Inin Group AS — Interim / Quarterly Report 2020

Mar 8, 2021

INTERIM FINANCIAL STATEMENTS 2020

Statement of profit or loss

Amounts in NOK	Note	2. half year		2. half year
		2020	2020	2019	2019
Revenue	4	-	-	20 042	29 692
Other operating revenue		-	-	-	-
Total revenue		-	-	20 042	29 692
Cost of sales		133 731	144 512	31 373	51 896
Employee benefit expenses		6 363 898	9 452 849	1 304 761	3 183 566
Other operating expenses		10 714 931	21 015 519	8 524 267	9 856 101
Total operating expenses		17 212 560	30 612 880	9 860 401	13 091 563
Depreciation and amortization	5	376 532	419 982	19 770	27 120
Operating profit/(loss) (EBIT)		(17 589 092)	(31 032 862)	(9 860 129)	(13 088 991)
Financial income		76 614	76 873	6 473	14 981
Financial expenses		(149 460)	(260 511)	(258 976)	(378 411)
Net financial items		(72 846)	(183 638)	(252 503)	(363 430)
Profit/(loss) before income tax		(17 661 938)	(31 216 500)	(10 112 632)	(13 452 421)
Income tax		-	-	-	-
Profit/(loss) for the year		(17 661 938)	(31 216 500)	(10 112 632)	(13 452 421)
Profit/(loss) for the year is attributable to:
Owners of ELOP AS		(17 661 938)	(31 216 500)	(10 112 632)	(13 452 421)
Earnings per share in NOK
Basic earnings per share attributable to the ordinary equity			(0,29)		(0,39)
Diluted earnings per share attributable to the ordinary equity			(0,29)		(0,39)

Statement of comprehensive income

Amounts in NOK	Note	2. half year 2020	2020	2. half year 2019	2019
Profit/(loss) for the year		(17 661 938)	(31 216 500)	(10 112 632)	(13 452 421)
Other comprehensive income: Items that might be subsequently reclassified to profit or loss:
-		-	-	-	-
Item that are not reclassified to profit or loss:
-		-	-	-	-
Total compr. income/(loss) for the year		(17 661 938)	(31 216 500)	(10 112 632)	(13 452 421)
Total comprehensive income/(loss) is attributable to:
Owners of ELOP AS		(17 661 938)	(31 216 500)	(10 112 632)	(13 452 421)

Balance sheet

Amounts in NOK	Note	31.12.2020	31.12.2019
ASSETS
Non-current assets
Intangible assets	6	28 689 977	12 372 858
Property, plant and equipment		1 366 825	256 400
Right of use assets	5	7 253 367	-
Total non-current assets		37 310 169	12 629 258
Current assets
Inventory		164 488	-
Trade receivables	8	-	12 865
Other current receivables		10 439 111	1 314 629
Cash and cash equivalents	8	116 271 534	8 014 384
Total current assets		126 875 133	9 341 878
TOTAL ASSETS		164 185 302	21 971 136
Amounts in NOK	Note	31.12.2020	31.12.2019
EQUITY AND LIABILITIES
Equity
Share capital	7	3 515 146	2 001 324
Share premium	7	181 219 901	27 781 676
Other equity reserves		4 571 922	4 355 682
Retained earnings (deficit)		(54 663 812)	(23 447 312)
Total equity		134 643 157	10 691 372
Non-current liabilities
Non-current liabilities to financial institutions	8	4 821 429	4 910 714
Non-current lease liabilities	5, 8	5 325 940
Total non-current liabilities		10 147 369	- 4 910 714
Current liabilities
Other loan	8	-	2 000 000
Trade payables	8	9 852 790	1 550 282
Current tax liabilities		1 270 640	643 570
Other current liabilities	5	8 271 346	2 175 198
Total current liabilities		19 394 776	6 369 050
Total liabilities		29 542 145	11 279 764
TOTAL EQUITY AND LIABILITIES		164 185 302	21 971 136

Statement of changes in equity

				Unregistered
Amounts in NOK		Share	Share	capital	Other equity	Retained	Total
	Note	capital	premium	Increases	reserves	earnings	equity
Balance 2019 at 1 January	7	1 464 000	9 187 000	1 632 000	76 101	(9 892) 994	2 364 210
Profit/(loss) for the year		-	-	-	-	(13 421) 452	(13 421) 452
OCI		-	-	-	-	-	-
Total comprehensive
income/(loss) for the year		-	-	-	-	(13 421) 452	(13 421) 452
Capital increase 14.02.2019		102 000	1 530 000	(1 000) 632	-	-	-
Capital increase 01.07.2019		000 174	2 326 000	-	-	-	2 500 000
Capital increase 16.09.2019		261 324	14 738 676	-	-	-	15 000 000
options/warrents Share		-	-	-	4 279 581	-	4 279 581
Balance December at 31 2019	7	2 001 324	27 781 676	-	4 355 682	(23 312) 447	10 691 372
Profit/(loss) for the year		-	-	-	-	(31 500) 216	(31 500) 216
OCI		-	-	-	-	-	-
Total comprehensive
income/(loss) for the year		-	-	-	-	(31 500) 216	(31 500) 216
Capital increase 28.01.2020		563 049	48 647 455		-	-	49 210 504
Capital increase 14.02.2020		118 273	10 218 770	-	-	-	10 337 043
Capital increase 16.07.2020		832 500	99 067 500	-	-	-	99 900 000
Issue costs		-	(4 500) 495	-	-	-	(4 500) 495
options/warrents Share		-	-	-	216 240	-	216 240
Balance December at 31 2020	7	3 515 146	181 219 901	-	4 571 922	(54 812) 663	134 643 157

