REG - RC365 Holding PLC - Final Results and Publication of Annual Report
30/07/2024 07:00
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RNS Number : 2849Y RC365 Holding PLC 30 July 2024
30 July 2024
RC365 Holding plc
("RC365", the "Company" or the "Group")
Final Results and Publication of Annual Report
RC365 Holding plc (LSE: RCGH), an established payment solutions and fintech
company, is pleased to announce its audited final results for the year ended
31 March 2024 and give notice of the publication of its annual report and
accounts.
Financial Highlights
· Revenue increased by 30.2% to HK$22.0 million (2023: HK$16.9 million)
· Gross margin improved to 99.6% (2023: 94.7%)
· Operating loss reduced to HK$3.9 million (2023: HK$5.3 million loss)
· Cash generated from operating activities of HK$7.5 million (2023: HK$6.0
million used in operating activities)
· Cash and cash equivalents at 31 March 2024 were HK$19.3 million (31 March
2023: HK$9.5 million)
Operational & Strategic Highlights
· Growth across the business with increased sales from the delivery of IT
support and development for payment and financial systems as well as from the
provision of app-based payments and remittance services
· Expanded product offering alongside sustained development of existing
solutions
o Entered partnership agreements to offer custodian accounts and branded
cards in association with MasterCard
o Gained a Money Lenders Licence, post period, to be able to offer digital
lending services, which are expected to be launched by the end of CY 2024
o Undertook development of the existing RC2.0 App to provide additional
functionality, such as virtual banking features, with the upgraded RC3.0 App
expected to be launched by the end of CY 2024
· Entered new geographical markets, in line with stated strategy to expand in
the ASEAN region, Japan and the UK
o Won first customers in Malaysia and Japan - eight new customers secured as
at year end
o Signed agreements to issue and manage MasterCard card services for a
leading enterprise in Japan and for a well-known entity in Malaysia, with over
1,000 cards issued to date
o Entered partnership to establish a collaborative platform offering
co-branded fintech solutions
o Established RC365 Solutions subsidiary in Malaysia
· Acquired Mr. Meal Production Ltd, a provider of media and advertising services
in Hong Kong, to support entry into new markets and raise awareness of the
Group in the region
Chi Kit (Michael) LAW, Chief Executive Officer of RC365, said: "This was an
excellent year for RC365. We delivered a significant increase in revenue,
reflecting growth across our business, and were cash generative. We
strengthened our existing product offering through establishing partnerships
that enable us to offer custodian accounts and payment cards while taking
important steps towards expanding into virtual banking, which we believe will
be a key driver of future growth. We also achieved a number of milestones in
executing on our strategy to expand geographically, securing our first
customers and partnerships in Japan and Malaysia and establishing a subsidiary
in Malaysia. These are large and growing target markets for our services. As a
result of these achievements and our current pipeline of opportunities, the
Board looks to the future with confidence and we look forward to updating the
market on our progress."
For further information please contact:
RC365 Holding plc
Chi Kit LAW, Chief Executive Officer T: +852 2251 1621
E: ir@rc365plc.com (mailto:ir@rc365plc.com)
Guild Financial Advisory Limited - Financial Adviser
Ross Andrews T: +44 (0)7973 839767
E: ross.andrews@guildfin.co.uk
Evangeline Klaassen T: +44 (0)7972 841276
E: evangeline.klaassen@guild.co.uk
Gracechurch Group - Financial PR
Harry Chathli, Claire Norbury, Heather Armstrong T: +44 (0)204 582 3500
E: rc365@gracechurchpr.com
About RC365 Holding plc
RC365 Holding plc (LSE: RCGH) is an established payment solutions and fintech
company. It operates primarily in East and Southeast Asia through its core
subsidiaries of Regal Crown Technology and RCPAY, and the recently-established
RC365 Solutions.
For over 10 years, the Company has delivered efficient and secure payment
gateway solutions and IT support and development services for payment and
financial systems, including ERP solutions. In 2021, it commenced providing
digital remittance and payment services, which expanded to include foreign
exchange and premium card solutions. These services are provided to
multinational merchants, SMEs and individuals. RC365 intends to expand into
the virtual banking market and geographically, including in the UK and wider
Europe.
For more information, visit: https://www.rc365plc.com
(https://www.rc365plc.com)
Chairman's Statement
I have great pleasure in presenting our audited financial statements to the
shareholders of RC365 Holding Plc for the year ended 31 March 2024.
The Group delivered year-on-year revenue growth of 30% to HK$22.0 million
(2023: HK$16.9 million), reflecting increased sales across our business as
well as the contribution from Mr. Meal Production Limited ("Mr. Meal") that we
acquired during the year. The vast majority of Group revenue continued to be
generated by our wholly-owned Regal Crown Technology Limited ("RCTech")
subsidiary, where we provide cutting-edge IT support and development for
payment and financial systems, including Enterprise Resource Planning ("ERP")
solutions, to SME clients in Hong Kong and the ASEAN region.
However, a growing proportion of revenue is being accounted for by our newer
activities, in line with our stated strategy, namely the provision of
remittance and payment services, including foreign exchange and premium card
solutions, by RCPAY Limited (UK) and RCPAY Limited (HK) ("RCPAY UK" and "RCPAY
HK", collectively "RCPAY"), licensed payment service providers in the United
Kingdom ("UK") and Hong Kong. During the year, RCPAY handled approximately
HK$47.0 million (2023: HK$0.9 million) in providing payment and remittance
services to clients (both individual and corporate) based in the UK and Asia.
The development of innovative products and services, as well as geographical
expansion, to attract new customers remained a key focus for the Group. A
number of new partnerships were established during the year to advance this
goal.
Thanks to the increased revenue and improvement in gross margin to 99.6%
(2023: 94.7%), operating loss was significantly reduced to HK$3.9 million
(2023: HK$5.3 million). Loss before tax was HK$36.8 million (2023: HK$5.4
million), which reflects the fair value loss on an equity instrument - a
non-cash expense. We are also pleased to report a cash inflow from operating
activities of HK$7.5 million compared with an outflow of HK$6.0 million for
2023 and an increase in cash and cash equivalents to HK$19.3 million at year
end (31 March 2023: HK$9.5 million).
Now, let's look at some of the major activities undertaken during the year in
more detail.
1. Development of Artificial Intelligence
The Group entered an agreement with YouneeqAI Technical Services Inc
("YouneeqAI"), an artificial intelligence based personalisation platform that
improves customer experience (YQAI: OTC US). This agreement gives RC365 the
exclusive rights to YouneeqAI's platform in the UK and a right for the first
refusal to purchase additional territories in the 24 months following the
signing of the agreement. The consideration is to be satisfied by the issue of
6,000,000 new Ordinary Shares, of which 3,000,000 were issued on signing with
the balance to be issued on or around 1 October 2024. In addition to the
consideration, YouneeqAI shall receive 1% of any and all gross revenue
(excluding VAT) generated from the use of the platform by RC365.
2. Development of Japan and Malaysia market
A key development this year was our expansion into the Japanese and Malaysian
markets, with RCPAY HK and RCTech successfully attracting new customers in
Japan and Malaysia, forming partnerships and the Group establishing a
Malaysian subsidiary. We signed agreements to issue and manage MasterCard card
services for a leading enterprise in Japan and for a well-known entity in
Malaysia. RCPAY HK also signed a memorandum of understanding with Koperasi
Usaha Maju Kuala Berhad ("KOMAJU"), a Malaysian organisation focused on
helping its members embrace digital technology to enhance their operational
efficiency. Through this partnership, we will establish a collaborative
platform offering co-branded fintech solutions for corporate and SME clients,
both domestically and on an international basis. The Group had successfully
secured eight new customers in Malaysia and Japan as at the year end.
In addition, the Company established a new, wholly-owned subsidiary, RC365
Solutions Sdn Bhd, in Malaysia. The new entity will enable the centralisation
of the IT activities undertaken across the Group as well as provide a base for
further expansion in Malaysia and the ASEAN region.
3. Acquisition of Mr. Meal Production Limited
The Group acquired 100% of the issued share capital of Mr. Meal, a company
providing media and advertising services in Hong Kong, for a total
consideration of HK$2.0 million, satisfied by a combination of cash and the
issue of new Ordinary Shares. The acquisition has assisted the Group's entry
into new rapidly growing industries and has increased public awareness of
the Group's business activities, which we intend to leverage as we expand our
presence in the region.
4. Expansion of service offerings
RCPAY HK entered into agreements with Hong Kong based financial
institutions, Unitrust Global Limited and Key Solution Venture Limited
("KSV"). The agreement with Unitrust Global Limited enables RCPAY HK to offer
Custodian Accounts to its Hong Kong customers, attracting large corporates and
high net worth clients. The agreement with KSV permits RCPAY HK to issue
branded cards in association with MasterCard to Hong Kong residents. In
addition to the agreements noted above with customers in Japan and Malaysia,
the Company has successfully issued over 1,100 cards to date.
5. Joint development of existing mobile application
RCTech signed an agreement with an associated company of Hatcher Group Limited
("Hatcher") for the development and upgrade of the Group's existing RC2.0 App
to an advanced RC3.0 App. The associated company of Hatcher paid HK$15.0
million on signing the agreement and, following the upgrade, the associated
company of Hatcher and RC365 will be entitled to an equal share of any profit
generated through the operation of the RC3.0 App. Once launched, the RC3.0 App
will provide users with additional functionality, such as virtual banking
facilities, enterprise resource planning and blockchain features. RC2.5 was
officially launched to the market in March 2024 and it is expected that the
RC3.0 App will be launched at the end of the 2024 calendar year.
6. Issuance of Convertible Loan Note
The Group entered into a Convertible Loan Note agreement with Mill End Capital
for the issuance of up to GBP4.0 million. In a high inflation environment and
a 30-year high lending rate, the issuance of a convertible note with zero
interest rate is an attractive option in order to support the Group's
anticipated CAPEX and OPEX growth plans. As at the date of the signing of this
report, RC365 has drawn down GBP1.0 million of the facility of which GBP0.5
million has been converted through the issuance of new Ordinary Shares.
Greenhouse Gas (GHG) Emissions
As the Company has not consumed more than 17,731 kWh of energy in the year
period, it qualifies as a low energy user under SI 2018/1155 and is not
required to report on its emissions, energy consumption or energy efficiency
activities.
Strategy
Our vision remains unchanged, which is to grow our share of our existing
markets, develop new capabilities and enter new geographies within the fast
growing and attractive industries in which we operate.
In particular, we intend to focus on growing our presence in Japan, the ASEAN
region and the UK; broaden our offering to include virtual banking and expand
our card solutions; and explore new product innovations that leverage Web 3.0
and artificial intelligence. A key element in achieving this will be
establishing strategic partnerships with global companies in the fintech
ecosystem, which we significantly progressed during the year.
