Financial Performance - The Group's revenue for the nine months ended 30 September 2020 was approximately HK$123.6 million, representing an increase of approximately HK$106.6 million, or 627.1%, compared to HK$17.0 million for the same period last year[4] - Cost of sales increased by approximately 154.2% from HK$8.3 million to HK$21.1 million for the same nine-month period[4] - The Group recorded a gross profit of approximately HK$102.4 million, an increase of approximately 1,077% compared to HK$8.7 million in the prior period[4] - Other income increased by approximately 152.5%, from HK$5.9 million to HK$14.9 million, mainly due to gains from financial asset disposals and government grants[6] - Selling and distribution expenses surged by approximately 986.3%, from HK$7.3 million to HK$79.3 million, attributed to increased efforts to boost revenue[6] - Administrative and other expenses rose by approximately 38.2%, from HK$82.2 million to HK$113.6 million, primarily due to higher staff costs and lease expenses[6] - For the three months ended September 30, 2020, the company reported revenue of HK$64,126,000, a significant increase from HK$5,422,000 in the same period of 2019, representing a growth of 1,080%[8] - The gross profit for the three months ended September 30, 2020, was HK$56,279,000, compared to HK$3,307,000 in 2019, indicating a substantial increase of 1,603%[8] - The total comprehensive income for the period was a loss of HK$50,679,000 for the three months ended September 30, 2020, compared to a loss of HK$43,422,000 in 2019, indicating an increase in losses of 17%[10] - The total comprehensive income for the nine months ended September 30, 2020, was a loss of HKD 222,248,000[14] - The accumulated losses amounted to HKD 182,073,000 as of September 30, 2020[14] - The loss for the nine months from continuing operations was HK$98,132,000, compared to HK$74,630,000 in 2019, representing an increase in losses of 32%[8] - The total loss for the Group in 2020 was HK$202,507,000, compared to a loss of HK$64,045,000 in 2019, indicating a substantial increase in overall losses[39] Disposals and Acquisitions - The Group completed the disposal of 100% equity interest in two subsidiaries, CRMT and CRHI, to Osibao International Limited, with results presented as "gain/(loss) for the period from discontinued operations"[24] - The total consideration for the disposal of CRMT and CRHI was HK$35,000,000, with HK$23,491,772 attributed to CRMT and HK$11,508,228 to CRHI[79] - The Group completed the disposal of 100% equity interest in CRMT and CRHI on September 30, 2020[84] - The company completed the disposal of the "dermatology and others," "ophthalmology products," and "stomatology products and others" business segments to focus on more profitable areas[32] - A proposed acquisition was canceled in June 2020, with a deposit of HK$46.51 million to be returned to the group by December 2020[32] Share Capital and Financing - The company entered into subscription and settlement agreements to issue 170 million new shares at a price of HK$0.20 per share, settling accounts payable of HK$34 million[29] - The placing of 500 million ordinary shares was completed on May 15, 2020, at a price of HK$0.20 per share[28] - The company will consider alternative fundraising methods that may involve issuing shares or convertible bonds[32] - The company has fully converted HK$120 million in zero coupon rate convertible bonds into 600 million ordinary shares during the reporting period[28] - The Board did not recommend the payment of dividends for the nine months ended September 30, 2020[59] Operational Challenges and Strategies - The Group's financial performance reflects ongoing challenges, necessitating strategic adjustments to ensure sustainability[25] - The company plans to improve working capital and cash flows by closely monitoring administrative expenses and operating costs[32] - The healthcare products and services segment showed substantial improvement in the second and third quarters of 2020, generating operating profit and enhancing liquidity[30] - The Group aims to improve working capital and cash flows by closely monitoring administrative expenses and operating costs, while also seeking new potential customers[95] - The Group's management is actively seeking strategies to enhance liquidity and address financial challenges[25] Research and Development - The company is engaged in the research and development of biomedical products, tissue engineering, and stem cell products[18] - The Company has paid GBP5.05 million (equivalent to HK$55.9 million) to the University of Oxford for research on stem cell therapy and tissue engineering as of September 30, 2020[69] - Research and development costs for the nine months ended September 30, 2020, amounted to HK$5,532,000, slightly down from HK$6,807,000 in 2019[53] - The