CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 OCTOBER 2021

Current and prior year amounts are all derived from continuing operations.

The accompanying notes form an integral part of these consolidated financial statements.

The accompanying notes form an integral part of these consolidated financial statements. The financial statements were approved and authorised for issue by the Board of Directors on 25 February 2022 and signed on its behalf by:

Li Chun Chung, Executive Director

  The accompanying notes form an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 OCTOBER 2021

  The accompanying notes form an integral part of these consolidated financial statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.  GENERAL INFORMATION

AIQ Limited ("The Company") was incorporated and registered in The Cayman Islands as a public limited company on 11 October 2017 under the Companies Law (as revised) of The Cayman Islands, with the name AIQ Limited, and registered number 327983.

The Company's registered office is located at 5th Floor Genesis Building, Genesis Close, PO Box 446, Cayman Islands, KY1-1106.

On 20 March 2020, the Company completed the acquisition of the entire issued share capital of Alchemist Codes Sdn Bhd ("Alchemist Codes"), (together, the "Group"), a Malaysian incorporated information technology solutions developer focusing on the e-commerce sector.

The Company has a standard listing on the London Stock Exchange.

The consolidated financial statements include the financial statements of the Company and its controlled subsidiaries (the "Group") as follows:

              * Held by Alchemist Codes Sdn Bhd.

2.  PRINCIPAL ACTIVITIES

The principal activity of the Company is to seek acquisition opportunities and to act as a holding company for a group of subsidiaries that are involved in the technology sector.

Alchemist Codes' principal activities currently comprise the delivery of information technology (IT) solutions for clients through the provision of IT consultancy.

Alcodes International's principal activities currently comprise the delivery of information technology (IT) solutions for clients through the provision of IT consultancy, primarily website development.

3.  ACCOUNTING POLICIES

a) Basis of preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the United Kingdom ("UK"), issued by the International Accounting Standards Board ("IASB"), including related interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC").

As permitted by Companies Law (as revised) of The Cayman Islands only the consolidated financial statements are presented.

The financial statements are presented in Pound Sterling ("GBP") which is the presentational currency of the Company. All values are rounded to the nearest pound, except where otherwise indicated.

The results for 31 October 2021 are prepared for a 12-month period. The results for the comparative period include the results of the subsidiaries from acquisition and or incorporation. Therefore, the comparative information which relates to the Company only for part of the year is not entirely comparable.

New interpretations and revised standards effective for the year ended 31 October 2021

The accounting policies adopted are consistent with those of the previous financial year except for the following new and amended standards and interpretations during the year that are applicable to the Group.

Other Standards

New standards and interpretations that have been adopted in the annual financial statements for the year ended 31 October 2021, but have not had a significant effect on the Group are:
 

·      IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (Amendment - Definition of Material);

·      Revised Conceptual Framework for Financial Reporting;

·      Amendments to IFRS 3 Business Combinations (Amendment - Definition of Business);

·      Amendments to IFRS 16 COVID-19-Related Rent Concessions; and

·      Amendments to IFRS 9, IAS 39 and IFRS 7 Interest Rate Benchmark Reform.

These standards did not have a significant effect on the Group.

Standards and interpretations in issue but not yet effective

There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in future accounting periods that the Group has decided not to adopt early. The most significant of these are as follows:

·      Amendments to IAS 37 Onerous Contracts - Cost of Fulfilling a Contract;

·      Amendments to IAS 16 Property, Plant and Equipment: Proceeds before Intended Use;

·      Classification of Liabilities as Current or Non-Current (Amendments to IAS 1);

·      Definition of Accounting Estimate (Amendments to IAS 8); and

·      Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction - Amendments to IAS 12 Income Taxes.

The Directors do not anticipate the adoption of any of these standards issued by IASB, but not yet effective, to have a material impact on the financial statements of the Group.

b) Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries made up to the end of the reporting period. Subsidiaries are entities over which the Group has control. The Group controls an investee if the Group has power over the investee, exposure to variable returns from the investee, and the ability to use its power to affect those variable returns.

The consolidated financial statements present the results of the Company and its subsidiaries as if they formed a single entity. Inter-company balances and transactions between Group companies are therefore eliminated in full. The financial information of subsidiaries is included in the Group's financial statements from the date that control commences until the date that control ceases.

c) Going concern

The financial statements are required to be prepared on the going concern basis unless it is inappropriate to do so.

The Group incurred losses of £1.2m during the year and experienced cash outflows of £1.2m. As at 31 October 2021, the Group had net current assets of £385k and cash of £585k. The Group's cash position was approximately £1.0m at the date of this report.

