Årsrapport 30700228 EY Godkendt Revisionspartnerselskab Østre Havnegade 65 9000 Aalborg 2022-01-01 2022-12-31 2021-01-01 2021-12-31 38341170 MDSI ApS Strandboulevarden 96 2100 København Ø 2017-01-17 København EY Godkendt Revisionspartnerselskab 30700228 Østre Havnegade 65 9000 Aalborg 2023-06-29 Niels Steinø Regnskabsklasse B Revisionspåtegning Grundlag for konklusion Konklusion true true 2023-06-29 2023-06-29 CaseWare Working Papers Copenhagen Karsten Anderskov Madsen Christian Steinø Chairman Kim Nødskov Claus Ørts Pedersen Karsten Anderskov Madsen Aalborg Hans B. Vistisen Jannie Bendtsen State Authorised Public Accountant mne23254 State Authorised Public Accountant mne49071 10844000 4077000 5167000 4809000 84000 79000 5593000 -811000 1000 9000 35000 24000 5559000 -826000 796000 -1136000 4763000 310000 4763000 310000 20035000 0 55000 120000 9258000 25133000 29348000 25253000 0 28000 0 28000 29348000 25281000 1309000 34000 626000 1609000 62000 62000 8000 12000 2005000 1717000 7580000 842000 9585000 2559000 38933000 27840000 40000 40000 22849000 19604000 -13670000 -18188000 9219000 1456000 1183000 283000 1183000 283000 511000 500000 511000 500000 954000 108000 3158000 1585000 23908000 23908000 28020000 25601000 28531000 26101000 38933000 27840000 40000 19604000 -18188000 0 4763000 4160000 -4160000 915000 -915000 3000000 40000 22849000 -13670000 4541000 4286000 378000 366000 66000 60000 182000 97000 5167000 4809000 8 8 9000 0 26000 24000 -100000 -1084000 900000 474000 -4000 -526000 796000 -1136000 0 253000 25133000 0 19000 4160000 20035000 0 -20035000 20035000 272000 9258000 0 133000 0 0 84000 0 0 217000 0 20035000 55000 9258000 262000 262000 234000 28000 262000 0 Today, the Board of Directors and the Executive Board have discussed and approved the annual report of MDSI ApS for the financial year 1 January - 31 December 2022. 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 2022 and of the results of the Company's operations for the financial year 1 January - 31 December 2022. 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 shareholders of MDSI ApS We have audited the financial statements of MDSI ApS for the financial year 1 January - 31 December 2022, 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 2022 and of the results of the Company's operations for the financial year 1 January - 31 December 2022 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 company's purpose is to research in the field of aircraft communication, as well as the development, production and sale of new mission and communication systems to military and civil aircraft. This area is still the focus for the company. The ongoing conflict in Europe, has sparked significant interest in the company’s capabilities, which has resulted in an important customer paid project. In 2019 the company engaged in a consortium named IDG, encompassing companies across the arctic states. The purpose of this collaboration is to stand up a system of systems providing the Arctic with resilient communication, remote sensing, and analytics for decision support. The first actual demonstration of the system, called ArcticX21, took place in northern Norway and in Odense Denmark, October 2021. The ArcticX22, took place in northern Norway and in Odense Denmark, September 2022. The interest for the system has been on the rise in 2022, and in 2023 the focus on maritime surveillance and protection of critical infrastructure, as the system is well suited for that task. The next ArcticX will have focus on surveillance and protection of critical infrastructure. Edge computing on airborne platforms is still a new strategic area for the company. The income statement for 2022 shows a profit of DKK 4,763 thousand against a profit of DKK 310 last year, and the balance sheet at 31 December 2022 shows equity of DKK 9,219 thousand. In 2022 the Company has received 3 mio. DKK in group subsidy from MDSI Holding ApS. Development projects include development and test of communication systems to military and civil aircrafts and a system providing the Arctic with resilient communication etc. The relating expenses primarily consist of internal expenses in the form of payroll costs and production overheads, which are recorded through the Company's internal project module. The carrying amount totalled DKK 29,293 thousand at 31 December 2022. The company have completed one project in December 2022 and currently work with two different costumers on two different projects. One project is a continuation of the project from 2022, and with a delivery in June 2023. The other project is a customer paid development of a new idea fostered in the company in 2022. Based on the income from signed contracts related to these projects, the company will have sufficient liquidity for the rest of the year 2023 without any further orders. Based thereon, the financial statements are prepared based on going concern basis. The development projects is primaly financed by grants, amounting to DKK 23,908 thousand as of 31 December 2022, which is presented as deferred income in the financial statement. The net value of the development projects in progress amounts to DKK 5,385 thousand as of 31 December 2022. The Company has no repayment obligations on the grants. The delivery in June 2023 can be seen as the company’s final proof of concept on the