XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 The Future of Laundry XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2023 CONTENTS STRATEGIC REPORT Chairman’s Statement 9 Chief Executive Officer’s Review 10 Financial Review 13 Strategic Report 14 GOVERNANCE Directors’ Report 18 Directors’ Remuneration Report 21 Corporate Governance Report 23 Statement of Directors’ Responsibilities 27 Independent Auditor’s Report to the Members of Xeros Technology Group plc 28 FINANCIAL STATEMENTS Consolidated Statement of Profit or Loss and Other Comprehensive Income 32 Consolidated Statement of Changes in Equity 33 Consolidated Statement of Financial Position 34 Consolidated Statement of Cash Flows 35 Notes to the Consolidated Financial Statements 36 Company Statement of Changes in Equity 57 Company Statement of Financial Position 58 Notes to the Company Information 59 The Future of Laundry XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 1 STRATEGIC REPORT INTRODUCTION GOVERNANCE FINANCIAL STATEMENTS Innovative sustainable technologies that greatly reduce the impact of laundry on the eco-system Xeros licenses sustainable proprietary technology solutions for the laundry and apparel industries. These drive significant cost, energy and water efficiencies, reducing pollution, in both the manufacture and laundering of clothing. “At the time of writing, we have four of the world’s largest washing machine manufacturers undergoing a technical verification process for our Laundry Care technology ahead of potential Joint Development Agreements (JDAs). We are also in discussions with three major washing machine brands for our external filter. Any one of these JDAs could be potentially transformational for Xeros. Not only do they bring some immediate revenue, but they are also the pathway to the scaling of our technology and subsequent royalty payments. While timing of JDAs can be frustrating, we continue to make progress across our discussions.” NEIL AUSTIN, CEO Xeros has developed patented and proven, industry-leading technologies which reduce the environmental impact of how industries make and care for clothes. The traditional wet processing methods used in industrial and domestic laundry and garment manufacturing consume billions of litres of fresh water and large amounts of energy and chemicals, as well as damaging and weakening clothing fibres and creating rising levels of environmental pollution. It is estimated that washing machines contribute 35% of the 171 trillion microplastic particles in the ocean. A range of actors, including consumers, the media NGOs and regulators are exerting pressure on these industries, with legislative action beginning to be taken. Xeros’ three main technologies, Microfibre Pollution filter, Garment finishing system and Laundry care system, facilitate garment manufacturers, industrial laundries, domestic washing machine manufacturers and consumers, to reduce their environmental impact, whilst also significantly improving efficiency in the process. OUR MICROFIBRE FILTER CAPTURES UP TO 99% OF MICROPLASTICS AND OVER 80% OF NATURAL FIBRES IN EVERY WASH MICROFIBRE FILTER INTRODUCTION XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 2 XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 3 STRATEGIC REPORT INTRODUCTION GOVERNANCE FINANCIAL STATEMENTS It is estimated that washing machines contribute 35% of the 171 trillion microplastic particles in the ocean. On an eco-setting, washing clothes releases 700,000 microfibres. Our microfibre filter technology helps trap microfibres, capturing up to 99% of microplastics and over 80% of natural fibres in every wash. XFilters can be integrated into any domestic or commercial washing machine during manufacture or used as an external solution. Independent tests show it is the highest performing filtration device available. XFilters work with every wash cycle to capture both synthetic and natural microfibres, with the lowest emptying frequency of any integrated filtration device. The filter uses an innovative spin process to remove water, drying the microfibres for simple removal and disposal that’s intuitive for the user. Just like taking the lint from a tumble dryer. PRODUCTS: PRODUCTS: • XF1 DOMESTIC • XF2 COMMERCIAL • XF3 EXTERNAL SEE OUR WEBSITE FOR DEMONSTRATION VIDEOS A LIFETIME ALTERNATIVE TO PUMICE USING A UNIQUE CLOSED LOOP SYSTEM GARMENT FINISHING INTRODUCTION XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 4 Making one pair of jeans can use up to 10 years’ worth of drinking water for one person. The process uses pumice stones, which constantly need replacing and together with the chemicals used in the process, create chemically contaminated sludge. Our garment finishing technology uses patented XOrbs, which are reusable polymer spheres, that replace pumice and can reduce water and chemistry by up to 50%. Machines fitted with our patented innovations, allow a closed system, the XDrum, to release XOrbs, into specially designed garment finishing cycles. PRODUCTS: PRODUCTS: • XFN1 DENIM • XFN2 WASHING SEE OUR WEBSITE FOR DEMONSTRATION VIDEOS XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 5 STRATEGIC REPORT INTRODUCTION GOVERNANCE FINANCIAL STATEMENTS XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 6 SIGNIFICANTLY PROLONGS THE LIFESPAN OF CLOTHES WHILE REDUCING ENERGY AND WATER CONSUMPTION LAUNDRY CARE XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 6 INTRODUCTION XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 7 STRATEGIC REPORT INTRODUCTION GOVERNANCE FINANCIAL STATEMENTS Washing garments uses 20 billion cubic metres of water per year globally, enough drinking water for 228 million people. The washing process also reduces the life and quality of garments. Our laundry care technology is designed to save tens of millions of litres of water every year and extend the life of garments. It uses XOrbs and XDrum to reduce water, chemistry and energy. It has a gentler mechanical action that improves wash performance to better care for fabrics allowing them to last longer. The technology can be integrated into either domestic or commercial washing machines and scaled from small drum sizes to over 2,000 litre capacity machines. The XOrbs are released through a closed-loop system, complementing wash programmes. At the end of the cycle, the XDrum collects the XOrbs back into their storage system. PRODUCTS: PRODUCTS: • XC1 DOMESTIC • XC2 COMMERCIAL SEE OUR WEBSITE FOR DEMONSTRATION VIDEOS STRATEGIC REPORT XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 8 There were no changes to the Board during 2024 , however, on 1 May 2025, Dr Paul Jourdan resigned as a Board Observer following the change of fund manager for Amati AIM VCT plc from Amati Global investors to Maven Capital Partners UK LLP. Amati AIM VCT plc holds 12.8% of Xeros shares, which following the change of fund manager has been renamed Maven Renovar VCT plc. On behalf of the Board, I would like to thank Paul for his contribution as a Board Observer. His support and insightful counsel have been very valuable and we wish him all the very best. The Nominations Committee will undertake a review of the composition of the Board during the second half of 2025 to assess its ongoing suitability as it transitions to a fully- fledged commercial enterprise. We continue to add to our strategic advisory board, which extends our knowledge and reach to support the management and sales team. I would like to once again thank you, shareholders, for your ongoing support, especially as AIM stocks continue to suffer from wider issues such as liquidity and low valuations. I also want to extend praise to the management team and everyone at Xeros for their hard work and dedication to expanding and scaling our technology. Xeros is passing an inflection point. We have six companies going through technical verification, this is the pre-JDA process, and each of them is a significant global player. Alongside this, interest in our technologies continues to increase, with particular near-term excitement for our microfibre filtration and domestic laundry platforms. The Board remains both confident and excited about Xeros’ technology and the drivers for clean-tech solutions, as well as the potential for global adoption of Xeros’ technologies. KLAAS DE BOER Chairman 19 May 2025 The detailed review of the year and current trading are given in the CEO and FD reports but I would like to highlight some key points. I am excited to report on concrete evidence that the transition to a sales-led organisation, under the leadership of Neil Austin, is translating into very near-term revenues. Across all our technologies we are making solid progress. We have XOrb orders from both IFB for its domestic 9kg washing machine and Yilmak for its denim processing machines, which signals that both machines are in the final stage ahead of sales launch. Our external microfibre filter has a world leading manufacturer in place and Russell Hobbs has been named as the first brand partner. We are also seeing increased interest for our commercial laundry care technology, with orders for machines from our partner in France, Georges, and the installation of a Xeros enabled commercial laundry machine at the Marriott Hotel at Heathrow. Beyond these we continue to gain traction with global washing machine brands and OEMs, who are interested in our laundry care and microfibre filtration technologies, and with denim brands whose environmental goals are supported by our garment processing technology. Operationally, we have codified our experience gained from Joint Development Agreements (“JDAs”) to make improvements to the process. We have implemented a milestone based, time-bound process with defined deliverables to help reduce the time it takes from JDA to market sales, which has been a delay factor in the past. During 2024 we raised £6.3m before fees of additional working capital from a warrant exercise and fundraise to support the Group through to breakeven. With net cash at 30 April 2025 of £1.4m, ongoing prudent cost controls, and revenue, albeit dependent on our licensees, in sight, month on month cash flow breakeven during 2025 remains achievable. CHAIRMAN’S STATEMENT As I write this introduction for the review of 2024, we are almost halfway through 2025 so I am writing to you from that perspective. XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 9 STRATEGIC REPORT INTRODUCTION GOVERNANCE FINANCIAL STATEMENTS When I joined Xeros in 2022, my goal was to refocus the business towards the commercialisation of its innovative sustainable technologies that greatly reduce the impact of laundry on the eco-system, and to progress the agreements it had in place. I believe that 2024 was a pivotal moment, with the Group moving closer to revenue generation and breakeven. During 2024 we signed a hugely significant contract with Donlim Group (“Donlim”), the World’s largest small domestic appliance manufacturer, to manufacture our XF3 External Filter under licence. This partnership has commenced in earnest post period end. We announced in January that a Letter of Intent had been signed with a major electronics distributor and I am delighted to report that Russell Hobbs has been named as the first brand partner for the pilot production of the XF3. Russell Hobbs is owned by Spectrum brands and the XF3 will be distributed by the Product Care Group. Our licence agreement with IFB also took a huge step forward with the 9kg washing machine achieving positive feedback from its consumer trials ahead of launch. I am pleased to report that IFB recently placed a purchase order for XOrbs which provides more confidence than ever that the machines will be going into production ahead of a retail launch later this year. The year under review also saw the Group’s denim finishing partner, Yilmak Makina / KRM (“Yilmak”), launch a machine at ITM, the leading garment manufacturing show. Although full roll out was delayed at the final stage of cycle development, it is on track to now dispatch its first machines to garment manufactures and accordingly Yilmak have placed a Purchase Order for initial XOrb requirement. Sales leads have been very encouraging, with strong interest from manufacturers and retailers alike. During the year we also made changes to the structure of the team to support the commercialisation model. This has proved a good move evidenced by the number of companies in our technical verification process. As I write this stands at six, four in Domestic Laundry Care, one in Commercial Laundry Care and one for Microfibre Filtration, covering some of the world’s largest washing machine companies. One of the Group’s key strengths is that our technology not only significantly improves the environmental impact of washing and making clothes, it also offers real economic benefits to industry and consumers. It is this which has buoyed interest for our IP during 2024; our technology can support the fashion industry by helping it make clothes more sustainable, and it can provide washing machine manufacturers with innovation not seen for over 40 years. OPERATIONAL REVIEW In 2024 a key part of the personnel change was completed with the appointment of Stephen Hayes as Category & Marketing Director. A veteran of the Appliances Industry Stephen’s knowledge of how to maximise appeal to our core target customers has been manifest throughout the year. We are confidently and succinctly projecting our expertise to washing machine manufacturers, distributors and retailers, to showcase how we can help them improve their offering and reap the commercial benefits that come from it. In 2023 we established an advisory board consisting of high-quality individuals with a lifetime of experience in some of the world’s largest organisations to bring additional strength to our core operational team. This has been further strengthened with the addition of Juan Pillay and Joe Szeto to the board. Juan has held leadership positions in several leading appliance brands and is one of the most respected names in his industry. Joe has an incredible network in South‑East Asia, with several decades of successful new business development particularly in B2B and licensing models in consumer electronics. Towards the end of the year we unveiled our new tagline, “The Future of Laundry’ at IFA (Europe’s largest consumer electronics fair) in September. This clear signalling of our technologies’ purpose, allied with the Group’s ambition, was extremely well received with a significant level of engagement from some of the World’s largest players in the laundry and appliances Industry. CHIEF EXECUTIVE OFFICER’S REVIEW I am pleased to report that in the year ended 31 December 2024, Xeros made considerable progress towards the commercialisation of its technology. XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 10 STRATEGIC REPORT BUSINESS UPDATE MICROFIBRE FILTRATION MICROFIBRE FILTRATION (XF1 – DOMESTIC, XF2 – COMMERCIAL, XF3 - EXTERNAL) We made a huge stride forward in Microfibre Filtration, with a contract to manufacture XF3 our external filtration product for the domestic market alongside a strategic partnership with Donlim, which we announced in Q3 2024. The first fruit of this deal will be the production and distribution of the filter under the Russell Hobbs brand as detailed above. The XF3 has been well received, and we are in discussions with three of the World’s largest washing machine brands and four of Europe’s largest retailers to bring the product to market. This ‘outside-of-machine’ microplastic filtration device can be retrofitted to the existing domestic install base with full flexibility of placement. Following rigorous tests, we are confident that our product leads the market in microfibre capture, preventing 99% of microplastics from our laundry getting into the water systems. It also has no requirement for replacement cartridges and is lifetime of machine tested. We are also in discussions with three washing machine brands interested in having our integrated filter, the XF1, fitted into their machines. Whilst not expected to reach conclusion in the near term, it is further evidence that washing machine brands are actively looking for solutions to meet planned legislation enforcing the inclusion of microfibre capture in their products. Our prototype commercial scale version of the filter, the XF2, has been on trial with our friends and partners Georges laundry in France and performed incredibly well in the laundering of uniforms for the likes of SNCF, Air France, etc. With this real world validation, we are now in discussions with a leading European component manufacturer for the development of a device for the hospitality and commercial laundry sector. LAUNDRY CARE LAUNDRY CARE (XC1 – DOMESTIC AND XC2 – COMMERCIAL) On XC1, an important milestone was reached with IFB in anticipation of their mass market 9kg domestic washing machine launch, they have placed the first XOrb orders to support the initial sales period of the machine Our sales pipeline for XC1 grew strongly in 2024, and in January of this year we announced a ‘paid for’ technical verification process with one of the World’s largest and best-known washing machine brands. This takes the total number to four of the World’s largest washing machine brands engaged in a pre-JDA engagement process. Our long-standing partner in France, Georges, a leading commercial laundry business that specialises in the cleaning and maintenance of workwear and PPE, has extended its services into the firefighting industry, winning contracts with a number of regional services. On the back of this expansion, they have ordered three more Xeros enabled commercial laundry machines to facilitate this new demand. In the UK we were delighted to have reached an agreement with the Marriott Group for the installation of a Xeros enabled commercial washing machine (XC2) at their Heathrow site. Beyond the UK, Xeros and IFB have placed a machine in the 5 Star ITC Mementos Hotel in Jaipur. These ‘proof of concept’ installations are a showcase for future deployments. GARMENT FINISHING GARMENT FINISHING (XFN1 – DENIM AND XFN2 – WASHING) Following a successful launch at the ITM Trade show our technical team have developed a bespoke ‘pumice replacement’ XOrb cycle with Yilmak. This provides them with a market leading alternative to the ever increasing cost and environmental impact generated by the use of pumice stone. Several high-profile garment manufacturers around the World have expressed interest in having machines placed in their facilities. Complemented by the significant retail & brand ‘pull’ in the technology a full-scale launch is on track for 2025. Accordingly, Yilmak moved out of the development phase of our engagement and into commercial readiness. This was signalled by the placing of first XOrb orders. Our other licensing partner Ramsons, a leading full range supplier of equipment solutions to the apparel industry in South and East Asia, is performing consistently and anticipates further installations in Sri Lanka and Pakistan. We are of huge interest to Denim brands and continue to engage with them, and retailers, who are keen to take advantage of the economical and environmental benefits of our sustainable technology. In anticipation of further denim processing machine installations in 2025, we look forward to making further announcements in this space. XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 11 STRATEGIC REPORT INTRODUCTION GOVERNANCE FINANCIAL STATEMENTS STRATEGY Our strategy to become an IP-rich, capital-light licensor of proprietary technology solutions to multiple scale industries, all of which deploy the same Xeros core technologies remains. Our technology provides cost-effective and sustainability solutions for garment manufacture and clothing care within the $2.5 trillion fashion industry and the $55 billion domestic washing machine market. The addressable markets in Microfibre Filter, Laundry Care, and Garment Finishing are estimated to be valued at £350m p.a., £3bn p.a. and £132m