Statement of cash flows

Amounts in NOK	Note	2020	2019
Cash flows from operating activities
Profit/(loss) before income tax		(31 216 500)	(13 452 420)
Adjustments for
Depreciation and amortization		419 982	27 120
Change in trade and other receivables		12 865	(4 115)
Change in inventory		(164 488)	-
Change in trade payables		8 302 508	1 030 209
Change in accruals		(4 554 930)	2 450 697
Dividends received		(5 465)	(5 458)
Share-based payments expences		216 240	4 286 593
Convertible debt amortisation of interest		-	47 742
Interest received		(66 086)	(4 169)
Interest paid		248 424	318 565
Cash inflow from operating activities		(26 807 449)	(5 305 235)
Cash flows from investing activities
Payment for property, plant and equipment		(1 304 168)	(226 620)
Payment for intangible assets		(16 317 121)	(5 560 073)
Cash (outflow) from investing activities		(17 621 289)	(5 786 693)
Cash flows from financing activities
Net withdrawals overdraft		-	(164 208) 2 500 000
Received funds - other debt (Non-current / Current)		-
Repayment of other debt (Non-current / Current)		(2 089 285) 5 465	(589 286) 5 458
Dividends received		66 086	4 169
Interest received
Interest paid		(248 424)	(318 565)
Capital increase received funds		154 952 047	17 500 000
Cash inflow from financing activities		152 685 888	18 937 568
Net increase/(decrease) in cash and cash equivalents		108 257 150	7 845 639
Cash and cash equivalents as of 1 January		8 014 384	168 745
Cash and cash equivalents as of 31 December		116 271 534	8 014 384
Unused operational credit facilities in addition		-	1 000 000

Note 1 General Information

Elop AS (the Company) is a limited liability company incorporated and domiciled in Norway, with its head office in Nordvikvegen 50, 2316 Hamar. The Company is listed on Euronext Growth and has the ticker "ELOP-ME".

ELOP AS is a Norwegian technology company established in 2013. The company has developed and patented technology based on ultrasound for inspection and mapping of critical infrastructure. The company develops and commercializes tools and digital solutions to inspect, monitor and manage infrastructure worldwide. The vision is to provide owners of constructions with smart solutions that contribute to increased safety and service life, and reduced service life costs and climate footprint.

These interim financial statements for the six months ending 31 December 2020, have been prepared in accordance with IAS 34 Interim Financial Reporting, taking into account that this is the first time reporting under IFRS, hence additional information for selected notes are disclosed.

The Company has converted to IFRS per 1 January 2019, as further described in note 10.

The interim financial statements are not audited.

Note 2 Accounting principles

The general accounting policies applied in the preparation of these financial statements are set out below. Specific accounting principles are described in the relevant notes.

Basis of preparation

The financial statements of Elop AS are prepared in accordance with International Financial Reporting Standards (IFRS) as endorsed by the European Union (EU), and additional disclosure requirements in the Norwegian Accounting Act as effective of 31 December 2020.

The consolidated financial statements are presented in Norwegian Kroner (NOK).

The financial statements are prepared on a going concern basis.

The financial statements have been prepared on a historical cost basis.

Classification of current and non-current items

An asset is classified as current when it is expected to be realized or sold, or to be used in the Company's normal operating cycle, or falls due or is expected to be realized within 12 months after the end of the reporting period. Other assets are classified as non-current. Liabilities are classified as current when they are expected to be settled in the normal operating cycle of the Company or are expected to be settled within 12 months of the end of the reporting period, or if the Company does not have an unconditional right to postpone settlement for at least 12 months after the balance sheet date.

Cash and cash equivalents

Cash and cash equivalents include bank deposits. Cash and cash equivalents are measured at amortized cost.

The cash flow statement is presented using the indirect method.

Intangible assets

Intangible assets acquired separately that have a finite useful life are carried at cost less accumulated amortization and any impairment charges. Amortization is calculated on a straight-line basis over the assets' expected useful life and adjusted for any impairment charges.

Internally generated intangible assets

Expenditures on research activities, undertaken with the prospect of gaining new technical knowledge and understanding, are recognized in profit or loss as incurred.

Expenditures on development activities are capitalized, providing a future financial benefit relating to the development of an identifiable intangible asset can be identified and the expenses can be reliably measured. Capitalized development costs include costs directly attributable to development of the intangible, such as personnel expenses and consultancy services. Otherwise, such expenses are expensed as and when incurred. Capitalized development cost is amortized on a straight-line basis over the assets' expected useful life and adjusted for any impairment charges.

