XPEL LTD - Limited company accounts 22.3

REGISTERED NUMBER: 08948116 (England and Wales)

REPORT OF THE DIRECTORS AND

AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021

FOR

XPEL LTD

Page

Company Information

1

Report of the Directors

2

Report of the Independent Auditors

4

Income Statement

7

Balance Sheet

8

Notes to the Financial Statements

10

DIRECTORS:

Ryan Lewis Pape

Barry Wood

Xpel Inc.

SECRETARY:

REGISTERED OFFICE:

PO Box REF SQE

Blm Law

30 Fenchurch Street

London, England

EC3M 3BL

REGISTERED NUMBER:

08948116 (England and Wales)

AUDITORS:

Milsted Langdon LLP

Chartered Accountants and Statutory Auditors

Freshford House

Redcliffe Way

Bristol

BS1 6NL

The directors present their report with the financial statements of the Company for the year ended 31 December 2021.

PRINCIPAL ACTIVITY

The principal activity of the Company in the year under review was that of

DIRECTORS

The directors shown below have held office during the whole of the period from 1 January 2021 to the date of this report.

Ryan Lewis Pape

Barry Wood

Xpel Inc.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the Report of the Directors and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), including Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the directors are required to:

-	select suitable accounting policies and then apply them consistently;

-	make judgements and accounting estimates that are reasonable and prudent;

-	prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS

So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the Company's auditors are unaware, and each director has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the Company's auditors are aware of that information.

AUDITORS

The auditors, Milsted Langdon LLP, will be proposed for re-appointment at the forthcoming Annual General Meeting.

This report has been prepared in accordance with the provisions of Part 15 of the Companies Act 2006 relating to small companies.

ON BEHALF OF THE BOARD:

Barry Wood - Director

14 November 2022

Opinion

We have audited the financial statements of XPEL LTD (the 'Company') for the year ended 31 December 2021 which comprise the Income Statement, Balance Sheet and Notes to the Financial Statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

-	give a true and fair view of the state of the Company's affairs as at 31 December 2021 and of its profit for the year then ended;

-	have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

-	have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Other information

The directors are responsible for the other information. The other information comprises the information in the Report of the Directors, but does not include the financial statements and our Report of the Auditors thereon.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

-	the information given in the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements; and

-	the Report of the Directors has been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Report of the Directors.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

-	adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

-	the financial statements are not in agreement with the accounting records and returns; or

-	certain disclosures of directors' remuneration specified by law are not made; or

-	we have not received all the information and explanations we require for our audit; or

-	the directors were not entitled to prepare the financial statements in accordance with the small companies regime and take advantage of the small companies' exemption from the requirement to prepare a Strategic Report or in preparing the Report of the Directors.

Responsibilities of directors

As explained more fully in the Statement of Directors' Responsibilities set out on page two, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Auditors' 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 a Report of the Auditors that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

- Obtained an understanding of the nature of the industry and sector, including the legal and regulatory framework that the company operates in and how the company is complying with the legal and regulatory framework;

- Inquired of management, and those charged with governance, about their own identification and assessment of the risks or irregularities, including known and actual, suspected or alleged instances of fraud;

- Discussed matters about non-compliance with laws and regulations and how fraud might occur including

assessment of how and where the financial statements may be susceptible to fraud.

However, it is the primary responsibility of management, with the oversight of those charged with governance, to ensure that the entity’s operations are conducted in accordance with the provisions of laws and regulations and for the prevention and detection of fraud.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our Report of the Auditors.

Use of our report

This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in a Report of the Auditors and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Guy Armitage-Norton (Senior Statutory Auditor)

for and on behalf of Milsted Langdon LLP

Chartered Accountants and Statutory Auditors

Freshford House

Redcliffe Way

Bristol

BS1 6NL

25 November 2022

TURNOVER

5,402,236

3,931,775

Cost of sales

(3,841,017

)

(2,576,727

)

GROSS PROFIT

1,561,219

1,355,048

Administrative expenses

(1,261,213

)

(1,149,859

)

OPERATING PROFIT

300,006

205,189

Interest payable and similar expenses

(49,406

)

(86,095

)

PROFIT BEFORE TAXATION

5

250,600

119,094

Tax on profit

(119,202

)

(27,180

)

PROFIT FOR THE FINANCIAL YEAR

131,398

91,914

FIXED ASSETS

Intangible assets

6

58,147

83,622

Tangible assets

7

425,934

111,581

Investments

8

4,380,000

-

4,864,081

195,203

CURRENT ASSETS

Stocks

9

632,915

280,691

Debtors: amounts falling due within one year

10

508,782

462,049

Debtors: amounts falling due after more than one year

10

2,759

2,759

Cash at bank

11

32,268

312,165

1,176,724

1,057,664

CREDITORS

Amounts falling due within one year

12

2,284,572

762,021

NET CURRENT (LIABILITIES)/ASSETS

(1,107,848

)

295,643

TOTAL ASSETS LESS CURRENT LIABILITIES

3,756,233

490,846

CREDITORS

Amounts falling due after more than one year

13

(3,468,021

)

(1,227,699

)

PROVISIONS FOR LIABILITIES

(893,667

)

-

NET LIABILITIES

(605,455

)

(736,853

)

CAPITAL AND RESERVES

Called up share capital

1,251

1,251

Retained earnings

(606,706

)

(738,104

)

(605,455

)

(736,853

)

The financial statements have been prepared in accordance with the provisions applicable to companies subject to the small companies regime.

