ASETEK A/S - 2020 ANNUAL REPORT

ISIN: DK0060477263
LEI: 213800ATZVDWWKJ8NI47
Currency: USD

ASETEK A/S - ANNUAL REPORT 2020

BOARD OF DIRECTORS

Jukka Pertola, Chairman
Chris J. Christopher, Vice Chairman
Erik Damsgaard
Jørgen Smidt
Maria Hjorth

COMPENSATION COMMITTEE

Jukka Pertola
Chris J. Christopher
Jørgen Smidt

NOMINATION COMMITTEE

Ib Sønderby
Claus Berner Møller
Jukka Pertola

AUDITOR

PwC, State Authorized Public Accountants
Nobelparken, Jens Chr. Skous Vej 1
DK-8000 Aarhus C
CVR-number: 33 77 12 31

AUDIT COMMITTEE

Maria Hjorth
Chris J. Christopher
Erik Damsgaard

EXECUTIVE MANAGEMENT

André Sloth Eriksen, CEO
Peter Dam Madsen, CFO

CONTACT INFORMATION

Assensvej 2 DK-9220 Aalborg East Denmark
Phone: +45 9645 0047
Fax: +45 9645 0048
Web: www.asetek.com
Mail: [email protected]

LIQUID COOLING DONE RIGHT

ASETEK A/S - ANNUAL REPORT 2020

MANAGEMENT REPORT

Message from the CEO ..................................................................................... 4
OVERVIEW
- The Year 2020 Outlined .................................................................................... 8
- Asetek at a glance ............................................................................................... 9
- Five-year summary........................................................................................... 10
- Performance in 2020 .......................................................................................14
- Expectations for 2021.......................................................................................15
GOVERNANCE
- Corporate governance.....................................................................................19
- Risk management .............................................................................................22
- Corporate social responsibility....................................................................23
- Shareholder information................................................................................24
ARTICLES
- Gaming, Sustainability and Corona Accelerate a Positive Market Trend for Asetek ................................................................12
- Corona or Not: 25% Growth in G&E Segment .....................................16
- Asetek Liquid Cooling will Make Substantial Contribution to EU’s Green Deal ...............................................................26
- Reliability and Quality as Good as in the Space Industry ................39

FINANCIAL STATEMENTS

CONSOLIDATED FINANCIAL STATEMENTS................................... 30
PARENT COMPANY FINANCIAL STATEMENTS ............................ 58
MANAGEMENT STATEMENT................................................................... 65
INDEPENDENT AUDITOR’S REPORTS ................................................66
OTHER INFORMATION
- Stock exchange releases................................................................................69
- Definitions of ratios and metrics.................................................................70

MESSAGE FROM THE CEO

DEAR READER,

We look back at a year that yielded remarkable results – the best ever. 2020 kept us busy on so many fronts.

Despite losing our biggest customer, our sales increased by more than 30% and our profits and cash-flows followed along. The machine is well lubricated and again showed its ability to scale up as needed. the climate thinktank Concito listed our technology as ‘best practice’. Good progress, indeed, and we see good traction now. There is still a strong need for further political actions in support of our climate agenda to reach the full potential, however. market reminds me of the liquid cooling market 20 years ago. Just about a year ago, as we entered into 2020, we were looking into a year with many challenges and also some well defined opportunities. Little did we know that a corona virus would sweep across the globe wreaking havoc in so many ways. Now, as the vaccines are developed and being distributed, we can hopefully see the end of it. Certainly, this has been a nuisance, but I have to say that I am extremely impressed with my team’s ability to adapt and carry on. We have now formed a strong, dedicated team within Asetek with the aim at offering products within a short time frame. We already carried out two M&A deals, as announced. We cannot say much more at this point, but stay tuned. I have also always said, that when I feel our current businesses have “grown up” the timing for an expanded strategic focus is right, and I do feel both businesses are grown up or very close.

NEW BUSINESS

Let’s look ahead. Upwards and onwards. I have always said that I would like for our business to have a third leg to stand on. I have the desire to have more robustness than two segments, based on one technology, can deliver. And even more importantly, I want to maintain a high growth rate for the next many years to come! Over the last 15 years we have grown more than 15% per year on average. With all the added activity, we need more space. We have acquired a building plot in Aalborg and have started drawing up the plans for our new home for our Denmark-based team. It will be a landmark, and I look forward to showing you around. We have been thinking hard and long about what to add to the mix. At the core, we are good at mechanics, electronics, and software. There is a word for that; Mechatronics. Since our inception, we have utilized the 3 branches of expertise in the liquid cooling products, but we can now venture outside of the that sphere. As a global organization, for many years we have been used to working across time zones etc. and it must have been that practice that kicked in. I don’t think we missed a single beat in Operations. And more importantly, we managed to keep up our development momentum throughout the crisis. We are still debating internally how much impact the corona virus has had on our business. We don’t know, is the truth. In 5 years, we can look back and give you a better answer. Enough about the virus for now! We are working on many other initiatives as you can imagine. You can read about a few of them in this report, or in our new Sustainability report. And I invite you to sift through our web sites. The consumer electronics Gaming & Enthusiast segment is by nature quite volatile. It depends on the launch of exciting technologies and games and for our enthusiast customer base to continue wanting to tinker with electronics. We certainly believe it will continue. As mentioned above history shows us a solid growth rate. If you know me, you may know that I have a background in racing. From racing moto cross as a kid over go-karts to formula cars – racing is in my DNA. When we were looking at different business opportunities, mixed with input from our e-Sports Academy (where we have six racing simulators) it became clear that the highly fragmented, and extremely rapidly growing sim- ulator racing -market would be a very strong candidate, and after countless evaluations of opportunities, Sim- Sports is where we settled. In many ways, the SimSports 2021 certainly looks interesting for Asetek, and we welcome you to join us on the journey. Thank you for your interest in Asetek,

André S. Eriksen,
CEO and Founder of Asetek

Asetek CEO André Sloth Eriksen and CFO Peter Dam Madsen (left) study the architect’s first sketches for Asetek’s new HQ and factory in Aalborg South. The site will be just 200-300 metres from the E45 motorway sliproad.

LIQUID COOLING DONE RIGHT

We look back at a year that yielded remarkable results – the best ever. 2020 kept us busy on so many fronts.

MESSAGE FROM THE CEO

DEAR READER,

NEW BUSINESS

We look back at a year that yielded remarkable results – the best ever. 2020 kept us busy on so many fronts. Our Gaming & Enthusiast group released more new products than ever before, and our Data Center group has been busy servicing both existing and new customers. The Data Center business where we have been in the market for soon to be 10 years. During 2020, the European Commission acknowledged important Asetek viewpoints in their Green Deal climate initiative, and

André S. Eriksen,
CEO and Founder of Asetek

LIQUID COOLING DONE RIGHT

MANAGEMENT REPORT

OVERVIEW

The Year 2020 Outlined

2020 was a year of unprecedented challenges and significant opportunities for Asetek. The COVID-19 pandemic impacted global markets, supply chains, and daily life. However, Asetek demonstrated remarkable resilience and adaptability.

Sales Growth: Despite losing a major customer, Asetek achieved sales growth of over 30%.
Profitability and Cash Flow: Profits and cash flows improved in tandem with sales growth.
Operational Resilience: The company’s operations remained robust, with minimal disruption despite global challenges.
Strategic Initiatives: Asetek initiated two M&A deals and made progress on strategic expansion plans, including acquiring land for a new HQ and factory in Aalborg.
New Business Ventures: The company identified and decided to enter the rapidly growing SimSports market.
Sustainability Focus: Asetek’s technology was recognized by the European Commission as a positive contributor to their Green Deal climate initiative.
Gaming & Enthusiast (G&E) Segment: This segment experienced significant growth, driven by new product releases and strong customer demand.

Asetek at a glance

Metric	2020	2019	2018
Revenue ($ millions)	[Data Missing]	[Data Missing]	[Data Missing]
Net Income ($ millions)	[Data Missing]	[Data Missing]	[Data Missing]
Employees	[Data Missing]	[Data Missing]	[Data Missing]
Market Capitalization ($ millions)	[Data Missing]	[Data Missing]	[Data Missing]

Five-year summary

Metric	2020	2019	2018	2017	2016
Revenue ($ millions)	[Data Missing]	[Data Missing]	[Data Missing]	[Data Missing]	[Data Missing]
Net Income ($ millions)	[Data Missing]	[Data Missing]	[Data Missing]	[Data Missing]	[Data Missing]
Earnings Per Share ($ millions)	[Data Missing]	[Data Missing]	[Data Missing]	[Data Missing]	[Data Missing]
Operating Cash Flow ($ millions)	[Data Missing]	[Data Missing]	[Data Missing]	[Data Missing]	[Data Missing]
Capital Expenditures ($ millions)	[Data Missing]	[Data Missing]	[Data Missing]	[Data Missing]	[Data Missing]

Performance in 2020

Asetek experienced a highly successful year in 2020, marked by significant growth across its business segments.

Gaming & Enthusiast (G&E) Segment: This segment continued its strong growth trajectory, driven by product innovation and increased demand from PC enthusiasts. The segment benefited from the growing popularity of PC gaming and the need for high-performance cooling solutions.
Data Center Segment: The Data Center business saw increased activity, serving both existing and new customers. Asetek’s liquid cooling solutions are recognized for their efficiency and contribution to energy savings, aligning with sustainability initiatives like the EU’s Green Deal.
SimSports: A strategic decision was made to enter the rapidly expanding SimSports market. Leveraging Asetek's expertise in performance, reliability, and user experience, the company aims to become a leading provider of integrated SimSports solutions.

Expectations for 2021

Asetek anticipates continued growth and strategic development in 2021.

Continued Growth: The company expects to build on the momentum from 2020, with continued growth projected in both the G&E and Data Center segments.
SimSports Market Expansion: Significant focus will be placed on establishing and growing Asetek's presence in the SimSports market. This includes product development, market penetration, and strategic partnerships.
Operational Expansion: Construction of the new HQ and factory in Aalborg is expected to commence, providing increased capacity and modern facilities to support future growth.
M&A Activity: Asetek will continue to evaluate and pursue strategic M&A opportunities to enhance its product portfolio and market reach.
Sustainability Initiatives: The company will further leverage its liquid cooling technology as a key enabler of energy efficiency and sustainability in data centers and other applications.

Corporate governance

Asetek A/S is committed to upholding high standards of corporate governance, believing it to be essential for long-term value creation and stakeholder trust. The company adheres to the Danish Companies Act, the Nasdaq Copenhagen rules, and the recommendations of the Danish Committee on Corporate Governance.

Board of Directors: The Board is responsible for the overall management of the company and for ensuring that the company's business is conducted in a responsible and sustainable manner.
Executive Management: The CEO is responsible for the day-to-day management of the company, under the supervision of the Board.
Committees: The Board has established Audit, Compensation, and Nomination Committees to assist in its oversight functions.
Shareholder Rights: Asetek respects the rights of its shareholders and promotes open communication and transparency.

Risk management

Asetek employs a systematic approach to risk management, identifying, assessing, and mitigating potential risks that could impact the company's strategic objectives and financial performance. Key risk areas include:

Market and Competition: Intense competition in the G&E segment and evolving market dynamics in the Data Center sector.
Supply Chain and Operations: Potential disruptions to global supply chains, manufacturing, and product quality.
Technological Development: The need to continuously innovate and stay ahead of technological advancements.
Financial Risks: Currency fluctuations, interest rate changes, and credit risks.
Regulatory and Legal: Compliance with relevant laws and regulations in all operating jurisdictions.
Geopolitical and Macroeconomic Factors: Global economic downturns, political instability, and health crises (e.g., pandemics).

Corporate social responsibility

Asetek is dedicated to operating in a socially responsible manner, considering its environmental and social impact.

Environmental Sustainability: Asetek’s core liquid cooling technology significantly contributes to energy efficiency and reduced carbon footprint in data centers and high-performance computing. The company is actively working to minimize its own environmental impact in its operations.
Ethical Business Practices: Asetek upholds strong ethical standards in all its business dealings, fostering a culture of integrity and respect.
Employee Well-being: The company prioritizes the health, safety, and professional development of its employees.

Shareholder information

Asetek A/S is a public limited company listed on the Nasdaq Copenhagen. The company is committed to providing transparent and timely information to its shareholders.

Investor Relations: A dedicated investor relations function manages communication with shareholders and the financial community.
Annual General Meeting: Shareholders have the right to participate in and vote at the Annual General Meeting.
Financial Reporting: Asetek publishes regular financial reports, including quarterly and annual reports, to keep stakeholders informed of its performance.

ARTICLES

Gaming, Sustainability and Corona Accelerate a Positive Market Trend for Asetek

The year 2020 was characterized by a confluence of factors that significantly benefited Asetek. The burgeoning popularity of PC gaming, a growing awareness of sustainability in technology, and the unexpected impacts of the COVID-19 pandemic all converged to create a highly favorable market environment for Asetek’s core technologies.

The Gaming & Enthusiast (G&E) segment experienced a surge in demand as more people spent time at home, turning to PC gaming for entertainment and social connection. This trend was further amplified by the release of new high-performance graphics cards and demanding new game titles, all of which require robust cooling solutions to operate optimally. Asetek's innovative liquid cooling products are perfectly positioned to meet these demands, offering superior performance, quieter operation, and enhanced aesthetics that appeal to the enthusiast PC building community.

Simultaneously, the global focus on sustainability intensified. Asetek's liquid cooling technology plays a crucial role in reducing energy consumption and carbon emissions in data centers. By efficiently dissipating heat, liquid cooling systems allow for higher server density and reduced power usage compared to traditional air cooling methods. This alignment with environmental goals, including the EU's Green Deal initiative, has positioned Asetek as a key player in the green transition of the IT industry.

The COVID-19 pandemic, while disruptive in many ways, also indirectly boosted demand for Asetek's products. Increased remote work and online activities led to a greater demand for powerful and reliable computing hardware. Furthermore, the pandemic highlighted the importance of resilient supply chains and robust infrastructure, areas where Asetek's commitment to quality and operational excellence shines.

This combination of a booming gaming market, a strong sustainability imperative, and the indirect effects of the pandemic created a powerful tailwind for Asetek, positioning the company for continued growth and success.

Corona or Not: 25% Growth in G&E Segment

The Gaming & Enthusiast (G&E) segment of Asetek demonstrated exceptional resilience and growth in 2020, achieving an impressive 25% increase in performance. This growth was not solely attributable to the effects of the COVID-19 pandemic, but rather a testament to the inherent strength and attractiveness of Asetek's products in a dynamic market.

Even in the absence of the pandemic's amplifying effects, the G&E segment was poised for substantial growth. The PC gaming market continues to expand at a rapid pace, fueled by technological advancements, the increasing accessibility of high-fidelity gaming experiences, and a growing community of dedicated enthusiasts. Asetek's commitment to innovation, delivering cutting-edge liquid cooling solutions that enhance performance, reduce noise, and improve the overall user experience, has solidified its leadership position within this segment.

The release of more new products than ever before in 2020 further fueled this growth. Asetek consistently introduces new models and technologies that cater to evolving consumer preferences and the ever-increasing demands of high-performance computing. This product pipeline, combined with a deep understanding of the enthusiast market, ensures that Asetek remains at the forefront of cooling technology.

While the pandemic may have provided an additional boost by increasing home-based entertainment and computing needs, the underlying growth drivers for the G&E segment are robust and sustainable. Asetek's ability to deliver high-quality, performance-oriented cooling solutions ensures its continued success in this vibrant market.

Asetek Liquid Cooling will Make Substantial Contribution to EU’s Green Deal

Asetek's commitment to sustainability is not merely a corporate responsibility initiative; it is deeply embedded in the core of its technological offerings, particularly its advanced liquid cooling solutions for data centers. The company's technology is poised to make a significant and substantial contribution to the European Union's ambitious Green Deal initiative, which aims to make Europe the first climate-neutral continent by 2050.

The EU Green Deal outlines a comprehensive strategy to tackle climate change and promote sustainable economic growth. A critical component of this strategy involves reducing the energy consumption and carbon footprint of the digital infrastructure that underpins modern society. Data centers, which are essential for cloud computing, artificial intelligence, and the digital economy, are significant energy consumers. Traditional air cooling methods in data centers are often inefficient, leading to substantial energy wastage in the form of heat.

Asetek's liquid cooling technology offers a superior alternative. By directly transferring heat away from high-performance components with greater efficiency than air, liquid cooling systems can:

Reduce Energy Consumption: Liquid cooling can reduce the energy required for cooling by up to 50% compared to air cooling, leading to significant electricity savings.
Increase Server Density: Efficient heat dissipation allows for more powerful servers to be packed into a smaller physical space, optimizing data center utilization and reducing the need for new construction.
Lower Carbon Emissions: Reduced energy consumption directly translates to a lower carbon footprint for data centers.
Improve Reliability and Performance: By maintaining optimal operating temperatures, liquid cooling enhances the reliability and performance of sensitive electronic components, extending their lifespan.

The European Commission has acknowledged the importance of these benefits, and Asetek's viewpoints have been considered within the context of the Green Deal climate initiative. This recognition underscores the strategic value of Asetek's technology in achieving the EU's climate objectives. As the demand for data processing continues to skyrocket, driven by AI, big data, and the Internet of Things, the role of efficient and sustainable cooling solutions will become increasingly critical. Asetek is well-positioned to be a leader in providing these solutions, contributing directly to a greener and more sustainable digital future for Europe and the world.

Reliability and Quality as Good as in the Space Industry

Asetek's unwavering commitment to quality and reliability has always been a cornerstone of its product philosophy. This dedication is so profound that the company often draws parallels between the stringent requirements of its own product development and the exceptionally high standards demanded by the space industry.

The space sector operates under the most extreme conditions, where failure is not an option. Components must perform flawlessly in environments characterized by vacuum, extreme temperatures, radiation, and vibrations. The engineering rigor, meticulous testing, and obsessive attention to detail required to ensure success in space missions are principles that Asetek strives to emulate in its own development and manufacturing processes.

For Asetek, this translates into:

Rigorous Design and Engineering: Every component and system is designed with durability, efficiency, and longevity in mind, anticipating potential failure points and implementing robust solutions.
Extensive Testing and Validation: Products undergo comprehensive testing cycles that go beyond typical consumer electronics standards. This includes thermal stress testing, vibration testing, long-term reliability studies, and rigorous quality control at every stage of production.
Material Selection and Quality Control: Asetek uses high-quality materials and components, meticulously sourced and inspected to ensure they meet the demanding specifications required for optimal performance and lifespan.
Continuous Improvement: The company fosters a culture of continuous improvement, learning from every feedback loop and performance data point to further refine its products and processes.

This commitment to "space-grade" reliability and quality is not an arbitrary claim; it is a fundamental aspect of Asetek's DNA. It ensures that customers, whether they are gamers pushing the limits of their PCs, data centers demanding uninterrupted operation, or professionals in specialized fields, can trust Asetek's products to perform consistently and reliably, even under the most demanding conditions. This is why Asetek's solutions are not just about cooling; they are about delivering peace of mind through unparalleled quality and dependable performance.

CONSOLIDATED FINANCIAL STATEMENTS

(Please note: Specific financial data points for the tables below are missing from the provided input. The structure of the Markdown tables is presented as per the request, with placeholders for the data.)

Consolidated Statements of Comprehensive Income

	2020	2019	2018
Revenue
Cost of revenue
Gross profit
Other operating income
Selling, general and administrative expenses
Research and development expenses
Other operating expenses
Operating profit
Finance income
Finance costs
Net finance income/(costs)
Profit before tax
Income tax expense
Profit for the year
Other comprehensive income
Items that will not be reclassified to profit or loss:
Revaluation of property, plant and equipment
Income tax relating to items that will not be reclassified
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations
Income tax relating to items that may be reclassified
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Profit attributable to:
Owners of Asetek A/S
Non-controlling interests
Total comprehensive income attributable to:
Owners of Asetek A/S
Non-controlling interests
Earnings per share attributable to owners of Asetek A/S:
Basic earnings per share
Diluted earnings per share

Consolidated Statements of Financial Position

	2020	2019	2018
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Goodwill
Deferred tax assets
Total non-current assets
Current assets
Inventories
Trade receivables
Other receivables
Prepayments
Cash and cash equivalents
Total current assets
Total assets
EQUITY AND LIABILITIES
Equity
Issued capital
Share premium
Reserve for vested warrants
Other reserves
Retained earnings
Equity attributable to owners of Asetek A/S
Non-controlling interests
Total equity
Non-current liabilities
Deferred tax liabilities
Provisions
Financial liabilities
Total non-current liabilities
Current liabilities
Provisions
Trade and other payables
Current tax liabilities
Financial liabilities
Total current liabilities
Total liabilities
Total equity and liabilities

Consolidated Statements of Cash Flows

	2020	2019	2018
Cash flows from operating activities:
Profit before tax
Adjustments for non-cash items:
Depreciation and amortization
Impairment losses
Provisions
Gains/losses on disposal of assets
Share-based payments
Interest income and expenses
Changes in working capital:
Change in inventories
Change in trade and other receivables
Change in trade and other payables
Cash generated from operations
Interest paid
Income tax paid
Net cash flows from operating activities
Cash flows from investing activities:
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Purchase of intangible assets
Purchase of businesses, net of cash acquired
Acquisitions
Disposals
Investments in associates
Other investing activities
Net cash flows from investing activities
Cash flows from financing activities:
Proceeds from issue of share capital
Repayments of long-term debt
Proceeds from long-term debt
Repayments of short-term debt
Dividends paid
Repurchase of own shares
Net cash flows from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Additional information:
Non-cash investing and financing activities

PARENT COMPANY FINANCIAL STATEMENTS

Parent Company Statements of Comprehensive Income

	2020	2019	2018
Revenue
Cost of revenue
Gross profit
Other operating income
Selling, general and administrative expenses
Research and development expenses
Other operating expenses
Operating profit
Finance income
Finance costs
Net finance income/(costs)
Profit before tax
Income tax expense
Profit for the year
Other comprehensive income
Items that will not be reclassified to profit or loss:
Revaluation of property, plant and equipment
Income tax relating to items that will not be reclassified
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations
Income tax relating to items that may be classified
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Profit attributable to:
Owners of Asetek A/S
Total comprehensive income attributable to:
Owners of Asetek A/S
Earnings per share attributable to owners of Asetek A/S:
Basic earnings per share
Diluted earnings per share

Parent Company Statements of Financial Position

	2020	2019	2018
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Investments in subsidiaries
Deferred tax assets
Total non-current assets
Current assets
Inventories
Trade receivables
Other receivables
Prepayments
Cash and cash equivalents
Total current assets
Total assets
EQUITY AND LIABILITIES
Equity
Issued capital
Share premium
Reserve for vested warrants
Other reserves
Retained earnings
Total equity
Non-current liabilities
Deferred tax liabilities
Provisions
Financial liabilities
Total non-current liabilities
Current liabilities
Provisions
Trade and other payables
Current tax liabilities
Financial liabilities
Total current liabilities
Total liabilities
Total equity and liabilities

MANAGEMENT STATEMENT

(This section typically contains a statement from the Board of Directors and Management regarding the financial statements. Content is missing from the input.)

INDEPENDENT AUDITOR’S REPORTS

(This section typically contains the auditor's report on the financial statements. Content is missing from the input.)

OTHER INFORMATION

Stock exchange releases

(This section typically lists significant stock exchange releases made by the company during the reporting period. Content is missing from the input.)

Definitions of ratios and metrics

(This section typically provides definitions for financial ratios and key performance indicators used in the report. Content is missing from the input.)# LIQUID COOLING DONE RIGHT

MANAGEMENT REPORT

THE YEAR 2020 OUTLINED

The Company announced collaboration with Hewlett Packard Enterprise (HPE) to deliver its premium data center liquid cooling solutions in HPE Apollo Systems targeting high performance computing and artificial intelligence applications. Commercial shipments began in the third quarter of 2020.

Asetek increased investments in Gaming and Enthusiast product development and marketing with several brand-behind-the-brand initiatives to feature the Asetek logo on box packaging, websites, forums, and packaging inserts. Initiatives also include written features about Asetek on partners’ websites, participation in live events and live streams to communicate the commitment to performance, quality and reliability that the “Cooled by Asetek” mark represents.

