UNAUDITED INTERIM REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2020
11 August 2020
TechFinancials, Inc.
(“TechFinancials” or the “Company” or the “Group”)
Unaudited Interim Report for the Six Months Ended 30 June 2020
TechFinancials Inc. (AQSE: TECH), a fintech software provider of financial solutions including blockchain-based digital assets and traditional financial trading solutions for retail clients, today announces its unaudited interim results for the six month period ended 30 June 2020 (“H1 2020”).
The Company was listed on AIM until January 2020 and is currently listed solely on the Aquis Stock Exchange.
Financial Overview
Group Revenues of US$0.61m (H1 2019: US$2.07m)
Loss for the period attributable to shareholders of US$0.55m (H1 2019: loss of US$1.09m)
Loss of US$0.75m from investments written off in subsidiaries DragonFinancials Ltd and B.O. TradeFinancials Ltd that have been struck off during the period
Cash position at the period end of US$0.72m (31 December 2019: US$0.67m)
Basic earnings per share (“EPS”) of (US$0.006) (H1 2019 (US$0.013))
The Company gained full control over Footies Ltd and Cedex Holdings Ltd
Cedex has been included for the first time in the Group’s financial statements
Asaf Lahav, Group Chief Executive Officer of TechFinancials, commented:
“In the first half of the year we have gained full control of Footies, following a conversion of a convertible loan in March 2020 and the signing of a separation agreement with Footies partners which led to holdings of 100% of Footies by the Group. The Group also decided to get full control over Cedex and, in March 2020, exercised its option that led to holdings of 97.3% of Cedex’ issued share capital (90.81% on a fully diluted basis).”
“Nonetheless, the Covid-19 crisis has affected dramatically all the plans of the Company.
Footies’ plan to complete the development of its ticketing solution and launching the product in 2020 was put on hold. It is unclear when and how the Event market will return to normal. It is clear that event organizers are suffering major losses and may not be in a position to try new technologies. Therefore, the Company will take a decision in the near future whether or not to continue to pursue this opportunity.
The Company’s plans to sell all or part of its interest in Cedex to a third party were also slowed down as a result of the new business atmosphere.
“The Company will cease its core software licensing business by the end of October this year. It is still uncertain how long the Covid-19 disruption will continue and what ongoing effect it will have on the remaining business of the Group.”
The directors of the Company accept responsibility for the contents of this announcement.
For further information:
TechFinancials, Inc Tel: +972 54 5233 943
Asaf Lahav, Group Chief Executive Officer
Peterhouse Capital Limited (AQSE Growth Market Advisor and Broker) Tel: +44 (0) 20 7469 0930
Guy Miller and Allie Feuerlein
Chairman’s Statement
In H1 2020 the Company gained full control over the remaining businesses it owns (Footies and Cedex). Nevertheless, and in light of the Covid-19 epidemic, the plans to take these businesses forward were disrupted.
Outlook
The next twelve months will continue to be challenging for the Company. In the next few months we will close our B2B business and the entire historical trading solutions of the Group. We will make decisions regarding the feasibility to continue the remaining businesses (Footies and Cedex) in light of the negative business conditions that
currently exist in the market. We will continue to look for opportunities to materialize our assets or join forces with other companies in order to be able move forward.
I would like to thank our shareholders and staff for their continued support in what has been a difficult period globally as well as to the Group.
We look forward to updating the market on our progress in due course.
Eitan Yanuv
Independent Non-Executive Chairman
11 August 2020
Chief Executive’s Statement
FINANCIAL RESULTS
The Group’s turnover in the six months ended 30 June 2020 decreased to US$0.62m (H1 2019: US$2.07m). Revenues in the core software licencing business decreased to US$0.34m from US$0.41m.
The Group also recorded US$0.27m from recognition of deferred revenues related to the token sale initiated in 2018 by the first time consolidated subsidiary Cedex, while in H1 2019 it recorded blockchain trading technology revenues of US$0.89m provided to Cedex which are eliminated on the consolidation in these reports.
Gross profit decreased by 59% to US$0.54m from US$1.31m in H1 2019, predominantly due to the reduced revenues of the Group.
