SHELLY GROUP AD CONSOLIDATED FINANCIAL STATEMENTS

31 MARCH 2024

CONSOLIDATED STATEMENT OF FINANCIAL POSITION SHELLY GROUP AD AS OF MARCH 31, 2024 UIC 201047670

All amounts are in thousand Bulgarian leva unless otherwise stated

ASSETS	Note	March 31, 2024	December 31, 2023
Non-current assets
Property, plant and equipment	3.01	5 388	5 373
Intangible assets	3.02	8 008	7 547
Right-of-use assets	3.03	513	422
Goodwill	3.04	3 514	3 514
Investments in associates	3.05	408	403
Trade receivables	3.06	1 027	1 027
Deferred tax assets	3.07	926	926
Total non-current assets		19 784	19 212
Current assets
Inventory	3.08	21 141	18 273
Receivables on loans granted	3.09	552	550
Trade receivables	3.10	57 969	52 279
Other receivables	3.11	3 000	6 590
Cash and cash equivalents	3.12	29 224	30 778
Total current assets		111 886	108 470
TOTAL ASSETS		131 670	127 682

Date: May 15, 2024

	Silviya Ivanova	Digitally signed by Silviya Ivanova Tomova
Prepared by:	Tomova	Date: 2024.05.15 10:53:52 +03'00'
/Sylvia Ivanova Tomova/

Executive Director: /Dimitar Stoyanov Dimitrov/ Dimitar Stoyanov Dimitrov

Digitally signed by Dimitar Stoyanov Dimitrov Date: 2024.05.15 20:21:52 +03'00'

CONSOLIDATED STATEMENT OF FINANCIAL POSITION SHELLY GROUP AD AS OF MARCH 31, 2024 UIC 201047670

All amounts are in thousand Bulgarian leva unless otherwise stated

LIABILITIES	Note	March 31, 2024	December 31, 2023
Non-current liabilities
Bank loans	3.13	951	1 019
Lease liabilities	3.14	225	369
Retirement benefit obligations	3.15	271	271
Total non-current liabilities		1 447	1 659
Current liabilities
Bank loans	3.13	699	670
Lease liabilities	3.14	378	216
Trade payables	3.16	3 931	4 104
Payables to employees and social security	3.17	1 601	2 453
Other liabilities	3.18	6 340	8 977
Total current liabilities		12 949	16 420
TOTAL LIABILITIES		14 396	18 079
EQUITY
Share capital	3.19	18 051	18 051
Retained earnings	3.20	90 430	83 165
Legal reserves	3.21	3 072	2 804
Premium reserve	3.22	5 403	5 403
Reserves from revaluation of defined benefits plans		3	3
Exchange differences from translation of foreign subsidiaries' financial statements		865	953
Equity attributable to Parent Company's equity holders		117 824	110 379
Non-controlling interest		(550)	(776)
TOTAL EQUITY		117 274	109 603
TOTAL EQUITY AND LIABILITIES		131 670	127 682

Date: May 15, 2024

Prepared by:	Silviya Ivanova Tomova	Digitally signed by Silviya Ivanova Tomova Date: 2024.05.15 10:54:08 +03'00'	Executive Director:	Dimitar Stoyanov Dimitrov	Digitally signed by Dimitar Stoyanov Dimitrov Date: 2024.05.15 20:22:03 +03'00'
/Sylvia Ivanova Tomova/			/Dimitar Stoyanov Dimitrov/

The consolidated statement of financial position shall be read together with the accompanying notes on pages 7-57. The notes are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME SHELLY GROUP AD FOR THE PERIOD ENDED MARCH 31, 2024 UIC 201047670

All amounts are in thousand Bulgarian leva unless otherwise stated

	Note	Period ended	Period ended
		March 31, 2024	March 31, 2023
Sales revenue	4.01	40 164	27 608
Cost of sales	4.01	(17 860)	(12 641)
Gross profit		22 304	14 967
Other operating income	4.02	268	41
Sales expenses	4.03	(3 107)	(734)
Administrative expenses	4.04	(8 247)	(6 829)
Other operating expenses	4.05	(757)	(221)
Profit from operating activity		10 461	7 224
Finance income	4.06	3	-
Finance expense	4.07	(13)	(241)
Share of associated companies' profit	3.05	5	34
Profit before tax		10 456	7 017
Income tax expense	4.08	(1 550)	(1 095)
Net profit		8 906	5 922
Other comprehensive income:
Items, that will not be reclassified to profit or loss
Other long-term capital instruments		-	35
Exchange differences from translation of foreign
subsidiaries' financial statements		(88)	(12)
Effect from business combinations		-	448
Other comprehensive income after taxes		(88)	471
TOTAL COMPREHENSIVE INCOME		8 818	6 393
Net profit attributable to:
Owners of the Parent Company		8 990	6 036
Non-controlling interest		(84)	(114)
Other comprehensive income attributable to:
Owners of the Parent Company		(88)	471
Non-controlling interest		-	-
Total comprehensive income attributable to:
Owners of the Parent Company		8 902	6 507
Non-controlling interest		(84)	(114)
Earnings per share	4.9	0.49	0.33

Date: May 15, 2024

Prepared by:

Silviya Ivanova Tomova Digitally signed by Silviya Ivanova Tomova Date: 2024.05.15 10:54:24 +03'00'

/Sylvia Ivanova Tomova/

Executive Director: /Dimitar Stoyanov Dimitrov/ Dimitar Stoyanov Dimitrov

Digitally signed by Dimitar Stoyanov Dimitrov Date: 2024.05.15 20:22:14 +03'00'

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY SHELLY GROUP AD

FOR THE PERIOD ENDED MARCH 31, 2024 UIC 201047670

All amounts are in thousand Bulgarian leva unless otherwise stated

	Share capital	Retained earnings	Revaluation reserve	Premium reserve	Legal reserves	Redeemed shares	Reserves from revaluation of defined benefits plans	Exchange differences from translation of foreign subsidiaries' financial statements	Total	Non controllin g interests	Total equity
Balance at January 1, 2023	18 000	55 117	(507)	5 403	1 800	(780)	-	39	79 072	-	79 072
Total comprehensive income, net, incl.	-	32 391	387	-	1 004	-	3	914	34 699	(776)	33 923
Net profit	-	33 593	-	-	-	-	-	-	33 593	(644)	32 949
Other comprehensive income	-	(1 202)	387	-	1 004	-	3	914	1 106	(132)	974
Other long-term capital instruments	-	-	443	-	-	-	-	-	443	-	443
Deferred tax	-	-	(56)	-	-	-	-	-	(56)	-	(56)
Actuarial gain	-	-	-	-	-	-	5	-	5	-	5
Deferred tax	-	-	-	-	-	-	(2)	-	(2)	-	(2)
Exchange differences from translation of foreign subsidiaries' financial statements	-	-	-	-	-	-	-	49	49	-	49
Effect from business combination	-	(1 202)	-	-	1 004	-	-	865	667	(132)	535
Redeemed shares	-	280	-	-	-	780	-	-	1 060	-	1 060
Increase of share capital	51	-	-	-	-	-	-	-	51	-	51
Dividends (BGN 0.25 per share)	-	(4 500)	-	-	-	-	-	-	(4 500)	-	(4 500)
Other adjustments	-	(123)	120	-	-	-	-	-	(3)	-	(3)
Balance at December 31, 2022	18 051	83 165	-	5 403	2 804	-	3	953	110 379	(776)	109 603
Balance at January 1, 2023	18 000	83 165	-	5 403	2 804	-	3	953	110 379	(776)	109 603
Total comprehensive income, net, incl.	-	7 264	-	-	268	-	-	(88)	7 444	226	7 670
Net profit	-	8 990	-	-	-	-	-	-	8 990	(84)	8 906
Other comprehensive income	-	-	-	-	-	-	-	(88)	(88)	-	(88)
Effect from business combination	-	(1 726)	-	-	268	-	-	-	(1 458)	310	(1 148)
Other adjustments	-	1	-	-	-	-	-	-	1	-	1
Balance at December 31, 2023	18 051	90 430	-	5 403	3 072	-	3	865	117 824	(550)	117 274

Date: May 15, 2024

Prepared by: /Sylvia Ivanova Tomova/ Silviya Ivanova Tomova

Digitally signed by Silviya Ivanova Tomova Date: 2024.05.15 10:54:38 +03'00'

Executive Director: /Dimitar Stoyanov Dimitrov/ Dimitar Stoyanov Dimitrov Digitally signed by Dimitar Stoyanov Dimitrov Date: 2024.05.15 20:22:27 +03'00'

CONSOLIDATED STATEMENT OF CASH FLOWS SHELLY GROUP AD FOR THE PERIOD ENDED MARCH 31, 2024 UIC 201047670

All amounts are in thousand Bulgarian leva unless otherwise stated

	Note	For period ended March 31, 2024	For period ended March 31, 2023
Cash flows from operating activities
Proceeds from customers		35 097	26 208
Payments to suppliers		(29 036)	(12 653)
Tax refunds		343	834
Payments to employees and social security institutions		(5 820)	(4 053)
Bank fees		(4)	-
Other payments, net		(177)	(198)
Net cash flows from operating activities		403	10 138
Cash flows from investing activities
Payments for acquisition of property, plant and		(790)	(584)
equipment and intangible assets
Loans granted		-	(181)
Proceeds from the sale of investments		178	167
Purchase of investments		(1 179)	(3 942)
Net cash flows (used in)/from investing activities		(1 791)	(4 540)
Cash flows from financing activities
Lease payments		(71)	(45)
Loans received		297	58
Loans repaid		(337)	(128)
Cash flows related to interest and commissions		(7)	(13)
Net cash flows used in financing activities		(118)	(128)
Net increase/(decrease) in cash and cash equivalents		(1 506)	5 470
Net exchange differences		(48)	(69)
Cash and cash equivalents at the beginning of the year		30 778	28 148
Cash and cash equivalents at the end of the period	3.12	29 224	33 549

Date: May 15, 2024

Prepared by: /Sylvia Ivanova Tomova/ Silviya Ivanova Tomova Digitally signed by Silviya Ivanova Tomova Date: 2024.05.15 10:54:54 +03'00'

Executive Director: /Dimitar Stoyanov Dimitrov/ Dimitar Stoyanov Dimitrov Digitally signed by Dimitar Stoyanov Dimitrov Date: 2024.05.15 20:22:38 +03'00'

1.	Information on the Group 9
2.	Basis for preparation of the financial statements and material accounting policy information 11
2.1.	Basis for preparation 11
2.2.	Initial application of new and amended IFRSs 11
2.2.1.	Standards effective for the current reporting period 11
2.2.2.	New standards and amendments to the existing standards issued by IASB but not yet adopted by the EU . 12
2.3.	Going concern 12
2.4.	Functional and reporting currency 13
2.5.	Comparative data 13
2.6.	Transactions and balances 13
2.7.	Accounting estimates and judgements 14
2.8.	Subsidiaries and associated companies 15
2.9.	Non-controlling interest 15
2.10.	Consolidation 15
2.11.	Definition and assessment of the items of the consolidated financial statements 16
2.11.1.	Revenue 16
2.11.2.	Expenses 17
2.11.3.	Property, plant and equipment 17
2.11.4.	Intangible assets 18
2.11.5.	Goodwill 19
2.11.6.	Other long-term equity investments 20
2.11.7.	Investments in associated companies 20
2.11.8.	Inventories 21
2.11.9.	Financial instruments 21
	2.11.10. Cash and cash equivalents 26
	2.11.11. Lease 27
	2.11.12. Provisions 28
	2.11.13. Payables to employees 28
	2.11.14. Share capital and reserves 29
	2.11.15. Income tax expense 30
	2.11.16. Earnings per share 31
	2.11.17. Significant judgements in applying the Group's accounting policy 31
	2.11.18. Fair values 33
3.	Notes to the consolidated statement of financial position 34
3.01.	Property, plant and equipment 34
3.02.	Intangible assets 35
3.03.	Right-of-use assets 36
3.04.	Goodwill 36

3.05.	Investments in associates 36
3.06.	Long-term trade receivables 37
3.07.	Deferred tax assets 37
3.08.	Inventory 37
3.09.	Receivables on loans granted 38
3.10.	Trade receivables 38
3.11.	Other receivables 39
3.12.	Cash and cash equivalents 39
3.13.	Bank loans 40
3.14.	Lease liabilities 41
3.15.	Retirement benefits obligation 41
3.16.	Trade payables 42
3.17.	Payables to employees and social security obligations 42
3.18.	Other liabilities 42
3.19.	Share capital 42
3.20.	Retained earnings 43
3.21.	Legal reserves 43
3.22.	Share premium reserve 44
4.	Notes to the consolidated statement of comprehensive income 44
4.01.	Sales revenue and cost of sales 44
4.02.	Other operating revenue 44
4.03.	Sales expenses 44
4.04.	Administrative expenses 45
4.05.	Other operating expenses 45
4.06.	Financial income 45
4.07.	Financial expenses 45
4.08.	Income tax expense 45
4.09.	Earnings per share, net 46
5.	Contingent liabilities and commitments 46
6.	Related party transactions 47
7.	Financial instruments by categories 47
8.	Financial risk management 48
9.	Fair values 56
10.	Events after the date of the report 57

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS SHELLY GROUP AD FOR THE PERIOD ENDED MARCH 31, 2024 UIC 201047670 All amounts are in thousand Bulgarian leva unless otherwise stated

1. Information on the Group

1.1.Legal status

Shelly Group AD (the Parent Company, former Allterco AD), Sofia, is entered in the Commercial Register of the Registry Agency with UIC (Unified Identification Code): 201047670 and LEI code 8945007IDGKD0KZ4HD95. The Parent Company is with seat and registered office in Bulgaria, 1407 Sofia, 103 Cherni vrah Blvd. No changes to the seat and registered office of Shelly Group AAD were made during the reporting period. The initial registered fixed capital is BGN 5,488,000. At the end of 2015, the capital was increased to BGN 13,500 thousand through cash and non-cash contributions. At the end of 2016, the capital was increased to BGN 15,000 thousand after the successful Initial Public Offering on the Bulgarian Stock Exchange. In 2020, the capital was increased to BGN 18,000 thousand as a result of a procedure for Secondary Public Offering of a new issue of shares.

In July 2023, the capital increase was increased to BGN 18 050 945. The increase was addressed to employees of Shelly Group AD and its subsidiaries.

Since December 20216 the shares of Shelly Group AD are traded on the Bulgarian Stock Exchange and since November 22, 2021 the Company's shares are traded on the Frankfurt Stock Exchange.

1.2.Ownership and management

The Shelly Group AD (the Group) includes Shelly Group AD (the Parent Company) and its subsidiaries as listed on the next page, in which the Parent Company has controlling interest directly. Shelly Group AD is a public company in Bulgaria under the Public Offering of Securities Act.

The distribution of the share capital of Shelly Group AD as of December 31, 2023, is as follows:

Name	Number of shares	% of the capital
Svetlin Todorov	5 485 620	30.39%
Dimitar Dimitrov	5 776 120	32.00%
Persons holding less than 5% of the capital
Other physical persons and legal entities	6 789 205	37.61%
Total	18 050 945	100.00%

The composition of the Board of Directors as at March 31, 2024 is as follows:

Christoph Vilanek Chairman;
Nikolay Martinov Deputy Chairman;
Dimitar Dimitrov Executive Director and representative;
Wolfgang Kirsch Executive Director and representative;
Svetlin Todorov member of the Board of Directors and representative;

The members of the Board of Directors represent the Parent Company jointly or separately.

On 18.12.2023 the General Meeting of Shareholders voted a change in the Board of directors' personnel. As of 01.01.2024 Mr. Christoph Vilanek replaced Mr. Gregor Bieler, who has left the role of board member due to increase in his professional engagements. This change is reflected in the Commercial Register and Register of Non-Profit Entities with the Register Agency on 08.01.2024.

1.3. Scope of activities

The main scope of activity of Shelly Group AD includes the acquisition, management, evaluation and sale of participations in Bulgarian and foreign companies; acquisition, management and sale of bonds; acquisition, evaluation and sale of patents, assignment of licenses for the use of patents to companies in which the Parent Company participates; financing of companies in which the Parent Company participates. The Group includes companies engaged in the development, production and trading in smart (IoT) devices and real estate management.

1.4.Group structure

As of March 31, 2024 the Group includes Shelly Group AD and the following subsidiaries in the country and abroad, which it controls.

	March 31, 2024	December 31, 2023
Company name	Percentage of	Percentage of
	participation	participation
In the country
Shelly Trading EOOD	100%	100%
Shelly Europe EOOD	100%	100%
Shelly Properties EOOD	100%	100%
	March 31, 2024	December 31, 2023
Company name	Percentage of	Percentage of
	participation	participation
Abroad
Shelly USA, USA	100%	100%
Shelly DACH GMBH, Germany	100%	100%
Shelly Tech d.o.o., Slovenia	76%	60%

On February 22, 2024. Shelly Group AD has announced that it is exercising a Call option to acquire an additional 16% stake in its Slovenian IoT subsidiary Shelly Tech (former name GOAP).

The exercise of the Call option is the second stage of the acquisition of the Slovenian company based on Option Agreement between Shelly Group and the partners in the Slovenian company, signed and announced in January 2023.

The total acquisition price of the 16% share amounts to EUR 586 666.30 calculated in accordance with the terms of the Option Agreement. The remaining 24% of the shares of the Company, owned by three partners, are subject to an additional Call/Put option that can be exercised in 2026. according to the agreed conditions.

In November 2023, the subsidiary company Shelly Trading EOOD opened a branch in Great Britain.

In the beginning of 2024, the subsidiary Shelly Europe EOOD closed its branch in the Republic of Ireland.

2. Basis for preparation of the financial statements and material accounting policy information

2.1. Basis for preparation

The Group keeps its current accounting records and prepares its financial statements in accordance with the requirements of the Bulgarian commercial and accounting legislation.

These consolidated financial statements have been prepared in accordance with the requirements of the International Accounting Standards (IAS), published by the International Accounting Standards Board (IASB) and adopted by the European Union (EU).

As of March 31, 2024, IASs comprises the International Financial Reporting Standards (IFRS) and the interpretations of the International Financial Reporting Interpretations Committee (IFRIC), approved by the IASB, and the International Accounting Standards and Interpretations of the Standing Interpretations Committee (SIC), approved by the International Accounting Standards Committee (IASC) and adopted by the EU.

