REG - AIQ Limited - Final Results and Publication of Annual Report
28/02/2023 14:00
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RNS Number : 3768R AIQ Limited 28 February 2023
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 2023
For Immediate Release
AIQ Limited
("AIQ" or the "Company" or, together with Alchemist Codes and Alcodes
International, the "Group")
Final Results and Publication of Annual Report
The Board of AIQ (LSE: AIQ) announces the Company's final results for the year
ended 31 October 2022.
Summary
· Completed contract to supply a decentralised finance ("DeFi") exchange
("DEX") to a customer based in Australia
· Awarded a contract to supply a non-fungible token ("NFT") marketplace
for education applications in Hong Kong, which was completed post period
· Revenue for the twelve months ended 31 October 2022 increased to
£498k (2021: £62k)
· Net loss for the year was reduced to £641k (2021: £1.2m loss)
· Cash and cash equivalents of £636k at 31 October 2022 (31
October 2021: £582k), having raised £500k through the issue of unsecured
convertible loan notes
Harry Chathli, Chairman of AIQ, said: "We entered the year having decided to
pivot to focus on the provision of IT consultancy services to customers who
deliver blockchain technology and digital assets, such as NFTs. We had some
success during 2022 in capitalising on the lack of IT solutions providers in
Asia that specialise in the delivery of blockchain platforms, including
forming partnerships with key solutions providers and completing a contract to
project manage the supply of a decentralised finance exchange to a customer
based in Australia.
"While there have been initial signs of progress during 2022 and subsequently,
revenue generation remains low as the environment for NFT projects comes under
pressure. We continue to receive interest and are hopeful of generating growth
for the full year, but we expect this to be second-half weighted.
Consequently, 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 4582 3500
Harry Chathli, Chairman
Guild Financial Advisory Limited (Financial Adviser) +44 (0)7973839767
Ross Andrews
Gracechurch Group (Financial PR) +44 (0)20 4582 3500
Claire Norbury
Operational Review
The Group's largest project during the year was the delivery of a contract,
which had been secured at the end of the previous year, to supply a DeFi DEX
to a customer based in Australia. For this project, the Group performed the
role of project manager and subcontracted the technical delivery (such that
the net benefit to the Group is the margin earned on the contract). The
majority of the project was delivered during the first half, with completion
occurring in the second half of the year.
AIQ took its first step into the NFT marketplace with the award of a contract
to supply an NFT platform designed to enable art schools and education centres
in Hong Kong to assist their students in publishing NFTs on a blockchain
platform. The Group commenced delivery during the year and completed it post
period. As with the DeFi DEX, the Group performed the role of project manager
herein as well. The platform is fully operational and the customer is expected
to engage the Group to administer and maintain the portal for 12 months. The
Group is also in discussions with the customer regarding expanding the
coverage of the platform from its current focus on Hong Kong to other regions.
The Group also continued to secure and deliver ICT projects (not blockchain
related) in its regular IT consultancy business in Hong Kong. However, this
business only accounts for a small proportion of revenue and is not a focus of
the Group's strategy.
An important focus for during the year was seeking to establish partnerships
to enable the Group to expand its network and offer. This resulted in a number
of collaborations that supported the delivery of the projects mentioned above
as well as some exciting prospects for 2023. In particular, the Group is
having positive discussions with potential partnerships that would expand its
offer to customers wishing to build infrastructure for the Blockchain-based
Service Network (BSN) Spartan Network. The BSN Spartan Network, which was beta
launched in September 2022, is a public infrastructure network that provides
non-cryptocurrency blockchain services and is based on data centre software,
which is open source, free and anonymous for anyone to install. By removing
cryptocurrencies, the BSN Spartan Network aims to make this infrastructure
available to any IT system globally. While it is early days, the Group has
received interest from several potential customers in this area.
Financial Review
Revenue for the twelve months to 31 October 2022 was £498,388, compared with
£61,863 for the previous year, a period in which sales were severely impacted
by the pandemic. The revenue was primarily based on the delivery of the DeFi
DEX contract, which accounted for £438,824, with £35,141 from the NFT
contract and a £22,331 contribution from IT projects in Hong Kong.
