consolidated financial statements and separate financial
TRANSCRIPT
Directors’ Report on Operations for the fiscal year ended December 31, 2020
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Consolidated Financial Statements and Separate Financial Statements
for the year ended December 31, 2020
Directors’ Report on Operations for the fiscal year ended December 31, 2020
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Index:
• Directors’ Report on operations for the fiscal period ended December 31, 2020…………….......pag. 1
• Consolidated Group Financial Statements.................................................................................. pag. 23
• Explanatory Notes to the consolidated Financial Statements ..................................................... pag. 29
• Separate Financial Statements Itway S.p.A................................................................................. pag. 87
• Explanatory Notes to the Separate Financial Statements........................................................... pag. 93
Attachments
• Report of Auditing Company
Directors’ Report on Operations for the fiscal year ended December 31, 2020
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Directors’ report on operations for the
Fiscal year ended December 31, 2020
Directors’ Report on Operations for the fiscal year ended December 31, 2020
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Social Bodies
Board of Directors (Until the approval of the December 31, 2022 Financial Statements)
Name and last name Position Giovanni Andrea Farina President and Chief Executive Cesare Valenti Managing Director Valentino Bravi Independent Director Piera Magnatti Independent Director Annunziata Magnotti Independent Director Board of Statutory Auditors (Until the approval of the December 31, 2022 Financial Statements)
Name and last name Position Daniele Chiari President Silvia Caporali Member Rita Santolini Member Manager mandated to draft corporate accounting documents The board of directors named Sonia Passatempi (Administrative Manager of the Group) as the Manager in charge of drafting corporate accounting documents for the Itway Group. Auditing company
Analisi S.p.A.
The General Meeting gave the mandate for the auditing on July 2, 2018 for a period of nine years until the approval of the financial statements for the year ending December 31, 2026 and, pursuant to the regulations in force, it cannot be renewed.
Directors’ Report on Operations for the fiscal year ended December 31, 2020
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Report on the ownership and on corporate governance In accordance to current laws, please note the Report on Ownership and Corporate Governance, approved by the Board of Directors of Itway S.p.A (hereinafter the “Company” or “Parent Company”) is available for the public at the administrative headquarters in Ravenna, via Braille 15, and can be consulted on the Internet site www.itway.com in the Investor Relation section. Activities and structure of the Group Following is the structure of the Itway Group at December 31, 2020:
The Company has its legal headquarters in Milan in Viale Achille Papa, 30 and the administrative headquarters in Ravenna in Via L. Braille, 15.
ITWAY S.p.A.
Itway France S.A.S.
100%
Itway Iberica S.L.
100%
Itway International
S.r.l. 100%
Itway Hellas S.A.
100%
Itway Turkyie Ltd
100%
Business-e
Infrastrutture S.r.l.
30%
Itway MENA FZC
17,1%
4 Science S.r.l.
100%
BE Innova S.r.l.
50%
Itway RE S.r.l.
100%
iNebula S.r.l. in
liquidazione 75%
Idrolab S.r.l.
10%
Dexit S.r.l.
9%
Directors’ Report on Operations for the fiscal year ended December 31, 2020
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Structure of the Management Report The current management Report is drafted along with the financial statements and the consolidated financial statements of Itway S.p.A.
Performance of the Group and the reference market
The accounting principles, the evaluation principles and the consolidation principles referred to in preparing the Financial Statements for the fiscal year ended December 31, 2020 are, as in the previous fiscal year, the international accounting principles defined as IFRS. In particular, these principles require forward looking statements, as indicated in the continuation of the current report, in particular in the section “Foreseeable Evolution of operations” and in detail in the Explanatory Notes. In the context of the economic uncertainty illustrated below, please note that these forecasts have a component of risk and uncertainty. Therefore, it cannot be ruled out that in the near future the results achieved could be different from those forecast, therefore possibly requiring revisions that today cannot be either estimated or forecasted.
On December 30, 2020, the Group finalized an agreement with Mercatoria S.p.A., the main creditor of the Group (with receivables totalling Euro 5.4 million) for the execution of a recovery plan drafted according to art. 67, paragraph 3, letter d), of R.D. 267/1942 that envisages a debt reduction of 67% with payments in 36 monthly instalments starting from June 2020; the deal foresees a further debt reduction of 62% in case of early repayment by December 31, 2021. The Itway-Mercatoria agreement, defined based on the 2020-2023 Industrial and Financial Plan, approved by the Board of Directors on September 14, 2020, and subsequently integrated and updated along with the related financial package, was certified on October 5, 2020, according to article 67, paragraph 3, letter d) of R.D. 267/1942 by an independent expert and subsequently integrated and updated on December 29, 2020, confirming the truthfulness of corporate data and the feasibility of the plan, as well as its conformity to pursue the objectives of recovery and rebalancing of the financial and capital position of Itway. In light of the double-digit growth rates expected for emerging sectors of IoT, AI, and Big Data, and the in-depth knowledge and reputation in Cybersecurity developed over almost 25 years, the Group during the fiscal year focused on implementing its industrial plan that envisages significant growth over the next few years considering and valuing the investments already made in the sectors above. Furthermore, the Group continued to invest in the Patent Pending ICOY ® (I Care Of You) product that will position Itway as a leader in the Environment Health Safety (EHS) segment. The Group continues it positioning on the Digital Product Oriented model, focusing on business segments with higher value added, through three Business Units.
- Cybersecurity; - Data Science;
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- Safety. The Itway Group in the fiscal year, also through its subsidiaries, continued to invest in Cybersecurity, IoT, Artificial Intelligence (AI), and Big Data, all of which are connected and correlated. As already disclosed to the market, during the fiscal year the Group took back full control of the Itway Hellas and Itway Turkiye subsidiaries, which operate in the historical Value Added Distribution (VAD) segment. Business unit areas:
• Itway S.p.A. is specialized in consultancy, planning, and system integration in the field of cybersecurity, in particular on the GDPR, Internet of Things (IoT) and work safety in the EH&S (Environment, Health & Safety) sector. The IoT and Safety sectors are covered and approached with the iNebula brand, of which Itway purchased, during the liquidation process underway, part of the products developed, and the brand name
• 4Science S.r.l. offers Data Science, Data Management services, and solutions for the scientific, and cultural heritage markets as well as Big Data
• Be Innova S.r.l. carries out Managed Security Services (MSS) with cybersecurity and network monitoring services through its NOC-SOC located in Trento. To date, there are approximately 50,000 protected digital devices. The main client of Be Innova is the Province of Trento for which it handles 24/365 days/year Cybersecurity. Also worthy of mention is the strong partnership established with IBM, for which in March 2019 it became a Service Center for Information Security
• Be Innova also has Smartys or the commercial name of the so-called ADAPT project co-financed with the Ministry of Education (MIUR) in the pre-commissioning phase in some Veneto region healthcare boards, the Fire Department, and the Trento Public Service Answering Point (PSAP). SMARTYS gathers biometric and environmental data used on the Environmental Healthcare Record (Fascicolo Socio Sanitario Elettronico-FSSE) of citizens, both in the private and public health care system, affiliated and not, in full safety and with the help of wearable sensors and IoT devices. Furthermore, there is also a Covid-19 App developed with the Bruno Kessler Foundation in Trento. The project was developed with a Security by design logic fully respecting privacy regulations and GDPR. SMARTYS is part of the emerging Health Data Security (HDS) segment of Cybersecurity.
General context and performance of the ICT Market: To date, there is only partial data on the ICT market performance in 2020 considering how the economic scenario has changed after Covid-19. GDP fell by 8.9% in 2020 (source: Istat, March 2021) and projections for the ICT market indicate an overall contraction of -3.1% with a significant rebound in 2021 (source: Assinform 2020).
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In 2020, the digital market dynamics turned negative (ICT Services -3.7%, ICT Software and Solutions -1.1%, Devices, and Systems -3.5%, Network Services -3.9%, Digital Content, and Digital Advertising -1.5%) but were more resilient than almost all other markets. Double-digit growth rates are still expected for the more innovative segments of digital innovation, or the so-called Digital Enablers, starting with Cloud, from Cybersecurity to IoT and AI and the collaborative and remote work platforms (including smart working).
It is also worth mentioning that some sectors that are fundamental to western economies, in particular the Italian one, were weighed down by the Covid-19 pandemic in 2020 with significant drops in turnover: manufacturing (-14.7%), metallurgical (-16.7%), mechanical (-18.8%), automotive (-25.9%), energy (-10%), furniture (-15.4%), fashion (-18.6%) and reported significantly to the wage guarantee fund and the layoff ban. On the other hand, other sectors like those related to healthcare (+3.6%) and pharmaceutical (+4.2%) recorded significant growth (Assolombarda 2002, source Prometeia-Intesa S.Paolo). Also, the bank and insurance sector grew with the former benefiting from their roles as intermediaries in the Covid support and recovery decrees, with an increase in online clients of 17%, in digital transactions of 32%, and newly acquired clients through digital channels of 75% (Source: Fintech & Insuretech Observatory, School of Management of the Milan Polytechnic, December 2020). Construction, which represents some 9% of Italian GDP in 2020, also saw solid growth (+1.8%). This sector, along with infrastructure, is seen recording a sharp recovery thanks to the Euro 209 billion Recovery Plan. These are the sector that offset digital investments.
Market positioning: The Itway Group during the fiscal year continued to invest in Cybersecurity, IoT, Artificial Intelligence and Big Data, all of which are connected. Furthermore, the repositioning on new product lines continued, with the aim of replacing lower-margin lines with higher value added ones that also allow a smaller use of working capital.
Group’s industrial policy: The industrial policy of the Group continued to focus on higher value added business lines represented by the new Business Unit described above.
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Following is the consolidated condensed income statement at December 31, 2020 compared with that of the same period a year earlier:
* The definition of Ebitda and Ebit is given in the Notes of the consolidated Financial Statements attached to the
current Report. In the 2020 fiscal year, Group revenues rose in volume terms by approximately 9% while EBITDA was Euro 2,203 thousand, down compared with Euro 3,358 thousand in 2019. The result after taxes is Euro 1,222 thousand compared with Euro 2,037 thousand in 2019. One-off items mainly related to the write-off of trade and financial payables for over Euro 2.8 million in 2019 and approximately Euro 2.3 million in 2020 impacted the results. Regarding the drop in operating Results, please note that the Group in the past fiscal years invested more significantly in the development of products than in 2020, and this, combined with investments in highly-skilled human resources is allowing the Group to broaden its presence on the market through products and services that are proprietary to Itway. At the same time, the lower capitalization for product development and the higher personnel costs, combined with a prudential write-down of receivables by the Parent Company, influenced the 2020 results. ICOY™ in the Safety Business Unit was the product line that most suffered from the slowdown caused by Covid-19. The product line is continuing its development road map, from an industrial prototype to a market product, a process that was slowed due to the Covid-triggered crisis of the sectors that it targets: manufacturing, metallurgical, oil & gas, and transport & logistics. The unit did not meet its budgeted sales, with a delay in part to 2021 and 2022. However, there was constant and growing sincere interest towards this innovative product that is proprietary to Itway from potential clients who increased their awareness towards the work safety of their workers.
(Thousands of Euro) December 31, 2020
December 31, 2019
Itway Group Itway Group
Turnover Sales revenue 35,786 31,219 Other operating revenue 2,968 4,125 Total turnover 38,754 35,344 Operating costs Cost of products 30,759 26,925 Personnel costs 2,511 2,260 Other costs and operating charges 3,461 2,801 Total operating costs 36,731 31,986 EBITDA* 2,023 3,358 Amortization and writedowns 577 639 EBIT* 1,446 2,719 Net financial charges (190) (287) Result before taxes 1,256 2,432 Income taxes (34) (395) Net result 1,222 2,037
Directors’ Report on Operations for the fiscal year ended December 31, 2020
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During the year there were Euro 468 thousand non-recurring costs, broadly unchanged from Euro 460 thousand in 2019, related to the restructuring underway due to the remodulation of financial debt and the management of extraordinary transactions. Sector performance: Value Added Distribution Through the Value Added Distribution sector, the Group operates in Greece and Turkey in the distribution of specialized software and hardware products, certification products on the software technologies distributed, and pre and post-sales technical assistance services. Following are the main economic indicators of the VAD SBU, compared with those of the previous fiscal year:
Thousands of Euro 31/12/2020
31/12/2019
Total revenue 33911 30288
EBITDA* 1927 1551
EBIT* 1819 1449
Result before taxes 2089 1472
Result of the period 1820 1124
* The definition of Ebitda and Ebit is given in the Notes of the consolidated Financial Statements attached to the
current Report
The Covid-19 pandemic hit harshly continental Europe, but much less so Greece and Turkey, and, in these countries, a faster recovery is expected compared with the European average. Following is the breakdown by Country: Itway Turkiye posted a +35% rise in revenue in local currencies compared with 2019 thanks to the addition of new product lines to its portfolio. Even considering the foreign exchange devaluation (Euro to Turkish Lira), revenue was up +7%, with higher margins than the previous year, thereby confirming its position as one of the leading Cyber Security operators in Turkey. The Greek subsidiary, Itway Hellas, posted significant growth both in terms of revenue (+21%) and in market share. The Company, which specializes in Cyber Security, witnessed a jump in demand generated by the increase in smart working and the need of public and private organizations to protect data and information. Furthermore, the newly introduced product lines are giving the expected results. In particular, the Imperva product line, which is the leader in the WAF (Web Application Firewall) segment, quadrupled revenue in one year. Itway Hellas received Euro 300 thousand of aid from the Greek State at very favourable interest rates as part of its measures to support companies under lockdown due to the Covid-19
Directors’ Report on Operations for the fiscal year ended December 31, 2020
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pandemic. This confirms its ability to dialogue with the local financial system and the proven bankability of the Company, even in a difficult year like 2020. Sector performance: Activities of the Parent Company and Subsidiaries in the “Scale-up” phase Itway S.p.A. is the parent company listed on Borsa Italiana S.p.A. that supplies services of different nature to the operating subsidiaries and includes new sectors described hereinafter that are investing in the realization of products and that are in the operational and commercial scale-up phase.
• Itway S.p.A., is an operational holding, dealing with consultancy, planning, and system integration in the field of cybersecurity, in particular on the GDPR, Internet of Things (IoT) and work safety in the EH&S (Environment, Health & Safety) sector. The IoT and Safety sectors are covered and approached with the iNebula brand, of which Itway purchased, during the liquidation process underway, part of the products developed, and the brand name
• 4Science S.r.l. offers Data Science, Data Management services, and solutions for the scientific, and cultural heritage markets as well as Big Data.
Following is the condensed income statement compared with the previous fiscal year including data from the ASA activities of the Parent Company and other sectors in the scale-up phase: (Thousands of €uro)
31/12/20
31/12/19
Revenue 4,843 5,056 Ebitda 96 1,807 Ebit (373) 1,270 Result before taxes (833) 960 Result for the period (598) 914
Following is a brief comment on the performance of 4Science and Itway: The positioning of the Cybersecurity and Safety Business Units, with the ICOY product line, continued in Itway S.p.A. with new technical and sales staff. The sales pipeline is growing. Bugnion S.p.A. completed the complex patent authorization procedure for ICOY in Italy and the EU and it is now Patent Pending. The ICOY MOVER Bridge Crane product line completed commissioning and is now ready for launch, while FORKLIFT completed commissioning in February 2021 with positive results despite the 13-month delay. Itway had to adapt the speed of commissioning to its Client/Partner with whom it executed the Proof of Concept (POC). Covid-19 had a significant adverse impact on this important partner, active in the metallurgical sector, and this affected also the progress in the POC, which was completed only in March 2021.
Directors’ Report on Operations for the fiscal year ended December 31, 2020
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As previously described, the product line is continuing its development path, from an industrial prototype to a market product, a process that has been delayed by the Covid-triggered crisis in the sectors it targets: manufacturing, metallurgical, oil & gas, and transport & logistics. The product line did not achieve its 2020 sales budget, with a delay into 2021 and 2022. However, there has been constant and increasing sincere interest towards this innovative proprietary Itway product from potential clients who have increased their awareness towards the safety of their workers. Despite the 14-month accumulated delay, which has weighed on operating results, the prospects for this innovative product line are very positive. In this context, it is worth remembering that both Itway S.p.A. and 4Science S.r.l. in the past few years invested more significantly in product development than in 2020 and this, combined with the investments in highly skilled human resources, is allowing to broaden its market presence through proprietary products and services. At the same time, the lower product development capitalization and higher personnel costs, combined with a prudential write-down of receivables of Euro 900 thousand by Itway S.p.A., has impacted 2020 results. 4Science S.r.l., after a few years of activity, is now a reference player in the emerging markets of Data Science, Data Management, and Big Data (Data Curation). It also has a leading role as a Digital Repository and Preservation of digital assets related to scientific research and cultural and artistic assets, the so-called Digital Libraries. The unit recorded constant growth since its establishment in 2017 and this trend continued in 2020 despite the complex period caused by the Covid-19 pandemic. At the end of 2020, it had over 100 in-house projects, acquired over three years, 75% of which on behalf of foreign Clients, namely in Europe, the US, LATAM, and the Far East.
Furthermore, in 2020 there was also an increase in the average value of the order that generated an increase of approximately 22% in sales revenue, while the Euro 1,400 thousand investment in DSpace CRIS (Current Research Information Systems) and in GLAM (Gallery Library Archive Museum) and their related add-ons has been almost completed, so the weight on capitalizations has been reduced to under 20% of total sales revenue, confirming the company’s ability to transform R&D efforts into sales
During the fiscal year, the Peruvian national consortium for research and science, CONCYTEC awarded 4Science the USD 1.3 million CRIS contract financed by the World Bank. This was possible thanks to the skills in the field of Big Data and Digital Repository that 4Science has developed over the years and that required a high degree of specialization and experience in the creation and management of CRIS (Current Research Information Systems) aimed at the research sector and the scientific community.
The skills acquired over the years, combined with the strategic choice to operate in the Open Source software sector, allowed 4Science to position itself at a global level as a reference point for CRIS solutions and to include among its clients prestigious universities (including the Institute for Advanced Study of Princeton University in New Jersey, where Albert Einstein taught).
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Precisely because of the specific skills developed on CRIS systems, many clients mandated 4Science to develop projects related to the research sector that in this period of the pandemic have assumed an even greater strategic role both in the scientific community and in government and political circles as they are part also of the digitalization of public administration at a global level.
Also the Cultural Heritage segment, with the GLAM product, which covers a very interesting and current market like the Long Term Preservation and Data Curation of digital information of cultural heritage, including collections, persons, events, concepts, places, and projects, recorded significant growth of 270%. In Italy, national points of excellence including the Naples National Library and the Giuseppe Verdi Conservatory in Milan chose 4Science to digitalize their cultural assets.
4Science recorded a net profit of Euro 220 thousand and an Ebitda of Euro 416 thousand, in line with the budget.
iNebula S.r.l. continues with its liquidation process that started 2018 with settlement agreements with its main creditors.
Personnel
The average number of employees of the Group during the 2020 fiscal year was of 50 units while the punctual number at the end of the fiscal period was of 53 units. The nine-unit increase from a year ago is due to the hiring of technical staff in Itway and 4Science. Following is a breakdown by category, compared with the previous fiscal period. 31/12/2020 31/12/2019 31/12/2020 31/12/2019 Avg Avg Punctual Punctual Managers 3 2 3 2 Mid-managers
5 6 5 6
Employees 42 35 45 36
Total 50 43 53 44
Directors’ Report on Operations for the fiscal year ended December 31, 2020
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Net financial position Following is the net financial position of the Group:
Following is the net financial position of the Parent Company:
Please see the Statement on Cash Flows for a more detailed analysis on the movements that generated the change in the Net Financial Position. There was a marked improvement in the net financial position of both the Group and the Parent Company as of December 31, 2020, mainly due to the write-off of certain debt positions, in particular the agreement reached with Mercatoria, the main creditor, for the execution of a recovery plan drafted pursuant to article 67, paragraph 3, letter d) of R.D. 267/1942 Furthermore, on December 15, 2020, the financing terms with Iccrea were redefined, allowing to reclassify debt as medium-term while in previous fiscal years it was included among current liabilities due to covenant breaches.
Thousands of Euro
31/12/2020
31/12/2019
Cash on hand 982 608 Financial receivables 2,275 2,498 Current financial assets 1,080 1,210 Current financial liabilities (2,947) (7,985) Convertible bonds (473) -
Current net financial position 917 (3,669)
Non-current financial assets 2,098 2,098
Non-current financial liabilities (4,389) (1,785)
Non-current net financial position (2,291) 313
Total net financial position (1,374) (3,356)
Thousands of Euro
31/12/2020
31/12/2019
Cash on hand 271 21 Financial receivables 2275 2498 Current financial assets (2625) (7161) Current financial liabilities (473) - Convertible bonds (552) (4642) Current net financial position 2098 2098 Non-current financial assets (3574) (1830)
Non-current financial liabilities (1476) 268
Non-current net financial position (2028) (4374)
Directors’ Report on Operations for the fiscal year ended December 31, 2020
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Non-current liabilities included the impact that was not significant from the application of IFRS 16 “Leasing” that became mandatory from January 1, 2019. Reconciliation between Parent Company and Consolidated data Following is the reconciliation sheet of the consolidated net equity and consolidated results with those of the parent company: 2020 2019
Recurrent
assets
Non-recurrent
assets Total Recurrent
assets
Non-recurrent
assets Total
Net result of the Parent Company 1222 - 1222 2036
2036
Results of subsidiaries
807 807 1439
1439
Adjustment to values already included in the consolidated financial statements (807) - (807) (901) (1439)
Consolidated net result 1222 - 1222 2036
2036
2020 2019
Recurrent
assets
Non-recurrent
assets Total Recurrent
assets
Non-recurrent
assets Total
Net equity of the Parent Company 8701 - 8701 7831 - 7831
Results of subsidiaries
-
- -
Other consolidated entries
157 - 157 176
- 176
Consolidated net equity 8858 - 8858 8007
- 8.007
Risk management
The Group is exposed to financial risks deriving from the economic situation at a global level; the Group uses, as a reference currency and for its purchasing and sales activities mainly the Euro and in a minor way the US Dollar and the Turkish lira. In order to analyze the financial risk management we refer to the half-year consolidated Financial Statements Explanatory Notes.
Going concern The Consolidated financial statements of the Itway Group as of December 31, 2020, show a positive result of Euro 1,222 thousand while that of the Parent Company ended with a net profit of approximately Euro 416 thousand (net of the results of subsidiaries booked under IAS 27).
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From a financial point of view, as of December 31, 2020, the Parent Company concluded an agreement with Mercatoria S.p.A., the main creditor of the Group (with receivables totalling Euro 5.4 million). The agreement defined based on the 2020-2023 Industrial and Financial Plan, approved by the Board of Directors on September 14, 2020, and subsequently integrated and updated along with the related financial plan, that received, pursuant to article 67, paragraph 3, letter d) of the Bankruptcy Law, the certification from an independent expert that confirmed its feasibility, the truthfulness of the data, as well as its suitability to pursue the objective of restructuring and rebalancing of the financial and capital position of Itway. The agreement with Mercatoria includes, among other things, a 67% reduction in debt with payment in 36 monthly instalments starting from June 2020 and a further reduction to 62% in case of early repayment by December 31, 2021. The financial statements to December 31, 2020, include the impact of the 67% reduction through the recording of Euro 1,792 thousand of non-recurring income within the Other Revenue and Proceeds. Itway is committed to respecting some financial parameters both on a quarterly and an annual basis and has granted Mercatoria a two-year call option, starting from January 1, 2023, on No. 390,000 own shares at a strike price of Euro 1. The failure of the company to pay two instalments, even not consecutively, unless agreed upon, could determine the resolution of the contract with the resulting payment of the entire debt outstanding before the write-off. Itway paid Euro 606 thousand at the signing of the agreement and to date another two instalments for a further Euro 202 thousand, leaving the residual debt towards Mercatoria and Socrate at Euro 2.8 million, to date. The plan also foresees:
(i) The repayment in instalments of around Euro 100 thousand per month of the financial debt towards Mercatoria by the May 30, 2023 deadline;
(ii) The repayment of the remaining financial debt by the December 31, 2021 deadline, according to the terms agreed in the rescheduling agreements that are being or that will be defined;
(iii) The payment of expired trade payables totalling approximately Euro 2 million; (iv) The issue of up to Euro 5.5 million of Convertible Bonds deliberated by the
Extraordinary Shareholders’ meeting of Itway on October 30, 2020, reserved for the Swiss institutional investor Nice & Green SA (“N&G”).
These are the essential elements of the 2020-2023 Plan aimed at developing the business of the Itway Group that will focus on: 1) The consolidation of the VAD Business Unit in Greece and Turkey; 2) The valuing and development of the Cybersecurity, Safety, and Data Science Business Unit 3) Supporting working capital through the issue of convertible bonds in favour of N&G with
whom a Warrant and Convertible Notes Funding Program investment contract was signed for an overall Euro 6 million.
The investment contract with Nice & Green SA aims at supporting working capital of the Company, strengthen its financial structure, and broaden the shareholder structure. The capital
Directors’ Report on Operations for the fiscal year ended December 31, 2020
17
raised from the N&G transaction will equip Itway with additional capital and financial resources that will be used to accelerate the development of the Company’s growth and investment strategies in the market segments in which Itway operates without any additional burden for the Company. The Program foresees an issuance period for an overall 36 months from the date of signing of the contract and comprises: (i) A tranche of warrants to buy up to Euro 500 thousand own shares of Itway already in its portfolio (the Warrants); (ii) 11 tranches of bonds, each with a nominal value of Euro 500 thousand convertible into newly issued Itway shares (Bonds). It envisages the commitment by N&G to subscribe to several tranches following a specific request from Itway. The contract foresees that the loan will be non-interest bearing and that each Bond will have a 12-month duration from the issue date. Furthermore, in case of failure to request the repayment by the maturity date, the Company shall be obliged to automatically convert the Bonds in circulation into newly issued shares. The Investor is entitled to ask for the conversion of the bonds into shares at any time following the conversion request. Upon conversion request, the Issuer, instead of issuing new shares, shall have the option to repay the Bonds in cash. The Bonds are non-interest bearing and will not be listed on any regulated market.
To execute the Bond issuance program, an extraordinary shareholders’ meeting took place on October 30, 2020, that deliberated the issue of bonds and a capital increase without option rights to service the conversion. To the date of writing of the current Report, the company entirely exercised the warrant during the 2020 financial year, using shares that it already held in its portfolio, while of the 11 tranches of Bonds one tranche (comprising 50 Bonds with a nominal value of Euro 10 thousand each) was issued and underwritten, upon request of the Company, and partially exercised by Nice&Green SA through the request to covert No. 20 bonds for an overall value of Euro 200 thousand.
The number of shares that are subject to the conversion was determined conforming to the terms of the Contract based on 91% of the minimum price (defined as the VWAP –volume-weighted average price) recorded in the eight trading days before the date of conversion request and totalled No. 286,286 newly issued ordinary shares of Itway, with regular dividend rights, representing 3.49% of share capital after the capital increase.
As of December 31, 2020, the Itway Group had a current net financial indebtedness of approximately Euro 3.4 million, of which Euro 1.3 million already expired at the date of the financial statements, an expired indebtedness with tax and social security bodies for a total of Euro 475 thousand (that will be paid within the terms foreseen by regulations in force), and expired indebtedness towards suppliers of Euro 2.7 million (of which approximately Euro 0.8 million for amounts being contested, also through legal means and Euro 1.8 million of suppliers
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18
no longer present on the market but that for prudential reasons are still booked in the balance sheet).
After the agreement reached with Mercatoria described above, to date negotiations are still underway with financial institutions or companies (art. 115 of TULPS) that acquired debt from certain banks for smaller amounts. The Company deems it reasonable to be able to conclude these negotiations, according to the plan, on the repayment terms. Based on the 2020-2023 Industrial and Financial Plan approved by the Board of Directors that an independent legal expert certified pursuant to article 67, paragraph 3, letter d) of the Bankruptcy Law, confirming the truthfulness of the corporate data and the feasibility of the plan as well as its conformity in pursuing the objectives of recovery and rebalancing the Company’s financial and capital position, the Directors, also comforted by the positive results achieved in these past years, drafted the financial statements on a going concern basis. Subsequent events In February 2021, No 286,286 new shares were issued following the request of conversion into shares for Euro 200 thousand of the first tranche of convertible bonds, increasing the Share Capital to Euro 4,085,802.
Foreseeable evolution of operations
As highlighted in the 2020-2023 Industrial Plan, which was approved by the Board of Directors and which was certified by an independent third party, the Group is expected to focus in the sectors of Cybersecurity, Data Science, and Safety. Furthermore there will be a growing focus on the Be Innova S.r.l. and the 4Science S.r.l. subsidiaries.
It is difficult to assess today whether there will be a significant impact on performance from the effects of the Covid-19 pandemic. However, it is important to remember that the activities of the Itway Group, mostly related to cybersecurity, have proven essential also, and above all, in these moments of global emergency, proving that Cybersecurity, dealing with the security of the core activities of companies, can be considered anti-cyclical compared to other market sectors. The measures adopted by almost all organizations in terms of smart working multiplies exponentially the risks related to security, resulting in greater demand for Cybersecurity solutions to mitigate these risks. The activities of Itway, being mainly made up of services, continued also with the new modality of remote working that the COVID emergency imposed. There was no significant impact on the Greek and Turkish subsidiaries, given the limited spread of the pandemic in these countries. However, as described above, the Safety ICOY Business Unit in 2020 and partially also in 2021 suffered from a lack of growth due to the segments it targets -- manufacturing, metallurgical, oil & gas, transport & logistic. The 2020 sales budget has been delayed in part to 2021 and in part in 2022. There was, however, constant and growing interest towards this innovative product that is proprietary to Itway from potential clients who
Directors’ Report on Operations for the fiscal year ended December 31, 2020
19
are more aware of the safety of their workers. Despite an expected 14-month delay, the outlook for this innovative product line is still very positive. Following is the foreseeable evolution of operation, divided by SBU: 4Science s.r.l. The company is fully operational with highly specialized personnel to carry out its objectives: becoming the reference company in the emerging Data Science, Data Management, Big Data (Data Curation), and Digital Repository and Preservation of cultural and artistic assets, the so- called Digital Library. The Big Data market is grew at an annual average of 23.1% from 2016-2019(Assinform) and 48% of companies forecasts investments in the sector in the future.
4Science offers services that place it in a highly specialized sector. On the one hand, it operates in the so-called Big Data segment, on the other hand, this sector is very broad and it is necessary to have a focus. Our skills are in data management for digital libraries and digital repositories, which in 2021 is forecast to be worth Euro 11.73 billion globally, with Europe worth, Euro 2.73 billion, and Italy Euro 188 million (Source: CiC Research and IDC Research, February 2021).
The Digital Libraries & Digital Repositories market is related to Business Analytics, Deep Learning, and Artificial Intelligence (AI) or Augmented Intelligence. This brings us to consider how to interact and collaborate with companies that are specialized in this sector.
Furthermore, we count on developing alliances with single players with whom we have synergies, with skills, therefore, that are complementary to our own and with whom to take part in projects from which we are excluded. In confirmation of this, the 2021 fiscal year started with an order portfolio of almost Euro 1 million that will be invoiced during 2021
Itway S.p.A. The company deals with consultancy, planning, and system integration in the field of cybersecurity, in particular, GDPR, Internet of Things (IoT), and work safety in the Environment, Health & Safety (EH&S) sector. In the Safety market, particular focus will be placed on developing and commercializing ICOY solutions. The ICOY line offers Artificial Intelligence and Deep Learning support to operators who work in dangerous work environments, to prevent and avert accidents. ICOY is today available with the ICOY MOVER®:
− MOVER CRANE for Bridge Crane, Quay Crane, Container; − MOVER FORKLIFT for forklift, forklift trucks that move in factories, docks,
and/or construction sites −
ICOY, which is in the start-up phase, was hit by slowdowns caused by Covid-19, which we count on starting to overcome in 2021.
