REG - AIQ Limited - Final Results and Publication of Annual Report
28/02/2022 07:00
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RNS Number : 9460C AIQ Limited 28 February 2022
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF
EU REGULATION 596/2014, WHICH IS PART OF UK LAW BY VIRTUE OF THE EUROPEAN
UNION (WITHDRAWAL) ACT 2018.
28 February 2022
For Immediate Release
AIQ Limited
("AIQ" or the "Company" or, together with Alchemist Codes an Alcodes
International, the "Group")
Final Results and Publication of Annual Report
Summary
· Low sales activity during the year due to the prolonged and
multifaceted impact of the COVID-19 pandemic in Malaysia combined with the
early nature of the Alchemist Codes business
· Strategic review undertaken that resulted in actions to cut
costs, dispose of non-core activities and prioritise new sources of revenue -
focusing now on the Group's IT consultancy business in Hong Kong and the
provision of services to customers who deliver blockchain technology and
digital assets
· Initial signs of progress - namely, the award of a contract to
supply a decentralised finance exchange to a customer based in Australia
· Revenue for the year ended 31 October 2021 was £61,863 (2020:
£154,649)
· Net loss for the year was £1.2m (2020: £3.6m loss)
· Cash and cash equivalents of £0.6m at 31 October 2021 (31
October 2020: £1.8m)
· Post period, raised £500k through the issue of unsecured
convertible loan notes; current cash balance of approximately £1.0m
Graham Duncan, Chairman of AIQ, said: "The COVID-19 pandemic, combined with
the early nature of the Alchemist Codes business, resulted in a disappointing
performance in 2021 with negligible revenue being generated. Accordingly, the
Board undertook a strategic review resulting in the implementation of
significant cost cutting measures and a refocusing of the strategy of the
Group. In particular, we are focused on the provision of IT consultancy
services to customers who deliver blockchain technology and digital assets.
"While it is early days, we are receiving initial interest in this market,
including securing a contract to project manage the supply of a decentralised
finance exchange to a customer based in Australia. At the same time, the Board
continues to closely monitor the cash position and forecasts, and to contain
expenditure levels.
"On behalf of the Board, I would like to thank all of our shareholders for
their continued support and we hope to be able to provide an update on
progress with our strategy in due course."
Enquiries
AIQ Limited c/o +44 (0)20 7618 9100
Graham Duncan, Chairman
VSA Capital Limited (Financial Adviser & Broker) +44 (0)20 3005 5000
Andrew Raca (Corporate Finance)
Luther Pendragon (Media Relations) +44 (0)20 7618 9100
Claire Norbury
Operational Review
As previously announced, the prolonged and multifaceted impact of the COVID-19
pandemic, which was compounded by Alchemist Codes being at a relatively early
stage of development, had a severe impact on our business in Malaysia, with
negligible revenue being generated in the first half of the year to 31 October
2021. Consequently, and combined with the continued significant uncertainty
over the post-pandemic market recovery, in April 2021 (and as announced in the
results for the year to 31 October 2020), the Board undertook a strategic
review to determine the future of the business, which resulted in actions to
cut costs, dispose of non-core activities and reposition the Group.
Our IT consultancy business in Hong Kong, Alcodes International Limited
("Alcodes International"), made initial progress during the year in securing
and delivering IT projects based on the Hong Kong government grant schemes for
IT solutions providers. However, the sales value was an insignificant amount
corresponding with the early nature of the business following its
establishment in July 2020.
The key outcomes of the strategic review were as follows:
· Divestment of certain e-commerce software and technology
developed in-house by Alchemist Codes to Wepin Sdn Bhd ("Wepin") in May 2021
for £35,424.
· A number of Alchemist Codes staff, including Charles Yong, CEO of
Alchemist Codes, becoming employed by Wepin.
· The OctaPLUS e-commerce platform and a small team were retained to
develop the product and seek methods to monetise the registered user base.
However, post year-end, the Board decided to put this activity on hold to
focus the Group's resources on the IT consultancy business.
· Alcodes International would focus on building the IT
consultancy business and look to expand it into other technology areas
such as digital assets.
· The Board and senior management took a
voluntary cut of 20% in their fees, that was backdated from 1 May 2021.
Following the completion of the strategic review, we have been focused on
securing projects for the delivery of blockchain platforms and digital assets
through the provision of IT consultancy. Shortly before the end of our
financial year, we were pleased to have been awarded a contract to supply a
decentralised finance ("DeFi") exchange ("DEX") to a customer based in
Australia. Under the terms of the contract, we will receive payment in
tranches upon completion of milestones, with the revenue expected to be
recognised in the current financial year to 31 October 2022. The project, for
which we perform the role of project manager and subcontract the technical
delivery (such that the net benefit to the Group will be the margin earned on
the contract), is progressing to plan and is expected to complete in Q2 of
calendar year 2022.
Financial Review
Revenue for the twelve months to 31 October 2021 was £61,863, with sales
being severely impacted by the pandemic as described above, compared with
£154,649 for the previous year, a period which included an approximately
seven-month contribution from Alchemist Codes following the acquisition in
March 2020. The revenue was predominantly based on the delivery of IT projects
in Hong Kong (approximately £19,415) and sale of software products (£37,639)
which consists of sale of software technology to Wepin (£35,424) with a small
contribution from other software sales (£4,628) and cashback income of
£3,121 generated by OctaPLUS.
The Group recognised a gross loss of £188,807 compared with a gross profit of
£11,381 for the previous year. This was as a result of the lower revenue and
higher costs of staff directly engaged on projects. In addition, the period
under review includes a full year of direct costs of Alchemist Codes compared
with seven months in the previous year.
Administrative expenses were reduced to £864,601 (2020: £1,367,162)
reflecting a saving in marketing expenses of £376,084 (with the Company
recording a net credit of £79,686 in 2021 against expenses of £296,398 in
the previous year) and the absence of amortisation costs in 2021 compared with
an amortisation expense of £239,765 in the previous year following the
impairment of intangible assets, partly offset by additional depreciation
costs of £88,297. The net credit of £79,686 relating to marketing costs
reflected certain cashback commissions that expired and were no longer payable
and which were written back. The Group recognised a net loss on foreign
exchange of £126,708 (2020: £2,926 loss) due to the weakness of the
Malaysian Ringgit and Hong Kong Dollar against the Pound. However, during the
year the Group did not incur any transaction costs or impairment charges
compared with £380,495 and £2,400,931 respectively in 2020. As a result,
total expenses were reduced to £998,309 compared with £4,151,514 for the
previous year.
The lower expenses more than offset the lower revenue to enable a reduction in
operating loss for the year to £1,180,116 (2020: £4,140,133 loss).
Net finance costs were £12,704 compared with net finance income of £9,546
for the previous year.
Loss before tax for the year was reduced to £1,192,820 (2020: £4,130,587
loss) and the loss per share to 1.9 pence (2020: 6.1 pence loss per share).
The Group had cash and cash equivalents of £581,618 at 31 October 2021 (30
April 2021: £1,022,585; 31 October 2020: £1,827,379).
Post period, as announced on 25 January 2022, the Group raised £500k from the
issue of convertible loan notes. Accordingly, at the date of this report, the
Group had cash and cash equivalents of approximately £1.0m.
