AIQ LIMITED
(incorporated and registered under the Companies Law (as revised) of The Cayman Islands and registered
number 327983.)
Annual Report and Consolidated Financial Statements
For the year ended 31 October 2020
AIQ Limited
Contents
Strategic Report – Chairman’s Statement
Strategic Report – Executive Director’s Statement
Directors’ Report
Corporate Governance Report
Statement of Directors’ Responsibilities
Independent Auditor’s Report
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Company Information
Annual Report 2020
Page Number
3-4
5-9
10-13
14-20
21
22-27
28
29
30
31
32-58
59-60
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AIQ Limited
Annual Report 2020
STRATEGIC REPORT – CHAIRMAN’S STATEMENT
On behalf of the Board, I present the annual report and financial statements of AIQ Limited for the year ended
31 October 2020.
We completed the acquisition of Alchemist Codes Sdn Bhd (“Alchemist Codes”), a Malaysian company
providing IT consultancy services (including messenger app development) and an e-commerce solution,
OctaPLUS, in March 2020. Alchemist Codes was at a relatively early stage of development, but with what was
believed to be exciting technology and potential; we had a strategy in place to grow the business and, in
particular, its offering for the e-commerce sector. However, the COVID-19 pandemic, which has prevailed
throughout the period since the acquisition, had a profound impact on Alchemist Codes. Consequently, the
performance of the business has been extremely disappointing.
Both the roll-out of OctaPLUS and Alchemist Codes’ IT consultancy business were met with severe headwinds
such that little progress could be made and revenues were significantly below the Board’s expectations. The
consumer trends emerging from the pandemic initially supported Alchemist Codes’ e-commerce proposition
and this was reflected in our interim results published in July 2020. However, the landscape subsequently
deteriorated rapidly as retailers transitioned to focus their efforts on online sales and, accordingly, enhanced
their direct-to-consumer sales & marketing channels, which was to the detriment of emerging online
marketplaces such as OctaPLUS that are based on an affiliate commission model. In addition, the travel and
tourism industry, which was expected to be one of the key sectors for OctaPLUS as it typically provides higher
commission rates, was particularly badly impacted by the pandemic. This had a serious negative impact on
OctaPLUS’ pipeline.
For the IT consultancy business, the stringent restrictions imposed on travel and the social distancing
measures introduced by the Malaysian government – with the country subject to lockdown measures
throughout the period since the acquisition – prevented Alchemist Codes from meeting with customers and
business partners; and the economic downturn and uncertainty impacted customers’ budget availability and
the willingness to commit resources to new projects.
Consequently, revenues from Alchemist Codes significantly underperformed against our expectations and,
due to the low level of revenues, the business incurred substantial losses for the year.
Towards the end of calendar year 2020, and early in 2021, the Company had looked forward to the roll-out of
COVID-19 vaccinations and progressive easing of lockdown restrictions in Malaysia. However, trading
conditions have remained extremely challenging as Malaysia continues to be under government lockdown,
causing a further reduction in demand and significant deterioration in revenue with negligible sales post year
end.
Whilst the programme of vaccination roll-out is underway, the Board has noted the low registration rate for
voluntary vaccination among Malaysia's senior citizens in March and April, which has been much lower than
widely anticipated. This has pushed back our expectations for revenues and, combined with the continued
uncertainty over the post-pandemic economic recovery and market outlook, highlighted the need for a
fundamental strategic review.
As a result of these factors, the Directors believe that it is in the best interests of AIQ and of our shareholders
to recognise an impairment charge against goodwill and intangibles of £2.4 million, reflecting the impact on
the Group’s business model.
The Board has initiated the strategic review to assess the viability of Alchemist Codes and to stem the losses
of the business, whilst also seeking to evaluate its future. This review is the Board’s highest priority and it has
already begun taking action to reduce the cost base. Our cash position, which was £1.8 million at the year end
and approximately £1.1 million at the date of this report, gives us sufficient headroom while we conduct this
process. We will update the market on the outcome of this review at the earliest possible opportunity.
On behalf of the Board, I would like to thank our shareholders for their continued support during this difficult
time.
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AIQ Limited
Graham Duncan
Non-Executive Chairman
29 April 2021
Annual Report 2020
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AIQ Limited
Annual Report 2020
STRATEGIC REPORT – EXECUTIVE DIRECTOR’S STATEMENT
On 26 March 2020 we completed the acquisition of Alchemist Codes Sdn Bhd (“Alchemist Codes”), a
Malaysian incorporated information technology solutions developer focusing on the e-commerce sector. The
acquisition was for a consideration of £2.3 million satisfied through the issue of Ordinary Shares in the
Company. While the initial outlook for the business held promise, the prolonged and multifaceted impact of the
COVID-19 pandemic, which was compounded by Alchemist Codes being at a relatively early stage of
development, resulted in a very disappointing performance for the year to 31 October 2020 and the incurring
of substantial losses. Since year end, trading conditions have deteriorated further and there has been
negligible sales activity. As a result, and given the continued significant uncertainty of the post-pandemic
market recovery, the Board has recognised an impairment of goodwill and intangibles of £2.4 million from the
investment in acquiring Alchemist Codes and is undertaking a strategic review to determine the future of the
business.
Operational Review
Alchemist Codes has two areas of activity: an e-commerce solution, OctaPLUS, which is an online shopping
platform that was launched at the end of 2019, and an IT business that provides clients with customised
software and web and app development, with its primary offering being messaging solutions. Alchemist Codes
builds the messenger app for customers and receives a development fee (the majority on completion of
delivery) and then a monthly maintenance fee for ongoing support. However, the performance of both
OctaPLUS, which was anticipated to be the primary driver of growth, and the IT business has been significantly
below the Board’s expectations.
The revenue model for OctaPLUS is that Alchemist Codes receives, from retailers, a portion of the consumer
spend on the retailers’ products through the platform. In response to the pandemic, retailers have reduced the
commission they are willing to pay for such affiliate referrals. With the closing of physical stores due to
lockdown measures as well as a reduction in foot traffic due to public health concerns, retailers have also
significantly enhanced their online direct-to-consumer marketing. This has significantly altered the competitive
landscape for OctaPLUS as well as its ability to attract retailers to sell their products via the platform, which
impacts OctaPLUS’ offer to consumers. In addition, the travel and tourism industry, which was severely
impacted by the pandemic, had been identified as a key target sector for OctaPLUS as it was expected to
provide the highest commission rates.
As a result, the forecast growth in registered users and customer spend on the platform did not materialise
and the rate of commission from retailers was materially below expectations.
In the IT business, which accounts for the vast majority of Alchemist Codes’ revenue and which is primarily
project-based, whilst some minor projects were delivered during the year, sales were significantly below
management’s expectations and lower than the prior year. Throughout the period following the acquisition of
Alchemist Codes, Malaysia was subject to a series of strict government lockdowns – known as “movement
control orders” (“MCO”) – as a result of the pandemic, which restricted opportunities for management to meet
physically with its customers, prospective customers and business partners. In addition, the economic
downturn and uncertainty caused customers to delay purchasing decisions or reallocate resources.
Consequently, Alchemist Codes did not secure the new IT projects that had been anticipated.
In the second half of the year, the Company took a number of measures designed to improve the outlook for
the business, such as refocusing some of Alchemist Codes’ R&D efforts. However, these have not been able
to stem the decline in the Company’s financial performance. In July 2020, an office was opened in Hong Kong
with a view to leveraging the government grant schemes for IT solutions providers, but this office has not yet
generated any significant revenues. Post period, the Company has made redundancies and other cost savings,
including reductions to all of the Directors’ fees.
The government lockdown has continued to be extended in Malaysia, which is still subject to MCO measures
(either MCO, conditional MCO or recovery MCO depending on district). As a result, trading conditions remain
extremely challenging and Alchemist Codes’ sales activity has been negligible. In addition, pipeline revenues
have suffered from the inability to secure IT projects during the year that would be completed post period.
As a consequence of the above, along with the considerable uncertainty over post-pandemic market
conditions, the Board of AIQ has initiated a strategic review to assess the viability of Alchemist Codes and to
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Annual Report 2020
stem the losses of the business, whilst also seeking to evaluate its future. The strategic review is the Board’s
immediate focus and highest priority.
Financial Review
The net loss for the year ended 31 October 2020 was £3.6 million (2019: £0.5 million loss). The increase in
the loss compared with 2019 is primarily due to an impairment against goodwill and intangibles of £2.4 million,
reflecting the impact of the pandemic on the Group’s business model, operational losses of Alchemist Codes
of £442,000, amortisation costs of £240,000 and transaction costs of £380,000 associated with the acquisition
and re-admission. Management anticipate that the further extensions to COVID-19 lockdowns in Malaysia and
the prolonged impact on international travel and tourism will limit revenue opportunities in the short to medium
term. Updated forecasts prepared by the Company assume much lower revenue than anticipated when
Alchemist Codes was acquired. As a consequence, these forecasts no longer support the carrying value of
intangibles that were recognised on the acquisition in March 2020.
As a result of the increased net loss, the loss per share increased to 6.1 pence (2019: 1.0 pence loss per
share).
The Group had cash of £1.8 million at 31 October 2020 (compared with £3.7 million at 31 October 2019) and
approximately £1.1 million as of the date of this report.
Alchemist Codes
The acquisition of Alchemist Codes completed in March 2020, and therefore approximately seven months’
activities have been included in these consolidated results.
In the six months ended 30 April 2020 (which covers a period largely prior to the acquisition by the Company),
Alchemist Codes generated revenue of 1.26 million Malaysian Ringgit (“RM”) (approximately £238,000).
However, the period between April and October 2020 was badly affected by the pandemic and revenues for
the seven-month period since acquisition were RM834,000 (approximately £155,000). The majority of revenue
was based on software development and maintenance for Alchemist Codes’ messenger apps customers.
Alchemist Codes’ loss before tax for the seven months from the acquisition to year end was RM2,384,000
(approximately £442,000) compared with a profit before tax for the six-month period ended 30 April 2020 of
RM110,000 (approximately £20,000).
As detailed above, since the year end, trading conditions have deteriorated further with negligible sales activity.
As a result, Alchemist Codes has generated revenues from 1 November 2020 to date of only RM20,000
(£4,000).
Alcodes International Limited (“AIL’’)
AIL was incorporated in Hong Kong in July 2020. AIL did not contribute any revenues to the Group during the
period to 31 October 2020 and incurred a net loss of £25,000. Approximately HK$73,000 (£7,000) in revenue
has been received in the period since the year end, resulting in total group revenue since year end of
approximately £11,000.
Key Performance Indicators
The Directors track the following as the Company’s key performance indicators (‘KPIs’):
(cid:120) Revenues
Reflects the element of billings generated and recognised during the period from all operations and
measures the Group’s overall performance at a sales level. Revenues, which totalled £155,000 in the
period between the acquisition of Alchemist Codes and the year end, have been severely impacted by
the COVID-19 pandemic, which has necessitated the need for a strategic review.
(cid:120) OctaPLUS transactions
The number of consumer purchases via the Company’s e-commerce platform, which demonstrates usage
and measures the extent to which the Company is succeeding in executing on its core strategy.
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Annual Report 2020
Transactions have been badly impacted by COVID-19 and the Board’s review is assessing the viability of
the OctaPLUS affiliate commission model.
(cid:120) New and total registered users for OctaPLUS
The number of consumers registered, and registering, to use the Company’s e-commerce platform, which
indicates the level of interest in the platform and the extent to which the Company is succeeding in
executing on its core strategy. The forecast growth in registered users and customer spend on the
platform did not materialise.
(cid:120)
Administrative expenses
Indirect expenditure on running the business, which reflects cost effectiveness and cost management and
which is of key importance while the Company is developing its revenue streams. Significant levels of
expenditure, particularly in relation to marketing, staff and R&D, has been needed to develop the Group’s
business model. However, in response to the disappointing levels of revenue, the Company has made a
number of redundancies, reducing headcount by a third since the year end. Further cost cuts are being
implemented alongside the strategic review in order to preserve cash for future investment.
(cid:120) Cash holdings
The Company’s cash balance provides a measure of the Group’s financial strength and self-sufficiency
to support operations while revenue streams are still in development. The Group’s losses have resulted
in a material reduction in cash balances of £1.9 million during the year. The Company has sought to
develop revenue streams against the headwinds of a pandemic and the strategic review is focused on
stemming these outflows and assessing the most viable revenue streams.
The Company’s accounting systems track performance on a monthly basis, focusing in particular on revenue
generation, development and marketing expenditure and working capital needs.
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 £3.6 million during the year and cash outflows of £1.9 million. As at 31 October 2020,
the Group had net current assets of £1.5 million and cash of £1.8 million. The Group’s cash position was
approximately £1.1 million at the date of this report.
The Group meets its day-to-day working capital requirements through cash generated from the capital it raised on
admission to the London Stock Exchange and, subsequent to the acquisition of Alchemist Codes, from the
operations of its subsidiary.
