[Financial Summary](index=3&type=section&id=%E6%91%98%E8%A6%81) [Performance Overview](index=3&type=section&id=%E6%91%98%E8%A6%81) The Group's revenue grew significantly, but its net loss widened, and no interim dividend was declared Key Performance Indicators for the First Three Quarters of 2021 | Metric | For the nine months ended September 30, 2021 | For the nine months ended September 30, 2020 | | :--- | :--- | :--- | | Revenue | Approx. HK$377.5 million | Approx. HK$101.8 million | | Loss Attributable to Equity Holders of the Company | Approx. HK$39.7 million | Approx. HK$17.6 million | | Interim Dividend | Nil | Nil | [Financial Performance](index=4&type=section&id=%E8%B2%A1%E5%8B%99%E6%A5%AD%E7%B8%BE) [Unaudited Consolidated Statement of Comprehensive Income](index=4&type=section&id=%E6%9C%AA%E7%B6%93%E5%AF%A9%E6%A0%B8%E7%B6%9C%E5%90%88%E5%85%A8%E9%9D%A2%E6%94%B6%E7%9B%8A%E8%A1%A8) Revenue grew substantially, but higher costs and other net losses led to a wider operating and net loss Summary of Consolidated Statement of Comprehensive Income (For the nine months ended September 30) | Item (HK$'000) | 2021 (Unaudited) | 2020 (Unaudited) | | :--- | :--- | :--- | | Revenue | 377,462 | 101,778 | | Gross Profit | 11,420 | 1,830 | | Other net losses | (18,843) | 6,993 | | Operating loss | (39,940) | (18,393) | | Loss for the period | (40,297) | (18,878) | | Loss attributable to equity holders of the Company | (39,676) | (17,638) | | Basic and diluted loss per share | (2.67) HK cents | (1.19) HK cents | [Unaudited Consolidated Statement of Changes in Equity](index=6&type=section&id=%E6%9C%AA%E7%B6%93%E5%AF%A9%E6%A0%B8%E7%B6%9C%E5%90%88%E6%AC%8A%E7%9B%8A%E8%AE%8A%E5%8B%95%E8%A1%A8) The statement details changes in equity components like share capital and reserves for the period - The report includes an unaudited consolidated statement of changes in equity, detailing movements in share capital, reserves, and retained earnings, with "Other reserve" mainly from a group reorganization and "Revaluation reserve" from fair value changes of financial assets[13](index=13&type=chunk)[14](index=14&type=chunk) [Notes to the Consolidated Financial Results](index=7&type=section&id=%E7%B6%9C%E5%90%88%E8%B2%A1%E5%8B%99%E6%A5%AD%E7%B8%BE%E9%99%84%E8%A8%BB) These notes detail accounting policies, revenue segmentation, and the source of significant other losses [Revenue Analysis](index=8&type=section&id=3.%20%E6%94%B6%E5%85%A5) Total revenue grew 271% YoY, driven by a surge in sales of TFT-LCD panels and modules Revenue Breakdown by Product (For the nine months ended September 30, HK$'000) | Product Category | 2021 (Unaudited) | 2020 (Unaudited) | YoY Change | | :--- | :--- | :--- | :--- | | TFT-LCD panels and modules | 297,644 | 66,874 | +345% | | Polarizers | 37,683 | 18,668 | +102% | | Health-related products | 15,628 | 2,810 | +456% | | Electronic advertising boards | 11,697 | 5,497 | +113% | | Integrated circuits | 6,291 | 53 | +11770% | | Optical products | 2,867 | 1,452 | +97% | | Others | 5,652 | 6,424 | -12% | | **Total** | **377,462** | **101,778** | **+271%** | [Analysis of Other Net (Losses)/Gains](index=9&type=section&id=4.%20%E5%85%B6%E4%BB%96%EF%BC%88%E8%99%A7%E6%90%8D%EF%BC%89%E2%95%B1%E6%94%B6%E7%9B%8A%E6%B7%A8%E9%A1%8D) The Group recorded a significant net loss from other items, primarily due to a fair value loss on its investment in Mobvoi Inc - The Group's investment in Mobvoi Inc is classified as a financial asset at fair value through profit or loss, with its fair value declining to approximately **HK$40.3 million** from HK$59.55 million, resulting in a fair value loss of **HK$19.25 million**[23](index=23&type=chunk) [Dividends and Loss Per Share](index=10&type=section&id=7.%20%E4%B8%AD%E6%9C%9F%E8%82%A1%E6%81%AF%20&%208.%20%E6%AF%8F%E8%82%A1%E5%9F%BA%E6%9C%AC%E5%8F%8A%E6%94%A4%E8%96%84%E8%99%A7%E6%90%8D) No interim dividend was declared, and the loss per share increased due to a wider net loss attributable to shareholders - The Board of Directors did not declare an interim dividend for the nine months ended September 30, 2021[28](index=28&type=chunk) Calculation of Loss Per Share | Item | For the nine months ended September 30, 2021 | For the nine months ended September 30, 2020 | | :--- | :--- | :--- | | Loss attributable to equity holders of the Company (HK$'000) | (39,676) | (17,638) | | Weighted average number of ordinary shares in issue ('000 shares) | 1,483,687 | 1,483,687 | | Basic and diluted loss per share | (2.67) HK cents | (1.19) HK cents | [Management Discussion and Analysis](index=11&type=section&id=%E7%AE%A1%E7%90%86%E5%B1%A4%E8%A8%8E%E8%AB%96%E5%8F%8A%E5%88%86%E6%9E%90) [Business Review and Prospects](index=11&type=section&id=%E6%A5%AD%E5%8B%99%E5%9B%9E%E9%A1%A7%E5%8F%8A%E5%89%8D%E6%99%AF) Revenue grew 2.7 times, but a fair value loss on an investment widened the net loss despite successful new business expansion - Despite revenue growth of 2.7 times to **HK$377 million**, the loss attributable to equity holders widened by 125% to **HK$39.68 million** due to a recognized fair value loss on the investment in Mobvoi[32](index=32&type=chunk) - Sales from the core business of TFT-LCD panels and modules increased **3.5 times** year-over-year, while revenue from polarizers doubled, and sales of integrated circuits also increased significantly[33](index=33&type=chunk) - New business expansion was successful: revenue from the electronic advertising board business more than doubled, and sales of health-related products (K-clean disinfection series) grew nearly **5-fold** to **HK$15.63 million**[34](index=34&type=chunk)[36](index=36&type=chunk) - The fair value of the investment in Mobvoi dropped significantly due to the negative impact of new Chinese government policies on after-school tutoring, leading to a fair value loss of approximately **HK$19.25 million**[37](index=37&type=chunk) [Financial Review](index=13&type=section&id=%E8%B2%A1%E5%8B%99%E5%9B%9E%E9%A1%A7) Revenue grew 271% due to strong demand, but a significant investment loss was the primary driver of the increased net loss - Total revenue increased by **271%** year-over-year to **HK$377 million**, mainly driven by demand for display components from remote learning and work-from-home models[40](index=40&type=chunk) - Gross profit increased from HK$1.83 million to **HK$11.42 million**, primarily due to higher revenue and improved product gross margins[41](index=41&type=chunk) - Other net losses of **HK$18.84 million** were recorded, mainly due to a **HK$19.25 million** fair value loss on the investment in Mobvoi[42](index=42&type=chunk) - Distribution and selling expenses increased by **62%** to **HK$13.02 million**, mainly due to higher sales commissions, staff costs, and promotional expenses for new products[44](index=44&type=chunk) - The loss attributable to equity holders of the Company widened to **HK$39.68 million**, primarily due to the fair value loss on the Mobvoi investment[46](index=46&type=chunk) [Other Disclosures](index=15&type=section&id=%E5%85%B6%E4%BB%96%E6%8A%AB%E9%9C%B2%E4%BA%8B%E9%A0%85) [Directors' and Chief Executives' Interests](index=15&type=section&id=%E8%91%A3%E4%BA%8B%E5%8F%8A%E4%B8%BB%E8%A6%81%E8%82%A1%E6%9D%B1%E6%AC%8A%E7%9B%8A) Director Mr. Cheng Wai Tak is the controlling shareholder, holding a 62.39% interest in the company Directors' Shareholdings (as at September 30, 2021) | Director's Name | Capacity | Number of shares held | Percentage of issued shares | | :--- | :--- | :--- | :--- | | Mr. Cheng Wai Tak | Interest of a controlled corporation and beneficial owner | 925,647,151 | 62.39% | | Mr. Kan Man Wai | Beneficial owner | 320,000 | 0.02% | - Substantial shareholder Winful Enterprises Limited, wholly owned by Mr. Cheng Wai Tak, held **923,427,151 shares**, representing **62.24%** of the issued shares[53](index=53&type=chunk)[55](index=55&type=chunk) [Share Option Scheme and Others](index=16&type=section&id=%E8%B3%BC%E8%82%A1%E6%AC%8A%E8%A8%88%E5%8A%83%E5%8F%8A%E5%85%B6%E4%BB%96) No share options have ever been granted under the 2014 scheme, and no share transactions were conducted by the company - No share options have been granted by the Company since the adoption of the share option scheme in 2014[56](index=56&type=chunk)[57](index=57&type=chunk) - During the reporting period, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's shares[60](index=60&type=chunk) [Corporate Governance and Compliance](index=17&type=section&id=%E4%BC%81%E6%A5%AD%E7%AE%A1%E6%B2%BB%E5%8F%8A%E5%90%88%E8%A6%8F) The company complied with governance codes but faces ongoing SFC legal proceedings regarding alleged breaches of director duties - The Company has complied with the Corporate Governance Code and has an audit committee comprising three independent non-executive directors[69](index=69&type=chunk)[70](index=70&type=chunk) - The controlling shareholder, Mr. Cheng Wai Tak, and Winful Enterprises have provided non-competition undertakings[62](index=62&type=chunk) - The Hong Kong SFC initiated legal proceedings in 2019 against the Company and certain directors, including Mr. Cheng Wai Tak, alleging a breach of directorial duties, with proceedings ongoing[66](index=66&type=chunk)[67](index=67&type=chunk)

Financial Performance - For the six months ended June 30, 2021, the group recorded revenue of approximately HKD 231.2 million, compared to HKD 37.7 million for the same period in 2020, representing a significant increase[7]. - The loss attributable to equity holders of the company for the six months ended June 30, 2021, was approximately HKD 3.0 million, an improvement from a loss of HKD 17.5 million for the same period in 2020[7]. - Gross profit for the six months ended June 30, 2021, was HKD 17.7 million, compared to a gross loss of HKD 1.6 million for the same period in 2020[9]. - Operating loss for the six months ended June 30, 2021, was HKD 3.2 million, compared to an operating loss of HKD 10.1 million for the same period in 2020, indicating improved operational efficiency[9]. - Total comprehensive loss for the six months ended June 30, 2021, was HKD 3.5 million, compared to HKD 18.6 million for the same period in 2020, reflecting a reduction in overall losses[11]. - The company reported a basic and diluted loss per share of HKD 0.20 for the six months ended June 30, 2021, compared to HKD 1.18 for the same period in 2020, indicating a reduction in loss per share[11]. - The company reported a loss of HKD 3,462,000 for the period, with non-controlling interests accounting for HKD 430,000 of this loss[17]. - The company’s retained earnings showed a loss of HKD 17,474,000 for the period, indicating a significant decrease in profitability[17]. - The company reported a loss attributable to equity holders of HKD 3,032,000 for the six months ended June 30, 2021, an improvement from a loss of HKD 17,474,000 in the same period of 2020[71]. - The gross loss attributable to equity holders decreased by approximately 83% to about HKD 3,032,000 from approximately HKD 17,474,000 in the same period of 2020[86]. Revenue Breakdown - For the six months ended June 30, 2021, the revenue from the main