Earnings Release • Mar 28, 2024
Earnings Release
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National Storage Mechanism | Additional information RNS Number : 6715I HeiQ PLC 28 March 2024 28 March 2024 HeiQ Plc ("HeiQ" or "the Company") Unaudited Interim Results HeiQ Plc (LSE: HEIQ), a leading company in materials innovation and hygiene technologies, announces its unaudited interim financial results for the 12 months ending 31 December 2023. As announced on 14 March 2024, the Company has deemed it prudent to extend its accounting reference date to 30 June 2024. The next set of audited financial reports and accounts will therefore be for the period 1 January 2023 to 30 June 2024 and will be published by 31 October 2024, following the appointment of a new auditor. Financial Overview: �� Revenue reduced 11.6% to US$41.7 million (12 months to 31 December 2022: US$47.2 million) �� Gross profit margin increased 8.5% to 37% (12 months to 31 December 2022: 28.5%) �� Adjusted LBITDA decreased to US$5.2 million (12 months to 31 December 2022: US$12.2 million) �� Operating loss of US$11.6 million (12 months to 31 December 2022: loss of US$29.2 million) �� Loss after taxation of US$14.0 million (12 months to 31 December 2022: loss of US$30.0 million) �� Cash at 31 December 2023 of US$9.7 million with net debt (including lease liabilities) of US$10 million Operational Overview: Challenging market conditions persisted during the period, leading to continued high inventories and weakened demand across the industry. HeiQ responded with decisive measures: �� New organizational structure established to drive growth and profitability of HeiQ's three venture initiatives (HeiQ AeoniQ, HeiQ GrapheneX and HeiQ ECOS). �� Strengthened financial reporting processes through the establishment of a central accounting function in Portugal. �� Advanced harmonizing the Enterprise Resource Planning (ERP) system across the group. �� Comprehensive actions taken to address deficiencies outlined by the former auditor. Post Period: �� Julien Born appointed as CEO of HeiQ AeoniQ Holding to lead scale up. �� Robert van de Kerkhof appointed as new Chair of HeiQ plc, effective 1 April 2024. �� Successful fundraising of ��2.4 million through placing, convertible loan note and retail offer. �� Acquisition of Portugal factory site for HeiQ AeoniQ's first commercial production plant. Investor Presentation: Carlo Centonze, CEO, and Xaver Hangartner, CFO, will provide a live presentation for investors via the Investor Meet Company platform at 11:00 am GMT today. The presentation is open to all existing and potential shareholders. Questions can be submitted at any time during the live presentation. Investors can sign up to Investor Meet Company for free and click "Add to Meet" HEIQ PLC via: https://www.investormeetcompany.com/heiq-plc/register-investor Carlo Centonze, co-founder and CEO, HeiQ plc, said: "As we look forward, we cautiously anticipate market conditions to improve in the second half of 2024. Until this time, we will continue to remain vigilant, focusing on operational efficiencies and adapting our cost base. "With resilience, innovation, and collaboration at our core, we are confident in our ability to overcome these obstacles and emerge stronger from these testing times. I extend my gratitude to our investors, team members, advisors, and customers for their unwavering support and dedication. Together, we will chart a path forward towards sustainable growth and success in 2024 and beyond." For further information, please contact: HeiQ Plc Carlo Centonze (CEO) +41 56 250 68 50 Cavendish Securities plc (Broker) Stephen Keys / Callum Davidson +44 (0) 207 397 8900 SEC Newgate (Media Enquiries) Elisabeth Cowell / Molly Gretton / Tom Carnegie +44 (0) 20 3757 6882 HeiQ@s ecnewgate .co.uk About HeiQ HeiQ is a Swiss-based international company that innovates pioneering and differentiating materials in partnership with established global brands. We bridge the academic and commercial worlds to conceive performance-enhancing materials and technologies, working with aligned brands to research, manufacture and bring products to market, aiming for lab to consumer in months. Our goal is to improve the lives of billions by innovating the materials that go into everyday products, making them more hygienic, comfortable, protective, and sustainable. Our strong IP portfolio positions us as an innovation leader for niche, premium and high-margin products in the textile chemicals, man-made fibers, paints and coatings, antimicrobial plastics, probiotics and household cleaner markets. We have also expanded into healthcare facilities, probiotic cleaning, and hygiene coatings markets to help make hospitals and healthcare environments more hygienic. We have developed over 200 technologies in partnership with 300 major brands. With a substantial research and development pipeline, including key technology development projects HeiQ AeoniQ, HeiQ ECOS, HeiQ GrapheneX, and HeiQ Synbio, HeiQ aims to deliver shareholder value through sales growth and entry into new lucrative markets through disruptive innovation and M&A. We have built a strong reputation for ESG & sustainable innovation, having won multiple awards including the Swiss Technology Award twice and the Swiss Environmental Award. Under experienced leadership, we are committed to driving our profit in close connection with people and the planet. For more information, please visit www.heiq.com. Chairwoman's Statement The market downturn which commenced in late 2022 continued to cause challenges for HeiQ throughout 2023. Contrary to predictions by many in the industry, market conditions failed to rebound during the period. Our revenues decreased by 11.6% to US$42 million for the twelve months ending December 31, 2023, primarily driven by historically high inventories, and weak industry demand. In response, we implemented measures to adjust our cost base and organizational structure, while maintaining HeiQ's innovation and differentiation capabilities. Despite the extremely challenging market conditions during the period for HeiQ's growth-oriented business units, we made significant progress with our exciting and potentially game-changing venture initiatives HeiQ AeoniQ, HeiQ GrapheneX and HeiQ ECOS. In light of the challenges faced during the year, we are greatly appreciative of the support shown by our shareholders in our recent fundraise to support the Company's next phase of growth. Strategy & Structure Since listing on the London Stock Exchange on December 7, 2020, HeiQ has evolved significantly. Initially known as an innovation company with a focus on specialty chemicals for textile and flooring, HeiQ has since developed into a company with leading technology platforms that drive sustainability in strategic industries and applications. This evolution means HeiQ, while still being recognized as a leader in textile performance chemicals and antimicrobials, today focuses are on sustainable technologies in textile fibres (HeiQ AeoniQ), probiotic healthcare cleaners (HeiQ Synbio), anode free solid state lithium metal batteries (HeiQ GrapheneX) and transparent conductive coatings (HeiQ ECOS). This evolution has been achieved both through acquisitions and HeiQ's own innovation and business development efforts. HeiQ's organizational structure, consists of three distinct technology ventures alongside three growth-orientated business segments. This Venture & Growth structure enables the organization to stay focused on growth and commercialization of existing as well as the incubation of new technologies. With dedicated teams for each unit, we can deploy and adjust resources and skills appropriate to the different maturity levels of the units. Governance The evolution of HeiQ over the last four years has led to a significant increase in administrative complexity, in turn, requiring our reporting processes and governance to evolve and improve. The Company acknowledges and is fully committed to implementing these improvements, and as such began making significant investments in 2023 to address them. In Q1 2023, we established a central accounting function within our global shared service hub in Portugal to strengthen our financial reporting processes. This has since expanded to include 5 full-time equivalents (FTEs). We have also advanced the implementation of harmonizing our enterprise resource planning (ERP) systems across our group. These initiatives aim to improve the quality, efficiency, and governance of our financial reporting processes. This investment in our organization has had a limited impact on the 2022 financial reporting process, but we expect significant improvements for the 2023/24 financial reporting cycle. To address the deficiencies identified by Deloitte LLP in auditing the 2022 accounts we have undertaken a comprehensive set of actions: ��� We engaged Ernst & Young (EY) to support the improvement of governance, reporting and financial accounting processes. ��� We are adding two additional employees to manage the EY governance project implementation and to strengthen the internal controls system on an ongoing basis. ��� We defined a roadmap to address the most severe deficiencies and those which will have the greatest positive impact on the 2023/24 financial reporting process. ��� We have already implemented improvements for this interim report as of December 31, 2023, as far as practicable. As previously announced, the Company continues to seek a replacement auditor following the resignation of Deloitte LLP. The Company will update the market in due course. The Company has extended its accounting reference date to June 30, to enable an incoming auditor to properly onboard and complete the audit in a reasonable timeframe. Therefore, this financial report represents unaudited interim financial statements for the 12-month period ending December 31, 2023. The Company's next set of audited financial reports and accounts will be for the period January 1, 2023 to June 30, 2024 and