Directors’ Report on Operations for the fiscal year ended December 31, 2020
20
Following the positive commissioning of ICOY MOVER Bridge Crane and MOVER Forklift, the pipeline prospect, which we presented and saw concrete interest, is significant with a market potential of thousands of retrofit aftermarket installations. Itway Turkiye Ltd. and Itway Hellas S.A. The value-added distribution activities continued to grow significantly, confirming also in 2020 a solid ability to grow. The Business Plan of the two countries foresees growth in 2021 in line with previous years, confirming their strategic leadership position in cybersecurity in Greece and Turkey. Significant, non-recurrent, atypical and/or unusual transactions In the fiscal period ended December 31, 2020, there were no atypical and/or unusual transactions with third parties or between Companies of the Group as defined by Consob Communication dated July 28, 2006, while the previous paragraphs extensively described significant and non-recurring transactions related to the write-off of some debt positions. Relationships with third parties In the 2020 fiscal period the Group had commercial and financial relationships with related parties. These relationships were part of normal management activity, regulated at market conditions that are established by contract by the parties in line with the standard procedures. Following is a summary: Thousands of €uro Receivables Payables Costs Revenue Itway S.p.A. vs Giovanni Andrea Farina & Co. S.r.l. 304 - 198 2
Itway S.p.A. vs Be Innova S.r.l. 4,587 117 177 175
Itway S.p.A. vs Fartech S.r.l. 34 142 31 33
TOTAL 4,25 259 406 210
Itway directs and coordinates its subsidiaries in Italy. This activity consists in indicating the general strategic and operational direction of the Group, defining and adjusting the organizational Model and elaborating the general policies to manage human and financial resources. No company directs or controls Itway S.p.A
Directors’ Report on Operations for the fiscal year ended December 31, 2020
21
Research & Development activities During the period a total of Euro 244 thousand (compared with Euro 763 thousand in the previous fiscal year) was invested in the development of new products and services in particular in the business units described above, which were capitalized in intangible assets. Own shares
The Parent Company as of December 31, 2020, owned No. 203,043 own shares (equal to 2.57% of share capital) for a nominal value of Euro 101,522 and an overall cost of the shares held in the portfolio of Euro 320 thousand (equal to the amount reflected in the Own Share reserve deducted from net equity of the fiscal period and at a consolidated level). Of these, No 136,400 own shares (equal to 1.73% of share capital) were allocated on loan to Nice & Green SA to service the previously described financial transaction. The reduction in the number of shares compared with the previous fiscal year is due to the exercising of the warrant underwritten by Nice & Green. Stakes held by the directors The following table sums up the information requested by the Consob regulation regarding the stakes in the parent company held by Directors, Auditors, Managing directors their spouses, minors, both directly or through controlling companies, trusts, or delegated third parties. Please note that the data are normally updated with communication carried out between the Shareholders and the Company Number of shares
Last name and name Ownership at
31/12/2019 Purchased Sold
Owned at 31/12/2020
Giovanni Andrea Farina & Co. S.r.l. 2,573,787 - - 2,573,787 Gavioli Anna Rita (*) 179,412 - - 179,412 Valenti Cesare 1,012,284 - - 1,012,284 Total 3,765,483 - - 3,765.483
(*) Spouse of G. Andrea Farina
The only shareholder that exceeds 10% of share capital is the company G. Andrea Farina & Co. S.r.l. and Cesare Valenti (Director of the Parent Company).
Directors’ Report on Operations for the fiscal year ended December 31, 2020
22
Proposed allocation of the result of the fiscal period In terms of the allocation of the result reported in the financial statements of the company, it has been proposed to allocate the Euro 1,222 thousand profit of the 2020 fiscal year to reserve.
Ravenna, March 29, 2021 FOR THE BOARD OF DIRECTORS Il President e Chief Executive Officer G. Andrea Farina
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
23
ITWAY GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31 , 2020
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
24
CONSOLIDATED INCOME STATEMEMT Thousand of Euro Fiscal year as of 31 Dec 2020 31 Dec 2019
Net amount Itway Group
Net amount Itway Group
Revenues from sales 35,786 31,219
Other operating revenues 2,968 4,125
Products (30,759) (26,925) Costs of services (2,304) (2,269) Costs of personnel (2,511) (2,260) Other operating expenses (1,157) (532)
EBITDA 2,023 3,358 Depreciations and amortisations (577) (639) EBIT 1,446 2,719 Financial proceeds 63 22 Financial charges (253) (309)
Profit before taxes 1,256 2,432
Taxes (34) (395)
Result for the period 1,222 2,037
Attributable to: Sharedholders of parent company 1,224 2,041 Minorities (2) (4) Result per share
From operations:
Basic 0.17 0.29 Diluited 0.17 0.29
* With regard to relations with related parties, reference should be made to Note 31. ** The definition of EBITDA and EBIT is provided in the following paragraph “Presentation of the financial statements”.
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
25
COMPREHENSIVE CONSOLIDATED INCOME STATEMENT
Fiscal year as of Euro migliaia 31 Dec 2020 31 Dec 2019 Net
amount Itway Group
Net amount Itway Group
Net result
1,222 2,037
Components that can be reclassified to the income statement:
Profit/(Losses) from the conversion of the balance sheet of foreign subsidiaries
(798) (265)
Components that cannot be reclassified to the income statement:
Actuarial gain (losses) on defined-benefit plans
(53) -
Comprehensive result 371 1,772
Attributable to:
Sharedholders of parent company 373 1,776
Minorities (2) (4)
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
26
CONSOLIDATED FINANCIAL STATEMENT Fiscal year as of
Thousand of Euro 31 Dec 20 31 Dec 19 ASSETS Net current assets Property, plans and machinery 942 991 Goodwill 1,849 1,852 Other intangible assets 2,183 2,319 Rights of use 2,605 2,801 Investments 709 1,765 Deferred tax assets 871 791 Non-current financial assets 2,098 2,098 Other non current assets 30 34
Total 11,287 12,651 Current assets Inventories 361 653 Account receivables - Trade 18,921 19,203 Other current assets 1,080 1,051 Cash on hand 982 608 Other financial credits 2,275 2,498 Current financial assets 1,080 1,210
Total 24,699 25,223 Total assets 35,986 37,874 NET EQUITY AND LIABILITIES Share capital and other reserves Share capital and reserves 7,987 6,323 Net result of the period 1,224 2,041 Total Net Equity 9,211 8,364 Share capital and reserves of minorities (353) (357) Total Group Net Equity 8,858 8,007 Non current liabilities Severance indemnity 483 406 Non current account payable – Trade 348 - Deferred tax liabilities 241 516 Non current financial liabilities 4,389 1,785
Total 5,461 2,707 Current liabilities Financial current liabilitites 3,420 7,985 Current account payable – Trade 13,389 14,158 Tax payable 2,656 2,447 Other current liabilities 2,202 2,570
Total 21,667 27,160 Total liabilities 27,128 29,867 Total Net Equity and Liabilities 35,986 37,874
* With regard to relations with related parties, reference should be made to Note 31.
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
27
Consolidated statement of charges in equity Cumulated profit (loss) Thousand of Euro Share
capital Own share
reserve
Share premiu
m reserve
Legal reserve
Voluntary reserve
Other reserve
Transaltion
reserve
Result for the period
Net equity of Group
Minority interests
Total Net Equity
Balance at January 1, 2019
3,953
(1,346)
17,584
485
4,792
(16,691)
(2,710)
520
6,587
(352)
6,235
Variation in own shares
-
-
-
-
-
-
-
-
-
-
-
Total operations with shareholders
-
-
-
-
-
-
-
-
-
-
-
Allocation of the result for the year
- - - - - 520 - (520) - - -
Result of the period - - - - - - - 2,041 2,041 (4) 2,037 Other operations - - - - - - - - - - - Other components of comprehensive results at 31 Dec 2019:
Gain/(Losses) on defined benefit plans
- - - - - - - - - - -
Overall result
-
-
-
-
-
-
(265)
-
(265)
-
(265)
Comprehensive result - - - - - - (265) 2,041 1,776 (4) 1,772 Balance at December 31, 2019
3,953
(1,346)
17,584
485
4,792
(16,171)
(2,975)
2,041
8,363
(356)
8,007
Cumulated profit (loss) Thousand of Euro Share
capital Own share
reserve
Share premiu
m reserve
and other
operations
Legal reserve
Voluntary reserve
Other reserve
Transaltion
reserve
Result for the period
Net equity of Group
Minority interests
Total Net Equity
Balance at January 1, 2020
3,953
(1,346)
17,584
485
4,792
(16,171)
(2,975)
2,041
8,363
(356)
8,007
Variation in own shares
-
1,026
(547)
-
-
-
-
-
479
-
479
Total operations with shareholders
-
1,026
(547)
-
-
-
-
-
479
-
479
Allocation of the result for the year
- - - - - 2,041 - (2,041) - - -
Result of the period - - - - - - - 1,224 1,224 (2) 1,222 Other operations - - - - - - - - - - - Other components of comprehensive results at 31 Dec 2020:
Gain/(Losses) on defined benefit plans
- - - - - (53) - - (53) - (53)
Overall result
-
-
-
-
-
-
(798)
-
(798)
-
(798)
Comprehensive result - - - - - (53) (798) 1,224 373 (2) 371 Balance at December 31, 2020
3,953
(320)
17,037
485
4,792
(14,187)
(3,773)
1,224
9,211
(354)
8,858
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
28
CONSOLIDATED STATEMENT OF CHARGES IN FINANCIAL POSI TION
Esercizio chiuso al
Euro migliaia 31/12/20 31/12/19
Risultato prima delle imposte "Netto Gruppo Itway" 1.222 2.039
Rettifiche per voci che non hanno effetto sulla liquidità:
Ammortamenti immobilizzazioni materiali 107 99
Ammortamenti attività immateriali 308 326
Ammortamento diritti d'uso 162 168
Accantonamento ai fondi svalutazione crediti 900 7
Accantonamento benefici ai dipendenti al netto dei versamenti vso ist. previd. 72 60
Variazione di attività/passività non correnti - (141)
Cash flow da attività operativa al lordo della variazione del capitale d'esercizio 2.771 2.558
Pagamenti di benefici a dipendenti (48) 25
Variazione dei crediti commerciali ed altre attività correnti (294) (529)
Variazione delle rimanenze 292 (189)
Variazione dei debiti commerciali ed altre passività correnti (927) (888)
Cash flow da attività operativa generato (assorbito) dalle variazioni di CCN (977) (1.581)
Cash flow da attività operativa (A) 1.794 977
Investimenti in immobilizzazioni materiali (al netto dei disinvestimenti) (58) 2.628
Incrementi/(Decrementi) di diritti d'uso 34 (2.969)
Investimenti in altre attività immobilizzate (al netto dei disinvestimenti) 884 625
Cash flow da attività di investimento (B) 860 284
Accensione/(Rimborsi) di passività finanziarie correnti (4.565) (1.262)
Accensione/(Rimborsi) di passività finanziarie non correnti nette 2.604 (77)
Operazioni su azioni proprie 479 -
Cash flow da attività di finanziamento (C) (1.482) (1.339)
Variazione netta della riserva di traduzione di valute non Euro (798) (265)
Cash flow da attività cedute (D) - -
Incremento/(Decremento) disponibilità liquide e mezzi equivalenti (A+B+C+D) 374 (343)
Disponibilità liquide e mezzi equivalenti di inizio periodo 608 951
Disponibilità liquide e mezzi equivalenti di fine periodo 982 608
Financial charges paid during the year amounted to Euro 136 thousand (Euro 106 thousand in the previous year).
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
29
EXPLANATORY NOTES OF THE CONSOLIDATED FINANCIAL STA TEMENTS GENERAL INFORMATION Itway S.p.A. (the “Company” or the “Parent Company”) is a public limited company constituted in Italy. The Company moved its legal headquarter to Milan, in Viale Achille Papa, and its administrative headquarters in Ravenna in Via L. Braille 15.
Going concern
The Consolidated financial statements of the Itway Group as of December 31, 2020, show a positive result of Euro 1,222 thousand while that of the Parent Company ended with a net profit of approximately Euro 416 thousand (net of results of the subsidiaries booked under IAS 27). From a financial point of view, on December 30, 2020, the Parent Company sealed an agreement for the execution of a recovery plan drafted pursuant to article 67, paragraph 3, letter d) of R.D. 267/1942 with Mercatoria S.p.A., the main creditor of the Group (with receivables totalling Euro 5.4 million). The agreement defined based on the 2020-2023 Industrial and Financial Plan, approved by the Board of Directors on September 14, 2020, and subsequently integrated and updated along with the related financial plan, that received, pursuant to article 67, paragraph 3, letter d) of the Bankruptcy Law, the certification from an independent expert that confirmed its feasibility, the truthfulness of the data, as well as its suitability to pursue the objective of restructuring and rebalancing of the financial and capital position of Itway.
The agreement with Mercatoria includes, among other things, a 67% reduction in debt with payment in 36 monthly instalments starting from June 2020 and a further reduction to 62% in case of early repayment by December 31, 2021. The financial statements to December 31, 2020, include the impact of the 67% reduction through the recording of Euro 1,792 thousand of non-recurring income within the Other Revenue and Proceeds. Itway is committed to respecting some financial parameters both on a quarterly and an annual basis and has granted Mercatoria a two-year call option, starting from January 1, 2023, on No. 390,000 own shares at a strike price of Euro 1. The failure of the company to pay two instalments, even not consecutively, unless agreed upon, could determine the resolution of the contract with the resulting payment of the entire debt outstanding before the write-off. Itway paid Euro 606 thousand at the signing of the agreement and to date another two instalments for a further Euro 202 thousand, leaving the residual debt towards Mercatoria and Socrate at Euro 2.8 million, to date.
The plan also foresees: (i) The repayment in instalments of around Euro 100 thousand per month of the financial debt
towards Mercatoria by the May 30, 2023 deadline; (ii) The repayment of the remaining financial debt by the December 31, 2021 deadline, according to
the terms agreed in the rescheduling agreements that are being or that will be defined; (iii) The payment of expired trade payables totalling approximately Euro 2 million; (iv) The issue of up to Euro 5.5 million of Convertible Bonds deliberated by the Extraordinary
Shareholders’ meeting of Itway on October 30, 2020, reserved for Swiss institutional investor Nice & Green SA (“N&G”).
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
30
These are the essential elements of the 2020-2023 Plan aimed at developing the business of the Itway Group that will focus on: 1) The consolidation of the VAD Business Unit in Greece and Turkey; 2) The valuing and development of the Cybersecurity, Safety, and Data Science Business Unit 3) Supporting working capital through the issue of convertible bonds in favour of N&G with whom a Warrant and Convertible Notes Funding Program investment contract was signed for an overall Euro 6 million.
The investment contract with Nice & Green SA aims at supporting working capital of the Company, strengthening its financial structure, and broadening the shareholder structure. The capital raised from the N&G transaction will equip Itway with additional capital and financial resources that will be used to accelerate the development of the Company’s growth and investment strategies in the market segments in which the Company operates without any additional burden for the Company. The Program foresees an issuance period for an overall 36 months from the date of signature of the contract and comprises:
(i) A tranche of warrants to buy up to Euro 500 thousand own shares of Itway already in its portfolio (the Warrants);
(ii) 11 tranches of bonds, each with a nominal value of Euro 500 thousand convertible into newly issued Itway shares (Bonds). It envisages the commitment by N&G to subscribe to several tranches following a specific request from Itway
The contract foresees that the loan will be non-interest bearing and that each Bond will have a 12-month duration from the issue date. Furthermore, in case of failure to request the repayment by the maturity date, the Company shall be obliged to automatically convert the Bonds in circulation into newly issued shares. The Investor is entitled to ask for the conversion of the bonds into shares at any time following the conversion request. Upon conversion request, the Issuer, instead of issuing new shares, shall have the option to repay the Bonds in cash. The Bonds are non-interest bearing and will not be listed on any regulated market. To execute the Bond issuance program, an extraordinary shareholders’ meeting took place on October 30, 2020, that deliberated the issue of bonds and a capital increase without option rights to service the conversion. To the date of writing of the current Report, the company entirely exercised the warrant during the 2020 financial year, using shares that it already held in its portfolio, while of the 11 tranches of Bonds, on December 15, 2020, one tranche (comprising 50 Bonds with a nominal value of Euro 10 thousand each) was issued and underwritten, upon request of the Company, and partially exercised by Nice&Green SA through the request to convert, in February 2021, No. 20 bonds for an overall value of Euro 200 thousand. The number of shares that are subject to the conversion was determined conforming to the terms of the Contract based on 91% of the minimum price (defined as the volume-weighted average price - VWAP) recorded in the eight trading days before the date of the conversion request and totalled No. 286,286 newly issued ordinary shares of Itway, with regular dividend rights, representing 3.49% of share capital after the capital increase.
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
31
As of December 31, 2020, the Itway Group had a current net financial indebtedness of approximately Euro 3.4 million, of which Euro 1.3 million already expired at the date of the financial statements, an expired indebtedness with tax and social security bodies for a total of Euro 475 thousand (that will be paid within the terms foreseen by regulations in force), and expired indebtedness towards suppliers of Euro 2.7 million (of which approximately Euro 0.8 million for amounts being contested, also through legal means and Euro 1.8 million of suppliers no longer present on the market but that for prudential reasons are still booked in the balance sheet).
After the agreement reached with Mercatoria described above, to date negotiations are still underway with financial institutions or companies (art. 115 of TULPS) that acquired debt from certain banks for smaller amounts. The Company deems it reasonable to be able to conclude these negotiations, according to the plan, on the repayment terms.
Based on the 2020-2023 Industrial and Financial Plan approved by the Board of Directors, that an independent legal expert certified pursuant to article 67, paragraph 3, letter d) of the Bankruptcy Law, confirming the truthfulness of the corporate data and the feasibility of the plan as well as its conformity in pursuing the objectives of recovery and rebalancing the Company’s financial and capital position, the Directors, also comforted by the positive results achieved in these past years, drafted the financial statements on a going concern basis.
ACCOUNTING PRINCIPLES General principles In the consolidated Financial Statements and in the comparative data the Group adopted the International Reporting Standards (IFRS) issued by IASB, the updates of those pre-existing (IAS) as well as the International Financial Reporting Interpretations Committee (IFRIC) and those issued by the Standing Interpretation Committee (SIC), that were deemed as applicable to the transactions carried out by the Group. The Financial Statements items were assessed based on an accrual basis. For the purpose of book entries, prevalence was given to the economic substance of transactions rather than their legal form.
The accounting principles adopted are consistent and, as those adopted in the drafting of the consolidated Financial Statements as of December 31, 2019, except the new accounting principles that entered into force in the current fiscal year, as better described hereinafter. These principles require estimates that, in the context of the current economic uncertainty, have for their own component of risk and uncertainty. Therefore, it cannot be ruled out that in the near future the results achieved could be different from those forecast, therefore requiring revisions that today cannot be either estimated or forecast.
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
32
Presentation of the Financial Statements For a better reading, the presentation of the consolidated financial statement, the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in financial position, the consolidated statement of changes in net equity and the data inserted in the notes are all expressed in thousands of Euro, unless otherwise indicated. In some cases the tables could be rounded down due to the fact they are expressed in thousands of Euro. The Financial Statements are drafted in the following way:
� In the financial statement, current and non-current assets are reported separately. The consolidated financial statement as at December 31, 2020 was compared with the balances of the previous fiscal year, which ended on December 31, 2019
� In the income statement, the representation of the costs is carried out on the basis of their own
nature. The income statement on December 31, 2020 was compared with that of the previous fiscal year;
� The consolidated statement of comprehensive income acknowledges those changes to net equity which, not being pertinent to the transactions with shareholders, do not have an impact on the result of the fiscal year;
� The indirect method was used for the consolidated statement of changes in financial position;
� EBITDA (gross operating result) is an economic indicator not defined in the International
Accounting Standards and does not have to be considered an alternative measure to assess the performance of the operating results. Ebitda is used by the management of the Company to monitor and assess the operational performance of the Company and of the Group. Management considers Ebitda an important parameter to measure the performance of the Group, as it is not impacted by the volatility generated by the different criteria used to determine taxable income, by the amount and the characteristics of employed capital as well as the related amortization and depreciation policies. Ebitda is defined as Profit/Loss before amortizations of material and immaterial assets, financial charges and income and income taxes. Since the composition of Ebitda is not regulated by the reference accounting principles, the criteria to determine here applied may not be homogeneous with that adopted by other entities and therefore not be comparable;
� EBIT (operating Result) is an economic indicator not defined in the International Accounting
Standards and does not have to be considered an alternative measure to assess the performance of the operating results. It is defined as the Profit/Loss net of depreciation of material and immaterial assets and before financial charges and proceeds and income taxes. Since the composition of Ebit is not regulated by the reference accounting principles, the criteria to determine here applied may not be homogeneous with that adopted by other entities and therefore not be comparable.
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
33
Consolidation criteria The Financial Statements include the Financial Statements of the parent company and of the companies that it controls as of December 31, 2020, approved by the respective Board of Directors with the opportune adjustments, where necessary, to make them consistent with the accounting principles of the parent company. The full consolidation method can be summarized as indicated later. The accounting data of the subsidiaries purchased by the Group are booked with the acquisition method according to what was established by IFRS 3 “Business Combinations”:
� Assets and liabilities are measured at their acquisition-date fair value at the date of their purchase; � The excess of cost of the acquisition, respect to the fair value of the stake attributable to the Group in
net assets of the company purchased is booked as goodwill. Such goodwill, as detailed subsequently, is periodically, at least once every fiscal year, reviewed to check if it can be recovered through future cash flows generated from the underlying investment. The higher values of the acquired assets and liabilities, since booked at the fair value on the date of their purchase, compared with values recognized for fiscal purposes, are considered for the purpose of deferred taxes. Profits and losses deriving from transaction between subsidiaries that have not yet been carried out on behalf of third parties, and the credits and debts, costs, revenues among consolidated companies were eliminated. Consolidation of foreign companies with exchange rates other than the Euro The balances of the foreign subsidiary Itway Turkiye expressed in Turkish lira are converted into Euro applying the end-period exchange rate for assets and liabilities. For the conversion of the income statement items the average exchange rate of the period is used. The differences in exchange rate emerging from the conversion are booked to the translation reserve of the consolidated income statement. Following are the exchange rates used for the conversion in Euro of the values of the company of the Group outside the Euro area: December 31, 2020 December 31, 2019 Avg. Punctual Avg. Punctual New Turkish Lira 8.0547 9.1131 6.3578 6.6843
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
34
Consolidation area The consolidated Financial Statements of the Itway Group include the results of the parent company Itway S.p.A and the companies it controls. Following is a list of companies consolidated with the full consolidation method:
NAME HEADQUARTERS SHARE CAPITAL
EURO
% Direct ownership
% Indirect ownership
% Total ownership
Itway Iberica S.L.
Argenters 2, Cerdanyola del Vallès, Barcelona
560,040
100%
-
100%
Itway France S.A.S.
4,Avenue Cely – Asniere Sur Seine, Cedex
100,000
100%
-
100%
Itway Hellas S.A.
Agiou Ioannou Str , 10 Halandri, Athens
846,368
-
100%
100%
Itway Turkiye Ltd.
Eski Uscudar Yolu NO. 8/18, Istanbul
1,500,000 *
-
100%
100%
iNebula S.r.l. in liquidation
Via A. Papa, 30, Milan
10,000
75%
-
75%
Itway RE S.r.l.
Via L. Braille 15, Ravenna
10,000
100%
-
100%
4Science S.r.l.
Via A. Papa, 30, Milan
10,000
100%
-
100%
* The value is expressed in the New Turkish Lira (YTL) For the sake of completeness, please note that Itway S.p.A. also owns 100% of Itway International S.r.l. (that has a share capital of Euro 10 thousand), which, in turn, has full ownership of Itway Hellas and Itway Turkyie. Itway International S.r.l. was constituted as a vehicle for the sale of these foreign subsidiaries, upon conferral of their respective stakes, based on agreements with Cyber 1 AB, which subsequently lapsed as extensively described hereinafter. Hence, this reorganization qualifies as business combinations under common control pursuant to paragraph B1 of IFRS 3 and, therefore, the acquisition method under IFRS 3 is not applicable to book business combinations. This transaction did not change the perimeter of the Group, intended as a group of entities subject to the control of Itway. The consolidation process was conducted by neutralizing the effects of the corporate reorganization, which took place only formally, as indicated above. Also, Itway International is a pure holding company that does not have any operating activity and did not carry out any management transactions, if not ownership of the two foreign companies. The net equity and the net result of Itway International are insignificant, excluding the value of the shareholdings included in its assets. The following associates are valued with the net equity method: NAME HEADQUARTERS SHARE
CAPITAL Euro % direct
ownership
BE Innova S.r.l. Via Cesare Battisti 26, Trento 20,000 50% BE Infrastrutture S.r.l.
Via Trieste, 76, Ravenna
100,000 30%
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Following are the minority interests valued at a cost basis since there is no quoted market price on an active market available and the fair value cannot be determined in a reliable way:
NAME HEADQUARTERS SHARE
CAPITAL Euro
% direct ownership
Serendipity Energia S.p.A. Piazza Bernini 2 – Ravenna 1,117,758 10.5%
Dexit S.r.l.
Via G. Gilli 2 – Trento
700,000
9% Idrolab S.r.l. Via dell’Arrigoni, 220 – Cesena (FC) 52,500 10%
Itway MENA FZC PO Box 53314, HFZ, Sharjah, United Arab Emirates 35,000*
17.1%
* The value is expressed in Dirham of the United Arab Emirates (AED) Use of estimates The drafting of the consolidated Financial Statements, applying IFRS principles, requires making estimates and assumptions that affect the value of assets and liabilities and information regarding potential assets and liabilities to the reference date. The estimates and assumptions are based on historical experience and on other factors that are considered to be relevant; the estimates and assumptions are reviewed periodically and the effects of each variation are reflected in the consolidated statement. Following are the balance sheet items that require greater subjectivity from directors in elaborating forecasts and for which a change in the conditions of the underlying assumptions used can have a significant impact on the financial statements. � assessment on shareholdings; � assessment on inventories; � assessment on the allowance for doubtful accounts; � assessment on deferred tax assets; � assessment on employee benefits; � assessment of the provision for risks and charges. Estimates and hypothesis are reviewed periodically and the impact of each variation is immediately reflected in the income statement of the fiscal year. Goodwill is mainly referred to the Itway Hellas Cash Generating Unit (CGU). The Group adopted the methodology described in the Note on Impairment to verify whether there was a loss of value of the goodwill booked in the balance sheet. The recoverable value was determined based on the calculation of the value in use. The cash flows of the cash-generating units to which goodwill is attributed were inferred from the Business Plan approved by the Board of Directors. A weighted average cost of capital (WACC) of 15.02% was punctually calculated as the discount rate, in line with previous fiscal years and with a focus on risk factors and uncertainties related to the current market. Sensitivity analyses on this rate were carried out considering changes in interest rates and other financial parameters (WACC, g rate, Ebitda of the terminal value). The assessment of the eventual loss of the value of assets (goodwill), the conclusion of which is in Note 12 “Goodwill”, was carried out with reference to December 31, 2020.
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Following is the summary of the valuation processes and the estimate/assumptions deemed receptive, should the forecasted events not take place, in full or in part, of producing significant effects on the economic and financial situation of the Itway Group. Property, plant and equipment Tangible assets are recognized at cost including accessory charges net of the relative accumulated depreciation. Ordinary maintenance expenses are fully charged to the income statement. Costs for improvements, modernization and transformations of an enhancing nature are accounted as assets. The accounting value of tangible assets is subject to review in order to detect possible losses in value either annually or when events or changes in the situation indicate that the carrying value can no longer be recovered (for details please seen paragraph “loss of value – impairment”). Depreciation begins when assets are ready to be used. Property, plants, and equipment are systematically depreciated each year based on economic-technical rates considered to be representative of the residual possibility of using the assets. Goods made up of components, of significant amounts, with different useful lives are considered separately when determining depreciation Depreciation is calculated on a straight basis, as a function of the expected useful lives and of the relative assets, periodically reviewed if necessary, applying the following percentage rates:
Plants 2% Furniture 12% Computers and electronic office equipment 20% Vehicles 25% Electronic telephone systems 20%
Profits and losses deriving from the sale or dismissal of assets are determined as a difference between revenue and the net book value of the asset and are booked in the income statement, respectively in other operating revenues and other operating expenses. Leasing Starting from January 1, 2019, following the first application of IFRS 16 – ‘Leases”, the Group recognizes for all leasing contracts, except short term ones, therefore within 12 months, and low-value ones, a right of use at the lease commencement date that corresponds to the date in which the underlying asset is available for use. The lease fee related to short-term contracts and low-value ones are booked as cost in the income statement throughout the lease term. The right of use is booked at cost, net of accrued depreciation and loss of value (impairment loss) and adjusted following each re-measurement of the lease liability. The value assigned to the right of use corresponds to the amount of the lease liability and it is amortized on a straight-line basis over the estimated useful life, or the term, of the contract, if lower. The financial lease liability is
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booked at the start of the contract for a value equal to the present value of the lease fee to be paid during the term of the contract, discounted using the incremental borrowing rate when the interest rate implicit in the leasing contract cannot be readily determined. Variable leasing costs are still booked to the income statement as a cost pertaining to the period. After the commencement date, the amount of liabilities for lease contracts increases to reflect the accrual of interest and decreases to reflect the payments made. Each lease payment is divided between repayment of principal portion of the liability and the financial cost. The financial cost is booked to the income statement for the term of the contract to reflect a constant interest rate on the residual debt of the liability for each period. The term of the lease is calculated based on the non-cancellable period of the lease, as well as periods covered by any extension option if it is reasonably certain that it will be exercised, or any other period covered by an option to terminate the lease if it is reasonably certain that it will not be exercised. The contracts are included or excluded from the application of the principle based on a detailed analysis carried out on the individual agreement and in line with the regulations foreseen by IFRS. Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the group’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is booked as an asset and is not amortized, but it is reviewed at least once a year to check that it did not incur a loss of value (impairment test), as indicated in the subsequent paragraph “Impairment”. Eventual impairment losses are booked to the income statement and cannot be reversed successively. Negative goodwill, should it emerge, would immediately be recognized in the income statement. Such goodwill is allocated, when an acquisition takes place, to cash-generating units represented by the single Legal Entities to which they refer. Intangible assets An intangible asset is booked only if it can be identified, if it is subjected to the Group's control, if it is probable that it will generate future economic benefits, and if its cost can be reliably determined. Intangible assets are registered at the cost determined according to criteria indicated for tangible assets and should it be estimated that they have a defined useful life, then they are amortized systematically during the estimated useful life with amortization starting from the moment when the assets are ready for use or in any case form when they start producing economic benefits for the company. The costs incurred to develop products are capitalized when the technical feasibility and the technical capability of the Group to complete the intangible asset are proven, when there is the intention to complete it for future use or sale, and when there is the capability of using or selling the intangible asset. Eventual incurred costs for intangible assets are booked to the income statement in the fiscal period when they are incurred, should they not satisfy the above-mentioned criteria.
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Following is the useful life generally attributed to the different asset categories: � Software licenses and similar rights: on the basis of the estimate of the period in which they will be
used by the company; � � Brands: 10 fiscal years; � Development costs: 3-5 fiscal years; � Other intangible assets: 3 fiscal years.
Impairment At least once every fiscal year the Group reviews the book value of its tangible and intangible assets to determine if there are indications that these assets incurred in impairment. Should such indications emerge, the amount that can be recovered is estimated in order to determine the amount of impairment loss. Should it not be possible to determine the recoverable value of a single asset, the Group carries out an estimate of the recoverable value of the cash-generating unit to which the asset belongs. The recoverable value is the higher amongst the net selling price and the value in use. The value in use is defined based on the actualization of future cash flows expected from the use of the good or from cash generating unit to which the asset belongs, discounted using an interest rate, net of taxes, that reflects the current money market value and the specific risks of the assets. The cash generating units have been identified consistently with the organizational and business structure of the Group, as homogeneous groupings that autonomously generate independent cash flows deriving from the constant use of assets. If the recoverable amount of an asset (or of a cash generating unit) is estimated to be lower than the carrying value, the carrying value of the asset is reduced to the lower recoverable value. The loss of value is charged to the income statement. When a devaluation no longer has reason to be maintained, the carrying value of the asset (or of the cash generating unit), with the exception of goodwill, is increased to the new value deriving from the estimate of its recoverable value, but not exceeding the book value that the asset would have had if there had been no impairment, net of depreciation that would have had to be calculated before the previous impairment. The reversal of the value is booked to the income statement. Investments The Group’s investments in minority interests or Joint Venture are accounted using the equity method. Investments in other companies are initially booked on a cost basis and then adjusted to the fair value at the balance sheet date, crediting/debiting in the consolidated income statement. Should the share price in an active market not be available and the fair value not able to be determined in a reliable manner, then they are valued on a cost of purchase basis, since it represents the best approximation of the fair value.
