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33771231 Esbjerg Brygge 28, 2. 6700 Esbjerg Denmark 76 12 45 00 esbjerg@pwc.dk 2024-12-20 Dan Børge Larsen Regnskabsklasse C, mellemstor virksomhed Revisionspåtegning The Executive Board and Board of Directors have today considered and adopted the Annual Report of Cloud Factory A/S for the financial year 1 July 2023 - 30 June 2024. The Annual Report is prepared in accordance with the Danish Financial Statements Act. In our opinion the Financial Statements and the Consolidated Financial Statements give a true and fair view of the financial position at 30 June 2024 of the Company and the Group and of the results of the Company and Group operations and of consolidated cash flows for 2023/24. In our opinion, Management's Review includes a true and fair account of the matters addressed in the Review. We recommend that the Annual Report be adopted at the Annual General Meeting. 2024-12-20 Jacob Vestergaard Schaumann Schmidt CEO Anders Nielsen Manager Mark Ringe Ibsen Manager Henrik Nicolai Hørdum Clausen Chairman Dan Børge Larsen Jacob Vestergaard Schaumann Schmidt Ole Skjoldborg Ørum-Petersen Mark Ringe Ibsen To the shareholders of Cloud Factory A/S Opinion In our opinion, the Consolidated Financial Statements and the Parent Company Financial Statements give a true and fair view of the financial position of the Group and the Parent Company at 30 June 2024 and of the results of the Group’s and the Parent Company’s operations as well as of the consolidated cash flows for the financial year 1 July 2023 - 30 June 2024 in accordance with the Danish Financial Statements Act. We have audited the Consolidated Financial Statements and the Parent Company Financial Statements of Cloud Factory A/S for the financial year 1 July 2023 - 30 June 2024, which comprise income statement, balance sheet, statement of changes in equity and notes, including a summary of significant accounting policies, for both the Group and the Parent Company, as well as consolidated statement of cash flows (”the Financial Statements”). Basis for Opinion 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 are independent of the Group 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. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Management is responsible for the preparation of consolidated financial statements and parent company 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 Group´s and the Parent 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 Group or the Parent Company or to cease operations, or has no realistic alternative but to do so. Our objectives are to obtain reasonable assurance about 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 these 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 Group´s and the Parent 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 Group´s and the Parent 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 Group and the Parent Company to cease to continue as a going concern. Evaluate the overall presentation, structure and contents of the Financial Statements, including the disclosures, and whether the Financial Statements represent the underlying transactions and events in a manner that gives a true and fair view. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the Consolidated Financial Statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. 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 Management’s Review. Our opinion on the Financial Statements does not cover 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 Management’s Review and, in doing so, consider whether 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 Management’s Review provides the information required under the Danish Financial Statements Act. Based on the work we have performed, in our view, Management’s Review is in accordance with the Consolidated Financial Statements and the Parent Company Financial Statements and has been prepared in accordance with the requirements of the Danish Financial Statements Act. We did not identify any material misstatement in Management’s Review. Esbjerg 2024-12-20 PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab Palle H. Jensen State Authorised Public Accountant mne32115 26923000 17864000 13077000 17407000 12321000 5988000 240000 730000 -3145000 -401000 -367000 -566000 139000 382000 3413000 51924000 32561000 25874000 2784000 6266000 9056000 5669000 4375000 19485000 5032000 4650000 26 16 12 0.615 0.554 0.647 0.69 0.458 -0.019 0.137 0.375 0.155 0.18 Key activities Cloud Factory A/S provides cloud services, Microsoft CSP, and hosting to IT partners. With more than 50 employees and 450 partners, the company is one of the fastest-growing Microsoft distributors in Europe. Since 2022, the company has invested heavily in their partner platform and opened offices in Oslo, Stockholm, and Hilversum.Cloud Factory’s focus has changed in recent years from producing and selling hosting to IT Partners to reselling third-party Software from Microsoft, Acronis, Keepit and other vendors. Therefore, measurement of Net Revenue has changed from the Financial Year 2023-24 to measure third-party revenue in accordance with guidance of IAS 18, where only the Net Margin income from third-party re-selling is considered, when measuring Net Revenue. Development in the year The income statement of the Group for 2023/24 shows a loss of DKK 13,530,977, and at 30 June 2024 the balance