Exhibit 99.1
SAHARA HOLDINGS LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2018
SAHARA HOLDINGS LIMITED
CONTENTS
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SAHARA HOLDINGS LIMITED
Board of directors
Sahara Holdings Limited
Dartford, United Kingdom
We have audited the accompanying consolidated financial statements of Sahara Holdings Limited and its subsidiaries, which comprise the consolidated balance sheets as of 31 December 2019 and 2018, and the related consolidated statements of comprehensive income, changes in equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice); this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Sahara Holdings Limited and its subsidiaries as of 31 December 2019 and 2018, and the results of their operations and their cash flows for the years then ended in accordance with United Kingdom Generally Accepted Accounting Practice.
Emphasis of Matter
United Kingdom Generally Accepted Accounting Practice varies in certain significant respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences is presented in Note 27 to the consolidated financial statements.
/s/ BDO LLP |
London, United Kingdom
10 December 2020
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SAHARA HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE TWO YEARS ENDED 31 DECEMBER
Note | 2019 | 2018 | |||||||||
£ | £ | ||||||||||
Turnover | 4 | 78,940,158 | 72,642,618 | ||||||||
Cost of sales | (60,030,298 | ) | (53,132,410 | ) | |||||||
Gross profit | 18,909,860 | 19,510,208 | |||||||||
Distribution costs | (3,327,122 | ) | (2,846,621 | ) | |||||||
Administrative expenses | (7,732,931 | ) | (7,547,515 | ) | |||||||
Operating profit | 5 | 7,849,807 | 9,116,072 | ||||||||
Interest receivable and similar income | 8 | 37,132 | 6,479 | ||||||||
Interest payable and similar expenses | 9 | (1,191 | ) | (5,477 | ) | ||||||
Profit before taxation | 7,885,748 | 9,117,074 | |||||||||
Tax on profit | 10 | (1,552,210 | ) | (1,747,144 | ) | ||||||
Profit for the financial year | 6,333,538 | 7,369,930 | |||||||||
Attributable to owners | 6,333,538 | 7,369,930 |
There were no recognised gains and losses for 2019 or 2018 other than those included in the consolidated statement of comprehensive income.
There was no other comprehensive income for 2019 (2018 : £Nil).
The notes form part of these consolidated financial statements.
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SAHARA HOLDINGS LIMITED
AS AT 31 DECEMBER
Note | 2019 | 2018 | |||||||||
£ | £ | ||||||||||
Fixed assets | |||||||||||
Intangible assets | 12 | - | 181,369 | ||||||||
Tangible assets | 13 | 142,735 | 165,210 | ||||||||
142,735 | 346,579 | ||||||||||
Current assets | |||||||||||
Inventory | 15 | 8,452,430 | 12,524,030 | ||||||||
Debtors: amounts falling due within one year | 16 | 11,123,395 | 13,553,388 | ||||||||
Cash and cash equivalents | 17 | 12,568,021 | 2,044,766 | ||||||||
32,143,846 | 28,122,184 | ||||||||||
Creditors: amounts falling due within one year | 18 | (3,674,867 | ) | (5,500,218 | ) | ||||||
Net current assets | 28,468,979 | 22,621,966 | |||||||||
Total assets less current liabilities | 28,611,714 | 22,968,545 | |||||||||
Provisions for liabilities | |||||||||||
Deferred taxation | 19 | - | (34,460 | ) | |||||||
Other provisions | 20 | (2,228,199 | ) | (1,884,108 | ) | ||||||
(2,228,199 | ) | (1,918,568 | ) | ||||||||
Net assets | 26,383,515 | 21,049,977 | |||||||||
Capital and reserves | |||||||||||
Called up share capital | 21 | 100 | 100 | ||||||||
Share premium account | 125,113 | 125,113 | |||||||||
Profit and loss account | 26,258,302 | 20,924,764 | |||||||||
26,383,515 | 21,049,977 |
The consolidated financial statements were approved and authorised for issue by the board of directors and were signed on its behalf on 10 December 2020.
/s/ P Foley | |
P Foley | |
Chief Financial Officer |
The notes form part of these consolidated financial statements.
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SAHARA HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE TWO YEARS ENDED 31 DECEMBER
Note | Called up share capital | Share premium account | Profit and loss account | Total equity | |||||||||||||||
£ | £ | £ | £ | ||||||||||||||||
At 1 January 2018 | 100 | 125,113 | 14,304,834 | 14,430,047 | |||||||||||||||
Comprehensive income for the year | |||||||||||||||||||
Profit for the year | - | - | 7,369,930 | 7,369,930 | |||||||||||||||
Total comprehensive income for the year | - | - | 7,369,930 | 7,369,930 | |||||||||||||||
Dividends | 11 | - | - | (750,000 | ) | (750,000 | ) | ||||||||||||
At 31 December 2018 | 100 | 125,113 | 20,924,764 | 21,049,977 | |||||||||||||||
Comprehensive income for the year | |||||||||||||||||||
Profit for the year | - | - | 6,333,538 | 6,333,538 | |||||||||||||||
Total comprehensive income for the year | - | - | 6,333,538 | 6,333,538 | |||||||||||||||
Dividends | 11 | - | - | (1,000,000 | ) | (1,000,000 | ) | ||||||||||||
At 31 December 2019 | 100 | 125,113 | 26,258,302 | 26,383,515 |
The notes form part of these consolidated financial statements.