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Financial assets Financial assets are booked when the entity becomes part of contractual clauses of the instrument. They are initially classified according to the following measuring method: amortized cost, fair value booked through other comprehensive income OCI (FVOCI), or fair value through profit or loss (FVTPL). The classification of financial assets when initially booked depends on the characteristics of the contractual cash flows of the financial assets and the business model that the company applies to their management. A cash-generating unit can only be valued with the amortized cost or the FVOCI if it generates cash flows that depend solely on the principal and on the interest on principal amount outstanding (so-called Solely Payments of Principal and Interest or SPPI test). The initial valuation of financial assets takes place at the fair value, plus, in case of financial assets not value at the fair value recorded in the profit or loss for the period, the costs of the transaction directly attributed to the acquisition or the issuance program or the financial liability, except for trade receivables that do not have a significant financing component and are booked at the price of the transaction, as defined by IFRS 15. The subsequent assessment of financial assets takes place according to the following criteria: Amortized cost A financial asset is valued at the amortized cost if both of the following two conditions apply: - The financial asset is held within a business model whose objective is to hold financial assets to collect contractual cash flows - The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. These assets are valued using the effective interest rate criterion and are subject to an impairment test. The profit and losses are booked to the income statement of the fiscal period when the asset is eliminated, modified, or revalued. Fair value through other comprehensive income (FVOCI) A financial asset is valued at fair value through other comprehensive income when both of the following conditions apply: - The financial asset is held within a business model whose objective is both to collect contractual cash flows and selling financial assets - The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Interest income, impairment losses and gains are recognized in the income statement of the fiscal year while changes to fair value are booked in other comprehensive income. When derecognized, the cumulative change of fair value booked in other comprehensive income is reclassified in the income statement of the fiscal period.
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Fair Value through Profit or loss (FVTPL) This criterion includes assets held for negotiation (acquired for the short-term sale), financial assets designated when initially booked as financial assets at fair value with changes recognized in the income statement, or financial assets that must be booked at fair value. Financial assets with cash flows that do not meet the SPPI test are classified and valued at fair value in profit and loss, regardless of the business model. Financial assets at FVTPL are recognized in the financial position at fair value and net changes to fair value are recognized in the income statement. At initial recognition, an entity may irrevocably elect to present in other comprehensive income (OCI) subsequent changes in its fair value of an equity investment that is not held for trading and that is not a potential payment from a business combination transaction that would apply to IFRS 3 Inventories Inventories are recognized as the lower of the purchase cost and presumable market value. Cost is determined, when possible, at the specific purchasing cost or otherwise, using the average weighted cost method. The purchase cost includes the additional charges incurred to bring the stock in the current place or in the current conditions. The net realized value is determined based on current selling value of the inventory at the end of the fiscal year minus the estimated necessary costs to sell the asset. The value of obsolete and slow moving stock is devalued in relation to the possibility of using or selling, through accrual of an ad hoc provision. Account receivables
� Trade receivables At initial recognition, receivables are booked at fair value. The initial recognition value is subsequently adjusted to consider principal payments, eventual write-downs, and the amortization of the difference between repayment value and initial recognition value. The amortization was carried out using an effective internal interest rate represented by the rate that, at the initial recognition, aligns the current value of expected cash flows and the initial recognition value (so-called amortized cost method with the effective interest rate criterion). The credit impairment is determined based on the expected credit losses foreseen by IFRS 9, using supportable information that is available without undue cost or effort that include historical, current and, forward-looking data. This valuation method was applied using a simplified approach that allows entities to recognize expected losses on trade receivables without the need to monitor increases in credit risk, as foreseen by the general impairment model described in IFRS 9 (general deterioration method). The simplified approach allows booking losses on a lifetime basis, classifying credit risk by class. Different loss rates were established grouping together receivables based on past-due payment days and other risk indicators. The loss rates of receivables are recognized in the Income Statement at the Other Operating Expenses line. The allowance for doubtful accounts is classified as a reduction of the corresponding item recognized among assets.
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41
Sales of receivables on a non-recourse basis, in which all risks and benefits are transferred to the buyer, determine the removal of the receivables from total assets.
Contract works in progress When the result of a multi-year order can be estimated with reason, the contract work in progress is assessed based on the earned revenue, according to the stage of completion measured through the so-called cost to cost criteria, to book revenues and the results on an accrual basis in the different fiscal periods based on the stage of completion. The positive or negative difference between the value of the contracts and the advanced payments is booked respectively to the assets or liabilities in the balance sheet. When the result of an order cannot be reasonably estimated, it is valued at recoverable costs (“zero profit method”). The costs of the order are charged to income statement when incurred.
When it is probable that the total costs of the order are higher than the contractual revenues, the expected loss is immediately charged to the income statement, through a specific provision.
Cash on hand Cash on hand includes petty cash, checks and current accounts and deposits that can be refunded upon request, which can easily be converted in cash and are subject to an insignificant risk of changes in value. It is recognized at its nominal value. Own shares Own shares owned by the Parent Company are stated at cost and reported debiting net equity, including ancillary expenses in buying and selling. The financial effects deriving from possible subsequent sales are recognized as a difference in net equity. Financial liabilities Financial liabilities are initially recognized at a cost basis, which corresponds to the fair value of the received amount, net of transaction costs that are directly attributed to the borrowing. Afterwards, borrowings are assessed with the amortized cost criterion using the effective interest rate method. Each profit or loss is recognized in the income statement when the liability is removed and through the amortization process. Employee benefits Liabilities related to defined benefit plans (including severance pay for the quota matured before January 1, 2007) are calculated net of eventual assets serving the plan on the basis of actuarial hypothesis and on an accrual basis, coherently with the employment necessary to obtain the benefit; the liability is assessed by independent actuaries. The value of the actuarial profits and losses is booked in the other components of comprehensive income. Following Financial Law No. 296 of December 27, 2006, for Italian companies with
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42
over 50 employees the severance indemnity accrued from January 1, 2007 is considered a defined benefit plan. Provisions for risks and charges Provisions are booked when the Group has a real obligation as a result of a past event and it is probable that it will be asked to uphold this obligation. Provisions are allocated on the basis of the best estimate of costs requested to fulfil the obligation at the end of the fiscal year and are actualized, when there is a significant impact. In this case, provisions are determined actualizing future expected cash flows at an interest rate before taxes that reflects the current money market over time; the increase of the accrual with the passing of time is booked to the income statement in “Financial income and expenses”. Accounts payable – Trade Payables are recognized at the amortized cost, when they mature within the subsequent fiscal period; the value is equal to the nominal value as the effects generated at the amortized cost are not deemed significant. When, owing to the agreed payment terms there is a financial transaction, then debts are booked at their current value, attributing the discount as financial cost on an accrual basis. Other current liabilities These refer to relationships of different nature and are recognized at the amortized cost when they mature within the subsequent fiscal period; the value is equal to the nominal value, as the effects generated from the amortized cost are not deemed to be significant. Derivatives Derivatives are solely used to cover forward exchange rate risks. Related assets/liabilities are booked at fair value. Derivatives are classified as hedging instruments when formally documented and their effectiveness, periodically verified, is high. The variations in fair value of hedging derivatives, formally not satisfying the accounting conditions for hedge accounting, are booked to the income statement. Derecognition of financial assets and liabilities A financial asset shall be derecognized when: � the entity's contractual rights to the asset's cash flows have expired; � the asset has been transferred to a third party, namely:
� Transfers the contractual rights to receive the cash flow of the financial assets (essentially all risks and reward of ownership of the financial asset are transferred or the control of the asset was not kept);
� Or maintains the contractual rights to receive the cash flows from the financial asset but assumes the contractual obligation to pay the cash flows to one or more beneficiaries in an agreement whereby (i) the entity has no obligation to pay amounts to the eventual recipients unless it collects equivalent
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43
amounts from the original asset; (ii) the entity is prohibited by the terms of the transfer contract from selling or pledging the original asset other than as security to the eventual recipients for the obligation to pay them cash flows; (iii) the entity has an obligation to remit any cash flows it collects on behalf of the eventual recipients without material delay.
A financial liability is derecognized from the balance sheet when the underlying liability is extinguished – that is, when the obligation is discharged, cancelled or has expired. When an existing financial liability is replaced by a new one by the same lender with contractual terms that are substantially different, there is a derecognition of the original liability and the recognition of a new liability. In the same way a substantial modification of the terms of an existing financial liability or a part of it (whether or not it is attributable to the financial difficulties of the debtor) must be treated as a derecognition of the original liability and the recognition of a new one. Revenue recognition Revenues are recognized in the following way: Sale of goods and services: they are booked pursuant to IFRS 15. This principle came into force for the fiscal years beginning from January 1, 2018 or subsequently and replaces the principles of IAS 18 – Revenue and IAS 11 – Work in Progress as well as the interpretations of IFRIC 13 (Customer Loyalty Programs), IFRIC 15 (Agreements for the Construction of Real Estate), IFRIC 18 (Transfer of Assets from Customers) and SIC 31 (Revenue - barter transactions involving advertising services). IFRS 15 establishes a new model of revenue recognition that is applied to all contracts with customers except those regulated by the application of the IAS/IFRS principles including leasing, insurance contracts and financial instruments. The new model to recognize revenue foresees the following five steps: 1. Identify the contract with the customer. 2. Identify all the individual performance obligations within the contract. 3. Determine the transaction price; 4. Allocate the price to the performance obligations within the contract; 5. Recognize revenue as the performance obligations are fulfilled. The principle was applied retroactively but no adjustments on the opening balances emerged considering that the contracts signed with clients are independent from one another and do not include multiple performance obligation nor do they include variable considerations. In terms of costs to obtain the contract, the analysis carried out highlighted that costs do not fall within the scope of “incremental cost” and therefore are not recognized as assets. The “practical expedient” in paragraph 63 of IFRS 15 was used. It allows to not adjust the promised consideration for the effects of a significant financing component since, considering sector practices for consolidated relationships with clients, the Company expects, at contract inception, that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less. Interest – is recorded on an accrual basis.
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Dividends Dividend distribution to shareholders is booked as a liability in the fiscal period when it is approved by the Shareholders’ meeting. Dividends received are recognized as asset and as income in the income statement only when: a) the right to receive the dividend is established b) it is probable that the economic benefits from the dividend will flow to the entity; c) the amount of the dividend can be reliably estimated. Costs Costs and other operating charges are booked in the income statement when they are incurred, on an accrual basis and in correlation to revenues, when they do not produce future economic benefits or they do not have the prerequisites to be booked as assets in the financial statement. Financial charges are booked on an accrual basis as a function of time using the effective interest rate. Income taxes The parent company Itway S.p.A. and its Italian subsidiaries exercised the option for the so-called domestic tax consolidation scheme as per articles 117 and following of the DPR 917/86 (TUIR) that allows determining the income tax on the basis of taxable income that is the algebraic sum of the single companies. The economic relationship, the responsibility and the reciprocal obligations between the consolidating companies and the subsidiaries are defined in the “regulation of the consolidation for the companies of the Itway Group”. Current income taxes are calculated based on the best estimate of the taxable income, in relation to current fiscal legislation in the Countries where the Group operates. Deferred taxes Deferred and prepaid taxes are calculated using the liability method, based on the time differences resulting, at the Financial Statements closing date, from the value of assets and liabilities posted in the balance sheet and the corresponding values recognized for tax purposes. Active deferred taxes are posted against all timing deductible differences, and for possible tax losses carried forward, in the amount they are recoverable by future taxable income. The value of deferred tax assets is reviewed at the closing of each fiscal year and reduced if not recoverable. In particular, in planning Budget and Business Plans used for the impairment tests it has been considered future taxable income. Deferred tax assets and liabilities are calculated based on the tax rates that are forecast to be used in the fiscal year in which such assets will be realized or liabilities extinguished, taking into account existing tax rates at the date of the Financial Statements. Foreign currency transactions Itway Group uses the Euro for presentation purposes. Foreign exchange transactions, are initially booked at the exchange rate at the date of the transaction. Assets and liabilities in foreign exchange are booked at the
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45
reference exchange rate at the fiscal year closing date and the relative profits and losses are booked in the Income Statement. The assets booked at the historical cost in foreign currency are converted using the exchange rate in force on the first date of the transaction. Earnings per share The basic earnings per share are represented by the net result of the fiscal period that can be attributed to owners of ordinary shares considering the weighted average of ordinary shares outstanding in the fiscal year. The diluted earnings per share are calculated on the weighted average of the shares outstanding, considering all potential ordinary shares with a dilution effect (ex. issuance of option rights, warrants, etc.). Recently issued accounting principles The criteria used to draft the consolidated Financial Statements for the 2020 fiscal year are not different from those used for the Financial Statements at December 31, 2019, except for the accounting principles, amendments and interpretations applicable from January 1, 2020, including: Definition of Material (Amendments to IAS 1 and IAS 8): The document introduced changes in the definition of “material” in the IAS 1 and IAS 8 principles. The adoption of the amendment did not impact the consolidated financial statements of the Group. Definition of a Business (Amendments to IFRS 3): The document clarifies the definition of “business” in correctly applying the IFRS 3 principle. The adoption of the amendment did not impact the consolidated financial statements of the Group. References to the Conceptual Framework in IFRS Standards: The amendment is effective for the period that begin January 1, 2020 or subsequently. The Conceptual Framework sets out the fundamental concepts for financial reporting that guide the Board in developing IFRS Standards. The adoption of this amendment did not impact the consolidated financial statements of the Group. Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform. This modifies IFRS 9 - Financial Instruments and IAS 39, in addition IFRS 7. The adoption of this amendment did not impact the consolidated financial statements of the Group. Accounting principles, amendments and interpretations applicable at a later date. Following are the principles, amendments and interpretations that, at the writing of the current Financial Statements, were endorsed but are not yet effective: Covid-19 Related Rent Concessions (Amendment to IFRS 16): The amendment allows lessees to recognize reductions in leases related to Covid-19 without assessing, through an analysis of the contracts, whether the
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46
definition of lease modification under IFRS 16 was respected. Directors do not expect a significant impact in the Group’s consolidated financial statements from the adoption of this amendment. “Extension of the Temporary Exemption from Applying IFRS 9 (Amendments to IFRS 4)”: The amendment allows extending the temporary exemption from applying IFRS 9 until January 1, 2023. This amendment entered into force on January 1, 2021. Directors do not expect a significant impact in the Group’s consolidated financial statements from the adoption of this amendment “Interest Rate Benchmark Reform—Phase 2” that contains amendments to the following standards: - IFRS 9 Financial Instruments; - IAS 39 Financial Instruments: Recognition and Measurement; - IFRS 7 Financial Instruments: Disclosures; - IFRS 4 Insurance Contracts; and - IFRS 16 Leases. All changes came into force on January 1, 2021. Directors do not expect a significant impact in the Group’s consolidated financial statements from the adoption of this amendment New accounting principles and amendments not yet endorsed by the European Union as of December 31, 2020
At the date of approval of the current Financial Statements, IASB issued, but the European Union has still not endorsed, some accounting principles, interpretations and amendments, some of which still in the consultation phase, including:
− IFRS 17 Insurance Contracts –will replace the current IFRS 4 with the objective to increase the transparency on the sources of profit by introducing a single principle to recognize revenues reflecting the services rendered by the insurance company. It will come into force on January 1, 2023;
− IFRS 3 Business combination –IASB introduced a definition of business that is much narrower compared with the current one. The changes will be applicable for acquisitions subsequent to January 1, 2022.
− IAS 1 Presentation of Financial Statements: the document aims to clarify how to classify debt and other short or long-term liabilities. The amendments will come into force on from January 1, 2023.
Eventual impacts of the accounting principles, the amendments and interpretations that will soon be applicable on financial disclosure of the Company are currently being assessed and measured. To the date of the writing of the current Annual Financial Report the accounting principles, interpretations and amendments listed above are not expected to have a significant impact on the economic and financial situation of the Company but an in-depth assessments in underway by the management.
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Other information
With regards to the Consob information request regarding significant transactions and balances with related parties, please note that these related parties, in addition to being highlighted in an ad hoc Note, if significant they are indicated separately in the financial statements schemes.
Other information required pursuant to article 114 of Legislative Decree 58/98 (TUF) In the notes to the annual financial statements as at December 31, 2020 that follow in each paragraph the following further information is reported: Note 33: the net financial position of the Parent Company and the Group that controls it, highlighting
separately the short term components from the medium- and long-term ones Notes 26-29 e 33: the expired debt positions of the Parent Company and the Group that control is,
divided by nature (financial, trade, tax, social security and towards employees) and the eventual related reaction initiatives by creditors (reminders, injunctions, interruption of supply, etc.);
Note 31: the main changes that took place in relations with related parties of this Company compared with the previous annual or half-year financial statements pursuant to article 154-ter of the TUF;
Note 26: eventual breaches of covenants, negative pledges and any other clause related to debt of the Company that limits the use of financial resources, with an updated indication of the level of compliance of these clauses;
Note 35: the state of implementation of eventual industrial and financial plans highlighting differences from the actual data from the budgeted ones.
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1. Sales revenue
Sales revenue for the fiscal period ended December 31, 2020 totalled Euro 35,786 thousand and following is the breakdown: Fiscal period ended Thousands of Euro 31/12/2020 31/12/2019
Revenue from sale of products 22,826 21,655 Revenue from services 12,960 9,564
Total 35,786 31,219
The results show an increase in revenue of the Group of approx. Euro 4.6 million mainly driven the Turkish and Greek subsidiaries.
2. Other operating revenue
Other operating revenue for the period ended December 31, 2020, totalled Euro 2,968 thousands and following is the breakdown: Fiscal period ended Thousands of Euro 31/12/2020 31/12/2019
Advertising and Marketing Contributions 50 111
Operating grants 38 -
Non-operating income 2,137 2,520
Other revenues and various proceeds 496 1.120
Proceeds from extraordinary transactions 247 375
Total 2,968 4,125
Non-operating income mainly refers to the write-off of debt positions towards suppliers and towards Mercatoria S.p.A. and Socrate SPV that in previous fiscal periods acquired the receivables of Unicredit, Banco BPM, and Intesa Sanpaolo towards Itway. On December 30, 2020, Itway concluded an agreement that foresees the write-off of 33% of the debt positions. In detail, Euro 1,792 thousand of non-operating income refers to the write-off of financial debt with Mercatoria and Socrate SPV and euro 345 thousand for the write-off of positions towards suppliers. Other revenue and proceeds include the increase in intangible assets for the product development for Euro 244 thousand, Euro 175 thousand of revenue for services rendered to associate company Be Innova, and other minor items. Proceeds from extraordinary transactions during the fiscal period refer to a non-recurring proceed in nature of Euro 247 thousand realized by the Parent Company following the collection of the guarantee deposit for the sale of the Greek and Turkish subsidiary that will not be returned after the transaction to buy back the subsidiaries that took place in April 2020.
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3. Cost for Products (net of charges in inventories of raw materials and goods)
Following is the breakdown: Fiscal period ended Thousands of Euro 31/12/2020 31/12/2019
Purchase of products 30,503 26,846
Cost for resold services 216 30
Additional purchasing charges (transportation) 28 33
Other purchases 12 17 Total 30,759 26,925
The increase in costs for products and resold services is strictly related to the higher sales revenue.
4. Cost of services
Following is the breakdown: Fiscal period ended Thousands of Euro 31/12/2020 31/12/2019
Directors’ remunerations of the parent company and social Charges 427 427
Directors’ remunerations of subsidiaries and social charges - -
Compensation for Statutory Auditors 69 69
Auditing company fees 140 101
Consultancy and collaborations 924 867
Commissions and agents’ charges 12 22
Advertising and trade fairs 247 207
Services, courses and client assistance 11 2
Telecom expenses 34 44
Insurance 69 119
Electricity, water and gas 28 31
Travel and representation 74 105
Specialist costs, IR and securities services 69 61
Other expenses and services 199 213 Total 2,304 2,269
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
50
Please note that:
• Consultancy includes non-recurring charges related to the management of extraordinary transactions underway and the financial debt remodulation for approx. Euro 488 thousand;
• The table includes the compensation agreed by social bodies deliberated at the Annual General Meeting of the Company and the Group, including social security charges and related accessories.
5. Personnel costs
Following is the breakdown, compared with the previous period: Fiscal period ended Thousands of Euro 31/12/2020 31/12/2019
Salaries 1,722 1,566
Social charges 509 467
Severance pay 85 50
Other personnel costs 195 176 Total 2,511 2,260
The following table details the average number of employees of the Group per category and the punctual figure at the end of the fiscal period compared with the previous year: 31/12/2020 31/12/2019 Variation 31/12/2020 31/12/2019 Variation
Avg. Avg. Punctual Punctual Managers 3 2 1 3 2 1 Mid-managers
5 6 (1)
5 6 (1)
Employees 42 35 7 45 36 9 Total 50 43 7 53 44 9
The average number of employee of the Group during the fiscal period was of 50 units, compared with 43 units in the previous fiscal period. The punctual data at the end of the period is of 53 units compared with 44 units in 2019.
6. Other operating expenses
Following is a breakdown compared with the previous period Fiscal period ended Thousands of Euro 31/12/2020 31/12/2019
Property lease, offices and vehicles 127 125
Writedowns of doubtful account 900 7
Extraordinary and contingent charges 23 304
Other charges 107 96 Total 1,157 532
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
51
The rental cost booked in the 2020 fiscal year refers to short term leasing costs (excluded from IFRS 16 application) and variable leasing payments (indexing and similar). The writedown on doubtful accounts refers to a prudential writedown of trade receivables.
7. Depreciation and Amortization
Following is a breakdown compared with the previous period:
Fiscal period ended Thousands of Euro 31/12/2020 31/12/2019
Depreciation of tangible assets 107 99
Amortization of intangible assets 308 326
Amortization for right of use 162 168
Writedown of investment - 45 Total 577 639
8. Financial income and expenses
Following is a breakdown:
The most significant variations regard: • the improvement in the Other proceeds line mainly relates to the payment by the Greek State
of contributions to those who regularly paid tax payables despite the concession to pay in instalments due to the Covid-19 situation
• The improvement in Financial Charges towards Financial Institutions reflects the sale to third parities of payables towards financial institutions from which interest payables are not applied;
Fiscal period ended Thousands of Euro 31/12/2020 31/12/2019
Financial income from financial institutions 5 5
Income from investments 5 15
Other income 53 2
Total financial income 63 22
Financial charges towards financial institutions (100) (253)
Bank commissions (78) (89)
Profit/(loss) on exchange rates 280 63
Other expenses (53) (30)
Total financial expenses 49 (309) Result of subsidiaries with Net Equity method (302) -
Total (190) (287)
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
52
• The improvement in the variation on exchange rates realized mainly by the Turkish subsidiary and related to the performance of the local currency;
• The increase in Other charges refers mainly to the costs of issuing convertible bonds previously described.
A cost of Euro 302 thousand was recognized as of December 31, 2020 for the application of the net equity method for the stake held in Be Innova S.r.l.
9. Income taxes Following is a breakdown: Fiscal period ended Thousands of Euro 31/12/2020 31/12/2019
Current taxes (387) (875)
Deferred (prepaid) taxes 353 479
Other taxes and fines - 1 Total (34) (395)
The following table highlights the reconciliation of the theoretical fiscal charge and the effective fiscal charge relating to the IRES tax on income: Fiscal period ended
Thousands of Euro 31/12/2020
31/12/2019
Taxable income
Tax Taxable income
Tax
Result before taxes 1,257 2,432 Theoretical tax rate (24%) 302 584
Temporary differences to be made in future fiscal periods 961 173 Differences that will not be carried over to future years (1,526) 223 Carry forwards of temporary differences from previous fiscal periods 746 546
Tax rate at 24% 1,438 3.376 Current taxes for the period 345 810
Deferred tax net of the use of taxes allocated in previous years (80) (229) Anticipated tax net of use of anticipated taxes allocated in previous years (273) (268)
Net tax for the period (8) 313
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
53
The following table highlights the reconciliation of the theoretical fiscal charge and the effective fiscal charge relating to the Irap tax:
Fiscal period ended Thousands of Euro
31/12/2020
31/12/2019
Taxable income
Tax Taxable income
Tax
Result before taxes 1,257 2,432 Results of foreign subsidiaries included in the consolidation perimeter not subject to IRAP (1,170) (1,476) Result subject to IRAP 86 957 Undeductable costs for IRAP purposes 782 1,074 Total 868 2,030
Theoretical fiscal charge (3,9%) 34 79 Temporary differences to be realized in future years Differences that will not be carried forward to future years 168 75 Carry forwards of temporary differences from previous fiscal periods Taxable income 1,036 2,106
Tax rate 4.82% 155 155 Tax rate 4.97% - - Tax rate 3.90% 882 1,951
Current IRAP of the fiscal year 42 84 Deferred tax net of use of taxes allocated in previous fiscal period - Anticipated taxes net of use of taxes allocated in previous fiscal periods -
Net IRAP for the fiscal period 42 60 10. Net result and earnings per share The basic result per share relative to the fiscal year that ended December 31, 2020 totalled Euro 0.17 and was determined dividing the result of the appropriate fiscal year of the Group by the average weighted number of outstanding Itway shares in the fiscal period, excluding own shares.
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
54
The weighted average number of outstanding shares is 7,203,419.
Fiscal period ended
31/12/2020
31/12/2019
Group net result in thousands of Euro 1,222 2,039 Weighted average no. of shares outstanding 7,203,419 7,052,275 Weighted average potential shares outstanding 19,946 0 Net result per share in Euro: - basic 0.17 0.29
- diluted 0.17 0.29
There are no elements that entail a dilution of the number of outstanding shares and therefore the base result coincides with the diluted one
11. Property, plant and equipment
Property, plants and equipment are expressed net of accumulated depreciation and have the following composition and variation in the last two fiscal years:
Thousands of Euro Property and
Offices
Equipment Tools Other goods
Total
Acquisition cost 4.233 242 34 4,247 8,756
Balance at 31.12.2018 4,233 242 34 4,247 8,756
Increases - - 75 8 83
Decreases - - - (53) (53)
IFRS16 “Leases” reclassification
(2,589) - - - (2,589)
Balance at 31.12.2019 1,644 242 109 4,202 6,197
Accumulated depreciation 749 242 16 4.031 5.038
Balance at 31.12.2018 749 242 16 4,031 5,038
Amortization for the period 92 - 8 68 168 Amortization balance at 31.12.2019
841
242
24
4,099
5,206
Net value:
December 31, 2018 3,484 - 18 217 3.719
December 31, 2019 803 - 85 103 991
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
55
Thousands of Euro Property and
Offices
Equipment Tools Other goods
Total
Acquisition cost 1,644 242 109 4,202 6,197
Balance at 31.12.2019 1,644 242 109 4,202 6,197
Increases - - 16 61 77
Decreases - - - - -
Balance at 31.12.2020 1,644 242 125 4,263 6,274
Accumulated depreciation 841 242 46 4,099 5,228
Balance at 31.12.2019 841 242 46 4,099 5,228
Amortization for the period 23 - 17 64 105 Amortization balance at 31.12.2020
864
242
63
4,163
5,333
Net value:
December 31, 2019 803 - 85 103 991
December 31, 2020 780 - 62 100 942
The investments in the ‘Other goods’ item recorded in the 2020 fiscal period essentially refer to the purchase of computers and network servers.
12. Goodwill
The overall goodwill as of December 31, 2020 totaled Euro 1,849 thousand broadly steady from the previous fiscal year. This goodwill is allocated to the units generating cash flows (Cash Generating Units), represented by the subsidiary Itway Hellas to which goodwill was allocated. Fiscal period ended Thousands of Euro 31/12/2020 31/12/2019
Itway Hellas 1,843 1,843
Other minor 6 9
Total 1.849 1.852
The Group updated the review of the recoverability of goodwill. The recoverable value of the CGU to which goodwill is attributed is determined by identifying the value in use. In order to verify the possible impairment of goodwill, the “Discounted Cash Flow” (“DCF”) method was used. This method requires discounting cash flows on the basis of an interest rate that represents the specific risk of any Cash Generating Units (CGU). The expected cash flows are taken from the Budgets of the identified CGU until December 31, 2025, approved by their respective Board of Directors, based on the performance expected of the market trends where the single CGU operate and acknowledged on the basis of the historical individual performances and the expected specificity. Perpetuity, which represents the Terminal Value, has to be added to the expected flows for the 2021-2025 period. The medium/long term growth rate (g rate) prudentially set at 0%.
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
56
The discounted interest rate used (WACC – Weighted Average Cost of Capital) is of 15.02% for the country risk for Itway Hellas, the only CGU that to date has booked goodwill. In this context, the situation caused by the current economic and financial crisis entailed the need to make assumptions regarding a future performance characterized by significant uncertainty. Therefore, near-term results could be different from those forecast, therefore requiring revisions that today cannot be either estimated or forecasted. The review of the values as of December 31, 2020, also through the sensitivity analysis carried out, did not prompt the need to write down the goodwill reported in the consolidated financial statements. This recoverability is furthermore confirmed by the sale values described in the management report.
13. Other intangible assets
Following is the breakdown and variation of other intangible assets in the past two fiscal periods:
Thousands of Euro Development
costs Patent rights Other
Work in progress Total
Acquisition costs 2.260 1,571 3,384 263 7,478 Balance at 31.12.2018 2,260 1,571 3,384 263 7,478 Increases - 24 - 763 787
Decreases - - - - -
Balance at 31.12.2019 2,260 1,595 3,386 1,026 8,267 Accumulated amortization 889 1.554 3,141 - 5,584 Balance at 31.12.2018 889 1,554 3,141 - 5,584 Amortization for the period 256 12 94 - 362 Amortization balance at 31.12.2019 1,145 1,566 3,235 - 5,946 Net value: December 31, 2018 1,371 17 243 263 1,894
December 31, 2019 1,115 29 149 1,026 2,319
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
57
The increase in “Work in Progress” refers to investments, the cost of which has been identified reliably, in the development and improvement of new products that began in the previous fiscal year and that required further investments for the Parent Company and the 4Science subsidiary. In particular, the Parent Company continued investments in ICOY® (I Care Of You), which is patent-pending, and that will position Itway as a leader in the Environment Health Safety (EHS) sector. The Group, which has the economic and technical skills to complete these activities in the near term, expects significant returns from these investments in future fiscal years. Euro 329 thousand of Development costs were capitalized at the end of the 2019 fiscal year and finalized in the current fiscal period.
14. Right of use
Right of use totaled Euro 2,605 thousand compared with Euro 2,801 thousand as of December 31,
2019. The assets in question mainly comprise property and vehicles. In particular, this amount includes the book value of the Milan headquarters, purchased in 2008
through an 18-year financial leasing contract (until the previous fiscal period recorded in the “Property, plants and machinery” according to the regulation previously in force IAS 17), booked at a value that includes directly booked accessory charges. It also includes the book value of a property in Ravenna (administrative headquarters of the Parent Company and the Italian companies of the Group), which was purchased in 2015. �
The related residual debt for the purchase of the two properties are booked in the Non-current and current financial liabilities item (Note 25 and Note 26).
Thousands of Euro
Development costs
Patent rights Other
Work in progress
Total Acquisition costs 2,260 1,595 3,386 1,026 8,267 Balance at 31.12.2019 2,260 1,595 3,386 1,026 8,267 Increases 329 7 - 244 580
Decreases - - - (329) (329)
Balance at 31.12.2020 2,589 1,602 3,386 941 8,518 Accumulated amortization 1,230 1,566 3,235 - 6,031
Balance at 31.12.2019 1,230 1,566 3,235 - 6,031 Amortization for the period 266 10 29 - 305 Amortization balance at 31.12.2020 1,496 1,576 3,264 - 6,336 Net value: December 31, 2019 1,115 29 149 1,026 2,319
December 31, 2020 1,093 26 122 941 2,183
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
58
15. Investments
Following are the non-fully consolidated investments as at December 31, 2020: • BE Innova S.r.l., Itway S.p.A. controls 50% of BE Innova, which offers a combination of
services that cover the range of activities connected to the management of information systems and security of large- and medium-sized firms.