COVID-19 has been identified as having a significant impact on the Group in the 2020 financial year due to the
prolonged public lockdown in Malaysia. The Board has taken, and continues to take, a number of actions to protect
operating cash flow in the short term. As a means of securing the Group’s long-term future, the Board has initiated
a strategic review to assess the viability of Alchemist Codes and to stem the losses of the business and reduce
the cost base, whilst also seeking to evaluate its future. The Group’s cash position gives sufficient headroom
while the Board conducts this process, in which it will consider all options for the future of the business. The
Group’s assessment of the COVID-19 pandemic is detailed in the Operational Review section of the Strategic
Report above.
The Directors have prepared forecasts and projections for a period of at least 12 months from the date of approval
of these financial statements, and have specifically performed a detailed review of those forecasts for the 15
months to July 2022. 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 ‘worst plausible 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.
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Annual Report 2020
These ‘worst plausible case scenario’ conditions indicate that a material uncertainty exists that may cast
significant doubt on the Group’s ability to continue as a going concern. This, in turn, has led Group
management to undertake a strategic review of the Group’s activities going forwards, which is due to be
reported shortly. The unknown outcome of the strategic review, coupled with uncertainty of future trading, give
rise to a material uncertainty over the going concern status of the Group. The Directors consider the Group to
be a going concern but have identified a material uncertainty in this regard.
Principal Risks and Uncertainties
The Directors consider the principal risks and uncertainties facing the Company and a summary of the key
measures taken to mitigate those risks are as follows:
Financial risks
The key financial risk is that of funding the continued development of the business with the current cash
reserves whilst protecting shareholder value. Redundancies have been made and further cuts to operating
costs have been actioned along with reductions to Directors’ fees.
The strategic review that is currently being performed is urgently addressing this position and assessing the
immediate actions that need to be taken. This is wide-ranging in scope and addressing all options to ensure
the Group’s long-term future.
COVID-19
The COVID-19 pandemic has had a profound impact on Alchemist Codes and the Group as a whole. As
detailed further in the Operational Review, this resulted in a low level of revenue generation and, consequently,
the incurring of substantial losses.
The continued market uncertainty and the prolonged nature of the COVID-19 pandemic across the region
poses a significant risk to Alchemist Codes’ business, which is at an early stage of its development. To address
this risk, the Board has initiated a strategic review as described above.
Since the outbreak of the pandemic in March 2020, we have followed WHO and government guidance to
protect the safety of our workers, customers and partners. We implemented a work-from-home policy with
effect for all staff, putting in place a number of measures to enable remote working.
Operational risks
The success of the Company’s business strategy has been dependent on growing the Alchemist Codes
business in Malaysia, Hong Kong and further afield as well as the Company’s ability to complete further
acquisition opportunities.
Alchemist Codes’ success, which is the current operating entity of the Group, is dependent on its ability to
secure and deliver projects in its IT consultancy business and to increase income from transactions conducted
on its OctaPLUS platform. The key risk to these activities is competition from IT service providers and, for
OctaPLUS, other e-commerce platforms, including retailers conducting direct marketing, with greater
resources and market presence.
The operations of Alchemist Codes and, since its establishment, Alcodes International have been monitored
and regularly reported to the Board. Whilst the hope and expectation of the Board has been that actions taken
in response to the impact of the pandemic would result in tangible improvement, this has not been the case.
The length and severity of lockdown restrictions, as well as the uncertainty over the post-pandemic market
recovery, has meant significant changes to the business model. We have prepared revised business plans
that anticipate a much more severe long-term impact on our markets. We have implemented a strategic review
that is addressing all of the Group’s operations. The scope of this review includes the operational cost model,
the opportunity for alternative revenue streams and overall operational structures.
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AIQ Limited
Li Chun Chung, Executive Director
29 April 2021
Annual Report 2020
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AIQ Limited
DIRECTORS’ REPORT
Annual Report 2020
The Directors present their report on the Group, together with the audited consolidated financial statements of
the Group, for the year ended 31 October 2020.
Principal activities
The Company was formed to undertake acquisitions in the e-commerce sector. In March 2020, the Company
completed the acquisition of Alchemist Codes.
Alchemist Codes is an information technology software designer and developer focused on the e-commerce
sector. It provides clients with customised software, web and app development and white labelled messaging
solutions that employ Alchemist Codes’ proprietary ready-made chat application. Alongside this, Alchemist
Codes has developed its own e-commerce web and mobile application called OctaPLUS – a cashback solution
that leverages big data analytics, data mining and artificial intelligence.
Results and dividends
The results of the Group are set out in detail in the financial statements.
The Directors do not propose to recommend a dividend for the year ended 31 October 2020. Given the losses
incurred to date, it is unlikely that the Board will recommend a dividend in the near-term.
Business review and future developments
Details of the business activities and developments made during the period can be found in the Strategic
Report.
Financial instruments and risk management
Disclosures regarding financial instruments are provided within the Strategic Report and Note 23 to the
financial statements.
Capital structure and issue of shares
Details of the Company’s share capital are set out in Note 20 to the financial statements. The Company has
one class of ordinary shares which carry no right to fixed income.
Post balance sheet events
On 9 April 2021, Alcodes International Limited entered into an agreement to provide website development
services to Ever Billions International Limited, a company fully owned by Li Chun Chung (an Executive Director
of the Company) and of which he is the Managing Director. The value of the six-month contract is HK$47,000
(approximately £4,500).
There are no other events subsequent to the year end that require disclosure in these financial statements.
Directors
The Directors of the Company who have served during the period and at the date of this report are:
Director
Role
Date of
appointment
Board
Committee
Graham Duncan
Independent Non-Executive Chairman
09/01/2018
N/A/R
Harry Chathli
Independent Non-Executive Director
09/01/2018
N/A/R
Soon Beng Gee*
Non-Executive Director
Lee Chong Liang*
Executive Director
Charles Yong Kai Yee
Executive Director
Li Chun Chung
Executive Director
* Resigned 30 December 2020
11/11/2017
11/10/2017
26/03/2020
30/12/2020
Board Committee abbreviations: N = Nomination Committee; A = Audit Committee; R = Remuneration
Committee
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Annual Report 2020
The Board comprises two executive and two non-executive directors.
Graham Duncan, Independent Non-Executive Chairman.
Graham Duncan is a UK-based chartered accountant with more than 20 years’ capital markets experience. He
also holds the Corporate Finance Diploma issued by the Institute of Chartered Accountants in England and
Wales.
He has specialised in advising quoted companies since 2000 with regard to financial reporting, transaction
support and regulatory compliance. Since 2013, Graham has run a consultancy business providing advice to
growing private and public companies in the UK and internationally. Until 2013, Graham was a capital markets
director with Mazars LLP in London. Graham has worked closely with Asian companies and previously worked
for an international firm of chartered accountants in Asia and was based in Hong Kong between 1993 and
1996. He resides in the UK.
Li Chun Chung, Executive Director
Mr Li has over 20 years' experience in assisting companies with their strategic growth. As a HKSFC licensed
investment consultant and Certified Financial Planner, he began his career working for several financial
planning and wealth management consultancies based in Hong Kong. Since 2016, Mr Li has provided
business advisory and mentorship services to companies across a range of industries related to e-commerce
and digital business primarily in Australia and China. This includes helping companies prepare for the public
market; overseeing development such as through business model construction and optimisation, company
reorganisation and recruitment; fundraising; and assisting with establishing a digital business presence.
Charles Yong Kai Yee, Executive Director
Charles Yong Kai Yee is Chief Executive Officer and Founder of Alchemist Codes. He founded Alchemist
Codes in 2018 and his initial efforts were focused around the development of an enterprise messaging
applications for corporate users. Prior to founding Alchemist Codes, Charles was the lead developer of MM
Intelligence Technology Sdn Bhd where he headed a CMS system project and was responsible for managing
and leading a team of mobile and backend developers and performing Research & Development on related
new technologies. In 2012, Charles was the Senior Design Engineer at Itrimech Technology (M) Sdn Bhd
where he was actively involved in leading and delivering large scale Internet of Things applications for multiple
institutions and corporations in Malaysia, including Taylor University and Sunway Group. Charles obtained a
Bachelor’s degree in Engineering with First Class Honours in Electrical Engineering from the University of
Bradford, UK.
Harry Chathli, Independent Non-Executive Director
Harry is an experienced capital markets specialist with over 25 years’ experience in advising global companies,
organisations and government agencies. Currently he is a director of Luther Pendragon, an independent
communications consultancy, and a director of a capital markets advisory consultancy, Access Capital
Markets. He is also Chairman of Lokcom Networks Ltd, an internet-of-things technology start-up company,
and a Non-executive Director of BiON plc, a Malaysian AIM-quoted renewable energy company.
Over the past 19 years he has advised public companies listed on the London Stock Exchange’s main market
and quoted on AIM, as well as on NASDAQ and other international bourses.
Harry’s experience includes advising on international M&A deals, IPOs, MBOs, crisis communications as well
as financial PR starting in 1998 at Brunswick Group, a global partnership advising on business critical issues
to companies in 14 countries. Prior to that, Harry worked for Adam Smith International, a global advisory and
consulting business, with his particular focus being Vietnam. In 2004, he established a financial PR company,
Corfin, which was then acquired by Luther Pendragon in 2011. He resides in the UK.
Directors’ interests in shares
Directors’ interests in the shares of the Company at the date of this report are disclosed below. There are no
requirements for Directors to hold shares in the Company.
Director
Ordinary Shares held
% held
Graham Duncan
Charles Yong Kai Yee
Li Chun Chung
Harry Chathli
-
1,679,755
1,425,500
-
-
2.59
2.20
-
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AIQ Limited
Substantial interests
Annual Report 2020
- Soon Beng Gee holds 11,766,650 (18.17%) shares in the Company through GBS Infinity Holding
-
Ltd, a BVI company whose issued share capital is wholly and beneficially owned by him.
Lee Ching Liang holds 11,766,650 (18.17%) shares in the Company through ML Infinity Holding Ltd,
a BVI company whose issued share capital is wholly and beneficially owned by him.
- Teong Tiek Wah holds 8,786,516 (13.57%) shares in the Company of which 8,398,876 (12.97%) are
held through Soctech Capital Fund, a Cayman island company whose issued share capital is wholly
and beneficially owned by him.
JIM Nominees Ltd holds 6,421,402 (9.92%) shares in the Company.
-
- Securities Services Nominees Ltd holds 6,310,817 (9.74%) shares in the Company.
Except as referred to above, the Directors are not aware of any person who, as at the date of this report, was
interested in 3% or more of the issued share capital of the Company or could directly or indirectly, jointly or
severally, exercise control.
Donations
No political or charitable donations have been made in the period.
Provision of information to auditors
Each of the persons who are Directors at the time when this Directors' Report is approved has confirmed that:
(cid:120)
so far as that Director is aware, there is no information relevant to the audit of which the Company's
auditors are unaware; and
(cid:120) each Director has taken all the steps that ought to have been taken as a director in order to be aware
of any information needed by the Company's auditors in connection with preparing their report and to
establish that the Company's auditors are aware of that information.
Independent auditors
Haysmacintyre LLP were appointed in November 2020 to replace BDO LLP. A resolution for the re-
appointment of Haysmacintyre LLP as auditor of the Company is to be proposed at the next Annual General
Meeting.
Duty to promote the success of the Company
The likely consequences of any decisions in the long-term
In making its decisions, the Board considers its priority of making the Group profitable alongside the interests
of our staff and the need to keep pace with market initiatives and technological changes so the business is
appropriately positioned to take best advantage of market conditions and remain viable for the long-term.
Engagement with employees
The Group's policy is to consult and engage with employees, by way of meetings and through personal contact
by Executive Directors and other senior executives, on matters likely to affect employees' interests. Information
on matters of concern to employees is given in meetings, handouts, letters and reports, which seek to achieve
a common awareness on the part of all employees on the financial and economic factors affecting the Group's
performance. We maintain oversight of their performance through a development review process. We value
our employees’ thoughts and ideas and two-way communication is actively sought and encouraged.
Business relationships with customers, suppliers and others
Our customers, suppliers and business partners are key to the long-term success of our business. We seek to
maintain and grow our relationships with all parties through regular dialogue as a means of enhancing our
reputation and to help us achieve our growth ambitions. We set out our relationship with our business partners
in terms of business or service level agreements. We maintain oversight of these arrangements as well as
making sure our customers receive appropriate levels of feedback.
The impact of the Company’s operations on the community and environment
AIQ seeks to be a responsible member of its community and take its environmental impact into account.
The desirability of the Company maintaining a reputation for high standards of business conduct
We communicate with shareholders through financial results on a yearly and half-yearly basis. We also provide
the required press releases to ensure compliance with the listing rules.
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AIQ Limited
Annual General Meeting
The Annual General Meeting (AGM) of the Company will be held in May 2021.
