Source - LSE Regulatory
RNS Number : 3768R
AIQ Limited
28 February 2023
 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF EU REGULATION 596/2014, WHICH IS PART OF UK LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018.

 

28 February 2023

 

For Immediate Release

 

AIQ Limited

("AIQ" or the "Company" or, together with Alchemist Codes and Alcodes International, the "Group")

 

Final Results and Publication of Annual Report

 

The Board of AIQ (LSE: AIQ) announces the Company's final results for the year ended 31 October 2022.

Summary

·    Completed contract to supply a decentralised finance ("DeFi") exchange ("DEX") to a customer based in Australia

·    Awarded a contract to supply a non-fungible token ("NFT") marketplace for education applications in Hong Kong, which was completed post period

·      Revenue for the twelve months ended 31 October 2022 increased to £498k (2021: £62k)

·      Net loss for the year was reduced to £641k (2021: £1.2m loss)

·      Cash and cash equivalents of £636k at 31 October 2022 (31 October 2021: £582k), having raised £500k through the issue of unsecured convertible loan notes

 

Harry Chathli, Chairman of AIQ, said: "We entered the year having decided to pivot to focus on the provision of IT consultancy services to customers who deliver blockchain technology and digital assets, such as NFTs. We had some success during 2022 in capitalising on the lack of IT solutions providers in Asia that specialise in the delivery of blockchain platforms, including forming partnerships with key solutions providers and completing a contract to project manage the supply of a decentralised finance exchange to a customer based in Australia.   

 

"While there have been initial signs of progress during 2022 and subsequently, revenue generation remains low as the environment for NFT projects comes under pressure. We continue to receive interest and are hopeful of generating growth for the full year, but we expect this to be second-half weighted. Consequently, the Board continues to closely monitor the cash position and forecasts, and to contain expenditure levels. On behalf of the Board, I would like to thank all of our shareholders for their continued support and we hope to be able to provide an update on progress with our strategy in due course."    

 

 

Enquiries

 

AIQ Limited

c/o +44 (0)20 4582 3500

Harry Chathli, Chairman




Guild Financial Advisory Limited (Financial Adviser)

+44 (0)7973839767

Ross Andrews




Gracechurch Group (Financial PR)

+44 (0)20 4582 3500

Claire Norbury



Operational Review

 

The Group's largest project during the year was the delivery of a contract, which had been secured at the end of the previous year, to supply a DeFi DEX to a customer based in Australia. For this project, the Group performed the role of project manager and subcontracted the technical delivery (such that the net benefit to the Group is the margin earned on the contract). The majority of the project was delivered during the first half, with completion occurring in the second half of the year.

 

AIQ took its first step into the NFT marketplace with the award of a contract to supply an NFT platform designed to enable art schools and education centres in Hong Kong to assist their students in publishing NFTs on a blockchain platform. The Group commenced delivery during the year and completed it post period. As with the DeFi DEX, the Group performed the role of project manager herein as well. The platform is fully operational and the customer is expected to engage the Group to administer and maintain the portal for 12 months. The Group is also in discussions with the customer regarding expanding the coverage of the platform from its current focus on Hong Kong to other regions.

  

The Group also continued to secure and deliver ICT projects (not blockchain related) in its regular IT consultancy business in Hong Kong. However, this business only accounts for a small proportion of revenue and is not a focus of the Group's strategy. 

 

An important focus for during the year was seeking to establish partnerships to enable the Group to expand its network and offer. This resulted in a number of collaborations that supported the delivery of the projects mentioned above as well as some exciting prospects for 2023. In particular, the Group is having positive discussions with potential partnerships that would expand its offer to customers wishing to build infrastructure for the Blockchain-based Service Network (BSN) Spartan Network. The BSN Spartan Network, which was beta launched in September 2022, is a public infrastructure network that provides non-cryptocurrency blockchain services and is based on data centre software, which is open source, free and anonymous for anyone to install. By removing cryptocurrencies, the BSN Spartan Network aims to make this infrastructure available to any IT system globally. While it is early days, the Group has received interest from several potential customers in this area.   

 

Financial Review

 

Revenue for the twelve months to 31 October 2022 was £498,388, compared with £61,863 for the previous year, a period in which sales were severely impacted by the pandemic. The revenue was primarily based on the delivery of the DeFi DEX contract, which accounted for £438,824, with £35,141 from the NFT contract and a £22,331 contribution from IT projects in Hong Kong.

 

The Group recognised a gross profit of £113,926 compared with a gross loss of £188,807 for the previous year. This reflects the significantly higher revenues and lower staff costs directly engaged on projects.

 

Administrative expenses were reduced to £682,722 (2021: £864,601) as the Group implemented cost control measures. The Group recognised a net gain on foreign exchange of £74,031 (2021: £126,698 loss) due to the strengthening of the Malaysian Ringgit, HK Dollar and US Dollar against the Pound during the year. However, this was counteracted by an impairment charge of £133,682 related to expenditure on improvements in furniture and fixtures in the Group's Malaysian office where the lease is due to expire in July 2023 and a decision has not yet been taken as to whether it will be renewed. While the lease may be renewed, the Group has taken the prudent approach of brining the value of those assets down to £nil.

