Optomed Oyj

Annual Report (ESEF) • Feb 29, 2024

7437009IVYWGEE4S7B77-2023-12-31-en.xhtml 7437009IVYWGEE4S7B77 2023-01-01 2023-12-31 7437009IVYWGEE4S7B77 2022-01-01 2022-12-31 7437009IVYWGEE4S7B77 2023-12-31 7437009IVYWGEE4S7B77 2022-12-31 7437009IVYWGEE4S7B77 2021-12-31 7437009IVYWGEE4S7B77 2022-12-31 ifrs-full:IssuedCapitalMember 7437009IVYWGEE4S7B77 2023-12-31 ifrs-full:IssuedCapitalMember 7437009IVYWGEE4S7B77 2021-12-31 ifrs-full:IssuedCapitalMember 7437009IVYWGEE4S7B77 2022-12-31 ifrs-full:SharePremiumMember 7437009IVYWGEE4S7B77 2023-12-31 ifrs-full:SharePremiumMember 7437009IVYWGEE4S7B77 2021-12-31 ifrs-full:SharePremiumMember 7437009IVYWGEE4S7B77 2022-12-31 optomed:ReserveForInvestedUnrestrictedEquityMember 7437009IVYWGEE4S7B77 2023-01-01 2023-12-31 optomed:ReserveForInvestedUnrestrictedEquityMember 7437009IVYWGEE4S7B77 2023-12-31 optomed:ReserveForInvestedUnrestrictedEquityMember 7437009IVYWGEE4S7B77 2021-12-31 optomed:ReserveForInvestedUnrestrictedEquityMember 7437009IVYWGEE4S7B77 2022-01-01 2022-12-31 optomed:ReserveForInvestedUnrestrictedEquityMember 7437009IVYWGEE4S7B77 2021-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 7437009IVYWGEE4S7B77 2022-01-01 2022-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 7437009IVYWGEE4S7B77 2022-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 7437009IVYWGEE4S7B77 2021-12-31 ifrs-full:RetainedEarningsMember 7437009IVYWGEE4S7B77 2022-01-01 2022-12-31 ifrs-full:RetainedEarningsMember 7437009IVYWGEE4S7B77 2022-12-31 ifrs-full:RetainedEarningsMember 7437009IVYWGEE4S7B77 2023-01-01 2023-12-31 ifrs-full:RetainedEarningsMember 7437009IVYWGEE4S7B77 2023-12-31 ifrs-full:RetainedEarningsMember 7437009IVYWGEE4S7B77 2023-01-01 2023-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 7437009IVYWGEE4S7B77 2023-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember iso4217:EUR iso4217:EUR xbrli:shares 23 Board of Directors’ Report and Financial Statements 2023 24 Board of Directors’ Report Optomed in brief Optomed is a Finnish medical technology company and a leading manufacturer of handheld fundus cameras and screening software. Optomed combines handheld fundus cameras with software and artificial intelligence with the aim to transform the diagnostic process of various diseases, such as rapidly increasing diabetic retinopathy. Optomed has offices in Finland, the US and China and the compa- ny’s products are sold via various sales channels in over 60 countries globally. Operating Environment Optomed operates in the global ophthalmic devices market including the fun- dus camera market, ophthalmic software market and the market for artificial intelligence in eye screening. The global fundus camera market exceeded 473 million USD in 2020 and is anticipated to grow at a CAGR of over 3.2 percent between 2021 and 2027. The fundus camera and eye screening market are driven by steady pace of technological advancements, growing awareness about eye care, increasing geriatric population and favorable government initiatives2. In 2023 a solution delivered by Optomed to a public sector customer in Valencia Spain will serve as a good indicator of public sector demand. The solution consist of Optomed Aurora IQ fundus cameras and associated software solutions. The solution will be used for the screening of local diabetic retinopathy patients and for the detection of potentially vision threatening diabetic retinopathy. The adaptation of artificial intelligence took a major leap forward in 2021 as the new reimbursement code for diabetic retinopathy screening with AI was opened in 2021 in the USA. This new CPT-code 92229 “retinal imaging with automated point-of-care”, will accelerate the use of AI within the US market, as payment for the service is more straightforward with the new coding. The US national average physician fee for CPT 92229 is approximately 45.69 USD. The physician payment amounts varies across the country depends on the applicable Geo- graphic Practice Cost Indices (GPCI) for a specific locality, and in the locality with the highest cost index the physician fee for CPT code 92229 is estimated to be 62.93 USD. The Outpatient Prospective Payment System (OPPS) payment rate for 92229 is 57.12 USD. According to the American Association of Ophthalmology, it is estimated that 61 million adults in the United States are at high risk for vision loss although only half have visited an eye doctor sometime in the last 12 months. New technology, such as artificial intelligence, may be an important step to make initial screenin- gs more convenient and accessible, reaching people who may have otherwise gone without. While it is not expected that artificial intelligence would replace physicians, it will increase efficiency. As artificial intelligence may be able to as- sist in the detection of diabetic retinopathy and macular degeneration, it may help to catch those patients that are currently being missed for this extremely important examination. 3 The FDA has now cleared three AI companies’ diabetic retinopathy algorithm to be sold with dedicated desktop cameras in the US market. Optomed’s goal is to receive FDA- approval for its Aurora AEYE AI camera. 1 https://www.gminsights.com/industry-analysis/fundus-cameras-market 2 https://www.prnewswire.com/news-releases/global-nonmydriatic-handheld-fundus-cameras- markets-2021-2026---focus-on-teleophthalmology-presents-opportunities-301438049.html 3 AAO, Artificial Intelligence Trends in Eye Care, Aug 22, 2018 1 25 Group summary - Key figures and APM’s Revenue, Profitability and Result EUR, thousand 2023 2022 Change, % 2021 Revenue 15,100 14,660 3.0% 14,850 Gross profit * 10,292 10,069 2.2% 10,558 Gross margin % * 68.2% 68.7% 71.1% EBITDA -1,781 -1,952 8.7% -2,002 EBITDA margin , % -11.8% -13.3% -13.5% Adjusted EBITDA * -1,470 -1,952 24.7% -2,002 Adjusted EBITDA margin , % -9.7% -13.3% -13.5% Operating result (EBIT) -3,974 -5,097 22.0% -4,780 Operating margin (EBIT) , % -26.3% -34.8% -32.2% Adjusted operating result (EBIT) * -3,663 -5,097 28.1% -4,780 Adjusted operating margin (EBIT margin) , % -24.3% -34.8% -32.2% Net profit/ loss -4,441 -5,472 18.9% -4,249 Earnings per share -0.27 -0.37 28.9% -0.32 Cash flow from operating activities -615 -2,370 74.0% -2,940 Net Debt -3,768 -3,251 15.9% 213 Net debt/ EBITDA (LTM) 2.1 1.7 -0.1 Net debt/ Adjusted EBITDA(LTM) 2.6 1.7 -0.1 Equity ratio * 70.0% 65.0% 58.8% R&D expenses personnel 1,280 1,198 6.8% 1,773 R&D expenses other costs 644 661 -2.6% 511 Total R&D expenses 1,924 1,859 3.5% 2,284 Optomed uses certain alternative performance measures (APMs) with the purpose to provide a better understanding of how the business develops. These APMs, as defined, cannot be fully compared with other companies’ APMs. ) Alternative performance measures, see section Alternative Performance Measures for definitions and calculations. 2 26 In January - December 2023, Group revenue increased by 3.0 percent to EUR 15,100 (14,660) thousand. The growth was driven by the Software segment as the Devices segment’s revenue decreased by 7.2 percent while the Software segment’s revenue increased by 8.9 percent. The gross margin decreased to 68.2 percent from 68.7 percent last year. During the comparison period, the gross margin was negatively affected by an inventory provision of EUR 251 thousand, and Optomed was granted a loan waiver in the amount of EUR 841 thousand treated as other operating income and, therefore, affecting the gross margin positively. The gross margin for 2023 adjusted for grants and other operating income is 67.8 percent compared to comparison period 62.8 percent. EBITDA amounted to EUR -1,781 (-1,952) thousand and adjusted EBITDA was EUR -1,470 (-1,952) thousand. The comparison period EBITDA was also positively affected by the previously mentioned loan waiver, and the comparison period EBITDA adjusted for grants and other operating income would have been EUR -2,809 thousand. EBIT was EUR -3,974 (-5,097) thousand and adjusted EBIT was EUR -3,663 (-5,097) thousand. The improvement is due to the improved gross profit. Net financial items amounted to EUR -545 (-454) thousand and consisted mainly of interest payments to financial institutions and the translation effect of CNY and USD to EUR. Financial summary per segment Devices segment Optomed has two synergistic business segments: Devices and Software. The Devices segment develops, commercializes and manufactures easy-to-use and affordable handheld fundus cameras, that are suitable for any clinic for screening of various eye diseases, such as diabetic retinopathy, glaucoma and AMD (Age Related Macular degeneration). EUR, thousand 2023 2022 Change,% Revenues 5,009 5,398 -7.2% Gross profit * 2,947 3,738 -21.2% Gross margin % * 58.8% 69.3% EBITDA -1,264 -670 -88.6% EBITDA margin , % -25.2% -12.4% Operating result (EBIT) -2,707 -3,159 14.3% Operating margin (EBIT) , % -54.0% -58.5% ) Alternative performance measures, see section Alternative Performance Measures for definitions and calculations In January - December 2023, the Devices segment revenue decreased by 7.2 percent to EUR 5,009 (5,398) thousand. The global distributor sales and USA grew strongly; however, the growth was offset by weak OEM sales. The gross margin decreased to 58.8 percent from 69.3 percent and gross margin adjusted for grants and other operating income increased to 58.8 (53.4) percent. EBITDA was EUR -1,264 (-670) thousand or -25.2 (-12.4) percent of revenue. During the comparison period, Optomed was granted a loan waiver in the amount of EUR 841 thousand treated as other operating income that had a corresponding effect on both gross margin and EBITDA. 3 27 ) Alternative performance measures, see section Alternative Performance Measures for definitions and calculations. Software segment Optomed has two synergistic business segments: Devices and Software. The Software segment develops and commercializes screening software for diabetic retinopathy and cancer screening for healthcare organizations. The segment also distributes off-the-shelf products from selected partners to supplement its own solutions and expertise and provides software consultation to support the Devices segment screening solution projects. Group-wide expenses Group-wide expenses consist of functions supporting the entire group such as treasury, group accounting, marketing, legal, HR and IT as well as public listing expenses. Group-wide operating expenses amounted to EUR 3,155 (3,368) thousand. Balance sheet, financial position and investments In January-December 2023, the cash flow from operating activities amounted to EUR –615 (-2,370) thousand. Net cash in investing activities was EUR -2,412 (-3,029) thousand and relates mainly to capitalized development expenses. Net cash from financing activities amounted to EUR 1,609 (7,003). In 2023 Optomed completed directed share issues consisting of 1,589,042 shares and collected gross proceeds of approximately EUR 4.3 million. Consolidated cash and cash equivalents at the end of the period amounted to EUR 7,118 (8,524) thousand. Interest-bearing net debt totaled EUR -3,768 (-3,251) thousand at the end of the period. Net working capital was EUR 2,460 (3,738) thousand at the end of the period. The net working capital includes trade receivables of EUR 2,6 (3,6) million. One Chinese customer represents approximately 45% of the total group trade re- ceivables out of which approximately EUR 1,5 million is overdue, which after management’s assessment have resulted in a credit risk accrual of EUR 767 thousand which represents approximately 50% of the total outstanding trade receivable. During 2023 credit risk accrual increased EUR 178 thousand. EUR, thousand 2023 2022 Change, % Revenues 10,091 9,263 8.9% Gross profit * 7,346 6,330 16.0% Gross margin % * 72.8% 68.3% EBITDA 2,629 2,079 26.4% EBITDA margin , % 26.1% 22.4% Operating result (EBIT) 1,889 1,431 32.0% Operating margin (EBIT) , % 18.7% 15.4% In January - December 2023, the Software segment revenue increased by 8.9 percent to EUR 10,091 (9,263) thousand. Gross margin increased and it was 72.8 (68.3) percent. EBITDA was EUR 2,629 (2,079) thousand or 26.1 (22.4) percent of revenue. The increased profitability was driven by improved performance of the healthcare solution sales. 4 28 Research and development Optomed is a research and development driven healthcare technology com- pany. The strong focus on research and development has been the core of the operations since the foundation of the company in 2004 and has resulted in a strong international patent portfolio comprising 38 international patents and 31 pending patents. Additionally, Optomed has six registered as well as four pending model protection and 91 registered and 3 pending trademarks. Optomed’s management believes that the strong patent portfolio and continuous development of new camera and software solutions are the most important competitive advantages of the company. Optomed’s proprietary and patented technology have resulted in Optomed being able to develop and construct hand- held fundus cameras that are able to provide high- quality fundus images. The quality of the images is higher or on the same level as most traditional desktop fundus cameras. The research and development expenditure totaled EUR 3,993 thousand, rep- resenting 26.4 percent of revenue in 2023, compared to EUR 4,000 thousand or 27.3 percent of revenue in 2022. Non-financial information Environment, Social and Governance (ESG) related matters are an integral part of Optomed’s operations. The company is still rather small which enables the management to take ESG matters into consideration efficiently. Optomed has identified manufacturing as one of its key ESG elements and the key ESG related risks are within the scope of manufacturing. Therefore, the ESG matters are taken into account when making resolutions with regards to manufacturing. Currently, Optomed’s devices are manufactured by an ESM partner that is a NYSE listed entity with its own strict sustainability requirements and reporting. This gives Optomed visibility and assurance that ESG matters are taken into account with regards to its device manufacturing. Optomed has implemented a governance structure required for the Nasdaq Helsinki main list and implemented significant amount of policies, including the code of conduct and whistleblowing that all employees are expected to follow. The code of conduct also highlights Anti-Bribery and Corruption (ABC) matters as they have been assessed to be extremely important due to the global nature of Optomed’s operations. The governance function has been strengthened significantly and new expertise has been brought to the board and audit com- mittee. The governance structure is described in detail in Optomed’s Corporate Governance Statement. Health technology is a regulated sector which also contributes to the company’s ESG approach. Optomed complies with RoHS, REACH, conflict mineral regulations and all applicable privacy, consumer protection and product safety regulations. Optomed’s compliance with respect to various medical devices related regula- tions is also audited by third parties regularly. EUR, thousand 2023 2022 R&D expenditure 3,993 4,000 As percentage of revenue 26.4% 27.3% 5 29 Personnel, management and legal structure Personnel On 31 December 2023, Optomed had a total of 114 employees, of which a significant number worked in expert roles. The employee contracts are mostly permanent contracts. Graphical distribution of employees 2023 2022 Finland 97 95 China 8 8 United States 9 11 Total 114 114 Number of employees 2023 2022 Average number of employees 114 119 Number of employees at the end of the period 114 114 Management Optomed Oyj leadership team consist of at the end of the 2023 CEO Juho Him- berg, CFO Sakari Knuutti, Software-segment leader Markku Myllylä and De- vices-segment leader Laura Piila. 6 30 Juho Himberg Chief Executive Officer Laura Piila VP, Devices Markku Myllylä VP, Software Sakari Knuutti Chief Financial Officer Design Value Chain Management R&D Sales Optomed China Finance and Accounting Business Control and Admin Marketing Sales R&D Group ICT functions Professional services, non-health care Healthcare solutions delivery Optomed USA HR Quality and Regulation 7 31 Subsidiaries of the company Consolidated shareholding and voting right, % Country of incorporation Optomed Software Oy 100 % Finland Optomed Hong Kong Ltd 100 % Hong Kong Optomed China Limited Co.,Ltd 100 % China O p t o m e d U S A I n c . 100 % United States Legal structure Optomed group consists of the parent company Optomed Plc and four subsi- diaries in Finland, China, the USA and Hong Kong. The parent company of the group, Optomed Plc, is responsible for, among other things, the management of the group as well as finance and accounting functions, human resources, legal affairs and corporate communication. The parent company and count- ry companies are responsible for the Devices segment operations, while the Software segment operations are carried out through Optomed Software Oy. In addition to Finland, Optomed operates in China and the USA through its subsidiaries. The main responsibilities of the foreign subsidiaries are local sa- les and distribution channel management, product registration as well as the launching of new products, brand building, marketing, after-sales services, and repair services. The following table presents the subsidiaries of the company along with respe- ctive ownership shares on 31 December 2023. Shanghai Optomed Medical Technology Co., Ltd was closed on January 2023. Shares and shareholders The company has one share series with all shares having the same rights. At the end of the review period Optomed Plc’s share capital consisted of 18,130,397 shares and the company held 353,973 shares in the treasury which corresponds to approximately 1.95 percent of the total amount of the shares and votes. Op- tomed’s market capitalization was EUR 67.4 million at the of the review period. 8 32 Sector Number of shareholders % of shareholders Number of shares % of shares Private companies 369 3.87 3,749,401 20.68 Financial and insurance institutions 19 0.20 3,972,649 21.91 Public sector organizations 5 0.05 1,431,512 7.90 Households 9,103 95.47 6,903,766 38.08 Non-profit instit serving households 11 0.12 204,345 1.13 Foreigners 19 0.20 34,795 0.19 Total, 9,526 99.91 16,296,468 89.88 Nominee registered 9 0.09 1,833,929 10.12 Total shares 18,130,397 100 Number of shares Shareholders % Shares % 1- 100 3,259 34.18 156,481 0.86 101–1,000 4,904 51.43 1,963,057 10.83 1,001–10,000 1,245 13.06 3,349,721 18.48 10,001–100,000 105 1.1 2,754629 15.19 100,001–1.000,000 20 0.21 6,744,740 37.2 >1,000,000 2 0.02 3,161,769 17.44 Total 9,535 100 18,130,397 100 Nomineeregistered 9 0.09 1,833,929 10.12 Number of shares issued 18,130,397 100 9 33 Shareholder Shares %,of,shares 1 ,Skandinaviska,Enskilda, Banken,Ab,(publ),Helsinki,Branch 1,728,813 9.54 2 OP-Suomi Pienyhtiöt 1,432,956 7.9 3 Sr Säästöpankki Pienyhtiöt 879,719 4.85 4 Sr Aktia Capital 687,409 3.79 5 Suomen Teollisuussijoitus Oy 601,080 3.32 6 Keskinäinen Työeläkevakuutusyhtiö Elo 561,916 3.1 7 Mandatum Henkivakuutusosakeyhtiö 419,382 2.31 8 Danske Invest Suomi Osake 418,824 2.31 9 Sr eQ Suomi 386,993 2.13 10 Joensuun Kauppa ja Kone Oy 364,858 2.01 , 10 largest shareholder’s total 7,481,950 41.27 , Nominee,registered 1,728,813 9.54 , Others 10,648,447 58.73 , Total 18,130,397 100 *Nominee register At the end of the review period, Optomed’s Chairman and Members of the Board of Directors controlled 48,900 shares, representing approximately 0.27 percent of the total number of all shares and 0.28 percent of all shares exclu- ding shares in treasury. The CEO and management team owned 2,000 shares and 348,000 options. Flagging notifications Under the provisions of the Finnish Securities Markets Act, shareholders of listed companies have an obligation to notify both the Finnish Financial Supervision Authority and the listed company of changes in their holdings when crossing pre - defined thresholds. In 2023, Optomed received the following major shareholder notifications: 5.6.2023 Cenova Capital notified that its total holdings in Optomed shares and votes has decreased to 9.96% of all of the registered shares in Optomed.. 2.11.2023 Universal-Investment-Gesellschaft mit beschränkter Haftung notified that its total holdings in Optomed shares and votes has decreased to 4.98 per cent of all of the registered shares in Optomed. 4.12.2023 Cenova Capital notified that its total holdings in Optomed shares and votes has decreased to 3.81% of all of the registered shares in Optomed. Shareholders agreements The company is not aware of the existence of any Shareholders’ agreements and it is not controlled by anyone. Additional information with respect to the shares, shareholding and trading can be found on the company’s website www.optomed.com. Authorizations The Company’s annual general meeting held 10.5.2023 approved following authorizations for the Board of Directors. 