Annual Report 2020
Signed by order of the Board
Harry Chathli, Non-Executive Director
29 April 2021
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AIQ Limited
Annual Report 2020
CORPORATE GOVERNANCE REPORT
The Board of AIQ Limited considers sound governance as a critical component of the Company’s success.
The Board has based its corporate governance principles on fundamental core values to build and maintain
strong relationships with all of its stakeholders – shareholders, suppliers, regulators, society, and others. This
means having the right people working together and doing the right things to deliver a sustainable business
model capable of delivering growth over the long-term. This is a key responsibility of the Company and it is the
Board’s job to ensure that through good decision-making, the Company is managed for the long-term benefit
of all its stakeholders.
The Board meets regularly throughout the year (either in person or by video conference call) and all necessary
information is supplied to the Board on a timely basis to enable it to discharge its duties effectively. Additionally,
special meetings will take place or other arrangements will be made when Board decisions are required in
advance of regular meetings.
During the year ended 31 October 2020, a total of six Board meetings were held. All Directors were in
attendance at these meetings, either in person or by video conference call.
The Board has established financial controls and reporting procedures that are considered appropriate given
the size, early stage and structure of the Group. It is the intention of the Board that these controls will be
reviewed regularly and adjusted as required in light of the performance of the Company.
Corporate Governance Code
The Company is not required to adopt the UK Corporate Governance Code, as a company with a standard
listing.
The corporate governance structures and practices will be kept under review and communicated to
shareholders as changes are required and made.
The Directors consider each of Graham Duncan and Harry Chathli to be independent upon appointment and
throughout their tenure. Whilst the business has been at early stage, it has not been considered appropriate
to appoint a full-time FD/CFO. Accordingly, Graham Duncan Limited, a company controlled by Graham
Duncan, was appointed to provide support to the Group’s finance team in this area as a means of controlling
costs. This appointment was approved by the Board independently of Graham Duncan, and the Board
continues to consider Graham Duncan as independent in character and judgement.
The Board has an audit committee, remuneration committee and nomination committee with formally
delegated duties and responsibilities, as described below.
Board of Directors
The Board is responsible for formulating, reviewing and approving the Company’s strategy, budgets and
corporate actions.
In accordance with the early stage of the Company’s development, the Board conducts an informal evaluation
of its performance, which includes identifying the Board’s ability to assess the operating environment, think
strategically and adapt as necessary. As the Company develops and its operations expand, the Board intends
to adopt a more comprehensive and formal performance evaluation process.
It is the responsibility of the Chairman and the Company Secretary to ensure that Board members receive
sufficient and timely information regarding corporate and business issues to enable them to discharge their
duties.
The Board considers that there is an appropriate balance between the Executive and Non-Executive Directors
and that no individual or small group dominates the Board’s decision making. The Board’s members have a
wide range of expertise.
The Company requires each Director to devote as much time to their duties and responsibilities as is necessary
to conduct those duties and responsibilities on behalf of the Company. The Executive Directors are full-time
whilst the Non-Executive Directors provide their services on a part-time basis.
Ensuring that between them the Directors have the necessary up-to-date experience, skills and capabilities
The Directors also expect to receive technical updates, compliance and governance training as needed by
attending courses and relevant events to stay up to date in terms of regulatory changes and technological
developments.
14
AIQ Limited
Annual Report 2020
The Directors receive and review operational and financial performance data for discussion at the regular
Board meetings.
The Board is satisfied that, between the Directors, it has an appropriate balance of up-to-date skills and
experience for the Company’s stage of development. Additional experience will be added as and when it is
considered necessary. Biographical details of the Directors are included in the Directors’ Report above.
Appointment, removal and re-election of Directors
The Board makes decisions regarding the appointment and removal of Directors, and there is a formal, rigorous
and transparent procedure for appointments.
In accordance with the Company’s Articles of Association, there is no requirement for Directors to retire from
office by rotation.
There is a minimum requirement of two Directors who have the power to fill a vacancy on the Board, or to add
another Board member.
The Executive Directors were appointed for a minimum period of twenty-four months, after which the service
agreement may be terminated by either party giving not less than three months’ prior written notice. The Non-
Executive Directors have signed service agreements that contain notice periods of three months. There are
no financial provisions for termination.
All Directors are able to take independent professional advice in the furtherance of their duties, if necessary,
at the Company’s expense. In addition, the Directors have direct access to the advice and services of the
Company Secretary.
Directors’ responsibilities
The Board comprises two executive and two non-executive directors. All Directors bring a wide range of skills
and international experience to the Board. The Non-Executive Directors may hold meetings without the
Executive Directors present. The Non-Executive Chairman is primarily responsible for the working of the Board
of the Company and oversight of Corporate Governance. The Executive Directors are primarily responsible for
the running of the business and implementation of the Board's strategy and policy.
High-level strategic decisions are discussed and taken by the full Board. Investment decisions are taken by
the full Board. Operational decisions are taken by the Executive Directors within the framework approved in
the annual financial plan and within a framework of Board-approved authorisation levels.
The Board regulations define a framework of high-level authorities that maps the structure of delegation below
Board level, as well as specifying issues that remain the Board’s preserve. Following the completion of the
acquisition of Alchemist Codes, the Board typically expects to meet at least monthly (either in person or by
conference call), with the Company Secretary, in attendance to consider a formal schedule of matters including
the operating performance of the business and to review the Company’s financial plan and business model.
It is the responsibility of the Chairman and the Company Secretary to ensure that Board members receive
sufficient and timely information regarding corporate and business issues to enable them to discharge their
duties.
Strategy and business model
Following completion of the acquisition of Alchemist Codes, the Directors developed a strategic growth plan
and business model that looked to develop the business within Malaysia and with an international presence.
As noted above, the COVID-19 pandemic – and associated economic impacts and travel and social distancing
measures – inhibited the execution of this strategy. The Board has initiated a strategic review to assess the
viability of Alchemist Codes and to stem the losses of the business and reduce the cost base, whilst also
seeking to evaluate its future. This review is the Board’s highest priority and it has already begun to take action
to reduce the cost base.
Meeting shareholders’ needs and expectations
The Directors seek to build on a mutual understanding of objectives between the Company and its
shareholders by meeting to discuss long-term issues and receive feedback, and issuing updates as
appropriate. The Board also seeks to use the Annual General Meeting to communicate with its shareholders,
who are encouraged to attend, and to meet and ask questions of Directors and to discuss the development of
the business.
15
AIQ Limited
Annual Report 2020
The Company operates a website at www.aiqhub.com. The website contains details of the Company and its
activities; regulatory announcements; interim financial statements, preliminary statements and Annual
Reports.
Shareholder relations are managed primarily by the Chairman with the support of Luther Pendragon. The
Board is also kept informed of shareholder views and concerns through its Financial Adviser and Broker, VSA
Capital Limited.
Each of the Directors is available to meet with shareholders (in person or via video conference) if required to
discuss issues of importance or concern.
Our stakeholders
Our stakeholders include shareholders, suppliers, regulators, and creditors. The principal ways in which their
feedback is gathered are via one-to-one meetings and conversations with stakeholders with an open dialogue.
Feedback from all stakeholders is reviewed at meetings of the Board as a means of making sure we keep to
our stated commitments. In particular, shareholders may communicate directly with the Chairman and the
Directors. In all cases, the Company’s ethos is to act on feedback and to respond in a timely manner.
The Board does not support discrimination of any form, positive or negative, and all appointments are based
solely on merit.
Risk management – Internal controls
In applying the principle that the Board should maintain a sound system of internal control to safeguard
shareholders’ investment and the Company’s assets, the Directors recognise that they have overall
responsibility for ensuring that the Company maintains systems to provide them with reasonable assurance
regarding effective and efficient operations, internal control and compliance with laws and regulations and for
reviewing the effectiveness of those systems. However, there are inherent limitations in any system of control
and accordingly even the most effective system can provide only reasonable and not absolute assurance
against material misstatement or loss, and that the system is designed to manage rather than eliminate the
risk of failure to achieve the business objectives.
The Company has an established documented framework of financial and non-financial procedures. The key
features of the internal control system are described below:
- Financial controls
The Board takes responsibility for reviewing and approving all financial budgets and business plans. These
are reviewed regularly and updated where necessary to reflect changes in the business environment or internal
strategy changes including evaluating acquisition targets.
The Company has implemented control procedures designed to ensure complete and accurate accounting for
financial transactions and to limit the exposure to loss of assets and fraud. Measures taken include segregation
of duties and reviews by management.
This process, which operates in accordance with the FRC guidance, has remained in place up to the date of
this report and is expected to continue on an ongoing basis.
The Board is supported by the Audit Committee in respect of its responsibilities to prepare financial reports to
shareholders. This includes an assessment of the appropriateness of key accounting policies, internal control
and regulatory compliance.
- Non-financial controls
Non-financial controls are considered as important as financial controls and these encompass risk
management and fraud, IT and business continuity, regulatory compliance, health and safety and corporate
social responsibility.
The key elements of these non-financial controls are set out below:
(cid:120) Control environment: the Company is committed to high standards of business conduct and there are
also policies in place for the reporting and resolution of suspected fraudulent activities.
(cid:120) Risk identification: Management is responsible for the identification and evaluation of key risks
applicable to their areas of business. These risks are assessed on a continual basis and may be
associated with a variety of internal and external sources, including investment risk and regulatory
requirements.
16
AIQ Limited
Annual Report 2020
The Board considers the internal control system to be adequate for the Company. The Audit Committee
reviews the scope and scale of any non-audit services undertaken by the auditors in order to ensure that their
independence and objectivity is safeguarded.
Market Abuse Regulations
The Board recognises the importance of complying with the Market Abuse Regulations (“MAR’’) relating to the
disclosure of inside information and disclosure of deals by persons discharging managerial responsibilities
(“PDMR”) and persons closely associated (“PCA”). The Company has adopted an appropriate share dealing
policy.
Anti-Corruption and Bribery Policy
The Board recognises the importance of having and operating effective anti-corruption and bribery practices
and safeguards. All Directors are bound by a code of conduct which covers anti-corruption and bribery.
The Company’s internal control processes are reviewed at least annually as a means of ensuring they remain
fit for purpose as the business evolves.
Relations with shareholders
The Directors seek to build on a mutual understanding of objectives between the Company and its
shareholders by being available to meet to discuss long-term issues and receive feedback. The Board also
seeks to use the Annual General Meeting to communicate with its shareholders.
Fair, balanced and understandable assessment of position and prospects
The Board is committed to presenting fair, balanced and comprehensible assessments of the Company’s
position and prospects. The Board has applied the principles of good governance relating to Directors’
remuneration as described below. The Board has determined that there are no specific issues that need to be
brought to the attention of shareholders.
Board Committees
The Board maintains three standing committees, being the Audit, Remuneration and Nomination Committees.
The minutes of all sub-committees are circulated for review and consideration by all relevant Directors,
supplemented by oral reports from the Committee Chairmen at Board meetings.
Audit Committee
The Audit Committee comprises Graham Duncan, who chairs the Committee, and Harry Chathli. The
Committee held two meetings during the year ended 31 October 2020, which were held to approve the annual
report for the period ended 31 October 2019 and interim report for the six months ended 30 April 2020. Further
details on the Audit Committee are provided below in the Report of the Audit Committee.
Remuneration Committee
The Remuneration Committee comprises Harry Chathli, who chairs the committee, and Graham Duncan. One
meeting was held during the financial year. Further details on the Remuneration Committee are provided below
in the Report of the Remuneration Committee.
Nomination Committee
The Nomination Committee comprises Harry Chathli, who chairs the Committee, and Graham Duncan. No
meetings were held during the financial year. Further details on the Nomination Committee are provided below
in the Report of the Nomination Committee.
Report of the Audit Committee
The Audit Committee has written terms of reference and provides a mechanism through which the Board can
maintain the integrity of the financial statements of the Company and any formal announcements relating to
its financial performance; to review the Company’s internal financial controls and its internal control and risk
management systems; and to make recommendations to the Board in relation to the appointment of the
external auditor, their remuneration both for audit and non-audit work, the nature, scope and results of the
audit and the cost effectiveness, independence and objectivity of the auditors. Provision is made by the Audit
Committee to meet the auditors at least twice a year.
17
AIQ Limited
Annual Report 2020
The Group is still at an early stage of its development and is reliant on the Audit Committee to perform various
reporting requirements particularly with regards the preparation of financial statements.
The Audit Committee has reviewed, considered and agreed the scope and methodology of the audit work to
be undertaken by the external auditors, their appointment and fees and agreed the terms of engagement for
the audit of the financial statements for the year ended 31 October 2020.
Significant matters considered by the Audit Committee during the year included the auditor’s scope and
methodology for the audit of the financial statements, in particular determining the areas at greatest risk of
material misstatement (whether or not due to fraud or poor internal controls). This included consideration of
risks that might impact results for the period, impairment reviews, the going concern assessment, net assets
at the end of the period and the disclosures in the financial statements.
