TIDMGLOK
RNS Number : 1368E
Global Lock Safety (Intl) Grp CoLtd
25 May 2012
Global Lock Safety (International) Group Co., Limited
("Global Lock" or the "Company")
Final results
Global Lock, the provider of security solutions to retailers and
other organisations in China, announces its final results for the
year ended 31 December 2011.
Highlights:
-- Revenue for the year RMB 31.86m (an increase of 47% over 2010's RMB 21.65m)
-- Loss for year RMB 24.42m (2010: loss of RMB 3.29m)
-- Net assets (including minority interests) of RMB 49.64m (2010: RMB 69.10m)
-- Cash and cash equivalents RMB 3.26m (2010: RMB 7.95m)
-- Loss per share RMB 0.02(2010: RMB 0.02)
Chairman's Statement
2011 was a challenging year for Global Lock Group with notably
tougher trading conditions in China. The Chinese Government's
desire to restrict credit fed through into the Chinese high street
and impacted Global Lock's potential customers accordingly. Despite
this, by the end of 2011 the Company's revenues had increased to
RMB 31.86 million, an increase of 47% over 2010's revenues of RMB
21.65 million. At the same time, the number of customers increased
to 17,850 retail stores (an increase of 63% on the 2010 figure of
11,000 retail store clients). The number of branches also
increased, from 56 branches at the end of 2010 to 67 branches by
the end of 2011. The average number of customers per branch was 266
at the end of 2011, compared with 196 a year earlier.
The high loss of RMB 24.42 million for the year is attributable
to the following:
-- the deferral of approximately RMB 22 million of income to the
following year under IFRS accounting rules
-- in 2011, the Company acquired some 1,400 retail store
customers as a part of its acquisition of local security companies.
These customers had, in the main, pre-paid for 12 months security
services but no apportionment of those pre-paid sums was made with
the various vendors. Therefore, since under the terms of the
various acquisition agreements Global Lock was obliged to continue
to provide its regular security services, including security guard
patrols and insurance services, to those new customers from the
date of acquisition to the period end, Global Lock incurred the
costs of providing those services but did not generate any revenue
during the period under review. The Directors expect that the
acquisition of these 1,400 retail store customers will general a
total of RMB 3.5m for the current accounting period;
-- a RMB 1.0 million share based payment charge was incurred
from 2010 as well as increased expenditure in 2012 at the BVI
company level of RMB 3.2 million (up from RMB 1.4 million in
2010);
-- higher selling and distribution costs and administrative
expenses also contributed to the loss. This includes spending on
acquisitions to increase the customer base as well as the costs of
expanding the nationwide branch network and the costs of funding of
those new branches in the early high-growth stage before they
acquire sufficient customers and fixed assets to attain
profitability; and
-- the loss also reflects what the directors perceive as in
adequate cost controls and management oversight and screening
during the acquisition process, as well as a lack of sustained
focus on the core business from the previous senior management.
Following a number of management changes, the new management team
is determined to correct these shortcomings and see Global Lock
take significant strides in 2012.
The Directors are confident that the Group's strategy of
continuing to expand the branch network and aggressively increase
customer numbers, by means of both organic growth and carefully
targeted and managed acquisitions of competitor security companies
and their customers, is well conceived and will deliver substantial
returns in the near term as well as taking the Company towards its
goal of becoming China's leading provider of security solutions. To
further this strategy the Company is making further improvements in
both the branch and head office management structures and systems
and in the Company's promotional and marketing activities. This
strategy continues to depend, inter-alia, on maintaining and
consolidating Global Lock's relationships and alliances with
provincial and local government bodies and local police forces as
well as with China Legal Daily, China's leading legal newspaper of
record, published under the auspices of the Ministry of Justice
with a circulation of approximately 30 million readers.
The Directors are also aware of the importance of retaining the
Company's position at the forefront of Chinese security technology
and the research and development department at Shenzhen Global Lock
Security System Engineering Co continues to develop enhancements
and improvements to Global Locks technical capabilities and
systems. Key current and envisaged developments include:
-- a wireless passive infrared detector for false positive signals / low-power;
-- upgrading the alarm system to a secure GPRS / phone line dual-mode network;
-- a low cost IP camera and a centre video monitoring platform
based on H.264 video coding technology, which can transmit real
time live video to alarm centre via WIFI /LAN / WAN(broadband);
-- an alarm/video integrated host based on GPRS / 3G
(narrow-band) to transmit both alarm packet and live pictures or
video stream to the alarm centre or guard patrol smart phone;
-- a monitoring service platform for police video and alarm networks;
-- a large centralized alarm / video integrated network platform based on BS Architecture; and
-- next generation of alarm / video integrated hosts and a
network alarm / video service platform based on IP / multi-channel
/ streaming media technology architecture for a high-speed, high
efficiency and high security alarm service centre.
With these new systems, the guard patrols can monitor the
retailer store via MMS or 3G video call for effective video
verification of the alarmed site. Used in conjunction with the new
generation of alarms and SD card / hard disk storage and the Police
service's own alarm platform with video, the Directors believe that
these systems will facilitate the verification of a suspected crime
and enhance evidence collection, including before and after photos.
Some of these security products are fully comparable with
equivalent US, Japanese and European products.
The Directors believe that these new and improved technologies
can improve the scheduling of guard patrols, reducing patrol
staffing and invalid alarm response expense, as well as improving
management capabilities and efficiency in meeting the overall
objectives effectively combating crime, lowering insurance payments
and reducing the risk of moral hazard. These technologies see the
Company begin to be able to move away from a purely passive,
reactive role to more targeted and proactive efforts.
Global Lock's progress can be measured in terms of the
certificates, licenses and level of intellectual property
protection it has achieved. Certificates included:
-- China Compulsory Certification (CCC) certificates for
FW-2A-A/B/C/D models of the alarm hosts;
-- Guangdong province security system design, construction & maintenance certificate;
-- ISO9001 quality certification;
-- PRC enterprise and software product certificates; and
-- Shenzhen municipal& state level high-tech enterprise qualification certificates;
In addition the Company has obtained various copyrights,
trademarks and patents with a further four patents in application
and each year Global Lock increases its technological and
intellectual property resources.
As part of its marketing and promotional efforts the Company
sponsored a major conference on security at the 'People's Great
Hall' in Beijing on 29 November 2011. The conference was organized
by China Legal Daily and was attended by many of the China's top
leaders. A Company speaker gave a keynote address.
During 21-23 December 2011, the Company held a 2012 business
planning conference in Ningxiang County, Hunan Province. The
conference involved a full review of 2011 and developed detailed
plans for 2012. All of the China based directors and the senior
executives participated in the conference, together with the branch
managers and a guest speaker from 'China Legal Daily'. One of the
key outcomes was the agreement of individual branch targets. The
level of attainment relative to these targets will in turn
determine the branch management's salaries and bonuses.
Recent Developments and Trading Update
At 30 April 2012 Global Lock had a total of 20,235 customers (an
increase in 4 months of 13% on the number at 31 December 2011). The
number of branches remained unchanged from year end at 67 in
all.
