Crypto Flow Technology Limited — Interim / Quarterly Report 2009

Aug 11, 2009

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MelcoLot Limited

(incorporated in the Cayman Islands with limited liability) website: http://www.melcolot.com

(Stock Code: 8198)

INTERIM RESULTS ANNOUNCEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2009

CHARACTERISTICS OF THE GROWTH ENTERPRISE MARKET (“GEM”) OF THE STOCK EXCHANGE OF HONG KONG LIMITED (THE “STOCK EXCHANGE”)

GEM has been positioned as a market designed to accommodate companies to which a higher investment risk may be attached than other companies listed on the Stock Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors.

Given the emerging nature of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board of the Stock Exchange and no assurance is given that there will be a liquid market in the securities traded on GEM.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange 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.

This announcement, for which the directors of MelcoLot Limited collectively and individually accept full responsibility, includes particulars given in compliance with the Rules Governing the Listing of Securities on the Growth Enterprise Market of the Stock Exchange (the “ GEM Listing Rules ”) for the purpose of giving information with regard to MelcoLot Limited. The directors of MelcoLot Limited, having made all reasonable enquiries, confirm that, to the best of their knowledge and belief: (1) the information contained in this announcement is accurate and complete in all material respects and not misleading; (2) there are no other matters the omission of which would make any statement in this announcement misleading; and (3) all opinions expressed in this announcement have been arrived at after due and careful consideration and are founded on bases and assumptions that are fair and reasonable.

1

MANAGEMENT DISCUSSION AND ANALYSIS

The board of directors (the “ Board ”) of MelcoLot Limited (the “ Company ”) hereby announces the unaudited consolidated results of the Company and its subsidiaries (the “ Group ”) for the six months ended 30 June 2009 (the “ Review Period ”) and the comparative unaudited figures for the correspondence period in 2008.

Business Review

During the Review Period, the Group continued to be engaged in two main streams of business, namely the network system integration and the lottery business. Total revenue of the Group during the Review Period amounted to HK$162.9 million (2008: HK$235.2 million), representing a decrease of 30.7%.

Consolidated loss attributable to owners of the Company amounted to HK$63.9 million for the Review Period (2008: HK$55.6 million), after charging the following items:

• (i) A deemed expense on convertible bonds amounting to HK$32.4 million (2008: HK$18.5 million); and

• (ii) An amortisation expense on other intangible assets in fair value of HK$10.3 million (2008: HK$25.9 million).

Loss before interest, taxes, depreciation and amortisation for the Review Period amounted to HK$21.2 million (2008: HK$12.1 million). The underperformance was mainly because of the decrease in revenue under the poor macro economic environment since the fourth quarter of 2008 arising from the financial turmoil.

In response to this, the Group has restructured and streamlined the operations, and imposed tight cost control measures in all applicable areas. For the Review Period, the employee benefits costs amounted to HK$24.8 million (2008: HK$33.0 million), a decrease of 24.8%. Other expenses for the Review Period amounted to HK$31.9 million (2008: HK$44.5 million), a decrease of 28.3% compared to the correspondence period in 2008.

A tax credit of HK$2.3 million (2008: tax charge of HK$1.6 million) for the Review Period was due to the deferred tax credit arising from the amortisation of other intangible assets for the Review Period.

Dividend

No interim dividend has been paid or declared by the Company during the six months ended 30 June 2009 (2008: Nil).

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Network System Integration

Network system integration of the Group represented the provision of network infrastructure solutions including (i) network infrastructure, (ii) professional management services, and (iii) network software. Revenue from this operating segment decreased by 34.2%, and amounted to HK$127.6 million for the Review Period (2008: HK$194.0 million) corresponding to 78.3% of the Group’s revenue. Owing to the global economic downturn, capital expenditure and upgrading plans about the network system for our customers have been partially cancelled or postponed. This macro economic environment in conjunction with the highly competitive nature of the system integration business have adversely impacted the results in this segment.

Lottery Business

Lottery business of the Group represented the venue management, scratch card distribution, and lottery terminal equipment manufacturing and distribution. Revenue from this operating segment for the Review Period amounted to HK$35.3 million (2008: HK$41.2 million). The decrease of 14.3% compared to the correspondence period in 2008 was a result of the unfavourable economic environment. The Group has undertaken business process reengineering aiming at improvements by means of elevating efficiency and effectiveness of the Group’s investments in China. Consequently the segment operational loss before depreciation and amortisation for the six months ended 30 June 2009 was reduced by 8.1% to HK$10.2 million (2008: HK$11.1 million) despite the decline in gross revenue.

Liquidity, Financial Resources and Capital Structure

During the Review Period, the Group kept its conservative policies in cash and financial management. Surplus funds were placed on interest-bearing deposits with banks. The Group generally financed its operations and serviced its debts with its internal resources, bank and other borrowings, and convertible bonds.

The Group had total cash and cash equivalents of HK$109.6 million as at 30 June 2009 (31 December 2008: HK$157.0 million). As a measure of liquidity, at 30 June 2009, the Group had net current assets of approximately HK$174.1 million, a decrease of 13.0% from HK$200.0 million as at 31 December 2008. The current ratio (ratio of current assets to current liabilities), however, increased to 2.09 at 30 June 2009 (31 December 2008: 1.75) because of the tight controls in inventories, trade receivables, as well as the trade payables.

The total bank and other borrowings also decreased from the balance of HK$115.4 million at 31 December 2008 to HK$108.0 million at 30 June 2009, of which HK$28.0 million (31 December 2008: HK$35.4 million) was due within 1 year. The gearing ratio, expressed as a percentage of long term borrowings of HK$80 million over total equity of HK$124.6 million, was 64.2% at 30 June 2009 (31 December 2008: 42.2%).

