TIDMTECH
RNS Number : 4376Q
TechFinancials Inc.
19 June 2020
19 June 2020
Techfinancials, Inc
("TechFinancials" or the "Company" or the "Group")
Annual Report & Accounts and AGM Update
TechFinancials Inc. (AQSE: TECH), a fintech software provider of
financial solutions including blockchain-based digital assets and
traditional financial trading solutions for retail clients,
announces that its audited Annual Report and Accounts, for the year
ended 31 December 2019, is available to view on the Company's
corporate website at https://group.techfinancials.com
In light of the Covid-19 situation and the recent announcements
by the UK Government, which the Board has reviewed carefully,
providing that all international arrivals into the UK, will be
required to self-isolate for 14 day , the Directors being non UK
residents, will not be able to attend the AGM in the near future.
Based on the latest available advice, the Company will hold the AGM
as soon as it becomes more practicable to do so. A notice
containing the full text of the resolutions to be proposed along
with the place of the meeting will be sent in due time.
Financial Highlights
-- Revenues of US$3.4 million (2018: US$7.8 million) a decrease of 56%
-- Blockchain trading technology revenues of US$1.9 million
(2018: US$3.8 million) a decrease by 50% - representing services
provided to CEDEX
-- Core software licensing revenues of US$0.6 million (2018: US$1.3 million) a decrease by 54%
-- Trading platform revenues of US$1.0 million (2018: US$2.7 million) decreased by 63%
-- Gross margins decreased slightly to 73% (2018: 79%)
-- Impairment provision of US$2.6 million made to write-down the
value of goodwill relating to the Group's 51% investment in
DragonFinancials
-- Operating loss of US$5.7 million (2018: loss of US$4.7 million)*
-- EBITDA loss attributable to shareholders of US$1.9 million (2018: loss US$1.9 million)
-- Pre-tax loss attributable to shareholders of US$5.7 million (2018: loss of US$5.3 million)*
-- Cash position of US$0.7 million as at 31 December 2019 (2018: US$1.7 million)
-- Basic earnings per share ('EPS') has decreased further to (US$0.068) (201 8 : (US$0.0 6 6))
-- In February 2019, the Company established Footies Ltd.
("Footies) in the UK, held 75% and 25% by the Company and
Footies.Tech respectively
-- In October 2019, the Company sold its entire shareholding in
MarketFinancials ("MF"), a fully owned subsidiary for a total
amount of EURO 100 thousand
-- In December 2019 DragonFinancials, the Company's 51%
subsidiary, ceased its operation. Consequently, the Company no
longer operates any B2C business in its traditional systems
unit
-- In January 2020 the Company's Shareholders approved the
cancellation of admission of Ordinary Shares to trading on AIM and
sole listing on the Aquis Stock Exchange ("AQSE")
-- In March 2020 the Company exercised its option over Cedex
Holdings Limited ("Cedex"). Following the exercise, the Company
will hold 97.3% of Cedex' issued share capital (90.81% on a fully
diluted basis)
-- Covid-19 crisis led to development of the Footies product being delayed
* including an impairment of intangible assets of US$2.6 million and US$2.4 million
in 2019 and 2018, respectively.
Operational Highlights
Blockchain Trading Technology Activity
-- The Company has devoted significant resources in its
subsidiary Footies, to develop a Blockchain based ticketing
software and app, for Sports Venues and teams. Footies continues to
broaden its solution by adding new software components to serve
Event Creators. These new software components allow creators to
establish and manage events while controlling the tickets. While
Footies development expenses were capitalised in the interim
reports of 2019, the uncertainty caused by the Covid-19 led to the
decision to reverse the capitalised expenses and recognise them as
development costs.
-- The Company continued to support Cedex in the
blockchain-related projects, providing the infrastructure and key
software components to the Cedex blockchain diamond exchange.
Software Licensing (B2B)
-- The Company continued to support customers of its B2B
division. However, this division of the Company has seen declining
revenues which will also suffer from losing DragonFinancials
revenues, its major customer. With the continuing regulatory
challenges facing the Company's traditional brokerage business
unit, in May 2020 the Company has taken the decision to give its
licensees a six months termination notice according to the license
agreement in place. The Company will terminate all its B2B
brokerage services activities by 1 November 2020 or earlier in the
case that all licensees will choose to terminate their agreement
any time before 1 November 2020.
Trading Platform (B2C)
-- The Company's 51 per cent owned B2C subsidiary,
DragonFinancials, has suffered from an increasingly challenging
regulatory and business environment which has resulted in it
incurring losses which started in 2018 and which have continued
throughout H1 2019. As prospects for DragonFinancials have not
improved in H2 2019, in conjunction with its joint-venture partners
at DragonFinancials, in December 2019 the Company has decided to
cease DragonFinancials trading with immediate effect, in order to
stem further losses. Consequently, the Company will no longer
operate any B2C business in its traditional systems unit.
