IQ International : 2020 Half-Year Report

IQ INTERNATIONAL AG

Half-Year Report 2020

Period covered: January - June 2020

Landis + Gyr Strasse 1

6300 Zug, Switzerland

Important Disclaimer

This half-year report on the unaudited, consolidated half-year financials covers the months January 2020 until and including June 2020. This half-year report may contain information on subsequent events (i.e. the period subsequent to 30 June 2020) which may qualify as forward-looking statements. Such statements are neither promises nor guarantees and they are necessarily subject to uncertainty and risk. Actual performance and results may differ materially from those projected or suggested due to various risks and uncertainties. These risks and uncertainties include, among others: the potential impacts due to the coronavirus pandemic. For further information on the Company's current position, please see the Company's Ad-Hoc and Corporate News sections on the website at https://www.iqint.com/adhocdisclosuresand https://www.iqint.com/corporatenews.

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To our shareholders

September 2020

Dear Shareholders;

The first half of 2020 has been an important period for iQ International AG (the Company). Management, working with our esteemed Board of Directors and our excellent and very active Industry Advisory Board, has successfully developed the Company's technologies and market penetration within its industry and has a number of opportunities which could greatly enhance its value and its position both in its industry as well as its market value. For example, management believes that upon consummating a planned $110 - $150 million institutional funding late in 2020 and then completing two targeted acquisitions of highly respected and profitable battery companies, the Company would greatly enhance its financial position and value. Further, and again assuming the success of the funding and acquisitions, Company consolidated revenues and EBITDA should substantially increase in 2021 and beyond. There is, of course, no guaranty of the success of this plan, but the Company has signed Letters of Intent with the two acquisition candidates, and the Company has retained the highly respected investment firm Capstone Headwaters to assist in the funding. Capstone Headwaters has expressed its confidence to management of a closing of the funding and acquisitions in the last quarter of 2020.

There is definitely a major risk factor of the financing and acquisitions not occurring, for, as indicated by the six-month unaudited financials contained in this report, the Company at present has substantial payables and long term debt and currently insufficient capital to repay this debt and major liquidity issues.

The planned funding would provide capital for (i) the acquisitions of the two long term, profitable and highly respected battery companies noted below, (ii) necessary equipment and working capital for the Company's Italian factory SIA which, itself, once funded, should provide for a profitable operation, (iii) the payment of current and long term obligations, (iv) further development of present and planned technologies, and finally (v) ongoing general corporate working capital.

The Company plans to use recent interim funding and this prospective institutional funding to expand its related technologies with a view toward becoming a leading clean battery technology company. These technologies, include (i) further development of the Company's 360 Mixing and ABF technologies, (ii) the Company's 48 Volt technology in development, (iii) the acquisition of a UK company with a worldwide license for innovative battery recycling from Cambridge University, and (iv) the development of a HYDRO Power technology that could, once developed and proved, provide power for the Company's factories totally off grid, providing "clean" energy and greatly reducing the Company's cost per KW for current electricity use in the Company's and other battery company plants, adding to a sustainable future for the Company and its industry. These technologies could emphasize the Company as a clean battery technology company with a future leading position in its industry. Finally, stock market advisors have opined that these developments should help increase the value of the Company on the Frankfurt Regulated Exchange.

In addition to the forgoing and further indicating the Company's recent success and industry standing, three major highly respected battery industry senior officer veterans, presently serving on the Company's Industry Advisory Board, are planning to join the Company on a full time basis before the end of 2020, bringing great expertise and industrial and financial respect, confidence and attention to the Company. They would comprise the primary senior management of iQ Power AG, the Company's

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primary subsidiary which conducts the Company's battery related business, and they would supervise the development of the Company's battery related technologies and the integration of the Company's Italian factory with the two plants the Company wishes to acquire. The addition of these three industry veterans, who have worked as part time consultants with Company management, should bring credibility to our Company and provide confidence for future funders and market makers that we can carry out our acquisition and integration plans and develop and market our potential technologies. Although there is never a guaranty of these matters, particularly during this time of COVID, Management firmly expects that the Company will succeed in these efforts and will become a highly valued firm.

I want to take this moment to extend heartfelt thanks to our staff and professionals for their confidence in us despite lower than deserved compensation and disappointing stock market performance, which we hope will change post funding and acquisitions. Further, on behalf of our Board of Directors and our entire staff, I want to thank shareholders who have and will participate in the planned private fund raises this year providing important working capital for us to complete the steps to success noted above. Now, with these developments, which should take place this year, we hope all shareholders will enjoy the fruits of our labors and hopefully what will be a market value the future Company deserves.

Sincerely,

George Weiss

Chairman

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Kevin T. Loman - CEO

OUR COMPANY & STRATEGY

Dear Shareholders and Partners,

When we took over management control of iQ International AG in late 2018 we set out to transition the Company from a purely licensing business to one that vertically integrated the Company's technologies into owned and operated manufacturing facilities. This required the completion

of an expanded technology portfolio, the addition of seasoned industry professionals, and the successful negotiation to acquire strategically located battery factories. Our factory SIA, operating in the European Union, licensed to produce batteries, was our first acquisition. Through 2019 and early 2020 management worked successfully to identify two suitable battery factories and successfully entered LOI's to acquire them. When COVID-19 hit the global market, management had to react and negotiate extensions of both LOI's as we could not meet the timeline contemplated by the original agreements. As of the end of June 2020 we have extended one of the two LOI's and are continuing to work on the second. If we are successful in raising the funds and closing the two acquisitions, iQ will have a compelling Western Hemisphere manufacturing footprint with the additional facilities licensed to produce in North and South America. Presuming we are successful, iQ's manufacturing technologies will be incorporated across all three plants and regions. In anticipation of closing the acquisitions we are looking to hire senior executives from the sector with experience integrating plants, sales teams, purchasing and other operational aspects. A core motivation for these hires is to ensure that we maximize the strategic competitive advantages gained from the Company's technology efficiencies and position the Company for rapid expansion amidst a transitioning industry.

SIA

SIA has been a unique challenge since acquisition in late 2018. Almost immediately after closing, SIA lost the lion's share of its main customers business do to circumstances unrelated to SIA. The team worked diligently to replace the lost volume with new customers and 2020 started with a positive outlook. SIA then of course hit a wall when the Italian Government mandated businesses to close due to COVID-19, of which SIA was initially included. Despite all of the hurdles and difficulties, the team was able to restart SIA in the middle of May from a dead stop, as well as complete an Audit at the end of June. One of SIA's limiting factors to expanding sales into other geographic locations has been the absence of certain battery types which are high volume in many parts of the globe outside of Europe. Tools for those sizes are being produced and we anticipate having the first done in July with the other two following by the end of September. As we sit today SIA has a strong order book and actionable prospects for more orders in the last half of the year. However, success on the sales side of the business brings strain on the limited working capital available at SIA. Management is exhausting all avenues to address this, including applying for the COVID-19 related loans. There is no guarantee of securing the necessary working capital increases, therefor in our opinion this is the primary threat to SIA and the Company at this moment.

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RECAPITALIZATION

With the Company's German heritage and significant German shareholder base it made good sense to list on the Regulated Market of the Frankfurt Stock Exchange. A great deal of effort and resources were expended on a recapitalization of the Company via German/European institutional sources, unfortunately highly confident potential disappeared when the European investment community shut down nearly overnight with the onset of COVID-19. Again, management was forced to react and fortunately had pre-emptively diversified the Company's fund-raising activities. There are currently a number of possibilities and the Company is negotiating term sheets with respected institutions for a combination of debt and equity raise before the end of 2020.

