HeiQ PLC

Annual Report and Accounts 2022

Differentiate.

Innovate.

Who we are

Headquartered in Switzerland, HeiQ is an IP creator

and established global brand in materials and

textile innovation, adding hygiene, comfort,

protection and sustainability to the products

we use every day. This is how we contribute to

saving our planet and improving the lives of billions

of people.

Our purpose

To improve lives by

innovating the materials

in the products people use

every day.

Our vision

Heiqed materials that improve

the lives of billions.

Our mission

To pioneer differentiating

materials through co-creation.

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Strategic

report

Corporate

governance

Financial

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HeiQ PLC

Annual Report and Accounts 2022

2022 highlights

Our strategy:

Our strategy to achieve sustainable growth and to materialize

our ambitions is based on three pillars:

People: To create a diverse, agile and entrepreneurial

high-performance global team, driven by our purpose

toimprove lives of which in particular includes reduction

of mankind’s footprint on the planet with disruptive

technologies.

Innovation: To commercialize a steady stream of

sustainable, circular and high-performance ingredients

andmaterials.

Differentiation: To effectively communicate the added

value of our innovations to our downstream customers,

as well as their customers, by providing best-in-class

ingredient branding.

Contents

Strategic report

Chair’s statement 002

Investment case 004

Market overview 006

Business model 008

Value creation 009

Chief Executive Officer’s review 010

Key performance indicators 014

Sustainability report

(including TCFD disclosures) 016

Section 172 statement 026

Financial review 030

Risk management 036

Principal risks and uncertainties 038

Non-financial information

statement 043

Corporate governance

The Board 044

Corporate governance statement 046

Audit committee report 049

Environmental, occupation, health

and safety committee report 053

Nomination committee report 054

Remuneration committee report 055

Directors’ report 062

Financial statements

Auditor’s report 066

Financial statements 080

Notes to the consolidated

financial statements 084

Company financial statements 142

Notes to the Company

financial statements 145

Company information 152

HeiQ PLC

Annual Report and Accounts 2022

Strategic report

Chair’s statement

Setting the

course for what

comes next

FY 2022 was an

extraordinarily challenging

year for HeiQ. Whilst trading

performance in the first half

remained robust given the

circumstances, the markets

we operate in became

significantly weaker in the

second half. An array of

macroeconomic pressures

converged, creating a

very challenging trading

environment for HeiQ, its

competitors and the textile

industry at large.

Esther Dale-Kolb

Chair

002

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Corporate

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Financial

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HeiQ PLC

Annual Report and Accounts 2022

The sudden decrease in sales

and related contribution margin

impacted on our performance.

In addition, we had to defer

previously recognized revenue

from partnership agreements and

therefore, our financial performance

fell short of expectations in

FY 2022.

Further, the Board of HeiQ Plc had

to announce that the Company

could not publish its audited FY

2022 Accounts by 30 April 2023,

which regrettably led to the shares

being suspended. HeiQ appointed

Deloitte as its new auditor in

November 2022, to reflect the

international expansion and

increased complexity of the Group

since listing. Following several

acquisitions, the Group has grown

significantly in terms of capabilities,

technology platforms and growth

potential, but also in terms of

organizational complexity. We have

seen a number of businesses

with different systems, processes

and cultures joining the Group

since 2017 and in particular in

2021. In order to integrate these

different businesses, the Group

started the harmonization of

processes, systems and ways of

working across the organization in

2022. While this is a challenging

project for any organization, the

changes in market conditions

made this process even more

challenging given our lean set-

up across the Group, including

in support functions. All these

factors contributed to a significantly

extended year end reporting

timetable for 2022 with a related

impact on the timing of the external

audit work.

Further, while reviewing our

processes, the Board has also

challenged key estimates and

judgments in relation to previous

reporting periods. This has led

to the restatement of prior year

financial statements as disclosed

in the notes to the financial

statements within this Annual

Report

We understand the frustration of

our stakeholders – in particular

shareholders – about the delay

in reporting audited FY 2022

Accounts and the related

suspension of shares from trading

on the London Stock Exchange.

With market conditions remaining

very challenging during 2023, we

have taken rapid, decisive action

to build additional resilience and to

reduce our cost base, reviewing and

prioritizing our activities rigorously,

including our innovation pipeline.

These activities have allowed us to

navigate through 2023 during which

time cash management is key given

the fragile market conditions and

uncommitted nature of the Group’s

current financing facilities as

further discussed in the Financial

Review.

Outlook

While we expect the trading

conditions for our commercialized

product range to continue to be

challenging into 2024, we have

significantly reduced our cost

base and will implement further

measures if needed. The Board

is also re-assessing the overall

strategy and resource allocation

of the Group as well as its

debt structure to address the

uncertainty in relation to financing

arising from the uncommitted

nature of credit facilities, as

disclosed in the notes to our

financial statements. This is to

ensure a healthy balance between

maintaining the long-term growth

potential of our key innovation

projects, the constraints of the

current market conditions for our

commercial business activities as

well as being prepared to capture

opportunities to gain market share

once market conditions improve.

We are facing uncertain times, both

politically and economically on a

global scale, which has impacted

many key regions of HeiQ’s

operation. At the same time, we are

seeing increasingly positive trends

within our markets and consumer

preferences quickly adapting

to more sustainable solutions,

opening up opportunities for growth

for HeiQ and its innovative portfolio

of sustainable products.

We thank our stakeholders for

their continuing support. We as

a Board as well as the whole

management team of HeiQ

remain committed and motivated

to deliver long-term growth and

value for our shareholders and

all other stakeholders by bringing

sustainable technologies to

market. With an aggregate holding

of approximately 24%, the Board

and extended management team

continues to be well aligned with

the interest of shareholders.

Esther Dale-Kolb

Chair

R Details on restatements of prior year financial information are disclosed in Note 2 to

the Financial Statements (pages 84 to 88). Restated prior year financial information in

the Strategic Report (pages 2 to 43) and Corporate Governance section (pages 44 to

65) of this Annual Report is marked with an asterisk as follows “R”. The same applies to

financial information for the six-months interim period ending June 30, 2022 which has

been restated as per the 2023 interim accounts published on the same date as this

Annual Report.

004

HeiQ PLC

Annual Report and Accounts 2022

Strategic report

Investment case

Market leading business in

materialsinnovation

7 advanced technology platforms developed in-house

or through acquisition

Established and commercialized innovation portfolio

of +200 products

Developing 4 venture industry disruptive technologies

with significant growth potential & value creation

Diversified 100+ key customer base served across

multiple markets & countries

Growth delivered organically

and through acquisition

Ca 70% revenue growth since 2019

5 capability building acquisitions

completed and integrated since listing

in2020

Experienced, diverse, and

committed leadership team

~24% ownership by Board &

leadershipteam

3 distinct Business Units: Textiles &

Flooring, Life Sciences, Antimicrobials

Active in high growth markets

HeiQ’ssix focus markets

Ingredient IP creator for six growth markets

(market data as per Statista)

1 Textile chemicals, $28bn (market growth 4.6%)

2 Man-made fibers, $135bn (market growth 3.5%)

3 Paints & coatings, $200bn (market growth 5.4%)

4 Antimicrobial plastics, $37bn (market growth 10.1%)

5 Probiotics, $53bn (market growth 6.8%)

6 Hospital & household cleaners, $55bn (market growth 5.2%

)

Addressable market segments: High-tech, highgrowth

1 Textile chemicals, $1bn

2 Man-made fibers, $2.9bn

3 Paints & coatings, $0.5bn

4 Antimicrobial plastics, $1bn

5 Probiotics, $0.5bn

6 Hospital & household cleaners, $1bn

Total addressable market: $6.9bn

Award-winning

ESGcredentials

Swiss Environmental award

in2019

Swiss Tech award

(2010and 2020)

Invest in HeiQ.

Invest in impact.

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HeiQ PLC

Annual Report and Accounts 2022

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HeiQ PLC

Annual Report and Accounts 2022

Strategic report

Market overview

Global

Megatrends

Technological advancements and

economic prosperity have enabled

improvements in medicine, sanitation,

food production and living conditions,

resulting in lower mortality rates and a

rapidly growing global population.

This growth has led to more people

migrating to towns and cities in pursuit

of increased quality of life, with cities

and urban areas now home to over half

of the world’s population. This influx

places huge strain on infrastructure

such as transportation, sewage,

housing and utilities in a limited space.

Population growth and urbanization

result in increased pollution and hygiene

needs, meaning a greater requirement

for sustainable and more effective

technologies to mitigate these risks.

Increasing population densities also

pose greater threats of disease while

the excessive usage of disinfectants

contributes to increasing antimicrobial

resistance, these all put substantial

emphasis on effective but sustainable

surface and air hygiene technologies

such as HeiQ Synbio

The negative implications of earth’s

rising temperatures, increased CO

levels and biodiversity loss are

profound. The scientific community has

clearly stated the urgent need to keep

global warming below a 1.5˚C increase

to preserve stable living conditions.

Despite this, emissions continue to

rise, species become endangered, and

deforestation continues.

The detrimental effects of climate

change include rising sea levels,

extreme weather events and habitat

loss, and will inevitably lead to resource

scarcity and social and political unrest,

leading to migrations. Often the poorest

in society are most severely impacted

by these environmental changes,

meaning the developed world has a

heightened responsibility to address

its production and consumption habits

and the wider implications of these for

poorer communities.

Microplastic pollution to our oceans

is a major issue and there is an

urgent need to mitigate our damage

to the marine ecosystem, which is

responsible for up to half of this world’s

annual CO

absorption. According to

the Ellen MacArthur Foundation* and

the World Economic Forum, by 2050

there will be more plastics than fish

in our oceans. And synthetic textiles

are a key contributing industry already

responsible for over 30% of all oceanic

microplastics. A problem we aim to

solve by substituting polluting Polyester

with HeiQ AeoniQ

climate positive

fibers.

* The New Plastics Economy, Ellen

MacArthur Foundation. 2016.

Humanity uses approximately 1.6

planets’ worth of resources to support

its current activities and if drastic

measures aren’t taken, this is set to

increase to two planets’ worth by 2030.

In short, we need to halve our current

impact to ensure we are able to live

within our planetary boundaries.

We are already seeing interconnected

problems arising from the resource

demands of a growing population

coupled with the impact of climate

change on resource availability.

These two unstoppable forces mean

competition for limited resources is

fierce, and management and mitigation

are vital to maintain a fair and balanced

society and to avoid conflict.

Extending products lifecycle,

manufacturing products using recycled

materials or waste and that are

recyclable at the end of their usable

life will preserve the raw material value

throughout its lifecycle. Focusing on

sustainable solutions for production

practices will support the preservation

of natural capital. Political intervention

and global collaboration are essential to

ensuring sustainable development and

the creation of closed-loop economies

and fair access to natural resources.

As an Innovator, we create technology solutions in

response to real world problems, megatrends and

specific market needs from our brand clients.

We anticipate future needs brought by global problems &

megatrends and develop science-based solutions to address

them swiftly. A number of global, long-term trends are having a

major impact on the planet. These sustainability challenges are

driving change in both manufacturing processes and product

development in the markets in which we operate, giving us the

opportunity to contribute and bring enhanced sustainability

downstream.

.01

Growing,

urbanizing

and migrating

global

population

.02

Climate

change and

environmental

degradation

.03

Scarcity of

and global

competition for

resources

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HeiQ PLC

Annual Report and Accounts 2022

Markets we operate in

As an innovator for novel materials and disruptive technologies, providing

solutions to consumers as their demands change based on megatrends,

there is scope for our products to be used across many markets. We

continue to consolidate our strong position in Textiles & Flooring and

to build up our Antimicrobials and Life Sciences (probiotics) footprint.

New markets we will increasingly move into include, for instance, man-

made cellulosic fibers (HeiQ AeoniQ

), and at an earlier stage, technical

filtration as well as batteries and electronics with our advanced R&D

project related to our disruptive porous graphene membrane technology

(HeiQ GrapheneX

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

Please refer to the Sustainability Report

on P.16 for more.

Textile chemicals

$28bn

CAGR 4.6%

HeiQ Business Unit serving the market

Textiles & Flooring

Man-made fibers

$135bn

CAGR 3.5%

HeiQ Business Unit serving the market

Venture development project HeiQ

AeoniQ

Paints & coatings

$200bn

CAGR 5.4%

HeiQ Business Unit serving the market

Antimicrobials

Antimicrobial plastics

$37bn

CAGR 10.1%

HeiQ Business Unit serving the market

Antimicrobials

Probiotics

$53bn

CAGR 6.8%

HeiQ Business Unit serving the market

Life Sciences

Hospital & household cleaners

$55bn

CAGR 5.2%

HeiQ Business Unit serving the market

Life Sciences

* Statista

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HeiQ PLC

Annual Report and Accounts 2022

Over our 18 years of history, we have grown organically as well as through

strategic, capability-building acquisitions, five of which were completed in

recent years. All our acquisitions bring us either technological know-how to

innovate for the segments we are already active in, extend our customer

base or give us access to a new segment. We have worked to ensure

the successful integration of the acquired teams and to take advantage

of synergies across all entities. Today, the HeiQ Group organizes its

commercial activities in three Business Units and an Innovation Service

function serving customers across the board. HeiQ has a special push-

and-pull business model, meaning we do not only try to push our product

downstream to the next immediate user but also promote our innovations

to their customers so as to create a “pull” force to receive nomination and

increase the speed of adoption for our technologies.

Strategic report

Business model

Our purpose is to improve

lives by innovating the

materials people use every

day. To achieve that, it is

important for us to bring

our innovations to multiple

industries.

Business

Unit/Service

Function Aim Key products/offering

Typical customers

who directly purchase

from us

Typical influencers

for our customers’

decision-making

(downstream

customers of our

customers)

Textiles &

Flooring

Provide

innovative

ingredients to

make textiles

& flooring more

functional,

durable and

sustainable.

Specialty functional

textile finishing

Fabric manufacturing

mills in South-/South-

east Asia, EMEA &

Central America

Apparel and home

textiles brands in

Europe, Asia & North

America

Auxiliaries and process

chemical that improve

efficiency in the

manufacturing process

Carpet & flooring

manufacturing mills

Carpet and flooring

brands

Life Sciences

Offer biotech

solutions to

replace harmful

substances

in domestic,

commercial

and industrial

usage, for a

more balanced

microbiome and

environment

Synbiotic professional

and household cleaning

products

Cleaning products

manufacturers, cleaning

service providers

Stakeholders of care

homes, medical

facilities, schools and

office buildings

Synbiotic ingredients for

cosmetics

Cosmetic product

manufacturers

Cosmetic consumer

brands

Synbiotic cleaning

agents for industrial

water treatment and air

conditioning

Water and HVAC service

companies

Industrial

manufacturers

Ingredients and

manufacturing solutions

for medical devices

Medical device product

manufacturers

Over-the-counter

retailers of medical

devices

Antimicrobials

Functionalize

different hard

surfaces in

everyday

products and

oursurroundings

Inorganic, organic and

botanical antimicrobial

technologies for

plastics and coatings

Masterbatchers,

compounders, and

coatings manufacturers

Brands of bathroom

and kitchen products,

home appliances, and

consumer paints

Transparent conductive,

low-E and radar

shielding coating

solutions

Manufacturers of

building materials,

automotive and defense

materials

Environmental housing

solution providers, or

electric car brands and

the defense industry

Innovation

Services

Enable customers

in all business

areas to

innovate beyond

their in-house

capability

Innovation project

management service,

grants applications

consulting and research

network support

Customers from all the

above sectors

Customers from all the

above sectors

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Strategic

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Corporate

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Financial

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HeiQ PLC

Annual Report and Accounts 2022

Our Business Units (see opposite) generate value along three key activities:

Value creation

Value Creation

.01

Scientific

research

.02

Specialty

material

manufacturing

.03

Consumer

marketing

& ingredient

branding

Key activities The HeiQ difference Revenue generation

20+% of our employees

are highly skilled scientists

working in research and

development; we also

leverage our extensive

network of 30+ global

academic partners through

government grants

Our co-creation approach

provides us with a steady

stream of innovation ideas

from different sectors,

forming the basis of future

commercialized products.

For projects that include

milestone payments or

project financing from our

customers, revenue is

generated directly during

the R&D process.

Our strong IP profile

and seven technology

platforms give us a strong

competitive advantage

on all the ingredients and

materials we manufacture

and sell to various

sectors.

Our primary source of

revenue is the sale of

products we manufacture.

Our second source of

revenue is royalties on IP

we license.

As innovations are created

in the laboratory and

used by consumers, we

have built competence

in explaining the impact

of our products to all

downstream stakeholders,

including consumers.

Strong consumer

marketing and ingredient

branding allow HeiQ to

generate revenues from

royalty bearing licenses

and exclusivity fees.

Partners and

customers

Our brand

partners and

direct customers

benefit from

access to our

differentiating

technologies.

Our performance-

enhancing

materials improve

their products. We

provide end-to-end

support and all

the services

required to bring

innovations to

market.

Consumers

Products featuring

our technology

offer tangible

benefits for the

end user, including

innovative

functionality,

comfort, hygiene,

protection and

sustainability

features.

Employees

Our employees

have the chance

to work and

develop in a

meritocratic

and diverse

environment,

being challenged

and supported to

help the Company

deliver on its

purpose and make

a difference for a

better world.

Investors

Our investors

benefit from

the high growth

potential of our

business and our

willingness to

create disruptive

innovation.

Suppliers

We develop strong

and trusted

partnerships with

our suppliers.

Our growth and

momentum will

lead to increased

spending on

raw materials in

innovative product

applications.

Society

By helping many

brands and

consumers to

reduce their impact

on the environment,

we are indirectly

improving the

lives of billions

more. Through our

engagement with

university research

partnerships,

we play a role

in fostering the

education of

new generations

of scientists,

engineers and

entrepreneurs.

010

HeiQ PLC

Annual Report and Accounts 2022

Strategic report

Chief Executive Officer’s review

Carlo Centonze

CEO

Cutting through

the headwinds:

ayear in review

I would like to first

acknowledge the

understandable frustration

felt by our valued

shareholders in regards to

the delayed publication of

FY 2022 accounts and the

corresponding suspension

from trading at LSE. As the

largest shareholder I share

this burden and as CEO I have

addressed the commercial

difficulties it generated for us.

010

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Strategic

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Corporate

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Financial

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HeiQ PLC

Annual Report and Accounts 2022

The macro picture and

FY 2022 performance

FY 2022 was a challenging year

for our industry and our business,

as we faced sudden and dramatic

market disruptions in H2, caused

by large inventory de-stocking by

brands and retailers following

reduced consumer demand,

high inflation, and rising interest

rates globally. These factors were

exacerbated by the war in Ukraine

and the resulting energy crisis in

Europe has hamstrung the entire

European chemical industry. Our

business was further exposed to

prolonged COVID-19 restrictions in

China in H1, and the downturn was

protracted by a sectoral recession

in our customer segment following

the lifting of restrictions and

value chain shifts by US brands

and retailers out of China. Given

that we were investing in scaling

up our four ventures with game-

changing innovation technologies,

the sudden decrease in sales and

the related innovation financing by

the profits from our commercial

businesses not only impacted top

line performance, but also Group

profitability.

The dramatic disruption in market

demand across our value chains

also impaired the ability of our

recently acquired businesses to

achieve their business plans. The

Directors therefore have concluded

that an impairment of goodwill

recognized upon acquisition of

some of these businesses is

appropriate.

Further, we had to partly defer

revenues (and corresponding

profits) in respect of certain

partnership agreements originally

recognized in H1 2022 and H2

2022 to future periods. Previously,

we had recognized revenue from

these contracts at the point in

time of achieving certain technical

development milestones. However,

upon further review, we concluded

that it is appropriate to recognize

such revenues over time to

coincide with specific exclusivity

rights being granted by HeiQ to

the partners. Consequently, total

revenue of US$4.0 million has

been deferred over a period of four

years with initial revenues being

recognized in H2 2022.

Total revenue for the year

amounts to US$47.2 million

(2021

: US$55.4 million) and the

operating loss for the year was

US$-29.2 million (2021

: US$-1.4

million) after goodwill impairments

(aggregated goodwill impairments

in 2021 and 2022 amount to

US$13 million). The cash balance

as of December 31, 2022 was

US$8.5 million.

2023 Trading Update

Since the start of 2023, we have

taken focused steps to reduce

our cost base and reorganize the

business. We have not seen the

challenges abate in 2023 but

actions taken since the start of the

year mean we are to be in a better

position going forward to manage

the challenging macro-economic

environment, continue building

value in our core innovations and

preserve our ability to deliver when

the market demand turns.

I am pleased to report that

the initiatives set out below

have delivered an annualized

15% reduction in overheads,

becoming effective mainly from

H2 2023 onwards. As set out in

our separately reported interim

results, for H1 2023, we achieved

sales of US$20.5 million (H1

2022

: US$27.6 million) with a

slight decrease in margins in a

buyers-market driven by current

overcapacity (H1 2023:40.9%

vs. 41.5% for FY 2022). I want

to point out that while we have

curtailed our investments in our

four ventures, we have maintained

their value creating momentum

and thus face the corresponding

costs. The benefits of the reduced

cost base will only be felt in H2

2023, so our operating loss

for H1 2023 amounts to US$-

6.0 million (H1 2022

: US$-1.6

million). The cash balance as of

June 30, 2023 amounts to US$7.3

million. Our credit facilities have

historically and continue to be

uncommitted in nature, which

casts a material uncertainty on the

going concern assessment until

appropriate longer-term funding

is in place, as disclosed in the

Notes to the financial statements.

However, the Board considers

that the Group has adequate

resources and accordingly, the

financial statements continue to

be prepared on the going concern

basis. The Board is in discussions

with financial institutions to replace

the currently uncommitted credit

facilities by committed, long-term

facilities, but the outcome of these

discussions cannot be guaranteed.

Reorganizing, right-sizing

and re-focusing

At the beginning of the year we

reorganized our activities into

three commercial business

units and one “Other” segment

encompassing four innovation

ventures with no commercial

activities yet, Innovation Services

provided internally and externally

to a broad range of customers,

as well as group functions. The

three distinct business units each

have their dedicated team leader,

management team, and P&L

responsibility:

• Textiles & Flooring, under the

leadership of Mr. Mike Abbott,

headquartered out of the US

• Antimicrobials, led by Mr. Tom

Ellefsen, headquartered out of

Thailand

• Life Sciences, led by Dr. Robin

Temmerman, headquartered out

of Belgium

I will give you an update for each

of these shortly, but before I do

so, it is worth touching on how

we have built resilience into the

service offerings - Innovation,

Differentiation and Regulatory -

which are delivered through each

business unit as well as internal

services like Finance.

Besides streamlining and relocating

various support functions out of

Switzerland to lower-cost locations,

we have created clear goals and

responsibilities for all our business

and service organizations to

optimize operations and to focus

resource allocation rigorously. In

Innovation, we have focused our

R&D investment on innovation

technologies which are closest to

cash-flow generation or are already

being financed by brand partners

or through grants. In Differentiation

we are leveraging our brand

customers to promote HeiQ to

a broader (consumer) audience

thereby reducing our costs. We

have expanded our internal service

organization particularly in Finance

by implementing a centralized

accounting function and will

continue to do so to strengthen our

financial reporting processes.

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HeiQ PLC

Annual Report and Accounts 2022

Antimicrobials

In our Antimicrobials business, we

have reduced the commercial team

by focusing on selected markets

and expanded our support to our

established large channel partners

Americhem and Avient. We are

further reducing our overheads and

divesting from our regional sales

hub HeiQ Brazil in order to build

up this particular market with a

commercialization partner instead.

We are focused on strengthening

our regulatory assets for inorganic,

botanical and natural antimicrobials

to enhance our position within

specialty antimicrobials and

are looking for opportunities to

consolidate the industry segment.

Life Sciences

In Life Sciences we have achieved

a key milestone with the publication

of the study comparing Ecolab

disinfectants with our HeiQ

Synbio probiotic cleaners at the

University Hospital Charité Berlin.

The study, which was sponsored

by the Melinda & Bill Gates

foundation and the German state

confirmed that HeiQ’s probiotic

cleaners are equally effective

to Ecolab’s disinfectants while

significantly reducing resistance

gene developments. The study

led to a recommendation for

probiotic cleaners by the German

Robert Koch institute and the

finalization of the new European

Detergent Regulation, now

including probiotic cleaners. With

this key regulatory milestone

achieved, we are doubling down

on securing significant contracts

for HeiQ Synbio in the healthcare

cleaning market and selecting

the best channel partner for

Strategic report

Chief Executive Officer’s review continued

In addition, we are applying

a strong focus on our

commercialization teams, aligning

our efforts with our mission

to improve the lives of billions

through our products. We are

prioritizing high value opportunities

in high growth markets, where

we can leverage competitive

advantages and deliver sustainable

value for our customers and

shareholders. We are focusing on

our commercialized innovations

and mature, sustainable and

future-proof products such as HeiQ

Allergen Tech and HeiQ Synbio,

HeiQ Mint and HeiQ Smart Temp

and are also actively challenging

competitors’ positions with a better

quality-price-terms ratio offering

with our HeiQ Pure range.

Textiles & Flooring

We have taken decisive steps

to strengthen our position as

the market leader for branded,

nominated textile innovation. In

order to maintain capabilities at

a lower cost, we have accelerated

the reallocation of our innovation,

testing, and product management

operations to Portugal, which is

a lower-cost country with high

education in which to undertake

these labor-intensive workstreams.

Our production has been moved

largely to the US from Switzerland

due to lower energy costs and

chemical raw material availability.

Our top-selling products are being

further integrated backwards to

improve our margin. Additionally, we

are investing in Central America,

a region which is increasingly

capturing supply from US brand’s

reducing their exposure to China.

We are exploring global local

manufacturing partnerships to

lower the impact on margins of

short notice orders and resulting

rapid delivery logistical costs.

global commercialization. We are

in negotiations with the leading

channel partner for an exclusive

OEM agreement for our probiotic

healthcare cleaners. Additionally,

we are revisiting our medical device

business strategy as closing

of an OEM agreement is not

materializing.

Venture Innovation

Innovation remains the lifeblood

of our business and future value

creation. I talked earlier about our

focused strategy for innovation,

prioritizing core technologies which

are close to positive cash flows

or are being funded by customers

or grants in order to alleviate the

impact of their expensed R&D

costs on our net commercial

revenues and accelerate their

technology and market readiness.

One of our most valuable

innovation platforms is HeiQ

AeoniQ

, the world’s first climate-

positive fiber. HeiQ AeoniQ™ has

had significant industry support

by Hugo Boss, The Lycra Company

and MAS Holdings and has been

taken to customers as a HUGO

BOSS Polo Shirt on consumer

shelves as early as January 2023,

just 15 months after launching it.

Hugo Boss has recently captured

global attention for HeiQ AeoniQ

with their “THE CHANGE” launch in

high fashion. Additionally, Beste, an

Italian manufacturer, introduced the

first fabric collection featuring HeiQ

AeoniQ™ to a range of major Italian

fashion brands.

HUGO BOSS has committed itself

to replacing all use of polyester

and nylon by 2030 and made

the achievement of the same a

fundamental part of leadership’s

remuneration. HeiQ AeoniQ™ has

one objective, to replace polyester,

a US$135 billion market with

a compounding annual growth

rate of 3.5%. Most recently, in

July 2023, we secured a further

US$2.5 million funding from MAS

Holdings, a premium leader in

garment making headquartered in

Singapore. We have further secured

US$1.2 million in grants for our

R&D work and up to US$ 8 million

government grant contributions

over the next two years for our

first 3 kilotons (kto) plant scale-

up in Portugal. We will continue

our efforts to secure funding and

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Annual Report and Accounts 2022

cosmetics and medical currently

being explored with leading channel

partners. By using waste-based

feedstock we prevent the burning

or fouling of organic waste and

thereby contribute to reduce

greenhouse gas emissions, with a

potential for carbon credits being

awarded.

Sustainability

Our technologies are intrinsically

built to bring sustainability

downstream to our customers

and to consumers. Our biggest

contribution to science-based

reduction goals is the continuous

substitution of hydrocarbon based

raw materials in our products

with bio-based raw materials.

With HeiQ AeoniQ

we are

bringing to the market a game

changing technology, capable of

decarbonizing the textile industry

with one of the few climate-positive

technologies able to reduce

the science-based footprint of

brands and retailers, contributing

significantly to reaching a net zero

target. At HeiQ, we are committed

to driving impactful game-changing

sustainable innovation technologies

to market.

Outlook

Looking ahead, our vision remains

firm: striving to improve the lives

of billions by bringing sustainable

technology solutions to market

that can make an impact. To

achieve this and to weather current

challenging market conditions

and financial uncertainties, we

have taken and will take further

actions as and when needed to

control our costs and sharpen

our strategy. This includes

prioritizing innovations close to

positive cash flow generation,

to put appropriate emphasis on

operational excellence as well

as to drive our high potential key

innovation initiatives with superior

sustainability profiles.

offtake agreements with leading

brands in order to finance and build

our first 30kto capacity production

plant scheduled to operate in

2026.

HeiQ GrapheneX is a proprietary

technology platform that enables

us to directly synthesize porous

graphene materials with high

performance and versatility.

This platform is strategically

positioned to capture the growing

demand for advanced materials

in the batteries and electric vents

sectors. We have recently sold

our first samples to a Fortune

500 Brand and top three leader in

handheld mobile devices. Over the

next two years we aim to deliver

our first pilot commercialization

plant and are currently negotiating

product development funding with

a key OEM player in the handheld

mobile devices industry.

HeiQ ECOS is a transparent

conductive coating technology

that enables low emissivity. HeiQ

ECOS can also be used in defense,

to alter the electromagnetic

signature of assets making them

stealth. We have two existing

defense customers paying for

the application development for

signature management. With the

knowledge gained from these

projects, we have developed

a strong proof of concept for

transparent window insulation and

yield-enhancing greenhouse films.

Less energy is needed to cool down

or warm buildings or greenhouses

and if utilized in the automotive

window space significantly

more reach can be conferred on

electric vehicles. We are currently

validating the technology in field

trials with market leading adopters

and have been able to secure

additional grants to develop further

technology applications.

HeiQ BacCell is centered around

our precision fermentation

technology, utilizing bacteria to

manufacture post-biotics (HeiQ

Synbio platform). Our aim is to

use agricultural and food waste

available in large amounts and

transform them into bacterial

cellulose. The latter is utilized as

a feedstock for our HeiQ AeoniQ

climate positive fiber and promises

additional market application

opportunities in packaging, food,

We expect the above-mentioned

measures beginning to flow through

to our bottom line in H2 2023 with

corresponding stabilization of our

financial performance. However,

we remain alert to take additional

corrective actions should markets

deteriorate further.

As always, I would like to end

my statement by thanking our

investors, team, advisors and

customers for their support

during what has been a very

challenging period for the market

and the company. As a significant

shareholder and a founder of HeiQ,

my commitment to grow HeiQ

and materialize its huge potential

remains unchanged.

Carlo Centonze

CEO

014

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Annual Report and Accounts 2022

We use a number of Key Performance Indicators (KPIs) to measure our

performance over time. We select KPIs that demonstrate the financial

and operational performance underpinning our strategic drivers.

Strategic report

Key performance indicators

Finance

.01

Innovation

.02

Revenue | US$ million

-14.8%

(growth in 2022)

Number of new projects that made it into

our R&D pipeline

Gross Profit Margin | %

-17.3% point

(change in 2022)

Number of launched innovations

Differentiation

.03

Total number of media mentions

-21%

(change in 2022)

Why we measure

Sales growth reflects the increasing impact of

our business on improving lives for millions.

Why we measure

This KPI gives insight into our operational

profitability.

Why we measure

We never run out of innovation ideas and there

are countless opportunities to innovate. HeiQ’s

ability to qualify the ideas through “proof of

concept” and market potential evaluation before

bringing them into our R&D pipeline is key to

ensuring we have the market in mind before

investing excessively into a project.

Why we measure

Innovations that are launched generate returns

on our R&D investments.

Why we measure

As a B2B, B2C and B2B2C ingredient brand, HeiQ

is building its brand awareness across different

target audience groups. Media mentions are

“earned” media, which show our ability to gain

face time with the audience without having to

invest heavily in media-buying.

22 47.2

55.4

50.4

28.0

26.2

0 51

22 34

0.0000 20.6235

22 10,927

13,749

7,610

2,000

2,179

0.0 31.5

22 10

22 28.5

45.8

55.8

48.6

42.8

015

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Annual Report and Accounts 2022

016

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Annual Report and Accounts 2022

Strategic report

Sustainability report

We aspire to improve

the lives of billions

by innovating their

everyday products.

Our purpose defines our reason for

being, beyond being profitable.

HeiQ is dedicated to improving

the lives of billions of people and

society as a whole by establishing

better and more sustainable

materials and technologies.

Our core focus is to replace harmful

substances with more sustainable

alternatives, to extend the useful

lives of consumer goods, to replace

resistance creating biocides, and

to improve energy utilization in

buildings, electric vehicles and

mobile devices.

We help fight air, water and soil

pollution and resource depletion.

We reduce energy consumption,

water usage, microplastics and

textile waste.

Only innovation can drive the

systemic and disruptive change

that is urgently needed.

Our ESG strategy

HeiQ’s core business strategy is

to improve lives through innovation

for more functional and more

sustainable materials which largely

overlaps with our ESG strategy.

Everything we do, all our innovation,

has sustainability at the core.

As a provider of both functional and

sustainable material ingredients,

we inspire and enable the entire

value chain to develop more

eco-friendly, durable, biobased,

renewable, recyclable and circular,

enhanced products.

People are our biggest asset. The global success of HeiQ is indebted to

their knowledge, skills, agility, cultural diversity (30+ nationalities) and

a shared passion for our purpose. HeiQ is a proud equal opportunity

employer.

HeiQ engages in sustainability reporting under the guidance of GRI (Global

Reporting Initiative). We bring a transparent and credible sustainability

promise, inspired by the principles and based on the requirements laid out

by the GRI. Please read the GRI Content Index on page 24 for an overview

of the disclosures published in this report.

Definition of material topics

1 Impact assessment

In 2021 we researched the impact of our activities on the economy, on

people, and on the environment, resulting in a long list of 43 material

topics.

2 Stakeholders definition

A stakeholder power-interest matrix helped us to identify our six most

relevant stakeholders: brand partners, mill customers, employees,

investors, consumers, and the HeiQ leadership team were selected from

the 40-stakeholder long list.

3 Materiality matrix and material topics selection

Stakeholder surveys and interviews and desk research resulted in a

classification of the above-mentioned impacts in a matrix.

The materiality matrix plots importance to stakeholders and potential

impact on the business and enables us to identify areas of high value

toboth.

Stakeholder

importance

Impact on the

business

Emissions

Energy

Drive to innovate

Impact on the

business

Stakeholder

importance

Employees

Enabler of sust. dev

017

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Annual Report and Accounts 2022

Of the elements of high importance

to both stakeholders and the

business, the sustainability

reporting team selected the 4 most

important material topics featured

under the GRI standard:

1 Energy consumption

2. Carbon emissions

3. Our employees as precondition

for success

4. Our role as enabler of

sustainable development in the

value chain

For the calculation of energy

consumption and carbon emissions

we follow the UK Government’s

Environmental Reporting Guidelines:

Including streamlined energy and

carbon reporting requirements.

For additional and voluntary

reporting on the selected material

topics, we follow the guidance of GRI

standards GRI-302 (Energy), GRI-305

(Emissions), GRI-401 (Employees)

and GRI-301 (Materials).

Principles applied for reporting

on energy consumption and

carbon emissions as per the UK

Government’s Environmental

Reporting Guidelines: Including

streamlined energy and carbon

reporting requirements (“SECR”)

We subscribe to the principles

of the Competition and Markets

Authority in the UK and engage

to be truthful and accurate, clear

and unambiguous, substantiated,

not omitting or hiding important

information, only making fair

and meaningful comparisons

and avoiding all inconsistencies

between claims and reality,

between intentions and practice.

We realize that reporting

sustainability impacts is a process

of continuous improvement and

acknowledge that we may face blind

spots. We invite all stakeholders and

readers to point these out to us.

Sources of information

Our SECR reporting is based on in-house data on the combustion of

primary fuel at owned sites and installations and purchased electricity.

We continuously work to improve the quality of our data, collected from

invoices for electricity, natural gas, propane, gasoline and diesel, the

energy sources used in our HeiQ entities. Gaps in the data are filled by

extrapolation or assumptions based on usage in other months.

Our contact for questions and remarks about the SECR reporting is HeiQ

sustainability officer Mr. Philip Ghekiere philip.ghekiere@heiq.com

Scope

Physical locations operated by a controlled legal entity are in scope of these

disclosures. This includes: HeiQ operational headquarters and laboratories

in Schlieren (Switzerland), HeiQ production site in Bad Zurzach (Switzerland),

HeiQ Chrisal (Belgium), HeiQ Chemtex in Concord, North Carolina and

Calhoun, Georgia (USA), HeiQ Australia, HeiQ Taiwan, HeiQ Iberia (Portugal),

HeiQ Medica (Spain), HeiQ RAS (Germany), HeiQ China, HeiQ Life (Thailand)

and – new in the Group since early 2022 – HeiQ AeoniQ GmbH (Austria).

Conversion tables

For the conversion of liters, kg, lbs., gallons and Centum Cubic-Feet of

Scope 1 primary fuel to kWh and tCO

-e (tons of carbon dioxide equivalent)

we used the gross caloric values of the ‘UK Government Greenhouse Gas

Conversion Factors for Company Reporting’ version 22/6/2022 that is

available for consultation at www.gov.uk

Fuel type Unit kWh kg CO

-e Notes

Diesel 1 liter 10.80 2.70

Petrol 1 liter 9.75 2.34

Natural Gas 1 kWh 1.00 0.18 from m

to kWh is x 11,2222

Propane 1 kWh 1,00 0.21 from kg to kWh is x 14,019

For the Scope 2 conversion of purchased electricity, the CO

-e values depend

on the carbon intensity of the electricity production and the energy mix in the

country where the electricity is produced. Our World in Data provides a global

overview and a detailed summary of the countries that are relevant for HeiQ

reporting. https://ourworldindata.org/grapher/carbon-intensity-electricity

Carbon intensity of electricity in countries relevant for HeiQ

Country

2021 Value

in grams CO

-e per kWh Country

2021 Value

in grams CO

-e per kWh

Taiwan 573 Portugal 219

China 544 Spain 193

Australia 531 Belgium 156

United States 379 Austria 147

Germany 365 Switzerland 47

We did not inherit

the earth from

our ancestors

but borrow it from

our children.

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

100

200

300

400

500

600

700

800

Taiwan

China

Australia

Germany

United States

Portugal

Spain

Belgium

Austria

Switzerland

Carbon intensity of electricity in countries relevant for HeiQ

Historic development per country (gCO

/kWh)

018

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Annual Report and Accounts 2022

Material topic 1: Energy

consumption

Under SECR Scope 1 we report

primary fuel for combustion

at owned sites and in owned

installations. Natural gas was the

main fuel type used for combustion

(3,632,408 kWh) and 85% of

this volume was used in our US

manufacturing plants.

In 2022 the group used small

volumes of diesel (133,207 kWh),

gasoline (272,311 kWh) and

propane (17,134 kWh).

75% of our diesel consumption was

in HeiQ AeoniQ GmbH in Austria,

where it was needed for energy

generators during the startup

period before installation of the

green energy powerline that was

operational from January 2023

and delivers energy from a 100%

renewable source.

The total of 4,055,060 kWh

combusted fuel is about the same

as in 2021 (4,054,911 kWh). Note

that HeiQ AeoniQ GmbH in Austria

was not yet part of the reporting

scope in 2021 and that 2022

group revenue is 14.8% lower than

in 2021.

Under SECR Scope 2 we report

884.479 kWh of purchased

electricity, approximately 15%

more than in 2021. 48% of

the total volume relates to our

manufacturing plants in the US.

Whenever possible we purchase

electricity from renewable sources:

100% in Austria, 75% in Belgium,

40% in Spain, 30% in China.

Strategic report

Sustainability report continued

ENERGY in kWh 2022 2021

Scope 1 fuel 422,652 342,738

combustion natural gas 3,632,408 3,712,173

Total Scope 1 4,055,060 4,054,911

Scope 2 purchased electricity 884,479 769,245

Total Scope 1 + Scope 2 4,939,539 4,824,156

Material topic 2: Carbon Emissions

In 2022 we report 756 tCO

-e emissions from combustion and 270tCO

-e

from purchased electricity, in total 1,026 tons of CarbonEquivalent. This

is about the same quantity as in 2021.

EMISSIONS in tCO

-e 2022 2021

Scope 1 fuel 102 86

combustion natural gas 654 668

Total Scope 1 756 754

Scope 2 purchased electricity 270 284

Total Scope 1 + Scope 2 1,026 1,038

Material topic 1&2: Intensity ratios

Intensity ratios allow analysis of the effect of our actions to reduce energy

consumption and carbon emissions irrespective of fluctuations in revenue.

The aggregated and reported revenue for the year 2021 was US$55.42

million (restated) and US$47.20 million for 2022.

ENERGY in kWh 2022 RATIO

2021 RATIO

(restated)

Scope 1 fuel 8,954 6,184

combustion natural gas 76,955 66,984

Total Scope 1 85,909 73,169

Scope 2 purchased electricity 18,738 13,880

Total Scope 1 + Scope 2 104,647 87,049

EMISSIONS in tCO

-e 2022 RATIO

2021 RATIO

(restated)

Scope 1 fuel 2.16 1.55

combustion natural gas 13.86 12.05

Total Scope 1 16.02 13.60

Scope 2 purchased electricity 5.72 5.12

Total Scope 1 + Scope 2 21.74 18.72

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Annual Report and Accounts 2022

Material topic 3: Employees

The following analysis of our workforce are based on data records as

received by our human resource department from employees.

About 67% of the 211 ‘HeiQans’ live in Europe. The gender split is

44% female and 56% male over all employees, which represent 30+

nationalities. Senior management consists of 36% female and 64% male

employees and the Board of 40% female and 60% male directors.

Employees in headcount

Region Female Male Total

Asia 17 15 32

Europe 66 77 143

N&S America 9 24 33

Other 0 3 3

Total 92 119 211

Employees in FTE

Region Female Male Total

Asia 17 15 32

Europe 61.8 73.2 135

N&S America 8.6 24 32.6

Other 0 2.4 2.4

Total 87.4 114.6 202

94% of our employees have permanent contracts, 6% have temporary

contracts (including interns).

Employees in FTE – permanent

Region Female Male Total

Asia 17 15 32

Europe 54.8 67.2 122

N&S America 8.6 24 32.6

Other 0 2.4 2.4

Total 80.4 108.6 189

Employees in FTE – temporary excl. interns

Region Female Male Total

Asia 0 0 0

Europe 7 6 13

N&S America 0 0 0

Other 0 0 0

Total 7 6 13

90% of our employees work full-time.

Employees in headcount working full-time

Region Female Male Total

Asia 17 15 32

Europe 54 70 124

N&S America 8 24 32

Other 0 2 2

Total 79 111 190

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Annual Report and Accounts 2022

Employees in headcount working part time

Region Female Male Total

Asia 0 0 0

Europe 12 7 19

N&S America 1 0 1

Other 0 1 1

Total 16 8 21

In 2022 we hired 60 people on permanent contracts, replacing 36

colleagues that left and creating 24 new roles.

New hires (permanent positions)

Region Female Male Total

Asia 4 2 6

Europe 21 19 40

N&S America 2 11 13

Other 0 1 1

Total 27 33 60

Leavers (permanent positions)

Region Female Male Total

Asia 3 1 4

Europe 11 14 25

N&S America 0 7 7

Other 0 0 0

Total 14 22 36

New hires (all positions)

Region Female Male Total

Asia 4 2 6

Europe 38 27 65

N&S America 2 11 13

Other 0 1 1

Total 44 41 85

Leavers (all positions)

Region Female Male Total

Asia 4 1 5

Europe 25 24 49

N&S America 0 7 7

Other 0 0 0

Total 29 32 61

HeiQ’s broader workforce includes 28 workers who are not employees;

they are mainly sales representatives and contractors. 14 of these work in

Europe.

The annual total compensation ratio was 4.17.

This is the ratio of the annual total compensation for the organization’s

highest-paid individual vs. the median annual total compensation for all

employees excluding the highest-paid individual.

Strategic report

Sustainability report continued

Policies

In the 2021 Annual Report, we

published the HeiQ Human Rights

Policy. In this report, we are

proud to share the HeiQ Equal

Opportunity Employer Policy.

Workplace harassment, third-

party harassment, and sexual

harassment policies, The HeiQ

Code of Ethics, The Supplier and

Business Partner Code of Conduct,

and The Employee Code of Conduct

will be communicated in future

annual reports.

All policies are embedded via a

Content Management System

that is accessible to everyone

(with physical copies in selected

locations like manufacturing sites).

Employees are informed globally

and/or locally when new policies

are published or changed.

HeiQ Equal Opportunity Employer

Policy

Purpose

Our equal opportunity employer

policy reflects our commitment

to ensure equality and promote

diversity in the workplace, the

pillar of a healthy and productive

workplace. Everyone should feel

supported and valued to work

productively so we are invested in

treating everyone with respect and

consideration.

Scope

Our equal opportunity employer

policy applies to all employees,

job candidates, contractors,

stakeholders, partners and visitors.

Equal opportunity is for everyone,

but it mainly concerns members

of underrepresented groups, who

are traditionally disadvantaged in

the workplace. We don’t guarantee

employment or promotions for

people in those groups, but we

will treat them fairly and avoid

discriminating against them, either

via conscious or unconscious

biases.

Policies

Being an equal opportunity

employer means that we provide

the same opportunities for hiring

advancement and benefits to

everyone without discriminating due

to protected characteristics like

age, sex/gender, sexual orientation,

ethnicity, nationality, religion,

disability, and medical history.

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Annual Report and Accounts 2022

We also want to make sure that

equal opportunity applies to other

instances. For example, we have

an open and transparent culture

for employees to speak up and we

are committed to preventing and

resolving any kind of harassment

against our employees.

