REG - AIQ Limited - Interim Results
31/07/2023 07:00
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RNS Number : 6405H AIQ Limited 31 July 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.
31 July 2023
For Immediate Release
AIQ Limited
("AIQ" or the "Company" or, together with Alchemist Codes and Alcodes
International, the "Group")
Interim Results
The Board of AIQ (LSE: AIQ) announces the Company's unaudited consolidated
interim results for the six months ended 30 April 2023.
Summary
· Completed a contract to supply a non-fungible token ("NFT")
marketplace for education applications in Hong Kong
· Awarded a contract to supply a virtual data centre
· Revenue for the six months ended 30 April 2023 was £73k (H1
2022: £361k)
· Net loss for the period was £353k (H1 2022: £202k loss)
· Cash and cash equivalents of £329k at 30 April 2023 (31 October
2022: £636K)
Harry Chathli, Chairman of AIQ, said: "The first half results were in line
with management's expectations and reflect the challenging market conditions
and impact of the macro-economic climate on NFT and other blockchain-based
projects. We completed the delivery of our project from last year and also
commenced a new contract in the first half that was completed in the second
half.
"At the time of the full year results earlier this year, we noted that we were
continuing to receive interest, but that the revenues would be second half
weighted. We remain hopeful of signing a new substantive contract in the
second half of this year, but we do not expect full revenue recognition from
this contract in this fiscal year. Consequently, we anticipate revenues for
the full year 2023 to be substantially below that of last year. We continue to
maintain tight cost control and lower our expenditure levels. We have vacated
our premises in Malaysia and are consolidating our operations in Malaysia with
those in Hong Kong thereby reducing our cost level by £100k on an annualised
basis. We are pleased that our supportive shareholders have extended the
deadline for repayment of their loan by 12 months from its due date in 2024.
Additionally, the Board is keeping all its strategic options open should the
markets not turn favourable in the short- to mid-term."
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
During the six months to 30 April 2023, AIQ completed the delivery of a
contract to supply an NFT platform. It has been built to enable art schools
and education centres in Hong Kong assist their students in publishing NFTs on
a blockchain platform. 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).
Towards the end of the period, the Group was awarded a contract, by a new
customer, to set up a virtual data centre. As with the NFT marketplace, the
Group's role is project manager. The Group has delivered the initial phase of
the project as planned. This comprised a feasibility study into building the
data centre on three different non-cryptocurrency public blockchains, in
accordance with the customer's requirements. Based on the findings of the
feasibility study, the customer has decided to reevaluate its plans to build a
virtual data centre. Accordingly, while the Group expects to be awarded
further work from this customer under new contracts in due course, for this
initial project the Group will now receive approximately 35% of the contract
value announced on 27 March 2023.
During the period, the Board resolved to not renew the lease on its Malaysian
office, which was due to expire in July 2023, and to formally close its
Malaysian subsidiary, which is expected to occur by the end of the year. The
Group's business has been primarily conducted from Hong Kong since the
establishment of Alcodes International in Hong Kong and the divestment of the
Group's Malaysia-based e-commerce business. Accordingly, the Group expects to
recognise further cost savings of approximately £100k on an annualised basis
by winding down its Malaysian operations.
Financial Review
Revenue for the six months ended 30 April 2023 was £73k (H1 2022: £361k).
The revenue was primarily based on delivery under the data centre contract
with a small proportion contributed by the NFT platform contract.
The Group recognised a gross profit of £71k (H1 2022: £115k), which reflects
the lower revenues.
Administrative expenses were reduced to £286k (H1 2022: £392k) as the Group
continued to implement cost reduction measures. However, this was offset by a
net loss on foreign exchange of £121k (H1 2022: £70k gain) due to the
weakening of the Pound against the Malaysian Ringgit and Hong Kong Dollar.
Accordingly, operating loss was £337k (H1 2022: £207k loss).
Net finance costs were £16k compared with net finance income of £5k for the
first half of the previous year. The increase in costs relates to the accrual
of interest on the convertible loan notes that were issued during the previous
year.
Loss before tax for the period was £353k (H1 2022: £202k loss) and the loss
per share was 0.5 pence (H1 2022: 0.3 pence loss per share).
