PHOENICIAN CORPORATION IV LIMITED
REPORT OF THE DIRECTORS AND FINANCIAL RESULTS
(presented in US Dollars)
FOR THE YEAR ENDED 31 OCTOBER 2013
CHAIRMAN'S STATEMENT
The Board has been evaluating acquisitions of either the whole or part of
suitable businesses (the "targets" or singularly, the "target") that will
provide improved value to shareholders.
Where and when appropriate and permitted, we will seek board representation on
each target in which the Company is an investor. As such, the Company will be
a pro-active investor and will seek, to the extent permitted by all applicable
laws, to control and operate a target. Acquisition of targets is not intended
to be financed solely through the proceeds gained from investors'
subscriptions, but may, if appropriate, be financed through the issuance of
further Class A Shares or through the issuance of additional unquoted Class B
Shares.
It remains the intention of the Company to effect an acquisition or sign a
letter of intent, agreement in principle or definitive agreement for an
acquisition. The Directors have identified potential targets and are
evaluating the opportunities, although no potential targets are yet at a stage
whereby they can be brought to shareholders' attention. The Company has
retained strategic positions in companies which the Board considers to be of
benefit to the Shareholders.
On December 22, 2011, the Company announced the successful exit from its KTI
investment which has significantly increased the Company's cash resources. The
Company received £422,500 (USD$635,254) in consideration for its holding of
6,499,999 shares in KTI Limited (selling its shares at 6.5 pence) and has
received £107,917 (USD$163,695) in consideration for its outstanding option in
respect of 3,083,332 shares, exercisable at 3 pence.
On April 2, 2013, the Company announced it had completed the conversion of the
refundable deposit to Amara in the sum of $1,050,000, into common shares of
Amara Hong Kong Limited ("AHK"). The Company received 36% of the outstanding
common shares of AHK. AHK holds a 100% interest in a Shanghai company with a
private Chinese Renminbi ("RMB") equity license, called Shanghai Amara Equity
Investment Management Co., Ltd. ("Shanghai Amara").
The Company was in discussions regarding several exciting business
opportunities for Shanghai Amara. However none of them has come to fruition
and IAS 39 required us to write off this investment under IFRS rules.
On October 4, 2012, the Company provided a secured loan note to Transonic
General Trading LLC ("Transonic") in the amount of AED250,000 (USD$68,418).
Transonic is primarily engaged in the business of car rental, bus rental and
passenger transport by rented buses. Transonic provides buses including
drivers to transport workers from living residences to/from work sites. They
also provide rental cars for corporate clients and the rental of heavy
equipment on long term basis such as tipper trucks, boom loaders and drilling
machines. Transonic has used the proceeds from the loan note to facilitate its
set up and expansion.
Interest is due and payable on the Loan Note every 30 days. The Company earns
a rate of interest of 2% on the total value per month whether redeemed or
otherwise. The interest is calculated pro rata to the number days the interest
is due for the period, in accordance to the amount of days outstanding, should
the loan note be redeemed during the term. The loan note is personally
guaranteed by Dr. Musab Jassim Al Qasimi. The terms of the loan note are
governed by and shall be construed in accordance with UAE law. The loan note
was due for repayment four months from the date of the certificate. The loan
note was called and is overdue for repayment. Dr. Jassim assures us he will
repay the loan note, with accrued interest. He has since paid AED100,000
(USD$27,225), and has agreed to make another payment later n October 2014.
The Company still maintains its holding in Prime Investments Group Limited
("Prime") which now trades under the name Makkah and Madinah Holdings ("MMH").
MMH's mid-price on the ICAP Securities and Derivatives Exchange is 3 pence and
the Company purchased the investment at 6 pence. This means our holding of
11,396,619 shares of MMH is being carried at $577,251 in these financial
statements versus our original cost of $1,325,000. IFRS (IAS 39) required the
Company to write down this asset against the management's belief that this
company's value has gone up during the current period and not down. At 31
December 2013, the net assets of MMH were $472.36 million (2012: $440.41
million) or $0.37 per share (2012: $0.35). MMH's book value has increased year
over year and our value per share should therefore be higher. Management
firmly believes this asset is undervalued based on today's share price on
ISDX.
MMH's main asset was a land bank of 67 plots which have a gross floor area of
21,905,000 square feet in a project known as the Eye of Ajman in the Emirate
of Ajman, UAE, which Ernst & Young's Dubai office has valued at approximately
US$400,000,000 (the "Eye of Ajman"). In May 2012, a transaction to sell the
Eye of Ajman was approved. In consideration for the disposal, MMH acquired a
100% interest in Makkah & Madinah International Limited, which in turn has a
34% interest in the closed joint stock company of Makkah & Madinah Commercial
Investments Company, KSA ("MMCI"). MMCI was incorporated in 2005 with a paid
up capital of SAR 2,000,000,000, It is a closed joint stock company, with real
property assets in the holy cities of Makkah & Madinah and commercial
investments in Egypt.
For more information on MMH, please refer to the ICAP Securities and
Derivatives Exchange website.
On January 24, 2014, the Company announced a collaboration, financing and
option agreement with Enco Fuels Limited. Under the terms of the arrangement,
the parties have agreed to work together on projects in the retail petroleum
industry in the UK to jointly develop and agree strategies, to pursue such
opportunities, and raise necessary capital. Unless earlier terminated in
accordance with the provisions therewith, the Agreement is for a term of 2
years.
