TIDMZAIM

RNS Number : 1442X

ZAIM Credit Systems PLC

30 April 2021

Not for release or distribution, directly or indirectly, within, into or in the United States or to or for the account or benefit of persons in the United States, Australia, Canada, Japan or any other jurisdiction where such offer or sale would violate the relevant securities laws of such jurisdiction

For Immediate Release

30 April 2021

Zaim Credit Systems Plc

("Zaim" or the "Group")

Audited financial results for the year ended 31 December 2020

Zaim Credit Systems plc (the 'Group' or 'Zaim'), the Russian focused fintech group, is pleased to announce its audited financial results for the year ended 31 December 2020.

Key highlights

   --      Group Net Profit for the second half of 2020 of GBP0.7m (1H 20 loss of GBP1.3m) 
   --      Adjusted EBIT profit for the second half of 2020 of GBP0.8m (1H 20 loss of GBP0.9m) 
   --      Adjusted EBIT loss for the year of GBP0.1m (FY 19 loss of GBP0.2m) 

-- Achieving profitability in the second half of the year extremely encouraging given the backdrop of the COVID-19 restrictions

-- Rapid transition to a predominantly online business model underlines the resilience and adaptability of the Group which is now well placed to capitalise on further growth

-- Transition from offline-centered to online-centered business model mid-way through 2020 resulted in significantly lower fixed costs and higher scalability of the business

-- Total loans issued increased by 15% to GBP10.4m (FY19 GBP9.0m) in FY20 and by 52% from GBP4.1m in 1H20 to GBP6.3m in 2H20

o The growth experienced in 2H is robust, sustainable and expected to continue as it is a result of the revised business model to focus the Groups resources online

o The rate of growth is expected to be stable as Zaim continues to take market share and not a result of any rebound from reduced business 1H or other short term result

-- Growth of the loans issued was driven by the sharp increase in the online business, which grew 16 fold from GBP0.3m in 2019 to GBP5m in 2020. This growth was especially notable in 2H20 vs. 1H20 after the successful transformation to a predominantly online business model, generating an increase in loans issued of 540% from GBP0.7m in 1H20 to GBP4.3m in 2H20

-- In December 2020, the online business represented 82% of total loans issued compared to 13% in March 2020 at the outset of COVID-19 and just 9% in December 2019

Financial highlights

 
                                  FY 2020  FY 2019   2 H 2020   1H 20 20 
                                  GBP'000  GBP'000    GBP'000    GBP'000 
                                  -------  -------  ---------  --------- 
 Loans issued during the period    10,392    9,028      6,275      4,117 
                                  -------  -------  ---------  --------- 
 Interest income                    4,857   3, 941      2,112      2,745 
                                  -------  -------  ---------  --------- 
 Operating income                   3,363    4,324      2,369        994 
                                  -------  -------  ---------  --------- 
 Net profit ( loss )                (615)    (892)        720    (1,335) 
                                  -------  -------  ---------  --------- 
 Operating margin(1)               27 .3%    41.2%      26.5%      28.8% 
                                  -------  -------  ---------  --------- 
 Adjusted EBIT(2) for the 
  period                            (125)    (177)        808      (933) 
                                  -------  -------  ---------  --------- 
 
 
                                        As at 31 December      As at    As at 31 
                                                     2020    30 June    December 
                                                                2020       20 19 
                                                  GBP'000    GBP'000     GBP'000 
                                        -----------------  ---------  ---------- 
 Gross outstanding loans to customers              28,298     30,844      32,078 
                                        -----------------  ---------  ---------- 
 Total outstanding loans, measured 
  at amortised cost                                 1,269        718         786 
                                        -----------------  ---------  ---------- 
 Cash and cash equivalents                            641        810       1,583 
                                        -----------------  ---------  ---------- 
 

1 Operating margin is calculated as net operating cash flow (net cash received for the period (including collecting claims) less loans provided including insurances) divided by total loans provided including insurances

2 Adjusted EBIT is calculated by taking loss for the year adding back accrued interest, non-cash share-based payment charges, costs related to the IPO and one-off restructuring costs which are non-recurring.

Zaim's CEO, Siro Cicconi commented:

"Following the successful completion of the IPO on November 4, 2019 the business was outperforming the internal growth plan and gaining very good momentum during the first two months of 2020. This was unfortunately impacted quite severely during March - June 2020 due to the Covid-19 pandemic and still to a slightly lesser extent for the remainder of 2020. This posed a serious challenge for our management team and the whole business at every level and I would like to thank all of our employees, customers, consultants and the management team for their hard work and dedication through the difficult time.

During the quarantine period in the Q2 2020 , the Group rapidly accelerated the shift in its business model to remote lending via the Internet, which resulted in a significant increase in access to our products without the need to visit our stores and at the same time decreasing the fixed costs base. The Group proceeded to optimise the physical store business, including the closure of loss-making outlets and moved forward focussing the majority of the Group's resource towards the online business. This was executed well and I am pleased with the results demonstrated by the profitability in the second half of 2020.

The Group experienced exceptional growth in lending volumes over the second half of 2020 and continues to see a large opportunity for our business to continue its current trajectory. I am both excited and optimistic about what the future holds for our Company and look forward to updating the market in the future."

A copy of the Report and Accounts will be available on the Company's website, www. zaimcreditsystemsplc .com/english and also from the National Storage Mechanism.

Enquiries:

 
 Zaim Credit Systems Plc 
 Simon Retter 
  Siro Cicconi                        Tel: +44 (0) 73 9377 9849 
 Alex Boreyko                       Tel: +7 925 708 98 16 
                                     investors@zaimcreditsystemsplc.com 
 Beaumont Cornish Limited 
 Roland Cornish / James Biddle      Tel: +44 (0) 20 7628 3396 
 
 Optiva Securities Limited 
 Jeremy King / Vishal Balasingham   Tel: +44 (0) 20 3137 1902 
 

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 as it forms part of UK Domestic Law by virtue of the European Union (Withdrawal) Act 2018 ("UK MAR")

Chairman's Statement

Dear Shareholders,

It is hard to imagine our life now without digital or online services. Over the past several years, most of us have transferred traditional "real-life" activities online. Activities such as shopping, education, communication, entertainment, ordering delivery from a restaurant or meeting any other essential needs can now be undertaken exclusively online.

Quarantine measures undertaken by the governments of most countries during 2020 as a reaction to the COVID-19 pandemic accelerated this shift in many cases and generated substantial additional demand for online services. Despite this, many of these services are difficult or even impossible to access without an online banking presence or a bank card. At the same time as services and activities that can be undertaken online are rapidly expanding, many people are excluded from this "online world." This phenomenon is quite noticeable in Russia, where in 2020, 65% of the population did not have a bank deposit account and 85% did not have a credit card .

Traditional banks are reluctant to approve credit to a large percentage of Russian borrowers with poor or no credit history as well as those from less well-off sections of society. This creates a significant segment of the population that is excluded from the online world and the modern standard of living.

Zaim has always built its business on ethical principles. Our mission is to provide access to financial services in the age of the Internet to those people who are not eligible for mainstream financial services. With this mission in mind, several years ago, Zaim created the Zaim MasterCard, an inclusivity tool that can be easily issued and delivered to those who lack the "key" to the modern online world.

With our motto "fast and flawless," we help people efficiently resolve their temporary financial difficulties without the need for collateral or guarantors, with funds usually delivered within a few minutes. In order to provide our customers with a quick and easy way to borrow money on transparent terms, we set a very high standard in customer service and we give full training to every one of our employees. We strive to provide financial support to a whole sector of the Russian population that has been ignored by conventional banks. Our best-in-class technology offering enables Zaim to do this and maximise shareholder returns at the same time.

This market still has a great potential. Penetration of the microfinance industry in the Russian market is less than 2% of the adult population, while in some mature markets, it ranges between 5% and 10%. Russian household debt in September 2020 was only 21% of the Russian GDP compared to 89% in the UK and 78% in the USA . Over the past several years, the microfinance market has grown by about 25% per annum, with the majority of this growth driven by the online segment. In addition, online lending in Russia has been doubling year after year. During 2020, which was hopefully an exceptional year for uncertainty and general economic turmoil, the total balance of Russian microfinance loans grew by 18% to 249 billion rubles (ca. GBP2.5 billion) .

We used the COVID-19 restrictions and change in habits of individuals as an opportunity to significantly accelerate the online transformation of our business. At the beginning of the year, we had a dominant share of the market in the Moscow region where our existing outlet network was based, even having only a very small-scale online business at the time. By the end of the year, we found ourselves in the enviable position of being able to provide the majority of our loans via remote channels and we are now able to include the whole of the Russian population as our market.

During the past few years, Zaim has been developing and executing a strategy of profitable growth whilst dealing with some significant headwinds. Zaim has successfully addressed the tightening of regulatory requirements experienced between 2016-2019, including a reduction in the maximum interest charges. In 2020, while our team focused on the implementation of our post-IPO strategy, COVID-19 emerged as a truly unforeseeable event but, once again, the team swiftly amended the strategy and ensured our prompt return to profitability and a leaner, more efficient and optimized business.

I would like to thank the management, employees, consultants and my fellow board members for their commitment and hard work in delivering these tremendous results and navigating the Group to a rapidly growing and profitable business in the second half of 2020.

We remain committed to strengthening our position as a leading Russian fintech company and will strive to keep delivering a fast and flawless solution to our customers.

Malcolm Groat

Chairman

29 April 2021

Chief Executive's Review

Dear fellow Stakeholders,

2020 became the year of great challenges not only for our company, but for the whole of humanity. I am extremely proud of our team that has successfully addressed these global challenges and turned a potential heavy threat to the business into an opportunity to increase growth and undertake an incredibly fast move to an online model. Our management has successfully navigated the difficulties connected with COVID-19 and its consequences as well as the tightening regulations in the microfinance field in Russia and has built a solid and reliable growth platform, generating significant profits in the second half of the year.

In the middle of 2019, the Russian financial regulator-the Central Bank of the Russian Federation-tightened restrictions for all operators in the microfinance market by reducing the maximum interest rate by 33%, in accordance to sector re-organization plan announced in 2016. The new rate is in line with international markets level. This lower interest rate affected us most significantly during 2020, the first full year of its impact, but despite this, the Group reported an increase in interest income of 23% during the year. This was driven by an increase in the amount of loans issued during the year to GBP10.4m (2019: GBP9.0m). During the year, it was observed that on average, customers held our loans for slightly longer (67 days; 2019: 52 days), predominantly due to the lower interest rates, resulting in an increased working capital requirement.

In 2020 we observed a significant threat to our business, as did a lot of other traditional businesses across the globe, with the emergence of the COVID-19 pandemic and associated restrictions imposed by governments. I am immensely proud of our team at all levels of the organisation who handled the situation in a calm, professional and conscientious manner and I would like to thank everybody for their great teamwork that has turned this significant risk into a successful opportunity to build our growing, profitable business.

Over the past 10 years, Zaim has developed a bespoke IT system that allows it to receive and repay loans remotely with an automated scoring process taking less than 10 minutes to approve or reject new applicants. 2020 saw the prioritization of the development of our online business and subsequent rapid expansion of lending volumes. At the same time, the physical outlet business was streamlined by reducing the number of outlets to 31 from 91 at the end of December 2020 and then to 27 as at 31 March 2021. As a result, the share of loans issued online dramatically increased from 9% in December 2019 to 82% in December 2020.

These swift and decisive actions resulted in an immediate improvement to the profitability of the Group with profits achieved on a quarterly basis in both Q3 and Q4 2020. While in the first half of 2020 the Group generated an adjusted EBIT loss of GBP0.9m, in the second half, it generated an adjusted EBIT profit of GBP0.8m, which is an impressive turnaround in performance.

This trend of strong growth in business volumes has continued during Q1 2021, with key performance indicators indicating healthy growth, and I look forward to providing more news in the Q1 trading update.

I am glad to note that the switch to an online-focused business model continues to outperform management's expectations and now that the platform has been successfully deployed and fine-tuned, our attention is turning to other business development opportunities and to further enhancements to our existing offerings. As part of this, the team is focusing on further improving the level of services, implementing new tools and, on top of this, we are glad to announce that we are releasing a mobile app. This gives us an opportunity to stay connected to our clients 24/7 and increase the potential for repeat business.

We are now ready to expand our portfolio of services and raise the fintech profile of the Group. Along with this, we are currently exploring opportunities with colleges and universities to create a mechanism for broadening access to financial services for people who are neglected by conventional providers. Once again, we confirm that the key words for our business are inclusivity and profitability.

I would like to thank the Directors and the management for navigating the successful return of the Group to net profitability. We are currently uniquely positioned to address market challenges and turn them into market opportunities with our consistent commitment to adding value and generating profitability for all of our stakeholders.

Siro Donato Cicconi

CEO

29 April 2021

Independent Auditor's Report to the Shareholders of Zaim Credit Systems plc

Opinion

We have audited the financial statements of Zaim Credit Systems plc (the 'parent company)' and its subsidiaries (the 'group') for the year ended 31 December 2020 which comprise the Consolidated Statement of Profit or Loss and Other Comprehensive Income, Consolidated and Company Statement of Financial Position, Consolidated and Company Statement of Changes in Equity, Consolidated and Company Statement of Cash Flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the parent company financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

In our opinion:

-- the financial statements give a true and fair view of the state of the group's and of the parent company's affairs as at 31 December 2020 and of the group's loss for the year then ended;

-- the group and the parent company financial statements have been properly prepared in accordance with International accounting standards in conformity with the requirements of the Companies Act 2006; and

-- the financial statements have been prepared in accordance with the requirements of the Companies Act 2006; and, as regards the group financial statements, Article 4 of the IAS Regulation.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the group and the parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the director's use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Our evaluation of the directors' assessment of the entity's ability to continue to adopt the going concern basis of accounting included carrying out a risk assessment which covered the nature of the group, its business model and related risks including where relevant the impact of Coronavirus, the requirements of the applicable financial reporting framework and the system of internal control. We evaluated the directors' assessment of the group's ability to continue as a going concern, including challenging the underlying data and key assumptions used to make the assessment, and evaluated the directors' plans for future actions in relation to their going concern assessment.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's or group's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance on our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

 
 Risk                                 Our response to the risk               Our response and observation 
 Impact of COVID-19 
  There is a risk that the              We read the Directors' assessment      The disclosures in 
  group may not be considered           of the risks and impacts of            the financial statements 
  a going concern as a result           COVID-19 on the business.              adequately reflect 
  of the impact of COVID-19             We compared this assessment            the Directors' conclusions 
  (Coronavirus).                        to our own understanding of            around the uncertainties 
                                        the risks, and the nature              and impact of COVID-19 
                                        of the group's operations,             and, that the going 
                                        products and customer base.            concern assumption 
                                        We then conducted a review             remains appropriate. 
                                        of going concern in respect 
                                        of COVID-19 which included 
                                        reviewing forecasts and current 
                                        trading performance, and carrying 
                                        out stress testing. The work 
                                        undertaken considered a period 
                                        of at least twelve months 
                                        from the date of approving 
                                        these financial statements. 
                                     -------------------------------------  -------------------------------- 
 Recoverability of loans 
  to customers                          We understood the group's              We did not identify 
  Given the extended credit             process for estimating the             any evidence of material 
  terms that were provided              expected credit loss provision         misstatement related 
  to customers, judgement               under IFRS 9. Loans to customers       to carrying value of 
  is required to establish              were tested on a sample basis          receivables. Management 
  how much of the loan receivables      which included considering             continue to apply an 
  balance is recoverable.               the recoverability of the              appropriate expected 
  There is a risk that management's     balances post year end. Overdue        credit loss provision. 
  judgements and estimates              balances were discussed with 
  over recoverability are               management and we assessed 
  inappropriate, when considering       whether the accounting provision 
  the specific balances                 appropriately reflects the 
  and the requirements of               facts and circumstances. 
  IFRS 9. 
                                     -------------------------------------  -------------------------------- 
 Risk of fraud in revenue 
  recognition                           We reviewed the group's revenue        Revenue was recognised 
  There is a risk that revenue          recognition policies and how           in accordance with 
  is materially understated             they are applied. Revenue              the group's accounting 
  due to fraud.                         was then tested on a sample            policy and we concluded 
                                        basis to confirm that transactions     that no evidence of 
                                        have been appropriately recorded       fraud or other understatement 
                                        in line with IFRS 15.                  was identified. 
                                     -------------------------------------  -------------------------------- 
 Risk that management is 
  able to override controls             We examined journals posted            We identified no evidence 
  Journals can be posted                around the year end, specifically      of management override 
  that significantly alter              focusing on areas which are            in respect of inappropriate 
  the financial statements.             more easily manipulated.               manual journals recorded 
                                                                               in any section of the 
                                                                               financial statements. 
                                     -------------------------------------  -------------------------------- 
 

Our application of materiality

We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be charged or influenced. We use materiality both in planning and in the scope of our audit work and in evaluating the results of our work.