Publication of Annual Report
The Company's annual report and accounts for the year ended 31 October 2021
has been published today and is available on the AIQ website at:
https://aiqhub.com/investors/financial-reports/
(https://aiqhub.com/investors/financial-reports/)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 OCTOBER 2021
Year ended Year ended
31 October 2021 31 October
Note 2020
£
£
Revenue 5 61,863 154,649
Cost of sales (250,670) (143,268)
Gross (loss) / profit (188,807) 11,381
Administrative expenses 7 (864,601) (1,367,162)
Transaction costs - (380,495)
Impairment of intangible assets 12 - (2,400,931)
Losses on foreign exchange (net) (126,708) (2,926)
Operating loss (1,180,116) (4,140,133)
Finance income 447 13,852
Finance costs (13,151) (4,306)
Loss before taxation (1,192,820) (4,130,587)
Taxation 9 (2,109) 493,000
Loss attributable to equity holders of the Company
(1,194,929) (3,637,587)
Other comprehensive income (as may be reclassified to profit and loss in
subsequent periods, net of taxes):
Exchange difference on translating foreign operations
16,949 (7,619)
Comprehensive income attributable to equity holders of the Company
(1,177,980) (3,645,206)
Loss per share basic and diluted (£) 10 (0.018) (0.061)
Current and prior year amounts are all derived from continuing operations.
The accompanying notes form an integral part of these consolidated financial
statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 OCTOBER 2021
Note 31 Oct 2021 31 Oct 2020
£ £
Assets
Non-current assets
Property, plant and equipment 11 175,207 204,684
Right of use assets 13 163,410 270,727
Intangible assets 12 - -
Rental deposits 29,834 31,453
368,451 506,864
Current assets
Trade and other receivables 14 127,414 69,459
Tax 9 23,489 24,764
receivable
Cash and cash equivalents 15 581,618 1,827,379
Total current assets 732,521 1,921,602
Total assets 1,100,972 2,428,466
Equity and liabilities
Capital and reserves
Ordinary shares 18 647,607 647,607
Share premium 6,019,207 6,019,207
Foreign currency translation reserve
19 9,330 (7,619)
Accumulated losses (5,990,400) (4,795,471)
Total equity 685,744 1,863,724
Liabilities
Current liabilities
Trade 16 1,075 155,468
payables
Accruals and other payables 17 244,664 136,573
Lease 13 94,672 94,012
liabilities
Total current liabilities 340,411 386,053
Non-current liabilities
Lease liabilities 13 74,817 178,689
Total non-current liabilities 74,817 178,689
Total equity and liabilities 1,100,972 2,428,466
The accompanying notes form an integral part of these consolidated financial
statements. The financial statements were approved and authorised for issue by
the Board of Directors on 25 February 2022 and signed on its behalf by:
Li Chun Chung, Executive Director
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 OCTOBER 2021
Foreign currency translation reserve
Share Share premium Accumulated losses Total equity
capital
£ £ £ £ £
Balance as at 31 October 2019 518,394 3,848,420 (1,157,884) 3,208,930
-
Total comprehensive loss for the year - - (3,637,587) (3,645,206)
(7,619)
Issue of shares (Note 18) 129,213 2,170,787 - - 2,300,000
Balance at 31 October 2020 647,607 6,019,207 (4,795,471) 1,863,724
(7,619)
Total comprehensive loss for the year - - (1,194,929) (1,177,980)
16,949
Balance at 31 October 2021 647,607 6,019,207 9,330 (5,990,400) 685,744
The accompanying notes form an integral part of these consolidated
financial statements.
Year Year ended
ended 31 October 2020
31 October 2021 £
£
Cash flows from operating activities
Loss before taxation (1,192,820) (4,130,587)
Adjustments for:-
Depreciation charges 119,328 31,031
Amortisation charges - 239,765
Impairment of intangible assets - 2,400,931
Interest income (447) (13,852)
Loss on foreign exchange 116,106 16,623
Operating loss before working capital changes (957,833) (1,456,090)
Increase in receivables (56,318) (33,544)
(Decrease)/ increase in payables (48,854) 19,579
Increase/ (decrease) in amounts owing to directors 2,533 (290,317)
Tax paid (2,109) (18,184)
Cash used in operations (1,062,581) (1,778,556)
Interest received 447 13,852
Net cash used in operating activities (1,062,134) (1,764,704)
Cash flows from investing activities
Cash acquired on purchase of subsidiary - 111,073
Acquisition of plant and equipment (6,540) (194,244)
(6,540)
Net cash used in investing activities (83,171)
Cash flows from financing activities
Repayment of lease liabilities (82,512) (22,637)
(82,512)
Net cash used in financing activities (22,637)
(1,151,186)
Net decrease in cash and cash equivalents (1,870,512)
Cash and cash equivalents at beginning of the year 1,827,379 3,703,592
Effect of exchange rates on cash and cash equivalents (94,575) (5,701)
581,618 1,827,379
Cash and cash equivalents at end of the year
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 OCTOBER 2021
The accompanying notes form an integral part of these consolidated
financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL INFORMATION
AIQ Limited ("The Company") was incorporated and registered in The Cayman
Islands as a public limited company on 11 October 2017 under the Companies Law
(as revised) of The Cayman Islands, with the name AIQ Limited, and registered
number 327983.
The Company's registered office is located at 5th Floor Genesis Building,
Genesis Close, PO Box 446, Cayman Islands, KY1-1106.
On 20 March 2020, the Company completed the acquisition of the entire issued
share capital of Alchemist Codes Sdn Bhd ("Alchemist Codes"), (together, the
"Group"), a Malaysian incorporated information technology solutions developer
focusing on the e-commerce sector.
The Company has a standard listing on the London Stock Exchange.
The consolidated financial statements include the financial statements of the
Company and its controlled subsidiaries (the "Group") as follows:
Name Place of incorporation Registered address Principal activity Effective interest
31.10.2021 31.10.2020
Alchemist Codes Sdn Bhd Malaysia 2-9, Jalan Puteri 4/8, Bandar Puteri, 47100 Puchong, Selangor Darul Design and development of software 100% 100%
Ehsan
Malaysia
Alcodes International Limited* Hong Kong 20/F One Pacific Centre, 414 Kwun Tong Road Kwun Tong, Hong Kong Software and app development 100% 100%
* Held by Alchemist Codes Sdn Bhd.
2. PRINCIPAL ACTIVITIES
The principal activity of the Company is to seek acquisition opportunities and
to act as a holding company for a group of subsidiaries that are involved in
the technology sector.
Alchemist Codes' principal activities currently comprise the delivery of
information technology (IT) solutions for clients through the provision of IT
consultancy.
Alcodes International's principal activities currently comprise the delivery
of information technology (IT) solutions for clients through the provision of
IT consultancy, primarily website development.
3. ACCOUNTING POLICIES
a) Basis of preparation
The financial statements have been prepared in accordance with International
Financial Reporting Standards ("IFRS") as adopted by the United Kingdom
("UK"), issued by the International Accounting Standards Board ("IASB"),
including related interpretations issued by the International Financial
Reporting Interpretations Committee ("IFRIC").
As permitted by Companies Law (as revised) of The Cayman Islands only the
consolidated financial statements are presented.
The financial statements are presented in Pound Sterling ("GBP") which is the
presentational currency of the Company. All values are rounded to the nearest
pound, except where otherwise indicated.
The results for 31 October 2021 are prepared for a 12-month period. The
results for the comparative period include the results of the subsidiaries
from acquisition and or incorporation. Therefore, the comparative information
which relates to the Company only for part of the year is not entirely
comparable.
New interpretations and revised standards effective for the year ended 31
October 2021
The accounting policies adopted are consistent with those of the previous
financial year except for the following new and amended standards and
interpretations during the year that are applicable to the Group.
Other Standards
New standards and interpretations that have been adopted in the annual
financial statements for the year ended 31 October 2021, but have not had a
significant effect on the Group are:
· IAS 1 Presentation of Financial Statements and IAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors (Amendment - Definition
of Material);
· Revised Conceptual Framework for Financial Reporting;
· Amendments to IFRS 3 Business Combinations (Amendment -
Definition of Business);
· Amendments to IFRS 16 COVID-19-Related Rent Concessions; and
· Amendments to IFRS 9, IAS 39 and IFRS 7 Interest Rate Benchmark
Reform.
