NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

1 General information

 

Sosandar Plc (formerly Orogen Plc) (the 'Company') is a public limited company by shares incorporated in England and Wales. Details of the registered office, the officers and advisers to the Company are presented on the Company Information page at the end of this report. The Company is listed on the AIM market of the London Stock Exchange (ticker: SOS).

 

The principal activity of the company in the year under review was that of a clothing manufacturer and distributer via internet and mail order.                                   

 

2 Significant accounting policies

 

Basis of preparation

The consolidated financial statements consolidate those of the Company and its subsidiaries (together the 'Group' or 'Sosandar'). The consolidated financial statements of the Group and the individual financial statements of the Company are prepared in accordance with applicable UK law and UK adopted international accounting standards (IFRSs) and as applied in accordance with the provisions of the Companies Act 2006. The Directors consider that the financial information presented in these Financial Statements represents fairly the financial position, operations and cash flows for the year, in conformity with IFRS.

 

These are the first financial statements prepared under UK adopted international accounting standards.  On 31 December 2020, IFRS as adopted by the European Union, at that date, was brought into UK law and became UK adopted international accounting standards, with future changes being subject to endorsement by the UK Endorsement Board. Sosandar plc transitioned to UK-adopted International Accounting Standards in its consolidated and Company financial statements on 1 April 2021. This change constitutes a change in accounting framework. However, there is no change on recognition, measurement or disclosure in the financial year reported as a result of the change in framework.

 

Going Concern

The Group's business activities, together with the factors likely to affect its future development, performance and position, are set out in Chairman's Statement on pages 2-3. The financial position of the Group, its cash flows and liquidity position are described in the financial statements and associated notes. In addition, note 21 to the financial statements includes the Group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments; and its exposures to credit risk and liquidity risk.

 

In order to assess the going concern of the Group, the directors have reviewed the Group's bank balances, cash flows, the annual budgets and forecasts, including assumptions concerning revenue growth, marketing spend, returns and repeat customers and expenditure commitments and their impact on cash flow. These cash flow and profit and loss forecasts show the Group expect an increase in revenue based on the assumptions set out in note 11 of the financial statements. This will have sufficient headroom over available banking facilities. Management continue to monitor costs and manage cashflows against these forecasts. 

 

In May 2021, the Group's cashflow position was strengthened through raising gross proceeds of £5.8 million via a Placing, Subscription and Primary Bid Offer. At 31 March 2022, the Group had a cash balance of £7.0m and is therefore in a strong position, with sufficient working capital to take advantage of opportunities in FY2023. This substantiates the view that the Group is a going concern.

 

The directors continue to monitor the Group's going concern basis against the backdrop of significant external events. Whilst Covid 19 still exists, it had significantly less impact on the Group compared with the prior year and the normal course of business resumed. In addition to this, it was concluded the Ukraine war has had no material impact on the consumer behaviour. Therefore, despite these events, the directors confirm that they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due for the foreseeable future.

 

Should the underlying assumptions of the working capital model prove invalid and the Group be unable to continue as a going concern it may be required to realise its assets and discharge its liabilities other than in the normal course of business and at amounts different to those stated in the financial statements. The financial statements do not include any adjustments relating to the recoverability and classifications of recorded asset amounts or liabilities that may be necessary should the Group and Company be unable to continue as a going concern.

After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

 

Consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries and associated undertakings. Thread 35 Limited has a reporting date of 31 March.

 

Subsidiaries are all entities over which Sosandar Plc has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights.

 

The existence and effect of potential voting rights that are currently exercisable or convertible are

considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are de-consolidated from the date that control ceases.

 

In November 2017, Sosandar Plc ('Company') acquired the entire issued share capital of Thread 35 Ltd ('legal subsidiary') for a consideration of £6,281,618, satisfied by the issue of shares of £1,603,422 and cash of £4,678,196.  As the legal subsidiary is reversed into the Company (the legal parent), which originally was a publicly listed cash shell company, this transaction cannot be considered a business combination, as the Company, the accounting acquiree, does not meet the definition of a business under IFRS 3 'Business Combinations'.  However, the accounting for such capital transaction should be treated as a share-based payment transaction and therefore accounted for under IFRS 2 'Share-based payment'. Any difference in the fair value of the shares deemed to have been issued by the Thread 35 Ltd (accounting acquirer) and the fair value of Sosandar Plc's (the accounting acquiree) identifiable net assets represents a service received by the accounting acquirer.

 

Although the consolidated financial information has been issued in the name of Sosandar Plc, the legal parent, it represents in substance continuation of the financial information of the legal subsidiary.