• Business-e Infrastrutture S.r.l., controlled by Cooperativa Muratori Cementisti CMC aims at supplying Information Technology services in the construction sector. In the previous fiscal year, this stake was written down since the results of the company are not positive and given the difficulties of the CMC Group it was liquidated.
• Dexit S.r.l., operates in the IT services sector for the public administration. The 9% investment is valued at its purchase cost;
• Serendipity Energia S.p.A., Itway S.p.A. purchased a 10.5% from Business-e S.p.A. before its
sale to Maticmind with the aim of ensuring the development part of remote control over alternative energy plants that the subsidiary will build. Since the development is incurring delays compared with the initial plans of the company, the Group prudently wrote down the value of the investment in the 2017 fiscal year;
• Itway Mena FZC, the 4Science subsidiary owns a 17.1% stake. The situation in the Middle
East, where the bloody war in Syria continued, had repercussions on Lebanon, the main headquarters of majority shareholder Libanica. Over four million Syrians migrated to Lebanon with social tensions evolving into financial ones and Lebanon in default since 2020. In the UEA, the economy slowed and the 2020 Expo in Dubai, on which the Emirates were counting, was cancelled due to Covid-19. Several commercial and technical expansion initiatives were launched in West Africa (Nigeria) during 2018 and 2019, with developments in Nigeria, Kenya, and other neighbouring countries. In 2020, there was a generalized delay due to Covid-19, but the negotiations pipeline is interesting and the presence of Itway Technologies LTD, which is 49% controlled by Itway Mena, will ensure the continuity of operations in the Middle East and Africa regions.
• Idrolab S.r.l. , operates in designing Electronic Data Interchange (EDI) management software of
data in the plumbing and sanitary sector, a precursor to the emerging European Technical Information Model (ETIM) standard. Itway S.p.A. bought a 10% stake from Business-e S.p.A. before its sale to Maticmind.
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
59
Following is the book value posted in the financial statements of subsidiaries: Fiscal period ended Thousands of Euro 31/12/2020 31/12/2019 BE Innova S.r.l. 106 409 Be Infrastrutture S.r.l. - - Related investments consolidated at net equity 106 409 Dexit S.r.l. 374 374 Itway MENA FZC 29 29 Idrolab S.r.l. 195 195 Tiche Foundation 5 5 Other investments - 753 Investments in other companies valued at cost 603 1,356 Total investments 709 1,765
The investment in BE Innova S.r.l. declined for the recognition mentioned in Note 8. Other investments in the previous fiscal period included the shares received during the fiscal year from Cyber 1 for the sale, which did not take place, of the Greek and Turkish subsidiaries valued at fair value. The sale transaction did not take place and the Group no longer owns these shares. Regarding the exclusive agreement with Cyber Security 1 AB (formerly Cognosec), a company listed on the Nasdaq First North (COGS OTC-Nasdaq Int’l Designation: CYBNY) for the sale of 100% of Itway Hellas SA and Itway Turkyie Ltd., already described in previous financial statements, on April 7, 2020, Itway took back full control of Itway Hellas and Itway Turkiye, which operate as value-added distributors (VAD), following a serious and persistent breach by Cyber 1 of the agreements to buy the shares of these companies. The two subsidiaries, the shares of which had been sold on May 28, 2019, as part of the agreements with Cyber 1 to Credence Security Europe S.r.l. (which is 95% controlled by Cyber 1, and 5% controlled by Itway), which is now Iway International S.r.l., have continued to be managed by Itway while awaiting an agreement that gave Itway the right to buy the full ownership of Credence Security Europe in case of breach of payment obligations by Cyber 1 in favour of Itway. The buyback transaction, foreseen by the shareholder pact between Itway and Cyber 1, as shareholders of Credence Security Europe S.r.l., became appropriate following persistent delays in payments by Cyber 1, initially not contested by Itway as the company certified with formal documents its ability to fulfil the agreements rapidly, despite the delay. The situation changed following the sudden passing at the end of December 2019 of Kobus Paulsen, CEO and majority shareholder of Cyber 1, architect and main promoter of the agreement between Cyber 1 and Itway, and the resulting stalemate within the company due to the nomination of the new Board of directors of Cyber 1 that did not order the fulfilment of the agreed commitments.
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
60
The existing agreements regarding the sale of the two subsidiaries, therefore, lapsed as Cyber 1 breached payment commitments of over Euro 12 million. Itway received the total amount of Euro 2.6 million, in part during the 2018 fiscal year and part in subsequent years, and will keep it as foreseen by contractual agreements for the violation of the obligations from Cyber 1. Please note that, to date, there are no disputes or litigation between Itway and Cyber 1. Please also note that Itway Hellas and Itway Turkiye were fully consolidated in the Financial Statements of previous fiscal years since, according to IFRS 10, as there were the prerequisites to define the control over them The detail of total assets and liabilities, of revenues and of the result for the period of the investments is highlighted in the following table (data in thousands of Euro):
Associate company
Country Asset Liability Revenue Result of the period
BE Innova S.r.l.* Italy 6,331 3,899 1,675 14 Be Infrastrutture S.r.l.* Italy 1,269 1,373 670 7
* Refers to December31, 2019, the last available Financial Statements
Other companies
Country Asset Liability Revenue Result of the period
Dexit S.r.l.* Italy 3,703 1,241 4,335 93 Idrolab S.r.l.* Italy 1,505 1,355 1,679 112 Itway MENA FZC** United
Arab Emirates
1,292
5,182
- (54)
* Refers to December31, 2019, the last available Financial Statements ** Refers to September 30, 2017, amounts in AED
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
61
16. Prepaid taxes and deferred tax liabilities
Prepaid tax assets, net of deferred tax liabilities, as of December 31, 2020 totaled Euro 630 thousand (Euro 275 thousand as of December 31, 201). � The prepaid taxes mainly represent deferred assets calculated on taxed accruals for Euro 728 thousand (Euro 518 thousand as of December 31, 2019), and other temporary differences for Euro 143 thousand (Euro 273 thousand as of December 31, 2019) that the Group expects to recover in future fiscal years, based on the expected taxable income. These prepaid taxes will be booked in the next fiscal year for a total of Euro 51 thousand and in subsequent years for Euro 820 thousand.
Deferred tax liabilities are booked against temporary differences taxable in future fiscal periods and as of December 31, 2020 total Euro 241 thousand (Euro 516 thousand as of December 31, 2019). These mainly refer to the timing difference that emerged on the capital gain from the sale of the VAD Italia business unit in 2016, which was spread for the sake of the IRES tax over five fiscal periods. These deferred taxes are booked in the next fiscal year for a total of Euro 72 thousand and in subsequent ones for Euro 169 thousand.
17. Other non-current assets
Other non current assets as of December 31, 2020 total Euro 30 thousand (Euro 34 thousand as of December 31, 2019) and mainly refer to security deposits paid to clients/suppliers as collateral for services supplied.
18. Inventories
Inventories as of December 31, 2020 total Euro 361 thousand (Euro 653 thousand as of December 31, 2019) net of an allowance for obsolete inventory of Euro 145 thousand (unchanged compared with December 31, 2019).
19. Account receivables - Trade
Trade receivables as at December 31, 2020, all short-term, totaled Euro 18,921 thousand (Euro 19,203 thousand as of December 31, 2019). The value is expressed net of the allowance for doubtful accounts that as at December 31, 2020 stood at Euro 3,318 thousand (Euro 2,418 thousand as of December 31, 2019). The allowances are deemed to be congruous compared with the insolvency risks of the existing receivable. Account receivables also include work in progress on contracts for Euro 3,304 thousand (Euro 3,307 thousand as of December 31, 2019). These include approximately Euro 2,750 thousand, relating to a contract in progress to order allocated in past fiscal years for which the client notified that it was rejecting the amount requested by the Company based on the progress in the work carried out. Trade payables at December 31, 2020
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
62
include approximately Euro 1,300 thousand, for liabilities to suppliers related to this work in progress. In 2016, with the support of its legal advisers, the company started a legal procedure against this client in order obtain the consideration of this credit, filing a writ of summons with the Rome Court, the verdict of which in the first degree was not favorable to the Group. It was therefore decided to file an appeal with the Rome Appeals Court, as there are ample elements to support what Itway S.p.A. claims that were not considered by the judge in the first degree. The above situation highlights the presence of uncertainty on the possibility of recovering Euro 2,750 thousand booked in trade receivables that could have a significant impact on the consolidated financial statements to December 31, 2020. Itway, supported by its legal advisers and by an independent technical valuation that comforts it on the value of the state of progress of the work that was executed, maintained this receivable among its assets in the financial statements. Trade receivables also include Euro 1,592 thousand towards the Itway MENA FZC subsidiary company and Euro 1,018 thousand towards the affiliate BE Innova S.r.l.
In particular, the recoverability of receivables towards Itway MENA FZC is correlated to the recovery of activities in the area where the company operates (MEA countries) that to date suffered from a slowdown, also due to the impact of the Covid-19 pandemic. In the context of assessing the recoverable value of receivables, directors made provision to the allowance for doubtful accounts of Euro 900 thousand. Following are the movements in the allowance for doubtful accounts:
Fiscal period ended Thousands of Euro 31/12/2020 31/12/2019 Initial allowance 2,418 2,961 Write-down for the period 900 7 Utilization - (550) Final allowance 3,318 2,418
Following is the breakdown of trade receivables as at December 31, 2020 classified by maturity:
Thousands of Euro 31/12/2020 31/12/2019 Maturing 13,629 11,974 Expired up to 30 days 912 777 Expired from 30 to 60 days 67 55 Expired > 60 days 7,631 8,815
Total gross receivables 22,239 21,621 Allowance for doubtful accounts (3,318) (2,418) Total net receivables 18,921 19,203
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
63
20. Other current assets
Following is a breakdown:
Fiscal period ended
Thousands of Euro 31/12/2020 31/12/2019 Variation Tax receivables 896 828 68 Other receivables 93 144 (51) Accruals and deferrals 91 79 12 Total 1,080 1,051 29
Tax receivables include Euro 353 thousand related to tax credits for research and development activities and the development booked by subsidiary 4Science, that will be used to offset the payment of other tax obligations by the same subsidiary.
21. Cash on hand
Following is a breakdown:
Bank deposits in foreign exchange are valued at the exchange rate at the end of the period and generally are to make payments to suppliers in foreign currency (US Dollars) in the first days of the subsequent fiscal year. The cash available is of a temporary nature as its origins lie in the normal short-term financial cycle that establishes a concentration of inflows from clients at the end of the month while payments to suppliers are less concentrated.
22. Net equity
Share capital
The share capital of the parent company on December 31, 2020, fully paid, is represented by No. 7,905,318 ordinary shares for a nominal value of Euro 0.5 each, equal to Euro 3,952,659.
Fiscal period ended
Thousands of Euro 31/12/2020
31/12/2019
Variation
Bank and postal deposits in Euro
581
224
357
Bank deposits in US Dollars 400 383 17 Money and petty cash 1 1 - Total 982 608 374
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
64
Own share reserve This reserve, totaling Euro 320 thousand, recognizes the purchase/sale of own shares, including accessory charges of the Parent Company‘s treasury shares at the date of the current financial statements. On December 31, 2020, the Group had No. 203,043 own shares, representing 2.57% of share capital, booked at an average cost of Euro 1.58 each. The total book value of treasury shares diminished by Euro 1,026 thousand when Nice & Green exercised the warrant that was implemented through the sale of treasury shares, as foreseen in the investment agreement between Itway and this institutional investor. The warrant was exercised at a price, determined according to contractual terms, that led to a capital loss on sale of Euro 547 thousand, recognized by reducing net equity, according to IAS 32. Share premium and other transactions
At December 31, 2020, it totaled Euro 17,037 (Euro 17,584 thousand as of December 31, 2019). The variation is due to the capital loss from the sale of Euro 547 thousand of own shares, as better detailed in the previous paragraph on the Own Share Reserve. Pursuant to article 2431 of the Civil Code, please note that the share premium reserve can be eventually distributed if the legal reserve reaches a fifth of share capital. Legal reserve
As of December 31, 2020 it stands at Euro 485 thousand, unchanged from the previous fiscal period.
Voluntary reserve
As of December 31, 2020 it stands at Euro 4,792 thousand, unchanged from the previous fiscal period.
Allowance for Retained earnings (losses) This allowance, negative in sign, equal to Euro 17,960 thousand, comprises the reserve for results carried forward, the reserve generated from the first time adoption of IFRS and, highlighted separately, the translation reserve generated from the conversion into Euro of the balance sheet of the Turkish subsidiary expressed in different currencies from the one used by the Group.
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
65
23. Employee benefits
This item is comprised of severance indemnity of the Italian companies of the Group. Following are the variations: Thousands of Euro
31/12/2019
Proceeds/ (financial charges)
Increases
Actuarial (Profits)
losses
Use
Payments pursuant to
Law 296/2006
31/12/2020
Employee benefits 406 11 72 13 (19) - 483
Total 406 11 72 13 (19) - 483
Following are the main assumptions used in the actuarial estimates of employee benefits:
Calculation date 31/12/2020 Mortality rate IPS55 Tables Invalidity rate INPS tables Personnel rotation rate 3.00% Discount rate* 0.34% Salary increase rate 3.00% Rate of advances 2.10% Inflation rate 0.80%
In particular, please not that:
• The annual discount rate used to determine the current value of the obligation was derived, pursuant to paragraph 83 of IAS 19, from the Iboxx Corporate AA index with a 10+ duration at the date of measurement. Toward this end the yield was chosen with a duration that is comparable to the one of the collective of workers subject to the measurement;
• The annual rate of increase in the severance pay pursuant to article 2120 of the Civil Code is equal to 75% of inflation plus 1.5 percentage points.
Following are the demographic technical basis used:
Death IPS55 mortality tables
Inability INPS Tables classified by age, gender
Retirement 100% upon reaching compulsory general insurance (AGO) adjusted to requirements pursuant to Leg. Decree 4/2019
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
66
ANNUAL FREQUENCY OF TURNOVER AND ADVANCES ON THE S EVERENCE PAY (TFR)
Advances frequency 2.00%
Turnover frequency 3.00%
The annual frequency of advances and turnover is inferred from the historical experience of the Company and the frequencies deriving from the experience of actuarial services provider M&P based on a significant number of similar companies.
Assuming a 25 basis point increase in the technical actuarial rate compared with the one effectively applied for assessments to December 31, 2019, and all other actuarial hypothesis being equal, the potential loss of current value of liabilities for defined benefit plans underway would total some Euro 13 thousand. At the same time, assuming a 25 basis point drop in the same interest rate, there would be a potential increase in the current value of the liability of some Euro 12 thousand.
The changes to the remaining actuarial hypothesis would generate a significantly lower impact on the current value of the liabilities for defined benefit plans booked in the financial statements.
24. Non-current trade payables
This item, totalling Euro 348 thousand, represents the medium/long term part of trade payables in force as of December 31, 2020 that were subject to settlement and that involved agreed payments that will be concluded beyond December 31, 2021.
25. Non-current financial liabilities
Following is the breakdown:
This item represents: - For Euro 1,786 thousand the non-current quota of the residual debt towards a leasing Institute for
the offices in Milan as previously commented (Note 14) maturing in 2026. The contract was already classified as financial leasing according to IAS 17. With the entry into force of IFRS 16, starting from January 1, 2019, this contract was recognized with the financial accounting method
Fiscal period ended
Thousands of Euro 31/12/2020
31/12/2019
Variation Maturity
Non-current residual leasing debt 1,786 1,731 55
November 2026 Non-current residual debt for mortgages 606 - 606 May 2022/June 2029 Non-current residual debt towards other investors 1,984 - 1,984
May 2023/December 2025
Debt for medium/long term right of use 13 54 (41) Total 4,389 1,785 2,604
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
67
foreseen by the new standard that, essentially, is in line with the valuation criterion previously adopted for this contract. These are the main terms of the leasing contract: cost of the property Euro 2,995 thousand, variable interest rate (3-month Euribor + 160 bps) convertible into a fixed rate at any moment chosen by the lessee.
- For Euro 606 thousand the non-current quota of two Iccrea financings, previously booked among current financial liabilities. In December 2020, an agreement was reached with the financial institution to redefine the terms of the financings and allowing them to go back to their original medium-term status;
- For Euro 1,717 thousand the non-current quota of residual debt towards Mercatoria S.p.A. and Socrate SPV as formally agreed in December 2020, and for Euro 267 thousand for the non-current quota of financing secured by Itway Hellas from the Greek state for support of companies in lockdown during the Covid-19 pandemic.
- For Euro 13 thousand the non-current quota of the right-of-use financial debt deriving from the application of IFRS 16.
Following is the detail of the residual non-current leasing debt broke down by maturity:
Fiscal period ended
Thousands of Euro 31/12/2020 31/12/2019 Residual non-current debt, net of interests: From 1 to 5 years 551 556 Over 5 years 1,235 1,175 Residual leasing debt, net of interests 1,786 1,731
26. Current financial liabilities
As of December 31, 2020, they total Euro 3,420 thousand (Euro 7,985 thousand at December 31, 2019) and are mainly represented by debt towards banks and unsecured loans. In addition, this item includes Euro 76 thousand of the short-term portion of the right of use debt, pursuant to IFRS 16, as per Note 25. As of December 31, 2020, the Parent Company had expired positions totalling Euro 1.1 million, and the Itway Group of Euro 1.3 million. In past fiscal years, the company and the Group started talks with financial institutions to redefine the terms and conditions to re-modulate financial debt. Talks continued on a bilateral basis with each institution after the interruption of collegiate negotiations and, progressively, it has remodulated debt with most lenders. On December 30, 2020, an agreement was reached with Mercatoria, the main creditor of the Group (receivables totalling Euro 5.4 million, representing 75% of the total Parent Company indebtedness) for the execution of a recovery plan according to art. 67, paragraph 3, letter d), of R.D. 267/1942. This agreement foresees a 67% debt reduction with payments in 36 monthly instalments starting from June 2020 and a further reduction in case of early repayment.
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68
To date negotiations are still under way for minor amounts with some banking institutions or special purpose vehicles that in the past bought banking debt. The Company deems reasonable that it will be able to reach an agreement on the modalities to pay back the debt, in line with the recovery plan. In terms of expired positions of Itway S.p.A. and the Itway Group, please note that to date there are legal disputes or judicial initiatives for Euro 339 thousand.
27. Current trade payables
Current trade payables, including invoices not yet received, amount to Euro 13,389 thousand as of December 31, 2020, of which Euro 2.3 million are invoiced not yet received compared with Euro 14,158 thousand at December 31, 2019. The balance at December 31, 2020, includes an expired debt towards suppliers of approximately Euro 2.7 million (of which approximately Euro 0.8 million for amounts being contested, possibly at court level). Trade payables includes euro 1.3 million related to Euro 2,750 thousand of orders related to the work in progress as commented in Note 19. The Parent Company as of December 31, 2020, had expired debt towards suppliers totalling Euro 1.6 million (of which Euro 0.5 million for amounts beg contested by one creditor, also in court). With reference to the commercial expiration of Itway S.p.A. and of the Itway Group, it should be noted that to date, some reminders have been received from creditors but there has not been any suspension of the supplies that could compromise the ordinary running of the company.
28. Tax payables
Tax payables as of December 31, 2020 total Euro 2,656 thousand (Euro 2,447 thousand at December 31, 2019) and following is the breakdown:
Fiscal period ended Thousands of Euro 31/12/2020 31/12/2019 Variation
Debt for income taxes 427 406 21 VAT 1,635 1,542 93 Withholding on personnel compensation 412 297 115 Other 182 202 (20) Total 2,656 2,447 209
VAT payables as of December 31, 2020 for Euro 146 thousand are due to debts not paid at the natural maturity (compared with Euro 168 thousand as of December 31, 2019) and that Management expects to pay back within the terms foreseen by regulations in force. The Group has an expired debt towards tax authorities, including the expired VAT mentioned above, of approximately Euro 441 thousand as of December 31, 2020. It relates to a debt not paid at the
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69
natural expiry and partially paid, for Euro 218 thousand, in January 2021; the residual debt will be paid back within the terms foreseen by regulations in force.
29. Other current liabilities
Other current liabilities as of December 31, 2020 total approximately Euro 2,202 thousand (Euro 2,570 thousand at December 31, 2019) with the following breakdown:
Fiscal period ended Thousands of Euro 31/12/2020 31/12/2019 Variation
Debt towards personnel for remuneration 185 142 43 Other debt towards personnel 305 218 87 Debt towards directors and collaborators 505 544 (39) Debt towards social security institutions 216 159 57 Accruals and deferrals 642 226 416 Advanced payments received and other liabilities 349 1,281 (932) Total 2,202 2,570 (368)
Other debt towards personnel includes provisions for deferred remuneration (vacation and additional monthly payments). Accruals and deferrals mainly include deferrals for services already invoiced, but relevant in the subsequent fiscal year. The Euro 353 thousand increase of this line is mainly due to the recognition of a tax credit on research and development investments made by the 4Science S.r.l. subsidiary in past fiscal years but attributable to the 2021 fiscal year. In the “Advanced payments and other liabilities” item, the most significant variation, of Euro 753 thousand, refers to the settlement of debt towards Cyber 1 in connection to the shares the Group received in the context of the sale of the Greek and Turkish subsidiaries. This sale was never sealed and the Group no longer owns Cyber 1 shares. This is why the related debt was cancelled. Other current liabilities do not include debt towards personnel that was not paid at the natural expiry. However, as of December 31, 2020, the Parent Company had approximately Euro 5 thousand of expired debts towards social security bodies that will be paid within the regulations in force. At the same date, the Itway Group had expired debts towards social security bodies of approximately Euro 34 thousand that will be paid within the regulations in force. Debts towards social security bodies include Euro 75 thousand that can be paid back in instalments over another four years.
30. Obligations and guarantees
The obligations and guarantees as of December 31, 2020 refer to third party guarantees in our favour for Euro 700 thousand relative to bank guarantees on behalf of companies of the Group in favour of suppliers or to take part in public tenders.
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70
31. Information on related parties
During the 2020 fiscal period, the Group had commercial and financial relationships with related companies. These are normal business activities, regulated with contractual conditions established by the parities at fair value, consistent with the ordinary market procedures. This is a summary:
The Group’s relationship with its managers is summed up in the Remuneration Report of the Board of Directors. Itway directs and coordinates its subsidiaries in Italy. This activity consists in indicating the general strategic and operational direction of the Group, defining and adjusting the Organizational Model and elaborating the general policies to manage human and financial resources.
No company directs or controls Itway S.p.A
32. Remuneration to Directors, Auditors, managing directors and managers with strategic Responsibility
Following the introduction of article 123 ter of the TUF, the data on these remunerations are reported analytically on the report on remuneration that will be made available to the public within the terms foreseen by law at the administrative headquarters. It will also be possible to consult them on the Internet site www.itway.com in the Investor Relation section.
33. Net financial position
Pursuant to Consob Communication No. 6064293 of July 28 2006, following is the breakdown of the Group’s net financial position (NFP):
Thousands of Euro Receivables Payables Costs Revenue Itway S.p.A. vs Giovanni Andrea Farina & Co. S.r.l. 304 - 198 2 Itway S.p.A. vs Be Innova S.r.l. 4,587 117 177 175 Itway S.p.A. vs Fartech S.r.l. 34 142 31 33 TOTAL 4,925 259 406 210
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
71
The Net financial position of the Group as of December 31, 2020, improved by Euro 1,982 thousand compared with December 31, 2019; this significant improvement is mainly related to the write off of some debt positions, in particular, the agreement reached with the main creditor Mercatoria for the execution of the recovery plan according to article 67, paragraph 3, letter d) of R.D. 267/1942, already referred to previously. To date, negotiations are still underway for minor amounts both with some financial institutions and with a Special securitization vehicle that, in the past, acquired bank debt. The Company deems that it can reasonably conclude agreements on the repayment in line with the approved recovery plan. Furthermore, on December 15, 2020, financing terms with Iccrea were redefined, allowing to reclassify debt as medium-term while in past fiscal periods it was part of current liabilities because of covenant breaches. Current financial receivables include: - A receivable of Itway S.p.A. towards the partner company Giovanni Andrea Farina & Co S.r.l,
mentioned in the previous Note 31 - A receivable that Business-e S.p.A. had towards Be Innova and that has been transferred to Itway
as a result of the sale of the subsidiary. Current financial assets are represented by the cash collateral of Itway Turkey and Itway Greece for bank guarantees issued and maturing by 31/12/2021. Non-current financial assets, totalling Euro 2,098 thousand, reflect: - Cash on hand present on a checking account with the Cassa di Risparmio di Ravenna as collateral
of a banking guarantee issued in favour of Esprinet with a five year duration; therefore they are not available until the maturity of the banking guarantee.
- Non-current financial assets reflect interest-free financing for a total of Euro 1.6 for Be Innova to finalize the “Adapt project”. The contract was signed by the minority interest in January 2017. Out
Thousands of Euro
31/12/2020
31/12/2019
Cash on hand 982 608 Financial receivables 2,275 2,498 Current financial assets 1,080 1,210 Current financial liabilities (2,947) (7,985) Convertible bonds (473) -
Net current financial position 917 (3,669)
Non-current financial assets 2,098 2,098
Non-current financial liabilities (4,389) (1,785)
Non-current net financial position (2,291) 313
Total net financial position (1,374) (3,356)
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
72
of total expected Euro 3,610 thousand, the company has already secured the first quotas, namely a Euro 327 thousand capital grant and a Euro 704 thousand subsidized medium-term loan, Euro 176 thousand of which was partially repaid, through which, combined with Be Innova's financial and income expectations that can be inferred from the 2021-2025 business plan, the financial and trade payables towards Itway S.p.A will be repaid.
The non-current net financial position reflects the funding detailed in Note 25. Net Financial Position of the Parent Company
The net financial position of the Parent Company as of December 31, 2020, improved by approximately Euro 2,346 thousand compared with December 31, 2019, as a result of the effects on the Group financial position described in the previous paragraph.
34. Information on the sector
The Group has three reference sectors: “Valued Added Distribution”, “Value Added Reseller”, and “Value Added Services”. These sectors are determined on the basis of market segments in which the companies of the Group work in and reflect the organizational and internal reporting structure of the Group. Through the Value Added Distribution sector the Group operates in the distribution of software and hardware products, certification services on software technologies distributed and pre- and post- sales technical assistance. Clients are “system integrators” and “value added resellers” who sell products to end clients. The VAS sector in the 2020 fiscal period reported data that was not material as still in the development phase and has therefore been aggregated, for the purpose of sector reporting, in the VAD sector. Through the “e-business Services and Security Management” the group operates in the following market sectors:
Thousands of Euro
31/12/2020
31/12/2019
Cash on hand 271 21 Financial receivables 2,275 2,498 Current financial liabilities (2,625) (7,161) Convertible bonds (473) - Net current financial position (552) (4,642) Non-current financial assets 2,098 2,098 Non-current financial liabilities (3,574) (1,830)
Non-current net financial position (1,476) 268
Total net financial position (2,028) (4,374)
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
73
• Professional services and production of services and software technologies for e-business; • Distribution and integration of products and services for logical security of information
systems; • Professional services of system integrators and centralization of applications.
Following is the breakdown of the main economic data regarding the identified segments, in the fiscal year ending December 31, 2020:
Thousands of Euro
Greece and Turkey VAD
transaction
Activities of Parent
Company and other
sectors
Consolidated total
Turnover Revenue 33,840 1,946 35,786 Other revenue and proceeds 70 2,898 2,968
Total revenue 33,911 4,843 38,754 Operating costs Costs for products (30,386) (373) (30,759)
Personnel costs (1,041) (1,470) (2,511)
Other costs and operating expenses (557) (2,904) (3,461)
Total operating costs (31,983) (4,748) (36,731)
EBITDA 1,927 96 2,023
Amortization (108) (469) (577)
EBIT 1,819 (373) 1,446
Financial income/(charges) 269 (459) (190)
Result before taxes 2,089 (833) 1,256
Income taxes (269) 235 (34)
Net result 1,820 (598) 1,222
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
74
Following is the breakdown of the main economic data regarding the identified segments, in the fiscal year ending December 31, 2019:
Thousands of Euro
Greece and Turkey VAD
transaction
Activities of Parent
Company and other
sectors
Consolidated total
Turnover Revenue 30,144 1,075 31,219 Other revenue and proceeds 144 3,981 4,125
Total revenue 30,288 5,056 35,344 Operating costs Costs for products (26,759) (166) (26,925)
Personnel costs (1,081) (1,179) (2,260)
Other costs and operating expenses (897) (1,904) (2,801)
Total operating costs (28,737) (3,249) (31,986)
EBITDA 1,551 1,807 3,358
Amortization (102) (537) (639)
EBIT 1,449 1,270 2,719 Financial income/(charges) 23 (310) (287)
Result before taxes 1,472 960 2,432
Income taxes (348) (47) (395)
Net result 1,124 914 2.037
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
75
Following is the balance sheet data regarding the identified segments for the fiscal year ended December 31, 2020:
Thousands of Euro
Greece and Turkey VAD
transaction
Parent Company and other activities
Consolidated Total
Non-current asset Property, plants and equipment 121 821 942 Goodwill 6 1,843 1,849 Other intangible assets 203 1,979 2,183 Right of use 47 2,558 2,605 Prepaid taxes assets - 871 871 Investments - 709 709 Non-current financial assets - 2,098 2,098 Other non-current assets 13 16 30
Total 391 10,897 11,287 Current assets Inventories 361 - 361 Account receivable - Trade 12,698 6,223 18,921 Other current assets 282 799 1,080 Cash on hand 610 371 982 Financial receivables - 2,275 2,275 Current financial assets 1,080 - 1,080
Total 15,030 9,668 24,699 Total assets 15,421 20,565 35,986 Net equity 3,922 4,938 8,860 Non-current liabilities Employee benefits - 483 483 Non-current trade payables - 348 348 Liabilities for deferred taxes - 241 241 Non-current financial liabilities 269 4,120 4,389
Total 269 5,192 5,461 Current liabilities Current financial liabilities 38 3,382 3,420 Infra-sector payables/receivables 48 (48) - Account payables - Trade 8,419 4,970 13,389 Tax payables 2,091 565 2,656 Other current liabilities 635 1,566 2,200
Total 11,230 10,435 21,665 Total liabilities 15,421 20,565 35,986
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
76
Following is the balance sheet data regarding the identified segments for the fiscal year ended December 31, 2020:
Thousands of Euro
Greece and Turkey VAD
transaction
Parent Company and other activities
Consolidated Total
Non-current asset Property, plants and equipment 105 886 991 Goodwill 9 1,843 1,852 Other intangible assets 313 2,006 2,319 Right of use 122 2,679 2,801 Prepaid taxes assets - 791 791 Investments - 1,765 1,765 Non-current financial assets - 2,098 2,098 Other non-current assets 10 23 34
Total 559 12,091 12,650 Current assets Inventories 653 - 653 Account receivable - Trade 11,626 7,578 19,203 Other current assets 281 770 1,051 Cash on hand 564 44 608 Financial receivables - 2,498 2,498 Current financial assets 1,210 - 1,210
Total 14,333 10,890 25,224 Total assets 14,893 22,982 37,874 Net equity 4,146 3,863 8,009 Non-current liabilities Employee benefits - 406 406 Liabilities for deferred taxes - 516 516 Non-current financial liabilities 6 1,778 1,785
Total 6 2,701 2,707 Current liabilities Current financial liabilities 46 7,939 7,985 Infra-sector payables/receivables 264 (264) - Account payables - Trade 7,808 6,350 14,158 Tax payables 2,013 434 2,447 Other current liabilities 609 1,959 2,568
Total 10,740 16,418 27,158 Total liabilities 14,893 22,982 37,874
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
77
35. Subsequent events
As highlighted in the 2020-2023 Industrial Plan approved by the Board of Directors and certified by an independent third party, the Group is expected to focus on the sectors of Cybersecurity, Data Science, and Safety. Furthermore, there will be an increasing focus on the Be Innova S.r.l. and 4Science S.r.l. subsidiaries.