At 30 June 2009, the Group had no significant capital commitments contracted but not provided for in the financial statements.

3

Employee Information

As at 30 June 2009, the Group had 310 employees (31 December 2008: 322 employees). The Group continues to provide remuneration packages to employees in accordance with market practices and staff past performance. In addition to basic remuneration, the Group also provides other benefits such as mandatory provident fund, medical scheme, share option scheme and staff training programs to employees.

Charges on Group Assets

As at 30 June 2009, the Group had pledged bank deposits of HK$15.6 million for securing certain banking facilities (31 December 2008: HK$15.3 million).

As at 30 June 2009, the Group had charged certain shareholdings in its subsidiaries: (i) 90% of Oasis Rich International Limited and Precious Success Holdings Limited and (ii) 100% of KTeMS Co., Ltd., to ensure the performance of its obligations under the convertible bonds due 2012 and convertible bonds due 2013, respectively.

Foreign Exchange Exposure

During the Review Period, the Group earned revenue and incurred costs and expenses mainly in United States dollars, Hong Kong dollars and Renminbi. As the impact of foreign exchange exposure has been insignificant, no hedging or other alternatives have been implemented.

Contingent Liabilities

The Group did not have any significant contingent liabilities at 30 June 2009.

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Outlook

Lottery ticket sales in many countries are one of the major sources of funds for building community sports facilities and financing the country’s social welfare programs. The lottery market in China has expanded rapidly over the last two decades and the penetration of lottery in China is still regarded as low by global standards. Furthermore, other than the two government operated lotteries (Welfare Lottery and Sports Lottery), all other forms of gambling are illegal. These factors create an encouraging environment for the authorised service providers to develop the lottery market in China. The Group is involved in various lottery industry verticals in China, namely provision of management consultancy services to a leading retail chain of lottery vending outlets, distribution of scratch cards, manufacture and distribution of highly robust and versatile point of sales machines and provision of marketing and technical services. The Group derives its revenue from sharing a certain proportion of the lottery sales turnover or other contractual arrangements as appropriate.

The recent downturn in the economy has inevitably affected the lottery industry. However, the Group is focused upon consolidating it’s presence in China, actively exploring new business opportunities whether by way of provision of technical services to lottery authorities or participating in new market developments. Together with the strong support from our world-leading strategic shareholders, we believe that the Group is well positioned to steadily expand market share and succeed in the China lottery market.

The Group is also actively exploring lottery opportunities in the Asia Pacific region in order to expand its geographical footprint. Through its local subsidiary, the Group has already participated in the Nanum Lotto international consortium which operates the South Korean Welfare Lottery under exclusive rights from the South Korean Government.

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Condensed Consolidated Income Statement

For the six months ended 30 June 2009

Notes Revenue 3 Changes in inventories of finished goods and work-in-progress Purchases of inventories and raw materials consumed Other income and gains Employee benefits costs Depreciation and amortisation Share of losses of jointly controlled entities Other expenses Finance costs 4 Loss before taxation 5 Taxation 6 Loss for the period Attributable to: Owners of the Company Non-controlling interests Loss per share 8 – Basic (cents) – Diluted (cents)	Three months ended 30 June 2009 2008 (Unaudited) (Unaudited) HK$’000 HK$’000 66,578 152,893 20,784 31,333 (74,389) (143,847) 61 3,644 (11,763) (21,171) (7,344) (14,652) (163) (1,524) (12,899) (24,388) (17,435) (9,875) (36,570) (27,587) 2,860 (1,618) (33,710) (29,205) (30,914) (26,874) (2,796) (2,331) (33,710) (29,205) (6.18) (6.17) N/A N/A	Six months ended 30 June 2009 2008 (Unaudited) (Unaudited) HK$’000 HK$’000 162,884 235,222 (32,897) 38,923 (95,970) (211,814) 2,009 4,251 (24,838) (32,984) (14,352) (29,289) (515) (1,152) (31,881) (44,539) (36,004) (20,951) (71,564) (62,333) 2,310 (1,618) (69,254) (63,951) (63,935) (55,596) (5,319) (8,355) (69,254) (63,951) (12.78) (12.79) N/A N/A
	2009 (Unaudited) HK$’000 66,578 20,784 (74,389) 61 (11,763) (7,344) (163) (12,899) (17,435) (36,570) 2,860 (33,710) (30,914) (2,796) (33,710) (6.18) N/A	2009 (Unaudited) HK$’000 162,884 (32,897) (95,970) 2,009 (24,838) (14,352) (515) (31,881) (36,004) (71,564) 2,310 (69,254) (63,935) (5,319) (69,254) (12.78) N/A

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Condensed Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2009

Loss for the period Other comprehensive income/(loss): Exchange differences arising on translation of foreign operations Total comprehensive loss for the period Total comprehensive loss attributable to: Owners of the Company Non-controlling interests	Six months ended 30 June 2009 2008 (Unaudited) (Unaudited) HK$’000 HK$’000 (69,254) (63,951) 1,196 2,436 (68,058) (61,515) (62,739) (53,239) (5,319) (8,276) (68,058) (61,515)
	2009 (Unaudited) HK$’000 (69,254) 1,196 (68,058) (62,739) (5,319) (68,058)

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Condensed Consolidated Statement of Financial Position