Property, plant and equipment

Property, plant and equipment are stated at historical cost, less accumulated depreciation and any impairment charges. Depreciation is calculated on a straight-line basis over the assets' expected useful life and adjusted for any impairment charges. Ordinary repairs and maintenance costs are charged to the income statement during the financial period in which they are incurred. Gains and losses on disposals are determined by comparing the disposal proceeds with the carrying amount and are included in operating profit. Major assets with different expected useful lives are reported as separate components.

Property, plant and equipment are reviewed for potential impairment whenever events or changes in circumstances indicate that the carrying amount of an asset exceeds its recoverable amount.

The difference between the asset's carrying amount and its recoverable amount is recognized in the income statement as an impairment loss. Property, plant and equipment that have suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

Borrowings

Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortized cost using the effective interest method. Any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the statement of comprehensive income over the duration of the borrowings.

Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

Trade and other payables

Financial liabilities regularly give rise to a redemption obligation in cash or another financial asset. These include, among others, trade payables.

Upon initial recognition, financial liabilities are measured at fair value. The transaction costs directly attributable to the acquisition are also recognized for all financial liabilities that are not subsequently measured at fair value through profit or loss. Trade payables and other non-derivative financial liabilities are generally measured at amortized cost using the effective interest method. A financial liability is derecognized when the obligation underlying the liability is discharged, canceled, or expired.

Government grants

Government grants that are related to assets are deducted from the carrying amount of the asset.

A government grant is recognized only when there is reasonable assurance that the company will comply with the conditions attached to the grant and the grant will be received.

Share-based payment

Equity-settled, share-based payments are measured at fair value (excluding the effect of non-market-based vesting conditions) at the grant date. The fair value is expensed over the vesting period as an employee benefit expense, with a corresponding increase in equity. The vesting period is the period over which all the specified vesting conditions are to be satisfied. At the end of each period, the Company revises its estimates of the number of options that are expected to vest, based on the non-market vesting and service conditions. It recognizes the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity.

The fair value at the grant date is determined using the Black-Scholes-Merton option pricing model. The expected share price volatility is based on historical volatility for a selection of comparable listed companies adjusted with a premium taking into account the maturity of the peers compared to the Company. The risk-free interest rate is based on zero-coupon government bonds with a term equal to the expected term of the option being valued.

Social security contributions payable in connection with an option grant are considered an integral part of the grant itself. The charges are treated as cash-settled, share-based payments and re-measured at each reporting date.

When the options are exercised, the appropriate number of shares are transferred to the employee. The proceeds received from the exercise of the options (net of any directly attributable transaction costs) are credited directly to equity.

Earnings Per Share (EPS)

The calculation of basic earnings per share is based on the profit attributable to ordinary shares using the weighted average number of ordinary shares outstanding during the year after the deduction of the average number of treasury shares held over the period.

The calculation of diluted earnings per share is consistent with the calculation of the basic earnings per share, but at the same time gives effect to all dilutive potential ordinary shares that were outstanding during the period, by adjusting the profit/loss and the weighted average number of shares outstanding for the effects of all dilutive potential shares, for example:

• The profit or loss for the period attributable to ordinary shares is adjusted for changes in profit or loss that would result from the conversion of the dilutive potential ordinary shares

• The weighted average number of ordinary shares is increased by the weighted average number of additional ordinary shares that would have been outstanding, assuming the conversion of all dilutive potential ordinary shares.

The use of estimates and assessment of accounting policies when preparing the annual accounts

Estimates and assumptions

Management has used estimates and assumptions that have affected assets, liabilities, revenues, expenses, and information on potential liabilities. Future events may lead to these estimates being changed. Estimates and their underlying assumptions are reviewed on a regular basis and are based on best estimates and historical experience. Changes in accounting estimates are recognized during the period when the changes take place. If the changes also apply to future periods, the effect is divided among the present and future periods.

Judgements

Management has, when preparing the financial statements; made certain significant assessments based on critical judgment when it comes to application of the accounting principles.

Material exercise of judgment and estimates relate to the following matters:

• Intangible assets, note 6

Note 3 Segments

Accounting principles

An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses. Furthermore, the Company's component's operating results are regularly reviewed by the Company's chief operating decision maker to make decisions about resources to be allocated to the segment and to assess its performance, and thus separate financial information is available. The Company has determined that the Board of Directors is the chief operating decision maker.

The segment information is reported in accordance with the reporting to the Board of Directors (the chief operating decision makers) and is consistent with financial information used for assessing performance and allocating resources.

The Company has identified one segment and at as this is a developing entity, the Company is currently following up the segment profit at the same level as for the Profit and Loss.

Note 4 Revenue

Accounting principles

For the period covered by this report there are no or limited revenue. The revenue is recognized at point in time, when services or sales are delivered.

In 2021 the Company will launch their products and the revenue recognition principles applied will be included as part of the first interim report released after launch of their commercial business.

Description

Disaggretating of revenue:

	2. half year		2. half year
Amounts in NOK	2020	2020	2019	2019
Sales revenue - recognized at point in time	-	-	6 042	10 942
Service revenue - recognized at point in time	-	-	4 250	18 750
Total	-	-	10 292	29 692

Revenue by geography: Amounts in NOK 2020 2019 Norway - 29 692 Total revenue - 29 692

Note 5 Leasing

Accounting policies

In 2019 there were no leasing contracts recognized as right of use assets and lease liabilities. At the end of 2020, the company entered into two new house rental contracts where right of use assets and lease liabilities were recognized.

