Led Ibond International A/S

Management’s reviewLetter from the CEOSuccessful streamlining of the business resulted in external revenue increase of 60% in 2022Today, LED iBond International’s (LED iBond) Board of Directors approved the full year report for 2022 to besubmitted for approval at the annual general meeting on 24th April 2023. Martin Løbel, CEO of LED iBondinternational comments“We are pleased to see that total revenue increased 23% from Q3 2022 to Q4 2022, hereby marking the thirdconsecutive quarter in a row with growth. Looking at revenue from external customers specifically, anddisregarding revenue from LED iBond’s Spin-off companies, revenue increased 60% compared to the yearbefore – from DKK 2.4 million in 2021 to DKK 3.9 million in 2022.We are also delighted that LED iBond in 2022 succeeded in raising DKK 8 million despite difficult financialmarkets. The progress in Q4 underlines the importance of the strategic initiatives in refocusing our smartbuilding sales activities, where TRACY®’s design and form-factor are unique selling points, and secondly todevelop vertical farming solutions for the longer term. We continue to see increased lead generation from ourfocused sales & marketing activities.Acceleration of top-line growth remains our number one priority, but at the same time, tight cost control, burnrate deduction, and streamline of our operation, have also been key objectives since I joined the company inMay 2022. It is therefore with great satisfaction that we observe that our cash flow (burn) from operationand investments in Q4 2022 has been reduced with more than 50% compared to the average level of cashburn for the full year 2021.To continue to stimulate growth through investment in sales and marketing activities, product development,and to extend the Company’s runway towards self-sustained operations, the management and Board ofdirectors will also in 2023 search and assess all relevant opportunities for raising capital to support thebusiness going forward.So, while we can be pleased with many things, it is, however, somewhat disappointing that the larger scalecommercial break-through driven especially by vertical farming is yet to fully materialize. While the pipelineof leads and potential orders is promising, customer decision making processes for large projects are simplylonger than initially expected, not least given macroeconomic uncertainties.In light of present level of revenue and for prudency reasons, we have decided not to include tax assets in thefull year account but rather keep tax loss carry forwards off balance sheet to be used against future taxableincome generated from future growth.”

Business developmentSmart Building: For Q4, the smart building market once again contributed with the larger part ofreported revenue, driven by steady sales of TRACY® for the kitchen segment and Canopy panels forindustrial use. Furthermore, TRACY® was introduce in black colour and sold into a large indoor interiorlighting project in South Korea.As announced in company announcement no. 70 26th January 2023, orders were received for TRACY®INDUSTRY lighting panels for two solar carport projects (Germany and Netherlands) and an indoorparking facility (Denmark) with a combined Q4 2022 order value of approximately DKK 400K, set fordelivery during 2023.Customers have widely recognized the uniqueness of the flagship product TRACY® - both in terms ofdesign, slim form-factor, ease-of-installation and energy efficiency - which positions the company forstrong growth in the market for solar carport and parking garage lighting in particular.LED IBond has more than 10 installations currently in place across Europe and the Middle East. Morerecently commercial interest has started to spread across other parts of Europe as well as the US withsample kits ordered and delivered for testing. The pipeline currently includes several larger salesopportunities in Europe.Vertical Farming: The expected long-term growth in vertical farming remains widely recognised and LEDiBond is positioned well to capitalise as the market gains more momentum. LED iBond has establishedclear proof of product and superior qualities against many comparable products, as a result of which thecompany received several orders for smaller pilot projects in 2022. The large sales opportunities in thepipeline, which represent anywhere from DKK 2-8 million individually, are yet to materialise during 2023and beyond.In late 2022, LED iBond started