As at 30 June 2009

Notes NON-CURRENT ASSETS Property, plant and equipment 9 Goodwill Other intangible assets Interests in jointly controlled entities Available-for-sales investment CURRENT ASSETS Inventories Trade and other receivables 10 Loan receivable – due within one year Amount due from a jointly controlled entity Amount due from a related company Pledged bank deposits Bank balances and cash CURRENT LIABILITIES Trade and other payables 11 Amount due to a shareholder of a jointly controlled entity Amount due to a shareholder Amounts due to related companies Tax payable Bank and other borrowings – due within one year NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES		As at 30 June 2009 (Unaudited) HK$’000 28,498 283,632 112,704 11,002 133,902 569,738 38,269 145,641 3,890 20,904 155 15,635 109,597 334,091 79,037 2,334 3,679 35,897 11,025 27,971 159,943 174,148 743,886	As at 31 December 2008	As at 31 December 2008
				(Audited) HK$’000 30,809 283,632 121,121 11,519 132,502
				579,583
				70,878 174,591 3,890 44,458 148 15,310 156,967
				466,242
				213,478 – 1,695 1,098 14,541 35,408
				266,220
				200,022
				779,605

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Notes NON CURRENT LIABILITIES Other borrowings – due after one year Convertible bonds Deferred tax liabilities NET ASSETS CAPITAL AND RESERVES Share capital 12 Reserves Equity attributable to owners of the Company Non-controlling interests TOTAL EQUITY		As at 30 June 2009 (Unaudited) HK$’000 80,000 533,324 6,009 619,333 124,553 5,005 94,643 99,648 24,905 124,553		As at 31 December 2008
				(Audited) HK$’000 80,000 501,331 8,535
				589,866
				189,739
				4,994 154,521
				159,515 30,224
				189,739

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Condensed Consolidated Statement of Changes in Equity

For the six months ended 30 June 2009

Share capital HK$’000 An at 1 January 2008 (audited) 4,322 Loss for the period – Exchange differences arising on translation of foreign operations – Total comprehensive income/(loss) for the period – Equity-settled share-based payments – Exercise of share options 33 Non-controlling interests arising from acquisition of a subsidiary – As at 30 June 2008 (unaudited) 4,355 As at 1 January 2009 (audited) 4,994 Loss for the period – Exchange differences arising on translation of foreign operations – Total comprehensive income/(loss) for the period – Equity-settled share-based payments – Exercise of share options 11 As at 30 June 2009 (unaudited) 5,005	Share premium HK$’000 334,020 – – – – 820 – 334,840 368,540 – – – – 121 368,661	Share- based payments reserve HK$’000 359 – – – 10,720 (92) – 10,987 16,244 – – – 2,784 (44) 18,984	Convertible PRC bonds statutory equity reserves reserve HK$’000 HK$’000 2,007 611,692 – – – – – – – – – – – – 2,007 611,692 5,589 645,492 – – – – – – – – – – 5,589 645,492	Attributable to owners Non- Exchange Accumulated of the controlling reserve losses Company interests HK$’000 HK$’000 HK$’000 HK$’000 4,483 (472,805) 484,078 56,189 – (55,596) (55,596) (8,355) 2,357 – 2,357 79 2,357 (55,596) (53,239) (8,276) – – 10,720 – – – 761 – – – – 527 6,840 (528,401) 442,320 48,440 37,184 (918,528) 159,515 30,224 – (63,935) (63,935) (5,319) 1,196 – 1,196 – 1,196 (63,935) (62,739) (5,319) – – 2,784 – – – 88 – 38,380 (982,463) 99,648 24,905	Total
					HK$’000 540,267
					(63,951) 2,436
					(61,515)
					10,720 761 527
					490,760
					189,739
					(69,254) 1,196
					(68,058)
					2,784 88
					124,553

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Condensed Consolidated Statement of Cash Flows

For the six months ended 30 June 2009

Notes Net cash used in operating activities Investing activities Interest received Purchase of property, plant and equipment 9 Proceeds from disposal of property, plant and equipment 9 Capital expenditure on other intangible assets (Increase)/decrease in pledged bank deposits Acquisition of subsidiaries (net of cash and cash equivalents acquired) Net cash (used in) / generated from investing activities Financing activities Repayment of bank and other borrowings Interest paid Proceeds from exercise of share options Bank and other borrowings raised Net cash (used in) / generated from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of the period Effect of foreign exchange rate changes Cash and cash equivalents at end of the period, represented by bank balances and cash

Six months ended 30 June 2009 2008 (Unaudited) (Unaudited) HK$'000 HK$'000 (31,953) (70,376) 110 1,556 (1,787) (2,255) – 1,059 (1,851) (1,035) (325) 693 – 206 (3,853) 224 (7,879) (36,558) (3,569) (2,402) 88 761 – 40,211 (11,360) 2,012 (47,166) (68,140) 156,967 143,816 (204) 1,041 109,597 76,717

2009 (Unaudited) HK$'000 (31,953) 110 (1,787) – (1,851) (325) – (3,853) (7,879) (3,569) 88 – (11,360) (47,166) 156,967 (204) 109,597

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Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2009

(1) BASIS OF PRESENTATION

The condensed consolidated financial statements have been prepared in accordance with 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 (the “ GEM Listing Rules ”) and with Hong Kong Accounting Standard 34 “Interim Financial Reporting”, issued by the Hong Kong Institute of Certified Public Accountants.

(2) SIGNIFICANT ACCOUNTING POLICIES

The condensed consolidated financial statements have been prepared under the historical cost convention.

A number of new or revised Standards and Interpretations are effective for the financial year beginning on 1 January 2009. Except as described below, the same accounting policies, presentation and methods of computation have been followed in these condensed consolidated financial statements as were applied in the preparation of the Group’s financial statements for the year ended 31 December 2008.

HKFRS 8 “Operating Segments”

(effective for annual periods beginning on or after 1 January 2009)

HKFRS 8 is a disclosure Standard that has resulted in a redesignation of the Group’s reportable segments, but has had no impact on the reported results or financial position of the Group.

HKAS 1 (revised 2007) “Presentation of Financial Statements”

(effective for annual periods beginning on or after 1 January 2009)

HKAS 1 (revised 2007) has introduced a number of terminology changes (including revised titles for the condensed consolidated financial statements) and has resulted in a number of changes in presentation and disclosure. However, HKAS 1 (revised 2007) has had no impact on the reported results or financial position of the Group.