The Group recognised a gross profit of £113,926 compared with a gross loss of
£188,807 for the previous year. This reflects the significantly higher
revenues and lower staff costs directly engaged on projects.
Administrative expenses were reduced to £682,722 (2021: £864,601) as the
Group implemented cost control measures. The Group recognised a net gain on
foreign exchange of £74,031 (2021: £126,698 loss) due to the strengthening
of the Malaysian Ringgit, HK Dollar and US Dollar against the Pound during the
year. However, this was counteracted by an impairment charge of £133,682
related to expenditure on improvements in furniture and fixtures in the
Group's Malaysian office where the lease is due to expire in July 2023 and a
decision has not yet been taken as to whether it will be renewed. While the
lease may be renewed, the Group has taken the prudent approach of brining the
value of those assets down to £nil.
Even with the impairment charge, the lower expenses and gain on foreign
exchange together with higher revenues combined to reduce operating loss for
the year to £616,245 (2021: £1,180,106 loss).
Net finance costs were £24,934 compared with £14,806 for the previous year.
The increase relates to the accrual of interest on the convertible loan notes
that were issued during the year.
Loss before tax for the year was reduced to £640,906 (2021: £1,192,820 loss)
and the loss per share to 1.0 pence (2021: 1.8 pence loss per share).
The Group had cash and cash equivalents of £636,459 at 31 October 2022 (31
October 2021: £581,618). This follows the Group raising £500,000 in January
2022 from the issue of convertible loan notes ("Loan Notes"). The Loan Notes
are classified as non-current liabilities as the noteholders have confirmed to
the Company that they do not intend to convert the Loan Notes in the next 12
months.
Going Concern
The financial statements have been prepared on a going concern basis.
In assessing whether the going concern assumption is appropriate, the
Directors take into account all available information for the foreseeable
future, in particular for the 12 months from the date of approval of the
financial statements, and perform scenario planning thereon. This information
includes management prepared cash flows forecasts for the Group. The Directors
have assessed that to meet its forecasted cash requirements, the Group is
dependent on cash generated from the successful winning of revenue contracts
and/or further funding. Whilst there is no indication at the date of the
signing of these financial statements that these new revenue contracts will
not be forthcoming, there can be no certainty that it will be successful.
Based on the new contract win and successful cost management in the current
year and significant prospective customer pipeline, the Directors are
confident that the Group will be able to generate sufficient resources to meet
liabilities as they fall due for at least 12 months from the date of approval
of the financial statements.
Accordingly, the financial statements have been prepared on a going concern
basis and do not include any adjustments that would result if the Group was
unable to continue as a going concern.
The auditors make reference to going concern by way of material uncertainty
within their audit report in the Company's annual report and accounts.
Publication of Annual Report
The Company's annual report and accounts for the year ended 31 October 2022
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 2022
Year ended Year ended
31 October 31 October
Note 2022 2021
£ £
Revenue 5 498,388 61,863
Cost of sales (384,462) (250,670)
Gross profit/(loss) 113,926 (188,807)
Other income 6 12,202 -
Administrative expenses 8 (682,722) (864,601)
Impairment charge 13 (133,682) -
Gain/(losses) on foreign exchange 74,031 (126,698)
Operating loss (616,245) (1,180,106)
Finance income 273 447
Finance costs (24,934) (13,151)
Loss before taxation (640,906) (1,192,820)
Taxation 10 - (2,109)
Loss attributable to equity holders of the Company
(640,906) (1,194,929)
Other comprehensive income (as may be reclassified to profit and loss in
subsequent periods, net of taxes):
Exchange difference on translating foreign operations
(2,902) 16,949
Comprehensive income attributable to equity holders of the Company
(643,808) (1,177,980)
Earnings per share basic and diluted (£) 11 (0.010) (0.018)
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 2022
Note As at As at
31 Oct 2022 31 Oct 2021
£ £
Assets
Non-current assets
Property, plant and equipment 12 12,270 175,207
