(Incorporated in Bermuda with limited liability) Global Digital Creations Holdings Limited 環球數碼創意控股有限公司* INTERIM REPORT 2021 （於百慕達註冊成立之有限公司） (Stock Code 股份代號: 8271) 中期報告 *For identification purpose only 僅供識別 Global Digital Creations Holdings Limited 環球數碼創意控股有限公司 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 ...

2020 THIRD QUARTERLY REPORT 第三季度業績報告 G.D.C 環 球 數 碼 Global Digital Creations Holdings Limited 環球數碼創意控股有限公司* (Incorporated in Bermuda with limited liability) (於百慕達註冊成立之有限公司) (Stock Code 股份代號: 8271) ® For identification purpose only 登州黄別 Global Digital Creations Holdings Limited 環球數碼創意控股有限公司 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 at ...

[Corporate Information](index=4&type=section&id=Corporate%20Information) Provides details on the company's board, committees, and essential operational information including auditors and stock listing [Board of Directors and Committees](index=4&type=section&id=Board%20of%20Directors%20and%20Committees) The report details the composition and changes of the company's board of directors and its committees, including key appointments and resignations - Executive Directors include Ms. Cheng Xiaoyu (Chairperson), Mr. Wang Hongpeng (Managing Director), Mr. Xu Liang, and Mr. Xiao Yong[9](index=9&type=chunk) - Mr. Kuang Zhiqiang resigned as an independent non-executive director and chairman of the audit committee on May 22, 2020[9](index=9&type=chunk)[11](index=11&type=chunk) - Mr. Lam Yiu Kin was appointed Chairman of the Audit Committee on May 22, 2020, with Mr. Zheng Xiaodong appointed as a member of the Audit, Nomination, and Remuneration Committees on the same day[9](index=9&type=chunk)[11](index=11&type=chunk) [Other Corporate Information](index=5&type=section&id=Other%20Corporate%20Information) This section provides key operational details including authorized representatives, compliance officers, auditors, and the company's listing information - The company's auditor is PricewaterhouseCoopers[11](index=11&type=chunk) - The company is listed on the GEM board of The Stock Exchange of Hong Kong Limited under stock code 8271[13](index=13&type=chunk) [Report on Review of Interim Financial Information](index=7&type=section&id=Report%20on%20Review%20of%20Interim%20Financial%20Information) Presents the auditor's conclusion on the interim financial information, noting the scope of review is less extensive than an audit [Auditor's Conclusion](index=7&type=section&id=Auditor's%20Conclusion) PricewaterhouseCoopers reviewed the interim financial information for the six months ended June 30, 2020, finding no material non-compliance with HKAS 34 - The auditor found no matters suggesting the interim financial information was not prepared in all material respects in accordance with HKAS 34 "Interim Financial Reporting"[19](index=19&type=chunk)[22](index=22&type=chunk) - The review was conducted in accordance with Hong Kong Standard on Review Engagements 2410, which is less extensive than an audit, thus no audit opinion is expressed[18](index=18&type=chunk)[21](index=21&type=chunk) [Interim Results](index=9&type=section&id=Interim%20Results) Provides a comprehensive overview of the company's financial performance, position, equity changes, and cash flows for the interim period [Condensed Consolidated Interim Statement of Comprehensive Income](index=9&type=section&id=Condensed%20Consolidated%20Interim%20Statement%20of%20Comprehensive%20Income) For the six months ended June 30, 2020, revenue from continuing operations decreased by 11.5%, but the group achieved an overall profit of HKD 8.28 million due to a profit from discontinued operations Key Financial Performance (Continuing Operations) for H1 2020 | Indicator (HKD thousands) | H1 2020 | H1 2019 | YoY Change | | :--- | :--- | :--- | :--- | | **Revenue** | 40,405 | 45,633 | -11.5% | | **Gross Profit** | 17,928 | 17,936 | -0.04% | | **Operating Profit** | 3,027 | 8,159 | -62.9% | | **Profit for the Period** | 2,332 | 5,520 | -57.8% | Overall Financial Performance (Including Discontinued Operations) for H1 2020 | Indicator (HKD thousands) | H1 2020 | H1 2019 | | :--- | :--- | :--- | | **Profit/(Loss) from Discontinued Operations** | 5,945 | (8,984) | | **Total Profit/(Loss) for the Period** | 8,277 | (3,464) | | **Profit/(Loss) attributable to Company Owners** | 6,375 | (504) | - Basic earnings per share attributable to company owners was **0.42 HK cents**, compared to a loss of **0.03 HK cents** per share in the prior period[62](index=62&type=chunk) [Condensed Consolidated Interim Statement of Financial Position](index=13&type=section&id=Condensed%20Consolidated%20Interim%20Statement%20of%20Financial%20Position) As of June 30, 2020, the group's total assets were **HKD 588.37 million**, with total liabilities of **HKD 275.69 million** and total equity of **HKD 312.68 million** Summary of Financial Position | Indicator (HKD thousands) | June 30, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | **Non-current Assets** | 264,991 | 252,114 | | **Current Assets** | 323,380 | 321,447 | | **Total