We determine materiality for the group and the parent company to be GBP96,983 and this financial benchmark, which has been used throughout the audit, was determined by way of a standard formula being applied to key financial results and balances presented in the financial statements. Where considered relevant the materiality is adjusted to suit the specific risk profile of the group.

Performance materiality is the application of materiality at the individual account or balance level set at an amount to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality. Performance materiality for both the group and the parent company was set at 75% of the above materiality levels, which equates to GBP72,737. We agreed with the audit committee that we would report to the committee all individual audit differences identified during the course of our audit in excess of GBP4,849. We also agreed to report differences below these thresholds that, in our view warranted reporting on qualitative grounds.

An overview of the scope of our audit

Our group audit was scoped by obtaining an understanding of the group and its environment, including the group's system of internal control, and assessing the risks of material misstatement in the financial statements at the group level.

Whilst Zaim Credit Systems plc is a company registered in England & Wales and its head office is located in the UK, the group's principal operations are located in Russia. In approaching the audit, we considered how the group is organised and managed. We assessed the activities of the group as being the issuance of microfinance loans to Russian individuals.

Our group audit scope focused on the group's principal operating subsidiary, being Zaim Express LLC, which was subject to a full scope audit together with the parent company. Shipleys LLP performed the audit of the parent company and BDO Unicon Aktsionernoe Obshchevstvo performed the audit of the Russian component.

The group audit team was actively involved in the direction of the audit and specific audit procedures performed by the component auditor along with the consideration of findings and determination of conclusions drawn. As part of our audit strategy, we issued group audit engagement instructions and discussed the instructions with the component auditor. A senior member of the group audit team met with the component auditor and local management performed a review of the component audit files and we discussed the audit findings with the component auditor.

Other Information

The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

In this context, matters that we are specifically required to report to you as uncorrected material misstatements of the other information include where we conclude that:

-- Fair, balanced and understandable - the statement given by the directors that the y consider the annual report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the groups' position and performance, business model and strategy, is materially inconsistent with our knowledge obtained in the audit; or

-- Audit committee reporting - the section describing the work of the audit committee does not appropriately address matters communicated by us to the audit committee; or

We have nothing to report in respect of these matters.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion the part of the directors' remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006.

In our opinion, based on the work undertaken in the course of the audit:

-- the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

-- the strategic report and the directors' report have been prepared in accordance with applicable legal requirements

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

-- adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

-- the parent company financial statements and the part of the directors' remuneration report to be audited are not in agreement with the accounting records and returns; or

   --      certain disclosures of directors' remuneration specified by law are not made; or 
   --      we have not received all the information and explanations we require for our audit. 

Responsibilities of directors

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditor's Responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. Our approach was as follows:

-- We obtained an understanding of the legal and regulatory frameworks that are applicable to the group and determined the most significant are those that relate to the reporting framework (IFRS, the Companies Act 2006) and the relevant tax compliance regulations in the jurisdictions in which the group operates.

-- We understood how Zaim Credit Systems plc is complying with those frameworks by making enquiries on management, the Company Secretary, and those responsible for legal and compliance procedures. We corroborated our enquiries through our review of board minutes, papers provided to the Audit Committee, discussion with the Audit Committee and any correspondence received from regulatory bodies.

-- We assessed the susceptibility of the group's financial statements to material misstatement, including how fraud might occur by enquiring with management and the Audit Committee during the planning and execution phase of our audit. We considered the programs and controls that the group has established to address risks identified, or that otherwise prevent, deter and detect fraud and how senior management monitors those programs and controls. Where the risk was considered to be higher, we performed audit procedures to address each identified fraud risk including revenue recognition as discussed above. These procedures included testing manual journals and were designed to provide reasonable assurance that the financial statements were free from fraud or error.

-- Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations identified in the paragraphs above. Our procedures involved journal entry testing, with a focus on manual journals and journals indicating large or unusual transactions based on our understanding of the business; enquiries of the Company Secretary and management; and focused testing, as referred to in the key audit matters section above.

Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Other matters which we are required to address

We were initially appointed by the board on 23 October 2019 to audit the financial statements for the period ending 31 December 2018. Our total uninterrupted period of engagement is 3 years, covering the periods ending 31 December 2018 to 31 December 2020.

The non-audit services prohibited by the FRC's Ethical Standard were not provided to the group or the parent company and we remain independent of the group and the parent company in conducting our audit.

Our audit opinion is consistent with the additional report to the audit committee.

Use of our report

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

BENJAMIN BIDNELL

For and on behalf of SHIPLEYS LLP, Chartered Accountants and Statutory Auditor

10 Orange Street, Haymarket, London, WC2H 7DQ

29 April 2021

Zaim Credit Systems plc

Consolidated Statement of Financial Position as at 31 December 2020

 
(in British pounds sterling) 
 Company Registered number 11418575            Note             2020         2019 
--------------------------------------------  -------  -------------  ----------- 
 
Assets 
Cash and cash equivalents                        5         640, 8 71    1 , 582,751 
Loans to customers                               6       1 ,269 ,313        786,346 
Property and equipment                                         5,677         11,967 
Right-of- use assets under lease agreements      7           297,925      2,549,233 
Other assets                                     8        25 1 ,2 97        222,117 
Total assets                                              2,465, 083      5,152,414 
--------------------------------------------  -------  -------------  ------------- 
 
Liabilities 
Loans received                                   9           735,646      742,603 
Lease liabilities                                7           347,216    2,555,648 
Other liabilities                               10           823,830      664,905 
Total liabilities                                         1,906,6 92    3,963,156 
--------------------------------------------  -------  -------------  ----------- 
 
 
  Equity 
Charter capital                                 11         4,369,750    4,369,750 
Shares to be issued Reserve                     26         800 , 000            - 
Additional capital                            11, 2 5      6,078,128    6,078,128 
Foreign currency translation reserve            11       4, 3 90,225    4,457,788 
                                                                         23 , 764 
Merger reserve                                11, 26   2 2,9 64 ,800         ,800 
Share options reserve                           11         218 , 099      166,883 
                                                          (38, 262 ,     (37, 648 
Accumulated deficit                             11             611 )      ,0 92 ) 
--------------------------------------------  -------  -------------  ----------- 
Total equity                                                 558,391    1,189,258 
--------------------------------------------  -------  -------------  ----------- 
Total liabilities and equity                               2,465,083    5,152,414 
--------------------------------------------  -------  -------------  ----------- 
 
 
 Siro Donato Cicconi, 
  Chief Executive Officer 
 
 
 Simon James Retter, 
  Finance Director 
 

29 April 2021

Zaim Credit Systems plc

Company Statement of Financial Position as at 31 December 2020

(in British pounds sterling)

Company Registered number 11418575

 
                               Note        2020         2019 
-----------------------------  ----  ----------  ----------- 
 
Assets 
Cash and cash equivalents       5     1 61 ,163    1 , 310,655 
Other assets                    8      126, 477         68,122 
                                      10 , 0 96 
Investment in Subsidiary        1          ,089     8,705 ,663 
                                                     10,084,44 
Total assets                         10,383,729              0 
-----------------------------  ----  ----------  ------------- 
 
Liabilities 
Other liabilities               10      186,739      162,666 
Total liabilities                       186,739      162,666 
-----------------------------  ----  ----------  ----------- 
 
 
  Equity 
Charter capital                 11    4,369,750    4,369,750 
Shares to be issued Reserve     26     800 ,000            - 
Additional capital              11    6,078,128    6,078,128 
Share options reserve           12      218,099    166 , 883 
                                      (1 ,268 ,      ( 692 , 
Accumulated deficit                     9 8 7 )        987 ) 
-----------------------------  ----  ----------  ----------- 
Total equity                         10,196,990    9,921,774 
-----------------------------  ----  ----------  ----------- 
Total liabilities and equity         10,383,729   10,084,440 
-----------------------------  ----  ----------  ----------- 
 

The above Company Statement of Financial Position should be read in conjunction with the accompanying notes, the loss for the period was GBP576,000 (2019: GBP626,317). As permitted by section 408 of the Companies Act 2006, the statement of comprehensive income of the Parent Company is not presented as part of these Financial Statements.

The Financial Statements were authorised for issue by the Board of Directors on 29 April 2021 and were signed on its behalf

 
 Siro Donato Cicconi, 
  Chief Executive Officer 
 
 
 Simon James Retter, 
  Finance Director 
 
 
Zaim Credit Systems Group 
 Consolidated Statement of Profit or 
 Loss and Other Comprehensive Income 
 for the Year Ended 31 December 2020 
 (in British pounds sterling)                  Note             2020         2019 
-------------------------------------------  --------  -------------  ----------- 
 
Interest income                                 13         4,857,496    3,940,747 
                                                            (12,8 35 
Interest expenses                                                  )     (28,018) 
Interest expense - lease liabilities            13          (92,442)    (243,281) 
-------------------------------------------  --------  -------------  ----------- 
Net interest income                                        4,752,218    3,669,448 
 
Allowance for ECL/impairment of loans                       (1, 790, 
 to customers                                6 ,8, 15           718)    (231,681) 
Net interest income after allowance 
 for ECL/impairment of loans to customers                  2,961,501    3,437,767 
Gains less losses from dealing in                          (189 ,127 
 foreign currency                               14                 )       95,497 
Other operating income                          16           590,502      790,554 
-------------------------------------------  --------  -------------  ----------- 
Operating income                                           3,362,875    4,323,818 
 
Staff costs                                     17       (1,810,443)  (2,006,265) 
Charge for share based options                  12          (51,216)    (166,883) 
Operating expenses                              18     (2, 11 5,735)  (2,523,112) 
                                                                      ( 369 , 146 
Costs of IPO                                    18                 -            ) 
                                                                      ( 150 , 000 
Deemed cost of listing                          26                 -            ) 
-------------------------------------------  --------  -------------  ----------- 
Loss before income tax                                     (614,519)    (891,589) 
 
  Income tax expense                            19                 -            - 
-------------------------------------------  --------  -------------  ----------- 
Net loss                                                 (61 4 ,519)    (891,589) 
-------------------------------------------  --------  -------------  ----------- 
 
Net other comprehensive income that 
 may be reclassified to profit or loss 
Foreign exchange differences arising 
 on translation into presentation currency                  (67,563)     (39,942) 
-------------------------------------------  --------  -------------  ----------- 
Total comprehensive expense                                (682,083)    (931,531) 
-------------------------------------------  --------  -------------  ----------- 
 
   Earnings per share                                                                      11 

Basic, profit for the year attributable to

ordinary equity holders of the parent 0.14p 0.77p

Diluted, profit for the year attributable to

ordinary equity holders of the parent 0.14p 0.77p

Zaim Credit Systems Group

Consolidated Statement of Changes in Equity for the Year Ended 31 December 2020

(in British pounds sterling)

 
 
 
                                                         Foreign                     Share 
                               Shares                   currency   Merger reserve   options 
                                to be                translation                    reserve 
                    Charter    issued    Additional      reserve                                   Accumulated      Total 
                    capital   Reserve       capital      (FCTR )                                       deficit     equity 
---------------  ----------  --------  ------------  -----------  ---------------  ---------  ----------------  --------- 
 
 Balance at 31 
  December 2018   2,492,363         -    29,122,880    4,497,731          -             -         (36,689,833)  (576,859) 
---------------  ----------  --------  ------------  -----------  ---------------  ---------  ----------------  --------- 
 
   Reverse 
   acquisition 
   in 2019       1 ,877,387         -  (23,044,752)            -     23,764,800            -        ( 66,670 )  2,530,765 
 Comprehensive 
  loss for 2019           -         -             -     (39,942)                -                    (891,589)  (931,531) 
 Share-based 
  payments                                                                          166 ,883                 -    166,883 
 Balance at 31 
  December 2019   4,369,750         -     6,078,128    4,457,788     23,764,800      166,883  (37, 648 ,0 92 )  1,189,258 
---------------  ----------  --------  ------------  -----------  ---------------  ---------  ----------------  --------- 
 
 
 Comprehensive 
  loss for 2020          -                        -   (67,563)                -      -               (614,519)  (682,083) 
 Contingent 
  consideration          -    800 , 000           -          -      (800,000)                                           - 
 Share-based 
  payments                                                                        51,216                     -     51,216 
 Balance at 31 
  December 2020  4,369,750      800,000   6,078,128  4,390,225     22,964,800      218,099  (38, 262 , 6 1 1 )    558,391 
---------------  ---------  -----------  ----------  ---------  ---------------  ---------  ------------------  --------- 
 

Zaim Credit Systems Group

   Company   Statement of Changes in Equity for the Year Ended 31 December 2020 

(in British pounds sterling)

 
                                                                                            Share options 
                                       Shares to be        Additional       Accumulated           reserve        Total 
                   Charter capital   issued Reserve           capital           deficit                         equity 
-----------------  ---------------  ---------------  ----------------  ----------------  ----------------  ----------- 
 Balance at 31 
  December 2018            60 ,000                -                 -          (66,670)                        (6,670) 
-----------------  ---------------  ---------------  ----------------  ----------------  ----------------  ----------- 
 
   Issue during 
   the year            4 ,309,7 50                -         6,406,699                 -                 -   10,716,449 
 Expenses on 
  issue of shares                -                -        (328 ,570)                 -                 -    (328,570) 
 Comprehensive 
  loss for 2019                  -                -                 -         (626,317)                 -  (626,31 7 ) 
 Share-based 
  payments                       -                -                 -                 -         166 , 883      166,883 
 Balance at 31 
  December 2019          4,369,750                -         6,078,128     ( 692 , 987 )           166,883  9,9 21 ,774 
-----------------  ---------------  ---------------  ----------------  ----------------  ----------------  ----------- 
 
 
 Comprehensive loss for 2020           -         -          -          (576,000)        -      (576,000) 
 Contingent consideration              -  800 ,000          -                  -        -        800,000 
 Share-based payments                  -         -          -                  -   51,216        5 1,216 
 Balance at 31 December 2020   4,369,750   800,000  6,078,128  (1 ,268 , 9 8 7 )  218,099  10 , 1 96,990 
-----------------------------  ---------  --------  ---------  -----------------  -------  ------------- 
 
 
Zaim Credit Systems plc 
 Consolidated Statement of Cash Flows for the 
 year ended 31 December 2020 
 (in British pounds sterling)                                  2020           2019 
----------------------------------------------------  -------------  ------------- 
 
Cash flows from operating activities 
Interest received                                         4,219,635      2,332,339 
Interest paid                                             (105,273)      (400,142) 
Gains less losses from dealing in foreign currency        (7, 460 )      (9, 448 ) 
Other operating income                                      559,981        198,600 
Staff costs                                             (1,854,393)    (2,005,236) 
Operating expenses                                    ( 1, 226,365)  ( 1, 440,487) 
Cash flows from/(used in) operating activities 
 before changes in operating assets and liabilities      1, 586,125  ( 1, 324,373) 
 
Net (increase)/decrease in operating assets 
                                                        ( 1,848,483 
Loans to customers                                                )      1,259,013 
                                                           (109 ,06 
Other assets                                                     3)          4,126 
 
  Net decrease in operating liabilities 
Other liabilities                                           57 ,357       1 62,957 
----------------------------------------------------  -------------  ------------- 
                                                          (314 ,064 
Net cash flows from operating activities                          )        101,723 
----------------------------------------------------  -------------  ------------- 
 