10 34 Group Share Indicators 2023 2022 2021 Earnings per share -0.27 -0.37 -0.32 Equity per share 1.22 1.39 1.34 Dividend per share - - - Dividend % of earnings - - - effective dividend yield % - - - P/E ratio -14.00 -10.03 -31.00 Share price performance, share issue adjusted * Lowest share price 2.38 2.11 7.25 Highest share price 4.63 10.75 18.90 Average share price 3.45 4.56 10.62 Closing share price 3.72 3.75 9.80 Market value of shares at end of period 67,445 62,030 137,231 Weighted average adjusted number of shares during the financial period 15,949,241 14,052,855 13,390,702 Weighted average adjusted number of shares in the end of financial year 16,706,508 14,640,697 13,441,437 The Annual General Meeting approved the authorization for the Board of Directors to repurchase Optomed’s own shares and to accept them as pledge. Altogether no more than 1,654,135 shares may be repurchased or accepted as pledge. The authorization will be valid until the earlier of the end of the next Annual General Meeting or 18 months from the resolution of the Annual General Meeting. The Annual General Meeting authorized the Board of Directors to decide on the issuance of shares and other special rights entitling to shares referred to in Chapter 10, Section 1 of the Finnish Companies Act. The number of shares to be issued based on this authorization may not exceed 1,654,135. The Board of Directors is authorized to resolve on all terms and conditions of the issuance of shares and special rights entitling to shares, including the right to derogate from the pre-emptive right of the shareholders. The authorization will be valid until the earlier of the end of the next Annual General Meeting or 18 months from the resolution of the Annual General Meeting. 11 35 Calculation of share indicators Option programs Optomed has established several option programs as incentive programs co- vering employees, managing directors and consultants of the group. Optomed’s amended option programs are described below. Each option entitles its owner to subscribe for one (1) new, or if the company’s Board of Directors so decides, existing A share in the company or if the company would only have one class of shares, as is the case following the Listing, such shares. The share subscription prices, and the exercise periods are set out in the terms and conditions of the options. The dividend right of the new shares and other shareholder rights will commence after the shares upon exercise of the relevant option are recorded into the Trade Register, or if existing shares of the company are being issued, upon comple- tion of the transfer of the share provided that the transfer has been fully paid. Earnings per share Net result / Weighted average number of outstanding shares Equity per share Shareholders’ equity / adjusted number of shares at the end of the financial period - own shares Dividend per share Total dividend / adjusted number of shares at the end of the financial period - own shares Dividend, % of earnings Dividends per share / earnings per share × 100 Effective dividend yield, % Dividend per share x 100 / adjusted share price at the end of the financial period P/E ratio Market value per share/ earnings per share The options are forfeited and automatically transferred to the company without consideration if the employment or service relationship to the group is termi- nated, for any reason whatsoever, or if the consulting agreement regarding the option holder’s work performed for the group is terminated for any reason whatsoever, unless the Board of Directors decides to deviate from the main rule. 12 36 Program Subscription price (EUR) Exercise Period Outstanding options at the end of 2023 2015 3.5 1 July 2020 – 1 July 2024 118,000 2017 3.5 1 July 2020 – 1 July 2024 131,300 2017B 3.5 1 July 2020 – 1 July 2024 29,300 2018C 3.5 (50%) 1 July 2020 – 31 December 2024 157,900 (50%) 1 July 2021 – 31 December 2024 2019A 3.5 1 July 2021 – 31 December 2024 66,000 2019B 3.5 (40%) 1 July 2020 – 31 December 2024 100,000 (20%) 1 September 2020 – 31 December 2024 (40%) 1 September 2021 – 31 December 2024 2019C 3.5 (50%) 1 July 2020 – 31 December 2024 20,000 (50%) 1 September 2020 – 31 December 2024 2019D 5 1 January 2023 – 31 December 2023 6,000 2020A 3.5 1 January 2023 – 31 December 2023 114,000 2022A 4.17 1 January 2026 – 31 December 2027 147,500 Total 890,000 13 37 Decisions of the annual general meeting The Annual General Meeting held on 10 May 2023 adopted the financial state- ments for the financial period ended on 31 December 2022 and discharged the members of the Board of Directors and the CEO from liability for the financial period ended on 31 December 2022. The Annual General Meeting decided to reject the remuneration report for governing bodies. The decision made is advisory. The Annual General Meeting resolved in accordance with the proposal of the Board of Directors that no dividend will be paid for the year 2022. The number of members of the Board of Directors was confirmed as six. Seppo Mäkinen, Petri Salonen, Reijo Tauriainen and Anna Tenstam were re-elected as members of the Board and Catherine Calarco and Ty Lee were elected as new members of the Board. The Annual General Meeting confirmed the annual Board remuneration as follows: • Chairman of the Board EUR 36,000 • members of the Board EUR 18,000. In addition, a meeting fee in the amount of EUR 300 is paid to the Chairpersons and EUR 200 to members of the Committees for each Committee meeting. 40 percent of the Board remuneration is paid in Optomed shares and 60 percent in cash. The remuneration will be paid once a year in August, after Optomed’s H1 report has been announced. The Annual General Meeting decided to re-elect KPMG Oy Ab, a firm of autho - rized public accountants, as the Company’s auditor. KPMG Oy Ab has informed the Company that Authorized Public Accountant Heidi Hyry acts as the auditor with principal responsibility. Auditor’s remuneration will be paid in accordance with an invoice approved by the Company. The Annual General Meeting approved the authorization for the Board of Directors to repurchase Optomed’s own shares and to accept them as pledge. Altogether no more than 1,654,135 shares may be repurchased or accepted as pledge. The authorization will be valid until the earlier of the end of the next Annual General Meeting or 18 months from the resolution of the Annual Gene - ral Meeting. The Annual General Meeting authorized the Board of Directors to decide on the issuance of shares and other special rights entitling to shares referred to in Chapter 10, Section 1 of the Finnish Companies Act. The number of shares to be issued based on this authorization may not exceed 1,654,135. The Board of Directors is authorized to resolve on all terms and conditions of the issuance of shares and special rights entitling to shares, including the right to derogate from the pre-emptive right of the shareholders. The authorization will be valid until the earlier of the end of the next Annual General Meeting or 18 months from the resolution of the Annual General Meeting. The Annual General Meeting decided to amend the Articles of Association so that the minimum number of the members of the Board of Directors was reduced from five members to four. Decisions of the Board of Directors: At its meeting held after the Annual General Meeting, the Board of Directors elected from among its members Petri Salonen as its Chairman. The committee members were elected as follows: Audit Committee: • Reijo Tauriainen (Chairman) • Catherine Calarco • Anna Tenstam Remuneration Committee: • Seppo Mäkinen (Chairman) • Catherine Calarco • Ty Lee 14 38 Risks and uncertainties AURORA AEYE FDA CLEARANCE PROCESS Optomed is in the process to obtain a US FDA clearance for its AI handheld camera Aurora AEYE. Optomed and its partner AEYE Health have a common goal to obtain the US FDA clearance for the handheld AI fundus camera Aurora AEYE. The Company has limited visibility to the FDA decision making process and the Company may be adversely affected if the process is delayed or requires significant ad- ditional work or investments from the Company. PUBLIC PROCUREMENT In addition to its healthcare customers, Optomed’s Software segment provides development services also to a non-healthcare Finnish governmental agency under a contract the term of which is ending in the beginning of July 2024. The new contract with the agency is subject to a public procurement process. There is a risk that the Company fails to win the procurement process and the new contract. In case the Company fails to win the new contract, the impact on 2024 revenue is expected to be approximately EUR 0.5M-1.0M. PANDEMICS In 2020, the COVID-19 pandemic led to widespread lockdowns and had signi- ficant effects on the supply chain and revenue streams of various companies. The Company may be adversely affected if a new outbreak of COVID-19 or another disease causes a new pandemic and lockdowns. HIGH QUALITY PRODUCTS The quality and safety of the Company’s products are extremely important for Optomed’s competitiveness. The Company may be adversely affected if it fails to continuously develop and update its fundus cameras and software solutions or to identify or integrate new products and product platforms into its offering. The Company’s or its partners’ products may also be subject to clinical trials, the results of which are critical for the products’ regulatory approvals and market acceptance. STRATEGY AND M&A The Company may be unsuccessful in fulfilling its strategy or the strategy itself may be unsuccessful. The successful implementation of the Company’s strategy depends upon a number of factors, some of which are completely or partially outside the Com- pany’s control. The Company has an appropriate risk management function in the context of the size of the Company’s operations, however, it may not be able to identify or monitor all relevant risks and determine efficient risk management procedures and responsible persons that may again affect the strategy. The Company is also dependent on its ability to develop and manage varying routes-to-market for its products, the efficiency of its sales channels and its customer and distributor relationships. Further, the Company has an opportunistic view on M&A which by nature include inherent risks. Failure of strategy may force the Company to record write-downs on its goodwill. MARKET AND COMPETITION Optomed operates in a niche market that is highly competitive. Optomed operates in the fundus camera market that is developing fast and the competition is sometimes fierce. The market acceptance of the Compa- ny’s products and solutions is important for our future growth. Optomed re- cognizes a possibility of new market changing products entering the market. Further, in certain key geographies the client base is limited and, therefore, a loss of a key customer in a key market may adversely affect our revenue streams. EXTERNAL ECONOMIC AND POLITICAL RISKS AND NATURAL DISASTERS Optomed operates globally and is thus exposed to various external risks. The Company is exposed to natural disasters taking place in countries where it operates and general and country specific economic political and regulatory risks, which could entail volatile sales in key markets. 15 39 SUPPLY CHAIN Optomed’s business is dependent on the effectiveness of purchasing mate- rials, manufacturing and timely distribution. The Company is dependent on contract manufacturers for functioning, effi- cient and effective production and product assembly. Further, the Company is dependent on suppliers which may affect the Company’s ability to supply its customers in a timely manner. SYSTEMS AND INFORMATION Our operations are increasingly dependent on IT systems. Disruption of the Company’s IT systems could inhibit our business operations in a number of ways, including disruption to financial reporting, sales, produc- tion and cash flows. LITIGATION Optomed operates globally and pursues double-digit annual organic growth in mdium term. Optomed may not always be able to reach the best contractual terms with stakeholders. The Company may be negatively affected by legal or administrative proceedings directed at the Company or third parties due to back- to-back liability, or other disputes and claims including product liability, especially in terms of medical devices, and intellectual property rights related items. TRADE SECRETS AND PATENTS The technologic capabilities are a competitive advantage that the Company must be .able to protect. The Company may not be able to protect its trade se- crets and know-how which could lead to losing the competitive advantage the Company has. At the same time, the Company maybe forced to take actions against parties that violate our IPRs. TALENT & ORGANISATION A skilled workforce and agile organisation are essential for the continued suc- cess of our business. The Company may be adversely affected if it would lose its key personnel or fails to attract the right talent. FINANCE The Company needs external financing to operate and is not currently profitable. The Company is dependent on external financing and the Company may have difficulties accessing additional financing on competitive terms or at all which may again contribute the Company’s liquidity risks. The Company is also sub- ject to credit and counterparty risks through its trade receivables. Optomed has a large credit risk concentration related to a major Chinese customer who- se payments are late. The payments from the customer have continued but materially slower than originally agreed. FOREX Optomed operates globally and are thus exposed to currency exchange risks. The Company is exposed to foreign exchange rate risks arising from fluctua- tions in currency exchange rates, especially with regards USD, EUR and RMB. Currency rates, along with demand cycles, can result in significant swings in the prices of the raw materials needed to produce our goods and our sales prices and OPEX. LEGAL AND REGULATORY Compliance with laws and regulations is an essential part of Optomed’s busi- ness operations. Optomed together with its suppliers and distributors operate globally and are subject to various national and regional regulations in the areas of medical devices, product safety, product claims, data protection, intellectual proper- ty rights, health and safety, competition, employment, taxes and anti-mo- ney laundering and anti- bribery & corruption (AML & ABC). Further, many of the Company’s devices are subject to various medical related assessment (including clinical trials), clearance and approval processes that are required to place our products the market. Failure to comply these might lead to loss of sales permits in different markets, product recalls, reputational issues, civil 16 40 and criminal actions leading to various direct and indirect damages to Opto- med and its employees that are not completely covered by Optomed’s insu- rance coverage. Especially, failures with respect to compliance with certain medical devices related regulations .and processes may hinder the Company’s devices’ market access. Disputes According to the understanding of the company board of directors ,the company is not currently involved in any disputes or trials that would have a significant impact on the group’s financial position. Major events after the review period No material events after the reporting period. The board’s proposal for the distribution of profit The parent company’s non-restricted equity on 31 December 2023 was EUR 24,937,168.01 and the net loss for the financial year was EUR - 2,583,822.23 . The Board of Directors proposes to the Annual General Meeting that no dividend will be paid and the non-restricted equity on the outstanding 18,130,397 shares shall be retained and carried forward. Outlook 2024 Optomed expects its full year 2024 revenue to grow compared to 2023. 17 41 Consolidated income statement In thousand of euro Note Jan 1 - Dec 31, 2023 Jan 1 - Dec 31, 2022 Revenue 2, 3 15,100 14,660 Other operating income 4 49 857 Materials and services 5 -4,857 -5,449 Employee benefit expenses 6 -8,699 -8,827 Depreciation, amortization and impaiment losses 8 -2,193 -3,145 Other operating expenses 7 -3,374 -3,193 Operating result -3,974 -5,097 Finance income 9 479 569 Finance expenses 9 -1,024 -1,024 Net finance expenses -545 -454 Loss before income taxes -4,519 -5,551 Income tax expense 10 79 79 Loss for the financial year -4,441 -5,472 Loss for the financial year attributable to Owners of the parent company -4,441 -5,472 Loss per share attributable to owners of the parent company Basic loss per share (euro) 11 -0.27 -0.37 18 42 Consolidated comprehensive income statement In thousand of euro Jan 1 - Dec 31, 2023 Jan 1 - Dec 31, 2022 Loss for the financial year -4,441 -5,472 Other comprehensive income Items that may be subsequently reclassified to profit or loss Foreign currency translation difference 283 139 Other comprehensive income for the financial year, net of tax 283 139 Total comprehensive income for the financial year -4,157 -5,333 Total comprehensive loss attributable to Owners of the parent company -4,157 -5,333 19 43 Consolidated balance sheet In thousand of euro Note Dec 31, 2023 Dec 31, 2022 ASSETS Non-current assets Goodwill 4,256 4,256 Development costs 7,731 6,562 Customer relationships 942 1,164 Technology 433 534 Other intangible assets 384 379 Total intangible assets 12 13,746 12,895 Tangible assets 13 710 852 Right-of-use assets 14 1,472 1,448 Deferred tax assets 10 23 15 Total non-current assets 15,951 15,210 Current assets Inventories 15 2,820 2,998 Trade receivables 16,21 2,583 3,556 Other receivables 17 607 1,012 Cash and cash equivalents 16 7,118 8,524 Total current assets 13,128 16,090 Total assets 29,079 31,300 20 44 LIABILITIES Non-current liabilities Borrowings from financial institutions 19,21 1,651 3,380 Government loans 19,21 713 906 Lease liabilities 14,19 991 1,058 Deferred tax liabilities 10 310 387 Total non-current liabilities 3,665 5,731 Current liabilities Borrowings from financial institutions 19,21 794 794 Government loans 19,21 193 193 Lease liabilities 14,19 516 412 Trade payables 19 782 869 Other payables 20 2,767 2,959 Total current liabilities 5,052 5,227 Total liabilities 8,718 10,957 Total equity and liabilities 29,079 31,300 In thousand of euro Note Dec 31, 2023 Dec 31, 2022 EQUITY Share capital 80 80 Share premium 504 504 Reserve for invested non-restricted equity 50,936 46,896 Translation differences 334 51 Retained earnings -27,052 -21,717 Profit (loss) for the financial year -4,441 -5,472 Total equity 18 20,361 20,342 Consolidated balance sheet 21 45 Consolidated cash flow statement In thousand of euro Note Jan 1 - Dec 31, 2023 Jan 1 - Dec 31, 2022 Cash flows from operating activities Loss for the financial year -4,441 -5,472 Adjustments: Depreciation, amortization and impairment losses 8 2,193 3,145 Finance income and finance expenses 9 468 618 Other adjustments 289 -770 Cash flows before change in net working capital -1,491 -2,479 Change in net working capital: Change in trade and other receivables (increase (-) / decrease (+)) 1,094 204 Change in inventories (increase (-) / decrease (+)) 118 -68 Change in trade and other payables (increase (+) / decrease (-)) -75 172 Cash flows before finance items -354 -2,171 Interest paid -169 -76 Other finance expenses paid -93 -123 Net cash from operating activities (A) -615 -2,370 Cash flows from investing activities Capitalization of development expenses 12 -2,199 -2,249 Acquisition of tangible assets 13 -213 -780 22 46 Net cash from (used in) operating, investing and financing activities (A+B+C) -1,419 1,605 Net increase (decrease) in cash and cash equivalents -1,419 1,605 Cash and cash equivalents at January 1 8,524 6,804 Effect of movements in exchange rate on cash held 13 115 Cash and cash equivalents at December 31 16 7,118 8,524 In thousand of euro Note Jan 1 - Dec 31, 2023 Jan 1 - Dec 31, 2022 Net cash used in investing activities (B) -2,412 -3,029 Cash flows from financing activities Proceeds from share subscriptions 18 4,310 9,012 Share issue transaction costs -318 -682 Repayment of loans and borrowings 19 -1,921 -912 Repayment of lease liabilities 14.19 -462 -415 Net cash from financing activities (C) 1,609 7,003 Consolidated cash flow statement 23 47 Consolidated statement of changes in equity Equity attributable to owners of the parent company In thousand of euro Note Share Capital Share Premium Reserve for invested non-restricted Translation differences Retained earnings Total Balance at January 1, 2023 80 504 46,896 51 -27,189 20,342 Comprehensive income Loss for the financial year -4,441 -4,441 Translation differences 283 283 Total comprehensive income for the financial year 283 -4,441 -4,157 Transactions with owners of the company Share issue 3,973 3,973 Share based payments 48 48 Share options 6 19 137 156 Total transactions with owners of the company 4,039 137 4,176 Balance at December 31, 2023 18 80 504 50,936 334 -31,493 20,361 24 48 In thousand of euro Note Share Capital Share Premium Reserve for invested non-restricted Translation differences Retained earnings Total Balance at January 1, 2022 80 504 38,526 -88 -21,970 17,052 Comprehensive income Loss for the financial year -5,472 -5,472 Translation differences 139 139 Total comprehensive income for the financial year 139 -5,472 -5,333 Transactions with owners of the company Share issue 8,200 8,200 Share based payments 41 41 Share options 6 129 253 382 Total transactions with owners of the company 8,371 253 8,624 Balance at December 31, 2022 18 80 504 46,896 51 -27,189 20,342 Equity attributable to owners of the parent company 25 49 Notes to the consolidated financial statements 26 50 1. Corporate information and basis of accounting 1.1 Corporate information Optomed is a Finnish medical technology group (hereafter ‘Optomed’ or ‘Group’) that specialises in hand-held fundus cameras and solutions for screening of blinding eye diseases, established in 2004. The Group’s parent company, Optomed Plc. (hereafter the ‘Company’) is a Finnish public limited liability company established under the laws of Finland, and its business ID is 1936446-1. It is domiciled in Oulu, Finland and the Com- pany’s registered address is Yrttipellontie 1, 90230 Oulu, Finland. The Board of Directors of Optomed Plc approved these consolidated financial statements for issue. According to the Finnish Limited Liability Companies’ Act, the shareholders have the right to approve or reject the financial statements in the Annual General Meeting held after the publication of the financial state- ments. Furthermore, the Annual General Meeting can decide on modifications to be made to the financial statements. 