 

Even with the impairment charge, the lower expenses and gain on foreign exchange together with higher revenues combined to reduce operating loss for the year to £616,245 (2021: £1,180,106 loss).

 

Net finance costs were £24,934 compared with £14,806 for the previous year. The increase relates to the accrual of interest on the convertible loan notes that were issued during the year.  

 

Loss before tax for the year was reduced to £640,906 (2021: £1,192,820 loss) and the loss per share to 1.0 pence (2021: 1.8 pence loss per share).

 

The Group had cash and cash equivalents of £636,459 at 31 October 2022 (31 October 2021: £581,618). This follows the Group raising £500,000 in January 2022 from the issue of convertible loan notes ("Loan Notes"). The Loan Notes are classified as non-current liabilities as the noteholders have confirmed to the Company that they do not intend to convert the Loan Notes in the next 12 months.

 

Going Concern

 

The financial statements have been prepared on a going concern basis.

 

In assessing whether the going concern assumption is appropriate, the Directors take into account all available information for the foreseeable future, in particular for the 12 months from the date of approval of the financial statements, and perform scenario planning thereon. This information includes management prepared cash flows forecasts for the Group. The Directors have assessed that to meet its forecasted cash requirements, the Group is dependent on cash generated from the successful winning of revenue contracts and/or further funding. Whilst there is no indication at the date of the signing of these financial statements that these new revenue contracts will not be forthcoming, there can be no certainty that it will be successful.

 

Based on the new contract win and successful cost management in the current year and significant prospective customer pipeline, the Directors are confident that the Group will be able to generate sufficient resources to meet liabilities as they fall due for at least 12 months from the date of approval of the financial statements.

 

Accordingly, the financial statements have been prepared on a going concern basis and do not include any adjustments that would result if the Group was unable to continue as a going concern.

 

The auditors make reference to going concern by way of material uncertainty within their audit report in the Company's annual report and accounts.

 

Publication of Annual Report

 

The Company's annual report and accounts for the year ended 31 October 2022 has been published today and is available on the AIQ website at: https://aiqhub.com/investors/financial-reports/  

 


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 OCTOBER 2022

 

 

 

 

 

 

 

 

 

 

 

Note

 

 

Year ended

31 October

2022

 

£

 

Year ended

31 October

2021

 

£

Revenue

5


498,388

61,863

Cost of sales



(384,462)

(250,670)

Gross profit/(loss)



113,926

(188,807)






Other income

6


12,202

-






Administrative expenses

8


(682,722)

(864,601)

Impairment charge

13


(133,682)

-

Gain/(losses) on foreign exchange



74,031

(126,698)

Operating loss



(616,245)

(1,180,106)






Finance income



273

447

Finance costs



(24,934)

(13,151)

Loss before taxation



(640,906)

(1,192,820)

Taxation

10


-

(2,109)

Loss attributable to equity holders of the Company



 

(640,906)

 

(1,194,929)






Other comprehensive income (as may be reclassified to profit and loss in subsequent periods, net of taxes):





Exchange difference on translating foreign operations



 

(2,902)

 

16,949






Comprehensive income attributable to equity holders of the Company



 

(643,808)

 

(1,177,980)






Earnings per share basic and diluted (£)

11


(0.010)

(0.018)

 

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

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

 



 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 OCTOBER 2022

 


Note

 

 

As at

31 Oct 2022

£

As at

31 Oct 2021

£

Assets






 






Non-current assets






Property, plant and equipment

12



12,270

175,207

Right of use assets

14



73,026

163,410

Rental deposits




-

29,834

 




85,296

368,451

 






Current assets






Trade and other receivables                        15



66,408

127,414

Tax receivable                                            



-

23,489

Cash and cash equivalents

16



636,459

581,618

Total current assets




702,867

732,521

Total assets




 788,163

 1,100,972

 

Equity and liabilities






Capital and reserves






Share capital

20



647,607

647,607

Share premium




6,019,207

6,019,207

Share warrant reserve

22



12,000

-

Foreign currency translation reserve

 

21



 

6,428

 

9,330

Accumulated losses




(6,631,306)

(5,990,400)

Total equity




53,936

685,744

 






Liabilities






Current liabilities






Trade payables                                           17



-

1,075

Accruals and other payables                      18



137,714

244,664

Lease restoration provision

19


18,500

-

Lease liabilities                                           14



78,013

94,672

Total current liabilities




234,227

340,411







Non-current liabilities






Lease liabilities

14



-

74,817

Convertible loan notes

23



500,000

-

Total non-current liabilities




500,000

74,817

Total equity and liabilities




788,163

1,100,972

 

The accompanying notes form an integral part of these consolidated financial statements. The financial statements were approved and authorised for issue by the Board of Directors on 28 February 2023 and signed on its behalf by:

 

 

Li Chun Chung,

Executive Director

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 OCTOBER 2022


 

 

 

Share

capital

 

 

Share premium

Share warrant reserve

Foreign currency translation reserve

 

 