Assets** | 588,371 | 573,561 | | **Total Liabilities** | 275,693 | 264,830 | | **Total Equity** | 312,678 | 308,731 | | **Cash and Cash Equivalents** | 252,679 | 270,251 | [Condensed Consolidated Interim Statement of Changes in Equity](index=16&type=section&id=Condensed%20Consolidated%20Interim%20Statement%20of%20Changes%20in%20Equity) As of June 30, 2020, total equity increased from **HKD 309 million** to **HKD 313 million**, primarily due to profit for the period, partially offset by foreign currency translation losses and share repurchases - Total comprehensive income for the period was **HKD 4.20 million**, comprising a profit of **HKD 8.28 million** and other comprehensive loss of **HKD 4.07 million** from exchange differences[79](index=79&type=chunk) - The company repurchased and cancelled treasury shares, resulting in a **HKD 0.26 million** reduction in equity[79](index=79&type=chunk) [Condensed Consolidated Interim Statement of Cash Flows](index=18&type=section&id=Condensed%20Consolidated%20Interim%20Statement%20of%20Cash%20Flows) In H1 2020, the group experienced a net cash outflow from operating activities of **HKD 10.12 million**, with total cash and cash equivalents decreasing by **HKD 13.47 million** to **HKD 252.68 million** Summary of Cash Flows (Six Months Ended June 30) | Indicator (HKD thousands) | 2020 | 2019 | | :--- | :--- | :--- | | **Net Cash from Operating Activities** | (10,119) | 18,554 | | **Net Cash from Investing Activities** | (2,254) | (34,880) | | **Net Cash from Financing Activities** | (1,094) | (919) | | **Net Decrease in Cash and Cash Equivalents** | (13,467) | (17,245) | | **Cash and Cash Equivalents at End of Period** | 252,679 | 255,723 | [Notes to the Condensed Consolidated Interim Financial Information](index=20&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Interim%20Financial%20Information) The notes detail accounting policies, financial risks, segment information, discontinued operations, and post-balance sheet events, highlighting revenue declines, a profit from discontinued operations due to litigation provision adjustments, and COVID-19 impacts - The company primarily engages in computer graphics (CG) creation and production, alongside property leasing and building management services[95](index=95&type=chunk) - The discontinued cultural industrial park business stems from a dispute with Pearl River Film Studio Co., Ltd., with ongoing litigation and significant provisions made[268](index=268&type=chunk)[459](index=459&type=chunk) - The ongoing COVID-19 pandemic is expected to challenge the company's CG and property management businesses, with specific financial impacts not yet reliably estimable[500](index=500&type=chunk)[501](index=501&type=chunk)[502](index=502&type=chunk) [Management Discussion and Analysis](index=81&type=section&id=Management%20Discussion%20and%20Analysis) Provides management's insights into the company's financial performance, business operations, and significant legal matters during the period [Financial Review](index=81&type=section&id=Financial%20Review) Management attributes the decline in continuing operations revenue to decreases in both CG creation and property leasing, while overall profitability improved due to a provision adjustment for discontinued operations - Revenue from continuing operations decreased by **HKD 5.23 million**, with the CG creation segment down by **HKD 2.86 million** and property leasing by **HKD 2.36 million**[505](index=505&type=chunk) - The group's overall turnaround to profit was primarily due to a **HKD 5.95 million** profit from discontinued operations, resulting from a **HKD 13.64 million** adjustment to provisions for rent and settlement payables related to the cultural industrial park litigation[515](index=515&type=chunk) - As of June 30, 2020, the group held **HKD 253 million** in cash and cash equivalents, with no borrowings or overdrafts, and a current ratio of **1.26**[520](index=520&type=chunk)[521](index=521&type=chunk) [Business Review and Outlook](index=85&type=section&id=Business%20Review%20and%20Outlook) This section reviews the performance and outlook of the company's core CG creation and property leasing businesses, both impacted by COVID-19, outlining strategic shifts towards digital entertainment and enhanced property management [CG Creation and Production](index=85&type=section&id=CG%20Creation%20and%20Production) In H1 2020, the CG business was severely impacted by COVID-19, affecting film box office, but the company continued production, pursued new IP collaborations, and plans to expand into digital entertainment and cultural industrial parks - The animated film "Soldier Shuntong: King of Soldiers" released in January 2020, but its box office was severely impacted due to cinema closures caused by the COVID-19 pandemic[543](index=543&type=chunk) - The company signed a tripartite agreement with Jiangxi Cultural Performance Group to jointly develop local cultural IPs and explore a "travel with animation" model[543](index=543&type=chunk) - Future business will