Araca Energy : Ecoteq Energy – Annual Report 2022

ECOTEQ ENERGY ASA

CONSOLIDATED FINANCIAL STATEMENTS AND STANDALONE FINANCIAL STATEMENTS OF THE PARENT COMPANY PREPARED IN ACCORDANCE WITH SIMPLIFIED APPLICATION OF INTERNATIONAL ACCOUNTING STANDARDS ACCORDING TO THE NORWEGIAN ACCOUNTING ACT § 3-9

31 DECEMBER 2022

Contents

	Page
Group Financial Statement of Ecoteq Energy ASA
Consolidated Statement of Comprehensive Income	7
Consolidated Statement of Financial Position	8
Consolidated Statement of Cash Flows	9
Consolidated Statement of Changes in Equity	10
Notes to the Consolidated Financial Statements	10-22

BOARD OF DIRECTORS' REPORT

Ecoteq Energy ASA (the "Company" or "Ecoteq") is a leading global sand oil extraction company that combines cutting- edge technology with an unwavering commitment to environmental sustainability. The Company's mission is to extract oil from waste materials in an eco-friendly manner while generating significant profits.

The Company's headquarter is located in Oslo, Norway. Ecoteq Energy is listed on the NOTC A-List in Norway under the ticker ECOT.

The Company changed its name from Araca Energy ASA to Ecoteq Energy ASA in December 2022.

Operations

In 2022 the Company had ownership interest in Aladdin Oil & Gas (Cyprus) Ltd ("Aladdin"), Culebra Holding Ltd ("Culebra"), Larchbay Traders & Consultants Ltd ("Larchbay") and Select Investment Ltd ("Select") together ("the Group").

Aladdin and Culebra were in 2022 financial investments for Ecoteq and the Company owned 47.6% and 34.3% respectively. Culebra owns 100% of the Russian company OOO Geotechnologia ("Geotechnologia"). Larchbay and Select was in 2022 100% owned subsidiaries.

In 2022 there were limited progress in the development of the underlying assets. Due to the now ongoing war between Russia and Ukraine all activity was very challenging and information from the companies have been limited.

Subsequent Events

In an extraordinary general meeting 31 March 2023, the following resolutions were passed:

• Decrease of the share capital from NOK 22 332 240 by NOK 16 749 180 to NOK 5 583 060 through a reduction of the nominal value of the Company's shares to NOK 5.
• The Board decided in 2022 to propose a purchase of 100% of the shares in Valkor Environmental LLC ("Valkor") for the AGM. Valkor owns 6 parcels in Unitah County in Utah, a license to extract oil as well as a license to use the extraction technology of Petroteq Energy Inc. The company has 2P reserves corresponding to approx. 121 million BOE. The company was owned by Global Commodities Business Partners Ltd ("GCBP") and after the acquisition, GCBP through its shareholders is now Ecoteq's largest shareholder. The purchase price was NOK 2 624 964 120 and was settled with new shares in Ecoteq. The shares were issued at NOK 9 per share each with a face value of NOK 5.
• In order to secure an additional upside for the existing shareholders, the general meeting decided to issue
  5 583 060 warrants to shareholders of the Company as per the date of the general meeting. No consideration is to be paid for the warrants. Subscription price is NOK 9 per share, and notice of exercise must be given no later than 31st March 2025.
• Divest all of the Company's shares in Aladdin, Culebra, Larchbay and Select to Saur International LLP against a consideration of USD 100.
• Election of new Board of Directors:

• 1. Raymond Gerald Bailey, chairman o Tatiana Melkaia
     o Karar S. Doomey o Kari Hübner
• A Private Placement was proposed by the Board, the share capital of Ecoteq Energy ASA shall be increased by NOK 5 508 000 by subscription of 612 000 shares, each of a nominal value of NOK 5, the subscription price was NOK 9 per share. The Private Placement were fully subscribed by Santana in Stockholm AB.

In March 2023, Lars Erik Bengtsson was appointed as CEO in the Company.

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Financial statements 2022

The Company prepares and presents its accounts in accordance with Simplified International Financial Reporting Standards (IFRS). The Board of Directors and the CEO consider the statements and corresponding notes presented in this report to give a correct and accurate summary of the Company's operations and position as at 31 December 2022.

The accounts for 2022 includes only the parent company Ecoteq Energy ASA.

Operating revenues for the year ended 31 December 2022 amounted to MNOK 0.1 compared to MNOK 0.2 in the year ended 31 December 2021. For the year ended 31 December 2022 the Company incurred a loss from operations of MNOK 2.2 (for the year ended 31 December 2021 the Group incurred a loss of MNOK 1.6).