Group continues to seek assistance from the Chinese government to enhance R&D in regenerative medicine and related medical devices[93] Share Options and Corporate Governance - The Share Option Scheme adopted on September 14, 2011, aims to provide incentives to directors and eligible employees[140] - The company reported no arrangements that would benefit directors or their families from the company's shares or securities as of September 30, 2020[142] - The report emphasizes the importance of transparency in the movement of share options and their impact on overall corporate governance[145] - The company continues to monitor the share option scheme's effectiveness in aligning management incentives with shareholder interests[145] - The company has a structured approach to share options, ensuring that new employees are eligible for a portion of the options granted[151] Shareholder Information - As of September 30, 2020, Mr. Wang Chuang holds 25,140,000 shares, representing approximately 1.17% of the issued share capital[111] - Mr. Wu Weiliang owns 22,620,000 shares, accounting for about 1.05% of the issued share capital as of September 30, 2020[111] - All Favour Holdings Limited is a substantial shareholder with 582,907,765 shares, which is 27.12% of the issued share capital[119] - Mr. Dai Yumin, through a controlled corporation, also holds 582,907,765 shares, equating to 27.12%[121] - Mr. Mao Xiaokai has a beneficial ownership of 280,000,000 shares, representing 13.03% of the issued share capital[123] - China Orient Asset Management Co., Ltd holds 157,744,659 shares, which is 7.34% of the issued share capital[125] - Wang Xiaogang owns 209,450,000 shares, accounting for 9.75% of the issued share capital[129] - Wu Yawei has a beneficial ownership of 205,000,000 shares, representing 9.54% of the issued share capital[130] Financial Position and Equity - As of 30 September 2020, the Group's total equity was approximately HK$52.8 million, indicating material uncertainty regarding its ability to continue as a going concern[25] - The Group's net assets are reported at HK$18,874 million, with current assets totaling HK$14,120 million and current liabilities at HK$7,221 million[90] - The Group has capital commitments of HK$733,000 for the purchase of property, plant, and equipment as of September 30, 2020[68] - The Group's capital commitments increased from HK$654,000 as of December 31, 2019, to HK$733,000 as of September 30, 2020[68]

Financial Performance - The company reported a significant increase in revenue, achieving a total of HKD 50 million for the first half of 2020, representing a 25% increase compared to the same period last year[4]. - Revenue for the three months ended June 30, 2020, was HK$64,252,000, a significant increase from HK$14,283,000 in the same period of 2019, representing a growth of 350%[14]. - Gross profit for the six months ended June 30, 2020, was HK$53,329,000, compared to HK$12,114,000 in 2019, indicating a growth of 340%[14]. - The Group's revenue for the six months ended 30 June 2020 was approximately HK$68.9 million, representing an increase of approximately HK$46.5 million, or 207.6%, compared to HK$22.4 million for the same period last year[110]. - The Group recorded a gross profit of approximately HK$53.3 million, an increase of approximately 443.9% compared to HK$9.8 million in the prior period, due to a focus on higher margin business[110]. Losses and Financial Challenges - The loss for the period attributable to owners of the Company was HK$148,668,000 for the three months ended June 30, 2020, compared to HK$24,047,000 in 2019, reflecting an increase in loss of 518%[16]. - Total comprehensive loss for the period attributable to owners of the Company was HK$143,892,000 for the three months ended June 30, 2020, compared to HK$40,120,000 in 2019, marking an increase of 258%[16]. - The loss for the period was HK$163,734,000, reflecting a significant decrease compared to previous periods[25]. - For the six months ended June 30, 2020, the company incurred a loss attributable to owners of approximately HK$163,734,000[36]. - The company reported a loss per share of HK$12.132 for the three months ended June 30, 2020, compared to HK$2.735 in 2019, indicating a significant increase in loss per share[16]. Assets and Liabilities - Current assets decreased to HK$330,053,000 as of June 30, 2020, from HK$343,994,000 as of December 31, 2019, a decline of 4%[18]. - Net current assets decreased to HK$18,583,000 as of June 30, 2020, down from HK$42,768,000 as of December 31, 2019, a decrease of 56%[20]. - Non-current liabilities decreased to HK$163,516,000 as of June 30, 2020, from HK$235,074,000 as of December 31, 2019, a reduction of 30%[20]. - Cash and bank balances increased to HK$28,493,000 as of June 30, 2020, compared to HK$19,210,000 as of December 31, 2019, an increase