The Company has agreed to work with Enco on an initial opportunity relating to
four sites in Scotland, namely Garvock, Boghall, Bridgeton and Tam O Shanter
(the "Sites"). On a consolidated basis, the revenues of the four sites were
approximately GBP7,000,000 in the year ended 31 December 2013. The Company has
agreed to provide a bank guarantee ("BG") of GBP160,000 (USD$263,198) which
will allow the Sites to use the BG to secure purchasing terms with petrol
suppliers. Prior to the BG being in place, the necessary funds have been
deposited with Certas Energy's UK lawyer (as the supplier of the goods
necessary to operate the Sites). Any funds released from the escrowed funds or
the BG will be reimbursed in full.
In consideration for providing the escrowed funds and BG, PIV is entitled,
under the Agreement, to 5% per annum on the full amount of the escrowed funds
and the BG, such payments to be received by PIV in equal monthly instalments
commencing one month after the funds have been escrowed.
Enco has also agreed to pay all costs in respect of: (a) setting up and
maintaining the BG; (b) retaining the Company's listing on ISDX (including
ISDX, corporate adviser, accounting, legal, share registrar and other fees)
and (c) negotiating and preparation of the Agreement.
All amounts due to PIV by Enco under the Agreement have been secured by means
of a personal guarantee from one of the shareholders of Enco, a debenture over
a company he owns which operates successful family entertainment centres
located in Dubai and a debenture over the assets of Enco.
Pursuant to the Agreement, the Company has been issued with an
option to acquire 6% of the then issued share capital of Enco for GBP30,000.
Moreover, at the time of exercising such option (which is exercisable at
PIV's discretion), PIV will be granted share options to acquire further shares
in Enco at a price and amount to be mutually agreed.
Furthermore, the parties have also agreed to work together to achieve a
merger. The combined entity would actively acquire and consolidate retail
petroleum assets to take advantage of off-market opportunities and economies
of scale to increase net margins.
It has been just over 6 months since Enco has taken over the operations stated
above. We will continue to monitor them to ensure they operate as efficiently
as possible. We have seen management reports that show the currents sites are
improving operationally and profitability is consistent with their current
budget. Executives at Enco have identified and targeted two more locations
that would double their gross revenues from the four current sites. The
acquisition of these two additional sites will not require any further
investment by the Company.
A number of representations and warranties have been provided by Enco and its
shareholders, on a joint and several basis.
As of 6 October 2014, there have been no significant changes in the operations
of the Company and we are diligently pursuing additional investment
opportunities with the objective of generating significant returns to
shareholders.
Jason R. Futko
Chairman
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 OCTOBER 2013
Year Year
Ended Ended
31 October 2013 31 October 2012
Notes $ $
Revenue - -
Administrative expenses 6 (142,409) (250,307)
Other (losses)/gains 7 - (565,502)
Operating loss (142,409) (815,809)
Finance income 22,128 128
Loss before income tax (120,281) (815,681)
Income tax expense 8 - -
Loss for the year from (120,281) (815,681)
continuing operations
Other comprehensive income:
Items that may be reclassified
subsequently to profit or loss
Fair value loss on (1,468,373) -
available-for-sale financial
assets
Total other comprehensive income (1,468,373) -
Total comprehensive income for (1,588,654) (815,681)
the year
Earnings per share
Basic and diluted loss per share in 9 (0.01) (0.08)
US cents
The Statement of Comprehensive Income has been prepared on the
basis that all operations are continuing operations.
STATEMENT OF FINANCIAL POSITION
As at As at
31 October 31 October 2012
2013
Notes $ $
Assets
Non-current assets
Available-for-sale financial 10 548,780 2,018,993
assets
Other receivables 12 90,335 68,418
639,115 2,087,411
Current assets
Cash and cash equivalents 11 322,226 445,883
Total assets 961,341 2,533,294
Capital and reserves
attributable to
Equity holders of the Company
Share capital 13 586,244 586,244
Share premium 14 4,762,513 4,762,513
Other reserves (778,012) 690,361
Retained earnings (3,735,092) (3,614,811)
Total Equity 835,653 2,424,307
Liabilities
Current liabilities
Other payables and accruals 15 125,688 108,987
Total liabilities 125,688 108,987
Total Equity and Liabilities 961,341 2,533,294
STATEMENT OF CHANGES IN EQUITY
Attributable to equity shareholders
Ordinary Share Other Retained Total
shares premium reserves earnings equity
$ $ $ $ $
At 31 October 2011 586,244 4,762,513 690,361 (2,799,130) 3,239,988
Loss for the year - - - (815,681) (815,681)
- - - - -
Other comprehensive income
Impairment of
available-for-sale
financial assets
recognised in
profit or loss
Fair value gain on - - - - -
available-for-sale
financial assets
Total comprehensive income - - - (815,681) (815,681)
for the year
At 31 October 2012 586,244 4,762,513 690,361 (3,614,811) 2,424,307
Loss for the year - - - (120,281) (120,281)
Other comprehensive income
Items that may be
reclassified subsequently
to profit or loss
Fair value loss on - - (1,468,373) - (1,468,373)
available-for-sale
financial assets
Total comprehensive income - - (1,468,373) (120,281) (1,588,654)
for the year
At 31 October 2013 586,244 4,762,513 (778,012) (3,735,092) 835,653
CASH FLOW STATEMENT
Year Year
Ended Ended
31 October 31 October
2013 2012
Notes $ $
Net cash used in operating activities 16 (119,257) (363,418)
Investing activities
Proceeds from disposal of available-for-sale financial assets - 798,949
Interest received 211 128
Net cash generated from investing activities 211 799,077
Net (decrease)/ increase in cash and cash equivalents (119,046) 435,659
Foreign exchange differences on translation (4,611) (4,691)
Cash and cash equivalents at the beginning of the year 445,883 14,915
Cash and cash equivalents at the end of the year 322,226 445,883
NOTES TO THE FINANCIAL STATEMENTS
1 ACCOUNTING POLICIES
GENERAL INFORMATION
The Company was incorporated, and is domiciled, in the Commonwealth
of Bahamas on 29 May 2007 as a limited company.
