Annual Financial Report

2.          Summary of significant accounting policies

Basis of accounting

The 2015 financial statements are prepared under International Financial Reporting Standards, as adopted for use by the European Union.

The financial statements have been prepared on the going concern basis and historical cost basis, except that the following assets and liabilities are stated at their fair value: financial instruments classified as fair value through the profit and loss.

The financial statements are presented in sterling, the currency of the primary economic environment in which the Company operates and in which the majority of the Company's transactions are denominated.

The principal accounting policies adopted are set out below.

Going concern

The financial statements have been prepared on the going concern basis.  The Directors expect to be able to be able to obtain further funding for the Company.  However, there can be no guarantee that the required funds will be raised within the necessary timeframe or on terms that will be acceptable to the Company.

Investments at fair value through profit or loss

Classification

The Company classifies its investments as financial assets at fair value through profit or loss ("financial assets"). The financial assets are designated by the Company at fair value through profit or loss at inception. At the year end the Company did not class any investments as financial assets at fair value through profit or loss.

 

Recognition

Purchases and sales of investments are recognised on the trade date - the date on which the Company commits to purchase or sell the investments.

 

Measurement

Financial assets at fair value are initially recognised at cost, being the fair value of consideration given. Subsequent to initial recognition, all financial assets at fair value through profit or loss are measured at fair value. Gains and losses arising from changes in the fair value of the 'financial assets at fair value' category are presented in the Statement of Comprehensive Income in the period in which they arise.

 

Fair value estimation

Marketable (Listed) Securities - Where an active market exists for the security, the value is stated at the bid price on the last trading day in the period. Marketability discounts are not applied unless there is some contractual, governmental or other legally enforceable restriction preventing realisation at the reporting date.

 

Unlisted Investments - Where the Company has investments in equity instruments that do not have a quoted price in an active market and whose fair value cannot be reliably measured these are carried at historic cost.

 

Fair value hierarchy

IFRS 13 requires disclosure of fair value measurements by level of the following fair value hierarchy:

Level 1 - inputs are quoted prices (unadjusted) in active markets for identical assets and liabilities that the entity can readily observe;

Level 2 - inputs are inputs other than quoted prices included within Level 1 that are observable for the asset, either directly or indirectly; and

Level 3 - inputs that are not based on observable market data (unobservable inputs).

 

2.             Summary of significant accounting policies (continued)

Investments available for sale

Available for sale financial assets are non-derivatives that are either designated as available for sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss.

 

The company has an investment in unlisted shares that are not traded in an active market but that are classified as available for sale financial and stated at fair value (because the directors consider that fair value can be reliably measured). Fair value is determined in the manner described in note 5. Gains and losses arising from changes in fair value are recognised in other comprehensive income and accumulated in the investments revaluation reserve with the exception of impairment losses, interest calculated using the effective interest method and foreign exchange gains and losses on monetary assets, which are recognised directly in profit or loss. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in the investments revaluation reserve is reclassified to profit or loss.

 

Available for sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost less any identified impairment losses at the end of each reporting period.

 

 

Taxation

The tax charge represents the sum of current and deferred tax. 

Current tax payable is based on taxable profits for the year. Taxable profits differ from net profits as reported in the income statement because it excludes items that are taxable or deductible in other years and items that are not taxable or deductible. The Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted at the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the liability method. Deferred tax liabilities are recognised for all temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets are offset when there is a legally enforceable right to offset current tax assets against current liabilities and when deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority on either the same taxable entity or different taxable entity where there is an intention to settle on a net basis.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability or the asset is realised.

Borrowing costs

Unless borrowing costs are capitalised that are directly attributable to the acquisition construction or production of a qualifying asset, borrowing costs are expensed in the period they are incurred. No borrowing costs were capitalised in the year (2014: Nil).

Currencies

Transactions in currencies other than Sterling are recorded at the rates of exchange prevailing on the dates of the transactions. Monetary items in the statement of financial position are retranslated at the closing exchange rate at each statement of financial position date, and the resulting translation differences are recorded in profit or loss.

Impairment

At each reporting date, the Company reviews the carrying amount of its tangible and intangible assets including investments 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 Company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

 

2.          Summary of significant accounting policies (continued)

Impairment (continued)

If the recoverable amount of an asset is estimated to be less than its carrying amount, the impairment loss is recognised as an expense.

Where an impairment loss subsequently reverses, the carrying amount of the asset 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. A reversal of an impairment loss is recognised as income immediately.

Financial instruments

Financial assets and financial liabilities are recognised in the Company's statements of financial position when the Company has become a party to the contractual provisions of the instrument.

