HEIQ PLC — Annual Report (ESEF) 2024

Oct 31, 2024

HeiQ PLC Annual Report and Accounts for the 18-months period ended June 30, 2024

Who we are

Headquartered in Switzerland, HeiQ is an IP creator and established global brand in materials and textile innovation, adding hygiene, comfort, protection and sustainability to the products we use every day. This is how we contribute to protecting our planet and improving the lives of billions of people.

Our purpose

To improve lives by innovating the materials in the products people use every day.

Our vision

“HeiQed” materials that improve the lives of billions.

Our mission

To pioneer differentiating materials through co-creation.

Our strategy

Our strategy to achieve sustainable growth and to materialize our ambitions is based on three pillars:

• People: To create a diverse, agile and entrepreneurial high- performance global team, driven by our purpose to improve lives by enabling a reduction of mankind’s footprint on the planet with disruptive technologies.
• Innovation: To commercialize a steady stream of sustainable, circular and high-performance ingredients and materials.
• Differentiation: To effectively communicate the added value of our innovations to our downstream customers, as well as their customers, by providing best-in-class ingredient branding.

Contents

Strategic report
Chair’s statement ... ... ... 1
Market overview ... ... 2
Business model ... ... 3
Value Creation ... ... 4
Chief Executive Officer’s review ... ... 5
Key performance indicators ... ... 7
Sustainability report (including TCFD disclosures)........................................................................................................................... .................... 8
Section 172 statement ... 14
Financial Review ... 17
Risk management ... 20
Principal risks and uncertainties ... 20
Non-financial information statement ... 23
Corporate Governance
The Board ... 24
Corporate governance statement ... 26
Audit committee report ... 29
Environmental, occupational, health and safety committee report ................................................................................................ 32
Nomination committee report ... 33
Remuneration Committee Report ...................................................................................................................................................................... 34
Annual report on Directors’ remuneration (audited) ........................................................................................................................................ 37
Directors’ report ... 41
Financial Statements
Independent auditor’s report to the members of HeiQ plc .............................................................................................................................. 44
Consolidated statement of profit and loss and other comprehensive income .............................................................................................. 51
Consolidated statement of financial position .................................................................................................................................................... 52
Consolidated statement of changes in equity ................................................................................................................................................... 53
Consolidated statement of cash flows ............................................................................................................................................................... 54
Notes to the Consolidated Financial Statements for the 18-month period ended June 30, 2024 .............................................................. 55
Company Statement of Financial Position (registered company number:09040064) ................................................................................. 96
Company Statement of Changes in Equity ........................................................................................................................................................ 97
Company statement of Cash Flows .................................................................................................................................................................... 98
Notes to the Company Financial Statements for the period ended June 30, 2024 ...................................................................................... 99
Company Information
Company information ... 105

HeiQ plc Annual Report 2023/24

Strategic Report

Chair’s statement

Re-position for growth

Over the reporting period, HeiQ has been challenged with, on one side the continued suppressed market conditions for our Textile & Flooring, and Antimicrobial businesses, while on the other side, the LifeSciences business and the three new ventures continue to deliver against our expectations. Considering the limited visibility of when the suppressed markets will recover, and the short term need to invest in the growth ventures, the Board has made two important decisions. First, it initiated a major restructuring project which will reduce costs by an additional 20% by the end of 2025. This project includes the merger of the Textile & Flooring and Antimicrobials into one business unit “Advanced Materials”, headcount reduction, and the optimization of our geographical presence. The impact of the project is essential for the future value creation of HeiQ for its investors as it allows the Company to focus on materializing on the significant growth potential of the LifeSciences business (HeiQ Synbio), as well as investing in the three venture businesses HeiQ AeoniQ, HeiQ Graphenex, and HeiQ Xpectra despite suppressed markets for today’s main commercial businesses. Second, the Board has decided to cancel the listing of HeiQ PLC at the London Stock Exchange effective November 19, 2024 for two main reasons: The cost burden associated with maintaining the Company’s listing is disproportionate to the benefits and secondly, each of our venture businesses is making great progress and will require capital over the next year to take the next, value creating steps. In particular HeiQ AeoniQ will require significant investments for the first commercial plant in Portugal in the near future. The Directors believe that de-listing and operating as a private company benefits fundraising at appropriate valuations for the ventures and enables their growth and value creation for the Company’s shareholders accordingly.

Outlook

For the merged business unit Advanced Materials, we expect markets to remain weak until at least the second half of 2025 and thus, we are consolidating the business capabilities into three main hubs (USA, Portugal, Thailand) in the course of 2025. The LifeSciences business unit is expected to grow significantly as industrial pro-/postbiotic solutions gain market acceptance in various applications.# HeiQ plc Annual Report 2023/24 Strategic Report

Market overview

As an Innovator, we create technology solutions in response to real world problems, megatrends and specific market needs from our brand clients. We anticipate future needs brought by global problems & megatrends and develop science-based solutions to address them swiftly. A number of global, long-term trends are having a major impact on the planet. These sustainability challenges are driving change in both manufacturing processes and product development in the markets in which we operate, giving us the opportunity to contribute and bring enhanced sustainability downstream.

Global Megatrends

Growing, urbanizing, and migrating global population

Technological advancements and economic prosperity have enabled improvements in medicine, sanitation, food production and living conditions, resulting in lower mortality rates and a rapidly growing global population. This growth has led to more people migrating to towns and cities in pursuit of increased quality of life, with cities and urban areas now home to over half of the world’s population. This influx places huge strain on infrastructure such as transportation, sewage, housing and utilities in a limited space. Population growth and urbanization result in increased pollution and hygiene needs, meaning a greater requirement for sustainable and more effective technologies to mitigate these risks. Increasing population densities also pose greater threats of disease while the excessive usage of disinfectants contributes to increasing antimicrobial resistance, these all put substantial emphasis on effective but sustainable surface and air hygiene technologies such as HeiQ Synbio TM.

Climate change and environmental degradation

The negative implications of earth’s rising temperatures, increased CO2 levels and biodiversity loss are profound. The scientific community has clearly stated the urgent need to keep global warming below a 1.5˚C increase to preserve stable living conditions. Despite this, emissions continue to rise, species become endangered, and deforestation continues. The detrimental effects of climate change include rising sea levels, extreme weather events and habitat loss, and will inevitably lead to resource scarcity and social and political unrest, leading to migrations. Often the poorest in society are most severely impacted by these environmental changes, meaning the developed world has a heightened responsibility to address its production and consumption habits and the wider implications of these for poorer communities. Microplastic pollution to our oceans is a major issue and there is an urgent need to mitigate our damage to the marine ecosystem, which is responsible for up to a quarter of this world’s annual CO2 absorption. According to the Ellen MacArthur Foundation* and the World Economic Forum, by 2050 there will be more plastics than fish in our oceans. And synthetic textiles are a key contributing industry already responsible for over 30% of all oceanic microplastics. A problem we aim to solve by substituting polluting Polyester with circular, promptly biodegradable HeiQ AeoniQ TM climate positive fibers.
* The New Plastics Economy, Ellen MacArthur Foundation, 2016

Scarcity of and global competition for resources

Humanity uses approximately 1.6 planets’ worth of resources to support its current activities and if drastic measures aren’t taken, this is set to increase to two planets’ worth by 2030. In short, we need to halve our current impact to ensure we are able to live within our planetary boundaries. We are already seeing interconnected problems arising from the resource demands of a growing population coupled with the impact of climate change on resource availability. These two unstoppable forces mean competition for limited resourcesaxis fierce, and management and mitigation are vital to maintain a fair and balanced society and to avoid conflict. Extending product lifecycle, manufacturing products using recycled materials or waste and that are recyclable at the end of their usable life will preserve the raw material value throughout its lifecycle. Focusing on sustainable solutions for production practices will support the preservation of natural capital. Political intervention and global collaboration are essential to ensuring sustainable development and the creation of closed-loop economies and fair access to natural resources. By using biobased and bio-derived raw materials in our textile technologies we enable functionality and a longer textile lifetime. Apparel functionalized with HeiQ Mint TM technology allows for less frequent washing thanks to an inbuilt life-long odor control.

Markets we operate in

As an innovator for novel materials and disruptive technologies, providing solutions to consumers as their demands change based on megatrends, there is scope for our products to be used across many markets. We continue to consolidate our strong position in Textiles & Flooring and to build up our Antimicrobials and LifeSciences (probiotics) footprint. New markets we will increasingly move into include, for instance, man-made cellulosic fibers (HeiQ AeoniQ TM ), and at an earlier stage, anode-free lithium metal batteries enabled by our disruptive porous graphene membrane current collector technology (HeiQ GrapheneX TM ).

The size of the markets we operate in are as follows:

Market Size*	Market Growth*CAGR	HeiQ Business Unit serving the market
Textile chemicals $28bn	4.6%	Business Unit Advanced Materials
Man-made fibers $135bn	3.5%	Venture Unit HeiQ AeoniQ TM
Paints & coatings $200bn	5.4%	Business Unit Advanced Materials
Antimicrobial plastics $37bn	10.1%	Business Unit Advanced Materials
Probiotics $53bn	6.8%	Business Unit LifeSciences
Hospital & household cleaners $55bn	5.2%	Business Unit LifeSciences

*Statista

Business model

Our purpose is to improve lives by innovating the materials people use every day. To achieve that, it is important for us to bring our innovations to multiple industries. Over our almost 20 years of history, we have grown organically as well as through strategic, capability-building acquisitions. All our acquisitions bring us either technological know-how to innovate for the segments we are already active in, extend our customer base or give us access to a new segment. Following five acquisitions in the most recent years, the HeiQ Group today organizes its activities in two Business Units and three Venture Units as well as an Innovation Service function serving customers across the board. HeiQ has a special push-and-pull business model, meaning we do not only try to push our product downstream to the next immediate user but also promote our innovations to their customers so as to create a “pull” force to receive nomination and increase the speed of consumer adoption for our technologies.

Business / Venture Unit (Status)	Aim	Key products / offering	Typical customers who directly purchase from us	Typical influencers for our customers’ decision-making (downstream customers of our customers)
Advanced Materials (Business Unit)	Provide innovative ingredients to make textiles & flooring more functional, durable and sustainable.	Specialty functional textile finishing	Fabric manufacturing mills in South- / South- east Asia, EMEA & Central America	Apparel and home textiles brands in Europe, Asia & North America
	Auxiliaries and process chemical that improve efficiency in the manufacturing process	Carpet & flooring manufacturing mills	Carpet and flooring brands
	Functionalize different hard surfaces in everyday products and our surroundings	Inorganic, organic and botanical antimicrobial technologies for plastics and coatings	Masterbatchers, compounders, and coatings manufacturers	Brands of bathroom and kitchen products, home appliances, and consumer paints
LifeSciences (Business Unit)	Offer biotech solutions to replace harmful substances in domestic, commercial and industrial usage, for a more balanced microbiome and environment	Synbiotic professional and household cleaning products	Cleaning products manufacturers, cleaning service providers	Stakeholders of care homes, medical facilities, schools and office buildings
	Synbiotic ingredients for cosmetics	Cosmetic product manufacturers	Cosmetic consumer brands
	Synbiotic cleaning agents for industrial water treatment and air conditioning	Water and HVAC service companies	Industrial manufacturers
	Ingredients and manufacturing solutions for medical devices	Medical device product manufacturers	Over- t he-counter retailers of medical devices
HeiQ AeoniQ (Venture Unit)	Scale-up cellulosic filament fibers from circular feedstock to replace oil-based Synthetic fibers	Filament fibers for textile apparel and footwear as well as technical textile e.g.	# HeiQ plc Annual Report 2023/24
## Strategic Report

Value Creation

Our two commercial business units generate value along three key activities:

Key activities

The HeiQ difference	Revenue generation	Value creation
Scientific research	20+% of our employees are highly skilled scientists working in research and development; we also leverage our extensive network of 30+ global academic partners through government grants	Our co-creation approach provides us with a steady stream of innovation ideas from different sectors, forming the basis of future commercialized products. For projects that include milestone payments or project financing from our customers, revenue is generated directly during the R&D process.
Partners and customers	Our brand partners and direct customers benefit from access to our differentiating technologies. Our performance-enhancing materials improve their products. We provide end-to-end support and all the services required to bring innovations to market.	Consumers Products featuring our technology offer tangible benefits for the end user, including innovative functionality, comfort, hygiene, protection and sustainability features.
Employees	Our employees have the chance to work and develop in a meritocratic and diverse environment, being challenged and supported to help the Company deliver on its purpose and make a difference for a better world.	Investors Our investors benefit from the high value growth potential of our business and our willingness to create disruptive innovation.
Specialty material manufacturing	Our strong IP profile and seven technology platforms give us a strong competitive advantage on all the ingredients and materials we manufacture and sell to various sectors. Our primary source of revenue is the sale of products we manufacture. Our second source of revenue is royalties on IP we license.	Suppliers We develop strong and trusted partnerships with our suppliers. Our growth and momentum will lead to increased spending on raw materials in innovative product applications
Consumer marketing & ingredient branding	As innovations are created in the laboratory and used by consumers, we have built competence in explaining the impact of our products to all downstream stakeholders, including consumers. Strong consumer marketing and ingredient branding allow HeiQ to generate visibility and potential revenues from royalty bearing licenses and exclusivity terms.	Society By helping many brands and consumers to reduce their impact on the environment, we are indirectly improving the lives of billions more. Through our engagement with university research partnerships, we play a role in fostering the education of new generations of scientists, engineers and entrepreneurs.

Chief Executive Officer’s review

Advancing innovation in curtailed markets

The beating heart of our innovation engine is to solve real world problems brought to us by our customers, with science. Over the past 18 months we were able to advance the technology readiness level of all our three disruptive venture platforms. With HeiQ AeoniQ, the climate positive cellulosic filament fibers from our Austrian pilot plant, we went to market with the capsule collection by Hugo Boss “The Change” and demonstrated the potential to replace 70 million tons of oil-based synthetic fibers. With HeiQ GrapheneX we secured a joint development agreement with a fortune 500 player in handheld mobile devices for our novel double energy density anode free lithium metal battery. With HeiQ Xpectra we secured a fortune 500 company to co-develop a transparent heat-reflective coating for simple, rapid and cost-effective building insulation. At the same time we signed a multi-year exclusive strategic partnership with a further fortune 500 company, Ecolab, for the distribution of our HeiQ Synbio probiotic cleaner line for hospitals and industrial customers (BU LifeSciences). A publication in the Lancet and more recently in the Antimicrobial Resistance & Infection Control confirmed that HeiQ Synbio indeed is a unique solution to reduce antibiotic resistant genes in pathogens causing hospital acquired infections. Our traditional business in textile, flooring and antimicrobials did its very best to cross-finance the advancement of our disruptive venture technology platforms; replacing oil-based and microplastic polluting synthetic fibers; enabling double energy density batteries; insulating rapidly and cost-efficiently the 50% poor building cohorts of Europe and blunting the damocletian sword of antimicrobial resistant genes in hospitals. It did so in adverse market conditions, with our loyal customer base operating at a reduced 50% to 70% capacity over the past two years. There were plenty of headwinds in the reporting period. We held the line and advanced our venture innovations, yet at high cost.

Trading Update

Markets remained a challenge throughout the period for our industry and our business. At the start of 2023, we took steps to reduce our cost base and reorganize the business. We have not seen the challenges abate in 2024 and thus have taken further restructuring actions to be in a better position going forward to manage the challenging macro-economic environment, to continue building value in our core innovations and to preserve our ability to deliver when the market demand turns. Our credit facilities continue to be uncommitted in nature, which casts a material uncertainty on the going concern assessment until appropriate longer-term funding is in place, as disclosed in the Notes to the financial statements. While the financial statements continue to be prepared on a going concern basis, the Board is of the view that, pending implementation of the restructuring, the Group has adequate resources. The main cash burn is related to investments in the ventures which could be reduced or stopped in case needed. HeiQ is in discussions to raise additional equity for those ventures and adapting the speed of investment accordingly.

Restructuring and divesting

In an effort to drive additional savings while maintaining key capabilities we are merging two business units (Textile & Flooring and Antimicrobials) to form a new business unit Advanced Materials. Advanced Materials and LifeScience each have their dedicated CEO, management team, and P&L responsibility: Advance Materials, under the leadership of Mr. Mike Abbott, headquartered in the US and LifeSciences, led by Dr. Robin Temmerman, headquartered in Belgium Besides continuing the streamlining and relocating of various support functions out of Switzerland to lower-cost locations, we have created clear goals and responsibilities for all our business and service organizations to optimize operations and to focus resource allocation rigorously. We are increasingly grouping our operations around our four hubs, USA, Belgium, Portugal and Thailand to serve our customer base. In Innovation, we keep focusing on technologies which are closest to cash-flow generation or are already being financed by brand partners or through grants. In Differentiation we are leveraging our brand customers to promote HeiQ to a broader (consumer) audience thereby reducing our costs. We have further streamlined our internal service organization, particularly in finance by implementing a centralized accounting function to strengthen our financial reporting processes. Further restructuring currently being implemented, will aim to reduce our cost base by an additional 20%. The announced de-listing contributes significantly to the overhead cost reduction. However, refinancing will be necessary to push forward with the scaling of our disruptive venture innovations. HeiQ AeoniQ needs a large fundraise to build its first production plant and has engaged an Investment Bank to support us in the task. The Board has judged that fundraising is best achieved by raising capital in the private markets and thus decided to cancel the listing of HeiQ plc as of November 19, 2024.

Advanced Materials (Merger between Textiles & Flooring & Antimicrobials)

We have taken decisive steps to strengthen our position as the market leader for branded, nominated textile innovation. Our top-selling products have been further integrated backwards to improve margins. We have right sized our presence in China and are building out our south Asia hub from Thailand. We have moved the semi-specialty part of our production from Switzerland to the US and our Innovation and Differentiation services to Portugal. We have worked hard to reduce our net working capital and improve the market availability in our main regions Asia, Europe and the Americas and we are integrating our distributors better to have more retail and service power.# Strategic Report

We are considering a divestment of one of our operational assets should we receive attractive offers from the market.

LifeSciences

Following our break-through publication in the Lancet with the University Hospital Charité Berlin study sponsored by the Melinda & Bill Gates foundation and the German state, we secured the US based fortune 500 market leader in Hygiene, Ecolab. Following changing regulations in the EU, we secured a potent exclusive channel partner. Our task now is to invest and scale for growth to disrupt the market with the market leader.

HeiQ AeoniQ

Successes to date include the launch to market with Hugo Boss the world’s first plastic minimized sneaker. With Robert van de Kerkhoff, former CCO of man-made cellulosic fiber market leader Lenzing (Austria), we secured a Chairman for HeiQ AeoniQ with deep fiber expertise. With Julien Born, former CEO of The Lycra company, we have a CEO for HeiQ AeoniQ who brings the expertise to finance and build our first two production plants. The asset heavy and CAPEX intensive scale-up is a new challenge for HeiQ, one that we must master to capture the technology value creation. At the end of 2023 we purchased an industrial production site in Maia, Portugal to be the cornerstone of the HeiQ AeoniQ scale-up and growth.

HeiQ GrapheneX

HeiQ GrapheneX has secured a joint development agreement with a fortune 500 player in handheld mobile devices for our novel double energy density anode free lithium metal battery. For the next phase, we have reached out to possible partners in Korea and Japan to access established battery clusters for the further acceleration of our development. A first prototype is planned to be ready by the end of 2024.

HeiQ Xpectra

HeiQ Xpectra secured an extension of the joint development agreement with a fortune 500 partner for the further development of electromagnetic signature management for stealth functionality. A further fortune 500 partner was secured for the co-development of a transparent heat reflective coating for simple, rapid and cost-effective building insulation with a joint commercialization launch planned for Q1 2025.

Outlook

Looking ahead, our vision remains firm: striving to improve the lives of billions by bringing sustainable material technology solutions to market that can make an impact. To achieve this and to weather current challenging market conditions and financial uncertainties, we have taken and will take further actions as and when needed to control our costs and sharpen our strategy. This includes prioritizing innovations close to positive cash flow generation, to put appropriate emphasis on operational excellence as well as to drive to market our high potential venture innovation initiatives with their superior performance and sustainability profiles. We expect the above-mentioned additional restructuring measures to flow through to our bottom line in H2 2025 with corresponding stabilization of our financial performance. However, we remain alert to take additional corrective action or seek additional fundraising should markets deteriorate further.

As always, I would like to end my statement by thanking our investors, team, advisors and customers for their support during what has been a very challenging period for the market and the Group. As a significant shareholder and a founder of HeiQ, my commitment to grow HeiQ and materialize its technological potential remains unchanged.

Carlo Centonze
CEO

Key performance indicators

We use a number of Key Performance Indicators (KPIs) to measure our performance over time. We select KPIs that demonstrate the financial and operational performance underpinning our strategic drivers.

Finance KPI’s

KPI	2023 / 24	2022	2021	2020	2019	2018
Revenue (in $m)	62.3	47.2	55.4	50.4	28.0	26.2
Growth vs prior year	(12.0%)*	(14.8%)	9.9%	80.0%	6.9%
Gross profit margin in %	36.6	28.5	45.8	55.8	48.6	42.8

*) based on annualized sales 2023/24

Why we measure
Sales growth reflects the increasing impact of our business on improving lives for millions.

Why we measure
This KPI gives insight into our operational profitability.

Innovation KPI’s

KPI	2023/24	2022	2021	2020	2019	2018
Number of new projects that made it into our R&D pipeline	47	34	22	12	10	7
Number of launched innovations	10	10	21	5	3	3

Why we measure
We never run out of innovation ideas and there are many opportunities to innovate. HeiQ’s ability to qualify the ideas through “proof of concept” and market potential evaluation before bringing them into our R&D pipeline is key to ensuring we have the market in mind before investing excessively into a project.

Why we measure
Innovations that are launched generate returns on our R&D investments.

Differentiation KPI

KPI	2023/24	2022	2021	2020	2019	2018
Number of media mentions	8,641	3,732	3,360	n/a*	n/a*	n/a*

• In 2024, the company changed the tool/service provider for measuring. The new service provider is only providing data back to 2021.

Why we measure
As a B2B, B2C and B2B2C ingredient brand, HeiQ is building its brand awareness across different target audience groups. Media mentions are “earned” media, which show our ability to gain face time with the audience without having to invest heavily in media-buying.

Sustainability report (including TCFD disclosures)

“WE DID NOT INHERIT THE EARTH FROM OUR ANCESTORS BUT BORROW IT FROM OUR CHILDREN.” Therefore, we aspire to improve the lives of billions by innovating their everyday products and our purpose defines our reason for being, beyond being profitable. HeiQ is dedicated to improving the lives of billions of people and society as a whole by establishing better and more sustainable materials and technologies. Our core focus is to replace harmful substances with more sustainable alternatives, to extend the useful lives of consumer goods, to replace resistance creating biocides, and to improve energy utilization in buildings, electric vehicles and mobile devices. We help fight air, water and soil pollution and resource depletion. We help to reduce energy consumption, water usage, microplastics and textile waste. And we are convinced that only innovation can drive the systemic and disruptive change that is urgently needed.

Our ESG strategy

• HeiQ’s core business strategy is to improve lives through innovation for more functional and more sustainable materials which largely overlaps with our ESG strategy. Everything we do, all our innovation, has sustainability at the core.
• As a provider of both functional and sustainable material ingredients, we inspire and enable the entire value chain to develop more eco-friendly, durable, biobased, renewable, recyclable and circular, enhanced products.
• People are our biggest asset. The global success of HeiQ is indebted to their knowledge, skills, agility, cultural diversity (30+ nationalities) and a shared passion for our purpose. HeiQ is a proud equal opportunity employer.

We follow the UK Government’s Environmental Reporting Guidelines: Including streamlined energy and carbon reporting requirements.

Energy consumption and carbon emissions disclosures

For the calculation of energy consumption and carbon emissions we follow the UK Government’s Environmental Reporting Guidelines: Including streamlined energy and carbon reporting requirements.

Principles applied for reporting on energy consumption and carbon emissions as per the UK Government’s Environmental Reporting Guidelines: Including streamlined energy and carbon reporting requirements (“SECR”)

We subscribe to the principles of the Competition and Markets Authority in the UK and engage to be truthful and accurate, clear and unambiguous, substantiated, not omitting or hiding important information, only making fair and meaningful comparisons and avoiding all inconsistencies between claims and reality, between intentions and practice. We realize that reporting sustainability impacts is a process of continuous improvement and acknowledge that we may face blind spots. We invite all stakeholders and readers to point these out to us.

Sources of information

Our SECR reporting is based on in-house data on the combustion of primary fuel at owned sites and installations and purchased electricity. We continuously work to improve the quality of our data, collected from invoices for electricity, natural gas, propane, gasoline and diesel, the energy sources used in our HeiQ entities. Gaps in the data are filled by extrapolation or assumptions based on usage in other months.

Our contact for questions and remarks about the SECR reporting is HeiQ sustainability officer Mr. Philip Ghekiere philip.ghekiere@heiq.com

Scope

Physical locations operated by a controlled legal entity are in scope of these disclosures. This includes: HeiQ operational headquarters and laboratories in Schlieren (Switzerland), HeiQ production site in Bad Zurzach (Switzerland), HeiQ Chrisal (Belgium), HeiQ ChemTex in Concord, North Carolina and Calhoun, Georgia (USA), HeiQ Taiwan, HeiQ Iberia (Portugal), HeiQ RAS (Germany), HeiQ China, HeiQ Life (Thailand) and HeiQ AeoniQ GmbH (Austria).

Conversion tables

For the conversion of liters, kg, lbs., gallons and Centum Cubic-Feet of Scope 1 primary fuel to kWh and tCO2-e (tons of carbon dioxide equivalent) we used the gross caloric values of the ‘UK Government Greenhouse Gas Conversion Factors for Company Reporting’ version June2023 that is available for consultation at www.gov.uk

For the Scope 2 conversion of purchased electricity, the CO2-e values depend on the carbon intensity of the electricity production and the energy mix in the country where the electricity is produced. Our World in Data provides a global overview and a detailed summary of the countries that are relevant for HeiQ reporting.# HeiQ plc Annual Report 2023/24

Strategic Report 9

Energy consumption

Under SECR Scope 1 we report primary fuel for combustion at owned sites and in owned installations. Natural gas was again the main fuel type used for combustion (5,552,732, kWh) and more than 80% of this volume was used in our US manufacturing plants. In the reporting period the group used small volumes of diesel (324,564 kWh), gasoline (232,221 kWh) and propane (50,097 kWh).

Under SECR Scope 2 we report 1,403,415 kWh of purchased electricity, 43% of the total volume relates to our manufacturing plants in the US. Whenever possible we purchase electricity from renewable sources: in total 414,671 kWh or 29.5% of the reported Scope 2 energy comes from a renewable source.

Period ended June 30, 2024	Year ended December 31, 2022
Energy in kWh
Scope 1 combustion
Fuel
natural gas
Total Scope 1
Scope 2 purchased electricity
Total Scope 1 + Scope 2
Scope 1 combustion
Fuel	606,871
natural gas	5,552,732
Total Scope 1	6,159,603
Scope 2 purchased electricity	1,403,415
Total Scope 1 + Scope 2	7,563,018
	422,652
	3,632,408
	4,055,060
	884,479
	4,939,539

Carbon Emissions

In the period ended June 30, 2024 we report 1,147 tCO2-e emissions from combustion and 403 tCO2-e from purchased electricity, in total 1,550 tons of Carbon Equivalent. This is, taking the reporting 18-months period into account, about the same quantity as in 2022.

Period ended June 30, 2024	Year ended December 31, 2022
Emissions in tCO2-e
Scope 1 combustion
Fuel
natural gas
Total Scope 1
Scope 2 purchased electricity
Total Scope 1 + Scope 2
Scope 1 combustion
Fuel	147
natural gas	1,000
Total Scope 1	1,147
Scope 2 purchased electricity	403
Total Scope 1 + Scope 2	1,550
	102
	654
	756
	270
	1,026

Intensity ratios

Intensity ratios allow analysis of the effect of our actions to reduce energy consumption and carbon emissions irrespective of fluctuations in revenue. The aggregated and reported revenue for the period ended June 30, 2024 was US$62.10 million and US$47.20 million for 2022.

Period ended June 30, 2024	Year ended December 31, 2022
Energy in kWh ratio
Scope 1 combustion
Fuel
natural gas
Total Scope 1
Scope 2 purchased electricity
Total Scope 1 + Scope 2
Scope 1 combustion
Fuel	9,772
natural gas	89,409
Total Scope 1	99,181
Scope 2 purchased electricity	22,597
Total Scope 1 + Scope 2	121,778
	8,954
	76,955
	85,909
	18,738
	104,647

Period ended June 30, 2024	Year ended December 31, 2022
Emissions in tCO2-e ratio
Scope 1 combustion
Fuel
natural gas
Total Scope 1
Scope 2 purchased electricity
Total Scope 1 + Scope 2
Scope 1 combustion
Fuel	2.37
natural gas	16.10
Total Scope 1	18.47
Scope 2 purchased electricity	6.49
Total Scope 1 + Scope 2	24.96
	2.16
	13.86
	16.02
	5.72
	21.74

Policies

In the 2021 Annual Report, we published the HeiQ Human Rights Policy and in the 2022 Annual Report the HeiQ Equal Opportunity Employer Policy. In this report, we are proud to share our Workplace Harassment Policy. Third-party harassment, and sexual harassment policies, The HeiQ Code of Ethics, The Supplier and Business Partner Code of Conduct, and The Employee Code of Conduct will be communicated in future annual reports. All policies are embedded via a Content Management System that is accessible to everyone (with physical copies in selected locations like manufacturing sites). Employees are informed globally and/or locally when new policies are published or changed.

HeiQ Workplace Harassment Policy

Purpose

Our anti-harassment policy expresses our commitment to maintain a workplace that's free of harassment, so our employees can feel safe and happy. We will not tolerate anyone intimidating, humiliating or sabotaging others in our workplace. We also prohibit willful discrimination based on age, sexual orientation, ethnicity, racial, religion or disability.

Scope

This workplace harassment policy applies to all employees, contractors, public visitors, customers and anyone else whom employees come into contact with at work. For more details on how to recognize, report and deal with sexual harassment and harassment from outside our company, please refer to our sexual harassment policy and our third party harassment policy.

What is the definition of harassment in the workplace?

Harassment includes bullying, intimidation, direct insults, malicious gossip and victimization. We can’t create an exhaustive list, but here are some instances that we consider harassment:

• Sabotaging someone’s work on purpose.
• Engaging in frequent or unwanted advances of any nature.
• Commenting derogatorily on a person’s ethnic heritage or religious beliefs.
• Starting or spreading rumors about a person’s personal life.
• Ridiculeing someone in front of others or singling them out to perform tasks unrelated to their job (e.g. bringing coffee) against their will.

Sexual harassment is illegal, and we will seriously investigate relevant reports. If an employee is found guilty of sexual harassment, they will be terminated.

How to address harassment

If you’re being harassed, whether by a colleague, customer or vendor, you can choose to talk to any of these people:

• Offenders: If you suspect that an offender doesn’t realize they are guilty of harassment, you could talk to them directly in an effort to resolve the issue. This tactic is appropriate for cases of minor harassment (e.g. inappropriate jokes between colleagues.) Avoid using this approach with customers or stakeholders.
• Your supervisor: If customers, stakeholders or team members are involved in your claim, you may reach out to your manager. Your manager will assess your situation and may contact HR if appropriate.
• HR: Feel free to reach out to HR in any case of harassment no matter how minor it may seem. For your safety, contact HR as soon as possible in cases of serious harassment (e.g. sexual advances) or if your manager is involved in your claim. Anything you disclose will remain confidential.

You can also find information on how to report misconduct under this page: Misconduct Reporting.

Disciplinary Consequences

Punishment for harassment depends on the severity of the offence and may include counselling, reprimands, suspensions or termination.

Other relevant disclosures

Grievance mechanisms for employees

We plan to introduce an anonymous grievance hotline submittance system for employees to raise sensitive concerns through the Company ticketing system. Grievances would go to global People Operations (HR) who could either, where appropriate, a) redistribute to local HR, b) manage directly/globally or c) escalate to the Board.

Mechanisms for raising concerns on business conduct for individuals

The workplace harassment and sexual harassment policies outline the procedure for raising concerns. In a case where an employee thinks that the offender might not be aware of their behavior, the employee may try and raise the concern directly with the offender. Where appropriate, or if a customer, other third parties or multiple team members are involved, the employee can report their concerns to their supervisor. In any case, People Operations (HR, local or global) can be involved as a first point of contact, mediator or escalation point.

Non-compliance with employment laws and regulations

No significant instances of non-compliance with laws and regulations were reported in the period.

Collective bargaining

No collective bargaining agreements reported in the period.

Important memberships

• USA: Corporate Members of AATCC (American Association of Textile Chemists and Colorists).
• USA: Member of ASQ (American Society for Quality) and certified auditor through ASQ.
• Switzerland: Carlo Centonze Member of the Economic Council at Swiss Textiles. Member of the Board and Economic Council at Science Industries, Member of the Women’s Wear Daily Global Impact Council.

