Windar Photonics : Consolidated Financial Statements 2023

Company number: 09024532

WINDAR PHOTONICS PLC

Report of the Directors and

Consolidated Financial Statements

For the year ended 31 December 2023

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	23
Consolidated Statement of Comprehensive Income	30
Consolidated Statement of Financial Position	31
Company Statement of Financial Position	32
Consolidated Statement of Cash Flows	33
Company Statement of Cash Flows	34
Consolidated and Company Statements of Changes in Equity	35
Notes to the Financial Statements	36

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WINDAR PHOTONICS PLC

COMPANY INFORMATION

Directors	David George Lis (Non-executive Chairman) (appointed 6 October
	2023)
	Jørgen Korsgaard Jensen (Chief Executive Officer)
	Paul Joseph Hodges (Non-executive Director)
	Andrew John Richardson (Non-executive Director)
	Gavin Maxwell Manson (appointed 14 February 2024)
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	Gravita Audit Limited
	2 Leman Street
	London E1 8FA
Nominated Adviser and Broker	WH Ireland Limited
	24 Martin Lane
	London EC4R 0DR
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 2023

Having delivered our second consecutive year of revenue growth of over 150% and the first positive EBITDA in the history of the Company in 2023, and with sales and orders for 2024 already at 125% of 2023 revenue when we raised £4.4m through an undiscounted capital raise in April 2024, the Company is well positioned to deliver its considerable potential.

Following the challenges in 2022 posed by the impact of the pandemic on supply chains, 2023 proved to be an extremely positive and pivotal year for the Company. Our second successive year of sales growth in excess of 150% allowed the achievement of positive EBITDA generation for the first time in the Company's history. As importantly, the sales momentum and pipeline established in the second half of 2023 gives confidence in our ability to maintain a similar trajectory of YOY sales growth with the resultant movement to significant profitability at EBITDA and EPS level. This confidence allowed us to seek and raise the £4.4m (before expenses) equity issue completed in April 2024 - providing not only the working capital and balance sheet strength necessary to move forward unconstrained by funding but also bringing new institutional investors onto our share register.

Our sales development and ability to raise capital has been facilitated by:

1. the continued development of our core physical LIDAR products for deployment across turbine platforms
2. development of our Nexus range of software products providing a platform for future development to enable data driven performance improvement for customers across individual turbines and entire wind farms
3. increasing commercial validation of the economic benefits of implementing our products through the now in excess of 1,000 systems deployed globally across turbine platforms in North America, Asia and Europe.
4. manufacturing process and capacity improvements as production is scaled up with increased quality assurance and product robustness

Our active product development now means that the proven 3-4% turbine performance improvement from installation of our WindEye and WindTimizer products will increasingly become an entry level benefit with our Nexus software range providing the opportunity for significantly enhanced turbine performance improvement, data driven maintenance planning and turbine life extension.

In April 2024 we were pleased to announce a €1.2m order marking a new relationship with a significant turbine operator in the North American market. As well as providing the potential for material further orders this also marked the first revenue from sales of software related services through our Nexus platform.

These developments leave the Company with a very exciting opportunity to develop scale and value and the Board are committed to delivering this value, as evidenced both through participation in the recent equity raise and in existing holdings.

During the year to 31 December 2023, revenue increased by over 150% from €1.9m to €4.8m. With 67% of revenue coming in the final 5 months of the financial year, this growth demonstrates developing sales momentum - albeit influenced by the seasonally slower first quarter for installations / invoicing due to weather conditions in Northern Hemisphere wind farm locations. Gross margins remaining at c50% provide a solid base for targeted progression as we extend our global reach and increasingly develop software related sales.

Our first positive financial year of positive EBITDA of €0.2m (before share-based payments) (2022: loss €0.8m) is a significant milestone, which, combined with our current order book and strong sales pipeline, gives us confidence for the future.

The Group exited 2023 with cash balances of €0.2m, influenced negatively by the concentration of sales late in the year and a resultant reduction in deferred revenue of €1m due to the timing of orders and scheduled deliveries.