  Cash flows from investing activities 
Purchases of property and equipment                               -        (2,130) 
Net cash flows from investing activities                          -        (2,130) 
----------------------------------------------------  -------------  ------------- 
 
 
Cash flows from financing activities 
Repayment of lease liabilities                            (536,120)    (1,389,284) 
Loans received                                              259,266        653,530 
Repayment of loans received                               (259,266)      (653,530) 
Issue of ordinary shares (including share premium)                -      2,716,449 
Share issue costs                                                 -     ( 328,570) 
----------------------------------------------------  -------------  ------------- 
                                                          (536 ,120 
Net cash flows from financing activities                          )        998,594 
----------------------------------------------------  -------------  ------------- 
Effect of exchange rate changes on cash and                (91 ,696 
 cash equivalents                                                 )         30,015 
                                                          (941 ,880 
Net change in cash and cash equivalents                           )      1,128,202 
 
  Cash and cash equivalents at the beginning of 
  the year                                              1 ,582 ,751        454,549 
----------------------------------------------------  -------------  ------------- 
Cash and cash equivalents at the end of the 
 year (Note 5)                                            640, 8 71      1,582,751 
----------------------------------------------------  -------------  ------------- 
 

Zaim Credit Systems plc

Company Statement of Cash Flows for the year ended 31 December 2020

(in British pounds sterling)

 
                                                             2020           2019 
----------------------------------------------------  -----------  ------------- 
 
Cash flows from operating activities 
Loss for the period                                     (576,000)      (626,317) 
Correction for non-cash transaction (charge 
 for share options granted)                                51,216        166,883 
Cash flows from/(used in) operating activities            ( 524 , 
 before changes in operating assets and liabilities         78 4)    ( 459 ,433) 
 
Adjustments for 
Increase in trade and other receivables , VAT          ( 5 8,355)        (8,122) 
Increase in trade and other payables                       24,073         95,995 
 
                                                         ( 559 ,0    ( 371 , 560 
Cash generated from operations                               6 6)              ) 
----------------------------------------------------  -----------  ------------- 
                                                        (559,0 66 
  Net cash flows used in operating activities                   )      (371,560) 
----------------------------------------------------  -----------  ------------- 
 
  Cash flows from investing activities 
Investment in Subsidiary                                (590,426)      (705,663) 
Net cash flows from investing activities              (5 90 ,426)      (705,663) 
----------------------------------------------------  -----------  ------------- 
 
 
Cash flows from financing activities 
Issue of ordinary shares (including share premium)              -      2,716,449 
Share issue costs                                               -     ( 328,570) 
----------------------------------------------------  -----------  ------------- 
Net cash flows from financing activities                        -    2,38 7 ,878 
----------------------------------------------------  -----------  ------------- 
 
                                                          (1,149, 
Net change in cash and cash equivalents                      492)      1,310,655 
 
  Cash and cash equivalents at the beginning of 
  the year                                            1 , 310,655              - 
----------------------------------------------------  -----------  ------------- 
Cash and cash equivalents at the end of the 
 year (Note 5)                                            161,163      1,310,655 
----------------------------------------------------  -----------  ------------- 
 

1. Principal Activities of the Group

The principal activity of Zaim Credit Systems plc ("the Company") and its subsidiary Zaim-Express , LLC (together "the Group") is the issuance of microloans to individuals (retail customers). The Company was incorporated as Agana Holdings Plc and registered in England and Wales on 15 June 2018 as a public limited company with company registration number 11418575 and LEI, 213800Z4MI9KSZA2VW72 and on 22 July 2019 the Company changed its name to Zaim Credit Systems Plc.

On 18 September 2019 the Company acquired the entire issued share capital of Zaim-Express LLC. The Company is now the holding company of a Russian based financial services company Zaim-Express LLC (S ubsidiary), so the main function of the Company is to provide holding company services and undertake management of their listed activities on the stock exchange. These business combinations in 2019 was stated in consolidated financial statements as reverse acquisitions under IFRS 3.

The organisational structure of Group:

 
                                                        The share votes of the Company 
                                                       --------------------------------- 
The name of Subsidiary     Country of registration          31.12.2020       31.12.201 9 
-----------------------  ---------------------------   --------------------  ----------- 
 Z aim-Express LLC                 Russia                      100%             100% 
 
 

The Subsidiary's principal activity is the issuance of microloans through its network of branches in Russian cities (mainly - in Moscow and the Moscow region, St. Petersburg). The Subsidiary was entered in the state register of microfinance organisations on 29 August 2011, registration number 2110177000440. The Subsidiary's assets and liabilities are located in the Russian Federation. The average number of Subsidiary's employees is as follows:

 
 
The average number of Subsidiary's employees, by groups                 2020                  2019 
------------------------------------------------------------   ----------------------  ------------------- 
                       Central office                                    47                    42 
                        Call center                                      22                    23 
                    Other spe c ialists                                 143                    208 
------------------------------------------------------------   ----------------------  ------------------- 
             Total average number of employees                          212                    273 
 
 

The average number of parent Company's employees (directors) is as follows:

 
The average number of parent Company's employees    2020  201 9 
--------------------------------------------------  ----  ----- 
                    Directors                        5      3 
 

As at 31 December 2020, the main shareholder of the Company is Zaim Holdings SA (with a 73.23 % equity holding; 31 December 2019 - with a 73.23 % equity holding). The ultimate controlling party of the Group is an individual - Mr. Siro Donato Cicconi (Director).

2. Operating Environment of the Group

General

The economy of the Russian Federation continues to demonstrate certain characteristics of an emerging market . They include, in particular, inconvertibility of the Russian rouble in most countries outside of Russia and relatively high inflation . The current Russian tax, currency and customs legislation is subject to various interpretations and frequent changes. The country's economy depends on oil and gas prices. Russia continues to develop the legal, tax and administrative infrastructure to meet the market economy requirements. The economic reforms implemented by the government are aimed at modernisation of the Russian economy, development of high-tech production, improvement of labour productivity and competitiveness of the Russian products on the global market.

Due to the consequences of the coronavirus pandemic in 2020, Russia faced the forced introduction of quarantine measures, the closure of enterprises and borders, and a sharp collapse in oil prices. At the same time, the economic downturn was not so large-scale as in a number of other states. Experts believe that this is primarily the result of timely state support measures for businesses and the population. In addition, 2020 saw the Central Bank rate plunge to a record-low, significant fluctuations in exchange rates and surging demand in the real estate market. The collapse in oil prices that occurred in the spring had a negative impact on national budget revenues and the dynamics of the national currency. At the same time, the pandemic did not result in any fundamental adverse changes in the Russian economy.

In the second half of 2020, as the restrictive measures imposed due to the pandemic were lifted and eco-nomic activity recovered, the consumer credit market -experienced an upturn, and microfinance volumes returned to the levels of the start of the year. Most of the MFI offices that were closed in the spring have resumed their work. In the context of restrictive measures that were introduced in April-May 2020 due to the deterioration- of the pandemic situation, online sales channels and customer interaction began- to play a special role in ensuring the continuity of MFI activities. Remote service channels will remain relevant in the future due to the pandemic and the continuing measures of social distancing. An accelerated transition to online- service may have a long-term effect and promote faster implementation of remote- service channels.

In general, the global and Russian economies are in the state of high uncertainty due to new lockdowns, but governments, central banks and businesses have already gained useful experience in dealing with the pandemic. The results of economic development in the 3rd and 4th quarters of 2020 in Russia and other countries showed potential for rapid recovery in the case of a declining epidemic threat. The financial system has demonstrated a fairly high degree of sustainability. According to the Central Bank of Russia, in the future, the risks associated with the solvency of the corporate sector will gradually become the highest on the agenda.

During the quarantine period, the Group changed its business model to one of remote lending via the Internet. All operations necessary for the performance of this activity were carried out by the employees remotely, which allowed the Group to maintain regularity and continuity of business processes. Based on the analysis conducted, the Group's management believes that the expected recession will not have any significant negative impact on the Group's financial performance in the short term. The management of the Group believes it is taking all the necessary measures to support the sustainability and further development of the Group's business operations in these circumstances.

As at 31 December 2020, the CBR's key rate was 4.25% (31 December 2019: 6.25%).

The future economic development of the Russian Federation is largely dependent upon the effectiveness of economic measures, financial mechanisms and monetary policies adopted by the Government, together with tax, regulatory, and political developments.

Inflation

The Russian economy experiences relatively high levels of inflation. The inflation indices for the last five years are given in the table below:

 
                    Inflation for 
The year ended         the period 
-----------------  -------------- 
 
31 December 2020             4.9% 
31 December 2019             3.0% 
31 December 2018             4.3% 
31 December 2017             2.1% 
31 December 2016             5.4% 
 

Foreign exchange transactions

Foreign currencies, especially the US Dollar, Euro, and British pound sterling play a significant role in determining economic parameters of many economic transactions carried out in Russia. The table below shows the CBR exchange rates of RUB relative to USD and EUR:

 
Date                   USD      EUR        GBP 
-----------------  -------  -------  --------- 
 
31 December 2020   73.8757  90.6824   100.0425 
31 December 2019   61.9057  69.3406     81.146 
31 December 2018   69.4706  79.4605    88.2832 
31 December 2017   57.6002  68.8668    77.6739 
31 December 2016   60.6569  63.8111    74.5595 
 

Management takes all necessary measures to ensure the sustainability of the Group's operations. However, the future impact of the current economic situation is difficult to predict and management's current expectations and estimates may differ from actual results.

For the purpose of estimating expected credit losses, the Group uses forward-looking information, including projections of macroeconomic variables. The Group takes these forecasts into account when providing its best estimate of outcomes. However, as with any economic forecast, the projections and likelihoods of their occurrence are subject to a high degree of inherent uncertainty and therefore the actual outcomes may be significantly different from those projected. Note 6 provides additional information on how the Group incorporates forward-looking information in its expected credit loss models.

Functional and presentation currency

The functional currency is the currency that mainly influences sales prices for goods and services (this will often be the currency in which sales prices for goods and services are denominated and settled) and which mainly influences labour, material and other costs of providing goods or services (this will often be the currency in which such costs are denominated and settled) . The Group's functional currency is the Russian rouble.

The presentation currency is the currency in which financial statements are presented .

The consolidated financial statements are presented in British pounds sterling. The reasons why the functional currency differs from the presentation currency are the consolidation of Subsidiary 's financial statements with the parent Company accounts which have been presented in GBP and investors' interests.

3. Basis of Presentation

General principles

These consolidated financial statements of the Group are prepared in accordance with International Financial Reporting Standards (IFRSs). The Group maintains its records in compliance with the applicable legislation of the United Kingdom . These financial statements have been prepared on the basis of those accounting records and adjusted as necessary in order to comply, in all material respects, with IFRSs.

Going concern

These consolidated financial statements reflect the Group management's current assessment of the impact of the Russian business environment on the operations and the financial position of the Group. The future economic direction of the Russian Federation is largely dependent upon the effectiveness of measures undertaken by the RF Government and other factors, including regulatory and political developments which are beyond the Group's control. The Group's management cannot predict what impact these factors will have on the Group's financial position in future. As a result, adjustments related to this risk have not been included in the accompanying financial statements.

As at 31 December 2020, the Group has an accumulated deficit of GBP 38, 262 , 6 1 1 (2019: GBP 37, 648 , 092 ) , and incurred a net loss of GBP 614 , 519 during the year ended 31 December 2020 (2019: GBP 891,589 ).

The Group's business activities together with the factors likely to affect its future development, performance and position are set out in the Chairman's Statement and Chief Executive Review . In addition note 3 to the Financial Statements includes the Group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and its exposure to credit and liquidity risk.

The Financial Statements have been prepared on a going concern basis. In 2020, the Group changed its business model to one of remote lending via the Internet, which resulted in a significant decrease in fixed lease and staff costs and a decrease in the share of lending costs within total expenses. The Group is planning to optimise the network operation, including removal of loss-making outlets and enhancement of the Internet channel to attract customers.

The Group is actively collecting overdue debts, inter alia, through legal action. Despite temporary suspension of judicial and enforcement proceedings during the COVID-19 pandemic, the proceeds from the loans of Stage 3 in 2020 increased by 87% compared to 2019.

The CBR sets the minimum mandatory liquidity ratio at over 70%. The Subsidiary meets the mandatory liquidity ratio: as at 31 December 2020 - 153.74% (unaudited) and as at 31 December 2019 - 132.89% (un- audited).

As a result of considerations noted above, the Directors have a reasonable expectation that the Group and Company have adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing these Financial Statements.

Basis of consolidation and business acquisitions

On 18 September 2019 Company acquired the entire issued share capital of Zaim-Express (LLC) by way of a share for share exchange. The transaction was treated as a reverse acquisition and was accounted for using the merger accounting method as the entities were under common control before and after the acquisition.

A Subsidiary is an entity controlled by the Group. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

The Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

   -     The contractual arrangement with the other vote holders of the investee. 
   -     Rights arising from other contractual arrangements. 
   -     The Group's voting rights and potential voting rights. 

Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income, and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

Other than for the acquisition of the Subsidiary as noted above, the Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred, and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values as at the acquisition date. Acquisition-related costs are expensed as incurred unless they result from the issuance of shares, in which case they are offset against the premium on those shares within equity.

If an acquisition is achieved in stages, the acquisition date carrying the value of the acquirer's previously held equity interest in the acquiree is remeasured to its fair value at the acquisition date through profit or loss.

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or a liability is recognised in accordance with IFRS9 either in profit or loss or as a change in other comprehensive income. The unwinding of the discount on contingent consideration liabilities is recognised as a finance charge within profit or loss. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity.

The excess of the consideration transferred and the fair value as at the acquisition date of any previous equity interest in the acquiree over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in profit or loss.

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Investments in subsidiaries are accounted for at cost less impairment.

Subsidiaries and Acquisitions

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. Control is recognised where an investor is expected, or has rights, to variable returns from its investment with the investee, and has the ability to affect these returns through its power over the investee. Based on the circumstances of the acquisition an assessment will be made as to whether the acquisition represents an acquisition of an asset or the acquisition of business . In the event of a business acquisition, the assets, liabilities and contingent liabilities of a subsidiary are measured at their fair value at the date of acquisition. Any excess of the cost of the acquisition over the fair values of the identifiable net assets acquired is recognised as a "fair value" adjustment.

If the cost of the acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in profit or loss. In the event of an asset acquisition, assets and liabilities are assigned a carrying amount based on relative fair value.

The results of subsidiaries acquired or disposed of during the year are included in the statement of comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies into line with those used by the Group.

Contingent consideration as a result of business acquisitions is included in the cost at its acquisition date assessed value and, in the case of contingent consideration classified as a financial liability, remeasured subsequently through profit and loss.

Critical Accounting Estimates and Judgments in Applying Accounting Policies

The Group makes estimates and assumptions that affect the amounts recognised in the financial statements and the carrying amounts of assets and liabilities in the next financial year. Judgements that have the most significant effect on the amounts recognised in the financial statements and estimates that can cause a significant adjustment to the carrying amount of assets and liabilities in the next financial year include:

Fair value of financial instruments

Information on the fair value of financial instruments measured on the basis of assumptions that use observable market prices is disclosed in Note 23.

ECL measurement

Calculation and measurement of ECLs is an area of significant judgement and involves methodology, models and data inputs. The methodology used by the Group for assessment of expected credit losses is disclosed in Note 6. The following components of ECL calculation have a major impact on the allowance for ECLs: default definition, significant increase in credit risk (SICR), probability of default (PD), exposure at default (EAD), loss given default (LGD), macro-models and scenario analysis for impaired loans. The Group regularly reviews and validates models and inputs to the models to reduce any differences between expected credit loss estimates and actual credit loss experience.

