Windar Photonics : Consolidated Financial Statements 2022

Company number: 09024532

WINDAR PHOTONICS PLC

Report of the Directors and

Consolidated Financial Statements

For the year ended 31 December 2022

WINDAR PHOTONICS PLC

Contents

Company Information	2
Chairman's Statement	3
Strategic Report	5
Directors' Report	8
Corporate Governance Statement	13
Independent Auditor's Report	21
Consolidated Statement of Comprehensive Income	27
Consolidated Statement of Financial Position	28
Company Statement of Financial Position	29
Consolidated Statement of Cash Flows	30
Company Statement of Cash Flows	31
Consolidated and Company Statements of Changes in Equity	32
Notes to the Financial Statements	33
Notice of Annual General Meeting	54

WINDAR PHOTONICS PLC

COMPANY INFORMATION

Directors	Johan Blach Petersen (Non-executive Chairman)
	Jørgen Korsgaard Jensen (Chief Executive Officer)
	Paul Joseph Hodges (Non-executive Director)
	Andy John Richardson (Non-executive Director) (appointed 19
	December 2022)
Company Secretary	Edward Indran Ratnam FCA
	23 Chetwynd Park
	Cannock
	Staffordshire WS12 0NZ
Registered Office	3 More London Riverside
	London SE1 2AQ
Registered Number	09024532
Auditor	Jeffreys Henry LLP
	Finsgate 5-7 Cranwood Street
	London EC1V 9EE
Nominated Adviser and Broker	WH Ireland Limited (appointed 19 December 2022)
	24 Martin Lane
	London EC4R 0DR
	Cenkos Securities plc (resigned 19 December 2022)
	6.7.8 Tokenhouse Yard
	London EC2R 7AS
Registrars	Share Registrars Limited
	The Courtyard
	17 West Street
	Farnham
	Surrey
	GU9 7DR

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WINDAR PHOTONICS PLC

CHAIRMAN'S STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2022

Despite a very positive underlying business development in respect of the Group's general product offerings, the year 2022 turned out to be a very challenging year once again, heavily impacted by the general COVID-19 pandemic. During parts of the first half of 2022, the Group's Shanghai based subsidiary handling substantial parts of sourcing and logistic tasks within the Group, was effectively locked down. This consequently had a severely negative impact on production and deliveries from our assembly facility in Denmark in 2022.

Despite being constrained by additional COVID-19 related impacts, in relation to specific electronic component shortages in the market, the Group achieved full year revenue of €1.9 million, an increase of 236% compared to 2021 (€0.6 million). Most of this revenue was earned in the second half. Furthermore, despite the general challenges and continued component shortages continuing during the second half of 2022, the Group moved towards an EBITDA breakeven level in the second half of 2022 (loss of €0.04 million), based on recognized revenues of €1.5 million in the period.

Gross Profit for the year amounted to €0.9 million, an increase of 112% compared to 2021 (€0.4 million), corresponding to a Gross Margin in 2022 of 51% compared to 81% in 2021. The 2022 Gross Margin was restored to historical levels, whereas the Gross Margin in 2021 was impacted by exceptional items. The underlying Gross Margin in 2022 was achieved despite the Group experiencing substantial cost increases, related to logistical and component costs. The change in the product mix compensated for these cost increases. Overall Costs of Goods Sold (COGS) for 2022 increased by approximately 5%, compared to COGS in 2021.This meant that the substantial cost savings, related to the introduction of our One Unite platform in 2021, were eliminated in 2022.

Despite the overall challenges in 2022, the year has also shown some very encouraging developments in relation to the fundamentals of the product offerings of the Group. The combined WindEye™ and WindTimizer products provide a unique "Plug and Play" turbine integration solution, focused on increasing electricity generation from existing installed wind turbines. These have become even more valuable, due to the generally increased price levels of energy during the year, and further by the increased focus on the need to move towards more renewable energy sources in general. Due to these developments, the Group's order backlog increased by the end of year to €4.3 million (2021: €2.6 million). The product mix continues to be favourable compared to the order backlog entering 2022.

Overall EBITDA loss for the year was reduced to €0.8 million in 2022 compared to a loss in 2021 of €1.1 million. The EBITDA loss in 2022 was primarily realised during the first half of 2022, whereas the Group progressed toward an EBITDA break-even position during the second half of 2022.

During 2022 the Group continued its strong development effort, both related to expanding current product offerings and new deployment of our general Lidar technology. In the short term, one of the most important developments was related to our WindTimizer products, which now also cover an analogue interface for turbine integrations. This expands the potential total market for our plug and play integration solution within the Retro-fit market segment. Our participation in the drone-based CO2 emissions project Khaosguard is progressing well and initial milestones such as preliminary in field CO2 measurements have successfully been demonstrated.

Financial Overview

Revenue during the year increased 236% to €1.9 million (2021: €0.6 million). Gross profit was up 112% (2021:

(36%) to €0.9 million (2021: €0.4 million).

During the year, administrative expenses excluding depreciation amortisation and warrant cost increased to €1.76 million compared to €1.58 million in 2021, relating to development projects, following the increased revenues.

Net loss for the year before taxes and exceptional expenses, decreased to €1.2 million from €1.4 million in 2021, which included depreciation, amortisation, and warranty costs of €0.2 million (2021: €0.3 million) in aggregate.

The Group held cash balances at the end of the year of €1.4 million (2021: €0.04 million) and trade receivables at

the end of the year amounted to €0.4 million (2021: €1.0 million). During the year the Company raised €2.4 million before expenses through the issue of share capital.

The Group has capitalised its continued cost of investment in technology during the year of €0.3 million in 2022 (2021: €0.7 million) before grants of €0.1 million (2021: €0.4 million).

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WINDAR PHOTONICS PLC

CHAIRMAN'S STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2022

Outlook

Entering 2023 the Group had a strong order backlog of €4.3 million scheduled for delivery in 2023. In 2023 the Group has received additional orders scheduled for delivery in 2023 and further additional significant orders are currently being negotiated. Based on these developments the Group expects to realise a substantial revenue growth in 2023 compared to 2022.

In 2023 the Group expects to see a reduction of the average COGS compared to costs in 2022 supporting an expected modest Gross Margin increase in 2023.

Entering 2023, the production capacity of the Group was fully booked by customer orders for deliveries in the first half of 2023. Currently, the Group is focused on increasing capacity by at least 100% to be implemented mid-year 2023 and planning for a further doubling of capacity when entering year 2024.

In particular, considering the very unexpected challenges the COVID-19 pandemic brought upon us in the past two years, I would like to take the opportunity to thank our employees, partners and management in Denmark, China and UK for their efforts and loyalty to the Group in 2022.

BY ORDER OF THE BOARD ON JUNE 12, 2023

Johan Blach Petersen

Chairman

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