Our HR departments are

responsible for assessing our

Company’s processes and ensuring

they are bias-free. Whenever we

find biases interfering, we will

act immediately to refine our

processes, train our people to

combat their biases and protect

possible victims of discrimination.

We will give everyone the chance to

work in an environment where their

rights are respected.

Other relevant disclosures

Grievance mechanisms for

employees

We plan to introduce an anonymous

grievance hotline submittance

system for employees to raise

sensitive concerns through

the Company ticketing system.

Grievances would go to global

People Operations (HR) who

could either, where appropriate, a)

redistribute to local HR, b) manage

directly/globally or c) escalate to

the Board.

Mechanisms for raising concerns

on business conduct for individuals

The workplace harassment and

sexual harassment policies outline

the procedure for raising concerns.

In a case where an employee

thinks that the offender might not

be aware of their behavior, the

employee may try and raise the

concern directly with the offender.

Where appropriate, or if a customer,

other third parties or multiple

team members are involved, the

employee can report their concerns

to their supervisor. In any case,

People Operations (HR, local or

global) can be involved as a first

point of contact, mediator or

escalation point.

Noncompliance with employment laws and regulations

No significant instances of non-compliance with laws and regulations were

reported in 2022.

Collective bargaining

No collective bargaining agreements reported in 2022.

Important memberships

1. USA: Corporate Members of AATCC (American Association of Textile

Chemists and Colorists)

2. USA: Member of ASQ (American Society for Quality) and certified

auditor through ASQ

3. Switzerland: Carlo Centonze Member of the Economic Council at

Swiss Textiles. Member of the Board and Economic Council at Science

Industries, Member of the Women’s Wear Daily Global Impact Council

Material topic 4: Enabler of sustainable development

HeiQ inspires and enables sustainable development along the entire

value chain and therefore considers our role as “enabler of sustainable

development” in the value chain as per our GRI Materiality Matrix. As

sustainability enabler we want to grow the portion of eco-friendly products

in our offering and therefore defined as a KPI to measure our progress

of increasing the share of eco-friendly products in % of total sales.

We defined eco-friendly products as products made from recycled raw

materials or products with a biobased content (4 categories).

One of GRI’s main reporting principles is continuous improvement and

encourages companies to take a start and improve/expand step by step

over time. Therefore, we started reporting by analyzing the products that

make up 93% of our total revenues only. We have been able to classify

products accounting for 73% of our total revenues so far, for products

accounting for 20% of our total revenues, classification has not yet been

completed. The large number of products accounting for the remaining 7%

of the total revenues, classification will be done only at a later stage.

Category

Revenue

2022

US$’000

In % of total

revenue

Cumulative

in % of total

revenue

Recycled materials non biobased 5,002 11% 11%

Biobased 0% to 25% 3,237 7% 18%

Biobased 26% to 50% – – 18%

Biobased 51% to 75% 1,151 2% 20%

Biobased +75% 414 1% 21%

Total eco-friendly products 9,804 21% 21%

Traditional chemistry 19,482 41% 62%

Services 5,357 11% 73%

Not yet categorized 9,557 20% 93%

Revenue 93% ranking

based on amount invoiced 44,199 – 93%

Total revenue 47,202 – 100%

022

HeiQ PLC

Annual Report and Accounts 2022

Strategic report

Sustainability report continued

TCFD

recommendation

TCFD recommended

disclosure

Compliance

position

Rationale

for explaining

Remediation

plans Timeline

Governance a. Describe the

Board’s oversight

of climate-

related risks and

opportunities.

Compliant The board of HeiQ Plc does not

currently have oversight of climate-

related risks and opportunities, and

as such there is no process nor

frequency for informing the board on

these matters.

The board and/or board committees

do not currently systematically

consider climate-related risks and

opportunities when reviewing and

guiding strategy, major plans of

action, risk management policies,

annual budgets, and business plans

as well as setting the organization’s

performance objectives, monitoring

implementation and performance, and

overseeing major capital expenditures,

acquisitions, and divestitures

There are no climate-related goals

and targets, and so the board does

not monitor progress.

N/A N/A

b. Describe

management’s role

in assessing and

managing climate-

related risks and

opportunities.

Compliant HeiQ plc has not assigned specific

climate-related responsibilities

including assessing and/or managing

climate-related issues to management-

level positions or committees and

as such, no management positions

or committees report to the Board

or a committee of the Board on such

topics. Management are not currently

routinely informed about climate-

related risks and opportunities and

there is no formal organizational

structure nor monitoring process in

place for this purpose.

N/A N/A

Strategy a. Describe the

climate-related

risks and

opportunities the

organization has

identified over the

short, medium and

long-term.

Explain We have not yet undertaken

scenario analysis including defining

timeframes, considering materiality,

or selecting scenarios. As such we’re

not identified the climate-related

risks and opportunities that might

be material to HeiQ under different

scenarios and different timeframes,

nor have we considered how these

risks and opportunities might vary by

sector and/or geography.

In a first step, the Company

plans to define climate-

related risk management

processes in order to

identify respective risks.

The Company foresees to

engage support from external

advisors if and when deemed

necessary by the Board to

support this process.

We appreciate the

importance of undertaking

scenario analysis and

are looking to complete

this in time for 2024

Annual Report. We will

be working closely as a

senior management team

in defining timeframes,

materiality and scenarios,

before approving the

climate-related risks and

opportunities that we intend

to report in our 2024 annual

report. We might consider

to engage a third party to

support us with this work.

b. Describe the

impact of climate-

related risks and

opportunities on

the organization’s

businesses,

strategy and

financial planning.

Explain Having not undertaken scenario

analysis we have not been able

to commence quantification

of our climate-related risks

and opportunities, nor provide

commentary as to the impacts,

mitigations, and actions we are

undertaking as a business. As yet we

also have not developed a transition

plan and have not been able to make

the appropriate disclosures as a

result.

Once climate-related risk

management processes

are in place and respective

risks have been identified,

the Company intends run a

scenario analysis in order to

evaluate the impact of those

identified climate-related risks

on the Company’s business,

strategy and financial

planning. In order to do so,

the Board will engage support

from external advisors if and

when deemed necessary.

Our work on quantification

is contingent on our

work outlined in strategy

(a) above on scenario

analysis. Once this is

complete we will commence

quantification; this is a

medium term priority. We

will provide a progress

update in our next annual

report with outputs provided

subsequently.

HeiQ has complied with FCA

listing rule 9.8.6R(8) that requires

standard listed companies to make

disclosures consistent with the

TCFD recommendations. TCFD

is a comply or explain disclosure

requirement. For the year

ended December 2022, HeiQ is

explaining on eight of eleven of the

recommended TCFD disclosures.

Climate reporting: TCFD

Recommended Disclosures

Compliance Statement

As an innovator and supplier of

sustainable material ingredients,

we inspire and enable the entire

value chain to develop more eco-

friendly, durable, energy saving,

biobased, renewable, recyclable,

and circular consumer products.

As such, and in line with the listing

rule requirements, the table below

outlines our reasons for explaining,

and our plans including timeframes

for remedial action.

023

Strategic

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Corporate

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Financial

statements

HeiQ PLC

Annual Report and Accounts 2022

TCFD

recommendation

TCFD recommended

disclosure

Compliance

position

Rationale

for explaining

Remediation

plans Timeline

c. Describe the

resilience of the

organization’s

strategy, taking

into consideration

different climate-

related scenarios,

including a 2°C or

lower scenario.

Explain HeiQ plc has not yet undertaken

any scenario analysis and therefore

has not been able to assess HeiQ’s

resilience to a 2°C degree or lower

climate scenario in detail.

We do not plan to undertake

a scenario analysis for a

2°C or lower scenario before

2025 as we intend to focus

on implementing other

TCFD recommendations

beforehand.

2°C or lower scenario

analysis and respective

resilience reporting is a

medium-term goal and will

therefore be addressed

earliest by the 2025 annual

report.

Risk

management

a. Describe the

organization’s

processes for

identifying and

assessing climate-

related risks.

Compliant HeiQ plc does not currently have

risk management processes in

place for identifying and assessing

climate-related risks and as such

does not determine the relative

significance of climate-related

risks in relation to other risks.

The Company has not yet formally

assessed existing and emerging

regulatory requirements related to

climate change or other relevant

factors. HeiQ plc does not currently

have processes for assessing

the potential size and scope of

identified climate-related risks nor

does it have specific definitions

of risk terminology or references

to existing risk classification

frameworks.

N/A N/A

b. Describe the

organization’s

processes for

managing climate

related risks.

Compliant HeiQ plc does not currently have

processes for managing climate-

related risks, including those

to make decisions to mitigate,

transfer, accept, or control those

risks. In addition, HeiQ plc does

not currently have processes for

prioritizing climate-related risks,

nor for undertaking materiality

determinations.

N/A N/A

c. Describe how

processes for

identifying,

assessing, and

managing climate-

related risks are

integrated into

the organization’s

overall risk

management.

Compliant HeiQ plc has not integrated

identification, assessment or

management of climate-related risks

into overall risk management.

N/A N/A

Metrics

& targets

a. Disclose the

metrics used by

the organization

to assess climate-

related risks and

opportunities

in line with its

strategy and risk

management

process.

Explain Beyond reporting scope 1 and 2

emissions, HeiQ does not measure

and report any other climate-related

metrics. HeiQ Plc don’t use an

internal carbon price.

HeiQ Plc will develop

metrics that align to the

identified material risks

and opportunities once the

exercise outlined above in

the strategy (a) section is

done. We will consider the

TCFD all sector and sector-

specific guidance when

identifying suitable metrics.

Disclosure of metrics used

is a medium-term goal and

will therefore be addressed

earliest by the 2025 annual

report.

b. Disclose scope

1, scope 2 and, if

appropriate, scope

3 greenhouse gas

(GHG) emissions

and the related

risks.

Explain HeiQ has reported its scope 1 and

2 emissions on page 18. To date we

have not been able to measure our

scope 3 emissions, but we estimate

that they will account for over 40% of

our total emissions and will therefore

be considered material.

Given the complexity

of assessing scope 3

emissions, addressing our

scope 3 measurement is a

long-term objective only.

Scope 3 reporting is a

long-term goal only and will

therefore be addressed

earliest by the 2025 annual

report or later.

c. Describe the

targets used by

the organization to

manage climate

related risks and

opportunities

and performance

against targets.

Explain HeiQ currently does not use any

climate-related targets.

As metrics used by the

organization to assess

climate-related risks and

opportunities are not yet

defined, the Company

considers the target

definition and measurement

of performance against these

targets as a medium-term

goal to be implemented

at the same time as the

definition of the metrics to be

measured and in alignment

with identified risks and

opportunities.

Definition of targets and

tracking against them is a

medium-term goal and will

therefore be addressed

earliest by the 2024 annual

report.

024

HeiQ PLC

Annual Report and Accounts 2022

LIST OF DISCLOSURES ON PAGE

1. GRI-1 Foundation 16 and 17

2. GRI-2 General Disclosures

D2-1 Organizational details 1 and 8 and 9

D2-2 Entities included in the reporting 17

D2-3 Reporting period, frequency and contact point 24

D2-4 Restatements of information 18

D2-5 External assurance 24

D2-6 Activities, business model and value chain 6-9

D2-7 Employees 19-21

D2-8 Workers who are not employees 20

D2-9 Governance structure and composition 44-45

D2-10 Governance nomination and selection 54

D2-11 Chair of the highest governance body 3 and 46-48

D2-12 Role of the highest governance body 46-48

D2-13 Delegation of responsibility 47-48

D2-14 Role of the highest body in sustainability reporting 47

D2-15 Conflicts of interest 46-47

D2-16 Communication of concerns 52

D2-17 Collective knowledge of the highest body 44-45

D2-18 Evaluation of performance 47

D2-19 Remuneration policies 55-61

D2-20 process to determine remuneration 55-61

D2-22 Statement on sustainable development strategy 16

D2-23 Policy commitments 20 and 21

D2-24 Embedding policy commitments 21

D2-25 Process to remediate negative impacts 16-18

D2-26 Mechanisms for seeking advice and raising concerns 21

D2-27 Compliance with laws and regulations 21

D2-28 Membership associations 21

D2-29 Approach to stakeholder engagement 26-29

D2-30 Collective bargaining agreements 21

3. GRI-3 Material Topics

D3-1 process to determine material topics 16

D3-2 List of material Topics 17

D3-3 Management of Material Topics 17-21

4. GRI Material Topic Standards and Disclosures

GRI 302 Energy

D302-1 Energy consumption 18

D302-3 Energy intensity ratio 18

GRI 305 Emissions

D305-1 Scope 1 18

D305-2 Scope 2 18

D305-4 Emissions intensity ratio 18

GRI 401 Employees

GRI 401-1 19 and 21

GRI 301 Materials

GRI 301-1 21

GRI 301-2 21

5. Omissions

There are no omissions in this sustainability report.

Contact for questions and remarks:

Philip Ghekiere

Sustainability Officer

philip.ghekiere@heiq.com

GRI content index

Statement of use

HeiQ PLC has reported the

information cited in this GRI

content index for the period

1/1/2022–31/12/2022 with

reference to the GRI Standards.

The GRI version used is GRI-1

foundation 2021. HeiQ PLC reports

on sustainability annually. This

sustainability report was reviewed

and approved by the Sustainability

Committee of the Board of

Directors. HeiQ PLC did not seek

external assurance for this report.

Strategic report

Sustainability report continued

025

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HeiQ PLC

Annual Report and Accounts 2022

026

HeiQ PLC

Annual Report and Accounts 2022

Strategic report

Section 172 statement

Section 172

statement

The Directors of the Company, as

those of all UK companies, must

act in accordance with a set of

general duties. These duties are

detailed in section 172 of the UK

Companies Act 2006, which is

summarized as follows:

“A director of a company must act in

the way they consider, in good faith,

would be most likely to promote

the success of the company for

the benefit of its members as a

whole and, in doing so have regard

(amongst other matters) to:

the likely consequences of any

decisions in the long term;

the interests of the company’s

employees;

the need to foster the

company’s business

relationships with suppliers,

customers and others;

the impact of the company’s

operations on the community

and environment;

the desirability of the company

maintaining a reputation for

high standards of business

conduct; and

the need to act fairly as between

members of the company.”

Ongoing engagement with our

stakeholders remains a priority and

is critical to HeiQ’s success.

The Directors of HeiQ consider,

both individually and together, that

they have acted in the way they

consider, in good faith, would be

most likely to promote the success

of the Company for the benefit of its

members as a whole having regard

to the stakeholders and matters

set out in s172 of the Companies

Act 2006 (“section 172”) in the

decisions taken during the year

ended 31 December 2022.

In doing so, the Directors have

taken account of the likely long-

term consequences of decisions

made in the year, the interests of

HeiQ’s employees, the Company’s

business relationships with its

clients, suppliers, and the impact

of the Company’s operations on the

community and the environment.

The Directors strive to maintain a

reputation for exacting standards of

business conduct, and the need to

act fairly between members of the

Company.

When formulating the Company’s

strategy, the Directors consider

the longer-term and broader

consequences and implications of

its business on key stakeholders

and society in general. The need to

be a responsible company in this

context is embedded in HeiQ’s ethos

and is the focus of the Company’s

ESG and Sustainability strategy.

Stakeholder engagement

As part of HeiQ’s commitment to

effective stakeholder engagement,

and in accordance with section

172, the Company sets out its

key stakeholder groups and

corresponding approach to

engagement with them.

HeiQ’s stakeholder engagement

strategies are tailored for each of

these key audiences to continue

a mutually beneficial dialogue

with those who are invested in,

or impacted by, the Company’s

operations.

The following paragraphs

summarize how the Directors

fulfill their duties. Information

collected by management in the

course of their interaction with

any stakeholder group is typically

considered by the Board at its

regular Board meetings (there

were nine such meetings in 2022).

The Board holds an annual strategy

workshop where the strategy

of individual Business Units as

well as the Group as a whole is

presented by the Business Unit

leaders, the Executive Directors

and reviewed by the Board.

027

Strategic

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Corporate

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Financial

statements

HeiQ PLC

Annual Report and Accounts 2022

Shareholders

HeiQ seeks to develop a broad

investor base with those who share

our values and are supportive of our

strategy and mission. Engagement

with shareholders is a key element

to fulfilling this objective. Besides

engaging through the Company’s

shareholder meetings, Executive

Directors engage with investors

directly in face-to-face meetings

in course of investor roadshows

typically organized at least three

times a year around the publication

of financial results and the AGM.

The Directors typically all attend

the AGM in person, a decision

that was taken to facilitate more

effective face to face engagement

with shareholders, allowing them

to ask questions directly to the

Board. Upon publication of financial

results, the Executive Directors hold

additional investor calls focused on

retail investors with extensive Q&A

sessions. In 2022, the Company

organized two site visits, one to

its operational headquarters in

Switzerland, and one in the newly

established HeiQ AeoniQ pilot

plant in Austria where members

of the executive team including

Directors participated. Feedback on

presentations and investor talks has

been collected by the Company’s

broker and Investor Relations

advisors and has been reported to

the Board on an anonymous basis.

This feedback has been taken into

consideration for future shareholder

communications and incorporated

into the strategic decision-making

process by the Board.

Employees

The Directors engage with the

workforce and management team

in different ways both directly and

indirectly.

Periodical leadership meetings:

The Executive Directors meet with

the leadership team typically every

other week to discuss operational

questions including such concerning

employees. Typically three times a

year, the leadership team meets

physically for more strategic

discussions with the Executive

Directors. Topics of interest and/

or concern for the entire Board are

reported by the Executive Directors

at Board meetings.

Periodical meetings of the

entire Board with executive

management: Take place several

times a year, the Board holds

meetings with each Business

Unit leader to discuss strategy

and operational performance of

the individual unit. This allows

the Directors to make informed

decisions on the performance of

individual Business Units, consider

longer term strategy for where to

invest further or where to scale back.

Quarterly town hall meetings:

The Group CEO hosts mandatory

quarterly town hall meetings with

all employees and participation of

Directors with an extensive Q&A

session. The Directors believe

this is an essential forum to allow

employees access to the upper tiers

of management and the Board that

they may not be afforded during

their day-to-day work life. It is also

a useful forum for the Board to

receive honest and direct feedback

on concerns from the ground up,

facilitating discussion and longer-

term planning around employee

satisfaction in the workplace and

specific issues that may need to be

addressed.

Informal meetings with senior

staff by individual Directors:

Directors, in particular the Chair,

periodically meet with senior staff

members for an informal exchange

on a one-to-one basis. Further,

a global quarterly newsletter

ensures that all employees and

Directors are aware of important

recent developments in the Group,

including those of the headquarters

as well as each local office.

Whistleblowing: HeiQ’s

whistleblowing policy provides

a mechanism for employees to

raise concerns in confidence and

anonymously, with any serious

matters being escalated to the

Board to review and ensure

arrangements for proportionate and

independent investigation and for

follow-up action if required.

028

HeiQ PLC

Annual Report and Accounts 2022

Strategic report

Section 172 statement continued

Customers

Understanding our customers

and their customers (consumers)

and what matters to them is of

paramount importance to HeiQ.

HeiQ aims to establish long term

win-win customer relationships

which might, from time to time,

require re-alignment and/or re-

negotiation of critical business

terms. The Group CEO therefore is

involved in customer meetings on

a regular basis and in particular

is significantly involved in the

business development which

typically is done in collaboration

with an application partner,

i.e. with future customers like

Hugo Boss in the case of HeiQ

AeoniQ. The Executive Directors

are further kept informed about

any significant development with

particular customers in course

of their periodical meetings with

the Leadership team. The Group

CEO provides feedback on specific

customers and market situation in

general to the Directors in Board

meetings. In meetings between

the Board and the Business Unit

leaders, Directors benefit from

getting direct insight into customer

issues from the Leadership team.

Suppliers

Fostering good business

relationships with suppliers is

important to the Company’s

success. HeiQ aims to establish

long term win-win supplier

relationships which might, from

time to time, require re-alignment

and/or re-negotiation of critical

business terms. While the key

contact to suppliers typically

happens with the individual

business leaders, the Group CEO

meets periodically with major

suppliers and is also involved in

negotiations with them. This is the

case in particular in relation to key

strategic business development

initiatives like HeiQ GrapheneX

or HeiQ AeoniQ. Critical supplier

situations are always discussed

by the Executive Directors and the

Leadership team in their regular

meetings. The Board is briefed

on any possibly critical situation

as needed during their regular

meetings.

Community and environment

HeiQ is proud to employ people

in the communities in which

we operate. We have product

standards, policies and guidance

covering the products we make

to help ensure that they are

manufactured safely, legally and

to the required quality standards.

Besides legally required standards.

HeiQ operates a significant

part of its business under ISO

standards and additionally, most

HeiQ products are also certified

for voluntary quality standards

such as ZDHC (Zero Discharge for

Hazardous Chemicals), bluesign®

and OEKO-TEX®. Various members

of HeiQ’s workforce are members

of local industry associations (e.g.

the Group CEO is a member of

the Board of ScienceIndustries

Switzerland (Business Association

Chemistry Pharma Life Sciences)

and HeiQ is a member of the

European Silver Task Force.

Business conduct

As explained in more detail in

Corporate Governance on page

55, values and culture are an

integral part of our strategy and the

Board strives to promote a culture

based on high business conduct

standards.

Acting fairly between members

of the Company

Having assessed all necessary

factors, and as supported by

the processes described above,

the Directors consider the best

approach to delivering on the

Company’s strategy. This is done

after assessing the impact on all

stakeholders and is performed

in such a manner to act fairly

between the Company’s members.

The Board is committed to sharing

information publicly so that all

members of the Company have

access to the same information

at the same point in time and in

accordance with the requirements

of the Financial Conduct Authority’s

Listing Rules, the Disclosure and

Transparency Rules and the UK

Market Abuse Regulation.

Key Board decisions and

Section 172 considerations

The following are examples of

some of the principal decisions

made by the Board during the year

under review which demonstrate

how employee interests, the need

to foster business relationships

with other key stakeholders

and other Section 172 matters

have been taken into account in

discussions and decision making.

Definition of Business Units

The Board agreed to form three

distinctive Business Units out of

its commercial business, designed

to drive activities and measure

performance in a more focused

way. The objective is to allow these

distinct business units to flourish

so as to have a higher impact on

society and the environment with

our sustainable product offerings.

It also aims to describe the HeiQ’s

diverse activities in a simpler way

for the benefit of all stakeholders,

including employees.

Sale of a minority shareholding in

HeiQ AeoniQ GmbH to Hugo Boss

In February 2022, the Board

decided to enter into a partnership

agreement with Hugo Boss in order

to support the commercialization

of our HeiQ AeoniQ technology.

The agreement includes the sale

of minority shareholding in HeiQ

AeoniQ GmbH. The decision to do

so was taken after considering

all stakeholder interests. The

onboarding of a major brand and

customer is expected to accelerate

the scale-up of the technology

significantly from which the

community and environment will

profit significantly as the technology

aims to replace polyester with a

cellulose yarn and thus reduces

the carbon footprint of textiles

significantly. In a similar way,

customers will benefit from the

faster go-to market time as many

brands in the textile industry

have themselves committed to a

“net-zero” strategy. HeiQ AeoniQ

will enable them to achieve these

goals and therefore scaling-up

HeiQ AeoniQ rapidly is in the

best interest of customers. Also

investors’ interests have been

considered as the transaction

supports the direct financing

029

Strategic

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Corporate

governance

Financial

statements

HeiQ PLC

Annual Report and Accounts 2022

on this scale-up, supports the

valuation of the technology and

de-risks the whole project as strong

partners are joining in.

Change of Auditor

As announced November 7,

2022 and following a period of

significant international expansion

and as our activities have

become increasingly complex and

diversified, the Board decided to

change the auditor of the Company

for the financial year 2022 based

on the recommendations from

its Audit Committee. Taking the

decision, interest from internal

as well as external stakeholders,

in particular shareholders, have

been considered. Given the

significantly increase complexity

within the Group, the ambitious

growth plans including the foreseen

scale-up of HeiQ AeoniQ, as well

as based on the review on the

previous auditor’s work by the

FRC, the Board concluded that it is

appropriate to identify an auditor

with greater capacity to understand

and work with HeiQ to address the

challenges the company faces.

Deloitte LLP was appointed as

the Company’s new auditor for the

financial year 2022. As discussed

in the Audit Committee report,

Deloitte LLP is not seeking re-

appointment at the next annual

general meeting.

Expansion of Terms of Reference

of the Remuneration Committee

The Directors took the decision

during the year to expand the

Terms of Reference of the

Remuneration Committee to

be more widely involved in the

structuring of HeiQ’s incentive

schemes with a view providing

additional governance and support

around effectively motivating

and rewarding employees. This

expansion of terms was decided in

order to ensure that all incentives

offered to the workforce of HeiQ

are well aligned with investors’

interests and that employees on

all levels are incentivized along the

same principles across the Group.

Option grant under the long-term

incentive schemes

The Board, as advised by the

Remuneration committee, agreed

to grant options over ordinary

shares in the Company to a

broader range of employees. The

intention behind this decision was

to align employees with the longer-

term success of the Company.

Options have been granted to 26

individuals, representing more

than 10% of the entire workforce.

Further details on granted options

can be found in Note 27 to the

financial statements. Granting

options to a wider range of

employees is a way to incentivize

employees driving the Group’s

future performance in a way that is

aligned with investors’ interests.

HeiQ PLC

Annual Report and Accounts 2022

Strategic report

Financial review

Xaver Hangartner

CFO

Navigating a

challenging

market with a

focused approach

2022 was a difficult

year where our financial

performance was impacted

by highly challenging market

conditions and fell short of

expectations. Sales suffered

from reduced market demand

– particularly in the last

quarter of the year – while we

continued to invest into our

key innovation initiatives to

maintain the long-term growth

potential of the Group. After

achieving a revenue growth of

10.0%

in the previous year,

revenues reduced by 14.8%

in 2022 to US$47.2 million

(2021

: US$55.4 million).

030

031

Strategic

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Corporate

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Financial

statements

HeiQ PLC

Annual Report and Accounts 2022

Following several acquisitions, the

Group has grown significantly in

terms of capabilities, technology

platforms and growth potential

but also in terms of organizational

complexity. The Group has seen

a number of businesses with

different systems, processes and

cultures joining the Group since

2017 and in particular during 2021.

Inorder to integrate the different

businesses, the Group commenced

the harmonization of processes,

systems and operating practices

across the organization in 2022.

Furthermore, the significant drop

in market demand required us to

review the valuation of intangible

assets and our approach to inventory

valuation as we envisaged a short-

term fall in demand for certain of our

technologies. Accordingly, despite our

continued confidence in the mid- to

long-term value potential of our

market offerings, we have revised

forecasts used in certain valuation

models related to intangible assets

as well as inventory. As a result,

the Board has concluded that it is

appropriate to impair various goodwill

positions as well as inventory

positions where we believe quantities

on hand exceed demand for the

next twelve months. While preparing

annual accounts 2022, including

reviewing aspects of accounting

which rely on significant judgment,

the Company has also identified prior

period errors that require correction

and thus lead to a restatement of

prior period financial statements.

These factors have contributed to

a significant delay in the financial

reporting process and the finalization

of the work by ourauditors.

The Group deemed it appropriate

to defer the recognition of

revenues (and profits) from certain

partnership agreements related

to HeiQ AeoniQ™ to future periods.

It was concluded that it is more

appropriate to recognize the

milestone-payments over time

during the agreed exclusivity period

rather than at a point in time upon

achieving the agreed technical

development milestones. Accordingly,

US$2.0 million recognized in H1

2022 has been deferred and will

be recognized over a 4-year period

commencing in H2 2022 and an

additional US$2.0 million previously

expected to be recognized in H2

2022 has also been deferred.

Accounting aspects

relyingon significant

judgment and estimations

that materially affected our

2022financialperformance

Impairment of Goodwill

Considering the challenging trading

conditions, we have determined a

cumulative impairment charge of

US$13 million to be appropriate

as of December 31, 2022. As

we have corrected the underlying

framework for modelling valuation

assumptions, we have also applied

the same approach retrospectively

to the FY 2021 accounts and have

concluded that of the cumulative

impairment charge of US$13

million, US$2.4 million should be

charged against income in 2021

instead of 2022. Further details

on the impairment charge can

be found in Note 18 and Note

2 (restatement of 2021) to the

financial statements.

Allowance on inventory

Due to the deterioration in market

conditions, the Group has limited the

demand forecast period to assess

whether a good is sellable or not to

twelve months. Previously,the Group

applied a longer period of up to three

years.However, the Board concluded

that this practice is no longer

appropriate given the deterioration

inmarket conditions.

This has resulted in recording a

significant allowance on inventory

of US$4.9 million in 2022. This

non-cash expense has a significant

impact on the gross margin for

2022 and relates mainly to the raw

materials for a limited number of

finished products.

Accounting for

take-or-pay contracts

Certain customers have agreed,

under a “take or pay” contract,

to purchase a specified minimum

quantity of particular products

over a specified period of time,

usually in exchange for a specified

exclusivity during the same period.

However, the customer must pay

for the full quantity stated in the

contract, irrespective of whether

the customer takes delivery of the

minimum quantity to which they

are committed. Upon payment

of the full amount, the contract

allows customers to defer their

unexercised rights and to consume

the remaining units within a twelve-

month period, although there is

no compulsion to do so. Revenue

recognition for the shortfall items

is deferred until the customer

consumes the units, or, in case

of expiry of the rights, typically

twelve months after payment by

the customer. This represents an

amendment to the accounting

policy for such contracts as

disclosed in Note 2 and has led

to prior year restatements as

discussed further below.

Consequently, the Directors have

also concluded that no revenue

should be recognized for a long-

term customer contract that the

Group is enforcing by way of legal

claim in court as the customer has

not shown a willingness to execute

any business as stipulated in the

signed agreement. This has led

to a de-recognition of revenue and

profits in 2021 (US$0.6 million)

and H1 2022 (US$0.7 million).

Financial Performance

Year ended

December 31, 2022

US$’000

Year ended

December 31, 2021

US$’000

(restated)

Revenue 47,202 55,419

Gross profit 13,457 25,397

Gross profit margin 28.5% 45.8%

Selling and general administrative expenses (30,969) (24,680)

Impairment losses (12,381) (2,454)

Net other income/expenses 648 383

Operating loss (29,245) (1,354)

Operating margin (62.0%) (2.4%)

Loss after taxation (29,814) (1,373)

Adjusted EBITDA (12,174) 4,545

EBITDA margin (adjusted) (25.8%) 8.2%

032

HeiQ PLC

Annual Report and Accounts 2022

Financial Performance

Revenues

Market demand for most of our businesses, with the exception of the Chinese market due to lockdowns imposed

by the government, was not significantly impacted by geo-political developments, inflation and rising interest rates

until late in the year on the back of consumer demand and inventory build-up across the value chain. After the

COVID-19 pandemic and supply-chain disruptions in the previous years, industry players have been building up

much higher inventory levels than in the past to mitigate possible supply issues which has supported demand.

As such, in the first half of the year, HeiQ was able to deliver a revenue growth of 6.8% (H1 2022

vs. H1 2021)

despite an extremely low level of business activity in China (lockdowns). As inflation continued to increase rapidly

in H2 2022, market sentiment weakened based on increasing global recession concerns. Late in the year,

this led to a sudden halt in business along the entire supply chain, particularly in the textile industry which, in

terms of revenue, is still the most important industry segment for HeiQ. Brands started to cancel orders as they

faced uncertain consumer demand coupled with very high levels of inventory. This caused a sudden and severe

decrease in manufacturing activity across the value chain. Consequently, revenues for H2 2022 were down

33.7% compared to H2 2021

and down 28.7% compared to H1 2022

. Given the high inventory levels seen in

Q3 2022, we expect demand for our functional ingredients to remain subdued for 2023.

Gross margin

Gross margins were 28.5% for the full year (2021

: 45.8%). In H1 2022

margin was stable compared to

H2 2021

(41.5% vs. 42.7%). The increased inventory allowance due to the change in the valuation approach

had a negative impact on the gross margin in H2 2022 which stood at 10.3%. Excluding the US$4.9 million

allowance on inventory recorded in 2022, the gross profit for FY 2022 would have been US$18.4 million and the

corresponding gross margin would have been 38.9% vs. 45.8% for the full year 2021

Sales and General Administration Expenses

As we have disruptive technologies with high value and market potential in our innovation pipeline, we continued

to invest during 2022 in our future and in value creation although we have both prioritized and adjusted the

scope of projects as revenues and related cash generation have suffered. Our Sales and General Administration

expenses (“SG&A”) have grown in 2022 to US$31.0 million, an increase of US$6.3 million or 25.5% (2021

US$24.7 million).

SG&A in H1 2022

was US$ 14.0 million, stable compared to H2 2021

(US$ 14.0 million) but significantly

higher than in H1 2021 (US$10.7 million). Approximately US$1.9 million of this increase in H1 2022 (vs H1

2021) relates to the full year inclusion of acquired companies. Further, in the course of 2021 we invested in our

skilled workforce, including the build-up of the HeiQ AeoniQ™ fiber team which increased the general cost base

for H1 2022 by another US$1.4 million compared to H1 2021.

In H2 2022, SG&A amounted to US$17.0 million which represents an increase of US$3.0 million against

H1 2022

and US$3.0 million against H2 2021

. Audit costs for FY 2022 increased by about US$1.0 million

compared to FY 2021.

Strategic report

Financial review continued

Sales and gross margin development SG&A costsUS$’000 US$’000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

60%

50%

40%

30%

20%

10%

1HY 21 2HY 21

2021 20221HY 22

2HY 22

Sales 1HY 2HYGross margin Gross margin excl. inventory allowance

25,795 30,313

42.7%

49.4%

28,280 10,671

14,099

41.5%

22,423 14,016

16,953

35.3%

10.3%

+2,944

+3,345

033

Strategic

report

Corporate

governance

Financial

statements

HeiQ PLC

Annual Report and Accounts 2022

Impairment losses

Impairment losses have been recorded both on intangible assets (US$11.7 million) – mainly related to goodwill

impairments as explained above – as well as on property, plant & equipment (US$0.7 million) as hygiene mask

production equipment has been impaired due to a significant decline in demand.

Other Income/Expenses

Other income and other expenses predominantly relate to foreign exchange gains on working capital (other income)

and foreign exchange losses (other expenses). Other expenses further include a write-off of intangible assets.

Overall, and including goodwill impairments, HeiQ reports an operating loss of US$-29.2 million for the year 2022

compared to an operating loss of US$-1.4 million in 2021

Reporting as per new Business Unit structure

As explained in the Chair and CEO statement, the Group has re-organized its management structure into distinct

Business Units and therefore has also amended its disclosures on reported segments.

HeiQ reports four segments: the three Business Units as well as “Other activities”. Other activities include the

Innovation Service function, Business Development initiatives (“Ventures”) as well as costs not allocated to one

of the three Business Units, including goodwill impairments. In 2022 and 2021, SG&A expenses have been

allocated to Business Units only to a limited extent with focus on commercial activities. For 2023 and going

forward, the Group intends to allocate costs more extensively to the three Business Units.

Textiles & Flooring Life Sciences Antimicrobials Other activities Total

US$’000 2022 2021

2022 2021

Revenue

33,870 39,773 6,894 10,115 3,577 3,379 2,861 1,792 47,202 55,419

Operating profits

(loss)

979 14,196 (1,078) 1,438 53 1,106 (29,199) (18,096) (29,245) (1,354)

Finance result

(590) (35)

Loss beforetaxation

(29,835) (1,389)

Taxation

21 16

Loss aftertaxation

(29,814) (1,373)

* As restated.

Revenues within the Textiles & Flooring business unit decreased by US$5.9 million (-15%) to $33.9 million in

2022. This was driven by two previously mentioned main contributors: COVID-19 related lockdowns in one of our

main markets, China, as well as the unprecedented, industry wide decrease in demand along the entire value

chain towards the end of the year.

Revenues within the Life Sciences business unit decreased by US$3.2 million (-32%) to $6.9 million in 2022

compared to 2021

. This decrease reflects the significantly lower sales of hygiene masks in 2022 which was

partly offset by an increase in sales of HeiQ Synbio products.

Revenues within the Antimicrobials business unit increased by US$0.2 million (+5.9%) to US$3.6 million.

Revenues allocated to other activities encompass mainly Innovation Services provided to 3rd party customers.

Adjusted EBITDA

Reported adjusted EBITDA loss was US$-12.2 million for 2022 compared to a positive EBITDA of US$4.5 million

in 2021

EBITDA is a way of measuring cash generation. HeiQ therefore adjusts EBITDA for share options and rights

granted to Directors and employees and significant non-cash items being impairments of goodwill and intangible

assets.

Adjusted EBITDA

US$’000 2022

2021

(restated)

Operating loss (29,245) (1,354)

Depreciation 2,220 1,971

Amortization 1,435 976

Impairment losses and write-offs 13,278 2,454

Share options and rights granted to Directors and employees 138 498

Adjusted EBITDA (12,174) 4,545

034

HeiQ PLC

Annual Report and Accounts 2022

Statement of Financial Position

Total assets were US$71.1 million as of December 31, 2022 (December 31, 2021

: US$94.1 million) with

equity amounting to US$40.3 million and liabilities of US$30.8 million as of December 31, 2022 (December

31, 2021

: US$59.5 million equity and US$34.6 million of liabilities). This corresponds to an equity ratio of 57%

(2021

: 63%).

Non-current assets decreased from US$47.3 million (December 31, 2021

) to US$38.7 million as of December

31, 2022, mainly driven by the impairment of intangible assets.

Current assets decreased by 30.9% to US$32.4 million as of December 31, 2022 (US$46.9m as of December

31, 2021

). Trade receivables reduced by US$8.2 million to US$6.5 million as of December 31, 2022 (2021

US$14.7 million). The cash balance decreased by US$6.1 million year-on-year and was US$8.5 million as of

December 31, 2022 (2021: US$14.6 million).

The decrease in total liabilities was mainly driven by the settlement of deferred consideration related to the

acquisitions made in 2021. Total liabilities decreased by US$3.8 million (11.0%) from US$34.6 million as

of December 31, 2021

to US$30.8 million as of December 31, 2022. Net debts (including lease liabilities)

amount to US$3.7 million as of December 31, 2022 (December 31, 2021

: net cash position of US$3.7 million).

Cash Flow Statement

As a result of sales below expectation coupled with the (budgeted) increase in our cost base, net cash generated

from operating activities in the year 2022 was negative and amounted to US$-2.5 million (2021: US$3.4 million).

Cash used in investing activities amounts to US$8.8 million in 2022 (2021: US$12.7 million) and reflects

the continued investment in building long-term value. With US$3.9 million the development and acquisition of

intangible assets accounts for the largest share of investment activities. This includes internal R&D activities

qualifying for capitalization but also the acquisition of intellectual property rights to further complement the

hygiene range of our Antimicrobial business. We also invested US$3.4 million of cash in plant and equipment,

predominantly related to the HeiQ AeoniQ

pilot plant located in Austria. Consideration paid for acquisitions

(US$1.6 million) relate to earn-out and installment payments for acquisitions executed in previous periods.

Net cash from financing activities amounted to US$5.9 million (2021: US$-1.3 million net cash used). The

largest portion of proceeds is related to the sale of a 2.5% equity stake in HeiQ AeoniQ GmbH to Hugo Boss in

H1 2022 (US$4.8 million). Proceeds from borrowings (net) amount to US$2.6 million and relate mainly to fixed

advances with a duration of up to 3 months.

The Group reports a cash balance of US$8.5 million as of December 31, 2022 (December 31, 2021: US$14.6

million).

Prior Period Adjustments

As describe further above, the Directors have concluded that certain adjustments to prior period financial

statements should be recorded. The cumulative impact on the prior period financial statements (FY 2021)

is as follows.

In US$ As published previously Total restatements As restated

Revenue for FY 2021 57.9 million (2.5 million) 55.4 million

Income (loss) after taxation for FY 2021 2.5 million (3.9 million) (1.4 million)

Total assets as at December 31, 2021 101.8 million (7.7 million) 94.1 million

Total equity as at December 31, 2021 64.6 million (5.1 million) 59.5 million

Total liabilities as at December 31, 2021 37.2 million (2.6 million) 34.6 million

These corrections resulted in a significant restatement of the income after taxation. Further details of these

corrections as well as additional corrections that did not result in material restatement of the income after

taxation are disclosed in Note 2 to the financial statements.

Restatement in respect of a significant take-or-pay contracts

As disclosed in Note 2 to the financial statements, the Group has renegotiated a significant take-or-pay contract

after the balance sheet date. As a result of renegotiations, the Group has effectively waived unpaid accounts

receivable in exchange for a right of first refusal on supply of a wide product range to a large industry player with

the expectation to grow this multiple million US$ account significantly over the coming years.

Strategic report

Financial review continued

035

Strategic

report

Corporate

governance

Financial

statements

HeiQ PLC

Annual Report and Accounts 2022

The company has reviewed its historic accounting for this contract. The conclusion of this review is that amounts

recognized as revenue in 2021 and accounts receivable as at December 31, 2020 and 2021 were overstated

as the criteria for revenue recognition under IFRS 15 had not been met. There are also associated impacts on

costs of sales, accrued liabilities and tax. The Group has determined that revenues of US$1.8 million and profits

of US$0.7 million recognized in 2021 required reversal. Additional revenues and profits of US$0.7 million have

been derecognized in relation to another take-or-pay contract in relation to which the Group has filed a claim

against the customer in court.

Restatement in regards of goodwill impairments

As highlighted further above and discussed in more detail in Note 2 to the financial statements, the Directors

concluded that a portion of the goodwill impairments identified in preparation of the 2022 Annual Accounts

should have been identified during the preparation of the 2021 financials, if all available information at the point

of publishing the annual report 2021 had been taken into consideration. Consequently, a retrospective review of

the 2021 goodwill impairment tests was performed. It was concluded that a portion of the identified impairment

amounting to US$2.3 million is to be allocated to the 2021 financial statements.

Going Concern Assessment

To manage its cash balance, the Group has access to credit facilities totalling CHF9.0 million (approximately

US$9.8 million as of September 30, 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 September 30, 2023, the Group has drawn CHF6.3 million of the facilities (CHF2.4 million as December

31, 2022) as follows:

Maturity dates of used credit facilities: Amount

November 27, 2023 CHF 4.5 million

June 17, 2024 CHF 0.8 million

September 30, 2024 CHF 1.0 million

Total CHF 6.3 million

The facilities are not committed, but the Board has not received any indication from financing partners that

facilities are at risk of being terminated. Furthermore, the Board is in discussions with financial institutions to

replace the currently uncommitted credit facilities by committed, long-term facilities, but the outcome of these

discussions remain uncertain.

The Group’s directors have a reasonable expectation that the Group has adequate resources to continue in

operational existence for the foreseeable future and operate within its credit facilities for a period of 12 months

from date of approval of these financial statements. Nevertheless, the Board acknowledges the uncommitted

status of the facilities which could be terminated without notice during the forecast period requiring the

refinancing of debts as per above maturity dates, indicates that a material uncertainty exists that may cast

significant doubt on the Group’s ability to continue as a going concern. Further disclosure on the going concern

assessment are made in Note 3b to the financial statements.

Xaver Hangartner

Chief Financial Officer

R Details on restatements of prior year financial information are disclosed in Note 2 to the Financial Statements (pages 84 to 88).

Restated prior year financial information in the Strategic Report (pages 2 to 43) and Corporate Governance section (pages 44 to 65) of

this Annual Report is marked with an asterisk as follows “R”. The same applies to financial information for the six-months interim period

ending June 30, 2022 which has been restated as per the 2023 interim accounts published on the same date as this Annual Report

036

HeiQ PLC

Annual Report and Accounts 2022

Strategic report

Risk management

Risk

management

framework

.01

.02

.03

.04

.05

Identify

the risks

Measure

the risk regarding

likelihood of

occurrence

Examine

solutions

Manage

the identified risks

Monitor

the results on an

ongoing basis

A comprehensive risk management

strategy is an essential part of

a truly sustainable business.

As such, HeiQ has adopted a

systematic method of identifying,

analyzing, evaluating, treating,

monitoring and communicating

risks in a way that will enable us

to minimize losses and maximize

opportunities.

Risk management will not be able

to eliminate risks entirely, but it will

enable us to identify, prioritize and

manage risks and opportunities in

a way that a possible impact can

be absorbed by the organization.

Risk management does not only

focus on preventing erosion

of value and addressing and

minimizing risk to an acceptable

level, but it can be a tool to set

strategies and identify business

opportunities to create and

maintain value. With our diverse

range of products and specialized

Risk management framework

Corporate risk management

is integral to our business

knowledge in material science,

we create innovations according

to the global megatrends and

act as a solution provider for our

downstream customers to provide

products that meet the latest

consumer needs. For example,

at the beginning of the COVID-19

pandemic, were able to quickly

identify an innovation that could

make textiles more hygienic and

such product had generated high

demand. By responding to the new

global situation, we were able to

build new businesses around the

innovation at fast pace.

Risk appetite

The Board has sought to frame

its risk appetite in terms of

technologies and markets in which

it is prepared to make investments.

In markets where the Group is

already commercially active, the

Board typically would expect that

investments are financed from

cash generated from the respective

commercial operations. In case of

investments into new technologies

and ventures outside of existing

commercial businesses, the

Board would expect that project-

financing from external parties like

grants and subsidies as well as

contributions from technology and

scale-up partners is limiting own

investments to a level that is not

jeopardizing the Groups mid-term

financial health in terms of liquidity

and debt/equity perspective.

Risk assessment is an item on

the leadership team’s agenda on a

periodical basis, and a risk report

is reviewed and discussed in Board

meetings at least twice a year. As

risks can arise from many different

angles, they need to be identified

top down and bottom up. Having

said that, while it is necessary to

have a formal risk management

system in place throughout the

organization, managing risk is also

the responsibility of each employee.

037

Strategic

report

Corporate

governance

Financial

statements

HeiQ PLC

Annual Report and Accounts 2022

.01

Identify the risks

Identification of risk is driven bottom-up. In its periodical management meetings typically held every other week,

members of the leadership team report on “red flags” as well as emerging risk in their area of responsibility.

Based on red flags and emerging risks, the Executive Directors review and update the Group’s risk report for

further discussion and review by the Board which typically happens twice a year.

