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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
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Glbal Lck Grp | LSE:GLOK | London | Ordinary Share | VGG393181034 | ORD NPV (DI) |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 1.125 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
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0 | 0 | N/A | 0 |
TIDMGLOK
RNS Number : 1368E
Global Lock Safety (Intl) Grp CoLtd
25 May 2012
Global Lock Safety (International) Group Co., Limited
("Global Lock" or the "Company")
Final results
Global Lock, the provider of security solutions to retailers and other organisations in China, announces its final results for the year ended 31 December 2011.
Highlights:
-- Revenue for the year RMB 31.86m (an increase of 47% over 2010's RMB 21.65m) -- Loss for year RMB 24.42m (2010: loss of RMB 3.29m) -- Net assets (including minority interests) of RMB 49.64m (2010: RMB 69.10m) -- Cash and cash equivalents RMB 3.26m (2010: RMB 7.95m) -- Loss per share RMB 0.02(2010: RMB 0.02)
Chairman's Statement
2011 was a challenging year for Global Lock Group with notably tougher trading conditions in China. The Chinese Government's desire to restrict credit fed through into the Chinese high street and impacted Global Lock's potential customers accordingly. Despite this, by the end of 2011 the Company's revenues had increased to RMB 31.86 million, an increase of 47% over 2010's revenues of RMB 21.65 million. At the same time, the number of customers increased to 17,850 retail stores (an increase of 63% on the 2010 figure of 11,000 retail store clients). The number of branches also increased, from 56 branches at the end of 2010 to 67 branches by the end of 2011. The average number of customers per branch was 266 at the end of 2011, compared with 196 a year earlier.
The high loss of RMB 24.42 million for the year is attributable to the following:
-- the deferral of approximately RMB 22 million of income to the following year under IFRS accounting rules
-- in 2011, the Company acquired some 1,400 retail store customers as a part of its acquisition of local security companies. These customers had, in the main, pre-paid for 12 months security services but no apportionment of those pre-paid sums was made with the various vendors. Therefore, since under the terms of the various acquisition agreements Global Lock was obliged to continue to provide its regular security services, including security guard patrols and insurance services, to those new customers from the date of acquisition to the period end, Global Lock incurred the costs of providing those services but did not generate any revenue during the period under review. The Directors expect that the acquisition of these 1,400 retail store customers will general a total of RMB 3.5m for the current accounting period;
-- a RMB 1.0 million share based payment charge was incurred from 2010 as well as increased expenditure in 2012 at the BVI company level of RMB 3.2 million (up from RMB 1.4 million in 2010);
-- higher selling and distribution costs and administrative expenses also contributed to the loss. This includes spending on acquisitions to increase the customer base as well as the costs of expanding the nationwide branch network and the costs of funding of those new branches in the early high-growth stage before they acquire sufficient customers and fixed assets to attain profitability; and
-- the loss also reflects what the directors perceive as in adequate cost controls and management oversight and screening during the acquisition process, as well as a lack of sustained focus on the core business from the previous senior management. Following a number of management changes, the new management team is determined to correct these shortcomings and see Global Lock take significant strides in 2012.
The Directors are confident that the Group's strategy of continuing to expand the branch network and aggressively increase customer numbers, by means of both organic growth and carefully targeted and managed acquisitions of competitor security companies and their customers, is well conceived and will deliver substantial returns in the near term as well as taking the Company towards its goal of becoming China's leading provider of security solutions. To further this strategy the Company is making further improvements in both the branch and head office management structures and systems and in the Company's promotional and marketing activities. This strategy continues to depend, inter-alia, on maintaining and consolidating Global Lock's relationships and alliances with provincial and local government bodies and local police forces as well as with China Legal Daily, China's leading legal newspaper of record, published under the auspices of the Ministry of Justice with a circulation of approximately 30 million readers.
The Directors are also aware of the importance of retaining the Company's position at the forefront of Chinese security technology and the research and development department at Shenzhen Global Lock Security System Engineering Co continues to develop enhancements and improvements to Global Locks technical capabilities and systems. Key current and envisaged developments include:
-- a wireless passive infrared detector for false positive signals / low-power; -- upgrading the alarm system to a secure GPRS / phone line dual-mode network;
-- a low cost IP camera and a centre video monitoring platform based on H.264 video coding technology, which can transmit real time live video to alarm centre via WIFI /LAN / WAN(broadband);
-- an alarm/video integrated host based on GPRS / 3G (narrow-band) to transmit both alarm packet and live pictures or video stream to the alarm centre or guard patrol smart phone;
-- a monitoring service platform for police video and alarm networks; -- a large centralized alarm / video integrated network platform based on BS Architecture; and
-- next generation of alarm / video integrated hosts and a network alarm / video service platform based on IP / multi-channel / streaming media technology architecture for a high-speed, high efficiency and high security alarm service centre.
With these new systems, the guard patrols can monitor the retailer store via MMS or 3G video call for effective video verification of the alarmed site. Used in conjunction with the new generation of alarms and SD card / hard disk storage and the Police service's own alarm platform with video, the Directors believe that these systems will facilitate the verification of a suspected crime and enhance evidence collection, including before and after photos. Some of these security products are fully comparable with equivalent US, Japanese and European products.
The Directors believe that these new and improved technologies can improve the scheduling of guard patrols, reducing patrol staffing and invalid alarm response expense, as well as improving management capabilities and efficiency in meeting the overall objectives effectively combating crime, lowering insurance payments and reducing the risk of moral hazard. These technologies see the Company begin to be able to move away from a purely passive, reactive role to more targeted and proactive efforts.
Global Lock's progress can be measured in terms of the certificates, licenses and level of intellectual property protection it has achieved. Certificates included:
-- China Compulsory Certification (CCC) certificates for FW-2A-A/B/C/D models of the alarm hosts;
-- Guangdong province security system design, construction & maintenance certificate; -- ISO9001 quality certification; -- PRC enterprise and software product certificates; and -- Shenzhen municipal& state level high-tech enterprise qualification certificates;
In addition the Company has obtained various copyrights, trademarks and patents with a further four patents in application and each year Global Lock increases its technological and intellectual property resources.
As part of its marketing and promotional efforts the Company sponsored a major conference on security at the 'People's Great Hall' in Beijing on 29 November 2011. The conference was organized by China Legal Daily and was attended by many of the China's top leaders. A Company speaker gave a keynote address.
