Brainhole Technology Limited — Interim / Quarterly Report 2020

Aug 28, 2020

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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BRAINHOLE TECHNOLOGY LIMITED 腦 洞科技有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 2203)

INTERIM RESULTS ANNOUNCEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2020

The board (the “ Board ”) of directors (the “ Directors ”) of Brainhole Technology Limited (the “ Company ”) is pleased to announce the unaudited condensed consolidated financial results of the Group for the six months ended 30 June 2020 together with the unaudited comparative figures for the corresponding period in 2019, as follows:

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the six months ended 30 June 2020

Notes Revenue 3 Cost of sales Gross profit Other income Selling and distribution costs Administrative expenses Finance costs 4 (Loss) profit before tax Income tax expenses 5 (Loss) profit for the period 6 Other comprehensive expense for the period Item that may be reclassified subsequently to profit or loss: Exchange difference arising on translation of foreign operations Total comprehensive (expense) income for the period

Six months ended 30 June 2020 2019 HK$’000 HK$’000 (Unaudited) (Unaudited) (Restated) 111,565 177,772 (99,086) (137,982) 12,479 39,790 1,546 767 (3,586) (6,309) (30,722) (30,394) (993) (136) (21,276) 3,718 (222) (927) (21,498) 2,791 (3,773) (935) (25,271) 1,856

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(Loss) profit for the period attributable to: – Owners of the Company – Non-controlling interests Total comprehensive (expense) income attributable to: – Owners of the Company – Non-controlling interests (Loss) earnings per share 7 – Basic and diluted (HK cents) Notes	(21,498) 2,777 – 14 (21,498) 2,791 (25,271) 1,842 – 14 (25,271) 1,856 (2.69) 0.35 Six months ended 30 June 2020 2019 HK$’000 HK$’000 (Unaudited) (Unaudited) (Restated)	(21,498) 2,777 – 14 (21,498) 2,791 (25,271) 1,842 – 14 (25,271) 1,856 (2.69) 0.35 Six months ended 30 June 2020 2019 HK$’000 HK$’000 (Unaudited) (Unaudited) (Restated)
		2,791
		1,842 14
		1,856
		0.35

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UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2020

Notes Non-current assets Plant and equipment 9 Right-of-use assets Finance lease receivable Intangible assets Deferred tax assets Prepayment for plant and equipment Current assets Inventories Finance lease receivable Trade and other receivables 10 Contract assets Amounts due from related companies Tax recoverable Bank balances and cash Non-current asset classified as held-for-sale 11 Current liabilities Trade and other payables 12 Lease liabilities Deferred income Consideration payable Tax payables Loan from immediate holding company Net current assets Total assets less current liabilities	30 June 2020 HK$’000 (Unaudited) 151,620 5,201 639 2,317 4,994 5,485 170,256 28,457 350 96,442 810 7,993 2,854 52,966 189,872 9,430 199,302 73,626 3,315 394 51,514 242 35,677 164,768 34,534 204,790	31 December 2019 HK$’000 (Audited) 145,286 4,526 842 2,515 5,092 20,547 178,808 30,847 322 117,586 784 7,360 3,037 56,018 215,954 15,276 231,230 91,505 2,535 300 51,514 – 34,776 180,630 50,600 229,408

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Non-current liabilities Lease liabilities Deferred tax liability Deferred income Capital and reserves Share capital Reserves Notes	2,196 356 2,629 5,181 199,609 8,000 191,609 199,609 30 June 2020 HK$’000 (Unaudited)	2,311 413 1,804 4,528 224,880 8,000 216,880 224,880 31 December 2019 HK$’000 (Audited)

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UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2020

At 31 December 2018 as originally stated Effect of adopting merger accounting for common control combinations Impact on adoption of HKFRS 16 At 1 January 2019 (restated) Profit for the period Other comprehensive expense for the period: Exchange difference arising on translation of foreign operations Total comprehensive (expense) income for the period Acquisition of additional interest in a subsidiary from non-controlling shareholders At 30 June 2019 (unaudited) (restated) At 1 January 2020 (audited) Loss for the period Other comprehensive expense for the period: Exchange difference arising on translation of foreign operations Total comprehensive expense for the period At 30 June 2020 (unaudited)			Attributable to own	Attributable to own	ers of the Company	ers of the Company		Total HK$’000 277,495 49,712 (265) 326,942 2,777 (935) 1,842 866 329,650 224,880 (21,498) (3,773) (25,271) 199,609	Non- controlling interests HK$’000 – 852 – 852 14 – 14 (866) – – – – – –	Total equity HK$’000 277,495 50,564 (265) 327,794 2,791 (935) 1,856 – 329,650 224,880 (21,498) (3,773)
	Share capital HK$’000 8,000 – – 8,000 – – – – 8,000 8,000 – – – 8,000	Share premium HK$’000 104,098 – – 104,098 – – – – 104,098 104,098 – – – 104,098	Statutory reserve HK$’000 6,347 694 – 7,041 – – – – 7,041 7,437 – – – 7,437	Capital reserve HK$’000 8 9,551 – 9,559 – – – (23,473) (13,914) (11,140) – – – (11,140)	Translation reserve HK$’000 (8,017) (2,664) 5 (10,676) – (935) (935) – (11,611) (14,926) – (3,773) (3,773) (18,699)	Merger reserve HK$’000 – 39,953 – 39,953 – – – 24,339 64,292 12,778 – – – 12,778	Retained profits HK$’000 167,059 2,178 (270) 168,967 2,777 – 2,777 – 171,744 118,633 (21,498) – (21,498) 97,135
										(25,271)
										199,609

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UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 30 June 2020

OPERATING ACTIVITIES (Loss) profit before tax Adjustments for: Amortisation of intangible assets Amortisation of deferred income Bank interest income Depreciation of plant and equipment Depreciation of right-of-use assets Finance cost on loan from immediate holding company Finance cost on lease liabilities Gain on disposal of plant and equipment Government grants Interest Income on finance lease Loss on disposal of non-current assets classified as held-for-sale Written off of plant and equipment Operating cash flows before movements in working capital Decrease (increase) in inventories Decrease (increase) in trade and other receivables (Increase) decrease in contract assets Increase in amounts due from related companies Decrease in trade and other payables Decrease in finance lease receivable Cash used in operations Hong Kong profits tax paid PRC enterprise income tax paid NET CASH USED IN OPERATING ACTIVITIES