STATE OF THE INDUSTRY

In last years' annual report, I wrote that "The lead-acid battery market is expanding more rapidly than even the most optimistic projections. An old commodity industry is on the cusp of a rapid evolution whereby a new market segment is emerging for Start-Stop Vehicles, which is expected to make up nearly 1/3 of the entire market by 2025. In addition, recent automotive trends have been characterized by a steep pace of electrification in vehicles, requiring increased battery performance beyond projections. The lead-acid battery sector is at an inflection point, making our technologies time relevant and of critical importance." A year on, not only is the lead-acidbattery market expanding, but certain markets are seeing increasing capacity constraints. At the same time, the distribution channel is experiencing disorder where there traditionally has been dependable stability in that the number one producer in the world, Johnson Controls - now Clarios, was recently sold to private equity, as was another top producer - Exide - through its recent bankruptcy process. Both events do not bode well for supply security, specifically in the North American market. In addition to all this, we are anticipating a COVID related spike in battery demand because the car park sat idle for extended periods, causing batteries to reach end of life more rapidly. If North America has an early cold snap, we could see record backorder situations, just as we are experiencing record order backlogs early in the year. In positioning the Company to take advantage of the fluid situation the lead-acidbattery industry finds itself in, iQ plans to add respected, highly experienced experts to the senior executive team.

STRATEGY

Looking to the future, through further technology commercialization we continue to pursue making our industry, which boasts being the most recycled consumer good in the world, even more environmentally friendly. With the addition of technologies that we plan to license from Cambridge University, we will further reduce water, electricity, and materials consumption over incumbent processes, while also enhancing the performance characteristics of the existing materials used in battery manufacturing. With strong CAGR and a growing need for innovation, the lead-acid battery industry presents the ideal foundation for iQ's future plans. Vertically integrated manufacturing is the bedrock for our transition to a clean technology company, and we will soon look to leverage this infrastructure that we will own and control to expand our product offering; including advanced chemistry batteries, 48V lead acid batteries, and other stored energy solutions. We also plan to expand our use of the unique skills developed through creating the closed loop lead-acid circular economy to offer similar circular solutions for the handling and repurposing of other consumer goods

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and waste streams including tires, plastics and MSW. Waste is a resource and there is a great deal of value in these discarded materials which can be repurposed into battery manufacturing.

It is with gratitude to the iQ team that I say congratulations on the accomplishments to date, and that I am looking forward to what will surely be an eventful finish to 2020 along with an exciting 2021.

Regards,

Kevin T. Loman

CEO

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Recent developments

LEAD ACID BATTERY MARKET

Lead Acid Batteries continue to be the market-leading technology for Starting-Lighting-Ignition (SLI), motive traction, and industrial storage applications. Despite the growth of other technologies, such as Lithium Ion and NiMH, Lead Acid remains the dominant player due to its affordability, reliability, availability of raw materials, and most importantly, recyclability. Global demand for Lead Acid batteries, which has grown at 9% per year since 2010 and is forecasted to continue this trend. In 2019, the SLI battery accounted for more than half (53%), the largest product segment, of the global lead acid battery market revenue (Grand View Research, 2020). Current forecasts estimate that automotive application sales will exceed 650 million units and $36 billion in revenues by 2025 (Wood Mackenzie, 2018). The large replacement market, which is 80% of the total market, is relatively recession proof. As we have seen during the COVID-19 pandemic (Force Majeure), the market was faced a brief slowdown, to then pick up speed exponentially again as the undersupplied market recognized an even larger demand than originally anticipated. Along with that, Exide Technologies a major battery producer, recently filed for bankruptcy creating a strain/shortage on the market. Since early second quarter 2020, the underserved market demand has left battery distributors scrambling to shore supply for the short and long term.

New challenges imposed by COVID caused the Company's operations at SIA to close temporarily. The SIA operations were allowed to recently reopen after being deemed essential part of the economy. Once reopened, SIA experienced an increase in order volume.

The Company is in discussions with three industry leaders, from iQ International Advisory Board members, who are expected to join the Company as executive staff. These individuals would bring industry expertise and knowledge that would certainly accelerate the Company's path forward.

Finally, management has been working hard on an exclusive license agreement between the University of Cambridge and iQ International for a battery recycling technology/patent that is reputedly superior to the current industry practices. This new technology combined with the advanced battery technologies provides one step closer to a closed loop battery economy.

ADVANCED BATTERY FACTORIES

To further advance our ability to implement the Advanced Battery Technologies in factories around the global, we were successful in extending the Letter of Intents for the US and Ecuadorian factories from first half 2020 to second half 2020, to allow for the general slowdown in the acquisition timeline due to the COVID. Upon completing the anticipated acquisition of these two factories, it is the first step in launching an aggressive global expansion of the Company's Advanced Battery Factories, to capitalize on its unique competitive advantage.

Furthermore, ongoing discussions continue to occur with the Westphalian government, the Company's German partners, and potential partners on funding and timeline for the development of a Westphalian Advanced Battery Factory. Additional details for this factory are expected by the end of 2020 - start of 2021.

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MD&A

FOREWORD

The following discussion and analysis should be read in conjunction with the unaudited financial statements and the related notes included below in this Half-Year Report. For discussion related to changes in financial condition and the results of operations for fiscal half-year2020-related items, refer to the "Unaudited Financials" section below.

MANAGEMENT OPPORTUNITIES, CHALLENGES AND RISKS AND OUR 2020 OUTLOOK

They key focus for the remainder of 2020 will primarily be the raising of the necessary funds to fund the two acquisitions noted below and to create the world's first Advanced Battery Factory (ABF) by upfitting the Company's Italian SIA plant. The SIA plant will be the proof of concept that will pool all of the current and being developed iQ technologies and provide a testament and proof to what the Company has been building on for over the past two years since the reverse merger with iQ Power AG. The Company's management will also use the funds to complete the acquisitions of long standing and profitable American and Ecuadorian battery factories, the building of a Westphalia plant, the payment of current obligations, further development of the Company's technologies, and provide the Company with ample working capital to expand its management team with more senior executives and industry veterans.

Management has decided to let some of its senior staff go to reduce costs and be more efficient in its operations whilst the funding is being negotiated and expected at the end of 2020. This reduction in staff is part of management's restructuring efforts in creating the team that will serve the Company and its shareholders best, post funding receival, expected later this year.

The Company faced a lot of new challenges imposed by the recent COVID pandemic, which seriously affected the Company's operations at SIA as the factory was forced to close. Fortunately, the factory was allowed to reopen a few months later due to the battery factories being considered an essential part of Italy's economy. The Company also closed new loans and extended existing loans due to the pandemic imposed financial distress that the Company was facing.

The Company is also fully aware of the potential risks that the ExWorks loan might bring, due later this year in October, if no extension is received and/or the Company fails to raise the larger funding amount between $110 - $150 million by the end of the year. Although ExWorks has expressed to the Company that if a term sheet is in place, it will not call the loan early and will provide extensions, it remains a risk. Nevertheless, the Company expects to raise the money within the final quarter of 2020. Finally, the Company is aware that it will have to raise more money before the end of 2020 and before the receival of the larger financing to be able to afford the legal fees and other costs that a term sheet's due diligence would bring before the planned funding closing and acquisitions of the battery factories. The Company is planning to raise this money through a Private Capital Raise in July and potentially again September if everything goes according to plan.

The Company is in deep negotiations with multiple groups on the larger funding required to fulfill all its future expansion plans. The potential funds being discussed are between $110 million and $150 million. Management has several term sheets ready to be signed but is actively negotiating each and every single deal before signing a commitment with any group.