Climate reporting: TCFD Recommended Disclosures

Compliance statement

As an innovator and supplier of sustainable material ingredients, we inspire and enable the entire value chain to develop more eco-friendly, durable, energy saving, biobased, renewable, recyclable, and circular consumer products. HeiQ has complied with FCA listing rule 9.8.6R(8) that requires standard listed companies to make disclosures consistent with the TCFD recommendations. TCFD is a comply or explain disclosure requirement. For the year ended June 2024, HeiQ is explaining on six of eleven of the recommended TCFD disclosures. As such, and in line with the listing rule requirements, the table below outlines our reasons for explaining, and our plans including timeframes for remedial action.

Strategic Report 11

TCFD recommendation	TCFD recommended disclosure	Compliance position	Rationale	Remediation plans	Timeline
Governance
a.	Describe the Board’s oversight of climate-related risks and opportunities.	Compliant	The board of HeiQ Plc does not currently have oversight of climate-related risks and opportunities, and as such there is no process nor frequency for informing the board on these matters. The board and/or board committees do not currently systematically consider climate-related risks and opportunities when reviewing and guiding strategy, major plans of action, risk management policies, annual budgets, and business plans as well as setting the organization’s performance objectives, monitoring implementation and performance, and overseeing major capital expenditures, acquisitions, and divestitures. There are no climate-related goals and targets, and so the board does not monitor progress.	N/A	N/A
b.	Describe management’s role in assessing and managing climate-related risks and opportunities.	Compliant	HeiQ Plc has not assigned specific climate-related responsibilities including assessing and/or managing climate-related issues to management-level positions or committees and as such, no management positions or committees report to the Board or a committee of the Board on such topics. Management are not currently routinely informed about climate-related risks and opportunities and there is no formal organizational structure nor monitoring process in place for this purpose.	N/A	N/A
Strategy
a.

Strategy

a. Describe the climate-related risks and opportunities the organization has identified over the short, medium and long-term.

We have not yet undertaken scenario analysis including defining timeframes, considering materiality, or selecting scenarios. As such we’ve not identified the climate-related risks and opportunities that might be material to HeiQ Plc under different scenarios and different timeframes, nor have we considered how these risks and opportunities might vary by sector and / or geography.

In a first step, the Company plans to define climate-related risk management processes in order to identify respective risks. The Company foresees to engage support from external advisors if and when deemed necessary by the Board to support this process.

We appreciate the importance of undertaking scenario analysis and are looking to complete this in time for 2025 Annual Report. We will be working closely as a senior management team in defining timeframes, materiality and scenarios, before approving the climate- related risks and opportunities that we intend to report in our 2025 annual report. We might consider to engage a third party to support us with this work.

b. Describe the impact of climate- related risks and opportunities on the organization’s businesses, strategy and financial planning.

Having not undertaken scenario analysis we have not been able to commence quantification of our climate- related risks and opportunities, nor provide commentary as to the impacts, mitigations, and actions we are undertaking as a business. As yet we also have not developed a transition plan and have not been able to make the appropriate disclosures as a result.

Once climate-related risk management processes are in place and respective risks have been identified, the Company intends to run a scenario analysis in order to evaluate the impact of those identified climate-related risks on the Company’s business, strategy and financial planning. In order to do so, the Board will engage support from external advisors if and when deemed necessary.

Our work on quantification is contingent on our work outlined in strategy (a) above on scenario analysis. Once this is complete we will commence quantification; this is a medium term priority. We will provide a progress update in our next annual report with outputs provided subsequently.

HeiQ plc Annual Report 2023/24 Strategic Report | 12

TCFD recommendation	TCFD recommended disclosure	Compliance position	Rationale	Remediation plans	Timeline
c. Describe the resilience of the organization’s strategy, taking into consideration different climate- related scenarios, including a 2°C or lower scenario.	HeiQ Plc has not yet undertaken any scenario analysis and therefore has not been able to assess HeiQ’s resilience to a 2°C degree or lower climate scenario in detail.	We do not plan to undertake a scenario analysis for a 2°C or lower scenario before 2025 as we intend to focus on implementing other TCFD recommendations beforehand.	2°C or lower scenario analysis and respective resilience reporting is a medium-term goal and will therefore be addressed earliest by the 2025 annual report.

Risk management

a. Describe the organisation’s processes for identifying and assessing climate- related risks.

TCFD recommendation	TCFD recommended disclosure	Compliance position	Rationale	Remediation plans	Timeline
Compliant	HeiQ Plc does not currently have risk management processes in place for identifying and assessing climate-related risks and as such does not determine the relative significance of climate-related risks in relation to other risks. The Company has not yet formally assessed existing and emerging regulatory requirements related to climate change or other relevant factors. HeiQ Plc does not currently have processes for assessing the potential size and scope of identified climate-related risks nor does it have specific definitions of risk terminology or references to existing risk classification frameworks.	N/A	N/A

b. Describe the organisation’s processes for managing climate related risks.

TCFD recommendation	TCFD recommended disclosure	Compliance position	Rationale	Remediation plans	Timeline
Compliant	HeiQ Plc does not currently have processes for managing climate-related risks, including those to make decisions to mitigate, transfer, accept, or control those risks. In addition, HeiQ plc does not currently have processes for prioritizing climate- related risks, nor for undertaking materiality determinations.	N/A	N/A

c. Describe how processes for identifying, assessing, and managing climate- related risks are integrated into the organisation’s overall risk management.

TCFD recommendation	TCFD recommended disclosure	Compliance position	Rationale	Remediation plans	Timeline
Compliant	HeiQ Plc has not integrated identification, assessment or management of climate-related risks into overall risk management.	N/A	N/A

Metrics & targets

a. Disclose the metrics used by the organisation to assess climate- related risks and opportunities in line with its strategy and risk management process.

Beyond reporting scope 1 and 2 emissions, HeiQ Plc does not measure and report any other climate- related metrics. HeiQ Plc don’t use an internal carbon price.

HeiQ Plc will develop metrics that align to the identified material risks and opportunities once the exercise outlined above in the strategy (a) section is done. We will consider the TCFD all sector and sector-specific guidance when identifying suitable metrics.

Disclosure of metrics used is a medium- t erm goal and will therefore be addressed earliest by the 2025 annual report.

HeiQ plc Annual Report 2023/24 Strategic Report | 13

b. Disclose scope 1, scope 2 and, if appropriate, scope 3 greenhouse gas (GHG) emissions and the related risks.

HeiQ Plc has reported its scope 1 and 2 emissions on page 9. To date we have not been able to measure our scope 3 emissions, but we estimate that they will account for over 40% of our total emissions and will therefore be considered material. Given the complexity of assessing scope 3 emissions, addressing our scope 3 measurement is a long-term objective only.

Scope 3 reporting is a long- t erm goal only and will therefore be addressed earliest by the 2025 annual report or later.

c. Describe the targets used by the organization to manage climate related risks and opportunities and performance against targets.

HeiQ Plc currently does not use any climate-related targets. As metrics used by the organization to assess climate-related risks and opportunities are not yet defined, the Company considers the target definition and measurement of performance against these targets as a medium-term goal to be implemented at the same time as the definition of the metrics to be measured and in alignment with identified risks and opportunities.

Definition of targets and tracking against them is a medium-term goal and will therefore be addressed earliest by the 2025 annual report.

HeiQ plc Annual Report 2023/24 Strategic Report | 14

Section 172 statement

The Directors of the Company, as those of all UK companies, must act in accordance with a set of general duties. These duties are detailed in section 172 of the UK Companies Act 2006, which is summarized as follows:

“A director of a company must act in the way they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole and, in doing so have regard (amongst other matters) to:

• the likely consequences of any decisions in the long term;
• the interests of the company’s employees;
• the need to foster the company’s business relationships with suppliers, customers and others;
• the impact of the company’s operations on the community and environment;
• the desirability of the company maintaining a reputation for high standards of business conduct; and
• the need to act fairly as between members of the company.”

Ongoing engagement with our stakeholders remains a priority and is critical to HeiQ’s success. The Directors of HeiQ consider, both individually and together, that they have acted in the way they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole having regard to the stakeholders and matters set out in s172 of the Companies Act 2006 (“section 172”) in the decisions taken during the period ended June 30, 2024. In doing so, the Directors have taken account of the likely long-term consequences of decisions made in the period, the interests of HeiQ’s employees, the Company’s business relationships with its clients, suppliers, and the impact of the Company’s operations on the community and the environment. The Directors strive to maintain a reputation for exacting standards of business conduct, and the need to act fairly between members of the Company.

When formulating the Company’s strategy, the Directors consider the longer-term and broader consequences and implications of its business on key stakeholders and society in general. The need to be a responsible company in this context is embedded in HeiQ’s ethos and is the focus of the Company’s ESG and Sustainability strategy.

Stakeholder engagement

As part of HeiQ’s commitment to effective stakeholder engagement, and in accordance with section 172, the Company sets out its key stakeholder groups and corresponding approach to engagement with them. HeiQ’s stakeholder engagement strategies are tailored for each of these key audiences to continue a mutually beneficial dialogue with those who are invested in, or impacted by, the Company’s operations.

The following paragraphs summarize how the Directors fulfil their duties. Information collected by management in the course of their interaction with any stakeholder group is typically considered by the Board at its regular Board meetings (there were fourteen such meetings in the reporting period). The Board holds an annual strategy workshop where the strategy of individual Business Units as well as the Group as a whole is presented by the Business Unit leaders, the Executive Directors and reviewed by the Board.# Shareholders

HeiQ seeks to develop a broad investor base with those who share our values and are supportive of our strategy and mission. Engagement with shareholders is a key element to fulfilling this objective. Besides engaging through the Company’s shareholder meetings, Executive Directors engage with investors directly in face-to-face meetings in course of investor roadshows typically organized at least three times a year around the publication of financial results and the AGM. The Directors typically all attend the AGM in person, a decision that was taken to facilitate more effective face to face engagement with shareholders, allowing them to ask questions directly to the Board. Upon publication of financial results, the Executive Directors hold additional investor calls focused on retail investors with extensive Q&A sessions. Feedback on presentations and investor talks has been collected by the Company’s broker and Investor Relations advisors and has been reported to the Board on an anonymous basis. This feedback has been taken into consideration for future shareholder communications and incorporated into the strategic decision-making process by the Board.

Employees

The Directors engage with the workforce and management team in different ways both directly and indirectly.

Periodical leadership meetings:

The Executive Directors meet with the leadership team typically every other week to discuss operational questions including such concerning employees. Typically, three times a year, the leadership team meets physically for more strategic discussions with the Executive Directors. Topics of interest and/or concern for the entire Board are reported by the Executive Directors at Board meetings.

Periodical meetings of the entire Board with executive management:

Several times a year, the Board holds meetings with each Business Unit leader to discuss the strategy and operational performance of the individual unit. This allows the Directors to make informed decisions on the performance of individual Business Units, consider longer term strategies for where to invest further or where to scale back.

Quarterly townhall meetings:

The Group CEO hosts mandatory quarterly townhall meetings with all employees and participation of Directors with an extensive Q&A session. The Directors believe this is an essential forum to allow employees access to the upper tiers of management and the Board that they may not be afforded during their day-to-day work life. It is also a useful forum for the Board to receive honest and direct feedback on concerns from the ground up, facilitating discussion and longer-term planning around employee satisfaction in the workplace and specific issues that may need to be addressed.

Informal meetings with senior staff by individual Directors:

Directors, in particular the Chair, periodically meet with senior staff members for an informal exchange on a one-to-one basis. Further, a global quarterly newsletter ensures that all employees and Directors are aware of important recent developments in the Group, including those of the headquarters as well as each local office.

HeiQ plc Annual Report 2023/24
Strategic Report 15

Whistleblowing:

HeiQ’s whistleblowing policy provides a mechanism for employees to raise concerns in confidence and anonymously, with any serious matters being escalated to the Board to review and ensure arrangements for proportionate and independent investigation and for follow-up action if required.

Customers

Understanding our customers and their customers (consumers) and what matters to them is of paramount importance to HeiQ. HeiQ aims to establish long term win-win customer relationships which might, from time to time, require re-alignment and/or re-negotiation of critical business terms. The Group CEO therefore is involved in customer meetings on a regular basis and in particular is significantly involved in the business development which typically is done in collaboration with an application partner, i.e. with future customers like Hugo Boss and MAS in the case of HeiQ AeoniQ. The Executive Directors are further kept informed about any significant development with particular customers in of their periodical meetings with the Leadership team. The Group CEO provides feedback on specific customers and market situation in general to the Directors in Board meetings. In meetings between the Board and the Business Unit leaders, Directors benefit from getting direct insight into customer issues from the Leadership team.

Suppliers

Fostering good business relationships with suppliers is important to the Company’s success. HeiQ aims to establish long term win-win supplier relationships which might, from time to time, require re-alignment and/or re-negotiation of critical business terms. While the key contact to suppliers typically happens with the individual business leaders, the Group CEO meets periodically with major suppliers and is also involved in negotiations with them. This is the case in particular in relation to key strategic business development initiatives like HeiQ GrapheneX or HeiQ AeoniQ. Critical supplier situations are always discussed by the Executive Directors and the Leadership team in their regular meetings. The Board is briefed on any possibly critical situation as needed during their regular meetings.

Community and environment

HeiQ is proud to employ people in the communities in which we operate. We have product standards, policies and guidance covering the products we make to help ensure that they are manufactured safely, legally and to the required quality standards. Besides legally required standards, HeiQ operates a significant part of its business under ISO standards and additionally, most HeiQ products are also certified for voluntary quality standards such as ZDHC (Zero Discharge for Hazardous Chemicals), bluesign® and OEKO-TEX®. Various members of HeiQ’s workforce are members of local industry associations (e.g. the Group CEO is a member of the Board of ScienceIndustries Switzerland (Business Association Chemistry Pharma Life Sciences) and HeiQ is a member of the European Silver Task Force.

Business conduct

As explained in more detail in Corporate Governance on page 26, values and culture are an integral part of our strategy and the Board strives to promote a culture based on high business conduct standards.

Acting fairly between members of the Company

Having assessed all necessary factors, and as supported by the processes described above, the Directors consider the best approach to delivering on the Company’s strategy. This is done after assessing the impact on all stakeholders and is performed in such a manner to act fairly between the Company’s members. The Board is committed to sharing information publicly so that all members of the Company have access to the same information at the same point in time and in accordance with the requirements of the Financial Conduct Authority’s Listing Rules, the Disclosure and Transparency Rules and the UK Market Abuse Regulation.

Key Board decisions and Section 172 considerations

The following are examples of some of the principal decisions made by the Board during the period under review which demonstrate how employee interests, the need to foster business relationships with other key stakeholders and other Section 172 matters have been taken into account in discussions and decision making.

## Key Board decision	Consideration of stakeholder interests
Appointment of a new Board Member and Chair As announced November 27, 2023, Robert van de Kerkhof was appointed as a new Board member as of January 1, 2024 to strengthen the Boards expertise in view the HeiQ AeoniQ venture with a cellulosic fiber technology and sustainability expert. Robert brings also along significant public company experience. Following the retirement of Esther Dale as Chair on March 31, 2024, Robert was appointed as new Chair.
Appointment of a new Auditor On May 30, 2024 the Company announced the appointment of RPG Crouch Chapman LLP as its auditor.
Extension of the accounting reference date In order to allow an incoming auditor to execute t he audit of the Annual Accounts in an orderly manner, the Board considered it to be appropriate to extend the financial reporting period by six months and decided to move the accounting reference date to June 30, 2024 as announced on February 15, 2024.

HeiQ plc Annual Report 2023/24
Strategic Report 16

Engagement of an accounting firm to support addressing control deficiencies

In order to further improve governance structure and process of the Group and as a response to key audit matters raised by the external auditor on the 2022 Annual Accounts, the Board decided to engage Ernst & Young in early 2024 to review our internal control and governance processes and to recommend implementation measures to improve the same.

Capital raise

In order to finance the acquisition of industrial property, the Company announced on February 15, 2024 to raise additional capital. In order to allow participation of as many interested shareholders as possible and in order to ensure full subscription of the fund raise, the Board decided to raise funds with a mix of a convertible loan note, a placing as well as a retail offer. With the issuance of 28’000’000 shares the capital raise was successfully concluded on March 14, 2024.

Option grant under the long- term incentive schemes:

The Board, as advised by the Remuneration committee, agreed to grant options over ordinary shares in the Company to a broader range of employees. The intention behind this decision was to align employees with the longer-term success of the Company. Options have been granted to 40 individuals, representing around 20% of the entire workforce. Further details on granted options can be found in Note 27 to the financial statements.# HeiQ plc Annual Report 2023/24 Strategic Report

Financial Review

Difficult market conditions for our main commercial business remained throughout the 18-months reporting period ending June 30, 2024. Revenues suffered from continuing reduced market demand and the anticipated recovery did not yet occur. Since the second half of 2022 we have seen revenues remaining at a low level of roughly US$20 million per each six-month period as a reflection of continuing low market demand mainly in the textile industry. On an annualized basis revenues decreased by 12.3% in the reporting period compared to 2022.

Following the recording of a significant allowance on inventory in 2022, the overall gross margin has recovered to 36.6% in the reporting period (2022: 28.5%). In order to adapt to the decrease in revenues, the Board has implemented various cost reduction measures throughout the period. On an annualized basis, these measures have contributed to reduce selling and general administration expenses (SG&A) by 5.8% compared to 2022, whereas not all implemented measures have fully materialized by the end of the reporting period yet.

The improved margin and reduced SG&A expenses are the key drivers for the significantly improved adjusted EBITDA in the reporting period compared to the prior period (annualized: reduction of adjusted EBITDA loss by 45.6%). The proceeds (gross amount US$2.75 million) from the out-of-court settlement of the ICP case are a key driver of Other Income in the reporting period.

Financial performance	Period ended June 30, 2024	Year ended December 31, 2022
US$’000
Revenue	62,318	47,202
Gross profit	22,833	13,457
Gross profit margin	36.6%	28.5%
Selling and general administrative expenses	(43,769)	(30,969)
Impairment losses	(323)	(12,381)
Net other income/(expenses)	2,277	648
Operating loss	(18,982)	(29,245)
Operating margin	(30.5%)	(62.0%)
Loss after taxation	(21,338)	(29,814)
Adjusted EBITDA	(9,935)	(12,174)
EBITDA margin (adjusted)	(15.9%)	(25.8%)

Adjusted EBITDA

Reported adjusted EBITDA loss was US$9.9 million for the period compared to a EBITDA loss of US$12.2 million in 2022. EBITDA is a way of measuring cash generation. HeiQ therefore adjusts EBITDA for share options and rights granted to Directors and employees and significant non-cash items being impairments of goodwill and intangible assets.

	Period ended June 30, 2024	Year ended December 31, 2022
US$’000
Operating loss	(18,982)	(29,245)
Depreciation	3,888	2,220
Amortization	3,238	1,435
Impairment losses and write-offs	1,742	13,278
Share options and rights granted to Directors and employees	179	138
Adjusted EBITDA	(9,935)	(12,174)

Reporting as per new Business Unit structure

Following the merger of the two former Business Units Textiles & Flooring and Antimicrobials into Advanced Materials, HeiQ reports three segments: the two commercial Business Units as well as "Other activities”. Other activities include the Venture Units as well as not allocated items including Innovation Service function.

In 2022 SG&A expenses have been allocated to Business Units only to a limited extent with focus on commercial activities. For 2023 and going forward, the Group had allocated costs more extensively to the Business Units.

	Advanced Materials	LifeSciences	Other activities	Total
US$’000	Period 23/24	Year 2022	Period 23/24	Year 2022
Revenue	50,697	38,366	6,988	6,164
Operating profits (loss)	(4,391)	(14,347)	(1,385)	(5,537)
Financial result	(1,441)	(590)
Loss before taxation	(20,423)	(29,835)
Taxation	(915)	21
Loss after taxation	(21,338)	(29,814)
Depreciation and amortization
Property, plant and equipment	1,200	362	453	335
Right-of use assets	383	165	218	145
Intangible Assets	1,512	773	837	550
Impairment loss
Property, plant and equipment	---	730	-	-
Intangible Assets	323	8,247	-	2,402

On an annualized basis, both Business units show a decrease in revenues. While for Advanced Materials this is driven by the general market conditions, for LifeSciences this is rather driven by the discontinued face mask business and related revenues that were still significant in 2022. Revenues allocated to other activities encompass mainly Innovation Services provided to 3rd party customers and from the Venture Units.

Statement of Financial Position

Total assets were US$62.6 million as of June 30, 2024 (December 31, 2022: US$71.1 million) with equity amounting to US$25.4 million and liabilities of US$37.1 million as of June 30, 2024 (December 31, 2022: US$40.3 million equity and US$30.8 million of liabilities). This corresponds to an equity ratio of 41% (2022: 57%).

Non-current assets increased from US$38.7 million (December 31, 2022) to US$40.1 million as of June 30, 2024, mainly driven by acquisition of two industrial sites in Portugal in 2024. Current assets decreased by 30.8% to US$22.5 million as of June 30, 2024 (US$32.4m as of December 31, 2022) driven by a reduction of inventories. The cash balance decreased by US$3.5 million and was US$5.0 million as of June 30, 2024 (December 31, 2022: US$8.5 million).

The increase in total liabilities was mainly driven by short- and long-term borrowings, reflecting the increased use of credit facilities. Total liabilities increased by US$6.3 million (20.5%) from US$30.8 million as of December 31, 2022 to US$37.1 million as of June 30, 2024. Net debts (including lease liabilities) amount to US$13.4 million as of June 30, 2024 (December 31, 2022: US$3.7 million).

In March 2024 the Company completed a fund raise of GBP 2.436 million through the issuance of 28 million new ordinary shares. At the same time, the general meeting approved a capital reorganization in course of which each existing ordinary share was subdivided into one new ordinary share of 5 pence and one deferred share of 25 pence. Following the fund raise, the Company has 168’537’907 ordinary shares of 5 pence each in issue.

Cash Flow Statement

Net cash generated from operating activities in the 18-months period continued to be negative and amounted to US$-3.7 million (2022: US$-2.5 million). On an annualized basis, this represents a decrease of -1.3% versus revenues being down by -12.3% compared to the prior period.

Cash used in investing activities amounts to US$8.4 million in the reporting period (2022: US$8.8 million) and is largely driven by the acquisition of two industrial sites in Portugal in relation to HeiQ AeoniQ for a total consideration of €5.0 million including taxes.

Net cash from financing activities amounted to US$8.7 million (2022: US$5.9 million net cash used). This includes US$3.0 million net proceeds from the fund raise in March 2024 as well as an increase in borrowings.

The Group reports a cash balance of US$5.0 million as of June 30, 2024 (December 31, 2022: US$8.5 million).

Going Concern Assessment

To manage its cash balance, the Group has access to credit facilities totaling CHF8.06 million (approximately US$9.3 million as of September 30, 2024). The credit facilities are in place with two different banks and both contracts have materially the same conditions. The facilities are not limited in time, can be terminated by either party at any time and allow overdrafts and fixed cash advances with a duration of up to one month. One credit facility is being reduced monthly by CHF0.02 million (approximately US$0.02 million) and the other facility is being reduced quarterly by CHF0.2 million (approximately US$0.23 million) until December 31, 2024 and CHF0.25 million (approximately US$0.29 million) per quarter thereafter. The facilities are not committed, but the Board has not received any indication from financing partners that facilities are at risk of being terminated and mentioned repayment schedules have been agreed only recently. As of September 30, 2024, the Group has drawn fixed advances of CHF7.06 million and EUR0.4 million of the facilities with maturity date within the month of October 2024.

The Group’s directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and operate within its credit facilities for a period of 12 months from date of approval of these financial statements. Nevertheless, the Board acknowledges the uncommitted status of the facilities which could be terminated without notice during the forecast period requiring the refinancing of debts as per above maturity dates, indicates that a material uncertainty exists that may cast significant doubt on the Group's ability to continue as a going concern. Additionally, should intended financing events for the venture units not materialize within the expected timeframe, the Group might need to delay or discontinue the scaling of respective ventures in order to continue as a going concern. Further disclosures on the going concern assessment are made in Note 3b to the financial statements.

Xaver Hangartner
Chief Financial Officer

Risk management

In the period, the Board has reviewed its Enterprise Risk Management (ERM) process supported by external advisors to confirm alignment with good practice. At HeiQ, ERM is a comprehensive strategy for identifying, evaluating, and addressing risks throughout the organization. ERM is essential for optimizing decision-making and enhancing resilience in achieving our objectives. We systematically identify, analyze, evaluate, treat, monitor, and communicate risks to minimize losses and maximize opportunities.# Leveraging our material science expertise, we innovate according to global megatrends, quickly responding to market needs.

Risk appetite

The Board defines our risk appetite and sets clear guidelines for investments. In existing markets, we finance investments from internally generated cash. For new technologies and ventures, we seek external financing, ensuring our investments do not compromise liquidity or debt/equity ratios.

Enterprise Risk Management

Macro Process

Risk assessment is a regular item on our leadership agenda. We employ both top-down and bottom-up approaches to identify risks. While a formal risk management system is in place, every employee is responsible for managing risk, fostering a culture of proactive risk mitigation across the organization. ERM unfolds as follows:

Enterprise Risk Management Macro Process

1. Scope, Context, Criteria
   At least annually and event driven:

   • Identify internal and external boundaries, stakeholders, and risk sources;
   • Understand the organizational context;
   • Establish risk management objectives and guidelines (such as risk appetite, criteria for likelihood and impact)
   • Define ERM timeline

2. Risk Assessment
   At least annually and event driven:

   • Identify risks that could affect the organization (top-down and bottom-up);
   • Assess identified risks against an impact and likelihood scale;
   • Evaluate the risks, deciding whether/how to treat that risk.

3. Risk Treatment
   At least annually for identification, and ongoing for implementation and execution:

   • Identify and select the risk treatment strategies (e.g., avoid, mitigate, transfer or accept);
   • Define risk treatment measures, plan and implement them.

4. Risk Monitoring
   At least quarterly for top down and at least annually for bottom up:

   • Monitor risks and evaluate the adequacy and effectiveness of relevant risks as well as mitigation measures;
   • Review risk management process to ensure its continued effectiveness and suitability.

5. Risk Reporting
   At least quarterly for top down and at least annually for bottom up:

   • Document and report the risk management process and its outcomes to promote and simplify the communication of ERM activities and results to relevant stakeholder;
   • Obtain useful information for decision-making and improve the ERM-related activities.

Principal risks and uncertainties

The Board has identified the following principal risks that include emerging risks and which are discussed in more detail on the following pages.

Risk Category	Principal risk	Impact	Likelihood
Strategic risks	1 Technology Portfolio risk	Medium	High
	2 Difficulty determining the group's scaling strategy for each technology	Medium	Medium
	3 Exposure to economical and geopolitical changes	Medium	High
	4 High competition levels	Medium	High
Operational risks	5 Varying maturity levels for the multiple businesses	Medium	Medium
	6 Cybersecurity threats	High	High
	7 Demanding talent recruitment and retention	Medium	High
Financial risks	8 Exposure to inflation and unfavorable global economy	Medium	Medium
	9 Difficulty managing liquidity and cash within the group	High	High
	10 Exposure to currency f luctuations	Low	High
Compliance/ legal risks	11 Intricate Reporting Requirements
	12 Exposure to Multiple Geographies with different Tax Regulations

---

HeiQ plc Annual Report 2023/24 Strategic Report 21

| Principle Risk | Description | Controls / Mitigation # HeiQ plc Annual Report 2023/24 Strategic Report

Non-financial information statement

Our non-financial information statement is set out below in compliance with Sections 414CA and 414CB of the Companies Act 2006. It is intended to guide our stakeholders to where relevant non-financial information can be found in this Annual Report.

| Reporting requirement | Policies and standards which govern our approach | A dditional information and risk management

Risk Management and Mitigation Strategies

The following table outlines the identified risks and the strategies employed to manage them:

| Risk ID | Risk Description # HeiQ plc Annual Report 2023/24

Corporate Governance

Disclosures are made based on data records received by our human resource department from the Directors. Whilst the Board acknowledges that the Company has not met the UK’s Financial Conduct Authority’s (FCA) diversity targets (being at least 40% of the board members should be female and that at least one of the senior board positions should be held by a woman) as of June 30, 2024, it had done previously since the Company’s IPO (two female directors and three males directors) until December 31, 2023. The reason for not meeting these targets since January 1, 2024 principally relates to the resignation of Esther Dale-Kolb during March 2024. During an extensive search for a replacement the most appropriately experienced candidate was male, and as such Robert Van de Kerkhof was subsequently appointed to the Board as of January 1, 2024. Under the QCA Corporate Governance Code the appointment of a Senior Independent Director is not a mandatory requirement and was not deemed appropriate by the Board at this point in time. However, Karen Brade holds the position of chair of the Audit Committee. The composition of the Board remains unchanged as of date of approval of these annual accounts.

Number of board members	Percentage of the board	Number of senior positions on the board (CEO, CFO, SID and chair)	Number in executive management	Percentage of executive management
Gender identity
Men	4	80%	3	2
Women	1	20%	-	-
Not specified/prefer not to say	-	0%	-	-
Ethnic background
White British or other White (including minority-white groups)	5	100%	3	2
Mixed/Multiple ethnic groups	-	0%	-	-
Asian/Asian British	-	0%	-	-
Blach/African/Caribbean/Black British	-	0%	-	-

Committees of the Board and its composition:

Committee	Chair	Members
Audit committee	Karen Brade	Benjamin Bergo, Robert van de Kerkhof
Nomination committee	Robert van de Kerkhof	Benjamin Bergo, Karen Brade
Remuneration committee	Benjamin Bergo	Robert van de Kerkhof, Carlo Centonze
Environmental, occupation, health and safety committee	Robert van de Kerkhof	Carlo Centonze, Karen Brade

Corporate governance statement

Chair’s Introduction

The Board is committed to the principles underpinning good corporate governance. We aim to apply these in a manner which is most suited to the Company, and best addresses the Board’s accountability to shareholders and other stakeholders. The Company, therefore, voluntarily observes the requirements of the QCA Corporate Governance Code (the “Code”) as the Board feels that this Code is more appropriate for the Group’s size and stage of development than the more prescriptive UK Corporate Governance Code. As per the Code, companies need to deliver growth in long-term shareholder value. This requires an efficient, effective and dynamic management framework and should be accompanied by good communication which helps to promote confidence and trust. Therefore, the Code has grouped the ten principles into three categories: “Deliver growth”, “Maintain a dynamic management framework” and “Build trust”. During the period under review, the Company has complied with the QCA Corporate Governance Code except for, inter alia, the expectation that each member of the Remuneration Committee be independent. At present, each independent non-executive Director is re elected in accordance with the Company’s Articles of Association. The Company will keep these matters and its governance framework under review as it continues to grow and develop. In this report, we have set out how we have applied the ten principles of the Code in the year ended June 30, 2024.

Robert van de Kerkhof
Chair

Delivering growth

Principle	How HeiQ applies the principle
1 Establish a strategy and business model which promote long-term value for shareholders	Our strategy, and the key challenges we face in executing the strategy, are set out in the Strategic Report on pages 1 to 6. HeiQ’s leadership team meets regularly and focuses on the delivery of the Group’s strategic plan which is set by the Board. The Chief Executive Officer reports to the Board on progress, and the Board supports and challenges the leadership team. Employees are kept informed of strategy and progress through regular employee briefings and newsletters.
2 Seek to understand and meet shareholder needs and expectations	In order to achieve this, we plan to make our Executive Directors available to shareholders through regular meetings throughout the year along with investor roadshows around the time of our financial results announcements.
3 Take into account wider stakeholder and social responsibilities and their implications for long-term success	We consider our key stakeholders, in addition to our shareholders, to be our employees, our partners, our customers, our suppliers, our bankers and our lenders, the local communities in which we operate and the environment. More information on our engagement with our key stakeholders can be found in our s172 Statement on pages 14 to 16 of this report.
4 Embed effective risk management, considering both opportunities and threats, throughout the organization	The Group’s significant risks and uncertainties are set out on pages 20 t o 22 of this report together with a summary of how risk management is executed within the Group. Disclosures on management of climate-related risk and opportunities (TCFD) are made on page 10 to 13 of this report.