1.2 Basis of accounting Optomed’s consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and in force as at December 31, 2023. In the EU IFRS are standards and their interpretations adopted in accordance with the procedure laid down in regulation (EC) No 1606/2002 of the European Parliament and of the Council. Optomed has consistently applied these policies to all the years presented (2022-2023), unless otherwise stated. General policies applied that relate to the consolidated financial statements as a whole are described in this section 1.2. Accounting policies that are specific to a component of the financial statements, together with descriptions of manage - ment judgements, related estimates and assumptions, have been incorporated into the relevant note. The consolidated financial statements are prepared on a historical cost basis, except for the following that are measured at fair value (refer to 1.2.3 Measu- rement of fair values below): — share-based payments The financial year of Optomed is the calendar year. The figures in the financial statements are mainly presented in thousands of euro. All figures presented have been rounded, and consequently the sum of individual figures may deviate from the presented aggregate figure. Key figures are computed using exact figures. 1.2.1 Consolidation The consolidated financial statements incorporate the financial statements of the parent company Optomed Plc. and of all those subsidiaries over which the parent company has control at the end of the reporting period. Optomed cont- rols an entity when Optomed is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Acquired subsidiaries are consolidated from the date on which control is transferred to Optomed until control ceases. Refer to Note 23. Related party transactions for disclosures on the Group structure. Intra-group transactions, receivables, liabilities and unrealized margins, as well as distribution of profits within the Group, are eliminated in preparing the con- solidated financial statements. Optomed had no non-controlling interests (NCI) during the financial years in the report. Acquired or established subsidiaries are accounted for by using the acquisition method. 1.2.2 Foreign currency transactions and balances Items included in the financial statements of each subsidiary are measured using the currency of the primary economic environment in which the company operates (‘the functional currency’). The consolidated financial statements are presented in Euro, which is the functional and presentation currency of the parent company. 27 51 For those subsidiaries with non-Euro functional and presentation currency, the income and expenses for the income statement and comprehensive income sta- tement, and the items for cash flow statement, are translated into Euro using the average exchange rates of the reporting period. The assets and liabilities for the balance sheet are translated using the exchange rates prevailing at the reporting date. The translation differences arising from the use of different exchange rates explained above are recognized in consolidated other comprehensive income. Any goodwill arising on the acquisition of foreign operations and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of those foreign operations are treated as assets and liabilities of those foreign operations. They are translated into Euro using the exchange rates prevailing at the reporting date. When a foreign operation is sold, or is otherwise partially or completely disposed of, the translation differences accumulated in equity are reclassified in profit or loss as part of the gain or loss on the transaction. 1.2.3 Measurement of fair values Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measure- ment date. A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Fair values are categorised into different levels in a fair value hierachy based on the inputs used in the valuation techniques as follows: — Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. — Level 2: inputs other than quoted prices included in Level 1 that are obser- vable for the asset or liability; either directly (i.e. as prices) or indirectly (i.e. derived from prices). — Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). Specific valuation techniques used in fair value measurement include: — Share-based payments – Black-Scholes option pricing model (Note 6.4 Share-based payment plans) 1.2.4 Operating result Optomed has determined operating result to be a relevant subtotal in unders- tanding the Group’s financial performance. However, IFRS does not define the concept of operating result. The Group has defined it as follows: operating result is the net amount attained when revenues are added by other operating income, less: — purchase expenses, adjusted with change in inventories — employee benefit expenses — depreciation, amortization and any impairment losses, and — other operating expenses. All other items are presented below operating result in the income statement. 1.2.5 Non-current assets held for sale Non-current assets (or disposal groups) are classified as held for sale, if their carrying amounts are to be recovered principally through a sale transaction rather than through continuing use. From the date of classification, these assets (or disposal groups) are measured at the lower of their carrying amounts and fair value less the costs to sell, and the recognition of depreciation or amor- tization is discontinued. 1.2.6 Critical management judgments and related estimates and assumptions The preparation of financial statements under IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the end of the reporting period as well as the reported amounts of income and expenses during the reporting period. These estimates and assumptions are based on historical experience and other justified assumptions, such as future expectations, that Optomed management believes are reasonable under the circumstances at the end of the reporting period and the time when they were made. Although these estimates are based on management’s best knowledge of current events and actions, actual results may ultimately differ from those estimates. The estimates and underlying assumptions are reviewed on an on-going basis 28 52 and when preparing financial statements. Changes in accounting estimates may be necessary if there are changes in the circumstances on which the estimate was based, or as a result of new information or more experience. Such changes are recognized in the period in which the estimate or the assumption is revised. Use of judgment and estimates Judgements that management has made in the process of applying accounting policies and that have the most significant effect on the amounts recognised in the financial statements, relate to the following areas: — capitalisation of development costs: determination of development expen- diture eligible for capitalisation (Note 12. Intangible assets ) — leases: determination of lease term (Note 14. Leases ) Assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year are the following: — Determining trade receivables credit risk (Note 21. Financial risk manage- ment) — goodwill impairment testing (Note 12. Intangible assets ) — capitalisation of development expenditures (Note 12. Intangible assets ) — Development expenditures impairment testing (Note 12. Intangible assets) 1.2.7 Adoption of new and amended standards in future financial years Optomed has not yet adopted the following amended standards and interpre- tations already issued by the IASB. The Group will adopt these pronouncements as of the effective date of each of the pronouncements, or if the effective date is not the first day of the financial year, as of the beginning of the next financial year following the effective date. Currently Optomed believes that the adoption of these pronouncements will not have a significant effect on the future conso- lidated financial statements. Effective for financial years beginning on or after January 1, 2024 : Amendments and interpretations are not expected to have an impact on the consolidated financial statements when adopted. 2. Segment reporting 2.1 Accounting policy An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses and for which discrete financial information is available. Optomed has two reportable segments, Devices and Software. Software segment offers products for optimal management of various screening operations as well as IT solutions and services for storing, viewing and working with medical images. Also professional IT consulting services for government institutions are included in this segment. Currently it comprises own screening solution products for diabetic retinopathy and breast, cervical and bowl cancer screening management as well as distributor of Sectra software solutions and reseller of artificial intelligence algorithms of several companies. The Devices segment develops, manufactures and sells Optomed fundus cameras for use by ophthalmologists, pediatricians, endocrinologists, neurologists and primary care professionals. Optomed subsidiaries Optomed USA and Optomed China are part of devices segment. Currently Devices segment comprises all Op- tomed branded camera products, such as Optomed Smartscope Pro, Optomed Aurora and Optomed Polaris cameras. Products for OEM customers, Pictor Plus and Pictor Prestige (Volk), Visuscout 100 (Zeiss), Fundus Module 300 (The Haag- Streit) and Signal (Topcon) are included in the Devices segment. In Optomed Group the CEO has been identified as being the chief operating decision maker responsible for assessing performance of the segments and making resource allocating decisions. The segment disclosures presented are based on the internal management reporting. Optomed has not aggregated operating segments into reportable segments. 29 53 2.2 Reportable segments 2023 In thousand of euro Devices Software Group Admin Group, Total External revenue 5,009 10,091 0 15,100 Net operating expenses -2,062 -2,745 0 -4,807 Margin 2,947 7,346 0 10,292 Depreciation and amortization -1,444 -740 -9 -2,193 Other expenses -4,210 -4,717 -3,146 -12,074 Operating result -2,707 1,889 -3,155 -3,974 Finance items 0 0 -545 -545 Loss before tax expense -2,707 1,889 -3,701 -4,519 Segment assets 11,024 8,369 241 19,635 Capital expenditure 1,520 634 53 2,208 Segment liabilities 189 618 192 999 30 54 2022 In thousand of euro Devices Software Group Admin Group, Total External revenue 5,398 9,263 0 14,660 Net operating expenses -1,659 -2,933 0 -4,592 Margin 3,738 6,330 0 10,069 Depreciation and amortization -2,489 -649 -8 -3,145 Other expenses -4,408 -4,251 -3,361 -12,020 Operating result -3,159 1,431 -3,368 -5,097 Finance items 0 0 -454 -454 Loss before tax expense -3,159 1,431 -3,823 -5,551 Segment assets 11,627 8,185 241 20,053 Capital expenditure 1,992 790 49 2,831 Segment liabilities 474 673 146 1,292 31 55 3. Revenue 3.1 Accounting policy Optomed recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which Optomed expects to be entitled in exchange for those goods or services. Devices segment sells medical imaging tools and solutions to distributors. The agreements with distributors are frame agreements. An enforceable contract is created based on each purchase order combined with the frame agreement. Typical sales agreements for the Software segment include maintenance ser- vice agreements, resource hiring agreements, service portal agreements and software package agreements. For medical imaging tools and solutions each product in a purchase order forms a separate performance obligation as: — the distributor can benefit from the good on its own, and — the promise to transfer the good to the customer is separately identifiable from other promises in the contract. Extended warranty may be sold separately, it is also a separate performance obligation. For Software segment: — A maintenance contract has one performance obligation containing overall service for the period agreed upon. — A resource hiring contract is based on hourly fee. Each hour of consulting service is a separate performance obligation. — A service portal agreement includes following separate performance obliga- tions: implementation, additions for new service providers, reconfigurations and continuous service provided. — A software package agreement includes following separate performance obligations: licences, implementation and continuous maintenance service. Transaction prices in the contracts are mostly fixed. Some contracts may, however, include a minimum amount for transactions in a certain period, for example. The variable fee is constrained to the amount for which it is highly probable that a significant reversal will not occur subsequently. The terms of payment applied vary to some extent geographically and in different business areas, but the term of payment provided is nonetheless always clearly less than a year. Consequently, contracts do not include a significant financing component. Optomed allocates the transaction price for medical imaging tools and solutions to performance obligations based their stand-alone selling prices using price 2.3 Geographic information In presenting the geographic information, segment assets were based on the geographic location of the assets. Segment assets are measured in the same way as in the IFRS financial statements. Non-current assets In thousands of euro 2023 2022 Finland 15,749 15,047 USA 61 127 China 117 21 Total 15,928 15,195 1 Group's non-current assets exclude financial instruments and deferred tax assets. Optomed has no defined benefit pension plans and thus no related assets. Disaggreration of consolidated revenue by geographical market is disclosed in Note 3.2 Disaggregation of revenue. 2.4 Major customers The Group’s revenues from two major customers in the financial years 2022-2023 were approximately as follows: from one customer EUR 2.4 million (2023), and EUR 2.4 million (2022), and from another customer EUR 1.4 million (2023) and EUR 1.3 million (2022). 1 32 56 lists. For service portal and software package contracts the transaction price is allocated based on costs incurred plus margin. For Devices segment the revenues from sales of medical imaging tools and solutions are recognised when the performance obligation is satisfied by tran- sferring a promised good to the distributor, i.e. at a point in time. The control is transferred when Optomed has present right to payment, significant risks and rewards of ownership have transferred to the distributor as well as the legal title and physical possession of the products. In respect of Software segment: — Service revenues are recognised over time as the customer simultaneously receives and consumes the benefits provided by Optomed’s performance. — Revenues from implementation projects are recognised at a point in time when the customer gets control and is able to start using the end product. — Licence revenues are recognised at the point in time when the customer gets control. This is based on the nature of licences, being to provide a right to use intellectual property of the Software segment as that intellectual property 3.2 Disaggregation of revenue In the following tables, consolidated revenue is disaggregated by geographical market and timing of revenue recognition. In thousands of euro 2023 2022 Finland 9,643 64% 8,606 59% Rest of the Europe 1,870 12% 1,715 12% Rest of the World 3,586 24% 4,340 30% Total 15,100 100% 14,660 100% 2023 2022 Products and services transferred at a point 11,140 74% 11,067 75 % in time Services transferred over time 3,960 26% 3,593 25 % Total 15,100 100% 14,660 100 % Trade receivables and related credit losses are described in Notes 16. Financial assets and 21.5 Liquity risk. 33 57 4. Other operating income 4.1 Accounting policy Other operating income comprises income from activities outside the ordinary business of Optomed. Examples include government grants, rental income and gains from disposals of tangible and intangible assets. The Group recognises a government grant only when: — there is reasonable assurance that Optomed will comply with the conditions attached to the grant, and — the grant will be received. Income-related grants are recognised in profit or loss over the periods necessary to match them with the related costs that they are intended to compensate. They are presented under the line item Other operating income. Asset-related grants, such as government grants received for development purposes, are deducted in arriving at the carrying amount of the assets. The grant is recognised over the life of the asset as a reduced depreciation expense. 4.2 Breakdown of other operating income In thousands of euro 2023 2022 Other operating income 49 857 Total 49 857 During the year 2023 Optomed did not receive significant grants. 2022 Optomed has received government grants from various organisations, such as Business Finland (previously Tekes). The most significant grants for the years 2022, Opto- med received from Business Finland. 2022 operating income include Business Finland waived loan of 841 thousand EUR. 5.Materials and services 5.1 Breakdown of materials and services expense In thousands of euro 2023 2022 Purchase expenses -4,370 -4,974 Change in inventories (increase (+), decrease (-)) -26 -99 External services -460 -375 Total -4,857 -5,449 Optomed has recognized 68 thousand inventory provision for non marketable items during 2023 and 251 thousand during 2022. 6. Employee benefits 6.1 Accounting policy Employee benefits include the following: a) short-term employee benefits b) post-employment benefits c) other long-term employee benefits (no such benefits were provided during the financial years 2022-2023) d) termination benefits, i.e. benefits provided in exchange for the termination of an employment (no such benefits were provided during the financial years 2022-2023) e) share-based payments (refer to Note 6.4 Share-based payment plans below). a) Wages, salaries, fringe benefits, annual leave and bonuses are included in short-term employee benefits. They are recognised in the period in which the work is performed. 34 58 b) Post-employment benefits are payable to employees after the completion of employment. In Optomed, these benefits are related to pensions. Pension cove- rage of the Group is arranged through external pension insurance companies. Pension plans are classified as either defined contribution or defined benefit plans. Optomed only has defined contribution plans. A defined contribution plan is a pension plan under which Optomed pays fixed contributions into a separate entity. Optomed has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the related benefits. All other plans are classified as defined benefit plans. The contributions for defined contribution plans are recognized as employee be- nefit expense in those periods to which they relate. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payments is available. c) Other long-term employee benefits are all employee benefits other than short- term employee benefits, post-employment benefits and termination benefits. Examples include long-term paid absences such as sabbatical leave. d) Termination benefits are not based on work performance but on the termina- tion of employment. These benefits consist of severance payments. Termination benefits result either from the Group’s decision to terminate the employment or the employee’s decision to accept the benefits offered by Optomed in exchange for the termination of employment. Such benefits are recognised at the earlier of: when Optomed can no longer withdraw the offer of the benefits, and when the Group recognises costs for a restructuring that involves the payment of termination benefits. e) The Group has ten share-based incentive plans for the Group key personnel, which are share option plans. The purpose of the plans is to encourage the emp- loyees to work on a long-term basis in order to increase shareholder value, and to commit the key employees to the company. The payments for the incentives are made with equity instruments. Share-based compensation is measured at the grant date and expensed using the straight-line method in the income statement over the vesting period. The expense determined at grant date is based on Optomed’s estimate of the num- ber of share options to which it is assumed that rights will vest by the end of the vesting period. The fair value is determined using the Black-Scholes pricing model. The Group updates its estimate of the final number of the share options that will vest at each reporting date. Changes in this estimate are recognised in the income statement. The options will be returned to Optomed in case the employee leaves the Group before the subscription period has commenced. There are no other vesting conditions. When the option rights are exercised, the proceeds received are recognised in accordance with the terms of the plan under Reserve for invested non-restricted equity, net of any transaction costs. 