In March 2009 the Company was admitted to the Plus quoted Market
(now ISDX Market). The address of the Company's registered office is Olde Town
Marina, Unit #2, Sandyport, West Bay Street, P.O.Box N-4825, Nassau, Bahamas.
BASIS OF PREPARATION AND ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of
these Financial Statements are set out below. These policies have been
consistently applied to the years presented, unless otherwise stated.
a) Basis of Preparation
The Financial Statements have been prepared in accordance with
EU-Endorsed International Financial Reporting Standards (IFRSs), International
Financial Reporting Interpretations Committee (IFRIC) interpretations and the
ISDX Market Rules. The Financial Statements have also been prepared under the
historical cost convention as modified by the carrying of available-for-sale
financial assets at fair value.
Items included in the Financial Statements are measured using the
currency of the primary economic environment in which the entity operates
("the functional currency"). The Financial Statements are presented in United
States Dollars ($), which is the Company's functional and presentational
currency, and rounded to the nearest dollar.
Comparative figures relate to the year ended 31 October 2012.
The preparation of Financial Statements in conformity with IFRSs
requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Company's
accounting policies. The areas involving judgements or where estimates and
assumptions are significant are disclosed in Note 4.
b) Changes in accounting policy and disclosures
New and amended standards mandatory for the first time for the
financial year beginning 1 November 2012
The financial statements have been drawn up on the basis of
accounting standards, interpretations and amendments effective at the
beginning of the accounting period. The following new standards,
interpretations and amendments to published standards effective in the year
have been adopted by the Group:
Standard Impact on initial application Effective date
IAS 1 (amendment) Presentation of items of other comprehensive
income 1 July 2012
b) Changes in accounting policy and disclosures
ii) Standards and Interpretations in issue but not yet effective or
not yet endorsed
The following new standards, amendments to standards and
interpretations have been issued but are not effective or not yet endorsed for
the financial year beginning 1 November 2012 and have not been early adopted.
IAS 12 Deferred tax: recovery of 1 January
(Amendment) underlying assets 2012*3
Consolidated financial 1 January
IFRS 10 statements 2013*1
1 January
IFRS 11 Joint arrangements 2013*1
IFRS 11 (2014 Accounting for acquisitions of 1 January
Amendment) joint ventures 2016*2
IAS 16 and IAS Clarification of acceptable
38 (2014 methods of depreciation and 1 January
Amendments) amortization 2016*2
IAS 19 (2013 Defined benefit plans: Employee 1 July
Amendment) contributions 2014*2
Annual
improvements to
IFRSs 2010-2012
Cycle (2013 1 July
Amendments) Annual improvements 2014*2
Annual
improvements to
IFRSs 2011-2013
Cycle (2013 1 July
Amendments) Annual improvements 2014*2
IFRS 9 and IFRS
7 (2011 Mandatory effective date and 1 January
Amendments) transition disclosures 2018*2
IFRS 9, IFRS 7
and IAS 39 (2013 1 January
Amendments) Hedge accounting 2018*2
1 January
IFRS 9 Financial instruments 2018*2
1 January
IFRS 14 Regulatory deferral accounts 2016*2
Revenue from contracts with 1 January
IFRS 15 customers 2017*2
Disclosure of interest in other 1 January
IFRS 12 entities 2013*1
1 January
IFRS 13 Fair value measurement 2013
IAS 19 1 January
(Amendment 2011) Employee benefits 2013*2
1 January
IAS 27 Separate financial statements 2013*1
Investments in associates and 1 January
IAS 28 joint ventures 2013*1
Disclosures - offsetting
IFRS 7 financial assets and financial 1 January
(Amendment 2011) liabilities 2013
IAS 32 Offsetting financial assets and 1 January
(Amendment 2011) financial liabilities 2014
1 January
IFRIC 21 Levies 2014
IAS 36 (2013 Recoverable amount disclosures 1 January
Amendment) for non-financial assets 2014
IAS 39 (2013 Novation of derivatives and 1 January
Amendment) continuation of hedge accounting 2014
IFRS 10, IFRS 12
and IAS 27 (2013 1 January
Amendments) Investment entities 2014
IFRS 10, IFRS 11
and IFRS 12
(2013 1 January
Amendments) Transition guidance 2014
Annual
improvements
2009-2011 (2012 1 January
Amendments) Annual improvements 2013
1 January
IFRS 1 Amendment Government loans 2013
Stripping costs in the
production phase of a surface 1 January
IFRIC 20 mine 2013
IFRS 10 and IAS Sale or contribution of assets
28 (2014 between an Investor and its 1 January
Amendments) Associate or Joint Venture 2016*2
IAS 27 (2014 Equity method in Separate 1 January
Amendment) Financial Statements 2016*2
IAS 16 and IAS
41 (2014 1 January
Amendments) Bearer plants 2016*2
*1 Effective date 1 January 2014 for the EU. *2 Not yet endorsed
by the EU
*3 Effective date 1 January 2013 for the EU
b) Changes in accounting policy and disclosures
ii) Standards and Interpretations in issue but not yet effective or
not yet endorsed
The Company is evaluating the impact of the above pronouncements
and will consider the potential impact of IFRS 13. No other pronouncement is
expected to have a material impact on the Company's results or shareholders'
funds.