Post year-end
RCTech successfully received conditional approval from the Trade and Industry
Department of the Hong Kong SAR Government for a grant of HK$0.9 million. This
grant will facilitate the Group's projects in Malaysia as we continue to
expand our operations within the region.
In addition, we gained a Money Lenders Licence ("MLL") in Hong Kong, which
allows us to provide money lending services to our customers and represents
progress on our strategy to expand our offering into virtual banking. We
expect to launch the service by the end of the current calendar year as an
app-based product. We gained the MLL via the acquisition of the entire issued
share capital of HC Capital Group Ltd, the licence holder, for a cash
consideration of HK$0.23 million.
Outlook
The Board continues to be optimistic about the outlook for FY 2025 given the
advances made during FY 2024 and our growing pipeline of potential
opportunities for further growth.
Finally, we would like to take this opportunity to thank our shareholders for
their continued support and we look forward to reporting on our progress as we
deliver on our growth strategy.
Robert Cairns
Non-Executive Chairman
29 July 2024
Financial Review
Revenue increased by 30.2% year-on-year to HK$22.0 million (2023: HK$16.9
million). The largest contributor to growth was RCTech, but there was a
meaningful contribution from Mr. Meal, which was acquired during the year,
alongside an increase in revenue generated by RCPAY. RCTech continued to
account for the majority of total revenue, but with a growing proportion being
generated by the Group's newer activities, in line with its stated strategy.
Gross margin improved to 99.6% (2023: 94.7%). This reflects the cost of a
number of one-off software licence agreements in the prior year.
Operating expenses and staff costs increased to HK$22.6 million (2023: HK$20.2
million), which reflects the Group expanding its operations, which was partly
offset by a reduction in subcontracting fees due to an exceptional project in
the prior year. As previously announced, once the Group's RC365 Solutions
subsidiary becomes fully operational, it will perform certain IT services that
had previously been outsourced to a provider in China, which is expected to
further significantly reduce subcontracting costs.
Operating loss was reduced to HK$3.9 million (2023: HK$5.3 million loss),
which reflects the increased revenue and gross margin partly offset by an
increase in depreciation and amortisation expenses to HK$3.2 million (2023:
HK$1.1 million).
The Group recognised a fair value loss on financial assets of HK$33.5 million
(2023: HK$41.1 thousand gain). This primarily represents the reduction in
value of an equity instrument. As a result, loss before tax was HK$36.8
million (2023: HK$5.4 million loss).
As noted in the Chairman's Statement above, the Group entered into a
convertible loan note agreement during the year for up to GBP4.0 million. As
at the date of this report, RC365 has drawn down GBP1.0 million of the
facility of which GBP0.5 million has been converted through the issuance of
new Ordinary Shares.
As at 31 March 2024, the Group had net current assets of HK$3.2 million (31
March 2023: HK$24.6 million), with the change primarily reflecting the
convertible loan note facility, and net assets of HK$31.6 million (31 March
2023: HK$31.0 million).
The Group is pleased to note that it generated net cash from operating
activities of HK$7.4 million (2023: HK$6.0 million used in). Net cash used in
investing activities was HK$2.7 million (2023: HK$7.0 million). Net cash
generated from financing activities was HK$4.6 million (2023: HK$1.2 million
used in), primarily reflecting the proceeds from the issue of convertible loan
notes.
Accordingly, cash and cash equivalents increased to HK$19.3 million as at 31
March 2024 (31 March 2023: HK$9.5 million).
Publication of Annual Report
The Company's annual report and accounts for the year ended 31 March 2024 has
been published today and is available on the Financial Reports page of the
RC365 website at: https://www.rc365plc.com/FinancialReports
(https://www.rc365plc.com/FinancialReports)
Consolidated statement of comprehensive income
for the year ended 31 March 2024
Notes 31 March 2024 31 March 2023
HK$ HK$
Revenue 4 22,029,649 16,883,559
Cost of sales (87,228) (898,533)
Gross profit 21,942,421 15,984,826
Other income 5 1,026,203 330,010
Subcontracting fee paid 7 (5,677,221) (8,457,204)
Staff costs 8 (8,419,266) (4,928,904)
Other operating expenses (9,567,043) (7,116,420)
Depreciation on property, plant and equipment and right-of-use assets and 7 (3,210,772) (1,065,313)
amortisation of intangible assets
Operating loss (3,905,678) (5,253,005)
Fair value gain on contingent consideration - 874,478 -
consideration shares
Fair value (loss)/gain on financial assets at FVPL (33,511,816) 41,064
Finance charges 6 (208,662) (166,510)
Loss before income tax 7 (36,751,678) (5,378,451)
Income tax expense 9 (128,762) -
Loss for the year (36,880,440) (5,378,451)
Loss per share - basic and diluted (HK$) 10 (29.00 cents) (4.96 cents)
The accompanying notes to the consolidated financial statements form an
integral part of these consolidated financial statements.
Consolidated statement of comprehensive income
for the year ended 31 March 2024
31 March 2024 31 March 2023
HK$ HK$
Loss for the year (36,880,440) (5,378,451)
Other comprehensive income, net of tax
Items that may be reclassified subsequently to profit or loss: 594,955 265,012
Exchange differences on translation of financial statements of foreign 594,955 265,012
operations
Total comprehensive loss for the year (36,285,485) (5,113,439)
The accompanying notes to the consolidated financial statements form an
integral part of these consolidated financial statements.
Consolidated statement of financial position
as at 31 March 2024
Notes 2024 2023
HK$ HK$
ASSETS
Non-current assets
Goodwill 11 759,289 -
Loan receivables 17 3,257,981 -
Intangible assets 12 23,513,372 6,184,803
Property, plant and equipment 13 457,213 61,057
Right-of-use assets 14 503,955 204,684
28,491,810 6,450,544
Current assets
Financial assets at FVPL 15 1,017,248 1,041,064
Deposit and prepayments 16 2,980,887 3,788,412
Trade and other receivables 16 34,862,948 17,698,025
Loan receivables 17 - 294,500
Cash and cash equivalents 18 19,318,967 9,548,364
58,180,050 32,370,365
Current liabilities
Trade and other payables 19 14,488,885 2,288,347
Borrowings 20 4,539,862 5,299,556
Lease liabilities 21 412,284 135,711
Convertible loan note 22 35,402,946 -
Tax payables 111,030 -
54,955,007 7,723,614
Net current assets 3,225,043 24,646,751
Non-current liabilities
Lease liabilities 21 65,529 65,143
Contingent consideration - consideration share 70,486 -
136,015 65,143
Net assets 31,580,838 31,032,152
EQUITY
Share capital 23 29,925,945 28,801,920
Share premium 49,329,087 16,576,592
Group reorganisation reserve 589,836 589,836
Convertible loan note reserve 2,957,651 -
Translation reserve 323,731 (271,224)
Accumulated losses (51,545,412) (14,664,972)
Total equity 31,580,838 31,032,152
The accompanying notes to the consolidated financial statements form an
integral part of these consolidated financial statements.
Approved by the Board and authorised for issue on 29 July 2024.
Robert Cairns
Director
Company Registration number: 13289422
Consolidated statement of changes in equity
for the year ended 31 March 2024
Share capital Share premium Translation reserves Group reorganisation Convertible loan note reserve Accumulated losses
reserves
Total
HK$ HK$ HK$ HK$ HK$ HK$ HK$
At 1 April 2022 11,500,995 16,576,592 (536,236) 750,476 - (9,286,521) 19,005,306
-
Loss for the year - - - - - (5,378,451) (5,378,451)
Exchange difference on consolidation - - 265,012 - - - 265,012
Total comprehensive expenses - - 265,012 - - (5,378,451) (5,113,439)
Acquisition of subsidiaries under common control
- - - (160,640) - - (160,640)
Issue of share capital 17,300,925 - - - - - 17,300,925
At 31 March 2023 and at 1 April 2023 28,801,920 16,576,592 (271,224) 589,836 - (14,664,972) 31,032,152
Loss for the year - - - - - (36,880,440) (36,880,440)
Exchange difference on consolidation - - 594,955 - - - 594,955
Total comprehensive expenses - - 594,955 - - (36,880,440) (36,285,485)
Issue of share capital 1,124,025 32,752,495 - - - - 33,876,520
Issue of convertible loan note - - - - 2,957,651 - 2,957,651
At 31 March 2024 29,925,945 49,329,087 323,731 589,836 2,957,651 (51,545,412) 31,580,838
The accompanying notes to the consolidated financial statements form an
integral part of these consolidated financial statements.
Consolidated statement of cash flows
for the year ended 31 March 2024
31 March 2024 31 March 2023
HK$ HK$
Cash flows from operating activities
Loss before income tax (36,751,678) (5,378,451)
Adjustments for:
Amortisation of intangible assets 2,711,515 475,957
Depreciation of property, plant and equipment 115,212 12,614
Depreciation of right-of-use-assets 384,045 576,742
Written-off of property, plant and equipment 50,239 -
Written-off of right-of-use-assets 136 -
Gain on termination of lease agreement - (38,132)
Impairment loss on loan receivables 42,019 -
Fair value loss/(gain) on financial assets at FVPL 33,511,816 (41,064)
Interest income (597,441) (13,649)
Fair value gain on contingent consideration - consideration shares (874,478) -
Net gain on disposal of financial assets at FVPL (80,883) -
Finance charges 208,662 166,510
Operating cashflow before working capital changes (1,280,836) (4,239,473)
(Increase)/decrease in trade and other receivable (1,825,163) 736,523
Decrease/(Increase) in deposits and prepayments 844,045 (3,635,536)
(Increase)/decrease in loan receivables (1,705,500) 405,500
Increase in trade and other payables 11,447,945 754,846
Cash generated from/ (used in) operating activities 7,480,491 (5,978,140)
Income tax paid (35,769) -
Net cash generated from/ (used in) operating activities 7,444,722 (5,978,140)
Cash flow from investing activities
Acquisition of intangible assets (2,738,575) (6,524,760)
Acquisition of property, plant and equipment (65,380) (67,951)
Purchase of financial assets at FVPL - (1,000,000)
Proceeds from disposal of financial assets at FVPL 379,496 -
Net cash (outflow)/ inflow for the acquisition of subsidiaries (545,826) 546,139
Interest received 297,441 13,649
Net cash used in investing activities (2,672,844) (7,032,923)
Cashflow from financing activities
Interest paid (175,755) (149,430)
Repayment of bank borrowings (759,694) (500,444)
Proceeds from issue of convertible loan note 5,967,000 -
Rental paid for lease liabilities (439,400) (547,650)
Net cash from/ (used in) financing activities 4,592,151 (1,197,524)
Net increase/ (decrease) in cash and cash equivalents 9,364,029 (14,208,587)
Effect of exchange rate changes 406,574 340,190
Cash and cash equivalents at beginning of the year 9,548,364 23,416,761
Cash and cash equivalents at the end of the year 19,318,967 9,548,364
The accompanying notes to the consolidated financial statements form an
integral part of these consolidated financial statements.