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(3) SEGMENT INFORMATION

The following is an analysis of the Group’s revenue and results by operating segment of the periods under review:

For the six months ended 30 June 2009

For the six months ended 30 June 2009
Revenue Operating cost Operating loss before depreciation and amortisation Depreciation and amortisation Result Unallocated corporate income Unallocated corporate expenses Share of losses of jointly controlled entities Finance costs Loss before taxation Taxation Loss for the period	Six months ended 30June 2009 Network system Lottery integration business Consolidated HK$’000 HK$’000 HK$’000 127,614 35,270 162,884 (130,422) (45,443) (175,865) (2,808) (10,173) (12,981) (1,409) (12,943) (14,352) (4,217) (23,116) (27,333) 2,009 (9,721) (515) (515) (36,004) (71,564) 2,310 (69,254)
	Network system integration HK$’000 127,614 (130,422) (2,808) (1,409) (4,217)

For the six months ended 30 June 2008

For the six months ended 30 June 2008
Revenue Operating cost Operating loss before depreciation and amortisation Depreciation and amortisation Result Unallocated corporate income Unallocated corporate expenses Share of losses of jointly controlled entities Finance costs Loss before taxation Taxation Loss for the period	Six months ended 30June 2008 Network system Lottery integration business Consolidated HK$’000 HK$’000 HK$’000 194,032 41,190 235,222 (183,804) (52,300) (236,104) 10,228 (11,110) (882) (1,795) (27,494) (29,289) 8,433 (38,604) (30,171) 4,251 (14,310) (1,152) (1,152) (20,951) (62,333) (1,618) (63,951)
	Network system integration HK$’000 194,032 (183,804) 10,228 (1,795) 8,433

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(4) FINANCE COSTS

FINANCE COSTS
Interest expenses on bank borrowings Interest expenses on other loans Effective interest expenses on convertible bonds	Three months ended 30 June 2009 2008 HK$’000 HK$’000 242 650 1,323 360 15,870 8,865 17,435 9,875	Six months ended 30 June
	2009 HK$’000 242 1,323 15,870 17,435	2009 HK$’000 430 3,139 32,435 36,004	2008 HK$’000 1,591 811 18,549
			20,951

(5) LOSS BEFORE TAXATION

Loss before taxation has been arrived at after charging:

Three months Six months ended 30 June ended 30 June 2009 2008 2009 2008 HK$’000 HK$’000 HK$’000 HK$’000 Amortisation of other intangible assets 5,133 12,891 10,270 25,910 Depreciation of property, plant and equipment 2,211 1,761 4,082 3,379 Staff costs (including directors’ remuneration) Salaries and other benefits 11,083 11,637 22,054 22,264 Share-based payments 680 9,534 2,784 10,720 and after crediting: Interest income 57 949 110 1,556 Other services income – 2,695 1,397 2,695 Net foreign exchange gain 4 – 502 – TAXATION Six months ended 30 June 2009 2008 HK$’000 HK$’000 Current period: Enterprise Income Tax of the People’s Republic of China 216 1,618 Deferred taxation (2,526) – Tax (credit)/charge (2,310) 1,618	Three months Six months ended 30 June ended 30 June 2009 2008 2009 2008 HK$’000 HK$’000 HK$’000 HK$’000 Amortisation of other intangible assets 5,133 12,891 10,270 25,910 Depreciation of property, plant and equipment 2,211 1,761 4,082 3,379 Staff costs (including directors’ remuneration) Salaries and other benefits 11,083 11,637 22,054 22,264 Share-based payments 680 9,534 2,784 10,720 and after crediting: Interest income 57 949 110 1,556 Other services income – 2,695 1,397 2,695 Net foreign exchange gain 4 – 502 – TAXATION Six months ended 30 June 2009 2008 HK$’000 HK$’000 Current period: Enterprise Income Tax of the People’s Republic of China 216 1,618 Deferred taxation (2,526) – Tax (credit)/charge (2,310) 1,618	Six months ended 30 June	Six months ended 30 June
		2009 2008 HK$’000 HK$’000 10,270 25,910 4,082 3,379 22,054 22,264 2,784 10,720 110 1,556 1,397 2,695 502 – Six months ended 30 June
	2009 HK$’000 216 (2,526) (2,310)		2008 HK$’000 1,618 –
			1,618

(6) TAXATION

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No provision for Hong Kong Profits Tax has been made as the Group had no assessable profit for the six months ended 30 June 2009 and its corresponding period in 2008.

Taxation arising in other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions.

(7) DIVIDEND

No interim dividend has been paid or declared by the Company during the six months ended 30 June 2009 (2008: Nil).

(8) LOSS PER SHARE

The calculation of basic loss per share for the three months and the six months ended 30 June 2009 is based on the unaudited loss attributable to owners of the Company of approximately HK$30,914,000 and HK$63,935,000 (2008: HK$26,874,000 and HK$55,596,000) respectively and on the weighted average number of approximately 500,515,000 and 500,226,000 (2008: 435,479,000 and 434,724,000) ordinary shares in issue during the period respectively.

No diluted loss per share has been presented since assuming the conversion and exercise of the Company’s outstanding convertible bonds and share options would result in a decrease in loss per share.

(9) PROPERTY, PLANT AND EQUIPMENT

The total cost of additions to property, plant and equipment of the Group during the six months to 30 June 2009 was approximately HK$1,787,000 (2008: HK$2,255,000). The total carrying amount of disposals of property, plant and equipment during the six months to 30 June 2009 were approximately HK$16,000 (2008: HK$1,766,000) for zero proceeds (2008: HK$1,059,000).