of 48%[18]. - The total equity attributable to owners of the Company was HK$101,963,000 as of June 30, 2020, compared to HK$92,826,000 as of December 31, 2019, an increase of 10%[20]. Strategic Initiatives and Future Outlook - The company has set a future outlook with a revenue target of HKD 100 million for the full year 2020, indicating a projected growth of 20% year-on-year[4]. - The company is expanding its market presence in Southeast Asia, targeting a 15% market share in the region by the end of 2021[4]. - New product development includes the launch of two innovative regenerative therapies, expected to enter the market by Q4 2020[4]. - The company plans to invest HKD 10 million in new technology for improving treatment efficiency and patient outcomes[4]. - The company is exploring partnerships with international research institutions to accelerate innovation in regenerative medicine[4]. Employee and Operational Expenses - The company reported employee benefit expenses of HK$77,706,000 for the six months ended June 30, 2020, compared to HK$35,052,000 in 2019, an increase of 121.8%[58]. - Administrative and other expenses rose by approximately 121.0%, from approximately HK$84.6 million for the six months ended 30 June 2019 to approximately HK$187.0 million for the six months ended 30 June 2020, mainly due to increased staff costs and lease expenses[112]. - Selling and distribution expenses increased by approximately 243.4%, from approximately HK$14.3 million for the six months ended 30 June 2019 to approximately HK$49.1 million for the six months ended 30 June 2020[112]. Share Options and Capital Management - The company reported a significant increase in share options, with 3,482,500 outstanding as of June 30, 2020[159]. - The exercise price for the share options granted ranges from HKD 7.2 to HKD 9.00, with various vesting schedules[159]. - The share options granted in 2019 were specifically noted for their impact on the company's financial performance[165]. - The company aims to enhance its market position through the effective management of share options and employee engagement strategies[165]. - The Company maintained compliance with the GEM Listing Rules regarding directors' interests and competing businesses[148]. Fundraising and Financial Activities - The Group plans to continue improving working capital and cash flows by closely monitoring administrative expenses and operating costs[44]. - The Group is exploring alternative means of fundraising, which may involve the issuance of shares or convertible bonds[108]. - Total net proceeds from fundraising activities amounted to HK$255.20 million, with HK$99.20 million utilized as of the reporting date[120]. - The Company entered into a placing agreement to issue up to 500 million ordinary shares at HK$0.20 per share on March 2, 2020[42]. - A subscription agreement for HK$120 million in zero coupon convertible bonds was completed on April 21, 2020, with full conversion into 600 million ordinary shares[42].

CHINA REGENERATIVE MEDICINE INTERNATIONAL LIMITED 中國再生醫學國際有限公司 Incorporated in the Cayman Islands with limited liability 於開曼群島註冊成立之有限公司 Stock Code 股份代號：8158 ANNUAL REPORT 2019 年報 香港聯合交易所有限公司（「聯交所」）GEM之特點 CHARACTERISTICS OF GEM OF THE STOCK EXCHANGE OF HONG KONG LIMITED (THE "STOCK EXCHANGE") GEM has been positioned as a market designed to accommodate small and mid-sized companies to which a higher investment risk may be attached than other companies listed on the Stock Exchange. Prospective investors should ...

Financial Performance - The Group recorded a revenue of approximately HK$4.7 million for the three months ended 31 March 2020, representing a decrease of 42.0% from HK$8.1 million in the corresponding period of last year[4]. - Gross profit increased by 36.4% to approximately HK$3.0 million, with a gross profit margin rising from 27.3% to 63.8%[4]. - The Group recorded a loss of approximately HK$13.8 million for the period, an improvement from a loss of HK$44.6 million in the same period last year[4]. - Revenue from dermatology and cosmetic products was approximately HK$1.5 million, down 40% from HK$2.5 million in the previous year[4]. - Revenue from ophthalmology products decreased by 44% to approximately HK$0.5 million, compared to HK$0.9 million in the previous year[4]. - Revenue from stomatology products fell by 84.8% to approximately HK$0.5 million, down from HK$3.3 million in the previous year[4]. - Revenue from cell and healthcare products and services increased by 61.5% to approximately HK$2.1 million, up from HK$1.3 million in the previous year[4]. - Total operating expenses for the three months ended 31 March 2020 were approximately HK$19.6 million, a decrease of 59.8% from HK$48.7 million in the previous year[6]. - Loss per share attributable to the owners of the Company for the period was HK1.713 cents, compared