products was HKD 231,168 thousand, a significant increase from HKD 37,733 thousand in the same period of 2020, representing a growth of approximately 514%[59]. - The revenue from TFT-LCD panels and modules reached HKD 174,217 thousand, compared to HKD 20,096 thousand in the previous year, indicating an increase of about 769%[59]. - Revenue from health-related products surged to HKD 12,182 thousand, up from HKD 1,254 thousand, marking a growth of approximately 871%[59]. - The company reported external customer revenue by geographic location, with Hong Kong contributing HKD 160,777 thousand, a rise from HKD 27,895 thousand, reflecting an increase of about 476%[60]. - Revenue from major customers (each contributing 10% or more to total revenue) for the six months ended June 30, 2021, was HKD 85,523,000, compared to HKD 12,075,000 for the same period in 2020, representing a significant increase[62]. - The revenue from electronic advertising board products was approximately HKD 7,793,000, more than double the HKD 3,719,000 recorded in the same period of 2020[88]. Cash Flow and Liquidity - Cash and cash equivalents as of June 30, 2021, were HKD 18.5 million, down from HKD 34.0 million as of December 31, 2020, highlighting liquidity challenges[13]. - The company reported a net cash generated from operating activities of HKD 7,733,000 for the six months ended June 30, 2021, compared to a net cash used of HKD 23,303,000 in the same period of 2020[20]. - The cash and cash equivalents increased to HKD 81,588,000 as of June 30, 2021, up from HKD 44,074,000 at the end of the previous year[20]. - The company had cash and cash equivalents of approximately HKD 81,588,000 as of June 30, 2021, compared to HKD 76,403,000 as of December 31, 2020[102]. Assets and Liabilities - As of June 30, 2021, total liabilities amounted to HKD 117.1 million, an increase from HKD 68.8 million as of December 31, 2020[15]. - The company's total equity attributable to equity holders was HKD 147.6 million as of June 30, 2021, compared to HKD 151.1 million as of December 31, 2020[15]. - The company’s financial liabilities increased to HKD 114,835,000 as of June 30, 2021, compared to HKD 65,851,000 at the end of 2020[28]. - The company reported accounts payable of HKD 95,177,000 as of June 30, 2021, compared to HKD 44,885,000 as of December 31, 2020[82]. - The company’s accounts receivable decreased to HKD 16,893,000 from HKD 32,606,000, indicating a reduction in credit sales or improved collection efforts[28]. - The company’s lease liabilities decreased slightly to HKD 10,699,000 from HKD 11,563,000, suggesting better management of lease obligations[28]. - Non-current assets as of June 30, 2021, totaled HKD 15,067,000, up from HKD 9,867,000 as of December 31, 2020, indicating growth in asset value[62]. Expenses - Distribution and selling expenses increased by approximately 74% to about HKD 8,816,000, primarily due to increased employee costs, sales commissions, transportation, and promotional expenses[96]. - Research and development expenses rose by approximately 17% to about HKD 768,000, mainly due to increased employee costs[98]. - Interest expenses on lease liabilities decreased to HKD 246,000 for the six months ended June 30, 2021, from HKD 360,000 in the same period of 2020, indicating improved cost management[65]. Corporate Governance and Shareholding - As of June 30, 2021, Mr. Zheng Weide holds 923,427,151 shares through Winful Enterprises Limited, representing 62.24% of the company's issued shares[118]. - Mr. Zheng Weide is also recognized as the beneficial owner of an additional 2,220,000 shares, bringing his total beneficial ownership to 925,647,151 shares, or 62.39%[120]. - The company has adopted a code of conduct for directors regarding securities trading, ensuring compliance with GEM listing rules[130]. - The company has adopted the principles and code provisions of the corporate governance code as per GEM Listing Rules Appendix 15, and has complied with all code provisions during the six months ended June 30, 2021[139]. - The independent non-executive director Xu Huimin resigned from the board of Mei Medical Holdings Limited effective March 25, 2021, and the company's shares were delisted on the same date[140]. - The audit committee has been established and consists of three independent non-executive directors, with Xu Huimin serving as the chairperson, ensuring compliance with the corporate governance code[141].

Perfect Optronics Limited 圓 美 光 電 有 限 公 司 (Incorporated in the Cayman Islands with limited liability) Stock Code : 8311 2021 First Quarterly Report Perfect Optronics Limited 圓 美 光 電 有 限 公 司 股 份 代 號 : 8311 （於開曼群島註冊成立之有限公司） 2021 第一季度報 告 香港聯合交易所有限公司（「聯交所」）GEM（「GEM」）的特色 GEM的定位，乃為中小型公司提供一個上市的市場，此等公司相比起其他在聯交所主 板上市的公司帶有較高投資風險。有意投資的人士應了解投資於該等公司的潛在風 險，並應經過審慎周詳的考慮後方作出投資決定。 由於GEM上市公司普遍為中小型公司，在GEM買賣的證券可能會較於聯交所主板買賣 之證券承受較大的市場波動風險，同時無法保證在GEM買賣的證券會有高流通量的市 場。 香港交易及結算所有限公司及聯交所對本報告之內容概不負責，對其準確性或完整性 亦不發表任何聲明，並明確表示概不就因本報告全部或任何 ...

Company Overview - Perfect Optronics Limited is incorporated in the Cayman Islands and listed on the GEM of the Hong Kong Stock Exchange[1]. - The company acknowledges the higher investment risks associated with small and mid-sized companies listed on GEM[2]. - There is a risk of high market volatility for securities traded on GEM compared to those on the Main Board[3]. Governance and Compliance - The directors of Perfect Optronics Limited accept full responsibility for the accuracy and completeness of the information in the report[5]. - The report includes compliance with the GEM Listing Rules to provide information regarding the company[5]. - The Company has adopted a code of conduct for securities transactions by Directors, which complies with the required standards set out in the GEM Listing Rules[150]. - The Company is committed to high standards of corporate governance to safeguard shareholder interests[148]. - The management provides monthly updates to the Board in accordance with the Corporate Governance Code[162]. - The Company ensures compliance with GEM Listing Rules and updates directors on regulatory requirements[175]. - All directors are subject to retirement by rotation at least once every three years, ensuring governance accountability[178]. - The Board comprises four executive Directors and five independent non-executive Directors, with several Directors suspended pending legal proceedings[155]. - Independent non-executive directors represent more than one-third of the Board, ensuring compliance with GEM Listing Rules[184]. - The Company has established three Board committees: audit committee, remuneration committee, and nomination committee, ensuring sufficient resources for their duties[192]. - The audit committee was formed on January 20, 2014, consisting of three independent non-executive Directors, with Ms. Hsu Wai Man Helen as chairperson[197]. - The primary duties of the audit committee include overseeing the financial reporting process, internal control, and risk management systems[199]. - The audit committee held four meetings during the year, with attendance details provided for individual members[200]. Financial Performance - The financial summary and consolidated statements are included in the annual report, detailing the company's financial performance[7]. - The Group recorded a revenue of approximately HK$207.0 million for the year ended 31 December 2020, representing a 24% increase compared to HK$166.6 million in 2019[14][30]. - The consolidated loss attributable to equity holders of the Company for the year amounted to approximately HK$16.9 million, a reduction of approximately 50% from the loss of HK$34.1 million in 2019[14][30]. - Sales of thin film transistor liquid crystal display (TFT-LCD) panels and modules amounted to approximately HK$138.5 million, an increase of approximately 3% compared to 2019[15][18]. - Sales of polarisers reached approximately HK$35.8 million, representing an increase of approximately HK$31.1 million compared to 2019[15][18]. - Revenue from the electronic signage business was approximately HK$11.8 million, reflecting a 52% increase compared to 2019[15][18]. - The Group's total revenue for the Year amounted to approximately HK$206,973,000, representing an increase of approximately 24% compared to HK$166,607,000 in 2019[65]. - The gross profit margin improved to 8.3% from a negative margin in 2019, reflecting a significant recovery in profitability[91]. - Cash and cash equivalents increased to approximately HK$76,403,000 from HK$70,308,000 in 2019, marking a 9% increase[100]. - Total liabilities rose significantly to HK$68,816,000 from HK$33,306,000 in 2019, an increase of 107%[96]. - The current ratio decreased to 2.3 times from 5.0 times in 2019, indicating a reduction in liquidity[96]. - The Group had no bank borrowings as of December 31, 2020, consistent with the previous year[104]. Business Strategy and Operations - The Group plans to maintain a flexible business strategy to seize new business opportunities and create greater value for shareholders[24]. - The Group introduced a personal hygiene and disinfectant product line branded "K-clean" in Hong Kong, responding to strong demand during the pandemic[20][21]. - The Group plans to continue promoting K-clean products while expanding its revenue base and product diversity[49]. - The Group has been actively working to secure business with existing customers while developing new reliable customers in new markets[117]. Legal and Regulatory Matters - The Company received a petition from the Securities and Futures Commission (SFC) alleging that certain Directors breached their duties related to the disposal of a subsidiary holding approximately 50.14% of Shinyoptics Corporation[140]. - The legal proceedings regarding the petition are ongoing, and the Director Respondents intend to contest the allegations vigorously[141]. - Trading in the Company's shares on GEM resumed on September 28, 2020, at 9:00 a.m.[145]. Human Resources - As of December 31, 2020, the employee headcount was 66, with total staff costs amounting to approximately HK$23,911,000, an increase of 11% from HK$21,533,000 in 2019[113]. - The management regularly reviews employee remuneration packages to ensure competitiveness with market standards[112]. - Continuous professional development is emphasized for all directors to ensure their contributions remain informed and relevant[172]. Audit and Financial Review - The audit is conducted by PricewaterhouseCoopers, ensuring an independent review of the financial statements[8]. - Net other gains amounted to approximately HK$3,256,000, including a fair value gain from the Group's investment in Mobvoi of approximately HK$2,009,000[73]. - The Group's finance costs for the Year were approximately HK$678,000, down from HK$890,000 in 2019[78]. - General and administrative expenses for the year were approximately HK$26,747,000, relatively stable compared to HK$26,916,000 in 2019[80]. - Research and development expenses decreased to approximately HK$1,394,000 from HK$1,972,000 in 2019, a reduction of about HK$578,000 due to lower employee costs and development expenses[81].