During 21-23 December 2011, the Company held a 2012 business planning conference in Ningxiang County, Hunan Province. The conference involved a full review of 2011 and developed detailed plans for 2012. All of the China based directors and the senior executives participated in the conference, together with the branch managers and a guest speaker from 'China Legal Daily'. One of the key outcomes was the agreement of individual branch targets. The level of attainment relative to these targets will in turn determine the branch management's salaries and bonuses.
Recent Developments and Trading Update
At 30 April 2012 Global Lock had a total of 20,235 customers (an increase in 4 months of 13% on the number at 31 December 2011). The number of branches remained unchanged from year end at 67 in all.
In accordance with the PRC's new law governing security companies, the Directors have established a new company, Hunan Provincial Family Fortune Security Services Co., Ltd to obtain both an Operational Security Licence and a Security Qualification Licence. This company is wholly owned by the Group's trading company, Shenzhen Global Lock Security System Engineering Co Ltd, and will assume total operational control of the whole Global Lock's Branch Structure in China.
Board Changes
Following the period end, Global Lock has implemented a number of changes at board level and Mr. Moxiang Li, formerly the Manufacturing Director, was appointed as the Chairman and CEO of Global Lock. Mr. Yong Luo, Mr. Xuean Yan and Mr. Jun Gai have resigned due to personal commitments. We thank them for their services to the Company and the Group. The Board are considering a number of new board level appointments and further announcements will be made at the appropriate time.
On behalf of the Board, I want to extend our warmest thanks to our investors, business partners, associates and customers for their support during the year and lastly, but by no means least, we wish to thank the management and staff of the Global Lock family for their tremendous efforts and dedicated hard work throughout the year.
The annual report and accounts for the year ending 31 December 2011 will be posted to shareholders shortly as well as being added to the Company's website, http://www.globallock.com, in accordance with AIM Rule 20.
Enquiries:
Global Lock Safety (International) Group
Moxiang Li,Chief Executive Tel: +86 755 8366 0755
Robert Zhang, Investor Relations E-mail: robertzh@globallock.com Andrew Gee, Non-Executive Director Tel: +44 777 565 3564
Allenby Capital Limited Tel: +44 203 328 5656
Nick Naylor
Nick Harriss
Alex Price
- Ends -
Global Lock provides a total anti-theft service for the Chinese retail sector. This service comprises three primary elements: a patented GSM alarm system; a 24 hour security service and guard response; and linked anti-theft insurance. The Directors of Global Lock believe that the Global Lock is the only provider of this type of comprehensive integrated security service in the Peoples Republic of China.
CONSOLIDATED STATEMENTOF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2011
Group ---------------------------- 2011 2010 Note RMB RMB Revenue Fees income 31,857,105 21,651,867 Sales business tax (1,780,430) (1,191,876) ------------- ------------- 30,076,674 20,459,991 Cost of sales (8,010,824) (5,501,627) ------------- ------------- Gross profit 22,065,850 14,958,364 Selling and distribution costs (34,178,175) (13,371,996) Administrative expenses (12,175,616) (3,537,946) Listing costs - (532,753) Other income 213,956 - ------------- ------------- Loss from operations (24,073,985) (2,484,331) Finance income 6,826 47,625 Finance cost (354,291) (47,626) ------------- ------------- Loss on ordinary activities before taxation 3 (24,421,450) (2,484,332) Taxation 8 - (802,766) ------------- ------------- Loss for the year (24,421,450) (3,287,098) Other companies income - - ------------- ------------- Total comprehensive loss for the year (24,421,450) (3,287,098) ============= ============= Loss attributable to: Owners of the parent (4,466,022) (1,460,511) Non-controlling interests (19,955,428) (1,826,587) ------------- ------------- (24,421,450) (3,287,098) ============= ============= Total comprehensive loss attributable to: Owners of the parent (4,466,022) (1,460,511) Non-controlling interests (19,955,428) (1,826,587) ------------- ------------- (24,421,450) (3,287,098) ============= ============= Loss per share 9 Basic (0.02) (0.02) ============= ============= Diluted (0.02) (0.02) ============= =============
CONSOLIDATED STATEMENTOF FINANCIAL POSITION
FOR THE YEAR ENDED 31 DECEMBER 2011
Group -------------------------- 2011 2010 Note RMB RMB Non-current assets Intangible assets 5 38,863,021 36,238,713 Property, plant and equipment 6 22,730,745 17,036,698 Investment in subsidiary 7 7,500,000 - Other receivables - - Deferred tax asset 8 - - ------------ ------------ Total non-current assets 69,093,766 53,275,411 Current assets Inventories 1,301,127 266,820 Trade and other receivables 9 27,153,896 21,676,630 Cash and cash equivalents 10 3,256,676 7,953,349 ------------ ------------ Total current assets 31,711,699 29,896,799 ------------ ------------ Total assets 100,805,465 83,172,210 ============ ============ Equity and reserves Share capital 11 20,323,800 20,323,800 Shares to be issued 4,000,000 - Reserves 962,835 - Accumulated losses (6,154,533) (1,688,511) ------------ ------------ 19,132,102 18,635,289 ------------ ------------ Non-controlling interest 12 30,511,083 50,466,511 ------------ ------------ Total equity 49,643,185 69,101,800 ------------ ------------ Current liabilities Borrowings 749,994 - Trade and other payables 13 49,496,808 13,820,590 Taxation 429,592 249,820 ------------ ------------ Total current liabilities 50,676,394 14,070,410 ------------ ------------ Non-Current liabilities Long-term payables 485,886 - Total liability 51,162,280 14,070,410 ------------ ------------ Total equity and liabilities 100,805,465 83,172,210 ============ ============
CONSOLIDATED STATEMENTOF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2011