2.2. Initial application of new and amended IFRSs

2.2.1. Standards effective for the current reporting period

The Group's management has complied with all standards and interpretations that are applicable to its activity and have been officially adopted by the EU as of the date of preparation of these consolidated financial statements.

The management has reviewed the changes in the existing accounting standards effective from January 1, 2024 and believes that they do not require changes in terms of the accounting policy applied in the current year.

At the date of preparation of these consolidated financial statements, the following new standards, issued by IASB and adopted by the EU are effective:

• Amendments to IFRS 16 Leasing - Lease Liability in a Sale and Leaseback issued by IASB on September 22, 2023 (effective for annual periods beginning on or after January 1, 2024);

Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current and Non-current Liabilities with Covenants (effective for annual periods beginning on or after January 1, 2024);
Amendments to IAS 7 and IFRS 7: Supplier Finance Arrangements (effective for annual periods beginning on or after January 1, 2024);
2.2.2. New standards and amendments to the existing standards issued by IASB but not yet adopted by the EU

At present, IFRS as adopted by the EU do not significantly differ from regulations adopted by the IASB except for the following new standards and amendments to the existing standards, which were not endorsed for use in EU as at the date of publication of these consolidated financial statements (the effective dates stated below is for IFRS as issued by IASB):

Amendments to IAS 21 Effects on changes of exchange rates Lack of Exchangeability (effective for annual periods beginning on or after January 1, 2025)
IFRS 14 Regulatory Deferral Accounts (effective for annual periods beginning on or after January 1, 2016) – European commission has decided not to adopt the standard and wait for a final version of it.
Amendment to IFRS 10 Consolidated financial statements and IAS 28 Investments in Associates and Joint Ventures - Sale or contribution of assets between an investor and its associate or joint venture and subsequent amendments (effective date deferred indefinitely, but earlier implementation permitted). The effective date has been postponed indefinitely pending the completion of the equity method valuation project.

The Group anticipates that the adoption of these new standards and amendments to the existing standards will have no material impact on the consolidated financial statements of the Company in the period of initial application.

Hedge accounting for a portfolio of financial assets and liabilities whose principles have not been adopted by the EU remains unregulated.

According to the Group's estimates, the application of hedge accounting to a portfolio of financial assets or liabilities pursuant to IAS 39 Financial Instruments - Recognition and Measurement would not significantly impact the consolidated financial statements, if applied as at the reporting date.

2.3. Going concern

The consolidated financial statements of the Group have been prepared on the going concern principle, as it is expected that the Group shall continue its operating activity in near future.

A military conflict between Russia and Ukraine continued during the reporting period, but since the Group does not have transactions and accounts with customers from these two countries, management believes that

this event is not expected to directly or indirectly affect the Group's results and financial position in the future. The military conflict in the Middle East that broke out is also not expected to affect the Group's results and financial situation.

Management has no plans or intentions to sell the business or cease operations, which could materially change the measurement or classification of assets and liabilities reported in the consolidated financial statements.

The assessment of assets and liabilities and the measurement of income and expenses is made in compliance with the historical cost principle. This principle is modified in specific cases by the revaluation of certain assets and/or liabilities to their fair value as of December 31 of the current year and December 31 of the previous year, as indicated in the relevant notes below.

2.4. Functional and reporting currency

The reporting currency for the elements of the consolidated financial statements is the Bulgarian lev (BGN), which is the functional currency of Shelly Group AD.

The data in the elements of the consolidated financial statements and the notes thereto are presented in thousands of BGN, unless explicitly stated otherwise. The amounts over BGN 500 are rounded up to 1 thousand for disclosure in the consolidated financial statements and the notes.

The companies of the Group keep their accounting registers in the functional currency of the country in which they operate. The effects of exchange differences relating to the settlement of foreign currency transactions or the reporting of transactions in a foreign currency at rates that are different from those at which they were originally recognised shall be included in the statement of comprehensive income at the time they arise, treated as <other operating income and expenses= except those related to investments and loans denominated in foreign currency, which are presented as <finance income= and <finance expenses=.

Non-monetary assets and liabilities originally denominated in a foreign currency are accounted for in a functional currency using the historical exchange rate at the date of the transaction and subsequently not revalued at a closing rate.

2.5. Comparative data

According to the Bulgarian accounting legislation and IAS, the financial year ends on December 31 and enterprises are required to present annual financial statements as of the same date, together with comparative data as of that date for the previous year.

If necessary, the data presented for the previous year are adjusted for better comparability with the data from the current period.

2.6. Transactions and balances

A transaction in foreign currency is recognized initially in the functional currency by applying the foreign currency exchange rate (spot) between the functional currency and the foreign currency at the time of the transaction or operation.

At each date of financial statement preparation:

(a) monetary positions, receivables and payables denominated in foreign currency are recalculated into the functional currency using the exchange rate published by the BNB on the last business day of the respective month;

(b) non-monetary items held at historical cost in a foreign currency are translated using the exchange rate at the date of the transaction, if an exchange rate other than that of the transaction (average monthly, daily or other) is applied; and

(c) non-monetary items held at fair value in a foreign currency are recalculated using the exchange rates at the date when the fair value was determined.

Foreign currency exchange differences are recognized in accordance with IAS 21 the Effects of Changes in Foreign Exchange Rates.

The items of the consolidated statement of financial position and consolidated statement of comprehensive income of foreign companies of the Group, using a functional currency other than Bulgarian lev, are retranslated into BGN to be included in the consolidated statement of the Group as follows:

All monetary and non-monetary assets and liabilities (including comparative information) are recalculated at the BNB closing exchange rate at the date of the relevant statement of financial position; Monetary positions in foreign currency as of December 31, 2023 and March 31, 2024 are retranslated in these financial statements at the closing exchange of the BNB. As of December 31, 2023 – BGN - 1.76998 for 1 USD; BGN 1.73998 for 10 NOK and BGN 1,95583 for 1 EUR, and as of March 31, 2024 – BGN 1,80911 for 1 USD; and BGN 1,95583 for 1 EUR.
The income and expense items of each comprehensive income statement are recalculated at the accounting date at the weighted average exchange rate for the accounting period;
All exchange rate differences obtained are recognized as other comprehensive income.
The cumulative amount of these exchange rate differences is presented in a separate component of equity until the foreign operation is disposed.
Share capital and other components of equity are translated using the historical rate, i.e. the exchange rate at the date of issue of share capital, or at the date of the associated transaction for other components of equity.

2.7. Accounting estimates and judgements

The application of the IAS requires the Group's management to apply certain accounting assumptions and judgments when preparing the annual consolidated financial statements and when determining the value of some of the assets, liabilities, income, expenses and contingent assets and liabilities.

All assessments are based on the management's best judgment as of the date of preparation of these

consolidated financial statements. Actual results could differ from those presented in these consolidated financial statements.

In preparing these consolidated financial statements, the management used judgments related to the following items:

Right-of-use assets period of use of the assets and discount factor (Note 3.03)
Current and non-current receivables need for impairment (Note 3.07 and 3.11)
Retirement benefits obligations (Note 3.16)
Deferred tax assets (Note 3.08)
Warranty service provision (Note 3.19)

2.8. Subsidiaries and associated companies

Subsidiaries are the entities over which Shelly Group AD exercises control as defined in IFRS 10 Consolidated Financial Statements.

The parent-company (the investor) controls the investee company if it has:

Rights over the ownership of the subsidiary;
Rights over the variable returns from its participation in the subsidiary;
Ability to use its powers over the entity in order to influence the size of return on investment.

Subsidiaries are considered controlled starting from the date on which control is acquired by the Group and they cease to be consolidated on the date when it is assumed that the control has been lost.

Associated company is a company in which the Group has significant influence on decisions regarding operating and financial policies, but without being able to fully control those policies.

2.9. Non-controlling interest

Non-controlling interest is valued at the proportionate share of identifiable net assets at the acquisition date. The changes in the participations of the Group in subsidiaries, which do not lead to lose of control, are reported as changes in equity. The book value of non-controlling interest is adjusted to reflect the change in their participation in the capital of the subsidiary. Any difference between the amount of adjustment in the non-controlling interest and the fair value of paid or received remuneration is recognised directly in the equity of the owners of the mother company.

2.10. Consolidation

The consolidated financial statements of the Group include the financial statements of the parent company and the subsidiaries. All assets, liabilities, capital, income, expenses and cash flows of the group companies are presented as such as they belong to just one entity.

Subsidiaries are those entities that are controlled by the parent company. Control occurs when the parent company exercises its rights on variable return arising from its participation in the subsidiary's capital and has the ability to influence this return from investment through its power. The consolidated financial statements have been prepared following the same accounting policies with respect to similar transactions and business

facts of all companies in the Group. All mutual interests, as well as significant internal transactions, balances and unrealized gains in the Group are eliminated and the financial statements are prepared using the full consolidation method. The financial results of operations of the subsidiaries are included in the consolidated financial statements from the date of acquisition of control over them and cease to be consolidated from the date on which such control is lost. When a subsidiary is acquired as a result of an internal group restructuring, its net assets and financial result are included from the beginning of the earliest accounting period presented in the financial statements.

2.11. Definition and assessment of the items of the consolidated financial statements 2.11.1. Revenue

The Group recognises revenue from the following major sources:

• Sale of electronic devices

Revenue is measured based on the consideration to which the Group expects to be entitled in a contract with a customer and excludes amounts collected on behalf of third parties. The Group recognises revenue when it transfers control of a product or service to a customer.

The Group sells electronic devices both to the wholesale market and directly to customers through its own website and through direct sales. Sales-related warranties associated with the products cannot be purchased separately and they serve as an assurance that the products sold comply with agreed-upon specifications. Accordingly, the Group accounts for warranties in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets (see note 3.19).

For sales of electronic equipment to the wholesale market, revenue is recognised when control of the goods has transferred, being when the goods have been shipped to the wholesaler's specific location (delivery). Following delivery, the wholesaler has full discretion over the manner of distribution and price to sell the goods, and bears the risks of obsolescence and loss in relation to the goods. A receivable is recognised by the Group when the goods are delivered to the wholesaler as this represents the point in time at which the right to consideration becomes unconditional, as only the passage of time is required before payment is due.

For internet sales, revenue is recognised when control of the goods has transferred to the customer, being at the point the goods are shipped to the customer's specific location. When the customer initially purchases the goods online the transaction price received by the Group is recognised as a contract liability until the goods have been delivered to the customer.

Under the Group's standard contract terms, customers have a right of return within 14 days. In case of returned goods, the Group adjusts the recognized revenue by reducing it by the value of the returned goods. At the same time, the Group has an obligation to receive back the returned goods, if the customer decides to exercise its right to return the goods, and accordingly reduces the cost of goods sold and increases its stock.

The Group uses its accumulated historical experience to estimate the number of returns on a portfolio level using the expected value method. It is considered highly probable that a significant reversal in the cumulative revenue recognised will not occur given the consistent level of returns over previous years.

Revenue from services

The Group reports revenue from services, complying with the commitments under the contract. Revenue from services is reported upon final completion of the services (by objects) recognized as performed.

During 2023 the Group started offering its customers a subscription to cloud services. The subscription can be paid in monthly instalments or once for a calendar year. In the event that a customer pays an annual subscription, the entire amount is initially recognized as a contractual liability, and each month 1/12 of the amount paid is recognized as revenue.

Other income/revenue

Other income and revenue are recognized when the right to receive them is established.

The Group companies apply IFRS 15 and the management carefully examines its trade practices for possible changes at the time of revenue recognition. No change in the performance obligations and the price allocation in the contracts and revenue recognition is needed for the reporting period.

2.11.2. Expenses

Expenses for future periods shall be deferred for recognition as current expenses in the period in which the obligations under the contracts to which they refer, would be performed.

Financial expenses consist of interest expenses and other direct costs related to loans as well as bank fees and losses from foreign currency exchange.

2.11.3. Property, plant and equipment

Property, plant and equipment (non-current tangible assets) are presented in the financial statements at acquisition cost (cost price) less accumulated depreciation and impairment losses.

Initial recognition

Upon initial acquisition, property, plant and equipment are evaluated at acquisition cost (cost price), which includes the purchase price, including customs charges and any directly attributable costs of bringing the asset to working condition. The direct costs are as follows: costs of site preparation, costs of initial delivering and handling, installation costs, costs for personnel remuneration fees related to the project, non-refundable taxes, etc.

When acquiring property, plant and equipment on a deferred payment basis, the purchase price is equivalent to the present value of the liability, discounted on the basis of the interest rate on the borrowed resources of the Group with a similar maturity and purpose. The difference between the cash price equivalent and the total

payment is recognized as interest over the course of the loan, unless it is capitalized in accordance with IAS 23.

Measurement after recognition

The approach chosen by the Group for the subsequent measurement of property, plant and equipment is the acquisition cost model - less any subsequent depreciation and any accumulated impairment losses.

For all other classes of non-current tangible assets, the Group applies the acquisition cost model.

Depreciation Methods

The Group uses the straight-line method of depreciation of non-current tangible assets. Depreciation of assets begins when they are available for use. The useful life by groups of assets is determined in accordance with: physical wear and tear, specifics of the equipment, future intentions for use and actual obsolescence.

The useful life by classes of assets is as follows:

Vehicles	4 years
Buildings	25 years
Computer equipment	2-5 years
Office equipment	5- 6,67 years
Other non-current tangible assets	6,67 years

The determined useful life of non-current tangible assets is reviewed at the end of each year and, if significant deviations are found against future expectations for the useful life of the assets, it is adjusted prospectively.

Derecognition of non-current tangible assets

The carrying amount of an item of property, plant and equipment is written off: when it is sold, when no other economic benefits are expected from its use, or when it is disposed.

Gains or losses arising on the derecognition of an item of property, plant and equipment are included in the statement of comprehensive income when the asset is written off. Gains and losses on disposals of non-current assets are determined when the proceeds from sale (disposal) are reduced by the book value of the asset and the costs related to the sale. They are stated net, to "Other operating income" in the statement of comprehensive income.

The amount of consideration to be included in the gain or loss arising from the derecognition of an item of property, plant and equipment is determined in accordance with the requirements for determining the transaction price in paragraphs 47–72 of IFRS 15. Subsequent changes to the estimated amount of the consideration included in the gain or loss shall be accounted for in accordance with the requirements for changes in the transaction price in IFRS 15.

2.11.4. Intangible assets

Intangible assets are presented in the financial statements at acquisition price (cost price) less accumulated

depreciation and impairment losses.

The Group applies a straight-line method of depreciation of intangible assets with a useful life of 2 years for the software products, 6.67 years for the prototypes and software development, 3 years for an ISO certificate.

The book value of the intangible assets is reviewed for impairment when there are events or changes in circumstances that indicate that the book value amount could exceed their recoverable amount. Then the impairment is included as an expense in the consolidated statement of comprehensive income.

Initial recognition

Externally generated intangible assets on their acquisition are measured at acquisition price, which includes purchase price, import duties, non-refundable taxes and expenses of preparing the asset for its intended use. The direct expenses are: costs of employee benefits (as defined in IAS 19) and professional fees arising directly from bringing the asset to its working condition; costs for testing whether the asset is functioning properly, expenses for fees of persons related to the project, non-refundable taxes, etc.

Intangible assets are recognized if they meet the definition of intangible assets set out in IAS 38 Intangible Assets, namely:

Meet the definition of an intangible asset;
Upon their acquisition they can be reliably measured;
Economic benefits are expected from the use of the asset, as evidenced by the availability or plan to obtain sufficient resources to enable the Group to obtain the expected economic benefits; the ability to effectively perform its functional role in accordance with the intention of the Group regarding its use or there is a clearly defined and specified technical feasibility.

Subsequent costs

Expenses related to the maintenance of initially established standard efficiency, incurred after the commissioning of intangible non-current assets, are recognized as current at the time when they are incurred.

The carrying amount of the respective intangible asset is adjusted by the expenses that lead to increase of the expected future economic benefits form the use of an intangible asset above the initially determined standard efficiency.

2.11.5. Goodwill

Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognised. Initially, it is measured in the consolidated financial statements as the excess of the sum of the consideration transferred over the amount of the net assets of the acquired company and subsequently it is presented at acquisition cost less impairment losses. Goodwill is not amortized.

The goodwill originating as a result of the acquisition of a subsidiary is presented in the consolidated statement of financial position as a part of non-current assets and the goodwill originating as a result of acquisition of joint-ventures or associated companies is included in the total value of investment and is reported as <investments in associated companies=.

The goodwill associated with the acquisition of associated companies is tested for impairment as part of the total value of the investment. Separately recognized goodwill on the acquisition of subsidiaries is tested mandatorily for impairment at least once annually. Impairment losses on goodwill are not reversed subsequently. Gains or losses on sale (disposal) of a subsidiary of the Group also include the book value of the goodwill, associated with the sold (disposed) company.

Any goodwill amount recognized in the financial statements is attributable to a certain cash generating object at the time a business combination is completed, and this object is applied when tests for impairment are conducted. For determining the cash-generating objects, are considered only objects that are expected to generate future economic benefits and that are subject to the business combination, which generated the goodwill.

Losses from impairment of goodwill are presented in the consolidated statement of comprehensive income (in profit or loss for the year) as part of item <Impairment expenses=.

2.11.6. Other long-term equity investments

Other long-term financial investments are non-derivative financial assets in the form of shares and participation of other companies (minority interest) held with a long-term perspective.

Initial recognition

Capital investments are initially recognized at acquisition cost, which is the fair value of the remuneration paid, including direct acquisition cost of the investment (the financial asset). All purchases and sales of capital investments are recognized on the <trading date= of the transaction, i.e., the date on which the Group commits to purchase or sell the asset.

Subsequent measurement

Capital investments owned by the Group are subsequently measured at fair value. The results of the subsequent measurement to fair value are presented in the statement of comprehensive income (in other components of comprehensive income) and respectively in the reserve related to financial assets at fair value, through other comprehensive income. These results are transferred to retained earnings on disposal (sale) of the respective investment.

2.11.7. Investments in associated companies

These investments are reported in the consolidated financial statements of the Group by the equity method. By this method, the share of the Group in the comprehensive income of an associated company is consolidated on one line, so that the value of the investment corresponds to its share in the net assets as of December 31 for the

respective year or at the end of the respective reporting period. The Group recognizes its share in losses in associated companies up to the amount of its investment, including internal loans granted, unless it has undertaken an obligation to pay such liabilities on behalf of the associated company.

As of March 31, 2024, the Group reports a share in the profit of associated companies amounting to BGN 5 thousand. The value of the investment indicated in the consolidated statement of financial position has been increased by the same amount.