Significant increase in credit risk (SICR)

In order to determine whether there has been a significant increase in credit risk, the Group compares the risk of a default occurring over the expected life of a financial instrument at the reporting date with the risk of default at the date of initial recognition. IFRS 9 requires an assessment of relative increases in credit risk rather than the identification of a specific level of credit risk at the reporting date. In this assessment, the Group considers a range of indicators, including behavioural indicators based on historical information as well as reasonable and supportable forward-looking information available without undue cost and effort. The most significant judgments include identifying behavioural indicators of increases in credit risk prior to default and incorporating appropriate forward-looking information into the assessment, either at an individual instrument, or on a portfolio level.

Due to the coronavirus pandemic, the Group updated the prospective information used in the models intended for the assessment of expected credit losses and reassessed the Probability of default during the 12 months for adequate reflection of the uncertainties caused by the decrease in market prices and the spread of the COVID-19 pandemic, taking into account:

   -      GDP drop and decline in income of individuals due to restricted economic activity; 
   -      state support measures; 
   -      real wage level; 
   -      real disposable income of the population. 

Determining business model and applying SPPI test

In determining the appropriate measurement category for debt financial instruments, the Group applies two approaches : a business model assessment for managing the assets and the SPPI test based on contractual cash flow characteristics on initial recognition to determine whether they are solely payments of principal and interest. The business model assessment is performed at a certain level of aggregation and the Group will need to apply judgement to determine the level at which the business model condition is applied .

The assessment of the SPPI criterion performed on initial recognition of financial assets involves the use of significant estimates in quantitative testing and requires considerable judgement in determining whether quantitative testing is required, what scenarios are reasonably possible and should be considered, and in interpreting the outcomes of quantitative testing (i.e. determining what represents a significant difference in cash flows).

Substantial modification of financial assets

When the contractual terms of financial assets are modified (e.g. renegotiated), the Group assesses whether the modification is substantial and should result in derecognition of the original asset and recognition of a new asset at fair value. This assessment is based primarily on qualitative factors described in the relevant accounting policy and requires significant judgment.

Recognition of a deferred tax asset

The recognised deferred tax asset represents the amount of income tax that can be offset against future income taxes and is recognised in the statement of financial position. A deferred tax asset is recognized only to the extent that realisation of the related tax benefit is probable. The future taxable profits and the amount of tax benefits that are probable in the future are based on medium-term forecasts prepared by management.

Changes in accounting policies

The revised standards presented below became mandatory for the Group since 1 January 2020, but had no material impact on the Group:

For the reporting periods beginning on or after 1 January 2020, the amendments to the standards presented below shall be effective:

-- Amendments to IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors - Definition of Material

   --           Amendments to IFRS 3 Business Combinations - Definition of a Business; 
   --           Amendments to References to the Conceptual Framework in IFRS Standards; 

-- Amendments to IFRS 9 "Financial Instruments", IAS 39 "Financial Instruments: Recognition and Measurement" and IFRS 7 "Financial Instruments: Disclosures" (issued on 26 September 2019) that provide temporary relief from specific hedge accounting requirements to hedging relationships directly affected by the IBOR reform.

The above amendments to the standards had no material impact on the financial statements.

The IASB issued a number of standards and amendments to them that will become effective in the next reporting periods and will not be early applied by the Group. The most significant ones are as follows:

-- Amendments to IFRS 16 Leases - Covid-19-Related Rent Concessions (effective for annual periods beginning on or after 1 June 2020);

-- Interest Rate Benchmark Reform and its Effects on Financial Reporting - Phase 2 (effective on 1 January 2021);

-- Annual Improvements to IFRSs - 2018-2020 cycle of amendments (effective on 1 January 2022);

-- Amendments to IAS 16 Property, Plant and Equipment - Proceeds before Intended Use (effective on 1 January 2022);

-- Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets - Onerous Contracts - Cost of Fulfilling a Contract (effective on 1 January 2022);

   --           IFRS 17 Insurance Contracts (effective on 1 January 2023); 

-- Amendments to IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors - Classification of Liabilities as Current or Non-Current (effective on 1 January 2023);

Unless otherwise described above, the new standards and interpretations are not expected to significantly impact the Group's financial statements.

4. Summary of Significant Accounting Policies

Fair value measurement

The fair value is the price that would be received when selling an asset, or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions (i.e. an exit price) regardless of whether that price is directly observable or estimated using another valuation technique.

All assets and liabilities for which a fair value is recognised or disclosed are categorised within the fair value hierarchy, described as below, based on the lowest level input that is significant to the fair value measurement as a whole:

- Level 1 - quoted market prices in an active market (that are unadjusted) for identical assets or liabilities;

- Level 2 - valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable;

- Level 3 - valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

For assets and liabilities that are remeasured in the financial statements at fair value on a recurring basis, the Group determines whether transfers have occurred between the Levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained below (Note 23).

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, current accounts and deposits with banks with original maturity of three months or less. Cash and cash equivalents are stated at amortised cost in the statement of financial position.

Financial instruments

Key measurement terms

Depending on their classification, financial instruments are carried at fair value or amortised cost, as described below .

Fair value is the price that would be received when selling an asset, or paid to transfer a liability in an orderly transaction between market participants at the measurement date . Fair value measurement assumes that the transaction to sell the asset or transfer the liability takes place in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability . Fair value is the current bid price for financial assets or current ask price for financial liabilities .

A mortised cost is the amount at which the financial asset or financial liability is measured at initial recognition minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount, and for financial assets, adjusted for any loss allowance.

The gross carrying amount of a financial asset is the amortised cost of a financial asset , before adjusting for any expected credit loss allowance .

The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating or recognising the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts over the expected life of the financial asset or financial liability to the gross carrying amount of the financial asset or to the amortised cost of a financial liability . When calculating the effective interest rate, the Group shall estimate cash flows considering all contractual terms of the financial instrument but shall not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs, and all other premiums or discounts. There is a presumption that the cash flows and the expected life of a group of similar financial instruments can be estimated reliably. However, in those rare cases when it is not possible to estimate

reliably the cash flows or the expected life of a financial instrument, the Group shall use the contractual cash flows over the full contractual term of the financial instrument .

Initial recognition of financial instruments

The Group recognises financial assets and financial liabilities in its statement of financial position when it becomes a party to the contractual obligations of the respective financial instrument. The regular way the purchase and sale of the financial assets and liabilities is recognised is by using settlement date accounting.

Classification and measurement of financial instruments

The Group classifies financial assets into the following categories:

   -      financial assets at fair value through profit or loss; 
   -      financial assets at fair value through other comprehensive income; 
   -      financial assets measured at amortised cost. 

Classification and subsequent measurement of debt financial assets depends on:

1) the business model used by the Group to manage the asset; and

2) characteristics of cash flows on the asset.

The business model is determined for a group of assets (on a portfolio basis) based on all relevant evidence of activities that the Group intends to undertake to achieve the objectives set out for the portfolio available as at the measurement date.

Loans to customers meeting the SPPI criterion are held for the purpose of collecting contractual cash flows and are carried at amortised cost.

Reclassifications

Financial assets are not reclassified after initial recognition unless the Group has changed its business model for managing financial assets.

Financial liabilities are not reclassified after initial recognition.

Derecognition

A financial asset is derecognised where:

   --      the rights to receive cash flows from the asset have expired; 

-- the Group has transferred its rights to receive cash flows from the asset, or retained the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party;

-- the Group either has transferred substantially all the risks and rewards of the asset or has neither transferred nor retained substantially all the risks and rewards of the asset but has transferred control of the asset. If the transferee has no practical ability to sell the asset in its entirety to an unrelated third party without needing to impose additional restrictions on the transfer, the entity has retained control.

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

Loans to customers

Based on cash flow characteristics, the Group classifies loans and advances to customers into the measurement category:

1) at amortised cost: loans held to collect contractual cash flows, if these cash flows are SPPI and are not classified at fair value through profit or loss, are measured at amortised cost;

Loans to customers are recorded when cash is advanced to borrowers. Impairment of loans at amortised cost or at FVOCI is assessed using a forward-looking ECL model. The Group does not acquire loans from third parties.

Impairment of financial assets : ECL allowance

The Group assesses, on a forward-looking basis, the ECL for debt instruments measured at amortised cost and FVOCI and for the exposures arising from credit related commitments and financial guarantee contracts. The Group measures ECL and recognises credit loss allowances at each reporting date. The measurement of ECL reflects:

(i) an unbiased and probability weighted amount that is determined by evaluating a range of possible outcomes,

   (ii)        time value of money, and 

(iii) all reasonable and supportable information that is available without undue cost and effort at the reporting date about past events, current conditions and forecasts of future economic conditions.

Debt instruments measured at amortised cost are presented in the statement of financial position net of the ECL allowance.

The Group applies a three-stage model for impairment, based on changes in credit quality since initial recognition, in accordance with IFRS 9.

1) A financial instrument that is not credit-impaired on initial recognition is classified into Stage 1. Financial assets in Stage 1 have their ECL measured at an amount equal to the portion of lifetime ECL that results from default events possible within the next 12 months (12m ECL).

2) If the Group identifies a significant increase in credit risk (SICR) since initial recognition, the asset is transferred to Stage 2 and its ECL is measured based on a lifetime basis (lifetime ECL). Refer to Note 3 for a description of how the Group determines when a SICR has occurred.

3) If the Group determines that a financial asset is credit-impaired, the asset is transferred to Stage 3 and its ECL is measured as a lifetime ECL. Assets that are more than 60 days past due are considered to be defaulted.

For financial assets that are purchased or originated credit-impaired (POCI assets), the ECL is always measured as a lifetime ECL.

Note 6 provides information about inputs, assumptions and estimation techniques used in measuring ECL, including an explanation of how the Group incorporates forward-looking information in the ECL models .

Modification of financial assets

Sometimes the Group reviews or otherwise modifies the contractual terms of financial assets. The Group estimates that the modification of contractual cash flows is significant taking into account, among other factors: the existence of new contractual terms that indicate a significant change in interest rates, which have a significant effect on the credit risk associated with the asset, a significant extension of the loan term in cases where the borrower is in financial difficulty.

If the modified terms significantly differ so that the rights to cash flows from the original asset are deemed expired, the Group derecognizes the original financial asset and recognizes the new asset at fair value. The date of renegotiation is considered to be the date of initial recognition for impairment calculation purposes, including determination of whether credit risk has increased significantly. The Group also evaluates the compliance of the new loan with the criterion of making payments solely against principal and interest. In situations where the renegotiation was caused by the debtor's financial difficulties and inability to make the originally agreed payments, the Group assesses whether the modified loan is considered impaired on initial recognition. The difference in the carrying amount is recognised in profit or loss.

If the conditions of the modified asset do not differ significantly, the modification does not result in derecognition. The Group restates its gross carrying amount based on revised cash flows by discounting the modified cash flows at the original effective interest rate ( or credit-adjusted effective interest rate for purchased or originated credit-impaired financial assets ) and recognises a gain or loss on modification in profit or loss.

Loans received

Loans received include loans received from the participant and are carried at amortised cost .

Property and equipment

Property and equipment are stated at cost, less accumulated depreciation and impairment allowance.

At the end of the reporting period the Group assesses whether there is any indication of impairment of property and equipment. If such an indication exists, the Group estimates the recoverable amount, which is determined as the higher of an asset's fair value less costs to sell or its value in use . Where the carrying amount of property and equipment is greater than their estimated recoverable amount, it is written down to their recoverable amount and the difference is charged as impairment loss to the statement of profit or loss and other comprehensive income.

Gains and losses on disposal of property and equipment are determined by reference to their carrying amount and recorded as operating expenses in the statement of profit or loss and other comprehensive income .

Repairs and maintenance are charged to the statement of profit or loss and other comprehensive income when the expense is incurred.

Depreciation

Depreciation of an asset begins when it is available for use. Depreciation is charged on a straight-line basis over the following useful lives of the assets:

   --      Equipment - 2- 7 years. 

Lease

The Group classifies its lease agreements as finance or operating leases.

The right-of-use asset and the lease liability are recognized by the lessee at the lease commencement date.

The original cost of the right-of-use asset includes the following:

   --      the amount of the initial measurement of the lease liability; 
   --      lease payments at or before the lease commencement date less any 

lease incentives received;

   --      any initial direct costs incurred by the Group; and 

-- an estimate of costs to be incurred by the lessee in dismantling, removing, restoring the site or restoring the underlying asset to the condition required by terms of the lease, unless those costs are incurred to produce inventories.

The right-of-use asset shall be amortised on a straight-line basis over the shorter of the asset's useful life and the lease term.

At the lease commencement date, the Group measures the lease liability at the present value of the lease payments that have not yet been made at that date. Lease payments shall be discounted using the interest rate implicit in the lease if that rate can be easily determined. If such rate cannot be easily determined, the Group uses the incremental borrowing rate at the lease commencement date.

If finance lease agreements provide for lease extension options, the Group plans to use these options for 3 years.

At the lease commencement date, lease payments that are included in the measurement of the lease liability consist of the following payments for the right to use the underlying asset during the lease term that have not yet been made at the lease commencement date:

-- fixed payments (including in-substance fixed payments) less any lease incentives receivable ;

-- variable lease payments that depend on an index or rate, initially measured using an index or a rate as at the lease commencement date;

   --      the amounts expected to be payable by the lessee under the residual value guarantees; 

-- the exercise price of a purchase option that the lessee is reasonably certain to exercise; and

-- payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease.

After initial recognition, the right-of-use assets related to property, plant and equipment shall be measured by the Group using the historical cost model less accumulated depreciation and accumulated impairment losses.

A right-of-use asset shall be assessed for impairment at the end of each reporting year in accordance with IAS 36 Impairment of Assets.

After initial recognition, the lease liability shall be increased by the amount of accrued interest and decreased by the amount of lease payments paid.

The carrying amount of the lease liability shall be remeasured, if there is a change in future lease payments resulting from changes in an index or a rate, there is a change in the amounts expected to be payable under a residual value guarantee, or, as appropriate, there is a change in the assessment of whether it is reasonably certain that the purchase option or the lease extension option will be exercised, or that the lease termination option will not be exercised. The lease liability shall be remeasured to reflect changes in lease payments.

When determining the lease term, the following periods shall be considered, as well as the Group's management's assessment of the probability that lease extension options and lease termination options will be exercised:

   --      the non-cancellable period of  lease not subject to early termination; 

-- periods covered by an extension option if exercise of that option by the lessee is reasonably certain;

-- periods covered by a termination option if the lessee is reasonably certain not to exercise that option.

As at the reporting date, right-of-use assets are disclosed in the "Right-of-use assets" line item of the statement of financial position. Lease liabilities are disclosed in the "Lease liabilities" line item of the statement of financial position. Finance costs are disclosed in the "Interest expense - lease liabilities" line item of the statement of profit or loss and other comprehensive income to provide a fixed periodic interest rate on the remaining lease liability for each period. Depreciation of right-of-use assets is disclosed in the "Operating expenses" line item in the statement of profit or loss and other comprehensive income. The cash outflow on the lease interest repaid is disclosed in the "Cash from operating activities" section of the statement of cash flows, and the amount of cash paid to repay the principal is disclosed in the "Cash from financing activities" section of the statement of cash flows.

Operating lease - the Group as lessee

A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership. The underlying asset is classified as a low-value asset based on professional judgement.

Payments for short-term leases and low-value asset leases are recognised as expenses on a straight-line basis over the lease term and included into operating expenses in the statement of profit or loss and other comprehensive income . A short-term lease has a lease term of 12 months or less. Low-value assets represent leased property with the value not exceeding the value limit determined by the Group's accounting policy.

Lease payments under short-term leases or leases where the underlying asset is of low value are recognized as an expense over the lease term.

Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of resources embodying future economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made .

Taxation

The income tax charge/recovery comprises current tax and deferred tax and is recorded in the statement of profit or loss and other comprehensive income. Income tax expense is recorded in the financial statements in accordance with the applicable legislation of the Russian Federation . Current tax is calculated on the basis of the estimated taxable profit for the year, using the tax rates enacted during the reporting period .

Current tax is the amount expected to be paid to or recovered from the taxation authorities in respect of taxable profits or losses for the current or prior periods. Tax amounts are based on estimates if financial statements are authorised prior to filing relevant tax returns.

Deferred income tax is provided using the balance sheet liability method for tax losses carried forward and temporary differences arising between the tax bases of assets and liabilities and their carrying amounts for financial statement purposes.

