CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2019

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

1.            GENERAL INFORMATION

Starcrest Education The Belt & Road Limited ("the Company") was incorporated and registered in the Cayman Islands as a private company limited by shares on 23 May 2018 under the Companies Law (as revised) of The Cayman Islands, with the name Starcrest Education The Belt & Road Limited, and registered number 337619.

The Company's registered office is located at Cricket Square, Hutchins Drive PO Box 2681, Grand Cayman KY1-1111, Cayman Islands.

These financial statements are presented for the 12 month period from 1 January 2019 to 31 December 2019 so are not directly comparable to the comparative period of 7 months from 23 May 2018 to 31 December 2018.

2.            PRINCIPAL ACTIVITIES

The principal activity of the Group is to seek education related acquisition opportunities in Europe.

3.            RECENT ACCOUNTING PRONOUNCEMENTS 

(a)       New interpretations and revised standards effective for the year ended 31 December 2019

The Group has applied the same accounting policies and methods of computation as used in its 2018 accounts, except for those that relate to new standards and interpretations effective for the first time for periods beginning on (or after) 1 January 2019, and have been adopted in the 2019 annual financial statements. New standards impacting the Group that have been adopted in the annual financial statements for the year ended 31 December 2019, and which have given rise to changes in the Group's accounting policies are:

i.  IFRS 16 Leases

Effective 1 January 2019, IFRS 16 has replaced IAS 17 Leases and IFRIC 4 Determining whether an Arrangement Contains a Lease.

IFRS 16 provides a single lessee accounting model, requiring the recognition of assets and liabilities for all leases, together with options to exclude leases where the lease term is 12 months or less, or where the underlying asset is of low value. On 1 January 2019 the Group had no leases (2018: none) so there was no impact on transition to IFRS 16. See Note 5.6 for lease accounting policies.  

The lease liabilities were measured at the present value of the remaining lease payments, discounted using the incremental borrowing rate.

(b)       Standards and interpretations in issue but not yet effective

There are a number of standards and interpretations which have been issued by the International Accounting Standards Board that are effective in future accounting periods that the Group has decided not to adopt early. The most significant of these are as follows, which are all effective for the period beginning 1 January 2020:

·      IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (Amendment - Definition of Material)

·      IFRS 3 Business Combinations (Amendment - Definition of Material)

·      Revised Conceptual Framework for Financial Reporting

The Directors do not believe these standards and interpretations will have a material impact on the financial statements once adopted.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

4.            BASIS OF PREPARATION

The consolidated financial information has been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and prepared under the historic cost convention.

The consolidated financial statements include the audited financial statements for the Company for the year ended 31 December 2019 and its subsidiary companies (See Note 16).

The Group's functional currency is USD. The Company listed its shares on the Main market of the London Stock Exchange on 31 January 2019 (See Note 19). The directors have decided to present the financial information in Pounds Sterling (£), which is the Company's presentation currency, as the Company is listed in the UK.

These financial statements have been prepared on a going concern basis. The Directors consider that, having reviewed current cash flow forecasts on a stand-alone basis (i.e. excluding the Proposed Transaction), having taken into account current overheads and projected costs associated with the due diligence on the Proposed Transaction and including specific consideration of the potential risks associated with COVID-19, they have a reasonable expectation the Group has adequate resources to continue its operations for the foreseeable future.

5.            SIGNIFICANT ACCOUNTING POLICIES

5.1         Foreign currency translation

Transactions in currencies other than the entity's functional currency (foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Results at 31 December 2019 are translated into the presentation currency. Assets and liabilities are translated at the closing rate while income and expenses are translated at exchange rates at the dates of the transactions. Differences arising are recognised in Other Comprehensive Income in the period in which they arise.

5.2         Financial instruments

A financial asset or a financial liability is recognised only when the Group becomes a party to the contractual provisions of the instrument.

Financial instruments are initially recognised at the transaction price as this represents fair value, unless the arrangement constitutes a financing transaction, where it is recognised at the present value of the future payments discounted at a market rate of interest.