In accordance with the PRC's new law governing security
companies, the Directors have established a new company, Hunan
Provincial Family Fortune Security Services Co., Ltd to obtain both
an Operational Security Licence and a Security Qualification
Licence. This company is wholly owned by the Group's trading
company, Shenzhen Global Lock Security System Engineering Co Ltd,
and will assume total operational control of the whole Global
Lock's Branch Structure in China.
Board Changes
Following the period end, Global Lock has implemented a number
of changes at board level and Mr. Moxiang Li, formerly the
Manufacturing Director, was appointed as the Chairman and CEO of
Global Lock. Mr. Yong Luo, Mr. Xuean Yan and Mr. Jun Gai have
resigned due to personal commitments. We thank them for their
services to the Company and the Group. The Board are considering a
number of new board level appointments and further announcements
will be made at the appropriate time.
On behalf of the Board, I want to extend our warmest thanks to
our investors, business partners, associates and customers for
their support during the year and lastly, but by no means least, we
wish to thank the management and staff of the Global Lock family
for their tremendous efforts and dedicated hard work throughout the
year.
The annual report and accounts for the year ending 31 December
2011 will be posted to shareholders shortly as well as being added
to the Company's website, http://www.globallock.com, in accordance
with AIM Rule 20.
Enquiries:
Global Lock Safety (International) Group
Moxiang Li,Chief Executive Tel: +86 755 8366 0755
Robert Zhang, Investor Relations E-mail: robertzh@globallock.com
Andrew Gee, Non-Executive Director Tel: +44 777 565 3564
Allenby Capital Limited Tel: +44 203 328 5656
Nick Naylor
Nick Harriss
Alex Price
- Ends -
Global Lock provides a total anti-theft service for the Chinese
retail sector. This service comprises three primary elements: a
patented GSM alarm system; a 24 hour security service and guard
response; and linked anti-theft insurance. The Directors of Global
Lock believe that the Global Lock is the only provider of this type
of comprehensive integrated security service in the Peoples
Republic of China.
CONSOLIDATED STATEMENTOF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2011
Group
----------------------------
2011 2010
Note RMB RMB
Revenue
Fees income 31,857,105 21,651,867
Sales business tax (1,780,430) (1,191,876)
------------- -------------
30,076,674 20,459,991
Cost of sales (8,010,824) (5,501,627)
------------- -------------
Gross profit 22,065,850 14,958,364
Selling and distribution
costs (34,178,175) (13,371,996)
Administrative expenses (12,175,616) (3,537,946)
Listing costs - (532,753)
Other income 213,956 -
------------- -------------
Loss from operations (24,073,985) (2,484,331)
Finance income 6,826 47,625
Finance cost (354,291) (47,626)
------------- -------------
Loss on ordinary
activities before
taxation 3 (24,421,450) (2,484,332)
Taxation 8 - (802,766)
------------- -------------
Loss for the year (24,421,450) (3,287,098)
Other companies income - -
------------- -------------
Total comprehensive
loss for the year (24,421,450) (3,287,098)
============= =============
Loss attributable
to:
Owners of the parent (4,466,022) (1,460,511)
Non-controlling interests (19,955,428) (1,826,587)
------------- -------------
(24,421,450) (3,287,098)
============= =============
Total comprehensive
loss attributable
to:
Owners of the parent (4,466,022) (1,460,511)
Non-controlling interests (19,955,428) (1,826,587)
------------- -------------
(24,421,450) (3,287,098)
============= =============
Loss per share 9
Basic (0.02) (0.02)
============= =============
Diluted (0.02) (0.02)
============= =============
CONSOLIDATED STATEMENTOF FINANCIAL POSITION
FOR THE YEAR ENDED 31 DECEMBER 2011
Group
--------------------------
2011 2010
Note RMB RMB
Non-current assets
Intangible assets 5 38,863,021 36,238,713
Property, plant
and equipment 6 22,730,745 17,036,698
Investment in subsidiary 7 7,500,000 -
Other receivables - -
Deferred tax asset 8 - -
------------ ------------
Total non-current
assets 69,093,766 53,275,411
Current assets
Inventories 1,301,127 266,820
Trade and other
receivables 9 27,153,896 21,676,630
Cash and cash equivalents 10 3,256,676 7,953,349
------------ ------------
Total current assets 31,711,699 29,896,799
------------ ------------
Total assets 100,805,465 83,172,210
============ ============
Equity and reserves
Share capital 11 20,323,800 20,323,800
Shares to be issued 4,000,000 -
Reserves 962,835 -
Accumulated losses (6,154,533) (1,688,511)
------------ ------------
19,132,102 18,635,289
------------ ------------
Non-controlling
interest 12 30,511,083 50,466,511
------------ ------------
Total equity 49,643,185 69,101,800
------------ ------------
Current liabilities
Borrowings 749,994 -
Trade and other
payables 13 49,496,808 13,820,590
Taxation 429,592 249,820
------------ ------------
Total current liabilities 50,676,394 14,070,410
------------ ------------
Non-Current liabilities
Long-term payables 485,886 -
Total liability 51,162,280 14,070,410
------------ ------------
Total equity and
liabilities 100,805,465 83,172,210
============ ============
CONSOLIDATED STATEMENTOF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2011
Group
----------------------------
2011 2010
RMB RMB
Cash flows from operating
activities
Loss on ordinary activities
before taxation (24,421,450) (2,484,332)
Adjustments for:
Amortization of intangible
assets 3,010,093 2,680,602
Depreciation of property,
plant and equipment 4,103,104 1,869,649
Loss on disposal 12,781 -
Share based payment charge 962,835 -
Loss of investment 500,000 -
Financial income (6,826) (47,625)
Financial costs 347,210 47,626
------------- -------------
(15,492,253) 2,065,920
Increase in inventories (649,918) (266,820)
Increase in trade and other
receivables (5,465,565) (12,509,286)
Increase in trade and other
payables 34,825,210 7,384,670
------------- -------------
Cash from/(used in) operations 13,217,474 (3,325,516)
Income taxes paid - -
------------- -------------
Net cash from/(used in)
operating activities 13,217,474 (3,325,516)
------------- -------------
Cash flows from investing
activities
Purchase of property, plant
and equipment (9,340,117) (10,500,042)
Research and development
costs (2,221,326) (640,432)
Proceed from non-controlling
interest - 500,000
Proceed from disposal of
property, plant and equipment 1,800 1,779
Acquisition of subsidiary (4,000,000) -
Acquisition of new branch (3,350,000)
------------- -------------
Net cash used in investing
activities (18,909,643) (10,638,695)
------------- -------------
Cash flows from financing
activities
Proceeds from share capital - 20,000,800
Amount paid to directors 100,000 -
Financial income 6,826 -
Financial costs (347,210) -
Borrowings (Net) 1,235,880 -
Loan to subsidiary - -
Loan repayment from subsidiary - -
------------- -------------
Net cash from financing
activities 995,496 20,000,800
------------- -------------
Net change in cash and cash
equivalents (4,696,673) 6,036,589
Cash and cash equivalents
at beginning of year 7,953,349 1,916,760
Cash and cash equivalents
at end of year 3,256,676 7,953,349
============= =============
CONDOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2011
Shares
Share to be Other Accumulated Non-controlling
capital issued reserve losses Total interest Total equity
RMB RMB RMB RMB RMB RMB RMB
Group
At 1 January
2010 323,000 - - (228,000) 95,000 51,793,098 51,888,098
Loss for the
year - - - (1,460,511) (1,460,511) (1,826,587) (3,287,098)
Total comprehensive
loss for the
year - - - (1,460,511) (1,460,511) (1,826,587) (3,287,098)
Issue of ordinary
share 20,000,800 - - - 20,000,800 - 20,000,800
Share issued
to non-controlling
interest - - - - - 500,000 500,000
- - - - - - -
At 31 December
2010 20,323,800 - - (1,688,511) 18,635,289 50,466,511 69,101,800
Loss for the
year - - - (4,466,022) (4,466,022) (19,955,428) (24,421,450)
Total comprehensive
loss for the
year - - - (4,466,022) (4,466,022) (19,955,428) (24,421,450)
Deferred share
consideration
to acquire
new subsidiary - 4,000,000 - - 4,000,000 - 4,000,000
Share based
payment transaction - - 962,835 - 962,835 - 962,835
At 31 December
2011 20,323,800 4,000,000 962,835 (6,154,533) 19,132,102 30,511,083 49,643,185
NOTES TO THE FINANCIAL INFORMATION
1 Accounting policies
(a) General information
The Company is a company incorporated in the British Virgin
Islands ("BVI") under the BVI Law. The Company is governed by its
articles of association and the principal statute governing the
company is BVI law. The company has an unlimited life. The
liability of the members of the company is limited. The Company is
domiciled and has its registered office in BVI and the company's
registration number is1561941 (British Virgin Islands).
