麦迪森控股(08057) - 2019 Q3 - 季度财报

Company Information This section provides essential details about Madison Holdings Group Limited, including its board, committees, and key corporate contacts Company Basic Information This section lists Madison Holdings Group Limited's board members, committee compositions, company secretary, compliance officer, authorized representatives, auditors, registered office, principal place of business in Hong Kong, principal bankers, Cayman Islands principal share registrar, Hong Kong share registrar, and stock code - The company's registered office is in the Cayman Islands, with its principal place of business in Hong Kong located at King's Road, North Point[16][17] - The company's stock code is 08057[23] Directors and Committees The company's Board of Directors comprises executive and independent non-executive directors, supported by Remuneration, Audit, and Nomination and Corporate Governance Committees to ensure robust corporate governance - Executive Directors include Mr. Ding Pengyun (Chairman), Mr. Zhu Qin (Vice Chairman), Mr. Zhang Zhiqiang (Chief Executive Officer, resigned), Mr. Zhou Bingrong (Chief Executive Officer, appointed), and Ms. Guo Qun[14] - Independent Non-executive Directors include Ms. Fan Wei, Mr. Chu Kin Hong, and Mr. Yip Cho Yin, JP[14] - The Audit Committee Chairman is Mr. Chu Kin Hong, the Remuneration Committee Chairman is Ms. Fan Wei, and the Nomination and Corporate Governance Committee Chairman is Mr. Ding Pengyun[14] Financial Highlights This section provides a concise overview of the Group's key financial performance indicators for the period Overview of Financial Performance For the nine months ended December 31, 2018, the Group's revenue decreased by 12.9% to approximately HK$122 million, loss attributable to owners significantly increased to approximately HK$177.3 million, and no dividend was recommended Financial Summary for the Nine Months Ended December 31, 2018 | Metric | Nine Months Ended December 31, 2018 (HK$'000) | Nine Months Ended December 31, 2017 (Restated, HK$'000) | Change Rate | | :--- | :--- | :--- | :--- | | Revenue | 122,000 | 140,100 | -12.9% | | Loss attributable to owners of the Company | 177,300 | 144,000 | +23.1% | | Dividend | Not recommended | Nil | - | Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income This section presents the Group's financial performance, including revenue, expenses, and comprehensive income, for the reporting period Analysis of Profit or Loss and Comprehensive Income For the nine months ended December 31, 2018, the Group reported revenue of HK$122 million, gross profit of HK$51.403 million, a loss for the period of HK$203.8 million, loss attributable to owners of HK$177.3 million, and basic and diluted loss per share of 4.24 HK cents Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income (for the nine months ended December 31) | Metric | 2018 (HK$'000) | 2017 (Restated, HK$'000) | | :--- | :--- | :--- | | Revenue | 122,003 | 140,116 | | Cost of sales | (70,600) | (95,431) | | Gross profit | 51,403 | 44,685 | | Other income | 5,142 | 1,507 | | Selling and distribution expenses | (12,328) | (12,535) | | Net (loss) gain on trading | (34,206) | 2,184 | | Administrative and other operating expenses | (169,879) | (41,658) | | Share of results of associates | (72) | – | | Fair value change of derivative financial instruments | (1,119) | – | | Fair value change of cryptocurrencies | (6,413) | – | | Fair value change of exchangeable bonds | (11,727) | (151,064) | | Impairment loss on goodwill | (3,492) | – | | Deemed loss on disposal of an associate | (69) | – | | Finance costs | (21,230) | (6,009) | | Loss before tax | (203,990) | (162,890) | | Income tax credit | 231 | 335 | | Loss for the period | (203,759) | (162,555) | | Loss for the period attributable to owners of the Company | (177,281) | (144,049) | | Loss for the period attributable to non-controlling interests | (26,478) | (18,506) | | Loss per share (HK cents) Basic and diluted | (4.24) | (3.60) | Condensed Consolidated Statement of Changes in Equity This section outlines the changes in the Group's equity components, including share capital, reserves, and non-controlling interests, for the reporting period Analysis of Changes in Equity The condensed consolidated statement of changes in equity illustrates movements for the nine months ended December 31, 2018, encompassing opening balances, total comprehensive expenses for the period, share-based payment transactions, and other equity adjustments - The statement of changes in equity presents the opening and closing balances of share capital, reserves, and non-controlling interests, along with movements during the period due to losses, share-based payment expenses, and other factors[32] - The origins of other reserves, share capital reserves, and merger reserves are explained in the notes, involving reorganization, equity dilution, and business combinations under common control[35] Notes to the Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements 1. General Information The company, incorporated in the Cayman Islands and listed on GEM, operates as an investment holding company primarily engaged in alcoholic beverage sales, financial services, blockchain services, and cryptocurrency mining, with HKD as its functional currency - The company was incorporated in the Cayman Islands on April 15, 2015, and listed on GEM of the Stock Exchange on October 8, 2015[38] - Principal activities include alcoholic beverage sales, financial services, blockchain services, cryptocurrency mining, and alcoholic beverage auctions[38] - The Group adopted HKD as its presentation currency[38] 2. Basis of Preparation These condensed consolidated financial statements are prepared in accordance with GEM Listing Rules, adopting merger accounting for business combinations under common control, with restatement to reflect financial information from the date of first control - The financial statements are prepared in accordance with the applicable disclosure provisions of Chapter 18 of the GEM Listing Rules of the Stock Exchange[39] - The Group adopted merger accounting for business combinations under common control, restating the financial information of the combined entities retrospectively from the date of first control[41][43] 3. Significant Accounting Policies These condensed consolidated financial statements are prepared on a historical cost basis, incorporating all new and revised Hong Kong Financial Reporting Standards effective on or after April 1, 2018, with no anticipated material impact on the Group's results or financial position - The financial statements are prepared on a historical cost basis, with accounting policies consistent with the interim condensed consolidated financial statements for the six months ended September 30, 2018[43][44] - The Group has adopted all new and revised Hong Kong Financial Reporting Standards effective on or after April 1, 2018, with no material impact expected on its results or financial position[47] 4. Revenue and Segment Information The Group's revenue primarily stems from alcoholic beverage sales, auctions, financial services, and blockchain services, totaling HK$122 million for the nine months ended December 31, 2018, with Hong Kong being the largest contributor and increased revenue from Europe and China - The Group's revenue sources include alcoholic beverage sales, alcoholic beverage auctions, financial services, and blockchain services[50] Segment Revenue (for the nine months ended December 31) | Segment | 2018 (HK$'000) | 2017 (Restated, HK$'000) | | :--- | :--- | :--- | | Alcoholic beverage sales | 92,136 | 118,352 | | Alcoholic beverage auctions | 3,227 | – | | Financial services | 10,919 | 21,764 | | Blockchain services | 15,721 | – | | Total Revenue | 122,003 | 140,116 | Revenue by Geographical Area (for the nine months ended December 31) | Region | 2018 (HK$'000) | 2017 (Restated, HK$'000) | | :--- | :--- | :--- | | Hong Kong | 106,282 | 140,116 | | China | 5,651 | – | | Europe | 10,070 | – | | Total Revenue | 122,003 | 140,116 | 5. Other Income For the nine months ended December 31, 2018, the Group's other income significantly increased to HK$5.142 million, primarily driven by higher government grants and claims and compensation income Other Income (for the nine months ended December 31) | Item | 2018 (HK$'000) | 2017 (Restated, HK$'000) | | :--- | :--- | :--- | | Bank interest income | 172 | 98 | | Claims and compensation income | 2,373 | – | | Consignment income | 623 | 284 | | Promotion income | 655 | 98 | | Government grants | 1,088 | – | | Others | 231 | 987 | | Total | 5,142 | 1,507 | - Other income increased by approximately 240% year-on-year, primarily due to significant increases in government grants and claims and compensation income[56] 6. Finance Costs For the nine months ended December 31, 2018, the Group's finance costs significantly increased to HK$21.23 million, mainly due to higher interest on exchangeable bonds and other borrowings Finance Costs (for the nine months ended December 31) | Item | 2018 (HK$'000) | 2017 (Restated, HK$'000) | | :--- | :--- | :--- | | Interest on exchangeable bonds | 10,077 | 5,589 | | Interest on other borrowings | 10,335 | – | | Interest on bills payable | 818 | 420 | | Total | 21,230 | 6,009 | - Finance costs increased by approximately 253.3% year-on-year, primarily impacted by increased other borrowings[58] 7. Income Tax Credit For the nine months ended December 31, 2018, the Group's income tax credit decreased to HK$0.231 million, mainly due to increased loss before tax and a reduction in deferred tax assets Income Tax Credit (for the nine months ended December 31) | Item | 2018 (HK$'000) | 2017 (Restated, HK$'000) | | :--- | :--- | :--- | | Current tax: Hong Kong Profits Tax | – | 120 | | Deferred tax | (231) | (455) | | Total | (231) | (335) | - The decrease in income tax credit is primarily attributable to increased loss before tax and a reduction in deferred tax assets arising from temporary timing differences[104] 8. Loss for the Period For the nine months ended December 31, 2018, the Group's loss for the period was HK$203.8 million, primarily influenced by staff costs, inventory costs, depreciation of plant and equipment, share-based payment expenses, and fair value changes of financial assets held for trading Loss for the Period Deducted (Credited) Items (for the nine months ended December 31) | Item | 2018 (HK$'000) | 2017 (Restated, HK$'000) | | :--- | :--- | :--- | | Staff costs (including directors' emoluments) | 30,833 | 21,946 | | Cost of inventories recognized as an expense | 70,600 | 95,284 | | Depreciation of plant and equipment | 17,691 | 3,894 | | Equity-settled share-based payment expenses | 70,473 | – | | Unrealized loss (gain) on fair value change of financial assets held for trading | 33,180 | (525) | | Net exchange (gain) loss | 552 | 255 | | Minimum lease payments under operating leases | 8,847 | 9,769 | 9. Dividends For the nine months ended December 31, 2018, the company neither paid, declared, nor proposed any dividends - The Directors do not recommend the payment of any dividend for the nine months ended December 31, 2018[64] 10. Loss Per Share For the nine months ended December 31, 2018, the basic and diluted loss per share attributable to owners of the company was 4.24 HK cents, identical to basic loss per share, as the effect of share options and exchangeable bonds would reduce the loss per share Loss Per Share Calculation (for the nine months ended December 31) | Metric | 2018 (HK$'000) | 2017 (Restated, HK$'000) | | :--- | :--- | :--- | | Loss for the period attributable to owners of the Company | (177,281) | (144,049) | | Weighted average number of ordinary shares | 4,184,341,202 | 4,000,000,000 | | Loss per share (HK cents) Basic and diluted | (4.24) | (3.60) | - Diluted loss per share is the same as basic loss per share because the effect of unexercised share options and exchangeable bonds would result in a reduction in loss per share[66][67] 11. Share-based Payment Transactions The company operates a share option scheme to incentivize eligible individuals; as of December 31, 2018, outstanding share options covered 484.1 million shares, representing 11.30% of issued ordinary shares, with HK$70.473 million in share-based payment expenses recognized during the period - The company adopted a share option scheme on September 21, 2015, and granted multiple tranches of share options on April 3, December 13, and December 14, 2018[69][70][72] - As of December 31, 2018, outstanding share options involved 484.1 million shares, representing 11.30% of the issued ordinary shares[73] - For the nine months ended December 31, 2018, the Group recognized share-based payment expenses of approximately HK$70.473 million for the grant of share options[74][159] 12. Business Combination under Common Control and Restatement On May 31, 2018, Forefront Financial exercised its exchange right, converting exchangeable bonds into a 49% equity interest in Bartha International Limited, resulting in a business combination under common control, for which the Group adopted merger accounting and restated comparative figures - On May 31, 2018, Forefront Financial exercised its exchange right, converting approximately HK$72.088 million in exchangeable bonds into a 49% equity interest in Bartha International Limited, constituting a business combination under common control[80] - The Group adopted merger accounting for this common control combination and restated comparative financial data for the three and nine months ended December 31, 2017[80][81][91] Management Discussion and Analysis This section provides an overview of the Group's business operations, financial performance, significant investments, and future outlook Business Review During the reporting period, the Group primarily engaged in retail and wholesale of wine products, alcoholic beverage auctions, financial services, blockchain services, and cryptocurrency mining, with total revenue of approximately HK$122 million for the nine months ended December 31, 2018, a 12.9% year-on-year decrease - The Group's businesses include wine business, alcoholic beverage auctions, financial services business, and blockchain services business[93] Revenue Contribution for the Nine Months Ended December 31, 2018 | Business | Revenue Contribution (HK$ million) | | :--- | :--- | | Alcoholic beverage sales | 92.1 | | Wine auctions | 3.2 | | Financial services | 10.9 | | Blockchain services | 15.7 | | Total | 122.0 | - Total revenue decreased by approximately 12.9% year-on-year, primarily due to a decline in alcoholic beverage sales and reduced placement commission income from financial services business[93][94] Financial Review This section details the financial performance for the nine months ended December 31, 2018, covering revenue decline, improved gross profit and margin, increased other income, reduced selling and distribution expenses, significant rise in administrative and other operating expenses, substantial increase in finance costs, recognition of goodwill impairment loss, and expanded loss attributable to owners Revenue For the nine months ended December 31, 2018, the Group's revenue was approximately HK$122 million, a 12.9% year-on-year decrease, mainly impacted by declining alcoholic beverage sales and reduced placement commission income from financial services Revenue Change (for the nine months ended December 31) | Metric | 2018 (HK$ million) | 2017 (Restated, HK$ million) | Change Rate | | :--- | :--- | :--- | :--- | | Revenue | 122.0 | 140.1 | -12.9% | - The decrease in revenue was primarily attributable to intense industry competition leading to lower alcoholic beverage sales and reduced placement commission income from financial services business[94] Gross Profit and Gross Profit Margin For the nine months ended December 31, 2018, the Group's gross profit increased by 15.0% to approximately HK$51.4 million, with the gross profit margin improving from 31.9% to 42.1%, primarily due to contributions from financial services, blockchain services, and wine auction businesses, which incur no cost of sales Gross Profit and Gross Profit Margin Change (for the nine months ended December 31) | Metric | 2018 (HK$ million) | 2017 (Restated, HK$ million) | Change Rate | | :--- | :--- | :--- | :--- | | Gross profit | 51.4 | 44.7 | +15.0% | | Gross profit margin | 42.1% | 31.9% | +10.2 percentage points | - The improvement in gross profit margin was mainly due to contributions from financial services, blockchain services, and wine auction businesses, which do not incur cost of sales[97] Other Income For the nine months ended December 31, 2018, the Group's other income significantly increased by 240.0% to approximately HK$5.1 million, primarily driven by higher government grants and claims and compensation income Other Income Change (for the nine months ended December 31) | Metric | 2018 (HK$ million) | 2017 (Restated, HK$ million) | Change Rate | | :--- | :--- | :--- | :--- | | Other income | 5.1 | 1.5 | +240.0% | - The increase in income was primarily attributable to higher government grants and claims and compensation income[98] Selling and Distribution Expenses For the nine months ended December 31, 2018, the Group's selling and distribution expenses decreased by 1.6% to approximately HK$12.3 million, mainly due to lower rental expenses Selling and Distribution Expenses Change (for the nine months ended December 31) | Metric | 2018 (HK$ million) | 2017 (Restated, HK$ million) | Change Rate | | :--- | :--- | :--- | :--- | | Selling and distribution expenses | 12.3 | 12.5 | -1.6% | - The decrease in expenses was primarily due to lower rental expenses[99] Administrative and Other Operating Expenses For the nine months ended December 31, 2018, the Group's administrative and other operating expenses significantly increased to approximately HK$169.9 million, primarily due to higher share-based payment expenses, new blockchain service operating expenses, staff costs, and professional fees Administrative and Other Operating Expenses Change (for the nine months ended December 31) | Metric | 2018 (HK$ million) | 2017 (Restated, HK$ million) | Change Rate | | :--- | :--- | :--- | :--- | | Administrative and other operating expenses | 169.9 | 41.7 | +307.4% | - The significant increase in expenses was primarily due to: (i) share-based payment expenses of approximately HK$70.5 million; (ii) increased operating expenses for new blockchain services, including depreciation, electricity, and consulting fees, of approximately HK$38.2 million; (iii) increased management and administrative staff costs of approximately HK$8.9 million; (iv) increased professional fees of approximately HK$4 million; and (v) increased other administrative expenses of approximately HK$6.6 million[100] Finance Costs For the nine months ended December 31, 2018, the Group's finance costs significantly increased by 253.3% to approximately HK$21.2 million, primarily due to increased other borrowings Finance Costs Change (for the nine months ended December 31) | Metric | 2018 (HK$ million) | 2017 (Restated, HK$ million) | Change Rate | | :--- | :--- | :--- | :--- | | Finance costs | 21.2 | 6.0 | +253.3% | - The increase in finance costs was primarily due to increased effective interest expenses on exchangeable bonds and bills payable, as well as interest payable on other borrowings[102] Impairment Loss on Goodwill For the nine months ended December 31, 2018, the Group recognized an impairment loss on goodwill of approximately HK$3.5 million, primarily due to cryptocurrency price volatility Impairment Loss on Goodwill (for the nine months ended December 31) | Metric | 2018 (HK$ million) | | :--- | :--- | | Impairment loss on goodwill | 3.5 | - The impairment loss was primarily due to cryptocurrency price volatility, impacting the goodwill recognized upon the acquisition of HPC Nordic AB[103] Income Tax Credit For the nine months ended December 31, 2018, the Group's income tax credit decreased to approximately HK$0.231 million, mainly due to increased loss before tax and a reduction in deferred tax assets Income Tax Credit Change (for the nine months ended December 31) | Metric | 2018 (HK$'000) | 2017 (Restated, HK$'000) | Change Rate | | :--- | :--- | :--- | :--- | | Income tax credit | 231 | 335 | -31.0% | - The decrease was due to increased loss before tax and a reduction in deferred tax assets arising from temporary timing differences[104] Loss Attributable to Owners of the Company For the nine months ended December 31, 2018, the loss attributable to owners of the company significantly increased to approximately HK$177.3 million, primarily due to higher share-based payment expenses and administrative expenses Loss Attributable to Owners of the Company Change (for the nine months ended December 31) | Metric | 2018 (HK$ million) | 2017 (Restated, HK$ million) | Change Rate | | :--- | :--- | :--- | :--- | | Loss attributable to owners of the Company | 177.3 | 144.0 | +23.1% | - The increase in loss was primarily due to higher share-based payment expenses and administrative expenses[105] Dividends The Directors do not recommend the payment of any dividend for the nine months ended December 31, 2018 - No dividends were paid for the nine months ended December 31, 2018[106] Significant Investments Held, Material Acquisitions and Disposals of Subsidiaries, and Future Plans for Material Investments and Capital Assets As of December 31, 2018, the Group held listed securities totaling approximately HK$27.9 million, including Tencent Holdings, AAC Technologies, Remixpoint, Inc., and TOMO Holdings Limited. During the period, several