MiLOC Group Limited - Audited results to 31 December 2016 - Part 2
31/05/2017 11:30
- Part 2: For the preceding part double click ID:nRSe7032Ga
MiLOC Biotechnology Limited 6 November 2009, BVI 100% Professor Chow Ching Fung and ONG, Ban Poh Michael Research anddevelopment
Interests held indirectly by the Company:
Cash generating unit:MiLOC Pharmaceutical (HK) Ltd MiLOC Clinics Limited MiLOC Medical Limited MiLOC Medical Jor1 Limited MiLOC Clinics Jor2 Limited MiLOC Store Limited 上海殿舜媚生物科技有限公司 9 March 2011, HK 15 February 2011, BVI 24 January 2011, HK 25 September 2007, HK 19 July 2010, HK 18 October 2010, HK 15 November, 2016, PRC 100% 100% 100% 100% 100% 100% 100% N/A N/A N/A Golden Ace Holdings Limited Chan Chi Hang Golden Ace Holdings Limited N/A Retailing and wholesaling of healthcare and skincare and related products Receipt of royalty fee from
clinics Provision of medical services Provision of Chinese medical services Provision of Chinese
medical services Retailing and wholesaling of healthcare and related products Retailing and
wholesaling of haircare products
Non-cash generating unit:Smart Falcon Limited MiLOC Clinics (HK)Limited Golden Ace Holdings Limited MiLOC Pharmaceutical (Macau) Limited 3 December 2009,BVI 15 March 2011, BVI 28 September 2010, BVI 9 June 2011, Macau 100% 100% 100% 100% He Yu and Professor He Zhong Sheng N/A LEE Mun Keat N/A Holding company of intellectual property rights, including the Rorrico patent Dormant Investment
holding company Retailing, wholesaling, import and export of TCM products
On 15 November 2016, the Company established a subsidiary 上海殿舜媚生物科技有限公司
14. Inventories
The inventories as at 31 December 2016 and 2015 are as follows.
2016 2015
HK$ HK$
Finished goods 7,923,958 3,557,034
Provision for the year - (1,069,620)
7,923,958 2,487,414
The inventories recognised as an expense during the year amounted
HK$907,200(2015: HK$606,353).
15. Trade receivables
All balances are aged within one year and are expected to be recovered within
one year. No amounts are past due or impaired.
16. Other receivables and prepayment
2016 2015
HK$ HK$
Deposits paid 745,860 773,450
Other receivables 146,760 74,348
Prepayment 6,553 1,225,176
899,173 2,072,974
Others receivables and Prepayment are expected to be recovered or recognised
as expenses within one year. No amounts are past due or impaired.
17. related party transactions
Transactions between the Group and its related parties as at 31 December 2016
and 2015 were as follow:
2016 2015
HK$ HK$
Amount due to directors 2,111,366 2,111,366
The above amounts are due to director of Company subsidiaries. The amounts are
unsecured, interest free and repayable on demand
Apart from the above amount from/to the related companies, significant
transactions between the Group and its related parties for the 31 December
2016 and 2015 were as follows:
2016 2015
HK$ HK$
Purchases from Green Health Supplement International Company 341,026 605,723
At 31 December 2016, the trade payable to Green Health Supplement
International Company is HK$284,771 (2015: HK$228,587)
Professor Chow Ching Fung, executive director, is a partner in Green Health
Supplement International Company, a partnership company.
18. Cash and cash equivalents
Cash and cash equivalents as at 31 December 2016 and 2015 comprise:
2016 2015
HK$ HK$
Cash at bank and in hand 3,045,423 1,243, 398
19. SHARE CAPITAL
2016 2015
HK$ HK$
Authorised,
100,000,000 ordinary shares of US$0.001 each
Allotted and fully paid:No. of shares:At the beginning and end of the year 68,011,248 65,269,042
Issuance of shares 2,804,041 2,742,206
At the end of the year 70,815,289 68,011,248
Amount:At the beginning and end of the year 529,242 507,853
Issuance of shares 21,872 21,389
At the end of the year 551,114 529,242
On 24 December 2015, the Company entered into a total of two agreements to
issue 296,123 new US$0.001 ordinary shares at the placing price of 28.5p per
share to raise approximately HK$1,000,000. The Company also agreed to pay a
referral fee of 5% of the fundraising amount to a consultant of the Company by
allotting and issuing a total of 11,241 new ordinary shares of US$0.001 each
at a price of 35.0p per share. These placings and allotments were completed
during June 2016.
