G-Resources Group Limited — Annual Report 2012

Oct 10, 2012

PALADIN LIMITED

(incorporated in Bermuda with limited liability) Stock Code : 495 and 642 (Preference Shares)

ANNUAL REPORT OF A SUBSIDIARY – SENSORS INTEGRATION TECHNOLOGY LIMITED 2012

Contents

	Page
Directors’ Statement	2
Biography of Directors	4
Directors’ Report	5
Independent Auditor’s Report	6
Consolidated Statement of Comprehensive Income	8
Consolidated Statement of Financial Position	9
Consolidated Statement of Changes in Equity	10
Consolidated Statement of Cash Flows	11
Notes to the Consolidated Financial Statements	12

1

Directors’ Statement

MANAGEMENT DISCUSSION AND ANALYSIS

The principal activity of the Company is the research and development of high technology systems and applications.

BUSINESS REVIEW AND PROSPECT

The Company has planned to conduct research and development of digital camera, camcorder, surveillance, video capturing and processing technology. The plan is in early stage and did not generate any revenue to the Company at this stage.

LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE

As at 30 June 2012, net current liabilities of the Company were approximately HK$69 million. The current ratio was 0.42. The bank balances were approximately HK$0.5 million.

As at 30 June 2012, the major outstanding liabilities of the Company was amount due to a fellow subsidiary of approximately HK$96 million, amount due to a director of approximately HK$13 million, amount due to ultimate holding Company of approximately HK$4 million and other payables and accruals of approximately HK$7 million.

The majority of the Company’s assets and borrowings are denominated either in Hong Kong dollars or US dollars thereby avoiding exposure to undesirable exchange rate fluctuations. In view of the stability of the exchange rate of HK dollars and US dollars, the directors consider that the Company has no significant exposure to exchange fluctuation and does not pledge against foreign exchange risk.

The Directors consider that it is not meaningful to publish a gearing ratio of the Company until such time the Company is in a positive shareholders’ equity position.

SIGNIFICANT INVESTMENTS, ACQUISITIONS AND DISPOSALS

During the year ended 30 June 2012, the Company had no material acquisitions and disposals of subsidiaries.

As at 30 June 2012, the Company had no material investment.

EMPLOYEES AND REMUNERATION POLICIES

As at 30 June 2012, the Company employed total of 14 employees. They were remunerated according to market conditions.

2

Directors’ Statement[(Cont’d)]

DIVIDEND

The Directors of the Company do not recommend the payment of a final dividend (2011: nil).

ACKNOWLEDGEMENT

On behalf of my fellow directors, I wish to thank all staff and employees for their diligence and loyal support during the year under review.

By order of the Board

Chen Te Kuang Mike

DIRECTOR

Hong Kong

26 September 2012

3

Biography of Directors

DIRECTORS

Mr. Oung Da Ming , aged 56, joined the Company in 2007. Previously he was the chairman between 1985 and 1989 of The E-Hsin International Corporation, a company headquartered in Taiwan engaged in manufacturing and export. In 1991, Mr. Oung became the president of Hualon Microelectronics Corporation until 2004. He became its chairman in 1995 and continues to hold this position. Hualon Microelectronics Corporation which is headquartered in Taiwan was established to engage in integrated circuit (“IC”) design, wafer fabrication and the research and development of IC products. In 2001 it disposed of its wafer foundry and has concentrated its activities on fabless wafer design and the research, development and trading in IC related products. Since 2000 Mr. Oung has also been actively developing a technology capability in Russia including establishing Optolink in 2001. Mr. Oung is the uncle of Mr. Mike Chen.

Mr. Chen Te Kuang Mike , aged 34, joined the Company in 2007. He has more than 10 years’ management and production experience in electronics industry.

4

Directors’ Report

The directors present their annual report and the audited consolidated financial statements for the year ended 30 June 2012.