As noted above, revenues were severely impacted by the COVID-19 pandemic, which necessitated the Company undertaking a strategic review in the second half of the year that resulted in actions to cut costs, dispose of non-core activities and prioritise new sources of revenue. The Group's assessment of the COVID-19 pandemic is detailed in the Operational Review section of the Strategic Report above.

The Group meets its day-to-day working capital requirements through cash generated from the capital it raised on admission to the London Stock Exchange and, subsequent to the acquisition of Alchemist Codes, from the operations of its subsidiaries.

More recently, the Company raised £500k through the issue of unsecured convertible loan notes to three existing shareholders as more fully described in Note 23 to the financial statements. The proceeds of the Loan Notes will be used for working capital purposes as well as widening the Group's offer to new sectors.

Following the issue of the convertible loan notes, the Group's cash position gives it sufficient headroom to execute its business plans. This has enabled the financial statements to be prepared on a going concern basis.

The Directors have prepared forecasts and projections and have specifically performed a detailed review of those forecasts for the period to June 2023. These reflect the expected trading performance of the Group on the basis of best estimates of management using current knowledge and expectations of trading performance. These forecasts and projections have also been stress tested to consider what the Directors believe to be a 'plausible worst-case scenario'.

The Directors report that they have re-assessed the principal risks, reviewed current performance and forecasts, combined with expenditure commitments, including capital expenditure. The Group's forecasts demonstrate it will have sufficient cash reserves to enable it to meet its obligations as they fall due, for a period of at least 12 months from the date of signing of these financial statements. Accordingly, the Directors consider the Group to be a going concern.  

d) Revenue

Revenue is recognised at an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring goods or services to a customer net of sales taxes and discounts. A performance obligation may be satisfied at a point in time or over time. The amount of revenue recognised is the amount allocated to the satisfied performance obligation. The board believe that the Group has one source of revenue, which is IT software services. This source of income can be broken down further into distinct revenue streams:

(i)         Revenue from software sales

Revenue from sales of software application is recognised progressively over time based on milestones and customers' acceptance by using the output method. In the current year the output method effectively equates to the timing of invoices raised.

Included within software sales during the year is an amount of £35,424 relating to the sale of certain e-commerce software and technology developed by the Group to Wepin Sdn Bhd. The agreement for the sale became effective on the 25 May 2021. All costs relating to the development of the software have been expensed in the current year.

(ii)        Revenue from maintenance and support contracts

The Group enters into annual fixed price support and maintenance services and managed services contracts with its customers. Revenues are recognised on a straight-line basis over the term of the contract.  This method best depicts the transfer of services to the customer as there is no reliable prediction that can be made as to if and when any individual customer will require the service.

No maintenance income was generated during the period.

(iii)       Revenue from merchant contracts

The Group earns commissions from merchants when transactions are completed on the OctaPLUS e-commerce platform. The commissions are generally determined as a percentage based on the value of merchandise being sold by the merchants. The variable consideration is estimated at contract inception and updated at the end of each reporting period if additional information becomes available. Revenue related to commissions is recognised based on the expected value when the performance obligation is satisfied.

The OctaPLUS e-commerce platform was effectively closed during the year and income generated from merchant contracts totalled £3,121.

(iv)       Project management and coordination

In addition to the above revenues, the Group earns project management and coordination revenues. In the current year, these primarily related to website development for clients. Revenue is recognised progressively over time based on milestones and customers' acceptance by using the output method. During the year the revenue earned was recognised on delivery of performance obligation based on the estimate of the percentage completed as judged by management.

The performance obligations extend over several months with milestone obligations over the term of the service agreement.

With regard to the Group's income as Project Coordinator, a customer agrees a DBP IT Contract for implementing the DBP IT Solution.  Typically, the Group invoices for 30% of the project fee on signing. These fees are intended to cover time costs incurred for initial planning of the project, soliciting and coordinating with the potential vendors, project management costs and preparing all documentation in relation to the project. Development of the solution including debugging and testing are the key performance obligations under the DBP Contract. Upon the final completion of the project, the client is expected to execute a UAT (User Acceptance Testing) confirmation signifying the final closure of the project, at which point a final invoice for the balance is issued.  Income is recognised over time under the output method, which looks at the measure of progress of the asset being transferred to the customer, in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

For each Service Level Agreement (SLA) there are agreed values attached to each element of performance obligation. Income is recognised for each such performance obligation as follows:

-       Project and website management: Over the period of the contract (typically 6 months)

-       Documentation of system - gateway and infrastructure: At point of completion

-       Technical development of web systems: At point of completion

-       IT support: Post completion over 12 months

-       Maintenance (including bug fixes): Post completion over time

-       Training: Post completion on provision of manual to customer

-       Website hosting: Post completion over 12 months

-       Warranty: Post completion over 12 months

In most cases, the measurement of revenue (when recognised over time) will not be the same as amounts invoiced to a customer. In these circumstances, the Company will recognise either a contract asset (accrued income) or a contract liability (deferred income) for the difference between cumulative revenue recognised and cumulative amounts billed for that contract. For income recognised over time, management estimates the percentage of work completed by reference to each customer.