Six months ended 30 June 2020 2019 HK$’000 HK$’000 (Unaudited) (Unaudited) (Restated) (21,276) 3,718 150 128 (148) (115) (26) (30) 10,877 12,317 1,707 1,448 901 – 92 136 (33) – (545) (220) (71) (94) 641 – – 2 (7,731) 17,290 2,150 (415) 20,428 (8,013) (41) 2,537 (775) (1,047) (14,612) (13,465) 225 236 (356) (2,877) (192) – (80) (2,091) (628) (4,968)

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INVESTING ACTIVITIES Acquisition of plant and equipment Prepayment for plant and equipment Settlement of payables for plant and equipment Acquisition of intangible assets Withdrawal of pledged deposit Bank interest received Proceeds from disposal of plant and equipment Proceeds from disposal of non-current assets classified as held-for-sale NET CASH USED IN INVESTING ACTIVITIES FINANCING ACTIVITIES Government grants received Repayment of lease liabilities Repayment of loan from immediate holding company Loan from immediate holding company Interest expenses paid NET CASH (USED IN) GENERATED FROM FINANCING ACTIVITIES NET DECREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD Effect of foreign exchange rate changes CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD, REPRESENTED BY BANK BALANCES AND CASH

Six months ended 30 June 2020 2019 HK$’000 HK$’000 (Unaudited) (Unaudited) (Restated) (3,700) (9,040) (567) (8,590) (5,129) (1,347) – (517) – 5,127 26 30 2,079 – 4,950 – (2,341) (14,337) 1,416 220 (1,805) (1,739) (13,630) – 14,000 11,968 (370) – (389) 10,449 (3,358) (8,856) 56,018 46,879 306 331 52,966 38,354

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL RESULTS

1. GENERAL INFORMATION

The Company was incorporated in the Cayman Islands on 10 September 2014 as an exempted company with limited liability under the Cayman Companies Law, Chapter 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands and its shares had been listed on GEM of The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”) since 9 October 2015 and subsequently transferred its listing to the Main Board of the Stock Exchange on 21 July 2017.

The address of the registered office of the Company is Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111, the Cayman Islands. The address of the principal place of business of the Company is Office A, 31st Floor, Billion Plaza II, 10 Cheung Yue Street, Cheung Sha Wan, Kowloon, Hong Kong. Its immediate holding company is Yoho Bravo Limited, a company incorporated in the British Virgin Islands with limited liability and its ultimate controlling party is Mr. Zhang Liang Johnson (“ Mr. Zhang ”).

The Company is principally engaged in investment holding. The principal activities of its subsidiaries are the manufacturing and trading of electronic and electrical parts and components, broadband infrastructure construction and the provision of integrated solution for smart domain application (including smart home, smart campus and smart communities).

2. BASIS OF PREPARATION AND ACCOUNTING POLICIES

The unaudited condensed consolidated financial results of the Group for the six months ended 30 June 2020 are presented in HK$ which is the same as the functional currency of the Company.

The unaudited condensed consolidated financial results of the Group for the Period have been prepared in accordance with the applicable disclosure requirements of the Listing Rules and the Hong Kong Accounting Standard 34 Interim Financial Reporting issued by the HKICPA.

The unaudited condensed consolidated financial results have been prepared on the historical cost basis except for consideration payable at fair value. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

The basis of preparation and accounting policies adopted in preparing these unaudited condensed consolidated financial results for the six months ended 30 June 2020 are consistent with those adopted in the preparation of the Group’s annual report for the year ended 31 December 2019.

In the current period, the Group has applied for the first time the following new or revised HKFRSs that are relevant to and effective for the Group’s consolidated financial statements for the annual period beginning on 1 January 2020.

Amendments to HKFRS 3	Definition of a Business
Amendments to HKFRS 9, HKAS 39 and HKFRS 7	Interest Rate Benchmark Reform
Amendments to HKAS 1 and HKAS 8	Definition of Material

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The adoption of the above new or revised HKFRSs in the current period has no material effect on the amounts reported and/or disclosures set out in these unaudited condensed consolidated financial statements.

The Group has not early adopted any new and amendments to HKFRSs that have been issued but are not yet effective.

The unaudited condensed consolidated financial results have not been audited nor reviewed by the auditor of the Company, but have been reviewed by the audit committee of the Company.

The preparation of unaudited condensed consolidated financial results in conformity with HKFRSs requires the use of certain critical accounting estimates. It also requires the management to exercise its judgement in the process of applying the Group’s accounting policies.

3. REVENUE AND SEGMENT INFORMATION

Information reported to the board of directors, being the chief operating decision maker (the “ CODM ”), for the purposes of resource allocation and assessment of segment performance focuses on types of goods delivered. No operating segments identified by the CODM have been aggregated in arriving at the reportable segments of the Group.

Specifically, the Group’s reportable and operating segments under HKFRS 8 Operating Segments are as follows:

• a) Manufacturing segment engages in selling of electronic and electrical parts and components manufactured by the Group.

• b) Trading segment engages in trading of electronic and electrical parts and components sourced from third-party suppliers.

• c) Broadband infrastructure and smart domain segment engages in the provision of broadband infrastructure construction services, promotion of broadband services, smart domain solution services and operating leases for broadband infrastructure.