The Group lists its key risk in five main categories as follows:

• Environmental and hazard risks

• Strategic risks

• Operational risks

• Financial risks

• Legal risks

.02

Measure the risk regarding likelihood of occurrence

Principal risks are identified and assessed individually and measured against the likelihood of them occurring

and the foreseeable impact if they do occur. Assessing the likelihood and impact of principal risks, the Board

uses the following classifications:

Risk Impact

Impact High

Medium

Low

Likelihood High

Medium

Low

.03

Examine solutions

Consider the various solutions to manage each risk and evaluate the optimal balance between cost and

effectiveness. Organizations usually have the option to accept, avoid, control or transfer a risk. Solutions how

to deal with risks are typically suggested by the leadership team in line with the risk appetite of the Group and

reviewed by the Board.

.04

Manage the identified risk

Once solutions are listed and prioritized, we allocate resources and personnel, including senior management,

possibly with external expertise as appropriate. A process is established to implement the solution and actively

manage the risk.

.05

Monitor the results on an ongoing basis

Since our organization, the environment and potential risks are constantly changing, risk management is a

continuous process which needs to be monitored regularly. A formalized process ensures a more complete

picture of the organization which enables more informed decision-making.

Emerging risks are to be identified and monitored by the leadership team and expected to be reported as soon

as they have the potential to become a principle risk (see “Identify the risks” above).

038

HeiQ PLC

Annual Report and Accounts 2022

Principal Risk Description Controls/Mitigation Impact Likelihood Trend

Delivery of growth

strategy/growth

rates not

sustainable

.01

If the Group does not successfully

implement its growth strategy for

a high margin business, this could

have a material adverse effect on

the business, financial condition

and operating results. The growth

strategy foresees to re-invest

profits from commercialized

products into innovation to further

grow the company.

Clear communication of

strategy and alignment

throughout the organization

with an Executive VP member

sponsoring each of the defined

strategic initiatives.

Leadership culture based on

objectives that are aligned with

the strategy.

High Medium Increase due

to lower

consumer demand,

originating from

higher inflation

and higher interest

rates.

Increase in

competition

.02

As competing products come to

market in direct competition to

HeiQ’s products, particularly from

large global companies, this may

result in a reduction in revenues

and associated profit margins.

HeiQ faces substantial competition

throughout our business from

international and domestic

companies.

HeiQ’s innovations typically

open up new markets and thus

the Group enjoys a first-mover

advantage.

HeiQ, with its three-in-one

approach (innovation,

production and marketing),

positions itself as a partner to

brands over the entire life cycle

of a technology, which provides

a lock-in effect.

Medium High Increase due to

strong overall

market demand

erosion, leading

competition to

fight fiercely over

existing business.

Geographical

risks

.03

HeiQ operates in a variety of

countries which have different laws,

taxes and markets at different

levels of maturity, together with a

range of competitors and customer

expectations. HeiQ’s business and

results of operations are affected

by changes in both global economic

conditions and the individual

markets in which we operate.

Terrorist acts, civil unrest and

other similar disturbances, as well

as natural disasters, can impact

economic conditions and consumer

confidence, degrade infrastructure,

disrupt supply chains and

otherwise result in business

interruption. A variety of factors

may adversely affect results of

operations and financial conditions

during periods of economic

uncertainty or instability, social or

labor unrest or political upheaval in

the markets in which we operate.

HeiQ has no business in Ukraine

and Russia and thus no direct

exposure to the conflict that

started in February 2022.

HeiQ’s strategy includes

developing a global footprint for

innovation and manufacturing,

as well as sales and

distribution channels. This

includes our own presence, as

well as cooperation with third

parties, such as distributors.

This ensures that the Group is

able to serve a given market

through different channels,

both from within and outside

of the respective geographical

area.

We are developing a local

presence in key markets

to ensure local markets

and regulatory frameworks

(including laws, taxes, etc.) are

well understood and addressed

appropriately.

Low High Increase due to

more economic

volatility leading

to protectionist

policies and

technical trade

hurdles.

Strategic report

Principal risks and uncertainties

The Board has identified the following principal risks that include emerging risks and which are discussed in

more detail on the following pages.

Risk category Principal risk Impact Likelihood

Strategic risks

1 Delivery on growth strategy/growth rates not sustainable High Medium

2 Increase in competition Medium Low

3 Geographical risks Low High

4 IP protection and first-mover advantage Medium Low

5 Regulatory risks High Medium

6 Reputational risks and failure to build brand equity High High

Operational risks

7 Innovation pipeline High Low

8 Supply chain disruptions High Medium

9 Personnel/Workforce Medium High

10 Interruption of IT system operations Medium Medium

Financial risks

11 Liquidity risk High Medium

12 Currency risks Low Medium

Legal risks

13 Product liability Medium Low

039

Strategic

report

Corporate

governance

Financial

statements

HeiQ PLC

Annual Report and Accounts 2022

Principal Risk Description Controls/Mitigation Impact Likelihood Trend

IP protection

and first-mover

advantage

.04

Any failure to substantiate or

assert HeiQ’s intellectual property

rights could make the business

less competitive and may have

a material adverse effect on net

revenue. HeiQ may face challenges

to its intellectual property rights

from third parties. If we are unable

to successfully defend against

allegations of infringement, we may

face various sanctions, including

injunctions, monetary sanctions,

product recalls and alterations to

our products and/or packaging,

which could result in significant

expense and negative publicity.

HeiQ’s business relies on

protecting our brands and

claims through a combination

of intellectual property rights,

unique market positioning,

trade secrets and freedom to

operate strategies.

It is key to the Group’s

intellectual property protection

strategy to constantly innovate

and further develop our existing

product portfolio to maintain a

first-mover advantage.

Medium Low Reduce due

to new patent

applications,

purchase of IP,

new trade secrets

generated, and

new ingredient

brands registered.

Regulatory

risks

.05

The manufacturing and marketing

of chemicals and medical devices

are subject to medical, biocidal,

chemical and environmental

regulations and permits. Such

regulations change frequently

and require HeiQ to invest in our

regulatory portfolio in order to

maintain access to markets and

licenses to operate. Failure to do

so may result in restricted market

access or prevent HeiQ from

manufacturing our products in the

relevant plants.

Regulators in different jurisdictions

might restrict use of certain

ingredients that are included

in HeiQ products and disallow

marketing of respective products in

different markets.

We follow regulatory

developments closely and

actively manage our product

portfolio and innovation

pipeline accordingly.

It is an integral part of HeiQ’s

strategy to innovate and

replace current solutions

with “greener”, future-proof

technologies.

We engage actively in

regulatory discussions

in industries in which we

operate, and we have recruited

additional experts to resource

increased

High Medium Stable to increase

due to more

frequent policy

changes following

the pandemic

who resourced

regulatory bodies

with more staff.

Reputational

risk/and failure to

build brand equity

.06

Substantial harm to HeiQ’s

reputation may materially adversely

affect our business. Various factors

may adversely impact HeiQ’s

reputation, including product quality

inconsistencies. Product defects

may occur due to human error or

equipment failure, among other

things, which may be outside of

our direct control. Reputational

risks may also arise with respect

to the methods and practices

of third parties that are part of

HeiQ’s supply chain, including

labor standards, health, safety and

environmental standards, and raw

material sourcing. HeiQ may also

be the victim of product tampering.

Moreover, third parties have

sold or may sell products that

are counterfeit or unauthorized

versions of HeiQ’s products or

inferior “lookalike” products that

resemble HeiQ’s. Consumers may

confuse our genuine products

with such unauthorized products,

which may adversely affect HeiQ’s

reputation.

Reputational risk could also arise

from not being able to meet

financial and non-financial reporting

requirements set-out by the Stock

Exchange or other regulatory

bodies.

We have a clear strategy

and policy in regard to

communication, both in terms

of product marketing as well as

at corporate level.

We actively manage claims

that are allowed in different

jurisdictions for different

products, and these are

also reflected in trademark

license agreements with our

customers.

HeiQ actively follows and

manages communication

both off- and online to ensure

potential issues can be

addressed in a timely and

appropriate way.

High High Increase due to

more stringent

laws, regulations

and policies

needing to be

followed. The

delay in financial

reporting on the

year 2022 also

has led to an

increase of this

principal risk.

040

HeiQ PLC

Annual Report and Accounts 2022

Principal Risk Description Controls/Mitigation Impact Likelihood Trend

Innovation pipeline

.07

Bringing innovations to market at

high speed is key to the Group’s

growth strategy and market

positioning. Failure to launch

innovations at a high pace might

have a material adverse impact on

the Group’s growth and operating

results.

HeiQ has a rich pipeline of

innovation ideas and a clear,

lean process for assessing and

developing these ideas into

product offerings.

The Innovation Advisory Board

prioritizes innovation projects

based on technical feasibility

and market potential, and the

Group’s network of research

partners allows it to access

knowledge needed for each

project.

High Low Stable to reduce

due to recent

major innovation

product launches

and full pipeline

of disruptive

innovations.

Supply chain

disruption

.08

We face the risk of supply chain

interruptions and disruptions in our

production facilities, which could

materially and adversely affect the

results of operations. Significant

disruptions to suppliers’ or our own

operations, such as those resulting

from natural catastrophes,

outbreaks of diseases, acts of

war or terrorism may affect our

ability to source raw materials

and negatively impact our costs.

The failure of suppliers to fulfill

their contractual obligations in a

timely manner may result in delays

or disruptions to our business.

Replacing suppliers may require

a new supplier to be qualified

under industry, governmental or

HeiQ’s own internal standards,

which may take time. In addition,

a number of our facilities are

critical to our business. Major

or prolonged disruption at those

facilities, whether due to accidents,

sabotage, strikes, closure by

government agencies or otherwise,

could materially and adversely

affect operations. Moreover,

manufacturing sites are subject to

supervision by regulatory agencies,

on both an ongoing and ad hoc

basis.

If the Group is unable to obtain or

produce sufficient quantities of a

particular product at specifically

approved facilities, whether due

to disruption to, or failure of,

manufacturing processes, or

otherwise, it may fail to meet

customer demand on a timely

basis, which could undermine

sales and result in customer

dissatisfaction and damage to

reputation.

We source raw and packaging

materials and finished

goods from a wide variety of

international chemical and

packaging companies and co-

producers.

We source key materials

whenever possible from at

least two different suppliers.

We periodically assess

potential for backwards

integration of materials that

allow either a material cost or

strategic advantage, including

security of supply.

We forecast our inventory

holding of critical raw materials

with our key customers and

place larger orders with key

suppliers.

High Medium Reduce due to

reduced consumer

demand, returning

to the market

overcapacities

leading to reduced

costs and

availability.

Strategic report

Principal risks and uncertainties continued

041

Strategic

report

Corporate

governance

Financial

statements

HeiQ PLC

Annual Report and Accounts 2022

Principal Risk Description Controls/Mitigation Impact Likelihood Trend

Personnel/

Workforce

.09

HeiQ’s business depends, in

part, on the ability of executive

officers and senior management to

provide uninterrupted leadership

and direction for the business,

and, in particular, on the ability to

recruit, train and maintain qualified

personnel for product research

and development. This need is

even more acute in the context

of a growing business and in the

strategic internal reorganizations

and resource planning programs to

promote and manage such growth.

HeiQ’s ability to attract and

retain key management and

other personnel is dependent

on factors including prevailing

market conditions, attractiveness

of others as potential employers,

working conditions and culture,

and the ability to offer attractive

compensation packages.

We have a structured hiring

process to ensure the cultural

fit of new hires.

HeiQ offers key senior

management and talent

participation via our share

option plan to align incentives

of individual employees to that

of the Group.

HeiQ supports employees’

growth with professional

and personal development

opportunities.

HeiQ fosters an inclusive,

meritocratic culture in which

employees are encouraged to

contribute and participate. We

also offer flexible work models

facilitating compatibility of work

with private and family life.

Medium High Stable to increase

Uncertain

global economic

outlook leads

to propensity to

review employment

terms.

Interruption of IT

system operations

.10

As a technology driven, global

acting Group, HeiQ relays on

various IT system to facilitate

its operations and management

if information. Interruption of IT

system might lead to a significant

negative impact on operational

performance with related adverse

impact on financial performance.

Interruption of IT system could be

caused by external cyber attacks

as well as by issues around

improvement, update or change of

IT systems leading to unforeseen

issues.

The Group invests significantly

in cyber security – both in

internal resources and training

of employees as well as

professional services related to

cyber security.

The CRM and ERP system

migration is supported by

external consultants to help

navigate through the transition

period and ensure a smooth

implementation of new

systems.

Medium Medium Increase Number

of global cyber

attacks from

external sources

are increasing

in general and

therefore more

likely to occur also

for HeiQ.

With the change

of our global CRM

and ERP systems

in 2022/2023,

the likelihood

for interruptions

related to system

changes is also

higher during the

transition period.

Liquidity risk

.11

As an Innovator and growth

company, the Group is depending

on sufficient financing at all

time to be able to execute on its

strategy. Innovations are typically

expected to be financed from

operating cash flows. In a situation

where marked demand for our

products deteriorates significantly

within a short period of time, the

Group is at risk of insufficient

operating cash flows to finance

all innovations and requires

credit lines to bridge financing

requirements until demand is

recovered or cost base is adjusted.

In such a situation, cancellation

of existing credit lines could have

a material impact on the Group’s

liquidity position.

The Group monitors cash

balances and cash flows

constantly. Further, it is in

periodical contact with its

financing partners to ensure

appropriate credit facilities are

available. Large investments

like technology scale-ups are

only executed once sufficient

project-related financing (equity

of debt) is available.

High Medium Increasing – with

rising interest

rates as well as

the challenging

market conditions

for our commercial

businesses,

receiving additional

financing has

become more

difficult.

042

HeiQ PLC

Annual Report and Accounts 2022

Strategic report

Principal risks and uncertainties continued

Principal Risk Description Controls/Mitigation Impact Likelihood Trend

Currency risks

.12

HeiQ Group operates mainly in

CHF, EUR, CNY, TWD and US$ and

reports in US$. Consequently,

changes in the GBP, CHF, EUR,

CNY, TWD and US$ exchange

rates will impact on the earnings

of the Group. The exchange rates

are affected by numerous factors

beyond the control of the Group,

including international markets,

interest rates, inflation, and the

general economic outlook and, as

such, the Group may not be able to

adequately manage these risks in

some circumstances.

The Group as far as possible

aligns operational cash in- and

outflows in the respective

currencies to achieve a natural

hedge.

Remaining short or long

positions are monitored

centrally and subject to

hedging where appropriate.

Low Medium Stable due to

globally aligned

monetary policies

and natural

currency hedging

by operating in

multiple locations.

Product liability

.13

As a product manufacturer, HeiQ

is subject, from time to time,

to certain legal proceedings

and claims in relation to our

products, including as a result

of unanticipated side effects or

issues that become evident only

after products are widely introduced

into the marketplace. HeiQ may

be required in the future to pay

compensation for losses or injuries

that are allegedly caused by our

products. Product liability claims

may arise, among other things,

from claims that products are

defective, contain contaminants,

provide inadequate warnings or

instructions, or cause personal

injury to persons or damage to

property. Product liability claims,

if resolved unfavorably, or if

settled, could result in injunctions

and/or may require HeiQ to pay

substantial damages and related

costs, including punitive damages,

as well as result in the imposition

of civil and criminal sanctions. If

one of HeiQ’s products is found to

be generally defective, HeiQ could

be required to recall the product,

and/or may be required to alter

trademarks, labels or packaging,

which could result in adverse

publicity, significant expenses,

potential disruptions in the supply

chain and loss of revenue.

HeiQ operates with defined

quality control procedures

integrated in production to

ensure that products sold are

within specifications defined

and agreed with customers.

Having onboarded multiple

suppliers for each raw material

reduces the risk of supply

chain issues but increases the

risk of variation in ingredients,

which may impact quality

control.

Medium Low Stable to reduce

due to new

more bio-based

innovations with

lower overall risk

profile.

043

Strategic

report

Corporate

governance

Financial

statements

HeiQ PLC

Annual Report and Accounts 2022

Strategic report

Principal risks and uncertainties continued

Non-financial information statement

Our non-financial information statement is set out below in compliance with Sections 414CA and 414CB of

the Companies Act 2006. It is intended to guide our stakeholders to where relevant non-financial information

can be found in this Annual Report.

Reporting requirement

Policies and standards which

govern our approach

Additional information and

risk management

Environmental matters ESG Policy

Code of Business Ethics Policy

Health, Safety, Environmental and Quality Policy

GRI reporting standards (voluntary disclosures)

Stakeholder engagement (pages 26 to 29)

Sustainability Report (pages 16 to 24)

Task Force on Climate-related Financial Disclosures

(pages 22 and 23)

Employees Code of Business Ethics Policy

ESG Policy

GDPR Policy

Whistleblowing Policy

Corporate Major Accident Prevention Policy

Grievance Disciplinary Policy

Health, Safety, Environmental and Quality Policy

Stakeholder engagement (pages 26 to 29)

Sustainability Report (pages 16 to 24)

EHOS Committee report (page 53)

Nomination Committee report (page 54)

Remuneration Committee Report (pages 55 to 57)

Report on Directors’ remuneration (pages 58 to

61)

Social matters Code of Business Ethics Policy

ESG Policy

GDPR Policy

Health, Safety, Environmental and Quality Policy

Lobbying Policy

Stakeholder engagement (pages 26 to 29)

Sustainability Report (pages 16 to 24)

Directors’ report (pages 62 to 65)

Respect for human rights Code of Business Ethics Policy Stakeholder engagement (pages 26 to 29)

Sustainability Report (pages 16 to 24)

Anti-corruption and bribery Code of Business Ethics Policy

Share Dealing Policy

Whistleblowing Policy

Anti-Bribery and Corruption Policy

Corporate Governance Statement (pages 46 to 48)

Directors’ report (pages 62 to 65)

Description of the business model Market Overview (pages 6 and 7)

Business model (pages 8 and 9)

Description of principal risks and

impact of business activity

Business model (pages 8 and 9)

Principal risks and uncertainties (pages 38 to 42)

Task Force on Climate-related Financial Disclosures

(pages 22 and 23)

Non-financial key performance

indicators

Strategic Report (pages 1 to 43)

Key performance indicators (page 14)

The Strategic Report was approved by the Board of Directors and signed on its behalf by:

Carlo Centonze

Director

October 26, 2023

HeiQ PLC

Annual Report and Accounts 2022

044

Corporate governance

The Board

Esther Dale-Kolb

Chair

Non-executive Director

Committees Committees

Esther was Chief Executive

Officer of Dr. W. Kolb Holding

AG (Kolb), a Swiss specialty

chemicals company. From 1991

until 2007 Esther was CEO

of the Kolb Group, with over

200 employees, producing in

Holland and Switzerland as

an internationally operating

specialty chemicals company.

Esther managed the change

from a pioneer-driven family

company to a process-

orientated modern business

with a cooperative management

style, contributing to substantial

growth in production capacity,

revenue and EBIT. She then

successfully concluded the trade

sale of the Kolb Group to Kuala

Lumpur Kepong Berhad, KLK

Malaysia and remained on the

board for a further 18 months.

Before leading Kolb, Esther

worked as a product manager in

paper chemicals and started her

career as a laboratory technician

at Dow Chemical. She

completed her apprenticeship

at the Swiss Federal Institute

of Technology, ETH Zurich, and

received her Bachelor of Science

degree at King’s College London.

Esther was active as a member

of the board of the Swisscross

Foundation, a Swiss charitable

foundation. Esther is the Chair

of HeiQ.

Carlo Centonze

Co-founder and CEO

Executive Director

Carlo studied Environmental

Sciences and Forest Engineering

(MSc) at the Swiss Federal

Institute of Technology, ETH

Zurich. He earned his Executive

MBA at the University of St.

Gallen (HSG). After his service

as an army pilot, he started

his professional career as

co-founder of the ETH spin-

off, myclimate, a non-profit

organization and prominent

provider of carbon offsetting

measures. Since 2004, Carlo

has served HeiQ as co-founder

and CEO, developing the firm

from a two-employee company

to an over 200-employee

company. He also serves as

chairman of ECSA Group, a

108-year-old Swiss chemical

and energy distributor with an

annual consolidated turnover

of over US$300 million and

is a member of the executive

board of Science Industries,

the Swiss association of the

pharmaceutical, biotech and

chemical industries.

Xaver Hangartner

CFO

Executive Director

Committees

Xaver started his career in

finance in 2005 after obtaining

a bachelor’s degree in

Business Administration from

the University of St. Gallen

(HSG). At the beginning of his

professional career, he worked

with EY Switzerland as an

auditor for industrial clients and

graduated as a Swiss Certified

Public Accountant in 2009. He

later worked in various finance

positions and led the global

finance and accounting team

of a listed Korean specialty

chemical producer before

joining HeiQ in 2018 as Head of

Controlling. He was appointed

Group Chief Financial Officer in

October 2019.

HeiQ PLC

Annual Report and Accounts 2022

045

Strategic

report

Corporate

governance

Financial

statements

Overall gender split

Male

Female

60%

40%

Board structure

Executive

Non-executive

40%

60%

Benjamin Bergo

Non-executive Director

Committees

Ben brings a wealth of

experience in high growth

technology operations and

venture capital. He currently

serves as President and CEO

of Visus Therapeutics, Inc., an

ophthalmic drug development

company with offices in

Seattle, WA, and Irvine, CA.

He has previously served

on the board of several high

growth companies, including

as a non-executive director at

Lumos Diagnostics Holdings

Ltd (ASX:LDX), a leading full-

service provider of point-of-care

diagnostic solutions; as a

non-executive director of Planet

Innovation Holdings Limited,

a HealthTech innovation and

commercialization company,

and he led investments into life

sciences transactions at a seed

stage venture fund between

2007 and 2011. Prior to this,

Ben held management roles

at Vision BioSystems, until the

sale of Vision Systems Limited

to Danaher Corporation in 2006.

Karen Brade

Non-executive Director

Committees

Karen has extensive experience

of project finance, private equity

and asset management. She

started her career at Citibank

working on multinational

project finance transactions.

Karen worked at British

International investment, the

UK Government’s development

finance institution, where

she held positions in equity

and debt investing, portfolio

management, fund raising and

investor development. Karen

has been an advisor to hedge

funds, family offices and private

equity houses. She currently

serves as chair of Aberdeen

Japan Investment Trust plc;

chair of Keystone Positive

Change Investment Trust plc;

non-executive director and chair

of audit at Augmentum Fintech

plc and is an external panel

member of the Albion Capital

VCT investment committee.

Audit Committee

Nomination Committee

Remuneration Committee

Environmental, Occupation,

Health and Safety Committee

Key: Committee membership

046

HeiQ PLC

Annual Report and Accounts 2022

Corporate governance

Corporate governance statement

Esther Dale-Kolb

Chair

Chair’s Introduction

The Board is committed to the

principles underpinning good

corporate governance. We aim to

apply these in a manner which

is most suited to the Company,

and best addresses the Board’s

accountability to shareholders

and other stakeholders. The

Company, therefore, voluntarily

observes the requirements of

the QCA Corporate Governance

Code (the “Code”) as the Board

feels that this Code is more

appropriate for the Group’s

size and stage of development

than the more prescriptive UK

Corporate Governance Code.

During the period under review,

the Company has complied with

the QCA Corporate Governance

Code except for, inter alia, the

expectation that each member

of the Remuneration Committee

be independent, and each

independent non-executive

Director be re-elected on an

annual basis. The Company

will keep these matters and its

governance framework under

review as it continues to grow

and develop.

In this report, we have set out

how we have applied the ten

principles of the Code in the year

ended December 31, 2022.

Esther Dale-Kolb

Chair

Delivering growth

Strategy and business model

Principle one of the Code requires

that companies establish a

strategy and business model

which promotes long-term value

for shareholders. Our strategy,

and the key challenges we face in

executing the strategy, are set out

in the Strategic Report on pages

6 to 13. HeiQ’s leadership team

meets regularly and focuses on the

delivery of the Group’s strategic

plan which is set by the Board. The

Chief Executive Officer reports to

the Board on progress, and the

Board supports and challenges

the leadership team. Employees

are kept informed of strategy and

progress through regular employee

briefings and newsletters.

Shareholder relations

Under principle two of the Code, we

are required to seek to understand

and meet the needs and

expectations of our shareholders.

In order to achieve this, we plan

to make our Executive Directors

available to shareholders through

regular meetings throughout the

year along with investor roadshows

around the time of our financial

results announcements.

Stakeholder engagement

Principle three of the Code

requires us to take into account

wider stakeholder and social

responsibilities and their

implications for long-term success.

We consider our key stakeholders,

in addition to our shareholders, to

be our employees, our partners,

our customers, our suppliers,

our bankers and our lenders, the

local communities in which we

operate and the environment. More

information on our engagement with

our key stakeholders can be found

in our s172 Statement on pages 26

to 29 of this report.

Risk management

Principle four of the Code requires

the Company to embed effective

risk management, considering both

opportunities and threats, throughout

the organization. The Group’s

significant risks and uncertainties

are set out on pages 36 to 42 of this

report together with a summary of

how risk management is executed

within the Group.

047

HeiQ PLC

Annual Report and Accounts 2022

Strategic

report

Corporate

governance

Financial

statements

Disclosures on management of

climate-related risk and opportunities

(TCFD) are made on pages 22 to 23

of this report.

Maintaining a dynamic

management framework

The Board

Principle five of the Code calls for

the maintenance of the Board as a

well-functioning, balanced team led

by the Chair.

The Board is led by Esther Dale-

Kolb, who is the non-executive

Chair. The Board also includes

two non-executive Directors who

both have extensive experience

with international and/or UK listed

companies, and two Executive

Directors. All Directors, including

the Chair, hold shares in the

Company. The two Executive

Directors and the Chair are not

considered independent, while the

two non-executive Directors are

considered independent.

There are four Board Committees:

The Audit Committee, the

Remuneration Committee, the

Nomination Committee and the

Environmental, Occupation, Health

and Safety Committee (EOHSC)

which the Board established

during the course of 2022.

More information on the Audit,

Environmental, Occupation, Health

and Safety Committee, Nomination

and Remuneration Committees can

be found on pages 49 to 55.

There have been nine Board

meetings during the financial year

to December 31, 2022 and all

Directors attended every meeting.

Directors are expected to attend all

Board meetings and the meetings

of the Committees on which

they sit. They are also required

to devote sufficient time to the

Company to enable them to fulfill

their duties as Directors. The time

commitment expected of the non-

executive Directors is set out in

their letters of appointment.

The Board’s skills and capabilities

Principle six of the Code requires

that the Company ensures that,

between them, the Directors

have the necessary up-to-date

experience, skills and capabilities.

The Board comprizes five

individuals with a mix of skills and

experience that is most appropriate

for the Company at this stage in its

development. More information on

the background and skills of the

individual Directors can be found

on pages 44 to 45. The Board’s

gender balance is good, being two

female and three male Directors.

The Board’s training and

development needs will be met

by implementing appropriate

training periodically during the

course of 2023. The Company

Secretary tables a report at each

Board meeting which covers

any significant developments in

corporate governance.

Board performance and evaluation

The seventh Code principle

requires the Board to evaluate

its performance based on clear

and relevant objectives, seeking

continuous improvement. The

Board conducted an internal

evaluation during the second

half of 2022. An anonymous

questionnaire with 5 questions was

given to and completed by all Board

members. The questions entailed

the following, how well has the

Board done its job, how well has

the Board conducted itself, it asked

about the Boards relationship

with Executive Directors, the

performance of the individual Board

Members and about Feedback to

the chair of the Board.

On a scale from poor to

satisfactory to good to very good

and to excellent the result was

between good and very good. To

further improve, the boards main

focus will be on close cooperation

with management.

Succession planning will be

addressed by the Nomination

Committee which will make

recommendations to the Board as

required.

Corporate culture

Principle eight of the Code requires

that the Company promotes a

corporate culture that is based on

ethical values and behaviors. We

strive to ensure that our business

success is in accordance with the

best environmental, ethical and

social standards. We aim to provide

diligent product stewardship and

deliver value to all our stakeholders.

We have an entrepreneurial culture

where disciplined execution is key.

We expect all our employees to work

hard and with determination and

in return we care for our people.

We pride ourselves on being

customer-focused thinkers who act

with integrity, honesty and trust.

Sustainability is our guiding star

in all our actions, processes and

products.

The Board will monitor and

promote a healthy corporate

culture by conducting employee

surveys with the aim of capturing

strategic alignment, employee

satisfaction, as well as suggested

improvements.

Governance structure

Principle nine of the Code

requires the Company to maintain

governance structures and

processes that are fit for purpose

and support decision-making by

the Board. The Board meets at

least four times a year. The Audit,

Environmental, Occupation, Health

and Safety Committee (EOHSC)

and Remuneration Committees

meet at least twice, twice and once

a year respectively. The Nomination

Committee meets at least once

a year and more frequently if

circumstances so require.

As disclosed on page 22, in

2022, the Company is compliant

6 out of 11 TCFD recommended

disclosures. With the formation

of the EOHSC towards the end of

2022, the Company expects to

significantly improve its governance

structure regarding management

of climate-related risks and

opportunities as defined by the

TCFD recommendations in course

of 2023.

048

HeiQ PLC

Annual Report and Accounts 2022

Corporate governance

Corporate governance statement continued

The Board provides strategic

leadership and sets the culture and

practices that should be followed

throughout the business. The

Board maintains a schedule of

matters reserved for its decision

and these include:

Management structure and

appointments:

senior management

responsibilities;

Board and other senior

management appointments or

removals;

Board and senior management

succession, training,

development and appraisal;

appointment or removal of the

Company Secretary;

appointment or removal of the

internal auditor;

remuneration, contracts,

grants of options and incentive

arrangements for senior

management;

delegation of the Board’s

powers;

agreeing to membership and

terms of reference of Board

Committees and task forces;

establishment of managerial

authority limits for smaller

transactions; and

matters referred to the Board by

the Board Committees.

Strategic/policy considerations:

business strategy;

diversification/retrenchment

policy;

specific risk management

policies, including insurance,

hedging, borrowing limits and

corporate security;

agreement of codes of ethics

and business practices;

receipt and review of regular

reports on internal controls;

annual assessment of

significant risks and

effectiveness of internal

controls;

calling of shareholders’

meetings; and

avoidance of wrongful or

fraudulent trading.

Transactions:

acquisitions and disposals of

subsidiaries or other assets over

10% of net assets/profits;

investment and other capital

projects over a similar level;

substantial commitments

including:

– pension funding;

– material contracts in excess

of one year’s duration; and

– giving security over

significant Group assets

(including mortgages and

charges over the Group’s

property);

contracts not in the ordinary

course of business;

actions or transactions where

there may be doubt over

property;

approval of certain

announcements, prospectuses,

circulars and similar documents;

disclosure of Directors’

interests; and

transactions with Directors or

other related parties.

Finance:

raising new capital and

confirmation of major financing

facilities;

treasury policies, including

foreign currency and interest

rate exposure;

discussion of any proposed

qualification to the accounts;

final approval of annual and

interim reports and accounts

and accounting policies;

appointment/proposal of

auditors;

material charitable donations;

approval and recommendation of

dividends; and

approval before each year starts

of operating budgets for the year

and periodic review during the

year.

Liaison with investors at:

AGM

Investor roadshow, typically

three per annum

Site visits for institutional

investors

Online retail presentations with

Q&A

General:

governance of Company pension

schemes and appointment of

Company nominees as trustee;

and

allotment, calls or forfeiture of

shares.

The Board has approved terms of

reference for each of the Board

Committees to which certain

responsibilities are delegated. The

chair of each Committee reports to

the Board on the activities of that

Committee. Further information on

the Committees can be found on

pages 49 to 55 of this report.

The Chair is responsible for the

leadership of the Board, ensuring

its effectiveness on all aspects

of its role and the setting of its

agenda. She ensures the Directors

receive accurate, timely and clear

information and she is responsible

for ensuring the Board’s effective

communication with shareholders.

In leading Board meetings, the

Chair facilitates the effective

contribution of non-executive

Directors and ensures constructive

relations between Executive and

non-executive Directors.

The Chief Executive Officer is

responsible for the leadership and

management of the Company, and

the implementation of objectives

and strategies agreed by the Board.

Build trust

Stakeholder communication

Principle ten of the Code requires

the Company to communicate

how the Company is governed

and is performing by maintaining

a dialogue with shareholders and

other relevant stakeholders.

During the period under review

we have had over 30 interactions

with shareholders, have conducted

several audits by regulatory

counterparts and interacted with

strong customer base. Further

information on our engagement

with shareholders can be found on

page 27 of this report.

Esther Dale-Kolb

Chair

October 26, 2023

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Annual Report and Accounts 2022

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Corporate

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Financial

statements

Corporate governance

Audit committee report

Karen Brade

Chair

The following is the Audit

Committee Report for the

year ended December 31,

2022.

Deloitte LLP was newly appointed

as our auditor for the year ended

31 December 2022. The choice

reflected the need to address the

increased complexity of the business

following multiple acquisitions and

organic growth in previous years.

During the audit it became clear

we had underestimated the time

it would take to implement new

processes and systems designed to

integrate and streamline the various

acquisitions that had been made

since our listing in 2020. This led

to an unforeseen and significant

extension to the year end reporting

timetable for 2022 with a related

impact on the timing of the external

audit work. The work revealed the

need to increase the strength of

our core finance function and to

design a stronger internal control

system both at the Group and

individual entity levels. In response

to identified control deficiencies, a

significant increase in the amount

of substantive audit work was

required. Regrettably we were unable

to publish our audited accounts

by April 30, 2023, which led to the

suspension of HeiQ’s shares.

As the Group has entered a

challenging trading period it has

been important to review all

aspects of the accounting which

rely on significant judgment.

Reviewing key judgments inherent

in the Group’s impairment review,

including operating margins,

long term growth rates and

discount factors has resulted in

significant impairments in the

period. Judgements surrounding

provisions required for inventory,

revenue and receivables have

also been reassessed to reflect

management’s updated views

on recoverability. The Board also

challenged key estimates and

judgments in relation to previous

reporting periods which has led to

certain restatements as outlined in

Note 2 to the financial statements.

Recognizing the significance of the

restatements and delays in the

reporting process, the Board, the

Audit Committee and Management

have carefully considered the

causes and the wider implications

for governance and controls in

general. Corrective measures

will be discussed in detail with

the auditors. Robust processes

surrounding the risks associated

with the material account balances

and transactions are being

defined and will be implemented

to improve the 2023 year-end

reporting process. We have and will

further strengthen our resources

and staffing to ensure continued

compliance with regulatory

requirements and to deepen our

knowledge of the listing rules.

There are two members of the Audit

Committee. I chair the Committee

and the other member is Benjamin

Bergo. Our biographies setting

out our skills and qualifications

can be found on page 45 of this

report. We are both non-executive

Directors. It is intended that the

Audit Committee meets at least

twice a year and the Committee is

responsible for ensuring that the

Group’s financial performance is

properly monitored, controlled and

reported. I report to the Board after

each Committee, and I will attend

each Annual General Meeting of

the Company.

In the period between January 1,

2022 and December 31, 2022,

the Committee met twice, with

both members in attendance.

Once the pending delay in regard

to the 2022 annual report became

apparent there was a weekly call

with the audit team at Deloitte to

address all the challenges this first

year audit presented and to ensure

the Board was up to date.

Duties of the Audit Committee

Internal control and risk

assessment

The Committee assists the Board

in discharging its duty to ensure

that the financial statements

presented by the Company to its

shareholders conform with all

legal requirements and that the

Company and its subsidiaries’

financial reporting and internal

control policies and procedures for

the identification, assessment and

reporting of risks are adequate,

by keeping such matters under

review and making appropriate

recommendations to the Board.

The Committee also considers

the major findings of internal

investigations and responses of

service providers and reviews its

own performance, constitution and

terms of reference.

External audit

The Committee considers and

makes recommendations to the

Board regarding the appointment

and reappointment of the

Company’s external auditor, as

well as any questions relating

to their resignation or removal.

The Committee oversees the

relationship with the external

auditor, including, but not limited to,

the approval of their remuneration

and terms of engagement, whether

in relation to audit or non-audit

services, and annually assesses

the auditor’s independence,

objectivity, qualifications, expertise,

resources and effectiveness.

The Audit Committee meets the

external auditor at least twice a

year and reviews the findings of

the audit.

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Audit committee report continued

Issue How this was addressed

Annual Report

and Accounts

The Committee was required to provide advice to the Board on whether the Annual Report

and Accounts, taken as a whole, provide a fair, balanced and understandable assessment of

the Group’s financial position and future prospects and provide all information necessary to a

shareholder to assess the Group’s performance, business model and strategy.

The assessment was assisted by an internal verification of the factual content by management

and a comprehensive review by the senior management team and the external auditors.

Following its review, the Committee was of the opinion that the Annual Report and

Accounts 2022 were representative of the year and present a fair, balanced and

understandable overview, providing the necessary information for shareholders to assess

the Group’s position and performance, business model and strategy.

Financial

Reporting 2022

The Committee reviewed whether suitable accounting policies had been adopted, and whether

management had made the appropriate estimates and judgments. In addition, views were

sought from the external auditor. To do so, the Committee received reports from the external

auditor covering the key risk areas addressed during the year-end audit, and the auditors’ view

of key judgments made by management.

Specific issues addressed by the Committee for the year ended December 31, 2022 included:

• analyzing forward looking budgets and making recommendations regarding improved financial

reporting to the Board.

• advice and discussion on revenue recognition principles and methodology while challenging

the accounting treatment for the Group’s take or pay contracts.

• advising on the review of long dated receivables to ensure related judgments are reasonable

and supportable and aged receivables are challenged appropriately. This is linked to the take

or pay contracts discussed above.

• advising on accounting for acquisitions and the impairment of goodwill and intangibles.

• advising on the provision for inventory given the disrupted market conditions.

• working with the auditor to identify the deficiencies in the control environment and agree

measures that need to be taken.

• the underperformance against the Group’s plan in 2022 and 2023 required a revision of the

going concern model and the need to understand the short-term nature of the credit facilities

in place against the projected cashflow requirements.

• review and discussion of the key audit matters raised by the auditors. The view of the Audit

Committee on the key audit matters raised by the auditors in their audit opinion is discussed

below.

Based upon the business assurance process and discussions with management and the

external auditor, the Committee was satisfied that the accounting disclosures and assumptions

were reasonable and appropriate for a business of the Group’s size and complexity, that the

external auditor had fulfilled its responsibilities in scrutinizing the financial statements for any

material misstatements and that the disclosures were satisfactory.

Financial statements

The Committee monitors the

integrity of the financial statements

of the Group, including the annual

and interim reports, preliminary

results announcements and any

other formal announcement relating

to its financial performance. It

reviews any significant financial

reporting issues and judgments,

and challenges, where necessary,

the Group’s financial statements

before submission to the Board. The

Committee keeps under review the

consistency of accounting policies

and practices on a year-to-year

basis, and across the Group.

The Company needs to undertake a

detailed assessment of the control

procedures designed to ensure

complete and accurate accounting

for financial transactions and to

limit the exposure to loss of assets

and fraud. Measures taken will

include segregation of duties and

reviews by management.

Reporting responsibilities

The Committee meets formally

with the Board at least once a year

to discuss matters such as the

annual report and the relationship

with the external auditor and also

makes whatever recommendations

to the Board it deems appropriate.

Internal audit and review of third-

party service providers

At present, the Company does not

have an internal audit function.

The decision of whether or not to

set up an internal audit function

will be made by the Board, on

the recommendation of the Audit

Committee, based on the growth of

the Company, the scale, diversity

and complexity of the Group’s

activities and the number of

employees, as well as cost and

benefit considerations.

Work of the Audit Committee

For the reporting period for the

year ended December 31, 2022

the Audit Committee discharged its

responsibilities by considering the

following matters:

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Financial

statements

Issue How this was addressed

Other topics Other topics addressed by the Committee within the financial year 2022 included:

• ensuring the previous auditor adopted the recommendations which came out of the

regulatory review of the audit of our 2020 financial statements in 2021 for the audit of the

31 December 2021 financial statements.

• Replacement of the Group auditor for the reporting period 2022.

• the introduction of a new, company-wide ERP system was discussed and considered at

length.

Key audit matters related to the financial accounts 2022

Key audit matters are those matters that, in the judgment of the auditor, are most significant to their audit and

which include the most significant assessed risks of material misstatements that they as auditor identified. Key

audit matters are defined and discussed by the auditor in their opinion on page 66 to 79 of this annual report

“5. Key audit matters”.

Audit matter Observation by the auditor Company view on audit matter

Going concern The auditors are drawing

attention to the disclosure

made within the financial

statements that a material

uncertainty exists in the

going concern assessment

but concluded that the use of

the Going Concern basis of

accounting is appropriate.

As disclosed in the financial statement, the uncommitted

nature of key credit facilities casts a doubt on the Group’s

ability to continue as a going concern in a scenario where

financing partners might terminate credit facilities in place

within the next twelve months requiring refinancing. The

Board recognizes the short-term nature of the Groups’

external borrowing and the ability for facilities to be

withdrawn with no notice. However, based on their active

reviews, they remain confident that the facilities are likely

to remain available for the foreseeable future.

Deficiencies in the

internal control

environment

In the auditor’s assessment,

internal controls have not yet

reached the maturity level

expected for a listed Group

and they see many significant

improvements that need to

be made.

The Audit Committee acknowledges the assessment by

the auditors and the implementation of robust controls

and processes is a priority for the organization as a whole.

The work to improve the robustness of processes including

controls has commenced and includes the implementation

of harmonized systems across the Group. Significant

resources have been added and will be added as deemed

necessary in the finance team building up a centralized

accounting function. The committee also asked the auditor

for detailed feedback on specific weaknesses identified

which the auditors agreed to provide shortly after the audit

is closed. Once received, this feedback will be considered in

the review of the internal control system which is currently

ongoing.

Revenue

recognition

of long-term

exclusivity

contracts with

customers

The auditors challenged the

accounting treatment for

certain long-term contracts

and concluded in a number of

circumstances that revenue

recognition criteria were not

met. One specific contract

was not effectively enforced

by the Group, evidenced by

significantly aged open trade

receivables and others were

not initially accounted for

correctly in accordance with

the requirements of IFRS15.

Significant audit adjustments

were recorded as a result

of their work to correct the

accounting.

For the specific contract not effectively enforced, given the

development of the situation in course of 2022 and the

renegotiation of the contract in 2023 including a waiver of

the open receivables, the Company agreed with the auditors

that revenue recognition criteria have not been met. A

significant payment in relation to the receivables in question

was collected at the end of 2019. In 2020 and 2021, the

Group received accounts receivables confirmations from

the customer and all due receivables from delivery of goods

were collected by the end of 2022. Nevertheless, the Group

did not take legal action against the customer despite the

significant, aged accounts receivables. The receivables were

waived in 2023 in the course of a contract re-negotiation, so

the Company shares the auditor’s view that the contract was

not effectively enforced.

For the contracts not accounted for in compliance with

IFRS15 the revenue recognized at a point in time was

reversed and, depending on the nature of the contract, will

now be spread over the period of time of the exclusivity

contract or minimum quantity requirements in accordance

with the requirements of the accounting standard.

052

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Annual Report and Accounts 2022

Corporate governance

Audit committee report continued

Audit matter Observation by the auditor Company view on audit matter

Impairment of

intangible assets

and goodwill

The auditor observed that

financial forecasts underlying

the work of impairment test

(Annual Budgets and 3-Year

Planning documents) had not

been adjusted for historic

underperformance against

forecasts and therefore the

auditors challenged the

assumptions used in the

models prepared for the

impairment tests.

The Audit Committee acknowledges that the Group has

recently underperformed against management forecasts.

As such, it deemed it more appropriate to base impairment

tests on year-to-date backlog/overperformance to annual

planning respectively on historic compound annual growth

rates for longer-term forecasts. Accordingly, the Group also

challenged its impairment testing done in the previous

reporting periods taking into account up-to-date performance

information which was available at the time of approval

of the prior year financial report. This exercise has shown

that in applying the same principles, a part of the overall

impairment should have been identified and recorded in the

previous period. During the process described above some

errors were noted in the original impairments models and

were also corrected.

Recoverability

of accounts

receivable from

contracts with

customers

The auditor challenged

managements assertion

that a number of long dated

trade receivables were

recoverable, which resulted

in a material adjustment and

the derecognition of certain

receivables.

The fact that certain revenues have not met recognition

criteria in previous periods as explained above (key audit

matter: revenue recognition from customer contracts), has

caused a related restatement of accounts receivables.

Further, in course of the closing process, the Group has

updated its view on the expected credit loss relating to an

open receivable for which the Group has filed a claim in court.

Provision for

obsolete and

excess inventory

The auditors note that

management’s procedures to

determine obsolete inventory

did not appropriately consider

future sales forecasts.

In view of the rapidly changed market conditions, the

Audit Committee and management have concluded that

it is appropriate to shorten the demand forecast period

underlying the inventory valuation model from up to 3 years

down to 12 months. This is considered appropriate given the

reduced demand the Group faces in general and due to the

limited visibility for market recovery.

Whistleblowing

The Group has a whistleblowing

policy in place which sets out

the formal process by which an

employee of the Group may, in

confidence, raise concerns about

possible improprieties in financial

reporting or other matters.

Anti-bribery

The Group has an anti-bribery and

anti-corruption policy which sets

out its zero-tolerance position

and provides information and

guidance to employees on how to

recognize and deal with bribery and

corruption issues.

Assessment of the effectiveness

of the Committee

The Board conducted a formal

assessment of its performance and

that of its Committees during Q4

2022.

External auditor

The Committee considered the

independence and effectiveness

of the external auditor. The Annual

Report 2022 is the first year

Deloitte LLP has been auditing

HeiQ and William Eversden has

been the audit partner for this

period. When assessing the

independence of the external

auditor the Committee considered

the fees paid to Deloitte LLP for

non-audit services. The auditor has

not provided any non-audit services

to the Company during the period

January 1, 2022 to December 31,

2022.