c) Financial Assets
i) Classification
The Company classifies its financial assets in the following
categories: at fair value through profit or loss, loans and receivables, and
available-for-sale. The classification depends on the purpose for which the
financial assets were acquired. Management determines the classification of
its financial assets at initial recognition.
Financial Assets at Fair Value through Profit or Loss
Financial assets at fair value through profit or loss are financial
assets held for trading. A financial asset is classified in this category if
acquired principally for the purpose of selling in the short term. Derivatives
are also categorised as held for trading. Assets in this category are
classified as current assets.
Loans and Receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active market. They
are included in current assets, except for maturities greater than 12 months
after the end of the reporting period. These are classified as non-current
assets. The Company's loans and receivables comprise Cash and Cash Equivalents
and other receivables in the Statement of Financial Position.
Available-For-Sale Financial Assets
Available-for-sale financial assets are non-derivatives that are
either designated in this category or not classified in any of the other
categories. They are included in non-current assets unless management intends
to dispose of the investment within 12 months of the end of the reporting
period.
ii) Recognition and measurement
Financial assets are initially recognised at fair value plus
transaction costs, except those carried at fair value through profit or loss,
which are initially recognised at fair value with transaction costs expensed
in profit or loss.
The fair values of quoted investments are based on current bid
prices.
The fair value of financial instruments that are not traded in an
active market or represent an investment in an unlisted entity is determined
by using valuation techniques. The Company uses its judgement to select a
variety of methods and makes assumptions that are mainly based on market
conditions existing at the end of each reporting period and which may include:
the use of recent arm's length transactions; reference to other instruments
that are substantially the same; discounted cash flow analysis; and review of
the net position of the unlisted entity less any adjustments following
discussions with the management of the unlisted entity.
Available-for-sale financial assets are subsequently carried at
fair value. Changes in fair value are recognised in other comprehensive
income.
Financial assets at fair value through profit or loss are
subsequently carried at fair value. Changes in fair value are recognised in
profit or loss.
Loans and receivables are subsequently carried at amortised cost
using the effective interest method.
Financial assets are derecognised when the rights to receive cash
flows from the investments have expired or have been transferred and the
Company has transferred substantially all of the risks and rewards of
ownership.
When securities classified as available-for-sale are sold or
impaired, the accumulated fair value adjustments recognised in equity are
included in profit or loss.
iii) Impairment of financial assets
The Company assesses at the end of each reporting period whether
there is objective evidence that a financial asset is impaired. For equity
investments classified as available-for-sale, a significant or prolonged
decline in the fair value of the security below its cost is evidence that the
assets are impaired. If any such evidence exists for available-for-sale
financial assets, the cumulative loss - measured as the difference between the
acquisition cost and the current fair value, less any impairment loss on that
financial asset previously recognised in profit or loss - is removed from
equity and recognised in profit or loss. Impairment losses recognised in the
profit or loss on equity instruments are not reversed through profit or loss.
Impairment testing of available-for sale financial assets is described in Note
4.
d) Cash and Cash Equivalents
Cash and cash equivalents comprise cash held at banks.
e) Equity
Equity comprises the following:
- "Share capital" represents the nominal value of the Class A equity shares;
- "Share Premium" represents consideration less nominal value of issued shares
and costs directly attributable to the issue of new shares;
- Other reserves represent the accumulated fair value adjustments on
available-for-sale financial assets that are not permanently impaired;
- "Retained earnings" represents retained losses.
f) Share Capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares
or options are shown in equity as a deduction from the proceeds.
g) Financial Liabilities
The comprise trade and other payables, which are recognised using
the effective interest method at amortised cost.
The Company derecognises a financial liability when its contractual
obligations are discharged or cancelled or expire.
h) Foreign Currency Translation
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of such
transactions, and from the translation at year-end exchange rates of monetary
assets and liabilities denominated in foreign currencies, are recognised in
profit or loss.
Changes in the fair value of monetary securities denominated in
foreign currency, and classified as available for sale, are analysed between
translation differences, resulting from changes in the amortised cost of the
security, and other changes in the carrying amount of the security.
Translation differences are recognised in profit or loss, and other changes in
the carrying amount are recognised in equity.
Translation differences on non-monetary financial assets and
liabilities such as equities held at fair value through profit or loss are
recognised in profit or loss as part of the fair value gain or loss.