PRINCIPAL ACTIVITY

The Company is an investment holding company. The activities of its principal subsidiaries are set out in note 15 to the consolidated financial statements. During the year under review, there was no significant change in the Group’s principal activities.

RESULTS

The results of the Group are set out in the consolidated statement of comprehensive income on page 8.

PROPERTY, PLANT AND EQUIPMENT

Details of movements during the year in property, plant and equipment of the Group are set out in note 12 to the consolidated financial statements.

DIRECTORS

The directors of the Company during the year and up to the date of this report were:

Oung Da Ming Chen Te Kuang Mike

In accordance with Articles 7 of the Company’s Articles of Association, both directors retire, being eligible, offer themselves for re-election.

AUDITOR

A resolution will be submitted to the annual general meeting to re-appoint Messrs. Deloitte Touche Tohmatsu as the auditor of the Company.

On behalf of the Board

Chen Te Kuang Mike

DIRECTOR

26 September 2012

5

Independent Auditor’s Report

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TO THE DIRECTORS OF SENSORS INTEGRATION TECHNOLOGY LIMITED 感應系統科技有限公司

(incorporated in Hong Kong with limited liability)

We have audited the consolidated financial statements of Sensors Integration Technology Limited (the “Company”) and its subsidiaries (collectively referred to as the “Group”) set out on pages 8 to 31, which comprise the consolidated statement of financial position as at 30 June 2012, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

Directors’ Responsibility for the Consolidated Financial Statements

The directors of the Company are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit and to report our opinion solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

6

Independent Auditor’s Report[(Cont’d)]

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of consolidated financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements give a true and fair view of the state of affairs of the Group as at 30 June 2012, and of its loss and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards.

Restriction on Distribution and Use

The consolidated financial statements are prepared pursuant to the articles of association of the Company amended on 8 June 2007. As a result, the consolidated financial statements may not be suitable for another purpose. Our report is intended solely for the Company and should not be distributed to or used by parties other than the Company without our prior written consent. We do not assume responsibility towards or accept liability to any other person for the contents of this report. For the avoidance of doubt, all duties and liabilities (including, without limitation, those arising from negligence or otherwise) to third parties are specifically disclaimed. Accordingly, any other person who relies on this report does so entirely at their own risk.

Deloitte Touche Tohmatsu

Certified Public Accountants Hong Kong 26 September 2012

7

Consolidated Statement of Comprehensive Income

For the year ended 30 June 2012

NOTES Other income Research and development expenses Administrative expenses Loss for the year 9 Other comprehensive expense Exchange differences arising on translation Total comprehensive expense for the year LOSS PER SHARE 11 Basic	2012 HK$ 1,158,467 – (8,955,985) (7,797,518) (30,083) (7,827,601) (3.00) HK cents	2011 HK$ 3,706,572 (3,602,993) (14,832,401) (14,728,822) (1,058,474) (15,787,296) (5.67) HK cents

8

Consolidated Statement Of Financial Position

AT 30 June 2012

NOTES Non-current assets Property, plant and equipment 12 Current assets Other receivables and prepayments Amounts due from fellow subsidiaries 13 Bank balances and cash Current liabilities Other payables and accruals Amount due to ultimate holding company 13 Amount due to a fellow subsidiary 13 Amount due to a director 14 Net current liabilities Net liabilities Capital and reserves Share capital 15 Reserves Deficiency of shareholder’s fund	2012 HK$ 79,986 221,378 49,847,898 463,691 50,532,967 6,879,122 4,035,450 95,929,530 12,881,725 119,725,827 (69,192,860) (69,112,874) 2,597,634 (71,710,508) (69,112,874)	2011 HK$ 147,273 1,425,268 50,847,898 3,014,967 55,288,133 6,816,453 92,950 95,929,530 13,881,746 116,720,679 (61,432,546) (61,285,273) 2,597,634 (63,882,907) (61,285,273)

The consolidated financial statements on pages 8 to 31 were approved and authorised for issue by the Board of Directors on 26 September 2012.