 

The assets and liabilities of the legal subsidiary are recognised and measured in the Group financial statements at the pre-combination carrying amounts and not restated at fair value.

 

The retained earnings and other reserves balances recognised in the Group financial statements reflect the retained earnings and other reserves balances of the legal subsidiary immediately before the business combination and the results of the period from 1 April 2017 to the date of the business combination are those of the legal subsidiary only.

 

The equity structure (share capital and share premium) appearing in the Group financial statements reflects the equity structure of Sosandar Plc, the legal parent.  This includes the shares issued in order to effect the business combination.

 

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). The financial statements are presented in Pounds Sterling (£), which is the Group's presentation currency and the Company's functional currency.

 

Foreign currency transactions are translated into the functional currency using 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 the income statement.

 

The results and financial position of all Group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

·     monetary assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position;

·     income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and

·     all resulting exchange differences are recognised as a separate component of equity.

 

On consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of borrowings and other currency instruments designated as hedges of such investments, are taken to shareholders' equity. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale.

 

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

 

Changes in accounting policies and disclosures

The accounting policies adopted are consistent throughout the financial period. Standards and amendments to UK adopted international accounting standards (IFRSs) effective as of 1 April 2021 have been applied by the Group.

There were a number of standards and interpretations which were in issue at 31 March 2022 but were not effective for periods commencing 1 April 2021 and have not been adopted for these Financial Statements.

These include:

·	Amendments to IFRS 3 Business Combinations - change in reference to the conceptual framework (applicable on or after 1 January 2022)
·	Amendments to IFRS 17 Insurance Contracts - measurement of insurance liabilities (applicable on or after 1 January 2023)
·	Amendments to IAS 1 Presentation of Financial Statements - further disclosure requirements including additional detail around accounting policies (applicable on or after 1 January 2023)
·	Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors - definition of accounting estimates (applicable on or after 1 January 2023)
·	A number of narrow-scope amendments to IFRS 3, IAS 16, IAS 17, IAS 37 and some annual improvements on IFRS 1, IFRS 9, IAS 41 and IFRS 16 (applicable on or after 1 January 2022)

 

The Directors have assessed the full impact of these accounting changes on the Company. To the extent that they may be applicable, the Directors have concluded that none of these pronouncements will cause material adjustments to the Group's Financial Statements. They may result in consequential changes to the accounting policies and other note disclosures. The new standards will not be early adopted by the Group and will be incorporated in the preparation of the Group Financial Statements from the effective dates noted above.

The directors anticipate that the adoption of these standards and interpretations in future periods will have no material effect on the financial statements of the group.

The Directors have taken advantage of the exemption available under Section 408 of the Companies Act 2006 and not presented an income statement nor a statement of comprehensive income for the Company alone.

Critical accounting judgements and key sources of estimation uncertainty

The preparation of Financial Statements in conformity with IFRS requires management to make estimates and judgements that affect the reported amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities at the year end and the reported amounts of revenues and expenses during the reporting period. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The key areas identified by the Group are as follows:

 

Inventories

Inventories are valued at the lower of cost and net realisable value, on a weighted average cost basis.  Net realisable value is the estimated selling price in the ordinary course of the business less applicable variable selling expenses.  Cost of purchase comprises the purchase price including import duties and other taxes, transport and handling costs and other attributable costs, less trade discounts.

 

A provision is made to write down any slow-moving or obsolete inventory to net realisable value.

 

The provision is £761k at 31 March 2022 (2021: £665k). A difference of 1%pt in the provision as a percentage of gross inventory would give rise to a difference of +/- £81k in gross profit (2021: +/- £35k).

 

Contract liabilities - refund accruals

Accruals for sales returns are estimated on the basis of historical returns and are recorded so as to allocate them to the same period in which the original revenue is recorded. These accruals are reviewed regularly and updated to reflect management's latest best estimates, although actual returns could vary from these estimates. The accrual for refunds totalled £2,029k (2021 refund accrual: £726k) and a right to returned goods asset recognised of £814k (2021: £311k). A performance obligation is deemed for returns and refunds. A 14 days return policy is noted for a full refund through Sosandar.com and up to 30 days on third party retailer websites. A difference of 1%pt in the sales returns rate have an impact of +/- £92k (2021: +/- £53k) on the refund provision, and +/- £38k (2021: +/- £21k) on the right to returned goods asset.

