Crypto Flow Technology Limited — Earnings Release 2005

Aug 12, 2005

GEM

WAFER SYSTEMS<08198> - Results Announcement (Q2, 2005, Summary)

Wafer Systems Limited announced on 11/08/2005:
(stock code: 08198 )

Year end date :31/12/2005
Currency :HKD
Auditors' report :N/A
2nd Quarterly Report Reviewed by Audit Committee

Important Note :

This result announcement form only contains extracted information from
and should be read in conjunction with the detailed results announcement
of the issuer, which can be viewed on the GEM website at
http://www.hkgem.com

                                     (\* Unaudited)     (\* Unaudited)
                                          Current Last Corresponding
                                           Period            Period
                                   from 01/01/2005   from 01/01/2004
                                     to 30/06/2005     to 30/06/2004
                                             $'000             $'000

Turnover : 218,930 96,410
Profit/(Loss) from Operations : 2,211 1,369
Finance cost : (1,355) (967)
Share of Profit/(Loss) of Associates : N/A N/A
Share of Profit/(Loss) of Jointly
Controlled Entites : N/A N/A
Profit/(Loss) after Taxation & MI : 862 373
% Change Over the Last Period : +131.10%
EPS / (LPS)
Basic (in dollar) : HKD 0.003 HKD 0.0013
Diluted (in dollar) : N/A HKD 0.0013
Extraordinary (ETD) Gain/(Loss) : N/A N/A
Profit (Loss) after ETD Items : 862 373
2nd Quarter Dividends per Share : NIL NIL
(specify if with other options) : N/A N/A
B/C Dates for 2nd Quarter Dividends : N/A
Payable Date : N/A
B/C Dates for (-) General Meeting : N/A
Other Distribution for Current Period : NIL
B/C Dates for Other Distribution : N/A
(bdi: both days inclusive)

For and on behalf of
Wafer Systems Limited

Signature :
Name : Pang Kin Man, Edmond
Title : Company Secretary

Responsibility statement

The directors of the Company (the "Directors") as at the date hereof
hereby collectively and individually accept full responsibility for the
accuracy of the information contained in this results announcement form
(the "Information") and confirm, having made all reasonable inquiries,
that to the best of their knowledge and belief the Information are
accurate and complete in all material respects and not misleading and
that there are no other matters the omission of which would make the
Information herein inaccurate or misleading.The Directors acknowledge
that the Stock Exchange has no responsibility whatsoever with regard to
the Information and undertake to indemnify the Exchange against all
liability incurred and all losses suffered by the Exchange in connection
with or relating to the Information.

Remarks:

(1) Basis of presentation

The condensed financial statements have been prepared in accordance
with Hong Kong Accounting Standard No.34 "Interim Financial Reporting"
issued by the Hong Kong Institute of Certified Public Accountants
("HKICPA") and the applicable disclosure requirements of the Rules
Governing the Listing of Securities on the Growth Enterprise Market of
the Stock Exchange of Hong Kong Limited.

During the Review Period, the Group has adopted all of the new and
revised Hong Kong Financial Reporting Standards and Hong Kong
Accounting Standards ("new HKFRSs") issued by the HKICPA which
are effective for accounting periods beginning on or after 1 January
2005. The impact of adoption of these new HKFRSs is set out below:

Share-based Payments (HKFRS 2)

HKFRS 2 requires the recognition of equity-settled share-based payments
at fair value at the date of grant. The Group granted share options to
certain directors, an advisor and employees. Prior to adoption of
HKFRS 2, the Group did not recognise the financial effect of share
options.

The adoption of HKFRS 2 has resulted in a change in accounting
policy for share options. The fair value of share options is determined
at the grant date and expensed on a straight-line basis over the
vesting period. In accordance with the transitional provisions,
HKFRS 2 has been applied retrospectively to all share options
granted after 7 November 2002 that were unvested on or after
1 January 2005.

The effect of adoption of HKFRS 2 in the current and prior periods is
summarized below:

                                         For the six months
                                           ended 30 June
                                         2005         2004
                                         HK$'000    HK$'000

Increase in staff costs (77) (141)
Decrease in profit for the period (77) (141)
Decrease in basic earnings per (0.02) (0.05)
share (cents)
Decrease in diluted earnings per N/A (0.05)
share (cents)

                                               As at
                                  30 June 2005      31 December 2004
                                     HK$'000          HK$'000

Increase in deficit (530) (453)
Increase in share options 530 453
reserve

Except for the above, the adoption of these new HKFRSs did
not result in material changes to the Group's principal accounting
policies and basis of preparation adopted in its annual financial
statements for the year ended 31 December 2004.

The condensed financial statements are unaudited but have been reviewed
by the Audit Committee.

(2) Turnover

Turnover represents the aggregate of the net amounts received and
receivable from third parties in connection with the provision of
network infrastructure solutions, network professional services and
network software.

(3) All of the Group's operations are classed as continuing.

(4) Taxation

The charges represented PRC income tax that were calculated at rates
applicable to the respective PRC subsidiaries.

No provision for Hong Kong profits tax has been made as the Group
had no assessable profit for the six months ended 30 June 2005
and its corresponding period in 2004.

Pursuant to the relevant laws and regulations in the PRC, the Company's
PRC subsidiaries are entitled to exemption from PRC income tax for
two or three years commencing from their first profit-making year of
operation and thereafter, these PRC subsidiaries will be entitled to a
50% relief from PRC income tax for the following three years. During
the Review Period, the Company has one PRC subsidiary within its
tax exemption period and one PRC subsidiary within its 50% tax
relief period.

No deferred tax asset has been recognized in respect of the unutilized
tax losses due to the unpredictability of future profit streams.

(5) Earnings per share

The calculation of basic earnings per share for the three months and
the six months ended 30 June 2005 is based on the unaudited profit
attributable to shareholders of the Company of approximately
HK$84,000 (2004: HK$1,419,000) and approximately HK$862,000
(2004: HK$373,000) respectively and on the weighted average number
of approximately 289,945,000 (2004: 289,945,000) shares in issue
during the period.

Diluted earnings per share has not been presented for the three months
and six months ended 30 June 2005 since the effect is anti-dilutive.

The calculation of the diluted earnings per share for the three months
and the six months ended 30 June 2004 is based on the profit
attributable to shareholders of the Company of approximately
HK$1,419,000 and approximately HK$373,000 and on the weighted
average number of approximately 290,029,000 shares and
approximately 290,309,000 shares respectively.