Deloitte LLP has informed us that

following the issuance of these

financial statements they will

resign as auditors of the Group

and certain subsidiaries, and

therefore will not seek re-election

at the forthcoming Annual General

Meeting of the Company. The Audit

Committee would have preferred

that Deloitte worked with a new

auditor to ensure the 2023 audit

is delivered on time. HeiQ has

incurred significant expense, while

Deloitte has invested considerable

time into the 2022 audit. The

identification of a new auditor has

been initiated and the new auditor

will be announced as soon as is

practicable.

Karen Brade

Chair

October 26, 2023

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Financial

statements

On behalf of the Committee,

I am pleased to present the

EOHS Committee Report for

the year ended December

31, 2022.

There are three members of the

EOHS Committee. I chair the

Committee and the other members

are Esther Dale-Kolb and Karen

Brade. Our biographies setting out

our skills and qualifications can be

found on pages 44 to 45 of this

report. Esther Dale-Kolb and Karen

Brade non-executive Directors. It is

intended that the EOHS Committee

meets at least twice a year, and

the Committee is responsible for

ensuring that the EOHS policy and

practices are a core consideration

across all functions of the Group.

I report to the Board after each

Committee, and I will attend each

Annual General Meeting of the

Group.

In the period between January 1,

2022 and December 31, 2022, the

Committee has met twice, with all

members in attendance.

The EOHS Committee plays a vital

role at HeiQ by ensuring that the

Group has effective and appropriate

EOHS policy and practices in

place. I will ensure that the EOHS

Committee provides the appropriate

guidance, governance and oversight

to the Board and management

teams to ensure environmental,

social and governance

considerations continue to be an

integral component of HeiQ’s global

operations.

Carlo Centonze

Chair

Duties of the EOHS Committee

Regular reviews

Review the Group’s operations to

ensure that the environment and

making a positive contribution

to society, is incorporated in

all aspects of the Group’s

development and the Group’s

stated responsibilities with respect

to environmental, social and EOHS

policy. Conduct an assessment

of the Group’s internal controls

used to demonstrate and record

conformity with the Group’s stated

EOHS goals. The Committee

shall review its own performance,

constitution, and terms of reference

and make recommendations to the

Board about any matters arising.

Furthermore, the Committee shall

keep abreast of external trends

or regulatory changes that may

be relevant to the Group and

its operations and understand

shareholders’ views and

expectations with regards to EOHS

matters and take account thereof.

Recommendations to the Board

The Committee shall make

recommendations to the Board

with regards to changes to the

Group’s existing environmental,

occupational, health & safety,

and policies and practices that

it sees fit to ensure that the

Group’s commitment to these is

maintained and demonstrated.

As the Group progresses through

the financial year ending December

31, 2023 the Committee shall

continue to assist the Board with

the development of internal KPIs

to allow the Group to assess its

activities with respect to its stated

goals and the method of monitoring

and reporting on those KPIs.

Carlo Centonze

Chair

October 26, 2023

Corporate governance

Environmental, occupation, health and safety (“EOHS”)

committee report

054

HeiQ PLC

Annual Report and Accounts 2022

Corporate governance

Nomination committee report

Duties of the Nomination

Committee

Regular reviews

The Committee reviews regularly,

and at least annually, the time

required from a non-executive

Director and whether each non-

executive Director is spending

enough time to fulfill his or her

duties. The Committee reviews

the structure, size, composition,

skills, knowledge and experience

of the Board and the leadership

needs of the Group to ensure that

the Group continues to compete

effectively in its marketplace. The

Committee undertakes to consider

its own performance, constitution

and terms of reference and makes

recommendations to the Board

about any matters arising.

Board appointments

The Committee is responsible

for identifying and nominating,

for the approval of the Board,

candidates taken from a wide

range of backgrounds to fill Board

vacancies as and when they

arise for any reason, including

retirement by rotation. It evaluates,

before making an appointment,

the balance of skills, knowledge

and experience on the Board and,

in the light of this evaluation,

prepares a description of the

role and capabilities required for

appointments. The Committee is

required to give full consideration

to succession planning in the

course of its work, considering

the challenges and opportunities

facing the Group and the skills

and expertise that will be needed

on the Board in the future. The

Committee ensures that, on

appointment to the Board, non-

executive Directors receive a

contract setting out clearly what is

expected of them in terms of time

commitment, Committee service

and involvement outside of Board

meetings.

Recommendations to the Board

The Committee undertakes to

make recommendations to the

Board about plans for an orderly

succession of the Chairman and

non-executive Directors and a

formal, rigorous and transparent

procedure to be used by them.

The Committee also considers

and recommends, if appropriate,

the reappointment of any

non-executive Director at the

conclusion of their specified term

of office or under the retirement

by rotation provisions in the

Company’s Articles of Association.

The Committee considers and

makes recommendations on

the membership of the Audit

Committee, the Environmental,

Occupation, Health and Safety

Committee, the Nomination

Committee, and the Remuneration

Committee in consultation with the

Chairmen/Chairwomen of those

Committees. The Committee may

also, at any time, recommend

to the Board the appointment of

additional non-executive Directors

and any Executive Directors (if such

are considered to be appropriate).

Assessment of the effectiveness

of the Committee

The Board conducted a formal

assessment of its performance and

that of its Committees during Q4

2022.

Esther M. Dale-Kolb

Chair

October 26, 2023

On behalf of the Committee,

I am pleased to present

the Nomination Committee

Report for the year ended

December 31, 2022.

There are three members of the

Nomination Committee. I chair the

Committee and the other members

are Karen Brade and Benjamin

Bergo. We are all non-executive

Directors. The Committee meets

at least annually, close to the end

of each financial year, and at such

other times as the Nomination

Committee requires.

In the period between January 1,

2022, and December 31, 2022, the

Committee has met once with all

members in attendance.

Esther Dale-Kolb

Chair

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Annual Report and Accounts 2022

Strategic

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Corporate

governance

Financial

statements

All five Directors of the Company,

both Executive and non-executive, are

shareholders of the Group. During

the year, the Executive Directors were

granted share options as detailed

in the Annual Report on Directors

Remuneration.

As no substantial changes were

made to the remuneration of

Executive and Non-Executive

Directors, the major decision on

directors’ remuneration was related

to the annual cash bonus whereas

it was decided not to pay any bonus

amount in 2022 as performance

measures have not been met. No

discretion has been exercised in the

award of directors’ remuneration. The

second major decision was the grant

of in total 448.000 share options

for Executive Directors in September

2022 as detailed on page 59.

Directors’ remuneration policy

The Company’s policy is to maintain

levels of remuneration sufficient to

attract, motivate and retain senior

executives of the highest calibre who

can deliver growth in shareholder

value. Executive Directors’

remuneration currently consists

of basic salary, benefits (including

pensions allowance), performance-

related bonus and participation in a

share option plan.

The Company continues to seek

to strike an appropriate balance

between fixed and performance-

related rewards, reinforcing a clear

link between pay and performance.

The performance targets for staff,

senior executives and the Executive

Directors continue to be aligned

to the key drivers of the business

strategy, thereby creating a strong

alignment of interest between

staff, Executive Directors and

shareholders. The Remuneration

Committee will continue to review the

Company’s remuneration policy and

make amendments, as and when

necessary, to ensure it remains fit

for purpose and continues to drive

high levels of executive performance

and remains both affordable and

competitive in the market.

The policy as detailed below was

approved by shareholders on June

25, 2021 by Annual General Meeting

and requires renewal by the Annual

General Meeting in the year 2024.

Benjamin Bergo

Chair

October 26, 2023

Corporate governance

Remuneration committee report

Duties of the Remuneration

Committee

The Committee’s responsibilities

include the following:

Regular reviews

The Committee reviews regularly,

and at least annually, the time

required from a non-executive

Director and whether each non-

executive Director is spending

enough time fulfilling his or her

duties. The Committee reviews

comparable Company data to

ensure that the Board is being

adequately remunerated and

to a level which will allow the

Company to attract new Directors,

the Remuneration Committee’s

own performance, constitution

and terms of reference and

remuneration to ensure it is aligned

to the implementation of the

Company strategy and effective risk

management, taking into account

the views of shareholders and

consultants as required.

Recommendations to the Board

The Committee undertakes

to make recommendations

about matters arising from the

Remuneration Committee’s regular

reviews and the annual review of

fees paid to the Board and any

changes to the current levels of

remuneration.

Option Scheme awards

The Committee is responsible for

making all decisions relating to

awards to be made to Executive

Directors under the Option Scheme.

Other matters

The Committee shall make a

statement in the Annual Report,

to keep up to date and fully

informed about strategic issues

and commercial changes affecting

the Company and the market in

which it operates and to ensure an

annual review of the Board and its

operations is undertaken.

Chair’s statement

The Directors are pleased to

present their annual report on

remuneration for 2022. The aim

of the Remuneration Committee

is to set clear objectives for each

individual Executive Director and

executive management team

member relating to the Company’s

KPIs plus individual and strategic

targets taking into account where

an individual has particular

influence and responsibility.

On behalf of the Committee,

I am pleased to present the

Remuneration Committee

Report for the year ended

December 31, 2022. The

Committee comprizes two

non-executive Directors,

Benjamin Bergo (Chair) and

Esther Dale-Kolb, and one

Executive Director, Carlo

Centonze.

In the period January 1, 2022 to

December 31, 2022, two meetings

of the Remuneration Committee

were held. The Remuneration

Committee will meet at least

annually, and the Committee Chair

shall attend each Annual General

Meeting of the Company. No

one shall be present during the

discussion of, or vote on, matters

regarding her/his own position. The

Chair of the Board shall not chair

the Committee meeting when it is

dealing with the appointment of

her successor. The committee may

seek assistance from remuneration

consultants if deemed necessary.

However, in 2022, no material

assistance from remuneration

consultants has been provided.

Benjamin Bergo

Chair

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Annual Report and Accounts 2022

Policy table

Base salary

Purpose and link

to strategy

To provide fixed remuneration to:

• help recruit and retain key individuals; and

• reflect the individual’s experience, role, rank

and contribution within the Company.

Operation The Remuneration Committee takes into

account a number of factors when setting

salaries, including:

• the scope and complexity of the role;

• the skills and experience of the individual;

• salary levels for similar roles within the

industry;

• pay elsewhere in the Company.

Salaries are reviewed, but not necessarily

increased, annually with any increase usually

taking effect in Q1.

Performance

conditions

None

Maximum

opportunity

The current base salaries of the Directors

can be found in the Directors’ Remuneration

section.

The Board retains discretion to make higher

increases in certain circumstances, for

example, following an increase in the scope

and/or responsibility of the role or the

development of the individual in the role or by

benchmarking.

Other benefits

Purpose and link

to strategy

To provide a basic benefits package, in order

to help recruit and retain key individuals.

Operation The Group may provide Directors and

management as well as employees with

accident insurance, pension insurance

and similar benefits in line with legal

requirements in the jurisdiction of

employment of the respective employee.

Performance

conditions

None

Maximum

opportunity

Maximum opportunity will be the expense of

providing the benefit.

Corporate governance

Remuneration committee report continued

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Annual Report and Accounts 2022

Strategic

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Corporate

governance

Financial

statements

Policy table continued

Annual bonus

Purpose and link

to strategy

To incentivize and reward the achievement of

annual financial, operational and individual

objectives which are key to the delivery of the

Company’s short-term strategy.

Operation Executive Directors and staff are eligible to

participate in a discretionary bonus plan.

• Maximum bonus levels and the proportion

payable for on-target performance are

considered in the light of market bonus

levels for similar roles among the industry

sector.

• From 2021 objectives will be set annually

to ensure that they remain targeted and

focused on the delivery of the Company’s

short-term goals, which will usually be

based on the annual budget.

• The Remuneration Committee sets

targets which require appropriate levels of

performance, taking into account internal

and external expectations of performance.

As soon as practicable after the year end,

the Remuneration Committee meets to

review performance against objectives and

determines payout levels.

Performance

conditions

At least 60% of the award will be assessed

against Company metrics including

operational, financial and non-financial

performance. The remainder of the award will

be based on performance against individual

objectives.

A sliding scale of between 0% and 100% of

the maximum award is paid dependent on

the level of performance.

Maximum

opportunity

The maximum potential bonus entitlement for

Executive Directors under the plan is up to

100% of base salary.

Share Option Plan

Purpose and link

to strategy

• To incentivize and reward the creation of

long-term shareholder value.

• To align the interests of the eligible

employees with those of shareholders.

• To help recruit and retain key individuals.

Operation Under the terms of the share option plan

(the “Share Option Plan”), the Remuneration

Committee may issue options over shares

up to 10% of the issued share capital of

the Company from time to time. Executive

Directors and employees are eligible for

awards.

The exercise of options may be subject to the

satisfaction of such performance conditions,

if any, as may be specified and subsequently

varied and/or waived by the Remuneration

Committee.

Performance

conditions

Vesting of the awards is dependent on

financial, operational and/or share price

measures, as set by the Remuneration

Committee, which are aligned with the long-

term strategic objectives of the Company.

The relevant performance conditions will be

set by the Remuneration Committee on the

award of each grant.

058

HeiQ PLC

Annual Report and Accounts 2022

All current Directors took office upon Re-admission of the enlarged Group for trading on December 7, 2020

and have been re-elected at the Company’s annual shareholder meeting held on June 25, 2021. The Executive

Directors are employed under a service agreement, which is capable of termination by either party giving 12

months’ notice in writing. The non-executive Directors are employed under service agreements with notice periods

of three months. The non-executive Directors are required to retire and seek re-election by the shareholders as

required by the Articles or as the Board resolves. The Articles require all Directors to retire and seek re-election

at the third AGM or general meeting (as the case may be) at which he or she was previously appointed.

The Executive Directors have – in addition to the Director’s service agreement – entered into employment contracts

with HeiQ Materials AG. The disclosed emoluments include the total compensation under both agreements.

Single figure of total Directors’ remuneration 2022

Salary/Fee Pension benefits Cash bonus payments

Currency of

payment 2022 2021 2022 2021 2022 2021

Carlo Centonze CHF 260,999 273,499 22,340 21,177 – 40,600

GBP 35,000 35,000 – – – –

Total in CHF* 302,281 371,511 22,340 21,177 – 40,600

Xaver Hangartner CHF 183,499 183,499 10,788 9,055 – 41,048

GBP 35,000 35,000 – – – –

Total in CHF* 224,782 227,51 2 10,788 9,055 – 41,048

Esther Dale-Kolb GBP 70,000 70,000 – – – –

Karen Brade GBP 40,000 40,000 – – – –

Benjamin Bergo GBP 40,000 40,000 – – – –

Total CHF 444,498 456,998 33,128 30,232 – 81,648

GBP 220,000 220,000 – – – –

Total Thereof fix renumeration Thereof variable renumeration

Currency of

payment 2022 2021 2022 2021 2022 2021

Carlo Centonze CHF 283,339 335,276 283,339 294,676 – 40,600

GBP 35,000 35,000 35,000 35,000 – –

Total in CHF* 324,621 379,288 324,621 338,688 – 40,600

Xaver Hangartner CHF 194,287 233,602 194,287 192,554 – 41,048

GBP 35,000 35,000 35,000 35,000 – –

Total in CHF* 235,570 27 7,615 235,570 236,567 – 41,048

Esther Dale-Kolb GBP 70,000 70,000 70,000 70,000 – –

Karen Brade GBP 40,000 40,000 40,000 40,000 – –

Benjamin Bergo GBP 40,000 40,000 40,000 40,000 – –

Total CHF 477,626 568,878 477,626 4 87, 23 0 – 81,648

GBP 220,000 220,000 220,000 220,000 – –

* To convert GBP into CHF, an average rate of 1.1795 was used for 2022 and of 1.2575 for 2021.

The only share-based compensation scheme is the option plan as set out in the policy table and as per further

details on option grants below. In 2022 no options vested (2021: Nil).

Annual Cash Bonus 2022

The Executive Directors did participate in the annual cash bonus plan in 2022 which is depending on the

performance during the year 2021. However, as performance conditions have not been achieved, no cash bonus

was paid in 2022.

The relevant performance conditions were defined as follows, whereas the average achievement of all conditions

has to be at least at 80%. In case of 100% average achievement, the cash bonus would equal 12.5% of the

annual fixed salary and the maximum opportunity is capped at 25% of the annual fixed salary.

Corporate governance

Annual report on Directors’ remuneration (audited)

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Financial

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Performance condition Target

Achievement

(before restatements of FY 2021) Achievement in %

Sales 2021 US$55 million US$57.9 million 105%

Operating Profit 2021 US$11.1 million US$3.1 million 28%

Net Profit 2021 US$8.5 million US$2.5 million 29%

Average achievement 54%

As the average achievement is lower than 80%, no cash bonus payment was earned in 2022.

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

Share options issued under the Company’s share option plan in 2022 are subject to the following conditions:

Exercise price £0.702 per option share (5-days average of closing price before thegrant date)

Grant date September 26, 2022

Employment period Three years

Performance conditions • 65% of the options are conditional upon sales growth targets Performance is

measure over the years 2022–2024 and performance target is 7.5% for each

individual year or 24.2% compound sales growth over the three years 2022-2024

• 35% of the options are conditional upon annual operating margin targets

Performance is measured each year 2022-2024 and the performance target is 25%

Changes of conditions

compared to prior year/

since grant date

None

Share options awarded to Executive Directors in the year are as follows:

2022 2021

Carlo Centonze 224,000 –

Xaver Hangartner 224,000 –

Only in case all of the performance conditions are met, 100% of the share options will vest at the end of the

employment period. The face value of the award for each Executive Director as of grant date is GBP 157,248

(224,000 shares at GBP 0.702 each) for which an exercise price in the same amount will become due upon

exercise of the option rights.

No share options have been awarded to non-executive Directors in 2022. In 2021 no share options have been

issued to any Director.

Directors’ interest

The Directors’ interests for disclosure purposes are as follows:

Number of

interests in

shares as of

December 31,

2021

purchased/

sold on market

in 2022

Number of

interest in

shares as of

December 31,

2022

Number of

interests

in share

options

as of

December 31,

2021

Share options

granted in

2022

Number

of interest

in share

options

as of

December 31,

2022

% shares and

options held

of total shares

in issue as at

December 31,

2022

Carlo Centonze

14,523,362 33,000 14,556,362 1,120,000 224,000 1,344,000 10.46%

Xaver Hangartner 493,746 – 493,74 6 1,120,000 224,000 1,344,000 1.21%

Esther Dale-Kolb 902,986 – 902,986 – – – 0.60%

Karen Brade 7,976 – 7,976 – – – 0.01%

Benjamin Bergo 284,853 – 284,853 – – – 0.19%

1. Including shares owned by close relatives and controlled entities.

2. All share options are subject to performance measures. None of the share options have vested.

060

HeiQ PLC

Annual Report and Accounts 2022

The Company has a policy on dealing with HeiQ plc shares which also applies to Executive Directors. Executive

Directors are required to option clearance for any share dealing in advance and must notify the Company and

FCA on any share dealing. Further, they are restricted from dealing during defined closed periods or during any

period when there exists any matter which constitutes inside information. Persons closely associated with

Executive Directors and their investment managers are also subject to the policy. In 2022, the requirements of

the policy have been met by the Executive Directors. The Company does not have a shareholding guideline for

Executive Directors in place.

Payments for loss of office/Payments to past directors

No payments were made to Directors for loss of office or to any past Directors in the year 2022 (2021: None).

Table of CEO remuneration

Year CEO

CEO single figure of

total remuneration

CHF’000

Annual bonus payout against

maximum opportunity

Option vesting rates against

maximum opportunity

2022 Carlo Centonze 324 0% n/a

2021 Carlo Centonze 379 59% n/a

1. To convert GBP into CHF, an average rate of 1.1795 was used for 2022 and of 1.2575 for 2021.

2. No incentives have been vesting during that period.

3. HeiQ plc listed on December 7, 2020. Therefore, no disclosure has been done for the year 2020 as not representative.

Percentage change in remuneration of the Directors and Average Employee

The table below shows the movement in salary, taxable benefits and annual incentives for each of the Directors

between the current and prior years at fixed exchange rates compared to the remuneration of the Average Employee

Executive Directors Non-executive Directors

Average

Employee

Carlo

Centonze

Xaver

Hangartner

Esther

Dale

Karen

Brade

Benjamin

Bergo

Base salary

2021–2022 –1.5% –4% 0% 0% 0% 0%

2020–2021

18% n/a n/a n/a n/a n/a

Taxable benefits

2021–2022 45% – – – – –

2020–2021

23% n/a n/a n/a n/a n/a

Annual Incentive

2021–2022 14% –100% –100% – – –

2020–2021

–17% n/a n/a n/a n/a n/a

1. Average Group employee data is based on the employee remuneration costs and average number of employees of HeiQ plc and HeiQ

Materials AG from which also the Directors received their compensation, with costs for the executive and non-executive Directors removed.

2. Non-executive Directors do not receive taxable benefits or annual incentives.

3. Taxable benefits include car and other transportation allowances and housing allowances. Directors do not receive taxable benefits.

4. Total annual Incentive includes cash bonus payments and commissions.

5. All Directors have assumed their role in December 2020. For years where the Director did not serve the full year the calculation has not

been made as it is not representative.

Total Shareholder Return performance

The graph below shows the TSR performance since December 7, 2020, the day when HeiQ plc relisted after the

reverse takeover of HeiQ Materials AG, against the FTSE (All) Index and the AIM Index. These indices have been

selected as the most relevant comparators for the Company across the time period reflected in the graph below

due to HeiQ’s main market listing and considering the Company’s market capitalization and size.

250

200

150

100

HeiQ plc TSR Chart since listing

Dec 7,

2020

Dec 31,

2020

Mar 31,

2021

Jun 30,

2021

Sep 30,

2021

Dec 31,

2021

Mar 31,

2022

Jun 30,

2022

Sep 10,

2022

Dec 30,

2022

HeiQ plc FTSE All-Share FTSE AIM

The middle market price of an ordinary share at the close of business on 4 January 2022 and 30 December

2022 (being the first and last days the London Stock Exchange was open for trading in 2022) was 93.5 pence

and 55 pence respectively, and during that period ranged between a high of 106 pence and a low of 55 pence.

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Annual Report and Accounts 2022

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Financial

statements

Relative importance of the spend on pay

The following table shows the total expenditure on pay for all of the Group’s employees compared to distributions to

shareholders by way of dividend. In order to provide context for these figures, operating profit/(loss) isalsoshown.

2022

US$’000

2021

US$’000 Change in %

Employee renumeration costs

(Note 12 of financial statements) 17,807 15,238 17%

Distributions to shareholders 0 0 0%

Operating loss (22,307) (665) 3254%

Statement of implementation of Remuneration Policy in 2023 (unaudited)

Information on how the Company intends to implement the Executive Directors’ Remuneration Policy in 2023 is set

out below. No significant changes in the way that the remuneration policy will be implemented in 2023 are foreseen.

Base salary

Currency 2023 2022 Change in %

Carlo Centonze CHF 260,999 260,999 0%

GBP 35,000 35,000 0%

Xaver Hangartner CHF 183,499 183,499 0%

GBP 35,000 35,000 0%

Taxable benefits

As in the previous year, no taxable benefits are foreseen.

Pension benefits

Executive Directors receive pension benefits as per the legally required pension benefit plan in Switzerland.

Nosignificant changes to the pension plan are foreseen for 2023.

Annual Cash Bonus

The Committee has set targets for the year focused on adjusted operating profit, revenue and cash flow. The

target details are considered commercially sensitive and therefore will only be disclosed on a retrospective basis

in the 2023 annual report. In case overall performance achievement is below 60% of target, no bonus is paid.

The maximum annual cash bonus paid is equivalent to 25% of the fixed annual renumeration.

Option grants

It is foreseen that in course of 2023, additional options will be granted to the Executive Directors under the

existing option plan.

Statement of shareholder voting

At the 2022 AGM on June 29 2022 the results of shareholder voting on remuneration matters were as follows:

Approval of the Report on Directors’ remuneration for the year to December 31, 2021.

Votes for

For % Votes against Against % Votes cast Votes withheld

47,976,791 99.87 62,571 0.13 48,039,362 9,804

The most recent binding vote for the Company’s Remuneration Policy was also approved by shareholders at the

2021 AGM and effective from June 25 2021:

Votes for

For % Votes against Against % Votes cast Votes withheld

47,540,743 86.75 7,260,301 13.25 54,801,044 124,537

1. The “For” vote includes those giving the Company Chairman discretion.

2. A vote withheld is not a vote in law and is not counted in the calculation of the votes “For” and “Against” the resolution.

Votes “For” and “Against” are expressed as a percentage of total votes cast.

062

HeiQ PLC

Annual Report and Accounts 2022

The Directors’ Report for the year ended December 31, 2022 comprizes pages 62 to 65 of this report, together

with the sections of the Annual Report incorporated by reference.

Directors

The names and biographical details of the current Directors are shown on pages 44 to 45 of this report.

Name Date of appointment

Benjamin Bergo December 7, 2020

Karen Brade December 7, 2020

Carlo Centonze December 7, 2020

Esther Dale-Kolb December 7, 2020

Xaver Hangartner December 7, 2020

Particulars of the Directors’ emoluments and their beneficial and non-beneficial interests in the shares of the

Company are shown on page 59.

Powers of the Directors

The Directors manage the business under the powers set out in the Company’s Articles of Association. These

powers include the ability to issue or buy back shares.

Shareholders’ authority to empower the Directors to buy back up to 10% of the Company’s issued share capital

will be sought at the Annual General Meeting. The Company’s Articles of Association can only be amended, or

new Articles adopted, by a resolution passed by shareholders in a general meeting by at least three-quarters of

the votes cast.

Directors’ indemnity provisions

Throughout the year/period under review the Company has maintained directors’ and officers’ liability insurance

cover in respect of the acts or omissions of its Directors and continues to do so. Details of the policy are

provided to new Directors on appointment. In common with other companies, the Group has made qualifying

third-party indemnity provisions for the benefit of its Directors against liabilities incurred in the execution of

theirduties.

Political donations

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

Dividend

The Directors have declared that no dividend would be paid in the year 2023.

Substantial interests

Information provided to the Company pursuant to the Financial Conduct Authority’s (FCA) Disclosure Guidance

and Transparency Rules (DTRs) is published on a Regulatory Information Service and on the Company’s website.

As at September 30, 2023, the following information has been received, in accordance with DTR 5, from holders

of notifiable interests in the Company’s issued share capital.

Notifiable interest Voting rights % of capital disclosed Nature of holding

Amati Global Investors Limited 11,607,000 8.26% Ordinary Shares

Carlo Centonze 9,287,080 6.61% Ordinary Shares

Dr. Murray Height 8,018,063 5.71% Ordinary Shares

Premier Miton Group plc 6, 827,5 0 0 4.86% Ordinary Shares

Bombyx Growth Fund SC 6,4 07,1 20 4.56% Ordinary Shares

Darren Morcombe 5,770,000 4.11% Ordinary Shares

FIL Limited 5,357,000 3.81% Ordinary Shares

Cortegrande AG

5,186,237 3.81% Ordinary Shares

Mike Smith trustees 4,268,628 3.04% Ordinary Shares

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

Corporate governance

Directors’ report

063

HeiQ PLC

Annual Report and Accounts 2022

Strategic

report

Corporate

governance

Financial

statements

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

Topic Page(s)

Share capital 122

Future developments 6-13

Research and development 10-13

Financial risk management objectives and policies 135-138

Events after the balance sheet date 141

Employee share option schemes 123

Restrictions on voting rights 150

Branches outside the UK 152

Engagement with employees 27

Engagement with suppliers, customers and others 27-29

Streamlined Energy & Carbon Reporting 17-18

Annual General Meeting

The Company’s Annual General Meeting was held at the offices of Cenkos Securities plc, 6 7 8 Tokenhouse Yard,

London EC2R 7AS on Thursday June 29, 2023 at 10.00 a.m. London time.

Disclosure of information to the auditors

The Directors, who were in office on the date of the approval of this report, confirm that, so far as they are

aware, there is no relevant audit information of which the Company’s auditor is unaware and that they have

taken all reasonable steps to make themselves aware of any relevant audit information and to establish that the

Company’s auditor is aware of that information.

This confirmation is given and should be interpreted in accordance with the provisions of s418 of the Companies

Act 2006.

Going Concern

The Consolidated Financial Statements have been prepared on a going concern basis, which contemplates the

continuity of normal business activity and the realization of the assets and the settlement of liabilities in the

normal course of business.

The Group’s business activities, together with the factors likely to affect its future development, performance and

position are set out in the Strategic Report on pages 2 to 42. The financial position of the Group, its cash flows,

liquidity position and borrowing facilities are described in the Financial Review on pages 30 to 35 and in Note

31 to the financial statements. In addition, Notes 41 and 42 to the financial statements include the Group’s

objectives, policies and processes for managing its capital; its financial risk management objectives; details of

its financial instruments; and its exposures to credit risk and liquidity risk.

The Group’s forecasts and projections for the next 12 months reflect the very challenging trading environment

and show that the Group should be able to operate within the level of its current facility for at least 12 months

from the date of signature of these financial statements if the facility drawdowns remain available. While the

facilities are not committed, the Board has not received any indication from financing partners that the facilities

are at risk of being terminated. Furthermore, the Board is in discussions with financial institutions to replace the

currently uncommitted credit facilities by committed, long-term facilities, but the outcome of these discussions

remains uncertain.

064

HeiQ PLC

Annual Report and Accounts 2022

Nevertheless, the Board acknowledges the uncommitted status of the facilities which could be terminated during

the forecast period requiring the refinancing of debts as per maturity dates disclosed in the Financial Review

on page 35, indicates that a material uncertainty exists that may cast significant doubt on the Group’s ability

to continue as a going concern, and therefore the Group may not be able to realize its assets and discharge its

liabilities in the normal course of business.

After considering the forecasts, sensitivities, and mitigating actions available to management and having regard

to the risks and uncertainties to which the Group is exposed (including the material uncertainty referred to

above), the Group’s directors have a reasonable expectation that the Group has adequate resources to continue

in operational existence for the foreseeable future and operate within its credit facilities for the period 12 months

from date of signature. Accordingly, the financial statements continue to be prepared at the going concern basis.

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

The directors are responsible for preparing the Annual Report and the financial statements in accordance with

applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the

directors are required to prepare the group financial statements in accordance with United Kingdom adopted

international accounting standards. The financial statements also comply with International Financial Reporting

Standards (IFRSs) as issued by the IASB. The directors have also chosen to prepare the parent company

financial statements under United Kingdom adopted international accounting standards. Under company law the

directors must not approve the financial statements unless they are satisfied that they give a true and fair view

of the state of affairs of the company and of the profit or loss of the company for that period.

In preparing these financial statements, International Accounting Standard 1 requires that directors:

• properly select and apply accounting policies;

• present information, including accounting policies, in a manner that provides relevant, reliable, comparable

and understandable information;

• provide additional disclosures when compliance with the specific requirements of the financial reporting

framework are insufficient to enable users to understand the impact of particular transactions, other events

and conditions on the entity’s financial position and financial performance; and

• make an assessment of the company’s ability to continue as a going concern.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the

company’s transactions and disclose with reasonable accuracy at any time the financial position of the company

and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also

responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention

and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information

included on the company’s website. Legislation in the United Kingdom governing the preparation and

dissemination of financial statements may differ from legislation in other jurisdictions.

Corporate governance

Directors’ report continued

065

HeiQ PLC

Annual Report and Accounts 2022

Strategic

report

Corporate

governance

Financial

statements

Responsibility statement

We confirm that to the best of our knowledge:

• the financial statements, prepared in accordance with the relevant financial reporting framework, give a

true and fair view of the assets, liabilities, financial position and profit or loss of the company and the

undertakings included in the consolidation taken as a whole;

• the strategic report includes a fair review of the development and performance of the business and the

position of the company and the undertakings included in the consolidation taken as a whole, together with a

description of the principal risks and uncertainties that they face; and

• the annual report and financial statements, taken as a whole, are fair, balanced and understandable and

provide the information necessary for shareholders to assess the company’s position and performance,

business model and strategy.

This responsibility statement was approved by the board of directors on October 26, 2023 and is signed on its

behalf by:

Ross Ainger

Company Secretary

066

HeiQ PLC

Annual Report and Accounts 2022

Financial statements

Independent auditor’s report to the members of HeiQ PLC

1. Opinion

In our opinion:

• the financial statements of HeiQ Plc (the ‘Parent Company’) and its subsidiaries (together the ‘Group’) give a

true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 December 2022

and of the Group’s loss for the year then ended;

• the Group financial statements have been properly prepared in accordance with United Kingdom adopted

international accounting standards;

• the Parent Company financial statements have been properly prepared in accordance with United Kingdom

adopted international accounting standards and as applied in accordance with the provisions of the

Companies Act 2006; and

• the financial statements have been prepared in accordance with the requirements of the Companies Act

2006.

We have audited the financial statements which comprize:

• Consolidated statement of profit and loss and other comprehensive income;

• Consolidated and Parent Company statements of financial position;

• Consolidated and Parent Company statements of changes in equity;

• Consolidated and Parent Company statements of cash flows; and

• Related notes 1 to 46 to the consolidated financial statements and notes 1 to 16 to the Parent Company

financial statements.

The financial reporting framework that has been applied in their preparation is applicable law and United

Kingdom adopted international accounting standards and, as regards the Parent Company financial statements,

as applied in accordance with the provisions of the Companies Act 2006.

2. Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable

law. Our responsibilities under those standards are further described in the auditor’s responsibilities for the audit

of the financial statements section of our report.

We are independent of the Group and the Parent Company in accordance with the ethical requirements that

are relevant to our audit of the financial statements in the UK, including the Financial Reporting Council’s (the

‘FRC’s’) Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical

responsibilities in accordance with these requirements. We confirm that we have not provided any non-audit

services prohibited by the FRC’s Ethical Standard to the Group or the Parent Company.

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

opinion.

3. Material uncertainty related to going concern

We draw attention to note 3.b in the financial statements, which indicates that a material uncertainty exists that

may cast significant doubt on the Group and Parent Company’s ability to continue as a going concern due to the

uncommitted nature of credit facilities that may be terminated during the going concern period.

The Group has access to credit facilities totaling CHF9.0 million (approximately US$9.8 million) as of September

30, 2023 in place with two banks but with materially the same conditions. The facilities are not limited in time,

can be terminated by either party at any time and allow overdrafts and fixed cash advances with a duration of

up to twelve months. If one or the other party terminates the agreement, fixed cash advances become due upon

their defined maturity date.

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 the publication of audited

accounts for the year 2022 was delayed, the Company was not able to submit these accounts within the

contractually defined timeframe but has received extensions to do so from both banks until October 31, 2023.

As of September 30, 2023, the Group had drawn CHF6.3 million of the facilities (CHF2.4 million as December

31, 2022) with maturity dates of November 27, 2023 (CHF 4.5m), June 17, 2024 (CHF 0.8m) and September

30, 2024 (CHF 1m).

The Group’s forecasts and projections for the next 12 months reflect the very challenging trading environment

but show that the Group should be able to operate within the level of its current facilities for at least 12 months

from the date of signature of these financial statements if the facility drawdowns remain available. While the

facilities are not committed, and the drawdowns currently mature on November 27, 2023 (CHF 4.5m), June 17,

2024 (CHF 0.8m) and September 30, 2024 (CHF 1m), the Board has not received any indication from financing

partners that the facilities are at risk of being terminated. Furthermore, the Board is in discussions with financial

institutions to replace the currently uncommitted credit facilities by committed, long-term facilities, but the

067

HeiQ PLC

Annual Report and Accounts 2022

Strategic

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Corporate

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Financial

statements

outcome of these discussions remain uncertain.

However, the uncommitted status of the facilities, which could be terminated during the forecast period requiring

the refinancing of debts indicates that a material uncertainty exists that may cast significant doubt on the

Group’s and Parent Company’s ability to continue as a going concern. Our opinion is not modified in respect of

this matter.

In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of

accounting in the preparation of the financial statements is appropriate.

Our evaluation of the directors’ assessment of the Group’s and Parent Company’s ability to continue to adopt the

going concern basis of accounting included:

• obtaining an understanding of the relevant controls that the Group has established regarding the drafting,

review and approval of the Group’s going concern assessment;

• obtaining an understanding of the financing facilities available to the Group, including repayment terms and

considering whether there were any covenants;

• assessing the status of the Group’s refinancing options with management involved in the negotiations with

lenders;

• testing the mechanical accuracy of the model used to prepare the Group’s cash flow forecasts;

• evaluating the consistency of the Directors’ forecasts with other areas of the audit, including asset

impairments, revenue recognition for long-term contracts, deferred tax asset recoverability and investment in

subsidiaries and intercompany recoverability;

• challenging the key assumptions within the going concern assessment including those in the Group’s

strategy which relate to revenue growth and cash flow generation. We have challenged these with reference

to historical trading performance, subsequent period results, market expectations, peer comparison, and

assessing whether the Group’s latest savings measures and sales initiatives were reasonable;

• assessed the feasibility of mitigating actions available to the Directors, should these be required, if the

forecast performance is not achieved; and

• assessed the appropriateness of the Group’s disclosures over the going concern basis and the material

uncertainty arising with reference to our knowledge and understanding of the assumptions taken by the

Directors and FRC guidance.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the

relevant sections of this report.

4. Summary of our audit approach

Key audit

matters

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

• Material uncertainty related to going concern (refer to section 3 above)

• Deficiencies in the internal control environment

• Revenue recognition on long-term contracts with customers

• Impairment of intangible assets and goodwill

• Recoverability of accounts receivable on contracts with customers

• Provision for obsolete and excess inventory

Materiality The materiality that we used for the Group financial statements was $780,000 which was

determined on the basis of revenues and net assets of the Group.

Scoping We focused our Group audit on 14 components which account for 99% of the Group’s revenue,

92% of the Group’s losses and 97% of the Group’s net assets.

Significant

changes

in our

approach

The following key audit matters were identified by the previous auditor in the prior year, but we do

not consider them to be key audit matters for the current year:

• Accounting for acquisition of subsidiaries – valuation of the acquired intangible assets,

inventory and consideration

• Valuation of the Group’s net Defined benefit obligations

The following are new key audit matters we identified in the current year, primarily due to the level

of audit effort required in these areas including consideration of misstatements identified:

• Material uncertainty related to going concern

• Deficiencies in the internal control environment

• Recoverability of accounts receivable on contracts with customers

• Provision for obsolete and excess inventory

The prior year key audit matter concerning the accounting for services, royalty, licenses and other

operating income was refined to cover revenue recognition on long term contracts with customers.

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5. Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit

of the financial statements of the current period and include the most significant assessed risks of material

misstatement (whether or not due to fraud) that we identified. These matters included those which had the

greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of

the engagement team.

These matters were addressed in the context of our audit of the financial statements as a whole, and in

forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the

matter described in the material uncertainty related to going concern section, we have determined the matters

described below to be the key audit matters to be communicated in our report.

5.1 Deficiencies in the internal control environment

Key audit matter

description

As discussed in the Audit Committee Report on page 49, the Group’s control environment

requires significant improvement, particularly related to management review controls,

balance sheet reconciliations and transactional processing controls (particularly in accounts

receivable and revenue recognition). The Group’s control environment also needs to be

properly formalized and documented. In addition, general IT control deficiencies relating to

access and change management controls also need to be addressed.

These control deficiencies were identified during the FY22 external audit as part of our

first audit of the Group which resulted in and are part of the cause of the prior year errors

as described in note 2 of the Group financial statements. The overall impact of prior year

adjustment to the 31 December 2021 financial statements was $3.9m on the net assets

and profit after tax, changing the net result of the Group from a profit after tax of $2.5m to a

loss after tax of $1.4m.

These prior year errors evidence a lack of management review controls over significant

transactions such as business combinations and the annual goodwill impairment review

as well as controls over transactional activities such as accounting for leases and revenue

recognition. In summary:

• We identified a control weakness over the review of the accounting for the Purchase Price

Allocation (‘PPA’) of Chrisal. This resulted in an increase of $1.5m on non-controlling

interest and $0.2m in additional amortization.

• We also identified a control weakness over the accounting for leases where management

effectively recorded the same lease contract twice.

• Further significant prior year misstatements and control deficiencies relating to revenue

recognition and annual goodwill impairment are as set out in the key audit matters below

(sections 5.2 and 5.3 respectively).

Whilst management have sought to make improvements to the IT system environment

and to the formalization of internal control activities in response to the errors identified as

described above, the process continues to be complex and involve calculations performed in

spreadsheets increasing the risk of fraud and error.

Financial statements

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5.1 Deficiencies in the internal control environment continued

How the scope

of our audit

responded to the

key audit matter

We adopted a fully substantive audit approach, with no reliance on internal controls.

We adapted our audit in order to respond to the identified deficiencies in the control

environment. Consequently, the nature, extent and timing of our audit procedures were

modified as a result of the pervasive risks arising from the deficiencies in the control

environment.

Specifically:

• we increased our coverage by including an additional 10 components that are subject to

specific audit procedures. (See section 7 below for details of our scoping assessment);

• we used a lower performance materiality (being 60% of materiality) than would ordinarily

be used if the control environment had been found to be effective. This increased

the volume of substantive testing completed (see section 6 below for our materiality

assessment);

• we tested a number of transactional balances (including accounts receivable, accruals,

prepayments, trade payable, cash and inventory) at an elevated risk level and have

therefore continued to perform an increased level of sample testing;

• we performed additional procedures to identify and address fraud risks, including the

involvement of a forensic specialist. We performed targeted procedures in relation

to specific fraud risks, including the risk of management override of controls and the

potential fraud risk in revenue recognition (see section 5.2);

• senior members of the audit team have performed audit testing directly in the more

complex areas of accounting, including revenue recognition, purchase price allocation,

impairment testing and going concern;

• we have increased the nature and extent of our testing on revenue given the control

deficiencies identified in the current year as well as the complex nature of some “take or

pay” arrangements.

Key observations The Group’s internal controls have not yet reached the maturity level expected for a listed

Group. There are a number of significant improvements that need to be made in order to

improve the accuracy and completeness of the underlying accounting records and reduce

the number of audit misstatements identified. Although there are processes identified at the

key components addressing certain risks, there is limited evidence and documentation in

place. We were unable to test the operating effectiveness of any controls which resulted in a

significant increase in the amount of substantive audit work performed.

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5.2 Revenue recognition of long-term exclusivity contracts with customers

Key audit matter

description

HeiQ Group accounts for its revenues in accordance with the requirements of IFRS 15 –

Revenues from Contracts with Customers. Most of HeiQ’s revenues are recognized at a point

in time, once the performance obligation has been fulfilled. Out of total revenues generated

of $47.2m (2021: $55.4m), $45.2m (2021: $55.4m), was recognized at point in time,

principally from delivery of materials, and the remaining amount was generated over time

from licenses.

HeiQ also engages in “take or pay” arrangements, in which the customers agree to

purchase a contractual minimum quantity of product, usually against a specified exclusivity

during the same period. We identified that these “take or pay” contracts include complex

elements of revenue recognition. The identification of the performance obligation and the

timing of fulfillment of the performance obligation for such contracts is complex and requires

judgment in accordance with IFRS 15 Revenue from Contracts with Customers.

HeiQ has recorded $5.9m of liabilities representing unsatisfied performance obligations

as of 31 December 2022. This corresponds to advances received from customers for

contractual obligations not fulfilled at year-end. See note 7.

In addition, HeiQ had contractual agreements with a customer which were in place for

several years, however the open trade receivables have aged significantly. The contract was

not effectively enforced by the Group and therefore the underlying revenue should not have

been recognized under IFRS 15 principles. As a result, a prior year restatement decreasing

revenue by $2.5m has been recorded in the financial statements as disclosed in Note 2.

Furthermore, given the control deficiencies identified, this has also resulted in the correction

of material misstatements to the revenue recognized in the current year.

Refer to note 7 for the Group’s accounting policy on revenue, as well as the Audit Committee

report on page 49.

How the scope

of our audit

responded to the

key audit matter

To respond to this key audit matter, we have:

• obtained an understanding of relevant controls around revenue recognition;

• tested a sample of customer statement reconciliations and increased the extent of our

coverage of reviewed revenue contracts given the control deficiencies identified;

• assessed “take or pay” agreements to identify potential performance obligations;

• involved an internal specialist to assess the revenue contracts and management’s

accounting treatment, especially on the revenue recognition criteria for “take or pay”

agreements;

• assessed recognition criteria for liabilities representing unsatisfied performance

obligations at the year end;

• involved an internal specialist to evaluate whether the revenue recognition criteria in

accordance with IFRS 15 were met by agreeing material revenue transactions to contracts;

and

• assessed appropriateness of the financial statement disclosures.

Key observations From the work performed above, we concluded that revenue recognition of long term

contracts with customers was appropriately stated after all audit misstatements were

corrected by management.

Financial statements

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5.3 Impairment of intangible assets and goodwill

Key audit matter

description

Under IAS 36 ‘Impairment of Assets’ the Group is required to perform an annual impairment

review of its goodwill as well as impairment testing of its intangible assets where there

are indicators of impairment and where there are indicators that previously recognized

impairment losses may no longer be appropriate.

The carrying value of the goodwill is $8.5m (2021: $19.1m) and other intangible assets

$11.9m (2021: $11.7m). Other intangible assets include internally developed assets,

brand names and customer relationships that were recognized with previous business

combinations and acquired technologies. See note 18 for further details.

The goodwill is allocated to one of four Cash Generating Units (‘CGUs’): ChemTex, Chrisal,

RAS and Life. Under IAS 36 Impairment of assets, each of the CGUs with goodwill is

tested annually for impairment while other intangible assets are assessed for impairment

indicators. The impairment review involves management making estimates to determine the

value in use of the CGU (being the net present value of the forecast cash flows). This is then

compared to the carrying value of the CGUs to identify whether any impairment is required.

The value in use model uses a discounted cash flow technique and utilizes the forecasts

approved by the Board’s five year plan. A perpetuity growth based on long-term Consumer

Price Index is used for subsequent periods. The model is sensitive to a number of

assumptions in the budget, including sales forecasts and gross margin.

An impairment charge of $10.6m was recognized against the goodwill balance in the current

year following the annual impairment review. The goodwill impairment loss relates to the full

impairment of the goodwill allocated to the Life CGU of $5.2m and partial impairment of the

CGUs of Chrisal ($2.4m) and RAS ($3.0m).

Additionally, we identified a prior year misstatement on the impairment review for its 2021

financial statements due to overly optimistic assumptions used based on the data and

environment existing at 31 December 2021. This resulted in a $2.3m reduction of the

goodwill balance as at 1 January 2022, which is split between the Chrisal CGU ($1.3m) and

the RAS CGU ($1.0m). See note 2 for further details.

The key audit matter therefore relates to the appropriateness of management’s estimate

of the future trading performance (particularly sales and gross margin) of each CGU, which

involves significant management judgment. Furthermore, the impairment model is complex

and is prepared using spreadsheets which increases the potential for error.

Refer to notes 3 and 18 for the Group’s impairment accounting policies and the key

assumptions used in the impairment assessment, as well as the Audit Committee report on

page 49.

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5.3 Impairment of intangible assets and goodwill continued

How the scope

of our audit

responded to the

key audit matter

To respond to this key audit matter, we have:

• obtained an understanding of the relevant controls around the impairment review,

including the budget and forecast setting processes which support the cash flows used

within the impairment model (and going concern assessment);

• assessed the methodology applied in performing the impairment review, with reference to

the requirements of IAS 36 ‘Impairment of Assets’;

• assessed management’s process of determining the cash flow forecast and challenged

the judgments applied by analysing both historic performance data, current performance,

industry trends and performing a search for contradictory evidence;

• evaluated and challenged key macroeconomic assumptions underlying the model

and projections based on the Group’s business plan and evaluated management’s

assessment of risk, including political and economic risk;

• challenged the key assumptions utilized in the cash flow forecasts, in particular the key

operating metrics including volumes, yields and costs in the models against historical

performance and independent external sources and industry reports, and investigated any

outliers identified in the Group assumptions;

• assessed the long-term growth rates, inflation rates and discount rates applied to CGU

impairment model by comparing the rates used to third party evidence, and by comparing

the discount rates to independent rates we determined with our valuation specialists;

• challenged the allocation of the impairment loss between the current and prior periods as

well as the consistency of the forecasts used by management in their 2021 impairment

review;

• engaged our modelling specialists to assist in evaluating the integrity of the spreadsheet

model and the build-up for the Weighted Average Cost of Capital;

• assessed management’s sensitivity analysis in relation to the key assumptions used in

the cash flow forecasts; and

• evaluated the appropriateness of the Group’s disclosures regarding the CGU impairment,

key assumptions and sensitivities.

Key observations As a result of our work, we identified a number of material adjustments to goodwill and

intangible assets relating to both FY21 and FY22. During testing for impairment for FY22 we

identified that the models prepared for FY21 incorporated assumptions which we consider

overly optimistic based on the conditions existing at 31 December 2021 and the data then

available. This led to a revised FY21 impairment analysis, which in turn resulted in the

restatement of goodwill balances as described above as well as material adjustment in the

current year.

From the work performed above, we concluded that intangible assets and goodwill are

appropriately stated after all audit misstatements were corrected by management.

Financial statements

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5.4 Recoverability of account receivable from long-term exclusivity contracts with customers

Key audit matter

description

At 31 December 2022, gross trade receivables of $6.5m were held by the Group (2021:

$14.7m) with a provision for expected credit losses for $0.4m (2021: $0.3m). The Group

also held trade receivables that were aged over 120 days with a balance of $2.4m (2021:

$3.0m).

Following a period of deteriorating market demand in the later part of 2022, there was

emerging heightened risk around the recoverability of debtors, particularly in relation with

customers that have long-term exclusivity contracts.

Under IFRS 9 - Financial instruments, management is required to evaluate all expected

credit losses based on historic, current and forward-looking information. In addition to

recording specific provisions against individual trade receivable balances related to “take or

pay” arrangements, management recognizes a provision for expected credit losses under

the simplified approach permitted by IFRS 9, by modelling an estimate of future lifetime

expected credit losses for the entire debtor book based on ageing of the invoices. In the

current economic environment, there is increased management judgment regarding expected

credit losses.

The trade receivables related to “take or pay” arrangements include a $3.0m receivable with

a customer in the US for which the Group has commenced legal proceedings. The balance

is overdue between 60 and 120 days and management has reflected the overdue and the

legal proceedings in its expected credit loss assessment.

Additionally, as disclosed in note 2, management restated the 31 December 2021

consolidated statement of financial position resulting in a decrease to receivables by $2.4m

and a decrease to “take or pay” revenues by $2.5m as the criteria for revenue recognition

under IFRS 15 had not been met.

Refer to note 3.r for the Group’s receivable provisioning policy, note 23 ‘Trade receivables’

and the Audit Committee report on page 49.

How the scope

of our audit

responded to the

key audit matter

To respond to this key audit matter, we have:

• obtained an understanding of the relevant controls regarding management’s provisioning

policy and the assessment of expected credit losses;

• assessed management’s provisioning policy. This work included considering compliance

with the requirements of IFRS 9, checking the mechanical accuracy of the model,

considering expected credit losses by country and validating country specific risk factors

to external reports in light of the current macroeconomic environment;

• performed sensitivities on key assumptions used in the model and recalculated the

expected credit losses provision based on sensitized assumptions;

• assessed the appropriateness of the total provision for trade receivables at the period

end through evaluating aging of trade receivables and agreeing to subsequent cash

receipts;

• evaluated consistency with information obtained through other parts of our audit, including

our review of litigation, claims and disputes; and

• tested a sample of the customers provided for within the specific provision, and a sample

of customers not provided for within the specific provision, and assessed the level of

provision against each customer.

Key observations During our audit procedures, we challenged management’s assertion that a number of long

dated trade receivables were recoverable resulting in significant material adjustments and

the derecognition of certain receivables as disclosed in the prior year adjustment in note 2.

Our review and challenge of management’s calculation of expected credit losses resulted in

a further material adjustment to the expected credit loss provision which was corrected in

the current period.

Following the work performed above, and the correction of identified audit adjustments, we

concluded that trade receivables remaining on the balance sheet are recoverable and a

sufficient provision has been recognized. We identified the need for improvement in controls

over recoverability of account receivable on contracts with customers and expected credit

loss provision.

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5.5 Provision for obsolete and excess inventory

Key audit matter

description

As at 31 December 2022, the Group held $13.2m of inventory (2021: $13.8m). The

inventory provision recorded against these amounts at the balance sheet date for FY2022

was $4.9m (2021: $0.5m).

A significant portion of the Group’s inventory balances are in raw materials and finished

goods that were in high demand during the COVID-19 pandemic. There has been a reduction

of net realisable value of inventory as demand for these products has slowed down.

Furthermore, there is a risk that the provision for obsolete inventory, and for excess

inventory held as a result of reduced trading caused by the slowdown of the market demand

in the later part of 2022 is not sufficient.

The Group’s accounting policy for providing for obsolete and excess inventory is based upon

the forecast of market demand and the assessment of the “take or pay” contracts. The

inventory obsolescence provision is an accounting estimate with high estimation uncertainty

due to the significance of judgments and assumptions made including future projected

sales. In addition, specific provisions are made for known products which management

considers unlikely to be sold at a positive margin.

The calculation of the inventory provision requires management judgment to assess the

demand from customers’ “take or pay” contracts and the expected realisable value based

on the quantities held and expected sell through patterns. Refer to note 2 for the Group’s

inventory provisioning policy and note 22 ‘Inventories’.

How the scope

of our audit

responded to the

key audit matter

To respond to this key audit matter, we have:

• obtained an understanding of the relevant controls that the Group has established

regarding the inventory provision, including understanding management estimate of

business impact of the unwind of COVID-19 pandemic demand and the related impact on

the provision on inventories;

• assessed the historical accuracy of management’s provisioning percentages for aged

inventory through a retrospective review of the level of provision recorded in prior years

compared to the actual level of inventory written off against the provision held. We also

factored in our experience of management’s ability to forecast future sales and cash flows

as evidenced from our work on impairment;

• compared the methodology used to calculate the inventory provision and its consistency

with prior periods;

• compared the methodology applied in calculating the slow-moving inventory obsolescence

provision to the Group’s policy and recalculated the provision, with reference to the policy;

• assessed the reasonableness of management’s methodology for identifying ‘excess

inventory’ in order to calculate the excess inventory provision for “take or pay” contracts;

• assessed the accuracy of the data used in the inventory provision calculation by testing

the ageing of a sample of inventory items back to supplier invoice;

• understood the change in trends at the year-end 2022 and in the subsequent period

that evidence a slowdown in customer demand and assessed management’s turnaround

plans in order to evaluate the reasonableness of the specific provision held against this

inventory; and

• inquired directly with warehouse staff during warehouse visits whether they foresaw

potential future usage for inventories, particularly those which were aged in excess of 6

months.

Key observations During our work we noted that management’s procedures to determine obsolete inventory

did not appropriately consider future sales forecasts and were overly optimistic. Further,

management did not perform a detailed obsolete inventory review for some of the key

inventory locations.

As a result of our challenge of management accounting estimates, and in particular

sensitising downward the forecasted sales, in addition to our knowledge gained during our

warehouse visits, we identified a material audit misstatement to provision for slow moving

inventory that was corrected in the period.

From the work performed above, we concluded that inventory has been appropriately

provided for after the correction for identified audit adjustments. We identified the need for

improvement in controls over obsolete inventory reviews, particularly where future sales

forecasts were overly optimistic.

Financial statements

Independent auditor’s report to the members of HeiQ PLC

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6. Our application of materiality

6.1. Materiality

We define materiality as the magnitude of misstatement in the financial statements that makes it probable

that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use

materiality both in planning the scope of our audit work and in evaluating the results of our work.

Based on our professional judgment, we determined materiality for the financial statements as a whole as

follows:

Group financial statements Parent Company financial statements

Materiality $780,000 $403,000

Basis for

determining

materiality

We determined materiality using a

combination of benchmarks. Our materiality

of $780,000 represented 1.65% of Group

revenues and 1.9% of Group net assets.

Parent Company materiality was determined

based on 1.0% of the Parent Company net

assets, capped at a percentage of group

materiality.

Rationale for

the benchmark

applied

Based on our professional judgment, we

consider a combination of revenue and

Group net asset to be the most appropriate

benchmark to determine materiality as

the Group is publicly listed and in a growth

phase with new product launch. In addition

we consider that the focus of investors is

not related to net result before tax because

of significant loss in the current year.

We have considered net assets as the

appropriate measure given the Parent

Company is primarily a holding Company for

the Group.

6.2. Performance materiality

We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate,

uncorrected and undetected misstatements exceed the materiality for the financial statements as a whole.

Group financial statements Parent Company financial statements

Performance

materiality

60% of Group materiality 60% of Parent Company materiality

Basis and

rationale for

determining

performance

materiality

In determining performance materiality, we considered the following factors:

a. the fact that is our first year audit;

b. our assessment of the Group’s overall control environment in the light of the number of

control deficiencies identified during the audit (as detailed within the key audit matter

above);

c. prior period errors found in the current year; and

d. the nature, number and size of misstatements identified and corrected during the audit.

6.3. Error reporting threshold

We agreed with the Audit Committee that we would report all audit differences in excess of $39,000, as well

as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report

to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the

financial statements.

7. An overview of the scope of our audit

7.1. Identification and scoping of components

Our Group audit was scoped by obtaining an understanding of the Group and its environment, including Group-

wide controls, and assessing the risks of material misstatement at the Group level.

We focused our Group audit on 14 components. Three of these were subject to a full audit being HeiQ Plc,

HeiQ Materials AG and HeiQ ChemTex Limited. In addition, audit of specified balances was performed on

the remaining 11 components, where the extent of our testing was based on our assessment of the risks of

material misstatement and of the materiality of the Group’s operations at those components. In response to the

deficiencies within the control environment (see section 5.1 above), we increased the number of components

that are subject to audit of specified balances from one to 11.

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28%

71%

56%

36%

74%

23%

Full audit scope

Specified audit procedures

Review at group level

Full audit scope

Specified audit procedures

Review at group level

Full audit scope

Specified audit procedures

Review at group level

Revenue

Contribution to

Group’s losses

Net assets

These components represent the principal business units and account for 99% of the Group’s revenue, 92% of

the Group’s losses and 97% of the Group’s net assets. They were also selected to provide an appropriate basis

for undertaking audit work to address the risks of material misstatement identified above.

Our audit work at the components, excluding the Parent company, was executed at levels of materiality applicable

to each individual entity which were lower than Group materiality and ranged from $187,000 to $304,000.

At the Group level we also tested the consolidation process and carried out analytical procedures to confirm our

conclusion that there were no significant risks of material misstatement of the aggregated financial information

of the remaining components not subject to audit or audit of specified account balances.

All audit work for the purpose of expressing an opinion on the Group’s financial statements is performed by

Deloitte, except the audit of specified account balances and the inventory count observation of HeiQ Chrisal

which are performed by another audit firm.

7.2. Our consideration of the control environment

As described in the Audit Committee report on page 49 and the Key Audit Matter in section 5.1, we identified

significant weaknesses in the Group’s internal control environment. The Company has not developed robust

processes relating to the risk associated with the material account balances and transactions. In addition, new

business risks are addressed and discussed on an “ad hoc” basis, often with no documentation.

7.3. Our consideration of climate-related risks

In the Group’s sustainability report, the Group assess the impact of both its carbon emissions and energy usage

as part of its wider ESG strategy. Carbon emissions and energy usage are rated as the two areas with the

highest impact in the matrix that the Group has developed. Both calculations have followed the UK Government’s

Environmental Reporting guidelines.

Our procedures did not identify any specific controls within the organization in considering the impact of client

risks, however the identification of carbon emissions and energy consumption as the two most material impacts

within the ESG topics is consistent with our understanding of the business.

As set out in the CEO’s report, the Group has focused on the ongoing replacement of hydrocarbon based raw

materials in the raw materials they use for manufacturing by replacing them with non-hydrocarbon materials. The

Group has stated that their aim is to contribute to the decarbonization of the textile industry.

We performed our own qualitative risk assessment of the potential impact of climate change on the

Group’s account balances and classes of transaction and did not identify any reasonably possible risks of

material misstatement. With the involvement of climate change and sustainability specialists, we evaluated

management’s risk assessment process in respect of the potential impact of climate change in judgments

and estimates taken in the financial statements, and evaluated management’s Task Force on Climate-Related

Disclosures in line with the latest guidance. We also read the climate-related disclosures in the Strategic Report

to consider whether it is materially consistent with the financial statements and our knowledge obtained in the

audit.

Financial statements

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7.4. Working with other auditors

Two financially significant components, HeiQ Materials AG and HeiQ Chemtex Inc. were audited by Deloitte Zurich

and therefore that audit team received detailed instructions, supervision, direction and oversight by the Group

Engagement team.

We instructed a third party auditor to audit specified account balances for HeiQ Chrisal N.V. The Group audit

team sent detailed instructions, supervized and performed onsite review of the work performed.

8. Other information

The other information comprizes the information included in the annual report, other than the financial

statements and our auditor’s report thereon. The directors are responsible for the other information contained

within the annual report.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise

explicitly stated in our report, we do not express any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether the other information is

materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or

otherwise appears to be materially misstated.

If we identify such material inconsistencies or apparent material misstatements, we are required to determine

whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work

we have performed, we conclude that there is a material misstatement of this other information, we are required

to report that fact.

We have nothing to report in this regard.

9. Responsibilities of directors

As explained more fully in the directors’ responsibilities statement, the directors are responsible for the

preparation of the financial statements and for being satisfied that they give a true and fair view, and for such

internal control as the directors determine is necessary to enable the preparation of financial statements that

are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Group’s and the Parent

Company’s ability to continue as a going concern, disclosing as applicable, matters related to going concern

and using the going concern basis of accounting unless the directors either intend to liquidate the Group or the

Parent Company or to cease operations, or have no realistic alternative but to do so.

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

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free

from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our

opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in

accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise

from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be

expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the FRC’s

website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

11. Extent to which the audit was considered capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures

in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities,

including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is

detailed below.

078

HeiQ PLC

Annual Report and Accounts 2022

11.1. Identifying and assessing potential risks related to irregularities

In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-

compliance with laws and regulations, we considered the following:

• the nature of the industry and sector, control environment and business performance including the design

of the Group’s remuneration policies, key drivers for directors’ remuneration, bonus levels and performance

targets.

• results of our enquiries of management, the directors and the audit committee about their own identification

and assessment of the risks of irregularities, including those that are specific to the Group’s sector and stage

of development.

• any matters we identified having obtained and reviewed the Group’s documentation of their policies and

procedures relating to:

– identifying, evaluating and complying with laws and regulations and whether they were aware of any

instances of non-compliance.

– detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected

or alleged fraud.

– the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations.

• the matters discussed among the audit engagement team and relevant internal specialists, including tax,

valuations, IT and forensic specialists regarding how and where fraud might occur in the financial statements

and any potential indicators of fraud.

As a result of these procedures, we considered the opportunities and incentives that may exist within the

organization for fraud and identified the greatest potential for fraud in the following areas: revenue recognition. In

common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the

risk of management override.

We also obtained an understanding of the legal and regulatory frameworks that the Group operates in, focusing

on provisions of those laws and regulations that had a direct effect on the determination of material amounts

and disclosures in the financial statements. The key laws and regulations we considered in this context included

the UK Companies Act, and relevant tax regulations.

In addition, we considered provisions of other laws and regulations that do not have a direct effect on the

financial statements but compliance with which may be fundamental to the Group’s ability to operate or to avoid

a material penalty.

11.2. Audit response to risks identified

As a result of performing the above, we identified revenue recognition on long-term contracts with customers as a

key audit matter related to the potential risk of fraud or non-compliance with laws and regulations. The key audit

matters section of our report explains the matter in more detail and also describes the specific procedures we

performed in response to that key audit matter.

In addition to the above, our procedures to respond to risks identified included the following:

• reviewing the financial statement disclosures and testing to supporting documentation to assess compliance

with provisions of relevant laws and regulations described as having a direct effect on the financial

statements.

• performed enhanced fraud risk procedures as agreed with the forensic specialist.

• enquiring of management, the audit committee and external legal counsel concerning actual and potential

litigation and claims.

• performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks

of material misstatement due to fraud.

• reading minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing

correspondence with relevant regulatory authorities.

• in addressing the risk of fraud through management override of controls, testing the appropriateness of

journal entries and other adjustments; assessing whether the judgments made in making accounting

estimates are indicative of a potential bias; and evaluating the business rationale of any significant

transactions that are unusual or outside the normal course of business.

We also communicated relevant identified laws and regulations and potential fraud risks to all engagement

team members, including internal specialists and significant component audit teams, and remained alert to any

indications of fraud or non-compliance with laws and regulations throughout the audit.

Financial statements

Independent auditor’s report to the members of HeiQ PLC

continued

079

HeiQ PLC

Annual Report and Accounts 2022

Strategic

report

Corporate

governance

Financial

statements

Report on other legal and regulatory requirements

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

In our opinion the part of the directors’ remuneration report to be audited has been properly prepared in

accordance with the Companies Act 2006.

In our opinion, based on the work undertaken in the course of the audit:

• the information given in the strategic report and the directors’ report for the financial year for which the

financial statements are prepared is consistent with the financial statements; and

• the strategic report and the directors’ report have been prepared in accordance with applicable legal

requirements.

In the light of the knowledge and understanding of the Group and the Parent Company and their environment

obtained in the course of the audit, we have not identified any material misstatements in the strategic report or

the directors’ report.

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

13.1. Adequacy of explanations received and accounting records

Under the Companies Act 2006 we are required to report to you if, in our opinion:

• we have not received all the information and explanations we require for our audit; or

• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit

have not been received from branches not visited by us; or

• the Parent Company financial statements are not in agreement with the accounting records and returns.

We have nothing to report in respect of these matters.

13.2. Directors’ remuneration

Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors’

remuneration have not been made or the part of the directors’ remuneration report to be audited is not in

agreement with the accounting records and returns.

We have nothing to report in respect of these matters.

14. Other matters which we are required to address

14.1. Auditor tenure

Following the recommendation of the audit committee, we were appointed by the Board of Directors on 6 October

2022 to audit the financial statements for the year ending 31 December 2022. The period of total uninterrupted

engagement of the firm is one year, covering the year ended 31 December 2022. We have informed the

Company’s board that we intend to resign as auditors and will not seek re-election at the forthcoming Annual

General Meeting.

14.2. Consistency of the audit report with the additional report to the audit committee

Our audit opinion is consistent with the additional reports to the audit committee we are required to provide in

accordance with ISAs (UK).

15. Use of our report

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the

Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members

those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest

extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the

Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

As required by the Financial Conduct Authority (FCA) Disclosure Guidance and Transparency Rule (DTR) 4.1.15R

and 4.1.18R, these financial statements will form part of the Electronic Format Annual Financial Report filed

on the National Storage Mechanism of the FCA in accordance with DTR 4.1.15R-DTR 4.1.18R. This auditor’s

report provides no assurance over whether the Electronic Format Annual Financial Report has been prepared in

compliance with DTR 4.1.15R-DTR 4.1.18.

William Eversden (Senior statutory auditor)

For and on behalf of Deloitte LLP

Statutory Auditor

London, United Kingdom

October 27, 2023

080

HeiQ PLC

Annual Report and Accounts 2022

Financial statements

Consolidated statement of profit and loss and other

comprehensive income

For the year ended December 31, 2022

Note

Year ended

December 31,

2022

US$’000

Year ended

December 31,

2021

US$’000

(restated*)

Revenue 7 47, 2 0 2 5 5 , 41 9

Cost of sales 9 (33 ,74 5) (3 0,0 22)

Gross profit 1 3 , 4 57 2 5, 3 97

Other income 10 4,8 32 6 ,625

Selling and general administrative expenses 11 (3 0, 9 6 9) (24 ,6 8 0)

Impairment loss on intangible assets 18 (1 1 ,6 51) (2, 4 5 4)

Impairment loss on property, plant & equipment 19 (73 0) –

Other expenses 13 (4, 1 8 4) (6 , 2 42)

Operating loss (2 9, 2 4 5) (1, 3 5 4)

Finance income 14 683 534

Finance costs 15 (1 , 2 7 3) (5 6 9)

Loss profit before taxation (2 9 , 8 3 5) (1 , 3 8 9)

Income tax 16 21 16

Loss after taxation (2 9 , 8 1 4) (1 , 3 73)

Other comprehensive income:

Exchange differences on translation of foreign operations (1 ,9 1 4) (2 , 5 5 0)

Items that may be reclassified to profit or loss in subsequent periods (1 , 9 1 4) (2 , 5 5 0)

Actuarial gains/(losses) from defined benefit pension plans 1 ,380 1,1 24

Income tax relating to items that will not be reclassified subsequently to

profit or loss (2 7 6) (2 2 5)

Items that will not be reclassified to profit or loss in subsequent

periods 1 ,10 4 899

Other comprehensive loss for the year (8 1 0) (1,6 51)

Total comprehensive loss for the year (3 0 , 6 2 4) (3 , 0 24)

Loss attributable to:

Equity holders of HeiQ (29, 2 5 1) (1 , 17 7)

Non-controlling interests (5 6 3) (1 9 6)

(2 9 , 8 1 4) (1 , 3 73)

Total Comprehensive loss attributable to:

Equity holders of the Company (3 0 , 0 6 1) (2 , 8 2 8)

Non-controlling interests (5 6 3) (1 9 6)

(3 0 , 6 2 4) (3 , 0 24)

Loss per share:

Basic (cents)

17 (2 1 . 9 2) (0 .9 1)

* The consolidated statement of profit and loss and other comprehensive income has been restated in the comparative period as

described in Note 2.

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

081

HeiQ PLC

Annual Report and Accounts 2022

Strategic

report

Corporate

governance

Financial

statements

Consolidated statement of financial position

As at December 31, 2022

Note

As at

December 31,

2022

US$’000

As at

December 31,

2021

US$’000

(restated*)

As at

December 31,

2020

US$’000

(restated*)

ASSETS

Intangible assets 18 2 0,4 42 3 0, 773 5, 2 6 4

Property, plant and equipment 19 9, 8 02 6, 86 5 5,4 67

Right-of-use assets 20 7, 8 1 9 7, 9 74 2,5 6 4

Deferred tax assets 32 538 1, 3 37 1,28 8

Other non-current assets 21 1 37 333 20 6

Non-current assets 38, 738 4 7, 2 8 2 14 ,7 8 9

Inventories 22 13,16 8 1 3 ,7 7 0 13 ,540

Trade receivables 23 6,4 87 14, 6 5 6 10,0 8 0

Other receivables and prepayments 24 4, 262 3 , 876 2, 609

Cash and cash equivalents 8,48 8 14 ,5 6 0 25,6 95

Current assets 32,4 05 46, 8 62 51, 9 24

Total assets 71, 1 4 3 9 4, 14 4 6 6 ,71 3

EQUITY AND LIABILITIES

Issued share capital and share premium 26 205,87 4 1 9 5 ,71 4 18 4,0 9 6

Other reserves 28 (1 2 8 , 0 17) (1 2 7, 1 9 5) (1 2 5 , 9 6 8)

Retained deficit 28 (3 9, 4 6 6) (11,525) (1 0 , 3 4 8)

Equity attributable to HeiQ shareholders 38 ,391 56 ,994

47,780

Non-controlling interests 1 ,94 8 2, 5 41 (2 0)

Total equity 40,3 3 9 5 9, 5 3 5

47,760

Lease liabilities 30 6,5 58 7, 2 0 9 2, 3 0 4

Long-term borrowings 31 1 ,44 5 1,6 0 5 1,4 0 0

Deferred tax liability 32 1,253 2 ,333 8 57

Other non-current liabilities 33 4 ,7 1 4 2,61 9 3 ,425

Total non-current liabilities 1 3 ,970 1 3 ,7 6 6 7, 9 8 6

Trade and other payables 34 5, 322 8 , 2 71 5, 815

Accrued liabilities 35 4 ,97 8 3, 3 86 2,16 8

Income tax liability 16 31 4 51 1,49 5

Deferred revenue 36 1,285 1 ,0 0 4 –

Short-term borrowings 31 2, 893 1,1 57 17 3

Lease liabilities 30 1 , 264 905 349

Other current liabilities 38 778 6,0 6 9 9 67

Total current liabilities 16,83 4 2 0, 8 4 3 1 0,9 67

Total liabilities 30, 80 4 34,609 18,953

Total equity and liabilities 71 , 14 3 94 ,14 4 6 6 ,71 3

* The consolidated statement of financial position has been restated for the comparative periods as described in Note 2.

The Notes on pages 84 to 141 form an integral part of these Consolidated Financial Statements. The Consolidated

Financial Statements were approved and authorized for issue by the Board of Directors on October 26, 2023 and

signed on its behalf by:

Xaver Hangartner

Chief Financial Officer

082

HeiQ PLC

Annual Report and Accounts 2022

Financial statements

Consolidated statement of changes in equity

For the year ended December 31, 2022

Note

Issued share

capital and

share premium

US$’000

Other

reserves

US$’000

Retained

deficit

US$’000

(restated*)

Equity

attributable

to HeiQ

shareholders

US$’000

(restated*)

Non-

controlling

interests

US$’000

(restated*)

Total

equity

US$’000

(restated*)

Balance at January 1,

2021 (as presented) 18 4 ,0 9 6 (1 2 5 , 9 6 8) (8,499) 49, 6 2 9 (2 0) 49 ,609

Prior year adjustment

in respect of revenue

recognition – – (1 , 8 4 9) (1 , 8 4 9) – (1, 8 4 9)

Balance at January 1,

2021 (as restated) 1 8 4,0 9 6 (1 2 5 , 9 6 8) (10 , 3 4 8) 47, 7 8 0

(

20) 47,760

Loss after taxation – – (1 , 17 7) (1 , 17 7) (1 9 6) (1 , 3 7 3)

Other comprehensive

(loss)/income – (1,6 51) – (1,6 51) – (1, 6 51)

Total comprehensive (loss)/

income for the year – (1,6 51) (1 , 17 7) (2, 8 2 8) (19 6) (3 , 0 24)

Issuance of shares 26 11,61 8 – – 11 ,618 – 1 1,61 8

Share-based payment

charges 27 – 424 – 424 – 424

Amounts arising on

business combinations 5 – – – – 2 ,7 5 7 2 ,7 5 7

Transactions with owners 11,61 8 424 – 1 2,0 42 2 ,7 5 7 1 4 ,79 9

Balance at December 31,

2021 1 9 5 ,71 4

(127,195)

(11, 525) 56, 994 2 , 5 41 59, 5 3 5

Loss after taxation – – (29, 2 5 1) (29, 25 1) (5 6 3) (2 9 , 8 1 4)

Other comprehensive

(loss)/income – (8 1 0) – (8 1 0) – (8 1 0)

Total comprehensive (loss)/

income for the year – (8 1 0) (29, 2 5 1) (3 0 , 0 6 1) (5 6 3) (3 0 , 6 2 4)

Issuance of shares 26 10,160 – – 10,160 – 10,160

Share-based payment

income 27 – (1 2) – (1 2) – (1 2)

Dividends paid to minority

shareholders 28 – – – – (24 3) (2 4 3)

Capital contributions from

minority shareholders – – – – 76 4 76 4

Adjustments arising from

change in non-controlling

interests 5a – – (2,445) (2,445) (6 1 6) (3,061)

Transfer of shares to

non-controlling interest 5b – – 3 ,7 5 5 3 ,7 5 5 65 3,820

Transactions with owners 10,160 (1 2) 1 ,310 1 1 ,4 58 (3 0) 11 ,428

Balance at December 31,

2022 205 ,87 4 (1 2 8 , 0 17) (3 9 , 4 6 6) 38 ,391 1 ,94 8 40, 3 39

* The consolidated statement of changes in equity has been restated for the comparative periods as described in Note 2.

083

HeiQ PLC

Annual Report and Accounts 2022

Strategic

report

Corporate

governance

Financial

statements

Consolidated statement of cash flows

For the year ended December 31, 2022

Cash flows from operating activities Note

Year ended

December 31,

2022

US$’000

Year ended

December 31,

2021

US$’000

(Restated*)

Loss before taxation (2 9 , 8 3 5) (1 , 3 8 9)

Cash flow from operations reconciliation:

Depreciation and amortization 9, 11 3 ,6 5 5 2 , 9 47

Impairment expense 13 12, 380 2,4 5 4

Net loss on disposal of assets 43 (5) (3 4)

Write-off of intangible assets 13 8 97 –

Fair value gain on derivative liability 38 (371) –

Gain on earnout consideration 5g – (8 0)

Finance costs 273 225

Finance income (2) (1 8)

Pension expense 2 47 156

Non-cash equity compensation 12 1 38 498

Gain from lease modification 20 (6 8) –

Other costs paid in shares 26 235 –

Currency translation (6 1) (79 3)

Working capital adjustments:

Decrease in inventories 43 602 2,0 28

Decrease/(Increase) in trade and other receivables 43 7,7 8 3 (2, 3 0 5)

(Decrease)/Increase in trade and other payables 43 2 ,54 3 2,181

Cash generated (used in)/from operations (1 , 5 8 9) 5, 870

Taxes paid 16 (870) (2, 4 62)

Net cash generated (used in)/from operating activities (2,459) 3,4 0 8

Cash flows from investing activities

Consideration for acquisition of businesses 43 (1 , 5 8 7) (8,857)

Cash assumed in asset acquisition 26 65 –

Purchase of property, plant and equipment 19 (3 ,4 1 8) (9 9 4)

Proceeds from the disposal of property, plant and equipment 53 138

Development and acquisition of intangible assets 18 (3 , 8 6 5) (2 , 9 6 9)

Interest received 2 18

Net cash used in investing activities (8, 750) (12, 664)

Cash flows from financing activities

Interest paid on borrowings (1 1 0) (10 8)

Repayment of leases 20, 43 (9 9 2) (6 6 2)

Interest paid on leases (1 6 3) (1 17)

Proceeds from disposals of minority interests 5b 4 ,7 9 2 –

Proceeds from borrowings 43 3,46 5 546

Repayment of borrowings 43 (9 0 4) (9 2 8)

Dividends paid to minority shareholders 28 (2 4 3) –

Net cash from/(used in) financing activities 5,84 5 (1 , 2 6 9)

Net decrease in cash and cash equivalents (5 , 3 6 4) (1 0,525)

Cash and cash equivalents – beginning of the year 1 4,560 25,6 95

Effects of exchange rate changes on the balance of cash held in

foreigncurrencies (70 8) (610)

Cash and cash equivalents – end of the year 8,48 8 14 ,5 6 0

* The consolidated statement of cash flows has been restated for the comparative period as described in Note 2.

084

HeiQ PLC

Annual Report and Accounts 2022

Financial statements

Notes to the consolidated financial statements

For the year ended December 31, 2022

1. General information

HeiQ Plc (the Company) is a company limited by shares incorporated and registered in the United Kingdom. Its

ultimate controlling party is HeiQ Plc. The address of the Company’s registered office is 5th Floor, 15 Whitehall,

London, SW1A 2DD.

The principal activities of the Company and its subsidiaries (the Group) and the nature of the Group’s operations

are set out in Note 6.

These financial statements are presented in United States Dollars (US$) which is the presentation currency of

the Group, and all values are rounded to the nearest thousand dollars except where otherwise indicated. Foreign

operations are included in accordance with the policies set out in Note 3.

2. Changes in accounting policies, prior period error correction and adoption of

new and revised standards

Change in accounting policy

Following the acquisitions in 2021, the Group had different accounting policies for inventory in the subsidiaries

and therefore aligned the methodology during the financial year 2022 closing process to apply solely a first-in-

first-out basis. The Group has assessed the impact on the valuation: the majority of inventory is valued on an

individual basis and the impact is limited to functional consumer goods. It was therefore concluded that there

was no material impact from the change in policy. See Note 3s for a description of the accounting policy.

Prior period error: Overstatement of lease assets and liabilities and reclassifications

During the compilation of the financial statements for the year ended December 31, 2022, the Group corrected

an overstatement of right-of-use assets and lease liabilities assumed in the acquisition of HeiQ Chrisal N.V.

It was determined that property capitalized as a right-of-use asset was owned by HeiQ Chrisal N.V. rather than

leased – and the corresponding liability was that of a loan rather than a lease in nature. The loan amount

payable was reported by Chrisal as short-term payables, and the assets were recognized as property, plant and

equipment. In addition, at Group level, the same contracts were also recognized as right-of-use asset and lease

liabilities.

Further, certain liabilities arising from customer contracts were incorrectly classified as deferred revenue rather

than accrued liabilities and certain other payables are reclassed to short- and long-term borrowings.

The following table summarizes the impact of the prior period error on the financial statements of the Group.

Consolidated statement of profit or loss

Year ended

December 31, 2021

US$’000

Selling and general administrative expenses 16

Finance costs (27)

Decrease in profit for the financial year (11)

Consolidated statement of financial position

Right-of-use assets (1,105)

Trade and other payables 1,088

Accrued liabilities (770)

Deferred revenue 770

Short-term borrowings (153)

Long-term borrowings (935)

Lease liabilities (current) 149

Lease liabilities (non-current) 967

Decrease in net assets and equity (11)

085

HeiQ PLC

Annual Report and Accounts 2022

Strategic

report

Corporate

governance

Financial

statements

Prior period error: PPA Chrisal: Accounting for 51% of intangible assets acquired instead of 100%

During the purchase price allocation of the Chrisal acquisition, the Group identified and accounted for brand and

customer relationship as well as technologies. The Group correctly valued the intangible assets at 51% in the

purchase price allocation. However, the Group also consolidated the intangible assets at 51% when it should have

accounted for them at 100% with the difference leading to an increase in non-controlling interests. The correction of

the error leads to an increase in intangible assets and a higher amortization charge for the reporting period 2021.

The following table summarizes the impact of the prior period error on the financial statements of the Group.

Consolidated statement of profit or loss

Year ended

December 31, 2021

US$’000

Selling and general administrative expenses (218)

Income tax 55

Decrease in profit for the financial year (163)

Consolidated statement of financial position

Intangible assets 1,759

Deferred tax liability (440)

Increase in net assets 1,319

Non-controlling interests (1,483)

Decrease in shareholders’ equity (163)

Prior period error: Correcting revenue recognition of take-or-pay contracts

A further restatement concerns two significant take-or-pay contracts which have minimum guaranteed pricing

irrespective of amounts delivered to the customer. Following a renegotiation with one customer post year-end,

the company has reviewed its historic accounting for this contract. The conclusion of this review is that amounts

recognized as revenue in 2021 and accounts receivable as at December 31, 2020 and 2021 were overstated as

the criteria for revenue recognition under IFRS 15 had not been met. There are also associated impacts on costs

of sales, accrued liabilities and tax.

As a further consequence, the accounting policy has been amended. Revenue from take-or-pay contracts is

recognized only upon shipment of the products. See updated accounting policy and additional background on take-

or-pay contracts in note 31. This has led to a restatement for 2021 in relation to a second take-or-pay contract.

The following table summarizes the impact of the prior period error on the financial statements of the Group.

The impact of the prior period error on basic earnings per share is presented in Note 17.

Consolidated statement of profit or loss

Year ended

December 31, 2021

US$’000

Revenue (2,455)

Cost of sales 876

Selling and general administrative expenses 19

Income tax 174

Decrease in profit for the financial year (1,386)

Consolidated statement of financial position

Trade receivables (37)

Other receivables and prepayments (2,399)

Deferred tax asset 174

Accrued liabilities 876

Decrease in net assets and equity (1,386)

2. Changes in accounting policies, prior period error correction and adoption of

new and revised standards continued

086

HeiQ PLC

Annual Report and Accounts 2022

Prior period error: Goodwill impairment and currency translation Chrisal CGU and RAS CGU

In course of the preparation of the 2022 financial statements, the Group identified a goodwill impairment in

relation to three CGUs (Chrisal, RAS, Life). It was found that a portion of the goodwill impairment should have

already been identified during the preparation of the 2021 financials, if all available information at the point

of publishing the annual report 2021 had been taken into consideration. Consequently, a retrospective review

of the 2021 goodwill impairment tests was performed and the underlying framework for modelling valuation

assumptions was corrected. It was concluded that a portion of the identified impairment amounting to US$2.3

million is to be allocated to the 2021 financial statements whereas US$1.3 million of the impairment charge

relates to the Chrisal CGU and US$1.0 million relates to the RAS CGU. No correction to the 2021 impairment

test was identified for Life CGU.

IAS 21 – The Effects of Changes in Foreign Exchange Rates requires that intangible assets including goodwill

arising on the acquisition shall be treated as assets of the foreign operation. Chrisal CGU and RAS CGU both

have a functional currency which is different to the presentation currency of the Group. Consequently, these

intangible assets should be translated from the functional currency of the CGU, Euro, to the presentation

currency US$. The company recalculated the US$ balances with the closing rate present as at December 31,

2021. This led to a decrease of the intangible asset balance as well as a charge to other comprehensive loss

of US$888,000.

See Note 18 for further details.

Consolidated statement of profit or loss

Year ended

December 31, 2021

US$’000

Impairment loss on intangible assets (2,310)

Decrease in profit for the financial year (2,310)

Consolidated statement of financial position

Intangible assets (3,198)

Other reserves 888

Decrease in net assets and equity (2,310)

Prior period error: foreign currency risk note

The amounts in Note 42d foreign currency risk have been restated as at December 31, 2021, as they contained

intercompany balances, related to long-term loans that form part of net investments in foreign operations.

Such balances are eliminated at Group level while foreign currency differences that arise between the entities’

functional currencies only affect other comprehensive income. The error has no impact on the consolidated

financial statements.

Impact of error corrections on the Group’s consolidated statement of financial position

The effect of error corrections on the financial year ended December 31, 2021 and the balance carried forward

from December 31, 2020 is shown in the following tables:

2. Changes in accounting policies, prior period error correction and adoption of

new and revised standards continued

Financial statements

Notes to the consolidated financial statements continued

For the year ended December 31, 2022

087

HeiQ PLC

Annual Report and Accounts 2022

Strategic

report

Corporate

governance

Financial

statements

Consolidated statement of financial position

December 31, 2020

US$’000 As presented

Restatement

revenue

recognition As Restated

Assets

Deferred tax asset 826 462 1,288

Trade receivables 13,437 (3,357) 10,080

Total Assets 69,608 (2,895) 66,713

Capital and reserves

Retained deficit (8,499) (1,849) (10,348)

Total Equity 49,609 (1,849) 47,760

Liabilities

Accrued liabilities 3,214 (1,046) 2,168

Total Liabilities 19,999 (1,046) 18,953

Consolidated statement of financial position

December 31, 2021

US$’000 As presented

Restatement

Leasing

Restatement

revenue

recognition

Restatement

PPA Chrisal

Restatement

Goodwill As Restated

Assets

Intangible assets 32,212 – – 1,759 (3,198) 30,773

Right-of-use assets 9,079 (1,105) – – – 7,974

Deferred tax assets 701 – 636 – – 1,337

Trade receivables 18,050 – (3,394) – – 14,656

Other receivables and

prepayments 6,275 – (2,399) – – 3,876

Total Assets 101,845 (1,105) (5,157) 1,759 (3,198) 94,144

Capital and reserves

Retained deficit (5,823) 6 (3,235) (164) (2,310) (11,526)

Other reserves (126,307) – – – (888) (127,195)

Non-controlling interests 1,053 5 – 1,483 – 2,541

Total Equity 64,637 11 (3,235) 1,319 (3,198) 59,535

Liabilities

Leases (non-current) 8,176 (967) – – – 7,2 09

Long-term borrowings 670 935 – – – 1,605

Deferred tax liability 1,894 – – 440 – 2,333

Trade and other payables 9,359 (1,088) – – – 8,271

Accrued liabilities 4,538 770 (1,922) – – 3,386

Deferred revenue 1,774 (770) – – – 1,004

Short-term borrowings 1,004 153 – – – 1,157

Leases (current) 1,054 (149) – – – 905

Total Liabilities 37,208 (1,116) (1,922) 440 – 34,609

2. Changes in accounting policies, prior period error correction and adoption of

new and revised standards continued

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Impact of adjustment on the Group’s statement of profit and loss and other comprehensive income

December 31, 2021

US$’000 As presented

Restatement

Leasing

Restatement

revenue

recognition

Restatement

PPA Chrisal

Restatement

Goodwill

impairment As Restated

Net result for the year

Revenue 57, 874 – (2,455) – – 55,419

Cost of sales (30,898) – 876 – – (30,022)

Selling and general

administration expense (24,465) (16) 19 (218) – (24,680)

Impairment losses on intangible

assets (144) – – – (2,310) (2,454)

Finance costs (597) 27 – – – (569)

Income tax (212) – 174 55 – (16)

Income (loss) after taxation 2,474 11 (1,386) (163) (2,310) (1,373)

Income (loss) after taxation

attributable to HeiQ Stockholders 2,676 6 (1,386) (163) (2,310) (1,177)

Income after taxation attributable

to non-controlling interest (202) 5 – – – (196)

Income (loss) after taxation 2,474 11 (1,386) (163) (2,310) (1,373)

Impact of adjustment on earnings per share

December 31, 2021

US$’000 As presented

Restatement

Leasing

Restatement

revenue

recognition

Restatement

PPA Chrisal

Restatement

Goodwill

impairment As Restated

Basic earnings (loss) per share 2.07 0.01 (1.08) (0.13) (1.78) (0.91)

New standards, interpretations and amendments effective for the current period

Adopted

The following new standards and amendments were effective for the first time in these financial statements but

did not have a material effect on the Group:

• Annual Improvements to IFRS Standards 2018-2020 Cycle

• Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37)

• Property, Plant and Equipment – Proceeds before Intended Use (Amendments to IAS 16)

• Conceptual Framework for Financial Reporting (Amendments to IFRS 3)

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

There are a number of standards, amendments to standards, and interpretations which have been issued by

the IASB that are effective in future accounting periods that the Group has decided not to adopt early. The most

significant of these are as follows:

Effective for annual periods beginning on or after January 1, 2023:

• 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).

Management anticipates that these new standards, interpretations and amendments will be adopted in the

financial statements as and when they are applicable and adoption of these new standards, interpretations and

amendments, will be reviewed for their impact on the financial statements prior to their initial application.

The Directors do not expect these new accounting standards and amendments will have a material impact on the

Group’s financial statements.

2. Changes in accounting policies, prior period error correction and adoption of

new and revised standards continued

Financial statements

Notes to the consolidated financial statements continued

For the year ended December 31, 2022

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3. Significant accounting policies

a. Basis of preparation

The Consolidated Financial Statements have been prepared in accordance with UK adopted international

financial reporting standards.

The Consolidated Financial Statements have been prepared under the historical cost convention except for

certain financial and equity instruments that have been measured at fair value. Historical cost is generally based

on the fair value of the consideration given in exchange for goods and services.

The preparation of Financial Statements in conformity with IFRS requires the use of certain critical accounting

estimates. It also requires management to exercise its judgment in the process of applying the Group’s

accounting policies. The areas involving a higher degree of judgment and complexity, or areas where assumptions

and estimates are significant to the Consolidated Financial Statements are disclosed in Note 4.

b. Going Concern

The Consolidated Financial Statements have been prepared on a going concern basis, which contemplates the

continuity of normal business activity and the realization of the assets and the settlement of liabilities in the

normal course of business.

The Group’s business activities, together with the factors likely to affect its future development, performance and

position are set out in the Strategic Report on pages 2 to 43. The financial position of the Group, its cash flows,

liquidity position and borrowing facilities are described in the CFO Review on pages 30 to 35 and in Note 31 to

the financial statements. In addition, Notes 41 and 42 to the financial statements include the Group’s objectives,

policies and processes for managing its capital; its financial risk management objectives; details of its financial

instruments; and its exposures to credit risk and liquidity risk.

To manage its cash balance, the Group has access to credit facilities totalling CHF9.0 million (approximately

US$9.8 million as of September 30, 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 the publication of audited accounts for

the year 2022 was delayed, the Company was not able to submit these accounts within the contractually defined

timeframe but has received extensions to do so from both banks until October 31, 2023.