Maintaining a dynamic management framework

Principle	How HeiQ applies the principle
5 Maintain the board as a well-functioning, balanced team led by the chair	The Board is led by Robert van de Kerkho f , who is the non-executive Chair. The Board also includes two non-executive Directors who both have extensive experience with international and/or UK listed companies, and two Executive Directors. All Directors except for the Chair, hold shares in the Company. The two Executive Directors are not considered independent, while the two non-executive Directors and the Chair are considered independent. There are four Board Committees: The Audit Committee, the Remuneration Committee, the Nomination Committee and the Environmental, Occupation, Health and Safety Committee (EOHSC). More information on the Audit, Environmental, Occupation, Health and Safety Committee, Nomination and Remuneration Committees can be found on pages 29 to 34. There have been fourteen Board meetings during the financial period to June 30, 2024. Directors are expected to attend all Board meetings and the meetings of the Committees on which they sit. They are also required to devote sufficient time to the Company to enable them to fulfil their duties as Directors. The time commitment expected of the non- executive Directors is set out in their letters of appointment.
6 Ensure that between them the directors have the necessary up-to- date experience, skills and capabilities	The Board comprises five individuals with a mix of skills and experience that is most appropriate for the Company at this stage in its development. More information on the background and skills of the individual Directors can be found on page 24. The Board’s gender balance has shifted following the retirement of Esther Dale and now includes one female and four male Directors. The Board’s training and development needs will be met by implementing appropriate training periodically during the course of 2025 as the composition of the Board has changed in course of 2024. The Company Secretary tables a report at each Board meeting which covers any significant developments in corporate governance.
7 Evaluate board performance based on clear and relevant objectives, seeking continuous improvement	The Board conducted an internal evaluation during the first quarter of 2024. A questionnaire with 5 categories and 51 questions was given to and completed by all Board members. The categories entailed the following, how well has the Board done its job, how well has the Board conducted itself, it asked about the Boards relationship with Executive Directors , the performance of the individual Board Members and about Feedback to the chair of the Board. On a scale from poor to satisfactory to good to very good and to excellent the result was between satisfactory and very good. To further evolve, the Board’s main focus will be on management evaluation including strategic goals and priorities, Succession planning will be addressed by the Nomination Committee which will make recommendations to the Board as required.
8 Promote a corporate culture that is based on ethical values and behaviors	We strive to ensure that our business success is in accordance with the best environmental, ethical and social standards. We aim to provide diligent product stewardship and deliver value to all our stakeholders. We have an entrepreneurial culture where disciplined execution is key. We expect all our employees to work hard and with determination and in return we care for our people. We pride ourselves on being customer-focused thinkers who act with integrity, honesty and trust. Sustainability is our guiding star in all our actions, processes and products. The Board will monitor and promote a healthy corporate culture with the aim of capturing strategic alignment, employee satisfaction, as well as suggested improvements.
9 Maintain governance structures and processes that are fit for purpose and support good decision-making by the board	The Board meets at least four times a year. The Audit, Environmental, Occupation, Health and Safety Committee (EOHSC) and Remuneration Committees meet at least twice, twice and once a year respectively. The Nomination Committee meets at least once a year and more frequently if circumstances so require. As disclosed on page 10, in 2023/24, the Company is compliant with 6 out of 11 TCFD recommended disclosures.

The Board provides strategic leadership and sets the culture and practices that should be followed throughout the business. The Board maintains a schedule of matters reserved for its decision. A list of matters reserved for decision by the Board is included further below. The Board has approved terms of reference for each of the Board Committees to which certain responsibilities are delegated. The chair of each Committee reports to the Board on the activities of that Committee. Further information on the Committees can be found on pages 29 to 34 of this report.

The Chair is responsible for the leadership of the Board, ensuring its effectiveness on all aspects of its role and the setting of its agenda. She ensures the Directors receive accurate, timely and clear information and she is responsible for ensuring the Board’s effective communication with shareholders. In leading Board meetings, the Chair facilitates the effective contribution of non-executive Directors and ensures constructive relations between Executive and non-executive Directors.

The Chief Executive Officer is responsible for the leadership and management of the Company, and the implementation of objectives and strategies agreed by the Board.

Matters reserved for decision by the Board:

Management structure and appointments

• senior management responsibilities
• Board and other senior management appointments or removals
• Board and senior management succession, training, development and appraisal
• appointment or removal of the Company Secretary
• appointment or removal of the internal auditor
• remuneration, contracts, grants of options and incentive arrangements for senior management
• delegation of the Board’s powers
• agreeing to membership and terms of reference of Board Committees and task forces
• establishment of managerial authority limits for smaller transactions
• matters referred to the Board by the Board Committees

Strategic/policy considerations

• business strategy
• diversification/retrenchment policy
• specific risk management policies, including insurance, hedging, borrowing limits and corporate security
• agreement of codes of ethics and business practices
• receipt and review of regular reports on internal controls
• annual assessment of significant risks and effectiveness of internal controls
• calling of shareholders’ meetings
• avoidance of wrongful or fraudulent trading

Transactions

• acquisitions and disposals of subsidiaries or other assets over 10% of net assets/profits
• investment and other capital projects over a similar level
• contracts not in the ordinary course of business
• substantial commitments including:
  • pension funding
  • material contracts in excess of one year’s duration
  • giving security over significant Group assets (including mortgages and charges over the Group’s property)
• actions or transactions where there may be doubts over property
• approval of certain announcements, prospectuses, circulars and similar documents
• disclosure of Directors’ interests; and
• transactions with Directors or other related parties

Finance

• raising new capital and confirmation of major financing facilities
• treasury policies, including foreign currency and interest rate exposure
• discussion of any proposed qualification to the accounts
• final approval of annual and interim reports and accounts and accounting policies
• appointment/proposal of auditors
• material charitable donations
• approval and recommendation of dividends
• approval before each year starts of operating budgets for the year and periodic review during the year

Liaison with investors at

• AGM
• Investor roadshow
• Site visits for institutional investors
• Online retail presentations with Q&A

General

• governance of Company pension schemes and appointment of Company nominees as trustee
• allotment, calls or forfeiture of shares

Build trust	Principle	How HeiQ applies the principle
10	Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders	During the period under review we have had multiple interactions with shareholders, have conducted several audits by regulatory counterparts and interacted with strong customer base. Further information on our engagement with shareholders can be found on page 14 of this report.

Robert van de Kerkhof
Chair
October 30, 2024

HeiQ plc Annual Report 2023/24 Corporate Governance 29

Audit committee report

The following is the Audit Committee Report for the period ended June 30, 2024. RPG Crouch Chapman LLP was newly appointed as our auditor for the period ended June 30, 2024. A major focus for the Audit Committee during the period was to address the high priority recommendations from the previous audit in relation to improving the control environment. Good progress was made by developing operating procedures particularly for the year end topics such as inventory, impairment testing, ECLs and overhead allocation. However, it was recognized that controls against these procedures would need to be rolled out.

Ernst & Young was engaged on April 1, 2024 to undertake an end to end review of processes and controls and to design the subsequent implementation of a new financial risk management framework and wider group governance structure. This project was overseen by the CFO and project managed by our finance team in Portugal. As Chair of the Audit Committee, I regularly attended meetings with Ernst & Young and the finance team, including a site visit to Portugal. I am pleased to report that significant progress has been made during the period in this regard. The finance team has worked tirelessly during the period to ensure that this audit process ran smoothly, with additional resources allocated to the task.

There are three members of the Audit Committee. I chair the Committee and the other members are Robert Van de Kerkhof and Benjamin Bergo. Our biographies setting out our skills and qualifications can be found on page 24 of this report. We are all non- executive Directors. It is intended that the Audit Committee meets at least twice a year and the Committee is responsible for ensuring that the Group’s financial performance is properly monitored, controlled and reported. I report to the Board after each Committee, and I will attend each Annual General Meeting of the Company. In the period between January 1, 2023 and June 30, 2024, the Committee met three times, with all members in attendance. Members of the Audit Committee met regularly during the process of selecting a new auditor and gave frequent updates to the Board on these conversations.

Duties of the Audit Committee

Internal control and risk assessment

The Committee assists the Board in discharging its duty to ensure that the financial statements presented by the Company to its shareholders conform with all legal requirements and that the Company and its subsidiaries’ financial reporting and internal control policies and procedures for the identification, assessment and reporting of risks are adequate, by keeping such matters under review and making appropriate recommendations to the Board. The Committee also considers the major findings of internal investigations and responses of service providers and reviews its own performance, constitution and terms of reference.

External audit

The Committee considers and makes recommendations to the Board regarding the appointment and reappointment of the Company’s external auditor, as well as any questions relating to their resignation or removal. The Committee oversees the relationship with the external auditor, including, but not limited to, the approval of their remuneration and terms of engagement, whether in relation to audit or non-audit services, and annually assesses the auditor’s independence, objectivity, qualifications, expertise, resources and effectiveness. The Audit Committee meets the external auditor at least twice a year and reviews the findings of the audit.

Financial statements

The Committee monitors the integrity of the financial statements of the Group, including the annual and interim reports, preliminary results announcements and any other formal announcement relating to its financial performance. It reviews any significant financial reporting issues and judgments, and challenges, where necessary, the Group’s financial statements before submission to the Board. The Committee keeps under review the consistency of accounting policies and practices on a year-to-year basis, and across the Group. The Company needs to undertake a detailed assessment of the control procedures designed to ensure complete and accurate accounting for financial transactions and to limit the exposure to loss of assets and fraud. Measures taken will include segregation of duties and reviews by management.

Reporting responsibilities

The Committee meets formally with the Board at least once a year to discuss matters such as the annual report and the relationship with the external auditor and also makes whatever recommendations to the Board it deems appropriate.

Internal audit and review of third-party service providers

At present, the Company does not have an internal audit function. The decision of whether or not to set up an internal audit function will be made by the Board, on the recommendation of the Audit Committee, based on the growth of the Company, the scale, diversity and complexity of the Group’s activities and the number of employees, as well as cost and benefit considerations.# Work of the Audit Committee

For the reporting period for the period ended June 30, 2024 the Audit Committee discharged its responsibilities by considering the following matters:

Issue

How this was addressed

Annual Report and Accounts

The Committee was required to provide advice to the Board on whether the Annual Report and Accounts, taken as a whole, provide a fair, balanced and understandable assessment of the Group’s financial position and future prospects and provide all information necessary to a shareholder to assess the Group’s performance, business model and strategy. The assessment was assisted by an internal verification of the factual content by management and a comprehensive review by the senior management team and the external auditors. Following its review, the Committee was of the opinion that the Annual Report and Accounts 2023/24 were representative of the year and present a fair, balanced and understandable overview, providing the necessary information for shareholders to assess the Group’s position and performance, business model and strategy.

Financial Reporting 2023/2024

The Committee reviewed whether suitable accounting policies had been adopted, and whether management had made the appropriate estimates and judgments. In addition, views were sought from the external auditor. To do so, the Committee received reports from the external auditor covering the key risk areas addressed during the year-end audit, and the auditors’ view of key judgments made by management. Specific issues addressed by the Committee for the period ended June 30, 2024 included:
* analyzing forward looking budgets
* advising on accounting for acquisitions and the impairment of goodwill and intangibles.
* advising on the provision for inventory given the disrupted market conditions.
* Review and discussion of the going concern assumptions both with management and the external auditor
* review and discussion of the key audit matters raised by the auditors.

The view of the Audit Committee on the key audit matters raised by the auditors in their audit opinion is discussed below. Based upon the business assurance process and discussions with management and the external auditor, the Committee was satisfied that the accounting disclosures and assumptions were reasonable and appropriate for a business of the Group’s size and complexity, that the external auditor had fulfilled its responsibilities in scrutinizing the financial statements for any material misstatements and that the disclosures were satisfactory.

Other topics

Other topics addressed by the Committee within the financial period 2023/24 included:
* Review and discussion of the recommendations on improvements of governance systems by the external consultant.

Key audit matters related to the financial accounts for the period ended June 30, 2024

Key audit matters are those matters that, in the judgment of the auditor, are most significant to their audit and which include the most significant assessed risks of material misstatements that they as auditor identified. Key audit matters are defined and discussed by the auditor in their opinion on page 44 to 50 of this annual report “5. Key audit matters”.

| Audit matter | Observation by the auditor

HeiQ plc
Annual Report 2
Corporate Governance

Financial Reporting 2023/2024

The Committee reviewed whether suitable accounting policies had been adopted, and whether management had made the appropriate estimates and judgments. In addition, views were sought from the external auditor. To do so, the Committee received reports from the external auditor covering the key risk areas addressed during the year-end audit, and the auditors’ view of key judgments made by management. Specific issues addressed by the Committee for the period ended June 30, 2024 included:
* analyzing forward looking budgets
* advising on accounting for acquisitions and the impairment of goodwill and intangibles.
* advising on the provision for inventory given the disrupted market conditions.
* Review and discussion of the going concern assumptions both with management and the external auditor
* review and discussion of the key audit matters raised by the auditors.

The view of the Audit Committee on the key audit matters raised by the auditors in their audit opinion is discussed below. Based upon the business assurance process and discussions with management and the external auditor, the Committee was satisfied that the accounting disclosures and assumptions were reasonable and appropriate for a business of the Group’s size and complexity, that the external auditor had fulfilled its responsibilities in scrutinizing the financial statements for any material misstatements and that the disclosures were satisfactory.

Other topics

Other topics addressed by the Committee within the financial period 2023/24 included:
* Review and discussion of the recommendations on improvements of governance systems by the external consultant.

Key audit matters related to the financial accounts for the period ended June 30, 2024

Key audit matters are those matters that, in the judgment of the auditor, are most significant to their audit and which include the most significant assessed risks of material misstatements that they as auditor identified. Key audit matters are defined and discussed by the auditor in their opinion on page 44 to 50 of this annual report “5. Key audit matters”.

| Audit matter | Observation by the auditor Guddi aur anchaarig asampann (A# HeiQ plc Annual Report 2023/24

Corporate Governance

Audit Committee Report

The calculation of the inventory provision requires management judgement to assess the demand from customers and the expected net realizable value based on the quantities held and expected sell through patterns. There is a risk that the stock is not valued at the lower of cost and NRV. There is also a risk that the inventory does not exist at year end and inventory is therefore misstated in the financial statements. The Audit Committee acknowledges the assessment by the auditors.

During the reporting period, the Company has reviewed its processes and accounting policies around inventory management, stock counting and inventory valuation. In addition, there has been a specific in-scope topic for the external financial reporting process review conducted in cooperation with Ernst & Young following the previous auditor’s feedback. To address this specific risk, updated and externally validated financial reporting processes and procedures around inventory have been put in place as of June 30, 2024.

Whistleblowing

The Group has a whistleblowing policy in place which sets out the formal process by which an employee of the Group may, in confidence, raise concerns about possible improprieties in financial reporting or other matters.

Anti-bribery

The Group has an anti-bribery and anti-corruption policy which sets out its zero-tolerance position and provides information and guidance to employees on how to recognize and deal with bribery and corruption issues.

Assessment of the effectiveness of the Committee

The Board conducted a formal assessment of its performance and that of its Committees during Q4 2024.

External auditor

The Committee considered the independence and effectiveness of the external auditor. This Annual Report is the first period RPG Crouch Chapman LLP has been auditing HeiQ and Paul Randall has been the audit partner for this period. When assessing the independence of the external auditor the Committee considered the fees paid to RPG Crouch Chapman LLP for non-audit services. The auditor has not provided any non-audit services to the Company during the period January 1, 2023 to June 30, 2024.

Karen Brade
Chair
October 30, 2024

Environmental, occupational, health and safety committee report

The following is the EOHS Committee Report for the period ended June 30, 2024.

There are three members of the EOHS Committee. I chair the Committee and the other members are Carlo Centonze and Karen Brade. Our biographies setting out our skills and qualifications can be found on page 44 to 45 of this report. Karen Brade and I are non-executive Directors. It is intended that the EOHS Committee meets at least twice a year, and the Committee is responsible for ensuring that the EOHS policy and practices are a core consideration across all functions of the Group. I report to the Board after each Committee, and I will attend each Annual General Meeting of the Group.

In the period between January 1, 2023 and June 30, 2024, the Committee has met three times, with all members in attendance. The EOHS Committee plays a vital role at HeiQ by ensuring that the Group has effective and appropriate EOHS policy and practices in place. I will ensure that the EOHS Committee provides the appropriate guidance, governance and oversight to the Board and management teams to ensure environmental, social and governance considerations continue to be an integral component of HeiQ’s global operations.

Duties of the EOHS Committee

Regular reviews

• Review the Group’s operations to ensure that the environment and making a positive contribution to society, is incorporated in all aspects of the Group’s development and the Group’s stated responsibilities with respect to environmental, social and EOHS policy.
• Conduct an assessment of the Group’s internal controls used to demonstrate and record conformity with the Group’s stated EOHS goals.
• The Committee shall review its own performance, constitution, and terms of reference and make recommendations to the Board about any matters arising.
• Furthermore, the Committee shall keep abreast of external trends or regulatory changes that may be relevant to the Group and its operations and understand shareholders’ views and expectations with regards to EOHS matters and take account thereof.

Recommendations to the Board

The Committee shall make recommendations to the Board with regards to changes to the Group’s existing environmental, occupational, health & safety, and policies and practices that it sees fit to ensure that the Group’s commitment to these is maintained and demonstrated. As the Group progresses through the financial year ending June 30, 2024 the Committee shall continue to assist the Board with the development of internal KPIs to allow the Group to assess its activities with respect to its stated goals and the method of monitoring and reporting on those KPIs.

Robert van de Kerkhof
Chair
October 30, 2024

Nomination committee report

The following is the Nomination Committee Report for the period ended June 30, 2024.

There are three members of the Nomination Committee. I chair the Committee and the other members are Karen Brade and Benjamin Bergo. We are all non-executive Directors. The Committee meets at least annually, close to the end of each financial year, and at such other times as the Nomination Committee requires.

In the period between January 1, 2023, and June 30, 2024, the Committee has met three times with all members in attendance.

Duties of the Nomination Committee

Regular reviews

• The Committee reviews regularly, and at least annually, the time required from a non-executive Director and whether each non- executive Director is spending enough time to fulfil his or her duties.
• The Committee reviews the structure, size, composition, skills, knowledge and experience of the Board and the leadership needs of the Group to ensure that the Group continues to compete effectively in its marketplace.
• The Committee undertakes to consider its own performance, constitution and terms of reference and makes recommendations to the Board about any matters arising.

Board appointments

The Committee is responsible for identifying and nominating, for the approval of the Board, candidates taken from a wide range of backgrounds to fill Board vacancies as and when they arise for any reason, including retirement by rotation. It evaluates, before making an appointment, the balance of skills, knowledge and experience on the Board and, in the light of this evaluation, prepares a description of the role and capabilities required for appointments. The Committee is required to give full consideration to succession planning in the course of its work, considering the challenges and opportunities facing the Group and the skills and expertise that will be needed on the Board in the future. The Committee ensures that, on appointment to the Board, non-executive Directors receive a contract setting out clearly what is expected of them in terms of time commitment, Committee service and involvement outside of Board meetings.

Recommendations to the Board

The Committee undertakes to make recommendations to the Board about plans for an orderly succession of the Chairman and non- executive Directors and a formal, rigorous and transparent procedure to be used by them. The Committee also considers and recommends, if appropriate, the reappointment of any non-executive Director at the conclusion of their specified term of office or under the retirement by rotation provisions in the Company’s Articles of Association. The Committee considers and makes recommendations on the membership of the Audit Committee, the Environmental, Occupation, Health and Safety Committee, the Nomination Committee, and the Remuneration Committee in consultation with the Chairmen/Chairwomen of those Committees. The Committee may also, at any time, recommend to the Board the appointment of additional non-executive Directors and any Executive Directors (if such are considered to be appropriate).

Assessment of the effectiveness of the Committee

The Board conducted a formal assessment of its performance and that of its Committees during Q4 2022.

Robert van de Kerkhof
Chair
October 30, 2024

Remuneration Committee Report

The following is the Remuneration Committee Report for the period ended June 30, 2024.

The Committee comprises two non-executive Directors, Benjamin Bergo (Chair) and Robert van de Kerkhof, and one Executive Director, Carlo Centonze.

In the period January 1, 2023 to June 30, 2024, three meetings of the Remuneration Committee were held. The Remuneration Committee will meet at least annually, and the Committee Chair shall attend each Annual General Meeting of the Company. No one shall be present during the discussion of, or vote on, matters regarding her/his own position. The Chair of the Board shall not chair the Committee meeting when it is dealing with the appointment of her successor. The committee may seek assistance from remuneration consultants if deemed necessary. During the period, no such assistance has been required.

Duties of the Remuneration Committee

Regular reviews

• The Committee reviews regularly, and at least annually, the time required from a non-executive Director and whether each non- executive Director is spending enough time fulfilling his or her duties.
• The Committee reviews comparable Company data to ensure that the Board is being adequately remunerated and to a level which will allow the Company to attract new Directors, the Remuneration Committee’s own performance, constitution and terms of reference and remuneration to ensure it is aligned to the implementation of the Company strategy and effective risk management, taking into account the views of shareholders and consultants as required.# Annual Report on Directors’ Remuneration (Audited)

The Directors are pleased to present their annual report on remuneration for the period 2023/24. The aim of the Remuneration Committee is to set clear objectives for each individual Executive Director and executive management team member relating to the Company’s KPIs plus individual and strategic targets taking into account where an individual has particular influence and responsibility. As no substantial changes were made to the remuneration of Executive and Non-Executive Directors, the major decision on directors’ remuneration was related to the annual cash bonus whereas it was decided not to pay any bonus amount in 2023 as performance measures have not been met. No discretion has been exercised in the award of directors’ remuneration. The second major decision was the grant of in total 10.300.000 share options for employees (none for Executive Directors) in 2024 as detailed in Note 27 to the Financial Statements.

Directors’ Remuneration Policy

The Company’s policy is to maintain levels of remuneration sufficient to attract, motivate and retain senior executives of the highest caliber who can deliver growth in shareholder value. Executive Directors’ remuneration currently consists of basic salary, benefits (including pensions allowance), performance-related bonus and participation in a share option plan. The Company continues to seek to strike an appropriate balance between fixed and performance-related rewards, reinforcing a clear link between pay and performance. The performance targets for staff, senior executives and the Executive Directors continue to be aligned to the key drivers of the business strategy, thereby creating a strong alignment of interest between staff, Executive Directors and shareholders. The Remuneration Committee will continue to review the Company’s remuneration policy and make amendments, as and when necessary, to ensure it remains fit for purpose and continues to drive high levels of executive performance and remains both affordable and competitive in the market. The policy as detailed below was approved by shareholders on June 25, 2021 by Annual General Meeting and requires renewal by the Annual General Meeting in the year 2024.

Benjamin Bergo
Chair
October 30, 2024

HeiQ plc Annual Report 2023/24 Corporate Governance 35

Policy table

Base salary

Purpose and link to strategy
To provide fixed remuneration to:
* help recruit and retain key individuals; and
* reflect the individual’s experience, role, rank and contribution within the Company.

Operation
The Remuneration Committee takes into account a number of factors when setting salaries, including:
* the scope and complexity of the role;
* the skills and experience of the individual;
* salary levels for similar roles within the industry;
* pay elsewhere in the Company.

Salaries are reviewed, but not necessarily increased, annually with any increase usually taking effect in Q1.

Performance conditions
None

Maximum opportunity
The current base salaries of the Directors can be found in the Directors’ Remuneration section. The Board retains discretion to make higher increases in certain circumstances, for example, following an increase in the scope and/or responsibility of the role or the development of the individual in the role or by benchmarking.

Other benefits

Purpose and link to strategy
To provide a basic benefits package, in order to help recruit and retain key individuals.

Operation
The Group may provide Directors and management as well as employees with accident insurance, pension insurance and similar benefits in line with legal requirements in the jurisdiction of employment of the respective employee.

Performance conditions
None

Maximum opportunity
Maximum opportunity will be the expense of providing the benefit.

Annual bonus

Purpose and link to strategy
To incentivize and reward the achievement of annual financial, operational and individual objectives which are key to the delivery of the Company’s short-term strategy.

Operation
Executive Directors and staff are eligible to participate in a discretionary bonus plan.
* Maximum bonus levels and the proportion payable for on-target performance are considered in the light of market bonus levels for similar roles among the industry sector.
* Objectives are set annually to ensure that they remain targeted and focused on the delivery of the Company’s short-term goals, which will usually be based on the annual budget.
* The Remuneration Committee sets targets which require appropriate levels of performance, taking into account internal and external expectations of performance. As soon as practicable after the year end, the Remuneration Committee meets to review performance against objectives and determines payout levels.

Performance conditions
At least 60% of the award will be assessed against Company metrics including operational, financial and non-financial performance. The remainder of the award will be based on performance against individual objectives. A sliding scale of between 0% and 100% of the maximum award is paid dependent on the level of performance.

Maximum opportunity
The maximum potential bonus entitlement for Executive Directors under the plan is up to 100% of base salary. The Board retains discretion to make higher increases in certain circumstances, for example, following an increase in the scope and/or responsibility of the role or the development of the individual in the role or by benchmarking.

HeiQ plc Annual Report 2023/24 Corporate Governance 36

Share Option Plan

Purpose and link to strategy
* To incentivize and reward the creation of long-term shareholder value.
* To align the interests of the eligible employees with those of shareholders.
* To help recruit and retain key individuals

Operation
Under the terms of the share option plan (the “Share Option Plan”), the Remuneration Committee may issue options over shares up to 10% of the issued share capital of the Company from time to time. Executive Directors and employees are eligible for awards. The exercise of options may be subject to the satisfaction of such performance conditions, if any, as may be specified and subsequently varied and/or waived by the Remuneration Committee.

Performance conditions
Vesting of the awards is dependent on financial, operational and/or share price measures, as set by the Remuneration Committee, which are aligned with the long-term strategic objectives of the Company. The relevant performance conditions will be set by the Remuneration Committee on the award of each grant.

HeiQ plc Annual Report 2023/24 Corporate Governance 37

Annual report on Directors’ remuneration (audited)

All current Directors except for the Chair took office upon Re-admission of the enlarged Group for trading on December 7, 2020 and have been re-elected at the Company’s annual shareholder meeting held on June 25, 2021. The Chair took office as a Director as of January 1 2024 and as Chair as of April 1 2024. The Executive Directors are employed under a service agreement, which is capable of termination by either party giving 12 months’ notice in writing. The non-executive Directors are employed under service agreements with notice periods of three months. The non-executive Directors are required to retire and seek re-election by the shareholders as required by the Articles or as the Board resolves. The Articles require all Directors to retire and seek re-election at the third AGM or general meeting (as the case may be) at which he or she was previously appointed. All Directors are required to seek re-election on the next general meeting. The Executive Directors have – in addition to the Director’s service agreement – entered into employment contracts with HeiQ Materials AG. The disclosed emoluments include the total compensation under both agreements.

Single figure of total Directors’ remuneration

Salary/fee	Pension benefits	Cash bonus payments	Currency of payment	Period 23/24	Year 2022	Period 23/24	Year 2022	Period 23/24	Year 2022
Carlo Centonze
	CHF 269,767	260,999	20,187	22,340	--
	GBP 52,500	35,000	––	--
Total in CHF*	329,134	302,281	20,187	22,340	--
Xaver Hangartner
	CHF 271,826	183,499	16,255	10,788	--
	GBP 52,500	35,000	––	--
Total in CHF*	331,193	224,782	16,255	10,788	--
Esther Dale-Kolb	GBP 87,500	70,000
Robert van de Kerkhof	GBP 20,000	n/a	-n/a	- n/a
Karen Brade	GBP 60,000	40,000
Benjamin Bergo	GBP 60,000	40,000
Total CHF	541,592	444,498	36,442	33,128	--
Total GBP	332,500	220,000

	Thereof fix remuneration		Thereof variable remuneration
Currency of payment	Period 23/24	Year 2022	Period 23/24	Yea r 2022	Period 23/24	Yea r 2022
Carlo Centonze
	CHF 289,954	283,339	289,954	283,339	--
	GBP 52,500	35,000	52,500	35,000	--
Total in CHF*	349,321	324,621	349,321	324,621	--
Xaver Hangartner
	CHF 288,081	194,287	288,081	194,287	--
	GBP 52,500	35,000	52,500	35,000	--
Total in CHF*	347,448	235,570	347,448	235,570	--
Esther Dale-Kolb	GBP 87,500	70,000	87,500	70,000
Robert van de Kerkhof	GBP 20,000	n/a	20,000	n/a	- n/a
Karen Brade	GBP 60,000	40,000	60,000	40,000	--
Benjamin Bergo	GBP 60,000	40,000	60,000	40,000	--
Total CHF	578,034	477,626	578,034	477,626	--
Total GBP	332,500	220,000	332,500	220,000

*To convert GBP into CHF, an average rate of 1.1308 was used for 2023/24 and## Statement of Implementation of Remuneration Policy

### Accrual Cash Bonus 2023 & 2024

The Executive Directors did participate in the annual cash bonus plan in 2022 and 2023 which is depending on the performance during the year 2022 and 2023 respectively. However, as performance conditions have not been achieved, no cash bonus was paid in 2023 nor in 2024. The relevant performance conditions were defined as follows, whereas the average achievement of all conditions has to be at least at 80%. In case of 100% average achievement, the cash bonus would equal 12.5% of the annual fixed salary and the maximum opportunity is capped at 25% of the annual fixed salary.

### HeiQ plc Annual Report 2023/24 Corporate Governance 38

Performance condition 2022

Target	Achievement	Achievement in %
Sales 2022 US$79.4 million	US$47.2 million	59%
Operating Profit 2022 US$8.7 million	US$-29.2 million	-436%
Net Profit 2022 US$6.1 million	US$29.8 million	-589%
Average achievement		-322%

Performance condition 2023

Target	Achievement	Achievement in %
Sales 2023 US$56.9 million	US$41.7 million	73%
Operating Profit 2023 US$3.3 million	US$-11.6 million	-451%
Net Profit 2023 US$2.4 million	US$-14.0 million	-683%
Average achievement		-354%

As the average achievement is lower than 80%, no cash bonus payment was earned in 2023 and 2024.

### Share options issued to Directors under the Company’s share option plan:

In the period ending June 30, 2024, no options have been awarded to any Director. In the year 2022, 224,000 options have been awarded to each of the Executive Directors.

Period ended June 30, 2024	Year ended December 31, 2022
Number of share options awarded to Executive Directors
Carlo Centonze -	224,000
Xaver Hangartner -	224,000

### Directors’ interest

The Directors’ interests for disclosure purposes are as follows:

Directors’ interest	Number of interest in shares as of December 31, 2022	Shares purchased / (sold) on market in the period	Number of interest in shares as of June 30, 2024	Number of interests in share options 2 as of December 31, 2022	Share options lapsed in the period	Number of interest in share options 3 as of June 30, 2024	% shares and options held of total shares in issue as at June 30, 2024
Carlo Centonze 1	14,556,362	8,725,748	23,282,110	1,344,000	-877,333	466,667	14.09%
Xaver Hangartner	493,746	73,368	567,114	1,344,000	-877,333	466,667	0.61%
Robert van de Kerkhof	-	-	-	--	-	-	0.00%
Karen Brade	7,976	32,287	40,263	-	-	-	0.00%
Benjamin Bergo	284,853	284,853	-	-	-	-	0.17%

1. Including shares owned by close relatives and controlled entities.
2. All share options are subject to performance measures.
3. 242,667 options have vested during the period for each of the Executive Directors.

The Company has a policy on dealing with HeiQ plc shares which also applies to Executive Directors. Executive Directors are required to option clearance for any share dealing in advance and must notify the Company and FCA on any share dealing. Further, they are restricted from dealing during defined closed periods or during any period when there exists any matter which constitutes inside information. Persons closely associated with Executive Directors and their investment managers are also subject to the policy. In the period ending June 30, 2024, the requirements of the policy have been met by the Executive Directors. The Company does not have a shareholding guideline for Executive Directors in place.

### Payments for loss of office / Payments to past directors

No payments were made to Directors for loss of office or to any past Directors in the period ended June 30, 2024 (year ended December 31, 2022: nil).

### Table of CEO remuneration

Period / Year	CEO	CEO single figure of total remuneration CHF’000 1	Annual bonus payout against maximum opportunity %	Option vesting rates against maximum opportunity %
01.01.2023 - 30.06.2024	Carlo Centonze	349	0%	21.67%
2022	Carlo Centonze	324	0%	n/a 2
2021	Carlo Centonze	379	59%	n/a 2

1. To convert GBP into CHF, an average rate of 1.1308 was used for the period 2023/2024, 1.1795 for year 2022 and of 1.2575 for year 2021.
2. No incentives have been vesting during that period.
3. HeiQ plc listed on December 7, 2020. Therefore, no disclosure has been done for the year 2020 as not representative.

### HeiQ plc Annual Report 2023/24 Corporate Governance 39

### Percentage change in remuneration of the Directors and Average Employee

The table below shows the movement in salary, taxable benefits and annual incentives for each of the Directors between the current period (annualized) and prior years at fixed exchange rates compared to the remuneration of the Average Employee 1 :

	Executive Directors	Non-executive Directors 2	Average Employee 1
	Carlo Centonze	Xaver Hangartner	Esther Dale
Base salary
2022 - 2023/2024	-3.1%	-28%	-2%
2021 - 2022 5	-1.5%	-4%	0%
2020 - 2021	18%	n/a	n/a
Taxable benefits 3
2022 - 2023/2024	-29.6%	-	-
2021 - 2022 5	45%	-	-
2020 - 2021	23%	n/a	n/a
Annual incentive 4
2022 - 2023/2024	-29.5%	0%	0%
2021 - 2022 5	14%	-100%	-100%
2020 - 2021	-17%	n/a	n/a

1. Average Group employee data is based on the employee remuneration costs and average number of employees of HeiQ plc and HeiQ Materials AG from which also the Directors received their compensation, with costs for the executive and non-executive Directors removed.
2. Non-executive Directors do not receive taxable benefits or annual incentives.
3. Taxable benefits include car and other transportation allowances and housing allowances. Directors do not receive taxable benefits.
4. Total annual Incentive includes cash bonus payments and commissions.
5. All Directors except Robert van de Kerkhof have assumed their role in December 2020. For years when the Director did not serve the full year the calculation has not been made as it is not representative.