Following the Audit Committee’s recommendation, the Board considers the internal control system to be
adequate for the Company. The Audit Committee reviews the scope and scale of the non-audit services
undertaken by the auditors in order to ensure that their independence and objectivity is safeguarded. The
Directors recognise the business will increase in complexity as it grows and they will review the internal control
system to ensure it responds to any change.
Report of the Remuneration Committee
The Remuneration Committee monitors the remuneration policies of the Company to ensure that they are
consistent with its business objectives. Its terms of reference include the recommendation and execution of
policy on Director and executive management remuneration and for reporting decisions made to the Board.
The Committee determines the individual remuneration package of the executive management of the Board.
During the year, the Company was engaged in executing its first acquisition and implementing its growth
strategy and the Directors’ remuneration packages reflect this.
The duties of the Committee are to:
(cid:120) determine and agree with the Board the framework or broad policy for the remuneration of the
Chairman, Executive Directors, Non-Executive Directors and any employees that the Board delegates
to it;
(cid:120) within the terms of the agreed policy, determine individual remuneration packages including bonuses,
incentive payments, share options, pension arrangements and any other benefits;
(cid:120) determine the contractual terms on termination and individual termination payments, ensuring that the
duty of the individual to mitigate loss is fully recognised;
(cid:120)
in determining individual packages and arrangements, give due regard to the comments and
recommendations of the Listing Rules;
(cid:120) be told of and be given the chance to advise on any major changes in employee benefit structures in
the Company; and
(cid:120)
recommend and monitor the level and structure of remuneration for senior managers below Board
level as determined.
The Committee is authorised by the Board to:
(cid:120)
seek any information it requires from any employee of the Company in order to perform its duties;
(cid:120) be responsible for establishing the selection criteria and then for selecting, appointing and setting the
terms of reference for any remuneration consultants providing advice to the Committee, at the
Company’s expense; and
(cid:120) obtain, at the Company’s expense, outside legal or other professional advice where necessary in the
course of its activities.
The Company’s Remuneration Policy is designed to provide remuneration packages to motivate and retain
high-calibre executives and to attract new talent as required. The Committee takes into account the principles
of sound risk management when setting pay and takes action to ensure that the remuneration structure at AIQ
Limited does not encourage undue risk. The Remuneration Policy is unaudited.
18
AIQ Limited
Executive Directors’ fees
Annual Report 2020
Purpose – a core element of remuneration, used to attract and retain executive directors of the calibre required
to develop and deliver our business strategy.
Operation and opportunity – Fees for executive directors are reviewed annually, although an out-of-cycle
review may be conducted if the Remuneration Committee determines it appropriate. A review may not
necessarily lead to an increase in fees.
Performance measures or basis of payment – Whilst there are no formal performance measures to determine
fee levels, general individual and business performance are taken into account. For the executive directors,
changes to fees may be made under certain circumstances such as increase in the scope or responsibility of
an individual’s role.
As noted above, post year end, each of the Executive Directors agreed to a reduction in their remuneration as
part of the reduction in Group costs.
Non-Executive Directors’ fees
Purpose – Core element of remuneration paid for fulfilling the relevant role.
Operation – Non-executive directors receive a basic fee, paid quarterly in arrears, in respect of their board
duties. Further fees may be paid for chairmanship or membership of board committees. Additional fees may
be paid for travelling regularly from overseas to board and committee meetings. Non-executive directors are
not eligible for annual bonus or other benefits. Expenses incurred directly in performance of non-executive
duties for the Company may be reimbursed or paid directly on their behalf.
Opportunity – Current fee levels can be found below in the remuneration report. Fees are set at a level which
is considered appropriate to attract or retain non-executive directors of the calibre required by the Company.
Fee levels are normally set by reference to amounts paid to non-executive directors serving on the boards of
similar sized UK-listed companies, taking into account the size, responsibility and time commitment of the role.
As noted above, post year end, each of the Non-Executive Directors agreed to a reduction in their remuneration
as part of the reduction in Group costs.
Termination
The Executive Directors were appointed for a minimum period of twenty-four months, after which the service
agreement may be terminated by either party giving not less than three months’ prior written notice to the other
party.
Each of the Non-Executive Directors were appointed with effect from Admission for a minimum period of twelve
months, after which the service agreement may be terminated by either party giving not less than three months’
prior written notice to the other party.
There are no additional financial provisions for termination.
Annual remuneration
The remuneration of the Directors for the year ended 31 October 2020 was as follows:
Executive Directors
Soon Beng Gee*
Lee Chong Liang
Charles Yong Kai Yee
Non-executive Directors
Graham Duncan
Harry Chathli
Year ended
31 October
2020
£
Year ended
31 October
2019
£
43,575
43,575
21,000
31,125
25,938
42,000
42,000
-
30,000
25,000
165,213
139,000
* Soon Beng Gee served as an executive director up until March 2020 and as a non-executive subsequently.
19
AIQ Limited
Annual Report 2020
All of the above amounts comprised fees paid in accordance with each Director’s service agreement. No
pension contributions or other allowances were paid. None of the above remuneration was performance
related. There are no additional financial provisions for termination.
None of the Directors were entitled to any other cash or non-cash benefits or pension entitlements.
Details of Directors’ shareholdings are disclosed in the Directors’ Report.
In addition to the remuneration above, other costs incurred in relation to services provided by Directors were
as follows:
- A total of £42,000 (2019: £21,000) was paid during the year to Luther Pendragon for financial PR
services, a company in which Harry Chathli is a director and shareholder.
- A total of £24,000 (2019: £nil) was paid during the year to Graham Duncan Limited for accounting
services in preparation of financial statements, a company in which Graham Duncan is a director and
shareholder.
Report of the Nomination Committee
The function of the Nomination Committee is to provide a formal, rigorous and transparent procedure for the
appointment of new directors to the Board. There were no meetings held during the financial year. In carrying
out its duties, the Nomination Committee is primarily responsible for:
(cid:120)
identifying and nominating candidates to fill Board vacancies;
(cid:120) evaluating the structure and composition of the Board with regard to the balance of skills, knowledge
and experience and making recommendations accordingly;
(cid:120)
reviewing the time requirements of Non-Executive Directors;
(cid:120) giving full consideration to succession planning; and
(cid:120)
reviewing the leadership of the Company.
Signed by order of the Board
Harry Chathli, Non-Executive Director
29 April 2021
20
AIQ Limited
Annual Report 2020
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the annual report and the consolidated financial statements in
accordance with applicable law and regulations.
The Directors of the Company are responsible for preparing the financial information in accordance with
International Financial Reporting Standards (“IFRS”).
The Directors must not approve the financial statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and of the profit or loss of the Group for that period. In preparing these
financial statements, the Directors are required to:
(cid:120)
select suitable accounting policies and then apply them consistently;
(cid:120) make judgements and estimates that are reasonable and prudent;
(cid:120)
state whether they have been prepared in accordance with IFRSs; and
(cid:120) prepare the financial statements on the going concern basis unless it is inappropriate to presume that
the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the
Company. They have general responsibility for taking such steps as are reasonably open to them to safeguard
the assets of the Company and to prevent and detect fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information
included on the Company’s website. Legislation in the UK governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
Directors’ responsibilities pursuant to DTR4
The Directors confirm to the best of their knowledge:
(cid:120)
(cid:120)
the financial statements have been prepared in accordance with IFRSs and Article 4 of the IAS regulation
and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group; and
the management report includes a fair review of the development and performance of the business and
the financial position of the Group, together with a description of the principal risks and uncertainties that
they face.
21
AIQ Limited
Independent auditor’s report to the directors of AIQ Limited
Opinion
We have audited the financial statements of AIQ Limited and its subsidiary undertakings (together “the Group”)
for the year ended 31 December 2019, which comprise:
Annual Report 2020
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
the Consolidated Statement of Financial Position;
the Consolidated Statement of Comprehensive Income;
the Consolidated Statements of Changes in Equity;
the Consolidated Statements of Cash Flows; and
the notes to the Consolidated Financial Statements, including a summary of significant accounting
policies.
The financial reporting framework that has been applied in the preparation of the financial statements is
applicable law and International Financial Reporting Standards (“IFRSs”) as adopted by the European Union
(“EU”).
In our opinion, the financial statements:
(cid:120) give a true and fair view of the state of the Group’s affairs as at 31 October 2020 and of the Group’s
loss for the year then ended; and
(cid:120) have been properly prepared in accordance with IFRSs as adopted by the EU.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and
applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities
for the audit of the financial statements section of our report. We are independent of the Group in accordance
with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the
Financial Reporting Council’s (FRC) Ethical Standard as applied to listed entities, and we have fulfilled our
other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for our opinion.
Material Uncertainty Related to Going Concern
We draw attention to Note 3 in the financial statements, which indicates that the performance of the trading
subsidiary has fallen significantly below expectations during the year and there is uncertainty over its future
trading performance. This, in turn, has led Group management to undertake a strategic review of the Group’s
activities going forwards which is due to report shortly. As stated in Note 3, these events or conditions, along
with other matters as set forth in Note 3, indicate that a material uncertainty exists that may cast significant
doubt on the Group’s ability to continue as a going concern. Our opinion is not modified in respect of this
matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit
of the financial statements of the current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the
overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
22
AIQ Limited
Annual Report 2020
Key audit matter: Going concern
There is a risk that the Group may not be a going concern. The losses incurred in the year, alongside the
reduction in cash during the year and post year-end, are potential indicators of risk that the Group is not a
going concern.
COVID-19 was declared a pandemic by the World Health Organisation and has prevailed throughout the period
since acquisition as detailed in note 27 and in the Strategic Report, this is having a significant impact on the
Group’s ability to operate, giving rise to a further indicator of risk that the Group may not be a going concern.
How the matter was addressed in the audit
Our audit work included, but was not restricted to:
(cid:120)
(cid:120)
(cid:120)
reviewing the Group’s cash flow forecasts and budgets for a minimum period of 15 months post
signing the financial statements;
challenging the reasonableness of assumptions applied to the cash flow forecasts;
reviewing post-period end management financial information;
(cid:120) performing sensitivity analysis on the forecasts;
(cid:120)
scrutinising the appropriateness and feasibility of mitigations detailed within the sensitised
forecasts; and
(cid:120) discussing future plans, future revenue streams and pipeline projects with management.
Key observations
Without qualifying our opinion, we draw attention to notes 3c and 27 to the financial statements relating to the
going concern of the Group. The Directors are of the opinion that the Group remains a going concern and we
concur, however as noted above we have identified the presence of a material uncertainty in relation to this.
Key audit matter: Acquisition accounting, valuation of goodwill and intangibles arising on acquisition
There is a risk that the accounting in relation to the acquisition of Alchemist Codes Sdn. Bhd. may have been
performed incorrectly, specifically in relation to the nature of the transaction and calculation of intangible assets
including goodwill.
How the matter was addressed in the audit
Our audit work included, but was not restricted to:
(cid:120)
reviewing acquisition accounting in line with IFRS 3 Business Combinations and focusing
particularly on whether AIQ Limited met the stated definition of a business;
(cid:120) assessing the criteria giving rise to an acquisition or reverse takeover;
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
reviewing the acquisition accounting board paper;
reviewing subsidiary results included on consolidation to ensure the appropriate post acquisition
results were included;
reviewing the sale of shares agreement to ensure appropriate recognition of the cost of acquisition,
completion accounts and fair value assumptions and calculations;
reviewing goodwill and other separately identifiable intangible calculations;
reviewing, challenging and scrutinising cashflow forecasts against identified intangibles on
consolidation for evidence of impairment;
23
AIQ Limited
(cid:120)
recalculating management’s impairment reviews, specifically in relation to the net present value
calculations performed on goodwill and other separately identifiable intangible assets, whilst
scrutinising assumptions included within the calculations; and
(cid:120) discussing impairment reviews with management and reviewing the board’s impairment paper.
Annual Report 2020
Key observations
As detailed in note 12, management have assessed the nature of the transaction to be that of an acquisition
of Alchemist Codes Sdn. Bhd, and have accounted for the acquisition under IFRS 3 Business Combinations.
The goodwill and separately identifiable intangible assets arising on acquisition, were subsequently impaired
in full, due to managements’ assessment of the valuation of such assets, showing the assets to have no value.
An impairment charge of £1,907,931 has been recognised. We agreed that impairment was appropriate given
the post-acquisition performance of the subsidiary and thus did not identify any material misstatements in
relation to this impairment charge.
Overview of our audit approach
Materiality
The scope and focus of our audit was influenced by our assessment and application of materiality. We define
materiality as the magnitude of misstatement that could reasonably be expected to influence the readers and
the economic decisions of the users of the financial statements. We use materiality to determine the scope of
our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements,
both individually and on the financial statements as a whole.