These standards did not have a significant effect on the Group.
Standards and interpretations in issue but not yet effective
There are a number of standards, amendments to standards, and interpretations
which have been issued by the IASB that are effective in future accounting
periods that the Group has decided not to adopt early. The most significant of
these are as follows:
· Amendments to IAS 37 Onerous Contracts - Cost of Fulfilling a
Contract;
· Amendments to IAS 16 Property, Plant and Equipment: Proceeds
before Intended Use;
· Classification of Liabilities as Current or Non-Current
(Amendments to IAS 1);
· Definition of Accounting Estimate (Amendments to IAS 8); and
· Deferred Tax Related to Assets and Liabilities Arising from a
Single Transaction - Amendments to IAS 12 Income Taxes.
The Directors do not anticipate the adoption of any of these standards issued
by IASB, but not yet effective, to have a material impact on the financial
statements of the Group.
b) Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and its subsidiaries made up to the end of the reporting period.
Subsidiaries are entities over which the Group has control. The Group controls
an investee if the Group has power over the investee, exposure to variable
returns from the investee, and the ability to use its power to affect those
variable returns.
The consolidated financial statements present the results of the Company and
its subsidiaries as if they formed a single entity. Inter-company balances and
transactions between Group companies are therefore eliminated in full. The
financial information of subsidiaries is included in the Group's financial
statements from the date that control commences until the date that control
ceases.
c) Going concern
The financial statements are required to be prepared on the going concern
basis unless it is inappropriate to do so.
The Group incurred losses of £1.2m during the year and experienced cash
outflows of £1.2m. As at 31 October 2021, the Group had net current assets of
£385k and cash of £585k. The Group's cash position was approximately £1.0m
at the date of this report.
As noted above, revenues were severely impacted by the COVID-19 pandemic,
which necessitated the Company undertaking a strategic review in the second
half of the year that resulted in actions to cut costs, dispose of non-core
activities and prioritise new sources of revenue. The Group's assessment of
the COVID-19 pandemic is detailed in the Operational Review section of the
Strategic Report above.
The Group meets its day-to-day working capital requirements through cash
generated from the capital it raised on admission to the London Stock Exchange
and, subsequent to the acquisition of Alchemist Codes, from the operations of
its subsidiaries.
More recently, the Company raised £500k through the issue of unsecured
convertible loan notes to three existing shareholders as more fully described
in Note 23 to the financial statements. The proceeds of the Loan Notes will be
used for working capital purposes as well as widening the Group's offer to new
sectors.
Following the issue of the convertible loan notes, the Group's cash position
gives it sufficient headroom to execute its business plans. This has enabled
the financial statements to be prepared on a going concern basis.
The Directors have prepared forecasts and projections and have specifically
performed a detailed review of those forecasts for the period to June 2023.
These reflect the expected trading performance of the Group on the basis of
best estimates of management using current knowledge and expectations of
trading performance. These forecasts and projections have also been stress
tested to consider what the Directors believe to be a 'plausible worst-case
scenario'.
The Directors report that they have re-assessed the principal risks, reviewed
current performance and forecasts, combined with expenditure commitments,
including capital expenditure. The Group's forecasts demonstrate it will have
sufficient cash reserves to enable it to meet its obligations as they fall
due, for a period of at least 12 months from the date of signing of these
financial statements. Accordingly, the Directors consider the Group to be a
going concern.
d) Revenue
Revenue is recognised at an amount that reflects the consideration to which
the entity expects to be entitled in exchange for transferring goods or
services to a customer net of sales taxes and discounts. A performance
obligation may be satisfied at a point in time or over time. The amount of
revenue recognised is the amount allocated to the satisfied performance
obligation. The board believe that the Group has one source of revenue, which
is IT software services. This source of income can be broken down further into
distinct revenue streams:
(i) Revenue from software sales
Revenue from sales of software application is recognised progressively over
time based on milestones and customers' acceptance by using the output method.
In the current year the output method effectively equates to the timing of
invoices raised.
Included within software sales during the year is an amount of £35,424
relating to the sale of certain e-commerce software and technology developed
by the Group to Wepin Sdn Bhd. The agreement for the sale became effective on
the 25 May 2021. All costs relating to the development of the software have
been expensed in the current year.
(ii) Revenue from maintenance and support contracts
The Group enters into annual fixed price support and maintenance services and
managed services contracts with its customers. Revenues are recognised on a
straight-line basis over the term of the contract. This method best depicts
the transfer of services to the customer as there is no reliable prediction
that can be made as to if and when any individual customer will require the
service.
No maintenance income was generated during the period.
(iii) Revenue from merchant contracts
The Group earns commissions from merchants when transactions are completed on
the OctaPLUS e-commerce platform. The commissions are generally determined as
a percentage based on the value of merchandise being sold by the merchants.
The variable consideration is estimated at contract inception and updated at
the end of each reporting period if additional information becomes available.
Revenue related to commissions is recognised based on the expected value when
the performance obligation is satisfied.
The OctaPLUS e-commerce platform was effectively closed during the year and
income generated from merchant contracts totalled £3,121.
(iv) Project management and coordination
In addition to the above revenues, the Group earns project management and
coordination revenues. In the current year, these primarily related to website
development for clients. Revenue is recognised progressively over time based
on milestones and customers' acceptance by using the output method. During the
year the revenue earned was recognised on delivery of performance obligation
based on the estimate of the percentage completed as judged by management.
The performance obligations extend over several months with milestone
obligations over the term of the service agreement.
With regard to the Group's income as Project Coordinator, a customer agrees a
DBP IT Contract for implementing the DBP IT Solution. Typically, the Group
invoices for 30% of the project fee on signing. These fees are intended to
cover time costs incurred for initial planning of the project, soliciting and
coordinating with the potential vendors, project management costs and
preparing all documentation in relation to the project. Development of the
solution including debugging and testing are the key performance obligations
under the DBP Contract. Upon the final completion of the project, the client
is expected to execute a UAT (User Acceptance Testing) confirmation signifying
the final closure of the project, at which point a final invoice for the
balance is issued. Income is recognised over time under the output method,
which looks at the measure of progress of the asset being transferred to the
customer, in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services.
For each Service Level Agreement (SLA) there are agreed values attached to
each element of performance obligation. Income is recognised for each such
performance obligation as follows:
- Project and website management: Over the period of the contract
(typically 6 months)
- Documentation of system - gateway and infrastructure: At point
of completion
- Technical development of web systems: At point of completion
- IT support: Post completion over 12 months
- Maintenance (including bug fixes): Post completion over time
- Training: Post completion on provision of manual to customer
- Website hosting: Post completion over 12 months
- Warranty: Post completion over 12 months
In most cases, the measurement of revenue (when recognised over time) will not
be the same as amounts invoiced to a customer. In these circumstances, the
Company will recognise either a contract asset (accrued income) or a contract
liability (deferred income) for the difference between cumulative revenue
recognised and cumulative amounts billed for that contract. For income
recognised over time, management estimates the percentage of work completed by
reference to each customer.
The Group has been seeking larger project management contracts to support its
turnaround efforts. In September 2021, a contract was signed with a total
value of US$552,500 (approximately £404,000). In November 2021, the Group
received US$128,400 (approximately £94,000) as a first deposit and kick start
payment under the contract and work commenced shortly afterwards. No revenue
under this contract has been recognised in the year as no work had been
commenced or costs incurred prior to the year end and hence no milestones had
been achieved.
(v) Software development contractual income
Alcodes International delivers IT projects based on the Hong Kong government
grant schemes for IT solutions providers. During the year the revenue earned
was based on delivery of performance obligation based on the estimate of the
percentage completed as judged by management.
e) Foreign currency transactions and translation
Functional and presentational currencies
The presentational currency of AIQ Limited and the Group is Pound Sterling.