p.a. respectively. To achieve market penetration, we take a three-pronged approach: • Commercial partnerships Commercial partnerships – We have commercial partnerships in place with IFB for domestic and commercial laundry machines, with Ramsons and Yilmak/KRM for garment finishing equipment, with three component manufacturers and Donlim on XFilter. • Direct engagement Direct engagement – We engage and work to influence major fashion and consumer brands to showcase the benefits of our technology and to build a market for it. We have significant engagement with leading global OEMs across all our technology platforms. • Drive influence Drive influence – We are a global leader in sustainable textile technologies and we work with legislators, industry groups and NGOs to show the scale of the environmental challenges and to demonstrate the effectiveness of our solutions. Our focus over the last two years has been on commercial partnerships. ESG In September 2023 Xeros became a certified B Corp business. This means we have to meet rigorous standards, that make us part of a global movement of companies dedicated to using business as a force for good. We are proud to be included in a network of over 6,000 mission-led businesses, committed to meeting the rising standards for social and environmental performance. Xeros develops innovative sustainable technologies that greatly reduce the impact of laundry on the eco-system. Our technology achieves superior performance, is cost effective and highly efficient all whilst minimising the environmental impact of manufacturing and cleaning our clothes. Our products reduce water use, chemical use, energy use, and can prevent microfibres from our laundry entering the oceans. It is estimated that 35% of all microplastic in the oceans come from washing our clothes. Being a B Corp is a testament to our team and we remain dedicated to making a positive difference in our communities and beyond. POST PERIOD END AND OUTLOOK On the back of our progress in 2024, and the near-term revenue opportunities progressed in 2025 month on month cash flow breakeven remains achievable in the current financial year, albeit dependent on the timing of licensees. At the time of writing, we have four of the world’s largest washing machine manufacturers undergoing a technical verification process for our Laundry Care technology ahead of potential Joint Development Agreements (JDAs). We are also in discussions with three major washing machine brands for our external filter. Any one of these JDAs could be potentially transformational for Xeros. Not only do they bring some immediate revenue, but they are also the pathway to the scaling of our technology and subsequent royalty payments. While timing of JDAs can be frustrating, we continue to make progress across our discussions. The XF3 external filter, retail sales of the 9kg IFB washing machine, the signing of one JDA and sales of Yilmak’s denim processing machines, are our near-term revenue generators underpinning current market expectations. As well as the commercialisation opportunities we have in hand, we continue to gain attention from the wider market about the potential of our technology to help save money, generate new sales interest, meet upcoming environmental legislation and aid the fashion industry in its need for more sustainable fashion. This interest together with the belief that our technology is ‘The Future of Laundry’ and the best solution for the industry’s problems, gives us confidence in the longer-term and global potential of the Group. NEIL AUSTIN Chief Executive Officer 19 May 2025 XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 12 STRATEGIC REPORT / CHIEF EXECUTIVE OFFICER’S REVIEW CONTINUED Group revenue was generated as follows: YEAR ENDED 31 DECEMBER 2024 £’000 YEAR ENDED 31 DECEMBER 2023 £’000 Service revenue 50 82 Licensing revenue 63 138 Sale of goods 48 77 Total revenue 161 297 The financial results in 2024 reflect the continuation of the Group’s shift to a pure licensing business. While, as communicated previously, there were delays in the commencement of the Group’s anticipated licencing revenue, long standing partners continued to value the Group’s technology, and the Group remains well positioned as contracts come online. The Group’s future revenue is based upon the anticipated commercial progress made by its commercial partners as they market and sell products incorporating Xeros technology into their respective markets. The Group has made further progress in the year at setting an appropriate cost base, which can support existing and attract new licence partners, with an expectation that this cost base can support the Group in the medium term as it moves into profitability. Further information on these financial results is provided below. Group revenue decreased by 45.8% to £0.2m in the year ended 31 December 2024 (2023: £0.3m). The Group’s revenue is derived from three principal sources: • Service revenue: reflecting the servicing of existing estate, based principally in Europe. • Licensing revenue: reflecting royalty payments from licence partners, milestone payments during the technology transfer process and advance fees for access to Group intellectual property. • Sale of goods: reflecting sales of XOrbs to licence partners and other physical goods as necessary The Group continues to receive service revenue related to the retained estate of commercial laundry machines in the UK and Europe. As the licensing model grows, this service revenue is expected to become a smaller part of the overall revenue mix. Licensing revenue in the period was £0.06m (2023: £0.14m), a decrease of 54.3%; revenue from sale of goods was £0.05m in the period (2023: £0.08m), a decrease of 37.7%. Service revenue in the period decreased to £0.05m (2023: £0.08m). The decrease in revenue and the revenue mix recorded in the year led to a decrease in gross margin for the period to £0.14m (2023: £0.25m), a decrease of 43.3%, resulting in a gross margin percentage of 86.3% (2023: 82.5%). The Group decreased its adjusted EBITDA loss by 5.2% to £4.4m (2023: loss £4.6m) as a result of ongoing cost controls. Gross profit/loss and adjusted EBITDA are considered the key financial performance measures of the Group as they reflect the trading activities of the Group, which are focused on core commercialisation activities. Adjusted EBITDA is defined as the loss on ordinary activities before interest, tax, share-based payments and warrant expense, depreciation and amortisation. Administrative expenses, decreased by 4.8% to £4.7m (2023: £5.0m), following a reduction in the Group’s headcount and a continued focus on cost across the business. The Group’s average headcount fell by 10% in the year to 27 (2023: 30). The Group reported an operating loss of £4.6m (2023: loss £4.7m), a decrease of 2.8%. The loss per share was 1.08p (2023: loss 2.82p). Net cash outflow from operations decreased by 3.7% to £4.5m (2023: £4.7m) as a result of the Group’s overall cost reduction, as shown in a reduction in cash used in operations to £4.7m (2023: £5.2m), and the receipt of £0.2m R&D tax credits from HMRC relating to 2023. Cash utilisation was in line with the Board’s expectations. Cash utilisation is not expected to increase during 2025. The Group had existing cash resources, including cash on deposit as at 31 December 2024 of £2.8m (2023: £1.6m) and remains debt free. The Going Concern statement on page 36 draws attention to the Directors’ views on the Group’s ongoing prospects and the key assumptions behind the preparation of these accounts on a going concern basis, including their views on the material uncertainty contained within that statement. ALEX TRISTRAM Finance Director 19 May 2025 FINANCIAL REVIEW XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 13 STRATEGIC REPORT INTRODUCTION GOVERNANCE FINANCIAL STATEMENTS PRINCIPAL ACTIVITY Our Care and Finish technologies use patented, reusable XOrbs housed in our engineered XDrum for minimum disruption. Together, these components significantly reduce the amount of water and chemistry used in the dyeing, finishing or laundering of garments and fabrics. They increase the efficiency of these processes which require molecules to be either affixed or removed from substrates. In the case of laundry, they are proven to significantly increase the life of clothes and fabrics. The results are major improvements in economic, operational, product and environmental outcomes. The Group has signed multiple licence agreements for its Care and Finish technologies with leading OEMs in major commercial and domestic markets. XFilter is the Group’s proprietary washing machine filtration technology which prevents harmful microfibres including microplastics, generated during washing cycles, from being released into the world’s rivers and oceans. Microfibres released into the environment from clothing and fabrics during their laundering are a major source of pollution in the environment and contamination in the food chain. The Company is incorporated and domiciled in the UK. BUSINESS MODEL The Group seeks to generate a return through the licence of its proprietary technology to third parties in order to generate royalties and through the sale of XOrbs to support the production and distribution of products which incorporate Xeros technology. Further information on the Group’s activities and how it seeks to create added value is included in the Chairman’s statement, Chief Executive Officer’s review and financial review on pages 9 to 13. BUSINESS REVIEW AND RESULTS A review of the Group’s performance and future prospects is included in the Chairman’s statement, Chief Executive Officer’s review and financial review on pages 9 to 13. The loss for the year attributable to equity holders was £4.5m (2023: £4.3m). KEY PERFORMANCE INDICATORS As the Group is in the process of commercialising its platform technologies, the Directors consider the key quantitative performance indicators to be: the level of cash and deposits held in the business of £2.8m (2023: £1.6m), gross profit/loss and adjusted EBITDA. Adjusted EBITDA is defined as the loss on ordinary activities before interest, tax, share-based payment and warrant expense, depreciation and amortisation. Adjusted EBITDA is discussed in more detail in the financial review on page 13. The Board performs regular reviews of actual results against budget, and monitors cash balances on a regular basis to ensure that the business has sufficient resources to enact its current strategy. Certain qualitative measures, such as the performance of commercial initiatives, are also monitored on a regular basis. The Board will continue to review the KPIs used to assess the business as it grows. KEY RISKS The Board carefully considers the risks facing the Group and endeavours to minimise the impact of those risks. The key risks are as follows: DEPENDENCE ON KEY EXECUTIVES AND PERSONNEL DEPENDENCE ON KEY EXECUTIVES AND PERSONNEL AND THE ABILITY TO ATTRACT AND RETAIN AND THE ABILITY TO ATTRACT AND RETAIN APPROPRIATELY QUALIFIED PERSONNEL APPROPRIATELY QUALIFIED PERSONNEL The Group’s future success is substantially dependent on the continued services and performance of its Executive Directors and senior management, and its ability to attract and retain suitably skilled and experienced personnel. The Group cannot give assurances that members of the senior management team and the Executive Directors will continue to remain within the Group. Finding and hiring any such replacements could be costly and might require the Group to grant significant equity awards or other incentive compensation, which could adversely impact its financial results. In mitigation, the Group seeks to appropriately reward and incentivise key Group personnel, alongside succession planning to reduce the impact of departures should they occur. STRATEGIC REPORT Xeros Technology Group plc (LN: XSG) is the creator of technologies that reduce the impact of clothing on the planet. XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 14 STRATEGIC REPORT INTELLECTUAL PROPERTY INTELLECTUAL PROPERTY The Group’s success will depend in part on its ability to maintain adequate protection of its intellectual property, covering its processes and applications. The intellectual property on which the Group’s business is based is a combination of patent applications and proprietary know- how. Patents for which the application is pending or for which applications are expected in the future may not be granted or that any such grant will be on a timely basis. The Group believes that the portfolio it holds is robust but there remains a risk that the portfolio will not provide the anticipated commercial advantages, or that the patents within it will be held valid if challenged, or that third parties will not claim rights in, or ownership of, the patents and other proprietary rights held by the Group. The Group is also subject to risks that others may develop similar products to the Group, duplicate any of the Group’s products or design around any patent applications held by the Group. Others may hold or receive patents which contain claims having a scope that covers products developed by the Group (whether or not patents are issued to the Group). In addition, no assurance can be given that others will not independently develop or otherwise acquire substantially equivalent techniques or otherwise gain access to the Group’s unpatented proprietary technology or disclose such technology or that the Group can ultimately protect meaningful rights to such unpatented technology. Any claims made against the Group’s intellectual property rights, even without merit, could be time-consuming and expensive to defend and could have a materially detrimental effect on the Group’s resources. In mitigation of the above risks, the Group holds significant patent litigation insurance, on which it could call should any litigation be required, either in defence of a claim against the Group or to prosecute those it believes infringe on IP protected rights. The Group actively engages in contingency planning, both internally and externally, and continues to monitor the wider IP landscape as to be aware of any relevant issues. ACCEPTANCE OF THE GROUP’S PRODUCTS ACCEPTANCE OF THE GROUP’S PRODUCTS The success of the Group will depend on the market’s acceptance of, and attribution of value to, its core technologies and the benefits of incorporating the same into various applications. There can be no guarantee that this acceptance will be forthcoming, that an acceptable value will be placed upon such technology, or that the Group’s core technology will succeed as an alternative to other applications. The Group has performed extensive testing, both internally and with its technology partners, to ensure that the technology works and can fit into the processes and equipment in the production chain. The Group acts as an influencer and thought leader to provide a path to long-term advocacy and acceptance within the relevant industries. LACK OF PROGRESS WITHIN THE LEGISLATIVE LACK OF PROGRESS WITHIN THE LEGISLATIVE ENVIRONMENT ENVIRONMENT The Group expects the legislative environment for domestic laundry filtration to be a significant factor in widespread adoption of the Group’s technology. There remains a risk that the relevant legislation within the Group’s target markets is not enacted, or that the legislation that is enacted is not of the standards anticipated. The Group works with industry and NGO partners to provide the relevant support and data to legislative assemblies in important jurisdictions, and continues to lobby for the protections it believes are required to safeguard the environment from worsening microparticle pollution. In addition, the Group has multiple applications with commercial potential and as such spreads risk in this way. SUPPLY AND LOGISTICS OF KEY MATERIALS SUPPLY AND LOGISTICS OF KEY MATERIALS The Group is dependent on a small number of key suppliers for the production, manufacture and logistics of key materials used in the Group’s technology and by licence partners. There remains a risk that these suppliers cannot fulfil the Group’s requirements on terms the Group considers acceptable and this could cause delays in the commercialisation of the Group’s technology, or reduce the returns from the Group’s commercial agreements. The Group has been working with a number of suppliers for key materials, and seeks to have long-term sourcing agreements in place with multiple suppliers to mitigate this risk. IT SECURITY IT SECURITY There is a risk that the Group suffers a breach of IT security, including a ransomware attack or significant data breach. In mitigation, the Group has strong IT security policies, and requires all staff to complete regular training to ensure they are up to date with the latest developments. RISK OF COMPETING TECHNOLOGY RISK OF COMPETING TECHNOLOGY There is a risk that technological advances in competing technology and/or the lower cost of such technology may impede the commercial exploitation of the Group’s technology. In mitigation, the Group has developed specific propositions to offer to customers and continues to monitor the global marketplace to keep up to date with the latest developments. XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 15 STRATEGIC REPORT INTRODUCTION GOVERNANCE FINANCIAL STATEMENTS ECONOMIC CONDITIONS, CURRENT ECONOMIC ECONOMIC CONDITIONS, CURRENT ECONOMIC WEAKNESS AND GEOPOLITICAL RISKS WEAKNESS AND GEOPOLITICAL RISKS Any economic downturn either globally or locally in any area in which the Group operates may have an adverse effect on the demand for the Group’s products. A more prolonged economic downturn may lead to an overall decline in the volume of the Group’s sales, or a delay in the full commercialisation of the Group’s technologies, restricting the Group’s ability to generate a profit. As a UK domiciled business which trades internationally, the Group is exposed to the risks associated with the global trading environment, including increased tariff and non-tariff barriers introduced in recent months. The Board expects future revenues from the commercialisation of its technology to be in the form of royalties on its intellectual property and from a wide variety of geographical locations, and continues to monitor closely the global trading environment. As at the date of this report, the Board does not consider the ongoing circumstances to pose a material risk to the Group’s future revenues. The Group operates, or is seeking to develop its operations, in several geographic regions and countries, some of which are categorised as developing and, as a result, is exposed to a wide range of political, economic, regulatory, social and tax environments. These environments are subject to changes in a manner that may have a material adverse effect on the Group, including changes to government policies and regulations governing import and export controls, tariffs, subsidies, income and other forms of taxation (including policies relating to the granting of advance rulings on taxation matters), repatriation of income, royalties, the environment, labour and health and safety. The geopolitical risks associated with operating in a variety of regions and countries, if realised, could affect the Group’s operations and could have a material adverse effect on the Group’s business, financial condition or results. FUTURE DEVELOPMENTS Future developments are described in the Chairman’s statement, Chief Executive Officer’s review and financial review on pages 9 to 13. STATEMENT IN RESPECT OF SECTION 172 OF THE COMPANIES ACT 2006 Under section 172 of the Companies Act 2006, the Directors of Xeros Technology Group plc have a duty to promote the success of the Group for the benefit of the members as a whole and, in doing so, have regard to: (i) the likely consequences of any decision in the long term; (ii) the interests of the Company’s employees; (iii) the need to foster the Company’s business relationships with suppliers, customers and others; (iv) the