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SAHARA HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWO YEARS ENDED 31 DECEMBER
Note | 2019 | 2018 | |||||||||
£ | £ | ||||||||||
Cash flows from operating activities | |||||||||||
Profit for the financial year | 6,333,538 | 7,369,930 | |||||||||
Adjustments for: | |||||||||||
Amortisation of intangible assets | 181,369 | 181,769 | |||||||||
Depreciation of tangible assets | 93,049 | 86,103 | |||||||||
Loss on disposal of tangible assets | - | 687 | |||||||||
Interest payable and expense | 1,191 | 5,477 | |||||||||
Interest receivable and similar income | (37,132 | ) | (6,479 | ) | |||||||
Taxation charge | 1,552,210 | 1,747,144 | |||||||||
Decrease/(increase) in inventory | 4,071,600 | (4,241,965 | ) | ||||||||
Decrease/(increase) in debtors | 2,429,993 | (2,382,017 | ) | ||||||||
(Decrease) in creditors | (1,483,535 | ) | (316,932 | ) | |||||||
Increase in provisions | 344,091 | 337,240 | |||||||||
Corporation tax (paid) | (1,928,486 | ) | (1,469,122 | ) | |||||||
Net cash generated from operating activities | 11,557,888 | 1,311,835 | |||||||||
Cash flows from investing activities | |||||||||||
Purchase of tangible fixed assets | 13 | (70,574 | ) | (104,713 | ) | ||||||
Sale of tangible fixed assets | - | 1,900 | |||||||||
Interest received | 37,132 | 6,479 | |||||||||
Net cash from investing activities | (33,442 | ) | (96,334 | ) | |||||||
Cash flows from financing activities | |||||||||||
Dividends paid | (1,000,000 | ) | (750,000 | ) | |||||||
Interest paid | (1,191 | ) | (5,477 | ) | |||||||
Net cash used in financing activities | (1,001,191 | ) | (755,477 | ) | |||||||
Net increase in cash and cash equivalents | 10,523,255 | 460,024 | |||||||||
Cash and cash equivalents at beginning of year | 2,044,766 | 1,584,742 | |||||||||
Cash and cash equivalents at the end of year | 12,568,021 | 2,044,766 | |||||||||
Cash and cash equivalents at the end of year comprise: | |||||||||||
Cash at bank and in hand | 12,568,021 | 2,044,766 | |||||||||
12,568,021 | 2,044,766 |
The notes form part of these consolidated financial statements.
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SAHARA HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2018
1. | General information |
Sahara Holdings Limited (the “Company”) is a private company limited by shares, incorporated in England and Wales under the United Kingdom Companies Act. The nature of the Company’s operations and its principal activities are that of a holding company. The principal activity of the group headed by the Company is the distribution of audio-visual display solutions.
The consolidated financial statements are presented in Pounds Sterling, which is the currency of the primary economic environment in which the Company operates.
Statement of Directors’ Responsibilities
The Board of Directors (the “Directors”) are responsible for preparing these consolidated financial statements for Sahara Holdings Limited and its subsidiaries as of 31 December 2019 and 2018 and for the years then ended, in conformity with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and Republic of Ireland (“United Kingdom Generally Accepted Accounting Practice”) including a reconciliation of profit for the financial year and shareholder’s equity to accounting principles generally accepted in the United States of America.
The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company, and for identifying and ensuring that the Company complies with the law and regulations applicable to their activities. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors confirm that suitable accounting policies have been used and applied consistently for the years presented. They also confirm that reasonable and prudent judgments and estimates have been made in preparing the consolidated financial statements and that applicable accounting standards have been followed.
2. | Accounting policies |
2.1 | Basis of preparation of financial statements |
These consolidated financial statements do not constitute the Company’s statutory accounts within the meaning of Section 434 of the United Kingdom Companies Act 2006 for either of the years presented. Statutory accounts for the years ended 31 December 2019 and 2018, which were presented in British Pounds Sterling, have been reported on by the Independent Auditors, BDO LLP, in the United Kingdom. The Independent Auditors’ Reports of BDO LLP on the statutory accounts for each of the years ended 31 December 2019 and 2018 were unqualified and did not contain statements under s498(2) or s498(3) of the United Kingdom Companies Act 2006. The Independent Auditors’ Reports on the statutory accounts for the years ended 31 December 2019 and 2018 did not draw attention to any matters by way of emphasis.
Statutory accounts for each of the years ended 31 December 2019 and 2018 have been filed with the Registrar of Companies in the United Kingdom.
The Directors have prepared these non-statutory financial statements for the years ended 31 December 2019 and 2018 for inclusion in a Form 8-K/A to be submitted by the Company’s new parent company, Boxlight Corporation (see Note 26: Events after the balance sheet date), to the United States Securities and Exchange Commission (“SEC”). These consolidated financial statements have been prepared, in conformity with United Kingdom Generally Accepted Accounting Practice including a reconciliation of profit for the financial year and shareholder’s equity to accounting principles generally accepted in the United States of America.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires Group management to exercise judgment in applying the company’s accounting policies (see note 3).
Since 31 December 2019 the Company has had to deal with the coronavirus pandemic and the associated measures that government, customers, suppliers and other stakeholders put in place to deal with it. While the Company will undoubtedly suffer some adverse impact from this in the short term, the Directors have prepared detailed forecasts to cover the review period and stress-tested these and are therefore confident that the Group will have sufficient funds to meet liabilities as they fall due and fund working capital requirements. On this basis the consolidated financial statements have been prepared on the going concern basis. We have paid a £12 million dividend subsequent to year end.
The following principal accounting policies have been applied:
2.2 | Basis of consolidation |
The consolidated financial statements present the results of the Company and its own subsidiaries (the “Group”) as if they formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of business combinations using the purchase method. In the balance sheet, the acquiree’s identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date control ceases.
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SAHARA HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2018
2.3 | Revenue |
The Group earns revenues from the sale of goods, including interactive touch screen panels, audiovisual equipment and related software.