With our strong order book coming into 2024 and the breakthrough €1.2m order from the new customer in North America in April 2024 that took our sales and forward order book for 2024 to €5.9m, the Board sought to raise capital in order to ensure that the company's development is unconstrained by working capital restriction, as well as provide the balance sheet strength necessary to develop new customer relationships and increase supply chain resilience. We were delighted to be successful in raising £4.4m (before expenses) through an equity placing at a premium share price of £0.35 - bringing in significant new institutional investors as well as individuals. The pricing of the issue demonstrated investor confidence in the Company's prospects and the Board is committed to ensuring that we deliver on the full potential of both our hardware and software products.

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WINDAR PHOTONICS PLC

CHAIRMAN'S STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2023

Board & Employees

Whilst the Group has developed significantly over the last 24 months, these have not been easy years for the Group's employees and we as a Board thank them for their resilience and dedication through, first of all, the pandemic, and then the challenges of rapid growth.

Having joined the Board as Chairman in October 2023, I was pleased to welcome Gavin Manson to the Board as a Non-Executive Director in February 2024. Gavin brings broad experience as a CFO of listed and developing companies and will bring focus on the development of robust financial and operational processes to support our targeted growth.

The Board and employees of Windar were shocked and greatly saddened by the sudden and unexpected passing of Johan Blach Petersen, my predecessor as Chairman, in April 2024. Johan was instrumental in the development of Windar over many years and his contribution was a significant factor in seeing the company through some difficult times on the way to our successful 2023 and the Company's current strong position. He will be greatly missed.

Outlook

With our sales and forward order book in June 2024 already reflecting over 125% of entire 2023 revenue, supported by a strong and developing order pipeline, we have confidence in the growth of sales of WindEye and WindTimizer hardware, and increasingly, of our Nexus software related services. To date, our sales focus has been largely around the Vestas V82 turbine platform, where there still remains significant potential, but we are beginning to successfully test and target sales on other turbine platforms, such as Senvion and GE, thereby hugely increasing the Company's prospects for future growth.

With a strong balance sheet, ongoing successful product development, increased manufacturing capacity and greater supply chain resilience, the Board looks to the future with confidence.

David George Lis

Chairman

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WINDAR PHOTONICS PLC

STRATEGIC REPORT

FOR THE YEAR ENDED 31 DECEMBER 2023

The Directors present their Strategic Report and the audited financial statements for the year ended 31 December 2023.

PRINCIPAL ACTIVITIES OF THE GROUP

Windar Photonics is a technology Group that has developed LiDAR wind sensors and a related software suite designed to efficiently and cost effectively increase the power output and reduce the lifetime operating costs of electricity generating wind turbines. LiDAR wind sensors in general are designed to remotely measure wind speed and direction.

The Group's key physical products are the WindEYE™ and WindVISION™ sensors which measure the wind speed at different measuring points by scanning a laser beam ahead of the wind turbine. By measuring the wind speed a variety of wind information is derived such as wind direction, turbulence, wind shear, wind gust and wake detection. The products and various algorithms are designed for the general optimisation of wind turbines both in respect of increasing the Annual Energy Production and general load reduction options.

The Group has recently developed and implemented the first phase of its Nexus software platform to support the data driven management of the improvement of performance of individual wind turbines and in future turbine farms.

REVIEW OF THE BUSINESS

The Chairman's Statement on page 3 and 4 includes a general review of the Group's business for the year.

FUTURE DEVELOPMENTS IN THE BUSINESS

Independent Power Producers (IPPs) and Wind Park Operators are primarily interested in general optimisation of existing wind turbines thereby potentially increasing power output. One method of achieving this is by optimisation of the yaw alignment of the wind turbine, meaning that the wind turbine is better facing the wind. This can be obtained by fitting a LiDAR wind sensor such as the WindEYE™ sensor. Windar's sales progress in 2023 marked a breakthrough year for the Group and this has again seen transformational development through a significant new customer relationship in North America. In April 2024 we signed a significant €1.2m order with this North American client as a first stage in addressing the substantial opportunity.

As well as including the sale of a number of WindVISION sensors the North American order also marked the first revenue from services related to our Nexus software platform. This platform will increasingly be the foundation for future developments in the provision of enhanced services giving clients with our WindEYE and WindVISION products the opportunity to realise performance improvements beyond the core wind alignment benefits from installation of our hardware. The data and benefits from utilising current and future Nexus software modules will optimise alignment, operating hours, planned maintenance and operating life of individual turbines as well as incremental benefits from the consolidation of data and response across wind farms.