The Group's places of business are in the People's Republic of
China ("PRC"). The principal place of business of the Global Lock
Group's operation is at 19/F Desay Technology Plaza, the 1st
Hi-Tech Road South, Hi-Tech Park, Nanshan District, 518057
Shenzhen, PRC.
These non-statutory consolidated financial statements are
presented in Renminbi ("RMB") which is also the functional currency
of the company.
The principal accounting policies are summarised below:
(b) Basis of preparation
The non-statutory financial statements have been prepared in
accordance with International Financial Reporting Standards as
adopted by the EU (together, "IFRS"). These financial statements
are for the year ended 31 December 2011.
New standards and interpretations not applied
The Group has adopted all relevant standards effective for
accounting periods beginning on or after 1 January 2011.
At the date of authorisation of these non-statutory financial
statements, the following standards and interpretations were in
issue, but not yet effective:
Standards and interpretations
Amendment to IFRS 7 - Enhanced Derecognition Disclosure
Requirements - effective 1 July 2011
The IASB introduced enhanced disclosure requirements to IFRS 7
Financial Instruments as part of its comprehensive review of
off-balance sheet activities. The amendments are designed to ensure
that users of financial statements are able to more readily
understand transactions involving the transfer of financial assets
(for example, securitisations), including the possible effects of
any risks that may remain with the entity that transferred the
assets. The amendments also require additional disclosures if a
disproportionate amount of transfer transactions are undertaken
around the end of a reporting period. As the change only results in
additional disclosures, there is no impact on the company's
financial statement.
IFRS 9 - Financial Instruments - Classification and Measurement
of Financial Assets - effective 1 January 2015
This has been introduced to replace IAS 39 - Recognition and
Measurement. The requirements were issued in 2009 as part of the
gradual development and phase-in of the new financial instruments
guidance. New requirements for classification and measurement of
financial liabilities were also added in year 2010. As a result,
IFRS 9 will eventually be a complete replacement for IAS 39. The
Group plans to apply this when it has such transactions.
IFRS 9 - Incorporation of requirements on the accounting for
financial liabilities - effective 1 January 2015
The 2010 revision to IFRS 9 also include guidance on the
classification and measurement of financial liabilities. The
guidance included in IFRS 9 retains the classification criteria for
financial liabilities currently contained in IAS 39. However, there
are two key differences, relating to presentation and measurement,
compared to IAS 39:
-- the presentation of the effects of changes in fair value
attributable to a liability's credit risk; and
-- the elimination of the cost exemption for derivative
liabilities to be settled by delivery of unquoted equity
instruments.
IFRS 10 "Consolidated Financial Statements" (effective 1 January
2013), it establishes the principles for the presentation and
preparation of consolidated financial statements when an entity
controls one or more other entities. IFRS 10 uses control as the
single basis for consolidation, irrespective of the nature of the
investee, thus eliminating the risks and rewards approach included
in SIC-12. IFRS 10 identifies the following three elements of
control:
-- power over the investee;
-- exposure, or rights, to variable returns from involvement with the investee; and
-- the ability to use power over the investee to affect the amount of the investor's returns.
An investor must possess all three elements to conclude it
controls an investee.
IFRS 11 - Joint Arrangements - effective 1 January 2013
IFRS 11 establishes two types of joint arrangements: joint
operations and joint ventures. The two types of joint arrangements
are distinguished by the rights and obligations of those parties to
the joint arrangement. In a joint operation, the parties to the
joint arrangement have rights to the actual assets and obligations
for the liabilities of the arrangement. In contrast, in a joint
venture, the parties to the arrangement have rights to the net
assets of the arrangement.
A joint operator recognises its share of the assets,
liabilities, revenues and expenses in accordance with applicable
IFRSs, while a joint venture would account for its interest using
the equity method of the accounting under IAS 28 (revised 2011),
thus eliminating the option of proportionate consolidation for
interest in joint ventures.
IFRS 12 - Disclosure of interests in Other Entities - effective
1 January 2013
IFRS 12 combines the disclosure requirements for an entity's
interest in subsidiaries, joint arrangements, associates and
structured entities into one comprehensive disclosure standard.
Many of the disclosure requirements were previously included in IAS
27, IAS 31 or IAS 28, whilst others are new.
IFRS 13 - Fair value measurement - effective 1 January 2013
IFRS 13 was issued in May 2011 and established a single
framework for measuring fair value and is applicable for both
financial and non-financial items. The standard does not include
requirements on when fair value measurement is required; it
prescribes how fair value is to be measured if required by another
standard.
It is considered that these do not apply to the Group and that
these standards are not expected to result in changes in accounting
policies, changes to the carrying amounts of assets or liabilities
or the published results. If any, but expect there will be no
material impact to the income statement and balance sheet when
implemented, although further disclosure may be required.
IAS 27 (revised 2011) - Separate financial statements -
effective 1 January 2013
IAS 27 establishes the accounting for investments in
subsidiaries, jointly ventures, and associates when an entity
elects, or is required by local regulations, to present separate
(non-consolidated) financial statements.
(c) Going concern policy
The non-statutory financial statements have been prepared
assuming the Group will continue as a going concern. During the
year, the Group incurred a net loss of RMB 24.42m and had net
current liabilities of RMB 19m. The loss reflects what the
Directors perceive as inadequate cost controls and management
oversight. This also includes over spending on acquisitions to
increase the customer base as well as the costs of expanding the
nationwide branch network. Following a number of management
changes, the new management team is determined to correct these
shortcomings and stay focused on the development of its existing
core business. In addition, the Group has obtained a RMB 20m
interest-free loan facility from Mr Shiman LIU, a third party
individual, to be drawn down over the next 12 months. In Jan 2012,
the Group has received its first tranche of this loan of RMB 5m.
The Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the
foreseeable future. Revenues are expected to continue to increase
in the coming years resulting in the Group becoming profitable in
due course.
Under the going concern assumption, an entity is ordinarily
viewed as continuing in business for the foreseeable future with
neither the necessity of liquidation, nor ceasing trading or
seeking protection from creditors pursuant to laws or regulations.
In assessing whether the going concern assumption is appropriate,
management takes into account all available information for the
foreseeable future, in particular for the twelve months from the
date of approval of the non-statutory financial statements. Based
on the budgets prepared, management have a reasonable expectation
that the group has adequate resources to continue its operational
exercises for the foreseeable future and the group has adopted the
going concern basis of accounting in preparing the non-statutory
financial statements.
(d) Basis of consolidation
The consolidated non-statutory financial statements incorporate
the financial statements of the Company and entities controlled by
the Company (its subsidiaries). Control is achieved where the
Company has the power to govern the financial and operating
policies of an investee entity so as to obtain benefits from its
activities.
Non-controlling interests in the net assets of consolidated
subsidiaries are identified separately from the Group's equity
therein. Non-controlling interests consist of the amount of those
interests at the date of the original business combination (see
below) and the non-controlling interests' share of changes in
equity since the date of the combination. Losses applicable to the
minority in excess of the non-controlling interest in the
subsidiary's equity are allocated against the interests of the
Group except to the extent that the non-controlling interest has a
binding obligation and is able to make an additional investment to
cover the losses.
The results of subsidiaries acquired or disposed of during the
year are included in the Consolidated Statement of Comprehensive
Income from the effective date of acquisition or up to the
effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies used
into line with those used by the Group. All intra-group
transactions, balances, income and expenses are eliminated on
consolidation.
The Group entered into the following agreements on 17 October
2010:
-- An Exclusive Technology Support Agreement between Global Lock
Safety (Shenzhen) Limited ("Global Lock WOFE") and Shenzhen Global
Lock Security System Engineering Co., Ltd ("Shenzhen Global Lock"),
with a quarterly services fee of 20 to 25 per cent of total monthly
operating revenues is payable by Shenzhen Global Lock to Global
Lock WOFE on a quarterly basis. The condition requires Shenzhen
Global Lock has profitability in the financial year in order to
meet this obligation.
-- A Business Operation Agreement between Global Lock WOFE and
Shenzhen Global Lock and the shareholders of Shenzhen Global Lock
(who are also the founder and controlling shareholders of the
Company) under which Shenzhen Global Lock cannot carry out any
activities which may affect its capital, personnel, obligations,
rights or business operations. In addition, the Founder
Shareholders grant Global Lock WFOE the rights to exercise their
respective voting rights in Shenzhen Global Lock.
-- An Exclusive Option Agreement entered into between Global
Lock WFOE, the Founder Shareholders and Shenzhen Global Lock, under
which Global Lock WFOE has an exclusive option to purchase by
itself or through a nominee, to the extent permitted by the laws of
the PRC, all or any part of the equity interests of each Founder
Shareholder in Shenzhen Global Lock. Each Founder Shareholder has
agreed that Shenzhen Global Lock will accept payment from Global
Lock WFOE on their behalf and that the payment received shall be a
loan to Shenzhen Global Lock to be used for the business operations
of Shenzhen Global Lock.
-- An Exclusive Sales Agreement entered into by Shenzhen Global
Lock and Global Lock WFOE, under which, Global Lock WFOE is allowed
to sell the various antitheft systems and ancillary products of
Shenzhen Global Lock, exclusively within the territories and period
as agreed between the parties.
-- An Equity Pledge Agreement entered into between Global Lock
WFOE, Shenzhen Global Lock and the Founder Shareholders under which
the Founder Shareholders have pledged their respective equity
interests in Shenzhen Global Lock to Global Lock WFOE as security
for the protection of the rights of Global Lock WFOE under the
Exclusive Technology Support Agreements, the Business Operation
Agreement, the Exclusive Option Agreement and the Exclusive Sales
Agreement referred to above (the "Contractual Arrangements"). In
addition, the Founder Shareholders have agreed not to transfer,
sell, pledge, dispose or create any encumbrance over their equity
interests in Shenzhen Global Lock.
The Group, through these contractual agreements, gained control
of Shenzhen Global Lock on that date.
In determining the appropriate accounting treatment for this
transaction, the Directors considered IFRS 3 "Business
Combinations" (Revised 2008). However, they concluded that this
transaction fell outside the scope of IFRS 3 (revised 2008) since
the transaction described above represents a combination of
entities under common control as the same group of individuals
acting in concert were shareholders of Shenzhen Global Lock as well
as the controlling shareholders of the Company.In accordance with
IAS 8 "Accounting Policies, changes in accounting estimates and
errors", in developing an appropriate accounting policy, the
Directors have considered the pronouncements of other standard
setting bodies and specifically looked to accounting principles
generally accepted in the United Kingdom ("UK GAAP") for guidance
(FRS 6 - Acquisitions and mergers) which does not conflict with
IFRS and reflects the economic substance of the transaction.
Under UK GAAP, the assets and liabilities of both entities are
recorded at book value, not fair value (although adjustments are
made to achieve uniform accounting policies), intangible assets and
contingent liabilities are recognised only to the extent that they
were recognised by the legal acquiree in accordance within
applicable IFRS, no goodwill is recognised, any expenses of the
combination are written off immediately to the income statement and
comparative amounts, if applicable, are restated as if the
combination had taken place at the beginning of the earliest
accounting period presented.
Therefore, although the Group reconstruction did not become
unconditional until 17 October 2010, these consolidated financial
statements are presented as if the Group structure has always been
in place, including the activity from incorporation of the group's
principal trading subsidiary. Both entities had the same management
as well as majority shareholders.
Business combinations
The acquisition of subsidiaries is accounted for using the
purchase method of accounting. The cost of the acquisition is
measured 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. The acquiree's identifiable assets, liabilities and
contingent liabilities that meet the conditions for recognition
under IFRS 3: Business Combinations are recognised at their fair
value at the acquisition date, except for non-current assets (or
disposal groups) that are classified as held for sale in accordance
with IFRS 5: Non-Current Assets Held for Sale and Discontinued
Operations, which are recognised and measured at fair value less
costs to sell.
Goodwill arising on acquisition is recognised as an asset and
initially measured at cost, being the excess of the cost of the
business combination over the Group's interest in the net fair
value of the identifiable assets, liabilities and contingent
liabilities recognised. If, after reassessment, the Group's
interest in the net fair value of the acquiree's identifiable
assets, liabilities and contingent liabilities exceed the cost of
the business combination, the excess is recognised immediately in
the Statement of Comprehensive Income.