Group ---------------------------- 2011 2010 RMB RMB Cash flows from operating activities Loss on ordinary activities before taxation (24,421,450) (2,484,332) Adjustments for: Amortization of intangible assets 3,010,093 2,680,602 Depreciation of property, plant and equipment 4,103,104 1,869,649 Loss on disposal 12,781 - Share based payment charge 962,835 - Loss of investment 500,000 - Financial income (6,826) (47,625) Financial costs 347,210 47,626 ------------- ------------- (15,492,253) 2,065,920 Increase in inventories (649,918) (266,820) Increase in trade and other receivables (5,465,565) (12,509,286) Increase in trade and other payables 34,825,210 7,384,670 ------------- ------------- Cash from/(used in) operations 13,217,474 (3,325,516) Income taxes paid - - ------------- ------------- Net cash from/(used in) operating activities 13,217,474 (3,325,516) ------------- ------------- Cash flows from investing activities Purchase of property, plant and equipment (9,340,117) (10,500,042) Research and development costs (2,221,326) (640,432) Proceed from non-controlling interest - 500,000 Proceed from disposal of property, plant and equipment 1,800 1,779 Acquisition of subsidiary (4,000,000) - Acquisition of new branch (3,350,000) ------------- ------------- Net cash used in investing activities (18,909,643) (10,638,695) ------------- ------------- Cash flows from financing activities Proceeds from share capital - 20,000,800 Amount paid to directors 100,000 - Financial income 6,826 - Financial costs (347,210) - Borrowings (Net) 1,235,880 - Loan to subsidiary - - Loan repayment from subsidiary - - ------------- ------------- Net cash from financing activities 995,496 20,000,800 ------------- ------------- Net change in cash and cash equivalents (4,696,673) 6,036,589 Cash and cash equivalents at beginning of year 7,953,349 1,916,760 Cash and cash equivalents at end of year 3,256,676 7,953,349 ============= =============
CONDOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2011
Shares Share to be Other Accumulated Non-controlling capital issued reserve losses Total interest Total equity RMB RMB RMB RMB RMB RMB RMB Group At 1 January 2010 323,000 - - (228,000) 95,000 51,793,098 51,888,098 Loss for the year - - - (1,460,511) (1,460,511) (1,826,587) (3,287,098) Total comprehensive loss for the year - - - (1,460,511) (1,460,511) (1,826,587) (3,287,098) Issue of ordinary share 20,000,800 - - - 20,000,800 - 20,000,800 Share issued to non-controlling interest - - - - - 500,000 500,000 - - - - - - - At 31 December 2010 20,323,800 - - (1,688,511) 18,635,289 50,466,511 69,101,800 Loss for the year - - - (4,466,022) (4,466,022) (19,955,428) (24,421,450) Total comprehensive loss for the year - - - (4,466,022) (4,466,022) (19,955,428) (24,421,450) Deferred share consideration to acquire new subsidiary - 4,000,000 - - 4,000,000 - 4,000,000 Share based payment transaction - - 962,835 - 962,835 - 962,835 At 31 December 2011 20,323,800 4,000,000 962,835 (6,154,533) 19,132,102 30,511,083 49,643,185
NOTES TO THE FINANCIAL INFORMATION
1 Accounting policies
(a) General information
The Company is a company incorporated in the British Virgin Islands ("BVI") under the BVI Law. The Company is governed by its articles of association and the principal statute governing the company is BVI law. The company has an unlimited life. The liability of the members of the company is limited. The Company is domiciled and has its registered office in BVI and the company's registration number is1561941 (British Virgin Islands).
The Group's places of business are in the People's Republic of China ("PRC"). The principal place of business of the Global Lock Group's operation is at 19/F Desay Technology Plaza, the 1st Hi-Tech Road South, Hi-Tech Park, Nanshan District, 518057 Shenzhen, PRC.
These non-statutory consolidated financial statements are presented in Renminbi ("RMB") which is also the functional currency of the company.
The principal accounting policies are summarised below:
(b) Basis of preparation
The non-statutory financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU (together, "IFRS"). These financial statements are for the year ended 31 December 2011.
New standards and interpretations not applied
The Group has adopted all relevant standards effective for accounting periods beginning on or after 1 January 2011.
At the date of authorisation of these non-statutory financial statements, the following standards and interpretations were in issue, but not yet effective:
Standards and interpretations
Amendment to IFRS 7 - Enhanced Derecognition Disclosure Requirements - effective 1 July 2011
The IASB introduced enhanced disclosure requirements to IFRS 7 Financial Instruments as part of its comprehensive review of off-balance sheet activities. The amendments are designed to ensure that users of financial statements are able to more readily understand transactions involving the transfer of financial assets (for example, securitisations), including the possible effects of any risks that may remain with the entity that transferred the assets. The amendments also require additional disclosures if a disproportionate amount of transfer transactions are undertaken around the end of a reporting period. As the change only results in additional disclosures, there is no impact on the company's financial statement.
IFRS 9 - Financial Instruments - Classification and Measurement of Financial Assets - effective 1 January 2015
This has been introduced to replace IAS 39 - Recognition and Measurement. The requirements were issued in 2009 as part of the gradual development and phase-in of the new financial instruments guidance. New requirements for classification and measurement of financial liabilities were also added in year 2010. As a result, IFRS 9 will eventually be a complete replacement for IAS 39. The Group plans to apply this when it has such transactions.
IFRS 9 - Incorporation of requirements on the accounting for financial liabilities - effective 1 January 2015
The 2010 revision to IFRS 9 also include guidance on the classification and measurement of financial liabilities. The guidance included in IFRS 9 retains the classification criteria for financial liabilities currently contained in IAS 39. However, there are two key differences, relating to presentation and measurement, compared to IAS 39:
-- the presentation of the effects of changes in fair value attributable to a liability's credit risk; and
-- the elimination of the cost exemption for derivative liabilities to be settled by delivery of unquoted equity instruments.
IFRS 10 "Consolidated Financial Statements" (effective 1 January 2013), it establishes the principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities. IFRS 10 uses control as the single basis for consolidation, irrespective of the nature of the investee, thus eliminating the risks and rewards approach included in SIC-12. IFRS 10 identifies the following three elements of control:
-- power over the investee; -- exposure, or rights, to variable returns from involvement with the investee; and -- the ability to use power over the investee to affect the amount of the investor's returns.
An investor must possess all three elements to conclude it controls an investee.
IFRS 11 - Joint Arrangements - effective 1 January 2013
IFRS 11 establishes two types of joint arrangements: joint operations and joint ventures. The two types of joint arrangements are distinguished by the rights and obligations of those parties to the joint arrangement. In a joint operation, the parties to the joint arrangement have rights to the actual assets and obligations for the liabilities of the arrangement. In contrast, in a joint venture, the parties to the arrangement have rights to the net assets of the arrangement.