GROUP RESULTS AND DIVIDENDS

In the year ended 31 December 2023, Windar Photonics achieved revenue of €4.8 million (2022; €1.9 million) from sales of WindEYETM and WindVISIONTM sensors and related services which represent a revenue increase of 157% from 2022. The total gross profit for the year amounted to €2.4 million (2022; €0.9 million) representing an increase of 167% from the prior year.

The Group loss for the year before taxation and exceptional expenses decreased to €0.35 million (2022: €1.3 million).

No dividends are payable for the year under review (2022: No dividends payable).

CAPITAL INCREASE

Following the period end, in April 2024, the Group raised £4.4m of capital through the issue of 12,631,426 Ordinary Shares at an undiscounted price of 35p per share. The Capital was raised in order to provide the Group with the working capital necessary to satisfy demand for its products and increased balance sheet strength.

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WINDAR PHOTONICS PLC

STRATEGIC REPORT

FOR THE YEAR ENDED 31 DECEMBER 2023

PRINCIPAL RISKS AND UNCERTAINTIES

Sales cycle and product acceptance

As with many large projects the successful addition of a client and the successful installation of the Group's product for a potential client can entail a long sales cycle, which often also involves protracted negotiations and meeting detailed technical specifications and requirements, the length of which may adversely affect the Group's financial situation and cash flow and increase project costs. Furthermore, there can be no guarantee that the commencement of such negotiations will result in successful addition of a client and, as such, significant time may be spent, and expense may be incurred without return for the Group.

As the Group increases its presence in the market and is undertaking projects with IPP, Wind Farm Operators and OEMs the sales cycle risk is reduced, as there are more potential clients, and the non-conversion of any potential client is less of a risk to the business. As the Group continues to grow this risk will become a normal trading risk.

Products and services failure

Quality is critical to the Group's business solution. While the Group's technology is complete and extensive security and scalability testing has been carried out, a major system defect, due to design mistake or technology failure could impact upon current and future customer demand. This may lead to adverse press and market commentary damaging the reputation of the Group, and require rectification costs and/or claims against the Group. Further, all sales made by the Group are made with a two-year warranty with the first sale having been made in the fourth quarter of 2013. No major claims have been made under such warranties and the Group has worked with its customers to enhance the installations on site to date but there can be no assurance that the Group will not incur significant liabilities in satisfying warranty claims in the future.

The Group has not had to initiate a product recall. However, it may be exposed to product recalls if its products are faulty or if regulations are breached. If the Group has to recall products, it may incur significant and unexpected costs and damage to its reputation. The Group has implemented quality control procedures to mitigate this risk.

Reliance on suppliers

The substantial part of subcomponents that are assembled into the WindEYE™ and WindVision™ sensors are manufactured and supplied by third parties. It may be difficult to replace any of these subcomponents if there was an interruption in the supply, consistency, quality or timely delivery or an increase in costs above the forecast levels, which could adversely affect the Group's operating results or harm its reputation. Any such interruption where the Group is unable to locate and engage an alternative within a reasonable time and at an acceptable cost may result in the Group being unable to offer its services or products or a material interruption in the provisions of its services or products, which in turn may have a material adverse effect on the Group's business and prospects.

Other commercial factors

The Group is still in an early business cycle stage and now entering the next higher growth cycle means that the Group will be exposed to a higher concentration of single customers and/or contracts. In 2023 this was illustrated by the fact that 2 customers accounted for 55% of the annual Group revenue (2022: 2 customers, 64%). New orders received post the period end are expected to significantly reduce concentration in 2024 and beyond. The Group is aware and is paying attention to the potential commercial risk this development brings. One of the ways to mitigate this risk going forward is to continue to focus strongly on both ongoing, but just as important, new OEM projects with the view over time to developing a broader customer base.

Being in an early business cycle the Group has been dependent on financing the business through placing of shares in the market primarily to finance annual losses generated in the Group. The Group is aware of the risks associated with being dependent on such capital sources. The focus in the Group to mitigate this risk is to arrive at a position where any potential future share placings primarily will be needed for financing of working capital and not financing of annual losses. Following the April 2024 share issue, no further issues are anticipated.