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Due to the recent filing for bankruptcy of Exide Technologies, one of the major battery developers/distributors within the industry, and the recent changes at Clarios/JCI, the automotive battery industry is in a supply shortage in certain markets and is in a state of restructuring/change. The Company has been able to take advantage of this restructure of power and is currently in discussion with major battery companies for a combined offtake of several millions of batteries whenever iQ can achieve the capacity. This is an ongoing prospect, and management expects to be able to disclose more by the end of 2020.

The acquisitions of the American and Ecuadorian plant are on schedule and expected to be completed within the last quarter of 2020, together with the expected incoming 'larger financing'. Management was able to receive extensions of its exclusive LOI's to acquire both plants due to the pandemic's impact (Force Majeure) on the world economy and general slowdown of the standard acquisition timeline. Finally, management is still in active conversations with the Westphalian government through its German partners in organizing a timeline and funding opportunities for the Westphalian Advanced Battery Factory which would a create jobs and a successful operation in the area. Management expects to have more details on the German entity and concrete plans on the factory by the end of 2020 - start of 2021.

The Company is currently working together with its Advisory Board Members, particularly, Dennis Brown, Raymond Brown, and Michael Tapp to join the Company on a full-time basis as Senior Executives. Their combined seniority and their understanding of every fiber and history of the industry through helping build Johnson Controls International and Interstate Batteries, two industry giants, would have a very big impact on the business and industry as management believes it has the ability to compete with the top players in the industry. The discussions with these Advisory Board Members are ongoing and management expects to come to an arrangement in the second half of 2020.

Management has also been preparing for the launch of its iQ Environmental subsidiary in the final quarter of 2020. The future planned staff has been working on a major battery recycling prospect noted below and a Qatar Project that would launch iQ Environmental.

Finally, management has been working diligently on an exclusive license agreement between the University of Cambridge and iQ International for a battery recycling technology/patent that reputedly would allow industry incumbents to be more environmentally efficient and more profitable. This new technology, combined with the already available technology, would help make the Company a clean, fully closed loop circular economy battery company.

Although the first half of 2020 has been far from an easy period, the Company is looking with a positive outlook towards the future with many good prospects lined up, including the major financing noted above for the expansion of the Company, the hiring of more senior executives and industry veterans, and the launch of its environmental division which has been in development for several years.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The consolidated half-year financial statements included below, were prepared in accordance with accounting principles generally accepted in the EU ("IFRS"). The preparation of the consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. We base our estimates on historical experience, as appropriate, and on various other assumptions that we believe to be reasonable under the circumstances. Changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ significantly from the estimates made by our management. We evaluate our estimates and assumptions on an ongoing basis. To the extent that there are material differences between these estimates and actual results, our future

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financial statement presentation, financial condition, results of operations and cash flows will be affected. We believe that the following critical accounting policies involve a greater degree of judgment and complexity than our other accounting policies. Accordingly, these are the policies we believe are the most critical to understanding and evaluating the consolidated financial condition and results of operations.

Revenue Recognition

The decrease of revenue compared to the previous half-year period is mainly affected by the 2020 lockdown attributable to the COVID-19 pandemic (Force Majeure) when the Italian factory was closed for several months in HY 2020. Furthermore, the revenue decrease was also impacted by the Company cancelling the exclusive license to Discover Energy due to Discover's failure to repay its loan and in preparation for the company's future expansion and upcoming distribution deals that are being negotiated.

The Company expects to recover the loss made in the first half of 2020 as the incoming battery demand to SIA is growing exponentially and the forecasts have already shown that we will turn a gross profit in the second half of 2020.

R&D

R&D has not stopped but has slowed down due to the COVID-19 pandemic (Force Majeure). The Company is negotiating an exclusive license agreement for a new innovate battery recycling technology from the University of Cambridge. The Company continues its work on the 48V battery, ABF technologies, and general integration analysis of the ABF technologies in the new plants sought to be acquired in the future. Besides that, the Company has also been working on its environmental projects, as listed above, with the Qatar project taking the lead. The iQ Environmental and its technologies are expected to officially launch in the later part of 2020, start of 2021, with new technologies that will all be proven through the upcoming recycling and Qatar projects.

Expenses

Expenses, like marketing, are generally lower than previous year due to the impact of the COVID-19 pandemic (Force Majeure), but again, expected to pick back up in the second half of 2020 as the effects from the pandemic are dying down by the end of June.

Financial Income

Financial Income has been down due to Discover Energy's failure to make timely payments on its loan, which is partially the reason for iQ to cancel its exclusive license to Discover Energy until a deal is made, after which Discover Energy will have the opportunity to receive a standard (non-exclusive) license from the Company.

Loss for the period

Although the impact of the COVID-19 pandemic (Force Majeure) has been severe, management sees the impact that it has caused to be 'within norms". With the current opportunities lined up for the second half of 2020, the Company expects the second half of the year to have a far more positive outcome, specifically due to the expected incoming larger financing, which would immediately turn the Company profitable - as noted in the MD&A section above.

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Further analysis

Please review the remaining financial notes within the consolidated unaudited financials below in the

"Unaudited Financials" section.

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Unaudited Financials

iQ International AG, Zug

Consolidated

Interim Financial Statements

as at 30 June 2020

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Consolidated Statement of Profit or Loss 1 January to 30 June 2020

		1.1.-30.6.	1.1.-30.6.
in kCHF	Note	2020	2019
Revenue	3.1.	4.080	10.264
Cost of Sales		-4.582	-9.736
Gross profit		-502	528
Research and development		-61	-170
Sales and marketing		-577	-803
General administrative expenses		-3.674	-5.618
Other taxes		-37	-30
Other income	3.2.	351	113
Other expenses	3.3.	-410	-241
Operating loss (EBIT)		-4.910	-6.221
Financial income	3.5.	671	1.139
Financial expenses	3.6.	-3.001	-4.219
Loss before income taxes		-7.240	-9.301
Income taxes		-1	-25
Loss for the period		-7.241	-9.326
thereof attributable to shareholders of
iQ International AG		-7.241	-9.326
Loss per share (basic and diluted, in CHF)	3.7.	-0,27	-0,35

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Consolidated Statement of Comprehensive Income 1 January to 30 June 2020

			1.1.-30.6.			1.1.-30.6.
in kCHF	Note		2020			2019
Loss for the period	3.7.		-7.241			-9.326
Currency translation differences		172	51
Items that will be reclassified to the consolidated			172			51
statement of profit or loss if certain conditions are met
Items not be reclassified to the consolidated
statement of profit or loss			0			0
Other comprehensive income, net of income taxes		172	51
Total comprehensive income			-7.069			-9.275
thereof attributable to shareholders of
iQ International AG		-7.069	-9.275

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Consolidated Balance Sheet as at 30 June 2020

			31.12.2019
in kCHF	Note	30.6.2020	(unaudited)
ASSETS
Cash and cash equivalents		118	545
Inventories		1.400	1.671
Trade receivables		3.582	3.748
Financial asset	4.1.	1.230	1.631
Other receivables and other assets		537	418
Income tax assets		30	29
Total current assets		6.897	8.042
Goodwill	4.2.	2.185	2.225
Other intangible assets	4.3.	19.282	20.504
Property, plant and equipment	4.3.	6.831	7.252
Right-of-use assets	4.3.	231	300
Other receivables and other assets		300	305
Total non-current assets		28.829	30.587
TOTAL ASSETS		35.726	38.629
LIABILITIES AND EQUITY
Financial liabilities	4.4.	26.215	24.659
Trade payables		5.926	6.526
Lease liabilities		128	129
Other liabilities		10.666	8.786
Total current liabilities		42.935	40.100
Provisions for post-employment benefits		591	614
Convertible bonds	4.4.	560	571
Other financial liabilities	4.4.	3.609	2.438
Lease liabilities		120	187
Other liabilities		1	1
Total non-current liabilities		4.881	3.811
Share capital		265	265
Capital reserve		44.265	44.265
Accumulated loss		-58.752	-51.511
Other reserves		2.132	1.699
Total equity	4.5	-12.090	-5.282
TOTAL LIABILITIES AND EQUITY		35.726	38.629