(10) TRADE AND OTHER RECEIVABLES

Trade receivables Retention money receivables Other receivables Prepayments and deposits		As at 30 June 2009 HK$’000 103,063 7,806 26,490 8,282 145,641	As at 31 December 2008	As at 31 December 2008
				HK$’000 127,790 7,806 30,559 8,436
				174,591

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The Group generally allows credit periods ranging from 30 to 90 days to its trade customers. The following is an aged analysis of trade receivables at the balance sheet date:

Within 30 days 31-90 days 91-180 days 181-365 days		As at 30 June 2009 HK$’000 50,780 26,165 15,649 10,469 103,063	As at 31 December 2008	As at 31 December 2008
				HK$’000 63,041 24,120 23,768 16,861
				127,790

Included in the Group’s trade receivable balance are debtors with aggregate carrying amount of HK$26,118,000 (31 December 2008: HK$40,629,000) which are past due at the reporting date but not considered as impaired. Majority of the trade receivables being neither past due nor impaired have no default repayment history. The directors of the Company consider that there has not been a significant change in credit quality of the trade debtors and there is no recent history of default, therefore the amounts considered recoverable.

(11) TRADE AND OTHER PAYABLES

Trade payables Other payables		As at 30 June 2009 HK$’000 41,857 37,180 79,037	As at 31 December 2008	As at 31 December 2008
				HK$’000 155,697 57,781
				213,478

The following is an aged analysis of trade payables at the balance sheet date:

Within 30 days 31-90 days 91-180 days over 180 days		As at 30 June 2009 HK$’000 14,716 10,444 13,489 3,208 41,857	As at 31 December 2008	As at 31 December 2008
				HK$’000 79,928 57,157 15,156 3,456
				155,697

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(12) SHARE CAPITAL

SHARE CAPITAL
Ordinary shares of HK$0.01 each: Authorised: At l January 2009 and 30 June 2009 Issued and fully paid: At 1 January 2009 Exercise of share options At 30 June 2009	Number of shares 2,000,000,000 499,430,433 1,085,000 500,515,433	Amount
		HK$’000 20,000
		4,994 11
		5,005

(13) OPERATING LEASE COMMITMENTS

As at 30 June 2009, the Group had operating lease commitments of approximately HK$8,393,000 (31 December 2008: HK$15,642,000), out of which approximately HK$6,525,000 was payable within 1 year (31 December 2008: HK$10,281,000).

(14) RELATED PARTY TRANSACTIONS

a. During the period, the Group had the following transactions with related parties:

Sales of goods to a jointly controlled entity Sales of goods to minority shareholders of subsidiaries Purchases of materials from minority shareholders of subsidiaries Reimbursement of office and administrative expenses to a related company Interest expenses to a shareholder	Six months ended 30 June
	2009 2008 HK$’000 HK$’000 5,132 23,118 21,082 – 17,764 59,003 242 352 1,984 –

b. Compensation of key management personnel

The remuneration of directors and other members of key management during the period is as follows:

Short-term benefits Post-employment benefits Share-based payments	Six months ended 30 June	Six months ended 30 June
	2009 HK$’000 4,115 49 763 4,927	2008 HK$’000 2,415 42 1,270
		3,727

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PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES OF THE COMPANY

During the six months ended 30 June 2009, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s listed securities.

SHARE OPTION SCHEMES

The Company, at the general meeting held on 20 April 2002, adopted both a pre-IPO share option scheme (the “ Pre-IPO Share Option Scheme ”) and a post-IPO share option scheme (the “ Post-IPO Share Option Scheme ”).

No options granted pursuant to either the Pre-IPO Share Option Scheme or the Post-IPO Share Option Scheme were cancelled during the Review Period.

Details of the movements in the number of share options during the Review Period for both schemes are as follows:

(a) Pre-IPO Share Option Scheme

One single grant of 11,913,000 shares in aggregate was made to various participants on 30 April 2002 under this scheme. As at 30 June 2009, options comprising an aggregate of 3,000,000 shares were outstanding, as detailed below:

Type of participant: Director	Exercise price per share HK$ 0.55		Number of share options	Number of share options
		Outstanding as at 1.1.2009 3,000,000	Exercised during Review Period –	Lapsed during Review Period –	Outstanding as at 30.6.2009
					3,000,000

Pre-IPO share options are exercisable as to (i) a maximum of 25% of the total number of options granted between six months and twelve months after 17 May 2002 (the “ Listing Date ”); (ii) a maximum additional 6.25% of the total number of options granted after the expiry of each successive 3-months period, twelve months after the Listing Date; and (iii) the remaining options on or after the third anniversary of the Listing Date until the end of the option period or lapse of an option.

The above outstanding options may be exercised, in accordance with the terms of the Pre-IPO Share Option Scheme, before 30 April 2012.

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(b) Post-IPO Share Option Scheme

There have been a total of 9 lots of Post-IPO share options granted. The lots were (1) 5,277,000 shares on 12 July 2002; (2) 7,859,000 shares on 20 February 2003; (3) 385,000 shares on 10 October 2003; (4) 2,844,000 shares on 23 February 2004; (5) 828,000 shares on 11 October 2004; (6) 6,980,000 shares on 12 January 2007; (7) 4,818,000 shares on 7 December 2007; (8) 30,000,000 shares on 31 March 2008 and (9) 13,000,000 shares on 16 February 2009.