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured as the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes. The following criteria must also be met before revenue is recognised:
● | the Group has transferred the significant risks and rewards of ownership to the buyer; | |
● | the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; | |
● | the amount of revenue can be measured reliably; | |
● | it is probable that the Group will receive the consideration due under the transaction; and | |
● | the costs incurred or to be incurred in respect of the transaction can be measured reliably. |
2.4 | Intangible assets |
Intangible assets are measured at cost less accumulated amortisation and any accumulated impairment losses. Intangible assets are recognised from the development phase of a project if and only if certain specific criteria are met in order to demonstrate the asset will generate probable future economic benefits and that its cost can be reliably measured. The capitalised development costs are subsequently amortised on a straight line basis over their expected useful economic lives. Amortisation begins when the intangible asset is available for use, ie when it is in the location and condition necessary for it to be usable in the manner intended by management.
Software represents the fair value of software acquired through the acquisition of Sedao Limited in 2017.
Amortisation is charged so as to allocate the cost of intangibles less their residual values over their estimated useful lives, using the straight-line method. The intangible assets are amortised over the following useful economic lives:
New product development costs | - | 20% straight line |
Intellectual property rights | - | 20% straight line |
Software | - | 3 years |
2.5 | Tangible fixed assets |
Tangible fixed assets under the cost model are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
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SAHARA HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2018
2. | Accounting policies (continued) |
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives.
Depreciation is provided on the following bases:
Leasehold improvements | - | shorter of 5 years or lease term | |
Plant and machinery | - | 20% straight line | |
Motor vehicles | - | 20% reducing balance | |
Fixtures & fittings | - | 10% straight line | |
Office equipment | - | 33% straight line |
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within ‘administrative expenses’ in the statement of comprehensive income.
2.6 | Operating leases: lessee |
Rentals paid under operating leases are charged to the statement of comprehensive income on a straight-line basis over the period of the lease.
2.7 | Stocks |
Stocks are stated at the lower of cost and net realisable value, being the estimated selling price less costs to complete and sell. Cost is based on the cost of purchase on a first in, first out basis.
At each balance sheet date, stocks are assessed for impairment. If stock is impaired, the carrying amount is reduced to its selling price less costs to complete and sell. The impairment loss is recognised immediately in the statement of comprehensive income.
2.8 | Financial instruments |
The Group has elected to apply provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments. Financial instruments are recognised in the Group’s balance sheet where the Group becomes party to the contractual provisions of the instrument.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group is mainly exposed to credit risk from credit sales. It is Group policy to assess the credit risk of new customers before entering contracts. To mitigate risk each new customer is required to make payment in advance for their first order, with credit being offered for subsequent orders if appropriate. Orders of a significant size are referred to management for credit approval.
Credit risk also arises from cash and cash equivalents and deposits with banks and financial institutions. Most of the Group’s cash is held with Barclays Bank Plc, a prominent UK Based bank.
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SAHARA HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2018
2. | Accounting policies (continued) |
Liquidity risk
Liquidity risk arises from the Group’s management of working capital. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.
Management review cash balances on a daily basis and forecast cash requirements throughout the year to ensure sufficient cash is available.
Market risk
Market risk arises from the Group’s use of tradable and foreign currency financial instruments. It is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in interest rates (interest rate risk), foreign exchange rates (currency risk) or other market factors (other price risk).
Foreign exchange risk
Foreign exchange risk arises when an entity enters into transactions denominated in a currency other than its functional currency.
The Group is predominantly exposed to currency risk on purchases made from a major supplier requiring payment in US Dollars. The Group aims to fund expenses and to manage foreign exchange risk by matching the currency in which revenue is generated and expenses are incurred.
Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the assets and settle the liabilities simultaneously.
2.9 | Basic financial assets |
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not discounted.
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SAHARA HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2018
2. | Accounting policies (continued) |
2.10 | Impairment of financial assets |
Financial assets are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in the statement of comprehensive income.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in the statement of comprehensive income.
2.11 | Derecognition of financial assets |
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the Group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
2.12 | Classification of financial liabilities |
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.
2.13 | Basic financial liabilities |
Basic financial liabilities, comprising creditors, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future receipts discounted at a market rate of interest. Financial liabilities classified as payable within one year are not discounted.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
2.14 | Derecognition of financial liabilities |
Financial liabilities are derecognised when the Group’s contractual obligations expire or are discharged or cancelled.
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SAHARA HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2018
2. | Accounting policies (continued) |
2.15 | Creditors |
Short term creditors are measured at the transaction price. In the case of certain suppliers, an advance payment is required to be paid. Amounts paid in advance for goods that have not yet been delivered are included in other debtors.
2.16 | Dividends |
Equity dividends are recognised when they become legally payable. Interim equity dividends are recognised when paid. Final equity dividends are recognised when approved by the shareholders.
Please also refer to note 26 regarding dividends that have been paid subsequent to 31 December, 2019.
2.17 | Pensions |
Defined contribution pension plans
The Group operates a defined contribution plans for its employees. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. Once the contributions have been paid the Group has no further payment obligations.
The contributions are recognised as an expense in the statement of comprehensive income when they fall due. Amounts not paid are shown in accruals as a liability in the balance sheet. The assets of the plan are held separately from the Group in independently administered funds.
2.18 | Warranty provision |
Provision is made for claims under warranties given by the Group for some of its products. The provision is based on an assessment of future claims with reference to past experience. Such costs are incurred within one to five years post-delivery.
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SAHARA HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2018
2. | Accounting policies (continued) |
2.19 | Taxation |
The tax expense for the year comprises current and deferred tax. Tax is recognised in the consolidated statement of comprehensive income, except that a charge attributable to an item of income and expense recognised as other comprehensive income or to an item recognised directly in equity is also recognised in other comprehensive income or directly in equity respectively.
The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the balance sheet date in the countries where the Company and the Group operate and generate income.