 

Calculation of share-based payment charges

The charge related to equity-settled transactions with employees is measured by reference to the fair value of the equity instruments at the date they are granted, using an appropriate valuation model selected according to the terms and conditions of the grant. Judgement is applied in determining the most appropriate valuation model and in determining the inputs to the model. Judgements are also applied in relation to estimations of the number of options which are expected to vest, by reference to historic leaver rates and expected outcomes under relevant performance conditions. Please see note 18.

 

Depreciation of property, plant and equipment and amortisation of other intangible assets

Depreciation and amortisation are provided to write down assets to their residual values over their estimated useful lives. The determination of these residual values and estimated lives, and any change to the residual values or estimated lives, requires the exercise of management judgement. Please see notes 10 and 11.

 

Principal accounting policies

The principal accounting policies are summarised below. They have been consistently applied throughout the year covered by the financial statements.

 

Revenue recognition

Revenue is recognised at the point where legal title in the goods passes from the Group to the customer.   This includes the price paid for the goods as well as any delivery charge where applicable.   Typically legal title is passed when the goods are despatched from the warehouse and as the invoice is created.

Revenue is reported after making deduction for actual and anticipated returns, relevant vouchers and sales taxes.   

No breakdown of revenue can be made in tabular form as all sales are UK and online, with similar risk profiles.

Business combinations

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. In the consolidated financial statements, acquisition costs incurred are expensed and included in general and administrative expenses.

 

Intangible assets

Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated. Costs are capitalised where the expenditure will bring future economic benefit to the company.

 

Amortisation is recognised so as to write off the cost or valuation of assets less their residual values over their useful economic lives. The estimated useful economic life of intangible assets has been revised to 5 years. For any assets older than this with a net book value at year end, the amortisation has been accelerated to make the net book value nil at the end of the financial year.

 

Property, plant and equipment

Property, plant and equipment are stated at historical cost less subsequent accumulated depreciation and accumulated impairment losses, if any. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

 

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the company and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.

 

Depreciation on property, plant and equipment is calculated using the straight-line method to write off their cost over their estimated useful lives at the following annual rates:

 

Plant and Machinery                                                      15% Straight line              
Computer Equipment                                                     33.33% Straight line        
Fixture and Fittings                                                         15% Reducing balance  
Office Equipment                                                            25% Reducing balance  
Leasehold Improvements                                              20% Straight line

Right of Use Asset                                                           20% Straight line

 

On 1 February 2022, the Group entered into a new lease. The corresponding right of use asset is depreciated over the life of the lease at 20% per annum.

 

Equity

Equity instruments issued by the Company are recorded at the value of the proceeds received, net of direct issue costs, allocated between share capital and share premium.

 

Government grants

Grants are recognised only when there is reasonable assurance that the Group will comply with the conditions attached to them and that the grants will be received. Any grants that are receivable as compensation for expenses already incurred are recognised in profit or loss in the period in which they become receivable.

 

Impairment of non-financial assets

At each statement of financial position date, the Company reviews the carrying amounts of its investments 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 the asset does not generate cash flows that are independent from other assets, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. An intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be impaired.

 

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 current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.  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 as an expense immediately, unless the relevant asset is carried at a revalued 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 as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

 

Taxation

Income tax

Income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year.  Taxable profit differs from profit as reported in the same income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.  The Group and Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the statement of financial position date.

 

Deferred tax

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the statement of financial position liability method.  Deferred tax liabilities are

generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. 

 

Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

 

The carrying amount of deferred tax is reviewed at each statement of financial position date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

 

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised.  Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

 

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group and Company intends to settle its current tax assets and liabilities on a net basis.

 

Share-based compensation

The fair value of the employee and suppliers' services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed over the vesting year is determined by reference to the fair value of the options granted, excluding the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. At each statement of financial position date, the entity revises its estimates of the number of options that are expected to

vest. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.

 

The fair value of share-based payments recognised in the income statement taking into account conditions attached to the vesting and exercise of the equity instruments. The expected life used in the model is adjusted; based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. The share price volatility percentage factor used in the calculation is based on management's best estimate of future share price behaviour and is selected based on past experience, future expectations and benchmarked against peer companies in the industry.

 

Pension costs

The Group contributes to a defined contribution scheme for employees. The costs of these contributions are charged to the statement of comprehensive income on an accruals basis as they become payable under the scheme rules.

 

Investments
Investments in subsidiary companies are stated at cost less any provision for impairment.

Investments are accounted for at cost unless there is evidence of a permanent diminution in value, in which case they are written down to their estimated realisable value. Any such provision, together with any realised gains and losses, is included in the statement of comprehensive income.

