 -419,058 75,899 211 76,109 Balance at 1 January 2022 494,956 -419,058 75,899 211 76,109 Profit/(loss) for the period - -21,688 -21,688 -829 -22,517 Other comprehensive income/(loss) - -187 -187 9 -178 Adjustment - - - - - Balance at 31 December 2022 494,956 -440,934 54,022 -609 53,413 Attributable to equity holders of the Company ANNUAL REPORT 2022 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR ’ S REPORT Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 29 Cash flow Consolidated Financial Statements (continued) Amounts in CAD 1000 Note FY 2022 FY 2021 Cash flow from operating activities Net profit/(loss) -22,517 -14,087 Depreciation, amortization and impairment 11.12 3,978 3,742 Variation in deferred taxes - - Interest accretion on LT debt 290 258 Discounted value of long-term loan -640 -378 FX variation on long-term loan - -515 (Gain)/Loss from sales of assets - -10 Share of results from associated companies and joint ventures 1,510 1,472 Total after adjustments to profit before income tax -17,379 -9,517 Change in Inventories -6,177 -2,378 Change in other assets -1,070 -2,773 Change in other liabilities 4,699 790 Total after adjustments to net assets -19,927 -13,878 Net cash from operating activities -19,927 -13,878 Cash flow from investing activities Proceeds from the sales of PPE - 28 Purchase of PPE and intangible assets 11.12 -5,965 -3,637 Other investing activities -816 -1,296 Purchase of shares in subsidiaries - -23,480 Net cash flow from investing activities -6,781 -28,385 Amounts in CAD 1000 Note FY 2022 FY 2021 Cash flow from financing activities Proceeds from issue of shares - 100,044 Proceeds from issue of shares in THC -42 1,331 Increase (decrease) of bank loan 17 -2,536 3,100 New loan 17 3,317 17,898 Repayment of loan 17 -263 -37,535 Repayment of lease liabilities 17 -874 -226 Net cash flow from financing activities -398 84,612 Net increase in cash and cash equivalents -27,105 42,348 Cash and cash equivalents at the beginning of the financial year 38,649 2,537 Effects of exchange rate changes on cash and cash equivalents -180 -6,237 Cash and cash equivalents at end of the period 11,364 38,649 ANNUAL REPORT 2022 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR ’ S REPORT Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 30 Notes to the Consolidated Financial Statements Organization and accounting principles Note 1 Organization Tekna Holding ASA (“ Company ”) is domiciled in Norway, and with the Group ’ s headquarters located in Sher- brooke, Canada. It manufactures products from thermal plasma processes and produces thermal plasma systems. The consolidated financial statements for financial year 2022 include the company and its subsidiar- ies (as a whole, referred to as the "Group"). The Company was incorporated on 30 June 2020. The Company's audited financial statements for 2022 have been prepared in accordance with International Financial Reporting Standards (IFRS). Following the admission to trading on Euronext Growth Oslo in 2021 and Oslo Stock Exchange per 1 July 2022, the Group has report- ed consolidated financial statements in accordance with IFRS, with the Company as the parent company, in- cluding quarterly financial statements. Significant accounting policies This note provides a list of the significant accounting policies adopted in the preparation of these consolidat- ed financial statements. These policies have been consistently applied to the previous year presented, unless otherwise stated. Basis for preparation The consolidated financial statements have been prepared in accordance with International Financial Report- ing Standards (IFRS) adopted by the European Union and associated interpretations, as well as Norwegian disclosure requirements pursuant to the Norwegian Accounting Act applicable as of 31 December 2022. The consolidated financial statements were approved by the board of directors on 10 April 2023. The company was incorporated on 30 June 2020 but did not have any activity before Arendals Fossekompani ASA (“ AFK ”) increased the share capital by contribution in kind in form of shares in Tekna Holding AS on 11 March 2021. The transaction represents a capital reorganization and is not in scope of IFRS 3 Business combinations. Management has determined that predecessor accounting best reflects the economic substance of the trans- action, since AFK ’ s ownership and control is not changed as a result of the transaction. The financial state- ments are based on predecessor values from Tekna Holdings Canada Inc. ‘ s consolidated financial statements. To be able to provide relevant historical financial information, predecessor accounting is applied retrospec- tively, and the financial statements are therefore presented based on the assumption that the transaction was completed 1 January 2019 (opening balance for these financial statements). The financial statements have been prepared using the historical cost principle, except for financial instruments at fair value through profit or loss. The Group recognizes changes in equity arising from transactions with owners in the statement of changes in equity. Other changes in equity are presented in the statement of other comprehensive income. Preparation of financial statements in accordance with IFRS requires the use of assessments, estimates and assumptions that influence which accounting policies shall be applied, and influence recognized amounts for assets and liabilities, revenues, and costs. Actual amounts can deviate from estimated amounts. Estimates and underlying assumptions are reviewed on an ongoing basis. Changes in accounting estimates are recognized in the period in which they arise if they only apply to that period. If the changes also apply to subsequent periods, the effect is allocated over the current and subsequent periods. Accounting policies The accounting policies applied in the preparation of the consolidated financial statements are described below. In case that subsidiaries have used other principles to prepare their separate annual financial state- ments, adjustments have been made so the consolidated financial statements are prepared according to common policies. Principles of consolidation Business combinations The acquisition method of accounting is used to account for the acquisition of shares that lead to control over another company. The Group's consideration is allocated to identifiable assets and liabilities. These are recognized in the consolidated financial statements at fair value at the date when control is obtained. Good- will is calculated when the consideration exceeds identifiable assets and liabilities: • The consideration transferred; plus • Any non-controlling interest in the acquired entity; plus, any gradual acquisition, the fair value of existing shareholdings in the acquired entity; less • Net value (normally fair value) of identifiable net assets included in the transaction If those amounts are less than the fair value of the net identifiable assets of the business acquired, the differ- ence is recognized directly in profit or loss as a bargain purchase. If the business combination is achieved in stages, the investment changes classification from associated company to subsidiary, the upward adjustment of the existing shareholding at fair value is recognized as a gain in the income statement. A buyout of non- controlling interests is considered a transaction with owners and does not require a calculation of goodwill. Non-controlling interests for such transactions are adjusted based on a proportionate share of the subsidi- ary's equity. ANNUAL REPORT 2022 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR ’ S REPORT Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 31 Losses in the parent company ’ s financial statements When an investment is reclassified from fair value through other comprehensive income to subsidiary or as- sociated company, the investment ’ s carrying amount at the time control or significant influence is obtained is used as recognized cost. Subsidiaries Subsidiaries are all entities over which the Group has control. Control exists when the investor is exposed or has rights to variable returns from its investment in the company and when it has the ability to influence the return through its power over the company. To determine the level of control, the potential voting rights that can be exercised or converted must be considered. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases. Associated companies Associated companies are entities where the company and/or the Group has significant influence, but not control over financial and operational management. Significant influence is assumed to exist when the Group has between 20 per cent to 50 per cent of the voting rights in a company. The consolidated financial state- ments include the Group's share of the profits/losses from associated companies are accounted for using the equity method, from the date significant influence was achieved until it ceases. Elimination of intercompany transactions Intercompany transactions, balances and unrealized gains and losses on transactions between group compa- nies are eliminated. Foreign currency translation Functional and presentation currency Items included in the financial statements of each of the group ’ s entities are measured using the currency of the primary economic environment in which the entity operates (‘ the functional currency ’). All amounts disclosed in the consolidated financial statements have been rounded off to the nearest thousand CAD units unless otherwise stated. From the date of incorporation, the functional currency of the parent company has been determined to be Norwegian kroner (NOK) due to its ties to Aren- dals Fossekompani ASA and predominantly NOK financing. With effect from 1 January 2022, the parent com- pany changed its functional currency from NOK to CAD to reflect the Group ’ s current financing, underlying operations and reduced ties to AFK. Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transac- tions, and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates, are generally recognized in profit or loss. They are deferred in equity if they relate to qualifying cash flow hedges and qualifying net investment hedges or are attributable to part of the net in- vestment in a foreign operation. Foreign exchange gains and losses that relate to borrowings are presented in the statement of profit or loss, within finance costs. All other foreign exchange gains and losses are pre- sented in the statement of profit or loss on a net basis within other gains/(losses). Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation differences on non- monetary assets and liabilities such as equities held at fair value through profit or loss are recognized in profit or loss as part of the fair value gain or loss, and translation differences on non-monetary assets such as equi- ties classified as at fair value through other comprehensive income are recognized in other comprehensive income. Group companies The results and financial position of foreign operations that have a functional currency different from the presentation currency are translated into the presentation currency as follows: • assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet • income and expenses for each statement of profit or loss and statement of comprehensive income are translated at average exchange rates, and • all resulting exchange differences are recognized in other comprehensive income. On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other financial instruments designated as hedges of such investments, are recognized in other comprehensive income. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, the associated exchange differences are reclassified to profit or loss, as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate. Notes to the Consolidated Financial Statements (- Note 1 continued) ANNUAL REPORT 2022 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR ’ S REPORT Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 32 Revenue recognition Revenues from contracts with customers Under IFRS 15, Tekna recognizes as revenue the agreed transaction price in a contract with a customer at the time when the Group transfers the control of a distinct product or service to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods and ser- vices. For each performance obligation identified at the inception of the contract, it is separately determined if those performance obligations are satisfied at a point in time or on an over-time basis. Revenue regarding each performance obligation is recognized when that performance obligation is satisfied. Consequently, rev- enue is recognized in full upon completion of a contract if it includes only one performance obligation or more than one performance obligations that are satisfied at the same time. The Group ’ s main revenues come from the sale of metal powders and delivers plasma systems for powder production of advanced materials. There are several types of customer contracts depending on what the customer needs. Some contracts may include only one type of service while other contracts include two or more types of services, hence the trans- action price will be allocated between different types of revenue depending on the performance obligation. Transaction price - Sale of metal powders The Group determines the transaction price to be the amount of consideration which it expects to be entitled in exchange for transferring the promised goods and services to the customer, net of discounts and sales related taxes. Sales related taxes are regarded as collected on behalf of the authorities. The Group considers whether there are other promises in the contract that are separate performance obligations to which a por- tion of the transaction price needs to be allocated. Fixed price contracts - Sale of plasma systems for powder production of advanced materials The Group transfers control of plasma systems over time, and therefore, satisfies a performance obligation and recognizes revenue over time. The asset has no alternative use and the entity has enforceable right to payment for performance completed to date. Revenue from manufacturing and distribution of thermal plas- ma systems are recorded under the percentage-of-completion method. Under this method, contract income and profits are recognized proportionally with the degree of completion of work when persuasive evidence of an arrangement exists, the sales price is fixed or determinable and collection is reasonably assured. The degree of completion is determined using the cost-to-cost method, which consists in comparing the actual costs incurred with the total expected costs. Contract balances Contract balances consist of client-related assets and liabilities. Contract assets relate to consideration for work complete, but not yet invoiced at the reporting date. The contract assets are transferred to trade receiv- ables when the right to payment has become unconditional, which usually occurs when invoices are issued to the customers. When a client pays consideration in advance, or an amount of consideration is due contractu- ally before transferring of the license or service, then the amount received in advance presented as a liability. Contract liabilities represent mainly prepayments from clients for unsatisfied or partially satisfied performance obligations in relation to licenses and services. Contract assets are within the scope of impairment require- ments in IFRS 9. For contract assets the simplified approach is applied, and the expected loss provision is measured at the estimate of the lifetime expected credit losses. Income tax Income tax on the profit for the period consists of current and deferred tax. Income tax is recognized in the income statement with the exception of tax on items that are recognized directly in equity or in other com- prehensive income. The tax effect of the latter items is recognized directly in equity or in other comprehen- sive income. Current tax is the forecast tax payable on the year's taxable income at current tax rates at the balance sheet date, and any adjustments of tax payable for previous years less tax paid in advance. Deferred tax liabilities are calculated based on the balance sheet-oriented liability method taking into account tempo- rary differences between the carrying amount of assets and liabilities for financial reporting and tax values. The following temporary differences are not considered: goodwill not deductible for income tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit, and differences relating to investments in subsidiaries that are not expected to reverse in the foreseeable future. The provi- sion for deferred tax is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, measured at the tax rates in force at the balance sheet date. Deferred tax assets are rec- ognized only to the extent that it is probable that the asset can be utilized against future taxable results. De- ferred tax assets are reduced to the extent that it is no longer probable that the related tax asset will be real- ized. Tax assets that can only be utilized via group contributions from the parent company are not recog- nized until the contribution has actually been paid and is recognized in the individual companies. Notes to the Consolidated Financial Statements (- Note 1 continued) ANNUAL REPORT 2022 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR ’ S REPORT Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 33 Leases The company's and the group's leases consist mainly of office space, machines, cars, IT equipment and other office machines. Assets and liabilities arising from a lease are initially measured on a present value basis. Right-of-use assets are measured at cost comprising the following: • the amount of the initial measurement of lease liability • any lease payments made at or before the commencement date less any lease incentives received • any initial direct costs, and restoration costs. Lease liabilities include the net present value of the following lease payments: • fixed payments (including in-substance fixed payments), less any lease incentives receivable • variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date • amounts expected to be payable by the group under residual value guarantees • the exercise price of a purchase option if the group is reasonably certain to exercise that option, • and payments of penalties for terminating the lease, if the lease term reflects the group exercising that option. Lease payments to be made under reasonably certain extension options are also included in the measure- ment of the liability. The lease payments are discounted using the lessee ’ s incremental borrowing rate, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of sim- ilar value to the right-of-use asset in a similar economic environment with similar terms, security and condi- tions. Impairment of assets Goodwill and intangible assets that have an indefinite useful life are not subject to amortization and are test- ed annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset ’ s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an as- set ’ s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely inde- pendent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial as- sets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period. Cash and cash equivalents For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand and deposits held at call with financial institutions. Trade receivables Trade receivables are recognized initially at the amount of consideration that is unconditional, unless they contain significant financing components when they are recognized at fair value. They are subsequently measured at amortized cost using the effective interest method, less loss allowance. See note 9 for further information about the group ’ s accounting for trade receivables. Inventories Raw materials and stores, work in progress and finished goods are recognized at the lower of cost and net realizable value. Net realizable value is the estimated sales price in ordinary operations, less the estimated costs for completion and sales costs. Cost is based on an average historical cost for raw material and includes costs incurred upon procurement of goods and the costs of bringing them to their present condition and location. For finished goods and work in progress, cost is calculated as a share of the indirect costs based on normal utilization of capacity. Financial instruments Non-derivative financial instruments Non-derivative financial instruments consist of investments in debt and equity instruments, trade and other receivables, cash and loans, trade payables and other debts. Trade and other receivables that fall due in less than three months are not discounted. Non-derivative finan- cial instruments are measured on initial recognition at fair value plus any directly attributable transaction costs. After initial recognition, the instruments are measured as described below. Notes to the Consolidated Financial Statements (- Note 1 continued) ANNUAL REPORT 2022 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR ’ S REPORT Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 34 Interest-bearing loans are valued at fair value less transaction costs on initial recognition in the balance sheet. Instruments are subsequently measured at amortized cost, with any differences between cost and redemp- tion value recognized over the term of the loan as part of the effective interest rate. Financial assets are derecognized when the contractual rights to the cash flows from an asset expire, or when the Group has transferred the contractual rights in a transaction where the risk and return of ownership of the financial asset have substantively been transferred. Financial assets classified as held for trading A financial instrument is classified at fair value through profit or loss if it is held for trading. The instrument is measured at fair value and the changes in fair value are recognized in the income statement. Other Other non-derivative financial instruments are measured at amortized cost less any impairment losses. Property, plant and equipment The depreciation methods and periods used by the group are disclosed in note 11. The assets ’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset ’ s carrying amount is written down immediately to its recoverable amount if the asset ’ s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are in- cluded in profit or loss. When revalued assets are sold, it is group policy to transfer any amounts included in other reserves in respect of those assets to retained earnings. Intangible assets Other intangible assets and development Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the group are recognized as intangible assets where the following criteria are met: • it is technically feasible to complete the product so that it will be available for use • management intends to complete the product and use or sell it • there is an ability to use or sell the product • it can be demonstrated how the product will generate probable future economic benefits • adequate technical, financial and other resources to complete the development and to use or sell the product are available, and • the expenditure attributable to the product during its development can be reliably measured. Directly attributable costs that are capitalized as part of the product include employee costs and an appropri- ate portion of relevant overheads. Capitalized development costs are recorded as intangible assets and amortized from the point at which the asset is ready for use. Development expenditure that does not meet the criteria above are recognized as an expense as incurred. Development costs previously recognized as an expense are not recognized as an asset in a subsequent pe- riod. Amortizations methods and periods Refer to note 12 for details about amortization methods and periods used by the group for intangible assets. Trade and other payables These amounts represent liabilities for goods and services provided to the group prior to the end of the fi- nancial year which are unpaid. The amounts are unsecured and are usually paid within 60 days of recogni- tion. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognized initially at their fair value and subsequently measured at amortized cost using the effective interest method. Notes to the Consolidated Financial Statements (- Note 1 continued) ANNUAL REPORT 2022 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR ’ S REPORT Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 35 Borrowings Borrowings are initially recognized at fair value, net of transaction costs incurred. Borrowings are subsequent- ly measured at amortized cost. Any difference between the proceeds (net of transaction costs) and the re- demption amount is recognized in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is de- ferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalized as a prepayment for liquidity services and amortized over the period of the facility to which it relates. Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period. Pensions For defined contribution plans, the group pays contributions to publicly or privately administered pension plans. The group has no further payment obligations once the contributions have been paid. The contribu- tions are recognized as employee benefit expense when they are due. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payments is available. Share-based compensation For share-based compensation by equity instruments granted that do not vest until the employee completes a specified period of service, it is assumed that the services to be rendered as consideration for the equity instruments will be received in the future, during the vesting period. Such services are accounted for as they are rendered by the employee during the vesting period, with a corresponding increase in equity. Government Grants Government grants are recognized when there is reasonable assurance that the grant will be received, and all attached conditions will be complied with. The grants related to an expense are presented as other reve- nues, not against the expense. The grants related to fixed assets or intangible assets are recorded against the cost on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is presented in the statement of financial position by deduct- ing the grant in arriving at the carrying amount of the asset. The grant is recognized in the income statement over the useful life of a depreciable asset as a reduced depreciation. Contributed equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are recognized as a deduction, net of tax, from the proceeds. On the repurchase of treasury shares, the purchase amount including directly attributable costs are recognized as a change in equity. Purchased shares are classified as treasury shares and reduce total equity. When treasury shares are sold, the received amount is recorded as an increase in equity, and the subsequent gain on the transaction is recognized in share premium. Dividends Provision is made for the amount of any dividend declared, being appropriately authorized and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period. Earnings per share Basic earnings per share is calculated by dividing: • the profit attributable to owners of the company, excluding any costs of servicing equity other than ordi- nary shares by • the weighted average number of ordinary shares outstanding during the financial year, adjusted for bo- nus elements in ordinary shares issued during the year and excluding treasury shares (note 20). • Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account: • the after-income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, and • the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. Segment information The Chief Operating Decision Maker (CODM) assesses the financial performance and position of the Group and makes strategic decisions. The internal financial reporting to the CODM is on a consolidated basis. As a result, the Group has only one reportable segment. The CODM is identified as the Board of Directors. Notes to the Consolidated Financial Statements (- Note 1 continued) ANNUAL REPORT 2022 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR ’ S REPORT Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 36 Note 2 Research and development Note 3 Revenue from contracts with customers Accounting principles and information related to external customers are described in the Accounting Princi- ples. There are no customers that represent 10 per cent or more of the Group's total revenues on an annual basis. Disaggregation of revenue from contracts with customers Notes to the Consolidated Financial Statements (continued) 2022 Amounts in CAD 1000 Revenue recognized at a point in time - 18,909 1,521 222 20,652 Revenue recognized over time 6,238 - - - 6,238 Revenue from external customers 6,238 18,909 1,521 222 26,889 Contribution margin 2,794 5,677 657 222 9,350 Contribution margin % 44.8% 30.0% 43.2% 100.0% 34.8% Revenue from external customers specified per geographical area: North America 1,608 7,204 760 111 9,684 Europe - 9,827 760 111 10,698 Asia 4,629 1,878 - - 6,507 Total 6,238 18,909 1521 222 26,889 Systems & Equipment Materials Spare parts Other Total 2021 Amounts in CAD 1000 Revenue recognized at a point in time - 17,492 974 414 18,879 Revenue recognized over time 7,931 - - - 7,931 Revenue from external customers 7,931 17,492 974 414 26,810 Contribution margin 4,440 6,368 545 151 11,503 Contribution margin % 56.0% 36.4% 56.0% 36.4% 42.9% Revenue from external customers specified per geographical area: North America 4,354 6,726 487 207 11,774 Europe - 8,159 487 207 8,853 Asia 3,577 2,606 - - 6,183 Total 7,931 17,492 974 414 26,810 Systems & Equipment Materials Spare parts Other Total Amounts in CAD 1000 2022 2021 Salaries 1,850 1,776 Materials and other costs 1,135 1,021 R & D Tax credits -253 -249 Research and Development costs 2,732 2,548 Less: development capitalized -532 -782 Research expensed 2,200 1,766 ANNUAL REPORT 2022 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR ’ S REPORT Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 37 Note 4 Other income Accounting principles and information related to grants and other income are described in the Accounting Principles. Disaggregation of other income Amounts in CAD 1000 2022 2021 Grant 755 476 Gain/loss disposals 12 10 Other - - Other Income 767 486 Note 5 Remuneration and employee benefits Amounts in CAD 1000 2022 2021 Salaries 16,903 13,965 Social security contributions 2,721 2,175 Pension costs 438 364 Other benefits 738 434 Capitalized as development, inventories etc. -4,791 -4,206 Total employee benefit expenses 16,009 12,733 Average number of full time employees 219 190 Note 6 Other operating expenses Amounts in CAD 1000 2022 2021 Maintenance equipment & buildings 831 750 Marketing, travel and representation costs 1,616 1,039 Consultants and professional fees 5,717 3,841 IT costs 1,482 2,036 Manufacturing overhead costs 1,189 734 Total operating expenses 10,835 8,401 Remuneration to auditor Amounts in CAD 1000 2022 2021 Statutory audit 374 254 Other assurance services 261 60 Tax advisory 30 16 Other non-audit services 22 - Total remuneration to auditor 687 330 Notes to the Consolidated Financial Statements (continued) ANNUAL REPORT 2022 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR ’ S REPORT Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 38 Note 7 Income tax Notes to the Consolidated Financial Statements (continued) Amounts in CAD 1000 2022 2021 Tax payable on ordinary income 114 -114 Adjustment for previous years - Current tax expense 114 -114 Deferred tax expense - - Total tax expense in the income statement 114 -114 Reconciliation of effective tax rate Profit / (loss) before income tax -22,404 -14,201 Tax based on current ordinary tax rate -5,937 -3,763 Effect of non-deductible expenses 29 375 Effect of unrecognised tax loss carryforward 5,908 3,274 Effect of changed tax assessments for previous years 114 - Total tax expense 114 -114 Effective tax rate -0.51% 0.80% 2022 Assets Liabilities Net assets Property, plant and equipment - -208 -208 Intangible assets - -1,216 -1,216 Other items 719 - 719 Tax loss carryforward 25,254 - 25,254 Unrecognised tax assets -24,549 - -24,549 Recognised tax loss carryforward 705 - 705 Deferred tax asset/liability 1,424 -1,424 - Offsetting of assets and liabilities Net deferred tax asset/liability 1,424 -1,424 - 2021 Assets Liabilities Net assets Property, plant and equipment - -200 -200 Intangible assets - -1,883 -1,883 Other items -668 -668 -1,336 Tax loss carryforward 9,767 - 9,767 Unrecognised tax assets -6,348 - -6,348 Recognised tax loss carryforward 3,419 - 3,419 Deferred tax asset/liability 2,751 -2,751 - Offsetting of assets and liabilities -2,751 2,751 Net deferred tax asset/liability - - - ANNUAL REPORT 2022 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR ’ S REPORT Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 39 Note 8 Inventories Inventory stock Amounts in CAD 1000 2022 2021 Raw materials 10,840 5,258 Work in progress 712 455 Finished goods 9,039 8,702 Total inventories (net after provision for obsolescence) 20,592 14,415 Provision for obsolescence related to finished goods Amounts in CAD 1000 2022 2021 Balance at 1 january 3,648 2,716 New provisions recognised during the year 2,218 938 Provisions reversed -871 -6 Balance at 31 December 4,996 3,648 Provision slow moving When producing powder of a specific alloy, the process generates a distribution of size fractions, which are dedicated to various markets and applications. Some of the size fractions could accumulate in inventory, depending on the demand and on the level of market penetration. A provision for slow moving inventory is recorded by Tekna following a periodic review of historical sales data for each fraction as well as the growth rate of sales and order intake. The provision could fluctuate depending on the level of inventory and the historic performance of sales. Note 9 Trade and other receivables Trade receivables Amounts in CAD 1000 2022 2021 Trade receivables from contracts with customers 5,676 3,727 Loss allowance -42 -26 Total 5,634 3,701 Write-down * Amounts in CAD 1000 2022 2021 Balance at 1 january -26 - New write-downs recognised during the year -38 -26 Write-downs reversed 22 - Balance at 31 December -42 -26 *For more information about credit risk and write-downs, see note 16 Other receivables Amounts in CAD 1000 2022 2021 Indirect Tax Receivable 599 565 Refundable deposit on Raw mat 703 453 Grant and Investment tax credit receivable 440 444 Prepaid Expenses 505 517 Total 2,246 1,979 Total trade and other receivables 7,880 5,680 Notes to the Consolidated Financial Statements (continued) ANNUAL REPORT 2022 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR ’ S REPORT Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 40 Note 10 Cash and cash equivalents Amounts in CAD 1000 2022 2021 Total cash at bank 11,364 38,649 Restricted cash - - Note 11 Property, plant and equipment Notes to the Consolidated Financial Statements (continued) Amounts in CAD 1000 Vehicles, machinery, equipment Buildings and land RoU assets Total Year ended 31 December 2021 Cost at 1 January 2021 17,512 9,929 1,132 28,573 Additions, net of tax credits & Translation adjustments 1,429 1,953 - 3,382 Grants -402 -71 - -473 Disposal -110 - - -110 Cost at 31 December 2021 18,429 11,811 1,132 31,372 Accumulated depreciation at 1 January 2021 8,539 3,076 475 12,090 Depreciation 1,288 1,287 226 2,801 Disposal -92 - - -92 9,735 4,363 701 14,799 Carrying amount at 31 December 2021 8,694 7,448 431 16,573 Accumulated depreciation at 31 December 2021 Amounts in CAD 1000 Vehicles, machinery, equipment Buildings and land RoU assets Total Year ended 31 December 2022 Cost at 1 January 2022 18,429 11,811 1,132 31,372 Additions, net of tax credits & Translation adjustments 3,830 758 1,983 6,571 Grants -1,059 -109 - -1,168 Disposal - - - - Cost at 31 December 2022 21,200 12,460 3,115 36,775 Accumulated depreciation at 1 January 2022 9,735 4,363 701 14,799 Depreciation 1,414 569 823 2,806 Translation adjustments -43 -28 1 -70 11,106 4,904 1,525 17,535 Carrying amount at 31 December 2022 10,094 7,556 1,590 19,240 Accumulated depreciation at 31 December 2022 Property, plant and equipment is recognized at historical cost less depreciation. Depreciation is calculated using the straight-line method over their estimated useful lives as follows: Asset Period Building 25 years Equipment incl. development cost 5-8 years Mobile infrastructure incl. development cost 25 years Permanent systems incl. development cost 10 years RoU assets 5-8 years ANNUAL REPORT 2022 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR ’ S REPORT Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 41 Note 12 Intangible assets Amounts in CAD 1000 Technologies IP and licenses Development Total Year ended 31 December 2021 Cost at 1 January 2021 10,767 4,393 1,837 16,997 Additions, net of tax credits - 327 455 782 Grants - -31 -24 -55 Cost at 31 December 2021 10,767 4,689 2,268 17,724 Accumulated amortization at 1 January 2021 5,384 2,099 83 7,566 Amortization 718 149 74 941 Disposal - - - - Accumulated amortzation and impairment at 31 December 2021 6,102 2,248 157 8,507 Carrying amount at 31 December 2021 4,666 2,441 2,111 9,217 Amounts in CAD 1000 Technologies IP and licenses Development Total Year ended 31 December 2022 Cost at 1 January 2022 10,767 4,689 2,268 17,724 Additions, net of tax credits - 311 221 532 Grants - -22 -23 -45 Cost at 31 December 2022 10,767 4,978 2,466 18,211 Accumulated amortization at 1 January 2022 6,102 2,248 157 8,507 Amortization 718 259 190 1,167 Disposal - - - - Accumulated amortzation and impairment at 31 December 2022 6,820 2,507 347 9,674 Carrying amount at 31 December 2022 3,948 2,471 2,119 8,537 Estimated useful lives 15 years 15 years 10 years Intangible assets are recognized at historical cost less amortization. Amortization is calculated using straight- line method to allocate the cost over their estimated useful lives. Intangible assets with definite useful life consists of acquired technology, internally generated intangible assets arising from development costs as well licenses for software. Useful life varies between four and ten years. If there are indications of impairment for the intangible assets with defined useful life, an impairment test is performed. For 2022, there are no such indications. Development cost is recognized as an asset when it is identifiable and the company has the power to obtain the future economic benefits following from the underlying resource and to restrict the access of others to those benefits. Note 13 Non-current receivables Notes to the Consolidated Financial Statements (continued) Amounts in CAD 1000 2022 2021 Loan to employees 933 1,331 R&D Tax Credit Receivable 4,406 4,267 Total non-current receivables 5,339 5,598 ANNUAL REPORT 2022 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR ’ S REPORT Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 42 Note 14 Leases This note provides information for leases where the group is a lessee. Amounts recognised in the balance sheet The balance sheet shows the following amounts relating to leases: Amounts in CAD 1000 2022 2021 Total right-of-use assets 1,590 431 Current lease liabilities 459 235 Non-current lease liabilities 1,161 227 Total lease liabilities 1620 462 Amounts recognised in the statement of income The statement of income shows the following amounts relating to leases: Amounts in CAD 1000 2022 2021 Total depreciation charge right-of-use assets 823 226 Interest expense 77 29 The group has no variable rate leases. Expenses in the statement of income related low value leases are im- material to these financial statements. Note 15 Trade payables and other current liabilities Trade payables are unsecured and are usually paid within 30 days of recognition. The carrying amounts of trade and other payables are considered to be the same as their fair values, due to their short-term nature. Specification of other current liabilities The accrued expenses include restructuring fees for an amount of CAD 150 thousand. Notes to the Consolidated Financial Statements (continued) Amounts in CAD 1000 2022 2021 Trade payables 7,852 4,772 Other current liabilities 2,059 1,744 Total 9,911 6,516 Amounts in CAD 1000 2022 2021 Accrued expenses and other current liabilities 2,059 1,744 Total 2,059 1,744 ANNUAL REPORT 2022 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR ’ S REPORT Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 43 Note 16 Financial risk and financial instruments This note explains the group ’ s exposure to financial risks and how these risks could affect the group ’ s future financial performance. Current year profit and loss information has been included where relevant to add fur- ther context. Tekna operates on an international level, and produces spherical powders and nano powders, and delivers plasma systems for powder production of advanced materials. The Group's metal powders and plasma sys- tems are produced for and delivered to a number of industrial sectors, such as aviation, aerospace, medical, mining and drilling, energy storage and microelectronics, and are delivered to its customers worldwide. The Group is headquartered in Canada and operates manufacturing centres in Canada and France, as well as sales and distribution offices in China and South Korea. COVID-19 Signs are positive that the COVID19 pandemic is coming to an end. However, should the situation persist, absenteeism and quarantines could continue to affect Tekna ’ s own day-to-day operations as well as its sup- ply chain performance. The opportunities to market its systems depend highly on tradeshows, which have frequently been cancelled due to the pandemic. Climate risk The most material climate risks in the short and medium term are physical risks in the supply chain and in Tekna ’ s own operations. There is a risk of extreme weather events impacting Chinese suppliers and their abil- ity to supply Tekna with titanium and nickel. Also, higher temperatures put the health and safety of workers in China at risk. Physical climate risks might also impact goods transportation. In the medium and long term, physical risks might impact where the company considers establishing new production locations. Market risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk. Currency risk Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Currency risk arises when financial assets or financial liabilities are de- nominated in a currency other than the Company's functional currency. The foreign exchange rate risk for the Group relates to the fact that the Group's business transactions, operations and sales are made in several currencies, including Canadian dollar (CAD), U.S dollar, euro, Chinese Yuan, Indian rupee, South Korean won. Unfavourable fluctuations in exchange rates could have an adverse effect on the Group's business, financial positions and profits. Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate be- cause of changes in market interest rates. The Company is exposed to interest rate risk on its fixed and float- ing interest rate financial instruments. Fixed interest rate instruments subject the Company to fair value risk, while floating rate instruments subject it to cash flow risk. As at December 31, 2022, the Company's exposure to interest rate risk is as follows: Cash: Floating rate Accounts receivable: Non-interest bearing Bank loan: Floating rate Accounts payable and accrued liabilities: Non-interest bearing Obligations under capital leases: fixed rate of 3,31% Long-term debt: Floating rate on loans totalling CAD 1,1m and non-interest bearing on other loans Price risk The Group's business is subject to price risk. There is no guarantee that the Group will be able to obtain the expected prices for its metal powders and plasma systems, and any change in the market conditions, includ- ing in the global technology and powder markets or in a specific regional and/or end markets in which the Group operates, could lead to lower sales prices or volumes of the Group's products and systems. If expected prices for products and systems are not obtained or the Group experiences lower sales volumes, this may adversely impact the Group's business, financial position and profits. Notes to the Consolidated Financial Statements (continued) ANNUAL REPORT 2022 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR ’ S REPORT Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 44 Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with its finan- cial liabilities. The Company is exposed to liquidity risk mainly in respect of its accounts payable and accrued liabilities, and long-term debt. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the avail- ability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. The group maintains flexibility in funding by maintaining availability under committed credit lines. Management monitors rolling forecasts of the group ’ s liquidity reserve (comprising the undrawn borrowing facilities) and cash and cash equivalents on the basis of expected cash flows. The committed credit facilities may be drawn at any time, subject to a limit of USD $0,75 million and CAD $4 million and may be terminated by the bank without notice. The group ’ s main interest rate risk arises from the bank credit facilities, which expose the group to cash flow interest rate risk. At year end all bank credit facilities are using base rate +2% as fixed rate. The amounts are carried at amortised cost. Credit Risk Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. Financial instruments which potentially subject the Company to credit risk consist principally of cash and accounts receivable. The Company's cash is maintained at major financial insti- tutions; therefore, the Company considers the risk of non-performance of this instrument to be remote. In addition, the Company has provided for this risk through the allowance it has taken on its accounts receiva- ble. No trade receivables mature beyond one year. To mitigate the credit risk on trade receivables, the group is following up credit risk on a regular basis and require down payments and letters of credit to cover the value of the systems contracts signed with its customers. Historically, the group has not experienced signifi- cant adverse impacts in relation to trade receivable collection. Financial assets are written off when there is no reasonable expectation of recovery, such as a debtor failing to engage in a repayment plan with the company. Where loans or receivables have been written off, the company continues to engage in enforcement activity to attempt to recover the receivable due. Where recoveries are made, these are recognised in profit or loss. Trade receivables 2022 Amounts in CAD 1000 Lease liabilities 1,620 1,838 337 320 526 655 - Trade and other payables 7,852 7,852 7,852 - - - - Bank loan 1,197 1,197 1,197 - - - - Borrowings 4,651 8,050 462 461 790 2,607 3,730 2021 Amounts in CAD 1000 Lease liabilities 462 489 126 126 142 94 - Trade and other payables 4,772 4,772 4,772 - - - - Bank loan 3,733 3,733 - 3,733 - - - Borrowings 3,978 7,139 154 263 728 2,083 3,911 2 to 5 years 1 to 2 years 6 months or less Carrying amount Contractual cash flows 6 months or less Over 5 years Carrying amount Contractual cash flows Over 5 years 6 to 12 months 6 to 12 months 1 to 2 years 2 to 5 yea r s External customer rec not due External customer rec 1- 30 days past due External customer rec 31-60 days past due External customer rec 61-90 days past due External customer rec > 90 days past due Trade accounts receivable Amounts in CAD 1000 2022 Outstanding trade receivables 2,276 1,218 833 463 885 5,676 Provision for losses - - - - -42 -42 2021 Outstanding trade receivables 1,653 888 709 -103 578 3,727 Provision for losses - - - - -26 -26 Provisions for losses are based on individual assessment of each item and customer. Expected loss in catego- ries without any provisions made is based on the assumption that there are not risk of any material losses. Notes to the Consolidated Financial Statements (- Note 16 continued) ANNUAL REPORT 2022 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR ’ S REPORT Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 45 Note 17 Borrowings This note provides information on the contractual terms of the Group ’ s interest-bearing loans and borrow- ings. For more information on the Group ’ s interest rate risk and foreign exchange risk see Note 16. Tekna Holding ASA has complied with the financial covenants of its borrowing facilities at year end 2022. The credit limit on the bank credit facilities is CAD 4 million and USD 0.75 million. The table below reconciles the movement in financial liabilities to cash flow from financing activities. Amounts in CAD 1000 2022 2021 2022 2021 2022 2021 2022 2021 Balance at 1 January 3,978 24,250 462 688 3,733 633 8,173 25,571 New loan 1,286 17,898 2,031 - - 3,100 3,317 20,998 Cash Flow - repayment -263 -37,535 -873 -226 -2,536 - -3,672 -37,761 Non cash changes FX variation loss (gain) - -515 - - - - - -515 Conversion to equity - - - - - - - - Amortization -640 -378 - - - - -640 -378 Debt accretion on long- term debt 290 258 - - - - 290 258 Total debt 4,651 3,978 1,620 462 1,197 3,733 7,468 8,173 Short-term portion -532 -200 -459 -235 -1,197 -3,733 -2,188 -4,168 Balance long-term portion at 31 December 4,119 3,778 1,161 227 - - 5,280 4,005 Total financial liabilities Borrowings Bank Loan (ST) Lease liabilities Amounts in CAD 1000 2022 2021 Loans secured by pledged assets Building and land 1,144 1,213 Machinery and equipment - - 1,218 682 Total non-current borrowings secured by pledged assets 2,362 1,895 Universality of movable and immovable property, tangible and intangible, current and future Notes to the Consolidated Financial Statements (continued) ANNUAL REPORT 2022 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR ’ S REPORT Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 46 Note 18 Finance items Amounts in CAD 1000 2022 2021 Interest income 20 - Currency exchange income 124 400 Total Finance income 144 400 IFRS 16 interest 77 29 Interest expense 255 627 Total finance cost 332 656 Net finance items -188 -256 Note 19 Share information Amounts in CAD 1000 2022 2021 Ordinary shares 125,227 125,227 Share capital 37,277 37,277 Share premium 451,473 451,473 At 31 December 2022 there were 125.227.346 ordinary shares each with a par value of NOK 2,00. They entitle the holder to participate in dividends, and to share in the proceeds of winding up the company in proportion to the number of and amounts paid on the shares held. There were no paid out dividends in 2022. Number of shares % of total Country Arendals Fossekompani ASA 89,046,452 71.11% NOR Ulfoss Invest AS 2,941,975 2.35% NOR Havfonn AS 2,913,580 2.33% NOR Must Invest AS 2,821,245 2.25% NOR Kvantia AS 2,354,862 1.88% NOR Skandinaviska Enskilda Banken AB 2,154,711 1.72% LUX Victoria India Fund AS 1,331,883 1.06% NOR Other 21,662,638 17.30% Various Total number of shares 125,227,346 100.00% Major shareholders at year-end 2022 Note 20 Earnings per share Basic earnings per share are based on profit attributable to the equity holders of the parent and the weighted average number of outstanding ordinary shares. Amounts in CAD 1000 2022 2021 Net profit for the year -22,517 -14,087 Attributable to non-controlling interests -829 -486 Attributable to ordinary shares -21,688 -13,601 Weighted number of ordinary shares, basic and diluted 125,227,346 100,272,679 Number of shares end of period 125,227,346 125,227,346 Basic and diluted earnings per share -0.17 -0.14 Note 21 Investment in joint ventures The Imphytek Powders S.A.S. joint venture is owned in equal parts by the Group (TPE; Tekna Plasma Europe S.A.S.) and Aperam. The business is organized as a company with limited liability corresponding to Norwe- gian corporations. Guidelines for the operation of companies are based on the shareholders agreement. Ac- cording to the shareholder agreement it is required unanimity between the parties for making decisions about relevant activities. Accordingly, participants in the companies have joint control over the activities. The Group's responsibility as a participant in Imphytek Powder S.A.S. is limited to the capital contribution, and the return equals the Group's share of profit. Thus, the group as a participant is entitled to the arrangements net assets. The investments in joint ventures are accounted for according to the equity method. Notes to the Consolidated Financial Statements (continued) Entity Country Activities Ownership interest Imphytek Powders S.A.S. France Production of powders 50% ANNUAL REPORT 2022 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR ’ S REPORT Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 47 Based on an overall assessment where the size and complexity is taken into consideration Imphytek Powders S.A.S. is considered to be significant joint ventures. Further information regarding this company is disclosed below . The company has no observable market value in form of market price or similar. Description of the business Imphytek Powders S.A.S. has its headquarters and operations in Macon in France. The company is combining Aperam's expertise in Nickel & Specialty Alloys with Tekna's unique wire plasma atomization technology. The joint venture has the exclusive right to sell nickel alloy powder in Europe, and benefits from all market and product developments made by Tekna and Aperam in the past years. The company's main activities are the production of high-performance powder for advanced manufacturing technologies. The company is orga- nized as a company with limited liability similar to Norwegian private limited liability companies, and the company is not publicly traded. The company is strategically important company in the business segment Advanced Materials. Imphytek Powders S.A.S. has no contingent liabilities or capital commitments as of 31.12.2022. The partners have an agreement with Imphytek Powders S.A.S. that profits of the company will not be distributed until it has the consent of both partners. The partners have not given consent at the reporting date. The table on the right shows the condensed financial information of the joint venture, based on 100% owner- ship. Imphytek Powders S.A.S. The joint venture has the same reporting period as the Group. Amounts in CAD 1000 Imphytek Powders Book value 31.12.2020 1,407 1,407 Share of profit after tax 2021 -1,472 Investment during the period 1,442 FX variations -146 Book value 31.12.2021 1,231 1,231 Share of profit after tax 2022 -1,509 Investment during the period 680 FX variations 177 Book value 31.12.2022 579 Book value as at 01.01.2022 Book value as at 01.01.2021 Amounts in CAD 1000 2022 2021 Total revenue 1,447 884 Depreciations -174 -255 Interest income - - Interest expenses -41 -2 Tax expenses - - Profit -3,110 -3,258 Other income and expenses - - Comprehensive income - - The Groups share of comprehensive income 1 1 Current assets 4,228 4,304 whereof cash and cash equivalents 995 781 Non-current assets - - Current liabilities 2,966 264 Long-term liabilities 4,374 2,882 Equity -1,166 1,158 The values are tested annually for impairment. In this testing each segment/subgroup is assessed as a cash generating unit. The recoverable amount is estimated based on value in use. Estimated value in use is based on discounted future cash flows. This measures the cash flows based on market requirements of return and risk. Value in use for 2022 has been calculated in the same way as in 2021. Budgets have been used for 2023 and long-term budgets from strategy plans for the period up to 2027. A terminal value is applied based on a growth rate of 2%. A risk premium of 3% was used in the calculations. The Required Rate of Return (pre-tax WACC) for the investment in the joint venture has been set to 12.2%. The risk-free rate of return has been set to 3.1%. When calculating the WACC consideration is given to the fact that the company's earnings are mainly in EUR. A sensitivity analysis based on a unilateral change in esti- mated future EBITDA shows that a reduction of more than 20% may lead to impairment. Equivalently, a change in pre-tax WACC from 12.2% to 14.5% may cause impairment. The cash-generating unit in the impairment testing suggests excess value. Reasonable changes in the as- sumptions will not result in additional impairment losses. Notes to the Consolidated Financial Statements (- Note 21 continued) ANNUAL REPORT 2022 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR ’ S REPORT Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 48 Note 22 Subsidiaries Note 23 Related parties At year end Arendals Fossekompani ASA (AFK) owned 89,046,452 shares, representing 71,11 % of the total number of shares in Tekna. See table on the next page. The CEO ’ s period of notice is eight (8) weeks, with a period of pay of twelve (12) months after termination of employment if the CEO is dismissed by the company. The other members of the Group Executive have a period of notice varying from four (4) weeks to eight (8) weeks. The purpose of Tekna's compensation and benefits policy is to attract personnel with the competence that the Group requires, develop and retain employees with key expertise and promote a long-term perspective and continuous improvement supporting achievement of Tekna's business goals. The general approach adopted in Tekna's policy is to pay fixed salaries and pensions in line market prices, while offering variable pay linked to results for bonus. a) Fixed elements b) Variable elements – annual bonus Executives in Tekna participate in the Group ’ s central annual bonus program. The program has a maximum ceiling of 25% of the executive ’ s fixed salary and 35% for CEO. The basis for bonus payments is based on financial targets and performance strategic KPIs. In addition, the Group has share-based incentive programs described in (c) below. (c) Shared incentive program On February 18, 2021, the Board of Directors of the Company resolved to establish a share incentive program for key employees of the Company. The share incentive program is based on a structure in which certain members of the Company's Management and management of the Portfolio Companies are offered the op- portunity to subscribe for Shares in Tekna Holdings Canada Inc., and where the Company will provide partial financing of their subscription of Shares under the share incentive program. The total number of Shares in- cluded in the share incentive program of Tekna Holdings Canada Inc is 3 482 408. As part of the share incen- tive program, the key employees purchased Shares subject to a lock-up undertaking of 36 months following the date of the purchase of the Shares. The company has originally provided full loan financing of the pur- chase price of the Shares under the share incentive program, for a total of CAD $1,3 million. As of December 31, 2022, the loan financing balance is CAD $0,93 million. The share incentive program is based on a struc- ture in which certain members of the management within the Group were offered the opportunity to sub- scribe for Shares in Tekna Holdings Canada at fair value less a discount reflecting the lock-up period. The vested portion of the discount is reflected in as share-based compensation with an amount totalling CAD $ 63 K for the executive team for 2022 as disclosed above. Notes to the Consolidated Financial Statements (continued) Company Ownership held by the group Ownership held by the non- controlling interests Domicile Tekna Holdings Canada Inc. 96.54% 3.46% Canada Tekna Plasma Systems Inc. 96.54% 3.46% Canada Tekna Advanced Materials Inc. 96.54% 3.46% Canada Tekna Plasma Europe S.A.S. 96.54% 3.46% France Tekna Plasma Systems Suzhou Co Ltd. 96.54% 3.46% China Tekna Plasma India Pr Ltd. 96.54% 3.46% India Tekna Inc. 96.54% 3.46% USA Tekna Plasma Korea Co Ltd. 96.54% 3.46% South Korea ANNUAL REPORT 2022 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR ’ S REPORT Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 49 Board of Directors compensation 2022 and number of shares owned 31 December 2022 Name Title Board of Directors remunera- ted Remunera- tion provision Own Holdings Related Parties Number of shares in Tekna Holding ASA Dag Teigland 1,2 Chair - 21,000 - 52,000 52,000 Morten Henriksen 2 Member of Board - - 51,500 4,125 55,625 Torkil Sigurd Mogstad 2 Member of Board - - 48,000 4,125 52,125 Anne-Lise Meyer 3 Member of Board - 38,667 - - - Barbara Thierart Perrin 4 Member of Board - 43,500 - - - Total - 103,167 99,500 60,250 159,750 Name Title Fixed salary Paid bonus Pension Share-based compensa- tion Other benefits Number of shares in Tekna Holdings Canada Inc Loan from Tekna Plasma Systems Inc Luc Dionne CEO 335 45 3 21 36 588,576 169,859 Serge Blackburn CFO 246 26 10 7 8 196,192 56,620 Other executive management 901 77 42 35 33 980,960 338,873 1: Dag Teigland representing Tibidabo Industrier AS, elected from October 2022. The remuneration is subject to approval by the general assembly. 2: Representing Arendals Fossekompani ASA with 89 046 452 shares 3: Anne-Lise Meyer elected from May 2022 4: Barbara Thierart-Perrin elected from April 2022 Note 24 Contingent liabilities The Company's subsidiary and the operating company of the Group, Tekna Plasma Systems Inc., is currently involved in a dispute with AP&C Advanced Powders & Coatings Inc. regarding competing patent rights for the production of titanium powder in Canada, and more precisely to a specific patent which is part of the same patent type as one of the Group's significant patents. Proceedings were conducted and parties are waiting for the court decision. If the dispute is not resolved in favor of Tekna Plasma Systems Inc., the Group's production and sales of titanium powder in Canada may be restricted, which could have a negative effect on the Group's business operations. There are no provisions booked for future income or expenses regarding the legal dispute in the financial state- ments Note 25 Subsequent events Arendals Fossekompani ASA, Tekna ’ s majority shareholder, and Tekna Plasma Systems Inc have signed an agreement for a CAD 25 million loan facility. Notes to the Consolidated Financial Statements (- Note 23 continued) ANNUAL REPORT 2022 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR ’ S REPORT Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 50 Parent Financial Statements Income Statement Amounts in CAD 1000 Note 2022 2021 Employee benefit expenses 2 103 - Other operating expenses 3 1,536 961 Net operating income/(loss) -1,639 -961 Finance income 8 2,513 1,332 Finance costs 8 320,974 92 Profit/(loss) before income tax -320,100 279 Income tax expense - - Profit/(loss) for the period -320,100 279 Attributable to equity holders of the company -320,100 279 Attributable to non-controlling interests - - Amounts in CAD 1000 Note 2022 2021 Items that may be reclassified to statement of income Exchange differences on translation of foreign operations - - Items that may be reclassified to statement of income - - Items that will not be reclassified to statement of income Exchange differences on translation of foreign operations - - Items that will not be reclassified to statement of income - - Other comprehensive income/(loss) for the period, net of tax - - Total comprehensive income/(loss) for the period -320,100 279 Attributable to equity holders of the company -320,100 279 Attributable to non-controlling interests - - ANNUAL REPORT 2022 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR ’ S REPORT Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 51 Balance Sheet Parent Financial Statements (continued) Amounts in CAD 1000 Note 31.12.2022 31.12.2021 Non-current assets Investment in subsidiaries 5 97,500 418,468 Intercompany loans 7 67,535 37,251 Total non-current assets 165,035 455,719 Current assets Trade and other receivables 7 77 24 Cash and cash equivalents 6 3,975 33,351 Total current assets 4,052 33,373 Total assets 169,087 489,094 Amounts in CAD 1000 Note 31.12.2022 31.12.2021 Equity Share capital and share premium 494,956 494,956 Other reserves -326,028 -5,928 Capital and reserves attributable to holders of the company 168,928 489,028 Non-controlling interests - - Total equity 168,928 489,028 Trade and other payables 7 51 65 Other current liabilities 108 - Total current liabilities 159 65 Total liabilities and equity 169,087 489,094 Dag Teigland Chair of the Board Torkil Sigurd Mogstad Member of the Board Barbara Thierart-Perrin Member of the Board Anne Lise Meyer Member of the Board Luc Dionne CEO Arendal, 10 April .2023 The Board of Directors and CEO of Tekna Holding ASA This document was electronically signed. ANNUAL REPORT 2022 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR ’ S REPORT Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 52 Changes in Equity Parent Financial Statements (continued) Amounts in CAD 1000 Share capital and share premium Other reserves Total Non- controlling interests Total equity Balance at 1 January 2021 14 - 14 - 14 Profit/(loss) for the period - -5,927 -5,927 - -5,927 Other comprehensive income/(loss) - - - - - Issue of stock 494,942 - 494,942 - 494,942 Adjustment - -1 -1 - -1 Balance at 31 December 2021 494,956 -5,928 489,028 - 489,028 Balance at 1 January 2022 494,956 -5,928 489,028 - 489,028 Profit/(loss) for the period - -320,100 -320,100 - -320,100 Other comprehensive income/(loss) - - - - - Adjustment - - - - - Balance at 31 December 2022 494,956 -326,028 168,928 - 168,928 Attributable to equity holders of the Company ANNUAL REPORT 2022 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR ’ S REPORT Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 53 Cash flow Parent Financial Statements (continued) Amounts in CAD 1000 FY 2022 FY 2021 Cash flow from operating activities Net profit/(loss) -320,100 279 Impairment loss 320,968 - Capitalized interest on intercompany loans -2,284 -782 Total after adjustments to profit before income tax -1,416 -503 Change in trade and other receivables -53 -22 Change in trade and other payables 93 64 Total after adjustments to net assets -1,375 -461 Net cash from operating activities -1,375 -461 Cash flow from investing activities Cash Flow from Internal Loans and Borrowings -28,000 -36,517 Purchase of shares in subsidiaries - -22,954 Net cash flow from investing activities -28,000 -59,471 Cash flow from financing activities Proceeds from issue of shares - 93,225 Net cash flow from financing activities - 93,225 Net increase in cash and cash equivalents -29,375 33,293 Cash and cash equivalents at the beginning of the financial year 33,351 14 Effects of exchange rate changes on cash and cash equivalents - 44 Cash and cash equivalents at end of the period 3,975 33,351 ANNUAL REPORT 2022 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR ’ S REPORT Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 54 Notes to the Parent Financial Statements Accounting principles Note 1 The financial statements comprise the statement of income, statement of financial position, statement of cash flows, and related notes. The financial statements have been prepared in accordance with the Norwegian Accounting Act §3-9 and Regulations for simplified IFRS issued by the Ministry of Finance on 10 December 2019 (generally accepted accounting principles). This means that recognition and measurement comply with International Financial Reporting Standards (IFRS) and the presentation and disclosures are in accordance with the Norwegian Accounting Act and general accepted accounting practice. All amounts are in CAD, un- less otherwise stated. The financial statements give a true and fair view of the assets and liabilities, financial position, and income. When applying accounting principles and presenting transactions and other matters, emphasis is placed on economic realities, not just legal form. Contingent losses that are probable and quantifiable are expensed. Transactions are recorded at the value of the consideration at the time of execution. Revenue is recognized in the accounting period in which they are earned and associated costs are matched with revenues. Assets and liabilities that are due within one year after the balance sheet date are classified as current assets or current liabilities. Current assets and liabilities are valued at the lowest or highest value of acquisition cost and fair value. Fair value is defined as the estimated future sales price less expected sales costs. Other assets are classified as fixed assets. Corresponding principles are normally used as a basis for liability items. Use of estimates In the preparation of the annual accounts, estimates and assumptions have been applied that have affected the statement of income and the valuation of assets and liabilities, as well as doubtful assets and liabilities on the balance sheet date in accordance with generally accepted accounting principles. Areas that to a large extent contain such discretionary assessments, a high degree of complexity, or areas where assumptions and estimates are material to the financial statements, are described in the notes. Foreign currency Foreign currency transactions are translated at the exchange rate at the time of execution. Cash items in for- eign currency are translated into Norwegian kroner using the exchange rate on the balance sheet date. Non- cash items measured at the historical exchange rate expressed in foreign currency are translated into Norwe- gian kroner using the exchange rate at the time of execution. Non-monetary items that are measured at fair value expressed in foreign currency are translated at the exchange rate determined at the measurement date. Exchange rate fluctuations are recognized in the statement of income on an ongoing basis during the accounting period under other financial income/costs. Tax Income tax expense represents the sum of the tax currently payable and deferred tax. Deferred tax is calcu- lated at 22% percent on the basis of existing temporary differences between accounting and tax values to- gether with tax loss carry forward at the year end. Tax-increasing and tax-reducing temporary differences that are reversed or can be reversed in the same period are offset and netted. Net deferred tax assets are recognized in the balance sheet to the extent that it is probable that this can be utilized. Non-current financial assets Fixed assets include assets intended for permanent ownership and use. Long-term receivables are carried at the nominal amount at the time of the transaction. Long-term receivables in foreign currency are carried in the balance sheet based on the exchange rate on the balance sheet date. Current assets Current assets and current liabilities normally include items that due within one year after the balance sheet date, as well as items related to the product cycle. Current assets are valued