Annual Results 2014

RM2 International S.A.

Annual Results 2014

15th June 2015 - RM2 International S.A. ("RM2" or the "Company"), the vertically-integrated innovator in pallet development, manufacture, supply and management, announces its financial results for the year ended 31 December 2014.

Highlights

Chairman of RM2, Ian Molson, commented:

"During 2014, as we have previously reported, the Company faced a number of challenges along the path to mass production and commercialisation. As well as the relocation to our new production facility, upgrades were made to personnel and procedures and operations were further improved. I expect to report significant progress in the coming months."

Chief Executive Officer, John Walsh, commented:

"We are now producing pallets in increasing numbers which enables us to engage with leaders of large global businesses about their deployment and makes the coming months very important for RM2. Thus far the response of these key individuals has been very satisfactory and we are confident in the future."

Chairman's and CEO's Statement

We are pleased to announce RM2's results for the year ended 31 December 2014. Our IPO, raising a net $218 million, completed on 6 January of the year under review.

The funds were used to acquire plant and equipment and move to our new facility in Vaughn, Ontario, allowing the Company to build capacity to facilitate the delivery of our revolutionary pallets in increasingly substantial numbers. An upgraded plant management team has implemented more robust processes and procedures delivering clear reporting and forecasting of our increasing production. We have therefore this year been in a position to reengage with our client base at senior levels and have strategic discussions required to drive widespread adoption of such a new and revolutionary platform in large and complex supply chains.

During the period of lower production where we established our new manufacturing facility, we focused on smaller users, or local decision makers, for whom our previous production levels were adequate. Now we have increasingly clear expectations of which organisations will pioneer large scale implementation of BLOCKPal across a number of sectors and where there is generally board level engagement. Our focus is on deploying, by rental or sale, BLOCKPal in areas where goods are fast moving or the problems associated with other pallets are most acute and where pallet retention is strong, typically internal or inbound movements.

We have taken the opportunity to refine our marketing to focus even more strongly on the wider attributes of the BLOCKPal which we are confident will drive penetration as users become familiar with the pallet and the Company. As well as the overwhelming advantages of strength, durability and sustainability which as previously reported were proven in an independent Life Cycle Analysis report, our discussions indicate that areas including hygiene, health and safety, and handling will be significant drivers of change.

During the year under review, as previously reported, there was very limited production due to the factory move and other changes associated with a transition to a mass production facility and processes. During this period we have paid for all the plant and machinery and whilst there is some further capital expenditure being incurred in 2015, this is largely focused on areas in which the new production facility management have identified significant efficiency opportunities. Building a mass production facility with such production levels also led to very high operating costs relative to production which are expected to become much lower in the future with increased production.

Although the Company retains strong cash balances ($82.8 million at 31 December 2015), as actual production levels build up, capital requirements increase. As a result, we are reviewing financing proposals and are confident of putting satisfactory facilities in place to fund expanded production against contracts.

Outlook

As our production levels increase, the challenge for RM2 is to build a matching forward order book with an appropriate client base that gives scale in parts of the supply chain that match our velocity and retention targets. We believe we are engaged across a range of sectors with key individuals in leading organisations and that demand will grow significantly during this year and next.

We have invested in our sales and implementation teams, allowing us to convert high level engagement into specific deployments with minimal disruption to our clients' operations.

Following the announcement on 2 March 2015 of a significant agreement with PPG, we today announce that we have agreed the sale of a significant number of pallets to a second major industrial customer. We expect outright purchases to remain a smaller part of the business than rentals but for these industrial clients, who have a deep understanding of the strength, durability and other attributes of composite engineered products, purchase is both an attractive option and a great endorsement of the product.

We expect to significantly expand deployment with our existing clients and to start deployment with a number of further global industry leaders over the balance of this year and next and for these to form the platform for large scale and profitable growth.

We would like to take this opportunity to thank our staff and our shareholders and look forward to reporting further details as the business develops.

Ian Molson, Chairman and John Walsh, Chief Executive Officer

Posting of Annual Report and Notice of AGM

The Company's Audited Consolidated Accounts for the year ended 31 December 2014 and (in compliance with Luxembourg law) its Company-only Accounts for the year ended 31 December 2014 have been posted to the Company's website www.rm2.com.

The Company's Annual General Meeting will be held June 30, 2015 at 9 am at 5, rue de la Chapelle, L-1325 Luxembourg.

Consolidated Statement of Comprehensive Income For the year ended 31 December 2014

Consolidated Statement of Financial Position For the year ended 31 December 2014

Consolidated statement of changes in equity For the year ended December 2014

1 Corporate information

RM2 International S.A. (the "Company") is a limited company (Société Anonyme) incorporated and domiciled in Luxembourg with the registration number B132.740. The registered office is located at Rue de la Chapelle 5, L-1325 Luxembourg. The Company is the ultimate parent entity of the RM2 Group (the "Group").

The Group is principally engaged in developing and selling shipping pallets and providing related logistical services.

2 Basis of preparation

The consolidated financial statements comprises the consolidated financial information of the Group as at 31 December 2014 and are prepared under the historic cost convention as disclosed in the accounting policies below.

The accounting policies which follow set out the policies applied in preparing the consolidated financial statements.

2.1 Statement of compliance

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") and IFRIC interpretations as issued by the International Accounting Standards Board ("IASB") and IFRS Interpretations Committee (IFRIC) and as adopted by the European Union ("EU").

2.2 Basis of consolidation

The consolidated financial statements comprise the financial information of the Group and its subsidiaries. Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date when such control ceases. The financial information of the subsidiaries is prepared for the same reporting period as the parent company, using consistent accounting policies. All intra-group balances, transactions and dividends are eliminated in full.

