Baldwin Sensors, Inc

Annual Report2021 in Review and Looking Forward to 2022 and Beyond

Baldwin Sensors, Inc1/1/2022

LETT ER TO SHAR EHOLDER S

Five years ago, Baldwin Sensors Inc. made a commitment to dedicate its manufacturing prowess to following a strategic plan expected to position Baldwin’s dominance in the sensor industry by the end of 2021; this dominance was to be measured by retaining 30% or greater market share.

We are pleased to report that on December 31, 2020 Baldwin Sensors Inc. achieved dominance by reporting 30.73% market share and $75.4 million cumulative profit. 2021 reported 28.66% market share and represented our 8th consecutive year of profitability. Our strategic plan resulted in a cumulative profit of over $100.3 million dollars.

In 2021 we introduced to you, Blintz; a product that’s speed and performance is so great that at its release the market was not prepared for such advances. While the early release of Blintz resulted in retaining $16.7 million dollars of inventory on hand, it is expected that Blintz will be the leading sensor in 2022. Our niche products Biskit, Brownie and Bagel have been our top sellers this year with over $184 million in sales.

Baldwin’s stock price is at an all-time high of $64.19 per share; $15.01 more than our closest competitor’s stock price. This year, the board of directors agreed to increase the dividend pay-out from $0.35 to $0.50. We remain focused on preserving our financial strength and enhancing shareholder value.

We are proud of these accomplishments and are currently working on another strategic plan to continue our success in the next five year term. Baldwin would like to thank each of our shareholders for your continued support and partnership in ensuring the vitality of our organization. Throughout our successes and in conclusion, we end our letter with a steady reminder of the Baldwin Sensors Inc. Vision Statement:

Baldwin Sensors Inc.’s vision is to think globally and act locally. As we move forward to develop the most advanced sensors possible we hope to benefit all humankind; To become a leader in sustainability and ecological awareness; Additionally, through our

jobs and community outreach we will provide tangible benefits to the global communities we touch; Finally, we will enrich our stakeholders through profitable and

ethical business practices.

-Baldwin Sensors Inc., Board of Directors, Management Team

COM PAN Y OPER A TIONS

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OperationsComing changes for 2022:

Baker: Baldwin’s first and oldest product will retire. Baker is being retired to open the production facilities for creating the next in our line of high tech sensors. The time frame to close out and create a new product is somewhere between 2 and 3 years. Our newest sensor, “Sensor X”, should hit the market in 2024.

Blintz: Baldwin’s latest product to hit the market will be adjusted to better suit the current market demand. In light of the increased time to turnaround a new product when closing out a new product, our staff will be tasked in keeping Blintz as our flagship product for the next 2 - 3 years.

Biskit, Brownie, and Bagel: Our low tech products will continue to drift as they meet a variety of user preferences. Our older products will continue their path of dominating the low tech market segment. Once again, with additional time being allotted to retiring Baker and the ramp up for “Sensor X” these products will be observed, and adjusted as necessary. This slight disruption to our normal course of action is required to maintain our

Long Term PlanningReducing our competitors in the market is an objective of Baldwin’s in the upcoming year. Specifically we would look at the opportunity in Chester. We believe with the right management scenario and team, Chester could become a profitable arm of Baldwin. Through these steps more market share will open up making it available for our market share.Chester is not the only company we would look at acquiring. Each of our competitors would be examined for possible acquisition. The factors we would look at are, profitability, stock price, margins, and capacity.

Our R&D division will remain a top priority, it is our goal to always be producing the finest sensors we can. We strive towards technological innovation to make the world better.

Our goals remain the same throughout. In 5 years we want to continue our market dominance. With the potential of acquisitions, our goal of 50% market share is attainable. And 5 years after that we want to have more that 50% of the total market share. These goals will be achieved via acquisitions and providing the best sensors in the market at a fair price.

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Competitors

A leading factor in the slight decrease to profitability was the emergence of a true competitor. Until 2020, no one company had emerged as true competition to our market share. Digby is now our major rival in the sensor marketplace.While other companies provide stiff competition, they are not close in terms of market share. Combined, Digby and Baldwin have over 50% of the total market share.