to HK4.171 cents in the previous year[6]. - There was no revenue from medical equipment sales for the period, down from HK$40,000 in the previous year, due to a reduction in less profitable trading[6]. - Total comprehensive income for the period was a loss of HK$12,949,000, compared to a loss of HK$36,851,000 in 2019[8]. - The loss attributable to owners of the Company was HK$15,066,000, while non-controlling interests contributed HK$1,292,000[10]. Operating Expenses - The Company reported a decrease in selling and distribution expenses to HK$2,237,000 from HK$6,766,000 in 2019, reflecting a reduction of 66.9%[8]. - Administrative and other expenses were HK$17,370,000, down from HK$41,941,000 in the same period last year, indicating a decrease of 58.7%[8]. - The company incurred employee benefit expenses of HK$7,723,000 in Q1 2020, a decrease of approximately 62% from HK$20,448,000 in Q1 2019[46]. Financial Position and Liquidity - As of 31 December 2019, the Group had a net liability of approximately HK$5.3 million, indicating significant uncertainty regarding the Group's ability to continue as a going concern[23]. - The Group's financial position raises doubts about its ability to realize assets and discharge liabilities in the normal course of business[25]. - The Group plans to improve liquidity by disposing of financial assets valued at HK$267.8 million, with 15% sold for US$5.8 million (HK$45.1 million) and the remaining 85% for US$32.9 million (HK$256.6 million) to Mr. Xiong Qiangen[27]. - The Group is in the process of placing up to 500 million ordinary shares at HK$0.20 per share and has completed a subscription for HK$120 million in zero coupon convertible bonds[29]. - The Group signed an agreement to increase a financing facility from HK$100 million to HK$200 million, extending the repayment date to June 30, 2021[29]. - An interest-free term loan facility of up to HK$100 million has been made available to the Group, repayable by September 30, 2021[29]. Research and Development - Research and development costs for the period were HK$507,000, significantly down from HK$5,033,000 in the previous year, indicating a reduction of approximately 90%[46][47]. - The company aims to expand its business scope in the medical industry and seeks additional resources from the Chinese government to enhance R&D in regenerative medicine and related medical devices[65]. - The company continues to develop stem cell therapy, pharmaceutical products, and precision disease detection and treatment[65]. Share Options and Management - The Share Option Scheme adopted on September 14, 2011, aims to provide incentives to directors and eligible employees of the Group[89]. - The movement of share options during the three months ended March 31, 2020, showed that 57,900 options were outstanding as of December 31, 2019, and remained unchanged by March 31, 2020[92]. - The exercise price for the options granted to directors was set at HKD 0.45, with a vesting schedule allowing up to 20% to be exercised in the first period from September 16, 2016, to September 15, 2017[92]. - The company has established a clear vesting schedule for the share options, which is crucial for aligning employee interests with company performance[190]. - The company emphasizes the importance of share options as part of its compensation strategy to attract and retain talent[190]. Strategic Partnerships and Future Outlook - The company signed sponsorship agreements with the University of Oxford for stem cell therapy research, committing to provide GBP9 million (approximately HK$93 million) over the agreement period[62]. - The company is exploring potential acquisitions to enhance its market position and diversify its product offerings[185]. - A new strategic partnership has been established, expected to drive growth and innovation in the upcoming fiscal year[187]. - The company has provided guidance for the next quarter, expecting revenue to be in the range of $B million to $C million, which represents a D% growth year-over-year[185].

CRMI 中國更生醫學 | --- | --- | --- | --- | --- | --- | --- | |-------|-------|--------------------|-------|-------|-------|-------| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | CHINA REGENERATIVE | | | | | � | --- | --- | |----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ...

| --- | --- | --- | --- | --- | --- | |-------|-------|--------------------|-------|-------|-------| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | CHINA REGENERATIVE | | | | U 香港聯合交易所有限公司（「聯交 | --- | --- | |------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ...

U | --- | --- | --- | --- | --- | |-------|-------|--------------------|-------|-------| | | | | | | | | | | | | | | | | | | | | | CHINA REGENERATIVE | | | q 香港聯合交易所有限公司（「聯交 | --- | --- | |----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ...