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Segment revenue represents revenue derived from the manufacturing and trading of electronic and electrical parts and components, and provision of broadband infrastructure construction services, promotion of broadband services, smart domain solution services and operating leases for broadband infrastructure. An analysis of the Group’s revenue for the period from continuing operations is as follows:

	Six months ended	Six months ended
	30 June
	2020	2019
	HK$’000	HK$’000
	(Unaudited)	(Unaudited)
		(Restated)
Revenue from contracts with customers within the scope of HKFRS 15
Manufacturing electronic goods	55,857	102,747
Trading of electronic goods	24,851	44,350
Broadband infrastructure and smart domain:
– Broadband infrastructure construction services	17,635	15,752
– Commission income	5,897	6,632
– Provision of smart domain solution services	6,827	7,742
	111,067	177,223
Revenue from other sources
Broadband infrastructure and smart domain:
Rental income from broadband infrastructure under operating lease
– Lease payments that are fixed at a rate	498	549
	111,565	177,772
Disaggregation of revenue from contracts with customers by timing of recognition
	Six months ended
	30 June
	2020	2019
	HK$’000	HK$’000
	(Unaudited)	(Unaudited)
		(Restated)
Timing of revenue recognition
At a point in time	93,432	161,471
Over time	17,635	15,752
Total revenue from contracts with customers	111,067	177,223

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Segment revenue and results

The following is an analysis of the Group’s revenue and results by reportable and operating segments:

Segment revenue Segment (loss) profit Unallocated income Unallocated expenses (Loss) profit before tax		Six months ended 30 June	Six months ended 30 June	Total 2020 2019 HK$’000 HK$’000 (Unaudited) (Unaudited) (Restated) 111,565 177,772 1,039 23,732 959 326 (23,274) (20,340) (21,276) 3,718
	Manufacturing 2020 2019 HK$’000 HK$’000 (Unaudited) (Unaudited) (Restated) 55,857 102,747 (3,809) 18,340	Trading 2020 2019 HK$’000 HK$’000 (Unaudited) (Unaudited) (Restated) 24,851 44,350 3,196 4,302	Broadband infrastructure and smart domain 2020 2019 HK$’000 HK$’000 (Unaudited) (Unaudited) (Restated) 30,857 30,675 1,652 1,090

The accounting policies of the operating segments are the same as the Group’s accounting policies. Segment (loss) profit represents the (loss) profit earned by each segment without allocation of certain administrative expenses, finance costs and certain other income. This is the measure reported to the CODM of the Group for the purposes of resource allocation and performance assessment.

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Segment assets and liabilities

The followings are analysis of the Group’s assets and liabilities by reportable and operating segments:

SEGMENT ASSETS Manufacturing Trading Broadband infrastructure and smart domain Unallocated Total assets SEGMENT LIABILITIES Manufacturing Trading Broadband infrastructure and smart domain Unallocated Total liabilities	As at 30 June 2020 HK$’000 (Unaudited) 203,578 14,566 87,560 63,854 369,558 30,174 10,241 34,628 94,906 169,949	As at 31 December 2019 HK$’000 (Audited) 236,533 29,521 83,941 60,043 410,038 37,855 20,519 31,428 95,356 185,158

For the purposes of monitoring segment performance and allocating resources between segments:

• all assets are allocated to operating segments other than certain plant and equipment and right-of-use assets for administrative purpose, certain intangible assets, tax recoverable, certain other receivables and prepayments, pledged deposit and certain bank balances and cash as these assets are managed on a group basis; and

• all liabilities are allocated to operating segments other than certain other payables, tax payables, deferred tax liability, consideration payable and loan from immediate holding company.

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4. FINANCE COSTS

Interest on: Lease liabilities Loan from immediate holding company	Six months ended 30 June 2020 2019 HK$’000 HK$’000 (Unaudited) (Unaudited) (Restated) 92 136 901 – 993 136	Six months ended 30 June 2020 2019 HK$’000 HK$’000 (Unaudited) (Unaudited) (Restated) 92 136 901 – 993 136
		136

5. INCOME TAX EXPENSES

The Group calculates the period income tax expenses using the tax rate that would be applicable to the expected total annual earnings. The major components of income tax expenses in the unaudited condensed consolidated statement of profit or loss and other comprehensive income are:

Current tax: Hong Kong The PRC Overprovision in prior years: Hong Kong The PRC Deferred tax	Six months ended 30 June 2020 2019 HK$’000 HK$’000 (Unaudited) (Unaudited) (Restated) 57 790 259 196 316 986 – (9) (44) – (44) (9) (50) (50) 222 927	Six months ended 30 June 2020 2019 HK$’000 HK$’000 (Unaudited) (Unaudited) (Restated) 57 790 259 196 316 986 – (9) (44) – (44) (9) (50) (50) 222 927
		986 (9) –
		(9) (50)
		927

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• (i) Pursuant to the rules and regulations of the British Virgin Islands and the Cayman Islands, the Group is not subject to any income tax in these jurisdictions for the six months ended 30 June 2020 and 2019.

• (ii) For the six months ended 30 June 2020 and 2019, Hong Kong profits tax was calculated at a flat rate of 16.5% of the estimated assessable profits.

• (iii) Under the Law of the People’s Republic of China on Enterprise Income Tax (the “ EIT Law ”) and Implementation Regulation of the EIT Law, the tax rate of the PRC subsidiaries is 25% from 1 January 2008 onwards.

For the six months ended 30 June 2020 and 2019, the PRC subsidiaries, Dongguan Jia Jun and Guangzhou Weaving, were recognised by the PRC government as “High and New Technology Enterprise” and were eligible to a preferential tax rate of 15%.

6. (LOSS) PROFIT FOR THE PERIOD

(Loss) profit for the period has been arrived at after charging (crediting):

Amount of inventories recognised as expenses Amortisation of intangible assets Depreciation of plant and equipment Depreciation of right-of-use assets Research and development costs (Note (i)) Written-off of plant and equipment Government grants (Note (ii)) Gain on disposals of plant and equipment Loss on disposal of non-current assets classified as held-for-sale Operating lease rentals in respect of rented premises Staff costs (including directors’ emoluments) Salaries and allowances Retirement benefits scheme contributions Total staff costs

Six months ended 30 June 2020 2019 HK$’000 HK$’000 (Unaudited) (Unaudited) (Restated) 99,086 137,982 150 128 10,877 12,317 1,707 1,448 6,936 10,163 – 2 (545) (220) (33) – 641 – 28 472 27,235 26,940 1,539 2,860 28,774 29,800

Notes:

• (i) The research and development costs included staff cost of approximately HK$4,227,000 (six months ended 30 June 2019: HK$6,240,000) which has been included in staff costs disclosure above.

• (ii) Government grants were subsidies received from local government authorities and the Group fulfilled all conditions attached to the subsidies. The grants were recognised as other income upon receipt for the six months ended 30 June 2020 and 2019.