The Group has been seeking larger project management contracts to support its turnaround efforts. In September 2021, a contract was signed with a total value of US$552,500 (approximately £404,000). In November 2021, the Group received US$128,400 (approximately £94,000) as a first deposit and kick start payment under the contract and work commenced shortly afterwards. No revenue under this contract has been recognised in the year as no work had been commenced or costs incurred prior to the year end and hence no milestones had been achieved.

(v)        Software development contractual income

Alcodes International delivers IT projects based on the Hong Kong government grant schemes for IT solutions providers. During the year the revenue earned was based on delivery of performance obligation based on the estimate of the percentage completed as judged by management.

e) Foreign currency transactions and translation

Functional and presentational currencies

The presentational currency of AIQ Limited and the Group is Pound Sterling. The functional currency of the Company and Group is also Pound Sterling. This is based on the principal currency of expenditure and the Company's fundraising activities, all being in Sterling.

The functional currency of Alchemist Codes Sdn Bhd is Malaysian Ringgit, being the currency in which the majority of the company's transactions are denominated.

The functional currency of Alcodes International Limited is the Hong Kong dollar, being the currency in which the majority of the company's transactions are denominated.

In preparing the financial statements of the individual entities, transactions in currencies other than the entity's functional currency are recorded at the rate of exchange prevailing on the date of the transaction.

At the end of each financial year, monetary items denominated in foreign currencies are retranslated at the rates prevailing as of the end of the financial year. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on retranslation of monetary items are included in profit or loss for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity. For such non-monetary items, any exchange component of that gain or loss is also recognised directly in equity.

In order to satisfy the requirements of IAS 21 with respect to presentation currency, the consolidated financial statements have been translated into Pound Sterling using the procedures outlined below:

•     Assets and liabilities where the functional currency is other than Pounds were translated into Pounds at the relevant closing rates of exchange;

•      non-Sterling trading results were translated into Pounds at the relevant average rates of exchange; and

•      differences arising from the retranslation of the opening net assets and the results for the period are recognised in other comprehensive income and taken to the foreign currency translation reserve.

f) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.

Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives are as follows:

Computers                                                                       5 years

Furniture and fittings                                                       10 years

Office equipment                                                             10 years

Renovations                                                                    10 years

Depreciation methods, useful lives and residual values are reviewed at each balance sheet date.

g) Intangible assets

With the exception of goodwill, intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and accumulated impairment losses. All intangible assets have been fully impaired however they remain in use by the business. All intangible assets purchased during the year have been expensed.

Goodwill

Goodwill represents the amount by which the fair value of the cost of a business combination exceeds the fair value of the net assets acquired. Goodwill is not amortised and is stated at cost less any accumulated impairment losses.

The recoverable amount of goodwill is tested for impairment annually or when events or changes in circumstance indicate that it might be impaired. Impairment charges are deducted from the carrying value and recognised immediately in the income statement. For the purpose of impairment testing, goodwill is allocated to each of the Group's cash generating units expected to benefit from the synergies of the combination. If the recoverable amount of the cash generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period. 

Acquisition-related intangible assets

Net assets acquired as part of a business combination includes an assessment of the fair value of separately identifiable acquisition-related intangible assets, in addition to other assets, liabilities and contingent liabilities purchased. These are amortised on a straight-line basis over their useful lives which are individually assessed. Useful lives are regularly reviewed.

The estimated useful lives of the Group's intangible assets are as follows:

·      OctaPLUS Platform    3 years                                                       

·      Messenger App          3 years

·      Software                     3 years

As more fully described in Note 12, each of these intangible assets were fully impaired in the prior year.

h) Research and development expenditure

Research expenditure is recognised as an expense when it is incurred.

Development expenditure is recognised as an expense except that costs incurred on development projects are capitalised as long-term assets to the extent that such expenditure is expected to generate future economic benefits. Development expenditure is capitalised if, and only if an entity can demonstrate all of the following:-

(i)     its ability to measure reliably the expenditure attributable to the asset under development;

(ii)    the product or process is technically and commercially feasible;

(iii)   its future economic benefits are probable;

(iv)   its ability to use or sell the developed asset; and

(v)    the availability of adequate technical, financial and other resources to complete the asset under development.