Based on our professional judgement, we determined overall materiality for the Group financial statements as
a whole at the planning stage to be £100,000, based on 6.1% of the Group’s draft consolidated loss before tax
for the year. The principal focus of stakeholders is considered to be profit focused as a result of the acquisition
of trading subsidiaries; our planning materiality equates to 2.8% of final loss before tax which remains within
the appropriate benchmark range and we therefore maintained our planning materiality throughout audit testing
and completion.
We use a different level of materiality (‘performance materiality’) to determine the extent of our testing for the
audit of the financial statements. Performance materiality is set based on 75% of audit materiality, being
£75,000.
We agreed with the Audit Committee to report to it all identified errors in excess of £5,000. Errors below that
threshold would also be reported to it if, in our opinion as auditor, disclosure was required on qualitative
grounds.
An overview of the scope of our audit
Our audit was scoped by obtaining an understanding of the Group and its environment, including internal
control, and assessing the risks of material misstatement.
The Group includes the listed parent company, AIQ Limited, and its trading subsidiaries, Alchemist Codes
Sdn. Bhd (“Alchemist Codes”) and Alcodes International Limited (“Alcodes”). Alchemist Codes was audited by
a component auditor locally in Malaysia. Alcodes was not considered significant, and hence was not subject
to full scope audit, with us instead performing a review. The parent company was not audited as an audit is
not required under Cayman Law, however we performed a level of review on the company, equivalent to that
of an audit, to provide sufficient comfort over the inputs into the consolidation and disclosures.
The component audit of Alchemist Codes was directed and overseen by us. We directed the audit strategy
and dictated component materiality of £80,000, being 80% of group materiality. Component materiality was
based on our assessment of aggregation risk with the majority of trade being in this one company. We reviewed
the component audit files, attended planning and completion meetings, and held a meeting involving all key
24
AIQ Limited
Annual Report 2020
audit partners to discuss identified areas of judgement. The main trading entity is the focus of our audit, as
this comprises all the Group revenue, but we also substantively tested the consolidation and challenged the
directors’ view on group intangible assets.
The Group’s accounting function is outsourced to a third-party accountancy firm. We included the outsourcer
in our planning discussions with management and established a dedicated portal where the outsourcer could
share the accounting records and supporting documentation with us. We discussed with management events
that had taken place during the year in order to obtain an understanding of any changes in the Group’s
environment that might impact our audit. Our tests included discussions with the outsourcer as well as the
Group’s management.
We did not identify any key audit matters relating to irregularities, including fraud. We also introduced variability
into our audit tests and assessed the risk of management override of internal controls, including testing journals
and evaluating whether there was evidence of bias from the directors, that represented a risk of material
misstatements arising due to fraud.
Based on our understanding of the Group, our audit was focused on the key risks as described above.
Other information
The Directors are responsible for the other information. The other information comprises the information
included in the Annual Report, other than the financial statements and our auditor’s report thereon. Our opinion
on the financial statements does not cover the other information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial statements or
our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are required to determine whether there is a
material misstatement in the financial statements or a material misstatement of the other information. If, based
on the work we have performed, we conclude that there is a material misstatement of this other information,
we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the financial statements
As explained more fully in the Directors’ responsibilities statement set out on page 21, the Directors are
responsible for the preparation of the financial statements and for being satisfied that they give a true and fair
view, and for such internal control as the Directors determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or have
no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
25
AIQ Limited
Annual Report 2020
A further description of our responsibilities for the audit of the financial statements is located on the Financial
Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our
auditor’s report.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s
website at www.frc.org.uk/auditscopeukprivate.
Extent to which the audit was considered capable of detecting irregularities, including fraud
We identify and assess the risks of material misstatement of the financial statements, whether due to fraud or
error, and then design and perform audit procedures responsive to those risks, including obtaining audit
evidence that is sufficient and appropriate to provide a basis for our opinion.
Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-
compliance with laws and regulations, we considered the following:
• the nature of the industry and sector, control environment and business performance including the
design of the Group’s remuneration policies, key drivers for directors’ remuneration, bonus levels and
performance targets;
• results of our enquiries of management and the audit committee about their own identification and
assessment of the risks of irregularities;
• any matters we identified having obtained and reviewed the Group’s documentation of their policies
and procedures relating to:
• identifying, evaluating and complying with laws and regulations and whether they were aware of any
instances of non-compliance;
• detecting and responding to the risks of fraud and whether they have knowledge of any actual,
suspected or alleged fraud;
• the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;
• the matters discussed among the audit engagement team regarding how and where fraud might occur
in the financial statements and any potential indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within the
organisation for fraud and identified the greatest potential for fraud in the following areas: valuation of goodwill
and intangibles, revenue recognition, acquisition accounting and the capitalisation of software development
costs. In common with all audits under ISAs (UK), we are also required to perform specific procedures to
respond to the risk of management override. We also obtained an understanding of the legal and regulatory
frameworks that the group operates in, focusing on provisions of those laws and regulations that had a direct
effect on the determination of material amounts and disclosures in the financial statements. The key laws and
regulations we considered in this context included the London Stock Exchange rules, Disclosure Guidance &
Transparency rules, Cayman Islands Company law and tax regulations, Malaysian tax regulations, and
General Data Protection Regulations.
Audit response to risks identified
As a result of performing the above, we identified the following key audit matters: capitalisation of development
costs and acquisition accounting, including valuation of goodwill and intangibles arising on acquisition as key
audit matters related to the potential risk of fraud. The key audit matters section of our report explains the
26
AIQ Limited
matters in more detail and also describes the specific procedures we performed in response to those key audit
matters. In addition to the above, our procedures to respond to risks identified included the following:
Annual Report 2020
• reviewing the financial statement disclosures and testing to supporting documentation to assess
compliance with provisions of relevant laws and regulations described as having a direct effect on the
financial statements;
• enquiring of management and the audit committee concerning actual and potential litigation and
claims;
• performing analytical procedures to identify any unusual or unexpected relationships that may indicate
risks of material misstatement due to fraud;
• reading minutes of meetings of those charged with governance; and
• in addressing the risk of fraud through management override of controls, testing the appropriateness
of journal entries and other adjustments; assessing whether the judgements made in making
accounting estimates are indicative of a potential bias and evaluating the business rationale of any
significant transactions that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement
team members and remained alert to any indications of fraud or non-compliance with laws and regulations
throughout the audit.
Other matters we are required to address
We were appointed by the Directors to audit the financial statements for the year ending 31 October 2020. As
this was our first year as auditors, our total uninterrupted period of engagement is one year.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the Parent
Company and we remain independent of the Group and the Parent Company in conducting our audit.
Our audit opinion is consistent with the additional report to the audit committee.
Use of our report
This report is made solely to the Company's members, as a body, in accordance with our engagement letter
dated 25 November 2020. Our audit work has been undertaken so that we might state to the Company's
members those matters we are required to state to them in an auditor's report and for no other purpose. To
the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
Company and the Company's members as a body, for our audit work, for this report, or for the opinions we
have formed.
Jon Dawson (Senior Statutory Auditor)
for and on behalf of
Haysmacintyre LLP
Statutory Auditor
10 Queen Street Place
London
EC4R 1AG
29 April 2021
Haysmacintyre LLP is a limited liability partnership, registered in England and Wales with registered number: OC423459.
27
AIQ Limited
Annual Report 2020
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 OCTOBER 2020
Note
5
7
12
13
9
Revenue
Cost of sales
Gross profit
Administrative expenses
Transaction costs
Impairment of intangible assets
Losses on foreign exchange (net)
Operating loss
Finance income
Finance costs
Loss before taxation
Taxation
Loss attributable to equity holders of
the Company
Other comprehensive income (as may be
reclassified to profit
and loss in subsequent periods, net of
taxes):
Exchange difference on
foreign operations
translating
Comprehensive income attributable to
equity holders of the Company
Year ended
31 October
2020
£
154,649
(143,268)
11,381
(1,367,162)
(380,495)
(2,400,931)
(2,926)
(4,140,133)
13,852
(4,306)
(4,130,587)
493,000
Year ended
31 October
2019
£
-
-
-
(487,791)
-
-
(35,630)
(523,421)
19,813
-
(503,608)
-
(3,637,587)
(503,608)
(7,619)
-
(3,645,206)
(503,608)
Loss per share basic and diluted (£)
10
(0.061)
(0.010)
Current and prior year amounts are all derived from continuing operations.
The accompanying notes form an integral part of these consolidated financial statements.
28
AIQ Limited
Annual Report 2020
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 OCTOBER 2020
Assets
Non-current assets
Property, plant and equipment
Right of use assets
Intangible assets
Rental deposits
Note
11
14
13
Current assets
Trade receivables 15
Prepayments and other receivables
Tax receivable 9
16
Cash and cash equivalents
Total current assets
Total assets
Equity and liabilities
Capital and reserves
Ordinary shares
Share premium
Foreign currency translation
reserve
Accumulated losses
Total equity
20
21
Liabilities
Current liabilities
Trade payables 17
Accruals and other payables 18
Lease liabilities 14
Amounts due to directors
19
Total current liabilities
Non-current liabilities
Lease liabilities
Total non-current liabilities
14
31 Oct 2020
£
31 Oct 2019
£
204,684
270,727
-
31,453
506,864
-
-
-
-
-
7,799
61,660
24,764
1,827,379
1,921,602
2,428,466
-
12,300
-
3,703,592
3,715,892
3,715,892
647,607
6,019,207
518,394
3,848,420
(7,619)
(4,795,471)
1,863,724
-
(1,157,884)
3,208,930
155,468
136,573
94,012
-
386,053
178,689
178,689
-
218,151
-
288,811
506,962
-
-
Total equity and liabilities
2,428,466
3,715,892
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 29 April 2021 and signed on
its behalf by:
Li Chun Chung, Executive Director
29
AIQ Limited
Annual Report 2020
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 OCTOBER 2020
Share
capital
£
Share
premium
£
Foreign
currency
translation
reserve
Accumulated
losses
£
£
Total
equity
£
Balance as at 31 October
2018
Total comprehensive
loss for the year
518,394 3,848,420
-
-
Balance at 31 October 2019
518,394 3,848,420
-
-
-
(654,276)
3,712,538
(503,608)
(503,608)
(1,157,884)
3,208,930
Total comprehensive
loss for the year
Issue of shares
(Note 20)
-
-
129,213 2,170,787
(7,619)
-
(3,637,587)
(3,645,206)
-
2,300,000
Balance at 31 October 2020
647,607 6,019,207
(7,619)
(4,795,471)
1,863,724
The accompanying notes form an integral part of these consolidated financial statements.
30
AIQ Limited
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 OCTOBER 2020
Annual Report 2020
Cash flows from operating activities
Loss before taxation
Adjustment for:-
Depreciation charges
Amortisation charges
Impairment of intangible assets
Interest income
Loss on foreign exchange
Operating loss before working capital changes
(Increase)/decrease in receivables
Increase in payables
Decrease in amount owing to directors
Tax paid
Cash used in operations
Interest received
Year
ended
31 October
2020
£
Year
ended
31 October
2019
£
(4,130,587)
(503,608)
31,031
239,765
2,400,931
(13,852)
16,623
(1,456,090)
(33,544)
19,579
(290,317)
(18,184)
(1,778,556)
13,852
-
-
-
(19,813)
35,630
(487,791)
3,408
99,864
-
-
(384,519)
19,813
Net cash used in operating activities
(1,764,704)
(364,706)
Cash flows from investing activities
Cash acquired on purchase of subsidiary (Note 12)
Acquisition of plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Repayment of lease liabilities
Net cash used in financing activities
111,073
(194,244)
(83,171)
(22,637)
(22,637)
-
-
-
-
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Effect of exchange rates on cash and cash
equivalents
(1,870,512)
3,703,592
(364,706)
4,103,928
(5,701)
(35,630)
Cash and cash equivalents at end of the year
1,827,379
3,703,592
Material non-cash transactions:
The Company’s acquisition of Alchemist Codes was a non-cash transaction satisfied wholly by the issue of
shares in the Company, as described in Note 12 below.
The accompanying notes form an integral part of these consolidated financial statements.
31
AIQ Limited
Annual Report 2020
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
Alchemist
Codes Sdn Bhd
Malaysia
Design and
development of
software
2-9, Jalan Puteri
4/8, Bandar Puteri,
47100 Puchong,
Selangor Darul
Ehsan
Malaysia
31.10.2020 31.10.2019
100%
-
Hong Kong
Alcodes
International
Limited*
20/F One Pacific
Centre, 414 Kwun
Tong Road Kwun
Tong, Hong Kong
Software and
app
development
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 e-commerce sector.
The Company completed the acquisition of Alchemist Codes, as noted above and more fully described in
Note 12 below, during the year. Alchemist Codes’ principal activities comprise designing and developing
information technology solutions for clients and the development of its own e-commerce solution.