The Group had cash and cash equivalents of £329k at 30 April 2023 (31 October
2022: £636k).
Outlook
The environment for NFT and other blockchain-based projects has remained
challenging as a result of the impact of the macro-economic conditions as well
as the volatility in the crypto markets. During the second half of the year,
the Group completed delivery of the new contract won in the first half and
continues to receive interest in its services and solutions. AIQ is hopeful of
signing a new substantive contract in the second half, however, it does not
expect full revenue recognition from this contract in the current fiscal year.
Consequently, AIQ anticipates revenues for the full year 2023 to be
substantially below that of last year.
The Group continues to maintain tight cost control and lower its expenditure
levels. It has vacated its premises in Malaysia and is in the process of
consolidating its operations in Malaysia with its operations in Hong Kong,
which is expected to reduce costs by £100k on an annualised basis.
In H1 2023, the Group had cash outflows from operating activities of £353k
and its cash position is approximately £200k at the date of this report. The
Board continues to monitor the Group's cash position closely. It considers
the Group to be a going concern, but, as set out in Note 2 to the financial
statements, has identified a material uncertainty in this regard. The Board is
pleased that, as also announced today, the Group's supportive shareholders
have extended the deadline for the repayment of the convertible loan notes by
12 months from the due date in 2024. Additionally, the Board is keeping all
its strategic options open should the markets not turn favourable in the
short- to mid-term.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 APRIL 2023
Six months Six months ended Year ended
ended 30 April 31 October
Note 30 April 2022 2022
2023 Unaudited Audited
Unaudited £ £
£
Revenue 5 72,960 361,061 498,388
Cost of sales (2,238) (246,097) (384,462)
Gross profit/(loss) 70,722 114,964 113,926
Other income - - 12,202
Administrative expenses (286,065) (391,791) (682,722)
Impairment charge 8 - - (133,682)
(Loss)/gain on foreign exchange (121,208) 69,985 74,031
Operating loss (336,551) (206,842) (616,245)
Finance income 102 9,184 273
Finance costs (16,399) (4,563) (24,934)
Loss before taxation (352,848) (202,221) (640,906)
Taxation - - -
Loss attributable to equity holders of the Company
(352,848) (202,221) (640,906)
Other comprehensive income (as may be reclassified to profit and loss in
subsequent periods, net of taxes):
Exchange difference on translating foreign operations
80,045 (21,110) (2,902)
Comprehensive income attributable to equity holders of the Company
(272,803) (223,331) (643,808)
Earnings per share basic and diluted (£) 7 (0.005) (0.003) (0.010)
The accompanying notes form an integral part of these consolidated financial
statements
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 APRIL 2023
Note As at As at
30 Apr 2023 31 Oct 2022
Unaudited Audited
£ £
Assets
Non-current assets
Property, plant and equipment 10,881 12,270
Right of use assets 23,628 73,026
Rental deposits - -
34,509 85,296
Current assets
Trade and other receivables 105,452 66,408
Cash and cash equivalents 329,364 636,459
Total current assets 434,816 702,867
Total assets 469,325 788,163
Equity and liabilities
Capital and reserves
Share capital 10 647,607 647,607
Share premium 6,019,207 6,019,207
Share warrant reserve 11 12,000 12,000
Foreign currency translation reserve
86,473 6,428
Accumulated losses (6,984,154) (6,631,306)
Total equity (218,867) 53,936
Liabilities
Current liabilities
Trade 9,434 -
payables
Accruals and other payables 125,388 137,714
Lease restoration provision 9 27,750 18,500
Lease 25,620 78,013
liabilities
Total current liabilities 188,192 234,227
Non-current liabilities
Convertible loan notes 12 500,000 500,000
Total non-current liabilities 500,000 500,000
Total equity and liabilities 469,325 788,163
The accompanying notes form an integral part of these consolidated financial
statements
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 APRIL 2023
Share warrant reserve Foreign currency translation reserve
Share Share premium Accumulated losses Total equity
capital
£ £ £ £ £ £
Balance as at 31 October 2021 (Audited) 647,607 6,019,207 - (5,990,400) 685,744
9,330
Total comprehensive loss for the period - - - (202,221) (223,331)
(21,110)
Balance at 30 April 2022 (Unaudited) 647,607 6,019,207 - (6,192,621) 462,413
(11,780)
Balance as at 31 October 2022 (Audited) 647,607 6,019,207 12,000 6,428 (6,631,306) 53,936
Total comprehensive loss for the period - - - (352,848) (272,803)
80,045
Share warrant reserve - - - - - -
Balance at 30 April 2023 647,607 6,019,207 12,000 86,473 (6,984,154) (218,867)
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
period.