As of September 30, 2023, the Group has drawn CHF6.3 million of the facilities (CHF2.4 million as at

December 31, 2022) as follows:

Term/Maturity date Amount

November 27, 2023 CHF4.5 million

June 17, 2024 CHF0.8 million

September 30, 2024 CHF1.0 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. Furthermore, the Board is in discussions with financial institutions to replace the

currently uncommitted credit facilities by committed, long-term facilities, but the outcome of these discussions

remains uncertain.

Nevertheless, the Board acknowledges the uncommitted status of the facilities which could be terminated

without notice during the forecast period requiring the refinancing of debts as per above maturity 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 at the going concern basis.

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c. Basis of consolidation

The Consolidated Financial Statements comprize the financial statements of the Company and its subsidiaries

listed in Note 6 “Subsidiaries” to the Consolidated Financial Statements.

A subsidiary is defined as an entity over which the Company has control. The Company controls an entity when

the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability

to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on

which control is transferred to the Group. They are deconsolidated from the date that control ceases.

Intra-group transactions, balances and unrealized gains on transactions between Group companies are

eliminated; unrealized losses are also eliminated unless cost cannot be recovered. Where necessary,

adjustments are made to the financial statements of subsidiaries to ensure consistency of accounting policies

with those of the Group.

Non-controlling interests in subsidiaries are identified separately from the Group’s equity therein. Those interests

of non-controlling shareholders that are present ownership interests entitling their holders to a proportionate

share of net assets upon liquidation may initially be measured at fair value or at the non-controlling interests’

proportionate share of the fair value of the acquiree’s identifiable net assets. The choice of measurement is

made on an acquisition-by-acquisition basis. Other non-controlling interests are initially measured at fair value.

Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at

initial recognition plus the non-controlling interests’ share of subsequent changes in equity.

The total comprehensive income of non-wholly owned subsidiaries is attributed to owners of the parent and to

the non-controlling interests in proportion to their relative ownership interests.

The preparation of the Consolidated Financial Statements in compliance with UK adopted international

accounting standards requires the Directors to exercise judgment in applying the Company’s accounting policies.

The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are

significant to the Consolidated Financial Statements are disclosed in Note 4 “Significant judgments, estimates

and assumptions” to the Consolidated Financial Statements.

d. Business combinations

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in

a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair

values of assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree

and the equity interest issued by the Group in exchange for control of the acquiree. Acquisition-related costs are

recognized in profit or loss as incurred.

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized at their fair

value at the acquisition date, except that:

• Deferred tax assets or liabilities and assets or liabilities related to employee benefit arrangements

are recognized and measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits

respectively;

• Liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-

based payment arrangements of the Group entered into to replace share-based payment arrangements of the

acquiree are measured in accordance with IFRS 2 at the acquisition date (see below);

• Assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets

Held for Sale and Discontinued Operations are measured in accordance with that Standard.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-

controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the

acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities

assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and

liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests

in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is

recognized immediately in profit or loss as a bargain purchase gain.

When the consideration transferred by the Group in a business combination includes a contingent consideration

arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of

the consideration transferred in a business combination. Changes in fair value of the contingent consideration

that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments

against goodwill. Measurement period adjustments are adjustments that arise from additional information

obtained during the ‘measurement period’ (which cannot exceed one year from the acquisition date) about facts

and circumstances that existed at the acquisition date.

3. Significant accounting policies continued

Financial statements

Notes to the consolidated financial statements continued

For the year ended December 31, 2022

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The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify

as measurement period adjustments depends on how the contingent consideration is classified. Contingent

consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent

settlement is accounted for within equity. Other contingent consideration is remeasured to fair value at

subsequent reporting dates with changes in fair value recognized in profit or loss.

When a business combination is achieved in stages, the Group’s previously held interests (including joint

operations) in the acquired entity are remeasured to its acquisition-date fair value and the resulting gain or loss,

if any, is recognized in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date

that have previously been recognized in other comprehensive income are reclassified to profit or loss, where such

treatment would be appropriate if that interest were disposed of.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the

combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete.

Those provisional amounts are adjusted during the measurement period (see above), or additional assets or

liabilities are recognized, to reflect new information obtained about facts and circumstances that existed as of

the acquisition date that, if known, would have affected the amounts recognized as of that date.

e. Foreign currency transactions and translation

The individual entities’ functional currencies are listed below:

Subsidiary: Functional currency

HeiQ Plc, United Kingdom GBP

HeiQ Materials AG, Switzerland CHF

HeiQ ChemTex Inc., United States of America USD

HeiQ Pty Ltd, Australia AUD

HeiQ GrapheneX AG, Switzerland CHF

HeiQ Company Limited, Taiwan TWD

HX Company Limited, Taiwan TWD

HeiQ Medica S.L., Spain EUR

HeiQ Iberia Unipessoal Lda, Portugal EUR

HeiQ Chrisal N.V., Belgium EUR

HeiQ RAS AG, Germany EUR

HeiQ Regulatory GmbH, Germany EUR

HeiQ (China) Material Tech LTD, China CNY

Life Material Technologies Limited, Hong Kong USD

Life Natural Limited, Hong Kong USD

Life Materials Latam Ltda, Brazil BRL

LMT Holding Limited, Thailand THB

Life Material Technologies Limited, Thailand THB

HeiQ AeoniQ GmbH, Austria EUR

ChemTex Laboratories Inc., United States of America USD

On a single entity level, transactions in foreign currencies are translated into the functional currency at the rate

of exchange on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies

are translated at the exchange rate ruling at the reporting date. The resulting gain or loss is reflected in the

“consolidated statement of profit and loss and other comprehensive income” within operating income or

operating expense, if the balance sheet account is of operating nature – e.g. trade and other receivables/

payables and within either “Finance income” or “Finance costs”, if the balance sheet account is of non-operating

nature – e.g. cash and cash equivalents, loans receivable, payable.

Single entities with functional currencies other than US$ are translated into US$ as part of the consolidation

where assets and liabilities are translated at closing rate for the year-ended, and profit and loss items are

translated at an average rate for the year. Equity transactions are translated at a historic rate. The residual value

flows into the currency translation reserve.

3. Significant accounting policies continued

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The results and financial position of all Group entities that have a functional currency different from the

presentation currency are translated into US$, the presentation currency, as follows:

1. assets and liabilities are translated at the closing rate at the date of the “Statement of Financial Position”;

2. income and expenses are translated at average exchange rates (unless this average is not a reasonable

approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income

and expenses are translated at the dates of the transactions); and

3. all resulting exchange differences are recognized in other comprehensive income.

On consolidation, the Group recognizes in “other comprehensive income” the exchange differences arising

from the translation of the net investment in foreign entities, and of monetary items receivable from foreign

subsidiaries for which settlement is neither planned nor likely to occur in the foreseeable future.

f. Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses, if any.

The cost of an item of property, plant and equipment initially recognized includes its purchase price and any cost

that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of

operating in the manner intended by the Group.

Property, plant and equipment are generally depreciated on a straight-line basis over their estimated useful lives:

Machinery and equipment 5–15 years

Motor vehicles 4–5 years

Computers and related software 3–5 years

Furniture and fixtures 5–10 years

Buildings 10–20 years

Freehold land is not depreciated.

The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting

period, with the effect of any changes in estimate accounted for on a prospective basis.

Property, plant and equipment held under leases are depreciated over the shorter of the lease term and

estimated useful life.

g. Intangible assets

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

impairment losses.

Goodwill

Goodwill represents the amount by which the fair value of the cost of a business combination exceeds the

fair value of the net assets acquired. Goodwill is not amortized and is stated at cost less any accumulated

impairment losses.

The recoverable amount of goodwill is tested for impairment annually or when events or changes in circumstance

indicate that it might be impaired. Impairment charges are deducted from the carrying value and recognized

immediately in the income statement. For the purpose of impairment testing, goodwill is allocated to each of

the Group’s cash generating units expected to benefit from the synergies of the combination. If the recoverable

amount of the cash generating unit is less than the carrying amount of the unit, the impairment loss is allocated

first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit

pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognized for goodwill

is not reversed in a subsequent period.

Intangible assets acquired in a business combination

Net assets acquired as part of a business combination includes an assessment of the fair value of separately

identifiable acquisition-related intangible assets, in addition to other assets, liabilities and contingent liabilities

purchased.

Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less

accumulated amortization and accumulated impairment losses, on the same basis as intangible assets that are

acquired separately.

Acquisition-related intangible assets are amortized on a straight-line basis over their useful lives which are

individually assessed.

3. Significant accounting policies continued

Financial statements

Notes to the consolidated financial statements continued

For the year ended December 31, 2022

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The estimated useful lives are as follows:

Brand names 10 years

Customer relations 5 years

Technologies 10 years

Other intangible assets 5–10 years

Internally developed assets

Internally generated assets represent expenditure incurred on research and development projects. Recognition

follows the following principles:

Research expenditure is recognized as an expense when it is incurred. Development expenditure is recognized

as an expense except that costs incurred on development projects are capitalized as long-term assets to the

extent that such expenditure is expected to generate future economic benefits. Development expenditure is

capitalized if, and only if an entity can demonstrate all of the following:

• its ability to measure reliably the expenditure attributable to the asset under development;

• the product or process is technically and commercially feasible;

• its future economic benefits are probable;

• its ability to use or sell the developed asset;

• Its intention to complete and use or sell the developed asset;

• the availability of adequate technical, financial and other resources to complete the asset under development.

Capitalized development expenditure is measured at cost less accumulated amortization and impairment losses,

if any. Certain internal salary costs are included where the above criteria are met. These internal costs are

capitalized when they are incurred in respect of products developed for sale or assets developed to be used.

In the event that it is no longer probable that the expected future economic benefits will be recovered, the

development expenditure is written down to its recoverable amount. Development expenditure initially recognized

as an expense is not recognized as assets in subsequent periods.

Capitalized development expenditure in relation to projects that are still in development phase are capitalized as

asset under construction until they are ready for sale or use. These assets are tested annually for impairment.

Internally developed assets are amortized on a straight-line method over a period of five to ten years when the

asset is ready for sale or use.

The estimated useful life is 5-10 years.

Other intangible assets

Other intangible assets include purchased rights, licenses, patent costs, concessions, website designs and

domains and trademarks. They are measured initially at purchase cost and are amortized on a straight-line basis

over their estimated useful lives. The estimated useful life is 5-10 years.

Derecognition intangible assets

An intangible asset is derecognized on disposal, or when no future economic benefits are expected from use or

disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between

the net disposal proceeds and the carrying amount of the asset, are recognized in profit or loss when the asset

is derecognized.

h. Impairment of financial assets

The expected credit loss model defined in IFRS 9 “Financial Instruments” requires the Group to account for

expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in

credit risk since initial recognition of the financial assets. The credit event does not have to occur before credit

losses are recognized. IFRS 9 “Financial Instruments” allows for a simplified approach for measuring the loss

allowance at an amount equal to lifetime expected credit losses for trade receivables and contract assets.

The Group has three types of financial assets subject to the expected credit loss model: trade receivables

contract assets, other receivables.

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

credit loss: The expected loss rates are based on the Group’s historical credit losses. The historical loss rates

are then adjusted for current and forward-looking information on macroeconomic factors affecting the Group’s

customers.

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

3. Significant accounting policies continued

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Significant increase in credit risk

In assessing whether the credit risk on a financial instrument has increased significantly since initial recognition,

the Group compares the risk of a default occurring on the financial instrument at the reporting date with the risk

of a default occurring on the financial instrument at the date of initial recognition. In making this assessment,

the Group considers both quantitative and qualitative information that is reasonable and supportable, including

historical experience and forward-looking information that is available without undue cost or effort. Forward

looking information considered includes the future prospects of the industries in which the Group’s debtors

operate, obtained from economic expert reports, financial analysts, governmental bodies, relevant think-tanks

and other similar organizations, as well as consideration of various external sources of actual and forecast

economic information that relate to the Group’s core operations.

• In particular, the following information is taken into account when assessing whether credit risk has increased

significantly since initial recognition:

• Significant deterioration in external market indicators of credit risk for a particular financial instrument, e.g. a

significant increase in the credit spread, the credit default swap prices for the debtor, or the length of time or

the extent to which the fair value of a financial asset has been less than its amortized cost.

• Existing or forecast adverse changes in business, financial or economic conditions that are expected to

cause a significant decrease in the debtor’s ability to meet its debt obligations.

• An actual or expected significant deterioration in the operating results of the debtor.

• Significant increases in credit risk on other financial instruments of the same debtor.

• An actual or expected significant adverse change in the regulatory, economic, or technological environment of

the debtor that results in a significant decrease in the debtor’s ability to meet its debt obligations.

Irrespective of the outcome of the above assessment, the Group presumes that the credit risk on a financial

asset has increased significantly since initial recognition when contractual payments are more than 180 days

past due, unless the Group has reasonable and supportable information that demonstrates otherwise.

Despite the foregoing, the Group assumes that the credit risk on a financial instrument has not increased

significantly since initial recognition if the financial instrument is determined to have low credit risk at the

reporting date. A financial instrument is determined to have low credit risk if:

• The financial instrument has a low risk of default.

• The debtor has a strong capacity to meet its contractual cash flow obligations in the near term.

• Adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce

the ability of the borrower to fulfill its contractual cash flow obligations.

The Group regularly monitors the effectiveness of the criteria used to identify whether there has been a

significant increase in credit risk and revises them as appropriate to ensure that the criteria are capable of

identifying significant increase in credit risk before the amount becomes past due.

Definition of default

The Group considers the following as constituting an event of default for internal credit risk management

purposes as historical experience indicates that financial assets that meet either of the following criteria are

generally not recoverable:

• When there is a breach of financial covenants by the debtor.

• Information developed internally or obtained from external sources indicates that the debtor is unlikely to pay

its creditors, including the Group, in full (without taking into account any collateral held by the Group).

Irrespective of the above analysis, the Group considers that default has occurred when a financial asset is more

than 360 days past due unless the Group has reasonable and supportable information to demonstrate that a

more lagging default criterion is more appropriate.

Write-off policy

The Group writes off a financial asset when there is information indicating that the debtor is in severe financial

difficulty and there is no realistic prospect of recovery, e.g. when the debtor has been placed under liquidation

or has entered into bankruptcy proceedings, or in the case of trade receivables, when the amounts are over

two years past due unless the Group has reasonable support to assume recoverability, whichever occurs sooner.

Financial assets written off may still be subject to enforcement activities under the Group’s recovery procedures,

taking into account legal advice where appropriate. Any recoveries made are recognized in profit or loss.

3. Significant accounting policies continued

Financial statements

Notes to the consolidated financial statements continued

For the year ended December 31, 2022

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i. Impairment of non-financial assets

At each reporting date, the Directors assess whether indications exist that an asset may be impaired. If

indications do exist, or when annual impairment testing for an asset is required, the Directors estimate the

asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s

fair value less costs to sell and its value-in-use, and is determined for an individual asset, unless the asset

does not generate cash inflows that are largely independent of those from other assets or groups of assets.

Where the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the Directors

consider the asset impaired and write the subject asset down to its recoverable amount. In assessing value-

in-use, the Directors discount the estimated future cash flows to their present value using a pre-tax discount

rate that reflects current market assessments of the time value of money and the risks specific to the asset.

In determining fair value less costs to sell, the Directors consider recent market transactions, if available. If no

such transactions can be identified, the Directors utilize an appropriate valuation model.

When applicable, the Group recognizes impairment losses of continuing operations in the “statement of profit

and loss and other comprehensive income” in those expense categories consistent with the function of the

impaired asset.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is

increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does

not exceed the carrying amount that would have been determined had no impairment loss been recognized for

the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in

profit or loss to the extent that it eliminates the impairment loss which has been recognized for the asset in prior

years. Any increase in excess of this amount is treated as a revaluation increase.

j. Leases

The determination of whether an arrangement is, or contains, a lease is based on the substance of the

arrangement at inception date: whether fulfillment of the arrangement is dependent on the use of a specific

asset or assets or the arrangement conveys a right to use the asset.

Identifying leases

Lessee position:

The Group accounts for a contract, or a portion of a contract, as a lease when it conveys the right to use an

asset for a period of time in exchange for consideration. Leases are those contracts that satisfy the following

criteria:

• there is an identified asset;

• the Group obtains substantially all the economic benefits from use of the asset; and

• the Group has the right to direct use of the asset.

In determining whether the Group obtains substantially all the economic benefits that arise from use of the

asset, the Group considers only the economic benefits that arise from use of the asset, not those incidental to

legal ownership or other potential benefits.

In determining whether the Group has the right to direct use of the asset, the Directors consider whether

the Group directs how and for what purpose the asset is used throughout the period of use. If there are no

significant decisions to be made because they are pre-determined due to the nature of the asset, the Directors

consider whether the Group was involved in the design of the asset in a way that predetermines how and for

what purpose the asset will be used throughout the period of use. If the contract or portion of a contract does

not satisfy these criteria, the Group applies other applicable IFRSs rather than IFRS 16 “Leases”.

Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease

term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the

case) this is not readily determinable, in which case the Group’s incremental borrowing rate on commencement

of the lease is used, which the Directors have assessed to be between 1.75% and 5%, depending on the nature

of the asset and location.

Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate

on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortized on a

straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if, rarely,

this is judged to be shorter than the lease term.

3. Significant accounting policies continued

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When the Group revises its estimate of the term of any lease (because, for example, it re-assesses the

probability of a lessee extension or termination option being exercised), it adjusts the carrying amount of the

lease liability to reflect the payments to make over the revised term, which are discounted at the same discount

rate that applied on lease commencement. The carrying value of lease liabilities is similarly revised when the

variable element of future lease payments dependent on a rate or index is revised. In both cases an equivalent

adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being

amortized over the remaining (revised) lease term.

Right-of-use assets

A right-of-use asset is recognized at the commencement date of a lease. The right-of-use asset is measured at

cost, which comprzes the initial amount of the lease liability, adjusted for, as applicable, any lease payments

made at or before the commencement date net of any lease incentives received, any initial direct costs incurred,

and an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and

restoring the site or asset.

Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the

estimated useful life of the asset, whichever is the shorter. Right-of-use assets are subject to impairment or

adjusted for any re-measurement of lease liabilities.

The Group has elected not to recognize a right-of-use asset and corresponding lease liability for short-term

leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are

expensed to profit or loss as incurred.

k. Taxation

The income tax expense represents the sum of the tax currently payable and deferred tax.

Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in

other comprehensive income or directly in equity, in which case the current and deferred tax are also recognized

in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from

the initial accounting for a business combination, the tax effect is included in the accounting for the business

combination.

Income taxation

Current income tax assets and liabilities are measured at the amount to be recovered from, or paid to, the

taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted

or substantively enacted at the reporting date in the jurisdictions where the Group operates and generates

taxable income.

Deferred taxation

Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases

of assets and liabilities and their carrying amounts in the Consolidated Financial Statements. Deferred tax is

determined using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and

expected to apply when the related deferred tax is realized or the deferred liability is settled.

Deferred tax assets are recognized to the extent that it is probable that the future taxable profit will be available

against which the temporary differences can be utilized.

l. Revenue from contracts with customers

The Group’s revenue represents the fair value of the consideration received or receivable for the rendering

of services, licenses and similar fees as well as for the sale of functional products in different forms (mainly

ingredients, materials and consumer goods), net of value added tax and other similar sales-based taxes, rebates

and discounts after eliminating intercompany sales.

Revenue from contracts with customers is recognized once the performance obligation has been fulfilled. If the

Group fulfills its performance obligations to the customer, revenues recognized are capitalized as contract assets

until the Group invoices the customers. In contrast, if customers pay in advance for the services, a contract

liability is recognized and is released at point of revenue recognition.

The Group has the following major revenue streams:

Sale of goods

The Group sells functional ingredients, materials or consumer goods. Revenue from the sale of goods to

customers is generally recognized at a point in time, once control over the goods is passed to customers.

3. Significant accounting policies continued

Financial statements

Notes to the consolidated financial statements continued

For the year ended December 31, 2022

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Research and development services

HeiQ provides research and development services to customers in exchange for a fee. Revenue is generally

recognized at the point in time of completion of the project, for example, with delivery of proof-of-concept to the

customer.

Consulting services for research and development projects

HeiQ provides consulting services for customers regarding research and development projects including grant

acquisition services, industry cluster services and management services. The revenue for these services is

recognized over time based on completion of the project. Any amounts invoiced for stages not completed, are

recognized as deferred revenue.

Take-or-pay arrangements

Certain customers have agreed, under a “take or pay” contract, to purchase a specified minimum quantity of

particular products over a specified period of time, usually in exchange for a specified exclusivity during the same

period. However, the customer must pay for the full quantity stated in the contract, irrespective of whether the

customer takes delivery of the minimum quantity to which they are committed. Upon payment of the full amount,

the contract allows customers to defer their unexercised rights and to consume the remaining units within a

twelve-month period, although there is no compulsion to do so. The customers are billed for each shipment of

products and revenue is recognized at the point in time control over the goods is passed to the customer. At the

end of the contractual period, the customer is billed for the amounts not ordered. Revenue recognition for these

shortfall items is deferred until the customer consumes the units, or, in case of expiry of the rights, typically

twelve months after payment by the customer.

Exclusivity fees

HeiQ grants exclusivity to customers for certain products in certain regions. The contracts restrict HeiQ from

selling specific products to competitors for a limited time. The customers pay a fee for exclusivity which

increases the price of the goods supplied by HeiQ. In cases where the obligation to grant exclusivity can be

valued separately from other obligations in the contract, the exclusivity portion is accounted for over time

according to the contractual definition of the exclusivity period.

m. Share-based payments

All of the Group’s share-based awards are equity settled. Equity-settled share-based payments to employees are

measured at the fair value of the equity instruments at the grant date. Equity-settled share-based payments to

non-employees are measured at the fair value of services received, or if this cannot be measured, at the fair

value of the equity instruments granted at the date that the Group obtains the goods or counterparty renders

the service. The fair value of such shares issued has been estimated by reference to the cash consideration

received for shares issued or material third party transactions at or close to the dates for such non-cash issues.

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-

line basis over the vesting period, based on the Directors’ estimate of equity instruments that will eventually

vest, with a corresponding increase in equity. Where the conditions are non-vesting, the expense and equity

reserve arising from share-based payment transactions is recognized in full immediately on grant.

At the end of each reporting period, the Directors revise their estimate of the number of equity instruments

expected to vest. The impact of the revision of the original estimates, if any, is recognized in profit or loss such

that the cumulative expense reflects the revised estimate, with a corresponding adjustment to other reserves.

n. Employee benefits

Short-term benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the

related service is provided. A liability is recognized for the amount expected to be paid under short-term cash

bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a

result of past service provided by the employee and the obligation can be estimated reliably.

Long-term benefits

Defined benefit plans

The Group operates a defined benefit pension plan in Switzerland, which requires contributions to be made to a

separately administered fund. The cost of providing benefits under the defined benefit plan is determined using the

projected unit credit method with actuarial valuations being carried out at the end of each annual reporting period.

3. Significant accounting policies continued

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Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts

included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts

included in net interest on the net defined benefit liability), are recognized immediately in the statement of

financial position with a corresponding debit or credit to other reserve through “Other Comprehensive Income”

in the period in which they occur. Re-measurements are not reclassified to profit or loss in subsequent periods.

Past-service costs are recognized in profit or loss on the earlier of:

• the date of the plan amendment or curtailment; and

• the date that the Group recognizes related restructuring costs, or termination benefits, if earlier.

Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Group

recognizes the following changes in the net defined benefit obligation under “cost of sales”, “administration

expenses” and “selling and distribution expenses” in the consolidated statement of profit or loss (by function):

• service costs comprising current service costs, past-service costs, gains and losses on curtailments and

non-routine settlements; and

• net interest expense or income.

Defined contribution plans

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

payable for the year.

o. Financial instruments

Financial assets and financial liabilities are recognized in the Group’s statement of financial position when the

Group becomes a party to the contractual provisions of the instrument.

Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial

liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or

deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.

Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value

through profit or loss are recognized immediately in profit or loss.

p. Finance income and expenses

Finance expenses comprize interest payable, lease expenses recognized in profit or loss using the effective

interest method, unwinding of the discount on provisions, and net foreign exchange losses that are recognized in

the income statement.

Finance income comprizes interest receivable on cash deposits and net foreign exchange gains.

Interest income and interest payable is recognized in profit or loss as it accrues, using the effective interest method.

Foreign currency gains and losses are reported on a net basis.

q. Cash and cash equivalents

For the purpose of presentation in the consolidated statement of cash flows, cash and cash equivalents include

cash on hand, deposits held at call with financial institutions, other short-term highly liquid investments with

original maturities of three months or less that are readily convertible to known amounts of cash and which are

subject to an insignificant risk of changes in value, and bank overdrafts.

r. Trade and other receivables

Trade receivables are recognized initially at transaction price and subsequently measured at amortized cost using

the effective interest method, less provision for impairment.

s. Inventories

Inventories are stated at the lower of cost and net realizable value. Cost is based on the first-in-first-out principle

and includes expenditure incurred in acquiring the inventories and other costs in bringing them to their existing

location and condition.

3. Significant accounting policies continued

Financial statements

Notes to the consolidated financial statements continued

For the year ended December 31, 2022

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t. Provisions

A provision is recognized when the Group has a present obligation, legal or constructive, as a result of a past

event and it is probable that an outflow of resources embodying economic benefits will be required to settle the

obligation, and a reliable estimate can be made. Provisions are reviewed at each reporting date and adjusted to

reflect the current best estimate. If it is no longer probable that an outflow of economic resources will be required

to settle the obligation, the provision is reversed.

Where the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that

reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision

due to the passage of time is recognized as an interest expense.

u. Contingent liabilities

Contingent liabilities are possible obligations whose existence depends on the outcome of uncertain future events

or present obligations where the outflow of resources is uncertain or cannot be measured reliably. Contingent

liabilities are not recognized in the Consolidated Financial Statements but are disclosed unless they are remote.

4. Critical accounting judgments and key sources of estimation uncertainty

In applying the Group’s accounting policies, which are described in note 3, the directors are required to make

judgments (other than those involving estimations) that have a significant impact on the amounts recognized

and to make estimates and assumptions about the carrying amounts of assets and liabilities that are not readily

apparent from other sources. The estimates and associated assumptions are based on historical experience and

other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates

are recognized in the period in which the estimate is revised if the revision affects only that period, or in the

period of the revision and future periods if the revision affects both current and future periods.

Critical accounting judgments

The following are the critical judgments, apart from those involving estimations (which are presented separately

below), that the directors have made in the process of applying the Group’s accounting policies and that have the

most significant effect on the amounts recognized in financial statements.

Accounting for take-or-pay contracts

Following a change in accounting policy in connection with an identified prior period error (see Note 2, page 85),

revenue recognition for shortfall items is deferred until the customer consumes the units, or typically twelve

months after payment by the customer in case of expiry of the rights (Note 3l). Applying this judgement results

in recognition of revenues and pre-tax profit at a later point in time. Revenue and pre-tax profits would have been

US$622,000 higher for the reporting year if such revenues were not deferred in 2022.

Allowance for inventory obsolescence

The slowdown of sales in 2022 led to an increase in unsold finished goods and unused raw materials. The Group

applied judgment in calculating the allowance for obsolete inventory. For slow-moving items, the Group compared

quantities on hand with budgeted sales quantities. The sales projections are inherently uncertain due to the

nature of the business and fluctuating market conditions. The inventory allowance calculated as at December 31,

2022 is US$4,912,000 (2021: US$17,000) as presented in Note 22.

Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting

period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and

liabilities within the next financial year, are discussed below.

Goodwill impairment testing

Following the assessment of the recoverable amount of goodwill allocated to the CGU “RAS” (allocated goodwill:

US$7.2 million), the directors consider the recoverable amount of goodwill allocated to CGU “RAS” to be most

sensitive to the achievement of forecasts in 2023 comprising forecasts of revenue, staff costs and operating

expenses based on current and anticipated market conditions. Whilst the Group can manage most of RAS

CGU’s costs, the revenue projections are inherently uncertain due to the nature of the business and fluctuating

market conditions. The market for RAS CGU has seen a slowdown in the second half of 2022 due to a decline in

customer demand. It is possible that underperformance to estimated revenues as considered in the impairment

test may occur in 2023.

The sensitivity analysis for a reasonably possible change in assumptions in respect of the recoverable amount of

the CGU “RAS” goodwill is presented in Note 18.

3. Significant accounting policies continued

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5. Business combinations

Business combinations in 2022

a. Acquisition of non-controlling interest in Chrisal N.V.

On December 14, 2022, HeiQ increased its interest in HeiQ Chrisal N.V. from 51% to 71% after some sellers

exercised their put options. HeiQ paid €2.9 million (approximately US$3.0 million) for the additional 20%

shareholding to the vendors through the issue of 3,348,164 new ordinary shares in the Company. The 20%

share was valued at US$0.6 million. The transaction resulted in a US$0.6 million reduction of non-controlling

interests and a US$2.4 million charge to retained earnings.

b. Transfer of shares in HeiQ AeoniQ GmbH to non-controlling interests

On February 11, 2022, HeiQ Materials AG reached an agreement with Hugo Boss AG to dispose of 2.5% of

its shareholding in HeiQ AeoniQ GmbH and issued a call option. Under the call option, the Company granted

Hugo Boss AG the contractual right to acquire from the Company a further 5% shareholding in HeiQ AeoniQ

GmbH for a call option exercise price of €10,000,000 (approximately US$10,657,000). The shares and call

option were issued for US$4,791,000, the call option was recognized as a derivative liability, see Note 38.

Business combinations in 2021

c. Acquisition of Chrisal NV

On March 9, 2021, HeiQ Iberia Unipessoal Lda acquired 51% of the share capital and voting rights of Chrisal NV,

a company incorporated in Belgium. Chrisal NV is a biotechnology company and a leader in innovative ingredients

and consumer products that incorporate the benefits of probiotics and synbiotics. It has technology platforms

with the purpose of creating healthy and sustainable microbial ecosystems. The application of its proprietary

technology includes cosmetics, personal care, textiles, wound dressings, water purification, air treatment and

cleaning products. The company has its office, manufacturing site and bottling facility in Lommel, Belgium.

The purchase consideration was payable partly in cash (€5,000,000, equivalent to approximately

US$6,054,000) and partly by the issue of 1,101,928 new ordinary shares for €2,500,000 (US$2,982,000),

equivalent to a total consideration of US$9,036,000.

The acquisition is part of the Group’s strategy of becoming a global leader in materials innovation and allows

access to the broader market of microbial surface management and a bio-based green complementary

technology platform to its successful antimicrobials.

Goodwill of US$6,163,000 was recognized and is attributable to anticipated future profit from expansion

opportunities and synergies of the business. The goodwill arising from the acquisition has been allocated to

the Chrisal CGU (see definition in Note 18). Fair value adjustments have been recognized for property, plant and

equipment and acquisition-related intangible assets which are in alignment with accounting policies of the Group.

Transaction costs relating to the acquisition of US$46,000 have been charged to the Statement of profit and

loss and other comprehensive Income in the period relating to the acquisition of Chrisal NV.

The sellers of Chrisal N.V. hold buyout options to sell their remaining shareholding to HeiQ. The options are

exercisable every year from March 9 (anniversary of the closing date) until December 31 each year at a

strike price defined in the respective shareholders’ agreement. As of December 31, 2022, four out of five old

shareholders have exercised their option (see above, Business combinations in 2022) and sold in total an

additional interest of 20% in Chrisal N.V. to the Group. The remaining non-controlling shareholder has partially

sold his interest and therefore the Group concludes that the option has lapsed as of December 31, 2022.

Financial statements

Notes to the consolidated financial statements continued

For the year ended December 31, 2022

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d. Acquisition of RAS AG

On April 29, 2021, the Company completed the acquisition of 100% of the share capital and voting rights of

RAS AG, a company based in Regensburg, Germany. The acquisition was for an initial consideration of €5.1

million (approximately US$6.1 million), with €1.25 million (US$1.48 million) payable in cash and €3.85 million

(US$4.66 million) through the issue of 1,701,821 new ordinary shares by the Company. An additional earn-out

of €2.7 million (US$3.2 million) was satisfied through the issuance of 2,743,841 new ordinary shares in 2022

resulting in an overall consideration of €7.8 million (US$9.37 million).

RAS AG is a materials innovation company that drives the development of resource-efficient and sustainable

products. RAS AG develops and manufactures highly functionalized materials for this purpose. This includes

the manufacture of antimicrobial, hygiene-enhancing additives and durable antimicrobial coating systems which

are sold worldwide under the trademark agpure®, and transparent electrically conductive and infrared reflective

coatings sold under the ECOS® trademark. The acquisition is in line with HeiQ’s strategic goal to gain market

share in hygiene solutions by providing antimicrobial surface hygiene technologies to the healthcare and other

sectors. This is building on the acquisition of Chrisal N.V. Belgium concluded earlier in the year, which gives HeiQ

expanded access to the healthcare sector through probiotic and synbiotic cleaners.

Goodwill of US$7,234,000 was recognized and is attributable to anticipated future profit from expansion

opportunities and synergies of the business. The goodwill arising from the acquisition has been allocated to

the RAS CGU (see definition in Note 18). Fair value adjustments have been recognized for acquisition-related

intangible assets which are in alignment with the accounting policies of the Group.

Transaction costs relating to the acquisition of US$50,000 have been charged to the Statement of profit and

loss and other comprehensive income in the period relating to the acquisition of RAS AG.

HeiQ Regulatory GmbH, a joint-venture company previously accounted for under the equity method, became a

wholly owned subsidiary on acquisition of RAS AG.

e. Acquisition of Life Material Technologies Limited

On June 15, 2021, the Company completed the acquisition of 100% of the share capital and voting rights of Life

Material Technologies Limited, Hong Kong (“LIFE”).

The acquisition was for an upfront consideration of US$6.45 million, with US$2.55 million payable in cash (the

“Cash Consideration”) and US$3.9 million to be satisfied through the issue of new ordinary shares by HeiQ (the

“Share Consideration”). Additional earn-out consideration of US$2,038,000 was paid in cash (US$1,400,000)

and through the issue of new ordinary shares (US$638,000) in 2022. A further US$614,000 working capital

adjustment was paid in shares in 2022 resulting in an overall consideration of US$9.1 million. An additional

US$762,000, which is not part of the consideration, was issued in shares and is expensed as remuneration over

a five-year period.

The Share Consideration was settled on July 9, 2021 by the issue of 1,887,883 new ordinary shares

(“Consideration Shares”) to the sellers of LIFE, at a price of £1.496201 per share, which was the intraday

volume-weighted average price (the “VWAP”) of HeiQ shares on the London Stock Exchange in the last five

trading days preceding the closing of the Acquisition.

LIFE is a materials technology company that has developed a strong portfolio of smart ingredients and

formulations with applications in numerous industries. This includes the development and distribution of bio-

based antimicrobial additives and treatments used by manufacturers of plastics, coatings, textiles, ceramics and

paper, that inhibit or manage bacteria, fungi, algae, and other micro-organisms that come in contact with treated

materials. LIFE has one of the broadest technology platforms in the industry, using inorganic, organic and bio-

based botanical active substances.

Goodwill of US$5,202,000 was recognized and is attributable to anticipated future profit from expansion

opportunities and synergies of the business. The goodwill arising from the acquisition has been allocated to

the Life CGU (see definition in Note 18). Fair value adjustments have been recognized for acquisition-related

intangible assets which are in alignment with the accounting policies of the Group.

Transaction costs relating to the acquisition of US$110,000 have been charged to the Statement of profit and

loss and other comprehensive income in the period relating to the acquisition of LIFE.

5. Business combinations continued

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f. Summary of acquisitions in 2021

The following table summarizes the consideration paid, the fair value of assets acquired, liabilities assumed,

goodwill arising on acquisition and non-controlling interests at the acquisition date:

Chrisal NV

US$’000

(restated)

RAS AG

US$’000

Life Material

Technologies

Limited

US$’000

Total

US$’000

(restated)

Consideration:

Cash paid to shareholders 6,054 1,482 2,550 10,086

Shares issued to shareholders 2,983 4,656 3,900 11,539

Contingent consideration payable in cash – – 1,400 1,400

Contingent consideration payable in shares – 3,232 638 3,870

Working capital adjustment payable in shares – – 614 614

Total Consideration payable 9,037 9,370 9,102 27,509

Fair value of net assets acquired:

Property, plant and equipment 1,872 179 29 2,080

Intangible Assets 20 159 401 580

Other non-current assets – – 17 17

Inventory 1,277 411 570 2,258

Cash 1,773 291 73 2,137

Trade and other receivables 874 1,184 1,480 3,538

Trade and other payables (1,426) (611) (460) (2,497)

IAS 19 Pension liability – – (92) (92)

Borrowings (1,582) – (210) (1,792)

Income tax liability (198) (420) (20) (638)

Right of use assets (restated) 161 139 122 422

Lease liability (restated) (161) (139) (122) (422)

Intangible assets identified on acquisition:

Customer Relationship 1,308 380 610 2,298

Brands 1,022 – 1,048 2,070

Technology-based assets 1,704 1,071 561 3,336

Deferred tax liability on intangible assets (1,008) (508) (111) (1,627)

Total net assets 5,636 2,136 3,896 11,668

Non-controlling interests (2,762) – 4 (2,758)

Goodwill 6,163 7,234 5,202 18,599

Total 9,037 9,370 9,102 27,509

5. Business combinations continued

Financial statements

Notes to the consolidated financial statements continued

For the year ended December 31, 2022

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g. Deferred consideration in relation to acquisitions

Deferred consideration includes earnout payments and a working capital adjustment in relation to the 2021

acquisitions of RAS AG and Life Material Technologies Limited, as presented in the table above in Note 5f.

Since these liabilities were due for settlement in 2022, the fair value of the consideration approximated its

nominal value.

Additionally, a further amount of deferred consideration pertains to the acquisition of assets from ChemTex Inc.

in 2017 and is payable other than in a short timeframe. The fair value of the deferred consideration has been

discounted using an imputed interest rate of 6% (being the Group’s estimated cost of debt) to take into account

the time value of money.

The deferred consideration and related financing expense are summarized below:

ChemTex

US$’000

RAS AG

US$’000

Life Material

Technologies

Limited

US$’000

Total

US$’000

As at January 1, 2021 1,116 – – 1,116

Amortization of fair value discount 58 – – 58

Additions from acquisitions as per Note 5f – 3,232 2,652 5,884

Gain on earnout calculation – (80) – (80)

Consideration settled in cash (908) – – (908)

Foreign exchange revaluation 13 – – 13

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

Current liability 92 – – 92

Non-current liability – – – –

Total 92 – – 92

5. Business combinations continued

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6. Subsidiaries

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

the table below.

Company

Country of

registration or

incorporation Registered office Principal activity

Percentage

of ordinary

shares held

HeiQ Materials AG Switzerland Rütistrasse 12, 8952 Schlieren Zurich Development, production

and sale of chemicals

100%

HeiQ ChemTex Inc. United

States

2725 Armentrout Dr, Concord,

NC 28025

Development, production

and sale of chemicals

100%

HeiQ Pty Ltd Australia Level 20/181 William Street,

Melbourne, VIC 3000

Research and

development

100%

HeiQ GrapheneX AG Switzerland Rütistrasse 12, 8952 Schlieren Zurich Inactive 100%

HeiQ Company

Limited

Taiwan No. 14 & 16, Ln. 50, Wufu 1st Rd.

Luzhu District, Taoyuan City 33850

Distribution 100%

HX Company Limited Taiwan No. 14 & 16, Ln. 50, Wufu 1st Rd.

Luzhu District, Taoyuan City 33850

Trading and production 66.7%

HeiQ Medica S.L. Spain Plaza de la Estación s/n, 29560

Pizarra

Manufacturer of medical

devices

50.1%

HeiQ Iberia

Unipessoal Lda

Portugal Rua Engº Frederico Ulrich, nº 2650,

4470-605 Maia

Sales agency and internal

services company

100%

Chrisal NV Belgium Priester Daensstraat 9, 3920

Lommel, Belgium

Biotechnology 71%

HeiQ RAS AG Germany Rudolf Vogt Straße 8-10, 93053

Regensburg

Materials innovation 100%

HeiQ Regulatory

GmbH

Germany Rudolf Vogt Straße 8-10, 93053

Regensburg

Materials innovation 100%

HeiQ (China)

Material Tech LTD

China Room 2501, Xuhui Commercial

Mansion, No. 168 Yude Road,

Shanghai

Distribution 100%

Life Material

Technologies Limited

Hong Kong Alexandra House, 6th Floor,

16-20 Chater Road, Central

Materials technology 100%

Life Natural Limited Hong Kong Alexandra House, 6th Floor,

16-20 Chater Road, Central

Inactive 100%

Life-Materials

Latam Ltda

Brazil Rua Cerro Cora

1851Villa Romano, Sao Paulo SP

Brasil CEP 05061350

Sales office 51%

LMT Holding Limited Thailand 222 Lumpini Building 2,

247 Rajdamri Road

Lumpini, Phatumwan,

Bangkok 10330

Holding 96.45%

Life Material

Technologies Limited

Thailand 222 Lumpini Building 2,

247 Rajdamri Road

Lumpini, Phatumwan,

Bangkok 10330

Trading 99.995%

HeiQ AeoniQ GmbH Austria Industriestrasse 35, 3130

Herzogenburg

Materials Innovation 97.5%

ChemTex

Laboratories Inc.

United

States

2725 Armentrout Dr, Concord,

NC 28025

Chemical production site 100%

Beijing HeiQ Material

Tech Co., Ltd.

China Room 17B9870, Floor 17, 101 Nei, -4

to 33, Building 13, Wangjing Dongyuan

Siqu, Chaoyang District, Beijing

Inactive/Distribution 100%

Financial statements

Notes to the consolidated financial statements continued

For the year ended December 31, 2022

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statements

7. Revenue

The Group’s activities are materials innovation which focuses on scientific research, manufacturing and consumer

ingredient branding. The primary source of revenue is the production and sale of functional ingredients, materials

and consumer goods. Other sources of revenue include services for research and development, take-or-pay and

exclusivity.

The following table reconciles HeiQ Group’s revenue for the periods presented:

Revenues by form

Year ended

December 31,

2022

US$’000

Year ended

December 31,

2021

US$’000

(restated)

Revenue recognized at a point in time

Functional ingredients 36,175 41,951

Functional materials 2,000 850

Functional consumer goods 6,827 10,069

Services 160 2,548

Revenue recognized over time

Services 2,040 –

Total revenue 47,202 55,419

Unsatisfied performance obligations

The transaction prices allocated to unsatisfied and partially unsatisfied obligations at 31 December 2022 are as

set out below:

Unsatisfied performance obligations

Year ended

December 31,

2022

US$’000

Year ended

December 31,

2021

US$’000

Exclusivity services 2,100 2,400

Research and development services 3,750 4,000

Total unsatisfied performance obligations 5,850 6,400

Management expects that 19 per cent of the transaction price allocated to the unsatisfied contracts as of the

year ended 2022 will be recognized as revenue during the next reporting period (US$1.1 million). The remaining

81 per cent, US$4.8 million will be recognized in the 2024 (US$1.1 million), 2025 (US$3.1 million) and 2026

financial year (US$0.6 million).

Disclosure related to contracts with customers

Contract assets and contract liabilities are disclosed under Note 25 and Note 37, respectively. Impairment

losses recognized on any receivables or contract assets arising from the Group’s contracts with customers are

disclosed under Note 23 and Note 25, respectively.

8. 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 organized 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 substances in domestic, commercial

and industrial usage, for a more balanced microbiome and environment.

Antimicrobials Functionalize different hard surfaces in everyday products and our surroundings.

Other activities All other activities of the Group including Innovation Services, Business

Development, and other non-allocated functions.

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Segment revenues and profits

The following is an analysis of the Group’s revenue and results by reportable segment in 2022:

Year ended December 31, 2022

Textiles &

Flooring

US$’000

Life Sciences

US$’000

Antimicrobials

US$’000

Other

activities

US$’000

Total

US$’000

Revenue 33,870 6,894 3,577 2,861 47,202

Operating profits (loss) 979 (1,078) 53 (29,199) (29,245)

Finance result – – – – (590)

Loss before taxation – – – – (29,835)

Taxation – – – – 21

Loss after taxation – – – – (29,814)

Depreciation and amortization

Property, plant and equipment 308 260 16 698 1,282

Right-of use assets – – – 938 938

Intangible Assets – – – 1,435 1,435

Impairment loss

Property, plant and equipment – 730 – – 730

Intangible Assets – – – 12,380 12,380

Year ended December 31, 2021

Textiles &

Flooring

US$’000

Life Sciences

US$’000

Antimicrobials

US$’000

Other activities

US$’000

Total

US$’000

Revenue 39,773 10,115 3,739 1,792 55,419

Operating profits (loss) 14,196 1,438 1,106 (18,096) (1,354)

Finance result – – – – (35)

Loss before taxation – – – – (1,389)

Taxation – – – – 16

Loss after taxation – – – – (1,373)

Depreciation and amortization

Property, plant and equipment 300 273 – 683 1,255

Right-of use assets – – – 716 716

Intangible Assets – – – 976 976

Impairment loss

Intangible Assets – – – 2,454 2,454

Segment revenue reported above represents revenue generated from external customers. There were no

intersegment sales in the year ended December 31, 2022 (2021: nil).

The accounting policies of the reportable segments are the same as the Group’s accounting policies described

in Note 3. Segment profit represents the profit earned by each segment without allocation of the central

SG&A costs including expenses for infrastructure, R&D and laboratories, directors’ salaries, finance income,

nonoperating gains and losses in respect of financial instruments and finance costs, and income tax expense.

This is the measure reported to the Group’s decision-making body for the purpose of resource allocation and

assessment of segment performance.

8. Operating Segments continued

Financial statements

Notes to the consolidated financial statements continued

For the year ended December 31, 2022

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Geographic information

Revenue by region

Year ended

December 31,

2022

US$’000

Year ended

December 31,

2021

US$’000

(restated)

North & South America 20,425 19,290

Asia 13,376 19,580

Europe 13,109 16,237

Others 293 312

Total revenue 47,202 55,419

Non-current assets by region

Year ended

December 31,

2022

US$’000

Year ended

December 31,

2021

US$’000

(restated)

Europe 22,290 31,008

Asia 8,102 8,593

North & South America 7,734 6,860

Others 612 821

Total non-current assets 38,738 47, 28 2

Information about major customers

During the year ended December 31, 2022, no customers individually totaled more than 10% of total revenues

(2021: none).