Deferred balances are recognised in respect of all timing differences that have originated but not reversed by the balance sheet date, except any deferred tax balances are reversed if and when all conditions for retaining associated tax allowances have been met
Deferred tax balances are not recognised in respect of permanent differences except in respect of business combinations, when deferred tax is recognised on the differences between the fair values of assets acquired and the future tax deductions available for them and the differences between the fair values of liabilities acquired and the amount that will be assessed for tax.
Deferred income tax is determined using tax rates and laws that have been enacted or substantively enacted by the reporting date.
2.20 | Functional and presentation currency |
Items included in the financial statements of the Group are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’).
On consolidation, the results of overseas operations are translated into pounds sterling at rates approximating to those ruling when the transactions took place. All assets and liabilities of overseas operations are translated at the rate ruling at the reporting date. Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised in other comprehensive income.
2.21 | Transactions and balances |
Foreign currency transactions are translated into the Parent’s functional currency using the exchange rates prevailing at the dates of the transactions. 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.
Foreign exchange gains and losses are presented in the statement of comprehensive income within ‘cost of sales’.
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SAHARA HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2018
2. | Accounting policies (continued) |
2.22 | Reserves |
The Group reserves are as follows:
● | Called up share capital reserve represents the nominal value of the shares issued. | |
● | Share premium account includes the premium on issue of equity shares, net of any issue costs. | |
● | Profit and loss account represents cumulative profits or losses, net of dividends paid and other adjustments. |
2.23 | Shared based payments scheme |
In June 2019, the Group granted options under an Enterprise Management Incentive (‘EMI’) scheme to two employees of the Group for 639 type B ordinary shares. The awards vest upon an ‘exit’ event. Exit events have been defined as initial public offerings (‘IPO’) or a takeover by another company or group, either through a full or partial acquisition. No exercise price is payable under the EMI scheme.
Conditions for vesting include that at the time of the exit event the employee remains employed by the Group unless it has been agreed by the board that they retain the right to the shares following dismissal, retirement or resignation. Since the original grant, one of the employeees holding 213 options has resigned, therefore 426 remain outstanding as at 31 December, 2019.
The settlement of the scheme is in the Company’s own shares with no cash settlement option, therefore the options are classified as an equity award. A charge will be recorded in respect of these awards at the point that the occurrence of an exit even is considered to be probable by the Directors.
As at 31 December 2019, the Directors did not deem that a transaction with a potential acquirer was probable, therefore no expense has been recognised.
2.24 | Business combinations |
The acquisition of subsidiaries is accounted for using the acquisition method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, including deferred consideration, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree.
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 exceeds the cost of the business combination, the excess is recognised immediately in the profit or loss.
In relation to the acquisition of Sedao in 2017, the fair value of intangibles acquired was allocated to acquired software and no goodwill was recognised.
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SAHARA HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2018
3. | Judgments in applying accounting policies and key sources of estimation uncertainty |
In preparing these financial statements, the Directors have made the following judgements:
● Determine whether leases entered into by the Group either as a lessor or a lessee are operating lease or finance leases. These decisions depend on an assessment of whether the risks and rewards of ownership have been transferred from the lessor to the lessee on a lease by lease basis.
● Determine whether there are indicators of impairment of the Group’s tangible and intangible assets. Factors taken into consideration in reaching such a decision include the economic viability and expected future financial performance of the asset and where it is a component of a larger cash-generating unit, the viability and expected future performance of that unit.
Other key sources of estimation uncertainty
● Intangible assets (see note 12)
Intangible assets includes an amount for software. This relates to the acquisition of Sedao Limited.
The categorisation and value of this asset is subject to the judgement of the Directors.
Intangible assets are amortised over their useful lives, as stated in the accounting policies, taking into account residual values, where appropriate. The actual lives of the assets and residual values are assessed annually and may vary depending on a number of factors. In re-assessing asset lives, factors such as technological innovation, product life cycles and maintenance programmes are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projected disposal values.
● Tangible fixed assets (see note 13)
Tangible fixed assets are depreciated over their useful lives as stated in the accounting policies, taking into account residual values, where appropriate. The actual lives of the assets and residual values are assessed annually and may vary depending on a number of factors. In re-assessing asset lives, factors such as technological innovation, product life cycles and maintenance programmes are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projected disposal values.
● Stock valuation (see note 15)
Stock is valued at the lower of cost and net realisable value. The net realisable value is based on estimated sales price which requires the management team to review each product line within stock to confirm the estimated selling price.
In determining the estimated selling price, management will consider the individual product line and it’s economic cycle on a standalone basis as well as the brand to which it is part, and assess:
● | The number of units held in stock to forecast and actual sales | |
● | The current sales data and sales values achieved | |
● | The sales data and sales values achieved when a product has been on promotion at reduced prices. | |
● | The competitor product of similar items and sales values in the market. |
● Warranty provisions (see note 20)
A provision is made for the cost of claims under warranty given by the Group for some of its products. The provision is based on an assessment of future claims, based on numbers of units within the warranty period. The provision is calculated with reference to past experience of the number of claims and the cost of settling the claim. Warranty costs are recognised over the term of the warranty, which is 5 years. The assessment of the future potential cost of the warranty is assessed on a continual basis.