Income and expense recognition

Interest income and expenses are recorded in the statement of profit or loss and other comprehensive income for all debt instruments on an accrual basis using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or interest expense over the relevant period . The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts over the expected life of the financial instrument to the net carrying amount of the financial asset or financial liability . When calculating the effective interest rate, the Group estimates cash flows considering all contractual terms of the financial instrument but does not consider future credit losses. The calculation includes all commissions and fees paid or received by the parties to the contract that are an integral part of the effective interest rate, transaction costs, and all other premiums or discounts .

When loans become doubtful of collection, they are written down to their recoverable amounts and interest income is thereafter recognised based on the rate of interest that was used to discount the future cash flows for the purpose of measuring the recoverable amount.

Employee benefits and social insurance contributions

The Group pays social insurance contributions predominantly in the Russian Federation. Social insurance contributions are recorded on an accrual basis and comprise contributions to the Russian Federation state pension, social insurance, and obligatory medical insurance funds in respect of the Group's employees. The Group does not have pension arrangements separate from the state pension system of the Russian Federation. Wages, salaries, contributions to the Russian Federation state pension and social insurance funds, paid annual leaves and paid sick leaves, bonuses and non-monetary benefits are accrued as the Group's employees render the related service .

Foreign currency

(a) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where such items are re-measured. 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.

Gains and losses on purchase and sale of foreign currency are determined as a difference between the selling price and the carrying amount at the date of the transaction.

(b) Group companies

The results and financial position of all the Group's entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

1. assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of the statement of financial position; 2. each component of profit or loss is translated at average exchange rates during the accounting period (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and 3. all resulting exchange differences are recognised in other comprehensive income.

5. Cash and Cash Equivalents

 
Group                                 2020         2019 
--------------------------------  --------  ----------- 
 
Cash on hand                        30,811       84,098 
Accounts with other banks          610,060  1 , 498,653 
Total cash and cash equivalents   640 ,871   1, 582,751 
--------------------------------  --------  ----------- 
 
 
Company                              2020         2019 
--------------------------------  -------  ----------- 
 
Cash on hand                            -            - 
Accounts with other banks         161,163  1 , 310,655 
Total cash and cash equivalents   161,163   1, 310,655 
--------------------------------  -------  ----------- 
 

As at 31 December 2020, the Group has 2 counterparties (2019: 2 counterparties) with balances exceeding 10% of total cash and cash equivalents in the amount of GBP 524 ,431 (2019: GBP 1 , 310 ,655 ).

The table below presents the credit quality analysis of cash and cash equivalents based on credit risk levels as at 31 December 2020.

 
Group                                                  Accounts with other banks      Total 
---------------------------------------------------  ---------------------------  --------- 
 
Minimum credit risk                                                    610 , 060  610 , 060 
Total cash and cash equivalents, less cash on hand                       610,060    610,060 
---------------------------------------------------  ---------------------------  --------- 
 
  Company                                              Accounts with other banks      Total 
---------------------------------------------------  ---------------------------  --------- 
 
Minimum credit risk                                                    161 , 163  161 , 163 
Total cash and cash equivalents, less cash on hand                       161,163    161,163 
---------------------------------------------------  ---------------------------  --------- 
 

The table below presents the credit quality analysis of cash and cash equivalents based on credit risk levels as at 31 December 2019.

 
Group                                                Accounts with other RF banks        Total 
---------------------------------------------------  ----------------------------  ----------- 
 
Minimum credit risk                                                   1,498 , 653  1,498 , 653 
Total cash and cash equivalents, less cash on hand                      1,498,653    1,498,653 
---------------------------------------------------  ----------------------------  ----------- 
Company                                              Accounts with other RF banks        Total 
---------------------------------------------------  ----------------------------  ----------- 
 
Minimum credit risk                                                   1,310 , 655  1,310 , 655 
Total cash and cash equivalents, less cash on hand                      1,310,655    1,310,655 
---------------------------------------------------  ----------------------------  ----------- 
 

For the purpose of assessing expected credit losses, cash and cash equivalent balances are included in Stage 1. The expected credit losses on these balances represent insignificant amounts, therefore, the Group does not create an ECL allowance for cash and cash equivalents.

Below is the credit quality analysis of cash and cash equivalents as at 31 December 2020 in accordance with ratings of international agencies:

 
Group                                Fitch A+   Fitch BB   S&P from BB- to BB+   No rating assigned       Total 
--------------------------  -----------------  ---------  --------------------  -------------------  ---------- 
Accounts with other banks              54,936          -                     -              555,124     610,060 
Total                                  54,936          -                     -              555,124  6 1 0 ,060 
--------------------------  -----------------  ---------  --------------------  -------------------  ---------- 
 
 
Company                              Fitch A+   Fitch BB   S&P from BB- to BB+   No rating assigned     Total 
--------------------------  -----------------  ---------  --------------------  -------------------  -------- 
Accounts with other banks              54,936          -                     -             106 ,227   161,163 
Total                                  54,936          -                     -             106, 227   161,163 
--------------------------  -----------------  ---------  --------------------  -------------------  -------- 
 

Below is the credit quality analysis of cash and cash equivalents as at 31 December 2019 in accordance with ratings from international agencies:

 
Group                                Fitch A+   Fitch BB   S&P from BB- to BB+   No rating assigned      Total 
--------------------------  -----------------  ---------  --------------------  -------------------  --------- 
Accounts with other banks             528,551    782,104                93,047               94,951  1,498,653 
Total                                 528,551    782,104                93,047               94,951  1,498,653 
--------------------------  -----------------  ---------  --------------------  -------------------  --------- 
 
 
Company                              Fitch A+   Fitch BB   S&P from BB- to BB+   No rating assigned       Total 
--------------------------  -----------------  ---------  --------------------  -------------------  ---------- 
Accounts with other banks             528,551    782,104                     -                    -   1,310,655 
Total                                 528,551    782,104                     -                    -   1,310,655 
--------------------------  -----------------  ---------  --------------------  -------------------  ---------- 
 

6. Loans to Customers

 
Group                                                2020          2019 
-------------------------------------------  ------------  ------------ 
 
  Loans to customers                           28,298,290    32,078,150 
Less: ECL allowance                          (27,028,977)  (31,291,804) 
-------------------------------------------  ------------  ------------ 
Total loans to customers at amortised cost      1,269,313       786,346 
-------------------------------------------  ------------  ------------ 
 
 
Company                                     2020  2019 
------------------------------------------  ----  ---- 
 
  Loans to customers                           -     - 
Less: ECL allowance                            -     - 
------------------------------------------  ----  ---- 
Total loans to customers at amortised cost     -     - 
------------------------------------------  ----  ---- 
 

Below is analysis of movements in the ECL allowance during 2020 (by type of loans specified in the first table of the Note):

 
Group                          Stage 1     Stage 2      Stage 3        Total 
--------------------------  ----------  ----------  -----------  ----------- 
 
ECL allowance as at 1 
 January 20 20                 128,028     288,985   30,874,790   31,291,804 
Assets recognised for 
 the period                    697,907           -            -      697,907 
 
Assets derecognised or 
 collected                    (47,273)    (33,654)    (629,075)    (710,002) 
Transfers to Stage 2         (189,937)     189,937            -            - 
Transfers to Stage 3         (355,164)   (187,618)      542,782            - 
Net loss on ECL allowance 
 charge/(reversal)                   -     414,887    1,377,954    1,792,841 
Effect of exchange rate 
 differences                  (32,067)    (83,237)  (5,928,268)  (6,043,572) 
ECL allowance as at 31                                 26 , 238     27 , 028 
 December 20 20              201 , 494   589 , 300        , 183        , 977 
--------------------------  ----------  ----------  -----------  ----------- 
 

Analysis of movements in the ECL allowance during 2019 is as follows:

 
Group                         Stage 1    Stage 2     Stage 3        Total 
--------------------------  ---------  ---------  ----------  ----------- 
 
ECL allowance as at 1 
 January 2019                 139,800    424,712  27,982,210   28,546,722 
Assets recognised for 
 the period                   687,271          -           -      687,271 
Assets derecognised or 
 collected                   (95,125)  (102,217)   (842,085)  (1,039,427) 
Transfers to Stage 2        (206,503)    206,503           -            - 
Transfers to Stage 3        (409,279)  (326,329)     735,608            - 
Net loss on ECL allowance 
 charge/(reversal)                        52,065     530,141      582,206 
Effect of exchange rate 
 differences                   11,864     34,252   2,468,916    2,515,032 
ECL allowance as at 31 
 December 2019                128,028    288,985  30,874,790   31,291,804 
--------------------------  ---------  ---------  ----------  ----------- 
 

The ECL allowance for loans and advances to customers recognised during the period is impacted by various factors. The table below describes the main changes:

transfers between Stages 1 and 2 and Stage 3 due to significant increases (or decreases) in credit exposure or impairment during the period and subsequent increases (or decreases) in the estimated ECL level: for 12 months or over the entire period;

accrual of additional allowances for new financial instruments recognised during the period, as well as reduction in the allowance as a result of derecognition of financial instruments during the period;

impact on ECL estimation due to changes in model assumptions, including changes in the probability of default, EAD and LGD during the period resulting from regular updating of the model inputs.

Following is the credit quality analysis of loans to customers as at 31 December 2020:

 
 Group                                               Stage 1      Stage 2            Stage 3             Total 
---------------------------------------------  -------------  -----------  -----------------  ---------------- 
 
Loans to customers 
Minimum credit risk                            1 , 222 , 507            -                  -     1 , 222 , 507 
Low credit risk                                            -    177 , 117                  -         177 , 117 
Moderate credit risk                                       -    388 , 723                  -         388 , 723 
High credit risk                                           -    271 , 760                  -         271 , 760 
Defaulted assets                                           -            -     26 , 238 , 183    26 , 238 , 183 
Total loans to customers before allowance      1 , 222 , 507    837 , 600     26 , 238 , 183    28 , 298 , 290 
---------------------------------------------  -------------  -----------  -----------------  ---------------- 
ECL allowance                                    (201 , 494)  (589 , 300)   (26 , 238 , 183)  (27 , 028 , 977) 
---------------------------------------------  -------------  -----------  -----------------  ---------------- 
Total loans to customers after ECL allowance   1 , 021 , 012    248 , 300                  -     1 , 269 , 313 
---------------------------------------------  -------------  -----------  -----------------  ---------------- 
 

Following is the credit quality analysis of loans to customers as at 31 December 2019:

 
 Group                                           Stage 1    Stage 2        Stage 3         Total 
---------------------------------------------  ---------  ---------  -------------  ------------ 
 
Loans to customers 
Minimum credit risk                              568,567                         -       568,567 
Low credit risk                                        -    374,288              -       374,288 
Moderate credit risk                                   -    164,962              -       164,962 
High credit risk                                       -     95,507              -        95,507 
Defaulted assets                                       -                30,874,826    30,874,826 
Total loans to customers before allowance        568,567    634,757     30,874,826    32,078,150 
---------------------------------------------  ---------  ---------  -------------  ------------ 
ECL allowance                                  (128,028)  (288,986)   (30,874,790)  (31,291,804) 
---------------------------------------------  ---------  ---------  -------------  ------------ 
Total loans to customers after ECL allowance     440,539    345,771             36       786,346 
---------------------------------------------  ---------  ---------  -------------  ------------ 
 

The ECL allowance for loans to customers recognized during the period is impacted by different factors. Information on the assessment of expected credit losses is disclosed in Note 3.

The Group uses the following approach to measurement of expected credit losses:

-- portfolio-based measurement: internal ratings are assigned individually, but the same credit risk parameters (e.g. PD, LGD) are applied to similar credit risk ratings and homogeneous credit portfolio segments in the process of ELC estimation.

This approach provides for aggregation of the portfolio into homogeneous segments on the basis of specific information on borrowers, such as delinquent loans, historic data on prior period losses and forward-looking macroeconomic information.

The amounts of loans recognised as "past due" represent the entire balance of such loans rather than the overdue amounts of individual payments.

7. Lease

The Group has agreements for lease of premises .

The Group did not apply a simplified approach to recognise lease modifications allowed due to the COVID-19 pandemic.

The carrying amount of right-of- use assets and its movements during the period are presented below :

 
  Group                                              Real Estate         Total 
--------------------------------------------------  ------------  ------------ 
 
 As at 1 January 2020                                  2,549,233     2,549,233 
 Depreciation charge                                   (661,165)     (661,165) 
 M odifications and remeasurement                      (248,309)     (248,309) 
 D erecognition                                      (1,003,208)   (1,003,208) 
 Effect of translation into presentation currency      (338,626)     (338,626) 
--------------------------------------------------  ------------  ------------ 
 As at 31 December 2020                                  297,925       297,925 
--------------------------------------------------  ------------  ------------ 
 
 
  Group                                              Real Estate         Total 
--------------------------------------------------  ------------  ------------ 
 
 As at 1 January 2019                                  3,407,065     3,407,065 
 Additions                                               112,021       112,021 
 Depreciation charge                                 (1,248,758)   (1,248,758) 
 Effect of translation into presentation currency        278,905       278,905 
--------------------------------------------------  ------------  ------------ 
 As at 31 December 2019                                2,549,233     2,549,233 
--------------------------------------------------  ------------  ------------ 
 

The carrying amounts of lease liabilities and their movements during the period are set out below:

Group

 
  Lease liabilities                                  Real Estate         Total 
--------------------------------------------------  ------------  ------------ 
 
 As at 1 January 2020                                  2,555,648     2,555,648 
 Interest expense on lease liabilities                    92,442        92,442 
 Lease payments                                        (628,563)     (628,563) 
 M odifications and remeasurement                      (248,309)     (248,309) 
 D erecognition                                      (1,080,605)   (1,080,605) 
 Effect of translation into presentation currency      (343,397)     (343,397) 
--------------------------------------------------  ------------  ------------ 
 As at 31 December 2020                                  347,216       347,216 
--------------------------------------------------  ------------  ------------ 
 

Group

 
  Lease liabilities                                  Real Estate         Total 
--------------------------------------------------  ------------  ------------ 
 
 As at 1 January 2019                                  3,325,625     3,325,625 
 Additions                                               108,875       108,875 
 Interest expense on lease liabilities                   243,281       243,281 
 Lease payments                                      (1,395,580)   (1,395,580) 
 Effect of translation into presentation currency        273,447       273,447 
--------------------------------------------------  ------------  ------------ 
 As at 31 December 2019                                2,555,648     2,555,648 
--------------------------------------------------  ------------  ------------ 
 

The Group exercises options to extend signed lease agreements for at least 3 years given the ongoing profitability of the loan outlet (in the ordinary course of business). During the current period, the Group exercised lease termination options. There were no early termination penalties under these agreements.

8. Other Assets

 
Group                                   2020      2019 
---------------------------------  ---------  -------- 
 
Other non-financial assets 
Lease prepayments                     23,062    16,603 
Settlements with suppliers            35,211    29,440 
Taxes other than income tax          110,980   139,069 
Other receivables                  104 , 193    52,937 
                                    ( 22,149 
Less: impairment allowance                 )  (15,932) 
---------------------------------  ---------  -------- 
Total other non-financial assets     251,297   222,117 
---------------------------------  ---------  -------- 
Total other assets                   251,297   222,117 
---------------------------------  ---------  -------- 
 
 
Company                                2020    2019 
---------------------------------  --------  ------ 
 
Other non-financial assets 
Settlements with suppliers                -       - 
Taxes other than income tax        80 , 732  68,122 
Other receivables                  45 , 745       - 
Less: impairment allowance                -       - 
---------------------------------  --------  ------ 
                                      126 , 
Total other non-financial assets        477  68,122 
---------------------------------  --------  ------ 
                                      126 , 
Total other assets                      477  68,122 
---------------------------------  --------  ------ 
 

Analysis of movements in the impairment allowance for non-financial assets during 2020 is presented below:

 
Group                                                          Non-financial assets        Total 
-------------------------------------------------------------  --------------------  ----------- 
 
  Impairment allowance for other assets as at 1 January 2020                 15,932       15,932 
 
  Impairment allowance charge during 20 20                                  9 , 972      9 , 972 
Effect of translation into presentation currency                        ( 3 , 754 )  ( 3 , 754 ) 
Impairment allowance for other assets as at 31 December 
 2020                                                                        22,149       22,149 
-------------------------------------------------------------  --------------------  ----------- 
 

Analysis of movements in the impairment allowance for non-financial assets during 2019 is presented below:

 
Group                                                          Non-financial assets   Total 
-------------------------------------------------------------  --------------------  ------ 
 
  Impairment allowance for other assets as at 1 January 2019                 13,117  13,117 
 
  Impairment allowance charge during 2019                                     1,631   1,631 
Effect of translation into presentation currency                              1,184   1,184 
Impairment allowance for other assets as at 31 December 
 2019                                                                        15,932  15,932 
-------------------------------------------------------------  --------------------  ------ 
 

The Group has no collateral for impaired assets recognised within other assets.