will be published by October 31, 2024. Changes to the Board of Directors On January 1, 2024, Robert van de Kerkhof joined the Board of HeiQ plc as a non-executive director and chair of the Environmental, Occupation, Health & Safety and Sustainability Committee. With over 30 years' experience in management and sustainability leadership, including serving as Chief Commercial Officer, Chief Sustainability Officer and board member of the listed company Lenzing AG (Austria), Robert is a great addition to the Board. As previously announced, I will retire as Chair and non-executive director of HeiQ plc on March 31, 2024. Joining the Company just before its listing in 2020, it has been an intense and very fulfilling time. Together with fellow directors and a dedicated management team, we have navigated through a myriad of challenges and opportunities, culminating in the development of a compelling portfolio of high-potential platform technologies poised to sustainably revolutionize growing industries. As HeiQ enters the next stage of its growth with the commercial launch and scaling of its venture technologies, I have concluded it is an appropriate moment to hand-over the Chair position. This will allow me to spend more time with my family while ensuring HeiQ has a new leader with exceptional experience and industry knowledge. Following the proposal by the Nomination Committee after a thorough selection process, the Board of Directors has unanimously appointed Robert van de Kerkhof as the new Chair of HeiQ plc, effective April 1, 2024. I am convinced that HeiQ is in very capable hands with Robert as Chair, as he is not only a technical expert, but also an exceptional leader with executive management experience on listed company boards. I thank the entire HeiQ team for the last four years and extend my best wishes to all HeiQans, our investors as well as all our other stakeholders. Esther Dale Chair March 28, 2024 Business Report & Outlook I am pleased to provide an update on our company's performance for the twelve months ending December 31, 2023 and an outlook for 2024. 2023 continued to present challenges for our industry and commercialized businesses. Despite the strategic initiatives of relocation of capabilities, cost containment and strategic focus undertaken to mitigate the impact of market disruptions, our financial performance remained under pressure, especially as we kept investing in our venture innovation platforms. Sales for the year amounted to US$41.7 million, reflecting a -11.6% decrease compared to the previous year. We continued to face margin pressure in a buyers-market driven by current overcapacity and historically high inventories at brands. Operating losses persisted in 2023, albeit with some improvement, amounting to US$11.6 million for the twelve months ending December 31, 2023. The ongoing macroeconomic uncertainties, coupled with the challenges in securing committed credit facilities, contributed to the financial constraints faced by the company. Innovation remains the cornerstone of our company's strategy, driving sustainable growth and differentiation in the market. We made significant strides in advancing our key commercial and venture innovation platforms in 2023: �� HeiQ AeoniQ, the world's first climate positive cellulosic filament fibre, launched to the market with Hugo Boss in 2023. Tennis star Matteo Berrettini featured the first t-shirt during the Australian Open 2023, and Hugo Boss prominently displayed a state-of-the-art fashion collection called "The Change" at the Milano Fashion Show. The uniqueness of HeiQ AeoniQ was awarded an ISPO award for product of the year. In Q1 2024 HeiQ purchased a large industrial plot of 25,000m2 in Portugal to build its first 3,000-ton HeiQ AeoniQ plant by 2026. Joining Hugo Boss, MAS Holdings, one of world's leading garment makers, co-invested into HeiQ AeoniQ. HeiQ AeoniQ secured an initial grant of EUR10 million from the Portuguese government and was given the status as a project of national strategic importance. We were delighted to appoint Julien Born, former CEO of The Lycra Company to lead HeiQ AeoniQ as CEO and Robert van de Kerkhof, former CCO/CSO of Lenzing, to act as its Chair. �� HeiQ ECOS, our transparent conductive coating technology platform, progressed well in application development with market leaders in thin film insulation for rapid retrofitting and energy efficiency improvement of buildings, climate control in advanced greenhouse foils, transparent car window heating, signature management for defence applications, as well as conductive layering for novel organic photovoltaics. We expect several of these potential applications to become first market prototypes in 2024. �� HeiQ GrapheneX, our highly porous graphene membrane, has secured its first external innovation funding from an electronics technology partner and progressed to demonstrate the performance benefits of its novel graphene membrane in building an anode-free solid-state lithium metal battery with double energy density. Considerable new IP was gained and is being filed in patent applications. In 2024 the first pilot commercialization plant will be commissioned in Switzerland, bringing the technology from the lab to the work floor. �� HeiQ Synbio , our biotech & life sciences platform, progressed rapidly in 2023 with the completion of the study conducted by the Charit�� University Hospital Berlin, sponsored by the German Government and the Bill and Melinda Gates Foundation. It established that probiotic HeiQ Synbio hospital cleaners perform equally well as Ecolab disinfectants but additionally prevent the formation of pathogens' multi-resistance buildup. Based on these stark results, the Robert Koch Institute recommended probiotic cleaners to German hospitals. The European Commission added probiotic cleaners to its new detergent regulation draft having previously awarded probiotic cleaners the EU Ecolabel. We therefore expect strong growth for our HeiQ Synbio platform in the years to come. As we look ahead to 2024, we anticipate a continuation of the challenging market conditions experienced in 2023 during the first half of the year. The global economy remains uncertain, with ongoing geopolitical tensions and supply chain disruptions affecting various industries. However, as of today, we expect market conditions to start improving in H2 2024. Considering the persisting challenges, focus for 2024 remains on: �� Lean Adaptation: Remaining agile and adaptive to changing market dynamics and consumer behaviours. �� Operational Efficiency: Continued emphasis on cost optimization measures to improve operational efficiency and preserve financial stability as well as liquidity. �� Innovation and Differentiation: Prioritizing rapid innovation initiatives that offer differentiation in the market and address evolving customer needs. �� Market Expansion: Exploring opportunities for market expansion in resilient sectors and geographies, while also strengthening existing partnerships. �� Sustainability: Upholding our commitment to sustainability by advancing our innovation initiatives that reduce environmental impact and promote responsible business practices. As we navigate through present-day challenges and uncertainties of the current market landscape, we remain steadfast in our commitment to delivering long-term value for our shareholders, customers, and stakeholders. With resilience, innovation, and collaboration, we are confident in our ability to raise again and overcome obstacles and emerge stronger from these testing times. I extend my gratitude to our investors, team members, advisors, and customers for their unwavering support and dedication. Together, we will chart a path forward towards sustainable growth and success in 2024 and beyond. Carlo Centonze CEO & Executive Director March 28, 2024 Principal risks and uncertainties The Group has an established, structured approach to identifying and assessing the impact of financial and operational risks on its business. The principal risks and uncertainties for the remainder of the financial year are not expected to change materially from those included on pages 38 to 42 of the Annual Report and Accounts 2022. The risks identified relate to the following areas: Delivery on growth strategy; Increase in competition; Geographical risks; IP protection and first mover advantage; Regulatory risks; Reputational risks and failure to build brand equity; Innovation pipeline; Supply chain disruptions; Personnel/Workforce; Interruption of IT system operations; Liquidity risk; currency risks; Product liability. Further information in relation to the Group's financial position and going concern is included in note 2. Carlo Centonze CEO & Executive Director March 28, 2024 Financial Review As outlined in the Chairwoman's statement and the Business Report, 2023 was a very challenging year for the Company. The continuously weak market conditions for our main commercial businesses led to a decrease in revenues for the 12-month period by -11.6% to US$41.7 million (2022: US$47.2 million). Gross profit of US$15.5 million (2022: US$13.5 million) represents a gross margin on sales of 37.0% (2022: 28.5%). While this represents an overall recovery of 8.5%, it was impacted by increased allowances on inventory to reflect the continuing weak market demand. Excluding this impact, the gross margin would be 41.2% for the period. Total selling, general and administrative expenses (SG&A) were US$29.6 million for the 12months ending December 31, 2023, representing an overall decrease of 4.5% versus the prior year period (2022: US$31.0 million). Personnel expenses accounted for 44.9% of total SG&A costs in 2023 and amount to US$13.3 million - down -11.3% (US$-1.7 million) compared to the same period in 2022 (US$15.0 million). A significant portion of SG&A is related to our venture initiatives and thus represents capability building development costs. In 2023 SG&A expenses of about US$2.5 million relate to our venture initiatives and thus