Non-controlling interests that are present ownership interest
and entitle their holders to a proportionate share of the entity's
net assets in the event of liquidation may be initially measured
either at fair value or at the non- controlling interests'
proportionate share of the recognised amounts of the acquiree's
identifiable net assets. The choice of measurement basis is made on
a transaction-by-transaction basis. Other types of non-controlling
interests are measured at fair value, when applicable, on the basis
specified in another IFRS.
(e) Intangible assets
1. Patent rights
Patent rights acquired are initially recognised at cost and are
subsequently carried at cost less accumulated amortisation and
accumulated impairment losses. These costs are amortised to the
income statement using the straight-line method over 14.6 years,
which is the shorter of the remaining useful life and periods of
contractual rights. The remaining useful life of 14.6 years of the
20 years patent is calculated from the date the patent was
transferred to the Group on 1 August 2009.
2. Research and development expenditure
Research expenditure is recognised as an expense as
incurred.
Costs incurred on development projects are recognised as
internally generated intangible assets only if all of the following
conditions are met by the Company:
- the technical feasibility of completing the intangible assets
so that it will be available for use or sales;
- its intention to complete the intangible asset and use or sell it;
- its ability to use or sell the intangible assets;
- it is probable that the intangible asset created will generate future economic benefits;
- the availability of adequate technical financial and other
resources to complete the development and use or sell the
intangible assets; and
- its ability to measure reliably the expenditure attributable
to the intangible assets during its development.
Internally generated intangible assets are amortised on a
straight-line basis over their estimated useful lives, from the
date the intangible is ready for use. Amortisation charge is
recognised in the income statement within "Cost of sales".
Development costs that have been capitalised as intangible
assets are amortised on a straight-line basis over the period of
its expected benefits.
3. Customer relationship
Customer relationships are measured initially at purchase cost
and are amortised on a straight-line basis over their estimated
useful life of 5 years.
(f) Property, plant and equipment
Property, plant and equipment are stated at cost less any
subsequent accumulated depreciation and subsequent accumulated
impairment losses.
Depreciation is charged so as to write off the cost, less
estimated residual value on assets other than land, over their
estimated useful lives, using the reducing balance method, on the
following bases:
Machinery equipment under construction straight line 5 years
Machinery equipment straight line 5years
Office equipment and motor vehicles straight line 5years
Gains and losses on disposals are determined by comparing
proceeds with the carrying amount of the asset. These are included
in statement of comprehensive income.
(g) Impairment of tangible and intangible assets excluding
goodwill
At each balance sheet date, the Group reviews the carrying
amounts of its tangible and intangible assets to determine whether
there is any indication that those assets have suffered an
impairment loss.
If any such indication exists, the recoverable amount of the
asset is estimated in order to determine the extent of the
impairment loss (if any). Where it is not possible to estimate the
recoverable amount of an individual asset, the group estimates the
recoverable amount of the cash-generating unit to which the asset
belongs.
The recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects the current market assessments
of the time value of money and the risks specific to the asset. If
the recoverable amount of an asset (or cash-generating unit) is
estimated to be less than its carrying amount, the carrying amount
of the asset (cash-generating unit) is reduced to its recoverable
amount. An impairment loss is recognised immediately in profit or
loss, unless the relevant asset is carried at a re-valued amount,
in which case the impairment loss is treated as a revaluation
decrease.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised
for the asset (cash-generating unit) in prior years. A reversal of
an impairment loss is recognised immediately in profit or loss,
unless the relevant asset is carried at a re-valued amount, in
which case the reversal of the impairment loss is treated as a
revaluation increase.
(h) Taxation
Current taxation
Current tax assets and liabilities for the current and prior
periods are measured at the amount expected to be recovered from or
paid to the tax authorities. The tax rates and the tax laws used to
compute the amount are those that are enacted, or substantively
enacted, by the balance sheet date.
Deferred taxation
Deferred tax is provided in full using the balance sheet
liability method for all taxable temporary timing differences
arising between the tax bases of assets and liabilities and their
carrying values for financial reporting purposes. Deferred tax is
measured using currently enacted or substantially enacted tax
rates.
Deferred tax assets are recognised to the extent the temporary
difference will reverse in the foreseeable future and that it is
probable that future taxable profit will be available against which
the asset can be utilised.
(i) Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable and represents amounts receivable in
accordance with the Group's principal activity, net of VAT and
trade discounts, also deducted sales business tax.
Revenue is general recognised in the period when the services
are provided, using a straight-line basis over the term of the
contract.
a. Leases
Leases in which a significant portion of the risks and rewards
of ownership are retained by the lesser are classified as operating
leases. Payments made under operating leases (net of any incentives
received from the lesser) are charged to the profit and loss on a
straight-line basis over the period of the lease.)
b. Investment in subsidiaries
Investments in subsidiaries are stated at cost less provision
for permanent diminution in value.
c. Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits, bank
balances, demand deposits and other short term, highly liquid
investments that are readily convertible to known amount of cash
and are subject to an insignificant risk of changes in value.
(j) Financial instruments
Financial assets and financial liabilities are recognised on the
group's balance sheet when the group becomes a party to the
contractual provisions of the instrument.
Trade and other receivables
Trade and other receivables are initially measured at fair value
and are subsequently reassessed at the end of each accounting
period.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand
deposits and other short-term highly liquid investments that are
readily convertible to a known amount of cash and are subject to an
insignificant risk of changes in value.
Financial liabilities and equity
Financial liabilities and equity instruments issued by the group
are classified according to the substance of the contractual
arrangements entered into and the definitions of a financial
liability and an equity instrument. An equity instrument is any
contract that evidences a residual interest in the assets of the
group after deducting all of its liabilities. The accounting
policies adopted for specific financial liabilities and equity
instruments are set out below.
Trade payables
Trade payables are initially measured at fair value and are
subsequently measured at amortised cost, using the effective
interest rate method.
Equity instruments
Equity instruments issued by the company are recorded at the
proceeds received, net of direct issue costs. Shares issued are
held at their fair value.
(k) Inventory
Inventory is stated at the lower of cost and net realisable
value. Cost is determined on a first-in first-out basis. Net
realisable value is based on estimated selling price allowing for
all further costs to completion and disposal.
The inventory is included within finished goods (spare parts and
uniform) and low-value consumption goods.
(l) Borrowings
Borrowings are recognised initially at the proceeds received,
net of transaction costs incurred, and subsequently measured at
amortised cost using the effective interest method. Borrowings are
classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability for at
least twelve months after the end of reporting date.
(m) Provisions
Provisions are recognised when the group has a present
obligation (legal or constructive) as a result of a past event and
it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation. Where the
group expects some or all of a provision to be reimbursed, the
reimbursement is recognised as a separate asset but only when the
reimbursement is virtually certain. The expense relating to any
provision is presented in the income statement net of any
reimbursement. If the effect of the time value of money is
material, provisions are discounted using a current pre-tax rate
that reflects, where appropriate, the risks specific to the
liability. Where discounting is used, the increase in the provision
due to the passage of time is recognised as a borrowing cost.