### Total Shareholder Return performance

The graph below shows the TSR performance since December 7, 2020, the day when HeiQ plc relisted after the reverse takeover of HeiQ Materials AG, against the FTSE (All) Index and the AIM Index. These indices have been selected as the most relevant comparators for the Company across the time period reflected in the graph below due to HeiQ’s main market listing and considering the Company’s market capitalization and size. The middle market price of an ordinary share at the close of business on January 3, 2023 and June 28, 2024 (being the first and last days the London Stock Exchange was open for trading in period ending June 30, 2024) was 55.00 pence and 11.975 pence respectively, and during that period ranged between a high of 55.00 pence and a low of 8.44 pence.

### Relative importance of the spend on pay

The following table shows the total expenditure on pay for all of the Group’s employees compared to distributions to shareholders by way of dividend. In order to provide context for these figures, operating profit(loss) is also shown.

### HeiQ plc Annual Report 2023/24 Corporate Governance 40

	Period ended June 30, 2024	Year ended December 31, 2022	Change in %
Employee renumeration costs (Note 12 of financial statements)	US$’000 24,707	US$’000 17,807
Distributions to shareholders	0	0	0%
Operating loss	(17,550)	(29,245)

## Statement of implementation of Remuneration Policy in 2024/2025 (unaudited)

Information on how the Company intends to implement the Executive Directors’ Remuneration Policy in the period ending June 2025 is set out below. No significant changes in the way that the remuneration policy will be implemented in the next financial period are foreseen.

### Base salary

Currency	Period 2024/2025	Period 2023/2024	Change in % (annualized, rounded)
Carlo Centonze	CHF 180,000	269,767	0%
	GBP 35,000	52,500	0%
Xaver Hangartner	CHF 183,500	271,826	0%
	GBP 35,000	52,500	0%

### Taxable benefits & Expense allowances

As in the previous year, no taxable benefits are foreseen. The directors do not receive any expense allowances as part of their director’s remuneration. Expenses like travel expenses are reimbursed at actual costs and not considered as part of the compensation.

### Pension benefits

Executive Directors receive pension benefits as per the legally required pension benefit plan in Switzerland. No significant changes to the pension plan are foreseen for the next financial period.

### Annual Cash Bonus

The Committee has set targets for the year focused on adjusted operating profit, revenue and cash flow. The target details are considered commercially sensitive and therefore will only be disclosed on a retrospective basis in the 2024/2025 annual report. In case overall performance achievement is below 60% of target, no bonus is paid. The maximum annual cash bonus paid is equivalent to 25% of the fixed annual renumeration.

### Option grants

It is foreseen that in course of 2024/2025, additional options will be granted to the Executive Directors under the existing option plan.

## Statement of shareholder voting

At the 2023 AGM on December 1 2023 the results of shareholder voting on remuneration matters were as follows:

Approval of the Report on Directors’ remuneration for the year ending December 31, 2022.

Votes for 1	For %	Votes against	Against %	Votes cast	Votes withheld 2
33,834,919	98.64	466,248	1.36	34,301,167	11,719

The most recent binding vote for the Company’s Remuneration Policy was also approved by shareholders at the 2021 AGM and effective from June 25 2021:

Votes for 1	For %	Votes against	Against %	Votes cast	Votes withheld 2
47,540,743	86.75	7,260,301	13.25	54,801,044	124,537

1. The “For” vote includes those giving the Company Chairman discretion.
   2.# HeiQ plc Annual Report 2023/24

Corporate Governance 41

Directors’ report

The Directors’ Report for the period ended June 30, 2024 comprises pages 41 to 43 of this report, together with the sections of the Annual Report incorporated by reference.

Directors

The names and biographical details of the current Directors are shown on page 24 of this report.

Name	Date of appointment	Date of resignation
Benjamin Bergo	December 7, 2020
Karen Brade	December 7, 2020
Carlo Centonze	December 7, 2020
Esther Dale-Kolb	December 7, 2020	March 31, 2024
Xaver Hangartner	December 7, 2020
Robert van de Kerkhof	January 1, 2024

Particulars of the Directors’ emoluments and their beneficial and non-beneficial interests in the shares of the Company are shown on page 38.

Powers of the Directors

The Directors manage the business under the powers set out in the Company’s Articles of Association. These powers include the ability to issue or buy back shares. Shareholders’ authority to empower the Directors to buy back up to 10% of the Company’s issued share capital will be sought at the Annual General Meeting. The Company’s Articles of Association can only be amended, or new Articles adopted, by a resolution passed by shareholders in a general meeting by at least three-quarters of the votes cast.

Directors’ indemnity provisions

Throughout the year/period under review the Company has maintained directors’ and officers’ liability insurance cover in respect of the acts or omissions of its Directors and continues to do so. Details of the policy are provided to new Directors on appointment. In common with other companies, the Group has made qualifying third-party indemnity provisions for the benefit of its Directors against liabilities incurred in the execution of their duties.

Political donations

The Company made no political donations and incurred no political expenditure during the year/period under review.

Dividend

The Directors have declared that no dividend would be paid in the year 2024.

Substantial interests

Information provided to the Company pursuant to the Financial Conduct Authority’s (FCA) Disclosure Guidance and Transparency Rules (DTRs) is published on a Regulatory Information Service and on the Company’s website. As at October 25, 2024, the following information has been received, in accordance with DTR 5, from holders of notifiable interests in the Company’s issued share capital.

Notifiable interest	Voting rights	% of capital disclosed	Nature of holding
Darren Morcombe	37,047,587	21.98%	Ordinary Shares
Cortegrande AG ¹	13,995,030	8.30%	Ordinary Shares
Carlo Centonze	10,287,080	6.10%	Ordinary Shares
Dr. Murray Height	8,018,063	4.76%	Ordinary Shares
Bombyx Growth Fund SC	7,385,355	4.38%	Ordinary Shares
Premier Miton Group plc	6,827,500	4.05%	Ordinary Shares
FIL Limited	5,357,000	3.18%	Ordinary Shares

¹ A company wholly owned by Carlo Centonze and of which he is the sole director.

HeiQ plc Annual Report 2023/24 Corporate Governance 42

Other information relevant to this Directors’ Report can be found on the following pages of this Report:

Topic	Page(s)
Share capital	103
Future developments	1, 6
Research and development	2 to 6
Financial risk management objectives and policies	90 t o 92
Events after the balance sheet date	95
Employee share option schemes	79
Restrictions on voting rights	102
Branches outside the UK	105
Engagement with employees	14
Engagement with suppliers, customers and others	14 to 16
Streamlined Energy & Carbon Reporting	8 to 9

Annual General Meeting

The Company’s Annual General Meeting will be held at the offices of Charles Russell Speechly LLPs, 5 Fleet Place, London EC4M 7RD on Monday November 25, 2024 at 12.00 p.m. London time.

Disclosure of information to the auditors

The Directors, who were in office on the date of the approval of this report, confirm that, so far as they are aware, there is no relevant audit information of which the Company’s auditor is unaware and that they have taken all reasonable steps to make themselves aware of any relevant audit information and to establish that the Company’s auditor is aware of that information. This confirmation is given and should be interpreted in accordance with the provisions of s418 of the Companies Act 2006.

Going Concern

The Consolidated Financial Statements have been prepared on a going concern basis, which contemplates the continuity of normal business activity and the realization of the assets and the settlement of liabilities in the normal course of business. The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic Report on pages 2 to 23. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Financial Review on pages 17 to 19 and in Note 31 to the financial statements. In addition, Notes 41 and 42 to the financial statements include the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments; and its exposures to credit risk and liquidity risk. The Group’s forecasts and projections for the next 12 months reflect the very challenging trading environment and show that the Group should be able to operate within the level of its current facility for at least 12 months from the date of signature of these financial statements if the facility drawdowns remain available. While the facilities are not committed, the Board has not received any indication from financing partners that the facilities are at risk of being terminated. In course of 2024, monthly respectively quarterly reductions of the credit facilities have been agreed with the financing partners. Nevertheless, the Board acknowledges the uncommitted status of the facilities which could be terminated during the forecast period requiring the refinancing of debts as per maturity dates disclosed in the Financial Review on page 19, indicates that a material uncertainty exists that may cast significant doubt on the Group's ability to continue as a going concern, and therefore the Group may not be able to realize its assets and discharge its liabilities in the normal course of business. After considering the forecasts, sensitivities, and mitigating actions available to management and having regard to the risks and uncertainties to which the Group is exposed (including the material uncertainty referred to above), the Group’s directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and operate within its credit facilities for the period 12 months from date of signature. Accordingly, the financial statements continue to be prepared at the going concern basis.

Statement of Directors’ responsibilities in respect of the annual report and financial statements

The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors are required to prepare the group financial statements in accordance with United Kingdom adopted international accounting standards. The financial statements also comply with International Financial Reporting Standards (IFRSs) as issued by the IASB. The directors have also chosen to prepare the parent company financial statements under United Kingdom adopted international accounting standards. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, International Accounting Standard 1 requires that directors:
• properly select and apply accounting policies;
• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
• provide additional disclosures when compliance with the specific requirements of the financial reporting framework are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance; and
• make an assessment of the company’s ability to continue as a going concern.

HeiQ plc Annual Report 2023/24 Corporate Governance 43

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.# Responsibility statement

We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole;
• the strategic report includes a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and
• the annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the company’s position and performance, business model and strategy.

This responsibility statement was approved by the board of directors on October 30, 2024 and is signed on its behalf by:

Ross Ainger
Company Secretary

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HeiQ plc Annual Report 2023/24 Financial Statements 44

Independent auditor’s report to the members of HeiQ plc

1. Opinion

We have audited the financial statements of HeiQ PLC (the ‘Company’) and its subsidiaries (the ‘Group’) for the 18-month period ended 30 June, 2024 which comprise the:

• Consolidated statement of profit and loss and other comprehensive income;
• Consolidated and Parent Company statements of financial position;
• Consolidated and Parent Company statements of changes in equity;
• Consolidated and Parent Company statements of cash flows; and
• Notes to the financial statements, including a summary of significant accounting policies.

The financial reporting framework that has been applied in their preparation is applicable law and UK adopted international accounting standards (‘IFRS’).

In our opinion the financial statements:

• give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 30 June 2024
• and of the Group’s loss for the period then ended;
• have been properly prepared in accordance with applicable law and UK-adopted international accounting standards; and
• have been prepared in accordance with the requirements of the Companies Act 2006.

2. Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We confirm that we have not provided any non-audit services prohibited by the FRC’s Ethical Standard to the Group or the Parent Company. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

3. Material uncertainty related to going concern

We draw attention to note 3.b in the financial statements, which indicates that a material uncertainty exists that may cast significant doubt on the Group and Parent Company’s ability to continue as a going concern due to the uncommitted nature of credit facilities that may be terminated during the going concern period. The Group has access to credit facilities totaling CHF8.06 million (approximately US$9.3 million) as of September 30, 2024 in place with two banks but with materially the same conditions. The facilities are not limited in time, can be terminated by either party at any time and allow overdrafts and fixed cash advances with a duration of up to twelve months. If one or the other party terminates the agreement, fixed cash advances become due upon their defined maturity date. One credit facility is being reduced monthly by CHF0.02 million (approximately US$0.02 million) and the other facility is being reduced quarterly by CHF0.2 million (approximately US$0.23 million) until December 31, 2024 and CHF0.25 million (approximately US$0.29 million) per quarter thereafter.

The Group’s forecasts and projections for the next 12 months reflect the very challenging trading environment but show that the Group should be able to operate within the level of its current facilities for at least 12 months from the date of signature of these financial statements if the facility drawdowns remain available. However, the uncommitted status of the facilities, which could be terminated during the forecast period requiring the refinancing of debts indicates that a material uncertainty exists that may cast significant doubt on the Group’s and Parent Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

We have highlighted going concern as a key audit matter. In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the Group’s and Parent Company’s ability to continue to adopt the going concern basis of accounting included:

• Obtaining an understanding of the financing facilities available to the Group, including repayment terms and considering whether there were any covenants;
• Assessing the status of the Group’s refinancing options with management involved in the negotiations with lenders;
• Testing the accuracy of the model used to prepare the Group’s cash flow forecasts;
• Evaluating the consistency of the Directors’ forecasts with other areas of the audit, including asset impairments, revenue recognition for long-term contracts, and investment in subsidiaries and intercompany recoverability;
• Challenging the key assumptions within the going concern assessment including those in the Group’s strategy which relate to revenue growth and cash flow generation. We have challenged these with reference to historical trading performance, subsequent period results, market expectations, and assessing whether the Group’s latest savings measures and sales initiatives were reasonable;
• Assessed the feasibility of mitigating actions available to the Directors, should these be required, if the forecast performance is not achieved; and
• Assessed the appropriateness of the Group’s disclosures over the going concern basis and the material uncertainty arising with reference to our knowledge and understanding of the assumptions taken by the Directors.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

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HeiQ plc Annual Report 2023/24 Financial Statements 45

4. Summary of our audit approach

Key audit Matters

The key audit matters that we identified in the current year were:

• Material uncertainty related to going concern (refer to section 3 above)
• Management Override of Control – presumed by ISA’s
• Revenue recognition – presumed by ISA’s
• Impairment of intangible assets and goodwill
• Carrying Value of Investments in subsidiaries / associates
• Provision for obsolete and excess inventory
• Deficiencies in the internal control environment

Materiality

The consolidated statement of financial position materiality that we used for the Group financial statements was $760,000, which was determined on the basis of net assets of the Group. Due to it being an 18 month period, a separate materiality of $620,000 was determined for the statement of profit and loss and other comprehensive income, this was based upon Group revenue.

Scoping

We focused our Group audit on 17 components which account for 99% of the Group’s revenue, 99% of the Group’s losses and 99% of the Group’s net assets.

Significant changes in our approach

The following key audit matters were identified by the previous auditor in the prior year, but we do not consider them to be key audit matters for the current year:

• Recoverability of accounts receivable on contracts with customers

The following are new key audit matters we identified in the current year, primarily due to the level of audit effort required in these areas including consideration of misstatements identified:

• Carrying Value of Investments in subsidiaries / associates

5. 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 of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Management Override of Control – presumed by ISA’s

Our audit work included Management override of controls is a presumed risk of fraud under the International Auditing Standards. Professional standards require us to communicate the fraud risk from management override of controls as significant because management is typically in a unique position to perpetrate fraud because of its ability to manipulate accounting records and prepare fraudulent financial statements by overriding controls that otherwise appear to be operating effectively.

• Obtained a listing of manual journals entered into the accounting system in the year and reviewing a sample of these against a range of different criteria.# Independent Auditor's Report

Audit of HeiQ plc Financial Statements

Our audit work included:

• Reviewed post year-end journals posted for evidence of any prior year transactions not included within the financial statements or any subsequent amendments.
• Reviewed the consolidation workings and journals entered in respect of this process for evidence of management override.
• Reviewed management estimations, judgements and significant accounting policies for undue bias in the financial statements.
• Developed an understanding of the internal financial procedures, systems and controls in place across the Group.
• Reviewed unadjusted audit differences for indications of bias or deliberate misstatement.
• Applied professional scepticism throughout our audit procedures.

Revenue recognition on long-term contracts with customers – Presumed by ISA’s

Our audit work included Revenue recognition is a presumed risk of fraud under the International Auditing Standards. There is a risk around the occurrence and cut-off of revenues. Management can manipulate revenues and may do so to inflate profits and the attractiveness of the group. This risk is considered more significant because the group is reliant upon external funding.

• Updated our understanding of the internal control environment in operation for the material income streams and undertook walk-throughs.
• A review of the revenue recognition policy in line with IFRS 15 requirements.
• For revenue recognised over a period of time (in HeiQ Materials AG, HeiQ GrapheneX AG and HeiQ RAS AG) we tested the revenue has been recognised in line with the performance obligations, as detailed in the contracts.
• For ‘ship and bill’ transactions, we substantively tested the income recognised in the financial statements.
• Reviewed a sample of revenue recorded on either side of the year to ensure cut-off is applied accurately.
• Reviewed post year-end credit notes for evidence of occurrence of revenue in the period that should not be recognized.
• Ensured disclosures in the financial statements are appropriate.

Impairment of intangible assets and goodwill

Our audit work included The Group carries a material amount of goodwill relating to the subsidiary undertakings that have been acquired. Within 12 months of acquisition, Management are required under IFRS 3 to conduct a purchase price allocation to allocate the goodwill, where applicable, to separately identifiable intangible assets and to finalize their assessment of the fair value of assets and liabilities acquired. Both areas require management judgement and estimation. Furthermore, internally developed assets should comply with IAS 38. HEIQ have a material amount of internally developed assets and therefore this carries a material risk of overstatement in the financial statements.

• Obtained management’s PPA allocation assessment for newly acquired company and reviewed the relating valuation methods for reasonableness.
• Ensured that internally generated assets are capitalised and measured in accordance with recognition criteria in IAS 38. Challenged the continued existence of intangible assets based on internal and external evidence of commercial and technical feasibility via inquiry and discussion with management.
• Identified external and internal indicators of impairment based on knowledge built via audit procedures and external environment it operates in. Investigated all indicators of impairment to ensure that assets are valued at an appropriate carrying amount and challenged management where appropriate.
• Reviewed and assessed the assumptions implicit within impairment reviews for reasonableness. Enquired into the underlying assumptions supporting valuations and corroborated assumptions and valuations to available data.
• Ensured that the charge on disposals within the year is complete and calculated accurately and accurately presented within the accounts.
• Obtained supporting documentation to verify the existence and ownership for appropriate sample of intangible assets. Ensured that amounts are correctly capitalised and measured within the financial statements.

Carrying Value of Investments in subsidiaries / associates (parent company only)

Our audit work included The parent company has a material investment in subsidiary undertakings. The carrying value of this balance is ultimately dependent on the performance of those subsidiaries. The parent company also has a material receivable what is owed by subsidiary undertakings. The valuation and recoverability of these amounts is therefore a risk, on the basis that their values may be impaired.

• Obtained documentary evidence as proof of ownership of subsidiaries.
• Obtained management’s impairment assessments for investments and receivables. We then corroborated and challenged the assumptions used by management.
• Assessed the net asset value of the group, in comparison to the market capitalization value.
• Reviewed the latest subsidiary financial information to confirm the performance against budgets and forecasts.
• Considered the appropriateness of disclosures included in the financial statements.

Provision for obsolete and excess inventory

Our audit work included Stock represents a material balance within the financial statements ($8.3m at 30 June 2024). The Group's accounting policy for providing for obsolete and excess inventory is based upon the forecast of market demand and the assessment of whether stock on hand is likely to be used. The inventory obsolescence provision is an accounting estimate with high estimation uncertainty due to the significance of judgements and assumptions made including future projected sales. In addition, specific provisions are made for known products which management considers unlikely to be sold at a

• Stock take – we attended the year end stock counts for HeiQ Chemtex Inc. (both Concord and Calhoun), HeiQ Materials AG, HeiQ Chrisal and HeiQ China. Local management were sought to provide explanations for any differences, with unexplained errors being extrapolated across the full population.
• For a sample of raw materials, we tested stock items to purchase invoices to ensure that stock is recorded at the appropriate costs.
• For a sample of stock items, we tested the valuation of finished goods against post period end selling prices to confirm that the net realisable value is greater than cost.

HeiQ plc Annual Report 2023/24 Financial Statements 47

positive margin. The calculation of the inventory provision requires management judgement to assess the demand from customers and the expected net realisable value based on the quantities held and expected sell through patterns. There is also a risk that stock is not valued at the lower of cost and NRV. There is also a risk that the inventory does not exist at year end and inventory is therefore misstated in the financial statements.

• We traced the allocation of overheads costs to finished goods by agreeing the elements of the calculation to the appropriate accounting records such as labour costs.
• Provision: We focused on the main operating entities regarding the stock provisions in place as at year end. Detailed workings and a thorough understanding of the process was obtained to support the assessment of stock provisions. Assumptions inputted in the provision workings were considered carefully on a local entity by entity basis. Budget optimism adjustments were considered as part of the assessment and concluded to be prudent. Lengthy discussion and challenge of management was conducted with the BL entity to ascertain if the lack of provision was appropriate, with the audit team concluding this to be reasonable. Local entity inputs and preparation of the year end provision were ultimately deemed to be reasonable and prudent.

Deficiencies in the internal control environment

Our audit work included As discussed in the Audit Committee Report, one of the main focuses of the Audit Committee during the period was an extensive remediation exercise of the Group’s control environment. Ernst and Young have been engaged during the reporting period to perform a review and to then assist with the implementation of a new financial risk and management framework.

• A fully substantive audit approach was performed, there was no reliance upon controls.
• Performance materiality for higher risk areas of audit testing was set at a lower level, to increase the chances of us identifying misstatements within the financial statements.
• The reduced Performance materiality levels resulted in us testing higher sample sizes than we ordinarily would.
• We increased our coverage by performing specific audit procedures on a total of 17 components.

6. Our application of materiality

6.1. Materiality

We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work. Based on our professional judgment, we determined materiality for the financial statements as a whole as follows:

Materiality – Group

Due to the reporting period being 18-months, we have determined that separate materiality thresholds will be set for the consolidated statement of financial position and the consolidated statement of profit and loss and other comprehensive income. For the Group consolidated statement of profit and loss and other comprehensive income, materiality is based upon turnover as the group is trading but is loss making. We selected 1% for group materiality as the entity is Main Market listed and the number of adjustments identified by the prior year auditor, we felt a percentage at the lower end of the usual range is appropriate. This resulted in an overall materiality of $620,000 being used. For the Group consolidated statement of financial position, materiality is based upon net assets.# 6. Materiality

We selected 3% for the same reasons as listed above, being at the lower end of the usual range. This resulted in an overall materiality of $760,000 being used.

Materiality – Parent

Due to the reporting period being 18-months, we have determined that separate materiality thresholds will be set for the statement of financial position and the statement of profit and loss and other comprehensive income.

For the statement of profit and loss and other comprehensive income, materiality is based upon loss before tax, on the basis that no revenue is generated in the period. We selected 5% for materiality as the entity is Main Market listed and the number of adjustments identified by the prior year auditor, we felt a percentage at the lower end of the usual range is appropriate. This resulted in an overall materiality of $130,000 being used.

For the statement of financial position, materiality is based upon net assets. We selected 3% for the same reasons as listed above, being at the lower end of the usual range. Due to the large investment value in the accounts, this would have produced an excessively high materiality figure, so we chose to reduce the figure to $100,000.

6.2. Performance materiality

We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements exceed the materiality for the financial statements as a whole.

6.3. Error reporting threshold

We agreed with the Audit Committee that we would report all group audit differences in excess of $38,000 for the consolidated statement of financial position, and $30,000 for the consolidated statement of profit and loss and other comprehensive income, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.

HeiQ plc Annual Report 2023/24 Financial Statements 48

For the HeiQ PLC Company statement specific balances we agreed that we would report all audit differences in excess of $6,500 for the statement of financial position, and $5,000 for the statement of profit and loss and other comprehensive income, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.

7. An overview of the scope of our audit

7.1. Identification and scoping of components

Our Group audit was scoped by obtaining an understanding of the Group and its environment, including Groupwide controls, and assessing the risks of material misstatement at the Group level. We focused our Group audit on specified balances across 17 components, where the extent of our testing was based on our assessment of the risks of material misstatement and of the materiality of the Group’s operations at those components. In total, the audited entities represent the principal business units and account for 99% of the Group’s revenue, 99% of the Group’s losses and 99% of the Group’s net assets. They were also selected to provide an appropriate basis for undertaking audit work to address the risks of material misstatement identified above.

Our audit work at the components, excluding the Parent company, was executed at levels of materiality applicable to each individual entity which were lower than Group materiality and ranged from $100,000 to $350,000 for Income statement and $100,000 to $310,000 for Balance Sheet. At the Group level we also tested the consolidation process and carried out analytical procedures to confirm our conclusion that there were no significant risks of material misstatement of the aggregated financial information of the remaining components not subject to audit or audit of specified account balances. All audit work for the purpose of expressing an opinion on the Group’s financial statements is performed by RPG Crouch Chapman, except the inventory count observation of HeiQ China that was performed by another audit firm.

7.2. Our consideration of the control environment

As described in the Audit Committee report on page 49 and the Key Audit Matter in section 5.1, we identified significant weaknesses in the Group’s internal control environment. The Company has not developed robust processes relating to the risk associated with the material account balances and transactions. In addition, new business risks are addressed and discussed on an “ad hoc” basis, often with no documentation.

7.3. Working with other auditors

We utilised Shanghai ZhongJian CPA Firm (a China based accounting firm) to perform an in-person stockcount attendance at the China stock warehouse on our behalf. Otherwise, all audit work was performed by RPG Crouch Chapman.

8. Other information

The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

9. Responsibilities of directors

As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Group’s and the Parent Company’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group's financial reporting process.

HeiQ plc Annual Report 2023/24 Financial Statements 49

10. Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below:

• Enquiries of management, including obtaining and reviewing supporting documentation concerning the Group’s policies and procedures relating to;
  • Identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non- compliance
  • Detecting to and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud
• Discussions amongst the engagement team regarding how and where fraud might occur in the financial statements and any potential indicators of fraud.

We also obtained an understanding of the legal and regulatory framework that the Group and Company operates in, focusing on provisions of those laws and regulations that had a direct effect on the determination of material amounts and disclosures included within the financial statements. The key laws and regulations we considered in this context included the UK Companies Act and IFRS. In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but compliance with which may be fundamental to the Group and Company’s ability to operate or to avoid a material penalty. These included health and safety regulations, employment law, data protection regulations and general trading laws in the UK and Australia.

As a result of these procedures, we consider the particular areas that were susceptible to misstatement due to fraud were in respect of revenue recognition, management override of controls, investment valuations and intangible valuations.Our procedures to respond to these risks identified included the following;
* Reviewing the financial statement disclosures and testing these to supporting documentation to asses compliance with provisions of relevant laws and regulations described as having a direct effect on the financial statements
* Enquiring with management concerning actual and potential litigation claims
* Performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud
* Agreeing investment and intangible valuations to supporting documentation and recalculating.
* Reviewing management impairment assessments and challenging assumptions made to ensure valuations of intangibles and investments are reasonable
* Reviewing board minutes and legal and professional fees during the year and any subsequent to the year end to identify any potential litigation not previously disclosed
* In addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments for evidence of management override/bias and agreeing these to supporting documentation.
* Assessing whether the judgements made in making accounting estimates are indicative of a potential bias and evaluating the rationale of any significant transactions that are deemed unusual or outside of the normal course of the Group and Company’s operations.

Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditor's Report.

Report on other legal and regulatory requirements

11. Opinions on other matters prescribed by the Companies Act 2006

In our opinion the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006.

In our opinion, based on the work undertaken in the course of the audit:
* the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
* the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the Group and the Parent Company and their environment obtained in the course of the audit, we have not identified any material misstatements in the strategic report or the directors’ report.

HeiQ plc Annual Report 2023/24
Financial Statements
50

12. Matters on which we are required to report by exception

12.1. Adequacy of explanations received and accounting records

Under the Companies Act 2006 we are required to report to you if, in our opinion:
* we have not received all the information and explanations we require for our audit; or
* adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or
* the Parent Company financial statements are not in agreement with the accounting records and returns.

We have nothing to report in respect of these matters.

12.2. Directors’ remuneration

Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors’ remuneration have not been made or the part of the directors’ remuneration report to be audited is not in agreement with the accounting records and returns.

We have nothing to report in respect of these matters.

13. Other matters which we are required to address

13.1. Auditor tenure

We were appointed on 30 May, 2024 and this is the first year of our engagement as auditors for the Group. We confirm that we are independent of the Group and Parent Company and have not provided any prohibited non-audit services, as defined by the Ethical Standard issued by the Financial Reporting Council as applied to listed public interest entities, and we have fulfilled our ethical responsibilities in accordance with these requirements. Our audit report is consistent with our additional report to the Audit Committee explaining the results of our audit.

14. Use of our report

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

As required by the Financial Conduct Authority (FCA) Disclosure Guidance and Transparency Rule (DTR) 4.1.15R and 4.1.18R, these financial statements will form part of the Electronic Format Annual Financial Report filed on the National Storage Mechanism of the FCA in accordance with DTR 4.1.15R-DTR 4.1.18R. This auditor’s report provides no assurance over whether the Electronic Format Annual Financial Report has been prepared in compliance with DTR 4.1.15R-DTR 4.1.18.

Paul Randall BA FCA (Senior statutory auditor)
For and on behalf of RPG Crouch Chapman Statutory Auditor
London, United Kingdom
October 30, 2024

HeiQ plc Annual Report 2023/24
Financial Statements
51

Consolidated statement of profit and loss and other comprehensive income

	Period ended June 30, 2024	Year ended December 31, 2022
US$’000	US$’000	US$’000
Revenue	62,318	47,202
Cost of sales	(39,485)	(33,745)
Gross profit	22,833	13,457
Other income	4,642	4,832
Selling and general administrative expenses	(43,769)	(30,969)
Impairment loss on intangible assets	(323)	(11,651)
Impairment loss on property, plant & equipment	-	(730)
Other expenses	(2,365)	(4,184)
Operating loss	(18,982)	(29,245)
Finance income	202	683
Finance costs	(1,643)	(1,273)
Loss before taxation	(20,423)	(29,835)
Income tax	(915)	21
Loss after taxation	(21,338)	(29,814)
Other comprehensive income:
Exchange differences on translation of foreign operations	466	(1,914)
Items that may be reclassified to profit or loss in subsequent periods	466	(1,914)
Actuarial gains/(losses) from defined benefit pension plans	(178)	1,380
Income tax relating to items that will not be reclassified subsequently to profit or loss	42	(276)
Items that will not be reclassified to profit or loss in subsequent periods	(136)	1,104
Other comprehensive loss for the year	330	(810)
Total comprehensive loss for the year	(21,008)	(30,624)
Loss attributable to:
Equity holders of HeiQ	(20,839)	(29,251)
Non-controlling interests	(499)	(563)
	(21,338)	(29,814)
Total Comprehensive loss attributable to:
Equity holders of the Company	(20,509)	(30,061)
Non-controlling interests	(499)	(563)
	(21,008)	(30,624)
Loss per share:
Basic (cents)*	(13.18)	(21.92)

*The effect of share options is anti-dilutive and therefore not disclosed.