The operating loss for the period was US$0.54m (H1 2019: loss of US$ 1.12m); the decrease in the loss is due to operating expenses decrease in line with the decrease in revenues compared to H1 2019.
Other income for the period was US$ 0.08m, attributed predominantly to US$0.82m gain from intangible assets realization and revaluation and a loss of US$0.75m from investments write off in subsidiaries that has been struck off.
The loss after taxation for the period attributable to shareholders of the Company was US$ 0.55m (H1 2019: loss of US$ 1.09m).
The Group’s cash position for the period ended 30 June 2020 was US$0.72m (31 December 2019: US$0.67m).
The unaudited interim financial results have not been reviewed by the Company’s auditor.
Asaf Lahav
Chief Executive Officer of the Group
11 August 2020
Statement of Comprehensive Income
For the six month period ended 30 June 2020
Note Unaudited
6 Month
Period Ended
30 June 2020US$’000
Unaudited
6 Month period
Ended
30 June
2020US$’000
Audited
12 Month period
Ended
30 December
2019US$’000
Revenue
7
614
2,065
2,065
Cost of sales
(79)
(757)
(911)
Gross profit
535
1,308
2,507
Research and development
(464)
(583)
(2,177)
Selling and marketing
(41)
(442)
(648)
Administrative
(565)
(1,341)
(2,648)
Impairment of intangible assets
–
–
(2,606)
Other expenses
–
(59)
(153)
Operating loss
(535)
(1,117)
(5,725)
Bank fees
(32)
(20)
(31)
Foreign exchange loss
(5)
(5)
(58)
Other financial expenses
(2)
(4)
(10)
Financing expenses
(39)
(29)
(99)
Other income / (expenses)
Other income / (expenses), net
82
–
(400)
8
Loss before taxation
(492)
(1,146)
(6,224)
Taxation
(13)
(19)
(47)
Loss from continuing operations
(505)
(1,165)
(6,224)
Loss from discontinued operations
–
(14)
(19)
Capital gain from a sale of subsidiary
–
–
65
Gain / (Loss) from discontinued operations, net
–
(14)
46
Other comprehensive income
–
–
--
Total comprehensive loss
(505)
(1,179)
(6,225)
Profit / (loss) attributable to:
Owners of the Company
(545)
(1,086)
(5,774)
Non-controlling interests
40
(93)
(451)
9
Loss for the period
(505)
(1,179)
(6,225)
Earnings per share attributable to owners of the parent during the year (Note 3):
Unaudited
6 Month Period Ended
30 June 2020(Cents USD)
Unaudited
6 Month Period Ended
30 June 2019(Cents USD)
Audited
12 Month Period Ended
31 December 2019(Cents USD)
Basic
(0.64)
(1.28)
(6.77)
Diluted
(0.64)
(1.28)
(6.77)
From continuing operations – Basic
(0.64)
(1.26)
(6.82)
From continuing operations – Diluted
(0.64)
(1.26)
(6.82)
From discontinued operations – Basic
–
(0.02)
0.05
From discontinued operations – Diluted
–
(0.02)
0.05
Consolidated Statement of financial position
As of 30 June 2020
Note
Unaudited
30
June 2020US$’000
Unaudited
30 June 2019US$’000
Audited
31 December 2019
US$’000
Non-current assets
Non-controlling interests
707
3,412
112
4
Property and equipment
3
798
16
Long term deposits
–
51
–
Investment in related party
–
200
200
9
710
4,461
328
Current assets
Trade receivables, net and other receivables
87
1,025
606
5
Loans to related parties
–
68
–
Restricted bank deposits
63
287
71
Cash
716
1,227
672
866
2,607
1,349
Total Assets
1,576
7,068
1,677
Non-Current liabilities
Shareholders loan
92
92
92
Other long term liabilities for lease, net
–
357
–
92
449
92
Current Liabilities
6
Trade and other payables
334
1,214
1,173
Deferred income liability
631
–
–
7
Income tax payable
9
107
103
974
1,321
1,276
Deferred income liability
1,066
1,770
1,368
Unaudited
30 June 2020US$’000
Unaudited
30 June 2019US$’000
Audited
31 December 2019
US$’000
Equity
Share Capital
61
61
61
Share premium account
12,022
12,022
12,022
Share-based payment reserve
798
945
934
Accumulated profits / (losses)
(12,392)
(7,839)
(12,459)
Equity attributable to owners of the Company
489
5,189
558
Non-controlling interests
21
109
(249)
9
Total equity
510
5,298
309