Subsidiaries and business combinations

Subsidiaries are all entities, including structured entities, over which the group has control. The group 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. The Group uses the acquisition method of accounting to account for the acquisition of subsidiaries.

The consideration transferred on acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. The excess of the consideration transferred over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If the consideration transferred acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in profit or loss. Acquisition costs are written off to profit or loss.

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

The subsidiaries of the Group are listed in note 24.

3 Summary of significant accounting policies

The principal accounting policies are summarised below:

3.1 Foreign currencies

The Group's consolidated financial statements are presented in United States Dollars ("USD"), which is also the parent company's functional currency. For each entity the Group determines the functional currency and items included in the financial statements of each entity are measured using that functional currency.

Transactions and balances

Transactions in foreign currencies are initially recorded by the Group's entities at their respective functional currency spot rates at the date the transaction first qualifies for recognition. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.

Differences arising on settlement or translation of monetary items are recognised in profit or loss.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of gain or loss on change in fair value of the item (i.e. translation differences on items whose fair value gain or loss is recognised in other comprehensive income or profit or loss are also recognised in other comprehensive income or profit or loss, respectively).

Group companies

On consolidation, the assets and liabilities of foreign operations are translated into USD at the rate of exchange prevailing at the reporting date and their income statements are translated at average exchange rate prevailing during the financial year. The exchange differences arising on translation for consolidation are recognised in other comprehensive income. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognised in profit or loss.

Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and translated at the spot rate of exchange at the reporting date.

3.2 Going concern

The consolidated financial statements have been prepared assuming the Group will continue as a going concern. Under the going concern assumption, an entity is ordinarily viewed as continuing in business for the foreseeable future with neither the intention nor the necessity of liquidation, ceasing trading or seeking protection from creditors pursuant to laws or regulations. In assessing whether the going concern assumption is appropriate, management has considered the company's existing working capital, its capacity to raise external financing and management is of the opinion that the Group has adequate resources to undertake its planned program of activities for the 12 months from the date of the closing of the consolidated financial statements.

On 6 January 2014, the parent company of the Group RM2 International SA completed a successful Initial Public Offering (IPO) on the London Stock Exchange AIM market, raising gross proceeds of approximately £137.2 million (equivalent to approximately USD 225 million) to expand its production capacity and to fund the production of pallets for rental and sale. Following the IPO, the Group terminated the DPEI Warrant Agreement by paying USD 40,000,000 and repaid all of the bridging loans as detailed in Note 10.

3.3 Property, plant and equipment

Initial recognition and measurement

Property, plant and equipment ("PPE") are tangible assets used by the Group for its own production or supply of goods or services, or for administrative purposes and are expected to be used during more than one period. PPE is recognised when it is probable that future economic benefits associated with the asset will flow to the Group and if the cost can be measured reliably.

PPE is initially recognised at cost. Such cost includes the purchase price and all cost incurred in bringing the assets to the location and condition for its operation in the manner intended by management. The cost of the PPE includes also the borrowing costs for long-term construction projects if the recognition criteria are met.

The pallet pool is initially recognised at the standard cost of production including all expenses directly attributable to the manufacturing process and portions of related production overheads, based on normal operating capacity.

When significant parts of property, plant and equipment will be required to be replaced, the Group will recognise such parts as individual assets with specific useful lives and depreciate them accordingly. Likewise, when a major inspection will be performed, its cost will be recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs will be recognised in profit or loss as incurred.

Finished goods (under inventory) represent pallets produced and not yet sold or deployed via the pallet pool in property, plant and equipment.

Subsequent measurement

PPE is subsequently measured at cost less any accumulated depreciation and any accumulated impairment losses.

Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets as follows:

An item of PPE and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss when the asset is derecognised.

The residual values, useful lives and methods of depreciation of PPE are reviewed at each financial year end and adjusted prospectively, if appropriate. Further explanation on management estimates and assumptions is disclosed in note 4.

The Group has not applied revaluation on any of its PPE.

3.4 Leases

The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date. The arrangement is assessed for whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.

Group as a lessee

Leases where a significant portion of the risks and rewards of ownership is retained by the lessor are classified as operating leases. Payments made under operating leases are charged to profit or loss on a straight-line basis over the period of the lease.

The aggregate benefit of lease incentives are recognised as a reduction to the expense recognised over the lease term on a straight line basis.

Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease's commencement date at the lower of the fair value of the leased property or the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in long-term and short-term borrowings. The interest element of the finance cost is charged to the profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases are depreciated over the shorter of the useful life of the asset or the lease term.

Group as a lessor

Leases in which the Group does not transfer substantially all the risks and benefits of ownership of an asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income. Contingent rents are recognized as revenue in the period in which they are earned.

Revenue arising on operating leases for pallets is accounted for as on a straight line basis or a usage basis in accordance with the contract.

Rental income arising from operating leases on investment properties is accounted for on a straight-line basis over the lease terms and included in other operating income.

3.5 Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

3.6 Investment property

Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, the Group has decided to measure investment properties using the cost model. Investment properties are measured similarly to property, plant and equipment as described in note 3.3.

The fair value, which reflects market conditions at the reporting date, is disclosed in the notes to the consolidated financial statements.

Investment properties are derecognised either when they have been disposed of or when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in the income statement in the period of de-recognition.

Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner-occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. If owner-occupied property becomes an investment property, the Group accounts for such property in accordance with the policy stated under property, plant and equipment up to the date of change in use.

3.7 Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses, if any.

The useful lives of intangible assets are assessed as finite, except goodwill.

Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in profit or loss in the expense category consistent with the function of the intangible assets.