16 | Page |
SAHARA HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2018
4. | Turnover |
Analysis of turnover by country of destination:
2019 | 2018 | |||||||
£ | £ | |||||||
United Kingdom | 38,895,028 | 36,680,278 | ||||||
Rest of Europe | 24,535,571 | 18,958,109 | ||||||
Rest of the World | 15,509,559 | 17,004,231 | ||||||
78,940,158 | 72,642,618 |
5. | Operating profit |
The operating profit is stated after charging/(crediting):
2019 | 2018 | |||||||
£ | £ | |||||||
Foreign exchange (gains)/losses | 451,929 | (274,191 | ) | |||||
Development costs expensed in the year | 728,270 | 674,893 | ||||||
Amortisation of intangible assets | 181,369 | 181,769 | ||||||
Depreciation of tangible fixed assets | 93,049 | 86,373 | ||||||
Inventory provision | (191,731 | ) | (243,762 | ) | ||||
Profit on disposal of tangible fixed assets | - | 687 | ||||||
Other operating lease rentals | 851,749 | 768,563 | ||||||
Defined contribution pension cost | 181,157 | 192,417 |
6. | Employees |
Staff costs, including Directors’ remuneration, were as follows:
2019 | 2018 | |||||||
£ | £ | |||||||
Wages and salaries | 4,895,084 | 4,955,344 | ||||||
Social security costs | 682,914 | 630,987 | ||||||
Cost of defined contribution scheme | 181,157 | 192,417 | ||||||
5,759,155 | 5,778,748 |
17 | Page |
SAHARA HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2018
7. | Directors’ remuneration |
2019 | 2018 | |||||||
£ | £ | |||||||
Directors' emoluments | 79,741 | 69,529 | ||||||
Company contributions to defined contribution pension schemes | 30,000 | 27,200 | ||||||
109,741 | 96,729 |
Additionally, dividends paid in 2019 and 2018 of £1,000,000 and £750,000, respectively, were paid to the Directors who were also shareholders until 24 September 2020.
During the year retirement benefits were accruing to 2 Directors (2018 - 2) in respect of defined contribution pension schemes. |
8. | Interest receivable |
2019 | 2018 | |||||||
£ | £ | |||||||
Other interest receivable | 37,132 | 6,479 | ||||||
37,132 | 6,479 |
9. | Interest payable and similar charges |
2019 | 2018 | |||||||
£ | £ | |||||||
Bank interest payable | 128 | 5,477 | ||||||
Other interest payable | 1,063 | - | ||||||
1,191 | 5,477 |
18 | Page |
SAHARA HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2018
10. | Taxation |
2019 | 2018 | |||||||
£ | £ | |||||||
Corporation tax | ||||||||
Current tax on profits for the year | 1,586,670 | 1,781,604 | ||||||
Total current tax | 1,586,670 | 1,781,604 | ||||||
Deferred tax | ||||||||
Origination and reversal of timing differences | (34,460 | ) | (34,460 | ) | ||||
Total deferred tax | (34,460 | ) | (34,460 | ) | ||||
Taxation on profit on ordinary activities | 1,552,210 | 1,747,144 |
Factors affecting tax charge for the year | |
The tax assessed for the year is higher than (2018 - higher than) the standard rate of corporation tax in the UK of 19% (2018 - 19%). The differences are explained below: |
2019 | 2018 | |||||||
£ | £ | |||||||
Profit on ordinary activities before tax | 7,885,748 | 9,117,074 | ||||||
Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 19% (2018 - 19%) | 1,534,495 | 1,675,244 | ||||||
Effects of: | ||||||||
Expenses not deductible for tax purposes | 41,176 | 108,730 | ||||||
Capital allowances for year less than / (in excess of) depreciation | 4,827 | (3,736 | ) | |||||
Deferred tax arising from business combination | (34,460 | ) | (34,460 | ) | ||||
Other differences leading to an increase in the tax charge | 6,172 | 1,366 | ||||||
Total tax charge for the year | 1,552,210 | 1,747,144 |
Factors that may affect future tax charges
There were no factors that may affect future tax charges.
19 | Page |
SAHARA HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2018
11. | Dividends |
2019 | 2018 | |||||||
£ | £ | |||||||
Interim dividends paid | 1,000,000 | 750,000 | ||||||
1,000,000 | 750,000 |
12. | Intangibles |
Intellectual property rights | New product development costs | Software | Total | |||||||||||||
£ | £ | £ | £ | |||||||||||||
Cost | ||||||||||||||||
At 1 January 2019 | 12,002 | 58,229 | 488,651 | 558,882 | ||||||||||||
At 31 December 2019 | 12,002 | 58,229 | 488,651 | 558,882 | ||||||||||||
At 1 January 2018 | 12,002 | 58,229 | 488,651 | 558,882 | ||||||||||||
At 31 December 2018 | 12,002 | 58,229 | 488,651 | 558,882 | ||||||||||||
Amortisation | ||||||||||||||||
At 1 January 2019 | 12,002 | 58,229 | 307,282 | 377,513 | ||||||||||||
Charge for the year | - | - | 181,369 | 181,369 | ||||||||||||
At 31 December 2019 | 12,002 | 58,229 | 488,651 | 558,882 | ||||||||||||
At 1 January 2018 | 11,602 | 58,229 | 125,913 | 195,744 | ||||||||||||
Charge for the year | 400 | - | 181,369 | 181,769 | ||||||||||||
At 31 December 2018 | 12,002 | 58,229 | 307,282 | 377,513 | ||||||||||||
Net book value | ||||||||||||||||
At 31 December 2019 | - | - | - | - | ||||||||||||
At 31 December 2018 | - | - | 181,369 | 181,369 |
20 | Page |
SAHARA HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2018
13. | Tangible fixed assets |
Leasehold improvements | Plant and machinery | Motor vehicles | Fixtures and fittings | Office equipment | Total | |||||||||||||||||||
£ | £ | £ | £ | £ | £ | |||||||||||||||||||
Cost | ||||||||||||||||||||||||
At 1 January 2019 | 125,700 | 74,748 | - | 103,742 | 310,705 | 614,895 | ||||||||||||||||||
Additions | - | 208 | - | 6,046 | 64,320 | 70,574 | ||||||||||||||||||
At 31 December 2019 | 125,700 | 74,956 | - | 109,788 | 375,025 | 685,469 | ||||||||||||||||||
Cost | ||||||||||||||||||||||||