Accumulated losses

 

 

 

Total equity

 


 

£

£

£

    £

£

 

£

 




 

Balance as at 31 October 2020               

647,607

6,019,207

-

 

(7,619)

(4,795,471)

 

1,863,724

 

Total comprehensive loss for the year

 

-

-

-

 

 

16,949

(1,194,929)

 

(1,177,980)

Balance at 31 October 2021

647,607

6,019,207

-

 

9,330

(5,990,400)


685,744

 

Total comprehensive loss for the year

 

-

-

-

 

 

(2,902)

(640,906)

 

   (491,628)

Share warrant reserve

 

-

-

12,000

-

-

 

12,000

 

Balance at 31 October 2022

647,607

6,019,207

12,000

6,428

(6,631,306)

 

53,936

 

 

Share premium - Represents amounts received in excess of the nominal value on the issue of share capital less any costs associated with the issue of shares.

 

Accumulated losses - The accumulated losses reserve includes all current and prior periods retained profits and losses.

 

Share warrant reserve - Amount arising on the issue of warrants during the year.

 

Translation reserve - The translation reserves includes foreign exchange movements on translating the overseas subsidiaries records, denominated MYR and HK$, to the presentational currency, GBP.

 

 

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

 

 

 

 

 

 

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 OCTOBER 2022


 

 

Year ended

31 October

2022

£

 

 

Year ended

31 October 2021

£

Cash flows from operating activities





Loss before taxation


(640,906)


(1,192,820)

Adjustments for:-





Depreciation


123,272


119,328

Impairment charge


133,682


-

Loss on disposal of fixed assets


10,467


-

Share based payment charge


1,000


-

Write off tax receivable


24,493


-

Lease restoration cost


18,500


-

Interest income


(273)


(447)

Interest expense


24,934


-

Foreign exchange


(16,891)


116,106

Operating loss before working capital changes


(321,722)


(957,833)

Decrease/(increase)  in receivables


103,115


(56,318)

Decrease in payables


(108,025)


(46,321)

Tax paid


-


(2,109)

Cash used in operations


(326,632)


(1,062,581)  

Interest received


273


447

 

Net cash used in operating activities


 

(326,359)


 

(1,062,134)






Cash flows from investing activities





Acquisition of plant and equipment


-


(6,540)

Proceeds from sale of fixed assets


512


-

 

Net cash used in investing activities


512


 

(6,540)






Cash flows from financing activities





Proceeds from issue of convertible loan notes


500,000


-

Interest on lease liability


(7,879)


-

Repayment of lease liabilities


(91,476)


(82,512)

 

Net cash inflow/(outflow) in financing activities


400,645


 

(82,512)

 

Net increase/(decrease) in cash and cash equivalents


74,798


 

(1,151,186)

Cash and cash equivalents at beginning of the year


581,618


1,827,379

Effect of exchange rates on cash and cash equivalents


(19,957)


(94,575)

 

Cash and cash equivalents at end of the year


636,459


581,618




 

The non cash movement from financing activities is £18,055 (2021: £Nil) on account of accrual of interest on loan notes £17,055 (refer to Note 23) and share-based payment charge £1,000 (refer to Note 22).

 

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

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

1.  GENERAL INFORMATION

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

The Company's registered office is located at 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:

Name

Place of incorporation

Registered address

Principal activity

Effective interest





31.10.2022

31.10.2021

Alchemist Codes Sdn Bhd

Malaysia

2-9, Jalan Puteri 4/8, Bandar Puteri, 47100 Puchong, Selangor Darul

Ehsan

Malaysia

 

Design and development of software

 

100%

100%

Alcodes International Limited*

Hong Kong

20/F One Pacific Centre, 414 Kwun Tong Road Kwun Tong, Hong Kong

 

Software and app development

 

100%

100%

              * Held by Alchemist Codes Sdn Bhd.

2.  PRINCIPAL ACTIVITIES

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

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

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

3.  ACCOUNTING POLICIES

a)    Basis of preparation

The financial statements have been prepared in accordance with UK adopted international accounting standards (IFRSs).

 

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

 

The financial statements are presented in Pound Sterling ("GBP") which is the functional currency of the Company. The functional currencies of the subsidiaries are Malaysian Ringgit and HK Dollar and they have been converted to GBP as explained in note 3(e). All values are rounded to the nearest pound, except where otherwise indicated.

 

The results for 31 October 2022 are prepared for a 12-month period.

 

New interpretations and revised standards effective for the year ended 31 October 2022

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

 

Other Standards

New standards and interpretations that have been adopted in the annual financial statements for the year ended 31 October 2022, but have not had a significant effect on the Group are:

·      Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16: Interest Rate Benchmark Reform - Phase 2

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

 

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

 

Standards and interpretations in issue but not yet effective

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

·    Amendments to IAS 16: Property, Plant and Equipment

·    Amendments to IAS 37: Provisions, Contingent Liabilities and Contingent Assets

·    Amendments to IAS 1: Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting Policies

·    Amendments to IAS 8: Accounting policies, Changes in Accounting Estimates and Errors - Definition of Accounting Estimates

 

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

 

b) Basis of consolidation

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

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

c) Going concern

The Group incurred losses of £641k during the year and experienced operating cash outflows of £326k. As at 31 October 2022, the Group had net current assets of £469k and cash of £636k. The Group's cash position was approximately £486k at 31 January 2023.

