Irisity : FR 2023 – Annual Report 2023 Irisity AB publ

ANNUAL REPORT

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TABLE OF CONTENTS

Irisity in brief	03
Products and services
A word from the CEO	04
Share and ownership	05
Ownership
Number of shares
Management report	07
The operations in general	08
Important developments and significant events during the financial year
Expected future development, key risks and uncertainty factors
Risk factors
Legislation and Articles of Association
Swedish Code of Corporate Governance	10
Patents
Financial overview
Investments and financial position	11
Incentive scheme
Staff and organisation
Related party transactions	13
Significant events after the end of the period
Multiple-year comparison for the Group
Multiple-year comparison for the Parent Company
Proposed appropriations of profit or loss	14
Consolidated data	15
Consolidated income statement
Consolidated balance sheet
Consolidated changes in equity
Consolidated cash flow statement
The Parent Company	21
The Parent Company's income statement
The Parent Company's balance sheet
The Parent Company's changes in equity
The Parent Company's cash flow statement
Notes	27
Signature of the annual and consolidated accounts	38
Auditor's Report	40
Board of Directors and management	43
Financial calendar and definitions	48
Definitions

Publication dates for interim reports

Certified adviser

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IRISITY

IN BRIEF

Irisity is a leading provider of AI-powered video analytics solutions. We develop innovative software upgrading ordinary security cameras to intelligent detection devices, while safeguarding personal privacy.

Our technology safeguards people and assets by detecting incidents in real time. This includes the detection of events such as intrusions, trespassing, flames, violence, falls, and unattended objects, as well as rapid search and analysis of recorded video, and extraction of statistical data. Irisity ensures ethical guarding without infringement on personal privacy by offering all functionality together with our patented real-time anonymization technology.

Irisity serves customers in more than 90 countries with headquarter in Gothenburg, Sweden and offices in Malmö, Israel, USA, UAE and Singapore. We operate through a network of resellers, partners, security companies, and camera manufacturers globally.

IRIS Security as a Service

State-of-the-art video analytics

Intrusion	Loitering	Violent
Detection	Detection	Behavior

Flame	Fall	Rail
Detection	Detection	Trespassing

Unattended	Anonymization	AI Alarm
Object		Filtering

Anomaly	Social	Crowd
Detection	Distancing	Management

Traffic	Advanced	Business
Management	Forensic Search	Intelligence

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A WORD FROM THE CEO

Irisity at the beginning of 2023 was a very different company compared to how we ended 2023. The year started with a profit warning, and we ended with record net sales which grew 34% YoY and improved EBITDA by 49%. When I joined in March, I had a clear objective from the board of directors. This was to grow the Irisity group revenues, improve profitability and accelerate R&D deliveries.

Growth Company

The best way to grow sales is to listen to you customers. To do this, I spend the first six months of 2023 traveling to meet with employees, partners, and end customers. A common request was for increased local sales presence and customer facing operations. The result, we started 2023 with 11 salespeople and ended the year with 16 and grew second half net sales to MSEK 57.8 (25.8) which is a YoY net sales increase of 133%. The results were achieved without increasing our personnel costs. This was accomplished thru optimizing our investments in other departments, converting back- office roles into sales roles, and shifting geographic market focus to the Americas.

Improved Profitability

With the changes in sales, we also focused on the sales operations and recruited Raziel Bareket to be Irisity's COO who joined in June. A key contribution to improving profitability was in lowering our cost of goods sold (COGS) by 30% YoY for a full year COGS

• of Net Sales which was 14.1% (20.3%). This was a direct result of increasing our focus on existing customer software upgrade plan renewals and sales campaigns which incentivized customers with end-of-life software to trade-in to new software versions.