Intangible assets with indefinite useful lives (goodwill) are not amortised, but are tested for impairment annually at the cash-generating unit level (see note 9 for details and assumptions). The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to definite is made on a prospective basis.

Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is derecognised.

Amortisation is calculated on the straight-line method to write off the cost of each asset to their residual values, over their estimated useful life. The annual amortisation periods are as follows:

3.8 Research and development costs

Research costs are expensed as incurred. Development expenditures on an individual project are considered as an intangible asset when the Group can demonstrate:

Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins when development is complete and the asset is available for use. It is amortised over the period of expected future benefit. Amortisation is recorded in cost of sales. During the period of development, the asset is tested for impairment annually.

To date no amounts have been capitalised in respect of the development phase of internal projects as management have assessed that they are unable to demonstrate that they have met all of the recognition criteria.

3.9 Inventories

Inventories are stated at the lower of cost or net realizable value. Costs incurred in bringing each product to its present location and conditions are accounted for as follows:

Pallets are held as inventory prior to being deployed in the pallet pool or sold direct to customer.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

When the net realizable value of stock is lower than its cost, provisions for impairment are created to reduce the value of the stock to its net realizable value.

The cost of inventories is recognised as an expense in the period in which the related revenue is recognised.

3.10 Impairment on non-financial assets

Non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of an asset's net selling price and value in use or fair value less cost to sell determined by using discounted cash flow method. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units).

The future discounted cash flow method used to determine the value in use or fair value less cost to sell is usually, but not always, based on cash flow projections over for the next 3 years.

Impairment losses of continuing operations are recognised in profit or loss in those expense categories consistent with the function of the impaired asset.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset's or cash-generating unit's recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset's recoverable amount since the last impairment loss recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation reserve.

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the Cash Generating Units (CGUs), or groups of CGUs, that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.

Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of the CGU containing the goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs of disposal. Any impairment is recognised immediately as an expense and is not subsequently reversed.

3.11 Financial instruments

3.11.1 Financial assets

The Group classifies its financial assets in the following categories: at fair value through profit and loss, loans and receivables, held-to-maturity investments and available-for-sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition and re-evaluates this designation at every reporting date.

All financial assets are recognised initially at fair value plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs.

The Group's financial assets include cash and short-term deposits, trade and other receivables, other current and non-current assets which are classified in the category of loans and receivables and available-for-sale financial assets. The Group does not have held-to-maturity investments.

3.11.2 Subsequent measurement

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets.

After initial measurement, they are subsequently measured at amortised cost using the effective interest rate method ("EIR"), less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the statement of comprehensive income. The losses arising from impairment are recognised in the finance costs in the statement of comprehensive income.

3.11.3 De-recognition

A financial asset is derecognised when:

The rights to receive cash flows from the asset have expired;

The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a 'pass-through' arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset; and

When the Group has transferred its rights to receive cash flows from an asset or has entered into a 'pass-through' arrangement, and has neither transferred nor retained substantially all of the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group's continuing involvement in the asset.

In that case, the Group also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

3.11.4 Impairment of financial assets

The Group assesses at each balance sheet date whether there is objective evidence that a financial asset is impaired. A financial asset is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that have occurred after the initial recognition of the asset and that event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include, but is not limited to, indications that the debtors or a group of debtors are experiencing significant financial difficulty, default or delinquency in interest or principal payments.

For financial assets carried at amortised cost, the Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial assets' original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate.

The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the statement of comprehensive income. Interest income continues to be accrued on the reduced carrying amount and is accrued using the interest rate used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income in the statement of comprehensive income. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to finance costs in the statement of comprehensive income.

3.12 Financial liabilities

3.12.1 Initial recognition and measurement

Financial liabilities are classified as financial liabilities at fair value through profit or loss or other financial liabilities as appropriate. The Group determines the classification of its financial liabilities at initial recognition.

All financial liabilities are recognised initially at fair value and in the case of loans and borrowings, plus directly attributable transaction costs.

The Group's other financial liabilities include trade and other payables, borrowings and long-term payables.

3.12.2 Subsequent measurement

The measurement of financial liabilities depends on their classification as follows:

After initial recognition, other financial liabilities are subsequently measured at amortised cost using the effective interest rate method. Gains and losses are recognised in the statement of comprehensive income when the liabilities are derecognised as well as through the effective interest rate method amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance costs in the statement of comprehensive income.

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

3.12.3 De-recognition

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are subsequently modified, such an exchange or modification is treated as a de-recognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the statement of comprehensive income.

Financial assets and financial liabilities are offset and the net amount reported in the consolidated statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.

3.13 Cash and cash equivalents

Cash and cash equivalents are carried in the statement of financial position at fair value. For the purposes of the cash flow statement, cash and cash equivalents are comprised of cash on hand and deposits held on call with banks having an original maturity of 3 months of less. In the statement of financial position, bank overdrafts are included in borrowings under current liabilities net of any related restricted cash.

3.14 Taxes

Current income tax

Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. A provision is made for corporation tax for the reporting period using the tax rates that have been substantially enacted for each company at the reporting date in the country where each company operates and generates taxable income.

Current income tax relating to items recognised directly in equity is recognised in equity and not in the statement of comprehensive income.

Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretations and establishes provisions where appropriate.

Deferred income tax

Deferred income tax is provided for using the liability method on all temporary differences arising between the tax bases of assets and liabilities and the carrying amounts in the financial statements. The deferred tax is calculated on currently enacted tax rates that are expected to apply when the temporary differences reverse. Where an overall deferred taxation asset arises, it is only recognised in the financial statements where its recoverability is foreseen with reasonable certainty.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

3.15 Pensions and other post-employment benefits

A defined contribution plan is a pension plan under which the group pays fixed contributions into a separate entity. The group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.