 

During the year, the Company raised £500k through the issue of unsecured convertible loan notes to three existing shareholders as more fully described in Note 23 to the financial statements.

 

The financial statements have been prepared on a going concern basis.

 

In assessing whether the going concern assumption is appropriate, the Directors take into account all available information for the foreseeable future, in particular for the 12 months from the date of approval of the financial statements, and perform scenario planning thereon. This information includes management prepared cash flows forecasts for the Group. The Directors have assessed that to meet its forecasted cash requirements, the Group is dependent on cash generated from the successful winning of revenue contracts and/or further funding. Whilst there is no indication at the date of signing of these financial statements that these new revenue contracts will not be forthcoming, there can be no certainty that it will be successful.

 

Based on the new contract win and successful cost management in the current year and significant prospective customer pipeline, the Directors are confident that the Group will be able to generate sufficient resources to meet liabilities as they fall due for at least 12 months from the date of approval of the financial statements.

 

Accordingly, the financial statements have been prepared on a going concern basis and do not include any adjustments that would result if the Group was unable to continue as a going concern.

 

The auditors make reference to going concern by way of material uncertainty within their audit report.

 

d) Revenue

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

 

(i)         Government grants

Monies received from government grants are recognised as other income.

 

(ii)         Sub-letting income

Income received from sub-letting is netted off against administrative expenses.

 

(iii)        Revenue from maintenance and support contracts

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

 

(iv)         Revenue from merchant contracts

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

 

(v)        Project management and coordination

The Group earns project management and coordination revenues. In the current year, these primarily related to blockchain platform development and digital business platform IT solutions for clients. Revenue is recognised progressively over time based on milestones and customers' acceptance by using the output method. During the year the revenue earned  was recognised on delivery of performance obligation.

 

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

 

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

e) Foreign currency transactions and translation

Functional and presentational currencies

 

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

 

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

 

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

 

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

 

At the end of each financial year, monetary items denominated in foreign currencies are retranslated at the rates prevailing as of the end of the financial year. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

 

Exchange differences arising on the settlement of monetary items, and on retranslation of monetary items are included in profit or loss for the period.

 

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

 

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

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

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

 

f) Property, plant and equipment

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

 

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

 

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

 

Computers                                                                        5 years

Furniture and fittings                                                       10 years

Office equipment                                                             10 years

Renovations                                                                    10 years

 

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

 

g) Intangible assets

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

 

 

Goodwill

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

 

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

 

Acquisition-related intangible assets

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

 

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

 

·      OctaPLUS Platform    3 years                                                       

·      Messenger App          3 years

·      Software                     3 years

 

Each of these intangible assets were fully impaired in the prior year.

 

h) Research and development expenditure

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

 

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

 

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

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

(iii)   its future economic benefits are probable;

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

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

 

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

 

i) Impairment of financial assets 

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

 

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

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

 

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

 

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

 

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

 

j) Impairment of non-financial assets 

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

 

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

 

k) Right of use assets

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

 

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

 

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

 

l) Leases

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

 

Lease liabilities are recognised at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease. If this rate cannot be readily determined, the Company's incremental borrowing rate is used. The discount rate estimated by management is 6% per annum.

 

m) Financial instruments

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

 

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

 

Non-derivative financial instruments

 

Non-derivative financial instruments comprise trade and other receivables, security deposits, cash and cash equivalents, convertible loan notes, lease liabilities and trade and other payables.

 

Convertible loan notes (CLNs)

 

Convertible Loan Notes are recorded at their issue price and are carried at their face value. Subsequently, the CLN is accounted for at amortised cost. Any interest due on these CLNs is recorded on accrual basis. On conversion/redemption, the face value of converted CLNs is reduced from the total carried value.

 

Trade and other receivables

 

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

 

Trade and other payables

 

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

 

Cash and cash equivalents

 

Cash and cash equivalents comprise cash balances and call deposits.

 

n) Financial assets

(i)  Initial recognition and measurement

 

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

 

Financial assets carried at amortised cost

 

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

 

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

 

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

 

(ii)  De-recognition

 

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

 

o) Financial liabilities

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

 

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

 

p) Share capital

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

 

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

 

q) Taxation

Current tax

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

 

Deferred tax

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

 

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

 

r) Cash and cash equivalents

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

 

s) Finance income and expense

Finance income comprises interest receivable on funds invested.

 

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

 

t) Employee benefits

Short-term benefits

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

 

Long-term benefits

Defined contribution plans

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

 

u) Earnings per share

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

 

v) Share warrants

 

Equity-settled share-based payments against services received are measured at fair value at the date of grant (i.e. date of agreement) by reference to the fair value of the services received. The fair value determined at the grant date is expensed on a straight-line basis over the service period. A corresponding adjustment is made to equity as share warrant reserve and accounts receivable as prepaid expense.

