HEIQ PLC

Annual / Quarterly Financial Statement • Apr 28, 2021

National Storage Mechanism | Additional information RNS Number : 7950W HeiQ PLC 28 April 2021 This article is not intended to be distributed in the USA. April 28, 2021 HeiQ Plc ("HeiQ" or "the Company") Results for the year ended December 31, 2020 Strong business performance with HeiQ entering new high-growth markets HeiQ Plc (LSE:HEIQ), an established global brand in materials and textile innovation that operates in high-growth markets, is pleased to announce strong financial and operational performance for the year ended December 31, 2020. Financial highlights: �� Revenue up 80% to US$50.4 million (2019: US$28.0 million) led by a 16% increase in HeiQ Smart Temp sales, the launch of HeiQ Viroblock, and entry into the medical device market �� Gross profit margin is up 7% to 55.6% (2019: 48.6%) �� Adjusted EBITDA increased 384% to US$14.0 million (2019: US$2.9 million) �� Profit before tax of US$ 7.0 million (2019: US$ 1.0 million) and profit after tax of US$4.9 million (2019: US$0.7 million) �� Basic EPS up 521% to US$ 0.0441 (2019: US$0.0071) �� A well-funded balance sheet with a net cash position of US$24.1 million (2019: US$1.1 million) and net current assets of US$43.1 million (2019: US$7.2 million) �� Raised ��20 million (before expenses) of growth capital through the stock market listing in December 2020 Operational highlights: �� Launched five new innovations and added 12 projects with high market potential to the R&D pipeline �� Broadened customer base (+124% number of invoiced customers vs. 2019) and on-boarded 650 new brands for co-branding (of which 150 already launched in 2020) �� Substantially shortened customer on-boarding lead-time from the typical 18-24 months to as short as three months �� Innovation and rapid go-to-market capability enabled the launch of HeiQ Viroblock in March 2020, creating a new antiviral textile market and enlarging the US$10 billion antimicrobials textile market �� Entered three new markets: medical, healthcare and consumer goods �� Entered into eight royalty contracts, illustrating the strong perceived value of HeiQ's ingredient brands �� Significantly strengthened brand equity with enhanced media presence with total 7610 times of media mentioning +280% vs. 2019 �� Expanded sales network with nine new distributors and six new sales staff to support increased demand �� Launched consumer brand and established direct-to-consumer e-commerce channel which achieved US$1 million sales in eight months �� Continued investment into IP portfolio, people, company structure, corporate processes and systems to capitalise on the significant market opportunities available �� Concluded the acquisition of HeiQ Medica to in-source medical device development competence and manufacturing know-how Post period-end highlights: �� Acquisition of 51% of Chrisal, a profitable, high-margin and leading industrial biotech business. Chrisal provides HeiQ with an established position in the US$50 billion probiotics market, 120 products including patented synbiotic products, manufacturing capability for functional consumer goods and access to new markets. Chrisal today serves 40 hospitals with its clinically trialed synbiotic cleaner proven to reduce infection levels by 70-80%. �� HeiQ has invested in talent to further develop its novel graphene technology in line with its IPO plans �� Filed five new patent applications �� New contract wins expanded impact of HeiQ innovation beyond textiles and into four new markets �� First-quarter trading in line with expectations and above same period previous year and the preceding quarter Carlo Centonze, co-founder and CEO, HeiQ plc, said: "2020 saw us make rapid strides towards our goal of becoming a leading materials innovation company beyond textiles. As well as strong financial performance, we have paved the way for additional future success. The rapid growth experienced in 2020 proves that we have developed the right strategy and business model to achieve our ambitions over that past 16 years. We continue to see strong demand for our existing technologies and have expanded into new markets and industries, including medical, healthcare and consumer goods. Our enlarged global footprint and market presence means our innovations are benefiting more people and improving more people's lives, Furthermore, despite challenges such as the extreme weather in the US, the Suez blockage, and lockdowns, our first quarter performance is in line with expectations. This performance once again demonstrates the resilience of our business and the benefits of having a diversified and well-balanced product portfolio. "2021 will see us building on the momentum created in 2020 both organically, and through M&A with companies that we have been working with for many years and where it makes sense. We will enter additional industries and markets, launch disruptive innovations, strengthen our differentiating capabilities and establish new revenue streams. Our recent HeiQ Viroblock contract wins with leading industrial laundry, paint, coatings and gym customers, as well as our acquisitions in the medical device and industrial biotech sectors, attest to our vision to grow beyond textiles. This is an exciting time for HeiQ, and I look forward to keeping shareholders up to date with our progress." Adjusted EBITDA = Operating Profit + 1) Depreciation + 2) Amortization + 3) Share based payments. Note on publication of Annual Report: Further to the Financial Conduct Authority's (FCA) policy statement issued on January 27, 2021, pursuant to which the financial reporting deadline for listed companies has been extended by two months, the Company confirms that it intends to publish its annual financial report for the year ended December 31, 2020 ("Annual Report") in accordance with the reporting extension in early May 2021. A further announcement will be made in due course upon publication. For further information, please contact: HeiQ Plc Carlo Centonze (CEO) +41 56 250 68 50 Arlington Group Asset Management Limited (Financial Advisor and Joint Broker) Charles Cannon Brookes +44 (0) 207 389 5017 Cenkos Securities plc (Joint Broker) Stephen Keys / Callum Davidson +44 (0) 207 397 8900 SEC Newgate (Media Enquiries) Elisabeth Cowell / Robin Tozer / Megan Kovach +44 (0) 20 3757 6882 HeiQ@secnewgate.co.uk Chairwoman's Statement Having known HeiQ and its founders for the last decade, I am delighted to be writing my first statement as Chairwoman of HeiQ plc, and the first as a constituent of the Main Market of the London Stock Exchange. HeiQ wants to expand to better serve our customers and partners and to create more value for our stakeholders. After going public on the London Stock Exchange in December 2020, the Company raised ��20 million (gross) to fuel our future growth and we are well placed to continue delivering on this mission. Overview I am pleased to report on a year which has seen HeiQ make significant progress towards our long-term objectives and deliver record results. HeiQ has long been a cash-generative and high margin business, with a healthy balance sheet, diversified revenue and a track record of delivering financial growth. In 2020, we took this further by generating revenues of US$50.4 million, almost doubling the previous year's figure. The ability to rapidly adapt to a changing environment in a smart way and with innovative ideas is clearly one of HeiQ's core strengths. This has enabled us to become well established and a rapidly expanding company across multiple significant growth markets, including the US$24 billion textile chemicals market and the US$10 billion antimicrobial textiles market. During the last year, the market for sanitation and disinfection has grown enormously due to the Covid-19 pandemic. We seized the opportunity to contribute to combating the pandemic and expand our product assortment by launching HeiQ Viroblock and by establishing ourselves in the medical devices market, producing personal protective equipment (PPE) like antiviral face masks that are more protective than conventional ones. Both the outstanding success of HeiQ Viroblock and entering the PPE market have contributed strongly to our revenue growth. At the end of the year, HeiQ acquired a controlling stake in the Spanish medical device production plant MasFabEs in order to in-source medical device manufacturing knowhow for future R&D in the key strategic field of PPE. It is noteworthy that this all took place whilst sustaining a healthy level of sales activities with the regular products. Despite the global economic headwinds that affected many of our industry peers severely, we were able to grow our revenue with the regular product range. New products and application ideas are continuously being developed by the HeiQ innovation hubs, in close cooperation with customers, as well as with over 20 universities around the world. As demonstrated by HeiQ Viroblock, HeiQ rapidly researches new solutions for partners, quickly delivers scale-up manufacturing from its sites across the world and helps partners market the product to end consumers - from lab to consumer in months. The continuous flow of our innovation pipeline is ingrained, and 2021 has commenced with a healthy, promising innovation pipeline. After such a boost in growth and going public, other tasks like the refinement of our strategy, Company structure and corporate processes and systems are being enhanced to cope with the increase demands of the business, as well as from a governance perspective. These are in the process of being diligently implemented. We also decided to repay most current bank loans in December 2020 whilst retaining significant credit line facilities with the banks. Dividend In order to take advantage of the momentum created in 2020 and invest into the growth opportunities, the Board has decided not to pay a dividend from 2020 retained earnings. Board At the time of re-admission to trading on the London Stock Exchange, all Board Members of the former Auctus Growth Plc resigned and the new HeiQ Plc Board was appointed. Of the five new directors, three were Board members of the former parent company of the Group (HeiQ Materials AG): Ben Bergo (NED), Carlo Centonze (Executive Director and Group CEO) and me (NED). In addition, Karen Brade (NED) and Xaver Hangartner (Executive Director and Group CFO) joined the Board. With a Board of five directors (of which three are non-executive), we believe we have a balanced, diversified and experienced team to lead the whole Group on behalf of the shareholders in an efficient and effective way. I have been impressed with the approach and achievements of the Board since we became a public company and look forward to working with this team and building the Group. The Board meets frequently to challenge and support the dynamic management team. Audit, Remuneration and Nomination Committees are also in place since readmission. Governance Upon admission to the London Stock Exchange's Main Market, HeiQ has chosen to adopt the QCA Corporate Governance Code (the 'Code') on a comply or explain basis. The Code is constructed around ten broad principles and how we have complied with each of these can be found in our Corporate Governance report contained within the Annual Report to be posted to shareholders shortly. Outlook The ��20 million of new capital raised (before expenses) in December 2020 will support our ambitious expansion strategy to diversify beyond textiles to become a leader in materials innovation. HeiQ is investing in additional personnel, geographic expansion, strategic alliances, regulatory registrations, product development, technology platforms and M&A activities. We are in discussion with a number of targets which fit and complement our offerings for our partners and customers. Since the start of the pandemic last year, we have all become much more aware of pathogens on the surfaces we touch and the health risks associated. This is driving increased market demand for material innovations that enable better microbial management on surfaces, such as packaging and other printed surfaces, as highlighted by some recent notable contract wins. We acquired 51% of Chrisal NV, a Belgium based company which offers expertise in probiotics/synbiotics in March 2021. This is a new technology platform for HeiQ and provides us with access to the US$50 billion global probiotic market. We will also invest to develop existing and new technologies, and to better monetize them and expand into new markets. Although this will increase our cost base in the short term, it is expected to contribute to a healthy and profitable growth in the mid and long term. I am extremely proud to chair and to be part of HeiQ. Its employees continually surprise me. Despite not having a lot of personal contact due to the workforce being spread all over the world under travel restrictions and home office requirements, they are nevertheless fulfilling their tasks with enthusiasm, team spirit and a big sense of responsibility. On behalf of the Board, I would like to thank the whole HeiQ team which has performed in the most extraordinary way to achieve the impressive overall 2020 result. We have set ourselves ambitious goals for 2021 in an uncertain environment and I am confident that, through our dedication and effort, we will achieve them. Esther Dale Chairwoman CEO Statement Improving the lives of billions. Sixteen years ago we started a venture, an unquenchable adventure named HeiQ. Conceived on a hike and born through Schlieren's first flame spray pyrolysis reactor, HeiQ today gives chase to the sun. From New Zealand to Colorado, today over 140 HeiQans work closely and around the clock to innovate and differentiate in order to improve the lives of billions of people. 