Accelerating R&D Delivery

In 2023, we reorganized our development teams in Tel Aviv and Gothenburg to improve the speed and impact of innovation. Some of the successes we have realized are the first release of IRIS+ on- premise, a new OEM version and support of Axis cameras. In addition, we launched our first personalized AI solution which is the industry's first AI solution built to detect multiple riders on a

motorcycle which will improve public safety in smart cities in Central and South America.

Many successful customer deployments Our sales and especially our renewals and expansions of service, highlight the efficacy of our software and our commitment to excellence. The past year's successes include expanding work for a UK technology firm, a US Government Agency, a Mexican government operations center and a central monitoring customer in Saudi Arabia.

Looking ahead, we're enthusiastic about future opportunities and confident in Irisity's ability to navigate market uncertainties. The increasing global adoption of AI solutions for security and safety use-cases will enable our future growth and with strategic investments in our AI Open Platform, Irisity is uniquely positioned to continue to be a leading software provider.

For Irisity, dedication fuels our drive for innovation and excellence, laying the foundation for delivering value in the years ahead.

I want to thank our chairman, board of directors, employees, and shareholders for you dedication to Irisity's success. Your dedication fuels our drive for innovation and excellence, laying the foundation for delivering value in the years ahead.

Sincerely,

Keven Marier

Chief Executive Officer, Irisity

Gothenburg, 2024-04-23

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SHARES AND OWNERSHIP

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Shareholders	Number of shares	Ownership interest
AVANZA PENSION	7,193,559	14.6%
WESTERGYLLEN AB	3,677,500	7.5%
Sun Red Beach Growth Partners ApS	3,127,608	6.4%
Altshare Trusts Ltd*	3,016,220	6.1%
CHALMERS INNOVATION SEED FUND AB	2,444,634	5.0%
Runmarker, Ulf	2,400,000	4.9%
HANS ANDERSSON HOLDING AB	1,300,000	2.6%
Perninger, Bo	1,066,000	2.2%
PERSHING, LLC, W9	900,622	1.8%
FORVALTNINGSAKTIEBOLAGET BRUNNEN	600,000	1.2%
The ten major shareholders in total	25,726,143	52.3%
Others	23,503,793	47.7%
Total	49,229,936	100.0%

*Paying agent of former Agent Vi shareholders

Ownership

Irisity AB (publ), org. nr./Reg. No. 556705-4571 is a public company listed on Nasdaq First North Growth

Market under the ticker IRIS. The shareholder overview describes the situation as of 31 December 2023, when 6 180 shareholders were registered.

Number of shares

Irisity has 49,229,936 shares outstanding as of 31 December 2023.

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MANAGEMENT REPORT

The Board of Directors and the Chief Executive Officer of Irisity AB (publ), 556705-4571, hereby present the annual report for the financial year 2023. Amounts are stated in SEK unless specified otherwise. Numbers within parentheses refer to the preceding year.

The operations in general

Irisity develops and markets intelligent video surveillance systems. The technology is based on proprietary patents, video analytics algorithms and self-learning AI systems.

Irisity is continuously developing its products and services further to stay as close to the customers as possible and at the same time be able to provide the best possible protection and security. The Company is also performing consultancy services on a very limited scale, which provides a comprehensive overview and skills development in AI-based video analytics.

Financing

As stated in the annual report, there is weak cash flow, which risks the company's ability to continue as a going concern. The company is dependent on the liquidity from the upcoming rights issue for continued operations to be secured for the rest of the year, i.e. 12 months after the balance sheet date. The rights issue is reported in significant events after the balance sheet date and is planned to be carried out during Q2. The issue is part of the agreement in the acquisition of Ultinous and amounts to MSEK 45. The share issue is subject to national FDI ("Foreign Direct Investments" or "FDI") regulation which requires approval from Swedish and Hungarian authorities.

Important developments and significant events during the financial year

Our employees in our second largest office in Tel Aviv, was affected by the terrorists attack in Israel the 7th October. All were safe after the attacks but most worked from home after the attacks to stay safe.

The operations continued as usual.