On 28 January 2016, the Company entered into a total of two agreements to
issue 155,807 new US$0.001 ordinary shares at the placing price of 28.5p per
share to raise approximately HK$500,000. The Company also agreed to pay a
referral fee of 5% of the fundraising amount to a consultant of the Company by
allotting and issuing a total of 7,790 new ordinary shares of US$0.001 each at
a price of 35.0p per share. These placings and allotments were completed
during June 2016.
On 24 March 2016, the Company entered into an agreement to issue 629,320 new
US$0.001 ordinary shares at the placing price of 28.5p per share to raise
approximately HK$2,000,000. This placing was completed during April 2016.
On 25 April 2016, the Company entered into an agreement to issue 88,731 new
US$0.001 ordinary shares at the placing price of 30.0p per share to raise
approximately HK$300,000. This placing was completed during June 2016.
On 12 and 17 May 2016, the Company entered into a total of two agreements to
issue 1,551,593 new US$0.001 ordinary shares at the placing price of 28.5p per
share to raise approximately HK$5,000,000. The Company also agreed to pay a
referral fee of 5% of the fundraising amount to a consultant of the Company by
allotting and issuing a total of 63,436 new ordinary shares of US$0.001 each
at a price of 35.0p per share. These placings and allotments were completed
during June 2016.
20. Other payables and accruals
2016 2015
HK$ HK$
Receipts in advance 310,773 1,590,477
Accruals 2,245,109 2,159,726
2,555,882 3,750,203
21. BOrrowings
2016 2015
HK$ HK$
Due within one year - -
- -
Due are more than one year but less than two years 4,885,914 -
4,885,914 -
On 19th July 2016 the Company issued a redeemable convertible loan note. The
key terms are as follows:
Issue date : 19 July 2016
Maturity date : 19 January 2018
Interest rate : 0% for first 12 months, 6% thereafter
The conversion right is contingent on whether the company achieves a listing
on the main market of the London Stock Exchange. If this is achieved then the
note holder can convert the principal at a 20% discount to the opening share
price on the main market.
On the basis that the contingent derivative cannot be estimated reliably the
company has present valued the cash flows inherent in the loan at the market
rate of interest of 9% and assigned the residual value to the derivative
instrument. At intial recognition the fair value of the derivative element was
HK$345k.
At 31 December 2016 management considered listing was unlikely to be achieved
and therefore the fair value of the derivative was £nil. The fair value
movement on the derivative is shown as part of finance costs.
22. Cash used in operations
Reconciliation of loss before taxation to cash used in operations:
2016 2015
HK$ HK$
Loss before taxation (11,488,841) (16,932,251)
Adjustments:
Depreciation of fixed assets 502,506 128,508
Amortisation of intangible assets 357,143 -
Fixed asset written off - 33,006
Impairment loss for intangible asset and goodwill 497,278 2,823,815
Operating cash flow before changes in working capital (10,131,914) (13,946,922)
Increase in inventories (5,436,544) (1,146,832)
Decrease/(increase)in trade receivables 14,987 (48,557)
Decrease in other receivables and prepayments 1,173,801 2,812,866
Increase/(decrease) in trade payables 5,835,918 (542,124)
(Decrease)/increase in other payables and accruals (1,194,321) 1,338,323
Decrease in amount due to shareholders - -
Cash used in operations (9,738,073) (11,533,246)
23. COMMITMENTS UNDER OPERATING LEASES
The Group had future aggregate minimum lease payments under non-cancellable
operating leases respect to office premises as follows:
2016 2015
HK$ HK$
Not later than one year 1,734,000 2,438,400
Later than one year but less than five years 1,228,500 448,900
2,962,500 2,887,300
24. FINANCIAL ASSETS AND RISK
The Group has exposure to credit risk, liquidity risk, interest rate risk and
foreign currency risk as a result of its operations. The Board of Directors
has overall responsibility for establishing and monitoring the Group's risk
management policies and processes. The Group's risk management policies are
established to identify and analyse the risks faced by the Group, to set
appropriate risk limits and controls, and to monitor risks and adherence to
limits.
All treasury transactions are reported to and approved by the Board. The Group
does not enter into or trade financial instruments for speculative purposes.
The principal risks to which the Group is exposed are market risk including
currency risk, credit risk, liquidity risk and interest rate risk.