The financial statements were approved by the Board of Directors and authorised for issue on 14 November 2022 and were signed on its behalf by:

Barry Wood - Director

1.	STATUTORY INFORMATION

Xpel Ltd is a private company limited by shares, incorporated and domiciled in the United Kingdom. The address of its registered office is PO Box REF SQE, Blm Law, 30 Fenchurch Street, London, England, EC3M 3BL.

The Company is registered at Companies House England and Wales. Its registered number is 08948116.

2.	ACCOUNTING POLICIES

Basis of preparing the financial statements

These financial statements have been prepared in accordance with Financial Reporting Standard 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" including the provisions of Section 1A "Small Entities" and the Companies Act 2006. The financial statements have been prepared under the historical cost convention.

All amounts have been rounded to the nearest £1 pound sterling, unless otherwise indicated.

The following principal accounting policies have been applied:

Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is measured as the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes. The following criteria must also be met before revenue is recognised:

Sale of goods

Revenue from the sale of goods is recognised when all of the following conditions are satisfied.

· the Company has transferred the significant risks and rewards of ownership to the buyer;

· the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

· the amount of revenue can be measured reliably;

· it is probable that the Company will receive the consideration due under the transaction; and

· the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Intangible assets

Goodwill

Goodwill represents the difference between amounts paid on the cost of a business combination and the acquirer’s interest in the fair value of its identifiable assets and liabilities of the acquiree at the date of acquisition. Subsequent to initial recognition, goodwill is measured at cost less accumulated amortisation and accumulated impairment losses. Goodwill is amortised on a straight line basis to the Statement of comprehensive income over its useful economic life.

Other intangible assets

Intangible assets are initially recognised at cost. After recognition, under the cost model, intangible assets are measured at cost less any accumulated amortisation and any accumulated impairment losses. All intangible assets are considered to have a finite useful life. If a reliable estimate of the useful life cannot be made, the useful life shall not exceed ten years.

Tangible fixed assets

Tangible fixed assets under the cost model are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.

Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.

Depreciation is provided on the following basis:

Leasehold improvements - 20%

Plant and machinery - 13%

Motor vehicles - 20%

Fixtures and fittings - 20%

Office equipment - 25%

The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.

Finished goods

Stocks are stated at the lower of cost and net realisable value after making due allowance for obsolete and slow moving stocks.

Taxation

Taxation for the year comprises current and deferred tax. Tax is recognised in the Income Statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.

Current or deferred taxation assets and liabilities are not discounted.

Current tax is recognised at the amount of tax payable using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date.

Timing differences arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in financial statements. Deferred tax is measured using tax rates and laws that have been enacted or substantively enacted by the year end and that are expected to apply to the reversal of the timing difference.

Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Foreign currencies

The Company's functional and presentational currency is GBP.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the spot exchange rates at the dates of the transactions. At each period end foreign currency monetary items are translated using the closing rate. Non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined.

Pension costs and other post-retirement benefits

The Company operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. Once the contributions have been paid the Company has no further payment obligations. The contributions are recognised as an expense in profit or loss when they fall due. Amounts not paid are shown in accruals as a liability in the Statement of financial position. The assets of the plan are held separately from the Company in independently administered funds.

Impairment of fixed assets and goodwill

Assets that are subject to depreciation or amortisation are assessed at each reporting date to determine whether there is any indication that the assets are impaired. Where there is any indication that an asset may be impaired, the carrying value of the asset (or cash-generating unit to which the asset has been allocated) is tested for impairment. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's (or CGU's) fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (CGUs). Non-financial assets that have been previously impaired are reviewed at each reporting date to assess whether there is any indication that the impairment losses recognised in prior periods may no longer exist or may have decreased.

Going concern

The directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. The company has continued financial support as needed from the parent company to provide capital to meet liabilities when they fall due. The COVID-19 pandemic has not had a significant, immediate impact on the Company's operations but the directors are aware that if the current situations becomes prolonged then this may change. The directors have sought and received assurances from the parent company that financial support will be forthcoming for the next 12 months. Having regard to the above and in assessing the going concern the directors have confirmed continued financial support will be provided for the foreseeable future on that basis, the directors continue to adopt the going concern basis of accounting in preparing the annual financial statements.

Debtors and creditors

Debtors

Short term debtors are measured at transaction price, less any impairment.

Creditors

Short term creditors are measured at the transaction price.