A joint operator recognises its share of the assets, liabilities, revenues and expenses in accordance with applicable IFRSs, while a joint venture would account for its interest using the equity method of the accounting under IAS 28 (revised 2011), thus eliminating the option of proportionate consolidation for interest in joint ventures.
IFRS 12 - Disclosure of interests in Other Entities - effective 1 January 2013
IFRS 12 combines the disclosure requirements for an entity's interest in subsidiaries, joint arrangements, associates and structured entities into one comprehensive disclosure standard. Many of the disclosure requirements were previously included in IAS 27, IAS 31 or IAS 28, whilst others are new.
IFRS 13 - Fair value measurement - effective 1 January 2013
IFRS 13 was issued in May 2011 and established a single framework for measuring fair value and is applicable for both financial and non-financial items. The standard does not include requirements on when fair value measurement is required; it prescribes how fair value is to be measured if required by another standard.
It is considered that these do not apply to the Group and that these standards are not expected to result in changes in accounting policies, changes to the carrying amounts of assets or liabilities or the published results. If any, but expect there will be no material impact to the income statement and balance sheet when implemented, although further disclosure may be required.
IAS 27 (revised 2011) - Separate financial statements - effective 1 January 2013
IAS 27 establishes the accounting for investments in subsidiaries, jointly ventures, and associates when an entity elects, or is required by local regulations, to present separate (non-consolidated) financial statements.
(c) Going concern policy
The non-statutory financial statements have been prepared assuming the Group will continue as a going concern. During the year, the Group incurred a net loss of RMB 24.42m and had net current liabilities of RMB 19m. The loss reflects what the Directors perceive as inadequate cost controls and management oversight. This also includes over spending on acquisitions to increase the customer base as well as the costs of expanding the nationwide branch network. Following a number of management changes, the new management team is determined to correct these shortcomings and stay focused on the development of its existing core business. In addition, the Group has obtained a RMB 20m interest-free loan facility from Mr Shiman LIU, a third party individual, to be drawn down over the next 12 months. In Jan 2012, the Group has received its first tranche of this loan of RMB 5m. The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Revenues are expected to continue to increase in the coming years resulting in the Group becoming profitable in due course.
Under the going concern assumption, an entity is ordinarily viewed as continuing in business for the foreseeable future with neither the necessity of liquidation, nor ceasing trading or seeking protection from creditors pursuant to laws or regulations. In assessing whether the going concern assumption is appropriate, management takes into account all available information for the foreseeable future, in particular for the twelve months from the date of approval of the non-statutory financial statements. Based on the budgets prepared, management have a reasonable expectation that the group has adequate resources to continue its operational exercises for the foreseeable future and the group has adopted the going concern basis of accounting in preparing the non-statutory financial statements.
(d) Basis of consolidation
The consolidated non-statutory financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.
Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group's equity therein. Non-controlling interests consist of the amount of those interests at the date of the original business combination (see below) and the non-controlling interests' share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the non-controlling interest in the subsidiary's equity are allocated against the interests of the Group except to the extent that the non-controlling interest has a binding obligation and is able to make an additional investment to cover the losses.
The results of subsidiaries acquired or disposed of during the year are included in the Consolidated 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 used into line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation.
The Group entered into the following agreements on 17 October 2010:
-- An Exclusive Technology Support Agreement between Global Lock Safety (Shenzhen) Limited ("Global Lock WOFE") and Shenzhen Global Lock Security System Engineering Co., Ltd ("Shenzhen Global Lock"), with a quarterly services fee of 20 to 25 per cent of total monthly operating revenues is payable by Shenzhen Global Lock to Global Lock WOFE on a quarterly basis. The condition requires Shenzhen Global Lock has profitability in the financial year in order to meet this obligation.
-- A Business Operation Agreement between Global Lock WOFE and Shenzhen Global Lock and the shareholders of Shenzhen Global Lock (who are also the founder and controlling shareholders of the Company) under which Shenzhen Global Lock cannot carry out any activities which may affect its capital, personnel, obligations, rights or business operations. In addition, the Founder Shareholders grant Global Lock WFOE the rights to exercise their respective voting rights in Shenzhen Global Lock.
-- An Exclusive Option Agreement entered into between Global Lock WFOE, the Founder Shareholders and Shenzhen Global Lock, under which Global Lock WFOE has an exclusive option to purchase by itself or through a nominee, to the extent permitted by the laws of the PRC, all or any part of the equity interests of each Founder Shareholder in Shenzhen Global Lock. Each Founder Shareholder has agreed that Shenzhen Global Lock will accept payment from Global Lock WFOE on their behalf and that the payment received shall be a loan to Shenzhen Global Lock to be used for the business operations of Shenzhen Global Lock.
-- An Exclusive Sales Agreement entered into by Shenzhen Global Lock and Global Lock WFOE, under which, Global Lock WFOE is allowed to sell the various antitheft systems and ancillary products of Shenzhen Global Lock, exclusively within the territories and period as agreed between the parties.
-- An Equity Pledge Agreement entered into between Global Lock WFOE, Shenzhen Global Lock and the Founder Shareholders under which the Founder Shareholders have pledged their respective equity interests in Shenzhen Global Lock to Global Lock WFOE as security for the protection of the rights of Global Lock WFOE under the Exclusive Technology Support Agreements, the Business Operation Agreement, the Exclusive Option Agreement and the Exclusive Sales Agreement referred to above (the "Contractual Arrangements"). In addition, the Founder Shareholders have agreed not to transfer, sell, pledge, dispose or create any encumbrance over their equity interests in Shenzhen Global Lock.
The Group, through these contractual agreements, gained control of Shenzhen Global Lock on that date.
In determining the appropriate accounting treatment for this transaction, the Directors considered IFRS 3 "Business Combinations" (Revised 2008). However, they concluded that this transaction fell outside the scope of IFRS 3 (revised 2008) since the transaction described above represents a combination of entities under common control as the same group of individuals acting in concert were shareholders of Shenzhen Global Lock as well as the controlling shareholders of the Company.In accordance with IAS 8 "Accounting Policies, changes in accounting estimates and errors", in developing an appropriate accounting policy, the Directors have considered the pronouncements of other standard setting bodies and specifically looked to accounting principles generally accepted in the United Kingdom ("UK GAAP") for guidance (FRS 6 - Acquisitions and mergers) which does not conflict with IFRS and reflects the economic substance of the transaction.