Contracts may contain both lease and non-lease components. The Company allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices. The lease agreements do not impose any covenants.

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the fixed payments. Currently the company has one long-term lease contract, which relates to the head-office.

The lease payments are discounted using the lessee's incremental borrowing rate, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the rightof-use asset in a similar economic environment with similar terms, security and conditions.

To determine the incremental borrowing rate, the Company would use a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the Group and makes adjustments specific to the lease.

The Company can be exposed to potential future increases in variable lease payments based on an index, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset. Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

Right-of-use assets are measured at cost comprising the amount of the initial measurement of lease liability.

Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. The right-of-use assets are reviewed for potential impairment whenever events or changes in circumstances indicate that the carrying amount of the asset exceeds its recoverable amount.

Payments associated with short-term leases and all leases of low-value assets are recognized on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Lowvalue assets comprise IT equipment and small items of office furniture.

The lease agreements include termination options and extension options. The termination option does not include a significant fee. It is the management intention to not early terminate the contract.

Description

The Company's has entered in to two new lease agreements in for rental of premises. The agreements are long term, and are included in the calculation for right of use assets and lease liabilities. Other contracts during the year have consisted of two rental agreements for premises where both the lessor or lessee had the right to terminate the agreements with either three- or six-month's termination notice. As these contracts could be cancelled within a few months they were classified as short-term contracts and payments associated with these contracts were recognized on a straight-line basis as an expense in profit or loss. Both of these contracts are terminated at year end in accordance with entering into the two new lease agreements.

Reconciliation of right og use assets

Amounts in NOK	2020	2019
Opening balance 1 January	-	-
New leases	7 570 457	-
Adjustments from discount rate	-	-
Depreciation	317 090	-
Closing balance 31 December	7 253 367	-
Useful life	3-4 years
Depreciation method	Straight-line	Straight-line

Amounts recognized in the statement of profit or loss

Amounts in NOK	2020	2019
Depreciation of right of use asset	317 090	-
Interest expense	32 979	-
Expenses relating to short-term leases	1 008 968	368 472
Expenses relating to leases of low-value	18 407	-

Reconciliation of lease liabilities

Amounts in NOK	2020	2019
Opening balance 1 January	-	-
New leases	7 570 457	-
Adjustments from discount rate	-	-
Lease payments in the period	123 830	-
Interests	32 978	-
Closing balance 31 December	7 479 605	-

Maturity profile lease liability

At 31 December 2020

				Total contractual cash
Amounts in NOK	Less than 1 year	1-3 years	3-5 years	flows
Lease liabilities	2 339 435	5 200 267	270 000	7 809 702
At 31 December 2019				Total contractual cash
Amounts in NOK	Less than 1 year	1-3 years	Over 5 years	flows
Lease liabilities	-	-	-	-

Note 6 Intangible assets

Accounting principles

Intangible assets acquired separately that have a finite useful life are carried at cost less accumulated amortization and any impairment charges. Amortization is calculated on a straight-line basis over the assets' expected useful life and adjusted for any impairment charges.

Description

Internally generated intangible assets

Expenditures on research activities, undertaken with the prospect of gaining new technical knowledge and understanding, are recognized in profit or loss as incurred.

Expenditures on development activities are capitalized, providing a future financial benefit relating to the development of an identifiable intangible asset can be identified and the expenses can be reliably measured. Capitalized development costs include costs directly attributable to development of the intangible, such as personnel expenses and consultancy services. Otherwise, such expenses are expensed as and when incurred. Capitalized development cost is amortized on a straight-line basis over the assets' expected useful life and adjusted for any impairment charges.

	NDI -
Amounts in NOK	Instrument	Patents	Total
Cost
Cost at 01 January 2019	6 297 849	514 936	6 812 785
Costs	5 560 073	-	5 560 073
Grants	-	-	-
Innovation grants (SkatteFUNN)	-	-	-
Cost at 31 December 2019	11 857 922	514 936	12 372 858
Costs	23 341 318	-	23 341 318
Grants	(2 300 000)	-	(2 300 000)
Innovation grants (SkatteFUNN)	(4 724 199)	-	(4 724 199)
Cost at 31 December 2020	28 175 041	514 936	28 689 977
Amortization and impairment Accumulated at 01 January 2019	-	-	-
Amortization for the year	-	-	-
Accumulated at 31 December 2019	-	-	-
Amortization for the year	-	-	-
Accumulated at 31 December 2020	-	-	-
Carrying amount at 31 December 2018 Carrying amount at 31 December 2019	6 297 849 11 857 922	514 936 514 936	6 812 785 12 372 858
Carrying amount at 31 December 2020	28 175 041	514 936	28 689 977

Amortization method	Straight-line	Straight-line
---------------------	---------------	---------------

Purchased research and development:

In March 2013, Elop AS acquired the business of Elop-Dolphiscan AS. This included capitalized research and development costs. Elop–Dolphiscan AS developed camera-based quality control in ongoing production processes with automatic detection and sorting of defects. Labeling, data capture and data handling is another major area.