Right of use assets 14 73,026 163,410
Rental deposits - 29,834
85,296 368,451
Current assets
Trade and other receivables 15 66,408 127,414
Tax - 23,489
receivable
Cash and cash equivalents 16 636,459 581,618
Total current assets 702,867 732,521
Total assets 788,163 1,100,972
Equity and liabilities
Capital and reserves
Share capital 20 647,607 647,607
Share premium 6,019,207 6,019,207
Share warrant reserve 22 12,000 -
Foreign currency translation reserve
21 6,428 9,330
Accumulated losses (6,631,306) (5,990,400)
Total equity 53,936 685,744
Liabilities
Current liabilities
Trade - 1,075
payables
17
Accruals and other payables 18 137,714 244,664
Lease restoration provision 19 18,500 -
Lease 78,013 94,672
liabilities
14
Total current liabilities 234,227 340,411
Non-current liabilities
Lease liabilities 14 - 74,817
Convertible loan notes 23 500,000 -
Total non-current liabilities 500,000 74,817
Total equity and liabilities 788,163 1,100,972
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 28 February 2023 and signed on its behalf by:
Li Chun Chung,
Executive Director
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 OCTOBER 2022
Share warrant reserve Foreign currency translation reserve
Share Share premium Accumulated losses Total equity
capital
£ £ £ £ £ £
Balance as 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 - (5,990,400) 685,744
9,330
Total comprehensive loss for the year - - - (640,906) (491,628)
(2,902)
Share warrant reserve - - 12,000 - - 12,000
Balance at 31 October 2022 647,607 6,019,207 12,000 6,428 (6,631,306) 53,936
Share premium - Represents amounts received in excess of the nominal value on
the issue of share capital less any costs associated with the issue of shares.
Accumulated losses - The accumulated losses reserve includes all current and
prior periods retained profits and losses.
Share warrant reserve - Amount arising on the issue of warrants during the
year.
Translation reserve - The translation reserves includes foreign exchange
movements on translating the overseas subsidiaries records, denominated MYR
and HK$, to the presentational currency, GBP.
The accompanying notes form an integral part of these consolidated
financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 OCTOBER 2022
Year ended Year ended
31 October 31 October 2021
2022 £
£
Cash flows from operating activities
Loss before taxation (640,906) (1,192,820)
Adjustments for:-
Depreciation 123,272 119,328
Impairment charge 133,682 -
Loss on disposal of fixed assets 10,467 -
Share based payment charge 1,000 -
Write off tax receivable 24,493 -
Lease restoration cost 18,500 -
Interest income (273) (447)
Interest expense 24,934 -
Foreign exchange (16,891) 116,106
Operating loss before working capital changes (321,722) (957,833)
Decrease/(increase) in receivables 103,115 (56,318)
Decrease in payables (108,025) (46,321)
Tax paid - (2,109)
Cash used in operations (326,632) (1,062,581)
Interest received 273 447
Net cash used in operating activities (326,359) (1,062,134)
Cash flows from investing activities
Acquisition of plant and equipment - (6,540)
Proceeds from sale of fixed assets 512 -
512
Net cash used in investing activities (6,540)
Cash flows from financing activities
Proceeds from issue of convertible loan notes 500,000 -
Interest on lease liability (7,879) -
Repayment of lease liabilities (91,476) (82,512)
400,645
Net cash inflow/(outflow) in financing activities (82,512)
74,798
Net increase/(decrease) in cash and cash equivalents (1,151,186)
Cash and cash equivalents at beginning of the year 581,618 1,827,379
Effect of exchange rates on cash and cash equivalents (19,957) (94,575)
636,459 581,618
Cash and cash equivalents at end of the year
The non cash movement from financing activities is £18,055 (2021: £Nil) on
account of accrual of interest on loan notes £17,055 (refer to Note 23) and
share-based payment charge £1,000 (refer to Note 22).
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 5(th) 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
31.10.2022 31.10.2021
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 UK adopted
international accounting standards (IFRSs).
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
functional currency of the Company. The functional currencies of the
subsidiaries are Malaysian Ringgit and HK Dollar and they have been converted
to GBP as explained in note 3(e). All values are rounded to the nearest pound,
except where otherwise indicated.
The results for 31 October 2022 are prepared for a 12-month period.