Total Equity and Liabilities
1,576
7,068
1,677
Share capital
US$’000
Share premium
US$’000
Share-based payment reserve
US$’000
Accumulated profits/ (losses)
US$’000
Total
US$’000
Non- controlling interests
US$’000
Total
US$’000
Balance at 31 December 2018
61 12,022 937 (6,755) 6,265 202 6,467
Total comprehensive loss for the period
– – – (1,086) (1,086) (93) (1,179)
Share-based payment
– – 10 – 10 – 10
Transfer of Shared based payment reserve on lapsed options
– – (2) 2 – – –
Balance at 30 June 2019
61 12,022 945 (7,839) 5,189 109 5,298
Total comprehensive loss for the period
– – – (4,688) (4,688) (358) (5,046)
Retained earnings of subsidiary disposed of during the year
– – – 50 50 – 50
Share-based payment
– – 7 – 50 – 50
Transfer of Shared based payment reserve on lapsed options
– – (18) 18 – – –
Balance at 31 December 2019
61 12,022 934 (12,459) 558 (249) 309
– – – (545) (545) 40 (505)
Total comprehensive loss for the period
Retained earnings of subsidiary disposed of during the year
700 700 – 700
Accumulated loss purchased from NCI (note 9)
(230) (230) 230 –
Share-based payment
– – 6 – 6 – 6
Transfer of Shared based payment reserve on lapsed options
– – (142) 142 – – –
Balance at 31 December 2019
61 12,022 798 (12,392) 498 21 510
Consolidated statement of cash flows
For the six month period ended 30 June 2020
Unaudited 6 months ended 30 June 2020
Note
Unaudited 6 months ended 30 June 2019
Audited Year ended 31 December 2019
US$’000 US$’000 US$’000
Loss before tax for the period (492) (1,160) (6,178)
Depreciation of property and equipment 2 34 61
Depreciation of leased asset – 176 –
Amortization of intangible assets 4 37 201 404
Impairment of intangible assets – – 2,696
Share Option Charge 6 10 17
Impairment of account receivables – 59 153
Financial expenses from leased – 3 –
asset
Capital loss on disposal of property
and equipment 12 – 400
Capital gain from realization and
revaluation of intangibles assets (818) – –
Capital loss on write off investments
in subsidiaries
749 – –
Operating cash flows before movements in working capital:
Decrease in trade and other
payables
5 405 994 1,414
Decrease in trade and other payables
6 (841) (224) (267)
Increase in other current liabilities
76 31 – –
Interest Income
– (1) (1)
Income tax received 53 – 1
Income tax paid
(2) (20) (43)
Net cash (used in) / generated from operating activities
(258) 72 (1,343)
Proceeds from selling a subsidiary
– – 112
Cash Flow from investing Activities:
Proceeds from a refund of deposit
– – 51
Decrease/(Increase) of restricted bank deposits
8 (11) 205
Development of intangible assets
4 – (402) –
Loans refund to the Company – – 68
Loans eliminated from obtaining control of a subsidiary – – 79
Investment eliminated on consolidation from obtaining control of a subsidiary
9 200 – –
Leased asset of right in use _ (509)
Acquisition of property and equipment – (4) (4)
Net cash generated from/ (used in) investing activities
208 (926) 511
Cash Flow from financing Activities:
Interest payments (2) – –
Lease payments – 509 (262)
Repayment of lease – (176) –
Net cash generated from/ (used in)
financing activities (2) 333 (262)
Net decrease in cash and cash equivalents (52) (521) (1,094)
Cash and equivalents at beginning
of period 6721, 712 1,712
Cash and equivalents at beginning
of period 6721, 712 1,712
Effect of changes in exchange rates on Cash 96 36 54
Cash and equivalents at end of period 716 1,227 672
Notes to the financial statements
General Information
Techfinancials Inc (the “Company”) and its subsidiaries (together, the “Group”) are engaged in the development of blockchain-based digital assets solutions and licensing of financials trading platforms to businesses. The financial statements present the consolidated results of the Group for each of the periods ending 30 June 2020, 30 June 2019 and 31 December 2019.