at the lower of acquisition cost and fair value. Current liabilities are carried at the nominal amount at the time of the transaction. Subsidiaries Investment in subsidiaries are evaluated at lower of cost or fair value. Any impairment losses and reversal of impairment losses are classified as net gains (loss and impairment) on financial assets in the income state- ment. An impairment to fair value has been recognized when impairment is due to reasons that cannot be expected to be temporary, and it is necessary in accordance with generally accepted accounting principles. Impairment losses are reversed when the basis for impairment is no longer present. ANNUAL REPORT 2022 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR ’ S REPORT Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 55 Notes to Parent Financial Statements (- Note 1 continued) Receivables Trade receivables and other receivables are carried at face value after deduction of provisions for expected credit losses. Provisions for credit losses are made on the basis of a separate assessment of the individual receivables. For other accounts receivable, an unspecified provision is made to cover expected losses. Statement of cash flows The cash flow statement has been prepared according to the indirect method. Cash and cash equivalents include cash, bank deposits and other short-term, liquid investments. Note 2 Remuneration and employee benefits The company has no employees. The company is not required to have an occupational pension scheme in accordance with Norwegian law on obligatory occupational pension (“ lov om obligatorisk tjenestepensjon ”). Note 3 Other operating expenses Amounts in CAD 1000 2022 2021 Salaries 103 - Social security contributions - - Pension costs - - Other benefits - - Capitalized as development, inventories etc. - - Total employee benefit expenses 103 - Amounts in CAD 1000 2022 2021 Audit and other fees 1,432 473 Marketing, travel and representation costs 11 - ICT expenses - 13 Other expenses 4 289 Intercompany expenses 88 185 Total operating expenses 1,536 961 Amounts in CAD 1000 2022 2021 Statutory audit 133 32 Other assurance services 209 76 Tax advisory - - Other non-audit services 10 - Total remuneration to auditor 352 108 ANNUAL REPORT 2022 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR ’ S REPORT Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 56 Notes to Parent Financial Statements (continued) Note 4 Tax Income tax - current year The tax effect of temporary differences and loss carry forwards that have given rise to deferred tax and deferred tax asset, specified by type of temporary differences. Deferred tax asset is not carried in the balance sheet. Statutory tax rate in Norway was 22.00% in 2021 and 2022. The 22% tax rate was used to calculate Deferred tax assets and liabilities as at 31 December 2022. Note 5 Investments in Subsidiaries Consolidated accounts for Tekna Holdings Canada Inc for 2022 reported a net loss of CAD 23 459 999 and booked equity of CAD -18 015 871. Tekna Holdings Canada Inc owns 100 % of the following 7 subsidiaries: • Tekna Plasma Systems Inc; Canada • Tekna Advanced Materials Inc; Canada • Tekna Plasma Europe S.A.S; France • Tekna Plasma Systems Suzhou Co Ltd; China • Tekna Plasma India Pr Ltd; India • Tekna Inc; USA • Tekna Plasma Korea Co Ltd; South Korea CEO Luc Dionne and other management of Tekna Holdings Canada Inc. own the remaining 3.46% of the shares in Tekna Holdings Canada Inc. Amounts in CAD 1000 2022 2021 Income tax expense: Tax Payable - - Change in deferred tax asset - - Income tax expense - - Taxable income: Ordinary profit before tax -320,100 263 Unrecognized tax loss carried forward -868 4,552 Permanent differences 320,968 -4,815 Taxable income - - Taxable payable: Income tax expense - - Taxable Income - - Calculation of effective tax rate Ordinary profit before tax -320,100 263 Tax at the applicable tax rate -70,422 58 Unrecognized tax loss carried forward -191 1,002 Tax effect of permanent differences 70,613 -1,059 Taxable income - - Effective tax rate 0.00% 0.00% Amounts in CAD 1000 2022 2021 Accumulated loss carryforward -5,421 -4,553 Not included in basis for calculation of deferred tax 5,421 4,553 Deferred tax asset (22%) - - Company Domicile 2022 2021 2022 2021 2022 2021 Tekna Holding Canada Inc. Canada 96.54% 96.43% 3.46% 3.57% 97,500,000 418,468,248 Ownership held by the non-controlling interests Ownership held by the group Value in Tekna Holding ASA balance sheet ANNUAL REPORT 2022 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR ’ S REPORT Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 57 Notes to Parent Financial Statements (continued) Note 6 Cash and cash equivalents Tax deduction deposits (restricted deposits) amounts to 0 CAD. Unused credit facilities as of 31 December 2022 was 2 802 809 CAD and 750 000 USD. Tekna Holding ASA are compliant with the financial covenant requirements in the loan facilities at the end of 2022. Note 7 Intercompany balances Loans to group companies consists of one loan in CAD and one loan in EUR. The CAD 59 881 537 loan is to the subsidiary Tekna Holdings Canada Inc. The loan will be repaid with CAD 500,000 every quarter from 15 June 2024. Interest on the loan is calculated at a rate corresponding to the Canadian 3 month Interbank rate (CDOR) + 2% on an annual basis. The EUR 5,300,000 loan is to the subsidiary Tekna Plasma Europe S.A.S. The loan will be repaid with EUR 300,000 every quarter from 15 June 2024. Interest on the loan is calculated with EURIBOR 3 months + 2% on an annual basis. Note 8 Financial items An impairment loss of CAD 320 968 thousand was recorded in 2022 The investment in the subsidiary Tekna Holdings Canada Inc was impaired to the market value of Tekna Holding ASA, as quoted on the Oslo Stock Exchange as of Dec 31st 2022, to CAD 97.5 million. The stock had limited trading volume before this date. Note 9 Financial risk The company's operations consist of financing the operations of the subsidiaries. The company is exposed to various types of financial risk: market risk (including currency, interest rate and market price risk), credit risk and liquidity risk. The company is somewhat sensitive to currency exchange rate fluctuations, limited cash flows, relatively low interest rate exposure. Interest rate risk The company has loans to group companies with interest rate returns based on the 3 month EURIBOR and CDOR; see note 7. Returns from interest rates on bank deposits are also exposed to rate levels. The funds are deposited at a floating interest rate. Amounts in CAD 1000 2022 2021 Total cash at bank 3,975 33,351 Restricted cash - - Amounts in CAD 1000 2022 2021 Intercompany loans to group companies 67,535 37,251 Trade accounts receivables from group companies 77 24 Total intercompany receivables 67,611 37,275 Amounts in CAD 1000 2022 2021 Trade accounts payables to group companies 4 1 Total intercompany payables 4 1 Amounts in CAD 1000 2022 2021 Interest income 20 - Currency exchange income (net) 50 782 Interest Income, IC 2,443 550 Total financial income 2,513 1,332 Amounts in CAD 1000 2022 2021 Interest expense 5 16 Other finance cost 1 - Interest expense, IC - 76 Impairment loss 320,968 - Total financial expense 320,974 92 ANNUAL REPORT 2022 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR ’ S REPORT Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 58 Notes to Parent Financial Statements (- note 9 continued) Credit risk The company is only exposed to credit risk on receivables from subsidiaries. The risk that counterparties do not have the financial ability to meet their obligations is considered moderate. Currency risk The company ’ s currency exposure is related to CAD and EUR receivables from subsidiaries, as well as EUR bank deposits. Market price risk The company ’ s is mainly invested in subsidiaries and associated companies. The value of these investments is to a high degree connected to the underlying operations of these companies. Liquidity risk The company is financed through a combination of bank and equity financing. See note 6 for more infor- mation on unused credit facilities. Note 10 Share Capital and Shareholder Information At 31 December 2022 there were 125.227.346 ordinary shares each with a par value of NOK 2,00. They entitle the holder to participate in dividends, and to share in the proceeds of winding up the company in proportion to the number of and amounts paid on the shares held. There were no paid out dividends in 2022. At year end Arendals Fossekompani ASA (AFK) owned 89,046,452 shares, representing 71,11 % of the total number of shares in Tekna. The CEO does not own shares in the company per 31 December 2022. 11 Subsequent Events Arendals Fossekompani ASA, Tekna ’ s majority shareholder, and Tekna Plasma Systems Inc, a Tekna group subsidiary, have signed an agreement for a CAD 25 million loan facility. Amounts in CAD 1000 2022 2021 Ordinary shares 125,227 125,227 Share capital 37,277 37,277 Share premium 451,473 451,473 Number of shares % of total Country Arendals Fossekompani ASA 89,046,452 71.11% NOR Ulfoss Invest AS 2,941,975 2.35% NOR Havfonn AS 2,913,580 2.33% NOR Must Invest AS 2,821,245 2.25% NOR Kvantia AS 2,354,862 1.88% NOR Skandinaviska Enskilda Banken AB 2,154,711 1.72% LUX Victoria India Fund AS 1,331,883 1.06% NOR Other 21,662,638 17.30% Various Total number of shares 125,227,346 100.00% Major shareholders at year-end 2022 Board of Directors compensation 2022 and number of shares owned 31 December 2022 Name Title Board of Directors remunera- ted Remunera- tion provision Own Holdings Related Parties Number of shares in Tekna Holding ASA Dag Teigland 1,2 Chair - 21,000 - 52,000 52,000 Morten Henriksen 2 Member of Board - - 51,500 4,125 55,625 Torkil Sigurd Mogstad 2 Member of Board - - 48,000 4,125 52,125 Anne-Lise Meyer 3 Member of Board - 38,667 - - - Barbara Thierart Perrin 4 Member of Board - 43,500 - - - Total - 103,167 99,500 60,250 159,750 ANNUAL REPORT 2022 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR ’ S REPORT Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 59 Independent auditor ’ s report ANNUAL REPORT 2022 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR ’ S REPORT Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 60 Independent auditor ’ s report (continued) ANNUAL REPORT 2022 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR ’ S REPORT Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 61 Independent auditor ’ s report (continued) CORPORATE GOVERNANCE REPORT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 62 1. Implementation and reporting on corporate governance ............................. 63 2. The business .......................... 63 3. Equity and dividends ........... 64 4. Equal treatment of share- holders and transactions with close associates .......... 64 5. Shares and negotiability ..... 64 6. General meetings ................. 64 7. The nomination committee .............................. 65 8. Board of Directors: composition and independence .............. 65 9. Work of the Board of Directors ................................. 66 10. Risk Management and Internal Control .................... 66 11. Board remuneration ............ 67 12. Remuneration for executive personnel ............................... 67 13. Information and communication ..................... 67 14. Take-over situations ............ 67 15. Auditor .................................... 68 | 62 Corporate Governance Report Corporate Governance Report CORPORATE GOVERNANCE REPORT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 63 Corporate Governance report Code of Conduct for suppliers and for employees In 2021 Tekna has developed the supplier code of conduct (“ sCoC ”) and the employee code of conduct (“ eCoC ”). The sCoC, signed off by the CEO in August 2021, gives clear guidance to our employees and business partners that we expect clean, transparent and fair business dealings. The employee code of conduct was signed off at the most senior level by the Board of Directors of Tekna on February 8, 2022 as part of the corporate code of governance. Both documents can be found here: www.tekna.com/investors. Deviations from the Code of Practice: None 2. The business The Company business is to conduct business development, including investments, and to be co-owner of other companies. The Company is the owner of the Tekna Group. The Tekna Group ’ s core business is to produce high-purity metal powders for applications such as 3D printing in the aerospace, medical and automotive sectors, as well as optimized induction plasma systems for industrial research and pro- duction. The Board has prepared clear goals, strategies, and a risk profile for the Company. The Company has guidelines for how it integrates the interests of the society at large into its value creation for shareholders in a sustainable manner. The ESG – Environmental, Social, Govern- ance - report is included in the annual report and is available on the Company ’ s website. The Board evaluates targets, strategies and a risk profile on an annual basis, at a minimum. Deviations from the Code of Practice: None Tekna aims to maintain high standards for corpo- rate governance. In the Company ’ s opinion, good corporate governance is an important condition for value creation. Tekna Holding ASA ’ s (the “ Company ”) corporate governance defines the business framework within which all activities in the Company should operate and clarifies the roles and responsibilities between governing bodies in the Company. The Company is subject to corporate governance reporting require- ments as defined in the Norwegian Accounting Act, section 3-3b and the Norwegian Code of Practice for Corporate Governance (the “ Code ”) available at www.nues.no. The Board of Directors ’ Statement of Corporate Governance follows the structure of the Code. This report provides an overview of how Tekna follows the 15 points set out in the Code and the deviations from the Code in Tekna ’ s op- erations. This report should be viewed in conjunction with all the measures relating to corporate governance detailed in the Compa- ny ’ s annual report 2022. 1. Implementation and reporting on corporate governance Our governance structure The Board has the overall responsibility for ensuring that the Compa- ny has a high standard of corporate governance. The Board has adopted a corporate governance policy document (the “ Policy ”). This Policy describes the Company ’ s main principles for corporate govern- ance and addresses the framework of guidelines and principles regu- lating the interaction between the Company ’ s shareholders, the Board of Directors, the Chief Executive Officer (the “ CEO ”) and the Tekna Group senior management (the “ Executive Leadership Team ”). The Company is a holding company, and the operations of the Tekna group of Companies are carried out through the operating subsidiar- ies of the Company (the “ Tekna Group ”). The Policy is based on the Code, the Company ’ s goal is to act in accordance with every recom- mendation in the Code. The Board and Executive Leadership Team perform an annual assess- ment of its principles for corporate governance. The Board members and the Executive Leadership Team are request- ed once a year to complete a Directors and Officers compliance questionnaire, disclosing any conflicts of interest. 1: Responsibility for Governance, including risk management is as- signed to the CFO 2: Responsibility for ESG reporting lies with the VP Corporate Strate- gic Development and Innovation CORPORATE GOVERNANCE REPORT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 64 Corporate Governance report (continued) 5. Shares and negotiability The Shares in Company are listed on the Oslo Stock Exchange and are freely negotiable. There are no provisions in the Company ’ s Articles of Association that limit the right to own, trade or vote for shares in the Company. Deviations from the Code of Practice: None 6. General meetings Through the General Meeting, the shareholders exercise the highest authority in the Company. All shareholders have a right to attend, make a statement and vote at the General Meeting as long as they are recorded in the Company ’ s share register no later than two busi- ness days before the date of the general meeting. The General Meet- ing deals with such matters as required by Norwegian law. The notice of the meeting, the agenda and detailed and comprehen- sive supporting information, are made available on Tekna ’ s website at least 21 days before a general meeting takes place. At the same time the notice and agenda are distributed to all shareholders. The Annual General Meeting for 2023 takes place on 3 May 2023. Shareholders who cannot attend the meeting in person can vote by proxy and voting instructions can be given on each item on the agen- da. In addition, shareholders may vote in advance, either in writing or by electronic means. The General Meetings are opened by the Chair of the Board. Normal- ly, the Board proposes that the Chair of the Board shall also Chair the General Meetings. The Board will propose an independent Chair for 3. Equity and dividends Equity Total equity for the group at 31 December 2022 was CAD 53.4 mil- lion, corresponding to a long-term debt/equity ratio of 0.10. Consid- ering the nature and scope of Tekna ’ s business, the Board considers that the Company has adequate equity and capital structure. The Board constantly assesses the company ’ s financial capacity in light of its objectives, strategy and risk profile. Dividend policy The Company strives to follow a dividend policy favourable to its shareholders. The amount of any dividend to be distributed will be dependent on, inter alia, the Company's investment requirements and rate of growth. In deciding whether to propose a dividend and in determining the dividend amount, the Board takes into account legal restrictions as well as capital expenditure plans, financing require- ments and maintaining the appropriate strategic flexibility. The Company has not distributed any dividends since the date of its incorporation. Capital increase and Repurchase of shares Existing mandates granted to the Board, to issue shares and to pur- chase its own shares, are presented in the shareholder information section of the annual report. The mandates are restricted to defined purposes and limited in time to no later than the date of the next Annual General Meeting, but in no event later than 30 June 2023. Deviations from the Code of Practice: None 4. Equal treatment of shareholders and transactions with close associates Equal treatment of shareholders There is only one class of shares, and all shares have equal voting rights. At 31 December 2022 there were 125,227,346 ordinary shares each with a par value of NOK 2.00. They entitle the holder to partici- pate in dividends, and to share in the proceeds of winding up the Company in proportion to the number of and amounts paid on the shares held. The articles of association place no restriction on voting rights. Shareholders do not have pre-emption rights upon any change of ownership of shares in the company. Largest shareholder Arendals Fossekompani ASA (“ AFK ”) is the Company ’ s largest share- holder, owning 71.1% of the Company ’ s shares at 31 December 2022. The Company ’ s guidelines require that AFK acts in a manner conduc- tive to equal treatment of Company ’ s shareholders. Transaction with close associates All transactions with close associates are disclosed in the notes to the annual accounts. All business activities are based on arm ’ s length terms. In the event of transactions with insiders or close associates, procedures apply to ensure the respect of the Norwegian Public Limited Liability Companies Act. Deviations from the Code of Practice: None CORPORATE GOVERNANCE REPORT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 65 Corporate Governance report (continued) Board of Directors consisted of four members, 2 women and 2 men: • Dag Teigland, Chair of the Board elected on October 3, 2022 • Torkil Sigurd Mogstad, elected until the Annual General Meeting of 2023 • Barbara Thierart-Perrin, elected on April 1, 2022. • Anne Lise Meyer, elected on May 30, 2022 See presentation of Board members in the annual report for details. The Chair of the Board at the beginning of 2022, Morten Henriksen has been replaced on October 3, 2022 by Dag Teigland. Morten Henriksen stayed on the Board as a Director until his resignation on January 17, 2023. Independence of the Board of Directors The composition of the Board ensures that it can operate independently of any special interest. Torkil Mogstad is not considered to be independent of the main shareholders due to his position as Executive Vice Presidents in Arendals Fossekompani ASA. Dag Teigland was engaged by Arendals Fossekompani ASA as a senior business advisor with a special focus on the Company and, as such, is not to be considered as an inde- pendent Chair of the Board. Barbara Thierart-Perrin and Anne Lise Meyer are independent from the Company main shareholder. The Board members are requested once a year to complete a Directors and Officers compliance questionnaire, disclosing any conflicts of interest. the General Meeting if any of the matters to be considered calls for such arrangement. The notices and minutes of the General Meetings are published in Oslo Børs ’ information system (https://newsweb.oslobors.no, ticker: TEKNA) and on Tekna ’ s website (www.tekna.com/investors). Deviations from the Code of Practice: two deviations from this sec- tion: 1) ” the members of the Board of Directors and the Chair of the nomi- nation committee attend the general meeting ”: The Company does not have a Nomination Committee. All members of Board of Direc- tors have normally not participated in the general meeting. Matters under consideration at the general meeting of shareholders have not previously required this. The Chair of the Board of Directors is always on hand to present the report and answer any questions. Other board members participate as needed. The Board considers this to be adequate. 2) “ the general meeting is able to elect an independent Chair for the general meeting ”: The General Meetings are opened by the Chair of the Board. Normally, the Board proposes that the Chair of the Board shall also Chair the General Meetings. The Board will propose an in- dependent Chair for the General Meeting if any of the matters to be considered calls for such arrangement. 7. The nomination committee The Company has not established a nomination committee. At the listing of the company in March 2021 the Board of Directors of the Company consisted of three male executives from its majority shareholder. The Board hired then an independent board selection agency for the selection of new Board members. Changes have now taken place to improve the Board composition in terms of competen- cies relevant to the Company, independence, and diversity and to comply with the exigence of the Code. Two independent female Board members have joined the Board bringing considerable market know-how for the company ’ s future endeavours, and a new Chair, which is not an employee of the majority shareholder, has been elect- ed. The remuneration of the members of the Board has been voted by the General Meeting. Deviations from the Code of Practice: The Company has not estab- lished a nomination committee. The function and responsibilities of a nomination committee are considered by the Company to have been sufficiently handled by the Board of Directors with the help of an in- dependent selection agency. 