[Corporate Information](index=3&type=section&id=Corporate%20Information) During the reporting period, the company's board and committee members underwent multiple changes, including resignations and new appointments - During the reporting period, the company's board and various committee members underwent multiple changes, including the resignation of executive, non-executive, and independent non-executive directors, and the appointment of a new Chairman, Executive Director, and Chief Executive Officer[6](index=6&type=chunk)[8](index=8&type=chunk) [Chairman's Statement](index=7&type=section&id=Chairman's%20Statement) [Chairman's Statement Summary](index=7&type=section&id=Chairman's%20Statement%20Summary) In 2018, new management implemented strategic adjustments focusing on market-oriented operations, strengthening teams, expanding tissue engineering to cosmetics, and restructuring stem cell business, with future growth centered on tissue engineering and global promotion of artificial cornea 'Aierxin' - In 2018, the Group implemented three major strategic adjustments: strengthening the senior management team with experienced biotechnology professionals; expanding the tissue engineering product line from limited medical applications to larger potential markets like anti-aging and cosmetics; and restructuring the stem cell product line to capture the stem cell storage market and develop broader applications[14](index=14&type=chunk)[15](index=15&type=chunk) - Future outlook focuses on four major business segments: **Tissue Engineering**: centered on the artificial cornea product 'Aierxin', expanding domestic markets while committing to global promotion, including Belt and Road regions; **Dermatology**: promoting technology commercialization, collaborating with cosmetic brands to enter medical aesthetics and cosmetic markets; **Stomatology**: striving for stable growth, retaining core technologies and employees, and exploring new channels; **Stem Cells**: leveraging established high-standard bases in Hong Kong and mainland China, expecting business growth for the Group[17](index=17&type=chunk)[18](index=18&type=chunk)[19](index=19&type=chunk) [Management Discussion and Analysis](index=9&type=section&id=Management%20Discussion%20and%20Analysis) [Operations Review](index=9&type=section&id=Operations%20Review) The Group pursued a 'dual-core, dual-wing' strategy, focusing on stem cells and tissue engineering for big health and medical aesthetics, optimizing product lines into activated cells, tissue-engineered cornea, and oral materials, while advancing third-generation artificial cornea R&D and expanding overseas operations - The Group established a 'dual-core, dual-wing' overall development strategy, with stem cells and tissue engineering as two core businesses, and big health and medical aesthetics as two future strategic growth points[29](index=29&type=chunk) - The Group formed three core business lines: **Activated Cell Product Line**: including tissue-engineered skin 'Antifu', newborn biological resource storage, stem cell storage, medical aesthetics, and big health-related products; **Tissue-Engineered Cornea Product Line**: with the core product being the world's first listed bio-engineered cornea 'Aierxin'; **Tissue-Engineered Oral Material Product Line**: including natural calcined bone repair material 'Gelu' and others[43](index=43&type=chunk)[60](index=60&type=chunk)[61](index=61&type=chunk) - Significant R&D progress was made, with the independently developed third-generation tissue-engineered cornea successfully developed and entering the approval process, expected to expand applicable populations and improve surgical success rates[40](index=40&type=chunk) - The Group actively expanded overseas markets, completing company establishment and operations in the United States and the United Kingdom, with overseas sales of tissue engineering products now in the implementation phase[71](index=71&type=chunk) [Financial Review](index=21&type=section&id=Financial%20Review) In FY2018, the Group's financial performance sharply deteriorated, with significant revenue decline and a substantial increase in annual loss, primarily driven by reduced sales, strategic adjustments, and large impairment losses on assets and financial instruments, leading to a significant reduction in net assets Key Financial Indicators for FY2018 | Indicator | FY2018 (12 months) | FY2017 (8 months) | YoY Change | | :--- | :--- | :--- | :--- | | **Revenue** | HKD 73 million | HKD 503.7 million | -85.5% | | **Gross Profit** | HKD 27 million | HKD 147.3 million | -81.7% | | **Gross Profit Margin** | 37.0% | 29.2% | +7.8pp | | **Annual Loss** | HKD 1,283.9 million | HKD 166.2 million | Loss widened | | **Loss Attributable to Owners of the Company** | HKD 1,193.5 million | HKD 158.5 million | Loss widened | | **Loss Per Share** | HKD 6.787 cents | HKD 0.901 cents | Loss widened | Revenue Breakdown by Business Segment | Business Segment | FY2018 (12 months) | FY2017 (8 months) | YoY Change | | :--- | :--- | :--- | :--- | | Skin, Cosmetics and Others | HKD 12.5 million | HKD 71.2 million | -82.4% | | Ophthalmic Products | HKD 5.3 million | HKD 55.6 million | -90.4% | | Oral Products and Others | HKD 19.4 million | HKD 63.6 million | -69.5% | | Cell and Big Health Products and Services | HKD 6.9 