HeiQ plc Annual Report 2023/24
Financial Statements
52

Consolidated statement of financial position

	As at June 30, 2024	As at December 31, 2022
Note	US$’000	US$’000
ASSETS
Intangible assets	18	18,671
Property, plant and equipment	19	13,312
Right-of-use assets	20	7,732
Deferred tax assets	32	305
Other non-current assets	21	79
Non-current assets		40,099
Inventories	22	8,256
Trade receivables	23	6,255
Other receivables and prepayments	24	2,925
Cash and cash equivalents		5,027
Current assets		22,463
Total assets		62,562
EQUITY AND LIABILITIES
Issued share capital and share premium	26	209,294
Other reserves	28	(127,738)
Retained deficit	28	(57,987)
Equity attributable to HeiQ shareholders		23,569
Non-controlling interests		1,859
Total equity		25,428
Lease liabilities	30	6,284
Long-term borrowings	31	1,829
Deferred tax liability	32	1,273
Other non-current liabilities	33	5,741
Total non-current liabilities		15,127
Trade and other payables	34	5,961
Accrued liabilities	35	3,066
Income tax liability	16	189
Deferred revenue	36	1,912
Short-term borrowings	31	9,380
Lease liabilities	30	997
Other current liabilities	38	502
Total current liabilities		22,007
Total liabilities		37,134
Total equity and liabilities		62,562

The Notes on pages 55 to 95 form an integral part of these Consolidated Financial Statements.The Consolidated Financial Statements were approved and authorized for issue by the Board of Directors on October 30, 2024 and signed on its behalf by: Xaver Hangartner, Chief Financial Officer HeiQ plc Annual Report 2023/24 Financial Statements 53

Consolidated statement of changes in equity

For the 18-month period ended June 30, 2024

	Issued share capital and share premium	Other reserves	Retained deficit	Equity attributable to HeiQ shareholders	Non-controlling interests	Total equity
Note	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000
Balance at January 1, 2022	195,714	(127,195)	(11,525)	56,994	2,541	59,535
Loss after taxation	-	-	(29,251)	(29,251)	(563)	(29,814)
Other comprehensive (loss)/income	-	(810)	-	(810)	-	(810)
Total comprehensive (loss)/income for the year	-	(810)	(29,251)	(30,061)	(563)	(30,624)
Issuance of shares	26	10,160	-	-	10,160	-
Share-based payment income	27	-	(12)	-	(12)	-
Dividends paid to minority shareholders	28	-	-	-	-	(243)
Capital contributions from minority shareholders	28	-	-	-	-	764
Changes in non-controlling interests	6b	-	-	(2,445)	(2,445)	(616)
Transfer of shares to non-controlling interest	6a	-	-	3,755	3,755	65
Transactions with owners		10,160	(12)	1,310	11,458	(30)
Balance at December 31, 2022	205,874	(128,017)	(39,466)	38,391	1,948	40,339
Loss after taxation	-	-	(20,839)	(20,839)	(499)	(21,338)
Other comprehensive (loss)/income	-	330	-	330	-	330
Total comprehensive (loss)/income for the year	-	330	(20,839)	(20,509)	(499)	(21,008)
Issuance of shares	26	3,420	-	-	3,420	-
Share-based payment income	27	-	(51)	-	(51)	-
Elimination of non-controlling interest at disposal of subsidiary	6c	-	-	-	-	73
Dividends paid to minority shareholders	28	-	-	-	-	(267)
Deconsolidation of subsidiary	6f	-	-	929	929	488
Transfer of shares to non-controlling interest	6a	-	-	1,389	1,389	116
Transactions with owners		3,420	(51)	2,318	5,687	410
Balance at June 30, 2024	209,294	(127,738)	(57,987)	23,569	1,859	25,428

HeiQ plc Annual Report 2023/24 Financial Statements 54

Consolidated statement of cash flows

For the 18-month period ended June 30, 2024

	Period ended June 30, 2024	Year ended December 31, 2022
Note	US$’000	US$’000
Cash flows from operating activities
Loss before taxation	(20,423)	(29,835)
Cash flow from operations reconciliation:
Depreciation and amortization	9,11	7,126
Impairment expense		323
Net loss on disposal of assets		43
(5)
Write-off of intangible assets	13	1,419
Gain from disposal of subsidiary		(460)
Fair value gain on derivative liability	38	(367)
Finance costs		896
Finance income		(45)
Pension expense		(305)
Non-cash equity compensation	12	178
Gain from lease modification	20	(33)
Other costs paid in shares	26	-
Currency translation		175
Working capital adjustments:
Decrease in inventories	43	4,920
Decrease/(Increase) in trade and other receivables	43	2,463
(Decrease)/Increase in trade and other payables	43	1,257
Cash generated (used in)/from operations		(2,695)
Taxes paid	16	(1,023)
Net cash generated (used in)/from operating activities		(3,718)
Cash flows from investing activities
Consideration for acquisition of businesses	43	(801)
Cash assumed in asset acquisition	26	13
Disposal of a subsidiary, net of cash disposed of	6c	(51)
Purchase of property, plant and equipment	19	(7,031)
Proceeds from the disposal of property, plant and equipment		870
Development and acquisition of intangible assets	18	(1,427)
Interest received		45
Net cash used in investing activities		(8,382)
Cash flows from financing activities
Interest paid on borrowings		(586)
Repayment of leases	20,43	(1,996)
Interest paid on leases	20	(311)
Proceeds from equity issuance, net	26	3,050
Proceeds from disposals of minority interests	5b	1,505
Proceeds from borrowings	43	10,278
Repayment of borrowings	43	(2,978)
Dividends paid to minority shareholders	28	(267)
Net cash from/(used in) financing activities		8,695
Net decrease in cash and cash equivalents		(3,405)
Cash and cash equivalents – beginning of the period/year		8,488
Effects of exchange rate changes on the balance of cash held in foreign currencies		(56)
Cash and cash equivalents – end of the period/year		5,027

HeiQ plc Annual Report 2023/24 Financial Statements 55

Notes to the Consolidated Financial Statements for the 18-month period ended June 30, 2024

1. General information

HeiQ Plc (the Company) is a company limited by shares incorporated and registered in the United Kingdom. Its ultimate controlling party is HeiQ Plc. The address of the Company’s registered office is 5th Floor, 15 Whitehall, London, SW1A 2DD. The principal activities of the Company and its subsidiaries (the Group) and the nature of the Group’s operations are set out in Note 6. These financial statements are presented in United States Dollars (US$) which is the presentation currency of the Group, and all values are rounded to the nearest thousand dollars except where otherwise indicated. Foreign operations are included in accordance with the policies set out in Note 3. The Group extended its accounting reference date from December 31 to June 30, to enable the incoming auditor to properly onboard and complete the audit in a reasonable timeframe.

2. Changes in accounting policies and adoption of new and revised standards

Change in accounting policy

Inventory valuation
The Group changed its inventory valuation method from first-in-first-out basis to weighted-average basis. The Group has assessed the impact on the valuation: there was no material impact from the change in policy. See Note 3s for a description of the accounting policy.

New standards, interpretations and amendments effective for the current period

Adopted
The following new standards and amendments were effective for the first time in these financial statements but did not have a material effect on the Group:
* Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2);
* Classification of Liabilities as Current or Non-current (Amendments to IAS 1);
* Definition of Accounting Estimates (Amendments to IAS 8);
* Deferred Tax Related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12);
* International Tax Reform—Pillar Two Model Rules—Amendments to the IFRS for SMEs Standard;
* Initial Application of IFRS 17 and IFRS 9—Comparative Information;
* Non-current Liabilities with Covenants (Amendments to IAS 1);
* Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7); and
* Lease Liability in a Sale and Leaseback Amendments to IFRS 16.

New standards, interpretations and amendments not yet effective for the current period

There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in future accounting periods that the Group has decided not to adopt early. The most significant of these are as follows:

Effective for annual periods beginning on or after January 1, 2025:
* Lack of Exchangeability (Amendments to IAS 21);
* IFRS 18 Presentation and Disclosure in Financial Statements; and
* IFRS 19 Subsidiaries without Public Accountability: Disclosures.

Management anticipates that these new standards, interpretations and amendments will be adopted in the financial statements as and when they are applicable and adoption of these new standards, interpretations and amendments, will be reviewed for their impact on the financial statements prior to their initial application. The Directors do not expect these new accounting standards and amendments will have a material impact on the Group’s financial statements.

3. Accounting policies

a. Basis of preparation

The Consolidated Financial Statements have been prepared in accordance with UK adopted international financial reporting standards. The Consolidated Financial Statements have been prepared under the historical cost convention except for certain financial and equity instruments that have been measured at fair value. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. The preparation of Financial Statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment and complexity, or areas where assumptions and estimates are significant to the Consolidated Financial Statements are disclosed in Note 4.

HeiQ plc Annual Report 2023/24 Financial Statements 56

b. Going Concern

The Consolidated Financial Statements have been prepared on a going concern basis, which contemplates the continuity of normal business activity and the realization of the assets and the settlement of liabilities in the normal course of business. The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic Report on pages 2 to 23. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Financial Review on pages 17 to 19 and in Note 31 to the financial statements. In addition, Notes 41 and 42 to the financial statements include the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments; and its exposures to credit risk and liquidity risk. To manage its cash balance, the Group has access to credit facilities totaling CHF8.06 million (approximately US$9.3 million as of September 30, 2024). The credit facilities are in place with two different banks and both contracts have materially the same conditions.The facilities are not limited in time, can be terminated by either party at any time and allow overdrafts and fixed cash advances with a duration of up to one month. One credit facility is being reduced monthly by CHF0.02 million (approximately US$0.02 million) and the other facility is being reduced quarterly by CHF0.2 million (approximately US$0.23 million) until December 31, 2024 and CHF0.25 million (approximately US$0.29 million) per quarter thereafter. The facilities are not committed, but the Board has not received any indication from financing partners that facilities are at risk of being terminated and mentioned repayment schedules have been agreed only recently. The facilities do not contain financial covenants, but they do require the delivery of certain financial and operational information within a defined timeframe after the balance sheet date. As of September 30, 2024, the Group has drawn fixed advances of CHF7.06 million and EUR0.4 million of the facilities with maturity date within the month of October 2024. The Group’s forecasts and projections for the next 12 months reflect the very challenging trading environment and show that the Group should be able to operate within the level of its current facility for at least 12 months from the date of signature of these financial statements if the facility drawdowns remain available. While the facilities are not committed, the Board has not received any indication from financing partners that the facilities are at risk of being terminated. In the course of 2024, the Group agreed with the financing partners to make scheduled repayments of the credit facilities. Nevertheless, the Board acknowledges the uncommitted status of the facilities which could be terminated during the forecast period requiring the refinancing of debts as per maturity dates disclosed in the Financial Review on page 19, indicates that a material uncertainty exists that may cast significant doubt on the Group's ability to continue as a going concern, and therefore the Group may not be able to realize its assets and discharge its liabilities in the normal course of business. After considering the forecasts, sensitivities, and mitigating actions available to management and having regard to the risks and uncertainties to which the Group is exposed (including the material uncertainty referred to above), the Group’s directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and operate within its credit facilities for the period 12 months from date of signature. Accordingly, the financial statements continue to be prepared at the going concern basis.

c. Basis of consolidation

The Consolidated Financial Statements comprise the financial statements of the Company and its subsidiaries listed in Note 6 “Subsidiaries” to the Consolidated Financial Statements. A subsidiary is defined as an entity over which the Company has control. The Company controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

d. Business combinations

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interest issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognized in profit or loss as incurred. Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognized, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognized as of that date.

e. Foreign currency transactions and translation

Each entity of the Group determines its own functional currency. The functional currency of the Group companies is the currency of their local economic environment. On a single entity level, transactions in foreign currencies are translated into the functional currency at the rate of exchange on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rate ruling at the reporting date. The resulting gain or loss is reflected in the “consolidated statement of profit and loss and other comprehensive income” within operating income or operating expense, if the balance sheet account is of HeiQ plc Annual Report 2023/24 Financial Statements 57 operating nature – e.g. trade and other receivables/payables and within either “Finance income” or “Finance costs”, if the balance sheet account is of non-operating nature – e.g. cash and cash equivalents, loans receivable, loans payable. Single entities with functional currencies other than US$ are translated into US$ as part of the consolidation where assets and liabilities are translated at closing rate for the year-ended, and profit and loss items are translated at an average rate for the year. Equity transactions are translated at a historic rate. The residual value flows into the currency translation reserve. The results and financial position of all Group entities that have a functional currency different from the presentation currency are translated into US$, the presentation currency, as follows:
* assets and liabilities are translated at the closing rate at the date of the “Statement of Financial Position”;
* income and expenses are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and
* all resulting exchange differences are recognized in other comprehensive income.

The Group recognizes in “other comprehensive income” the exchange differences arising from the translation of the net investment in foreign entities, and of monetary items receivable from foreign subsidiaries for which settlement is neither planned nor likely to occur in the foreseeable future.

f. Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses, if any. The cost of an item of property, plant and equipment initially recognized includes its purchase price and any cost that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by the Group. Property, plant and equipment are generally depreciated on a straight-line basis over their estimated useful lives:

Item	Years
Machinery and equipment	5 - 15
Motor vehicles	4 - 5
Computers and related software	3 - 5
Furniture and fixtures	5 - 10
Buildings	10 – 20

Freehold land is not depreciated. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. Property, plant and equipment held under leases are depreciated over the shorter of the lease term and estimated useful life.

g. Intangible assets

All intangible assets, except goodwill, are stated at cost less accumulated amortization and any accumulated impairment losses.

Goodwill

Goodwill represents the amount by which the fair value of the cost of a business combination exceeds the fair value of the net assets acquired. Goodwill is not amortized and is stated at cost less any accumulated impairment losses. The recoverable amount of goodwill is tested for impairment annually or when events or changes in circumstance indicate that it might be impaired. Impairment charges are deducted from the carrying value and recognized immediately in the income statement. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash generating units expected to benefit from the synergies of the combination. If the recoverable amount of the cash generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognized for goodwill is not reversed in a subsequent period.

Intangible assets acquired in a business combination

Net assets acquired as part of a business combination includes an assessment of the fair value of separately identifiable acquisition- related intangible assets, in addition to other assets, liabilities and contingent liabilities purchased. Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortization and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.# HeiQ plc Annual Report 2023/24

Financial Statements

58

Acquisition-related intangible assets are amortized on a straight-line basis over their useful lives, which are individually assessed. The estimated useful lives are as follows:

• Brand names: 10 years
• Customer relations: 5 years
• Technologies: 10 years
• Other intangible assets: 5 - 10 years

Internally developed assets

Internally generated assets represent expenditure incurred on research and development projects. Recognition follows the following principles:

• Research expenditure is recognized as an expense when it is incurred.
• Development projects are capitalized as long-term assets to the extent that such expenditure is expected to generate future economic benefits.
• Capitalized development expenditure is measured at cost less accumulated amortization and impairment losses, if any.
• Certain internal salary costs are included where the above criteria are met. These internal costs are capitalized when they are incurred in respect of products developed for sale or assets developed to be used.
• In the event that it is no longer probable that the expected future economic benefits will be recovered, the development expenditure is written down to its recoverable amount.
• Development expenditure initially recognized as an expense is not recognized as assets in subsequent periods.
• Capitalized development expenditure in relation to projects that are still in the development phase are capitalized as asset under construction until they are ready for sale or use. These assets are tested annually for impairment.
• Internally developed assets are amortized on a straight-line method over a period of five to ten years when the asset is ready for sale or use. The estimated useful life is 5-10 years.

Other intangible assets

Other intangible assets include purchased rights, licenses, patent costs, concessions, website designs and domains, and trademarks. They are measured initially at purchase cost and are amortized on a straight-line basis over their estimated useful lives. The estimated useful life is 5-10 years.

Derecognition intangible assets

An intangible asset is derecognized on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognized in profit or loss when the asset is derecognized.

h. Impairment of financial assets

The expected credit loss model defined in IFRS 9 “Financial Instruments” requires the Group to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition of the financial assets. The credit event does not have to occur before credit losses are recognized.

IFRS 9 “Financial Instruments” allows for a simplified approach for measuring the loss allowance at an amount equal to lifetime expected credit losses for trade receivables and contract assets. The Group has three types of financial assets subject to the expected credit loss model: trade receivables, contract assets, and other receivables.

For trade receivables and contract assets, the company uses a simplified provision matrix to calculate expected credit loss:

The expected loss rates are based on the Group’s historical credit losses. The historical loss rates are then adjusted for current and forward-looking information on macroeconomic factors affecting the Group’s customers.

For other receivables, the company makes use of the low credit risk exemption.

Significant increase in credit risk

In assessing whether the credit risk on a financial instrument has increased significantly since initial recognition, the Group compares the risk of a default occurring on the financial instrument at the reporting date with the risk of a default occurring on the financial instrument at the date of initial recognition. In making this assessment, the Group considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort.

Forward looking information considered includes the future prospects of the industries in which the Group’s debtors operate, obtained from economic expert reports, financial analysts, governmental bodies, relevant think-tanks and other similar organizations, as well as consideration of various external sources of actual and forecast economic information that relate to the Group’s core operations.

In particular, the following information is taken into account when assessing whether credit risk has increased significantly since initial recognition:

• Significant deterioration in external market indicators of credit risk for a particular financial instrument, e.g., a significant increase in the credit spread, the credit default swap prices for the debtor, or the length of time or the extent to which the fair value of a financial asset has been less than its amortized cost;
• Existing or forecast adverse changes in business, financial or economic conditions that are expected to cause a significant decrease in the debtor’s ability to meet its debt obligations;
• An actual or expected significant deterioration in the operating results of the debtor;
• Significant increases in credit risk on other financial instruments of the same debtor;
• An actual or expected significant adverse change in the regulatory, economic, or technological environment of the debtor that results in a significant decrease in the debtor’s ability to meet its debt obligations.

Irrespective of the outcome of the above assessment, the Group presumes that the credit risk on a financial asset has increased significantly since initial recognition when contractual payments are more than 180 days past due, unless the Group has reasonable and supportable information that demonstrates otherwise.

Despite the foregoing, the Group assumes that the credit risk on a financial instrument has not increased significantly since initial recognition if the financial instrument is determined to have low credit risk at the reporting date. A financial instrument is determined to have low credit risk if:

• The financial instrument has a low risk of default;
• The debtor has a strong capacity to meet its contractual cash flow obligations in the near term;
• Adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the borrower to fulfil its contractual cash flow obligations.

The Group regularly monitors the effectiveness of the criteria used to identify whether there has been a significant increase in credit risk and revises them as appropriate to ensure that the criteria are capable of identifying significant increase in credit risk before the amount becomes past due.

Definition of default

The Group considers the following as constituting an event of default for internal credit risk management purposes, as historical experience indicates that financial assets that meet either of the following criteria are generally not recoverable:

• When there is a breach of financial covenants by the debtor;
• Information developed internally or obtained from external sources indicates that the debtor is unlikely to pay its creditors, including the Group, in full (without taking into account any collateral held by the Group).

Irrespective of the above analysis, the Group considers that default has occurred when a financial asset is more than 360 days past due, unless the Group has reasonable and supportable information to demonstrate that a more lagging default criterion is more appropriate.

Write-off policy

The Group writes off a financial asset when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery, e.g., when the debtor has been placed under liquidation or has entered into bankruptcy proceedings, or in the case of trade receivables, when the amounts are over two years past due unless the Group has reasonable support to assume recoverability, whichever occurs sooner.

Financial assets written off may still be subject to enforcement activities under the Group’s recovery procedures, taking into account legal advice where appropriate. Any recoveries made are recognized in profit or loss.

i. Impairment of non-financial assets

At each reporting date, the Directors assess whether indications exist that an asset may be impaired. If indications do exist, or when annual impairment testing for an asset is required, the Directors estimate the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value-in-use, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets.

Where the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the Directors consider the asset impaired and write the subject asset down to its recoverable amount.

In assessing value-in-use, the Directors discount the estimated future cash flows to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, the Directors consider recent market transactions, if available. If no such transactions can be identified, the Directors utilize an appropriate valuation model.

When applicable, the Group recognizes impairment losses of continuing operations in the “statement of profit and loss and other comprehensive income” in those expense categories consistent with the function of the impaired asset.

59# Notes to the Consolidated Financial Statements

Basis of preparation (continued)

j. Leases

Lessee position: The Group accounts for a contract, or a portion of a contract, as a lease when it conveys the right to use an asset for a period of time in exchange for consideration. Leases are those contracts that satisfy the following criteria:
* there is an identified asset;
* the Group obtains substantially all the economic benefits from use of the asset; and
* the Group has the right to direct use of the asset.

In determining whether the Group obtains substantially all the economic benefits that arise from use of the asset, the Group considers only the economic benefits that arise from use of the asset, not those incidental to legal ownership or other potential benefits. In determining whether the Group has the right to direct use of the asset, the Directors consider whether the Group directs how and for what purpose the asset is used throughout the period of use. If there are no significant decisions to be made because they are pre- determined due to the nature of the asset, the Directors consider whether the Group was involved in the design of the asset in a way that predetermines how and for what purpose the asset will be used throughout the period of use. If the contract or portion of a contract does not satisfy these criteria, the Group applies other applicable IFRSs rather than IFRS 16 “Leases”.

Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case the Group’s incremental borrowing rate on commencement of the lease is used, which the Directors have assessed to be between 1.75% and 5%, depending on the nature of the asset and location.

Right-of-use assets
A right-of-use asset is recognized at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset.

Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Right-of-use assets are subject to impairment or adjusted for any re-measurement of lease liabilities.

The Group has elected not to recognize a right-of-use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred.

k. Taxation

The income tax expense represents the sum of the tax currently payable and deferred tax. Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case the current and deferred tax are also recognized in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

HeiQ plc Annual Report 2023/24 Financial Statements 60

Income taxation
Current income tax assets and liabilities are measured at the amount to be recovered from, or paid to, the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date in the jurisdictions where the Group operates and generates taxable income.

Deferred taxation
Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Consolidated Financial Statements. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and expected to apply when the related deferred tax is realized or the deferred liability is settled. Deferred tax assets are recognized to the extent that it is probable that the future taxable profit will be available against which the temporary differences can be utilized.

l. Revenue from contracts with customers

The Group’s revenue represents the fair value of the consideration received or receivable for the rendering of services, licenses and similar fees as well as for the sale of functional products in different forms (mainly ingredients, materials and consumer goods), net of value added tax and other similar sales-based taxes, rebates and discounts after eliminating intercompany sales. Revenue from contracts with customers is recognized once the performance obligation has been fulfilled. If the Group fulfills its performance obligations to the customer, revenues recognized are capitalized as contract assets until the Group invoices the customers. In contrast, if customers pay in advance for the services, a contract liability is recognized and is released at point of revenue recognition.

The Group has the following major revenue streams:

Sale of goods
The Group sells functional ingredients, materials or consumer goods. Revenue from the sale of goods to customers is generally recognized at a point in time, once control over the goods is passed to customers.

Research and development services
HeiQ provides research and development services to customers in exchange for a fee. Revenue is generally recognized at the point in time of completion of the project, for example, with delivery of proof-of-concept to the customer.

Consulting services for research and development projects
HeiQ provides consulting services for customers regarding research and development projects including grant acquisition services, industry cluster services and management services. The revenue for these services is recognized over time based on completion of the project. Any amounts invoiced for stages not completed, are recognized as deferred revenue.

Exclusivity fees
HeiQ grants exclusivity to customers for certain products in certain regions. The contracts restrict HeiQ from selling specific products to competitors for a limited time. The customers pay a fee for exclusivity which increases the price of the goods supplied by HeiQ. In cases where the obligation to grant exclusivity can be valued separately from other obligations in the contract, the exclusivity portion is accounted for over time according to the contractual definition of the exclusivity period.

m. Share-based payments

All of the Group's share-based awards are equity settled. Equity-settled share-based payments to employees are measured at the fair value of the equity instruments at the grant date. Equity-settled share-based payments to non-employees are measured at the fair value of services received, or if this cannot be measured, at the fair value of the equity instruments granted at the date that the Group obtains the goods or counterparty renders the service. The fair value of such shares issued has been estimated by reference to the cash consideration received for shares issued or material third party transactions at or close to the dates for such non-cash issues.

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Directors’ estimate of equity instruments that will eventually vest, with a corresponding increase in equity. Where the conditions are non-vesting, the expense and equity reserve arising from share-based payment transactions is recognized in full immediately on grant. At the end of each reporting period, the Directors revise their estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognized in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to other reserves.

n. Employee benefits

Short-term benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

Long-term benefits
Defined benefit plans
The Group operates defined benefit pension plans, which require a contribution to be made to a separately administered fund. The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method with actuarial valuations being carried out at the end of each annual reporting period.# HeiQ plc Annual Report 2023/24 Financial Statements

3. Significant accounting policies (Cont'd)

Re-measurements

Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognized immediately in the statement of financial position with a corresponding debit or credit to other reserve through “Other Comprehensive Income” in the period in which they occur. Re-measurements are not reclassified to profit or loss in subsequent periods.

Past-service costs are recognized in profit or loss on the earlier of:
* the date of the plan amendment or curtailment; and
* the date that the Group recognizes related restructuring costs, or termination benefits, if earlier.

Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Group recognizes the following changes in the net defined benefit obligation under “cost of sales”, “administration expenses” and “selling and distribution expenses” in the consolidated statement of profit or loss (by function):
* service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements; and
* net interest expense or income.

Defined contribution plans

The income statement expense for the defined contribution pension plans operated represents the contributions payable for the year.

o. Financial instruments

Financial assets and financial liabilities are recognized in the Group’s statement of financial position when the Group becomes a party to the contractual provisions of the instrument. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

p. Finance income and expenses

Finance expenses comprise interest payable, lease expenses recognized in profit or loss using the effective interest method, unwinding of the discount on provisions, and net foreign exchange losses that are recognized in the income statement. Finance income comprises interest receivable on cash deposits and net foreign exchange gains. Interest income and interest payable is recognized in profit or loss as it accrues, using the effective interest method. Foreign currency gains and losses are reported on a net basis.

q. Cash and cash equivalents

For the purpose of presentation in the consolidated statement of cash flows, cash and cash equivalents include cash on hand, deposits held at call with financial institutions, other short-term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts.

r. Trade and other receivables

Trade receivables are recognized initially at transaction price and subsequently measured at amortized cost using the effective interest method, less provision for impairment.

s. Inventories

Inventories are stated at the lower of cost and net realizable value. Cost is based on the weighted-average principle and includes expenditure incurred in acquiring the inventories and other costs in bringing them to their existing location and condition.

t. Provisions

A provision is recognized when the Group has a present obligation, legal or constructive, as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of economic resources will be required to settle the obligation, the provision is reversed. Where the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as an interest expense.

u. Contingent liabilities

Contingent liabilities are possible obligations whose existence depends on the outcome of uncertain future events or present obligations where the outflow of resources is uncertain or cannot be measured reliably. Contingent liabilities are not recognized in the Consolidated Financial Statements but are disclosed unless they are remote.

HeiQ plc Annual Report 2023/24 Financial Statements 62

4. Critical accounting judgements and key sources of estimation uncertainty

In applying the Group’s accounting policies, which are described in Note 3, the directors are required to make judgements (other than those involving estimations) that have a significant impact on the amounts recognized and to make estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Critical accounting judgements

The following are the critical judgements, apart from those involving estimations (which are presented separately below), that the directors have made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognized in financial statements.

Allowance for inventory obsolescence

The Group applied judgement in calculating the allowance for obsolete inventory. For slow-moving items, the Group compared quantities on hand with budgeted sales quantities. The sales projections are inherently uncertain due to the nature of the business and fluctuating market conditions. The inventory allowance calculated as at June 30, 2024 is US$4,992,000 (December 31, 2022: US$5,396,000) as presented in Note 22.

Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

Goodwill impairment testing

Following the assessment of the recoverable amount of goodwill, the directors consider the recoverable amount of goodwill allocated to CGU “ChemTex”(book value: US$3.3 million) and “RAS” (remaining goodwill book value: US$3.7 million) to be most sensitive to the achievement of forecasts in 2024/2025 comprising forecasts of revenue, staff costs and operating expenses based on current and anticipated market conditions. Whilst the Group can manage most of the CGUs’ costs, the revenue projections are inherently uncertain due to the nature of the business and fluctuating market conditions. The market for both ChemTex and RAS CGU has been stable in 2024 compared to 2023. However, it is possible that underperformance to estimated revenues as considered in the impairment test may occur in 2024/2025. The sensitivity analysis for a reasonably possible change in assumptions in respect of the recoverable amount of the CGU “ChemTex” and “RAS” goodwill is presented in Note 18.

5. Business combinations

Business combinations in the 18-month period ended June 30, 2024

a. Acquisition of Tarn Pure

On January 12, 2023, HeiQ Plc, completed the acquisition of the entire issued share capital of Tarn-Pure Holdings Ltd ("Tarn-Pure"). Tarn-Pure is a UK-based intellectual property company holding critical EU and UK regulatory registrations to sell elemental copper and elemental silver for use in disinfecting hygiene applications. The regulatory registrations of Tarn-Pure are critical to HeiQ to ensure regulatory compliance of its antimicrobial products long term. To acquire Tarn-Pure, HeiQ paid the vendors £530,000 (approximately US$621,000) in cash with an additional £317,000 (approximately US$372,000) satisfied through the issuance of 455,435 new ordinary shares of 30p each in the Company (the "Consideration Shares"), issued at a price of 69.6p per share. A further US$244,000 of deferred consideration is payable in cash in monthly instalments from February 2023 to February 2025. The final purchase price allocation was finalised with minor changes to the preliminary figures published in the interims. The following table summarizes the consideration paid, the fair value of assets acquired, liabilities assumed, and goodwill arising on acquisition at the acquisition date.# Purchase price allocation

US$’000	Consideration:
Cash paid to shareholders	621
Shares issued to shareholders	372
Deferred consideration	244
Total Consideration	1,237

HeiQ plc Annual Report 2023/24 Financial Statements	63
Fair value of net assets acquired:
Cash and cash equivalents	12
Trade and other receivables	12
Trade and other payables	(2)
Borrowings	(42)
Intangible assets identified on acquisition:
Customer Relationship	150
Regulatory asset	507
Deferred tax liability on intangible assets	(164)
Total net assets	473
Goodwill	764
Total	1,237

Goodwill of US$764,000 was recognized and is attributable to anticipated future profit from expansion opportunities and synergies of the business. The goodwill arising from the acquisition has been allocated to the existing RAS CGU (see definition in Note 18). Fair value adjustments have been recognized for acquisition-related intangible assets which are in alignment with accounting policies of the Group. Transaction costs relating to the acquisition of US$23 have been charged to the Statement of profit and loss and other comprehensive Income in the period relating to the acquisition of Tarn Pure and a further US$50 was incurred in 2022.

Business combinations in the year 2022

There were no business combinations in the year 2022.

Subsidiaries

The consolidated financial statements include the financial statements of HeiQ Plc and the subsidiaries listed in the table below.

Company	Country of registration or incorporation	Registered office	Principal activity	Percentage of ordinary shares held
HeiQ Materials AG	Switzerland	Rütistrasse 12, 8952 Schlieren Zurich	Development, production and sale of chemicals	100%
HeiQ ChemTex Inc.	United States	2725 Armentrout Dr, Concord, NC 28025	Development, production and sale of chemicals	100%
HeiQ Pty Ltd	Australia	Level 20/181 William Street, Melbourne, VIC 3000	Research and development	100%
HeiQ GrapheneX AG	Switzerland	Rütistrasse 12, 8952 Schlieren Zurich	Research and development	100%
HeiQ Company Limited	Taiwan	No. 14 & 16, Ln. 50, Wufu 1st Rd. Luzhu District, Taoyuan City 33850	Distribution	100%
HX Company Limited	Taiwan	No. 14 & 16, Ln. 50, Wufu 1st Rd. Luzhu District, Taoyuan City 33850	Trading and production	66.7%
HeiQ Iberia Unipessoal Lda	Portugal	Rua Engº Frederico Ulrich, nº 2650, 4470-605 Maia	Sales agency and internal services company	100%

HeiQ plc Annual Report 2023/24 Financial Statements	64
Company	Country of registration or incorporation
Chrisal NV	Belgium
HeiQ RAS AG	Germany
HeiQ Regulatory GmbH	Germany
HeiQ (China) Material Tech LTD	China
Life Material Technologies Limited	Hong Kong
Life Natural Limited	Hong Kong
LMT Holding Limited	Thailand
Life Material Technologies Limited	Thailand
HeiQ AeoniQ GmbH	Austria
Chem-Tex Laboratories Inc.	United States
Beijing HeiQ Material Tech Co., Ltd.	China
HeiQ AeoniQ Holding AG	Switzerland
Tarn-Pure Holdings Ltd	United Kingdom
Tarn Pure (IP) Limited	United Kingdom
Tarn-Pure AG Ltd.	United Kingdom
Tarn-Pure Ireland Limited	Ireland
HeiQ AeoniQ Portugal	Portugal

Changes to subsidiaries during the period other than acquisitions

HeiQ plc Annual Report 2023/24 Financial Statements	65
a. Transfer of shares in HeiQ AeoniQ GmbH to non-controlling interests
On February 11, 2022, HeiQ Materials AG reached an agreement with Hugo Boss AG to dispose of 2.5% of its shareholding in HeiQ AeoniQ GmbH and issued a call option. Under the call option, the Company granted Hugo Boss AG the contractual right to acquire from the Company a further 5% shareholding in HeiQ AeoniQ GmbH for a call option exercise price of €10,000,000 (approximately US$10,657,000). The option agreement was changed in December 2023. Hugo Boss AG now has the right to acquire a shareholding of up to 12.5% (in addition to the 2.5% already owned) for the exercise price of €10,000,000 (approximately US$10,688,000). The shares and call option were issued for US$4,791,000, the call option was recognized as a derivative liability, see Note 38. In July 2023, HeiQ Materials AG reached an agreement with MAS to dispose of 1.5% of its shareholding in HeiQ AeoniQ GmbH reducing the Group’s ownership to 96%.
b. Acquisition of non-controlling interest in Chrisal N.V.
On December 14, 2022, HeiQ increased its interest in HeiQ Chrisal N.V. from 51% to 71% after some sellers exercised their put options. HeiQ paid €2.9 million (approximately US$3.0 million) for the additional 20% shareholding to the vendors through the issue of 3,348,164 new ordinary shares in the Company. The 20% share was valued at US$0.6 million. The transaction resulted in a US$0.6 million reduction of non-controlling interests and a US$2.4 million charge to retained earnings.
c. Disposal of Life Material Latam, Ltda, Brazil
In July 2023, the Group sold 31% of its share in Life Materials Latam Ltda, Brazil for a consideration of US$nil. The Group’s stake was reduced to 20% and, as a result, the company is no longer consolidated.
d. Foundation of HeiQ AeoniQ Holding AG
The Group founded HeiQ AeoniQ Holding AG Switzerland. As at June 30, 2024, the Group holds 95.95% ownership.
e. Foundation of HeiQ AeoniQ Portugal
The Group founded HeiQ AeoniQ Holding Portugal. As at June 30, 2024, the Group holds 100% ownership.
f. Deconsolidation of HeiQ Medica S.L.
In October 2023, the Group lost its control over, HeiQ Medica S.L. Consequently, the Group derecognized the subsidiary’s assets and liabilities as well as the carrying amount of non-controlling interests in the subsidiary. The deconsolidation of the subsidiary’s assets and liabilities resulted in a net income of US$479,000 which was recognized under other income, see Note 10.

Revenue

The Group derives its revenue from contracts with customers for the transfer of goods and services over time and at a point in time in the following major organization units. The disclosure of revenue by organizational units is consistent with the revenue information that is disclosed for each reportable segment under IFRS 8 Operating Segments (see note 8).