The Group has the following categories of financial assets and liabilities at
the balance sheet date:
2016 2015
HK$ HK$
Loan and receivables Loan and receivables
Financial assets
Trade receivables 235,748 250,735
Other receivables 146,760 74,348
Cash and cash equivalents 3,045,423 1,243,398
3,427,931 1,568,481
Other financial liabilities Other financial liabilities
Financial liabilities
Trade payables 6,335,533 499,615
Borrowings 4,885,914 -
Amount due to directors 2,111,366 2,111,366
Accruals 2,245,109 2,159,726
15,577,922 4,770,707
The carrying value of financial instruments included in the above table
approximates to their fair value.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or
counterparty fails to meet its contractual obligations and is primarily
attributable to its trade receivables. Any impairment of doubtful receivables
is estimated by the Group's management based on prior experience and the
current economic environment. The carrying amount of financial assets
represents the maximum credit exposure.
The maximum exposure to credit risk at the reporting date was:
2016 2015
HK$ HK$
Trade receivables 235,748 250,735
Other receivables 146,760 74,348
Cash and cash equivalents 3,045,423 1,243,398
3,427,931 1,568,481
The credit risk on liquid funds is limited because the counterparties are
banks with high credit-ratings assigned by international credit rating
agencies.
The Group has no significant concentration of credit risk.
Market risk
Market risk is the risk that the fair value or the future cash flows of a
financial instrument will fluctuate because of changes in market prices. The
principal ways in which the Group is exposed to such fluctuations are through
currency risk and interest rate risk.
Interest rate risk
The Group is exposed to interest rate risk on cash and cash equivalents.
Assuming that all other variables remain constant, an increase of 100 basis
points in interest rates would have increased equity and profit and loss by
HK$30,454 (2015: HK$12,434). A corresponding decrease would have an equal but
opposite effect.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its
financial obligations as they fall due. The Group's approach to managing
liquidity is to ensure, as far as possible, that it will always have
sufficient liquidity to meet its liabilities when due, under both normal and
stressed conditions, without incurring unacceptable losses or risking damage
to the Group's reputation. See going concern assessment within the Directors'
Report. The contractual cash flows of financial liabilities are considered to
be equal to their carrying amount in the balance sheet, and the maturities are
all expected to be within one year.
2016 2015
HK$ HK$
Financial liabilities due within one year
Trade payables 6,335,533 499,615
Amount due to directors 2,111,366 2,111,366
Accruals 2,245,109 2,159,726
10,692,008 4,770,707
The settlement of the financial liabilities due within one year is reliant on
future Company fund raising, the sale of inventory and the collection of trade
receivables.
Currency risk management
The Group is exposed to currency risk on financial assets of HK$976 (2015:
HK$976) that are denominated in currencies other than Hong Kong dollars.
The Group operates mainly out of Hong Kong and its operations are denominated
in Hong Kong dollar and a majority of the assets and liabilities are in that
currency. The only fluctuation to the reporting currency of HK$ would be in
relation to the translation at the year end to the reporting currency.
The Group has used a sensitivity analysis technique that measures the
estimated change to the income statement and equity of a 10% strengthening and
weakening in HK$ against all other currencies, with all other variables
remaining constant. The sensitivity analysis includes only outstanding foreign
currency denominated assets and liabilities and adjusts their translation at
the balance sheet date for a 10% change in the applicable currency rate.
Under this assumption, with a 10% strengthening or weakening of HK$ against
all exchange rates, loss before taxation would have increased or decreased
respectively by US$13 (2015: US$13).
25. CAPITAL MANAGEMENT
The Board's policy is to manage its overall capital so as to ensure that
companies within the Group continue to operate as going concerns and to
maintain sufficient financial flexibility to undertake planned productions and
investments.
The Groups' capital structure currently represents the equity attributable to
the shareholders together with the cash and cash equivalents. The structure is
reviewed on a quarterly basis to ensure that an appropriate level of gearing
is being used.
26. SHAre Based compensation
72,161 conditional share options were granted to one adviser of the company in
2010. The exercise price of the granted options is at the listing price of
GBP0.33 per share on NEX. The options are is exercisable by notice to the
Company at any time during the five year period commencing on the date of
Admission.
In 2010, the compensation cost with respect to the outstanding plan, which are
equity settled instruments, was minimal and no expenses were recognised in the
income statement.
During the year ended 31 December 2015 all outstanding options lapsed.
During the year ended 31 December 2016 and 2015, there were no share options
granted.
27. POST BALANCE SHEET EVENT
Private Placings
The Company entered into placing agreements to issue 967,551 new US$0.001
ordinary shares at a placing price of 28.5p per share to raise approximately
HK$2,800,401. The placing and allotment are expected to be completed on 31 May
2017.
This information is provided by RNS
The company news service from the London Stock Exchange