New interpretations and revised standards effective for the year ended 31
October 2022
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 2022, but have not had a
significant effect on the Group are:
· Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16:
Interest Rate Benchmark Reform - Phase 2
· Amendments to IFRS 16 COVID-19-Related Rent Concessions
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 International Accounting Standards Board (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 16: Property, Plant and Equipment
· Amendments to IAS 37: Provisions, Contingent Liabilities and
Contingent Assets
· Amendments to IAS 1: Presentation of Financial Statements and IFRS
Practice Statement 2: Disclosure of Accounting Policies
· Amendments to IAS 8: Accounting policies, Changes in Accounting
Estimates and Errors - Definition of Accounting Estimates
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 Group incurred losses of £641k during the year and experienced operating
cash outflows of £326k. As at 31 October 2022, the Group had net current
assets of £469k and cash of £636k. The Group's cash position was
approximately £486k at 31 January 2023.
During the year, 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 financial statements have been prepared on a going concern basis.
In assessing whether the going concern assumption is appropriate, the
Directors take into account all available information for the foreseeable
future, in particular for the 12 months from the date of approval of the
financial statements, and perform scenario planning thereon. This information
includes management prepared cash flows forecasts for the Group. The Directors
have assessed that to meet its forecasted cash requirements, the Group is
dependent on cash generated from the successful winning of revenue contracts
and/or further funding. Whilst there is no indication at the date of signing
of these financial statements that these new revenue contracts will not be
forthcoming, there can be no certainty that it will be successful.
Based on the new contract win and successful cost management in the current
year and significant prospective customer pipeline, the Directors are
confident that the Group will be able to generate sufficient resources to meet
liabilities as they fall due for at least 12 months from the date of approval
of the financial statements.
Accordingly, the financial statements have been prepared on a going concern
basis and do not include any adjustments that would result if the Group was
unable to continue as a going concern.
The auditors make reference to going concern by way of material uncertainty
within their audit report.
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) Government grants
Monies received from government grants are recognised as other income.
(ii) Sub-letting income
Income received from sub-letting is netted off against administrative
expenses.
(iii) 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.
(iv) Revenue from merchant contracts
The Group earned a nominal amount from merchant contracts during the year as
the OctaPLUS e-commerce platform was effectively closed in the prior year. 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.
(v) Project management and coordination
The Group earns project management and coordination revenues. In the current
year, these primarily related to blockchain platform development and digital
business platform IT solutions 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.
The performance obligations extend over several months with milestone
obligations over the term of the service agreement.
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.
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 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.
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
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.
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,
security deposits, cash and cash equivalents, convertible loan notes, lease
liabilities and trade and other payables.
Convertible loan notes (CLNs)
Convertible Loan Notes are recorded at their issue price and are carried at
their face value. Subsequently, the CLN is accounted for at amortised cost.
Any interest due on these CLNs is recorded on accrual basis. On
conversion/redemption, the face value of converted CLNs is reduced from the
total carried value.
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, trade and other
receivables 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, accruals
and convertible loan notes. 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.
v) Share warrants
Equity-settled share-based payments against services received are measured at
fair value at the date of grant (i.e. date of agreement) by reference to the
fair value of the services received. The fair value determined at the grant
date is expensed on a straight-line basis over the service period. A
corresponding adjustment is made to equity as share warrant reserve and
accounts receivable as prepaid expense.
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
Impairment reviews
Fixed assets
An impairment charge of £133,682 has been made in respect of leasehold
improvements and furniture and fixtures in the Group's Malaysian office, which
have been fully impaired bringing the value of those assets down to £nil on
the basis that the lease expires in July 2023 and the lease may not be
renewed. While a decision to renew the lease has not been taken, it was felt
prudent at this stage to fully impair the associated costs and an element may
be reinstated if the lease is renewed.
MSC Pioneer
In Malaysia, Alchemist Codes applied for MSC Pioneer Status but decided not to
pursue the application as they did not consider it would be successful and on
that basis the tax previously considered to be recoverable of £24,493 has
been written off.
Key estimates
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.
