Operational Review

Extracted from Annual Report 2017

For the financial year ended 31 March 2017 ("FY2017"), the Group registered a turnover of US$0.6 million, which represented a 77% decline or US$2.1 million compared to US$2.7 million for the previous 12 months ended 31 March 2016 ("FY2016").

The turnover decline was mainly due to the weak demand in the products and commodities of the Group in FY2017 compared to FY2016. This was however partly mitigated by the turnover contribution from the Group's systems segment. Gross profit for FY2017 was US$0.1 million against FY2016's US$0.4 million.

Other credits was US$3.1 million for FY2017 as compared to US$1.1 million in FY2016. The increase of US$2.0 million in FY2017 was mainly due to the increase in fair value gain on financial liability carried at fair value and fair value gain on a derivative financial instrument of US$0.5 million and US$2.0 million respectively. The increase was offset by the lesser write back of trade and other payables of US$0.4 million and the gain on expiration of warrants of US$0.2 million in FY2016.

The Group's operating expenses rose to US$7.8 million in FY2017 from US$3.3 million in the previous corresponding year. Marketing and distribution expenses decreased by 76% from US$0.2 million in FY2016 to US$0.05 million in FY2017. Administration expenses fell by 12% from US$2.1 million in FY2016 to US$1.8 million in FY2017 mainly due to the reduction in staff incentive expenses and operating cost for the Group's systems segment. Finance costs totalled US$0.1 million while other charges rose to US$5.8 million in FY2017 from US$1.0 million in FY2016. This was mainly due to the impairment of an associated company which totalled US$3.6 million and an allowance for impairment of trade and other receivables of US$1.5 million.

For FY2017, the Group incurred a one-off expense of US$5.1 million consisting of allowance for impairment of trade and other receivables and impairment of an associated company. Excluding this one-off expense, the loss from operating activities before tax stands at US$0.9 million.

BALANCE SHEET

The Group's non-current assets increased by US$2.4 million from US$12.3 million as at 31 March 2016 to US$14.7 million as at 31 March 2017. The increase was mainly due to a loan of US$8.3 million granted to an associated company. The increase was however offset by the impairment of an associated company of US$3.6 million, share of loss of associated company of US$1.5 million, and translation loss in associated company of US$0.8 million.

Current assets, which comprised mostly trade and other receivables, convertible loan, derivative financial instrument, and cash and cash equivalents, amounted to US$21.7million as at 31 March 2017. The reduction by US$7.2 million as compared to current assets of US$28.9 million as at 31 March 2016 was mainly due to the decrease in cash and cash equivalents due to a direct loan granted to an associated company and additional allowance for impairment of trade and other receivables.

Current liabilities, which consisted of income tax payable, trade and other payables, and other financial liabilities, amounted to US$3.4 million as at 31 March 2017 as compared to US$3.9 million as at 31 March 2016. The decrease was a result of lower trade and other payables of US$0.5 million, which was aligned to lower expenses after excluding one-off expenses relating to the impairment of an associate company of US$3.6 million and the impairment of trade and other receivables of US$1.5 million.

Non-current liabilities increased from US$1.6 million as at 31 March 2016 to US$3.8 million as at 31 March 2017. This increase was mainly due to the convertible loans obtained from Singapore Rixin Zhonghe Investment Pte. Ltd. in support of the new Corporate Accretion Services business focusing on education and financial technology sectors.

The Group's working capital was US$8.8 million as at 31 March 2017 as compared to US$25.0 million as at 31 March 2016. The decrease was in cash and cash equivalents and other receivables being formalised to a convertible loan and direct loan.

CASH FLOW STATEMENT

Net cash flow provided by operating activities for the financial year under review was US$6.4 million, comprising operating cash flows before working capital changes of US$2.8 million and working capital inflow of US$9.2 million.

The working capital inflow was mainly due to the decrease in trade and other receivables of US$9.8 million. This inflow was slightly offset by the decrease in trade and other payables of US$0.6 million.

Net cash used in investing activities for FY2017 of US$16 million was mainly due to a loan granted to an associate company, Jubilee Industrial Holdings Limited ("JIH") and the subscription of a convertible loan issued by JIH. Cash used in financing activities was US$3.3 million mainly due to the issuance of a convertible loan, the drawdown of cash restricted in use over three months as well as bank deposits pledged.

The Group's cash and cash equivalents was US$2.3 million as at 31 March 2017 as compared to US$8.5 million as of 31 March 2016, a net decrease of US$6.2 million.