It is difficult to assess today whether there will be a significant impact on the business performance in light of the current situation concerning the possible effects of the Covid-19 pandemic. However, it is important to remember that the activities of the Itway Group, mostly related to cybersecurity, have proven essential also, and above all, in these moments of global emergency, proving that Cybersecurity, dealing with the security of the core activities of companies, can be considered anti-cyclical compared to other market sectors. The measures adopted by almost all organizations in terms of smart working multiplies exponentially the risks related to security, resulting in greater demand for Cybersecurity solutions to mitigate these risks. The activities of Itway, being mainly made up of services, continued also with the new modality of remote working that the COVID emergency imposed. There was no significant impact on the Greek and Turkish subsidiaries, given the limited spread of the pandemic in these countries. However, as described above, the Safety ICOY Business Unit in 2020 and partially also in 2021 suffered and will suffer from a lack of growth due to the segments it targets -- manufacturing, metallurgical, oil & gas, transport & logistic. The 2020 sales budget has been delayed in part to 2021 and in part in 2022. There was, however, constant and growing interest towards this innovative product that is proprietary to Itway from potential clients who are more aware of the safety of their workers. Despite an expected 14-month delay, the outlook for this innovative product line is still very positive.
36. Contingent liabilities
The Directors deem that there are no significant potential liabilities. 37. Non-recurrent, atypical and/or unusual transactions
During the fiscal year that ended on December 31, 2020, no significant and/or non-recurrent and/or atypical and/or unusual transactions were carried out with third parties, as defined by Consob Communication of July 28, 2006. Previous paragraphs broadly describe the significant, non-recurring transactions related to the write-off of some debt positions.
38. Financial risk management: objectives and criteria
The international accounting principle IFRS 7 requires providing disclosures in their financial statements that enable users to evaluate:
� The significance of financial instruments for the financial position and performances;� � The nature and entity of risks arising from financial instruments to which the Group is
exposed during the fiscal year and as at the reporting date, and how the entity managed those risks.
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
78
The accounting principles regarding financial instruments applied in drafting the consolidated balance sheet are described in the section Accounting Principles and Main Assessment Criteria, while the definition of financial risks and the analysis of the degree of significance of the exposure of the Itway Group to the different categories of risks identified are reported hereinafter. Account receivables, cash, and cash on hand that derive from the operating activity represent the main financial activities of the Group. Financial liabilities are made up of short-term debt towards major credit institutes and medium- and long-term debt towards leasing companies, Mercatoria S.p.A., and ICCREA.
The following sheet reconciles the balance sheet items that represent financial instruments and the financial assets and liabilities categories in accordance with accounting principle IFRS 9:
ASSETS December 31, 2020 Thousands of Euro Carrying
value Financial
instruments at amortized
cost
Financial instruments at
FVTPL (*)
Financial instruments at FVTOCI (**)
Other non-current assets 30 30 - - Non-current financial assets
2,098
2,098
Non-current assets 2,128 2,128 - - Trade receivables 18,921 18,921 - - Other current assets 1,080 1,080 - - Other financial assets 2,275 2,275 Cash on hand 1,080 1,080 - - Current assets 23,356 23,356 - -
Assets December 31, 2019 Thousands of Euro Carrying
value Financial
instruments at amortized
cost
Financial instruments at
FVTPL (*)
Financial instruments at FVTOCI (**)
Other non-current assets 34 34 - - Non-current financial assets 2,098
2,098
Non-current assets 2,132 2,132 - - Trade receivables 19,203 19,203 - - Other current assets 1,051 1,051 - - Other financial assets 2,498 2,498 Cash on hand 608 608 - - Current assets 23,360 23,360 - -
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
79
*
* Fair Value Trough Profit and Loss
** Fair Value Trough Other Comprehensive Income
Financial assets and liabilities are booked at a value that is not different from the fair value.
Interest rate risk
The financial instruments of the Group include anticipated credits by banking institutes and sight deposits. Such instruments finance the Group’s activities
Total loans obtained by the group foresee variable interest rates (generally 1-3 month Euribor + spread). Therefore the interest rate risk is represented by the exposure of cash flows to interest rate fluctuations. The current policy of the Group is not to hedge interest rate fluctuations. On the basis of the short-term average exposure in the period, a fluctuation of 1 percentage point of interest rates would entail a variation of +/- in interest payments of some Euro 34 thousand per fiscal period. On non-current financial liabilities a 1-percentage point fluctuation in interest rates would entail a variation of +/- of interests of some Euro 44 thousand per fiscal year.
LIABILITIES December 31, 2020 Thousands of Euro Carrying value Liabilities for
derivatives at FVTPL (*)
Other financial liabilities
Hedging derivatives
Non-current financial liabilities 4,389 - 4,389 -
Non-current liabilities 4,389 - 4,389 - Current financial liabilities 3,420 - 3,420 - Current trade payables 13,389 - 13,389 - Tax payables 2,656 2,656 Other current liabilities 2,202 - 2,202 -
Current liabilities 21,667 - 21,667 -
LIABILITIES December 31, 2019 Thousands of Euro Carrying value Liabilities for
derivatives at FVTPL (*)
Other financial liabilities
Hedging derivatives
Non-current financial liabilities 1,785 - 1,785 -
Non-current liabilities 1,785 - 1,785 - Current financial liabilities 7,985 - 7,985 - Current trade payables 14,158 - 14,158 - Tax payables 2,447 2,447 Other current liabilities 2,570 - 2,570 -
Current liabilities 27,160 - 27,160 -
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
80
Foreign exchange risk
The Group uses as its main currency for its purchases and sales mainly the Euro and on an exceptional basis the US Dollar or the Turkish Lira. Credit risk
The credit risk represents the Group’s potential exposure to losses deriving from counterparties not fulfilling their obligations. The Group does not have significant concentrations of credit risk therefore it isn’t deemed opportune to highlight quantitative and detailed information, except for the details regarding account receivables per expiration breakdown in Note 19. In order to check such risk the Group implemented procedures and measures to assess the clientele and the possible recovery measures. Regarding other financial assets, including cash available and cash equivalents, financial counter-parties are exclusively highly solvable financial institutions and pertinent policies were adopted to limit credit risk exposure to a single credit institution Liquidity risk
The liquidity risk represents the risk that the financial resources available to the company are not enough to face the financial obligations in the pre-set terms and maturities. The liquidity risk of the Group is minimized by the agreement signed by the Parent Company to execute the recovery plan drafted according to Article 67, paragraph 3, letter d) of R.D. 267/1942 with Mercatoria, the main creditor of the group (with receivables of Euro 5.4 million). The agreement, defined based on the 2020-2023 Industrial and Financial Plan, approved by the Board of Directors on September 14, 2020, and subsequently integrated and updated along with the related financial package, was certified on October 5, 2020, and subsequently integrated and updated on December 29, 2020, confirming the truthfulness of corporate data and the feasibility of the plan, as well as its conformity to pursue the objectives of recovery and rebalancing of the financial and capital position of Itway. The plan, among other things, envisages significant financial support through the issue of convertible bonds for institutional investor N&G with which it signed an investment contract for a Warrant and Convertible Notes Funding Program worth an overall Euro 6 million that can be exercised by Itway upon its discretion, quarterly, in tranches of Euro 500 thousand each. To date, Euro 1 million has been exercised. A prudent management of the liquidity risk is pursued maintaining sufficient resources in cash or easily convertible into cash and an adequate availability of credit lines. In addition to what has been already reported, in the other statements of the Financial Statements and in the notes regarding current financial liabilities, expiring within the end of next fiscal year, the following table analyses the Group’s non-current liabilities, grouped together on the basis of the contract expiration compared with the balance sheet date.
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
81
Thousands of Euro 31/12/2020 Contractual cash flows
1-2 years 2-5 years Over
Non-current financial liabilities 3,783 3,783 1,492 1,056 1,235 Non-current liabilities 3,783 3,783 1,492 1,056 1,235
Thousands of Euro 31/12/2019 Contractual cash flows
1-2 years 2-5 years Over
Non-current financial liabilities 1,785 1,785 188 422 1,175 Non-current liabilities 1,785 1,785 188 422 1,175
Capital management
The main objective of capital management of the Group is to maintain adequate levels of capital indicators so as to support activities and to maximize value for shareholders. We feel the best assessment of capital indicators can be seen in the s financial prospectus above
39. Financial instruments
The financial instruments of the Group booked in the consolidated financial statements do not diverge significantly from their fair value.
40. Compensation for the auditing firm - Art. 149 duodecies of Issuers Regulations - Prospectus
Description Thousands of Euro
Compensation for HLB Analisi for the auditing of the financial statements of the fiscal year at a consolidated and Itway SpA level
58
Compensation to HLB Analisi for other services 18
Compensation to Network HLB for auditing activities of the financial statements of subsidiaries
25
Compensation to other auditors for auditing activities of the financial statements of subsidiaries
39
Total 140
In addition to the compensation mentioned above, no other mandates were given to the auditing firm or other companies of its network.
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
82
41. Publication of the Financial Statements
The financial statements were approved by the Board of Directors of Itway S.p.A. at the March 29, 2021 meeting in which the mandate was given to the President to carry out formal fine tuning amendments or integrations should they be necessary or opportune for a better drafting and a more complete text, in all its elements.
42. Companies of the Itway S.p.A. Group
Following is the list of companies and relevant investments of the Group, pursuant to Consob Deliberation No. 11971 of May 14 1999 and successive modification and Consob communication No. DEM/6064293 of July 28 2006. In the list that follows the companies are divided by type of control and consolidation method. For each company the following is highlighted: name, headquarters, country affiliation, share capital in the original currency. Furthermore, also listed are the shareholdings, voting rights in ordinary shareholders meeting, if different from the stake of the capital and the controlling companies.
Parent Company Headquarters Share capital Euro
Itway S.p.A.
Milan
3,952,659
_________________________________________________________________________________________________ Consolidated Financial Statements as of December 31, 2020
83
SUBSIDIARY CONSOLIDATED WITH FULL METHOD
HEADQUAR
TERS
SHARE CAPIT AL Euro
% OWNERSHIP
CONTROLLING COMP ANY
Itway Iberica S.L.
Barcelona
560,040
100%
Itway S.p.A
Itway France S.A.S.
Paris
100,000
100%
Itway S.p.A
Itway Hellas S.A.
Athens
846,368
100%
Itway S.p.A
Itway Turkiye Ltd. Istanbul 1,500,000 * 100%
Itway S.p.A.
iNebula S.r.l. in liquidation
Milan
10,000
75%
Itway S.p.A
4Science S.r.l.
Milan
10,000
100%
Itway S.p.A
Itway RE S.r.l. Ravenna 10,000 100% Itway S.p.A.
* The value is expressed in the New Turkish Lira (YTL)
ASSOCIATE COMPANY VALUED WITH EQUITY METHOD
HEADQUAR
TERS
SHARE CAPIT AL Euro
% OWNERSHIP
CONTROLLING COMP ANY
BE Infrastrutture S.r.l.
Ravenna
100,000
30%
Itway S.p.A.
BE Innova S.r.l.
Trento
20,000
50%
Itway S.p.A.
OTHER COMPANIES HEADQUAR
TERS
SHARE CAPIT AL Euro
% OWNERSHIP
CONTROLLING COMP ANY
Dexit S.r.l. Trento
700,000
9%
Itway S.p.A
Itway MENA FZC Saudi Arabia 35,000* 17.1% 4Science S.r.l. Idrolab S.r.l. Cesena 52,500 10% Itway S.p.A. Serendipity Energia SpA
Ravenna 1,117,758
10.5% Itway S.p.A.
* the value is expressed in Dirham of the United Arab Emirates (AED)
Ravenna, March 29, 2021 FOR THE BOARD OF DIRECTORS President and Chief Executive Officer G. Andrea Farina
___________________________________________________________________________________________________________
______________________________________________________________________________________________________ Separate Financial Statements as of December 31, 2020
84
SEPARATE FINANCIAL STATEMENT OF ITWAY S.P.A. FOR THE PERIOD ENDED DECEMER 31, 2020
___________________________________________________________________________________________________________
______________________________________________________________________________________________________ Separate Financial Statements as of December 31, 2020
85
SEPARATED INCOME STATEMENT Euro Note Fiscal year as of
31 Dec 2020 31 Dec 2019
Revenues from sales 1 770,842 358,945
of which to Group companies 232,100 127,263
Other operating revenues 2 3,355,979 3,428,874
of which to Group companies 857,993 279,300
Products 3 (233,233) (117,653) Costs of services 4 (1,714,461) (1,707,805)
of which to Group companies (140,000) (80,000) Costs of personnel 5 (519,145) (410,060) Other operating expenses 6 (1,044,392) (299,848)
of which to Group companies (59,622) (59,622)
EBITDA 615,590 1,252,453 Depreciations and amortisations 7 (391,752) (501,472) EBIT 223,838 750,981 Financial proceeds 8 6,263 17,168
of which to Group companies - 407 Financial charges 8 (128,111) (279,030) Result of subsidiaries evaluated using the equity method
8
807,065 1,438,748
Profit before taxes 909,055 1,927,867
Taxes 9 313,802 108,398 Result for the period 1,222,858 2,036,265
* for a description of relations with related parties, please refer to Note 32. ** the definition of Ebitda and Ebit is provided in the paragraph “Presentation of the financial statements” of the Explanatory Notes .
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COMPREHENSIVE SEPARATED INCOME STATEMENT Euro Note 31 Dec 2020 31 Dec 2019
Net result 1,222,858 2,036,265
Components that cannot be reclassified to the income statement: 22 Actuarial gain (losses) on defined-benefit plans (34,065) - Components that can be reclassified to the income statement: 21 Profits/(Losses) comprensive from evaluated using the equity method (798,607) (264,780)
Result of the period 390,186 1,771,485
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SEPARATED FINANCIAL STATEMENT
Euro Note 31 Dec 20 31 Dec 19
ASSETS
Net current assets Property, plans and machinery 10 31,186 76,253 Other intangible assets 11 1,163,800 1,284,307 Rights of use 2,607,736 2,778,132 Investments 12 6,813,571 7,874,403 Anticipated tax assets 13 857,490 777,793 Non-current financial assets 14 - 7,002 Other non current assets 15 2,098,000 2,098,000 Total 13,571,783 14,895,890
Current assets Account receivables - Trade 16 4,558,252 5,964,122 Financial receivables from subsidiaries 17 9,533,211 9,731,454 Commercial receivables from subsidiaries 32 345,515 424,619 Other current assets 18 267,683 630,849 Other financial credits 19 2,274,842 2,498,398 Cash on hand 20 270,514 21,097 Total 17,250,017 19,270,539 Total assets 30,821,800 34,166,429 NET EQUITY AND LIABILITIES Share capital and other reserves Share capital 3,952,659 3,952,659 Own share reserve (321,103) (1,347,103) Share premium reserve 17,037,086 17,583,874 Legal reserve 484,904 484,904 Retained earnings / (losses) reserve (13,675,531) (14,879,124) Other reserves 1,222,858 2,036,265 Total Net Equity 21 8,700,873 7,831,475 Non current liabilities Severance indemnity 22 295,658 265,943 Non current account payable – Trade 347,518 - Provision for risks and charges 23 8,175,087 8,172,875 Deferred taxes 84,382 358,909 Non current financial liabilities 25 3,573,606 1,830,226 Total 12,476,251 10,627,953
Current liabilities Financial current liabilitites 26 3,156,875 7,160,802 Current account payable – Trade 27 3,899,570 5,263,538 Payables to subsidiaries 32 1,577,859 1,457,648 Tax payable 28 73,788 27,903 Other current liabilities 29 936,584 1,797,110 Total 9,644,676 15,707,001 Total liabilities 22,120,927 26,334,954
Total Net Equity and Liabilities 30,821,800 34,166,429
* for a description of relations with related parties, please refer to Note 32 and Note 33.
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SEPARATED STATEMENT OF CHARGES IN EQUITY
1 the retained earnings / (losses) reserve incorporates the effects of the transition to the IAS / IFRS international accounting standards.
1 the retained earnings / (losses) reserve incorporates the effects of the transition to the IAS / IFRS international accounting standards.
Cumulated profit (loss)
Euro Share capital
Own share
reserve
Share premium reserve
Legal reserve
Retained earning/losse
s reserve
Result of the period
Net equity
Balance at January 1, 2019 3,952,659
(1,347,103)
17,583,874
484,904
(14,786,318)
171,974
6,059,990
Variations in own share
- - - - - - -
Total operations with shareholders - - - - - - -
Allocation of the result for the year - - - - 171,974 (171,974) -
Result of the period - - - - - 2,036,265 2,036,265
Other components of comprehensive results at 31 Dec 2019:
Total profits / (losses) deriving from the application of IAS 27
-
-
-
-
(264,780)
-
(264,780)
Gain/(Losses) on defined benefit plans - - - - - - -
Comprehensive result - - - - (264,780) 2,036,265 1,771,485
Balance at December 31, 2019
3,952,659
(1,347,103)
17,583,874
484,904
(14,879,124)
2,036,265
7,831,475
Cumulated profit (loss)
Euro Share capital
Own share
reserve and other operatons
Share premium reserve
Legal reserve
Retained earning/losse
s reserve
Result of the period
Net equity
Balance at January 1, 2020 3,952,659
(1,347,103)
17,583,874
484,904
(14,879,124)
2,036,265
7,831,475
Variations in own share
- 1,026,000 (546,788) - - - 479,212
Total operations with shareholders - 1,026,000 (546,788) - - - 479,212
Allocation of the result for the year - - - - 2,036,265 (2,036,265) -
Result of the period - - - - - 1,222,858 1,222,858
Other components of comprehensive results at 31 Dec 2020:
Total profits / (losses) deriving from the application of IAS 27
-
-
-
-
(798,607)
-
(798,607)
Gain/(Losses) on defined benefit plans - - - - (34,065) - (34,065)
Comprehensive result - - - - (832,672) 1,222,858 390,186
Balance at December 31, 2020
3,952,659
(321,103)
17,037,086
484,904
(13,675,531)
1,222,858
8,700,873
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SEPARATED STATEMENT OF CHARGES IN FINANCIAL POSITIO N
Thousand of Euro Fiscal year as
of 31 Dec 2020
Fiscal year as of
31 Dec 2019
Results for the period 909 1,928
Adjustments of items not affecting liquiduty:
Depeciations of tangible assets 53 128
Depeciations of intangible assets 174 226
Depreciations of rights of use 165 102
Allowances for doubtful accounts 900 -
Provisions for severance indemnity, net of payments to social security bodies 28 21
Controlled results evaluated using the PN method (807) (1,439)
Devaluation of participation - 45
Cash flow from operating activities, gross of the variation in working capital 1,422 1,011
Payments of secerance indemnity 2 11
Variation in trade receivable and other current assets 506 (148)
Variation in financial and commercial credits toward subsidiaries 277 (1,028)
Variation in inventories - -
Variation in trade payables and other current liabilitites 616 557
Variation in account payable (1,244) 224
Cash flow from operations generated/(absorbed)by changes in NWC 157 (384)
Cash flow from operations (A) 1,579 627
Change in non-current assets / liabilities to subsidiaries and others 3 (88)
Investments in tangible assets (net of disinvestments) (8) 2,582
Rights of use 5 (2,903)
Change in financial receivables 224 27
Dividends collected 318 215
Investment in other intangible assets (net of disinvestments) (55) (203)
Cash flow from investing activities (B) 487 (370) Variation in current financial liabilities (4,004) (674) Variation in non current financial liabilities 1,743 (32)
IAS 19 (34) -
Variations in own shares 479 -
Cash flow from financial activities (C) (1,816) (706)
Cash flow from asset sold (D) - -
Increase/(Decrease)cash available and cash equivalents (A+B+C+D) 250 (449)
Cash and cash equivalents at the beginning of the period 21 468
Cash and cash equivalents at the end of the period 271 21 Financial charges paid during the year amounted to 83,000 euros (63,000 euros in the previous year).
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EXPLANATORY NOTES OF THE SEPARATE FINANCIAL STATEME NTS AS OF DECEMBER 31, 2020 GENERAL INFORMATION Itway S.p.A. (the “Company” or the “Parent Company”) is a public limited company constituted in Italy. The Company moved its legal headquarter to Milan, in Viale Achille Papa, 30 keeping its administrative headquarters in Ravenna and it is active with commercial office in Rome at the following address: - Roma - Via Edoardo D'Onofrio 304.
Going concern assessment The financial statements of the Parent Company ended with a net profit of Euro 416 thousand (net of results of the subsidiaries booked under IAS 27 that total Euro 807 thousand). From a financial point of view, on December 30, 2020, the Parent Company sealed an agreement for the execution of a recovery plan drafted pursuant to article 67, paragraph 3, letter d) of R.D. 267/1942 with Mercatoria S.p.A., the main creditor of the Group (with receivables totalling Euro 5.4 million). The agreement defined based on the 2020-2023 Industrial and Financial Plan, approved by the Board of Directors on September 14, 2020, and subsequently integrated and updated along with the related financial plan, that received, pursuant to article 67, paragraph 3, letter d) of the Bankruptcy Law, the certification from an independent expert that confirmed its feasibility, the truthfulness of the data, as well as its suitability to pursue the objective of restructuring and rebalancing of the financial and capital position of Itway. The agreement with Mercatoria includes, among other things, a 67% reduction in debt with payment in 36 monthly instalments starting from June 2020 and a further reduction to 62% in case of early repayment by December 31, 2021. The financial statements to December 31, 2020, include the impact of the 67% reduction through the recording of Euro 1,792 thousand of non-recurring income within the Other Revenue and Proceeds. Itway is committed to respecting some financial parameters both on a quarterly and an annual basis and has granted Mercatoria a two-year call option, starting from January 1, 2023, on No. 390,000 own shares at a strike price of Euro 1. The failure of the company to pay two instalments, even not consecutively, unless agreed upon, could determine the resolution of the contract with the resulting payment of the entire debt outstanding before the write-off. Itway paid Euro 606 thousand at the signing of the agreement and to date another two instalments for a further Euro 202 thousand, leaving the residual debt towards Mercatoria and Socrate at Euro 2.8 million, to date. The plan also foresees:
(i) The repayment in instalments of around Euro 100 thousand per month of the financial debt towards Mercatoria by the May 30, 2023 deadline;
(ii) The repayment of the remaining financial debt by the December 31, 2021 deadline, according to the terms agreed in the rescheduling agreements that are being or that will be defined;
(iii) The payment of expired trade payables totalling approximately Euro 2 million; (iv) The issue of up to Euro 5.5 million of Convertible Bonds deliberated by the Extraordinary Shareholders’
meeting of Itway on October 30, 2020, reserved for Swiss institutional investor Nice & Green SA (“N&G”). These are the essential elements of the 2020-2023 Plan aimed at developing the business of the Itway Group that will focus on: 1) The consolidation of the VAD Business Unit in Greece and Turkey; 2) The valuing and development of the Cybersecurity, Safety, and Data Science Business Unit 3) Supporting working capital through the issue of convertible bonds in favour of N&G with whom a Warrant and Convertible Notes Funding Program investment contract was signed for an overall Euro 6 million. The investment contract with Nice & Green SA aims at supporting working capital of the Company, strengthening its financial structure, and broadening the shareholder structure. The capital raised from the N&G transaction will equip Itway with additional capital and financial resources that will be used to accelerate the development of the Company’s growth and investment strategies in the market segments in which the Company operates without any additional burden for the Company.
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The Program foresees an issuance period for an overall 36 months from the date of signature of the contract and comprises:
(i) a tranche of warrants to buy up to Euro 500 thousand own shares of Itway already in its portfolio (the Warrants);
(ii) 11 tranches of bonds, each with a nominal value of Euro 500 thousand convertible into newly issued Itway shares (Bonds). It envisages the commitment by N&G to subscribe to several tranches following a specific request from Itway
The contract foresees that the loan will be non-interest bearing and that each Bond will have a 12-month duration from the issue date. Furthermore, in case of failure to request the repayment by the maturity date, the Company shall be obliged to automatically convert the Bonds in circulation into newly issued shares. The Investor is entitled to ask for the conversion of the bonds into shares at any time following the conversion request. Upon conversion request, the Issuer, instead of issuing new shares, shall have the option to repay the Bonds in cash. The Bonds are non-interest bearing and will not be listed on any regulated market. To execute the Bond issuance program, an extraordinary shareholders’ meeting took place on October 30, 2020, that deliberated the issue of bonds and a capital increase without option rights to service the conversion. To the date of writing of the current Report, the company entirely exercised the warrant during the 2020 financial year, using shares that it already held in its portfolio, while of the 11 tranches of Bonds, on December 15, 2020, one tranche (comprising 50 Bonds with a nominal value of Euro 10 thousand each) was issued and underwritten, upon request of the Company, and partially exercised by Nice&Green SA through the request to convert, in February 2021, No. 20 bonds for an overall value of Euro 200 thousand. The number of shares that are subject to the conversion was determined conforming to the terms of the Contract based on 91% of the minimum price (defined as the volume-weighted average price - VWAP) recorded in the eight trading days before the date of the conversion request and totalled No. 286,286 newly issued ordinary shares of Itway, with regular dividend rights, representing 3.49% of share capital after the capital increase. After the transactions above, as of December 31, 2020, the Itway Group had a current net financial indebtedness of approximately Euro 3.4 million, of which Euro 1.3 million already expired at the date of the financial statements, an expired indebtedness with tax and social security bodies for a total of Euro 475 thousand (that will be paid within the terms foreseen by regulations in force), and expired indebtedness towards suppliers of Euro 2.7 million (of which approximately Euro 0.8 million for amounts being contested, also through legal means and Euro 1.6 million of suppliers no longer present on the market but that for prudential reasons are still booked in the balance sheet).
After the agreement reached with Mercatoria described above, to date negotiations are still underway with financial institutions or companies (art. 115 of TULPS) that acquired debt from certain banks for smaller amounts. The Company deems it reasonable to be able to conclude these negotiations, according to the plan, on the repayment terms. Based on the 2020-2023 Industrial and Financial Plan approved by the Board of Directors, that an independent legal expert certified pursuant to article 67, paragraph 3, letter d) of the Bankruptcy Law, confirming the truthfulness of the corporate data and the feasibility of the plan as well as its conformity in pursuing the objectives of recovery and rebalancing the Company’s financial and capital position, the Directors, also comforted by the positive results achieved in these past years, drafted the financial statements on a going concern basis.
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General principles For a better reading, the presentation of the financial statement, the income statement, the statement of comprehensive income, and the statement of changes in net equity are drafted in units of Euro and the data inserted in the notes are all expressed in thousands of Euro, unless otherwise indicated. The Financial Statements are drafted in the following way:
� In the financial statement, current and non-current assets are reported separately. The financial statement as of December 31, 2020 was compared with the balances of the previous fiscal year, which ended on December 31, 2019;
� In the income statement, the representation of the costs is carried out on the basis of their own nature. The
balances of the income statement on December 31, 2020 were compared with that of the previous fiscal year ended December 31, 2019;
� The indirect method was used for the statement of changes in financial position;
� EBITDA (gross operating result) is an economic indicator not defined in the International Accounting
Standards and does not have to be considered an alternative measure to assess the performance of the operating results. Management uses Ebitda to monitor and assess the operational performance of the Company. Management considers Ebitda an important parameter to measure the performance of the Company, as it is not impacted by the volatility generated by the different criteria used to determine taxable income, by the amount and the characteristics of employed capital as well as the related amortization and depreciation policies. Ebitda is defined as Profit/Loss before amortizations of material and immaterial assets, provision and writedowns, depreciation of fixed and intangible assets, provisions to cover losses of investments, financial charges and income and income taxes. Since the composition of Ebitda is not regulated by the reference accounting principles, the criteria to determine here applied may not be homogeneous with that adopted by other entities and therefore not be comparable;
• EBIT (operating Result) is an economic indicator not defined in the International Accounting Standards and does not have to be considered an alternative measure to assess the performance of the operating results. It is defined as the Profit/Loss net of depreciation of material and immaterial assets, provisions to cover losses of investments, financial charges and proceeds and income taxes. Since the composition of Ebit is not regulated by the reference accounting principles, the criteria to determine here applied may not be homogeneous with that adopted by other entities and therefore not be comparable.
In the financial statements and in the comparative data the Company adopted the International Reporting Standards (IFRS) issued by IASB, the updates of those pre-existing (IAS) as well as the International Financial Reporting Interpretations Committee (IFRIC) and those issued by the Standing Interpretation Committee (SIC), that were deemed as applicable to the transactions carried out by the Company. The Financial Statements items were assessed based on an accrual basis.
For the purpose of book entries, prevalence was given to the economic substance of transactions rather than their legal form. The accounting principles adopted are consistent and, as those adopted in the drafting of the Financial Statements as of December 31, 2020. These principles require estimates that, in the context of the current economic uncertainty, have for their own component of risk and uncertainty. Therefore, it cannot be ruled out that in the near future the results achieved could be different from those forecast, therefore requiring revisions that today cannot be either estimated or forecast.
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Use of estimates The drafting of the Financial Statements, applying IFRS principles, requires making estimates and assumptions that have an effect on the value of assets and liabilities and on information regarding potential asset and liabilities to the reference date. The estimates and assumptions are based on historical experience and on other factors that are considered to be relevant; the estimates and assumptions are reviewed periodically and the effects of each variation are reflected in the income statement. Following are the balance sheet items that require greater subjectivity from directors in elaborating forecasts and for which a change in the conditions of the underlying assumptions used can have a significant impact on the financial statements. � assessment on shareholdings; � assessment on inventories; � assessment on the allowance for doubtful accounts; � assessment on deferred tax assets; � assessment on employee benefits;; � assessment on the provision for risks and charges. Estimates and hypothesis are reviewed periodically and the impact of each variation is immediately reflected in the income statement of the fiscal year. Regarding investments in subsidiaries, the Company, when it identifies impairment indicators, carries out an impairment test on the book value of the investments pursuant to what is described in the next Note “Impairments”. As of December 31, 2020, the Company did not reveal impairment indicators on the values of the investments held. Property, plant and equipment Tangible assets are recognized at the purchase or production cost including accessory charges net of the relative accumulated depreciation. Ordinary maintenance expenses are fully charged to the income statement. Costs for improvements, modernization and transformations of an enhancing nature are accounted as assets. The accounting value of tangible assets is subject to review in order to detect possible losses in value either annually or when events or changes in the situation indicate that the carrying value can no longer be recovered (for details please seen Note “loss of value – impairment”). Depreciation begins when assets are ready to be used. Property, plants and equipment are systematically depreciated in each fiscal period based on the economic-technical rates deemed representative of the residual possibility of using the asset. Goods made up of components, of significant amounts, with different useful lives are considered separately when determining depreciation. Depreciation is calculated on a straight-line basis, as a function of the expected useful lives and of the relative assets, periodically reviewed if necessary, applying the following percentage rates:
Plants 2% Furniture 12% Computers and electronic office equipment 20% Vehicles 25% Electronic telephone systems 20%
Profits and losses deriving from the sale or dismissal of assets are determined as a difference between revenue and the net book value of the asset and are booked in the income statement, respectively in other operating revenues and other operating expenses
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Leasing Starting from January 1, 2019, following the first application of IFRS 16 – ‘Leases”, the Group recognizes for all leasing contracts, except short term ones, therefore within 12 months, and low-value ones, a right of use at the lease commencement date that corresponds to the date in which the underlying asset is available for use. The lease fee related to short-term contracts and low-value ones are booked as cost in the income statement throughout the lease term. The right of use is booked at cost, net of accrued depreciation and loss of value (impairment loss) and adjusted following each re-measurement of the lease liability. The value assigned to the right of use corresponds to the amount of the lease liability and it is amortized on a straight-line basis over the estimated useful life, or the term, of the contract, if lower. The financial lease liability is booked at the start of the contract for a value equal to the present value of the lease fee to be paid during the term of the contract, discounted using the incremental borrowing rate when the interest rate implicit in the leasing contract cannot be readily determined. Variable leasing costs are still booked to the income statement as a cost pertaining to the period. After the commencement date, the amount of liabilities for lease contracts increases to reflect the accrual of interest and decreases to reflect the payments made. Each lease payment is divided between repayment of principal portion of the liability and the financial cost. The financial cost is booked to the income statement for the term of the contract to reflect a constant interest rate on the residual debt of the liability for each period. The term of the lease is calculated based on the non-cancellable period of the lease, as well as periods covered by any extension option if it is reasonably certain that it will be exercised, or any other period covered by an option to terminate the lease if it is reasonably certain that it will not be exercised. The contracts are included or excluded from the application of the principle based on a detailed analysis carried out on the individual agreement and in line with the regulations foreseen by IFRS. Goodwill Goodwill deriving from the purchase of a company represents the excess of the cost of an acquisition over the fair value of the identifiable assets and liabilities of the acquired company at the date of acquisition. Goodwill is booked as an asset and is not amortized, but it is reviewed at least once a year to check that it did not incur loss of value (impairment test), as indicated in the subsequent paragraph “Impairment”. Eventual impairment losses are booked to the income statement and cannot be reversed successively. Should a negative goodwill emerge, it would immediately be recognized in the income statement. Intangible assets An intangible asset is booked only if it can be identified, if subjected to the control of the Company, it is probable that it will generate future economic benefits and its cost can be determined in a reliable way. Intangible assets are registered at the cost determined according to criteria indicated for tangible assets. Should it be estimated that the assets have a defined useful life then they are amortized systematically during the estimated useful life and the amortization starts from the moment in which the assets are ready for use or in any case form when they start producing economic benefits for the company. Following is the useful life usually attributed to the different categories:
• Software licenses and similar rights: on the basis of the duration of the license and/or right; • Other intangible assets: 3 fiscal years.