sheet of the Group shows a negative equity of DKK 2,294,621. Gross Revenue increased by 49% to DKK 277 million, while Net Revenue increased by 40% to DKK 47 million. Partner base grew by 44%. Core markets include Denmark, Norway, Sweden, and the Netherlands. EBITDA increased from DKK 1.8 million to DKK 6.2 million. The company has changed accounting policies for measuring revenue to apply IAS 18 as its basis of interpretation for the recognition of revenue. Consequently the company recognizes revenue as agent and not principal. Gross profit and result for the year are not affected in current and last year. Furthermore the company's equity and cash flow are not affected by the change. Management refers to note 20. The past year and follow-up on development expectations from last year Despite the growth, a loss of DKK 5.0 million before tax was realized, which is a major improvement from last year's loss of DKK 10.6 million before tax. The deficit, which was worse than budgeted, is due to the delayed onboarding of a major partner and increased compliance costs in the hosting business. Capital resources The company received a growth loan from Riverside Acceleration Capital in February 2024, which improved liquidity and enabled expansion in Norway, Sweden, and the Netherlands. Management also refers to note 1. Targets and expectations for the year ahead For 2024/25, a gross revenue of DKK 425-485 million, a Net Revenue of DKK 55-75 million and a positive result of DKK 1-5 million is expected. The focus will be on growth in existing markets and expansion into new areas, as well as investments in technological platforms. Financial Risks The company has a conservative financial risk management strategy and has converted short term loans to long term financing agreements and thereby reduced the financial Risk in the group. Research and development Development activities continued with a focus on innovative cloud solutions, the Partner Portal, and automated processes. External environment The company is working to reduce its environmental footprint using renewable energy and internal energy-saving policies. Uncertainty relating to recognition and measurement There has been no uncertainty regarding recognition and measurement in the Annual Report. Management has reassessed the useful lifetime of development cost from 3 years to 5 years based on management's historical knowledge and experiences.The change has resulted in a decrease of depreciation for the current year with TDKK 3,050. Management refers to note 20. Unusual events A deferred tax asset of DKK 9.6 million has not been recognized as an asset in the balance sheet 30 June 2024. With the current strategic focus of the company being continued growth into rest of Europe over short-term profitability the criteria for recognition in 2023/24 has not been met and therefore the deferred tax asset has been written down. Consequently a tax expense of DKK 8.3 million has been recognized in the income statement for 2023/24. Subsequent events After year end the company received further capital in the amount of DKK 4 million as capital increase, to reestablish the Equity and to open new Markets in Early 2025. No other significant events affect the annual report after the balance sheet date. 47093412 33654987 42268808 32465207 203601 2011601 203601 2011601 9909330 5474895 9841036 5474896 8402436 11555874 9198874 12906435 28985247 18635819 23432499 16095477 22771580 16813495 18175463 14823471 9340210 11041367 9308756 11031631 0 223208 0 223208 -3126543 -9442251 -4051720 -9982833 0 0 726636 514614 125722 35476 125628 35302 2033344 1216221 2032521 1212745 -5034165 -10622996 -5231977 -10645662 8496812 -2401997 8299000 -2424663 -13530977 -8220999 -13530977 -8220999 726636 110749 -14257613 -8331748 22106745 12498087 22106745 12498087 109256 0 0 0 22216001 12498087 22106745 12498087 11252765 14109058 11120988 14053524 11252765 14109058 11120988 14053524 0 0 859510 143572 312064 256696 259624 200800 312064 256696 1119134 344372 33780830 26863841 34346867 26895983 75371223 41201649 57493471 37665607 1024842 910708 2496050 3574540 1484570 574766 482188 540325 7817 8299000 0 8299000 0 1071663 0 1071663 4623473 1831211 4407110 1805043 82511925 53888997 64878819 52956178 2619640 1230578 342467 1142442 85131565 55119575 65221286 54098620 118912395 81983416 99568153 80994603 789474 789474 789474 789474 0 0 809545 93607 0 0 17243261 9748508 -27840 -17142 0 0 -3056255 10474722 -21136901 615465 -2294621 11247054 -2294621 11247054 4125392 6956869 4125392 6956869 17049506 0 17049506 0 21174898 6956869 21174898 6956869 394692 8150096 1088443 8150096 4769876 4566216 4769876 4566216 84004028 47299926 68994655 47204566 231894 0 0 0 6336651 3043455 5074906 2150002 4294977 719800 759996 719800 100032118 63779493 80687876 62790680 121207016 70736362 101862774 69747549 118912395 81983416 99568153 80994603 789474 -17142 10474722 0 -10698 0 0 0 -13530977 789474 -27840 -3056255 789474 93607 9748508 615465 0 -10698 0 0 0 726636 0 -14257613 0 0 7494753 -7494753 789474 809545 17243261 -21136901 -13530977 -8220999 20108188 9820115 4328930 5920309 10906141 7519425 125722 35476 -2033344 -1216221 8998519 6338680 1097928 0 10096447 6338680 -13792076 -10868980 -2783997 -6266211 -55368 -122105 0 220000 -16631441 -17037296 -7755404 0 -2627817 0 0 -332648 0 6379399 0 1194404 -114134 290248 18421411 0 7924056 7531403 1389062 -3167213 1230578 4397791 2619640 1230578 2619640 