million | HKD 1.9 million | +271.0% | | Medical Devices | HKD 28.9 million | HKD 311.5 million | -90.7% | - The significant increase in annual loss was primarily attributable to: **Reduced gross profit**: due to decreased sales of proprietary products, gross profit decreased by approximately **HKD 120.3 million**; **Expected credit losses**: due to the adoption of new accounting standards, expected credit losses on trade receivables of **HKD 139 million** were recognized; **Asset impairment**: due to poor financial performance of business units and changes in operating strategies, impairment losses on goodwill, property, plant and equipment, and intangible assets totaled approximately **HKD 646.7 million**; **Financial asset losses**: financial assets at fair value through profit or loss generated a fair value loss of approximately **HKD 113.8 million**[76](index=76&type=chunk) - As of December 31, 2018, the Group's net assets were **HKD 567.3 million**, a **68.7%** decrease from **HKD 1.8133 billion** at the end of 2017, primarily due to the substantial loss incurred during the year[76](index=76&type=chunk) [Contractual Arrangements](index=24&type=section&id=Contractual%20Arrangements) This section details the Group's control over several PRC domestic companies via contractual arrangements (VIE structure), enabling control and financial consolidation of foreign investment-restricted businesses like human stem cell R&D and application, outlining the rationale, terms, risks, and financial impact [Jiangsu Ding Xuan Contractual Arrangements](index=24&type=section&id=Jiangsu%20Ding%20Xuan%20Contractual%20Arrangements) To circumvent Chinese legal restrictions on foreign investment in human stem cell R&D, the Group controls Jiangsu Ding Xuan through contractual arrangements, which generated no revenue and incurred a net loss in FY2018 - The reason for adopting contractual arrangements is that Jiangsu Ding Xuan's business in human stem cell R&D and application technology falls under areas prohibited for foreign investment by Chinese law, preventing the Group from directly acquiring its equity[92](index=92&type=chunk) Summary of Jiangsu Ding Xuan Financial Data | Indicator | FY2018 (HKD thousand) | FY2017 (HKD thousand) | | :--- | :--- | :--- | | **Revenue** | – | – | | **Net Loss** | 2,003 | 3,910 | | **Total Assets** | 4,386 | 9,034 | [AK (Suzhou) Contractual Arrangements](index=36&type=section&id=AK%20Suzhou%20Contractual%20Arrangements) The Group controls AK (Suzhou) through contractual arrangements due to its foreign investment-restricted human stem cell R&D business, which generated revenue but incurred a significant net loss in FY2018 - The reason for adopting contractual arrangements is that AK (Suzhou)'s business in human stem cell R&D and application technology falls under areas prohibited for foreign investment by Chinese law[140](index=140&type=chunk) Summary of AK (Suzhou) Financial Data | Indicator | FY2018 (HKD thousand) | FY2017 (HKD thousand) | | :--- | :--- | :--- | | **Revenue** | 3,244 | 736 | | **Net Loss** | 53,256 | 4,968 | | **Total Assets** | 28,590 | 76,964 | [Tianjin Weikai Contractual Arrangements](index=43&type=section&id=Tianjin%20Weikai%20Contractual%20Arrangements) The Group controls Tianjin Weikai through contractual arrangements, as it engages in the design and manufacturing of preclinical cell and stem cell-related equipment, generating revenue but incurring a substantial net loss in FY2018 - The reason for adopting contractual arrangements is that Tianjin Weikai's business in human stem cell R&D and application technology falls under areas prohibited for foreign investment by Chinese law[172](index=172&type=chunk) Summary of Tianjin Weikai Financial Data | Indicator | FY2018 (HKD thousand) | FY2017 (HKD thousand) | | :--- | :--- | :--- | | **Revenue** | 1,643 | 742 | | **Net Loss** | 107,385 | 7,317 | | **Total Assets** | 10,665 | 101,990 | [Other Information](index=59&type=section&id=Other%20Information) This section discloses other important information, including the company's sponsorship commitment to Oxford University, asset pledges for bank loans, and employee numbers as of the reporting period end - The company signed a sponsorship agreement with Oxford University, committing **GBP 9 million** for cell therapy and tissue engineering research, with **GBP 5.05 million** paid as of December 31, 2018[206](index=206&type=chunk) - As of December 31, 2018, the Group had **334** employees, a decrease from **449** in 2017, with total annual employee remuneration approximately **HKD 110.6 million**[206](index=206&type=chunk) [Biographical Details of Directors and Chief Executives](index=60&type=section&id=Biographical%20Details%20of%20Directors%20and%20Chief%20Executives) This section provides detailed biographies of executive directors, independent non-executive directors, and chief executives, detailing their professional backgrounds, industry experience, and roles within the company - This section provides detailed biographies of executive directors, independent non-executive directors, and chief executives, including Dr. Ye Lei (Chairman of the Board), Mr. Wang Xuejun (Chief Executive Officer), Mr. Chan Ping Huen, Mr. Wong Yiu Kit, and Dr. Fang Jun, detailing their professional backgrounds, industry experience, and roles within