3.	CRITICAL ACCOUNTING JUDGEMENTS & KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the company's accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

There are no estimates and assumptions which are considered to have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities.

4.	EMPLOYEES AND DIRECTORS

The average number of employees during the year was 19 (2020 - 17 ) .

5.	PROFIT BEFORE TAXATION

The profit is stated after charging:

2021

2020

£

£

Depreciation - owned assets

57,126

39,258

Patents & Trade names amortisation

25,475

19,558

6.	INTANGIBLE FIXED ASSETS

Patents &

Trade

Goodwill

names

Totals

£

£

£

COST

At 1 January 2021

and 31 December 2021

274,284

91,218

365,502

AMORTISATION

At 1 January 2021

247,735

34,145

281,880

Amortisation for year

-

25,475

25,475

At 31 December 2021

247,735

59,620

307,355

NET BOOK VALUE

At 31 December 2021

26,549

31,598

58,147

At 31 December 2020

26,549

57,073

83,622

7.	TANGIBLE FIXED ASSETS

Improvements

Fixtures

to

Plant and

and

property

machinery

fittings

£

£

£

COST

At 1 January 2021

51,670

9,136

16,135

Additions

308,896

1,611

39,202

At 31 December 2021

360,566

10,747

55,337

DEPRECIATION

At 1 January 2021

51,476

5,390

16,135

Charge for year

16,971

1,668

3,590

At 31 December 2021

68,447

7,058

19,725

NET BOOK VALUE

At 31 December 2021

292,119

3,689

35,612

At 31 December 2020

194

3,746

-

Motor

Computer

vehicles

equipment

Totals

£

£

£

COST

At 1 January 2021

138,030

68,333

283,304

Additions

-

21,770

371,479

At 31 December 2021

138,030

90,103

654,783

DEPRECIATION

At 1 January 2021

49,648

49,074

171,723

Charge for year

25,907

8,990

57,126

At 31 December 2021

75,555

58,064

228,849

NET BOOK VALUE

At 31 December 2021

62,475

32,039

425,934

At 31 December 2020

88,382

19,259

111,581

8.	FIXED ASSET INVESTMENTS

Other

investments

£

COST

At 1 January 2021

and 31 December 2021

4,380,000

NET BOOK VALUE

At 31 December 2021

4,380,000

At 31 December 2020

4,380,000

9.

STOCKS

2021

2020

£

£

Stocks

626,834

280,691

Work-in-progress

6,081

-

632,915

280,691

10.

DEBTORS

2021

2020

£

£

Amounts falling due within one year:

Trade debtors

402,396

275,097

Amounts owed by group undertakings

-

31,258

Other debtors

28,281

12,548

Tax

20,948

-

VAT

21,148

-

Deferred tax asset

-

126,484

Prepayments and accrued income

36,009

16,662

508,782

462,049

Amounts falling due after more than one year:

Trade debtors

2,759

2,759

Aggregate amounts

511,541

464,808

11.	CASH AT BANK

Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours.

12.

CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

2021

2020

£

£

Trade creditors

13,709

8,320

Amounts owed to group undertakings

2,207,627

393,844

Corporation tax

-

1

VAT

-

305,763

Other creditors

12,884

6,783

Accruals and deferred income

50,352

47,310

2,284,572

762,021

13.

CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR

At the 31 December 2021 a loan balance of £3,468,021 (2020: £1,227,699) was due to Xpel, Inc. from Xpel Ltd. Interest of £49,405.95 (2020: £86,095) was accrued on this balance during the period, charged at the rate of 4.5% APR.

14.	LEASING AGREEMENTS

Minimum lease payments under non-cancellable operating leases fall due as follows:

2021

2020

£

£

Within one year

84,120

67,839

Between one and five years

268,641

352,761

352,761

420,600

15.	FINANCIAL INSTRUMENTS

The Company only enters into basic financial instrument transactions that result in the recognition of financial assets and liabilities like trade and other debtors and creditors, loans from banks and other third parties, loans to related parties and investments in ordinary shares. Basic financial assets and liabilities that are payable or receivable within one year, typically trade payables and receivables, are measured, initially and subsequently, at the undiscounted amount of the cash or other consideration, expected to be paid or received

16.	RELATED PARTY DISCLOSURES

The company has taken advantage of the exemption provided under section 33 of the Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland', not to disclose related party transactions with wholly owned subsidiaries within the group.

17.	ULTIMATE CONTROLLING PARTY

The company is an 100% owned subsidiary of Xpel, Inc., company incorporated in the United States of America. Xpel, Inc. is immediate parent company.

The largest and smallest group in which the results of the company are consolidated is that of Xpel, Inc.with its principal place of business 3251 I-35, San Antonio, TX 78219. USA.

18.	FINANCE COSTS

Finance costs are charged to profit or loss over the term of the debt using the effective interest method so that the amount charged is at a constant rate on the carrying amount. Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument.