Revenue and Market Performance - For the nine months ended September 30, 2019, the Group experienced a decrease in revenue from sales of male fertility IVD reagent products, attributed to a decline in birth rates and increased price sensitivity among customers [17]. - The Group anticipates continued support from the PRC Government for the biomedical industry, with growth in the male fertility IVD reagent market driven by rising infertility rates and the implementation of a universal two-child policy [17]. - The Group's major product line is male fertility IVD reagents, which are facing challenges due to market conditions [17]. - Revenue from male fertility IVD reagents decreased to RMB 14,517,000 for the nine months ended September 30, 2019, down 6.4% from RMB 15,508,000 in 2018 [144]. - Revenue from sales of biological reagents for the nine months ended September 30, 2019, was RMB 16,676,000, accounting for 90.5% of total revenue, while sales of auxiliary reproductive supplies and equipment contributed RMB 1,736,000 [144]. - The Group's total revenue for the nine months ended September 30, 2019, was RMB 18,412,000, a decrease of 12.8% compared to RMB 21,049,000 for the same period in 2018 [144]. Financial Performance - The Group's revenue decreased by approximately RMB2.6 million, or 12.4%, to approximately RMB18.4 million for the nine months ended 30 September 2019 compared to approximately RMB21.0 million for the same period in 2018 [24]. - The Group recorded a gross profit of approximately RMB13.2 million for the nine months ended 30 September 2019, a decrease of approximately RMB2.8 million, or approximately 17.5%, from approximately RMB16.0 million for the same period in 2018 [31]. - The gross profit margin remained relatively stable at approximately 71.6% for the nine months ended 30 September 2019, compared to approximately 75.8% for the same period in 2018 [32]. - Profit attributable to the owners of the company decreased to approximately RMB1.7 million for the nine months ended 30 September 2019, compared to approximately RMB4.0 million for the same period in 2018 [47]. - Basic earnings per share for the period was RMB0.43 cents, down from RMB1.32 cents for the nine months ended 30 September 2018 [47]. - The net profit attributable to the owners of the Company for the nine months ended September 30, 2019, was RMB 1,721,000, down 56.4% from RMB 3,951,000 in the previous year [122]. Expenses and Cost Management - Selling and distribution expenses increased from approximately RMB2.6 million to approximately RMB4.6 million, representing a growth of approximately RMB2.0 million or 76.9% during the period [41]. - Administrative expenses increased from approximately RMB3.4 million to approximately RMB6.4 million, representing an increase of approximately RMB3.0 million or 88.2% during the period [42]. - Research and development expenses increased from approximately RMB1.1 million for the nine months ended 30 September 2018 to approximately RMB1.2 million for the nine months ended 30 September 2019, representing an increase of approximately RMB66,000 or 6.0% [46]. - Total staff costs for the nine months ended September 30, 2019, were RMB 6,539,000, an increase of 37% compared to RMB 4,772,000 in the same period of 2018 [162]. Strategic Initiatives - The Group's strategy includes expanding the product portfolio, enhancing research and development capabilities, and consolidating the sales and distribution network [18]. - The Group aims to improve product competitiveness through increased focus on research and development and market promotion efforts [18]. - The Group is committed to developing its auxiliary reproductive supply business as part of its growth strategy [18]. - The Group plans to develop and sell auxiliary reproductive products in the PRC and overseas markets, collaborating with a Canadian manufacturer to enhance male fertility functions [23]. Corporate Governance and Compliance - The Company has adopted and complied with the Corporate Governance Code during the relevant period [110]. - The Board conducted reviews of the internal control system to ensure effectiveness and adequacy [111]. - All Directors confirmed full compliance with the Required Standard for securities transactions during the relevant period [112]. - The Company appointed Ever-Long Securities Company Limited as the new compliance adviser effective from 31 May 2019 [102]. Shareholder Information - As of September 30, 2019, Mr. Zhang Shuguang held 240,000,000 shares, representing 60.0% of the total shareholding [83]. - The total number of shares in issue as of September 30, 2019, was 400,000,000 [85]. - The company’s shares are controlled by Mr. Zhang Shuguang and Mr. Chang Yim Yang, who hold equity interests indirectly through their respective companies [126]. Other Financial Information - The company recognized a gain on the disposal of property, plant, and equipment of RMB 10,000 for the nine months ended September 30, 2019, compared to no gains in the same period of 2018 [155]. - The total impairment losses reversed for the nine months ended September 30, 2019, were RMB 534,000, compared to RMB 129,000 in the same period of 2018, indicating a substantial increase of 314% [157]. - The company incurred research and development expenses of RMB 1,157,000 for the nine months ended September 30, 2019 [122].

Revenue and Profitability - For the six months ended June 30, 2019, the Group experienced a decrease in revenue from sales of male fertility IVD reagent products, which was the major product, attributed to a decrease in birth rate and increased price sensitivity among customers[17]. - The Group's revenue decreased by approximately RMB1.7 million or 12.9%, to approximately RMB11.6 million for the six months ended 30 June 2019, compared to approximately RMB13.4 million for the same period in 2018[21]. - Revenue from male fertility IVD reagents, which accounted for approximately 82.7% of total revenue, decreased by approximately RMB1.2 million or 11.4% to approximately RMB9.6 million for the six months ended 30 June 2019[21]. - The Group recorded a profit of approximately RMB 223,000 for the six months ended June 30, 2019, a decrease from approximately RMB 2.0 million for the same period in 2018[41]. - Excluding non-recurring listing expenses, the Group recorded a profit before tax of approximately RMB 670,000 for the six months ended 30 June 2019, down from approximately RMB 6.0 million for the same period in 2018[42]. - Basic earnings per share for the six months ended June 30, 2019, was RMB 0.06, down from RMB 0.68 in the same period of 2018[150]. Expenses and Financial Performance - Gross profit decreased by approximately RMB1.6 million or 16.0% to approximately RMB8.5 million for the six months ended 30 June 2019, with a gross profit margin of approximately 72.6%[26][27]. - Selling and distribution expenses increased by approximately RMB1.3 million or 82.6% to approximately RMB2.9 million for the six months ended 30 June 2019, primarily due to increased staff costs and marketing expenses[35]. - Administrative expenses rose by approximately RMB2.3 million or 105.8% to approximately RMB4.5 million for the six months ended 30 June 2019, driven by higher audit fees and staff costs[36]. - Research and development expenses increased from approximately RMB 699,000 for the six months ended 30 June 2018 to approximately RMB 832,000 for the six months ended 30 June 2019, representing an increase of approximately RMB 133,000 or 19.0%[40]. - The company incurred net cash used in operating activities of RMB 7,767,000 for the six months ended June 30, 2019, compared to a net cash inflow of RMB 1,297,000 in the same period of 2018[156]. Strategic Focus and Development - The development strategy includes expanding the product portfolio, improving existing offerings, strengthening R&D capabilities, and consolidating the sales and distribution network[18]. - The Group's strategic focus includes enhancing R&D capabilities, expanding the product portfolio, and increasing market promotion efforts to capture market opportunities[19]. - The Group has continued the final stage of clinical trials for in vitro diagnostic reagents for sperm nuclear DNA integrity, with three independent hospitals involved[54]. - The Group manufactured a prototype of semen biochemical immunoassay equipment, which is currently undergoing debugging[54]. - Three newly developed products are undergoing final clinical evaluation and trials, with plans to proceed with registration within the year[66]. Government Support and Market Conditions - The Group anticipates continued support from the PRC Government for the biomedical industry, driven by rising infertility rates, acceptance of assisted reproductive treatments, and favorable government policies[17]. - The decrease in sales of auxiliary reproductive supplies and equipment was approximately RMB241,000, primarily due to reduced demand for automatic enzyme-linked immunologic workstations[22]. Corporate Governance and Compliance - The Board is committed to high corporate governance standards, which are essential for safeguarding shareholder interests and enhancing corporate value[135]. - The Company has complied with the Corporate Governance Code during the relevant period, ensuring transparency and accountability[132]. - The Audit Committee consists of three independent non-executive Directors, ensuring oversight of financial reporting and internal controls[141]. - The Company has made adequate disclosures in accordance with GEM Listing Rules and other legal requirements[146]. Financial Position and Assets - As of June 30, 2019, the Group's total cash and bank balances were approximately RMB 46.1 million, a decrease from approximately RMB 54.8 million as of December 31, 2018, primarily due to daily operating expenses[63]. - Total assets less current liabilities as of June 30, 2019, amounted to RMB 71,902,000, slightly up from RMB 71,451,000 as of December 31, 2018[152]. - Non-current assets as of June 30, 2019, totaled RMB 14,448,000, an increase from RMB 13,667,000 as of December 31, 2018[151]. - The Group reported a net current assets value of RMB 57,454,000 as of June 30, 2019, slightly down from RMB 57,784,000 as of December 31, 2018[151]. Shareholder Information - The interests of Mr. Zhang Shuguang, a Director, include 240,000,000 shares, representing 60.0% of the total shares issued as of June 30, 2019[107]. - The total number of shares in issue as of June 30, 2019, was 400,000,000[107]. - As of June 30, 2019, the substantial shareholders include Crystal Grant and Ever Charming, each holding 240,000,000 shares, representing 60.0% of the total shareholding[116]. - Gallizul Global Investments and Huang Yan each hold 36,000,000 shares, accounting for 9.0% of the total shareholding[116]. Accounting Policies and Financial Reporting - The financial statements have been prepared in accordance with applicable Hong Kong Financial Reporting Standards (HKFRSs) and the disclosure requirements of the Hong Kong Companies Ordinance[166]. - The unaudited condensed consolidated financial statements are presented in Renminbi (RMB), which is the functional currency of the Company and its subsidiaries[160]. - The Group has not early adopted any new and revised HKFRSs that have been issued but not yet effective in the current accounting period[169]. - The financial statements have been prepared under the historical cost basis[174]. - The Group has chosen not to separate non-lease components from lease components, treating them as a single lease component[191].

Market Conditions and Challenges - For the three months ended March 31, 2019, the Group faced challenges including a decrease in the birth rate in China, increased price sensitivity among customers, and the impact of a vaccine incident from late 2018 [19]. - The overall market conditions indicate a potential for recovery and growth in the biomedical sector, despite current challenges [19]. - The increase in per capita income and healthcare expenditures in China is expected to positively impact the demand for the Group's products [19]. Growth Strategy - The growth of the PRC male fertility IVD reagent market is expected to be driven by rising infertility rates, acceptance of assisted reproductive treatments, and favorable government policies, including the implementation of a universal two-child policy [19]. - The Group's development strategy includes expanding the product portfolio, strengthening R&D capabilities, and consolidating the sales and distribution network [20]. - The Group aims to enhance product competitiveness through continuous investment in research and development and increased market promotion efforts [20]. - The Group is focused on developing its auxiliary reproductive supply business as part of its growth strategy [20]. - The Group plans to cultivate and recruit talented employees to support its growth strategies [20]. Financial Performance - The Group's revenue decreased by approximately RMB913,000, or approximately 15.3%, to approximately RMB5.1 million for the three months ended 31 March 2019 [23]. - Revenue from male fertility IVD reagents, which accounted for approximately 84.4% of total revenue, decreased by approximately 10.2% to approximately RMB4.3 million [24]. - Gross profit for the period was approximately RMB3.8 million, representing a slight decrease of approximately RMB326,000 or approximately 8.0% from the previous year [28]. - The gross profit margin improved from approximately 68.2% to approximately 74.0% due to increased production efficiency and reduced headcount [29]. - Selling and distribution expenses increased by approximately 67.0% to approximately RMB1.4 million, primarily due to higher staff costs and increased marketing expenses [36]. - Administrative expenses rose by approximately 97.0% to approximately RMB2.1 million, driven by increased staff costs and one-off bonuses [37]. - The Group recorded a loss of approximately RMB148,000 for the period, an improvement from a loss of approximately RMB230,000 in the previous year [42]. - Excluding non-recurring listing expenses, the Group recorded a profit before tax of approximately RMB35,000, down from approximately RMB1.9 million in the previous year [43]. Research and Development - Research and development expenses remained stable at approximately RMB310,000 for the period [41]. - Research and development expenses remained relatively stable, approximately RMB 304,000 for the three months ended March 31, 2018, and RMB 310,000 for the three months ended March 31, 2019 [45]. Corporate Governance - The company has appointed RHB Capital as its compliance adviser, which has declared its independence as per GEM Listing Rules [3]. - The audit committee has been established in compliance with GEM Listing Rules and consists of three independent non-executive Directors [4]. - The company has adopted a code of conduct for securities transactions by Directors, confirming full compliance during the relevant period [5]. - The company has applied the principles and code provisions of the Corporate Governance Code since its listing date [6]. - The board will continue to monitor and review the company's corporate governance practices to ensure compliance with the Corporate Governance Code [7]. - There were no incidents of non-compliance with the required standards by relevant employees noted by the company [8]. - The company has conducted reviews of its internal control system to ensure effectiveness and adequacy [9]. - The board believes that good corporate governance standards are essential for safeguarding shareholder interests and enhancing corporate value [10]. Shareholding and Capital Structure - As of March 31, 2019, the company's issued share capital was HK$4,000,000, with 400,000,000 shares issued at HK$0.01 each [50]. - Mr. Zhang Shuguang holds 240,000,000 ordinary shares, representing 60.0% of the total shareholding [73]. - The total number of shares in issue as of March 31, 2019, is 400,000,000 [75]. - Crystal Grant Limited and Ever Charming Inc. are both deemed to have an aggregate interest of 240,000,000 shares, equating to 60.0% [83]. - Gallizul Global Investments Incorporated holds 36,000,000 shares, representing 9.0% of the total shareholding [83]. - As of March 31, 2019, no directors or chief executives had any interests or short positions in the shares or debentures of the company [78]. - The directors confirm that none of the controlling shareholders or directors have competing business interests [86]. - All interests stated in the reports are long positions [77]. - The beneficial ownership of Crystal Grant Limited is 240,000,000 shares, which is 60.0% of the total [83]. - Huang Yan has interests in 36,000,000 shares through controlled corporations, also representing 9.0% [83]. - As of March 31, 2019, the company has a total of 240,000,000 shares deemed to be interested by Mr. Zhang Shuguang and Mr. Chang Yim Yang, consisting of 144,576,000 shares held by Crystal Grant and 95,424,000 shares held by Ever Charming [1]. Taxation - The effective corporate income tax rate applicable to the group's subsidiaries is 15% [47]. - The tax rate for entities established in the PRC is 25%, but Shenzhen Huakang is entitled to a reduced tax rate of 15% as a "New and High Technology Enterprise" [148]. - The latest approval for Shenzhen Huakang to enjoy the 15% tax benefit was obtained in October 2018, valid for three years until 31 December 2020 [148].

Huakang Biomedical Holdings Company Limited 華康生物醫學控股有限公 司 (incorporated in the Cayman Islands with limited liability) (於開曼群島註冊成立之有限公司) Stock Code 股份代號: 8622 ANNUAL REPORT 年 報 20 18 Huakang Biomedical Holdings Company Limited 華康生物醫學控股有限公 司 ANNUAL REPORT 2018 年報 Huakang Biomedical Holdings Company Limited 華康生物醫學控股有限公 This Report, for which the Directors (the "Directors") of Huakang Biomedical Holdings Company Limited (the "Company", and together with its subsidiaries, the "Group", "we" or "our") collectively ...