Investments in subsidiaries, associates or joint ventures The Company adopted the Amendment to IAS 27 that allows measuring, in the separate financial statements, investments in subsidiaries, associates and joint ventures, respectively at cost, pursuant to IFRS 9 or with the net equity method pursuant to IAS 28. The Company, in particular, chose to use the fair value criteria to measure minority investments and the net equity method to measure investments in subsidiaries and associates.
Therefore, investments in subsidiaries and affiliates are initially booked at cost and, after the acquisition, are adjusted based on the share that the controlling company has in the net equity of the controlled company. The
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investor’s profit or loss reflects its attributable interest in the profit (loss) in the fiscal period of the subsidiary and the investor’s other comprehensive income reflects its share of the subsidiary’s other comprehensive income. Impairment At least once per year, but at the end of each fiscal year, the Company reviews the book value of its tangible and intangible assets to determine if there are indications that these assets incurred in impairment. Should such indications emerge, the amount that can be recovered is estimated in order to determine the amount of impairment loss. Should it not be possible to determine the recoverable value of a single asset, the Company carries out an estimate of the recoverable value of the cash-generating unit to which the asset belongs. The recoverable value is the higher amongst the net selling price and the value in use. The value in use is defined based on the actualization of future cash flows expected from the use of the good or from cash generating unit to which the asset belongs, discounted using an interest rate, net of taxes, that reflects the current money market value and the specific risks of the assets. The cash generating units have been identified consistently with the organizational and business structure of the subsidiaries, as homogeneous groupings that autonomously generate independent cash flows deriving from the constant use of assets. If the recoverable amount of an asset (or of a cash generating unit) is estimated to be lower than the carrying value, the carrying value of the asset is reduced to the lower recoverable value. The loss of value is charged to the income statement. When a devaluation no longer has reason to be maintained, the carrying value of the asset (or of the cash generating unit), with the exception of goodwill, is increased to the new value deriving from the estimate of its recoverable value, but not exceeding the book value that the asset would have had if there had been no impairment, net of depreciation that would have had to be calculated before the previous impairment. The reversal of the value is booked to the income statement. Financial assets Financial assets are booked when the entity becomes part of contractual clauses of the instrument. They are initially classified according to the following measuring method: amortized cost, fair value booked through other comprehensive income (FVOCI), or fair value through profit or loss (FVTPL). The classification of financial assets when initially booked depends on the characteristics of the contractual cash flows of the financial assets and the business model that the company applies to their management. A cash-generating unit can only be valued with the amortized cost or the FVOCI if it generates cash flows that depend solely on the principal and on the interest on the principal amount outstanding (so-called Solely Payments of Principal and Interest or SPPI test). The initial valuation of financial assets takes place at the fair value, plus, in case of financial assets not value at the fair value recorded in the profit or loss for the period, the costs of the transaction directly attributed to the acquisition or the issuance program or the financial liability, except for trade receivables that do not have a significant financing component and are booked at the price of the transaction, as defined by IFRS 15. The subsequent assessment of financial assets takes place according to the following criteria Amortized cost A financial asset is valued at the amortized cost if both of the following two conditions apply: - The financial asset is held within a business model whose objective is to hold financial assets to collect contractual cash flows; - the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. These assets are valued using the effective interest rate criterion and are subject to an impairment test. The profit and losses are booked to the income statement of the fiscal period when the asset is eliminated, modified, or revalued. Fair value through other comprehensive income (FVOCI) A financial asset is valued at fair value through other comprehensive income when both of the following conditions apply:
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- The financial asset is held within a business model whose objective is both to collect contractual cash flows and selling financial assets - The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Interest income, impairment losses and gains are recognized in the income statement of the fiscal year while changes to fair value are booked in other comprehensive income. When derecognized, the cumulative change of fair value booked in other comprehensive income is reclassified in the income statement of the fiscal period. Fair Value through Profit or loss (FVTPL) This criterion includes assets held for negotiation (acquired for the short-term sale), financial assets designated when initially booked as financial assets at fair value with changes recognized in the income statement, or financial assets that must be booked at fair value. Financial assets with cash flows that do not meet the SPPI test are classified and valued at fair value in profit and loss, regardless of the business model. Financial assets at FVTPL are recognized in the financial position at fair value and net changes to fair value are recognized in the income statement. At initial recognition, an entity may irrevocably elect to present in other comprehensive income (OCI) subsequent changes in its fair value of an equity investment that is not held for trading and that is not a potential payment from a business combination transaction that would apply to IFRS 3. Deferred tax assets Deferred tax assets are booked at their nominal value. They are booked when their recovery is deemed probable. See also the subsequent comment on “Income Taxes”. Inventories Inventories are recognized as the lower of the purchase cost and presumable market value. Cost is determined, when possible, at the specific purchasing cost or otherwise, using the average weighted cost method. The purchase cost includes the additional charges incurred to bring the stock in the current place or in the current conditions. The net realized value is determined based on current selling value of the inventory at the end of the fiscal year minus the estimated necessary costs to sell the asset. The value of obsolete and slow moving stock is devalued in relation to the possibility of using or selling, through accrual of an ad hoc provision. Account receivables:
� Trade receivables At initial recognition, receivables are booked at fair value. The initial recognition value is subsequently adjusted to consider principal payments, eventual write-downs, and the amortization of the difference between repayment value and initial recognition value. The amortization was carried out using an effective internal interest rate represented by the rate that, at the initial recognition, aligns the current value of expected cash flows and the initial recognition value (so-called amortized cost method with the effective interest rate criterion). The credit impairment is determined based on the expected credit losses foreseen by IFRS 9, using supportable information that is available without undue cost or effort that include historical, current and, forward-looking data. This valuation method was applied using a simplified approach that allows entities to recognize expected losses on trade receivables without the need to monitor increases in credit risk, as foreseen by the general impairment model described in IFRS 9 (general deterioration method). The simplified approach allows booking losses on a lifetime basis, classifying credit risk by class. Different loss rates were established grouping together receivables based on past-due payment days and other risk indicators. The loss rates of receivables are recognized in the Income Statement at the Other Operating Expenses line. The allowance for doubtful accounts is classified as a reduction of the corresponding item recognized among assets.
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Sales of receivables on a non-recourse basis, in which all risks and benefits are transferred to the buyer, determine the removal of the receivables from total assets. Contract works in progress
When the result of a multi-year order can be estimated with reason, the contract work in progress is assessed based on the earned revenue, according to the stage of completion measured through the so-called cost to cost criteria, to book revenues and the results on an accrual basis in the different fiscal periods based on the stage of completion. The positive or negative difference between the value of the contracts and the advanced payments is booked respectively to the assets or liabilities in the balance sheet. When the result of an order cannot be reasonably estimated, it is valued at recoverable costs (“zero profit method”). The costs of the order are charged to income statement when incurred. When it is probable that the total costs of the order are higher than the contractual revenues, the expected loss is immediately charged to the income statement, through a specific provision. Cash on hand Cash on hand includes petty cash, checks and current accounts and deposits that can be refunded upon request, which can easily be converted in cash and are subject to an insignificant risk of changes in value. It is recognized at its nominal value. Own shares Own shares are stated at cost and reported debiting net equity, including ancillary expenses in buying and selling. The financial effects deriving from possible subsequent sales are recognized as a difference in net equity. Financial liabilities Financial liabilities are initially recognized at a cost basis, which corresponds to the fair value of the received amount, net of transaction costs that are directly attributed to the borrowing. Afterwards, borrowings are assessed with the amortized cost criterion using the effective interest rate method. Employee benefits Liabilities related to defined benefit plans (including severance pay for the quota matured before January 1, 2007) are calculated net of eventual assets serving the plan on the basis of actuarial hypothesis and on an accrual basis, coherently with the employment necessary to obtain the benefit; the liability is assessed by independent actuaries. The value of the actuarial profits and losses is booked in the other components of comprehensive income. Following Financial Law No. 296 of December 27, 2006, for Italian companies with over 50 employees the severance indemnity accrued from January 1, 2007 is considered a defined benefit plan. Provisions for risks and charges Provisions are booked when the Company has a real obligation as a result of a past event and it is probable that it will be asked to uphold this obligation. Provisions are allocated on the basis of the best estimate of costs requested to fulfill the obligation at the end of the fiscal year and are actualized, when there is a significant impact. In this case, provisions are determined actualizing future expected cash flows at an interest rate before taxes that reflects the current money market over time; the increase of the accrual with the passing of time is booked to the income statement in “financial income and expenses”. Trade payables Payables are recognized at the nominal value. When, owing to the agreed payment terms there is a financial transaction, then debts are booked at their current value, attributing the discount as financial cost on an accrual basis.
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Other current liabilities These refer to relationships of different nature and are booked at the nominal value. Derivatives Derivatives are solely used to cover forward exchange rate risks. Related assets/liabilities are booked at fair value. Derivatives are classified as hedging instruments when formally documented and their effectiveness, periodically verified, is high. The variations in fair value of hedging derivatives, formally not satisfying the accounting conditions for hedge accounting, are booked to the income statement. Derecognition of financial assets and liabilities A financial asset shall be derecognized when:
• the entity's contractual rights to the asset's cash flows have expired; • the asset has been transferred to a third party, namely:
o Transfers the contractual rights to receive the cash flow of the financial assets (essentially all risks and reward of ownership of the financial asset are transferred or the control of the asset was not kept);
o Or maintains the contractual rights to receive the cash flows from the financial asset but assumes the contractual obligation to pay the cash flows to one or more beneficiaries in an agreement whereby (i) the entity has no obligation to pay amounts to the eventual recipients unless it collects equivalent amounts from the original asset; (ii) the entity is prohibited by the terms of the transfer contract from selling or pledging the original asset other than as security to the eventual recipients for the obligation to pay them cash flows; (iii) the entity has an obligation to remit any cash flows it collects on behalf of the eventual recipients without material delay.
A financial liability is derecognized from the balance sheet when it is extinguished or when the obligation is discharged, cancelled or has expired. When an existing financial liability is replaced by a new one from the same lender with contractual terms that are substantially different, there is derecognition of the original liability and the recognition of a new liability. In the same way a substantial modification of the terms of an existing financial liability or a part of it (whether or not it is attributable to the financial difficulties of the debtor) must be treated as derecognition of the original liability and the recognition of a new one. Revenue recognition Revenues are recognized as follows: Sale of goods and services: they are booked pursuant to IFRS 15. This principle came into force for the fiscal years beginning from January 1, 2018 or subsequently and replaces the principles of IAS 18 – Revenue and IAS 11 – Work in Progress as well as the interpretations of IFRIC 13 (Customer Loyalty Programs), IFRIC 15 (Agreements for the Construction of Real Estate), IFRIC 18 (Transfer of Assets from Customers) and SIC 31 (Revenue - barter transactions involving advertising services). IFRS 15 establishes a new model of revenue recognition that is applied to all contracts with customers except those regulated by the application of the IAS/IFRS principles including leasing, insurance contracts and financial instruments. The new model to recognize revenue foresees the following five steps: 1. Identify the contract with a customer. 2. Identify all the individual performance obligations within the contract. 3. Determine the transaction price. 4. Allocate the price to the performance obligations within the contract; 5. Recognize revenue as the performance obligations are fulfilled. The principle was applied retroactively but no adjustments on the opening balances emerged considering that the contracts signed with clients are independent from one another and do not include multiple performance obligation nor do they include variable considerations. In terms of costs to obtain the contract, the analysis carried out highlighted that
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costs do not fall within the scope of “incremental cost” and therefore are not recognized as assets. The “practical expedient” in paragraph 63 of IFRS 15 was used. It allows to not adjust the promised consideration for the effects of a significant financing component since, considering sector practices for consolidated relationships with clients, the Company expects, at contract inception, that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less. Interest - is recorded on an accrual basis.. Dividends - Dividend distribution to shareholders is booked as a liability in the fiscal period when it is approved by the Shareholders’ meeting. Dividends received are recognized as asset and as income in the income statement only when: a) the right to receive the dividend is established b) it is probable that the economic benefits from the dividend will flow to the entity; c) the amount of the dividend can be reliably estimated. Costs Costs and other operating charges are booked in the income statement when they are incurred, on an accrual basis and in correlation to revenues, when they do not produce future economic benefits or they do not have the prerequisites to be booked as assets in the financial statement. Financial charges are booked on an accrual basis as a function of time using the effective interest rate. Income taxes Itway S.p.A. (the consolidating company) and its Italian subsidiaries exercised the option for the so-called domestic tax consolidation scheme as per articles 117 and following of the DPR 917/86 (TUIR) that allows determining the income tax on the basis of taxable income that is the algebraic sum of the single companies. The economic relationship, the responsibility and the reciprocal obligations between the consolidating companies and the subsidiaries are defined in the “regulation of the consolidation for the companies of the Itway Group”. Current income taxes are calculated based on the best estimate of the taxable income, in relation to fiscal legislation in force. Deferred taxes Deferred and prepaid taxes are calculated using the liability method, based on the time differences resulting, at the Financial Statements closing date, on the timing differences from the value of assets and liabilities posted in the balance sheet and the corresponding values recognized for tax purposes. Active deferred taxes are posted against all timing deductible differences, and for possible tax losses carried forward, in the amount they are recoverable by future taxable income. The value of deferred tax assets is reviewed at the closing of each fiscal year and reduced if not recoverable. Active deferred taxes that are not recognized are assessed annually at the closing of the financial statements and are booked in the amount in which it has become probable that the fiscal income is sufficient to allow that these active deferred taxes be recovered. Deferred tax assets and liabilities are calculated based on the tax rates that are forecast to be used in the fiscal year in which such assets will be realized or liabilities extinguished, taking into account existing tax rates in force at the date of the Financial Statements. Foreign currency transactions The functional currency of Itway S.p.A. is the Euro, which is also used for presentation purposes. Foreign exchange transactions, initially, are booked at the exchange rate at the date of the transaction. Assets and liabilities in foreign exchange are booked at the reference exchange rate at the fiscal year closing date and the relative profits and losses are booked in the Income Statement. Recently issued accounting principles
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The criteria used to draft the consolidated Financial Statements for the 2020 fiscal year are not different from those used
for the Financial Statements at December 31, 2019, except for the accounting principles, amendments and
interpretations applicable from January 1, 2020, including:
Definition of Material (Amendments to IAS 1 and IAS 8): The document introduced changes in the definition of “material” in the IAS 1 and IAS 8 principles. The adoption of the amendment did not impact the consolidated financial statements of the Group.
Definition of a Business (Amendments to IFRS 3): The document clarifies the definition of “business” in correctly applying the IFRS 3 principle. The adoption of the amendment did not impact the consolidated financial statements of the Group.
References to the Conceptual Framework in IFRS Standards: The amendment is effective for the period that begin
January 1, 2020 or subsequently. The Conceptual Framework sets out the fundamental concepts for financial reporting
that guide the Board in developing IFRS Standards. The adoption of this amendment did not impact the consolidated
financial statements of the Group. Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform. This modifies IFRS 9 - Financial Instruments and IAS 39, in addition IFRS 7. The adoption of this amendment did not impact the consolidated financial statements of the Group.
Accounting principles, amendments and interpretations applicable at a later date. Following are the principles, amendments and interpretations that, at the writing of the current Financial Statements,
were endorsed but are not yet effective:
Covid-19 Related Rent Concessions (Amendment to IFRS 16): The amendment allows lessees to recognize reductions
in leases related to Covid-19 without assessing, through an analysis of the contracts, whether the definition of lease
modification under IFRS 16 was respected. Directors do not expect a significant impact in the Group’s consolidated
financial statements from the adoption of this amendment.
“Extension of the Temporary Exemption from Applying IFRS 9 (Amendments to IFRS 4)”: The amendment allows
extending the temporary exemption from applying IFRS 9 until January 1, 2023. This amendment entered into force on
January 1, 2021. Directors do not expect a significant impact in the Group’s consolidated financial statements from the
adoption of this amendment.
“Interest Rate Benchmark Reform—Phase 2” that contains amendments to the following standards:
- IFRS 9 Financial Instruments;
- IAS 39 Financial Instruments: Recognition and Measurement;
- IFRS 7 Financial Instruments: Disclosures;
- IFRS 4 Insurance Contracts; and
- IFRS 16 Leases.
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New accounting principles and amendments not yet endorsed by the European Union as of December 31, 2020
At the date of approval of the current Financial Statements, IASB issued, but the European Union has still not endorsed, some accounting principles, interpretations and amendments, some of which still in the consultation phase, including: - IFRS 17 Insurance Contracts –will replace the current IFRS 4 with the objective to increase the transparency on the sources of profit by introducing a single principle to recognize revenues reflecting the services rendered by the insurance company. It will come into force on January 1, 2023; - IFRS 3 Business combination –IASB introduced a definition of business that is much narrower compared with the current one. The changes will be applicable for acquisitions subsequent to January 1, 2022. - IAS 1 Presentation of Financial Statements: the document aims to clarify how to classify debt and other short or long-term liabilities. The amendments will come into force on from January 1, 2023.
Eventual impacts of the accounting principles, the amendments and interpretations that will soon be applicable on
financial disclosure of the Company are currently being assessed and measured.
Other information
With regards to the Consob information request regarding significant transactions and balances with related parties, please note that these related parties, in addition to being highlighted in an ad hoc Note, if significant they are indicated separately in the financial statements schemes.
Other information required pursuant to article 114 of Legislative Decree 58/98 (TUF) In the notes to the annual financial statements as at December 31, 2020 that follow in each paragraph the following further information is reported:
Nota 35: the net financial position of the Parent Company, highlighting separately the short term components
from the medium- and long-term ones Note 27-30: the expired debt positions of the Parent divided by nature (financial, trade, tax, social security and
towards employees) and the eventual related reaction initiatives by creditors (reminders, injunctions, interruption of supply, etc.);
Nota 32: the main changes that took place in relations with related parties of this Company compared with the previous annual or half-year financial statements pursuant to article 154-ter of the TUF;
Nota 26: eventual breaches of covenants, negative pledges and any other clause related to debt of the Company that limits the use of financial resources, with an updated indication of the level of compliance of these clauses;
Nota 36: the state of implementation of eventual industrial and financial plans highlighting differences from the actual data from the budgeted ones.
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1. Sales revenue
Sales revenue for the fiscal period ended December 31, 2020 totalled Euro 771 thousand and following is the breakdown: The increase of revenue for 2020 mainly reflects the rise in services rendered by the Company both to third parties and to subsidiaries.
2. Other operating revenue
Other operating revenue for the period ended December 31, 2020, totalled Euro 3,356 thousands and following is the breakdown:
Fiscal period ended
Thousands of Euro 31/12/20 31/12/19 Non-operating income 1,984 2,354 Other revenues and various proceeds 1,125 700 Proceeds from extraordinary transactions 247 375
Total 3,356 3,429
Non-operating income mainly refers to the write-off of debt positions towards suppliers and towards
Mercatoria S.p.A. and Socrate SPV that in previous fiscal periods acquired the receivables of Unicredit, Banco
BPM, and Intesa Sanpaolo towards Itway. On December 30, 2020, Itway concluded an agreement that foresees
the write-off of 33% of the debt positions. In detail, Euro 1,792 thousand of non-operating income refers to the
write-off of financial debt with Mercatoria and Socrate SPV and euro 192 thousand for the write-off of
positions towards suppliers.
The “Other revenues and various proceeds” line includes, among others, charges for services rendered to
subsidiaries, settled with specific contracts. Proceeds from extraordinary transactions during the fiscal period refer to a non-recurring proceed in nature of Euro 247 thousand realized by the Parent Company following the collection of the guarantee deposit for the sale of the Greek and Turkish subsidiary that will not be returned after the transaction to buy back the subsidiaries that took place in April 2020.
Fiscal period ended Thousands of Euro 31/12/20 31/12/19 Revenue from sale of products 55 117 Revenue from services 716 242
Total 771 359
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3. Cost for Products (net of charges in inventories of raw materials and goods)
Following is the breakdown
Fiscal period ended Thousands of Euro 31/12/20 31/12/19 Purchase of products 99 85
Cost for resold services 125 22
Other purchases 9 11
Total 233 118 4. Cost of services
Following is the breakdown:
Please note that:
• Consultancy includes non-recurring charges related to the management of extraordinary transactions underway and the financial debt remodulation for approx. Euro 391 thousand;
• The table includes the compensation agreed by social bodies deliberated at the Annual General Meeting of the Company and the Group, including social security charges and related accessories.
5. Personnel costs
Following is the breakdown, compared with the previous period:
Fiscal period ended Thousands of Euro 31/12/20 31/12/19 Salaries 351 263 Social charges 147 125 Severance pay 21 22
Total 519 410
Fiscal period ended Thousands of Euro 31/12/20 31/12/19 Directors’ remunerations of the parent company and social Charges 427 427
Auditing company fees 69 69
Consultancy and collaborations 76 55
Commissions and agents’ charges 673 648
Advertising and trade fairs 7 38
Telecom expenses 17 27
Insurance 59 112
Electricity, water and gas 24 27
Travel and representation 16 40
Specialist costs, IR and securities services 69 61
Other expenses and services 277 204
Total 1,714 1,708
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The following table details the number of employees, both average and punctual:
6. Other operating expenses
Following is a breakdown compared with the previous period
Fiscal period ended Thousands of Euro 31/12/20 31/12/19 Property lease, offices and vehicles 74 69 Writedowns of doubtful account 900 - Extraordinary and contingent charges 70 231
Total 1,044 300 Property lease for the 2020 fiscal year refers to short-term leasing costs (excluded from IFRS 16 application) in addition to variable leasing payments (indexing, and similar). The writedown on doubtful accounts refers to a prudential writedown of trade receivables.
Extraordinary and contingent charges are non-recurring.
7. Amortization
Following is a breakdown:
Fiscal period ended Thousands of euro 31/12/20 31/12/19 Depreciation of tangible assets 53 128 Amortization of intangible assets 174 226 Amortization for right of use 165 102 Writedown of investment - 45
Total 392 501
31/12/2020 31/12/2019 Variation 31/12/2020 31/12/2019 Variation
Avg Avg Punctual Punctual Managers 1 1 - 1 1 -
Mid-managers
. - - - - -
Employees 7 3 4 8 5 3
Total 8 4 4 9 6 3
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8. Financial income and expenses
Following is a breakdown:
Fiscal period ended
Thousands of Euro 31/12/20 31/12/19
Income from investments 4 15
Other income 2 2
Total financial income 6 17 Financial charges towards financial institutions (39) (184)
Bank commissions (11) (24)
Profit/(loss) on exchange rates (1) (55)
Other expenses (77) (16)
Total financial expenses (128) (279) Result of subsidiaries with Net Equity method 807 1,439
Total 685 1,177
Financial proceeds refer mainly to dividends cashed in by the Dexit S.r.l. subsidiary.
The improvement in “Financial Charges towards Financial Institutions” reflects the sale to third parties of
payables towards financial institutions from which interest payables are not applied. The increase in “Other
expenses” mainly refers to costs related to the convertible bond issuance, as previously described.
Please see Note 13 “Investments” for eventual details of the result of subsidiaries valued with the net equity
method 9. Income taxes
Following is the breakdown:
Thousands of Euro 31/12/2020
31/12/2019
Variation
Current income taxes (Ires) (7) (331) 324 Irap (33) (57) 24 Deferred (prepaid) taxes 354 495 (141) Other taxes and fines - 1 (1) Total 314 108 206
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The following table highlights the reconciliation of the theoretical fiscal charge and the effective fiscal charge relating to the IRES tax on income:
Fiscal period ended
Thousands of Euro 31/12/2020 31/12/2019
Taxable income
Tax Taxable income
Tax
Result before taxes
909
1.928
Theoretical tax rate (24%)
218
463
Temporary differences to be made in future fiscal periods
958 165
Differences that will not be carried over to future years
(2,582) (1,260)
Carry forwards of temporary differences from previous fiscal periods
747 546
Tax rate at 24% 32 1,379
Current income tax (IRES) 7 331 Deferred tax net of the use of taxes allocated in previous years
(80) (227)
Anticipated tax net of use of anticipated taxes allocated in previous years
(275) (269)
Net IRES for the period (347) (164)
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The following table highlights the reconciliation of the theoretical fiscal charge and the effective fiscal charge relating to the Irap tax:
Fiscal period ended Thousands of Euro 31/12/2020
31/12/2019
Taxable
income Tax
Taxable income
Tax
Result before taxes
909
1.928
Costs that are not relevant for IRAP purposes
668 (421)
Total 849 1.506 Theoretical fiscal charge (3.9%)
35 59
Temporary differences to be realized in future years
- -
Differences that will not be carried forward to future years
(7) (37)
Carry forward of temporary differences from previous years
- -
Taxable income
842 1.469
Taxable at (4,90%) - - - Taxable at (3,90%) 842 33 57
Current IRAP for the period 33 57 Deferred tax net of use of taxes allocated in previous fiscal period
- -
Anticipated taxes net of use of taxes allocated in previous fiscal periods
- -
Net IRAP for the period 33 57
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10. Property, plant and equipment
Property, plants and equipment are expressed net of accumulated depreciation and have the following composition and variation in the last two fiscal years:
Thousands of Euro Property and
offices Other goods Total Purchase cost 3,330 1,684 5,014 Balance at 31.12.2018 3,330 1,684 5,014 Increases - 4 4 Decreases - - - IFRS16 "Leases" reclassification (2,586) - 2,586) Balance at 31.12.2019 744 1.688 2,432 Accrued depreciation 676 1,553 2,229 Balance at 31.12.2018 676 1,553 2,229 Amortization 69 59 128 Balance at 31.12.2019 745 1,612 2,357 Net value December 31, 2018 2,654 131 2,785
December 31, 2019 - 76 76
Thousands of Euro Property and
offices Other goods Total Purchase cost 744 1,688 2,432 Balance at 31.12.2019 744 1,688 2,432 Increases - 8 8 Decreases - - - Balance at 31.12.2020 744 1,696 2,440 Accrued depreciation 744 1,612 2,356 Balance at 31.12.2019 744 1,612 2,356 Amortization - 53 53 Balance at 31.12.2020 744 1,665 2,409 Net value December 31, 2019 - 76 76 December 31, 2020 - 31 31
The investments in the ‘Other goods’ item recorded in the 2020 fiscal period essentially refer to the purchase of computers and network servers.
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11. Other intangible assets
Following is the breakdown and variation of other intangible assets in the past two fiscal periods:
Thousands of Euro
Development costs
Software licenses
and patent rights
Other
Work in progress
Total Purchase cost 1,198 1,455 1,699 - 4,352 Balance at 31.12.2018 1,198 1,455 1,699 - 4,352 Increases - 1 2 200 203 Decreases - - - - - Balance at 31.12.2019 1,198 1,456 1,701 200 4,555 Accrued amortization - 1,457 1,587 - 3,044 Balance at 31.12.2018 - 1,457 1,587 - 3,044 Amortization 150 - 76 - 226 Amortized balance at 31.12.2019 150 1,457 1,663 - 3,270 Net value December 31, 2018 1,198 96 14 - 1,308 December 31, 2019 1,048 - 38 200 1,285
Thousands of Euro
Development costs
Software licenses
and patent rights
Other
Work in progress
Total Purchase cost 1,198 1,456 1,701 200 4,555 Balance at 31.12.2019 1,198 1,456 1,701 200 4,555 Increases - 3 - 50 53 Decreases - - - - - Balance at 31.12.2020 1,198 1,459 1,701 250 4,608 Accrued amortization 150 1,457 1,663 - 3,270 Balance at 31.12.2019 150 1,457 1,663 - 3,270 Amortization 150 1 23 - 174 Amortized balance at 31.12.2020 300 1,458 1,686 - 3,444 Net value December 31, 2019 1,048 - 38 200 1,285 December 31, 2020 898 1 15 250 1,164
The increase in “Work in Progress” refers to investments, the cost of which has been identified reliably, in the development and improvement of new products that began in the previous fiscal year and that required further investments for the Parent Company. In particular, the Parent Company continued investments in ICOY® (I Care Of You), which is patent-pending, and that will position Itway as a leader in the Environment Health Safety (EHS) sector. The Group, which has the economic and technical skills to complete these activities in the near terms, expects significant returns from these investments in future fiscal years.
12. Right of use
Right of use totaled Euro 2,608 thousand (Euro 2,778 thousand as of December 31, 2019). The assets in question mainly comprise property and vehicles. The related residual debt for the purchase of the two properties are booked in the Non-current and current financial liabilities item (Note 25 and Note 26).
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13. Investments
Following is some information regarding the investments of the Company:
Name Headquarters Share capital in
Euro
% direct
ownership
% indirect
ownership
Value at 31/12/20
Value at 31/12/19
Subsidiary
Itway Turkiye Ltd. Eski Uscudar Yolu NO. 8/18 – Istanbul
1,500,000 *
-
100%
2,049 2,622
Itway Hellas S.A. Ag. Ioannu Str. 10, Athens
846,368 - 100% 3,326 2,978
4Science S.r.l. Viale A. Papa, 30 Milan 10,000 100% 764 544 Other companies
Dexit S.r.l. Via G. Gilli 2, Trento 700,000 9% 374 374 Be Infrastrutture S.r.l. Via Trieste, 76
Ravenna 100,000 30%
Be Innova S.r.l. Piazza C. Battisti, 26 Trento
20,000
50%
107 409
Idrolab S.r.l. Via Dell’Arrigoni, 120 Cesena
52,500 10% 195 195
Cyber Security 1 AB E145NR, Floor 19, 40 Bank Street, London
77,332 5.64% - 753
Total 6,815 7,875
* The value is expressed in the New Turkish Lira (YTL) For the sake of completeness, please note that Itway S.p.A. also owns 100% of Itway International S.r.l. (with a share capital of Euro 10 thousand), which, in turn, has full ownership of Itway Hellas and Itway Turkyie. Itway International S.r.l. was established as a vehicle for the sale of these foreign subsidiaries, upon conferral of their respective stakes, based on agreements with Cyber 1 AB that subsequently lapsed, as extensively described hereinafter. Hence, this reorganization qualifies as business combinations under common control pursuant to paragraph B1 of IFRS 3, and, therefore, the acquisition method according to IFRS 3 to recognize business combinations is not applicable. For this reason, from a substantive point of view and considering the reclassification of capital balances of Itway International based on the group’s accounting principles, the book value of the investment by Itway in 100% of Itway International is considered the sum of the book values of Itway Hellas and Itway Turkiye, as indicated in the table. On the other hand, since Itway International is a pure holding company that does not have any operating activity and does not carry out any management transactions, if not the ownership of the two foreign companies, net equity and the net result of Itway International are insignificant, excluding the value of the shareholdings included in its assets. It was therefore considered appropriate to give a substantive disclosure of the reference value of the investment held by Itway by detailing in the table the theoretical book value of the two subsidiaries with their respective net equity, neutralizing the impact of the corporate reorganization that took place only formally, as previously indicated. The data on Net Equity and Net Result of the subsidiaries, detailed in the following table, are taken from the financial statements for the fiscal year ending December 31, 2020 approved by the respective Board of Directors and rectified, where necessary, to adjust them to the accounting principles adopted by the Company.