A summary of the Post-IPO Share Option Scheme movements during the Review Period are as follows:

Date of grant 20.2.2003 (Note 2) 23.2.2004 (Note 2) 11.10.2004 (Note 2) 12.1.2007 (Note 2) 7.12.2007 (Note 3)	Type of participants Exercisable period Director 20.2.2004 to 19.2.2013 Employees 23.2.2005 to 22.2.2014 Employees 11.10.2005 to 10.10.2014 Director 12.1.2008 to 11.1.2017 Employees 12.1.2008 to 11.1.2017 Directors 7.6.2008 to 6.12.2009 Employees 7.6.2008 to 6.12.2009	Exercise Outstanding price as at per share 1.1.2009 HK$ 0.138 1,200,000 0.165 81,500 0.124 82,000 0.088 562,500 0.088 4,110,500 4,673,000 2.720 1,150,000 2.720 3,360,000 4,510,000		Number of share options	Number of share options	Number of share options	Number of share options
				Granted during Review Period – – – – – – – – –	Exercised during Review Period – – (10,000) – (1,075,000) (1,075,000) – – –	Lapsed during Outstanding Review as at Period 30.6.2009 (Note 1) – 1,200,000 (5,000) 76,500 (7,500) 64,500 – 562,500 – 3,035,500 – 3,598,000 – 1,150,000 (228,000) 3,132,000 (228,000) 4,282,000
							1,200,000
							76,500
							64,500
							562,500 3,035,500
							3,598,000
							1,150,000 3,132,000
							4,282,000

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Number of share options

Date of grant 31.3.2008 (Note 4) 16.2.2009 (Note 5)	Type of participants Director Advisors Employees Director Advisors Employees	Exercisable period 1.10.2008 to 31.3.2018 1.10.2008 to 31.3.2018 1.10.2008 to 31.3.2018 16.2.2010 to 15.2.2019 16.2.2010 to 15.2.2019 16.2.2010 to 15.2.2019	Exercise Outstanding price as at per share 1.1.2009 HK$ 0.890 4,354,000 0.890 17,906,000 0.890 7,740,000 30,000,000 0.300 – 0.300 – 0.300 – – Total: 40,546,500	Granted during Review Period – – – – 2,120,000 (Note 6) 4,180,000 6,700,000 13,000,000 13,000,000	Exercised during Review Period – – – – – – – – (1,085,000)	Lapsed during Outstanding Review as at Period 30.6.2009 (Note 1) – 4,354,000 (700,000) 17,206,000 (1,302,000) 6,438,000 (2,002,000) 27,998,000 – 2,120,000 – 4,180,000 – 6,700,000 – 13,000,000 (2,242,500) 50,219,000	Lapsed during Outstanding Review as at Period 30.6.2009 (Note 1) – 4,354,000 (700,000) 17,206,000 (1,302,000) 6,438,000 (2,002,000) 27,998,000 – 2,120,000 – 4,180,000 – 6,700,000 – 13,000,000 (2,242,500) 50,219,000
							4,354,000 17,206,000 6,438,000
							27,998,000
							2,120,000 4,180,000 6,700,000
							13,000,000
							50,219,000

Notes:

• (1) These options lapsed according to the rules of this scheme due to the employees having left the Group.

• (2) These grants under the Post-IPO Share Option Scheme are exercisable starting from the first anniversary of the date of grant at stepped annual increment of 25% of the total options granted, for a period not later than 10 years from the date of grant.

• (3) These grants under the Post-IPO Share Option Scheme are exercisable starting from six months of the date of grant at stepped six-months increment of 50% of the total options granted, for a period not later than 2 years from the date of grant.

• (4) These grants under the Post-IPO Share Option Scheme are exercisable starting from six months of the date of grant at stepped six-months increment of 50% of the total options granted, for a period not later than 10 years from the date of grant.

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• (5) These grants under the Post-IPO Share Option Scheme are exercisable starting from the first anniversary of the date of grant at stepped annual increment of 33% of the total options granted, for a period not later than 10 years from the date of grant.

• (6) These share options were granted to Mr. Christos Moumouris, executive Director of the Company.

The above outstanding options may be exercised within such exercise period in accordance with the terms of the Post-IPO Share Option Scheme.

DIRECTORS’ AND CHIEF EXECUTIVE’S INTERESTS OR SHORT POSITIONS IN SHARES AND UNDERLYING SHARES OF THE COMPANY

As at 30 June 2009, the interests and short positions of the Directors, the chief executive of the Company and their respective associates (as defined in the GEM Listing Rules) in the shares, underlying shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the “ SFO ”)), as recorded in the register required to be kept by the Company pursuant to Section 352 of the SFO or as otherwise notified to the Company and the Stock Exchange pursuant to the required standard of dealings by Directors as referred to in Rule 5.46 to 5.67 of the GEM Listing Rules, were as follows:

(a) Long positions in shares of the Company:

Name of Director Mr. Chan Sek Keung, Ringo Mr. David Tsoi Mr. Pang Hing Chung, Alfred	Nature of interests Personal Corporate_(Note 2)_ Personal Personal	Approximate Number of percentage Shares of Shares interested interested (Note 1) 18,876,000 3.77% 56,400,000 11.27% 413,500 0.08% 1,500,000 0.30%

Notes:

• (1) As at 30 June 2009, the total number of issued shares of the Company was 500,515,433.

• (2) Mr. Chan Sek Keung, Ringo is deemed, by virtue of the SFO, to be interested in the 56,400,000 Shares held by Woodstock Management Limited, a company wholly-owned by him.