1230578 2619640 1230578 During the year, the company has raised a loan of DKK 18.7 million from external lender. The company's management assesses, on basis of budgets and projections for the coming years, that the company will be able to operate within the current credit facilities, taking into account that the company's liquidity for shorter periods may result in a periodic need for additional credit from the company's credit institution. The company's management expects that credit facilities with periodically granted extra credits will be able to be continued in the coming year. Management is working to strengthen the company's capital with additional capital increase and has currently received a commitment for new capital of DKK 4 million. Furthermore management has a positive dialog with existing and potential new investors. No events materially affecting the assessment of the Annual Report have occurred after the balance sheet date. 18629872 13625911 14391375 11791288 2168684 2039425 1975007 1927099 310274 283033 304827 281733 1662750 865126 1504254 823351 22771580 16813495 18175463 14823471 5197570 4508496 5197570 4508496 50000 50000 50000 50000 5247570 4558496 5247570 4558496 44 39 39 36 Including remuneration to the Executive Board and Board of Directors: The company has an incentive scheme, which use to strengthen the employees' commitment and attachment to the company and to create value for the shareholders.The incentive scheme includes the option for employees in the period Q4 2024 to Q4 2025 to subscribe for new shares for up to 2.5% of the current company capital at the rate stated below.In December 2021, 1,105,000 warrants were issued at a price per share of DKK 1 with a conversion date for the general meeting in autumn 2024 and in March 2023, 895,000 warrants were issued at a price per share of DKK 2 with a conversion date for the general meeting in autumn 2025. Of the issued warrants, 175,000 were issued to members of the executive board. Incentive programmes are not recognised in the Financial Statements. Write-down of deferred tax asset 8299000 0 8299000 0 Total 8299000 0 8299000 0 62470 35302 62470 35302 94 174 0 0 63158 0 63158 0 125722 35476 125628 35302 2033344 1166147 2032521 1162671 0 50074 0 50074 2033344 1216221 2032521 1212745 197812 22666 0 0 8299000 -2425000 8299000 -2425000 0 -1071663 0 -1071663 0 1072000 0 1072000 8496812 -2401997 8299000 -2424663 18487485 0 18487485 13802066 109256 13802066 1400433 0 1400433 30889118 109256 30889118 5989398 0 5989398 4142520 0 4142520 -1349545 0 -1349545 8782373 0 8782373 22106745 109256 22106745 Completed development projects consist of development of the "Cloud Factory Partner Portal" including advanced invoicing processes. Projects consists of external advice, own time and other external costs. The depreciation period is five years and it is expected to have competitive advantages in the future. The management has no indication of impairment in relation to the accounting values.Development costs for the Cloud Factory Partner Portal comprises costs related to partners being able to log in and create offers for their customers. The portal must also function as a provisioning tool for Cloud Factory's services, so the Partner only log in at one place to handle the sales and provisioning process. Development of an advanced billing process comprises costs related to our partners being able to quickly and efficiently load consumption data into their own billing systems. The development takes place continuously and in connection with the fact that we implement new services. 30483626 30418425 2783997 2676637 2836896 2836896 30430727 30258166 16374567 16364901 -336 0 5140925 5109471 2337194 2337194 19177962 19137178 11252765 11120988 9464134 9464134 49965 22200 109256 27765 159221 49965 93607 -403865 -10698 -17142 617380 514614 700289 93607 859510 143572 Cloud Factory Norge AS Asker, Norge 100 Cloud Factory AB Stockholm, Sverige 100 Cloud Factory Benelux B.V. Hilversum, Netherlands 100 256696 200800 -3456 0 58824 58824 312064 259624 312064 259624 Positive differences arising on initial measurement of subsidiaries at net asset value 0 0 109256 0 Investments in subsidiaries are specified as follows: Prepayments include incurred prepaid costs relating to rent, insurance premiums, subscriptions and interest. Deferred tax asset at 1 July 8299000 6946000 8299000 6946000 Amounts recognised in the income statement for the year -8299000 1353000 -8299000 1353000 Amounts recognised in equity for the year 7817 0 0 0 Deferred tax asset at 30 June 7817 8299000 0 8299000 The company has an unrecognized deferred tax asset which , assuming full realization at the current tax rate, amounts to TDKK 9,579. The unrecognized deferred tax asset primarily consists of tax losses from previous years. However, with current strategic focus of the company being continued growth into rest of Europe over short-term profitability, means that the criteria for recognition in 2023/24 is not in place. Therefore the deferred tax asset has been written down 0 0 0 0 4125392 6956869 4125392 6956869 4125392 6956869 4125392 6956869 4769876 4566216 4769876 4566216 0 0 0 0 17049506 0 17049506 0 17049506 0 17049506 0 1371905 0 1371905 0 4964746 3043455 3703001 2150002 Payments due within 1 year are recognised in short-term debt. Other debt is recognised in long-term debt. The debt falls due for payment as specified below: Lease obligations Other