Årsrapport 30700228 EY Godkendt Revisionspartnerselskab Østre Havnegade 65 9000 Aalborg 2023-01-01 2023-12-31 2022-01-01 2022-12-31 32653847 Sky-Watch A/S Østre Alle 6 9530 Støvring 2009-12-01 Rebild Nordea EY Godkendt Revisionspartnerselskab 30700228 Østre Havnegade 65 9000 Aalborg 2024-05-08 Søren Pedersen Regnskabsklasse B Revisionspåtegning Grundlag for konklusion Konklusion true true 2024-05-08 2024-05-08 CaseWare Working Papers Støvring Martin Schousboe CEO Per-Erik Edvard Svehag Chairman Søren Pedersen Niels Jesper Jespersen Jensen Aalborg Hans B. Vistisen Mads Obel Knøsgaard State Authorised Public Accountant mne23254 State Authorised Public Accountant mne49041 124825000 13343000 32946000 20163000 454000 297000 91425000 -7117000 1840000 0 890000 1000000 1334000 865000 91041000 -8982000 19964000 -14485000 71077000 5503000 62850000 0 8227000 5503000 0 12000 0 12000 1587000 244000 3163000 48000 795000 67000 5545000 359000 5545000 371000 7745000 3136000 5283000 1929000 1170000 0 14198000 5065000 3871000 105000 2741000 13763000 0 708000 2853000 414000 483000 178000 9948000 15168000 85499000 284000 109645000 20517000 115190000 20888000 1000000 1000000 9605000 1378000 10605000 2378000 318000 108000 318000 108000 1516000 1594000 1516000 1594000 312000 137000 0 11250000 59584000 0 12075000 938000 9011000 0 8507000 4329000 13262000 154000 102751000 16808000 104267000 18402000 115190000 20888000 1000000 1378000 71077000 62850000 1000000 9605000 29166000 17722000 2980000 1894000 262000 236000 538000 311000 32946000 20163000 43 32 9011000 -708000 11023000 -13763000 -70000 -14000 757000 757000 745000 12000 757000 0 648000 583000 813000 1558000 3195000 875000 0 370000 0 2206000 3408000 1688000 404000 535000 746000 215000 80000 147000 0 -370000 0 619000 245000 893000 1587000 3163000 795000 1000000 1000000 1000000 -13763000 0 0 3000 177000 -45000 -2918000 0 0 -13721000 Today, the Board of Directors and the Executive Board have discussed and approved the annual report of Sky-Watch A/S for the financial year 1 January - 31 December 2023. The annual report is prepared in accordance with the Danish Financial Statements Act. In our opinion, the financial statements give a true and fair view of the financial position of the Company at 31 December 2023 and of the results of the Company's operations for the financial year 1 January - 31 December 2023. Further, in our opinion, the Management's review gives a fair review of the matters discussed in the Management's review. We recommend that the annual report be approved at the annual general meeting. To the shareholder of Sky-Watch A/S We have audited the financial statements of Sky-Watch A/S for the financial year 1 January - 31 December 2023, which comprise income statement, balance sheet, statement of changes in equity and notes, including accounting policies. The financial statements are prepared in accordance with the Danish Financial Statements Act. In our opinion, the financial statements give a true and fair view of the financial position of the Company at 31 December 2023 and of the results of the Company's operations for the financial year 1 January - 31 December 2023 in accordance with the Danish Financial Statements Act. We conducted our audit in accordance with International Standards on Auditing (ISAs) and the additional requirements applicable in Denmark. Our responsibilities under those standards and requirements are further described in the "Auditor's responsibilities for the audit of the financial statements" section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Company in accordance with the International Ethics Standards Board for Accountants' International Code of Ethics for Professional Accountants (IESBA Code) and the additional ethical requirements applicable in Denmark, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the Danish Financial Statements Act and for such internal control as Management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, Management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting in preparing the financial statements unless Management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Our objectives are to obtain reasonable assurance as to whether the financial statements as a whole are free from material misstatement, whether due to fraud or error and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and the additional requirements applicable in Denmark will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. As part of an audit conducted in accordance with ISAs and the additional requirements applicable in Denmark, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error as fraud may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management. Conclude on the appropriateness of Management's use of the going concern basis of accounting in preparing the financial statements and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern. Evaluate the overall presentation, structure and contents of the financial statements, including the note disclosures, and whether the financial statements represent the underlying transactions and events in a manner that gives a true and fair view. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Management is responsible for the Management's review. Our opinion on the financial statements does not cover the Management's review, and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the Management's review and, in doing so, consider whether the Management's review is materially inconsistent with the financial statements or our knowledge obtained during the audit, or otherwise appears to be materially misstated. Moreover, it is our responsibility to consider whether the Management's review provides the information required under the Danish Financial Statements Act. Based on the work we have performed, we conclude that the Management's review is in accordance with the financial statements and has been prepared in accordance with the requirements of the Danish Financial Statement Act. We did not identify any material misstatement of the Management's review. The purpose of Sky-Watch is to develop and commercialize market leading mini UAS (Unmanned Aerial Systems) for professional users, primarily in the Defense & Security segment. The company collaborates with world leading corporations to develop leading edge system components and solutions and serves a growing international customer base. Development in activities and financial matters Directly and indirectly the war in Ukraine continues to drive an increase in demand for Sky-Watch solutions and the Company has utilized its operational set-up to realize a satisfactory growth and profitability in 2023. The extent of confirmed sales contracts and late-stage sales opportunities for 2024 is firm and the Company expects a satisfactory growth and profitability for 2024 also. Supporting the increased activity level and projected growth an expansion of both facilities and organization was initiated from the beginning of 2023. This will continue throughout 2024. Sky-Watch continues to invest in development of its product and technology platform. Partnership formation with globally leading defense industry corporations is in process and Sky-Watch expects to add new solution layers and value propositions to the Company’s offerings in 2024 and beyond. In March 2022, the Company was acquired by US based AIRO Group Holdings, Inc. The AIRO Group business model is to consolidate ownership of several companies in the aerospace segment. AIRO Group Holdings, Inc. is in process to go public on Nasdaq (New York) through a merger with blank Check (SPAC) Company Kernel Group Holdings. The merged company, to be known as AIRO Group, will have businesses aligned with avionics, advanced air mobility, uncrewed air systems (UAS) and training. During the year, the Company executed a large order at a price of DKK XX, positively affecting the Company's revenue and results of operations for the year. The Company's current order book does not contain any orders for a similar volume to be executed going forward. The income statement for 2023 shows a profit of DKK 71,077 thousand against a profit of DKK 5,503 thousand last year, and the balance sheet at 31 December 2023 shows equity of DKK 10,605 thousand. No events materially affecting the Company's financial position have occurred subsequent to the financial year-end. The annual report of Sky-Watch A/S for 2023 has been prepared in accordance with the provisions in the Danish Financial Statements Act applying to reporting class B entities and elective choice of certain provisions applying to reporting class C entities. The accounting policies used in the preparation of the financial statements are consistent with those of last year. Reporting currency The financial statements are presented in Danish kroner (DKK'000). On initial recognition, transactions denominated in foreign currencies are translated at the exchange rate at the transaction date. Foreign exchange differences arising between the exchange rates at the transaction date and the date of payment are recognised in the income statement as financial income or financial expenses. Receivables and payables and other monetary items denominated in foreign currencies are translated at the exchange rate at the balance sheet date. The difference between the exchange rates at the balance sheet date and the date at which the receivable or payable arose or was recognised in the most recent financial statements is recognised in the income statement as financial income or financial expenses. The Company has chosen IAS 11/IAS 18 as interpretation for revenue recognition. On the conclusion of sales contracts that consist of several separate sales transactions, the contract price is split up into the individual sales transactions based on the relative fair value approach. The separate sales transactions are recognised as revenue when the criteria for sale of goods and services are met. A contract is split up into individual transactions when the fair value of each individual sales transaction can be estimated reliably and when each individual sales transaction represents a stand-alone value for the buyer. Sales transactions are deemed to have a stand-alone value for the buyer when the transaction is individually identifiable and sold separately. Revenue is measured at the fair value of the agreed consideration exclusive of VAT and taxes charged on behalf of third parties. All discounts and rebates granted are recognised in revenue. Revenue from sale of goods Income from the sale of goods for resale and finished goods, including sale of mini UAS (Unmanned Aerial Systems), is recognised in revenue when the most significant rewards and risks have been transferred to the buyer, the income can be measured reliably and payment is expected to be received. The date of the transfer of the most significant rewards and risks is based on standardised terms of delivery based on Incoterms® 2020. Income from the sale of goods where installation is a prerequisite for considering significant risks to have been transferred to the buyer is recognised in revenue when the installation is complete. Revenue from the sale of services Income from the sale of services, which include service contracts, is recognised in revenue on a straight-line basis as the services are rendered because the services are rendered in the form of an indefinite number of actions over a specified period of time. Revenue