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
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 30 APRIL 2023
Six months ended Six months ended Year ended
30 April 30 April 31 October 2022
2023 2022
Unaudited Unaudited Audited
£ £ £
Cash flows from operating activities
Loss before taxation (352,848) (202,221) (640,906)
Adjustments for:-
Depreciation 50,218 117,383 123,272
Impairment charge - - 133,682
Loss on disposal of fixed assets - - 10,467
Share based payment charge (6,000) - 1,000
Write off tax receivable - - 24,493
Lease restoration cost 9,250 - 18,500
Interest income (102) (9,184) (273)
Interest expense 16,399 - 24,934
Foreign exchange 1,482 (57,595) (16,891)
Operating loss before working capital changes (281,601) (151,617) (321,722)
(Increase)/decrease in receivables (33,957) (34,886) 103,115
Decrease in payables (2,892) (15,840) (108,025)
Cash used in operations (318,450) (211,459) (326,632)
Interest received 102 9,184 273
(202,275)
Net cash used in operating activities (318,348) (326,359)
Cash flows from investing activities
Proceeds from sale of fixed assets - - 512
- - 512
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of convertible loan notes - 500,000 500,000
Interest on lease liability (14,995) - (7,879)
Repayment of lease liabilities (52,393) (55,862) (91,476)
(67,388) 444,138 400,645
Net cash inflow/(outflow) in financing activities
(385,736) 241,863 74,798
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the period 636,459 581,618 581,618
Effect of exchange rates on cash and cash equivalents 78,641 28,158 (19,957)
329,364 851,639 636,459
Cash and cash equivalents at end of the period
The non-cash movement from financing activities is £18,500 (2022: £5,555) on
account of accrual of interest on loan notes £12,500 (refer to Note 13) and
share-based payment charge £6,000 (refer to Note 12).
The accompanying notes form an integral part of these consolidated financial
statements
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. GENERAL INFORMATION
AIQ Limited ("the Company") was incorporated and registered in The Cayman
Islands as a private company limited by shares 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.
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").
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.
The Group is an information technology (IT) solutions provider, currently
focused on the delivery of blockchain platforms in Asia through the provision
of IT consultancy.
3. ACCOUNTING POLICIES
a) Basis of preparation
The condensed consolidated interim financial statements have been prepared in
accordance with the Disclosure and Transparency Rules of the Financial Conduct
Authority and International Accounting Standard 34 "Interim Financial
Reporting" (IAS 34). Other than as noted below, the accounting policies
applied by the Group in these condensed interim financial statements are the
same as those set out in the Group's audited financial statements for the year
ended 31 October 2021. These financial statements have been prepared under the
historical cost convention and cover the six-month period to 30 April 2023.
These condensed financial statements do not include all of the information
required for a complete set of IFRS financial statements. However, selected
explanatory notes are included to explain events and transactions that are
significant to an understanding of the changes in the Group's financial
position and performance since the audited financial statements for the year
ended 31 October 2022.
The condensed interim financial statements are unaudited and have not been
reviewed by the auditors and were approved by the Board of Directors on 30
July 2023.
The financial information is presented in Pounds Sterling (£), which is the
presentational currency of the Company.
A summary of the principal accounting policies of the Group are set out below.
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 £0.35 million during the period and cash
outflows from operating activities of £0.32 million. As at 30 April 2023, the
Group had net current assets of £0.25 million and cash of £0.33 million. The
Group's cash position was approximately £200,000 at the date of this report.