3. ACCOUNTING POLICIES
a) Basis of preparation
The financial statements have been prepared in accordance with International Financial Reporting
Standards as adopted by the EU (“IFRS”) 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.
32
AIQ Limited
Annual Report 2020
The results for 31 October 2020 are prepared for a 12-month period and include the subsidiaries from
acquisition and or incorporation. Therefore, the comparative information which relates to the Company
only is not entirely comparable.
New interpretations and revised standards effective for the year ended 31 October 2020
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
The Group has adopted the following new standards and interpretations in accordance with the
relevant transitional provisions which became effective on 1 January 2019:
-
-
IFRS 16 ‘Leases’.
IFRIC 23 ‘Uncertainty over income tax treatments’.
With the exception of IFRS 16 the adoption of these standards has not had a material impact on the
financial statements.
IFRS 16 Leases
IFRS 16 is effective from 1 November 2019 and supersedes IAS 17 Leases. The standard eliminates
the classification of leases as either operating or finance leases and introduces a single accounting
model for all leases, except for short-term leases and leases of low value assets. Lessees are required
to recognise a right-of-use asset and related lease liability for their operating leases and show
depreciation of leased assets and interest on lease liabilities separately in the statement of
comprehensive income. The standard sets out the principles for the recognition, measurement,
presentation and disclosure of leases and requires lessees to recognise substantially all leases on the
statement of financial position.
The Group adopted IFRS 16 effective 1 November 2019 using the modified retrospective method of
adoption. Under this method, the standard is applied retrospectively with the cumulative effect of
initially applying the standard recognised at the date of initial application as an adjustment to the
opening balance of retained earnings. Accordingly, prior year financial information has not been
restated and will continue to be reported under IAS 17 Leases. The right-of-use asset and lease liability
have initially been measured at the present value of remaining lease payments, with the right-of-use
asset being subject to certain adjustments.
Impact of adoption
The adoption of the standard has impacted on the Group in relation to a lease which was entered into
in August 2020. Prior to this date, the Group had no long-term leases and accordingly, no adjustments
have been recognised in the Statement of Financial Position at 1 November 2019.
The determination of whether an arrangement is, or contains, a lease is based on the substance of
the arrangement at inception date: whether fulfilment of the arrangement is dependent on the use of
a specific asset or assets or the arrangement conveys a right to use the asset.
All leases are accounted for by recognising a right of use asset and a lease liability except for:
•
leases of low value assets; and
•
leases with a duration of 12 months or less.
Identifying leases
The Group accounts for a contract, or a portion of a contract, as a lease when it conveys the right to
use an asset for a period of time in exchange for consideration. Leases are those contracts that satisfy
the following criteria:
•
there is an identified asset;
•
the Group obtains substantially all the economic benefits from use of the asset; and
33
AIQ Limited
Annual Report 2020
•
the Group has the right to direct use of the asset.
The Group considers whether the supplier has substantive substitution rights. If the supplier does have
those rights, the contract is not identified as giving rise to a lease.
In determining whether the Group obtains substantially all the economic benefits that arise from use
of the asset, the Group considers only the economic benefits that arise from use of the asset, not those
incidental to legal ownership or other potential benefits.
In determining whether the Group has the right to direct use of the asset, the Directors consider
whether the Group directs how and for what purpose the asset is used throughout the period of use.
If there are no significant decisions to be made because they are pre-determined due to the nature of
the asset, the Directors consider whether the Group was involved in the design of the asset in a way
that predetermines how and for what purpose the asset will be used throughout the period of use. If
the contract or portion of a contract does not satisfy these criteria, the Group applies other applicable
IFRSs rather than IFRS 16 “Leases”.
Lease liabilities are measured 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 unless
(as is typically the case) this is not readily determinable, in which case the Group’s incremental
borrowing rate on commencement of the lease is used, which the Directors have assessed to be 6%.
Variable lease payments are only included in the measurement of the lease liability if they depend on
an index or rate. In such cases, the initial measurement of the lease liability assumes the variable
element will remain unchanged throughout the lease term. Other variable lease payments are
expensed in the period to which they relate.
On initial recognition, the carrying value of the lease liability also includes:
•
•
•
amounts expected to be payable under any residual value guarantee;
the exercise price of any purchase option granted in favour of the Group if it is reasonably certain
to assess that option; and
any penalties payable for terminating the lease, if the term of the lease has been estimated on
the basis of termination option being exercised.
Right of use assets are initially measured at the amount of the lease liability, reduced for any lease
incentives received, and increased for:
•
•
•
lease payments made at or before commencement of the lease;
initial direct costs incurred; and
the amount of any provision recognised where the Group is contractually required to dismantle,
remove or restore the leased asset.
Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant
rate on the balance outstanding and are reduced for lease payments made. Right of use assets are
amortised on a straight-line basis over the remaining term of the lease or over the remaining economic
life of the asset if, rarely, this is judged to be shorter than the lease term.
When the Group revises its estimate of the term of any lease (because, for example, it re-assesses
the probability of a lessee extension or termination option being exercised), it adjusts the carrying
amount of the lease liability to reflect the payments to make over the revised term, which are
discounted at the same discount rate that applied on lease commencement. The carrying value of
lease liabilities is similarly revised when the variable element of future lease payments dependent on
a rate or index is revised. In both cases an equivalent adjustment is made to the carrying value of the
right-of-use asset, with the revised carrying amount being amortised over the remaining (revised) lease
term.
34
AIQ Limited
Annual Report 2020
Practical expedients have been applied for leases whose term ends within 12 months of the date of
initial application. Such leases have been accounted for in the same way as short-term leases (i.e.
expensed through profit or loss on a straight line basis).
If this expedient is applied, such leases would be accounted for in the same way as short-term leases
(i.e. usually expensed through profit or loss on a straight line basis). This transitional expedient is
independent of the short term lease recognition exemption. The recognition exemption must be applied
consistently to leases of underlying assets in the same class whereas the transitional expedient can
be applied on a lease-by-lease basis.
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:
(cid:120)
IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in
Accounting Estimates and Errors (Amendment – Definition of Material);
(cid:120) Revised Conceptual Framework for Financial Reporting
(cid:120) Amendments to IFRS 3 Definition of a Business
(cid:120) Amendments to IFRS 9, IAS 39 and IFRS 7 Interest Rate Benchmark Reform
(cid:120) Amendments to IFRS 16 COVID-19-Related Rent Concessions
(cid:120) Amendments to IAS 37 Onerous Contracts – Cost of Fulfilling a Contract
(cid:120) Amendments to IAS 16 Property, Plant and Equipment: Proceeds before Intended Use
(cid:120) Amendments to IFRS 3 Business Combinations (Amendment – Definition of Business); and
Revised Conceptual Framework for Financial Reporting
The Directors does 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.
On 20 March 2020, the Company completed a conditional share purchase agreement (the “SPA”) with
Alchemist Codes Sdn. Bhd (“Alchemist Codes’’) for the acquisition by the Company of 100% of the issued
share capital of Alchemist Codes (the "Transaction") which is more fully described in Note 12.
The acquisition of Alchemist Codes Sdn Bhd by the Company does not meet the definition of a reverse
acquisition under IFRS 3 due to:
-
-
-
-
a greater proportion of share capital in the Group being held by shareholders of AIQ Limited, rather
than pre-acquisition shareholders of Alchemist Codes;
AIQ Limited’s shareholders have the ability to appoint or remove a majority of the members of the
Board;
greater Board representation in the Group of the AIQ Limited Board of directors rather than pre-
acquisition members of the Alchemist Codes’ Board; and
the composition of the senior management of the Group consists mostly of AIQ Limited management.
The acquisition of Alchemist Codes has therefore been accounted for under the acquisition method.
Under the acquisition method, the results of Alchemist Codes are included from the date of acquisition. At
the date of acquisition, the fair values of the net assets of Alchemist Codes have been determined and
these values are reflected in the Consolidated Financial Statements. The cost of acquisition is measured
35
AIQ Limited
Annual Report 2020
at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed,
and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly
attributable to the business combination. Any excess of the purchase consideration of the business
combination over the fair value of the identifiable assets and liabilities acquired is recognised as goodwill.
Goodwill, if any, is not amortised but reviewed for impairment at least annually. If the consideration is less
than the fair value of assets and liabilities acquired, the difference is recognised directly in the statement
of comprehensive income.
Acquisition-related costs are expensed as incurred.
In July 2020, the Company established a wholly-owned Hong Kong subsidiary, Alcodes International
Limited.
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 £3.6 million during the year and cash outflows of £1.9 million. As at 31
October 2020, the Group had net current assets of £1.5 million and cash of £1.8 million. The Group’s
cash position was approximately £1.1 million at the date of this report.
The Group meets its day-to-day working capital requirements through cash generated from the capital it
raised on admission to the London Stock Exchange and, subsequent to the acquisition of Alchemist
Codes, from the operations of its subsidiary.
COVID-19 has been identified as having a significant impact on the Group in the 2020 financial year due
to the prolonged public lockdown in Malaysia. The Board has taken, and continues to take, a number of
actions to protect operating cash flow in the short term. As a means of securing the Group’s long-term
future, the Board has initiated a strategic review to assess the viability of Alchemist Codes and to stem
the losses of the business and reduce the cost base, whilst also seeking to evaluate its future. The Group’s
cash position gives sufficient headroom while the Board conducts this process, in which it will consider
all options for the future of the business. The Group’s assessment of the COVID-19 pandemic is detailed
in the Operational Review section of the Strategic Report above.
The Directors have prepared forecasts and projections for a period of at least 12 months from the date of
approval of these financial statements, and have specifically performed a detailed review of those
forecasts for the 15 months to July 2022. 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 ‘worst plausible 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.
These ‘worst plausible case scenario’ conditions indicate that a material uncertainty exists that may
cast significant doubt on the Group’s ability to continue as a going concern. This, in turn, has led Group
management to undertake a strategic review of the Group’s activities going forwards, which is due to
be reported shortly. The unknown outcome of the strategic review, coupled with the uncertainty of
future trading performance, give rise to a material uncertainty over the going concern status of the
Group. The Directors consider the Group to be a going concern but have identified a material
uncertainty in this regard.
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.
36
AIQ Limited
Annual Report 2020
(i)
(ii)
(iii)
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.
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.
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.
e) Foreign currency transactions and translation
Functional and presentational currencies
The presentational currency of AIQ Limited is Pounds Sterling. The functional currency of the
Company is also Pound Sterling. This is based on the principal currency of expenditure and the
Company’s equity raise, 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.
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 Pounds 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.
37
AIQ Limited
Annual Report 2020
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
Furniture and fittings
Office equipment
Renovations
5 years
10 years
10 years
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.
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:
(cid:120) OctaPLUS Platform 3 years
(cid:120) Messenger App 3 years
(cid:120) Software 3 years
As more fully described in Note 13, each of these intangible assets were fully impaired.
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:-
38
AIQ Limited
Annual Report 2020
its ability to measure reliably the expenditure attributable to the asset under development;
the product or process is technically and commercially feasible;
(i)
(ii)
(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, it does not have significant amounts of historic information on credit
losses. Accordingly, only specific provisions have been made.
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.
39
AIQ Limited
k) Right of use assets
Annual Report 2020
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
The Group has adopted IFRS 16 which became effective on 1 January 2019. The standard replaces
IAS 17 'Leases' and for lessees eliminates the classifications of operating leases and finance 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).
m) Financial instruments
Financial assets and financial liabilities are recognised in the Consolidated Statement of Financial Position
when the Company 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.
40
AIQ Limited
Annual Report 2020
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.
41
AIQ Limited
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.
Annual Report 2020
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
Acquisition of Alchemist Codes
The Directors judged that under IFRS 3 Business Combinations, the accounting acquirer is considered to
be AIQ Limited as described above in the note describing the basis of consolidation. The acquisition of
Alchemist Codes has therefore been accounted for under the acquisition method.
42
AIQ Limited
Annual Report 2020
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 but have identified a material uncertainty in this regard. Having undertaken
a detailed review of forecasts to July 2022, considering the impact on the Group’s cash position and the
unknown outcome of the pending strategic review, the Directors consider there to be a material uncertainty
over the going concern status of the Group.
Key estimates
Valuation of Intangible Assets
The determination of the fair value of assets and liabilities including goodwill arising on the acquisition of
Alchemist Codes in March 2020, and development expenditure which is expected to generate future
economic benefits, is based to a considerable extent on management’s judgement.
The fair value of these assets was determined by discounting estimated future net cash flows generated
by the asset. The assets are bespoke and cannot be benchmarked against a market transaction price.
The use of different assumptions for the expectations of future cash flows and the discount rate would
change the valuation of the intangible assets.
Allocation of the purchase price affects the results of the Group as finite life intangible assets are
amortised, whereas indefinite lived intangible assets, including goodwill, are not amortised and could
result in differing amortisation charges based on the allocation to indefinite lived and finite lived intangible
assets.