Reliance on key personnel

The Company's future success is substantially dependent on the Group's ability to attract, train, motivate and retain key management, commercial and technical personnel with the necessary skills and experience. There is no guarantee that the Group will be successful in attracting and/or retaining key personnel. The loss of any of these key personnel for whatever reason may have a material adverse effect on the future of the Company's business.

Confidentiality

In order to protect its proprietary technology and processes, the Group relies on confidentiality agreements with employees, licensees, independent contractors and other third parties. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of disclosure of confidential information. Costly and time-consuming litigation could be necessary to enforce and determine the scope of the Group's proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect the Group's competitive business position.

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WINDAR PHOTONICS PLC

STRATEGIC REPORT

FOR THE YEAR ENDED 31 DECEMBER 2023

SECTION 172 OF THE COMPANIES ACT 2006

The Directors are well aware of their duty under Section.172 of the Companies Act 2006 to act in the way which they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole and, in doing so, to have regard (amongst other matters) to:

• the likely consequences of any decision in the long term;
• the interests of the Company's employees;
• the need to foster the Company's business relationships with suppliers, customers and others;
• the impact of the Company's operations on the community and the environment;
• the desirability of the Company maintaining a reputation for high standards of business conduct; and
• the need to act fairly between members of the Company.

The Board recognises that the long-term success of the Group requires positive interaction with its stakeholders. Positive engagement with stakeholders will enable our stakeholders to better understand the activities, needs and challenges of the business and enable the Board to better understand and address relevant stakeholder views which will assist the Board in its decision making and to discharge its duties under Section 172 of the Companies Act 2006. The comprehensive interaction with stakeholder incorporates among others regulatory announcements as well as direct communication between Shareholders and the Board.

In Windar Photonics, we set an honour in building long-term corporate relationships, with both suppliers, customers and development partnerships, which has been an essential part, since the incorporation of the Group and is still today a fundamental part of our progress.

One of the biggest assets in Windar Photonics PLC is our team members. Their hard work and personal commitment are highly valued and is the cornerstone for the continued positive future journey for the Group. We will continue to ensure the well-being, embracedtheir ambitions and empower them, as an essential part of our Group.

KEY PERFORMANCE INDICATORS

The Group considers the revenue, the EBITDA development, cash balances, levels of debt, and employee numbers as the current key performance indicators of the business as it has been in a start-up phase.

Revenue for the year was €4.8 million (2022: €1.9 million) representing an increase of 157% and Gross Profit showed an increase of 154%.

EBITDA gain, representing the loss from operations and adding back the depreciation and amortisation charges of €0.2 million (2022: €0.2 million), amounted to €0.1 million (2022 loss: €0.8 million).

At 31 December 2023 the Group had cash balances of €0.2 million (2022: €1.4 million).

Trade receivables at the end of the year increased to €0.5 million (2022: €0.4 million).

The Group's loans at 31 December 2023 amount to €1.8 million (2022: €1.9 million) of which €0.5 million (2022: €0.2 million) is classified as current.

Employee numbers at 31 December 2023 were 29 (2022: 23).

BY ORDER OF THE BOARD ON JUNE 29, 2024

Jorgen Korsgaard Jensen

Director

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WINDAR PHOTONICS PLC

DIRECTORS' REPORT

FOR THE YEAR ENDED 31 DECEMBER 2023

The Directors present their report and the Financial Statements for the year ended 31 December 2023.

FUTURE DEVELOPMENTS

The future developments for the Group are discussed in the Chairman's Statement and the Strategic Report.

GROUP RESULTS AND DIVIDENDS

The Group results and dividends are shown in the Strategic Report.

DIRECTORS

The Directors of the Company during the year were:

Jørgen Korsgaard Jensen

Johan Blach Petersen (resigned on 9 April 2024)

Paul Joseph Hodges

Andrew John Richardson

David George Lis (appointed on 6 October 2023)

Gavin Maxwell Manson was appointed on 14 February 2024.