 

Impairment of investments

The impairment of the carrying value of the investment in subsidiaries is calculated using forward-looking assumptions of profit growth rates, discount rates and timeframe which require management judgement and estimates that cannot be certain.

 

Provisions

Provisions are recognised when the Group and Company has a present obligation as a result of a past event, and it is probable that the Group and Company will be required to settle that obligation.  Provisions are measured at the Directors' best estimate of the expenditure required to settle the obligation at the statement of financial position date and are discounted to present value where the effect is material.

 

Financial instruments

Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables. Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transactions costs, except as described below. Subsequent to initial recognition non-derivative financial instruments are measured as described below.

 

A financial instrument is recognised when the Group becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if the Group's contractual rights to the cash flows from the financial assets expire or if the Group transfers the financial assets to another party without retaining control or substantially all risks and rewards of the asset. Regular purchases and sales of financial assets are accounted for at trade date, i.e. the date that the Group commits itself to purchase or sell the asset. Financial liabilities are derecognised if the Group's obligations specified in the contract expire or are discharged or cancelled.

 

Fair values

The carrying amounts of the financial assets and liabilities such as cash and cash equivalents, receivables and payables of the Group and Company at the statement of financial position date approximated their fair values, due to the relatively short-term nature of these financial instruments.

 

Trade payables and other non-derivative financial liabilities  

Trade payables and other creditors are non-interest bearing and are measured at cost.

 

Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held on call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts.  Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position.

Trade and other receivables

Trade and other receivables are recognised initially at fair value and subsequently measured at their cost when the contractual right to receive cash or other financial assets from another entity is established.

A provision for doubtful debts is made when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation and default or delinquency in payments are considered indicators that a trade and other receivables are impaired.

Financial assets and liabilities

The Group classifies its financial assets at inception into three measurement categories; 'amortised cost', 'fair value through other comprehensive income' ('FVOCI') and 'fair value through profit and loss' ('FVTPL'). The Group classifies its financial liabilities, other than financial guarantees and loan commitments, as measured at amortised cost. Management determines the classification of its investments at initial recognition. A financial asset or financial liability is measured initially at fair value. At inception transaction cost that are directly attributable to its acquisition or issue, for an item not at fair value through profit or loss, is added to the fair value of the financial asset and deducted from the fair value of the financial liability.

 

Amortised cost measurement

The amortised cost of a financial asset or financial liability is the amount at which the financial asset or liability is measured at initial recognition, minus principal payments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initial amount recognised and maturity amount, minus any reduction for impairment.

 

Fair value measurement

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction on the measurement date. The fair value of assets and liabilities in active markets are based on current bid and offer prices respectively. If the market is not active the group establishes fair value by using appropriate valuation techniques. These include the use of recent arm's length transactions, reference to other instruments that are substantially the same for which market observable prices exist, net present value and discounted cash flow analysis.

 

Derecognition

Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or where the group has transferred substantially all of the risks and rewards of ownership. In transaction in which the group neither retains nor transfers substantially all the risks and rewards of ownership of a financial asset and it retains control over the asset, the group continues to recognise the asset to the extent of its continuing involvement, determined by the extent to which it is exposed to changes in the value of the transferred asset. There have not been any instances where assets have only been partly derecognised. The group derecognises a financial liability when its contractual obligation are discharge, cancelled or expire.

 

Impairment losses from contracts with customers

The Group assesses at each financial position date whether there is objective evidence that a financial asset or group of financial assets is impaired. If there is objective experience (such as significant financial difficulty of obligor, breach of contract, or it becomes probable that debtor will enter bankruptcy), the asset is tested for impairment. The amount of the loss is measured as the difference between the asset's carrying amount and the present value of the estimated future cash flows (excluding future expected credit losses that have not been incurred) discounted at the financial asset's original effective interest rate (that is, the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced through use of an allowance account. The amount of loss is recognised in the Statement of Comprehensive Income.

 

 

Leases

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

 

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

 

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee's incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.

 

Right-of-use assets are measured at cost comprising the following:

·    the amount of the initial measurement of lease liability

·    any lease payments made at or before the commencement date less any lease incentives received

·    any initial direct costs, and

·    restoration costs.

 

Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT-equipment and small items of office furniture less than £5k.

 

3 Other operating income

 

The Group did not receive any government grants through the Furlough scheme during the year (2021: £135k).