Chen Te Kuang Mike DIRECTOR

Oung Da Ming DIRECTOR

9

Consolidated Statement of Changes in Equity

For the year ended 30 June 2012

At 1 July 2010 Loss for the year Exchange differences arising on translation Total comprehensive expense for the year At 30 June 2011 Loss for the year Exchange differences arising on translation Total comprehensive expense for the year At 30 June 2012	Share capital HK$ 2,597,634 – – – 2,597,634 – – – 2,597,634	Translation Accumulated reserve losses HK$ HK$ (829,658) (47,265,953) – (14,728,822) (1,058,474) – (1,058,474) (14,728,822) (1,888,132) (61,994,775) – (7,797,518) (30,083) – (30,083) (7,797,518) (1,918,215) (69,792,293)	Total HK$ (45,497,977) (14,728,822) (1,058,474) (15,787,296) (61,285,273) (7,797,518) (30,083) (7,827,601) (69,112,874)

10

Consolidated Statement of Cash Flows

For the year ended 30 June 2012

Operating activities Loss for the year Adjustment for: Depreciation and impairment loss Impairment loss on other receivables Gain on disposal of property, plant and equipment Interest income Operating cash flows before movements in working capital (Increase) decrease in other receivables and prepayments Increase (decrease) in other payables and accruals Net cash used in operating activities Investing activities Decrease (increase) in amounts due from fellow subsidiaries Interest received Purchase of property, plant and equipment Sales proceeds from disposal of property, plant and equipment Net cash from (used in) investing activities Financing activities Advance from ultimate holding company (Repayment to) advance from a director Net cash from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of the year Effect of foreign exchange rate changes Cash and cash equivalents at end of the year, representing bank balances and cash	2012 HK$ (7,797,518) 66,876 1,268,216 – (574) (6,463,000) (64,326) 32,362 (6,494,964) 1,000,000 574 – – 1,000,574 3,942,500 (1,000,021) 2,942,479 (2,551,911) 3,014,967 635 463,691	2011 HK$ (14,728,822) 507,369 – (64,160) (74,914) (14,360,527) 1,001,338 (475,515) (13,834,704) (12,465,312) 74,914 (70,052) 118,208 (12,342,242) 92,950 13,881,746 13,974,696 (12,202,250) 15,217,603 (386) 3,014,967

11

Notes to the Consolidated Financial Statements

For the year ended 30 June 2012

1. GENERAL

The Company is a private limited company incorporated in Hong Kong. Its immediate holding company is Perfect Place Limited, a company incorporated in the British Virgin Islands. Its ultimate holding company is Paladin Limited (“Paladin”), a company incorporated in Bermuda with limited liability and its shares are listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). The addresses of the registered office and the principal place of business of the Company are Room 4501, 45th Floor, Office Tower, Convention Plaza, 1 Harbour Road, Wanchai, Hong Kong.

The consolidated financial statements are presented in Hong Kong dollars (“HK$” or “HKD”) which is the same as the functional currency of the Company.

The Company is an investment holding company. Its principal subsidiaries are engaged in scientific development.

2. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements for the year ended 30 June 2012 have been prepared solely for the information of the Company’s management.

In preparing the consolidated financial statements, the directors of the Company have given careful consideration to the future liquidity of the Group in light of the net current liabilities of approximately HK$69,193,000 as at 30 June 2012 and a loss of approximately HK$7,798,000 for the year then ended. Paladin has agreed to provide adequate funds for the Group to meet in full its financial obligations as they fall due for the foreseeable future.

Taking into account the available unutilised bank credit facilities of Paladin and its subsidiaries (collectively the “Paladin Group”) as at 30 June 2012 and the cash flows generated from the operations of Paladin Group, the directors of the Company are satisfied that the Group will be able to meet in full its financial obligations as they fall due for the foreseeable future and accordingly, the consolidated financial statements have been prepared on a going concern basis.