2.11.8. Inventories

Inventories are accounted at the lower of the two following values: price for acquisition (cost) and net realizable value.

Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completing the production cycle and the estimated costs necessary to make the sale. In the event that inventories have already been depreciated to net realizable value and in a subsequent accounting period it turns out that the conditions that led to their impairment are no longer present, their new net realizable value is assumed. The amount of the refund can only be up to the amount of the book value of the inventory before the impairment. The amount of the reversal of the inventory value is reported as a reduction in the cost of materials for the period in which the reversal occurs.

The costs incurred to bring an inventory to its present condition and location are included in the cost of acquisition (cost) as follows:

Materials the purchase price and all related costs of delivery;
Goods the purchase price and all related costs of delivery, customs duties, transport costs, nonrecoverable taxes and other costs incurred in order to bring the goods in ready for use state.

In the use (sale) of inventory, the weighted average method is used.

2.11.9. Financial instruments

A financial instrument is any contract that simultaneously gives rise to both a financial asset in one entity and a financial liability or equity instrument in another entity. Financial assets and liabilities are recognised in the consolidated statement of financial position when the Group becomes a party to the contractual terms of the relevant financial instrument that gave rise to this asset or liability.

а) Financial assets

Initial recognition and measurement

Upon initial recognition, financial assets are classified as financial assets that are subsequently measured at amortized cost, at fair value in other comprehensive income (OCI) and as financial assets at fair value in profit or loss. Financial assets are classified upon their initial acquisition according to the characteristics of the contractual cash flows of the financial asset and the Group's business management model. The Group initially measures the financial asset at fair value plus transaction costs, in the case of financial assets that are not measured at fair value through profit or loss.

Trade receivables that do not have a significant financing component, and for which the Group has applied a practically expedient measure, are stated at the transaction price determined according to IFRS 15. The Group reclassifies financial assets only when its business model changes.

In order to be classified and measured at amortized cost or at fair value in OCI, the financial asset should generate cash flows that represent " solely payments of principal and interest" (SPPI) on the outstanding principal amount. This measurement is called the "SPPI test= and is performed at the relevant instrument level. The Group's business model for managing financial assets refers to how the Company manages its financial assets to generate cash flows. The business model determines whether cash flows will arise from the collection of contractual cash flows, the sale of financial assets, or both.

Purchases or sales of financial assets, the terms of which require the delivery of the assets within a certain period of time, usually established by a regulatory provision or current practice in the relevant market (regular purchases), are recognized on the date of trading (transaction), i.e. on the date on which the Group has committed to buy or sell the asset.

Subsequent measurement

For the purposes of subsequent measurement, financial assets are classified into four categories:

Financial assets at amortized cost (debt instruments);
Financial assets at fair value in other comprehensive income with "recycling" of cumulative profit or loss (debt instruments);
Financial assets designated as financial assets at fair value in other comprehensive income with no "recycling" of cumulative profit or loss at their derecognition (equity instruments) (measurement alternative);
Financial assets at fair value through profit or loss.

Financial assets at amortized cost (debt instruments)

The Group measures financial assets at amortized cost if both of the following conditions are met:

The financial asset is held within a business model aimed at obtaining the contractual cash flows, and
The terms of the contract for the financial asset give rise to cash flows on specific dates that represent solely payments of principal and interest on the outstanding principal amount. Financial assets at amortized cost are subsequently measured using the effective interest rate (EIR) method and are subject to impairment. Gains and losses are recognized in profit or loss when the asset is derecognized, modified or impaired.

The Group's financial assets at amortized cost include trade and other receivables, term deposits and cash at bank accounts.

Financial assets designated as financial assets at fair value in other comprehensive income (equity instruments)

Upon initial recognition, the Group may elect to classify irrevocably as equity instruments designated as measured at fair value in other comprehensive income when they meet the equity requirements under IAS 32 Financial Instruments: Presentation and when they are not held for trading. The classification is determined on an individual instrument basis. These investments in equity instruments are held for medium to long-term purpose and accordingly, the Group elected to designate them as equity instruments at fair value through other comprehensive income as it believes that recognising short-term fluctuations in these investments fair value in profit or loss would not be consistent with the Group's strategy of holding these investments for long term purposes.

Gains and losses on these financial assets are never "recycled" in profit or loss. Dividends are recognized as income in the statement of comprehensive income when the right to payment is established, except when the Group derives benefits from these receipts as a refund of part of the acquisition price of the financial asset, in which case the gains are reported in other comprehensive income. Equity instruments designated as measured at fair value in other comprehensive income are not in the scope of IFRS 9 expected credit loss model.

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets that do not qualify for classification at amortized cost or at fair value through other comprehensive income and financial assets designated at initial recognition as measured at fair value through profit or loss, or financial assets that are required to be measured at fair value. Derivatives, including separated embedded derivatives, are classified as held for trading unless designated as effective hedging instruments. Financial assets with cash flows that are not solely payments of principal and interest are classified and measured at fair value in profit or loss, regardless of the business model.

Notwithstanding the criteria for debt instruments to be classified at amortized cost or at fair value in other comprehensive income as described above, debt instruments may be designated as measured at fair value in profit or loss upon initial recognition, if thus eliminates or substantially reduces the accounting mismatch. Financial assets at fair value through profit or loss are reflected in the statement of financial position at fair value, and the net changes in fair value are recognized in the statement of comprehensive income

Derecognition

A financial asset (or, where applicable, part of a financial asset or part of a group of similar financial assets) is derecognised (i.e. removed from the Group's statement of financial position) when:

the rights to receive cash flows from the asset have expired; or
the rights to receive cash flows from the asset have been transferred or the Group has assumed the obligation to pay the received cash flows in full, without significant delay, to a third party through a transfer agreement; where either (a) the Group has transferred substantially all the risks and rewards of ownership of the asset; or (b) the Group has neither transferred nor retained substantially all the risks and rewards of ownership of the asset but has not retained control.

When the Group has transferred its rights to receive cash flows from the asset or entered into a transfer agreement, it evaluates whether and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all the risks and rewards of ownership of the financial asset, nor has it transferred control over it, it still recognizes the transferred asset to the extent of its continuing involvement in it.

In this case, the Group also recognizes the related obligation. The transferred asset and related liability are valued on a basis that reflects the rights and obligations that the Group has retained. A continuing involvement being a security of the transferred asset is valued at the lower of the original book value of the asset and the maximum amount of consideration that the Group may be required to pay. The Group applies the same derecognition policies for impaired financial assets.

Impairment of financial assets

Additional disclosures related to impairment of financial assets, are included in the following notes as well:

Significant judgements in applying the Group's accounting policy. Key estimates and assumptions with high uncertainty. (Note 2.11.17);
Trade and other receivables (Notes 3.11 and 3.10).

The Group recognizes an allowance for expected credit losses (ECL) for all debt instruments that are not measured at fair value through profit or loss. ECL are based on the difference between the contractual cash flows due under the terms of the contract and any cash flows the Group expects to receive, discounted at an approximation of the original effective interest rate. Expected cash flows include cash flows from the sale of collateral held or other credit enhancements that are an integral part of the terms of the contract.

ECL are recognized in three stages. For exposures for which there has been no significant increase in credit risk since initial recognition. Allowances for ECL are recognized for credit losses that arise as a result of default events that are possible occur within the next 12 months (12-month ECL). For exposures for which there has been a significant increase in credit risk since initial recognition, an allowance for expected credit loss is required in respect of credit losses expected over the remaining term of the exposure, regardless of when the default occurs (ECL over the lifetime of the instrument). A significant increase in credit risk is observed in the case of material financial difficulties of the debtor, probability of declaring bankruptcy and liquidation, financial restructuring or inability to repay the debt (overdue for more than 30 days) are taken as an indicator for impairment of the asset.

Regarding cash and cash equivalents, the Group applies the credit ratings of the banks and publicly available information on default rates for banks for in order to prepare an impairment assessment. The Group uses historical experience in order to determined loss given default. As significant increase in credit risk has not been identified, the Group applies 12-month ECL.

The Group considers a financial instrument in default when contractual payments are overdue for 90 days. However, in certain cases, it may consider a financial asset to be in default when internal or external information provides an indication that it is unlikely that the Group will receive the outstanding contractual amounts in full before taking into account any credit improvements. All financial assets measured at amortized cost are subject to collective impairment, except for those in default (phase 3).

Financial liabilities

Initial recognition and measurement

Upon initial recognition, financial liabilities are classified as financial liabilities at fair value through profit or loss, incl. derivatives or as financial liabilities at amortized value, incl. loans and other borrowings and trade and other payable as appropriate. Initially, all financial liabilities are recognized at fair value, and in the case of loans and borrowed funds and liabilities, net of direct transaction costs.

The Group's financial liabilities include trade and other payables, bank loans and lease liabilities.

Subsequent measurement

Financial liabilities are measured according to their classification as specified below:

Financial liabilities at amortized cost

The Group's financial liabilities at amortized cost are reported at amortized cost after applying the effective interest method.

Derecognition

A financial liability is derecognized when the obligation is discharged, cancelled or expires. When an existing financial liability is exchanged with another from the same creditor under substantially different terms, or the terms of an existing liability are substantially changed, this exchange or modification is treated as extinguishment of the original financial liability and recognition of a new financial liability. The difference in the respective carrying amounts is recognized in the statement of comprehensive income.

The main financial instruments included in the consolidated statement of financial position of the Group are presented below.

Trade and other receivables

Trade receivables are amounts owed by customers for goods sold and services performed in the ordinary course of business. They are usually due for short-term settlement and are therefore classified as current. Trade receivables are initially recognized at the amount of the unconditional consideration due, unless they contain significant financing components.

The Group holds trade receivables for the purpose of collecting contractual cash flows and therefore measures them at amortized cost using the effective interest method. No discounting is applied when the effect is

immaterial.

Future cash flows determined for a group of financial assets that are collectively measured for impairment are determined on the basis of historical information regarding financial assets with credit risk characteristics similar to the characteristics of the group of financial assets.

Assets that are subject to individual impairment are not included in an impairment group.

The Group applies a simplified approach in recognizing impairment of trade and other receivables and recognizes loss allowance for lifetime expected credit losses. In estimating expected credit losses on trade receivables, the Company uses a provision matrix.

When estimating expected credit losses on trade receivables, the Group uses its historical experience of credit losses on trade receivables to estimate the expected credit losses for the entire life of the financial assets.

Borrowings

Borrowings are recognized initially at fair value, which is formed by the cash proceeds received, less the inherent transaction costs. After their initial recognition, interest-bearing loans are measured at amortized cost, where any difference between the initial cost and the maturity value is recognized in profit or loss over the period of the loan by applying the effective interest method.

Finance costs, including direct borrowing costs, are included in profit or loss using the effective interest method, except for transaction costs on bank overdrafts, which are recognized in profit or loss on a straightline basis for the period, for which the overdraft was agreed upon.

Loans are classified as current when they are to be settled within twelve months from the end of the reporting period.

Payables to suppliers, other current liabilities and advances received

Trade and other payables arise as a result of goods or services received. Current liabilities are not amortized.

Trade payables are recognized initially at fair value and subsequently at amortized cost using the effective interest method.

2.11.10. Cash and cash equivalents

Cash includes cash on hand and current accounts, and cash equivalents include short-term bank deposits with an original maturity of less than 3 months. The consolidated statement of cash flows is presented using the direct method.

Cash and cash equivalents are subsequently presented at amortised cost, excluding the accumulated allowance for expected credit losses.

2.11.11. Lease

On the effective date of the contract, the Group assesses whether the contract is or contains a lease. In particular, whether the contract transfers the right to control the use of the identified asset for a certain period of time.

The Group as a lessee

The Group applies a unified approach to the recognition and assessment of all leases, except for short-term leases (i.e., leases with a lease term of up to 12 months) and leases of low-value assets. The Group recognises lease liabilities for the payment of lease instalments and right-of-use assets, representing the right to use the assets.

Right-of-use assets

The Group recognizes right-of-use assets from the inception date of the lease (i.e. the date on which the underlying asset is available for use). Right-of-use assets are measured at acquisition cost less accumulated depreciation and impairment losses and adjusted for any revaluation of lease liabilities.

The acquisition cost of right-of-use assets includes the amount of recognized lease liabilities, the initial direct costs incurred and the lease payments made on or before the inception date of the lease, an estimate of the costs to be incurred by the lessee in dismantling and relocating the asset, the restoration of the site on which it is located or the restoration of the asset to the condition required under the terms of the lease, less any incentives received under the lease. The right-of-use assets are depreciated on a straight-line basis over the lease term.

If at the end of the lease term the ownership of the leased asset is transferred to the Group, or the acquisition cost reflects the exercise of a purchase option, depreciation is calculated using the expected useful life of the asset.

Lease liabilities

From the inception date of the lease, the Group recognises lease liabilities measured at the present value of the lease payments to be made during the lease term. Lease payments include fixed payments (including insubstance fixed payments) less any eligible lease incentives, variable lease payments depending on an index or an interest rate, and amounts that are expected to be paid under guarantees for residual value.

Lease payments also include the exercise price of a purchase option if the Group is reasonably certain to exercise that option, as well as penalties for terminating the lease, if the lease term reflects the Group's exercising an option to terminate the lease.

Variable lease payments, not depending on an index or an interest rate, are recognised as expense in the period in which the event or condition triggering the payment occurs.

In calculating the present value of lease payments, the Group uses an intrinsic interest rate at the inception date of the lease because the interest rate implicit in the lease cannot be determined reliably. After the inception date, the amount of lease liabilities is increased by the interest and reduced by the lease payments made.

In addition, the carrying amount of lease liabilities is revalued, if there is a modification, a change in the lease term, a change in lease payments (for example, changes in future payments resulting from a change in the index or interest rate used to determine those lease payments) or a change in the measurement of the option to purchase the underlying asset

Short-term leases and low-value assets leases

The Group applies recognition exemption for short-term leases to its short-term building leases (for example, leases with lease term of 12 months or less from the inception date and not containing a purchase option). The Group also applies the recognition exemption of low-value assets leases to leases of office equipment which is considered low-value. Lease payments on short-term leases and low-value assets leases are carried as an expense on the straight-line basis over the lease term.

2.11.12.Provisions

Provisions are recognised when the Group has a current (constructive or legal) liability as a result of a past event, and it is probable that the repayment/settlement of this liability will involve an outflow of resources. Provisions are estimated based on management's best estimate as at the date of preparation of the financial statements of the costs necessary to settle the respective liability. The estimate is discounted when the maturity is long-term. When part of the resources to be used to settle the liability is expected to be recovered by a third party, the Group recognises a receivable in case it is highly probable to be received, its value can be reliably measured as well as an income (credit) under the same item in the consolidated statement of financial position, where the provision itself is presented.

The Group charges warranty service provisions. Liabilities for warranty service provisions are accrued based on management's best judgment of the potential amount of costs that the Group will incur upon the occurrence of a warranty event, based on the accumulated experience of goods/products sold.

2.11.13. Payables to employees Defined benefit plans

The Government of Bulgaria is responsible for providing pensions under defined benefit plans. The liabilities under the Group commitment to transfer accrued amounts to defined benefit plans are recognised in the statement of comprehensive income when they are incurred.

Paid annual leave

The Group recognises as a liability the undiscounted amount of the estimated costs of paid annual leave, in accordance with the Labor Code and its internal rules, expected to be paid to employees in exchange for their labor for the past reporting period.

Retirement benefit plans

In accordance with the requirements of the Labor Code, upon termination of the employment contract of an employee who has acquired the right to a pension, the Group pays the employee a compensation in the amount of two gross salaries, if the accumulated service at the Group is less than ten years, or six gross salaries, in case of accumulated service time at the Group of over ten consecutive years.

Based on their characteristics, these schemes are retirement benefit plans.

The measurement of long-term employee benefits is carried out using the projected unit credit method and the estimate at the date of the statement of financial position is made by licensed actuaries. The amount recognised in the statement of financial position is the present value of the liabilities. The revaluations of the retirement benefit plan liability (actuarial gain or loss), arising from experience and changes in actuarial financial and demographic assumptions, are recognised in equity through other comprehensive income as a reserve for retirement liabilities. The amounts released from this reserve are transferred through other comprehensive income into retained earnings.

2.11.14. Share capital and reserves

The Group has adopted the capital maintenance financial concept. Maintaining the share capital is assessed in nominal monetary units. Profit for the reporting period is considered acquired only if the cash /financial/ amount of equity at the end of the period exceeds the cash amount at the beginning of the period, after deducting the distributions between the owners or the capital invested by them during the period.

Shelly Group AD is a joint-stock company and is obliged to register in the Commercial Register a certain amount of share capital to serve as collateral for the claims of creditors of the Parent Company. The shareholders are responsible for the Parent Company's liabilities up to the amount of their shareholding in the capital and can claim the return of this shareholding only in bankruptcy or liquidation proceedings. The Parent Company reports its share capital at the nominal value of the shares registered in court.

Equity is the residual value of the Group company's assets after deducting all of their liabilities. It includes:

Share capital is presented in the consolidated statement of financial position at nominal value per share according to the number of shares issued.

Financial result is the difference between the revenue and the related costs charged.

Equity is reported less the distributed dividends of the owned shares during the period in which they will be distributed (by decision of the General Meeting).

According to the requirements of the Commerce Act and the Articles of Association of the Parent Company

Shelly Group AD, the Group is obliged to allocate reserves at the expense of:

at least one tenth of the profit, which is allocated until the funds reach 10 percent of the share capital;
the funds received above the nominal value of the shares upon their issuance (premium reserve).

Redeemed shares are presented in the consolidated statement of financial position at cost (acquisition price), with their gross purchase price reduced by the Group's equity capital. Profit or loss from the sale of redeemed shares are presented directly in the Group's equity, under the "Redeemed shares".

In past periods, the Group reported share-based payments to employees in Bulgarian subsidiaries. Share-based payments to employees related to services rendered are settled through equity instruments. Transferred capital instruments are measured at their fair value on the date of transfer. Share-based payment expense is recognised in the period in which the services are received.

Reserve from recalculation of the currency of the presented foreign activity - arises from the net effects of the translation of the accounts of subsidiaries abroad from their functional currencies into Bulgarian leva, for consolidation purposes.

Revaluation reserve is the difference between the previous book value of fixed assets reported at fair value through other comprehensive income and their fair values as of the date of this consolidated financial statements.