Translation differences on non-monetary financial assets such as equities
classified as available for sale are included in equity.
i) Related Parties
Parties are considered to be related to the Company if the Company
has the ability, directly or indirectly, to control the party or exercise
significant influence over the party in making financial and operating
decisions, or vice versa, or where the Company and the party are subject to
common control or common significant influence. Related parties may be
individuals (being members of key management personnel, significant
shareholders and/or their close family members) or other entities and include
entities which are under significant influence of related parties of the
Company where those parties are individuals.
j) Other Receivables
Other receivables comprise loans made to external parties,
including accrued interest. They, except where disclosed otherwise, are
expected as being due within one year. Such assets are recognised as financial
assets classified as loans and receivables.
k) Trade and Other Payables
Trade and other payables, such as accruals, are obligations to pay
for goods or services that have been acquired in the ordinary course of
business from suppliers. Accounts payable are classified as current
liabilities if payment is due within one year or less. If not, they are
presented as non-current liabilities.
Trade and other payables are recognised initially at fair value and
subsequently measured at amortised cost using the effective interest method.
l) Taxation
The Company is registered in the Bahamas, such that its results are
not subject to UK Corporation Tax. The Company's results are subject to tax at
the applicable rate in the Bahamas.
NOTES
1 GOING CONCERN
In considering the Company's ability to continue in operation for
the foreseeable future, the Directors have considered the Company's forecast
operating cash-flows for the period up to the end of October 2015, and all
other related matters. This involved consideration of the cash flow
implications of the budget and the plan. The Directors consider that the
Company has adequate cash flows to operate for the foreseeable future.
Since the year end the Company announced a collaboration, financing
and option agreement (Agreement) with Enco Fuels Limited (Enco). Under the
terms of the Agreement, the parties have agreed to work together on projects
in the retail petroleum industry in the UK to jointly develop and agree
strategies, to pursue such opportunities, and raise necessary capital. Unless
earlier terminated in accordance with the provisions therewith, the Agreement
is for a term of 2 years. As part of the Agreement, the Company transferred
GBP160,000 (USD$263,198) to an escrow account to be used by Enco as a Bank
Guarantee (BG). In return Enco has agreed to pay all costs in respect of
setting up and maintaining the BG and retaining the Company's listing on ISDX
(including settlement of ISDX, corporate adviser, accounting, legal, share
registrar and other fees). All amounts owed to the Company by Enco under the
Agreement have been secured by means of a personal guarantee from one of the
shareholders of Enco, a debenture over a company he owns which operates
successful family entertainment centres located in Dubai and a debenture over
the assets of Enco.
Further details are disclosed in the Chairman's Statement.
The Directors see no reason why the Company should not continue in
operational existence for the foreseeable future and they have adopted the
going concern basis in preparing the Financial Statements.
2 AUDITORS OPINON ON FINANCIAL STATEMENTS
Emphasis of matter - going concern
The auditors, PKF Littlejohn LLP, in forming their opinion, which
is not modified, have considered the adequacy of the disclosure made in Note 1
to the Financial Statements in respect of Going Concern. Following the
agreement with Enco whereby GBP160,000 (USD$263,198) was transferred to an
escrow account as a Bank Guarantee (BG), Enco has agreed to pay all costs in
respect of setting up and maintaining the BG and retaining the Company's
listing on ISDX (including ISDX, corporate adviser, accounting, legal, share
registrar and other fees). The Financial Statements do not include any
adjustment that may result if Enco does not transfer the required funds when
required.
3 FINANCIAL RISK MANAGEMENT
Financial Risk Factors
The Company's activities expose it to a variety of financial risks:
market risk (including currency risk and price risk), credit risk and
liquidity risk. The Company's overall risk management programme focuses on the
unpredictability of financial markets and seeks to minimise potential adverse
effects on the Company's financial performance.
a) Market Risk
i) Foreign Exchange Risk
The Company operates internationally and is exposed to foreign
exchange risk arising from various currency exposures, primarily with respect
to the UK pound sterling and Canadian dollar. Foreign exchange risk arises
from recognised monetary assets and liabilities. The exposure to this risk is
not considered material to the Company's operations and thus the Directors
consider that, for the time being, no hedging or other arrangements are
necessary to mitigate this risk.
ii) Price Risk
The Company is exposed to equity securities price risk because of
investments held and classified in the Statement of Financial Position either
as available-for-sale or at fair value through profit or loss. To manage its
price risk arising from investments in equity securities, the Company could
diversify its portfolio. However, given the size of the Company's operations,
the costs of managing exposure to securities price risk exceed any potential
benefits. The Directors will revisit the appropriateness of this policy should
the Company's operations change in size or nature. The Company has no exposure
to commodity price risk.
The Company's investments in equity of other entities are publicly
traded and are listed on the ISDX Market exchange. There is a limited volume
of shares traded in these companies and if a significant disposal of the
shares was made by the Company, this could have a significant impact on the
realisable value of their shares.
The table below summarises the potential impact of
increases/decreases in the ISDX market price on the Company's loss for the
year and on equity. The analysis is based on the assumption that the share
prices have increased/decreased by 5% with all other variables held constant
and all the Company's equity instruments moved according to the historical
correlation with the market:
Potential Potential
impact on loss impact on other
for the year components of equity
2013 2012 2013 2012
$ $ $ $
ISDX Market - - 27,439 100,950
Losses for the year would increase/decrease as a result of
gains/losses on equity securities classified as at fair value through profit
or loss. Other components of equity would increase/decrease as a result of
gains/losses on equity securities classified as available for sale.
b) Credit Risk
Credit risk arises from cash and cash equivalents.