12

Notes to the Consolidated Financial Statements[(Cont’d)]

For the year ended 30 June 2012

3. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”)

In the current year, the Group has applied the following new and revised HKFRSs issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

Amendments to HKFRSs Improvements to HKFRSs issued in 2010 HKAS 24 (as revised in 2009) Related party disclosures Amendments to HKFRS 7 Disclosures – Transfers of financial assets Amendments to HK(IFRIC*) Prepayments of a minimum funding requirement – INT 14

• IFRIC represents the IFRS Interpretations Committee.

The application of the above new or revised HKFRSs in the current year has had no material effect on the amounts reported in these consolidated financial statements and/or disclosures set out in these consolidated financial statements.

The Group has not early applied the following new or revised HKFRSs that have been issued but are not yet effective:

Amendments to HKFRSs Annual improvements to HKFRSs 2009 – 2011 cycle[2] Amendments to HKFRS 7 Disclosures – Offsetting financial assets and financial liabilities[2] Amendments to HKFRS 9 Mandatory effective date of HKFRS 9 and transition and HKFRS 7 disclosures[4] Amendments to HKFRS 10, Consolidated financial statements, joint arrangements HKFRS 11 and HKFRS 12 and disclosure of interests in other entities: Transition guidance[2] HKFRS 9 Financial instruments[4] HKFRS 10 Consolidated financial statements[2] HKFRS 11 Joint arrangements[2] HKFRS 12 Disclosures of interests in other entities[2] HKFRS 13 Fair value measurements[2] Amendments to HKAS 1 Presentation of items of other comprehensive income[1] HKAS 19 (as revised in 2011) Employee benefits[2] HKAS 27 (as revised in 2011) Separate financial statements[2] HKAS 28 (as revised in 2011) Investments in associates and joint ventures[2] Amendments to HKAS 32 Offsetting financial assets and financial liabilities[3] HK(IFRIC) – INT 20 Stripping costs in the production phase of a surface mine[2]

13

Notes to the Consolidated Financial Statements[(Cont’d)]

For the year ended 30 June 2012

3. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”) (Cont’d)

1 Effective for annual periods beginning on or after 1 July 2012.

2 Effective for annual periods beginning on or after 1 January 2013.

3 Effective for annual periods beginning on or after 1 January 2014.

4 Effective for annual periods beginning on or after 1 January 2015.

Amendments to HKAS 1 Presentation of items of other comprehensive income

The amendments to HKAS 1 retain the option to present profit or loss and other comprehensive income in either a single statement or in two separate but consecutive statements. However, the amendments to HKAS 1 require additional disclosures to be made in the other comprehensive income section such that items of other comprehensive income are grouped into two categories: (a) items that will not be reclassified subsequently to profit or loss; and (b) items that may be reclassified subsequently to profit or loss when specific conditions are met. Income tax on items of other comprehensive income is required to be allocated on the same basis.

The amendments to HKAS 1 are effective for annual periods beginning on or after 1 July 2012. The presentation of items of other comprehensive income will be modified accordingly when the amendments are applied in the future accounting periods.

The directors of the Company anticipate that the application of the other new and revised HKFRSs will have no material impact on the consolidated financial statements.

4. SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements have been prepared on the historical cost basis and in accordance with Hong Kong Financial Reporting Standards issued by the HKICPA.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

14

Notes to the Consolidated Financial Statements[(Cont’d)]

For the year ended 30 June 2012

4. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for services rendered in the normal course of business.

Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income from a financial asset is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.

Property, plant and equipment

Property, plant and equipment are stated in the consolidated statement of financial position at cost less subsequent accumulated depreciation and accumulated impairment losses, if any.

Depreciation is recognised so as to write off the cost of items of property, plant and equipment less their residual values over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

Financial instruments

Financial assets and financial liabilities are recognised in the consolidated statement of financial position when a group entity becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

15

Notes to the Consolidated Financial Statements[(Cont’d)]

For the year ended 30 June 2012

4. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

Financial instruments (Cont’d)

Financial assets

The Group’s financial assets are loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset or, where appropriate, a shorter period to the net carrying amount on initial recognition.