The useful life used to amortise intangible assets relates to the expected future performance of the assets
acquired and management’s estimate of the period over which economic benefit will be derived from the
asset.
The estimated useful life principally reflects management’s view of the average economic life of each
asset and is assessed by reference to historical data and future expectations. Any reduction in the
estimated useful life would lead to an increase in the amortisation charge.
The fair value of intangibles acquired in the acquisition of Alchemist Codes has been based on a
discounted cash flow income approach. The fair value of the OctaPLUS Platform and Messenger App
acquired with Alchemist Codes during the year ended 31 October 2020 was determined using a discount
factor of 22.4%.
The fair values of intangible assets acquired through the business combination has been based on the
Multi-Period Excess Earnings Method (“MEEM”) which is within the income approach. The multi-period
excess earnings method estimated value is based on expected future earnings attributable to the assets
which have been discounted to a net present value using a discount rate of 22.4%, based on the Group’s
weighted average cost of capital. If the estimation of the cost of capital was reduced by 1%, the valuation
of acquired intangible assets would have increased by approximately £162,000.
The useful life used to amortise intangible assets relates to the expected future performance of the assets
acquired and management’s estimate of the period over which economic benefit will be derived from the
asset.
The estimated useful life principally reflects management’s view of the average economic life of each
asset and is assessed by reference to historical data and future expectations. Any reduction in the
estimated useful life would lead to an increase in the amortisation charge. The average economic life of
the intangible assets has been estimated at 3 years. If the estimation of economic life was reduced by
one year, the amortisation charge would have increased by approximately £123,000.
43
AIQ Limited
Annual Report 2020
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 tested for impairment as of the reporting
date. 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. As
described in Note 13 below, these impairment tests indicated an impairment loss is required and this loss
has resulted in the full write-down of goodwill and intangibles arising from the acquisition of Alchemist
Codes.
5. REVENUE
Sale of software products
Maintenance income
Cashback income
Other
Total
All revenues were generated in Malaysia.
Year
ended
31 October
2020
£
99,596
41,725
13,043
285
154,649
Year
ended
31 October
2019
£
-
-
-
-
During the year ended 31 October 2020, one customer accounted for 55.16% of the Group’s revenues.
No other customers accounted for more than 10%.
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 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
44
AIQ Limited
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.
Annual Report 2020
7. OPERATING LOSS BEFORE TAXATION
Loss from operations has been arrived at after charging:
Auditor’s remuneration:
- Audit of the financial statements*
- Reporting accountant and transaction services
- Other services
Year
ended
31 October
2020
£
Year
ended
31 October
2019
£
58,000
-
-
33,000
35,875
3,000
* Additionally, £107,033 for services were performed in the year to 31 October 2020 by the previous
auditor.
Cost of sales:
Wages and salaries
Cashback expenses
Other
Administrative expenses:
Directors’ remuneration
Wages and salaries
Marketing expenses
Consultancy fees
Outsourcing fees
Amortisation of intangibles
Depreciation of tangible fixed assets
Depreciation of right of use assets
Office rental
Professional fees
Regulatory fees
Secretarial fees
Audit fees
Bookkeeping costs
Share service fees
Vetting fees
Other costs
Year
ended
31 October
2020
£
135,350
7,860
58
143,268
Year
ended
31 October
2020
£
165,212
158,293
296,398
84,322
90,000
239,765
6,483
24,548
13,051
18,982
14,802
33,143
61,281
6,000
12,390
35,000
107,492
Year
ended
31 October
2019
£
-
-
-
-
Year
ended
31 October
2019
£
139,000
-
-
115,727
-
-
-
-
30,104
41,583
20,227
28,849
33,000
24,000
15,221
-
40,080
1,367,162
487,791
45
AIQ Limited
8. STAFF COSTS AND KEY MANAGEMENT EMOLUMENTS
Staff costs:
Wages and salaries (including directors)
Social security costs
Post-employment benefits
Annual Report 2020
Year
ended
31 October
2020
£
433,931
2,397
22,527
Year
ended
31 October
2019
£
139,000
-
-
458,855
139,000
Key management personnel are considered to be the directors and one senior member of staff. Their
remuneration was as follows:
Key management personnel:
Wages and salaries (including directors)
Social security costs
Post-employment benefits
Year
ended
31 October
2020
£
224,445
100
2,287
Year
ended
31 October
2019
£
139,000
-
226,832
139,000
Included within accruals is £23,196 (2019: £154,000), which relates to Directors’ remuneration yet to be
paid.
The average monthly number of employees during the year ended 31 October 2020 was as follows:
Management
Administrative
Operations
Year
ended
31 October
2020
No.
2
2
25
Year
ended
31 October
2019
No.
-
-
-
29
-
The Company did not have any employees during the year ended 31 October 2019, other than the
Directors.
46
AIQ Limited
9. TAXATION
Annual Report 2020
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).
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 £470,000)
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:
Loss before taxation
Tax calculated at the standard rate of tax
applicable to Alchemist Codes of 24% (2019: at
0%)
Tax effects of:
Non-deductible expenditure
Effect of different
jurisdictions
foreign
rates
tax
in
Deferred tax assets on temporary differences
not recognised
Tax credit
Year
ended
31 October
2020
£
(4,130,587)
Year
ended
31 October
2019
£
(503,608)
(991,340)
25,827
87,030
385,483
(493,000)
-
-
-
-
-
The deferred tax recognised on the business combination was recognised at the rate of 24%, being
the rate of tax prevailing in Malaysia. Following the impairment charge to fully write-down the goodwill
and identifiable assets recognised on the acquisition of Alchemist Codes, the deferred tax provision
was released accordingly.
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.
47
AIQ Limited
Annual Report 2020
Year ended
31 October
2020
Year ended
31 October
2019
Loss attributable to ordinary shareholders (£)
(3,637,587)
(503,608)
Weighted average number of shares
59,818,130
51,839,375
Loss per share (expressed as £ per share)
(0.061)
(0.010)
11. PROPERTY PLANT AND EQUIPMENT
Cost
At 1 November 2018 and
2019
Additions through
business combinations
Other additions
Currency translation
differences
As at 31 October 2020
Accumulated
depreciation
At 1 November 2018 and
2019
Depreciation for the year
Currency translation
differences
As at 31 October 2020
Carrying amounts
At 31 October 2020
At 31 October 2019
Fixtures and
fittings
Office
equipment
Computer
equipment Renovations
£
£
£
-
393
74,487
176
75,056
-
1,247
-
1,247
3,023
6,827
(119)
9,731
-
381
(13)
368
-
13,195
15,557
(560)
28,192
-
3,202
(143)
3,059
£
-
427
97,373
233
98,033
-
1,653
1
1,654
Total
£
-
17,038
194,244
(270)
211,012
-
6,483
(155)
6,328
73,809
9,363
25,133
96,379
204,684
-
-
-
-
-
48
AIQ Limited
Annual Report 2020
12. ACQUISITION OF ALCHEMIST CODES SDN BHD
On 20 March 2020, the Company completed a conditional share purchase agreement (the “SPA”) with
Alchemist Codes Sdn. Bhd (“Alchemist Codes’’) for the acquisition by the Company of 100% of the issued
share capital of Alchemist Codes (the “Transaction”), and, on 26 March 2020 readmission of the enlarged
share capital to trading on the Main Market of the London Stock Exchange. Alchemist Codes is a
Malaysian incorporated information technology solutions developer focusing on the e-commerce sector.
Under the terms of the SPA, the consideration was £2.3 million which was settled through the allotment
and issue of 12,921,346 ordinary shares of 1 pence each in the capital of AIQ (the “Consideration Shares”)
at 17.8 pence per share.
The following table summarises the consideration paid for Alchemist Codes, the fair value of assets
acquired, and liabilities assumed at the acquisition date.
Consideration
Consideration shares
Total consideration
identifiable assets
Recognised amounts of
acquired and liabilities assumed
Cash and cash equivalents
Property, plant and equipment
Software
Trade and other receivables
Trade and other payables
OctaPLUS platform
Messenger App
Deferred tax
Total identifiable net assets
Goodwill
Total
Book
value
£
Fair value
adjustments
£
111,073
17,038
38,676
80,011
(55,818)
-
-
190,980
-
-
-
-
-
1,328,996
726,150
(493,000)
1,562,146
Fair value
£
2,300,000
2,300,000
111,073
17,038
38,676
80,011
(55,818)
1,328,996
726,150
(493,000)
1,753,126
546,874
2,300,000
The goodwill arising is attributable to the acquired workforce, anticipated future profit from expansion
opportunities and synergies of the business. Fair value adjustments were deemed necessary in respect of
the OctaPLUS platform and the Messenger App, both of which have been recognised within intangible fixed
assets.
Deferred tax on the fair value adjustments has been recognised at 24%, being the rate of tax prevailing in
Malaysia.
Alchemist Codes contributed £154,649 of revenue for the period between the date of acquisition and
the balance sheet date and £442,175 loss before tax. If the acquisition of Alchemist Codes had been
completed on the first day of the financial year, Group revenues would have been approximately
£210,000 higher and Group loss attributable to equity holders of the parent would have been
approximately £38,000 lower.
Transaction costs of £380,495 were expensed in the year ended 31 October 2020 relating to the
acquisition of Alchemist Codes and re-admission to the Official List of the London Stock Exchange. No
amounts were directly attributable to issuing new shares which would otherwise be deducted from
equity.
49
AIQ Limited
13. INTANGIBLE ASSETS
Annual Report 2020
Cost
At 1 November 2019
Additions through
business combinations
Goodwill
£
Software
£
OctaPLUS
Platform
£
Messenger
App
£
-
-
38,676
-
-
-
-
Total
£
-
38,676
Arising on acquisition
546,874
-
1,328,996
726,150
2,602,020
As at 31 October 2020
546,874
38,676
1,328,996
726,150
2,640,696
Accumulated
amortisation and
impairment
At 1 November 2019
Amortisation for the
year
Impairment provision
-
-
546,874
-
-
-
-
-
38,676
155,050
1,173,946
84,715
641,435
239,765
2,400,931
As at 31 October 2020
546,874
38,676
1,328,996
726,150
2,640,696
Carrying amounts
At 31 October 2020
At 31 October 2019
-
-
-
-
-
-
-
-
-
Goodwill and acquisition related intangible assets recognised have arisen from the acquisition of
Alchemist Codes in March 2020 and purchase price allocation as described in Note 12. The OctaPLUS
Platform and Messenger App are being amortised over their estimated useful economic life of three
years.
Goodwill
The Group tests goodwill annually for impairment or more frequently if there are indications that these
assets might be impaired. The recoverable amounts of the CGU are determined from value in use. The
value of the goodwill comes from using the assets as they are (i.e. there is no expansionary capex
assumed).
The key assumptions for the value in use approach are those regarding growth in revenues and
associated earnings and a discount rate. The Group monitors its pre-tax Weighted Average Cost of
Capital and those of its competitors using market data. In considering the discount rate applying to the
CGU, the Directors have considered the relative sizes, risks and the inter-dependencies of its CGUs.
The Group prepares cash flow forecasts derived from the most recent financial plan approved by the
Board and extrapolates revenues, net margins and cash flows for the following five years based on a
forecast monthly growth rate of 15% in active users of the CGU. Cash flows beyond this period have
been ignored in assessing the need for any impairment provisions. A discount rate of 22.4% has been
assumed. The directors consider these assumptions are consistent with that which a market participant
would use in determining fair value. As a result of the COVID-19 pandemic, the anticipated growth has
not materialised, and the impairment testing has considered the significant uncertainties as to future
activity with no growth assumed.
The Company has tested goodwill for impairment and determined that the recoverable amount relating
to the acquisition of Alchemist Codes is lower than its carrying amount and is therefore impaired. An
impairment loss of £546,874 has therefore been recognised to write off the goodwill which arose on the
acquisition.
50
AIQ Limited
Annual Report 2020
OctaPLUS platform and messenger app
The OctaPLUS platform and messenger app relate to the valuation of the technology developed by
Alchemist Codes at the time of acquisition in March 2020.
The fair value of these assets on acquisition was determined by discounting estimated future net cash
flows generated by the assets where no active market for the assets exists.
The fair values of intangible assets acquired through the business combination has been based on the
Multi-Period Excess Earnings Method (“MEEM”) which is within the income approach.
The Multi-Period Excess Earnings Method (“MEEM”) which is within the income approach was adopted
as being the most appropriate methodology. The multi-period excess earnings method estimated value
is based on expected future earnings attributable to the assets which have been discounted to a net
present value using a discount rate of 22.4%, based on the Group’s weighted average cost of capital.