The purchase price amounted to NOK 300 000 and was depreciated on a straight-line basis over 4 years.

In-house developed research and development:

Elop AS researches and develops an instrument for NDT (Non-Destructive Testing) and inspection of concrete infrastructure. In addition the company develops associated software to manage and analyze inspection data for asset owners. Elop AS has chosen to capitalize directly registered wage costs, project-related costs regarding hired services from approved research and development institutions and other partners in addition to direct travel and diet costs on research and development projects as an intangible asset. Capitalized costs have been reduced with grants from Innovation Norway AS, the Regional Research Fund, the Research Council, Horizon 2020 SMEs through the EU Commission and Skattefunn.

It is assumed that the total expected earnings from capitalized research and development correspond to the total expenses incurred.

Depreciation is expected to start in 2021 together with commercial launch of products.

Patents:

The book value of patents amounts to NOK 514 936. These are patent costs for patent applications that are being processed. The costs are identifiable and are expected to represent future economic benefits. Processing of patent applications both in Norway and internationally takes a long time, in most cases several years before a final decision is made. As the patent applications have not yet been approved and it has not yet generated income yet, no depreciation has been made in 2020 and 2019.

Note 7 Equity

Share capital and share premium

Elop AS only has one class of shares and all shares have the same voting rights. The shareholders are entitled to receive dividends as and when declared and are entitled to one vote per share at General Meetings of the Company. All Shares are freely transferable, meaning that a transfer of Shares is not subject to the consent of the Board of Directors or rights of first refusal.

		Share capital	Share premium
	Number of shares	(NOK)	(NOK)
Balance at 01 January 2019	1 464 000	1 464 000	9 187 000
Issued during the year (prior to share split)	276 000	276 000	3 856 000
Effect of share split (1:10)	15 660 000	-	-
Effect of share split (1:2)	17 400 000	-	-
Issued during the year (after share split)	5 226 481	261 324	14 738 676
Reduction share premium			-
Balance at 31 December 2019	40 026 481	2 001 324	27 781 676
Issued during the year	30 276 441	1 513 822	157 933 725
Emission costs			(4 495 500)
Reduction share premium			-
Balance at 31 December 2020	70 302 922	3 515 146	181 219 902

The share capital is fully paid and has a par value of NOK 0.05.

In the General Meeting held on 22 June 2020, the Board of Directors was granted authorization to increase the share capital of the Company by up to an aggregate nominal value of NOK 1 341 323,05. The shareholders' preferential rights pursuant to section 10-4 of the Norwegian Private Companies Act may be set aside. The authorization also covers share capital increases against non-cash contributions and the right to assume special obligations on behalf of the Company, as well as resolutions on mergers and demergers, cf. sections 13-5 and 14-6 (2) of the Norwegian Private Companies Act. The authorization is valid until 22 June 2022, and replaces all previously granted authorizations to increase the Company's share capital.

On 15 July 2020 the Merkur Market (Euronext Growth) listing committee resolved to admit all of ELOP's Shares for listing on the Euronext Growth. The first day of trading of the Shares on Euronext Growth were 17 July 2020 under the ticker code "ELOP-ME". The Company does not have securities listed on any stock exchange or other regulated marketplace.

Warrants

Warrants issued to Gimle Invest AS and Middelborg Invest AS The Company's General Meeting resolved to issue 600 000 warrants on 20 December 2019 (300 000 warrants to Gimle Invest AS an entity wholly owned by Oivind Horpestad and Chairman of the Board of Elop AS, 300 000 warrants to Middelborg Invest AS an entity wholly owned by Kristian Lundkvist and Board member of Elop AS). Each warrant entitles the subscription of one share in the Company against a share subscription price of NOK 4,37 per share.

Warrants issued to Storbrea AS

The Company issued 2 400 000 warrants to Storbrea AS on 20 December 2019. Each warrant entitles the subscription of one share in the Company against a share subscription price of NOK 3,75 per share.

Storbrea AS has in December 2020 notified Elop that it wishes to convert all warrants to shares, equivalent to a total contribution of NOK 9 million. Upon the issuance of shares, Storbrea AS will own 2 907 182 shares, representing approximately 4,14% of the shares of Elop.

Note 8 Financial risk management

The most significant financial risks which affect the Company are credit risk and liquidity risk, described further below. Management performs continuous evaluations of these risks and related processes established to manage them within the Company.

Risk	Exposure arising from	Measurement
Credit risk	Cash and cash equivalents, trade receivables and other receivables	Aging analysis
Liquidity risk	Current liabilities	Rolling cash flow forecasts

The Company has currently limited exposre to exchange rate risk.. Some components are sourced internationally, but majority of cost base and near term revenue opportunities are in NOK

Financial instruments:

Amounts in NOK	Category	2020	2019
Trade receivables	Amortised cost	-	12 865
Cash and cash equivalents	Amortised cost	116 271 534	8 014 384
Total Assets		116 271 534	8 027 249
Non-current liabilities to financial institutions	Amortised cost	4 821 429	4 910 714
Non-current lease liabilities	Amortised cost	5 325 940	-
Other Loans	Amortised cost	-	2 000 000
Trade payable	Amortised cost	9 852 790	1 550 282
Current liabilities to financial institutions	Amortised cost	-	-
Total Liabilities		20 000 159	8 460 996

Credit risk

Credit risk is the loss that the Company would suffer if a counterparty fails to perform its financial obligations.