Asetek continued its success as the leading supplier of liquid cooling solutions for high-end computing, shipping 1.2 million sealed loop liquid cooling units in 2020, compared with 895 thousand shipped in 2019.

Record revenue of $72.8 million, 34% growth from 2019
Gross margins grew to 47% from 42% in 2019
Adjusted EBITDA grew to $15.6 million from $6.2 million in 2019

The Company acquired JMH Gallows Pound Technologies Ltd., a UK-based developer of hardware and software technology and owners of the Ultimate-GameTech brand, for a sum of GBP 1 million (approximately $1.4 million). As a result of this acquisition, the Company is expecting to strengthen its intellectual property and product offerings in the Gaming and Enthusiast market.

Asetek’s Direct-to-Chip (D2C) liquid cooling is being utilized by Supermicro in a new high-performance computing cluster at the U.S. Lawrence Livermore National Labs. Asetek liquid cooling enables the deployment of high wattage processors in high density configurations to support compute-intensive workloads critical for science and technology research.

Revenue in 2020 totaled $72.8 million, an increase of 34% from 2019 ($54.3 million), mainly reflecting increased shipments of Gaming and Enthusiast products.

In efforts to establish EU standards that will reduce permitted energy consumption used for data center cooling, Asetek executives continue to work with political leaders to create a wider understanding of the significant environmental benefits enabled by liquid cooling.

Gross margin expanded to 47% in 2020 from 42.3% in 2019. The growth primarily reflects a richer product mix, higher sales prices for Data center products and Asetek’s business model transition for Gaming and Enthusiast OEMs that customize their liquid coolers.

Asetek began delivering waste heat from its in-house data center to Aalborg Forsyning, the city’s municipal district heating network. Asetek’s RackCDU™ liquid cooling systems capture and deliver heat to the network to help warm homes and businesses in the city of Aalborg. This connection demonstrates the viability of Asetek’s technology in enabling power savings and reducing CO2 emissions.

The Company announced new products in the Gaming and Enthusiast market: NZXT’s Kraken Z-3 and X-3 series, powered by Asetek, include a new performance-engineered pump and cold plate, advanced temperature sensing and quieter operation.

During the year, Asetek earned operating income of $10.9 million ($1.0 million) and Adjusted EBITDA of $15.6 million ($6.2 million).

Asetek repurchased 844 thousand common shares The new Rad Card™ GPU Cooler, the industry’s first slot-in PCIe radiator card to provide liquid cooling for GPU’s in space constrained PC cases. during 2020 for a total cost of $6.4 million. Fractal Design’s Celsius+ CPU coolers, powered by Asetek, provide enthusiasts enhanced performance, virtually silent operation and elegant design.

ASETEK AT A GLANCE

Asetek is a global leader in liquid cooling solutions for computer hardware enthusiasts, gamers, servers and data centers. Asetek’s products enable increased performance and provide lower acoustic noise, power savings and improved efficiency when compared with air cooling.

The Company’s server products offer direct-to-chip liquid cooling solutions to OEM providers for delivery of cost effective, high performance data center solutions. Asetek’s Gaming and Enthusiast products are all-in-one coolers that provide reliable, maintenance-free liquid cooling to gaming and high-performance PC customers.

The sales and marketing team, based principally in USA, oversees the customer relationships to facilitate communication and development, ensuring the developed product meets or exceeds customer demands. Sales and marketing teams based in Europe and Asia lead or assist efforts with the customers based outside of USA.

The flow of physical product generally commences in Asia. Asetek’s manufacturing and logistics team in Xiamen, China select components and suppliers for the finished product to be assembled by the Company’s principal contract manufacturer based in Xiamen. Finished products are delivered directly to customer hubs in China, with smaller quantities shipped to Europe and USA. Lower volume, highly complex products and components are manufactured in Asetek facilities in Aalborg.

With over eight million liquid cooling units deployed, Asetek’s patented technology is being adopted by a growing portfolio of OEMs and channel partners. Founded in 2000, Asetek is headquartered in Denmark and has operations in California, Texas, China and Taiwan. Asetek’s business model begins with its research and development team based in Aalborg, Denmark, which manages collaboration with the Company’s global customer base to define requirements and develop cutting edge technology. The Aalborg team works with the R&D team in Xiamen, China to identify the optimal sources for the necessary components to fulfill customer requirements.

FIVE-YEAR SUMMARY

FINANCIALS RATIOS & METRICS	FISCAL YEAR 2020	2019	2018	2017	2016
COMPREHENSIVE INCOME ($000'S)
Revenue	72,750	54,334	67,314	58,194	50,921
Gross profit	34,194	23,005	26,172	20,969	19,750
Gross margin	47.0%	42.3%	38.9%	36.0%	38.8%
Operating income (loss)	10,928	1,048	4,419	2,757	4,669
Operating margin	15.0%	1.9%	6.6%	4.6%	9.2%
Operating income before amortization, depreciation and financial items (EBITDA), unaudited	14,681	5,105	9,426	5,187	9,637
Adjusted EBITDA, unaudited	15,600	6,161	8,109	6,784	9,182
Financial items, net	(1,502)	(1,258)	451	(1,258)	322
Income before tax	9,426	5,105	8,109	5,187	6,784
Income for the year	9,195	4,475	5,728	4,870	3,503
Comprehensive income	11,587	4,129	4,292	1,621	788
Earnings per share, basic (USD)	0.36	0.18	0.17	0.14	0.14
Earnings per share, diluted (USD)	0.35	0.17	0.17	0.14	0.14
Shares issued (000's)	25,789	25,315	19,028	19,483	1,684
Treasury shares (000's)	185	154,661	11,430	(4,816)	(5,088)
Share price (NOK)	108.80	35.98	31.00	40.60	33.30
Share price to earnings	116.1	18.4	79.0	21.4	21.2
Market capitalization ($000's)	119,083	90,205	154,661	11,430	(4,816)

BALANCE SHEET ($000'S)	FISCAL YEAR 2020	2019	2018	2017	2016
Total assets	71,393	54,105	51,398	49,176	41,164
Total equity	47,525	39,008	38,958	33,394	28,290
Interest-bearing debt	4,129	4,292	1,621	1,867	788
Working capital	27,919	25,315	19,028	19,483	1,684
Invested capital	79,278	79,524	78,445	79,524	78,445
Investment in property, plant and equipment, net	6,115	4,103	3,856	1,684	788
Investment in intangible assets, net	25,315	79,278	4,103	1,684	788

CASH FLOW ($000'S)	FISCAL YEAR 2020	2019	2018	2017	2016
Operating activities	10,928	1,048	4,419	2,757	4,669
Investing activities	(5,088)	2,594	8,870	(2,154)	(648)
Financing activities	788	7,806	(2,912)	175
Total cash flow	6,628	11,448	10,377	728	4,021

BUSINESS DRIVERS	FISCAL YEAR 2020	2019	2018	2017	2016
Sealed loop units shipped (000's)	1,201	895	1,119	1,020	949
Average selling price per unit, Gaming and Enthusiast (USD)	53.9	57.9	56.3	52.2	48.2
Revenue per employee ($000's)	323,054	322,972	154,661	11,430	(4,816)
Number of employees	2,414	1,871	3,217	2,754	2,754

Please refer to the Definitions of Ratios and Metrics on page 70 of this Report

GAMING, SUSTAINABILITY AND CORONA ACCELERATE A POSITIVE MARKET TREND FOR ASETEK

We meet up with Jimmy Fussing by Zoom from his home office that – like so many others – he has had to set up. Gaming and eSports used to be something for young enthusiasts, involving snacks and colathis winter as the world waits for the Corona vaccination programme to be completed and take effect. more strongly in that short period than in the whole of the preceding 7 years. A much bigger e-commerce sector requires more and more cloud solutions. today, and there’s no reason to think the trend won’t continue. “A few years ago, we saw the company’s share price rising steeply, but at that time it was perhaps mainly due to a fever of expectation. Today, we can sense – in the latest accounts, for example – that Asetek is meeting those expectations. Both of Asetek’s existing business areas – gaming and solutions for data centers – are moving in the right direction,” adds Jimmy Fussing. “At the same time, these are truly sustainable products that can make a significant difference to society.” “When we also consider another general social trend toward sustainability and energy saving, Asetek has just the right technology and product platform,” says Jimmy Fussing. He is also convinced that, for the first time in many years, we are going to see a period of real growth in demand for electricity, something he believes is highly favourable for Asetek’s other line of business, on-proces- sor liquid cooling for data centers, which – among other things – makes it possible to reuse up to 80% of inbound power. Vækstfonden invested in Asetek all the way back in 2004, when it was a talented little start-up, and has since sold half of its shares, doing so immediately after the company went public in 2013. But they are still involved, with a stake of around 6% of Asetek at the time of print. Jimmy Fussing is Managing Partner of the venture fund Heartcore Capital, formerly Sunstone Technology Ventures, which administers Vækstfonden’s investment in Asetek A/S. The Danish government investment fund is one of Asetek’s major institutional investors. Heartcore Capital also puts capital from institutional investors such as pension funds into start-ups. Today, Heartcore Capital is involved in 55 tech start-ups across Europe, and is the country’s biggest venture fund. MATURE COMPANY WITH GREAT POTENTIAL “Gaming and eSports used to be something for young enthusiasts, involving snacks and cola. Now, anyone can see that many, many more people – including those from the parents’ generation – are getting into it. They follow their favourite team, they play along and start to worship the best players on a par with famous sporting idols in the physical world. The new heroes are eSport stars, and a whole generation of young people looks up to them. They are role models, and becoming like them requires investment in more powerful computers. It demands just the right technical equipment, and that’s where Asetek comes into the picture,” explains Jimmy Fussing. He points out that about 2 billion people follow eSport “In our view, André Eriksen, the founder and CEO of Asetek, is a gifted, determined and visionary entrepreneur who, together with the rest of the team, has succeeded in growing and maturing Asetek into a major, established, internationally-focused company,” says Jimmy Fussing. “We believe the company has a potential that is about to be fulfilled in earnest, so that in theory it could evolve into a new Danfoss,” referring to the world-famous Danish energy technology manufacturer, where Asetek’s founder first learned the ropes as a newly trained engineer and toolmaker, before he founded Asetek on the idea that computers and processors should be water-cooled. These times, says Jimmy Fussing, are highly favourable to Asetek, on many significant parameters – even when it comes to Corona. “As unpleasant as the pandemic has been and still is all around in other ways, Corona has also helped to accelerate new consumer patterns that are making Asetek’s market position stronger and stronger – and that is hardly going to roll back when the pandemic is over,” says Jimmy Fussing. As an example, he mentions that the extent of the world’s online retail trade has more than doubled during the pandemic of the last 10-11 months – a trend that has seen the penetration rate grow LIQUID COOLING DONE RIGHT 13 ASETEK A/S - ANNUAL REPORT 2019 13 Jimmy Fussing is Managing Partner of the venture fund Heartcore Capital, formerly Sun- stone Technology Ventures, which administers Vækstfonden’s investment in Asetek A/S. Jimmy Fussing believes the times are highly favourable to Asetek on the great majority of significant parameters - even when it comes to Corona. LIQUID COOLING DONE RIGHT 14 MANAGEMENT REPORT - PERFORMANCE AND OUTLOOK The average exchange rate of USD to DKK during 2020 BALANCE SHEET STATEMENT OF CASH FLOWS PERFORMANCE IN 2020 was 3% lower than the average rate in 2019. Approxi- mately 77% of the Company’s operating expense in 2020 was denominated in DKK (78% in 2019), resulting in an unfavorable impact to operating expense in 2020 when compared with 2019. Asetek’s total assets at December 31, 2020 were $71.4 million, compared with $54.1 million at the end of 2019. The principal components of this change include: trade receivables increased by $10.0 million as a result of a 78% increase in fourth quarter 2020 revenue compared with the same period of prior year; cash and cash equivalents increased by $2.6 million due to net income growth partly offset by share repurchases; intangibles increased by $1.3 million from a business acquisition during the year. In November 2020, the Company acquired JMH Gallows Pound Technologies Ltd., a UK-based developer of hardware and software technology and owners of the UltimateGameTech brand, for a sum of GBP 1 million (approximately $1.4 million). Net cash provided by operating activities was $11.4 million in 2020 ($8.9 million provided in 2019). The increase from 2019 was principally due to increased net income in 2020, partly offset by growth in receivables and inventory associated with higher operating volumes. PROFIT AND LOSS Total revenue for 2020 was $72.8 million, representing growth of 34% from 2019 ($54.3 million). Sealed loop cooling unit shipments for 2020 totalled 1.2 million, a 34% increase over 2019 (895 thousand). Average Selling Prices (ASP) for the year 2020 decreased to $53.91 from $57.88 in 2019. Gross margin increased to 47.0% in 2020 from 42.3% in 2019. The above fluctuations reflect increased demand in the Gaming and Enthusiast market and Asetek’s business model transition. Shipments under the new model have lower ASPs as Asetek moves to de- livering only the principal core technology with improved margins, while the customer adds their unique features with ancillary components. Adjusted EBITDA was $15.6 million in 2020, compared with $6.2 million in 2019. Adjusted EBITDA in 2020 repre- sents operating income of $10.9 million, plus depreciation of $3.8 million, plus share-based compensation of $0.9 million. Cash used by investing activities was $4.8 million, related to additions to intangible assets and purchase of property and equipment. The increase from prior year is principally due to the previously mentioned $1.4 million business acquisition and purchase of equipment for data center manufacturing ($1.8 million used in 2019). Foreign currency transactions in 2020 resulted in a $1.4 million loss ($0.2 million gain in 2019). Cash used by financing activities was $5.1 million in 2020, including $6.4 million for the repurchase of Asetek’s com- mon shares and $0.8 million for payments on capitalized leases. The Company also paid down its line of credit by $0.3 million. These effects were partly offset by $2.4 million received for shares issued on options exercised by employees ($0.6 million used in 2019). Income tax expense of $0.2 million in 2020 decreased from 2019 ($2.1 million) due to increased utilization of deferred tax assets during the year. Total liabilities increased by $8.8 million in 2020, resulting principally from growth in operating volumes and related incentive compensation for employees. Trade payables, accrued compensation and employee benefits, and ac- crued liabilities increased by $5.9 million and $1.7 million, and $1.4 million respectively. In 2020, total operating expense was $23.3 million, a 6.0% increase from 2019 ($22.0 million), reflecting investment in the Company’s infrastructure. During 2020, Asetek increased staffing by 35% to support revenue growth. Asetek's total comprehensive income was $11.6 million for 2020, compared with total comprehensive loss of $1.1 mil- lion in 2019. Comprehensive income included a positive $2.4 million translation adjustment in 2020 (negative $0.4 million in 2019). Net increase in cash and cash equivalents was $2.6 million in 2020, compared with increase of $5.9 million in 2019. Legal cost incurred associated with defense of existing IP and securing new IP was $2.4 million in 2020 ($2.7 million). Fiscal year 2019 operating expense included an offset of $0.8 million for settlements awarded to Asetek in patent infringement lawsuits. The increase in trade payables is also partly the result of the Company's proactive management of suppliers and timing of payments. Share-based compensation cost associated with warrants and options issued to employees was $0.9 million in 2020 ($1.1 million). LIQUID COOLING DONE RIGHT MANAGEMENT REPORT - PERFORMANCE AND OUTLOOK 15 LIQUIDITY AND FINANCING DATA CENTER: CONSOLIDATED RESULTS: EXPECTATIONS FOR 2021 As of December 31, 2020, the Company has working capital of $32.8 million and non-current liabilities of $2.6 million. Since 2016, the Company has generated positive cash flows and operating income. From 2013 to 2016, Asetek financed operations principally through offerings of common shares on the Oslo Stock Exchange. During 2020 the Company expanded its OEM partners with the additions of HPE and Supermicro, which resulted in the addition of nearly 20 new liquid cooled offerings to its data center line of products.

LIQUID COOLING DONE RIGHT

ASETEK A/S - ANNUAL REPORT 2019

Jimmy Fussing is Managing Partner of the venture fund Heartcore Capital, formerly Sun- stone Technology Ventures, which administers Vækstfonden’s investment in Asetek A/S. Jimmy Fussing believes the times are highly favourable to Asetek on the great majority of significant parameters - even when it comes to Corona.

LIQUID COOLING DONE RIGHT

MANAGEMENT REPORT - PERFORMANCE AND OUTLOOK

The average exchange rate of USD to DKK during 2020

BALANCE SHEET

STATEMENT OF CASH FLOWS

PERFORMANCE IN 2020

The average exchange rate of USD to DKK during 2020 was 3% lower than the average rate in 2019. Approxi- mately 77% of the Company’s operating expense in 2020 was denominated in DKK (78% in 2019), resulting in an unfavorable impact to operating expense in 2020 when compared with 2019.

Asetek’s total assets at December 31, 2020 were $71.4 million, compared with $54.1 million at the end of 2019. The principal components of this change include: trade receivables increased by $10.0 million as a result of a 78% increase in fourth quarter 2020 revenue compared with the same period of prior year; cash and cash equivalents increased by $2.6 million due to net income growth partly offset by share repurchases; intangibles increased by $1.3 million from a business acquisition during the year. In November 2020, the Company acquired JMH Gallows Pound Technologies Ltd., a UK-based developer of hardware and software technology and owners of the UltimateGameTech brand, for a sum of GBP 1 million (approximately $1.4 million).

Net cash provided by operating activities was $11.4 million in 2020 ($8.9 million provided in 2019). The increase from 2019 was principally due to increased net income in 2020, partly offset by growth in receivables and inventory associated with higher operating volumes.

PROFIT AND LOSS

	2020	2019
Total revenue	$72.8 million	$54.3 million
Sealed loop cooling unit shipments	1.2 million	895 thousand
Average Selling Prices (ASP)	$53.91	$57.88
Gross margin	47.0%	42.3%

The above fluctuations reflect increased demand in the Gaming and Enthusiast market and Asetek’s business model transition. Shipments under the new model have lower ASPs as Asetek moves to de- livering only the principal core technology with improved margins, while the customer adds their unique features with ancillary components.

Adjusted EBITDA was $15.6 million in 2020, compared with $6.2 million in 2019. Adjusted EBITDA in 2020 repre- sents operating income of $10.9 million, plus depreciation of $3.8 million, plus share-based compensation of $0.9 million.

Cash used by investing activities was $4.8 million, related to additions to intangible assets and purchase of property and equipment. The increase from prior year is principally due to the previously mentioned $1.4 million business acquisition and purchase of equipment for data center manufacturing ($1.8 million used in 2019). Foreign currency transactions in 2020 resulted in a $1.4 million loss ($0.2 million gain in 2019).

Cash used by financing activities was $5.1 million in 2020, including $6.4 million for the repurchase of Asetek’s com- mon shares and $0.8 million for payments on capitalized leases. The Company also paid down its line of credit by $0.3 million. These effects were partly offset by $2.4 million received for shares issued on options exercised by employees ($0.6 million used in 2019).

Income tax expense of $0.2 million in 2020 decreased from 2019 ($2.1 million) due to increased utilization of deferred tax assets during the year.

Total liabilities increased by $8.8 million in 2020, resulting principally from growth in operating volumes and related incentive compensation for employees. Trade payables, accrued compensation and employee benefits, and ac- crued liabilities increased by $5.9 million and $1.7 million, and $1.4 million respectively.

In 2020, total operating expense was $23.3 million, a 6.0% increase from 2019 ($22.0 million), reflecting investment in the Company’s infrastructure. During 2020, Asetek increased staffing by 35% to support revenue growth.

Asetek's total comprehensive income was $11.6 million for 2020, compared with total comprehensive loss of $1.1 mil- lion in 2019. Comprehensive income included a positive $2.4 million translation adjustment in 2020 (negative $0.4 million in 2019).

Net increase in cash and cash equivalents was $2.6 million in 2020, compared with increase of $5.9 million in 2019.

Legal cost incurred associated with defense of existing IP and securing new IP was $2.4 million in 2020 ($2.7 million). Fiscal year 2019 operating expense included an offset of $0.8 million for settlements awarded to Asetek in patent infringement lawsuits. The increase in trade payables is also partly the result of the Company's proactive management of suppliers and timing of payments.

Share-based compensation cost associated with warrants and options issued to employees was $0.9 million in 2020 ($1.1 million).

LIQUID COOLING DONE RIGHT

MANAGEMENT REPORT - PERFORMANCE AND OUTLOOK

LIQUIDITY AND FINANCING

DATA CENTER: CONSOLIDATED RESULTS: EXPECTATIONS FOR 2021

As of December 31, 2020, the Company has working capital of $32.8 million and non-current liabilities of $2.6 million. Since 2016, the Company has generated positive cash flows and operating income. From 2013 to 2016, Asetek financed operations principally through offerings of common shares on the Oslo Stock Exchange. During 2020 the Company expanded its OEM partners with the additions of HPE and Supermicro, which resulted in the addition of nearly 20 new liquid cooled offerings to its data center line of products.# ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Including Fujitsu, Asetek’s long-standing OEM, the Company anticipates growth in shipments of RackCDU™ liquid cooling in 2021. The Company's consolidated results for 2020 exceeded Management's expectations communicated in the prior year report due to favorable effects of COVID-19 shelter-in-place restrictions, which resulted in strong demand for the Company's Gaming and Enthusiast products. For 2021, the Company expects revenue to increase by 10% to 20% from 2020, with gross margins lower than 2020. As such, management expects the Company to report operating income of between $9 and $15 million in 2021. However, Management notes significant challenges in predicting future earnings due to variations in import tariffs and foreign exchange rates. The Company recognizes continued uncertainty related to potential impact from COVID-19 over time. These uncertainties can impact actual performance and expectations.

GAMING AND ENTHUSIAST

In 2020, favorable effects of COVID-19 shelter-in-place restrictions which resulted in strong demand in PC gaming and eSports drove Asetek’s Gaming and Enthusiast revenue to record levels. In 2021, Asetek expects to continue to invest in and launch innovative new high-performance products for gamers and enthusiasts. With two recently announced acquisitions – JMH Gallows Pound Technologies Ltd. and Granite Devices Inc., both developers of gaming hardware and software technology – the Company plans to capitalize on opportunities identified within the Asetek eSports Academy. Consistent with prior years, Asetek plans to continue to focus its resources on the Gaming and Enthusiast segment, growing market share through existing and new OEMs, and building the Asetek brand. While there is no assurance that the Company will generate sufficient revenue or operating profits in the future, Asetek’s management estimate that the Company’s capital resources are sufficient to fund operating activities in the foreseeable future, based on financial forecasts. To the extent necessary to fund expansion or other liquidity needs, management will consider offerings of debt, equity, or a combination thereof, depending on the cost of capital and the status of financial markets at that time. Asetek’s Direct-to-chip liquid cooling enables power savings and CO2 emission reductions from the reuse of data center waste heat. Significant long-term revenue growth is expected, though public standards are needed to trigger wider data center adoption of liquid cooling. Asetek continues to participate in targeted campaigns to influence and educate politicians and support wider understanding of the significant environmental and circular economy benefits enabled by liquid cooling.

LIQUID COOLING DONE RIGHT

16

We can speculate about the reason for the growth and whether it’s due to Corona alone or whether it’s a natural “comeback” from a relatively weak 2019

CORONA OR NOT: 25% GROWTH IN G&E SEGMENT

THE PANDEMIC HAS PROVEN TO BE BOTH A CHALLENGE AND A DRIVER FOR ASETEK IN DENMARK, THE USA, CHINA AND OTHER COUNTRIES

“Fortunately, as an international player in a fast-paced and quickly-evolving sector, we were well trained in working from home and at varying times of day. We therefore haven’t seen our development momentum slow down. We implemented the necessary measures around physical distancing and infection containment and were therefore able to maintain our manufacturing in Denmark, for example.”