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• (b) Long positions in the underlying shares in the Company (Directors’ rights to acquire shares)

acquire shares)
Name of Director Mr. Chan Sek Keung, Ringo Mr. Ko Chun Fung, Henry Mr. Christos Moumouris Mr. David Tsoi Mr. Pang Hing Chung, Alfred Mr. So Lie Mo, Raymond	Date of grant 30.4.2002 20.2.2003 31.3.2008 16.2.2009 12.1.2007 7.12.2007 7.12.2007 7.12.2007	Number of unlisted pre-IPO share option outstanding as at 1.1.2009 3,000,000 – – – – – – –	Number of unlisted pre-IPO share option outstanding as at 30.6.2009 3,000,000 – – – – – – –	Number of unlisted post-IPO share option outstanding as at 1.1.2009 – 1,200,000 4,354,000 – 562,500 200,000 200,000 750,000	Number of unlisted post-IPO share option outstanding as at 30.6.2009 – 1,200,000 4,354,000 2,120,000 562,500 200,000 200,000 750,000	Aggregate interests 3,000,000 1,200,000 4,200,000 4,354,000 2,120,000 562,500 200,000 762,500 200,000 750,000	Approximate percentage of the Company’s issued share capital
							0.84% 0.87% 0.42% 0.15% 0.04% 0.15%

Notes:

• (1) Each of the above Directors is the personal beneficial owner of the share options granted to him.

• (2) Each of the Directors’ interests represent his respective long positions in the underlying shares in the Company by virtue of options granted to the Directors pursuant to the Pre-IPO Share Option Scheme and the Post-IPO Share Option Scheme both adopted by the Company on 20 April 2002 (further details are set out under the section headed “ Share Option Schemes ”).

• (3) Options granted on 30 April 2002 were exercisable during the period from 17 November 2002 to 29 April 2012 at the exercise price of HK$0.55 per share.

• (4) Options granted on 20 February 2003 were exercisable during the period from 20 February 2004 to 19 February 2013 at the exercise price of HK$0.138 per share.

• (5) Options granted on 12 January 2007 were exercisable during the period from 12 January 2008 to 11 January 2017 at the exercise price of HK$0.088 per share.

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• (6) Options granted on 7 December 2007 were exercisable during the period from 7 June 2008 to 6 December 2009 at the exercise price of HK$2.72 per share.

• (7) Options granted on 31 March 2008 were exercisable during the period from 1 October 2008 to 31 March 2018 at the exercise price of HK$0.89 per share.

• (8) Options granted on 16 February 2009 were exercisable during the period from 16 February 2010 to 15 February 2019 at the exercise price of HK$0.30 per share.

Other than as disclosed above, none of the Directors, the chief executive of the Company and their respective associates (as defined in the GEM Listing Rules), had any interests or short positions in any shares, underlying shares or debentures of the Company or any of its associated corporations as at 30 June 2009.

SUBSTANTIAL SHAREHOLDERS AND OTHER SHAREHOLDERS WHOSE INTERESTS ARE RECORDED UNDER SECTION 336 OF THE SFO

As at 30 June 2009, the following persons or corporations, in addition to the Directors, stated under the section headed “Directors’ and chief executive’s interests or short position in shares and underlying shares of the Company”, were interested in shares or underlying shares representing 5% or more in the issued share capital of the Company as recorded in the register of interests required to be kept by the Company pursuant to Section 336 of the SFO.

Long positions in shares of the Company (“Shares”)

Name of shareholder Melco LottVentures Holdings Limited (“Melco LV”) Melco Leisure and Entertainment Group Limited (“Melco Leisure”) Melco International Development Limited (“Melco International”) Mr. Ho, Lawrence Yau Lung (“Mr. Ho”)	Capacity Beneficial owner Interest through a controlled corporation Interest through controlled corporations Interest through controlled corporations Beneficial owner	Number of Share interested 51,977,024 51,977,024 (Note 2) 51,977,024 (Note 3) 51,977,024 (Note 4) –	Number of underlying Shares interested 419,059,095 (Note 5) 419,059,095 (Note 2) 419,059,095 (Note 3) 419,059,095 (Note 4) 4,354,000 (Note 6)	Approximate shareholding percentage
				(Note 1) 94.11% 94.11% 94.11% 94.11% 0.87%

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Name of shareholder Intralot International Limited (Note 7) Intralot S.A. Integrated Lottery Systems and Services (“Intralot S.A.”)(Note 7) Global Crossing Holdings Limited (“Global Crossing”) (Note 8) Toprich Company Limited (“Toprich”)(Note 8) Firich Enterprises Co., Ltd. (Note 8) LottVision Investments Holdings Limited (“LottVision Investments”)(Note 9) LottVision Limited_(Note 9) Mr. Ng Lai Yick (Note 10) North 22 Nominees Limited (Note 10)_ Legg Mason, Inc.	Capacity Beneficial owner Interest through a controlled corporation Beneficial owner Beneficial owner Interest through controlled corporations Beneficial owner Interest through a controlled corporation Beneficial owner Interest through a controlled corporation Beneficial owner Interest through controlled corporations	Number of Share interested 47,632,938 (Note 7) 47,632,938 (Note 7) 20,787,042 9,712,000 30,499,042 8,947,934 8,947,934 3,134,744 36,900,000 36,900,000 27,304,000	Number of underlying Shares interested 349,401,622 (Note 7) 349,401,622 (Note 7) 206,104,195 (Note 5) – 206,104,195 (Note 5) 46,366,121 46,366,121 – – – –	Approximate shareholding percentage
				(Note 1) 79.33% 79.33% 45.33% 1.94% 47.27% 11.05% 11.05% 0.63% 7.37% 7.37% 5.46%

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Notes:

• (1) As at 30 June 2009, the total number of issued shares of the Company was 500,515,433.

• (2) Melco Leisure is deemed to be interested in the 51,977,024 Shares and the underlying 419,059,095 Shares from convertible bonds in the Company as described in (5) below by virtue of its controlling interests in its wholly-owned subsidiary, Melco LV.

• (3) Melco International is deemed to be interested in the 51,977,024 Shares and the underlying 419,059,095 Shares from convertible bonds in the Company as described in (5) below by virtue of its controlling interests in its wholly-owned subsidiary, Melco Leisure.

• (4) Mr. Ho is deemed to be interested in the 51,977,024 Shares and the underlying 419,059,095 Shares from convertible bonds in the Company as described in (5) below by virtue of his controlling interests in Melco International together with Melco LV, which are held by his controlled corporations.