(n) Commitments and contingencies
Commitments and contingent liabilities are disclosed in the
financial statements. They are disclosed unless the possibility of
an outflow of resources embodying economic benefits is remote. A
contingent asset is not recognised in the financial statements but
disclosed when an inflow of economic benefits is probable.
(o) Events after the balance sheet date
Post year-end events that provide additional information about a
company's position at the balance sheet date and are adjusting
events are reflected in the financial statements. Post year-end
events that are not adjusting events are disclosed in the notes
when material.
(p) Foreign currencies
The financial information is presented in Renminbi ("RMB") which
is the functional currency of the Group.
Monetary assets and liabilities denominated in foreign
currencies in each company are translated at the rates of exchange
prevailing at the accounting date. Transactions in foreign
currencies are translated at the rate prevailing at the date of
transaction.
(q) Share-based payment arrangement
Equity-settled share-based payment transactions with parties
other than employees are measured at the fair value of the goods or
services received, except where that fair value cannot be estimated
reliably, in which case they are measured at the fair value of the
equity instruments granted, measured at the date the entity obtains
the goods or the counterparty renders the services.
Fair value is measured by use of the Black-Scholes model. The
expected life used in the model has been adjusted, based on
management's best estimate, for the effects of non-transferability,
exercise restrictions, and behavioural considerations.
(r) Employee Benefits
Short Term Employee Benefits
Wages, salaries, annual leave and sick leave, social security
contributions, bonuses and non-monetary benefits are accrued in the
period in which the associated services are rendered by the
employees.
Post-employment benefits
For the subsidiary of the Group in PRC, there are contributory
retirement plans operated by the local government. The employees
participate in the defined contribution retirement plan whereby the
company is required to contribute to the schemes at fixed rates of
the employees' salary costs. The company's contributions to these
plans are charged to profit or loss when incurred. The company has
no obligation for the payment of retirement and other
post-retirement benefits of staff other than the contributions
described above.
Contribution made to the defined contribution retirement plan
includes basic pension insurance in PRC which is charged to the
profit and loss in the period to which they are related.
Under the pension plan which the Group pays fixed contributions
and will have no legal or constructive obligations to pay further
contributions if the fund does not hold sufficient assets to pay
all employee benefits relating to employee service in the current
or prior financial periods. Once the contributions have been paid,
the Group has no further payment obligations.
(s) Government grants
Government grants are recognised as income over the periods
necessary to match them with the related costs which they are
intended to compensate; and are recognised only when there is
reasonable assurance that:
-- the company will comply with the conditions attached to them; and
-- the grants will be received.
Unconditional government grant is recognised in profit or loss
as other income when the grant becomes receivables
(t) Accounting estimates and judgments
The preparation of financial statements in conforming to adopted
IFRSs requires management to make judgments, estimates and
assumptions that affect the application of policies and reported
amounts of assets, liabilities, income and expenses. The estimates
and assumptions are based on historical experience and other
factors considered reasonable at the time, but actual results may
differ from those estimates. Revisions to these estimates are made
in the period in which they are recognised.
Consolidation
The Group does not consolidate the results of Hunan XinXiang
Jingan Security Technology Co., Limited ("Henan XinXiang") as the
Directors are of the opinion the control is intended to be
temporary and Henan XinXiang will be disposed within next 12
months. As such, the Directors are actively seeking a buyer for
Hunan XinXiang.
(u) Use of estimates
The assumptions concerning the future, and other key sources of
estimation at the balance sheet date, that have a significant risk
of causing a material adjustment to the carrying amounts of assets
and liabilities within the next financial year are discussed
below:
Intangible Assets
Amortisation
Intangible assets (other than goodwill) are amortised over their
useful lives. Useful lives are based on management's estimates of
the periods over which the assets are expected to generate
revenues. These estimates are periodically reviewed for
reasonableness. Due to the long lives of these assets, especially
patent rights long lives (14 years) changes to the estimates can
result in significant changes to the carrying value. A decrease of
10% in the charge in the next year would reduce costs by RMB270,000
approximately.
Impairment review
The Group assesses the impairment of intangible assets subject
to amortisation or depreciation whenever events or changes in
circumstances suggest that the carrying amount of the asset may not
be recoverable or may have been impaired. Factors that may trigger
an impairment review include the following:
i. Significant underperformance relative to historical or projected operating results.
ii. Significant changes in the manner of the use of the assets
or the overall business strategy.
iii. Significant negative industry or macro-economic trends.
The key assumptions used in the value in use calculations for
the customer list included with intangible assets are customer
attrition rates, revenue growth rates and appropriate discount
rates.
Management has assessed the net present value and thereby
impairment on variety of bases and assumptions. The impairment test
are particularly sensitive to changes in the key assumptions and
changes to the assumptions could result in impairment; however all
of the varying bases indicate a net present value in excess of the
carrying value of the intangible assets.
The key assumptions in the value in use calculations are as
follows:
Customer Attrition Rate 5.3%
Growth Rate 50%
Discount Factor 14.26%
A decrease of 10% in the key assumptions rates would result in
the request for an impairment of the intangible asset.
Share-based payment
The Group has share option schemes for certain suppliers.
Judgements and estimates are required in determining the
share-based payment charge as an expense in the income statement.
The directors have used Black-Scholes model which has been widely
used in valuing the share based payment charge. The directors are
in the opinion that the model used has been adjusted to their best
estimate in arriving at the charge.
2 Business segments
For the purpose of IFRS 8, the chief operating decision maker
takes the form of the Board of Directors. The Directors are of the
opinion that the business of the Group comprises of a single
activity, being the provider of security solutions to retail stores
in the PRC. At the meetings between the Directors, the income,
expenditure cash flows, assets and liabilities are reviewed on a
whole-group basis.
The investment criterion of the Group is to invest in sales
opportunities in prime locations. Sub-division of sales by type,
function or by town or city of location is therefore of little
significance in reviewing operations.
Based on the above considerations, there is considered to be one
reportable segment, the provider of security solutions to retail
stores in PRC. Internal and external reporting is on a consolidated
basis, with transactions between Group companies eliminated on
consolidation. Therefore the financial information of the single
segment is the same as that set out in the Consolidated Statement
of Comprehensive Income, the Consolidated Statement of Changes in
Equity, the Consolidated Statement of Financial Position and
Consolidated Statement of Cash Flows.
All Group non-current assets are located in the PRC. No Group
non-current assets are located in the entity's country of
domicile.
3 Taxation
Group
2011 2010
RMB RMB
Current tax - -
Deferred tax - 802,766
Tax charge/(credit)
on ordinary activities - 802,766
Reconciliation of
the tax expense
The tax assessed
for the year is
different from the
standard rate of
corporation tax
in the PRC (15%).
The differences
are explained below:
Group
2011 2010
RMB RMB
Loss on ordinary
activities before
taxation (24,421,450) (2,484,332)
Loss on ordinary
activities multiplied
by standard rate
of corporation tax
in the PRC of 15%
(2010: 15%) (3,196,659) (372,650)
Effects of:
Non-deductible expenses 202,112 219,077
Deferred tax movement 2,994,547 956,339
Tax charge/(credit)
on ordinary activities - 802,766
The company is regarded as resident for the tax purposes in BVI.