8. Board of directors: composition and independence Composition and election In 2022, three new Board members joined the Board, and one of them has been elected as the new Chair. The Board members have been chosen with the interest of the shareholders in mind and for the capacity, expertise and diversity needed by the Company. The Board acts as a collegial body, independently of special interests. Board members are elected for a period of up to two years. The Board members and Chair are elected by the general meeting. There is no corporate assembly in Tekna. According to the articles of association, the Board shall consist of minimum three and maximum nine members. On 31 March 2023, the CORPORATE GOVERNANCE REPORT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 66 Corporate Governance report (continued) Committee have collectively the expertise required for the perfor- mance of the tasks assigned to the Audit Committee. Deviations from the Code of Practice: two deviations from this section: ” The majority of the members of the Audit Committee should be independent. ”: The Audit Committee has two members, one is inde- pendent, the other is not. The Board considers this to be adequate. ” The Board evaluates its performance once a year. ”: The Board has not evaluated its performance in 2022 since three of the Board mem- bers are new, and the Board consider that a full year of Board activity is needed before it is meaningful to proceed with an evaluation. 10. Risk Management and Internal Control The Board ensures that Tekna has sound internal control and systems for risk management that are appropriate in relation to the extent and nature of the company ’ s activities. The internal control and the sys- tems also encompass the Company ’ s corporate values and ethical guidelines. The objective of the risk management and internal control is to man- age exposure to risks to ensure successful conduct of the Company ’ s business and to support the quality of its financial reporting. The Board carries out an annual review of the Company ’ s most important areas of exposure to risk and the Board and the Executive Leadership Team conduct risk assessments related to various dimen- sions and aspects of operations to verify that adequate risk manage- ment systems are in place. Board members ’ shareholdings Board members are encouraged to own shares of the Company. Board members ’ shareholdings in the Company are disclosed in Note 23 Related Parties of Tekna ’ s consolidated financial statements. Deviation from the Code of Practice: ” The majority of the sharehold- er-elected members of the Board of Directors should be independent of the company ’ s executive personnel and material business con- tacts. ”: The Company has four Board members, half of which are in- dependent and the other half is not. The Company considers this to be adequate. 9. Work of the Board of Directors Duties of the Board of Directors The Board of Directors has adopted Rules of Procedures for the Board, which indicate rules as to the work and administrative proce- dures of the Board and as to the functions and duties of the CEO towards the Board. The overall management of the Company is vested in the Board and the Executive Leadership Team. In accordance with Norwegian law, the Board of Directors is responsible for, among other things, super- vising the general and day-to-day management of the Company ’ s business, ensuring proper organization and allocation of responsibili- ties and duties, preparing plans and budgets for its activities, ensuring that the Company ’ s activities, accounts, and assets management are subject to adequate controls and undertaking investigations neces- sary to perform its duties. The Board leads the governance system and meets with relevant Board Committees a minimum of four times a year to gain insights, review and ensure proper implementation of internal control mecha- nisms and risk management processes for good governance. The Board meets the CEO, the CFO and the Executive Leadership Team as often as necessary to perform its duties. ESG, including climate- related risks and opportunities are subject to an annual review with the Board. Top risks and emerging risks are reported in the compa- ny ’ s risk management tool. The Board had 13 meetings during 2022 with 94 per cent participa- tion. Agreements with related party The Board has also adopted Guidelines for Related Party Agreements to ensure proper handling of agreements between the Company and related parties. These Guidelines stipule that Members of the Board and the Executive Leadership Team must notify the Board if they have any material direct or indirect interest in any agreement to be entered into by the Company. In each case, the Board will consider whether it is necessary to obtain an independent evaluation. In 2022, no Related Party Agreements were executed. The Audit Committee In light of the company ’ s conversion to public limited company Tekna ’ s Board has initiated an Audit Committee in 2022 (the “ Audit Committee ”) and adopted Guidelines for the Audit Committee. The Audit Committee is a subcommittee of the Board and acts as a pre- paratory and advisory body for the Board and supports the Board in the exercise of its responsibility for financial reporting, internal control, and risk management. The Audit Committee also reviews and moni- tors the independence of the Company ’ s auditor. The Audit Committee consists of two members who are members of the Board: Anne Lise Meyer and Torkil Mogstad. They have been appointed by the Board which has also designated Anne Lise Meyer as the Chair of the Audit Committee. The members of the Audit CORPORATE GOVERNANCE REPORT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 67 Corporate Governance report (continued) 13. Information & communication Communication with shareholders, investors and analysts is a priority for the Company. The Board has implemented an Investor Relations Policy with the objective to provide the public with accurate, compre- hensive and timely information to form a good basis for making decisions related to valuation and trade of the Company share. The Company's communication is based on openness and respects the requirement for equal treatment of all shareholders. All notices sent to the stock exchange are made available on the Company website and at https://newsweb.oslobors.no. The dates for major events such as the Annual General Meeting, the publication of interim reports and public presentations are published on the Company ’ s website: www.tekna.com/investors/calendar and at https://newsweb.oslobors.no. Deviations from the Code of Practice: None 14. Take-over situations The Board has adopted Guidelines relating to take-over bids. In the event of a take-over bid being made for the Company, the Board will follow the overriding principle of equal treatment for all shareholders and will seek to ensure that the Company ’ s business activities are not disrupted unnecessarily. The Board will strive to ensure that share- holders are given sufficient information and time to form a view of the offer. The Board provides an account in the annual report of the main features of the Company ’ s internal control and risk management systems as they relate to the Company ’ s financial reporting. Internal control of financial reporting is conducted through day-to- day follow- up by Executive Leadership Team, and supervision by the Audit Committee. Deviations from the Code of Practice: None 11. Board remuneration The General Meeting determines the Board ’ s remuneration annually. Remuneration of Board members is reasonable and based on the Board ’ s responsibilities, work, time invested and the complexity of the enterprise. The remuneration of the Board members is not perfor- mance-related nor include share option elements. The Board is informed if individual Board members perform tasks for the Company other than exercising their role as Board members. Work in sub-committees may be compensated in addition to the remuneration received for Board membership. Additional information on remuneration paid to the individual Board members can be found in Note 23 of the financial statements for 2023. Deviations from the Code of Practice: None 12. Salary and other remuneration for executive personnel The Board has resolved guidelines to the CEO for remuneration to the Executive Leadership Team, including performance-related remu- neration. The Guidelines can be found in the Corporate Governance Policy of the Company. The salary and other remuneration of the CEO are decided by the Board. The Company ’ s senior executive remuneration policy is based primar- ily on the principle that executive pay should be competitive and mo- tivating, in order to attract and retain key personnel with the neces- sary competence, in order to ensure the long terms interest of the Company. The performance-related remuneration portion is limited in the varia- ble compensation plan. Details relating to the salary and benefits payable to the CEO and other subsidiaries ’ senior executives are available in note 23 to the financial statements and the Remuneration Report 2022. Deviations from the Code of Practice: None CORPORATE GOVERNANCE REPORT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 68 Corporate Governance report (continued) The Board will not seek to prevent any take-over bid unless it believes that the interests of the Company and the shareholders justify such actions. The Board will not exercise mandates or pass any resolutions with the intention of obstructing any take-over bid unless this is approved by the General Meeting following the announcement of the bid. If a take-over bid is made, the Board will issue a statement in accord- ance with statutory requirements and the recommendations in the Code. In the event of a take-over bid, the Board will obtain a valuation from an independent expert. If a major shareholder, any member of the Board or Executive Leadership Team, or related parties or close asso- ciates of such individuals, or anyone who has recently held such a position, is either the bidder or has a particular personal interest in a take-over bid, the Board will arrange for an independent valuation. Any transaction that is in effect a disposal of the Company ’ s activities will be submitted to the General Meeting for its approval. Deviations from the Code of Practice: None 15. Auditor Role of Auditor PwC is the Company ’ s Auditor. The primary task of the Auditor is to perform the audit work required by law and professional standards with the level of care, competence and integrity required by law and such standards. The Auditor partici- pates in all meetings of the Audit Committee. The Minutes of the Audit Committee are shared with the Board Members. If required by the Board, the Auditor can assist to the Board. The Auditor has assisted the Board related to 2022 Annual financial results. Use of the Auditor for services other than the audit. The Audit Committee reviews and monitors the independence of the Company's auditor, including the extent to which services other than auditing provided by the auditor or the audit firm represent a threat to the inde- pendence of the auditor. The Auditor provides the Board with an annual written confirmation that it continues to satisfy the requirements for independ- ence. The Auditor annually provides the Board with a summary of all services in addition to audit work that have been undertaken for the Company. The fees paid for audit work and fees paid for other specific assignments are specified in the notes to the financial statements. Deviations from the Code of Practice: None SUSTAINABILITY REPORT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 69 This is Tekna ................................. 70 Executive introduction ......... 71 Highlights 2022 ...................... 74 Climate footprint ................... 75 Key indicators ......................... 76 Sustainability journey ........... 77 Material topics ............................. 79 Stakeholders .......................... 79 Materiality analyses ............. 81 Value chain ............................ 82 Focus Areas .................................. 83 Enabling customer ’ s impact .... 84 Circular and sustainable production ............................. 86 Resilient and responsible supply chain ........................... 88 Great place to work ............. 89 Ethical business conduct .... 91 Restatements and Assurances .. 92 Appendix ....................................... 93 A: Materiality analysis ................ 94 B: Sustainability Roadmap ....... 95 C: Abbreviations ........................ 101 | 69 Sustainability Report Sustainability Report Every particle counts... Sustainability report Financial Statements Auditors report Contact Information Corporate Governance report CONTENTS ANNUAL REPORT 2022 This is Tekna Shareholder information Board of Directors ’ report 2022 CEO letter Board and Management | 70 Advancing the world one particle at a time … The magic of Tekna originates in the strong drive of its employees to do better. Better for an earth that is damaged and in desperate need of a green transition. At Tekna we make tiny particles of advanced materials that enable this transition. It is through the transformation of the metal supply chain in additive manufacturing, and enabling electrifi- cation through the miniaturization of microelectronic components as well as improving the characteristics of a lithium-ion battery that these tiny particles become magical. And so does the plasma technology that produces them. Photo credit: Microsoft SUSTAINABILITY REPORT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 71 Part 1 | This is Tekna Introduction letter to the Sustainability Report resources as much as possible in closed loops (water, helium and argon), and driving social change through our supply chain. We also take tangible actions in our community, such as partici- pating in no-mow-May and spring-cleaning efforts to remove litter from a wide area. These initiatives are inspired by our Environment Committee, which comprises employees from various departments in Tekna. Last year, we communicated our ambitions to reduce CO2 emissions in scopes 1 and 2. Although the sum of emissions in these scopes has remained stable in 2022, we have identified an opportunity to switch our natural gas heating systems to elec- tricity, which we plan to budget for before 2030. We have also mapped additional categories in scope 3, such as Employee Commute, Business Travel, and Waste, and plan to estimate up- and downstream emissions next year to identify signifi- cant reduction potential and set a target for achieving climate-neutrality. Furthermore, we have conducted an initial assess- ment of climate-related risks and have begun the process of quantifying these risks financially. We are confident in the quality of the data pre- sented, as Tekna's main shareholder, Arendals Fossekompani, has its (including our) CO2 emis- sions assured by an auditor. Our Audit Committee and Board of Directors review all ESG reporting before publication. 2022 was a challenging year across the globe. The lingering COVID19, the war in Ukraine, high inflation, off- pattern weather-events... Resilience, which we are building in our teams and in our value chain, is becoming more relevant than ever before. We want to express our sincere gratitude to our colleagues, customers, and suppliers for their unwa- vering support and dedication to our mission. We firmly believe that it is only by working together that we can make progress, especially during challenging times. In 2021, Tekna released its first Sustainability report, recognizing the importance of measuring our impacts to motivate positive change. For our second report, we have adopted a methodology that further enhances transparency. We have created separate reports for external frameworks such as GRI, GHG Protocol, i.e., carbon accounting, EU Taxonomy, and the UN Global Compact. This Sustainability Report 2022 focuses primarily on our vision and the actions we are taking to achieve it. We have made significant strides in 2022, but we also acknowledge that some actions take longer to execute. One example is the Life-Cycle Assessment of our titanium metal powder, a customer-driven action that we are committed to completing. However, we have a solid foundation on which to build our sustainability journey. Our manufacturing locations are based in countries where we can utilize clean energy, such as hydropower in Cana- da and nuclear power in France. Our vision is to expand these sites to produce each metal powder in North America and Europe, bringing us closer to the point-of-use and creating supply resilience through redundancy. Elaborating further on the foundation of the com- pany, at Tekna we are driven by a culture that seeks to leave the world a better place than we found it. Advancing the world one particle at a time … Finding solutions to use production We are dedicated to continuing this journey with much energy and passion and will continue to report on our progress. If you have any questions, com- ments, or ideas on how we can improve, please do not hesitate to reach out. Sincerely, Luc Dionne CEO Tekna Arina van Oost VP Corporate Strategic Development and In- novation (incl. Sustain- ability) SUSTAINABILITY REPORT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 72 1: Coding at the end of the topic relates to the map in the materiality analyses in Appendix A. “ O ” is opportunity and “ R ” is risk. 2: Global Reporting Initiative. 3: UN Strategic Development Goals. 4: Environment, Social, Governance Guidance on Tekna ’ s ESG reporting This year we have decided to split our ESG reporting into topic-specific in-depth reporting particularly for external frameworks. Therefore, this sustainability report focusses on our vision, our roadmap and our actions. We present an overview of the reports you can download from our website on the right. The relation between Tekna ’ s material topics, our focus areas, UN Sustainable Development Goals and the GRI requirements are below. We also included direct links to the documents. This is Tekna (continued) In-depth Report (with link) Content description GRI Report 2022 Sustainability information provided in the structure of the GRI General Disclosures 2021. This also includes metrics from 2019- 2022 per GRI definition. Carbon Accounting Report 2022 Quantitative and Qualitative information on the CO2 emissions of the Company Human Rights and Transparency Act Report 2022 Reporting on Supply Chain governance following the Norwegian Transparency Act Corporate Governance Report 2022 Reporting on the Company ’ s Governance structure following the Norwegian Code of practice for Corporate Governance EU taxonomy Progress Report 2022 Progress report ahead of the EU taxonomy reporting requirement per 2023 TCFD progress Report 2021 Progress report on preparations following the structure of the Task Force on Climate-Related Financial Disclosures (TCFD). Keep an eye out for the update in 2023. UN Global Compact CoP United Nations Global Compact communication on progress. This is an online reporting in the UN system due in June 2023 Annual Report 2022 Tekna ’ s annual report containing the Board of Directors ’ report and consolidated and audited financial statements among other Material topics 1 Focus area SDG 2 ESG 3 in GRI 4 Report, item: See also this Report Enable customers to reach their ESG targets [4.O] Producing more with less materials [8.O] Sustainability: Enabling customers ’ positive impact SDG 7 S 201, 202, 203, 416, 417, 418 EU Taxonomy Progress Report 2022 Increased demand for circular economy innovation and solutions [1.O] Growing demand for green technology drives demand for certain raw materials [5.R] Circularity: Strive for circular and sustainable production SDG 12 E 301, 302, 303, 304, 305, 306 Carbon Accounting Report 2022 Achieve climate-friendly production [2.O] Rising resource scarcity worsening the increasing costs [12.R] Resilience: Responsible and resilient supply chain SDG 9 G 2-6, 2-13, 2-25, 3-1, 3- 2 ,204,308,410, 411, 413, 414 Human Rights and Transparency Act Report 2022 TCFD progress Report 2021 Hygiene area (minimum safeguard) Society: Great place to work SDG 8 S 2-7, 2-8, 2-16, 2-17, 2-26, 2-30, 401, 402, 403, 404, 405, 406, 407, 408, 409 Hygiene area (minimum safeguard) Governance: Ethical business conduct SDG 16 G 2-1, 2-2, 2-3, 2-4, 2-5, 2-9, 2-10, 2- 11, 2-12, 2-14, 2-15, 2-18, 2-19, 2-20, 2-21, 2-22, 2-23, 2-24, 2-27, 2-28, 2 -29, 205, 206, 207, 415 Corporate Governance Report 2022 SUSTAINABILITY REPORT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 73 Tekna is a global leader in the development, manufacturing and sales of advanced micron and nano powders as well as plasma process solutions. Since we started in 1990, Tekna has developed a unique and pro- prietary plasma technology platform for manufacturing micro and nano sized powders for a range of industries. Our business model relies on two revenue streams, both with synergistic effects: • Development and sale of plasma systems: We develop and sell plasma systems customized for the purpose of research and development. • Development and sale of advanced powders: We develop and operate our own proprietary plasma processes to produce and sell spherical powders and nano powders. Tekna ’ s is developing the position of its advanced materials in three multi-billion-dollar market verticals. Tekna is headquartered in Québec, Canada, and has additional offices in France, China, Korea, USA, and seven distributors oper- ating globally (Europe, Asia and North America). Additive Manufacturing: Currently our fastest growing segment. Tekna enjoys an esti- mated 19 per cent market share, up by 6 per cent on main selling products. This global market is on track to outperform, in terms of growth, traditional machining due to improved environmental efficiency, for instance through resource efficiency and speed of availability of parts. Microelectronics: We aim to secure industrial scale supply to global tier 1 cus- tomers in the microelectronics industry. Nano powders below 100 nm are expected to become the new industry standard for high-end MLCC devices, and Tekna is one of only three pro- ducers that can deliver this. Energy Storage: Tekna has developed and pa- tented its industrial process to produce high purity spherical silicon nano powder. Nano sili- con used in rechargeable bat- teries could provide electric ve- hicles with 60 per cent more distance travelled on a single charge. Important industries for our powders are: batteries, elec- tronics, medical, automotive, aerospace and satellites. Systems | PlasmaSonic: In the systems business we launched the PlasmaSonic Prod- uct line. This wind tunnel simu- lates hypersonic conditions to enable research for for instance space tourism. Founded in 1990 Tekna Holding ASA listed in OSLO 2022 Aspiration 2030 Headquartered in Sherbrooke, QC, Canada 216 employees 90 active patents 3 manufacturing and research centers 7 subsidiaries 1 joint venture carbon neutral This is Tekna (continued) About Tekna SUSTAINABILITY REPORT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 74 Great place to work Ethical business conduct This is Tekna (continued) Sustainability highlights 2022 per focus area Enabling customer ’ s impact Circular and sustainable production Resilient and responsible supply-chain  345 Health and safety audits and awareness interactions took place between management and personnel throughout the year. (page 89)  We increased the skill level of our staff by training on various topics through scheduled in- house knowledge sharing pro- gram (page 89)  Finalized and implemented the pay equity process ensuring unbiased treatment of all em- ployees. (page 89)  62% of employees have passed with success the Cyber security training in 2022 (page 90).  