significant acquisitions were completed, including equity interests in Bartha International, Diginex High Performance Computing Limited, HPC Nordic, and BITOCEAN Co., Ltd., and the joint venture Madison Blockhouse Limited was established to expand blockchain and cryptocurrency businesses Significant Investments As of December 31, 2018, the Group held listed securities totaling approximately HK$27.9 million, including Tencent Holdings, AAC Technologies, Remixpoint, Inc., and TOMO Holdings Limited. During the period, all holdings in China New City were disposed of at a loss, and the Group held exchangeable bonds issued by Bartha Holdings - As of December 31, 2018, the Group held listed securities including Tencent Holdings, AAC Technologies, Remixpoint, Inc. (REM), and TOMO Holdings Limited (TWD), totaling approximately HK$27.9 million[109] Significant Financial Assets Held for Trading (as of December 31, 2018) | Company Name | Fair Value (HK$'000) | Percentage of Total Group Assets | Gain/(Loss) on Disposal/Redemption (HK$'000) | | :--- | :--- | :--- | :--- | | China New City | – | Not applicable | (1,026) | | Tencent Holdings Limited | 314 | 0.03% | – | | AAC Technologies Holdings Inc. | 228 | 0.02% | – | | Remixpoint, Inc. (REM) | 22,834 | 1.95% | – | | TOMO Holdings Limited (TWD) | 4,533 | 0.39% | – | - The Group holds exchangeable bonds issued by Bartha Holdings Limited with a fair value of approximately HK$63.3 million, granting the right to exchange for a 51% equity interest in Bartha International[117] Transactions Completed During the Period The Group completed several strategic acquisitions during the period, including 49% equity in Bartha International, 51% in Diginex High Performance Computing Limited, 100% in HPC Nordic, and established the joint venture Madison Blockhouse Limited. Additionally, REM shares were acquired, and agreements were signed for the acquisition of 77% equity in Hackett Enterprises Limited and 67.2% in BITOCEAN Co., Ltd - Acquisition of 49% equity interest in Bartha International through the exercise of exchange rights on exchangeable bonds[118] - Acquisition of 51% equity interest in Diginex High Performance Computing Limited for approximately HK$426.1 million[118] - Acquisition of 100% equity interest in HPC Nordic for approximately HK$13.7 million[118] - Establishment of joint venture Madison Blockhouse Limited, with the company holding a 66.7% interest and an initial capital injection of US$2 million[118] - Acquisition of 802,900 REM shares for approximately HK$56.56 million[120] - Entered into an agreement to acquire a 77% equity interest in Hackett Enterprises Limited (comprising 52% from Forefront Financial Group and 25% from SRA) for a total consideration of HK$685.3 million, aiming to provide loan financing and financial advisory services[120] - Entered into an agreement to acquire a 67.2% equity interest in BITOCEAN Co., Ltd. for a total consideration of approximately HK$115.85 million, completed on January 11, 2019[124] Outlook and Prospects The Group plans to solidify its position in the high-end fine wine market through wine auction businesses and expand blockchain services and virtual currency trading platforms via recent cryptocurrency business acquisitions like Diginex and BITOCEAN. The Hackett acquisition will enhance cryptocurrency-related financing capabilities, with the overall strategy aiming to broaden revenue streams, improve operational mechanisms, and strengthen market presence - The Group has expanded its wine business through wine auction operations and plans to leverage online platforms to consolidate its position in the high-end fine wine market[125] - Through the Diginex acquisition, the Group has gained cryptocurrency mining experience, and through the BITOCEAN acquisition, it participates in Japanese virtual exchange services, with plans to expand BITOCEAN's business to online trading of various virtual currencies[125] - The Hackett acquisition will strengthen the Group's potential to develop cryptocurrency-related financing or leasing products and explore the development of cryptocurrency mining and financial services businesses[127] - The Board believes that through the completed acquisitions, the Group will expand its revenue streams, leverage the resources of various companies to apply blockchain technology in wine, financial services, and cryptocurrency businesses, enhance operational mechanisms, and strengthen its market position[127] Other Information This section covers various corporate governance matters, including directors' and major shareholders' interests, share option schemes, use of proceeds, and compliance with codes Directors' and Chief Executive's Interests and Short Positions in Shares, Underlying Shares, and Debentures of the Company or Any Associated Corporation As of December 31, 2018, Mr. Ding Pengyun held a total interest of approximately 2.629 billion shares in the company's shares and underlying shares, representing about 61.38% of the issued shares, with other directors holding minor share or share option interests Directors' and Chief Executive's Long Positions in Shares, Underlying Shares, and Debentures of the Company (as of December 31, 2018) | Director Name | Capacity/Nature of Interest | Number of Shares Held | Number of Convertible Shares | Total Interest | Approximate Percentage of Company's Issued Shares | | :--- | :--- | :--- | :--- | :--- | :--- | | Mr. Ding Pengyun | Interest in controlled corporation | 2,486,916,727 | 142,363,636 | 2,629,280,363 | 61.38% | | Mr. Zhu Qin | Beneficial owner | – | 2,000,000 | 2,000,000 | 0.05% | | Ms. Guo Qun | Beneficial owner | – | 5,000,000 | 5,000,000 | 0.12% | | Ms. Fan Wei | Beneficial owner | – | 300,000 | 300,000 | 0.01% | | Mr. Chu Kin Hong | Beneficial owner | – | 300,000 | 300,000 | 0.01% | | Mr. Yip Cho Yin, JP | Beneficial owner | – | 300,000 | 300,000 | 0.01% | - Mr. Ding Pengyun's interests are primarily held through his wholly-owned Devoss Global Holdings Limited and Royal Spectrum Holding Company Limited, which he controls[131][132] - Mr. Ding Pengyun is also deemed to have an interest in 136,363,636 convertible shares held by Bartha Holdings[133] Interests and Short Positions of Substantial Shareholders and Other Persons in the Shares and Underlying Shares of the Company As of December 31, 2018, Royal Spectrum, Devoss Global, Forefront Financial Group, Ms. Luu Huyen Boi, SRA, SRA Holdings, Time Base Holdings Limited, and Ms. Lu Mengjia were substantial shareholders or held interests in the company's shares and underlying shares Interests and Short Positions of Substantial Shareholders and Other Persons in the Shares and Underlying Shares of the Company (as of December 31, 2018) | Name | Capacity/Nature of Interest | Number of Shares Held | Number of Convertible Shares | Total Interest | Approximate Percentage of Company's Issued Shares | | :--- | :--- | :--- | :--- | :--- | :--- | | Royal Spectrum | Beneficial owner | 1,968,000,000 | – | 1,968,000,000 | 45.95% | | Devoss Global | Interest in controlled corporation | 1,968,000,000 | 6,000,000 | 1,974,000,000 | 46.09% | | Forefront Financial Group | Beneficial owner | 504,872,727 | – | 504,872,727 | 11.79% | | Ms. Luu Huyen Boi | Spouse's interest | 2,486,916,727 | 142,363,636 | 2,629,280,363 | 61.38% | | SRA | Beneficial owner | 447,045,454 | – | 447,045,454 | 10.44% | | SRA Holdings | Interest in controlled corporation | 447,045,454 | – | 447,045,454 | 10.44% | | Time Base Holdings Limited | Beneficial owner | 177,299,440 | 40,000,000 | 217,299,440 | 5.07% | | Ms. Lu Mengjia | Interest in controlled corporation | 177,299,440 | 45,000,000 | 222,299,440 | 5.19% | - Ms. Luu Huyen Boi, as the spouse of Mr. Ding Pengyun, is deemed to have an interest in all shares and underlying shares in which Mr. Ding has an interest[144] - The interests of Forefront Financial Group and SRA relate to consideration shares for the Hackett acquisition, which was not completed as of the reporting date[143][146] Share Option Scheme The company operates a share option scheme to incentivize and retain talent; for the nine months ended December 31, 2018, the Group recognized total expenses of HK$70.473 million for share options, with multiple tranches granted during the period, involving adjustments to both the number of shares and exercise prices - The share option scheme was adopted on September 21, 2015, and its authorized limit was updated on August 17, 2018, aiming to provide incentives and attract talent[149] - Following the share split on November 8, 2016, the share option exercise price and number of shares were adjusted[149] - For the nine months ended December 31, 2018, the Group recognized