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7. (LOSS) EARNINGS PER SHARE

The calculation of the basic and diluted (loss) earnings per share attributable to owners of the Company is based on the following data:

Basic (loss) earnings per share

(Loss) earnings (Loss) profit for the purpose of basic (loss) earnings per share – (Loss) profit for the period attributable to owners of the Company Number of shares Weighted average number of ordinary shares for the purpose of basic and diluted (loss) earnings per share Diluted (loss) earnings per share	Six months ended 30 June 2020 2019 (Unaudited) (Unaudited) (Restated) HK$(21,498,000) HK$2,777,000 800,000,000 800,000,000	Six months ended 30 June 2020 2019 (Unaudited) (Unaudited) (Restated) HK$(21,498,000) HK$2,777,000 800,000,000 800,000,000
		800,000,000

Diluted (loss) earnings per share is the same as basic (loss) earnings per share for the six months ended 30 June 2020 and 2019 as there were no dilutive potential ordinary shares outstanding during these periods.

8. DIVIDEND

No interim dividend was paid or proposed during the period ended 30 June 2020, nor has any interim dividend been proposed since the end of the reporting period (six months ended 30 June 2019: nil).

9. PLANT AND EQUIPMENT

During the six months ended 30 June 2020, the Group acquired plant and equipment of approximately HK$22,104,000 (six months ended 30 June 2019: HK$40,907,000).

During the six months ended 30 June 2020, plant and equipment with a net carrying value of approximately HK$2,046,000 (six months ended 30 June 2019: nil) were disposed of by the Group, for cash proceeds of approximately HK$2,079,000, resulting in a net gain on disposals of approximately HK$33,000.

There was no plant and equipment which was written off by the Group during the six months ended 30 June 2020, while plant and equipment with a net carrying value of approximately HK$2,000 were written off by the Group during the six months ended 30 June 2019.

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10. TRADE AND OTHER RECEIVABLES

Receivables at amortised cost comprise: Trade receivables Less: allowance for impairment loss Deposits and other receivables Prepayments Total trade and other receivables	As at 30 June 2020 HK$’000 (Unaudited) 79,679 (2,027) 77,652 11,129 7,661 96,442	As at 31 December 2019 HK$’000 (Audited) 103,401 (2,061) 101,340 4,611 11,635 117,586

As at 30 June 2020, the gross amount of trade receivables arising from contracts with customers and operating leases amounted to approximately HK$77,179,000 (31 December 2019: HK$101,289,000) and HK$473,000 (31 December 2019: HK$51,000) respectively.

The Group does not hold any collateral over its trade and other receivables.

The Group allows a credit period of 0 to 90 days (31 December 2019: 0 to 90 days) to its customers for manufacturing and trading segments. For customers for broadband infrastructure and smart domain segment, the Group does not have a standardised and universal credit period granted to its customers, and the credit period of individual customer is considered on a case-by-case basis and stipulated in the project contract, as appropriate.

The following is an aged analysis of trade receivables, net of allowance for impairment, presented based on the date of delivery/invoice date, which approximates the respective revenue recognition dates, at the end of the reporting period.

0 to 30 days 31 to 90 days 91 to 365 days Over 365 days	As at 30 June 2020 HK$’000 (Unaudited) 37,568 31,593 3,772 4,719 77,652	As at 31 December 2019 HK$’000 (Audited) 85,210 7,062 3,148 5,920 101,340

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11. NON-CURRENT ASSET CLASSIFIED AS HELD-FOR-SALE

In December 2019, the management resolved to dispose certain machineries with carrying amount of approximately HK$15,276,000 under manufacturing segment, which are expected to be sold in 2020 and is therefore classified as noncurrent asset held-for-sale and presented separately in the consolidated statement of financial position.

During the six months ended 30 June 2020, non-current asset classified as held-for-sale with a net carrying value of approximately HK$5,591,000 were disposed of by the Group (six months ended 30 June 2019: nil), for cash proceeds of approximately HK$4,950,000, resulting in a net loss on disposals of approximately HK$641,000.

12. TRADE AND OTHER PAYABLES

Trade payables Payables for acquisition of plant and equipment Accruals of costs for contract works Accrued staff costs Accruals and other payables	As at 30 June 2020 HK$’000 (Unaudited) 56,278 2,775 349 4,028 10,196 73,626	As at 31 December 2019 HK$’000 (Audited) 70,238 5,129 314 3,259 12,565 91,505

Included in the Group’s accrued staff costs as at 30 June 2020 were accrued directors’ emoluments of approximately HK$270,000 (31 December 2019: nil).

The following is an aged analysis of trade payables presented based on the invoice date at the end of the reporting period.

Within 3 months 4 to 6 months 7 to 12 months Over 1 year	As at 30 June 2020 HK$’000 (Unaudited) 46,469 2,090 5,988 1,731 56,278	As at 31 December 2019 HK$’000 (Audited) 65,191 3,472 982 593 70,238

The credit period on purchases of goods ranged from 30 to 120 days (31 December 2019: 30 to 120 days). The Group has financial risk management policies in place to ensure that all payables are settled within the credit timeframe.

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13. CAPITAL COMMITMENTS

At 30 June 2020, the Group has contracted for but not provided in the unaudited condensed consolidated financial results in respect of acquisition of plant and equipment of approximately HK$10,542,000 (31 December 2019: HK$5,988,000).

14. BUSINESS COMBINATION UNDER COMMON CONTROL

On 5 March 2019, Brainhole Technology Investments Limited, an indirectly wholly-owned subsidiary of the Company, has entered into a sale and purchase agreement with Guangzhou Chong Dong, a company beneficially wholly-owned by Mr. Zhang, for the purchase of its entire interest of Guangzhou Weaving, for a consideration of RMB68,000,000 (equivalent to approximately HK$78,200,000), subject to profit guarantee adjustment.

The acquisition was completed on 12 September 2019, and Guangzhou Weaving and its subsidiaries have become subsidiaries of the Group since then. As Guangzhou Weaving and the Company are ultimately controlled by Mr. Zhang, the acquisition of Guangzhou Weaving has been accounted for business combination under common control.