Notes to the consolidated financial statements
for the year ended 31 March 2024
1. GENERAL INFORMATION
RC365 Holding Plc (the "Company") was incorporated as a private limited
company on 24 March 2021 in the United Kingdom ("UK") under the Companies Act
2006. The Company acted as a holding company and converted to a public limited
company on 22 September 2021. The address of the registered office is Cannon
Place, 78 Cannon Street, London, United Kingdom, EC4N 6AF. The Company was
listed on the Standard List of the London Stock Exchange ("LSE") on 23 March
2022.
The principal activity of the Company is to act as an investment holding
company. The Company together with its subsidiaries (the "Group") are mainly
engaged in provision of IT software development and payment solutions,
remittance and payment services, and provision of media production services.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of preparation
On 31 December 2020, International Financial Reporting Standards ("IFRS") as
adopted by the European Union at that date was brought into UK law and became
UK-adopted International Accounting Standards, with future changes being
subject to endorsement by the UK Endorsement Board. RC365 Holding Plc adopted
the UK-adopted International Accounting Standards in its Group and parent
company financial statements for the current and comparative periods.
These Group and parent company financial statements were prepared in
accordance with UK-adopted International Accounting Standards and with the
requirements of the Companies Act 2006 as applicable to companies reporting
under those standards.
The financial statements of the Group and parent company have been prepared on
accrual basis and under historical cost convention except for financial assets
at fair value through profit or loss ("FVPL") which are measured at fair value
as explained in the accounting policies set out below. The financial
statements are presented in Hong Kong Dollars ("HK$"), which is the Group's
functional and presentational currency, and rounded to the nearest dollar.
2.2 New Standards and Interpretations
No new standards, amendments or interpretations, effective for the first time
for the period beginning on or after 1 April 2023 have had a material impact
on the Group and the parent company.
Standards, amendments and interpretations that are not yet effective and have
not been early adopted are as follows:
Standard Impact on initial application Effective date
IAS 1 Classification of liabilities as current or non-current 1 January 2024
IAS 1 Amendments - Non-current liabilities with covenants 1 January 2024
IFRS 16 Amendments - Leases on sale and leaseback 1 January 2024
IAS 7 & IFRS 17 Amendments - Supplier finance arrangements 1 January 2024
ISA 21 Amendments - Lack of exchangeability 1 January 2025
IFRS 18 Presentation and Disclosure in Financial Statements 1 January 2027
IFRS 19 Subsidiaries without Public Accountability: Disclosures 1 January 2027
IFRS10 & IAS 28 Amendments - Sales or contribution of assets between an investor and its To be determined
associate/joint venture
2.3 Going Concern
The Group meets its day to day working capital
requirement through use of cash reserves and bank borrowings. The directors
(the "Directors") have considered the applicability of the going concern basis
in the preparation of the consolidated financial statements. This included
review of forecasts which show that the Group should be able to sustain its
operation within the level of its current debt and equity funding
arrangements.
The Group incurred a loss of HK$36,880,440 for
the year ended 31 March 2024. This included a fair value loss on financial
assets at FVPL of HK$33,511,816 as disclosed in note 15(b). The loss
(excluding a fair value loss on financial assets at FVPL) was HK$3,368,624 for
the year ended 31 March 2024. On the other hand, the remittance service fee
and topup service fee earned by RCPAY Limited (Hong Kong and UK), Regal Crown
Technology Limited has a large customer, Junca Japan LLC, in providing
approximately USD280,000 for 18 months for the MasterCard Whitelabel program.
The business development team expects that there will be another 3-4 sizeable
customers similar to Junca Japan LLC from the Japan region to enrol for the
MasterCard Whitelabel program on the coming 6 to 9 months. The management team
of the Group would like to state that the Group has a strong cash flow
(approximately HK$9 million for 2023 and approximately HK$19 million for 2024)
through the issuance of a convertible bond with remaining approximately GBP3
million for the coming 9 months.
Accordingly, the Directors have a reasonable expectation that the Group has
adequate resources to continue operation for the foreseeable future for the
reason they have adopted a going concern basis in the preparation of the
consolidated financial statements.
2.4 Basis of consolidation
i) Business combination not under common control
The Group applies the acquisition method to account for business combinations
not under common control. The consideration transferred for the acquisition of
a subsidiary is the fair value of the assets transferred, the liabilities
incurred to the former owners of the acquiree and the equity interest issued
by the Group, as appropriate. The consideration transferred also includes the
fair value of any asset or liability resulting from a contingent consideration
arrangement. Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination not under common control is
measured initially at their fair values at the acquisition date.
Acquisition-related costs are expensed as incurred.
Allocation of total comprehensive income
Profit or loss and each component of other comprehensive income are attributed
to the owners of the Company and to the non-controlling interests (if
applicable). Total comprehensive income is attributed to the owners of the
Company and the non-controlling interest (if applicable) even if this results
in the non-controlling interest having a deficit balance. The results of
subsidiaries are consolidated from the date on which the Group obtains control
and continue to be consolidated until the date that such control ceases.
ii) Merger accounting for common control combinations
The Company acquired its 100% interest in Regal Crown Technology Limited
("RCTech") on 31 August 2021 by way of a share for share exchange. This is a
business combination involving entities under common control and the
consolidated financial statements are issued in the name of the Group but they
are a continuance of those of RCTech. Therefore the assets and liabilities of
RCTech have been recognised and measured in these consolidated financial
statements at their pre combination carrying values. The equity structure
appearing in these consolidated financial statements (the number and the type
of equity instruments issued) reflect the equity structure of the Company
including equity instruments issued by the Company to effect the
consolidation. The difference between consideration given and net assets of
RCTech at the date of acquisition is included in a group reorganisation
reserve.
On 28 June 2022 and 7 November 2022, the Group acquired 100% equity interest
of RCPay Ltd (Hong Kong) ("RCPay HK"), Regal Crown Technology (Singapore) Pte
Ltd ("RC Singapore") and RCPAY Limited ("RCPay UK"), respectively from Mr. Chi
Kit Law. As RCPay HK, RC Singapore, RCPAY UK and the Group are under common
control of Mr. Chi Kit Law before and after the acquisition, the acquisition
and the business combination have been accounted for as a business combination
under common control.
In the consolidated financial statements, the results of subsidiaries acquired
or disposed of during the period are included in the consolidated statement of
profit or loss and other comprehensive income from the effective date of
acquisition and up to the effective date of disposal, as appropriate.
Intra-Group transactions, balances and unrealised gains and losses on
transactions between Group companies are eliminated in preparing the
consolidated financial statements. Profits and losses resulting from the
inter-Group transactions that are recognised in assets are also eliminated.
Amounts reported in the financial statements of subsidiaries have been
adjusted where necessary to ensure consistency with the accounting policies
adopted by the Group.
When the Group loses control of a subsidiary, the profit or loss on disposal
is calculated as the difference between (i) the aggregate of the fair value of
the consideration received and the fair value of any retained interest and
(ii) the previous carrying amount of the assets (including goodwill), and
liabilities of the subsidiary.
2.5 Foreign currency
translation
In the individual financial statements of the consolidated entities, foreign
currency transactions are translated into the functional currency of the
individual entity using the exchange rates prevailing at the dates of the
transactions. At the reporting date, monetary assets and liabilities
denominated in foreign currencies are translated at the foreign exchange rates
ruling at that date. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the reporting date retranslation of
monetary assets and liabilities are recognised in profit or loss.
Non-monetary items carried at fair value that are denominated in foreign
currencies are retranslated at the rates prevailing on the date when the fair
value was determined. Non-monetary items that are measured in terms of
historical cost in a foreign currency are not retranslated.
In the consolidated financial statements, all individual financial statements
of foreign operations, originally presented in a currency different from the
Group's presentation currency, have been converted into Hong Kong dollars.
Assets and liabilities have been translated into Hong Kong dollars at the
closing rates at the reporting date. Income and expenses have been converted
into the Hong Kong dollars at the exchange rates ruling at the transaction
dates, or at the average rates over the reporting period provided that the
exchange rates do not fluctuate significantly. Any differences arising from
this procedure have been recognised in other comprehensive income and
accumulated separately in the translation reserve in equity.
On the disposal of a foreign operation (i.e., a disposal of the Group's entire
interest in a foreign operation, or a disposal involving loss of control over
a subsidiary that includes a foreign operation, loss of joint control over a
joint venture that includes a foreign operation, or loss of significant
influence over an associate that includes a foreign operation), all of the
accumulated exchange differences in respect of that operation attributable to
the Group are reclassified to profit or loss. Any exchange differences that
have previously been attributed to non-controlling interests are derecognised,
but they are not reclassified to profit or loss.
2.6 Contingent consideration
Contingent consideration to be transferred by the Group as the acquirer in a
business combination is recognised at acquisition-date fair value. Subsequent
adjustments to consideration are recognised against goodwill only to the
extent that they arise from new information obtained within the measurement
period (a maximum of 12 months from the acquisition date) about the fair value
at the acquisition date. The subsequent accounting for changes in the fair
value of the contingent consideration that do not qualify as measurement
period adjustments depends on how the contingent consideration is classified.
Contingent consideration that is classified as equity is not remeasured at
subsequent reporting dates and its subsequent settlement is accounted for
within equity. Contingent consideration that is classified as an asset or a
liability is remeasured at subsequent reporting dates with the corresponding
gain or loss being recognised in profit or loss.
2.7 Goodwill
Goodwill arising on an acquisition of a
subsidiary is measured at the excess of the consideration transferred, the
amount of any non-controlling interest in the acquiree and the fair value of
any previously held equity interests in the acquiree over the acquisition date
amounts of the identifiable assets acquired and the liabilities assumed of the
acquired subsidiary.
Goodwill on acquisition of subsidiary is recognised as a separate asset and is
carried at cost less accumulated impairment losses, which is tested for
impairment annually or more frequently if events or changes in circumstances
indicate that the carrying value may be impaired. For the purpose of
impairment test and determination of gain or loss on disposal, goodwill is
allocated to cash-generating units ("CGU"). An impairment loss on goodwill is
not reversed.
On the other hand, any excess of the acquisition date amounts of identifiable
assets acquired and the liabilities assumed of the acquired subsidiary over
the sum of the consideration transferred, the amount of any non-controlling
interests in the acquiree and the fair value of the acquirer's previously held
interest in the acquiree, if any, after reassessment, is recognised
immediately in profit or loss as an income from bargain purchase.
Any resulting gain or loss arising from remeasuring the previously held equity
interests in the acquiree at the acquisition-date fair value is recognised in
profit or loss or other comprehensive income, as appropriate.
Goodwill impairment reviews are undertaken annually or more frequently if
events or changes in circumstances indicate a potential impairment. The
carrying value of goodwill is compared to the recoverable amount, which is the
higher of value in use and the fair value less costs of disposal. Any
impairment is recognised immediately as an expense and is not subsequently
reversed.