Financial assets

Financial assets are initially recognised at fair value, less transaction costs. Subsequent to initial recognition, they are recorded at amortised cost.

Financial liabilities

Financial liabilities are initially recognised at fair value less transaction costs. Subsequent to initial recognition, they are recorded at amortised cost.

5.3         Share Capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares or options in relation to ordinary shares are shown in equity as a deduction, net of taxation, from the proceeds. 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

5.            SIGNIFICANT ACCOUNTING POLICIES (Continued)

5.4         Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held on call with banks and other short term highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.

5.5         Earnings per share

Basic earnings per share is computed using the weighted average number of shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of shares during the period plus the dilutive effect of dilutive potential ordinary shares outstanding during the year.

5.6        Leases

During the year the Group has recognised a right-of-use asset measured at an amount equal to the lease liability, in relation to leased office space. The lease liability is measured at the present value of the remaining lease payments, discounted using the Group's incremental borrowing rate at date of lease commencement. Lease modifications are accounted for at the effective date of the lease modification.

6.            ACCOUNTING ESTIMATES AND JUDGEMENTS

Preparation of financial information in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources.

The Directors have applied judgement in determining the appropriate split of professional costs incurred in connection with the listing between profit or loss and equity. The Directors have made this assessment based on the proportion of shares in issue before and after the listing.

The Directors have applied judgement in determining the incremental borrowing rate, which is the rate at which a similar borrowing could be obtained from an independent creditor under comparable terms and conditions. The rate is used to measure lease liabilities by discounting the present value of future lease payments (See Note 15).

7.            FINANCIAL RISK MANAGEMENT

The Group has exposure to liquidity risk, foreign currency risk and capital risks from its use of financial instruments. Credit, interest rate and market risks are not considered to be material to the Group. The Group is not subject to any external imposed capital requirements.

The Group's financial instruments consist mainly of cash and accounts payable.

a) Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities. The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation.

The Group's financial liabilities comprise amounts due to the parent company, lease liabilities and accruals. The Group's financial assets comprise cash and cash equivalents.

The Group has sufficient cash to meet their liabilities as they fall due.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

7.            FINANCIAL RISK MANAGEMENT (Continued)

b) Foreign currency risk (Continued)

The Group's operations expose it primarily to the financial risks of variations in foreign currency exchange rates. The Group undertakes transactions denominated in currencies which are different to its presentation currency. Consequently, the Group's financial performance is affected by exchange rate fluctuations.

The impact of exchange rate fluctuations that are recognised through other comprehensive income are those that arise on translation from functional to presentation currency. The carrying amounts of the balances and transactions denominated in a currency other than the Group's presentation currency are as follows:

A ten percent strengthening of GBP (£) against the following currencies at 31 December would have (decreased)/increased reported equity and other comprehensive income by the following amounts:

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

7.          FINANCIAL RISK MANAGEMENT (Continued)

b) Foreign currency risk (Continued)

A ten percent weakening of GBP (£) against the following currencies at 31 December would have (decreased)/increased reported equity and other comprehensive income by the following amounts:

The impact of the exchange rate fluctuations that are recognised through profit or loss are those that arise on translation to functional currency. The carrying amounts of the balances and transactions denominated in a currency other than the entity's functional currency (United States Dollar) are as follows:

A ten percent strengthening of USD ($) against the following currencies at 31 December would have (decreased)/increased reported equity and profit or loss by the following amounts:

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

7.          FINANCIAL RISK MANAGEMENT (Continued)

b) Foreign currency risk (Continued)

A ten percent weakening of USD ($) against the following currencies at 31 December would have (decreased)/increased reported equity and profit or loss by the following amounts:

c)  Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. Credit allowances are made for estimated losses that have been incurred by the reporting date.

The Group's cash balances were all held with Oversea-Chinese Banking Corporation Limited (OCBC). Per Standard & Poor's, the Short Term Foreign / Local Currency Deposit Rating is A-1+.