Disaggregation of revenue

Period ended	Year ended
June 30, 2024	December 31, 2022
Revenue by organizational unit	US$’000
Advanced Materials	50,697
LifeSciences	6,988
Other activities	4,633
Total revenue	62,318

Period ended	Year ended
June 30, 2024	December 31, 2022
Revenue by timing of revenue	US$’000
Goods transferred at a point in time	56,860
Services transferred at a point in time	1,914
Services transferred over time	3,544
Total revenue	62,318

HeiQ plc Annual Report 2023/24 Financial Statements	66
Unsatisfied performance obligations
The transaction prices allocated to unsatisfied and partially unsatisfied obligations at reporting date are as set out below:
	As at June 30, 2024
	US$’000
Unsatisfied performance obligations
Exclusivity services	1,200
Research and development services	5,087
Total unsatisfied performance obligations	6,287

Management expects that 25 per cent of the transaction price allocated to the unsatisfied contracts at the reporting date will be recognized as revenue during the next reporting period 2024/2025 (US$1.6 million). Another 24% is expected to be recognized in the 2025/2026 period (US$1.5 million). The remaining 51 per cent, US$3.3 million, are expected to be recognized in later periods.

Disclosure related to contracts with customers Contract assets and contract liabilities are disclosed under Note 25 and Note 37, respectively. Impairment losses recognized on any receivables or contract assets arising from the Group’s contracts with customers are disclosed under Note 23 and Note 25, respectively.

Operating Segments

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors of the Company.# Segment Information

For management purposes and following the decision by the Board of Directors to merge two units, the Group is organized into the following reportable segments:

• Segment Activity
• Advanced Materials: Provide innovative ingredients to make textiles & flooring more functional, durable and sustainable and functionalize different hard surfaces in everyday products and our surroundings
  • Life Sciences: Offer biotech solutions to replace harmful substances in domestic, commercial and industrial usage, for a more balanced microbiome and environment
  • Other activities: All other activities of the Group including Innovation Services, Business Development, and other non- allocated functions.

In 2023 new overhead allocation rules were introduced and as a result more overhead costs were allocated to segments. 2022 segment revenue and profits are restated below using the new rules to allow for like for like comparison.

Segment revenues and profits

The following is an analysis of the Group’s revenue and results by reportable segment:

	Advanced Materials	Life Sciences	Other activities	Total
US$’000	Period 23/24	Year 2022	Period 23/24	Year 2022
Revenue	50,697	38,366	6,988	6,164
Operating profits (loss)	(4,391)	(14,347)	(1,385)	(5,537)
Financial result
Loss before taxation	(20,423)	(29,835)
Taxation	(915)	21
Loss after taxation	(21,338)	(29,814)
Depreciation and amortization
Property, plant and equipment	1,200	362	453	335
Right-of use assets	383	165	218	145
Intangible Assets	1,512	773	837	550
Impairment loss
Property, plant and equipment	-	-	-	730
Intangible Assets	323	8,247	-	2,402

HeiQ plc Annual Report 2023/24 Financial Statements 67

The segment revenue reported above represents revenue generated from external customers. There were no intersegment sales in the period ended June 30, 2024 (year ended December 31, 2022: nil).

The accounting policies of the reportable segments are the same as the Group’s accounting policies described in Note 3.

Segment profit represents the profit earned by each segment without allocation of the central SG&A costs including expenses for infrastructure, R&D and laboratories, directors’ salaries, finance income, nonoperating gains and losses in respect of financial instruments and finance costs, and income tax expense. This is the measure reported to the Group’s decision-making body for the purpose of resource allocation and assessment of segment performance.

Geographic information

	Period ended June 30, 2024	Year ended December 31, 2022
US$’000
Revenue by region
North & South America	26,726	20,425
Asia	18,911	13,376
Europe	16,228	13,109
Others	453	293
Total revenue	62,318	47,202

	Period ended June 30, 2024	Year ended December 31, 2022
US$’000
Non -current assets by region
Europe	30,379	22,290
Asia	2,226	8,102
North & South America	7,318	7,734
Others	176	612
Total non-current assets	40,099	38,738

Information about major customers

During the period ended June 30, 2024, no customers individually totaled more than 10% of total revenues (year ended December 31, 2022: none).

9. Cost of sales

	Period ended June 30, 2024	Year ended December 31, 2022
US$’000
Cost of sales
Material expenses	30,086	20,942
Personnel expenses	4,682	2,830
Depreciation of property, plant and equipment	892	652
Inventory allowance increase (reduction)	(427)	4,912
Other costs of sales	4,252	4,409
Total cost of sales	39,485	33,745

Other costs of goods sold include freight and custom costs, warehousing and allowances on inventory.

HeiQ plc Annual Report 2023/24 Financial Statements 68

10. Other income

	Period ended June 30, 2024	Year ended December 31, 2022
US$’000
Other income
Gain on disposal of property plant and equipment	23	21
Gain on earnout consideration payable (Note 5g)	138	-
Foreign exchange gains	121	3,539
Fair value gain on derivative liabilities (Note 38)	367	371
Income from out-of-court settlement	2,750	-
Other income	1,243	901
Total other income	4,642	4,832

In November 2023, the Group reached a settlement of the litigation with ICP, which includes dismissal of claims and counterclaims by both parties with prejudice. ICP has agreed to pay HeiQ Plc a total of USD $2.75 million. The settlement refers to a complaint filed by the Group in October 2022 for breaching its Exclusive Agreement terms.

Foreign exchange gains previously reported under other income have been reclassified to finance income (Note 14) during the 2024 reporting period to more fairly present the nature of such items.

11. Selling and general administration expenses

	Period ended June 30, 2024	Year ended December 31, 2022
Selling and general administration expenses	US$’000	US$’000
Personnel expenses	19,324	14,977
Depreciation of property, plant and equipment	1,423	630
Amortization of intangible assets	3,238	1,435
Depreciation of right-of -use assets	1,573	938
Net credit losses on financial assets and contract assets	1,025	85
Other	17,186	12,904
Total selling and general administration expense	43,769	30,969

Other selling and general administration expenses include costs for infrastructure, professional services and marketing as well as R&D and laboratory related costs, information technology & data expenses, sales representative & distribution expenses.

Auditor’s remuneration

The total remuneration of the Group's auditors, being RPGCC for the audit of the 18-month period ended June 30, 2024, and Deloitte LLP for the audit of the year ended December 31, 2022, for services provided to the Group, and included in other selling and general administration expenses, is analyzed below:

	Period ended June 30, 2024	Year ended December 31, 2022
Auditor’s remuneration	US$’000	US$’000
Audit of Group performed by Group Auditor	443	1,180*
Audit of subsidiaries performed by local auditors	77	122
Total fees for audit services	520	1,302
Audit related assurance services	-	-
Other assurance services	-	-
Total auditor remuneration	-	-

*: includes US$180,000 related to the 2021 audit (Crowe UK LLP) which was agreed on after the issuance of the annual report.

HeiQ plc Annual Report 2023/24 Financial Statements 69

12. Personnel expenses

	Period ended June 30, 2024	Year ended December 31, 2022
Personnel expenses	US$’000	US$’000
Wages & salaries	21,273	15,274
Social security & other payroll taxes	2,249	1,685
Pension costs	306	710
Share-based payments	178	138
Total personnel expenses	24,006	17,807

Reported as cost of sales (Note 9) | 4,682 | 2,830 |
Reported as selling and general administration expense (Note 11) | 19,324 | 14,977 |
Total personnel expenses | 24,006 | 17,807 |

The average monthly number of employees was as follows:

194 | 218

13. Other expenses

	Period ended June 30, 2024	Year ended December 31, 2022
Other expenses	US$’000	US$’000
Foreign exchange losses	343	3,050
Loss on disposal of property, plant and equipment	204	16
Transaction costs relating to mergers and acquisitions	23	50
Write off intangible assets (Note 18)	1,419	897
Other	376	171
Total other expenses	2,365	4,184

The write-off mainly relates to patents acquired in view of the commercial partnership with ICP. As the partnership ended, the asset’s economic benefits were deemed to no longer have any value.

Foreign exchange losses previously reported under other expenses have been reclassified to finance costs (Note 15) during the 2023 reporting period to more fairly present the nature of such items.

14. Finance income

	Period ended June 30, 2024	Year ended December 31, 2022
Finance income	US$’000	US$’000
Interest income	18	5
Gains on foreign currency transactions	157	678
Other	27	-
Total finance income	202	683

15. Finance costs

	Period ended June 30, 2024	Year ended December 31, 2022
Finance costs	US$’000	US$’000
Amortization of deferred finance costs – acquisition costs	3	-
Lease finance expense	311	163
Interest on borrowings	586	110
Bank fees	364	98
Loss on foreign currency transactions	379	902
Total finance costs	1,643	1,273

HeiQ plc Annual Report 2023/24 Financial Statements 70

16. Income tax

The Group’s average expected tax rate was 20.2% in the 18-month period ended June 30, 2024 (Year ended December 31, 2022: 21.1%). During the period ended June 30, 2024, there were no significant changes to local tax rates in the tax jurisdictions in which the Group operates.

For the period ending June 30, 2024, the Group had a tax expense of US$915 (year ending December 31, 2022: tax credit of US$21,000). The effective tax rate was 4.7% (2022: 0.1%). The effective tax rate was primarily impacted by unrecognized tax losses.

The differences between the statutory income tax rate and the effective tax rates are summarized as follows:

	Period ended June 30, 2024	Year ended December 31, 2022
	Tax rate %	Tax rate %
	US$’000	US$’000
Expected tax at average tax rate	(3,905)	20.2%
Increase/(decrease) in tax resulting from:
Tax credits	21	(0.1%)
Unrecognized tax losses	4,385	(22.7%)
Non-deductible expenditure	52	(0.3%)
Temporary differences	328	(1.7%)
Other – net	34	(0.1%)
Total income tax expense (income)	915	(4.7%)

The components of the provision for taxation on income included in the “Statement of profit or loss and other comprehensive income” are summarized below:

	Period ended June 30, 2024	Year ended December 31, 2022
US$’000
Current income tax expense
Swiss corporate income taxes	(27)	58
United States state and federal taxes	455	393
Taiwan corporate income taxes	229	118
Belgium corporate income taxes	37	(123)
Germany corporate income taxes	(24)	51
United Kingdom corporate income taxes	89	-
Others	1	63
Total current income tax expense	760	560
Deferred income tax expense (income)
Switzerland	518	90
United States	(38)	(606)
China	6	117
Austria	3	20
Belgium	(198)	(136)
Germany	(91)	(68)
Others	(45)	2
Total deferred income tax expense (income)	155	(581)
Total income tax expense

Description	Period ended June 30, 2024 US$’000	Year ended December 31, 2022 US$’000
Current tax expense	760	560
Deferred income tax expense (income)
Switzerland	518	90
United States	(38)	(606)
China	6	117
Austria	3	20
Belgium	(198)	(136)
Germany	(91)	(68)
Others	(45)	2
Total deferred income tax expense (income)	155	(581)
Total income tax expense (income)	915	(21)

In addition to the amount charged to profit or loss, the following amounts relating to deferred tax have been recognized in other comprehensive income:

Items that will not be reclassified subsequently to profit or loss	Period ended June 30, 2024 US$’000	Year ended December 31, 2022 US$’000
Remeasurement of net defined benefit liability	42	(276)
Total income tax recognized in other comprehensive income	42	(276)

HeiQ plc Annual Report 2023/24 Financial Statements 71

Net tax(assets)/liabilities	Period ended June 30, 2024 US$’000	Year ended December 31, 2022 US$’000
Opening balance – (prepaid taxes)	(343)	51
Assumed on business combinations	-	-
Assumed on asset acquisition	-	(32)
Income tax expense for the year	760	560
Taxes paid	(1,023)	(870)
Foreign currency differences	-	(52)
Net tax (asset)/liability	(606)	(343)

As at June 30, 2024 US$’000	As at December 31, 2022 US$’000	Net tax(assets) liabilities
(795)	(657)	Prepaid income taxes
189	314	Income tax liabilities
(606)	(343)	Net tax (asset)/liability

Since the Group operates internationally, it is subject to income taxes in many different tax jurisdictions. The Group calculates its average expected tax rate as a weighted average of the tax rates in the tax jurisdictions in which the Group operates. This rate changes from year to year due to changes in the mix of the Group’s taxable income and changes in local tax rates.

17. Earnings per share

The calculation of the basic earnings per share is based on the following data:

Earnings	Period ended June 30, 2024 US$’000	Year ended December 31, 2022 US$’000
Loss attributable to the ordinary equity holders of the parent entity	(20,839)	(29,251)

Number of shares	Period ended June 30, 2024	Year ended December 31, 2022
Weighted average number of ordinary shares for the purposes of basic earnings per share	158,135,830	133,426,953

Basic earnings per share is calculated by dividing the profit/loss after tax attributable to the equity holders of the Company by the weighted average number of shares in issue during the year. The effect of share options is anti-dilutive and therefore not disclosed.

18. Intangible assets

	Goodwill US$’000	Internally developed assets US$’000	Brand names and customer relations US$’000	Acquired technologies US$’000	Other intangible assets US$’000	Total US$’000
Cost
As at January 1, 2022	21,382	3,509	4,503	3,180	2,332	34,906
Additions arising from internal development	-	2,165	-	-	-	2,165
Other acquisitions	-	-	-	-	1,700	1,700
Disposals / write-offs	-	(85)	-	-	(812)	(897)
Currency translation differences	(795)	5	(160)	(165)	14	(1,101)
As at December 31, 2022	20,587	5,594	4,343	3,015	3,234	36,773
Business combinations	764	-	150	-	507	1,421
Additions arising from internal development	-	1,277	-	-	-	1,277
Other acquisitions	-	-	-	-	150	150
Disposals / write-offs	-	(1,169)	-	-	(1,806)	(2,975)
HeiQ plc Annual Report 2023/24 Financial Statements 72
Deconsolidation of subsidiary	(123)	-	-	-	-	(123)
Currency translation differences	70	141	14	7	106	338
As at June 30, 2024	21,298	5,843	4,507	3,022	2,191	36,861
Amortization and accumulated impairment losses
As at January 1, 2022	2,305	474	602	234	518	4,133
Amortization for the year	-	198	695	334	208	1,435
Impairment loss	10,576	880	73	-	122	11,651
Currency translation differences	(750)	3	(72)	(45)	(24)	(888)
As at December 31, 2022	12,131	1,555	1,298	523	824	16,331
Amortization for the year	-	1,136	1,057	500	545	3,238
Disposals / write-offs	-	(958)	-	-	(599)	(1,557)
Deconsolidation of subsidiary	(123)	-	-	-	-	(123)
Impairment loss	-	323	-	-	-	323
Currency translation differences	19	30	(46)	(30)	5	(22)
As at June 30, 2024	12,027	2,086	2,309	993	775	18,190
Net book value
As at December 31, 2022	8,456	4,039	3,045	2,492	2,410	20,442
As at June 30, 2024	9,271	3,757	2,198	2,029	1,416	18,671

Other intangible assets include acquired rights, licenses, patent costs, concessions, website designs and domains and trademarks.

Goodwill

Goodwill acquired in a business combination was allocated, at acquisition, to the following cash generating units (CGUs):

• CGU: ChemTex
• Description of activities: This CGU is based on the 2017 acquisition of ChemTex Inc. The CGU’s main activities are carpet polymer, industrial polymer, textile finishes, R&D, laboratory work, production and sales. The CGU contributes to the Group’s Advanced Materials segment.
• CGU: Chrisal
• Description of activities: The CGU is based on the 2021 acquisition of Chrisal, a biotechnology company and a leader in innovative ingredients and consumer products that incorporate the benefits of probiotics and synbiotics. The CGU contributes to the Group’s LifeSciences segment.
• CGU: RAS
• Description of activities: The CGU is based on the 2021 acquisition of RAS AG. RAS AG develops and manufactures antimicrobial, hygiene-enhancing additives and durable antimicrobial coating systems which are sold under the trademark agpure®, and transparent electrically conductive and infrared reflective coatings sold under the Xpectra technology (formerly known under the ECOS® trademark). Furthermore, the CGU includes the regulatory registrations acquired in the Tarn Pure acquisition. Which support the regulatory compliance of HeiQ’s antimicrobial products. The CGU contributes to the Group’s Advanced Materials segment.
• CGU: Life
• Description of activities: The CGU is based on the 2021 acquisition of Life Group. LIFE develops and distributes bio-based antimicrobial additives and treatments used by manufacturers of plastics, coatings, textiles, ceramics and paper, that inhibit or manage bacteria, fungi, algae, and other micro-organisms that come in contact with treated materials. The CGU contributes to the Group’s Advanced Materials segment.
• CGU: MasFabEs
• Description of activities: The CGU is based on the 2020 acquisition of MasFabEs. The MasFabEs CGU manufactures medical masks and devices. The CGU contributes to the Group’s LifeSciences segment.

The following table summarizes goodwill allocation and accumulated impairment for each CGUs:

	Goodwill US$’000	Accumulated impairment US$’000	Currency revaluation US$’000	Net book value US$’000
ChemTex	3,393	-	-	3,393
Chrisal*	6,163	(3,677)	(291)	2,195
RAS (incl. Tarn Pure in 2023/2024)*	7,998	(4,007)	(308)	3,683
Life	5,202	(5,202)	-	-
MasFabEs**	123	(123)	-	-
Total goodwill	22,879	(13,009)	(599)	9,271

The balances of Chrisal and RAS are revalued from local currency to US$ at each reporting date.
*Goodwilll allocated to the MasFabEs CGU was derecognized following the deconsolidation of HeiQ Medica S.L.

Goodwill impairment test

The Group tests goodwill annually for impairment or more frequently if there are indications that these assets might be impaired. For the 18-month period ended June 30, 2024, the Group tested goodwill for ChemTex, Chrisal and RAS CGU. The recoverable amount of HeiQ plc Annual Report 2023/24 Financial Statements 73 each CGU is determined based on a value in use calculation which uses cash flow projections based on financial budgets approved by the directors. The projections are based on a seven-year period and an individual pre-tax discount rate ranging between 8.3% to 9.8% per cent per annum for each CGUs as presented further below in more detail (2022: 12 to 14 per cent per annum). The discount rate is based on pre-tax weighted average cost of capital for an average company in the chemical industry adjusted for relative size and risks of each CGU. The directors expect income from all CGUs over the next seven years. The perpetuity growth rate used is based on consumer price index relevant for each CGU. The assumptions used by management in forecasting revenues for the relevant periods are as follows: For the financial period 2024/2025, forecast has been determined by adjusting the forecast for the year as approved by the Board (“Budget”) for any variance of actual performance (to date June 2024) against it. For later periods, revenue growth was estimated based on projected (2025-2030) compound annual growth rate of the respective business. Operating profits are forecast based on historical experience of operating margins, adjusted for the impact of known or expected changes in pricing and regional inflation expectations. A summary of the key assumptions used in the value-in-use calculation is set below:

Assumption	ChemTex	Chrisal	RAS
Discount factor	9.3%	9.8%	8.3%
Perpetual growth rate	2.09%	1.96%	1.96%
Compound annual growth rate for the next five years	5.2%	36.8%	15.8%

As of end of June 2024, the Group conducted its annual goodwill impairment test review and identified that the aggregated recoverable amount of each Chrisal CGU, RAS CGU and Life CGU (based on the value in use approach and the inputs displayed in the table above) exceeded its carrying amount. As a result, no impairment was considered necessary as a result of these test in this financial period ended June 30, 2024 (2022: total impairment loss recognized of US$10,576,000).

As a result of the impairment losses described above, the following book values remain for each CGU:

	As at June 30, 2024 US$’000	As at December 31, 2022 US$’000
Goodwill book value
ChemTex	3,393	3,393
Chrisal*	2,195	2,189
RAS (incl. Tarn Pure in 2023/2024)*	3,683	2,874
Life	-	-
Total goodwill book value	9,271	8,456

*The balances of Chrisal and RAS are revalued from local currency to US$ at each reporting date.

Sensitivity analysis

The Group has conducted an analysis of the sensitivity of the impairment test to reasonably possible changes in the key assumptions used to determine the recoverable amount for each CGU to which goodwill is allocated. In the process, the recoverable amount for ChemTex CGU and RAS CGU was identified as key estimate.For ChemTex CGU, the sensitivity analysis showed that an impairment loss would be possible if the compound annual growth rate (7.2%) over the next seven years would be lower than 3.2%. A reasonably possible underperformance against the forecast sales growth rate (7.2%) for ChemTex CGU by 5 percent points, i.e. applying a compound annual growth rate of 2.2% for the next seven years, would result in a partial impairment of US$1,980,000. For RAS CGU, the sensitivity analysis showed that an impairment loss would be possible if the compound annual growth rate over the next seven years would be lower than 15.8%. RAS’ CAGR suggests that a 10 percent point underperformance against forecast sales growth rates (15.8%), i.e. assuming a compound annual growth rate of 5.8% for the next seven years - would result in a partial impairment of US$2,922,000 of RAS CGU.

2022 goodwill impairment test

In the reporting year ended December 31, 2022, a US$10,576,000 impairment loss was recognized relating to Chrisal CGU (US$2,402,000), RAS CGU (US$2,972,000) and Life CGU (US$5,202,000).

Internally developed assets under construction

The Group tests internally developed assets under construction on a yearly basis. The Directors consider whether estimated future economic benefits outweigh the costs capitalized by reviewing whether each project:
* is still in development phase;
* can be used or sold in the future; and
* can be completed given the technical, financial and other resources available.

The Group has processes in place for continually reviewing development expenditure to ensure that projects under development are still viable. In the reporting period ended June 30, 2024, assets amounting to US$211,000 were written off relating to projects that HeiQ plc Annual Report 2023/24 Financial Statements 74 were no longer to meet the capitalization criteria. Furthermore, an impairment of US$323,000 was posted in relation to an innovation project in the Advanced Materials segment due to doubts around the technical and commercial feasibility of the product.

Internally developed assets and other intangibles with finite lives

The Group tests internally developed assets and other intangibles with finite lives for impairment only if there are indications that these assets might be impaired. The Group has processes in place for continually reviewing development expenditure to ensure that projects under development are still viable. In the reporting period ended June 30, 2024, assets worth US$1.2m. The write-offs mainly related to patents acquired in view of the commercial partnership with ICP. With the end of the partnership, the asset’s economic benefits were deemed to no longer have any value.

19. Property, plant and equipment

	Machinery and equipment	Motor vehicles	Computers and software	Furniture and fixtures	Land and buildings	Total
Cost	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000
As at January 1, 2022	7,288	536	914	474	1,523	10,735
Additions	2,272	26	197	50		2,735
Disposals	(69)	(12)	-	-		(81)
Reclassifications	(407)	59	-	348		-
Currency translation differences	(233)	(1)	(21)	(23)	(90)	(368)
As at December 31, 2022	8,851	608	1,090	849	4,168	15,566
Additions	1,319	113	32	62	5,505	7,031
Disposals	(1,748)	(59)	(748)	(207)		(2,762)
Deconsolidation of subsidiary	(1,265)	(30)	(11)	(33)		(1,339)
Reclassifications	(37)			37		-
Currency translation differences	76	1	27	10	(68)	46
As at June 30, 2024	7,196	633	390	718	9,605	18,542
Depreciation and accumulated impairment losses	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000
As at January 1, 2022	2,723	330	619	86	112	3,870
Charge for the year	763	90	218	83	128	1,282
Eliminated on disposal	(27)	(5)	-	-		(32)
Impairment loss	730					730
Reclassifications	(222)			222		-
Currency translation differences	(67)		(9)	(3)	(7)	(86)
As at December 31, 2022	3,900	415	828	388	233	5,764
Charge for the year	1,421	114	148	152	480	2,315
Eliminated on disposal	(736)	(35)	(743)	(198)		(1,712)
Deconsolidation of subsidiary	(1,210)	(8)	(5)	(8)		(1,231)
Reclassifications	7		(6)	(1)		-
Currency translation differences	67	1	22	7	(3)	94
As at June 30, 2024	3,449	487	244	340	710	5,230
Net book value	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000
As at December 31, 2022	4,951	193	262	461	3,935	9,802
As at June 30, 2024	3,747	146	146	378	8,895	13,312

Impairment losses recognized in the year

During the year ended December 31, 2022, as a result of the significant decline in demand for of certain types of hygiene masks, the Group carried out a review of the recoverable amount of machinery. The Group recognized an impairment loss of US$730,000 for machinery that was intended to be used to manufacture hygiene masks for which demand declined significantly. The asset was used in the LifeSciences reportable segment. In the period ended June 30, 2024, the machinery was derecognized following deconsolidation of the subsidiary HeiQ Medica SL.

20. Right-of-use assets

	Land and buildings	Motor vehicles	Machinery and equipment	Total
Cost	US$’000	US$’000	US$’000	US$’000
As at January 1, 2022	8,913	611	341	9,865
Additions	86	174	1,921	2,181
Disposals due to expiry of lease		(36)		(36)
Disposals due to business combination*	(467)			(467)
Modification to lease terms**	(1,199)			(1,199)
Currency translation differences	(381)	(67)	(26)	(474)
As at December 31, 2022	6,952	682	2,236	9,870
Additions	860	140	913	1,913
Disposals due to expiry of lease	(475)	(40)	(32)	(547)
Modification to lease terms***	(1,228)	(110)		(1,338)
Currency translation differences	(58)	19	(29)	(68)
As at June 30, 2024	6,051	691	3,088	9,830
Depreciation	US$’000	US$’000	US$’000	US$’000
As at January 1, 2022	1,716	109	66	1,891
Depreciation for the year	730	140	68	938
Disposals due to expiry of lease		(36)		(36)
Modification to lease terms**	(693)			(693)
Currency translation differences	(34)	(6)	(9)	(49)
As at December 31, 2022	1,719	207	125	2,051
Depreciation for the year	1,096	232	245	1,573
Disposals due to expiry of lease	(301)	(25)	(33)	(359)
Modification to lease terms***	(990)	(41)		(1,031)
Currency translation differences	(134)	(1)	(1)	(136)
As at June 30, 2024	1,390	372	336	2,098
Net book value	US$’000	US$’000	US$’000	US$’000
As at December 31, 2022	5,233	475	2,111	7,819
As at June 30, 2024	4,661	319	2,752	7,732

With the acquisition of ChemTex Laboratories’ property, plant and equipment (Note 26), the Group no longer has a lease liability with a third party.
The Group agreed to shorten the agreed lease terms of two existing leases from 2032 to 2027. These modifications have resulted in a reduction in the total amounts payable under the leases and a reduction to both of the right-of-use assets and lease liabilities with effect from the date of modification. The resulting US$68,000 net gain was recognized as operating income.
**The Group terminated certain lease agreements prior to their expiry resulting in the disposal of the right-of-use assets and related liabilities. Furthermore, a building lease has been restructured resulting in amended contract terms. The result of these changes resulted in a total US$33,000 net gain which was recognized as operating income.

Amounts recognized in profit and loss	Period ended June 30, 2024	Year ended December 31, 2022
	US$’000	US$’000
Depreciation expense on right-of-use assets	1,573	938
Interest expense on lease liabilities	311	163
Expense relating to short-term leases	374	225
Expense relating to leases of low value assets	51	40
Gain from early disposal and modification of leases	33	68

HeiQ plc Annual Report 2023/24 Financial Statements 76

Amounts recognized in cash flow statement	Period ended June 30, 2024	Year ended December 31, 2022
	US$’000	US$’000
Total fixed lease payments	1996	992
Gain from early disposal and modification of leases	(33)	(68)
Interest paid on leases	311	163

21. Other non-current assets

	As at June 30, 2024	As at December 31, 2022
	US$’000	US$’000
Other non-current assets
Deposits	72	80
Other prepayments	7	57
Other non-current assets	79	137

22. Inventories

	As at June 30, 2024	As at December 31, 2022
	US$’000	US$$’000
Inventories
Gross inventories	12,616	18,564
Allowance for inventories	(4,360)	(5,396)
Net realizable value	8,256	13,168

The cost of inventories recognized as an expense during the period ended June 30, 2024 in respect of continuing operations was US$39,485,000 (Year ended December 31, 2022: US$33,745,000). The cost of inventories recognized during the period includes a reduction of the inventory allowance of US$417,000 (Year ended December 31, 2022: net loss of US$4,912,000).

23. Trade receivables

	As at June 30, 2024	As at December 31, 2022
	US$’000	US$’000
Trade receivables
Not past due	2,791	2,788
<30 days	2,011	520
31-60 days	671	781
61-90 days	234	215
91-120 days	46	180
>120 days	1,782	2,407
Total trade receivables	7,535	6,891
Provision for expected credit losses	(1,280)	(404)
Total trade receivables (net)	6,255	6,487

The average credit period on sales of goods varies by region from 30 - 120 days. No interest is charged on outstanding trade receivables. The Group always measures the loss allowance for trade receivables at an amount equal to lifetime ECL. The expected credit losses on trade receivables are estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor’s current financial position, adjusted for factors that are specific to the debtors, general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast. As at June 30, 2024, the Group has recognized an expected credit loss of US$1,280,000 (December 31, 2022: US$404,000). The following table details the risk profile of receivables based on the Group’s provision matrix.# HeiQ plc Annual Report 2023/24 Financial Statements 77

Lifetime Expected credit losses on trade receivables

Trade receivables – days past due	Not past due	1-60	61-120	>120 days	Total
Expected credit loss	US$’000	US$’000	US$’000	US$’000	US$’000
Expected credit loss rate	1%	1%	1%	68%	17%
Estimated total gross carrying amount at default	2,791	2,682	280	1,782	7,535
Lifetime ECL as at June 30, 2024	40	18	2	1,220	1,280

Trade receivables – days past due	Not past due	1-60	61-120	>120 days	Total
Expected credit loss	US$’000	US$’000	US$’000	US$’000	US$’000
Expected credit loss rate	0%	0%	0%	17%	6%
Estimated total gross carrying amount at default	2,788	1,301	395	2,407	6,891
Lifetime ECL as at December 31, 2022	-	-	-	404	404

The following table shows the movement in lifetime ECL that has been recognized for trade receivables in accordance with the simplified approach set out in IFRS 9.

	Individually assessed	Collectively assessed	Total
Expected credit losses	US$’000	US$’000	US$’000
Balance as at January 1, 2022	278	46	324
Net remeasurement of loss allowance	172	(6)	166
Amounts written off	(81)	-	(81)
Foreign exchange gains and losses	(4)	(1)	(5)
Balance as at December 31, 2022	365	39	404
Net remeasurement of loss allowance	878	85	963
Amounts written off	(97)	-	(97)
Foreign exchange gains and losses	12	(2)	10
Balance as at June 30, 2024	1,158	122	1,280

The following tables explain how significant changes in the gross carrying amount of the trade receivables contributed to changes in the loss allowance:

Increase (decrease) in lifetime expected credit losses	Period ended June 30, 2024	Year ended December 31, 2022
Origination of new trade receivables net of those settled, as well as increase in days past due up to 120 days	US$’000	US$’000
Write-off of receivables older than 120 days	878	172

24. Other receivables and prepayments

	As at June 30, 2024	As at December 31, 2022
Other receivables and prepayments	US$’000	US$’000
Contract assets	83	115
Receivables from tax authorities	1,804	1,864
Prepayments	769	1,023
Other receivables	269	1,260
Total other receivables and prepayments	2,925	4,262

25. Contract assets

Amounts relating to contract assets are balances due from customers under construction contracts that arise when the Group receives payments from customers in line with a series of performance-related milestones. The Group recognizes a contract asset for any work performed. Any amount previously recognized as a contract asset is reclassified to trade receivables at the point at which it is invoiced to the customer.

HeiQ plc Annual Report 2023/24 Financial Statements 78

	As at June 30, 2024	As at December 31, 2022	As at January 1, 2022
Contract assets	US$’000	US$’000	US$’000
Research and development services	83	65	80
Take-or-pay services	-	-	170
Exclusivity services	-	50	-
Total contract assets	83	115	250
Current assets	83	115	250
Non-current assets	-	-	-
Total contract assets	-	115	250

Revenues related to research and development services were recognized at the point of delivering proof of concept and completing testing services. Performance obligations related to exclusivity services were deemed fulfilled by the Group upon completion of the contractual term. Payment for the above services is not due from the customer yet and therefore a contract asset is recognized.

The directors of the Company always measure the loss allowance on amounts due from customers at an amount equal to lifetime ECL, taking into account the historical default experience, the nature of the customer and where relevant, the sector in which they operate. There has been no change in the estimation techniques or significant assumptions made during the current reporting period in assessing the loss allowance for the amounts due from customers under construction contracts.