total expenses of HK$70.473 million for share options[159] Change in Use of Proceeds from Placing The net proceeds from the placing, approximately HK$116.76 million, were originally intended for the BITPoint acquisition, but due to its termination, the funds were reallocated to acquire REM shares and for the BITOCEAN acquisition, and have now been fully utilized - The net proceeds from the placing, approximately HK$116.76 million, were originally designated for the BITPoint acquisition[162] - Due to the termination of the BITPoint acquisition, approximately HK$56.56 million of the proceeds were used for the acquisition of REM shares, and the remaining approximately HK$60.2 million for the BITOCEAN acquisition[162] - As of the date of this report, all proceeds from the placing have been fully utilized[162] Achievement of Profit Estimate According to Bartha International's consolidated financial statements, its audited consolidated profit attributable to owners for the year ended March 31, 2018, was approximately HK$9.1 million, exceeding the previously disclosed profit estimate - Bartha International's audited consolidated profit attributable to owners for the year ended March 31, 2018, was approximately HK$9.1 million, exceeding the previously disclosed profit estimate[163] Purchase, Sale or Redemption of Listed Securities For the nine months ended December 31, 2018, neither the company nor any of its subsidiaries purchased, sold, or redeemed any shares - During the period, neither the company nor its subsidiaries engaged in any purchase, sale, or redemption of shares[164] Directors' Interests in Competing Business As of December 31, 2018, Mr. Ding Pengyun held approximately a 9.57% interest in Sun Hung Kai & Co. Limited as a passive investor, which primarily engages in financial services and may compete with the Group's business; no other directors held interests in competing businesses - Mr. Ding Pengyun holds approximately a 9.57% interest in Sun Hung Kai & Co. Limited, which primarily engages in financial services and may constitute a competing business with the Group[165] - Save for Mr. Ding, no other Directors or their associates held any interests in businesses that directly or indirectly compete with the Group's business[165] Code of Conduct for Directors' Securities Transactions The company has adopted a stringent code of conduct for securities transactions and confirms that all directors complied with this code for the nine months ended December 31, 2018 - The company has adopted a code of conduct for securities transactions with terms no less exacting than those required by the GEM Listing Rules[167] - For the nine months ended December 31, 2018, all Directors complied with the code of conduct for securities transactions[167] Corporate Governance Practices The company is committed to high standards of corporate governance, having adopted the Corporate Governance Code outlined in Appendix 15 of the GEM Listing Rules, and complied with its code provisions during the reporting period - The company has adopted the Corporate Governance Code and Corporate Governance Report as set out in Appendix 15 of the GEM Listing Rules[168] - From April 1, 2018, up to the date of this report, the company has complied with the code provisions of the Corporate Governance Code[168] Audit Committee The Audit Committee, established on September 21, 2015, comprises three independent non-executive directors, responsible for reviewing financial systems, accounting policies, financial position, and reporting procedures, and liaising with external auditors. The committee has reviewed the unaudited consolidated results in this report and deemed them compliant with applicable standards - The Audit Committee was established on September 21, 2015, comprising three independent non-executive directors: Mr. Chu Kin Hong (Chairman), Ms. Fan Wei, and Mr. Yip Cho Yin, JP[169] - Its primary responsibilities include reviewing the Group's financial systems, accounting policies, financial position, and financial reporting procedures, as well as assessing internal controls and risk management[169] - The Audit Committee has reviewed the Group's unaudited consolidated results for the nine months ended December 31, 2018, and considers them to be in compliance with applicable accounting standards and disclosure requirements[171]