The functional currency of the Company and Group is also Pound Sterling. This
is based on the principal currency of expenditure and the Company's
fundraising activities, all being in Sterling.
The functional currency of Alchemist Codes Sdn Bhd is Malaysian Ringgit, being
the currency in which the majority of the company's transactions are
denominated.
The functional currency of Alcodes International Limited is the Hong Kong
dollar, being the currency in which the majority of the company's transactions
are denominated.
In preparing the financial statements of the individual entities, transactions
in currencies other than the entity's functional currency are recorded at the
rate of exchange prevailing on the date of the transaction.
At the end of each financial year, monetary items denominated in foreign
currencies are retranslated at the rates prevailing as of the end of the
financial year. Non-monetary items carried at fair value that are denominated
in foreign currencies are retranslated at the rates prevailing on the date
when the fair value was determined. Non-monetary items that are measured in
terms of historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on
retranslation of monetary items are included in profit or loss for the period.
Exchange differences arising on the retranslation of non-monetary items
carried at fair value are included in profit or loss for the period except for
differences arising on the retranslation of non-monetary items in respect of
which gains and losses are recognised directly in equity. For such
non-monetary items, any exchange component of that gain or loss is also
recognised directly in equity.
In order to satisfy the requirements of IAS 21 with respect to presentation
currency, the consolidated financial statements have been translated into
Pound Sterling using the procedures outlined below:
• Assets and liabilities where the functional currency is other than
Pounds were translated into Pounds at the relevant closing rates of exchange;
• non-Sterling trading results were translated into Pounds at the
relevant average rates of exchange; and
• differences arising from the retranslation of the opening net
assets and the results for the period are recognised in other comprehensive
income and taken to the foreign currency translation reserve.
f) Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation
and accumulated impairment losses.
Where parts of an item of property, plant and equipment have different useful
lives, they are accounted for as separate items of property, plant and
equipment.
Depreciation is charged to the income statement on a straight-line basis over
the estimated useful lives of each part of an item of property, plant and
equipment. The estimated useful lives are as follows:
Computers
5 years
Furniture and
fittings
10 years
Office equipment
10 years
Renovations
10 years
Depreciation methods, useful lives and residual values are reviewed at each
balance sheet date.
g) Intangible assets
With the exception of goodwill, intangible assets that are acquired by the
Group are stated at cost less accumulated amortisation and accumulated
impairment losses. All intangible assets have been fully impaired however they
remain in use by the business. All intangible assets purchased during the year
have been expensed.
Goodwill
Goodwill represents the amount by which the fair value of the cost of a
business combination exceeds the fair value of the net assets acquired.
Goodwill is not amortised and is stated at cost less any accumulated
impairment losses.
The recoverable amount of goodwill is tested for impairment annually or when
events or changes in circumstance indicate that it might be impaired.
Impairment charges are deducted from the carrying value and recognised
immediately in the income statement. For the purpose of impairment testing,
goodwill is allocated to each of the Group's cash generating units expected to
benefit from the synergies of the combination. If the recoverable amount of
the cash generating unit is less than the carrying amount of the unit, the
impairment loss is allocated first to reduce the carrying amount of any
goodwill allocated to the unit and then to the other assets of the unit
pro-rata on the basis of the carrying amount of each asset in the unit. An
impairment loss recognised for goodwill is not reversed in a subsequent
period.
Acquisition-related intangible assets
Net assets acquired as part of a business combination includes an assessment
of the fair value of separately identifiable acquisition-related intangible
assets, in addition to other assets, liabilities and contingent liabilities
purchased. These are amortised on a straight-line basis over their useful
lives which are individually assessed. Useful lives are regularly reviewed.
The estimated useful lives of the Group's intangible assets are as follows:
· OctaPLUS Platform 3
years
· Messenger App 3 years
· Software 3 years
As more fully described in Note 12, each of these intangible assets were fully
impaired in the prior year.
h) Research and development expenditure
Research expenditure is recognised as an expense when it is incurred.
Development expenditure is recognised as an expense except that costs incurred
on development projects are capitalised as long-term assets to the extent that
such expenditure is expected to generate future economic benefits. Development
expenditure is capitalised if, and only if an entity can demonstrate all of
the following:-
(i) its ability to measure reliably the expenditure attributable to
the asset under development;
(ii) the product or process is technically and commercially feasible;
(iii) its future economic benefits are probable;
(iv) its ability to use or sell the developed asset; and
(v) the availability of adequate technical, financial and other
resources to complete the asset under development.
Capitalised development expenditure is measured at cost less accumulated
amortisation and impairment losses, if any. Development expenditure initially
recognised as an expense is not recognised as assets in subsequent periods.
i) Impairment of financial assets
IFRS 9 "Financial Instruments" requires an expected credit loss model as
opposed to an incurred credit loss model under IAS 39 "Financial Instruments:
Recognition and Measurement". The expected credit loss (ECL) model requires
the Group to account for expected credit losses and changes in those expected
credit losses at each reporting date to reflect changes in credit risk since
initial recognition of the financial assets. The credit event does not have to
occur before credit losses are recognised. IFRS 9 "Financial Instruments"
allows for a simplified approach for measuring the loss allowance at an amount
equal to lifetime expected credit losses for trade receivables and contract
assets.
The Group has one type of financial asset subject to the expected credit loss
model: trade receivables.
The Group recognises a loss allowance for expected credit losses on trade
receivables. The amount of expected credit losses is updated at each reporting
date to reflect changes in credit risk since initial recognition of the
respective financial instrument.
The expected credit losses are estimated using a provision based on the
Group's historical credit loss experience, adjusted for factors that are
specific to the debtors, general economic conditions and an assessment of both
the current as well as the forecast direction of conditions at the reporting
date, including time value of money where appropriate.
As the Group is at an early stage and the volume of sales is very low, it does
not have significant amounts of historic information on credit losses.
Accordingly, only specific provisions have been made. To analyse and adjust
for any expected credit loss would likely skew the reported results for the
year.
The Group considers a financial asset in default when contractual payments are
between 30 to 180 days past due. However, in certain cases, the Group may also
consider a financial asset to be in default when internal or external
information indicates that the Group is unlikely to receive the outstanding
contractual amounts in full before taking into account any credit enhancements
held by the Group. A financial asset is written off when there is no
reasonable expectation of recovering the contractual cash flows.
j) Impairment of non-financial assets
At each reporting date, the Directors assess whether indications exist that an
asset may be impaired. If indications do exist, or when annual impairment
testing for an asset is required, the Directors estimate the asset's
recoverable amount. An asset's recoverable amount is the higher of an asset's
or cash-generating unit's fair value less costs to sell and its value-in-use,
and is determined for an individual asset, unless the asset does not generate
cash inflows that are largely independent of those from other assets or groups
of assets. Where the carrying amount of an asset or cash-generating unit
exceeds its recoverable amount, the Directors consider the asset impaired and
write the subject asset down to its recoverable amount. In assessing
value-in-use, the Directors discount the estimated future cash flows to their
present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset. In
determining fair value less costs to sell, the Directors consider recent
market transactions, if available. If no such transactions can be identified,
the Directors utilise an appropriate valuation model.
When applicable, the Group recognises impairment losses of continuing
operations in the "Statements of Profit or Loss and Other Comprehensive
Income" in those expense categories consistent with the function of the
impaired asset.
k) Right of use assets
A right of use asset is recognised at the commencement date of a lease. The
right of use asset is measured at cost, which comprises the initial amount of
the lease liability, adjusted for, as applicable, any lease payments made at
or before the commencement date net of any lease incentives received, any
initial direct costs incurred, and an estimate of costs expected to be
incurred for dismantling and removing the underlying asset, and restoring the
site or asset.
Right of use assets are depreciated on a straight-line basis over the
unexpired period of the lease or the estimated useful life of the asset,
whichever is the shorter. Right of use assets are subject to impairment or
adjusted for any re-measurement of lease liabilities.