2.8 Property, plant and equipment
Property, plant and equipment (other than cost of right-of-use assets as
described in note 2.12 are stated at acquisition cost less accumulated
depreciation and impairment losses. The acquisition cost of an asset comprises
of its purchase price and any direct attributable costs of bringing the assets
to the working condition and location for its intended use. Depreciation of
assets commences when the assets are ready for intended use.
Depreciation on property, plant and equipment, is provided to write off the
cost over their estimated useful life, using the straight-line method, at the
following rates per annum:
Furniture & Fixtures 20% per annum
Leasehold Improvement 20% per annum
Office Equipment 20% per annum
The assets' depreciation methods and useful lives are reviewed, and adjusted
if appropriate, at each reporting date.
In the case of right-of-use assets, expected useful lives are determined by
reference to comparable owned assets or the lease term, if shorter. Material
residual value estimates and estimates of useful life are updated as required,
but at least annually.
The gain or loss arising on the retirement or disposal is determined as the
difference between the sales proceeds and the carrying amount of the asset and
is recognised in profit or loss.
Subsequent costs are included in the asset's carrying amount or recognised as
a separate asset, as appropriate, only when it is probable that future
economic benefits associated with the item will flow to the Group and the cost
of the item can be measured reliably. The carrying amount of the replaced part
is derecognised. All other costs, such as repairs and maintenance, are charged
to profit or loss during the financial period in which they are incurred.
2.9 Intangible assets
Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are
carried at costs less accumulated amortisation and accumulated impairment
losses. Amortisation is recognised on a straight-line basis over their
estimated useful lives. The estimated useful lives and amortisation method are
reviewed at the end of each reporting period, with the effect of any changes
in estimate being accounted for on a prospective basis. Intangible assets with
indefinite useful lives that are acquired separately are carried at cost less
accumulated impairment losses.
Research and development expenditure
Expenditure on research activities is recognised as an expense in the period
in which it is incurred.
An internally-generated intangible asset arising from development (or from the
development phase of an internal project) is recognised if, and only if, all
of the following have been demonstrated:
· the technical feasibility of completing the intangible asset so that it will
be available for use or sale;
· the intention to complete the intangible asset and use or sell it;
· the ability to use or sell the intangible asset;
· how the intangible asset will generate probable future economic benefits;
· the availability of adequate technical, financial and other resources to
complete the development and to use or sell the intangible asset; and
· the ability to measure reliably the expenditure attributable to the intangible
asset during its development.
The amount initially recognised for internally-generated intangible asset is
the sum of the expenditure incurred from the date when the intangible asset
first meets the recognition criteria listed above. Where no
internally-generated intangible asset can be recognised, development
expenditure is recognised to profit or loss in the period in which it is
incurred.
Subsequent to initial recognition, internally-generated intangible assets are
reported at cost less accumulated amortisation and accumulated impairment
losses, on the same basis as intangible assets that are acquired separately.
Derecognition of intangible assets
An intangible asset is derecognised on disposal, or when no future economic
benefits are expected from use or disposal. Gains and losses arising from
derecognition of an intangible asset, measured as the difference between the
net disposal proceeds and the carrying amount of the asset, are recognised in
profit or loss when the asset is derecognised.
2.10 Financial instruments
IFRS 9 requires an entity to address the classification, measurement and
recognition of financial assets and liabilities.
i) Classification
The Company classifies its financial assets in the following measurement
categories:
• those to be measured at amortised cost.
The classification depends on the Company's business model for managing the
financial assets and the contractual terms of the cash flows.
The Company classifies financial assets at amortised cost only if both of the
following criteria are met:
• the asset is held within a business model whose objective is to collect
contractual cash flows; and
• the contractual terms give rise to cash flows that are solely payment of
principal and interest.
ii) Recognition
Purchases and sales of financial assets are recognised on trade date (that is,
the date on which the Company commits to purchase or sell the asset).
Financial assets are derecognised when the 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.
iii)
Measurement
At initial recognition, the Company measures a financial asset at its fair
value plus, in the case of a financial asset not at fair value through profit
or loss (FVPL), transaction costs that are directly attributable to the
acquisition of the financial asset. Transaction costs of financial assets
carried at FVPL are expensed in profit or loss.
Debt Instruments
Amortised cost: Assets that are held for collection of contractual cash flows,
where those cash flows represent solely payments of principal and interest,
are measured at amortised cost. Interest income from these financial assets is
included in finance income using the effective interest rate method. Any gain
or loss arising on derecognition is recognised directly in profit or loss and
presented in other gains/(losses) together with foreign exchange gains and
losses. Impairment losses are presented as a separate line item in the
statement of profit or loss.
(iv) Impairment
The Company assesses, on a forward looking basis, the expected credit losses
associated with any debt instruments carried at amortised cost. The impairment
methodology applied depends on whether there has been a significant increase
in credit risk. For trade receivables, the Company applies the simplified
approach permitted by IFRS 9, which requires lifetime expected credit losses
("ECL") to be recognised from initial recognition of the
receivables.
The Group measures the loss allowance for other receivables equal to 12-month
ECL, unless when there has been a significant increase in credit risk since
initial recognition, the Group recognises lifetime ECL. The assessment of
whether lifetime ECL should be recognised is based on significant increase in
the likelihood or risk of default occurring since initial recognition.
Financial liabilities
The Group's financial liabilities include lease liabilities, trade and other
payables, borrowings, contingent consideration and convertible loan note.
Financial liabilities are initially measured at fair value, and, where
applicable, adjusted for transaction costs unless the Group designated a
financial liability at fair value through profit or loss.
Subsequently, financial liabilities are measured at amortised cost using the
effective interest method except for derivatives and financial liabilities
designated at FVPL, which are carried subsequently at fair value with gains or
losses recognised in profit or loss (other than derivative financial
instruments that are designated and effective as hedging instruments).
All interest-related charges and, if applicable, changes in an instrument's
fair value that are reported in profit or loss are included within finance
costs or finance income.
A financial liability is derecognised when the obligation under the liability
is discharged or cancelled or expires.
Where an existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an existing liability
are substantially modified, such an exchange or modification is treated as a
derecognition of the original liability and the recognition of a new
liability, and the difference in the respective carrying amount is recognised
in profit or loss.
Convertible loan note
The component of the convertible loan note that exhibits characteristics of a
liability is recognised as a liability in the statement of financial position,
net of issue costs. The corresponding dividends on those shares are charged as
interest expense in profit or loss.
On the issue of the convertible loan note, the fair value of the liability
component is determined using a market rate for a similar note that does not
have a conversion option; and this amount is carried as a long-term liability
on the amortised cost basis until extinguished on conversion or redemption.
The remainder of the proceeds is allocated to the conversion option that is
recognised and included in the convertible loan note equity reserve within
shareholders' equity, net of issue costs. The value of the conversion option
carried in equity is not changed in subsequent years. When the conversion
option is exercised, the balance of the convertible loan note equity reserve
is transferred to share capital or other appropriate reserve. When the
conversion option remains unexercised at the expiry date, the balance remained
in the convertible loan note equity reserve is transferred to accumulated
profits/losses. No gain or loss is recognised in profit or loss upon
conversion or expiration of the option.
Issue costs are apportioned between the liability and equity components of the
convertible loan note based on the allocation of proceeds to the liability and
equity components when the instruments are first recognised. Transaction costs
that relate to the issue of the convertible loan note are allocated to the
liability and equity components in proportion to the allocation of proceeds.
2.11 Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and call deposits, and other
short-term highly liquid investments that are readily convertible to a known
amount of cash and are subject to an insignificant risk of changes in value.
2.12 Lease
Definition of a lease and the Group as a lessee
At inception of a contract, the Group considers whether a contract is, or
contains a lease. A lease is defined as "a contract, or part of a contract,
that conveys the right to use an identified asset (the underlying asset) for a
period of time in exchange for consideration". To apply this definition, the
Group assesses whether the contract meets three key evaluations which are
whether:
· the contracts contain an identified asset, which is either explicitly
identified in the contract or implicitly specified by being identified at the
time the asset is made available to the Group;
· the Group has the right to obtain substantially all of the economic benefits
from use of the identified asset throughout the period of use, considering its
rights within the defined scope of the contract; and
· the Group has the right to direct the use of the identified asset throughout
the period of use. The Group assess whether it has the right to direct "how
and for what purpose" the asset is used throughout the period of use.
For contracts that contains a lease component and one or more additional lease
or non-lease components, the Group allocates the consideration in the contract
to each lease and non-lease component on the basis of their relative
stand-alone prices.
Measurement and recognition of leases as a lessee
At lease commencement date, the Group recognises a right-of-use asset and a
lease liability on the consolidated statement of financial position. The
right-of-use asset is measured at cost, which is made up of the initial
measurement of the lease liability, any initial direct costs incurred by the
Group, an estimate of any costs to dismantle and remove the underlying asset
at the end of the lease, and any lease payments made in advance of the lease
commencement date (net of any lease incentives received).
The Group depreciates the right-of-use assets on a straight-line basis from
the lease commencement date to the earlier of the end of the useful life of
the right-of-use asset or the end of the lease term unless the Group is
reasonably certain to obtain ownership at the end of the lease term. The Group
also assesses the right-of-use asset for impairment when such indicator
exists.
At the commencement date, the Group measures the lease liability at the
present value of the lease payments unpaid at that date, discounted using the
interest rate implicit in the lease or, if that rate cannot be readily
determined, the Group's incremental borrowing rate.
Lease payments included in the measurement of the lease liability are made up
of fixed payments (including in-substance fixed payments) less any lease
incentives receivable, variable payments based on an index or rate, and
amounts expected to be payable under a residual value guarantee. The lease
payments also include the exercise price of a purchase option reasonably
certain to be exercised by the Group and payment of penalties for terminating
a lease, if the lease term reflects the Group exercising the option to
terminate.
Subsequent to initial measurement, the liability will be reduced for lease
payments made and increased for interest cost on the lease liability. It is
remeasured to reflect any reassessment or lease modification, or if there are
changes in in-substance fixed payments. The variable lease payments that do
not depend on an index or a rate are recognised as expense in the period on
which the event or condition that triggers the payment occurs.
When the lease is remeasured, the corresponding adjustment is reflected in the
right-of-use asset, or profit and loss if the right-of-use asset is already
reduced to zero.
The Group has elected to account for short-term leases using the practical
expedients. Instead of recognising a right-of-use asset and lease liability,
the payments in relation to these leases are recognised as an expense in
profit or loss on a straight-line basis over the lease term. Short-term leases
are leases with a lease term of 12 month or less.
On the consolidated statement of financial position, right-of-use assets and
lease liabilities have been presented separately.
2.13 Equity
· "Share capital" represents the nominal value of equity shares.
· "Share premium" represents the amount paid for equity shares over the nominal
value.
· "Translation reserve" comprises foreign currency translation differences
arising from the translation of financial statements of the Group's foreign
entities to HK$.
· "Group reorganisation reserve" arose on the group reorganisation.