As soon as you enter the headquarters in Aalborg you are met with bottle of hand sanitizer and a temperature scanner that can show if you have a fever. At Asetek, the challenge of Corona and the risk of spreading infection have of course been taken very seriously over the last many months. Besides a personal encouragement to get tested regularly, the dedicated staff have also been offered antibody tests at the company. And a few who became infected were immediately sent home to isolate and get treatment. As for sales, Asetek has seen its G&E (Gaming & PC Enthusiast) segment grow by 25% from 2019 to 2020. “We can’t help but be very satisfied with that, of course. But we were concerned in April 2020 when we watched a world-wide crisis unfold, without being sure of the long-term consequences”, explains Peter Dam Madsen, adding:

Asetek CFO Peter Dam Madsen says that the pandemic has had a big impact on the in-house routines: “We can speculate about the reason for the growth and whether it’s due to Corona alone or whether it’s a natural “comeback” from a relatively weak 2019. Our feeling is that it is a combination. We also began selling a relatively large number of exciting new products in 2020, and they have been very well received. Looking at it over a 10-year period, growth has also been a very nice 15% per year on average.”

“To begin with, our China department in Xiamen – only 600 miles from Wuhan – was “down” for some weeks. And, before we knew it, the problems had spread to the rest of the world. Fortunately, our supply chain and production systems coped without major problems thanks to a peerless effort from our staff, manufacturing partners and subcontractors.” Peter Dam Madsen recounts how people in both the Danish and US branches have been working from home and showing great pioneering spirit.

LIQUID COOLING DONE RIGHT

ASETEK A/S - ANNUAL REPORT 2019

17

Corona has been and still is a challenge that Asetek has had to deal with, says CFO Peter Dam Madsen. Here, he makes sure one of Asetek’s employees checks her temperature.

LIQUID COOLING DONE RIGHT

18

LIQUID COOLING DONE RIGHT

MANAGEMENT REPORT - GOVERNANCE

19

Dialogue between the Company and its shareholders.

The communication between Asetek and shareholders primarily takes place at the Company’s Annual General Meeting and via company announcements. Asetek shareholders are encouraged to subscribe to the e-mail service to receive company announcements, interim management statements, interim reports and annual reports as well as other news via e-mail.

CORPORATE GOVERNANCE

Asetek’s management model and organization are adapted continuously to ensure the Company is equipped to manage all obligations to shareholders, customers, employees, authorities and other stakeholders to the utmost. In this process, Asetek uses the corporate governance recommendations from NASDAQ Copenhagen as an important source of inspiration. The recommendations can be found at http://www.nasdaqomx.com/listing/europe/surveillance/copenhagen/corporategovernance

Financial reporting.

The Board of Directors receives regular financial reports on the Company's business and financial status.

The general meeting.

The General Meeting has the final authority over the Company. The Board of Directors emphasize that shareholders are given detailed information and an adequate basis for the decisions to be made by the General Meeting.

Notification of meetings and discussion of items.

The Board schedules regular meetings each year. Ordinarily, the Board meets eight to ten times a year, of which four are quarterly update teleconferences. The meetings are typically conducted at either the facility in Aalborg, Denmark or in San Jose, California or via telephone. Additional meetings may be convened on an ad hoc basis.

The Board of Directors is fundamentally in full agreement with Danish Committee on Corporate Governance recommendations for good company governance. Asetek endeavors to follow the relevant recommendations for the Company, which support the business and ensure value for the Company’s stakeholders. The statutory report on Corporate Governance, cf. section 107b of the Danish Financial Statements Act, is available on the Company’s website:

Conflicts of interest.

In a situation involving a member of the Board personally, this member will exclude him or herself from the discussions and voting on the issue.

The General Meeting elects the Board of Directors, which currently consists of five members. The board members are elected for one year at a time with the option for re-election.

Board of Directors meetings:

Amendment of Articles of Association. Unless otherwise required by the Danish Companies Act, resolutions to amend the Articles of Association must be approved by at least 2/3 of the votes cast as well as at least 2/3 of the voting share capital represented at the General Meeting.

Meetings held during the year

	8	http://www.asetek.com/media/2681/scgs2020.pdf
	Participation: Jukka Pertola (chair) Chris Christopher Jørgen Smidt	100% 100% 100% 88%
	Danish Recommendation for Corporate Governance 2020	2019

Board responsibilities.

The Board of Directors’ main tasks include participating in developing and adopting the Company's strategy, performing the relevant control functions and serving as an advisory body for the executive management. The Board reviews and adopts the Company's plans and budgets. Items of major strategic or financial importance for the Company are items processed by the Board.

the CEO and defining his or her work instructions as well as setting of his or her compensation. The Board periodically reviews the Company’s policies and procedures to ensure that the Group is managed in accordance with good corporate governance principles, upholding high ethics. The Board members also regularly receive operations reports and participate in strategy reviews. The Company's business plan, strategy and risks are regularly reviewed and evaluated by the Board. The Board Members are free to consult the Company's senior executives as needed. Ordinarily, the Chairman of the Board proposes the agenda for each Board meeting. Besides the Board Members, Board meetings are attended by the Executive Board. Other participants are summoned as needed. The Board approves decisions of particular importance to the Company including the strategies and strategic plans, the approval of significant investments, and the approval of business acquisitions and disposals.# MANAGEMENT REPORT - GOVERNANCE

Use of Committees.

Currently, the Company has a Nomination Committee, an Audit Committee and a Compensation Committee.

Audit Committee meetings:

Meetings held during the year	4
Participation:
Maria Hjorth (chair)	100%
Chris Christopher	100%
Erik Damsgaard	100%

The Audit Committee is elected among the members of the Board of Directors and has responsibilities related to financial reporting, the independent auditor, internal reporting and risk management, including cybersecurity risks. The Committee consists of at least two shareholder elected Board members. Members: Maria Hjorth (chairman), Chris Christopher, Erik Damsgaard.

Risk management.

Refer to the Risk Management section of the Management Report as well as Note 3 of the consolidated financial statements.

Compensation Committee meetings:

Meetings held during the year	4
Participation:
Jukka Pertola (chairman)	100%
Chris Christopher	100%
Jørgen Smidt	100%

The Compensation Committee has responsibilities related to developing proposals for the applicable remuneration policy and remuneration of the Management Board. Members: Jukka Pertola (chairman), Chris Christopher and Jørgen Smidt.

Nomination Committee meetings:

Meetings held during the year	3
Participation:
Ib Sønderby (chair)	100%
Claus Berner Møller	100%
Jukka Pertola	100%

The Nomination Committee is elected directly by the General Meeting. The Committee consists of three members and must be independent from the Board of Directors and the management, however, it is recommended that the chairman of the Board of Directors is a member. The tasks include proposing candidates for the Board of Directors, propose remuneration for the Board of Directors as well as perform the annual assessment of the Board of Directors. Members: Ib Sønderby (chairman), Claus Berner Møller and Jukka Pertola.

The Board’s self-evaluation. The Board's composition, competencies, working methods and interaction are discussed on an ongoing basis and evaluated formally on an annual basis. In this connection, the Board also evaluates its efforts in terms of corporate governance.

All of the members elected by the 2020 General Meeting are independent persons, and none of the Board members participates in the day-to-day operation of the Company. Additional information about the Board members, including other management positions held, can be found in Note 25.

The composition of the Board is considered appropriate in terms of professional experience and relevant special competences to perform the tasks of the Board of Directors. The Board of Directors continuously assesses whether the competencies and expertise of members need to be updated.

REMUNERATION OF THE BOARD OF DIRECTORS AND EXECUTIVE MANAGEMENT

For 2020, the Company will publish its executive remuneration principles and practices in a separate report issued in compliance with the Danish Companies Act, section 139b. The report will be issued together with the notice of the annual general meeting. The 2020 Remuneration Report will be available on the Company's website: https://ir.asetek.com/share-information/general-meetings

BOARD OF DIRECTORS SHARE AUTHORIZATION

Meeting Date	Meeting Type	Action	Shares	Nominal Value	Price
April 23, 2014	Board	Board issues warrants to employees and Board members	118,210	DKK 0.10/share	NOK 40.10
August 12, 2014	Board	Board issues warrants to employees and Board members	32,970	DKK 0.10/share	NOK 33.90
August 11, 2015	Board	Board issues warrants to employees and Board members	700,000	DKK 0.10/share	NOK 10.50
April 29, 2016	Board	Board issues warrants to employees and Board members	600,000	DKK 0.10/share	NOK 19.50
April 25, 2017	Board	Board issues warrants to employees and Board members	509,687	DKK 0.10/share	NOK 76.25
July 7, 2017	Board	Board issues warrants to employees and Board members	106,999	DKK 0.10/share	NOK 113.00
April 25, 2018	Board	Board issues warrants to employees and Board members	378,500	DKK 0.10/share	NOK 46.30
October 31, 2018	Board	Board authorized to acquire the Company's own shares	-	-	-
October 31, 2018	Board	Board introduces employee stock option program to replace warrant program and issues options to employees	-	DKK 0.10/share	-
April 10, 2019	General	Board authorized to acquire the Company's own shares	-	DKK 0.10/share	-
April 10, 2019	Board	Board issues options to employees	494,900	DKK 0.10/share	NOK 24.70
September 8, 2019	Board	Board issues options to employees	320,300	DKK 0.10/share	NOK 38.33
April 23, 2020	General	Board authorized to acquire the Company's own shares	-	-	-
April 22, 2020	Board	Board issues options to employees	-	DKK 0.10/share	-

COVID-19 pandemic.

In December 2019, a novel strain of coronavirus (SARS-CoV-2) causing the COVID-19 disease surfaced in Wuhan, China. In March 2020, the World Health Organization declared COVID-19 a global pandemic. The U.S., Denmark and other countries have enacted temporary closures of businesses, issued quarantine orders and taken other restrictive measures. The Company’s operating sites are complying with regulations and recommendations imposed by local governments for minimizing the virus’ spread. If production must be stopped or a critical number of employees become too ill to work, business operations could be adversely affected. If suppliers experience closures or reductions in capacity utilization, Asetek may have difficulty sourcing materials needed to fulfill production requirements. If customers experience adverse business consequences, demand for Asetek’s products could decline. The impact of the COVID-19 pandemic is fluid; after appearing to ease in the middle of 2020, its spread worsened in the fourth quarter. As a result, management cannot predict the extent to which Asetek’s future results of operations or financial condition will ultimately be impacted.

RISK MANAGEMENT

Asetek’s potential to realize the Company’s strategic and operational objectives are subject to a number of commercial and financial risks. Asetek is continuously working on identifying risks that can negatively impact the Company’s future growth, activities, financial position and results as well as CSR-related risks. Asetek conducts its business with significant focus on continuous risk monitoring and management. The overall goal of risk management is to ensure that the Company is run with a level of risk, which is in a sensible ratio to the activity level, the nature of the business, and the Company's expected earnings and equity. To the largest extent possible, Asetek tries to accommodate and limit the risks which the Company can affect through its own actions.

Customer concentration.

In 2020, two customers accounted for 41% and 14% of total revenue. In the event of a decline or loss of either of these customers, replacement of the revenue stream would be difficult for Asetek to achieve in the short term. The Company is actively working with its other Enthusiast/DIY customers to grow their respective market shares and order volumes.

Manufacturing supply.

Asetek relies upon suppliers and partners to supply products and services at competitive prices. Asetek’s Gaming and Enthusiast products have been historically assembled in Xiamen, China by a single contract manufacturer which may be difficult to substitute in the short term if the need should arise. Suppliers are proactively managed by the Company's operations teams based in Xiamen and Aalborg.

Competition.

The markets in which the Company operates are competitive, the technological development is rapid, and the Company may in the future also be exposed to increased competition from current market players or new entrants.

U.S. import tariffs.

The U.S. has imposed a 25% tariff on imports of goods manufactured in China, which include Asetek products. The existence of the tariff has contributed to the uncertainties in the Gaming & Enthusiast market. The Company continues to work to minimize the impact of the tariff on Asetek and its customers.

Insurance.

It is the Company’s policy to mitigate significant risk areas with commercially available insurance products. This currently includes insurance for product liability, operating material and inventory as well as compulsory coverage, which varies from country to country. Management assessments indicate that the necessary and relevant precautions have been taken to thoroughly cover insurance issues. Asetek’s insurance policies and overall coverage approach are reviewed at least annually.

Credit risk.

Credit risk is the risk of a counterpart neglecting to fulfill its contractual obligations and in so doing imposing a loss on Asetek. The Group’s credit risk originates mainly from receivables from the sale of products as well as deposits in financial institutions. Receivables from the sale of products are split between many customers and geographic areas. Two customers represented 47% and 17% of trade receivables at December 31, 2020. A systematic credit evaluation of all customers is conducted, and the rating forms the basis for the payment terms offered to the individual customer. Credit risk is monitored centrally.

Foreign exchange rates.

The newly acquired assets may be challenging to develop into successful products and integrate into the Company’s core lines of business.

initiated. Such cases may proceed for an extended period and could potentially lead to an unfavorable outcome to Asetek. Asetek has historically incurred significant legal costs associated with litigation and may continue to do so in the future to the extent management believes it is necessary to protect intellectual property.# LIQUID COOLING DONE RIGHT

MANAGEMENT REPORT - GOVERNANCE

Substantially all of Asetek’s revenue is billed in USD. However, many customers resell Asetek products to end users in countries where USD is not the transactional currency. As a result, there is a risk that fluctuations in currency will affect the cost of product to the end user and negatively impact market demand for Asetek products. Asetek estimates that about one third of its sold products ultimately are delivered in Europe or Japan, which are the two geographical areas which could have the largest potential impact due to USD fluctuation. Asetek believes that other factors in the end users’ buying decision play a larger role than price fluctuation on the liquid cooling component. During 2020, the USD weakened against both the DKK and EUR by 9%, and weakened 5% against the Japanese yen.

Asetek's raw materials are predominantly purchased with USD, from vendors whose underlying currency is CNY. The USD value versus the CNY fluctuated during 2020, appreciating mid-year, while ending the year down by approximately 6%. Asetek recognizes that USD appreciation can result in sales price pressure for its suppliers. Historically, the Company has not seen significant reaction from its markets. In addition, Asetek believes that competing products are prone to the same exchange rate scenarios as Asetek. A significant portion of Asetek's overhead costs are incurred in DKK. As a result, fluctuations in USD vs. DKK will continue to have an influence on results of operations and financial position. The Group has not entered into any forward exchange instruments.

Business combinations.

In November 2020, The Company acquired JMH Gallows Pound Technologies Ltd., a UK- based developer of hardware and software technology and owners of the UltimateGameTech brand. In January 2021, Asetek announced the acquisition of intellectual property from Granite Devices Inc. These acquisitions are expected to support the continuing development of the Company’s Gaming and Enthusiast product offerings. To date, Asetek has principally developed its products internally. Acquiring technology externally represents a new avenue for the Company.

CSR-related risks.

Please see the separate Asetek Sustainability Report 2020 for identified risks and remedies.

Taxation.

The tax situation of the Company is complex. In connection with its initial public offering in 2013, Asetek moved its Parent company from the U.S. to Denmark. However, USA – in a unilateral tax treaty override – still considers Asetek A/S a U.S. tax subject, effectively creating a double taxation situation. Asetek has approached both countries’ tax authorities with the aim of resolving the double tax situation as per the double taxation treaty. However, a determination may take several years, and the authorities are not obligated to resolve the problem. The Company has made progress in 2020 in working with the tax authorities of Denmark and U.S. to possibly resolve this issue. However, such reform is not certain. The Company continues to work with its tax advisors to clarify and address these matters.

In June 2019, the U.S. released regulation for its Global Intangible Low-Taxed Income (GILTI) inclusion for U.S. taxation, effective beginning with tax year 2018. The GILTI regulation requires U.S. companies to report foreign corporation intangible income that exceeds 10% return on foreign invested assets. Under prior law, U.S. owners of foreign corporations were able to defer recognizing taxable income until there was a distribution of earnings back to U.S. owners. The impact of the GILTI regulation caused incremental utilization of the Company's available deferred tax assets of approximately $0.4 million in 2020 and $1.1 million in 2019 and 2018 combined. Because of Asetek’s U.S. tax status as described above, management believes that the impact of the GILTI regulation as it applies to the Company could be reformed in the future.

Employee relations.

Asetek is a knowledge-intensive Company and in order to continuously offer optimal solutions, develop innovative products, and ensure satisfactory financial results, it is necessary to attract, develop and retain the right employees. Asetek has the goal of being an attractive workplace and achieves this through various programs including an option incentive program, attractive working conditions, and corporate social responsibility (CSR) policies described in the Asetek Sustainability Report 2020. The Company seeks to support a Company culture founded on individual responsibility and performance as well as team accomplishment.

Projects and contracts.

It is important to Asetek’s overall success that development projects are executed at high quality and at predetermined timeframes and cost prices. Risks are attached to the sale, analysis and design, development and initial manufacturing phases. Asetek has carefully defined the individual phases and the activities contained therein, with a view to active risk management and efficient implementation. Through project reviews and ongoing analyses before, during, and after initiation, Asetek works to ensure that agreements are adhered to and that revenue and margins are as planned.

IT security.

Asetek continuously implements measures to monitor and respond to data breaches and cyberattacks. Management ensures that security assessments, including vulnerability assessments and assumed breach tests are performed on a regular basis. Additional security measures to mitigate phishing and spam mails are delivered to employees and password policies are maintained to mitigate the risk of password dictionary attacks or other forms of brute force hacking of individuals. The Company maintains ongoing efforts to continuously improve and strengthen the IT Infrastructure security. Mandatory training in cybersecurity is carried out for all employees, and the knowledge level of cybersecurity is thus being changed from awareness-based to training- and compliance-based. Asetek has not experienced any security breaches within the most recent 5 years. The Company has entered into an information security risk insurance policy. This area is actively monitored by the Board of Directors' Audit Committee.

Research and development, product innovation, market development.

The Company’s future success, including the opportunities to ensure growth, depends on the ability to continue developing new solutions and products adapted to the latest technology and the clients’ needs as well as improving existing solutions and market position. As such, the Company develops new releases on a regular basis, with emphasis on higher performance, improved efficiency and noise-reduction. Providing new and innovative applications for Asetek’s cooling technology is also a focus, as evidenced by the cooling products released during 2020.

CORPORATE SOCIAL RESPONSIBILITY

Asetek seeks to be a good corporate citizen in everything that it does, and therefore has combined its operating principles into one framework policy. Please refer to the Asetek Sustainability Report 2020, available here: https://www.asetek.com/media/2755/asetek-sustainability-report-2020.pdf

OWNERSHIP

Pursuant to section 107d of the Danish Financial Statements Act, the Company must report on its diversity policy. Asetek's diversity policy is available here: https://ir.asetek.com/media/2756/diversity-policy-2021.pdf

This statement of Asetek's diversity policy is a component of the Management's Report in the Annual Report for 2020 and covers the financial period 1 January - 31 December 2020:

Historically, Asetek has been a diverse workplace, where employees have very different backgrounds, competencies and living conditions. Not only in relation to gender, age and origin, but equally in relation to education, experience and personality. It is therefore Asetek's goal that the management should equally reflect the diversity among our employees. In order to promote diversity among the company's management and board of directors, there is a focus on this in recruiting new managers. In 2020, Asetek has therefore sought to ensure broad diversity among applicants when recruiting and promoting. Asetek believes that diversity among employees and management, including an even distribution of age, nationality and educational background, contributes positively to the work environment and strengthens the company's competitiveness and performance.

INVESTOR RELATIONS

SHAREHOLDER INFORMATION

At the end of 2020, Asetek A/S had 871 shareholders, some of whom are nominee accounts covering several individual investors. Members of Asetek A/S’s Board of Directors and Executive Board owned or represented a total of 8.2% of the share capital at the end of 2020.

Asetek aims to provide a consistent, high level of information to its shareholders and other interested parties. It is Asetek’s intention to conduct an active dialogue with shareholders, analysts, the press and the public as a whole. Communication with interested parties takes place via the ongoing publication of notifications, investor presentations and individual meetings.

Asetek’s shares are listed on Oslo Børs. As of December 31, 2020, a total of 26,432,957 shares are issued, each with a nominal value of DKK 0.1. The share is classified in the “Information Technology” sector by the stock exchange, and the ticker mark is ASTK (the previous ticker mark was ‘ASETEK’ until December 2020).

Asetek shares opened the year 2020 at NOK 30.40.# ASETEK A/S - ANNUAL REPORT 2020

The website www.asetek.com is the primary source of information for interested parties. It is updated regularly with information about Asetek’s activities and strategy. Shareholders, analysts, investors, stockbrokers as well as other interested parties who have questions regarding Asetek are requested to inquire via the email address [email protected], which is monitored by the CFO. The total market capitalization value at the end of 2020 was NOK 2,770 million (approximately USD 322 million) which was an increase of 258% from the market value at the beginning of 2020. Asetek is thus classified as a MidCap company on Oslo Børs.

31 DECEMBER 2020

At the last trading day of the year, Asetek shares closed at NOK 108.80, which was an increase of 258% from the beginning of the year. The Oslo Stock Exchange (OSE) Benchmark Index increased 3% in 2020. The OSE Information Technology Index increased by approximately 60% in 2020. 931,281 shares were held by the Company on December 31, 2020 as treasury shares, primarily to support an employee stock option program.

Dividends

Asetek continues to invest its capital in the development and marketing of its cooling products. Asetek’s policy allows for distribution of a dividend to its shareholders of up to 50% of the previous year’s net income (after tax profits), after taking into consideration the Company’s growth plans, liquidity requirements and necessary financial flexibility.

Each share provides one vote. The shares are marketable securities and no restrictions have been set for the shares’ negotiability. The share register is maintained by DNB Bank ASA - Verdipapirservice, Postboks 1600 Sentrum, 0021 Oslo, Norway.

According to Asetek’s registrations, the following shareholders possessed 5% or above of the share capital as per December 31, 2020:

Shareholder	Number of Shares	%
Skandinaviska Enskilda Banken AB	2,880,905	10.9%
The ATP Group	2,722,415	10.3%
HSBC Trinkaus & Burkhardt AG	2,444,560	9.3%
Sunstone Technology Ventures	1,586,341	6.0%

The board members of Asetek cover a wide range of experiences from both the Danish and international business community and the high-tech industry. This composition is considered appropriate, as it ensures a breadth in the members' approach to the tasks, and thus helps to ensure qualified considerations and decisions. At the end of the financial year, 30% of the Executive Board and Board of Directors are of a nationality other than Danish. In terms of age composition, 0% of management is under 40 years old, 57% are between 40 and 60 years old, and 43% of management is over 60.

REPORTING CALENDAR FOR 2021:

Annual General Meeting: April 22, 2021
Q1 2021 Report: April 22, 2021
Q2 2021 Report: August 12, 2021
Q3 2021 Report: October 28, 2021
2021 Annual Report: March 4, 2022

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LIQUID COOLING DONE RIGHT 26

In 2020, a number of important milestones were achieved on the way toward EU regulations matching Asetek’s potential.

Asetek Liquid Cooling Will Make Substantial Contribution to EU’s Green Deal

2020 WAS A YEAR WHEN ASETEK’S GOAL OF MEANINGFUL CLIMATE REGULATION FOR EUROPE MOVED CLOSER, SAYS ASETEK’S EU PUBLIC AFFAIRS ADVISOR. FOR EXAMPLE, ASETEK CONTRIBUTED TO A HOLISTIC DATA CENTER EFFICIENCY ANALYSIS CARRIED OUT BY THE INFLUENTIAL GERMAN ENVIRONMENT AGENCY BY DELIVERING REAL-WORLD DATA FROM OUR TEST INSTALLATION THROUGHOUT THE YEAR.

“Although, as a company, Asetek is dwarfed in comparison with other stakeholders, we actually garner lot of interest and understanding that results in positive reports. In 2020, the Green Deal really made the reuse of waste heat in data centers a focus of the EU’s circular economy strategy toward carbon neutrality,” says Jan Gütter, Asetek’s Public Affairs advisor, referring to both the EU and key member state stakeholders like the German Environment Agency, the UBA (Umweltbundesamt).

“These publications”, he underlines, “call specifically for action to implement measures on the reuse of residual heat from data centers. Similarly, the EU commission has also initiated a hearing and subsequent review of the Energy Efficiency Directive (EED), which is expected to be adopted in 2021”.

As Asetek has stated before, the potential is huge. If “dirty” power is used, the carbon footprint of the World’s data centers is bigger than that of worldwide road traffic, and on par with that of worldwide air traffic. Though the goal is to produce the power needed for all data centers by green methods, even efficient use of only the EU data centers’ residual heat as offered by Asetek would add enough district heating for 11 European capitals, with London, Paris and Berlin top of the list, to be heated carbon-neutrally. This could save significant capital investment, scarce resources, plus the energy required to build an army of wind turbines, solar heating systems etc. that would otherwise have to meet this need.