The Group has elected not to recognise a right-of-use asset and corresponding
lease liability for short-term leases with terms of 12 months or less and
leases of low-value assets. Lease payments on these assets are expensed to
profit or loss as incurred.
l) Leases
Except for short-term leases and leases of low-value assets, right of use
assets and corresponding lease liabilities are recognised in the statement of
financial position. Straight-line operating lease expense recognition is
replaced with a depreciation charge for the right-of-use assets (included in
operating costs) and an interest expense on the recognised lease liabilities
(included in finance costs).
Lease liabilities are recognised at the present value of the contractual
payments due to the lessor over the lease term, with the discount rate
determined by reference to the rate inherent in the lease. If this rate cannot
be readily determined, the Company's incremental borrowing rate is used. The
discount rate estimated by management is 6% per annum. The current Malaysian
base rate is 1.75% and the premium of 4.25% is considered reasonable given the
nature of the asset.
Payments associated with all short-term leases and certain leases of all
low-value assets are recognised on a straight-line basis as an expense in
profit or loss. The Company applies the exemption for low-value assets on a
lease-by-lease basis i.e. for the leases where the asset is sub-leased, a
right-of-use asset is recognised with corresponding lease liability; for all
other leases of low value asset, the lease payments associated with those
leases will be recognised as an expense on a straight-line basis over the
lease term. Short-term leases are leases with a lease term of 12 months or
less. Low-value assets comprise computers, tablets, mobile phones and small
items of office furniture.
m) Financial instruments
Financial assets and financial liabilities are recognised in the Consolidated
Statement of Financial Position when the Group becomes a party to the
contractual provisions of the instruments. Financial assets and financial
liabilities are initially measured at fair value.
Transaction costs that are directly attributable to the acquisition or issue
of financial assets and financial liabilities (other than financial assets and
financial liabilities at fair value through profit or loss) are added to or
deducted from the fair value of the financial assets or financial liabilities,
as appropriate, on initial recognition.
Non-derivative financial instruments
Non-derivative financial instruments comprise trade and other receivables,
cash and cash equivalents, and trade and other payables.
Trade and other receivables
Trade and other receivables are recognised initially at fair value. Subsequent
to initial recognition they are measured at amortised cost using the effective
interest method, less any impairment losses.
Trade and other payables
Trade and other payables are recognised initially at fair value. Subsequent to
initial recognition they are measured at amortised cost using the effective
interest method.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits.
n) Financial assets
(i) Initial recognition and measurement
The Company classifies its existing financial assets as financial assets
carried at amortised cost. The classification depends on the nature of the
assets and the purpose for which the assets were acquired. Management
determines the classification of its financial assets at initial recognition
and this designation at every reporting date.
Financial assets carried at amortised cost
Financial assets carried at amortised cost are non-derivative financial assets
with fixed or determinable payments that are not quoted in an active market.
They are presented as current assets, except for those expected to be realised
later than twelve months after the reporting date which are classified as
non-current assets. They include cash and bank balances, and a rental
deposit.
Subsequent to initial recognition, these assets are measured at amortised cost
using the effective interest rate method, less impairment.
Impairment of financial assets is considered using a forward-looking expected
credit loss (ECL) review.
(ii) De-recognition
Financial assets are de-recognised when the contractual rights to receive cash
flows from the financial assets have expired or have been transferred and the
Company has transferred substantially all the risks and rewards of ownership.
On de-recognition of a financial asset in its entirety, the difference between
the carrying amount and the sum of the consideration received and any
cumulative gain or loss that had been recognised in other comprehensive income
is recognised in profit or loss.
o) Financial liabilities
The Company's financial liabilities include trade and other payables and
accruals. Financial liabilities are recognised when the Company becomes a
party to the contractual provision of the instrument. All financial
liabilities are recognised initially at their fair value, net of transaction
costs, and subsequently measured at amortised cost, using the effective
interest method, unless the effect of discounting would be insignificant, in
which case they are stated at cost.
The Company derecognises financial liabilities when, and only when, the
Company's obligations are discharged, cancelled or they expire.
p) Share capital
Proceeds from issuance of ordinary shares are classified as equity. Amounts in
excess of the nominal value of the shares issued are recognised as share
premium.
Transaction costs that are directly attributable to the issue of share capital
are deducted from share premium.
q) Taxation
Current tax
Current tax is the expected amount of income taxes payable in respect of the
taxable profit for the reporting period and is measured using the tax rates
that have been enacted or substantively enacted at the end of the reporting
period, and any adjustment to tax payable in respect of previous financial
years.
Deferred tax
Deferred tax is provided in full, using the liability method, on temporary
differences arising between the tax bases of assets and liabilities and their
carrying amounts in the Group's Financial Statements. Deferred tax is
determined using tax rates (and laws) that have been enacted or substantially
enacted by the reporting date and expected to apply when the related deferred
tax is realised or the deferred liability is settled.
Deferred tax assets are recognised to the extent that it is probable that the
future taxable profit will be available against which the temporary
differences can be utilised.
r) Cash and cash equivalents
Cash and cash equivalents include cash in hand, demand deposits and other
short-term highly liquid investments with original maturities of three months
or less that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value.
s) Finance income and expense
Finance income comprises interest receivable on funds invested.
Interest income and interest payable is recognised in profit or loss as it
accrues, using the effective interest method.
t) Employee benefits
Short-term benefits
Short-term employee benefit obligations; wages, salaries, paid annual leave,
sick leave, bonuses and non-monetary benefits, are measured on an undiscounted
basis and are expensed in the profit or loss as the related service is
provided. A liability is recognised for the amount expected to be paid under
short-term cash bonus or profit-sharing plans if the Group has a present legal
or constructive obligation to pay this amount as a result of past service
provided by the employee and the obligation can be estimated reliably.
Long-term benefits
Defined contribution plans
The income statement expense for the defined contribution pension plans
operated represents the contributions payable for the year. As required by
law, companies in Malaysia make contributions to the state pension scheme, the
Employees Provident Fund ("EPF") which is charged to profit or loss in the
year to which they relate. Once the contributions have been paid, the Group
has no further liabilities in respect of the defined contribution plans.
u) Earnings per share
Basic earnings per share is computed using the weighted average number of
shares outstanding during the period. Diluted earnings per share is computed
using the weighted average number of shares during the period plus the
dilutive effect of dilutive potential ordinary shares outstanding during the
period.
4. ACCOUNTING ESTIMATES AND JUDGEMENTS
Preparation of financial information in conformity with IFRS requires
management to make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets,
liabilities, income and expenses. The estimates and associated assumptions are
based on historical experience and various other factors that are believed to
be reasonable under the circumstances, the results of which form the basis of
making judgements about carrying values of assets and liabilities that are not
readily apparent from other sources.
The key estimates and underlying assumptions concerning the future and other
key sources of estimation uncertainty at the statement of financial position
date, that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial period
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. In particular:
Key judgments
Going concern
As more fully described above, the Directors have prepared forecasts and
projections for the Group for the purposes of assessing the Company's going
concern assumptions.
The Directors have concluded that it is appropriate to adopt the going concern
basis of accounting in preparing the Annual Report.
Key estimates
Impairment reviews
IFRS requires management to undertake an annual test for impairment of
indefinite lived assets and, for finite lived assets, to test for impairment
if events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable.
Impairment testing is an area involving management judgement, requiring
assessment as to whether the carrying value of assets can be supported by the
net present value of future cash flows derived from such assets using cash
flow projections which have been discounted at an appropriate rate. In
calculating the net present value of the future cash flows, certain
assumptions are required to be made in respect of highly uncertain matters
including management's expectations of:
• growth in EBITDA, calculated as adjusted operating profit before
depreciation and amortisation;
• long-term growth rates; and
• the selection of discount rates to reflect the risks involved.