· "Accumulated losses" include all current period results as disclosed in the
income statements.
No dividends are proposed for the year.
2.14 Revenue recognition
Revenue arises mainly from contracts for IT software development.
To determine whether to recognise revenue, the Group follows a 5-step process:
Step 1: Identifying the contract with a customer.
Step 2: Identifying the performance obligations.
Step 3: Determining the transaction price.
Step 4: Allocating the transaction price to the performance obligations.
Step 5: Recognising revenue when/as performance obligation(s) are satisfied.
In all cases, the total transaction price for a contract is allocated amongst
the various performance obligations based on their relative stand-alone
selling prices. The transaction price for a contract excludes any amounts
collected on behalf of third parties.
Revenue is recognised either at a point in time or over time, when (or as) the
Group satisfies performance obligations by transferring the promised goods or
services to its customers.
Where the contract contains a financing component which provides a significant
financing benefit to the customer for more than 12 months, revenue is measured
at the present value of the amount receivable, discounted using the discount
rate that would be reflected in a separate financing transaction with the
customer, and interest income is accrued separately under the effective
interest method. Where the contract contains a financing component which
provides a significant financing benefit to the Group, revenue recognised
under that contract includes the interest expense accreted on the contract
liability under the effective interest method.
Further details of the Group's revenue and other income recognition policies
are as follows:
Services income
Revenue from IT software development is recognised over time as the Group's
performance creates and enhances an asset that the customer controls. The
progress towards complete satisfaction of a performance obligation is measured
based on input method, i.e. the costs incurred up to date compared with the
total budgeted costs, which depict the Group's performance towards satisfying
the performance obligation.
When the outcome of the contract cannot be reasonably measured, revenue is
recognised only to the extent of contract costs incurred that are expected to
be recovered.
Remittance and payment service fee income
Remittance and payment service fee income are recognised at the time the
related services are rendered.
Media production service income
Media production service income is recognised on an appropriate basis over the
relevant period in which the services are rendered.
Interest income
Interest income is recognised on a time-proportion basis using the effective
interest method.
Contract assets and contract liabilities.
If the Group performs by transferring goods or services to a customer before
the customer pays consideration or before payment is due, the contract is
presented as a contract asset, excluding any amounts presented as a
receivable. Conversely, if a customer pays consideration, or the Group has a
right to an amount of consideration that is unconditional, before the Group
transfers a good or service to the customer, the contract is presented as a
contract liability when the payment is made or the payment is due (whichever
is earlier). A receivable is the Group's right to consideration that is
unconditional or only the passage of time is required before payment of that
consideration is due.
For a single contract or a single set of related contracts, either a net
contract asset or a net contract liability is presented. Contract assets and
contract liabilities of unrelated contracts are not presented on a net basis.
For certain services provided by the Group, in accordance with the underlying
service agreements which negotiated on a case-by-case basis with customer, the
Group may receive from the customer the whole or some of the contractual
payments before the services are completed or when the goods are delivered
(i.e. the timing of revenue recognition for such transactions). The Group
recognises a contract liability until it is recognised as revenue. During that
period, any significant financing components, if applicable, will be included
in the contract liability and will be expensed as accrued unless the interest
expense is eligible for capitalisation.
2.15 Government grants
Grants from the government are recognised at their fair value where there is a
reasonable assurance that the grant will be received and the Group will comply
with all attached conditions. Government grants are deferred and recognised in
profit or loss over the period necessary to match them with the costs that the
grants are intended to compensate. Government grants relating to income is
presented in gross under other income in the consolidated statement of profit
or loss and other comprehensive income.
2.16 Impairment of non-financial assets
Property, plant and equipment (including right-of-use assets) and the
Company's interests in subsidiaries are subject to impairment testing.
An impairment loss is recognised as an expense immediately for the amount by
which the asset's carrying amount exceeds its recoverable amount. Recoverable
amount is the higher of fair value, reflecting market conditions less costs of
disposal, and value in use. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax discount rate
that reflects current market assessment of time value of money and the risk
specific to the asset.
For the purposes of assessing impairment, where an asset does not generate
cash inflows largely independent from those from other assets, the recoverable
amount is determined for the smallest group of assets that generate cash
inflows independently (i.e. a cash-generating unit). As a result, some assets
are tested individually for impairment and some are tested at cash-generating
unit level. Goodwill in particular is allocated to those cash-generating units
that are expected to benefit from synergies of the related business
combination and represent the lowest level within the Group at which the
goodwill is monitored for internal management purpose and not be larger than
an operating segment.
Impairment loss is charged pro rata to the other assets in the cash generating
unit, except that the carrying value of an asset will not be reduced below its
individual fair value less cost of disposal, or value in use, if determinable.
Impairment loss is reversed if there has been a favourable change in the
estimates used to determine the assets' recoverable amount and only to the
extent that the assets' carrying amount does not exceed the carrying amount
that would have been determined, net of depreciation or amortisation, if no
impairment loss had been recognised.
2.17 Employee benefits
Retirement benefits
Retirement benefits to employees are provided through defined contribution
plans.
The Group participates in various defined contribution retirement benefit
plans which are available to all relevant employees. These plans are generally
funded through payments to schemes established by governments or
trustee-administered funds. A defined contribution plan is a pension plan
under which the Group pays contributions on a mandatory, contractual or
voluntary basis into a separate fund. The Group has no legal or constructive
obligations to pay further contributions if the fund does not hold sufficient
assets to pay all employees the benefits relating to employee services in the
current and prior years. The Group's contributions to the defined contribution
plans are recognised as an expense in profit or loss as employees render
services during the year.
Short-term employee benefits
Liability for wages and salaries, including non-monetary benefits, annual
leave, long service leave and accumulating sick leave expected to be settled
within 12 months of the reporting date are recognised in other payables in
respect of employees' services up to the reporting date and are measured at
the amounts expected to be paid when the liabilities are settled.
2.18 Related parties
For the purposes of these consolidated financial statements, a party is
considered to be related to the Company if:
(a) the party is a person or a close member of that person's family and if
that person:
(i) has control or joint control over the Group;
(ii) has significant influence over the Group; or
(iii) is a member of the key management personnel of the Group or of a
parent of the Group.
(b) the party is an entity and if any of the following conditions applies:
(i) the entity and the Group are members of the same group.
(ii) one entity is an associate or joint venture of the other entity
(or an associate or joint venture of a member of a group of which the other
entity is a member).
(iii) the entity and the Group are joint ventures of the same third
party.
(iv) one entity is a joint venture of a third entity and the other
entity is an associate of the third entity.
(v) the entity is a post-employment benefit plan for the benefit of
employees of either the Group or an entity related to the Group.
(vi) the entity is controlled or jointly controlled by a person
identified in (a).
(vii) a person identified in (a)(i) has significant influence over the
entity or is a member of the key management personnel of the entity (or of a
parent of the entity).
(viii) the entity, or any member of a group of which it is a part, provides
key management personnel services to the Group or to the parent of the Group.
Close family members of an individual are those family members who may
expected to influence, or be influenced by, that individual in their dealings
with the entity.
2.19 Accounting for income taxes
Taxation comprises current tax and deferred tax.
Current tax is based on taxable profit or loss for the period. Taxable profit
or loss differs from profit or loss as reported in the income statement
because it excludes items of income and expense that are taxable or deductible
in other years and it further excludes items that are never taxable or
deductible. The asset or liability for current tax is calculated using tax
rates that have been enacted or substantively enacted by the balance sheet
date.
Deferred tax is recognised on differences between the carrying amounts of
assets and liabilities in the financial information and the corresponding tax
bases used in the computation of taxable profit and is accounted for using the
balance sheet liability method. Deferred tax liabilities are generally
recognised for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits will be
available against which deductible temporary differences can be utilised. Such
assets and liabilities are not recognised if the temporary difference arises
from initial recognition of goodwill or from the initial recognition (other
than in a business combination) of other assets and liabilities in a
transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries, except where the Group is able to
control the reversal of the temporary differences and it is probable that the
temporary differences will not reverse in the foreseeable future.
Deferred tax is calculated, without discounting, at tax rates that are
expected to apply in the period the liability is settled or the asset
realised, provided they are enacted or substantively enacted at the reporting
date.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered. Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled, or the asset realised.
Deferred tax is charged or credited to profit or loss, except when it relates
to items charged or credited directly to equity, in which case the deferred
tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right set off current tax assets against current tax liabilities
and when they relate to income taxes levied by the same taxation authority and
the Company intends to settle its current tax assets and liabilities on a net
basis.
2.20 Earnings per ordinary share
The Company presents basic and diluted earnings per share data for its
ordinary shares.
Basic earnings per ordinary share is calculated by dividing the profit or loss
attributable to Shareholders by the weighted average number of ordinary shares
outstanding during the reporting period.
Diluted earnings per ordinary share is calculated by adjusting the earnings
and number of ordinary shares for the effects of dilutive potential ordinary
shares.
2.21 Segment reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-makers. The chief operating
decision-makers, who are responsible for allocating resources and assessing
performance of the operating segments, has been identified as the executive
board of Directors.
All operations and information are reviewed together. During the year, in the
opinion of the Directors, there is only one reportable operating segment of IT
software development in Hong Kong due to its significant portion of operation
among all business activities.
3. KEY SOURCES OF ESTIMATION UNCERTAINTY
In the process of applying the Group's accounting policies which are described
in note 2, Directors have made the following judgement that might have
significant effect on the amounts recognised in the consolidated financial
statements. The key assumptions concerning the future, and other key sources
of estimation uncertainty at the statement of financial position date, that
might have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year, are also
discussed below.
Discount rate of lease liabilities and right-of-use assets determination
In determining the discount rate, the Group is required to exercise
considerable judgement in relation to determining the discount rate taking
into account the nature of the underlying assets, the terms and conditions of
the leases, at the commencement date and the effective date of the
modification. The Group's rate is referenced to the related party bank
borrowing in Hong Kong.
Fair value measurements and valuation processes
Some of the Group's financial assets are measured at fair value for financial
reporting purposes.
In estimating the fair value of an asset or a liability, the Group uses
market-observable data to the extent it is available. Where Level 1 and Level
2 inputs are not available, the Group engages an independent firm of
professional valuers to perform the valuation. In relying on the valuation
report, the Directors have exercised their judgement and are satisfied to
establish the appropriate valuation techniques and inputs to the model. The
fluctuation in the fair value of the assets and liabilities is reported and
analysed periodically.
The Group uses valuation techniques that include inputs that are not based on
observable market data to estimate the fair value of certain types of
financial instruments. Judgement and estimation are required in establishing
the relevant valuation techniques and the relevant inputs thereof. Whilst the
Group considers these valuations are the best estimates, the ongoing changes
in market conditions that may result in greater market volatility and may
cause further disruptions to the investees'/issuers' businesses, which have
led to higher degree of uncertainties in respect of the valuations in the
current year. Changes in assumptions relating to these factors could result in
material adjustments to the fair value of these consolidated financial
instruments. Detailed information about the valuation techniques, inputs and
key assumptions used in the determination of the fair value of various assets
and liabilities are set out in note 15, 22, 24 and 26.6.