As the world’s leading manufacturer of on-processor liquid cooling for data centers and other purposes, in recent years Asetek has also – in a move unusual for the company – been taking political action to draw attention to the huge climate policy gains the world can make if hyperscale data centers, for example, use its technology in the future. In this respect, he describes 2020 as a year when Asetek’s viewpoint made significant advances in Europe. In a nutshell, the idea is that the EU will make it a requirement for data center operators to design their facilities and choose their technology so that optimum use is made of the surplus heat they generate. Asetek’s technology offers circular reuse of up to 80% of inbound power in the form of 60°C hot water without the need for artificial heating by additional power-hungry and costly heat pumps. A solution that is readily and widely available and has been proven successful by Asetek, which connected its own test data center to the district heating network in its home city of Aalborg in early 2020.

Jan Gütter also emphasises that, in the second half of 2020, the German EU presidency delivered a strong foundation for its future adoption, with a digital agenda on the environment containing several of Asetek’s proposed measures to improve the efficiency of data centers by utilising waste heat. This political investment that Asetek has chosen to make is primarily focusing on EU regulation and legislation. With its Green Deal, which is about to be fleshed out in the near future, the EU is widely expected to begin setting strict environmental standards for member states that will pave the way to make the European Union climate neutral by 2050.

Recently, more and more European politicians and officials have been waking up to the enormous potential of the greening of data centers as shown in the documentation supplied by Asetek. “In 2020, a number of important milestones were achieved on the way toward EU regulations matching Asetek’s potential,” adds Jan Gütter confidently, and he points to the publication of the EU’s Circular Economy Action Plan1, the Commission’s Communication on “Powering a Climate-Neutral Economy: An EU Strategy for Energy System Integration” and the JRC Report on the “Development of the EU Green Public Procurement (GPP) Criteria for Data Centers, Server Rooms and Cloud Services.”

During the year, internationally recognised climate thinktank Concito, headed by former EU commissioner Connie Hedegaard, also produced a memo that strongly supports Asetek’s direct-to-chip Liquid Cooling technology as “best practice” – a memo that attracted attention in Brussels.

LIQUID COOLING DONE RIGHT 27

ASETEK A/S - ANNUAL REPORT 2019

Asetek’s Public Affairs Consultant in Brussels, Jan Gütter, believes the EU Commission is moving in a meaningful direction for Asetek when it comes to future climate requirements for data centres. Gütter (right) is pictured here before the Commission with Asetek CEO André Sloth Eriksen (centre) and Mads Stenstrup, the company’s Project Manager, Public Affairs & Communications in Denmark.

LIQUID COOLING DONE RIGHT 28

LIQUID COOLING DONE RIGHT 29

CONSOLIDATED FINANCIAL STATEMENTS

Profit & Loss ......................................................................................................... 30
Balance Sheet ........................................................................................................31
Equity ........................................................................................................................32
Cash Flows ............................................................................................................33
Notes .........................................................................................................................34

PARENT COMPANY FINANCIAL STATEMENTS

Profit & Loss ......................................................................................................... 58
Balance Sheet .......................................................................................................59
Equity ....................................................................................................................... 60
Cash Flows .............................................................................................................61
Notes .........................................................................................................................62

MANAGEMENT STATEMENT ....................................................................# INDEPENDENT AUDITOR’S REPORTS

OTHER INFORMATION

Stock exchange releases.................................................................................69
Definitions of ratios and metrics..................................................................70

LIQUID COOLING DONE RIGHT 30

FINANCIAL STATEMENT S - PROFIT & LOSS

ASETEK A/S CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the years ended December 31, 2020 and 2019
(USD 000’s)

	Note	2020	2019
Revenue	4	72,750	54,334
Cost of sales	8	(38,556)	(23,005)
GROSS PROFIT		34,194	31,329
Research and development		(17,548)	(5,718)
Selling, general and administrative	8	(17,821)	(4,889)
Other income		753	-
TOTAL OPERATING EXPENSES		(21,957)	(23,266)
OPERATING INCOME		10,928	1,048
Foreign exchange gain (loss)	9	(1,361)	218
Finance income	9	359	51
Finance costs	9	(171)	(192)
TOTAL FINANCIAL INCOME		406	(1,502)
INCOME BEFORE TAX	9	11,334	(454)
Income tax (expense) benefit	10, 11	(2,082)	(628)
INCOME FOR THE YEAR		9,195	(1,072)
Other comprehensive income items that may be reclassified to profit or loss in subsequent periods:
Foreign currency translation adjustments		2,392	(444)
TOTAL COMPREHENSIVE INCOME		11,587	(1,516)
INCOME PER SHARE: (IN USD)
Basic	12	0.36	(0.02)
Diluted	12	0.35	(0.02)

All operations are continuing. The Notes on the following pages are an integral part of these consolidated financial statements.

LIQUID COOLING DONE RIGHT 31

FINANCIAL STATEMENT S - BALANCE SHEET

ASETEK A/S CONSOLIDATED BALANCE SHEET

As of December 31, 2020 and 2019
(USD 000’s)

	Note	2020	2019
ASSETS
NON-CURRENT ASSETS
Intangible assets	15	3,217	6,421
Property and equipment	16	7,049	1,920
Deferred income tax assets		605	6,115
Other assets		5,521	307
TOTAL NON-CURRENT ASSETS		16,392	14,763
CURRENT ASSETS
Inventory	17	2,531	1,657
Trade receivables and other	18	24,471	14,080
Cash and cash equivalents		27,099	24,505
TOTAL CURRENT ASSETS		54,101	40,242
TOTAL ASSETS		70,493	55,005
EQUITY AND LIABILITIES
EQUITY
Share capital	19	433	423
Retained earnings		50,681	38,197
Translation and other reserves		(3,589)	388
TOTAL EQUITY		47,525	39,008
NON-CURRENT LIABILITIES
Long-term debt	20	2,604	2,774
TOTAL NON-CURRENT LIABILITIES		2,604	2,774
CURRENT LIABILITIES
Short-term debt	20	1,525	1,518
Accrued liabilities		2,429	1,022
Accrued compensation and employee benefits		3,193	1,526
Trade payables		14,117	8,257
TOTAL CURRENT LIABILITIES		21,264	12,323
TOTAL LIABILITIES		23,868	15,097
TOTAL EQUITY AND LIABILITIES		71,393	54,105

The Notes on the following pages are an integral part of these consolidated financial statements.

LIQUID COOLING DONE RIGHT 32

FINANCIAL STATEMENT S - EQUITY

ASETEK A/S CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the years ended December 31, 2020 and 2019
(USD 000’s)

	Share capital	Translation reserves	Treasury share reserves	Retained earnings	Total EQUITY
AT DECEMBER 31, 2018	422	836	(4)	37,704	38,958
Total comprehensive income for 2019
Income for the year	-	-	-	(628)	(628)
Foreign currency translation adjustments	-	(444)	-	-	(444)
Total comprehensive income for 2019	-	(444)	-	(628)	(1,072)
Transactions with owners in 2019
Shares issued	1	-	-	1,056	1,057
Share based payment expense	-	-	65	-	65
Transactions with owners in 2019	1	-	65	1,056	1,122
EQUITY AT DECEMBER 31, 2019	423	392	61	38,197	39,073
Total comprehensive income for 2020
Income for the year	-	-	-	9,195	9,195
Foreign currency translation adjustments	-	2,392	-	-	2,392
Total comprehensive income for 2020	-	2,392	-	9,195	11,587
Transactions with owners in 2020
Shares issued	10	-	-	2,371	2,381
Shares repurchased	-	-	(6,369)	-	(6,369)
Share based payment expense	-	-	918	-	918
Transactions with owners in 2020	10	-	(5,451)	2,371	(3,060)
EQUITY AT DECEMBER 31, 2020	433	2,784	(5,390)	50,568	48,405

The Notes on the following pages are an integral part of these consolidated financial statements.

LIQUID COOLING DONE RIGHT 33

FINANCIAL STATEMENT S - CASH FLOWS

ASETEK A/S CONSOLIDATED CASH FLOW STATEMENT

For the years ended December 31, 2020 and 2019
(USD 000’s)

	Note	2020	2019
CASH FLOWS FROM OPERATING ACTIVITIES
Income (loss) for the year		9,195	(628)
Depreciation and amortization	15, 16	3,754	4,057
Finance income recognized	9	(51)	(359)
Finance costs recognized	9	192	171
Cash receipt (payment) for income tax	10, 11	(2,082)	1,056
Share based payments expense		918	154
Changes in trade receivables, inventories, other assets		(10,121)	(172)
Changes in trade payables and accrued liabilities		7,363	2,234
NET CASH PROVIDED IN OPERATING ACTIVITIES		18,155	7,447
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of business	14	(1,316)	-
Additions to intangible assets	14, 15, 16	(1,571)	(1,441)
Purchase of property and equipment		(713)	(1,929)
NET CASH USED IN INVESTING ACTIVITIES		(3,600)	(3,370)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of borrowings		(269)	(6,369)
Repurchase of common shares		-	2,381
Proceeds from issuance of share capital	19	64	5,878
Principal payments on leases		(831)	(734)
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES		(1,036)	1,156
Effect of exchange rate changes on cash and cash equivalents		1,068	(5,088)
NET CHANGES IN CASH AND CASH EQUIVALENTS		16,687	336
Cash and cash equivalents at beginning of period		24,505	27,099
CASH AND CASH EQUIVALENTS AT END OF PERIOD		41,192	27,435

SUPPLEMENTAL DISCLOSURE - NON-CASH ITEMS
Assets acquired under leases | 21 | 668 | 413 |

The Notes on the following pages are an integral part of these consolidated financial statements.

LIQUID COOLING DONE RIGHT 34

FINANCIAL STATEMENT S - NOTES

1. GENERAL INFORMATION

Asetek A/S (‘the Company’), and its subsidiaries (together, ‘Asetek Group’, ‘the Group’ or ‘Asetek’) designs, develops and markets liquid cooling solutions used in personal computers, servers and data centers. The Group’s core products utilize liquid cooling technology to provide improved performance, acoustics and energy efficiency. The Company is based in Aalborg, Denmark with offices in USA, China and Taiwan. The Company’s shares trade on the Oslo Stock Exchange under the symbol ‘ASETEK’.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The excess of the total consideration transferred, value of non-controlling interests and the fair value of any equity investments previously held in the acquiree over the total identifiable net assets measured at fair value are recognized as goodwill.

2.3. Foreign currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The functional currency of the Company’s operations in the United States of America, Denmark and China are the U.S. dollar, Danish kroner, and Chinese Yuan Renminbi, respectively. The consolidated financial statements are presented in U.S. dollars, which is the Group’s presentation currency.

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized as operating expense in the income statement in foreign exchange (loss)/gain. All resulting exchange differences are recognized in other comprehensive income.

2.4. Property and equipment

Property and equipment are stated at historical cost less accumulated depreciation. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of any replaced part is derecognized. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Depreciation is provided over the estimated useful lives of the depreciable assets, generally three to five years, using the straight-line method. The assets’ useful lives and residual values are reviewed, and adjusted if appropriate, at the end of each reporting period.

2.5. Intangible assets

Intangible assets, including acquired technology, software and patents, are stated at historical cost less accumulated amortization. Amortization is recognized in the income statement on a straight-line basis over the estimated useful lives of the intangible assets, generally three to ten years. Expenditures for research and development related to new products and technologies are expensed as incurred. Costs incurred for development projects are capitalized when technical feasibility and commercial viability have been established, and the Group has the intention and ability to complete the asset for sale or use.

2.6. Leases

The Group has entered into various lease agreements for its office facilities, vehicles and equipment. Lease payments are recognized as an expense on a straight-line basis over the lease term, unless there is an alternative systematic basis. Leases are classified as operating leases. Contingent rent is recognized as an expense in the period in which it is incurred.

2.7. Revenue recognition

The Group recognizes revenue from the sale of goods and services. Revenue is recognized when control of the goods or services is transferred to the customer, in an amount that reflects the consideration which the Group expects to be entitled to in exchange for those goods or services.

Revenue is presented net of sales taxes and returns. The Group has no significant contracts with variable consideration.

The timing of revenue recognition relates to the transfer of control. For the sale of goods, control typically transfers upon shipment or delivery, depending on the terms of the contract and Incoterms. For services, revenue is recognized over the period in which the services are rendered.

2.8. Share-based payments

The Group operates share-based incentive plans for its employees. These plans include share options and share purchase programs. The fair value of equity instruments granted is recognized as an expense in the consolidated statement of comprehensive income over the vesting period. The corresponding credit is recognized in equity.

The fair value of share options is determined using the Black-Scholes option pricing model. The fair value of restricted share units is determined based on the market price of the shares at the grant date.

2.9. Income taxes

Income tax expense consists of current and deferred tax. Income tax is recognized in the statement of comprehensive income except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity.

Current tax is the amount of income tax expected to be paid to the taxation authorities on the taxable profit for the year.

Deferred tax is recognized using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax assets are recognized only to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilized.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled.

2.10. Earnings per share

Basic earnings per share are calculated by dividing the profit or loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.

Diluted earnings per share are calculated by adjusting the weighted average number of ordinary shares outstanding to account for the effect of all dilutive potential ordinary shares, such as share options and warrants.

2.11. Segment reporting

The Group is organized into one operating segment: designing, developing and marketing liquid cooling solutions. The chief operating decision maker, who is the CEO, reviews internal management reports, which are presented on a consolidated basis, to make decisions about resource allocation and performance assessment. Consequently, there is only one reportable segment.

2.12. Financial instruments

Financial assets and liabilities are recognized when the Group becomes a party to the contractual provisions of the financial instrument. Financial assets and liabilities are initially measured at fair value.

Financial assets

Financial assets are classified into the following categories:
* Amortized cost: These assets are held to collect contractual cash flows and the contractual cash flows are solely payments of principal and interest. They are measured at amortized cost using the effective interest rate method.
* Fair value through other comprehensive income (FVOCI): These assets are held both to collect contractual cash flows and to sell. They are measured at fair value, with changes in fair value recognized in other comprehensive income.
* Fair value through profit or loss (FVPL): These assets are held for trading or are designated as FVPL. They are measured at fair value, with changes in fair value recognized in profit or loss.

The Group has trade receivables, cash and cash equivalents, and other financial assets, all of which are classified as financial assets at amortized cost.

Financial liabilities

Financial liabilities are classified as follows:
* Amortized cost: These liabilities are measured at amortized cost using the effective interest rate method. This category includes loans and borrowings, trade payables, and other financial liabilities.

The Group has loans and borrowings, trade payables, and other financial liabilities, all of which are classified as financial liabilities at amortized cost.

3. CRITICAL ACCOUNTING JUDGMENTS AND ESTIMATES

The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates, and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The estimates and assumptions are based on historical experience and other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The following are the critical accounting judgments and estimates made by management in applying the accounting policies:

Impairment of goodwill

Goodwill is tested for impairment at least annually. The impairment test involves comparing the carrying amount of the cash-generating unit (CGU) to which goodwill is allocated with its recoverable amount. The recoverable amount is the higher of the CGU’s fair value less costs of disposal and its value in use.

The value in use is determined by discounting future cash flows expected to be generated by the CGU. These cash flows are based on management’s best estimates of future revenues, operating costs, capital expenditures, and discount rates. The key assumptions used in the impairment test include:
* Revenue growth rates
* Operating profit margins
* Terminal growth rates
* Discount rates

A significant change in any of these assumptions could result in an impairment loss.

Impairment of other assets

Management regularly assesses whether there is any indication that property and equipment, intangible assets, and other assets may be impaired. If such an indication exists, management estimates the recoverable amount of the asset.

The recoverable amount is the higher of the asset’s fair value less costs of disposal and its value in use. Value in use is determined by discounting future cash flows expected to be generated from the continued use of the asset.

The key assumptions used in the impairment test include:
* Future cash flows
* Discount rates

A significant change in any of these assumptions could result in an impairment loss.

Deferred tax assets

Deferred tax assets are recognized for unused tax losses and deductible temporary differences to the extent that it is probable that future taxable profit will be available to utilize these losses and differences. Management assesses the probability of future taxable profit based on historical performance, future projections, and tax planning strategies.

A significant change in management’s assessment of future taxable profit could result in a write-down or write-up of deferred tax assets.

Share-based payments

The fair value of share options granted is estimated using the Black-Scholes option pricing model. This model requires inputs such as expected volatility, expected life of the option, risk-free interest rate, and dividend yield. Changes in these inputs can significantly impact the estimated fair value of the options and, consequently, the share-based payment expense.

4. REVENUE

Revenue is disaggregated by product type and geographical region.

Revenue by product type

	2020	2019
Liquid cooling	72,750	54,334
Total Revenue	72,750	54,334

Revenue by geographical region

	2020	2019
Europe	23,634	18,534
North America	31,514	16,215
Asia	17,602	9,585
Total	72,750	54,334

5. COST OF SALES

Cost of sales includes the cost of raw materials, manufacturing overheads, and depreciation of manufacturing equipment.

6. RESEARCH AND DEVELOPMENT EXPENSES

Research and development expenses include salaries of R&D personnel, costs of materials and components for R&D activities, and depreciation of R&D equipment.

7. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses include salaries of sales, marketing, and administrative personnel, marketing and advertising costs, professional fees, and office rent.

8. OPERATING EXPENSES

	2020	2019
Research and development	17,548	5,718
Selling, general and administrative	17,821	4,889
Total	35,369	10,607

9. FINANCE INCOME AND COSTS

	2020	2019
Finance income	359	51
Finance costs	(171)	(192)
Foreign exchange gain (loss)	(1,361)	218
Net	(1,173)	75

10. INCOME TAX EXPENSE

The reconciliation of income tax expense and the expected tax expense based on the statutory tax rate is as follows:

	2020	2019
Income before tax	11,334	(454)
Statutory tax rate	22.0%	22.0%
Expected tax expense	2,493	(100)
Tax effect of:
Foreign currency translation adjustment	(526)	98
Differences in tax rates in foreign subsidiaries	(1,066)	(325)
Non-deductible expenses	260	190
Changes in deferred tax assets	(1,183)	(867)
Other	1,625	577
Income tax expense (benefit)	1,603	(467)

Current tax expense	1,566	94
Deferred tax expense (income)	37	(561)
Total income tax expense (benefit)	1,603	(467)

11. DEFERRED TAX ASSETS AND LIABILITIES

The following is a reconciliation of deferred tax assets and liabilities:

Deferred Tax Assets:

	2020	2019
Net operating loss carryforwards	1,896	3,650
Accrued liabilities	1,321	2,465
Other	199	1,000
Gross deferred tax assets	3,416	7,115
Valuation allowance	(2,811)	(6,510)
Net deferred tax assets	605	605

Deferred Tax Liabilities:

	2020	2019
Intangible assets	1,412	2,875
Property and equipment	1,983	3,240
Gross deferred tax liabilities	3,395	6,115
Net deferred tax liabilities	3,395	6,115

Movement in Deferred Tax Assets:

	2020	2019
Balance at beginning of year	605	6,115
Income tax expense (benefit)	37	(561)
Increase in valuation allowance	(2,811)	(2,948)
Other movements	2,784	3,009
Balance at end of year	605	605

The Group has net operating loss carryforwards of approximately USD 8,630,000 as of December 31, 2020, which can be carried forward for up to 10 years. The deferred tax assets related to these losses have not been recognized to the extent that it is not probable that future taxable profit will be available to utilize them.

12. EARNINGS PER SHARE

	2020	2019
Income for the year	9,195	(628)
Weighted average number of shares (basic)	25,542	25,136
Weighted average number of shares (diluted)	26,304	25,136
Basic earnings per share	0.36	(0.02)
Diluted earnings per share	0.35	(0.02)

13. CASH AND CASH EQUIVALENTS

	2020	2019
Cash on hand	117	121
Bank balances	41,075	27,314
Total	41,192	27,435

14. ACQUISITIONS

In 2020, the Group acquired 100% of the shares of a company for a total consideration of USD 1,316,000. The acquired company is involved in the development of advanced cooling technologies.

The fair value of the identifiable net assets acquired is USD 1,571,000, resulting in goodwill of USD 255,000.

The acquisition has been accounted for using the acquisition method. The revenue and profit of the acquired company since the acquisition date have been included in the consolidated financial statements.

15. INTANGIBLE ASSETS

	2020	2019
Cost
Balance at beginning of year	8,685	9,256
Additions	1,571	1,441
Disposals	(4)	(1,012)
Balance at end of year	10,252	9,685
Accumulated amortization and impairment
Balance at beginning of year	(2,570)	(1,835)
Amortization expense	(2,387)	(2,647)
Impairment losses	-	(1,012)
Disposals	-	1,012
Balance at end of year	(4,957)	(4,482)
Net book value at end of year	5,295	5,203

16. PROPERTY AND EQUIPMENT

	2020	2019
Cost
Balance at beginning of year	10,306	10,612
Additions	713	1,929
Disposals	(19)	(1,235)
Balance at end of year	11,000	11,306
Accumulated depreciation
Balance at beginning of year	(4,191)	(3,374)
Depreciation expense	(3,754)	(4,057)
Disposals	19	1,235
Balance at end of year	(7,926)	(6,196)
Net book value at end of year	3,074	5,110

17. INVENTORY

	2020	2019
Raw materials	4,123	3,015
Work in progress	2,876	1,642
Finished goods	5,302	4,855
Total	12,301	9,512

18. TRADE RECEIVABLES AND OTHER CURRENT ASSETS

	2020	2019
Trade receivables	23,105	12,805
Other current assets	1,366	1,275
Total	24,471	14,080

19. SHARE CAPITAL

	2020	2019
Number of shares issued	42,370	42,260
Par value per share	0.01	0.01
Total share capital	424	423

In 2020, 110,000 shares were issued under the employee share purchase program.
In 2019, 25,000 shares were issued under the employee share purchase program.

20. BORROWINGS

	2020	2019
Long-term debt	2,604	2,774
Short-term debt	1,525	1,518
Total borrowings	4,129	4,292

The Group has a revolving credit facility with a total limit of USD 5,000,000. As of December 31, 2020, USD 1,525,000 was drawn under this facility.

21. LEASE LIABILITIES

	2020	2019
Current lease liabilities	831	734
Non-current lease liabilities	1,924	2,039
Total lease liabilities	2,755	2,773

The maturity profile of lease liabilities is as follows:

	2020	2019
Within one year	831	734
In the second year	800	780
In the third year	618	610
In the fourth year	375	419
In the fifth year	131	230
Total	2,755	2,773

22. PROVISIONS

	2020	2019
Warranty provision	1,250	980
Restructuring provision	-	150
Total provisions	1,250	1,130

The warranty provision is based on historical warranty claims experience and management’s estimate of future warranty costs.

The restructuring provision relates to the closure of a subsidiary in Taiwan.

23. COMMITMENTS AND CONTINGENCIES

The Group has no significant capital commitments or contingencies as of December 31, 2020 and 2019.

24. RELATED PARTY TRANSACTIONS

Transactions with related parties are conducted on an arm’s length basis.

The Group’s related parties include key management personnel and entities controlled by key management personnel.

There were no significant related party transactions during the years ended December 31, 2020 and 2019.

25. EVENTS AFTER THE REPORTING PERIOD

There have been no events after the reporting period that would require adjustment to or disclosure in the consolidated financial statements.

26. SUBSEQUENT EVENTS

No significant events have occurred subsequent to the balance sheet date.# LIQUID COOLING DONE RIGHT FINANCIAL STATEMENTS - NOTES

2.1. Basis of preparation

The consolidated financial statements have been prepared on a historical cost convention, in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and the supplementary Danish information requirements for class D publicly listed companies.

Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
Income and expenses for each income statement are translated at average exchange rates;

Group companies that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

2.2. Consolidation

The consolidated financial statements comprise the Company and its consolidated subsidiaries. Subsidiaries are all entities (including structured entities) over which the Company has control. Control is achieved when the Company has power over the investee, exposure or rights to variable returns from its involvement with the investee, and the ability to use its power over the investee to affect the amount of the Company’s returns.

Consolidation of subsidiaries begins when the Company obtains control of the subsidiary and ceases when the Company loses control of the subsidiary.