The condensed consolidated statement of financial position as at 30 June 2019, condensed consolidated statement of profit or loss and other comprehensive income, condensed consolidated statement of changes in equity and condensed consolidated statement of cash flows of the Group for the six months ended 30 June 2019 have been restated to include the assets and liabilities and the operating results of Guangzhou Weaving Group as if this acquisition had been completed since 27 April 2018, which is the date when Guangzhou Weaving Group and the Company first came under the control of Mr. Zhang.

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The summary of restated results of operations of the Group for the six months ended 30 June 2019 and the financial position as at 30 June 2019 are set out below:

Results of operations for the six months ended 30 June 2019 Revenue Cost of sales Gross profit Other income Selling and distribution costs Administrative expenses Finance costs Profit before tax Income tax expenses Profit for the period Other comprehensive expense for the period Item that may be reclassified subsequently to profit or loss: Exchange difference arising on translation of foreign operations Total comprehensive income for the period Profit for the period attributable to: – Owners of the Company – Non-controlling interests Total comprehensive income attributable to: – Owners of the Company – Non-controlling interests Earnings per share – Basic and diluted (HK cents)	The Group HK$’000 (as previously reported) 147,097 (118,308) 28,789 441 (6,301) (20,265) (75) 2,589 (643) 1,946 (717) 1,229 1,946 – 1,946 1,229 – 1,229 0.24	Guangzhou Weaving Group HK$’000 30,675 (19,713) 10,962 326 (8) (10,129) (61) 1,090 (284) 806 (214) 592 792 14 806 578 14 592 0.10	Effect of adoption of HKFRS 16 HK$’000 – 39 39 – – – – 39 – 39 (4) 35 39 – 39 35 – 35 0.01	Inter- company eliminations HK$’000 – – – – – – – – – – – – – – – – – – –	The Group HK$’000 (Restated) 177,772 (137,982) 39,790 767 (6,309) (30,394) (136) 3,718 (927) 2,791 (935) 1,856 2,777 14 2,791 1,842 14 1,856 0.35

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Financial position as at 30 June 2019 Non-current assets Plant and equipment Finance lease receivable Intangible asset Right-of-use assets Deferred tax asset Prepayment for plant and equipment Current assets Inventories Finance lease receivable Trade and other receivables Contract assets Amount due from related companies Tax recoverable Bank balances and cash Current liabilities Trade and other payables Lease liabilities Amount due to immediate holding company Deferred income Tax payables Net current assets Total assets less current liabilities	The Group HK$’000 (as previously reported) 160,725 – – 3,498 138 9,553 173,914 43,314 – 91,333 – – 3,067 32,982 170,696 49,457 – 13,068 225 – 62,750 107,946 281,860	Guangzhou Weaving Group HK$’000 26,188 1,027 2,462 3,016 410 – 33,103 776 308 33,311 125 2,385 128 5,372 42,405 20,810 1,332 – – 182 22,324 20,081 53,184	Effect of adoption of HKFRS 16 HK$’000 – – – (230) – – (230) – – – – – – – – – – – – – – – (230)	Inter- company eliminations HK$’000 – – – – – – – – – – – – – – – – – – – – – – –	The Group HK$’000 (Restated) 186,913 1,027 2,462 6,284 548 9,553
					206,787
					44,090 308 124,644 125 2,385 3,195 38,354
					213,101
					70,267 1,332 13,068 225 182
					85,074
					128,027
					334,814

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Non-current liabilities Lease liabilities Deferred tax liability Deferred income Net assets Capital and reserves Share capital Reserves	The Group HK$’000 (as previously reported) 1,716 45 1,375 3,136 278,724 8,000 270,724 278,724	Guangzhou Weaving Group HK$’000 1,732 296 – 2,028 51,156 13,594 37,562 51,156	Effect of adoption of HKFRS 16 HK$’000 – – – – (230) – (230) (230)	Inter- company eliminations HK$’000 – – – – – (13,594) 13,594 –	The Group HK$’000 (Restated) 3,448 341 1,375
					5,164
					329,650
					8,000 321,650
					329,650

15. APPROVAL OF UNAUDITED CONDENSED CONSOLIDATED FINANCIAL RESULTS

The unaudited condensed consolidated financial results were approved and authorised for issue by the Board on 28 August 2020.

16. EVENTS AFTER THE REPORTING PERIOD

There was no significant event that took place after the reporting period and up to the date of this announcement.

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MANAGEMENT DISCUSSION AND ANALYSIS

BUSINESS REVIEW

(i) Semiconductor business

The Group is principally engaged in the assembly, packaging and sales of its self-manufactured discrete semiconductors and trading of semiconductors sourced from third-party suppliers.

During the Period, due to the outbreak of the coronavirus disease (“ COVID-19 ”), the economic activities have been slowed down globally. The public health measures which put in place to prevent the spread of the COVID-19 pandemic has also caused temporary suspension of production of semiconductors for about one month after the Chinese New Year.

Despite the impact of the COVID-19 pandemic diminishes gradually in the PRC, the Group’s customers of semiconductors have still slowed down their new order placing during the Period, due to the reduction of global economic activities aroused by COVID-19 and the growing tension of the global trade dispute and tariff battle between China and the United States. As a result, the Group’s revenue from manufacturing and trading of semiconductors for the Period dropped by approximately 45.1% as compared to the corresponding period of previous financial year.

During the Period, the revenue from manufacturing business of semiconductors has recorded a decrease of approximately 45.6% as compared to the corresponding period of previous financial year. In addition to its manufacturing business, the Group continues to operate its trading business during the Period, primarily to supplement its sales of self-manufactured products. The Group acts as a solution kits integrator and is engaged in trading of semiconductors that its customers specifically require. These semiconductors, however, are not manufactured by the Group. The product mix required by customers varies from time to time. During the Period, the outbreak of COVID-19 and continuing effect of global trade dispute and tariff battle also hit the trading operations and the revenue from trading of semiconductors dropped by approximately 44.0% as compared to the corresponding period of previous financial year.