 

4 Operating loss

	31 March 2022		31 March 2021
	£'000		£'000
Operating loss is stated after charging/(crediting):
Operating lease rentals	24		47
Auditors' remuneration:
Audit fee - group and company	44		32
Non audit fees	-		4
Legal and other fees	167		105
Foreign currency (gain)/loss	48		(33)
Share based payment	255		175

 

5 Finance cost

	31 March 2022		31 March 2021
	£'000		£'000
Interest on the lease	4		5
Other interest	4		5
Total	8		10

 

 

6 Employees

	31 March		31 March
	2022		2021
	£'000		£'000
Aggregate Directors' emoluments including consulting fees	629		414
Wages and salaries	1,641		1,324
Social security costs	230		175
Pension costs	94		72
Share-based payments	255		175
Total	2,849		2,160

 

	31 March		31 March
	2022		2021
	£'000		£'000
Directors	8		7
Staff	45		34
Total	53		41

 

 

Directors' remuneration

 

Details of emoluments received by Directors of the Company for the year ended 31 March 2022 are as follows:

	2022	2022	2022	2021
	Base Salary	Pensions	Total	Total
	£	£	£	£
Alison Hall	172,500	13,800	186,300	145,800
Julie Lavington	172,500	13,800	186,300	145,800
Steve Dilks	119,750	8,382	128,132	63,344
Nicholas Mustoe	28,500	-	28,500	24,000
Bill Murray	39,750	-	39,750	24,000
Adam Reynolds	39,000	-	39,000	48,000
Mark Collingbourne	28,500	-	28,500	24,000
Andrew Booth	28,500	-	28,500	24,000
Total	629,000	35,982	664,982	498,944

 

 

7 Income tax
a) Analysis of charge in the period

	31 March	31 March
	2022	2021
Current tax	£'000	£'000
UK corporation tax based on the profit/loss for the period	-	-
Adjustment in respect of prior periods	-	-
Total current tax charge/(credit)	-	-
Deferred tax
Origination and reversal of timing differences	(412)	-
Total deferred tax charge/(credit)	(412)	-
b) Factors affecting the tax charge for the period
	31 March	31 March
	2022	2021
	£'000	£'000
Loss on ordinary activities before taxation	(554)	(3,098)
Tax at the UK corporation tax rate of 19% (2021: 19%)	(105)	(589)
Expenses not deductible for tax purposes	60	15
Losses unutilised	-	581
Adjustments to losses	1	-
Fixed asset differences	(2)	(7)
Remeasurement of deferred tax for changes in tax rates	(1,256)	-
Movement in deferred tax not recognised	890	-
Tax on loss on ordinary activities	(412)	-

On 3 March 2021, it was announced that the UK corporation tax rate will increase to 25% from 19%, effective from 1 April 2023. The deferred tax asset recognised in the accounts has been calculated using the current year tax rate of 19% (2021: 19%). The unrecognised deferred tax asset amounts to £4,692,886 (2021: £3,970,000) and has been calculated at the tax rate of 25%.

The deferred tax asset has been recognised due to the expectation that it will be reversed in future years.

8 Earnings/(loss) per share

Basic earnings/(loss) per share is calculated by dividing the loss attributable to equity shareholders by the weighted average number of ordinary shares in issue during the year:

 

	31 March		31 March
	2022		2021
Loss after tax attributable to equity holders of the parent (£'000)	(142)		(3,098)
Weighted average number of ordinary shares in issue	216,844,739		192,268,110
Fully diluted average number of ordinary shares in issue	216,844,739		192,268,110
Basic and diluted earnings/(loss) per share (pence)	(0.07)		(1.61)

 

 

Where a loss is incurred the effect of outstanding share options and warrants is considered anti-dilutive and is ignored for the purpose of the loss per share calculation. For the prior year loss per share, the share options outstanding as at 31 March 2021 totalled 20,217,698 and were potentially dilutive.

 

9 Intangible assets - Group		Website		Trademark		Total
		£'000		£'000		£'000
Cost
At 1 April 2020		218		-		218
Additions		10		2		12
At 31 March 2021		228		2		230
Amortisation
At 1 April 2020		20		-		20
Charge for the year		11		1		12
At 31 March 2021		31		1		32
Carrying value 31 March 2021		197		1		198
Cost
At 1 April 2021		228		2		230
Additions		-		-		-
Disposals		-		-		-
At 31 March 2022		228		2		230
Amortisation
At 1 April 2021		31		1		32
Charge for the year		197		1		198
Disposals		-		-		-
At 31 March 2022		228		2		230
Carrying value 31 March 2022		-		-		-

 

 