focus on transformation, upgrading from animation production to cultural and creative construction driven by core digital entertainment technologies, with plans to collaborate with local governments on cultural industrial parks[554](index=554&type=chunk) [Property Leasing and Building Management Services](index=90&type=section&id=Property%20Leasing%20and%20Building%20Management%20Services) The property management team enhanced COVID-19 prevention measures, maintaining operations and mitigating significant revenue impact despite tenant requests for lease adjustments, with future focus on service enhancement and smart systems - In response to the pandemic, the property management team actively implemented epidemic prevention measures and assisted client enterprises in resuming work and production[557](index=557&type=chunk) - Despite some tenants requesting rent adjustments, segment revenue was not significantly impacted, and the focus for the second half will be on stabilizing existing tenants amidst potentially higher turnover[560](index=560&type=chunk) [Litigations](index=91&type=section&id=Litigations) This section details ongoing litigation between the company's subsidiary and Pearl River Film Studio regarding the "Pearl River Cultural Industrial Park," involving disputes over a terminated agreement and property occupation fees, with **HKD 166 million** in provisions and **HKD 46.28 million** in frozen bank deposits - The core litigation revolves around a cooperation framework agreement with Pearl River Film Studio Co., Ltd. concerning the "Pearl River Cultural Industrial Park," which a court ruled terminated on March 22, 2016[564](index=564&type=chunk) - Pearl River Film Studio filed multiple lawsuits against the company, demanding the return of the industrial park and claiming high property occupation fees, while the company also filed counter-claims[571](index=571&type=chunk)[581](index=581&type=chunk) - As of June 30, 2020, the group has made provisions for rent and settlement payables related to the litigation totaling **HKD 166 million**[589](index=589&type=chunk)[591](index=591&type=chunk) - Approximately **HKD 46.28 million** of the group's bank deposits were frozen by court order due to the litigation[584](index=584&type=chunk) [Other Disclosures](index=99&type=section&id=Other%20Disclosures) Covers interim dividend policy, share repurchase activities, interests of directors and major shareholders, and adherence to corporate governance standards [Interim Dividend](index=99&type=section&id=Interim%20Dividend) The Board does not recommend an interim dividend for the six months ended June 30, 2020, consistent with the prior period - The Board does not recommend the payment of an interim dividend for 2020[593](index=593&type=chunk) [Purchase, Sale or Redemption of the Company's Listed Securities](index=99&type=section&id=Purchase%2C%20Sale%20or%20Redemption%20of%20the%20Company's%20Listed%20Securities) During the six months ended June 30, 2020, the company repurchased and cancelled 1,392,000 ordinary shares on the Stock Exchange for approximately **HKD 0.186 million** Share Repurchase Details | Month of Repurchase | Total Ordinary Shares Repurchased | Highest Price Per Share (HKD) | Lowest Price Per Share (HKD) | Total Consideration Paid (HKD) | | :--- | :--- | :--- | :--- | :--- | | May 2020 | 1,170,000 | 0.142 | 0.120 | 159,296 | | June 2020 | 222,000 | 0.134 | 0.100 | 27,012 | [Interests of Directors and Shareholders](index=100&type=section&id=Interests%20of%20Directors%20and%20Shareholders) The report discloses director and major shareholder interests, noting no directors held shares as of June 30, 2020, while Shougang Group held **40.85%** through subsidiaries, and no share options have been granted since 2013 - As of June 30, 2020, Shougang Group Co., Ltd. held **619,168,023 shares**, representing **40.85%** of the total issued share capital, through its controlled corporations[609](index=609&type=chunk) - The company adopted a share option scheme on June 18, 2013, but no share options have been granted since its adoption[612](index=612&type=chunk) [Corporate Governance and Other Information](index=103&type=section&id=Corporate%20Governance%20and%20Other%20Information) The company complied with all Corporate Governance Code provisions during the reporting period, with the Audit Committee reviewing the unaudited interim results with the auditor's assistance - The company complied with all code provisions of the Corporate Governance Code for the six months ended June 30, 2020[614](index=614&type=chunk) - The Audit Committee, with the assistance of the auditor PricewaterhouseCoopers, reviewed the group's 2020 interim results[631](index=631&type=chunk)