9. Cost of sales

Cost of sales

Year ended

December 31,

2022

US$’000

Year ended

December 31,

2021

US$’000

(restated)

Material expenses 20,942 23,704

Personnel expenses 2,830 2,164

Depreciation of property, plant and equipment 652 706

Other costs of sales 9,321 3,448

Total cost of sales 33,745 30,022

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

10. Other income

Other income

Year ended

December 31,

2022

US$’000

Year ended

December 31,

2021

US$’000

Gain on disposal of property plant and equipment 21 54

Gain on earnout consideration payable (Note 5g) – 80

Foreign exchange gains 3,539 5,032

Fair value gain on derivative liabilities (Note 38) 371 –

Other income 901 1,459

Total other income 4,832 6,625

8. Operating Segments continued

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11. Selling and general administration expenses

Selling and general administration expense

Year ended

December 31,

2022

US$’000

Year ended

December 31,

2021

US$’000

(restated)

Personnel expenses 14,977 13,074

Depreciation of property, plant and equipment 630 549

Amortization 1,435 976

Depreciation of right-of-use assets 938 716

Net credit losses on financial assets and contract assets 85 307

Other 12,904 9,058

Total selling and general administration expense 30,969 24,680

Other selling and general administration expenses include costs for infrastructure, professional services

and marketing as well as R&D and laboratory related costs, information technology & data expenses, sales

representative & distribution expenses.

Auditor’s remuneration

The total remuneration of the Group’s auditors, being Deloitte LLP for the audit of the year ended December 31,

2022 and Crowe UK LLP for the audit of the year ended December 31, 2021, for services provided to the Group,

and included in other selling and general administration expenses, is analyzed below:

Auditor’s remuneration

Year ended

December 31,

2022

US$’000

Year ended

December 31,

2021

US$’000

Audit of Group 1,180* 231

Audit of subsidiaries 122 84

Total fees for audit services 1,302 315

Audit related assurance services – 6

Other assurance services – –

Total auditor remuneration – 6

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

12. Personnel expenses

Personnel expenses

Year ended

December 31,

2022

US$’000

Year ended

December 31,

2021

US$’000

Wages & salaries 15,274 12,708

Social security & other payroll taxes 1,685 1,387

Pension costs 710 645

Share-based payments 138 498

Total personnel expenses 17,807 15,238

Reported as cost of sales (Note 9) 2,830 2,164

Reported as selling and general administration expense (Note 11) 14,977 13,074

Total personnel expenses 17,807 15,238

The average monthly number of employees was as follows: 218 221

Financial statements

Notes to the consolidated financial statements continued

For the year ended December 31, 2022

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13. Other expenses

Other expenses

Year ended

December 31,

2022

US$’000

Year ended

December 31,

2021

US$’000

Foreign exchange losses 3,050 4,671

Loss on disposal of property, plant and equipment 16 20

Transaction costs relating to mergers and acquisitions 50 206

Write off intangible assets (Note 18) 897 –

Other 171 1,345

Total other expenses 4,184 6,242

14. Finance income

Finance income

Year ended

December 31,

2022

US$’000

Year ended

December 31,

2021

US$’000

Interest income 5 4

Gains on foreign currency transactions 678 518

Other – 12

Total finance income 683 534

15. Finance costs

Finance costs

Year ended

December 31,

2022

US$’000

Year ended

December 31,

2021

US$’000

(restated)

Amortization of deferred finance costs – acquisition costs – 58

Lease finance expense 163 117

Interest on borrowings 110 108

Bank fees 98 55

Loss on foreign currency transactions 902 231

Total finance costs 1,273 569

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16. Income tax

For the year ending December 31, 2022, the Group had a tax credit of US$21,000 (2021: tax credit of

US$16,000). The effective tax rate was 0.1% (2021: 1.2%). The effective tax rate was primarily impacted by

non-deductible expenditure following the goodwill impairment expense as well as unrecognized tax losses.

The components of the provision for taxation on income included in the “Statement of profit or loss and other

comprehensive income” are summarized below:

Current income tax expense

Year ended

December 31,

2022

US$’000

Year ended

December 31,

2021

US$’000

Swiss corporate income taxes 58 (282)

United States state and federal taxes 393 (33)

Taiwan corporate income taxes 118 200

Belgium corporate income taxes (123) 186

Germany corporate income taxes 51 301

Others 63 43

Total current income tax expense 560 415

Deferred income tax expense

Switzerland 90 (190)

United States (606) 138

China 117 (146)

Spain – 108

Austria 20 (25)

Belgium (136) (285)

Others (66) (31)

Total deferred income tax expense (income) (581) (431)

Total income tax expense (income) (21) (16)

In addition to the amount charged to profit or loss, the following amounts relating to deferred tax have been

recognized in other comprehensive income:

Items that will not be reclassified subsequently to profit or loss

Year ended

December 31,

2022

US$’000

Year ended

December 31,

2021

US$’000

Remeasurement of net defined benefit liability (276) (225)

Total income tax recognized in other comprehensive income (276) (225)

Net tax (assets)/liabilities

Year ended

December 31,

2022

US$’000

Year ended

December 31,

2021

US$’000

Opening balance – (prepaid taxes) 51 1,495

Assumed on business combinations – 638

Assumed on asset acquisition (32) –

Income tax expense for the year 560 415

Taxes paid (870) (2,462)

Foreign currency differences (52) (35)

Net tax (asset)/liability (343) 51

Financial statements

Notes to the consolidated financial statements continued

For the year ended December 31, 2022

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statements

Net tax (assets)/liabilities

Year ended

December 31,

2022

US$’000

Year ended

December 31,

2021

US$’000

Prepaid income taxes (657) (444)

Income Tax Liabilities 314 495

Net tax (asset)/liability (343) 51

Since the Group operates internationally, it is subject to income taxes in many different tax jurisdictions. The

Group calculates its average expected tax rate as a weighted average of the tax rates in the tax jurisdictions in

which the Group operates. This rate changes from year to year due to changes in the mix of the Group’s taxable

income and changes in local tax rates.

The Group’s average expected tax rate was stable at 21.1% in 2022 (2021: 20.6%). During 2022, there were no

significant changes to local tax rates in the tax jurisdictions in which the Group operates.

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

US$’000

Year ended

December 31, 2022

Expected tax at average tax rate (6,304) 21.1%

Increase/(decrease) in tax resulting from:

Tax credits (340) 1.1%

Unrecognized tax losses 3,796 (12.7%)

Non-deductible expenditure 2,586 (8.7%)

Temporary differences 165 (0.6%)

Other – net 76 (0.1%)

(21) 0.1%

US$’000

Year ended

December 31, 2021

Expected tax at average tax rate (285) 20.6%

Increase/(decrease) in tax resulting from:

Tax credits (58) 4.1%

Unrecognized tax losses 378 (27. 2 %)

Non-deductible expenditure 296 (21.3%)

Tax exempt income (105) 7.6 %

Temporary differences (259) 18.6%

Other – net (17) (1.2%)

(16) 1.2%

17. Earnings per share

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

Earnings

Year ended

December 31,

2022

US$’000

Year ended

December 31,

2021

US$’000

(restated*)

Loss attributable to the ordinary equity holders of the parent entity (29,251) (1,177)

* Earnings have been restated in the comparative period as described in note 2.

16. Income tax continued

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Number of shares

Year ended

December 31,

2022

Year ended

December 31,

2021

Weighted average number of ordinary shares

for the purposes of basic earnings per share 133,426,953 128,871,639

Basic earnings per share is calculated by dividing the profit/loss after tax attributable to the equity holders of the

Company by the weighted average number of shares in issue during the year. The effect of share options is anti-

dilutive and therefore not disclosed.

18. Intangible assets

Cost

Goodwill

US$’000

(restated)

Internally

developed

assets

US$’000

Brand names

and customer

relations

US$’000

(restated)

Acquired

technologies

US$’000

(restated)

Other

intangible

assets

US$’000

Total

US$’000

(restated)

As at January 1, 2021 3,516 1,851 295 – 491 6,153

Reclassification* – (725) – – 725 –

Additions through business

combinations 18,599 – 4,368 3,336 580 26,883

Additions arising from internal

development – 2,390 – – – 2,390

Other acquisitions – – – – 579 579

Currency translation differences (733) (7) (160) (156) (43) (1,099)

As at December 31, 2021 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

Amortization and accumulated

impairment losses

As at January 1, 2021 – 432 107 – 350 889

Reclassification* – (19) – – 19 –

Amortization for the year – 50 516 246 164 976

Impairment loss 2,433 21 – – – 2,454

Currency translation differences (128) (10) (21) (12) (15) (186)

As at December 31, 2021 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

Net book value

As at December 31, 2021 19,077 3,035 3,901 2,946 1,814 30,773

As at December 31, 2022 8,456 4,039 3,045 2,492 2,410 20,442

* Regulatory registrations have been reclassed from internally developed assets to other intangible assets. Internally generated assets

represent expenditure incurred on development projects and IT. Other intangible assets include acquired rights, licenses, patent costs,

concessions, website designs and domains and trademarks.

17. Earnings per share continued

Financial statements

Notes to the consolidated financial statements continued

For the year ended December 31, 2022

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Goodwill

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

(CGUs):

CGU Description of activities

ChemTex This CGU is based on the 2017 acquisition of ChemTex Inc. The CGU’s main activities are carpet

polymer, industrial polymer, textile finishes, R&D, laboratory work, production and sales. The CGU

contributes to the Group’s Textiles & Flooring segment.

Chrisal The CGU is based on the 2021 acquisition of Chrisal, a biotechnology company and a leader in

innovative ingredients and consumer products that incorporate the benefits of probiotics and

synbiotics. The CGU contributes to the Group’s Life Sciences segment.

RAS The CGU is based on the 2021 acquisition of RAS AG. RAS AG develops and manufactures

antimicrobial, hygiene-enhancing additives and durable antimicrobial coating systems which are

sold under the trademark agpure®, and transparent electrically conductive and infrared reflective

coatings sold under the ECOS® trademark. The CGU contributes to the Group’s Antimicrobials

segment.

Life The CGU is based on the 2021 acquisition of Life Group. LIFE develops and distributes bio-based

antimicrobial additives and treatments used by manufacturers of plastics, coatings, textiles,

ceramics and paper, that inhibit or manage bacteria, fungi, algae, and other micro-organisms

that come in contact with treated materials. The CGU contributes to the Group’s Antimicrobials

segment.

MasFabEs The CGU is based on the 2020 acquisition of MasFabEs. The MasFabEs CGU manufactures

medical masks and devices. The CGU contributes to the Group’s Life Sciences segment.

Goodwill before impairment losses has been allocated to CGUs as follows:

Goodwill

Year ended

December 31,

2022

US$’000

Year ended

December 31,

2021

US$’000

(restated)

ChemTex 3,393 3,393

Chrisal

5,428 5,791

RAS

6,441 6,873

Life 5,202 5,202

MasFabEs 123 123

Total goodwill acquired 20,587 21,382

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

The Group tests goodwill annually for impairment or more frequently if there are indications that these assets

might be impaired. The recoverable amount of each CGU is determined based on a value in use calculation which

uses cash flow projections based on financial budgets approved by the directors. The projections are based on

a five-year period and a pre-tax discount rate of 12 per cent per annum for CGUs ChemTex and RAS and 14 per

cent per annum for CGUs Chrisal and Life (2021: 14 per cent per annum). The discount rate is based on pre-tax

weighted average cost of capital for an average company in the chemical industry adjusted for relative size and

risks of each CGU. The directors expect income from all CGUs over the next five years. The perpetuity growth rate

used is based on consumer price index relevant for each CGU.

The assumptions used by management in forecasting revenues for the relevant periods are as follows:

For 2023, forecast has been determined by adjusting the forecast for the year as approved by the Board

(“Budget”) for any variance of actual performance (to date May 2023) against it. For later periods, revenue

growth was estimated based on historic (2018-2022) compound annual growth rate of the respective business.

Operating profits are forecast based on historical experience of operating margins, adjusted for the impact of

known or expected changes in pricing and regional inflation expectations.

18. Intangible assets continued

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2022 goodwill impairment test

A summary of the key assumptions used in the value-in-use calculation is set below:

Assumption ChemTex Chrisal RAS Life

Compound annual growth rate for the next five years 1.2% 3.8% 13.9% (0.8%)

Discount factor 12.2% 13.8% 11.7% 14.1%

Perpetual growth rate 2.0% 1.7% 2.0% 2.5%

As of end of December 2022, the Group conducted its annual goodwill impairment test review and identified

that the aggregated carrying amount of each Chrisal CGU, RAS CGU and Life CGU exceeded its aggregated

recoverable amount (based on the value in use approach and post-tax discount rate ranges in the 2022 table

above) resulting in a total impairment loss recognized of US$10,576,000 (2021 restatement: US$2,310,000)

which is accounted for as “other expenses” in the financial statements.

Goodwill relating to Chrisal CGU saw an impairment loss of US$2,402,000 in the reporting period 2022 (2021

restatement: US$1,275,000). The impairment charge results from the fact that the market development of the

new technology is taking longer than anticipated at the time of acquisition of the company and therefore short-

term growth assumptions have been adjusted down.

A partial goodwill impairment of US$2,972,000 for the 2022 reporting period (2021 restatement:

US$1,035,000) relates to RAS CGU. The impairment loss relates to the fact that the innovation advisory

business has been affected by the unexpected, temporary closing of certain government programs. Additionally,

investments into innovations in general are under review as global economic markets have destabilized since

acquisition. Furthermore, market launch and respective profit contribution is expected to be delayed compared to

expectations upon acquisition of RAS in 2021, negatively impacting the years in consideration for the calculation

of the recoverable amount of the CGU.

Lastly, the full US$5,202,000 goodwill balance relating to Life CGU was impaired in the reporting year 2022.

The reason for the impairment is the significant decrease in sales towards the end of 2022 which has caused

the Board to significantly lower growth expectations of the CGU for the years relevant for the calculation of the

recoverable amount.

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

Goodwill book value

As at

December 31,

2022

US$’000

As at

December 31,

2021

US$’000

ChemTex 3,393 3,393

Chrisal 2,189 4,593

RAS 2,874 5,889

Life – 5,202

MasFabEs – –

Total goodwill book value 8,456 19,077

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

18. Intangible assets continued

Financial statements

Notes to the consolidated financial statements continued

For the year ended December 31, 2022

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Sensitivity analysis

The Group has conducted an analysis of the sensitivity of the impairment test to reasonably possible changes in

the key assumptions used to determine the recoverable amount for each CGU to which goodwill is allocated. In

the process, the recoverable amount for RAS CGU was identified as key estimate.

An reasonably possible underperformance against the forecast sales growth rate (13.9%) for RAS CGU by 8.9

percent points, i.e. applying a compound annual growth rate of 5% for the next five years, would lead to an

additional impairment charge of US$2.1 million.

2021 goodwill impairment test

In the reporting year ended December 31, 2021, the goodwill related to the MasFabEs CGU was tested for

impairment. The MasFabEs CGU manufactures medical masks and devices. Using a discount rate of 14%, the

Company calculated a value-in-use of US$544,000 which was less than the carrying amount and accordingly an

impairment provision of US$123,000 was posted in the year ended December 31, 2021. The impairment was a

consequence of declining customer demand.

Furthermore, as explained in Note 2, the 2021 goodwill impairment test result has been restated which resulted

in an impairment charge of US$1,275,000 and US$1,035,000 for Chrisal and RAS CGU respectively.

Internally developed assets under construction

The Group tests internally developed assets under construction on a yearly basis. The Directors consider whether

estimated future economic benefits outweigh the costs capitalized by reviewing whether each project:

• is still in development phase;

• can be used or sold in the future; and

• can be completed given the technical, financial and other resources available.

The Group has processes in place for continually reviewing development expenditure to ensure that projects

under development are still viable. In the reporting year ended December 31, 2022, a US$880,000 impairment

was considered in relation to the GrapheneX project assets as timing of future benefits is not predictable with

high enough certainty.

Internally developed assets and other intangibles with finite lives

The Group tests internally developed assets and other intangibles with finite lives for impairment only if there

are indications that these assets might be impaired. The Group has processes in place for continually reviewing

development expenditure to ensure that projects under development are still viable. For the reporting year ended

December 31, 2022, the Company concluded that an impairment of US$122,000 is necessary for capitalized

registration fees obtained in the acquisition of RAS following decreased customer demand. Additionally, brand

names and customer relations related to the Life CGU saw an impairment of US$73,000 as a result of the sales

decline mentioned above in the goodwill impairment test.

18. Intangible assets continued

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19. Property, plant and equipment

Cost

Machinery

and

equipment

US$’000

Motor

vehicles

US$’000

Computers

and

software

US$’000

Furniture

and fixtures

US$’000

Land and

buildings

US$’000

Total

US$’000

As at January 1, 2021 6,779 492 810 132 – 8,213

Acquisition on business combination 191 19 24 171 1,675 2,080

Additions 596 67 104 213 14 994

Disposals (30) (37) – (15) (68) (150)

Currency translation differences (248) (5) (24) (27) (98) (402)

As at December 31, 2021 7,2 8 8 536 914 474 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 15,565

Depreciation and accumulated

impairment losses

As at January 1, 2021 2,002 242 464 38 – 2,74 6

Charge for the year 797 118 168 55 117 1,255

Eliminated on disposal (13) (26) – (7) – (46)

Currency translation differences (63) (4) (13) – (5) (85)

As at December 31, 2021 2,723 330 619 86 112 3,870

Charge for the year 763 90 218 83 128 1,282

Eliminated on disposal (27) (5) – – – (32)

Impairment loss 730 – – – – 730

Reclassifications (222) – – 222 – –

Currency translation differences (67) – (9) (3) (7) (86)

As at December 31, 2022 3,900 415 828 388 233 5,764

Net book value

As at December 31, 2021 4,565 206 295 388 1,411 6,865

As at December 31, 2022 4,951 193 262 461 3,935 9,802

Impairment losses recognized in the year

During the year ended December 31, 2022, as a result of the significant decline in demand for of certain types

of hygiene masks, the Group carried out a review of the recoverable amount of machinery. The Group recognized

an impairment loss of US$730,000 for machinery that was intended to be used to manufacture hygiene masks

for which demand declined significantly. The asset was used in the Life Sciences reportable segment.

Financial statements

Notes to the consolidated financial statements continued

For the year ended December 31, 2022

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20. Right-of-use assets

Cost

Land and

buildings

US$’000

(restated)

Motor

vehicles

US$’000

Machinery and

equipment

US$’000

(restated)

Total

US$’000

(restated)

As at January 1, 2021 3,701 76 41 3,818

Additions through business combinations 122 300 – 422

Additions 5,147 289 264 5,700

Disposals due to expiry of lease – (33) (9) (42)

Currency translation differences (57) (21) 45 (33)

As at December 31, 2021 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

Depreciation

As at January 1, 2021 1,182 60 12 1,254

Depreciation for the year 564 89 63 716

Disposals due to expiry of lease – (32) (9) (41)

Currency translation differences (30) (8) – (38)

As at December 31, 2021 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

Net book value

As at December 31, 2021 7,197 502 275 7,974

As at December 31, 2022 5,233 475 2,111 7,819

* With the acquisition of ChemTex Laboratories’ property, plant and equipment (Note 26), the Group no longer has a lease liability with a

third party.

** The Group agreed to shorten the agreed lease terms of two existing leases from 2032 to 2027. These modifications have resulted in

a reduction in the total amounts payable under the leases and a reduction to both of the right-of-use assets and lease liabilities with

effect from the date of modification as follows:

Revaluation

Before revaluation

US$’000

After revaluation

US$’000

Revaluation

US$’000

Right-of-use assets 1,385 879 (506)

Lease liabilities (1,453) (879) 574

Impact on net assets 68 – 68

The impact on net assets was recognized as non-operating income.

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Amounts recognized in profit and loss

As at

December 31,

2022

US$’000

As at

December 31,

2021

US$’000

(restated)

Depreciation expense on right-of-use assets 938 716

Interest expense on lease liabilities 163 118

Expense relating to short-term leases 225 189

Expense relating to leases of low value assets 40 22

Amounts recognized in cash flow statement

As at

December 31,

2022

US$’000

As at

December 31,

2021

US$’000

(restated)

Total fixed lease payments 992 662

Interest paid on leases 163 117

21. Other non-current assets

As at

December 31,

2022

US$’000

As at

December 31,

2021

US$’000

Deposits 80 140

Other pre-payments 57 193

Other non-current assets 137 333

22. Inventories

As at

December 31,

2022

US$’000

As at

December 31

2021

US$’000

Functional ingredients 7,420 7,4 8 0

Functional materials 4,000 4,310

Functional consumer goods 1,748 1,822

Services – 158

Total inventories 13,168 13,770

The cost of inventories recognized as an expense during the year in respect of continuing operations was

US$33,597,000 (2021: US$30,022,000).

The cost of inventories recognized as an expense includes US$4,912,000 (2021: US$17,000) in respect of

write-downs of inventory to net realizable value. The write-downs are mainly related to stock that is unlikely to be

sold or consumed within 12 months due to a decline in forecasted customer demand.

There have been no reversals of such write-downs for the reporting period (2021: nil).

20. Right-of-use assets continued

Financial statements

Notes to the consolidated financial statements continued

For the year ended December 31, 2022

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23. Trade receivables

Trade receivables

As at

December 31,

2022

US$’000

As at

December 31,

2021

US$’000

(restated)

Not past due 2,788 7,5 67

< 30 days 520 2,930

31-60 days 781 55

61-90 days 215 1,115

91-120 days 180 351

>120 days 2,407 2,962

Total trade receivables 6,891 14,980

Provision for expected credit loss (404) (324)

Total trade receivables (net) 6,487 14,656

The average credit period on sales of goods varies by region from 30 – 120 days. No interest is charged on

outstanding trade receivables. The Group always measures the loss allowance for trade receivables at an

amount equal to lifetime ECL. The expected credit losses on trade receivables are estimated using a provision

matrix by reference to past default experience of the debtor and an analysis of the debtor’s current financial

position, adjusted for factors that are specific to the debtors, general economic conditions of the industry in

which the debtors operate and an assessment of both the current as well as the forecast.

As at December 31, 2022, the Group has recognized an expected credit loss of US$404,000 (2021:

US$324,000). The following table details the risk profile of receivables based on the Group’s provision matrix.

Lifetime Expected credit losses on trade receivables

Expected credit loss on trade receivables 2022

Trade receivables – days past due

Not past due

US$’000

1-60

US$’000

61-120

US$’000

>120 days

US$’000

Total

US$’000

Expected credit loss rate 0% 0% 0% 17% 6%

Estimated total gross carrying amount

at default 2,788 1,301 395 2,406 6,891

Lifetime ECL as at December 31, 2022 – – – 404 404

Expected credit loss on trade receivables 2021

Trade receivables – days past due

Not past due

US$’000

1-60

US$’000

61-120

US$’000

>120 days

US$’000

Total

US$’000

Expected credit loss rate 0% 0% 0% 11% 2%

Estimated total gross carrying amount

at default 7, 567 2,985 1,466 2,962 14,980

Lifetime ECL as at December 31, 2021 – – – 324 324

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The following table shows the movement in lifetime ECL that has been recognized for trade receivables in

accordance with the simplified approach set out in IFRS 9.

Expected credit losses

Individually

assessed

US$’000

Collectively

assessed

US$’000

Total

US$’000

Balance as at January 1, 2021 13 27 40

Net remeasurement of loss allowance 288 19 307

Foreign exchange gains and losses (23) – (23)

Balance as at December 31, 2021 278 46 324

Net remeasurement of loss allowance 172 (6) 166

Amounts written off (81) – (81)

Foreign exchange gains and losses (4) (1) (5)

Balance as at December 31, 2022 365 39 404

The following tables explain how significant changes in the gross carrying amount of the trade receivables

contributed to changes in the loss allowance:

Increase (decrease) in lifetime expected credit losses for 2022 US$’000

Origination of new trade receivables net of those settled, as well as increase in days past due up

to 120 days 172

Write-off of receivables older than 120 days (81)

Increase (decrease) in lifetime expected credit losses for 2021 US$’000

Origination of new trade receivables net of those settled, as well as increase in days past due up

to 120 days 288

24. Other receivables and prepayments

As at

December 31,

2022

US$’000

As at

December 31,

2021

US$’000

Contract assets 115 250

Receivables from tax authorities 1,864 1,734

Prepayments 1,023 1,052

Other receivables 1,260 840

Total other receivables and prepayments 4,262 3,876

23. Trade receivables continued

Financial statements

Notes to the consolidated financial statements continued

For the year ended December 31, 2022

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25. Contract assets

Amounts relating to contract assets are balances due from customers under construction contracts that arise

when the Group receives payments from customers in line with a series of performance-related milestones. The

Group recognizes a contract asset for any work performed. Any amount previously recognized as a contract asset

is reclassified to trade receivables at the point at which it is invoiced to the customer.

As at

December 31,

2022

US$’000

As at

December 31,

2021

US$’000

As at

January 1,

2021

US$’000

Research and development services 65 80 –

Take-or-pay services – 170 –

Exclusivity services 50 – –

Total contract assets 115 250 –

Current assets 115 250 –

Non-current assets – – –

Total contract assets 115 250 –

Revenues related to research and development services were recognized at the point of delivering proof of

concept and completing testing services. Performance obligations related to exclusivity services were deemed

fulfilled by the Group upon completion of the contractual term. Payment for the above services is not due from

the customer yet and therefore a contract asset is recognized.

The directors of the Company always measure the loss allowance on amounts due from customers at an amount

equal to lifetime ECL, taking into account the historical default experience, the nature of the customer and where

relevant, the sector in which they operate. There has been no change in the estimation techniques or significant

assumptions made during the current reporting period in assessing the loss allowance for the amounts due from

customers under construction contracts.

Lifetime Expected credit losses on contract assets

The following table details the risk profile of amounts due from customers based on the Group’s provision matrix.

Based on the historic default experience, no expected credit loss has been recognized:

As at

December 31,

2022

US$’000

As at

December 31,

2021

US$’000

Expected credit loss rate 0% 0%

Estimated total gross carrying amount at default 115 250

Lifetime ECL – –

Net carrying amount 115 250

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26. Issued share capital and share premium

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

Note

Number

of shares

No.

capital

US$’000

premium

US$’000

Totals

US$’000

Balance as of January 1, 2021 125,891,904 49,559 134,537 184,096

Issue of shares to acquire Chrisal NV 5c 1,101,928 456 2,526 2,982

Issue of shares to acquire RAS AG 5d 1,701,821 710 3,946 4,656

Issue of shares to acquire Life Materials 5e 1,887,883 798 3,182 3,980

Balance as at December 31, 2021 130,583,536 51,523 144,191 195,714

Issue of shares to vendors of

Life Materials (a) 3 47,5 52 141 471 612

Issue of shares as deferred consideration (b) 5g 3,461,615 1,359 2,921 4,280

Issue of shares to Advisory Board and

others (c) 164,721 60 175 235

Issue of shares ChemTex Labs (d) 2,176,884 795 1,177 1,972

Issue of shares Chrisal (e) 5a 3,348,164 1,223 1,838 3,061

Balance as at December 31, 2022 140,082,472 55,101 150,773 205,874

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 February 25, 2022, HeiQ Plc issued 347,552 new ordinary shares of £0.30 each in the Company. These

shares were allotted to the vendors of Life Material Technologies Limited to satisfy a closing working capital

adjustment in the amount of US$612,000 in connection with the Company’s acquisition of Life in June 2021.

b) On May 12, 2022, HeiQ Plc issued a total of 3,461,615 ordinary shares as part of the deferred consideration

paid pursuant to the acquisitions of RAS AG, Regensburg, Germany (“RAS AG”) and Life Material Technologies

Limited (“LIFE”).

– In relation to the acquisition of RAS AG, the Company made a payment of €2.6 million (approximately

US$2.88 million), based on RAS AG’s performance for the year ended December 31, 2021. The deferred

consideration was settled entirely through the issue of 2,743,941 ordinary shares in the capital of

the Company.

– In relation to the acquisition of LIFE, the Company made a payment of US$2.8 million, based on LIFE’s

financial performance for the year ended December 31, 2021. The deferred consideration was settled

equally in cash (US$1.4 million) and through the issue of 717,674 ordinary shares (US$1.4 million) in the

capital of the Company. The share issue satisfied earnout payments as part of the purchase consideration

of US$640,000 as well as share-based payments made as remuneration of US$764,000 which were not

part of the purchase consideration.

c) On August 9, 2022, the Company issued 164,721 new ordinary shares for a consideration of £173,000

(approximately US$ 235,000) to satisfy certain share payments due to the Company’s Innovation Advisory

Board, as well as for consultancy and other services provided by third parties.

d) On December 2, 2022, HeiQ Plc completed the acquisition of 100% of the issued share capital and voting

rights of ChemTex Laboratories, Inc. (“ChemTex Labs”) in North Carolina, USA for a total consideration of

US$2.5 million. The purchase consideration was payable partly in cash (US$550,000) and partly by the

issue of 2,176,884 new ordinary shares for (US$1.95 million). The acquisition was accounted for as asset

acquisition resulting in the addition of land and buildings worth US$2.4 million. The Group also assumed

US$65,000 in cash, prepaid income tax of US$32,000 as well as accrued liabilities worth US$9,000.

e) On December 15, 2022, HeiQ increased its interest In HeiQ Chrisal from 51% to 71%. HeiQ paid €2.9 million

(approximately US$3 million) for the additional 20% shareholding to the vendors of Chrisal through the issue

of 3,348,164 new ordinary shares in the Company.

Financial statements

Notes to the consolidated financial statements continued

For the year ended December 31, 2022

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27. Share-based payments

Equity-settled Share Option Scheme

The Company has adopted the HeiQ Plc Option Scheme.

Under the Option Scheme, awards may be made only to employees and executive directors. The Board will

administer the Option Scheme with all decisions relating to awards made to executive directors taken by the

Remuneration Committee.

Awards under the equity-settled option plan will be market value options, but participants resident in jurisdictions

where local securities laws or other regulations are considered problematic may be awarded cash-based

equivalents. Any awards made are not pensionable.

All awards made will be subject to one or more performance conditions at the discretion of the Board. Ordinary

Shares received on exercise of any options awarded under the Option Scheme may be required to be held for a

period of time before they can be disposed of (other than disposals to satisfy any tax payable on exercise).

The total number of Ordinary Shares which can be issued under the Option Scheme (together with any other

employees’ share scheme operated by the Company) may not exceed 10 per cent. of the Company’s ordinary

share capital from time to time.

An option-holder has no voting or dividend rights in the Company before the exercise of a Share option.

There are currently four option grants with the same vesting requirements. The key performance indicators

attaching to these awards relate to targets for sales growth (65 per cent. of the award) and operating margin

(35 per cent. of the award) over a period of three years.

Options are exercisable at a price equal to the average quoted market price of the Company’s shares on the date

of grant. The vesting period is three years. If the options remain unexercised after a period of ten years from the

date of grant the options expire. Options are forfeited if the employee leaves the Group before the options vest.

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

As at December 31, 2022 As at December 31, 2021

Number of options

Weighted average

exercise price (£) Number of options

Weighted average

exercise price (£)

Outstanding at beginning of year 8,707,658 1.06 6,260,000 1.12

Granted during the year 3,349,125 0.83 2,4 47,6 58 0.90

Forfeited during the year (530,872) 1.05 – –

Exercised during the year – – – –

Expired during the year – – – –

Outstanding at the end of the year 11,525,911 0.99 8,707,6 5 8 1.06

Exercisable at the end of the year – – – –

The options outstanding at December 31, 2022 had a weighted average exercise price of £0.994 and a weighted

average remaining contractual life of 1.5 years. In 2022, options were granted on June 15 and September 26.

The aggregate of the estimated fair values of the options granted on those dates is £1,117,000 (approximately

US$1,304,000). In 2021, options were granted on October 19. The aggregate of the estimated fair values of the

options granted on that date was £930,000 (approximately US$1,275,000). The inputs into the Black-Scholes

model are as follows:

Year ended

December 31,

2022

Year ended

December 31,

2021

Weighted average share price (£) 0.817 0.900

Weighted average exercise price (£) 0.834 0.903

Expected volatility 69.3%/70.3%* 64%

Expected life 2.6/2.3 years* 3 years

Risk-free rate 0.19%/0.44%* 0.71%

Expected dividend yields 0% 0%

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

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Expected volatility was determined by calculating the historical volatility of the Group’s share price since going

public in December 2020. The expected life used in the model is equal to the vesting period.

Due to lower market expectations, the number of options expected to vest dropped to 2,279,236 (2021: 5,204,978).

This resulted in an income of US$12,000 arising from these share-based payment transactions for the year ended

December 31, 2022 (expense for the year ended December 31, 2021: US$424,000).

Other share-based payments

Remuneration of US$764,000 described in Note 26 in relation to the acquisition of Life Materials Technologies

Limited is linked to a service period of five years. An expense of US$150,000 was recognized in the year

ended December 31, 2022 (year ended December 31, 2021: US$74,000). The remainder of approximately

US$544,000 is expected to be expensed over the period from January 1, 2023, to June 30, 2026.

28. Other reserves and retained deficit

Other reserves comprize the share-based payment reserve, the merger reserve, the currency translation reserve

and the other reserve.

The retained deficit comprizes all other net gains and losses and transactions with owners not recognized elsewhere.

Movements in the other reserves were as follows:

Note

Share- based

payment

reserve

US$’000

Merger

reserve

US$’000

Currency

translation

reserve

US$’000

Other

reserve

US$’000

Total Other

reserves

US$’000

Balance at January 1, 2021 50 (126,912) 2,937 (2,043) (125,968)

Other comprehensive (loss)/income – – (2,550) 899 (1,651)

Total comprehensive (loss)/income for the year – – (2,550) 899 (1,651)

Share-based payment charges 27 424 – – – 424

Transactions with owners 424 – – – 424

Balance at December 31, 2021 474 (126,912) 387 (1,144) (127,19 5)

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 27 (12) – – – (12)

Transactions with owners (12) – – – (12)

Balance at December 31, 2022 462 (126,912) (1,527) (40) (128,017)

The share-based payment reserve arises from the requirement to fair value the issue of share options at grant

date. Further details of share options are included at Note 27.

The merger reserve was created in accordance with IFRS3 ‘Business Combinations’. The merger reserve arises

due to the elimination of the Company’s investment in HeiQ Materials AG. Since the shareholders of HeiQ

Materials AG became the majority shareholders of the enlarged Group, the acquisition is accounted for as though

there is a continuation of the legal subsidiary’s financial statements. In reverse acquisition accounting, the

business combination’s costs are deemed to have been incurred by the legal subsidiary.

The currency translation reserve represents cumulative foreign exchange differences arising from the translation

of the financial statements of foreign subsidiaries and is not distributable by way of dividends.

The other reserve comprizes the cumulative re-measurement of defined benefit obligations and plan assets to

fair value, and which are recognized as a component of other comprehensive income. Such actuarial gains and

losses from defined benefit pension plans are not reclassified to profit or loss in subsequent periods.

27. Share-based payments continued

Financial statements

Notes to the consolidated financial statements continued

For the year ended December 31, 2022

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Dividend paid by subsidiary

In June 2022, HeiQ Chrisal N.V. declared and paid a dividend of €470,000 (approximately US$496,000) of which

49% or US$243,000 was paid to minority shareholders.

Capital contributions from minority shareholders

The Group received a capital contribution from a minority shareholder of US$764,000 which arose from a waived

loan (see Note 31 for details).

29. Pensions and other post-employment benefit plans

The Group operates a defined benefit pension plan in Switzerland, which requires contributions to be made to a

separately administered fund. The cost of providing benefits under the defined benefit plan is determined using

the projected unit credit method.

Correspondingly the value of the defined benefit obligation at valuation date is equal to the present value of the

accrued pro-rated service considering expected salary at eligibility date and the future pension increase.

The pension scheme was administered by Swisscanto pension fund (“Swisscanto Sammelstiftung”) until

December 31, 2021, and by AXA pension fund from January 1, 2022, following a change in pension fund

provider. The Directors have adopted the actuarial valuation as of January 1, 2022.

Pension plan description

The pension plans grant disability and death benefits which are defined as a percentage of the salary insured.

Although the Swiss plan operates like a defined contribution plan under local regulations, it is accounted for as a

defined benefit pension plan under IAS19 ‘Employee Benefits’ because of the need to accrue a minimum level of

interest on the mandatory part of the pension accounts. Upon reaching retirement age, the savings capital will be

converted with a fixed conversion rate into an old-age pension. In the event that an employee leaves employment

prior to reaching a pensionable age, the cumulative balance of the savings account is withdrawn from the

pension plan and invested into the pension plan of the employee’s new employer.

Regulatory framework

Pension plan legal structure

HeiQ Materials AG is affiliated to a collective foundation. The collective foundation operates one defined benefit

pension plan for HeiQ Materials AG. Under Swiss law, all employees are required to be a member of the pension

plan. There are minimum benefits requested by law (for old-age, disability, death and termination). The pension

plans cover more than legally requested. Each affiliated company has a pension plan committee. The committee

is represented by 50% of employer representatives and the remaining 50% are employee representatives.

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

The highest corporate body of the collective foundation is the board of trustees. The board of trustees is elected

out of the affiliated companies and is also represented by 50% of employee and employer representatives (on

the level of the collective foundation). This board handles the general management of the pension scheme,

ensures compliance with the statutory requirements, defines the strategic objectives and policies of the pension

scheme and identifies the resources for their implementation. This board decides also on the asset allocation

and is responsible to the authorities for the correct administration of the collective foundation.

Special situation

The pension scheme has no minimum funding requirement (when the pension fund is in a surplus position),

although the pension scheme has a minimum contribution requirement as specified below. Under local

requirements, where a pension fund is operated in a surplus position, limited restrictions apply in terms of the

trustee’s ability to apply benefits to the members of the locally determined “free reserves”. In instances where

the pension fund enters into an underfunded status the active members, along with the employer, are required to

make additional contributions until such time the pension fund is in a fully funded position.

Funding arrangements that affect future contributions

Swiss law provides for minimum pension obligations on retirement. Swiss law also prescribes minimum annual

funding requirements. An employer may provide or contribute a higher amount than as specified under Swiss law

– such amounts are specified under the terms and conditions of each of the Swiss employee’s individual terms

and conditions of employment.

In addition, employers are able to make one off contributions or prepayments to these funds. Although these

contributions cannot be withdrawn, they are available to the Company to offset its future employer cash

contributions to the plan. Although a surplus can exist in the fund, Swiss law requires minimum annual funding

requirements to continue.

28. Other reserves and retained deficit continued

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For the active members of the pension plan, annual contributions are required by both the employer and

employee. The employer contributions must be at least equal to the employee contributions, but may be higher,

separately mentioned in the constitution of the pension plan.

Minimum annual contribution obligations are determined with reference to an employee’s age and current salary,

however as indicated above these can be increased under the employee’s terms and conditions of employment.

In the event of the winding up of HeiQ Materials AG, or the pension fund, HeiQ Materials AG has no right to any

refund of any surplus in the pension fund. Any surplus balance is allocated to the members (active and pensioners).

General risk

The Group faces the risk that its equity ratio can be affected by a poor performance of the assets of the pension

fund or a change of assumptions. Therefore, sensitivities of the main assumptions have been calculated and

disclosed (see below).

The following tables summarize the components of net benefit expense recognized in the statement of profit and

loss and the funded status and amounts recognized in the statement of financial position for the plan:

Net benefit obligations

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

As at

December 31, 2022

US$’000

As at

December 31, 2021

US$’000

Fair value of plan assets 9,616 10,858

Defined benefit obligations (10,568) (13,003)

Funded status (net liability) (952) (2,146)

Duration (years) 13.8 16.5

Expected benefits payable in following year (389) (393)

Development of obligations and assets

Year ended

December 31, 2022

US$’000

Year ended

December 31, 2021

US$’000

Present value of funded obligations, beginning of year (13,003) (9,588)

Employer service cost (571) (521)

Employee contributions (352) (342)

Past service cost – 28

Curtailments/Settlements – 65

Interest cost (45) (14)

Benefits paid/(refunded) 522 (2,589)

Actuarial (loss)/gain on benefit obligation 2,562 (256)

Currency (loss)/gain 319 214

Present value of funded obligations, end of year (10,568) (13,003)

Defined benefit obligation participants (10,568) (13,003)

Defined benefit obligation pensioners – –

Present value of funded obligations, end of year (10,568) (13,003)

Fair value of plan assets, beginning of year 10,858 6,311

Expected return on plan assets 37 10

Employer’s contributions 352 342

Employees’ contributions 352 342

Benefits (paid)/refunded (522) 2,589

Admin expense (21) (20)

Actuarial (loss)/gain on plan assets (1,182) 1,380

Currency gain/(loss) (258) (96)

Fair value of plan assets, end of year 9,616 10,858

29. Pensions and other post-employment benefit plans continued

Financial statements

Notes to the consolidated financial statements continued

For the year ended December 31, 2022

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Movements in net liability recognized in statement of financial position:

Year ended

December 31,

2022

US$’000

Year ended

December 31,

2021

US$’000

Net liability, beginning of year (2,146) (3,276)

Employer service cost (571) (521)

Interest cost (45) (14)

Expected return on plan assets 37 10

Admin expense (21) (20)

Past service cost recognized in year – 28

Curtailment, settlement, plan amendment gain (loss) – 65

Employer’s contributions (following year expected contributions) 352 342

Prepaid (accrued) pension cost: 247 111

– operating income (expense) (240) (107)

– finance expense (7) (4)

Total gains recognized within other comprehensive income 1,380 1,124

Currency loss 62 116

Net liability, end of year (952) (2,146)

Expected employer’s cash contributions for following year 360 361

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,

2022

US$’000

As at

December 31,

2021

US$’000

Cash 2.8% 3.6%

Bonds 29.1% 31.7%

Equities 33.2% 34.8%

Property (incl. mortgages) 31.3% 27.0 %

Other 3.6% 2.9%

Total 100.0% 100.0%

Amounts recognized in profit and loss

Year ended

December 31,

2022

US$’000

Year ended

December 31,

2021

US$’000

Employer service cost (571) (521)

Past service cost recognized in year – 28

Interest cost (45) (14)

Expected return on plan assets 37 10

Admin expense (21) (20)

Curtailment, settlement, plan amendment gain (loss) – 64

Components of defined benefit costs recognized in profit or loss (600) (453)

29. Pensions and other post-employment benefit plans continued

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Amounts recognized in other comprehensive income

Year ended

December 31,

2022

US$’000

Year ended

December 31,

2021

US$’000

Actuarial gains/(losses) arising from plan experience 2,392 (1,449)

Actuarial (losses)/gains arising from demographic assumptions (23) 74 4

Actuarial gains arising from financial assumptions 193 449

Re-measurement of defined benefit obligations 2,562 (256)

Re-measurement of assets (1,182) 1,380

Deferred tax asset recognized (276) (225)

Other – –

Total recognized in OCI 1,104 899

Principal actuarial assumptions (beginning of year):

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

shown below:

As at

December 31,

2022

US$’000

As at

December 31,

2021

US$’000

Discount rate 2.25% 0.35%

Interest credit rate 2.25% 1.00%

Average future salary increases 2.50% 2.00%

Future pension increases 0.00% 0.00%

Mortality tables used BVG 2020 GT BVG 2020 GT

Average retirement age 65/65 65/64

The forecasted contributions of the Group for the 2023 financial year amount to US$360,000.

Sensitivities

A quantitative sensitivity analysis for significant assumptions is as follows:

Impact on defined benefit obligation

As at

December 31,

2022

US$’000

As at

December 31,

2021

US$’000

Discount rate + 0.25% (323) (524)

Discount rate – 0.25% 343 560

Salary increase + 0.25% 44 72

Salary increase – 0.25% (43) (70)

Pension increase + 0.25% 167 278

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.

29. Pensions and other post-employment benefit plans continued

Financial statements

Notes to the consolidated financial statements continued

For the year ended December 31, 2022

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Other pension plans

Life Materials Technologies Limited, Thailand, also has a pension scheme which gives rise to defined benefit

obligations under IAS 19. This pension plan contributed a net defined benefit obligation of US$92,000 to the net

assets acquired in the business combination in 2021. The pension expense in profit and loss was US$1,000

(2021: US$43,000) which results in a US$134,000 net defined liability as at December 31, 2021 (2021:

US$135,000).

30. Lease liabilities

Future minimum lease payments associated with leases were as follows:

As at

December 31,

2022

US$’000

As at

December 31,

2021

US$’000

(restated)

Not later than one year 1,301 959

Later than one year and not later than five years 3,813 3,253

Later than five years 3,387 4,905

Total minimum lease payments 8,501 9,117

Less: Future finance charges (679) (1,003)

Present value of minimum lease payments 7,822 8,114

Current liability 1,264 905

Non-current liability 6,558 7, 20 9

7,822 8,114

31. Borrowings

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

As at

December 31,

2022

US$’000

As at

December 31,

2021

US$’000

Unsecured bank loans 3,573 1,159

Secured bank loans 628 778

Loans from non-controlling interest 137 825

Total borrowings 4,338 2,762

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

Unsecured bank loans

A credit facility was taken out in December 2022 which incurs interest at a fixed rate of 2.2%. It was repaid on

February 28, 2023 and the loan was replaced with a new credit facility worth CHF 4,500,000 (US$ 4,964,000).

As at December 31, 2022, CHF 2,400,000 (US$2,574,000) was outstanding.

Several loans amounting to US$1.6 million were assumed through the acquisition of Chrisal. They finance the

acquisition of property, plant and equipment as well as the prepayment of provisional taxes. As at December 31,

2022, €938,000 (US$999,000) is outstanding (2021: €1,019,000 (US$1,159,000)). A further €277,000 was

taken out in February 2023. The loans are repayable over a period of up to ten 10 years. These loans all have

fixed interest rates between 0.78 and 3.95% and the weighted average fixed interest rate on the outstanding

balances is 2.21%.