The group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due.

The Group does not operate any defined benefit pension plan.

3.16 Provisions, contingent assets and liabilities

Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. Where the Group expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement of comprehensive income net of any reimbursement. Provisions are not recognised for future operating losses.

Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Provisions are discounted to their present values, where the time value of money is material.

Any reimbursement that the Group can be virtually certain to collect from a third party with respect to the obligation is recognised as a separate asset. However, this asset may not exceed the amount of the related provision.

In those cases where the possible outflow of economic resources as a result of present obligations is considered improbable or remote, no liability is recognised.

Contingent assets

A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity.

Contingent assets are not recognised in the consolidated financial statements. However, when the realisation of income from the contingent asset is virtually certain, then the related asset is not a contingent asset and its recognition is appropriate.

Contingent liabilities

Contingent liability is a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity, or is a present obligation that arises from past events but is not recognised because it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation or the amount of the obligation cannot be measured with sufficient reliability.

Contingent liabilities are not recognised in the consolidation financial statements.

3.17 Equity, reserves and dividend payments

Issued share capital represents the nominal value of shares that have been issued. Share premium includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits.

Other components of equity include the following:

All transactions with owners of the parent are recorded separately within equity.

Dividend distributions payable to equity shareholders are included in other liabilities when the dividends have been approved in a general meeting prior to the reporting date.

3.18 Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the invoiced value for the sale of goods net of value added tax, rebates and discounts which represents the fair value of the consideration received or receivable. The Group assesses its revenue arrangements against specific criteria in order to determine if it is acting as principal or agent. The Group has concluded that it is acting as a principal in all of its revenue arrangements. The following specific recognition criteria must also be met before revenue is recognised:

Sales of goods

Revenue from the sale of goods is recognised when significant risks and rewards of ownership of the goods have been transferred to the buyer and the collectability of the related receivables is reasonably assured, regardless of when the payment was made.

Rendering of services

Revenue relating to logistical services is recognised as the services are performed.

Rental income

Pallets

Revenue arising on operating leases for pallets is accounted for as on a straight line basis or a usage basis in accordance with the contract.

Property income

Rental income arising from operating leases on investment properties is accounted for on a straight-line basis over the lease terms and included in revenue due to its operating nature.

Rental income is recognised within other operating income as it is not considered as related to the primary activity of the Group.

Interest income

Interest income is reported on an accruals basis using the effective interest method.

3.19 Share based payments

The Group operates a number of equity-settled, share-based compensation plans, under which the entity receives services from employees as consideration for equity instruments of the Group. The fair value of the employee services received in exchange for the grant of the equity instruments is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the instruments granted. At the end of each reporting period, the group revises its estimates of the number of instruments that are expected to vest based on the non-market vesting conditions and service conditions. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity.

3.20 Changes in accounting policies and disclosures

The Group applied, for the first time, certain standards and amendments for the preparation of these consolidated financial statements:

The Group has reassessed the control over its investees in the light of the provisions of IFRS 10 that redefines this notion of control and concluded that no change was necessary. In addition the Group has included the disclosures required by IFRS 12.

The other standards and amendments have no significant impact on these consolidated financial statements.

At the date of approval of these consolidated financial statements, the following amendments and Interpretations, which have not been applied in these consolidated financial statements, were issued but not yet effective. These amendments and Interpretations are effective for accounting periods beginning on or after the dates shown below:

IFRS Standards and Interpretations issued by IASB and endorsed by EU but not yet effective:

IFRS Standards and Interpretations issued by IASB but not yet endorsed by EU:

The Group cannot early adopted these new standards and amendments. The Group is still assessing the impact that the adoption of these new standards and amendments will have on the financial statements.

4 Significant accounting judgements, estimates and assumptions

The preparation of financial statements conforming with adopted IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and assumptions are based on historical experience and other factors considered reasonable at the time, but actual results may differ from those estimates. Revisions to these estimates are recognised in the period in which they are made.

4.1 Judgments

In the process of applying the Group's accounting policies, management has made the following judgments, which have the most significant effect on the amounts recognised in the consolidated financial information:

Recognition of deferred tax assets

The assessment of the probability of future taxable income against which deferred tax assets can be utilised is based on the Group's latest approved forecast, which is adjusted for significant non-taxable income and expenses and specific limits to the use of any unused tax loss or credit. The tax rules in the numerous jurisdictions in which the Group operates are also carefully taken into consideration. If a positive forecast of taxable income indicates the probable use of a deferred tax asset in the foreseeable future, especially when it can be utilised without a time limit, that deferred tax asset is usually recognised in full. The recognition of deferred tax assets that are subject to certain legal or economic limits or uncertainties are assessed individually by management based on the specific facts and circumstances.

The Group has not recognised any deferred tax assets as there is no certainty of the timing of recovery. For further detail on deferred tax, refer to note 20.

Research and development expenditure - comparative information

Research and development expenditure has been fully written off to the statement of comprehensive income. Management had taken into account the inherent risks in all research and development expenditure and specifically that expenditure being incurred by the business in the year ended 31 December 2013 and have concluded that the requirements of IAS 38 to capitalise development expenditure have not been met. No research and development expenditure was incurred in 2014.

Receivable from Plastics Research Corporation - comparative information

The litigation between the Group and Plastics Research Corporation (ionChe litigation between the Group and Plastics Research Corporation (etween the parties dated 17 November 2012. As per the settlement agreement, PRC were required to pay USD 13,500,000 to RM2 as indemnity for the transfer of the equipment (the "Equipment") to PRC.