Further baseline CO2 emission assessments completed in cate- gories of Scope 3 of GHG pro- tocol (page 75)  The development of the carbon reduction action plan is pro- gressing (page 86)  In our JV Imphytek we are initi- ating to recycle within our own value-chain (page 82)  Powder products formally certi- fied for REACH and RoHS. Cer- tificates available on the web- site. (page 82)  We have signed a partnership with Factlines to apply a solid and consistent approach to re- sponsibility in Supply Chain (Transparency Act) (page 88)  Improved governance through hiring of a full-time legal coun- sel. (page 91)  Reducing single –use plastic powder packaging by reusable transportation vessel (page 84)  Providing Plasma system customers with guidance on “ green ” maintenance and end- of-life disposal (page 84)  EU Taxonomy: Completed a progress report in preparation of 2023 reporting (page 76)  Supported the AMGTA research on resource efficiency for AM (in peer review) (page 85)  Signed the UN Global Compact. We will start communicating on progress (“ CoP ”) in 2023. (page 91)  Two independent Board mem- bers started tenure and gender diversity was achieved. Further- more, an Audit committee was established (page 91)  91 % of employees signed CoC (page 76) SUSTAINABILITY REPORT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 75 Energy Intensity per kg metal powder produced Performance vs baseline FY19 Direct electricity of plasma systems within Tekna | Ti64 and AlSiMg | in kWh per kg Our capacity improvement program increases the productivity of the plasma atomization systems, ie higher output for the same energy. However, the test- ing to achieve the improvements has impacted our energy intensity in 2022. This is Tekna (continued) Tekna ’ s climate footprint at a glance Scope 1 585 tCO2e vs 577 (+1%) in 2021. Tekna has added a third facility in Canada, increasing natural gas con- sumption for heating in 2022. Scope 2 34 tCO2e vs 42 4 (-19%) in 2021. At the end of 2021 Tekna has added AM production equipment in Canada increasing consumption in 2022. France and China reduced by 9 tCO2e total. Scope 3 (incomplete) 755 tCO2e The emissions compared to 2021 increased due to broader emissions mapping in scope 3 and improved data quality. FY19: 16.3 kWh/kg FY22: 13.1 kWh/kg baseline -20x% (vs FY19) FY21: 12.0 kWh/kg 4 -26% (vs FY19) 1 Historical data should not change, but we always revise historical figures if data quality or science has improved. 2: Included only hazard- ous waste in 2021. 3: Employee Commute not included in 2021. 4: Restated 2022, see part 4 on restatements Tekna ’ s climate footprint at diﬀerent stages of the value chain (GHG protocol 1 | in tCO2e) Categories to be included for Customers: Downstream Transportation and Distribution and Processing of sold product Categories to be included for End-users & End-of-life: Use of sold products and End- of-life treatment Complete baseline estimations for upstream emissions (scope 3) expected in 2023. Suppliers & Resources Tekna operations Customers End-users & End-of-life Baseline estimations for downstream emissions (scope 3) expected latest in 2024. Other categories to be included for Suppliers & resources: Purchased goods and services, Capital goods, and Upstream Transportation and Distribution -50 % Target for 2030 Reduce in absolute terms compared to baseline year See also focus areas Circularity and Society. For a full breakdown of the cli- mate footprint accounting, scope 1, 2 and 3 emissions, read the Carbon Accounting Report 2022 under development under development Fuel– and energy-related activities (scope 3) 391 385 FY22 FY21 baseline -2% (vs FY21) under development Production (scope 1 + scope 2) Employees (business travel + daily commute 3 - scope 3) Waste 2 (scope 3) 619 619 402 FY22 FY22 FY22 FY21 FY21 FY21 baseline baseline 0% (vs FY21) 19 baseline Renewable energy share 69% SUSTAINABILITY REPORT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 76 Lost time injuries 1 Internal Safety audits 345 This is Tekna (continued) Key indicators at a glance EU taxonomy 2 High eligibility, alignment to be confirmed 3.6. Manufacture of other low carbon technologies (Climate Change Mitigation) 47 % % completion of all GRI standards 3 (GRI Standards 2021: 2, 3, 20x, 30x, 40x) Start of reporting +150% (vs FY21) 19 % 95 % 94 % 91 % 100% 88 % 100% FY22 FY22 FY22 FY21 FY21 FY21 eligible Revenue eligible OpEx eligible CapEx FY22 FY21 71% 29% 25% 75% 60% 40% Board of Directors Management excl ELT Executive Leadership Team All employees 75% 25% Gender diversity per 31 December 2022 Our people 16% 62% 22% under 30 30-50 years over 50 Age distribution all employees excl Board of Directors Nationalities 22 Total employees 216 Employees absence rate 2.6% Health & Safety Reporting: Transparency Act | EU Taxonomy | GRI standards Code of Conduct signed 91% Governance Fatalities 0 Compliance incidents detected 1 1: Top 25 selected suppliers based on highest spend and / or greater risk, status completion % as of 17 March 2023. Refer to Human Rights and Transparency Act Report 2022. 2: Refer to EU taxonomy progress report 2022. 3: Refer to GRI Report 2022. 20 % Suppliers assessed for social impacts 1 Status as per 17 March 2023, due diligence in process 0 % FY22 FY21 targeting 100% SUSTAINABILITY REPORT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 77 aging and revalorising waste material, are becom- ing valid options. See page 84 on universal and reusable container and page 87 on revalorising waste material. One of our material topics is raw materials which we use as feedstock. Circularity, using recycled material as feedstock, is a direct improvement to- wards mitigating negative impacts associated with raw material extraction. Our aim is to increase the percentage of recycled material in the feedstock Tekna is in the process of revisiting its corporate purpose. Building on our core, sustainability will play a more explicit role in our strategy. The vision, mission and values for the corpora- tion will integrate driving positive impact, creating sustainable value for the company as well as society. Our Sustainability vision consists of three parts: Circularity in our value-chain, Business model resili- ence and Resilience across and for all stakeholders. The journey towards CIRCULARITY in our value chain The circular loops within Tekna ’ s own operations are well-established (light blue arrow in image). We have closed loop systems for process gases and water and recycle waste. As additive manufac- turing material volumes are shifting to industrial- ised demand, the opportunity for building sustain- able loops with our customers in for instance pack- we use to 75 percent. There are serious challenges to overcome in achieving that while maintaining the quality and specifications our customers prescribe. Metal recycling streams today are highly contaminat- ed, and our advanced materials are made of alloys with a high purity and specific oxygen level. For 2023 our target is to work with the suppliers and know how much recycled material is used. From there we envision designing a joint approach to work towards the target. See the short story on page 82 on how our JV Imphytek Powders is proposing to do this within France. This is Tekna (continued) Sustainability journey SUSTAINABILITY REPORT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 78 Business model resilience: Eco-systems (ie value-chains) per continent Let ’ s start with the end goal: having supply eco- systems per continent that are resilient to local adversity and are dynamic enough to support each other when facing shortages or crises. Today Tekna produces most materials in Canada and nickel alloys in France. Our vision is to set up local manufacturing ecosystems, in essence supply chains, per continent. This would make those supply chains much more resilient, with lower exposure to the cli- mate and other risks, while leaving a smaller carbon footprint due to reduced transportation and at the same time enabling circular use of materials within our own ecosystem. As a first step toward this vision Tekna announced in January 2022 that we are setting up a new produc- tion facility in France, Europe. The plan is for this fa- cility to produce all products we deliver in Europe. The realization of this ambition started with the com- missioning of the Mâcon factory in France for the production of nickel alloys and will continue with the establishment of a supply chain for aluminum mate- rials that is 100 per cent European-based, ranging from feedstock procurement to manufacturing of advanced powders, and delivery to point-of-use, with fully traceable, closed-loop material recycling. Tekna ’ s RESILIENCE framework Human and climate resilience are the capacity of our ecosystem, including our society, to thrive long term. It entails sustainability by proactively plan- ning for stability and circularity in the face of adversity. Workforce resilience is mankind resilience, and it is the capacity of our teams to sustain their well- being by collectively coping with and responding to external stresses and disturbances from social, political, and environmental changes. Vulnerability risks are increased by climate change and require inclusive bottom-up knowledge-building and pre- paredness. Tekna ’ s supply chain resilience relies on a resilient and diverse workforce, climate resilience, and col- laboration between all stakeholders to anticipate and overcome disruptions. Developing support networks help responsiveness, problem solving and resourcefulness, allowing Tekna to maintain high service levels. With operational resilience Tekna is expanding its business continuity with initiatives focused on risk mitigation, identification and assessment, and sub- sequent monitoring. The adaptability of our opera- tions through the planning of alternative stable states and teamwork flexibility is key to pursuing our vision. This is Tekna (continued) Sustainability journey (continued) We produce advanced materials that act as enablers for rapidly growing industries that are driving the green transition. SUSTAINABILITY REPORT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 79 Employees In 2020 Tekna created its environment committee, le Comité Environnement. A committee consisting of vol- unteering employees created to drive awareness and improvements on the environmental footprint both of Tekna as well as outside of work. An example of their contribution as that, early 2022, the committee inspired a large group of colleagues to collaborate on a spring-cleaning of the industrial park. Read more about it in the feature story (page 80). Tekna has identified four main stake- holder groups that guide our journey towards increased sustainability. We have conversations throughout the year and at various levels of the or- ganization to ensure we focus on the topics that resonate with our stake- holders. Investors Tekna is proud to find amongst its major investors many that are driven by sustainability. We are thankful for the insights and support they have provided to improve our sustainability reporting and obtain a fair evaluation on our status quo and improvements. Customers Tekna ’ s customer base consists mostly of large OEMs that have adopted sustainability as part of their strategies. When Tekna is qualified as a sup- plier sustainability is usually part of the discussion. Customers frequently enquire about the environ- mental footprint of our technology. Requests for CO2 emissions, cradle-to-grave, per kilogram of powder, have moved us to include a Life-Cycle Assessment for titanium powder on our roadmap. General public and authorities The expectations of the society-at-large are clear: a more equitable and sustainable future for all, addressing the global challenges we face, includ- ing poverty, inequality, climate change, environ- mental degradation, peace and justice. We aim to make our value-chain as sustainable as possible. As a relatively small organization we communicate our efforts and achievements mostly on LinkedIn and endeavor to engage where possible. Part 2 | Material topics Our Stakeholders Tekna thanks its Environment committee members for their ongoing drive for continuous improvement. SUSTAINABILITY REPORT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 80 An active employee Environment committee by Andreane Laberge, Chair of the committee The Environment Committee, le Comité Environnement, was created in 2019 to promote environmental awareness and behavioral change for Tekna and also at home. In 2022, Tekna continued to support sustainable practices and took several actions to reduce its environmental impact. This section summarizes the environmental initiatives carried out. During the year, Tekna introduced an on-site or- ganic fruits and vegetables market, to promote healthy, sustainable, and local food choices among employees and reduce the carbon footprint asso- ciated with the transportation of food. In May, we participated in the No Mow May cam- paign, which aims to promote the conservation of native plant species, natural habitats, and biodiver- sity by reducing lawn mowing. Material topics (continued) Many other activities were aiming to reduce the amount of waste in the environment. We intro- duced washable rags for the mechanical team to replace the disposable wipes previously used. A litter pickup activity in the industrial district was organized, in which many employees participated (see images below). Tekna also placed several waste reduction awareness posters throughout our facilities and carried out a characterization of the compost in our operations. This compost initiative allowed us to identify opportunities to improve our composting practices. Finally, Tekna ’ s environmental committee pub- lished three environmental bulletins. These bulle- tins highlight different topics, such as the im- portance of buying local and recycling practices, and report on the progress of Tekna ’ s sustainabil- ity strategy. The bulletins were distributed to all employees to raise awareness about environmen- tal issues and promote sustainable practices. This year, the committee will be supporting the ISO 14001 certification effort and working towards making the Tekna terrains in Sherbrooke (HQ) more bio-friendly (spring-cleaning, nesting boxes, less grass more native flowers). Tekna spring-cleaning in Sherbrooke (CA) industrial park SUSTAINABILITY REPORT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 81 1: This definition is taken from the Interna- tional Integrated Reporting Council (IIRC) In the context of corporate sustaina- bility, the concept of materiality has evolved – and broadened - to char- acterize issues that substantively affect the company ’ s ability to create, preserve, or erode value over the short, medium, and long term 1 . These issues can be of an economic or envi- ronmental, social, and governance (ESG) nature. Tekna is using double materiality, i.e. financial mate- riality as well as impact materiality, in its sustainability reporting. Our material topics are selected based on two sources: stakeholder expectations and internal strate- gic priorities. Stakeholder expectations are mapped through interviews, and in dialogue with stakeholders as part of our daily business. We assess identified topics for the significance of their environmental, social and economic impacts. The information col- lected was aggregated and defined our most im- portant ESG material topics and priorities. A topic is material if the company has an actual or potential significant impact on people or the environment connected to the topic. A topic is also material if it triggers financial effects on the company that are likely to influence its future cash flow. Late 2021, we reviewed the value chain analysis, opportunities, risks and impacts of material topics across our supply chain and updated our material- ity priorities, making sure to include items from the climate risk assessment. From the twenty identified strategic material topics, six were classified as high likelihood and high consequences. The six topics led to the creation of the top three focus areas in our sustainability pyramid, which serves as the ba- sis for our sustainability strategy and reporting. This year, we ’ re building upon last year and im- proving our strategy. One of the key learnings after submitting our 2021 sustainability report to the UN Global compact peer review process, was to better highlight the relationship between our material topics and the focus areas. At the base of the pyramid are hygiene areas (governance and Circular and Sustainable production (Circularity goal) Increased demand for circular economy innovation and solutions, e.g. create products with lower re- source density, better resource management, more recycled materials, and a zero-waste production. Growing demand for green technologies drives de- mand for certain raw materials and decreases it for others that negatively impact the environment (e.g. Titanium, Silicon) Responsible and resilient supply chain (Resilience goal) Achieve a climate friendly production which ensures the offering of products with lower emissions than those of our peers, offer alternatives, and aim to have a positive impact on nature and biodiversity. Rising resource scarcity worsening the increasing costs of materials, raw materials, and energy due to restrictions, regulations and/or climate change. Refer to Appendix A for the full materiality matrix and all topics included as per update Q4 2021. Material topics (continued) Materiality analyses employees/society), vital to accomplish the top strategies. We can only achieve the top focus are- as if the hygiene ones are covered. Next, the six high consequence and high likelihood material topics were used to define the top of our pyramid. Sustainability, circularity, and resilience are our response to the materiality analysis. They are at the core of our strategic focus areas. Tekna ’ s bot- tom-up approach in the pyramid ensures that all material topics are incorporated within our supply chain and topics are placed according to where the most significant potential impact occurs. A list of the top six material topics used to build our strategic focus areas is presented below: Enable customers ’ positive impact (Sustainability goal) Enable customers to reach their ESG targets, by AM producing e.g. more resource efficient prod- ucts, and by addressing vulnerability challenges (e.g. transportation disrupted by extreme weather events), and building resilience to supply chain disruptions. Reduce costs by producing more with less materi- als and resources and by considering the limited availability of critical raw materials, which can spike raw material prices. SUSTAINABILITY REPORT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 82 1: Critical raw material list. 2: Potential conflict material Tekna ’ s supplier guaranteed material purchased non-conflict. Tekna Holding ASA and its subsidiaries (“ Tekna ”) consists of ten legal entities (including one joint ven- ture), of which three are in Europe (“ EU ”) (32 em- ployees), four are in North America (“ NA ”) (179 em- ployees) and three are in Asia (6 employees). Manu- facturing takes place in Canada and France, whereas the other entities are sales offices. In our sustainability journey, we have focused our attention on understanding the impacts of our own operations. However, Tekna has a diversity of inter- actions across the value chain: suppliers, customers, our own operations and interactions related to the end user and end-of-life process. Our supply chain and geographical footprint are examples of factors that affect the value chain and our impacts, risks and opportunities. Tekna can have a positive or negative impact on the value chain. Examples of a positive impact is the enabling strength of our high-quality additive manufacturing (“ AM ”) materials converting more customers to resource efficient AM methods. As a global business the need for business travel and the related Greenhouse gas emissions (GHG) is an example of a negative impact. Raw materials for the manufacturing of metal powders are likely to repre- sent the main negative impact, both potential and actual, in our supply chain. We have a general understanding of the potential impacts and risks associated with raw material ex- traction and refining. This may include child labor, pollution of land, soil, water and air, perilous working conditions, hazardous workplaces, exposure to haz- ardous chemicals, conflict and disputes in local com- munities and GHG emissions. We need to study the impacts specifically for the feedstock materials we use, from extraction to delivery at Tekna. Only this way we can mitigate negative impacts. In 2023, we want to focus our attention to upstream impacts and continue downstream in 2024. Below a simplified overview of the Tekna value chain for the two business segments. We have indicated in red the part with highest impact, which materials are on the Critical raw material list, and which are potential conflict material.  