The Group prepares and approves a detailed annual budget and longer-term
strategic plan for its operations, which are used in the fair value
calculations.
Changing the assumptions selected by management, in particular the discount
rate and growth rate assumptions used in the cash flow projections, could
significantly affect the Group's impairment evaluation and hence results.
Goodwill of £546,874 relating to the acquisition of Alchemist Codes was
allocated to the Alchemist Codes business and represents a Cash Generating
Unit ("CGU") and was tested for impairment last year. The goodwill and other
intangible assets were tested for impairment on the basis of value in use,
including a discount rate of 22.4% based on the rate that would be used by a
market participant. These impairment tests indicated an impairment loss was
required and this loss has resulted in the full write-down of goodwill and
intangibles arising from the acquisition of Alchemist Codes. The assets remain
fully impaired.
Revenue recognition
The Group earns project management and coordination revenues. In the current
year, these primarily related to website development costs for clients.
Revenue is recognised progressively over time based on milestones and
customers' acceptance. During the year the revenue earned was recognised on
the delivery of performance obligations based on the estimate of the
percentage completed as judged by management.
The performance obligations extend over several months with milestone
obligations over the term of the service agreement.
Any changes to the Directors' estimates of the percentage of completion of a
project would impact on the level of income recognised in the year.
MSC Pioneer Status
In Malaysia, Alchemist Codes has applied for MSC Pioneer Status which, if
granted, would result in the company becoming income tax exempt. Although the
application has been submitted there is no certainty as to whether Alchemist
Codes will be successful in obtaining MSC Pioneer Status. Alchemist Codes
continues to account for tax and makes scheduled tax payments, which are
recoverable if the Pioneer status is granted. The Directors are of the view
that this tax is probably recoverable and have included the receivable in the
balance sheet.
5. REVENUE
Year Year
ended ended
31 October 31 October
2021 2020
£ £
Sale of software products 37,639 -
Software development contractual income - 99,596
Maintenance income - 41,725
Project management and coordination income 19,415 -
Cashback income 4,628 13,043
Other 181 285
Total 61,863 154,649
All revenues were generated in Asia.
During the year ended 31 October 2021, one customer accounted for £35,424
(57.26%) (2020: one customer accounted for £85,304 (55.15%)) of the Group's
revenues. No other customers accounted for more than 10%.
An analysis of revenue by the timing of the delivery of goods and services to
customers for 2021 is as follows:
Goods transferred at a point in time Services transferred over time
£ £
Sale of software products 35,424 2,215
Project management 12,822 6,593
Cashback income - 4,628
Other - 181
Total 48,246 13,617
Revenue in 2020 was entirely from services transferred over time.
6. SEGMENT REPORTING
IFRS 8 defines operating segments as those activities of an entity about which
separate financial information is available and which are evaluated by the
Board of Directors to assess performance and determine the allocation of
resources. The Board of Directors is of the opinion that under IFRS 8 the
Group has only one operating segment, the sale of software and ancillary
services. The Board of Directors assesses the performance of the operating
segment using financial information that is measured and presented in a manner
consistent with that in the Financial Statements. Segmental reporting will be
reviewed and considered in light of the development of the Group's business
over the next reporting period.
7. OPERATING LOSS BEFORE TAXATION
Loss from operations has been arrived at after
charging and (crediting):
Year Year
ended ended
31 October 31 October 2020
2021
£ £
Auditor's remuneration:
- Audit of the financial statements 96,750 58,000
- Other services 3,500 -
Year Year
ended ended
31 October 31 October
2021 2020
Cost of sales: £ £
Wages and salaries 252,576 135,350
Cashback expenses (1,906) 7,860
Other - 58
250,670 143,268
Year Year
ended ended
31 October 31 October
2021 2020
Administrative expenses: £ £
Directors' remuneration 140,844 165,212
Wages and salaries 211,066 158,293
Consultancy fees 45,376 84,322
Amortisation of intangibles - 239,765
Depreciation of tangible fixed assets 25,542 6,483
Depreciation of right of use assets 93,786 24,548
Short-term leases on property 23,018 13,051
Professional fees 34,359 18,982
Regulatory fees 30,738 14,802
Secretarial fees 44,059 33,143
Audit fees 99,079 61,281
Credit loss adjustment 2,354 -
Vetting fees - 35,000
Other costs 114,380 512,280
864,601 1,367,162
8. STAFF COSTS AND KEY MANAGEMENT EMOLUMENTS
Year Year
ended ended
31 October 31 October
2021 2020
Staff costs: £ £
Wages and salaries (including directors) 592,673 433,931
Social security costs 576 2,397
Post-employment benefits 11,237 22,527
604,486 458,855
Key management personnel are considered to be the directors and one senior
member of staff. Their remuneration was as follows:
Year Year
ended ended
31 October 31 October
2021 2020
Key management personnel: £ £
Wages and salaries (including directors) 227,839 224,445
Social security costs 0 0
Post-employment benefits 0 0
227,839 224,445
Included within accruals is £7,666 (2020: £23,196), which relates to
Directors' remuneration yet to be paid.
The average monthly number of employees (including directors) during the year
ended 31 October 2021 was as follows:
Year Year
ended ended
31 October 31 October
2021 2020
No. No.
Management 4 2
Administrative 4 2
Operations 34 25
42 29
9. TAXATION
The Company is incorporated in the Cayman Islands, and its activities are
subject to taxation at a rate of 0%.
In Malaysia, Alchemist Codes has applied for MSC Pioneer Status which, if
granted, would result in the Company becoming income tax exempt. Although the
application has been submitted there is no certainty as to whether Alchemist
Codes will be successful in obtaining MSC Pioneer Status. Alchemist Codes
continues to account for tax and makes scheduled tax payments, which are
recoverable if the Pioneer status is granted. A total of RM133,200 has been
paid on account in this regard (equivalent to £24,764). As outlined in note
4, the Directors are of the view that this tax is probably recoverable and
have included the receivable in the balance sheet.
The income tax rate in Malaysia is calculated at the Malaysian statutory tax
rate of 24% of the chargeable income for the year, except for companies with
paid-up capital of RM2.5m (approximately £470k) and below at the beginning of
the basis period and gross income from source of business not exceeding RM50m
(approximately £9.4m), the first RM600k (approximately £110k) of chargeable
income is subject to tax at a rate of 17%.
A reconciliation of income tax applicable to the loss before taxation at the
effective tax rate of Alchemist Codes is as follows:
Year Year
ended ended
31 October 31 October
2021 2020
£ £
Loss before taxation (1,192,820) (4,130,587)
Tax calculated at the standard rate of tax applicable to Alchemist Codes of (286,277) (991,340)
24% (2020: at 24%)
Tax effects of:
Non-deductible expenditure 119,328 25,827
Effect of different tax rates in foreign jurisdictions 166,949
87,030
Withholding tax charge 2,109 -
Deferred tax assets on temporary differences not recognised -
385,483
Tax charge/(credit) 2,109 (493,000)
10. LOSS PER SHARE
The Company presents basic and diluted loss per share information for its
ordinary shares. Basic loss per share is calculated by dividing the loss
attributable to ordinary shareholders of the Company by the weighted average
number of ordinary shares in issue during the reporting period. Diluted
earnings per share are determined by adjusting the profit or loss attributable
to ordinary shareholders and the weighted average number of ordinary shares
outstanding for the effects of all dilutive potential ordinary shares.
There is no difference between the basic and diluted earnings per share, as
the Company has no potential ordinary shares.