Loans and other receivables

Loans and other receivables are recognised initially at fair value and subsequently measured at amortised costs using the effective interest rate method, as reduced by appropriate provisions for estimated irrecoverable amounts less provision for impairment. A provision for impairment is accounted for when management deems the specific trade receivable balance not to be collectable. The amount of the impairment loss is recognised in the income statement

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term deposits and liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

 

Other financial liabilities

Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.

Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on the expected yield basis. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expect life of the expected financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. 

Financial liabilities and equity

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that creates a residual interest in the assets of the Company.

Trade payables

Trade payables are stated at their amortised cost less any discount or rebate received.

 

2.          Summary of significant accounting policies (continued)

Dividends

Dividend distribution to the Company's shareholders is recognised as a liability in the Company's financial statements in the period in which the dividends are approved by the Company's shareholders.

Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Capital redemption reserve

Where a company acquires its own shares out of free reserves, then a sum equivalent to the nominal value is transferred to a capital redemption reserve.

 

 

Critical accounting judgements and key sources of estimation uncertainty

The Directors consider the critical accounting estimates and judgements used in the financial statements and concluded that the main areas of judgement are:

The preparation of the financial statements 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 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.

The following are the critical accounting judgements, apart from those involving estimations (which are dealt with separately below), that the directors have made in the process of applying the Company's accounting policies and that have the most significant effect on the amounts recognised in the financial statements.

 

(a)  Critical judgements in applying the Company's accounting policy

In the process of applying the Company's accounting policies which are described above, management has not had to make any further significant judgements on the amounts recognised in the financial statements.

                                                                                                         

(b)  Key sources of estimation uncertainty

As the Company is now an investing company, the key source of estimation uncertainty is the valuation of unlisted investments.

 

 

3.          Segment analysis

 

The segmental analysis relates to the operations of the Company, as these are individual financial statements of the Company.  The Company has one reportable operating segment on the basis that it earns revenues and incurs expenses from one business activity; being investing, and on the basis that it operates in one geographical location; being the United Kingdom.  During the current year, the Company did not generate any turnover from its investment activities, as no acquisition was completed during the reporting period.

 

 

 

4.          Investments at fair value through profit & loss

 

For the period ended 31 December 2015

	Level 1 £'000	Level 2 £'000	Level 3 £'000	Total £'000
Opening cost	-	-	-	-
Additions at cost - cash	-	-	-	-
Additions at cost - in specie	-	-	-	-
Disposal proceeds	-	-	-	-
Net realised loss on disposal of investments	-	-	-	-
Closing portfolio cost	-	-	-	-
Net unrealised (loss)/gain on investments	-	-	-	-
Closing valuation	-	-	-	-
Net unrealised (loss)/gain on investments	-	-	-	-
Net realised loss on disposal of investments	-	-	-	-
Net capital (loss)/gain on fair value of financial assets designated at fair value through profit or loss	-	-	-	-
Investment income	-	-	-	-
Total (losses)/gains on Financial Assets at fair value through profit or loss	-	-	-	-

 

Details of the additions and disposals can be found in the Chairman's Statement and Strategic Report.

 

For the period ended 31 December 2014

	Level 1 £'000	Level 2 £'000	Level 3 £'000	Total £'000
Opening cost	-	-	-	-
Additions at cost - cash	610	-	-	610
Additions at cost - in specie	-	-	-	-
Disposal proceeds	(599)	-	-	(599)
Net realised loss on disposal of investments	(11)			(11)
Closing portfolio cost	-	-	-	-
Net unrealised (loss)/gain on investments	-	-	-	-
Closing valuation	-	-	-	-
Net unrealised (loss)/gain on investments	-	-	-	-
Net realised loss on disposal of investments	(11)	-	-	(11)
Net capital (loss)/gain on fair value of financial assets designated at fair value through profit or loss	(11)	-	-	(11)
Investment income	6	-	-	6
Total (losses)/gains on financial Assets at fair value through profit or loss	(5)	-	-	(5)

 

 

 

 

 

5.          Investments available for sale

 

	2015	2014
	£'000	£'000
Opening	200	-
Additions at cost - cash	-	50
Additions at cost - in specie	-	150
Closing	200	200

 

Details of the additions can be found in the Chairman's Statement and Strategic Report. The opinion of the Directors at the prior period was that the fair value of this investment could not be reliably measured given the early stage of development of the entity. The fair value can now be determined with reference to subsequent issue prices of convertible debentures by the company the investment is in. This classifies the asset at Level 2 of the fair value hierarchy.