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Consolidated Statement of Cash Flows 1 January to 30 June 2020

		1.1.-30.6.	1.1.-30.6.
in kCHF	Note	2020	2019
Net loss	3.7.	-7.241	-9.326
Income taxes (income) expenses		1	25
Financial (income) expenses, net	3.5./3.6.	2.330	3.080
Depreciation and amortization	3.4.	1.571	1.742
Equity-settled share based payments		262	263
Other non-cash (income) expenses		506	187
Operating Cashflow before changes in working capital		-2.571	-4.029
Changes in inventories, trade receivables and other receivables
and other assets		318	-261
Changes in payables and other liabilities		1.280	517
Income taxes paid		0	-32
Cashflow from operating activities		-973	-3.805
Additions to intangible assets and property, plant and equipment	4.3.	-32	-727
Cashflow from investing activities		-32	-727
Proceeds from new shares issued and options granted		0	505
Proceeds from financing loans		1.288	5.192
Repayments of financing loans		-603	-674
Interest paid		-95	-798
Cashflow from financing activities		590	4.225
Cash effective movements		-415	-307
Effect of changes in exchange rates on cash
and cash equivalents		-12	-11
Change in cash and cash equivalents		-427	-318
Cash and cash equivalents at beginning of period		545	970
Cash and cash equivalents at end of period		118	652

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Consolidated Statement of Changes in Equity for the period ended 30 June 2020

								Equity
					Other	Other		attributable to
					reserves-	reserves-	Other	shareholders of
					currency	share	reserves-	iQ
in kCHF	Issued	Share	Capital	Accumulated	translation	based	actuarial	International
(except number of shares)	Shares	Capital	reserve	losss	differences	payments	gains/losses	AG	Total equity
Balance as at 1.1.2020	26.456.100	265	44.265	-51.511	703	1.009	-13	-5.282	-5.282
Net loss				-7.241				-7.241	-7.241
Other comprehensive income					172			172	172
Total comprehensive loss				-7.241	172			-7.069	-7.069
Capital contributions from
share-based payments						262		262	262
Capital transactions with
owner						262		262	262
Balance as at 30.6.2020	26.456.100	265	44.265	-58.752	872	1.271	-13	-12.090	-12.090

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Consolidated Statement of Changes in Equity for the period ended 30 June 2019

								Equity
					Other	Other		attributable to
					reserves-	reserves-	Other	shareholders of
					currency	share	reserves-	iQ
in kCHF	Issued	Share	Capital	Accumulated	translation	based	actuarial	International
(except number of shares)	Shares	Capital	reserve	losss	differences	payments	gains/losses	AG	Total equity
Balance as at 1.1.2019	26.398.456	264	42.478	-31.236	667	505	4	12.682	12.682
Net loss				-9.326				-9.326	-9.326
Other comprehensive income					51			51	51
Total comprehensive loss				-9.326	51			-9.275	-9.275
Capital increase	187.234	2	434					436	436
Capital contributions from
share-based payments			1.364			263		1.627	1.627
Capital transactions with
owner	187.234	2	1.798			263		2.063	2.063
Balance as at 30.6.2019	26.585.690	266	44.276	-40.562	718	768	4	5.470	5.470

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Selected explanatory notes to consolidated financial statements

1. General information

iQ International AG ("the Company" or together with its subsidiaries, collectively "iQ International" or "Group" is incorporated in Switzerland and is the ultimate legal parent of the Group. iQ International is a listed corporation domiciled in Zug, Switzerland.

The consolidated interim financial statements of iQ International AG and its subsidiaries cover the period from 1 January to 30 June 2020.

The consolidated interim financial statements as at 30 June 2020 have been approved by the Board of Directors ("Board")

on 29 September 2020.

2. Summary of significant accounting policies

2.1. Basis of preparation

The condensed consolidated interim financial statements as at 30 June 2020 have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board and effective for 2020. These condensed interim financial statements include all information and disclosures required by IFRSs to be presented in condensed interim financial statements.

Preparation of the condensed consolidated interim financial statements in accordance with IAS 34 requires Board and Management to exercise judgement and make estimates and assumptions that effect the application of accounting policies in the Group and the presentation of assets, liabilities, income and expenses. Actual amounts may differ from these estimates. The results obtained this far in financial year 2020 are not necessarily an indication of how business will develop in the future. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 2.3. "Significant accounting judgements, estimates and assumptions".

For better readability, the amounts in the Group's consolidated financial statements and notes are presented in thousand Swiss Francs (kCHF) unless stated otherwise. Due to rounding, numbers presented throughout this report may not add up precisely to the totals provided.

The accounting policies applied to the condensed consolidated interim financial statements are generally based upon the same accounting policies used in the consolidated financial statements for financial year 2019. Exceptions are the new or revised International Financial Reporting Standards (IFRSs) required to be applied for the first time in financial year 2020 that, however, have not a material influence on the consolidated interim financial statements.

No separate reporting is provided in cases where effects cannot be unequivocally attributed to the COVID-19 pandemic.

2.2. Uncertainties and ability to continue operations

The Group is subject to various risks and uncertainties, including, but not limited to the time of achieving sustainable profitability and the uncertainty of the discovery, development, and commercialization of licensees. The Company's ability to continue operations also depends on its ability to raise additional capital in order to fund operations and assure the liquidity of the Company until revenues reach a level to sustain positive cash flows.

Group's equity is not covered by assets, not as at beginning of FY 2020, nor as at 30 June 2020. Negative equity of the Group increased during the first half 2020 from kCHF -5.282 to kCHF -12.090, mainly driven by the loss for the reporting period 1 January - 30 June 2020.

Liabilities due within 12 months totaling kCHF 42.935 (1.1.2020: kCHF 40.100) exceed total assets of kCHF 35.726

(1.1.2020: kCHF 38.629) by kCHF 7.209 (1.1.2020: kCHF 1.471). Senior credit facility with a total value including interest and fees due at maturity as at 30 June 2020 of kCHF 22.301 is contractually due in mid October 2020. A settlement and/or extension with senior creditor lender is not yet effective. Additionally, the deferred consideration from SIA acquisition of kEUR 2.808 for the remaining 49% of shares are contractually due in December 2020, by amended agreement in October 2019.

After intense negotiations with selected investment groups, iQ International has signed a term sheet for a $130 million institutional equity and debt financing with a major Asian institutional fund to finance the Company's expansion plan. The term sheet provides that the total financing will be approximately half in three-year debt and half in preferred equity. The

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institutional fund was introduced to the Company and represented by Capstone Headwaters, a well-known US financial advisory firm. When and if that funding is completed, Capstone will become the Company's primary financial advisor going forward. The Company works towards a signing and closing of the financing within the last quarter of 2020. The Company has been working for over 18 months on transitioning the Company's business strategy from purely licensing to one that vertically integrates its technologies into owned and operated battery factories. The financing is intended for iQ's expansion that will address the current capacity-constrained battery industry and the batteries shrinking life in today's highly electrified vehicles. This expansion is aiming at the acquisition of two corporations owning well known and long-standing battery plants as well as the upfitting of the Company's SIA plant. The Company will demonstrate its Advanced Battery Factory (ABF) production technologies through the SIA upfit and will thereafter begin installing its new equipment at the two acquisition factories. Part of the refinancing in negotiation is a settlement with actual senior facility lender who will be replaced completely.