represents capability building development costs. Accounting aspects relying on significant judgment and estimations and individual transactions that materially affected our interim financial statements as of December 31, 2023, are as follows: Allowance on inventory In line with existing accounting policies of the Company, an inventory allowance of US$1.8 million was recorded within cost of sales. The allowance relates mainly to excess inventory positions. Based on the continuing weak market conditions, for a limited number of inventory items the Board has concluded that it is not certain that all inventory on hand can be sold within the foreseeable future and therefore has determined this allowance to be appropriate. Impairment of intangible assets The Company acquired in previous years certain intangible assets to secure its intellectual property position in relation to certain long-term customer contracts, including the exclusivity agreement with ICP Industrial Inc. As the exclusive agreement with ICP has been terminated, the Directors have deemed it appropriate to write-off the corresponding intangible assets, amounting in a write-off of US$1.1 million in 2023. Settlement of litigation As announced in November 2023, the Group settled the litigation and the termination of an exclusive agreement between its subsidiary HeiQ Materials AG and ICP Industrial Inc. ("ICP"). The settlement of the litigation included dismissal of claims and counterclaims by both parties with prejudice and ICP agreed to pay HeiQ Plc a total of US$2.75 million, which was received in December 2023. The settlement payment is accounted for as "Other income" within the operating loss. All the above contributed to a loss from operations for the 12 months ending December 31, 2023 of US$11.6 million (2022: US$29.2 million). Results For the six months ended December 31, For the year ended December 31 2023 2022 2023 2022 US$'000 US$'000 US$'000 US$'000 Revenue 21,247 19,644 41,747 47,202 Cost of sales (14,177) (17,618) (26,287) (33,745) Gross profit 7,070 2,026 15,460 13,457 Other income 3,284 2,084 4,230 4,832 Selling and general administrative expenses (15,319) (16,953) (29,582) (30,969) Impairment reversal/(loss) on intangible assets 90 (11,651) 90 (11,651) Impairment loss on property, plant & equipment (84) (730) (84) (730) Other expenses (623) (2,449) (1,698) (4,184) Operating loss (5,582) (27,673) (11,584) (29,245) Depreciation of property, plant and equipment 742 638 1,453 1,282 Amortization of intangible assets 1,134 769 2,203 1,435 Depreciation of right-of-use assets 527 441 1,005 938 Impairment losses and write-offs 1,396 13,278 1,396 13,278 Share options and rights granted to Directors and employees 202 (348) 334 138 Adjusted EBITDA (1,581) (12,895) (5,193) (12,174) EBITDA Margin (adjusted) (7.4%) (65.6%) (12.4%) (25.8%) Cashflow from operating activities Liquidity and cashflow is a key focus for the Company in these challenging circumstances. We have undertaken decisive steps to reduce the cash-use of operating activities during the period. As a result, the Company managed to return to a positive cashflow from operating activities in H2 2023: US$'000 Jul - Dec 2023 Jan - Jun 2023 Jul - Dec 2022 Jan - Jun 2022 Net cash from (used in) operating activities 1,505 (4,799) (486) (1,973) Inventory & Trade receivables Both inventory and trade receivables were significantly reduced during the reporting period. As of December 31, 2023, inventory was valued at US$11.3 million which represents a reduction of -14.6% (2022: US$13.2 million). Trade receivables of US$5.7 million represent a reduction of 12.5% (2022: US$6.5 million). Post balance sheet date events In February 2024 the Group completed the acquisition of two industrial properties in Portugal for a total consideration of EUR5.0 million (including taxes) which we believe represented a significant discount to market prices for similar properties. To secure the price and to finance the acquisition, the Company received bridge financing from Cortegrande AG, a company owned by the Group CEO Carlo Centonze. In late March 2024, the Group secured a mortgage of EUR0.75 million for the smaller lot acquired at a price (before taxes) of EUR1.0 million while negotiations for the large lot (acquisition price before tax EUR3.6 million) with the mortgage provider are ongoing. Further, in March 2024 the Company completed a capital raise issuing 28 million new shares for a total consideration of ��2.4 million (��0.087 per share). Liquidity as of December 31, 2023 & Going Concern Assessment As of December 31, 2023, the Company's cash balance was US$9.7 million (December 31, 2022: US$8.5 million) and net debt position including lease liabilities was US$-10.0 million as of December 31, 2023 (2022: US$-3.7 million). To manage its cash balance, the Group has access to credit facilities totalling CHF8.8 million (approximately US$9.9 million as of March 28, 2023). The credit facilities are in place with two different banks and both contracts have materially the same conditions. The facilities are not limited in time, can be terminated by either party at any time and allow overdrafts and fixed cash advances with a duration of up to twelve months. As of March 28, 2023, the Group has drawn fixed cash advances amounting to CHF7.8 million and EUR0.4 million (December 31, 2022: CHF2.4 million) - see Note 2 for details including maturity dates. The facilities are not committed, but the Board has not received any indication from financing partners that facilities are at risk of being terminated. However, the credit facilities will be reduced by CHF0.3 million to CHF8.5 million in total as of June 17, 2024. The Group's directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and operate within its credit facilities for the period of 12 months from date of signature. Nevertheless, the Board acknowledges the uncommitted status of the facilities which could be terminated requiring the refinancing of debts, and which casts material uncertainty on the going concern assessment until appropriate longer-term funding is in place. Further disclosures on the going concern assessment are made in the notes to the financial statements. Xaver Hangartner CFO & Executive Director March 28, 2024 Unaudited Condensed Consolidated Interim Financial Statements Condensed consolidated statement of profit and loss and other comprehensive income For the six months ended December 31, For the year ended December 31, 2023 2022 2023 2022 (Unaudited) (Unaudited) (Unaudited) (Audited) Note US$'000 US$'000 US$'000 US$'000 Revenue 5 21,247 19,644 41,747 47,202 Cost of sales 7 (14,177) (17,618) (26,287) (33,745) Gross profit 7,070 2,026 15,460 13,457 Other income 8 3,284 2,084 4,230 4,832 Selling and general administrative expenses 9 (15,319) (16,953) (29,582) (30,969) Impairment reversal/(loss) on intangible assets 16 90 (11,651) 90 (11,651) Impairment loss on property, plant & equipment 17 (84) (730) (84) (730) Other expenses 11 (623) (2,449) (1,698) (4,184) Operating loss (5,582) (27,673) (11,584) (29,245) Finance income 12 69 241 74 683 Finance costs 13 (1,055) (749) (1,439) (1,273) Loss before taxation (6,568) (28,181) (12,949) (29,835) Income tax 14 (884) 275 (1,030) 21 Loss after taxation (7,452) (27,906) (13,979) (29,814) Other comprehensive income: Exchange differences on translation of foreign operations 546 (824) 975 (1,914) Items that may be reclassified to profit or loss in subsequent periods 546 (824) 975 (1,914) Actuarial gains/(losses) from defined benefit pension plans (218) 1,380 (218) 1,380 Income tax relating to items that will not be reclassified subsequently to profit or loss 249 (276) 249 (276) Items that will not be reclassified to profit or loss in subsequent periods 31 1,104 31 1,104 Other comprehensive income (loss) for the period 577 280 1,006 (810) Total comprehensive loss for the period (6,875) (27,626) (12,973) (30,624) Loss attributable to: Equity holders of HeiQ (7,147) (27,546) (13,583) (29,251) Non-controlling interests (305) (360) (396) (563) (7,452) (27,906) (13,979) (29,814) Total Comprehensive loss attributable to: Equity holders of the Company (6,570) (27,266) (12,577) (30,061) Non-controlling interests (305) (360) (396) (563) (6,875) (27,626) (12,973) ( 30,624 ) Loss per share: Basic (cents) * 15 (5.09) (20.39) (9.67) (21.92) The effect of share options is anti-dilutive and therefore not disclosed. Condensed consolidated statement of financial position As at December 31, 2023 (Unaudited) As at December 31, 2022 (Audited) Note US$'000 US$'000 ASSETS Intangible assets 16 20,489 20,442 Property, plant and equipment 17 9,003 9,802 Right-of-use assets 18 8,132 7,819 Deferred tax assets 30 312 538 Other non-current assets 19 82 137 Non-current assets 38,018 38,738 Inventories 20 11,250 13,168 Trade receivables 21 5,673 6,487 Other receivables and prepayments 22 4,349 4,262 Cash and cash equivalents 9,694 8,488 Current assets 30,966 32,405 Total assets 68,984 71,143 EQUITY AND LIABILITIES Issued share capital and share premium 24 206,246 205,874 Other reserves 26 (126,830) (128,017) Retained deficit (51,661) (39,466) Equity attributable to HeiQ shareholders 27,755 38,391 Non-controlling interests 1,728 1,948 Total equity 29,483 40,339 Lease liabilities 27 6,674 6,558 Long-term borrowings 29 1,501 1,445 Deferred tax liability 30 1,384 1,253 Other non-current liabilities 31 5,010 4,714 Total non-current liabilities 14,569 13,970 Trade and other payables 32 6,672 5,322 Accrued liabilities 33 4,483 4,978 Income tax liability 14 606 314 Deferred revenue 34 1,423 1,285 Short-term borrowings 29 10,409 2,893 Lease liabilities 27 1,131 1,264 Other current liabilities 36 208 778 Total current liabilities 24,932 16,834 Total liabilities 39,501 30,804 Total equity and liabilities 68,984 71,143 The Notes form an integral part of these Condensed Consolidated Interim Financial Statements. The Financial Statements were approved and authorized for issue by the Board of Directors on March 27, 2024 and signed