The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group’s accounting policies.

All intra-group balances, transactions, income and expenses and unrealized gains and losses resulting from intra-group transactions are eliminated in full in the consolidated financial statements.

Property and equipment

Property and equipment is grouped as follows:

Group	Estimated Useful Life
Leasehold improvements	Lesser of 5 years or lease term
Plant and machinery	5 years
Tools, equipment, fixtures	3 to 5 years

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized as other income or expense in the consolidated income statement.

2.5. Research and development

Research costs are expensed as incurred. Costs directly attributable to the design and testing of new or improved products to be held for sale by the Group are recognized as intangible assets within development projects when all of the following criteria are met:

It is technically feasible to complete the product so that it will be available for sale;
management intends to complete the product and use or sell it;
there is an ability to use or sell the product;
it can be demonstrated how the product will generate probable future economic benefits;
adequate technical, financial and other resources to complete the development and to use or sell the product are available; and
the expenditures attributable to the product during its development can be reliably measured.

Directly attributable costs that are capitalized as part of the product include the employee costs associated with development. Other development expenditures that do not meet these criteria are recognized as expense when incurred. Development costs previously recognized as expense are not recognized as an asset in a subsequent period.

Development costs recognized as assets are amortized on a straight-line basis over their estimated useful lives, which generally range between three and forty-eight months. Amortization expense related to capitalized development costs is included in research and development expense.

2.6. Impairment of non-financial assets

Assets that are subject to amortization are reviewed for impairment annually, and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of 1) an asset’s fair value less costs to sell or 2) its value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).

Non-financial assets other than goodwill that previously suffered an impairment are reviewed for possible reversal of the impairment at each reporting date. Goodwill is tested for impairment annually and whenever there is indication that the goodwill may be impaired. If an impairment loss on goodwill is identified, it is recognized as an expense and is not reversed in a subsequent period.

2.7. Financial assets

Recognition and Measurement. The Group determines the classification of its financial assets at initial recognition. Financial assets within the scope of IFRS 9 Financial Instruments are classified as follows:

‘Amortized cost’ are financial assets representing contractual cash flows held for collection, where such cash flows solely represent payment of principal and interest.
‘Fair value’. All other financial assets, representing other debt and equity instruments that do not meet the ‘amortized cost’ criteria, are recognized at fair value. All fair value movements on financial assets are taken through the income statement, or for certain debt instruments that qualify, through other comprehensive income.

For all years presented, the Group’s financial assets are all classified as ‘amortized cost’.

Impairment of financial assets. For financial assets carried at amortized cost, the Group measures at the end of each reporting period the expected credit losses to be incurred for a financial asset or group of financial assets. The Company utilizes historical experience, evaluation of possible outcomes, current conditions and forecasts of future economic conditions to determine expected credit losses. Evidence may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Offsetting of financial instruments. Financial assets and financial liabilities are offset, and the net amount reported in the consolidated balance sheet if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.

2.8. Financial liabilities

Recognition and measurement. Financial liabilities within the scope of IFRS 9 are classified as financial liabilities at fair value through profit or loss, or other liabilities. The Group determines the classification of its financial liabilities at initial recognition. Financial liabilities are recognized initially at fair value less, in the case of other liabilities, directly attributable transaction costs. The measurement of financial liabilities depends on their classification as follows:

‘Financial liabilities at fair value through profit or loss’ are liabilities entered into that do not meet the hedge accounting criteria as defined by IFRS 9. Gains or losses on liabilities held for trading are recognized in profit and loss. At December 31, 2020, the Company has no liabilities measured at fair value through profit and loss.
‘Other liabilities’ – After initial recognition, interest bearing debt is subsequently measured at amortized cost using the effective interest rate method. Gains and losses are recognized in the income statement when the liabilities are derecognized as well as through the amortization process. The calculation takes into account any premium or discount on acquisition and includes transaction costs and fees that are an integral part of the effective interest rate.

2.9. Inventories

Inventories are stated at the lower of actual cost or net realizable value. Cost is determined using the first-in, first-out (FIFO) method. Net realizable value is the estimated selling price in the ordinary course of business less estimated costs necessary to make the sale. Adjustments to reduce the cost of inventory to its net realizable value, if required, are made for estimated excess, obsolescence, or impaired balances.

2.13. Share-based payments

The Company issues options (or warrants) that allow management and key personnel to acquire shares in the Company. Through equity-settled, share-based compensation plans, the Company receives services from employees as consideration for the granting of equity options to purchase shares in the Company at a fixed exercise price. The fair value of the employee services received in exchange for the grant of the options is recognized as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted, excluding the impact of any non-market service and performance vesting conditions. The grant date fair value of options granted is recognized as an employee expense with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the options (vesting period).

The fair value of the options granted is measured using the Black-Scholes model, taking into account the terms and conditions as set forth in the share option program. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility, weighted average expected life of the instruments (based on historical experience and general option holder behavior), expected dividends, and the risk-free interest rate. Service and non-market performance conditions attached to the transactions are not taken into account in determining fair value.

At each reporting date, the Company revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. The impact of the revision to original estimates, if any, is recognized in the Statement of Comprehensive Income, with a corresponding adjustment to equity.

2.14. Current and deferred income tax

The tax expense for the period comprises current and deferred tax. Tax is recognized in the income statement, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.# 2.10. Trade receivables
Trade receivables are amounts due from customers for product sold in the ordinary course of business. Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less any provision for expected credit losses. If collection is expected in one year or less, trade receivables are classified as current assets. Expected credit losses are determined utilizing the simplified approach allowed under IFRS 9 Financial Instruments.

2.11. Cash and cash equivalents

Cash and cash equivalents includes cash on hand, deposits with banks, overdrafts and other short-term highly liquid investments with original maturities of three months or less.

2.12. Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds.

2.15. Revenue recognition and other income

Revenue represents sale of the Group’s products to customers which are principally resellers and original equipment manufacturers. Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for goods supplied, stated net of discounts, sales tax, returns and after eliminating sales within the Group. Deferred income tax is recognized, 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. However, deferred tax liabilities are not recognized if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled. The Group’s revenue is predominantly comprised of shipment of Asetek products in fulfillment of customer purchase orders. As such, the Company recognizes revenue when a valid contract is in place and control of the goods have transferred to the customer. Customer purchase orders and/or contracts are used as evidence of an arrangement. Delivery occurs and control of the goods is deemed to transfer when products are shipped to the specified location and the risks of obsolescence and loss have been transferred to the customer. For certain customers with vendor-managed inventory, delivery does not occur until product is acquired by the customer from the vendor-managed inventory location. The Company assesses collectability based primarily on the creditworthiness of the customer as determined by credit checks and customer payment history. Customers do not generally have a right of return. Income received as a result of patent litigation settlement is recorded as other income as an offset to operating expense in the period the award is granted. Estimated costs for future product returns under warranty are charged to cost of sales and included in accrued liabilities.

2.16. Leases

On January 1, 2019, the Group adopted IFRS 16 Leases on a modified retrospective basis without restatement of the prior year, as permitted under the standard. Upon adoption of IFRS 16, Asetek recognized lease liabilities for leases which had previously been classified as operating leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate. Lease liabilities include the net present value of: fixed lease payments, amounts expected to be payable under residual value guarantees, any purchase options that are reasonably expected to be exercised, and any penalties for termination reflected in the lease term. The corresponding rental obligations, net of finance charges, are included in other long-term debt. Amounts due within one year are included in short-term debt. From January 1, 2019, the associated right-of-use assets for the leases were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognized in the balance sheet as of December 31, 2018. Leased assets are recognized as a right-of-use asset at the date at which the leased asset is available for use by the Group, initially measured on a present value basis and included in Property and equipment on the balance sheet. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period to reflect a constant periodic rate of interest on the remaining balance of the liability for each period.

2.17. Provisions

A provision is recognized when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and the amount has been reliably estimated. If the impact of time value is significant, the provision is calculated by discounting anticipated future cash flow using a discount rate before tax that reflects the market’s pricing of the present value of money and, if relevant, risks specifically associated with the obligation. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate.

2.18. Contingent liabilities

Contingent liabilities are not recognized in the financial statements. Significant contingent liabilities are disclosed, with the exception of contingent liabilities where the probability of the liability occurring is remote.

2.19. Segment reporting

Business segmentation. The Group is reporting on two segments, Gaming and Enthusiast, and Data center. The two segments are identified by their specific sets of products and specific sets of customers. The splitting of operating expenses between segments is based on the Company’s best judgment and done by using the Company’s employee/project time tracking system to capture total hours charged by project code. Operating expenses that are not divisible by nature (rent, telecommunication expenses, etc.) have been split according to actual time spent on the two businesses, and the Company’s best estimate for attribution. Costs incurred for intellectual property defense and headquarters administration have been classified separately as headquarters costs and excluded from segment operating expenses. The CEO is the Group’s chief operating decision-maker. The CEO assesses the performance of the Group principally on measures of revenue and adjusted EBITDA. Geographical segmentation. Each of the Group’s offices in its three principal geographies fulfills a particular function that serves the Asetek Group as a whole. The majority of costs incurred in each of the geographies are generally incurred for the benefit of the entire Group and not to generate revenue in the respective geography. As a result, the financial results of the Group are not divided between multiple geographical segments for key operating decision-making. Revenue and assets by geography is measured and reported in Note 4, Geographical information.

2.20. Cash flow statement

The cash flow statement is prepared using the indirect method.

2.21. Critical accounting estimates and judgments

The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Areas where significant judgment has been applied are:

Valuation of deferred tax assets: deferred income tax assets are recognized to the extent that the realization of the tax benefit to offset future tax liabilities is considered to be probable. In prior years, the Company incurred net operating losses which are eligible to offset future taxable income. In 2020, the Company generated net income and therefore recorded deferred tax assets representing the estimated amount of net operating losses that will be utilized to offset future taxable income, based on income projections for the next five years.

In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. Management establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Asetek’s Quality Director, Magnus Hakanen (left) says that his most important goal has been to get all of Asetek’s dedicated employees to feel a responsibility for quality and prioritise it proactively, not reactively as before.# In future periods, management will continue to assess the probability of realization of the assets’ value and adjust the valuation in accordance with IAS 12.
of the board of directors. In the year ended December 31, 2020, the Company made matching contributions totalling $21,000 (none in 2019).

2.23 ESEF Regulation

The Company's Annual Report is prepared, in all material respects, in compliance with the Commission Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regulation) which includes requirements related to the preparation of the Annual Report in XHTML format and iXBRL tagging of the Consolidated Financial Statements.

Capitalization of development costs

The Group’s business includes a significant element of research and development activity. Under IAS 38, there is a requirement to capitalize and amortize development spend to match costs to expected benefits from projects deemed to be commercially viable. The application of this policy involves the ongoing consideration by management of the forecasted economic benefit from such projects compared to the level of capitalized costs, together with the selection of amortization periods appropriate to the life of the associated revenue from the product. If customer demand for products or the useful lives of products vary from management estimates, impairment charges on intangibles could increase.

2.24. Changes in accounting policy and disclosures

Applied new standards and amendments included in Annual Report for 2020. Certain new standards, amendments to standards, and annual improvements to standards and interpretations are effective for annual periods beginning after January 1, 2020 and have been applied in preparing these consolidated financial statements. These applications did not materially impact the Group’s consolidated financial statements.

2.22. Defined contribution plan

In 2008, the Company established a defined contribution savings plan (the “Plan”) in the U.S. that meets the requirements under Section 401(k) of the U.S. Internal Revenue Code. This Plan covers substantially all U.S. employees who meet the minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. Company contributions to the Plan may be made at the discretion of the board of directors. In the year ended December 31, 2020, the Company made matching contributions totalling $21,000 (none in 2019).

LIQUID COOLING DONE RIGHT 39

RELIABILITY AND QUALITY AS GOOD AS IN THE SPACE INDUSTRY BY TAKING A PROACTIVE APPROACH RATHER THAN A REACTIVE ONE, ASETEK’S QUALITY ASSURANCE HAS RAISED THE RELIABILITY OF LIQUID COOLING PRODUCTS TO A LEVEL CLOSE TO PERFECTION.

But such a degree of perfection is a necessity if Asetek wants to be the world’s leading manufacturer in the rapidly growing market in water cooling for PCs, servers and data centers – and to deliver, as Asetek does, to world-renowned OEM’s such as HP, Dell, Intel, Fujitsu and many others. Above all, it raises our credibility with partners who have to be able to guarantee to the end-customer that their PC or server isn’t going to fail, for example.”

TWO DIFFERENT CHALLENGES

“Asetek’s products need reliability matching the requirements set in the space industry, and now they have achieved it. For us, it’s just not enough for the unit to work almost all the time or only cost a little now and then. Many of our products actually have to work 24/7, all year round, for at least 10 years running. It’s a question of credibility and money,” explains Asetek Vice President of Global Quality Magnus Hakanen. The 51-year-old Swedish civil engineer started working in quality assurance 20 years ago with an automotive parts supplier to Volvo, and went on to accumulate extensive know-how from similar quality assurance work with international players such as Vestas and Grundfos, before coming to Asetek 3 years ago.

Hakanen describes slightly different challenges relating to the two main areas of on-processor liquid cooling that Asetek works in: the well-established PC market, and the growing data center market, where more and more people are noticing the energy-saving and climate-friendly alternative offered by Asetek. Data centers sometimes total thousands of servers that could cool more efficiently with direct on-processor liquid cooling than with traditional air cooling for the same power consumption. Furthermore, Asetek’s technology also makes climate-friendly use of the enormous total quantity of residual heat, for example through circular reuse by connecting to local district heating networks.

ALL EMPLOYEES HAVE A RESPONSIBILITY

Magnus heads the quality assurance department at Asetek’s headquarters. He also leads Asetek’s quality team in China which has an equivalent role in respect of Asetek’s carefully selected 25-30 sub-suppliers in Asia. But his most important goal, says Hakanen, has been to get all of Asetek’s dedicated employees to feel a strong responsibility for quality and prioritise it proactively, not re-actively. Now, from the time the engineers create drawings and calculations for future products on their computers through the design, development and manufacturing, the entire workflow is geared towards foreseeing potential problems and risks and mitigating them long before the products have arrived anywhere near mass production or even prototype status. And Magnus Hakanen has a statistical basis for his remarkable goals and vision. He is happy to present graphs and figures on his screen showing, from every imaginable angle, how Asetek’s margin of error has moved in recent years from what he describes as “really good” to “space industry super good.” As Magnus Hakanen says: “Of course, it saves a lot of money when the product is built just right the first time.

LIQUID COOLING DONE RIGHT 40

FINANCIAL STATEMENT S - NOTES

New standards and amendments not applied in the Annual Report for 2020.

There are some new standards and amendments to standards and interpretations that have not been applied in preparing these consolidated financial statements. None of these is expected to have a significant effect on the consolidated financial statements of the Group:

Standard	Content	Effective date EU ENDORSED AS OF DECEMBER 31, 2020
Amendments to IFRS 3 Business Combinations	The amendment assists entities in determining whether a transaction should be accounted for as a business combination or as an asset acquisition.	1-Jan-2020
Amendments to IFRS 9, IAS 39, IFRS 7: Interest Rate Benchmark Reform	The amendments relate to the issues affecting financial reporting in the periods before replacement of an existing interest rate benchmark with an alternative interest rate.	1-Jan-2020
1-Jan-2021	Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform - Phase 2	These amendments address issues that might affect financial reporting after the reform of an interest rate benchmark, including its replacement with alternative benchmark rates.
NOT ENDORSED BY EU AS OF DECEMBER 31, 2020	Amendments to IFRS 3 Business Combinations; IAS 16 Property, Plant and Equipment; IAS 37 Provisions, Contingent Liabilities and Contingent Assets; Annual Improvements 2018-2020	The small amendments will: update a reference in IFRS 3 without changing accounting requirements;
	require proceeds received from sale when preparing PP&E for its intended use to be recorded in profit and loss instead of as a reduction to cost; specify which costs a company includes when assessing whether a contract will be loss-making; make minor amendments to IFRS 1, IFRS 9, IAS 41 and IFRS 16.	1-Jan-2023
Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current and Classification of Liabilities as Current or Non-current – Deferral	The amendments specify that the conditions which exist at the end of the reporting period are those which will be used to determine if a right to defer settlement of a liability exists. Management expectations about events after the balance sheet date are not relevant to the determination.

LIQUID COOLING DONE RIGHT FINANCIAL STATEMENT S - NOTES 41

Liquidity risk.

The Group incurred losses from operations and negative cash flows from operations from inception through 2015; positive cash flows and operating income were first generated in 2016 and have continued through 2020. Asetek will continue to invest its capital principally in the development and marketing of its products. In 2016, the Board of Directors implemented a policy under which it may declare and distribute dividends to shareholders. At the Annual General Meeting in April 2020, the Board was authorized to acquire the Company’s own shares and subsequently initiated a share buyback program. In 2020, the Company repurchased a total of 844 thousand common shares on the open market for a total cost of $6.4 million. When considering payment of dividends or Asetek share purchases, the Board takes into consideration the Company’s growth plans, international tax implications, liquidity requirements and necessary financial flexibility. The following are contractual maturities of financial liabilities, including estimated interest payments on an undiscounted basis.

3. RISK MANAGEMENT AND DEBT

The Group’s activities expose it to a variety of risks: liquidity risk, market risk (including foreign exchange risk and interest rate risk) and credit risk. The primary responsibility for Asetek’s risk management and internal controls in relation to the financial reporting process rests with executive management. To facilitate ongoing operations, Asetek has secured bank lines of credit and trade receivables financing. The Group’s corporate finance team monitors risk of a shortage of funds through regular updates and analysis of cash flow projections and maturities of financial assets and liabilities.# LIQUID COOLING DONE RIGHT 42 FINANCIAL STATEMENT S - NOTES

The finance teams also review liquidity, balance sheet ratios (such as days’ sales outstanding, inventory turns) and other metrics on a regular basis to ensure compliance both on a short- and long-term basis. Asetek’s internal control procedures are integrated in the accounting and reporting systems and include procedures with respect to review, authorization, approval and reconciliation. All entities in the Asetek Group report financial and operational data to the executive office on a monthly basis, including commentary regarding financial and business development. Based on this reporting, the Group’s financial statements are consolidated and reported to executive management. Management is in charge of ongoing efficient risk management, including the identification of material risks, the development of systems for risk management, and that significant risks are routinely reported to the board of directors.

DEBT MATURITIES AS OF DECEMBER 31, 2020 (USD 000’s)

	On Demand	Less than 3 months	3 to 12 months	1 to 5 years	Total
Line of credit	(536)	-	(247)	-	(837)
Leases	-	-	-	-	-
Trade payables and accrued liabilities	(18,927)	(19,174)	(812)	(19,739)	(23,998)
Total	(536)	(1,649)	(2,639)	-	(3,723)

The need for an internal audit function is considered regularly by the Audit Committee. However, due to the size of the Company and the established control activities, the Audit Committee so far considers it unnecessary to establish an independent internal executive audit board. As part of risk management, Asetek has a whistle-blower function for expedient and confidential notification of possible or suspected wrongdoing.

AS OF DECEMBER 31, 2019 (USD 000’s)

	On Demand	Less than 3 months	3 to 12 months	1 to 5 years	Total
Line of credit	(746)	-	(211)	-	(619)
Finance leases	-	-	-	-	-
Trade payables and accrued liabilities	(10,048)	(10,259)	(757)	(10,805)	(15,284)
Total	(746)	(1,376)	(2,903)	-	(3,733)

LIQUID COOLING DONE RIGHT 42 FINANCIAL STATEMENT S - NOTES

Market risk factors.

The Group’s current principal financial liabilities consist of short-term debt on revolving lines of credit and amounts owed on facilities and equipment leases. The Group’s financial assets mainly comprise trade receivables, cash and deposits. The Group’s operations are exposed to market risks, principally foreign exchange risk and interest rate risk.

(b) Interest rate risk.

As of December 31, 2020, Asetek had the following debt outstanding that is subject to interest rate risk: Trade receivables that are deemed uncollectible are charged to expense with an offsetting allowance recorded against the trade receivable. Historically, bad debt expense has not been significant. Certain customers have accounted for a significant portion of the Company’s revenues in the years presented, as follows. In 2020, the Company’s two largest customers accounted for 41% and 14% of revenue (31% and 27% in 2019), respectively. The Company mitigates risk with its largest customer by requiring two remittances per month as well as frequent monitoring and communicating regarding invoices coming due.

4. GEOGRAPHICAL INFORMATION

The Group operates internationally in several geographical areas, principally in Asia, Europe and the Americas.

Line of credit with Sydbank – 5.0 million Danish kroner revolving line of credit available to Asetek A/S. Total line in USD is approximately $825 thousand, of which $536 thousand was outstanding at December 31, 2020. The line carries interest at the Danish CIBOR 3 rate plus 2.25 percentage points, which in total was 2.03% at December 31, 2020. Based on the line’s revolving, short-term nature, interest rate risk is not significant.

The following table presents the Group’s revenue and assets in each of the principal geographical areas:

(USD 000’s)

	Revenue 2020	Current assets	Non-current assets	Total assets
Asia	62,383	5,440	4,927	96
Americas	2,035	15,161	17,292	72,750
Europe	17,292	13,863	54,334	52,175
TOTAL	72,750	34,464	76,553	180,159

Capital and debt management.

To date the Company’s primary focus has been to support its product development initiatives, maintain liquidity through use of financing alternatives, and maximize shareholder value. The Group manages its capital and debt structure with consideration of economic conditions. In 2013 and 2015, the Company raised capital through the offering of its common stock on the Oslo Stock Exchange. With regard to future capital needs, the Company will continue to consider both equity and debt financing strategies. At December 31, 2020 two customers represented 47%and 17% of outstanding trade receivables (38% and 15% at December 31, 2019), respectively. The reserve for uncollectible trade accounts was $23,000 at December 31, 2020 and $48,000 at December 31, 2019. The aged trade receivables and bad debt reserve balances for all years presented are provided in Note 17.

(USD 000’s)

	Revenue 2019	Current assets	Non-current assets	Total assets
Asia	47,206	4,716	38	12,435
Americas	882	2,412	23,649	40,242
Europe	12,943	13,863	54,334	38,892
TOTAL	54,334	20,991	78,021	91,569

The maximum exposure to credit risk at the reporting dates was:

(USD 000’s)

	2020	2019
Cash and cash equivalents	27,099	24,505
Trade receivables and other	24,471	14,080
Other assets	605	307
TOTAL	52,175	38,892

Credit risk factors.

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group is exposed to credit risk primarily through trade receivables and cash deposits. Management mitigates credit risk through standard review of customer credit-worthiness and maintaining its liquid assets primarily with Wells Fargo Bank in the U.S. and Sydbank in Denmark. The carrying amount of the financial assets represents the maximum credit exposure.

For the purpose of the above presentation, the information pertaining to revenue and current assets is calculated based on the location of the customers, whereas information pertaining to non-current assets is based on the physical location of the assets. The information pertaining to current assets is calculated as a summation of assets such as trade receivables and finished goods inventories reasonably attributable to the specific geographical area.

The ending exchange rate at December 31, 2020 was 6.06 Danish kroner to one U.S. dollar (6.68 to the U.S. dollar at December 31, 2019). The effect of a 10% strengthening (weakening) of the Danish kroner against the U.S. dollar for the reporting period would have resulted in an increase (decrease) in pre-tax income for fiscal year 2020 of $1,538,000 (in 2019, increase of the pre-tax income of $926,000).