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(*) Financial statements as of December 31, 2019 (**) Net equity includes Euro 1,598 thousand as a fund for future capital increases paid by shareholder Itway S.p.A. Please note that in the Separate financial statements of Itway S.p.A. this amount is booked in the “Non-Current financial assets” in the balance sheet as of 31/12/2020. For a better understanding of the activities carried out by the subsidiaries, please see the consolidated financial statements, drafted by the Board of Directors along with the current separate financial statements. The Group controls the Greek and Turkish subsidiaries through Itway International S.r.l. (formerly Credence Security Europe S.r.l.) after taking back full control on April 7, 2020, as the agreements with Cyber 1 lapsed because of serious breaches. Regarding the exclusive agreement with Cyber Security 1 AB (formerly Cognosec), a company listed on the Nasdaq First North (COGS OTC-Nasdaq Int’l Designation: CYBNY) for the sale of 100% of Itway Hellas SA and Itway Turkyie Ltd., already described in previous financial statements, on April 7, 2020, Itway took back full control of Itway Hellas and Itway Turkiye, which operate as value-added distributors (VAD), following a serious and persistent breach by Cyber 1 of the agreements to buy the shares of these companies. The two subsidiaries, the shares of which had been sold on May 28, 2019, as part of the agreements with Cyber 1 to Credence Security Europe S.r.l. (which is 95% controlled by Cyber 1, and 5% controlled by Itway), which is now Iway International S.r.l., have continued to be managed by Itway while awaiting the execution of the agreement that gave Itway the right to buy the full ownership of Credence Security Europe in case of breach of payment obligations by Cyber 1 in favour of Itway. The buyback transaction, foreseen by the shareholder pact between Itway and Cyber 1, as shareholders of Credence Security Europe S.r.l., became appropriate following persistent delays in payments by Cyber 1, initially not contested by Itway as the company certified with formal documents its ability to fulfil the agreements rapidly, despite the delay. The situation changed following the sudden passing at the end of December 2019 of Kobus Paulsen, CEO and majority shareholder of Cyber 1, architect and main promoter of the agreement between Cyber 1 and Itway, and the resulting stalemate within the company due to the nomination of the new Board of directors of Cyber 1 that did not order the fulfilment of the agreed commitments. The existing agreements regarding the sale of the two subsidiaries, therefore, lapsed as Cyber 1 breached payment commitments of over Euro 12 million. Itway received the total amount of Euro 2.6 million, in part during the 2018 fiscal year and part in subsequent years, and will keep it as foreseen by contractual agreements for the violation of the obligations from Cyber 1. Please note that, to date, there are no disputes or litigation between Itway and Cyber 1.
Denominazione (Euro)
% Patrimonio
Netto
di cui Risultato
d'esercizio
Quota Patrimonio
Netto di pertinenza
Valore a bilancio
Itway Iberica S.L. 100% (26.302) 31.098 (26.302) - Itway France S.A.S. 100% (7.948.185) (22.422) (7.948.185) - Itway Hellas S.A. 100% 1.468.074 347.660 1.468.074 3.325.590 Itway Turkiye Ltd. 100% 2.453.719 544.049 2.453.719 2.048.959 iNebula S.r.l. in liquidazione 75% 65.170 (9.672) 48.878 - 4Science S.r.l. 100% 734.467 219.560 734.467 763.734 Itway RE S.r.l. 100% 10.737 (1.216) 10.737 - Dexit S.r.l. (*) 9,00% 2.462.166 92.572 221.595 373.544 Be Infrastrutture S.r.l. in liquidazione (*) 30,00% (103.718) 6.714 (31.115) - Be Innova S.r.l. (*) (**) 50,00% 2.432.043 14.411 1.216.022 106.727 Idrolab S.r.l. (*) 10,00% 150.052 112.206 15.005 195.000 Altre partecipazioni 17 Totale Partecipazioni 6.813.571
Al 31 dicembre 2020
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Thanks to the addition of new product lines in its portfolio, the Turkish subsidiary posted a +35% rise in revenue in local currencies compared with 2019. Even considering the foreign exchange devaluation (Euro to Turkish Lira), growth was +7%. Itway Turkiye confirmed its position as one of the leading Cyber Security operators in Turkey, with increasing margins compared with 2019. During the 2020 fiscal year, Itway received dividends for a total of Euro 318 thousand from Itway Turkey that were recognized as a reduction of the book value of the investment, according to the net equity method under IAS 28. The Greek subsidiary posted significant growth both in terms of revenue (+21%) and in market share. The Company, which specializes in Cyber Security, witnessed a jump in demand generated by the increase in smart working and the need of public and private organizations to protect data and information. Furthermore, the newly introduced product lines are giving the expected results. In particular, the Imperva product line, which is the leader in the WAF (Web Application Firewall) segment, quadrupled revenue in one year. Itway Hellas received aid from the Greek State supporting companies under lockdown due to the Covid-19 pandemic totalling Euro 300 thousand at very favourable interest rates. This confirms its ability to dialogue with the local financial system and the proven bankability of the Company, even in a difficult year like 2020.
The French and Iberian subsidiaries, following the termination in past fiscal years of VAD activities in the countries where they operate, are no longer operational. The financial statements of the fiscal year of the French subsidiary ended with a loss of Euro 22 thousand as administrative-tax and auditing costs attributed to the current fiscal year were allocated and estimated. The Spanish subsidiary ended the year with a net profit of Euro 31 thousand mainly reflecting the recognition of revenue related to the write-off of some payables towards suppliers.
4Science S.r.l., after a few years of activity, is now a reference player in the emerging markets of Data Science, Data Management, and Big Data (Data Curation). It also has a leading role as a Digital Repository and Preservation of digital assets related to scientific research and cultural and artistic assets, the so-called Digital Libraries. The unit recorded constant growth since its establishment in 2017 and this trend continued in 2020 despite the complex period caused by the Covid-19 pandemic. At the end of 2020, it had over 100 in-house projects, acquired over three years, 75% of which on behalf of foreign Clients, namely in Europe, the US, LATAM, and the Far East.
Furthermore, in 2020 there was also an increase in the average value of the order that generated an increase of approximately 22% in sales revenue, while the Euro 1,400 thousand investment in DSpace CRIS (Current Research Information Systems) and in GLAM (Gallery Library Archive Museum) and their related add-ons has been almost completed, so the weight on capitalizations has been reduced to under 20% of total sales revenue, confirming the company’s ability to transform R&D efforts into sales. During the fiscal year, the Peruvian national consortium for research and science, CONCYTEC awarded 4Science the USD 1.3 million CRIS contract financed by the World Bank. This was possible thanks to the skills in the field of Big Data and Digital Repository that 4Science has developed over the years and that required a high degree of specialization and experience in the creation and management of CRIS (Current Research Information Systems) aimed at the research sector and the scientific community. The skills acquired over the years, combined with the strategic choice to operate in the Open Source software sector, allowed 4Science to position itself at a global level as a reference point for CRIS solutions and to include among its clients prestigious universities (including the Institute for Advanced Study of Princeton University in New Jersey, where Albert Einstein taught). Precisely because of the specific skills developed on CRIS systems, many clients mandated 4Science to develop projects related to the research sector that in this period of the pandemic have assumed an even greater strategic role both in the scientific community and in government and political circles as they are part also of the digitalization of public administration at a global level. Also the Cultural Heritage segment, with the GLAM product, which covers a very interesting and current market like the Long Term Preservation and Data Curation of digital information of cultural heritage, including collections, persons, events, concepts, places, and projects, recorded significant growth of 270%. In Italy,
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national points of excellence including the Naples National Library and the Giuseppe Verdi Conservatory in Milan chose 4Science to digitalize their cultural assets. 4Science recorded a net profit of Euro 220 thousand and an Ebitda of Euro 416 thousand, in line with the budget. iNebula S.r.l. continues with its liquidation process that started in 2018 with settlement agreements with its main creditors. All the assets related to iNebula Connect (IoT market, security solutions, ICOY work safety) in addition to the brand name and the website were sold to Itway for Euro 1,198 thousand at the end of 2018. Following is a brief comment on the other investments: • The Itway RE S.r.l. subsidiary charged the Parent Company the rent for the Ravenna headquarters; • The associated company Dexit S.r.l continued its activities mainly in the Autonomous Province of Trento
with a profit in the period ended December 31, 2019 of Euro 93 thousand. The results as of December 31, 2020 are still not available and will be approved within the terms foreseen by regulations;
• BE Innova S.r.l. (50% ownership) offers a combination of services that cover the range of activities connected to the management of information systems and security of large- and medium-sized firms;
• Business-e Infrastrutture S.r.l. (30% ownership), controlled by Cooperativa Muratori Cementisti CMC, aims to supply Information Technology services in the construction sector. In the past fiscal year, the investment was written down since the results of the company were not positive, and given the difficulties of the CMC Group, it was liquidated.
• Idrolab S.r.l (10% ownership) operates in data management in the software sector of Electronics Data Interchange (EDI) management for the plumbing and sanitary sector. It is a precursor to the emerging ETIM (European Technical Information Model) standard that is key in Building Information Model (BIM) projects.
Following the adoption of the Amendment to IAS 27, as described above, the book value of investments were not subject to impairment tests as of December 31, 2020 as no impairment indicators were detected. Following is a summary of the economic and financial data of associate companies:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Revenue Profit/(Loss) for the period
Comprehensive income
Dexit S.r.l.* 3,529 174 888 352 4,335 93 93 Be Infrastrutture S.r.l.* in liquidation
1,186 83 1,310 63 670 7 7
Be Innova S.r.l.* 897 5,435 3,819 80 1,675 14 14 Idrolab S.r.l.* 1,137 367 1,100 300 1,679 112 112
* Refers to the fiscal year ended December 31, 2019, the last financial statements available
14. Prepaid taxes assets and deferred tax liabilities
Prepaid tax assets, net of deferred tax liabilities, as of December 31, 2020 totalled Euro 773 thousand (Euro 419 thousand as of December 31, 2019). The Company expects to recover in future fiscal years based on the expected taxable income and the use of above-mentioned taxed funds. Deferred tax liabilities are booked against temporary differences taxable in future fiscal periods and as of December 31, 2020 total Euro 84 thousand (Euro 359 thousand as of December 31, 2019). These mainly refer to the timing difference that emerged on the capital gain from the sale of the VAD Italia business unit in 2016, which was spread for the sake of the IRES tax over five fiscal periods.
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The following table highlights the variations in the period:
31/12/2020 31/12/2019
Thousands of Euro Amount Prepaid
taxes Amounts Prepaid
taxes Variation
prepaid taxes
Taxed provision for bad debt 3,034 728 2.160 518 (210) Losses - - - - - Non-deductible interest 326 78 892 214 135 Other 212 51 188 45 (6)
Total prepaid tax receivables
3,572
857
3.240
777
(80)
31/12/2020 31/12/2019
Thousands of Euro Amount Deferred
taxes Amount Deferred
taxes Variation in deferred taxes
Capital gains on disposals 298 72 1,446 347 276 Discounting 54 13 49 11 (1) Total deferred Tax payables
352
85
1,495
358
275
15. Other non-current assets
Other non current assets as of December 31, 2020 totaled Euro 7 thousand and refer to security deposits paid in previous fiscal years and returned during 2020.
16. Non-current financial assets
Other noncurrent financial assets, totaling Euro 2,098 thousand as of December 31, 2020 and unchanged compared with the previous fiscal period, refer to:
− Euro 500 thousand of cash on hand on a checking account with Cassa di Risparmio di Ravenna as collateral of a banking guarantee issued in favor of Esprinet with a five year duration; therefore they are not available until the maturity of the banking guarantee;
− An interest-free financing for a total Euro 1.6 million granted to BE Innova S.r.l. and purchased from
Business-e, aimed at finalizing the “Adapt project”. The contract was signed by the minority interest in January 2017 and it should allow the subsidiary to obtain in the coming months a capital grant for a significant amount and a medium-term subsidized financing through which it will repay the commercial and financial payables towards Itway S.p.A.
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17. Account receivables - Trade
Trade receivables as at December 31, 2020, all short-term, totaled Euro 4,558 thousand (Euro 5,964 thousand at December 31, 2019). The value is expressed net of the allowance for doubtful accounts that as at December 31, 2020 Euro 3,060 thousand (Euro 2,160 thousand at December 31, 2019). The allowances are deemed to be congruous compared with the insolvency risks of the existing receivable
Trade receivables include also Euro 2,770 thousand of work in progress, of which Euro 2,750 relating to a contract in progress to order allocated in past fiscal years for which the client notified the Business-e S.p.A subsidiary, from which the receivable was purchased before its sale to Maticmind, that it was rejecting the amount requested by the Company based on the progress in the work carried out. Trade payables at December 31, 2020 include approximately Euro 1,300 thousand, for liabilities to suppliers related to this work in progress. In 2016, with the support of its legal advisers, the company started a legal procedure against this client in order obtain the consideration of this credit, filing a writ of summons with the Rome Court, the verdict of which in the first degree was not favorable to the Group. It was therefore decided to file an appeal with the Rome Appeals Court, as there are ample elements to support what Itway S.p.A. claims that were not considered by the judge in the first degree. The above situation highlights the presence of uncertainty on the possibility of recovering Euro 2,750 thousand booked in trade receivables that could have a significant impact on the consolidated financial statements to December 31, 2020. Itway, supported by its legal advisers and by an independent technical valuation that comforts it on the value of the state of progress of the work that was executed, kept this credit among its assets in the balance sheet.
Trade receivables also include Euro 1,531 thousand towards the Itway MENA FZC subsidiary company and Euro 1,018 thousand towards the affiliate BE Innova S.r.l.
In particular, the recoverability of receivables towards Itway MENA FZC is correlated to the rebound in activities in the area where the company operates (MEA countries) that to date suffered a slow-down also due to the impact of the Covid-19 pandemic. In the context of assessing the recoverability of receivables, directors made a writedown in the allowance for doubtful accounts for an overall Euro 900 thousand.
Following are the movements in the allowance for doubtful accounts:
Fiscal period ended Thousands of Euro 31/12/2020 31/12/2019 Initial allowance 2,160 2,229
Writedown for the period 900 -
Utilization - (69)
Final allowance 3,060 2,160
Following is the breakdown of trade receivables classified by maturity:
Fiscal period ended Thousands of Euro 31/12/2020 31/12/2019
Maturing 1,401 990 Expired up to 30 days 18 14 Expired from 30 to 60 days - - Expired > 60 days 6,199 7,120 Total gross receivables 7,618 8,124 Allowance for doubtful accounts (3,060) (2,160) Total 4,558 5,964
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18. Financing towards subsidiaries
In order to centralize and optimize its treasury operations, the Company has current financial relationships, regulated at market rates, with its subsidiaries for an overall Euro 9,533 thousand as of December 21, 2020 (Euro 9,731 thousand as of December 31, 2019).
19. Other current assets
Following is a breakdown: Fiscal period ended Thousands of Euro 31/12/2020 31/12/2019 Variation Tax receivables 240 557 (317) Other receivables - 26 (26) Accruals and deferrals 28 48 (20) Total 268 631 (363)
20. Other financial receivables The item “other financial receivables reflects: �- a receivable from the partner company Giovanni Andrea Farina & Co S.r.l that as of December 31, 2020 totaled Euro304 thousand (Euro 331 thousand as of December 31, 2019); - an interest-free receivable towards Be Innova initially purchased with the subsidiary and totaling as of
December 31, 2020 Euro 1,971 thousand (Euro 2,167 thousand as at December 31, 2019).
21. Cash on hand
Following is the breakdown:
Fiscal period ended Thousands of Euro 31/12/2020 31/12/2019 Variation Bank and postal deposits in Euro 269 20 249 Bank deposits in Dollars 1 - 1 Money and petty cash 1 1 - Total 271 21 250
22. Net equity
Share capital
The share capital of the parent company on December 31, 2020, fully paid, is represented by No. 7,905,318 ordinary shares for a nominal value of Euro 0.5 each, equal to Euro 3,952,659.
Own share reserve This reserve recognizes the purchase/sale of own shares, including accessory charges of the Parent Company‘s treasury shares at the date of the current financial statements. On December 31, 2020, the Company had No. 203,043 own shares, representing 2.57% of share capital, booked at an average cost of Euro 1.58 each. The total book value of treasury shares diminished by Euro 1,026 thousand when Nice & Green exercised the warrant that was implemented through the sale of treasury shares, as foreseen in the investment agreement between Itway and this institutional investor. The warrant was exercised at a price, determined according to contractual terms, that led to a capital loss on sale of Euro 547 thousand, recognized by reducing net equity, according to IAS 32.
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Share premium and other transactions
At December 31, 2020, it totaled Euro 17,037 (Euro 17,584 thousand as of December 31, 2019). The variation is due to the capital loss from the sale of Euro 547 thousand of own shares, as better detailed in the previous paragraph on the Own Share Reserve. Pursuant to article 2431 of the Civil Code please note that the share premium reserve can be eventually distributed if the legal reserve reaches a fifth of share capital.
Legal reserve
As of December 31, 2020 it stands at Euro 485 thousand, unchanged from the previous fiscal period Allowance for profit/(losses) carried forward
As of December 31, 2020, it was negative for losses carried forward totaling Euro 13,676 thousand (Euro 14,789 thousand at December 31, 2019); the variation compared with 2019 is due to the allocation of the 2019 profit for the period, and the recognition/valuation of results of subsidiaries with the net equity method and the discounting of the severance pay. The reserve includes the impact on net equity deriving from the transition to international accounting standards carried as of September 30, 2004, as well as the exchange rate movements with regards to the stake owned in Itway Turkiye; the amount referred to the 2020 fiscal year included in the OIC (Italian Accounting Standard Setter) is Euro 798 thousand.
23. Employee benefits
This item highlights the provisions in favor of personnel for the severance indemnity due pursuant to the law, net of the advances given to employees. Following are the changes in the 2020 fiscal year:
Thousands of Euro 31/12/19 Financial
charges Increases Actuarial
profit (loss) Use 31/12/20
Severance pay 219 10 28 (6) (2) 296 Total 266 10 28 (6) (2) 296
Following are the main assumptions used in the actuarial estimates of employee benefits:
Calculation date 31/12/2020 Mortality rate IPS55 Tables Invalidity rate INPS tables Personnel rotation rate 3.00% Discount rate* 0.34% Salary increase rate 3.00% Rate of advances 2.10% Inflation rate 0.80%
In particular, please note that:
• The annual discount rate used to determine the current value of the obligation was derived, pursuant
to paragraph 83 of IAS 19, from the Iboxx Corporate AA index with a 10+ duration at the date of
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measurement. Toward this end the yield was chosen with a duration that is comparable to the one of the collective of workers subject to the measurement;
• The annual rate of increase in the severance pay pursuant to article 2120 of the Civil Code is equal to 75% of inflation plus 1.5 percentage points.
Following are the demographic technical basis used:
Death IPS55 mortality tables
Inability INPS Tables classified by age, gender
Retirement 100% upon reaching compulsory general insurance (AGO) adjusted to requirements pursuant to Leg. Decree 4/2019
ANNUAL FREQUENCY OF TURNOVER AND ADVANCES ON THE S EVERENCE PAY (TFR.
Advances frequency 2.00%
Turnover frequency 3.00%
The annual frequency of advances and turnover is inferred from the historical experience of the Company and the frequencies deriving from the experience of actuarial services provider M&P based on a significant number of similar companies.
Assuming a 25 basis point increase in the technical actuarial rate compared with the one effectively applied for assessments to December 31, 2019 and all other actuarial hypothesis being equal, the potential loss of current value of liabilities for defined benefit plans underway would total some Euro 6 thousand. At the same time, assuming a 25 basis point drop in the same interest rate, there would be a potential increase in the current value of the liability of some Euro 6 thousand.
The changes to the remaining actuarial hypothesis would generate a significantly lower impact on the current value of the liabilities for defined benefit plans booked in the financial statements.
24. Non-current trade payables
This item, totalling Euro 348 thousand, represents the medium/long term part of trade payables in force as of December 31, 2020 that were subject to settlement and that involved agreed payments that will be concluded beyond December 31, 2021.
25. Accruals for risks and charges
Following is the change in the fiscal period:
Thousands of Euro 31/12/2019 Amortization Use 31/12/2020 Investment loss provision 8,173 33 (31) 8,175 Total 8,173 33 (31) 8,175
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The investment loss provision reflects mainly for Euro 7,947,463, the negative net equity of the French subsidiary at December 31, 2020 for which – to date - there are no legal obligations to recapitalize. This loss coverage fund constitutes an indirect write-down of all trade and financial receivables vested in Itway S.p.A. towards the French subsidiary, as shown in note 33 below, and towards iNebula S.r.l., under liquidation, Itway RE S.r.l., and Itway Iberica SL.
26. Non-current financial liabilities
Following is a breakdown:
This item represents: - for Euro 1,786 thousand the non-current quota of the residual debt towards a leasing Institute for the
offices in Milan as previously commented (Note 12) maturing in 2026. The contract was already classified as financial leasing according to IAS 17. With the entry into force of IFRS 16, starting from January 1, 2019, this contract was recognized with the financial accounting method foreseen by the new standard that, essentially, is in line with the valuation criterion previously adopted for this contract. These are the main terms of the leasing contract: cost of the property Euro 2,995 thousand; variable interest rate (3-month Euribor + 160 bps) convertible into a fixed rate at any moment chosen by the lessee.
- for Euro 606 thousand the non-current quota of two Iccrea financings, previously booked among current financial liabilities. In December 2020, an agreement was reached with the financial institution to redefine the terms of the financings and allowing them to go back to their original medium-term status;
- for Euro 1,718 thousand the non-current quota of residual debt towards Mercatoria S.p.A. and Socrate SPV as formally agreed in December 2020;
- for Euro 10 thousand the non-current quota of financial payables related to the right of use deriving from the application of IFRS 16.
Following is the detail of the residual non-current leasing debt broke down by maturity:
Fiscal period ended
Thousands of Euro 31/12/2020 31/12/2019 Residual non-current debt, net of interest 1-5 years 551 556 Over 5 years 1,235 1,175 Residual leasing debt, net of interests 1,786 1,731
Fiscal period ended
Thousands of Euro 31/12/2020
31/12/2019
Variation Maturity
Non-current residual leasing debt 1,786 1,731 55
November 2026 Non-current residual debt for mortgages 60 - 60 May 2022/June 2029 Non-current residual debt towards other investors 1,718 - 1,718
May 2023/December 2025
Debt for medium/long term right of use 10 99 (89) Total 3,574 1,830 1,744
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27. Current financial liabilities
As at December 31, 2020 they total Euro 3,157 thousand (Euro 7,161 thousand at December 31, 2019) and are mainly represented by debt towards banks, other investors and unsecured loans. In addition, this item includes Euro 84 thousand of the short-term portions of right of use debt, pursuant to IFRS 16, as per Note 26. As of December 31, 2020, the Parent Company had expired positions totalling Euro 1.1 million, and the Itway Group of Euro 1.3 million. In past fiscal years, the Company and the Group started talks with financial institutions to redefine the terms and conditions to re-modulate financial debt. Talks continued on a bilateral basis with each institution after the interruption of collegiate negotiations and, progressively, it has remodulated debt with most lenders. On December 30, 2020, an agreement was reached with Mercatoria, the main creditor of the Group (receivables totalling Euro 5.4 million, representing 75% of the total Parent Company indebtedness) for the execution of a recovery plan according to art. 67, paragraph 3, letter d), of R.D. 267/1942. This agreement foresees a 67% debt reduction with payments in 36 monthly instalments starting from June 2020 and a further reduction in case of early repayment.
To date negotiations are still under way for minor amounts with some banking institutions and one special purpose vehicle that in the past bought banking debt. The Company deems reasonable that it will be able to reach an agreement on the modalities to pay back the debt, in line with the recovery plan.
. In terms of expired positions of the Company, please note that to date there are legal disputes or judicial initiatives for Euro 339 thousand.
28. Current trade payables
As of December 31, 2020, trade payables, including invoices not yet received, total Euro 3,900 thousand compared with Euro 5,264 thousand on December 31, 2019. These payables are all short-term and include approximately Euro 1.6 million of expired debt towards suppliers (of which approximately Euro 0.5 million being contested, possibly at a court level). Please note that the Company has received some reminders for past-due positions but there has been no suspension of supplies that could jeopardize the execution of ordinary corporate activities.
29. Tax payables
Tax payables as of December 31, 2020 total Euro 74 thousand (Euro 28 thousand at December 31, 2019) and following is the breakdown:
Fiscal period ended Thousands of Euro 31/12/2020 31/12/2019 Variation Debt for income taxes 32 - 32 Withholding on personnel compensation
42 28 14
Total 74 28 46
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30. Other current liabilities
Other current liabilities as of December 31, 2020 total approximately Euro 937 thousand (Euro 1,797 thousand at December 31, 2019) with the following breakdown:
Fiscal period ended Thousands of Euro 31/12/2020 31/12/2019 Variation Debt towards personnel 19 9 10
Other debt towards personnel 130 122 8
Debt towards directors and collaborators 505 544 (39)
Debt towards social security institutions 57 55 2
Accruals and deferrals - 90 (90)
Advanced payments received and other liabilities 226 977 (751) Total 937 1.797 (860)
Other debt towards personnel includes provisions for deferred remuneration (vacation and additional monthly payments).
In the “Advanced payments and other liabilities” item, the most significant variation, of Euro 751 thousand, refers to the settlement of debt towards Cyber 1 in connection to the shares the Group received in the context of the sale of the Greek and Turkish subsidiaries. This sale was never sealed and the Group no longer owns Cyber 1 shares. This is why the related debt was cancelled.
Other current liabilities do not include debt towards personnel that was not paid at the natural expiry. However, as of December 31, 2020, the Parent Company had approximately Euro 5 thousand of expired debts towards social security bodies that will be paid within the regulations in force.
31. Obligations and guarantees Following are the obligations and guarantees as of December 31, 2020:
• Third party guarantees in favor of the Company for Euro 700 thousand relative to bank guarantees on behalf the Company towards suppliers;
• Company guarantees for Euro 1,200 thousand in favor of the Iway Re S.r.l. subsidiary as a collateral
for a mortgage. 32. Information on related parties
During the 2020 fiscal period, the Company had commercial and financial relationships with related companies. These are normal business activities, regulated with contractual conditions established by the parities at fair value, consistent with the ordinary market procedures. This is a summary:
Thousands of Euro Receivables Payables Costs Revenue Itway S.p.A. vs Giovanni Andrea Farina & Co. S.r.l. 304 - 198 2 Itway S.p.A. vs Be Innova S.r.l. 4,587 117 177 175 Itway S.p.A. vs Fartech S.r.l. 34 142 31 33 TOTAL 4,925 259 406 210
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The Group’s relationship with its managers is summed up in the Remuneration Report of the Board of Directors.
33. Infra-group relationships
The following table sums up the relationship of the Company with the subsidiaries of the Itway Group:
Thousands of Euro Trade receivables
Financial receivables
Financial payables (*)
Trade payables (*)
Operating and financial costs
Revenue, other revenue and financial proceeds
Itway Iberica S.L. 175 - 61 - - 60 Itway France S.A.S. - 7,893 - 42 - - Itway RE S.r.l. 20 - - (21) 60 - Inebula S.r.l. in liquidation -
59
- 150 - -
4Science S.r.l. 102 1,582 - 1,347 140 102 Itway Hellas S.A. 21 - - - - 258 Itway Turkiye Ltd. 28 - - - - 671 Total 346 9,534 61 1,518 200 1,091
(*) These amounts are classified at the “Payables towards subsidiaries” item of the balance sheet. Commercial relationships The company is not in a situation of being dependent or controlled by other companies. Itway S.p.A carries out commercial sales and purchase transactions of products and services with subsidiaries, within the normal management of the Company. Financial relationships The Company, in order to centralize and optimize treasury services, has current account financial relationships with subsidiaries, regulated at market rates, highlighted in the previous table, for an overall Euro 9,534 thousand as of December 31, 2020.
34. Remuneration to Directors, Auditors, managing directors and managers with strategic Responsibility
Following the introduction of article 123 ter of the TUF, the data on these remunerations are reported analytically on the report on remuneration that will be made available to the public within the terms foreseen by law at the administrative headquarters. It will also be possible to consult them on the Internet site www.itway.com in the Investor Relation section.
35. Net financial position Pursuant to Consob Communication No. 6064293 of July 28 2006, following is the breakdown of the Company’s net financial position (NFP), not inclusive of intercompany loans towards subsidiaries previously disclosed:
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Please see the Cash Flow Statement for the details of the movements that generated the variation in the Net Financial Position. There was a marked improvement in the net financial position of the Parent Company as of December 31, 2020, mainly due to the write-off of certain debt positions, in particular the agreement reached with Mercatoria, the main creditor, for the execution of a recovery plan drafted pursuant to article 67, paragraph 3, letter d) of R.D. 267/1942. Furthermore, on December 15, 2020, the financing terms with Iccrea were redefined, allowing to reclassify debt as medium-term while in previous fiscal years it was included among current liabilities due to covenant breaches. The non-current net financial position reflects financings detailed in Note 26. The variation in the fiscal year reflects the drop in expiring quotas beyond the fiscal year of funding granted in past fiscal years.
36. Subsequent events
As highlighted in the 2020-2023 Industrial Plan approved by the Board of Directors and certified by an independent third party, the Group is expected to focus on the sectors of Cybersecurity, Data Science, and Safety. Furthermore, there will be an increasing focus on the Be Innova S.r.l. and 4Science S.r.l. subsidiaries. It is difficult to assess today whether there will be a significant impact on the business performance in light of the current situation concerning the possible effects of the Covid-19 pandemic. However, it is important to remember that the activities of the Itway Group, mostly related to cybersecurity, have proven essential also, and above all, in these moments of global emergency, proving that Cybersecurity, dealing with the security of the core activities of companies, can be considered anti-cyclical compared to other market sectors. The measures adopted by almost all organizations in terms of smart working multiplies exponentially the risks related to security, resulting in greater demand for Cybersecurity solutions to mitigate these risks. The activities of Itway, being mainly made up of services, continued also with the new modality of remote working that the COVID emergency imposed. There was no significant impact on the Greek and Turkish subsidiaries, given the limited spread of the pandemic in these countries. However, as described above, the Safety ICOY Business Unit in 2020 and partially also in 2021 suffered and will suffer from a lack of growth due to the segments it targets -- manufacturing, metallurgical, oil & gas, transport & logistic. The 2020 sales budget has been delayed in part to 2021 and in part in 2022. There was, however, constant and growing interest towards this innovative product that is proprietary to Itway from potential clients who are more aware of the safety of their workers. Despite an expected 14-month delay, the outlook for this innovative product line is still very positive.
Thousands of Euro
31/12/2020
31/12/2019
Cash on hand 271 21 Financial receivables 2,275 2,498 Current financial liabilities (2,625) (7,161) Convertible bonds (473) - Current net financial position (552) (4,642) Non-current financial assets 2,098 2,098 Non-current financial liabilities (3,574) (1,830)
Non-current net financial position (1,476) 268
Total net financial position (2,028) (4,374)
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37. Non-recurrent, atypical and/or unusual transactions
During the fiscal year that ended on December 31, 2020, no significant and/or non-recurrent and/or atypical and/or unusual transactions were carried out with third parties, as defined by Consob Communication of July 28, 2006. The Management Report of the 2020 Financial Statements broadly describes the significant, non-recurring transactions related to the write-off of some debt positions.
38. Financial risk management: objectives and criteria
The international accounting principle IFRS 7 requires providing disclosures in their financial statements that enable users to evaluate:
� The significance of financial instruments for the financial position and the income statement;
� The nature and entity of risks arising from financial instruments to which the Company is exposed
during the fiscal year and as at the reporting date, and how the entity managed those risks.
The accounting principles regarding financial instruments applied in drafting the separate balance sheet are described in the section Accounting Principles and Main Assessment Criteria, while the definition of financial risks and the analysis of the degree of significance of the exposure of the Company to the different categories of risks identified are reported hereinafter. Account and trade receivables, cash and cash on hand that directly derives from the operating activity represent the main financial activities of the Company. Financial liabilities are made up of short- term debt towards major credit institutes and medium- and long-term debt towards leasing companies, towards Mercatoria S.p.A. and towards ICCREA.