the company[208](index=208&type=chunk)[216](index=216&type=chunk)[218](index=218&type=chunk) [Corporate Governance Report](index=64&type=section&id=Corporate%20Governance%20Report) This report details the company's adherence to corporate governance principles, board composition, committee structures, and risk management practices - During the reporting period, the company complied with most provisions of the Corporate Governance Code, with a single deviation from code provision A.6.7, where an independent non-executive director was unable to attend the 2018 Annual General Meeting due to other commitments[234](index=234&type=chunk)[235](index=235&type=chunk) - The Board of Directors comprises five directors, including two executive directors and three independent non-executive directors, meeting the requirement that independent non-executive directors constitute at least one-third of the Board, with the roles of Chairman and Chief Executive Officer held by different individuals to ensure checks and balances[248](index=248&type=chunk)[250](index=250&type=chunk)[289](index=289&type=chunk) - The company has established an Audit Committee, Nomination Committee, and Remuneration Committee, each predominantly or entirely composed of independent non-executive directors, holding regular meetings to fulfill their duties, including reviewing financial statements, nominating directors, and reviewing remuneration policies[295](index=295&type=chunk)[310](index=310&type=chunk)[320](index=320&type=chunk) - The Board of Directors bears overall responsibility for the Group's risk management and internal control systems, with an established enterprise risk management framework and an internal audit department reporting directly to the Audit Committee[348](index=348&type=chunk)[351](index=351&type=chunk) [Environmental, Social and Governance Report 2018](index=89&type=section&id=Environmental,%20Social%20and%20Governance%20Report%202018) This report outlines the company's environmental, social, and governance policies and performance in accordance with HKEX guidelines - This report is prepared in accordance with Appendix 20 of the HKEX GEM Listing Rules, 'Environmental, Social and Governance Reporting Guide', disclosing the company's policies and performance in environmental protection, employment and labor practices, operating practices, and community investment[374](index=374&type=chunk) Summary of 2018 Environmental Performance | Indicator | Emission Data (Approx) | Unit | | :--- | :--- | :--- | | **Total Greenhouse Gas Emissions** | 3,542 | tonnes of CO2 equivalent | | **Greenhouse Gas Emission Intensity** | 10.6 | tonnes of CO2 equivalent/employee | | **Total Water Consumption** | 4,418,484 | cubic meters | | **Total Electricity Consumption** | 4,418,484 | kWh | | **Hazardous Waste** | 1 | tonnes | | **Non-Hazardous Waste** | 15 | tonnes | - As of December 31, 2018, the Group had **334** employees, with **52%** female and **48%** male; employees aged 30-40 accounted for the highest proportion at **47%**; and those with bachelor's degrees also represented the highest proportion at **47%**[434](index=434&type=chunk)[435](index=435&type=chunk)[436](index=436&type=chunk) - The company established a comprehensive supply chain management system, evaluating suppliers and signing customized contracts with agents to strengthen sales management, while strictly monitoring product quality in terms of product responsibility, adhering to ISO 13485:2016 quality management system, and implementing stringent customer data privacy protection measures[453](index=453&type=chunk)[455](index=455&type=chunk) [Directors' Report](index=111&type=section&id=Directors'%20Report) This report covers key corporate actions, including dividend policy, share option scheme changes, major shareholder information, and top customer and supplier details - The Board of Directors does not recommend the payment of a final dividend for the year ended December 31, 2018[473](index=473&type=chunk) - During the reporting period, changes occurred in share options under the company's share option scheme, including a significant number of options lapsing due to director resignations, such as the **500 million** share options granted to Mr. Chen Chunguo, which all lapsed upon his resignation[497](index=497&type=chunk)[699](index=699&type=chunk) - Major shareholder holdings were disclosed, with China Orient Asset Management Co, Ltd holding approximately **32.08%** of shares through its controlled entities as of December 31, 2018, making it the largest shareholder[712](index=712&type=chunk) - During the reporting period, sales to the Group's top five customers accounted for approximately **50%** of total turnover, with the largest customer accounting for **17%**; purchases from the top five suppliers accounted for approximately **54%** of total purchases, with the largest supplier accounting for **27%**[718](index=718&type=chunk) [Independent Auditor's Report](index=132&type=section&id=Independent%20Auditor's%20Report) This report presents the auditor's unmodified opinion on the consolidated financial statements and highlights key audit matters - The auditor, BDO Limited, issued an unmodified opinion on the company's consolidated financial statements for 2018, deeming them to present a true and fair view of the Group's