Although there is no guaranty that this financing and these acquisitions will happen, as both will be subject to due diligence and final agreements, management is confident that they can consummate both the financing and the acquisitions.

These matters indicate the existence of a material uncertainty, which may cast significant doubt about the ability of the Company to continue as a going concern. However, the Management and the Board of Directors remain confident that the strategic direction, comprising financing measures such as additional financing rounds or equity and debt financing with this major Asian institutional fund, will be successful and therefore considers the preparation of the present financial statements on a going concern basis as appropriate.

If it is not possible for the company to continue as a going concern, the financial statements will need to be prepared on the basis of liquidation values.

2.3. Significant accounting judgements, estimates and assumptions

The condensed consolidated financial statements are prepared in accordance with IFRS as issued by the IASB. iQ

International's significant accounting policies, as described below are essential to understanding the group's results of

operations, financial positions and cash flows. Certain of these accounting policies require critical accounting estimates that involve complex and subjective judgments and the use of assumptions, some of which may be for matters that are inherently uncertain and susceptible to change. Such critical accounting estimates could change from period to period and have a

material impact on the group's results of operations, financial positions and cash flows. Critical accounting estimates could

also involve estimates where management reasonably could have used a different estimate in the current accounting period. Management cautions that future events often vary from forecasts and that estimates routinely require adjustments.

Going concern (note 2.2.)

iQ International Group considers liquidity and capital taking into account the Group's current plans, budgets and forecasts. The Group can continue as a going concern.

Impairment of cash generating units (note 4.2.)

iQ International tests at least annually whether goodwill has incurred any impairment, in accordance with its accounting policy. The determination of the recoverable amount of a cash-generating unit or a group of cash-generating units to which goodwill is allocated involves the use of estimates by management. The outcome predicted by these estimates is influenced e.g. by the successful integration of acquired entities, volatility of capital markets, interest rate developments, foreign exchange rate fluctuations and the outlook on economic trends, especially during current in COVID-19 pandemic. The

recoverable amount is the higher of the cash-generating unit's or the group of cash-generating units' fair value less costs to

sell and its value in use. The Company generally uses discounted cash flow based methods to determine these values. These discounted cash flow calculations use five-year projections that are based on financial forecasts. Cash flow projections take

into account past experience and represent management's best estimate about future developments. Cash flows after the

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planning period are extrapolated using individual growth rates. Key assumptions on which management has based its determination of fair value less costs to sell and value in use include estimated growth rates, weighted average cost of capital and tax rates. These estimates, including the methodology used, can have a material impact on the respective values and ultimately the amount of any goodwill impairment. As at 30 June 2020 no (additional) impairment was to be recognized on goodwill from business combinations during 2018. As at 31 December 2018 an impairment of kCHF 15.899 was recognized on the goodwill from business combination Nektar Energy Inc. (date of acquisition: February 2018) as a result of refocused strategic opportunities after the reverse acquisition between Engenavis Inc. and iQ Power Licensing AG end of September 2018.

Collectability of financial assets (note 4.1.)

The Group regularly estimates the risk of default on financial assets, esp. shareholder loan granted to a Discover Energy Corporation. Several factors are taken into consideration in this context, including historical loss experience, current economic events and conditions as well as market and business position of the counterparty. In addition to historical and current information on economic impacts, appropriate and reliable forward-looking information on factors is also included. Changes to the estimation and assessment of these factors influence the allowance for credit losses - for financial assets, esp. receivables from granted loans - with a resulting impact on the Group's net profit.

Management expects the loan granted to Discover Energy Corporation with a total carrying amount of kCHF 3.070 as at 30 June 2020 (31 December 2019: kCHF 3.125) (principal and accrued interest) to be collected in full, even when total amount was due 31 December 2019. Nevertheless, an additional allowance for credit losses in the amount of kCHF 369 is recognized as at 30 June 2020 (31 December 2019: kCHF 1.471) to cover potential late payment and default risks as well as costs for collection. Expected credit loss (ECL) is calculated by general approach, considering fair value of collateral. Addition to ECL allowance of uncovered balance exposure is recognized as at 30 June 2020 as one-off expenses through profit or loss and recognized as other expenses (see notes 3.3. and 4.1.).

Estimations of employee post-employment benefits obligations

The costs of the employee benefit plans and the related obligations recognized in the balance sheet, representing the present value of the defined benefit obligation, are calculated annually by independent actuaries. These actuarial valuations include assumptions such as discount rates, salary progression rates and mortality rates. These actuarial assumptions applicable to the Group vary according to the prevailing economic and social conditions.

Income taxes

iQ International operates in various tax jurisdictions and therefore has to determine tax positions under respective local tax laws and tax authorities' views which can be complex and subject to different interpretations of tax payers and local tax authorities. As an effect of tax audits, different interpretations of tax laws may result in additional tax payments for prior years and are taken into account based on management's considerations. Deferred tax assets are recognized if sufficient future taxable profit is available, including income from forecasted operating earnings, the reversal of existing taxable temporary differences and established tax planning opportunities. As of each period-end, management evaluates the recoverability of deferred tax assets, based on projected future taxable profits. As future developments are uncertain and partly beyond management's control, assumptions are necessary to estimate future taxable profits as well as the period in which deferred tax assets will recover. Estimates are revised in the period in which there is sufficient evidence to revise the assumption. If management considers it probable that all or a portion of a deferred tax asset cannot be realized, that portion would not be recognized.

2.4. Consolidated group

There were no acquisitions nor disposals of fully consolidated companies / subsidiaries in the first half of 2020.

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2.5. Significant transactions

To ensure its liquidity - especially during the worldwide lockdown periods attributable to the COVID-19 pandemic, the Company extended its subordinated debt exposure by kCHF 1.247 and received an assistance loan in Switzerland of kCHF

41. US based subsidiaries received a forgivable loan totalling kUSD kUSD 291 as part of the US Paycheck Protection Program.

3. Consolidated Income Statement disclosures

3.1. Total revenue Revenue by product category:

	HY	HY
in kCHF	2020	2019
Batteries, own manufacturing	3.607	9.590
Batteries, other	103	452
Royalties	131	221
Other products and services	239	1
Total	4.080	10.264

Allocation of revenue to geographical regions:

	HY	HY
in kCHF	2020	2019
Europe	3.846	9.590
Other Americas	0	28
Asia and Africa	234	646
Total	4.080	10.264

Decrease of revenue compared to previous half-year period

The decrease of revenue compared to the previous half-year period is mainly affected by the lockdown attributable to the COVID-19 pandemic, when Italian factory was closed for several weeks/months in HY 2020.

3.2. Other income

Based on the government assistance model under IAS 20, the forgivable loan received (totalling kCHF 280) is treated as a government grant and enclosed as other income in profit or loss, because of reasonable assurance that the Company meets the terms of forgiveness of the loan.

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3.3. Other expenses

	HY	HY
in kCHF	2020	2019
Expected credit loss charge financial asset (see note 4.1.)	369	180
Expected credit loss charges trade accounts receivables	0	18
Other expenses	42	43
Total	411	241

3.4. Depreciation, amortization and impairment losses

	HY	HY
in kCHF	2020	2019
Impairment of Goodwill	0	0
Amortization of and impairment losses on other intangible assets, of which
impairment losses: kCHF 0 (prior year: kCHF 0)	1.173	1.239
Depreciation of and impairment losses on property, plant and equipment, of
which impairment losses: kCHF 0 (prior year: kCHF 0)	334	436
Depreciation of and impairment losses on right-of-use assets, of which
impairment losses: kCHF 0 (prior year: kCHF 0)	64	67
Total	1.571	1.742

3.5. Financial income

	HY	HY
in kCHF	2020	2019
Accrued interest loan Discover Energy Corporation	0	70
Fair value change of derivative financial instruments	299	321
Modification of derivative financial instruments	0	363
Foreign currency gains	342	341
Other interest income	30	44
Total	671	1.139

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3.6. Financial expenses

	HY	HY
in kCHF	2020	2019
Interest charge on financial liabilities from lending parties	2.825	3.937
Interest on convertible bonds	14	24
Interest on lease liabilities	7	10
Bank interest	61	67
Foreign currency loss	83	54
Other	11	127
Total	3.001	4.219

3.7. Loss per share

Basic and diluted loss per share has been computed based upon the weighted average number of registered shares outstanding. Basic loss per share excludes any dilutive effects of options, shares subject to repurchase, and convertible bonds and notes.