The receivable was repayable in several instalments starting 2 years after the settlement agreement date. During this period, PRC only had to reimburse the interest accrued on the receivable and this was secured by the Equipment.

Management had estimated that the effective interest rate to amortise the receivable was 7%.

Due to delay in payment of the interest receivable by PRC, Management had estimated that there were significant uncertainties in relation to the future reimbursement of the capital amount. Therefore, Management had in 2012 decided to record full impairment of the outstanding nominal amount of the receivable.

The settlement agreement also provided for royalty payments to be made by PRC to the Group in relation to future sales made by PRC with the Equipment. The royalty to be paid was computed based on the quantity of manufactured items sold and the quantity of composite ground generated and sold by PRC during the 7 years following the settlement agreement's date, with a cap of USD 11,000,000.

Management also determined that there was very low probability that PRC will generate sales from the use of the Equipment and consequently determined that the fair value of the royalty receivable was nil.

In November 2013, PRC defaulted on the interest payment due and subsequently, in March 2014, ownership of the Equipment was transferred to the Group, valued at $1, in application of the security agreement. The Group holds these assets at the year end at the valuation of $1. Full provision has been made for interest due in respect of the interest receivable and not paid in the year.

Restricted Shares

The Group has issued restricted shares in 2013 and 2014 under the "2013 Share Option Scheme".

Management has considered that the restricted shares issued to date should be measured similarly to share options. As per the agreement, the shares granted vest immediately and are accompanied by a restricted share agreement. Management has considered that the restrictions on shares were representative of market related vesting conditions, as the holders of the restricted shares can only dispose of their shares if the quotation price reaches different thresholds, or in certain cases on the third year anniversary following the date of the grant as long as the holder has a business relationship with the Company.

Management has considered that achievement of these market conditions would require time corresponding to the advantage provided to the holders of restricted shares. Management has estimated that Tranche 1 and 2 would be achieved within 5 years and Tranche 3 within 10 years, therefore, Management has applied those durations as vesting periods for the instruments. For the restricted shares that vest on the third anniversary this date has been used as the duration of the vesting period.

For further detail on share-based payments transactions, refer to note 22.

Accrued liabilities

An amendment to a contract was made in January 2014 which resulted in the payment in respect of past consultancy services by the Group. In reviewing the contract and the payment the Group has recorded a liability for the payment in the 2013 consolidated financial statements as all the costs related to past services rendered.

As part of the bridging facility until the completion of the IPO a premium was payable to cancel outstanding warrants in the Company. When considering the premium, the period to which it relates and as the IPO was completed on 6 January 2014, Management considers that the cost of this cancellation had to be recognised pro rata temporis over the period from issuance date to reimbursement date as a finance charge in the 2013 consolidated financial statements.

Machinery depreciation 2013 - comparative information

During 2013 the Group had been developing its machinery and products. The Group's machinery and products were not in full operation at the end of 2013 and there was no significant income derived from the machinery. The Group therefore had not depreciated the machinery in the year and will depreciate against future income when the machinery becomes fully operational in manufacturing finished product for sale or internal use.

Investment in Mafic S.A. 2013 - comparative information

The investment in Mafic S.A. was disposed of in 2013 by way of a contribution in kind of 842,000 shares of Mafic S.A. to Basalt Holding S. à r. l.

The Group then cancelled 12,286,000 RM2 International S.A.'s Class J shares and disposed of the entire share capital of Basalt Holding S. à r. l. to the holders of the Class J shares.

Management considered that the fair value of the disposed investment in Mafic S.A. was represented by the fair value of the investment held in Basalt Holding S. à r. l. as the disposal was made by an exchange of financial assets. The final fair value of Mafic S.A. on disposal was determined in consideration of the actual value transferred to holders of Class J shares, corresponding to the nominal value of the Class J shares.

Management recorded the difference between the carrying value of Mafic S.A., prior to disposal, and the actual liquidated value of Class J shares as representative of the gain realised on the transaction, the amount has been recorded within financial income. For further detail, refer to note 19.3.

4.2 Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Group based its assumptions and estimates on parameters available when the consolidated financial information were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions when they occur.

The Management has disclosed reasonably possible assumptions and estimates, on the basis of its existing knowledge at year end. Outcomes within the next financial years that are different from these assumptions could require a material adjustment to the carrying amount of the asset or liability affected.

Share-based payments

The Group measures the cost of equity-settled transactions by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share (options), volatility and risk-free interest rate, dividend yield and making assumptions about them.

During the year, the Company issued restricted shares and options under the 2013 Equity Incentive Plan.

The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in note 22.

Employee Stock Option Plan ("ESOP")

The Group has granted Employee Stock Option Plan to some of its employees and managers. The fair value of the plan at grant date is based upon actuarial assumptions estimated by the management and disclosed in note 22.3.

Measurement of property, plant and equipment, pallet pool and investment property

The Group holds a building property which is used for both Group administrative purpose and rental to third parties. Therefore, the management has determined that the building accounting should be split between the part used by the Group, classified as property, plant and equipment, and the part rented to third parties, classified as investment property.

The initial cost of acquisition of the building is for both the building construction and the land. In determining the part of the acquisition cost related to the land, by default of explicit description in the notarial deed, the Management has made the assumption that 25% of the initial cost was related to the land.

In determining the measurement of each part of the building (PPE and investment property), the management has determined the split based on the surface used for each purpose. Management has also determined that the depreciation should be made using straight line method and over a useful life of 30 years.

Due to the inability of Management to determine the residual value at the end of the useful life, the Management has made the assumption that the residual value is nil and, therefore, the depreciation is computed on the entire value of the building cost.

