AIQ Aiq Limited

Operational & Strategic Review

As noted in the Group's FY 2023 results announcement, the environment for non-fungible tokens and other blockchain-based projects has become challenging. Accordingly, the Group has shifted its focus to sourcing IT services projects in alternative sectors.

During the six months to 30 April 2024, the Group completed the delivery of a project, which commenced in the previous year, to develop a gaming application. The Group assisted the customer with the concept for the video game app and its technical development. In this project, the Group performed the role of project manager and subcontracted the technical delivery (such that the net benefit to the Group is the margin earned on the contract).

Post period, the Group undertook a consulting project, for which it received HK$200k, whereby it advised a customer in Hong Kong on the feasibility of operating an e-commerce platform, based on a mass affiliate programme, focusing on the food & beverage industry. If the customer decides to launch the platform, the Group expects to be appointed to assist with building the platform engine. The Group is delivering this project directly (as opposed to performing the role of project manager), leveraging its previous experience with its OctaPLUS platform, and, accordingly, it carries a higher gross margin than the other projects recently undertaken.  

With revenue generation remaining subdued, the Board continues to closely monitor the cash position and is keeping all its strategic options open in assessing how best to deliver shareholder value. The Board is grateful for the ongoing support of its major shareholders.

Financial Review*

Revenue for the six months ended 30 April 2024 was £153k (H1 2023: £73k). The revenue was generated from the delivery of a project to develop a gaming application.

The Group recognised a gross profit of £79k (H1 2023: £71k).

Administrative expenses were slightly reduced to £245k (H1 2023: £278k) as the Group continued to implement cost reduction measures. There was a net loss on foreign exchange of £8k (H1 2023: £115k loss) due to the continued weakness of the Pound against the Hong Kong Dollar. Accordingly, operating loss was £175k (H1 2023: £323k loss).

Net finance costs were £15k compared with £16k for the first half of the previous year.

Loss before tax for the period was £189k (H1 2023: £339k loss).

The Group had cash and cash equivalents of £30k at 30 April 2024 (31 October 2023: £135k). Post period, as announced on 5 July 2024, the Group entered a non-interest bearing loan agreement with Li Chun Chung, an Executive Director of the Company, to raise US$100k (see Note 11 to the financial statements). As at 26 July 2024, the Group had cash and cash equivalents of £72k.

* The comparative figures for H1 2023 are for continuing operations only (see the financial statements for further detail on discontinued operations)

Going Concern

The Group incurred losses of £189k during the period and cash outflows from operating activities of £94k. As at 30 April 2024, the Group had net current liabilities of £160k and cash and cash equivalents of £30k. The Group's cash position was approximately £72k as at 26 July 2024, being the last practicable date prior to the date of this report.

In assessing whether the going concern assumption is appropriate, the Directors take into account all available information for the foreseeable future, in particular for the 12 months from the date of approval of the financial statements. This information includes management prepared cash flows forecasts for the Group.

The Directors have assessed that to meet its forecasted cash requirements, the Group is dependent on cash generated from the new revenue contracts, continued support from its loan holders and/or obtaining further funding in the form of debt/equity. As discussed in Note 11, post period, the Company raised USD100,000 from an Executive Director. The significant shareholders of the Company have also indicated their intention to provide further support. The Directors are confident that the actions required to maintain the going concern position of the Group can be achieved as successfully demonstrated in the past. As a result, the Board continues to adopt the going concern basis of accounting in preparing the financial statements.

The uncertainty around management estimation of winning new revenue contracts and/or obtaining additional funding gives rise to a material uncertainty that may cast significant doubt on the Group's ability to continue as a going concern. Therefore, the Directors consider the Group to be a going concern but have identified a material uncertainty in this regard.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 APRIL 2024

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

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

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 APRIL 2024

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

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

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

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

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

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 30 APRIL 2024

The non-cash movement from financing activities was £12,500 (H1 2023: £18,500) on account of the accrual of interest on loan notes (refer to Note 10). The first half of 2023 also included a share-based payment charge of £6,000.  

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

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1. GENERAL INFORMATION

AIQ Limited ("the Company") was incorporated and registered in The Cayman Islands as a private company limited by shares 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.

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").

2. PRINCIPAL ACTIVITIES

The principal activities of the Group currently comprise the delivery of information technology (IT) solutions for clients through the provision of IT consultancy.

3. ACCOUNTING POLICIES

a) Basis of preparation

The condensed consolidated interim financial statements have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and International Accounting Standard 34 "Interim Financial Reporting" (IAS 34). Other than as noted below, the accounting policies applied by the Group in these condensed interim financial statements are the same as those set out in the Group's audited financial statements for the year ended 31 October 2023. These financial statements have been prepared under the historical cost convention and cover the six-month period to 30 April 2024.