Lifetime Expected credit losses on contract assets

The following table details the risk profile of amounts due from customers based on the Group’s provision matrix. Based on the historic default experience, no expected credit loss has been recognized:

	As at June 30, 2024	As at December 31, 2022
Expected credit loss	US$’000	US$’000
Expected credit loss rate	0%	0%
Estimated total gross carrying amount at default	83	115
Lifetime ECL	-	-
Net carrying amount	83	115

26. Issued share capital and share premium

Movements in the Company’s share capital and share premium account were as follows:

Note	Number of shares	Share capital	Share premium	Totals
	No.	US$’000	US$’000	US$’000
Balance as of January 1, 2022	130,583,536	51,523	144,191	195,714
Issue of shares to vendors of Life Materials	347,552	141	471	612
Issue of shares as deferred consideration	3,461,615	1,359	2,921	4,280
Issue of shares to Advisory Board and others	164,721	60	175	235
Issue of shares ChemTex Labs	2,176,884	795	1,177	1,972
Issue of shares Chrisal	3,348,164	1,223	1,838	3,061
Balance as at December 31, 2022	140,082,472	55,101	150,773	205,874
Issue of shares Tarn Pure (a)	455,435	160	212	372
Issue of shares from fundraise (b)	28,000,000	1,752	1,296	3,048
Balance as at June 30, 2024	168,537,907	57,013	152,281	209,294

All shares in issue were allotted, called up and fully paid. The Group subdivided each existing ordinary share of 30p into one new ordinary share of 5 pence and one deferred share of 25 pence. The share premium account represents the amount received on the issue of ordinary shares by the Company in excess of their nominal value and is non-distributable.

The Company issued new ordinary shares for the following:

a) On January 12, 2023, HeiQ plc completed the acquisition of 100% of the issued share capital and voting rights of Tarn Pure for a total consideration of US$1,237,000. The purchase consideration was payable partly by the issue of 455,435 new ordinary shares for (US$372,000). See Note 4 for details.

HeiQ plc Annual Report 2023/24 Financial Statements 79

b) In March 2024, the Group issued 28,000,000 new ordinary shares at £0.087 per share raising in aggregate £2.44 million (approximately US$3.0m).

27. Share-based payments

Equity-settled Share Option Scheme

The Company has adopted the HeiQ Plc Option Scheme. Under the Option Scheme, awards may be made only to employees and executive directors. The Board will administer the Option Scheme with all decisions relating to awards made to executive directors taken by the Remuneration Committee. Awards under the equity-settled option plan will be market value options, but participants resident in jurisdictions where local securities laws or other regulations are considered problematic may be awarded cash-based equivalents. Any awards made are not pensionable. All awards made will be subject to one or more performance conditions at the discretion of the Board. Ordinary Shares received on exercise of any options awarded under the Option Scheme may be required to be held for a period of time before they can be disposed of (other than disposals to satisfy any tax payable on exercise). The total number of Ordinary Shares which can be issued under the Option Scheme (together with any other employees’ share scheme operated by the Company) may not exceed 10 per cent. of the Company’s ordinary share capital from time to time. An option-holder has no voting or dividend rights in the Company before the exercise of a Share option.

There are four option grants with the same vesting requirements. The key performance indicators attaching to these awards relate to targets for sales growth (65 per cent. of the award) and operating margin (35 per cent. of the award) over a period of three years. A fifth option grant introduced new vesting requirements which are subject to share price growth. Options are exercisable at a price equal to the average quoted market price of the Company’s shares on the date of grant. The vesting period is three years. If the options remain unexercised after a period of ten years from the date of grant the options expire. Options are forfeited if the employee leaves the Group before the options vest.

Details of the share options outstanding during the year are as follows:

Period ended June 30, 2024		Year ended December 31, 2022
Number of options	Weighted average exercise price (£)	Number of options	Weighted average exercise price (£)
Outstanding at beginning of period/year	11,525,911	1.05	8,707,658
Granted during the period/year	10,300,000	0.09	3,349,125
Forfeited during the period/year	(2,364,362)	1.06	(530,872)
Lapsed during the period/year	(3,783,496)	1.23	-
Vested during the period/year	(1,046,504)	1.23	-
Exercised during the period/year	-	-	-
Expired during the period/year	-	-	-
Outstanding at the end of the period	14,631,549	0.31	11,525,911
Exercisable at the end of the period	1,046,504	1.23	-

The options outstanding at June 30, 2024 had a weighted average exercise price of £0.31 and a weighted average remaining contractual life of 1.9 years.

Since the options are subject to market-based performance conditions, the Monte Carlo model was used in calculating the fair value. The estimated fair value of the 10,300,000 options granted in April 2024 is £221,120 (approximately US$280,000).

In 2022, options were granted on June 15 and September 26. The aggregate of the estimated fair values of the options granted on those dates is £1,117,000 (approximately US$1,304,000). In 2021, options were granted on October 19. The Black-Scholes model was used in calculating the fair value of these option grants. The aggregate of the estimated fair values of the options granted on that date was £930,000 (approximately US$1,275,000).The inputs into the valuation models are as follows:

	Period ended June 30, 2024	Year ended December 31, 2022
Model used	Monte Carlo	Black Scholes
Weighted average share price (£)	0.0860	0.817
Weighted average exercise price (£)	0.0898	0.834
Expected volatility	65.0%	69.3%/70.3%*
Expected life	2.7 years	2.6 /2.3
Risk-free rate	4.32%	1.90%/4.38%*
Expected dividend yields	0%	0%
Share price hurdle	£0.3250	n/a

*In the reporting year ended 2022, there were two grants with different inputs used in the Black Scholes model.

Expected volatility was determined by calculating the historical volatility of the Group’s share price as well as a set of comparable listed companies. The expected life used in the model is equal to the vesting period. Due to the expectation that performance targets will not be met, the number of options expected to vest from the second, third and fourth option grant dropped to nil (2022: 2,279,236). This resulted in a net income of US$51,000 arising from options-related share-based payment transactions for the 18-month period ended June 30, 2024 (income for the year ended December 31, 2022: US$12,000).

Other share-based payments

Remuneration of US$764,000 described in Note 26 in relation to the acquisition of Life Materials Technologies Limited is linked to a service period of five years. An expense of US$229,000 was recognized in the 18-month period ended June 30, 2024 (year ended December 31, 2022: US$150,000). The remainder of approximately US$306,000 is expected to be expensed over the period from July 1, 2024, to June 30, 2026.

28. Other reserves and retained deficit

Other reserves comprise the share-based payment reserve, the merger reserve, the currency translation reserve and the other reserve. The retained deficit comprises all other net gains and losses and transactions with owners not recognized elsewhere.

Movements in the other reserves were as follows:

Note	Share-based payment reserve US$’000	Merger reserve US$’000	Currency translation reserve US$’000	Other reserve US$’000	Total Other reserves US$’000
	Balance at January 1, 2022	474	(126,912)	387	(1,144)
	Other comprehensive (loss)/income	-	-	(1,914)	1,104
	Total comprehensive (loss)/income for the year	-	-	(1,914)	1,104
2	Share-based payment charges	7	(12)	-	-
	Transactions with owners	(12)	-	-	-
	Balance at December 31, 2022	462	(126,912)	(1,527)	(40)
	Other comprehensive (loss)/income	-	-	466	(136)
	Total comprehensive (loss)/income for the year	-	-	466	(136)
2	Share-based payment charges/(reversal)	7	(51)	-	-
	Transactions with owners	(51)	-	-	-
	Balance at June 30, 2024	411	(126,912)	(1,061)	(176)

The share-based payment reserve arises from the requirement to fair value the issue of share options at grant date. Further details of share options are included at Note 27.

The merger reserve was created in accordance with IFRS3 ‘Business Combinations’. The merger reserve arises due to the elimination of the Company’s investment in HeiQ Materials AG. Since the shareholders of HeiQ Materials AG became the majority shareholders of the enlarged Group, the acquisition is accounted for as though there is a continuation of the legal subsidiary’s financial statements. In reverse acquisition accounting, the business combination’s costs are deemed to have been incurred by the legal subsidiary.

The currency translation reserve represents cumulative foreign exchange differences arising from the translation of the financial statements of foreign subsidiaries and is not distributable by way of dividends.

The other reserve comprises the cumulative re-measurement of defined benefit obligations and plan assets to fair value, and which are recognized as a component of other comprehensive income. Such actuarial gains and losses from defined benefit pension plans are not reclassified to profit or loss in subsequent periods.

Dividend paid by subsidiary

In October 2023, HeiQ Chrisal N.V. declared and paid a dividend of US$42,000 of which 29% or US$12,000 was paid to minority shareholders. In January 2024, HeiQ Chrisal declared and paid a dividend of US$704,000 of which 29% or US$204,000 was paid to minority shareholders. In June 2024, HeiQ Chrisal declared and paid a dividend of US$174,000 of which 29% or US$50,500 was paid to minority shareholders.

Capital contributions from minority shareholders

In the year ended December 31, 2022, the Group received a capital contribution from a minority shareholder of US$764,000 which arose from a waived loan (see Note 31 for details).

29. Pensions and other post-employment benefit plans

The Group operates a defined benefit pension plan in Switzerland, which requires contributions to be made to a separately administered fund. The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method. Correspondingly the value of the defined benefit obligation at valuation date is equal to the present value of the accrued pro-rated service considering expected salary at eligibility date and the future pension increase.

Pension plan description

The pension scheme is with AXA pension fund. The pension plans grant disability and death benefits which are defined as a percentage of the salary insured. Although the Swiss plan operates like a defined contribution plan under local regulations, it is accounted for as a defined benefit pension plan under IAS19 ‘Employee Benefits’ because of the need to accrue a minimum level of interest on the mandatory part of the pension accounts. Upon reaching retirement age, the savings capital will be converted with a fixed conversion rate into an old-age pension. In the event that an employee leaves employment prior to reaching a pensionable age, the cumulative balance of the savings account is withdrawn from the pension plan and invested into the pension plan of the employee’s new employer.

Regulatory framework

Pension plan legal structure

HeiQ Materials AG is affiliated to a collective foundation. The collective foundation operates one defined benefit pension plan for HeiQ Materials AG. Under Swiss law, all employees are required to be a member of the pension plan. There are minimum benefits requested by law (for old-age, disability, death and termination). The pension plans cover more than legally requested. Each affiliated company has a pension plan committee. The committee is represented by 50% of employer representatives and the remaining 50% are employee representatives.

Responsibilities of the board of trustees (and/or the employer on the board of trustees)

The highest corporate body of the collective foundation is the board of trustees. The board of trustees is elected out of the affiliated companies and is also represented by 50% of employee and employer representatives (on the level of the collective foundation). This board handles the general management of the pension scheme, ensures compliance with the statutory requirements, defines the strategic objectives and policies of the pension scheme and identifies the resources for their implementation. This board decides also on the asset allocation and is responsible to the authorities for the correct administration of the collective foundation.

Special situation

The pension scheme has no minimum funding requirement (when the pension fund is in a surplus position), although the pension scheme has a minimum contribution requirement as specified below. Under local requirements, where a pension fund is operated in a surplus position, limited restrictions apply in terms of the trustee’s ability to apply benefits to the members of the locally determined “free reserves”. In instances where the pension fund enters into an underfunded status the active members, along with the employer, are required to make additional contributions until such time the pension fund is in a fully funded position.

Funding arrangements that affect future contributions

Swiss law provides for minimum pension obligations on retirement. Swiss law also prescribes minimum annual funding requirements. An employer may provide or contribute a higher amount than as specified under Swiss law – such amounts are specified under the terms and conditions of each of the Swiss employee’s individual terms and conditions of employment. In addition, employers are able to make one off contributions or prepayments to these funds. Although these contributions cannot be withdrawn, they are available to the Company to offset its future employer cash contributions to the plan. Although a surplus can exist in the fund, Swiss law requires minimum annual funding requirements to continue. For the active members of the pension plan, annual contributions are required by both the employer and employee. The employer contributions must be at least equal to the employee contributions, but may be higher, separately mentioned in the constitution of the pension plan. Minimum annual contribution obligations are determined with reference to an employee’s age and current salary, however as indicated above these can be increased under the employee’s terms and conditions of employment. In the event of the winding up of HeiQ Materials AG, or the pension fund, HeiQ Materials AG has no right to any refund of any surplus in the pension fund. Any surplus balance is allocated to the members (active and pensioners).

General risk

The Group faces the risk that its equity ratio can be affected by a poor performance of the assets of the pension fund or a change of assumptions. Therefore, sensitivities of the main assumptions have been calculated and disclosed (see below).The following tables summarize the components of net benefit expense recognized in the statement of profit and loss and the funded status and amounts recognized in the statement of financial position for the plan: In February 2023, nine employees were made redundant which resulted in a curtailment gain US$148,000. The valuation was based on the participants data as of year-end 2022 and the valuation assumptions as of end of February 2023. In October 2023, the Board of Trustees of the AXA pension fund decided that a new enveloping conversion rate of 5.20% will apply to retirements from January 1, 2025 for men and women aged 65. For retirements up to the end of 2024, the split conversion rates of 6.80% for mandatory savings capital and 5.00% for men aged 65 and 4.88% for women aged 64 for supplementary savings capital will continue to apply. The decision was accounted for as a plan amendment at the time the decision was made. The valuation was based on the participants data as at December 31, 2023 and the valuation assumptions as at October 31, 2023. The impact was recognized as a plan amendment and a gain of US$341,000.

HeiQ plc Annual Report 2023/24 Financial Statements 82

Net benefit obligations

The components of the net defined benefits obligations included in non-current liabilities are as follows:

	As at June 30, 2024	As at December 31, 2022
	US$’000	US$’000
Net benefit obligations	7,245	9,616
Fair value of plan assets	(8,094)	(10,568)
Defined benefit obligations	(849)	(952)
Funded status (net liability)	15.8	13.8
Duration (years)	(351)	(389)
Expected benefits payable in following year	(351)	(389)

Development of obligations and assets

	Period ended June 30, 2024	Year ended December 31, 2022
	US$’000	US$’000
Present value of funded obligations, beginning of period/year	(10,568)	(13,003)
Employer service cost	(571)	(571)
Employee contributions	(452)	(352)
Past service cost	341	-
Curtailments/Settlements	148	-
Interest cost	(302)	(45)
Benefits paid/(refunded)	4,309	522
Actuarial (loss)/gain on benefit obligation	(636)	2,562
Currency (loss)/gain	(363)	319
Present value of funded obligations, end of period/year	(8,094)	(10,568)
Defined benefit obligation participants	(6,746)	(10,568)
Defined benefit obligation pensioners	(1,348)	-
Present value of funded obligations, end of period/year	(8,094)	(10,568)
Fair value of plan assets, beginning of period/year	9,616	10,858
Expected return on plan assets	273	37
Employer’s contributions	448	352
Employees’ contributions	452	352
Benefits (paid)/refunded	(4,309)	(522)
Admin expense	(28)	(21)
Actuarial (loss)/gain on plan assets	458	(1,182)
Currency gain/(loss)	335	(258)
Fair value of plan assets, end of period/year	7,245	9,616

Movements in net liability recognized in statement of financial position:

	Period ended June 30, 2024	Year ended December 31, 2022
	US$’000	US$’000
Net liability, beginning of year	(952)	(2,146)
Employer service cost	(571)	(571)
Interest cost	(302)	(45)
Expected return on plan assets	273	37
Admin expense	(28)	(21)
Past service cost recognized in period/year	341	-
Curtailment, settlement, plan amendment gain (loss)	148	-
Employer’s contributions (following year expected contributions)	448	352
Prepaid (accrued) pension cost:	(311)	247
- operating income (expense)	339	(240)
- finance expense	(28)	(7)
Total gains recognized within other comprehensive income	(178)	1,380
Currency loss	(28)	62
Net liability, end of period/year	(849)	(952)

Expected employer's cash contributions for following period/year: 264 (2024), 360 (2022)

Amounts recognized in profit and loss

	Period ended June 30, 2024	Year ended December 31, 2022
	US$’000	US$’000
Employer service cost	(571)	(571)
Past service cost recognized in period/year	341	-
Interest cost	(302)	(45)
Expected return on plan assets	273	37
Admin expense	(28)	(21)
Curtailment, settlement, plan amendment gain (loss)	150	-
Components of defined benefit costs recognized in profit or loss	(137)	(600)

Amounts recognized in other comprehensive income

	Period ended June 30, 2024	Year ended December 31, 2022
	US$’000	US$’000
Actuarial gains/(losses) arising from plan experience	212	193
Actuarial (losses)/gains arising from demographic assumptions	-	(23)
Actuarial gains arising from financial assumptions	(848)	2,392
Re-measurement of defined benefit obligations	(636)	2,562
Re-measurement of assets	458	(1,182)
Deferred tax asset derecognized / (recognized)	42	(276)
Total recognized in OCI	(136)	1,104

The assets of the scheme are invested on a collective basis with other employers. The allocation of the pooled assets between asset categories is as follows.

Asset allocation	As at June 30, 2024	As at December 31, 2022
Cash	1.2%	2.8%
Bonds	30.2%	29.1%
Equities	34.4%	33.2%
Property (incl. mortgages)	28.8%	31.3%
Other	5.4%	3.6%
Total	100.0%	100.0%

Principal actuarial assumptions (beginning of period/year):

The principal assumptions used in determining pension and post-employment benefit obligations for the plan are shown below:

The principal assumptions	As at June 30, 2024	As at December 31, 2022
Discount rate	1.50%	2.25%
Interest credit rate	2.00%	2.25%
Average future salary increases	1.50%	2.50%
Future pension increases	0.00%	0.00%
Mortality tables used	BVG 2020 GT	BVG 2020 GT
Average retirement age	65/65	65/65

The forecasted contributions of the Group for the 2024/2025 financial year amount to US$351,000.

HeiQ plc Annual Report 2023/24 Financial Statements 84

Sensitivities

A quantitative sensitivity analysis for significant assumptions is as follows:

		As at June 30, 2024	As at December 31, 2022
Impact on defined benefit obligation
Discount rate + 0.25%		(308)	(323)
Discount rate – 0.25%		329	343
Salary increase + 0.25%		44	44
Salary increase – 0.25%		(43)	(43)
Pension increase + 0.25%		165	167
Pension decrease – 0.25%	(not lower than 0%)	-	-

A negative value corresponds to a reduction of the defined benefit obligation, a positive value to an increase of the defined benefit obligation. The sensitivity analyses above have been determined based on a method that extrapolates the impact on the defined benefit obligation as a result of reasonable changes in key assumptions occurring at the end of the reporting period. The sensitivity analyses are based on a change in a significant assumption, keeping all other assumptions constant. The sensitivity analyses may not be representative of an actual change in the defined benefit obligation as it is unlikely that changes in assumptions would occur in isolation from one another.

Other pension plans

Life Materials Technologies Limited, Thailand, also has a pension scheme which gives rise to defined benefit obligations under IAS 19 net defined liability as at June 30, 2024 is US$134,000 (December 31, 2022: US$134,000).

30. Lease liabilities

Future minimum lease payments associated with leases were as follows:

	As at June 30, 2024	As at December 31, 2022
	US$’000	US$’000
Not later than one year	1,151	1,301
Later than one year and not later than five years	3,398	3,813
Later than five years	3,271	3,387
Total minimum lease payments	7,820	8,501
Less: Future finance charges	(539)	(679)
Present value of minimum lease payments	7,281	7,822
Current liability	997	1,264
Non-current liability	6,284	6,558
	7,281	7,822

31. Borrowings

The Group’s borrowings are held at amortized cost. They consist of the following:

	As at June 30, 2024	As at December 31, 2022
	US$’000	US$’000
Unsecured bank loans	9,973	3,573
Secured bank loans	793	628
Loans from related parties	443	-
Loans from non-controlling interest	-	137
Total borrowings	11,209	4,338

The following table provides a reconciliation of the Group’s future maturities of its total borrowings for each year presented:

HeiQ plc Annual Report 2023/24 Financial Statements 85

	As at June 30, 2024	As at December 31, 2022
	US$’000	US$’000
Not later than one year	9,380	2,893
Later than one year but less than five years	884	1,029
After more than five years	945	416
Total borrowings	11,209	4,338

The other principal features of the Group’s borrowings are as follows:

Unsecured bank loans

Description	Currency	Repayment date	Principal US$’000	Interest rate	Principal US$’000	Interest rate
			As at June 30, 2024		As at Dec 31, 2022
Credit facility	CHF	August 2024	550	7.10%	-	-
Credit facility	CHF	September 2024	1,100	5.45%	-	-
Credit facility	CHF	July 2024	5,829	4.44%	2,574	2.20%
Credit facility	CHF	July 2024	550	4.40%	-	-
Credit facility	EUR	July 2024	415	6.82%	-	-
Various bank loans 1)	EUR	1-10 years	1,504	3,04%	999	2.21%
Bank loan	GBP	May 2026	25	2.50%	-	-
Outstanding at the end of the year			9,973		3,573

1) Several loans repayable over nine years. The loans are repayable over a period of up to nine years. These loans have fixed interest rates between 1.19% and 4.50% and the weighted average fixed interest rate on the outstanding balances is 3,04%.

Secured bank loans

The Group took out a bank loan in October 2020 which incurs interest at a fixed rate of 3.25%. The loan was secured by property owned by a company which is controlled by a minority shareholder of HeiQ Medica. As at December 31, 2022, US$628,000 was outstanding on the loan. The loan was derecognized following deconsolidation of the subsidiary, see Note 6f. In March 2024, a new bank loan was taken out in the amount of EUR750.000 at an interest rate of 7%. The loan is secured by property owned by the Group. As of June 30, 2024, EUR740,000 is outstanding (US$793,000).

Related party loans

In December 2023, Cortegrande AG, a company controlled by Carlo Centonze, granted a loan to HeiQ Group in the amount of EUR 1,350,000 (approximately US$1,494,000). The loan was increased to EUR 1,475,000 in January 2024. In March 2024, most of the outstanding loan was repaid in shares as part of the settlement of the convertible loan note issued by the Company. The remaining loan amounts to EUR 400,000 (approximately US$443,000), incurs interest at 4.5% and is repayable in June 2025.# HeiQ plc Annual Report 2023/24

Financial Statements

86

1. Deferred tax

The following are the major deferred tax liabilities and assets recognized by the Group and movements thereon during the current and prior reporting period.

	Pension fund obligations	Tax losses	Share-based payments	Temporary differences	Total
	US$’000	US$’000	US$’000	US$’000	US$’000
Balance at January 1, 2022	429	178	85	(1,686)	(994)
Charge/(credit) to profit or loss	49	(150)	1	681	581
Credit to other comprehensive income	(276)	-	-	-	(276)
Foreign currency differences	(12)	(28)	5	9	(26)
Balance as at December 31, 2022	190	-	91	(996)	(715)
Charge/(credit) to profit or loss	(457)	-	(87)	389	(155)
Charge to other comprehensive income	42	-	-	-	42
Arising from business combinations	-	-	-	(164)	(164)
Foreign currency differences	20	-	(4)	8	24
Balance as at June 30, 2024	(205)	-	-	(763)	(968)

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:

	Year ended June 30, 2024	Year ended December 31, 2022
	US$’000	US$’000
Deferred tax assets	305	538
Deferred tax liabilities	(1,273)	(1,253)
Net deferred tax assets (liabilities)	(968)	(715)

Deferred tax assets related to pension fund obligations and share-based payments were derecognized due to the current operational results and the uncertainty about future profits in the Swiss tax jurisdiction. Deferred tax liabilities related to capital allowances and depreciation increased following the recognition of intangible assets acquired in the Tarn Pure acquisition. Tax losses were not recognized as deferred tax assets. During the period ended June 30, 2024, such tax losses amounted to US$4.4million (year ended December 31, 2022: US$3.2million). They arose from aggregated losses of US$20.8million (2022: US$17.5million).

The Group has applied the exception under the IAS 12 amendment with respect to International Tax Reform – Pillar Two Model Rules to not recognize or disclose any information about deferred tax assets and liabilities related to top-up income taxes. The group applies the exception recognizing and disclosing information about deferred tax assets and liabilities related to OECD pillar two income taxes, as provided in the amendments to IAS 12 issued in May 2023.

1. Other non-current liabilities

	As at June 30, 2024	As at December 31, 2022
	US$’000	US$’000
Defined benefit obligation IAS 19 Switzerland (Note 29)	849	952
Defined benefit obligation IAS 19 Thailand (Note 29)	134	134
Contract liabilities	4,758	3,614
Deferred grant income	-	14
Total other non-current liabilities	5,741	4,714

HeiQ plc Annual Report 2023/24

Financial Statements

87

1. Trade and other payables

	As at June 30, 2024	As at December 31, 2022
	US$’000	US$’000
Trade payables	3,706	3,321
Payables to tax authorities	315	375
Other payables	1,940	1,626
Total trade and other payables	5,961	5,322

Trade payables principally comprise amounts outstanding for trade purchases and ongoing costs. Other payables relate to employee-related expenses, utilities and other overhead costs. Typically, no interest is charged on the trade payables. The Group has financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms. The directors consider that the carrying amount of trade payables approximates to their fair value.

1. Accrued liabilities

	As at June 30, 2024	As at December 31, 2022
	US$’000	US$’000
Costs of goods sold	837	875
Personnel expenses	1,202	1,737
Other operating expenses	1,027	2,366
Total accrued liabilities	3,066	4,978

1. Deferred revenue

	As at June 30, 2024	As at December 31, 2022
	US$’000	US$’000
Contract liabilities	1,700	1,176
Prepayments for unshipped goods	120	94
Deferred grant income	92	15
Total deferred revenue	1,912	1,285

1. Contract liabilities

	As at June 30, 2024	As at December 31, 2022	As at January 1, 2022
	US$’000	US$’000	US$’000
Exclusivity agreements	2,107	1,832	-
Research and development services	4,351	2,958	1,000
Total contract liabilities	6,458	4,790	1,000
Current liabilities (Note 36)	1,700	1,176	1,000
Non-current liabilities (Note 33)	4,758	3,614	-
Total contract liabilities	6,458	4,790	1,000

Revenue relating to both exclusivity and research and development services is recognized over time although the customer pays up- front in full for these services. A contract liability is recognized for revenue relating to the services at the time of the initial sales transaction and is released over the service period. The Group received a total of US$3.9 million prepayments for research and development services related to distribution agreements. The Group is expected to fulfill its performance obligations over the next five years. In 2022, the Group entered into an agreement to grant exclusivity to a customer worth US$2 million and research and development services worth a further US$2 million. The customer has prepaid, and revenue recognition is spread over four reporting periods starting in July 2022 and ending June 2026.

The following table shows how much of the revenue recognized in the current reporting period relates to brought forward contract liabilities.

	Period ended June 30, 2024	Year ended December 31, 2022
	US$’000	US$’000
Exclusivity agreements	785	-
Research and development services	905	-
Total revenue recognized from contract liabilities	1,690	-

HeiQ plc Annual Report 2023/24

Financial Statements

88

1. Other current liabilities

	As at June 30, 2024	As at December 31, 2022
	US$’000	US$’000
Deferred consideration in relation to acquisitions	169	92
Call option derivative liability	333	686
Other current liabilities	502	778

Deferred consideration

The deferred consideration relating to business combinations is summarized below:

	ChemTex RAS AG	Life Tarn Pure	Total
	US$’000	US$’000	US$’000
As at January 1, 2022	279	3,152	2,652
Foreign exchange revaluation	-	(277)	-
Consideration settled in cash	(187)	-	(1,400)
Consideration settled in shares	-	(2,875)	(1,252)
As at December 31, 2022	92	-	-
Additions from acquisition as per Note 5a	-	-	244
Consideration settled in cash	-	-	(180)
Amortization of fair value discount	-	-	3
Foreign exchange revaluation	-	-	10
As at June 30, 2024	92	-	77

Additional deferred consideration relates to the acquisition of Tarn Pure. The fair value of the deferred consideration has been discounted using an imputed interest rate of 2.20% to take into account the time value of money.

Call option derivative liability

As described in Note 6a, HeiQ AeoniQ GmbH’s minority shareholder Hugo Boss AG had the contractual right to acquire a further 5% shareholding in HeiQ AeoniQ GmbH for a call option exercise price of €10,000,000 (approximately US$10,657,000) for which a liability was recognized. The option was set to expire on December 31, 2023 but was renewed until December 31, 2024 which resulted in the revaluation of the liability as well as a gain disclosed under other income, see Note 10. The Group valued the option at initial recognition at US$1,097,000 based. As at June 30, 2024, the liability was revalued to US$333,000 using the Black-Scholes model. The gain from Hugo Boss not exercising the option was US£367,000 for the period ended June 30, 2024 (year ended December 31, 2022: US$371,000).

The inputs into the Black-Scholes model are as follows:

Weighted average share price (€)	2,285.71
Weighted average exercise price (€)	2,500.00
Expected volatility	22.5%
Expected life	0.5 year
Risk-free rate	1.0%
Expected dividend yield	0%

1. Contingent assets and liabilities

A minority shareholder of one of the Group's subsidiaries has made a claim in court regarding the interpretation of certain put-option rights on shares of the same subsidiary. The Company considers these option rights as lapsed as per the Shareholder Agreement. At present, it is not possible to determine the outcome of these matters. Hence, no provision has been made in the financial statements for their ultimate resolution.

The Group entered into a manufacture, supply and exclusive distribution agreement with Ecolab Inc. The Group received a €1.8m upfront payment from Ecolab Inc. which compensates the Group’s efforts in the preparation and upkeep of the contract. The full amount is refundable contingent on the Group breaching certain commitments. As at June 30, 2024, the Group has assessed the probability of a refund as unlikely and therefore has not recognized a liability.

HeiQ plc Annual Report 2023/24

Financial Statements

89

1. Provisions

	As at June 30, 2024	As at December 31, 2022
Provisions	US$’000	US$’000
Legal/Compliance provision	-	339
Total provisions	-	339
Current liability	-	339
Non-current liability	-	-
Total provisions	-	339

Legal/Compliance provision

	Total
	US$’000
Provisions
Balance at January 1, 2022	-
Additional provision in the year	339
Utilization of provision	-
Exchange difference	-
Balance as at December 31, 2022	339
Additional provision in the year	-
Utilization of provision	(339)
Exchange difference	-
Balance as at June 30, 2024	-

The liability relating to United States Environmental Protection Agency (“EPA”) in connection with alleged violations of the Federal Insecticide, Fungicide and Rodenticide Act (“FIFRA”) pertaining to mislabeling was settled in May 2023.# Financial Statements

41. Fair value and financial instruments

a) Fair value

The fair value of an asset or liability is the price that would be received to sell that asset or paid to transfer that liability in an orderly transaction occurring in the principal market (or most advantageous market in the absence of a principal market) for such asset or liability. In estimating fair value, the Directors utilize valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. Such valuation techniques are consistently applied. Inputs to valuation techniques include the assumptions that market participants would use in pricing an asset or liability. IFRS 13 “Fair Value Measurement” establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is defined as follows:

• Level 1: Inputs are unadjusted, quoted prices in active markets for identical assets at the measurement date.
• Level 2: Inputs (other than quoted prices included in Level 1) can include the following:
  • observable prices in active markets for similar assets;
  • prices for identical assets in markets that are not active;
  • directly observable market inputs for substantially the full term of the asset; and
  • market inputs that are not directly observable but are derived from or corroborated by observable market data.
• Level 3: Unobservable inputs which reflect the Directors’ best estimates of what market participants would use in pricing the asset at the measurement date.

We have not identified any financial instruments measured at fair value for the period ended June 30, 2024 and the year ended December 31, 2022. There were no transfers between fair value levels during the period ended June 30, 2024 (year ended December 31, 2022: US$nil).

b) Financial instruments

For trade receivables, the Group applies the simplified approach permitted by IFRS 9 “Financial Instruments”, which requires expected lifetime losses to be recognized from initial recognition of the receivables. Financial liabilities are initially measured at fair value and subsequently measured at amortized cost.

HeiQ plc Annual Report 2023/24 Financial Statements 90

The Group is not a financial institution. The Group does not apply hedge accounting and its customers are considered creditworthy and in general pay consistently within agreed payments terms. In the period ended June 30, 2024, few customers have shown delays in payment which are closely monitored. A classification of the Group's financial instruments is included in the table below. These financial instruments are held at amortized cost which is estimated to be equal to fair value.