Capitalised development expenditure is measured at cost less accumulated amortisation and impairment losses, if any. Development expenditure initially recognised as an expense is not recognised as assets in subsequent periods.

i) Impairment of financial assets 

IFRS 9 "Financial Instruments" requires an expected credit loss model as opposed to an incurred credit loss model under IAS 39 "Financial Instruments: Recognition and Measurement". The expected credit loss (ECL) model requires the Group to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition of the financial assets. The credit event does not have to occur before credit losses are recognised. IFRS 9 "Financial Instruments" allows for a simplified approach for measuring the loss allowance at an amount equal to lifetime expected credit losses for trade receivables and contract assets.

The Group has one type of financial asset subject to the expected credit loss model: trade receivables.

The Group recognises a loss allowance for expected credit losses on trade receivables. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument.

The expected credit losses are estimated using a provision based on the Group's historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date, including time value of money where appropriate.

As the Group is at an early stage and the volume of sales is very low, it does not have significant amounts of historic information on credit losses. Accordingly, only specific provisions have been made. To analyse and adjust for any expected credit loss would likely skew the reported results for the year.

The Group considers a financial asset in default when contractual payments are between 30 to 180 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group.  A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.

j) Impairment of non-financial assets 

At each reporting date, the Directors assess whether indications exist that an asset may be impaired. If indications do exist, or when annual impairment testing for an asset is required, the Directors estimate the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating unit's fair value less costs to sell and its value-in-use, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the Directors consider the asset impaired and write the subject asset down to its recoverable amount. In assessing value-in-use, the Directors discount the estimated future cash flows to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, the Directors consider recent market transactions, if available. If no such transactions can be identified, the Directors utilise an appropriate valuation model.

When applicable, the Group recognises impairment losses of continuing operations in the "Statements of Profit or Loss and Other Comprehensive Income" in those expense categories consistent with the function of the impaired asset.

k) Right of use assets

A right of use asset is recognised at the commencement date of a lease. The right of use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset. 

Right of use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Right of use assets are subject to impairment or adjusted for any re-measurement of lease liabilities.  

The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred.

l) Leases

Except for short-term leases and leases of low-value assets, right of use assets and corresponding lease liabilities are recognised in the statement of financial position. Straight-line operating lease expense recognition is replaced with a depreciation charge for the right-of-use assets (included in operating costs) and an interest expense on the recognised lease liabilities (included in finance costs).

Lease liabilities are recognised at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease. If this rate cannot be readily determined, the Company's incremental borrowing rate is used. The discount rate estimated by management is 6% per annum. The current Malaysian base rate is 1.75% and the premium of 4.25% is considered reasonable given the nature of the asset.

Payments associated with all short-term leases and certain leases of all low-value assets are recognised on a straight-line basis as an expense in profit or loss. The Company applies the exemption for low-value assets on a lease-by-lease basis i.e. for the leases where the asset is sub-leased, a right-of-use asset is recognised with corresponding lease liability; for all other leases of low value asset, the lease payments associated with those leases will be recognised as an expense on a straight-line basis over the lease term. Short-term leases are leases with a lease term of 12 months or less.  Low-value assets comprise computers, tablets, mobile phones and small items of office furniture.

m) Financial instruments

Financial assets and financial liabilities are recognised in the Consolidated Statement of Financial Position when the Group becomes a party to the contractual provisions of the instruments. Financial assets and financial liabilities are initially measured at fair value.

Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.

Non-derivative financial instruments

Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, and trade and other payables.

Trade and other receivables

Trade and other receivables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective interest method, less any impairment losses.

Trade and other payables

Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective interest method.

Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits.

n) Financial assets

(i)  Initial recognition and measurement

The Company classifies its existing financial assets as financial assets carried at amortised cost. The classification depends on the nature of the assets and the purpose for which the assets were acquired. Management determines the classification of its financial assets at initial recognition and this designation at every reporting date. 

Financial assets carried at amortised cost

Financial assets carried at amortised cost are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are presented as current assets, except for those expected to be realised later than twelve months after the reporting date which are classified as non-current assets. They include cash and bank balances, and a rental deposit. 

Subsequent to initial recognition, these assets are measured at amortised cost using the effective interest rate method, less impairment.

Impairment of financial assets is considered using a forward-looking expected credit loss (ECL) review.

(ii)  De-recognition

Financial assets are de-recognised when the contractual rights to receive cash flows from the financial assets have expired or have been transferred and the Company has transferred substantially all the risks and rewards of ownership. On de-recognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss.

o) Financial liabilities

The Company's financial liabilities include trade and other payables and accruals. Financial liabilities are recognised when the Company becomes a party to the contractual provision of the instrument. All financial liabilities are recognised initially at their fair value, net of transaction costs, and subsequently measured at amortised cost, using the effective interest method, unless the effect of discounting would be insignificant, in which case they are stated at cost.