REACH, RoHS and potential conflict minerals Our supply team has delivered third-party verifica- tion guaranteeing our powder products are meet- ing REACH (toxic chemicals) and RoHS (hazardous substances) requirements. Tekna is following the Responsible minerals initia- tive (Conflict minerals reporting) for Tungsten and Tantalum. Both are sourced exclusively from Con- flict-Free material based on OECD due diligence and Dodd-Frank requirements. Tekna has the dec- laration, which is made with all the information from partners in the entire supply-chain from smelters up to Tekna. Material topics (continued) Value chain Value chain Business Segments Suppliers & Resources Tekna Operations Customers End-users (& End-of-life-stage) Advanced Materials BU ’ s: Raw materials to feedstock: Processing feedstock by plasma atomization: heat- ing the metals until they turn into liquids or vapor and subsequently develop the liquids or vapor into micro- and nanoscale ad- vanced materials. Production of: Utilization: Additive Manufacturing Aluminum Alloys Nickel alloys Tantalum 1,2 Titanium 1 Tungsten 1,2 Tier 1 and Tier 2 Metal part manufacturers Aerospace, medical implants, automo- tive and consumers (enabling additive manufacturing) Microelectronics Nickel Multi-Layer Ceramic Capaci- tors (MLCC) Original Equip- ment Manufacturers for Electronics (devices, EVs, enabling miniaturization and electrification) Energy Storage Silicon 1 Material for anodes of Lithium-ion batteries: Product in development Systems Parts and subassembly producers Manufacturing, commis- sioning and servicing of Plasma systems Research institutes and com- panies Research and small production of (new) materials (enabling electrification)  Recycling nickel within our own value- chain Imphytek Powders (“ IP ”), a joint venture between Tekna and Aperam, has developed a small-scale pro- posal to recycle nickel alloys within France. IP would buy back at fair market value unused powder, reject parts and 3D printing supports and coordinate the recycling at Aperam Imphy plant (a melt shop 175 km from Tekna ’ s production site in France). Strict materi- al segregation will be a success factor for this ap- proach. SUSTAINABILITY REPORT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 83 enabling our customers ’ positive impact. We want to offer business continuity to our customers by maximizing resilience on all fronts, this includes having a diverse number of suppliers working with us towards a circular economy. This will guarantee our customers ’ positive impacts to shape society and allow innovation to take place. The focus area of “ Circular and sustainable pro- duction ” supports the previous one as we aim to make our operations ecosystem friendly. This calls for a low carbon footprint and closed-loop sys- tems. An example of the latter is our green hydro- gen production for own consumption. Tekna has defined five focus areas, consisting of hygiene factor areas at the base of the sustainability pyramid and more unique and strategic areas towards the top. Hygiene areas entail topics that stakeholders expect Tekna to manage, whereas the strategic are- as are calibrated to Tekna ’ s products and processes. This part will go deep- er into the various focus areas, its rel- evance, our impact, the achievements and its short and mid- to long term goals. At the base of our operations are ethics and our employees. These are hygiene factors that stake- holders expect Tekna to manage well. Ethical busi- ness conduct is a focus area which aims for inclu- sive and cohesive growth across our value chain. Human rights are a precondition for the freedom and dignity of people, for the rule of law, as well as for the inclusive and sustainable growth on which we depend as a business. The next layer is the fo- cus of offering “ A great place to work, ” with the goal of attracting and retaining talent and offering a safe and healthy workplace. Now, becoming our own ecosystem requires unique and strategic areas for our products and processes. We aim to drive the green transition by Part 3 | Focus Areas At the intersection between the hygiene factors and strategic areas lies the focus of a resilient and re- sponsible supply chain, which is essential to achieve inclusive and sustainable growth. Transparency and knowledge sharing helps capacity building and sets the conditions to allow innovation to take place as more people have access to employment, educa- tion, services and skills training while working along- side our stakeholders to carefully plan for resilience according to local challenges and potential disrup- tions. The end goal is to have supply ecosystems per continent that are resilient to local adversity and are dynamic enough to support each other when facing shortages or crises. Our first step towards that goal is to strengthen our production facility in Mâcon, France, for our European customers. SUSTAINABILITY REPORT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 84 Focus area: Sustainability This focus area highlights Tekna ’ s commitment to its customers. Tekna aspires to actively contribute to the implementation of circular and re- source efficient solutions and carefully plan for resilience with all stakehold- ers. This will not only reduce the envi- ronmental impact of the value chains it operates within, but also reduce the impact of climate change on business continuity. Enabling our customers in such ways allows them to contribute and further integrate our resilient ecosystem. Planning for adversity to- gether guarantees that Tekna and its stakeholders can keep advancing de- spite climate change and other chal- lenges. By empowering its customers in achieving their goals, Tekna can be a driving force in the transition to greener and circular materials.  Tons of material saved There is a common understanding that Additive Manufacturing (“ AM ”) reduces the amount of raw material needed to make a part. Tekna estimates, based on customer inputs and depending on the industry, that 60 to 90 per cent of material is saved by applying additive manufacturing techniques versus traditional substractive approaches like mill- ing. Based on our AM powder sales we estimate that 200 – 1300 Tons of metal was avoided by our customers.  Replacing single-use packaging Additive manufacturing ("AM") materials are typi- cally transported in single-use packaging, with aluminum powder being shipped in 5kg plastic drums and titanium powder in metallic bottles of 2.5kg each. Unfortunately, once they have been used, the single-use packaging are left with small quantities of residual metal powder making them not easily reusable nor recyclable. As the volumes of AM materials are increasing, the business case for returning the powder to Tekna for reconditioning will become stronger. (read also Revalorizing powder). In order to reduce single-use packaging, Tekna is developing a Universal and Reusable CONTAINER for Additive Manufacturing powders together with industry partners. One container replaces 25 single -use plastic drums or 80 metallic bottles. • Eliminate the use of single-use packaging and disposal activities • Allow for safer handling both during transporta- tion as well as at the point of use. 1) reducing the risk of exposure to powder; 2) the Container has wheels, eliminating the risk of dropping or injuries due to lifting; 3) easy to use, “ plug and play ” re- ducing the risk of handling mistakes • Increased efficiency as more material is loaded to the machine per packaging unit The prototype was certified in 2022 and is ready to be put into operation early 2023. Given Tekna ’ s pro- jected volumes, the company will avoid ~1 Million tCO2e over the next 5-years.  Updating Systems manuals Systems have a very long life. Of the more than 200 Systems sold, Tekna is aware of only a handful that have been dismantled. Since 2022 we included in our manuals how to dismantle a system and how the different parts can be recycled and reused. Further- more, we have also made recommendations on good environmental practices for maintenances and cleaning. Roadmap short and midterm In appendix B we have included a summarizing roadmap reflecting the various activities we are working. The sustainability roadmap is here. The key benefits of this solution: • Enabling resource efficiency, circularity and GHG reduction: the sturdy containers can be reused “ indefinitely ” and will be used to deliver pristine powder to the customer and the cus- tomer can return degraded material back to Tekna Enabling Customer / Stakeholder impact SUSTAINABILITY REPORT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 85 Developing advanced materials for Lithium-ion batteries Energy Storage is one of our developing businesses units. Tekna has developed a cost and resource-efficient process to produce silicon nano powders that can be used in the manufacturing of Lithium-ion batteries (LiB). The use of silicon nano powders opens the possibility of increasing the LiB charge density and number or charging cycles and therefore improve battery • Repairability & spare parts: 3D printers can quick- ly and cheaply make repair parts for unique or out-of-production equipment, keeping older ma- chines and vehicles running, eliminating the need for new (raw material and energy) • Make parts locally: Less environmental impact from transportation due to locally produced parts, prototypes and products. (3D printers fit into an office.) • Inventory reduction: With 3D printers, you can print on demand or print small batches instead of having a warehouse of spare and overstock parts, many of which may never be needed. • Smaller, quieter factories: Less manufacturing equipment makes for smaller, quieter factories and fewer emissions. 1 printer replaces multiple traditional manufacturing equipment as it can make a wide variety of materials, shapes and forms. • Streamline manufacturing: 3D printers require fewer tools, parts, and processes than traditional manufacturing eliminating much of the labor, equipment and energy. 3D printing is often fast- er. Focus area: Sustainability (continued) Enabling Customer / Stakeholder impact Benefits of Additive Manufacturing Many aspects of Additive Manufacturing can have a positive impact on the environment. There ’ s plenty of anecdotal information about how com- panies have saved time, money, and materials by using 3D printing instead of carving foam, machin- ing metal, molding plastic, or forming clay. Cur- rently there is limited independent research. The Additive Manufacturer Green Trade Association (AMGTA) is working to improve this by commis- sioning life-cycle assessment (LCA) studies. As this report is being written the studies are in peer re- view and should become available soon. A brief overview of the opportunities: • More efficient design: 3D printers can produce parts with shapes and features unachievable with traditional manufacturing methods. One can redesign your part or product to make it more efficient, while using less material. Prod- ucts that were once made of multiple sub- components can now be printed as one, re- ducing material use, time and labor. The knock -on effect of this more efficient part design optimization (called topology optimization) and part consolidation are products, such as cars and aircraft, that use less raw material and are lighter, and therefore are more fuel efficient and emit fewer greenhouse gases. • Less raw material: 3D printing makes parts with only the material needed and minimal support material, instead of carving out a part from a block of material, which produces waste. performance with the following direct benefits: • Increases clean energy storage capability (windmills, solar cells, etc.) • Reduces the volume of raw materials in manu- facturing LiB and thus the cost; • Increases clean energy performance as a sub- stitute to coal and fossil-fuels; • Reduce global consumption of fossil fuels. Tekna employees with a Powered Air Purifying Respirator Unit, personal protective equipment SUSTAINABILITY REPORT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 86 Focus area: Circularity Tekna ’ s growth, powered by the green transition, introduces an envi- ronmental cost to the value chain. Tekna is committed to keeping this cost as low as possible, through green energy, resource efficiency and aim- ing for increased circularity. This sim- ultaneously reduces our production cost and contributes to securing and improving our market positions. Climate change and increased de- mand for greener materials will wors- en resource scarcity. Moving forward, Tekna ’ s decisions, where available, will be guided by life cycle assessment- based management of all resources. The sustainability and circularity of Tekna ’ s operations become a priority because all future proof consumer ac- tivities must contribute to balancing our ecosystem. Circular and resource eﬀicient products through Additive Manufacturing Tekna's inhouse developed manufacturing processes are low emission, resource efficient (e.g. closed-loop gas and water), green (hydro) powered systems. For over 30 years, Tekna has been a responsible manufacturer of quality, leading-edge products. The manufacturing processes developed by Tekna have the following characteristics: • Low carbon emissions; • 95% of the gases involved in the manufacturing of its products are reused in the process (read also Closed-loop manufacturing); • 100% of the power used to run the facility and the processes are sourced from clean energy, i.e. hydro power plants in Canada and nuclear power in France; • The stocks of gases are maximized with gas trailers and silos containers avoiding non-eco- friendly weekly replacement of bulk packs. • Re-using and repurposing of material waste from ours and our customers ’ processes.  CO2 reduction plan Last year, we communicated our ambitions to re- duce CO2 emissions in scopes 1 and 2. The sum of emissions in these scopes has remained stable in Roadmap short and midterm In appendix B we have included a summarizing roadmap reflecting the various activities we are working. The circularity roadmap is here. 2022. The key reduction opportunity we identified is to switch our natural gas heating systems to electricity. We plan to budget for this before 2030. We have also mapped additional categories in scope 3, such as Employee Commute, Business Travel, and Waste, and plan to estimate up- and downstream emissions next year to identify signifi- cant reduction potential and set a target for achieving reductions and climate-neutrality.  Quantifying waste Waste is one of the first topics we focused on sus- tainability. We have increased our waste segrega- tion and recycling adding organic in the offices and cafeterias and volunteers bringing Styrofoam to the eco-center recycling station. This year for the first time we have quantified our complete waste and recycling streams, including hazardous waste, in our headquarter and manufacturing sites in Canada and France. Our emissions amount to 19 tCO2e, which is our baseline from which we will start reducing. We will set a reduction target in 2023.  Water management We have identified one Tekna office is located in an area known to have water stress and that is a small sales office in Korea. We used 0.03 megaliter of water in that office in 2022. The water that is being withdrawn is discharged back into the eco- system via sewerage (not measured). Circular and sustainable production SUSTAINABILITY REPORT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 87 Closed-loop manufacturing by Richard Dolbec (Director emerging technologies) Climate change and other environmental concerns remind us that resources are valuable and must be managed wisely. Companies with manufacturing operations can reduce their negative impacts on re- sources is by including sustainability in the design and manufacture of their goods. One model being implemented across many industries is closed-loop manufacturing. In closed-loop manufacturing, waste materials are conditioned and reintroduced into the production process to create new products. Negative environ- mental impacts such as waste, energy consumption, transports, and packaging can thus be significantly reduced or even eliminated. The same goes for the costs they entail. Simply put, closed-loop production systems strive for sustainability by simultaneously improving economic and environmental goals. At Tekna, we constantly innovate to improve the performances of our powder production process- es. We benefit from closed-loop manufacturing in three different ways. Firstly, the pure gases re- quired for generating the plasma are expensive. Since plasma is only a transient state of the gases (no permanent change), we have developed a gas recycling technology that collects gases at the out- let of the process and reinject them at the inlet, in a virtually infinite loop. This is a major advantage for the good control of our production cost, and for the environment as gas supply ’ embedded emissions are minimized. Secondly, our powder production units require high-quality cooling wa- ter. This high-quality water produced internally is recirculated in a closed loop across the manufac- turing area. Water temperature in regulated with a heat exchanger connected to a second water cool- ing circuit that interacts with ambient conditions outside the building. Our approach minimizes freshwater consumption. It also ensures a perfect Revalorizing powder 1 by Richard Dolbec (Director emerging technologies) Powders used in additive manufacturing (AM) are considered at the end of their service life when their characteristics are no longer meeting the specifica- tions imposed by the end use. Amongst other waste- reducing solutions, the plasma spheroidization tech- nology developed by Tekna over the last 30 years is a promising solution for reconditioning AM powders. By exposing end-of-life AM powders to plasma, al- tered characteristics are restored, readying those powders for a new service life. Up until now, Tekna ’ s powder reconditioning process has been successfully demonstrated for materials including Titanium, In- conel 718 and Cobalt-chrome powders. Note that for this to become a real solution, local capacity, close to point-of-use, is needed. Neither the ecological nor the financial business case make sense if waste material needs to be shipped over long distances to be revalorized. Tekna is selling the spheroidization equipment it produces. A solid re- turn on investment on this equipment requires a certain volume of material. Focus area: Circularity (continued) Circular and sustainable production control over cooling water properties and provides stability to our plasma processes. Finally, the wastewater generated from our industrial opera- tions is filtered and treated in our facility. The qual- ity level we obtain is sufficiently high to allow intro- ducing this water back into our processes, thus closing the loop again. In Tekna ’ s close-loop manufacturing approach, natural resources are conserved, which is a big win for the environment. It also helps keeping a good control over production cost without compromis- ing process stability. Those efforts positively impact sustainability not only for Tekna but also for the supply chains we are part of. 1: Source: J.Pollak, O.Bailly and R.Dolbec (Tekna employees), Production of spherical metallic powders dedicated to additive manufacturing, Proceedings of the 2017 International Conference on Powder Metallurgy & Particulate Materials (POWDERMET 2017) pp.436-443. Improving resource efficiency by reconditioning used “ out-of-spec ” powder to quality compliant powder SUSTAINABILITY REPORT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 88  Using our voice for good In cooperation with the Additive Manufacturing Green Trade Associa- tion (“ AMGTA ”), we have participat- ed in panel discussions. Luc Dionne (CEO) discussed on Sustainability Innovation in Metal Additive Manu- facturing Powder at the RAPID con- ference, North America ’ s largest and Additive Manufacturing event (Detroit, May 2022). Arina van Oost (VP) discussed the making of a first ESG report at the TIPE conference, a Women in 3D Printing event, (virtual, January 2022). Focus area: Resilience The global supply chain faces many risks and can be vulnerable to the ad- verse effects of climate change. As part of our resilience goal, we there- fore want to encourage capacity- building initiatives aimed at strength- ening local supply chains. In order to stay ahead of disruptions and short- ages Tekna will focus on more inclu- sive planning and a circular and sus- tainable management of resources. Being capable of quickly responding and adapting to events is key to resili- ence and a better management of re- sources. All on the basis of a solid due diligence on who we partner with and their willingness to improve. Developing resource eﬀicient production processes Tekna is a global leader in manufacturing powders for Additive Manufacturing (“ AM ”). Tekna ’ s involvement goes beyond the manufac- turing of powders up to assisting the industry in developing standards and product requirements that will, in the end, accelerate the technology adoption. By being a leader in its field and pro- moting the development and adoption of AM as an alternative solution to traditional manufacturing methods Tekna directly contributes to these UN SDG targets. (9.2; 9.4; 9.5)  Business partner sustainability due diligence process Tekna is in the process of performing the due dili- gence to identify, measure and understand the most important risks in our supply chain. This is conducted with assistance from Factlines, a com- pany that provides a corporate social responsibility self-reporting form based on the ten principles of UN Global Compact, OECDs guidelines for re- sponsible business conduct, and the Transparency Act law. The form covers topics such as supply chain, risk assessment, management systems, working conditions, social responsibility, environ- ment, anti-corruption, and conflict minerals. See the Human Rights and Transparency Act Report 2022  Producing hydrogen for Tekna ’ s own consumption Hydrogen is a hot topic. Since around 2010 Tekna has produced hydrogen (H2) for use in our plasma processes by means of water hydrolysis. We use renewable energy (hydroelectricity) for the hydrol- ysis process. By doing so, we avoid using H2 de- rived from fossil fuels. Currently, most hydrogen is produced from fossil fuels, specifically natural gas. By producing H2 on-demand, we avoid storing bulk quantities of H2 on-site, which is a big plus for the safety of our workers on the plant. The same goes for community safety as we contribute to reducing the volume of flammable gas trans- ported on the roads. Resilient and responsible supply Luc Dionne (CEO) in a panel discussion on Sustainability Innovation Roadmap short and midterm In appendix B we have included a summarizing roadmap reflecting the various activities we are working. The resilience roadmap is here. SUSTAINABILITY REPORT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 89 Focus area: Society Tekna believes in the strength of di- versity as proof shows that more di- verse teams make better decisions. As a high-tech company Tekna is driven to keep and attract exceptional talent to drive innovations, as our employ- ees are our most important resource. Continued focus on the health, safety and well-being of our people is con- sidered critical to the resilience of the ongoing operations. SDG 8 Decent work and economic growth SDG 8 is at the core of our focus area ‘ Great place to work ’. As such, we want to achieve higher levels of eco- nomic productivity through diversification, technological upgrading, and innova- tion (target 8.2). Target 8.8 highlights the importance of protecting labor rights and promote safe and se- cure working environments for all workers.  Health, Safety (OHS) and Well-being Tekna continues to focus on this very important top- ic. 345 health and safety audits and awareness inter- actions took place between management and per- sonnel throughout the year. 19 major and 47 mi- nor OHS actions were identified and resolved dur- ing the year. In the GRI Report 2022 you will find an extensive description of our OHS system and metrics. We had 4 recordable work-related inju- ries, which based on 200,000 worked hours gives an injury rate of 10.7.  Pay equity program fully implemented Tekna has developed and transitioned its workers compensation system to ensure equality, based on an objective job evaluation method that positions employees on the relative value of their jobs. This system is compliant with the legal requirements prescribed by the Commission for labor standards, pay equity and occupational health and safety (CNESST) of the Province of Quebec. Therefore, the average pay for men and women vary due to differences in job categories and years of service, not because of gender.  Raising competence level in Lean six sigma Starting in April 2022, internal training has been given by our Master Black Belt at Tekna on Lean six sigma to gain common understanding over quality and continuous improvement initiatives. Over a year, 40 people completed successfully white belt level certification, 7 reached yellow belt level and 18 others are in process of achieving that goal. Training sessions include usage of tools and Great place to work In 2022, we had zero fatalities and one injury that required time off. We believe ZERO is the only acceptable number. SUSTAINABILITY REPORT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 90 practical sessions over real-life situations and chal- lenges we face as a company on a demanding mar- ket driven by high quality standards. As Tekna has a tremendous amount of talent in- house we use this to raise the skill level on many more topics, e.g. Cyber security, Project Manage- ment and a Sustainability training is planned.  