• (5) Convertible bonds in the principal amount of HK$606,800,000 carrying the rights to subscribe for Shares at an initial conversion price of HK$0.85 per Share was issued by the Company to Power Way Group Limited (“ Power Way ”) on 13 December 2007 to satisfy part of the consideration for the acquisition of the entire issued share capital of Precious Success Holdings Limited and 60% of the entire issued share capital of Oasis Rich International Limited, (“ Oasis Rich ”), under the agreement dated 8 October 2007 entered into among the Company, Rising Move International Limited (a wholly-owned subsidiary of the Company), Power Way, LottVision Limited, Melco International and Firich Enterprises Co., Ltd. If Power Way exercises the conversion rights attaching to the said convertible bonds in full at the initial conversion price, a total of 713,882,352 Shares will be issued to Power Way. However, no conversion of the convertible bonds shall be made, if immediately upon such conversion, (1) Power Way and its parties acting in concert (as defined under the Takeovers Code) with it will be under an obligation to make a general offer under the Code; (2) each of (i) any of the existing Shareholders holding more than 20% or more of the voting rights of the Company as at the date of the Agreement; and (ii) Power Way and its parties acting in concert (as defined under the Takeovers Code) will hold 20% or more of the voting rights of the Company respectively; or (3) the public float of the Shares falls below 25% (or any given percentage as required by the GEM Listing Rules) of the issued Shares.

These convertible Bonds in the principal sum HK$606,800,000 had been, as at 30 June 2009, distributed to the shareholders of Power Way as to Melco LV HK$356,200,231, Global Crossing HK$175,188,566 and LottVision Limited HK$75,411,203. With LottVision Limited transferring HK$36,000,000 to three independent third parties, it held the balance of the convertible bonds in the principal amount of HK$39,411,203.

• (6) Mr. Ho is an advisor of the Company and the Group without receiving any compensation. He was granted the share options in recognition of his contributions in the past and for the future for the benefits of the Company and the Group.

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• (7) Pursuant to an agreement dated 7 September 2008 (as amended by a supplemental agreement dated 26 September 2008) entered into between the Company and Intralot International Limited (the “ Assets Transfer Agreement ”), the Company has agreed to acquire the Assets (as defined in the Assets Transfer Agreement) at the consideration of HK$305,130,367.558, as disclosed in the announcement of the Company on 28 September 2008. The consideration will be satisfied by the Company by allotting and issuing 28,208,938 Shares and issuing the convertible bonds I in the principal amount of HK$277,175,310 which is convertible into 279,692,542 new Shares at the conversion price I of HK$0.991 per Share. In addition, upon obtaining two agreements in connection with the projects envisaged by China Sports Lottery Administration and/or China Welfare Lottery Issuance in the PRC, the Company shall pay the success payment to Intralot International Limited. The success payment will be satisfied by way of the convertible bonds II, which are convertible into 69,709,080 new Shares in the Company at the conversion price II of HK$1.0759. Intralot S.A. is therefore deemed interested in the Shares and underlining Shares held by Intralot International Limited, a wholly owned subsidiary of Intralot S.A.

• (8) Firich Enterprises Co., Ltd. is deemed to be interested in the 30,499,042 Shares and the underlying 206,104,195 Shares from convertible bonds in the Company as described in (5) above by virtue of its controlling interests in its wholly-owned subsidiaries, Global Crossing and Toprich.

• (9) LottVision Limited is deemed to be interested in the 8,947,934 Shares and the underlying 46,366,121 Shares from convertible bonds in the Company as described in (5) above by virtue of its controlling interests in its wholly-owned subsidiary, LottVision Investments.

• (10) Mr. Ng Lai Yick is deemed, by virtue of the SFO, to be interested in the 36,900,000 Shares held by North 22 Nominees Limited, a company wholly-owned by him, in addition to the 3,134,744 Shares held by him personally.

Save as disclosed above, the Company had not been notified of any other relevant interests or short positions in the shares or underlying shares in the Company as at 30 June 2009.

AUDIT COMMITTEE

The Company has established the Audit Committee in accordance with the GEM Listing Rules to review and supervise the financial reporting process and internal control procedures of the Group. The Audit Committee comprises three Independent Nonexecutive Directors of the Company. The Audit Committee has reviewed the Group’s unaudited consolidated financial statements for the six months ended 30 June 2009.

REQUIRED STANDARD OF SECURITIES DEALINGS BY DIRECTORS

During the six months ended 30 June 2009, the Company had adopted a code of conduct for directors’ securities transactions on terms no less exacting than the required standard of dealings set out in Rules 5.48 to 5.67 of the GEM Listing Rules. Having made specific enquiry with all the Directors, the Directors confirmed that they had complied with the required standard of dealings and the code of conducts for directors’ securities transactions during the six months ended 30 June 2009.

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CORPORATE GOVERNANCE

The Company has complied with all the code provisions set out in the Code on Corporate Governance Practices contained in Appendix 15 of the GEM Listing Rules, and where appropriate, adopted the recommended best practices throughout the Review Period.

by Order of the Board of MelcoLot Limited Chan Sek Keung, Ringo Chairman

Hong Kong, 11 August 2009

As at the date of this announcement, the Board consists of three executive Directors, namely, Mr. Chan Sek Keung, Ringo, Mr. Ko Chun Fung, Henry and Mr. Christos Moumouris; and three independent non-executive Directors, namely, Mr. David Tsoi, Mr. Pang Hing Chung, Alfred and Mr. So Lie Mo, Raymond.

This announcement will remain on the “Latest Company Announcements” page of the GEM website at www.hkgem.com for at least 7 days from the date of its publication and on the Company’s website at www.melcolot.com.

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