Financial Performance - For the nine months ended September 30, 2020, the group recorded revenue of approximately HKD 101.8 million, a decrease of 27.2% compared to HKD 140.0 million for the same period in 2019[4] - The loss attributable to equity holders for the nine months ended September 30, 2020, was approximately HKD 17.6 million, an improvement from a loss of HKD 25.9 million for the same period in 2019, representing a reduction of 31.8%[4] - The gross profit for the nine months ended September 30, 2020, was HKD 1.83 million, compared to a gross loss of HKD 1.14 million for the same period in 2019[6] - Operating loss for the nine months ended September 30, 2020, was HKD 18.39 million, a significant improvement from an operating loss of HKD 26.06 million for the same period in 2019[6] - The total comprehensive loss for the nine months ended September 30, 2020, was HKD 19.59 million, compared to HKD 27.23 million for the same period in 2019, indicating a reduction of 28.1%[6] - Total revenue for the nine months ended September 30, 2020, was HKD 101,778,000, compared to HKD 139,951,000 for the same period in 2019, indicating a decrease of 27%[30] - The company reported a net loss attributable to equity holders of HKD 17,638,000 for the nine months ended September 30, 2020, an improvement from a loss of HKD 25,883,000 in the same period of 2019[50] - Basic and diluted loss per share for the nine months ended September 30, 2020, was HKD 1.19, compared to HKD 1.74 for the same period in 2019, reflecting a reduction in loss per share[52] Revenue and Sales - Revenue from TFT-LCD panels and modules for the three months ended September 30, 2020, was HKD 46,778,000, a significant increase from HKD 21,684,000 in the same period of 2019, representing a growth of 115%[30] - Sales of TFT-LCD panels and modules amounted to approximately HKD 66,874,000, a decline of about 44% from approximately HKD 120,353,000 in the same period of 2019[58] Expenses and Costs - Research and development expenses for the nine months ended September 30, 2020, were HKD 941,000, down from HKD 1.45 million for the same period in 2019[6] - The company reported a net finance cost of HKD 490,000 for the nine months ended September 30, 2020, compared to HKD 813,000 for the same period in 2019, reflecting a decrease of 39.7%[6] - Financial expenses for the nine months ended September 30, 2020, totaled HKD 513,000, a decrease from HKD 961,000 in the same period of 2019[43] - Distribution and selling expenses increased by about 20% to approximately HKD 8,053,000, primarily due to expenses from a newly established subsidiary in Taiwan and increased promotional costs for new products[67] Investments - The fair value of financial assets measured at fair value through profit or loss was approximately HKD 63,408,000 as of September 30, 2020, up from HKD 57,538,000 as of December 31, 2019[40] - The company recognized other income of HKD 1,253,000 for the nine months ended September 30, 2020, primarily from government subsidies under the "Employment Support Scheme" in Hong Kong[41] - Other net income for the nine months ended September 30, 2020, was approximately HKD 6,993,000, an increase from approximately HKD 3,271,000 in the same period of 2019, primarily due to fair value gains from the investment in Mobvoi[66] - The company’s investment in Mobvoi saw a fair value increase to approximately HKD 63,408,000 as of September 30, 2020, up from HKD 57,538,000 as of December 31, 2019[61] - The company’s equity interest in Mobvoi was diluted from approximately 1.50% to about 1.23% following a recent acquisition, but the investment's fair value increased[61] Corporate Governance and Compliance - The company has adopted a code of conduct for directors regarding securities trading, which aligns with the GEM Listing Rules[83] - The company has confirmed compliance with the adopted trading standards and code of conduct for directors during the reporting period[83] - The company has adopted the principles and code provisions of the corporate governance code as per GEM listing rules, with some deviations noted[92] - The audit committee has been established, consisting of three independent non-executive directors, with a qualified member serving as the chair[94] - The company believes that having the same individual serve as both chairman and CEO provides unified leadership, although it plans to separate these roles in the long term[92] - The company has ensured that the roles of chairman and CEO are clearly delineated despite being held by the same person[92] - The company is committed to maintaining appropriate power distribution within the board and management, ensuring effective checks and balances[92] Legal Proceedings - The company is currently involved in legal proceedings initiated by the Securities and Futures Commission regarding the sale of approximately 50.14% of its subsidiary's shares[89] - As of September 25, 2020, several directors, including the CEO, have suspended their roles pending the outcome of the legal proceedings[90] - The independent non-executive director has been appointed as the acting chairman to replace the suspended CEO[93] - The legal proceedings are ongoing, and the company is actively defending against the claims made by the Securities and Futures Commission[89] Shareholder Information - As of September 30, 2020, the company has issued a total of 923,427,151 shares, with major shareholder Winful Enterprises holding 62.24% of the shares[72][76][77] - Zheng Wei Teh, the major shareholder, holds 923,427,151 shares through Winful Enterprises and has a beneficial ownership of 2,220,000 shares, representing 0.15%[72][78] - The company has not granted any stock options under its stock option plan since its adoption on January 20, 2014[79][80] - There were no arrangements made for directors to benefit from purchasing shares or bonds of the company or any other entity during the nine months ending September 30, 2020[81] - The company did not redeem any of its shares nor did it purchase or sell any shares during the nine months ending September 30, 2020[82] - No other individuals or entities, apart from the disclosed parties, held any interests in the company's shares or related securities that required disclosure as of September 30, 2020[73][78] - A non-competition agreement was established on January 20, 2014, by major shareholder Zheng Wei Teh and Winful Enterprises, preventing them from engaging in competing businesses[86] Future Plans - The company aims to continue its focus on trading, developing, and selling display and optical products, as well as related electronic components[22] - The company plans to expand its revenue base, enhance product diversity, and explore new business opportunities in response to economic uncertainties and challenges posed by the COVID-19 pandemic[62] - The company is currently evaluating the impact of new accounting standards on its performance and financial position[27]

Financial Performance - For the six months ended June 30, 2020, the group recorded revenue of approximately HKD 37.7 million, a decrease of 65.5% compared to HKD 109.3 million for the same period in 2019 [4]. - The loss attributable to equity holders for the six months ended June 30, 2020, was approximately HKD 17.5 million, compared to a loss of HKD 19.7 million for the same period in 2019, representing a 11.2% improvement [4]. - The company reported a comprehensive loss of HKD 19,730,000 for the six months ended June 30, 2020, compared to a loss of HKD 295,000 from non-controlling interests, resulting in a total loss of HKD 20,025,000 [27]. - The group reported a net loss attributable to equity holders of HKD 17,474,000 for the six months ended June 30, 2020, compared to a loss of HKD 19,730,000 in 2019 [101]. - The basic and diluted loss per share for the six months ended June 30, 2020, was HKD 1.18, an improvement from HKD 1.33 in the same period of 2019 [101]. Revenue Breakdown - Revenue from the main product categories included HKD 20,096,000 from TFT-LCD panels and modules, down 79.7% from HKD 98,669,000 in 2019 [87]. - Revenue from polarizers increased significantly from approximately HKD 488,000 in 2019 to HKD 7,873,000 in the current period [126]. - Revenue from electronic advertising boards reached HKD 3,719,000, an increase of approximately HKD 897,000 compared to HKD 2,822,000 in the same period of 2019 [126]. - Major customers contributed HKD 12,075,000 to revenue, significantly up from HKD 3,574,000 in the previous year, with Customer A generating HKD 8,209,000 [90]. Assets and Liabilities - Total assets as of June 30, 2020, amounted to HKD 171.5 million, a decrease of 15.7% from HKD 203.7 million as of December 31, 2019 [12]. - Total liabilities as of June 30, 2020, were HKD 19.8 million, down 40.3% from HKD 33.3 million as of December 31, 2019 [23]. - The company’s total equity decreased to HKD 119,795,000 as of June 30, 2020, from HKD 150,773,000 as of December 31, 2019 [45]. - The company’s accounts receivable and other receivables were HKD 15,386,000 as of June 30, 2020, down from HKD 20,254,000 as of December 31, 2019 [41]. - The total accounts payable as of June 30, 2020, was HKD 4,935,000, a decrease from HKD 14,467,000 as of December 31, 2019 [53]. Cash Flow and Liquidity - Cash used in operating activities was HKD 23,303,000 for the six months ended June 30, 2020, a significant decrease from the net cash generated of HKD 4,398,000 in the same period of 2019 [31]. - The company recorded a decrease in cash and cash equivalents, with a net decrease of HKD 26,179,000, bringing the total to HKD 44,074,000 as of June 30, 2020, down from HKD 70,308,000 at the beginning of the period [31]. - The company’s cash and cash equivalents decreased from HKD 70.3 million as of December 31, 2019, to HKD 44.1 million as of June 30, 2020, a decline of 37.3% [13]. - The company had no bank borrowings as of June 30, 2020, compared to a repayment of HKD 911,000 in the same period of 2019 [117]. Expenses - The cost of sales for the six months ended June 30, 2020, was HKD 39,545,000, a decrease of 67.3% from HKD 120,879,000 in 2019 [93]. - Distribution and selling expenses for the six months ended June 30, 2020, were approximately HKD 5,056,000, an increase of about 22% compared to approximately HKD 4,148,000 for the same period in 2019 [132]. - General and administrative expenses for the six months ended June 30, 2020, were approximately HKD 11,727,000, a decrease of about 13% from approximately HKD 13,428,000 for the same period in 2019 [132]. - R&D expenses for the six months ended June 30, 2020, were approximately HKD 657,000, a decrease of about 32% compared to approximately HKD 961,000 for the same period in 2019 [132]. Corporate Governance - The company has adopted a code of conduct for directors regarding securities trading, ensuring compliance with GEM listing rules [168]. - The company has confirmed that all directors complied with the trading standards and code of conduct during the reporting period [168]. - The company has complied with all provisions of the corporate governance code during the six months ending June 30, 2020, with the exception of the separation of roles between the Chairman and CEO [176]. - The Chairman and CEO roles are currently held by Mr. Zheng Weide, who is believed to provide unified leadership for effective business decision-making [176]. Shareholder Information - As of June 30, 2020, the company has issued 923,427,151 shares, with Winful Enterprises holding a direct beneficial interest of 62.24% [155][161]. - The company has no share buybacks or purchases of its own shares during the six months ending June 30, 2020 [167]. - There have been no stock options granted under the stock option plan since its adoption on January 20, 2014 [164]. - The company has a non-competition agreement in place with its controlling shareholder, effective from the date of listing [169].