2020 has been a transformative and momentous year for HeiQ, characterised by fast growth. After having successfully built an agile business model that allows for rapid deep innovation, in March 2020 as the World Health Organization (WHO) declared the pandemic, HeiQ stepped up to deliver an innovative antiviral technology for the benefit of the society. Over the years, we have developed over 200 high-performance textile technologies, many in partnership with major brands. Until recently, these have had a strong "lifestyle" focus - a T-shirt that cools you, a curtain that purifies the air in your home, or the lightest but warmest jacket for those climbing Mount Everest, are just a few of hundreds of examples of our innovations. Our strategy has successfully positioned HeiQ as a global, cash-generative and IP-backed leader in the US$24 billion textile chemicals market. We are known for creating some of the most effective, durable and high-performance technologies in the market. Our research network with over 20 universities, our seven manufacturing plants and our marketing and ingredient branding prowess allow us to be trusted by over 300 brands, including several Fortune 500 companies, as their innovation arm. Our skills and reputation have enabled sales of our core lifestyle range, HeiQ Smart Temp, which has seen a +16% year-on-year growth despite pandemic economic headwinds. Our business is evolving at a time of a global emergency and we have shown our agility in rapidly shapeshifting and redeploying our innovation and production resources to deliver a best-in-class and Swiss Technology Award-winning technology, HeiQ Viroblock, to market, which has been hugely satisfying during the period. HeiQ is now known for another leading innovation: we turn textiles and other surfaces antiviral. The global health crisis became a tipping point for antimicrobial textiles and over the past 12 months, we have been part of the creation of the antiviral textile market, which enlarges the US$10 billion antimicrobial fabrics market (9.8% CAGR) and positioned ourselves as technology leaders in this space. In doing so, we have demonstrated the rapid growth and value creation that we can deliver for our shareholders through fast, disruptive and eco-conscious innovation. I am very proud of the "can-do" mentality, spirit and dedication shown by the entire HeiQ team in 2020. Our culture and teamwork allowed us to make a significant contribution to the fight against Covid-19, and it has been very rewarding for us all to know that our technology is protecting people around the world, allowing businesses to keep operating and retain jobs. Another proud moment of 2020 was our listing on the Main Market of the London Stock Exchange. Going public has been a long-standing vision of the Founders and Board, and we have been preparing for it for several years. We were very pleased with the support for our listing, and the funds raised will enable HeiQ to build on the significant momentum achieved in 2020. Operational and financial performance 2020 saw the Group achieve its best ever results in both financial terms and operational output. We manufactured an unprecedented quantity of products and, as a result, we almost doubled our revenue and delivered a strong EBITDA figure. In a year of home working, we managed to establish new teams and facilities and on-board new talents in all our locations. Our excellent performance was driven by the enormous success of HeiQ Viroblock, our world-leading antimicrobial technology. We quickly allocated our innovation resources to satisfy the pressing demand for this antiviral technology, and dedicated much of our manufacturing capacity to ramp up production. The team quickly built a solid business around antiviral medical devices, including creating a new direct-to-consumer business, which has strengthened brand awareness of HeiQ and will continue to do so going forward. Since its launch, HeiQ Viroblock has been embraced by existing clients and attracted many new partners due to its ability to provide brands with a unique point of differentiation, which protects their customers when they need it most. Consequently, we have doubled our customer base. Thanks partly to our IP-licensing and royalty model, which sees HeiQ Viroblock production licensed to third parties, we have been able to deploy this innovation very quickly to achieve a wide distribution of ingredient-branded products and increased consumer awareness of HeiQ. HeiQ Viroblock has already been used by over 150 brands and deployed in over a billion face masks worldwide. We continue to build relationships with the medical industry by delivering much needed PPE in the form of surgical face masks and gowns. Despite the resource requirements of our rapidly expanding antimicrobial business, our fundamental innovations and sales have not been impacted. Many of our established products continued to grow in 2020, with demand following the growth rate of previous years despite dire conditions in the textile industry. Delivering for stakeholders The commitment and resilience of our team enabled us to scale up HeiQ Viroblock and protect many families across the globe. With brand partners, we also made several mask donations to big and small hospitals and organisations such as the NHS (UK) or the Blue Cross in Como (Italy). We are thankful for the ongoing trust and support of our customers. We believe that our unique approach to co-creation ensures that we can build strong and long-lasting relationships with our brand partners, and these have been beneficial for both sides during a challenging year. Many of our manufacturing partners, suppliers and customers in textiles have been and still are severely affected by the pandemic, and we have engaged and supported them wherever possible. Current trading and outlook 2020 was a tipping point for HeiQ and we continue to see strong demand for our technologies. Despite the global supply chain still being in distress, we are gearing up to sustain our momentum throughout 2021 and we will invest our capital in talents, capabilities and infrastructure to facilitate this. I am pleased that, despite Texas freezes, California shortages, Suez blockages and regional lockdowns, our first quarter performance is in line with our expectations for our antimicrobials and comfort technologies. Our recently launched enhanced fluorine free water repellent performance range will have to prove its mettle in a year of unprecedented opportunity where, due to the ban of perfluorinated chemicals, market shares will be reallocated. Our medical devices manufacturing facility acquired in December 2020 will build its success on innovations that we are launching this May and beyond. Our recent HeiQ Viroblock contract wins with leading industrial laundry, paint and packaging coating manufacturers attest to our vision to grow beyond textiles, as do the completed acquisitions in the medical device and industrial biotech arenas. Through our acquisition of a majority stake in Belgian industrial biotech company Chrisal NV, we now have access to the US$50 billion probiotic market. In the synbiotic and probiotic market our focus is on hospital hygiene and microbial management. Our strong pipeline of brand partners underpins our confidence that market demand for microbial management technologies will continue to be very strong going forward. We will work tirelessly to maintain our leading position, while entering new lucrative markets such as durable antimicrobial surface protection, synbiotic healthcare and homecare cleaning as well as synbiotic cosmetic ingredients. Looking ahead, our focus lies in the innovation of more sustainable materials as well as increasing market penetration of our core technologies. HeiQ GrapheneX, our highly porous graphene membrane research project, remains an exciting potential value trigger and we look forward to building the pilot commercialization plant. We expect this to be the stepping stone for us to enter the US$29 billion technical filtrations and membranes market from a position of strength. To ensure that we remain at the top of our game, we will be expanding our research, building our capabilities and diversifying our tech platforms into new markets and industries, both organically and through strategic M&A. HeiQ innovates systemically and our technology and solutions are created in response to megatrends and market needs. We identify, or even foresee, a problem and develop a science-based solution to solve it. It is solving the problems that customers bring to us with sustainable functional ingredients and materials that will guide the specific areas we target. As a cash-generative, high margin company expanding across multiple significant growth markets, we have built a strong platform for future growth. While 2021 will remain a year of regional disruption and limitations for many businesses, for HeiQ it is a capability building and investment year that will see us enter new industries, launch new innovations and establish new revenue streams. This is an exciting time for HeiQ and I look forward to keeping the market abreast of our progress. I wish all our stakeholders a healthy and prosperous year. Carlo Centonze, Co-founder and group CEO Consolidated statement of comprehensive income For the year ended December 31, 2020 Year ended Year ended December 31, December 31, 2020 2019 Note $'000 $'000 Revenue 8 50,401 27,954 Cost of sales 9 (22,402) (14,382) Gross profit 27,999 13,572 Other operating income 8 4,744 1,585 Selling and general administrative expenses 9 (16,117) (12,048) Other operating expenses 9 (5,127) (1,687) Operating profit 11,499 1,422 Deemed cost of listing 5 (1,402) - Transaction costs of relisting 5 (1,871) - Other income - 24 Other costs (69) - Finance income 22 68 8 Finance costs 22 (1,184) (428) Share of (losses) / profits of associates 7 (15) 3 Income before taxation 7,026 1,029 Taxation 10 (2,112) (314) Income after taxation 4,914 715 Earnings per share (cents) - basic 11 4.41 0.71 Earnings per share (cents) - diluted 11 4.21 0.71 Other comprehensive income: Exchange differences on translation of foreign operations 2,469 53 Items that may be reclassified to profit or loss in subsequent periods 2,469 53 Actuarial losses from defined benefit pension plans (731) (205) Items that will not be reclassified to profit or loss in subsequent periods (731) (205) Total comprehensive income for the year 6,652 563 Income attributable to: Equity holders of HeiQ 4,991 726 Non-controlling interests (77) (11) 4,914 715 Comprehensive income / (loss) attributable to: Equity holders of the Company 6,729 574 Non-controlling interests (77) (11) 6,652 563 Consolidated statement of financial position As at December 31, 2020 As at As at December 31, December 31, 2020 2019 Note $'000 $'000 ASSETS Intangible assets 12 5,264 4,522 Property, plant and equipment 13 5,467 3,884 Right-of-use assets 14 2,564 2,714 Investments 6,7 - 44 Deferred tax assets 10 826 380 Other non-current assets 15 206 73 Non-current assets 14,327 11,617 Inventories 16 13,328 3,202 Trade receivables 17 13,437 9,175 Other receivables and prepayments 17 2,609 342 Cash and cash equivalents 25,695 3,603 Current assets 55,069 16,322 Total assets 69,396 27,939 EQUITY AND LIABILITIES Share capital 18 49,559 2,696 Capital reserve 18 134,537 25,168 Other reserve 19 (2,043) (1,312) Share-based payment reserve 19 50 - Merger reserve 5 (126,912) - Currency translation reserve 19 2,937 467 Retained deficit 19 (8,711) (13,702) Equity attributable to owners of the parent 49,417 13,317 Non-controlling interests (20) 23 Total equity 49,397 13,340 Lease liabilities 14 2,304 2,445 Deferred tax liability 10 857 216 Long-term borrowings 22 1,400 - Other non-current liabilities 21 3,425 2,780 Total non-current liabilities 7,986 5,441 Trade and other payables 5,815 1,830 Accrued liabilities 3,214 3,113 Income tax liability 10 1,495 101 Deferred revenue - 50 Short-term borrowings 22 173 2,478 Lease liabilities 14 349 339 Other current liabilities 23 967 1,247 Total current liabilities 12,013 9,158 Total liabilities 19,999 14,599 Total liabilities and equity 69,396 27,939 Consolidated statement of changes in shareholders' equity For the year ended December 31, 2020 Share capital Capital reserve Other reserve Share- based payment reserve Merger reserve Currency translation reserve Retained deficit Non- controlling interests Total equity Note $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 Balance on January 1, 2019 2,664 24,921 (1,107) - - 414 (14,428) - 12,464 Income after taxation - - - - - - 726 (11) 715 Other comprehensive (loss)/income - - (205) - - 53 - - (152) Total comprehensive (loss)/income for the year - - (205) - - 53 726 (11) 563 Issuance of shares 19 32 396 - - - - - - 428 Dividends paid from capital contributions 19 - (149) - - - - - - (149) Capital contributions from non-controlling interests - - - - - - - 34 34 Transactions with owners 32 247 - - - - - 34 313 Balance on December 31, 2019 2,696 25,168 (1,312) - - 467 (13,702) 23 13,340 Income after taxation - - - - - - 4,991 (77) 4,914 Other comprehensive (loss)/income - - - (731) - - 2,469 - - 1,738 Total comprehensive (loss)/income for the year - - - (731) - - 2,469 4,991 (77) 6,652 Reverse acquisition adjustment - 39,587 89,866 - - (126,912) - - - 2,542 Issuance of shares 19 7,276 20,763 - - - - - - 28,039 Cost of share issues - (1,260) - - - - - - (1,260) Share-based payment charges - - - 50 - - - - 50 Capital contributions from non-controlling interests - - - - - - - 34 34 Transactions with owners 7,276 19,503 - 50 - - - 34 26,863 Balance on December 31, 2020 49,559 134,537 (2,043) 50 (126,912) 2,937 (8,711) (20) 49,397 Consolidated statement of cash flows For the year ended December 31, 2020 Year ended Year ended December 31, December 31, 2020 2019 Cash flows from operating activities $'000 $'000 Income before taxation 7,026 1,029 Cash flow from operations reconciliation: Depreciation and amortisation 1,254 1,267 Loss on disposal of property, plant and equipment 46 2 Loss on disposal of investments 22 - Finance costs 399 428 Finance income (68) (8) Expected credit loss on trade receivables 377 - Pension expense 176 - Non-cash equity compensation 1,217 428 Share of loss / (profit) of associates 15 (3) Deemed cost of listing 1,402 - Foreign exchange differences (164) (40) Working capital adjustments: (Increase)/decrease in inventories (8,161) 696 (Increase) in trade and other receivables (5,165) (2,044) Increase in trade and other payables 2,777 1,412 Cash generated from operations 1,153 3,167 Taxes paid (48) (178) Net cash generated from operating activities 1,105 2,989 Cash flows from investing activities Consideration for acquisitions of businesses (Note 26) (1,424) (1,290) Cash assumed on acquisitions of businesses (Note 26) 27,111 - Purchase of property, plant and equipment (932) (370) Proceeds from the disposal of property, plant and equipment 10 4 Development of intangible assets (635) (118) Investment in associated company - (15) Proceeds from the disposal of associated company 7 - Finance income 68 8 Net cash from / (used in) investing activities 24,205 (1,781) Cash flows from financing activities Finance costs (399) (182) Repayment of leases (354) (386) Proceeds from borrowings 2 929 Repayment of borrowings (2,737) - Dividends paid from capital contributions - (149) Net cash (used in) / from financing activities (3,488) 212 Net increase in cash and cash equivalents 21,822 1,420 Cash and cash equivalents - beginning of the year 3,603 2,163 Effects of exchange rate changes on the balance of cash held in foreign currencies 270 20 Cash and cash equivalents - end of the year 25,695 3,603 Note: Non-cash transactions: Certain shares were issued during the year for a non-cash consideration as described in Note 19 Notes to the Consolidated Financial Statements for the year ended December 31, 2020 1. General information HeiQ Plc ("the Company'') and its subsidiaries (together, "the Group'') is an established global brand in materials and textile innovation which operates in high-growth markets, creating some of the most effective, durable and high-performance textile effects available worldwide. The principal activity of the Company is that of a holding company for the Group, as well as performing all administrative, corporate finance, strategic and governance functions of the Group. The Company was incorporated on May 14, 2014 as Auctus Growth Limited, in England and Wales under the Companies Act 2006 with company number 09040064, with an investment strategy to undertake an acquisition of a target company or business. The Company was re-registered as a public company on July 24, 2014. On December 4, 2020, the Company's name was changed to HeiQ Plc. The Company's registered office is 5th Floor, 15 Whitehall, London, SW1A 2DD. The Company was admitted to listing on the Official List by way of a Standard Listing in accordance with Chapter 14 of the Listing Rules and to trading on the London Stock Exchange's Main Market for listed securities on August 22, 2014. Following the reverse takeover by the Company of HeiQ Materials AG ("HeiQ"), an established global brand in materials and textile innovation, the Company's enlarged share capital was admitted to the standard segment of the Official List and initiation of trading on the London Stock Exchange's Main Market commenced on December 7, 2020 under the ticker 'HEIQ'. The ISIN of the Ordinary Shares is GB00BN2CJ299 and the SEDOL Code is BN2CJ29. 