DIRECTORS' INTERESTS

Jørgen Korsgaard Jensen (held by Pasinika Limited. see below)

David George Lis

Paul Joseph Hodges

Johan Blach Petersen

Andrew John Richardson

Gavin Manson

As at 31 December 2023

Ordinary Per cent Warrants Shares

5,649,864	8.3%	-
337,500	0.5%	-
2,125,318	3.1%	-
1,882,841	2.8%	-
-	-	-
-	-	-

As at 6 June 2024

Ordinary	Per cent	Warrants
Shares
5,649,864	7.0%	-
1,826,071	2.2%	-
3,545,318	4.4%	-
1,882,841	2.3%	-
50,000	0.1%	-
428,571	0.5%	-

SIGNIFICANT SHAREHOLDERS

Shareholders who have notified the company of shareholdings in excess of 3% as at 31 December 2023 and at 6 June 2024 are as follows:

	As at 31 December 2023	As at 6 June 2024
	Number of	Percentage	Number of	Percentage
	ordinary shares		ordinary shares
Pasinika Limited	5,649,864	8.3	5,649,864	7.0
Paul Joseph Hodges	2,125,318	3.1	3,545,318	4.4
Danmarks Tekniske Universitet	2,352,990	3.4	2,352,990	2.9
Milton Holding Horsens A/S	2,119,400	3.1	2,119,400	2.6

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WINDAR PHOTONICS PLC

DIRECTORS' REPORT

FOR THE YEAR ENDED 31 DECEMBER 2023

DIRECTORS' BIOGRAPHIES

David George Lis (Non-Executive Chairman), aged 74

David George Lis is an experienced non-executive director within investment and fund management. David joined Norwich Union Investment Management in 1997 (later merging to form Aviva Investors), before becoming Head of Equities in 2012 and latterly Chief Investment Officer, Equities and Multi Assets, until his retirement in March 2016. David is currently the Chairman of WildLife Group Limited, the Senior Independent Director of Melrose Industries plc and Hostmore Plc and a Non-Executive Director of Dowgate Capital Limited. He has previously held the position of Senior Independent Director of Electra Private Equity plc as well as being a non- executive director of BCA Marketplace plc and the Multifamily Housing REIT plc.

Jørgen Korsgaard Jensen (Chief Executive Officer and Founder), aged 61

Jørgen Korsgaard Jensen is an expert in optical technology solutions and has been involved in Research & Development projects in the field of optical technology in collaboration with the Danish Technical University, DTU for more than twenty years. Prior to that he held leading positions in international companies with responsibilities for strategy, finance, purchasing and logistics. He is the chief executive and founder of OPDI Technologies A/S, which is a technology incubator company focused on development of opto/electronic sensors primarily for consumer electronic products.

Further, he is chief executive of WaveTouch Group Limited, which develops and markets optical touch screen technologies.

The businesses of Windar Photonics and WaveTouch Group Limited were both initially created by, and are derived from businesses within OPDI Technologies A/S.

Paul Joseph Hodges, aged 64

Paul Joseph Hodges has had a career in the City of London, spanning 40 years, as an investment analyst, stockbroker and corporate financier. During this period, Paul has held prominent roles at S G Warburg, James Capel, Schroder Securities, Collins Stewart and Cenkos plc. Paul was a founding partner of Cenkos, a main board director and a central figure in the firm's landmark deals. He now acts as an independent consultant. Paul has a B.Sc(Economics) degree in Econometrics from the London School of Economics and a M.Sc degree in Management Science from Imperial College, London.

Andrew John Richardson, aged 59

Andy is a non-executive chairman, director and board advisor who helps businesses to achieve success. Andy has a wealth of expertise across a range of organisations at CEO, Chair and non-executive levels, including having been Chairman of Rubicon Partners Industries, CEO of Arc Specialist Engineering Limited and CEO of Metalrax Group Plc. He has a strong track record in business transformation, scale-up and international development in quoted, private equity and family office ownership structures. He has a demonstrated history of success internationally in the manufacturing sector including Automotive, FMCG, Medical Devices, Aerospace, Off-Highway, Engines, Consumer Products, Safety Products, Building Products. Andy was educated at Cambridge University holding two degrees, M.A. and M.Eng. Andy loves helping people to succeed.

Gavin Maxwell Manson, aged 58

Gavin Manson is an experienced non-executive director and CFO. He is currently CFO of agriculture and engineering group Carr's Group plc and is a Non-Executive Director of healthcare group Meallmore Ltd. He was previously Chairman of Hostmore plc and between 2016 and 2022 was Chief Financial and Operating Officer of Electra Private Equity PLC having previously held senior finance positions in a number of listed companies including Thomas Cook Group plc, Premier Farnell plc and Merck KGaA.

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