The Company considers the credit ratings of banks in which it holds
funds in order to reduce exposure to credit risk. The Company will only keep
its holdings of cash and cash equivalents with institutions which have a
minimum credit rating of 'AA-'.
The Company considers that it is not exposed to major
concentrations of credit risk.
c) Liquidity Risk
To date the Company has relied upon equity funding to finance
operations. Equity comprises $835,653 (2012: $2,424,307). The Directors are
confident that adequate funding will be forthcoming with which to finance
operations. Controls over expenditure are carefully managed.
The Company ensures that its liquidity is maintained by entering
into financial instruments to support operational and other funding
requirements. The liquidity and funding management process includes projecting
cash flows and considering the level of liquid assets in relation thereto,
monitoring Statement of Financial Position liquidity and maintaining funding
sources and back-up facilities.
Fair Value Estimation
Fair value measurements are disclosed according to the following
fair value measurement hierarchy:
- quoted prices (unadjusted) in active markets for identical assets
or liabilities (Level 1);
- inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (that is, as prices) or
indirectly (that is, derived from prices) (Level 2);
- inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (Level 3).
The following table presents the Company's assets and liabilities
that are measured at fair value at 31 October 2013:
Level 1 Level 2 Level 3 Total
Assets $ $ $ $
Available-for-sale financial assets
- Equity securities 548,780 - - 548,780
- Equity holdings - - - -
______ ______ ______ ______
Total Assets 548,780 - - 548,780
______ ______ ______ ______
The following table presents the Company's assets and liabilities
that are measured at fair value at 31 October 2012:
Level 1 Level 2 Level 3 Total
Assets $ $ $ $
Available-for-sale financial assets
- Equity securities 2,018,993 - - 2,018,993
- Refundable deposit - - - -
______ ______ ______ ______
Total Assets 2,018,993 - - 2,018,993
______ ______ ______ ______
The fair value of financial instruments traded in active markets is
based on quoted market prices at the end of the reporting period. A market is
regarded as active if quoted prices are readily and regularly available from
an exchange, dealer, broker, industry group, pricing service or regulatory
agency, and those prices represent actual and regularly occurring market
transactions on an arm's length basis. The quoted market price used for
financial assets held by the Company is the current bid price. These
instruments are included in Level 1.
Instruments included in Level 1 comprise primarily ISDX quoted
equity investments classified as trading securities or available-for-sale.
The fair value of financial instruments that are not traded in an
active market is determined by using valuation techniques. These valuation
techniques maximise the use of observable market data where it is available,
and rely as little possible on entity-specific estimates. If all significant
inputs required to fair value an instrument are observable, the instrument is
included in level 2.
If one or more of the significant inputs is not based on observable
market data, the instrument is included in Level 3.
Specific valuation techniques used to value financial instruments
include:
- quoted market prices or dealer quotes for similar instruments;
- other techniques, such as discounted cash flow analysis, are used
to determine fair value for the remaining financial instruments.
The following table presents the changes in Level 3 instruments for
the year ended 31 October 2013 and 31 October 2012:
Available-for- Available-
Sale financial for-Sale-
assets financial
assets
2013 2012
$ $
Opening balance - 1,364,452
Disposal - (314,452)
(Losses)/gains recognised in profit or loss - (1,050,000)
_______ _______
Closing balance - -
_______ _______
4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of financial statements in conformity with IFRS
requires management to make judgements, estimates and assumptions that affect
the application of policies and reported amounts of assets and 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 the judgements about carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates.
The estimates and underlying assumptions 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.
a) Critical Accounting Estimates and Assumptions
The Company makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition, seldom equal the
related actual results.
There were no estimates and assumptions made in these financial
statements that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities.
b) Critical Judgments in Applying the Entity's Accounting Policies
Impairment of financial assets
The Company follows the guidance of IAS 39 to determine when a
financial asset is impaired. This determination requires significant
judgement. In making this judgement, the Company evaluates, among other
factors, the duration and extent to which the fair value of an investment is
less than its cost, and the financial health of, and short-term business
outlook for, the investee, including factors such as industry and sector
performance, changes in technology and operational and financing cash flow.
The Company treats the Makkah and Madinah Holdings Limited
available for sale financial asset in accordance with IAS 39 and so recognised
in an impairment loss of $1,468,373, which is not considered permanent, and as
such was recognised in other comprehensive income.
The other receivables balance of $90,335 (2012: $68,418) is
considered materially recoverable. The loan was extended to Transonic General
Trading LLC on October 4, 2012. The loan is secured and is callable, with the
full principal payable 45 days from the day of notice in accordance with its
Conditions. Interest is due at 2% on the total value per month regardless as
to whether the loan is redeemed or otherwise. The interest is pro rata to the
number of days that the interest is due for the period, with $21,917 accrued
in relation to interest due to 31 October 2013 (2012: $nil). The Company has
since received AED100,000 (USD$27,225), and has agreed to make another payment
in October 2014.
5 SEGMENTAL ANALYSIS
No segmental analysis has been disclosed as the Company has no
trade. As noted in the Chairman's Statement, it is still the intention of the
Company to effect an acquisition or sign a letter of intent, agreement in
principle or definitive agreement for an acquisition.