Year ended 31 October 2021 Year ended
31 October
2020
Loss attributable to ordinary shareholders (£) (1,194,929) (3,637,587)
Weighted average number of shares 64,760,721 59,818,130
Loss per share (expressed as £ per share) (0.018) (0.061)
11. PROPERTY PLANT AND EQUIPMENT
Fixtures and fittings Office equipment Computer equipment Renovations Total
£ £ £ £ £
Cost
At 1 November 2020 75,056 9,731 28,192 98,033 211,012
Additions 173 4,034 2,333 - 6,540
Currency translation differences (3,779) (155) 2,757 (4,952) (6,129)
As at 31 October 2021 71,450 13,610 33,282 93,081 211,423
Accumulated depreciation
At 1 November 2020 1,247 368 3,059 1,654 6,328
Depreciation for the year 7,173 1,936 6,593 9,840 25,542
Currency translation differences (7) 353 4,033 (33) 4,346
As at 31 October 2021 8,413 2,657 13,685 11,461 36,216
Carrying amounts
At 31 October 2021 63,037 10,953 19,597 81,620 175,207
At 31 October 2020 73,809 9,363 25,133 96,379 204,684
12. INTANGIBLE ASSETS
Goodwill and acquisition related intangible assets arising from the
acquisition of Alchemist Codes were fully impaired in the prior year. The
OctaPLUS Platform and Messenger App were also fully impaired and any
development costs relating to the OctaPLUS Platform and Messenger App incurred
during the year have been expensed to profit and loss.
No research and development costs were capitalised in the year. The amount
expensed during the year was £5,728.
13. RIGHT OF USE ASSETS AND LEASE LIABILITIES
Land and buildings Total
£ £
Cost
At 1 November 2020 295,338 295,338
Currency translation differences (15,207) (15,207)
As at 31 October 2021 280,131 280,131
Accumulated amortisation
At 1 November 2020 24,611 24,611
Depreciation for the year 93,786 93,786
Currency translation differences (1,676) (1,676)
As at 31 October 2021 116,721 116,721
Carrying amounts
At 31 October 2021 163,410 163,410
At 31 October 2020 270,727 270,727
Future minimum lease payments associated with these leases were as follows:
As at As at
31 Oct 2021 31 Oct 2020
£ £
Not later than one year 178,966 107,817
Later than one year and not later than five years - 188,680
Total minimum lease payments 178,966 296,497
Less future finance charges (9,477) (23,796)
Present value of minimum lease payments 169,489 272,701
Current liability 94,672 94,012
Non-current liability 74,817 178,689
169,489 272,701
The lease may be extended at the end of its two-year term for a further two
years, at a new rental rate to be based on the prevailing market rate
provided, that in the event that there is any increase in rental, such
increase shall not exceed 15% of the preceding's rental rate. No option to
extend has been assumed in the above calculations.
Short-term leases are recognised on a straight-line basis as an expense in
profit or loss. In the year, £23,018 (2020: £13,051) was charged as an
expense.
14. TRADE AND OTHER RECEIVABLES
As at As at
31 October 31 October
2021 2020
£ £
Trade receivables 6,693 7,799
Provision for expected credit losses (2,354) -
Total trade receivables 4,339 7,799
Prepayments, deposits and other receivables 123,075 61,660
Total trade and other receivables 127,414 69,459
All balances are reviewed specifically due to the limited number of
receivables and limited history of average rates of default losses to rely on.
The increase in the provision for expected credit losses rose from £nil
brought forward to £2,354 at the end of the year.
15. CASH AND CASH EQUIVALENTS
As at As at
31 October 31 October
2021 2020
£ £
Cash at bank 581,618 1,827,379
581,618 1,827,379
Cash at bank earns interest at floating rates based on daily bank deposit
rates.
16. TRADE PAYABLES
As at As at
31 October 31 October
2021 2020
£ £
Redeemable cash back credit 1,075 123,100
Other trade payables - 32,368
1,075 155,468
17. ACCRUALS AND OTHER PAYABLES
As at As at
31 October 31 October
2021 2020
£ £
Accruals 139,410 123,998
Deferred revenue 105,254 1,464
Taxes and social security - 11,111
244,664 136,573
18. SHARE CAPITAL
Number Nominal
value
£
Authorised
Ordinary shares of £0.01 each 800,000,000 8,000,000
Issued
As at 31 October 2021 64,760,721 647,607
Year Year
ended ended
31 Oct 2021 31 Oct 2020
£ £
As at beginning of year 647,607 518,394
Issued during the year - 129,213
As at end of year 647,607 647,607
The holders of Ordinary Shares are entitled to receive dividends as declared
from time to time and are entitled to one vote per share at meetings of the
Company.
19. FOREIGN CURRENCY TRANSLATION RESERVE
The foreign currency translation reserve represents cumulative foreign
exchange differences arising from the translation of the financial statements
of foreign subsidiaries and is not distributable by way of dividends.
20. FINANCIAL RISK MANAGEMENT
a) Categories of financial instruments
The carrying amounts and fair value of the Group's financial assets and
liabilities as at the end of the reporting period are as follows:
Financial assets:
As at As at
31 October 31 October
2021 2020
£ £
Trade receivables 4,339 7,799
Tax recoverable 23,489 24,764
Deposits and other receivables 107,146 45,008
Cash and cash equivalents 581,618 1,827,379
716,592 1,904,950
Financial liabilities at amortised cost:
As at As at
31 October 31 October
2021 2020
£ £
Trade payables 1,075 155,468
Accruals and other payables 244,664 136,573
Finance leases 171,581 272,701
417,320 564,742
The financial assets and financial liabilities maturing within the next 12
months approximate their fair values due to the relatively short-term maturity
of the financial instruments.
b) Financial risk management objectives and policies
The Group is exposed to a variety of financial risks: market risk (including
interest rate risk and currency risk), credit risk and liquidity risk. The
risk management policies employed by the Company to manage these risks are
discussed below. The primary objectives of the financial risk management
function are to establish risk limits, and then ensure that exposure to risk
stays within these limits. The operational and legal risk management functions
are intended to ensure proper functioning of internal policies and procedures
to minimise operational and legal risks.
i) Interest rate risks
Certain cash holdings and cash equivalents are held in accounts with variable
rates. If interest rates were to increase or decrease by 2%, the effect would
not be material.
ii) Currency risks
The Group is exposed to exchange rate fluctuations as certain transactions are
denominated in foreign currencies.
Foreign currency risk is the risk that the fair value or future cash flows of
an exposure will fluctuate due to changes in foreign exchange rates. The
Group's exposure to the risk of changes in foreign exchange rates relates
primarily to its financing activities (when cash balances are denominated
other than in a company's functional currency).
Most of the Group's transactions are carried out in Pounds, Malaysian Ringgit
('RM') and Hong Kong Dollar ('HK$'). Foreign currency risk is monitored
closely on an ongoing basis to ensure that the net exposure is at an
acceptable level.
The Group maintains a natural hedge whenever possible, by matching the cash
inflows (revenue stream) and cash outflows used for purposes such as capital
and operational expenditure in the respective currencies. The Group's net
exposure to foreign exchange risk was as follows:
US$ Total
As at 31 October 2021 £'000 £'000
Financial assets denominated in £ 522 522
Financial liabilities denominated in £ - -
Net foreign currency exposure 522 522
US$ Total
As at 31 October 2020 £'000 £'000
Financial assets denominated in £ 894 894
Financial liabilities denominated in £ - -
Net foreign currency exposure 894 894
Foreign currency sensitivity analysis:
The following tables demonstrate the sensitivity to a reasonably possible
change in foreign currency exchange rates, with all other variables held
constant.
The impact on the Group's loss before tax is due to changes in the fair value
of monetary assets and liabilities. The Group's exposure to foreign currency
changes for all other currencies is not material.
A 10 per cent. movement in US Dollar ($) would increase/(decrease) net assets
by the amounts shown below. This analysis assumes that all other variables, in
particular interest rates, remain constant.