The pallet pool is recognised at an amount based on standard cost of production including all expenses directly attributable to the manufacturing process and potions of related production overheads, based on normal operating capacity, and carried at this cost net of impairment and depreciation.

Fair value of financial instruments - comparative information

Prior to completion of the IPO the Group had a significant financial instrument in the form of warrants issued to DPEI.

As a result of an agreement entered into on 8 November 2013, the warrants were cancelled and the Company recognised a liability for the termination of the warrants. The liability has been measured in reference to the amount actually paid by the Company in early January 2014. For further detail on warrants, refer to note 14.

Finished goods and work in progress

Finished goods and work in progress are recognised at an amount based on standard cost of production including all expenses directly attributable to the manufacturing process and portions of related production overheads, based on normal operating capacity.

Management consider that this is a fair reflection of the cost of the pallets.

Pallet Pool

The pallet pool is depreciated over 5 years. Management have assessed the durability of the pallets supported by external testing and consider that this is a fair reflection of their estimated useful life. The residual value is estimated to be nil.

Management will review the useful life of the pallets at each reporting date.

Impairment of Goodwill

In assessing impairment, Management estimates the recoverable amount of cash generating units based on expected future cash flows and uses an interest rate to discount them. Estimation uncertainty relates to assumptions about future operating results and the determination of a suitable discount rate (see note 9 for details and assumptions).

Business combinations comparative for 2013

The directors have identified the separable net assets acquired and have valued those assets using discounted cash flows for the expected revenue from those assets. The separable assets identified are the software, client list and brand name.

Management measured assets acquired and liabilities assumed by reference to their fair value at acquisition date. Management has determined the fair value of separable identified assets using discounted cash flow ("DCF") of the entity over the next 6 years. In determining the net present value of each asset, the Group has applied discount rate of 13%.

For further detail on the Group's business combination, refer to note 5.

Impairment of inventory comparative for 2013

In 2012, during the development of the production line dedicated to the pallet pool production, several samples were produced. Management had estimated for those samples which were not deemed to be part of the cost of property, plant and equipment that full impairment of these inventories was recorded due to the inability of the Group to sell these samples.

In 2013 the Group reviewed the estimates used in the valuation of the inventory in 2012 and considered that there is value in the samples produced in 2012. Therefore, management reversed the impairment for USD 1,447,797 as at 31 December 2013.

5 Business combinations and acquisition of non-controlling interests

5.1 Acquisitions in 2013

Acquisition of Equipment Tracking Limited

In 2013, the Group acquired the remaining 97% of the voting shares of Equipment Tracking Limited. The Group had an equity investment representing 3% of the voting shares of Equipment Tracking Limited as at 31 December 2012.

On 27 September 2013, RM Total Solutions International BV signed an agreement to acquire the entire issued share capital of Equipment Tracking for £2 million. Completion of the acquisition of Equipment Tracking occurred on 10 December 2013. Control of the business was considered effective at the time of the consideration was paid.

The assets and liabilities acquired are as follows:

Equipment Tracking was founded in 1995 (having traded as Adventures in Business Limited until the incorporation of Equipment Tracking in 2004). Its pallet tracking and management software assists customers in managing complex pallet and equipment flows. It has serviced some of the world's largest suppliers of consumer goods.

The ERICA system offers customers services which provide 'real time' equipment balances throughout their supply chains.

These services can replace or strengthen existing tracking systems and are designed to enable customers to improve their pallet pool management. The ERICA system was designed to provide customers with greater visibility over costs and, where possible, the ability to reduce the direct and indirect costs associated with goods movements between customers and suppliers. This offers major cost savings to the Group and its customers, increasing the Group's offer and attraction of the pallet pool business. The synergies arising from the experience and know-how of the team of Equipment Tracking closely linked to their involvement in the use and development of ERICA system gives the benefits of a back office system that can not only track the Group's assets, but also generate movement statistics, invoicing data and measurement against performance criteria, which justifies the goodwill in the acquisition. The fair value of the separable net assets has been identified and the goodwill in the business has been calculated at USD 1,150,189 relating to the value attributed to the organisation.

Included in the results for the 2013 is revenue and loss of USD 98,939 and USD 17,740 respectively representing the results from the date of acquisition. The results for the full 2013 year, had Equipment Tracking been owned for the full year, would have shown revenue and losses of USD 1,079,163 and USD 14,935, respectively.

No contingent liabilities were considered in determining the fair value of assets acquired and liabilities assumed.

Acquisition of additional interest in RM2 Europe Sp. Zoo

On 8 October 2013, the Group acquired an additional 20% interest in the voting shares of RM2 Europe Sp. Zoo increasing its ownership interest to 100%. The consideration of USD 68,193 was part of the settlement agreement with STM Technologies, Inc., the non-controlling shareholders made on 27 September 2013. The carrying value of the additional interest in RM2 Europe Sp. Zoo was USD 68,193. Following is a schedule of additional interest acquired in RM2 Europe Sp. Zoo:

6 Property, plant and equipment - Others

\* The Group has decided to disclose the pallet pool as a separate heading and therefore have disclosed the Pallet Pool separate note 7.

The Group has no liens and encumbrances on its property, plant and equipment. The Group has capital commitments on the development and acquisition of property, plant and equipment in Canada for USD 2,249,326 - CAD 2,615,526 (2013: USD 2,386,380 - CAD 2,535,529).

As at 31 December 2013, the Group had several items of property, plant and equipment which were temporarily idle. The carrying amount of these items was USD 2,452,532. This amount corresponds to machines for the production of pallets which have been completed and for which the production has not started. There was no amount of depreciation charge as per prior periods as these machines were still in the construction phase.