	HY	HY
	2020	2019
Net loss attributable to the shareholders of the Company (in kCHF)	-7.241	-9.326
Weighted average number of shares outstanding (in thousand)	26.586	26.459
Basic and diluted loss per share (in CHF)	-0,27	-0,35

Reconciliation of the weighted average number of shares adjusted for the effect of the reverse acquisition and reverse merger used in calculating the loss per share is as follows:

	HY	HY
in thousand	2020	2019
Ordinary shares outstanding as at 1 January	26.586	26.398
Shares issued during the period	0	187
Ordinary shares outstanding as at 30 June	26.586	26.586
Weighted average number of shares outstanding	26.586	26.459

Anti-dilutive effect of potential shares

At 30 June 2020 and 2019 potential shares were excluded from the weighted average number of shares outstanding used for calculating the diluted loss per share, because their effect would have been anti-dilutive.

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4. Consolidated Balance sheet disclosures

4.1. Financial asset

in kCHF

Balance as at 31 December 2019

Foreign currency translation

Balance as at 30 June 2020, gross

Expected credit loss allowance as at 31 December 2019

Increase ECL June 2020 (see note 3.3)

Balance as at 30 June 2020, net

	Accrued
Principal	Interest	Total asset
2.718	407	3.125
-49	-6	-575
2.669	401	3.070
		-1.471

-369

1.230

In December 2016 and January 2017, iQ Power Licensing AG granted loans in total of kEUR 2.500 to Discover Energy Corporation. Discover Energy Group is the majority shareholder of Discover Mixtech Manufacturing Co. Ltd., Korea and a shareholder of around 9% interest in iQ International AG. The loan has a maximum term of 3 years (due 31 December 2019) and bears interest at 5 % pa.

Expected credit loss (ECL) is calculated by general approach, considering fair value of collateral. Addition to ECL allowance of uncovered balance exposure is recognized as at 30 June 2020 as one-off expenses through profit or loss (see note 2.3).

4.2. Goodwill

iQ International performs the mandatory annual impairment tests for all goodwill positions at the end of the business year, if no impairment indicators have been identified throughout the business year. Based on a lack in revenues and operating results - mainly attributable to the lockdown as a consequence of the COVID-19 pandemic - during HY 2020 against budgeted figures at SIA, the company reviewed and updated the impairment test from 2019 for this business as at 30 June 2020 accordingly. SIA goodwill amounts to kCHF 1.471 (31 December 2019: kCHF 1.498). For the goodwill in relation to the acquisitions of iQ International AG and Nektar Energy no impairment indicators have been identified.

The recoverable amounts for the impairment test update at SIA as at 30 June 2020 was estimated to be higher than the carrying amounts. Key assumptions on which management has based its determinations of the value-in-use calculation for carrying amount include an unchanged terminal value growth rate of 1,0 %, respectively and after-tax discount rates of 9,8% (as at 31 December 2019: 9,8%). Where possible, reference to market prices is made. For the purpose of estimating the value-in-use, cash flows were projected for the next five years based on past experience, actual operating results and management's best estimate about future developments as well as market assumptions. The determined fair value of the cash generating unit is assigned to level 3 of the fair value hierarchy in accordance with IFRS 13. The value-in-use mainly driven by the terminal value which is particularly sensitive to changes in the assumptions on the terminal value growth rate and discount rate. Both assumptions are determined individually for the cash generating unit. Discount rates reflect the current market assessment of the risks specific to the cash generating unit and are based on the weighted average cost of capital for the relevant cash generating unit. Terminal value growth rates take into consideration external macroeconomic sources of data and industry specific trends.

Discount rates represent the current market assessment of the risks specific to SIA CGU, taking into consideration the time value of money and individual risks of the underlying assets that have not been incorporated in the cash flow estimates. The discount rate calculation is based on the specific circumstances of the Group and its operating units and is derived from

7 | P a g e

its weighted average cost of capital (WACC). The WACC takes into account both debt and equity. The cost of equity is derived from the expected return on investment by the Group's investors. The cost of debt is based on the interest-bearing borrowings the Group is obliged to service. Segment-specific risk is incorporated by applying individual beta factors. The beta factors are evaluated annually based on publicly available market data. Adjustments to the discount rate are made to factor in the specific amount and timing of the future tax flows in order to reflect a pre-tax discount rate.

4.3. Other intangible assets and property, plant and equipment

Other intangible assets (not including Goodwill), property, plant and equipment and right-of-use assets can be broken down as follows:

		31.12.2019
in kCHF	30.6.2020	(unaudited)
Acquired Mix-Tech patent portfolio
from business combination iQ Power Licensing	16.842	17.863
Acquired customer relationships
from business combination Nektar Energy and SIA	2.429	2.630
Software, licenses and similar rights	11	11
Total other intangible assets	19.282	20.504
Land and buildings	2.820	2.999
Equipment and machinery	3.041	3.251
Tooling	277	317
Assets under construction (ABF concept)	693	685
Total property, plant and equipment	6.831	7.252
Land and buildings	214	276
Equipment	17	24
Total right-of-use assets	231	300

Investments in property plant and equipment and right-of-use assets amounted to kCHF 32 in the first half of 2020 (HY 2019: kCHF 727 ).

	HY	HY
in kCHF	2020	2019
Equipment and machinery	0	46
Assets under construction (ABF concept)	32	662
Right-of-use assets - Equipment	0	19
Total investments	32	727

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4.4. Financial liabilities

Financial liabilities can be broken down as follows:

											31.12.2019
		in kCHF					30.6.2020			(unaudited)
		Borrowings from related parties				561	549
		Senior credit facilities				21.631	19.790
		Subordinated debt				743	919
		Financing lines				3.025	3.223
		Bank loans, due within one year				255	178
		Current financial liabilities					26.215			24.659
		Convertible bonds				560	571
		Subordinated debt				3.422	2.301
		Bank loans, due in more than one year				146	137
		Other loans, due in more than one year				41	0
		Non-current financial liabilities					4.169			3.009
		Total financial liabilities					30.384	-		27.668
Carrying amount of financial liabilities can be broken down as follows:
		30.06.2020:				at fair value
			at amortized			through
		in kCHF		cost		profit or loss				Total
		Borrowings from related parties	561	0		561
		Senior credit facilities	21.576	55	21.631
		Subordinated debt	4.078	87	4.165
		Financing lines	3.025	0		3.025
		Bank loans	401	0		401
		Convertible bonds	560	0		560
		Oher loans	41	0		41
		Total financial liabilities		30.243		142			30.384
		31.12.2019 (unaudited):				at fair value
			at amortized			through
		in kCHF		cost		profit or loss				Total
		Borrowings from related parties	549		0		549
		Senior credit facilities	19.637		153	19.790
		Subordinated debt	3.019		201	3.220
		Financing lines	3.223		0		3.223

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Bank loans	315	0	315
Convertible bonds	571	0	571
Total financial liabilities	27.314	354	27.668

Financial liabilities measured at fair value through profit or loss relate exclusively to derivative financial instruments which are not used in hedge accounting. Change of financial liabilities through profit or loss are as follows:

	HY	HY
in kCHF	2020	2019
Balance as at 1 January	354	758
Issuance of other derivative financial liabilities	0	70
Issuance of subordinated debt	88	0
Fair value change	-299	-321
Modification of derivative financial liabilities	0	-363
Currency translation differences	-1	6
Balance as at 30 June	142	150

Senior credit facilities

In October 2018 the Company obtained a senior credit facility with a total notional amount of kUSD 10.704, an interest rate of 18% and a term of one year. The Company increased its senior credit facility with the existing lending party in April 2019 by kUSD 1.500. As a result, the success fee due by the end of the term increased from kUSD 1.900 to kUSD 2.050 (kCHF 2.000). There were no further options granted during the period in addition to the 1.186.838 iQ International share options with an exercise price of EUR 1,30 and a 5-year term the Company granted the lending party in October 2018.