Group changes in the period
In March 2020, the Company exercised its option to acquire additional shares in Cedex Holdings Limited. Following the exercise, the Company increased its holding in Cedex from 2% to 97.3% of Cedex’ shares.
As a result, these financial statements consolidate for the first time the results of Cedex Holdings Limited.
In March 2020, DragonFinancials Limited, a company owned 51% by TechFinancials Inc has been struck off.
During the period of the report, the Company increased its holding in Footies Ltd from 75% to 100% of Footies shares, following a conversion of a convertible loan and an acquisition of the entire shares held by the non-controlling partners of Fotties Ltd, and as such, these financial statements fully consolidates the results of Footies Ltd.
In March 2020, B.O. TradeFinancials Ltd the Company’s fully owned subsidiary has been struck off.
Basis of preparation
As permitted, the Group has chosen not to adopt International Accounting Standard 34 ‘Interim Financial Reporting’ in preparing these interim financial statements. The condensed consolidated interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2019, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union.
The interim financial information set out above does not constitute statutory accounts. The information has been prepared on a going concern basis in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS) as adopted by the European Union.
The accounting policies applied in preparing the interim financial information are consistent with those that have been adopted in the Group’s 2019 audited financial statements. Statutory financial statements for the year ended 31 December 2019 were approved by the Board of Directors on 18 June 2020. The report of the auditors on those financial statements were not modified in respect of the matter mentioned, however, has drawn attention to material uncertainty related to going concern.
The Directors approved these condensed interim financial statements on 11 August 2020.
Risks and uncertainties
The key risks that could affect the Group’s short and medium term performance and the factors that mitigate those risks have not substantially changed from those set out in the Group’s 2019 Annual Report and Financial Statements, a copy of which is available on the Company’s website: www.techfinancials.com. The Group’s key financial risks are the availability of adequate funding and the COVID-19 lockdown restrictions on the events industry.
Accounting policies
The condensed consolidated interim financial statements have been prepared under the historical cost convention, as modified by the revaluation of certain financials assets and liabilities at fair value through the statement of profit and loss.
The business is not subject to seasonal variations.
The financial information for the 6 months ended 30 June 2020 and the 6 months ended 30 June 2019 has not been audited.
No dividends have been paid in the period (2019: $nil).
Critical accounting estimates and judgements
The preparation of condensed consolidated interim financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the end of the reporting period. Significant items subject to such estimates and have not changed during the interim period and are set out in note 3(v) of the Group’s 2019 Annual Report and Financial Statements.
Critical accounting estimates and judgements of deferred revenue related to the new consolidated subsidiary
In determining the deferred revenue, the calculation includes determining future cost estimates associated with utilisation of the token sale proceeds as detailed in notes 4.1 and 7. The calculation of the amount deferred requires assumptions such as application of cost estimates and utilisation. The revenue recognised is periodically reviewed and updated based on the facts and circumstances available at the time.
-
Earnings per share
The calculation of earnings per share is based on the following losses and number of shares:
Unaudited 6 months ended 30 June 2020
Unaudited 6 months ended 30 June 2019
Audited Year ended 31 December 2019
Earnings per share
US$’000 US$’000 US$’000
Loss attributable to equity holders (545) (1,086) (5,774)
Weighted average number of shares
basic 85,680,979 84,980,979 85,234,130
Basic
US$ US$ US$
Loss per share – basic (0.0064) (0.013) (0.0677)
Earnings per share from continuing
operations – basic (0.0064) (0.013) (0.0682)
Earnings per share from discontinued
operations – basic – _ (0.0002) 0.0005
Intangible assets net
Unaudited 6 months ended 30 June 2020
Unaudited 6 months ended 30 June 2019
Audited Year ended 31 December 2019
Note
US$’000 US$’000 US$’000
Consist of:
Goodwill – 2,606
License – 90
Crypto assets 4.1,
7
633 – –
Development expenditure capitalised as intangible assets:
Trading platform
projects, net 4.2 74 314 112
Footies Ticketing
Product Expenditure – 402 –
Intangible assets, net 707 3,412 112
Current estimates of the useful economic life of intangible assets are as follows:
Development expenditure for trading projects 5 years
Goodwill N/A
License N/A
Crypto assets N/A
Development expenditure for ticketing Product N/A
Impairment review and estimates of intangible assets are as follows:
The intangible assets are reviewed for impairment annually or more frequently whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Crypto assets
The Crypto assets are measured at the available fair values as of 30 June 2020.