	As at June 30, 2024	As at December 31, 2022
Financial instruments	US$’000	US$’000
Cash and cash equivalents	5,027	8,488
Trade receivables	6,255	6,487
Accrued income and other receivables	2,156	3,239
Trade and other payables	(5,961)	(5,322)
Accrued liabilities	(3,066)	(4,978)
Deferred consideration	(169)	(92)
Call option derivative liability	(333)	(686)
Borrowings held at amortized cost	(11,209)	(4,338)
Lease liabilities held at present value	(7,281)	(7,823)
of lease payments
Total financial instruments	(14,581)	(5,025)

42. Financial risk management

For the purposes of capital management, capital includes issued capital and all other equity reserves attributable to the equity holders of the Company, as well as debt. The primary objective of the Directors’ capital management is to ensure that the Group maintains a strong credit rating and healthy capital ratios in order to support its business and maximize shareholder value. To maintain or adjust the capital structure, the Directors may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the year. The Directors manage the Group’s capital structure and adjust it in light of changes in economic conditions and the requirements of the financial covenants. The Group includes in its net debt, interest-bearing loans, lease liabilities and borrowings, trade and other payables, less cash and short-term deposits. The Group’s principal financial liabilities comprise of borrowings and trade and other payables, which it uses primarily to finance and financially guarantee its operations. The Group’s principal financial assets include cash and cash equivalents and trade and other receivables derived from its operations.

a. Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the returns.

b. Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. As the Group’s borrowings are either on fixed interest terms or interest-free, the Group is not subject to significant interest rate risk.

c. Credit risk

Credit risk is the risk that a customer or counterparty to a financial instrument will not meet its obligations under a contract and arises primarily from the Group's cash in banks and trade receivables. The Company considers the credit risk in relation to its cash holdings low because the counterparties are banks with high credit ratings. Trade receivables are due from customers and collectability is dependent on the financial condition of each individual company as well as the general economic conditions of the industry. The Directors review the financial condition of customers prior to extending credit and generally do not require collateral in support of the Group’s trade receivables. The majority of trade receivables are current or overdue for less than 30 days and the Directors believe these receivables are collectible. Amounts overdue longer than 120 days relate to a limited number of customers with a long trading history. Collection of these receivables is expected in the course of the next reporting period. For doubtful accounts, the Group calculates an expected credit loss provision which is disclosed in Note 23. As at June 30, 2024, the Group had one customer that individually accounted for more than 10% of total receivables, totaling 14% of total trade receivables (December 31, 2022: one customers that individually accounted for more than 10% of total receivables, totaling 29%). In order to minimize credit risk, the Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. The credit rating information is supplied by independent rating agencies where available and, if not available, the Group uses other publicly available financial

HeiQ plc Annual Report 2023/24 Financial Statements 91

information and its own trading records to rate its major customers. The Group’s exposure and the credit ratings of its counterparties are continuously monitored, and the aggregate value of transactions concluded is spread amongst approved counterparties. Credit approvals and other monitoring procedures are also in place to ensure that follow-up action is taken to recover overdue debts. Furthermore, the Group reviews the recoverable amount of each trade debt and debt investment on an individual basis at the end of the reporting period to ensure that adequate loss allowance is made for irrecoverable amounts. In this regard, the directors of the Company consider that the Group’s credit risk is significantly reduced. Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of accounts receivable and, where appropriate, credit guarantee insurance cover is purchased.

d. Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate due to changes in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to its financing activities (when financial liabilities and cash are denominated other than in a company’s functional currency). Most of the Group’s transactions are carried out in US Dollars ($). Foreign currency risk is monitored closely on an ongoing basis to ensure that the net exposure is at an acceptable level. The Group maintains a natural hedge whenever possible, by matching the cash inflows (revenue stream) and cash outflows used for purposes such as capital and operational expenditure in the respective currencies. The Group’s net exposure to foreign exchange risk was as follows:

Functional currency	AUD	EUR	GBP	US$	Others	Total
As at June 30, 2024
US$’000
Financial assets denominated in $	-	153	3	1,386	(4)	1,538
Financial liabilities denominated in $	-	(163)	-	407	-	244
Net foreign currency exposure	-	(10)	3	1,793	(4)	1,782
As at December 31, 2022
US$’000
Financial assets denominated in $	19	92	206	6,771	3	7,091
Financial liabilities denominated in $	-	-	-	-	-	-
Net foreign currency exposure	19	92	206	6,771	3	7,091

Foreign currency sensitivity analysis: The following tables demonstrate the sensitivity to a reasonably possible change in foreign currency exchange rates, with all other variables held constant. The impact on the Group’s profit before tax is due to changes in the fair value of monetary assets and liabilities.The Group’s exposure to foreign currency changes for all other currencies is not material. A 10 per cent. movement in each of the Australian dollar (AUD), euro (EUR), British pound (GBP) and US dollar ($) would increase/(decrease) net assets by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant.

	AUD US$’000	EUR US$’000	GBP US$’000	US$ US$’000	Others US$’000
As at June 30, 2024
Effect on net assets:
Strengthened by 10%	-	(1)	-	179	178
Weakened by 10%	-	1	-	(179)	(178)

	AUD US$’000	EUR US$’000	GBP US$’000	US$ US$’000	Others US$’000
As at December 31, 2022
Effect on net assets:
Strengthened by 10%	2	9	21	677	-
Weakened by 10%	(2)	(9)	(21)	(677)	-

e. Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they are due. The Directors manage this risk by:

• maintaining adequate cash reserves through the use of the Group’s cash from operations and bank borrowings as well as overdraft facilities; and
• continuously monitoring projected and actual cash flows to ensure the Group maintains an appropriate amount of liquidity.

HeiQ plc Annual Report 2023/24 Financial Statements 92

Overview of financing facilities

The following tables detail the Group’s remaining contractual maturity for financial liabilities with agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows.

	Less than 1 year US$’000	2 to 5 years US$’000	> 5 years US$’000	Total US$’000
As at June 30, 2024
Trade and other payables	5,961	-	-	5,961
Borrowings held at amortized cost	9,380	884	945	11,209
Leases (gross cash flows)	1,151	3,398	3,271	7,820
Other liabilities	3,255	-	-	3,255
Financing facilities	19,747	4,282	4,216	28,245

	Less than 1 year US$’000	2 to 5 years US$’000	> 5 years US$’000	Total US$’000
As at December 31, 2022
Trade and other payables	5,322	-	-	5,322
Borrowings held at amortized cost	2,893	1,029	416	4,338
Leases (gross cash flows)	1,302	3,813	3,387	8,502
Other liabilities	5,290	-	-	5,290
Financing facilities	14,807	4,842	3,803	23,452

Unsecured bank overdraft facility

	As at June 30, 2024 US$’000	As at December 31, 2022 US$’000
Amount used	8,935	2,790
Amount unused	414	6,861
Total	9,349	9,651

The bank overdraft facilities are reviewed at least annually.

f. Capital risk management

The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximizing the return to shareholders through the optimization of the debt and equity balance. The Group’s overall strategy remains unchanged from 2022. The capital structure of the Group consists of equity and liabilities of the Group. The Group intends to keep debt low to minimize the interest rate impact. The Group is not subject to any externally imposed capital requirements. The Directors review the capital structure on a semi-annual basis based on the equity ratio and total borrowings. The equity ratio at June 30, 2024 is as follows:

	As at June 30, 2024 US$’000	As at December 31, 2022 US$’000
Equity	25,428	40,339
Total equity and liabilities	62,562	71,143
Equity ratio	41%	57%

Notes to the statements of cash flows

Non-cash transactions

Certain shares were issued during the year for a non-cash consideration as described in Note 5g. Additions to buildings and land during the year ended December 31, 2022 amounting to US$1,862,000 million were financed by share issue.

HeiQ plc Annual Report 2023/24 Financial Statements 93

Gains and losses on disposal of assets

	Note	As at June 30, 2024 US$’000	As at December 31, 2022 US$’000
Gain on disposal of property, plant and equipment	10	(23)	(21)
Loss on disposal of property, plant and equipment	13	204	16
Net loss (gain) on disposal of assets		181	(5)

Changes in liabilities arising from financing activities

The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group’s consolidated cash flow statement as cash flows from financing activities.

	Leases US$’000	Borrowings US$’000	Total US$’000
Balance at January 1, 2022	8,114	2,762	10,876
Cash flows	(992)	2,561	1,569
New lease agreements	2,181	-	2,181
Revaluation of lease agreements	(574)	-	(574)
Disposal due to acquisitions	(490)	-	(490)
Loans waived by creditors	-	(764)	(764)
Exchange differences	(416)	(221)	(637)
Balance at December 31, 2022	7,823	4,338	12,161
Cash flows	(1,996)	7,300	5,304
New lease agreements	1,601	-	1,601
Revaluation of lease agreements	(213)	-	(213)
Derecognized following deconsolidation of subsidiary	-	(304)	(304)
Exchange differences	66	(125)	(59)
Balance at June 30, 2024	7,281	11,209	18,490

Working capital reconciliation:

The Company defines working capital as trade receivables, other receivables and prepayments less trade and other payables, accrued liabilities, deferred revenue and non-current liabilities excluding pension liabilities.

Period ended June 30, 2024

	Opening balances US$’000	Assumed on acquisition of assets US$’000	Deconsolidation of subsidiary US$’000	Change in balance US$’000	Closing balances US$’000
Inventories	13,168	13	(5)	(4,920)	8,256
Trade receivables	6,487	2	(18)	(216)	6,255
Other receivables and prepayments	4,262	10	900	(2,247)	2,925
Trade and other receivables and prepayments	10,749	12	882	(2,463)	9,180
Trade and other payables	5,322	2	(315)	952	5,961
Accrued liabilities	4,978	-	-	(1,912)	3,066
Deferred revenue incl. non-current contract liabilities	4,913	-	(460)	2,217	6,670
Trade and other payables, accrued liabilities and deferred revenue	15,213	2	(775)	1,257	15,697

HeiQ plc Annual Report 2023/24 Financial Statements 94

Year ended December 31, 2022

	Opening balances US$’000	Assumed on acquisition of assets US$’000	Change in balance US$’000	Closing balances US$’000
Inventories	13,770	-	(602)	13,168
Trade receivables	14,656	-	(8,169)	6,487
Other receivables and prepayments	3,876	-	386	4,262
Trade and other receivables and prepayments	18,532	-	(7,783)	10,749
Trade and other payables	8,271	-	(2,949)	5,322
Accrued liabilities	3,386	9	1,583	4,978
Deferred revenue incl. non-current contract liabilities	1,004	-	3,909	4,913
Trade and other payables, accrued liabilities and deferred revenue	12,661	9	2,543	15,213

Consideration for acquisition of businesses

Period ended June 30, 2024

	US$’000
Consideration payment for acquisition of Tarn Pure	801
Cash assumed on acquisition of Tarn Pure	(12)
Net consideration payment for acquisitions of businesses and assets	789

Year ended December 31, 2022

	US$’000
Consideration payment for acquisition of Life Materials Technologies Ltd	1,400
Consideration payment for acquisition of ChemTex assets	187
Net consideration payment for acquisitions of businesses and assets	1,587

44. Related party transactions

HeiQ Materials AG supplied materials and services totaling US$40,000 to ECSA, a company controlled by a director of HeiQ Materials AG, in the period ended June 30, 2024 (year ended December 31, 2022: US$46,000). The transactions were made on terms equivalent to those in arm's length transactions.

Loans due to related parties

	As at June 30, 2024 US$’000	As at December 31, 2022 US$’000
Cortegrande AG, €400,000 (Note 31)	443	-
Loans due to related parties	443	-

The associates have provided the Group with short-term loans at rates comparable to the average commercial rate of interest.

Remuneration of key management personnel

The remuneration of the directors, who are the key management personnel of the Group, is set out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures.

	Year ended June 30, 2024 US$’000	Year ended December 31, 2022 US$’000
Short- term employee benefits	1,042	738
Post-employment benefits	42	35
Cash remuneration of key management personnel	1,084	773
Share-based payment expense (income)	46	(58)
Total remuneration of key management personnel	1,130	715

The cash remuneration for the period ended June 30, 2024 is equivalent to the total compensation of CHF 578,034 and GBP 332,500 (year ended December 31, 2022: CHF 477,626 and GBP 220,000) which are presented in the annual report on Director’s remuneration.

HeiQ plc Annual Report 2023/24 Financial Statements 95

45. Material subsequent events

The Company announced on October 22, 2024 that it decided to cancel the listing of its ordinary shares on the Official List of the Financial Conduct Authority ("FCA") and to cancel the admission to trading of the Shares on the Main Market for listed securities of the London Stock Exchange ("LSE") ("Delisting"). Following the Group’s decision and communication to de-list from the London Stock Exchange on October 22, 2024, the Group’s share price dropped temporarily to 1 pence and has been fluctuating below 6 pence thereafter.

46. Ultimate controlling party

As at June 30, 2024, the Company did not have any single identifiable controlling party.# HeiQ plc Annual Report 2023/24 Financial Statements 96

Company Statement of Financial Position

(registered company number:09040064)

As at June 30, 2024

	A s at June 30, 2024	A s at December 31, 2022
	£ ’000	£ ’000
Investments	4	10,184
Amounts due from subsidiaries	5	9,998
Non-current assets		20,182
Trade and other receivables	7	2,375
Cash and bank balances	6	8
Current assets		2,383
TOTAL ASSETS		22,565
Borrowings	8	(351)
Trade and other payables	9	(582)
Current liabilities		(933)
TOTAL LIABILITIES		(933)
NET ASSETS		21,632
Ordinary Share capital	10	8,428
Deferred share capital	10	35,134
Share premium account	10	115,879
Share-based payment reserve	11	301
Accumulated losses		(138,110)
Total EQUITY		21,632

The Company has taken advantage of Section 408 of the Companies Act 2006 and has not included a Profit and Loss account in these separate financial statements. The loss attributable to members of the Company for the period ended June 30, 2024 is £33,740,000 (December 31, 2022: loss of £76,099,000)

The notes on pages 99 to 104 form an integral part of these Financial Statements.

The Financial Statements were authorized for issue by the board of Directors on October 30, 2024 and were signed on its behalf by.

Xaver Hangartner
Director

HeiQ plc Annual Report 2023/24 Financial Statements 97

Company Statement of Changes in Equity

For the 18-month period ended June 30, 2024

	Ordinary Share capital	Deferred Share capital	Share premium account	Share-based payment reserve	Accumulated losses	Total
	£’000	£’000	£’000	£’000	£’000	£’000
Balance at January 1, 2022	39,175	-	109,460	346	(28,271)	120,710
Loss for the year	-	-	-	-	(76,099)	(76,099)
Issue of shares	2,850	-	5,203	-	-	8,053
Share-based payment charges	-	-	-	(6)	-	(6)
Transactions with owners	2,850	-	5,203	(6)	-	8,047
Balance at December 31, 2022	42,025	-	114,663	340	(104,370)	52,658
Loss for the period	-	-	-	-	(33,740)	(33,740)
Issue of shares	1,537	-	1,216	-	-	2,753
Capital reorganization	(35,134)	35,134	-	-	-	-
Share-based payment charges	-	-	-	(39)	-	(39)
Transactions with owners	(33,597)	35,134	1,216	(39)	-	2,714
Balance at June 30, 2024	8,428	35,134	115,879	301	(138,110)	21,632

HeiQ plc Annual Report 2023/24 Financial Statements 98

Company statement of Cash Flows

For the 18-month period ended June 30, 2024

	Period ended June 30, 2024	Year ended December 31, 2022
	£’000	£’000
Cash flows from operating activities
Loss before taxation	(33,740)	(76,099)
Cash flow from operations reconciliation:
Net finance income	(573)	(377)
Impairment provision	4	33,849
Working capital adjustments:
(Increase) / decrease in trade and other receivables	(1,577)	8,580
Increase / (decrease) in trade and other payables	379	(95)
Net cash used in operating activities	(1,662)	(811)
Cash flows from investing activities
Interest received	592	377
Amounts advanced to subsidiaries	5	(1,996)
Consideration payment for acquisitions of businesses	10	(317)
Net cash used in investing activities	(1,721)	(86)
Cash flows from financing activities
Proceeds from equity issuance	10	2,753
Proceeds from borrowings	8	1,281
Repayment of borrowings	8	(930)
Interest paid on borrowings		(19)
Net cash generated from / (used in) financing activities	3,085	(86)
Net decrease in cash and cash equivalents	(298)	(897)
Cash and cash equivalents – beginning of the period/year	306	1,203
Cash and cash equivalents – end of the period/year	8	306

HeiQ plc Annual Report 2023/24 Financial Statements 99

Notes to the Company Financial Statements for the period ended June 30, 2024

1. General information

The Company was incorporated on May 14, 2014 as Auctus Growth Limited, in England and Wales under the Companies Act 2006 with company number 09040064. The Company was re-registered as a public company on July 24, 2014. On December 4, 2020, following a reverse takeover of Swiss based HeiQ Materials AG, the Company’s name was changed to HeiQ Plc. The Company’s registered office is 5th Floor, 15 Whitehall, London, SW1A 2DD. The Company’s enlarged share capital is admitted to the standard segment of the Official List and trading on the London Stock Exchange's (“LSE”) Main Market under the ticker 'HEIQ'. The ISIN of the Ordinary Shares is GB00BN2CJ299 and the SEDOL Code is BN2CJ29.

On October 22, 2024 the Company announced that it has requested that (i) the FCA cancel the listing of the Shares on the Official List of the FCA, and that (ii) the LSE cancels the admission to trading of the Shares on the Main Market for listed securities of the LSE. It is anticipated that the delisting will become effective from 08:00 a.m. (London time) on November 19, 2024.

The principal activity of the Company is that of a holding company for the Group, as well as performing all administrative, corporate finance, strategic and governance functions of the Group. The Company’s financial statements are prepared in Pounds Sterling, which is the presentational currency for the financial statements and all values are rounded to the nearest thousand Pounds Sterling except where otherwise indicated.

2. Summary of significant accounting policies

a. Basis of preparation

These Financial Statements have been prepared in accordance with UK adopted international accounting standards applying the FRS101 Reduced Disclosure Framework. These financial statements are prepared under the historical cost convention. Historical cost is generally based on the fair value of the consideration given in exchange of assets. The principal accounting policies are set out below. The Company also produces consolidated accounts which include the results of the Company.

The financial statements have been prepared on a going concern basis which contemplates the continuity of normal business activities and the realization of assets and the settlement of liabilities in the ordinary course of business. The Directors have assessed both the Company’s and the Group’s ability to continue in operational existence for the foreseeable future. The Company has prepared forecasts and projections which reflect the expected trading performance of the Company and the Group on the basis of best estimates of management using current knowledge and expectations of trading performance.

As at June 30, 2024, the Company had £8,000 (December 31, 2022: £306,000) in cash. The company’s ongoing cash needs are satisfied by collecting open receivables from subsidiaries. As described in Note 3b to the consolidated financial statements, there is material uncertainty at the Group level that casts significant doubt upon the company’s ability to continue as a going concern and that, therefore, the company may be unable to realize its assets and discharge its liabilities in the normal course of business. Nevertheless, after making enquiries and considering the uncertainties described above, the Directors consider there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable, as well as to fund the Company’s future operating expenses. The going concern basis preparation is therefore considered to be appropriate in preparing these financial statements.

b. Investments

Fixed asset investments are carried at cost less, where appropriate, any provision for impairment.

c. Loans to subsidiaries

Loans to subsidiaries are measured at the present value of the future cash payments discounted at a market rate of interest for a similar debt instrument unless such amounts are repayable on demand. The present value of loans that are repayable on demand is equal to the undiscounted cash amount payable, reflecting the Company’s right to demand immediate repayment.

d. Foreign currencies

The company’s equity is raised in Pound Sterling (£) which is the functional and presentational currency of the Company, and all values are rounded to the nearest thousand pounds except where otherwise indicated. Transactions in foreign currencies are recorded using the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the contracted rate or the rate of exchange ruling at the balance sheet date and the gains or losses on translation are included in the profit and loss account.

e. Cash and cash equivalents

Cash and cash equivalents comprise cash in hand, bank balances, deposits with financial institutions and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

f. Trade and other receivables

Trade and other receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment.

HeiQ plc Annual Report 2023/24 Financial Statements 100

g. Income taxes

The charge for taxation is based on the profit/ loss for the year and takes into account taxation deferred because of timing differences between the treatment of certain items for taxation and accounting purposes. Deferred tax is provided on timing differences which arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognized in the financial statements. The following timing differences are not provided for: differences between accumulated depreciation and tax allowances for the cost of a fixed asset if and when all conditions for retaining the tax allowances have been met; and differences relating to investments in subsidiaries, to the extent that it is not probable that they will reverse in the foreseeable future and the reporting entity is able to control the reversal of the timing difference.# HeiQ plc

Annual Report 2023/24

Financial Statements

3. Critical accounting judgments and key sources of estimation uncertainty

In the application of the Company's accounting policies, which are described in Note 2, management is required to make judgments, estimates and assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and underlying assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Critical accounting judgements

There were no critical accounting judgements impacting the Company’s standalone financial statements 2023/2024 and 2022. Critical accounting judgments affecting the Group are discussed in Note 4 to the consolidated financial statements.

Key sources of estimate uncertainty

Impairment of amounts due from subsidiaries

As described in Note 2 to the financial statements, fixed asset investments are stated at the lower of cost less provision for impairment. The present value of loans to subsidiaries that are repayable on demand is equal to the undiscounted cash amount payable, reflecting the Company’s right to demand immediate repayment. At each reporting date fixed asset investments and loans made to subsidiaries are reviewed to determine whether there is any indication that those assets have suffered an impairment loss. If there is an indication of possible impairment, the recoverable amount of any affected asset is estimated and compared with its carrying amount. If the estimated recoverable amount is lower, the carrying amount is reduced to its estimated recoverable amount, and an impairment loss is recognized immediately in profit or loss.

The Directors have carried out an impairment test on the value of the loans due from subsidiaries and have concluded that an impairment provision of £9,998,000 (2022: £9,000,000) is necessary to reflect the uncertainty around financing of the Group and Company as mentioned in Note 3b to the consolidated financial statements and Note 2a to the Company Financial Statements, respectively.

Impairment of fixed asset investments

The Directors have also carried out an impairment test on the value of the Company’s fixed asset investments and considered whether there are any indicators of impairment from external and internal sources of information, including the fact that the market capitalization of the Company has fallen below the net carrying value of such investments which would indicate that the carrying value may have been impaired and have concluded that an impairment provision of £126.8m (2022: £94.0m) is required to write down these amounts to their estimated recoverable amount.

4. Investments

Period ended	Year ended June 30, 2024	December 31, 2022
Investments in subsidiary undertakings
£ ’000	£ ’000	£ ’000
Balance brought forward	42,758	101,484
Additions	277	8,454
Impairment provision charge	(32,851)	(67,180)
Balance at the end of the period/year	10,184	42,758

Details of the Company’s principal subsidiaries as at June 30, 2024 are set out in Note 6 to the consolidated financial statements.

The Company’s investments in subsidiaries are carried at cost less impairment. The Directors have concluded that the significant devaluation of the Group represents an indicator of impairment as at June 30, 2024. Therefore, the Directors performed an impairment test of the Group and valued the Company’s investment in its subsidiaries at £20,182,000 based on market capitalization (December 31, 2022: £51,758,000 based on company valuation).

The carrying value of its investments in subsidiaries was £137,036,000 (December 31, 2022: £136,759,000) before impairment provision charges. The amounts due from subsidiaries as at June 30, 2024 was £9,000,000 (December 31, 2022: £9,000,000). The Company has therefore increased its impairment provision to £127,850,000 (December 31, 2022: £94,001,000) against the carrying value of the Company’s investments in subsidiaries to reduce such value to £10,184,000 (December 31, 2022: £42,758,000).

Sensitivity

The calculation of the market capitalization of £20,182,000 is based on the Company’s share price of 12 pence as at June 30, 2024. Due to the volatility of the share price, a decrease of 90% in the share price to 1.1 pence is reasonably possible.## HeiQ plc Annual Report 2023/24 Financial Statements

5. Amounts due from subsidiaries

	Period ended June 30, 2024	Year ended December 31, 2022
Investments in subsidiary undertakings
Balance brought forward	£’000 9,000	£’000 18,000
Additions	£’000 1,996	£’000 -
Impairment provision charge	£’000 (998)	£’000 (9,000)
Balance at the end of the period/year	£’000 9,998	£’000 9,000

The amounts (£9,000,000 and £1,996,000) due from subsidiaries are unsecured and are repayable on demand. They yield interest at 2.5% and 4.5%, respectively.

Given the uncertainty described in the going concern review of the Group in Note 3b to the consolidated financial statements, the recoverability of the loan was reassessed. Due to the persistently increased risk of default following the Group’s recent performance, it was concluded that an expected credit loss of £9,998,000 is appropriate for the financial period ended June 30, 2024 (year ended December 31, 2022: £9,000,000).

Sensitivity

The expected credit loss of £9,998,000 reflects 50% of the balance due. Had the Directors’ assessment been that the whole £19,996,000 are not collectible, there would have been an additional expected credit loss of £9,998,000.

6. Cash and cash equivalents

	As at June 30, 2024	As at December 31, 2022
Cash and cash equivalents	£’000 8	£’000 306
Bank balances	£’000 8	£’000 306
Total cash and cash equivalents	£’000 8	£’000 306

7. Trade and other receivables

	As at June 30, 2024	As at December 31, 2022
Trade and other receivables	£’000 2,375	£’000 798
Receivables from subsidiaries	£’000 2,309	£’000 772
Prepayments	£’000 26	£’000 14
Vat receivable	£’000 40	£’000 12
Total trade and other receivables	£’000 2,375	£’000 798

8. Borrowings

	Period ended June 30, 2024	Year ended December 31, 2022
Borrowings	£’000 351	£’000 -
Balance brought forward	£’000 -	£’000 -
Additions	£’000 1,281
Repayments	£’000 (930)
Balance at the end of the period/year	£’000 351	£’000 -

In December 2023, Cortegrande AG, a company controlled by Carlo Centonze, granted a loan to the Company in the amount of EUR 1,350,000. The loan was increased to EUR 1,475,000 (approximately £1,281,000) in January 2024. In March 2024, most of the outstanding loan was repaid in shares as part of the settlement of the convertible loan note issued by the Company. The remaining loan amounts to EUR 350,000 (approximately £351,000), incurs interest at 4.5% and is repayable in June 2.

9. Trade and other payables

	As at June 30, 2024	As at December 31, 2022
Trade and other payables	£’000 582	£’000 204
Trade payables	£’000 90	£’000 1
Other payables	£’000 46	£’000 -
Income tax liability	£’000 70	£’000 -
Accruals	£’000 376	£’000 203
Total trade and other payables	£’000 582	£’000 204

The directors consider that the carrying amounts of amounts falling due within one year approximate to their fair values.

10. Share capital and share options

Share capital

Details of the Company’s allotted, called-up and fully paid share capital are set out in Note 26 to the Consolidated Financial Statements. The Ordinary shares of the Company carry one vote per share and an equal right to any dividends declared.

Movements in the Company’s share capital were as follows:

	Number of shares	Ordinary Share capital £’000	Deferred share capital £’000	Share premium £’000	Totals £’000
Balance as of January 1, 2022	130,583,536	39,175	-	109,460	148,635
Issue of shares to vendors of Life Materials	347,552	104	-	347	451
Issue of shares as deferred consideration	3,461,615	1,039	-	2,233	3,272
Issue of shares Advisory Board	164,721	50	-	146	196
Issue of shares Chem-Tex Labs	2,176,884	653	-	967	1,620
Issue of shares Chrisal	3,348,164	1004	-	1510	2,514
Balance as at December 31, 2022	140,082,472	42,025	-	114,663	156,688
Issue of shares to vendors of Tarn Pure (a)	455,435	137	-	180	317
Capital reorganization (b)	-	(35,134)	35,134	-	-
Issue of shares for fundraise (c)	28,000,000	1,400	-	1,036	2,436
Balance as at June 30, 2024	168,537,907	8,428	35,134	115,879	159,441

a) On January 12, 2023, HeiQ plc completed the acquisition of 100% of the issued share capital and voting rights of Tarn Pure for a total consideration of US$1,237,000. The purchase consideration was payable partly by the issue of 455,435 new ordinary shares for (US£317,000). See Note 4 to the Consolidated Financial Statements for details.

b) In March 2024, the Company subdivided all existing 140,537,907 ordinary shares of 30p into new ordinary shares of 5 pence and deferred shares of 25 pence. The par value of all ordinary shares is £0.05 as at June 30, 2024 (December 31, 2022: £0.30). All shares in issue were allotted, called up and fully paid. The Ordinary shares of the Company carry one vote per share and an equal right to any dividends declared. The 140,537,907 Deferred Shares do not carry voting rights and only receive a return on a capital event relating to the Company after every ordinary share has had the sum of £1,000,000 returned on them. It is a condition of issue of the Deferred Shares that the Company will not issue any share certificates or credit CREST accounts in respect of them. The Deferred Shares are not admitted to trading on the Main Market or any other exchange.

c) In March 2024, the Group issued 28,000,000 new ordinary shares at £0.087 per share raising in aggregate £2,436,000 which is net of £78,000 transaction costs incurred in the fundraise.

Share premium

The share premium account represents the amount received on the issue of ordinary shares by the Company in excess of their nominal value and is non-distributable.

11. Share-based payments

Details of the Company’s share option scheme and options issued during the year are contained in Note 27 to the Consolidated Financial Statements.

12. Segment information

Operating segments are identified on the basis of internal reports about components of the Company that are regularly reviewed by the Board. Until its acquisition of HeiQ Materials AG on December 7, 2020, the Company was an investing company and did not trade. On the completion of the acquisition of HeiQ Materials AG and its subsidiaries, the Company became the holding company of the Group.

The Company has one segment, namely that of a parent company to its subsidiaries. Accordingly, no segmental analysis has been provided in these financial statements.

13. Employees

The average monthly number of employees including directors was as follows:

	As at June 30, 2024	As at December 31, 2022
Employees	No. 5	No. 5
Directors	No. 5	No. 5
Total employees	No. 5	No. 5

14. Related party transactions

The only key management personnel of the Company are the Directors. Details of their remuneration are contained in Note 44 to the consolidated financial statements. Cortegrande AG, a company controlled by Carlo Centonze, granted a loan to the Company, see Note 8 for details. Details of amounts due between the Company and its subsidiaries are shown in Notes 5 above.

15. Subsequent events

As discussed in Note 5, the valuation of investments is dependent on the Group’s market capitalization. Following the Group’s decision and communication to de-list from the London Stock Exchange on October 22, 2024, the share price dropped temporarily to 1 pence and has been fluctuating below 6 pence thereafter. Had the share price on June 30, 2024 been below 6 pence instead of 12 pence, there would have been an additional impairment loss of approximately £10.2 million on the investment.

Disclosures in relation to events subsequent to June 30, 2024 are shown in Note 45 to the consolidated financial statements.

16. Ultimate controlling party

As at June 30, 2024, no one entity owns greater than 50% of the issued share capital. Therefore, the Company does not have an ultimate controlling party.

HeiQ plc Annual Report 2023 Company Information

Company information

Directors

• Carlo Centonze, Chief Executive Officer
• Xaver Hangartner, Chief Financial Officer
• Esther Dale-Kolb, (retired March 31, 2024) Non-Executive Chairwoman
• Karen Brade, Non-Executive Director
• Benjamin Bergo, Non-Executive Director
• Robert van de Kerkhof Non-Executive Director

Non-Executive Chair as of April 1, 2024

Company secretary

• Ross Ainger

Company number

• 09040064

Registered address

• 5th Floor
• 15 Whitehall
• London, SW1A 2DD

Independent auditors

• RPG Crouch Chapman LLP
• 40 Gracechurch Street
• London, EC3V 0BT

Broker

• Cavendish Securities plc
• One Bartholomew Close
• London, EC1A 7BL

Registrars

• Computershare Investor Services PLC
• The Pavilions
• Bridgwater Road
• Bristol, BS13 8AE

Legal Entities of the Group

UNITED KINGDOM

• HeiQ PLC (Ultimate parent)
  1st floor
  47/48 Piccadilly
  London, W1J 0DT
• Tarn-Pure Holdings Ltd / Tarn Pure (IP) Limited / Tarn-Pure AG Ltd.
  Castle Court
  6 Cathedral Road
  Cardiff, CF11 9LJ

SWITZERLAND (Operational headquarters)

• HeiQ Materials AG / HeiQ GrapheneX AG
  Ruetistrasse 12
  8952 Schlieren (Zurich)
• HeiQ AeoniQ Holding AG
  Parkstrasse 1
  5234 Villigen

AUSTRALIA

• HeiQ PTY
  PO Box 940
  Geelong VIC 3220

AUSTRIA

• HeiQ AeoniQ GmbH
  Industriestraße 35
  3130 Herzogenburg

BELGIUM

• HeiQ Chrisal NV
  Priester Daensstraat 9
  3920 Lommel

GREATER CHINA

• HeiQ (China) Material Tech Co., Ltd.
  Room 2501 Xuhui Commercial Mansion
  No. 168 Yude Road
  Shanghai
• Beijing HeiQ Material Tech Co. Ltd.
  Room 17B, Floor 17th, 101 Nei, -4 to 33, Building 13
  Wangjing Dongyuan Siqu
  Chaoyang District, Beijing
• HeiQ Company Ltd / HX Company Ltd
  No. 14 & 16, Ln. 50, Wufu 1st Rd.
  Luzhu District
  Taoyuan City 33850
• Life Material Technologies Ltd. / Life Natural Ltd.
  Alexandra House, 6th floor
  18-20 Chater Road
  Central Hong Kong

GERMANY

• HeiQ RAS AG / HeiQ Regulatory GmbH
  Rudolf Vogt Straße 8-10
  93053 Regensburg

IRELAND

• Tarn-Pure Ireland Limited
  C/O Duggan & Power
  Odeon House
  7 Eyre Square
  Co.Galway JAPAN Representative Office
  NIU Bldg 2F
  2-1-17 Nihonbashi Chuo-ku
  Tokyo, 103-0027

PORTUGAL
HeiQ Iberia Unipessoal Lda / HeiQ AeoniQ Portugal Lda
Tecmaia Rua Engº Frederico Ulrich, nº 2650
4470-605 Maia

SPAIN
HeiQ Medica SL
Plaza de la Estación s/n
29560 Pizarra (Málaga)

THAILAND
Life Material Technologies Ltd., Thailand / LMT Holding Ltd.
222 Lumpini Building 2
247 Sarasin Road
Bangkok 10330

USA
HeiQ ChemTex Inc. / Chem-Tex Laboratories, Inc.
180 Gee Rd NE
Calhoun GA 30701
2725 Armentrout Drive
Concord NC 280

www.heiq.com

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