on its behalf by: Xaver Hangartner CFO & Executive Director Condensed consolidated statement of changes in equity Issued share capital and share premium Other reserves Retained deficit Equity attributable to HeiQ shareholders Non-controlling interests Total equity Note US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Balance at January 1, 2022 (Audited) 195,714 (127,195) (11,525) 56,994 2,541 59,535 Loss after taxation - - (29,251) (29,251) (563) (29,814) Other comprehensive (loss)/income - (810) - (810) - (810) Total comprehensive (loss)/income for the period - (810) (29,251) (30,061) (563) (30,624) Issuance of shares 24 10,160 - - 10,160 - 10,160 Share-based payment charges 25 - (12) - (12) - (12) Dividends paid to minority shareholders 26 - - - - (243) (243) Capital contributions from minority shareholders - - - - 764 764 Adjustments arising from change in non-controlling interests - - (2,445) (2,445) (616) (3,061) Transfer on disposal of non-controlling interest - - 3,755 3,755 65 3,820 Transactions with owners 10,160 (12) 1,310 11,458 (30) 11,428 Balance at December 31, 2022 (Audited) 205,874 (128,017) (39,466) 38,391 1,948 40,339 Loss after taxation - - (13,583) (13,583) (396) (13,979) Other comprehensive (loss)/income - 1,006 - 1,006 - 1,006 Total comprehensive (loss)/income for the period - 1,006 (13,583) (12,577) (396) (12,973) Issuance of shares 24 372 - - 372 - 372 Share-based payment charges 25 - 181 - 181 - 181 Elimination of non-controlling interest at disposal of subsidiary 4b - - - - 73 73 Dividends paid to minority shareholders 26 - - - - (12) (12) Transfer of shares to non-controlling interest 4c - - 1,388 1,388 115 1,503 Transactions with owners 372 181 1,388 1,941 176 2,117 Balance at December 31, 2023 (Unaudited) 206,246 (126,830) (51,661) 27,755 1,728 29,483 Condensed consolidated statement of cash flows Six months ended December 31, Year ended December 31, 2023 2022 2023 2022 (Unaudited) (Unaudited) (Unaudited) (Audited) Note US$'000 US$'000 US$'000 US$'000 Cash flows from operating activities Loss before taxation (6,568) (28,181) (12,949) (29,835) Cash flow from operations reconciliation: Depreciation and amortization 16-18 2,403 1,848 4,661 3,655 Impairment expense 16-17 (6) 12,380 (6) 12,380 Net loss/gain on disposal of assets 67 (8) 84 (5) Write-off of intangible assets 11 1,388 897 1,402 897 Gain from disposal of subsidiary 4b (138) - (138) Fair value gain on derivative liability 8 (453) (371) (701) (371) Finance costs 300 149 517 273 Finance income (29) (1) (34) (2) Pension expense (389) 130 (346) 247 Non-cash equity compensation 25 202 (348) 334 138 Gain from lease modification (6) - (15) (68) Other costs paid in shares 24 - 235 - 235 Currency translation 916 623 322 (61) Working capital adjustments: Decrease in inventories 39 3,164 3,016 1,926 602 Decrease in trade and other receivables 39 2,350 9,391 733 7,783 (Decrease)/Increase in trade and other payables 39 (1,798) 95 1320 2,543 Cash from (used in) operations 1,403 (145) (2,890) (1,589) Taxes paid 14 102 (341) (404) (870) Net cash from (used in) operating activities 1,505 (486) (3,294) (2,459) Cash flows from investing activities Consideration for acquisition of businesses 39 (730) - (730) (1,587) Cash assumed in asset acquisition 39 10 65 12 65 Disposal of a subsidiary, net of cash disposed of 4b (24) - (24) - Purchase of property, plant and equipment 17 (829) (2,358) (1,413) (3,418) Proceeds from the disposal of property, plant and equipment 29 16 844 53 Development and acquisition of intangible assets 16 (484) (1,919) (1,149) (3,865) Interest received 29 1 34 2 Net cash used in investing activities (1,999) (4,195) (2,426) (8,750) Cash flows from financing activities Interest paid on borrowings (190) (68) (312) (110) Repayment of leases (682) (540) (1,296) (992) Interest paid on leases (110) (81) (205) (163) Proceeds from disposals of minority interests 1,504 2,333 1,504 4,792 Proceeds from borrowings 27 2,964 2,642 7,962 3,465 Repayment of borrowings 27 (693) (707) (958) (904) Dividends paid to minority shareholders 26 (12) - (12) (243) Net cash from financing activities 2,781 3,579 6,683 5,845 Net decrease in cash and cash equivalents 2,287 (1,102) 963 (5,364) Cash and cash equivalents - beginning of the period/year 7,274 9,488 8,488 14,560 Effects of exchange rate changes on the balance of cash held in foreign currencies 133 102 243 (708) Cash and cash equivalents - end of the period 9,694 8,488 9,694 8,488 Notes to the Unaudited Condensed Consolidated Financial Statements for the six months ended December 31, 2023 1. General information HeiQ Plc (the Company) is a company limited by shares incorporated and registered in the United Kingdom. The address of the Company's registered office is 5th Floor, 15 Whitehall, London, SW1A 2DD. 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. 2. Basis of preparation and measurement Basis of preparation 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. The Company's next set of audited financial reports and accounts will be for the period January 1, 2023 to June 30, 2024 and will be published by October 31, 2024. The unaudited condensed consolidated interim financial statements have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and UK adopted International Accounting Standard 34 "Interim Financial Reporting" (IAS 34). Other than as noted below, the accounting policies applied by the Group in the preparation of these interim financial statements are the same as those set out in the Company's audited financial statements for the year ended December 31, 2022. These financial statements have been prepared under the historical cost convention except for certain financial and equity instruments that have been measured at fair value. These condensed financial statements do not include all of the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Company's financial position and performance since the audited financial statements for the year ended December 31, 2022. Statutory accounts for the year ended December 31, 2022 have been filed with the Registrar of Companies in October 2023 and the auditor's report was unqualified, did not contain any statement under Section 498(2) or 498(3) of the Companies Act 2006, and contained a matter (material uncertainty in regards to the going concern assumption) to which the auditors drew attention without qualifying their report. The condensed interim financial statements are unaudited and have not been reviewed by the auditors and were approved by the Board of Directors on March 27, 2024. Going concern The unaudited condensed consolidated interim 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. To manage its cash balance, the Group has access to credit facilities totalling CHF8.80 million (approximately US$9.9 million as of March 28, 2023). The credit facilities are in place with two different 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. In case one or the other party terminates the agreement, fixed cash advances become due upon their defined maturity date. 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 March 28, 2024, the Group has drawn fixed advances amounting to CHF7.8 million and EUR0.4 million (CHF2.4 million as December 31, 2022) as follows: Term / Maturity date CHF April 26, 2024 5.5 million April 15, 2024 0.5 million June 17, 2024 0.8 million September 30, 2024 1.0 million Term / Maturity date EUR April 02, 2024 0.4 million 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. However, the credit facilities will be reduced by CHF0.3 million to CHF8.5 million in total as of June 17, 2024. 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 date 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, 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 on a going concern basis. Basis of consolidation The Condensed Consolidated Financial Statements comprise the financial statements of the Company and its subsidiaries. Business combinations are accounted for under the acquisition method. New standards, interpretations and amendments not yet effective for the current period 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); and ��� Deferred Tax Related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12). 3. Significant accounting policies The Company has applied the same accounting policies and methods of computation in its interim consolidated financial statements as in its 2022 financial statements. New and amended standards and Interpretations issued by the IASB that will apply for the first time in the next annual financial statements are not expected to impact the Group as they are either not relevant to the Group's activities or require accounting which is consistent with the Group's current accounting policies. Use of estimates and judgements There have been no material revisions to the nature and amounts of estimates of amounts reported in prior periods. 4. Significant events and transactions 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$244,000 of deferred consideration is payable in cash in monthly instalments from February 2023 to February 2025. The purchase price allocation has not been finalized yet and is subject to possible changes in valuation of the assets acquired. it will be completed in the 2023/2024 annual report. The following table provides an overview of the preliminary purchase price allocation. It summarizes the consideration paid, the fair value of assets acquired, liabilities assumed, and goodwill arising on acquisition at the acquisition date. Preliminary purchase price allocation US$'000 Consideration: Cash paid to shareholders 621 Shares issued to shareholders 372 Deferred consideration 244 Total Consideration 1,237 Fair value of net assets acquired: Inventory 13 Cash and cash equivalents 12 Trade and other receivables 12 Borrowings (42) Intangible assets identified on acquisition: Customer Relationship 123 Regulatory asset 682 Deferred tax liability on intangible assets (201) Total net assets 599 Goodwill 638 Total 1,237 b. 