These condensed financial statements do not include all of the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the audited financial statements for the year ended 31 October 2023.

The condensed interim financial statements are unaudited and have not been reviewed by the auditors and were approved by the Board of Directors on 28 July 2024.

The financial information is presented in Pounds Sterling (£), which is the presentational currency of the Company.

A summary of the principal accounting policies of the Group are set out below.

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.

During the year to 31 October 2023, the Group discontinued its operation in Malaysia as part of its consolidation strategy to save cost and focus on operations in Hong Kong and therefore the comparatives in the consolidated statement of comprehensive income pertaining to discontinued operations were restated in line with IFRS 5- Non-current assets held for sale sand discontinued operations.

c) Going concern

The Group incurred losses of £189k during the period and cash outflows from operating activities of £94k. As at 30 April 2024, the Group had net current liabilities of £160k and cash and cash equivalents of £30k. The Group's cash position was approximately £72 as at 26 July 2024, being the last practicable date prior to the date of this report.

In assessing whether the going concern assumption is appropriate, the Directors take into account all available information for the foreseeable future, in particular for the 12 months from the date of approval of the financial statements. This information includes management prepared cash flows forecasts for the Group.

The Directors have assessed that to meet its forecasted cash requirements, the Group is dependent on cash generated from the new revenue contracts, continued support from its loan holders and/or obtaining further funding in the form of debt/equity. As discussed in Note 11, post period, the Company raised USD100,000 from an Executive Director. The significant shareholders of the Company have also indicated their intention to provide further support. The Directors are confident that the actions required to maintain the going concern position of the Group can be achieved as successfully demonstrated in the past. As a result, the Board continues to adopt the going concern basis of accounting in preparing the financial statements.

The uncertainty around management estimation of winning new revenue contracts and/or obtaining additional funding gives rise to a material uncertainty that may cast significant doubt on the Group's ability to continue as a going concern. Therefore, the Directors consider the Group to be a going concern but have identified a material uncertainty in this regard.

4. SUBSIDIARIES

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

* During the year to 31 October 2023, the Company discontinued the operations of Alchemist Codes Sdn Bhd and on 31 October 2023, commenced the strike off process to dispose of the subsidiary. Accordingly, Alchemist Codes was a discontinued operation for the period under review.

5.       REVENUE

All revenues were generated in Asia. An analysis of revenue by the timing of the delivery of goods and services to customers for the periods ended 30 April 2024, 30 April 2023 and the year ended 31 October 2023 is as follows:

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, information technology product and services. The Board of Directors assesses the performance of the operating segment using financial information that is measured and presented in a manner consistent with that in the Financial Statements.

All revenues were derived from Asia.

7. LOSS PER SHARE

The Company presents basic and diluted earnings 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 loss per share is determined by adjusting the 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 loss per share, as the Company's warrants and loan notes are anti-dilutive in nature and therefore the diluted loss per share has not been presented.

8.       SHARE CAPITAL

9.       SHARE WARRANT RESERVE

On 3 October 2022, the Company granted 300,000 warrants to Guild Financial Advisory ("GFA"), the Company's corporate adviser, exercisable at a price of £0.01 for a period of up to ten years. The warrants were granted in return in part for their corporate financial services carried out for a period of 12 months whereby it was agreed that GFA would provide services for an amount of £24,000 with £12,000 being settled in cash and the balance of £12,000 represented by the issue of the warrants As a result of this the fair value of the warrants was deemed to be £12,000 spread evenly over the 12-month period of the contract, £1,000 was expensed in October 2022 and £11,000 was expensed during the year to October 2023 and £12,000 was taken to a warrant reserve.

10.     CONVERTIBLE LOAN NOTES

On 24 January 2022, the Company entered into an unsecured convertible loan note agreement (the "Convertible Loan Note Facility") for a total subscription of £500,000 (the "Loan Notes").

On 31 July 2023, the Company came to an agreement to amend certain terms of the convertible loan note instrument whereby the expiration date of the convertible loan notes was extended by a period of 12 months from 24 January 2024 to 24 January 2025 (the "Expiration Date"). All other details of the Convertible Loan Note Facility remained unchanged, namely that the loan notes can be repaid, in part or in full, by the Company on 31 December in any year prior to the Expiration Date by giving not less than 14 days' written notice to the noteholders. All outstanding Loan Notes attract interest at a rate of 5% per annum from the date of issue (25 January 2022) to the date of repayment or conversion and is payable on the anniversary of the issue of the Loan Notes.

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

11.     POST BALANCE SHEET EVENTS

As announced on 5 July 2024, post period end the Company entered into an agreement with Li Chun Chung, an Executive Director of the Company, for an interest-free, unsecured loan of USD100,000 (the "Loan Agreement"). Mr. Chung has informed the Company that he does not intend to request any repayment of the loan, which is re-payable upon demand, before 31 March 2025.