2.11.15. Income tax expense

Income tax expense is the amount of current income tax and the tax effect on temporary tax differences. Current taxes on the profit of Bulgarian companies are determined in accordance with the requirements of the Bulgarian tax legislation. The nominal tax rate in Bulgaria for 2023 and 2024 is 10%.

Subsidiaries abroad are charged according to the requirements of the relevant tax laws by country, at the following nominal tax rates:

Country	Nominal tax rates per year
	2023	2024
Germany	15.825%	15.825%
USA	15-35%	15-35 %
Slovenia	19%	19%

Deferred income tax is calculated using the balance sheet liability method. Deferred tax liabilities are calculated and recognised for all taxable temporary differences, while deferred tax assets are recognised only if likely to be reversed and if the Group will be able to generate sufficient profit in the future from which they can be deducted.

The effect of recognising deferred tax assets and/or liabilities is reported where the effect of the event that gave rise to them is presented.

For events affecting profit or loss and other comprehensive income, the effect of deferred tax assets and liabilities is recognised in the consolidated statement of comprehensive income.

For events that are initially recognised in equity (revaluation reserve) deferred tax assets and liabilities are recognised in the consolidated statement of comprehensive income.

Deferred tax assets and/or liabilities are presented offset the consolidated statement of financial position as they are subject to a uniform taxation regime in the country.

As of March 31, 2024, the Group recognises income tax expenses only for Bulgarian companies and at a 10% tax rate, for the German entity at 15.825% tax rate and for the Slovenian entity at 19% tax rate.

2.11.16. Earnings per share

Earnings per share are calculated by dividing the net profit or loss for the period attributable to shareholders by the weighted average number of ordinary shares held for the period.

The weighted average number of shares is the number of ordinary shares held at the beginning of the period, adjusted by the number of ordinary shares repurchased and newly issued during the period, multiplied by the time average factor. This factor represents the number of days particular shares were held compared to the total number of days during the period.

Diluted earnings per share are not calculated because there are no potentially diluted shares issued.

2.11.17. Significant judgements in applying the Group's accounting policy

Key estimates and assumptions with high uncertainty

When applying the accounting policy, the Group's management makes certain estimates that have a significant effect on these financial statements. Such estimates, by definition, rarely equal actual results.

Given their nature, these estimates are subject to ongoing review and updating and summarize historical experience and other factors, including expectations of future events that management believes are reasonable under current circumstances.

Estimates and assumptions that carry a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities in the next financial year are set out below.

Defined benefit plans

The employee defined benefit obligation is determined by actuarial valuation. This estimate requires assumptions on the discount rate, future wage growth, staff turnover and mortality rates. Due to the long-term nature of defined benefit plans, these assumptions are subject to significant uncertainty. The Group prepared an actuarial valuation of defined benefits and reported them in the consolidated financial statements at the end of 2023 (note 3.16). The group have not prepared actuarial valuation as of March 31, 2024.

Useful lives of property, plant and equipment and intangible assets

Financial reporting of property, plant and equipment and intangible assets includes the use of estimates of their expected useful lives and carrying amounts, based on the Group management's judgments.

Impairment of receivables

Management estimates the volume and timing of expected future cash flows related to receivables based on experience versus current circumstances. Due to the inherent uncertainty of this estimate, actual results may differ. Group's management compares prior year estimates with actual results.

The Group uses a simplified approach in reporting trade and other receivables and recognises an impairment loss as expected credit losses over the entire term. They represent the expected shortfall in contractual cash flows, given the possibility of default at any point in the life of the financial instrument. The Group uses its experience, external indicators and information to calculate expected credit losses in the long-term. Impairments recognised for the reporting period are disclosed in Note 4.05.

Impairment of property, plant and equipment

At the date of preparation of the financial statements, the Group's management organizes an impairment review of property, plant and equipment.

As of March 31, 2024, such review was carried out, as a result of which management considered that no impairment indicators were available. No impairment loss on property, plant and equipment is reported in the consolidated financial statements.

Impairment of inventories

At the date of preparation of the financial statements, the Group's management reviews and analyses existing inventories. A review and analysis of all available inventories is made in terms of basic indicators – uniformity, commercial appearance, expiry date, etc., and expert prices are determined.

The proposed expert prices are consistent with the prices reached under concluded contracts for realization on the domestic and foreign markets, the dynamics of supply and demand of inventories, the latest price levels and trends in transactions with similar inventories. For the calculation of the net realisable value of individual types of inventories, the estimated direct costs associated with sales are excluded from determined expert selling prices. When assessing the inventories for which sales contracts are concluded, the net realisable value is determined based on the contract price less the cost of sales. Inventories not related to sales contracts are valued according to assumptions about the possibilities for their future disposal.

As of March 31, 2024, no impairment of inventory was recognized

The impairment of inventories is calculated as the difference between their carrying amount, as recognized in the consolidated statement of financial position prior to review and analysis, and their net realisable value, determined on the basis of expert prices as set out above.

Income taxes

The companies in the Group are tax entities under the jurisdiction of the tax administration in the country in which they operate. A significant estimate needs to be made to determine the tax provision. There are numerous examples for which the tax finally determined is unspecified in the normal course of business. Group companies recognise liabilities for expected tax payables based on the judgement of the management of the relevant company and the Group. When the final tax result of such events is different from the amounts originally recognized, those differences will affect current income tax and deferred tax provisions in the tax revisions period.

Leases

Determining the lease term for contracts with renewal and termination options – the Group as a lessee

The Group defines the lease term as the irrevocable term of the lease, together with any periods covered by an option to extend it if it is reasonably certain that the option will be exercised, or any periods covered by a termination option if it is reasonably certain that the option will not be exercised (note 3.15).

2.11.18. Fair values

Some of the Group's accounting policies and disclosures require a fair value measurement of financial and non-financial assets and liabilities.

When measuring the fair value of an asset or liability, the Group uses observable data as far as possible.

Fair values are categorized at different levels in the fair value hierarchy based on the inputs to the valuation techniques as follows:

• Level 1: quoted prices (unadjusted) in active markets for similar assets or liabilities.

• Level 2: inputs other than quoted prices included in Level 1 that, directly (i.e., as prices) or indirectly (i.e., derived from prices), are available for observation for the asset or liability.

• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable input data).

If the inputs used to measure the fair value of an asset or liability can be categorized at different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety at that level of the fair value hierarchy whose input information is relevant to the overall assessment.

The Group recognizes transfers between levels of the fair value hierarchy at the end of the reporting period in which the change occurs. In 2023 and first quarter of 2024 there have been no transfers between the levels of the fair value hierarchy.

More information on the assumptions made in measuring fair values is included in the relevant notes.

3. Notes to the consolidated statement of financial position

3.01. Property, plant and equipment

	Land	Buildings	Machinery and	Vehicles	Computers	Office equipment	Other	Assets under construction	Total






































Book value	1 476	2 616	261	311	199	76	153	296	5 388

Contractual mortgages have been established on the lands and buildings owned by the Group, in connection with bank financing used by the companies in Bulgaria (see 3.14 and 5).

3.02. Intangible assets

	Software	ISO Certificates and intellectual property rights	Patents, licenses, trademarks, prototypes and develop ment	Other	Assets under constructio n	Total
01.01.2023
Cost	331	12	3 535	264	1 591	5 733
Amortization	(275)	(7)	(1 195)	(36)	-	(1 513)
Book value	56	5	2 340	228	1 591	4 220
Additions (cost)	9	46	1 711	1 317	3 421	6 504
Purchase	9	-	-	295	879	1 183
Self-constructed	-	-	-	-	2 542	2 542
Business combination	-	46	-	880	-	926
Transfer	-	-	1 711	142	-	1 853
Disposals (book value)	-	-	(605)	-	(2 281)	(2 886)
Book value written-off	-	-	(605)	-	(428)	(1 033)
Transfer	-	-	-	-	(1 853)	(1 853)
Amortization for the period	(51)	(3)	(524)	(66)	-	(644)
Change in amortization	-	-	353	-	-	353
Amortization of assets written-off	-	-	353	-	-	353
Book value at the end	14	48	3 275	1 479	2 731	7 547
31.12.2023
Cost	340	58	4 641	1 581	2 731	9 351
Amortization	(326)	(10)	(1 366)	(102)	-	(1 804)
Book value	14	48	3 275	1 479	2 731	7 547
01.01.2024
Cost	340	58	4 641	1 581	2 731	9 351
Amortization	(326)	(10)	(1 366)	(102)	-	(1 804)
Book value	14	48	3 275	1 479	2 731	7 547
Additions (cost)	-	14	-	-	660	674
Self-constructed	-	-	-	-	660	660
Transfer	-	14	-	-	-	14
Disposals (book value)	-	-	(14)	-	-	(14)
Transfer	-	-	(14)	-	-	(14)
Amortization for the period	(2)	(1)	(170)	(26)	-	(199)
Change in amortization	-	-	-	-	-	-
Book value at the end	12	61	3 091	1 453	3 391	8 008
31.03.2024
Cost	340	72	4 627	1 581	3 391	10 011
Amortization	(328)	(11)	(1 536)	(128)	-	(2 003)
Book value	12	61	3 091	1 453	3 391	8 008

During 2023 the Group has recognized as expense research and development expenditure for the amount of BGN 623 thousand. As of March 31, 2024 there are no research and development expenses recognized.

3.03. Right-of-use assets

	March 31, 2024		December 31, 2023
	Vehicles	Build ings	Total	Vehicles	Build ings	Total
At the beginning of the period
Cost	397	517	914	394	108	502
Depreciation	(260)	(232)	(492)	(183)	(23)	(206)
Book value	137	285	422	211	85	296
Additions (cost)	-	160	160	3	409	412
Operating lease	-	160	160	3	-	3
Business combination	-	-	-	-	409	409
Disposals (book value)	-	(12)	(12)	-	-	-
Book value written off	-	(12)	(12)	-	-	-
Depreciation for the period Change in depreciation (business	(17)	(42)	(59)	(77)	(117)	(194)
combination)	-	2	2	-	(92)	(92)
Book value at the end of the period
Cost	397	665	1 062	397	517	914
Depreciation	(277)	(272)	(549)	(260)	(232)	(492)
Book value	120	393	513	211	85	296

The Group has concluded lease contracts for the lease of office premises and vehicles.

3.04. Goodwill

Name	March 31, 2024	December 31, 2023
Shelly Properties EOOD	126	126
Shelly Tech d.o.o, Slovenia	3 388	3 388
Total:	3 514	3 514

The Group does not report impairment of goodwill as of March 31, 2024.

As of December 31, 2023, the Group recognizes impairment of goodwill in its subsidiary Shelly USA in the amount of BGN 34 thousand.

3.05. Investments in associates

During 2021 Shelly Group AD has participated in the establishment of an associated company in China named Allterco Asia Ltd., Guangdong province with a seat and management address at Shenzhen. The registered capital of the company is CNY 100 000 and the participation of Shelly Group AD is 30% (BGN 8 thousand), with an option to acquire additionally up to 50% and reach a controlling package of up to 80%, at the discretion of Shelly Group AD.

During 2023 Shelly Group AD concluded Investment Agreement with Ground Solutions Group AD for participation in the capital increase and subscription of new preferred company shares from the capital of its subsidiary Corner Solutions EOOD. As a result, the Company acquired 625 new preferred company shares,

representing 10% of the capital of Corner Solutions EOOD after the increase, for the price of BGN 196 thousand (EUR 100 thousand).

Movement of investments in associates is as follows:

	For the year	For the year
	ended March 31, 2024	ended December 31, 2023
Balance as of January 01	403	158
Acquisition of shares	-	196
Share in current profit for the year	5	49
Balance as of the year end	408	403

3.06. Long-term trade receivables

In September 2021 the Group sold its business located, through ALLTERCO PTE, ALLTERCO SDN and ALLTERCO CO. LTD in Singapore, Malaysia and Thailand, respectively. As part of the clauses of the sales contract, the payment of part of the value of the transaction is deferred. In July 2023 an agreement was signed with the buyer for additional deferral of the amounts due and as a result in these consolidated financial statements BGN 1 027 thousand are presented as long-term receivable.

3.07. Deferred tax assets

	March 31, 2024	December 31, 2023
Deferred tax assets
Deferred tax on provision for expenses	410	410
Deferred tax on unused paid leave	59	59
Deferred tax on impairment of receivables	308	308
Deferred tax asset on impairment of stocks	64	64
Deferred tax on unused benefits of individuals	77	77
Deferred tax asset related to the application of IFRS 16	1	1
Deferred tax on long-term employee benefits	9	9
Total assets	928	928
Deferred tax liabilities
Deferred tax related to the application of IFRS 16	(2)	(2)
Total liabilities	(2)	(2)
Total deferred tax assets/(liabilities)	926	926

3.08. Inventory

	March 31, 2024	December 31, 2023
Goods	17 376	14 948
Goods in transit	2 591	2 004
Deliveries	1 137	1 299
Materials	37	22
Total:	21 141	18 273

As of December 31, 2024, the consolidated statement of financial position includes:

Deliveries representing components for production, purchased on behalf of the Group, by its main suppliers of production services amounting to BGN 1 137 thousand. The components are available in the warehouses of the suppliers, and the Group holds the title on the components;
Goods in transit that are not available in the Group's warehouses, but which it owns under purchase agreements.

It is the policy of the Group companies to strive to maintain optimal stock levels equal to the estimated sales for several months ahead. The Group's management believes that the trend for the foreseeable future is for stock levels to increase as a result of growing sales as well as an increasing assortment of devices.

During 2023 the Group has accrued impairment of goods in the amount of BGN 645 thousand. The impairment is related to the imposed restriction for sale of one type of product on the territory of the EU.

As of March 31, 2024 the Group has not recognized impairment of goods and materials inventory.

3.09. Receivables on loans granted

On June 23, 2023, Shelly Group AD has provided short-term loan to third party in the amount of BGN 548 thousand for a term of 1 year at 1% annual interest rate. The loan is not secured. The interest due at the end of the period amounts to BGN 2 thousand.

3.10. Trade receivables

	March 31, 2024	December 31, 2023
Receivables from clients	47 237	45 126
Impairment of receivables from clients, net	(2 042)	(2 042)
Advances to suppliers	12 774	10 249
Advances written-off	-	(1 054)
Total:	57 969	52 279

The movement in impairment of trade receivables during the year is as follows:

	March 31, 2024	December 31, 2023
Impairment at the beginning of the period	2 042	526
Impairment reversed	-	-
Impairment charged for the period	-	1 516
Impairment at the period end, net	2 042	2 042

3.11. Other receivables

	March 31, 2024	December 31, 2023
TAX RECEIVABLES, including:	2 542	6 124
VAT recoverable	2 536	6 118
Corporate tax advance payments	6	6
OTHER RECEIVABLES, including:	458	466
Deposits in commercial entities and guarantees	61	106
Petty cash	61	-
Prepaid expenses	272	338
Other receivables	64	22
Total:	3 000	6 590

The prepaid expenses include:

	March 31, 2024	December 31, 2023
Information services	3	5
Insurance	27	77
Licenses/certificates	91	161
Membership fees	14	10
Subscriptions	39	55
Exhibitions	2	4
Analysis and publications	69	13
Other	27	13
Total	272	338

3.12. Cash and cash equivalents

	March 31, 2024	December 31, 2023
Cash on hand	76	49
Cash in current bank accounts	28 937	30 693
Debit cards	85	26
Restricted funds	116	-
Cash equivalents	-	10
Total:	29 224	30 778

Restricted fund represent deposit provided by Group companies

By currency	March 31, 2024	December 31, 2023
EUR	4 451	23 402
BGN	21 641	4 915
USD	3 132	1 243
Other	-	1 218
Total:	29 224	30 778

The Group's cash is in bank accounts with banks with a stable long-term rating. The Management has assessed the expected credit losses on Cash and cash equivalents. The estimated credit losses are insignificant and are not recognized in the consolidated financial statements of the Group as of March 31, 2024.

3.13. Bank loans

Bank loans are as follows:

	March 31, 2024	December 31, 2023
UBB, incl.:	1 247	1 321
− up to one year	296	302
− over one year	951	1 019
DSK Bank AD, incl.:	110	167
− up to one year	110	167
− over one year	-	-
Other short-term financing in Shelly USA	188	188
Other short-term financing in Shelly Tech	98	-
Other short-term financing Shelly DACH	11	13
Total bank loans – non-current portion:	951	1 019
Total bank loans – current portion:	699	670

Bank	UBB AD
Date of the contract:	August 25, 2017
Contracted credit amount:	BGN 3 168 thousand (EUR 1 620 000)
Original currency	EUR
Purpose	Financing of up to 90% (VAT exclusive) of the final price of all company shares, representing 100% of the capital of the Joint Debtor Shelly Properties EOOD, defined in an Agreement concluded between the Borrower and JFC Developments OOD for transfer of the company shares in the Final Agreement.
Repayment deadline	February 10, 2028
Collateral:	Mortgage on real estate, owned by Shelly Properties EOOD, joint debtor - Shelly Properties EOOD, pledge on all bank accounts of Shelly Group AD at the bank.
Lender	DSK Bank AD
Date of the contract:	September 28, 2020
Total amount	BGN 880 thousand (EUR 450 000)
Purpose	90% funding of expenses for real estate purchase
Original currency	EUR
Fixed maturity	September 28, 2024
Collateral	Mortgage on real property of Shelly Properties EOOD

The subsidiaries Shelly USA and Shelly DACH use financing under company credit card. The Slovenian company Shelly Tech d.o.o. uses factoring services.

A Group company has an agreed bank financing in the form of an overdraft, which was not utilized during the reporting period. Details of the parameters of the provided financing are presented in note 5.

3.14. Lease liabilities

	March 31, 2024	December 31, 2023
Lease liabilities
- up to 1 year	378	216
- more than 1 year	225	369
Total	603	585

The liabilities under lease contracts presented in the consolidated statement of financial position include the Group's liabilities under lease contracts for offices and vehicles, which are recognized in accordance with the requirements of IFRS 16 Leases.

3.15. Retirement benefits obligation

As of December 31, 2023, the Group has obligations for a defined benefit plan upon retirement of BGN 271 thousand. The amount of the obligation is determined on the basis of an actuarial assessment based on assumptions about mortality, disability, probability of leaving, salary growth, etc.

The movements of the present value of the defined benefits plan upon retirement:

	March 31, 2024	December 31, 2023
Liabilities at the beginning of the year	271	112
Liabilities paid during the year	-	(30)
Expenses recognized in profit or loss	-	-
Current service expense	-	192
Finance costs on future liabilities	-	-
Actuarial gain, recognized in other comprehensive income	-	(3)
Liabilities at the end of the year	271	271

In the case of early retirement due to disability, the staff shall be entitled to a benefit of up to two months' salaries, increased by 100% for a minimum period of five years and provided that no such benefits have been received during the last five years of service.