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, the issue of the convertible loan notes in the period (see note 10)
and from the operations of its subsidiaries.
Notwithstanding these actions, a material uncertainty exists that may cast
significant doubt on the Group's ability to continue as a going concern with
the uncertainty of future trading performance giving rise to a material
uncertainty over the going concern status of the Group. The Directors consider
the Group to be a going concern but have identified a material uncertainty in
this regard.
4. SUBSIDIARIES
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
30.04.2023 31.10.2022
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 Room 47, Smart-Space FinTech, Level 4, Core E, Cyberport 3, 100 Cyberport Software and app development 100% 100%
Road, Hong Kong
* Held by Alchemist Codes Sdn Bhd.
5. REVENUE
Six months Six months Year
ended ended ended
30 April 30 April 31 October
2023 2022 2022
£ £ £
Sale of software products - 19,052 -
Software development income 72,960 341,263 496,296
Merchant commission income - 746 844
Other - - 1,248
Total 72,960 361,061 498,388
All revenues were generated in Asia. An analysis of revenue by the timing of
the delivery of goods and services to customers for the periods ended 30 April
2023, 30 April 2022 and the year ended 31 October 2021 is as follows:
30 April 2023 30 April 2023
Goods transferred at a point in time Services transferred over time
£ £
Sale of software products - -
Software development income - 72,960
Cashback income - -
Other - -
Total - 72,960
30 April 2022 30 April 2022
Goods transferred at a point in time Services transferred over time
£ £
Sale of software products - -
Software development income - 360,315
Cashback income 746 -
Other - -
Total 746 360,315
31 October 2022 31 October 2022
Goods transferred at a point in time Services transferred over time
£ £
Sale of software products - -
Software development income - 496,296
Cashback income - 844
Other 19 1,229
Total 19 498,369
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.
All revenues were derived from Asia.
7. LOSS PER SHARE
The Company presents basic and diluted earnings 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 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.
Six months ended 30 April 2022 Year ended 31 October 2022
Six months ended 30 April 2023
Loss attributable to ordinary shareholders (£) (352,848) (202,221) (640,906)
Basic - Weighted average number of shares 64,760,721 64,760,721 64,760,721
Basic earnings per share (expressed as £ per share) (0.005) (0.003) (0.010)
8. IMPAIRMENT CHARGE
An impairment charge of £133,682 was made in the 2022 year-end accounts 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 would expire in July 2023.
9. LEASE RESTORATION PROVISION
As at As at
30 April 31 October
2023 2022
£ £
Balance b/f 18,500 -
Addition 9,250 18,500
Balance c/f 27,750 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 further provision of 25%
amounting to £9,250 has been provided in the period with the remaining
£9,250 to be provided for in the second half of the year to 31 October 2023
as the Company does not intend to renew its lease.
10. SHARE CAPITAL
Number Nominal
value
£
Authorised
Ordinary shares of £0.01 each 800,000,000 8,000,000
Issued and fully paid:
As at 1 November 2022
64,760,721 647,607
Issue of shares in the period - -
At 30 April 2023 64,760,721 647,607
Six months ended Year ended
30 April 2023 31 Oct 2022
£ £
As at beginning of the period 647,607 647,607
Issued during the period - -
As at end of the period 647,607 647,607
11. 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 £6,000 expensed for the six months to April 2023
and £5,000 carried forward as a prepaid expense while £12,000 was taken to a
warrant reserve.
12. CONVERTIBLE LOAN NOTES
On 24 January 2022, the Company entered into an unsecured convertible loan
note agreement (the "Convertible Loan Note Facility") for a total subscription
of £500,000 (the "Loan Notes").
Under the Convertible Loan Note Facility, the Loan Notes had 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 annum 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.
As disclosed in Note 13, post period end, the Expiration Date of the Loan
Notes was extended to 24 January 2025.
13. POST BALANCE SHEET EVENTS
Post period end, as announced on 31 July 2023, the Company and the holders of
the Loan Notes referred to in Note 12 above entered an agreement to extend the
Expiration Date of the Loan Notes by 12 months to 24 January 2025. All other
terms of the Convertible Loan Note Facility remain unchanged.
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