Whilst it seeks an acquisition, the Company has taken strategic
positions in companies which the Board considers to be of benefit to the
shareholders and the Chairman's Statement gives an explanation of the results
of these investments.
6 EXPENSES BY NATURE
Year ended Year ended
31 October 2013 31 October 2012
$ $
Auditor's fees:
- Auditor's remuneration 16,938 25,821
- Other services - -
Foreign exchange loss 6,451 7,264
Directors' Remuneration (Note 55,250 48,400
19)
Operating expenses 62,915 134,687
Bank charges 855 1,031
Impairment of other receivables - 33,104
Administrative expenses 142,409 250,307
7 OTHER LOSSES/GAINS
Year ended Year ended
31 October 2013 31 October 2012
$ $
Fair value gain/(loss) on available- - -
for-sale financial assets
Impairment of available for sale - (1,050,000)
financial assets
Net gain from disposal of certain - 484,498
available-for-sale financial assets (Note 10)
- (565,502)
8 TAXATION
No liability to corporation tax arose on ordinary activities for
the years ended 31 October 2013 and 31 October 2012.
No deferred tax asset has been recognised on the available tax
losses due to the directors being uncertain over future taxable profits
against which the losses may be utilised.
9 EARNINGS PER SHARE
The calculation of the basic earnings/(loss) per share is based on
the profit/(loss) attributable to the shareholders of the Company divided by
the weighted average number of shares in issue during the year. All
earnings/(loss) per share calculations relate to continuing operations of the
Company.
In accordance with IAS 33, shares are usually included in the
weighted average number of shares from the date consideration is receivable.
Ordinary shares issued as a result of the conversion of a debt instrument to
ordinary shares are included from the date that interest ceases to accrue.
The Company has potential ordinary shares as at 31 October 2013
being share options and warrants. However the diluted earnings per share is
the same as the basic earnings per share as the options that were in existence
have an immaterial effect on the earnings per share (2012 - anti-dilutive
effect on the loss per share) and therefore have not been taken into account.
Loss Weighted
to attributable average Basic loss
shareholders number of per share in
shares US cents
Year ended 31 October 2013 $(120,281) 100,719,094 (0.01)
Year ended 31 October 2012 $(815,681) 100,719,094 (0.08)
10 AVAILABLE-FOR-SALE FINANCIAL ASSETS
Unlisted Listed
Unlisted Equity Equity
Equity Security Security
Securities United United
Far East Kingdom Kingdom Total
$ $ $ $
At 31 October 2011 1,050,000 314,452 2,021,565 3,386,017
- - - -
Transfer to unlisted securities
Fair value loss (1,050,000) - - (1,050,000)
Disposal - (314,452) - (314,452)
Exchange differences - - (2,572) (2,572)
At 31 October 2012 - - 2,018,993 2,018,993
- - - -
Transfer to unlisted securities
Fair value loss - - (1,468,373) (1,468,373)
Exchange differences - - (1,840) (1,840)
At 31 October 2013 - - 548,780 548,780
Equity Securities Far East represented a refundable deposit given
to Amara Holdings Inc and this was agreed to be converted into shares on
October 5, 2011. The process of conversion was subsequently completed in the
first quarter of 2013 At 31 October 2012 the directors fully impaired the
unlisted investment. The directors concluded that there are no changes at 31
October 2013.
King Tech International Limited, a company that was quoted on the
Plus quoted Markets exchange (now ISDX Market) and was delisted on April 1,
2011 and the Company disposed of its investment during the year ended 31
October 2012.
At 31 October 2013 the Company owns listed shares in:
- PharmEng Technology Inc, a company listed on the Canadian stock
exchange which has filed for financial restructuring. The investment has been
previously fully written down.
- Makkah & Medinah Holdings Limited (formerly Prime Investments
Group Limited, a company listed on ISDX Market (formerly Plus Markets), which
has been subject to an impairment charge of $1,468,373.
Further details on the Directors' assessment of the fair value at
31 October 2013 are explained in Note 4.
11 CASH AND CASH EQUIVALENTS
As at As at
31 October 31 October
2013 2012
$ $
Cash at bank 322,226 445,883
12 OTHER RECEIVABLES
As at As at
31 October 31 October
2012 2011
$ $
Other receivables 90,335 68,418
On October 4, 2012 the Company extended a secured loan note to
Transonic General Trading LLC (Transonic) in the amount of AED250,000 in
Emirati Dirhams (USD$68,418). The loan note is due in four months from the
date of the certificate. The loan note is callable and the full principal is
payable 45 days from day of notice to the Company in accordance with the
Conditions. Interest is due or payable on the Loan Note every 30 days. The
Company will earn a rate of interest of 2% on the total value per month
whether redeemed or otherwise. The loan note is secured against the assets of
Transonic. The Loan Note and the Instrument are governed by and shall be
construed in accordance with UAE law.
Receivables as at 31 October 2013 are not past due and are not
impaired.
$21,917 of interest has been accrued for reporting purposes as at
31 October 2013 (2012: $nil).
13 SHARE CAPITAL
As at As at
31 October 31 October
2013 2012
$ $
Authorised:
30,000,000,000 Class A Shares of $0.005 each 150,000,000 150,000,000
30,000,000,000 Class B Shares of $0.005 each 150,000,000 150,000,000
300,000,000 300,000,000
Allotted and called up:
117,248,828 Class A Shares of $0.005 each 586,243 586,243
2 Class B Shares of $0.005 each 1 1
586,244 586,244
The authorised share capital is divided into non-redeemable,
participating non-voting Class A Shares and voting Class B Shares. Each share
will be entitled to participate equally in the profits of the Company and its
assets on liquidation.