At 1 January 2018 | 125,700 | 69,300 | 15,000 | 96,643 | 218,539 | 525,182 | ||||||||||||||||||
Additions | - | 5,448 | - | 7,099 | 92,166 | 104,713 | ||||||||||||||||||
Disposals | - | - | (15,000 | ) | - | - | (15,000 | ) | ||||||||||||||||
At 31 December 2018 | 125,700 | 74,748 | - | 103,742 | 310,705 | 614,895 | ||||||||||||||||||
Depreciation | ||||||||||||||||||||||||
At 1 January 2019 | 100,560 | 54,980 | - | 62,352 | 231,793 | 449,685 | ||||||||||||||||||
Charge for the year | 25,140 | 13,933 | - | 11,350 | 42,626 | 93,049 | ||||||||||||||||||
At 31 December 2019 | 125,700 | 68,913 | - | 73,702 | 274,419 | 542,734 | ||||||||||||||||||
At 1 January 2018 | 75,150 | 40,891 | 12,413 | 51,241 | 196,030 | 375,725 | ||||||||||||||||||
Charge for the year | 25,410 | 14,089 | - | 11,111 | 35,763 | 86,373 | ||||||||||||||||||
Disposals | - | - | (12,413 | ) | - | - | (12,413 | ) | ||||||||||||||||
At December 2018 | 100,560 | 54,980 | - | 62,352 | 231,793 | 449,685 | ||||||||||||||||||
Net book value | ||||||||||||||||||||||||
At 31 December 2019 | - | 6,043 | - | 36,086 | 100,606 | 142,735 | ||||||||||||||||||
At 31 December 2018 | 25,140 | 19,768 | - | 41,390 | 78,912 | 165,210 | ||||||||||||||||||
At 1 January 2018 | 50,550 | 28,409 | 2,587 | 45,402 | 22,509 | 149,457 |
21 | Page |
SAHARA HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2018
14. | Subsidiaries | |
Direct subsidiary undertakings | ||
The following were direct subsidiary undertakings of the Company: |
Name | Country | Principal activity | Class of shares | Holding | |||||||
Sahara Presentation Systems Plc | England and Wales | Sale and distribution of audio visual equipment | Ordinary | 100 | % | ||||||
Sahara Nordic AB | Sweden | Sale and distribution of audio visual equipment | Ordinary | 100 | % | ||||||
Sahara Nordic OY | Finland | Sale and distribution of audio visual equipment | Ordinary | 100 | % | ||||||
Sahara Presentation Systems Inc | USA | Sale and distribution of audio visual equipment | Ordinary | 100 | % | ||||||
Sahara Presentation Systems GmbH | Germany | Sale and distribution of audio visual equipment | Ordinary | 100 | % |
Indirect subsidiary undertakings | |
The following were indirect subsidiary undertakings of the Company: |
Indirect subsidiary undertakings
The following were indirect subsidiary undertakings of the Company:
Name | Country | Principal activity | Class of shares | Holding | |||||||
Sedao Limited | England and Wales | Dormant | Ordinary | 100 | % | ||||||
Clevertouch B.V. | Netherlands | Sale and distribution of audio visual equipment | Ordinary | 100 | % |
15. | Stocks |
2019 | 2018 | |||||||
£ | £ | |||||||
Finished goods and goods for resale | 8,452,430 | 12,524,030 | ||||||
8,452,430 | 12,524,030 |
22 | Page |
SAHARA HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2018
16. | Debtors |
2019 | 2018 | |||||||
£ | £ | |||||||
Trade debtors | 8,674,582 | 10,340,693 | ||||||
Other debtors | 1,134,863 | 2,600,624 | ||||||
Called up share capital not paid | 100 | 100 | ||||||
Prepayments and accrued income | 1,313,850 | 611,971 | ||||||
11,123,395 | 13,553,388 |
Other debtors include advance vendor payments and deposits of £1,134,863 (2018: £1,200,015) and VAT receivable of £nil (2018: £1,385,334).
Prepayments refer mainly to software and subscription yearly prepayments and other prepaid expenses of £863,129 (2018: £504,125), rebates receivable from vendors of £403,717 (2018: £52,296) and other of £47,004 (2018: £55,550).
The Company is party to an invoice financing facility under which advances may be drawn against eligible trade debtors, up to a maximum of £6,000,000. Invoices are financed on a full-recourse basis. No amounts have been borrowed on this facility in either year.
17. | Cash and cash equivalents |
2019 | 2018 | |||||||
£ | £ | |||||||
Cash at bank and in hand | 12,568,021 | 2,044,766 | ||||||
12,568,021 | 2,044,766 |
23 | Page |
SAHARA HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2018
18. | Creditors: Amounts falling due within one year |
2019 | 2018 | |||||||
£ | £ | |||||||
Trade creditors | 1,375,200 | 2,687,334 | ||||||
Corporation tax | 636,721 | 978,537 | ||||||
Other taxation and social security | 470,284 | 256,949 | ||||||
Other creditors | 380,524 | 305,379 | ||||||
Personnel | 536,875 | 1,047,272 | ||||||
Accruals | 275,263 | 224,747 | ||||||
3,674,867 | 5,500,218 |
19. | Deferred taxation |
2019 | ||||
£ | ||||
At beginning of year | 34,460 | |||
Credited to statement of comprehensive income | (34,460 | ) | ||
At end of year | - |
The deferred taxation balance is made up as follows:
2019 | 2018 | |||||||
£ | £ | |||||||
Accelerated capital allowances | - | 34,460 | ||||||
- | 34,460 |
24 | Page |
SAHARA HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2018
20. | Other provisions |
Warranty provision | ||||
£ | ||||
At 1 January 2019 | 1,884,108 | |||
Charged to profit or loss | 344,091 | |||
At 31 December 2019 | 2,228,199 |
Warranty provision | ||||
£ | ||||
At 1 January 2018 | 1,546,868 | |||
Charged to profit or loss | 337,240 | |||
At 31 December 2018 | 1,884,108 |
A provision is made for the cost of claims under warranty given by the Group for some of its products. The provision is based on an assessment of future claims, based on numbers of units within the warranty period. The provision is calculated with reference to past experience of the number of claims and the cost of settling the claim. The assessment of the future potential cost of the warranty is assessed on a continual basis.