corresponds to the selling price of the services rendered in the year (percentage of completion method). The items revenue, cost of sales, other external costs and other operating income have been aggregated into one item called gross profit/loss in accordance with section 32 of the Danish Financial Statements Act. Cost of sales comprise costs incurred in generating revenue for the year. Such costs include direct costs of raw materials and consumables and wages and salaries. Other external costs comprise costs of distribution, sale, advertising, administration, premises, etc. Other external costs also comprise research and development costs that do not qualify for capitalisation and payments relating to operating leases. Staff costs include wages and salaries, including compensated absence and pension to the Company's employees, as well as other social security contributions, etc. The item is net of refunds from public authorities. The item comprises amortisation/depreciation of intangible assets and property, plant and equipment. The cost of completed development projects and intellectual property rights acquired is amortised on a straight-line basis over the expected useful life. The basis of amortisation, which is calculated as cost less any residual value, is amortised on a straight line basis over the expected useful life. The expected useful lives of the assets are as follows: Acquired intangible assets 5-7 years Where individual components of an item of property, plant and equipment have different useful lives, they are accounted for as separate items, which are depreciated separately. The basis of depreciation, which is calculated as cost less any residual value, is depreciated on a straight line basis over the expected useful life. The expected useful lives of the assets are as follows: Plant and machinery 5 - 15 years Other fixtures and fittings, tools and equipment 3 - 8 years Leasehold improvements 3 - 5 years In case of changes in the depreciation period, the effect on the depreciation charges is recognised prospectively as a change in accounting estimates. Financial income and expenses are recognised in the income statements at the amounts that concern the financial year. Net financials include interest income and expenses as well as allowances and surcharges under the advance-payment-of-tax scheme, etc. Tax for the year includes current tax on the year's expected taxable income and the year's deferred tax adjustments. The portion of the tax for the year that relates to the profit/loss for the year is recognised in the income statement, whereas the portion that relates to transactions taken to equity is recognised in equity. On initial recognition, intangible assets are measured at cost. Acquired intangible assets consist of software. Software is measured at cost less accumulated amortisation and impairment losses. Gains and losses on the sale of intangible assets are recognised in the income statement under "Other operating income" or "Other operating expenses", respectively. Gains and losses are calculated as the difference between the selling price less selling expenses and the carrying amount at the time of sale. Property, plant and equipment Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses. Cost includes the acquisition price and costs directly related to the acquisition until the time at which the asset is ready for use. Gains or losses on the sale of property, plant and equipment are recognised in the income statement under "Other operating income" or "Other operating expenses", respectively. Gain and losses are calculated as the difference between the selling price less selling expenses and the carrying amount at the time of sale. The Company has chosen IAS 17 as interpretation for classification and recognition of leases. Leases that do not transfer substantially all the risks and rewards incident to the ownership to the Company are classified as operating leases. Payments relating to operating leases and any other rent agreements are recognised in the income statement over the term of the lease. The Company's aggregate liabilities relating to operating leases and other rent agreements are disclosed under "Contingent liabilities". The carrying amount of intangible assets and property, plant and equipment is assessed for impairment on an annual basis. Impairment tests are conducted on assets or groups of assets when there is evidence of impairment. The carrying amount of impaired assets is reduced to the higher of the net selling price and the value in use (recoverable amount). The recoverable amount is the higher of the net selling price of an asset and its value in use. The value in use is calculated as the present value of the expected net cash flows from the use of the asset or the group of assets and the expected net cash flows from the disposal of the asset or the group of assets after the end of the useful life. Previously recognised impairment losses are reversed when the reason for recognition no longer exists. Inventories are measured at cost in accordance with the FIFO method. Where net realisable value is lower than cost, inventories are written down to this lower value. Goods for resale and raw materials and consumables are measured at cost, comprising purchase price plus delivery costs and other costs directly related to the purchase. Finished goods are measured at cost, comprising the cost of raw materials, consumables, direct wages and salaries as well as direct production costs. Production overheads and borrowing costs are not included in cost. The net realisable value of inventories is determined as the selling price less any discounts, costs of completion and costs incurred to effect the sale, taking into account