desirability of the Company maintaining a reputation for high standards of business conduct; and (v) the need to act fairly between members of the Company. The Directors of Xeros Technology Group plc consider the following areas of key importance in fulfilment of this duty: • Long-term strategic planning and budgeting to allow the Group to project a path to creating value for shareholders; • Continued emphasis on health and safety, with regular and comprehensive dialogue with employees; • Open and fair dealings with partners, customers, and suppliers, leading to long-term mutually beneficial relationships; • A Group built on improving sustainability, with innovative technologies serving a range of industries; and • Consideration of the Group’s operations on the community and the environment. The strategic report on pages 14 to 16 was approved by the Board and is signed on its behalf. NEIL AUSTIN Chief Executive Officer 19 May 2025 XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 16 STRATEGIC REPORT / STRATEGIC REPORT CONTINUED GOVERNANCE XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 17 DIRECTORS’ REPORT KLAAS DE BOER KLAAS DE BOER NEIL AUSTIN NEIL AUSTIN Chairman Chairman Chief Executive Officer Chief Executive Officer Appointed to the board: Appointed to the board: January 2020 Appointed to the board: Appointed to the board: August 2022 Skills and experience: Skills and experience: Klaas joined Xeros as Chairman in January 2020. In June 2021 he left Entrepreneurs Fund Management LLP, where he had served as Managing Partner since 2008. Klaas holds numerous board positions with international companies including SmartKem, Inc., General Fusion, Inc., where he is Chair, and veriNOS Pharmaceuticals GmbH. Klaas began his career with McKinsey & Company before transitioning to venture capital with Baan Investment more than 20 years ago. He holds an MSc in Applied Physics from Delft University of Technology and an MBA from INSEAD. Klaas is Chair of the Nominations Committee. Skills and experience: Skills and experience: Neil joined Xeros in August 2022 from Strix Ltd, an AIM listed global leader in domestic appliance heating control, where he led the consumer goods and group marketing divisions. Prior to that Neil was CCO of Neurovalens Limited, an innovative med tech company working in cerebral stimulation. He has also held leadership positions in sales, marketing & strategy functions with the Glen Dimplex Group and Whirlpool EMEA. As well as general management, Neil has worked on M&A, integration projects, project management approaches and commercial excellence initiatives. The Directors hereby present their annual report and audited consolidated and parent company financial statements for the year ended 31 December 2024. SHARE CAPITAL AND FUNDING SHARE CAPITAL AND FUNDING Full details of the Group and Company’s share capital movements during the year are given in note 18 of the financial statements. DIVIDENDS DIVIDENDS The Directors do not recommend the payment of a dividend (2023: nil). DIRECTORS AND THEIR INTERESTS DIRECTORS AND THEIR INTERESTS The following Directors held office during the period and up to the date of signing this report except where noted otherwise: Klaas de Boer David Armfield Neil Austin Rachel Nooney Alexander Tristram (appointed 11 March 2024) Directors’ interests in the shares of the Company, including family interests, are included in the Directors’ remuneration report on pages 21 to 22. DIRECTORS’ INDEMNITY DIRECTORS’ INDEMNITY INSURANCE INSURANCE The Group has maintained insurance throughout the year for its Directors and officers against the consequences of actions brought against them in relation to their duties for the Group. PROFILES OF THE CURRENT DIRECTORS PROFILES OF THE CURRENT DIRECTORS XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 18 GOVERNANCE ALEX TRISTRAM ALEX TRISTRAM DAVID ARMFIELD DAVID ARMFIELD RACHEL NOONEY RACHEL NOONEY Finance Director Finance Director Senior Independent Director Senior Independent Director Non-Executive Director Non-Executive Director Appointed to the board: Appointed to the board: March 2024 Appointed to the board: Appointed to the board: June 2018 Appointed to the board: Appointed to the board: July 2021 Skills and experience: Skills and experience: Alex joined the Xeros in January 2018 as Group Financial Accounting Manager and was appointed Director of Finance and Company Secretary in March 2023, formally joining the Board in March 2024. Prior to joining Xeros, Alex qualified as a Chartered Accountant with PwC in 2013 and worked previously at Pressure Technologies PLC. Skills and experience: Skills and experience: David joined Xeros in June 2018. His background is in corporate finance, having previously worked for Lehman Brothers Limited as its Co-Head of European Industrial Coverage. He has also served as a partner at PwC, and as the firm’s National Head of Industrial Products. He is a founding Partner of Kinetix Critchleys Corporate Finance LLP, which provides advisory services to companies in the Clean Technology and Resource Efficiency industries. David is Chair of the Audit Committee and the Remuneration Committee. Skills and experience: Skills and experience: Rachel joined Xeros in July 2021. Her background is in brand development, strategy, marketing planning, and creative. She has held senior Head of Brand and Marketing roles at Marks and Spencer plc and New Look, where she was responsible for leading brand development, marketing campaigns, digital and retail marketing, talent, creative and production. Rachel has worked both client and agency side in marketing, and is the founder and principal consultant of shoreseven, a brand and strategic marketing consultancy. Rachel is a member of CIM and has provided mentorship for marketeers and young people wanting to develop and break into the creative industries with both CIM and Creative Mentor Network. XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 19 STRATEGIC REPORT INTRODUCTION GOVERNANCE FINANCIAL STATEMENTS SUBSTANTIAL SHAREHOLDERS SUBSTANTIAL SHAREHOLDERS As at 31 March 2025, shareholders holding more than 3% of the share capital of Xeros Technology Group plc were: NAME OF SHAREHOLDER NUMBER OF SHARES % OF VOTING RIGHTS Amati Global Investors 66,666,666 12.80 Dowgate Capital 54,341,528 10.44 Lombard Odier Investment Managers 40,548,196 7.79 Entrepreneurs Fund LP 35,767,534 6.87 Rathbones 33,333,333 6.40 Interactive Investor 30,467,799 5.85 Hargreaves Lansdown 27,265,231 5.24 First Equity 24,500,000 4.71 Spreadex 21,069,493 4.05 Patronus Partners 19,822,449 3.81 EMPLOYMENT POLICIES EMPLOYMENT POLICIES The Group supports employment of disabled people where possible through recruitment, by retention of those who become disabled and generally through training, career development and promotion. The Group is committed to keeping employees as fully informed as possible with regard to the Group’s performance and prospects and seeks their views, wherever possible, on matters which affect them as employees. DISCLOSURE OF RISKS DISCLOSURE OF RISKS The Group’s exposure to price risk, credit risk, liquidity risk and cash flow risk are discussed in note 15 to the Financial Statements. RESEARCH AND DEVELOPMENT RESEARCH AND DEVELOPMENT The Group is engaged in research and development in respect of current and future applications of its technologies, improving both existing processes and developing new ones where appropriate. STATEMENT AS TO DISCLOSURE OF INFORMATION TO STATEMENT AS TO DISCLOSURE OF INFORMATION TO THE AUDITOR THE AUDITOR The Directors who were in office on the date of approval of these financial statements have confirmed that, as far as they are aware, there is no relevant audit information of which the auditor is unaware. Each of the Directors have confirmed that they have taken all the steps that they ought to have taken as directors in order to make themselves aware of any relevant audit information and to establish that it has been communicated to the auditor. AUDITOR AUDITOR The Board will put Crowe U.K. LLP forward to be appointed as auditor by the shareholders and a resolution concerning their appointment will be put to the forthcoming AGM of the Company. On behalf of the Board NEIL AUSTIN Unit 2, Evolution Chief Executive Officer Advanced Manufacturing Park 19 May 2025 Whittle Way Catcliffe Rotherham S60 5BL XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 20 GOVERNANCE / DIRECTORS’ REPORT CONTINUED DIRECTORS’ REMUNERATION REPORT This remuneration report is not intended to comply with the quoted company remuneration reporting requirements in company law and is provided in order to meet the requirements of AIM rule 19. It is the Company’s policy that Executive Directors should have contracts with an indefinite term providing for a maximum of six months’ notice. In the event of early termination, the Directors’ contracts provide for compensation up to a maximum of basic salary for the notice period. Non-Executive Directors are employed on letters of appointment which may be terminated on not less than one month’s notice. Companies with securities listed on AIM do not need to comply with the UKLA Listing Rules. The Remuneration Committee is, however, committed to maintaining high standards of corporate governance and disclosure and has applied the guidelines, as far as practicable, given the current size and development of the Company. REMUNERATION COMMITTEE REMUNERATION COMMITTEE The Remuneration Committee consists of David Armfield as Chairman and Klaas de Boer. The Remuneration Committee reviews and make recommendations in respect of the Directors’ remuneration and benefits packages, including share options, and the terms of their appointment. The Remuneration Committee also makes recommendations to the Board concerning the allocation of share options to employees under the share incentive schemes. The Remuneration Committee meets at least once a year. The main elements of the remuneration packages for Executive Directors and senior management are: BASIC ANNUAL SALARY (INCLUDING DIRECTORS’ FEES) The base salary is reviewed annually from the beginning of each calendar year. The review process is undertaken by the Remuneration Committee and takes into account several factors, including the current position and development of the Group, individual contribution and market salaries for comparable organisations. PENSION CONTRIBUTIONS Executive directors are eligible to join the Group’s defined contribution pension scheme where they choose to do so. Executive directors may, where considered appropriate by the Remuneration Committee, request the monetary value of the pension contributions to which they are entitled under the terms of the Group’s pension scheme be paid to them in cash. DISCRETIONARY ANNUAL BONUS All Executive Directors and senior managers are eligible for a discretionary annual bonus which is paid in accordance with a bonus scheme developed by the Remuneration Committee. This takes into account business performance and commercial progress, along with financial results. SHARE INCENTIVE SCHEMES The Group operates share option plans, under which certain Directors and senior management have been granted options to subscribe for ordinary shares. All options are equity settled. The options are subject to service and performance conditions, have an exercise price of between 1.5 pence and 30,500 pence and the vesting period is generally three years. If the options remain unexercised after a period of 10 years from the date of grant, the options expire. The Group has no legal or constructive obligation to repurchase or settle the options in cash. REMUNERATION POLICY FOR NON-EXECUTIVE DIRECTORS Remuneration for Non-Executive Directors is set by the Chairman and the Executive Members of the Board. Non-Executives do not participate in bonus schemes. DIRECTORS’ REMUNERATION DIRECTORS’ REMUNERATION The remuneration of the main Board Directors’ of Xeros Technology Group plc who served from 1 January 2024 (or date of appointment if later) to 31 December 2024 (or date of resignation if earlier) was: SALARY AND FEES £’000 PENSION £’000 BENEFITS £’000 TOTAL YEAR ENDED 31 DECEMBER 2024 £’000 TOTAL YEAR ENDED 31 DECEMBER 2023 £’000 Klaas de Boer 70 – – 70 70 Neil Austin 221 – 1 222 222 Paul Denney (note 1) – – – – 91 Alexander Tristram (note 2) 85 4 1 90 – David Armfield 35 – – 35 35 Rachel Nooney 35 – – 35 35 Total 446 4 2 452 453 Note 1: Paul Denney resigned as a Director on 28 February 2023 Note 2: Alexander Tristram was appointed as a Director on 11 March 2024 XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 21 STRATEGIC REPORT INTRODUCTION GOVERNANCE FINANCIAL STATEMENTS DIRECTORS’ SHAREHOLDINGS DIRECTORS’ SHAREHOLDINGS The interests of the Directors holding office at 31 December 2024 in the shares of the Company as at 31 March 2025, including family interests, were: ORDINARY SHARES OF 0.1P EACH NUMBER % Klaas de Boer 11,383,333 2.19 Neil Austin 866,666 0.17 Alexander Tristram 166,666 0.03 David Armfield 2,892,857 0.56 Rachel Nooney 200,000 0.04 DIRECTORS’ INTERESTS IN SHARE OPTIONS DIRECTORS’ INTERESTS IN SHARE OPTIONS Directors’ interests in share options, for Directors who held office at any point during the period, granted under either the Xeros Technology Group plc Enterprise Management Incentive Share Option Scheme or the Xeros Technology Group plc Unapproved Share Option Scheme, to acquire ordinary shares of 0.01 pence each in the Company at 31 December 2024 were: AT 1 JANUARY 2024 GRANTED DURING THE PERIOD EXERCISED DURING THE PERIOD FORFEITED/ LAPSED DURING THE PERIOD APPOINTMENT AS A DIRECTOR AT 31 DECEMBER 2024 EXERCISE PRICE Neil Austin (note 1) 4,529,403 – – – – 4,529,403 5 pence Neil Austin (note 2) – 11,091,189 – – – 11,091,189 1.5 pence Alex Tristram (note 3) – 3,905,148 – – – 3,905,148 1.5 pence Alex Tristram (note 4) – – – – 32,523 32,523 70 pence Alex Tristram (note 5) – – – – 1,550 1,550 1,000 pence Alex Tristram (note 6) – – – – 52 52 7,650 pence Alex Tristram (note 7) – – – – 18,987 18,987 175 pence Alex Tristram (note 8) – – – – 7,000 7,000 93.5 pence Note 1: There were employment conditions in relation to the 4,529,403 options issued on 10 November 2022 which allowed for vesting in three equal proportions on 11 November 2023, 11 November 2024 and 11 November 2025. On behalf of the Board DAVID ARMFIELD Chairman of the Remuneration Committee 19 May 2025 XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 22 GOVERNANCE / DIRECTORS’ REMUNERATION REPORT CONTINUED CORPORATE GOVERNANCE REPORT CORPORATE GOVERNANCE The Company adopts the 2024 edition of the Quoted Companies Alliance Corporate Governance Code for small and mid-sized quoted companies (the “Code”), released in 2024, as the basis for its corporate governance structures, and sets out below how it applies the various aspects of the Code. The responsibility for ensuring compliance and accurate reporting of Corporate Governance resides with the Board. Corporate Governance will be continually monitored and reviewed by the Board at least annually, as part of the Annual Report and Accounts process each year. The Board sets out its view on compliance with the corporate governance principles as detailed in the Code below and publishes further details on it’s Corporate Governance, including the Chair’s Corporate Governance Statement, on its website at www.xerostech.com. PRINCIPLE ONE: PRINCIPLE ONE: ESTABLISH A PURPOSE, STRATEGY AND BUSINESS MODEL WHICH PROMOTE LONG-TERM VALUE FOR SHAREHOLDERS The Xeros Group develops innovative sustainable technologies that greatly reduce the impact of laundry on the eco-system, and the Group’s purpose is to enable these technologies to have a far-reaching impact. The Group’s strategy is to develop into an IP-rich, capital-light licensor of proprietary solutions to multiple scale industries, all of which deploy the same Xeros core technologies. To enable these technologies to have a far-reaching impact, the strategy is to license our intellectual property to partners who already have strong international market positions and who also demonstrate a strategic intent to deliver increased levels of sustainability, empowering them to scale our innovations. Full details of the Xeros Group strategy can be seen in the Group’s Annual Report. Updates on the strategy of the Group are published within the half-year and full-year financial reports, and at other times as necessary. PRINCIPLE TWO: PRINCIPLE TWO: PROMOTE A CORPORATE CULTURE THAT IS BASED ON ETHICAL VALUES AND BEHAVIOURS Lessening the impact of global industries on the environment is at the core of Xeros’ technologies, and the Board believes that wide adoption of Xeros’ technologies would provide genuine solutions to huge industry challenges. It is this belief in the positive impact of the Group’s technology that underpins the Group’s broader purpose. During 2024, the Group’s shareholders approved the amended to its Articles of Association to finalise the process of becoming B Corp Certified – an external assessment of the Group’s corporate culture and important validation for both the Board and the employees of the Group. The support of the Board for both the B Corp certification and the values which sit below if is indicative of the culture as led by the Board. PRINCIPLE THREE: PRINCIPLE THREE: SEEK TO UNDERSTAND AND MEET SHAREHOLDER NEEDS AND EXPECTATIONS The Group remains committed to an ongoing dialogue with shareholders to ensure that its strategy, direction and performance are clearly understood. Understanding the opinion of analysts and investors in the Group, and, as result, helping our business be better understood, is a crucial objective for the Group and the Group actively seeks to engage in this area. PRIVATE SHAREHOLDERS The AGM is the key forum for dialogue between retail shareholders and the Board. The Notice of Meeting is sent to shareholders at least 21 days before the meeting. The Non-Executive Directors and the Executive Directors routinely attend the AGM and are available to answer questions raised by shareholders. For each vote, the number of proxy votes received for, against and withheld is announced at the meeting. The results of the AGM are subsequently published on the Group’s website. The Executive Directors and the Chair have routinely held a virtual results presentation and question and answer session to interested private shareholders at least twice annually. INSTITUTIONAL SHAREHOLDERS The Directors seek to build long-term relationships with institutional shareholders. These relationships are primarily managed by the Chief Executive Officer and the Finance Director. This process includes presentations to institutional shareholders and analysts following the release of the full-year and interim results, alongside other meetings as appropriate. Where appropriate, these relationships are supported by the Chair. The Board as a whole is updated on these relationships, including any views or concerns held by shareholders, by the Executive Directors on a regular basis. Analyst reports are also discussed with the Board when they are produced. PRINCIPLE FOUR: PRINCIPLE FOUR: TAKE INTO ACCOUNT WIDER STAKEHOLDER INTER- ESTS, INCLUDING SOCIAL AND ENVIRONMENTAL RESPONSIBILITIES XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 23 STRATEGIC REPORT INTRODUCTION GOVERNANCE FINANCIAL STATEMENTS EMPLOYEES The Group is committed to employee engagement, as the knowledge, skill and application of its employees is the defining factor in the long-term success of the Group. The Group engages with employees to establish what is important to them, through direct feedback, employee surveys and ongoing dialogue. The annual performance review cycle is key to the Group, ensuring that staff are given the necessary support in their development throughout the year, as well as allowing the senior management team to get feedback at a one-to-one level. SUPPLIERS The Group has relationships with key suppliers which are managed closely by relevant senior management to ensure