The demographic statistical assumptions used are based on the following:

turnover rate of the Group's staff over the past few years;
mortality of the population of Bulgaria in the period 2020 2022 according to the data of the National Statistical Institute;
statistics of the National Center for Health Information on disability of the population and premature retirement.

3.16. Trade payables

	March 31, 2024	December 31, 2023
Suppliers	3 465	3 782
Advances on customers	466	322
Total:	3 931	4 104

3.17. Payables to employees and social security obligations

	March 31, 2024	December 31, 2023
Payables to employees	682	1 260
Liabilities for unused paid leave	567	695
Liabilities to insurance companies	352	498
Total:	1 601	2 453

3.18. Other liabilities

	March 31, 2024	December 31, 2023
Tax payables, including	3 657	4 543
Corporate tax	2 206	536
Value Added Tax	521	1 262
Income tax	116	113
Payables to customs	770	2 555
Other taxes	44	77
Other liabilities, including	2 683	4 434
Liabilities for participations	385	415
Warranty service provisions	650	650
Liability provisions	1 456	2 976
Guarantees/Rental deposits	15	15
Deferred income	5	7
Other	172	371
Total other liabilities	6 340	8 977

At the end of 2023 the Group reports a provision related to an inspection made by a state authority in the Republic of Germany, related to the security of one of the devices sold. An order was issued to stop the sale of the specific device in the EU and to notify customers of the potential risks associated with the use of the device. As of the end of the quarter part of the provision was used and as a result the liability was decreased to BGN 1 456 thousand.

3.19. Share capital

Shelly Group AD was registered in 2010. The share capital of the Parent Company as of December 31, 2023 amounts to BGN 18,050,945 and is distributed in 18 050 945 ordinary shares with par value of BGN 1 each. The share capital is fully paid in the following instalments:

The first issue was made upon the establishment of the Parent Company in the form of a non-monetary contribution in the amount of BGN 50,000 consisting ordinary registered voting shares of Teravoice AD's capital.

In 2010 a second non-monetary contribution was made in the amount of BGN 5,438,000 with the objective to acquire shares from the capital of Tera Communications AD at the total cash value of BGN 5 438 000.

At the end of 2015, a new issue of 8,012,000 ordinary registered voting shares was issued, with a nominal value of BGN 1 (one) each.

At the end of 2016 the capital of Shelly Group AD was increased with a new issue in the amount of 1,500,000 shares on the basis of a successful initial public offering, according to the Prospectus for public offering of shares.

In 2020 the capital of the Parent Company was increased by cash contributions in the total amount of 2,999,999 against 2,999,999 subscribed and paid dematerialized ordinary registered voting shares with a nominal value of BGN 1 as a result of a procedure for Public Offering of a new issue of shares.

In July 2023 the Parent Company successfully completed the public offering of shares from its capital increase. The capital increase was addressed to employees of Shelly Group AD and its subsidiaries. The registered increase of capital amounts to BGN 50 946, representing 50 946 ordinary, dematerialized, registered shares with voting right and par value of BGN 1 each. The capital of Shelly Group AD after the increase is BGN 18 050 945, representing 18 050 945 ordinary, dematerialized, registered shares with voting right and par value BGN 1 each.

The shareholders of the Parent Company are disclosed in note 1.2.

3.20. Retained earnings

	For the period March 31, 2024	For the year ended December 31, 2023
Balance at the beginning of the year	83 165	55 117
Net profit	8 990	33 593
Effect of sale of repurchased shares	-	280
Profit distribution for dividends	-	(4 500)
Effect of business combination	(1 726)	(1 202)
Other changes	1	(123)
Balance at the year end	90 430	83 165

3.21. Legal reserves

	For the period	For the year
	ended March 31,	ended December
	2024	31, 2023
Balance at the beginning of the year	2 804	1 800

Balance at the year end	3 072	2 804
Effect of business combination	268	1 004
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED MARCH 31, 2024	SHELLY GROUP AD UIC 201047670

3.22. Share premium reserve

As of December 31, 2023 and March 31, 2024 the reserves from issue of shares amount to BGN 5 403 thousand. They are formed by the excess of proceeds from new shares issued in 2020 above their nominal value in the amount of BGN 6 000 thousand, reduced by the costs related to the capital increase amounting to BGN 297 thousand, and by BGN 300 thousand, that were transferred to Legal reserves by decision of the General Meeting of the Shareholders held on June 28, 2021.

4. Notes to the consolidated statement of comprehensive income

4.01. Sales revenue and cost of sales

	Period ended March 31, 2024		Period ended March 31, 2023
	Devices	Services and rent	Total	Devices	Services and rent	Total
REVENUE	40 009	155	40 164	27 595	13	27 608
Book value of goods
sold	(17 576)	-	(17 576)	(12 434)	-	(12 434)
Cost	(284)	-	(284)	(207)	-	(207)
COST OF SALES	(17 860)	-	(17 860)	(12 641)	-	(12 641)
GROSS PROFIT	22 149	155	22 304	14 954	13	14 967

4.02. Other operating revenue

	Period ended March 31, 2024	Period ended March 31, 2023
Insurance claims received	5	-
Liabilities written-off	4	27
Financing/ electricity price compensations	-	5
Gains on currency transactions and exchange rate gains, net	244	-
Other operating income	15	9
Total:	268	41

4.03. Sales expenses

	Period ended December 31, 2024	Period ended March 31, 2023
Transport of goods to customers	(495)	(239)
Certification of products	(34)	(42)
Exhibitions	(402)	(231)
Advertising	(1 991)	(155)
Fees and commissions	(56)	(5)
Representative costs	(100)	(50)
Other	(29)	(12)
Total	(3 107)	(734)

4.04. Administrative expenses

	Period ended March 31,	Period ended March 31,
	2024	2023
Materials	(90)	(113)
Hired services	(2 686)	(2 511)
Depreciation/amortization expenses	(203)	(156)
Employees expenses	(5 246)	(4 036)
Other administrative expenses	(22)	(13)
Total:	(8 247)	(6 829)

4.05. Other operating expenses

	Period ended March 31, 2024	Period ended March 31, 2023
Bank fees and charges	(129)	(115)
Receivables written-off	(1)	(76)
Prototypes written-off	-	(15)
Interest, fines and penalties	(2)	(3)
Business trips	(188)	-
Trainings and seminars	(36)	-
Returned goods	(383)	-
Expenses related to hiring	(13)	-
Other	(5)	(12)
Total:	(757)	(221)

4.06. Financial income

	Period ended	Period ended
	March 31,	March 31,
	2024	2023
Interest income	3	-
Total	3	-

4.07. Financial expenses

	Period ended March 31, 2024	Period ended March 31, 2023
Lease interest	(4)	(2)
Loans interest	(9)	(15)
Foreign exchange expenses, net	-	(224)
Total:	(13)	(241)

4.08.

4.09. Income tax expense

	Period ended	Period ended
	March 31, 2024	March 31, 2023
Current tax expense	(1 550)	(1 095)
Tax effect from temporary differences	-	-
Tax expense	(1 550)	(1 095)

4.10. Earnings per share, net

	Period ended March 31, 2024	Period ended March 31, 2023
Net profit for the reporting period in thousand BGN	8 906	5 922
Weighted-average number of shares	18 026 985	17 979 835
Basic earnings per share in BGN:	0.49	0.33

As of the end of 2023 the Parent Company's share capital is increased by 50 946 shares up to 18 050 945 shares.

Contract	Annex	Creditor	Debtor	Joint debtor / Guarantor	Amount / Limit	Financial conditions	Maturity	Collateral provided by the borrower
Investment loan August 25, 2017 Agreement pursuant to Art. 114, para. 10 of POSA	Annexes No. 1/ October 31, 2018	UBB AD	Shelly Group AD	Shelly Properties EOOD – joint debtor	BGN 3 168 thousand. (EUR 1 620 thousand )	Fixed interest rate for the whole period 3% per year; Management fee	February 10, 2028	Mortgage on real estate owned by Shelly Properties EOOD; Pledge of receivables on bank accounts of Shelly Group AD in the bank. Pledge under the Financial Collateral Contracts Act
Overdraft September 30, 2019 – Agreement pursuant to Art. 114, para. 10 of POSA	Annexes No 1/ September 30, 2022	UBB AD	Shelly Europe EOOD	Shelly Group AD – guarantor	BGN 1 956 thousand (EUR 1 000 thousand)	One-month EURIBOR, increased by 2.5 percentage points, but not less than 2.5%; management fee; commitment fee; commission for issuing guarantees	September 30,.2025	Pledge of receivables on accounts of Shelly Europe EOOD in bank;
Contract for a standard investment loan № 2757 of 28.09.2020	-	DSK Bank AD	Shelly Properties EOOD	Shelly Trading EOOD – joint debtor	BGN 880 thousand (EUR 450 thousand)	Annual interest formed by a variable interest rate of 1m EURIBOR+2.1% premium, but not less than 2.1%; annual management fee;	September 28,.2024	Mortgage on real estate owned by Shelly Properties EOOD; Pledge of receivables on bank accounts of the company and Shelly Trading EOOD in DSK Bank

5. Contingent liabilities and commitments

6. Related party transactions

During the reporting period Shelly Group AD has no transactions concluded with interested parties within the meaning of the POSA.

Shelly Group AD has no transactions which are beyond of its ordinary business activity or significantly deviate from market conditions with its subsidiaries and associated companies. Transactions with subsidiaries within its ordinary business activity are excluded from consolidation.

Key management staff

During the reporting period the members of the Board of Directors of the Parent Company received gross renumeration totalling BGN 394 thousand (2022: BGN 258 thousand.) from Shelly Group AD.

The remuneration paid was in accordance with the disclosed Remuneration policy of the members of the Board of Directors of the Parent Company.

At the General Meetings of Shareholders held on April 4, 2022, December 13, 2022, and December 19, 2023 decisions were adopted to amend the Remuneration policy, as well as schemes were approved to provide members of the Board of Directors of Shelly Group AD with variable remuneration in shares of the Parent Company for the period 2022 - 2025.

7. Financial instruments by categories

The structure of the financial assets and liabilities by categories is as follows:

		March 31, 2024
Financial assets according to the Statement of financial position	Financial assets at amortized cost - Cash	Financial assets at amortized cost	Total
Cash and cash equivalents	29 224	-	29 224
Long term trade receivables	-	1 027	1 027
Receivables on granted loans	-	552	552
Trade receivables	-	45 195	45 195
Deposits in commercial companies and guarantees	-	61	61
TOTAL FINANCIAL ASSETS	29 224	46 835	76 059
	March 31, 2024

Financial liabilities according to the Statement of financial position	Financial liabilities at amortized cost	Total
Lease liabilities	603	603
Bank loans	1 650	1 650
Trade liabilities	3 465	3 465
Contributory obligations	385	385
Guarantees	15	15

TOTAL FINANCIAL LIABILITIES	6 118	6 118

	December 31, 2023
Financial assets according to the Statement of financial position	Financial assets at amortized cost - Cash	Financial assets at amortized cost	Total
Cash and cash equivalents	30 778	-	30 778
Long term trade receivables	-	1 027	1 027
Receivables on granted loans	-	550	550
Trade receivables	-	43 084	43 084
Deposits in commercial companies and guarantees	-	106	106
TOTAL FINANCIAL ASSETS	30 778	44 767	75 545
		December 31, 2023
Financial liabilities according to the Statement of financial position	Financial liabilities at amortized cost		Total

Lease liabilities	585	585
Bank loans	1 689	1 689
Trade liabilities	3 782	3 782
Contributory obligations	415	415
Guarantees	15	15
TOTAL FINANCIAL LIABILITIES	6 486	6 486

The fair value of the bank loans that the Group is using, is determined based on market interest rate applicable for similar instruments with similar term.

8. Financial risk management

In the course of their usual business activity, the companies of the Group may be exposed to various financial risks, the most important of which are: market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The overall risk management is focused on forecasting changes in financial markets in order to minimize the potential negative effects that could affect the financial results. Financial risks are currently identified, measured and monitored using various control mechanisms to adequately assess market conditions and their effects by the companies of the Group to avoid unjustified concentration of any specific risk.

Risk management is carried out on an ongoing basis under the direct supervision of the management and the Group's financial experts in accordance with the policy set by the Board of Directors of the Parent Company who developed the basic principles of general financial risk management. Based on these principles, the specific procedures for managing separate specific financial risks have been defined.

The following describes the different types of risks to which the companies within the Group are exposed, as well as the approach taken in managing these risks.

Market risk

Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market prices.

а. Currency risk

The companies within the Group carry out their transactions on the domestic market, in the European Union and in third countries (Asia and USA). The companies within the Group carry out their main deliveries in Bulgarian leva, euros and US dollars. To control the currency risk, a system has been introduced for planning supplies from countries in and outside the European Union, as well as procedures for monitoring movements in exchange rates of foreign currencies and control of incoming payments.

The tables below summarize the currency risk exposure:

March 31, 2024	In EUR	In USD	In BGN	Total
Cash and cash equivalents	21 641	3 132	4 451	29 224
Long-term trade receivables	1 027	-	-	1 027
Receivables from granted loans	552	-	-	552
Trade receivables	44 366	186	643	45 195
Deposits in commercial companies	-	-	61	61
TOTAL ASSETS	67 586	3 318	5 155	76 059

Lease liabilities	479	-	124	603
Bank loans	1 466	184	-	1 650
Trade payables	1 872	239	1 354	3 465
Contributory obligations	-	-	385	385
Guarantees	-	-	15	15
TOTAL LIABILITIES	3 817	423	1 878	6 118

December 31, 2024	In EUR	In USD	In other foreign currency	In BGN	Total
Cash and cash equivalents	23 402	1 243	1 218	4 915	30 778
Long-term trade receivables	1 027	-	-	-	1 027
Receivables from granted loans	550	-	-	-	550
Trade receivables	41 453	164	-	1 467	43 084
Deposits in commercial companies	-	-	-	106	106
TOTAL ASSETS	66 432	1 407	1 218	6 488	75 545
Lease liabilities	419	-	-	166	585
Bank loans	1 501	188	-	-	1 689

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED MARCH 31, 2024				SHELLY GROUP AD UIC 201047670
Trade payables	1 922	258	-	1 602	3 782
Contributory obligations	-	-	-	415	415

Currency sensitivity analysis

The companies within the Group are not exposed to currency risk in relation to their exposures in euro, because the exchange rate of the BGN to EUR is fixed.

Guarantees - - - 15 15 TOTAL LIABILITIES 3 842 446 - 2 198 6 486

There is a currency risk exposure mainly in USD. As of 31.03.2024 88.9% of the Group's assets are in EUR, 4.4% in USD.

In the table below, a sensitivity analysis is presented to the possible changes in the exchange rate BGN/USD and the effect on profit before taxes (through changes in the book values of monetary assets and liabilities), provided that all other variables are assumed to be constant.

	Increase/ Decrease in exchange rate BGN/ USD	Effect on the profit before tax
	%
2024	+/-1.00%	33
2023	+/-1.00%	14

b. Price risk

The companies within the Group are exposed to a specific price risk regarding the prices of the goods and services offered. Minimizing the price risk for negative price changes is achieved by periodically reviewing contractual relationships and revising and updating prices in relation to market changes.

Risk of the interest-bearing cash flows

The companies within the Group do not have a significant concentration of interest-bearing assets, except for loans granted and cash on current accounts with banks, therefore the revenue and operating cash flows are not largely dependent on changes in market interest rates.

At the same time, the cash outflows of the companies within the Group are exposed to interest rate risk from utilizing a bank loans and lease, agreed with a variable interest rate.

Cash on current accounts with banks bear interest at interest rates according to the tariffs of the respective banks.

The exposure of the companies within the Group is currently monitored and analyzed to changes in market interest rates. Different refinancing scenarios, renewal of existing interest-bearing positions and alternative financing are considered.

March 31, 2024	Interest-free	With floating interest %	With fixed interest %	Total
Cash and cash equivalents	-	-	29 224	29 224
Trade receivables	45 195	-	-	45 195
Long term trade receivables	1 027	-	-	1 027
Receivables from granted loans	-	-	552	552
Deposits in commercial companies and
guarantees	61	-	-	61
TOTAL ASSETS	46 283	-	29 775	76 059
Lease liabilities	-	-	603	603
Bank loans	-	293	1 357	1 650
Trade payables	3 465	-	-	3 465
Contributory obligations	385	-	-	385
Guarantees	15	-	-	15
TOTAL LIABILITIES	3 865	293	1 960	6 118

December 31, 2023	Interest-free	With floating interest %	With fixed interest %	Total
Cash and cash equivalents	-	-	30 778	30 778
Trade receivables	43 084	-	-	43 084
Long term trade receivables	1 027	-	-	1 027
Receivables from granted loans	-	-	550	550
Deposits in commercial companies and
guarantees	106	-	-	106
TOTAL ASSETS	44 217	-	31 328	75 545
Lease liabilities	-	-	585	585
Bank loans	-	368	1 321	1 689
Trade payables	3 782	-	-	3 782
Contributory obligations	415	-	-	415
Guarantees	15	-	-	15
TOTAL LIABILITIES	4 212	368	1 906	6 486

Credit risk

The financial assets of the companies within the Group are concentrated in two groups: cash (cash on hand and at bank accounts) and receivables from clients.

Credit risk is mainly the risk that the customers of the companies within the Group will not be able to pay in full and within the usual deadlines the amounts owed by them. Trade receivables are presented in the consolidated statement of financial position at amortized cost. An impairment has been charged for doubtful and uncollectible loans, as there have been events identifying uncollectible losses based on past experience.

The companies within the Group do not have significant concentration of credit risk. Their policy is to negotiate a credit period longer than 60 days only with customers who have a long history and commercial cooperation with them. Payments from customers for sales are mainly made by bank transfer.

Significant part of Group's revenue is generated by large companies with good credit rating.

The collection and concentration of receivables is monitored on an ongoing basis, according to the established policy of the companies within the Group. For this purpose, the open positions by clients, as well as the received receipts, are periodically reviewed by the financial and accounting department and the management, and an analysis of the unpaid amounts is performed.

In addition, the Group has an insurance on the receivables from 12 of its largest customers.