21. | Share capital |
2019 | 2018 | |||||||
£ | £ | |||||||
Allotted, called up and fully paid | ||||||||
4,900 (2018 - 49) A Ordinary shares of £0.01 each | 49 | 49 | ||||||
100 (2018 - 1) B Ordinary shares of £0.01 each | 1 | 1 | ||||||
4,900 (2018 - 49) C Ordinary shares of £0.01 each | 49 | 49 | ||||||
100 (2018 - 1) D Ordinary shares of £0.01 each | 1 | 1 | ||||||
100 | 100 |
On 13 June 2019 the issued share capital, of 100 ordinary shares of £1 each, was sub-divided into 10,000 ordinary shares of £0.01 each. The issued shares rank pari passu in all respects, except for the purpose of the declaration of dividends. The declaration of a dividend in respect of one class does not compel a dividend at the same rate to be declared in respect of any other class of share
22. | Pensions |
The Group operates defined contribution pension schemes. The assets of these schemes are held separately from those of the Group in independently administered funds. The pension cost charge represents contributions payable by the Group to the funds and amounted to £179,860 (2018 - £148,418). The amount payable at the year end was £1,144 (2018 - £Nil)
25 | Page |
SAHARA HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2018
23. | Commitments under operating leases |
At 31 December 2019 the Group and the Company had future minimum lease payments under non-cancellable operating leases as follows:
2019 | 2018 | |||||||
£ | £ | |||||||
Not later than 1 year | 840,019 | 798,121 | ||||||
Later than 1 year and not later than 5 years | 2,349,440 | 2,273,688 | ||||||
Later than 5 years | - | 43,228 | ||||||
3,189,459 | 3,115,037 |
24. | Related party transactions |
Key management personnel include all Directors across the Group who together have authority for planning, directing and controlling the activities of the Group. The total compensation paid to key management personnel for services provided to the Group was £831,558 (2018- £1,228,044).
25. | Controlling party |
During the two years ended 31 December 2019 and until 24 September 2020 the controlling party was Kevin Batley and Nigel Batley.
Since 24 September 2020 Boxlight Corporation is the single controlling party of Sahara Holding and subsidiaries (see note 26).
26 | Page |
SAHARA HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2018
26. | Events after the balance sheet |
Covid-19
The Covid-19 pandemic has affected the audio-visual industry, with Group turnover for the 2020 financial year expected to be around 8% lower than 2019. This main driver for this downside relates to the UK audio-visual distribution business which is down 40% compared to the prior year, however sales of the Group’s manufactured Clevertouch Interactive Flat Panel Displays (IFPDs), has remained strong and grown globally as a quality brand. The shift in product mix favouring Clevertouch which enjoys significantly stronger gross margin than the distributed products means that management are confident the Group will actually exceed 2019 reported profits. Despite Covid-19 the Group has continued to perform strongly in 2020 and remains profitable and cash generative. During these globally challenged times the Group continued to employ all of the staff on a full-time basis, it did not benefit or receive any Government support, it did not furlough any staff or make redundancies. The Directors have prepared detailed forecasts to cover the review period and continually stress-test and refresh these plans and are confident the Group will have sufficient funds to meet all liabilities as they fall due.
Ownership change
On 24 September 2020, the Group was acquired by Boxlight Corporation, a US entity listed on the Nasdaq Capital Markets Stock Exchange for a purchase price of £74,000,000 in the form of £52,000,000 cash and £22,000,000 of preferred stock. The leadership team of the Sahara Group continue to run and manage the Group’s business on a day-to-day basis and their achievements have been recognised with their appointment to executive leadership positions within Boxlight Corporation.
As a result, all of the outstanding EMI options vested in accordance with the terms of the scheme, as disclosed in note 2.23.
Dividends
An interim dividend of £12,000,000 was declared and paid on 25 September 2020 to Boxlight Corporation. The Directors do not currently envisage any further dividend payments for the remainder of the 2020 financial year.
Brexit
The UK formally left the EU on 31 January 2020. The UK is now in a transition period which is due to end on 31 December 2020, and the UK Government and the European Union remain in negotiations to determine and conclude formal trade agreements. In preparation of the transition, and for purposes of mitigating the potential business impact of the parties not reaching an acceptable trade agreement, the Group subsidiary Clevertouch B.V., based in The Netherlands became a full trading entity in 2020 with a functional warehouse operation based in Venlo. Since March 2020 Clevertouch B.V began fulfilment of European customer orders from the Dutch warehouse. In the event the UK Government and the European Union cannot conclude a deal; the Directors are confident that the decisions and actions which have been taken to create European operations will mean there will be little impact on Group operations and results.