ongoing supply of products and services which are crucial to the Group. As part of the Group’s supplier onboarding processes, the Group considers key social and environmental indicators to ensure that suppliers policies are in place where necessary and that their environmental values are in line with those of Xeros. The Board is actively updated on supplier relationships on a regular basis. CUSTOMERS The Group’s commercial strategy is to license its proprietary polymer-based water, energy & chemical saving and microfibre filtration solutions to partners with the ability and expertise to bring them to market in a successful and sustainable way, and who share the environmental and social values of Xeros. As these contracts develop, these long terms relationships are crucial to the success of the Group. These key customers relationships are managed by the appropriate members of the Group’s senior management, with Board support where necessary. The Board are updated on key customer relationships on a regular basis. ENVIRONMENTAL AND SOCIAL ISSUES Xeros’ focus is, at heart, on reducing the impact on the planet from some of the world’s biggest industries, and in some of the world’s most affected areas. This aim feeds into how Xeros interacts with key stakeholders, working with partners who share a desire to make a difference. PRINCIPLE FIVE: PRINCIPLE FIVE: EMBED EFFECTIVE RISK MANAGEMENT, INTERNAL CONTROLS AND ASSURANCE ACTIVITIES, CONSIDERING BOTH OPPORTUNITIES AND THREADS, THROUGHOUT THE ORGANISATION The Group has established a framework of risk management and internal controls that the Directors believe to be appropriate for the size and operations of the Group. This framework is reviewed by the Executive Team, the Audit Committee and the Board on an ongoing basis. The Board is responsible for the overall risk management of the Group, including the internal control environment. The Group’s risk register is updated and maintained by the Executive team and discussed with the Board on a regular basis. Monthly results, including variances and commentary, are reported to the Board. The Board considers that the internal control environment in place within the Group is appropriate for the size, complexity and risk profile of the Group. The Board delegates appropriate duties to the Audit Committee, including regarding the financial statements, accounting policies and the maintenance of proper internal business, and operational and financial controls. PRINCIPLE SIX: PRINCIPLE SIX: ESTABLISH AND MAINTAIN THE BOARD AS A WELL-FUNCTIONING, BALANCES TEAM LED BY THE CHAIR The Board comprises the Non-Executive Chairman, two Executive Directors and two Non-Executive Directors. The Board believes that the Non-Executive Chairman and the Non- Executive Directors are classified as independent. The Board believes that the make-up of the Directors currently provides a balance between independence and knowledge of the Group which allows them to discharge their responsibilities effectively, alongside the relevant Board committees. The Audit, Nominations and Remuneration Committees are formed exclusively of Non-Executive Directors. The Board is expected to commit time for a minimum of eight Board meetings a year, alongside adequate preparation time. Other meetings and commitments may be required as appropriate PRINCIPLE SEVEN: PRINCIPLE SEVEN: MAINTAIN APPROPRIATE GOVERNANCE STRUCTURES AND ENSURE THE INDIVIDUALLY AND COLLECTIVELY THE DIRECTORS HAVE THE NECESSARY UP-TO-DATE EXPERIENCE, SKILLS AND CAPABILITIES The Board believes that the current make-up of Directors offers a well-balanced mix of skills in areas relevant to the long-term strategy of the Group which is appropriate for the current size and scope of the Group’s operations. This belief is gained through a knowledge and understanding of the backgrounds of the Board, alongside the understanding of the needs of the Xeros Group. Details of the Directors, their backgrounds and the skills and expertise they bring to Xeros can be found on our website. The Board members keep their skills up to date through regular updates from professional advisors and relevant training. The Board delegates authority to Committees where appropriate, including the Nominations Committee, the Audit Committee and the Remuneration Committee. The Board considers the skills and expertise required for effective support to be received from these committees when considering those skills required for the Board as a whole. XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 24 GOVERNANCE / CORPORATE GOVERNANCE REPORT CONTINUED The Board considers succession planning through the work of the nomination committee, considering the long-term benefits of an appointee and how their skills fit into the existing skills possessed by the Board. The continuous improvement process the Board undergoes ensures that members are aware of the areas in which they would like to strengthen, and it is through this lens that Director Recruitment is performed. Executive Director and Senior Management succession planning is informed through the annual review cycle. PRINCIPLE EIGHT: PRINCIPLE EIGHT: EVALUATE BOARD PERFORMANCE BASED ON CLEAR AND RELEVANT OBJECTIVES, SEEKING CONTINUOUS IMPROVEMENT The Board is committed to continuous improvement and ensuring that the Board performs as an effective unit and provides the leadership that the Group requires. The Group performs an annual review of its performance as a unit and of the specific performance of the Chair, which is carried out internally and led by the Chair. The Group’s Senior Independent Director also performs a review in to the performance of the Chair. The Board considers that this review is sufficient for the current size and scope of the Group’s operations. PRINCIPLE NINE: PRINCIPLE NINE: ESTABLISH A REMUNERATION POLICY WHICH IS SUPPORTIVE OF LONG-TERM VALUE CREATION AND THE COMPANY’S PURPOSE, STRATEGY AND CULTURE The Group’s remuneration policy is set by the Remuneration Committee. The Board believes that the policy and the remuneration outcomes from the policy are appropriate within the current operational and financial circumstances of the Group, and the Board considered that it supports the Group’s long term strategic aims. The Group’s remuneration strategy is for Executive Directors and other key members of the management team to be provided with sufficient opportunities for remuneration in order to provide incentives, and for this remuneration to be judged against objectives considered to be in line with the long term interests of the shareholders of the Group. The Remuneration Committee Report is put to an advisory vote as part of the Group’s AGM process each year. PRINCIPLE TEN: PRINCIPLE TEN: COMMUNICATE HOW THE GROUP IS GOVERNED AND IS PERFORMING BY MAINTAINING A DIALOGUE WITH SHAREHOLDERS AND OTHER KEY STAKEHOLDERS The Group communicates with shareholders through the Annual Report and Accounts, full- year and half-year announcements, the AGM and through meetings with institutional shareholders. In addition, the Group holds an online briefing and question and answer session, at least twice a year following results and on an ad-hoc basis as required. More detailed corporate information, including all announcements and presentations, can be seen on the Xeros website. The Board is provided with updates on these communications by the Executive team and through the Group’s brokers as appropriate. The Group maintains an open dialogue with other key stakeholders, including Group employees. THE BOARD THE BOARD The Board currently comprises two Executive Directors and three Non-Executive Directors. AUDIT COMMITTEE AUDIT COMMITTEE The Audit Committee consists of David Armfield as Chairman and Rachel Nooney. Klaas de Boer, Neil Austin and Alex Tristram attend by invitation. The Audit Committee will, inter alia, determine and examine matters relating to the financial affairs of the Company including the terms of engagement of the Company’s auditor and, in consultation with the auditor, the scope of the audit. It has in the year received and reviewed reports from management and the Company’s auditor relating to the annual accounts and the accounting and internal control systems in use throughout the Group. The Audit Committee meets at least twice a year. NOMINATIONS COMMITTEE NOMINATIONS COMMITTEE The Nominations Committee consists of Klaas de Boer as Chairman, David Armfield and Neil Austin. The Nominations Committee monitors the size and composition of the Board and the other Board committees and is responsible for identifying suitable candidates for Board membership and monitoring the performance and suitability of the current Board on an ongoing basis. The Board underwent significant change in 2022 and the Committee has reviewed the structure and skill set and, with appointment of Alex Tristram as Finance Director in March 2024, it meets the current needs of the Group. The Nominations Committee meets at least once a year. INTERNAL CONTROL INTERNAL CONTROL The Board is responsible for maintaining a sound system of internal control. The Board’s measures are designed to manage, not eliminate risk, and such a system provides reasonable but not absolute assurance against material misstatement or loss. As it is AIM listed, the Company is not required to apply the full provisions of the UK Corporate Governance Code. The Board has adopted the QCA Corporate Governance Code, which it considers it appropriate for the size and scope of the business. Some key features of the internal control system are: (i) Management accounts information, budgets, forecasts and business risk issues are regularly reviewed by the Board which meets at least eight times per year; (ii) The Company has operational, accounting and employment policies in place; XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 25 STRATEGIC REPORT INTRODUCTION GOVERNANCE FINANCIAL STATEMENTS (iii) The Board actively identifies and evaluates the risks inherent in the business and ensures that appropriate controls and procedures are in place to manage these risks; (iv) There is a clearly defined organisational structure; and (v) There are well-established financial reporting and control systems. GOING CONCERN GOING CONCERN As at 31 December 2024, the Group had £2.8m of cash and cash equivalents. At this stage of its development, the Group incurs operating cash outflows and is reliant on existing cash resources to fund its operations. The Group has made commercial progress in recent periods and expects to generate revenue within 2025. The Directors consider that the Group has and expects to generate sufficient cash to meet its obligations as they fall due for at least 12 months following the date of this report. The Directors also believe that these financial resources, alongside the Group’s existing and anticipated customer contracts, provide the Group with a platform to reach cash breakeven. While the Group actively manages key customer stakeholders where appropriate, the revenue anticipated to allow the Group to reach cash breakeven anticipated to be generated by these contracts is reliant on the actions of third parties and there remains risk that progress is not forthcoming in the timeframes anticipated by the Directors. As a result of uncertainties over the timing of commercialisation, the Directors consider there be a material GOVERNANCE / CORPORATE GOVERNANCE REPORT CONTINUED uncertainty over the going concern status of the Group. The Directors consider that they have a number of options in place should there be delays in commercialisation, including reductions in discretionary spending, that would allow the existing cash resources to provide a longer runway. For these reasons, they continue to adopt the going basis of accounting in preparing this financial information. The Group is subject to a number of risks, including those as set out in the strategic report on pages 14 to 16. These risks include the global macro-economic conditions, particularly in the global markets in which the Group and its partners operate. The going concern assessment as carried out by the Directors has taken the impact of these into account as far as possible. While this inclusion does not change the assessment of the Directors in respect of going concern, the Group remains reliant on the progress of international licence partners in order for it to execute the commercialisation strategy. When making their going concern assessment the Directors assess available and committed funds against all non- discretionary expenditure, and related cash flows, as forecast for the period ended 31 December 2026. These forecasts indicate that the Group is able to settle its liabilities as they fall due in the forecast period. In these forecasts the Directors have considered appropriate sensitivities, including the progress of the Group’s commercial contracts. Accordingly, whilst the Directors acknowledge the material uncertainties mentioned above, they continue to believe that the going concern assumption is appropriate for the Group and the financial statements have been prepared on that basis. XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 26 STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND THE FINANCIAL STATEMENTS The Directors are responsible for preparing the Strategic Report, the Directors’ Report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the consolidated financial statements in accordance with UK-adopted international accounting standards and the parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law, including FRS101 ‘Reduced Disclosure Framework’). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss of the Company and the Group for that period. In preparing these financial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and accounting estimates that are reasonable and prudent; • state whether applicable international accounting standards in conformity with the requirements of the Companies Act 2006 or UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy, at any time, the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. The Directors are also responsible for safeguarding the Company’s assets and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors confirm that: • so far as each director is aware, there is no relevant audit information of which the Company’s auditor is unaware; and • the Directors have taken all the steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that the Company’s auditor is aware of that information. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. STATEMENT OF DIRECTORS’ RESPONSIBILITIES XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 27 STRATEGIC REPORT INTRODUCTION GOVERNANCE FINANCIAL STATEMENTS OPINION We have audited the financial statements of Xeros Technology Group plc (the “Parent Company”) and its subsidiaries (the “Group”) for the year ended 31 December 2024, which comprise: • the consolidated statement of profit or loss and other comprehensive income for the year ended 31 December 2024; • the consolidated and parent company statements of changes in equity for the year then ended; • the consolidated and parent company statements of financial position as at 31 December 2024; • the consolidated statement of cash flows for the year then ended; and • the notes to the financial statements, including material accounting policies. The financial reporting framework that has been applied in the preparation of the consolidated Group financial statements is applicable law and UK-adopted international accounting standards. The financial reporting framework that has been applied in the preparation of the Parent Company financial statements is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 101 Reduced Disclosure Framework (United Kingdom Generally Accepted Accounting Practice). In our opinion: • the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 December 2024 and of the Group’s loss for the year then ended; • the Group financial statements have been properly prepared in accordance with UK-adopted international accounting standards; • the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. BASIS FOR OPINION BASIS FOR OPINION We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. MATERIAL UNCERTAINTY RELATED TO GOING MATERIAL UNCERTAINTY RELATED TO GOING CONCERN CONCERN We draw attention to note 1 in the financial statements, which indicates that the Directors believe that the group is reliant on the actions of third parties to generate revenue anticipated from customer contracts to meet its obligations as they fall due and there remains risk that progress is not forthcoming in the timeframes anticipated by the Directors. Should there be significant delays in the receipt of this revenue, the Group’s existing cash balance may not be sufficient to support the Group’s expenditure until the point the Group generates sufficient revenue to reach cash breakeven. As stated in note 1, these events or conditions, along with the other matters as set forth in note 1, indicate that a material uncertainty exists that may cast significant doubt on the Group’s and Parent Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. In auditing the financial statements, we have concluded that the director’s use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the Group’s and Parent Company’s ability to continue to adopt the going concern basis of accounting included. Our evaluation of management’s assessment of the entity’s ability to continue as a going concern Our evaluation of the directors’ assessment of the group’s and the parent company’s ability to continue to adopt the going concern basis of accounting included the following audit procedures: • obtaining management’s going concern assessment including future financing expectations, cash flow forecasts and sensitivity analysis covering the period to 31 December 2026; • gaining an understanding of the design of processes and controls in place over management’s forecasts supporting the going concern assessment and confirming that they are implemented as designed; • challenging management over the likelihood, timing and quantity of future revenues forecast; • challenging management over the key cost assumptions applied in the forecasts to determine whether these are reasonable and consistent with the trading expectations and history of the business; • agreeing funds raised since the year end to supporting documentation; • assessing the adequacy of the disclosures in the financial statements. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF XEROS TECHNOLOGY GROUP PLC XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 28 GOVERNANCE OVERVIEW OF OUR AUDIT APPROACH OVERVIEW OF OUR AUDIT APPROACH MATERIALITY In planning and performing our audit we applied the concept of materiality. An item is considered material if it could reasonably be expected to change the economic decisions of a user of the financial statements. We used the concept of materiality to both focus our testing and to evaluate the impact of misstatements identified. Based on our professional judgement, we determined overall materiality for the Group financial statements as a whole to be £265,000, based on a 6% of the Group’s Loss Before Tax. Materiality for the Parent Company financial statements as a whole was set at £245,000 based on 6% of the Parent Company’s Loss Before Tax prior to the impairment of the intercompany receivable. We use a different level of materiality (‘performance materiality’) to determine the extent of our testing for the audit of the financial statements. Performance materiality is set based on the audit materiality as adjusted for the judgements made as to the entity risk and our evaluation of the specific risk of each audit area having regard to the internal control environment. This is set at £185,000 for the group and £175,000 for the parent. Where considered appropriate performance materiality may be reduced to a lower level, such as, for related party transactions and directors’ remuneration. We agreed with the Audit Committee to report to it all identified errors in excess of £14,000. Errors below that threshold would also be reported to it if, in our opinion as auditor, disclosure was required on qualitative grounds. OVERVIEW OF THE SCOPE OF OUR AUDIT Our group audit was scoped by obtaining an understanding of the Group and its environment, including Group-wide controls, and assessing the risks of material misstatements at the Group level. For the two significant components we identified, which are Xeros Technology Group plc and Xeros Limited, we performed a full scope audit of the complete financial information to component materiality. For the remaining components, we performed analytical reviews and other audit procedures on specific accounts within that component that we considered had the potential for the greatest impact on the significant accounts in the financial statements, either because of the size of these accounts or their risk profile. The group audit team conducted the audit of the all components of the business and no component auditors were used during the audit process. KEY AUDIT MATTERS Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Aside from going concern, the work on which is noted in the section above, “Material uncertainty related to going concern”, we have not identified any additional key audit matters to be reported. OTHER INFORMATION OTHER INFORMATION The directors are responsible for the other information contained within the annual report. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. OPINION ON OTHER MATTER PRESCRIBED BY THE OPINION ON OTHER MATTER PRESCRIBED BY THE COMPANIES ACT 2006 COMPANIES ACT 2006 In our opinion based on the work undertaken in the course of our audit • the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and • the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements. MATTERS ON WHICH WE ARE REQUIRED TO REPORT MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION BY EXCEPTION In light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report. We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 29 STRATEGIC REPORT INTRODUCTION GOVERNANCE FINANCIAL STATEMENTS • the parent company financial statements are not in agreement with the accounting records and returns; or • certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. RESPONSIBILITIES OF THE DIRECTORS FOR THE RESPONSIBILITIES OF THE DIRECTORS FOR THE FINANCIAL STATEMENTS FINANCIAL STATEMENTS As explained more fully in the directors’ responsibilities statement set out on page 27, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the group’s and parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so. AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS THE FINANCIAL STATEMENTS Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below: We obtained an understanding of the legal and regulatory frameworks within which the Group and Parent Company operates. We also considered and obtained an understanding of the UK legal and regulatory framework which we considered in this context were the Companies Act 2006 and UK taxation legislation. We identified the greatest risk of material impact on the financial statements from irregularities, including fraud, to be the override of controls by management and misstatement of income. Our audit procedures to respond to these risks included enquiries of management about their own identification and assessment of the risks of irregularities, sample testing on the posting of journals. We also reviewed and challenged accounting estimates and assumptions used by management in their going concern assessment, in order to verify that the calculations and models were reasonable and free of biases. Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. We are not responsible for preventing non-compliance and cannot be expected to detect non‑compliance with all laws and regulations. These inherent limitations are particularly significant in the case of misstatement resulting from fraud as this may involve sophisticated schemes designed to avoid detection, including deliberate failure to record transactions, collusion or the provision of intentional misrepresentations. A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/ auditorsresponsibilities. This description forms part of our auditor’s report. USE OF OUR REPORT USE OF OUR REPORT This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Michael Jayson (Senior Statutory Auditor) for and on behalf of Crowe U.K. LLP Statutory Auditor 3rd Floor, St George’s House, 56 Peter Street, Manchester, M2 3NQ 19 May 2025 GOVERNANCE / INDEPENDENT AUDITOR’S REPORT CONTINUED XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 30 FINANCIAL STATEMENTS XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 31 XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 32 FINANCIAL STATEMENTS NOTES YEAR ENDED 31 DECEMBER 2024 £’000 YEAR ENDED 31 DECEMBER 2023 £’000 Continuing operations Continuing operations REVENUE REVENUE 3 161 297 Cost of sales (22) (52) GROSS PROFIT GROSS PROFIT 139 245 Administrative expenses 6 (4,830) (4,982) Adjusted EBITDA* Adjusted EBITDA* (4,365) (4,606) Share-based payment (expense)/credit 20 (175) 20 Depreciation of tangible fixed assets 10 (151) (151) OPERATING LOSS OPERATING LOSS (4,691) (4,737) Net finance income/(expense) 7 23 (38) LOSS BEFORE TAX LOSS BEFORE TAX (4,668) (4,775) Taxation 8 183 520 LOSS FOR THE PERIOD LOSS FOR THE PERIOD (4,485) (4,255) OTHER COMPREHENSIVE (EXPENSE)/INCOME: OTHER COMPREHENSIVE (EXPENSE)/INCOME: Items that are or may be reclassified to profit or loss: Items that are or may be reclassified to profit or loss: Foreign currency translation differences – foreign operations – 2,209 TOTAL COMPREHENSIVE EXPENSE FOR THE PERIOD TOTAL COMPREHENSIVE EXPENSE FOR THE PERIOD (4,485) (2,046) LOSS PER SHARE LOSS PER SHARE Basic and diluted on loss from continuing operations Basic and diluted on loss from continuing operations 9 (1.08)p (2.82)p Basic and diluted on total loss for the period Basic and diluted on total loss for the period 9 (1.08)p (2.82)p * Adjusted EBITDA comprises loss on ordinary activities before interest, tax, share-based payment expense, warrant expense, depreciation and amortisation. CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2024 XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 33 STRATEGIC REPORT INTRODUCTION GOVERNANCE FINANCIAL STATEMENTS SHARE CAPITAL £’000 SHARE PREMIUM £’000 DEFERRED SHARE CAPITAL £’000 WARRANT RESERVE £’000 MERGER RESERVE £’000 FOREIGN CURRENCY TRANSLATION RESERVE £’000 ACCUMULATED LOSSES £’000 TOTAL £’000 Balance at 31 December 2022 Balance at 31 December 2022 151 125,766 3,544 947 15,443 (2,209) (137,773) 5,869 Loss for the year – – – – – – (4,255) (4,255) Other comprehensive expense 10 – 10 Reclassification of historical foreign exchange on the closure of overseas subsidiaries – – – – – 2,199 (2,199) – Loss and total comprehensive expense for the period – – – – – 2,209 (6,454) (4,245) Transactions with owners, recorded directly in equity: Share-based payment Expense – – – – – – (20) (20) Total contributions by and distributions to owners (restated) – – – – – – (20) (20) At 31 December 2023 At 31 December 2023 151 125,766 3,544 947 15,443 – (144,247) 1,604 Loss for the year – – – – – – (4,485) (4,485) Loss and total comprehensive expense for the year – – – – – – (4,485) (4,485) Transactions with owners, recorded directly in equity: Issue of shares following placing and open offer 311 4,351 – – – – – 4,662 Exercise of share warrants 59 1,620 – – – – – 1,679 Cost of share issues – (517) – – – – – (517) Share-based payment Expense – – – – – – 175 175 Total contributions by and distributions to owners 370 5,454 – – – – 175 5,913 At 31 December 2024 At 31 December 2024 521 131,220 3,544 947 15,443 – (148,557) 3,118 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2024 XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 34 FINANCIAL STATEMENTS NOTES AT 31 DECEMBER 2024 £’000 AT 31 DECEMBER 2023 £’000 ASSETS ASSETS Non–current assets Non–current assets Property, plant and equipment 10 149 129 Right of use assets 10 664 772 Trade and other receivables 12 – – TOTAL NON-CURRENT ASSETS TOTAL NON-CURRENT ASSETS 813 901 Current assets Current assets Inventories 11 154 159 Trade and other receivables 12 541 352 Bank deposits 13 4 4 Cash and cash equivalents 14 2,803 1,595 TOTAL CURRENT ASSETS TOTAL CURRENT ASSETS 3,502 2,110 TOTAL ASSETS TOTAL ASSETS 4,315 3,011 LIABILITIES LIABILITIES Non-current liabilities Non-current liabilities Right-of-use liabilities 16 (558) (727) Other payables 16 (80) – Deferred tax 17 (38) (38) TOTAL NON-CURRENT LIABILITIES TOTAL NON-CURRENT LIABILITIES (676) (765) Current liabilities Current liabilities Trade and other payables 16 (521) (642) TOTAL CURRENT LIABILITIES TOTAL CURRENT LIABILITIES (521) (642) TOTAL LIABILITIES TOTAL LIABILITIES (1,197) (1,407) NET ASSETS NET ASSETS 3,118 1,604 EQUITY EQUITY Share capital 18 521 151 Share premium 18 131,220 125,766 Deferred share capital 18 3,544 3,544 Warrant reserve 18 947 947 Merger reserve 18 15,443 15,443 Accumulated losses (148,557) (144,247) TOTAL EQUITY TOTAL EQUITY 3,118 1,604 Approved by the Board of Directors and authorised for issue on 19 May 2025. KLAAS DE BOER NEIL AUSTIN Chairman Chief Executive Officer Company number: 08684474 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2024 XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 35 STRATEGIC REPORT INTRODUCTION GOVERNANCE FINANCIAL STATEMENTS NOTES YEAR ENDED 31 DECEMBER 2024 £’000 YEAR ENDED 31 DECEMBER 2023 £’000 OPERATING ACTIVITIES OPERATING ACTIVITIES Loss before tax (4,668) (4,775) Adjustment for non-cash items: Depreciation of property, plant and equipment 10 43 53 Amortisation of Right of Use assets 10 108 98 Share-based payment/(credit) 20 175 (20) Finance income 7 (59) (2) Finance expense 7 36 39 Decrease in inventories 11 5 5 (Increase)/decrease in trade and other receivables 12 (188) 40 Decrease in trade and other payables 16 (88) (615) Impairment 6 (39) – Cash used in operations Cash used in operations (4,675) (5,177) Tax receipts 8 183 520 NET CASH OUTFLOW FROM OPERATIONS NET CASH OUTFLOW FROM OPERATIONS (4,492) (4,657) INVESTING ACTIVITIES INVESTING ACTIVITIES Purchases of property, plant and equipment 10 (68) (79) Sale of property, plant and equipment 4 – Finance income 7 59 1 NET CASH INFLOW/(OUTFLOW) FROM INVESTING ACTIVITIES NET CASH INFLOW/(OUTFLOW) FROM INVESTING ACTIVITIES (5) (78) FINANCING ACTIVITIES FINANCING ACTIVITIES Proceeds from issue of share capital, net of costs 18 5,824 – Payment of lease liabilities (83) (105) Finance expense 7 (36) (39) NET CASH INFLOW FROM FINANCING ACTIVITIES NET CASH INFLOW FROM FINANCING ACTIVITIES 5,705 (144) Increase/(decrease) in cash and cash equivalents 1,208 (4,879) Cash and cash equivalents at start of year/period 1,595 6,469 Effect of exchange rate fluctuations on cash held – 5 CASH AND CASH EQUIVALENTS AT END OF YEAR CASH AND CASH EQUIVALENTS AT END OF YEAR 14 2,803 1,595 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2024 XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 36 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024 1) BASIS OF PREPARATION Xeros Technology Group plc is a public limited company domiciled in the United Kingdom. The financial statements of Xeros Technology Group plc are audited consolidated financial statements for the year ended 31 December 2024. These include comparatives for the year ended 31 December 2023. The level of rounding for financial information is to the nearest thousand pounds. The Company’s registered office is Unit 2, Evolution, Advanced Manufacturing Park, Whittle Way, Catcliffe, Rotherham, S60 5BL. The consolidated financial statements have been prepared under the historical cost convention in accordance with UK-adopted international accounting standards. BUSINESS COMBINATIONS AND BASIS OF BUSINESS COMBINATIONS AND BASIS OF CONSOLIDATION CONSOLIDATION Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and are deconsolidated from the date control ceases. Intercompany transactions, balances and unrealised gains and losses on transactions between Group companies are eliminated. Where the acquisition is treated as a business combination, the purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Acquisition costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of the acquisition is less than the fair value of net assets of the subsidiary acquired, the difference is recognised directly in the income statement. All intragroup balances and transactions, including unrealised profits arising from intragroup transactions, are eliminated fully on consolidation. GOING CONCERN GOING CONCERN As at 31 December 2024, the Group had £2.8m of cash and cash equivalents. At this stage of its development, the Group incurs operating cash outflows and is reliant on existing cash resources to fund its operations. The Group has made commercial progress in recent periods and expects to generate revenue within 2025. The Directors consider that the Group has and expects to generate sufficient cash to meet its obligations as they fall due for at least 12 months following the date of this report. The Directors also believe that these financial resources, alongside the Group’s existing and anticipated customer contracts, provide the Group with a platform to reach cash breakeven. While the Group actively manages key customer stakeholders where appropriate, the revenue anticipated to allow the Group to reach cash breakeven anticipated to be generated by these contracts is reliant on the actions of third parties and there remains risk that progress is not forthcoming in the timeframes anticipated by the Directors. As a result of uncertainties over the timing of commercialisation, the Directors consider there be a material uncertainty over the going concern status of the Group. The Directors consider that they have a number of options in place should there be delays in commercialisation, including reductions in discretionary spending, that would allow the existing cash resources to provide a longer runway. For these reasons, they continue to adopt the going basis of accounting in preparing this financial information. The Group is subject to a number of risks, including those as set out in the strategic report on pages 14 to 16. These risks include the global macro-economic conditions, particularly in the global markets in which the Group and its partners operate. The going concern assessment as carried out by the Directors has taken the impact of these into account as far as possible. While this inclusion does not change the assessment of the Directors in respect of going concern, the Group remains reliant on the progress of international licence partners in order for it to execute the commercialisation strategy. When making their going concern assessment the Directors assess available and committed funds against all non-discretionary expenditure, and related cash flows, as forecast for the period ended 31 December 2026. These forecasts indicate that the Group is able to settle its liabilities as they fall due in the forecast period. In these forecasts the Directors have considered appropriate sensitivities, including the progress of the Group’s commercial contracts. Accordingly, whilst the Directors acknowledge the material uncertainties mentioned above, they continue to believe that the going concern assumption is appropriate for the Group and the financial statements have been prepared on that basis. Note 15 to this financial information includes the Group’s objectives, policies and processes for managing its capital, its financial risk management objectives, details of its financial instruments and its exposure to credit, liquidity and market risk. The Directors have considered their obligation, in relation to the assessment of the going concern of the Group and each statutory entity within it and have reviewed the current budget cash forecasts and assumptions as well as the main risk factors facing the Group XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 37 STRATEGIC REPORT INTRODUCTION GOVERNANCE FINANCIAL STATEMENTS 2) MATERIAL ACCOUNTING POLICIES The material accounting policies applied are set out below. The Group considers that there are no new accounting standards in effect for this reporting period which change or alter the existing policies. REVENUE RECOGNITION REVENUE RECOGNITION LICENCE REVENUE When the Group receives payments in the form of upfront payments or technology fees, the Group assesses those payments against the contracts in accordance with the provisions of IFRS 15, and allocates the revenue against the performance obligations accordingly based on the proportion of agreed scope allocated to each part of the contract. Where licence revenue is based on sales of equipment by the licensee, the Group recognises revenue at the time of that sale. SALE OF GOODS Where the Group sells either equipment or consumables to a customer directly, revenue is recognised when the product in question is delivered to the customer, and, if required, any installation or setup of the equipment has been performed. SERVICE CONTRACTS Where the Group has a service contract in place, revenue is recognised in line with the profile of the delivery of the service to the customer on an outputs basis. LINKED CONTRACTS When the Group sells equipment, services and consumables in a package under a single contract, the Group assess the contract against the five steps of IFRS 15. This process includes the assessment of the performance obligations within the contract and the allocation of contract revenue across these performance obligations once identified. Revenue is allocated according to the value of consideration expected to be received for the transfer of the relevant goods or services to the customer. This consideration is calculated on an inputs basis using cost data and an appropriate margin. Revenue is shown net of Value Added Tax or Sales Tax as appropriate. The difference between the amount of income recognised and the amount invoiced on a particular contract is included in the statement of financial position as deferred income. Amounts included in deferred income due within one year are expected to be recognised within one year and are included within current liabilities. FOREIGN CURRENCIES FOREIGN CURRENCIES The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purposes of the consolidated financial statements, the results and the financial position of each group entity are expressed in pounds sterling, which is the functional currency of the Company and the presentational currency for the consolidated financial statements. In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency (foreign currencies) are recorded at the rates of exchange prevailing at the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in foreign currency are not retranslated. The assets and liabilities of foreign operations are translated using exchange rates at the balance sheet date. The components of shareholders’ equity are started at historical value. An average exchange rate for the period is used to translate the results and cash flows of foreign operations. Exchange differences arising on translating the results and net assets of foreign operations are taken to the translation reserve in equity until the disposal of the investment. The gain or loss in the statement of profit or loss and other comprehensive income on the disposal of foreign operations includes the release of the translation reserve relating to the operation that is being sold. RESEARCH AND DEVELOPMENT RESEARCH AND DEVELOPMENT Expenditure on research activities is recognised as an expense in the period in which it is incurred. Development costs are only capitalised when the related products meet the recognition criteria of an internally generated intangible asset, the key criteria being as follows: • it is probable that the future economic benefits that are attributable to the asset will flow to the Group; • the project is technically and commercially feasible; • the Group intends to and has sufficient resources to complete the project; • the Group has the ability to use or sell the asset; and • the cost of the asset can be measured reliably. Such intangible assets are amortised on a straight-line basis from the point at which the assets are ready for use over the period of the expected benefit and are reviewed for an indication of impairment at each reporting date. Other development costs are charged against profit or loss as incurred since the criteria for their recognition as an asset are not met. The costs of an internally generated intangible asset comprise all directly attributable costs necessary to create, produce and prepare the asset to be capable of operating in the manner XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 38 intended by management. Directly attributable costs include employee costs incurred on technical development, testing and certification, materials consumed and any relevant third-party cost. The costs of internally generated developments are recognised as intangible assets and are subsequently measured in the same way as externally acquired intangible assets. However, until completion of the development project, the assets are subject to impairment testing only. No development costs to date have been capitalised as intangible assets as it was deemed that the probability of future economic benefit was uncertain at the time the costs were incurred. LEASES LEASES AS A LESSEE Where the Group enters a new contract, the Group considers whether this contract is, or contains, a lease. A lease is defined as “a contract, or part of a contract, that conveys the right to use an asset for a period of time in exchange for consideration”. To apply this definition, the Group assesses whether the contract meets three key evaluations, which are whether: • the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the Group; • the Group has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use, considering its rights within the defined scope of the contract; and • the Group has the right to direct the use of the identified asset throughout the period of use. MEASUREMENT AND RECOGNITION OF LEASES AS A LESSEE At the lease commencement date, the Group recognises a right-of-use asset and a lease liability in the statement of financial position. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date (net of any incentives received). The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for impairment when such indicators exist. At the lease commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available, of the Group’s incremental borrowing rate. Lease payments included in the measurement of the lease liability are made up of fixed payments. Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments. When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the right-of-use asset is already reduced to zero. The Group has elected to account for short-term leases and leases of low-value assets using the practical expedients. Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss on a straight-line basis over the lease term. On the statement of financial position, right-of-use assets are shown separately and are included in property, plant and equipment notes for disclosure purposes. Lease liabilities are shown separately. PROPERTY, PLANT AND EQUIPMENT PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment is stated at cost less accumulated depreciation and any impairment losses. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Depreciation is charged so as to write off the costs of assets over their estimated useful lives, on the following basis: Leasehold improvements – over the term of the lease on a straight-line basis Plant and machinery – 20% on cost on a straight-line basis Fixtures and fittings – 20% on cost on a straight-line basis Computer equipment – 33% on cost on a straight-line basis Vehicles – 20% on cost on a straight-line basis Right of use assets – over the lifetime of the lease The gain or loss arising from the disposal of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset, and is recognised in the statement of profit or loss and other comprehensive income. IMPAIRMENT OF NON-CURRENT ASSETS IMPAIRMENT OF NON-CURRENT ASSETS For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). As a result, some assets are tested individually for impairment and FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 39 STRATEGIC REPORT INTRODUCTION GOVERNANCE FINANCIAL STATEMENTS some are tested at cash-generating unit level. All individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the assets or cash-generating unit’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use based on an internal discounted cash flow evaluation. INVENTORIES INVENTORIES Inventories are valued at the lower of cost and net realisable value. Cost incurred in bringing each product to its present location and condition is accounted for as follows: Raw materials, work in progress and finished goods – purchase cost on a first-in, first-out basis. Net realisable value is the estimated selling price in the ordinary course of business. CASH ON DEPOSIT CASH ON DEPOSIT Bank deposits where maturity is greater than three months from the date of investment, the Group cannot access the funds prior to the maturity date and the Group is not relying on the funds to meet its short-term operating requirements are disclosed as cash on deposit. SHARE-BASED PAYMENTS SHARE-BASED PAYMENTS Certain employees and consultants (including Directors and senior executives) of the Group receive remuneration in the form of share-based payment transactions, whereby employees render services as consideration for equity instruments (“equity-settled transactions”). This policy applies to all schemes, including the Deferred Annual Bonus scheme open to certain management personnel. The cost of equity-settled transactions with employees is measured by reference to the fair value at the date on which they are granted. The fair value is determined by using an appropriate pricing model. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (“the vesting date”). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest. The profit or loss charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance and/or service conditions are satisfied. Where the terms of an equity-settled award are modified, the minimum expense recognised is the expense as if the terms had not been modified. An additional expense is recognised for any modification, which increases the total fair value of the share-based payment arrangement or is otherwise beneficial to the employee as measured at the date of modification. Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph. The dilutive effect of outstanding options is reflected as additional share dilution in the computation of earnings per share. WARRANTS WARRANTS The cost of equity-settled transactions with shareholders – i.e. the issuing of new shares to holders, in the form of warrants, is measured by reference to the fair value on the date on which they are granted. The fair value is determined by using an appropriate pricing model. The warrant charge is recognised over the vesting period of the warrants, if appropriate. Where warrants are issued to shareholders in their capacity as such, the warrant charge is recognised directly in equity. Where the terms of existing warrants are amended, the charge is recalculated and, if greater than the original charge, the additional charge is recognised in the same way. FINANCIAL ASSETS AND LIABILITIES FINANCIAL ASSETS AND LIABILITIES Financial assets and financial liabilities are recognised in the consolidated statement of financial position when the Group becomes party to the contractual provisions of the instrument. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire or when the contractual rights to those assets are transferred. Financial liabilities are derecognised when the obligation specified in the contract is discharged, cancelled or expired. Financial assets, other than those designated and effective as hedging instruments, are classified into the following categories: • amortised cost • fair value through profit or loss (FVTPL) • fair value through other comprehensive income (FVOCI). In the periods presented, the Group does not have any financial assets categorised as FVTPL or FVOCI. After initial recognition, these are measured at amortised cost using the effective interest rate method. Discounting is omitted where the effect is immaterial. All of the Group’s financial assets and financial liabilities fall into this category. TRADE RECEIVABLES Trade receivables are recognised initially at fair value and subsequently measured at amortised cost less expected credit XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 40 losses. Appropriate provisions for estimated irrecoverable amounts are recognised in the statement of profit or loss and other comprehensive income when there is objective evidence that the assets are impaired. CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise cash on hand, demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. EQUITY INSTRUMENTS An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs. TRADE AND OTHER PAYABLES Trade payables are initially measured at their fair value and are subsequently measured at their amortised cost using the effective interest rate method; this method allocates interest expense over the relevant period by applying the “effective interest rate” to the carrying amount of the liability. IMPAIRMENT OF FINANCIAL ASSETS The Group accounts for impairment of financial assets using the expected credit loss model as required by IFRS 9. The Group considers a broad range of information when assessing credit risk and measuring expected credit losses, including past events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument. TAXATION TAXATION The tax expense/(credit) represents the sum of the tax currently payable or recoverable and the movement in deferred tax assets and liabilities. Current tax is based upon taxable profit/(loss) for the year. Taxable profit/(loss) differs from net profit/(loss) as reported in the statement of profit or loss and other comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated by using tax rates that have been enacted or substantively enacted by the reporting date. Credit is taken in the accounting period for research and development tax credits, which have been claimed from HM Revenue and Customs, in respect of qualifying research and development costs incurred. Research and development tax credits are recognised on an accruals basis with reference to the level of certainty regarding acceptance of the claims by HMRC. The Group accounts for R&D tax credits as an investment tax credit accounted for on a flow through basis – R&D tax credits, while investment tax credits, are not considered to be substantially different from other tax credits and they are recognised when the conditions required to receive the credit, including that the Group is relatively certain of approval from the relevant taxation authorities are met and they are claimed on the Group’s tax return. Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled based upon tax rates that have been enacted or substantively enacted by the reporting date. Deferred tax is charged or credited in the statement of profit or loss and other comprehensive income, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available, against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the profit nor the accounting period and which does not give rise to equal taxable and deductible temporary differences. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. CRITICAL ACCOUNTING ESTIMATES AND AREAS OF CRITICAL ACCOUNTING ESTIMATES AND AREAS OF JUDGEMENT JUDGEMENT Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and assumptions that have the most significant effects on the carrying amounts of the assets and liabilities in the financial information are discussed below. The point listed below is considered to be an area of judgement. RESEARCH AND DEVELOPMENT COSTS Careful judgement by the Directors is applied when deciding whether the recognition requirements for capitalising development costs have been met. This is necessary as the economic success of any product development is uncertain and may be subject to future technical problems. Judgements are based on the information available at each reporting date which includes the progress with testing and certification and progress on, for example, establishment of commercial arrangements with third parties. Specifically, the Directors consider production scale evidence of commercial operation of FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 41 STRATEGIC REPORT INTRODUCTION GOVERNANCE FINANCIAL STATEMENTS the Group’s technology. In addition, all internal activities related to research and development of new products are continuously monitored by the Directors. To date, no development costs have been capitalised. RECOGNITION OF REVENUE FROM AND THE LOAN ISSUED TO ESTR LTD The Directors apply judgement in respect of the relationship that the Group holds with ESTR Ltd. The Group has an outstanding loan owed by ESTR Ltd, against which the Group recorded an expected credit loss in accordance with IFRS 9 in a prior period. The Directors review this loan on at least an annual basis and apply judgement as to the recoverability or otherwise of the loan. At the date of this report, the Directors believe there remains significant doubt regarding the recoverability of this loan and therefore the expected credit loss remains in place. In addition, the Group has a technology licence with the same entity. The Directors consider the revenue recognition with respect to this licence against the criteria of IFRS 15 and assess at which point the revenue receivable under this licence is to be recognised. The licence contains minimum annual royalty payments for the duration of the licence, and under IFRS 15, given the Group’s performance obligations under the contract, these minimum royalty payments could meet the criteria for recognition. However, given the commercial circumstances, the Directors consider that payment of these minimum royalties is not probable and future contractual revenue is not recognised. ACCOUNTING STANDARDS AND INTERPRETATIONS NOT ACCOUNTING STANDARDS AND INTERPRETATIONS NOT APPLIED APPLIED At the date of authorisation of these financial statements, the following IFRSs, IASs and Interpretations were in issue but not yet effective. Their adoption is not expected to have a material effect on the financial statements unless otherwise indicated: IFRS 18 Presentation and Disclosure in Financial Statements 1 January 2027 Amendments to IFRS 9 and IFRS 7 Contracts References Nature-dependent Electricity 1 January 2026 Annual Improvements Volume 11 1 January 2026 3) SEGMENTAL REPORTING The financial information by segment detailed below is frequently reviewed by the Chief Executive Officer, who has been identified as the Chief Operating Decision Maker (“CODM”). The Group considers that it currently has one operating segment and reports revenue by type. An analysis of revenues by type is set out below: YEAR ENDED 31 DECEMBER 2024 £’000 YEAR ENDED 31 DECEMBER 2023 £’000 Sale of goods 48 77 Rendering of services 50 82 Licensing revenue 63 138 161 297 The Group’s had two customers responsible for more than 10% of revenue, who were responsible for 49% and 31% respectively. During the year ended 31 December 2023 the Group’s largest customer was responsible for 32% of Group revenue. An analysis of revenues by geographic location of customers is set out below: YEAR ENDED 31 DECEMBER 2024 £’000 YEAR ENDED 31 DECEMBER 2023 £’000 Europe 139 161 North America 8 8 Rest of the World 14 128 161 297 XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 42 4) LOSS FROM OPERATIONS YEAR ENDED 31 DECEMBER 2024 £’000 YEAR ENDED 31 DECEMBER 2023 £’000 Loss from operations is stated after charging to administrative expenses: Foreign exchange losses 10 3 Depreciation of plant and equipment (note 10) 151 151 Short term and low value rentals 7 16 Staff costs (excluding share-based payment charge) 2,049 2,661 Research and development 591 222 Auditor’s remuneration: Auditor’s remuneration: – Audit of these financial statements 21 24 – Audit of financial statements of subsidiaries of the company 24 23 – Audit related assurance services 3 4 Total auditor’s remuneration 48 51 5) STAFF NUMBERS AND COSTS YEAR ENDED 31 DECEMBER 2024 NUMBER YEAR ENDED 31 DECEMBER 2023 NUMBER The average monthly number of persons (including directors) employed by the Group during the year was: Directors 2 2 Operational staff 27 30 29 32 £’000 £’000 The aggregate remuneration, including directors, comprised: Wages and salaries 2,007 2,246 Social security costs 237 267 Pension contributions 139 132 Share-based payment (credit)/expense (note 21) 175 (20) 2,558 2,625 Directors’ remuneration comprised: Emoluments for qualifying services 446 453 Directors’ emoluments disclosed above include £222,000 paid to the highest paid director (year ended 31 December 2023: £222,000). Executive directors are eligible to join the Group’s defined contribution pension scheme on the same terms as all other employees. Please see Directors’ remuneration report on pages 21 to 22 for further information on Directors’ emoluments. FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 43 STRATEGIC REPORT INTRODUCTION GOVERNANCE FINANCIAL STATEMENTS 6) EXPENSES BY NATURE The administrative expenses charge by nature is as follows: YEAR ENDED 31 DECEMBER 2024 £’000 YEAR ENDED 31 DECEMBER 2023 £’000 Staff costs, recruitment and other HR 2,453 2,735 Share-based payment expenses/(credit) 175 (20) Premises and establishment costs 154 160 Research and development costs 288 84 Patent and IP costs 384 549 Legal, professional and consultancy fees 741 617 IT, telecoms and office costs 152 164 Depreciation charge 151 151 Travelling, subsistence and entertaining 200 275 Advertising, conferences and exhibitions 175 256 Bad debt expense – 10 Other expenses (13) (2) Impairment (39) – Foreign exchange losses 9 3 Total administrative expenses 4,830 4,982 7) NET FINANCE (EXPENSE)/INCOME YEAR ENDED 31 DECEMBER 2024 £’000 YEAR ENDED 31 DECEMBER 2023 £’000 Bank interest receivable (59) – Finance expense in relation to right-of-use assets 36 39 Finance income from lease receivables – (1) Net finance income (23) 38 8) TAXATION TAX ON LOSS ON ORDINARY ACTIVITIES TAX ON LOSS ON ORDINARY ACTIVITIES YEAR ENDED 31 DECEMBER 2024 £’000 YEAR ENDED 31 DECEMBER 2023 £’000 Current tax: Current tax: UK Tax credits received in respect of prior periods (195) (521) Foreign taxes paid 12 1 (183) (520) Deferred tax: Deferred tax: Origination and reversal of temporary timing differences – – Tax credit on loss on ordinary activities (183) (520) XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 44 The credit for the year can be reconciled to the loss before tax per the statement of profit or loss and other comprehensive income as follows: FACTORS AFFECTING THE CURRENT TAX CHARGES FACTORS AFFECTING THE CURRENT TAX CHARGES The tax assessed for the year varies from the main company rate of corporation tax as explained below: YEAR ENDED 31 DECEMBER 2024 £’000 YEAR ENDED 31 DECEMBER 2023 £’000 The tax assessed for the period varies from the main company rate of corporation tax as explained below: Loss on ordinary activities before tax (4,668) (4,775) Tax at the standard rate of corporation tax 25% (2023: 19%) (1,167) (907) Effects of: Expenses not deductible for tax purposes 22 (4) Research and development tax credits receivable (195) (521) Unutilised tax losses for which no deferred tax asset is recognised 1,145 911 Employee share acquisition adjustment – – Foreign taxes paid 12 1 Tax credit for the year Tax credit for the year (183) (520) The Group accounts for Research and Development tax credits where there is certainty regarding HMRC approval. The Group has received a tax credit in respect of the year ended 31 December 2023. There is no certainty regarding the claim for the year ended 31 December 2024 and as such no relevant credit or asset is recognised. 