Under UK GAAP, the assets and liabilities of both entities are recorded at book value, not fair value (although adjustments are made to achieve uniform accounting policies), intangible assets and contingent liabilities are recognised only to the extent that they were recognised by the legal acquiree in accordance within applicable IFRS, no goodwill is recognised, any expenses of the combination are written off immediately to the income statement and comparative amounts, if applicable, are restated as if the combination had taken place at the beginning of the earliest accounting period presented.
Therefore, although the Group reconstruction did not become unconditional until 17 October 2010, these consolidated financial statements are presented as if the Group structure has always been in place, including the activity from incorporation of the group's principal trading subsidiary. Both entities had the same management as well as majority shareholders.
Business combinations
The acquisition of subsidiaries is accounted for using the purchase method of accounting. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3: Business Combinations are recognised at their fair value at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5: Non-Current Assets Held for Sale and Discontinued Operations, which are recognised and measured at fair value less costs to sell.
Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities exceed the cost of the business combination, the excess is recognised immediately in the Statement of Comprehensive Income.
Non-controlling interests that are present ownership interest and entitle their holders to a proportionate share of the entity's net assets in the event of liquidation may be initially measured either at fair value or at the non- controlling interests' proportionate share of the recognised amounts of the acquiree's identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value, when applicable, on the basis specified in another IFRS.
(e) Intangible assets
1. Patent rights
Patent rights acquired are initially recognised at cost and are subsequently carried at cost less accumulated amortisation and accumulated impairment losses. These costs are amortised to the income statement using the straight-line method over 14.6 years, which is the shorter of the remaining useful life and periods of contractual rights. The remaining useful life of 14.6 years of the 20 years patent is calculated from the date the patent was transferred to the Group on 1 August 2009.
2. Research and development expenditure
Research expenditure is recognised as an expense as incurred.
Costs incurred on development projects are recognised as internally generated intangible assets only if all of the following conditions are met by the Company:
- the technical feasibility of completing the intangible assets so that it will be available for use or sales;
- its intention to complete the intangible asset and use or sell it; - its ability to use or sell the intangible assets; - it is probable that the intangible asset created will generate future economic benefits;
- the availability of adequate technical financial and other resources to complete the development and use or sell the intangible assets; and
- its ability to measure reliably the expenditure attributable to the intangible assets during its development.
Internally generated intangible assets are amortised on a straight-line basis over their estimated useful lives, from the date the intangible is ready for use. Amortisation charge is recognised in the income statement within "Cost of sales".
Development costs that have been capitalised as intangible assets are amortised on a straight-line basis over the period of its expected benefits.
3. Customer relationship
Customer relationships are measured initially at purchase cost and are amortised on a straight-line basis over their estimated useful life of 5 years.
(f) Property, plant and equipment
Property, plant and equipment are stated at cost less any subsequent accumulated depreciation and subsequent accumulated impairment losses.
Depreciation is charged so as to write off the cost, less estimated residual value on assets other than land, over their estimated useful lives, using the reducing balance method, on the following bases:
Machinery equipment under construction straight line 5 years Machinery equipment straight line 5years Office equipment and motor vehicles straight line 5years
Gains and losses on disposals are determined by comparing proceeds with the carrying amount of the asset. These are included in statement of comprehensive income.
(g) Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss.
If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a re-valued amount, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a re-valued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
(h) Taxation
Current taxation
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the tax authorities. The tax rates and the tax laws used to compute the amount are those that are enacted, or substantively enacted, by the balance sheet date.
Deferred taxation
Deferred tax is provided in full using the balance sheet liability method for all taxable temporary timing differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes. Deferred tax is measured using currently enacted or substantially enacted tax rates.
Deferred tax assets are recognised to the extent the temporary difference will reverse in the foreseeable future and that it is probable that future taxable profit will be available against which the asset can be utilised.
(i) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable in accordance with the Group's principal activity, net of VAT and trade discounts, also deducted sales business tax.
Revenue is general recognised in the period when the services are provided, using a straight-line basis over the term of the contract.
a. Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lesser are classified as operating leases. Payments made under operating leases (net of any incentives received from the lesser) are charged to the profit and loss on a straight-line basis over the period of the lease.)
b. Investment in subsidiaries
Investments in subsidiaries are stated at cost less provision for permanent diminution in value.
c. Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits, bank balances, demand deposits and other short term, highly liquid investments that are readily convertible to known amount of cash and are subject to an insignificant risk of changes in value.
(j) Financial instruments
Financial assets and financial liabilities are recognised on the group's balance sheet when the group becomes a party to the contractual provisions of the instrument.
Trade and other receivables
Trade and other receivables are initially measured at fair value and are subsequently reassessed at the end of each accounting period.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
Financial liabilities and equity
Financial liabilities and equity instruments issued by the group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities and equity instruments are set out below.
Trade payables
Trade payables are initially measured at fair value and are subsequently measured at amortised cost, using the effective interest rate method.
Equity instruments
Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs. Shares issued are held at their fair value.
(k) Inventory
Inventory is stated at the lower of cost and net realisable value. Cost is determined on a first-in first-out basis. Net realisable value is based on estimated selling price allowing for all further costs to completion and disposal.
The inventory is included within finished goods (spare parts and uniform) and low-value consumption goods.
(l) Borrowings
Borrowings are recognised initially at the proceeds received, net of transaction costs incurred, and subsequently measured at amortised cost using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least twelve months after the end of reporting date.
(m) Provisions
Provisions are recognised when the group has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the group expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost.
(n) Commitments and contingencies
Commitments and contingent liabilities are disclosed in the financial statements. They are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. A contingent asset is not recognised in the financial statements but disclosed when an inflow of economic benefits is probable.
(o) Events after the balance sheet date
Post year-end events that provide additional information about a company's position at the balance sheet date and are adjusting events are reflected in the financial statements. Post year-end events that are not adjusting events are disclosed in the notes when material.
(p) Foreign currencies
The financial information is presented in Renminbi ("RMB") which is the functional currency of the Group.
Monetary assets and liabilities denominated in foreign currencies in each company are translated at the rates of exchange prevailing at the accounting date. Transactions in foreign currencies are translated at the rate prevailing at the date of transaction.
(q) Share-based payment arrangement
Equity-settled share-based payment transactions with parties other than employees are measured at the fair value of the goods or services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the services.
Fair value is measured by use of the Black-Scholes model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.