marketability, obsolescence and developments in the expected selling price. The Company has chosen IAS 39 as interpretation for impairment write-down of financial receivables. Receivables are measured at amortised cost. Write-down for bad and doubtful debts is made when there is objective evidence that a receivable has been impaired. Prepayments comprise costs incurred concerning subsequent financial years. Cash comprise cash. Proposed dividends Proposed dividend is recognised as a liability at the date when it is adopted at the annual general meeting (declaration date). Dividend expected to be distributed for the year is presented as a separate line item in equity. Proposed dividend is recognised as a liability at the date when it is adopted at the annual general meeting (declaration date). Dividend expected to be distributed for the year is presented as a separate line item in equity. Provisions comprise anticipated costs related to warranties. Provisions are recognised when, as a result of past events, the Company has a legal or constructive obligation and it is probable that there may be an outflow of resources embodying economic benefits to settle the obligation. Provisions for warranties are measured at net realisable value and recognised based on past experience. Current tax payable and receivable is recognised in the balance sheet as tax computed on the taxable income for the year, adjusted for tax on the taxable income of prior years and for tax paid on account. Deferred tax is measured using the balance sheet liability method on all temporary differences between the carrying amount and the tax base of assets and liabilities. Where alternative tax rules can be applied to determine the tax base, deferred tax is measured based on Management's intended use of the asset or settlement of the liability, respectively. Deferred tax assets, including the tax value of tax loss carryforwards, are measured at the expected value of their realisation; either as a set-off against tax on future income or as a set-off against deferred tax liabilities in the same legal tax entity. Deferred tax is measured according to the tax rules and at the tax rates applicable in the respective countries at the balance sheet date when the deferred tax is expected to crystallise as current tax. The Company has chosen IAS 39 as interpretation for liabilities. Financial liabilities comprising amounts owed to credit institutions, trade payables and payables to external lenders are recognised at the date of borrowing at cost, corresponding to the proceeds received less transaction costs paid. In subsequent periods, financial liabilities are measured at amortised cost. Other liabilities are measured at net realisable value. Prepayments received from customers include deferred revenue where payment has been received for later sales of goods and services but delivery has not yet taken place. Deferred income Deferred income recognised as a liability comprises payments received concerning income in subsequent financial reporting years. Hereof an amount of DKK 59,593 thousand (2022: DKK 0 thousand) is deposited on a closed account as a warranty. The amount is expected to be released as the Company delivers goods to the customer. Other contingent liabilities Share options comprising 30,900 shares have been granted to the Executive Board. The subscription period expires 30 April 2023. No shares have been subscribed in 2023. The company has entered into rent agreements with a remaining term of 3-6 months and with a total obligation of DKK 410 thousand. Lease liabilities on operating assets during the notice period total DKK 262 thousand. The company has provided security in bank deposits for totally DKK 59,817 thousand. Information about consolidated financial statements Parent Domicile Requisitioning of the parent company's consolidated financial statements Airo Group Holdings, Inc. 1209 Orange Street Wilmington, New Castle County Delaware 19801, United States of America. https://theairogroup.com/investor-relations/ 32653847 2023-01-01 2023-12-31 32653847 2023-01-01 32653847 2022-01-01 2022-12-31 32653847 2022-12-31 32653847 2023-12-31 32653847 2022-01-01 32653847 2023-01-01 2023-12-31 1 32653847 2023-01-01 2023-12-31 2 32653847 2023-01-01 2023-12-31 3 32653847 2023-12-31 1 32653847 2023-01-01 2023-12-31 1 32653847 2023-01-01 2023-12-31 2 32653847 2023-01-01 2023-12-31 1 32653847 2023-01-01 e:AcquiredIntangibleAssetsMember 32653847 2023-01-01 2023-12-31 e:AcquiredIntangibleAssetsMember 32653847 2023-12-31 e:AcquiredIntangibleAssetsMember 32653847 2023-01-01 e:PlantAndMachineryMember 32653847 2023-01-01 2023-12-31 e:PlantAndMachineryMember 32653847 2023-12-31 e:PlantAndMachineryMember 32653847 2023-01-01 e:FixturesFittingsToolsAndEquipmentMember 32653847 2023-01-01 2023-12-31 e:FixturesFittingsToolsAndEquipmentMember 32653847 2023-12-31 e:FixturesFittingsToolsAndEquipmentMember 32653847 2023-01-01 e:LeaseholdImprovementsMember 32653847 2023-01-01 2023-12-31 e:LeaseholdImprovementsMember 32653847 2023-12-31 e:LeaseholdImprovementsMember 32653847 2023-01-01 e:ContributedCapitalMember 32653847 2023-12-31 e:ContributedCapitalMember 32653847 2023-01-01 e:RetainedEarningsMember 32653847 2023-01-01 2023-12-31 e:RetainedEarningsMember 32653847 2023-12-31 e:RetainedEarningsMember 32653847 2023-12-31 e:IntangibleAssetsMember 32653847 2022-12-31 e:IntangibleAssetsMember 32653847 2023-12-31 e:PropertyPlantAndEquipmentMember 32653847 2022-12-31 e:PropertyPlantAndEquipmentMember 32653847 2023-12-31 e:TaxLossesMember 32653847 2022-12-31 e:TaxLossesMember 32653847 2022-12-31 1 32653847 2023-12-31 e:LiabilitiesOtherThanProvisionsMember 32653847 2022-12-31 e:LiabilitiesOtherThanProvisionsMember iso4217:DKK xbrli:shares xbrli:pure