9. Loans Received

 
Group                        2020     2019 
------------------------  -------  ------- 
 
Loan from related party   735,646  742,603 
Total loans received      735,646  742,603 
------------------------  -------  ------- 
 

On 31 December 2020, the Group entered into an agreement amending the loan terms - coming into effect from January 2021, the interest rate on the above loan is set at 13.42 % per annum, and the loan repayment period is extended until 31 December 2023.

 
Company                                             2020  2019 
-----------------------  -------------------------------  ---- 
 
Loan from related party                                -     - 
Total loans received                                   -     - 
-----------------------  -------------------------------  ---- 
 

10. Other Liabilities

 
Group                                           2020     2019 
------------------------------------------   -------  ------- 
 
  Other financial liabilities 
Payables                                     326,692  200,618 
Other settlements with customers on loan 
 's agreements                               200,019   97,322 
Other                                          7,195   16,732 
 
  Other non-financial liabilities 
Taxes other than income tax                   26,412   16,982 
Provision for unused vacations               104,353  144,024 
Payables to employees and payroll related 
 taxes                                       159,159  189,227 
Total other liabilities                      823,830  664,905 
-------------------------------------------  -------  ------- 
 
 
Company                                           2020     2019 
------------------------------------------   ---------  ------- 
 
  Other financial liabilities 
Payables                                       119,057  126,057 
Other                                               27       27 
 
  Other non-financial liabilities 
Payables to employees and payroll related       67, 65 
 taxes                                               5   36,582 
Total other liabilities                      1 8 6,739  162,666 
-------------------------------------------  ---------  ------- 
 

11. Charter and Additional Capital , Other reserves . Earnings per share

As at 31 December 2018, the Charter capital states the amount of Share capital of the Subsidiary - the authorised capital represents the contribution made by the sole participant of the Subsidiary .

D uring 2019 the reverse acquisition was stated in the consolidated financial statements, as a result, the Charter capital as at 31 December 2019 states the Share capital of the legal parent Company, totalling

GBP4,369,750.   All the shares issued have equal voting rights . 

Below is a reconciliation of the movement in the legal parent Company Share capital during 2019:

 
 
                                          31 Dec 
  Group and Company                         2018   Amount 
  Issued and fully paid                   Number    , GBP 
-----------------------------------   ----------  ------- 
                                         6 , 000 
  Ordinary shares of GBP0, 01 each         , 000   60,000 
 
                                      6 ,000,000   60,000 
 -----------------------------------  ----------  ------- 
 

For the year 2019 ( Ordinary shares issue of GBP0.01 each):

Group and Company Number Amount, GBP

 
                                                                     320 , 000       3 ,200 
  Consideration shares (acquisition of Subsidiary)                       , 000         ,000 
IPO                                                               104 ,000,000    1,040,000 
Fee shares                                                          6 ,975,000       69,750 
                                                                430 ,975,000    4 , 309,750 
 ------------------------------------------------------------  ---------------  ----------- 
                                                                        31 Dec 
              Group and Company                                           2019   Amount 
              Issued and fully paid                                     Number    , GBP 
-------------------------------------------------------------      -----------  ----------- 
                                                                     436 , 975 
  Ordinary shares of GBP0 . 01 each                                      , 000    4,369,750 
 
                                                                  436 ,975,000    4,369,750 
 ------------------------------------------------------------  ---------------  ----------- 
 
 
   T here are no changes in the structure and amount of the share capital   during 2020. 
 
                                                             31 Dec 
              Group and Company                                2020   Amount 
              Issued and fully paid                          Number    , GBP 
-----------------------------------------  ------------  ----------  --------- 
                                                          436 , 975 
  Ordinary shares of GBP0 . 01 each                           , 000  4,369,750 
 
                                                       436 ,975,000  4,369,750 
 --------------------------------------------------  --------------  --------- 
 
 

As at 31 December 2018 the amount of Additional capital stated in the agreement on in-kind contribution (debt on the loan) of the Subsidiary was - GBP29,122,880.

Amounts of Additional capital as at 31 December 2018 were restated as at the date of the agreement on in-kind contribution (debt on the loan).

Group

 
   Date of exchange rate 
      for translation to                   Exchange 
   presentation currency   Amount in RUB       rate   Amount in GBP 
------------------------                  ---------  -------------- 
              29.12.2018   2,561,820,344    87.9659      29,122,880 
       Total additional capital at 
        31 December , 2018                               29,122,880 
----------------------------------------  ---------  -------------- 
 

As a result of the reverse acquisition , which was stated in the consolidated financial statements in 2019, the Additional capital as at 31 December 2019 of the legal parent Company was GBP6,078,128.

Below there is reconciliation of movement in Additional capital (share premium) of legal parent Company during 2019:

For the year 2019:

Group and Company Amount, GBP

 
 
  As at 1 January 2019                                    - 
Premium arising on issue of ordinary shares       6,406,699 
Issue costs                                       (328,570) 
As at 31 December 2019                          6 , 078,128 
----------------------------------------------  ----------- 
 
   T here are no changes in the structure and amount of additional capital   during 2020. 

Group and Company Amount, GBP

 
 
  Share premium (with consideration of issue          6, 078 
  costs)                                                ,128 
As at 31 December 2020                           6 , 078,128 
-----------------------------------------------  ----------- 
 

Other reserves

 
 
 
                                                    Shares                   Share 
                                                     to be                   option 
                                                    issued     Merger        reserve   Translation 
  Group                                             Reserve    reserve                  reserve 
------------------------------------  ---------  ----------  -----------  ----------  ------------ 
                                                                                            4,497, 
  As at 1 January 2019                                    -            -           -           731 
Merger reserve                                            -   23,764,800 
                                                                                 166 
Share based payments                                      -                     ,883 
Translation differences                                   -            -           -      (39,942) 
As at 31 December 2019                                    -  23 ,764,800     166,883     4,457,788 
---------------------------------------------   -----------  -----------  ----------  ------------ 
 
                                                      800 , 
Contingent consideration                                000 
Merger reserve                                            -    (800,000)           -             - 
Share based payments                                      -                   51,216 
Translation differences                                   -            -           -      (67,563) 
                                                                    22 , 
As at 31 December 2020                              800,000     9 64,800     218,099     4,390,225 
-----------------------------------------------  ----------  -----------  ----------  ------------ 
 
 

The merger and foreign currency translation reserve as at 31 December 2019 arose on consolidation as a result of merger accounting for the acquisition of the entire issued share capital of the Subsidiary during 2019 and represents the difference between the value of the share capital issued for the acquisition of the Subsidiary and investments made in the Subsidiary and that of the acquired share capital of the Subsidiary.

Share options reserve - this reserve represents cumulative share-based payment expense for the Group's share option schemes. See Note 12 Share-based payments.

Shares to be issued Reserve - this reserve represents shares to be issues in respect of contingent consideration, see note 26 Business Combination for further details.

Currency translation differences relate to the translation of the Subsidiary that have a functional currency different from the presentation currency (refer note 2). Movements in the translation reserve are linked to the changes in the value of the Russian Ruble against the Pound Sterling: the business of the Group is located in Russian Federation, and the Subsidiary's functional currency is the Russian Ruble, which had substantial volatility against Sterling during the year.

Accumulated deficit represents retained earnings.

Earnings per share . The basic loss per share of 0.14p loss per share (2019 loss per share: 0.77p) is calculated by dividing the loss attributable to owners of the parent by the weighted average number of ordinary shares in issue during the year.

 
       Group                                                              2020               2019 
------------------------------------  ----------------------------------------  ----------------- 
 
      Loss attributable to owners of the parent                    ( 614 ,519)        ( 891 ,589) 
      Weighted average number of ordinary 
       shares in issue                                             436,975,000        115,689,178 
 
 
 

The basic and diluted loss per share for the years ended 31 December 2020 and 31 December 2019 are the same as the current year result was a loss, the options and warrants outstanding would be anti-dilutive. Therefore, the dilutive loss per share is considered the same as the basic loss per shares.

 
       Group                                                        2020                   2019 
------------------------------  ----------------------------------------  --------------------- 
 
      Loss attributable to owners of the 
       parent                                                  (614,519)              (891,589) 
      Weighted average number of ordinary 
       shares in issue outstanding for the 
       effects of all dilutive potential 
       ordinary 
       shares                                                436,975,000            115,689,178 
        12. Share-based payments 
 
         In October 2019, a total of 32,250,000 options were issued to certain 
         directors, senior management and other advisers in recognition 
         of the work undertaken for Zaim prior to the IPO. In addition the 
         Company issued a total of 13,600,000 warrants to advisers in relation 
         to the funds raised at the time of the IPO. All the options were 
         issued with an exercise price of 2.5 pence per share and expire 
         after 5 years from the date of issue. 17,200,000 of the options 
         vest immediately and have no employment related conditions, the 
         remaining 15,050,000 vest over 1-2 years from the date of issue 
         and, should the individual end their employment, the options either 
         expire immediately or are valid for a further 6 months (depending 
         on the circumstances of the departure of the individual). All the 
         warrants have a contractual term of 3 years from the date of issue, 
         have no performance related terms attached and have a strike price 
         of 2.5 pence per share. 
 
         In addition to the options noted above as set out in the prospectus 
         at the time of the IPO the Directors have the discretion to issue 
         a further 10,750,000 options to key employees and consultants of 
         the Group as an incentivising tool to retain key individuals. As 
         at the date of this report these have not been issued and have 
         therefore not been included in the calculations. Neither the Company 
         nor the Group has any legal or constructive obligation to settle 
         or repurchase the options in cash. 
         Movements on number of share options and their related exercise 
         price are as follows: 
 
                                                           Weighted 
                                                 N umber   exercise 
                                             of options&      price 
                                                warrants      2019, 
         Group                                      2019        GBP 
         ---------------------------------  ------------  --------- 
 
          Outstanding at 1 January 2019                -          - 
         Granted                              40,650,000       2.50 
         Forfeited                                     -          - 
         Outstanding at 3 1 December 2019     40,650,000       2.50 
         Exercisable at 31 December 2019      25,600,000       2.50 
         ---------------------------------  ------------  --------- 
 
 
         On 24 September 2020, 2,000,000 options were issued to Paul Auger 
         a non-executive director of the company at a price of 2.7p. The 
         options vest equally over one year from the date of grant and express 
         after 5 years. 
 
         On 26 November 2020, 1,000,000 options were issued to an employee 
         of the Group at a price of 2.7p. The options vest equally over 
         2 years from the date of the grant and express after 5 years. 
 
                                                           Weighted 
                                                 N umber   exercise 
                                             of options&      price 
                                                warrants      2020, 
         Group                                      2020        GBP 
         ---------------------------------  ------------  --------- 
 
          Outstanding at 1 January 2020      40 ,650,000      2 .50 
         Granted                               3,000,000          - 
         Forfeited                                     -          - 
                                                               2. 5 
         Outstanding at 3 1 December 2020     43,650,000          0 
                                                               2. 5 
         Exercisable at 31 December 2020      34,200,000          0 
         ---------------------------------  ------------  --------- 
 
 
 
         The options & warrants outstanding at 31 December 2020 had a weighted 
         average remaining contractual life of 3.8 years. 
 
 
         The fair value of the share options and warrants was determined 
         using the Black-Scholes valuation model. 
 
         The parameters used are detailed below. 
 
 
 
 
         For the year 2019 : 
                                                                    2019 
         Group and Company                                       options 
         -----------------------------------------------   ------------- 
 
          Date of Grant                                     29 Oct 20 19 
         Weighted average share price                         2.50 pence 
         Weighted average exercise price                      2.50 pence 
         Weighted average fair value at the measurement       0 .57 penc 
          date 
         Expiry date                                        29 Oct 20 24 
         Options granted                                     40 ,650,000 
         Volatility                                                  20% 
         Dividend yield                                              Nil 
         Option life                                              5 year 
         Annual risk free interest rate                            2.83% 
         ------------------------------------------------  ------------- 
 
 
 
         For the year 2020: 
                                                                   2020 
         Group and Company                                      Options 
         -----------------------------------------------   ------------ 
 
          Date of Grant                                     29 Oct 2019 
         Weighted average share price                        2.60 pence 
         Weighted average exercise price                     2.70 pence 
         Weighted average fair value at the measurement     0 .7 8 penc 
          date 
         Expiry date                                       29 Oct 20 24 
         Options granted                                    40 ,650,000 
         Volatility                                                 30% 
         Dividend yield                                             Nil 
         Option life                                             5 year 
         Annual risk free interest rate                         2 . 83% 
         ------------------------------------------------  ------------ 
 
 

13. Interest Income and Expense

 
 
  Group                      202 0       2019 
-----------------------  ---------  --------- 
 
  Interest income 
Loans to customers       4,857,496  3,940,747 
Total interest income    4,857,496  3,940,747 
-----------------------  ---------  --------- 
 
  Interest expense 
Loans received            (12,836)   (28,018) 
Lease liabilities         (92,442)  (243,281) 
Total interest expense   (105,277)  (271,299) 
Net interest income      4,752,218  3,669,448 
-----------------------  ---------  --------- 
 

14. Gains less Losses from Dealing in Foreign Currency

 
Group                                                2020    2019 
---------------------------------------------   ---------  ------ 
 
Gain/loss on revaluation of financial assets       (181 ,   102 , 
 and liabilities                                     466)     327 
Realised gain/ (loss) from foreign exchange                (6,830 
 transactions                                   (7 , 661)       ) 
Total gains less losses from dealing in 
 foreign currency                               (189,127)  95,497 
----------------------------------------------  ---------  ------ 
 

15. Allowance for Expected Credit Losses / Impairment of Other Assets

 
Group                                        Note     2020     2019 
-------------------------------------------  ----  -------  ------- 
 
                                                   1 , 780 
Loans to customers                            6      , 746  230,050 
Other assets                                  8    9 , 972    1,631 
Total allowance for expected credit losses         1 , 790 
 / impairment of other assets                        , 718  231,681 
-------------------------------------------  ----  -------  ------- 
 

16. Other Operating Income

 
Group                                                      2020     2019 
----------------------------------------------------   --------  ------- 
 
                                                          253 , 
Agent's fee                                                 889  150,036 
                                                          158 , 
Fines received under loan agreements                       32 2   34,846 
Financial result from derecognition of lease assets       126 , 
 and liabilities                                            091 
Taxes other than income tax                                   -  591,965 
Other income                                           52 , 200   13,707 
                                                          590 , 
Total other operating income                                502  790,554 
-----------------------------------------------------  --------  ------- 
 

17. Staff Costs

 
Group                       20 2 0       2019 
----------------------   ---------  --------- 
 
                           1 , 429 
Salary                       , 920  1,722,792 
Payroll related taxes    380 , 523    283,473 
                           1 , 810 
Total staff costs            , 443  2,006,265 
-----------------------  ---------  --------- 
 

18. Operating Expenses

 
Group                                       2020       2019 
------------------------------------   ---------  --------- 
Depreciation of right-of-use assets      661,165  1,248,759 
State duty                               283,523     23,036 
Advertising and marketing                269,304     25,736 
Investor Relations                       181,456          - 
Consulting services                      209,828    851,223 
Communication                             98,172      87,83 
Postal services                           91,328     38,491 
Banking services                          87,558     43,246 
Rental expenses                           66,434    257,639 
Material expenses                         33,920      3,412 
Security                                  22,023     42,594 
Office equipment                               -     17,274 
Repairs                                        -      2,038 
Representative and travel expenses             -     81,250 
Other expenses                           111,025    169,730 
Total operating expenses               2,115,735  2,892,258 
-------------------------------------  ---------  --------- 
 

19. Income Tax

As at 31 December 2020 and 31 December 2019, the Group has no current income tax expense. The current income tax rate applicable to the majority of the Group's profit is 20% (2019: 20%).