Financial Performance - For the three months ended March 31, 2020, the group recorded revenue of approximately HKD 19.5 million, a decrease of 70.3% compared to HKD 65.6 million for the same period in 2019[3] - The loss attributable to equity holders of the company for the three months ended March 31, 2020, was approximately HKD 7.7 million, compared to a loss of HKD 8.0 million for the same period in 2019, representing a 3.8% improvement[3] - Gross profit for the three months ended March 31, 2020, was HKD 160,000, down 85.5% from HKD 1.1 million in the same period of 2019[5] - Operating loss for the three months ended March 31, 2020, was HKD 8.1 million, compared to an operating loss of HKD 7.7 million for the same period in 2019[5] - The total comprehensive loss for the period attributable to equity holders was HKD 7.9 million, compared to HKD 7.9 million for the same period in 2019, indicating no significant change[8] - Basic and diluted loss per share for the three months ended March 31, 2020, was HKD 0.52, slightly improved from HKD 0.54 in the same period of 2019[8] - The company reported a net loss before tax of HKD 8.2 million for the three months ended March 31, 2020, compared to a loss of HKD 8.0 million for the same period in 2019[5] - The company reported a loss attributable to equity holders of approximately HKD 7,743,000 for the three months ended March 31, 2020, compared to a loss of approximately HKD 7,953,000 for the same period in 2019[32] Revenue Breakdown - The company's revenue for the three months ended March 31, 2020, was approximately HKD 19,498,000, a significant decrease of about 70% from HKD 65,627,000 for the same period in 2019[34] - Sales of TFT-LCD panels and modules were approximately HKD 9,397,000, representing a decline of about 85% compared to approximately HKD 61,829,000 in the same period of 2019[35] - Revenue from polarizers increased to approximately HKD 4,736,000, up from approximately HKD 185,000 in the same period of 2019, marking an increase of about 2,448%[35] - Revenue from electronic advertising boards was approximately HKD 2,326,000, an increase of about 237% from approximately HKD 690,000 in the same period of 2019[35] Expenses and Cost Management - The group incurred finance costs of HKD 190,000 for the three months ended March 31, 2020, down from HKD 355,000 in the same period of 2019, reflecting a 46.5% decrease[5] - The company’s operational expenses and cost of sales reductions helped mitigate the negative impact on its performance during the period[34] - Distribution and selling expenses increased by approximately 12% to HKD 2,300,000, primarily due to the establishment of a new subsidiary in Taiwan[41] - General and administrative expenses decreased by about 13% to HKD 5,653,000, mainly due to a reduction in professional fees[41] - Research and development expenses were approximately HKD 367,000, down about HKD 152,000 from HKD 519,000 in the previous year, attributed to reduced employee costs[41] Dividend and Shareholder Information - The board of directors did not declare an interim dividend for the three months ended March 31, 2020, consistent with the previous year[3] - The company did not redeem any shares during the three months ended March 31, 2020[58] Market Conditions and Future Outlook - The company experienced a significant decline in customer orders due to factory shutdowns caused by COVID-19 prevention measures[34] - The smartphone market in China saw a shipment volume decrease of 36.4% to 49 million units compared to the same period in 2019[35] - The company anticipates continued weakness in sales of electronic components and products in the first half of 2020 due to the ongoing pandemic and international tensions[37] - The company plans to explore opportunities for collaboration with new suppliers and customers across various industries and regions to mitigate the economic impact of the COVID-19 pandemic and international conflicts[37] Corporate Governance and Compliance - All directors confirmed compliance with the company's securities trading code during the three months ended March 31, 2020[59] - There were no business interests held by directors or controlling shareholders that would compete with the company's business during the three months ended March 31, 2020[63] - The company has adopted the corporate governance code as per GEM Listing Rules and has complied with all provisions except for the separation of roles between the Chairman and CEO[67] - The audit committee, consisting of five independent non-executive directors, has reviewed the report and provided feedback[69] Investments and Product Development - The fair value of financial assets measured at fair value through profit or loss related to the investment in Mobvoi Inc. was approximately HKD 57,745,000 as of March 31, 2020[25] - Mobvoi continued to launch new products, including the TicWatch Pro 2020 and TicPods 2 Pro, which are expected to generate significant investment returns for the company[37]

Financial Performance - The Group's revenue for the year amounted to approximately HK$166.6 million, representing a decrease of 34% compared to 2018[19] - Consolidated loss attributable to equity holders of the Company for the year amounted to approximately HK$34.1 million, a decrease in loss of approximately HK$21.7 million compared to 2018[19] - The Group's revenue for the year was approximately HK$166.6 million, a decrease of 34% compared to approximately HK$254.1 million in 2018[23] - The loss attributable to equity holders of the Company was approximately HK$34.1 million, a reduction of approximately HK$21.7 million from a loss of approximately HK$55.8 million in 2018[23] - Total revenue for the year ended December 31, 2019, was approximately HK$166,607,000, a decrease of approximately 34% compared to HK$254,072,000 in 2018[65] - Loss attributable to equity holders of the Company was HK$34,078,000 for the year ended December 31, 2019, a reduction of 39% from HK$55,780,000 in 2018[90] Revenue Segments - The Group's medium-to-large sized display products continued to be a key revenue generator despite a decrease in trades compared to 2018[20] - Sales from the display products segment amounted to approximately HK$164.1 million, representing a decrease of approximately 34% from approximately HK$249.5 million in 2018[39] - Sales of thin film transistor liquid crystal display (TFT-LCD) panels and modules were approximately HK$135.0 million, a drop of approximately 40% from approximately HK$226.2 million in 2018[39] - Revenue from electronic signage products reached approximately HK$7,749,000, significantly up from HK$397,000 in 2018[42] - The optics products segment recorded revenue of approximately HK$2,458,000, a decrease of approximately HK$2,096,000 compared to HK$4,554,000 in 2018[43] Business Development - The new electronic signage business began to contribute notable revenue during the year, with promotional showcases at major expos[20] - The Group is focused on widening its revenue base through proactive development of new business segments[20] - The Group has actively developed new electronic advertising board business, which began contributing significant revenue during the year[23] - A branch was established in Taiwan in late 2019 to expand the electronic signage business[20] - The Group established a subsidiary in Taiwan at the end of 2019 to expand its electronic advertising board business[23] Economic Challenges - The Group faced challenges due to economic uncertainties and Sino-American trade tensions, impacting the mobile phone market[18] - The overall market for mobile phones in China experienced a decline in shipments during the year[18] - Domestic mobile phone shipments in China dropped by 6.2% to 388.6 million units in 2019 compared to 2018, impacting the Group's performance[35] - The economic outlook remains uncertain due to trade frictions and the impact of COVID-19, which may negatively affect sales in the first half of 2020[53] - The Group anticipates a weak sales outlook for electronic components and products in the first half of 2020 due to economic uncertainties and the impact of COVID-19[54] Cost Management - Total cost of sales for the year ended December 31, 2019, amounted to approximately HK$166,902,000, a decrease of approximately 38% compared to HK$268,428,000 in 2018[71] - Gross loss recorded for the year ended December 31, 2019, was approximately HK$295,000, a decrease from HK$14,356,000 in 2018[72] - Distribution and selling expenses for the year ended December 31, 2019, were approximately HK$8,680,000, representing a decrease of approximately 26% from HK$11,761,000 in 2018[74] - Research and development expenses for the year ended December 31, 2019, amounted to approximately HK$1,972,000, a decrease of approximately HK$1,393,000 compared to HK$3,365,000 in 2018[82] Assets and Equity - The Group's total assets decreased by 15% to HK$203,663,000 as of December 31, 2019, down from HK$240,795,000 in 2018[97] - Total equity attributable to equity holders of the Company decreased by 17% to HK$168,947,000 in 2019 from HK$203,965,000 in 2018[97] - Cash and cash equivalents amounted to HK$70,308,000 as of December 31, 2019, a slight decrease of 1% from HK$71,153,000 in 2018[102] - The Group had no bank borrowings as of December 31, 2019, compared to HK$8,979,000 in bank borrowings in 2018[106] Corporate Governance - The Company has complied with all code provisions of the Corporate Governance Code throughout the year ended December 31, 2019, except for one deviation[148] - The Board comprises three executive Directors and five independent non-executive Directors, with all attending four regular board meetings held during the year[167] - The Company has arranged appropriate insurance coverage for Directors' and officers' liabilities, reviewed annually[163] - The audit committee consists of five independent non-executive Directors, with Mr. Wong Yik Chung John serving as the chairman, ensuring effective oversight of financial reporting and internal controls[190] - The primary duties of the audit committee include providing an independent view of the Company's financial reporting process and overseeing the audit process[191] Shareholder Matters - The Company did not recommend or declare any dividend for the year ended December 31, 2019[129] - Trading in the Company's shares on GEM has been suspended since 9:00 a.m. on September 26, 2019, until further notice[142] - The Company received a petition from the Securities and Futures Commission alleging breaches of duties by six Directors regarding the disposal of a subsidiary holding approximately 50.14% of Shinyoptics Corporation[141]

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |-------|-------|-------|-------|-------|-------|-----------------|---------------------------------------------------|-------|-------|-------|-------|------------------| | | | | | | | | | | | | | | | | | | | | | | Perfect Optronics Limited 圓 美 光 電 有 限 公 司 | | | | | | | | | | | | | 股份代號 : 8311 | (於関曼群島註冊成立之有限公司) | | | | | | | | | | | | | | o for a for our of on of o | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 00 | ...