 

 

6.          Loss from operations

 

	2015	2014
The result from operations has been arrived at after charging:	£'000	£'000
Auditors' remuneration - audit of Company	11	10
Auditors' remuneration - other services	-	-
Staff costs	48	24

 

7.          Staff costs

 

Staff employment costs were:	2015	2014
	£'000	£'000
Wages and salaries
Social security costs	48	24
Other pension costs	-	-
	-	-
	48	24

 

During the year there were no employees (2014: nil) employed by the Company excluding directors in administration roles.  The staff costs during the year include the accrual of director fees in the amount of £24,000 which were not paid during the reporting period.

 

 

8.          Directors' remuneration

 

The emoluments (including pension contributions) paid to Directors during the year was as follows:

 

	Salary & fees	Compensation for loss of office	Pension contribution	2015 Total	2014 Total
	£'000	£'000	£'000	£'000	£'000
Executive Directors
Jeremy Edelman	24	-	-	24	-
Anthony Samaha	24	-	-	24	24
	48	-	-	48	24

An accrual of £24,000 for directors which were unpaid during the reporting period has been made.

 

As at 31 December 2015, no Director was accruing benefits under a money purchase scheme (2014: none). At the year-end no Director had any share options. Share options of directors who resigned in the prior years lapsed on their resignation.

 

 

 

 

9.          Finance income

	2015	2014
	£'000	£'000
Interest income	-	2

 

 

10.           Finance costs

	2015	2014
	£'000	£'000
Interest on loans and overdrafts	-	3

 

 

11.        Tax on profit on ordinary activities

 

Analysis of charge in year

                                                                                                                                                                        2015                        2014

                                                                                                                                                                       £'000                       £'000

Current tax:

UK corporation tax on profits/ (loss) of the year                                                                                                 -                               -

Adjustments in respect of previous periods                                                                                                         -                               -

                                                                                                                                                                                                                           

Total current tax                                                                                                                                                                                    - -

                                                                                                                                                                                                                           

           

Deferred tax:      

Release of deferred tax asset                                                                                                                                  -                               -

Origination and reversal of temporary differences                                                                                                -                               -

                                                                                                                                                                                                                   

Total deferred tax                                                                                                                                                  -                               -

                                                                                                                                                                                                                           

Total tax for the year                                                                                                                                             -                               -

                                                                                                                                                                                                                   

                                                                                                                                                                                

 

Factors affecting tax charge for the year:

 

The tax assessed for the year is lower than the standard rate of corporation tax in the UK 23.25 % (2014: 23.25%). 

                           

                                                                                                                                                                        2015                        2014

                                                                                                                                                                       £'000                      £'000

Loss on ordinary activities before tax                                                                                                              (104)                       (118)

                                                                                                                                                                                                                           

 

Loss on ordinary activities multiplied by standard rate 
of corporation tax in the UK of 20.0% (2014: 21.5%)                                                                                      (20)                       (25)

 

Effects of:

Expenses not deductible for tax purposes                                                                                                             -                              -

Unrelieved tax losses                                                                                                                                           20                            25

                                                                                                                                                                                                                   

Total tax for the year                                                                                                                                             -                              -

                                                                                                                                                                                                                   

 

No deferred tax assets have been recognised (2014: nil)

 

The corporation tax rate was reduced from 21.5% to 20.0% on 1 April 2014. Thus the corporation tax rate for the year ended 31 December 2015 is 20.0%.

 

The company has unused tax losses of £1.7 million and capital losses of £2.5 million. The deferred tax asset for these losses, amounting to £835,000 (2014: £815,000) has not been recognised as the timing of profits is uncertain.

 

12.        Loss per share

 

The calculations of the basic and diluted earnings per share are based on the following data:				2015		2014
				£'000		£'000
Loss for the year				(104)		(118)
Loss for the purpose of basic earnings per share				(104)		(118)
				Number		Number
Number of shares
Weighted average number of ordinary shares in issue during the year				251,682,611		207,177,116
Effect of dilutive options				-		-
Diluted weighted average number of ordinary shares in issue during the year				251,682,611		207,177,116
Loss per share
Basic and diluted loss per share (pence)					(0.04)		(0.06)

 

 

13.        Trade and other receivables

 

	2015	2014
	£'000	£'000
Other taxation and social security	1	1
	1	1

Credit risk

The Company's credit risk is primarily attributable to its trade receivables and cash balances. The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies.