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$nil. The Group's stake was reduced to 20% and, as a result, the company is no longer consolidated. c. Transfer of shares in HeiQ AeoniQ GmbH to non-controlling interests In July 2023, HeiQ Materials AG reached an agreement with MAS to dispose of 1.5% of its shareholding in HeiQ AeoniQ GmbH. d. Foundation of HeiQ AeoniQ Holding AG The Group founded HeiQ AeoniQ Holding AG Switzerland, which resides at Parkstrasse 1, 5234 Villigen. As at December 31, 2023, the Group holds 97% ownership. 5. Revenue The Group's focus on materials innovation which includes scientific research, manufacturing and consumer ingredient branding. The primary source of revenue is the production and sale of functional ingredients, materials and finished goods. Other sources of revenue include research and development, take-or-pay and exclusivity services. The following table reconciles HeiQ Group's revenue for the periods presented: For the six months ended December 31, For the year ended December 31, 2023 2022 2023 2022 Revenue by type of product US$'000 US$'000 US$'000 US$'000 Revenue recognized at point in time Functional ingredients 16,376 15,019 32,123 36,175 Functional materials 197 1,566 743 2,000 Functional consumer goods 2,680 1,785 5,382 6,827 Services 189 - 1,169 160 Revenue recognized over time Services 1,805 1,274 2,330 2,040 Total revenue 21,247 19,644 41,747 47,202 Unsatisfied performance obligations The transaction prices allocated to unsatisfied and partially unsatisfied obligations at December 31, 2023 are as set out below: As at December 31, 2023 As at December 31, 2022 Unsatisfied performance obligations US$'000 US$'000 Exclusivity services 1,500 2,100 Research and development services 3,360 3,750 Total unsatisfied performance obligations 4,860 5,850 Management expects that 25 per cent of the transaction price allocated to the unsatisfied contracts as of 31 December 2023 will be recognized as revenue during 2024 (US$1.2 million). The remaining 75 per cent, US$3.7 million, will be recognized in 2025 (US$1.1 million) and 2026 financial year (US$2.6 million). Disclosure related to contracts with customers Contract assets and contract liabilities are disclosed under Note 23 and Note 35, respectively. Impairment losses recognized on any receivables or contract assets arising from the Group's contracts with customers are disclosed under Note 21 and Note 23, respectively. 6. Operating Segments Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors of the Company. For management purposes, the Group is organised into business units and the following reportable segments: Segment Activity Textiles & Flooring Provide innovative ingredients to make textiles & flooring more functional, durable and sustainable. Life Sciences Offer biotech solutions to replace harmful biocides in domestic, commercial, healthcare and industrial usage, for a more balanced microbiome and environment. Antimicrobials Functionalize by enhancing hygiene of different hard surfaces in everyday products and our surroundings. Other activities All other activities of the Group including Innovation Services, Venture Business Development, and other non-allocated functions. In 2023 new overhead allocation rules were introduced and as a result more overhead costs were allocated to segments. 2022 segment revenue and profits are restated below using the new rules to allow for like for like comparison. Segment revenues and profits The following is an analysis of the Group's revenue and results by reportable segment: Six months ended December 31, 2023 Textiles & Flooring US$'000 Life Sciences US$'000 Antimicrobials US$'000 Other activities US$'000 Total US$'000 Revenue 15,809 2,363 1,776 1,299 21,247 Operating loss (2,005) (1,019) 584 (3,142) (5,582) Finance result (986) Loss before taxation (6,568) Taxation (884) Loss after taxation (7,452) Depreciation and amortization Property, plant and equipment 282 190 23 247 742 Right-of use assets 76 75 20 356 527 Intangible assets 144 287 391 312 1,134 Impairment loss / (reversal) Property, plant and equipment - 84 - - 84 Intangible assets - - - (90) (90) Six months ended December 31, 2022 Textiles & Flooring US$'000 Life Sciences US$'000 Antimicrobials US$'000 Other activities US$'000 Total US$'000 Revenue 14,646 2,273 1,154 1,571 19,644 Operating loss (6,913) (5,000) (9,648) (6,112) (27,673) Finance result (508) Loss before taxation (28,181) Taxation 275 Loss after taxation (27,906) Depreciation and amortization Property, plant and equipment 126 162 11 339 638 Right-of use assets 48 73 18 302 441 Intangible assets 38 276 350 105 769 Impairment loss Property, plant and equipment - 730 - - 730 Intangible assets - 2,402 8,247 1,002 11,651 Year ended December 31, 2023 Textiles & Flooring US$'000 Life Sciences US$'000 Antimicrobials US$'000 Other activities US$'000 Total US$'000 Revenue 31,340 4,842 2,940 2,625 41,747 Operating loss (888) (1,712) (1,126) (7,858) (11,584) Finance result (1,365) Loss before taxation (12,949) Taxation (1,030) Loss after taxation (13,979) Depreciation and amortization Property, plant and equipment 580 361 38 474 1,453 Right-of use assets 166 149 42 648 1,005 Intangible assets 288 564 792 559 2,203 Impairment loss / (reversal) Property, plant and equipment - 84 - - 84 Intangible assets - - - (90) (90) Year ended December 31, 2022 Textiles & Flooring US$'000 Life Sciences US$'000 Antimicrobials US$'000 Other activities US$'000 Total US$'000 Revenue 34,184 6,164 4,182 2,672 47,202 Operating loss (4,231) (5,537) (10,116) (9,361) (29,245) Finance result (590) Loss before taxation (29,835) Taxation 21 Loss after taxation (29,814) Depreciation and amortization Property, plant and equipment 334 335 28 585 1,282 Right-of use assets 123 145 42 628 938 Intangible assets 74 550 699 112 1,435 Impairment loss Property, plant and equipment - 730 - - 730 Intangible assets - 2,402 8,247 1,002 11,651 Segment revenue reported above represents revenue generated from external customers. There were no intersegment sales in the six months ended December 31, 2023 (2022: nil). Geographic information For the six months ended December 31, For the year ended December 31, 2023 2022 2023 2022 Revenue by region US$'000 US$'000 US$'000 US$'000 North & South America 9,010 9,327 18,704 20,425 Asia 6,914 4,421 11,712 13,376 Europe 5,243 5,782 11,091 13,109 Others 80 114 240 292 Total revenue 21,247 19,644 41,747 47,202 As at December 31, As at December 31, 2023 2022 Non-current assets by region US$'000 US$'000 Europe 27,767 22,290 Asia 2,370 8,102 North & South America 7,512 7,734 Others 369 612 Total non-current assets 38,018 38,738 Information about major customers During the six months ended December 31, 2023, no customers individually totalled more than 10% of total revenues (2022: none). 7. Cost of sales For the six months ended December 31, For the year ended December 31, 2023 2022 2023 2022 Cost of sales US$'000 US$'000 US$'000 US$'000 Material expenses 8,003 8,829 18,354 20,942 Personnel expenses 1,689 1,354 3,252 2,830 Depreciation of property, plant and equipment 291 310 643 652 Other costs of sales 4,194 7,125 4,038 9,321 Total cost of sales 14,177 17,618 26,287 33,745 Other costs of goods sold include freight and custom costs, warehousing and allowances on inventory. 8. Other income For the six months ended December 31, For the year ended December 31, 2023 2022 2023 2022 Other income US$'000 US$'000 US$'000 US$'000 Gain on disposal of property plant and equipment 9 12 21 21 Gain on disposal of investments 138 - 138 - Foreign exchange gains (517) 1,205 - 3,539 Fair value gain on derivative liabilities 453 371 701 371 Income from out-of-court settlement 2,750 - 2,750 - Other income 451 496 620 901 Total other income 3,284 2,084 4,230 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 $2.75 million. The settlement refers to a complaint filed by the Group in October 2022 for breaching its Exclusive Agreement terms. Foreign exchange gains previously reported under other income have been reclassified to finance income (Note 12) during the 2023 reporting period so as to more fairly present the nature of such items. 9. Selling and general administration expenses Selling and general administration expenses For the six months ended December 31, For the year ended December 31, 2023 2022 2023 2022 US$'000 US$'000 US$'000 US$'000 Personnel expenses 6,442 7,169 13,291 14,977 Depreciation of property, plant and equipment 451 328 810 630 Amortization of intangible assets 1,134 769 2,203 1,435 Depreciation of right-of-use assets 527 441 1,005 938 Net credit losses on financial assets and contract assets 171 85 171 85 Other 6,594 8,161 12,102 12,904 Total selling and general administration expenses 15,319 16,953 29,582 30,969 Other selling and general administration expenses include costs for infrastructure, professional services and marketing as well as R&D and laboratory related costs, information technology & data expenses, sales representative & distribution expenses. 10. Personnel expenses For the six months ended December 31, For the year ended December 31, 2023 2022 2023 2022 Personnel expenses US$'000 US$'000 US$'000 US$'000 Wages & salaries 7,323 7,344 14,547 15,274 Social security & other payroll taxes 766 1,061 1,568 1,685 Pension costs (160) 466 94 710 Share-based payments 202 (348) 334 138 Total personnel expenses 8,131 8,523 16,543 17,807 Reported as cost of sales (Note 7) 1,689 1,354 3,252 2,830 Reported as selling and general administration expense (Note 9) 6,442 7,169 13,291 14,977 Total personnel expenses 8,131 8,523 16,543 17,807 The pension costs for the six months ended December 31, 2023 were impacted by a curtailment gain (US$141,000) and further income from a plan amendment (US$341,000) as explained further in Note 28. 