[Executive Summary](index=3&type=section&id=Executive%20Summary) The Group's revenue decreased by approximately 10% year-on-year, while loss attributable to owners of the Company also decreased Key Financial Highlights for the Six Months Ended June 30, 2019 | Metric | For the Six Months Ended June 30, 2019 (Thousand HKD) | For the Six Months Ended June 30, 2018 (Thousand HKD) | | :--- | :--- | :--- | | Revenue | 109,300 | 121,100 | | Loss attributable to owners of the Company | (19,700) | (25,900) | | Interim Dividend | Nil | Nil | - The Group's revenue decreased by approximately **10% year-on-year**, from approximately **HKD 121.1 million** in 2018 to approximately **HKD 109.3 million** in 2019[4](index=4&type=chunk) - Loss attributable to owners of the Company decreased year-on-year, from approximately **HKD 25.9 million** in 2018 to approximately **HKD 19.7 million** in 2019[4](index=4&type=chunk) [Financial Results](index=4&type=section&id=Financial%20Results) The Group's financial performance for the six months ended June 30, 2019, shows a decrease in revenue and a narrowing of losses compared to the prior year [Condensed Consolidated Statement of Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statement%20of%20Comprehensive%20Income) The Group's revenue for the six months ended June 30, 2019, decreased by approximately 10% year-on-year, recording a gross loss and operating loss, but with a narrower loss compared to the same period last year, and reduced basic and diluted loss per share Key Data from Condensed Consolidated Statement of Comprehensive Income (For the Six Months Ended June 30) | Metric | 2019 (Thousand HKD) | 2018 (Thousand HKD) | | :--- | :--- | :--- | | Revenue | 109,293 | 121,066 | | Gross Loss | (1,417) | (5,324) | | Operating Loss | (19,435) | (25,980) | | Loss for the Period | (20,025) | (25,940) | | Loss attributable to owners of the Company | (19,730) | (25,940) | | Basic and Diluted Loss Per Share (HK cents) | (1.33) | (1.75) | - Revenue decreased from **HKD 121,066 thousand** in the same period of 2018 to **HKD 109,293 thousand** in 2019, a decrease of approximately **10%**[6](index=6&type=chunk) - Gross loss narrowed from **HKD 5,324 thousand** in the same period of 2018 to **HKD 1,417 thousand** in 2019[6](index=6&type=chunk) [Condensed Consolidated Statement of Financial Position](index=6&type=section&id=Condensed%20Consolidated%20Statement%20of%20Financial%20Position) The Group's financial position as of June 30, 2019, shows a decrease in total assets and equity, while total liabilities remained relatively stable [Overview of Condensed Consolidated Statement of Financial Position](index=6&type=section&id=Overview%20of%20Condensed%20Consolidated%20Statement%20of%20Financial%20Position) As of June 30, 2019, the Group's total assets and total equity both decreased, but total liabilities remained relatively stable, with non-current assets increasing due to right-of-use assets and intangible assets, while current assets decreased Key Data from Condensed Consolidated Statement of Financial Position | Metric | June 30, 2019 (Thousand HKD) | December 31, 2018 (Thousand HKD) | | :--- | :--- | :--- | | Non-current assets | 80,475 | 63,801 | | Current assets | 141,216 | 176,994 | | Total assets | 221,691 | 240,795 | | Total equity | 185,683 | 203,965 | | Total liabilities | 36,008 | 36,830 | | Right-of-use assets | 15,211 | — | | Intangible assets | 5,322 | 3,122 | | Lease liabilities (non-current) | 10,955 | — | | Lease liabilities (current) | 5,555 | — | - Non-current assets increased from **HKD 63,801 thousand** as of December 31, 2018, to **HKD 80,475 thousand** as of June 30, 2019, primarily due to the initial recognition of **HKD 15,211 thousand** in right-of-use assets and an increase in intangible assets[13](index=13&type=chunk) - Current assets decreased from **HKD 176,994 thousand** as of December 31, 2018, to **HKD 141,216 thousand** as of June 30, 2019[13](index=13&type=chunk) [Condensed Consolidated Statement of Changes in Equity](index=8&type=section&id=Condensed%20Consolidated%20Statement%20of%20Changes%20in%20Equity) This statement outlines changes in the components of the Company's equity for the six months ended June 30, 2019 [Overview of Condensed Consolidated Statement of Changes in Equity](index=8&type=section&id=Overview%20of%20Condensed%20Consolidated%20Statement%20of%20Changes%20in%20Equity) This condensed consolidated statement of changes in equity outlines the movements in each component of the Company's equity for the six months ended June 30, 2019, including share capital, reserves, and retained earnings, explaining the composition of other reserves and revaluation reserves - Other reserves include the difference between the share capital and total capital acquired from subsidiaries during the company's listing reorganization, and the amount of loans waived by controlling shareholders during common control mergers[30](index=30&type=chunk) - Revaluation reserve refers to the fair value reserve for financial assets measured at fair value through other comprehensive income[31](index=31&type=chunk) [Condensed Consolidated Statement of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) This statement presents the cash flows from operating, investing, and financing activities for the six months ended June 30, 2019 [Overview of Condensed Consolidated Statement of Cash Flows](index=9&type=section&id=Overview%20of%20Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) For the six months ended June 30, 2019, the Group generated net cash inflow from operating activities, with net cash outflows from investing and financing activities, but achieved a net increase in cash and cash equivalents overall, reversing the net decrease trend of the prior year Key Data from Condensed Consolidated Statement of Cash Flows (For the Six Months Ended June 30) | Metric | 2019 (Thousand HKD) | 2018 (Thousand HKD) | | :--- | :--- | :--- | | Net cash generated from / (used in) operating activities | 4,398 | (35,880) | | Net cash used in investing activities | (2,152) | (1,143) | | Net cash generated from / (used in) financing activities | 909 | (154) | | Net increase / (decrease) in cash and cash equivalents | 3,155 | (37,177) | | Cash and cash equivalents at end of period | 74,305 | 50,818 | - Operating activities shifted from a net cash outflow of **HKD 35,880 thousand** in the same period of 2018 to a net cash inflow of **HKD 4,398 thousand** in 2019[37](index=37&type=chunk) - Cash and cash equivalents at the end of the period increased from **HKD 50,818 thousand** in the same period of 2018 to **HKD 74,305 thousand** in 2019[53](index=53&type=chunk) [Notes to the Condensed Consolidated Interim Financial Statements](index=10&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Interim%20Financial%20Statements) This section provides detailed notes explaining the basis of preparation, significant accounting policies, financial risk management, and other key financial information for the condensed consolidated interim financial statements [1. Basis of Preparation](index=10&type=section&id=1.%20Basis%20of%20Preparation) The Company, incorporated in the Cayman Islands and listed on GEM since February 7, 2014, primarily engages in display panel trading and processing, and optical product development and sales, with interim financial statements prepared in accordance with HKAS 34 and GEM Listing Rules and reviewed by the audit committee - The Company was incorporated in the Cayman Islands on June 13, 2013, and its shares have been listed on GEM since February 7, 2014[54](index=54&type=chunk) - The Group primarily engages in the trading and processing of display panels, the development and sale of optical products, and the trading of related electronic components[54](index=54&type=chunk) - The interim financial statements are prepared in accordance with Hong Kong Accounting Standard 34 and the GEM Listing Rules, and have been reviewed by the Company's audit committee[54](index=54&type=chunk)[55](index=55&type=chunk) [2. Significant Accounting Policies](index=10&type=section&id=2.%20Significant%20Accounting%20Policies) The Group first adopted and applied HKFRS 16 Leases, leading to significant changes in lease accounting, recognizing right-of-use assets and lease liabilities, and impacting retained earnings at the beginning of the period - The Group first adopted and applied Hong Kong Financial Reporting Standard 16 Leases from January 1, 2019[56](index=56&type=chunk) - Upon adoption of HKFRS 16, leases are recognized as right-of-use assets and corresponding liabilities, measured at present value[58](index=58&type=chunk) Impact of Adopting HKFRS 16 on Consolidated Statement of Financial Position (January 1, 2019) | Item | Impact (Thousand HKD) | | :--- | :--- | | Right-of-use assets | Increase 14,943 | | Deferred tax assets | Increase 55 | | Lease liabilities | Increase 15,966 | | Retained earnings | Decrease 968 | [3. Financial Risk Management and Financial Instruments](index=14&type=section&id=3.%20Financial%20Risk%20Management%20and%20Financial%20Instruments) The Group faces market, credit, liquidity, and price risks, with detailed disclosures on financial instrument classification, contractual maturities for liquidity risk, and fair value measurement hierarchies and valuation techniques - The Group's business is exposed to market risk (including foreign exchange risk and cash flow and fair value interest rate risk), credit risk, liquidity risk, and price risk[81](index=81&type=chunk) - Risk management policies have not changed since the year-end[82](index=82&type=chunk) [3.1 Financial Instruments by Category](index=14&type=section&id=3.1%20Financial%20Instruments%20by%20Category) The Group's financial instruments primarily include financial assets and liabilities measured at amortized cost, and financial assets measured at fair value through other comprehensive income or profit or loss Financial Assets (June 30, 2019 vs December 31, 2018) | Financial Asset Category | June 30, 2019 (Thousand HKD) | December 31, 2018 (Thousand HKD) | | :--- | :--- | :--- | | Financial assets measured at amortized cost | 91,482 | 93,609 | | Financial assets measured at fair value through other comprehensive income | 2,392 | 2,652 | | Financial assets measured at fair value through profit or loss | 55,248 | 54,988 | Financial Liabilities (June 30, 2019 vs December 31, 2018) | Financial Liability Category | June 30, 2019 (Thousand HKD) | December 31, 2018 (Thousand HKD) | | :--- | :--- | :--- | | Liabilities measured at amortized cost | 32,251 | 27,776 | [3.2 Financial Risk Factors](index=15&type=section&id=3.2%20Financial%20Risk%20Factors) The Group's business is exposed to market risk (including foreign exchange and interest rate risks), credit risk, liquidity risk, and price risk, with no changes in risk management policies since the last year-end - The Group's business is exposed to market risk (including foreign exchange risk and cash flow and fair value interest rate risk), credit risk, liquidity risk, and price risk[81](index=81&type=chunk) - Risk management policies have not changed since the year-end[82](index=82&type=chunk) [3.3 Liquidity Risk](index=15&type=section&id=3.3%20Liquidity%20Risk) The Group disclosed the contractual maturities of its non-derivative financial liabilities as of June 30, 2019, with a significant portion of lease liabilities due within one to five years Contractual Maturities of Non-derivative Financial Liabilities (June 30, 2019) | Liability Category | Less than 1 year (Thousand HKD) | Between 1 and 5 years (Thousand HKD) | Total contractual cash flows (Thousand HKD) | Carrying amount (Thousand HKD) | | :--- | :--- | :--- | :--- | :--- | | Trade payables | 5,250 | — | 5,250 | 5,250 | | Other payables | 2,423 | — | 2,423 | 2,423 | | Bank borrowings | 8,092 | — | 8,092 | 8,068 | | Lease liabilities | 6,346 | 12,003 | 18,349 | 16,510 | [3.4 Fair Value Measurement](index=16&type=section&id=3.4%20Fair%20Value%20Measurement) The Group categorizes financial instrument fair value measurement inputs into three levels and discloses financial assets measured on a recurring basis as of June 30, 2019, primarily investments in Mobvoi preferred shares and a private company's ordinary shares, providing valuation techniques and quantitative information on unobservable inputs - The Group classifies financial instruments into three levels for fair value measurement: Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[85](index=85&type=chunk) Ending Balances of Financial Assets Measured at Fair Value | Category | June 30, 2019 (Thousand HKD) | June 30, 2018 (Thousand HKD) | | :--- | :--- | :--- | | Financial assets measured at fair value through profit or loss | 55,248 | 54,777 | | Financial assets measured at fair value through other comprehensive income | 2,392 | 2,678 | | Total | 57,640 | 57,455 | - The valuation of Mobvoi Inc. preferred shares uses business valuation (discounted cash flow) and equity value allocation (option pricing method), with the primary unobservable input being the weighted average cost of capital (**16.18%**)[92](index=92&type=chunk) [4. Revenue](index=18&type=section&id=4.