development that has been ongoing since it was founded in 2017. Besides this delivery the Company has signed another contract in 2023 and expects further orders in 2023. The annual report of MDSI ApS for 2022 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. Income from the sale of goods for resale and finished goods, 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. Revenue is measured at the fair value of the agreed consideration excluding VAT and taxes charged on behalf of third parties. All discounts and rebates granted are recognised in revenue. The items revenue, work performed for own account and capitalised and external expenses have been aggregated into one item in the income statement called gross profit in accordance with section 32 of the Danish Financial Statements Act. Other operating income comprise items of a secondary nature relative to the Company's core activities, including gains on the sale of fixed assets. Other external expenses include the year's expenses relating to the Company's core activities, including expenses relating to administration, premises, bad debts, payments under operating leases, etc. 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 depreciation of acquired intangible assets and property, plant and equipment. The cost net of the expected residual value for completed development projects and acquired IP rights is amortised over the expected useful life. Acquired IP rights include patents, rights and licences. The basis of amortisation/depreciation, which is calculated as cost less any residual value, is amortised/depreciated on a straight line basis over the expected useful life. The expected useful lives of the assets are as follows: Completed development projects 5 years Acquired intangible assets 3 years Fixtures and fittings, other plant and equipment 2-5 years 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. The entity is jointly taxed with other group entities. The total Danish income tax charge is allocated between profit/loss-making Danish entities in proportion to their taxable income (full absorption). Jointly taxed entities entitled to a tax refund are reimbursed by the management company based on the rates applicable to interest allowances, and jointly taxed entities which have paid too little tax pay a surcharge according to the rates applicable to interest surcharges to the management company. Development costs comprise expenses, salaries and amortisation directly or indirectly attributable to development activities. Development projects that are clearly defined and identifiable, where the technical feasibility, sufficient resources and a potential future market or development opportunities areidentifiable and where the Company intends to produce, market or use the project, are recognised as intangible assets provided that the cost can be measured reliably and that there is sufficient assurance that future earnings can cover production costs, selling costs and administrative expenses and development costs. Other development costs are recognised in the income statement as incurred. Development costs that are recognised in the balance sheet are measured at cost less accumulated amortisation and impairment losses. On completion of a development project, development costs are amortised on a straight-line basis over the estimated useful life. The amortisation period is usually 5 years and cannot exceed 10 years. Patents and licences are measured at cost less accumulated amortisation and impairment losses. Patents are amortised on a straight line basis over the remaining term of the patent, and licences are amortised over the term of the licence, but not exceeding 3 years. 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 are calculated as the difference between the selling price less selling costs and the carrying amount at the date of disposal. Gains and losses from the disposal of property, plant and equipment are recognised in the income statement as other operating income or other operating expenses. 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. Impairment losses on goodwill are not reversed. The Company has chosen IAS 39 as interpretation for impairment write-down of financial receivables. Receivables are measured at amortised cost. An impairment loss is recognised if there is objective evidence that a receivable is impaired. Prepayments recognised under "Assets" comprise prepaid expenses regarding subsequent financial reporting years. Cash comprises cash on bank accounts. Reserve for development costs The reserve for development costs comprises recognised development costs. The reserve cannot be used to distribute dividends or cover losses. The reserve will be reduced or dissolved if the recognised development costs are no longer part of the Company's operations by a transfer directly to the distributable reserves under equity. Proposed dividends Dividend proposed for the year is recognised as a liability once adopted at the annual general meeting (declaration date). Dividends expected to be distributed for the financial year are presented as a separate item under "Equity". Dividend proposed for the year is recognised as a liability once adopted at the annual general meeting (declaration date). Dividends expected to be distributed for the financial year are presented as a