As of March 31, 2024 cash and the payment operations of the companies within the Group are spread over several banks which limits the risk for cash and cash equivalents.

Management has defined its policy for assessing credit losses. For trade receivables, the simplified method is applied, with percentages determined based on past experience.

As of December 31, 2023, an impairment of receivables amounting to BGN 1,516 thousand is recognised. As of March 31, 2024, the Group has not recognized any impairment of receivables.,

Group's credit risk exposure arising from its financial assets as of December 31, 2023 and March 31, 2024 is presented below:

	March 31, 2024	December 31, 2023
Cash and cash equivalents	29 224	30 778
Long-term trade receivables	1 027	1 027
Receivables on granted loans	552	550
Trade receivables	45 195	43 084
Total	75 998	75 439

The impairment staging of the financial assets of the Parent Company as of December 31, 2023 and March 31, 2024:

	March 31, 2024
	Stage 1	Stage 2	Stage 3	Total
Financial assets
Cash and cash equivalents	29 224	-	-	29 224
Receivables on granted loans	552	-	-	552
Long-term trade receivables	1 027	-	-	1 027
Trade receivables	45 245	-	1 992	47 237
Total	76 048	-	1 992	78 040
Booked provisions (ECL) for financial assets	(50)	-	(1 992)	(2 042)
Financial assets, net of booked provisions	75 998	-	-	75 998
	December 31, 2023
	Stage 1	Stage 2	Stage 3	Total
Financial assets
Cash and cash equivalents	30 778	-	-	30 778

Receivables on granted loans	550	-	-	550
Long-term trade receivables	1 027	-	-	1 027
Trade receivables	43 134	-	1 992	45 126
Total	75 489	-	1 992	77 481
Booked provisions (ECL) for financial assets	(50)	-	(1 992)	(2 042)
Financial assets, net of booked provisions	75 439	-	-	75 439

The changes in the gross carrying amount of the financial assets are presented below:

Gross carrying amount of the financial instruments	Stage 1 - expected credit loss for 12 months period	Stage 2 - expected credit loss for the period of the financial asset life	Stage 3 - expected credit loss for the period of the financial asset life	TOTAL
Gross carrying amount as of December 31, 2023	75 489	-	1 992	77 481
Changes during the year:
Transfer from Stage 1 to Stage 2	-	-	-	-
Transfer from Stage 1 to Stage 3	-	-	-	-
Transfer from Stage 2 to Stage 3	-	-	-	-
New financial assets	128 930	-	-	128 930
Maturity of financial assets	(128 371)	-		(128 371)
Gross carrying amount as of March 31, 2024	76 048	-	1 992	78 040

Gross carrying amount of the financial instruments	Stage 1 - expected credit loss for 12 months period	Stage 2 - expected credit loss for the period of the financial asset life	Stage 3 - expected credit loss for the period of the financial asset life	TOTAL
Gross carrying amount as of December 31, 2022	48 802	-	850	49 652
Changes during the year:
Transfer from Stage 1 to Stage 2	-	-	-	-
Transfer from Stage 1 to Stage 3	-	-	1 142	1 142
Transfer from Stage 2 to Stage 3	-	-	-	-
New financial assets	497 756	-	-	497 756
Maturity of financial assets	(471 069)	-	-	(471 069)
Gross carrying amount as of December 31, 2023	75 489	-	1 992	77 481

The changes in booked ECL provision for financial assets are presented below:

	Stage 1 – 12 months ECL	Stage 2 – Lifetime ECL	Stage 3 – Lifetime ECL	TOTAL
ECL provision as of December 31, 2023	(50)	-	(1 992)	(2 042)
Changes during the year:
Transfer from Stage 1 to Stage 2	-	-	-	-
Transfer from Stage 1 to Stage 3
Transfer from Stage 2 to Stage 3	-	-	-	-
New financial assets	-	-	-	-
Maturity of financial assets	-	-
ECL provision as of March 31, 2024	(50)		(1 992)	(2 042)

	Stage 1 – 12 months ECL	Stage 2 – Lifetime ECL	Stage 3 – Lifetime ECL	TOTAL
ECL provision as of December 31, 2023	(50)	-	(476)	(526)
Changes during the year:
Transfer from Stage 1 to Stage 2	-	-	-	-
Transfer from Stage 1 to Stage 3	-	-	(1 516)	(1 516)
Transfer from Stage 2 to Stage 3	-	-	-	-
New financial assets	-	-	-	-
Maturity of financial assets	-	-	-	-
ECL provision as of March 31, 2024	(50)	-	(1 992)	(2 042)

Liquidity risk

Liquidity risk is the risk that the Group experiences difficulties meeting its obligations with respect to financial liabilities settled with cash or another financial asset.

The companies within the Group carry out a conservative liquidity management policy, through which they constantly maintain an optimal liquid stock of cash. Borrowed credit resources are also used.

In order to control the liquidity risk, the companies within the Group monitor the timely payment of the incurred liabilities according to agreed terms of payment.

The Companies within the Group monitor and control the actual and projected cash flows for periods ahead and maintain a balance between the maturity limits of the assets and liabilities of the Company. Currently, the maturity and timely execution of payments is monitored by the finance and accounting departments, maintaining daily information on available cash and upcoming payments.

March 31, 2024	Up to 1 m.	1-3 m.	3-6 m.	6-12 m.	1-2 y.	2-5 y.	over 5 y.	Without maturity	Total
Cash and cash equivalents Receivables on	-	-	-	-	-	-	-	29 224	29 224
granted loans Trade receivables	- 34 240	- 7 640	- 1 084	- 2 231	- -	- -	- -	- -	45 195
Long-term trade receivables	-	-	-	-	1 027	-	-	-	1 027
Trade loans extended Deposits in commercial	-	553	-	-	-	-	-	-	552
companies and guarantees	-	-	-	-	-	-	-	61	61
TOTAL ASSETS	34 240	8 192	1 084	2 231	-	-	-	29 285	76 059
Lease liabilities	32	63	95	188	225				603
Bank loans	94	185	177	243	469	482			1 650
Trade payables Contributory	1 840	1 240	385	-					3 465
obligations Guarantees	10	20	30	325				15	385 15
TOTAL LIABILITIES	1 976	1 508	687	756	694	482	-	15	6 118

December31, 2023 Up to 1 m.		1-3 m.	3-6 m.	6-12 m.	1-2 y.	2-5 y.	over 5 y.	Without maturity	Total
Cash and cash equivalents	-	-	-	-	-	-	-	30 778	30 778
Receivables on granted loans	-	-	550	-	-	-	-	-	550
Trade receivables	20 113	12 940	7 488	2 543	-	-	-	-	43 084
Long-term trade
receivables Deposits in commercial	-	-	-	-	1 027	-	-	-	1 027
companies and
guarantees	-	-	-	-	-	-	-	106	106
TOTAL ASSETS	20 113	12 940	8 038	2 543	1 027	-	-	30 884	75 545
Lease liabilities	18	36	54	108	369	-	-	-	585
Bank loans	63	126	188	293	473	546	-	-	1 689
Trade payables Contributory	2 781	785	216	-	-	-	-	-	3 782
obligations	10	20	30	355	-	-	-	-	415
Guarantees	-	-	-	-	-	-	-	15	15
TOTAL LIABILITIES	2 885	993	525	833	689	546	-	15	6 486

Capital risk management

With the capital management the Parent Company aims to create and maintain opportunities for it to continue to operate as a going concern and to ensure the appropriate return on investment of shareholders, and to maintain optimal capital structure, to reduce capital expenses.

Shelly Group AD currently monitors the capital structure based on the debt ratio. This ratio is calculated between the net debt capital and the total amount of capital. Net debt capital is defined as the difference between all borrowings (current and non-current) as stated in the consolidated statement of financial position and the cash and cash equivalents. The total amount of capital is equal to the equity and net debt capital.

The table below presents the debt ratios based on the capital structure:

	March 31, 2024	December 31, 2023
Total debt capital, incl.	14 396	18 079
-Bank loans	1 650	1 689
-Lease liabilities	603	585
Less: cash and cash equivalents	29 224	30 778
Net debt capital	(14 828)	(12 699)
Total equity	117 274	109 603
Total capital	102 246	96 904
Debt ratio	0.00%	0.00%

As the cash is larger than the debt capital, the Group has no indebtedness.

9. Fair values

For the purposes of disclosing fair value, the Group defines different classes of assets and liabilities depending on their nature, characteristics and risk and the respective level of the fair value hierarchy specified in note 2.11.18. Fair Values.

The Group's management has considered that the book values of cash and cash equivalents, trade and other receivables approximate their fair values due to the short-term nature of these financial instruments.

The attached table shows the book values and fair values of financial assets and liabilities, including their levels in the fair value hierarchy. Fair value information is not included if the book value is reasonably close to the fair value.

The table below presents the hierarchy of the fair value of the Group's assets and liabilities in accordance with IFRS 13:

March 31, 2024	Book value	Level 1	Level 2	Level 3
Financial assets
Other long - term trade receivables	1 027	-	-	-
Cash and cash equivalents	29 224	-	29 224	-
TOTAL ASSETS	30 251	-	29 224	-
Financial liabilities
Lease liabilities	603	-	561	-
Bank loans	1 650	-	1 561	-
TOTAL LIABILITIES	2 253	-	2 122	-
December 31, 2023	Book value	Level 1	Level 2	Level 3
Financial assets
Cash and cash equivalents	30 778	-	30 778	-
TOTAL ASSETS	30 778	-	30 778	-
Financial liabilities
Lease liabilities	585	-	541	-
Bank loans	1 689	-	1 597	-
TOTAL LIABILITIES	2 274	-	2 138	-

The fair value of the financial liabilities included in Level 2 in the table above was determined in accordance with the generally accepted valuation model based on discounted cash flows, the interest rate on the loan was used as a discount factor.

The fair value of trade receivables, short-term financial assets, trade payables and other liabilities approximates their carrying amount as these assets/liabilities are short-term in nature and there are not subject to effects, that lead to different fair value.

The fair value of financial assets included in Level 1 is determined using the market quotation for the price of the asset at the reporting date.

10. Events after the date of the report

On April 9, 2024 Shelly Group was notified that the shares of the Company (code: SLYG / ISIN: BG1100003166) registered on Prime Standard of Frankfurt Stock Exchange will be included in the trade though XETRA platform since April 29, 2024. Shelly Group becomes the first Bulgarian company which will be trade on XETRA. With the transition to the wholly online trade through XETRA the Company expects higher liquidity of its share and increasing number of investors. As Designated sponsor is appointed Baader Bank AG.

On April 29, 2024 Shelly Group published an invitation for an annual meeting of shareholders, which will be held on June 4, 2024

After the end of the reporting period the board of Directors of Shelly Group decided to provide additional money contribution at the amount of EUR 600 000 to Slovenian subsidiary Shelly Tech. The money contribution will be extended for a period of 1 year at annual interest rate of 1% and will be used for covering of losses and current liabilities in order to ensure smooth operation of the company. It was decided also that the term of previous money contribution that was extended to the company during 2023 (at the amount of EUR 500 000) will be extended for one more year at the same interest rate.

QUARTERLY REPORT ON BUSINESS ACTIVITIES of SHELLY GROUP AD

first quarter of 2024

consolidated basis

Pursuant to Art. 100o, Para 4of the Public Offering of Securities Act and Art. Art. 12 of Ordinance No. 2 dated 09.11.2021 on the for initial and subsequent disclosure of information in public offerings of securities and admission of securities to trading on a regulated market

These Notes to the Quarterly Report on the Business Activities of SHELLY GROUP AD (former company name ALLTERCO JSCo) on an consolidated basis present information about the company, relevant to the end of first quarter of 2024 for the period 01.01.2024 –31.03.2024 (the <reporting period').

1. INFORMATION ABOUT THE GROUP

SHELLY GROUP AD is a public listed joint stock company, established in 2010 in the city of Sofia and entered in the Commercial Register at the Registry Agency on 11.02.2010 under UIC (unified identification code): 201047670 and LEI code (identification code of the legal entity) 8945007IDGKD0KZ4HD95 and is established for an unlimited period. Its name is written in Latin: SHELLY GROUP AD (former company name ALLTERCO JSCo).

The company has its registered office and address of management: Republic of Bulgaria, Sofia County, Sofia Municipality, Sofia 1407, 103CherniVrah Blvd. The address for correspondence is the same; Tel: +359 2 957 12 47. The website of the Company is www.corporate.shelly.com

The Company is public listed within the meaning of the Public Offering of Securities Act and is registered as a public company in the register kept by the FSC with Decision 774 - PD of November 14, 2016 as a result of successfully completed initial public offering of shares from the Company9s capital increase.

Since November 22, 2021 the shares of SHELLY GROUP AD are traded on two regulated markets in EU – Bulgarian Stock Exchange and Frankfurt Stock Exchange.

The company operates according to Bulgarian legislation.

The economic group consists of the parent company SHELLY GROUP AD and its subsidiaries as shown below:

1.1.Structure of the economic group at the end of the reporting quarter for 2023

* During the reporting period the subsidiary Shelly Europe Ltd. (former company name <Alterco Robotics=) has closed its branch in Ireland.

** In January 2024 the Company the Company exercised its Call Option to acquire an additional 16% stake in the capital of its Slovenian IoT subsidiary Shelly Tech (formerly known as GOAP Računalniški inženiring in avtomatizacija proces d.o.o. Nova Gorica) (the "Slovenian Company"). The exercise of the Call Option is the second stage of the acquisition of the Slovenian Company on the ground of an Option Agreement between Shelly Group and the shareholders of the Slovenian Company entered into and disclosed in January 2023. The total acquisition price of the 16% interest under the exercised Call Option amounts to EUR 586,666.30, calculated in accordance with the terms of the Option Agreement. The remaining 24% of the shares of the Slovenian company held by three individual partners are subject to an additional Call/Put option exercisable in 2026 in accordance with the terms of the Option Agreement.

***The subsidiary Shelly Trading Ltd. has registered a branch in the United Kingdom.

SHELLY GROUP AD has participation in a company in China, Allterco Asia Ltd. (associated company) with headquarters and registered office in Shenzhen, Guangdong Province. The capital of the new company is CNY 100 000, as the participation of SHELLY GROUP AD is 30% with an option to acquire additional up to 50% and reach a controlling stake of up to 80%.

SHELLY GROUP AD has participation of 625 new preference shares representing 10% of the capital of Corner Solutions Ltd. The participation was acquired for the price of BGN 196 thousand (EUR 100 000) as a result of an Investment Agreement that was entered into in the reporting quarter by and between Shelly Group AD and Vitosha Venture Partners - Fund I KD, UIC: 206223492, as co-investors, on one hand, and Ground Solutions Group AD, its founders Mr. Vladimir Konstantinov Todorov, Mr. Denis Krasimirov Florov, Mr. Nikola Konstantinov Ruychev and Corner Solutions Ltd, with UIC 206375571, on the other hand.

The scope of business of the SHELLY GROUP AD, according to Art. 4 of its Articles of Association is: Acquisition, management, evaluation and sale of share participations in Bulgarian and foreign companies; acquisition, management and sale of bonds; acquisition, evaluation, sale and assignment of licenses for the use of patents and other intellectual and industrial property rights; financing of companies in which SHELLY GROUP AD participates; purchase of goods and other items for resale in their original, manufactured or processed form; sale of goods of own production; foreign trade transactions; commission, forwarding, warehousing and leasing transactions; transport transactions in the country and abroad; transactions of commercial representation and intermediation of local and foreign individuals and legal entities; consulting and marketing transactions; providing management and administration services to local and foreign legal entities; as well as any other commercial transactions not prohibited by law.

The core business of the Company and its economic group during the 2024 reporting period remains the development, manufacture and sale of IoT devices. At present, the major share of the Group's revenue is generated from the sale of Shelly branded products.

1.2.Management

During the reporting period there has been change in the personnel of the Board of Directors. Based on Resolution of the General Meeting of the Shareholders of 18.12.2023, as of 01.01.2024 Mr. Gregor Bieler (who has resigned his position as a member of the BoD) has been replaced by Mr. Christoph Vilanek. With Resolution of the BoD of 18.12.2023 the as of 01.01.2024 the Board of Directors consists of:

Christoph Vilanek Chairman;
Nikolay Martinov Deputy Chairman;
Dimitar Dimitrov Executive Director and Representative;
Wolfgang Kirsch Executive Director and Representative;
Svetlin Todorov Member of the Board of Directors and Representative;

The representatives represent the Company together or individually.

1.3.Capital structure

As of the end of the reporting period the issued, subscribed, paid-in and registered capital of the Company amounts to 18 050 945 (eighteen million fifty thousand nine hundred forty-five) BGN, divided into 18 050 945 (eighteen million fifty thousand nine hundred forty-five), and is divided into 18 050 945 (eighteen million fifty thousand nine hundred forty-five) dematerialized ordinary registered voting shares, with a par value of 1 (one) BGN each.

The capital is fully paid in five contributions:

Non-monetary contribution representing 100% of the shares of Teravoice EAD, with an appraised monetary value of BGN 50,000 (fifty thousand);
Non-monetary contribution representing 69.60% of the shares of Terra Communications JSCo, with an appraised monetary value of BGN 5,438,000 (five million four hundred and thirty-eight thousand);
A combination of non-monetary and cash contributions amounting to BGN 8,012,000 (eight million and twelve thousand).
Cash contributions at the amount of BGN 1,500,000 (one million and five hundred thousand) compared to 1,500,000 (one million and five hundred thousand) subscribed and fully paid-in dematerialized ordinary registered voting shares with a par value of BGN 1 each, as a result of a procedure for Initial Public Offering of a new issue of shares.
Cash contributions at the amount of BGN 2,999,999 (two million nine hundred ninety-nine thousand nine hundred ninety-nine) against 2,999,999 (two million nine hundred and ninety-nine thousand nine hundred and ninety-nine) subscribed and paid-in dematerialized ordinary registered voting shares with a nominal value of BGN 1 each, as a result of a procedure for Public Offering of a new issue of shares. The public offering of shares from the capital increase of SHELLY GROUP AD was carried out in the period 28.09.2020 - 30.10.2020, on the basis of a Prospectus, together with the supplements thereto, confirmed by the Financial Supervision Commission with Decision № 148- F of 18.02.2020, Decision № 405-E of 11.06.2020, Decision № 601-E of 13.08.2020 and Decision № 791-E of 29.10.2020.
In July 2023 the Company's capital was increased to 18 050 945 (eighteen million fifty thousand nine hundred forty-five) BGN, divided into 18 050 945 (eighteen million fifty thousand nine hundred forty-five) ordinary registered shares with voting rights, with a par value of 1 (one) BGN per share. The increase was made by cash contributions in the total amount of BGN 50 496 (fifty thousand four hundred ninety-six) in procedure of initial public offering of the issue of shares, held in the period from 28.06.2023 to 29.06.2023, in accordance with the procedure under Art. 112, par. 3 of the Public Offering of Securities Act, without a prospectus and based on Information Document pursuant to Article 1(4)(i) in conjunction with Article 1(5)(h) of Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market

As of 31 March, 2024 the capital structure of SHELLY GROUP AD is as follows:

NAME OF SHAREHOLDER	CAPITAL PERCENTAGE
Svetlin Todorov	30,39 %
Dimitar Dimitrov	32,00 %
Other individuals and legal entities	37,61 %

At the end of the reporting period, the Company held no treasury shares.