The Company derecognises financial liabilities when, and only when, the Company's obligations are discharged, cancelled or they expire.

p) Share capital

Proceeds from issuance of ordinary shares are classified as equity. Amounts in excess of the nominal value of the shares issued are recognised as share premium.

Transaction costs that are directly attributable to the issue of share capital are deducted from share premium.

q) Taxation

Current tax

Current tax is the expected amount of income taxes payable in respect of the taxable profit for the reporting period and is measured using the tax rates that have been enacted or substantively enacted at the end of the reporting period, and any adjustment to tax payable in respect of previous financial years.

Deferred tax

Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Group's Financial Statements. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and expected to apply when the related deferred tax is realised or the deferred liability is settled.

Deferred tax assets are recognised to the extent that it is probable that the future taxable profit will be available against which the temporary differences can be utilised.

r) Cash and cash equivalents

Cash and cash equivalents include cash in hand, demand deposits and other short-term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

s) Finance income and expense

Finance income comprises interest receivable on funds invested.

Interest income and interest payable is recognised in profit or loss as it accrues, using the effective interest method. 

t) Employee benefits

Short-term benefits

Short-term employee benefit obligations; wages, salaries, paid annual leave, sick leave, bonuses and non-monetary benefits, are measured on an undiscounted basis and are expensed in the profit or loss as the related service is provided.  A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

Long-term benefits

Defined contribution plans

The income statement expense for the defined contribution pension plans operated represents the contributions payable for the year. As required by law, companies in Malaysia make contributions to the state pension scheme, the Employees Provident Fund ("EPF") which is charged to profit or loss in the year to which they relate. Once the contributions have been paid, the Group has no further liabilities in respect of the defined contribution plans.

u) Earnings per share

Basic earnings per share is computed using the weighted average number of shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of shares during the period plus the dilutive effect of dilutive potential ordinary shares outstanding during the period.

4.   ACCOUNTING ESTIMATES AND JUDGEMENTS

Preparation of financial information in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources.

The key estimates and underlying assumptions concerning the future and other key sources of estimation uncertainty at the statement of financial position date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. In particular:

Key judgments

Going concern

As more fully described above, the Directors have prepared forecasts and projections for the Group for the purposes of assessing the Company's going concern assumptions.

The Directors have concluded that it is appropriate to adopt the going concern basis of accounting in preparing the Annual Report.

Key estimates

Impairment reviews

IFRS requires management to undertake an annual test for impairment of indefinite lived assets and, for finite lived assets, to test for impairment if events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Impairment testing is an area involving management judgement, requiring assessment as to whether the carrying value of assets can be supported by the net present value of future cash flows derived from such assets using cash flow projections which have been discounted at an appropriate rate. In calculating the net present value of the future cash flows, certain assumptions are required to be made in respect of highly uncertain matters including management's expectations of:

•      growth in EBITDA, calculated as adjusted operating profit before depreciation and amortisation;

•      long-term growth rates; and

•      the selection of discount rates to reflect the risks involved.

The Group prepares and approves a detailed annual budget and longer-term strategic plan for its operations, which are used in the fair value calculations.

Changing the assumptions selected by management, in particular the discount rate and growth rate assumptions used in the cash flow projections, could significantly affect the Group's impairment evaluation and hence results.

Goodwill of £546,874 relating to the acquisition of Alchemist Codes was allocated to the Alchemist Codes business and represents a Cash Generating Unit ("CGU") and was tested for impairment last year. The goodwill and other intangible assets were tested for impairment on the basis of value in use, including a discount rate of 22.4% based on the rate that would be used by a market participant. These impairment tests indicated an impairment loss was required and this loss has resulted in the full write-down of goodwill and intangibles arising from the acquisition of Alchemist Codes. The assets remain fully impaired.

Revenue recognition

The Group earns project management and coordination revenues. In the current year, these primarily related to website development costs for clients. Revenue is recognised progressively over time based on milestones and customers' acceptance. During the year the revenue earned was recognised on the delivery of performance obligations based on the estimate of the percentage completed as judged by management.

The performance obligations extend over several months with milestone obligations over the term of the service agreement.

Any changes to the Directors' estimates of the percentage of completion of a project would impact on the level of income recognised in the year.

MSC Pioneer Status

In Malaysia, Alchemist Codes has applied for MSC Pioneer Status which, if granted, would result in the company becoming income tax exempt. Although the application has been submitted there is no certainty as to whether Alchemist Codes will be successful in obtaining MSC Pioneer Status. Alchemist Codes continues to account for tax and makes scheduled tax payments, which are recoverable if the Pioneer status is granted. The Directors are of the view that this tax is probably recoverable and have included the receivable in the balance sheet.