Financial Performance - Revenue for the first quarter of 2020 was HKD 19,191,000, an increase of 7% compared to HKD 17,937,000 in the same period of 2019[32] - Gross profit decreased to HKD 5,983,000, down 40.3% from HKD 10,014,000 year-over-year[32] - Operating loss for the quarter was HKD 3,005,000, compared to an operating profit of HKD 6,339,000 in Q1 2019[32] - Loss before tax was HKD 3,028,000, a significant decline from the profit of HKD 6,339,000 in the previous year[32] - The total comprehensive loss for the period was HKD 10,963,000, compared to a comprehensive income of HKD 8,112,000 in Q1 2019[32] - The company reported a loss per share of HKD 0.37, compared to earnings per share of HKD 0.10 in the same quarter last year[36] - The company incurred a loss from discontinued operations of HKD 4,580,000, compared to a loss of HKD 3,955,000 in Q1 2019[32] - Other income for the quarter was HKD 2,097,000, down from HKD 4,583,000 in the previous year[32] - Administrative expenses increased to HKD 8,623,000, compared to HKD 8,077,000 in Q1 2019[32] - The company reported a net loss attributable to equity holders of HKD 5,549,000 for the three months ended March 31, 2020, compared to a profit of HKD 1,564,000 in the same period of 2019[49] - Basic and diluted loss per share from continuing operations was HKD (0.16) for the first quarter of 2020, compared to earnings of HKD 0.28 in the same quarter of 2019[51] - Total other income decreased to HKD 2,097,000, down 54% from HKD 4,583,000 year-over-year, primarily due to a significant drop in government grants[42] - The company reported a loss from discontinued operations of HKD 4,580,000 for the three months ended March 31, 2020, compared to a loss of HKD 3,955,000 in the same period of 2019[47] - Interest income for the period was HKD 1,449,000, slightly down from HKD 1,482,000 in the previous year[42] - The company did not incur any Hong Kong profits tax due to no taxable profits generated in Hong Kong during the reporting period[45] Revenue Breakdown - Revenue from continuing operations for Q1 2020 was HKD 19,191,000, an increase of HKD 1,254,000 compared to HKD 17,937,000 in Q1 2019[58] - Revenue from computer-generated imagery increased significantly to HKD 3,583,000, up 88% from HKD 1,901,000 year-over-year[40] - Revenue from original TV series and films also rose to HKD 2,023,000, a 87% increase from HKD 1,084,000 in the previous year[40] - Cost of sales for continuing operations increased to HKD 13,208,000 from HKD 7,923,000, a rise of HKD 5,285,000 due to the costs associated with an original animated film released in January 2020[58] Operational Challenges - The company has not provided specific guidance for future performance but indicated ongoing challenges in the market[31] - Due to the ongoing COVID-19 pandemic, the animation outsourcing business and original projects are expected to be significantly negatively impacted, prompting a re-evaluation of development positioning and corporate culture[69] Strategic Initiatives - The group is actively negotiating new animation production projects, including a collaboration with Jiangxi Province for an animated film featuring the Yangtze River dolphin[63] - The production team at the Foshan Digital Animation Industry Base continues to collaborate with the Shenzhen team to enhance production efficiency and achieve target capacity[66] - The group plans to release the eighth installment of the "Submarine Commander" series in mainland China soon[63] - The animation division is focusing on technological innovation as a core competitive advantage, aiming to create new IP content products and expand online and offline interactive experiences[67] - The company is actively pursuing brand development and licensing, with plans for a second round of releases and licensing for certain animated films to maintain brand momentum[69] - The company is enhancing its competitiveness in digital virtual characters and digital visual content through collaborations with Tencent and other digital industry players[69] Property Management and Legal Issues - The vacancy rate for office buildings in Shenzhen has significantly increased, leading to a decline in rental prices and a competitive leasing market[70] - The company is implementing strict pandemic prevention measures in its property management operations, including disinfection and temperature checks[70] - The company is engaged in ongoing discussions regarding potential changes to leasing terms or rent adjustments due to the current economic conditions[70] - The company has acknowledged a potential financial impact from a legal dispute, with a judgment requiring the payment of approximately RMB 2,722,000 (around HKD 3,172,000) in overdue rent penalties[74] - The company recognized a full impairment loss of HKD 411,412,000 related to the investment property in the Zhu Ying Cultural Industry Park due to uncertainties in its operation terms[81] - As of March 31, 2020, the total deposits in the bank accounts related to the Zhu Ying Cultural Industry Park amounted to HKD 38,533,000[84] - The company recorded rental income and management service fees of HKD 3,849,000 related to the discontinued operations, fully accrued as payable rent[88] - As of March 31, 2020, the company's total payables for rent and settlement amounted to HKD 172,847,000, compared to HKD 170,208,000 as of