1.4.Development and research activities

The company has not carried out activities in the area of research and development and does not plan such in the near future. One of the subsidiaries of SHELLY GROUP AD has carried out such activity during the reporting period, namely: Shelly Europe Ltd. and Shelly Tech d.o.o., Slovenia.

2. IMPORTANT EVENTS FOR SHELLY GROUP AD

Detailed information about the important events that occurred during the reporting period for SHELLY GROUP AD, as well as other information that could be important for investors is regularly disclosed by the company in accordance with regulatory requirements. In compliance with the requirement of Art.43a et seq. of Ordinance No. 2 of FSC, in conjunction with Art. 100t, Para 3 of the POSA, the Company discloses the regulated information to the public through selected information media. All information provided to the media in fully unedited text is available at: http://www.x3news.com/. The required information is submitted to the FSC - through the unified system for submission of information electronically, developed and maintained by the FSC - e-Register. The information is also available on the Company9s website at: https://corporate.shelly.com/publications/inside-information/

The announced important events that occurred during the reporting period did not have a significant impact on the financial results of the company on an consolidated basis.

3. FINANCIAL POSITION AND DEVELOPMENT OF THE BUSINESS ACTIVITIES DURING THE REPORTING PERIOD

3.1.Operating income

As of the end of the reporting period, SHELLY GROUP AD reported a consolidated profit of BGN 8 906 thousand, representing an increase of 50.4% compared to 2023.

During the reporting period, SHELLY GROUP AD reported on a consolidated basis revenue from sales of device of BGN 40 009 thousand, an increase of 45.0% compared to the previous year.

In the first quarter of 2024, the Company reported revenue from premium subscription services, which was attributable to the increase in revenue from services.

	3 months of 2023	y/y change	3 months of 2024
REVENUE	thousand BGN	%	thousand BGN
Sale of goods and production	27 595	45.0%	40 009
Revenue from services and rents	13	1091.7%	155

Other operating revenue	41	553.7%	268
Total operating revenue	27 649	46.23%	40 432
Share in the profit of associated companies	34	-85.3%	5
Financial revenue	-	-	3
Profit form operation with financial assets	27 683	46.1%	40 440

3.2.Operating expenses

As of the end of the reporting period the total operating expenses of SHELLY GROUP AD increased by 55.6 % compared to the same reporting period of the previous year. This is mainly due to increase of the expenses for marketing and sales by 323.2% and external services with 30.0%.

The biggest part of the reported operating expenses for the reporting period belongs to the expenses for salaries and social securities with 43.3 % share in total expenses, followed by the expenses for marketing and sales with a share of 25.7% and the expenses for external services with a share of 22.2 %.

	3 months of 2023	y/y change	3 months of 2024
EXPENSES	thousand BGN	%	thousand BGN
Materials	(113)	-20.4%	(90)
External services	(2 511)	7.0%	(2 686)
Depreciation	(156)	30.1%	(203)
Salaries	(4 036)	30.0%	(5 246)
Other administrative expenses	(13)	69.2%	(22)
Total administrative expenses	(6 829)	20.8%	(8 247)

Marketing and Sales	(734)	323.2%	(3 107)
Other operating expenses	(221)	242.5%	(757)
Total Operating Expenses	(7 784)	55.6%	(12 111)

3.3. Financial indicators

Liquidity Ratios

LIQUIDITY RATIOS	31-12-23	31-03-24
Current ratio	6.61	8.64
Quick ratio	5.49	7.01
Absolute liquidity ratio	1.87	2.26
Cash ratio	5.06	6.73

The current liquidity ratio at the end of the reporting period increased due to the following: the current assets increased by 3.1 % compared to the end of 2023, while the current liabilities decreased by 21.1%.

The quick liquidity ratio at the end of the reporting period increased due to the following: the current assets increased by 15.7 % compared to the end of 2023, while the current liabilities decreased by 21.1%.

The absolute liquidity ratio at the end of the reporting period decreased due to the following: the current liabilities decreased by 21.1% compared to the end of 2023, while cash decreased by 5.0%.

The cash ratio at the end of the reporting period increased due to the following: The current liabilities decreased by 21.1% compared to the end of 2023, while cash decreased by 5.0%, the commercial receivables increased by 10.9%.

Financial autonomy coefficients

DEBT RATIOS	31-12-23	31-03-24
Debt / Equity	0.16	0.12
Debt / Assets	0.14	0.11
Equity/ Debt	6.06	8.15

The change in the debt/equity ratio at the end of the reporting period is due to the following: the Company9s total liabilities decreased by 20.4% compared to the end of 2023, and the equity increased by 7.0%.

The change in the debt/assets ratio at the end of the reporting period is due to the following: the Company9s total assets increased by 3.1% compared to the end of 2023, while the Company9s total liabilities decreased by 20.4%.

The change in equity/ debt ratio at the end of the reporting period is due to the following: the total liabilities of the Company decreased by 20.4% compared to the end of 2023, and the equity increased by 7.0%.

4. DESCRIPTION OF THE MAIN RISKS AND UNCERTAINTIES

The risks associated with the core business of the Company can generally be divided into systemic (general) and non-systemic (related specifically to its business and the industry in which it operates). Relevant for the Company are also the similar categories of risks inherent in the company business and the industry in which its subsidiaries operate, insofar as they are the main source of the Company9s income. Separately, investors in the Company9s financial instruments are also exposed to risks related to the investments in securities themselves (derivative and underlying).

4.1.SYSTEMIC RISKS

Systemic risks are related to the market and the macro environment in which the Company operates, which is why they cannot be managed and controlled by the Company9s management team. Systemic risks are: political risk, macroeconomic risk, inflation risk, currency risk, interest rate risk, tax risk and unemployment risk.

Type of risk	Description
POLITICAL RISK	Political risk is the likelihood of a change of Government, or of a sudden change in its policy, of occurrence of internal political turmoil and adverse changes in European and/or national legislation, as a result of which the environment in which local businesses operate will change negatively, and investors will incur losses. On 5 March 2024, Prime Minister Nikolay Denkov deposited the resignation of the cabinet before the Parliament. The next day, the cabinet's resignation was accepted by parliament with 216 votes in favour. Early parliamentary elections are scheduled for June 2024.
	Political risks for Bulgaria internationally are related to the commitments undertaken to implement serious structural reforms in the country in its capacity as an equal member of the EU, increasing social stability, limiting inefficient spending, on the one hand, as well as the strong destabilization of the countries of The Middle East, military interventions and conflicts in the region of the former Soviet Union, the refugee waves generated by these factors, and the potential instability of other key countries in the immediate proximity of the Balkan
	Other factors that also affect this risk are the possible legislative changes and in particular those concerning the economic and investment climate in the country.
GENERAL MACROECONOMIC RISK	According to the National Statistical Institute, in March 2024, the overall business climate indicator remains roughly at its February level (from 22.6% to 23.0%). An increase in the indicator was observed in the retail trade and services sectors, while industry and construction registered a decrease.1
	Overall, average annual real GDP growth is expected to be 0.6% in 2024 and accelerate to 1.5% in 2025 and 1.6% in 2026. Compared with the December 2023 euro area macroeconomic forecasts of the Eurosystem experts, the GDP growth forecast has been revised down for 2024 due to the carry-over effects of previous surprise negative results and weaker incoming information on future developments, it has not been revised up for 2025 and it has been revised up slightly for 20262
INTEREST RATE RISK	Interest rate risk is related to possible negative changes in interest rates established by the financial institutions of the Republic of Bulgaria.
	At its meeting on 7 March 2024 the Governing Council decided to keep the ECB's three key interest rates unchanged. The Governing Council is determined to ensure a timely return of inflation to the medium-term target of 2%. On the basis of its current assessment, it considers that the ECB's key interest rates are at a level which, if sustained 3 for a sufficiently long period, will contribute substantially to achieving this objective. .

¹ https://www.nsi.bg/sites/default/files/files/pressreleases/Economy2024-03\_VMKA13V.pdf

² https://www.bnb.bg/bnbweb/groups/public/documents/ecb\_publication/publications\_ecb\_mb\_202402\_bg.pdf

³ https://www.bnb.bg/bnbweb/groups/public/documents/ecb\_publication/publications\_ecb\_mb\_202402\_bg.pdf

		Basic Interest Rate
		Date	Percentage
		01.04.2024	3.79
		01.03.2024	3.80
		01.02.2024	3.79
		01.01.2024	3.79
		*Source: BNB4
INFLATION RISK	Inflation risk is a general price increase in which money depreciates and households and firms are likely to suffer a loss.
	final monetary consumption expenditure of Bulgarian households.			The consumer price index is the official measure of inflation in the Republic of Bulgaria. It assesses the overall relative change in the prices of goods and services used by households for personal (non-productive) consumption and is calculated by applying the structure of
	According to the NSI,in March 2024, monthly inflation is 0.2% and annual inflation is 3.0%. Inflation is measured by the CPI, where monthly inflation is for March 2024 compared to the previous month and annual inflation is for March 2024 compared to the same month of the previous year.5
	and services.			The Harmonized Index of Consumer Prices is a comparable measure of inflation for EU countries. It is one of the criteria for price stability and for Bulgaria's accession to the euro area. The HICP, like the CPI, measures the overall relative change in the price level of goods
	2024 compared to April 2022 to March 2023 is 6.2%.6			According to the NSI, in March 2024 monthly inflation is 0.2% and annual inflation for March 2024 compared to March 2023 is 3.1%1 . Year-to-date inflation (March 2024 to December 2023) is 0.7% and the average annual inflation rate for April 2023 to March
				According to the March 2024 macroeconomic projections for the euro area by the ECB's experts, inflation has been revised down, especially for 2024, largely reflecting the smaller contribution of energy prices. The experts now forecast inflation to average 2.3% in 2024, 2.0% in 2025 and 1.9% in 2026. Inflation forecasts (excluding the energy and food components) have also been revised downwards, to average 2.6% in 2024, 2.1% in 2025 and 2.0% in 2026 [] The experts have revised down their 2024 growth forecast to 0.6%, with economic activity expected to remain weak in the short term. They then expect the

⁴ https://www.bnb.bg/Statistics/StBIRAndIndices/StBIBaseInterestRate/index.htm

⁵ https://www.nsi.bg/sites/default/files/files/pressreleases/Inflation2024-03\_IF8MJCQ.pdf

⁶ https://www.nsi.bg/sites/default/files/files/pressreleases/Inflation2024-03\_IF8MJCQ.pdf

	economy to pick up and grow by 1.5% in 2025 and 1.6% in 2026, driven initially by consumption and subsequently by investment []Inflation eased slightly to 2.8% in January, and according to Eurostat's preliminary estimate, fell further to 2.6% in February. Food inflation fell again to 5.6% in January and 4.0% in February, with energy prices continuing to decline year-on-year in these two months, but at a slower pace than in December. Commodity inflation also continued to fall, reaching 2.0% in January and 1.6% in February. After holding at 4.0% for three consecutive months, services inflation fell slightly to 3.9% in February. 7
CURRENCY RISK	Exposure to currency risk is the dependence and effects of changes in exchange rates. Systemic currency risk is the probability of a possible change in the currency regime of the country (currency board), which would lead either to BGN devaluation or to BGN appreciation compared to foreign currencies.
	Currency risk will have an impact on companies with market shares, the payments of which are made in a currency other than BGN and EUR. Since, according to the current legislation in the country the Bulgarian lev is fixed to the euro in the ratio EUR 1 = BGN 1.95583, and the Bulgarian National Bank is obliged to maintain a level of Bulgarian levs in circulation equal to the bank9s foreign exchange reserves, the risk of devaluation of the BGN compared to the European currency is minimal and consists in the eventual early abolition of the currency board in the country. At this stage, this seems unlikely, as the currency board is expected to be abolished upon the adoption of the EUR in Bulgaria as an official unit of payment.
	Theoretically, currency risk could increase when Bulgaria joins the second stage of the European Exchange Rate Mechanism (ERM II). This is a regime in which the country must maintain the exchange rate compared to the EUR within +/- 15% on the background of the central parity. In practice, all countries currently in this mechanism (Denmark, Estonia, Cyprus, Lithuania, Latvia, Malta) are witnessing fluctuations that are significantly less than the allowed ones of ± 15%.
	On July 10, 2020, Bulgaria joined the ERM II exchange rate mechanism, known as the 8euro area9s waiting room9. The central rate of the Bulgarian lev is fixed at EUR 1 = BGN 1.95583. Around this central exchange rate of the BGN, the standard range of plus or minus 15 percent will be maintained. Bulgaria joins the exchange rate mechanism with its existing currency board regime, as a unilateral commitment and without additional requirements to the ECB.8 At the same time, our country must enter into close cooperation with the unified banking supervision. The fixed exchange rate of the BGN to the EUR does not eliminate for the Bulgarian currency the risk of unfavorable movements of the euro exchange rate against other major currencies (US dollar, British pound, Swiss franc) on the international financial markets, but at present the company does not consider that such a risk would be material to its business. The company may be affected by currency risk depending on the type of cash flow currency and the type of currency of the company9s potential loans.
	The SHELLY GROUP AD Group companies operate in Bulgaria as well as in EU countries and first countries, mainly in the USA, Latin America and Australia. At present, the main revenues from the Group9s IoT business are in BGN or EUR, and the costs of delivery of goods in this segment are mainly in US dollars and are largely tied to the Chinese yuan, which is why the appreciation of the US dollar or Chinese yuan would have an adverse

⁷ https://www.bnb.bg/bnbweb/groups/public/documents/ecb\_publication/publications\_ecb\_mb\_202402\_bg.pdf

⁸ https://www.ecb.europa.eu/press/pr/date/2020/html/ecb.pr200710~4aa5e3565a.en.html

	effect on the business performance. In terms of US dollar exposure, the Group companies are expected to have significant US dollar sales revenue in the US and other non-EU markets in the future, which to some extent balances the Group9s net exposure to this major currency.
	To limit the effects of the currency risk, the companies of the Group have introduced a system for planning the deliveries from countries inside and outside the EU, as well as procedures for ongoing monitoring of the movements in the exchange rates of the foreign currencies and control over the forthcoming payments. Currently, the Group companies do not use derivative instruments for hedging the currency risk but, if necessary, the management is ready to enter into such transactions.
Credit risk of the state	Credit risk is the probability of deterioration of Bulgaria9s international credit ratings, caused by the government9s inability to repay its liabilities regularly. Low credit ratings of the country can lead to higher interest rates, more difficult financing conditions, both for the state and for individual economic entities, including the Company. Credit ratings are prepared by specialized credit rating agencies and serve to determine and measure a country9s credit risk. Bulgaria9s credit rating is presented in the following table: Table 1: Credit risk of Bulgaria
	Fitch Ratings has affirmed Bulgaria's 'BBB' long-term foreign and local currency sovereign credit rating with a positive outlook.
	Fitch Ratings has affirmed Bulgaria9s Long-Term Foreign and Local Currency Issuer Default Ratings (IDR) at 8BBB9 with a Positive Outlook.
	Bulgaria9s ratings are supported by its strong external and public balance sheets versus 8BBB9 peers and credible policy framework, underpinned by EU membership and a long standing currency board. On the other hand, the low level of investments/GDP and unfavourable demographics weigh on potential growth and government finances over the long term.
	The Positive Outlook reflects the prospects for Bulgaria9s euro adoption, which would lead to further improvement in external metrics. Despite a delay in the euro area accession process, there is broad political commitment to euro adoption in 2025. Since the formation of the new government, parliament has passed all remaining post-ERM II commitments, while the amendment of the Central Bank Law should be approved by end 2023.
	Euro adoption: Bulgaria9s HICP inflation is easing but remains significantly above that of the three best performing EU member states, and does not currently comply with the price stability criterion. Given the considerable uncertainty about the inflation trajectory, it remains questionable whether Bulgaria will meet the price stability criterion in mid-2024 (the key date for 2025 euro adoption). Bulgaria is on course to meet all other nominal euro-adoption criteria (public finances, interest rate and exchange rate). Fitch analysts consider euro adoption as supportive to the rating, as all else equal, the output of Fitch9s proprietary Sovereign Rating Model (SRM) would improve by around two notches.
	Growth acceleration: Following the economic expansion in the first half of 2023, despite slowing external demand, high inflation and elevated uncertainty, Fitch has raised its GDP growth forecast for this year to 1.9% (from 1.3% expected in May). Household consumption will likely be supported by higher fiscal spending, the strong labour market, reduction in the saving rate and strong credit growth. Investment growth should gradually improve in the second half of 2023 as EU transfers increase. The GDP growth will speed

	up to 2.8% in 2024 and 3% in 2025, as easing of private consumption will be balanced by stronger investment supported by EU transfers. Fitch analysts take account of the fact that the government is committed to implementation of Recovery and Resilience Facility reforms and recently submitted the second payment request for EUR 724 million (0.8% of 2023 GDP).
	Gradual easing of inflation: Fitch projects headline HICP inflation will continue to gradually decelerate, while core pressures will decline slower due to strong private consumption, a tight labour market and second-round effects. Fitch sees inflation on average at 9.1% in 2023, 4.6% in 2024 and 2.9% in 2025. The inflation outlook remains subject to considerable uncertainty stemming mainly from development of commodity prices and persistency of second-round effects.
	Wider medium-term fiscal deficits and low public debt: We forecast the budget deficit at 2.6% of GDP in 2023, affected by the lower-than-planned cost of energy support measures, higher social and capital spending, and public sector wage increases. While Bulgaria has a good record of fiscal prudence, it is expected that the current government might favour slightly wider deficits in the medium term to boost public sector investment and increase social transfers to reduce inequalities. The Agency expects budget deficits of 2.8% of GDP in 2024 and 3.5% of GDP in 2025.
	Despite wider fiscal deficits, Bulgaria9s public debt ratio will remain very low compared with EU countries and 8BBB9 peers. Fitch analysts project general government debt/GDP ratio to remain below 30% until 2027.
	Factors that could lead to positive rating action: progress toward euro area accession, including greater confidence in Bulgaria meeting membership criteria and the likely timing of euro adoption; an improvement in the economic growth potential, for example, via the implementation of structural and governance reforms to improve the business environment and/or effective use of EU funds.
	Factors that could lead to negative rating action: lack of progress in euro area accession due to persistent political instability or a failure in meeting convergence criteria; lower medium-term growth prospects driven, for example, by a large adverse macroeconomic shock or inflation entrenched at high levels.9
Unemployment risk	As a major factor affecting consumer purchasing power, an increase in unemployment would reduce demand for IoT products. On the other hand, the demand for staff from businesses continues to be very active, so such a risk seems negligible within the next year.
	According to Eurostat in March 2024, the euro area seasonally-adjusted unemployment rate was 6.5 %, stable compared with February 2024 and down from 6.6 % in March 2023. The EU unemployment rate was 6.0 % in March 2024, down from 6.1 % in February 2024 and stable compared with March 202310
	The registered unemployment rate in the country in February was 5.8% and remained stable on a monthly basis. The number of registered unemployed persons at the end of the month is 165 585, down by 255 persons compared to last month.
	The number of unemployed persons who started work with the assistance of the Employment Agency increased - in February they are 12 484, which is 1 141 more than in

⁹ https://www.minfin.bg/en/news/12384

¹⁰ https://ec.europa.eu/eurostat/statistics-

explained/index.php?title=Unemployment\_statistics#Unemployment\_in\_the\_EU\_and\_the\_euro\_area

the previous month. The administrative data of the institution show that the largest share
of those settled in the labour market is in manufacturing - 15.8%, followed by trade - with
14.6%, public administration - with 9.3%, human health - with 6.7%, construction - with
4.6%, etc. During the month, 355 pensioners, students and employees also found jobs with
the support of the employment offices. In the European Union countries 914 unemployed
people started work with the help of labour offices or 8.0% of all transitions into
employment during the month.11

Risk associated
with the legal
system

Although Bulgaria has introduced a number of significant legislative changes since joining
the EU and most of the Bulgarian legislation has been harmonized with EU legislation, the
legal system in the country is still in the process of reform. Judicial and administrative
practices remain problematic and it is difficult to effectively resolve property disputes,
breaches of laws and contracts and other. Deficiencies in the legal infrastructure can result
in uncertainties arising from the implementation of corporate actions, the implementation
of supervision and other issues.