 

 

14.           Borrowings

 

	2015	2014
	£'000	£'000
Bank overdraft	-	-
	-	-

 

During the previous reporting period, the Company entered into a stock margin service financing facility with Barclays Bank Plc to provide a facility with an initial drawdown of circa £400,000 to support the Company's listed investment programme. The initial term of the facility is 12 months, with interest payable quarterly at the TM (TomNext) rate applicable to low-volatility currency plus 1.35 per cent.  The facility may be repaid in whole or part without penalty prior to the expiry of the term.  The balance owing under the facility as at 31 December 2015 was £nil (2014: £nil).

 

15.        Share capital

 

	2015	2015	2014	2014
Called up, allotted and fully paid	£'000	No of shares	£'000	No of shares
Ordinary shares
Opening 1st January, ordinary shares of 0.10 pence each	171	240,915,896	171	170,915,896
Placement of new ordinary shares of 0.10 pence each	70	40,000,000	70	70,000,000
	____	__________	____	__________
Closing, 31st December, ordinary shares of 0.10 pence each	241	280,915,896	241	240,915,896
"A" Deferred Share
Opening, 1st January, "A" Deferred Share of 1.65 pence each	114	6,915,896	114	6,915,896
	____	__________	____	__________
Closing, 31st December, "A" Deferred Share of 1.65 pence each	114	6,915,896	114	6,915,896

At 31^st December 2014 no share options were outstanding (2014: nil).

On 23 June 2014, the Company issued 65,000,000 new ordinary shares of 0.1p each at a price of 0.5p per share raising £325,000 in funds to make investments in accordance with the Company's investing policy and for working capital purposes.

 

On 23 June 2014, the Company issued 5,000,000 new ordinary shares of 0.1p each at a deemed price of 3p per share to Mogul Ventures Corp ("Mogul"), as part of the consideration for the acquisition of 1,480,000 shares in Mogul.

 

On 18 September 2015, the Company issued 40,000,000 new ordinary shares of 0.1p each at a price of 0.5p per share raising £200,000 in funds for working capital purposes.

 

As at 31 December 2015, the Company's total issued ordinary share capital was 280,915,896 ordinary shares of 0.1p each and 6,915,896 "A" Deferred Shares of 1.65 pence per share.

 

The holders of ordinary shares are entitled to one vote per share at the meetings of the company and to dividends as declared in proportion to the amounts paid up on the ordinary shares. No shares are of the Company are currently redeemable or liable to be redeemable at the option of the holder or the Company.

 

The holders of "A" Deferred Shares do not have any right to receive written notice of or attend, speak or vote at any general meeting of the company, or to any dividend declared by the company. They may however be redeemed by the Company at any time at its option for one penny for all the "A" Deferred Shares without obtaining sanction of such holders.

 

On 8 January 2016, the Company announced the placement of 40,000,000 ordinary shares at 0.5 pence per share to raise gross proceeds of £200,000 to provide additional working capital for the Company.  The funds in respect of this placement were received prior to 31 December 2015.

 

 

16.        Employee benefit trust

 

At the Extraordinary General Meeting held on 29 May 2008 shareholders authorised the Company to purchase its own shares and during the remainder of the 2008 financial year the Company entered into a number of transactions acquiring a total of 104,136 shares which it put into Treasury. The potential beneficiaries of the EBT included the executive directors and employees of the Group and their respective families.  In 2014 an Employee Benefit Trust ("EBT") held 9,311 Ordinary Shares, which were disposed and the EBT was dissolved. In the current year there is no treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

 

17.        Trade and other payables

 

	2015	2014
	£'000	£'000
Trade payables	4	29
Accruals	47	34
Loans from related party	7	7
	58	70

 

The Directors consider that the carrying amount of trade and other payables approximates to their fair value.  All liabilities are due within one year.

 

18.           Related party transactions

The Subscription agreements announced on 23 June 2014 totalling £325,000 for 65,000,000 new Ordinary Shares of 0.1p each in the Company at a price of 0.5p per share, included a subscription by Saltwind, a company controlled by Jeremy Edelman, for 20,000,000 new Ordinary Shares.

During the previous reporting period, Saltwind provided funds for the payment of a creditor of the Company in the amount of £7,260, on an interest free basis. As at 31 December 2015 the amount of £7,260 was payable to Saltwind. The fair value of this loan is not materially different from the face value.

The directors are the key management of the Company (refer to note 7).

 

19.        Financial risk management

The Company's operations expose it to a limited level of credit, foreign currency and liquidity risk. There is little financial risk arising from the effects of changes in market prices of commodities based on its current activities. Interest rate risk exists on bank and third party borrowings.