Loss after tax for the year ended 31 December 2022 was MNOK 3.8, compared to profit of MNOK 7.4 for the Group in 2021. The profit in 2021 was due to a reversal of accruals in the subsidiary Larchbay.

Net working capital is negative with MNOK 0.4 in the end of 2022. (2021: MNOK negative MNOK 20.9). Available cash and cash equivalents as at 31 December 2022 were MNOK 0.1. The Company did not have any interest-bearing debt in the end of 2022.

As at 31 December 2022, the Company had total assets of MNOK 0.4. Total Shareholders' equity was minus MNOK 0.4.

In December 2022, a total of NOK 24 130 498 in outstanding debt was converted to equity at NOK 0.032 per share, resulting in 754 078 075 new shares.

Board of directors and key management

In 2022 the Board consisted of:

• Mr Rashid Ibrahim, Chairman of the Board
• Mr Abdulkareem Al Mutawa
• Mrs Tatiana Melkaia

Gender equality

Out of three employees and consultants in the Group as of the year ended 31 December 2022, there is one woman. Women are represented in the board members in Ecoteq Energy ASA. The Company is trying to recruit women to Group management positions. Women are well represented in the Group. There are no significant differences in employee benefits between men and women.

Working conditions

Safe working conditions are a fundamental prerequisite for the future growth of the Group. The Board and the CEO consider the working conditions in the Group to be satisfactory. No serious accidents resulting in major personal injuries or material damage have been reported in year ended 31 December 2022.

Research & development activities

The Group has not undertaken any research and development (R&D) activities in year ended 31 December 2022.

Anti-discrimination

The Discrimination Act´s purpose is to promote equality, ensure equal opportunities and rights, and prevent discrimination. The Group is working actively to promote this in all of the Group's activities including recruitment, salary, working condition, promotion, development and protection against harassment.

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The external environment

The Company was in 2022 an indirect minority owner of Geotechnologia, an operator of the Group's oil & gas fields in Russia. During drilling, the responsibility for the wells may be transferred to a subcontractor (drilling company) which holds full responsibility for the operations and any reporting to Russian authorities until the well is finished. When a well is finished and ready for production, the responsibility for the well is transferred back to the operating entities. The Board is aware of the importance in finding industrial solutions protecting the external environment and ensuring coexistence with other important industries. The Company upholds the laws and regulations applying in Russia at all times. No environmental incidents have been reported to Ecoteq for the year ended 31 December 2022 or to date. Due to the war between Russia and Ukraine there is a risk that not all information was available to the Board or Management of Ecoteq.

Financial risk

Mainly, the Group´s financial risks are currency risk, price risk and liquidity risk. The Group seeks to achieve an acceptable risk level within these areas. As to interest rate risk, the Company's loans were converted to equity in 2022. The functional and presentation currency for the Group is Norwegian kroner, while the subsidiaries in Cyprus and UAE had presentation currency is US dollars. The Group was therefore exposed to currency risk in 2022. In 2023, Valkor will be a part of the Group, having functional and presentation currency in USD.

As to liquidity, the Company is in a development phase and has currently low or no revenue. The access to necessary funds to maintain its operation is considered to be a low risk factor after the purchase of Valkor and a subsequent equity raise in 2023.

Business ethics

The Company has adopted a policy that all activities and operations are to be conducted in a professional and safe manner, without injuries to humans or environmental damage. Training and exercises are important measures to achieve such. The Company supports honesty and trustful relationships with its business partners as well as the local community and has zero tolerance of corruption.

Going Concern

The Company had negative equity in the end of 2022. However, a NOK 5.5 million share issue was made in 2023 which resulted in positive equity and liquidity to for operations in 2023. The Board of Directors' intention is to maintain the Company as a going concern and the financial statements have been prepared based on the going concern assumption.

Outlook

After the purchase of Valkor, Ecoteq will now be a global leader in sand oil extraction, combining technology and environmental sustainability to extract oil from waste materials efficiently. The Company's closed-loop system, which recycles 95% of solvents used in the process, results in no greenhouse gas emissions, no wastewater or toxic trailing ponds, and no water usage. The company has 2P reserves corresponding to approx. 121 million BOE.

Parent company accounts and the coverage of the loss for the year

The profit and loss account for the parent company Ecoteq Energy ASA showed a loss for the year ended 31 December 2022 of MNOK 3.8 (2021 Loss MNOK 3.2).

The Board propose to post the loss to accumulated losses.

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