TAX RISK

It is essential for the financial performance of the companies to maintain the current tax
regime. There is no guarantee that the tax legislation, which is directly relevant to the core
business of the Company, will not be changed in a direction that would lead to significant
unforeseen expenses and, accordingly, would adversely affect its profit. The taxation
system in Bulgaria is still developing, as a result of which a contradictory tax practice may
arise.

4.2.NON-SYSTEMIC RISKS

Risks related to the industry in which the Group operates

Such risks are: risk of shortage of key personnel, risk of strong competition, risk related to personal data security and hacker attacks, risk of technology change.

Risk of shortage of key personnel

One of the biggest challenges for technology companies, such as the companies of the Group, as well as given the specific scope of their business in the field of telecommunications and engineering and software development, is the shortage of skilled personnel. Insufficient availability of suitable staff in the subsidiaries could adversely affect the future development of the Group due to delays in the development of new products/services and the maintenance of existing ones. On the other hand, the high competition in this sector raises the cost of labor. Thus, the financial position and market share of the Group companies could suffer.

Risk of strong competition

After the sale of most of the telecommunication business of the group, the Group companies operate mainly in the segment of the Internet of Things (IoT). This segment is one of the most modern and promising sectors of the industry, which attracts the interest of many technology giants and start-up companies. The loss or inability to gain market share and the fall in final product prices due to increased competition may have a negative effect on revenue, profit and profit margins. Maintaining a competitive position requires

¹¹ https://www.az.government.bg/bg/news/view/ravnishteto-na-registriranata-bezrabotica-prez-fevruari-se zapazva-na-5-8-4113/

investment in the creation of devices with new utilities, improvement of existing solutions and expansion of market share and it cannot be taken for granted that new developments will be established among the competing ones on the market.

Risk related to personal data security and hacker attacks

The technology industry is characterized by digital transmission of information that could be strictly confidential, containing personal data of users of products, financial information of companies, information about new products and other. The protection of such information is a critical factor for the normal operation of companies in the industry, including of the Group. The sales of the devices and the use by the users of the accompanying mobile applications and cloud services provided by the Group are related to the exchange and storage of personal data. Potential breaches in information security can lead to: i) Loss of customers and/or partners and their migration to competing companies; (ii) Imposing sanctions and lawsuits related to breaches of applicable data protection and privacy laws; iii) Lost or delayed orders and sales; iv) Adverse effects on reputation, business, financial position, profits and cash flows.

Risk of regulatory and specific technical requirements

The supply of IoT devices is related to regulation regarding the certification of products for sale in the respective country. In the European Union, products are required to bear the 8CE9 marking, which indicates that the product has been evaluated and meets the requirements of safety, health and environmental protection. In the US, the equivalent is 8UL9 certification. For certification purposes, accredited laboratories are assigned compliance tests, which involve significant costs. In addition, specifics in the requirements of local regulators and contractors (especially mobile operators) may require additional tests and certification to be performed, which increases the cost of entering a particular market or particular distribution channel.

Sales of the Group companies9 products cover an increasing number of markets, which often have local regulation regarding the certification of similar products in the respective country. Meeting the requirements of local regulation is related to time and resources and may delay the Company in entering new markets or require additional costs in order to meet different standards.

The change in regulatory requirements for devices may involve additional costs for making them compliant with the new requirements, including costs for withdrawing products from the market to making them compliant with these requirements. The Group companies and their local partners regularly monitor planned changes in the legislation and take timely measures to ensure the compliance of products with them.

Potential changes in telecommunications service regulations may also have some impact on the Group's operations as mobile operators are one of the main sales channels for the existing MyКi products. Many of the IoT devices developed and sold by the Group companies use Internet-based technology and can work with the services of any Internet service provider. In this sense, the Group is now less dependent on regulations in the field of telecommunications insofar as the companies in its structure are not telecommunications service providers and mobile operators are only one of the marketing and distribution channels for IoT devices.

Risk of technology change

Shelly Group AD and its subsidiaries operate in an extremely dynamic segment, in which technologies have a significant impact and are a source of competitive advantage. To that effect, there is a risk of delayed adaptation to new technologies due to lack of knowledge, experience or sufficient funding, which may have a negative impact on the Company. The slow adaptation to the new realities may lead to a loss of competitive positions and market shares, which in turn will lead to a deterioration of the Group9s performance.

Risks related to the Group's business

Such risks are: operational risk, risk related to business partners, risks arising from new projects and liquidity risk.

Operational risk

Operational risk can be defined as the risk of loss as a result of inadequate or non-functioning internal management procedures. Such risks may be caused by the following circumstances:

Adoption of wrong operational decisions by the management staff related to the management of current projects;
Insufficient amount of skilled personnel needed for the development and implementation of new projects;
Leaving key employees and inability to replace them with new ones;
Risk of excessive increase in management and administration costs, leading to a decrease in the overall profitability of the Company;
Technical damages leading to prolonged interruption of the provided services may lead to termination of contracts with clients.

The effects of such circumstances would be a decrease in the Company9s revenues and deterioration of its business performance.

Risk associated with business partners

Production activities in the IoT segment is outsourced, mainly to China, concentrated in several manufacturers. Potential risks associated with key subcontractors are related to the accurate and timely execution of deliveries or termination of business relationships. Although management believes that there is a wide range of alternative suppliers, the possible transfer of production to new partners and diversification of subcontractors may lead to delivery delays and additional costs, which may affect the ability of the Group companies to perform agreed orders from customers and adversely affect the Group9s reputation and financial performance.

Risks arising from new projects

The main business activity of SHELLY GROUP AD is related to investments in subsidiaries. There is a risk that some of the subsidiaries will not be able to meet their goals, which will lead to lower or negative return on investment.

The development of new products and services by the subsidiaries of SHELLY GROUP AD is related to the investment in human resources, software, hardware, materials, goods and services. Should new products and services fail to be marketed, such investments would be unjustified. This in turn would have a negative impact on the costs and assets of the Company, as well as on the performance of its business activities. In order to manage the risk arising from new projects, the Group companies perform a market analysis, prepare a financial analysis containing different scenarios, and in some cases discuss with potential customers the concept of the new service/product.

Liquidity risk

The expression of the liquidity risk in relation to the Group is associated with the possibility of lack of timely and/or sufficient available funds to meet all current liabilities. This risk may appear both in case of significant delay of the payments by the debtors of the Company, as well as in case of insufficiently effective management of the cash flows from the operation of the Company.

Some of the Group companies use bank financing in the form of an investment loan, overdraft or revolving credit line, which can be used in case of liquidity problems.

The company pursues a conservative liquidity management policy, through which it constantly maintains an optimal liquidity cash reserve and good ability to finance its business activities. In order to control the risk, the Company monitors the timely payment of incurred liabilities. The company monitors and controls the actual and projected cash flows for periods ahead and maintains a balance between the maturity limits of the assets and liabilities.

5. TRANSACTIONS WITH RELATED OR INTERESTED PARTIES

For the reporting period the Company has not entered into transactions with interested parties in the meaning according to POSA.

The Company has not entered into any transactions with other Group companies that fall beyond its scope of regular business or that significantly deviate from the market conditions. Transactions in the ordinary course of business with subsidiaries are subject to the separate quarterly report for the first quarter of 2024, that was published on 29 April, 2024.

The transactions with other Group companies are excluded here for the purposes of the consolidation.

Board of Directors

During the reporting period, to the members of the Board of Directors have been paid gross remunerations in total amount of BGN 394 thousand. The amounts paid are in compliance with the approved remuneration policy of the Company and the changes made in the number of seats in the Board and the appointment new members, that were appointed on an extraordinary meetings of shareholders held on April 8, 2022, 13 December, 2022 and 19 December 2023.

6. INFORMATION ON NEWLY INCURRED SIGNIFICANT RECEIVABLES AND/OR LIABILITIES FROM THE BEGINNING OF THE YEAR TO THE END OF THE REPORTING QUARTER

No material new receivables and/or payables arose during the period, except as described in paragraph 5 of this Report..

7. INFORMATION ON THE TRADING IN THE SHARES OF SHELLY GROUP AD DURING THE REPORTING PERIOD

Historical data on trade
Date	Volume	Turnover	Highest Price	Lowest Price	Opening Price	Closing Price
28.03.2024	83420	5432623.80	70,000	58,600	59,000	67,600
29.02.2024	55900	3232975.80	59,400	56,600	58,400	59,200
31.01.2024	109042	5719979.30	59,200	46,000	47,300	58,800

Source: Investor.bg

Information on the trading of SHELLY GROUP AD shares during the reporting period on the Frankfurt Stock Exchange is available at https://www.boerse-frankfurt.de/equity/allterco-jsco/price-history/historical prices-and-volumes

8. EVENTS AFTER THE END OF THE REPORTING PERIOD

After the end of the reporting period, SHELLY GROUP AD submitted to the FSC, the BSE and the public additional information.

Date	NOTIFICATION
09.04.2024	Shelly Group AD (Ticker: SLYG / ISIN: BG1100003166) (<Shelly Group= / <the Company=) announced 45.5% year-on-year increase in revenue from sales of devices and related services to EUR 20.5 million (BGN 40.2 million) in Q1 2024, based on preliminary data. The revenue from sales of Shelly IoT and smart home devices increased by 46.4%, amounting to EUR 20.2 million (BGN 39.5 million).
	For the current financial year 2024, the Board of Directors expects revenue from sales of devices and related services of EUR 105.0 million (BGN 205.4 million) and earnings before interest and taxes (EBIT) likely to be above EUR 26.0 million (BGN 50.9 million).
	In the past financial year 2023, preliminary figures put revenue at EUR 74.9 million (BGN 146.5 million) and EBIT at EUR 19.1 million (BGN 37.4 million).
	The Company will officially disclose unaudited consolidated financials for Q1 2024 on 15 May 2024 after the close of trading.
25.04.2024	Shelly Group AD (<Shelly Group= / <the Company=), has been informed today that its shares (Ticker: SLYG / ISIN: BG1100003166) (<Shelly shares=) listed in the Prime Standard of the Frankfurt Stock Exchange, will be included in XETRA trading as of Monday, 29 April 2024. This makes Shelly Group the first Bulgarian company to be traded on Xetra. By uplisting from specialist trading on the Frankfurt Stock Exchange to the fully electronic trading venue XETRA, the company expects more liquid trading in Shelly shares and the development of a broader investor base. Baader Bank AG is acting as Designated Sponsor. The Company has been listed on the Regulated Market of the Bulgarian Stock

	Exchange in Sofia since December 2016 and has had a secondary listing on the Regulated Market (Prime Standard) of the Frankfurt Stock Exchange since November 2021.
30.04.2024	The Company has announced to the Financial Supervision Commission and the public Invitation for Ordinary Annual General Meeting of the Shareholders, scheduled for 04.06.2024

9. OTHER INFORMATION AT THE DISCRETION OF THE COMPANY

Based on the approval by the Board of Directors of Shelly Group AD, Shelly Europe Ltd., as a lessee, has concluded with Office X AD, UIC 206163814, as lessor, 10-years Agreement for lease of office premises. The subject of the agreement are 2840 sq. m. of office spaces, 60 parking spaces and a service room, located in the office building "Office X", Building 3 (under construction), the use of which is granted against a monthly remuneration (rental price and management and maintenance fee fixed for a period of 5 years) in the total amount of 57,914.40 or BGN 113,270.72 excluding VAT, subject to annual indexation or in total € 6,949,728.00 or BGN 13,592,486.51 excluding VAT for the entire term of the agreement. No interested or related parties are involved in the transaction.

The transaction relates to the need for additional office spaces as a result of the expansion of the team and the development of the business. To the extent that the current office building housing the Shelly Group companies no longer meets their needs, the Company has entered into discussion about its potential sale

For the purpose of fulfilling the obligation of Shelly Europe Ltd. under the Lease Agreement to provide a bank guarantee in favor of the landlord "Office X" AD, after the end of the reporting period, the subsidiary entered into a Credit Line Agreement with "EUROBANK BULGARIA" EAD for the amount of EUR 500 000 (BGN 977 915 at the BNB fixing rate) for a term of 36 months.

After the end of the reporting period, the Board of Directors of Shelly Group AD has decided to grant an additional cash contribution of EUR 600 000 to its Slovenian subsidiary Shelly Tech d.o.o. (formerly GOAP Računalniški inženiring in avtomatizacija proces d.o.o. Nova Gorica). The additional cash contribution was provided for a period of 1 year at an annual interest rate of 1% to cover losses and temporary cash need for covering of current liabilities in order to ensure the continuance of the normal business operations. In this regard, the Board of Directors has also decided to extend the additional cash contribution of EUR 500,000 granted in 2023 for another year under the same conditions.

The Company considers that there is no other information that has not been publicly disclosed that would be important to shareholders and investors in making an informed investment decision.

Date: 15 May 2024

For SHELLY GROUP AD:

Dimitar Stoyanov Dimitrov Digitally signed by Dimitar Stoyanov Dimitrov Date: 2024.05.15 20:12:13 +03'00'

Dimitar Dimitrov CEO

AI Terminal

Shelly Group SE

2562_10-q_2024-05-29_07a91f3a-562c-4080-bd00-69f0239cfed4.pdf

CONSOLIDATED STATEMENT OF FINANCIAL POSITION SHELLY GROUP AD AS OF MARCH 31, 2024 UIC 201047670

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME SHELLY GROUP AD FOR THE PERIOD ENDED MARCH 31, 2024 UIC 201047670

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY SHELLY GROUP AD

CONSOLIDATED STATEMENT OF CASH FLOWS SHELLY GROUP AD FOR THE PERIOD ENDED MARCH 31, 2024 UIC 201047670

1. Information on the Group

1.1.Legal status

1.2.Ownership and management

1.3. Scope of activities

1.4.Group structure

2. Basis for preparation of the financial statements and material accounting policy information

2.1. Basis for preparation

2.2. Initial application of new and amended IFRSs

2.2.1. Standards effective for the current reporting period

2.3. Going concern

2.4. Functional and reporting currency

2.5. Comparative data

2.6. Transactions and balances

2.7. Accounting estimates and judgements

2.8. Subsidiaries and associated companies

2.9. Non-controlling interest

2.10. Consolidation

2.11. Definition and assessment of the items of the consolidated financial statements 2.11.1. Revenue

• Sale of electronic devices

Revenue from services

Other income/revenue

2.11.2. Expenses

2.11.3. Property, plant and equipment

Initial recognition

Measurement after recognition

Depreciation Methods

Derecognition of non-current tangible assets

2.11.4. Intangible assets

Initial recognition

Subsequent costs

2.11.5. Goodwill

2.11.6. Other long-term equity investments

Initial recognition

Subsequent measurement

2.11.7. Investments in associated companies

2.11.8. Inventories

2.11.9. Financial instruments

а) Financial assets

Initial recognition and measurement

Subsequent measurement

Financial assets at amortized cost (debt instruments)

Financial assets designated as financial assets at fair value in other comprehensive income (equity instruments)

Financial assets at fair value through profit or loss

Derecognition

Impairment of financial assets

Financial liabilities

Initial recognition and measurement

Subsequent measurement

Financial liabilities at amortized cost

Derecognition

Trade and other receivables

immaterial.

Borrowings

Payables to suppliers, other current liabilities and advances received

2.11.10. Cash and cash equivalents

2.11.11. Lease

The Group as a lessee

Right-of-use assets

Lease liabilities

Short-term leases and low-value assets leases

2.11.12.Provisions

2.11.13. Payables to employees Defined benefit plans

Paid annual leave

Retirement benefit plans

2.11.14. Share capital and reserves

2.11.15. Income tax expense

2.11.16. Earnings per share

2.11.17. Significant judgements in applying the Group's accounting policy

Key estimates and assumptions with high uncertainty

Defined benefit plans

Useful lives of property, plant and equipment and intangible assets

Impairment of receivables

Impairment of property, plant and equipment