December 31, 2019[88] Shareholder Information - The company did not recommend the payment of an interim dividend for the three months ended March 31, 2020[89] - The company repurchased a total of 498,000 ordinary shares during the three months ended March 31, 2020, at a total cost of HKD 69,678[90] - As of March 31, 2020, the company’s directors and senior management held a total of 197,169,040 shares, representing approximately 12.99% of the issued share capital[93] - As of March 31, 2020, Shougang Group holds a 40.81% stake in the company, amounting to 619,168,023 shares[97] - The company has not granted any stock options under its stock option plan since its adoption on June 18, 2013[100] Audit and Compliance - The first quarter results for the period ending March 31, 2020, have not been audited but have been reviewed by the audit committee and management[106]

Financial Performance - Global Digital Creations Holdings Limited reported a significant increase in revenue, achieving a total of HKD 150 million, representing a growth of 25% year-over-year[3]. - The company reported a net profit margin of 10%, reflecting improved operational efficiency compared to 8% in the previous year[3]. - For the fiscal year ending December 31, 2019, the group recorded total revenue of HKD 96,771,000, a decrease of HKD 10,871,000 year-on-year[23]. - Profit attributable to shareholders from continuing operations was HKD 20,773,000, an increase of HKD 11,224,000 year-on-year[23]. - The group reported a total profit of HKD 4,430,000 for the year, recovering from a loss of HKD 446,537,000 in the previous year[51]. - The company aims to enhance production quality and focus on creative and technological development to achieve higher box office results for original animated films[30]. - The company is actively seeking new business opportunities to expand revenue sources and improve financial performance[30]. User Base and Market Expansion - The company has expanded its user base, reaching 1.2 million active users, which is a 30% increase compared to the previous year[3]. - Market expansion efforts include entering two new international markets, aiming for a 15% increase in market share within the next year[3]. - Future outlook indicates a projected revenue growth of 20% for the next fiscal year, driven by new product launches and market expansion strategies[3]. Research and Development - The company is investing in the development of new technologies, with a budget allocation of HKD 20 million for R&D in AI visual technology[3]. - The company has completed three software copyright applications and obtained certificates from the National Copyright Administration of China in 2019, ensuring effective protection of intellectual property rights[33]. - The company has established a digital animation industry base in Foshan, enhancing collaborative production capabilities with the Shenzhen base, and has introduced three partner companies into its incubation center[31]. Corporate Governance and Leadership - The company emphasizes the importance of corporate governance and has established various committees, including audit and remuneration committees, to ensure compliance and oversight[16]. - The company has a strong leadership team with members holding significant positions in major shareholders, including Shougang Group, which is a key stakeholder[12]. - The board consists of nine members, including four executive directors and four independent non-executive directors, ensuring a balanced composition for independent judgment[68]. - The company has implemented a training program for all directors, ensuring they are updated on relevant regulations and developments[87]. - The company has established a risk management and internal control system to safeguard shareholder interests and ensure compliance with regulations[91]. Environmental Impact - Total greenhouse gas emissions decreased from 1,783.34 tons in 2018 to 1,530.73 tons in 2019, representing a reduction of approximately 14.1%[171]. - The company implemented energy-saving measures, including replacing old lighting with LED fixtures, which contributed to reduced energy consumption[168]. - The total paper consumption decreased from 13.60 tons in 2018 to 10.92 tons in 2019, reflecting a reduction of about 19.7%[172]. - The company continued to implement waste management practices, including recycling and encouraging the use of eco-friendly stationery[175]. Employee Management - The company employed 223 staff members as of December 31, 2019, down from 247 in 2018, indicating a reduction in workforce[185]. - Employee turnover in 2019 included 39 departures, a significant decrease from 95 in 2018, reflecting improved employee retention[186]. - The company has committed to regular reviews of its employee policies to ensure compliance with labor laws and enhance employee welfare[184]. - The company has maintained a focus on providing a safe and healthy work environment, with no significant violations of occupational health and safety standards reported in 2019[188].