2. Basis of preparation and measurement a. Basis of preparation The Consolidated Financial Statements have been prepared in accordance with IFRS, issued by the International Accounting Standards Board, including interpretations issued by the International Financial Reporting Interpretations Committee, applicable to companies reporting under IFRS. and the Companies Act 2006 applicable to companies reporting under IFRS. Unless otherwise stated, the Consolidated Financial Statements are presented in United States Dollars ($) which is the presentational currency of the Group, and all values are rounded to the nearest thousand dollars except where otherwise indicated. The individual entities' functional currencies are listed below: Entity: Functional currency HeiQ Plc GBP HeiQ Materials AG CHF HeiQ ChemTex Inc. USD HeiQ Pty Lty AUD HeiQ Australia Pty Ltd AUD HeiQ GrapheneX AG CHF HeiQ Company Limited TWD (Taiwan Dollar) HX Company Limited TWD HeiQ Medica S.L. EUR HeiQ Iberia Unipessoal Lda EUR On a single entity level, transactions in foreign currencies are translated into the functional currency at the rate of exchange ruling on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rate ruling at the reporting date. The resulting gain or loss is reflected in the Consolidated Statement of Comprehensive Income within operating income or operating expense if the account in the Statement of Financial Position is of an operating nature - e.g., trade and other receivables/payables and within either "Finance income" or "Finance costs" if the account is of a non-operating nature - e.g., cash and cash equivalents, loans receivable, payable. Single entities with a functional currency other than US$ are translated into US$ as part of the consolidation where assets and liabilities are translated at closing rate and profit and loss items are translated at an average rate for the year. Equity transactions are translated at the historic rate. The residual value flows into the currency translation reserve. The Consolidated Financial Statements have been prepared under the historical cost convention except for certain financial and equity instruments that have been measured at fair value. The Consolidated Financial Statements have been prepared on the going concern basis, which contemplates the continuity of normal business activity and the realization of assets and the settlement of liabilities in the normal course of business. The Directors have reviewed the Group's overall position and outlook and are of the opinion that the Group is sufficiently well funded to be able to operate as a going concern for at least the next twelve months from the date of signing these financial statements. The preparation of Financial Statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement and complexity, or areas where assumptions and estimates are significant to the Consolidated Financial Statements are disclosed in note 3. Transaction costs of equity transactions relating to the issue and re-admission of the Company's shares are accounted for as a deduction from equity where they relate to the issue of new shares and listing costs are charged to the Statement of Comprehensive Income. b. Basis of consolidation The Consolidated Financial Statements comprise the financial statements of the Company and its subsidiaries listed in Note 6 "Subsidiaries" to the Consolidated Financial Statements. The basis of consolidation of the acquisition of HeiQ Materials AG by the Company in December 2020 is described in the basis of preparation above in Note 2(a). Business combinations other than reverse acquisitions as described in Note 5 are accounted for under the acquisition method. A subsidiary is defined as an entity over which the Company has control. The Company 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. They are deconsolidated from the date that control ceases. Intra-group transactions, balances and unrealized gains on transactions are eliminated; unrealized losses are also eliminated unless the cost cannot be recovered. Where necessary, adjustments are made to the financial statements of subsidiaries to ensure consistency of accounting policies with those of the Group. The total comprehensive income of non-wholly owned subsidiaries is attributed to owners of the parent and to the non-controlling interests in proportion to their relative ownership interests. c. Investment in associates The Group has applied IFRS 11 "Joint Arrangements" to its investment in associates. Under IFRS 11"Joint Arrangements", investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. The Directors have assessed the nature of the Company's joint arrangements and determined them to be that of an associated company, accounted for using the equity method. Under the equity method of accounting, interests in associated companies are initially recognized at cost and adjusted thereafter to recognize the Group's share of the post-acquisition profits or losses and movements in other comprehensive income. When the Group's share of losses in an associated company equals or exceeds its interests in the associated company, the Group does not recognize further losses, unless it has incurred obligations or made payments on behalf of the associated company. d. New standards, interpretations and amendments effective for the current period Adopted - Amendments to IFRS 3: Definition of a Business - Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform - Amendments to IFRS 16: COVID-19-Related Rent Concessions - Amendments to IAS 1 and IAS 8: Disclosure Initiative - Definition of Materiality The Group has considered the above new standards, interpretations and amendments and has concluded that they are either not relevant to the Group or they do not have a significant impact on the Group's consolidated financial statements. New standards, interpretations and amendments not yet effective for the current period There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in future accounting periods that the Group has decided not to adopt early. The most significant of these are as follows: - Amendments to IAS 37 Onerous Contracts - Cost of Fulfilling a Contract - Amendments to IAS 16 Property, Plant and Equipment: Proceeds before Intended Use - Amendments to IFRS 3 References to Conceptual Framework Management is currently assessing the impact of these new standards on the Group. 3. Significant accounting policies The preparation of the Consolidated Financial Statements in compliance with IFRS requires the Directors to exercise judgement in applying the Company's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Consolidated Financial Statements are disclosed in Note 4 "Significant accounting judgements, estimates and assumptions" to the Consolidated Financial Statements. a. Foreign currency transactions and translation The Consolidated Financial Statements are presented in US Dollars (US$), which is the Group's principal functional currency. The results and financial position of all Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows: �� assets and liabilities are translated at the closing rate at the date of the Statement of Financial Position; �� income and expenses are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and �� all resulting exchange differences are recognized in other comprehensive income. On consolidation, the Group recognizes in other comprehensive income the exchange differences arising from the translation of the net investment in foreign entities, and of monetary items receivable from foreign subsidiaries for which settlement is neither planned nor likely to occur in the foreseeable future. b. Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses, if any. The cost of an item of property, plant and equipment initially recognized includes its purchase price and any cost that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by the Group. Property, plant and equipment are generally depreciated on a straight-line basis over their estimated useful lives: Furniture and fixtures 5-7 years Motor vehicles 5 years Machinery and equipment 5-15 years Computers and software 5 years Property, plant and equipment held under leases are depreciated over the shorter of the lease term and estimated useful life. c. Research and development expenditure Research expenditure is recognized as an expense when it is incurred. Development expenditure is recognized as an expense except those costs incurred on development projects are capitalized as long-term assets to the extent that such expenditure is expected to generate future economic benefits. Development expenditure is capitalized if, and only if an entity can demonstrate all of the following: �� its ability to measure reliably the expenditure attributable to the asset under development; �� the product or process is technically and commercially feasible; �� its future economic benefits are probable; �� its ability to use or sell the developed asset; and �� the availability of adequate technical, financial and other resources to complete the asset under development. Capitalized development expenditure is measured at cost less accumulated amortization and impairment losses, if any. Certain internal salary costs are included where the above criteria are met. These internal costs are capitalized when they are incurred in respect of products developed for sale. Development expenditure initially recognized as an expense is not recognized as assets in subsequent periods. Capitalized development expenditure in respect of such products is amortized on a straight-line method over a period of five to ten years when the products or services are ready for sale or use. In the event that it is no longer probable that the expected future economic benefits will be recovered, the development expenditure is written down to its recoverable amount. d. Intangible assets All intangible assets, except goodwill, are stated at cost less accumulated amortization and any accumulated impairment losses. The estimated useful lives are as follows: Patents and trademarks 5-10 years Internally developed assets 5-10 years Goodwill Goodwill represents the amount by which the fair value of the cost of a business combination exceeds the fair value of the net assets acquired. Goodwill is not amortized and is stated at cost less any accumulated impairment losses. The recoverable amount of goodwill is tested for impairment annually or when events or changes in circumstance indicate that it might be impaired. Impairment charges are deducted from the carrying value and recognized immediately in the income statement. For the purpose of impairment testing, goodwill is allocated to each of the Group's cash generating units expected to benefit from the synergies of the combination. If the recoverable amount of the cash generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognized for goodwill is not reversed in a subsequent period. Acquisition-related intangible assets Net assets acquired as part of a business combination includes an assessment of the fair value of separately identifiable acquisition-related intangible assets, in addition to other assets, liabilities and contingent liabilities purchased. These acquisition-related intangible assets are amortized on a straight-line basis over their useful lives which are individually assessed. The estimated useful lives are as follows: Patents and trademarks 10 years Brand names 10 years e. Impairment of financial assets The expected credit loss model defined in IFRS 9 "Financial Instruments" requires the Group to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition of the financial assets. The credit event does not have to occur before credit losses are recognized. IFRS 9 "Financial Instruments" allows for a simplified approach for measuring the loss allowance at an amount equal to lifetime expected credit losses for trade receivables and contract assets. The Group has one type of financial asset subject to the expected credit loss model: trade receivables. The expected loss rates are based on the Group's historical credit losses experienced over the three year period prior to the period end. The historical loss rates are then adjusted for current and forward-looking information on macroeconomic factors affecting the Group's customers. f. Impairment of non-financial assets At each reporting date, the Directors assess whether indications exist that an asset may be impaired. If indications do exist, or when annual impairment testing for an asset is required, the Directors estimate the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating unit's fair value less costs to sell and its value-in-use, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the Directors consider the asset impaired and write the subject asset down to its recoverable amount. In assessing value-in-use, the Directors discount the estimated future cash flows to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, the Directors consider recent market transactions, if available. If no such transactions can be identified, the Directors utilize an appropriate valuation model. When applicable, the Group recognizes impairment losses of continuing operations in the Statements of Comprehensive Income in those expense categories consistent with the function of the impaired asset. g. Right-of-use assets A right-of-use asset is recognized at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset. Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Right-of use assets are subject to impairment or adjusted for any re-measurement of lease liabilities. The Group has elected not to recognize a right-of-use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred. h. Leases The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date: whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset. Identifying leases The Group accounts for a contract, or a portion of a contract, as a lease when it conveys the right to use an asset for a period of time in exchange for consideration. Leases are those contracts that satisfy the following criteria: �� there is an identified asset; �� the Group obtains substantially all the economic benefits from use of the asset; and �� the Group has the right to direct use of the asset. The Group considers whether the supplier has substantive substitution rights. If the supplier does have those rights, the contract is not identified as giving rise to a lease. In determining whether the Group obtains substantially all the economic benefits that arise from use of the asset, the Group considers only the economic benefits that arise from use of the asset, not those incidentals to legal ownership or other potential benefits. In determining whether the Group has the right to direct use of the asset, the Directors consider whether the Group directs how and for what purpose the asset is used throughout the period of use. If there are no significant decisions to be made because they are pre-determined due to the nature of the asset, the Directors consider whether the Group was involved in the design of the asset in a way that predetermines how and for what purpose the asset will be used throughout the period of use. If the contract or portion of a contract does not satisfy these criteria, the Group applies other applicable IFRSs rather than IFRS 16 "Leases". Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case the Group's incremental borrowing rate on commencement of the lease is used, which the Directors have assessed to be between 1.75% and 5%, depending on the nature of the asset and location. Variable lease payments are only included in the measurement of the lease liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate. On initial recognition, the carrying value of the lease liability also includes: �� amounts expected to be payable under any residual value guarantee; �� the exercise price of any purchase option granted in favor of the Group if it is reasonably certain to assess that option; and �� any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of termination option being exercised. Right-of-use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for: �� lease payments made at or before commencement of the lease; �� initial direct costs incurred; and �� the amount of any provision recognized where the Group is contractually required to dismantle, remove or restore the leased asset. Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortized on a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if, rarely, this is judged to be shorter than the lease term. When the Group revises its estimate of the term of any lease (because, for example, it re-assesses the probability of a lessee extension or termination option being exercised), it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised term, which are discounted at the same discount rate that applied on lease commencement. The carrying value of lease liabilities is similarly revised when the variable element of future lease payments dependent on a rate or index is revised. In both cases an equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being amortized over the remaining (revised) lease term. i. Taxation Deferred taxation Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Consolidated Financial Statements. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and expected to apply when the related deferred tax is realized, or the deferred liability is settled. Deferred tax assets are recognized to the extent that it is probable that the future taxable profit will be available against which the temporary differences can be utilized. Income taxation Current income tax assets and liabilities are measured at the amount to be recovered from, or paid to, the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date in the jurisdictions where the Group operates and generates taxable income. j. Revenue from contracts with customers and other income The Group's revenue represents the fair value of the consideration received or receivable for the sale of functional ingredients (including chemicals), materials or finished goods directly to retail or wholesale customers and the rendering of services, net of value added tax and other similar sales-based taxes, rebates and discounts after eliminating intercompany sales. For fixed-price contracts, the customer pays the fixed amount based on a payment schedule. If the value of services rendered by the Group exceed the payment received, an amount recoverable on contracts asset is recognized. Conversely, if the payments exceed the value of services rendered, a liability is recognized. If the contract is time-and-materials based and includes an hourly fee, revenue is recognized over time in the amount to which the Group has the right to invoice. Take or pay arrangements Certain customers have agreed, under a "take or pay" contract, to purchase a specified minimum quantity of a range of particular products over a specified period of time. However, the customer has to pay for the full quantity stated in the contract, irrespective of whether the customer takes delivery of the minimum quantity to which they are entitled. Upon payment of the full amount, the contract allows customers to defer its unexercised rights and to consume the remaining units to a later date, although there is no compulsion to do so. If the Group expects to benefit from such future exercise by the customer, it recognizes the expected amount as revenue in proportion to the pattern of rights exercised by the customer (by comparing the goods delivered to date with those expected to be delivered overall). The Directors have therefore considered likely future customer behavior and thus estimated the proportion of revenues to be recognized under such contracts. Framework agreements For services revenue from framework agreements, the stage of completion is determined based on the proportion of contract costs incurred compared to total estimated contract costs. The outcome of a development project can be determined with reasonable certainty when a project budget is agreed which sets out milestones and costs for all project deliverables. Staff and contractors record their actual time and external costs spent on each project which is regularly reviewed against budget. In making their estimation as to the amounts recoverable on contracts, the Directors consider estimates of anticipated revenues and costs from each contract and monitors the need for any provisions for losses arising from adjustments to underlying assumptions if this indicates it is appropriate. Contract work in progress is stated at costs incurred, less those amounts transferred to profit or loss, after deducting foreseeable losses and payments on account not matched with revenue. Amounts recoverable on contracts are included in current assets and represent revenue recognized in excess of payments on account. The revenue recognized and deferred from such agreements was as follows: Year ended Year ended December 31, 2020 December 31, 2019 Revenue from framework agreements $'000 $'000 Amounts invoiced - - Amounts recognized 50 300 Amount recognized in revenue 50 300 As at As at December 31, 2020 December 31, 2019 Deferred revenue $'000 $'000 Amount brought forward 50 350 Recognized as income (50) (300) Amount carried forward to be recognized in future periods - 50 k. Share-based payments The Group accounts for share-based payments under IFRS 2 "Share-based payment". All of the Group's share-based awards are equity settled. Equity-settled share-based payments to employees are measured at the fair value of the equity instruments at the grant date. Equity-settled share-based payments to non-employees are measured at the fair value of services received, or if this cannot be measured, at the fair value of the equity instruments granted at the date that the Group obtains the goods or counterparty renders the service. The fair value of such shares issued has been estimated by reference to the cash consideration received for shares issued or material third party transactions at or close to the dates for such non-cash issues. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Directors' estimate of equity instruments that will eventually vest, with a corresponding increase in equity. Where the conditions are non-vesting, the expense and equity reserve arising from share-based payment transactions is recognized in full immediately on grant. At the end of each reporting period, the Directors revise their estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognized in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to other reserves. l. Employee benefits Short-term benefits Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. Long-term benefits Defined benefit plans The Group operates a defined benefit pension plan in Switzerland, which requires contributions to be made to a separately administered fund. The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method. Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognized immediately in the statement of financial position with a corresponding debit or credit to retained earnings through other Comprehensive Income in the period in which they occur. Re-measurements are not reclassified to profit or loss in subsequent periods. Past-service costs are recognized in profit or loss on the earlier of: �� the date of the plan amendment or curtailment; and �� the date that the Group recognizes related restructuring costs. Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Group recognizes the following changes in the net defined benefit obligation under "cost of sales", "administration expenses" and "selling and distribution expenses" in the consolidated statement of profit or loss (by function): �� service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements; and �� net interest expense or income. Defined contribution plans The income statement expense for the defined contribution pension plans operated represent the contributions payable for the year. m. Finance income and expenses Finance expenses comprise interest payable, lease expenses recognized in profit or loss using the effective interest method, unwinding of the discount on provisions, and net foreign exchange losses that are recognized in the income statement. Finance income comprises interest receivable on cash deposits and net foreign exchange gains. Interest income and interest payable are recognized in profit or loss as it accrues, using the effective interest method. Foreign currency gains and losses are reported on a net basis. n. Cash and cash equivalents For the purpose of presentation in the consolidated statement of cash flows, cash and cash equivalents include cash on hand, deposits held at call with financial institutions, other short-term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. o. Trade and other receivables Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment. p. Inventories Inventories are stated at the lower of cost and net realizable value. Cost is based on the weighted average principle and includes expenditure incurred in acquiring the inventories and other costs in bringing them to their existing location and condition. q. Provisions A provision is recognized when the Group has a present obligation, legal or constructive, as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of economic resources will be required to settle the obligation, the provision is reversed. Where the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as an interest expense. Contingent liabilities Contingent liabilities are possible obligations whose existence depends on the outcome of uncertain future events or present obligations where the outflow of resources is uncertain or cannot be measured reliably. Contingent liabilities are not recognized in the Consolidated Financial Statements but are disclosed unless they are remote. r. Segmental reporting The Directors consider that the Group has one reportable segment, that of textile innovation focused on scientific research, specialty materials manufacturing and consumer ingredient branding. Accordingly, all revenues, operating results, assets and liabilities are allocated to this activity. The Group also analyses and measures its performance into geographic regions, specifically Europe, North & South America and Asia. 4. Significant accounting judgements, estimates and assumptions The Directors have made the following judgements which may have a significant effect on the amounts recognized in the Consolidated Financial Statements: a. Basis of consolidation The Directors consider that the share for share exchange between Auctus Growth Plc and HeiQ Materials AG to be a reverse acquisition as HeiQ Materials AG is considered to be the acquirer. Further details of the basis of consolidation and how the Directors developed the most appropriate accounting policy are outlined in the basis of consolidation within accounting policy Note 2(b). The difference between the consideration shares transferred in the combination ("Consideration Shares'') and the fair value of the net assets acquired has been charged to the consolidated statement of income as a deemed cost of listing. b. Revenue from take or pay arrangements Certain customers have agreed, under a "take or pay" contract, to purchase a specified minimum quantity of a range of particular products over a specified period of time. However, the customer has to pay for the full quantity stated in the contract, irrespective of whether the customer takes delivery of the minimum quantity to which they are entitled. Upon payment of the full amount, the contract allows customers to defer its unexercised rights and to consume the remaining units to a later date, although there is no compulsion to do so. If the Group expects to benefit from such future exercise by the customer, it recognizes the expected amount as revenue in proportion to the pattern of rights exercised by the customer (by comparing the goods delivered to date with those expected to be delivered overall). The Directors have therefore considered likely future customer behaviour and thus estimated the proportion of revenues to be recognized under such contracts. Any changes to such estimates would not have a material impact on the amount of revenue recognized in each year. c. Impairment of non-financial assets IFRS requires the Directors to undertake an annual test for impairment of indefinite lived assets and, for finite lived assets, to test for impairment if events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment testing is an area involving judgement in determining estimates, requiring assessment as to whether the carrying value of assets can be supported by the net present value of future cash flows derived from such assets using cash flow projections which have been discounted at an appropriate rate. In calculating the net present value of the future cash flows, certain assumptions are required to be made in respect of highly uncertain matters including management's expectations of: �� growth in EBITDA, calculated as adjusted operating profit before depreciation and amortization; �� the level of capital expenditure to support long-term growth; and �� the selection of discount rates to reflect the risks involved. The Directors prepare and approve cash flow projections which are used in the fair value calculations. Changing the assumptions selected by the Directors, in particular the discount rate and growth rate assumptions used in the cash flow projections, could significantly affect their impairment evaluation and hence the Group's results. Goodwill of ��3.4 million relating to the acquisition of the Chem-Tex Assets in 2017 was allocated to the Chem-Tex business and represents a group of cash generating units and tested for impairment as of the reporting date. The carrying value of the Chem-Tex Assets was tested for impairment on the basis of value-in-use, including a gross margin of 47.5%, capital expenditure of $400,000 and a discount rate of 16% based on the rate that would be used by a market participant. The impairment test indicated that no impairment loss is required. The sensitivity of impairment tests to changes to underlying assumptions is summarized below. Impairment would result from the following changes to assumptions: �� An increase in the discount rate to 23% �� A gross margin of 41% or below �� Capital expenditure of $1,100,000 per annum or higher. d. Defined benefit plans (pension benefits) The costs of the Group's defined benefit pension plan and other post-employment medical benefits and the present value of the pension obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases, mortality rates and future pension increases. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. Further details about pension obligations are provided in Note 20 "Pensions and other post-employment benefit plans". 5. Business combinations Reverse acquisition On December 7, 2020, HeiQ Plc became the legal parent of HeiQ Materials AG by way of reverse acquisition. The cost of the acquisition is deemed to have been incurred by HeiQ Materials AG, the legal subsidiary, in the form of equity instruments issued to the owners of the legal parent. This acquisition has been accounted for as a reverse acquisition. This transaction is deemed outside the scope of IFRS 3 and not considered a business combination because the Directors have made a judgement that, prior to the transaction, Auctus Growth Plc was not a business under the definition of IFRS 3 Appendix A and the application guidance in IFRS 3.B7- B12 due to Auctus Growth Plc being a shell company that had no processes or capability for outputs (IFRS 3.B7). On this basis, the Directors have developed an accounting policy for this transaction, applying the principles set out in IAS 8.10-12, in that the policy adopted: �� is relevant to the users of the financial statements; �� is more representative of the financial position, performance and cash flows of the Group; �� reflects the economic substance of the transaction, not merely the legal form; and �� is free from bias, prudent and complete in all material aspects. The accounting policy adopted by the Directors applies the principles of IFRS 3 in identifying the accounting acquirer and the presentation of the Consolidated Financial Statements of the legal parent (HeiQ Plc) as a continuation of the accounting acquirer's Financial Statements (HeiQ AG Materials). This policy reflects the commercial substance of this transaction as the original shareholders of the subsidiary undertakings were the most significant shareholders post transaction, owning 84.8 per cent. of the enlarged issued share capital of the Company. Accordingly, the following accounting treatment and terminology was applied in respect of the reverse acquisition: �� the assets and liabilities of the legal subsidiary, HeiQ Materials AG, are recognized and measured in the Group Financial Statements at the pre-combination carrying amounts, without reinstatement to fair value; �� the retained earnings and other equity balances recognized in the Group Financial Statements reflect the retained earnings and other equity balances of HeiQ Materials AG and its subsidiaries immediately before the business combination, and the results of the year from January 1, 2020 to the date of the business combination are those of HeiQ Materials AG. However, the equity structure appearing in the Consolidated Financial Statements reflects the equity structure of the legal parent (Auctus Growth Plc), including the equity instruments issued under the share for share exchange to effect the business combination; the cost of the combination has been determined from the perspective of HeiQ Materials AG. The fair value of the shares in HeiQ Materials AG has been determined from the admission price of the HeiQ Plc shares on re-admission to trading on the London Stock Exchange's Main Market of ��1.12 per share. The value of the consideration shares was ��119,571,088 (equivalent to US$156,889,584). The fair value of the notional number of equity instruments that the legal subsidiary would have had to have issued to the legal parent to give the owners of the legal parent the same percentage ownership in the combined entity was 15.2 per cent of the market value of the shares after issues, being ��21,428,000 ($28,124,000). The difference between the notional consideration paid by HeiQ Plc for HeiQ Materials AG and the HeiQ Plc net assets acquired of ��20,360,000 ($26,722,000) has been charged to the Consolidated Statement of Comprehensive Income as a deemed cost of listing amounting to ��1,068,000 (equivalent to $1,402,000) with a corresponding entry to the merger reserve. The transaction costs associated with the reverse acquisition and readmission totaled $1,871,000 and have been charged to profit and loss. Details of net assets acquired and the deemed cost of listing are as follows: $'000 Consideration effectively transferred 28,124 Net assets acquired: Cash and cash equivalents 27,105 Trade and other receivables 163 Trade and other payables (546) Net assets acquired 26,722 Deemed cost of listing 1,402 The amounts transferred to the merger reserve were as follows: $'000 HeiQ equity capital pre-combination 29,095 Deemed cost of acquisition 1,402 Consideration shares issued on acquisition (156,894) Retained losses of Company at combination (515) Merger reserve as at December 31, 2020 (126,912) Acquisition of MasFabE On December 15, 2020, the Group completed the acquisition of a 50.01% interest in a leading Spanish mask manufacturer MasFabEs S.L. for a consideration of ���132,751 (equivalent to US$156,570). The company was renamed HeiQ Medica S.L. and will manufacture medical devices with the Group's cutting-edge textile technologies. The following table summarizes the consideration paid for the goodwill, the fair value of assets acquired, liabilities assumed and non-controlling interests at the acquisition date: $'000 Fair value of consideration 157 Net assets acquired: Property, plant and equipment 1,195 Inventories 1,152 Cash 6 Net working capital (886) Deferred tax asset 112 Borrowings (1,512) Total identifiable net assets acquired at fair value 67 Non-controlling interests (33) Goodwill recognized on acquisition 123 6. Subsidiaries Details of the Company's subsidiaries as at December 31, 2020 are as follows: Company Country of registration or incorporation Registered office Principal activity Percentage of ordinary shares held HeiQ Materials AG Switzerland R��tistrasse 12, 8952 Schlieren Zurich Development, production and sale of chemicals 100% HeiQ ChemTex Inc. United States 2725 Armentrout Dr Concord, NC 28025 Level 20/181 William Street Melbourne, VIC 3000 Development, production and sale of chemicals 100% HeiQ Pty Ltd Australia Research and development 100% HeiQ Australia Pty Ltd Australia Level 20/181 William Street Melbourne, VIC 3000 Trading and production 100% HeiQ GrapheneX AG Switzerland R��tistrasse 12, 8952 Schlieren Zurich No. 14 & 16, Ln. 50, Wufu 1st Rd. Luzhu District, Taoyuan City 33850 Inactive 100% HeiQ Company Limited Taiwan Distribution 100% HX Company Limited Taiwan No. 14 & 16, Ln. 50, Wufu 1st Rd. Luzhu District, Taoyuan City 33850 Plaza de la Estaci��n s/n, 29560 Pizarra Rua Eng�� Frederico Ulrich, n�� 2650, 4470-605 Maia Trading and production 66.7% HeiQ Medica S.L. Spain Manufacture of medical devices 50% HeiQ Iberia Unipessoal Lda Portugal Sales agency company 100% With the exception of HeiQ Materials AG all subsidiaries are held indirectly. * The HeiQ Group held a 50% interest up until May 2017, when it acquired the remaining 50%. HeiQ Pty Ltd comprised HeiQ Pty Ltd and its wholly owned subsidiary, HeiQ Australia Pty Ltd, until HeiQ Australia Pty Ltd filed for voluntary deregistration on July 17, 2020 as part of a consolidation of the local businesses into a single entity. Subsequently, the business name "HeiQ Australia" was registered on July 20, 2020 by HeiQ Pty Ltd to be used for trading purposes and on October 4, 2020, trading as a single entity commenced. The official registered address for HeiQ Pty Ltd (and the business name HeiQ Australia) is as above. HeiQ operates a sales representative office in the People's Republic of China registered as HeiQ Materials Company Limited at Room 2011, Xuhui Commercial Mansion, No. 168 Yude Road, Shanghai, China. 7. Associated companies Details of the Group's investments in associated companies are as follows: Company Country of registration or incorporation Registered office Principal activity Percentage of ordinary shares held by HeiQ HeiQ-RAS GmbH Germany An der Irler H��he 3a, 93055 Regensburg Regulatory Services 50% As at As at December 31, December 31, 2020 2019 $'000 $'000 HeiQ-RAS GmbH - 15 Microbe Investigations AG - 29 Carrying value - 44 HeiQ-RAS GmbH ("HeiQ Germany") In June 2019, the Group incorporated HeiQ Germany with a paid in capital of ���25,000 and, upon incorporation, agreed to sell a 50% interest to RAS AG, Germany for consideration of ���12,500, equivalent to approximately $15,000. The investment has been accounted for using the equity method of accounting whereby the investment is initially recognized at cost and the carrying value is increased or decreased to recognize the Group's share of the profit or loss of the associate after the date of acquisition. As at December 31, 2020, the carrying value of the investment is summarized as follows: As at As at December 31, December 31, 2020 2019 $'000 $'000 Balance brought forward 15 - Consideration paid - 15 Group's share of post-acquisition losses (15) - Carrying value - 15 Summarized financial information Set out below is summarized financial information for HeiQ Germany which is accounted for using the equity method. The information reflects the amounts presented in the financial information of HeiQ Germany, adjusted for differences in accounting policies between the Group and the associated company where appropriate, and not the Group's share of those amounts. Summarized statement of comprehensive income: Year ended Year ended December 31, December 31, 2020 2019 $'000 $'000 Revenue - - Loss from continuing operations (42) - Tax - - Loss after tax (42) - Total comprehensive income for the year (42) - Microbe Investigations AG On June 7, 2012, HeiQ subscribed for a 49% interest in Microbe Investigations AG for a total consideration of CHF 24,500 ($ 25,634). The investment was accounted for using the equity method of accounting, as summarized below: As at As at December 31, December 31, 2020 2019 $'000 $'000 Balance brought forward 29 23 Group's share of post-acquisition results - 6 Proceeds received on disposal (7) - Loss on disposal (22) - Carrying value - 29 On October 23, 2020, the Group disposed of its interest in Microbe Investigations AG for a consideration of CHF 6,000 (approximately USD 7,000). 8. Revenue and other operating income The Group's activities are materials innovation which focuses on scientific research, manufacturing and consumer ingredient branding. The primary source of revenue is the production and sale of functional ingredients, materials and finished goods. Other sources of revenues include research and development services as well as laboratory work. Revenues were mainly generated in regions Europe, North & South America and Asia. The following table reconciles HeiQ Group's revenue for the periods presented: Year ended Year ended December 31, December 31, 2020 2019 $'000 $'000 Functional ingredients sales 42,023 27,526 Functional materials sales 764 42 Finished goods sales 7,444 Other third-party revenues 170 386 Total revenue 50,401 27,954 Year ended Year ended December 31, December 31, 2020 2019 $'000 $'000 North & South America 19,813 17,218 Asia 19,887 7,098 Europe 10,429 3,513 Others 272 125 Total revenue 50,401 27,954 During the year ended December 31, 2020, no customers individually totaled more than 10% of total revenues (2019: two customers totaling more than 10% at 12% and 11% respectively). Year ended Year ended December 31, December 31, 2020 2019 Other operating income $'000 $'000 Foreign exchange gains 3,986 1,401 Other 758 184 Total other operating income 4,744 1,585 Expenses by nature Year ended Year ended December 31, 2020 December 31, 2019 Cost of goods sold $'000 $'000 Material expenses 17,586 11,016 Personnel expenses 1,279 1,285 Depreciation of property, plant and equipment 382 395 Other costs of goods 3,155 1,686 Total cost of goods sold 22,402 14,382 Year ended Year ended December 31, December 31, 2020 2019 Selling and general administration expense $'000 $'000 Personnel expenses 9,091 6,783 Commissions 1,133 1,117 Audit expense 108 (9) Depreciation of property, plant and equipment 394 317 Amortization 110 149 Depreciation of right-of-use assets 368 404 Other 4,913 3,278 Total selling and general administration expense 16,117 12,048 Year ended Year ended December 31, December 31, 2020 2019 Personnel expenses $'000 $'000 Wages & salaries 8,290 7,496 Social security & other payroll taxes 415 283 Pension costs 448 89 Share-based payments 1,217 201 Total personnel expenses 10,370 8,069 The average monthly number of employees was as follows: 97 86 Year ended Year ended December 31, December 31, 2020 2019 Other operating expenses $'000 $'000 Foreign exchange losses 5,124 1,687 Other 3 - Total other operating expenses 5,127 1,687 9. Taxation For the year ending December 31, 2020, the Group had a tax expense of $2,112,000 (2019: $314,000). The effective tax rate was 28.8% (2019: 30.5%). The effective tax rate was primarily impacted by non-deductible expenditure. The components of the provision for taxation on income included in the "Statement of Profit or Loss and Other Comprehensive Income" are summarized below: Year ended Year ended