As at 31 December 2014, the Group had several items as PPE corresponding to machines that are not yet completed for the production of pallets.. These items are presented at construction in progress and not amortized.

There were no borrowing costs capitalised during any period.

6.1 Security on property, plant & equipment for liabilities

The Group has granted a security interest over the property held in Switzerland in return for the CHF 2,000,000 bank loan USD 2,021,220 (2013: CHF 2,100,000 - USD 2,361,142).

7 Property, plant and equipment - Pallet pool

\* The Group has decided to disclose the pallet pool as a separate heading and therefore have disclosed the Pallet Pool in a separate note.

8 Investment property

The investment property is a building used by the Group for both administrative purpose and for rental. The cost of the property related to the administrative purpose is classified within property, plant and equipment. The cost for the rental part is classified as investment property.

8.1 Revenue from investment property

(*) included within Other operating income (see note 19)

8.2 Fair value of investment property

The investment property is measured at cost. The fair value of the property as at 31 December 2014 has been determined by Régie Châtel S.A., an independent external appraiser, on 20 January 2015.. Régie Châtel S.A. is a specialist in valuing such investment properties. The fair value of the property has been determined using the rental income and the construction value. The valuation has been determined with the following primary inputs.

9 Intangible assets

The Group has no intangible assets pledged as security for liabilities.

The Group has no contractual commitment for the acquisition of intangible assets.

In 2013 following the acquisition of Equipment Tracking Limited, the assets were recognised late in the year therefore, the software, trade names, customer relationships resulting from the business combination were not amortized during the year 2013.

The licence acquired in 2014 for USD 250,000 is for the use of new pallets following development of those pallets. As these are currently not being used no amortization has been calculated on this amount.

9.1 Impairment of Goodwill

Management has reviewed the carrying value of goodwill at the yearend in light of the future three year cash generation of the entire group as the goodwill underpins the group business. A pre-tax discount rate of 10% that considers the risk profile of the Group and growth rates based on the 2015 forecast revenues (being the base case following the setup of the business) of 104% have been used in the assessment of any impairment. The growth rate is based on management's assessment considering the capacity of production of pallets and the sale and lease capacities. During the year the group has continued to develop its business, a successful IPO has been achieved where the group's debt, other than a mortgage on its Swiss property, has been repaid, the manufacturing environment has been improved and the pallet pool deployment has started in the last quarter of 2014. A reasonably possible change in the discount rate or the growth rate in the revenues forecast would not cause an impairment on the carrying amount of goodwill.

Management therefore considered that the prospects of the business have improved dramatically during the year and therefore the carrying value of the goodwill has not been impaired as at 31 December 2014 as there is no change in the underlying rational for the goodwill than as 31 December 2013.

10 Financial assets and liabilities

10.1 Loan notes

The Group entered into an agreement in 2009 with Plastics Research Corporation ("PRC") for the development and production of specific shipping pallets. A machine for the production of pallets was developed on land rented by PRC from a third party (the "Redlands Facility"). The development of the production facility required the acquisition of equipment (the "Equipment") which was located at the Redlands Facility. In the course of the development of the Equipment, several disputes arose between the Group and PRC. The disputes were settled by an agreement of the parties entered into on 15 November 2012.

As per the Settlement Agreement, it has been agreed that:

The loan bore interest at the effective interest rate of 7% per annum and had a maturity date as at 15 November 2019.

In November 2013, PRC defaulted on the interest payment due.

At 31 December 2013, Management determined that there was significant risk on the recoverability of the capital amount of the Indebtedness for USD 13,500,000 and decided to record a full impairment on the investment (for further detail, refer to note 4). The impairment on the loans and receivables was incurred as the Group estimated that the recoverability of the receivable resulting from the resolution of the litigation with PRC was uncertain as a result of the delinquent payment made by PRC.

As at 31 December 2013, the carrying amount of the loan notes PRC was USD nil, as PRC was in default.

Subsequently in 2014, ownership of the Equipment was transferred to the Group at a valuation of USD 1, in respect of the cancellation of the indebtness and accrued interest, pursuant to the security agreement. The Group will decide whether to dispose of the Equipment, or redeploy the assets within the Group. The Equipment is fully impaired in the consolidated financial statements. Full provision has been made for interest due in respect of the interest receivable and not paid in the year of USD 236,250 (2013: USD 609,414 also fully provided).

The outstanding balance of the indebtedness as at 31 December 2014 amounts to USD nil (in 2013: USD 14,109,414) and includes interest of USD nil (in 2013: USD 609,414).

10.2 Interest-bearing loans and borrowings

CHF 2,000,000 bank loan

The loan is secured by a mortgage on the building held by the Group in Switzerland for a total value of CHF 2,470,000 (USD 2,496,207) and by transfer of rental income to the lender. If the loan is not terminated by the company at least 3 months before its maturity, it will be automatically renewed.

10.2.1 Domestic Private Equity Investors LLC ("DPEI") Bridge Facility

The Group had entered into a bridge facility with DPEI for the financing of its operations on 30 June 2010. As a result of the Group restructuring operations in 2011, the bridge facility had been fully reimbursed during the year 2011.

The Group also issued warrants on the same date to DPEI granting to DPEI the right to purchase up to 10% of the fully diluted share capital of the Company. The right existed as long as the outstanding warrant shares represented more than 5% of the share capital of the Company. The fair value of the warrants was immaterial.

On 8 November 2013 the agreement was amended such that the right to warrants would be terminated following a successful IPO before 31 March 2014 on the condition that the company pay DPEI USD 40m. This occurred in January 2014 and was considered as a cost of the facility in the year ended 31 December 2013; as such, it has been recognised in finance costs during the year 2013 (see note 19.4).