In September 2019 senior credit facility was completely modified. Modified and extended senior credit facility has a term until mid of October 2020 and a total notional amount as at 30 June 2020 of kUSD 19.724, an interest rate of 18% p.a. As a result of the modification and extension, the success fees due by the end of the term are totaling to kUSD kUSD 2.050. In addition, the Company granted the lending party a total of 1.967.386 IQ International share options with an exercise price of 0,93 EUR and 5-year term as part of the modification agreement. The fair value of the options granted as at modification / initial recognition was estimated to be kCHF 425 using the black scholes model. Both the success fee and the initial fair value of the options are included in the effective interest calculation of the financial liability at amortized cost. The subsequent measurement of the options granted as at initial recognition measured at fair value through profit or loss is based on the black scholes model. Both the success fees and the initial fair value of the options are included in the effective interest calculation of the financial liability at amortized cost.

Subordinated debt

In first half year 2020 IQ International received additional subordinated debt with a total notional amount of kCHF 1.247, interest rates in the range between 15%-18% and a term between 1 and 2 years. The Company granted to the lending parties a total of 906.915 IQ International share options with an exercise price range between 0,98€ - 1,18 €, and a 5 year term. The fair value of the of the options granted as at initial recognition was estimated to be kCHF 88 using the black scholes model and is included in the effective interest calculation of the financial liability at amortized cost.

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Other derivative financial liabilities

In May 2019, iQ International received a capital increase with a total notional amount of kUSD 500 (kCHF 506). The Company granted to the share investor as part of this transaction a total of 198.000 iQ International share options with an exercise price of 1,48 EUR exercisable in April 2021 without any further consideration. The fair value of the options as at grant date was estimated to be kCHF 70 using the black scholes model and is deducted from the capital reserve increase by recognising a derivative financial liability measured at fair value through profit or loss.

Financing lines and bank loans

The financing lines and bank loans consist of various short term and long term bank facilities.

4.5. Equity

Share capital of the legal parent iQ International

			in kCHF
		Number of	Share
Registered shares with nominal value of CHF 0,01	shares	capital
Balance as at 31	December 2019	26.456.100	265
Balance as at 30	June 2020	26.456.100	265

Registered share capital of iQ International AG as per commercial register amounts to CHF 265.856,90 divided into 26.585.690 registered shares with a nominal value of CHF 0,01 each. Share capital is fully paid in. As at 30 June 2020, the Company still holds 129.580 own shares from acquisitions during 2019 as treasury stock.

	in kCHF	in kCHF
	30.6.2020	31.12.2019
Authorized capital	133	133
Conditional capital for financing purposes	89	89
Conditional capital for equity incentive plans	44	44

Authorized capital

The Board of Directors is authorized to increase the share capital at any time until 14 November 2021 in the maximal amount of CHF 132.928,45 by issuing maximally 13.282.845 fully paid in registered shares with a par value of CHF 0,01 each. Increases in partial amounts are permitted.

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Conditional capital for financing purposes

The share capital of the Company may be increased in the maximum amount of CHF 88.931,02 by the issuance of no more than 8.893.102 fully paid in registered shares with a par value of CHF 0,01 each, by the exercise of option and conversion rights which are granted in connection with bonds, similar obligations, loans or other financial market instruments or contractual obligations of the Company or one of its group companies, and/or by the exercise of option rights issued by the Company or one of its group companies ("Financial Instruments"). The pre-emptive rights of shareholders are excluded. The holders of Financial Instruments are entitled to the new shares. The conditions of the Financial Instruments shall be determined by the Board of Directors.

When issuing Financial Instruments the Board of Directors is authorized to limit or exclude the advance subscription rights of shareholders:

1. for the purpose of financing or refinancing the acquisition of enterprises, divisions thereof, or of participations, products, intellectual property rights, licenses, cooperations or of newly planned investments of the Company;
2. if the issue occurs on domestic or international capital markets including private placements; or
3. for purposes of an underwriting of the Financial Instruments by a banking institution or a consortium of banks with subsequent offering to the public.

To the extent that the advance subscription rights are excluded, i) the Financial Instruments are to be placed at market conditions; ii) the exercise period, the conversion period or the exchange period of the Financial Instruments may not exceed 10 years as of the date of the issue; and iii) the conversion price, the exchange price or other exercise price of the Financial Instruments must be determined by reference to the market price.

Conditional capital for equity incentive plans

The Company's share capital shall, to the exclusion of the pre-emptive rights and advance subscription rights of shareholders, be increased by a maximum aggregate amount of CHF 43.997,43 through the issuance of not more than 4.399.743 registered shares, which shall be fully paid-in, with a nominal value of CHF 0,01 each, by issuance of shares upon the exercise of options or pre-emptive rights thereof, which have been issued or granted to employees, members of the Board of Directors or consultants of the Company or of one of its group companies according to one or several equity incentive plans or regulations issued by the Board of Directors.

Capital reserve

Capital reserve movements in HY 2020 and HY 2019 can be broken down as follows:

	HY	HY
in kCHF	2020	2019
Balance as at 1 January	44.265	42.478
Capital contributions from share-based payments	0	1.364
Capital increase	0	434
Balance as at 30 June	44.265	44.276

4.6. Deferred taxes

The group has unrecognized deferred tax assets in relation to tax loss carryforward. As at 30 June 2020 management's assessment regarding the realizability of deferred tax assets remains unchanged compared to the assessment disclosed in the consolidated financial statements 2019 and has therefore not recognized any deferred tax assets.

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5. Segment reporting

The Group operates in focusing on manufacturing, distribution and development of highly efficient lead acid batteries for the automotive SLI (Starting-Lighting-Ignition) and storage markets using patented, eco-friendly technologies that prevent acid stratification and corrosion.

Reportable segments

The reportable segments of the group are "batteries" and "licensing". The segments are organized and managed separately, according to nature of products and services provided, licenses, production and channels and profile of customers. The batteries segment comprises sale of own production batteries and trade of batteries for the automotive SLI. Royalties from patented, eco-friendly technologies that prevent acid stratification and corrosion are achieved from third party licensees.

No changes concerning segments were effective as of 1 January 2020.