Should a counterparty fail to honor its obligations under its agreements with the Company, this could impair the Company's liquidity and cause significant losses, which in turn could have a material adverse effect on the Company's business, results of operations, cash flows, financial condition and/or prospects.

Liquidity risk

The Company's business and future plans are capital intensive and, to the extent the Company does not generate sufficient cash from operations in the long term, the Company may need to raise additional funds through public or private debt or equity financing to execute the Company's growth strategy and to fund capital expenditures. Adequate sources of capital funding might not be available when needed or may only be available on unfavorable terms. If funding is insufficient at any time in the future, the Company may be unable to, inter alia, fund acquisitions, take advantage of business opportunities or respond to competitive pressures, any of which could adversely impact the Company's financial condition and results of operations.

Any future debt arrangements could limit the Company's liquidity and flexibility in obtaining additional financing and/or in pursuing other business opportunities. Further, the Company's future ability to obtain bank financing or to access the capital markets for any future debt or equity offerings may be limited by the Company's financial condition at the time of such financing or offering, as well as by adverse market conditions related to, for example, general economic conditions and contingencies and uncertainties that are beyond the Company's control. Failure by the Company to obtain funds for future capital expenditures could impact the Company's results, financial condition, cash flows and prospects

Capital management

The Company's objectives for capital management are to ensure that it maintains sufficient free liquidity with regards to cash and cash equivalents in order to support its business and obligations as well as having sufficient flexibility to invest in attractive investment opportunities. The Company manages its capital structure in light of changes in economic and actual conditions, and the development in the underlying business. The Company's equity ratio exceeded 82,0 % per 31.12.2020 and 84,1 % per 31.12.2019.

Note 9 Events after the balance sheet date

Business combination

21st December 2020 the Company signed the share purchase agreement to acquire 100 percent of the shares in Norwegian artificial intelligence (AI) company Simplifai AS (Simplifai), which gives Elop immediate access to highly advanced SaaS and automation competence and resources.

Through partnering with Simplifai, Elop obtains technological and commercial resources that enable the company to move faster towards a commercially viable data driven, cloud-based software as a service business model for monitoring and optimized maintenance of concrete infrastructure.

According to the share purchase agreement, Elop will acquire all the shares of Simplifai, whose shareholders will receive a consideration reflecting an ownership of 22 percent of the shares on a fully diluted basis in the combined company after completion. The transaction valued Simplifai at NOK 148,463,095. The equity of Simplifai 31.12.2020 is The transaction was settled whereby 99% of the purchase price was covered through a sellers credit and 1% through cash.

The valuation principles are based on corresponding, long term growth forecasts for both companies, with revenue and profitability to a large degree driven by software services.

The transaction was completed at 18 January 2021. Following the transaction the sellers credit was converted to shares. 20 300 893 new shares were issued and registration completed on January 26th . This corresponds to a capital increase of NOK 1 015 045 with accoutning premium of NOK 145,963,419. The difference between the equity value at closing and the purchase price will be allocated in an ongoing PPA.

As a result of the exercise of warrants by Storbrea on December 20th, Elop issued 2 400 000 shares that were registered on January 15th. This corresponds to a capital increase of NOK 120 000 at an accounting premium of NOK 8 880 000.

Note 10 Conversion to IFRS

These financial statements, for the interim period ended 31 December 2020, are the first the Company has prepared in accordance with IFRS. For the year ended 31 December 2019, the Company prepared its financial statements in accordance with Norwegian Generally Accepted Accounting Principles (NGAAP).

The Company has prepared financial statements that comply with IFRS applicable as at 31 December 2020, together with the comparative period data for the year ended 31 December 2019, as described in general accounting principles and relevant notes.

In preparing the financial statements, the Company's opening statement of financial position was prepared as at 1 January 2019, the Company's date of transition to IFRS. This note explains the principal adjustments made by the Company in restating its NGAAP financial statements. The figures under NGAAP were presented in NOK and there are no changes to either functional or presentation currency at implementation of IFRS.

Exemptions applied

IFRS 1 First-Time Adoption of International Financial Reporting Standards allows first-time adopters certain exemptions from the general requirement to apply IFRS as effective for December 2020 year ends retrospectively. Elop AS has not used any of the available exemptions. At the date of transition to IFRS, 1 January 2019, the entity had no lease agreements that were scoped into IFRS 16, no granted stock options, and no cumulative translation differences.

IFRS to NGAAP differences

In adopting IFRS the following differences from NGAAP to IFRS were identified and taken into account during the conversion for the balance sheet dates of 1 January 2019 and 31 December 2019 as well as the time period 2019.

Notes to the reconciliation of changes from NGAAP to IFRS:

A) Share-based payments

Under NGAAP, the Company did not recognize any costs associated to the share-based payments as an expense. This includes both share options to employees and warrants granted as consideration for services. IFRS requires the fair value of the share options to be determined using an appropriate pricing model recognized over the vesting period.