In order to maintain our market leading performance, Baldwin will set forth the beginnings of our strategy for the next phase of growth and expansion. There are many factors to consider in the sector marketplace and each of these factors will be taken into account.

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FINA NC IAL DA T A

Baldwin Sensors is maintaining an over 20% net margin. Our products are at a combined contribution margin of over 35%. Our goal as a company is for these numbers to never drop below 20% and 30% respectively.Through ongoing TQM processes our overall costs are being reduced.

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Baldwin Sensors maintains an AAA bond rating. Our cash on hand status changed dramatically from 2020 to 2021 as we increased our production facilities by almost $50 million dollars. These are necessary expenditures for maintaining our market share. Our storing of excess inventory also affected our available cash. Operations are making adjustments to prevent this in the future.Baldwin will continue the trend of financing its operations via the sale of stock, the taking on of long term debt, and retained earnings.

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Baldwin’s assets are tied up primarily in Plants, Equipment, Inventory, and Cash. Our goal is to maintain this trend. We will continue to sell stock and pay dividends. In the last 8 years, we were the only company that rewarded our shareholders with a dividend.

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SU M MA R Y AND F U TU R E PLAN NING

Baldwin Sensors Inc. is committed to providing our shareholders and clients with profitable, reasonable and exceptional quality products. In the coming years we will continue with our successful niche strategy. Going into year 2022 and beyond, it is important for us to continue maintaining our strong position above the competition. Baldwin remains focused on recapturing 30% of entire market share and strengthen our lead in the market. Our long term objective of 50% market share is

Baldwin Sensors Inc. continues its mission to provide the highest quality sensors facilitating our customers to meet their fullest potential. The company’s vision remains unwavering. As we continue to uphold our fundamental values, we conclude this year’s annual report by repeating our Company Vision:

Baldwin Sensors Inc.’s vision is to think globally and act locally. As we move forward to develop the most advanced sensors possible we hope to benefit all humankind; To become a leader in sustainability and ecological awareness; Additionally, through our

jobs and community outreach we will provide tangible benefits to the global communities we touch; Finally, we will enrich our stakeholders through profitable and

ethical business practices.

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COM PAN Y OFFIC ERS

Bill L., Vice President of Research & Development

Our class, at first seemed to be overwhelming with tasks, a CapSim learning curve, and working together as a team with classmates I have never met before. How can I possibly succeed? What I can take from this challenging but rewarding experience is being able to take a glimpse into how a large corporation operates in the fraction of the time. I learned that a 5 year plan has to have specific objectives. Stick to those objectives. If mistakes are made, change only the way on how you get to those objectives. Our success proved that team effort is a vital role in the outcome of any company. Communicate well and listen to what your team

can offer. Use their strengths to accomplish specific goals and you will have a formula that will be unbeatable. I am proud of our team and know they will be successful at whatever endeavors they pursue.

Aaron R., Vice President of Operations

This has been the most fun and entertaining class I’ve taken so far. It has been a great exercise working with an awesome team. In completing this class I learned how to create a business plan as a team and follow through. To stick to the plan no matter what. We decided to use the “Niche” marketing plan. It allowed me to observe the effects of adjusting production and marketing to the market segment targeted. Primarily we focused on high tech. Low tech wasn’t ignored, but it’s a good rule of thumb that what was high tech will become low tech. I learned to watch the Customer

Survey Scores for trending. The other thing I learned, build capacity early and often. I believe we left money on the table, by not always having enough stock. The class is informative, challenging, and fun.

Laurel M., Vice President of Marketing

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A strong component of this course was teamwork both in and outside the simulation. By having two regularly scheduled weekly meetings it gave structure to the way our team operated. These meetings improved communication, collaboration, and efficiency within the team. We chose to utilize the strengths of each team member whether it be writing or crunching numbers. Collectively as a team we thrived in the simulation and assignments

Michelle W., Vice President of Finance

Our team is comprised of four committed and intelligent students, each with their own strengths. Our regular meetings and respectful discussions lead to developing an environment of open communication where we fed off of each other’s experiences, input and limitations. For example, I excel in formal writing, but struggled understanding the simulation’s results. Throughout each round, my team was able and willing to explain each element and by assisting with writing/editing our written submissions I was able to better grasp these more technical concepts.

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