December 31, December 31, 2020 2019 Current income tax expense $'000 $'000 Swiss corporate income taxes 304 46 United States state and federal taxes 1,112 147 Taiwan corporate income taxes 161 35 Total current income tax expense 1,577 228 Deferred income tax expense Switzerland 588 86 Portugal (28) - Taiwan (25) - Total deferred income tax expense 535 86 Total income tax expense 2,112 314 Year ended Year ended December 31, December 31, 2020 2019 Tax liability $'000 $'000 Opening balance - (Prepaid taxes) (42) (92) Income tax expense for the year 1,577 228 Taxes paid (48) (178) Foreign currency movements 8 - Closing balance 1,495 (42) The differences between the statutory income tax rate and the effective tax rates are summarized as follows: Year ended December 31, 2020 $'000 Expected tax at statutory Swiss income tax rate of 20% 1,469 20.0% Increase/(decrease) in tax resulting from: Effect of different tax rates in foreign jurisdictions 175 2.4% Tax credits (60) (0.8%) Net recognized tax losses (329) (4.5%) Non-deductible expenditure 567 7.7% Other - net 290 4.0% 2,112 28.8% Year ended December 31, 2019 $'000 Expected tax at statutory Swiss income tax rate of 20% 206 20.0% Increase/(decrease) in tax resulting from: Effect of different tax rates in foreign jurisdictions (19) (1.8%) Net unrecognized tax losses 100 9.7% Capital allowances less depreciation (6) (0.6%) Other - net 33 3.2% 314 30.5% The Group had net deferred tax liabilities of $31,000 at December 31, 2020 (2019: Net deferred tax assets of $164,000). The deferred tax assets relate to taxable temporary differences. The components of the net deferred income tax assets included in non-current assets are as follows: Year ended Year ended December 31, December 31, 2020 2019 $'000 $'000 Deferred tax assets Pension fund obligations 655 370 Tax losses recognized 171 - Deferred revenue - 10 Total deferred tax assets 826 380 Deferred tax liabilities Capital allowances and depreciation (857) (216) Deferred tax liabilities (857) (216) Net deferred tax assets (liabilities) (31) 164 As at December 31, 2020, the Group had approximately $171,000 of tax losses available to be carried forward against future profits (2019: $2.2 million). Approximately $1.5 million of the losses brought forward expired in 2020. In applying judgement in recognizing deferred tax assets, management has critically assessed all available information, including future business profit projections and the track record of meeting forecasts. Management expects the deferred tax asset to be substantially recovered in 2021. 10. Earnings per share The calculation of earnings per share is based on the following earnings and number of shares: Year ended Year ended December 31, December 31, 2020 2019 $'000 $'000 Profit after tax attributable to owners of the Company 4,991 726 Basic earnings per share (cents) 4.41 0.71 Diluted earnings per share (cents) 4.21 0.71 Basic weighted average number of shares in issue 113,143,731 102,959,511 Diluted weighted average number of shares in issue 118,666,601 102,959,511 Basic earnings per share is calculated by dividing the profit/loss after tax attributable to the equity holders of the Company by the weighted average number of shares in issue during the year. Diluted earnings per share is calculated by dividing the profit/loss attributable to the equity holders of the Company by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares. In calculating the weighted average number of ordinary shares outstanding (the denominator of the earnings per share calculation) during the period in which the reverse occurs: (a) the number of ordinary shares outstanding from the beginning of that period to the acquisition date shall be computed on the basis of the weighted average number of ordinary shares of the legal acquiree (accounting acquirer) outstanding during the period multiplied by the exchange ratio established in the merger agreement; and (b) the number of ordinary shares outstanding from the acquisition date to the end of that period shall be the actual number of ordinary shares of the legal acquirer (the accounting acquiree) outstanding during that period. The basic earnings per share for each comparative period before the acquisition date presented in the Consolidated Financial Statements following a reverse acquisition shall be calculated by dividing: (a) the profit or loss of the legal acquiree attributable to ordinary shareholders in each of those periods by (b) the legal acquiree's historical weighted average number of ordinary shares outstanding multiplied by the exchange ratio established in the acquisition agreement. 11. Intangible assets Goodwill Trademarks & patents Internally developed assets Brands Total Cost $'000 $'000 $'000 $'000 $'000 As at January 1, 2019 3,393 378 1,030 295 5,096 Additions arising from internal development - 39 79 - 118 Currency translation differences - - 19 - 19 As at December 31, 2019 3,393 417 1,128 295 5,233 Additions through business combinations 123 - - - 123 Additions arising from internal development - 33 602 - 635 Currency translation differences - 41 121 - 162 As at December 31, 2020 3,516 491 1851 295 6,153 Amortization As at January 1, 2019 - 170 336 48 554 Amortization for the year - 78 41 30 149 Currency translation differences - 1 7 - 8 As at December 31, 2019 - 249 384 78 711 Amortization for the year - 70 11 29 110 Currency translation differences - 31 37 - 68 As at December 31, 2020 - 350 432 107 889 Net book value As at December 31, 2020 3,516 141 1,419 188 5,264 As at December 31, 2019 3,393 168 744 217 4,522 Goodwill, brands and certain trademarks were recognized in earlier years arising from the acquisition of certain assets (the "Chem-Tex Assets'') through a newly established subsidiary, HeiQ USA, in April 2017. Additional goodwill was recognized on the acquisition of MasFabEs S.L. in December 2020 as described in Note 5 above. Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating unit ('CGU') that is expected to benefit from that business combination. Management considers that the goodwill is attributable to the textile innovation CGU, because that is where the benefits are expected to arise from expansion opportunities and synergies of the business. The Directors consider that the Group has one reportable segment, that of textile innovation focused on scientific research, specialty materials manufacturing and consumer ingredient branding. The Group tests goodwill annually for impairment or more frequently if there are indications that these assets might be impaired. The recoverable amounts of the CGU are determined from fair value less costs to sale. The value of the goodwill comes from the future potential of the assets rather than using the assets as they are (i.e., there is assumed expansionary capex which supports growth in revenues and the value of the business and therefore goodwill). The key assumptions for the fair value less costs to sale approach are those regarding sales prices, margins and a discount rate. The Group monitors its pre-tax Weighted Average Cost of Capital and those of its competitors using market data. In considering the discount rate applying to the CGU, the Directors have considered the relative size and risks of its CGU. The impairment review uses a discount rate adjusted for post-tax cash flows. The Group prepares cash flow forecasts derived from the most recent financial plan approved by the Board and extrapolates revenues, net margins and cash flows for the following five years based on forecast growth rates of the CGU. Cash flows beyond this period are also considered in assessing the need for any impairment provisions. A discount rate of 16% and expenditure of $2,000,000 to maintain the assets in their current use over the five years has been assumed. The terminal growth rate used for the fair value calculation thereafter is 1%. The directors consider these assumptions are consistent with that which a market participant would use in determining fair value. The Company tested goodwill for impairment and determined that the recoverable amount relating to the acquisition of the Chem-Tex Assets in excess of its carrying amount and therefore no impairment is considered necessary. In calculating the net present value of the future cash flows, certain key input assumptions were used, including: - Long-term revenue growth of 1% per annum - A gross margin of 47.5% - Capital expenditure of $400,000 per annum - A discount rate of 16% Goodwill in respect of MasFabEs S.L. was not tested as the business was acquired in December 2020 and the net assets recognized at their estimated fair value at this time. Internally developed assets and other intangibles Internally generated assets represent expenditure incurred on development projects. The Group tests internally developed assets and other intangibles for impairment only if there are indications that these assets might be impaired. The Company has not identified any impairment indicators and accordingly, has concluded that no impairment is necessary. 12. Property, plant and equipment Machinery and equipment Motor vehicles Computers and software Furniture and fixtures Total Cost $'000 $'000 $'000 $'000 $'000 As at January 1, 2019 4,811 332 641 100 5,884 Additions 348 10 12 - 370 Disposals (7) - - - (7) Currency translation differences 37 1 12 - 50 As at December 31, 2019 5,189 343 665 100 6,297 Acquisition on business combination 1,224 - 1 12 1,237 Additions 629 191 77 35 932 Disposals (628) (46) (2) (18) (694) Currency translation differences 365 4 69 3 441 As at December 31, 2020 6,779 492 810 132 8,213 Depreciation As at January 1, 2019 1,393 109 150 21 1,673 Charge for the year 504 71 127 10 712 Disposals (1) - - - (1) Currency translation differences 21 - 8 - 29 As at December 31, 2019 1,917 180 285 31 2,413 Acquisition on business combination 42 - - - 42 Charge for the year 538 84 142 12 776 Eliminated on disposal (607) (24) - (7) (638) Currency translation differences 112 2 37 2 153 As at December 31, 2020 2,002 242 464 38 2,746 Net book value As at December 31, 2020 4,777 250 346 93 5,467 As at December 31, 2019 3,272 163 380 69 3,884 Right-of-use assets Land and buildings Motor vehicles Office equipment Total Cost $'000 $'000 $'000 $'000 As at January 1, 2019 3,748 111 22 3,881 Additions 9 - - 9 As at December 31, 2019 3,757 111 22 3,890 Additions 76 - 32 108 Disposals due to expiry of lease (306) (43) (14) (363) Currency translation differences 174 8 1 183 As at December 31, 2020 3,701 76 41 3,818 Depreciation As at January 1, 2019 698 61 13 772 Depreciation for the year 379 19 6 404 As at December 31, 2019 1,077 80 19 1,176 Depreciation for the year 345 16 7 368 Disposals due to expiry of lease (306) (43) (14) (363) Currency translation differences 66 7 0 73 As at December 31, 2020 1,182 60 12 1,254 Net book value As at December 31, 2020 2,519 16 29 2,564 As at December 31, 2019 2,680 31 3 2,714 Future minimum lease payments associated with these leases were as follows: As at December 31, 2020 As at December 31, 2019 $'000 $'000 Not later than one year 385 390 Later than one year and not later than five years 1,346 1,265 Later than five years 1,162 1,413 Total minimum lease payments 2,893 3,068 Less: Future finance charges (240) (284) Present value of minimum lease payments 2,653 2,784 Current liability 349 339 Non-current liability 2,304 2,445 2,653 2,784 13. Other non-current assets As at December 31, As at December 31, 2020 2019 $'000 $'000 Deposits 55 57 Amounts due from third parties 151 16 Other non-current assets 206 73 14. Inventories As at As at December 31, December 31, 2020 2019 $'000 $'000 Raw materials 7,951 1,045 Semi-finished goods 2,692 956 Finished goods 2,685 1,201 Total inventories 13,328 3,202 Trade and other receivables The majority of trade receivables are current, and the Directors believe these receivables are collectible. The Directors consistently assess the collectability of these receivables. As at December 31, 2020, the Directors considered a portion of these receivables uncollectable and recorded a provision in the amount of $551,000 (2019: $174,000). At at As at December 31, December 31, 2020 2019 Trade receivables $'000 $'000 Not past due 3,975 6,113 <30 days 1,304 860 31-60 days 763 191 61-90 days 115 9 91-120 days 482 - >120 days 7,349 2,176 Total trade receivables 13,988 9,349 Provision for expected credit loss (551) (174) Total trade receivables 13,437 9,175 The Group uses a simplified approach to recognize lifetime expected losses on trade and other receivables. Expected losses consider payment performance history, external information available regarding credit ratings as well as future expected credit losses. The provision for expected loss rates is based on the Group's historical credit losses experienced over the three-year period prior to the period end. Most significantly, in the case of take-or-pay contracts, the rate of provision is 5% for amounts more than one year past due, 20% for amounts more than two years past due and 25% for amounts more than three years past due. The historical loss rates are then adjusted for current and forward-looking information on macroeconomic factors affecting the Group's customers. The Directors have identified the gross domestic product, unemployment rate and inflation rate as the key macroeconomic factors in the countries in which the Group operates. Other receivables and prepayments As at As at December 31, December 31, 2020 2019 $'000 $'000 Other receivables - from tax authorities 1,372 262 Prepayments and other receivables 1,237 80 Total other receivables and prepayments 2,609 342 15. Share capital and share options Movements in the Company's share capital were as follows: Note Number of shares Share capital Share premium Total No. $'000 $'000 $'000 Balance as of January 1, 2019 and December 31, 2019 2,668,999 350 1,305 1,655 Consolidation of shares (i) (1,779,346) - - - Placing of shares (ii) 11,789,142 4,641 12,684 17,325 Subscription for shares (iii) 6,068,000 2,389 6,529 8,918 Issue of shares to acquire HeiQ Materials AG (iv) 106,759,900 42,027 114,865 156,892 Shares issued in lieu of fees (v) 385,209 152 414 566 Costs of share issues (vi) - - (1,260) (1,260) Balance as at December 31, 2020 125,891,904 49,559 134,537 184,096 The par value of all shares is ��0.30. All shares in issue were allotted, called up and fully paid. i. On December 4, 2020, the Company's share capital was reorganized such that every three existing Ordinary Shares of ��0.10 each were consolidated into one new Ordinary Share of ��0.30 each. ii. On the same date, the Company completed a conditional placing of 11,789,142 new Ordinary Shares in the capital of the Company at ��1.12 per Ordinary Share, raising ��13,203,839 (equivalent to US$17,325,158). iii. A conditional subscription to raise gross proceeds of ��6,796,160 (US$8,917,448), through the issue of 6,068,000 new Ordinary Shares at ��1.12 per share was also completed on the same date. iv. On December 4, 2020, the Company announced that