-- The Company completed the sale of MarketFinancials in October
2019 for a cash amount of EURO 100 thousand.
Chairman's Statement
2019 was a very challenging year, following which the Board has
taken major decisions to make substantial adjustments to its
operating structure and cost base, in order to allow the
continuation of the Group, in its quest to establish new business'
in Blockchain related products.
During the period the continuing regulatory challenges affected
revenues and profitability of the Group's historical B2C business
in Asia and led to the decision to close DragonFinancials and the
entire B2C business which resulted in a write-off of goodwill
balance which arose from the acquisition of DragonFinancials.
Whilst the B2B business suffered as well, both from the loss of
DragonFinancials, its major customer in the first half of 2019,
along with the decline in the number of the remaining active
customers, the Company proposed to its shareholders, in order to
reduce costs, to cancel the admission of the Company's Ordinary
Shares to trading on AIM and to remain listed solely on the AQSE
Growth Market ("AQSE"). Subsequently the Company's admission on AIM
was cancelled on 20 January 2020.
In October 2019, the Company managed to complete the sale of its
entire holdings in MarketFinancials for a cash amount of EURO 100
thousand, and hence the associated transaction is presented in the
reports as discontinued operations.
Footies
In February 2019, the Group established Footies Limited
("Footies"), a subsidiary incorporated in the UK, in which
TechFinancials had an interest of 75 per cent. It has been
established to develop a Blockchain based digital ticketing and fan
engagement solution for sports organizations and venues.
The Company provided funding during the year to Footies
totalling circa US$1 million (US$0.4 million of the amount by way
of Convertible Loans), to be used to develop the product and for
sales efforts. At the beginning of Q3, the first version of the
platform has become available for testing with potential clients
following which Footies has started approaching potential customers
with a 'demo' product.
With the feedback received from potential prospects combined
with market research Footies management has decided to develop and
broaden its solution by adding new software components to serve
Event Creators. These new software components allow creators to
establish and manage events while controlling the tickets.
Cedex
During the year the Company continued to provide development and
support services to Cedex allowing it to maintain its Cedex trading
platform.
In the past year, Cedex has concentrated its business efforts on
business development activities in order to create the eco-system
for issuing advanced financial instruments based on diamonds as an
underlying asset, such as ETP and futures contracts utilizing
Cedex' proprietary technology, comprising the DEX algorithm, and
the Cedex trading platform.
Dividend s
The Board will not be recommending a final dividend to the
shareholders of the Company for FY2019 (2018: $nil).
Outlook and current trading
The year was a turning point for the Group, where it had to
close its subsidiary DragonFinancials, historically the most
profitable business for the Group, and cancel its admission to AIM
while entering into the new ticketing business of Footies.
The next twelve months will continue to be challenging for the
team while by the end of the year we will close our B2B business
and the entire historical trading solutions of the Group, and
continue to operate our Blockchain technology related solutions
through Footies and Cedex, subject to developments around the
Covid-19 pandemic.
We have continued to focus on developing Footies' new technology
and 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.
Following the recent global pandemic, the Company's management
believes that Footies' capabilities in controlling tickets and
attendance has some advantages in coping with Covid-19.
Nonetheless, the Covid-19 crisis has affected dramatically Footies'
plan to complete the development of its ticketing solution and
launching the product in 2020. The Company understands that the
ticketing market, which is currently on halt, will not recover to
its previous stage this year, and maybe not even in 2021, creating
a big question mark around Footies plans going forward .
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).
Cedex's vision is to transform diamonds into a new financial
asset class.
Business development efforts in Cedex were also affected by the
Covid-19 crisis, and in the current business atmosphere the Company
finds it hard to promote its solution in the financial sector.
Nevertheless, Cedex's board will be looking for other opportunities
to commercialise the Cedex technology. The Company will consider
selling all or part of its interest in Cedex to a third party if it
believes that to be in the best interests of the Company.
I would like to thank our shareholders and staff for their
continued support in what has been a difficult year.
We look forward to updating the market on our progress in due
course.
Eitan Yanuv
Independent Non-Executive Chairman
Material uncertainty related to going concern (extracted from
the Auditor Report)
We draw attention to note 3u in the financial statements, which
indicates that the group are loss making, having made a loss of
$6,225k in 2019, and dependent on obtaining financing and the
COVID-19 lockdown restrictions on the events industry being lifted
globally in order to meet its working capital requirements over the
next 12 months. As stated in note 3u, these events or conditions,
along with the other matters as set forth in note 3u, indicate that
a material uncertainty exists that may cast significant doubt on
the company's ability to continue as a going concern.
Our opinion is not modified in respect of this matter.
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2019
2019 2018
-------------------------------------- -------------------------
US$'000 US$'000
Revenue 3,418 7,764
Cost of sales (911) (1,650)
-------------------------------------- -------------------------
Gross profit 2,507 6,114
Expenses:
Research and development ( 2 , 177 ) (3,478)
Selling and marketing ( 648 ) (1,396)
Administrative ( 2 ,648) (3,499)
Other expenses (153) (41)
Impairment of goodwill (2, 606 ) (2,434)
-------------------------------------- -------------------------
Operating Loss (5,725) (4,734)
Bank fees (31) (59)
Foreign exchange loss (58) (166)
Other financial (expenses)
/ income (10) 4
-------------------------------------- -------------------------
Financing expenses ( 99 ) (221)
Other expenses
Loss from a disposal of fixed (400) -
assets
Loss before taxation (6,224) (4,955)
Taxation (47) (85)
-------------------------------------- -------------------------
Loss for the year from continuing
operations (6,271) (5,040)
Loss from discontinued operations (19) (35)
Capital gain from a sale ____________________65 __________
of subsidiary -
Gain / (loss) for the year
from discontinued operations,
net 46 (35)
Other comprehensive income - -
Total comprehensive Loss (6,22 5 ) (5,075)
====================================== =========================
Loss attribute able to:
Owners of the Company (5,774) (5,274)
Non-controlling interest (45 1 ) 199
-------------------------------------- -------------------------
Loss for the period (6,22 5 ) (5,075)
Consolidated Statement of Financial Position
As at 31 December 2019
31 December 31 December
------------- -------------
2019 2018
------------- -------------
US$'000 US$'000
Non-current assets
Intangible assets, net 112 3,212
Property and equipment, net 16 471
Long term deposits - 51
Investment in related party 200 200
Loans to related parties - 147
------------- -------------
328 4,081
------------- -------------
Current assets
Trade receivables, net and other
receivables 606 2,020
Restricted bank deposits 71 276
Cash 672 1,712
------------- -------------
1,349 4,008
------------- -------------
Total Assets 1,677 8,089
Current liabilities
Trade and other payables 1,173 1,440
Income tax payable 103 90
------------- -------------
1,276 1,530
------------- -------------
Non-current liabilities
Shareholders loan 92 92
Equity
Share capital 61 61
Share premium account 12,022 12,022
Share-based payment reserve 934 937
Accumulated profits / (losses) (12,459) (6,755)
------------- -------------
Equity attributable to owners
of the Company 558 6,265
Non-controlling interests (249) 202
Total equity 309 6,467
Total Equity and Liabilities 1,677 8,089
Consolidated statements of cash flows
For the year ended 31 December 2019
Years ended 31 December
--------------------------
2019 2018
------------ ------------
US$'000 US$'000
------------ ------------
Cash Flows from operating activities
Loss before tax for the period (6,178) (4,990)
Adjustment for:
Amortisation of intangible assets 404 403
Impairment of intangible assets 2,696 2,434
Depreciation of property and equipment 61 227
Share option charge 17 44
Impairment of account receivables 153 41
Capital loss on disposal of property
and equipment 400 -
Operating cash flows before movements
in working capital:
Decrease in trade and other receivables 1,414 1,026
Decrease in long term receivables - 39
Decrease in trade and other payables (267) (28)
Interest Income (1) (4)
Income tax received 1 13
Income tax paid (43) (83)
------------ ------------
Net cash used for operating activities (1,343) (878)
------------ ------------
Cash flows from investing activities
Proceeds from selling a subsidiary 112 -
Proceeds from a refund of deposit 51 -
Proceeds from disposal of property, plant
and equipment - 1
Decrease in restricted bank deposits 205 29
Increase in software license - (25)
Loans given by the Company to related
party - (79)
Loans eliminated from obtaining control
of a subsidiary 79 -
Loans refunded to the Company 68 332
Investment in Equity - (200)
Acquisition of property and equipment ( 4 ) ( 27 )
------------ ------------
Net cash generated from investing activities 511 31
------------ ------------
Cash flows from financing activities
Dividends paid to NCI - (833)
Lease payments (262) -
------------ ------------
Net cash used in financing activities (262) (833)
------------ ------------
Net decrease in cash and cash equivalents (1,094) (1,680)
Cash and equivalents at beginning of
period 1,712 3,499
Effect of changes in exchange rates on
Cash 54 (107)
------------ ------------
Cash and equivalents at end of period 672 1,712
============ ============
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
Yuval Tovias, Chief Financial Officer
Peterhouse Capital Limited (AQSE Growth Tel: +44 (0) 20
Market Advisor and Broker) 7469 0930
Guy Miller and Allie Feuerlein
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END
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