6.2 Expenses recognised in profit or loss In thousands of euro 2023 2022 Wages and salaries -7,287 -7,197 Contributions to defined contribution post-employment plans -1,016 -1,105 Other social security expenses -260 -271 Share-based payment plans -137 -253 Total -8,699 -8,827 35 59 6.3 Number of personnel 2023 2022 Average number of employees for the financial year 114 119 6.4 Share-based payment plans Option programs in effect during the financial year 2015: 118,000 Outstanding options on December 31,2023. Subcription price EUR 3.50 per share. Subscription period July 1, 2020–July 1, 2024. Each option right entitles its holder to subscribe for one new share. Up to 118,000 shares can be subscribed for based on the option rights, corresponding to 0.7% of the company’s share capital and votes. 2017: 131,300 Outstanding options on December 31,2023. Subcription price EUR 3.50 per share. Subscription period July 1, 2020–July 1, 2024. Each option right entitles its holder to subscribe for one new share. Up to 131,300 shares can be subscribed for based on the option rights, corresponding to 0.7% of the company’s share capital and votes. 2017B: 29,300 Outstanding options on December 31,2023. Subcription price EUR 3.50 per share. Subscription period July 1, 2020–July 1, 2023. Each option right entitles its holder to subscribe for one new share. Up to 29,300 shares can be subscribed for based on the option rights, corresponding to 0.2% of the company’s share capital and votes. 2018C: 157,900 Outstanding options on December 31,2023. Subcription price EUR 3.50 per share. Subscription period (50%) July 1, 2020–December 31, 2024 and (50%) 1 July 2021–31 December 2024. Each option right entitles its holder to subscribe for one new share. Up to 157,900 shares can be subscribed for based on the option rights, corresponding to 0.9% of the company’s share capital and votes. 2019A: 66,000 Outstanding options on December 31,2023. Subcription price EUR 3.50 per share. Subscription period July 1, 2021–December 31, 2024. Each option right entitles its holder to subscribe for one new share. Up to 66,000 shares can be subscribed for based on the option rights, corresponding to 0.4% of the company’s share capital and votes. 2019B: 100,000 Outstanding options on December 31,2023. Subcription price EUR 3.50 per share. Subscription period (40%) July 1, 2020–December 31, 2024, (20%) September 1, 2020–December 31,2024 and (40%) September 1, 2021–De- cember 31, 2024 . Each option right entitles its holder to subscribe for one new share. Up to 100,000 shares can be subscribed for based on the option rights, corresponding to 0.6% of the company’s share capital and votes. 2019C: 20,000 Outstanding options on December 31,2023. Subcription price EUR 3.50 per share. Subscription period (50%) July 1, 2020–December 1, 2024 and (50%) 1 September 2020–31 December 2024. Each option right entitles its holder to subscribe for one new share. Up to 20,000 shares can be subscribed for based on the option rights, corresponding to 0.1% of the company’s share capital and votes. 2019D: 6,000 Outstanding options on December 31,2023. Subcription price EUR 5.0 per share. Subscription period January 1, 2023–December 31, 2023. Each option right entitles its holder to subscribe for one new share. Up to 6,000 shares can be subscribed for based on the option rights, corresponding to 0.0% of the company’s share capital and votes. 2020A: 114,000 Outstanding options on December 31,2023. Subcription price EUR 3.5 per share. Subscription period January 1, 2023–December 31, 2023. Each option right entitles its holder to subscribe for one new share. Up to 114,000 shares can be subscribed for based on the option rights, corresponding to 0.6% of the company’s share capital and votes. 2022A: 147,500 Outstanding options on December 31,2023. Subcription price EUR 4.17 per share. Subscription period January 1, 2026–December 31, 2027. Each option right entitles its holder to subscribe for one new share. Up to 147,500 shares can be subscribed for based on the option rights, corresponding to 0.8% of the company’s share capital and votes. 36 60 Key terms and measurement of option plans Plan 2015 2017 2017B 2018C 2019A Maximum number of options 250,000 210,000 58,000 266,000 84,000 Number of options issued 250,000 210,000 58,000 266,000 84,000 Issued 2015-2018 2017 2017 2018 2019 Vesting period 2015 - 2020 2017 - 2020 2017 - 2020 2018 - 2021 2019 - 2021 Vesting condition Employment Employment Employment Employment Employment Option subscription price 3.50 3.50 3.50 3.50 3.50 Fair value at grant date 2.25 2.17 2.09 2.09 2.09 Total fair value (1,000 EUR) 562 455 121 556 175 Plan 2019B 2019C 2019D 2020A 2022A Maximum number of options 100,000 20,000 72,000 150,000 250 000 Number of options issued 100,000 20,000 72,000 119,000 147,500 Issued 2019 2019 2019 2020 2022 Vesting period 2019 - 2020 2019 - 2020 2019 - 2023 2020 - 2023 2022 - 2026 Vesting condition Employment Employment Employment Employment Employment Option subscription price 3.50 3.50 5.00 3.50 4.17 Fair value at grant date 2.02-2.09 2.02 1.69 2.97 1.771 Total fair value (1,000 EUR) 205 40 122 446 443 37 61 The grant-date fair value of Optomed’s all option programs is determined using the Black Scholes option pricing model that takes into account the following key inputs: — expected fair value of the underlying share EUR 4.0 - 6.5 — expected volatility 30 - 64 % — the term of the option 1.3 - 3.7 years Changes in outstanding share options Pieces 2023 2022 Outstanding at January 1 903,600 854,900 Granted during the year - 178,000 Forfeited during the year -8,100 -92,000 Exercised during the year -5,500 -37,300 Expired during the year - - Outstanding at December 31 890,000 903,600 Exercisable at December 31 742,500 629,100 Option subscription price during the 2023 was 3.50 EUR for exercised options. Optomed average share price during the 2023 was 3.45 EUR. In case the share options issued are fully exercised, the number of outstanding A shares will increase by 5.0%. The subscription prices will be recorded in the Reserve for invested non-restricted equity. Expenses from share-based payment plans Total expenses arising from share-based payment plans recognised as part of employee benefits were as follows: In thousands of euro 2023 2022 Equity-settled share-based payments -137 -253 7. Other operating expenses 7.1 Accounting policy Optomed’s other orerating expenses include: — expenses other than the cost of goods sold, such as travel, marketing, IT and office expenses. — losses on the disposal of tangible and intangible assets. 7.2 Breakdown of other operating expenses In thousands of euro 2023 2022 Travel expenses -424 -356 Marketing expenses -635 -784 IT expenses -403 -403 Office expenses -161 -186 Other administrative expenses -813 -765 Research and development expenses -230 -361 Credit loss accrual -206 123 Other fixed expenses -502 -463 Total -3,374 -3,193 Other operating expenses also comprise changes in expected credit losses and realised credit losses. More info about credit loss acrual in 21.4. Credit risk and counterparty risk. 38 62 7.3 Auditor’s fees In thousands of euro 2023 2022 Audit fees -160 -145 Other services 0 -7 Total -160 -152 8. Depreciation, amortization and impaiment losses 8.1 Accounting policy Depreciation and amortization is the systematic allocation of the depreciable amount of a tangible / an intangible asset over its useful life. Optomed generally applies the straight-line method. An impairment loss is the amount by which the carrying amount of an asset exceeds its recoverable amount. Refer to Notes 12. Intangible assets and 13. Tangible assets. 8.2 Depreciation, amortization and impaiment losses by asset category In thousands of euro 2023 2022 Intangible assets Development costs -920 -1,939 Customer relationships -222 -222 Technology -102 -102 Other intangible assets -87 -83 Total -1,331 -2,346 In thousands of euro 2023 2022 Tangible assets Machinery and equipment -355 -372 Total -355 -372 Total depreciation and amortization / owned assets -1,685 -2,718 8.3 Impairment losses The Group recognised impairment losses on intangible assets during financial year 2023 of 21 thousand euros and 1,040 thousand euros in 2022. 2023 Impair - ment losses are due to terminated patents. There were no recognised impairment losses on tangible assets during years 2022-2023. 9. Finance income and expenses The accounting policies for financial assets and financial liabilities are presented in Note 16. Financial assets and 19. Financial liabilities. Recognised through profit or loss 9.1 Finance income In thousands of euro 2023 2022 Foreign exchange gains 422 560 Interest income 23 4 Other finance income 34 6 Total 479 569 39 63 9.2 Finance expenses In thousands of euro 2023 2022 Foreign exchange losses -736 -756 Interest expenses -204 -115 Other finance expenses -84 -153 Total -1,024 -1,024 Net finance expenses -545 -454 Net financial items amounted to EUR -545 (-454) thousand and consisted mainly of interest payments to financial institutions and the translation effect of Chinese RMB and USD to EUR. 9.3 Borrowing costs - government loans Optomed has capitalised under Development costs those borrowing costs incurred from the government loans (Business Finland) granted for development activities, refer also to Note 19. Financial liabilities. The capitalisation rate used to determine the amount of borrowing costs to be capitalised was 1 % for the years 2022-2023, being the interest rate applicable to those loans during the said annual periods. The capitalised costs amounted to EUR 21 thousand (2023) and EUR 21 thousand 2022 which were recorded as deductions to interest expenses. 10. Income taxes 10.1 Accounting policy The income tax expense for the period consists of: — current tax, and — change in deferred tax assets and deferred tax liabilities. Income tax is recognized in the income statement, except that the income tax effects of items recognized in other comprehensive income or directly in equity are similarly recognized in other comprehensive income or equity. The current income tax charge is calculated on the basis of the taxable income determined in accordance with the tax rates and laws enacted (or substantive- ly enacted) in the countries where Optomed operates and generates taxable income. Income taxes are adjusted with any taxes relating to previous financial years. Other taxes not based on income are included within other operating expenses. Current taxes are calculated using the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Taxable profit differs from the profit reported in the consolidated income sta- tement, since: — some income or expense items are taxable or deductible in other years, and/or — certain income items are not taxable or certain expense items are non-deduc- tible for taxation purposes. Generally deferred tax is provided using the liability method on: — temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and — unused tax losses or unused tax credits. Deferred tax assets are recognised for deductible temporary differences only to the extent that it is probable that future taxable profits will be available, against which Optomed can utilise deductible temporary differences. The amount and the probability of the utilisation of deferred tax assets are reviewed at the end of each reporting period. A valuation allowance is recognized against the deferred tax asset, if the utilisation of the related tax benefit is no more considered probable. Deferred tax liabilities are usually recognized in full. However, deferred tax liability is not accounted for, if it arises from: — the initial recognition of goodwill, or — the initial recognition of an asset or a liability in a transaction which is not a business combination, and at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss). 40 64 A deferred tax liability is recognised for investments in subsidiaries, except to the extent that Optomed is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets and deferred tax liabilities are determined using tax rates (and laws) that are expected to apply when the related deferred tax asset is realized or the deferred tax liability is settled. The applied tax rate is the rate enacted or substantively enacted by the balance sheet date in the respective countries. 10.2 Current tax In thousands of euro 2023 2022 Current tax for the reporting year 0 0 Current tax adjustments for prior years 0 0 Change in deferred taxes 79 79 Total 79 79 10.3 Reconciliation between income tax expense in profit or loss and tax expense calculated using the Finnish corporate tax rate 2023 2022 Profit before income tax -4,519 -5,551 Tax using the Finnish corporate tax rate (20 %) 904 1,110 Effect of tax rate in foreign jurisdictions 38 40 Unrecognised deferred tax assets on taxable losses -550 -527 Non-deductible expenses -17 -21 Share option expense -27 -51 Depreciation and amortisation not deducted for tax purposes -264 -466 Consolidation-related adjustments -4 -7 Taxes in the income statement 79 79 10.4 Income taxes recognised in other comprehensive income During the years 2022-2023 the Group did not recognise any income taxes in other comprehensive income. 41 65 10.5 Gross movements in deferred tax asset and deferred tax liability balances 2023 Recognised Exchange At Jan 1, Business through Recognised differences and At Dec 31, In thousands of euro 2023 combinations profit or loss in equity other changes 2023 Deferred tax assets, Lease liabilities 306 7 318 Right-of-use assets -290 -5 5 -294 Total 16 3 5 24 Deferred tax liabilities, gross changes, additions PPA Intangible assets -340 65 -275 Development costs -47 12 -35 Total -387 76 -310 Total deferred tax assets and deferred tax liabilities -371 79 5 -288 42 66 2022 Recognised Exchange At Jan 1, Business through Recognised differences and At Dec 31, In thousands of euro 2022 combinations profit or loss in equity other changes 2022 Deferred tax assets Lease liabilities 255 51 306 Right-of-use assets -241 -49 -290 Total 14 2 16 Deferred tax liabilities, gross changes additions PPA Intangible assets -404 65 -340 Development costs -59 12 -47 Total -463 76 -387 Total deferred tax assets and deferred tax liabilities -450 78 -371 43 67 10.6 Group’s tax losses and depreciation and amortization not deducted for tax purposes In thousands of euro Dec 31, 2023 Dec 31, 2022 Tax losses approved by tax authorities 7,940 6,854 Depreciation and amortization not 10,424 9,102 deducted for tax purposes These tax losses relate to Optomed Plc. The Group has not recognised any de- ferred tax asset on these losses as at the time of preparation of these financial statements it is unlikely that these entities will generate taxable income against which the losses could be utilised before their expiration dates. The losses will expire in the years 2024-2033. The depreciation and amortization not deducted for tax purposes relate to Optomed Plc. 11. Loss per share 11.1 Accounting policy Basic and diluted earnings (loss) per share Basic earnings (loss) per share is calculated by dividing: — the profit (loss) attributable to owners of the parent company — by the weighted average number of ordinary shares outstanding during the financial year. In calculating the diluted earnings (loss) per share, the dilutive effect of all dilutive potential ordinary shares is taken into account in the weighted average number of outstanding shares. The Group’s dilutive potential ordinary shares comprise the share-based incentive plans payable in shares. 11.2 Loss per share Diluted loss per share is not presented, as the results for the financial years 2022 and 2023 were negative and thus the dilutive instruments would have an undilutive effect on loss per share. 2023 2022 Loss attributable to owners of the parent company (in thousands of euro) -4,441 -5,472 Weighted average number of shares outstanding during the 16,706,508 14,640,697 financial year (pcs) Basic loss per share (EUR/share) -0.27 -0.37 44 68 12. Intangible assets 12.1 Accounting policy The Group’s intangible assets comprise the following: a) goodwill, b) develop- ment costs, c) customer relatioships and technology (identified in the Commit acquisition) and d) other intangible assets. a) Goodwill: The excess of the — consideration transferred — amount of any non-controlling interest in the acquired entity, measured at fair value, and — acquisition-date fair value of any previous equity interest in the acquired entity, over the fair value of the net identifiable assets acquired is recorded as goodwill. Goodwill reflects e.g. expected future synergies resulting from acquisitions. Goodwill is not subject to amortization but is tested annually for impairment, or more frequently if there is any indication that it might be impaired, refer to Note 12.3 below. Goodwill is carried at historical cost less accumulated impairment losses. b) Development costs: Development is the application of research findings or other knowledge to a plan or design for the production of new or substantially improved materials, devices, products, processes, systems or services before the start of commercial production or use. Optomed capitalises such costs when all the following criteria are met: — Optomed can demonstrate the technical feasibility of completing the intan- gible asset so that it will be available for use or sale. — Optomed intends to complete the intangible asset and use or sell it. — Optomed is able to use or sell the intangible asset. — Optomed is able to demonstrate how the intangible asset will generate probable future economic benefits. — The Group has adequate technical, financial and other resources available to complete the development and to use or sell the intangible asset — Optomed is able to measure reliably the expenditure attributable to the intangible asset during its development. Capitalised development costs comp- rise all directly attributable costs (mainly labour) necessary to prepare the asset to be capable of operating in the manner intended. Optomed has also: — capitalised borrowing costs arisen from government loans granted for development purposes, and — deducted an applicable amount of major government grants received for development activities from the carrying amount. Development expenditure that was initially expensed is not capitalised at a later date. The estimated useful life for development costs is 10 years. Research is original and planned investigation Optomed undertakes with the prospect of gaining new scientific or technical knowledge and understanding. Such costs are expensed as incurred. c) Customer relationships and technology: these assets were measured at fair value at the acquisition date using the multi-period excess earnings method and the relief-from-royalty method. Their estimated remaining useful lives are 10 years. d) Other intangible assets: An intangible asset is recognised only if it is probable that the expected future economic benefits that are attributable to the asset will flow to Optomed, and the cost of the asset can be measured reliably. All other expenditure is expensed as incurred. Group’s other intangible assets mainly comprise patents and trademark rights, which are amortised on a straight-line basis over their estimated useful lives (10 years). Optomed reviews the amortization periods and the amortization methods applied at least at each financial year-end. If the expected useful life of the asset is different from previous estimates, the amortization period shall be changed accordingly. The changes of useful lives can be due to e.g. technical development, changes in demand or competition, for example. The Group assesses, at each reporting date, whether there is an indication that an intangible asset other than goodwill may be impaired. If any indication exists, Optomed estimates the asset’s recoverable amount. An impairment loss is re- cognised in the income statement when the carrying amount of an asset exceeds its recoverable amount. 