Cyber Security high priority In 2022 Tekna did not experience any data breaches. We have a thorough risk assessment process on cyber security, of which we inform the Board of Di- rectors twice a year, once in-depth and once as part of the general risk management. As a philosophy, the IT team itself is working under the zero-trust model, using least privileged access and multifactor authentication to secure our environ- ment and access levels within the team. We do not host customer-facing applications at Tekna. As any enterprise, we are vulnerable to social engi- neering tactics, but phishing awareness campaigns in addition to an internal security conference, elevates our staff ’ s knowledge and reduces the inherent risk we face. 143 (62%) users have passed with success the Cyber training from the service provider Know- be4 during 2022 and efforts will continue increase this to +90%. As a metric, every new employee is assigned basic cybersecurity training and are made aware of the cybersecurity conference video as part of the new IT orientation in 2023. The aim is to com- plete ISO 27001 on information security in the course of 2023.  Remuneration The average remuneration in the company was 90k CAD. The total compensation ratio of CEO to the median of all employees was 5.4 1 , which is within range for midsize Canadian companies.  Employee Commute and Electrical Vehicles This year we mapped the CO2 emissions from employees commuting to Tekna facilities around the globe. The emissions amounted to 236 tCO2e, which will be our baseline for 216 employees. The number of employees with electrical vehicles is rising year after year. With 100 per cent electricity from hydro power this is a clean means of trans- portation in Quebec. Tekna provides free charging to its employees at its four charging stations. In 2022 this equaled 9,205 kWh (439 charging ses- sions) and negligible emissions.  Business travel back to pre-covid level Creating strong relations is considered a strong success factor for the company as we are develop- ing business across the globe. In 2021 we looked at our emissions from our business travel, which we knew would not reflect a true picture due Covid travel restrictions skewing the trips. For 2022 we tripled 155 tCO2e (40) emissions and take this as the realistic baseline to start from. The employees were requested to complete a form per business trip, including km travelled by car (incl taxi), train, flights, and hotel nights. support medical research and one local school here in Sherbrooke. With our donation, the school has been able to buy specific sporting equipment for some students with physical handicap as well as playing modules installed in their backyard for the benefits of all students. In 2023, we are repeating the experience with a more ambitious target of 20,000$. Etienne Villeneuve, the team captain and VP Opera- tions at Tekna: ‘’ I ’ m proud to be part of this social movement since 2012. We have raised, along with my teammates, more than 200,000$ to promote healthy life habits among young people in the past twelve years. What is my motivation? I really think I make a real difference for some of these students leading by example. If I can influence some of them to start doing sporting activities more regularly and having better lifestyle habits, it makes me feel I reached a personal goal ”. Focus area: Society (continued) Great place to work Social engagement: Le Grand défi Pierre Lavoie by Etienne Villeneuve (VP Operations) What is it: Cycling 1,000 km end-to-end within 60 hours, across several Quebec regions, with major stops in several of Québec ’ s cities along the way: that is “ The 1,000 KM ” event. What is the ultimate goal: The Grand défi Pierre Lavoie distributes millions of dollars every year to promote healthy life habits among young people and to support research on rare genetic diseases. This was done by means of scholarships and grants awarded by the Fondation du Grand défi Pierre Lavoie and through the school sponsorships of the teams in the 1,000 KM. How does it work: Each cycling team is invited to partner with one or more elementary schools of their choice and to encourage its pupils to enroll in the Energy Cubes Challenge that requires them to practice physical activities on a daily basis alone and with their family. Additionally, all the surplus donations raised by the teams enabled more than 325 elementary schools to pay for projects that promote healthy life habits. The profits generated by The 1,000 KM are given to the Fondation du Grand défi Pierre Lavoie to support research of rare genetic diseases and projects promoting healthy life habits. In 2022, we are proud to mention the Tekna team has raised more than 16,000$ in our fund raise to Tekna team at Le Grand défi Pierre Lavoie 1: The CEO pay ratio is calculated by dividing the CEO's compensation by the pay of the median employee, meaning half of a company's workers make more and half make less. SUSTAINABILITY REPORT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 91 Focus area: Governance It is Tekna ’ s belief that it has a social responsibility to the communities reached through its operations, as they are key stakeholders to achieve green, circular, inclusive, transparent, and fair business practices that can succeed in the long-term. Respect for human rights is rooted in our values and key to our license to operate from employees, customers, investors, communities, governments and other stakeholders. A human centered business with respect for the individual and which recognizes the fundamental human rights for everyone is essential as there can be no climate resilience without social resilience. Vulnerability and injustices are exacerbated by climate change and its many adverse effects. Ac- countability of actions through better and trans- parent reporting can effectively tackle corruption and vulnerability challenges, supporting the devel- opment of local capacity-building and resilience: both necessary for an inclusive and sustainable global growth. Making sure we do things right Supporting our pyramid and supply chain is our ‘ Ethical business conduct ’ focus area. SDG 16 inspired its direction as we aim to substantially reduce cor- ruption and bribery in all their forms (16.5), and ensure responsive, inclusive, participatory, and representative decision-making at all levels (16.7). Furthermore, we aim to develop an effective, ac- countable and transparent business (16.6) and ac- tively work to ensure public access to information and protect fundamental freedoms, in accordance with national legislation and international agree- ments (16.10). consisting of one dependent and one independent Board member. Tekna is in the process of creating a Nomination Committee. In 2022 Tekna expanded its executive team to in- clude a VP for legal affairs. Two new board members are female increasing the diversity ratio to 50% (0%). The VP Legal Affairs is also female increasing the ratio of females in the Executive Leadership Team to 29% (17%). Read more in the Corporate Governance Report.  Business ethics Tekna has no revenue in countries with the 50% lowest rankings in the Transparency International ’ s Corruption Perception Index. The index includes 180 countries. 2022 Corruption Perceptions Index: Explore the … - Transparency.org Roadmap short and midterm In appendix B we have included a summarizing roadmap reflecting the various activities we are working. The governance roadmap is here.  Ambitious compliance program for 2023 In 2022, we rolled out the Employee Code of Con- duct (“ CoC ”) and 91% has already signed the code. We will reach 100% in Q1. In 2023 we put compli- ance on the agenda. We have planned an employ- ee training on the CoC. We look to expand our Supplier CoC to include Business Partners. To- wards the end of the year, we should have the Anti -Corruption Policy and training done in line with principle 10 of the UN Global Compact. And in order to also push our sustainability vision we look to educate our employees on Sustainability and back it up with an updated Environment Policy.  UN Global Compact We completed our submission to join the UN Global Compact in 2021 and we are a confirmed member since January 31, 2022. We will start com- municating on progress (“ CoP ”), which is due in June 2023. (link)  Progress in the Board of Directors and Executive Leadership Team Currently, Tekna has four Board members, none of whom are members of the company ’ s manage- ment. Two Board members are independent of company management and significant business partners. Two Board members, including its Chair Dag Teigland elected in 2022, have an affiliation with Arendals Fossekompani ASA, Tekna ’ s main shareholder. An Audit Committee was established Ethical business conduct Tekna supports the local cycling team 1 1: Faces blurred for privacy protection SUSTAINABILITY REPORT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 92 Part 4 | Restatements and Assurances Restatements 1. CO2 Scope 2 2019-2021 Corrected for Canada TPS and TAM facili- ties. The supplier, Hydro Sherbrooke, published its emissions, which are slightly higher than the default setting of zero emissions for hydro power in CEMAsys. 2021 is the baseline. For more information see the Carbon Accounting Report 2022 on www.tekna.com/esg 2. Energy intensity 2021 was restated due to incomplete electricity data taken in the calculation. 2021 Published 10.9 kwh / kg powder produced 2021 Correction 12.0 kwh / kg powder produced (See page 75) Independent assurance of this report This report was not independently reviewed or assured. Screen capture of relevant section of the Carbon Accounting Report 2022. Sustainability report Financial Statements Auditors report Contact Information Corporate Governance report CONTENTS ANNUAL REPORT 2022 This is Tekna Shareholder information Board of Directors ’ report 2022 CEO letter Board and Management | 93 A: Materiality analysis ................ 94 B: Sustainability Roadmap ....... 95 C: Abbreviations ........................ 101 Appendix Appendix SUSTAINABILITY REPORT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 94 Appendices Explanation to numbers in matrix on the right. In bold the items we deem of high materiality. A: Materiality analysis 2021 Categories Opportunity Risk Market 1. Increased demand for circular economy innovation and solutions, e.g. create products with lower resource density, better resource management, more recycled materials, and a zero-waste production. 2. Achieve a climate friendly production which ensures the offering of products with lower emissions than those of our peers, offer alternatives, and aim to have a positive impact on nature and biodiversity. 3. Increase customer interest by having a transparent and resilient focus on ESG targets (e.g. adapting new production sites in Japan and Korea by integrating relevant regulations). 4. Enable customers to reach their ESG targets, by AM producing e.g. more resource efficient products, and by addressing vulnerability challenges (e.g. transportation disrupted by extreme weather events), and building resilience to supply chain disruptions. 2. Increased competition and expectations on sustainability (targets, transparency, reporting, awareness) 3. Not meeting the sustainability targets of customers by driving GHG emissions, fuel consumption and waste (packaging, single-use & hazardous) production. 4. Rising energy prices and regulation taxes, such as EU import tax on carbon intensive raw materials (e.g. aluminum), increases costs of materials and high energy production. 5. Growing demand for green technologies drives demand for certain raw materials and decreases it for others that negatively impact the environment (e.g. Titanium, Silicon). Climate 5. Integrate climate change assessment into Tekna’s strategy and risk management in order to harness climate opportunities, mitigate climate risks and build resilience of operations. 6. TCFD disclosures provides opportunities to drive green transition and for positive attention from stakeholders (e.g. investors) 7. Supplier and production sites exposed to extreme weather events, causing power outages and disrupting deliveries (e.g. flood & wildfire risks in France; flood & storm risks with tier one Chinese suppliers of titanium and nickel). 8. Mining sector can permanently cause biodiversity damage, water stress and deforestation, impacting negatively the reputation of those involved and losing the confidence of stakeholders. 9. Conflict materials and higher temperatures puts workers' HSE at risk (e.g. workers in China and heat waves, ultimately reducing resilience and disrupting production). Financial 7. Increase investor and other stakeholder confidence by increasing transparency through reliable non- financial disclosures. 8. Reduce costs by producing more with less materials and by considering the limited availability of critical raw materials, which can spike raw material prices. 10. Unfavorable financing terms due to lack of ESG reporting and/or lack of reliable non-financial data, reducing the advantage for low-carbon solutions. 11. Fail to properly account for climate change and nature related risks and regulations, leading to financial consequences (e.g. fines & added costs) or losing customers. 12. Rising resource scarcity worsening the increasing costs of materials, raw materials, and energy due to restrictions, regulations and/or climate change. Internal 9. Opportunity to attract, recruit and retain talent by building a strong people culture and offering jobs with a greater purpose contributing to a more sustainable future. 6. Increased labor costs and failing to attract talents due to lack of sustainability focus Reputational 1. Negative reputation risk if suppliers and customers have negative environmental or social impact. SUSTAINABILITY REPORT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 95 Appendices (continued) B. Roadmap 1/6: Strategy, reporting and carbon accounting 2019-2021 Status Quo 2022 1 st report 2023 Transparency 2024 - ’26 Change 2030 Impact 2019-2021 2022 2023 2024-2026 2030 Status Quo > 1st report > Transparency > Change >> Impact Strategy Materiality analyses based on stakeholder interviews and value chain analyses Vision toward circularity in supply chain Update company vision and values to include sustainability Enhancing understanding and Measuring Vision on resilience Further integrate Environment in decision- making Sharpened Focus areas Vision to produce close(r) to point-of-use Reporting 2022 reporting: 2023 reporting: -Sustainability Report -Sustainability Report -Carbon Accounting Report -Carbon Accounting Report -GRI Report -GRI Report Transparency Act (also in focus area) -Human Rights and Transparency Act report -Human Rights and Transparency Act report EU taxonomy (also in focus area) EU taxonomy eligibility assessment EU taxonomy alignment preparations and Report EU taxonomy - full reporting (legal req.) EU taxonomy - evaluate opportunities to increase aligned activities Communication Website & Social media Website & Social media Website & Social media AMGTA panels Quarterly ESG reporting Quarterly ESG reporting UN UN Strategic Development Goals (SDG) selection 7, 9, 12 Signatory UN Global Compact (UNGC) UNGC Communication on Progress (Report) SDG target reporting Delivery on SDG 7, 9, 12 Content in 2019 + 2020 Sustainability Report AFK 2021 Sustainability Report Circularity in production and value-chain Resilient Supply-chains per continent the Tekna "voice" promotes sustainable (corp.) behaviour Continued enhancement of transparency SUSTAINABILITY REPORT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 96 Appendices (continued) B. Roadmap 2/6: Enabling Customer / Stakeholder impact Packaging Powder transportation container - design Powder transportation container - certify Powder transportation container - in operation Life-cycle assessments Life-Cycle Assessment titanium powder- start Life-Cycle Assessment titanium powder Manuals System manuals - green maintenance / disposal AMGTA AMGTA membership AMGTA panels analyse AMGTA research publication EU taxonomy EU taxonomy: 1) Substantial Contribution Assessment 2) DNSH Environmen-tal Impact assessments 3) Minimum Safeguards 4) Financial Reporting R&D Powder reconditioning titanium Find development partner to improve LiB capacity Certifications ISO 27001 Information Security ISO 14001 Environmental Management System ISO 31000 Risk Management We focus on: 1) Enabling technology & products for customers 2) Resource efficiency for customers 3) Emission and waste reduction for customers 4) Increased availability & affordability for customers and end-users 5) Extended life, recyclability and reduced costs for products and resources 2019-2021 Status Quo 2022 1 st report 2023 Transparency 2024 - ’26 Change 2030 Impact SUSTAINABILITY REPORT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 97 Resources and Production Improvement process gasses, reduction 20% Energy conservation through improved output Energy conservation in production Water conservation TPS plant Map upstream impacts; raw material extraction "Ici on recycle+" certification TPS (CA) . "Ici on recycle+" certification TAM (CA) Measure recycled material in feedstock Increase recycled material in feedstock Relighting mercury lights and fluorescents to LED (Canada) Imphytek: Recycling within nickel value-chain Map downstream impacts and opportunities Hololens Factory Acceptance Testing . Responsible Packaging Improve inbound and outbound packaging We focus on: 1) Tekna’s emissions from production and transport 2) Resource efficiency 3) Waste/water/energy management Appendices (continued) B. Roadmap 3/6: Circular and sustainable production 2019-2021 Status Quo 2022 1 st report 2023 Transparency 2024 - ’26 Change 2030 Impact SUSTAINABILITY REPORT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 98 Transparency Act ("TA") (business Partners) Roll out SCoC Roll out SCoC (continued) Transparency Act Update New supplier Assessment process Supplier audits Routine for requests for information Re T.A. Factlines Due Diligence top 25 suppliers Follow-up after DD External Whistleblowing system TCFD Climate-related risk Climate-related risk analyses TCFD roadmap Quantification of climate- related risk Supplier mitigation plans Supplier interviews for mitigation Mitigate risks in transport routes Product compliance REACH and RoHS certificates powders Completed responsible minerals initiative for potential confilict materials We focus on: 1) Diversification of suppliers and strengthening resilience of local communities 2) Improving environmental and social impacts of supplier manufacturing activities 3) Understanding exposure to climate- related risks and ensure the development of mitigation plans. Appendices (continued) B. Roadmap 4/6: Resilient and responsible supply 2019-2021 Status Quo 2022 1 st report 2023 Transparency 2024 - ’26 Change 2030 Impact SUSTAINABILITY REPORT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 99 Occupational Health & Safety (GRI 403) 430 OHS audits 345 OHS audits OHS audits OHS system in GRI report expand on OHS in GRI Employee satisfaction eSAT: 76% | eNPS: 22 eSAT: 76% | eNPS: -3 Measure eSAT and eNPS Employee Survey CORE employee representative team Anchored virtual collaboration in Work- from-Home policy Competence improvement (GRI 404) Competences: inhouse training Competences: inhouse training Competences: Inhouse training and budget Cyber security training Cyber security training Diversity and equality (GRI 405) Pay equity process design Pay equity process implementation Diversity: measure status quo Diversity: increase board and exec team Diversity: Improve at all levels Disability Accessibility Assessment We focus on: 1) Employee health, safety and security. 2) Employee satisfaction and development in all levels (administrative, engineers, factory). 3) Labour and human rights, particularly at production sites. 4) Diversity & Inclusion Appendices (continued) B. Roadmap 5/6: Great place to work 2019-2021 Status Quo 2022 1 st report 2023 Transparency 2024 - ’26 Change 2030 Impact SUSTAINABILITY REPORT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 100 Policy and training Code of Conduct Roll out CoC CoC training Supplier Code of Conduct Business Partner CoC Environment Policy Sustainability Training Anti-Corruption Policy and Training Board of Directors Board of Directors: improve independence Board of Directors: Nomination Committee Board of Directors: Sustainability Committee Board of Directors: Audit Committee Board of Directors: Remuneration Committee Governance Assessments Hire inhouse Legal Council Governance assessment: Audit of activity in China Certifications Sustainability report assurance B-Corporation certified ISO 26000 Social Responsibility ISO 37001 Governance of Organisations FTSE4Good index We focus on: 1) Zero tolerance on corruption and bribery 2) Increasing transparency 3) Best practice governance 4) Training our employees Appendices (continued) B. Roadmap 6/6: Ethical business conduct 2019-2021 Status Quo 2022 1 st report 2023 Transparency 2024 - ’26 Change 2030 Impact SUSTAINABILITY REPORT ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 101 Abbreviation Clarification Useful link Abbreviation Clarification Useful link AFK Arendals Fossekompani ASA Home - Arendals Fossekompani IR Injury Rate AM Additive Manufacturing ISO International Organisation for Standardisation ISO - International Organization for Standardization AMGTA Additive Manufacturer Green Trade Association Home - AMGTA IT Information Technology AR Absentee Rate KPI Key Performance Indicator BoD Board of Directors investors/governance (tekna.com) LCA Life Cycle Assessment Life-cycle assessment - Wikipedia CoC Code of Conduct LDA Lost Day Rate CoP Communication on Progress (Re: UN Global Compact) LiB Lithium-ion Battery CSR Corporate Social Responsibility LTI Lost Time Injury Rate eCoC employee Code of Conduct esg (tekna.com) NACE Nomenclature of Economic Activities eNPS employee Net Promotor Score NGO Non-Governmental Organisations ERP Enterprise Resource Planning NPS Net Promoter Score eSAT employee Satisfaction Score OECD The Organisation for Economic Co-operation and Devel- opment Home page - OECD ESG Environmental, Social and Governance esg (tekna.com) OEM Original Equipment Manufacturer EU taxonomy an European tool to help investors understand whether an economic activity is environmentally sustainable, and to navigate the transition EU taxonomy for sustainable activities | European Commission (europa.eu) OHS Occupational Health and Safety EY Ernst & Young R&D Research & Development FTE Full-time Employees SASB Sustainability Accounting Standards Boards SASB GDPR General Data Protection Regulation sCoC Supplier Conduct of Conduct esg (tekna.com) GHG Greenhouse Gas SDG Sustainable Development Goals THE 17 GOALS | Sustainable Development (un.org) GRI Global Reporting Initiative GRI - Home (globalreporting.org) TCFD Task Force on Climate-related Financial Disclosures Task Force on Climate-Related Financial Disclosures | TCFD) (fsb-tcfd.org) HSSE Health, Safety, Security and Environment TAM Tekna Advanced Materials HR Human Resources TPE Tekna Plasma Europe IoT Internet of Things TPS Tekna Plasma Systems IPCC Intergovernmental Panel on Climate Change IPCC — Intergovernmental Panel on Climate Change UN United Nations Homepage | UN Global Compact Appendices (continued) C. Abbreviations ADDITIONAL INFORMATION ANNUAL REPORT 2022 Sustainability report Contact Information Corporate Governance report This is Tekna CEO letter Board and Management Financial Statements Auditors report Shareholder information Board of Directors ’ report 2022 | 102 Tekna Holding ASA Langbryggen 9 4841 Arendal Norway Headquarter: 2935 Boul. Industriel Sherbrooke, Québec J1L 2T9 Canada +1-819-820-2204 [email protected] www.tekna.com/investors [email protected] www.tekna.com/esg request We encourage you to read the document on a device instead of printing it.

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