ASSETS December 31, 2020 Thousands of Euro Carrying
value Assets for
derivatives at FVTPL (*)
Financial instruments at amortized
costs
Derivatives used for hedging
Financial instruments at
FVTPL (*)
Financial instruments at FVTOCI (**)
Other non-current assets - - - - - - Non-current financial assets 2,098 2,098
Non-current assets 2,098 - 2,098 - - - Trade receivables 4,558 - 4,558 - - - Financial receivables towards subsidiaries
9,533 - 9,533 - - -
Trade receivables towards subsidiaries
346 - 346 - - -
Other current assets 268 - 268 - - - Cash on hand 271 - 271 - - - Current assets 14,976 - 14,976 - - -
___________________________________________________________________________________________________________
______________________________________________________________________________________________________ Separate Financial Statements as of December 31, 2020
125
*Fair Value Trough Profit and Loss
**Fair Value Trough Other Comprehensive Income
Financial assets and liabilities are booked at a value that is not different from the fair value.
ASSETS December 31, 2019 Thousands of Euro Carrying
value Assets for
derivatives at FVTPL (*)
Financial instruments at amortized
costs
Derivatives used for hedging
Financial instruments at
FVTPL (*)
Financial instruments at FVTOCI (**)
Other non-current assets 7 - 7 - - - Non-current assets 7 - 7 - - - Trade receivables 5,816 - 5,816 - - - Financial receivables towards subsidiaries
8,610 - 8,610 - - -
Trade receivables towards subsidiaries
518 - 518 - - -
Other current assets 1,051 - 1,051 - - - Cash on hand 468 - 468 - - - Current assets 16,463 - 16,463 - - -
LIABILITIES December 31, 2020 Thousands of Euro Carrying value Liabilities for
derivatives at FVTPL (*)
Other financial liabilities
Derivatives used for hedging
Non-current financial liabilities 3,574 - 1,830 - Non-current liabilities 3,574 - 1,830 - Current financial liabilities 3,157 - 3,157 - Current trade payables 3,900 - 3,900 - Payables towards subsidiaries 1,578 - 1,578 - Other current liabilities 937 - 937 - Tax payables 74 74 Current liabilities 9,646 - 9,646 -
LIABILITIES December 31, 2019 Thousands of Euro Carrying value Liabilities for
derivatives at FVTPL (*)
Other financial liabilities
Derivatives used for hedging
Non-current financial liabilities 1,830 - 1,830 - Non-current liabilities 1,830 - 1,830 - Current financial liabilities 7,161 - 7,161 - Current trade payables 5,264 - 5,264 - Payables towards subsidiaries 1,458 - 1,458 - Other current liabilities 1,797 - 1,797 - Tax payables 28 28 Current liabilities 15,708 - 15,708 -
___________________________________________________________________________________________________________
______________________________________________________________________________________________________ Separate Financial Statements as of December 31, 2020
126
Following are the main risks for the activities of the company: Interest rate risk
The financial instruments of the Company include anticipated credits by banking institutes and sight deposits. Such instruments finance the Company’s activities. Total loans obtained by the group foresee variable interest rates (generally 1-3 month Euribor). Therefore the interest rate risk is represented by the exposure of cash flows to interest rate fluctuations. The current policy is not to hedge interest rate fluctuations. On the basis of the short-term average exposure in the period, a fluctuation of 1 percentage point of interest rates would entail a variation of +/- in interest payments of some Euro 32 thousand per fiscal period. On non-current financial liabilities a 1-percentage point fluctuation in interest rates would entail a variation of +/- of interests of some Euro 36 thousand per fiscal year.
Foreign exchange risk The Company uses as its main currency for its purchases and sales mainly the Euro and on an exceptional basis the US Dollar. Credit risk The credit risk represents the Company’s potential exposure to losses deriving from counterparties not fulfilling their obligations. The Company does not have significant concentrations of credit risk therefore it isn’t deemed opportune to highlight quantitative and detailed information, except for the details regarding account receivables per expiration breakdown in Note 17. In order to check such risk the Group implemented procedures and measures to assess the clientele and the possible recovery measures. Regarding other financial assets, including cash available and cash equivalents, financial counter-parties are exclusively highly solvable financial institutions and pertinent policies were adopted to limit credit risk exposure to a single credit institution Liquidity risk The liquidity risk represents the risk that the financial resources available to the company are not enough to face the financial obligations in the pre-set terms and maturities. The liquidity risk of the Group is minimized by the agreement signed by the Parent Company to execute the recovery plan drafted according to Article 67, paragraph 3, letter d) of R.D. 267/1942 with Mercatoria, the main creditor of the group (with receivables of Euro 5.4 million). The agreement, defined based on the 2020-2023 Industrial and Financial Plan, approved by the Board of Directors on September 14, 2020, and subsequently integrated and updated along with the related financial package, was certified on October 5, 2020, and subsequently integrated and updated on December 29, 2020, confirming the truthfulness of corporate data and the feasibility of the plan, as well as its conformity to pursue the objectives of recovery and rebalancing of the financial and capital position of Itway. The plan, among other things, envisages significant financial support through the issue of convertible bonds for institutional investor N&G with which it signed an investment contract for a Warrant and Convertible Notes Funding Program worth an overall Euro 6 million that can be exercised by Itway upon its discretion, quarterly, in tranches of Euro 500 thousand each. To date, Euro 1 million has been exercised. To date negotiations are still under way for minor amounts with some banking institutions and one special purpose vehicle that in the past bought banking debt. The Company deems reasonable that it will be able to reach an agreement on the modalities to pay back the debt, in line with the recovery plan.
A prudent management of the liquidity risk is pursued maintaining sufficient resources in cash or easily convertible into cash and an adequate availability of credit lines. In addition to what has been already reported, in the other statements of the Financial Statements and in the notes regarding current financial liabilities, expiring within the end of next fiscal year, the following table analyses the Group’s non-current liabilities, grouped together on the basis of the contract expiration compared with the balance sheet date.
___________________________________________________________________________________________________________
______________________________________________________________________________________________________ Separate Financial Statements as of December 31, 2020
127
Thousands of Euro 31/12/2019 Contractual cash flows
1-2 years 2-5 years Over
Non-current financial liabilities 1,830 1,830 188 422 1,221 Non-current liabilities 1,830 1,830 188 422 1,221
Capital management The main objective of capital management of the Company is to maintain adequate levels of capital indicators so as to support activities and to maximize value for shareholders. We feel the best assessment of capital indicators can be seen in the s financial prospectus above.
39. Other information
Regarding the information Consob requested regarding transactions and significant balances with related parties and infra group, it should be underlined that these, in addition to being commented in an ad hoc Note, were separately indicated in the financial statements.
40. Issuers’ regulation Art. 149 duodecies – Prospectus
In addition to the compensation mentioned above, Itway S.p.A. gave no other mandates to the auditing firm or other companies of its network.
Thousands of Euro 31/12/2020 Contractual cash flows 1-2 years 2-5 years Over
Non-current financial liabilities 3,574 3,574 1,416 923 1,235 Non-current liabilities 3,574 3,574 1,416 923 1,235
Description Thousands of Euro
Compensation for Analisi for the auditing of the financial statements of the fiscal year at a consolidated and Itway SpA level
58
Compensation to Analisi for other services
18
Total 76
___________________________________________________________________________________________________________
______________________________________________________________________________________________________ Separate Financial Statements as of December 31, 2020
128
41. Publication of the Financial Statements
The financial statements were approved by the Board of Directors of Itway S.p.A., which approved its publication, at the March 29, 2021 meeting in which the mandate was given to the President to carry out formal fine tuning amendments or integrations should they be necessary or opportune for a better drafting and a more complete text, in all its elements
42. The companies of the Itway S.p.A. Group
Following is the list of companies and relevant investments of the Group, pursuant to Consob Deliberation No. 11971 of May 14 1999 and successive modification and Consob communication No. DEM/6064293 of July 28 2006. In the list that follows the companies are divided by type of control and consolidation method as well as sector activity. For each company the following is highlighted: name, headquarters, country affiliation, share capital in the original currency. Furthermore, also listed are the shareholdings, voting rights in ordinary shareholders meeting, if different from the stake of the capital and the controlling companies.
PARENT COMPANY HEADQUARTERS SHARE CAPITAL Euro
Itway S.p.A.
Milan
3,952,659
___________________________________________________________________________________________________________
______________________________________________________________________________________________________ Separate Financial Statements as of December 31, 2020
129
SUBSIDIARY HEADQUARTERS SHARE
CAPITAL Euro
OWNERSHIP % CONTROLLING COMPANY
Itway Iberica S.L.
Barcelona
560,040
100%
Itway S,p.A
Itway France S.A.S.
Paris
100,000
100%
Itway S.p.A
Itway Hellas S.A.
Athens
846,368
100%
Itway S.p.A
Itway Turkiye Ltd. Istanbul 1,500,000
* 100%
Itway S.p.A.
. iNebula S.r.l. in liquidation
Milan
10,000
75%
Itway S.p.A
Itway RE S.r.l. Ravenna 10,000 100% Itway S.p.A.
4Science S.r.l.
Milan
10.000
100%
Itway S.p.A
* the value is expressed in the New Turkish Lira (YTL)
ASSOCIATE COMPANY HEADQUARTERS SHARE CAPITAL
Euro
% OWNEWRSHIP CONTROLLING COMPANY
BE Infrastrutture S.r.l.
Ravenna
100,000
30%
Itway S.p.A
BE Innova S.r.l.
Trento
20,000
50%
Itway S.p.A
OTHER COMPANIES
HEADQUARTERS SHARE CAPITAL
Euro
% OWNEWRSHIP CONTROLLING COMPANY
Dexit S.r.l. Trento
700,000
9%
Itway S.p.A
Itway MENA FZC Saudi Arabia 35,000* 17.1% 4Science S.r.l. Idrolab S.r.l.
Cesena 52,500 10% Itway S.p.A
Serendipity Energia SpA
Ravenna 1,117,758
10,5%
Itway S.p.A
* the value is expressed in Dirham of the United Arab Emirates (AED)
Ravenna, March 29, 2021
FOR THE BOARD OF DIRECTORS
The President and Chief Executive
G. Andrea Farina
www.analisi.it
viale Ramazzini 39/E 42124 Reggio Emilia (Italia) TEL +39 0522 271516 FAX +39 0522 230612 EMAIL [email protected]
CF – PI – Registro Imprese di Reggio Emilia 01459840359 | Capitale sociale € 200.000 int. versato
Analisi S.p.A. is a member of HLB International the global advisory and accounting network
INDEPENDENT AUDITOR’S REPORT IN ACCORDANCE WITH ARTICLE 14 OF LEGISLATIVE
DECREE NO. 39 OF JANUARY 27, 2010 AND ARTICLE 10 OF REGULATION (EU) NO. 537/2014
To the Shareholders of
ITWAY S.p.A.
Report on the Audit of the consolidated Financial Statements
Opinion
We have audited the consolidated financial statements of Itway Group (the Group), which comprise the
consolidated balance sheet as of December 31, 2020, the consolidated profit and loss account, the
consolidated statement of comprehensive income, the consolidated statements of changes in equity, the
consolidated statement of cash flows for the year then ended and the notes to the consolidated financial
statements, including a summary of significant accounting policies.
In our opinion, the consolidated financial statements give a true and fair view of the financial position of
the Group as of December 31, 2020, and of the result of its operations and cash flows for the year then
ended in accordance with International Financial Reporting Standards adopted by the European Union
and the regulations issued to implement article 9 of Legislative Decree No. 38/2005.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISA Italia). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit
of the Consolidated Financial Statements section of this report. We are independent of Itway S.p.A. (the
Company) pursuant to the regulations and standards on ethics and independence applicable to audits of
financial statements under Italian law. We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
Emphasis of Matter
We draw attention on paragraph “Going concern” into the Notes and “Going concern” into the Report of
Operations in which Directors described the agreement with the main creditor of the Group Mercatoria
S.p.A., in execution of a recovery plan prepared by Itway S.p.A. according to article 67 paragraph 3.d) of
R.D. 267/1942 certified by an independent expert, and the guidelines of Business Plan 2020-2023 under
which that agreement has been prepared. The Business Plan includes the issue of a convertible bond up
to the amount of Euro 5,5 million, as resolved by the Shareholders' Meeting of October 30, 2020, reserved
to the investor Nice & Green SA. Due to those circumstances and to Business Plan suitability to pursue
the financial recovery targets of the Group, Directors set out that the financial statements are prepared
on a going concern basis.
We draw attention on paragraph “Account receivables – Trade” into the Notes, concerning uncertainty on
the recovering of Euro 2.750 million, related to a contract in progress and booked in trade receivables,
that could have a significant impact on the consolidated financial statements as of December 31, 2020.
As described by Directors, a legal procedure was started with that customer to recognize the credit. The
judgment of the Court of First Instance in Rome was not favorable to the Group. Directors set out in the
Notes that, under the opinion of their legal consultants and an external technical assessment, they have
decided to present an appeal to the Court of Appeal of Rome, because in their opinion there are elements
supporting the request of Itway SpA.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements of the current period. These matters were addressed in the
context of our audit of the consolidated financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
Key Audit Matters Auditing procedures performed in response to key audit matters
Going concern assessment Notes: “Going concern”; Report on Operations: “Going concern”
In the consolidated financial statements as of December 31, 2019, Directors described that Itway Group was underscoring: current financial debts of Euro 7,98 million, of which Euro 7 million overdue at the balance sheet date, social security and tax debts overdue amounting Euro 426 thousand, and trade payables overdue amounting Euro 4,7 million. The business plan approved by the Directors was to reposition the Group in the market, collect cash flows from the associated companies Itway Hellas SA, Itway Turkyie Ltd and BE Innova S.r.l., and to outcome successfully the negotiations with the main creditors in order to reschedule maturities according to business plan and to pay also the other overdue debts.
With reference to this key audit matter, our procedures included:
discussion with Management and exchange of information with the Board of Statutory Auditors (“Collegio Sindacale”) on the going concern of the Group and the business plan 2020-2023;
discussion with Management on the reasonableness of the business plan assumptions, with particular reference to expected cash;
discussion with Management and analysis of the agreement with Mercatoria S.p.A.;
During the year ended December 31, 2020, Itway S.p.A. concluded an agreement with the main creditor of the Group Mercatoria S.p.A. for the amount of 5,4 million, in execution of a recovery plan according to article 67 paragraph 3.d) of R.D. 267/1942 certified by an independent expert, and the guidelines of Business Plan 2020-2023 under which that agreement has been prepared. That provides for a reduction of the debt to 67% of the original amount and payment by monthly installments of Euro 100 thousand by the deadline of May 30, 2023. The agreement also provides that the non-payment by Itway S.p.A. of two installments, even if not consecutive, if not agreed, could result in the termination of the contract with consequent payment of the entire residual debt prior to removal. The recovery plan provides also the payment of the other overdue financial and trade debts and the agreement with the investor Nice&Green SA to issue a warrant for Euro 500 thousand, concerning treasury shares, and a bond up to the amount of Euro 5,5 million convertible into new Itway shares, as resolved by the Shareholders' Meeting of October 30, 2020, reserved to the investor Nice & Green SA. Directors set out that they have prepared financial statements as of December 31, 2020 on a going concern basis considering that recovery plan as of article 67 of R.D. 267/1942, agreement with Mercatoria S.p.A., business plan and the investment agreement with Nice&Green are suitable to pursue the financial recovery targets of the Group. Then we considered this assessment as a key audit matter.
discussion with Management on the expected outcome of negotiations with the other overdue financial and trade creditors, not rescheduled yet;
discussion with Management and analysis of the investment agreement with Nice&Green SA;
subsequent events; we have verified the information provided in the
notes to the financial statements in respect of the going concern basis.
Key Audit Matters Auditing procedures performed in response to key audit matters
Uncertainty on the recovering of trade recevibles Notes: “Trade receivables”
The assertion Trade receivables in the consolidated financial statements as of December 31, 2020, includes a receivable concerning the amount of Euro 2.750 million, related to a contract in progress, for which the customer notified to reject the amount requested by Itway.
With reference to this key audit matter, our procedures included:
• discussion with Management and with the Board of Statutory Auditors (“Collegio Sindacale”) on the recoverability assessment by Directors and related uncertainties;
Itway started in 2016 a legal procedure with that customer to recognize the credit. The judgment of the Court of First Instance in Rome was not favorable to the company. Directors set out in the Notes that there are elements supporting the request of Itway SpA, not taken into consideration by the judge of first instance, and they have decided to present an appeal to the Court of Appeal of Rome. The dispute is still ongoing. Directors have described an uncertainty on the recovering of that amount of Euro 2.750 million, booked into trade receivables, that could have a significant impact on the consolidated financial statements as of December 31, 2020, while considering that in the financial statements there are Euro 1,3 million concerning trade payables incurred to execute the contract that, in the opinion of the Directors, could not be paid reasonably likely. Directors set out that, under the opinion of their legal consultants and an external technical assessment on the state of progress of the contract, Itway have decided to maintain that receivables into the assets of financial statements. Then we considered this assessment as a key audit matter.
• the request for an update on the status of the dispute to the lawyer appointed by the Company;
• the examination of the first sentence of the Court of First Instance in Rome of the appeal prepared by the lawyer appointed by the Company;
• we have verified the information provided in the notes to the financial statements.
Responsibilities of the Directors and Board of Statutory Auditors for the consolidated Financial
Statements
The Directors are responsible for the preparation of consolidated financial statements that give a true and
fair view in accordance with the International Financial Reporting Standards adopted by the European
Union as well as the provisions issued to implement the art. 9 of Legislative Decree no. 38/05 and, in the
terms established by law, for such internal control as the Directors determine is necessary to enable the
preparation of consolidated financial statements that are free from material misstatement, whether due
to fraud or error.
The Directors are responsible for assessing the Group’s ability to continue as a going concern and, in
preparing the consolidated financial statements, for the appropriate application of the going concern basis
of accounting, and for disclosing matters related to going concern. In preparing the consolidated financial
statements, the directors use the going concern basis of accounting unless they either intend to liquidate
Itway S.p.A. or to cease operations, or have no realistic alternative but to do so.
The Board of Statutory Auditors is responsible for overseeing, in the terms prescribed by law, the
Company’s financial reporting process.
Auditor’s Responsibilities for the Audit of the consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’
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 International Standards on Auditing (ISA Italia) 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 the consolidated financial statements.
As part of an audit conducted in accordance with International Standards on Auditing (ISA Italia), we
exercised our professional judgement and maintained professional skepticism throughout the audit.
Furthermore:
• We identified and assessed the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error; we designed and performed audit procedures
responsive to those risks; we obtained audit evidence that is sufficient and appropriate to provide
a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is
higher than for one resulting from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control;
• We obtained an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control;
• We evaluated the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the Directors;
• We concluded on the appropriateness of the Directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Group’s ability to continue
as a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the consolidated financial statements
or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the
audit evidence obtained up to the date of our auditor’s report. However, future events or conditions
may cause the Group to cease to continue as a going concern;
• We evaluated the overall presentation, structure and content of the consolidated financial
statements, including the disclosures, and whether the consolidated financial statements
represent the underlying transactions and events in a manner that achieves fair presentation;
• We obtained sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the group audit.
We remain solely responsible for our audit opinion on the consolidated financial statements.
We communicated with those charged with governance, identified at an appropriate level as required by
ISA Italia, regarding, among other matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that we identified during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence applicable in Italian law, and to communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence, and where
applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current period and
are therefore the key audit matters. We describe these matters in our auditor’s report.
Additional Disclosures required by Article 10 of Regulation (EU) No. 537/2014
On July 2, 2018, the shareholders of Itway S.p.A. in general meeting engaged us to perform the statutory
audit of the Company’s and the consolidated financial statements for the years ending December 31,
2018 to December 31, 2026.
We declare that we did not provide any prohibited non-audit services referred to in article 5, paragraph
1, of Regulation (EU) No. 537/2014 and that we remained independent of the Company in conducting
the statutory audit.
We confirm that the opinion on the consolidated financial statements expressed in this report is consistent
with the additional report to the board of statutory auditors, in its capacity as audit committee, prepared
pursuant to article 11 of the aforementioned Regulation.
Report on Compliance with other Laws and Regulations
Opinion in accordance with Article 14, paragraph 2, letter e), of Legislative Decree No. 39/2010
and Article 123-bis, paragraph 4, of Legislative Decree No. 58/1998
The directors of Itway S.p.A. are responsible for preparing a report on operations and a report on the
corporate governance and ownership structure of the Itway Group as of December 31, 2020, including
their consistency with the relevant consolidated financial statements and their compliance with the law.
We have performed the procedures required under auditing standard (SA Italia) No. 720B in order to
express an opinion on the consistency of the report on operations and of the specific information included
in the report on corporate governance and ownership structure referred to in article 123-bis, paragraph
4, of Legislative Decree No. 58/1998, with the consolidated financial statements of the Itway Group as of
December 31, 2020 and on their compliance with the law, as well as to issue a statement on material
misstatements, if any.
In our opinion, the report on operations and the specific information included in the report on corporate
governance and ownership structure mentioned above are consistent with the consolidated financial
statements of Itway Group as of December 31, 2020 and are prepared in compliance with the law.
With reference to the statement referred to in article 14, paragraph 2, letter e), of Legislative Decree No.
39/2010, issued on the basis of our knowledge and understanding of the Company and its environment
obtained in the course of the audit, we have nothing to report.
Analisi S.p.A.
Signed by
Renzo Fantini
(Partner)
Reggio Emilia, April 9, 2021
This report has been translated into the English language solely for the convenience of International readers. The
Italian original remains the definitive version.
www.analisi.it
viale Ramazzini 39/E 42124 Reggio Emilia (Italia) TEL +39 0522 271516 FAX +39 0522 230612 EMAIL [email protected]
CF – PI – Registro Imprese di Reggio Emilia 01459840359 | Capitale sociale € 200.000 int. versato
Analisi S.p.A. is a member of HLB International the global advisory and accounting network
INDEPENDENT AUDITOR’S REPORT IN ACCORDANCE WITH ARTICLE 14 OF LEGISLATIVE
DECREE NO. 39 OF JANUARY 27, 2010 AND ARTICLE 10 OF REGULATION (EU) NO. 537/2014
To the Shareholders of
ITWAY S.p.A.
Report on the Audit of the statutory Financial Statements
Opinion
We have audited the statutory financial statements of Itway S.p.A. (the Company), which comprise the
balance sheet as of December 31, 2020, the profit and loss account, the statement of comprehensive
income, the statements of changes in equity, the statement of cash flows for the year then ended and the
notes to the financial statements, including a summary of significant accounting policies.
In our opinion, the financial statements give a true and fair view of the financial position of the Company
as of December 31, 2020, and of the result of its operations and cash flows for the year then ended in
accordance with International Financial Reporting Standards adopted by the European Union and the
regulations issued to implement article 9 of Legislative Decree No. 38/2005.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISA Italia). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit
of the Financial Statements section of this report. We are independent of the Company pursuant to the
regulations and standards on ethics and independence applicable to audits of financial statements under
Italian law. We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Emphasis of Matter
We draw attention on paragraph “Going concern” of the Notes to the financial statements and “Going
concern” of the Report of Operations in which Directors described the agreement with the main creditor
of the Company Mercatoria S.p.A., in execution of a recovery plan prepared by Itway S.p.A. according to
article 67 paragraph 3.d) of R.D. 267/1942 certified by an independent expert, and the guidelines of
Business Plan 2020-2023 under which that agreement has been prepared. The Business Plan includes
the issue of a convertible bond up to the amount of Euro 5,5 million, as resolved by the Shareholders'
Meeting of October 30, 2020, reserved to the investor Nice & Green SA. Due to those circumstances and
to Business Plan suitability to pursue the financial recovery targets of Itway, Directors set out that the
financial statements are prepared on a going concern basis.
We draw attention on paragraph “Account receivables – Trade” into the Notes, concerning uncertainty on
the recovering of Euro 2.750 million, related to a contract in progress and booked in trade receivables,
that could have a significant impact on the financial statements as of December 31, 2020. As described
by Directors, a legal procedure was started with that customer to recognize the credit. The judgment of
the Court of First Instance in Rome was not favorable to the Company. Directors set out in the Notes that,
under the opinion of their legal consultants and an external technical assessment, they have decided to
present an appeal to the Court of Appeal of Rome, because in their opinion there are elements supporting
the request of Itway SpA.
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. 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.
Key Audit Matters Auditing procedures performed in response to key audit matters
Going concern assessment Notes: “Going concern”; Report on Operations: “Going concern”
In the financial statements as of December 31, 2019, Directors described that Itway was underscoring: current financial debts of Euro 7,12 million, of which Euro 6,76 million overdue at the balance sheet date, social security and tax debts overdue amounting Euro 49 thousand, and trade payables overdue amounting Euro 3,2 million. The business plan approved by the Directors was to reposition the Company in the market, collect cash flows from the associated companies Itway Hellas SA, Itway Turkyie Ltd and BE Innova S.r.l., and to outcome successfully the negotiations with the main creditors in order to reschedule maturities according to business plan and to pay also the other overdue debts.
With reference to this key audit matter, our procedures included:
discussion with Management and exchange of information with the Board of Statutory Auditors (“Collegio Sindacale”) on the going concern of the Company and the business plan 2020-2023;
discussion with Management on the reasonableness of the business plan assumptions, with particular reference to expected cash;
discussion with Management and analysis of the agreement with Mercatoria S.p.A.;
During the year ended December 31, 2020, Itway S.p.A. concluded an agreement with the main creditor of the Company Mercatoria S.p.A. for the amount of 5,4 million, in execution of a recovery plan according to article 67 paragraph 3.d) of R.D. 267/1942 certified by an independent expert, and the guidelines of Business Plan 2020-2023 under which that agreement has been prepared. That provides for a reduction of the debt to 67% of the original amount and payment by monthly installments of Euro 100 thousand by the deadline of May 30, 2023. The agreement also provides that the non-payment by Itway S.p.A. of two installments, even if not consecutive, if not agreed, could result in the termination of the contract with consequent payment of the entire residual debt prior to removal. The recovery plan provides also the payment of the other overdue financial and trade debts and the agreement with the investor Nice&Green SA to issue a warrant for Euro 500 thousand, concerning treasury shares, and a bond up to the amount of Euro 5,5 million convertible into new Itway shares, as resolved by the Shareholders' Meeting of October 30, 2020, reserved to the investor Nice & Green SA. Directors set out that they have prepared financial statements as of December 31, 2020 on a going concern basis considering that recovery plan as of article 67 of R.D. 267/1942, agreement with Mercatoria S.p.A., business plan and the investment agreement with Nice&Green are suitable to pursue the financial recovery targets of Itway. Then we considered this assessment as a key audit matter.
discussion with Management on the expected outcome of negotiations with the other overdue financial and trade creditors, not rescheduled yet;
discussion with Management and analysis of the investment agreement with Nice&Green SA;
subsequent events; we have verified the information provided in the
notes to the financial statements in respect of the going concern basis.
Key Audit Matters Auditing procedures performed in response to key audit matters
Uncertainty on the recovering of trade recevibles Notes: “Trade receivables”
The assertion Trade receivables in the financial statements as of December 31, 2020, includes a receivable concerning the amount of Euro 2.750 million, related to a contract in progress, for which the customer notified to reject the amount requested by Itway. Itway started in 2016 a legal procedure with that customer to recognize the credit. The judgment of the
With reference to this key audit matter, our procedures included:
• discussion with Management and with the Board of Statutory Auditors (“Collegio Sindacale”) on the recoverability assessment by Directors and related uncertainties;
Court of First Instance in Rome was not favorable to the company. Directors set out in the Notes that there are elements supporting the request of Itway SpA, not taken into consideration by the judge of first instance, and they have decided to present an appeal to the Court of Appeal of Rome. The dispute is still ongoing. Directors have described an uncertainty on the recovering of that amount of Euro 2.750 million, booked into trade receivables, that could have a significant impact on the financial statements as of December 31, 2020, while considering that in the financial statements there are Euro 1,3 million concerning trade payables incurred to execute the contract that, in the opinion of the Directors, could not be paid reasonably likely. Directors set out that, under the opinion of their legal consultants and an external technical assessment on the state of progress of the contract, Itway have decided to maintain that receivables into the assets of financial statements. Then we considered this assessment as a key audit matter.
• the request for an update on the status of the dispute to the lawyer appointed by the Company;
• the examination of the first sentence of the Court of First Instance in Rome of the appeal prepared by the lawyer appointed by the Company;
• we have verified the information provided in the notes to the financial statements.
Responsibilities of the Directors and Board of Statutory Auditors for the Financial Statements
The Directors are responsible for the preparation of financial statements that give a true and fair view in
accordance with the International Financial Reporting Standards adopted by the European Union as well
as the provisions issued to implement the art. 9 of Legislative Decree no. 38/05 and, in the terms
established by law, 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.
The Directors are responsible for assessing the Company’s ability to continue as a going concern and,
in preparing the financial statements, for the appropriate application of the going concern basis of
accounting, and for disclosing matters related to going concern. In preparing the financial statements, the
directors use the going concern basis of accounting unless they either intend to liquidate the Company
or to cease operations, or have no realistic alternative but to do so.
The Board of Statutory Auditors is responsible for overseeing, in the terms prescribed by law, the
Company’s financial reporting process.
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 auditors’ 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 International Standards on Auditing (ISA Italia) 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 the financial statements.
As part of an audit conducted in accordance with International Standards on Auditing (ISA Italia), we
exercised our professional judgement and maintained professional skepticism throughout the audit.
Furthermore:
• We identified and assessed the risks of material misstatement of the financial statements, whether
due to fraud or error; we designed and performed audit procedures responsive to those risks; we
obtained audit evidence that is sufficient and appropriate to provide a basis for our opinion. The
risk of not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or
the override of internal control;
• We obtained an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control;
• We evaluated the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the Directors;
• We concluded on the appropriateness of the Directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Company’s ability to continue
as a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events or conditions may
cause the Company to cease to continue as a going concern;
• We evaluated the overall presentation, structure and content of the financial statements, including
the disclosures, and whether the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation;
We communicated with those charged with governance, identified at an appropriate level as required by
ISA Italia, regarding, among other matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that we identified during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence applicable in Italian law, and to communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence, and where
applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the financial statements of the current period and are therefore
the key audit matters. We describe these matters in our auditor’s report.
Additional Disclosures required by Article 10 of Regulation (EU) No. 537/2014
On July 2, 2018, the shareholders of Itway S.p.A. in general meeting engaged us to perform the statutory
audit of the Company’s and the consolidated financial statements for the years ending December 31,
2018 to December 31, 2026.
We declare that we did not provide any prohibited non-audit services referred to in article 5, paragraph
1, of Regulation (EU) No. 537/2014 and that we remained independent of the Company in conducting
the statutory audit.
We confirm that the opinion on the financial statements expressed in this report is consistent with the
additional report to the board of statutory auditors, in its capacity as audit committee, prepared pursuant
to article 11 of the aforementioned Regulation.
Report on Compliance with other Laws and Regulations
Opinion in accordance with Article 14, paragraph 2, letter e), of Legislative Decree No. 39/2010
and Article 123-bis, paragraph 4, of Legislative Decree No. 58/1998
The Directors of Itway S.p.A. are responsible for preparing a report on operations and a report on the
corporate governance and ownership structure of the Itway S.p.A. as of December 31, 2020, including
their consistency with the relevant financial statements and their compliance with the law.
We have performed the procedures required under auditing standard (SA Italia) No. 720B in order to
express an opinion on the consistency of the report on operations and of the specific information included
in the report on corporate governance and ownership structure referred to in article 123-bis, paragraph
4, of Legislative Decree No. 58/1998, with the financial statements of the Itway as of December 31, 2020
and on their compliance with the law, as well as to issue a statement on material misstatements, if any.
In our opinion, the report on operations and the specific information included in the report on corporate
governance and ownership structure mentioned above are consistent with the financial statements of
Itway S.p.A. as of December 31, 2020 and are prepared in compliance with the law.
With reference to the statement referred to in article 14, paragraph 2, letter e), of Legislative Decree No.
39/2010, issued on the basis of our knowledge and understanding of the Company and its environment
obtained in the course of the audit, we have nothing to report.
Analisi S.p.A.
Signed by
Renzo Fantini
(Partner)
Reggio Emilia, April 9, 2021
This report has been translated into the English language solely for the convenience of International readers. The
Italian original remains the definitive version.