10 Property, plant and equipment - Group

	Computer Equipment	Fixtures and fittings equipment	Right of use asset	Total
	£'000	£'000	£'000	£'000
Cost
At 1 April 2020	86	279	192	557
Additions	7	27	-	34
At 31 March 2021	93	306	192	591
Accumulated depreciation
At 1 April 2020	33	167	75	275
Charge for year	25	51	75	151
At 31 March 2021	58	218	150	426
Carrying value 31 March 2021	35	88	42	165
Cost
At 1 April 2021	93	306	192	591
Additions	30	6	364	400
At 31 March 2022	123	312	556	991
Accumulated depreciation
At 1 April 2021	58	218	150	426
Charge for year	27	38	54	119
At 31 March 2022	85	256	204	545
Carrying value 31 March 2022	38	56	352	446

 

11 Non-current assets

Investments in subsidiaries and associates:

	Group		Company
	2022	2021	2022	2021
	£'000	£'000	£'000	£'000
Cost at 1 April	-	-	6,282	6,282
Disposals during the year	-	-	-	-
Cost at 31 March	-	-	6,282	6,282
Impairment at 1 April	-	-	-	-
Disposals during the year	-	-	-	-
Impairment at 31 March	-	-	-	-
Carrying value as at 31 March	-	-	6,282	6,282

 

Investments are tested for impairment at the balance sheet date. The recoverable amount of the investment in Thread 35 Ltd at 31 March 2022 was assessed on the basis of value in use. As this exceeded carrying value no impairment loss was recognised.

The key assumptions in the calculation to access value in use are the future revenues and the ability to generate future cash flows. The most recent financial results and forecast approved by management were for the next 9 years and included terminal value. The projected results were discounted at a rate which is a prudent evaluation of the pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the cash-generating unit.

The key assumptions used for the value in use calculation in 2022 were as follows:
                                                                                                                                                                                %

Discount rate                                                                                                                                                        11
Returns assumption                                                                                                                                            45

Compound annual revenue growth rate                                                                                                         20          

 

The Directors have made significant estimates on future revenues and EBITDA growth in future years based on the budgeted investment and expansion of our clothing and footwear ranges, increased stocking levels and continued investment in marketing channels to acquire new customers.

 

The Directors have performed a sensitivity analysis to assess the impact of downside risk of the key assumptions underpinning the projected results of the Group. The projections and associated headroom used for the Group is sensitive to the EBITDA growth assumptions that have been applied.

 

The subsidiaries of Sosandar Plc are as follows:

Subsidiary companies	Incorporation	Holding	Type of share held	% Holding 2022	% Holding 2021
	UK
Thread 35 Limited		Direct	Ordinary shares	100	100

 

 

12 Inventories - Group

	31 March		31 March
	2022		2021
	£'000		£'000
Stock - finished goods	6,493		2,555
Right to returned stock	814		311
Total	7,307		2,866

 

The cost of inventories charged in the year as an expense equated to £12,962k (2021: £6,319k). Right to returned stock relates to the cost of products sold in the financial year but expected to be returned after the financial period.

 

13 Loans to subsidiaries

 

	Group		Company
	2022	2021	2022	2021
	£'000	£'000	£'000	£'000
Loan to subsidiary	-	-	-	-

 

The loan made to Thread 35 Limited by Sosandar Plc of £4,681,346 (2021: £18,366,142) was waived at the year end. The interest due on this loan was waived at the start of the year and subsequently, no further amounts are due between the two entities.

 

14 Trade and other receivables

	Group		Company
	2022	2021	2022	2021
	£'000	£'000	£'000	£'000
Trade receivables	1,683	305	-	-
VAT recoverable	16	18	16	18
Other receivables and prepayments	796	405	18	20
Trade and other receivables	2,495	728	34	38

 

The Directors consider that the carrying amount of trade and other receivables approximates their fair value.

 

 

15 Cash and cash equivalents

	Group		Company
	2022	2021	2022	2021
	£'000	£'000	£'000	£'000
Cash at bank	7,048	3,928	3,399	2,952

16 Share capital and reserves

Details of ordinary shares issued are in the table below:

 

Ordinary Shares (£0.01)
	Number of shares	Issue Price £	Total Share Capital £'000	Total Share Premium £'000
At 31 Mar 2021	192,268,122	0.001	192	41,592
Shares issued: Fundraise May 21	28,840,210	0.001	29	5,739
Shares issued: Warrants exercised Dec 21	300,000	0.001	-	45
Direct costs: Fundraise May 21				(287)
At 31 Mar 2022	221,408,332	0.001	221	47,089

 

 

17 Share based payments

 

Share option plans

The Group has a share ownership compensation scheme for Directors and senior employees of the Group. On 2^nd November 2017 share options over ordinary shares of 15.1p were issued with a further issue over ordinary shares of 29.1p issued on 25^th February 2019. On 21 June 2021 the Group announced the establishment of a new Long Term Incentive Plan in which it granted new nil cost options totalling 21,431,942 ordinary shares of 0.1 pence each to its executive directors and members of the senior management team. Some of the existing options granted, totalling 13,888,742 ordinary shares, were modified as part of these arrangements. There was no incremental fair value because of this modification.