11. Other expenses For the six months ended December 31, For the year ended December 31, 2023 2022 2023 2022 Other expenses US$'000 US$'000 US$'000 US$'000 Foreign exchange losses (928) 1,429 - 3,050 Loss on disposal of property, plant and equipment 76 5 105 16 Transaction costs relating to mergers and acquisitions - 50 23 50 Write off intangible assets 1,388 897 1,402 897 Other 87 68 168 171 Total other expenses 623 2,449 1,698 4,184 The write off mainly relates to patents acquired in view of the commercial partnership with ICP. As the partnership has been ended, the asset's economic benefits were consumed. Foreign exchange losses previously reported under other expenses have been reclassified to finance costs (Note 13) during the 2023 reporting period so as to more fairly present the nature of such items. 12. Finance income For the six months ended December 31 For the year ended December 31, 2023 2022 2023 2022 Finance income US$'000 US$'000 US$'000 US$'000 Interest income 11 4 14 5 Gains on foreign currency transactions 39 238 39 678 Other 19 (1) 21 - Total finance income 69 241 74 683 13. Finance costs For the six months ended December 31 For the year ended December 31, Finance costs 2023 2022 2023 2022 US$'000 US$'000 US$'000 US$'000 Lease finance expense 110 82 205 163 Interest on borrowings 190 68 312 110 Bank fees 104 65 271 98 Loss on foreign currency transactions 651 534 651 902 Total finance costs 1,055 749 1,439 1,273 14. Income tax The components of the provision for taxation on income included in the "Statement of profit or loss and other comprehensive income" are summarized below: For the six months ended December 31 For the year ended December 31 2023 2022 2023 2022 Current income tax expense US$'000 US$'000 US$'000 US$'000 Swiss corporate income taxes (70) 28 (49) 58 United States state and federal taxes 355 10 456 393 Taiwan corporate income taxes 73 40 154 118 Belgium corporate income taxes (53) (199) 30 (123) Germany corporate income taxes (24) 68 (24) 51 Others 34 (16) 45 63 Total current income tax expense 315 (69) 612 560 Deferred income tax expense Switzerland 698 159 676 90 United States (41) (535) (45) (606) China 8 245 6 117 Austria 5 24 3 20 Belgium (63) (65) (131) (136) Others (38) (34) (91) (66) Total deferred income tax expense (income) 569 (206) 418 (581) Total income tax expense (income) 884 (275) 1,030 (21) As at December 31, As at December 31, 2023 2022 Net tax (assets)/liabilities US$'000 US$'000 Opening balance (prepaid taxes) (343) 51 Assumed on asset acquisition - (32) Income tax expense for the year 612 560 Taxes paid (404) (870) Foreign currency differences (5) (52) Net tax (asset)/liability (140) (343) As at December 31, As at December 31, 2023 2022 Net tax (assets) liabilities US$'000 US$'000 Prepaid income taxes (746) (657) Income tax liabilities 606 314 Net tax (asset)/liability (140) (343) 15. Earnings per share The calculation of basic earnings per share is based on the following data: For the six months ended December 31, For the year ended December 31, 2023 2022 2023 2022 Loss attributable to the ordinary equity holders of the parent entity (US$'000) (7,147) (27,546) (13,583) (29,251) Weighted average number of ordinary shares for the purposes of basic earnings per share 140,537,907 135,084,870 140,522,934 133,426,953 Basic loss per share (cents) (5.09) (20.39) (9.67) (21.92) The effect of share options is anti-dilutive and therefore not disclosed. 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. 16. Intangible assets Goodwill Internally developed assets Brand names and customer relations Acquired technologies Other intangible assets Total Cost US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 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 Additions arising from internal development - 1,006 - 123 - - 1,006 Business combinations 641 - 123 - 682 1,446 Other acquisitions - - - - 143 143 Disposals / write-offs - (228) - - (1,441) (1,669) Reclassifications - 93 - - - 93 Currency translation differences 494 579 100 95 161 1,429 As at December 31, 2023 21,722 7,044 4,566 3,110 2,779 39,221 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 - 715 721 334 433 2,203 Disposals / write-offs - (25) - - (242) (267) Reclassifications - 93 - . - 93 Impairment loss - (90) - - - (90) Currency translation differences 263 190 (9) (6) 24 462 As at December 31, 2023 12,394 2,438 2,010 851 1,039 18,732 Net book value As at December 31, 2022 8,456 4,039 3,045 2,492 2,410 20,442 As at December 31, 2023 9,328 4,606 2,556 2,259 1,740 20,489 17. 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 2,736 5,280 Disposals (69) (12) - - - (81) Reclassifications (407) 59 - 348 - - Currency translation differences (233) (1) (21) (23) (91) (369) As at December 31, 2022 8,851 608 1,090 849 4,168 15,566 Additions 1,167 113 32 60 41 1,413 Disposals (976) (57) (8) (15) - (1,056) Reclassifications (37) - - 37 - - Currency translation differences 374 9 97 49 68 597 As at December 31, 2023 9,379 673 1,211 980 4,277 16,520 Depreciation and accumulated impairment losses As at January 1, 2022 2,723 330 619 86 112 3,870 Depreciation 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 Depreciation for the year 920 84 103 108 238 1,453 Eliminated on disposal (84) (33) (2) (8) - (127) Impairment loss 34 21 6 23 - 84 Reclassifications 7 - (6) (1) - - Currency translation differences 214 5 81 30 13 343 As at December 31, 2023 4,991 492 1,010 540 484 7,517 Net book value As at December 31, 2022 4,951 193 262 461 3,935 9,802 As at December 31, 2023 4,388 181 201 440 3,793 9,003 18. 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 99 140 858 1,096 Disposals due to expiry of lease (330) (28) (32) (390) Modification to lease terms *** (253) (110) - (362) Currency translation differences 311 33 201 545 As at December 31, 2023 6,780 717 3,262 10,759 Depreciation 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 703 157 145 1,005 Disposals due to expiry of lease (301) (25) (33) (359) Modification to lease terms (173) (41) - (214) Currency translation differences 125 11 7 144 As at December 31, 2023 2,073 309 245 2,627 Net book value As at December 31, 2022 5,233 475 2,111 7,819 As at December 31, 2023 4,707 408 3,017 8,132 With the acquisition of ChemTex Laboratories' property, plant and equipment, 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 Group terminated certain lease agreements prior to their expiry resulting in the disposal of the right-of-use assets and related liabilities. The disposal resulted in a US$15,000 net gain. 19. Other non-current assets As at As at December 31, 2023 December 31, 2022 Other non-current assets US$'000 US$'000 Deposits 75 80 Other prepayments 7 57 Other non-current assets 82 137 20. Inventories As at As at December 31, 2023 December 31, 2022 Inventories US$'000 US$'000 Functional ingredients & materials 9,154 11,420 Functional consumer goods 2,096 1,748 Total inventories 11,250 13,168 21. Trade receivables As at As at December 31, 2023 December 31, 2022 Trade receivables US$'000 US$'000 Not past due 3,154 2,788 < 30 days 1,269 520 31-60 days 344 781 61-90 days 549 215 91-120 days 69 180 >120 days 776 2,407 Total trade receivables 6,161 6,891 Provision for expected credit losses (488) (404) Total trade receivables (net) 5,673 6,487 22. Other receivables and prepayments As at As at December 31, 2023 December 31, 2022 Total other receivables and prepayments US$'000 US$'000 Contract assets 34 115 Receivables from tax authorities 2,092 1,864 Prepayments 1,612 1,023 Other receivables 611 1,260 Total other receivables and prepayments 4,349 4,262 23. Contract assets Amounts relating to contract assets are balances due from customers under construction contracts that arise when the Group receives payments from customers in line with a series of performance-related milestones. The Group recognizes a contract asset for any work performed. Any amount previously recognized as a contract asset is reclassified to trade receivables at the point at which it is invoiced to the customer. As at December 31, 2023 As at December 31, 2022 Contract assets US$'000 US$'000 Research and development services 34 65 Exclusivity services - 50 Total contract assets 34 115 Current assets 34 115 Non-current assets - - Total contract assets 34 115 Revenues related to research and development services were recognized at the point of delivering proof of concept and completing testing services. Performance obligations related to exclusivity services were deemed fulfilled by the Group upon completion of the contractual term. Payment for the above services is not due from the customer yet and therefore a contract asset is recognized. The directors of the Company always measure the loss allowance on amounts due from customers at an amount equal to lifetime ECL, taking into account the historical default experience, the nature of the customer and where relevant, the sector in which they operate. There has been no change in the estimation techniques or significant assumptions made during the current reporting period in assessing the loss allowance for the amounts due from customers under construction contracts. Lifetime Expected credit losses on contract assets The following table details the risk profile of amounts due from customers based on the Group's provision matrix. Based on the historic default experience, the following expected credit loss has been recognized: As at December 31, 2023 As at December 31, 2022 Expected credit loss US$'000 US$'000 Expected credit loss rate 0% 0% Estimated total gross carrying amount at default 34 115 Lifetime ECL - - Net carrying amount 34 115 24. Issued share capital and share premium Movements in the Company's share capital and share premium account were as follows: Number of shares Share capital Share premium Totals No. US$'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 to vendors of ChemTex Labs 2,176,884 795 1,177 1,972 Issue of shares to vendors of 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 Balance as at December 31, 2023 140,537,907 55,261 150,985 206,246 The par value of all shares is ��0.30. All shares in issue were allotted, called up and fully paid. 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. 