it had agreed to acquire the entire issued and to be issued share capital of HeiQ Materials AG, the consideration for which was ��119,571,088 (equivalent to US$ 156,892,850), satisfied by the issue and allotment to the HeiQ Shareholders of 106,759,900 Consideration Shares at a deemed issue price of ��1.12 per Ordinary Share. The Acquisition constituted a reverse takeover under the Listing Rules as it resulted in a fundamental change in the business and management of the Company. v. On the same date, the Company issued a further 385,209 new ordinary shares at ��1.12 per Ordinary Share to satisfy the payment of certain fees amounting to ��431,434 (US$566,098) in connection with the acquisition. vi. Costs directly associated with the raising of equity funds totaling ��960,500 (US$1,260,275) were expensed against share premium. For the purposes of the financial statements, each of the share transactions have been translated to US Dollars at ��1:$1.312. Share Option Scheme The Company has adopted the HeiQ plc Option Scheme. Under the Option Scheme, awards may be made only to employees and executive directors. The Board will administer the Option Scheme with all decisions relating to awards made to executive directors taken by the Remuneration Committee. Awards under the plan will be market value options, but participants resident in jurisdictions where local securities laws or other regulations are considered problematic may be awarded cash-based equivalents. Any awards made are not pensionable. All awards made will be subject to one or more performance conditions at the discretion of the Board. Ordinary Shares received on exercise of any options awarded under the Option Scheme may be required to be held for a period of time before they can be disposed of (other than disposals to satisfy any tax payable on exercise). The total number of Ordinary Shares which can be issued under the Option Scheme (together with any other employees' share scheme operated by the Company) may not exceed 10 per cent. of the Company's ordinary share capital from time to time. A total of 6,260,000 awards were made under the Option Scheme pursuant to re-admission on December 7, 2020. The key performance indicators attaching to these awards relate to targets for sales growth (65 per cent. of the award) and operating margin (35 per cent. of the award) over a period of three years An option-holder has no voting or dividend rights in the Company before the exercise of a Share option. The weighted average share price of options granted at grant date was ��1.12 and the estimated fair value of each share option granted was ��0.269. This estimated fair value was calculated by applying a Black-Scholes option pricing model. A 0.25% risk-free interest rate and an expected volatility of the Company's share price has been used in these calculations. The weighted average exercise price of options granted during the year was ��1.23. The expense and equity reserve arising from these share-based payment transactions recognized in the year ended December 31, 2020 was $50,000 (year ended December 31, 2019: nil). Other share-based transactions During the year ended December 31, 2020, HeiQ Materials AG issued 18,000 shares (2019: 9,000 shares) to employees in respect of contractual obligations for a total consideration of $1,167,000 (2019: $428,000). 16. Reserves The share-based payment reserve arises from the requirement to value share options in existence at the year end at fair value. Further details of share options are included at Note 18. The currency translation reserve represents cumulative foreign exchange differences arising from the translation of the financial statements of foreign subsidiaries and is not distributable by way of dividends. The share premium account represents the amount received on the issue of ordinary shares by the Company in excess of their nominal value and is non-distributable. The other reserve comprises the cumulative re-measurement of defined benefit obligations and plan assets to fair value and which are recognized as a component of other comprehensive income. Such actuarial gains and losses from defined benefit pension plans are not reclassified to profit or loss in subsequent periods. The retained deficit comprises all other net gains and losses and transactions with owners not recognized elsewhere. The merger reserve was created in accordance with IFRS3 'Business Combinations'. The merger reserve arises due to the elimination of the Company's investment in HeiQ Materials AG. Since the shareholders of HeiQ Materials AG became the majority shareholders of the enlarged Group, the acquisition is accounted for as though there is a continuation of the legal subsidiary's financial statements. In reverse acquisition accounting, the business combination's costs are deemed to have been incurred by the legal subsidiary. 17. Pensions and other post-employment benefit plans The Group operates a defined benefit pension plan in Switzerland, which requires contributions to be made to a separately administered fund. The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method. Correspondingly the value of the defined benefit obligation at valuation date is equal to the present value of the accrued pro-rated service considering expected salary at eligibility date and the future pension increase. The pension scheme is with Swisscanto pension fund ("Swisscanto Sammelstiftung"). Pension plan description The pension plans grant disability and death benefits which are defined as a percentage of the salary insured. Upon reaching the retirement age, the savings capital will be converted with a fixed conversion rate into an old age pension. In the event that an employee leaves employment prior to reaching a pensionable age, the cumulative balance of the savings account is withdrawn from the pension plan and invested into the pension plan of the employee's new employer. Regulatory framework Pension plan legal structure HeiQ Materials AG is affiliated to a collective foundation. The collective foundation operates one defined benefit pension plan for HeiQ Materials AG. Under Swiss law, all employees are required to be a member of the pension plan. There are minimum benefits requested by law (for old-age, disability, death and termination). The pension plans cover more than legally requested. Each affiliated company has a pension plan committee. The committee is represented by 50% of employer representatives and the remaining 50% are employee representatives. Responsibilities of the board of trustees (and/or the employer on the board of trustees) The highest corporate body of the collective foundation is the board of trustees. The board of trustees is elected out of the affiliated companies and is also represented by 50% of employee and employer representatives (on the level of the collective foundation). This board handles the general management of the pension scheme, ensures compliance with the statutory requirements, defines the strategic objectives and policies of the pension scheme and identifies the resources for their implementation. This board decides also on the asset allocation and is responsible to the authorities for the correct administration of the collective foundation. Special situation The pension scheme has no minimum funding requirement (when the pension fund is in a surplus position), although the pension scheme has a minimum contribution requirement as specified below. Under local requirements, where a pension fund is operated in a surplus position, limited restrictions apply in term of the trustee's ability to apply benefits to the members of the locally determined "free reserves". In instances where the pension fund enters into an underfunded status as per statutory valuation (which follows different valuation principles than IFRS and is not to be compared with the funding status per IFRS mentioned above), the active members, along with the employer, are required to make additional contributions until such time the pension fund is in a fully funded position. Funding arrangements that affect future contributions Swiss law provides for minimum pension obligations on retirement. Swiss law also prescribes minimum annual funding requirements. An employer may provide or contribute a higher amount than as specified under Swiss law - such amounts are specified under the terms and conditions of each of the Swiss employee's individual terms and conditions of employment. In addition, employers are able to make one off contributions or prepayments to these funds. Although these contributions cannot be withdrawn, they are available to the company to offset its future employer cash contributions to the plan. Although a surplus can exist in the fund, Swiss law requires minimum annual funding requirements to continue. For the active members of the pension plan, annual contributions are required by both the employer and employee. The employer contributions must be at least equal to the employee contributions, but may be higher, separately mentioned in the constitution of the pension plan. Minimum annual contribution obligations are determined with reference to an employee's age and current salary; however, as indicated above these can be increased under the employee's terms and conditions of employment. In the event of the winding up of HeiQ Materials AG, or the pension fund, HeiQ Materials AG has no right to any refund of any surplus in the pension fund. Any surplus balance is allocated to the members (active and pensioners). General risk The Group faces the risk that its equity ratio can be affected by a poor performance of the assets of the pension fund or change of assumptions. Therefore, sensitivities of the main assumptions have been calculated and disclosed (see below). The following tables summarize the components of net benefit expense recognized in the Statement of Comprehensive Income and the funded status and amounts recognized in the Statement of Financial Position for the plan: Net benefit obligations The components of the net defined benefits obligations included in non-current liabilities are as follows: As at As at December 31, December 31, 2020 2019 $'000 $'000 Fair value of plan assets 6,311 4,454 Defined benefit obligation (9,587) (6,374) Funded status (net liability) (3,276) (1,920) Duration (years) 18.9 19.0 Expected benefits payable in following year (269) (194) Year ended Year ended December 31, December 31, 2020 2019 Development of obligations and assets $'000 $'000 Present value of funded obligations, beginning of year (6,374) (6,178) Employer service cost (391) (356) Employee contributions (237) (213) Past service cost - 301 Interest cost (21) (53) Benefits (paid)/refunded (1,044) 784 Actuarial (loss)/gain on benefit obligation (809) (544) Currency (loss)/gain (711) (115) Present value of funded obligations, end of year (9,587) (6,374) Defined benefit obligation participants (8,942) (5,775) Defined benefit obligation pensioners (645) (599) (9,587) (6,374) Fair value of plan assets, beginning of year 4,454 4,420 Expected return on plan assets 14 38 Employer's contributions 237 213 Employees' contributions 237 213 Benefits (paid)/refunded 1,044 (784) Admin expense (15) (14) Actuarial gain/(loss) on plan assets (141) 289 Currency gain 481 79 Fair value of plan assets, end of year 6,311 4,454 Movements in net liability recognized in statement of financial position: Year ended Year ended December 31, December 31, 2020 $'000 2019 $'000 Net liability, beginning of year (1,920) (1,758) Expense recognized in profit and loss (413) (85) Employer's contributions (following year expected contributions) 237 213 Prepaid/(accrued) pension cost: 176 (129) - operating income/(expense) (169) 144 - finance expense (7) (15) Total gains recognized within other comprehensive income (950) (256) Currency loss (230) (34) Net liability, end of year (3,276) (1,920) Actual return on plan assets -2.37% 7.50% Expected employer's cash contributions for following year 295 212 Asset allocation As at As at December 31, December 31, 2020 2019 Cash 0.5% 0.6% Bonds 24.5% 24.5% Equities 34.5% 34.6% Property (incl. mortgages) 24.2% 18.8% Other 16.3% 21.5% Total 100.0% 100.0% Amounts recognized in other comprehensive income Year ended Year ended December 31, December 31, 2020 2019 $'000 $'000 Actuarial (losses)/gains arising from plan experience (553) 177 Actuarial gains / (losses) arising from financial assumptions (256) (722) Re-measurement of defined benefit obligations (809) (544) Re-measurement of assets (141) 289 Deferred tax asset recognized 286 51 Other (96) - Total recognized in OCI (760) (204) Principal actuarial assumptions (beginning of year): The principal assumptions used in determining pension and post-employment benefit obligations for the plan are shown below: As at As at December 31, December 31, 2020 2019 Discount rate 0.30% 0.90% Interest credit rate 1.00% 1.00% Expected net return on plan assets 0.30% 0.90% Average future salary increases 1.50% 1.50% Future pension increases 0.00% 0.00% Mortality tables used BVG 2015 GT BVG 2015 GT Average retirement age 65/64 65/64 Expected life expectation at regular retirement age (male / female) 22.83 / 25.85 22.61 / 25.64 Sensitivities A quantitative sensitivity analysis for significant assumptions is as follows: Sensitivities As at As at December 31, December 31, 2020 2019 Impact on defined benefit obligation $'000 $'000 Discount rate + 0.25% (401) (293) Discount rate - 0.25% 432 315 Salary increase + 0.25% 61 49 Salary increase - 0.25% (59) (48) Pension increase + 0.25% 216 156 Pension decrease - 0.25% (not lower than 0%) - - A negative value corresponds to a reduction of the defined benefit obligation, a positive value to an increase of the defined benefit obligation. The sensitivity analyses above have been determined based on a method that extrapolates the impact on the defined benefit obligation as a result of reasonable changes in key assumptions occurring at the end of the reporting period. The sensitivity analyses are based on a change in a significant assumption, keeping all other assumptions constant. The sensitivity analyses may not be representative of an actual change in the defined benefit obligation as it is unlikely that changes in assumptions would occur in isolation from one another. 18. Other non-current liabilities As at December 31, As at December 31, 2020 2019 $'000 $'000 Defined benefit obligation IAS 19 (Note 20) 3,276 1,920 Deferred consideration in relation to the acquisition of the Chem-Tex Assets (see below) 149 856 Other non-current liabilities - 4 Other non-current liabilities 3,425 2,780 Deferred consideration pertains to the acquisition of assets from Chem-Tex Inc. in 2017 and is payable other than in a short timeframe. The fair value of the deferred consideration has been discounted using an imputed interest rate of 6% (being the Group's estimated cost of debt) to take into account the time value of money. The deferred consideration and related financing expense are summarized below: As at As at December 31, December 31, 2020 2019 $'000 $'000 Consideration: Balance brought forward 2,103 3,102 Amortization of fair value discount 245 245 Consideration settled in cash (1,267) (1,290) Foreign exchange differences 35 46 Deferred consideration carried forward 1,116 2,103 Current liability 967 1,247 Non-current liability 149 856 Total 1,116 2,103 The maturity profile of other non-current liabilities is shown in paragraph (g) "Liquidity risk" of Note 25 "Financial risk management" to the Consolidated Financial Statements. 