A reconciliation between the theoretical and the actual taxation charge is provided below.

 
Group                                                     2020          2019 
---------------------------------------------------  ---------  ------------ 
 
                                                       (614, 5    (891, 5 89 
  IFRS loss before taxation                               19 )             ) 
Theoretical tax charge at the applicable statutory 
 rate                                                  122,904       178,318 
Non-deductible expenses and other differences         29 , 521    ( 19,132 ) 
                                                       (152 ,4 
) Unrecognised deferred tax asset                          25)     (159,186) 
Income tax expense for the year                              -             - 
---------------------------------------------------  ---------  ------------ 
 

The Company has a potential deferred tax asset of GBP153,847 (2019: GBP56,987) as a result of trade losses to be offset against future profits, should they arise.

Differences between IFRS and statutory taxation regulations of the Russian Federation give rise to certain temporary differences between the carrying amount of certain assets and liabilities for financial statement purposes and for the Group's income tax purposes.

 
                                                              Effect   Change recognised 
                                                         of exchange           in profit 
                                            2019    rate differences            and loss          2020 
-------------------------------------  ---------  ------------------  ------------------  ------------ 
 
  Tax effect of deductible temporary 
  differences 
                                                              ( 15 ,          ( 24 , 565 
Loans to customers                      91 , 779               500 )                   )      51 , 714 
                                                           ( 3 , 749          ( 12 , 752 
Other assets                            24 , 891                   )                   )       8 , 390 
                                                           ( 1 , 234 
Intangible assets                              -                   )            16 , 521      15 , 287 
                                           511 ,              ( 68 ,             ( 373 , 
Lease liabilities                            130               680 )               007 )      69 , 443 
                                                           ( 1 , 199           ( 8 , 517 
Other liabilities                        9 , 716                   )                   )             - 
                                         3 , 882             ( 734 ,                           3 , 330 
Tax loss                                   , 681               761 )           182 , 082         , 002 
-------------------------------------  ---------  ------------------  ------------------  ------------ 
                                                                                               3 , 474 
                                         4 , 520               ( 825              (220 ,         , 8 3 
D eferred tax assets                       , 197             , 123 )              2 38 )             6 
-------------------------------------  ---------  ------------------  ------------------  ------------ 
 
  Tax effect of taxable temporary 
  differences 
                                                                                ( 10,745 
Other liabilities                              -                 803                   )     (9 , 942) 
Property and equipment                 (1 , 857)                28 7                 871         (700) 
 
Right-of-use assets under                 (509 ,                                                 (59 , 
 lease agreements                           846)            67 , 725           382 , 536          585) 
 
                                            (511                                                 (70 , 
Gross deferred tax liabilities            , 703)            68 , 815           372 , 663          227) 
                                         4 , 008              (756 , 
Total net deferred tax asset               , 494                310)           152 , 425   3 , 404,608 
-------------------------------------  ---------  ------------------  ------------------  ------------ 
                                            (4 ,                                                  (3 , 
                                           008 ,               756 ,              (152 ,       404,608 
Unrecognised tax assets                     494)                 310             4 2 5 )             ) 
-------------------------------------  ---------  ------------------  ------------------  ------------ 
Recognised tax liabilities                                         -                   -             - 
-------------------------------------  ---------  ------------------  ------------------  ------------ 
 
 
 
                                                     Change recognised           Effect of 
                                                             in profit            exchange 
Group                                         2018            and loss    rate differences          2019 
-------------------------------------  -----------  ------------------  ------------------  ------------ 
 
  Tax effect of deductible temporary 
  differences 
Loans to customers                          97,301            (13,827)               8,305        91,779 
Other assets                                42,397            (20,854)               3,348        24,891 
Lease liabilities                                -             501,961               9,169       511,130 
Other liabilities                           54,654            (48,853)               3,915         9,716 
Tax loss carried forwards                3,342,776             241,480             298,425     3,882,681 
-------------------------------------  -----------  ------------------  ------------------  ------------ 
Deferred tax assets                      3,537,128             659,907             323,162     4,520,197 
-------------------------------------  -----------  ------------------  ------------------  ------------ 
 
  Tax effect of taxable temporary 
  differences 
Property and equipment                     (1,688)                (20)               (149)       (1,857) 
Right-of-use assets under lease 
 agreements                                                  (500,701)             (9,145)     (509,846) 
Gross deferred tax liabilities             (1,688)           (500,721)             (9,294)     (511,703) 
Total net deferred tax asset             3,535,440             159,186             313,868     4,008,494 
-------------------------------------  -----------  ------------------  ------------------  ------------ 
Unrecognised tax assets                (3,535,440)           (159,186)           (313,868)   (4,008,494) 
-------------------------------------  -----------  ------------------  ------------------  ------------ 
Recognised tax liabilities                       -                   -                   -             - 
-------------------------------------  -----------  ------------------  ------------------  ------------ 
 

20. Risk Management

The risk management function within the Group is carried out in respect of financial risks (credit, market, currency, liquidity and interest rate), operational, and legal risks. The primary objectives of the financial risk management function are to establish risk limits and then ensure that exposure to risks stays within these limits. The assessment of exposure to risks also serves as a basis for optimal distribution of risk-adjusted capital, transaction pricing and business performance assessment. The operational and legal risk management functions are intended to ensure proper functioning of internal policies and procedures to minimise operational and legal risks.

Credit risk

The Group assumes a credit risk, namely the risk that a counterparty will fail to meet its debt obligations within the specified period. The Group has developed policies and procedures for the management of credit exposures (both for recognised financial assets and unrecognised contractual commitments), including requirements for establishment and monitoring of the loan portfolio concentration limits.

The credit policy establishes:

procedures for review and approval of loan applications,

methodology for assessment of the borrowers' solvency,

credit documentation requirements,

procedures for the ongoing monitoring of loans and other credit exposures.

The Group continuously monitors the status of individual loans and regularly reassesses the creditworthiness of its customers. The review is based on the most recent loan delinquency statistics .

The Group applies the expected credit loss model for the purpose of provisioning for financial debt instruments, the key principle of which is timely reflection of deterioration or improvement in the credit quality of debt financial instruments based on current and forward-looking information.

The amount of the ECL recognised as a credit loss allowance depends on the extent of credit quality deterioration since initial recognition of a debt financial instrument .

Credit risk classification system . Each level of credit risk is assigned a certain degree of solvency, using a single scoring system:

minimum credit risk - high credit quality with low expected credit risk, debt is not past due;

low credit risk - sufficient credit quality with average credit risk, debt is prolonged and not past due;

moderate credit risk - average credit quality with satisfactory credit risk, the debt is from 1 to 30 days past due;

high credit risk - low credit quality with unsatisfactory credit risk, high probability of default, the debt is from 31 to 60 days past due;

default - assets that meet the definition of default, the debt is more than 60 days past due.

Expected credit losses on financial assets that are not impaired are usually measured on the basis of default risk over one or two different time periods, depending on whether there has been a significant increase in the borrower's credit risk since initial recognition.

The Group performs collective assessment of loans to individuals. This approach provides for the aggregation of the portfolio into homogeneous segments based on specific information about borrowers, such as delinquent loans, historic data on prior period losses and forward-looking macroeconomic information.

Collective assessment principles : for assessing risk stages and estimating ECL on a collective basis, the Group combines its loans into segments based on shared credit risk characteristics, so that exposure within a grouping has a homogeneous pattern.

Market risk

The Group assumes a market risk. Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises currency risk, interest rate risk and other price risks. Market risk arises from open positions in interest rates, currency and equity financial instruments which are exposed to general and specific market movements and changes in the volatility levels of market prices.

The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk .

Currency risk

Currency risk is the risk that the fair value or the future cash flows of a financial instrument will fluctuate because of changes in foreign currency exchange rates.

The Group accepts the risk of effect of foreign currency exchange rate fluctuations on its financial position and cash flows. Currency risk arises when the existing or prospective assets in foreign currencies are greater or lower than the existing or prospective liabilities in the same currencies. The Group's management controls the exposure to currency risk on a regular basis.

The table below provides the analysis of the Group's currency risk as at 31 December 2020.

 
 Group                                   RUB       GBP        EUR      Total 
---------------------------------  ---------  --------  ---------  --------- 
 
 Assets 
                                                                       640,8 
 Cash and cash equivalents           479,708   161,095         68         71 
 Loans to customers                1,269,313         -          -  1,269,313 
 Property and equipment                5,676         -          -      5,676 
 Right-of-use assets under lease 
  agreements                         297,925         -          -    297,925 
                                                                     251, 29 
 Other assets                        124,821   126,477          -          8 
                                                                       2,4 6 
 Total assets                      2,177,443   287,571         68      5,083 
---------------------------------  ---------  --------  ---------  --------- 
 
 Liabilities 
 Loans received                            -         -    735,646    735,646 
 Lease liabilities                   347,216         -          -    347,216 
 Other liabilities                   637,091   186,739          -    823,830 
                                                                      1,9 06 
 Total liabilities                   984,307   186,739    735,646       ,692 
---------------------------------  ---------  --------  ---------  --------- 
 Net balance sheet position        1,193,136   100,832  (735,578)   558 ,391 
---------------------------------  ---------  --------  ---------  --------- 
 

The table below provides the analysis of the Group's currency risk as at 31 December 2019.

 
 Group                                   RUB  USD          GBP        EUR       Total 
---------------------------------  ---------  ---  -----------  ---------  ---------- 
 
 Assets 
 Cash and cash equivalents           271,229  867   1 ,310,393        263  1, 582,751 
 Loans to customers                  786,346    -            -          -     786,346 
 Property and equipment               11,967    -            -          -      11,967 
 Right-of-use assets under lease 
  agreements                       2,549,233    -            -          -   2,549,233 
 Other assets                        150,525    -       68,122      3,470     222,117 
 Total assets                      3,769,300  867    1,378,514      3,733   5,152,414 
---------------------------------  ---------  ---  -----------  ---------  ---------- 
 
 Liabilities 
 Loans received                            -    -            -    742,603     742,603 
 Lease liabilities                 2,555,648    -            -          -   2,555,648 
                                                                                664,9 
 Other liabilities                   499,077    -      162,666      3,162          05 
 Total liabilities                 3,054,725    -      162,666    745,765   3,963,156 
---------------------------------  ---------  ---  -----------  ---------  ---------- 
 Net balance sheet position          714,575  867    1,215,849  (742,032)   1,189,258 
---------------------------------  ---------  ---  -----------  ---------  ---------- 
 

The table below presents a change in the financial result and equity due to possible fluctuations of exchange rates used at the end of the reporting period if all other conditions remain unchanged. Reasonable exchange rate changes for each currency were projected on the basis of historical information on maximum daily exchange rate fluctuations in December 2020.

 
                                    31 December 2020 
                   --------------------------------- 
                                Effect on 
                    profit or loss before  Effect on 
Group                            taxation     equity 
-----------------  ----------------------  --------- 
 
EUR appreciation 
 by 2 0%                        (147,129)  (117,703) 
EUR depreciation 
 by 20%                           147,129    117,703 
-----------------  ----------------------  --------- 
 

The table below presents a change in the financial result and equity due to possible fluctuations of exchange rates used at the end of the reporting period if all other conditions remain unchanged. Reasonable exchange rate changes for each currency were projected on the basis of historical information on maximum daily exchange rate fluctuations in December 2019.

 
                                    31 December 2019 
                   --------------------------------- 
                                Effect on 
                    profit or loss before  Effect on 
Group                            taxation     equity 
-----------------  ----------------------  --------- 
 
EUR appreciation 
 by 10%                          (74,229)   (59,383) 
EUR depreciation 
 by 10%                            74,229     59,383 
-----------------  ----------------------  --------- 
 

Liquidity risk

Liquidity risk arises when the maturity of assets and liabilities do not match. The Group does not accumulate cash resources to meet all liabilities mentioned above, as based on the existing practice it is possible to forecast with a sufficient degree of certainty the required level of cash funds necessary to meet the above obligations.

To manage its liquidity, the Group is required to analyse the level of liquid assets needed to settle the liabilities when they mature, provide access to various sources of financing, draw up plans to solve the problems with financing, and exercise control over the compliance of the liquidity ratios with the statutory laws and regulations.

The CBR sets and monitors liquidity requirements for microfinance organisations. The Group calculates the liquidity ratio in accordance with Instruction No. 5 114 -U of the Central Bank of the Russian Federation "On establishment of economic standards for a microloan company attracting loan funds from individuals, including individual entrepreneurs who are founders (participants, shareholders), and (or) legal entities" dated 2 April 2019. As at 31 December 2020 and 31 December 2019, the minimum liquidity ratio was 70%. The Group provides the territorial CBR division that supervises its activities with information on mandatory liquidity ratios in accordance with the set format on a quarterly basis as at the first day of each month. Also, if the liquidity ratio values approach the limit set by the CBR, this information is communicated to the Group's management. The Group complies with the liquidity ratio as at 31 December 2020 (unaudited) and as at 31 December 2019 ( unaudited) .

The table below shows the maturity profile of financial liabilities as at 31 December 2020:

 
                            On demand                                From      From 
                             and less                     From   6 months      1 to 
                               than 1       1 to      3 months       to 1   3 years 
                                month   3 months   to 6 months       year              Total 
--------------------------  ---------  ---------  ------------  ---------  --------  ------- 
 
Liabilities 
Loans received                      -     51,582        77,373    154,745   618,982  902,682 
Lease liabilities                   -     83,486        86,451    161,569    31,707  363,213 
Other liabilities             533,909          -             -          -         -  533,909 
--------------------------  ---------  ---------  ------------  ---------  --------  ------- 
Total potential future 
 payments under financial                                                             1, 799 
 liabilities                  533,909    135,068       163,824    316,314   650,689    , 804 
--------------------------  ---------  ---------  ------------  ---------  --------  ------- 
 

The table below shows the maturity profile of financial liabilities as at 31 December 2019:

 
                            On demand                                From       From 
                             and less                     From   6 months       1 to 
                               than 1       1 to      3 months      to 12    3 years 
Group                           month   3 months   to 6 months      years                 Total 
--------------------------  ---------  ---------  ------------  ---------  ---------  --------- 
 
Liabilities 
Loans received                742,603          -             -          -          -    742,603 
Lease liabilities                   -    396,064       396,064    787,925  3,069,025  4,649,078 
Other liabilities             351,253          -             -          -          -    351,253 
--------------------------  ---------  ---------  ------------  ---------  ---------  --------- 
Total potential future 
 payments under financial       1,093 
 liabilities                     ,856    396,064       396,064    787,925  3,069,025  5,742,934 
--------------------------  ---------  ---------  ------------  ---------  ---------  --------- 
 

The Group does not use the above undiscounted amounts in the maturity analysis to monitor the liquidity profile. Instead, the Group monitors the expected maturity limits that are shown in the table below as at 31 December 2020:

 
                       On demand                                                         No stated 
                        and less       From        From      From 6                       maturity 
                            than       1 to        3 to      months  More than 
                         1 month   3 months    6 months   to 1 year     1 year  Overdue                 Total 
---------------------  ---------  ---------  ----------  ----------  ---------  -------  ---------  --------- 
 
Assets 
 
Cash and cash              640,8                                                                        640,8 
 equivalents                  71          -           -           -          -        -          -         71 
Loans to customers     1,168,937          -           -           -          -  100,376          -  1,269,313 
Property and 
 equipment                     -          -           -           -          -        -      5,676      5,676 
Right-of-use 
 assets under 
 lease agreements              -          -           -           -          -        -    297,925    297,925 
                           156,7 
Other assets                  12         29         415         862        162        -     93,118    251,297 
                                                                                             396,7 
Total assets           1,966,520         29         415         862        162  100,376         20  2,465,084 
---------------------  ---------  ---------  ----------  ----------  ---------  -------  ---------  --------- 
 