Provisions
Provisions are recognised when the Group has a legal obligation and a
provision has been made based on an estimate and expectation of the future
restoration costs relating to the leasehold premises in Malaysia to restore
the premises to its original state. The lease expires in July 2023, and based
on an estimation by management of the future expected costs of £37,000, a
provision of 50% amounting to £18,500 has been provided for with the
remaining £18,500 to be provided for in the year to 31 October 2023 if the
Company does not renew its lease. The Group has been prudent in its approach
as no decision has yet been made as to whether to renew the lease.
5. REVENUE
Year Year
ended ended
31 October 31 October
2022 2021
£ £
Sale of software products - 37,639
Software development income 496,296 19,415
Merchant commission income 844 4,628
Other 1,248 181
Total 498,388 61,863
All revenues were generated in Asia.
During the year ended 31 October 2022, one customer accounted for £438,824
(88.05%) (2021: one customer accounted for £35,424 (57.26%)) 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 2022 is as follows:
31 October 2022 31 October 2022 31 October 2021 31 October 2021
Goods transferred at a point in time Services transferred over time Goods transferred at a point in time Services transferred over time
£ £ £ £
Sale of software products - - 35,424 2,215
Software development income - 496,296 12,822 6,593
Merchant commission income - 844 - 4,628
Other 19 1,229 - 181
Total 19 498,369 48,246 13,617
6. OTHER INCOME
Other income derives from the receipt of government grants.
7. 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, information technology product and
services. In addition, the Group is only trading in Asia and therefore there
is only one geographical segment. The Board of Directors assesses the
performance of the operating and geographical segments 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.
8. OPERATING LOSS BEFORE TAXATION
Loss from operations has been arrived at after
charging and (crediting):
Year Year
ended ended
31 October 31 October 2021
2022
£ £
Auditor's remuneration:
- Audit of the financial statements
- - PKF - accrued fees 55,873 -
- - Haysmacintyre 43,500 96,750
- Other services - Haysmacintyre (included under professional 3,500 3,500
fees)
Year Year
ended ended
31 October 31 October
2022 2021
Cost of sales: £ £
Wages and salaries 5,421 252,576
Cashback expenses (109) (1,906)
Purchases 356,541 -
Other 22,391 -
384,462 250,670
Year Year
ended ended
31 October 31 October
2022 2021
Administrative expenses: £ £
Directors' remuneration 95,457 140,844
Wages and salaries 143,555 211,066
Consultancy fees 50,500 45,376
Loss on disposal of fixed assets 10,467 -
Depreciation of tangible fixed assets 19,487 25,542
Depreciation of right of use assets 96,877 93,786
Short term leases on property 12,875 23,018
Provision for lease restoration 18,500 -
Professional fees 38,648 34,359
Regulatory fees 37,269 30,738
Secretarial fees 35,909 44,059
Audit fees 99,373 99,079
Credit loss adjustment - 2,354
Travel. Subsistence and Entertainment 26,675 414
Other costs 65,040 123,985
Sub-letting income (67,910) (10,019)
682,722 864,601
9. STAFF COSTS AND KEY MANAGEMENT EMOLUMENTS
Year Year
ended ended
31 October 31 October
2022 2021
Staff costs: £ £
Wages and salaries 242,556 592,673
Social security costs 437 576
Post-employment benefits 1,440 11,237
244,433 604,486
Key management personnel are considered to be the directors and three senior
members of staff. Their remuneration was as follows:
Year Year
ended ended
31 October 31 October
2022 2021
Key management personnel: £ £
Wages and salaries (including directors as detailed in the Directors' 162,559 227,839
Remuneration Report in the 2022 annual report)
Social security costs 113 -
Post-employment benefits 913 -
163,585 227,839
Included within accruals is £6,420 (2021: £7,666), which relates to
Directors' remuneration yet to be paid.
The average monthly number of employees during the year ended 31 October 2022
was as follows:
Year Year
ended ended
31 October 31 October
2022 2021
No. No.
Management 6 4
Administrative 3 4
Operations 6 34
15 42
10. TAXATION
The Company is incorporated in the Cayman Islands, and its activities are
subject to taxation at a rate of 0%. Loss before taxation is £396,531.