exploring how LED iBond’s Horticulture lighting solutions can be applied inthe well-establish greenhouse market as top-lighting and not only in vertical farms. Based on initialfeedback from potential customers in Denmark and other parts of Europe, LED iBond believes that thecompany’s technology represents a competitive alternative also in top-lighting solutions. As such, newprototypes are expected to be available for customer engagement during Q2 and Q3 2023.UV Disinfection: As announced in company announcement no. 57 13th July 2022, LED iBond is lookinginto the possibility of supplying UV disinfection modules to third-party manufacturers of disinfectionequipment. It is the expectation that the market for UV solutions will gradually shift to LED technology,rather than traditional Hg-based mercury lamps which EU has banned from March 2027. LED iBondtherefore continues with limited resources to monitor and investigate UV opportunities even if it may notmaterialize short term in volume.OperationThe new management team (CEO, CTO, CFO) was set in 2022, with a view to further sharpen the strategyto accelerate sales and streamline operations. The revised strategy includes stronger cost control, afocused market approach with fewer customer segments, a targeted product portfolio with preciseproduct/market fit, and a much stronger and aligned execution of sales processes throughout the entireorganization to support the growth phase during 2023 and beyond.The cost structure of the company’s product portfolio has historically been too high to ensure acceptablemargins, and significant efforts and development has therefore been completed during 2022 to reduceproduction cost and streamline manufacturing processes. As a result, the production cost has for someproducts been reduced with as much as 30% resulting in potentially significantly more competitive pricingto customers and better margins for LED iBond. Furthermore, the Operation and Finance functions havebeen digitalised with an ERP system that has further successfully resulted in headcount saving.LED iBond is ready for growth and has an automated production line in Farum (800 m2) with capacity for200,000+ meters of TRACY pa. Currently, ~10,000 meters are produced per year, hereby utilizing less than5% of the full capacity. As such, revenue growth can accelerate significantly without driving the need forincremental investment into this production line.Acceleration of top-line growth remains the number one priority. As a result, the company will in the shortterm continue to focus sales and marketing efforts on selected smart building market segments to boostshort-term revenue growth and on vertical farming projects for longer-term growth. In addition, thecompany continues to operate with tight cost control. Cost reduction initiatives have been initiatedthroughout second half of 2022, with effects materializing fully in 2023. The head count by the end of 2022was down ~50% compared to 2021. Consequently, the burn rate level at end of 2022 has been reducedwith ~40% compared to 12-months earlier.During 2022, new and focused sales & marketing efforts (direct and digital) have been implementedincluding a new CRM system. During Q3+Q4, efforts resulted in an increased pipeline of new customerprospects (contact with ~1,100 new companies) and several sales opportunities (pipeline of ~50M totaland ~8M weighted).Financial DevelopmentIn Q4 2022, LED iBond generated total reported revenues of TDKK 1,233, an increase of TDKK 861 (231%)relative to the same quarter last year. Compared to Q3 2022 revenue was up by TDKK 232 (23%). Totalreported revenue decreased from TDKK 5,380 in 2021 to TDKK 3,958 in 2022 due to mentionable sales(TDKK 2,945) to spin-off companies in 2021. Importantly, and more reflective of the real commercialmomentum, revenue from external customers increased 60% in 2022 - from TDKK 2,435 in 2021 to TDKK3,889 in 2022.In Q4 the company completed an EU project. The deferred income from the project was DKK 2.5 million.In total revenue from sales and the completed EU project amounted to an income of DKK 6.5 million.EBITDA for Q4 amounted to a loss of TDKK 5,068 an improvement of 40% relative to the previous Q4.For 2022, EBITDA decreased by TDKK 1,496 primarily due to lower capitalisation of development costsand revenue. Further, stock related costs have been reclassified from financial costs to administrationcosts. The same explanation applies to the development in EBIT.Net