Under this method the following were key inputs:
- The number of internet users in Malaysia
- Monthly active user growth
- Average spend per user of RM83-95 per month
- Advertising spend of RM1.50 per user per month
- App software maintenance fee of RM75,000 per customer per annum
- OctaPLUS sales commission of 7% from merchants
- OctaPLUS cash back spend of 71% of sales commission
- Software development licence income of RM416,000 per licence sale
- Taxation at the rate of 24%
The Group tests intangible assets for impairment only if there are indications that these assets might be
impaired. An impairment loss is calculated as the difference between its carrying amount and the present
value of the estimated future cash flows which is highly sensitive to the expected revenue.
Both the rollout of OctaPLUS and Alchemist Codes’ IT consultancy business met with severe headwinds
during the year. The competitive landscape for the Group’s e-commerce solution evolved as retailers
transitioned to focus their efforts on online sales. Accordingly, retailers enhanced their direct-to-
consumer sales & marketing, which was to the detriment of emerging online marketplaces such as
OctaPLUS that are based on a commission model. In addition, the travel and tourism industry, which
was expected to be one of the key sectors for OctaPLUS as it typically provides higher commission
rates, was particularly badly impacted by the pandemic.
For the IT consultancy business, the stringent restrictions imposed on travel and the social distancing
measures introduced by the Malaysian government – with the country subject to lockdown measures
throughout the period – prevented Alchemist Codes from meeting with customers and business
partners; and the economic downturn and uncertainty impacted customers’ budget availability and the
willingness to commit resources to new projects.
Revised business plans have assumed much lower levels of activity and a significant reduction in long-
term potential. Since year end, trading conditions have remained very challenging as Malaysia continues
to be under government lockdown, causing a further reduction in demand, and there is continued
uncertainty over the post-pandemic economic recovery and market outlook. As a result, the Board has
initiated a strategic review to stem the losses of the business and reduce the cost base, whilst also
seeking to evaluate its future.
The revised business plans have been used in the testing for impairment of the Alchemist Codes CGU
(the Group’s only CGU) and the tests indicate that the recoverable amount of the CGU has been reduced
to nil. The carrying amount of the intangible asset has therefore been fully impaired by recognising an
impairment loss of £1,815,381.
Software
The software acquired in the business combination has also been fully impaired by recognising a loss
51
AIQ Limited
of £38,676. Updated forecasts prepared by the Company assume much lower revenue than anticipated
when Alchemist Codes was acquired. Accordingly, these forecasts no longer support the carrying value.
Annual Report 2020
14. RIGHT OF USE ASSETS AND LEASE LIABILITIES
Cost
At 1 November 2019
Additions
As at 31 October 2020
Accumulated amortisation
At 1 November 2019
Depreciation for the year
Currency translation differences
As at 31 October 2020
Carrying amounts
At 31 October 2020
At 31 October 2019
Land and
buildings
£
-
295,338
295,338
-
24,548
63
24,611
Total
£
-
295,338
295,338
-
24,548
63
24,611
270,727
270,727
-
-
Future minimum lease payments associated with these leases were as follows:
As at
31 Oct 2020
As at
31 Oct 2019
£
£
Not later than one year
Later than one year and not later than five years
Total minimum lease payments
Less future finance charges
Present value of minimum lease payments
Current liability
Non-current liability
107,817
188,680
296,497
(23,796)
272,701
94,012
178,689
272,701
-
-
-
-
-
-
-
-
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. In previous years, the Company’s lease commitments related to operating leases
which expired in the year ended 31 October 2019.
52
AIQ Limited
Impact of IFRS 16 “Leases” on the statement of comprehensive income
The following table summarises the effect of IFRS 16 “Leases” on the Group’s loss before tax:
Annual Report 2020
Loss before tax excluding lease charges
Lease payments under short-term and low-value
assets
Depreciation of right-of use assets
Lease finance expense
Year ended
31 October
2020
£
(3,595,682)
(13,051)
(24,548)
(4,306)
Year ended
31 October
2019
£
(473,504)
(30,104)
-
-
Loss before tax after lease charges
(3,637,587)
(503,608)
15. TRADE RECEIVABLES
Trade receivables
Provision for expected credit losses
Total trade receivables
As at
31 October
2020
£
7,799
-
7,799
As at
31 October
2019
£
-
-
-
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
Cash at bank
Cash in hand
As at
31 October
2020
£
1,816,583
10,796
1,827,379
Cash at bank earns interest at floating rates based on daily bank deposit rates.
17. TRADE PAYABLES
Redeemable cash back credit
Other trade payables
As at
31 October
2020
£
123,100
32,368
155,468
As at
31 October
2019
£
3,703,592
-
3,703,592
As at
31 October
2019
£
-
-
-
53
AIQ Limited
18. ACCRUALS AND OTHER PAYABLES
Accruals
Deferred revenue
Taxes and social security
19. AMOUNTS DUE TO A DIRECTOR
Annual Report 2020
As at
31 October
2020
£
123,998
1,464
11,111
136,573
As at
31 October
2019
£
218,151
-
-
218,151
31 October
2020
£
31 October
2019
£
Amounts due to a director
-
288,811
The amounts due to a director were unsecured, interest free and repayable on demand. The balance
arose from administrative expenses and transaction costs settled by the director on behalf of the Company
in the period ended 31 October 2018, prior to the Company’s bank account being opened. All amounts
were repaid in the year ended 31 October 2020.
20. SHARE CAPITAL
Authorised
Ordinary shares of £0.01 each
As at 1 November 2019
Issue of shares in the year
At 31 October 2020
As at beginning of year
Issued during the year
As at end of year
Number Nominal
value
£
800,000,000
8,000,000
51,839,375
12,921,346
64,760,721
518,394
129,213
647,607
Year
ended
31 Oct 2020
£
518,394
129,213
647,607
Year
ended
31 Oct 2019
£
518,394
-
518,394
During the year ended 31 October 2020, the Company allotted and issued a total of 12,921,346 Ordinary
Shares of 1 pence each at 17.8 pence each for a total consideration of £2,300,000 in connection with the
acquisition of Alchemist Codes (the “Consideration Shares”) as described in Note 12 above.
Readmission of the enlarged share capital of 64,760,721 Ordinary Shares to listing on the Standard Listing
Segment of the Official List of the FCA and to trading on the Main Market of the London Stock Exchange
(together, the "Readmission") occurred on 26 March 2020. 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.
54
AIQ Limited
Annual Report 2020
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. 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:
Trade receivables
Tax recoverable
Deposits and other receivables
Cash and cash equivalents
Financial liabilities at amortised cost:
Trade payables
Accruals and other payables
Amounts due to directors
Finance leases
As at
31 October
2020
£
7,799
24,764
45,008
1,827,379
As at
31 October
2019
£
-
-
12,300
3,703,592
1,904,950
3,715,892
As at
31 October
2020
£
155,468
136,573
-
272,701
As at
31 October
2019
£
-
218,151
288,811
-
564,742
506,962
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 1%, the effect would not be material.
55
AIQ Limited
ii)
Currency risks
Annual Report 2020
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 and Malaysian Ringgit (‘RM’). 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:
As at 31 October 2020
Financial assets denominated in £
Financial liabilities denominated in £
Net foreign currency exposure
As at 31 October 2019
Financial assets denominated in £
Financial liabilities denominated in £
Net foreign currency exposure
Foreign currency sensitivity analysis:
US$
£’000
894
-
894
Total
£’000
894
-
894
US$
£’000
3,037
-
3,037
Total
£’000
3,037
-
3,037
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 ($) would increase/(decrease) net assets by the amounts shown
below. This analysis assumes that all other variables, in particular interest rates, remain constant.
As at 31 October 2020
Effect on net assets:
Strengthened by 10%
Weakened by 10%
As at 31 October 2019
Effect on net assets:
Strengthened by 10%
Weakened by 10%
US$
£’000
89
(89)
US$
£’000
304
(304)
56
AIQ Limited
Annual Report 2020
At 31 October 2020 the Company had £893,965 (2019: £3,036,744) of cash and cash equivalents in
United States Dollar accounts. At 31 October 2020, 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 £89,396 (2019: £303,674) / loss of £89,396 (2019: £303,674).
At 31 October 2020 the Company had £894,587 (2019: £nil) of cash and cash equivalents in Malaysian
Ringgit accounts. At 31 October 2020, 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 £89,459
(2019: £nil) / loss of £89,459 (2019: £nil).
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 £885,082 of the Group's cash
balances were held with RHB Bank Berhad in Singapore and the equivalent of £900,012 was held with
Hong Leong Bank in Malaysia.
S&P Global Ratings affirmed on 31 October 2020 the issuer credit ratings of RHB Bank Bhd at
BBB+/Stable/A-2, while their ASEAN regional scale ratings were affirmed at "axA+"/"axA-1."
In February 2020, Moody’s Investors Services Ltd upgraded the Hong Leong Bank’s baseline credit
assessment to a3 and reaffirmed its long-term rating at A3 and short-term rating at P2, with a stable
outlook.
Accordingly, the Company considers that the credit risk in relation to its cash holding to be small.
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.
23. 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 2020 consisted of Ordinary Shares and equity
attributable to the shareholders of the Company, totalling £1,863,724 (2019: £3,208,930) (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.
24. RELATED PARTY TRANSACTIONS
The remuneration of the Directors and the key management personnel of the Company is set out in
the Report of the Remuneration Committee.
A total of £42,000 (2019: £21,000) was paid during the year to Luther Pendragon for financial PR
services, a company in which Harry Chathli is a director and shareholder.
As at 31 October 2019, there was a balance due to a director of £288,811 which was repaid during the
year ended 31 October 2020 (see Note 19).
57
AIQ Limited
Annual Report 2020
Included within accruals is £23,196 (2019: £154,000), which relates to Directors’ remuneration
outstanding.
A total of £24,000 (2019: £nil) was paid during the year to Graham Duncan Limited for accounting
services, a company in which Graham Duncan is a director and shareholder.
The related party transactions were made on terms equivalent to those that prevail in arm’s length
transactions.
25. MATERIAL SUBSEQUENT EVENTS
There are no events subsequent to the year-end that require disclosure in these financial statements.
26. ULTIMATE CONTROLLING PARTY
As at 31 October 2020, no one entity owns greater than 50% of the issued share capital. Therefore,
the Company does not have an ultimate controlling party.
27. COVID-19
The outbreak of SARS-CoV-2 (“COVID-19”) severely impacted the Group’s revenues and results for
the year. The stringent lockdown measures introduced by the Malaysian government – known as
“movement control orders” (MCO), which were in effect throughout the period following the acquisition
– prevented Alchemist Codes from meeting with customers and business partners; and the economic
downturn and uncertainty impacted 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, due to retailers significantly enhancing their direct-to-consumer
marketing and reducing the commission they are prepared to pay for affiliate referrals. The impact of
the pandemic on the Group was particularly pronounced due to Alchemist Codes being at an early
stage of development.
The pandemic continues to have a profound impact on the Group’s operations, with MCO measures
in Malaysia being extended in Malaysia into April.
As a consequence of the above, along with the considerable uncertainty over post-pandemic market
conditions, the Board of AIQ has initiated a strategic review to stem the losses of the business and
reduce the cost base, whilst also seeking to evaluate its future.
Management has needed to revise its assumptions as to going concern, and has made provision for
impairment to the carrying value of goodwill and other intangibles assets as described in Note 13
above.
58
AIQ Limited
Directors
Company Secretary
Registered office of the Company
Financial Adviser and Broker
English Legal Advisers to the Company
Cayman Islands Legal Adviser to the
Company
Auditors
Registrars
Principal Bankers
COMPANY INFORMATION
Annual Report 2020
Graham Duncan, Independent Non-Executive Chairman
Harry Chathli, Independent Non-Executive Director
Charles Yong Kai Yee, Executive Director
Li Chun Chung, Executive Director
MSP Secretaries Limited
27/28 Eastcastle Street
London W1W 8DH
United Kingdom
Genesis Building, 5th Floor
Genesis Close, PO Box 446
Cayman Islands, KY1-1106
VSA Capital Limited
New Liverpool House
15-17 Eldon Street
London EC2M 7LD
Stephenson Harwood LLP
18/F United Centre
95 Queensway
Hong Kong
Conyers Dill & Pearman
Cricket Square
Hutchins Drive
P.O. Box 2681
Grand Cayman KY1-1111
Cayman Islands
Haysmacintyre LLP
10 Queen Street Place,
London EC4R 1AG
Computershare Investor Services (Cayman) Limited
The R&H Trust Co. Ltd.
Winward 1, Regatta Office Park
West Bay Road
Grand Cayman KY1-1103
Cayman Island
RHB Bank Berhad
IOI Boulevard, Jalan kenari
5, Bandar Puchong Jaya,
47100 Puchong
Selangor
Malaysia
Hong Leong Bank,
No. 2, Jalan Puteri
2/4, Bandar Puteri,
47100 Puchong,
59
AIQ Limited
Financial PR
Annual Report 2020
Selangor
Malaysia
Luther Pendragon
48 Gracechurch Street
London EC3V 0EJ
Company Website
www.aiqhub.com
60