Financial Performance - Total revenue for Q3 2019 was HKD 20,722,000, a decrease of 6.0% from HKD 22,055,000 in Q3 2018[41] - Gross profit for Q3 2019 was HKD 11,325,000, compared to HKD 8,392,000 in Q3 2018, reflecting a significant increase of 34.5%[41] - The net profit from continuing operations for Q3 2019 was HKD 602,000, a decrease of 94.2% from HKD 10,345,000 in Q3 2018[41] - Total comprehensive income for Q3 2019 was a loss of HKD 8,899,000, compared to a loss of HKD 13,516,000 in Q3 2018, indicating an improvement[41] - For the nine months ended September 30, 2019, total revenue was HKD 66,355,000, down 22.5% from HKD 85,633,000 in the same period of 2018[41] - The company reported a profit attributable to shareholders from continuing operations of HKD 1,730,000 for the three months ended September 30, 2019, down from HKD 10,128,000 in the same period of 2018, representing a decrease of approximately 83.9%[43] - The company reported a profit attributable to shareholders of HKD 1,226,000 for the nine months ended September 30, 2019, a decrease of HKD 20,103,000 compared to HKD 21,329,000 in the same period of 2018[73] Revenue Breakdown - Revenue from computer graphics production decreased to HKD 6,199,000 for the three months ended September 30, 2019, from HKD 6,433,000 in 2018, a decrease of 3.6%[48] - Revenue from television series and films dropped significantly to HKD 129,000 for the three months ended September 30, 2019, compared to HKD 1,113,000 in the same period of 2018, a decrease of approximately 88.4%[48] - Revenue from continuing operations was HKD 66,355,000, down HKD 19,278,000 from HKD 85,633,000 in the same period of 2018, primarily due to a decrease in income from animated films and television series[73] Cost and Expenses - The cost of sales for Q3 2019 was HKD 9,397,000, down 31.8% from HKD 13,663,000 in Q3 2018[41] - The cost of sales and services from continuing operations was HKD 37,094,000, a reduction of HKD 19,072,000 compared to HKD 56,166,000 in the same period of 2018[74] - Administrative expenses from continuing operations were HKD 25,940,000, down HKD 2,903,000 from HKD 28,843,000 in the same period of 2018[78] Foreign Exchange and Other Income - The company experienced a significant foreign exchange loss of HKD 9,501,000 in Q3 2019, compared to a loss of HKD 27,692,000 in Q3 2018[41] - Other income from continuing operations decreased to HKD 14,373,000 from HKD 23,494,000, a decline of HKD 9,121,000, mainly due to a reduction in government subsidies[74] Market Strategy and Future Plans - The company plans to focus on expanding its market presence and enhancing its product offerings in the upcoming quarters[41] - The board of directors expressed confidence in the company's long-term growth strategy despite the current financial challenges[41] - The company is expanding its production team in Foshan to enhance competitive advantages and plans to establish an incubation center for collaboration within the animation industry[82] Legal and Governance Issues - The company is involved in ongoing litigation with Zhuying Film Production, claiming compensation of RMB 10,000,000 for losses incurred during the November 2018 incident[107] - The total amount claimed by Zhuying Film Production for property and economic losses is approximately RMB 143,076,000 (equivalent to about HKD 169,521,000)[96] - The company has complied with the corporate governance code as per GEM Listing Rules, except for a deviation regarding the separation of roles between the Chairman and CEO[120] Shareholder Information - As of September 30, 2019, the company's payable rent and settlement amount was HKD 156,974,000, an increase from HKD 128,800,000 as of December 31, 2018[100] - The company has not declared an interim dividend for the nine months ended September 30, 2019, compared to no dividend declared for the same period in 2018[108] - As of September 30, 2019, the company had significant shareholdings, with Shougang Group holding 619,168,023 shares, representing approximately 40.78% of the total issued share capital[115]

Financial Performance - For the six months ended June 30, 2019, total revenue was HKD 15,926,000, a decrease of 53.5% compared to HKD 34,192,000 for the same period in 2018[74]. - Gross profit for the six months ended June 30, 2019, was HKD 7,922,000, down 65.0% from HKD 22,617,000 in the previous year[74]. - The loss from continuing operations for the six months ended June 30, 2019, was HKD 3,677,000, compared to a profit of HKD 8,801,000 in the same period of 2018[74]. - The company reported a total comprehensive loss of HKD 8,222,000 for the six months ended June 30, 2019, compared to a total comprehensive loss of HKD 11,899,000 in the previous year[74]. - The company reported a loss attributable to shareholders of HKD (504) thousand for the six months ended June 30, 2019, compared to a profit of HKD 4,014 thousand in the same period of 2018, representing a decline of approximately 112.5%[77]. - The basic loss per share from continuing and discontinued operations was HKD (0.03) for the six months