	HY 2020:
					Total		Recon-
	in kCHF	Battery	Licensing		segments		ciliation
	External revenue	3.949	131	4.080	0
	Intersegment revenue	1	47	48	-48
	Total revenue	3.950	178		4.128		-48
	Segment loss EBITDA	-1.154	-2.213		-3.367		28
	Segment assets	16.985	22.060		39.045		-4.670
	Segment liabilities	19.328	32.568		51.896		-4.670
	Additions to non-current assets	32	0		32		0
	Depreciation and amortization of
	non-current assets	503	1.068		1.571		0

HY 2019:
				Total		Recon-
in kCHF	Battery	Licensing		segments		ciliation
External revenue	10.042	222	10.264	0
Intersegment revenue	1	122	123	-123
Total revenue	10.043	344		10.387		-123
Segment loss EBITDA	-1.209	-3.213		-4.422		71

iQ Group

4.080

0

4.080

-3.339

34.375

47.226

32

1.571

iQ Group

10.264

0

10.264

-4.351

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Segment assets	20.752	23.582	44.334	-4.307	40.027
Segment liabilities	19.996	21.245	41.241	-4.307	36.934
Additions to non-current assets	724	3	727	0	727
Depreciation and amortization of
non-current assets	674	1.068	1.742	0	1.742

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6. Other disclosures

6.1. Disclosures on financial instruments

The following table presents the carrying amounts of each category of financial assets and liabilities.

The carrying amounts of cash and cash equivalents, trade and other receivables and trade payables with a remaining term of up to twelve months, other current financial assets and liabilities represent a reasonable approximation of their fair values, mainly due to the current maturities of these instruments.

Receivables with a remaining term of more than twelve months are evaluated by the Group based on parameters such as interest rates, specific country risk factors, individual creditworthiness of the customer, and the risk characteristics of the financed project. Based on this evaluation, allowances for these receivables are recognized. As balance sheet date, the carrying amounts of such receivables, net of allowances, approximate their fair values.

The fair value of loans from lending parties and other financial indebtedness as well as other non-current financial liabilities is estimated by discounting future cash flows using rates currently available for debt of similar terms and remaining maturities. The fair value of embedded derivatives is based on black scholes valuation using directly and indirectly observable data (Level 2).

The levels of the fair value hierarchy and its application to our financial assets and financial liabilities are described below:

Level 1: quoted prices in active markets for identical assets or liabilities;

Level 2: inputs other than quoted prices that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

Level 3: inputs for assets or liabilities, not based on observable market data.

Reconciliation of carrying amounts in accordance with IFRS 9 is as follows:

			31.12.2019
	30.6.2020	(unaudited)
	Carrying	Fair	Carrying	Fair
in kCHF:	amount	Value	amount	Value
Financial assets, measured at amortized cost
Cash and cash equivalents	118	118	545	545
Trade receivables	3.582	3.582	3.748	3.748
Financial assets	1.230	1.230	1.631	1.631
Other receivables (w/o tax balances)	465	465	577	577
Total financial assets	5.395	5.395	6.501	6.501
Financial liabilities, measured at amortized cost
Financial liabilities	30.243	30.243	27.314	27.314
Trade payables	5.926	5.926	6.526	6.526
Other liabilities (w/o tax balances)	9.561	9.561	7.820	7.820
Total	45.730	45.730	41.660	41.660
Financial liabilities, measured at fair value through profit or loss
Financial liabilities - Embedded derivatives	142	142	354	354

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Total	142	142	354	354
Total financial liabilities	45.872	45.872	42.014	42.014

Other financial instruments outside IFRS 9:

			30.6.		31.12.
				2019
	in kCHF		2020
			(unaudited)
	Lease liabilities, current	128	129
	Lease liabilities, non-current	120	187
	Total		248		316

6.2. Contingent liabilities and other financial obligations

The Group's contingent liabilities and other financial obligations have not changed significantly compared with 31 December 2019.

6.3. Assignment for security

Shares in in all Group companies of iQ International Group are pledged in favor to lending parties as guarantee for short- term interest bearing liabilities (see note 4.4.) amounting to with nominal value of kCHF 18.773 (31.12.2019: kCHF 17.445) as at 30 June 2020.

In the years 2012 to 2019, the former CEO of the iQ Power Group only partially received proportionate remunerations from iQ Power Licensing AG. Since the merger of iQ Power Licensing AG and iQ International AG, the pro rata fixed remuneration for the years 2018 and 2019 was paid proportionately for the period until end of the contract in August 2019; the variable remuneration for this period has not yet been paid. The payroll costs accrued for the period were calculated accordingly. The amounts outstanding for the previous years are to be paid until 31 December 2020. Subordinated security interests up to the amounts deferred in favor of the entitled person exist in the intellectual property and the patent rights of kCHF 1.100 as security for the deferred CEO remuneration. The deferral of remuneration payments may be revoked by the relevant entitled person at any time, with the effect that the accrued amounts are due for payment immediately. Shares in all Group companies of iQ International Group are pledged in favor to lending parties as guarantee for short-term interest bearing liabilities. In addition all financial assets in the carrying amount of kCHF 35.726 of iQ International as well as of all affiliates are assigned as a security in favor of third party lenders. During the term of a subordination agreement and for as long as any claim or amount due to the senior creditor under or in connection with the credit agreement and any other loan document remains outstanding, the deferral of remuneration is not become due.

6.4. Related party transactions

Assets from / and liabilities to related parties enclosed in consolidated balance sheet can be broken down as follows:

	30.6.2020:	Shareholder and	Other
		management of iQ	related
	in kCHF	International	parties	Total
	Financial asset (see note 4.1.)	0	1.230	1.230
	Other receivables and other assets	100	0	100
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Financial liabilities	-228	-549	-777
Other liabilities	-2.150	-1.379	-3.529
Total net assets (+) /
net liabilities (-)	-2.278	-698	-2.976
31.12.2019 (unaudited):	Shareholder and	Other
	management of iQ	related
in kCHF	International	parties	Total
Financial asset (see note 4.1.)	0	1.631	1.631
Other receivables and other assets	100	0	100
Financial liabilities	-208	-549	-757
Other liabilities	-1.592	-1.299	-2.891
Total net assets (+) /
net liabilities (-)	-1.700	-217	-1.917

There were no significant changes in related party disclosures as against 31 December 2019.

7. Audit of Group financial statements 2019

Audit of Group financial statements for financial year 2019 is not yet finished. So, numbers disclosed with reference to 31 December 2019 are still subject to audit.

8. Subsequent events

Subsequent events in connection with uncertainties and the ability of the company to continue its operations are outlined in note 2.2.

iQ International has, in preparation for an institutional financing organized a private capital raise from a group of its shareholders in early July 2020. This private capital raise was, in accordance with applicable legal limitations, only open to a limited number of shareholders, who were all invited to participate in providing the necessary bridging capital until a lager financing facility is accomplished. The capital raise took place at 0.88 EUR per share plus options. The Company received subscription declarations from shareholders relating to cash payments of kEUR 791 which results in a total of 898,438 new shares being issued. Subscribing shareholders have received a total of 1,527,091 stock options in addition.

Since the share price of iQ International decreased slightly from EUR 0,68 as of 30 June 2020 to EUR 0,65 as of 25 September 2020, the fair value of the collateral for the gross value of the financial asset of kCHF 3.125 (refer to note 4.1.)) decreased by kCHF 74 from kCHF 1.230 to kCHF 1.156 with a corresponding increase of the additional net credit risk exposure.

The Company concluded the COVID-19 pandemic as a significant event. As a result of the global pandemic, the world economic outlook has worsened significantly this far in 2020 and International Market experts expect the global economy to shrink by 5,5% - 6% year-to-date 2020. For the second half of the year, a uptick in economic is forecasted under the condition that measures implemented to halt the spread of the COVID-19 virus. Largest risk identified to the current outlook is the threat of a second global wave of infections. However, if the COVID-19 pandemic can be contained more quickly, the economic recovery could also be faster. As a result, the extent and duration of the individual effects on our business and the success of our raise of additional capital are extremely difficult to predict. For example, if containment

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measures are initiated on short notice or last unforeseeably long, this might significantly impact our business and financing activities in a way that exceeds current expectations and might go beyond already initiated mitigation measures.

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