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 RM2.5million (approximately £460,000) and below at the
beginning of the basis period and gross income from source of business not
exceeding RM50million (approximately £9.4 million), the first RM600,000
(approximately £110,000) 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
statutory tax rate to the income tax at the effective tax rate of Alchemist
Codes is as follows:
Year Year
ended ended
31 October 31 October
2022 2021
£ £
Loss before taxation (321,269) (1,192,820)
Tax calculated at the standard rate of tax applicable to Alchemist Codes of (77,104) (286,277)
24% (2021: at 24%)
Tax effects of:
Non-deductible expenditure 20,442 119,328
Effect of different tax rates in foreign jurisdictions - 166,949
Withholding tax charge - 2,109
Unrelieved tax losses carried forward 56,662 -
Tax charge/(credit) - 2,109
The income tax rate used excludes that of Alcodes International due to the
scaling of Hong Kong tax rates making any estimation of tax rates used
difficult to apply. The profit before taxation for Alcodes International is
£76,894 and due to brought forward tax loss, no tax expense is expected in
the current year. Also, the results of Alcodes International are largely
immaterial compared to those of Alchemist Codes.
The Group has not recognised deferred tax assets on carried forward tax losses
as the management is not certain that it will generate sufficient taxable
profits in the near future to absorb such carried forward tax losses.
11. EARNINGS PER SHARE
The Company presents basic and diluted earning per share information for its
ordinary shares. Basic earning 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 warrants and loan notes are anti dilutive in nature and therefore the
diluted loss per share has not been presented.
Year ended 31 October 2022 Year ended
31 October
2021
Loss attributable to ordinary shareholders (£) (640,906) (1,194,929)
Basic - Weighted average number of shares 64,760,721 64,760,721
Basic earning per share (expressed as £ per share) (0.010) (0.018)
12. PROPERTY PLANT AND EQUIPMENT
Fixtures and fittings Office equipment Computer equipment Leasehold improvements Total
£ £ £ £ £
Cost
At 1 November 2021 71,450 13,610 33,282 93,081 211,423
Additions - - - - -
Disposals - (547) (28,815) - (29,362)
Currency translation differences 3,076 1,688 1,421 3,979 10,164
As at 31 October 2022 74,526 14,751 5,888 97,060 192,225
Accumulated depreciation
At 1 November 2021 8,413 2,657 13,685 11,461 36,216
Depreciation for the year 7,432 2,400 6,906 9,657 26,395
Impairment 58,279 - - 75,403 133,682
Disposals - (136) (18,247) - (18,383)
Currency translation differences 402 484 620 539 2,045
As at 31 October 2022 74,526 5,405 2,964 97,060 179,955
Carrying amounts
At 31 October 2022 - 9,346 2,924 - 12,270
At 31 October 2021 63,037 10,953 19,597 81,620 175,207
As stated in Note 13, an impairment charge of £133,682 has been made in
respect of leasehold improvements and furniture and fixtures in the Group's
Malaysian office bringing the value of those assets down to £nil on the basis
that the lease expires in July 2023. While the lease may be renewed, it was
felt prudent at this stage to fully impair the associated costs and an element
may be reinstated if the lease is renewed.
13. IMPAIRMENT CHARGE
An impairment charge of £133,682 has been made in respect of leasehold
improvements and furniture and fixtures in the Group's Malaysian office
bringing the value of those assets down to £nil on the basis that the lease
expires in July 2023. While the lease may be renewed, it was felt prudent at
this stage to fully impair the associated costs and an element may be
reinstated if the lease is renewed.
14. RIGHT OF USE ASSETS AND LEASE LIABILITIES
Land and buildings Total
£ £
Cost
At 1 November 2021 280,131 280,131
Currency translation differences 11,971 11,971
As at 31 October 2022 292,102 292,102
Accumulated amortisation
At 1 November 2021 116,721 116,721
Depreciation for the year 96,877 96,877
Currency translation differences 5,478 5,478
As at 31 October 2022 219,076 219,076
Carrying amounts
At 31 October 2022 73,026 73,026
At 31 October 2021 163,410 163,410
Future minimum lease payments associated with these leases were as follows:
As at As at
31 Oct 2022 31 Oct 2021
£ £
Not later than one year 88,690 178,966
Later than one year and not later than five years - -
Total minimum lease payments 88,690 178,966
Less future finance charges (10,677) (9,477)
Present value of minimum lease payments 78,013 169,489
Current liability 78,013 94,672
Non-current liability - 74,817
78,013 169,489
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 rental rate. No option to
extend has been assumed in the above calculations
The interest paid on lease liability is £7,879 (2021: £13,151). The lease
rental paid on short-term lease is £12,875 (2021: £23,018).