Interest income is recognised on an effective interest basis for debt instruments.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables (including other receivables, amounts due from fellow subsidiaries and bank balances and cash) are carried at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on impairment loss on financial assets below).

Impairment of financial assets

Financial assets are assessed for indicators of impairment at the end of the reporting period. Financial assets are considered to be impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial assets have been affected.

16

Notes to the Consolidated Financial Statements[(Cont’d)]

For the year ended 30 June 2012

4. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

Financial instruments (Cont’d)

Impairment of financial assets (Cont’d)

Objective evidence of impairment could include:

• significant financial difficulty of the issuer or counterparty;

• breach of contact, such as default or delinquency in interest or principal payments; or

• it becoming probable that the borrower will enter bankruptcy or financial re-organisation.

For financial assets carried at amortised cost, an impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the financial asset’s original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial

assets.

For financial assets measured at amortised cost, if, in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment losses was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

Financial liabilities and equity instruments

Financial liabilities and equity instruments issued by a group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

17

Notes to the Consolidated Financial Statements[(Cont’d)]

For the year ended 30 June 2012

4. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

Financial instruments (Cont’d)

Financial liabilities and equity instruments (Cont’d)

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Interest expense is recognised on an effective interest basis.

Financial liabilities

Financial liabilities including other payables, amount due to ultimate holding company, amount due to a fellow subsidiary and amount due to a director are subsequently measured at amortised cost, using the effective interest method.

Derecognition

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss.

The Group derecognise financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

18

Notes to the Consolidated Financial Statements[(Cont’d)]

For the year ended 30 June 2012

4. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

Impairment loss

At the end of the reporting period, the Group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or a cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or a cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately.

Research and development expenditure

Expenditure on research activities is recognised as an expense in the period in which it is incurred.

Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recorded in the respective functional currency (i.e. the currency of the primary economic environment in which the entity operates) at the rates of exchanges prevailing on the dates of the transactions. At the end of the reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

19

Notes to the Consolidated Financial Statements[(Cont’d)]

For the year ended 30 June 2012

4. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

Foreign currencies (Cont’d)

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are recognised in profit or loss in the period in which they arise.

For the purposes of presenting the consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated into the presentation currency of the Company (i.e. Hong Kong dollars) at the rate of exchange prevailing at the end of the reporting period. income and expenses items are translated at the average exchange rates for the year. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity under the heading of translation reserve.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantially enacted by the end of the reporting period.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the statement of financial position liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are generally recognised for all deductible temporary difference to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are generally not recognised for all deductible temporary difference if the temporary difference arises from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at the end of the reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

20

Notes to the Consolidated Financial Statements[(Cont’d)]

For the year ended 30 June 2012

4. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

Taxation (Cont’d)

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realised, based on tax rate (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Current and deferred tax is recognised in profit or loss, except when it relates to items that are recognised in other comprehensive income or directly in equity, in which case the deferred tax is also recognised in other comprehensive income or directly in equity respectively.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

The Group as lessee

Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

Retirement benefit costs

Payments to Mandatory Provident Fund Scheme in Hong Kong, Employee Provident Fund Scheme in Malaysia and state-managed retirement benefit schemes in United States of America (“USA”) are charged as an expense when employees have rendered service entitling them to the contributions.

5. CAPITAL RISK MANAGEMENT

The Group manages its capital to ensure that the entities within the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. The Group’s overall strategy remains unchanged from prior year.

The capital structure of the Group consists of amount due to ultimate holding company, amount due to fellow subsidiaries, amount due to a director and equity attributable to equity holders of the Company, comprising issued share capital and reserves as disclosed in relevant notes and the consolidated statement of changes in equity.