 

4.   ACCOUNTING ESTIMATES AND JUDGEMENTS

 

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

 

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

 

Key judgments

 

Impairment reviews

 

Fixed assets

An impairment charge of £133,682 has been made in respect of leasehold improvements and furniture and fixtures in the Group's Malaysian office, which have been fully impaired bringing the value of those assets down to £nil on the basis that the lease expires in July 2023 and the lease may not be renewed. While a decision to renew the lease has not been taken, it was felt prudent at this stage to fully impair the associated costs and an element may be reinstated if the lease is renewed.

 

MSC Pioneer

In Malaysia, Alchemist Codes applied for MSC Pioneer Status but decided not to pursue the application as they did not consider it would be successful and on that basis the tax previously considered to be recoverable of £24,493 has been written off.

 

 

 

 

 

Key estimates

 

Going concern

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

 

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

 

Provisions

Provisions are recognised when the Group has a legal obligation and a provision has been made based on an estimate and expectation of the future restoration costs relating to the leasehold premises in Malaysia to restore the premises to its original state. The lease expires in July 2023, and based on an estimation by management of the future expected costs of £37,000, a provision of 50% amounting to £18,500 has been provided for with the remaining £18,500 to be provided for in the year to 31 October 2023 if the Company does not renew its lease. The Group has been prudent in its approach as no decision has yet been made as to whether to renew the lease.

 

5.   REVENUE

 

 

 

Year

ended

31 October

2022

Year

ended

31 October

2021

 

£

£

Sale of software products

-

37,639

Software development income

496,296

19,415

Merchant commission income

844

4,628

Other

1,248

181

Total

498,388

61,863

 

             All revenues were generated in Asia.

 

During the year ended 31 October 2022, one customer accounted for £438,824 (88.05%) (2021: one customer accounted for £35,424 (57.26%)) of the Group's revenues. No other customers accounted for more than 10%. 

 

An analysis of revenue by the timing of the delivery of goods and services to customers for 2022 is as follows:

 

 

31 October 2022

31 October 2022

31 October 2021

31 October 2021

 

Goods transferred at a point in time

Services transferred over time

Goods transferred at a point in time

Services transferred over time

 

£

£

£

£

Sale of software products

-

-

35,424

2,215

Software development income

-

496,296

12,822

6,593

Merchant commission income

-

844

-

4,628

Other

19

1,229

-

181

Total

19

498,369

48,246

13,617

 

 

6.   OTHER INCOME

 

Other income derives from the receipt of government grants.

7.   SEGMENT REPORTING

 

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

 

 

8.   OPERATING LOSS BEFORE TAXATION

 

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

 


 

 

 

 

 

 

 

 

 

Year

ended

31 October

2022

Year

 ended

31 October 2021

 

£

£

Auditor's remuneration:

 

 

-       Audit of the financial statements

 

 

-       - PKF - accrued fees

55,873

-

-       - Haysmacintyre

43,500

96,750

-       Other services - Haysmacintyre (included under professional fees)

3,500

3,500

 

 

 

 

Year

ended

31 October

2022

Year

ended

31 October

2021

 

Cost of sales:

£

£

 

Wages and salaries

5,421

252,576

 

Cashback expenses

(109)

(1,906)

 

Purchases

356,541

-

 

Other

22,391

-

 

 

384,462

250,670

 

 

Year

ended

31 October

2022

 

Year

ended

31 October

2021

 

Administrative expenses:

£

£

 

Directors' remuneration

95,457

140,844

 

Wages and salaries

143,555

211,066

 

Consultancy fees

50,500

45,376

 

Loss on disposal of fixed assets

10,467

-

 

Depreciation of tangible fixed assets

19,487

25,542

 

Depreciation of right of use assets

96,877

93,786

 

Short term leases on property

12,875

23,018

 

Provision for lease restoration

18,500

-

 

Professional fees

38,648

34,359

 

Regulatory fees

37,269

30,738

 

Secretarial fees

35,909

44,059

 

Audit fees

99,373

99,079

Credit loss adjustment

-

2,354

 

Travel. Subsistence and Entertainment

26,675

414

 

Other costs

65,040

123,985

 

Sub-letting income

(67,910)

(10,019)

 

 

682,722

864,601

 

 

9.   STAFF COSTS AND KEY MANAGEMENT EMOLUMENTS

 

 

Year

ended

31 October

2022

Year

ended

31 October

2021

 

Staff costs:

£

£

 

Wages and salaries

242,556

592,673

 

Social security costs

437

576

 

Post-employment benefits

1,440

11,237

 

 

244,433

604,486

 

 

 

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

 

Year

ended

31 October

2022

Year

ended

31 October

2021

 

Key management personnel:

£

£

 

Wages and salaries (including directors as detailed in the Directors' Remuneration Report in the 2022 annual report)

162,559

227,839

 

Social security costs

113

-

 

Post-employment benefits

913

-

 

 

163,585

227,839

 

Included within accruals is £6,420 (2021: £7,666), which relates to Directors' remuneration yet to be paid.