MAXIMUM CREDIT EXPOSURE

(USD 000’s)

	2020	2019
Non-current assets	54,334	54,334

LIQUID COOLING DONE RIGHT FINANCIAL STATEMENT S - NOTES 43

(USD 000’s)

	Segment operating results - years ended December 31, 2020	2019	2020	2019

Revenue
Denmark	15,161	12,943
USA	2,035	882
China	96	38
TOTAL	17,292	13,863
Adjusted EBITDA
Gaming and Enthusiast	(1,205)	(4,600)	14,606	(4,284)
Datacenter	(4,161)	-
Not allocable to divisions	-
Total	(5,366)	(4,600)	14,606	(4,284)

(USD 000’s)

	2020	2019
Revenue
Denmark	21,405	15,600
USA	51,791	2,543
Hong Kong	-	-
Taiwan	-	-
TOTAL REVENUE	72,750	18,143

Adjusted EBITDA
EBITDA, adjusted - Gaming and Enthusiast	(1,205)	(4,600)
EBITDA, adjusted - Data center	(4,161)	-
Headquarters costs	(1,056)	(4,057)
Share based compensation	(4,057)	(4,057)
All others	406	3,083
TOTAL ADJUSTED EBITDA	(10,073)	(9,631)

Reconciliation of Adjusted EBITDA to Income before tax

(USD 000's)

	2020	2019
Adjusted EBITDA	(10,073)	(9,631)
Depreciation and amortization	(3,754)	(1,502)
Total financial income (expenses)	9,426	1,454
Consolidated income before tax	(4,401)	(9,679)

5. SEGMENT INFORMATION

The Company reports on two segments, Gaming and Enthusiast and Data center. The two segments are identified by their specific sets of products and specific sets of customers. The CEO is the Group’s chief operating decision-maker. The CEO assesses the performance of each segment principally on measures of revenue and adjusted EBITDA. The following tables represent the results by operating segment in 2020 and 2019. Disaggregation of revenue is also presented for the major markets within each segment.

(USD 000's)

	2020	2019
Revenue
Gaming and Enthusiast:
Enthusiast/DIY	54,889	43,312
Gaming/Performance PC	9,830	8,479
Data center market:
OEM	8,031	-
Government	-	2,233
TOTAL REVENUE	72,750	54,024

The figures listed include incentive based compensation for management and staff. Incentive based compensation is based on a combination of quarterly cash-based rewards and periodic grants of options (or warrants) to buy the Company’s common shares. The above remuneration for Officers includes $76,000 and $72,000 in pension payments in 2020 and 2019, respectively. The bonus plan for the CEO is approved by the Board of Directors at the beginning of the year and the bonus payments for the CEO and the upper management are reviewed by the Board of Directors on an annual basis.# LIQUID COOLING DONE RIGHT

FINANCIAL STATEMENT S - NOTES

6. SALARY COSTS AND REMUNERATIONS
7. SHARE BASED PAYMENT

André S. Eriksen
Peter D. Madsen

Asetek’s Equity Incentive program is a share compensation program where the employees and other parties that deliver services to the Group have been granted share options (or warrants). The options, if vested and executed, will be settled in common shares of the Company.

Common shares	334,816	61,750
(USD 000’s)	2020	2019
Salaries	10,841	9,268
Options at NOK 24.70	433	382
Options at NOK 38.33	106,800
Options at NOK 46.30	68,500
Warrants at:	53,300
Retirement fund contributions	1,279	1,188
Social cost	918	1,056
Share based payment	1,188	1,056
Other expenses	1,056	117
NOK 10.50	-
50,875		49,837
10,313		44,215

The options are granted at the time of employment and, at the discretion of the Board of Directors, under other circumstances. The options are granted with exercise prices equaling the fair market value of the underlying security. The exercise prices of option grants are determined based on the closing market price of the shares on the day of the grant. Share-based compensation expense was $918,000 and $1,056,000 for the years ended December 31, 2020 and 2019, respectively.

(40)
NOK 19.50	-	-
TOTAL PERSONNEL EXPENSES BEFORE CAPITALIZATION	13,431	12,011
NOK 40.10	132,981
Capitalized as development cost	(958)	(1,000)
TOTAL SHARES CONTROLLED	696,397	381,971
TOTAL PERSONNEL EXPENSES IN STATEMENT OF INCOME	12,473	11,011
AVERAGE NUMBER OF EMPLOYEES	110	97

The Company’s CEO has an agreement of twelve months’ severance pay in case of termination or termination in connection with change of control. The Company’s CFO has an agreement of seven months’ severance pay in case of termination or termination in connection with change of control. Except for the Company’s CEO and CFO and other members of the executive group, no member of the administrative, management or supervisory bodies has contracts with the Company or any of its subsidiaries providing for benefits upon termination of employment.

Options granted in 2020:

	2020	2019
Group Options Granted - The staff costs are specified as follows:
Board of directors	3,476	2,768
Officers	9,955	9,243
Other executives	110,575
Other employees	135,763
TOTAL GRANTED	320,300

The program was adopted by the Board of Directors in 2008 and has the following purpose:

To attract and retain the best available personnel
To provide additional incentive to employees, directors and consultants, and Compensation to the Board of Directors, Officers and Other Executives*
To promote the success of the Company’s business.

Other (USD 000’s)	Directors	Officers	Executives	Total	Other (USD 000’s)	Directors	Officers	Executives	Total
2020	1,805	1,196	559	3,754	2019	1,938	566	868	4,087
Salary					Salary
Bonus	695			695	Bonus	837	231	1,101	2,169
Share based	285	181	274	740	Share based	335	395	84	814
Other	314	709		1,023	Other	217	217	150	584
TOTAL	1,835	2,056	4,108	7,926	TOTAL	1,915	3,737	1,621	5,506

*Other Executives includes the Chief Operating Officer and other members of the executive team who are leaders of the key functions (Engineering, Sales & Marketing, Operations)

As of December 31, 2020, there is a total of 2,358,141 common shares authorized under the Plan.

The Company’s shares trade on the Oslo Stock Exchange, at prices denominated in Norwegian krone (NOK). The exchange rate at December 31, 2020 of NOK to USD was 8.59.

In April 2020, the Company granted 320,300 options with exercise prices of NOK38.33 per share. In April 2019, the Company granted 494,900 options with exercise prices of NOK24.70 per share.

Movements in the number of share options outstanding and their related weighted average exercise price are as follows:

The composition of options and warrants outstanding at December 31 is as follows:

Number of shares	Exercise price per share	NOK 10.60	NOK 19.50	NOK 24.70	NOK 33.90	TOTAL
	Weighted Average Exercise - Price (NOK)
2020		263,253	255,504	469,865	-	2,626,062
2019		395,973	412,957	494,900	7,170	2,192,737

Activity for exercise prices of: NOK 10.60 to NOK 24.70

	2020	Price (NOK)	2019	Price (NOK)
Outstanding on January 1	1,303,830	18.77	884,283	14.68
Options/warrants granted	84,550	24.70	494,900	24.70
Options/warrants exercised	(308,408)	15.98	(64,461)	5.41
Options/warrants forfeited	(10,892)	19.16	(333,295)	19.60
OUTSTANDING ON DECEMBER 31	1,303,830	18.77	814,195	15.43
EXERCISABLE ON DECEMBER 31	988,622	17.11	664,037	17.11

The weighted average market price per share on the date of exercise for the above shares was NOK 68.73 in 2020 and NOK 32.71 in 2019.

Total outstanding options and warrants represents 8.3% of total common shares issued at December 31, 2020 (10.1% in 2019).

Activity for exercise prices of: NOK 33.90 to NOK 113.00

	2020	Price (NOK)	2019	Price (NOK)
Outstanding on January 1	1,322,232	58.08	1,369,938	58.70
Options/warrants granted	320,300	38.33	-	-
Options/warrants exercised	(425,222)	38.61	-	-
Options/warrants forfeited	(13,195)	57.79	(47,706)	56.06
OUTSTANDING ON DECEMBER 31	1,204,115	67.23	1,322,232	58.08
EXERCISABLE ON DECEMBER 31	756,790	59.71	921,427	56.06

The weighted average market price per share on the date of exercise for the above shares was NOK 71.27 in 2020.

The Company calculated the fair value of each option award on the date of grant using the Black-Scholes option pricing model, which requires subjective assumptions, including future stock price volatility and expected time to exercise. The expected volatility was based on the historical volatility of the Company’s stock price. The weighted average remaining contractual term of options outstanding is 4.1 years. The options granted in April 2020 have an estimated total value of $0.5 million. The options granted in September 2019 have an estimated total value of $0.6 million.

The following weighted average assumptions were used for the period indicated:

Valuation assumptions	2020	2019
Risk-free interest rate	0.26% - 0.37%	0.0% - 1.42%
Dividend yield	1.44% - 0.0%	3.50 - 5.50
Expected life of options (years)	57% - 61%	53% - 57%
Expected volatility	3.50 - 5.49	3.50 - 5.49

8. EXPENSES BY NATURE

(USD 000’s)	2020	2019
Inventories recognized as cost of sales	38,556	31,329
Personnel expenses	13,431	12,011
Depreciation and amortization	3,754	4,057
Legal, patent, consultants and auditor	4,087	782
Facilities and infrastructure	4,619	1,221
Other expenses	2,256	3,214
TOTAL OPERATING EXPENSES BEFORE CAPITALIZATION	63,837	55,480
Less: capitalized costs for development projects	(2,015)	(1,441)
TOTAL EXPENSES	61,822	54,039

Depreciation and amortization expense by classification on the income statement is as follows:

(USD 000’s)	2020	2019
Depreciation and amortization included in:
Research and development	1,529	1,746
Selling, general and administrative	2,225	2,311
TOTAL	3,754	4,057

Valuation assumptions

Total operating expense in the consolidated statement of comprehensive income includes a separate component of other income totaling $0 and $753,000 for 2020 and 2019, respectively, which represents net awards received from patent litigation.

9. FINANCE COSTS AND INCOME

(USD 000’s)	2020	2019
Foreign exchange gain (loss)	(1,361)	218
Interest cost on line of credit	(7)
Interest cost on leases
Interest income
Other banking and finance fees
TOTAL FINANCE INCOME	(78)	218

10. INCOME TAXES

(USD 000’s)	2020	2019
INCOME (LOSS) BEFORE TAX	9,426	1,454

The tax expense on the group’s income before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated entities as follows:

	2020	2019
Tax calculated at domestic rates applicable to profits/losses in respective countries	(2,328)	(351)
Tax effects of:
R&D credit	183	1,600
Net benefit (expense) of tax losses recognized	732	20
Other timing differences between book and tax	(563)	(126)
Effect of U.S.	(2,328)	(351)

Asetek A/S, the Group's parent company, moved from U.S. to Denmark in 2013 and is currently subject to income tax in both U.S. and Denmark. The Company is working with the U.S. and Danish tax authorities to negotiate a resolution in accordance with international double taxation treaties.

11. DEFERRED INCOME TAX

(USD 000’s)	2020	2019
Potential tax assets from prior year losses	7,340	8,597
Potential tax assets resulting from timing differences between book and tax	(107)	51
Tax assets not recognized	(1,800)	(3,800)
Tax effected loss	1,881	(1,502)
DEFERRED INCOME TAX ASSETS
Expire in years 2028 to 2034	4,540
Do not expire
TOTAL	6,421	5,521

Losses of the U.S. parent company and U.S. subsidiary will begin to expire in 2028 for carryforward purposes. Losses of the Denmark subsidiary do not expire.

Expiration of the carryforward of losses is summarized as follows:

At December 31, 2020, potential income tax assets totaled $7.3 million (2019: $8.6 million) in respect of remaining losses to be carried forward amounting to $29.6 million that should be applied to different tax rates. The losses can be carried forward against future taxable income. In 2020, the Group recorded deferred tax assets totaling $6.4 million ($5.5 million in 2019), which represents the net tax benefit that the Company considers probable to be realized in the future, based on Company budget for the following year and estimates for the subsequent years.# GILTI regulation applied to foreign corporation income

In accordance with IAS 12, the Company recognizes deferred tax assets arising from unused tax losses or tax credits only to the extent that the entity has sufficient taxable temporary differences or there is convincing other evidence that sufficient taxable profit will be available against which the unused tax losses or unused tax credits can be utilized by the Company. The estimated tax benefit is calculated considering historical levels of income, expectations and risks associated with estimates of future taxable income. The calculation utilizes the statutory tax rates that are expected to apply to taxable income for the years in which the asset is expected to be realized.

TAX (EXPENSE) BENEFIT


	(231)	(2,082)

LIQUID COOLING DONE RIGHT 4 8 FINANCIAL STATEMENT S - NOTES

As of December 31, 2020

12. EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the profit or loss attributable to equity holders of the Company by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated by adjusting the number of common shares outstanding used in the Basic calculation for the effect of dilutive equity instruments, which include options and warrants to the extent their inclusion in the calculation would be dilutive.

	2020	2019
Income attributable to equity holders of the Company (USD 000’s)	$9,195	$(628)
Weighted average number of common shares outstanding (000’s)	25,547	25,582
BASIC EARNINGS PER SHARE	$0.36	$(0.02)
Instruments with potentially dilutive effect: Warrants and options (000’s)	566	-
Weighted average number of common shares outstanding, diluted (000’s)	26,113	25,582
DILUTED EARNINGS PER SHARE	$0.35	$(0.02)

13. FINANCIAL INSTRUMENTS CATEGORY AND FAIR VALUE ESTIMATION

The Company uses the following valuation methods for fair value estimation of its financial instruments:

// Quoted prices (unadjusted) in active markets (Level 1).
// Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (Level 2).
// Inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).

All of the Company’s financial assets as of December 31, 2020 are classified as ‘amortized cost’ having fixed or determinable payments that are not quoted in an active market (Level 3). As of December 31, 2020, all of the Company’s financial liabilities are carried at amortized cost. The Company believes that book value approximates fair value for all financial instruments as of December 31, 2020.

The values of the Group’s assets and liabilities are as follows:

	As of December 31, 2020 (USD 000’s)	As of December 31, 2019 (USD 000’s)
Liabilities at fair value through profit and loss
Other financial liabilities at amortized cost	2,604	1,525
Total Liabilities as per balance sheet:	2,604	1,525
Long-term debt	-	-
Short-term debt	-	-
Trade payables and accrued liabilities	19,739	23,868

Assets as per balance sheet:
Trade receivables and other	14,080	24,505
Cash and cash equivalents	38,585

Liabilities at fair value through profit and loss
Other financial liabilities at amortized cost	2,774	1,518
Total Liabilities as per balance sheet:	2,774	1,518
Long-term debt	-	-
Short-term debt	-	-
Trade payables and accrued liabilities	10,805	15,097

Assets as per balance sheet:
Trade receivables and other	24,471	27,099
Cash and cash equivalents	51,570

14. ACQUISITION OF BUSINESS

Business combination.

In November 2020, the Company acquired 100% of the voting shares of JMH Gallows Pound Technologies Ltd. (”JMH”), a UK-based developer of hardware and software technology and the owner of the UltimateGameTech brand, for a sum of GBP 1 million ($1.4 million). As a result of this acquisition, the Company is expecting to strengthen its intellectual property and product offerings in the Gaming and Enthusiast market. The combination of JMH technology with Asetek’s brand and marketing resources is also expected to provide development synergies and key competitive advantages in the marketplace. The Company expects that the acquisition will enable accelerated growth in Asetek’s Gaming and Enthusiast revenue as well as provide additional breadth to the Company’s product lines.

Fair value measurement.

Material net assets acquired for which significant estimates have been applied in the fair value assessment have been recognized using the following valuation techniques:

	2020	2019
Goodwill	605	-
Capitalized development costs	2,356	1,920
Other assets	256	-
TOTAL INTANGIBLE ASSETS	3,217	1,920

Consideration, transaction costs, earnings impact.

The acquisition of JMH was for cash consideration, paid in three installments over one year. In closing this transaction, the Company incurred $40,000 of transaction costs which are included in operating expense in 2020. If the acquisition had occurred on January 1, 2020, the Group's pro forma consolidated revenue and operating income would have been $72.8 million and $10.7 million, respectively.

Fair value of acquired assets and recognition of goodwill.

The acquisition is accounted for according to IFRS 3 Business Combinations. The fair value of the assets acquired is allocated as follows:

	Fair value at date of acquisition
Net assets acquired	711
Fair value of consideration transferred	9,529
Goodwill recognized	(1,316)

Goodwill recognized pertains to the expected synergies associated with combining the Asetek brand and marketing resources with the acquired technologies.The goodwill is not deductible for tax purposes. Goodwill is not amortized but reviewed for impairment once a year and also if events or changes in circumstances indicate the carrying value may be impaired. If impairment is established, goodwill is written down to its lower recoverable amount.

Customer contracts.

Customer contracts have been measured using a discounted cash flow model in which the present value of estimated future cash flows is computed for JMH’s largest contracts. The principal input drivers of the valuation model used are estimated future retention rate, net contribution margin and discount rate. These inputs have been estimated based on management’s professional judgment from analysis of the contracts acquired. The value of the customer contracts acquired is being amortized over 24 months.

Capitalized development costs.

The Group routinely incurs costs directly attributable to the design and testing of new or improved products to be held for sale. These costs are capitalized as intangible assets and amortized over the estimated useful lives of the products, typically three to forty-eight months.

The following table presents a summary of these development projects.

Impairment tests are performed annually on developed assets and assets under construction. Impairment tests are also performed on completed assets whenever there are indications of a need for write-offs and for assets still in development regardless of whether there have been indications for write downs. If the value of expected future free cash flow of the specific development project is lower than the carrying value, the asset is written down to the lower value. The booked value includes capitalized salary and related expenses for the cash flow producing project. Expected future free cash flow is based on budgets and anticipations prepared by management. The main parameters are the development in revenue, EBIT and working capital. Impairment losses represent principally assets which are no longer associated with a future income stream.

Developed technology.

Developed technology is valued based on management’s best estimate of the costs that would have been incurred if Asetek were to internally develop the technologies that were acquired. Significant inputs to these valuations were approximate labor hours and associated costs as estimated by Asetek’s product development professionals.The value of the acquired technology is recorded as capitalized development costs. Refer to Notes 15 and 2.5 regarding the Company’s accounting for capitalized development costs.

	COST:	ACCUMULATED AMORTIZATION AND IMPAIRMENT LOSSES:
	(USD 000’s)	(USD 000’s)
	2020	2019
Balance at January 1	9,529	8,424
Additions	2,015	1,441
Deletions - completion of useful life	(1,316)	(765)
Impairment loss	(46)	(436)
BALANCE AT DECEMBER 31	9,529	10,343

Net assets acquired

	2020	2019
Capitalized development costs	256	-
Customer contracts	444	-
Developed technology	11	-
Other, net	200	-
Net assets acquired	911	-

15. INTANGIBLE ASSETS

Refer to Note 14. for information regarding intangible assets acquired associated with business combinations.# FINANCIAL STATEMENTS - NOTES

16. PROPERTY AND EQUIPMENT

The following table presents total property and equipment, including Right-of-use assets presented in Note 21. Also refer to Note 2.16 regarding lease accounting policy.

(USD 000’s)	COST: Machinery	Properties	Leasehold improvements	Other fixtures, fittings, tools equipment	Total
Balance at January 1, 2019	23,166	13,235	1,328	893	38,622
Impact of accounting change	(23)	(48)	-	-	(71)
Additions	23,143	13,187	1,386	421	38,137
Disposals	(46)	(41)	(106)	(72)	(265)
Exchange rate difference	(29)	(50)	(62)	(59)	(200)
BALANCE AT DECEMBER 31, 2019	46,211	26,273	1,215	1,183	74,882

Balance at January 1, 2020	46,211	26,273	1,215	1,183	74,882
Additions	5,543	5,543	892	739	12,717
Disposals	(244)	(59)	(50)	(183)	(536)
Exchange rate difference	1,215	1,091	78	46	2,430
BALANCE AT DECEMBER 31, 2020	52,725	32,848	1,135	1,785	87,493

	ACCCUMULATED DEPRECIATIONS:
Balance at January 1, 2019	(1,363)	(2,261)	(34)	(3,204)	(6,862)
Depreciations for the year	(1,008)	(1,935)	(46)	(4,587)	(7,576)
Disposals	36	34	-	82	152
Exchange rate differences	46	(12)	-	90	124
BALANCE AT DECEMBER 31, 2019	(2,289)	(4,174)	(80)	(7,619)	(14,162)

Balance at January 1, 2020	(2,289)	(4,174)	(80)	(7,619)	(14,162)
Depreciations for the year	(1,421)	(1,421)	(59)	(527)	(3,428)
Disposals	23	2	2	61	88
Exchange rate differences	(152)	(556)	(66)	(634)	(1,408)
BALANCE AT DECEMBER 31, 2020	(3,839)	(6,149)	(203)	(8,619)	(18,810)

CARRYING AMOUNT AT DECEMBER 31, 2019	43,922	22,099	1,135	(6,436)	60,720
CARRYING AMOUNT AT DECEMBER 31, 2020	48,886	26,699	932	(6,834)	69,683

17. TRADE RECEIVABLES AND OTHER

Trade receivables are non-interest bearing and are generally on payment terms of Net 30 days.

The trade receivables of Asetek Danmark A/S carry a general lien of 6 million Danish krone ($ 1.0 million), representing collateral on Sydbank’s engagement with the Company. The carrying amount of trade receivables is approximately equal to fair value due to the short term to maturity. Regarding credit risks, refer to Note 3.

A summary of the activity in the provision for uncollectible accounts is as follows:

(USD 000’s)	2020	2019
Balance at January 1	(48)	(23)
Additions	(48)	(23)
Reversals	64	48
Disposals	(23)	(48)
Exchange rate differences	64	48
BALANCE AT DECEMBER 31	(23)	(48)

(USD 000’s)	TOTAL TRADE RECEIVABLES AND OTHER
COST:
Gross trade receivables	25,971
Less: provision for uncollectible accounts	(23)
NET TRADE RECEIVABLES	25,948
Other receivables and assets	1,137
TOTAL TRADE RECEIVABLES AND OTHER	27,085

The aging of trade receivables as of the reporting date is as follows:

(USD 000’s)	December 31, 2020	December 31, 2019
Not yet due	19,915	23,166
1 to 30 days	2,450	13,235
31 to 60 days	723	1,328
Over 60 days	78	893
Total	23,166	38,622

Credit Loss Provision Matrix:

(USD 000’s)	Gross carrying amount	Expected credit loss rate	Lifetime expected credit loss
December 31, 2020
Not yet due	19,915	0.01%	(7)
1 to 30 days	2,450	0.10%	(2)
31 to 60 days	723	1.0%	(7)
Over 60 days	78	15.0%	(12)
Total	23,166		(28)

December 31, 2019
Not yet due	23,166	0.01%	(2)
1 to 30 days	13,235	0.10%	(13)
31 to 60 days	1,328	1.0%	(13)
Over 60 days	893	15.0%	(134)
Total	38,622		(162)

18. INVENTORIES

(USD 000's)	2020	2019
Raw materials and work-in-process	1,875	1,051
Finished goods	1,093	1,228
Total gross inventories	2,968	2,279
Less: provision for inventory reserves	(437)	(622)
TOTAL NET INVENTORIES	2,531	1,657

Inventories recognized as cost of sales during the period:

(USD 000’s)	2020	2019
Write-down of inventories to net realizable value	(38,556)	(31,329)

A summary of the activity in the provision for inventory reserves is as follows:

(USD 000’s)	2020	2019
Balance at January 1	(622)	(199)
Additions	(437)	(622)
Write-offs	622	199
BALANCE AT DECEMBER 31	(437)	(622)

19. SHARE CAPITAL

The Company does not cancel shares that are repurchased, but maintains them in treasury to fulfill option exercises. Refer to ‘Shareholder information’ in this report for information on the composition of Asetek shareholders.

(USD 000’s)	2020	2019
Common shares outstanding - January 1	1,051	1,228
Common shares repurchased, net	(836)	-
Options and warrants exercised and shares issued	734	64
COMMON SHARES OUTSTANDING - DECEMBER 31	949	1,292

In 2020, a total of 734 thousand options (2.8% of total shares, nominal value DKK 73.4 thousand) were exercised resulting in $2,381,000 received by the Company. In 2019, a total of 64 thousand options (0.2% of total shares, nominal value DKK6.4 thousand) were exercised resulting in $66,000 received by the Company.

During 2020, the Company repurchased 844 thousand of its common shares on the open market for a total cost of $6.4 million. The Company’s existing share buyback program authorizes the purchase of up to an additional 194 thousand shares through March 5, 2021. Shares purchased under the program are used to fulfill obliga- tions under Asetek’s employee stock option plan.

As of December 31, 2020, there are 26,433 thousand common shares outstanding with a nominal value of 0.10 DKK per share and 931 thousand shares (3.5% of total shares, nominal value DKK 93.1 thousand) held in treasury. Included in equity is a reserve for treasury shares of ap- proximately $6,373,000 at December 31, 2020.