There are no applicable taxes in the BVI for the company.
The Group is regarded as residents for the tax purposes in PRC
and subject to national income tax rate at 25%. Due to its high
technology enterprise status, the company is entitled to a
reduction in tax rate at 15%.
A deferred tax asset of approximately RMB3,900,000 (2010: RMB
900,000) has not been recognized in respect of timing differences
relating to losses not utilised and carried forward at the year end
as there is insufficient evidence that the amount will be recovered
in future years.
4 Loss per share
The calculation of basic and diluted loss per share at 31
December 2011 was based on the loss attributable to ordinary
shareholders of RMB 4,466,022 (2010: RMB 1,460,511). The weighted
average number of ordinary shares outstanding during the year ended
31 December 2011 and the effect of the potentially dilutive
ordinary shares to be issued are shown below.
Group
-----------------------------
2011 2010
Number Number
Issued ordinary shares at beginning of
the year 250,000,000 25,000,000
Effect of shares issued - 56,095,890
--------------- ------------
Basic weighted average number of shares
in issue during the year 250,000,000 81,095,890
=============== ============
Diluted weighted average number of shares
in issue during the year 250,000,000 81,095,890
=============== ============
Group
-----------------------------
2011 2010
RMB RMB
Net loss for the year attributable to
equity holders (4,466,022) (1,460,511)
=============== ============
Basic loss per share (0.02) (0.02)
=============== ============
Diluted loss per share (0.02) (0.02)
=============== ============
At 31 December 2011, 2.5m share options (2010: 2.5m) were
excluded from the diluted weighted average number of ordinary
shares calculation as their effect would have been
anti-dilutive.
The average market value of the Company's shares for purposes of
calculating the dilutive effect of the share options was based on
quoted market prices for the period during which the options were
outstanding.
5 Intangible assets
Development Customer
Group Patent rights cost relationship Total
RMB RMB RMB RMB
Cost
As at 1 January 2010 39,203,800 192,000 - 39,395,800
Additions 640,432 - 640,432
As at 31 December
2010 39,203,800 832,432 - 40,036,232
Additions - 2,221,326 3,413,075 5,634,401
-------------- ------------ -------------- -----------
As at 31 December
2011 39,203,800 3,053,758 3,413,075 45,670,633
-------------- ------------ -------------- -----------
Less:
Accumulated amortization
As at 1 January 2010 1,116,917 - - 1,116,917
Amortization for
the year 2,680,602 - - 2,680,602
As at 31 December
2010 3,797,519 - - 3,797,519
Amortization for
the year 2,685,192 - 324,901 3,010,093
-------------- ------------ -------------- -----------
As at 31 December
2011 6,482,711 - 324,901 6,807,612
-------------- ------------ -------------- -----------
Carrying amounts
At 31 December 2011 32,721,089 3,053,758 3,088,174 38,863,021
============== ============ ============== ===========
At 31 December 2010 35,406,281 832,432 - 36,238,713
============== ============ ============== ===========
Intangible assets include patent rights, development costs and
customer relationship.
The Group undertakes development projects to improve and upgrade
its software solution that includes the peripheral devices used for
the security and the related software.
The goodwill arising on the acquisition of local business
operatorsis attributable to the anticipated profitability of the
foreseeable future contracts to be obtained by the customer
relationships in the security solutions sectors, the expertise of
the technical staffs and the anticipated future operating synergies
from the combination.
6 Property, plant and equipment
Group Security Assets Security Security Office Total
equipment under equipment centre equipment
not installed construction installed and motor
at customer at customer vehicles
RMB RMB RMB RMB RMB RMB
At cost
As at 1 January 2011 3,826,513 34,493 11,096,135 926,204 3,555,177 19,443,522
Additions 6,464,815 74,973 - 928,798 2,343,146 9,811,732
Disposal - - - - (26,068) (26,068)
Transfer (6,624,293) (44,571) 6,137,263 44,571 - (487,030)
As at 31 December
2011 3,667,035 69,895 17,233,398 1,899,573 5,872,255 28,742,155
Accumulated depreciation
As at 31 December
2010 - - 1,827,903 71,907 507,014 2,406,824
Charge for the year - - 2,936,301 164,056 1,002,747 4,103,104
Eliminated - - - - (11,487) (11,487)
Transfer - - (487,030) - - (487,030)
As at 31 December
2011 - - 4,277,174 235,963 1,498,274 6,011,411
Net book value of property, plant
and equipment
At 31 December 2011 3,667,035 69,895 12,956,224 1.663.610 4.373.981 22,730,745
At 31 December 2010 3,826,513 39,493 9,268,232 854,297 3,048,163 17,036,698
7 Shares in subsidiary undertakings
Group
2011 2010
RMB RMB
Investment costs
As at 1 January - -
Additions 16,000,000 -
Withdrawn* (8,000,000) -
As at 31 December 8,000,000 -
Impairment
From 1 January - -
Impairment loss 500,000 -
As at 31 December 500,000 -
Carrying value
As at 31 December 2011 7,500,000 -
On 14 March 2011, the Group subscribed 15.78% of the entire
share capital of Shenzhen China Security Investment Holding Co.,
Limited for RMB 30 million at nominal of which RMB 9 million has
been invested. This investment is a joint venture project to
construct an office building in Shenzhen.
*Following to the failure in obtaining approval from the local
government for the construction site, the Group recovered RMB 8
million of its capital investment. The directors are of the opinion
that the impairment provision of RMB 500,000 to the remaining RMB 1
million to cover the losses incurred to date.
Details of the subsidiaries, all of which have ordinary shares
and a year ended 31 December 2011, are as follows:
Effective Contractual
equity interest interest
held by held by Country
Subsidiary the Group the group of registration Nature of business
------------------------------- ----------------- ------------ ----------------- -------------------
HK Global Lock Safety 100% n/a Hong Kong Investment holding
(International) Group
Co Limited
Held by subsidiaries:
Global Lock Safety (Shenzhen) 100% n/a PRC Investment holding
Limited
Shenzhen Global Lock - 100% PRC Provide security
Security System Engineering solutions to
Co., Ltd. retail stores.
Yuxi City Global Lock - 50% PRC Provide security
Security Engineering solutions to
Co., Ltd ("Yuxi") retail stores.
Shenzhen Global Lock - 100% PRC Dormant
Security Technology Co.,
Limited
Henan Xinxiang Jingan Provide security
Security Electronic Co., solutions to
Limited 40% 30% PRC retail stores.
Shenzhen China Security - 15.78% PRC Non-trading
Investment Holding Co.,
Limited
Global Lock Safety (Shenzhen) Limited has a contractual
agreement with Shenzhen Global Lock Security System Engineering
Co., Ltd. where full managerial, operational and financial controls
of Shenzhen Global Lock Security System Engineering Co., Ltd. has
been granted to Global Lock Safety (Shenzhen) Limited. The
contractual agreement directs 25% of Shenzhen Global Lock's revenue
and results to the Group.
Yuxi is consolidated in the financial statements due to deemed
control. The Group considers this company as a subsidiary because
it has control over the Board of Directors of the company.