profit decreased TDKK 26,214 due to reduction of the company’s deferred tax asset (tax lossescarried forward). From a perspective of prudency, the company has chosen to reduce its deferred taxasset to zero. As revenue and profit growth start to materialise in scale, the company will be able torebuild the deferred tax asset recorded on the balance sheet. Total tax losses carried forward per 31December 2022 amounts to appx. MDKK 115 and represents a value of more than MDKK 25 (at 22%company tax rate) of which none is reported on the balance sheet per 31 December 2022.Total cash flow for Q4 shows an inflow of TDKK 4,858 against an outflow of TDKK 6,350 in Q4 2021. Theincreased cash inflow in Q4 is primary explained by the capital increase in November 2022 and reducedlabor cost due to decreased head count compared to 2021. Not taking the capital increase into account,the average cash outflow in Q4 was TDKK ~850 per month. A significant reduction in cash burn rate froma monthly average of more than MDKK 2.7 in 2021 (also without taking the capital increase in 2021 intoaccount).As announced in company announcement no. 66 29th November 2022, reported investments in IPRwere TDKK 6,677 for the period Q1-Q3 2022, primarily capitalization of labor cost used for productdevelopment. However, as part of finalizing resultsfor the year, the detailed review concluded that thecapitalization of development costs during Q1-Q3 2022 was overstated, resulting in a Q4 2022 reversalof TDKK 2,282 to end at the 2022 full year investments in IPR of TDKK 4,441.The total cash flow for 2022 shows an outflow of TDKK 16,709 against an inflow of TDKK 15,873 in 2021where the company raised MDKK 48 in new capital. The cash balance on 31 December 2022 amountedto TDKK 9,025 compared to TDKK 25,734 on 31 December 2021.On 31 December 2022, the company’s equity amounted to TDKK 30,990 against TDKK 71,090 on 31December 2021.Patents and IPR updatePatent application for an LED plug (WO2023041136), referred to as Fam 9, has been publish on 23March 2023. The application covers a replaceable LED plug which is useful in a component fittingsystem. Link to the applicationhttps://patentscope.wipo.int/search/en/detail.jsf?docId=WO2023041136Patent application for an electrical supply module, referred to as Fam7 in LED iBond’s 2021 prospectus(https://ledibond.com/wp-content/uploads/2021/10/LED-iBond-International-Prospectus-rights-issue-1.pdf ), has been withdrawn due to the filing of patent application Fam 9 which is covering theinvention broader and better.As announced in company announcement no. 66 29 November 2022, validation of European patent3532772 (Electricity Supply System - Fam. 6, Tracy) was confirmed for the following four countries on27 September 2022: Denmark, Germany, France, and Great BritainAs announced in company announcement no. 66 29 November 2022, LED iBond has acquired fullownership of several patent applications from LED Livestock ApS regarding a Teat Cup Steriliserapparatus incorporating UV disinfection. The applications are the following: Danish patent applicationno. PA 2018 70421 (21 June 2018), International patent application no. PCT/EP2019/066552 (21 June2019), and all national patent applications from the international patent application (Chinese patentapplication 201980041488.3; European patent application 19734021.9; Indian patent application202127002474; Russian patent application 2021101018; US patent application 17/257,368). TheEuropean patent application is far in the process and has been approved for ratification.As announced in company announcement no. 66 29 November 2022; Baldr Light ApS (CVR. 42193208)is owned jointly by LED iBond International A/S (50%) and the US based company Solar-Tectic LLC (50%).The purpose of Baldr light ApS is to develop and apply for a patent for a new lighting technology capableof generating FAR UV lightning for disinfection purposes. On 15. Sep 2022, the international patentapplication for such a UV lighting technology (WO2022188937) was published under the patentcooperat ion t reaty (PCT). Link to the applicat ionhttps://patentscope.wipo.int/search/en/detail.jsf?docId=WO2022188937Numbers of SharesOn December 31, 2022, the number of outstanding shares in LED iBond International A/S was25,850,871, against 15,864,825 on December 31, 2021.Financial calendarAnnual General Meeting24 April 2023Interim report Q1 202325 May 2023Interim report H1 202324 August 2023Interim report Q3 202329 November 2023