Trading Platform related products
The net balance of intangible assets as of 30 June 2020 and 31 December 2019 represents the Trading solution for CFD Project.
Trade and other receivables
Trade and other receivables
Unaudited 6 months ended 30 June 2020
Unaudited 6 months ended 30 June 2019
Audited Year ended 31 December 2019
US$’000US $’000US $’000
Trade Receivables, net 16 650 358
Other Receivables* 25 199 194
Prepayments 44 38 23
Short term deposit 2 46 31
Related party receivables in
respect of trade – 92 –
87 1,025 606
*Other receivables balance relates mostly to VAT and tax advances on account of income tax payables.
The carrying amounts of trade and other receivables approximate their fair values.
Trade and other payables
Unaudited 6 months ended 30 June 2020
Unaudited 6 months ended 30 June 2019
Audited Year ended 31 December 2019
US$’000US $’000US $’000
Trade Payable 76 525 475
Other Payable – 2 8
Deposit held – 242 239
Advance received – 114 –
Employees’ salaries related
balance 93 248 199
Accrued liabilities 165 82 138
Related party payables in
respect
of trade – – 114
334 1,214 1,173
Deferred revenues and deferred income liability
The deferred income liability balance in the amount of US$0.631m relates to a subsidiary consolidated for the first time, Cedex Holdings Limited.
The subsidiary performed a token sale during 2018 and the proceeds were received in crypto assets, predominantly Ether and Bitcoin, which are presented as intangible assets.
The deferred revenues related to the token sale exits in the subsidiary’s historical financial statements since 2018, where a portion of the token sale proceeds has been deferred and a proportion of the consideration has been recognised as deferred revenue.
The deferred revenues from the above token sale proceeds that has been recognised in the reported period is in the amount of US$0.273m.
OTHER INCOME AND EXPENSES NET
Unaudited 6 months ended 30 June 2020
Unaudited 6 months ended 30 June 2019
Audited Year ended 31 December 2019
US$’000US $’000US $’000
Loss from a disposal of fixed assets (12) – (400)
Investments write off in subsidiaries (749) – –
Gain from intangible assets realization
and revaluation 818 – –
Gain from NCI25 – –
82 – (400)
Non – Controlling Interest changes
In March 2020 the company has converted a US$0.3 million loan provided to its subsidiary Footies Ltd, following this conversion the Company holdings has increased to 82.5%.
In addition, in May 2020 the Company has signed a separation agreement with Footies partners in which TechFinancials shall purchase from Footies partners all of the Footies partners Shares (the “Purchased Shares”) at no cost, so that following the purchase of the Purchased Shares TechFinancials holdings will increase from 82.5% to 100% of the issued share capital of Footies Ltd. on a fully diluted basis. In return Footies partners will receive the basic source code of the Footies Ltd. as it existed on 31 May 2019. The ownership in the Basic Source Code will be jointly owned by the Company and Footies partners and each side will be free to continue and develop the product on its own.
As such in these reports Footies Ltd has no longer non-controlling interest holders (NCI holdings in 2019 reports were 25% holdings in Footies Ltd results).
In March 2020 the Company exercised its option over Cedex Holdings Limited. Following the exercise, the Company will hold 97.3% of Cedex’ issued share capital (90.81% on a fully diluted basis).
As such these reports include non-controlling interest holders of 2.7% over Cedex Holdings Ltd results.