5.   REVENUE

             All revenues were generated in Asia.

During the year ended 31 October 2021, one customer accounted for £35,424 (57.26%) (2020: one customer accounted for £85,304 (55.15%)) of the Group's revenues. No other customers accounted for more than 10%. 

An analysis of revenue by the timing of the delivery of goods and services to customers for 2021 is as follows:

Revenue in 2020 was entirely from services transferred over time.

6.   SEGMENT REPORTING

IFRS 8 defines operating segments as those activities of an entity about which separate financial information is available and which are evaluated by the Board of Directors to assess performance and determine the allocation of resources. The Board of Directors is of the opinion that under IFRS 8 the Group has only one operating segment, the sale of software and ancillary services. The Board of Directors assesses the performance of the operating segment using financial information that is measured and presented in a manner consistent with that in the Financial Statements. Segmental reporting will be reviewed and considered in light of the development of the Group's business over the next reporting period.

7.   OPERATING LOSS BEFORE TAXATION

              Loss from operations has been arrived at after charging and (crediting):

8.   STAFF COSTS AND KEY MANAGEMENT EMOLUMENTS

Key management personnel are considered to be the directors and one senior member of staff. Their remuneration was as follows:

Included within accruals is £7,666 (2020: £23,196), which relates to Directors' remuneration yet to be paid.

The average monthly number of employees (including directors) during the year ended 31 October 2021 was as follows:

9.   TAXATION

The Company is incorporated in the Cayman Islands, and its activities are subject to taxation at a rate of 0%.

In Malaysia, Alchemist Codes has applied for MSC Pioneer Status which, if granted, would result in the Company becoming income tax exempt. Although the application has been submitted there is no certainty as to whether Alchemist Codes will be successful in obtaining MSC Pioneer Status. Alchemist Codes continues to account for tax and makes scheduled tax payments, which are recoverable if the Pioneer status is granted. A total of RM133,200 has been paid on account in this regard (equivalent to £24,764). As outlined in note 4, the Directors are of the view that this tax is probably recoverable and have included the receivable in the balance sheet.

The income tax rate in Malaysia is calculated at the Malaysian statutory tax rate of 24% of the chargeable income for the year, except for companies with paid-up capital of RM2.5m (approximately £470k) and below at the beginning of the basis period and gross income from source of business not exceeding RM50m (approximately £9.4m), the first RM600k (approximately £110k) of chargeable income is subject to tax at a rate of 17%.

A reconciliation of income tax applicable to the loss before taxation at the effective tax rate of Alchemist Codes is as follows:

10.  LOSS PER SHARE

The Company presents basic and diluted loss per share information for its ordinary shares. Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares in issue during the reporting period. Diluted earnings per share are determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.

There is no difference between the basic and diluted earnings per share, as the Company has no potential ordinary shares.

12.  INTANGIBLE ASSETS

Goodwill and acquisition related intangible assets arising from the acquisition of Alchemist Codes were fully impaired in the prior year. The OctaPLUS Platform and Messenger App were also fully impaired and any development costs relating to the OctaPLUS Platform and Messenger App incurred during the year have been expensed to profit and loss.

No research and development costs were capitalised in the year. The amount expensed during the year was £5,728.

13.  RIGHT OF USE ASSETS AND LEASE LIABILITIES

Future minimum lease payments associated with these leases were as follows:

The lease may be extended at the end of its two-year term for a further two years, at a new rental rate to be based on the prevailing market rate provided, that in the event that there is any increase in rental, such increase shall not exceed 15% of the preceding's rental rate. No option to extend has been assumed in the above calculations.

Short-term leases are recognised on a straight-line basis as an expense in profit or loss. In the year, £23,018 (2020: £13,051) was charged as an expense.

14.  TRADE AND OTHER RECEIVABLES

All balances are reviewed specifically due to the limited number of receivables and limited history of average rates of default losses to rely on. The increase in the provision for expected credit losses rose from £nil brought forward to £2,354 at the end of the year.

15.  CASH AND CASH EQUIVALENTS

Cash at bank earns interest at floating rates based on daily bank deposit rates.

16.  TRADE PAYABLES

17.  ACCRUALS AND OTHER PAYABLES

18.  SHARE CAPITAL

The holders of Ordinary Shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.

19.  FOREIGN CURRENCY TRANSLATION RESERVE

The foreign currency translation reserve represents cumulative foreign exchange differences arising from the translation of the financial statements of foreign subsidiaries and is not distributable by way of dividends.