%20Revenue) The Group's revenue primarily derives from the sale of display products, optical products, and related electronic components to external parties - Revenue refers to income derived from the sale of display products, optical products, and related electronic components to external parties[93](index=93&type=chunk) [5. Segment Information](index=19&type=section&id=5.%20Segment%20Information) The Group has two reportable operating segments, display products and optical products, with performance assessed based on revenue and results, and detailed disclosures on revenue by product, customer geographical location, and major customers, as well as non-current segment assets by asset location - The Group has two reportable operating segments: the display products segment and the optical products segment[97](index=97&type=chunk) - Directors assess the performance of operating segments based on the measurement of revenue and results for each segment[98](index=98&type=chunk) [5.1 Revenue from Major Products](index=19&type=section&id=5.1%20Revenue%20from%20Major%20Products) For the six months ended June 30, 2019, TFT-LCD panels and modules remained the primary revenue source but decreased year-on-year, while the electronic billboard business began to contribute revenue Revenue from Major Products (For the Six Months Ended June 30) | Product Category | 2019 (Thousand HKD) | 2018 (Thousand HKD) | | :--- | :--- | :--- | | TFT-LCD panels and modules | 98,669 | 104,779 | | Electronic billboards | 2,822 | — | | Light guide plates | 1,709 | 5,111 | | Optical products | 1,689 | 4,398 | | Driver ICs | 1,028 | 1,704 | | Polarizers | 488 | 2,389 | | Others | 2,888 | 2,685 | | Total | 109,293 | 121,066 | [5.2 Revenue by Geographical Location of Customers](index=20&type=section&id=5.2%20Revenue%20by%20Geographical%20Location%20of%20Customers) The Group's revenue primarily originates from customers in Hong Kong and Mainland China, with Hong Kong revenue decreasing year-on-year and Taiwan revenue increasing Revenue by Geographical Location of Customers (For the Six Months Ended June 30) | Geographical Location | 2019 (Thousand HKD) | 2018 (Thousand HKD) | | :--- | :--- | :--- | | Hong Kong | 90,911 | 102,304 | | People's Republic of China | 15,508 | 17,568 | | Taiwan | 2,874 | 1,194 | | Total | 109,293 | 121,066 | [5.3 Revenue from Major Customers](index=20&type=section&id=5.3%20Revenue%20from%20Major%20Customers) For the six months ended June 30, 2019, three major customers (Customers A, B, and C) contributed over 10% of total revenue, totaling HKD 43,355 thousand, all recognized within the display products segment Revenue from Major Customers (For the Six Months Ended June 30) | Customer | 2019 (Thousand HKD) | 2018 (Thousand HKD) | | :--- | :--- | :--- | | Customer A | 18,777 | — | | Customer B | 12,511 | 19,655 | | Customer C | 12,067 | — | | Total | 43,355 | 19,655 | - All three major customers mentioned above are included in the display products segment[102](index=102&type=chunk) [5.4 Non-current Segment Assets](index=21&type=section&id=5.4%20Non-current%20Segment%20Assets) The Group's non-current segment assets are primarily located in Hong Kong and Mainland China, with right-of-use assets and intangible assets showing growth in the first half of 2019 Non-current Segment Assets (Excluding Financial Assets and Deferred Tax Assets) | Asset Category | Hong Kong (Thousand HKD) | China (Thousand HKD) | Total (Thousand HKD) | | :--- | :--- | :--- | :--- | | Property, plant and equipment | 431 | 1,780 | 2,211 | | Right-of-use assets | 5,251 | 9,960 | 15,211 | | Intangible assets | 4,200 | 1,122 | 5,322 | [6. Net Other Income](index=21&type=section&id=6.%20Net%20Other%20Income) For the six months ended June 30, 2019, the Group's net other income was HKD 519 thousand, primarily comprising fair value changes of financial assets measured at fair value through profit or loss and net exchange gains Composition of Net Other Income (For the Six Months Ended June 30) | Item | 2019 (Thousand HKD) | 2018 (Thousand HKD) | | :--- | :--- | :--- | | Fair value changes of financial assets measured at fair value through profit or loss | 260 | 508 | | Net exchange gains / (losses) | 139 | (109) | | Others | 120 | 99 | | Total | 519 | 498 | [7. Finance Costs](index=21&type=section&id=7.%20Finance%20Costs) For the six months ended June 30, 2019, the Group's finance costs significantly increased to HKD 714 thousand, mainly due to interest expenses on bank borrowings and the initial recognition of interest expenses on lease liabilities Composition of Finance Costs (For the Six Months Ended June 30) | Item | 2019 (Thousand HKD) | 2018 (Thousand HKD) | | :--- | :--- | :--- | | Interest expense on bank borrowings | 255 | 5 | | Interest expense on lease liabilities | 459 | — | | Factoring fees | — | 3 | | Total | 714 | 8 | - Finance costs significantly increased from **HKD 8 thousand** in the same period of 2018 to **HKD 714 thousand** in 2019[108](index=108&type=chunk) - Interest expense on lease liabilities of **HKD 459 thousand** was initially recognized due to the adoption of Hong Kong Financial Reporting Standard 16[108](index=108&type=chunk) [8. Loss Before Income Tax](index=22&type=section&id=8.%20Loss%20Before%20Income%20Tax) The Group's loss before income tax for the six months ended June 30, 2019, was primarily influenced by factors such as cost of inventories sold, reversal of inventory provisions, depreciation of property, plant and equipment, and depreciation of right-of-use assets Components of Loss Before Income Tax (For the Six Months Ended June 30) | Item | 2019 (Thousand HKD) | 2018 (Thousand HKD) | | :--- | :--- | :--- | | Cost of inventories sold | 120,879 | 122,992 | | Net (reversal of provision) / provision for obsolete inventories | (12,706) | 203 | | Depreciation of property, plant and equipment | 828 | 958 | | Depreciation of right-of-use assets | 2,515 | — | - A reversal of provision for obsolete inventories of **HKD 12,706 thousand** was recorded in the first half of 2019, compared to a provision of **HKD 203 thousand** in the same period last year[110](index=110&type=chunk) - Depreciation of right-of-use assets of **HKD 2,515 thousand** was initially recognized due to the adoption of new accounting standards[110](index=110&type=chunk) [9. Income Tax](index=22&type=section&id=9.%20Income%20Tax) The Group's income tax for the six months ended June 30, 2019, was HKD 26 thousand, primarily consisting of deferred income tax, with no Hong Kong profits tax provision made during the period Income Tax Amount (For the Six Months Ended June 30) | Item | 2019 (Thousand HKD) | 2018 (Thousand HKD) | | :--- | :--- | :--- | | Current income tax | (2) | (2) | | Deferred income tax | 28 | 37 | | Total | 26 | 35 | - No provision for Hong Kong profits tax has been made as the Group had no estimated assessable profits arising in or derived from Hong Kong during the period[111](index=111&type=chunk) [10. Dividends](index=22&type=section&id=10.%20Dividends) The Board of Directors decided not to declare an interim dividend for the six months ended June 30, 2019, consistent with the same period last year - The Board of Directors did not declare an interim dividend for the six months ended June 30, 2019 (for the six months ended June 30, 2018: nil)[112](index=112&type=chunk) [11. Basic and Diluted Loss Per Share](index=23&type=section&id=11.%20Basic%20and%20Diluted%20Loss%20Per%20Share) For the six months ended June 30, 2019, the Company's basic and diluted loss per share was 1.33 HK cents, a decrease from 1.75 HK cents in the same period last year, with basic and diluted losses being consistent due to the absence of potentially dilutive ordinary shares Calculation of Basic and Diluted Loss Per Share (For the Six Months Ended June 30) | Metric | 2019 (Unaudited) | 2018 (Unaudited) | | :--- | :--- | :--- | | Loss attributable to owners of the Company (Thousand HKD) | (19,730) | (25,940) | | Weighted average number of ordinary shares in issue (Thousand shares) | 1,483,687 | 1,483,687 | | Basic and diluted loss per share (HK cents per share) | (1.33) | (1.75) | - As the Group had no potentially dilutive ordinary shares in issue for the six months ended June 30, 2019 and 2018, the basic loss per share was the same as the diluted loss per share[118](index=118&type=chunk) [12. Property, Plant and Equipment](index=23&type=section&id=12.%20Property,%20Plant%20and%20Equipment) As of June 30, 2019, the net book value of the Group's property, plant and equipment decreased, primarily due to depreciation and disposals, though minor additions were made during the period Movements in Net Book Value of Property, Plant and Equipment (For the Six Months Ended June 30) | Item | 2019 (Thousand HKD) | | :--- | :--- | | Opening balance as at January 1, 2019 | 3,031 | | Additions | 50 | | Depreciation | (828) | | Disposals | (49) | | Exchange differences | 7 | | Closing balance as at June 30, 2019 | 2,211 | - The net book value of property, plant and equipment decreased from **HKD 3,031 thousand** as of January 1, 2019, to **HKD 2,211 thousand** as of June 30, 2019[115](index=115&type=chunk) [13. Intangible Assets](index=24&type=section&id=13.%20Intangible%20Assets) As of June 30, 2019, the net book value of the Group's intangible assets significantly increased due to additions, with no changes in the prior year Movements in Net Book Value of Intangible Assets (For the Six Months Ended June 30) | Item | 2019 (Thousand HKD) | | :--- | :--- | | Opening balance as at January 1, 2019 | 3,122 | | Additions | 2,200 | | Amortization | — | | Closing balance as at June 30, 2019 | 5,322 | - The net book value of intangible assets increased from **HKD 3,122 thousand** as of January 1, 2019, to **HKD 5,322 thousand** as of June 30, 2019, primarily due to additions of **HKD 2,200 thousand**[127](index=127&type=chunk)[128](index=128&type=chunk)[130](index=130&type=chunk) [14. Trade and Other Receivables](index=24&type=section&id=14.%20Trade%20and%20Other%20Receivables) As of June 30, 2019, the Group's total trade and other receivables decreased, with reductions in both trade receivables and prepayments, deposits, and other receivables, and the aging analysis of trade receivables showing a decrease in short-term receivables Trade and Other Receivables (June 30, 2019 vs December 31, 2018) | Item | June 30, 2019 (Thousand HKD) | December 31, 2018 (Thousand HKD) | | :--- | :--- | :--- | | Trade receivables | 4,890 | 8,218 | | Bills receivable | 139 | — | | Prepayments, deposits and other receivables | 4,741 | 5,133 | | Total | 9,770 | 13,351 | Aging Analysis of Trade and Bills Receivables (June 30, 2019) | Aging | June 30, 2019 (Thousand HKD) | | :--- | :--- | | 0–30 days | 1,864 | | 31–60 days | 2,105 | | 61–90 days | 347 | | 91–180 days | 359 | | 181 days –12 months | 354 | | Total | 5,029 | - The Group generally grants credit terms of **30 to 90 days**[137](index=137&type=chunk) [15. Trade and Other Payables](index=25&type=section&id=15.