On 16 February 2011, the Group subscribed the entire share
capital of Shenzhen Global Lock Security Technology Co., Limited
for RMB 10 million at nominal, fully paid. As at year end, the
company was non-trading.
On 3 June 2011, the Group acquired 70% of the of the issued
share capital of Henan XinXiang Jingan Security Electronic Co.,
Limited ("Henan Xinxiang") for a total consideration of RMB 7
million of which RMB 3 million payable in cash and balance of RMB 4
million issue of new shares of Global Lock after one year. The
number of shares to be issued will be based on the calculation of
the same value of share amount and closing share price of Global
Lock at date of business combination. The Group considers this
company as an investment and intends to dispose of Henan XinXiang
within next 12 months. As such, the Directors are actively seeking
a buyer for Henan XinXiang.
8 Deferred tax assets
Group
------------------
2011 2010
RMB RMB
At 1 January - 802,766
Charged to income statement (Note 8) - (802,766)
At 31 December - -
====== ==========
The Group has the following unutilised tax losses at end of the
financial year to offset against future profits in PRC:
Group
--------------------
2011 2010
RMB RMB
Unutilised tax losses 4,100,000 900,000
========== ========
There are no significant temporary differences. The realisation
of deferred tax is dependent on suitable taxable profits made in
future periods.
9 Trade and other receivables
Group
2011 2010
RMB RMB
Trade receivables 333,494 519,695
Loans to directors 3,255,122 1,100,000
Amount due from group - -
undertakings
Amount due from connected
party 5,063,039 4,666,017
Other receivables 12,003,303 10,170,255
Deposit - 789,783
Prepayments 6,498,938 2,762,680
Prepaid insurance - 1,668,200
27,153,896 21,676,630
There are no trade or other receivables past due and the
carrying amount of trade and other receivables approximates their
fair value.
Amount owing by directors represents amount drawn on account
and, are non-trade, interest-free and payable on demand.
10 Cash and cash equivalents
Group
2011 2010
RMB RMB
Cash on hand 965,819 540,142
Bank balances 2,290,857 7,413,207
3,256,676 7,953,349
Included in the Group bank balances as at 31 December 2011 are
RMB Nil (2010: RMB 702,660) held in trust by directors.
Cash and cash equivalents were denominated in the following
currencies:
Group
2011 2010
RMB RMB
Great Britain - -
Pounds
United States
Dollars 370,469 461,697
Hong Kong Dollars 4,018 843
Renminbi 2,882,189 7,490,809
3,256,676 7,953,349
11 Stated capital account and share capital
Share capital
Share capital 2011 2011 2010 2010
Number RMB Number RMB
Ordinary shares of no
face value
- brought forward 250,000,000 20,323,800 25,000,000 323,000
- share issues - - 225,000,000 20,000,800
250,000,000 20,323,80 250,000,000 20,323,800
============ =========== ============ ===========
Authorized Unlimited Unlimited
============ =========== ============ ===========
On 29 December 2009, the company issued 50,000 ordinary shares
of US$1 each at par.
On 20 September 2010, the company increased the authorised share
capital from 50,000 ordinary shares of US$1 each to 250,000,000
ordinary shares of US$1 each. The company subsequently converted
all the existing and issued ordinary shares of US$1 each par value
into 500 shares of no par value.
On 2 October 2010, the company further increase the authorised
share capital to an unlimited number of no par value shares.
On 2 October 2010, the company issued 212,500.000 ordinary
shares of no par value for US$0.000001 per share.
Subsequently, the company issued 12,500,000 ordinary shares of
no par value of RMB20,000,000.
The holders of ordinary shares are entitled to receive dividends
from time to time and are entitled to one vote per share at
meetings of the company.
12 Non-controlling interest
Group
2011 2010
RMB RMB
At 1 January 50,466,511 51,793,098
Capital contributed by non-controlling
interest - 500,000
Loss for the year (19,955,428) (1,826,587)
At 31 December 30,511,083 50,466,511
============= ============
13 Trade and other payables
Group
2011 2010
RMB RMB
Trade payables 1,845,017 551,524
Loan from directors 4,460,590 -
Amount due to group undertakings - -
Amount due to connected
party 233,020 729,519
Net wages control 3,354,769 -
Other creditors 16,023,756 2,273,250
Accruals 1,414,176 368,872
Deferred income 22,165,480 9,897,425
49,496,808 13,820,590
14 Financial Commitments
Financial commitments in relation to non-cancellable operating
leases for office premises contracted for at the date of the
statement of financial position but not recognised as liabilities,
are payable as follows:
2011 2010
RMB RMB
Less than 1 year 1,608,972 1,405,675
More than 1 year and not more than 5 years 1,478,949 1,524,225
More than 5 years -
3,087,921 2,929,900
========== ====================
15 Related party transactions
Key management personnel are considered to be the directors and
their emoluments are included in Note 7.
As at balance sheet date, the amount due from Mr Xuean Yan is
RMB 3,255,122 and the amount due to Mr Moxiang Li is RMB
4,300,590
In addition to the related party information disclosed elsewhere
in the financial statements, the following were significant related
party transactions during the year under review and at terms and
rates agreed between the parties:
Hunan Xiang long Electronics Development Co., Ltd ("Hunan
Xiang")
Hunan Xiang, the key supplier of the Group's equipment, is owned
by some of the directors. Details of transactions with Hunan Xiang
are presented below:
2011 2010
RMB RMB
Purchase of equipment 6,464,815 6,641,688
Balance payable 12,297 25,548
Prepayment for machinery equipment 1,013,000 4,666,017
Family Fortune International Co., Ltd
The Group has a non-trade balance receivable from a shareholder
of the Company, Family Fortune International Co., Ltd, of RMB
103,311 (2010: RMB 26,500).
Shenzhen Family Fortune Investment Co., Ltd
The Group has non-trade balance receivable to Shenzhen Family
Fortune Investment Co., Ltd, a company with some common directors,
of RMB 1,501,355 (2010: payable of RMB 670,000).
Shenzhen Global Lock Security Mobile Co., Ltd
The Group has non-trade balance receivable to Shenzhen Global
Lock Security Mobile Co., Ltd, a company with some common
directors, of RMB 2,272,430 (2010: RMB NIL).
Shenzhen Lin En Energy Investment Co., Ltd
The Group has non-trade balance receivable to Shenzhen Lin En
Energy Investment Co., Ltd, a company with some common directors,
of RMB 184,823 (2010: RMB NIL).
Henan Xinxiang Jingan Security Electronic Co., Ltd
The Group has non-trade balance payable to Henan Xinxiang Jingan
Security Electronic Co., Ltd, a partial owned subsidiary by the
Group, of RMB 233,020 (2010: RMB NIL).
16 Other matters
This statement was approved by the directors on 25 May 2012. The
financial information for the year ended 31 December 2011 set out
in this announcement does not constitute financial statements but
is based on the financial statements for the year then ended.
The auditors have reported on those financial statements and
their report contains an emphasis of matter in relation to the
Group's ability to continue as a going concern but did not contain
any formal qualification or disclaimer. The auditor's report of the
accounts for the year ended 31 December 2010 was unqualified.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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