20.  FINANCIAL RISK MANAGEMENT

a) Categories of financial instruments

The carrying amounts and fair value of the Group's financial assets and liabilities as at the end of the reporting period are as follows:

Financial liabilities at amortised cost:

The financial assets and financial liabilities maturing within the next 12 months approximate their fair values due to the relatively short-term maturity of the financial instruments.

b) Financial risk management objectives and policies

The Group is exposed to a variety of financial risks: market risk (including interest rate risk and currency risk), credit risk and liquidity risk. The risk management policies employed by the Company to manage these risks are discussed below. The primary objectives of the financial risk management function are to establish risk limits, and then ensure that exposure to risk stays within these limits. The operational and legal risk management functions are intended to ensure proper functioning of internal policies and procedures to minimise operational and legal risks.

i)          Interest rate risks

Certain cash holdings and cash equivalents are held in accounts with variable rates. If interest rates were to increase or decrease by 2%, the effect would not be material.

ii)          Currency risks

The Group is exposed to exchange rate fluctuations as certain transactions are denominated in foreign currencies.

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate due to changes in foreign exchange rates. The Group's exposure to the risk of changes in foreign exchange rates relates primarily to its financing activities (when cash balances are denominated other than in a company's functional currency).

Most of the Group's transactions are carried out in Pounds, Malaysian Ringgit ('RM') and Hong Kong Dollar ('HK$'). Foreign currency risk is monitored closely on an ongoing basis to ensure that the net exposure is at an acceptable level.

The Group maintains a natural hedge whenever possible, by matching the cash inflows (revenue stream) and cash outflows used for purposes such as capital and operational expenditure in the respective currencies. The Group's net exposure to foreign exchange risk was as follows:

Foreign currency sensitivity analysis:

The following tables demonstrate the sensitivity to a reasonably possible change in foreign currency exchange rates, with all other variables held constant.

The impact on the Group's loss before tax is due to changes in the fair value of monetary assets and liabilities. The Group's exposure to foreign currency changes for all other currencies is not material. 

A 10 per cent. movement in US Dollar ($) would increase/(decrease) net assets by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant.

At 31 October 2021 the Company had £427,511 (2020: £893,965) of cash and cash equivalents in United States Dollar accounts. At 31 October 2021, had the exchange rate between the Pound Sterling and United States Dollar increased/decreased by 10%, the effect on the result in the period would be a gain of £42,751 (2020: £89,396) / loss of £42,751 (2020: £89,396).

At 31 October 2021 the Company had £71,758 (2020: £894,587) of cash and cash equivalents in Malaysian Ringgit accounts. At 31 October 2021, had the exchange rate between the Pound Sterling and Malaysian Ringgit increased/decreased by 10%, the effect on the result in the period would be a gain of £7,176 (2020: £89,459) / loss of £7,176 (2020: £89,459).

At 31 October 2021 the Company had £13,129 (2020: £14,758) of cash and cash equivalents in Hong Kong Dollar accounts. At 31 October 2021, had the exchange rate between the Pound Sterling and Hong Kong Dollar increased/decreased by 10%, the effect on the result in the period would be a gain of £1,313 (2020: £1,476) / loss of £1,313 (2020: £1,476).

iii)         Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. Credit allowances are made for estimated losses that have been incurred by the reporting date. No such amounts have been made to date.

Concentrations of credit risk exist to the extent that the equivalent of £494,371 of the Group's cash balances were held with DBS Bank Limited in Singapore and the equivalent of £43,507 was held with Hong Leong Bank in Malaysia.

S&P Global Ratings affirmed on 31 October 2021 the issuer credit ratings of DBS Bank Limited at AA-. Hong Leong Bank's was recently downgraded by Fitch from A- to BBB+.

Accordingly, the Company considers that the credit risk in relation to its cash holding to be low.

iv)         Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities. The Company's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation.

The Group's financial liabilities are primarily trade and other payables. The amounts are unsecured, interest-free and repayable on demand. Details of trade payables are found in Note 16.

21.  CAPITAL MANAGEMENT

The Group manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the balance between debt and equity.

The capital structure of the Group as at 31 October 2021 consisted of Ordinary Shares and equity attributable to the shareholders of the Company, totalling £676,652 (2020: £1,863,724) (disclosed in the statement of changes in equity).

The capital structure is reviewed on an on-going basis. As part of this review, the Directors consider the cost of capital and the risks associated with each class of capital.

22.  RELATED PARTY TRANSACTIONS

The remuneration of the Directors of the Company is set out in the Report of the Remuneration Committee.