payables Deferred income consists of payments received in respect of income in subsequent years. -125722 -35476 2033344 1216221 9340210 11041367 8496812 -2401997 20108188 9820115 363544 0 -37871640 -25119438 42200570 31039747 4328930 5920309 Charges and security The following assets have been placed as security with bankers: Mortgage deeds registered to the mortgagor totalling kDKK 10.000, providing security on goodwill, inventory, trade receivables as well as other property, plant and equipment at a total carrying amount of: 68614460 51719131 68614460 51719131 Rental and lease obligations Lease obligations under operating leases. Total future lease payments: Within 1 year 2833929 393197 2833929 393197 Between 1 and 5 years 3299760 611382 3299760 611382 Total 6133689 1004579 6133689 1004579 Lease obligations, period of non-terminability 551552 267858 418020 182034 Other contingent liabilities The group companies are jointly and severally liable for tax on the jointly taxed incomes etc of the Group. The total amount of corporation tax payable is disclosed in the Annual Report of Jacob V. Schmidt ApS, which is the management company of the joint taxation purposes. Moreover, the group companies are jointly and severally liable for Danish withholding taxes by way of dividend tax, tax on royalty payments and tax on unearned income. Any subsequent adjustments of corporation taxes and withholding taxes may increase the Company's liability. Basis Controlling interest Jacob V. Schmidt ApS Parent company Transactions The Company has chosen only to disclose transactions which have not been made on an arm's length basis in accordance with section 98(c)(7) of the Danish Financial Statements Act. Consolidated Financial Statements The Company is included in the Group Annual Report of the Parent Company of the largest and smallest group: Name Place of registered office Jacob V. Schmidt ApS Varde The Annual Report of Cloud Factory A/S for 2023/24 has been prepared in accordance with the provisions of the Danish Financial Statements Act applying to medium-sized enterprises of reporting class C. The Consolidated Financial Statements and the Parent Company Financial Statements for 2023/24 are presented in DKK. false The company has changed accounting policies for measuring revenue to apply IAS 18 as its basis of interpretation for the recognition of revenue. Consequently the company recognizes revenue as agent and not principal. The change has resulted in an decrease of revenue and cost of sales for the current year with TDKK 229,522 and last years revenue and cost of sales with TDKK 150,397. Gross profit and result for the year are not affected and remains unchanged in current and last year. Furthermore the company's equity and cash flow are not affected by the change. Revenues are recognised in the income statement as earned. Furthermore, value adjustments of financial assets and liabilities measured at fair value or amortised cost are recognised. Moreover, all expenses incurred to achieve the earnings for the year are recognised in the income statement, including depreciation, amortisation, impairment losses and provisions as well as reversals due to changed accounting estimates of amounts that have previously been recognised in the income statement. Assets are recognised in the balance sheet when it is probable that future economic benefits attributable to the asset will flow to the Company, and the value of the asset can be measured reliably. Liabilities are recognised in the balance sheet when it is probable that future economic benefits will flow out of the Company, and the value of the liability can be measured reliably. Assets and liabilities are initially measured at cost. Subsequently, assets and liabilities are measured as described for each item below. Basis of consolidation The Consolidated Financial Statements comprise the Parent Company, Cloud Factory A/S, and subsidiaries in which the Parent Company directly or indirectly holds more than 50% of the votes or in which the Parent Company, through share ownership or otherwise, exercises control. Enterprises in which the Group holds between 20% and 50% of the votes and exercises significant influence but not control are classified as associates. On consolidation, items of a uniform nature are combined. Elimination is made of intercompany income and expenses, shareholdings, dividends and accounts as well as of realised and unrealised profits and losses on transactions between the consolidated enterprises. The Parent Company's investments in the consolidated subsidiaries are set off against the Parent Company's share of the net asset value of subsidiaries stated at the time of consolidation. Leases in terms of which the Group assumes substantially all the risks and rewards of ownership (finance leases) are recognised in the balance sheet at the lower of the fair value of the leased asset and the net present value of the lease payments computed by applying the interest rate implicit in the lease or an alternative borrowing rate as the discount rate. Assets acquired under finance leases are depreciated and written down for impairment under the same policy as determined for the other fixed assets of the Group. The remaining lease obligation is capitalised and recognised in the balance sheet under debt, and the interest element on the lease payments is charged over the lease term to the income statement. All other leases are