45 69 12.2 Assumptions and estimation uncertainties – development costs Optomed capitalises development expenditure as an intangible asset where the related criteria are met (refer to 12.1 Accounting policy above). This requires management to make judgement on when all of the criteria for capitalisation are met and when to cease capitalisation and start amortising the asset. The point at which development costs meet the criteria for capitalisation is depen- dent on Optomed management’s judgement of, for example, the point at which technical feasibility is demonstrable. In impairment testing the recoverable amount of development costs are de- termined based on value-in-use calculations. The calculations use cash flow projections approved by management covering a seven year period. The cash flow projections exclude expansion investments. The discount rate is defined as WACC (weighted average cost of capital), which reflects the total cost of equity and debt while considering the asset-specific risks. The pre-tax discount rate was 20.2% (19.7%) and the post-tax discount rate 13.1% (13.1%) The sensivity analysis is prepared in respect of the discount rate and the terminal growth rate applied beyond the seven-year projection period. The changes in these key assumptions - holding other assumptions constant - would result in the recoverable amount of the tested assets to equal their carrying amount as at December 31, 2023. — The pre-tax discount rate should increase by 117.0 percentage point. So that the net present value of the 7 year forecast is 0. — The terminal growth rate for break even cannot be measured. Based on the impairment test carried out as at December 31, 2023 the deve- lopment costs were not impaired. The Group recognised impairment losses on intangible assets during financial year 2023 of 21 thousand euros and 1,040 in 2022. 2023 Impairment loss is due to terminated patents. 46 70 12.3 Reconciliation of carrying amounts At December 31, 2023 Other In thousands of euro Goodwill Develop- Customer Technology intangible Total ment costs relationships assets Cost Balance at January 1 4,256 13,978 2,222 1,023 1,054 22,533 Additions 2,089 93 2,182 Balance at December 31 4 ,256 16,067 2,222 1,023 1,147 24,715 Accumulated amortization and impairment losse Balance at January 1 -7,416 -1,057 -489 -676 -9,638 Amortization -920 -223 -101 -66 -1,311 Impairment losses -21 -21 Balance at December 31 -8,336 -1,280 -590 -763 -10,969 Carrying amount at Jan 1 4,256 6,562 1,164 534 379 12,895 Carrying amount at Dec 31 4,256 7,731 942 433 384 13,746 47 71 At December 31, 2022 Other In thousands of euro Goodwill Develop- Customer Technology intangible Total ment costs relationships assets Cost Balance at January 1 4,256 11,815 2,222 1,023 951 20,267 Additions 2,163 103 2,266 Balance at December 31 4,256 13,978 2,222 1,023 1,054 22,533 Accumulated amortization and impairment losses Balance at January 1 -5,477 -836 -387 -593 -7,292 Amortization -899 -222 -102 -83 -1,306 Impairment losses -1,040 -1,040 Balance at December 31 -7,416 -1,057 -489 -676 -9,638 Carrying amount at Jan 1 4,256 6,338 1,386 636 358 12,975 Carrying amount at Dec 31 4,256 6,562 1,164 534 379 12,895 The research and development costs expensed amounted to EUR 1,924 thousand (2023) and EUR 1,859 thousand (2022), mainly comprising personnel expenses. 48 72 12.4 Impairment testing of goodwill 12.4.1 Accounting policy For the purposes of impairment testing goodwill is allocated to the cash-gene- rating units (CGUs) or the groups of CGUs that are expected to benefit from the business combination in which the goodwill arose. A cash-generating unit is the smallest identifiable group of assets in Optomed that generates inflows that are largely independent from the cash inflows from other assets or groups of assets. A cash-generating unit is impaired when its carrying amount exceeds its recoverable amount. The recoverabe amount is: — the higher of the asset’s or CGU’s fair value less costs of disposal, and — its value in use. whichever is greater. Optomed determines recoverable amounts based on value-in-use calculations prepared using discounted future net cash flows. 12.4.2 Assumptions and estimation uncertainties At each balance sheet date Optomed management assesses if there is any indi- cation of impairment of goodwill (or other intangible, tangible asset or right-of- use asset). Review is based on indicators that measure economic performance, such as Group’s management reporting as well as economic environment and market follow-up. Such indications may include, among others: — unexpected changes in significant factors underlying impairment tests (revenues, profitability levels and changes in prevailing interest rates), and — changes in market conditions. The recoverable amount determined in the testing process is based on assump- tions and estimates made by management on future sales, production costs, sales growth rate and discount rate, among others. Optomed has allocated the goodwill arisen from the Commit acquisition to the Software operating segment. This segment establishes a single cash-generating unit. The carrying amount of the assets amounted to EUR 7,813 (7,816) thousand as at December 31, 2023, including the goodwill of EUR 4,256 (4,256) thousand. In impairment testing the recoverable amount of the Software segment is determined based on value-in-use calculations. The calculations use cash flow projections approved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated steady gro- wth rate of 1.8 %. The cash flow projections exclude expansion investments. The discount rate is defined as WACC (weighted average cost of capital), which reflects the total cost of equity and debt while considering the asset-specific risks. The pre-tax discount rate was 20.3% (15.7%) and the post-tax discount rate 13.1% (13.1%.) The sensivity analysis is prepared in respect of the discount rate and the termi- nal growth rate applied beyond the five- year projection period. The changes in these key assumptions - holding other assumptions constant - would result in the recoverable amount of the tested assets to equal their carrying amount as at December 31, 2023: — The pre-tax discount rate should increase by 51.9 percentage point. — The terminal growth rate for break even cannot be measured. Based on the impairment test carried out as at December 31, 2023 the goodwill was not impaired. 49 73 13. Tangible assets 13.1 Accounting policy Tangible assets acquired by Optomed held for use are stated in the balance sheet at their cost. The cost comprises directly attributable incremental costs incurred in their acquisition and installation. Subsequently tangible assets are carried at cost, less any accumulated depreciation and any accumulated impairment losses. Ordinary repairs and maintenance costs are expensed during the reporting period in which they are incurred. Government grants are accounted for by reducing the carrying amount of the asset. The grant is then recognised in profit or loss over the useful life of the asset by way of a reduced depreciation charge. Depreciation is charged so as to write off the cost of assets using the straight-line method, over their estimated useful lives, as follows: — Production machinery and equipment: six years — Other machinery and equipment: three years — Office furniture: three years — Cars: three years Expected useful lives and residual values are reviewed at least at each financial year-end and if they differ significantly from previous estimates, the useful lives are revised accordingly. Recognition of depreciation is discontinued when a tan- gible asset is classified as held for sale. The Group assesses, at each reporting date, whether there is an indication that a tangible asset may be impaired. If any indication exists, Optomed estimates the asset’s recoverable amount. An impairment loss is recognised when the carrying amount of an asset exceeds its recoverable amount. The gain or loss arising on the disposal or retirement of a tangible asset is determined as the difference between any net sale proceeds and the carrying amount of the asset and is recognised in other operating income or other ope- rating expenses. 13.2 Reconciliation of carrying amounts Machinery and equipment 2023 2022 Cost Balance at January 1 3,512 2,721 Additions 212 791 Balance at December 31 3,724 3,512 Accumulated depreciation and impairment losses Balance at January 1 -2,660 -2,288 Depreciation -355 -372 Balance at December 31 -3,015 -2,660 Carrying amount at January 1 852 433 Carrying amount at December 31 710 852 Refer to Note 14. Leases for disclosures on Group’s tangible assets acquired under lease agreements. 50 74 14. Leases 14.1 Accounting policy The Group acts as a lessee leasing mainly business premises, cars, IT equipment as well as other machinery and equipment. As a general rule, Optomed recogni- ses a leased asset (right-of-use asset) and a lease liability for all leases, except for short-term leas s and leases of low-value items (the accounting treatment is described below). The Group assesses whether a contract is or contains a lease at inception of a contract. A contract is or contains a lease if the contract con- veys the right to control the use of an identified asset for a period in exchange for consideration. The Group recognises a right-of-use asset and a lease liability at the lease com- mencement date. The right-of- use asset is initially measured at cost, which comprises: — the amount of the initial measurement of the lease liability — any lease payments made at or before the commencement date, less any lease incentives (e.g. lease-free months) — any initial direct costs incurred by Optomed, and — an estimate of restoration costs to be incurred by Optomed. After the commencement date the right-of-use assets are measured at cost less any accumulated depreciation and any accumulated impairment losses and adjusted for certain remeasurements of the lease liability. The right-of-use asset is depreciated using the straight-line method, from the commencement date to the earlier of the end of the useful life of the right-of-use asset, or the end of the lease term. The estimated useful life for the business premises applied by Optomed is three years. The right-of-use asset is tested for impairment where necessary and any impairment loss identified is recorded in profit or loss. Initially the lease liability is measured at the present value of the lease payments that are not paid at the commencement date. The discount rate used by the Group is Optomed’s incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise: — fixed payments, including in substance fixed payments — variable lease payments that depend on an index or a rate, initially measu- red using the index or rate as at the commencement date of the contract — amounts expected to be payable under a residual value guarantee, and — the exercise price under a purchase option that the Group is reasonably certain to exercise. Subsequently the lease liability is measured at amortised cost using the effe- ctive interest method. It is remeasured when there is a change in future lease payments arising from change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee or if the Group changes its assessment of whether it will exercise a purchase, extension or termination option. When a lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero. Optomed has elected not to recognise right-of-use assets and lease liability for: — short-term leases (that have a lease term of 12 months or less) — leases of low-value assets (each asset with a value of approximately EUR 5,000 or less when new). Such assets include IT equipment as well as other machinery and equipment. The Group recognises the lease payments associated with above-mentioned leases as an expense on a straight-line basis over the lease term. 51 75 14.2 Management judgements Some business facility leases of the Group include termination options. Optomed uses such terms in its contract management to maximise operational flexibility for its business. Termination options are considered on a case-by-case basis following a regular management assessment. The factors considered include, for example, contractual terms and conditions for optional periods compared with market rates, the importance of the underlying asset to Optomed’s operations as well as termination and replacement costs. 14.3 Amounts recognised in income statement In thousands of euro 2023 2022 Expense relating to leases of low-value assets1 (that are not short-term leases) -4 -5 Depreciation charge for right-of-use assets by class of underlying asset (business premises,- -508 -428 cars) (included in Depreciation, amortization and impairment losses in the income statement) Interest expense on lease liabilities (included in Finance expenses) -42 -33 14.4 Amounts presented in cash flow statement Total cash outflow for leases -462 -415 14.5 Leased tangible assets In thousands of euro 2023 2022 Additions to right-of-use assets 532 671 Depreciation charge for right-of-use assets -508 -428 Carrying amount at the end of the financial year 1,472 1,448 Leased tangible assets comprise business premises and cars and are presented as a separate line item Right-of-use assets in the consolidated balance sheet. 14.6 Lease liabilities In thousands of euro 2023 2022 Current 516 412 Non-current 991 1,058 Total 1,507 1,470 The weighted average Optomed’s incremental borrowing rate applied for discounting purposes was 3.2 %. The above liabilities are presented on the line item Lease liabilities (non-current / current) in the consolidated balance sheet, based on their maturity. The maturity analysis is disclosed in Note 21.5 Liquidity risk. 52 76 15. Inventories 15.1 Accounting policy Inventories are stated at the lower of cost and net realisable value. The cost of ready purchased products consists of the purchase price, including direct transportation, processing and other costs. Cost is determined using the first-in, first-out (FIFO) method. Net realisable value is the estimated selling price in the ordinary course of business, less the esti- mated costs of completion and the estimated costs necessary to make the sale. Optomed has recognized 68 thousand euros inventory provision for non mar- ketable items in inventory during 2023 and 251 thousand euros during 2022. In thousands of euro 2023 2022 Raw materials and consumables 2,820 2,998 Total 2,820 2,998 16. Financial assets 16.1 Accounting policy Optomed classifies financial assets as follows: — financial assets measured at fair value through profit or loss (FVTPL) — financial assets measured at amortized cost, and — financial assets measured at fair value through other comprehensive income (FVOCI). Classification of financial assets is made based on their purpose of use upon initial recognition. Classification relies on the objectives of Optomed’s business model and the contractual cash flows from financial assets, or by applying the fair value option upon initial recognition. Optomed recognises all its financial assets at amortized cost. All purchases and sales of financial assets are recognised at the trade date. For financial assets not carried at fair value through profit or loss, transaction costs are included in the initial carrying amount. Financial assets are derecognised when the Group loses the rights to receive the contractual cash flows on the financial asset or it has transferred substantially all the risks and rewards of ownership outside the Group. Financial assets measured at amortized cost Optomed recognises all trade receivables that are non-derivative assets at amortized cost. In the Group trade receivables are held within a business mo- del whose objective is to collect the contractual cash flows, and those cash flows that are solely payments of principal and interest. Trade receivables are current assets that Optomed has the intention to hold for less than 12 months from the end of reporting period. Assets classified in this category are measu- red at amortized cost using the effective interest (EIR) method. The carrying amounts of current trade receivables are expected to substantially equal their fair values. Optomed recognizes a loss allowance for expected credit losses on financial as- sets that are measured at amortized cost. The expected credit losses on trade receivables are recorded based on Optomed’s historical knowledge on trade receivables at default and payment delays due to financial difficulties. The loss allowance is assessed both on an individual basis and collectively. The expect- ed loss is measured as the difference between the asset’s carrying amount and the pre sent value of estimated future cash flows discounted at the financial asset’s effective interest rate. This adjustment is recognised in other operating expenses and as a deduction to the carrying amount of the receivable. All realised credit losses are recognised in profit or loss. A credit loss is reversed in a subsequent period, if the reversal can be related objectively to an event occurring after the impairment was recognised. Optomed did not recognise credit losses during the financial years 2022-2023. 53 77 17. Other receivables In thousands of euro 2023 2022 Prepayments and accrued income 511 792 Other 96 220 Total 607 1,012 Cash and cash equivalents The Group’s cash and cash equivalents consist of cash on hand, demand depo- sits and short-term, highly liquid investments. Items qualifying as cash equiva- lent have a maturity of three months or less from the date of acquisition. 16.2 Carrying amounts - at amortised cost Current financial assets The year 2023 include a specific credit risk accrual of EUR 767 (589) thousand covering overdue trade receivable from a Chinese customer. More information on Note 21.4.2. The Group had no non-current financial assets at the end of the financial years 2022-2023. During the 2023 The Group has ended its recourse factoring agreement. In thousands of euro Note 2023 2022 Trade receivables Recourse factoring 21 0 324 Other trade receivables 21 2,583 3,232 Total trade receivables 2,583 3,556 Cash and cash equivalents 7,118 8,524 Total 9,701 12,080 16.3 Cash and cash equivalents In thousands of euro 2023 2022 Cash and bank accounts 7,118 8,524 Total 7,118 8,524 18. Capital and reserves 18.1 Accounting policy The Group classifies the instruments it has issued either as equity instruments or financial liabilities based on their nature. — An equity instrument is any contract that evidences a residual interest in the assets of Optomed after deducting all of its liabilities. — A financial liability is an instrument that obligates Optomed to deliver cash or another financial asset, or the holder has a right to demand cash or another financial asset. 54 78 Optomed evaluates the terms of an issued compound instrument to determi- ne whether it contains both a liability and an equity component. Such compo- nents are classified separately as financial liabilities, financial assets or equity instruments in accordance with the substance of the contractual arrangement. 18.2 Share capital and share series 18.2.1 Accounting policy The share capital consists of the parent company’s ordinary shares classified as equity. The subscription price of a share received by the company in conne- ction with share issues is credited to the share capital, unless it is provided in the share issue decision that a part of the subscription price is to be recorded in the Reserve for invested non-restricted equity. Transaction costs directly att- ributable to the issue of new shares are recorded in equity as a deduction, net of tax, from the proceeds. The share capital of Optomed Plc amounted to EUR 80 thousand at December 31, 2023 and 80 thousand at December 31.2022. The share capital consists of one share class. The shares have no nominal value. All issued shares have been fully paid. Each share carries one vote. 18.2.2 Movements in share numbers and Group’s equity The table below discloses changes in the number of shares and respective changes in Group’s equity. 55 79 2023 Pieces In thousands of euro A series Total Share capital Reserve for invested non-restricted equity At January 1, 2023 16,541,355 16,541,355 80 46,896 Share issue 25.9.2023 1,589,042 1,589,042 3,973 Additions to Reserve for Invested non-equity based on option subscription and board share fee. 67 At Dec 31, 2023 18,130,397 18,130,397 80 50,936 2022 Pieces In thousands of euro A series Total Share capital Reserve for invested non- restricted equity At January 1, 2022 14,003,144 14,003,144 80 38,526 Share issue 10.5.2022 1,397,853 1,397,853 4,441 Share issue 14.12.2022 1,140,358 1,140,358 3,760 Additions to Reserve for Invested non-equity based on option subscription and board share fee. 170 At Dec 31, 2022 16,541,355 16,541,355 80 46,896 56 80 18.3 Treasury shares 18.3.1 Accounting policy The consideration paid for treasury shares, including any directly attributable transaction costs (net of taxes), is deducted from equity, until the shares are cancelled or reissued. Where such shares are subsequently sold or reissued, any consideration received, net of any directly attributable transaction costs and net of taxes, is directly recognised in equity. The total amount of treasury shares was 353,973 shares in the end of the fi- nancial year. 18.4 Dividends 18.4.1 Accounting policy Dividend distribution to the parent company’s shareholders is recognised as a liability in the consolidated balance sheet in the period in which the dividends are approved by the company’s Annual General Meeting. Under the Finnish Limited Liability Companies Act the amount of capitalised development costs (accounted for in accordance with the Finnish Accounting Act) is deducted from unrestricted equity in calculating distributable funds. 