financial position and performance[746](index=746&type=chunk) - The report identified two key audit matters: **Impairment of goodwill, other intangible assets, and property, plant and equipment**: due to the Group's continuous losses, the carrying amounts of these assets posed significant impairment risks; management engaged independent valuers for assessment, ultimately confirming substantial impairment losses; **Impairment of trade receivables**: assessing the recoverability of trade receivables involved significant management judgment, especially after adopting the new Expected Credit Loss (ECL) model; impairment losses of **HKD 139 million** were recognized during the year[751](index=751&type=chunk)[754](index=754&type=chunk) [Consolidated Financial Statements](index=139&type=section&id=Consolidated%20Financial%20Statements) [Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=139&type=section&id=Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income) For the year ended December 31, 2018, the Group recorded significantly reduced revenue and gross profit, leading to a substantial annual loss primarily driven by large asset impairment losses, expected credit losses, and fair value losses on financial assets Summary of Consolidated Statement of Profit or Loss (HKD thousand) | Item | 2018 (12 months) | 2017 (8 months) | | :--- | :--- | :--- | | **Revenue** | 72,952 | 503,680 | | **Gross Profit** | 27,006 | 147,296 | | **Loss Before Income Tax** | (1,352,799) | (171,826) | | **Annual Loss** | (1,283,915) | (166,216) | | **Loss Attributable to Owners of the Company** | (1,193,501) | (158,492) | [Consolidated Statement of Financial Position](index=141&type=section&id=Consolidated%20Statement%20of%20Financial%20Position) As of December 31, 2018, the Group's total assets significantly decreased due to impairment of non-current assets, while total liabilities were substantial, and total equity plummeted due to the large annual loss Summary of Consolidated Statement of Financial Position (HKD thousand) | Item | December 31, 2018 | December 31, 2017 | | :--- | :--- | :--- | | **Non-Current Assets** | 556,282 | 2,351,617 | | **Current Assets** | 866,641 | 1,176,356 | | **Total Assets** | 1,422,923 | 3,527,973 | | **Current Liabilities** | 623,099 | 761,733 | | **Non-Current Liabilities** | 232,561 | 952,916 | | **Total Liabilities** | 855,660 | 1,714,649 | | **Total Equity** | 567,263 | 1,813,324 | [Consolidated Statement of Changes in Equity](index=143&type=section&id=Consolidated%20Statement%20of%20Changes%20in%20Equity) During the reporting period, equity attributable to owners of the company significantly decreased from the beginning to the end of the year, primarily driven by the substantial annual loss incurred - Equity attributable to owners of the company decreased from **HKD 1,760,032 thousand** at the end of 2017 to **HKD 605,779 thousand** at the end of 2018, primarily due to an annual loss of **HKD 1,193,501 thousand**[783](index=783&type=chunk)[787](index=787&type=chunk) [Consolidated Statement of Cash Flows](index=145&type=section&id=Consolidated%20Statement%20of%20Cash%20Flows) In 2018, the Group experienced a net decrease in cash and cash equivalents, with positive cash flow from operating and investing activities offset by significant net cash outflow from financing activities, primarily for debt repayment Summary of Consolidated Statement of Cash Flows (HKD thousand) | Item | 2018 (12 months) | 2017 (8 months) | | :--- | :--- | :--- | | **Net Cash From/(Used In) Operating Activities** | 18,751 | (193,291) | | **Net Cash From/(Used In) Investing Activities** | 350,157 | (559,471) | | **Net Cash (Used In)/From Financing Activities** | (579,362) | 419,296 | | **Net Decrease in Cash and Cash Equivalents** | (210,454) | (333,466) | | **Cash and Cash Equivalents at Year-End** | 20,062 | 244,373 | [Notes to the Financial Statements](index=147&type=section&id=Notes%20to%20the%20Financial%20Statements) This section provides detailed notes to the financial statements, including company information, a summary of significant accounting policies, the impact of newly adopted HKFRS 9 (Financial Instruments) and HKFRS 15 (Revenue from Contracts with Customers), and detailed explanations and breakdowns of various financial statement items such as revenue composition, asset impairment, financial instruments, and related party transactions - The company adopted new Hong Kong Financial Reporting Standards HKFRS 9 (Financial Instruments) and HKFRS 15 (Revenue from Contracts with Customers) effective January 1, 2018; the adoption of HKFRS 9 resulted in changes to financial asset classification and impairment models, shifting from an 'incurred loss model' to an 'expected credit loss (ECL) model', and led to adjustments to opening retained earnings[797](index=797&type=chunk)[800](index=800&type=chunk) [Financial Summary](index=268&type=section&id=Financial%20Summary) This section provides a summary of the Group's performance, assets, and liabilities over the past five financial years for trend analysis - This section provides a summary of the Group's performance, assets, and liabilities over the past five financial years for trend analysis (Note: specific data is on page 268 of the original report and not included in the provided content)[5](index=5&type=chunk)