Impairment of goodwill
The Group determines whether goodwill is impaired at least on an annual basis.
This requires an estimation of the value in use of the CGU to which the
goodwill is allocated. Estimating the value in use requires the management to
choose a suitable valuation model and make estimation of the key valuation
parameter and other relevant business assumptions.
4. REVENUE
The Group is engaged in provision of IT software development and payment
solutions, remittance and payment services and provision of media production
services in Hong Kong. Revenue was principally derived from IT software
development and payment solutions for both years.
5. OTHER INCOME
2024 2023
HK$ HK$
Government subsidy (note) 110,000 263,200
Gain on termination of lease agreement - 38,132
Sundry income 237,879 15,029
Net gain on disposal of financial assets at FVPL 80,883 -
Interest income 597,441 13,649
1,026,203 330,010
Note: During the year ended 31 March 2024, the Group received funding support
amount HK$110,000 (2023: HK$263,200) from the Animation Support Program, set
up by the Government of the Hong Kong Special Administrative Region. The
purpose of the funding is to provide financial support to enterprises for
producing animation works.
6. FINANCE CHARGES
2024 2023
HK$ HK$
Finance charges on lease liabilities 32,907 17,080
Interest on bank loan 175,755 149,430
208,662 166,510
7. LOSS BEFORE INCOME TAX
Loss before income tax is arrived at after charging:
2024 2023
HK$ HK$
Subcontractors' fee 5,677,221 8,457,204
Amortisation of intangible assets 2,711,515 475,957
Depreciation
- Property, plant and equipment 115,212 12,614
- Right-of-use assets 384,045 576,742
During the year the Group obtained following audit and non-audit services:
2024 2023
HK$ HK$
Audit services:
Statutory audit - Group and Company 589,964 190,000
Non-audit services
Accountancy review fee - Group and Company 19,668 11,894
8. STAFF COSTS AND DIRECTOR'S EMOLUMENTS
The aggregate payroll costs (including Directors' remuneration) were as
follows:
2024 2023
HK$ HK$
Wages, salaries and other employee benefits 8,161,460 4,804,428
Contributions to defined contribution plans 257,282 124,476
Housing allowances 524 97,500
The average number of persons employed by the Group (including Directors) was
25 during the year (2023: 11).
The Directors' remuneration for the year was as follows:
2024 2023
HK$ HK$
Fees - -
Other emoluments 2,683,561 3,201,425
9. Income tax expense
2024 2023
HK$ HK$
Tax expense for the year 128,762 -
UK corporation tax is calculated at 19% of the estimated assessable profit for
the year (2023: Nil).
Hong Kong Profits Tax calculated at 8.25% on the first HK$2 million of the
estimated assessable profits and at 16.5% on the estimated assessable profits
above HK$2 million for the year (2023: Nil). Deferred tax assets have not been
recognised in respect of these losses due to the unpredictability of future
taxable profits streams of the subsidiaries in Hong Kong.
Reconciliation between tax expense and accounting profit at applicable tax
rates:
2024 2023
HK$ HK$
Loss before taxation (36,751,678) (5,378,451)
Tax at applicable income tax rate 42,975 (959,244)
Tax effect of non-deductible expense 269,383 870,841
Tax effect of non-taxable income (124,820) (55,096)
Tax effect on temporary differences 305,071 65,880
Tax effect of tax losses not recognised 359,313 77,619
Utilisation of tax losses brought forward (687,192) -
Tax reduction (6,000) -
Tax at applicable concessionary rate (29,968) -
Income tax expense 128,762 -
10. EARNINGS PER SHARE
2024 2023
HK$ HK$
Loss attributable to equity shareholders (36,880,440) (5,378,451)
Weighted average number of ordinary shares 127,181,165 108,500,249
Loss per share in HK$:
Basic (29.00 cents) (4.96 cents)
Diluted (29.00 cents) (4.96 cents)
There were no potential dilutive ordinary shares in existence during the years
ended 31 March 2024 and 2023, and hence diluted earnings per share is the same
as the basic earnings per share.
11. GOODWILL
2024 2023
HK$ HK$
Cost and net carrying amount
At 1 April - -
Additions 759,289 -
At 31 March 759,289 -
Goodwill was derived from the acquisition of 100% equity interests in Mr. Meal
Production Limited ("Mr. Meal") and its subsidiary (together the "Mr. Meal
Group") at an aggregate consideration of HK$2,000,000 in July 2023. The excess
of the consideration transferred over the acquisition-date fair values of the
identifiable assets acquired and the liabilities assumed of HK$759,289 is
recognised as goodwill. At 31 March 2024, the Group assessed the recoverable
amount of the goodwill with reference to the cash flow projection of Mr. Meal
for the next twelve months and determined that no impairment for goodwill was
required.
12. INTANGIBLE ASSETS
Development cost HK$
Cost
At 31 March 2023 and 1 April 2023 6,660,760
Additions 19,938,476
Exchange realignment 104,400
At 31 March 2023 26,703,636
Accumulated amortisation
At 31 March 2023 and 1 April 2023 475,957
Charge for the year 2,711,515
Exchange realignment 2,792
At 31 March 2024 3,190,264
Net Book Value
At 31 March 2024 23,513,372
At 31 March 2023 6,184,803
The above intangible assets have definite useful lives. Such intangible assets
are amortised on a straight-line basis ranged over 5 years and 10 years.
13. PROPERTY, PLANT AND EQUIPMENT
Office equipment Leasehold improvement Furniture & fixtures Total
HK$ HK$ HK$ HK$
Cost
At 31 March 2023 and 1 April 2023 273,004 - 31,000 304,004
Additions - - 65,380 65,380
Acquisition of a subsidiary 433,099 100,000 - 533,099
Written off (45,040) - (5,199) (50,239)
Exchange realignment - 1,474 - 1,474
At 31 March 2024 661,063 101,474 91,180 853,718
Accumulated Depreciation
At 31 March 2023 and 1 April 2023 240,057 - 2,890 242,947
Charge for the year 83,610 20,448 11,154 115,212
Acquisition of a subsidiary 38,499 - - 38,499
Exchange realignment - (153) - (153)
At 31 March 2024 362,166 20,295 14,044 396,505
Net Book Value
At 31 March 2024 298,897 81,179 77,137 457,213
At 31 March 2023 32,947 - 28,110 61,057
14. RIGHT-OF-USE ASSETS
Lease assets HK$
Cost
At 31 March 2023 and 1 April 2023 981,425
Additions 746,470
Written off (906,683)
At 31 March 2024 821,212
Accumulated Depreciation
At 31 March 2023 and 1 April 2023 776,741
Charge for the year 384,045
Written off (843,528)
At 31 March 2024 317,258
Net Book Value
At 31 March 2024 503,954
At 31 March 2023 204,684
15. FINANCIAL ASSETS AT FVPL
2024 2023
Notes HK$ HK$
Convertible bonds with put option 15(a) - 1,041,064
Equity investments listed in Hong Kong 15(b) 1,017,248 -
1,017,248 1,041,064
(a) The Group invested in convertible bonds in a principal amount of
HK$1,000,000 with the maturity date on 2 January 2024. The convertible bonds
carry interest at 10% per annum. The convertible bonds will be convertible
into shares of the bond issuer at the option of the Group upon the bond issuer
being listed on the Hong Kong Stock Exchange on or before 13 March 2024. Exact
number of shares to be issued upon conversion will depend on the total number
of shares of the bond issuer at the time of conversion and the amount of
shares of the bond issuer at the time of conversion and the amount of the
convertible bonds to be converted into shares. The put option may be exercised
by the Group if and only if the exercise event occurs to require the issuer to
purchase all but not part of the convertible bonds. During the year ended 31
March 2024, fair value loss on convertible bonds will put option of HK$41,064
was recognised in profit of loss.
(b) On 22 February 2023, the Company as issuer entered into a share
subscription agreement with Hatcher Group Limited (a company listed on the
Growth Enterprise Market of the Hong Kong Stock Exchange, stock code: 8365)
(the "Subscriber" or "Hatcher Group"), pursuant to which the Subscriber has
conditionally agreed to subscribe for , and the Company has conditionally
agreed to issue and allot, an aggregate of 18,000,000 shares at the
subscription price of £0.19 per subscription share for a total consideration
of £3,420,000 (the "Subscription"). The consideration for the Subscription
shall be settled by the Subscriber by way of the issue and allotment of an
aggregate of 38,640,000 shares of the Subscriber at the issue price of HK$0.90
per share to the Company upon completion of the Subscription.
The Subscription was completed on 17 April 2023 and the consideration was
settled by way of issue and allotment of an aggregate of 38,640,000 shares of
the Subscriber at the issue price of HK$0.90 each, totalling HK$34,776,000.
On 27 October 2023, the Company disposed of an aggregate of 8,000,000 shares.
Net gain on disposal of equity investments of HK$80,883 was recognised in
profit of loss.
The fair values of the equity investments were determined on the basis of
quoted market bid price at the end of the reporting period.
During the year ended 31 March 2024, fair value loss on equity investments of
HK$33,470,752 was recognised in profit or loss.
Details of the fair value measurements are set out in note 26 to the
consolidated financial statements.
16. TRADE AND OTHER RECEIVABLES AND DEPOSIT AND PREPAYMENT
2024 2023
Notes HK$ HK$
Trade receivables (note) 16(a) 2,349,282 -
Other receivables 32,513,666 17,698,025
Deposit and prepayment 2,980,887 3,788,412
37,843,835 21,486,437
Note:
(a) The Group allows an average credit period of 14 days to its trade
customers. Before accepting any new customer, the Group assesses the potential
customer's credit quality and defines its credit limits. Credit sales are made
to customers with a satisfactory trustworthy credit history. Credit limits
attributed to customers are reviewed regularly.
Age of trade receivables that are past due but not impaired are as follows:
2024 2023
HK$ HK$
Overdue by:
0 - 30 days 931,282 -
31 - 60 days 150,000 -
61 - 90 days 435,000 -
Over 90 days 342,500 -
1,858,782 -
Trade receivables that were past due but not impaired relate to a number of
customers that have a good track record with the Group. Based on past
experience, the Directors believe that no impairment allowance is necessary in
respect of these balances as there has not been a significant change in credit
quality and the balances are still considered fully recoverable.
As at 31 March 2024 and 2023, no ECL has been provided for trade and other
receivables, deposit and prepayment. The Group does not hold any collateral
over these balances.
The Directors consider that the fair values of trade and other receivables,
and deposit and prepayment are not materially different from their carrying
amounts because these balances have short maturity periods on their inception.