8.            CAPITAL MANAGEMENT

The Group actively manages the capital available to fund the Group, comprising equity and reserves. The Group's objectives when maintaining capital is to safeguard the entity's ability to continue as a going concern, so that it can continue to provide returns for shareholders.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

9.            SEGMENT REPORTING

IFRS 8 defines operating segments as those activities of an entity about which separate financial information is available and which are evaluated by the Board of Directors to assess performance and determine the allocation of resources. The Board of Directors are of the opinion that under IFRS 8 the Group has only one operating segment. The Board of Directors assess the performance of the operating

segment using financial information which is measured and presented in a manner consistent with that in the Financial Statements. Segmental reporting will be reviewed and considered in light of the development of the Group's business over the next reporting period.

10.          OPERATING LOSS

11.          STAFF COSTS AND KEY MANAGEMENT EMOLUMENTS

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

12.          AUDITORS' REMUNERATION

13.          TAXATION

The Company is incorporated in the Cayman Islands, and its activities are subject to taxation at a rate of 0%. All subsidiaries have not started trading during the year.

14.          EARNINGS PER SHARE

The Company presents basic and diluted earnings per share information for its ordinary shares. Basic earnings per share is calculated by dividing the loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares in issue during the reporting period.

There is no difference between the basic and diluted loss per share.

The loss per share for the period has been calculated using the weighted average number of shares in issue during the year. The Company issued new Ordinary shares in January 2019 (See note 19).

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

15.          LEASES

Leases: right-of-use assets

Lease liabilities

During the year the lease was extended from February 2020 to August 2020. This extension is a lease modification as it is a change in the scope of the lease by extension of contractual lease term, and is applied from the effective date of the modification, which was when the extension agreement was signed, prior to year-end.

16.          SUBSIDIARIES

All subsidiaries which have been included in these consolidated financial statements, are as follows:

Both companies above were incorporated in November 2019 and had not started trading in the period to 31 December 2019.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

17.          CASH AND CASH EQUIVALENTS

18.          TRADE AND OTHER PAYABLES

The amounts above includes £179,160 (2018: £243,120) in relation to share issue costs.

All payables are financial liabilities measured at amortised cost.

Amounts due to the parent company are unsecured, interest free and repayable on demand.

19.          SHARE CAPITAL

On incorporation, the Company had an authorised share capital of US$50,000 divided into 50,000 ordinary shares of a par value of US$1.00 each.

On 18 December 2018 the Company repurchased and cancelled the issued ordinary share capital of 10,000 of US$1 each. Separately, the Company's authorised share capital became 1,000,000,000 ordinary shares of £0.01 each. On the same date the Company issued 800,000 ordinary shares at nominal value.

On 18 December 2018 20,760,000 were subscribed to and recognised as shares to be issued in other reserves. These were subsequently issued as part of the share issue on 31 January 2019.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

19.        SHARE CAPITAL (Continued)

On 31 January 2019, a total of 20,760,000 ordinary shares of nominal value £0.01 each were issued by way of placing at a price of £0.20 per share on the London Stock Exchange.

20.          SHARE PREMIUM

Transaction costs of £111,177 for the year ended 31 December 2019 and £291,222 for the period from 23 May 2018 to 31 December 2018 have been deducted from equity. These costs are incremental and directly attributable to the issue of shares.

The opening balance of Other Reserves of £3,773,141 has been recognised as share capital and share premium after the issue of the new shares on 31 January 2019.

21.          RESERVES

The following describes the nature and purpose of each reserve within equity:

22.          RELATED PARTY TRANSACTIONS

As at 31 December 2019, an amount of £203,788 (31 December 2018: £249,451) was owed to Starcrest Education Management Company Ltd. This amount mainly arose from business expenses paid on behalf of the Company by the parent company.

The remuneration of the Directors, the key management personnel of the Company, is set out in note 11.

23.          ULTIMATE CONTROLLING PARTY

The immediate parent company is Starcrest Education Management Company Ltd. The ultimate parent company is Shenzhen Xing Chen Investment Holdings Limited.  The ultimate controlling party is Mr Xingchen Zhu, who is also a director of the Company.