%20Trade%20and%20Other%20Payables) As of June 30, 2019, the Group's total trade and other payables significantly decreased, mainly due to reductions in trade payables and customer deposits received, with the aging structure of trade payables showing a decrease in short-term payables Trade and Other Payables (June 30, 2019 vs December 31, 2018) | Item | June 30, 2019 (Thousand HKD) | December 31, 2018 (Thousand HKD) | | :--- | :--- | :--- | | Trade payables | 5,250 | 15,370 | | Customer deposits received | 3,756 | 9,032 | | Accruals and other payables | 2,424 | 3,448 | | Total | 11,430 | 27,850 | Aging Analysis of Trade Payables (June 30, 2019) | Aging | June 30, 2019 (Thousand HKD) | | :--- | :--- | | 0–30 days | 4,990 | | 31–60 days | 251 | | 61–90 days | 9 | | 91–180 days | — | | Total | 5,250 | [16. Bank Borrowings](index=26&type=section&id=16.%20Bank%20Borrowings) As of June 30, 2019, the Group's short-term bank loans decreased, with repayments being the primary activity during the period - As of June 30, 2019, the Group's short-term bank loans amounted to approximately **HKD 8,068 thousand** (December 31, 2018: **HKD 8,979 thousand**), bearing fixed interest rates, denominated in RMB, and repayable within a period not exceeding one year[139](index=139&type=chunk) Analysis of Bank Borrowings Movements (For the Six Months Ended June 30) | Item | 2019 (Thousand HKD) | | :--- | :--- | | Opening balance as at January 1, 2019 | 8,979 | | Repayment of bank loans | (911) | | Closing balance as at June 30, 2019 | 8,068 | [17. Related Party Transactions](index=26&type=section&id=17.%20Related%20Party%20Transactions) The Group disclosed key management personnel compensation, including short-term employee benefits and employee retirement benefits, with the total amount remaining similar to the prior year Key Management Personnel Compensation (For the Six Months Ended June 30) | Item | 2019 (Thousand HKD) | 2018 (Thousand HKD) | | :--- | :--- | :--- | | Short-term employee benefits | 3,843 | 3,816 | | Employee retirement benefits — defined contribution plans | 27 | 27 | | Total | 3,870 | 3,843 | [18. Contribution from Non-controlling Interests](index=26&type=section&id=18.%20Contribution%20from%20Non-controlling%20Interests) In March 2019, the Group entered into agreements with two independent third parties to invest in shares of its subsidiary, Perinnova Limited, with each investing USD 190,000 for a 19% stake, and the Group holding the remaining 62% - The Group entered into subscription and shareholders' agreements with two independent third parties (the "Investors") to invest in shares of Perinnova Limited, a subsidiary of the Group[141](index=141&type=chunk) - The subscription was completed in April 2019, with each investor investing **USD 190,000** (totaling approximately **HKD 2,964,000**) and holding **19%** equity, while the Group holds the remaining **62%** equity in Perinnova[141](index=141&type=chunk) [19. Major Non-cash Transactions](index=26&type=section&id=19.%20Major%20Non-cash%20Transactions) For the six months ended June 30, 2019, the Group's major non-cash transaction was the recognition of right-of-use assets of HKD 2,764,000 due to property lease arrangements - For the six months ended June 30, 2019, the Group entered into property lease arrangements and recognized right-of-use assets of **HKD 2,764,000**[142](index=142&type=chunk) [Management Discussion and Analysis](index=27&type=section&id=Management%20Discussion%20and%20Analysis) This section provides an overview of the Group's business performance, financial results, liquidity, and future prospects, along with employee information [Business Review](index=27&type=section&id=Business%20Review) The Group primarily engages in electronic product display component trading and optical product development and sales, with revenue and loss decreasing due to the shrinking Chinese mobile phone market, but with a narrower loss, and is actively expanding its product portfolio, particularly electronic billboards, and optimizing investments - The Group primarily engages in the trading of electronic product display components, and the development and sale of optical products and related electronic components[144](index=144&type=chunk) - For the six months ended June 30, 2019, the Group's revenue was approximately **HKD 109,293,000**, a year-on-year decrease of approximately **10%**; loss attributable to owners of the Company was approximately **HKD 19,730,000**, a year-on-year decrease in loss of approximately **HKD 6,210,000**[144](index=144&type=chunk) - The continuous contraction of the domestic mobile phone market in China has impacted the Group as an upstream mobile phone component supplier[144](index=144&type=chunk) [Display Products Segment](index=27&type=section&id=Display%20Products%20Segment) To counter the shrinking mobile display panel market, the Group expanded into medium to large-sized display products and launched electronic billboards, which have begun to contribute revenue, and secured investments from Innolux Corporation and Novatek Microelectronics Corporation - The Group expanded its product portfolio by selling medium to large-sized display products, such as display modules for laptops, monitors, and televisions[145](index=145&type=chunk) - Revenue from the display products segment was approximately **HKD 107,604,000**, a decrease of approximately **8%** compared to the same period in 2018, with TFT-LCD panel and module sales decreasing by approximately **6%**[145](index=145&type=chunk) - The Group launched electronic billboard products and secured investments from Innolux Corporation and Novatek Microelectronics Corporation through their subsidiaries in Perinnova, each holding a **19%** equity stake[147](index=147&type=chunk) [Optical Products Segment](index=28&type=section&id=Optical%20Products%20Segment) The optical products segment experienced a revenue decline this period, facing intense market price competition and insufficient development of virtual reality product content, which the Group plans to address through cost control and technological updates - The optical products segment recorded revenue of approximately **HKD 1,689,000**, a decrease of approximately **HKD 2,709,000** compared to the same period in 2018[148](index=148&type=chunk) - Intense market price competition and a lack of breakthrough in virtual reality product content development pose challenges to optical product sales[148](index=148&type=chunk) - The Group will control costs and update technology to capitalize on opportunities when stronger growth emerges in the extended reality and virtual reality markets[148](index=148&type=chunk) [Investments](index=28&type=section&id=Investments) The fair value of the Group's investment in Mobvoi remained stable as Mobvoi continued to launch new products and expand globally, while the investment in a Taiwanese private company saw a slight dilution of equity due to additional share allocation - There was no significant change in the fair value of the Group's investment in Mobvoi, with the shareholding ratio remaining at approximately **1.53%**[149](index=149&type=chunk) - Mobvoi continued to launch new models of smartwatches and AI watches for children, and expanded its market through collaborations with China Mobile, China Unicom, and Verizon[149](index=149&type=chunk) - The Group's equity investment in a Taiwanese private company engaged in separator film business was slightly diluted from approximately **3.33%** to approximately **3.03%**[149](index=149&type=chunk) [Prospects](index=29&type=section&id=Prospects) Looking ahead to the second half of 2019, the Group anticipates no significant changes in the Chinese mobile phone display panel market trend and will continue to focus on display products as its core business, adopting flexible strategies to diversify products, expand its customer base, and introduce new suppliers to explore new business opportunities - The Group anticipates no significant changes in the trend of the Chinese mobile phone display panel market in the second half of 2019[151](index=151&type=chunk) - The display products segment will continue to be the Group's core business, and flexible strategies will be adopted to broaden the revenue base and enrich the product portfolio, including electronic billboards[151](index=151&type=chunk) - The Group will focus on promoting product diversification, expanding its customer base from different regions, introducing new suppliers, and maintaining flexible business strategies to explore new business opportunities[151](index=151&type=chunk) [Financial Review](index=29&type=section&id=Financial%20Review) For the six months ended June 30, 2019, the Group's revenue decreased, but gross loss narrowed due to reduced inventory provisions, distribution and selling expenses and R&D expenses both decreased, while finance costs significantly increased due to the adoption of new accounting standards, ultimately leading to a reduction in loss attributable to owners of the Company [Revenue](index=29&type=section&id=Revenue) The Group's total revenue decreased by approximately 10% year-on-year, primarily due to reduced sales of TFT-LCD panels and modules, light guide plates, driver ICs, polarizers, and optical products, partially offset by increased electronic billboard revenue - For the six months ended June 30, 2019, the Group's total revenue was approximately **HKD 109,293,000**, a decrease of approximately **10%** compared to the same period in 2018[152](index=152&type=chunk) - The decrease in revenue was primarily due to reduced sales of TFT-LCD panels and modules, light guide plates, driver ICs, polarizers, and optical products, while revenue from electronic billboards increased[152](index=152&type=chunk) [Gross Loss](index=29&type=section&id=Gross%20Loss) The Group's gross loss for the six months ended June 30, 2019, was HKD 1,417,000, a significant reduction from HKD 5,324,000 in the prior year, mainly attributable to a decrease in inventory provisions - A gross loss of approximately **HKD 1,417,000** was recorded for the six months ended June 30, 2019 (same period in 2018: **HKD 5,324,000**)[153](index=153&type=chunk) - The reduction in gross loss was primarily due to a decrease in inventory provisions during the period[153](index=153&type=chunk) [Expenses](index=29&type=section&id=Expenses) The Group's distribution and selling expenses and research and development expenses both decreased, while general and administrative expenses remained similar to the prior year - Distribution and selling expenses were approximately **HKD 4,148,000**, a decrease of approximately **31%** compared to the same period in 2018, mainly due to reduced warehousing costs[154](index=154&type=chunk) - General and administrative expenses were approximately **HKD 13,428,000**, similar to the same period in 2018[154](index=154&type=chunk) - Research and development expenses were approximately **HKD 961,000**, a decrease of approximately **48%** compared to the same period in 2018, mainly due to reduced staff costs and development expenses[154](index=154&type=chunk) [Finance Costs](index=30&type=section&id=Finance%20Costs) The Group's finance costs primarily include interest expenses on bank loans and finance costs on lease liabilities recognized due to the adoption of HKFRS 16, leading to a significant increase in total finance costs - Finance costs for the period primarily included interest expense on bank loans of approximately **HKD 255,000** (same period in 2018: **HKD 5,000**)[156](index=156&type=chunk) - Finance costs on lease liabilities of approximately **HKD 459,000** were recognized in accordance with Hong Kong Financial Reporting Standard 16 (same period in 2018: nil)[156](index=156&type=chunk) [Loss for the Period Attributable to Owners of the Company](index=30&type=section&id=Loss%20for%20the%20Period%20Attributable%20to%20Owners%20of%20the%20Company) For the six months ended June 30, 2019, the loss attributable to owners of the Company was approximately HKD 19,730,000, a decrease of approximately HKD 6,210,000 compared to the prior year, mainly due to reduced gross loss and operating expenses - Loss attributable to owners of the Company was approximately **HKD 19,730,000**, a decrease of approximately **HKD 6,210,000** compared to the same period in 2018[157](index=157&type=chunk) - The