 

The options are settled in equity once exercised. If the options remain unexercised for a period after ten years from the date of grant, the options expire.

 

Details of the number of share options and the weighted average exercise price ("WAEP") outstanding during the period are as follows:

	31 March 2022		31 March 2021
	Number ('000)	WAEP £	Number ('000)	WAEP £
Outstanding at 31 March 2021	20,218	0.154	20,400	0.155
Modifications in the year	(13,889)	0.154	-	-
	11,789	0.000
Issuances in the year	9,643	0.000	-	-
Cancellations in the year	-	-	(182)	0.265
Outstanding at 31 March 2022	27,761	0.035	20,218	0.154
Exercisable at 31 March 2022	14,682	0.035	13,502	0.154

 

The options outstanding at 31 March 2022 had a weighted average exercise price of £0.035 and a weighted average remaining contractual life of 8.59 years.

The fair values of options granted prior to 2021 were calculated using the Black Scholes pricing model. The fair values of the options granted in June 2021 were calculated using the Monte Carlo model. The Group used historical data to estimate expected period to exercise, within the valuation model. Expected volatilities of options outstanding granted prior to the Company's admission to AIM were based on implied volatilities of a sample of listed companies based in similar sectors. The risk-free rate for the expected period to exercise of the option was based on the UK gilt yield curve at the time of the grant.

The Group recognised a charge of £255k (2021: £175k) related to equity-settled share-based payment transactions during the year.

 

The assumptions used in the valuation of the options at the grant date are as follows. There were no new share issues in the year.

 

	Share options 2022	Share options 2020	Share options 2018
Exercise price	0.0p	29.1p	15.1p
Share price at date of grant	23.75p	29.1p	15.1p
Risk-free rate	0.25%	0.25%	0.25%
Volatility	42%	25%	25%
Expected Life	5 years	10 years	10 years
Fair Value	0.13	0.07	0.05

 

 

18 Trade and other payables

 

	Group		Company
	2022	2021	2022	2021
	£'000	£'000	£'000	£'000
Trade payables	2,869	1,110	22	3
Accruals	656	405	30	27
Other payables	269	12	-	-
VAT payable	856	529	-	-
Contract liabilities	2,029	726	-	-
Deferred income	82	73
Trade and other payables	6,761	2,855	52	30

 

 

19 Leases

 

The Group has a property lease contract which is used in its day to day operations.

	31 March	31 March
	2022		2021
	£'000		£'000
Lease liability brought forward	49		126
Additions	345		-
Finance cost	4		6
Lease payments	(71)		(83)
Lease liability recognised in statement of financial position	327		49
	31 March		31 March
	2022		2021
	£'000		£'000
Of which
Current lease liabilities	38		49
Non-current lease liabilities	289		-
Lease liability recognised in statement of financial position	327		49

                               

 

The lease has a term of five years with a break clause after three years. On 1 April 2022, the Group entered into a second property lease in Wilmslow, England in order to expand its office space.

 

20 Related party transactions

 

During the year to 31 March 2022 the Group was charged £39,000 (2021: £48,000) for services provided by Reyco Limited, a company controlled by A Reynolds. There was no amount outstanding at the balance sheet date (2021: £nil).

 

During the year to 31 March 2022 the Group was charged £28,500 (2021: £24,000) for services provided by Morrison Kingsley Consultants Limited, a company controlled by M Collingbourne. There was £3,040 outstanding at the balance sheet date (2021: £nil).

 

During the year to 31 March 2022 the Group was charged £39,750 (2021: £24,000) for services provided by Bill Murray and Associates, a company controlled by B Murray. There was no amount outstanding at the balance sheet date (2021: £nil).

 

During the year to 31 March 2022 the Group was charged £28,500 (2021: £24,000) for services provided by N Mustoe. There was £10,000 outstanding at the balance sheet date (2021: £nil).

 

During the year to 31 March 2022 the Group was charged £28,500 (2021: £24,000) for services provided by Skale Limited, a company controlled by A Booth. There was £3,000 outstanding at the balance sheet date (2021: £nil).