considered operating leases. Payments made under operating leases are recognised in the income statement on a straight-line basis over the lease term. Transactions in foreign currencies are translated at the exchange rates at the dates of transaction. Gains and losses arising due to differences between the transaction date rates and the rates at the dates of payment are recognised in financial income and expenses in the income statement. Receivables, payables and other monetary items in foreign currencies that have not been settled at the balance sheet date are translated at the exchange rates at the balance sheet date. Any differences between the exchange rates at the balance sheet date and the rates at the time when the receivable or the debt arose are recognised in financial income and expenses in the income statement. Fixed assets acquired in foreign currencies are measured at the transaction date rates. The value of share-based payment, including share option and warrant plans that do not involve an outflow of cash and cash equivalents, offered to the Executive Board and a number of senior employees is not recognised in the income statement. The most significant conditions of the share option plans are disclosed in the notes. IAS 18 is applied as its basis of interpretation for the recognition of revenue. Revenue is recognised in the income statement if delivery and passing of risk to the buyer have taken place before the end of the year and if the income can be determined reliably and inflow is anticipated. Recognition of revenue is exclusive of VAT and taxes and less any discounts relating directly to sales. Sale of software and cloud licenses acting as an agent is recognised in the income statement if supply and risk transfer to the purchaser has taken place before the end of the year. Sale of software and cloud licenses acting as an agent is recognised exclusive of VAT, duties and less discounts related to the sale. For the majority of the Company's license reseller contracts, the Company acts as an agent. The performance obligation is to arrange for the licenses to be provided. The Company normally only has one performance obligation that is satisfied upon the initial completion of the contract towards the agent. Revenue consists of any agent fees from the software company and any sales proceeds from the end user less any costs from the software company. Direct expenses primarily include operating expenses for the year. Other external expenses comprise expenses for premises, sales as well as office expenses, etc. Staff costs include wages and salaries including compensated absence and pensions as well as other social security contributions etc. made to the entity's employees. Amortisation, depreciation and impairment losses comprise amortisation, depreciation and impairment of intangible assets and property, plant and equipment. Other operating income and other operating expenses comprise items of a secondary nature to the main activities of the Group, including gains and losses on the sale of intangible assets and property, plant and equipment. The item “Income from investments in subsidiaries” in the income statement includes the proportionate share of the profit for the year. Financial income and expenses are recognised in the income statement at the amounts relating to the financial year. Tax for the year consists of current tax for the year and changes in deferred tax for the year. The tax attributable to the profit for the year is recognised in the income statement, whereas the tax attributable to equity transactions is recognised directly in equity. The Company is jointly taxed with the Parent Company. The tax effect of the joint taxation is allocated to Danish enterprises in proportion to their taxable incomes. Goodwill is amortised on a straight-line basis over the estimated useful life of 5 years, determined on the basis of Management’s experience with the individual business areas. Development projects relating to products and processes that are clearly defined and identifiable, where the degree of technical utilization, sufficient resources and a potential future market or development opportunity in the company can be demonstrated, and where the intention is to manufacture, launch or use the product or process , are recognized as intangible fixed assets. Other development costs are recognized as costs in the income statement when the costs are incurred. When development projects are recognized as intangible fixed assets, an amount corresponding to the incurred costs is tied to the equity under the reserve for development costs, which is reduced in line with depreciation and write-downs on the development projects. The cost price for development projects includes costs that can be directly attributed to the development projects. Completed development projects are depreciated on a straight-line basis over the expected useful life, which is determined based on a specific assessment of the individual development project. If the useful life cannot be estimated reliably, it is set at 10 years. For development projects protected by intangible rights, the maximum amortization period is the remaining term of the rights in question. The depreciation periods used are 5 years. Acquired intangible rights are measured at cost less accumulated depreciation. Licenses are depreciated on a straight-line basis over the term of the agreement. Intangible