The Company does not use derivative financial instruments to manage interest rate costs, and no hedge accounting is thus applied. Given the size of the Company, the Directors have not delegated the responsibility of monitoring financial risk management to a sub-committee of the Board.

Price risk

Price risk arises from uncertainty about the future prices of financial instruments held within the Company's portfolio. It represents the potential loss that the Company might suffer through holding market positions in the face of market movements. The investments in equity and fixed interest stocks of unquoted companies are not traded and as such the prices are more uncertain than those of more widely traded securities. The Board's strategy in managing the market price risk inherent in the Company's portfolio of equity investments is determined by the requirement to meet the Company's investment objective. The directors manage these risks by regular reviews of the portfolio within the context of current market conditions. Unquoted investments are valued as per accounting policy in these financial statements. Regular reviews of the financial results, combined with close contact with the management of these investments, provide sufficient information to support these valuations.

 

Liquidity risk

The Company actively maintains a treasury system that maintains a net credit position and is designed to ensure the Company have sufficient available funds for operations and planned expansions.

 

 

 

 

 

 

19.           Financial risk management (continued)

 

Maturity of financial liabilities

The following table shows details the Company's remaining contractual maturity for its non-derivative financial liabilities. The maturity of the financial liabilities table has been drawn up based on the undisclosed cash flows based on the earliest date on which the Company can be required to pay.

	2015	2014
	£'000	£'000
Within one year	58	70

 

Interest rate risk

The Company's exposure to changes in interest rate risk relates primarily to interest-earning financial assets and interest-bearing financial liabilities. Interest rate risk is managed by the Company on an ongoing basis with the primary objective of limiting the extent to which net interest expense could be affected by an adverse movement in interest rates. Variable interest rates are based on LIBOR plus a margin.  The Company has assessed the impact of changes in interest rate risks as being immaterial, as all borrowings have a fixed rate of interest.

Foreign currency risk

The Company incurs foreign currency risk on investments that are denominated in currencies other than Sterling. At present, the Company does not have any formal policy for hedging against exchange exposure. The Company may, when necessary, enter into foreign currency forward contracts to hedge against exposure from foreign currencies fluctuations. As at both 31^st December 2014 and 31^st December 2015 the Company has investments denominated in Canadian Dollar. Any movement in the Canadian Dollar against Sterling will create a fair value gain or loss. The Company has assessed the impact of changes in exchange rates as not being significant to the Company.

Capital risk management

The Company manages its capital to ensure the Company will be able to continue on a going concern on a long term basis while ensuring the optimal return to shareholders and other stakeholders through an effective debt and equity balance.

The capital structure of the Company consists of equity attributable to equity holders of the Company, less cash and bank balances.  The Management reviews the capital structure and makes adjustment to it in the light of changes in economic conditions. 

 

The Company's capital employed is funded by equity attributable to equity shareholders of the Company and net debt as follows:

	2015	2014
	£'000	£'000
Bank borrowings	-	-
Less: cash and bank balances	(481)	(196)
Net cash	(481)	(196)
Total equity	624	328
Capital Employed	143	131

 

 

 

 

 

 

 

 

 

 

 

 

19.           Financial risk management (continued)

Other financial assets and liabilities

The notional amounts of financial assets and liabilities with a maturity of less than one year (including trade and other receivables, cash and cash equivalents and trade and other payables) are assumed to approximate their fair value.

 

Categories of financial instruments

 

	Available for sale investments	Loans and receivables/ other financial liabilities	Total		Available for sale investments	Loans and receivables/ other financial liabilities	Total
	2015	2015	2015		2014	2014	2014
	£'000	£'000	£'000		£'000	£'000	£'000
Financial assets:
Cash and cash equivalents	-	481	481		-	196	196
Loans and other receivables	-	1	1		-	2	2
Available for sale investments	200	-	200		200	-	200
	__
Financial assets	200	482	682		200	198	398
Financial liabilities:
Other financial liabilities	-	58	58		-	70	70

 

 

20.        Post balance sheet events

 

On 8 January 2016, the Company announced the placement of 40,000,000 ordinary shares at 0.5 pence per share to raise gross proceeds of £200,000 to provide additional working capital for the Company.

 

On 29 April 2016, Knowlton announced the termination of the Arrangement Agreement with Mogul to pursue another reverse take-over transaction.  Notwithstanding the termination of the transaction with Knowlton, the management and key stakeholders in Mogul remain positive towards Mogul's future in the public markets under improved market conditions.

 

 

 

21.        Ultimate controlling party

 

Jeremy Edelman is the ultimate controlling party.