29. Pensions and other post-employment benefit plans continued

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Loans from non-controlling interests

A loan is payable to a minority shareholder of Life-Materials Latam Ltda, Brazil. Interest is fixed at 0.5%. There

is no specific repayment date, but the loan is payable once the entity is able to repay it. The balance as at

December 31, 2022 is BRL 715,683 (US$137,000).

The balance as at December 31, 2021 included three loans totaling €725,000 (US$825,000) payable to a company

controlled by a minority shareholder of HeiQ Medica. The loans did not incur any interest and were waived in full by the

borrower in December 2022 resulting in a capital contribution from minority shareholders of US$764,000.

Secured bank loans

A bank loan taken out in October 2020 which incurs interest at a fixed rate of 3.25% and which is secured on

property owned by a company which is controlled by a minority shareholder of HeiQ Medica. It is repayable in

equal monthly installments of €8,000 (US$9,500) over eight years up to September 2028. As at December 31,

2022, €590,000 (US$629,000) is outstanding (2021: US$779,000).

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

year presented:

As at

December 31,

2022

US$’000

As at

December 31,

2021

US$’000

(restated)

Not later than one year 2,893 1,157

Later than one year but less than five years 1,029 951

After more than five years 416 654

Total borrowings 4,338 2,762

32. 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

US$’000

Tax losses

US$’000

Share-based

payments

US$’000

Capital

allowances,

depreciation and

other temporary

differences

US$’000

Total

US$’000

Balance at January 1, 2021 655 171 – (395) 431

Charge to profit or loss 22 17 82 310 431

Charge to other comprehensive income (225) – – – (225)

Business Combinations – – – (1,627) (1,627)

Foreign currency differences (23) (10) 3 26 (4)

Balance as at December 31, 2021 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)

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.

31. Borrowings continued

Financial statements

Notes to the consolidated financial statements continued

For the year ended December 31, 2022

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

Year ended

December 31,

2022

US$’000

Year ended

December 31,

2021

US$’000

Deferred tax

Deferred tax assets 538 1,337

Deferred tax liabilities (1,253) (2,333)

Net deferred tax assets (liabilities) (715) (994)

Deferred tax assets amounting to US$239,000 were derecognized following remeasurements of defined benefit

obligations (see also Note 29). Deferred tax liabilities related to capital allowances and depreciation decreased

following the release of excess reserves on inventory and receivables in Switzerland as well as amortization of

intangible assets acquired in the business combinations in 2021.

As at December 31, 2021, the Group had approximately US$178,000 of tax losses available to be carried

forward against future profits. Management no longer expects the deferred tax asset to be substantially

recovered in 2023. Therefore, the deferred tax assets were derecognized as at December 31, 2022.

Some tax losses were not recognized as deferred tax assets. During the year ended December 31, 2022,

such tax losses amounted to US$3,175,000 (2021: US$378,000). They arose from aggregated losses of

US$17,482,000 (2021: US$1,134,000).

33. Other non-current liabilities

As at

December 31,

2022

US$’000

As at

December 31,

2021

US$’000

Defined benefit obligation IAS 19 Switzerland (Note 29) 952 2,146

Defined benefit obligation IAS 19 Thailand (Note 29) 134 135

Deferred consideration in relation to ChemTex acquisition (see Note 5g) – 88

Contract liabilities 3,614 –

Deferred grant income 14 –

Others – 250

Total other non-current liabilities 4,714 2,619

34. Trade and other payables

As at

December 31,

2022

US$’000

As at

December 31,

2021

US$’000

(restated)

Trade payables 3,321 4,090

Payables to tax authorities 375 1,167

Other payables 1,626 3,014

Total trade and other payables 5,322 8,271

Trade payables principally comprize 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.

32. Deferred tax continued

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35. Accrued liabilities

As at

December 31,

2022

US$’000

As at

December 31,

2021

US$’000

(restated)

Costs of goods sold 875 1,328

Personnel expenses 1,737 1,525

Other operating expenses 2,366 533

Total accrued liabilities 4,978 3,386

36. Deferred revenue

As at

December 31,

2022

US$’000

As at

December 31,

2021

US$’000

(restated)

Contract liabilities 1,176 1,000

Prepayments for unshipped goods 94 –

Deferred grant income 15 4

Total deferred revenue 1,285 1,004

37. Contract liabilities

As at

December 31,

2022

US$’000

As at

December 31,

2021

US$’000

As at

January 1,

2021

US$’000

Exclusivity agreements 1,832 – –

Research and development services 2,958 1,000 –

Total contract liabilities 4,790 1,000 –

Current liabilities (Note 36) 1,176 1,000 –

Non-current liabilities (Note 33) 3,614 – –

Total contract liabilities 4,790 1,000 –

Revenue relating to both exclusivity and research and development services is recognized over time although

the customer pays up-front in full for these services. A contract liability is recognized for revenue relating to the

services at the time of the initial sales transaction and is released over the service period.

In the reporting year ended December 31, 2021, the Group received a US$ 1 million prepayment for research

and development services. The Group is expected to complete its obligations in the reporting year ended

December 31, 2024. In 2022, the Group entered into an agreement to grant exclusivity to a customer worth

US$2 million and research and development services worth a further US$2 million. The customer has prepaid,

and revenue recognition is spread over four reporting periods starting in July 2022 and ending June 2026.

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

forward contract liabilities.

As at

December 31,

2022

US$’000

As at

December 31,

2021

US$’000

Exclusivity agreements – –

Research and development services – –

Total revenue recognized from contract liabilities – –

Financial statements

Notes to the consolidated financial statements continued

For the year ended December 31, 2022

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38. Other current liabilities

As at

December 31,

2022

US$’000

As at

December 31,

2021

US$’000

Deferred consideration in relation to acquisitions (Note 5g) 92 5,995

Deferred consideration in relation to share-based payments (Note 27) – 74

Call option derivative liability 686 –

Other current liabilities 778 6,069

Deferred consideration

As more fully described in Note 5, the Company settled a total of US$5.5 million of deferred consideration

relating to the acquisition of RAS AG and Life Materials by way of cash and share issuance. A further settlement

of deferred consideration of US$187,000 in cash payments related to the ChemTex acquisition in 2017.

Call option derivative liability

As described in Note 5b, HeiQ AeoniQ GmbH’s minority shareholder Hugo Boss AG has the contractual right

to acquire a further 5% shareholding in HeiQ AeoniQ GmbH for a call option exercise price of €10,000,000

(approximately US$10,657,000) which expires on December 31, 2023.

The Group has valued the option at initial recognition at US$1,097,000 based on the Black-Scholes model. As at

December 31, 2022, a liability of US$686,000 was recognized with a corresponding US$371,000 debit entry to

profit and loss and a US$40,000 charge to currency translation reserve. The inputs into the Black-Scholes model

are as follows:

As at

December 31,

2022

Weighted average share price (€) 4,326.68

Weighted average exercise price (€) 5,714.29

Expected volatility 44.7%

Expected life 1 year

Risk-free rate 1.0%

Expected dividend yield 0%

39. Contingent assets and liabilities

On October 10, 2022 the Group announced that it has filed a complaint in the United States District Court for

the Western District Of North Carolina, Charlotte Division, against ICP Industrial Inc, for breaching its Exclusive

Agreement terms. Because of the claimed contract breach, the Group has not recognized any income or assets

from the contract. Within the same legal proceeding, ICP Industrial Inc, has filed a counter claim against the

Group. Although the Group is confident in its legal position, the outcome of the legal proceedings as well as

the court-mandated mediation remains uncertain. Therefore, while a future economic benefit is expected, it

can not be reliably quantified at this point in time and could bear the risk of prejudice given the ongoing legal

proceedings.

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40. Provisions

As at

December 31,

2022

US$’000

As at

December 31,

2021

US$’000

Legal/Compliance provision 339 –

Total provisions 339 –

Current liability 339 –

Non-current liability – –

339 –

This provision is reported in Note 35 as Accrued liabilities – Other operating expenses.

Legal/

Compliance

provision

US$’000

Total

US$’000

Balance at January 1, 2021 – –

Additional provision in the year – –

Utilization of provision – –

Exchange difference – –

Balance as at December 31, 2021 – –

Additional provision in the year 339 339

Utilization of provision – –

Exchange difference – –

Balance as at December 31, 2022 339 339

The Group was contacted by the United States Environmental Protection Agency (“EPA”) in connection with

potential alleged violations of the Federal Insecticide, Fungicide and Rodenticide Act (“FIFRA”) pertaining to

alleged mislabelling. As at December 31, 2022, the Company has assessed the claim and made a provision for

US$339,000 (December 31, 2021: US$nil) which was paid in May 2023.

41. Fair value and financial instruments

a) Fair value

The fair value of an asset or liability is the price that would be received to sell that asset or paid to transfer that

liability in an orderly transaction occurring in the principal market (or most advantageous market in the absence

of a principal market) for such asset or liability. In estimating fair value, the Directors utilize valuation techniques

that are consistent with the market approach, the income approach and/or the cost approach. Such valuation

techniques are consistently applied. Inputs to valuation techniques include the assumptions that market

participants would use in pricing an asset or liability. IFRS 13 “Fair Value Measurement” establishes a fair value

hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets

or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is defined as follows:

Level 1: Inputs are unadjusted, quoted prices in active markets for identical assets at the measurement date.

Level 2: Inputs (other than quoted prices included in Level 1) can include the following:

• observable prices in active markets for similar assets;

• prices for identical assets in markets that are not active;

• directly observable market inputs for substantially the full term of the asset; and

• market inputs that are not directly observable but are derived from or corroborated by observable

market data.

Level 3: Unobservable inputs which reflect the Directors’ best estimates of what market participants would use

in pricing the asset at the measurement date.

Financial statements

Notes to the consolidated financial statements continued

For the year ended December 31, 2022

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We have not identified any financial instruments measured at fair value for the years ended December 31, 2021

and December 31, 2022.

There were no transfers between fair value levels during the year ended December 31, 2022 (2021: US$nil).

b) Financial instruments

For trade receivables, the Group applies the simplified approach permitted by IFRS 9 “Financial Instruments”,

which requires expected lifetime losses to be recognized from initial recognition of the receivables.

Financial liabilities are initially measured at fair value and subsequently measured at amortized cost.

The Group is not a financial institution. The Group does not apply hedge accounting and its customers are

considered creditworthy and in general pay consistently within agreed payments terms. In 2022, few customers

have shown delays in payment which are closely monitored.

A classification of the Group’s financial instruments is included in the table below. These financial instruments

are held at amortized cost which is estimated to be equal to fair value.

Financial instruments

As at

December 31,

2022

US$’000

As at

December 31,

2021

US$’000

(restated)

Cash and cash equivalents 8,488 14,560

Trade receivables 6,487 14,656

Accrued income and other receivables 3,239 2,824

Trade and other payables (5,322) (8,271)

Accrued liabilities (4,978) (3,386)

Deferred consideration (92) (6,158)

Call option derivative liability (686) –

Borrowings held at amortized cost (4,338) (2,763)

Lease liabilities held at present value of lease payments (7,823) (8,114)

Total financial instruments (5,025) 3,348

42. Financial risk management

For the purposes of capital management, capital includes issued capital and all other equity reserves

attributable to the equity holders of the Company, as well as debt. The primary objective of the Directors’ capital

management is to ensure that the Group maintains a strong credit rating and healthy capital ratios in order to

support its business and maximize shareholder value.

To maintain or adjust the capital structure, the Directors may adjust the dividend payment to shareholders, return

capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes

during the year.

The Directors manage the Group’s capital structure and adjust it in light of changes in economic conditions and

the requirements of the financial covenants. The Group includes in its net debt, interest-bearing loans, lease

liabilities and borrowings, trade and other payables, less cash and short-term deposits.

The Group’s principal financial liabilities comprize of borrowings and trade and other payables, which it uses

primarily to finance and financially guarantee its operations.

The Group’s principal financial assets include cash and cash equivalents and trade and other receivables derived

from its operations.

a. Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect

the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is

to manage and control market risk exposures within acceptable parameters, while optimizing the returns.

b. Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because

of changes in market interest rates. As the Group’s borrowings are either on fixed interest terms or interest-free,

the Group is not subject to significant interest rate risk.

41. Fair value and financial instruments continued

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c. Credit risk

Credit risk is the risk that a customer or counterparty to a financial instrument will not meet its obligations under

a contract and arises primarily from the Group’s cash in banks and trade receivables.

The Company considers the credit risk in relation to its cash holdings is low because the counterparties are

banks with high credit ratings.

Trade receivables are due from customers and collectability is dependent on the financial condition of each

individual company as well as the general economic conditions of the industry. The Directors review the financial

condition of customers prior to extending credit and generally do not require collateral in support of the Group’s

trade receivables. The majority of trade receivables are current or overdue for less than 30 days and the Directors

believe these receivables are collectible. Amounts overdue longer than 120 days relate to a limited number of

customers with a long trading history. Collection of these receivables is expected in the course of the year 2023.

For doubtful accounts, the Group calculates an expected credit loss provision which is disclosed in Note 23.

As at December 31, 2022, the Group had one customer that individually accounted for more than 10% of total

receivables, totaling 29% of total trade receivables (2021: two customers that individually accounted for more

than 10% of total receivables, totaling 36.4%).

In order to minimize credit risk, the Group has adopted a policy of only dealing with creditworthy counterparties

and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from

defaults. The credit rating information is supplied by independent rating agencies where available and, if not

available, the Group uses other publicly available financial information and its own trading records to rate its

major customers. The Group’s exposure and the credit ratings of its counterparties are continuously monitored

and the aggregate value of transactions concluded is spread amongst approved counterparties.

Credit approvals and other monitoring procedures are also in place to ensure that follow-up action is taken to

recover overdue debts. Furthermore, the Group reviews the recoverable amount of each trade debt and debt

investment on an individual basis at the end of the reporting period to ensure that adequate loss allowance is

made for irrecoverable amounts. In this regard, the directors of the Company consider that the Group’s credit

risk is significantly reduced. Trade receivables consist of a large number of customers, spread across diverse

industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of accounts

receivable and, where appropriate, credit guarantee insurance cover is purchased.

d. Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate due to

changes in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates relates

primarily to its financing activities (when financial liabilities and cash are denominated other than in a company’s

functional currency).

Most of the Group’s transactions are carried out in US Dollars ($). Foreign currency risk is monitored closely on

an ongoing basis to ensure that the net exposure is at an acceptable level.

The Group maintains a natural hedge whenever possible, by matching the cash inflows (revenue stream) and

cash outflows used for purposes such as capital and operational expenditure in the respective currencies. The

Group’s net exposure to foreign exchange risk was as follows:

As at December 31, 2022

Functional currency

AUD

US$’000

EUR

US$’000

GBP

US$’000

US$

US$’000

Others

US$’000

Total

US$’000

Financial assets denominated in $ 19 92 206 6,771 3 7,0 91

Financial liabilities denominated in $ – – – – – –

Net foreign currency exposure 19 92 206 6,771 3 7,091

42. Financial risk management continued

Financial statements

Notes to the consolidated financial statements continued

For the year ended December 31, 2022

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As at December 31, 2021

Functional currency

AUD

US$’000

(restated)

EUR

US$’000

(restated)

GBP

US$’000

(restated)

US$

US$’000

(restated)

Others

US$’000

(restated)

Total

US$’000

(restated)

Financial assets denominated in $ 115 375 284 11,804 622 13,200

Financial liabilities denominated in $ (10) (1,717) (475) (2,226) (55) (4,483)

Net foreign currency exposure 105 (1,342) (191) 9,578 567 8,717

Foreign currency sensitivity analysis:

The following tables demonstrate the sensitivity to a reasonably possible change in foreign currency exchange

rates, with all other variables held constant.

The impact on the Group’s profit before tax is due to changes in the fair value of monetary assets and liabilities.

The Group’s exposure to foreign currency changes for all other currencies is not material.

A 10 per cent. movement in each of the Australian dollar (AUD), euro (EUR), British pound (GBP) and US dollar

($) would increase/(decrease) net assets by the amounts shown below. This analysis assumes that all other

variables, in particular interest rates, remain constant.

As at December 31, 2022

AUD

US$’000

EUR

US$’000

GBP

US$’000

US$

US$’000

Others

US$’000

Effect on net assets:

Strengthened by 10% 2 9 21 677 –

Weakened by 10% (2) (9) (21) (677) –

As at December 31, 2021

AUD

US$’000

EUR

US$’000

GBP

US$’000

US$

US$’000

Others

US$’000

Effect on net assets:

Strengthened by 10% 11 (134) (19) 958 57

Weakened by 10% (11) 134 19 (958) (57)

e. Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they are due.

The Directors manage this risk by:

• maintaining adequate cash reserves through the use of the Group’s cash from operations and bank

borrowings as well as overdraft facilities; and

• continuously monitoring projected and actual cash flows to ensure the Group maintains an appropriate

amount of liquidity.

Overview of financing facilities

The following tables detail the Group’s remaining contractual maturity for financial liabilities with agreed repayment

periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the

earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows.

Year ended December 31, 2022

Less than

1 year

US$’000

2 to 5

years

US$’000

> 5

years

US$’000

Total

US$’000

Trade and other payables 5,322 – – 5,322

Borrowings held at amortized cost 2,893 1,029 416 4,338

Leases (gross cash flows) 1,302 3,813 3,387 8,502

Other liabilities 5,290 – – 5,290

As at December 31, 2022 14,807 4,842 3,803 23,453

42. Financial risk management continued

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Year ended December 31, 2021

Less than

1 year

US$’000

(restated)

2 to 5

years

US$’000

(restated)

> 5

years

US$’000

(restated)

Total

US$’000

(restated)

Trade and other payables 8,271 – – 8,271

Borrowings 1,157 951 655 2,763

Leases (gross cash flows) 959 3,253 4,905 9,117

Other liabilities 3,435 – 88 3,524

As at December 31, 2021 13,822 4,204 5,648 23,674

Unsecured bank overdraft facility

As at

December 31,

2022

US$’000

As at

December 31,

2021

US$’000

(restated)

Amount used 2,790 –

Amount unused 6,861 9,329

Total 9,651 9,329

The bank overdraft facilities are reviewed at least annually.

f. Capital risk management

The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns

while maximising the return to shareholders through the optimization of the debt and equity balance. The Group’s

overall strategy remains unchanged from 2021.

The capital structure of the Group consists of equity and liabilities of the Group. The Group intends to keep debt

low to minimize the interest rate impact.

The Group is not subject to any externally imposed capital requirements.

The Directors review the capital structure on a semi-annual basis based on the equity ratio and total borrowings.

The equity ratio at December 31, 2022 is 57 per cent (see below).

As at

December 31,

2022

US$’000

As at

December 31,

2021

US$’000

(restated)

Equity 40,339 59,535

Total equity and liabilities 71,143 94,144

Equity ratio 57% 63%

42. Financial risk management continued

Financial statements

Notes to the consolidated financial statements continued

For the year ended December 31, 2022

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statements

43. Notes to the statements of cash flows

Non-cash transactions

Certain shares were issued during the year for a non-cash consideration as described in Note 5g.

Additions to buildings and land during the year amounting to US$1,862,000 million were financed by share issue

(2021: nil).

Gains and losses on disposal of assets

Gains and losses on disposal of assets Note

As at

December 31,

2022

US$’000

As at

December 31,

2021

US$’000

(restated)

Gain on disposal of property, plant and equipment 10 (21) (54)

Loss on disposal of property, plant and equipment 13 16 20

Net loss on disposal of assets (5) (34)

Changes in liabilities arising from financing activities

The table below details changes in the Group’s liabilities arising from financing activities, including both cash and

non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash

flows will be, classified in the Group’s consolidated cash flow statement as cash flows from financing activities.

Leases Borrowings Total

Balance at January 1, 2021 (2,652) (1,573) (4,225)

Cash flows 662 382 1,044

Assumed on acquisitions of subsidiaries (422) (1,792) (2,214)

New lease agreements (5,700) – (5,700)

Exchange differences (2) 221 219

Balance at December 31, 2021 (8,114) (2,762) (10,876)

Cash flows 992 (2,561) (1,569)

New lease agreements (2,181) – (2,181)

Revaluation of lease agreements 574 – 574

Disposal due to acquisitions 490 – 490

Loans waived by creditors – 764 764

Exchange differences 416 221 637

Balance at December 31, 2022 (7,823) (4,338) (12,161)

Working capital reconciliation:

The Company defines working capital as trade receivables, other receivables and prepayments less trade and

other payables, accrued liabilities, deferred revenue and non-current liabilities excluding pension liabilities.

Year ended December 31, 2022

Opening

balances

US$’000

Assumed on

acquisition of

assets

US$’000

Change in

balance

US$’000

Closing

balances

US$’000

Inventories – (602) 13,168

Trade receivables – – (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 8,27 – (2,949) 5,322

Accrued liabilities 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

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Year ended December 31, 2021

Opening

balances

US$’000

(restated)

Assumed on

acquisition

subsidiaries

US$’000

(restated)

Change in

balance

US$’000

(restated)

Closing

balances

US$’000

(restated)

Inventories 13,540 2,258 (2,028) 13,770

Trade receivables 10,080 3,538 1,038 14,656

Other receivables and prepayments 2,609 – 1,267 3,876

Trade and other receivables and prepayments 12,689 3,538 2,305 18,532

Trade and other payables 5,815 2,497 (41) 8,271

Accrued liabilities 2,168 – 1,218 3,386

Deferred revenue – – 1,004 1,004

Trade and other payables, accrued liabilities and deferred

revenue 7,98 3 2,497 2,181 12,661

Consideration for acquisition of businesses

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

Year ended December 31, 2021 US$’000

Consideration payment for acquisition of Chrisal NV 6,054

Consideration payment for acquisition of RAS AG 1,482

Consideration payment for acquisition of Life Materials Technologies Ltd 2,550

Consideration payment for acquisition of ChemTex assets 908

Cash assumed on acquisition of Chrisal NV (1,773)

Cash assumed on acquisition of RAS AG (291)

Cash assumed on acquisition of Life Material Technologies Ltd (73)

Net consideration payment for acquisitions of businesses 8,857

43. Notes to the statements of cash flows continued

Financial statements

Notes to the consolidated financial statements continued

For the year ended December 31, 2022

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44. Related party transactions

HeiQ Materials AG supplied materials and services totaling US$46,000 to ECSA, a company controlled by a

director of HeiQ Materials AG, in the year ended December 31, 2022 (2021: US$32,000). HeiQ Materials AG in

turn supplied US$88,000 in 2021 (2022: US$nil). The transactions were made on terms equivalent to those in

arm’s length transactions.

There are no loans outstanding with related parties.

Remuneration of key management personnel

The remuneration of the directors, who are the key management personnel of the Group, is set out below in

aggregate for each of the categories specified in IAS 24 Related Party Disclosures.

As at

December 31,

2022

US$’000

As at

December 31,

2021

US$’000

(restated)

Short-term employee benefits 738 836

Post-employment benefits 35 32

Cash remuneration of key management personnel 773 868

Share-based payment expense (income) (58) 170

Total remuneration of key management personnel 715 1,038

The cash remuneration for the reporting year ended December 31, 2022 is equivalent to the total compensation

of CHF 477,626 and GBP 220,000 (2021: CHF 568,878 and GBP 220,000) which are presented in the annual

report on Director’s remuneration.

45. Material subsequent events

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.

To acquire Tarn-Pure, HeiQ have paid the vendors £530,000 (approximately US$621,000) in cash with an

additional £317,000 (approximately US$372,000) to be 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 resulting

in a total consideration of £847,000 (approximately US$993,000). The purchase price allocation for this

acquisition is incomplete. Impacts on this acquisition and the results will be included in the 2023 consolidated

financial statements.

As communicated on July 06, 2023, HeiQ Plc sold a 1.5% minority interest in HeiQ AeoniQ GmbH to MAS

Holdings for US$1.5 million. It was also agreed that a further 1% shareholding will be sold to MAS Holdings for

US$1 million subject to the achievement of a mutually agreed milestone.

46. Ultimate controlling party

As at December 31, 2022, the Company did not have any single identifiable controlling party.

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Financial statements

Company statement of financial position

(registered company number: 09040064)

As at December 31, 2022

Note

As at

December 31,

2022

£’000

As at

December 31,

2021

£’000

ASSETS

Non-current assets

Investments 4 42,758 101,484

Amounts due from subsidiaries 5 9,000 18,000

51,758 119,484

Current assets

Trade and other receivables 7 798 377

Cash and bank balances 6 306 1,203

1,104 1,580

TOTAL ASSETS 52,862 121,064

LIABILITIES

Current liabilities

Trade and other payables 8 (204) (354)

(204) (354)

NET ASSETS 52,658 120,710

EQUITY

Share capital 9 42,025 39,175

Share premium account 9 114,663 109,460

Share-based payment reserve 11 340 346

Accumulated losses (104,370) (28,271)

TOTAL EQUITY 52,658 120,710

The Company has taken advantage of Section 408 of the Companies Act 2006 and has not included a Profit and

Loss account in these separate financial statements. The loss attributable to members of the Company for the

year ended December 31, 2022 is £76,099,000 (2021: loss of £26,801,000).

The notes on pages 145 to 151 form an integral part of these Financial Statements. The Financial Statements

were authorized for issue by the board of Directors on October 26, 2023 and were signed on its behalf by.

Xaver Hangartner

Director

143

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Corporate

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Financial

statements

Company statement of changes in equity

For the year ended December 31, 2022

Share capital

£’000

premium

account

£’000

Share-based

payment

reserve

£’000

Accumulated

losses

£’000

Total

£’000

For the year ended December 31, 2021:

Balance as at January 1, 2021 37,767 102,536 38 (1,470) 138,871

Loss for the year – – – (26,801) (26,801)

Issue of shares 1,408 6,924 – – 8,332

Share-based payment charges – – 308 – 308

Transactions with owners 1,408 6,924 308 – 8,640

Balance as at December 31, 2021 39,175 109,460 346 (28,271) 120,710

For the year ended December 31, 2022:

Loss for the year – – – (76,099) (76,099)

Issue of shares 2,850 5,203 – – 8,053

Share-based payment charges – – (6) – (6)

Transactions with owners 2,850 5,203 (6) – 8,047

Balance as at December 31, 2022 42,025 114,663 340 (104,370) 52,658

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Financial statements

Company statement of cash flows

For the year ended December 31, 2022

Cash flows from operating activities

Year ended

December 31,

2022

£’000

Year ended

December 31,

2021

£’000

Loss before taxation (76,099) (26,801)

Cash flow from operations reconciliation:

Net finance income (377) (375)

Impairment provision 67,180 26,821

Working capital adjustments:

(Increase) in trade and other receivables 8,580 (186)

Increase/(decrease) in trade and other payables (95) (184)

Cash used in operations (811) (726)

Net cash used in operating activities (811) (726)

Cash flows from investing activities

Interest received 377 375

Consideration payment for acquisitions of businesses (463) –

Net cash used in investing activities (86) 375

Cash flows from financing activities

Net cash from financing activities – –

Net increase (decrease) in cash and cash equivalents (897) (351)

Cash and cash equivalents – beginning of the year 1,203 1,554

Cash and cash equivalents – end of the year 306 1,203

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Corporate

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Financial

statements

Notes to the Company financial statements

For the year ended December 31, 2022

1. General information

The Company was incorporated on May 14, 2014 as Auctus Growth Limited, in England and Wales under the

Companies Act 2006 with company number 09040064. The Company was re-registered as a public company

on July 24, 2014. On December 4, 2020, following a reverse takeover of Swiss based HeiQ Materials AG, the

Company’s name was changed to HeiQ Plc. The Company’s registered office is 5th Floor, 15 Whitehall, London,

SW1A 2DD.

The Company’s enlarged share capital is admitted to the standard segment of the Official List and trading

on the London Stock Exchange’s Main Market under the ticker ‘HEIQ’. The ISIN of the Ordinary Shares is

GB00BN2CJ299 and the SEDOL Code is BN2CJ29.

The principal activity of the Company is that of a holding company for the Group, as well as performing all

administrative, corporate finance, strategic and governance functions of the Group.

The Company’s financial statements are prepared in Pounds Sterling, which is the presentational currency for the

financial statements.

2. Summary of significant accounting policies

a. Basis of preparation

These Financial Statements have been prepared in accordance with UK adopted international accounting

standards applying the FRS101 Reduced Disclosure Framework.

These financial statements are prepared under the historical cost convention. Historical cost is generally based

on the fair value of the consideration given in exchange of assets. The principal accounting policies are set

outbelow.

The Company also produces consolidated accounts which include the results of the Company.

The financial statements have been prepared on a going concern basis which contemplates the continuity of

normal business activities and the realization of assets and the settlement of liabilities in the ordinary course

of business. The Directors have assessed both the Company’s and the Group’s ability to continue in operational

existence for the foreseeable future. The Company has prepared forecasts and projections which reflect the

expected trading performance of the Company and the Group on the basis of best estimates of management

using current knowledge and expectations of trading performance. As at December 31, 2022, the Company

had £306,000 (2021: £1,203,000) in cash, which is considered sufficient for its present needs. As described

in Note 3b to the consolidated financial statements, there is material uncertainty at the Group level that casts

significant doubt upon the company’s ability to continue as a going concern and that, therefore, the company may

be unable to realize its assets and discharge its liabilities in the normal course of business.

Nevertheless, after making enquiries and considering the uncertainties described above, the Directors consider

there are reasonable grounds to believe that the Company will be able to pay its debts as and when they

become due and payable, as well as to fund the Company’s future operating expenses. The going concern basis

preparation is therefore considered to be appropriate in preparing these financial statements.

b. Investments

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

c. Loans to subsidiaries

Loans to subsidiaries are measured at the present value of the future cash payments discounted at a market

rate of interest for a similar debt instrument unless such amounts are repayable on demand. The present

value of loans that are repayable on demand is equal to the undiscounted cash amount payable, reflecting the

Company’s right to demand immediate repayment.

d. Foreign currencies

The company’s equity is raised in Pound Sterling (£) which is the functional and presentational currency of

the Company, and all values are rounded to the nearest thousand pounds except where otherwise indicated.

Transactions in foreign currencies are recorded using the rate of exchange ruling at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies are translated using the contracted rate or the

rate of exchange ruling at the balance sheet date and the gains or losses on translation are included in the profit

and loss account.

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e. Cash and cash equivalents

Cash and cash equivalents comprize cash in hand, bank balances, deposits with financial institutions and short-

term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an

insignificant risk of changes in value.

f. Trade and other receivables

Trade and other receivables are recognized initially at fair value and subsequently measured at amortized cost

using the effective interest method, less provision for impairment.

g. Income taxes

The charge for taxation is based on the profit/loss for the year and takes into account taxation deferred because

of timing differences between the treatment of certain items for taxation and accounting purposes.

Deferred tax is provided on timing differences which arise from the inclusion of income and expenses in tax

assessments in periods different from those in which they are recognized in the financial statements. The

following timing differences are not provided for: differences between accumulated depreciation and tax

allowances for the cost of a fixed asset if and when all conditions for retaining the tax allowances have been

met; and differences relating to investments in subsidiaries, to the extent that it is not probable that they will

reverse in the foreseeable future and the reporting entity is able to control the reversal of the timing difference.

Deferred tax is not recognized on permanent differences arising because certain types of income or expense are

non-taxable or are disallowable for tax or because certain tax charges or allowances are greater or smaller than

the corresponding income or expense.

h. Share-based payment arrangements

Equity-settled share-based payments to employees are measured at the fair value of the equity instruments at

the grant date. Equity-settled share-based payments to non-employees are measured at the fair value of services

received, or if this cannot be measured, at the fair value of the equity instruments granted at the date that the

Company obtains the goods or counterparty renders the service. Details regarding the determination of the fair

value of equity-settled share-based transactions are set out in Note 27 to the consolidated financial statements.

The fair vale determined at the grant date of the equity-settled share-based payments is recognized on a straight-

line basis over the vesting period, based on the Company’s estimate of equity instruments that will eventually

vest, with a corresponding increase in equity. Where the conditions are non-vesting, the expense and equity

reserve arising from share-based payment transactions is recognized in full immediately on grant.

Where the Company grants an equity-settled share-based payment award to employees of a subsidiary, then

the Company classifies the transaction as equity-settled in its separate financial statements. The Company

recognizes a capital contribution from the subsidiary as a credit to the share-based payment reserve and a

corresponding increase in its investment in the subsidiary.

At the end of each reporting period, the Group revises its estimate of the number of equity instruments expected

to vest. The impact of the revision of the original estimates, if any, is recognized in profit or loss such that the

cumulative expense reflects the revised estimate, with a corresponding adjustment to other reserves.

i. Trade and other payables

Trade and other payables are initially recognized at fair value and thereafter stated at amortized cost using the

effective interest method unless the effect of discounting would be immaterial, in which case they are stated

atcost.

j. Share capital

Proceeds from issuance of ordinary shares are classified as equity. Incremental costs directly attributable to the

issuance of new ordinary shares or options are shown in equity as a deduction from the proceeds.

k. Financial instruments

Financial instruments are recognized in the statements of financial position when the Company has become a

party to the contractual provisions of the instruments.

Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual

arrangement. Interest, dividends, gains and losses relating to a financial instrument classified as a liability are

reported as an expense or income. Distributions to holders of financial instruments classified as equity are

charged directly to equity.

Financial instruments are offset when the Company has a legally enforceable right to offset and intends to settle

either on a net basis or to realize the asset and settle the liability simultaneously.

2. Summary of significant accounting policies continued

Financial statements

Notes to the Company financial statements continued

For the year ended December 31, 2022

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Financial

statements

A financial instrument is recognized initially at its fair value plus, in the case of a financial instrument not at

fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the

financial instrument.

Financial instruments recognized in the statements of financial position are disclosed in the individual policy

statement associated with each item.

(i) Financial liabilities

Financial liabilities are recognized when, and only when, the Company becomes a party to the contractual

provisions of the financial instrument.

All financial liabilities are recognized initially at fair value plus directly attributable transaction costs and

subsequently measured at amortized cost using the effective interest method other than those categorized as

fair value through profit or loss.

Fair value through profit or loss category comprizes financial liabilities that are either held for trading or are

designated to eliminate or significantly reduce a measurement or recognition inconsistency that would otherwise

arise. Derivatives are also classified as held for trading unless they are designated as hedges. There were no

financial liabilities classified under this category.

A financial liability is derecognized when the obligation under the liability is discharged, cancelled or expires.

When an existing financial liability is replaced by another from the same party on substantially different terms,

or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a

derecognition of the original liability and the recognition of a new liability, and the difference in the respective

carrying amounts is recognized in the profit or loss.

(ii) Equity instruments

Ordinary shares are classified as equity. Dividends on ordinary shares are recognized as liabilities when approved

for appropriation.

(iii) Other financial instruments

Other financial instruments not meeting the definition of Basic Financial Instruments are recognized initially at

fair value. Subsequent to initial recognition other financial instruments are measured at fair value with changes

recognized in profit or loss except investments in equity instruments that are not publicly traded and whose fair

value cannot otherwise be measured reliably shall be measured at cost less impairment.

3. Critical accounting judgments and key sources of estimation uncertainty

In the application of the Company’s accounting policies, which are described in Note 2, management is required

to make judgments, estimates and assumptions about the carrying values of assets and liabilities that are

not readily apparent from other sources. The estimates and underlying assumptions are based on historical

experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates

are recognized in the period in which the estimate is revised if the revision affects only that period or in the

period of the revision and future periods if the revision affects both current and future periods.

Critical accounting judgments

There were no critical accounting judgements impacting the Company’s standalone financial statements 2022

and 2021. Critical accounting judgments affecting the Group are discussed in Note 4 to the consolidated

financial statements.

Key sources of estimate uncertainty

Impairment of amounts due from subsidiaries

As described in Note 2 to the financial statements, fixed asset investments are stated at the lower of cost less

provision for impairment. The present value of loans to subsidiaries that are repayable on demand is equal to the

undiscounted cash amount payable reflecting the Company’s right to demand immediate repayment.

At each reporting date fixed asset investments and loans made to subsidiaries are reviewed to determine

whether there is any indication that those assets have suffered an impairment loss. If there is an indication of

possible impairment, the recoverable amount of any affected asset is estimated and compared with its carrying

amount. If estimated recoverable amount is lower, the carrying amount is reduced to its estimated recoverable

amount, and an impairment loss is recognized immediately in profit or loss.

2. Summary of significant accounting policies continued

148

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Annual Report and Accounts 2022

The Directors have carried out an impairment test on the value of the loans due from subsidiaries and have

concluded that an impairment provision of £9,000,000 (2021: nil) is necessary to reflect the uncertainty around

financing of the Group and Company as mentioned in Note 3b to the consolidated financial statements and Note

2a to the Company Financial Statements, respectively.

Impairment of fixed asset investments

The Directors have also carried out an impairment test on the value of the Company’s fixed asset investments

and considered whether there are any indicators of impairment from external and internal sources of information,

including the fact that the market capitalization of the Company has fallen below the net carrying value of such

investments which would indicate that the carrying value may have been impaired and have concluded that an

impairment provision of £94.0m (2021: £26.8m) is required to write down these amounts to their estimated

recoverable amount.

4. Investments

Investments in subsidiary undertakings

As at

December 31,

2022

£’000

As at

December 31,

2021

£’000

Balance brought forward 101,484 119,609

Additions 8,454 8,696

Impairment provision charge (67,180) (26,821)

Balance at end of year 42,758 101,484

Details of the Company’s principal subsidiaries as at December 31, 2022 are set out in Note 6 to the consolidated

financial statements. The Company’s investments in subsidiaries are carried at cost less impairment.

The Directors have concluded that the significant devaluation of the Group represents an indicator of impairment

as at December 31, 2022. Therefore, the Directors performed an impairment test of the Group and valued

the Company’s investment in its subsidiaries at £51,758,000 (2021: £119,484,000 valued based on market

capitalization). The carrying value of its investments in subsidiaries was £136,759,000 (2021: £128,305,000)

before impairment provision charges. The amounts due from subsidiaries as at December 31, 2022 was

£9,000,000 (2021: £18,000,000).

The Company has therefore made additional provision for an impairment of £94,001,000 (2021: £26,821,000)

against the carrying value of the Company’s investments in subsidiaries to reduce such value to £42,758,000

(2021: £101,484,000).

Sensitivity

The calculation of the market capitalization of £77,045,000 is based on the Company’s share price of 55.0

pence as at 31 December 2022. Due to the volatility of the share price, a decrease of 75% in the share price to

13.8 pence is reasonably possible. A decrease in the share price of 75%, would result in a market capitalization

of £19.3 million and an additional impairment loss of approximately £32.4 million.

3. Critical accounting judgments and key sources of estimation uncertainty

continued

Financial statements

Notes to the Company financial statements continued

For the year ended December 31, 2022

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5. Amounts due from subsidiaries

As at

December 31,

2022

£’000

As at

December 31,

2021

£’000

Balance brought forward at beginning of year 18,000 18,000

Amounts advanced – –

Expected credit loss (9,000) –

Balance at end of year 9,000 18,000

The amounts due from subsidiaries are unsecured, yield 2.5% interest and are repayable on demand. Given

the uncertainty described in the going concern review of the Group in Note 3b to the consolidated financial

statements, the recoverability of the loan was reassessed. Due to the increased risk of default following the

Group’s recent performance, it was concluded that an expected credit loss of £9,000,000 is appropriate for

the financial year ended December 31, 2022.

Sensitivity

The expected credit loss of £9,000,000 reflects 50% of the balance due. Had the Directors’ assessment been

that the whole £18,000,000 are not collectible, there would have been an additional expected credit loss of

£9,000,000.

6. Cash and cash equivalents

As at

December 31,

2022

£’000

As at

December 31,

2021

£’000

Bank balances 306 1,203

306 1,203

7. Trade and other receivables

As at

December 31,

2021

£’000

As at

December 31,

2020

£’000

Prepayments 14 108

Vat receivable 12 5

Other receivables from subsidiaries 772 264

798 377

8. Trade and other payables

As at

December 31,

2022

£’000

As at

December 31,

2021

£’000

Trade payables 1 16

Accruals 203 129

Taxes and social security – 8

Deferred consideration – 55

Other payables – 145

204 354

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

fairvalues.

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9. Share capital and share options

Share capital

Details of the Company’s allotted, called-up and fully paid share capital are set out in Note 26 to the Consolidated

Financial Statements.

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

Number of shares

No.

Share capital

£’000

Share premium

£’000

Totals

£’000

Balance as of January 1, 2021 125,891,904 37,767 102,536 140,303

Issue of shares to acquire Chrisal NV 1,101,928 331 1829 2,160

Issue of shares to acquire RAS AG 1,701,821 511 2837 3,348

Issue of shares to acquire Life Materials 1,887,883 566 2258 2,824

Balance as at December 31, 2021 130,583,536 39,175 109,460 148,635

Issue of shares to vendors of Life Materials (a) 347, 552 104 347 451

Issue of shares as deferred consideration 3,461,615 1,039 2,233 3,272

Issue of shares Advisory Board 164,721 50 146 196

Issue of shares ChemTex Labs 2,176,884 653 967 1,620

Issue of shares Chrisal 3,348,164 1004 1510 2,514

Balance as at December 31, 2022 140,082,472 42,025 114,663 156,688

The par value of all shares is £0.30 (2021: £0.30). All shares in issue were allotted, called up and fully paid.

The Ordinary shares of the Company carry one vote per share and an equal right to any dividends declared.

Share options

Details of the Company’s share option scheme and options issued during the year are set out in Note 27 to the

Consolidated Financial Statements.

10. Reserves

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 share-based payment reserve arises from the requirement to value share options in existence at the year

end at fair value (see Note 28 to the Consolidated Financial Statements).

11. Share-based payments

Details of the Company’s share options are contained in Note 27 to the Consolidated Financial Statements.

12. Segment information

Operating segments are identified on the basis of internal reports about components of the Company that are

regularly reviewed by the Board. Until its acquisition of HeiQ Materials AG on 7 December 2020, the Company

was an investing company and did not trade. On the completion of the acquisition of HeiQ Materials AG and its

subsidiaries, the Company became the holding company of the Group.

The Company has one segment, namely that of a parent company to its subsidiaries. Accordingly, no segmental

analysis has been provided in these financial statements.

Financial statements

Notes to the Company financial statements continued

For the year ended December 31, 2022

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13. Employees

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

Year ended

December 31,

2022

No.

Year ended

December 31,

2021

No.

Directors 5 5

14. Related party transactions

The only key management personnel of the Company are the Directors. Details of their remuneration are

contained in Note 44 to the consolidated financial statements.

Details of amounts due between the Company and its subsidiaries are shown in Notes 5 above.

15. Subsequent events

The Group’s share price as at April 30, 2023 closed at 20.2 pence followed by share suspension which will be

in place until the consolidated financial statements have been published. Had this been the valuation as at 31

December 2022, market capitalization would have been £28,297,000.

Other disclosures in relation to events subsequent to December 31, 2022 are shown in Note 45 to the

consolidated financial statements.

16. Ultimate controlling party

As at December 31, 2022, no one entity owns greater than 50% of the issued share capital. Therefore,

the Company does not have an ultimate controlling party.

152

HeiQ PLC

Annual Report and Accounts 2022

Financial statements

Company information

Directors

Carlo Centonze,

Chief Executive Officer

Xaver Hangartner,

Chief Financial Officer

Esther Dale-Kolb,

Non-Executive Chairwoman

Karen Brade,

Non-Executive Director

Benjamin Bergo,

Non-Executive Director

Company secretary

Ross Ainger

Company number

09040064

Registered address

5th Floor

15 Whitehall

London

SW1A 2DD

Independent auditors

Deloitte LLP

2 New Street Square

London EC1A 7BL

Broker

Cavendish Securities plc

One Bartholomew Close

London EC1A 7BL

Registrars

Computershare Investor

Services PLC

The Pavilions

Bridgwater Road

Bristol

BS13 8AE

UNITED KINGDOM

(Ultimate parent)

HeiQ PLC

1st floor 47/48 Piccadilly

London W1J 0DT

SWITZERLAND

(Operational headquarters)

HeiQ Materials AG/

HeiQ GrapheneX AG

Ruetistrasse 12

8952 Schlieren (Zurich)

AUSTRALIA

HeiQ PTY

PO Box 940

Geelong VIC 3220

Australia

AUSTRIA

HeiQ AeoniQ GmbH

Industriestraße 35

3130 Herzogenburg

BELGIUM

HeiQ Chrisal NV

Priester Daensstraat 9

3920 Lommel

BRAZIL

Life Materials Latam Ltda

Avenida. Marques de São Vicente,

405 – Suite 1605

Barra Funda – São Paulo/SP

Brasil, Postal Code: 01139-001

GREATER CHINA

HeiQ (China) Material Tech Co., Ltd.

Room 2501

Xuhui Commercial Mansion

No. 168 Yude Road

Shanghai

Beijing HeiQ Material Tech Co. Ltd.

Room 17B, Floor 17th, 101 Nei, -4

to 33, Building 13

Wangjing Dongyuan Siqu

Chaoyang District, Beijing

HeiQ Company Ltd/

HX Company Ltd

No. 14 & 16, Ln. 50, Wufu 1st Rd.

Luzhu District

Taoyuan City 33850

Taiwan

Life Material Technologies Ltd./Life

Natural Ltd.

Alexandra House, 6th floor

18-20 Chater Road

Central

Hong Kong

GERMANY

HeiQ RAS AG/

HeiQ Regulatory GmbH

Rudolf Vogt Straße 8-10

93053 Regensburg

JAPAN

Representative Office

NIU Bldg 2F

2-1-17 Nihonbashi

Chuo-ku

Tokyo, 103-0027

PORTUGAL

HeiQ Iberia Unipessoal Lda

Tecmaia

Rua Engº Frederico Ulrich, nº 2650

4470-605 Maia

SPAIN

HeiQ Medica SL

Plaza de la Estación s/n

29560 Pizarra (Málaga)

THAILAND

Life Material Technologies Ltd.,

Thailand/LMT Holding Ltd.

222 Lumpini Building 2

247 Sarasin Road

Bangkok 10330

USA

HeiQ ChemTex Inc./Chem-tex

Laboratories, Inc.

180 Gee Rd NE

Calhoun GA 30701

2725 Armentrout Drive

Concord NC 28025