 

The average monthly number of employees during the year ended 31 October 2022 was as follows:

 

 

Year

ended

31 October

2022

Year

ended

31 October

2021

 

 

No.

No.

 

Management

6

4

 

Administrative

3

4

 

Operations

6

34

 

 

15

42

 

 



 

10.  TAXATION

The Company is incorporated in the Cayman Islands, and its activities are subject to taxation at a rate of 0%. Loss before taxation is £396,531.

 

The income tax rate in Malaysia is calculated at the Malaysian statutory tax rate of 24% of the chargeable income for the year, except for companies with paid-up capital of RM2.5million (approximately £460,000) and below at the beginning of the basis period and gross income from source of business not exceeding RM50million (approximately £9.4 million), the first RM600,000 (approximately £110,000) of chargeable income is subject to tax at a rate of 17%.

 

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

 

 

Year

ended

31 October

2022

Year

ended

31 October

2021

 

 

£

£

 

Loss before taxation

(321,269)

(1,192,820)

 


 

 

 

Tax calculated at the standard rate of tax applicable to Alchemist Codes of 24% (2021: at 24%)

(77,104)

(286,277)

 

Tax effects of:

 

 

 

Non-deductible expenditure

20,442

119,328

 

Effect of different tax rates in foreign jurisdictions

-

166,949

 

Withholding tax charge

-

2,109

 

Unrelieved tax losses carried forward

56,662

-

 

Tax charge/(credit)

-

2,109

 

The income tax rate used excludes that of Alcodes International due to the scaling of Hong Kong tax rates making any estimation of tax rates used difficult to apply. The profit before taxation for Alcodes International is £76,894 and due to brought forward tax loss, no tax expense is expected in the current year. Also, the results of Alcodes International are largely immaterial compared to those of Alchemist Codes.

The Group has not recognised deferred tax assets on carried forward tax losses as the management is not certain that it will generate sufficient taxable profits in the near future to absorb such carried forward tax losses.

 

11.  EARNINGS PER SHARE

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

 

There is no difference between the basic and diluted earnings per share, as the warrants and loan notes are anti dilutive in nature and therefore the diluted loss per share has not been presented.

 


 

 

 

Year ended 31 October 2022

 

Year ended

31 October

 2021

 

 






 

 

Loss attributable to ordinary shareholders (£)



(640,906)

(1,194,929)

 

 

Basic - Weighted average number of shares



64,760,721

64,760,721

 

 

Basic earning per share (expressed as £ per share)

 

 

(0.010)

(0.018)

 

 

 

 

 

 

 

 

 

12.  PROPERTY PLANT AND EQUIPMENT

 

 

 


Fixtures and fittings

Office equipment

Computer equipment

Leasehold improvements

Total

 

    £

    £

    £

£

£

Cost

 





At 1 November 2021

71,450

13,610

33,282

93,081

211,423

Additions

-

-

-

-

-

Disposals

-

(547)

(28,815)

-

(29,362)

Currency translation differences

3,076

1,688

1,421

3,979

10,164

As at 31 October 2022

74,526

14,751

5,888

97,060

192,225

 

 

 

 

 

 

Accumulated depreciation

 





At 1 November 2021

8,413

2,657

13,685

11,461

36,216

Depreciation for the year

7,432

2,400

6,906

9,657

26,395

Impairment

58,279

-

-

75,403

133,682

Disposals

-

(136)

(18,247)

-

(18,383)

Currency translation differences

402

484

620

539

2,045

As at 31 October 2022

74,526

5,405

2,964

97,060

179,955







Carrying amounts

 





At 31 October 2022

-

9,346

2,924

-

12,270

At 31 October 2021

63,037

10,953

19,597

81,620

175,207

 

 

As stated in Note 13, an impairment charge of £133,682 has been made in respect of leasehold improvements and furniture and fixtures in the Group's Malaysian office bringing the value of those assets down to £nil on the basis that the lease expires in July 2023. While the lease may be renewed, it was felt prudent at this stage to fully impair the associated costs and an element may be reinstated if the lease is renewed.

 

 

13.  IMPAIRMENT CHARGE

An impairment charge of £133,682 has been made in respect of leasehold improvements and furniture and fixtures in the Group's Malaysian office bringing the value of those assets down to £nil on the basis that the lease expires in July 2023. While the lease may be renewed, it was felt prudent at this stage to fully impair the associated costs and an element may be reinstated if the lease is renewed.

 

14.  RIGHT OF USE ASSETS AND LEASE LIABILITIES


Land and buildings

Total

 

    £

£

Cost

 


At 1 November 2021

280,131

280,131

Currency translation differences

11,971

11,971

As at 31 October 2022

292,102

292,102

 

 

 

Accumulated amortisation

 


At 1 November 2021

116,721

116,721

Depreciation for the year

96,877

96,877

Currency translation differences

5,478

5,478

As at 31 October 2022

219,076

219,076




Carrying amounts

 


At 31 October 2022

73,026

73,026

At 31 October 2021

163,410

163,410


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


As at

31 Oct 2022

As at

31 Oct 2021

 

    £

    £

Not later than one year

88,690

178,966

Later than one year and not later than five years

-

-

Total minimum lease payments

88,690

178,966

Less future finance charges

(10,677)

(9,477)

Present value of minimum lease payments

78,013

169,489




Current liability

78,013

94,672

Non-current liability

-

74,817


78,013

169,489

 

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

 

The interest paid on lease liability is £7,879 (2021: £13,151). The lease rental paid on short-term lease is £12,875 (2021: £23,018).