21

Notes to the Consolidated Financial Statements[(Cont’d)]

For the year ended 30 June 2012

5. CAPITAL RISK MANAGEMENT (Cont’d)

The directors of the Company reviews the capital structure on a regular basis. As part of this review, the directors consider the cost of capital and the risks associated with each class of capital. The Company will balance its overall capital structure through new share issues as well as issue of new debts.

6. FINANCIAL INSTRUMENTS

Categories of financial instruments

Financial assets Loans and receivables Other receivables Amounts due from fellow subsidiaries Bank balances and cash Financial liabilities Amortised cost Other payables Amount due to ultimate holding company Amount due to a fellow subsidiary Amount due to a director	2012 HK$ 59,924 49,847,898 463,691 50,371,513 502,114 4,035,450 95,929,530 12,881,725 113,348,819	2011 HK$ 1,151,358 50,847,898 3,014,967
		55,014,223
		436,471 92,950 95,929,530 13,881,746
		110,340,697

Financial risk management objectives and policies

The Group’s major financial instruments include other receivables, amounts due from fellow subsidiaries, bank balances and cash, other payables, amount due to ultimate holding company, amount due to a fellow subsidiary and amount due to a director. Details of the financial instruments are disclosed in respective notes. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. The management manages and monitors exposures to ensure appropriate measures are implemented on a timely and effective manner. The Group’s overall strategy remains unchanged from prior period.

22

Notes to the Consolidated Financial Statements[(Cont’d)]

For the year ended 30 June 2012

6. FINANCIAL INSTRUMENTS (Cont’d)

Financial risk management objectives and policies (Cont’d)

Currency risk

The carrying amounts of the Group’s foreign currency denominated monetary assets (being bank balances and cash) at the reporting dates are as follows:

	2012	2011
	HK$	HK$
Assets
United States Dollars (“USD”)	373	468,104

The management continuously monitors the foreign exchange exposure and will consider hedging foreign currency risk should the need arise.

The Group is mainly exposed to the foreign currency risk on HKD against USD. As HKD is pegged to USD, the financial impact on exchange difference between HKD and USD is expected to be immaterial and therefore no sensitivity analysis has been prepared.

Credit risk

The Group’s credit risk on liquid funds is limited because majority of the counterparties are banks with high credit ratings assigned by international credit-rating agencies.

At 30 June 2012, the Group has concentration of credit risk in relation to the receivables due from certain fellow subsidiaries totalling HK$47,402,545 (2011: HK$48,402,545). In order to minimise the credit risk, the directors of the Company have reviewed the recoverable amount of the receivables from fellow subsidiaries at the end of the reporting period to ensure that adequate impairment losses are made for the irrecoverable amount. In this regard, the directors of the Company consider that the Group’s credit risk on receivables from fellow subsidiaries is significantly reduced.

Interest rate risk

The Group’s bank balances have exposure to cash flow interest rate risk due to the fluctuation of the prevailing market interest rate on bank balances. The directors of the Company consider the Group’s exposure of the short-term bank deposits to interest rate risk is not significant as interest bearing bank balances are with short maturity.

23

Notes to the Consolidated Financial Statements[(Cont’d)]

For the year ended 30 June 2012

6. FINANCIAL INSTRUMENTS (Cont’d)

Financial risk management objectives and policies (Cont’d)

Liquidity risk

The Group relies on financial support from Paladin which has agreed to provide adequate funds for the Group as a significant source of liquidity.

In the management of the liquidity risk, the Group monitors and maintains a level of cash and cash equivalents deemed by the management to finance the Company’s operations and mitigate the effects of the fluctuations in cash flows.

The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows.