10.3 Hedging activities and derivatives

The Group has not entered into any hedging activity during each period covered by the consolidated financial statements.

10.4 Fair values

The Group estimates that the fair value of the financial assets and liabilities approximates their carrying amount as these are mainly composed of short-term receivables and payables.

10.4.1.1 Fair value hierarchy

The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

The Group has no financial instruments carried at fair value as at 31 December 2014 or 31 December 2013.

11 Inventories

Finished goods represent pallets produced and not yet sold or deployed via the pallet pool in property, plant and equipment.

As at 31 December 2013, the Group assessed the carrying value of the inventory and considered that there were value in the samples produced in 2012 which had previously been impaired and therefore reversed the impairment.

The cost of inventory sold and recognised as an expense during the year was USD 554,962 (2013: USD 47,755).

12 Trade and other receivables

The ageing of the trade receivables as at 31 December 2014 is detailed below:

The Group has a provision for impairment of the Canadian HST receivables for USD 96,465 (2013: USD 143,124).

The other tax receivables primarily relate to Harmonised Sales Tax (VAT) balances due in Canada and VAT due in Luxembourg.

13 Cash and short-term deposits

Cash at banks earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates. At both periods ended, the Group does not have any undrawn committed borrowing facilities.

The Group has not pledged any part of its short-term deposits to fulfil collateral requirements other than USD 3,986 in respect of rental of office space. In connection with the operational lease of the factory premises located in Canada, a letter of credit amounting to CAD 2,500,000 (USD 2,149,975) has been issued to the landlord as a guarantee for lease payments and lease defaults. The related deposit bank account is shown under Restricted cash.

For the purpose of the statement of cash flows, cash and cash equivalents comprise the following at 31 December:

14 Share capital and reserves

2014

On 6 January 2014 the Company completed the IPO issuing, 155,903,548 shares at £0.88 on AIM and receiving net proceeds, after payment of fees of USD 215,760,052. Following repayment of USD71,679,712 of development loans, fees and interest, the Company's balance sheet was free of debt (other than the mortgage on the office building in Switzerland) and retained USD144,080,340 to finance capital expenditure, production of inventory and overheads. The premium arising on the newly issued IPO shares has been taken to the Share Premium Account.

On 6 January 2014 the Company issued 4,157,428 Ordinary Shares at par to a significant shareholder.

On 24 January 2014, 2,316,405 restricted shares were granted to certain Directors having Performance Conditions (see note 22).

On 3 April 2014, 900,000 restricted shares were granted to a consultant subject to certain vesting conditions.

On 13 June 2014, 2,317,000 restricted shares were granted to certain employees, 1,000,000 of which were subject to Performance Conditions, and 1,317,000 of which were subject to certain vesting conditions.

On 22 September 2014 1,000,000 restricted shares were granted subject to certain Performance Conditions.

Following such issuances, the Company had 322,777,156 Ordinary Shares issued.

2013

On 11 October 2013, the Company's issued share capital was reorganised. The Company's share capital was decreased by USD 9,956,043 (to reflect absorption of historic losses and reimbursement in kind to shareholders consisting of all the shares held by the Company in Basalt Holding S. à r. l.).

Linked to such decrease in issued share capital, the ordinary shares designated as Class J ordinary shares were cancelled. This took the Company's total issued share capital to USD 45,330,956, consisting of 110,574,000 ordinary shares of USD 0.45 each.

Immediately following this, the nominal value of the ordinary shares was reduced from USD 0.45 to USD 0.01.

Following such reorganisation, the Company's issued share capital was USD 1,105,740, consisting of 110,574,000 ordinary shares of USD 0.01 each.

On 6 November 2013, the Company issued an additional 22,275,000 ordinary shares taking the Company's total issued share capital to 132,849,000 ordinary shares of USD 0.01 each.

On 14 November 2013, the Company's shareholders resolved to reorganise the Company's share capital such that, with effect from Admission, each of the classes of ordinary share designated as Class A-I be converted into a single class of ordinary share, being the Ordinary Shares.

On 26 November 2013, 11,025,000 Ordinary Shares were issued to certain founders of the Company, taking the Company's total issued share capital to 143,874,000 Ordinary Shares.

On 3 December 2013, 12,308,775 Restricted Shares were granted to certain Directors, taking the Company's total issued share capital to 156,182,775 Ordinary Shares.

The restricted shares are issued with performance criteria. The Performance Conditions are linked to the volume weighted average quoted price of the Ordinary Shares (the "Average Price") for a consecutive 30 day period (the "Relevant Period"). If the Average Price is 50 per cent higher than the Placing Price for the Relevant Period, the Performance Condition in respect of one-third of the Restricted Shares shall be fulfilled. If the Average Price is 75 per cent higher than the Placing Price for the Relevant Period, the Performance Condition in respect of a further one-third of the Restricted Shares shall be fulfilled. If the Average Price is 100 per cent higher than the Placing Price for the Relevant Period, the Performance Condition in respect of the final third of the Restricted Shares shall be fulfilled. If any Performance Conditions are not fully satisfied by 19 November 2023, the Director shall transfer any of his remaining Restricted Shares to the Company at a purchase price equal to the nominal value of the Restricted Shares, being USD 0.01 each.

The holders of the Restricted Shares cannot sell, transfer, mortgage, charge, encumber or otherwise dispose of any of the Restricted Shares as long as the performance conditions are not fully satisfied. These Restricted Shares are considered by Management as share-based payments and performance conditions as market vesting conditions. For further detail on the share-based payments transactions refer to note 22.

14.1 Authorised shares