19. Borrowings As at December 31, 2020, the Group's borrowings consist primarily of: - a bank loan taken out in October 2020 which incurs interest at 2.25% and which is secured on property owned by a company which is controlled by a minority shareholder of HeiQ Medica. It is repayable in equal monthly instalments of ���8,000 ($9,500) over eight years up to September 2028. As at December 31, 2020, ���777,000 ($951,000) is outstanding - the short-term portion being ���93,000 ($114,000) and the long-term portion being ���684,000 ($838,000). - a loan of ���459,000 ($562,000) payable to a company controlled by a minority shareholder of HeiQ Medica. The loan is repayable by December 31, 2022 and does not incur any interest; and - a short-term bank loan of ���45,000 ($55,000) which was repaid in January 2021 and did not incur any interest. In 2019, the Group's borrowings consisted of a short-term revolving credit facility which incurred interest at Libor plus a margin of 0.8%. This loan was repaid during 2020. The following table provides a reconciliation of the Group's future maturities of its total borrowings for each year presented: As at December 31, As at December 31, 2020 2019 $'000 $'000 Not later than one year 173 2,478 Later than one year but less than five years 1,043 - After more than five years 357 - Total borrowings 1,573 2,478 The following table represents the Group's finance costs for each year presented: Year ended Year ended December 31, December 31, 2020 2019 $'000 $'000 Amortization of deferred finance costs - acquisition costs 245 245 Lease finance expense 52 58 Interest on borrowings 108 88 Bank fees 46 33 Loss on foreign currency transactions 733 4 Total finance costs 1,184 428 20. Other current liabilities As at December 31, As at December 31, 2020 2019 $'000 $'000 Deferred consideration in relation to the acquisition of the Chem-Tex Assets (Note 21) 967 1,247 Other current liabilities 967 1,247 21. Fair value and financial instruments a. Fair value The fair value of an asset or liability is the price that would be received to sell that asset or paid to transfer that liability in an orderly transaction occurring in the principal market (or most advantageous market in the absence of a principal market) for such asset or liability. In estimating fair value, the Directors utilize valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. Such valuation techniques are consistently applied. Inputs to valuation techniques include the assumptions that market participants would use in pricing an asset or liability. IFRS 13 "Fair Value Measurement" establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is defined as follows: Level 1: Inputs are unadjusted, quoted prices in active markets for identical assets at the measurement date. Level 2: Inputs (other than quoted prices included in Level 1) can include the following: �� observable prices in active markets for similar assets; �� prices for identical assets in markets that are not active; �� directly observable market inputs for substantially the full term of the asset; and �� market inputs that are not directly observable but are derived from or corroborated by observable market data. Level 3: Unobservable inputs which reflect the Directors' best estimates of what market participants would use in pricing the asset at the measurement date. All financial instruments measured at fair value use Level 2 valuation techniques for the each of the years ended December 31, 2019 and December 31, 2020. Level 2 fair value measurements are those including inputs other than quoted prices included within Level 1 that are observable for the asset or liability directly or indirectly. There were no transfers between fair value levels during the year ended December 31, 2020 (2019: $nil). b. Financial instruments For trade receivables, the Group applies the simplified approach permitted by IFRS 9 "Financial Instruments", which requires expected lifetime losses to be recognized from initial recognition of the receivables. Financial liabilities are initially measured at fair value and subsequently measured at amortized cost. The Group is not a financial institution. The Group does not apply hedge accounting and its customers are considered creditworthy and pay consistently within agreed payments terms. A classification of the Group's financial instruments is included in the table below: As at As at December 31, December 31, 2020 2019 $'000 $'000 Cash and cash equivalents held at amortized cost 25,695 3,603 Trade receivables and accrued income held at amortized cost 13,437 9,175 Financial assets at amortized cost 2,815 415 Financial liabilities at amortized cost (14,820) (9,070) Borrowings and leases (4,225) (5,262) Total 22,902 (1,139) 22. Financial risk management For the purposes of capital management, capital includes issued capital and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Directors' capital management is to ensure that the Group maintains a strong credit rating and healthy capital ratios in order to support its business and maximize shareholder value. To maintain or adjust the capital structure, the Directors may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the year. The Directors manage the Group's capital structure and adjust it in light of changes in economic conditions and the requirements of the financial covenants. The Group includes in its net debt, interest-bearing loans and borrowings, trade and other payables, less cash and short-term deposits. The Group's principal financial liabilities comprise borrowings and trade and other payables, which it uses primarily to finance and financially guarantee its operations. The Group's principal financial assets include cash and cash equivalents and trade and other receivables derived from its operations. a. Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Group's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the returns. b. Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. As the Group's borrowings are either on fixed interest terms or interest-free, the Group is not subject to interest rate risk. c. Credit risk Credit risk is the risk that a customer or counterparty to a financial instrument will not meet its obligations under a contract and arises primarily from the Group's cash in banks and trade receivables. d. Foreign currency risk Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate due to changes in foreign exchange rates. The Group's exposure to the risk of changes in foreign exchange rates relates primarily to its financing activities (when financial liabilities and cash are denominated other than in a company's functional currency). Most of the Group's transactions are carried out in US Dollars ($). Foreign currency risk is monitored closely on an ongoing basis to ensure that the net exposure is at an acceptable level. The Group maintains a natural hedge whenever possible, by matching the cash inflows (revenue stream) and cash outflows used for purposes such as capital and operational expenditure in the respective currencies. The Group's net exposure to foreign exchange risk was as follows: Functional currency CNY EUR GBP US$ Others Total As at December 31, 2020 $'000 $'000 $'000 $'000 $'000 $'000 Financial assets denominated in $ 248 2,145 717 17,190 5 20,305 Financial liabilities denominated in $ (102) (268) (475) (129) 23 (951) Net foreign currency exposure 146 1,877 242 17,061 28 19,354 Functional currency CNY EUR GBP US$ Others Total As at December 31, 2019 $'000 $'000 $'000 $'000 $'000 $'000 Financial assets denominated in $ 2,030 2,253 8 7,093 2 11,386 Financial liabilities denominated in $ - (200) (96) (7) 21 (282) Net foreign currency exposure 2,030 2,053 (88) 7,086 23 11,104 Foreign currency sensitivity analysis: The following tables demonstrate the sensitivity to a reasonably possible change in foreign currency exchange rates, with all other variables held constant. The impact on the Group's profit before tax is due to changes in the fair value of monetary assets and liabilities. The Group's exposure to foreign currency changes for all other currencies is not material. A 10 per cent. movement in each of the Chinese Yuan (CNY), Euro (EUR), British Pound (GBP) and US Dollar ($) would increase/(decrease) net assets by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. CNY EUR GBP US$ Others As at December 31, 2020 $'000 $'000 $'000 $'000 $'000 Effect on net assets: Strengthened by 10% 15 188 24 1,706 3 Weakened by 10% (15) (188) (24) (1,706) (3) CNY EUR GBP US$ Others As at December 31, 2019 $'000 $'000 $'000 $'000 $'000 Effect on net assets: Strengthened by 10% 203 205 (9) 709 2 Weakened by 10% (203) (205) 9 (709) (2) e. Cash and cash equivalents The credit risk from its cash and cash equivalents is limited because the counter parties are banks with high credit ratings and have not experienced any losses in such accounts. f. Trade receivables Trade receivables are due from customers and collectability is dependent on the financial condition of each individual company as well as the general economic conditions of the industry. The Directors review the financial condition of customers prior to extending credit and generally does not require collateral in support of the Group's trade receivables. The majority of trade receivables are current and the Directors believe these receivables are collectible. As at December 31, 2020, the Group had two customers that individually accounted for more than 10% of total receivables, totaling 38% of total trade receivables (2019: two customers that individually accounted for more than 10% of total receivables, totaling 65%). g. Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they are due. The Directors manage this risk by: �� maintaining adequate cash reserves through the use of the Group's cash from operations and bank borrowings; and �� continuously monitoring projected and actual cash flows to ensure the Group maintains an appropriate amount of liquidity. The table below summarizes the maturity profile of the Group's financial liabilities, based on contractual undiscounted payments: Less than 1 year 2 to 5 years > 5 years Total Year ended December 31, 2020 $'000 $'000 $'000 $'000 Trade and other payables 5,815 - - 5,815 Borrowings 1,573 - - 1,573 Leases (gross cash flows) 385 1,346 1,162 2,893 Other liabilities 4,283 5,675 - 9,958 Retirement obligations - - 3,276 3,276 As at December 31, 2020 12,056 7,021 4,438 23,515 Less than 1 year 2 to 5 years > 5 years Total Year ended December 31, 2019 $'000 $'000 $'000 $'000 Trade and other payables 1,930 - - 1,930 Borrowings 2,478 - - 2,478 Leases (gross cash flows) 390 1,265 1,413 3,068 Other liabilities 4,360 2,780 - 7,140 Retirement obligations - - 1,920 1,920 As at December 31, 2019 9,158 4,045 3,333 16,536 23. Notes to the statements of cash flows Net debt reconciliation: Opening balances New agreements Assumed on acquisition of subsidiaries Cash movements Foreign exchange differences Closing balances Year ended December 31, 2020 $'000 $'000 $'000 $'000 $'000 $'000 Cash and cash equivalents 3,603 - - 21,822 270 25,695 Leases (2,784) (222) - 354 - (2,652) Borrowings (2,478) (61) (1,512) 2,735 (257) (1,573) Totals (1,659) (283) (1,512) 24,911 13 21,470 Opening balances New agreements Cash movements Foreign exchange differences Closing balances Year ended December 31, 2019 $'000 $'000 $'000 $'000 $'000 Cash and cash equivalents 2,163 - 1,420 20 3,603 Leases (3,162) (8) 386 - (2,784) Borrowings (1,522) - (929) (27) (2,478) Totals (2,521) (8) 877 (7) (1,659) Reconciliation of cash on business combinations: Cash assumed on reverse acquisition of HeiQ Plc 27,105 Cash assumed on acquisition of HeiQ Medica 6 Cash assumed on acquisitions of businesses 27,111 Consideration payment for acquisition of Chem-Tex (1,267) Consideration payment for acquisition of HeiQ Medica (157) Consideration payment for acquisitions of businesses (1,424) 24. Contingencies and provisions The Directors are not aware of any contingencies or other provisions which might impact on the Group's operations or financial position. 25. Related party transactions Two companies controlled by a director of HeiQ USA are the landlord for two buildings in the United States which are leased to HeiQ USA. These leases have been capitalized as right-of-use assets in accordance with IFRS 16 "Leases". The total amount paid during the year ended December 31, 2020 was $160,000 (2019: $160,000). A company controlled by a director of HeiQ Materials AG supplied materials and services totaling $145,000 in the year ended December 31, 2020 (2019: $48,000). As at December 31, 2020, the Group has a balance receivable from its associated company, HeiQ-RAS GmbH, of $17,000 (2019: $nil). A bank loan of ���800,000 (US$950,000) is secured on property owned by a company which is controlled by a minority shareholder of HeiQ Medica. A loan of ���459,000 (US$562,000) is payable to a company controlled by minority shareholders of HeiQ Medica. See note 22 for further details. Details of the remuneration of the directors are contained in the Remuneration Committee Report on pages 50 to 53. 26. Material subsequent events On March 9, 2021, HeiQ Iberia Unipessoal Lda acquired 51% of the share capital and voting rights of Chrisal NV, a company incorporated in Belgium, to be renamed HeiQ Chrisal. Chrisal NV is a biotechnology company and a leader in innovative ingredients and consumer products that incorporate the benefits of probiotics and synbiotics. It has three technology platforms, all with the purpose of creating healthy and sustainable microbial ecosystems. The application of its proprietary technology includes cosmetics, personal care, textiles, wound dressings, water purification, air treatment and cleaning products. The company has its office, manufacturing site and bottling facility in Lommel, Belgium. The purchase consideration was payable partly in cash (���5,000,000) and partly by the issue of 1,101,928 new ordinary shares for ���2,500,000. The acquisition is part of the Group's strategy of becoming a global leader in materials innovation and allows access to the broader market of microbial surface management and a bio-based green complementary technology platform to its successful antimicrobials. 27. Ultimate controlling party As at December 31, 2020, the Company did not have any single identifiable controlling party. This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com. 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