rights, etc. written down to recoverable amount if this is lower than the accounting value. Property, plant and equipment are measured at cost less accumulated depreciation and less any accumulated impairment losses. Cost comprises the cost of acquisition and expenses directly related to the acquisition up until the time when the asset is ready for use. Depreciation based on cost reduced by any residual value is calculated on a straight-line basis over the expected useful lives of the assets, which are: Other fixtures and fittings, tools and equipment 3-6 years The fixed assets’ residual values are determined at nil. Depreciation period and residual value are reassessed annually. The carrying amounts of intangible assets and property, plant and equipment and investments are reviewed on an annual basis to determine whether there is any indication of impairment other than that expressed by amortisation and depreciation. If so, the asset is written down to its lower recoverable amount. Investments in subsidiaries are recognised and measured under the equity method. The item “Investments in subsidiaries” in the balance sheet include the proportionate ownership share of the net asset value of the enterprises calculated on the basis of the fair values of identifiable net assets at the time of acquisition with deduction or addition of unrealised intercompany profits or losses and with addition of the remaining value of any increases in value and goodwill calculated at the time of acquisition of the enterprises. The total net revaluation of investments in subsidiaries is transferred upon distribution of profit to “Reserve for net revaluation under the equity method“ under equity. The reserve is reduced by dividend distributed to the Parent Company and adjusted for other equity movements in the subsidiaries. Subsidiaries with a negative net asset value are recognised at DKK 0. Any legal or constructive obligation of the Parent Company to cover the negative balance of the enterprise is recognised in provisions. Other fixed asset investments consist of deposit. Receivables are measured in the balance sheet at the lower of amortised cost and net realisable value, which corresponds to nominal value less provisions for bad debts. Prepayments comprise prepaid expenses concerning rent, insurance premiums, subscriptions and interest. Purchase and sales prices for treasury shares are recognised directly in retained earnings under equity. A reduction of capital by cancellation of treasury shares reduces the share capital by an amount equal to the nominal value of the shares and increases retained earnings. Dividend on treasury shares is recognised directly in equity under retained earnings. Deferred income tax is measured using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes on the basis of the intended use of the asset and settlement of the liability, respectively. Deferred tax assets, including the tax base of tax loss carry-forwards, are measured at the value at which the asset is expected to be realised, either by elimination in tax on future earnings or by set-off against deferred tax liabilities within the same legal tax entity. Deferred tax is measured on the basis of the tax rules and tax rates that will be effective under the legislation at the balance sheet date when the deferred tax is expected to crystallise as current tax. Any changes in deferred tax due to changes to tax rates are recognised in the income statement or in equity if the deferred tax relates to items recognised in equity. Current tax liabilities and receivables are recognised in the balance sheet as the expected taxable income for the year adjusted for tax on taxable incomes for prior years and tax paid on account. Extra payments and repayment under the on-account taxation scheme are recognised in the income statement in financial income and expenses. Debts are measured at amortised cost, substantially corresponding to nominal value. Deferred income comprises payments received in respect of income in subsequent years. With reference to section 86(4) of the Danish Financial Statements Act, the Parent Company has not prepared a cash flow statement for the Company itself but has only prepared a cash flow statement for the Group. The cash flow statement shows the Group’s cash flows for the year broken down by operating, investing and financing activities, changes for the year in cash and cash equivalents as well as the Group’s cash and cash equivalents at the beginning and end of the year. Cash flows from operating activities are calculated as the net profit/loss for the year adjusted for changes in working capital and non-cash operating items such as depreciation, amortisation and impairment losses, and provisions. Working capital comprises current assets less short-term debt excluding items included in cash and cash equivalents. Cash flows from investing activities comprise cash flows from acquisitions and disposals of intangible assets, property, plant and equipment as well as fixed asset investments. Cash flows from financing activities comprise cash flows from the raising and repayment of long-term debt as well as payments to and from shareholders. Cash and cash equivalents comprise ”Cash at bank and in hand”. The cash flow statement cannot be immediately derived from the published financial records. Gross margin Gross profit x 100 / Revenue Solvency ratio Equity at year end x 100 / Total assets at year end