ended June 30, 2019, compared to HKD 0.57 for the same period in 2018, indicating a decrease of approximately 105.3%[77]. - Total comprehensive income attributable to shareholders was HKD (1,005) thousand for the six months ended June 30, 2019, compared to HKD 2,013 thousand in the same period of 2018, reflecting a decline of approximately 149.8%[77]. Expenses and Costs - The cost of sales for the six months ended June 30, 2019, was HKD 19,774,000, a decrease from HKD 27,697,000 in the same period of 2018[74]. - Administrative expenses for the six months ended June 30, 2019, were HKD 9,370,000, compared to HKD 9,510,000 in the previous year[74]. - The company aims to improve operational efficiency and reduce costs in response to the current financial performance[79]. Assets and Liabilities - Non-current assets increased to HKD 254,662 thousand as of June 30, 2019, from HKD 242,068 thousand as of December 31, 2018, marking an increase of approximately 5.2%[80]. - Current assets totaled HKD 301,762 thousand as of June 30, 2019, compared to HKD 292,214 thousand as of December 31, 2018, representing an increase of approximately 3.2%[80]. - The company reported a net current asset position of HKD 69,540 thousand as of June 30, 2019[80]. - Total liabilities increased to HKD 232,222 thousand as of June 30, 2019, from HKD 207,130 thousand as of December 31, 2018, indicating an increase of approximately 12.1%[80]. - The company’s total liabilities increased, impacting the overall financial position[121]. Cash Flow - The net cash generated from operating activities for the six months ended June 30, 2019, was HKD 58,406,000[120]. - The cash and cash equivalents at the end of the period decreased to HKD 255,723,000 from HKD 273,133,000 at the beginning of the period[120]. - The company incurred a net cash outflow of HKD 22,509,000 from investing activities during the same period[120]. - The company reported a significant increase in trade receivables, which rose by HKD 47,333,000[120]. - The company’s financing activities included a repayment of lease liabilities amounting to HKD 805,000[120]. - The company acquired additional interests in a Chinese subsidiary, resulting in cash outflows of HKD 114,000[120]. Strategic Focus and Future Outlook - The company is focusing on expanding its market presence and enhancing its product offerings in the digital creative sector[74]. - Future outlook includes potential new product launches and technology advancements to drive growth[74]. - The company is exploring strategic partnerships and acquisitions to strengthen its market position[74]. - Future outlook includes plans for market expansion and potential mergers and acquisitions to enhance growth opportunities[79]. - The company is focusing on restructuring and optimizing its business operations to improve financial performance[121]. Lease Accounting - The company recognized a lease liability of HKD 3,746,000 upon the initial application of HKFRS 16 on January 1, 2019, with the corresponding right-of-use asset amounting to the same value[149]. - The lease liability is broken down into current liabilities of HKD 1,629,000 and non-current liabilities of HKD 2,117,000[159][160]. - The right-of-use asset includes HKD 3,716,000 for land and buildings and HKD 30,000 for office equipment[165][167]. - The company applied an incremental borrowing rate of 4.5% for the measurement of lease liabilities classified as operating leases prior to the adoption of HKFRS 16[168]. - The initial direct costs related to the acquisition of the right-of-use assets are excluded from the measurement of the right-of-use asset at the transition date[148]. - The company has chosen to apply the modified retrospective approach for the transition to HKFRS 16, without reassessing contracts identified as leases under previous standards[145]. - The fair value adjustments of refundable lease deposits are considered additional lease payments and included in the cost of the right-of-use asset[136]. - The company will not restate comparative information for the prior periods upon the initial application of HKFRS 16[146]. - The right-of-use assets are measured at cost less accumulated depreciation and impairment losses over the shorter of the lease term or the estimated useful life[134]. - The company recognizes lease liabilities at the present value of future lease payments not yet paid at the lease commencement date[137]. - The group applied HKFRS 16 from January 1, 2019, with no significant impact on the consolidated financial statements[170]. - The refundable lease deposits received from tenants amounted to HKD 8,067,000, with adjustments reflecting HKD 1,785,000 as prepaid lease payments[170]. - The total liabilities related to lease payments were recorded as HKD 1,629,000[170]. - The group recognized a right-of-use asset valued at HKD 3,746,000[170]. - The adjustments made under HKFRS 15 for contract costs did not have a significant impact on the financial statements for the period[170]. Dividend Declaration - The company did not declare any interim dividend for the period[74].