separate item under "Equity". Current tax payables and receivables are recognised in the balance sheet as the estimated income tax charge for the year, adjusted for prior-year taxes and tax paid on account. Deferred tax is measured according to the 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 is measured according to the tax rules and at the tax rates applicable at the balance sheet date when the deferred tax is expected to crystallise as current tax. Deferred tax assets are recognised at the expected value of their utilisation; 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. Changes in deferred tax due to changes in the tax rate are recognised in the income statement. The Company has chosen IAS 39 as interpretation for recognition and measurement of liabilities. Freeze liability, which comprises frozen holiday funds, is measured at net realisable value, including indexation. Indexation is recognised in the income statement as interest expenses. Other liabilities are measured at net realisable value. Deferred income Deferred income recognised as a liability comprises grants received to acquire assets. The grants are recognised as a cut off item and are taken to income as the asset to which the grant relates is amortised. A part the estimated tax charge for the year is caused by development costs. According to the Danish tax legislation the tax value (22%) of development costs can be paid out subsequent to the filing of the taxable income for the year. Accordingly, the tax loss carried forward is reduced. Estimated tax charge for the year and tax adjustments, prior years is affected by tax deduction of 130 % on development costs according to the Danish tax legistation. Development projects Development projects include development and test of communication systems to military and civil aircrafts and a system providing the Arctic with resilient communication etc. The relating expenses primarily consist of internal expenses in the form of payroll costs and production overheads, which are recorded through the Company's internal project module. The carrying amount totalled DKK 29,293 thousand at 31 December 2022. The company have completed one project end December 2022 with delievery of a prototype and further contracts have been signed in 2023. The other project is expected to be completed in 2024. The systems is expected to result in considerable competitive advantages and, hence, at significant increase in the level of activity and results from 2023. The development projects is primaly financed by grants, amounting to DKK 23,908 thousand as of 31 December 2022, which is presented as deferred income in the financial statement. The net value of the development projects in progress amounts to DKK 5,385 thousand as of 31 December 2022. The Company has no repayment obligations on the grants. Depriciation of 28 t.DKK is capitalized in development projects under progress as IPO. Other contingent liabilities Rent and lease liabilities include a rent obligation totalling 160 t.DKK in interminable rent agreements with remaining contract terms of 6 months. The company is jointly taxed with MDSI Holding ApS. The company has joint and several umlimited liability for Danish corporation taxes and for certain possible withholding taxes such as taxes on dividend, interest and royalties within the joint taxation group. At 31 December 2022, the jointly taxed companies' net liability to SKAT amounted to t.DKK 0. Any subsequent corrections of the taxable income or withholding taxes on dividends, interest and royalties may entail that the company's liability will increase. 38341170 2022-01-01 2022-12-31 38341170 2021-01-01 2021-12-31 38341170 2021-12-31 38341170 2022-12-31 38341170 2022-01-01 2022-12-31 1 38341170 2022-01-01 2022-12-31 2 38341170 2022-01-01 2022-12-31 3 38341170 2022-01-01 2022-12-31 4 38341170 2022-01-01 2022-12-31 1 38341170 2022-01-01 2022-12-31 2 38341170 2022-01-01 2022-12-31 1 38341170 2022-01-01 e:CompletedDevelopmentProjectsMember 38341170 2022-01-01 e:AcquiredIntangibleAssetsMember 38341170 2022-01-01 2022-12-31 e:AcquiredIntangibleAssetsMember 38341170 2022-12-31 e:AcquiredIntangibleAssetsMember 38341170 2022-01-01 e:DevelopmentProjectsInProgressAndPrepaymentsForIntangibleAssetsMember 38341170 2022-01-01 2022-12-31 e:DevelopmentProjectsInProgressAndPrepaymentsForIntangibleAssetsMember 38341170 2022-12-31 e:DevelopmentProjectsInProgressAndPrepaymentsForIntangibleAssetsMember 38341170 2022-01-01 2022-12-31 e:CompletedDevelopmentProjectsMember 38341170 2022-12-31 e:CompletedDevelopmentProjectsMember 38341170 2022-01-01 2022-12-31 e:RetainedEarningsMember 38341170 2021-01-01 2021-12-31 e:RetainedEarningsMember 38341170 2022-01-01 e:FixturesFittingsToolsAndEquipmentMember 38341170 2022-01-01 2022-12-31 e:FixturesFittingsToolsAndEquipmentMember 38341170 2022-12-31 e:FixturesFittingsToolsAndEquipmentMember 38341170 2022-01-01 e:ContributedCapitalMember 38341170 2022-12-31 e:ContributedCapitalMember 38341170 2022-01-01 e:RetainedEarningsMember 38341170 2022-01-01 2022-12-31 e:RetainedEarningsMember 38341170 2022-12-31 e:RetainedEarningsMember 38341170 2022-01-01 e:ReserveForDevelopmentExpenditureMember 38341170 2022-01-01 2022-12-31 e:ReserveForDevelopmentExpenditureMember 38341170 2022-12-31 e:ReserveForDevelopmentExpenditureMember iso4217:DKK xbrli:pure