15. TRADE AND OTHER RECEIVABLES
As at As at
31 October 31 October
2022 2021
£ £
Trade receivables 773 6,693
Provision for expected credit losses - (2,354)
Total trade receivables 773 4,339
Rental deposits 31,109 -
Prepayments and other receivables 34,526 123,075
66,408 127,414
The rental deposits have been transferred from long-term assets to current
assets as the lease term expires in July 2023.
All balances are reviewed specifically due to the limited number of
receivables and limited history of average rates of default losses to rely on.
16. CASH AND CASH EQUIVALENTS
As at As at
31 October 31 October
2022 2021
£ £
Fixed deposits held with bank 12,872 17,635
Cash at bank 623,004 558,203
Cash in hand 583 5,780
636,459 581,618
Cash at bank earns interest at floating rates based on daily bank deposit
rates.
17. TRADE PAYABLES
As at As at
31 October 31 October
2022 2021
£ £
Redeemable cash back credit - 1,075
- 1,075
18. ACCRUALS AND OTHER PAYABLES
As at As at
31 October 31 October
2022 2021
£ £
Other creditors 32,975 37,205
Accruals 96,825 102,205
Deferred revenue 6,979 105,254
Taxes and social security 935 -
137,714 244,664
Included within accruals is £6,420 (2021: £7,666), which relates to
Directors' remuneration yet to be paid and accrual of interest on loan notes
of £17,055.
19. LEASE RESTORATION PROVISION
As at As at
31 October 31 October
2022 2021
£ £
Balance b/f - -
Addition 18,500 -
Balance c/f 18,500 -
The Group has made a provision for the future costs of restoring its Malaysian
office to its original specification as the lease expires in July 2023. Based
on an estimation by management of the future expected costs of £37,000 to
restore the premises to its original state, a provision of 50% amounting to
£18,500 has been provided in the period with the remaining £18,500 to be
provided for in the year to 31 October 2023 if the Company does not renew its
lease. The Group has been prudent in its approach as no decision has yet been
made whether to renew the lease.
20. SHARE CAPITAL
Number Nominal
value
£
Authorised
Ordinary shares of £0.01 each 800,000,000 8,000,000
As at 31 October 2022 64,760,721 647,607
As at As at
31 Oct 2022 31 Oct 2021
£ £
As at beginning of year 647,607 647,607
Issued during the year - -
As at end of year 647,607 647,607
The holders of ordinary shares are entitled to receive dividends as may be
declared from time to time and are entitled to one vote per share at meetings
of the Company.
21. 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.
22. SHARE WARRANT RESERVE
On 3 October 2022 the Company granted 300,000 warrants to Guild Financial
Advisory ("GFA"), the Company's corporate adviser, exercisable at a price of
£0.01 for a period of up to ten years. The warrants were granted in return in
part for their corporate financial services carried out for a period of 12
months whereby it was agreed that GFA would provide services for an amount of
£24,000 with £12,000 being settled in cash and the balance of £12,000
represented by the issue of the warrants. As a result of this the fair value
of the warrants is deemed to be £12,000 spread evenly over the 12-month
period of the contract with £1,000 expensed for October 2022 and £11,000
carried forward as a prepaid expense and £12,000 taken to a warrant reserve.
23. CONVERTIBLE LOAN NOTES
On 25 January 2022, the Company entered into an unsecured convertible loan
note agreement for a total subscription of £500,000 (the "Loan Notes").
Pursuant to this instrument, the Company immediately raised £500,000 through
the issue of unsecured convertible loan notes to several existing investors
(together the "Noteholders"), including an Executive Director of the Company.
The Loan Notes have an expiration date of 25 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 annum from the date of issue (25 January 2022) to the date of
repayment or conversion and is payable on the anniversary of the issue of the
Loan Notes.