25. Share-based payments Equity-settled Share Option Scheme As of December 2023, 1,062,738 options vested with a strike price of ��1.23. Following the vesting and employee departures, the number of options expected to vest dropped to 938,502 as per December 31, 2023 (June 30, 2023: 2,279,236; December 31, 2022: 2,497,281). The expense arising from these share-based payment transactions was US$49,000 for the six months ended December 31, 2023 and US$ 181,000 for the year ended December 31, 2023 which compares against an income of US$12,000 for the year ended December 31, 2022 following a drop in market expectations during the second half of 2022. In the six months ended June 30, 2022, the Group incurred an expense of US$415,000. Details of the share options outstanding and exercisable during the year are as follows: As at December 31, 2023 As at December 31, 2022 Number of options Weighted average exercise price (��) Number of options Weighted average exercise price (��) Outstanding at beginning of year 11,525,911 1.05 8,707,658 1.14 Granted during the year 3,349,125 0.83 Forfeited during the year (2,289,440) 1.06 (530,872) 1.12 Lapsed during the year (3,842,184) 1.23 - - Vesting during the year (1,062,738) 1.23 - - Outstanding at the end of the year 4,331,549 0.84 11,525,911 1.05 As at December 31, 2023 As at December 31, 2022 Number of options Weighted average exercise price (��) Number of options Weighted average exercise price (��) Exercisable at beginning of year - - - - Vesting during the year 1,062,738 1.23 - - Exercisable at the end of the year 1,062,738 1.23 - - Other share-based payments Remuneration of US$764,000 in relation to the acquisition of Life Materials Technologies Limited is linked to a service period of five years. An expense of US$78,000 was recognized in the six months ended December 31, 2023 (year ended December 31, 2023: US$153,000; year ended December 31, 2022: US$150,000). The remainder of US$382,000 is expected to be expensed over the period from January 1, 2024, to June 30, 2026. 26. Other reserves Other reserves comprise the share-based payment reserve, the merger reserve, the currency translation reserve and the other reserve. The retained deficit comprises all other net gains and losses and transactions with owners not recognized elsewhere. Movements in the other reserves were as follows: Share- based payment reserve Merger reserve Currency translation reserve Other reserve Total Other reserves Note US$'000 US$'000 US$'000 US$'000 US$'000 Balance at January 1, 2022 474 (126,912) 387 (1,144) (127,195) Other comprehensive (loss)/income - - (1,914) 1,104 (810) Total comprehensive (loss)/income for the year - - (1,914) 1,104 (810) Share-based payment charges 25 (12) - - - (12) Transactions with owners (12) - - - (12) Balance at December 31, 2022 462 (126,912) (1,527) (40) (128,017) Other comprehensive (loss)/income - - 975 31 1,006 Total comprehensive (loss)/income for the period - - 975 31 1,006 Share-based payment charges 25 181 - - - 181 Transactions with owners 181 - - - 181 Balance at December 31, 2023 643 (126,912) (552) (9) (126,830) 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 25. 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. 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$12,000 was paid to minority shareholders. 27. Lease liabilities Future minimum lease payments associated with leases were as follows: As at December 31, 2023 As at December 31, 2022 Lease payments US$'000 US$'000 Not later than one year 1,211 1,301 Later than one year and not later than five years 3,665 3,813 Later than five years 3,542 3,387 Total minimum lease payments 8,419 8,501 Less: Future finance charges (615) (679) Present value of minimum lease payments 7,805 7,822 Later than one year and not later than five years 1,128 1,264 Later than five years 6,677 6,558 Total minimum lease payments 7,805 7,822 28. Pensions and other post-employment benefit plans In February 2023, nine employees were made redundant which resulted in a curtailment gain US$141,000. 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 1 January 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$341,000. Net benefit obligations The components of the net defined benefits obligations included in non-current liabilities are as follows: As at As at December 31, December 31, 2023 2022 US$'000 US$'000 Fair value of plan assets 8,126 9,616 Defined benefit obligations (9,032) (10,568) Funded status (net liability) (906) (952) Duration (years) 14.6 13.8 Expected benefits payable in following year (352) (389) Year ended Year ended December 31, December 31, 2023 2022 Development of obligations and assets US$'000 US$'000 Present value of funded obligations, beginning of year (10,568) (13,003) Employer service cost (417) (571) Employee contributions (321) (352) Past service gain 341 - Curtailments/Settlements 141 - Interest cost (236) (45) Benefits paid/(refunded) 3,405 522 Actuarial (loss)/gain on benefit obligation (448) 2,562 Currency (loss)/gain (937) 319 Present value of funded obligations, end of year (9,032) (10,568) Defined benefit obligation participants (7,757) (10,568) Defined benefit obligation pensioners (1,274) - Present value of funded obligations, end of year (9,032) (10,568) Fair value of plan assets, beginning of year 9,616 10,858 Expected return on plan assets 215 37 Employer's contributions 320 352 Employees' contributions 321 352 Benefits (paid)/refunded (3,405) (522) Admin expense (19) (21) Actuarial (loss)/gain on plan assets 130 (1,182) Currency gain/(loss) 850 (258) Fair value of plan assets, end of year 8,126 9,616 Movements in net liability recognized in statement of financial position: Year ended Year ended December 31, December 31, 2023 US$'000 2022 US$'000 Net liability, beginning of year (952) (2,146) Employer service cost (417) (571) Interest cost (236) (45) Expected return on plan assets 215 37 Admin expense (19) (21) Past service cost recognized in year 341 - Curtailment, settlement, plan amendment gain (loss) 148 - Employer's contributions (following year expected contributions) 320 352 Prepaid (accrued) pension cost: (352) 247 - operating income (expense) 373 (240) - finance expense (22) (7) Total gains recognized within other comprehensive income (218) 1,380 Currency loss (87) 62 Net liability, end of year (906) (952) Expected employer's cash contributions for following year 269 360 The assets of the scheme are invested on a collective basis with other employers. The allocation of the pooled assets between asset categories is as follows: Asset allocation As at December 31, As at December 31, 2023 2022 US$'000 US$'000 Cash 3.1% 2.8% Bonds 29.6% 29.1% Equities 33.6% 33.2% Property (incl. mortgages) 28.9% 31.3% Other 4.8% 3.6% Total 100.0% 100.0% Amounts recognized in profit and loss Year ended Year ended December 31, December 31, 2023 US$'000 2022 US$'000 Employer service cost 417 (571) Past service cost recognized in year 341 - Interest cost (236) (45) Expected return on plan assets 215 37 Admin expense (19) (21) Curtailment, settlement, plan amendment gain (loss) 148 - Components of defined benefit costs recognized in profit or loss 32 (600) Amounts recognized in other comprehensive income Year ended Year ended December 31, December 31, 2023 2022 US$'000 US$'000 Actuarial gains/(losses) arising from plan experience 314 193 Actuarial (losses)/gains arising from demographic assumptions - (23) Actuarial gains / (losses) arising from financial assumptions (762) 2,392 Re-measurement of defined benefit obligations (448) 2,562 Re-measurement of assets 230 (1,182) Deferred tax asset recognized 44 (276) Other - - Total recognized in OCI (174) 1,104 Principal actuarial assumptions: The principal assumptions used in determining pension and post-employment benefit obligations for the plan are shown below: As at As at December 31, December 31, 2023 2022 US$'000 US$'000 Discount rate 1.50% 2.25% Interest credit rate 2.00% 2.25% Average future salary increases 2.00% 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 calendar year amount to US$269,000. Sensitivities A quantitative sensitivity analysis for significant assumptions is as follows: As at As at December 31, December 31, 2023 2022 Impact on defined benefit obligation US$'000 US$'000 Discount rate + 0.25% (320) (346) Discount rate - 0.25% 339 368 Salary increase + 0.25% 41 47 Salary increase - 0.25% (40) (46) Pension increase + 0.25% 183 179 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. The pension expense in profit and loss was US$10,000 (2022: US$1,000) which results in a US$144,000 net defined liability as at December 31, 2023 (2022: US$134,000). 29. Borrowings The Group's borrowings are held at amortized cost. They consist of the following: As at December 31, 2023 As at December 31, 2022 Borrowings US$'000 US$'000 Unsecured bank loans 10,112 3,573 Secured bank loans 304 628 Loans from related parties 1,494 - Loans from non-controlling interest - 137 Total borrowings 11,910 4,338 The following table provides a reconciliation of the Group's future maturities of its total borrowings for each year presented: As at December 31, 2023 As at December 31, 2022 Maturity of borrowings US$'000 US$'000 Not later than one year 10,409 2,893 Later than one year but less than five years 1,010 1,029 After more than five years 491 416 Total borrowings 11,910 4,338 The other principal features of the Group's borrowings are as follows: Unsecured bank loans As at December 31, 2023 As at December 31, 2022 Description Currency Repayment date Principal US$'000 Interest rate Principal US$'000 Interest rate Credit facility CHF February 2024 6,461 4.67% 2,574 2.20% Credit facility CHF June 2024 1,175 5.45% - - Credit facility CHF September 2024 940 4.70% - - Various bank loans1) EUR 1-10 years 1,504 2.93% 999 2.21% Bank loan GBP April 2026 32 2.50% - - Outstanding at the end of the year 10,112 3,573 1) Several loans repayable over ten years. The loans are repayable over a period of up to ten 10 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 2.93%. 