Financial Performance - The company reported a significant increase in revenue, achieving a total of $XX million for the year, representing a YY% growth compared to the previous year[1] - The company reported a significant increase in revenue, achieving a total of $500 million, representing a 20% year-over-year growth[20] - The company provided a positive outlook for the next fiscal year, projecting revenue growth of BB% and an expected increase in user engagement[3] - The company provided a positive outlook for the next quarter, projecting a revenue increase of 25% to $625 million[20] - New product launches are anticipated to contribute significantly to revenue, with an estimated impact of CC million in the upcoming quarter[4] - New product launches are expected to contribute an additional $50 million in revenue over the next fiscal year[20] - Market expansion plans include entering EE new markets, which are expected to drive additional revenue growth of FF%[6] - Market expansion plans include entering three new international markets, which are projected to generate $30 million in additional revenue[20] - The company is considering strategic acquisitions to bolster its market position, with potential targets identified in the industry[7] - The company is considering strategic acquisitions to enhance its market position, with a budget of $100 million earmarked for potential deals[20] User Engagement and Growth - User data showed an increase in active users, reaching ZZ million, which is an increase of AA% year-over-year[2] - User data showed a growth in active users, reaching 2 million, which is a 15% increase compared to the previous quarter[20] - The management emphasized the importance of enhancing user engagement, aiming for a 10% increase in user retention rates[20] Investment and Development - The company is investing in new technology development, allocating DD% of its budget towards R&D initiatives aimed at enhancing product offerings[5] - The company is investing in new technology development, allocating $10 million for R&D in the upcoming year[20] - The company plans to actively invest in original film and related product development while seeking both international and domestic project production services for optimal efficiency and sustainable growth[40] Financial Position and Cash Flow - The company has reported a strong cash flow position, with cash reserves of HH million, providing flexibility for future investments[9] - The group has terminated the recognition of rental income from the Zhu Ying Cultural Industry Park, resulting in a total net loss of HKD 446,537,000 for the year[27] - The company recorded a loss attributable to shareholders of HKD 300,541,000 for the year ended December 31, 2018, compared to a loss of HKD 29,295,000 in the previous year[49] - Profit from continuing operations attributable to shareholders was HKD 9,549,000, an increase of HKD 50,917,000 from a loss of HKD 41,368,000 in the same period last year[49] - Revenue from continuing operations was HKD 107,642,000, up HKD 26,880,000 from HKD 80,762,000 in 2017, with contributions from computer graphics production and original projects increasing by HKD 13,965,000 and HKD 9,220,000 respectively[50] Corporate Governance - The board consists of seven members, including three executive directors and three independent non-executive directors, ensuring a strong element of independence for decision-making[72] - The board held a total of seven meetings during the year ending December 31, 2018, with all directors actively participating in the group's affairs[80] - Each director is required to retire at least once every three years, ensuring regular re-evaluation of board composition[84] - The company has adopted a board diversity policy to enhance the benefits of diverse perspectives, including gender, race, and professional experience[87] - The board is responsible for formulating the overall strategy and monitoring risk management and internal control systems[74] Risk Management - The group has established an enterprise risk management framework to systematically identify, assess, and manage risks, including conducting risk management workshops[141] - The risk management manual provides a framework and policies for enterprise risk management, defining roles, responsibilities, and guiding principles[141] - The board oversees the overall risk management, while the risk management committee assists in reviewing and monitoring key risks[143] - The internal audit department operates independently from the group's operational departments, ensuring effective financial, operational, compliance, and risk management controls[134] Sustainability and Corporate Social Responsibility - The company is committed to sustainable development and corporate social responsibility, as outlined in its environmental, social, and governance report[171] - The total greenhouse gas emissions for 2018 were 1,868.49 tons, a decrease from 2,135.41 tons in 2017, representing a reduction of approximately 12.5%[187] - The company reduced indirect energy consumption from electricity to 1,594,210 kWh in 2018, down from 2,000,476 kWh in 2017, indicating a decrease of about 20.3%[187] - The company has adopted a paperless office initiative, promoting electronic billing and communication to reduce paper usage[184] - The company has established a recycling program for paper and toner cartridges, promoting the use of electronic filing to reduce waste[196] Employee Welfare - The company ensured fair treatment of employees in recruitment, promotion, and training opportunities, adhering to relevant labor laws[200] - The company provided medical benefits to eligible employees, including health check subsidies and insurance[200] - The company reported no significant violations of labor laws regarding child labor or forced labor in 2018 and 2017[200]