14 SHARE PREMIUM
2013 2012
$ $
At 1 November and 31 October 4,762,513 4,762,513
15 OTHER PAYABLES AND ACCRUALS
2013 2012
$ $
Trade and other payable 125,688 108,987
16 CASH USED IN OPERATING ACTIVITIES
Year ended Year ended
31 October 2013 31 October 2012
$ $
(Loss) before income tax (120,281) (815,681)
Adjustments for:
Finance income (22,128) (128)
Foreign exchange movements 6,451 7,264
Net gain on disposal of available-for-sale assets - (484,498)
Impairment of unlisted available-for-sale assets - 1,050,000
Reclassification of cumulative loss on available-
for-sale financial assets due to impairment - -
Fair value impairment on Grosvenor Loan receivable - 33,104
Increase in other receivables - (68,418)
(Decrease)/increase in other payables and accruals 16,701 (85,061)
Cash used in operations (119,257) (363,418)
17 CAPITAL RISK MANAGEMENT
The Company's capital management objectives are:
- to ensure the Company's ability to continue as a going concern; and
- to provide an adequate return to shareholders.
The Company monitors capital on the basis of the carrying amount of equity
totalling $835,653 (2012: $2,424,307) less cash and cash equivalents totalling
$322,226 (2012: $445,883) as presented on the face of the Statement of
Financial Position.
Although the Company is not constrained by any externally imposed capital
requirements, its goal is to maximise its capital-to-overall financing
structure ratio.
The Company sets the amount of capital in proportion to its overall financing
structure and manages its capital structure and makes adjustments to it in the
light of changes in economic conditions and the risk characteristics of the
underlying assets.
18 RELATED PARTY TRANSACTIONS
Mr Jason Futko, a Director and Shareholder of the Company was a
Director and sole shareholder of Amara Holdings Inc ("Amara"), a company
incorporated in the British Virgin Islands. On 23 December 2010, Jason
resigned and was replaced as Director of Amara. On 24 August 2009, the Company
entered into an arrangement with Amara Holdings Inc whereby the Company issued
a refundable deposit to Amara Holdings Inc of $1,050,000. A decision was made
by the Board to exercise the conversion of the refundable deposit to shares on
October 5, 2011. This investment was fully impaired in 2012 as detailed in
Note 4.
Mr Edwin Lee, a Director and Shareholder of the Company, was an
independent, Non-Executive Director and Shareholder of King Tech International
Limited, a company listed on the PLUS-quoted Markets exchange (now ISDX).
Edwin resigned in March 2011 before the company was delisted on April 1, 2011.
The Company disposed of its investment in 2012. See Note 10.
Mr Edwin Lee, a Director and Shareholder of the Company is also a
Director and sole shareholder of Amara Hong Kong Limited ("AHK"), a company
incorporated in Hong Kong. The shareholdings of AHK are held by Mr Edwin Lee
in trust for various beneficial owners of AHK. This investment was fully
impaired in 2012 as detailed in Note 4.
Edwin Lee (a Director and a Shareholder of the Company) was also a
Director of Makkah and Medinah Holdings Limited (formerly Prime Investments
Group Limited), a company listed on the ISDX Market. Edwin Lee resigned in
February 2012 from Makkah and Medinah Holdings Limited.
Mr. Spencer Wilson, Mr. Edwin Lee, and Mr. Jason Futko, directors
of the Company are also directors of Octavian Growth Partners Ltd
("Octavian"). During the year the Company contemplated a transaction with
Octavian and in so doing incurred Bahamian legal expenses of $10,906 on behalf
of both companies. No transaction was consummated with Octavian and the
Company accrued but did not pay the legal fees incurred. The accrual was
released into profit or loss during the year ended 31 October 2013.
19 DIRECTORS' REMUNERATION
Year ended Year ended
31 October 2013 31 October 2012
$ $
Jason R Futko 14,417 12,400
Lisa Lee 12,000 12,000
Spencer J Wilson 14,416 12,000
Edwin S Lee 14,417 12,000
55,250 48,400
20 ULTIMATE CONTROLLING PARTY
The Directors believe there to be no ultimate controlling party.
21 SUBSEQUENT EVENTS
On 24 January 2014 the Company confirmed that it had entered into a
collaboration agreement with Enco Fuels Limited (Enco). Under the terms of the
agreement, the parties have agreed to work together on projects in the retail
petroleum industry to jointly develop and agree strategies, to pursue such
opportunities and raise necessary capital. The agreement is for a term of two
years. The Company has agreed to work with Enco on an initial project relating
to four sites in Scotland. The Company has agreed to provide a bank guarantee
of £160,000 to allow the sites to use the bank guarantee to secure purchasing
terms with the petrol suppliers. The necessary funds have been deposited in
Escrow with suppliers' solicitors. During the period of this agreement, Enco
has agreed to cover certain operating costs of the Company to cover its
working capital needs. Further details are disclosed in the Chairman's
Statement
22 AUDITED INFORMATION AND ISDX MATTERS
The Company confirms that this announcement has been extracted from audited
information.
The Company confirms compliance with Guidance Note 69.1 throughout the period.