(r) Employee Benefits
Short Term Employee Benefits
Wages, salaries, annual leave and sick leave, social security contributions, bonuses and non-monetary benefits are accrued in the period in which the associated services are rendered by the employees.
Post-employment benefits
For the subsidiary of the Group in PRC, there are contributory retirement plans operated by the local government. The employees participate in the defined contribution retirement plan whereby the company is required to contribute to the schemes at fixed rates of the employees' salary costs. The company's contributions to these plans are charged to profit or loss when incurred. The company has no obligation for the payment of retirement and other post-retirement benefits of staff other than the contributions described above.
Contribution made to the defined contribution retirement plan includes basic pension insurance in PRC which is charged to the profit and loss in the period to which they are related.
Under the pension plan which the Group pays fixed contributions and will have no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employee benefits relating to employee service in the current or prior financial periods. Once the contributions have been paid, the Group has no further payment obligations.
(s) Government grants
Government grants are recognised as income over the periods necessary to match them with the related costs which they are intended to compensate; and are recognised only when there is reasonable assurance that:
-- the company will comply with the conditions attached to them; and -- the grants will be received.
Unconditional government grant is recognised in profit or loss as other income when the grant becomes receivables
(t) Accounting estimates and judgments
The preparation of financial statements in conforming to adopted IFRSs requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and assumptions are based on historical experience and other factors considered reasonable at the time, but actual results may differ from those estimates. Revisions to these estimates are made in the period in which they are recognised.
Consolidation
The Group does not consolidate the results of Hunan XinXiang Jingan Security Technology Co., Limited ("Henan XinXiang") as the Directors are of the opinion the control is intended to be temporary and Henan XinXiang will be disposed within next 12 months. As such, the Directors are actively seeking a buyer for Hunan XinXiang.
(u) Use of estimates
The assumptions concerning the future, and other key sources of estimation at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:
Intangible Assets
Amortisation
Intangible assets (other than goodwill) are amortised over their useful lives. Useful lives are based on management's estimates of the periods over which the assets are expected to generate revenues. These estimates are periodically reviewed for reasonableness. Due to the long lives of these assets, especially patent rights long lives (14 years) changes to the estimates can result in significant changes to the carrying value. A decrease of 10% in the charge in the next year would reduce costs by RMB270,000 approximately.
Impairment review
The Group assesses the impairment of intangible assets subject to amortisation or depreciation whenever events or changes in circumstances suggest that the carrying amount of the asset may not be recoverable or may have been impaired. Factors that may trigger an impairment review include the following:
i. Significant underperformance relative to historical or projected operating results.
ii. Significant changes in the manner of the use of the assets or the overall business strategy.
iii. Significant negative industry or macro-economic trends.
The key assumptions used in the value in use calculations for the customer list included with intangible assets are customer attrition rates, revenue growth rates and appropriate discount rates.
Management has assessed the net present value and thereby impairment on variety of bases and assumptions. The impairment test are particularly sensitive to changes in the key assumptions and changes to the assumptions could result in impairment; however all of the varying bases indicate a net present value in excess of the carrying value of the intangible assets.
The key assumptions in the value in use calculations are as follows:
Customer Attrition Rate 5.3% Growth Rate 50% Discount Factor 14.26%
A decrease of 10% in the key assumptions rates would result in the request for an impairment of the intangible asset.
Share-based payment
The Group has share option schemes for certain suppliers. Judgements and estimates are required in determining the share-based payment charge as an expense in the income statement. The directors have used Black-Scholes model which has been widely used in valuing the share based payment charge. The directors are in the opinion that the model used has been adjusted to their best estimate in arriving at the charge.
2 Business segments
For the purpose of IFRS 8, the chief operating decision maker takes the form of the Board of Directors. The Directors are of the opinion that the business of the Group comprises of a single activity, being the provider of security solutions to retail stores in the PRC. At the meetings between the Directors, the income, expenditure cash flows, assets and liabilities are reviewed on a whole-group basis.
The investment criterion of the Group is to invest in sales opportunities in prime locations. Sub-division of sales by type, function or by town or city of location is therefore of little significance in reviewing operations.
Based on the above considerations, there is considered to be one reportable segment, the provider of security solutions to retail stores in PRC. Internal and external reporting is on a consolidated basis, with transactions between Group companies eliminated on consolidation. Therefore the financial information of the single segment is the same as that set out in the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Financial Position and Consolidated Statement of Cash Flows.
All Group non-current assets are located in the PRC. No Group non-current assets are located in the entity's country of domicile.
3 Taxation Group 2011 2010 RMB RMB Current tax - - Deferred tax - 802,766 Tax charge/(credit) on ordinary activities - 802,766 Reconciliation of the tax expense The tax assessed for the year is different from the standard rate of corporation tax in the PRC (15%). The differences are explained below: Group 2011 2010 RMB RMB Loss on ordinary activities before taxation (24,421,450) (2,484,332) Loss on ordinary activities multiplied by standard rate of corporation tax in the PRC of 15% (2010: 15%) (3,196,659) (372,650) Effects of: Non-deductible expenses 202,112 219,077 Deferred tax movement 2,994,547 956,339 Tax charge/(credit) on ordinary activities - 802,766
The company is regarded as resident for the tax purposes in BVI. There are no applicable taxes in the BVI for the company.
The Group is regarded as residents for the tax purposes in PRC and subject to national income tax rate at 25%. Due to its high technology enterprise status, the company is entitled to a reduction in tax rate at 15%.
A deferred tax asset of approximately RMB3,900,000 (2010: RMB 900,000) has not been recognized in respect of timing differences relating to losses not utilised and carried forward at the year end as there is insufficient evidence that the amount will be recovered in future years.
4 Loss per share
The calculation of basic and diluted loss per share at 31 December 2011 was based on the loss attributable to ordinary shareholders of RMB 4,466,022 (2010: RMB 1,460,511). The weighted average number of ordinary shares outstanding during the year ended 31 December 2011 and the effect of the potentially dilutive ordinary shares to be issued are shown below.