During the Period, the Group continued its ongoing efforts in research and development and innovations. Regarding the semiconductors business, the Group has registered 47 patent rights in the PRC in respect of its process innovation and product innovation as at 30 June 2020. The Group’s principal subsidiary of semiconductors business, Dongguan Jia Jun, continued to enjoy the status of High and New-Technology Enterprise and is entitled to a reduced PRC Enterprise Income Tax rate at 15%.

The number of the Group’s customers of semiconductors increased from 165 as at 30 June 2019 to 170 as at 30 June 2020.

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(ii) Broadband infrastructure and smart domain business

In September 2019, the Group completed the acquisition of Guangzhou Weaving, and therefore extended its business portfolio to broadband infrastructure construction and the provision of integrated solution for smart domain application (including smart home, smart campus and smart communities) in the PRC. Its smart domain solution includes hardware for security and identification purposes, software for residence management, energy saving and community services.

During the Period, the outbreak of COVID-19 also led to the temporary suspension of work of Guangzhou Weaving Group. With the effective control of the pandemic in the PRC, the operation of Guangzhou Weaving Group has been resumed shortly. Due to its business nature, the new business of the Group including the broadband infrastructure construction and the provision of integrated solution for smart domain application are relatively less susceptible to the COVID-19 pandemic than semiconductors business in 2020.

FINANCIAL REVIEW

Revenue

The Group recorded revenue of approximately HK$111.6 million during the Period, as compared to the revenue of approximately HK$177.8 million for the six months ended 30 June 2019. The decrease in revenue was approximately HK$66.2 million or 37.2% when compared to the previous year. It was primarily attributable to the decrease in the sales of semiconductors business as a result of (i) the outbreak of COVID-19, leading to the reduction in the global economic activities and the slowdown in orders from customers; and (ii) the continuing effect of global trade dispute and tariff battle.

The outbreak of COVID-19 and the slowdown of customers’ order hit both the manufacturing and trading business of semiconductors. During the Period, the Group recorded revenue of approximately HK$55.8 million from sales of its self-manufactured semiconductors, representing a decrease of approximately HK$46.9 million or 45.6% as compared to that of approximately HK$102.7 million for the same period of the previous financial year. The production volume of the Group’s self-manufactured semiconductors witnessed an overall decrease during the Period when compared to the same period of the previous financial year.

The Group’s trading of semiconductors primarily complements sales of self-manufactured semiconductors when it provides solution kits services to its customers. During the Period, the Group’s revenue derived from its trading of semiconductors amounted to approximately HK$24.9 million, representing a decrease of approximately HK$19.5 million or 44.0% as compared to that of approximately HK$44.4 million for the same period of the previous financial year.

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The operating results of Guangzhou Weaving Group was consolidated to the Group since 27 April 2018 when the common control by Mr. Zhang firstly existed. Guangzhou Weaving Group contributed revenue of approximately HK$30.9 million for the Period, while compared to the revenue of approximately HK$30.7 million for the six months ended 30 June 2019.

Gross profit and gross profit margin

The Group’s gross profit amounted to approximately HK$12.5 million for the Period, representing a decrease of approximately HK$27.3 million or 68.6% from approximately HK$39.8 million for the same period of the previous financial year. It was mainly attributable to the decrease in revenue and gross profit margin of semiconductors business, which led to the gross profit of semiconductors business decreased from approximately HK$28.8 million for the six months ended 30 June 2019 to approximately HK$2.8 million for the Period.

Moreover, Guangzhou Weaving Group contributed gross profit of approximately HK$9.7 million for the Period, while recorded gross profit of approximately HK$11.0 million for the same period of the previous financial year.

The Group’s overall gross profit margin for the Period was approximately 11.2%, representing a decrease of approximately 11.2 percentage points as compared with gross profit margin of approximately 22.4% for the six months ended 30 June 2019. Such decrease was primarily due to the decrease of gross profit margin of semiconductor business, which decreased from approximately 19.6% for the six months ended 30 June 2019 to approximately 3.4% for the Period. This was mainly attributable to the public health measures which put in place to prevent the spread of the COVID-19 pandemic has caused temporary suspension of production of semiconductors for about one month after the Chinese New Year. The anti-epidemic measures such as the quarantine, social distancing and other pandemic containment measures have also reduced the Group’s productivity and incurred incremental costs to the Group. Furthermore, there were also increase in labour costs driven by the labour shortage for the manufacture of semiconductors in Dongguan, Guangdong, the PRC and the additional costs incurred for new quality assurance system to cope with customers’ new technological standard and requirements on semiconductors.

The gross profit margin of Guangzhou Weaving Group recorded at approximately 31.4% and 35.8% respectively for the Period and the same period of the previous financial year. The decrease was mainly attributable to more commission cost was incurred when facing the downward pressure and adverse impact to the economic activities brought from the outbreak of COVID-19.

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Selling and Distribution Costs

The Group’s selling and distribution costs for the Period was approximately HK$3.6 million, representing a decrease of approximately HK$2.7 million or 43.2% from approximately HK$6.3 million for the six months ended 30 June 2019. The amount mainly represented the selling and distribution costs of semiconductors business and such decrease was in line with the change of revenue of semiconductors during the Period as discussed above.

Administrative Expenses

Administrative expenses mainly included staff costs, professional fees, depreciation, office expenses, rental expenses, travelling expenses, entertainment expenses, investor relation expenses and other miscellaneous operating expenses.

The Group’s administrative expenses for the Period was approximately HK$30.7 million, increased by approximately HK$0.3 million or 1.1% as compared to that of approximately HK$30.4 million for the six months ended 30 June 2019.

Income tax expenses

The Group’s income tax expenses for the Period was approximately HK$0.2 million, as compared to income tax expense of approximately HK$0.9 million for the six months ended 30 June 2019. Such decrease of income tax expense was primarily attributable to decrease in operating profits from semiconductors business due to the factors discussed above.

(Loss) Profit for the Period

As a result of the foregoing, the Group’s net loss for the Period was approximately HK$21.5 million, when compared to the net profit of approximately HK$2.8 million for the six months ended 30 June 2019.

LIQUIDITY AND FINANCIAL RESOURCES AND CAPITAL STRUCTURE

During the Period, the operations of the Group were funded principally by internally generated cash flows.