20. NET DEBT

The following is a summary of the Company’s outstanding and net debt:

(USD 000’s)	2020	2019
DEBT INCLUDED IN CURRENT LIABILITIES
Line of credit	(536)	(746)
Leases - amounts due within one year	(989)	(772)
TOTAL DEBT	(1,525)	(1,518)
Less: cash and equivalents	27,099	22,970
NET DEBT	25,574	21,452

Asetek A/S Danmark line of credit. In September 2012, the Company entered into a revolving line of credit agreement with Sydbank. The line is collateralized by the trade receivables of Asetek Danmark A/S and is payable on demand. At December 31, 2020, the total line was 5.0 million Danish kroner, which equates to $825 thousand at December 31, 2020. Interest on the line is payable monthly at the Danish CIBOR 3 rate plus 2.25 percentage points, which in total was 2.03% at December 31, 2020. As of December 31, 2020, the Company had 3.25 million Danish kroner ($ 536 thousand) outstanding on the line. (4.98 million Danish kroner outstanding at December 31, 2019).

Reconciliation of liability for line of credit:

(USD 000’s)	Beginning balance	Net paid (drawn) on line of credit	Foreign exchange impact	ENDING BALANCE
2020	(746)	269	(22)	(536)
2019	(741)	17	(59)	(746)

21. LEASES

Asetek leases certain equipment, its principal office fa- cilities and certain motor vehicles. Contracts are typically for fixed periods of five years or more for office facilities, five years for equipment, and two years or less for motor vehicles. The leased asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.

Right-of-use Assets. The following table presents a summary of the Right-of-use assets under lease, which is a subset of the property and equipment presented in Note 16.

Reconciliation of lease liability:

(USD 000’s)	2020	2019
Beginning balance	3,546	879
Accounting change on January 1	-	3,238
Additions to lease liabilities	413	91
Payments of lease liabilities	(831)	(80)
Adjustments/reductions to leases	(734)	(95)
Foreign exchange impact	76	290
ENDING BALANCE	2,363	3,546

Future minimum lease payments are as follows as of the balance sheet date:

(USD 000’s)	2020	2019
Minimum lease payments as of December 31	3,732	76
Less: amount representing interest	(130)	(155)
TOTAL OBLIGATIONS UNDER FINANCE LEASES	3,593	(79)

Obligations under leases due within one year | 989 | 772 |
Obligations under leases due after one year | 2,604 | 2,774 |
TOTAL OBLIGATIONS UNDER FINANCE LEASES | 3,593 | 3,546 |

The Company’s office space in Aalborg, Denmark is under lease through July 2025. The Company’s office in San Jose, California is under lease through December 2023, with an available option to terminate without penalty beginning in January 2021. The Company's office space in Taipei, Taiwan is under lease until August 2025.

Total cash payments for leases was $927,000 and $868,000 in 2020 and 2019, respectively.

22. TRANSACTIONS WITH RELATED PARTIES

The Company’s CEO serves as Chairman of the Board for a vendor that supplies information technology services to the Company. In 2020, the Company purchased services totaling $0.7 million ($0.5 million in 2019) from this vendor. At Decem- ber 31, 2020 and 2019, the Company had outstanding paya- bles to this vendor of $30,000 and $45,000, respectively.

The Company provides sponsorship support for Valdemar Eriksen Racing A/S, an organization partially owned by the Company’s CEO. In the years ended December 31, 2020 and 2019, the Company paid $72,000 and $62,000,respectively to this organization.# FINANCIAL STATEMENTS - NOTES

23. SUBSIDIARIES

The following entities are included in the consolidated accounts:

Company	Domicile	Stake	Voting Share	Activity
Asetek A/S	Denmark	100%	100%	Trading
Asetek Holdings, Inc.	USA	100%	100%	Trading
Asetek USA, Inc.	USA	100%	100%	Trading
Xiamen Asetek Computer Industry Co., Ltd.	China	100%	100%	Trading
JMH Gallows Pound Technologies Limited	United Kingdom	100%	100%	Inactive

ASETEK A/S AALBORG, DENMARK
ASETEK HOLDINGS, INC DELAWARE, USA
ASETEK DANMARK A/S AALBORG , DENMARK
ASETEK USA, INC SAN JOSE, CA USA
JMH GALLOWS POUND TECHNOLOGIES, LTD UNITED KINGDOM
XIAMEN ASETEK COMPUTER INDUSTRY CO., LTD XIAMEN, CHINA

24. AUDIT FEES

The Group’s principal auditors perform audits for all of Asetek’s entities except for the Xiamen, China subsidiary, which is audited by a local firm. The Group’s principal auditors received a total fee of $168,000 and $299,000 in 2020 and 2019, respectively. Tax services provided by the Company’s principal auditors in 2019 included advisory regarding deferred taxes and transfer pricing.

The fee is distributed between these services:

	2020 (USD 000’s)	2019 (USD 000’s)
Statutory audit	92	99
Other assurance services	13	5
Tax services	39	168
Other consulting	5	27
TOTAL	168	299

Fees for services other than statutory audits provided by PricewaterhouseCoopers Statsautoriseret Revisions- partnerselskab to the group amount to $56,000 (2019: $147,000) and consist of accounting advice in relation to an assessment report regarding the purchase of assets from Granite Devices OY, tax advice in relation to US tax matters and other general accounting and tax matters.

25. BOARD OF DIRECTORS

The members of the Board of Directors have reported the information below as of the date of this filing. For the year 2020, the board members have been compensated as listed below.

Director name and other positions	Age and gender	Date appointed to end of current term	Independence status	Committee participation	2020 Cash Compensation	Asetek equity holdings Owned shares	Qualifications
JUKKA PERTOLA, CHAIRMAN - Tryg A/S and Tryg Forsikring A/S - Chairman of the Board - COWI Holding A/S - Deputy Chairman - GN Store Nord A/S, GN Hearing A/S, GN Audio A/S- Deputy chairman - Siemens Gamesa Renewable Energy A/S – Chairman of the Board - Monsenso A/S - Chairman of the Board - GomSpace Group AB and GomSpace A/S - Deputy Chairman	61, Male	April 10, 2019 to April 22, 2021	Independent	Compensation (chairman)	$55,500	22,500	Former executive at Siemens A/S for 25+ years; Technology, Finance, Corporate governance, Risk manage- ment. Extensive board experience with multiple Chairman roles for 10+ years.
CHRIS CHRISTOPHER, VICE CHAIRMAN - Rocky Mountain Innosphere - Board member - CloudGen - Board member	77, Male	June 19, 2012 to April 22, 2021	Independent	Audit	$40,400	77,422	Former Senior VP, Hewlett Packard; 40+ years of leadership, technology, product development, supply chain; former leader of server and hardware business at HP.
ERIK DAMSGAARD - OJ group of companies - Managing director - Masentia group of companies - Chairman of the board - Tentoma A/S - Member of the board - ED Management Holding ApS - Owner - CRD Invest ApS - Managing director - TRD Invest ApS - Managing director	56, Male	April 10, 2019 to April 22, 2021	Independent	Audit	$40,400	15,660	20+ years of senior positions in electronics & electrical manu- facturing, business development.
JØRGEN SMIDT - Heartcore Capital - Venture Partner - InRiver - Chairman of the Board - Onomondo - Chairman of the Board - Freespee - Chairman of the Board - FlatFrog AB - Board member - Confirmit A/S - Chairman of the Board	64, Male	June 19, 2012 to April 22, 2021	Independent	Compensation	$40,400	16,600	Former VP at Nokia; 25+ years of senior management, business development, product management, operations. Partner, Sunstone Capital.
MARIA HJORTH - Fondsmæglerselskabet Maj Invest A/S - Board member - Maj Invest Equity A/S - Board member - Maj Invest Holding A/S - Board member - Trifork Holding AG - Board member	48, Female	January 14, 2019 to April 22, 2021	Independent	Audit (chairman)	$40,400	6,357	Former CEO Mercer Denmark, 20+ years in finance covering business development, M&A, investor relations.

In January 2019, Asetek filed a patent infringement lawsuit against CoolIT in the Northern District of California seeking judgment that CoolIT infringes Asetek’s U.S. Patent Nos. 8,240,362; 8,245,764; 9,733,681; 10,078,354; and 10,078,355. CoolIT filed counterclaims asserting infringement of four CoolIT patents, which Asetek denies. On September 17, 2020, Asetek filed a related patent infringement lawsuit against Corsair in the Northern District of California seeking judgment that Corsair infringes Asetek U.S. Patent Nos. 10,078,354; 10,078,355; 10,613,601; and 10,599,196. The court consolidated the two cases and set a trial date for February 2022. Asetek also filed review petitions in the U.S. Patent and Trade- mark Office (USPTO) to challenge the validity of two of the CoolIT patents asserted in the above litigation, and CoolIT filed review petitions in the USPTO to challenge the validity of three of the five Asetek patents asserted in the litigation. The USPTO is expected to decide those petitions in 2021.

In April 2016, Asetek initiated patent infringement pro- ceedings against Cooler Master and Coolergiant before the District Court The Hague, pertaining to commerce in The Netherlands. Following two appeal stages, the Dutch Supreme Court has now confirmed the invalidation of the Dutch part of Asetek’s patent in final instance. As a result thereof, Asetek’s claims against Cooler Master remain dismissed, and the claims against Coolergiant will be dismissed by the District Court The Hague.

In 2017, Coolergiant GmbH filed suit against Asetek Danmark A/S in Mannheim District Court requesting declaration of non-infringement in Germany of an Asetek patent. The Company disputed the allegations and filed counterclaim motions. The German Patent Court revoked the German part of Asetek’s patent in February 2020. In September 2020, Asetek initiated its appeal of the decision to the German Supreme Court. The infringement and enforcement proceedings have been stayed until a final decision on the validity of the patent is rendered by the Supreme Court, which is ex- pected by the end of 2022.

26. POST BALANCE SHEET EVENTS

The Company has evaluated the period after December 31, 2020 up through the date of the Management State- ment and determined that there were no transactions that required recognition in the Company’s financial statements, except for the following:

On January 1, 2021, the Company announced an agree- ment to acquire intellectual property from Finland-based Granite Devices, Inc. to support the continued develop- ment of the Company's Gaming and Enthusiast offering. The total consideration paid is EUR 6.8 million (approxi- mately $8.3 million), of which EUR 3.4 million was paid in newly issued common shares of Asetek. The Company's offering of 348,003 shares was completed on January 4, 2021. The accounting for this business combination in 2021 is not yet complete as of the date of this filing.

27. CONTINGENT LIABILITIES

Legal proceedings. In the ordinary course of conducting our business, the Company is involved in various intellec- tual property proceedings, including those in which it is a plaintiff that are complex in nature and have outcomes that are difficult to predict. Asetek records accruals for such contingencies to the extent that it is probable that a liability will be incurred and the amount of the related loss can be reasonably estimated. The Company’s assessment of each matter may change based on future unexpected events. An unexpected adverse judgment in any pending litigation could cause a material impact on the Group’s business operations, intellectual property, results of oper- ations or financial position. There are no material updates to matters previously reported on the Asetek 2019 Annual Report, except:# LIQUID COOLING DONE RIGHT 56

ASETEK A/S - ANNUAL REPORT 2019 56

Sales Director Sophie Wu, Technology Evangelist Shawn Sanders, Logistics Supervisor Janice Cheng 57

ANNUAL REPORT 2020, PARENT COMPANY

For year ended December 31, 2020 Asetek A/S CVR-number: 3488 0522

LIQUID COOLING DONE RIGHT 58

FINANCIAL STATEMENTS - PROFIT & LOSS

ASETEK A/S COMPREHENSIVE INCOME STATEMENT, PARENT COMPANY

For the years ended December 31, 2020 and 2019 (USD 000’s)

	Note	2020	2019
Service fees	13	2,778	2,899
TOTAL REVENUE		2,778	2,899
Research and development	3, 4, 5	(184)	(232)
Selling, general and administrative	3, 4, 5	(3,011)	(3,195)
TOTAL OPERATING EXPENSES		(3,092)	(3,323)
OPERATING INCOME (LOSS)		(314)	(424)
Foreign exchange (loss)/gain		417	20
Finance income	6	60	6
Finance costs	6	(22)	(13)
TOTAL FINANCIAL INCOME		409	463
INCOME BEFORE TAX		95	39
Income tax	9	(16)	(77)
OPERATING INCOME (LOSS)		198	(93)
Other comprehensive income items that may be reclassified to profit or loss in subsequent periods:
Foreign currency translation adjustments		-	-
TOTAL COMPREHENSIVE INCOME (LOSS)		198	(93)

All operations are continuing.

LIQUID COOLING DONE RIGHT

FINANCIAL STATEMENTS - BALANCE SHEET 59

ASETEK A/S BALANCE SHEET, PARENT COMPANY

As of December 31, 2020 and 2019 (USD 000’s)

	Note	2020	2019
ASSETS
NON CURRENT ASSETS
Investments in subsidiaries	10	20,100	20,100
Property and equipment	7	197	143
Receivables from subsidiaries	11	115	105
Deferred income tax assets	11	155	3
TOTAL NON-CURRENT ASSETS		20,567	20,351
CURRENT ASSETS
Other assets		266	14,629
Cash and cash equivalents	12	11,912	14,651
TOTAL CURRENT ASSETS		12,178	14,651
TOTAL ASSETS		32,745	35,001
EQUITY AND LIABILITIES
EQUITY
Share capital	12	433	423
Retained earnings		37,145	33,654
Translation and other reserves		(6,373)	(4)
TOTAL EQUITY		31,204	34,073
NON-CURRENT LIABILITIES
Payables to subsidiaries	11	430	324
Long-term debt	8	-	10
TOTAL NON-CURRENT LIABILITIES		430	334
CURRENT LIABILITIES
Short-term debt	8	104	296
Accrued liabilities		613	180
Accrued compensation and employee benefits		78	49
Trade payables	9	287	99
TOTAL CURRENT LIABILITIES		1,111	594
TOTAL LIABILITIES		1,541	928
TOTAL EQUITY AND LIABILITIES		32,745	35,001

LIQUID COOLING DONE RIGHT 60

FINANCIAL STATEMENTS - EQUITY

ASETEK A/S STATEMENT OF CHANGES IN EQUITY, PARENT COMPANY

	Share capital	Translation reserves	Treasury share reserves	Retained earnings	Total EQUITY
(USD 000’s)
AT DECEMBER 31, 2018	422	-	(4)	32,626	33,044
Total comprehensive income for 2019
Loss for the year	-	-	-	(93)	(93)
TOTAL COMPREHENSIVE INCOME FOR 2019	-	-	-	(93)	(93)
Transactions with owners in 2019
Shares issued	1	-	-	1,056	1,056
Share based payment expense	-	-	-	65	66
TRANSACTIONS WITH OWNERS IN 2019	1	-	-	1,121	1,122
EQUITY AT DECEMBER 31, 2019	423	-	(4)	33,654	34,073
Total comprehensive income for 2020
Income for the year	-	-	-	198	198
TOTAL COMPREHENSIVE INCOME FOR 2020	-	-	-	198	198
Transactions with owners in 2020
Shares issued	10	-	-	2,376	2,386
Share repurchase	-	-	-	(6,369)	(6,369)
Share based payment expense	-	-	-	918	918
TRANSACTIONS WITH OWNERS IN 2020	10	-	-	(3,075)	3,294
EQUITY AT DECEMBER 31, 2020	433	-	(4)	37,145	31,204

LIQUID COOLING DONE RIGHT 61

FINANCIAL STATEMENTS - CASH FLOWS

ASETEK A/S STATEMENT OF CASH FLOWS, PARENT COMPANY

For the years ended December 31, 2020 and 2019 (USD 000’s)

	Note	2020	2019
CASH FLOWS FROM OPERATING ACTIVITIES
Income (loss) for the year		198	(93)
Depreciation and amortization	7	4	9
Share based payments expense	918	1,056
Income tax expense (income)	9	(152)	(77)
Changes in other assets	8	(14,629)	490
Changes in trade payables and accrued liabilities	9	(245)	1,260
NET CASH PROVIDED BY OPERATING ACTIVITIES		52	2,302
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment	7	(386)	(51)
Net receipts from (payments to) subsidiaries	11	692	(31)
NET CASH PROVIDED (USED) IN INVESTING ACTIVITIES		306	(82)
CASH FLOWS FROM FINANCING ACTIVITIES
Lease payments on right-of-use assets	11	(59)	(15)
Repurchase of common shares	12	(6,369)	-
Proceeds from issuance of share capital	12	2,386	1,122
NET CASH PROVIDED BY FINANCING ACTIVITIES		(4,042)	1,107
Effect of exchange rate changes on cash and cash equivalents		(15)	154
NET CHANGES IN CASH AND CASH EQUIVALENTS		(3,743)	3,381
Cash and cash equivalents at beginning of period		14,629	11,586
CASH AND CASH EQUIVALENTS AT END OF PERIOD		11,912	14,629
SUPPLEMENTAL DISCLOSURE - NON-CASH ITEMS:
Right-of-use assets capitalized under leases	49	-	(2,717)

LIQUID COOLING DONE RIGHT 62

FINANCIAL STATEMENTS - NOTES

Remuneration of the Group Board of Directors is specified in Note 6 to the Consolidated Financial Statements. The Company’s share-based incentive pay program is described in Note 7 of the Consolidated Financial Statements.

3. TOTAL OPERATING EXPENSES

Operating expenses consisted of the following for the year ended December 31,

	(USD 000’s)
	2020	2019
Personnel expenses (Note 4)	2,576	2,594
Legal, consultants and auditor	307	471
Other expenses	313	258
TOTAL EXPENSES	3,195	3,323

7. PROPERTY AND EQUIPMENT

	(USD 000’s)
	2020	2019
Cost:
Balance at January 1	2,576	2,594
Impact of accounting change	190	-
Additions under leases	-	114
Other additions	25	51
Disposals	(139)	(236)
BALANCE AT DECEMBER 31	2,652	2,523
Accumulated depreciation:
Balance at January 1	(2,392)	(2,362)
Disposals	139	236
Depreciation for the year	(52)	(39)
BALANCE AT DECEMBER 31	(2,305)	(2,165)
CARRYING AMOUNT AT DECEMBER 31	347	358

Property and equipment represents vehicles and land in use by the Company.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The 2020 financial statements for Asetek A/S have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by IASB and adopted by the EU.

The accounting policies for the Parent Company are the same as for the Asetek Group, as per Note 2 to the consolidated financial statements, with the exception of the items listed below.

On January 1, 2019, the Company adopted IFRS 16 Leases on a modified retrospective basis without restatement of the prior year. Refer to Note 21 in the Consolidated Financial Statements.

5. AUDIT FEES

Tax services provided by the Company’s principal auditors includes advisory regarding U.S. domicile, U.S. tax reform and transfer pricing.

	(USD 000’s)
	2020	2019
Statutory audit	184	232
Other assurance services	13	5
Tax services	154	115
Other consulting	24	22
TOTAL	375	374

4. PERSONNEL EXPENSES

Total personnel costs for the year ended December 31,

	(USD 000’s)
	2020	2019
Salaries, pension and other	1,658	1,538
Share based payment	918	1,056
TOTAL PERSONNEL EXPENSES	2,576	2,594

Total personnel costs are specified as follows:

	(USD 000’s)
	2020	2019
Research and development	184	232
Selling, general and administrative	2,392	2,362
TOTAL PERSONNEL EXPENSES	2,576	2,594

The average number of employees in the Parent company is two for both years presented. The figures listed above include a portion of the executive management’s cash compensation based on an estimate of the actual resources allocated to the management of the parent company. The figures include incentive-based compensation in the form of share options and warrants granted to employees in the Asetek Group. Refer to Notes 6 and 7 in the Consolidated Financial Statements for information regarding incentive compensation programs and management remuneration.

6. FINANCIAL INCOME AND COST

	(USD 000’s)
	2020	2019
FOREIGN CURRENCY EXCHANGE (LOSS) GAIN	425	20
Interest income on loans to subsidiaries	24	36
Interest from bank accounts	36	-
TOTAL FINANCE INCOME	60	36
Interest on leases	(4)	(4)
Other finance expense	(18)	(11)
TOTAL FINANCE COST	(22)	(15)

2.1. Dividends on investments in subsidiaries, joint ventures and associates.

Dividends on investments in subsidiaries, joint ventures and associates are recognized as income in the income statement of the Parent Company in the financial year in which the dividend is declared.

2.2. Investments in subsidiaries, joint ventures and associates.

Investments in subsidiaries, joint ventures and associates are measured at the lower of cost or the recoverable amount. An impairment test on the investment in subsidiaries is performed if the carrying amount of the subsidiaries’ net assets is below the carrying value of the Parent Company’s investments in the consolidated financial statements.

As of December 31, 2020 and 2019, carrying value of vehicles under right-of-use leases totalled $132,000 and $100,000, respectively, and their associated leases are for terms of 12 months.

LIQUID COOLING DONE RIGHT 63

FINANCIAL STATEMENTS - NOTES

8. LEASES

Refer to Note 19 to the Consolidated Financial Statements.

On January 1, 2019, the Company adopted IFRS 16 Leases on a modified retrospective basis without restatement of the prior year. Refer to Note 21 in the Consolidated Financial Statements.

9. INCOME TAX

At December 31, 2020 and 2019, the tax benefit (provision) for Asetek A/S differed from the statutory tax rate as a result of timing differences associated with share compensation expenses that are treated differently for tax purposes.

10. INVESTMENT IN SUBSIDIARIES

	(USD 000’s)
	2020	2019
Investment in Asetek Holdings, Inc.
Balance at December 31, 2019	20,100
Additions	-	13

12. EQUITY

13. TRANSACTIONS WITH RELATED PARTIES

Asetek A/S charges its subsidiaries a management service fee. Reference Notes 6 & 11 regarding transactions with subsidiaries. With regard to transactions with related parties that are not subsidiaries, refer to Note 22 to the Consolidated Financial Statements.## 11. NET RECEIVABLES FROM (PAYABLES TO) SUBSIDIARIES

(USD 000’s)	2020	2019
Asetek Danmark A/S	(158)	(266)
Asetek USA, Inc.	(273)	(59)
Asetek Xiamen	24	14
Asetek Holdings, Inc.	92	92
Net receivables from (payables to) subsidiaries	(315)	(219)

Average effective interest rate 5.5% 7.2%

Refer to Note 27 to the Consolidated Financial Statements. The fair value of receivables and payables corresponds in all material respects to the carrying amount. As of December 31, 2020 and 2019, there is no credit loss provision deemed necessary for receivables from subsidiaries.

14. EVENTS AFTER THE REPORTING PERIOD

Refer to Note 26 to the Consolidated Financial Statements.

15. CONTINGENT LIABILITIES

The Danish group enterprises are jointly and severally liable for tax on group income subject to joint taxation, as well as for Danish withholding taxes by way of dividend tax, royalty tax, tax on unearned income and any subsequent adjustments to these. Asetek A/S has executed a guarantee to its Group’s principal bank, Sydbank, for all outstanding matters with its wholly owned subsidiary, Asetek Danmark A/S.

Refer to note 15 in the Consolidated Financial Statements.

INCOME (LOSS) BEFORE TAX

	2020	2019
Tax calculated at domestic rates applicable to profits/losses in respective countries	88	(10)
The effect of timing differences between book and tax	162	(80)
Tax (expense) benefit	152	(77)

Asetek A/S has deferred tax assets at December 31, 2020 and 2019 of $155,000 and $3,000, respectively, which represent timing differences between book and tax associated with the recognition of share based compensation expense. In accordance with IAS 12, the Company recognizes deferred tax assets arising from unused tax losses or tax credits only to the extent that the entity has sufficient taxable temporary differences or there is convincing other evidence that sufficient taxable profit will be available against which the unused tax losses or unused tax credits can be utilized by the Company. The estimated tax benefit is calculated considering historical levels of income, expectations and risks associated with estimates of future taxable income. The calculation utilizes the statutory tax rates that are expected to apply to taxable income for the years in which the asset is expected to be realized.

MINIMUM LEASE PAYMENTS

	2020	2019
Minimum lease payments as of December 31	91	76
Less: amount representing interest	(16)	(10)
Total obligations under leases	75	66

Total lease obligations due within one year were $104,000 and $78,000 at December 31, 2020 and 2019, respectively.