In connection with share options to employees, expenses of NOK 81 034 (2019), were recognized in profit or loss as employee benefit expenses. This includes social security tax. In connection with warrants granted as consideration for services, expenses of NOK 4 205 559 were recognized in profit or loss as other operating expenses in 2019 in connection with issued warrants.

The following amounts were recognized against the other reserves, NOK 4 279 581, where NOK 74 022 related to options and NOK 4 205 559 related to warrants (31 December 2019).

For the corresponding social security tax liability on options, the recognized amount was NOK 7 012 (31 December 2019).

B) Convertible debt amortization

Under NGAAP, the Company did not amortize convertible debt or recognize any costs associated to the interest component as an expense during the first twelve-month interest free period of the loan. IFRS requires that a financial component of the loan be recognized during the interest free period in equity and that the convertible debt be shown at the amortized value.

In 2018 Equity in the other reserve was increased NOK 76 101. Interest expenses of NOK 28 360 were recognized in profit and loss and reduced Equity in Retained earnings. Convertible debt was decreased by a net NOK 47 742 (a decrease of NOK 76 101 with separation of the equity component and an increase of NOK 28 360 with the expensing of interest).

In 2019 interest expenses related to the convertible debt of NOK 47 742 were recognized in profit and loss. Convertible debt increased with NOK 47 742 with the expensing of interest. Equity in retained earnings decreased with NOK 47 742 with the expensing of interest.

C) Leases

Under NGAAP, a lease is classified as a finance lease or an operating lease. Operating lease payments are recognized as an operating expense in the statement of profit or loss on a straight-line basis over the lease term. Under IFRS, a lessee applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets and recognizes lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.

In 2019 the Company determined all leasing contracts it had were either short term or low value and as such the accounting treatment was unchanged.

D) Research and Development

Under NGAAP, both research and development can be capitalized dependent on the probability of future economic benefits and in line with the matching principle where expenses are synchronized with revenue income. Under IFRS only development costs are capitalized and only when these costs can be sufficiently linked to future economic benefits and meet other capitalization criteria. Additionally, the carrying amount is required to be amortized in line with expected future benefits (or impaired if required) if they have a finite life.

'Under NGAAP, NOK 7 486 022 was recognized as a Development asset with a definite useful life. As at the date of transition to IFRS, 1 January 2019, the carrying value deemed to meet the capitalization criteria of IAS 38 was NOK 6 297 849 and consequently a reduction adjustment was applied for NOK 1 188 173 (with a counter post against Retained Earnings to the same value). In 2019 NOK 5 560 073 were capitalized as Development and consequently an IFRS adjustment. The asset is still in a developmental stage and therefore no amortization was applied.

E) Reclassification from share premium to retained earnings.

Under NGAAP, the accumulated losses are reclassified from retained earnings to share premium. These reclassifications are reversed and share premium reflects the contributed capital and retained earnings reflects the accumulated deficit. As at the date of transition to IFRS, 1 January 2019, NOK 8 778 359 increased share premium and reduced retained earnings (deficit). As at 31 December 2019, NOK 14 678 158 increased share premium and reduced retained earnings (deficit).

F) Unregistered capital increase

Under NGAAP, the Company recognized unregistered capital increases in equity as an Unregistered capital receivable and in receivables as a Share capital/premium receivable. IFRS requires that this capital is not recognized until it has been approved by the general assembly and the funds have been received.

Equity in Unregistered capital increase was reduced by NOK 49 210 504 (31 December 2019) and Share capital/premium receivables was reduced by the same amount.

Changes to statement of Balance sheet

		Effect of transition to
		NGAAP	IFRS	IFRS
31 December 2019	Note	NOK	NOK	NOK
ASSETS
Non-current assets
Intangible assets	D	8 000 958	4 371 900	12 372 858
Property, plant and equipment		256 400	-	256 400
Deferred tax asset		-	-	-
Total non-current assets		8 257 358	4 371 900	12 629 258
Current assets
Trade receivables		12 865	-	12 865
Other current receivables		1 314 629	-	1 314 629
Share capital/premium receivables	F	49 210 504	(49 210 504)	-
Cash and cash equivalents		8 014 384	-	8 014 384
Total current assets		58 552 382	(49 210 504)	9 341 878
TOTAL ASSETS		66 809 740	(44 838 604)	21 971 136

31 December 2019	Note
EQUITY AND LIABILITIES
Equity
Share capital		2 001 324	-	2 001 324
Share premium	E	4 325 159	23 456 517	27 781 676
Unregistered capital increase	F	49 210 504	(49 210 504)	-
Other reserves	A,B	-	4 355 682	4 355 682
Retained earnings	A,B,D,E	-	(23 447 312)	(23 447 312)
Total equity		55 536 988	(44 845 616)	10 691 372
Non-current liabilities
Non-current liabilities to financial institutions		4 910 714	-	4 910 714
Deferred tax liability		-	-	-
Total non-current liabilities		4 910 714	-	4 910 714
Current liabilities
Other loan	B	2 000 000	-	2 000 000
Trade payables		1 550 282	-	1 550 282
Current liabilities to financial institutions		-	-	-
Current tax liabilities		643 570	-	643 570
Other current liabilities	A	2 168 186	7 012	2 175 198
Total current liabilities		6 362 038	7 012	6 369 050
Total liabilities		11 272 752	7 012	11 279 764
TOTAL EQUITY AND LIABILITIES		66 809 740	(44 838 604)	21 971 136