The Group’s outstanding capital commitments as at 30 June 2020 amounted to approximately HK$10.5 million (31 December 2019: HK$6.0 million). Such commitments primarily related to the broadband infrastructure construction and purchase of equipment and machinery to meet the demand of the market and quality control improvements in the production plant. Such outstanding commitments are expected to be funded by the Group’s internally generated funds.

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As at 30 June 2020, the Group had no outstanding bank borrowings.

Please refer to note 12 to the unaudited condensed consolidated financial results of the Group in this announcement for the ageing analysis in respect of the trade payables of the Group as at 30 June 2020 and 31 December 2019.

The Group’s gearing ratio as at 30 June 2020 and 31 December 2019, which were calculated by dividing its total bank borrowings by its total equity as at those dates, were both nil due to the absence of bank borrowings as at those dates.

The Group adopts conservative treasury policies in cash and financial management. To achieve better risk control and minimise the cost of funds, the Group’s treasury activities are centralised with all bank deposits denominated either in HK$, US$ or RMB. The Group’s liquidity and financing requirements are reviewed regularly. The Group will continue to maintain a prudent capital structure when considering financing for new investments.

CHARGES ON GROUP ASSETS

As at 30 June 2020, the Group did not have any pledged asset (31 December 2019: nil).

SIGNIFICANT INVESTMENTS/MATERIAL ACQUISITIONS AND DISPOSALS

During the Period, the Group had not made any significant investments or material acquisitions and disposals of subsidiaries.

CONTINGENT LIABILITIES

As at 30 June 2020, the Group did not have any significant contingent liabilities (31 December 2019: nil).

EXPOSURE TO FLUCTUATIONS IN EXCHANGE RATES

The Group is exposed to foreign currency risks as several of its subsidiaries have foreign currency sales and purchases. For the six months ended 30 June 2020 and 2019, approximately 39.5% and 52.5%, respectively, of the Group’s sales were denominated in currencies other than the functional currency of the relevant group entities making the sale, and approximately 8.2% and 17.6%, respectively, of purchases were not denominated in the relevant group entities’ functional currency.

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The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities as at 30 June 2020 and 31 December 2019 are as follows:

United States dollars (“US$”) Renminbi (“RMB”) Total:	Assets 30 June 2020 31 December 2019 HK$’000 HK$’000 (Unaudited) (Audited) 37,189 47,563 729 2,277 37,918 49,840	Liabilities 30 June 2020 31 December 2019 HK$’000 HK$’000 (Unaudited) (Audited) 3,236 4,998 76 74 3,312 5,072	Liabilities 30 June 2020 31 December 2019 HK$’000 HK$’000 (Unaudited) (Audited) 3,236 4,998 76 74 3,312 5,072
			5,072

The Group currently does not have a foreign currency hedging policy. However, the Directors continuously monitor the related foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arise.

HUMAN RESOURCES

As at 30 June 2020, the Group had a workforce of 458 full-time employees (including three executive Directors but excluding three independent non-executive Directors) of whom approximately 96.5% were employed in the PRC and approximately 3.5% in Hong Kong. The Group’s staff costs (including Directors’ emoluments) for the six months ended 30 June 2020 and 2019 amounted to approximately HK$28.8 million and HK$29.8 million, respectively. The Group’s employees in Hong Kong are required to participate in the Mandatory Provident Fund scheme under which it is required to contribute a fixed percentage of the employees’ payroll costs (up to a maximum of HK$1,500 per month) to the scheme. For the Group’s employees in the PRC, the Group makes contributions to various government sponsored employee benefit funds, including housing provident fund, basic pension insurance fund, basic medical insurance, unemployment insurance, maternity insurance and work related injury insurance funds in accordance with applicable PRC laws and regulations.

The Group generally recruits employees from the open market. It actively pursues a strategy to recruit, develop and retain talented employees by (i) providing them with training programs on a regular basis to keep them abreast of their knowledge in the products it distributes, technology development and market conditions of the electronics industry, broadband infrastructure industry and smart domain industry; (ii) aligning employees’ compensation and incentives with their performance; and (iii) providing them with a clear career path with opportunities for additional responsibilities and promotions.

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RESERVES

Movements in the reserves of the Group for the six months ended 30 June 2020 are set out in the unaudited condensed consolidated statement of changes in equity set out above.

DIVIDENDS

The Board does not recommend the payment of any interim dividend for the six months ended 30 June 2020 (30 June 2019: nil).

BUSINESS PROSPECT

Looking ahead to the second half of 2020, the global economy is expected to face the uncertainties aroused by COVID-19 and the growing tension of the global trade dispute and tariff battle between China and the United States. It is expected that the reduction of global economic activities would continue to affect the customer orders of semiconductors in 2020.

The semiconductor industry and its downstream industries are characterized by rapid technological changes and evolving industry standards and an effective quality assurance system is critical to the success of the Group. The Group intends to continue its research and development to strengthen its production process and quality control.

The management will continue to assess the impact of the COVID-19 pandemic and closely monitor the market condition of semiconductors, including the recovery progress of customer demand, the increasing technical standard requested by customers and the current industry standard of semiconductors for the production of electronic devices with more advanced technological functions.

On the other hand, after the completion of the acquisition of Guangzhou Weaving in September 2019, the Group has expanded its business to smart living sector. Guangzhou Weaving is principally engaged in broadband construction infrastructure and the provision of integrated solutions for smart domain application in the PRC, which include smart home, smart campus and smart communities. Under the China’s state policies, technological innovation and development are highly encouraged and supported. At present, China maintains a leading position in 5G network technology in the world, and the full implementation of 5G network in commercial and civilian applications has already been commenced. It is foreseeable that artificial intelligence, Internet of Things, cloud computing and big data processing will be benefited continuously from the PRC government’s dedicated support in its development. The technological innovation will speed up and further stimulate the growth and development of technological application in the smart living sector.

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Furthermore, the COVID-19 pandemic has enhanced the public awareness on hygiene and social distancing, especially in the PRC. With the effective use of contactless solution, the safety of living environment can be promoted and protected. The application of various smart technology has also widely extended from home to communities and other application scenarios. The management believes, this pandemic will bring another opportunity to facilitate the rapid development of smart technology application. In view of these, the Group will capitalise the fast-growing demand of technological application in the smart living sector.