17. LOAN RECEIVABLES
2024 2023
HK$ HK$
Receivables:
- within one year - 294,500
- in the second to fifth years inclusive 3,300,000 -
3,300,000 294,500
Less: Amount shown under current assets - (294,500)
Balance due after one year 3,300,000 -
Less: Impairment losses (42,019) -
3,257,981 -
The loans to independent third parties are unsecured, bearing interest at 10%
(2023: 0.1%) per annum and with fixed terms of repayment. The Directors
consider that the fair values of loan receivables are not materially different
from their carrying amounts.
18. CASH AND CASH EQUIVALENTS
2024 2023
HK$ HK$
Cash and bank balance 19,318,967 9,548,364
19. TRADE AND OTHER PAYABLES
2024 2023
HK$ HK$
Trade payables 1,751,682 235,726
Accrued charges and other payables 2,215,699 354,038
Contract liabilities 8,424,227 750,035
Amount due to a director 2,097,277 948,548
14,488,885 2,288,347
The amount due to a director is unsecured, interest free and repayable on
demand.
Contract liabilities represent receipt in advance from a customer in relation
to its projects placed with the Group. Changes in contract liabilities
primarily relate to the Group's performance of services under the projects.
All amounts are short-term and hence the carrying values of trade and other
payables are considered not materially different from their fair value.
20. BORROWINGS
2024 2023
HK$ HK$
Bank loans - secured 4,539,862 5,299,556
Presented by:
- Carrying amount repayable on demand or within one year 785,841 763,429
- Carrying amount repayable after one year with repayment on 3,754,021 4,536,127
demand clause
4,539,862 5,299,556
Less: Amount shown under current liabilities (4,539,862) (5,299,556)
Non-current liabilities - -
Bank borrowings are variable interest bearing borrowings which carry interest
at 2.5% below Prime Rate per annum. At 31 March 2024, the banking facilities
were secured by the joint and several guarantees given by Mr. Chi Kit Law, the
ultimate controlling party of the Company.
21. LEASE LIABILITIES
The following table illustrates the remaining contractual maturities of the
lease liabilities:
2024 2023
HK$ HK$
Total minimum lease payments:
Due within one year 432,300 142,100
Due in the second to fifth years 66,000 67,050
498,300 209,150
Future finance charges on lease liabilities (20,487) (8,296)
Present value of lease liabilities 477,813 200,854
Present value of liabilities:
Due within one year 412,284 135,711
Due in the second to fifth years 65,529 65,143
477,813 200,854
Less: Portion due within one year included under current liabilities (412,284) (135,711)
Portion due after one year included under non-current liabilities 65,529 65,143
The Group entered into lease arrangements for car parking space and office
with contract period of two years. The Group makes fixed payments during the
contract periods. At the end of the lease terms, the Group does not have the
option to purchase the properties and the leases do not include contingent
rentals.
22. CONVERTIBLE LOAN NOTE
The convertible loan note recognised at the end of the reporting period are
calculated as follows:
2024 2023
HK$ HK$
Liability component
At 1 April - -
Fair value of liabilities component at date of issue 35,265,495 -
Interest expenses - -
Conversion of convertible loan note - -
Exchange realignment 137,451 -
At 31 March 35,402,946 -
Portion classified as non-current - -
Current portion 35,402,946 -
Equity component
At 1 April - -
Fair value of convertible loan note at date of issue 2,957,651 -
Conversion of convertible loan note - -
At 31 March 2,957,651 -
On 2 March 2024, the Group entered into an unsecured convertible loan note
with an independent third party (the "lender" or "Noteholder"). The
convertible loan note bears no interest with nominal value of GBP4,000,000.
The Group may redeem all of the convertible loan note outstanding by paying to
the Noteholder in immediately available cleared funds an amount equal to 120%
of the outstanding amount of the convertible loan note.
The fair values of the liability component and the equity conversion component
were determined at issuance of the convertible loan note. The fair value of
the liability component was calculated using cash flows and payoffs discounted
at a market interest rate. The value of the conversion option, representing
the value of equity component, is credited to a convertible loan note reserve.
The market interest rate is based on comparable bonds with similar credit
rating and maturity. It is assumed to be constant along the holding period of
the convertible loan note. The fair value assessment of the convertible loan
note was performed by an independent professional valuer.
For more details of the terms of convertible loans, please refer to the
announcement dated on 4 March 2024.
23. SHARE CAPITAL
2024 2023
HK$ HK$
Issued shares:
At the beginning of the reporting period 28,801,920 11,500,995
Issue of shares 1,124,025 17,300,925
At the end of the reporting period 29,925,945 28,801,920
On 22 February 2023, the Company as issuer entered into a share subscription
agreement with Hatcher Group Limited (a company listed on the Growth
Enterprise Market of the Hong Kong Stock Exchange, stock code: 8365) (the
"Subscriber"), pursuant to which the Subscriber has conditionally agreed to
subscribe for , and the Company has conditionally agreed to issue and allot,
an aggregate of 18,000,000 shares at the subscription price of £0.19 per
subscription share for a total consideration of £3,420,000 (the
"Subscription"). The consideration for the Subscription shall be settled by
the Subscriber by way of the issue and allotment of an aggregate of 38,640,000
shares of the Subscriber at the issue price of HK$0.90 per share to the
Company upon completion of the Subscription.
On 22 February 2023, 9,500,000 shares at £0.19 each were issued and allotted
by the Company to the Subscriber.
As at 31 March 2023, 9,500,000 shares had been issued and allotted by the
Company to the Subscriber. Completion of the Subscription took place on 17
April 2023.
On 3 April 2023, the Company further issued and allotted 8,500,000 shares at
£0.19 each to the Subscriber and the Subscription was completed in April
2023.
On 7 September 2023, 3,000,000 shares at £0.58 each were issued and allotted
by the Company to the Subscriber.
24. BUSINESS COMBINATION UNDER COMMON CONTROL
a) Acquisition of RCPay HK
On 28 June 2022, the Group acquired 100% equity interest in RCPay HK at a cash
consideration of £1 from the ultimate controlling party. As the Group and
RCPay HK are under the common control of Mr. Chi Kit Law before and after the
acquisition, the business combination has been accounted as a business
combination under common control.
The Group elects to account for the common control combination using the
pooling-of-interest method and the results of RCPay HK are consolidated by the
Group from the date of acquisition, being the date on which the Group obtains
control, and continue to be consolidated until the date that such control
ceases.
The difference between the cash consideration and the carrying amount of the
net assets of RCPay HK at the completion date is recognised in group
reorganisation reserve amounting to HK$24,792.
Details of the carrying amounts of the assets and liabilities of RCPay HK at
the date of acquisition are as follows:
At 28 June 2022
HK$
Right-of-use assets 461,391
Trade and other receivables 73,600
Cash and cash equivalents 63,362
Trade and other payables (107,335)
Lease liabilities (466,216)
Net assets 24,802
Merger reserve recognised (24,792)
10
Net cash inflow arising on the acquisition:
Consideration (10)
Cash and cash equivalents acquired 63,362
63,352
b) Acquisition of RC Singapore
On 28 June 2022, the Group acquired 100% equity interest in RC Singapore at a
cash consideration of £1 from the ultimate controlling party. As the Group
and RC Singapore are under the common control of Mr. Chi Kit Law before and
after the acquisition, the business combination has been accounted as a
business combination under common control.
The Group elects to account for the common control combination using the
pooling-of-interest method and the results of RC Singapore are consolidated by
the Group from the date of acquisition, being the date on which the Group
obtains control, and continue to be consolidated until the date that such
control ceases.
The difference between the cash consideration and the carrying amount of the
net liabilities of RC Singapore at the completion date is recognised in group
reorganisation reserve amounting to HK$112,395.
Details of the carrying amounts of the assets and liabilities of RC Singapore
at the date of acquisition are as follows:
At 28 June 2022
HK$
Trade and other receivables 14,879
Cash and cash equivalents 276,116
Trade and other payables (403,380)
Net liabilities (112,385)
Merger reserve recognised 112,395
10
Net cash inflow arising on the acquisition:
Consideration (10)
Cash and cash equivalents acquired 276,116
276,106
c) Acquisition of RCPAY UK
On 7 November 2022, the Group acquired 100% equity interest in RCPAY UK at a
cash consideration of £1 from the ultimate controlling party. As the Group
and RCPAY UK are under the common control of Mr. Chi Kit Law before and after
the acquisition, the business combination has been accounted as a business
combination under common control.
The Group elects to account for the common control combination using the
pooling-of-interest method and the results of RCPAY UK are consolidated by the
Group from the date of acquisition, being the date on which the Group obtains
control, and continue to be consolidated until the date that such control
ceases.
The difference between the cash consideration and the carrying amount of the
net liabilities of RCPAY UK at the completion date is recognised in group
reorganisation reserve amounting to HK$73,037.
Details of the carrying amounts of the assets and liabilities of RCPAY UK at
the date of acquisition are as follows:
At 7 November 2022
HK$
Cash and cash equivalents 206,691
Trade and other payables (279,718)
Net liabilities (73,027)
Merger reserve recognised 73,037
10
Net cash inflow arising on the acquisition:
Consideration (10)
Cash and cash equivalents acquired 206,691
206,681
d) Acquisition of Mr. Meal Group
On 12 July 2023 (the "Completion Date"), the Group entered into sale and
purchase agreements (the "Agreement") with certain independent third parties
(the "Vendors") pursuant to which the Group and the Vendors both agree to
acquire/ sell the entire equity interests of Mr. Meal Group (the "Mr. Meal
Acquisition"). Mr. Meal Group is primarily engaged in the provision of media
production services.
Pursuant to the Agreement, the consideration of the Mr. Meal Acquisition is to
be satisfied by the Group as follows:
(i) Initial consideration
HK$1,000,000 to be paid in cash on completion of the Group being registered as
the sole shareholder of Mr. Meal with the Companies Registry in Hong Kong and
all the existing key employees shall have entered into the retention agreement
with Mr. Meal;
(ii) Contingent consideration
HK$1,000,000 to be settled by the allotment of 915 new ordinary shares
(determined according to the closing price of the Company's shares listed on
the London Stock Exchange on the Completion Date) of the Company (the
"Consideration Shares"). The Consideration Shares are contingent on the
retention of key employees for a 12-month period and if satisfied will be
issued 18 months after the Completion Date of the Mr. Meal Acquisition.
Details of the carrying amounts of the assets and liabilities of Mr. Meal
Group at the date of acquisition are as follows:
At 12 July 2023
HK$
Consideration
Cash paid 1,000,000
Contingent consideration - Consideration Shares 1,000,000
2,000,000
Recognised amounts of identifiable assets acquired and liabilities assumed
Property, plant and equipment 494,600
Deposits and prepayments 36,099
Trade and other receivables 1,047,000
Cash and cash equivalents 454,174
Trade and other payables (791,162)
Net assets of Mr. Meal Group 1,240,711
Goodwill arising on acquisition 759,289
Net cash outflow arising on the acquisition:
HK$
Cash consideration paid (1,000,000)
Cash and cash equivalents acquired 454,174
(545,826)
The value of the Consideration Shares is mainly based on the trading price of
the Company and the relevant indicators, which considered as significant
inputs to the valuation. At 31 March 2024, the fair value of the Consideration
Shares is estimated to be HK$70,486.