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 is secured by property owned by a company which is controlled by a minority shareholder of HeiQ Medica. As at December 31, 2023, US$304,000 is outstanding (December 31, 2022: US$628,000). 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. As of March 28, 2024, the remaining loan amounts to EUR 400,000, incurs interest at 4.5% and is repayable in June 2024. Loans from non-controlling interests A loan disclosed in the 2022 annual report in the amount of BRL 715,683 (US$137,000) which was payable to a minority shareholder of Life Materials Latam Ltda, Brazil is no longer consolidated following the deconsolidation of the subsidiary. 30. Deferred tax The following are the major deferred tax liabilities and assets recognized by the Group and movements thereon during the current and prior reporting period. Pension fund obligations Tax losses Share-based payments Capital allowances, depreciation and other temporary differences Total Deferred tax US$'000 US$'000 US$'000 US$'000 US$'000 Balance at January 1, 2022 429 178 85 (1,686) (994) Charge to profit or loss 49 (150) 1 681 581 Charge 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 to profit or loss (453) - (86) 121 (417) Charge to other comprehensive income 249 - 249 Arising from business combinations - - - (201) (201) Foreign currency differences 14 - (5) 4 13 Balance as at December 31, 2023 - - - (1,072) (1,072) 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 jurist. Deferred tax liabilities related to capital allowances and depreciation increased following the recognition of intangible assets acquired in the Tarn Pure acquisition. 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: As at December 31, 2023 As at December 31, 2022 Deferred tax US$'000 US$'000 Deferred tax assets 312 538 Deferred tax liabilities (1,384) (1,253) Net deferred tax assets (liabilities) (1,072) (715) 31. Other non-current liabilities Other non-current liabilities As at December 31, 2023 US$'000 As at December 31, 2022 US$'000 Defined benefit obligation IAS 19 Switzerland 906 952 Defined benefit obligation IAS 19 Thailand 144 134 Contract liabilities 3,932 3,614 Deferred consideration Tarn Pure acquisition 19 - Deferred grant income 9 14 Total other non-current liabilities 5,010 4,714 32. Trade and other payables As at December 31, 2023 As at December 31, 2022 Trade and other payables US$'000 US$'000 Trade payables 4,446 3,321 Payables to tax authorities 462 375 Other payables 1,764 1,626 Total trade and other payables 6,672 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. 33. Accrued liabilities As at December 31, 2023 As at December 31, 2022 Accrued liabilities US$'000 US$'000 Costs of goods sold 967 875 Personnel expenses 1,338 1,737 Other operating expenses 2,178 2,366 Total accrued liabilities 4,483 4,978 34. Deferred revenue As at December 31, 2023 As at December 31, 2022 Deferred revenue US$'000 US$'000 Contract liabilities 1,380 1,176 Prepayments for unshipped goods 22 94 Deferred grant income 21 15 Total deferred revenue 1,423 1,285 35. Contract liabilities As at December 31, 2023 As at December 31, 2022 Contract liabilities US$'000 US$'000 Exclusivity agreements 2,812 1,832 Research and development services 2,500 2,958 Total contract liabilities 5,312 4,790 Current liabilities (Note 34) 1,380 1,176 Non-current liabilities (Note 31) 3,932 3,614 Total contract liabilities 5,312 4,790 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. 36. Other current liabilities As at December 31, 2023 As at December 31, 2022 Other current liabilities US$'000 US$'000 Deferred consideration in relation to acquisitions 208 92 Call option liability - 686 Other current liabilities 208 778 The deferred consideration in relation to business acquisition and related financing expense are summarized below: Deferred consideration in relation to acquisitions Chemtex RAS Life Tarn Pure Total US$'000 US$'000 US$'000 US$'000 US$'000 As at December 31, 2021 279 3,152 2,652 - 6,083 Foreign exchange revaluation - (276) - - (276) Consideration settled in cash (187) - (1,400) - (1,587) Consideration settled in shares - (2,875) (1,252) - (4,127) As at December 31, 2022 92 - - - 92 Additions from Tarn Pure acquisition as per Note 4a - - - 244 244 Consideration settled in cash - - - (110) (110) Amortization of fair value discount - - - 1 1 As at December 31, 2022 92 - - 135 227 As at December 31, 2023 As at December 31, 2022 Deferred consideration US$'000 US$'000 Current liabilities 208 92 Non-current liabilities 19 - Total deferred consideration 227 92 37. Contingent assets and liabilities A minority shareholder of one of the Group's subsidiaries has made a claim in court regarding the interpretation of certain put-option rights on shares of the same subsidiary. The Company considers these option rights as lapsed as per the Shareholder Agreement. At present, it is not possible to determine the outcome of these matters. Hence, no provision has been made in the financial statements for their ultimate resolution. 38. Provisions Provisions As at December 31, 2023 US$'000 As at December 31, 2022 US$'000 Current liabilities - 339 Non-current liabilities - - Total provisions - 339 Legal/Compliance provision Total Provisions US$'000 US$'000 Balance at January 1, 2022 - - Additional provision in the year 339 339 Utilization of provision - - Exchange difference - - Balance as at December 31, 2022 339 339 Additional provision in the period Utilization of provision (339) (339) Exchange difference Balance as at December 31, 2023 - - 39. 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 24. During the year ended December 31, 2022, additions to buildings and land amounting to US$1,862,000 million were financed by issuing shares. Working capital reconciliation The Company defines working capital as trade receivables, other receivables and prepayments less trade and other payables, accrued liabilities and deferred revenue. Year ended December 31, 2023 Opening balances Assumed on acquisition of assets Disposal of subsidiary Change in balance Closing balances US$'000 US$'000 US$'000 US$'000 Inventories 13,168 13 (5) (1,926) 11,250 Trade receivables 6,487 2 - (816) 5,673 Other receivables and prepayments 4,262 10 (6) 83 4,349 Trade and other receivables and prepayments 10,749 12 (6) (733) 10,022 Trade and other payables 5,322 2 (16) 1,364 6,672 Accrued liabilities 4,978 - - (495) 4,483 Deferred revenue incl. non-current contract liabilities 4,913 - - 451 5,364 Trade and other payables, accrued liabilities and deferred revenue 15,213 2 (16) 1,320 16,519 Year ended December 31, 2022 Opening balances Assumed on acquisition of assets Change in balance Closing balances US$'000 US$'000 US$'000 US$'000 Inventories 13,770 - (602) 13,168 Trade receivables 14,656 - (8,169) 6,487 Other receivables and prepayments 3,876 - 386 4,262 Trade and other receivables and prepayments 18,532 - (7,783) 10,749 Trade and other payables 8,271 - (2,949) 5,322 Accrued liabilities 3,386 9 1,583 4,978 Deferred revenue incl. non-current contract liabilities 1,004 - 3,909 4,913 Trade and other payables, accrued liabilities and deferred revenue 12,661 9 2,543 15,213 Consideration for acquisition of businesses (Note 4a) Year ended December 31, 2023 US$'000 Consideration payment for acquisition of Tarn Pure 730 Cash assumed on acquisition of Tarn Pure (12) Net consideration payment for acquisitions of businesses 718 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 40. Related party transactions ECSA, a company controlled by a director of HeiQ Materials AG supplied materials and services totalling US$36,000 to HeiQ Materials AG, in the year ended December 31, 2023 (2022: US$88,000). The transactions were made on terms equivalent to those in arm's length transactions. The directors have deferred payment of their board fees earned in the period July - December 2023 and thus the Company has recorded a corresponding liability against each of the directors. Loans due to related parties As at December 31, 2023 As at December 31, 2022 Loans due to related parties US$'000 US$'000 Cortegrande AG, ���1,350,000 1,494 - Loans due to related parties 1,494 - The associates have provided the Group with short-term loans at rates comparable to the average commercial rate of interest. 41. Material subsequent events Purchase of industrial site In February 2024 the Group completed the acquisition of two industrial properties in Portugal for a total consideration of EUR5.0 million (including taxes). In March 2024, the Group was able to refinance the acquisition of the smaller property with a mortgage amounting to EUR 750,000. The refinancing of the larger property is still ongoing as of March 28, 2024. Fundraise In March 2024, the Group issued 28,000,000 new ordinary shares raising in aggregate ��2.44 million (gross). Following the issue and allotment of the New Ordinary Shares the Company has 168,537,907 Ordinary Shares in issue. The Company holds no Ordinary Shares in treasury, and therefore the total number of voting rights in the Company is 168,537,907. All new shares have been issued at ��0.087 per share. Directors have participated in the fundraise and acquired Convertible Loan Note shares as follows: Director name Number of ordinary shares acquired Carlo Centonze (via Cortegrande AG) 8,808,793 Esther Dale 180,974 Xaver Hangartner 73,368 Furthermore, the Group subdivided each existing ordinary share of 30p into one new ordinary share of 5 pence and one deferred share of 25 pence. Appointment of new chair In March 2024, Robert van de Kerkhof. who was appointed Director in November 2023, was nominated as the new Chairman replacing Esther Dale Kolb who resigned from her role as Chair and Director as of March 31, 2024. 42. Ultimate controlling party As at December 31, 2023, the Company did not have any single identifiable controlling party. This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. 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