 

 

 

 

 

 

 

15.  TRADE AND OTHER RECEIVABLES


 

 

 

As at

31 October

 2022

As at

31 October

 2021


 

 

 

£

 

£

 

Trade receivables 




773

6,693

Provision for expected credit losses




-

(2,354)

Total trade receivables




773

4,339







Rental deposits




31,109

-

Prepayments and other receivables




34,526

123,075





66,408

127,414

 

The rental deposits have been transferred from long-term assets to current assets as the lease term expires in July 2023.

 

All balances are reviewed specifically due to the limited number of receivables and limited history of average rates of default losses to rely on.

 

16.  CASH AND CASH EQUIVALENTS


 

 

 

As at

31 October

 2022

As at

31 October

 2021


 

 

 

£

 

£

 

Fixed deposits held with bank




12,872

17,635

Cash at bank 




623,004

558,203

Cash in hand




583

5,780





636,459

581,618

 

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

 

17.  TRADE PAYABLES


 

 

 

As at

31 October

 2022

As at

31 October

 2021


 

 

 

£

 

£

 

Redeemable cash back credit




-

1,075





-

1,075



 

18.  ACCRUALS AND OTHER PAYABLES


 

 

 

As at

31 October

 2022

As at

31 October

 2021


 

 

 

£

 

£

 

Other creditors




32,975

37,205

Accruals 




96,825

102,205

Deferred revenue




6,979

105,254

Taxes and social security




935

-





137,714

244,664

 

Included within accruals is £6,420 (2021: £7,666), which relates to Directors' remuneration yet to be paid and accrual of interest on loan notes of £17,055.

 

19.       LEASE RESTORATION PROVISION


 

 

 

As at

31 October

 2022

As at

31 October

 2021


 

 

 

£

 

£

 

Balance b/f




-

-

Addition




18,500

-

Balance c/f




18,500

-

 

The Group has made a provision for the future costs of restoring its Malaysian office to its original specification as the lease expires in July 2023. Based on an estimation by management of the future expected costs of £37,000 to restore the premises to its original state, a provision of 50% amounting to £18,500 has been provided in the period with the remaining £18,500 to be provided for in the year to 31 October 2023 if the Company does not renew its lease. The Group has been prudent in its approach as no decision has yet been made whether to renew the lease.

 

20.  SHARE CAPITAL


 

Number     

Nominal

value     

£


Authorised

 



Ordinary shares of £0.01 each

800,000,000

8,000,000


 

As at 31 October 2022

 

64,760,721

 

647,607

 

 

As at

As at

 

31 Oct 2022

31 Oct 2021

 

£

£

As at beginning of year

647,607

647,607

Issued during the year

-

-

As at end of year

647,607

           647,607

 

The holders of ordinary shares are entitled to receive dividends as may be declared from time to time and are entitled to one vote per share at meetings of the Company.

 

 

 

21.  FOREIGN CURRENCY TRANSLATION RESERVE

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

 

22.  SHARE WARRANT RESERVE

On 3 October 2022 the Company granted 300,000 warrants to Guild Financial Advisory ("GFA"), the Company's corporate adviser, exercisable at a price of £0.01 for a period of up to ten years. The warrants were granted in return in part for their corporate financial services carried out for a period of 12 months whereby it was agreed that GFA would provide services for an amount of £24,000 with £12,000 being settled in cash and the balance of £12,000 represented by the issue of the warrants. As a result of this the fair value of the warrants is deemed to be £12,000 spread evenly over the 12-month period of the contract with £1,000 expensed for October 2022 and £11,000 carried forward as a prepaid expense and £12,000 taken to a warrant reserve.

 

23.  CONVERTIBLE LOAN NOTES

On 25 January 2022, the Company entered into an unsecured convertible loan note agreement for a total subscription of £500,000 (the "Loan Notes"). Pursuant to this instrument, the Company immediately raised £500,000 through the issue of unsecured convertible loan notes to several existing investors (together the "Noteholders"), including an Executive Director of the Company.

 

The Loan Notes have an expiration date of 25 January 2024 ("Expiration Date") and can be repaid, in part or in full, by the Company on 31 December in any year prior to the Expiration Date by giving not less than 14 days' written notice to the Noteholders. All outstanding Loan Notes attract interest at a rate of 5% per annum from the date of issue (25 January 2022) to the date of repayment or conversion and is payable on the anniversary of the issue of the Loan Notes.

 

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

 

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

 

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

 

b.    £125,000 to Soon Beng Gee who has an interest in 11,766,650 ordinary shares, representing 18.2% of the Company's issued share capital

 

c.     £125,000 to Lee Chong Liang who has an interest in 11,766,650 ordinary shares, representing 18.2% of the Company's issued share capital

 

Accrual of interest on loan notes was £17,055 at year end.

