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Financial Instruments and Risk Management

6 Months Ended

Jun. 30, 2023

Financial Instruments and Risk Management [Abstract]

FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

NOTE 15 – FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Set out below are categories of financial instruments and fair value measurements as of June 30, 2023 and December 31, 2022:

Financial assets at fair value	June 30, 2023			December 31, 2022
Cash	€	498,099		€	502,585

Financial assets at amortized cost
Accounts receivable and other receivables		1,730,467			3,137,609
Amount due from related parties		79,835			140,264

Financial liabilities at amortized cost
Accounts payable and accrued liabilities		(2,231,281	)		(2,652,868	)
Amount due to related parties		(3,801,385	)		(237,285	)
Lease liabilities		(67,380	)		(95,059	)
Bank loans		(3,844,731	)		(8,334,530	)
	€	(7,636,376	)	€	(7,539,284	)

Liquidity risk

Liquidity risk is the risk that the Company will not have sufficient cash resources to meet its financial obligations as they come due in the normal course of business. Liquidity risk also includes the risk of not being able to liquidate assets in a timely manner at a reasonable price. Difficulty accessing capital markets could impair the Company’s capacity to grow, execute its business model and generate financial returns. The Company manages its liquidity risk by monitoring its operating requirements to ensure financial resources are available, actively monitoring market conditions and by diversifying its sources of funding and maintaining a diversified maturity profile of its debt obligations.

Credit risk

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Company’s main credit risk relates to its cash and accounts receivable. The Company’s credit risk is reduced by a broad customer base and a review of customer credit profiles.

The Company’s maximum exposure to credit risk corresponds to the carrying amount for all cash and accounts receivable. Cash is held with prominent financial institutions. Accounts receivable are held with vendors in which the Company has a historically strong relationship with or related to VAT receivable.

The Company mitigates credit risk associated with its trade receivables through established credit approvals, limits and a regular monitoring process. The Company generally considers the credit quality of its financial assets that are neither past due nor impaired to be solid. Credit risk is further mitigated due to the large number of customers and their dispersion across geographic areas.

As of June 30, 2023 and December 31, 2022, there was one customer and one customer with amount outstanding that exceed 10% of the Company’s revenue that totaled 13% and 16,1% in aggregate, respectively. The Company assessed credit risk as low.

Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk.

Currency risk

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company is not exposed to significant currency risk.

Interest risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk on its lines of credit due to fluctuations in interest rates. The Company’s bank loans and leases have fixed rates of interest resulting in limited interest rate fair value risk for the Company. The Company manages interest rate risk by seeking financing terms in individual arrangements that are most advantageous taking into account all relevant factors, including credit margin, term and basis. The risk management objective is to minimize the potential for changes in interest rates to cause adverse changes in cash flows to the Company.

Other price risk

Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. The Company is not exposed to other price risk.

Capital management

The Company’s capital consists of share capital and reserve. The Company’s capital management is designed to ensure that it has sufficient financial flexibility both in the short and long-term to support its financial obligations and the future development of the business.

The Company manages its capital with the following objectives:

(i)

Ensuring sufficient liquidity is available to support its financial obligations and to execute its operating strategic plans;

(ii)

Maintaining financial capacity and flexibility through access to capital to support future development of the business;

(iii)

Minimizing its cost of capital and considering current and future industry, market and economic risks and conditions; and

(iv)

Utilizing short-term funding sources to manage its working capital requirements and long- term funding sources to match the long-term nature of the property, plant and equipment of the business.

There were no changes to the Company’s approach to capital management during the six months ended June 30, 2023 and year ended December 31, 2022. The Company is not subject to externally imposed capital requirements.