27 | Page |
SAHARA HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2018
27. | Summary of Differences between UK and US Generally Accepted Accounting Principles |
The accompanying consolidated financial statements have been prepared in accordance with UK GAAP, which differs in certain significant respects from accounting principles generally accepted in the United States of America (U.S. GAAP). The significant differences that affect profit for the financial year and total equity are set forth below:
Effect on profit for the financial year as a result of significant differences between UK GAAP and U.S. GAAP
Notes | 31 December 2019 | 31 December 2018 | ||||||||
£ | £ | |||||||||
Profit for the financial year in accordance with UK GAAP | 6,333,538 | 7,369,930 | ||||||||
U.S. GAAP Adjustments: | ||||||||||
Revenue | (i) | (1,605,101 | ) | (2,518,881 | ) | |||||
Cost of sales – warranty provision | (ii) | 344,091 | 337,240 | |||||||
Deferred taxation credit | (iii) | 242,608 | 427,962 | |||||||
Total U.S. GAAP Adjustments: | (1,018,402 | ) | (1,753,679 | ) | ||||||
Profit for the financial year in accordance with U.S. GAAP | 5,315,136 | 5,616,251 |
Effect on Shareholder’s Equity a result of significant differences between UK GAAP and U.S. GAAP
Notes | 31 December 2019 | 31 December 2018 | ||||||||
£ | £ | |||||||||
Total equity in accordance with UK GAAP | 26,383,515 | 21,049,977 | ||||||||
U.S. GAAP Adjustments: | ||||||||||
Deferred revenue | (i) | (13,227,156 | ) | (11,622,055 | ) | |||||
Warranty provision | (ii) | 2,228,199 | 1,884,108 | |||||||
Deferred tax asset | (iii) | 2,089,966 | 1,847,358 | |||||||
Total U.S. GAAP Adjustments: | (8,908,991 | ) | (7,890,589 | ) | ||||||
Shareholder’s equity in accordance with U.S. GAAP | 17,474,524 | 13,159,388 |
Significant differences between UK GAAP and U.S. GAAP
(i) | Revenue from contracts with customers |
Under UK GAAP, revenue is recognised at the point that the goods are delivered to the customer to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, as disclosed in note 2.3.
In May 2014, the FASB issued Accounting Standards Update 2014-09 – Revenue from Contracts with Customers (Topic 606), as amended, which has been developed to provide a comprehensive set of principles in presenting the nature, amount, timing and uncertainty of revenue and cash flows arising from a contract with a customer. The standard was originally effective for non-public entities for periods beginning on or after December 15, 2018 with early adoption permitted. Management have early adopted ASC 606 for the year ended 31 December 2018 (effective January 1, 2018).
28 | Page |
SAHARA HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2018
In accordance with ASC Topic 606, the Company recognizes revenue at the amount to which it expects to be entitled when control of the products or services is transferred to its customers. Control is generally transferred when the Company has a present right to payment and the title and the significant risks and rewards of ownership of products or services are transferred to its customers. For most of the Company’s product sales, control transfers, and therefore, revenue is recognized when goods are shipped at the point of origin. The Company’s services revenue is generally recognized ratably over the service term (generally 60 months) since time is the best output measure of how those services are transferred to the customer.
For contracts with multiple performance obligations, each of which represent promises within a contract that are distinct, the Company allocates revenue to all distinct performance obligations based on their relative stand-alone selling prices (“SSPs”). Performance obligations included in the Company’s arrangements include display panels (hardware), service warranties, software, and software maintenance services.
The Company’s products and services included in its contracts with multiple performance obligations generally are not sold separately and there are no observable prices available to determine the SSP for those products and services. Since observable prices are not available, SSPs are established that reflect the Company’s best estimates of what the selling prices of the performance obligations would be if they were sold regularly on a stand-alone basis. The Company’s process for estimating SSPs without observable prices considers multiple factors that may vary depending upon the unique facts and circumstances related to each performance obligation including, when applicable, the estimated cost to provide the performance obligation, market trends in the pricing for similar offerings, product-specific business objectives, and competitor or other relevant market pricing and margins.
The Company sells its products and services under standard terms and conditions and has applied the portfolio approach to its allocation of the transaction price. The portfolio approach is applied to arrangements for which performance obligations have similar characteristics and the Company believes that the application of the portfolio approach produces the same result as if they were applied at the contract level.
The Company has an unconditional right to consideration for all products and services transferred to the customer. That unconditional right to consideration is reflected in accounts receivable in accordance with Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606). Contract liabilities are reflected in deferred revenue and reflect amounts allocated to performance obligations that have not yet been transferred to the customer related to service warranties and software maintenance.
Deferred revenue as at 31 December, 2019 and 2018 is classified as follows:
31 December, 2019 | 31 December, 2018 | |||||||
£ | £ | |||||||
Deferred revenues – short term | (4,520,609 | ) | (3,908,677 | ) | ||||
Deferred revenues – long term | (8,706,547 | ) | (7,713,378 | ) | ||||
(13,227,156 | ) | (11,622,055 | ) |
Rebates are provided to certain customers when specified volume purchase thresholds have been met. The Company includes variable consideration in its transaction price when there is a basis to reasonably estimate the amount of the fee and it is probable there will not be a significant reversal. These estimates are generally made using the expected value method based on historical experience and are measured at each reporting date.
29 | Page |
SAHARA HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2018
(ii) | Warranty provision |
Under UK GAAP, a provision for the estimated cost of providing warranty services on sales of products is recorded. Under U.S. GAAP, as described under (i) above, the service warranty obligation is a separate performance obligation and revenue is allocated to this, and deferred over the warranty period which is generally 5 years. Any related costs are recognised as incurred.
Accordingly, the warranty provision and associated impact to cost of sales is reversed under U.S. GAAP.
(iii) | Deferred taxation |
Related to the U.S. GAAP adjustments described above, a deferred tax asset arises in relation to the contract liability deferred revenue and the associated reversal of the warranty provision. The net deferred tax asset has been determined based on the UK statutory tax rate of 19% for each period and is presented in long term assets, with the corresponding movements in the asset being recognised as a deferred tax charge/(credit) in each year. The deferred tax asset is fully recoverable against future taxable income.
Cash flow statement
There is no significant difference in the presentation of cash flows under UK GAAP and U.S GAAP.
30 | Page |