 

During the year to 31 March 2022, a management fee of £166,302 (2021: £157,946) was waived in line with the intercompany loan.

 

During the year to 31 March 2022, interest of £nil (2021: £nil) was charged to Thread 35 Limited relating to the intercompany loan as a result of the waiving of the loan and interest by the Company.

 

The Company's intercompany loan receivable balance from Thread 35 Limited at the year-end was £nil (2021: £nil).

 

21 Financial instruments - risk management

In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments.  This note describes the Group's objectives, policies and processes for managing those risks and the methods used to measure them.  Further quantitative information in respect of these risks is presented throughout these financial statements.

 

There have been no substantive changes in the Group's exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note.

General objectives, policies and processes

The Board has overall responsibility for the determination of the Group's risk management objectives and policies and, whilst retaining responsibility for them it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group's finance function.  The Board receives regular updates from the management team through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets.  The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility.  The Company's operations expose it to some financial risks arising from its use of financial instruments,

the most significant ones being cash flow interest rate risk, foreign exchange risk, liquidity risk and capital risk. Further details regarding these policies are set out below:

 

Cash flow interest rate risk

The Group is exposed to cash flow interest rate risk from its deposits of cash and cash equivalents with banks.  The cash balances maintained by the Group are proactively managed in order to ensure that attractive rates of interest are received for the available funds but without affecting the working capital flexibility the Group requires. The Group is not at present exposed to cash flow interest rate risk on borrowings as it has no debt.  No subsidiary company of the Group is permitted to enter into any borrowing facility or lease agreement without the prior consent of the Company.

 

Foreign exchange risk

Foreign exchange risk may arise because the Group purchases stock in currencies other than the functional currency.

The Group monitors whether there is a requirement for foreign currency on a monthly basis. The Group considers this policy minimises any unnecessary foreign exchange exposure.

 

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. The principal obligations of the Group arise in respect of committed expenditure in respect of its stock purchases and design. The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its obligations when they become due.  To achieve this aim, it seeks to maintain readily available cash balances (or agreed facilities) to meet expected requirements and to raise new equity finance if required for future development or expansion.

 

The Board receives cash flow projections on a monthly basis as well as information on cash balances. The Board will not commit to material expenditure in respect of its ongoing commitments prior to being satisfied that sufficient funding is available to the Group to finance the planned programmes. For cash and cash equivalents, the Company only uses recognised banks with medium to high credit ratings.

 

The maturity of borrowings and other financial liabilities (representing undiscounted contractual cash-flows) is as follows:

	Group		Company
	Within 1 year	1-2 years	Within 1 year	1-2 years
As at 31 March 2022	£'000	£'000	£'000	£'000
Trade and other payables	6,761	-	52	-
Lease liabilities	38	289	-	-
Total	6,799	289	52	-
	Group		Company
	Within 1 year	1-2 years	Within 1 year	1-2 years
As at 31 March 2021	£'000	£'000	£'000	£'000
Trade and other payables	2,855	-	29	-
Lease liabilities	49	-	-	-
Total	2,904	-	29	-

 

 

Financial assets

At the reporting date, the Group held the following financial assets, all of which were classified as financial assets at amortised cost:

	Group		Company
	31 March	31 March	31 March	31 March
	2022	2021	2022	2021
	£'000	£'000	£'000	£'000
Cash and cash equivalents	7,048	3,928	3,399	2,952
Trade & other receivables	2,027	728	34	38
Total	9,075	4,656	3,433	2,990

 

Financial liabilities

At the reporting dates, the Group held the following financial liabilities, all of which were classified as other financial liabilities at amortised cost:

	Group		Company
	31 March	31 March	31 March	31 March
	2022	2021	2022	2021
	£'000	£'000	£'000	£'000
Trade payables	2,869	1,110	22	3
Accruals	656	405	30	27
Other payables	269	12	-	-
VAT payable	856	529
Contract liabilities	2,029	726	-	-
Lease liabilities	327	49	-	-
Trade and other payables	7,006	2,831	52	30

Capital risk

The Group's objectives when managing capital are to safeguard the ability to continue as a going concern in order to provide returns for shareholders and benefits to other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

 

22 Post balance sheet events

 

On 1 April 2022, the Group entered into a new lease in Wilmslow, England in order to expand its office space. On 1 April 2022, the lease liability on the new lease totalled £361k.

 

On 14 April 2022, Jonathan Wragg was appointed as a Director to the Board.

 

23 Contingent liabilities

 

The Company and Group has no contingent liabilities.

 

24 Ultimate controlling party

There is no ultimate controlling party of the Company.