A total of £41,000 (2020: £42,000) was paid during the year to Luther Pendragon for financial PR services, a company in which Harry Chathli is a director and shareholder.

Included within accruals is £7,667 (2020: £23,196), which relates to Directors' remuneration outstanding and £1,457 (2020: £nil) relating to KMP salaries.

A total of £11,000 (2020: £24,000) was paid during the year to Graham Duncan Limited for accounting services, a company in which Graham Duncan is a director and shareholder.

A total of £9,500 (2020: £nil) was paid to Ever Billions International Limited for general management services, a company in which Li Chun Chung is a director. Additionally, revenue for project management services of £3,020 was recognised during the year and £1,836 recognised as deferred revenue at year end.

A total of £2,900 (2020: £nil) was paid to Credigroup Fiduciary Services for payment processing services, a company in which Ng Chun Fai, Senior Manager of the Group, is a director.

Revenue from AI Sport Asia for project management services, a company in which Ng Chun Fai is a director, of £231 was recognised during the year and £1,544 recognised as deferred revenue at year end.

Revenue from Consortium Family Office Ltd for project management services, a company in which Ng Chun Fai is a director, of £2,520 was recognised during the year and £1,897 recognised as deferred revenue at year end.

The related party transactions were made on terms equivalent to those that prevail in arm's length transactions.

23.  MATERIAL SUBSEQUENT EVENTS

Issue of convertible loan notes

On 24 January 2022, the Company entered into a convertible loan note instrument constituting up to £1,000,000 of unsecured convertible loan notes with an expiry date of 24 January 2024. Pursuant to this instrument, the Company immediately raised £500,000 through the issue of unsecured convertible loan notes (the "Loan Notes") to several existing investors (together the "Noteholders"), including an Executive Director of the Company. The net proceeds of the Loan Notes will be used for working capital purposes.

Terms of the Loan Notes

The Loan Notes have an expiration date of 24 January 2024 ("Expiration Date") and can be repaid, in part or in full, by the Company on 31 December in any year prior to the Expiration Date by giving not less than 14 days' written notice to the Noteholders. All outstanding Loan Notes attract interest at a rate of 5% per day from the date of issue (24 January 2022) to the date of repayment or conversion.

The Loan Notes shall be convertible into new Ordinary Shares of the Company at the lesser of 11 pence per Ordinary Share or the Volume Weighted Average Price of the Company's Ordinary Shares on the London Stock Exchange in the seven-day period prior to the date on which the Loan Note is converted into Ordinary Shares. The Loan Notes shall be convertible, in part or in full, at any time from the date of issue until the Expiration Date by the Noteholder giving to the Company at least one week's written notice (the "Conversion Notice").

In the event of the Company receiving a Conversion Notice in circumstances where the Company would be required to publish a prospectus in relation to the application to trading of such Ordinary Shares, the Company shall have the sole right to reject such notice. In addition, a Noteholder shall not be permitted to issue a Conversion Notice if they are in possession of any unpublished price sensitive or inside information as such terms are defined in the UK Criminal Justice Act 1993 and the Market Abuse Regulation (as in force in the United Kingdom).

The Loan Notes have been issued to the Noteholders as follows:

•      £250,000 to Li Chun Chung, an Executive Director of the Company and who has an interest in 1,425,500 ordinary shares in the Company ("Ordinary Shares"), representing 2.2% of the Company's issued share capital

•      £125,000 to Soon Beng Gee who has an interest in 11,766,650 Ordinary Shares, representing 18.2% of the Company's issued share capital

•      £125,000 to Lee Chong Liang who has an interest in 11,766,650 Ordinary Shares, representing 18.2% of the Company's issued share capital

24.  ULTIMATE CONTROLLING PARTY

As at 31 October 2021, no one entity owns greater than 50% of the issued share capital, or holds significant control over the Company. Therefore, the Directors have determined the Company does not have an ultimate controlling party.

25.  COVID-19

SARS-CoV-2 ("COVID-19") has continued to severely impact the Group's revenues and results for the year. The stringent lockdown measures still being taken by the Malaysian government - known as "movement control orders" (MCO), which were in effect throughout the year; and the economic downturn and uncertainty continues to negatively impact customers' budget availability and the willingness to commit resources to new projects. The pandemic also severely impacted the rollout of the Group's e-commerce solution, OctaPLUS, which resulted in this area of the business closing.

Hong Kong is showing signs of improving and this appears to be the Groups best opportunity for growth in the future.

Whilst significant cost cutting measures and reorganisations have been put into effect these savings have not been augmented by revenue improvements during the year.

The pandemic continues to have a profound impact on the Group's operations, with MCO measures in Malaysia still in place as the pace of emerging from the pandemic in the region remains slow.