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 at the option of the
Noteholders by giving to the Company at least one week's written notice.
The Loan Notes have been issued to the Noteholders as follows:
a. £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, representing
2.2% of the Company's issued share capital
b. £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
c. £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
Accrual of interest on loan notes was £17,055 at year end.
24. 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
2022 2021
£ £
Trade receivables 773 4,339
Tax recoverable - 23,489
Rental deposits 31,109 29,834
Prepayments and other receivables 34,526 123,075
Cash and cash equivalents 636,459 581,618
702,867 762,355
Financial liabilities at amortised cost:
As at As at
31 October 31 October
2022 2021
£ £
Convertible loan notes 500,000 500,000
Trade payables - 1,075
Accruals and other payables 137,714 244,664
Provisions 18,500 -
Finance leases 78,013 171,581
734,227 917,320
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') Hong Kong Dollar ('HK$') and United States Dollar ('US$'). Foreign
currency risk is monitored closely on an ongoing basis to ensure that the net
exposure is at an acceptable level.
The Group maintains a natural hedge whenever possible, by matching the cash
inflows (revenue stream) and cash outflows used for purposes such as capital
and operational expenditure in the respective functional currencies. The
Group's net exposure to foreign exchange risk in US$ is as follows:
US$ Total
As at 31 October 2022 £'000 £'000
Financial assets denominated in £ 288 288
Financial liabilities denominated in £ - -
Net foreign currency exposure 288 288
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
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 2022 £'000
Effect on net assets:
Strengthened by 10% 29
Weakened by 10% (29)
US$
As at 31 October 2021 £'000
Effect on net assets:
Strengthened by 10% 43
Weakened by 10% (43)
At 31 October 2022 the Company had £288,357 (2021: £427,511) of cash and
cash equivalents in United States Dollar accounts. At 31 October 2022, 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 £28,836 (2021: £28,836) / loss of £26,214 (2021: £42,751).
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 major credit risk exist to the extent that the equivalent of
£533,548 of the Group's bank balances were held with DBS Bank Limited in
Singapore and the equivalent of £74,480 was held with Standard Chartered Bank
in Hong Kong. There are bank balances with other banks totalling to £27,848
were the credit risk is relatively low.
S&P Global Ratings affirmed on 31 October 2022 the issuer credit ratings
of DBS Bank Limited at AA- and Standard Chartered at A+.
Accordingly, the Group 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 Group'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 Group'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.
25. 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 2022 consisted of ordinary
shares and equity attributable to the shareholders of the Company, totalling
£41,936 (2021: £685,744) (disclosed in the statement of changes in equity
excluding share warrants reserve).
The capital structure is reviewed on an ongoing basis. As part of this review,
the Directors consider the cost of capital and the risks associated with each
class of capital.
26. RELATED PARTY TRANSACTIONS
The remuneration of the Directors of the Company is set out in the Report of
the Remuneration Committee.
Included within accruals is £6,420 (2021: £7,667), which relates to
Directors' remuneration outstanding.
In addition to the remuneration, other costs incurred in relation to services
provided by related parties of Directors were as follows:
A total of £38,631 (2021: £41,000) was paid during the year to Gracechurch
Group (formerly trading as Luther Pendragon) for financial PR services, a
company in which Harry Chathli is a director and shareholder.
A total of £Nil (2021: £11,000) 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 £16,500 (2021: £9,500) was paid to Ever Billions International
Limited for general management services, a company in which Li Chun Chung is a
director.
A total of £Nil (2021: £2,900) 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 £4,484 was recognised during the year.
Revenue from Consortium Family Office Ltd for project management services, a
company in which Ng Chun Fai is a director, of £4,931 was recognised during
the year.
Proceeds from sale of fixed assets of £512 was received from Wepin Digital
Sdn Bhd in which Charles Yong Kai Yee is a Chief Technology Officer.
There were no outstanding monies owed at the year end (2021: £Nil).
27. MATERIAL SUBSEQUENT EVENTS
There are no significant or disclosable post-balance sheet events.
28. ULTIMATE CONTROLLING PARTY
As at 31 October 2022, no one entity or individual 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.
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