Group ----------------------------- 2011 2010 Number Number Issued ordinary shares at beginning of the year 250,000,000 25,000,000 Effect of shares issued - 56,095,890 --------------- ------------ Basic weighted average number of shares in issue during the year 250,000,000 81,095,890 =============== ============ Diluted weighted average number of shares in issue during the year 250,000,000 81,095,890 =============== ============ Group ----------------------------- 2011 2010 RMB RMB Net loss for the year attributable to equity holders (4,466,022) (1,460,511) =============== ============ Basic loss per share (0.02) (0.02) =============== ============ Diluted loss per share (0.02) (0.02) =============== ============
At 31 December 2011, 2.5m share options (2010: 2.5m) were excluded from the diluted weighted average number of ordinary shares calculation as their effect would have been anti-dilutive.
The average market value of the Company's shares for purposes of calculating the dilutive effect of the share options was based on quoted market prices for the period during which the options were outstanding.
5 Intangible assets Development Customer Group Patent rights cost relationship Total RMB RMB RMB RMB Cost As at 1 January 2010 39,203,800 192,000 - 39,395,800 Additions 640,432 - 640,432 As at 31 December 2010 39,203,800 832,432 - 40,036,232 Additions - 2,221,326 3,413,075 5,634,401 -------------- ------------ -------------- ----------- As at 31 December 2011 39,203,800 3,053,758 3,413,075 45,670,633 -------------- ------------ -------------- ----------- Less: Accumulated amortization As at 1 January 2010 1,116,917 - - 1,116,917 Amortization for the year 2,680,602 - - 2,680,602 As at 31 December 2010 3,797,519 - - 3,797,519 Amortization for the year 2,685,192 - 324,901 3,010,093 -------------- ------------ -------------- ----------- As at 31 December 2011 6,482,711 - 324,901 6,807,612 -------------- ------------ -------------- ----------- Carrying amounts At 31 December 2011 32,721,089 3,053,758 3,088,174 38,863,021 ============== ============ ============== =========== At 31 December 2010 35,406,281 832,432 - 36,238,713 ============== ============ ============== ===========
Intangible assets include patent rights, development costs and customer relationship.
The Group undertakes development projects to improve and upgrade its software solution that includes the peripheral devices used for the security and the related software.
The goodwill arising on the acquisition of local business operatorsis attributable to the anticipated profitability of the foreseeable future contracts to be obtained by the customer relationships in the security solutions sectors, the expertise of the technical staffs and the anticipated future operating synergies from the combination.
6 Property, plant and equipment Group Security Assets Security Security Office Total equipment under equipment centre equipment not installed construction installed and motor at customer at customer vehicles RMB RMB RMB RMB RMB RMB At cost As at 1 January 2011 3,826,513 34,493 11,096,135 926,204 3,555,177 19,443,522 Additions 6,464,815 74,973 - 928,798 2,343,146 9,811,732 Disposal - - - - (26,068) (26,068) Transfer (6,624,293) (44,571) 6,137,263 44,571 - (487,030) As at 31 December 2011 3,667,035 69,895 17,233,398 1,899,573 5,872,255 28,742,155 Accumulated depreciation As at 31 December 2010 - - 1,827,903 71,907 507,014 2,406,824 Charge for the year - - 2,936,301 164,056 1,002,747 4,103,104 Eliminated - - - - (11,487) (11,487) Transfer - - (487,030) - - (487,030) As at 31 December 2011 - - 4,277,174 235,963 1,498,274 6,011,411 Net book value of property, plant and equipment At 31 December 2011 3,667,035 69,895 12,956,224 1.663.610 4.373.981 22,730,745 At 31 December 2010 3,826,513 39,493 9,268,232 854,297 3,048,163 17,036,698 7 Shares in subsidiary undertakings Group 2011 2010 RMB RMB Investment costs As at 1 January - - Additions 16,000,000 - Withdrawn* (8,000,000) - As at 31 December 8,000,000 - Impairment From 1 January - - Impairment loss 500,000 - As at 31 December 500,000 - Carrying value As at 31 December 2011 7,500,000 -
On 14 March 2011, the Group subscribed 15.78% of the entire share capital of Shenzhen China Security Investment Holding Co., Limited for RMB 30 million at nominal of which RMB 9 million has been invested. This investment is a joint venture project to construct an office building in Shenzhen.
*Following to the failure in obtaining approval from the local government for the construction site, the Group recovered RMB 8 million of its capital investment. The directors are of the opinion that the impairment provision of RMB 500,000 to the remaining RMB 1 million to cover the losses incurred to date.
Details of the subsidiaries, all of which have ordinary shares and a year ended 31 December 2011, are as follows:
Effective Contractual equity interest interest held by held by Country Subsidiary the Group the group of registration Nature of business ------------------------------- ----------------- ------------ ----------------- ------------------- HK Global Lock Safety 100% n/a Hong Kong Investment holding (International) Group Co Limited Held by subsidiaries: Global Lock Safety (Shenzhen) 100% n/a PRC Investment holding Limited Shenzhen Global Lock - 100% PRC Provide security Security System Engineering solutions to Co., Ltd. retail stores. Yuxi City Global Lock - 50% PRC Provide security Security Engineering solutions to Co., Ltd ("Yuxi") retail stores. Shenzhen Global Lock - 100% PRC Dormant Security Technology Co., Limited Henan Xinxiang Jingan Provide security Security Electronic Co., solutions to Limited 40% 30% PRC retail stores. Shenzhen China Security - 15.78% PRC Non-trading Investment Holding Co., Limited
Global Lock Safety (Shenzhen) Limited has a contractual agreement with Shenzhen Global Lock Security System Engineering Co., Ltd. where full managerial, operational and financial controls of Shenzhen Global Lock Security System Engineering Co., Ltd. has been granted to Global Lock Safety (Shenzhen) Limited. The contractual agreement directs 25% of Shenzhen Global Lock's revenue and results to the Group.
Yuxi is consolidated in the financial statements due to deemed control. The Group considers this company as a subsidiary because it has control over the Board of Directors of the company.
On 16 February 2011, the Group subscribed the entire share capital of Shenzhen Global Lock Security Technology Co., Limited for RMB 10 million at nominal, fully paid. As at year end, the company was non-trading.
On 3 June 2011, the Group acquired 70% of the of the issued share capital of Henan XinXiang Jingan Security Electronic Co., Limited ("Henan Xinxiang") for a total consideration of RMB 7 million of which RMB 3 million payable in cash and balance of RMB 4 million issue of new shares of Global Lock after one year. The number of shares to be issued will be based on the calculation of the same value of share amount and closing share price of Global Lock at date of business combination. The Group considers this company as an investment and intends to dispose of Henan XinXiang within next 12 months. As such, the Directors are actively seeking a buyer for Henan XinXiang.