The movements of the Consideration Shares are as follows:
HK$
Initial recognition on 12 July 2023 1,000,000
Fair value changes (874,478)
Exchange realignments (55,036)
70,486
25. MAJOR NON-CASH TRANSACTIONS
i) Following note 23 to the financial statements,
the Subscription was completed on 17 April 2023, 8,500,000 shares at £0.19
each had been issued and allotted by the Company to the Subscriber. As a
result, there was an increase in share capital of HK$827,475, increase in
share premium of HK$15,849,145, increase in financial assets at FVPL of
HK$34,776,000 and decrease in other receivables of HK$18,099,380,
respectively.
ii) During the year ended 31 March 2024, the Group
entered into acquisition agreement in respect of the addition to intangible
assets of 17,199,900, which was financed by way of the issue and allotment of
an aggregate of 3,000,000 shares at £0.58 each to the Subscriber. As a
result, there was an increase in share capital of HK$296,550 and increase in
share premium of HK$16,903,350, respectively.
iii) During the year ended 31 March 2024, the Group
entered into the financial lease arrangements in respect of the office,
resulted in an increase in the right-of-use assets and lease liabilities of
HK$746,470 respectively.
26. FINANCIAL RISK MANAGEMENT AND FAIR VALUE MEASUREMENTS
The Group is exposed to financial risks through its use of financial
instruments in its ordinary course of operations and in its investment
activities. The financial risks include market risk (including foreign
currency risk and interest rate risk), credit risk and liquidity risk.
There has been no change to the types of the Group's exposure in respect of
financial instruments or the manner in which it manages and measures the
risks.
26.1 Categories of financial assets and liabilities
The carrying amounts presented in the consolidated statement of financial
position relate to the following categories of financial assets and financial
liabilities:
2024 2023
HK$ HK$
Financial assets
Financial assets at fair value
- Financial assets at FVPL 1,107,248 1,041,064
Financial assets at amortised costs
- Trade receivables 2,349,282 -
- Other receivables 32,513,666 17,698,025
- Deposit and prepayment 1,682,543 3,788,412
- Loan receivables 3,257,981 294,500
- Cash and cash equivalents 19,318,967 9,548,364
60,229,687 25,314,128
2024 2023
HK$ HK$
Financial liabilities
Financial liabilities at amortised cost
- Trade payables 1,751,682 235,726
- Accrued charges and other payables - 354,038
- Contract liabilities 8,424,227 750,035
- Amount due to a director 2,097,277 948,548
- Lease liabilities 477,812 200,854
- Borrowings 4,539,862 5,299,556
- Convertible loan note 35,402,946 -
52,693,806 7,788,757
26.2 Foreign currency risk
Foreign currency risk refers to the risk that the fair value or future cash
flows of a financial instrument will fluctuate because of changes in foreign
exchange rates. The Group has no significant exposure to foreign currency risk
as substantially all of the Group's transactions are denominated in the
functional currency of respective subsidiaries.
26.3 Interest rate risk
The Group has no significant interest-bearing assets. Cash at bank earns
interest at floating rates based on daily bank deposits rates.
The Group is exposed to cash flow interest rate risk in relation to
variable-rate bank borrowings. It is the Group's policy to keep its borrowings
at floating rate of interest to minimize the fair value interest rate risk.
The Group currently does not have hedging policy. However, the Directors
monitor interest rate exposure and will consider necessary action when
significant interest rate exposure is anticipated.
Sensitivity analysis
The sensitivity analyses below have been determined based on the exposure to
interest rates for variable-rate borrowings. The analysis is prepared assuming
the borrowings outstanding at the end of the reporting period were outstanding
for the whole year. A 100 basis point increase or decrease is used when
reporting interest rate risk internally to Directors and represents Directors'
assessment of the reasonably possible change in interest rates. If interest
rates had been 100 basis point higher/lower and all other variables were held
constant, the Group's pre-tax loss for the year would increase/decrease by
HK$45,399 (2023: HK$52,996). This is mainly attributable to the Group's
exposure to interest rates on its variable-rate bank borrowings.
26.4 Credit risk
The Group's exposure to credit risk mainly arises from granting credit to
customers and other counterparties in the ordinary course of its operations.
The Group's maximum exposure to credit risk for the components of the
consolidated statement of financial position at 31 March 2024 refers to the
carrying amount of financial assets as disclosed in note 26.1.
The exposures to credit risk are monitored by the Directors such that any
outstanding debtors are reviewed and followed up on an ongoing basis. The
Group's policy is to deal only with creditworthy counterparties. Payment
record of customers is closely monitored. Normally, the Group does not obtain
collateral from debtors.
Trade receivables
The Group has applied the simplified approach to assess the ECL as prescribed
by IFRS 9. To measure the ECL, trade receivables have been grouped based on
shared credit risk characteristics and the past due days. In calculating the
ECL rates, the Group considers historical elements and forward looking
elements. Lifetime ECL rate of trade receivables is assessed minimal for all
ageing bands as there was no recent history of default and continuous payments
were received. The Group determined that the ECL allowance in respect of trade
receivables for the years ended 31 March 2024 and 2023 is minimal as there has
not been a significant change in credit quality of the customers.
Other financial assets at amortised cost
Other financial assets at amortised cost include deposits, other receivables,
loan receivables and cash and cash equivalents.
The Directors are of opinion that there is no significant increase in credit
risk on deposits, other receivables, loan receivables and cash and cash
equivalents since initial recognition as the risk of default is low after
considering the factors as following:
- any changes in business, financial or economic conditions that
affects the debtor's ability to meet its debt obligations;
- any changes in the operating results of the debtor;
- any changes in the regulatory, economic, or technological
environment of the debtor that affects the debtor's ability to meet its debt
obligations.
The Group has assessed that the ECL for deposits, other receivables and loan
receivables are minimal under the 12-months ECL method as there is no
significant increase in credit risk since initial recognition. The credit risk
with related parties is limited because the counterparties are fellow
subsidiaries. The Directors have assessed the financial position of these
related parties and there is no indication of default.
The credit risk for cash and cash equivalents are considered negligible as the
counterparties are reputable banks with high quality external credit ratings.
26.5 Liquidity risk
Liquidity risk relates to the risk that the Group will not be able to meet its
obligations associated with its financial liabilities that are settled by
delivering cash or another financial asset.
The Group's prudent policy is to regularly monitor its current and expected
liquidity requirements, to ensure that it maintains sufficient reserves of
cash and cash equivalents to meet its liquidity requirements in the short term
and longer term.
Analysed below are the Group's remaining contractual maturities for its
non-derivative financial liabilities as at the reporting date. When the
creditor has a choice of when the liability is settled, the liability is
included on the basis of the earliest date when the Group is required to pay.
Where settlement of the liability is in instalments, each instalment is
allocated to the earliest period in which the Group is committed to pay.
Carrying Within Over 1 year Total
amount 1 year or but within contractual
on demand 5 years undiscounted
Over 5 years cash flow
HK$ HK$ HK$ HK$ HK$
2024
- Trade and other payables 3,967,381 3,967,381 - - 3,967,381
- Amount due to a director 2,097,277 2,097,277 - - 2,097,277
- Lease liabilities 477,812 432,300 66,000 - 498,300
- Bank borrowings 4,539,862 937,440 4,062,240 - 4,999,680
- Convertible loan note 35,402,946 35,402,946 - - 35,402,946
46,485,278 42,837,344 4,128,240 - 46,965,584
2023
- Trade and other payables 1,339,799 1,339,799 - - 1,339,799
- Amount due to a director 948,548 948,548 - - 948,548
- Lease liabilities 200,854 142,100 67,050 - 209,150
- Bank borrowings 5,299,556 930,552 3,722,208 1,240,736 5,893,496
7,788,757 3,360,999 3,789,258 1,240,736 8,390,993
26.6 Fair values measurement
The following presents the assets and liabilities measured at fair value or
required to disclose their fair value in the consolidated financial statements
on a recurring basis across the three levels of the fair value hierarchy
defined in IFRS 13 "Fair Value Measurement" with the fair value measurement
categorised in its entirety based on the lowest level input that is
significant to the entire measurement. The levels of inputs are defined as
follows:
• Level 1 (highest level): quoted prices (unadjusted) in active markets for
identical assets or liabilities that the Group can access at the measurement
date;
• Level 2: inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly;
• Level 3 (lowest level): unobservable inputs for the asset or liability.
(a) Assets measured at fair value
During the year, there were no transfer between Level 1 and Level 2, nor
transfer into and out of Level 3 fair value measurements.
(b) Assets and liabilities with fair value disclosure, but not measured at
fair value
The carrying amounts of financial assets and liabilities that are carried at
amortised costs are not materially different from their fair values at the end
of each reporting period.
27. CAPITAL MANAGEMENT
The Group's capital management objectives are to ensure its ability to
continue as a going concern and to provide an adequate return for shareholders
by pricing services commensurately with the level of risks.
The Group actively and regularly reviews and manages its capital structure and
makes adjustments in light of changes in economic conditions. In order to
maintain or adjust the capital structure, the Group may adjust the amount of
dividends paid to shareholders, issue new shares or raises new debt financing.
28. CAPITAL COMMITMENTS
There were no capital commitments at 31 March
2024.
29. CONTINGENT LIABILITIES
There were no contingent liabilities at 31
March 2024.
30. ULTIMATE CONTROLLING PARTY
The Directors are of the opinion that the
ultimate controlling party was Mr. Chi Kit Law as at 31 March 2024.
31. RECLASSIFICATION
Certain comparative figures have been reclassified to conform to the current
year presentation.
32. EVENTS AFTER THE REPORTING DATE
On 3 April 2024, pursuant to the convertible loan note agreement, further
2,023,439 shares of the Company were issued and allotted at £0.01 each to the
Subscriber.
On 23 April 2024, pursuant to the convertible loan note agreement, further
3,409,090 shares of the Company were issued and allotted at £0.01 each to the
Subscriber.
On 25 April 2024, RC365 Business Advisory Limited was struck off and its
investment cost had been fully impaired as at 31 March 2024.
On 15 May 2024, pursuant to the convertible loan note agreement, further
5,357,143 shares of the Company were issued and allotted at £0.01 each to the
Subscriber.
On 22 July 2024, a money lender license was granted to the Group through the
acquisition of the entire issued share capital of its wholly owned subsidiary,
HC Capital Group Limited, for a cash consideration of approximately
HK$230,000. HC Capital Group Limited is licenced and regulated in Hong Kong
under the Money Lenders Ordinance (Chapter 163).
On 26 June 2024, pursuant to the convertible loan note agreement, further
4,507,211 shares of the Company were issued and allotted at £0.01 each to the
Subscriber.
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