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Legislation and Articles of Association

The Company is a public listed company governed by Swedish law, primarily by the Swedish Companies Act. The Company is listed on Nasdaq First North Growth Market and applies and fully adheres to the rules and recommendations that. derive from the Company's listing on Nasdaq First North Growth Market. Alongside regulations, rules and recommendations, the Company's operations are governed by the Articles of Association. The Articles of Association state, among other things, where the Board of Directors shall have its registered office, the scope of the Company's operations, restrictions on the share capital and number of shares, and the requirements for participation in the General Meeting of shareholders.

Expected future development, key risks and uncertainty factors

The Company has a clear growth strategy and is projected to take a strong position on the growing video analytics market. The Company's key risk and uncertainty factors include operational risks as well as risks that relate to market and technology development, patents, competitors and IT-security as well as stated risk factors in the column to the right.

The Company actively monitors legislative bodies and authorities to stay up-to-date on any new laws, regulations or policies that may be introduced. Risk management within the group is an ongoing process that aims to balance between limiting uncertainty and promoting growth and shareholder value.

Liquidity and financing

The company's greatest risk lies in liquidity and the possibility of raising capital. Recession and the market's risk appetite make the opportunities to raise new capital more challenging. Despite the more difficult market situation, the company has carried out several successful capital raisings, which shows a strong existing ownership base.

Interest rate risk

Interest rate risk is mainly affected by exposure to interest-bearing liabilities. The company has a loan from DBT Capital and an overdraft facility from SEB as of the balance sheet date.

Staff

The company is strongly dependent on its specialist- competence, where the risks primarily are connectected to staff turnover. Creativity and competence of staff are crucial to continue developing a competetive product.

Recruitment of new personnel is a also a key factor for sucess.

Changes in political conditions or relations between countries may affect the working conditions of foreign employees.

Credit and counterparty risk

Credit and counterparty risk refers to the risk that a counterparty cannot fulfill its obligations, such as the provision of liquidity or payment. Irisity has a large variety of customers, both public and private businesses, directly to end customers and via partners, which spreads the risk. The international expansion increases the risk due to uncertainties in different countries.

Currency

Currency risk refers to the risk of a negative impact on the income statement, balance sheet and cash flow due to changes in exchange rates. The company's global expansion and increased sales, primarily in USD, increases the currency risk.

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Swedish Code of Corporate Governance

The Swedish Code of Corporate Governance ("the Code") shall be applied by companies admitted to trading their shares on a regulated market.

Companies listed on Nasdaq First North Growth Market are currently not subject to the Code. Hence, the Company is not bound by the Code, but implements it as an important part of its corporate governance guidelines. In the event that the Code becomes binding on the Company, the Company will apply it.

Patents

Irisity is a technology/software company and it

is of the utmost importance that Irisity's technology is well and formally protected by patents and patent applications. Irisity's development work has been continuously protected by qualified patenting.

As of 2023-12-31, Irisity AB (publ) was the owner of 22 approved patents and 27 patent application in total. The patents belong to 9 different patent families. In addition to own patent protection, the strategy includes continuous monitoring of competing technologies.

Financial overview

The Group's net sales amounted to MSEK 117.6 (87.7).

Gross margin amounted to 85.9 percent (79.7).

EBITDA amounted to MSEK -16.4(-32.0)

The year's result after taxes amounted to MSEK -132.5(-136.9).

The number of shares at the end of the period was 49,229,936 and earnings per share amounted to SEK -2.69(-3.57). The weighted average number of shares during the year was 41,327,226.

	January -	January -
Sales and results in	December	December
The Group (KSEK)	2023	2022
Net sales	117,599	87,681
Capitalized development work	28,129	24,951
EBITDA	-16,440	-32,024
EBIT	-140,644	-147,429
Operating margin	neg	neg
Result after financial terms	-143,928	-147,752
Result for the year	-132,530	-136,925
Resultat per aktie	-2.69	-3.57

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