18.5 Reserves Reserve for invested non-restricted equity The reserve for invested non-restricted equity comprises other equity investments and that part of the share subscription price that has not specifically been al- located to share capital. Share premium The share premium accrued under the previous Finnish Limited Liability Com- panies Act. Under the current Act the share premium is classified as restricted equity and may no longer increase. The share premium may be reduced in accordance with the rules applying to decreasing share capital and can be used to increase the share capital as a reserve increase. Translation differences The reserve includes translation differences arisen from the IFRS post-transition date (January 1, 2016) translation of the financial statements of foreign opera- tions into euro. Retained earnings Retained earnings are earnings accrued over the previous financial years that have not been transferred to equity reserves or issued as dividends to owners. 18.6 Capital management Optomed’s objective in capital management is to maintain optimum capital structure in order to secure normal operating conditions and to optimise cost of capital to create value to shareholders. For capital management purposes, Optomed manages equity as indicated in the consolidated balance sheet. The equity is mainly influenced through share issues and restructuring of loans and borrowings. The Group is not subject to externally imposed capital require- ments. Group management and the Board of Directors of the parent company monitor Group’s capital structure and liquidity development. The objective of this monitoring is to ensure Group’s liquidity and flexibility of capital structure in order to fulfil the growth strategy. Optomed monitors the development of capital structure based on equity ratio. Equity ratio is also the financial covenant of Optomed’s borrowing facilities (line item Borrowings from financial institutions). For covenant accounting purposes equity ratio is calculated based on the related terms of the borrowings, refer to 19.4 Financial covenant for more details. 57 81 19. Financial liabilities 19.1 Accounting policy Optomed classifies financial liabilities as follows: — financial liabilities measured at amortized cost, and — financial liabilities measured at fair value through profit or loss (FVTPL). Optomed did not use derivative instruments during the years 2022-2023, and the Group had no other financial liabilities at fair value through profit or loss at the end of financial years 2022-2023. Financial liabilities at amortized cost Financial liabilities are initially recognised at fair value. Transaction costs are included in the original carrying amount. Subsequently these financial liabilities are measured at amortized cost using the effective interest rate (EIR) method. A financial liability is classified as current if Optomed does not have an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting period. In respect of loans and borrowings current financial liabilities comprise the portion falling due within less than 12 months and repayments in accordance with the repayment plans. Financial liabilities may be interest-bearing or non-interest-bearing. The Group’s all financial liabilities carry interest. A financial liability (or part of the liability) is not derecognised until the liability has ceased to exist, that is, when the obligation identified in a contract has been fulfilled, cancelled or is no longer effective. Borrowing costs Optomed capitalises borrowing costs that are directly attributable to creation of a qualifying asset as an addition to the cost of that asset. — Borrowing costs are interest and other costs that Optomed incurs in con- nection with the borrowing of funds. — A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use. Optomed considers capitalised development costs to be a qualifying asset. Consequently, the Group recognises those borrowing costs incurred from the government loans (from Business Finland), granted for development activities, as an addition to the carrying amount of the development cost. The capitali- sed borrowing costs are recorded as a deduction to interest expenses. Other borrowing costs are expensed in the period in which Optomed incurs them. Optomed ceases capitalising borrowing costs when the development project is substantially complete. For cash flow statement purposes Optomed classifies cash flows related to capitalised borrowing costs as operating activities. 58 82 19.2 Financial liabilities measured at amortized cost In thousands of euro 2023 2022 Non-current financial liabilities Borrowings from financial institutions 1,651 3,380 Government loans 713 906 Lease liabilities 991 1,058 Total 3,355 5,344 Current financial liabilities Borrowings from financial institutions 794 794 Government loans 193 193 Lease liabilities 516 412 Trade payables 782 869 Total 2,285 2,268 Total financial liabilities 5,640 7,612 During the financial year 2023 Company paid Nordea term loan of EUR 1,000 thousand. The company mortgages related to the borrowings from financial institutions are disclosed in Note 22. Contingent assets, contingent liabilities and commitments. 19.3 Changes in financial liabilities During the financial year 2023 the Group paid its Nordea Loan. 19.4 Financial covenant Optomed’s borrowings from financial institutions contain a financial covenant (equity ratio) and Optomed also has to meet certain key operative targets. The related liabilities amounted to EUR 2,444 thousand (at December 31, 2023) and EUR 4,172 thousand (at December 31, 2022). The borrowings will be repaid in accordance with the repayment schedule. Optomed has to comply with the financial covenant terms specified in the loan agreement terms at the financial year-end. Equity ratio is calculated using the agreed formula. The table below summarises the Group’s financial covenant term and compliance over the financial years 2022-2023. Covenant accounting purposes equity ratio is calculated, based on the related terms of the borrowings. Covenant Actual term ratio Applicable level OP loan Equity ratio At December 31, 2023 35% 83.1% Optomed Group At December 31, 2022 35% 76.7% Optomed Group OP loan equity ratio calculation formula: Adjusted equity/Balance sheet total- received advances-Goodwill Optomed was in compliance with the covenant as at December 31, 2023 and as at December 31, 2022. 19.5 Government loans - borrowings costs Optomed has capitalised borrowing costs incurred from the government loans granted for development activities in the balance sheet under Development costs. Details are disclosed in Note 9.3 Borrowing costs - government loans. 59 83 19.6 Fair values - financial liabilities measured at amortized cost Optomed considers that the carrying amounts of the financial liabilities measu- red at amortized cost substantially equal to their fair values. This estimate corresponds to the fair value hierachy Level 3, as the measurement of the said liabilities is based on Optomed management view. The fair value hierarchy is presented in Note 1.2.3 Fair value measurement. 20. Other payables In thousands of euro 2023 2022 Accrued expenses and prepaid income 1,962 1,939 Other 805 1,019 Total 2,767 2,958 21. Financial risk management 21.1 Principles of financial risk management Optomed’s financial risks consist of liquidity risk, interest rate risk, foreign exchan- ge transaction risk, foreign exchange translation risk and counterparty credit risk. The Group manages centrally loan negotiations for the parent company and the subsidiaries, for example, and projects the financing requirements for the next 12 months on a rolling basis, in order to ensure long-term liquidity. The Group also handles negotiations in respect of letters of credit on a centralised basis. The objective is to ensure that the Group has liquidity for outgoing commitments at all times and that the financing portfolio is well diversified. The financing port- folio should also be flexible in case of changes in Optomed’s business operations. The Board of Directors of the parent company has the following responsibilities: — reviewing and approving the Group’s risk management policy and the Group’s strategy concerning external financing and financial risk management on an annual basis. — evaluating and approving new financial instruments and arrangements. — delegating the authority to undertake financial risk management and finan- cing activities to the CEO and CFO. — reviewing the Group’s risk exposures on a monthly basis, and — reviewing any policy breaches. Currently letters of credit, as well as non-current loans and borrowings from financial institutions are the only approved financial instruments. Subsidiaries should maximise their long-term performance by optimising their working capital structure. Basic financial management operations are delegated to the subsidiaries, such as payment transactions and debt collection. 21.2 Foreign exchange transaction risk and foreign exchange translation risk Due to its international operations, Optomed is exposed to transaction risks arising from foreign currency positions and risks from investments denominated in foreign currencies translated into the functional currency of the parent company. The Group’s foreign exchange translation risk is defined as the negative effect of movements in exchange rates on the value of a foreign subsidiary’s assets when those values are translated into the reporting currency of the parent company. The Group has subsidiaries in China and USA. So far, the translation diffe- rence has not been a significant item, and thus the Group has not hedged this risk by using currency derivative instruments. Optomed’s trade receivables and trade payables may be denominated in fo- reign currencies and thus prone to foreign exchange transaction risk. Foreign exchange transaction risk may also arise from tangible assets subject to price changes due to volatility in exchange rates. 60 84 The Group has foreign currency positions denominated in Chinese Renminbi (CNY) and US Dollar (USD). Transaction is managed by actively monitoring cur- rency positions, i.e. absolute amounts. Should the absolute amounts for currency positions increase significantly, Optomed may consider using currency derivative instruments for hedging purposes, where necessary. 21.2.1 Currency risk exposure In thousands of euro USD CNY At December 31, 2023 Gross trade receivables 334 1,534 Trade payables 211 0 Total 544 1,534 At December 31, 2022 Gross trade receivables 635 1,962 Trade payables 245 0 Total 880 1,962 21.2.2 Sensitivity analysis on exchange rate movements Income statement In thousands of euro strenghtening weakening At December 31, 2023 Gross trade receivables +/- 10 % change in USD 33 -33 +/- 10 % change in CNY 153 -153 Trade payables +/- 10 % change in USD -21 21 +/- 10 % change in CNY 0 0 Total net effect 166 -166 In thousands of euro strenghtening weakening At December 31, 2022 Gross trade receivables +/- 10 % change in USD 64 -64 +/- 10 % change in CNY 196 -196 Trade payables +/- 10 % change in USD -24 24 +/- 10 % change in CNY 0 0 Total net effect 235 -235 61 85 21.2.3 Average rates and closing rates for financial years used in consolidated financial statements Average rate Closing rate Average rate Closing rate 2023 2023 2022 2022 EUR/USD 0.94 0.91 0.95 0.94 EUR/CNY 0.13 0.13 0.14 0.14 21.3 Interest rate risk Optomed’s interest rate risk is primarily derived from outstanding floating-rate borrowings from financial institutions. Interest rate risk is not significant. The Group’s revenues and operational cash flows are to a large extent independent of fluctuations in interest rates. Optomed’s loans and borrowings carry variable interest. The Group had inte- rest-bearing financial liabilities totaling EUR 3,351 thousand (at December 31, 2023) and EUR 5,270 thousand (at December 31, 2022). Those liabilities are linked to Euribor rates (0 to 12 months). The weighted average interest rate was 3.2% (2023) and 1.6% (2022). Optomed manages interest rate risk by projecting its outstanding net debt for the next 12 months on a rolling basis. In addition, the Group uses likely interest rate scenarios to identify the effect interest rate risk could have on Optomed’s result and key figures. As the interest rate risk is not significant for the Group, Optomed has not used derivative instruments to hedge financial liabilities against changes in market interest rates. The following interest rate sensitivity analysis presents how Optomed’s interest expenses on borrowings from financial institutions would change following a change of 1 percentage point (100 basis points) in reference interest rates. In respect of the government loans a change of 3 percentage points was applied since only a change of at least 3 percentage points would increase the Group’s interest expenses, based on the loan terms. The effect of decrease in interest expenses of 3 (three) percentange points – is excluded from the sensitivity analysis, as the reference rate cannot be negative. 21.3.1 Cash flow sensitity due to interest rates Income Statement In thousands of euro 100 bps change 300 bps increase At December 31, 2023 Borrowings from financial institutions +14,-14 Government loans 35 At December 31, 2022 Borrowings from financial institutions +39,-40 Government loans 40 21.4. Credit risk and counterparty risk Credit and counterparty risk arise from a counterparty not being able to fulfil its contractual requirements, and thus resulting in a loss to the creditor. Trade receivables are the main driver of credit and counterparty credit risk. Counterparty risk results from receivables from companies with which the Group provides credit. Optomed considers it has heightened risk regarding Chinese customer’s trade receivables. The customer missed several payments during H2 and, conse- quently, the specific loss allowance weighted average loss rate was increased from 30% to 50% in Q3. The payment schedule negotiations continue with the said customer. The total amount of the receivable in the balance sheet is now EUR 767 thousand. Optomed manages counterparty credit risk by using credit limits approved by the Board of Directors and only dealing with authorized counterparties when it comes to financing activities such as letters of credit. 62 86 Optomed has policies in place to ensure that products are sold and services provided only to those clients with appropriate credit history. Client credit data is reviewed prior to the signing of the agreement. Receivable collection and fol- low-up are performed actively. The Group also manages counterparty credit risk with advance payments and letters of credit. The maximum exposure to credit risk at the end of the financial year is the carrying amount of financial assets. The following tables disclose credit exposure per geographical area, aging analysis for trade receivables and related expected credit losses (ECL). The loss allowance has been recorded in accordance with the tables presented below. 21.4.1 Credit exposure per geographical area In thousands of euro 2023 2022 Gross trade receivables from companies Finland 1,129 1,190 China 1,547 1,962 Other 716 684 Total 3,392 3,836 Carrying amount 21.4.2 Exposure to credit risk and loss allowance In thousands of euro Gross carrying Weighted av. Loss amount loss rate % allowance At December 31, 2023 Current (not past due) 1,516 0.5% 8 Past due 1-30 days 51 1.5% 1 31-60 days 6 4% 0 61-90 days 10 9% 1 More than 90 277 12% 33 days past due Specific loss allowance 1,534 50% 767 Total 3,392 809 The year 2023 include a specific credit risk accrual of EUR 767 thousand which consist of overdue trade receivable from a Chinese customer. At December 31, 2022 Current (not past due) 1,664 0.5% 8 Past due 1-30 days 161 1.5% 2 31-60 days 7 4% 0 61-90 days 29 9% 3 More than 90 12 12% 1 days past due Specific loss allowance 1,962 30% 589 Total 3,836 604 The year 2022 include a specific credit risk accrual of EUR 589 thousand which consist of over- due trade receivable from a Chinese customer. 63 87 21.4.3 Reconciliation of loss allowance In thousands of euro 2023 2022 Balance at January 1 604 727 Net remeasurement of loss allowance 206 -123 Balance at December 31 809 604 Changes in expected credit losses and realised credit losses are recognised in the income statement under Other operating expenses. Company had no realized credit losses in 2022-2023. 21.4.4 Recourse factoring (insured receivables) In thousands of euro 2023 2022 Carrying amount at December 31 Trade receivables, recourse factoring 0 324 Total 0 324 During the 2023 the company ended its recourse factoring agreement. 21.5 Liquidity risk Liquidity risk is incurred from a potential mismatch between Optomed’s liquid assets and financing requirements. The company adheres to careful liquidity risk management and aims to ensure sufficient liquidity even in difficult circumstances. The Group manages liquidity risk by ensuring that non-current liabilities have different maturities and by limiting individual receivables. Optomed also aims at ensuring liquidity through credit instruments. The liquidity of the company is monitored and forecasted over a 12-month period and, if necessary, short- term liquidity is monitored. Liquidity is followed up on a rolling basis and any changes are addressed promptly. The liquidity reserve comprises highly liquid assets that can be used without delay to cover financial obligations at all times. Optomed aims at ensuring that it always has the amount of liquid funds available to fund operations. The liquidity reserve includes the following components: cash and cash equivalents, liquid investments and credit limits. The table below analyses financial liabilities based on their contractual maturities. The amounts disclosed are undiscounted, comprising both interest payments and repayments of capital. 64 88 21.5.1 Contractual maturities of financial liabilities In thousands of euro Total 0-3 months 3-12 months 2-3 years 4-5 years Over 5 years At December 31, 2023 Borrowings from financial institutions 2,444 199 596 1,631 19 Government loans 906 32 161 342 210 161 Lease liabilities 1,559 129 387 1,043 Trade payables 782 782 Total 5,691 1,142 1,143 3,016 229 161 In thousands of euro Total 0-3 months 3-12 months 2-3 years 4-5 years Over 5 years At December 31, 2022 Borrowings from financial institutions 4,172 199 596 1,794 1,583 Government loans 1,098 32 161 385 263 257 Lease liabilities 1,470 121 363 986 Trade payables 869 869 Total 7,609 1,220 1,119 3,165 1,847 257 If the covenants are breached, the financial institutions has the right to imme- diately terminate the contracts or require repayment and/or alternatively the right to increase the marginal for the borrowings and obligations by 2 percentage points. The covenant agreement is in force as long as Optomed Plc has unpaid debt, obligations or other commitments. For more details about covenant terms refer to 19.4.Financial covenant. In 2023 Optomed paid its Nordea loan. For more details see note 19.3 Changes in financial liabilities. The lender has no right to demand for repayment, except in the event of a breach of the covenant (refer to Note 19.4 Financial covenant). The borrowings can be renegotiated. 65 89 22. Contingent liabilities, contingent assets and commitments 22.1 Accounting policy A contingent liability arises when: — there is a possible obligation that arises from past events and whose existence will be confirmed by a future event that is outside the control of Optomed — there is a present obligation that arises from past events, but probably will not require an outflow of resources, or — Optomed cannot make a sufficiently reliable estimate of the amount of a present obligation. — Contingent liabilities are not recognised, but require disclosure unless the possibility of outflow is remote. A contingent asset arises when: — the inflow of economic benefits to Optomed is probable, but not virtually certain, and — occurrence depends on an event outside the control of Optomed. Contingent assets require disclosure only. If the realisation of income is virtually certain, the income item is recognised. 22.2 Collaterals In thousands of euro 2023 2022 Liabilities secured under company mortgages given by Optomed1 Borrowings from financial institutions, current 987 987 Borrowings from financial institutions, non-current 2,364 4,286 Total 3,351 5,273 Collaterals given by collateral type Borrowings from financial institutions, 8,700 8,700 company mortgages given Other collaterals given 800 1,000 Total 9,500 9,700 1 Nominal values of the borrowings, which differ from the amounts recognised in the consolidated balance sheet, measured at amortised cost. 22.3 Guarantees 2023: Delivery guarantee, USD 800 thousand. 2022: Delivery guarantee, USD 1,000 thousand. 22.4 Legal proceedings and disputes Optomed was not involved in any legal proceedings nor had any disputes during the financial years 2022-2023. 66 90 22.5 Contingencies attaching to government grants Non-compliance with the conditions attached to the EU Horizon 2020 funding programme may result in, for example, the rejection of ineligible costs or reduc- tion of the grant. 23. Related party disclosures 23.1 Accounting policy The parent company Optomed Plc’s related parties include the following: — its subsidiaries — key management personnel, comprising the members of the Board of Di- rectors, CEO and the Group Management — Team member, entities, over which the above-mentioned persons have control, joint control or significant influence — close family members of the above-mentioned persons The related party transactions disclosed consist of transactions carried out with related parties that are not eliminated in the consolidated financial statements. 