In future, Guangzhou Weaving is dedicated to be a hardware solution integrator for smart domain application. Hence, the Group will keep searching for other acquisition or investment targets, primarily focusing on areas of smart living related technology and electronic parts for artificial intelligence and Internet of Things, which could have potential business synergy with Guangzhou Weaving and semiconductor business, as well as other area of technology which could improve the living standard of human being.

Looking forward, the Group is vigorous to explore other possible business opportunities, and one of the potential opportunities is to develop smart campus in the PRC, an all-in-one technological innovation industrial parks, that supports and pilots application of innovative solutions, drive new technology development and enhance collaboration of high technology companies. The Group possesses strong management team with high technology expertise and network in the field of mobile telecommunication, networking and smart city. Leveraging on its well-established relationship with telecom carriers and property developers (such as Seedland and R&F Properties), the Group aims to assist local government to build up the smart campus from scratch, including building the innovation centers, inserting necessary infrastructure and technological support. The management believes, with the supportive preferential policies from local government, the smart campus can act as an incubator to attract talents and enterprises from nationwide and worldwide to start their research and development and production line of smart technologies within the parks. The Group can enjoy the synergy created together with the incubatees, the property developers and the local government.

CODE OF CONDUCT REGARDING DIRECTORS’ SECURITIES TRANSACTIONS

The Company has adopted the Model Code regarding securities transactions by Directors on terms no less exacting than the required standard of dealings set out in Appendix 10 of the Listing Rules. Having made specific enquiry of all Directors, all Directors confirmed that they had complied with the required standard of dealings and the code of conduct regarding securities transactions by Directors adopted by the Company throughout the Period.

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COMPETING INTERESTS

None of the Directors or controlling shareholders of the Company and their respective close associates (as defined in the Listing Rules) has any interest in a business which competed or might compete with the business of the Group or has any other conflict of interests with the Group during the Period.

CORPORATE GOVERNANCE PRACTICES

The Company is committed to achieving high standards of corporate governance. The Directors believe that sound and reasonable corporate governance practices are essential for the continued growth of the Group and for safeguarding and maximising Shareholders’ interests.

During the Period, the Company has complied with the code provisions set out in the CG Code.

AUDIT COMMITTEE

The Company established an audit committee on 23 September 2015 with written terms of reference in compliance with the Listing Rules.

The primary duties of the audit committee are mainly to make recommendation to the Board on the appointment, reappointment and removal of external auditor, monitor the integrity of the financial statements, annual reports and interim reports, and review significant financial reporting judgements contained in them, and oversee financial reporting system, risk management and internal control systems of the Group. The audit committee of the Company consists of three members, namely Mr. Xu Liang, Mr. Chen Johnson Xi and Ms. Zhang Yibo. Mr. Xu Liang, who has appropriate professional qualifications and experience in accounting matters, is the chairperson of the audit committee.

The audit committee has reviewed this announcement and the Group’s unaudited condensed consolidated financial results for the Period and is of the opinion that the preparation of such results complied with the applicable accounting standards and that adequate disclosure has been made in respect thereof.

PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES OF THE COMPANY

Neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s listed securities during the Period.

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DEFINITIONS

In this announcement, unless the context otherwise requires, the following expressions have the following meanings:

“Board”	the board of Directors
“CG Code”	Corporate Governance Code as set out in Appendix 14 to the Listing
	Rules
“close associate(s)”	has the meaning ascribed to it under the Listing Rules
“Company”	Brainhole Technology Limited腦洞科技有限公司, a company
	incorporated as an exempted company with limited liability in the
	Cayman Islands
“Director(s)”	the director(s) of the Company
“Dongguan Jia Jun”	東莞市佳駿電子科技有限公司(Dongguan Jia Jun Electronic
	Technology Company Limited*), a company established in the PRC
	with limited liability and a wholly-owned subsidiary of the Company
“Group”	the Company and its subsidiaries
“Guangzhou Brainhole	Guangzhou Brainhole Weaving Communications Telecommunications
Weaving”	Technology Limited（廣州腦洞織網通訊科技有限公司*), a company
	established in the PRC with limited liability
“Guangzhou Chong Dong”	Guangzhou Chong Dong Technology Co., Ltd.（廣州蟲洞科技有限
	公司*）, a company established in the PRC and is wholly beneficially
	owned by Mr. Zhang
“Guangzhou Weaving”	Guangzhou Weaving Communications Telecommunications Technology
	Limited（廣州織網通訊科技有限公司*), a company established in the
	PRC with limited liability
“Guangzhou Weaving	Guangzhou Weaving and its subsidiary
Group”
“HKFRS(s)”	Hong Kong Financial Reporting Standards issued by the HKICPA
“HKICPA”	Hong Kong Institute of Certified Public Accountants

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“HK$” or “HK dollar(s)”	Hong Kong dollars and cents respectively, the lawful currency of Hong
and “HK cents”	Kong
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock Exchange, as
	amended, supplemented and/or otherwise modified from time to time as
	the context may require
“Model Code”	a code of conduct adopted by the Company regarding securities
	transactions by Directors on terms no less exacting than the required
	standard of dealings set out in Appendix 10 of the Listing Rules
“Period”	for the six months ended 30 June 2020
“PRC”	the People’s Republic of China, save that, for the purpose of this
	announcement and unless the context otherwise requires, references
	in this announcement do not include Hong Kong, Macau Special
	Administrative Region of the People’s Republic of China and Taiwan
“Share(s)”	ordinary share(s) of HK$0.01 each in the share capital of the Company
“Shareholder(s)”	holder(s) of the Shares
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“%”	per cent.

• The English translation of the company name is for reference only. The official name of this company is in Chinese.

By order of the Board Brainhole Technology Limited Zhang Liang Johnson Chairman and executive Director

Hong Kong, 28 August 2020

As at the date of this announcement, the Board comprises three executive Directors, namely, Mr. Zhang Liang Johnson, Mr. Tong Wen-hsin and Ms. Wan Duo and three independent non-executive Directors, namely Mr. Xu Liang, Mr. Chen Johnson Xi and Ms. Zhang Yibo.

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