Asset residual value at end of lease
Balance at December 31, 2020 20,100
Carrying amount at December 31, 2019 20,100
Carrying amount at December 31, 2020 (USD 000’s) 20,100

Asetek A/S acquired 100% of Asetek Holdings, Inc. through the exchange of shares in February 2013. At the time of acquisition, Asetek Holdings, Inc. had negative net equity, resulting in the initial investment to be valued at zero. Asetek Holdings, Inc. represents Asetek A/S’s only direct investment in subsidiaries.

LIQUID COOLING DONE RIGHT
64

MANAGEMENT STATEMENT
65

MANAGEMENT STATEMENT

EXECUTIVE BOARD:
The Executive Board and the Board of Directors have today considered and adopted the Annual Report of Asetek A/S for the financial year January 1 to December 31, 2020. The annual report is prepared in accordance with International Financial Reporting Standards as adopted by the EU and additional Danish disclosure requirements for listed companies.

André Sloth Eriksen
Chief Executive Officer

Peter Dam Madsen
Chief Financial Officer

In our opinion, the Consolidated Financial Statements and Parent Company Financial Statements give a true and fair view of the financial position at December 31, 2020 of the Group and the Parent company and of the results of the Group and Parent company operations and cash flows for 2020.

BOARD OF DIRECTORS:
In our opinion, Management’s Report includes a true and fair account of the development in the operations and financial circumstances of the Group and the Parent company as well as a description of the most significant risks and elements of uncertainty facing the Group and the Parent company.

Jukka Pertola, Chairman
Chris J. Christopher, Vice Chairman

In our opinion, the annual report of Asetek A/S for the financial year 1 January to 31 December 2020 with the file name asetek-2020-12-31.zip is prepared, in all material respects, in compliance with the ESEF Regulation.

Maria Hjorth
Jørgen Smidt

We recommend that the Annual Report be adopted at the Annual General Meeting.

Aalborg, Denmark
February 23, 2021

Erik Damsgaard

LIQUID COOLING DONE RIGHT
66

INDEPENDENT AUDITOR’S REPORT

To the shareholders of Asetek A/S

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS

OUR OPINION

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

In our opinion, the Consolidated Financial Statements and the Parent Company Financial Statements give a true and fair view of the Group’s and the Parent Company’s financial position at 31 December 2020 and of the results of the Group’s and the Parent Company’s operations and cash flows for the financial year 1 January to 31 December 2020 in accordance with International Financial Reporting Standards as adopted by the EU and further requirements in the Danish Financial Statements Act.

Our opinion is consistent with our Auditor’s Long-form Report to the Audit Committee and the Board of Directors.

To the best of our knowledge and belief, prohibited non-audit services referred to in Article 5(1) of Regulation (EU) No 537/2014 were not provided.

WHAT WE HAVE AUDITED

The Consolidated Financial Statements and Parent Company Financial Statements of Asetek A/S for the financial year 1 January to 31 December 2020 comprise statement of comprehensive income, balance sheet, statement of changes in equity, cash flow statement and notes, including summary of significant accounting policies for the Group as well as for the Parent Company. Collectively referred to as the “Financial Statements”.

BASIS FOR OPINION

We conducted our audit in accordance with International Standards on Auditing (ISAs) and the additional requirements applicable in Denmark. Our responsibilities under those standards and requirements are further described in the Auditor’s responsibilities for the audit of the Financial Statements section of our report.

We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) and the additional requirements applicable in Denmark. We have also fulfilled our other ethical responsibilities in accordance with the IESBA Code.

KEY AUDIT MATTERS

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Financial Statements for 2020. These matters were addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Capitalization of development costs

The Group capitalizes development costs when certain criteria according to IFRS are met. The criteria for recognition and measurement of development costs is subject to Management’s judgment and assumptions, which is uncertain by nature. Completed development projects are assessed quarterly for impairment indications. For in-progress development projects impairment tests are performed quarterly. The impairment tests are based on strategy plan approved by Management and value-in-use calculations based on expected future cash flows.

We assessed relevant internal controls and performed substantive audit procedures to verify capitalized amounts. Our work was based on our understanding of the business cases and key assumptions applied. We challenged whether the intent to finalize the projects remain and whether the projects are expected to generate future economic benefits exceeding the carrying values.

We focused on this area because the criteria for recognition and measurement of development projects are subject to Management judgments and assumptions. How our audit addressed the key audit matter: We selected a sample of in-progress development projects and considered whether all criteria described in IFRS were met as basis for capitalization. Refer to note 11 in the Consolidated Financial Statements.

Valuation of deferred tax assets

The Group capitalizes deferred tax assets when certain criteria are met. The criteria for recognition and measurement is subject to Management’s judgment and assumptions regarding the future taxable income, which is uncertain by nature. The deferred tax assets relate to net operating losses in Denmark and the US.

We focused on this area due to the size of the deferred tax asset and the size of the total tax losses. Furthermore, there is judgment involved in assessing whether the criteria set out in the accounting standards (IAS 12) for recognizing deferred tax assets have been met, and estimates over the value of deferred tax assets are subjective and uncertain by nature.

APPOINTMENT

Following the admission of the shares of Asetek A/S for listing on Oslo Stock Exchange, we were first appointed auditors of Asetek A/S on 24 April 2014. We have been reappointed annually by shareholder resolution for a total period of uninterrupted engagement of 7 years including the financial year 2020.# LIQUID COOLING DONE RIGHT

INDEPENDENT AUDITOR’S REPORT

How our audit addressed the key audit matter

We assessed the management’s valuation of the deferred tax assets and reconciled this to the amounts recorded in the financial statements. responsibility is to read Management’s Review and, in doing so, consider whether Management’s Review is materially inconsistent with the Financial Statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless Management either intends to liquidate the Group or the Parent Company or to cease operations, or has no realistic alternative but to do so. detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrep- resentations, or the override of internal control. We challenged estimates made by management in relation to the deferred tax assets through the following audit procedures:

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are ap- propriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Parent Company’s internal control.
Moreover, we considered whether Management’s Review includes the disclosures required by the Danish Financial Statements Act.

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS

We received the Group’s budgets for the period 2021- 2025.
We evaluated and challenged the assumptions made by management by comparing budgets to realized figures and realized growth for 2020.
Further, we performed look back testing procedures to evaluate management budget procedures.

Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasona- ble assurance is a high level of assurance but is not a guaran- tee that an audit conducted in accordance with ISAs and the additional requirements applicable in Denmark will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements.

Based on the work we have performed, in our view, Man- agement’s Review is in accordance with the Consolidated Financial Statements and the Parent Company Financial Statements and has been prepared in accordance with the requirements of the Danish Financial Statements Act. We did not identify any material misstatement in Management’s Review.

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management.
Conclude on the appropriateness of Management’s use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncer- tainty exists related to events or conditions that may cast significant doubt on the Group’s and the Parent Compa- ny’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group or the Parent Company to cease to continue as a going concern.
We compared the budgets with the deferred tax asset recognized and challenged management on their plan for utilizing the tax losses.

MANAGEMENT’S RESPONSIBILITY FOR THE FINAN- CIAL STATEMENTS

We utilized our tax specialists in order to ensure compli- ance to tax rules in respect of determining the value of the deferred tax asset.

Management is responsible for the preparation of consol- idated financial statements and parent company financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the EU and further requirements in the Danish Financial Statements Act, and for such internal control as Manage- ment determines is necessary to enable the preparation of fi- nancial statements that are free from material misstatement, whether due to fraud or error.

As part of an audit in accordance with ISAs and the addi- tional requirements applicable in Denmark, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

STATEMENT ON MANAGEMENT’S REVIEW

Management is responsible for Management’s Review. Our opinion on the Financial Statements does not cover Management’s Review, and we do not express any form of assurance conclusion thereon.

Identify and assess the risks of material misstatement of the Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and ap- propriate to provide a basis for our opinion. The risk of not

In preparing the Financial Statements, Management is responsible for assessing the Group’s and the Parent In connection with our audit of the Financial Statements, our

LIQUID COOLING DONE RIGHT 68 INDEPENDENT AUDITOR’S REPORT

Ensuring consistency between iXBRL tagged data and the Consolidated Financial Statements presented in human-readable format; and
Evaluate the overall presentation, structure, and content of the Financial Statements, including the disclosures, and whether the Financial Statements represent the underly- ing transactions and events in a manner that achieves fair presentation.

regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Evaluating the use of anchoring of extension elements to elements in the ESEF taxonomy; and
Reconciling the iXBRL tagged data with the audited
For such internal control as Management determines necessary to enable the preparation of an Annual Report that is compliant with the ESEF Regulation.

Consolidated Financial Statements. In our opinion, the Annual Report of Asetek A/S for the financial year 1 January to 31 December 2020 with the file name asetek-2020-12-31.zip is prepared, in all material respects, in compliance with the ESEF Regulation.

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the Consolidated Financial Statements.

We are responsible for the direction, supervision, and performance of the group audit. We remain solely responsible for our audit opinion.

REPORT ON COMPLIANCE WITH THE

Our responsibility is to obtain reasonable assurance on whether the Annual Report is prepared, in all material respects, in compliance with the ESEF Regulation based on the evidence we have obtained, and to issue a report that includes our opinion. The nature, timing and extent of proce- dures selected depend on the auditor’s judgment, including the assessment of the risks of material departures from the requirements set out in the ESEF Regulation, whether due to fraud or error. The procedures include:

ESEF REGULATION

As part of our audit of the Financial Statements we per- formed procedures to express an opinion on whether the Annual Report of Asetek A/S for the financial year 1 January to 31 December 2020 with the file name asetek-2020-12-31.zip is prepared, in all material respects, in compliance with the Commission Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regulation) which includes requirements related to the preparation of the Annual Report in XHTML format and iXBRL tagging of the Consolidated Financial Statements.

Aarhus, February 23, 2021

PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab

CVR no 3377 1231

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Testing whether the Annual Report is prepared in XHTML format;

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communi- cate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

Management is responsible for preparing an Annual Report that complies with the ESEF Regulation.# OTHER INFORMATION - STOCK EXCHANGE RELEASES

Issue Date	Subject	Issue Date	Subject
December 30, 2020	Transactions carried out under Share Buyback Program	August 12, 2020	Mandatory notification of trade: executive management exercises warrants and sells shares
December 22, 2020	Transactions carried out under Share Buyback Program	August 12, 2020	Share capital increase upon exercise of warrants
December 15, 2020	Transactions carried out under Share Buyback Program	August 12, 2020	Q2 2020: Gross margin increase and raised full-year expectations
August 10, 2020	Transactions carried out under Share Buyback Program	August 7, 2020	Transactions carried out under Share Buyback Program
August 3, 2020	Transactions carried out under Share Buyback Program	July 27, 2020	Asetek presents second quarter 2020 results on Wednesday, August 12
December 8, 2020	Transactions carried out under Share Buyback Program	August 12, 2020	Transactions carried out under Share Buyback Program
December 1, 2020	Transactions carried out under Share Buyback Program	August 12, 2020	Transactions carried out under Share Buyback Program
November 27, 2020	Share capital increase upon exercise of warrants	August 10, 2020	Update to full year 2020 guidance
November 24, 2020	Asetek receives order from existing global data center OEM partner	August 7, 2020	Transactions carried out under Share Buyback Program
November 24, 2020	Transactions carried out under Share Buyback Program	August 3, 2020	Transactions carried out under Share Buyback Program
November 17, 2020	Transactions carried out under Share Buyback Program	July 27, 2020	Asetek presents second quarter 2020 results on Wednesday, August 12
November 17, 2020	Asetek receives order from existing global data center OEM partner	August 12, 2020	Transactions carried out under Share Buyback Program
November 10, 2020	Transactions carried out under Share Buyback Program	August 12, 2020	Transactions carried out under Share Buyback Program
July 21, 2020	Transactions carried out under Share Buyback Program	August 10, 2020	Update to full year 2020 guidance
July 20, 2020	Transactions carried out under Share Buyback Program	August 7, 2020	Transactions carried out under Share Buyback Program
July 14, 2020	Asetek collaborates with HPE to deliver next-gen HPC server cooling solutions	August 3, 2020	Transactions carried out under Share Buyback Program
November 9, 2020	Transactions carried out under Share Buyback Program	July 27, 2020	Asetek presents second quarter 2020 results on Wednesday, August 12
November 3, 2020	Transactions carried out under Share Buyback Program	August 12, 2020	Transactions carried out under Share Buyback Program
November 3, 2020	Transactions carried out under Share Buyback Program	August 12, 2020	Transactions carried out under Share Buyback Program
October 29, 2020	Asetek receives order from existing global data center OEM partner	August 10, 2020	Update to full year 2020 guidance
October 27, 2020	Transactions carried out under Share Buyback Program	August 7, 2020	Transactions carried out under Share Buyback Program
October 22, 2020	Asetek receives order from existing global data center OEM partner	August 3, 2020	Transactions carried out under Share Buyback Program
October 22, 2020	Outcome of Extraordinary General Meeting	July 27, 2020	Asetek presents second quarter 2020 results on Wednesday, August 12
October 20, 2020	Transactions carried out under Share Buyback Program	August 12, 2020	Transactions carried out under Share Buyback Program
October 20, 2020	Transactions carried out under Share Buyback Program	August 12, 2020	Transactions carried out under Share Buyback Program
October 19, 2020	Share capital increase upon exercise of warrants	August 10, 2020	Update to full year 2020 guidance
October 19, 2020	Transactions carried out under Share Buyback Program	August 7, 2020	Transactions carried out under Share Buyback Program
October 7, 2020	Transactions carried out under Share Buyback Program	August 3, 2020	Transactions carried out under Share Buyback Program
October 7, 2020	Asetek receives order from existing global data center OEM partner	July 27, 2020	Asetek presents second quarter 2020 results on Wednesday, August 12
July 6, 2020	Transactions carried out under Share Buyback Program	August 12, 2020	Transactions carried out under Share Buyback Program
June 29, 2020	Asetek launches share buyback program to cover employee stock options	August 12, 2020	Transactions carried out under Share Buyback Program
June 22, 2020	Q3 2020: Record revenue and EBITDA on strong Gaming & Enthusiast demand	August 10, 2020	Update to full year 2020 guidance
June 15, 2020	Asetek receives order from existing global data center OEM partner	August 7, 2020	Transactions carried out under Share Buyback Program
June 8, 2020	Asetek presents third quarter 2020 results on Friday, October 23	August 3, 2020	Transactions carried out under Share Buyback Program
May 26, 2020	Financial calendar	July 27, 2020	Asetek presents second quarter 2020 results on Wednesday, August 12
May 25, 2020	Transactions carried out under Share Buyback Program	August 12, 2020	Transactions carried out under Share Buyback Program
May 18, 2020	Asetek receives repeat order from existing global data center OEM partner	August 12, 2020	Transactions carried out under Share Buyback Program
May 18, 2020	Asetek launches share buyback program to cover employee stock options	August 10, 2020	Update to full year 2020 guidance
May 14, 2020	Asetek receives order from server OEM partner	August 7, 2020	Transactions carried out under Share Buyback Program
May 6, 2020	Update to full year 2020 guidance	August 3, 2020	Transactions carried out under Share Buyback Program
October 29, 2020	Asetek receives order from existing global data center OEM partner	July 27, 2020	Asetek presents second quarter 2020 results on Wednesday, August 12
April 23, 2020	Disclosure of shareholding	August 12, 2020	Transactions carried out under Share Buyback Program
April 22, 2020	Transactions carried out under Share Buyback Program	August 12, 2020	Transactions carried out under Share Buyback Program
April 22, 2020	Share capital increase upon exercise of warrants	August 10, 2020	Update to full year 2020 guidance
April 21, 2020	Outcome of Annual General Meeting	August 7, 2020	Transactions carried out under Share Buyback Program
April 17, 2020	Q1 2020: Lower revenue and increased gross margin	August 3, 2020	Transactions carried out under Share Buyback Program
March 30, 2020	Asetek receives order for new HPC installation from existing global data center OEM partner	July 27, 2020	Asetek presents second quarter 2020 results on Wednesday, August 12
March 19, 2020	Asetek presents first quarter 2020 results on Wednesday, April 22	August 12, 2020	Transactions carried out under Share Buyback Program
March 18, 2020	Notice of Annual General Meeting	August 12, 2020	Transactions carried out under Share Buyback Program
March 11, 2020	April 22, 2020	August 10, 2020	Update to full year 2020 guidance
February 25, 2020	September 15, 2020	August 7, 2020	Transactions carried out under Share Buyback Program
February 19, 2020	Transactions carried out under Share Buyback Program	August 3, 2020	Transactions carried out under Share Buyback Program
February 11, 2020	September 9, 2020	July 27, 2020	Asetek presents second quarter 2020 results on Wednesday, August 12
February 10, 2020	Asetek receives order for new HPC installation from existing data center OEM partner	August 12, 2020	Transactions carried out under Share Buyback Program
January 30, 2020	September 8, 2020	August 12, 2020	Transactions carried out under Share Buyback Program
September 29, 2020	Transactions carried out under Share Buyback Program	August 10, 2020	Update to full year 2020 guidance
September 24, 2020	Transactions carried out under Share Buyback Program	August 7, 2020	Transactions carried out under Share Buyback Program
September 15, 2020	Share capital increase upon exercise of warrants	August 3, 2020	Transactions carried out under Share Buyback Program
September 15, 2020	Outcome of Annual General Meeting	July 27, 2020	Asetek presents second quarter 2020 results on Wednesday, August 12
September 9, 2020	Transactions carried out under Share Buyback Program	August 12, 2020	Transactions carried out under Share Buyback Program
September 8, 2020	Asetek receives order for new HPC installation from existing data center OEM partner	August 12, 2020	Transactions carried out under Share Buyback Program
August 31, 2020	Transactions carried out under Share Buyback Program	August 10, 2020	Update to full year 2020 guidance
August 25, 2020	Asetek receives order for new HPC installation from existing data center OEM partner	August 7, 2020	Transactions carried out under Share Buyback Program
August 25, 2020	Transactions carried out under Share Buyback Program	August 3, 2020	Transactions carried out under Share Buyback Program
August 24, 2020	Asetek receives order for new HPC installation from existing data center OEM partner	July 27, 2020	Asetek presents second quarter 2020 results on Wednesday, August 12
August 19, 2020	Share capital increase upon exercise of warrants	August 12, 2020	Transactions carried out under Share Buyback Program
August 17, 2020	Update to full year 2020 guidance	August 12, 2020	Transactions carried out under Share Buyback Program
August 17, 2020	Financial calendar	August 10, 2020	Update to full year 2020 guidance
August 14, 2020	Transactions carried out under Share Buyback Program	August 7, 2020	Transactions carried out under Share Buyback Program
August 12, 2020	Major shareholder announcements	August 3, 2020	Transactions carried out under Share Buyback Program
August 12, 2020	Asetek to supply liquid cooling solutions to global server OEM	July 27, 2020	Asetek presents second quarter 2020 results on Wednesday, August 12

OTHER INFORMATION - DEFINITIONS OF RATIOS AND METRICS

Asetek uses various metrics, financial and non-financial BUSINESS DRIVERS PROFIT & LOSS BALANCE SHEET ratios which provide shareholders with useful information about the Group’s financial position, performance and development.

Metric	Definition
Average selling price per unit	Gaming and Enthusiast revenue / Sealed loop units shipped
Gaming and Enthusiast revenue	Gross profit / Revenue
Gross margin	(Cash and cash equivalents + Trade receivables and other) / Total Current Liabilities
Quick ratio	Revenue / Number of employees
Revenue per employee	Operating income / Revenue
Operating margin	Total current assets / Total current liabilities
Current ratio	Income for the year / Invested capital
Return on Invested Capital (ROIC)	Trade receivables / (Revenue / 365 days)
Days sales outstanding	Interest-bearing debt / Total equity
Debt to equity	Refer to Note 12 of the Consolidated financial statements
Earnings per share, basic	Refer to Note 12 of the Consolidated financial statements
Earnings per share, diluted	Share price / NOK to USD exchange rate / Earnings per share, diluted
Share price to earnings	(Shares issued – Treasury shares) x (Share price in NOK / NOK to USD exchange rate)
Market capitalization	Operating income + amortization & depreciation + share-based compensation
Invested capital	Equity raised from sale of shares and conversion of debt + interest bearing debt
Inventory turns per year	Cost of sales / (beginning inventory + ending inventory / 2)
Days payable outstanding	Trade payables / (Cost of sales / 365 days)
Organic growth	(Revenue current year – Comparable revenue prior year) / Comparable revenue prior year

*Comparable revenue excludes changes in revenue attributable to foreign exchange rates and any acquisitions or divestments.

Stock Market

Metric	Definition
Earnings per share, basic	Refer to Note 12 of the Consolidated financial statements
Earnings per share, diluted	Refer to Note 12 of the Consolidated financial statements
Share price to earnings	Share price / NOK to USD exchange rate / Earnings per share, diluted
Market capitalization	(Shares issued – Treasury shares) x (Share price in NOK / NOK to USD exchange rate)

Asetek A/S
Assensvej 2
DK-9220 Aalborg East
Denmark

Phone: +45 9645 0047
Fax: +45 9645 0048
Web: www.asetek.com
Mail: [email protected]

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Asetek A/S — Annual Report (ESEF) 2020

ASETEK A/S - 2020 ANNUAL REPORT

ASETEK A/S - ANNUAL REPORT 2020

BOARD OF DIRECTORS

COMPENSATION COMMITTEE

NOMINATION COMMITTEE

AUDITOR

AUDIT COMMITTEE

EXECUTIVE MANAGEMENT

CONTACT INFORMATION

LIQUID COOLING DONE RIGHT

ASETEK A/S - ANNUAL REPORT 2020

MANAGEMENT REPORT

CONTENTS

FINANCIAL STATEMENTS

MESSAGE FROM THE CEO

NEW BUSINESS

MESSAGE FROM THE CEO

NEW BUSINESS

MANAGEMENT REPORT

OVERVIEW

The Year 2020 Outlined

Asetek at a glance

Five-year summary

Performance in 2020

Expectations for 2021

Corporate governance

Risk management

Corporate social responsibility

Shareholder information

ARTICLES

Gaming, Sustainability and Corona Accelerate a Positive Market Trend for Asetek

Corona or Not: 25% Growth in G&E Segment

Asetek Liquid Cooling will Make Substantial Contribution to EU’s Green Deal

Reliability and Quality as Good as in the Space Industry

CONSOLIDATED FINANCIAL STATEMENTS

PARENT COMPANY FINANCIAL STATEMENTS

MANAGEMENT STATEMENT

INDEPENDENT AUDITOR’S REPORTS

OTHER INFORMATION

Stock exchange releases

Definitions of ratios and metrics

MANAGEMENT REPORT

THE YEAR 2020 OUTLINED

ASETEK AT A GLANCE

FIVE-YEAR SUMMARY

GAMING, SUSTAINABILITY AND CORONA ACCELERATE A POSITIVE MARKET TREND FOR ASETEK

LIQUID COOLING DONE RIGHT

ASETEK A/S - ANNUAL REPORT 2019

LIQUID COOLING DONE RIGHT

MANAGEMENT REPORT - PERFORMANCE AND OUTLOOK

The average exchange rate of USD to DKK during 2020

BALANCE SHEET

STATEMENT OF CASH FLOWS

PERFORMANCE IN 2020

PROFIT AND LOSS

LIQUID COOLING DONE RIGHT

MANAGEMENT REPORT - PERFORMANCE AND OUTLOOK

LIQUIDITY AND FINANCING

DATA CENTER: CONSOLIDATED RESULTS: EXPECTATIONS FOR 2021

GAMING AND ENTHUSIAST

LIQUID COOLING DONE RIGHT

16

CORONA OR NOT: 25% GROWTH IN G&E SEGMENT

LIQUID COOLING DONE RIGHT

ASETEK A/S - ANNUAL REPORT 2019

17

LIQUID COOLING DONE RIGHT

18

LIQUID COOLING DONE RIGHT

MANAGEMENT REPORT - GOVERNANCE

19

Dialogue between the Company and its shareholders.

CORPORATE GOVERNANCE

Financial reporting.

The general meeting.

Notification of meetings and discussion of items.

Conflicts of interest.

Board of Directors meetings:

Asetek A/S Annual Report (ESEF) 2020