23.2 Key management personnel compensation The amounts disclosed in the tables below represent the expenses recognised in those financial years. Salary amounts include any fringe benefits. The CEO and the Group Management Team members are entitled to the statutory pension, and the retirement age is determined by the Finnish statutory pension system. In thousands of euro 2023 2022 CEO Seppo Kopsala (until 9/2023) Salaries and other short-term employee benefits -98 -137 Pension benefits (defined contribution plans) -20 -30 Paid resignation fee 10-12/2023 -38 0 Total -156 -166 CEO Juho HImberg (From 10/2023) Salaries and other short-term employee benefits -52 0 Pension benefits (defined contribution plans) -12 0 Total -63 0 In thousands of euro 2023 2022 Group Management Team Salaries and other short-term employee benefits -377 -627 Pension benefits (defined contribution plans) -81 -143 Share-based payments -52 -124 Total -509 -894 In thousands of euro 2023 2022 Key management personnel Salaries and other short-term employee benefits -527 -764 Pension benefits (defined contribution plans) -113 -172 Paid resignation fee 10-12/2023 -38 0 Share-based payments -52 -124 Total -729 -1,060 67 91 23.3 Transactions with other related parties and outstanding balances Revenues and trade receivables relate to the major shareholders of Optomed Plc considered to be related parties to the parent company. In thousands of euro Revenues Trade Other receivables expenses 2023 0 0 -78 2022 0 0 -80 Other expenses consist of expenses consulting fees paid to the Chairman of the Board of Directors. 23.4 Group structure At December 31, 2023 the Group comprised the following companies: Subsidiary Domicile Ownership interest, % Optomed Software Oy Finland 100 Optomed Hong Kong Ltd. Hong Kong 100 Optomed China Ltd China 100 Optomed USA Inc USA 100 Shanghai Optomed Medical Technology Ltd was closed in January 2023. 24. Events after the end of the reporting period No material events after the reporting period. 68 92 Profit and loss account 1 Jan - 31 Dec 2023 1 Jan - 31 Dec 2022 NET TURNOVER 4,184,753.55 5,150,299.16 Other operating income 89,491.78 971,610.36 Materials and supplies Raw materials and consumables Purchases during the financial year -1,875,038.74 -2,435,577.19 Change in stocks -64,508.39 -1,939,547.13 -222,929.35 -2,658,506.54 Personnel expenses Wages and salaries -2,438,658.25 -2,838,275.46 Social security expenses -408,401.97 -567,531.25 Pension expenses -80,999.33 -2,928,059.55 -95,724.24 -3,501,530.95 Other social security expenses Depreciation, amortization and impairment Depreciation and amortization according to plan -1,129,199.37 -1,162,464.99 Impairment of non-current assets -20,608,52 -1,149,807.89 -1,040,052.71 -2,202,517.70 Other operating expenses -2,098,608.50 -2,127,344.66 OPERATING PROFIT (LOSS) -3,841,777.74 -4,367,990.33 Financial income and expenses From group undertakings 3,694.87 42,155.21 From others 97,243.52 3,773.84 Interest expense and other financial expenses Parent Company’s Financial Statements 69 93 1 Jan - 31 Dec 2023 1 Jan - 31 Dec 2022 Impairment of securities held as current assets (–) -9,582.03 To group undertakings (–) -21,088.98 -21,505.63 To others (–) -638,031.80 -558,182.39 -981,756.77 -966,915.38 PROFIT (LOSS) BEFORE APPROPRIATIONS AND TAXES -4,399,960.13 -5.334.905.71 Appropriatons Group contribution 1,816,137.90 1,816,137.90 1,787,265.38 1,787,265.38 PROFIT (LOSS) FOR THE FINANCIAL YEAR -2,583,822.23 -3,547,640.33 70 94 31 Dec 2023 31 Dec 2022 Assets NON-CURRENT ASSETS Intangible assets Development expenditure 6,009,727.49 5,315,096.65 Intangible rights 383,977.45 378,666.83 Other capitalised long-term expenditure 300.00 6,394,004.94 40,555.30 5,734,318.78 Tangible assets Machinery and equipment 761,815.57 855,530.39 Other tangible assets 950.00 762,765.57 950 856,480.39 Advance payments and construction in process 813.08 813.08 9,993.16 9,993.16 Investments Holdings in group undertakings 9,266,906.46 9,266,906.46 Receivables from group undertakings 1,064,760.89 10,331,667.35 1,083,006.89 10,349,913.35 TOTAL NON-CURRENT ASSETS 17,489,250.94 16,950,705.68 CURRENT ASSETS Stocks Raw materials and consumables 1,590,909.24 1,591,574.37 Finished products / goods for resale 787,453.58 2,378,362.82 829,337.46 2,420,911.83 Long-term receivables Amounts owed by group undertakings 2,117,963.81 2,117,963.81 1,265,704.11 1,265,704.11 Short-term receivables Trade debtors 1,644,701.31 2,044,663.59 Amounts owed by group undertakings 7,629,653.16 7,074,826.90 Balance sheet 71 95 Capital, reserves and liabilities CAPITAL AND RESERVES Share capital 80,000.00 80,000.00 Share premium account 503,699.60 503,699.60 Reserve for invested free own capital 55,849,637.77 51,492,364.99 Retained earnings (Cumulative loss) -22,318,920.04 -18,771,279.71 Profit (loss) for the financial year -2,583,822.23 -3,547,640.33 TOTAL CAPITAL AND RESERVES 31,530,595.10 29,757,144.55 LIABILITIES Non-current Loans from credit institutions 2,362,770.54 4,283,472.54 Amounts owed to group undertakings 1,040,000.00 3,402,770.54 1,040,000.00 5,323,472.54 Current Loans from credit institutions 986,892.00 986,892.00 Advances received 65,254.21 167,924.74 Trade creditors 397,398.83 481,657.27 Amounts owed to group undertakings 43,786.29 21,805.07 Other liabilities 74,643.07 74,633.35 31 Dec 2023 31 Dec 2022 Other receivables 60,175.65 158,019.94 Prepayments and accrued income 237,360.06 9,571,890.18 479,388.84 9,756,899.27 Cash at bank and in hand 5,640,798.73 7,205,755.63 TOTAL CURRENT ASSETS 19,709,015.54 20,649,270.84 Total assets 37,198,266.48 37,599,976.52 Balance sheet 72 96 31 Dec 2023 31 Dec 2022 Accurals and deferred income 696,926.44 2,264,900.84 786,447.00 2,519,359.43 TOTAL LIABILITIES 5,667,671.38 7,842,831.97 Total capital, reserves and liablities 37,198,266.48 37,599,976.52 Balance Sheet 73 97 Cash flow stament 1 Jan 2023–31 Dec 2023 1 Jan 2022-31 Dec 2022 Cash flow from operating activities: Profit(loss) (+/–) -2,583,822.23 -3,547,640.33 Adjustments to operating profit (+/–) for: Depreciation, amortization and impairment losses 1,149,807.89 2,202,517.70 Unrealised foreign exchange gains and losses 50,239.38 49,471.39 Financial income and expenses 648,216.38 113,016.97 Other adjustments, share benefit - members of the board 47,609.38 18,925.22 Cash flow before working capital changes -687,949.20 -1,163,709.05 Working capital changes: Increase/decrease in trade an other short-term interest-free receivables 239,650.52 -1,796,731.79 Increase/decrease in stocks 42,549.01 82,795.82 Increase/decrease in short-term interest-free liabilities -268,388.36 -52,775.91 Operating cash flow before financing items and taxes -674,138.03 -2,930,420.93 Interest and other financial expenses paid relating to operating activities (–) -666,279.99 -934,347.20 Cash flow from operating activities: -1,340,418.02 -3,864,768.13 Cash flow from investing activities: Purchase of tangible and intangible items (–) -1,706,599.15 -2,142,837.24 Purchase of investments (–) -906,901.13 -822,580.33 Cash flow from investing activities -2,613,500.28 -2,965,417.57 Cash flow from financing activities Proceeds from issuance of share capital 4,309,663.40 9,033,817.33 Repayment of short-term borrowings (–) 0.00 -366,550.24 Proceeds from long-term borrowings 0.00 550,000.00 74 98 Cash flow statement 1 Jan 2023–31 Dec 2023 1 Jan 2022-31 Dec 2022 Repayment of long-term borrowings (–) -1,920,702.00 -545,056.74 Cash flow from financing activities 2,388,961.40 8,672,210.35 Net increase (+)/ decrease (–) in cash and cash equivalents -1,564,956.90 1,842,024.65 Cash and cash equivalents at beginning of period 7,205,755.63 5,363,730.98 Cash and cash equivalents at end of period 5,640,798.73 7,205,755.63 75 99 Accounting policies Optomed Oyj financial statements have been prepared in accordance with the Finnish Accounting Act (FAS) Valuation principles and methods Valuation principles and methods of non-current assets Tangible and intangible assets are recognised in the balance sheet at cost less depreciation according to plan. Cost includes variable expenditure relating to the acquisition and production of the assets. Grants received are deducted from the cost. Depreciation according to plan is calculated using the straight-line method based on the useful life of the assets. Depreciation is started at the month when the asset is taken into use. The depreciation periods are as follows: Intangible assets 5-10 years Machinery and equipment 3–6 years The cost of tangible and intangible assets whose probable useful life is less than 3 years or whose value is low (less than 1,200.00 €) is recognised as an expense as incurred expense. Valuation of stocks Stocks are recognised by using the FIFO method at cost, reacquisition cost, or probable selling price, whichever lower. Cost includes, in addition to variable costs, an appropriate portion of fixed costs attributable to the purchase and production or construction of the asset. Measurement of financial instruments Financial instruments are measured at the lower of cost or probable value. Recognition of development costs and long-term expenditure Company has capitalized R&D costs relating to new product development accor- ding to Finnish Accounting Act (KPL 5:8§). Capitalized costs include personnel and other costs that directly relate to developing the product to its intended use. Capitalized R&D costs are depreciated during their estimated useful life that is 10 year straight line depreciation. Change in the presentation of the profit and loss account or balance sheet Increase or decrease in stocks is partly included in the purchases during financial year. This accounting princible has no material effect to the assessment of the company’s performance and financial position. Preparation of the cash flow statement The cash flow statement was drawn up in accordance with the Accounting Board’s general guideline (30 Jan 2007). Cash flow from operating activities is indicated on indirect method. 76 100 1 Jan 2023–31 Dec 2023 1 Jan 2022–31 Dec 2022 Net turnover Net turnover by geographical markets Finland 39,898.38 4,329.19 EU 1,471,935.09 956,822.53 Outside the EU 2,672,920.08 4,189,147.44 4,184,753.55 5,150,299.16 Other operating income Contributions received -1,636.73 853,966.03 Management fee from group companies 91,080.13 116,165.25 Other income 48.38 1,479.08 89,491.78 971,610.36 The company’s received contributions includes a waived loan from Business Finland of EUR 841 thousand in 2022. Materials and services Materials and supplies Purchases during the financial year -1,875,038.74 -2,435,577.19 Variation in stocks -64,508.39 -222,929.35 -1,939,547.13 -2,658,506.54 The inventory change includes a 68 (211 in 2022) thousand euro inventory write-down provision. Notes relating to personnel Average number of personnel during the financial year 48 55 48 55 Notes to the profit and loss account 77 101 1 Jan 2023–31 Dec 2023 1 Jan 2022–31 Dec 2022 Wages, salaries and pension expenses Wages and salaries -2,438,658.25 -2,838,275.46 Pension expenses -408,401.97 -567,531.25 Other staff expenses -80,999.33 -95,724.24 -2,928,059.55 -3,501,530.95 Wages, salaries and other remuneration of directors and management CEO and Board members compensation -307,648.00 -261,077.00 Depreciation, amortization and impairment Depreciation according to plan -1,129,199.47 -1,162,464.99 Impairment of tangible and intangible assets -20,608.52 -1,040,052.71 -1,149,807.89 -2,202,517.70 Notes to the profit and loss account Other operating expenses Administrative expenses -511,188.08 -543,753.30 Marketing expenses -108,984.79 -141,937.18 Travelling expenses -206,460.35 -179,577.73 Representation expenses -7,581.86 -8,888.17 Other operating expenses -1,264,393.42 -1,253,188.28 -2,098,608.50 -2,127,344.66 Auditor's fees Audit of financial statements -135,021.05 -128,181.20 Other fees 0.00 -6,600.00 -135,021.05 -134,781.20 78 102 1 Jan 2023–31 Dec 2023 1 Jan 2022–31 Dec 2022 Other interest income From group undertakings 3,694.87 42,155.21 From others 97,243.52 3,773.84 Total financial income 100,938.39 45,929.05 Interest and financial expenses Realized loss in value, investments 0.00 -9,582.03 From group undertakings -21,088.98 -21,505.63 From others -638,031.80 -981,756.77 Total financial expenses -659,120.78 -1,012,844.43 Total financial income and expenses -558,182.39 -966,915.38 Notes to the profit and loss account 79 103 Notes to assets Amortization period for capitalised development expenditure Development costs: Development is the application of research findings or other knowledge to a plan or design for the production of new or substantially improved materials, devices, products, processes, systems or services before the start of commercial production or use. Optomed capitalises such costs when all the following criteria are met: — Optomed can demonstrate the technical feasibility of completing the in- tangible asset so that it will be available for use or sale. — Optomed intends to complete the intangible asset and use or sell it. — Optomed is able to use or sell the intangible asset. — Optomed is able to demonstrate how the intangible asset will generate probable future economic benefits. — The Group has adequate technical, financial and other resources available to complete the development and to use or sell the intangible asset — Optomed is able to measure reliably the expenditure attributable to the intangible asset during its development. Capitalised development costs comprise all directly attributable costs (mainly labour) necessary to prepare the asset to be capable of operating in the manner intended. Optomed has also: — capitalised borrowing costs arisen from government loans granted for development purposes, and — deducted an applicable amount of major government grants received for development activities from the carrying amount. Development expenditure that was initially expensed is not capitalised at a later date. The estimated useful life for development costs is 10 years. Amortization period for capitalised intangible rights and other long-term expenditure An intangible asset is recognised only if it is probable that the expected future economic benefits that are attributable to the asset will flow to Optomed, and the cost of the asset can be measured reliably. All other expenditure is expensed as incurred. Depreciation times and methods of other intangible assets are: License fees and computer software 5 year straight-line Patents 10 year straight-line Trademarks 10 year straight-line Stocks 31 Dec 2023 31 Dec 2022 Raw materials and consumables 1,590,909.24 1,591,574.37 Finished products / goods for resale 787,453.58 829,337.46 2,378,362.82 2,420,911.83 80 104 Intangible assets Development expenditure Intangible rights Other longterm expenditure Total Acquisition cost at 1 Jan,2023 10,926,692.21 646,154.27 229,641.63 11,802,488.11 Additions 1,482,683.75 92,324.64 0.00 1,575,008.39 Disposals 0.00 -20,608.52 0.00 -20,608.52 Acquisition cost at 31 Dec 2023 12,409,375.96 717,870.39 229,641.63 13,356,887.98 Accumulated amortization and reduction in value at 1 Jan 2023 5,611,595.56 267,487.44 189,086.33 6,068,169.33 Amortization for the financial year 788,052.91 66,405.50 40,255.30 894,713.71 Accumulated amortization and reduction in value at 31 Dec 2023 6,399,648.47 354,501.46 229,341.63 6,962,883.04 Book value at 31 Dec 2023 6,009,727.49 383,977.45 300.00 6,394,004.94 Book value at 31 Dec 2022 5,315,096.65 378,666.83 40,555.30 5,734,318.78 Tangible assets Machinery and equipment Total Acquisition cost at 1 Jan 2023 2,288,632.79 2,288,632.79 Additions 140,770.85 140,770.85 Acquisition cost at 31 Dec 2023 2,429,403.64 2,429,403.64 Accumulated amortization and reduction in value at 1 Jan 2023 1,433,102.41 1,433,102.41 Amortization for the financial year 234,485.66 234,485.66 Accumulated amortization and reduction in value at 31 Dec 2023 1,667,588.07 1,667,588.07 Book value 31 Dec 2023 761,815.57 761,815.57 Book value 31 Dec 2022 855,530.38 855,530.38 Book value of machinery and equipment used for production at 31 Dec 2023 684,731.14 Book value of machinery and equipment used for production at 31 Dec 2022 751,478.55 Non-current assets 81 105 Investments Shares in group companies Receivables from group companies Total Acquisition cost at 1 Jan 2023 9,266,906.46 1,083,006.89 10,349,913.35 Additions 0.00 -18,246.00 -18,246.00 Acquisition cost at 31 Dec 2023 9,266,906.46 1,064,760.89 10,331,667.35 Book value 31 Dec 2023 9,266,906.46 1,064,760.89 10,331,667.35 Book value 31 Dec 2022 9,266,906.46 1,083,006.89 10,349,913.35 Holdings in other undertakings Shanghai Optomed Medical Technology Ltd, China was closed on January 2023. Group undertakings Ownership % Optomed Software Oy, Espoo 100 Optomed Hong Kong Limited, China 100 Optomed China Ltd, China 100 Optomed USA Inc 100 82 106 Analysis of receivables Long-term receivables 31 Dec 2023 31 Dec 2022 From group undertakings Loans receivable 1,064,760.89 1,083,006.89 Other receivables 2,117,963.81 1,265,704.11 Total 3,182,724.70 2,348,711.00 Total long-term receivables 3,182,724.70 2,348,711.00 Short-term receivables From group undertakings Trade debtors 5,756,893.83 6,044,985.01 Other receivables 1,872,759.33 1,029,841.89 Total 7,629,653.16 7,074,826.90 From others Trade debtors 1,644,701.31 2,044,663.59 Other receivables 60,175.65 158,019.94 Prepayments and accrued income 237,360.06 479,388.84 Total 1,942,237.02 2,682,072.37 Total short-term receivables 9,571,890.18 9,756,899.27 83 107 Restricted equity 31 Dec 2023 31 Dec 2022 Subscribed capital at 1 January 80,000.00 80,000.00 Subscribed capital at 31 December 80,000.00 80,000.00 Share premium account at 1 January 503,699.60 503,699.60 Share premium account at 31 December 503,699.60 503,699.60 Total restricted equity 583,699.60 583,699.60 Unrestricted equity Reserve for invested unrestricted equity at 1 January 51,492,364.99 42,439,622.44 Share issue 4,357,272.78 9,052,742.55 Reserve for invested unrestricted equity at 31 December 55,849,637.77 51,492,364.99 Retained earnings from previous financial years at 1 January -22,318,920.04 -18,771,279.71 Retained earnings from previous financial years 31 December -22,318,920.04 -18,771,279.71 Profit for the financial year -2,583,822.23 -3,547,640.33 Total unrestricted equity 30,946,895.50 29,173,444.95 Total capital and reserves 31,530,595.10 29,757,144.55 Capital and reserves 84 108 Optomeds share treasury Optomed has conveyed 15,093 treasury shares to the members of the Board of Directors as a part of the Board members’ annual remuneration in accordance with the decision of the Annual General Meeting 2023 and the weighted average price of share from July 28 to August 3, 2023 In addition total of 5,500 of shares have been subscribed for under the Compa- ny’s stock option plans 2018C and 2020A Optomed has used treasury shares for the share subscriptions. The total amount of treasury shares was 353,973 shares in the end of the financial year. 31 Dec 2023 31 Dec 2022 Distributable equity Calculation regarding distributable equity Profit from previous financial years -22,318,920.04 -18,771,279.71 Profit of the financial year -2,583,822.23 -3,547,640.33 Reserve for invested unrestricted equity 55,849,637.77 51,492,364.99 Capitalised development expenditure -6,009,727.49 -5,315,096.65 24,937,168.01 23,858,348.30 85 109 Liabilities Appropriations 31 Dec 2023 31 Dec 2022 Non-current liabilities Loans from financial institutions 2,362,770.54 4,283,472.54 Other non-current liabilities 1,040,000.00 1,040,000.00 3,402,770.54 5,323,472.54 Liabilities falling due later than in five years Loans from financial institutions 160,932.00 257,335.00 160,932.00 257,335.00 Current liabilities Other liabilities 43,786.29 21,805.07 43,786.29 21,805.07 Amounts owed to others Loans from financial institutions 986,892.00 986,892.00 Advances received 65,254.21 167,924.74 Trade creditors 397,398.83 481,657.27 Other liabilities 74,643.07 74,633.35 Accruals and deferred income 696,926.44 786,447.00 2,221,114.55 2,497,554.36 Material items included in accruals and deferred income Wages and salaries including social security costs 596,282.47 667,767.63 Interest 12,995.28 20,154.49 Other 87,648.69 98,524.88 696,926.44 786,447.00 86 110 Related party transactions The following material transctions were carried out with related parties during the financial period: The transactions between group companies are carried out with regular terms. Parent company has also received a group contribution of 1,816,137.90€. Parent company has given loan to daughter company, 852,259.70€. Guarantees and contingent liabilities Pension obligations The company’s pension obligations are insured in external pension insurance companies. The pension obligations are fully covered. 31 Dec 2023 31 Dec 2022 Sale of goods, group companies 369,959.02 672,861.42 Other operating income, group companies 91,080.13 116,165.25 Interest income of loans, group companies 3,694.87 42,155.21 Purchases, group companies -207,495.29 -376,638.35 Interests of loans, group companies -21,088.98 -21,505.63 Total 236,149.75 433,037.90 Liabilities in balance sheet secured by enterprise mortgages 31 Dec 2023 31 Dec 2022 Loans from financial institution 2,443,910.54 4,172,000.54 Enterprise mortgages 8,700,000.00 8,700,000.00 Enterprise mortgages, total 8,700,000.00 8,700,000.00 The liability has been guaranteed with 80% share by Osuuspankki of Oulu and 20% by Finnvera Oyj special guarantee. 