reduction in loss was primarily due to a decrease in gross loss and operating expenses during the period[157](index=157&type=chunk) [Liquidity and Financial Resources](index=30&type=section&id=Liquidity%20and%20Financial%20Resources) The Group primarily obtains funding through operating cash and bank borrowings, maintaining a robust liquidity position, with a stable gearing ratio and no significant contingent liabilities or capital commitments, and continuously monitors foreign exchange risks primarily denominated in USD, HKD, RMB, and NTD - The Group's primary sources of funding are cash generated from operations and bank borrowings[158](index=158&type=chunk) Total Bank Deposits, Bank Balances and Cash (June 30, 2019 vs December 31, 2018) | Item | June 30, 2019 (Thousand HKD) | December 31, 2018 (Thousand HKD) | | :--- | :--- | :--- | | Total bank deposits, bank balances and cash | 83,548 | 81,488 | | Less: Restricted bank deposits included in current assets | (9,243) | (10,335) | | Cash and cash equivalents | 74,305 | 71,153 | - The Group has adopted a prudent financial management approach for its treasury policy, maintaining a robust liquidity position throughout the period[171](index=171&type=chunk) [Gearing Ratio](index=31&type=section&id=Gearing%20Ratio) As of June 30, 2019, the Group's gearing ratio was approximately 4.3%, remaining stable compared to 4.4% as of December 31, 2018 - As of June 30, 2019, the Group's gearing ratio (calculated as total interest-bearing bank borrowings divided by total equity) was approximately **4.3%** (December 31, 2018: **4.4%**)[169](index=169&type=chunk) [Pledged Assets](index=32&type=section&id=Pledged%20Assets) As of June 30, 2019, the Group had pledged bank deposits of approximately HKD 9,243,000 to banks to secure bank facilities granted to the Group - As of June 30, 2019, the Group had pledged bank deposits of approximately **HKD 9,243,000** (December 31, 2018: **HKD 10,335,000**) to banks to secure bank facilities granted to the Group[174](index=174&type=chunk) [Foreign Exchange](index=32&type=section&id=Foreign%20Exchange) The Group's business transactions, assets, and liabilities are primarily denominated in USD, HKD, RMB, and NTD, and while there is currently no foreign currency hedging policy, the Board of Directors continuously monitors related foreign currency risks - The Group's business transactions, assets, and liabilities are primarily denominated in USD, HKD, RMB, and NTD[175](index=175&type=chunk) - Currently, the Group does not have a foreign currency hedging policy, but the Board of Directors continuously monitors related foreign currency risks and considers hedging when necessary[175](index=175&type=chunk) [Employee Information](index=32&type=section&id=Employee%20Information) As of June 30, 2019, the Group's total number of employees increased to 75, with total staff costs decreasing, and competitive remuneration packages and benefits provided - As of June 30, 2019, the Group had a total of **75 employees** (December 31, 2018: **72 employees**)[180](index=180&type=chunk) - Total staff costs (including directors' emoluments) for the six months ended June 30, 2019, were approximately **HKD 11,033,000** (same period in 2018: **HKD 12,750,000**)[180](index=180&type=chunk) - The Group provides employees with competitive remuneration packages and various employee benefits consistent with industry practice, including medical benefits, social security, MPF, bonuses, and share option schemes[180](index=180&type=chunk) [Other Information](index=33&type=section&id=Other%20Information) This section covers information regarding directors' and substantial shareholders' interests, share option schemes, securities transactions, compliance with conduct codes, non-competition undertakings, competing interests, corporate governance, and audit committee details [Directors' and Chief Executive's Interests and/or Short Positions in the Shares, Underlying Shares and Debentures of the Company or any Associated Corporation](index=33&type=section&id=Directors'%20and%20Chief%20Executive's%20Interests%20and%2For%20Short%20Positions%20in%20the%20Shares,%20Underlying%20Shares%20and%20Debentures%20of%20the%20Company%20or%20any%20Associated%20Corporation) As of June 30, 2019, Mr. Cheng Wai Tak directly and indirectly held shares in the Company, including 62.24% through Winful Enterprises Limited and beneficially owned 0.15% of the shares Mr. Cheng Wai Tak's Long Positions in the Company's Shares (June 30, 2019) | Name of Director | Capacity | Number of Shares Held | Percentage | | :--- | :--- | :--- | :--- | | Mr. Cheng Wai Tak | Interest in controlled corporation | 923,427,151 | 62.24% | | | Beneficial owner | 2,220,000 | 0.15% | - Mr. Cheng Wai Tak is deemed to be interested in **923,427,151 shares** through Winful Enterprises Limited, which is wholly and beneficially owned by him[183](index=183&type=chunk) [Substantial Shareholders' Interests and/or Short Positions in the Shares and Underlying Shares of the Company](index=34&type=section&id=Substantial%20Shareholders'%20Interests%20and%2For%20Short%20Positions%20in%20the%20Shares%20and%20Underlying%20Shares%20of%20the%20Company) As of June 30, 2019, Winful Enterprises, as a substantial shareholder, directly and beneficially owned 62.24% of the Company's issued share capital, with Mr. Cheng Wai Tak deemed to be interested in the shares held by it Substantial Shareholders' Long Positions in the Company's Shares (June 30, 2019) | Name | Nature of Interest | Number of Shares Held | Percentage | | :--- | :--- | :--- | :--- | | Winful Enterprises | Directly and beneficially owned | 923,427,151 | 62.24% | - Pursuant to the Securities and Futures Ordinance, Mr. Cheng Wai Tak is deemed to be interested in the **923,427,151 shares** held by Winful Enterprises[190](index=190&type=chunk) [Share Option Scheme](index=34&type=section&id=Share%20Option%20Scheme) The Company's share option scheme was approved and adopted on January 20, 2014, but no share options have been granted since its adoption date - The Company's share option scheme was approved and adopted on January 20, 2014[191](index=191&type=chunk) - No share options have been granted under the share option scheme since its adoption date[192](index=192&type=chunk) [Directors' Right to Acquire Shares or Debentures](index=34&type=section&id=Directors'%20Right%20to%20Acquire%20Shares%20or%20Debentures) For the six months ended June 30, 2019, neither the Company, its parent company, nor any of its subsidiaries or fellow subsidiaries entered into any arrangements enabling directors to benefit from acquiring shares or debentures of the Company or any other body corporate - At no time during the six months ended June 30, 2019, was the Company, its parent company, or any of its subsidiaries or fellow subsidiaries a party to any arrangement to enable the directors to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate[193](index=193&type=chunk) [Purchase, Sale or Redemption of Securities](index=35&type=section&id=Purchase,%20Sale%20or%20Redemption%20of%20Securities) For the six months ended June 30, 2019, the Company did not redeem any of its shares, nor did the Company or any of its subsidiaries purchase or sell any of the Company's shares - During the six months ended June 30, 2019, the Company did not redeem any of its shares, nor did the Company or any of its subsidiaries purchase or sell any of the Company's shares[195](index=195&type=chunk) [Compliance with the Code of Conduct for Securities Transactions by Directors](index=35&type=section&id=Compliance%20with%20the%20Code%20of%20Conduct%20for%20Securities%20Transactions%20by%20Directors) The Company has adopted a code of conduct for directors' securities transactions that is no less stringent than the GEM Listing Rules, and all directors confirmed compliance with this code during the reporting period - The Company has adopted a code of conduct regarding directors' securities transactions, the terms of which are no less stringent than the required standard of dealings set out in Rules 5.48 to 5.67 of the GEM Listing Rules[196](index=196&type=chunk) - All directors confirmed compliance with the required standard of dealings and the code of conduct for securities transactions by directors adopted by the Company for the six months ended June 30, 2019[196](index=196&type=chunk) [Non-Competition Undertaking](index=35&type=section&id=Non-Competition%20Undertaking) Mr. Cheng Wai Tak and Winful Enterprises, the Company's controlling shareholders, have entered into non-competition undertakings, committing not to directly or indirectly engage in activities competing with the Group's existing business under specific conditions, and not to interfere with the Group's restricted business - Mr. Cheng Wai Tak and Winful Enterprises, the controlling shareholders of the Company, have entered into deeds of non-competition undertaking[197](index=197&type=chunk) - Each covenantor undertakes not to directly or indirectly engage in, participate in, or hold any business that competes or may compete with the Group's restricted business under specific conditions[197](index=197&type=chunk) - Undertaking not to take any direct or indirect action that constitutes interference with or disruption of the restricted business, including but not limited to soliciting the Group's customers, suppliers, or employees[197](index=197&type=chunk) [Competing Interests](index=36&type=section&id=Competing%20Interests) For the six months ended June 30, 2019, neither the directors nor the Company's controlling shareholders held any business or interest that competed or might compete with the Group's business, and there were no other conflicts of interest - During the six months ended June 30, 2019, none of the directors or controlling shareholders of the Company held any business or interest that competed or might compete with the Group's business[200](index=200&type=chunk) - There were no, nor will there be, any other conflicts of interest with the Group[200](index=200&type=chunk) [Corporate Governance](index=36&type=section&id=Corporate%20Governance) The Company has complied with all code provisions of the Corporate Governance Code, with a deviation where the Chairman and Chief Executive Officer roles are held by the same person (Mr. Cheng Wai Tak), which the Board believes provides strong and unified leadership, but the long-term goal is to separate these positions - The Company has complied with all code provisions of the Corporate Governance Code, with a deviation where the roles of Chairman and Chief Executive Officer are held by the same person (Mr. Cheng Wai Tak)[201](index=201&type=chunk) - The Board believes that Mr. Cheng Wai Tak serving concurrently as Chairman and Chief Executive Officer provides strong and unified leadership for the Company, making business decisions and strategies more effective and efficient in planning and implementation[201](index=201&type=chunk) - The Company's long-term goal is for the roles of Chairman and Chief Executive Officer to be held by different individuals, once suitable candidates are identified[201](index=201&type=chunk) [Audit Committee](index=37&type=section&id=Audit%20Committee) The Company has established an Audit Committee, comprising three independent non-executive directors, with Mr. Wong Yick Chung as Chairman, and it has reviewed this report - The Audit Committee comprises three independent non-executive directors, with Mr. Wong Yick Chung, who possesses appropriate professional background in accounting and financial management, serving as Chairman[204](index=204&type=chunk) - The Audit Committee has reviewed this report and provided its advice and responses thereto[204](index=204&type=chunk) [Disclosure of Directors' Information](index=36&type=section&id=Disclosure%20of%20Directors'%20Information) Effective May 24, 2019, Mr. Wong Yick Chung was appointed as an independent non-executive director of Xinjiang Xinxin Mining Industry Co., Ltd - Effective May 24, 2019, Mr. Wong Yick Chung was appointed as an independent non-executive director of Xinjiang Xinxin Mining Industry Co., Ltd. (Stock Code: 3833)[202](index=202&type=chunk)