9) LOSS PER SHARE (BASIC AND DILUTED) Basic loss per share is calculated by dividing the loss attributable to equity holders of the parent by the weighted average number of ordinary shares in issue during the year. Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares in issue during the period to assume conversion of all dilutive potential ordinary shares. YEAR ENDED 31 DECEMBER 2024 £’000 YEAR ENDED 31 DECEMBER 2023 £’000 Total loss from continuing operations Total loss from continuing operations (4,485) (4,255) Total loss attributable to the equity holders of the parent Total loss attributable to the equity holders of the parent (4,485) (4,255) No. No. Weighted average number of ordinary shares in issue during the year Weighted average number of ordinary shares in issue during the year 414,109,299 150,982,728 Loss per share Loss per share Basic and diluted on loss from continuing operations (1.08)p (2.82)p Basic and diluted on total loss for the year (1.08)p (2.82)p FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 45 STRATEGIC REPORT INTRODUCTION GOVERNANCE FINANCIAL STATEMENTS The weighted average number of shares in issue throughout the period is as follows. YEAR ENDED 31 DECEMBER 2024 YEAR ENDED 31 DECEMBER 2023 Issued ordinary shares at 1 January 2024/1 January 2023 150,982,917 150,980,123 Effect of shares issued for cash 263,126,382 2,605 Weighted average number of shares at 31 December 414,109,299 150,982,728 The Company has issued employee options over 36,222,942 (31 December 2023: 9,557,130) ordinary shares which are potentially dilutive. There is, however, no dilutive effect of these issued options as there is a loss for each of the periods concerned. 10) PROPERTY, PLANT AND EQUIPMENT RIGHT-OF-USE ASSETS £’000 LEASEHOLD IMPROVEMENTS £’000 PLANT AND EQUIPMENT £’000 COMPUTER EQUIPMENT £’000 FIXTURES AND FITTINGS £’000 TOTAL £’000 COST COST At 31 December 2022 At 31 December 2022 775 577 293 165 48 1,859 Additions 154 51 20 7 1 232 Disposals – – – – – – At 31 December 2023 At 31 December 2023 928 628 313 173 49 2,091 Additions – 4 62 2 – 68 Disposals – – – (8) – (8) At 31 December 2024 At 31 December 2024 928 632 375 166 49 2,151 DEPRECIATION DEPRECIATION At 31 December 2022 At 31 December 2022 57 550 267 116 48 1,038 Charge for the year 98 4 23 26 1 151 Disposals – – – – – – At 31 December 2023 At 31 December 2023 155 554 290 142 49 1,189 Charge for the year 108 11 13 18 1 151 Disposals – – – (3) – (3) At 31 December 2024 At 31 December 2024 263 565 303 157 50 1,338 NET BOOK VALUE NET BOOK VALUE At 31 December 2024 At 31 December 2024 664 68 71 9 1 813 At 31 December 2023 At 31 December 2023 772 74 23 31 1 901 At 31 December 2022 At 31 December 2022 718 27 26 49 1 821 All the right-of-use assets relate to land and buildings. XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 46 11) INVENTORIES 31 DECEMBER 2024 £’000 31 DECEMBER 2023 £’000 Finished goods 154 159 In the year ended 31 December 2024, changes in finished goods recognised as cost of sales amounted to £5,000 (year ended 31 December 2023: £5,000). 12) TRADE AND OTHER RECEIVABLES 31 DECEMBER 2024 £’000 31 DECEMBER 2023 £’000 Due within 12 months Due within 12 months Trade debtors 3 10 Other receivables 245 11 Prepayments 167 209 Accrued income 126 122 541 352 Due after more than 12 months Due after more than 12 months Other receivables – – Contractual payment terms with the Group’s customers are typically 30 to 60 days. The Directors considered the carrying value of trade receivables at 31 December 2024 and maintained a provision of £55,000 (31 December 2023: £55,000) for potential impairment losses arising from balances which were considered to be past due. The Directors believe that the carrying value of trade and other receivables represents their fair value. In determining the recoverability of trade receivables the Directors consider any change in the credit quality of the receivable from the date credit was granted up to the reporting date. For details on credit risk management policies, refer to note 15. 13) BANK DEPOSITS 31 DECEMBER 2024 £’000 31 DECEMBER 2023 £’000 Bank deposits maturing between 3 and 12 months 4 4 4 4 At 31 December 2024, the Group held £4,000 (2023: £4,000) in 95 day deposit accounts. This balance is denominated in pound sterling (£). The Directors consider that the carrying value of cash and cash equivalents approximates to their fair value. For details of credit risk management, see note 15. FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 47 STRATEGIC REPORT INTRODUCTION GOVERNANCE FINANCIAL STATEMENTS 14) CASH AND CASH EQUIVALENTS 31 DECEMBER 2024 £’000 31 DECEMBER 2023 £’000 A+ 2,793 – A 7 1,585 BBB+ – 8 Held outside banking institutions 3 2 Cash and cash equivalents 2,803 1,595 The above has been split by the Fitch rating system and gives an analysis of the long-term credit rating of the financial institutions where cash balances are held. All of the Group’s cash and cash equivalents at 31 December 2024 are at floating interest rates. Balances are denominated in UK sterling (£), US dollars ($) and euros (€) as follows: 31 DECEMBER 2024 £’000 31 DECEMBER 2023 £’000 Denominated in pound sterling 2,611 1,456 Denominated in US dollars – 17 Denominated in euros 192 122 Cash and cash equivalents 2,803 1,595 The Directors consider that the carrying value of cash and cash equivalents approximates to their fair value. For details of credit risk management policies, refer to note 15. 15) FINANCIAL INSTRUMENTS The Group’s principal financial instruments comprise short-term receivables and payables, and cash and cash equivalents. The Group does not trade in financial instruments. (A) FAIR VALUES OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (A) FAIR VALUES OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES DERIVATIVE FINANCIAL INSTRUMENTS – FAIR VALUE HIERARCHY The following hierarchy classifies each class of financial asset or liability depending on the valuation technique applied in determining its fair value: Level 1: The fair value is calculated based on quoted prices traded in active markets for identical assets or liabilities. Level 2: The fair value is based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Level 3: The fair value is based on inputs for the asset or liability that are not based on observable market data (unobservable inputs). The Group considers any forward foreign exchange contracts to be Level 2 in the fair value hierarchy should it enter into any. The Group has not entered into any such contracts in either the current or the prior year. There have been no transfers between categories in the current or preceding year. The fair value of financial instruments held at fair value have been determined based on available market information at the balance sheet date. XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 48 (B) CREDIT RISK (B) CREDIT RISK FINANCIAL RISK MANAGEMENT Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group is exposed to credit risk in respect of trade and lease receivable balances such that, if one or more customers or a counterparty to a financial instrument encounters financial difficulties, this could materially and adversely affect the Group’s financial results. The Group attempts to mitigate credit risk by assessing the credit rating of new customers and financial counterparties prior to entering into contracts and by entering into contracts with customers on agreed credit terms. The Group is potentially exposed to credit risk in respect of its cash, both bank deposits and cash held on deposit, in the event of failure of the respective banks. The Group attempts to mitigate this risk through ongoing monitoring of the credit ratings of those banks. Further details are set out in note 16. At 31 December 2024, the Directors were not aware of any factors affecting the recoverability of the Group’s bank balances. EXPOSURE TO CREDIT RISK At 31 December 2024, the Group had gross trade receivables outstanding of £58,000 (2023: £65,000). The Directors have considered the recoverability of outstanding balances at 31 December 2024 and have made provisions for bad and doubtful debts amounting to £55,000 (2023: £55,000). The Group had gross lease receivable balances outstanding of £nil (2023: £7,000) and provision in place in respect of these lease receivables of £nil (2023: £nil). The concentration of credit risk for trade and other receivables and lease receivables at the balance sheet date by geographic region was: 31 DECEMBER 2024 £’000 31 DECEMBER 2023 £’000 United Kingdom 541 353 United States of America – – 541 353 (C) LIQUIDITY RISK (C) LIQUIDITY RISK FINANCIAL RISK MANAGEMENT Liquidity risk arises from the Group’s management of working capital. It is the risk that the Group will encounter difficulty in meeting its future obligations as they fall due. The Group’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. To achieve this aim, it seeks to maintain cash balances to meet its expected cash requirements. The following are the contractual maturities of financial liabilities: NON-DERIVATIVE FINANCIAL LIABILITIES 31 DECEMBER 2024 £’000 31 DECEMBER 2023 £’000 Due within one year Due within one year Trade and other payables 229 283 Due after one year Due after one year Right of use liabilities 639 876 Other liabilities 80 80 Total Total 948 1,239 Further analysis of Right of use liabilities is given in note 19. The Group’s bank also provides the Group with a credit card facility, with a maximum value of £50,000, which is repaid in full each month. FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 49 STRATEGIC REPORT INTRODUCTION GOVERNANCE FINANCIAL STATEMENTS (D) MARKET RISK (D) MARKET RISK FINANCIAL RISK MANAGEMENT Market risk is the risk that changes in market prices, such as interest rates or foreign exchange rates, will affect the Group’s income. The objective of market risk management is to manage and control market risk exposures within acceptable parameters. Market interest rate risk arises from the Group’s holding of cash and cash equivalent balances and from cash held on term deposit accounts (see notes 13 and 14). The Board makes ad hoc decisions at its regular Board meetings, as to whether to hold funds in instant access accounts or longer-term deposits. All accounts are held with reputable banks. These policies are considered to be appropriate to the current stage of development of the Group and will be kept under review in future years. FOREIGN CURRENCY RISK The Group is exposed to currency risk on sales and purchases and cash held in bank accounts that are denominated in a currency other than the respective functional currencies of Group entities, primarily pound sterling (GBP), US dollars (USD) and the euro (EUR). The Group’s policy is to reduce currency exposure on sales and purchasing through forward foreign currency contracts where appropriate. The Group had no forward currency contracts in place as at either 31 December 2024 or 31 December 2023. The Group’s overall exposure to foreign currency risk is as follows. This is based on the carrying amount for monetary financial instruments. AT 31 DECEMBER 2024 AT 31 DECEMBER 2024 STERLING £’000 US DOLLAR £’000 EURO £’000 TOTAL £’000 Cash and cash equivalents 2,607 – 192 2,799 Cash on deposit 4 – – 4 Trade and other receivables 540 1 1 542 Trade and other payables (525) 2 – (523) Balance sheet exposure 2,626 3 193 2,822 Net exposure – 193 193 AT 31 DECEMBER 2023 AT 31 DECEMBER 2023 STERLING £’000 US DOLLAR £’000 EURO £’000 TOTAL £’000 Cash and cash equivalents 1,453 17 122 1,592 Cash on deposit 4 – – 4 Trade and other receivables 343 (1) 10 352 Trade and other payables (597) (46) – (643) Balance sheet exposure 1,203 (30) 132 1,305 Net exposure – (30) 132 102 SENSITIVITY ANALYSIS SENSITIVITY ANALYSIS A 10% weakening of the following currencies against the pound sterling at 31 December 2024 would have increased equity and profit or loss by the amounts shown below. The calculation assumes that the change occurred at the balance sheet date and had been applied to the risk exposure existing at that date. XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 50 This analysis assumes that all other variables, in particular, other exchange rates and interest rates remain constant. The analysis is performed on the same basis for the period ended 31 December 2023. EQUITY PROFIT OR LOSS 31 DECEMBER 2024 £’000 31 DECEMBER 2023 £’000 31 DECEMBER 2024 £’000 31 DECEMBER 2023 £’000 US Dollars – (3) – (3) Euros (19) (13) (19) (13) A 10% strengthening of the above currencies against the pound sterling at 31 December 2024 would have had the equal but opposite effect on the above currencies to the amounts shown above on the basis that all other variables remain constant. INTEREST RATE RISK INTEREST RATE RISK At the balance sheet date, the interest rate profile of the Group’s interest-bearing financial instruments was: 31 DECEMBER 2024 £’000 31 DECEMBER 2023 £’000 Fixed rate instruments Fixed rate instruments Financial assets 4 4 Financial liabilities – – 4 4 Variable rate instruments Variable rate instruments Financial assets – cash 2,799 1,592 Financial liabilities – – 2,799 1,592 Based on the Group’s above balances at 31 December 2024, if interest rates had been 5% higher, then the impact on the results for the year would be a reduction in the loss for the period of approximately £140,000 with a corresponding increase in the Group’s net assets. If the interest rate had reduced to 0%, there would have been no effect on the reported loss or on the Group’s net assets. (E) CAPITAL MANAGEMENT (E) CAPITAL MANAGEMENT The Group’s capital is made up of share capital, share premium and retained losses, totalling £1,278,000 at 31 December 2024 (31 December 2023: £1,278,000). The Group’s objectives when managing capital are: • to safeguard the entity’s ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders; and • to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk. The capital structure of the Group consists of shareholders’ equity as set out in the consolidated statement of changes in equity. All working capital requirements are financed from existing cash resources. There are no externally imposed capital requirements. Financing decisions are made by the Board of Directors based on forecasts of the expected timing and level of capital and operating expenditure required to meet the Group’s commitments and development plans. FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 51 STRATEGIC REPORT INTRODUCTION GOVERNANCE FINANCIAL STATEMENTS 16) TRADE AND OTHER PAYABLES 31 DECEMBER 2024 £’000 31 DECEMBER 2023 £’000 Trade payables 141 206 Taxes and social security 58 76 Other creditors 16 44 Accruals and deferred income 220 233 Right-of-use liabilities 88 83 523 642 Current 523 642 Non-current, comprising right-of-use liabilities and other creditors 638 727 1,161 1,369 Trade payables, split by the currency they will be settled in are shown below: 31 DECEMBER 2024 £’000 31 DECEMBER 2023 £’000 Sterling 143 203 US dollars (2) 3 Euros – – Chinese yuan renminbi – – Trade payables 141 206 Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs. They are non- interest bearing and are normally settled on 30 to 45 day terms. The Directors consider that the carrying value of trade and other payables approximate their fair value. The Group has financial risk management policies in place to ensure that all payables are paid within the relevant credit timeframe and no interest has been charged by any suppliers as a result of late payment of invoices during the period. 17) DEFERRED TAX 31 DECEMBER 2024 £’000 31 DECEMBER 2023 £’000 Accelerated depreciation for tax purposes 38 38 Deferred tax credit/(expense) for the period – – YEAR ENDED 31 DECEMBER 2024 £’000 YEAR ENDED 31 DECEMBER 2023 £’000 At beginning of year 38 38 Tax expense – – At end of year 38 38 As at 31 December 20234 the Group had unrecognised deferred tax assets in relation to losses of £78,513,000 (31 December 2023: £76,532,000). The Group has not recognised this as an asset in the Statement of Financial Position due to the uncertainty in the timing of its crystallisation. XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 52 18) SHARE CAPITAL AND WARRANTS NUMBER SHARE CAPITAL £’000 SHARE PREMIUM £’000 DEFERRED SHARE CAPITAL £’000 MERGER RESERVE £’000 TOTAL £’000 Total ordinary shares of 0.1p each Total ordinary shares of 0.1p each as at 31 December 2022 as at 31 December 2022 150,980,123 151 125,766 3,544 15,443 144,904 Issue of ordinary shares as a result of warrants following placing and open offer 2,794 – – – – – Costs of share issues – – – – – – Total ordinary shares of 0.1p each Total ordinary shares of 0.1p each as at 31 December 2023 as at 31 December 2023 150,982,917 151 125,766 3,544 15,443 144,904 Issue of ordinary shares as a result of placing and open offer 310,789,561 311 4,351 – – 4,662 Issue of ordinary shares as a result of warrants 58,913,935 59 1,620 – – 1,679 Costs of share issues – – (518) – – (518) TOTAL ORDINARY SHARES OF TOTAL ORDINARY SHARES OF 0.1P EACH AS AT 31 DECEMBER 2024 0.1P EACH AS AT 31 DECEMBER 2024 520,686,413 521 131,220 3,544 15,443 150,727 The Group undertook a share capital reorganisation exercise during the year ended 31 December 2022, splitting the ordinary shares with a nominal value of 15p into ordinary shares of 0.1p and deferred shares of 14.9p. The new deferred shares have no significant rights attached to them and carry no right to vote or participate in distribution of surplus assets and have not been admitted to trading on the AIM market of the London Stock Exchange plc, nor will they in the future. Accordingly, deferred shares are excluded from the calculation of earnings per share in note 9. NUMBER Total deferred shares of 14.9p each as at 31 December 2022 Total deferred shares of 14.9p each as at 31 December 2022 23,784,483 Total deferred shares of 14.9p each as at 31 December 2023 Total deferred shares of 14.9p each as at 31 December 2023 23,784,483 Total deferred shares of 14.9p each as at 31 December 2024 Total deferred shares of 14.9p each as at 31 December 2024 23,784,483 As permitted by the provisions of the Companies Act 2006, the Company does not have an upper limit to its authorised share capital. The following is a summary of the changes in the issued share capital of the Company during the period ended 31 December 2024: a) On 18 January 2024, 1,502,405 ordinary shares of 0.1p per share were allotted at a price of 2.85p per share, for total cash considerations of £42,819 upon the exercise of warrants. b) On 26 January 2024, 12,450,041 ordinary shares of 0.1p per share were allotted at a price of 2.85p per share, for total cash considerations of £354,826 upon the exercise of warrants. c) On 29 January 2024, 2,732,434 ordinary shares of 0.1p per share were allotted at a price of 2.85p per share, for total cash considerations of £77,874 upon the exercise of warrants. d) On 30 January 2024, 7,922,845 ordinary shares of 0.1p per share were allotted at a price of 2.85p per share, for total cash considerations of £225,801 upon the exercise of warrants. e) On 31 January 2024, 10,315,622 ordinary shares of 0.1p per share were allotted at a price of 2.85p per share, for total cash considerations of £293,995 upon the exercise of warrants. f) On 2 February 2024, 23,990,588 ordinary shares of 0.1p per share were allotted at a price of 2.85p per share, for total cash considerations of £683,732 upon the exercise of warrants. g) On 5 April 2024, 15,098,290 ordinary shares of 0.1p per share were allotted at a price of 1.50p per share, for total cash considerations of £226,474 upon a placing h) On 30 April 2024 295,691,271 ordinary shares of 0.1p per share were allotted at a price of 1.50p per share, for total cash