87 111 Other off-balance-sheet financial commitments Company has off-balance sheet commitment to enterprice resource planning system licence fees total of 164,175.72 euros. Company has liabilities for the delivery guarantee of 800,000.00 USD, which is covered 40% by Oulu Osuuspankki corporate mortgage and 60% by Finnvera’s special guarantee. 31 Dec 2023 31 Dec 2022 Other commitments Rental commitments (Inc. VAT) Payble during the following financial year 140,077.84 251,824.08 Payable in later years 0.00 0.00 Total 140,077.84 251,824.08 Amounts payable based on lease contracts (Inc.VAT) Payble during the following financial year 3,518.59 1,122.99 Payable in later years 2,333.18 3,368.98 5,851.77 4,491.97 Collateralised loans include covenants. The specific terms relate to the compa- ny’s solvency and liquidity. Breaching the covenants may increase the cost of financing or result in termination of the loans. The management of the company states that the covenants are met and they are being monitored. 88 112 Signatures to the Financial Statements and Board of Director’s Report Espoo, February 14, 2024 Petri Salonen Chairman of the Board Anna Tenstam Board Member Seppo Mäkinen Board Member Catherine Calarco Board Member Reijo Tauriainen Board Member Juho Himberg CEO Heidi Hyry Authorised Public Accountant, KHT The Auditor’s Note A report on the audit performed has been issued today. Oulu, February 15, 2024, KPMG Oy Ab Ty Lee Board Member Auditor’s Report 89 KPMG Oy Ab Kauppurienkatu 10 B 90100 Oulu FINLAND Telephone +358 20 760 3000 www.kpmg.fi KPMG Oy Ab, a Finnish limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Business ID 1805485-9 Domicile Helsinki This document is an English translation of the Finnish auditor’s report. Only the Finnish version of the report is legally binding. Auditor’s Report To the Annual General Meeting of Optomed Oyj Report on the Audit of the Financial Statements Opinion We have audited the financial statements of Optomed Oyj (Finnish business identity code 1936446-1) for the year ended 31 December 2023. The financial statements comprise the consolidated balance sheet, income statement, statement of comprehensive income, statement of changes in equity, statement of cash flows and notes, including material accounting policy information, as well as the parent company’s balance sheet, income statement, statement of cash flows and notes. In our opinion — the consolidated financial statements give a true and fair view of the group’s financial position, financial performance and cash flows in accordance with IFRS Accounting Standards as adopted by the EU — the financial statements give a true and fair view of the parent company’s financial performance and financial position in accordance with the laws and regulations governing the preparation of financial statements in Finland and comply with statutory requirements. Our opinion is consistent with the additional report submitted to the Audit Committee. Basis for Opinion We conducted our audit in accordance with good auditing practice in Finland. Our responsibilities under good auditing practice are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the parent company and of the group companies in accordance with the ethical requirements that are applicable in Finland and are relevant to our audit, and we have fulfilled our other ethical responsibilities in accordance with these requirements. In our best knowledge and understanding, the non-audit services that we have provided to the parent company and group companies are in compliance with laws and regulations applicable in Finland regarding these services, and we have not provided any prohibited non-audit services referred to in Article 5(1) of regulation (EU) 537/2014. The non-audit services that we have provided have been disclosed in note 7.3 to the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Materiality The scope of our audit was influenced by our application of materiality. The materiality is determined based on our professional judgement and is used to determine the nature, timing and extent of our audit procedures and to evaluate the effect of identified misstatements on the financial statements as a whole. The level of materiality we set is based on our assessment of the magnitude of misstatements that, individually or in aggregate, could reasonably be expected to have influence on the economic decisions of the users of the financial statements. We have also taken into account misstatements and/or possible misstatements that in our opinion are material for qualitative reasons for the users of the financial statements. Optomed Oyj Auditor’s Report 15 February 2024 2 Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole and in forming our opinion thereon, and we do not provide a separate opinion on these matters. The significant risks of material misstatement referred to in the EU Regulation No 537/2014 point (c) of Article 10(2) are included in the description of key audit matters below. We have also addressed the risk of management override of internal controls. This includes consideration of whether there was evidence of management bias that represented a risk of material misstatement due to fraud. THE KEY AUDIT MATTER HOW THE MATTER WAS ADDRESSED IN THE AUDIT Goodwill (Basis of Preparation for the consolidated financial statements and Note 12.4 to the Financial Statements) — The carrying amount of goodwill in the consolidated financial statements amounted to EUR 4,256 thousand as at December 31, 2023, accounting for 14,6 % of the total assets and 21 % of total balance of equity and reserves. — Goodwill is tested for impairment by the management annually or more frequently. Impairment is recorded in case the carrying amount exceeds the asset’s recoverable amount. — For purposes of impairment testing, the recoverable amount is determined by Optomed based on value in use. The projected cash flows underlying the estimates made involve an element of management judgment regarding profitability of operations, long-term growth factors and interest rates applicable to the discounting of cash flows. — Resulting from management judgment underlying estimates and the significance of the book value of goodwill, the valuation of goodwill is perceived as a key audit matter. Our audit measures included, among others: — We have assessed the key assumptions made by the management such as profitability of operations, interest rates and long-term growth factors. In the course of our audit of the estimates we have assessed the projections prepared by management in comparison with realized cash flows and employed professional judgment in the testing of key assumptions and their effect on sensitivity analyses. — We involved KPMG’s valuation specialists in the audit for assessment of the appropriateness of the assumptions employed and the technical integrity of the calculations. The procedures have included a comparison to general market and industry-specific forecasts. — In addition, we assessed the appropriateness of the disclosures to the accounts relating to goodwill and impairment testing in the consolidated financial statements. Optomed Oyj Auditor’s Report 15 February 2024 3 Revenue recognition and trade receivables (Basis of Preparation for the consolidated financial statements and Notes 3, 16.2 and 21.4 to the Financial Statements) — The net sales for the Group, total EUR 15,100 thousand, is comprised of sales of medical screening devices and solutions to wholesale dealers and of sales of software services. — Optomed recognises revenue to reflect the transfer of negotiated goods or services to customers in the amount of compensation Optomed expects to be entitled to in exchange of the goods and services. — The sales revenue from sales of screening devices and solutions are recognized when the performance obligation is fulfilled by the delivery of good to wholesale dealer and control is transferred to customer. — For the sales of software services, revenue is recognized over a period of time; for licensing agreements, at a point of time as control is transferred to customer; and for installation solutions, at the point of time as control is transferred and the end product is at the customer’s disposal. — Optomed has a significant amount of trade receivables, EUR 2,583 thousand, with payment time of different lengths. There is always a credit risk in trade receivables, which is increased by a significant amount of overdue trade receivables, as in Note 21.4 is described. The significant expiry of trade receivables is a reference of increased credit risk and loss allowance. — Group recognises all trade receivables at amortised cost. The expected credit losses on trade receivables are recorded based on Optomed's historical knowledge on trade receivables at default and payment delays due to financial difficulties. The loss allowance is assessed both on an individual basis and collectively. Our audit measures included, among others: — Our audit measures have included the assessment of internal control environment monitoring sales processes and overdue trade receivables and testing of effectiveness of key sales controls identified. Additionally, we have performed substantive audit measures on net sales recorded. — We have tested the recording of sales transactions as well as the function of recording and invoicing of sales transactions and evaluated the correctness of sales proceeds by testing the accrual of sales between periods. — We have performed substantive audit procedures for trade receivables in the consolidated financial statements to evaluate the valuation of trade receivables. — We have evaluated the reasonability of estimates related to valuation of trade receivables, especially regarding overdue trade receivables. — In addition, we assessed the appropriateness of the disclosures to the accounts relating to sales revenue and trade receivables recognized in the consolidated financial statements. Optomed Oyj Auditor’s Report 15 February 2024 4 — Optomed has evaluated the expected credit loss related to overdue trade receivables and increased the loss allowance from 30% to 50% which was recognized EUR 767 thousand this year. — Following the variety of types of sales proceeds collected by the Group and the significant amount of overdue trade receivables and related credit loss risk, revenue recognition and trade receivables are perceived as a key audit matter. Capitalized development costs (Basis of Preparation for the consolidated financial statements and Note 12.2 to the Financial Statements) — The development of screening devices is a key part of Optomed Group operating model. It takes lot of development work before launching the products. Optomed capitalizes such costs when all the financial statement regulation criteria are met and those will generate probable future economic benefits. The carrying amount of capitalized development cost in the consolidated financial statements amounted to EUR 7,731 thousand as at December 31, 2023. — Optomed capitalizes development expenditure as an intangible asset where all the related criteria mentioned in basis of preparation are met. — This requires management to make judgement on when all of the criteria for capitalization are met and when to cease capitalization and start amortising the asset. — The carrying amount of capitalized development cost is depreciated as a straight-line amortization over 10 years of economic life and consequently the capitalized cost has a significant impact on the company’s level of operating profit. Our audit measures included, among others: — Our audit measures have included the assessment of internal control environment monitoring capitalization of development cost processes. We have assessed if the capitalized development expenses in the financial period have met all the criteria. — We have assessed the appropriateness of the principles related to capitalization, valuation and the amortization period of those development expense. — We have assessed the judgements and assumptions made by the management decisions related to capitalization, cease capitalization and amortising the asset. — We have tested the correctness of capitalized screening device development expense by sample tests and analytical substantive audit measures. — We have assessed the appropriateness of valuation of capitalized development cost and the amortization period by reviewing the profit projections of most significant projects and the technical accuracy of the calculations and employed professional Optomed Oyj Auditor’s Report 15 February 2024 5 — Following from the element of management judgment in the capitalized development cost and the related amortizations, the significance of book value of the asset and the effect on the result of operations, the appropriateness of capitalized development cost is perceived as a key audit matter. judgment in the testing of key assumptions and their effect on sensitivity analyses. — We involved KPMG’s valuation specialists in the audit for assessment of the appropriateness of the assumptions employed and the technical accuracy of the calculations. — In addition, we assessed appropriateness of the disclosures to the accounts relating to capitalized development costs. Responsibilities of the Board of Directors and the Managing Director for the Financial Statements The Board of Directors and the Managing Director are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with IFRS Accounting Standards as adopted by the EU, and of financial statements that give a true and fair view in accordance with the laws and regulations governing the preparation of financial statements in Finland and comply with statutory requirements. The Board of Directors and the Managing Director are also responsible for such internal control as they determine 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, the Board of Directors and the Managing Director are responsible for assessing the parent company’s and the group’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting. The financial statements are prepared using the going concern basis of accounting unless there is an intention to liquidate the parent company or the group or cease operations, or there is no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Statements 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 good auditing practice 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 in accordance with good auditing practice, we exercise professional judgment and maintain professional skepticism 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 parent company’s or the group’s internal control. Optomed Oyj Auditor’s Report 15 February 2024 6 — Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. — Conclude on the appropriateness of the Board of Directors’ and the Managing Director’s use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the parent company’s or the group’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 parent company or the group to cease to continue as a going concern. — Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events so that the financial statements give 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. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Other Reporting Requirements Information on our audit engagement We were first appointed as auditors by the Annual General Meeting on 11 May 2016, and our appointment represents a total period of uninterrupted engagement of 8 years. Optomed Oyj has become a Public Interest Entity 5 December 2019 and we have been auditors all that time. Other Information The Board of Directors and the Managing Director are responsible for the other information. The other information comprises the report of the Board of Directors and the information included in the Annual Report, but does not include the financial statements and our auditor’s report thereon. We have obtained the report of the Board of Directors prior to the date of this auditor’s report, and the Annual Report is expected to be made available to us after that date. Our opinion on the financial statements does not cover the other information. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. Optomed Oyj Auditor’s Report 15 February 2024 7 With respect to the report of the Board of Directors, our responsibility also includes considering whether the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations. In our opinion, the information in the report of the Board of Directors is consistent with the information in the financial statements and the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations. If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Oulu 15 February 2024 KPMG OY AB HEIDI HYRY Authorised Public Accountant, KHT Independent Auditor’s Reasonable Assurance Report on Optomed Plc’s ESEF Financial Statements To the Board of Directors of Optomed Plc We have undertaken a reasonable assurance engagement in respect of whether the consolidated financial statements for the year ended 31 December, 2023 included in the digital financial statements 7437009IVYWGEE4S7B77-2023-12-31-en.zip of Optomed Plc (Business ID 1936446-1) have been marked up with iXBRL markups in accordance with the requirements of Article 4 of EU Delegated Regulation 2018/815 (ESEF RTS). The Responsibility of the Board of Directors and Managing Director The Board of Directors and Managing Director are responsible for preparing the report of the Board of Directors and financial statements (ESEF financial statements) that comply with the requirements of ESEF RTS. This responsibility includes: — preparation of ESEF financial statements in XHTML format in accordance with Article 3 of the ESEF RTS — marking up the primary statements and the notes to the consolidated financial statements, and the company identification data included in the ESEF financial statements with iXBRL tags in accordance with Article 4 of the ESEF RTS; and — ensuring consistency between ESEF financial statements and audited financial statements. The Board of Directors and the Managing Director are also responsible for such internal control as they deem necessary to prepare the ESEF financial statements in accordance with the requirements of the ESEF RTS. Auditor’s Independence and Quality Management We are independent of the company in accordance with the ethical requirements applicable in Finland, which apply to the engagement we have performed, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The auditor applies International Standard on Quality Management ISQM 1, which requires the firm to design, implement and operate a system of quality management including policies or procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulations requirements. Auditor’s Responsibility In accordance with the Engagement Letter our responsibility is to express an opinion on whether the marking up of the consolidated financial statements included in the ESEF financial statements comply in all material respects with the Article 4 of the ESEF RTS. We conducted our reasonable assurance engagement in accordance with International Standard on Assurance Engagements 3000. The engagement involves procedures to obtain evidence whether; — the primary statements of the consolidated financial statements included in the ESEF financial statements are, in all material respects, marked up with iXBRL tags in accordance with Article 4 of the ESEF RTS, and; — whether the notes to the consolidated financial statements and the company identification data included in the ESEF financial statements data, have been marked up, in all material respects, with iXBRL tags in accordance with Article 4 of the ESEF RTS; and 2 — whether the ESEF financial statements and the audited financial statements are consistent with each other. The nature, timing and the extent of procedures selected depend on practitioner’s judgement. This includes the assessment of the risks of material departures from the requirements set out in the ESEF RTS, whether due to fraud or error. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Opinion In our opinion, the primary statements of the consolidated financial statements, the notes to the consolidated financial statements and the company identification data included in the ESEF financial statements of Optomed Plc identified as 7437009IVYWGEE4S7B77-2023-12-31-en.zip for the year ended 31 December, 2023 are, in all material respects, marked up in compliance with the ESEF Regulatory Technical Standard. Our audit opinion on the audit of the consolidated financial statements of Optomed Plc for the year ended 31 December, 2023 is set out in our Auditor’s Report dated 15 February, 2024. In this report, we do not express any audit opinion or other assurance conclusion on the consolidated financial statements. Oulu 28 February, 2024 KPMG OY AB Heidi Hyry Authori sed Public Accountant, KHT 122 www.optomed.com This is voluntary published pdf report, so it does not fulfill the disclosure obligation pursuant to Section 7:5§ of the Securities Markets Act 90