 

24.  FINANCIAL RISK MANAGEMENT

a) Categories of financial instruments

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

 

 

Financial assets:

 

As at

As at

 

 

31 October

2022

  31 October

2021

 

 

£

£

 

 

Trade receivables

773

4,339

 

 

Tax recoverable

-

23,489

 

 

Rental deposits

31,109

29,834

 

 

Prepayments and other receivables

34,526

123,075

 

 

Cash and cash equivalents

636,459

581,618

 

 

 

702,867

762,355

 

Financial liabilities at amortised cost:

 

As at

As at

 

31 October

2022

  31 October

2021

 

£

£

 

Convertible loan notes

500,000

500,000

 

Trade payables

-

1,075

 

Accruals and other payables

137,714

244,664

 

Provisions

18,500

-

 

Finance leases

78,013

171,581

 

 

734,227

917,320

 

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

 

b) Financial risk management objectives and policies

 

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

 

i)          Interest rate risks

 

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

 

ii)          Currency risks

 

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

 

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate due to changes in foreign exchange rates.

The Group's exposure to the risk of changes in foreign exchange rates relates primarily to its financing activities (when cash balances are denominated other than in a company's functional currency).

 

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

 

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

 


US$

Total

As at 31 October 2022

£'000

£'000

Financial assets denominated in £

288

288

Financial liabilities denominated in £

-

-

Net foreign currency exposure

288

288

 


US$

Total

As at 31 October 2021

£'000

£'000

Financial assets denominated in £

522

522

Financial liabilities denominated in £

-

-

Net foreign currency exposure

522

522

 

Foreign currency sensitivity analysis:

 

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

 

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

 

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

 


US$

As at 31 October 2022

£'000

Effect on net assets:


Strengthened by 10%

29

Weakened by 10%

(29)

 


US$

As at 31 October 2021

£'000

Effect on net assets:


Strengthened by 10%

43

Weakened by 10%

(43)

 

At 31 October 2022 the Company had £288,357 (2021: £427,511) of cash and cash equivalents in United States Dollar accounts. At 31 October 2022, had the exchange rate between the Pound Sterling and United States Dollar increased/decreased by 10%, the effect on the result in the period would be a gain of £28,836 (2021: £28,836) / loss of £26,214 (2021: £42,751).

 

iii)         Credit risk

 

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

 

Concentrations of major credit risk exist to the extent that the equivalent of £533,548 of the Group's bank balances were held with DBS Bank Limited in Singapore and the equivalent of £74,480 was held with Standard Chartered Bank in Hong Kong. There are bank balances with other banks totalling to £27,848 were the credit risk is relatively low.

 

S&P Global Ratings affirmed on 31 October 2022 the issuer credit ratings of DBS Bank Limited at AA- and Standard Chartered at A+.

 

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

 

iv)         Liquidity risk

 

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

 

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

 

 

25.  CAPITAL MANAGEMENT

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

 

The capital structure of the Group as at 31 October 2022 consisted of ordinary shares and equity attributable to the shareholders of the Company, totalling £41,936 (2021: £685,744) (disclosed in the statement of changes in equity excluding share warrants reserve).

 

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

 

26.  RELATED PARTY TRANSACTIONS

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

 

Included within accruals is £6,420 (2021: £7,667), which relates to Directors' remuneration outstanding.

 

In addition to the remuneration, other costs incurred in relation to services provided by related parties of Directors were as follows:

 

A total of £38,631 (2021: £41,000) was paid during the year to Gracechurch Group (formerly trading as Luther Pendragon) for financial PR services, a company in which Harry Chathli is a director and shareholder.

 

A total of £Nil (2021: £11,000) was paid during the year to Graham Duncan Limited for accounting services, a company in which Graham Duncan is a director and shareholder.

 

A total of £16,500 (2021: £9,500) was paid to Ever Billions International Limited for general management services, a company in which Li Chun Chung is a director.

 

A total of £Nil (2021: £2,900) was paid to Credigroup Fiduciary Services for payment processing services, a company in which Ng Chun Fai, Senior Manager of the Group, is a director.

 

Revenue from AI Sport Asia for project management services, a company in which Ng Chun Fai is a director, of £4,484 was recognised during the year.

 

Revenue from Consortium Family Office Ltd for project management services, a company in which Ng Chun Fai is a director, of £4,931 was recognised during the year.

 

Proceeds from sale of fixed assets of £512 was received from Wepin Digital Sdn Bhd in which Charles Yong Kai Yee is a Chief Technology Officer.

 

There were no outstanding monies owed at the year end (2021: £Nil).

 

27.  MATERIAL SUBSEQUENT EVENTS

There are no significant or disclosable post-balance sheet events.

 

28.  ULTIMATE CONTROLLING PARTY

As at 31 October 2022, no one entity or individual owns greater than 50% of the issued share capital, or holds significant control over the Company. Therefore, the Directors have determined the Company does not have an ultimate controlling party.

 

 

 

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