considerations of £4,435,369 upon a placing and retail offer At 31 December 2023, the Company had two classes of share, being ordinary shares of 0.1p each and deferred shares of 14.9p each. FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 53 STRATEGIC REPORT INTRODUCTION GOVERNANCE FINANCIAL STATEMENTS The Group’s Share Capital reserve represents the nominal value of the ordinary shares in issue. The Group’s Share Premium Reserve represents the premium the Group received on issue if its shares. The Group’s Deferred Share Capital reserve represents the nominal value of the deferred shares in issue. The Merger Reserve arose on the combination of companies within the Group prior to the flotation on AIM. As part of the placing completed in October 2022 the Group issued warrants to purchase ordinary shares of 0.1p for a fixed fee of 5p per share. Following consultation with warrant holders, the outstanding warrants were repriced to 2.85p per share in December 2023. In addition, the warrant exercise lapse date was amended to 31 January 2024. The warrant charge as calculated based on this reprice was lower than the initial warrant charge recognised on issue and hence no adjustment to the warrant charge has been recognised in these financial statements. NUMBER OF WARRANTS WEIGHTED AVERAGE EXERCISE PRICE (P) WEIGHTED AVERAGE CONTRACTUAL LIFE (YEARS) At 31 December 2022 127,195,640 5 1.5 Exercised in the period (2,794) 5 1.5 Effect of warrant reprice – (2.15) (1.4) At 31 December 2023 127,192,846 2.85 0.1 Exercised in the period (58,913,935) 2.85 – Expired warrants (68,278,911) 2.85 – At 31 December 2024 – – – 19) LEASES The Group has leases for office buildings and associated warehousing and operational space. With the exception of short-term leases and leases of low-value underlying assets, each lease is reflected on the balance sheet as a right-of-use asset and a lease liability. The Group classifies its right-of-use assets in a consistent manner to its property, plant and equipment (see note 10). Leases of buildings end within ten years. Lease payments are generally fixed. Each lease generally imposes a restriction that, unless there is a contractual right for the Group to sublet the asset to another party, the right-of-use asset can only be used by the Group. Leases are either non-cancellable or may only be cancelled by incurring a substantive termination fee. The Group is prohibited from selling or pledging the underlying leased assets as security. For leases over office buildings and factory premises, the Group must keep those properties in a good state of repair and return the properties in their original condition at the end of the lease. Further, the Group must insure items of property, plant and equipment and incur maintenance fees on such items in accordance with the lease contracts. The table below describes the nature of the Group’s leasing activities by type of right-of-use asset recognised on the balance sheet: RIGHT-OF-USE ASSET NO. OF RIGHT- OF-USE ASSETS LEASED REMAINING RANGE OF TERM AVERAGE REMAINING LEASE TERM NO. OF LEASES WITH TERMINATION OPTIONS Land and buildings 2 40 - 87 months 64 months 2 RIGHT-OF-USE ASSETS RIGHT-OF-USE ASSETS Additional information on the right-of-use assets by class is as follows: LAND AND BUILDINGS £’000 Balances as at 31 December 2022 718 Additions in the year 154 Depreciation charged in the year (98) Balance as at 31 December 2023 Balance as at 31 December 2023 772 Additions in the year – Depreciation charged in the year (108) Balance as at 31 December 2024 Balance as at 31 December 2024 664 XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 54 FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED LEASE LIABILITIES LEASE LIABILITIES Lease liabilities are presented in the statement of financial position as follows: 31 DECEMBER 2024 £’000 31 DECEMBER 2023 £’000 Current 88 83 Non-current 558 647 646 730 Both leases have termination options and no leases with extension options. The lease liabilities are secured by the related underlying assets. The undiscounted maturity analysis of the lease liabilities at 31 December 2024 is as follows: WITHIN 1 YEAR 1–2 YEARS 2–3 YEARS 3–4 YEARS 5+ YEARS TOTAL Lease payments (119) (119) (119) (101) (299) (757) Finance charges 30 25 20 15 21 111 Net present value (89) (94) (99) (86) (278) (646) 20) SHARE BASED PAYMENTS SHARE OPTIONS SHARE OPTIONS The Company has share option plans (The Xeros Technology Group plc Unapproved Share Option Scheme and The Xeros Technology Group plc Enterprise Management Incentive Share Option Scheme) under which it grants options over ordinary shares to certain Directors, employees and consultants of the Group. Options under these plans are exercisable at a range of exercise prices ranging from the nominal value of the Company’s shares to the market price of the Company’s shares on the date of the grant. The vesting period for shares is usually over a period of three years. The options are settled in equity once exercised. If the options remain unexercised for a period after 10 years from the date of grant, the options expire. Options are forfeited if the employee leaves the Group before the options vest. Options issued in 2019, 2020 and 2021 have vesting conditions based upon the share price meeting certain targets. The number and weighted average exercise prices of share options are as follows: NUMBER OF SHARE INTERESTS WEIGHTED AVERAGE EXERCISE PRICE PER SHARE (£) EMI OPTIONS UNAPPROVED OPTIONS DEFERRED ANNUAL BONUS PLAN TOTAL At 31 December 2022 7,918,914 2,933,555 45 10,852,514 0.543 Cancelled in the period (495,063) (93,719) – (588,782) (0.232) Forfeited in the period (705,894) (708) – (706,602) (0.021) At 31 December 2023 6,717,957 2,839,128 45 9,557,130 0.290 Granted in the period 18,912,823 9,522,533 – 28,435,356 (0.206) Cancelled in the period (575,357) (1,062,588) – (1,637,945) (0.013) Forfeited in the period (131,550) (49) – (131,599) (0.001) At 31 December 2024 24,923,873 11,299,024 45 36,222,942 0.070 There were 5,639,626 share options outstanding at 31 December 2024 which were eligible to be exercised. The remaining options were not eligible to be exercised as these are subject to employment period and/or market-based vesting conditions, some of which had not been met at 31 December 2024. Options have a range of exercise prices from 1.5 pence per share to 30,500 pence per share and have a weighted average contractual life of 10.06 years (31 December 2023: 8.62 years). XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 55 STRATEGIC REPORT INTRODUCTION GOVERNANCE FINANCIAL STATEMENTS A charge/(credit) has been recognised in the consolidated statement of profit or loss and other comprehensive income for each period as follows: 31 DECEMBER 2024 £’000 31 DECEMBER 2023 £’000 Share options 175 (20) OPTIONS GRANTED IN THE PERIOD ALL OPTIONS GRANTED IN THE YEAR Dividend yield Nil Expected volatility* 26% Risk free interest rate 4.07% Expected vesting life of options (years) 4.5 Share price (pence) 1.5 Fair value of an option (pence per share) 0.417 *Expected volatility is based on the Company’s historical share price. 21) RELATED PARTY TRANSACTIONS During the year, the Group entered into transactions, in the ordinary course of business, with other related parties. Those transactions with directors are disclosed below. Transactions entered into, along with trading balances outstanding at each period end with other related parties, are as follows: RELATED PARTY RELATIONSHIP PURCHASES FROM RELATED PARTY 31 DECEMBER 2024 £’000 AMOUNTS OWED TO RELATED PARTY 31 DECEMBER 2024 £’000 PURCHASES FROM RELATED PARTY 31 DECEMBER 2023 £’000 AMOUNTS OWED TO RELATED PARTY 31 DECEMBER 2023 £’000 IP Group plc Fund manager for certain shareholders (note 1) – – (4) – Cofra London Limited Shareholder (note 2) – – 15 15 Amati Global Investors Limited Shareholder (note 3) 13 – – – Note: IP Group plc provided the services of David Baynes, who was a director of the Company until 31 December 2022, and invoice the Group for related fees. David Baynes was a Director of both the Company and of IP Group plc. Note2: Cofra London Limited provided the services of Donald Brenninkmeijer as a strategic advisor to the Board, and invoice the Group for related fees. Note3: Amati Global provide a board observer to the Board and invoice the group for related fees. TERMS AND CONDITIONS OF TRANSACTIONS WITH RELATED PARTIES TERMS AND CONDITIONS OF TRANSACTIONS WITH RELATED PARTIES Purchases between related parties are made on an arm’s length basis. Outstanding balances are unsecured, interest free and cash settlement is expected within 60 days of invoice. TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL The Company’s key management personnel comprise only the Directors of the Company. During the period, the Company entered into the following transactions in which the Directors had an interest: XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 56 DIRECTORS’ REMUNERATION: Remuneration received by the Directors from the Company is set out below. Further detail is provided within the Directors’ remuneration report: YEAR ENDED 31 DECEMBER 2024 £’000 YEAR ENDED 31 DECEMBER 2023 £’000 Short-term employment benefits* 446 453 *In addition, certain Directors hold share options in the Company for which a fair value share based charge of £175,000 has been recognised in the consolidated statement of profit or loss and other comprehensive income (year ended 31 December 2023: (£20,000)). The highest-paid Director in the year received a total remuneration of £221,000 (year ended 31 December 2023: £221,000). During the year ended 31 December 2024, the Company entered into numerous transactions with its subsidiary companies which net off on consolidation – these have not been shown above. FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 57 STRATEGIC REPORT INTRODUCTION GOVERNANCE FINANCIAL STATEMENTS COMPANY STATEMENT OF CHANGES IN EQUITY ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE COMPANY ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE COMPANY SHARE CAPITAL £’000 SHARE PREMIUM £’000 DEFERRED SHARE CAPITAL £’000 WARRANT RESERVE £’000 MERGER RESERVE £’000 RETAINED EARNINGS RESERVE £’000 TOTAL £’000 At 31 December 2022 (restated) At 31 December 2022 (restated) 151 125,766 3,544 947 6,625 (131,632) 5,401 Total expense and other comprehensive loss for the period – – – – – (4,681) (4,681) Transactions with owners, recorded directly in equity: Issue of placing and open offer shares – – – – – – – Costs of share issues – – – – – – – Share based payment expense – – – – – (20) (20) Share based payment expense in respect of services provided to subsidiary undertaking – – – – – – – Total contributions by and distributions to owners – – – – – (4,672) (4,672) At 31 December 2023 At 31 December 2023 151 125,766 3,544 947 6,625 (136,333) 700 Total expense and other comprehensive loss for the period – – – – – (4,238) (4,238) Transactions with owners, recorded directly in equity: Issue of placing and open offer shares 311 4,351 – – – – 4,662 Issue of shares upon the exercise of warrants 59 1,620 1,679 Costs of share issues – (518) – – – – (518) Share based payment expense – – – – – 175 175 Share based payment expense in respect of services provided to subsidiary undertaking – – – – – – – Total contributions by and distributions to owners 370 5,454 – – – (4,064) 1,760 At 31 December 2024 At 31 December 2024 521 131,220 3,544 947 6,625 (140,397) 2,460 XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 58 NOTES AT 31 DECEMBER 2024 £’000 AT 31 DECEMBER 2023 £’000 ASSETS ASSETS Current assets Current assets Trade and other receivables C6 222 27 Cash and cash equivalents 2,368 832 Total current assets Total current assets 2,590 859 TOTAL ASSETS TOTAL ASSETS 2,590 859 LIABILITIES LIABILITIES Current liabilities Current liabilities Trade and other payables C7 (130) (159) TOTAL LIABILITIES TOTAL LIABILITIES (130) (159) NET ASSETS NET ASSETS 2,460 700 EQUITY EQUITY Share capital 18 521 151 Share premium 18 131,220 125,766 Deferred share capital 3,544 3,544 Warrant reserve 947 947 Merger reserve 6,625 6,625 Retained earnings (140,397) (136,333) TOTAL EQUITY TOTAL EQUITY 2,460 700 The Company reported a loss for the year ended 31 December 2024 of £4,238,000 (2023: £4,681,000). The accounting policies and notes on pages 59 to 61 form part of these Financial Statements. Approved by the Board of Directors and authorised for issue on 19 May 2025. KLAAS DE BOER NEIL AUSTIN Chairman Chief Executive Officer Company number: 08684474 FINANCIAL STATEMENTS / NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED COMPANY STATEMENT OF FINANCIAL POSITION XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 59 STRATEGIC REPORT INTRODUCTION GOVERNANCE FINANCIAL STATEMENTS NOTES TO THE COMPANY INFORMATION C1. BASIS OF PREPARATION AND ACCOUNTING POLICIES C1. BASIS OF PREPARATION AND ACCOUNTING POLICIES Xeros Technology Group plc is registered in England and Wales as a public limited company. The address of its registered office is Unit 2, Evolution, Advanced Manufacturing Park, Whittle Way, Catcliffe, Rotherham, South Yorkshire, S60 5BL. The principal activity of Xeros Technology Group plc (together the “Group”) is that of a platform technology company that is transforming water-intensive industrial and commercial processes. The principal activity of the Company is that of a holding company. The separate financial statements of the Company have been prepared in accordance with the Financial Reporting Standard 101 “Reduced Disclosure Framework” (FRS 101), on the going concern basis under the historical cost convention, and in accordance with the Companies Act 2006 and applicable Accounting Standards in the UK. The principal accounting policies are consistent with those set out in the financial statements of the Group. The following exemptions from the requirements in IFRS have been applied in the preparation of these financial statements, in accordance with FRS 101: • The following paragraphs of IAS 1 “Presentation of Financial Statements” o 16 (statement of compliance with all IFRS); and o 134–136 (capital management disclosures) • IFRS 9 “Financial Instruments: Disclosures”; • IAS 24 (paragraphs 17 and 18a) “Related Party Disclosures” (key management compensation); and • IAS 24 “Related Party Disclosures” – the requirement to disclose related party transactions between two or more members of a group. As the Group financial statements include the equivalent disclosures, the Company has taken the exemptions available under FRS 101 in respect of the following disclosures: • A cashflow statement and related notes • IFRS 2 “Share-Based Payments” in respect of Group settled equity share-based payments; and • Certain disclosures required by IFRS 13 “Fair Value Measurement” and disclosures required by IFRS 7 “Financial Instruments: Disclosures”. CRITICAL ACCOUNTING ESTIMATES AND AREAS OF JUDGEMENT CRITICAL ACCOUNTING ESTIMATES AND AREAS OF JUDGEMENT Estimates and judgements are continually evaluated and are based on historical experiences and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and assumptions that have the most significant effects on the carrying amounts of the assets and liabilities in the financial information are discussed below: CARRYING VALUE OF INTERCOMPANY LOAN BALANCES Xeros Technology Group has previously held significant balances as investments in subsidiaries and intercompany loan balances. The Directors consider the valuation and recoverability of these balances based on the potential future cashflows from utilisation of the Xeros technology. The Directors consider all available evidence in making their judgements on the recoverability of these balances, including both internal and external valuations of the Group, the likelihood and extent of any Group funding requirements and the anticipated timescale to recovery of the balances. A provision of £3,579,000 has been made in the year and the Company’s intercompany loan balance to Xeros Ltd stands at £nil as at the period end. C2. COMPANY RESULTS C2. COMPANY RESULTS The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the parent company’s statement of profit or loss and other comprehensive income. The parent company’s result for the year ended 31 December 2024 was a loss of £4,153,000 (year ended 31 December 2023: loss of £4,681,000). The audit fee for the Company is set out in note 5 of the Group’s financial statements. XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 60 C3. STAFF NUMBERS AND COSTS C3. STAFF NUMBERS AND COSTS YEAR ENDED 31 DECEMBER 2024 NUMBER YEAR ENDED 31 DECEMBER 2023 NUMBER The average monthly number of persons (including directors) employed by the Group during the year was: Directors 4 4 4 4 £’000 £’000 The aggregate remuneration, including directors, comprised: Wages and salaries 361 448 Social security costs 45 60 Share based expense (note 20) 58 64 464 572 Directors’ remuneration comprised: Emoluments for qualifying services 446 493 Directors’ emoluments disclosed above include £221,000 paid to the highest paid director (Year ended 31 December 2023: £262,000). There are no pension benefits for directors. Please see Directors’ Remuneration Report on pages 21 to 22 for further information on directors’ emoluments. C4. INVESTMENT IN SUBSIDIARY COMPANIES C4. INVESTMENT IN SUBSIDIARY COMPANIES At 31 December 2024, the Company held the following investments in subsidiaries; UNDERTAKING SECTOR SHARE OF ISSUED CAPITAL AND VOTING RIGHTS 2024 Xeros Limited Research, development and commercialisation of polymer technology alternatives to traditional aqueous based technologies 100% Xeros Limited, is incorporated in England and Wales as a private limited company under registered number 05933013. Its registered office is Unit 2, Evolution, Advanced Manufacturing Park, Whittle Way, Catcliffe, Rotherham, S60 5BL. COST AND NET BOOK VALUE £’000 At 31 December 2022 – Diminutions (20) Reversal of impairment 20 At 31 December 2023 At 31 December 2023 – Additions 89 Impairment (89) At 31 December 2024 At 31 December 2024 – Additions comprise amounts in respect of the IFRS 2 share-based payment contribution relating to options granted to employees of the Company’s subsidiaries. Impairment relates to provisions against the investment in Xeros Ltd as the Directors believe that this amount may not be recoverable. FINANCIAL STATEMENTS / NOTES TO THE COMPANY INFORMATION CONTINUED XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024 61 STRATEGIC REPORT INTRODUCTION GOVERNANCE FINANCIAL STATEMENTS C5. INTERCOMPANY LOANS C5. INTERCOMPANY LOANS 31 DECEMBER 2024 £’000 31 DECEMBER 2023 £’000 Intercompany loan – – Loans comprise a loan of £nil (31 December 2023: £nil) to Xeros Limited. No interest was payable on this loan. All intercompany loans are repayable on demand. The expected credit loss recorded in the year was £3,579,000. C6. TRADE AND OTHER RECEIVABLES C6. TRADE AND OTHER RECEIVABLES 31 DECEMBER 2024 £’000 31 DECEMBER 2023 £’000 Prepayments 8 28 Other debtors 214 (1) 222 27 C7. TRADE AND OTHER PAYABLES C7. TRADE AND OTHER PAYABLES 31 DECEMBER 2024 £’000 31 DECEMBER 2023 £’000 Trade payables 7 26 Social security and other taxes 15 18 Accruals 108 115 130 159 DIRECTORS AND OFFICERS DIRECTORS Klaas de Boer (Chairman) Neil Austin (Chief Executive Officer) Alexander Tristram (Finance Director) David Armfield (Non-Executive Director) Rachel Nooney (Non-Executive Director) COMPANY SECRETARY Alexander Tristram COMPANY WEBSITE https://www.xerostech.com/ COMPANY NUMBER 08684474 (England and Wales) REGISTERED OFFICE Unit 2 Evolution Advanced Manufacturing Park Whittle Way Catcliffe Rotherham S60 5BL REGISTRAR Neville Registrars Limited Neville House Steelpark Road Halesowen B62 8HD AUDITOR 3rd Floor St Georges House 56 Peter Street Manchester M2 3NQ LEGAL ADVISER Squire Patton Boggs (UK) LLP 60 London Wall London EC2M 4UJ NOMINATED ADVISER AND BROKER Cavendish Capital Markets Ltd 1 Bartholomew Close London EC1A 7BL XEROS TECHNOLOGY GROUP PLC – ANNUAL REPORT – DECEMBER 2024