		Effect of transition to
		NGAAP	IFRS	IFRS
1 January 2019	Note	NOK	NOK	NOK
ASSETS
Non-current assets
Research and Development	D	8 000 958	(1 188 173)	6 812 785
Operating equipment, fixtures and fittings		56 900	-	56 900
Deferred tax asset		-	-	-
Total non-current assets		8 057 858	(1 188 173)	6 869 685
Current assets
Trade receivables		8 750	-	8 750
Other current receivables		1 845 631	-	1 845 631
Share capital/premium receivables		-	-	-
Cash and cash equivalents		168 745	-	168 745
Total current assets		2 023 126	-	2 023 126
TOTAL ASSETS		10 080 984	(1 188 173)	8 892 811

1 January 2019	Note
EQUITY AND LIABILITIES
Equity
Share capital		1 464 000	-	1 464 000
Share premium	E	408 641	8 778 359	9 187 000
Unregistered capital increase		1 632 000	-	1 632 000
Other reserves	B	-	76 101	76 101
Retained earnings	B,D,E	-	(9 994 892)	(9 994 892)
Total equity		3 504 641	(1 140 431)	2 364 210
Non-current liabilities
Non-current liabilities to financial institutions		2 500 000	-	2 500 000
Deferred tax liability		-	-	-
Total non-current liabilities		2 500 000	-	2 500 000
Current liabilities
Convertible debt	B	2 500 000	(47 742)	2 452 258
Trade payables		520 073	-	520 073
Current liabilities to financial institutions		164 208	-	164 208
Current tax liabilities		332 393	-	332 393
Other current liabilities		559 670	-	559 670
Total current liabilities		4 076 343	(47 742)	4 028 601
Total liabilities		6 576 343	(47 742)	6 528 601
TOTAL EQUITY AND LIABILITIES		10 080 984	(1 188 173)	8 892 811

Changes to Profit (Loss) and Comprehensive Income (Loss)

	Effect of
	transition to
	NGAAP	IFRS	IFRS
Note	NOK	NOK	NOK
	29 692	-	29 692
	-	-	-
	29 692	-	29 692
	51 896	-	51 896
A	4 942 836	(1 759 270)	3 183 566
A	9 370 311	485 790	9 856 101
	14 365 043	(1 273 480)	13 091 563
	27 120	-	27 120
	(14 362 471)	1 273 480	(13 088 991)
	14 981	-	14 981
B	(330 669)	(47 742)	(378 411)
	(315 688)	(47 742)	(363 430)
	(14 678 159)	1 225 738	(13 452 421)
	-	-	-
	(14 678 159)	1 225 738	(13 452 421)
	-	-	-
	-	-	-
	(14 678 159)	1 225 738	(13 452 421)

Changes to Cash Flow statements

		Effect of transition to
		NGAAP	IFRS	IFRS
For the period ended 31 December 2019	Note	NOK	NOK	NOK
Cash flows from operating activities
Profit/(loss) before income tax		(14 678 158)	1 225 738	(13 452 420)
Adjustments for
Depreciation and amortization		27 120	-	27 120
Change in trade and other receivables		(4 115)	-	(4 115)
Change in trade payables		1 030 209	-	1 030 209
Change in accruals		2 450 697	-	2 450 697
Dividends received		-	(5 458)	(5 458)
Share-based payment expenses	A	-	4 286 593	4 286 593
Convertible debt amortisation of interest	B	-	47 742	47 742
Interest received		-	(4 169)	(4 169)
Interest paid		-	318 565	318 565
Other operational activities		-	-	-
Net cash inflow from operating activities		(11 174 247)	5 869 011	(5 305 236)
Cash flows from investing activities Payment for property, plant and equipment		(226 620)	-	(226 620)
Payment for intangible assets		-	(5 560 073)	(5 560 073)
Net cash (outflow) from investing activities		(226 620)	(5 560 073)	(5 786 693)
Cash flows from financing activities
Net withdrawals overdraft		(164 208)	-	(164 208)
Received funds - other debt (Non-current / Current)		2 500 000	-	2 500 000
Repayment of other debt (Non-current / Current)		(589 286)	-	(589 286)
Dividends received			5 458	5 458
Interest received			4 169	4 169
Interest paid			(318 565)	(318 565)
Capital increase received funds		17 500 000	-	17 500 000
Net cash inflow from financing activities		19 246 506	(308 938)	18 937 568
Net increase/(decrease) in cash and cash equivalents		7 845 639	-	7 845 639
Cash and cash equivalents as of 1 January		168 745	-	168 745
Cash and cash equivalents as of 31 December		8 014 384	-	8 014 384
Unused operational credit facilities in addition		1 000 000	-	1 000 000