US$
As at 31 October 2021 £'000
Effect on net assets:
Strengthened by 10% 52
Weakened by 10% (52)
US$
As at 31 October 2020 £'000
Effect on net assets:
Strengthened by 10% 89
Weakened by 10% (89)
At 31 October 2021 the Company had £427,511 (2020: £893,965) of cash and
cash equivalents in United States Dollar accounts. At 31 October 2021, had the
exchange rate between the Pound Sterling and United States Dollar
increased/decreased by 10%, the effect on the result in the period would be a
gain of £42,751 (2020: £89,396) / loss of £42,751 (2020: £89,396).
At 31 October 2021 the Company had £71,758 (2020: £894,587) of cash and cash
equivalents in Malaysian Ringgit accounts. At 31 October 2021, had the
exchange rate between the Pound Sterling and Malaysian Ringgit
increased/decreased by 10%, the effect on the result in the period would be a
gain of £7,176 (2020: £89,459) / loss of £7,176 (2020: £89,459).
At 31 October 2021 the Company had £13,129 (2020: £14,758) of cash and cash
equivalents in Hong Kong Dollar accounts. At 31 October 2021, had the exchange
rate between the Pound Sterling and Hong Kong Dollar increased/decreased by
10%, the effect on the result in the period would be a gain of £1,313 (2020:
£1,476) / loss of £1,313 (2020: £1,476).
iii) Credit risk
Credit risk refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the Group. Credit
allowances are made for estimated losses that have been incurred by the
reporting date. No such amounts have been made to date.
Concentrations of credit risk exist to the extent that the equivalent of
£494,371 of the Group's cash balances were held with DBS Bank Limited in
Singapore and the equivalent of £43,507 was held with Hong Leong Bank in
Malaysia.
S&P Global Ratings affirmed on 31 October 2021 the issuer credit ratings
of DBS Bank Limited at AA-. Hong Leong Bank's was recently downgraded by Fitch
from A- to BBB+.
Accordingly, the Company considers that the credit risk in relation to its
cash holding to be low.
iv) Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting
the obligations associated with its financial liabilities. The Company's
approach to managing liquidity is to ensure, as far as possible, that it will
always have sufficient liquidity to meet its liabilities when due, under both
normal and stressed conditions, without incurring unacceptable losses or
risking damage to the Company's reputation.
The Group's financial liabilities are primarily trade and other payables. The
amounts are unsecured, interest-free and repayable on demand. Details of trade
payables are found in Note 16.
21. CAPITAL MANAGEMENT
The Group manages its capital to ensure that it will be able to continue as a
going concern while maximising the return to shareholders through the
optimisation of the balance between debt and equity.
The capital structure of the Group as at 31 October 2021 consisted of Ordinary
Shares and equity attributable to the shareholders of the Company, totalling
£676,652 (2020: £1,863,724) (disclosed in the statement of changes in
equity).
The capital structure is reviewed on an on-going basis. As part of this
review, the Directors consider the cost of capital and the risks associated
with each class of capital.
22. RELATED PARTY TRANSACTIONS
The remuneration of the Directors of the Company is set out in the Report of
the Remuneration Committee.
A total of £41,000 (2020: £42,000) was paid during the year to Luther
Pendragon for financial PR services, a company in which Harry Chathli is a
director and shareholder.
Included within accruals is £7,667 (2020: £23,196), which relates to
Directors' remuneration outstanding and £1,457 (2020: £nil) relating to KMP
salaries.
A total of £11,000 (2020: £24,000) was paid during the year to Graham Duncan
Limited for accounting services, a company in which Graham Duncan is a
director and shareholder.
A total of £9,500 (2020: £nil) was paid to Ever Billions International
Limited for general management services, a company in which Li Chun Chung is a
director. Additionally, revenue for project management services of £3,020 was
recognised during the year and £1,836 recognised as deferred revenue at year
end.
A total of £2,900 (2020: £nil) was paid to Credigroup Fiduciary Services for
payment processing services, a company in which Ng Chun Fai, Senior Manager of
the Group, is a director.
Revenue from AI Sport Asia for project management services, a company in which
Ng Chun Fai is a director, of £231 was recognised during the year and £1,544
recognised as deferred revenue at year end.
Revenue from Consortium Family Office Ltd for project management services, a
company in which Ng Chun Fai is a director, of £2,520 was recognised during
the year and £1,897 recognised as deferred revenue at year end.
The related party transactions were made on terms equivalent to those that
prevail in arm's length transactions.
23. MATERIAL SUBSEQUENT EVENTS
Issue of convertible loan notes
On 24 January 2022, the Company entered into a convertible loan note
instrument constituting up to £1,000,000 of unsecured convertible loan notes
with an expiry date of 24 January 2024. Pursuant to this instrument, the
Company immediately raised £500,000 through the issue of unsecured
convertible loan notes (the "Loan Notes") to several existing investors
(together the "Noteholders"), including an Executive Director of the Company.
The net proceeds of the Loan Notes will be used for working capital purposes.
Terms of the Loan Notes
The Loan Notes have an expiration date of 24 January 2024 ("Expiration Date")
and can be repaid, in part or in full, by the Company on 31 December in any
year prior to the Expiration Date by giving not less than 14 days' written
notice to the Noteholders. All outstanding Loan Notes attract interest at a
rate of 5% per day from the date of issue (24 January 2022) to the date of
repayment or conversion.
The Loan Notes shall be convertible into new Ordinary Shares of the Company at
the lesser of 11 pence per Ordinary Share or the Volume Weighted Average Price
of the Company's Ordinary Shares on the London Stock Exchange in the seven-day
period prior to the date on which the Loan Note is converted into Ordinary
Shares. The Loan Notes shall be convertible, in part or in full, at any time
from the date of issue until the Expiration Date by the Noteholder giving to
the Company at least one week's written notice (the "Conversion Notice").
In the event of the Company receiving a Conversion Notice in circumstances
where the Company would be required to publish a prospectus in relation to the
application to trading of such Ordinary Shares, the Company shall have the
sole right to reject such notice. In addition, a Noteholder shall not be
permitted to issue a Conversion Notice if they are in possession of any
unpublished price sensitive or inside information as such terms are defined in
the UK Criminal Justice Act 1993 and the Market Abuse Regulation (as in force
in the United Kingdom).
The Loan Notes have been issued to the Noteholders as follows:
• £250,000 to Li Chun Chung, an Executive Director of the Company
and who has an interest in 1,425,500 ordinary shares in the Company ("Ordinary
Shares"), representing 2.2% of the Company's issued share capital
• £125,000 to Soon Beng Gee who has an interest in 11,766,650
Ordinary Shares, representing 18.2% of the Company's issued share capital
• £125,000 to Lee Chong Liang who has an interest in 11,766,650
Ordinary Shares, representing 18.2% of the Company's issued share capital
24. ULTIMATE CONTROLLING PARTY
As at 31 October 2021, no one entity owns greater than 50% of the issued share
capital, or holds significant control over the Company. Therefore, the
Directors have determined the Company does not have an ultimate controlling
party.
25. COVID-19
SARS-CoV-2 ("COVID-19") has continued to severely impact the Group's revenues
and results for the year. The stringent lockdown measures still being taken by
the Malaysian government - known as "movement control orders" (MCO), which
were in effect throughout the year; and the economic downturn and uncertainty
continues to negatively impact customers' budget availability and the
willingness to commit resources to new projects. The pandemic also severely
impacted the rollout of the Group's e-commerce solution, OctaPLUS, which
resulted in this area of the business closing.
Hong Kong is showing signs of improving and this appears to be the Groups best
opportunity for growth in the future.
Whilst significant cost cutting measures and reorganisations have been put
into effect these savings have not been augmented by revenue improvements
during the year.
The pandemic continues to have a profound impact on the Group's operations,
with MCO measures in Malaysia still in place as the pace of emerging from the
pandemic in the region remains slow.
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