Liabilities 
Loans received                 -     27,345      54,270     113,642    540,389        -          -    735,646 
Lease liabilities              -     77,397      81,779     157,129     30,911        -          -    347,216 
Other liabilities       719 ,477          -           -           -          -        -    104,353    823,830 
Total liabilities        719,477    104,742     136,049     270,771    571,300        -    104,353  1,906,692 
---------------------  ---------  ---------  ----------  ----------  ---------  -------  ---------  --------- 
Net liquidity 
 gap as at 31           1,247,04 
 December 2020                 3  (104,713)   (135,634)   (269,909)  (571,138)  100,376    292,367    558,391 
---------------------  ---------  ---------  ----------  ----------  ---------  -------  ---------  --------- 
Cumulative liquidity 
 gap as at 31                                                736,78 
 December 2020         1,247,043  1,142,329  1, 006,695           7    165,648  266,024    558,391 
---------------------  ---------  ---------  ----------  ----------  ---------  -------  ---------  --------- 
 

The table below present the maturity profile of assets and liabilities as at 31 December 2019:

 
                       On demand                                                              No stated 
                        and less       From       From     From 6                              maturity 
                            than       1 to       3 to      to 12    More than 
  Group                  1 month   3 months   6 months     months       1 year     Overdue                   Total 
---------------------  ---------  ---------  ---------  ---------  -----------  ----------  -----------  --------- 
 
Assets 
Cash and cash 
 equivalents           1,582,751          -          -          -            -           -            -  1,582,751 
Loans to customers       786,346          -          -          -            -           -                 786,346 
Property and 
 equipment                     -          -          -          -            -           -       11,967     11,967 
Right-of-use 
 assets under 
 lease agreements              -          -          -          -            -           -    2,549,233  2,549,233 
Other assets             131,938          -          -      2,218            -      12,649     7 5 ,312    222,117 
                         2,501,0 
Total assets                  35          -          -      2,218            -      12,649    2,636,512  5,152,414 
---------------------  ---------  ---------  ---------  ---------  -----------  ----------  -----------  --------- 
 
Liabilities 
Loans received           742,603          -          -          -            -           -            -    742,603 
Lease liabilities                   227,558    352,680    725,218    1,250,193           -            -  2,555,648 
Other liabilities        520,880          -          -          -            -           -      144,025    664,905 
Total liabilities      1,263,483    227,558    352,680    725,218    1,250,193           -      144,025  3,963,157 
---------------------  ---------  ---------  ---------  ---------  -----------  ----------  -----------  --------- 
Net liquidity 
 gap at 31 December          1 , 
 2019                    237,552  (227,557)  (352,680)  (723,000)  (1,250,193)      12,649    2,492,487  1,189,257 
---------------------  ---------  ---------  ---------  ---------  -----------  ----------  -----------  --------- 
Cumulative liquidity 
 gap as at 31                1 ,                          (65,685   (1,315,878  (1,303,229 
 December 2019           237,552  1,009,995    657,315          )            )           )  1 , 189,257 
---------------------  ---------  ---------  ---------  ---------  -----------  ----------  -----------  --------- 
 

Interest rate risk

The Group assumes the risk associated with the effects of fluctuations in market interest rates on its financial position and cash flows. Interest margins may increase as a result of such changes but may also decrease or create losses in the event of unexpected movements in interest rates.

The Group is exposed to interest rate risk primarily as a result of its lending activities at fixed interest rates, in amounts and for periods which differ from those of fixed interest rate borrowings (Loans to customers as at 31 December 2020: 1, 269,313 and as at 31 December 2019: 786,346 British pounds sterling) . In practice, interest rates are usually set for short periods. In addition, interest rates recorded in both asset and liability contracts are often revised by mutual agreement in accordance with current market conditions. I n 2019 the maximum daily interest rate was limited to 1.5% per day in the first half of the year and 1% the second half of 2019.

Also, the Group's lease liabilities are exposed to interest rate risk (as at 31 December 2020: 347,216 and as at 31 December 2019: 2 , 555,648 British pounds sterling) .

Other assets and liabilities are not exposed to interest rate risk.

21. Capital management

The Group's objectives when managing capital are to comply with the capital requirements set by the Central Bank of Russia , as the main area of business of the Group is in the Russian Federation , and to ensure the Group's ability to continue as a going concern and maintain a capital base at the level necessary to achieve the capital adequacy ratio of 5% in accordance with the CBR requirements.

The Group provides the territorial division of the CBR supervising its operations with information on the mandatory capital adequacy ratio in accordance with the established format quarterly as at the first day of each month.

The statutory requirements for own funds (equity) as at 31 December 2020 are set at one million roubles. The Group is in compliance with the above requirements.

22. Contingencies

Litigations. In the ordinary course of business, the Group is subject to legal actions and complaints. Management believes that the ultimate liability, if any, arising from such actions or complaints will not have a material adverse effect on the Group's financial condition or the results of its future operations.

Tax legislation. As the main business of Group is in Russia , Russian tax legislation is subject to varying interpretations, and changes, which can occur frequently. Management's interpretation of such legislation as applied to the transactions and activities of the Group's companies may be challenged by the relevant regional or federal authorities. Current trends in the Russian Federation suggest that the tax authorities are taking a more assertive position in their interpretation of the legislation and assessments. As a result, tax authorities may challenge transactions and accounting methods for which they have not previously challenged. As a result, significant additional taxes, penalties, and fines may be assessed.

As at 31 December 2020, management believes that its interpretation of the relevant legislation is appropriate and the Group's tax, currency and customs positions will be sustained by the regulatory authorities. Management believes that the Group has accrued all relevant taxes.

Operating lease commitments. In the course of its business, the Group enters into a number of lease agreements. These agreements are not irrevocable. The minimum future lease payments under operating leases where the Group is the lessee are presented below:

 
Group                                31 December 20 20  31 December 20 19 
-----------------------------------  -----------------  ----------------- 
 
 Less than 1 year                                    -             66,434 
 Total operating lease commitments                   -             66,434 
-----------------------------------  -----------------  ----------------- 
 

23. Fair Value of Financial Instruments

A quoted market price in an active market is the best evidence of fair value. As no readily available market exists for the major part of the Group's financial instruments, their fair value is based on current economic conditions and the specific risks attributable to the instrument. The estimates presented below are not necessarily indicative of the amounts the Group could realise in a market exchange from the sale of its full holdings of a particular instrument.

Below is the estimated fair value of the Group's financial instruments as at 31 December 2020 and

31 December 2019:

 
                                         2020                     2019 
                        ---------------------  ----------------------- 
                         Carrying                 Carrying 
Group                       value  Fair value        value  Fair value 
 
  Financial assets 
Cash                      640,871     640,871  1 ,582 ,751   1,582,751 
Loans to customers      1,269,313   1,269,313      786,346     786,346 
 
Financial liabilities 
Loans received            735,646     735,646      742,603     742,603 
Other liabilities         533,907     533,907      351,253     351,253 
----------------------  ---------  ----------  -----------  ---------- 
 

The Group uses the following methods and assumptions to estimate the fair value of these financial instruments:

Cash and cash equivalents. The estimated fair value of cash and cash equivalents does not differ from their carrying amounts due to the nature of these financial instruments.

Loans to customers . Loans to customers are reported net of impairment allowance. The estimated fair value of loans to customers represents the discounted amount of estimated future cash flows expected to be received. To determine fair value, expected cash flows are discounted at current market rates (the interest rate on loans in 2020 was 1%, and in 2019 - from 1.5% to 1%).

Loans received. The fair value of other fixed interest-bearing borrowed funds is based on discounted cash flows using interest rates for instruments with similar maturity and in similar currency. The lending rates are equal to the market rates .

To present information on the fair value hierarchy of financial instruments as required by IFRS 13 Fair Value Measurement, the management of the Group assigns the above financial assets and liabilities as at 31 December 2019 and 31 December 2018, excluding cash and cash equivalents (Level 1 = GBP 640,871 at 31 December 2020 and GBP 1 ,582 ,751 at 31 December 2019) to Level 3 of the fair value hierarchy of inputs.

24. Reconciliation of Classes of Financial Instruments with Measurement Categories

In accordance with IFRS 9 "Financial Instruments", the Group classifies its financial assets and liabilities into the following categories: (a) financial assets at fair value through profit or loss; (b) financial assets at fair value through other comprehensive income; and (c) financial assets at amortised cost.

At the same time, in accordance with the requirements of IFRS 7 "Financial Instruments: Disclosures", the Group discloses various classes of financial instruments.

As at 31 December 2020 and 31 December 2019, all financial assets and liabilities of the Group are classified as financial assets and liabilities measured at amortised cost.

25. Related Party Transactions

For the purposes of these consolidated financial statements, parties are considered to be related if one party has the ability to control or exercise significant influence over the other party in making financial or operational decisions as defined by IAS 24 Related Party Disclosures. In considering each possible related party relationship, attention is directed to the economic substance of the relationship, not merely the legal form.

In the normal course of business, the Group enters into transactions with its sole participant and directors. These transactions include settlements, payment of remuneration to employees, and loan draw downs. According to the Group's policy, the terms of related party transactions are equivalent to those prevailing in arm's length transactions.

The outstanding balances at the year end and liability transactions with related parties for 2019 are as follows:

 
Transactions with party under common ultimate control      2020     2019 
------------------------------------------------------  -------  ------- 
 
Loans received (balance)                                735,646  742,603 
------------------------------------------------------  -------  ------- 
 

No interest was accrued in 2020 and 2019 (see Note 9 Loans received) .

As at 31 December 2020 and at 31 December 2019, the balance on loans received represents the obligation to pay interest on the loan , which was forgiven in 2018.

 
Transactions with ultimate beneficiary                            2020     2019 
---------------------------------------  -----------------------------  ------- 
 
Loan to beneficiary                                           (55,559) 
Loan offset                                                     55,559 
Services rendered                                                    -  206,718 
---------------------------------------  -----------------------------  ------- 
 
 
 
  Transactions with parent company                         2020  2019 
-----------------------------------  --------------------------  ---- 
 
Loan issued                                              45,411     - 
Interest income                                             334     - 
 
 

Total balance as at 31 December , 2020 45,745 -

For the year ended 31 December 2020, the total remuneration of key management personnel of the Subsidiary was GBP 27 4 ,28 1 , including social insurance contributions of GBP 44,106 (2019: GBP 267,128, including social insurance contributions of GBP 39,7 65 ). The Group does not provide key management personnel with post-employment and employment termination benefits. The remuneration of the Board of Directors of the Group for the year 2020 was as follows:

Below is the summary of remuneration for each Director for 2020:

 
                     Salary, GBP   Bonus for   Shares held   Stock options 
                      , for the     the year 
                      year 2020     2020 
 Malcolm Groat       25,000        -           0             2,150,000 
                    ------------  ----------  ------------  -------------- 
 Siro Donato 
  Cicconi            100,000       35 ,000     320,000,000   10,750,000 
                    ------------  ----------  ------------  -------------- 
 Vladimir Golovko    124,361       3,500       0             8,600,000 
                    ------------  ----------  ------------  -------------- 
 Simon James 
  Retter             60,000        21,000      3,600,000     6,450,000 
                    ------------  ----------  ------------  -------------- 
 Paul James 
  Auger              20,000        -           0             2 ,000,000 
                    ------------  ----------  ------------  -------------- 
 

The social insurance contributions , paid by the Company for the year 2020 on remuneration, was GBP17,388.

Out of pocket expenses totalling GBP78,055 were incurred by Siro Donato Cicconi in 2019 and as at 31 December

2020   GBP48,055 remained payable ( as at 31 December 2019 :  GBP78,055 ) . 

26. Business combination

On 19 September 2019 Zaim Credit Systems plc (Parent Company) became the legal parent of Zaim Express LLC (Subsidiary) by way of reverse acquisition. The cost of the acquisition is deemed to have been incurred by Zaim Express LLC, the legal subsidiary, in the form of equity instruments issued to the owners of the legal parent. This acquisition has been accounted for as a reverse acquisition as described in Note 3, Basis of Preparation.

The fair value of the shares in Zaim Express LLC have been determined from the admission price of the Zaim Credit Systems plc shares on re-admission to trading on the LSE for 2.5 pence per share. The value of the consideration shares was GBP8,000,000. The fair value of the notional number of equity instruments that the legal subsidiary would have had to have issued to the legal parent to give the owners of the legal parent the same percentage ownership in the combined entity is 1.84 per cent of the market value of the shares after issues, being GBP150,000. The difference between the notional consideration paid by Zaim Credit Systems plc for Zaim Express LLC and the Zaim Credit Systems plc net assets acquired of GBPnil has been charged to the Consolidated Statement of Comprehensive Income as a deemed cost of the listing amounting to GBP150,000 with a corresponding entry to the reverse acquisition reserve.

Details of net assets acquired and the deemed cost of the listing were as follows:

GBP

   Consideration effectively received            150,000 

Less net asset required:

   Cash and cash equivalents                            52,055 
   Debtors and prepayments                             11,982 
   Current liabilities                                       (64,037) 
   Total net asset required:                                     - 
   Deemed cost of listing                                150,000 

T he terms of the share purchase agreement between the Company and Zaim Express LLC were as follows : there are certain circumstances under which deferred contingent consideration might become payable. Should the Company record a monthly EBITDA figure in accordance with IFRS of GBP200k per month for a continuous period of four months and there be no reasonable expectation that this should fall below this level for a further period of six months then a further 16,000,000 new ordinary shares in the Company shall become payable. Additional consideration of 16,000,000 shares over and above that already mentioned shall become payable should the Company record a monthly EBITDA figure of GBP350k per calendar month with the same continuous period clause as noted above. At the IPO price per share these deferred contingent considerations would have a value of GBP400k each for a combined value of GBP800k. It has been considered by the Directors at this time that, in light of the Covid-19 pandemic it remains difficult to predict if and when this might occur. This combined with the current low probability of these milestones being met in the current environment, mean t that no fair value has been calculated for such deferred considerations.

Under the terms of the share purchase agreement between the Com-pany and Zaim Express LLC ( Subsidiary) there are certain circumstances under which deferred contingent consideration might become payable. Should the Company record a monthly EBITDA figure in accordance with IFRS of GBP200k per month for a continuous period of four months and there be no reasonable expectation that this should fall below this level for a further period of six months then a further 16,000,000 new ordinary shares in the Company shall become payable. Addition-al consideration of 16,000,000 over and above that already mentioned shall become payable should the Company record a monthly EBITDA figure of GBP350k per calendar month with the same continuous period clause as noted above. At the IPO price per share these deferred contingent considerations would have a value of GBP400k each for a combined GBP800k in value. It has been considered by the Directors that given the improvement in outlook for the business that this additional consideration is likely to become payable in the near future and therefore a reserve of shares to be issued has been recognised and associated increase in carrying value of the investment in Zaim Express LLC (Subsidiary) as a result of this consideration.

27. Auditor's remuneration

 
                                                31.12.20      31.12.19 
 Audit                                       GBP              GBP 
 Fees payable to the company's 
  auditor for the audit of the 
  annual parent company and consolidated 
  accounts                                          40 000        40 000 
 Fees payable to the company's                            -            - 
  auditor for other services provided 
  to the company and its subsidiaries: 
 The audit of the company's subsidiaries                -            - 
  under legislative requirements 
                                            ---------------  ----------- 
 Total audit                                        40 000        40 000 
                                            ===============  =========== 
 

28. Events after the Reporting Period

Currently the Group does not consider the impact of COVID-19 to be significant to the business going forward.

On 6th April 2021, Zaim Express LLC, the Groups wholly owned Subsidiary, entered into an agreement for an unsecured loan of RUB 50M for a period until September 2022 with an interest rate of 15% per annum.

There are not considered to be any other events after the reporting date.

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(END) Dow Jones Newswires

April 30, 2021 02:00 ET (06:00 GMT)

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