8 Deferred tax assets Group ------------------ 2011 2010 RMB RMB At 1 January - 802,766 Charged to income statement (Note 8) - (802,766) At 31 December - - ====== ==========
The Group has the following unutilised tax losses at end of the financial year to offset against future profits in PRC:
Group -------------------- 2011 2010 RMB RMB Unutilised tax losses 4,100,000 900,000 ========== ========
There are no significant temporary differences. The realisation of deferred tax is dependent on suitable taxable profits made in future periods.
9 Trade and other receivables Group 2011 2010 RMB RMB Trade receivables 333,494 519,695 Loans to directors 3,255,122 1,100,000 Amount due from group - - undertakings Amount due from connected party 5,063,039 4,666,017 Other receivables 12,003,303 10,170,255 Deposit - 789,783 Prepayments 6,498,938 2,762,680 Prepaid insurance - 1,668,200 27,153,896 21,676,630
There are no trade or other receivables past due and the carrying amount of trade and other receivables approximates their fair value.
Amount owing by directors represents amount drawn on account and, are non-trade, interest-free and payable on demand.
10 Cash and cash equivalents
Group 2011 2010 RMB RMB Cash on hand 965,819 540,142 Bank balances 2,290,857 7,413,207 3,256,676 7,953,349
Included in the Group bank balances as at 31 December 2011 are RMB Nil (2010: RMB 702,660) held in trust by directors.
Cash and cash equivalents were denominated in the following currencies:
Group 2011 2010 RMB RMB Great Britain - - Pounds United States Dollars 370,469 461,697 Hong Kong Dollars 4,018 843 Renminbi 2,882,189 7,490,809 3,256,676 7,953,349
11 Stated capital account and share capital
Share capital Share capital 2011 2011 2010 2010 Number RMB Number RMB Ordinary shares of no face value - brought forward 250,000,000 20,323,800 25,000,000 323,000 - share issues - - 225,000,000 20,000,800 250,000,000 20,323,80 250,000,000 20,323,800 ============ =========== ============ =========== Authorized Unlimited Unlimited ============ =========== ============ ===========
On 29 December 2009, the company issued 50,000 ordinary shares of US$1 each at par.
On 20 September 2010, the company increased the authorised share capital from 50,000 ordinary shares of US$1 each to 250,000,000 ordinary shares of US$1 each. The company subsequently converted all the existing and issued ordinary shares of US$1 each par value into 500 shares of no par value.
On 2 October 2010, the company further increase the authorised share capital to an unlimited number of no par value shares.
On 2 October 2010, the company issued 212,500.000 ordinary shares of no par value for US$0.000001 per share.
Subsequently, the company issued 12,500,000 ordinary shares of no par value of RMB20,000,000.
The holders of ordinary shares are entitled to receive dividends from time to time and are entitled to one vote per share at meetings of the company.
12 Non-controlling interest
Group 2011 2010 RMB RMB At 1 January 50,466,511 51,793,098 Capital contributed by non-controlling interest - 500,000 Loss for the year (19,955,428) (1,826,587) At 31 December 30,511,083 50,466,511 ============= ============
13 Trade and other payables
Group 2011 2010 RMB RMB Trade payables 1,845,017 551,524 Loan from directors 4,460,590 - Amount due to group undertakings - - Amount due to connected party 233,020 729,519 Net wages control 3,354,769 - Other creditors 16,023,756 2,273,250 Accruals 1,414,176 368,872 Deferred income 22,165,480 9,897,425 49,496,808 13,820,590
14 Financial Commitments
Financial commitments in relation to non-cancellable operating leases for office premises contracted for at the date of the statement of financial position but not recognised as liabilities, are payable as follows:
2011 2010 RMB RMB Less than 1 year 1,608,972 1,405,675 More than 1 year and not more than 5 years 1,478,949 1,524,225 More than 5 years - 3,087,921 2,929,900 ========== ====================
15 Related party transactions
Key management personnel are considered to be the directors and their emoluments are included in Note 7.
As at balance sheet date, the amount due from Mr Xuean Yan is RMB 3,255,122 and the amount due to Mr Moxiang Li is RMB 4,300,590
In addition to the related party information disclosed elsewhere in the financial statements, the following were significant related party transactions during the year under review and at terms and rates agreed between the parties:
Hunan Xiang long Electronics Development Co., Ltd ("Hunan Xiang")
Hunan Xiang, the key supplier of the Group's equipment, is owned by some of the directors. Details of transactions with Hunan Xiang are presented below:
2011 2010 RMB RMB Purchase of equipment 6,464,815 6,641,688 Balance payable 12,297 25,548 Prepayment for machinery equipment 1,013,000 4,666,017
Family Fortune International Co., Ltd
The Group has a non-trade balance receivable from a shareholder of the Company, Family Fortune International Co., Ltd, of RMB 103,311 (2010: RMB 26,500).
Shenzhen Family Fortune Investment Co., Ltd
The Group has non-trade balance receivable to Shenzhen Family Fortune Investment Co., Ltd, a company with some common directors, of RMB 1,501,355 (2010: payable of RMB 670,000).
Shenzhen Global Lock Security Mobile Co., Ltd
The Group has non-trade balance receivable to Shenzhen Global Lock Security Mobile Co., Ltd, a company with some common directors, of RMB 2,272,430 (2010: RMB NIL).
Shenzhen Lin En Energy Investment Co., Ltd
The Group has non-trade balance receivable to Shenzhen Lin En Energy Investment Co., Ltd, a company with some common directors, of RMB 184,823 (2010: RMB NIL).
Henan Xinxiang Jingan Security Electronic Co., Ltd
The Group has non-trade balance payable to Henan Xinxiang Jingan Security Electronic Co., Ltd, a partial owned subsidiary by the Group, of RMB 233,020 (2010: RMB NIL).
16 Other matters
This statement was approved by the directors on 25 May 2012. The financial information for the year ended 31 December 2011 set out in this announcement does not constitute financial statements but is based on the financial statements for the year then ended.
The auditors have reported on those financial statements and their report contains an emphasis of matter in relation to the Group's ability to continue as a going concern but did not contain any formal qualification or disclaimer. The auditor's report of the accounts for the year ended 31 December 2010 was unqualified.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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