Liquidity and interest rate table

				Total
				undiscounted
	Weighted			cash flows
	average	On	Less than	and carrying
	interest rate	demand	3 months	amounts
	%	HK$	HK$	HK$
At 30 June 2012
Non-derivative financial liabilities
Other payables	N/A	–	502,114	502,114
Amount due to ultimate holding
company	N/A	4,035,450	–	4,035,450
Amount due to a fellow subsidiary	N/A	95,929,530	–	95,929,530
Amount due to a director	N/A	12,881,725	–	12,881,725
		112,846,705	502,114	113,348,819
At 30 June 2011
Non-derivative financial liabilities
Other payables	N/A	–	436,471	436,471
Amount due to ultimate holding
company	N/A	92,950	–	92,950
Amount due to a fellow subsidiary	N/A	95,929,530	–	95,929,530
Amount due to a director	N/A	13,881,746	–	13,881,746
		109,904,226	436,471	110,340,697

24

Notes to the Consolidated Financial Statements[(Cont’d)]

For the year ended 30 June 2012

6. FINANCIAL INSTRUMENTS (Cont’d)

Fair value

The fair value of financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow analysis.

7. SEGMENT INFORMATION

The Group’s operating activities are attributable to a single reporting and operating segment focusing on scientific development. This reportable segment has been identified on the basis of internal management reports prepared in accordance with accounting policies conform to HKFRSs that are regularly reviewed by the directors of the Company.

The directors of the Company review the overall results of the Group as a whole to make decisions about resources allocation. Accordingly, no analysis of this single reporting segment is presented.

8. TAXATION

No provision for Hong Kong Profits Tax has been made in the consolidated financial statements as the Group has no assessable profit in both years. Taxation arising in other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions.

Taxation for the year can be reconciled to loss for the year per the consolidated statement of comprehensive income as follows:

Loss before taxation Tax credit at Hong Kong Profits Tax rate of 16.5% (2011: 16.5%) Tax effect of expenses not deductible for tax purposes Tax effect of income not assessable for tax purposes Taxation for the year	2012 HK$ (7,797,518) (1,286,590) 1,477,737 (191,147) –	2011 HK$ (14,728,822) (2,430,256) 3,041,840 (611,584) –

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Notes to the Consolidated Financial Statements[(Cont’d)]

For the year ended 30 June 2012

9. LOSS FOR THE YEAR

Loss for the year has been arrived at after charging: Directors’ remuneration (note 10) Other staff costs Contributions to retirement benefit scheme Auditor’s remuneration Depreciation and impairment loss on property, plant and equipment Impairment loss recognised on other receivables and after crediting: Consultancy fee income Interest income Net exchange gain Gain on disposal of property, plant and equipment	2012 HK$ – 2,665,018 10,350 2,675,368 50,000 66,876 1,268,216 1,154,554 574 3,338 –	2011 HK$ – 6,369,025 111,801
		6,480,826
		50,000 507,369 – 3,197,829 74,914 369,639 64,160

10. DIRECTORS’ EMOLUMENTS

Particulars of the emoluments of the directors of the Company are as follows:

The emoluments paid or payable to each of the two (2011: two) directors of the Company were as follows:

Directors’ fees Other emoluments: Salaries and other benefits Retirement benefit scheme contributions Total	Oung Da Ming HK$ – – – – –	2012 Chen Te Kuang Mike HK$ – – – – –	Total HK$ –
			– –
			–
			–

26

Notes to the Consolidated Financial Statements[(Cont’d)]

For the year ended 30 June 2012

10. DIRECTORS’ EMOLUMENTS (Cont’d)

Directors’ fees Other emoluments: Salaries and other benefits Retirement benefit scheme contributions Total	Oung Da Ming HK$ – – – – –	2011 Chen Te Kuang Mike HK$ – – – – –	Total HK$ –
			– –
			–
			–

11. LOSS PER SHARE

The calculation of the basic loss per share attributable to the owners of the Company is based on the following data:

Loss Loss for the purposes of basic loss per share Number of shares Number of shares for the purposes of basic loss per share	For the year ended 30 June 2012 2011 HK$ HK$ (7,797,518) (14,728,822) 2012 2011 259,763,430 259,763,430	For the year ended 30 June 2012 2011 HK$ HK$ (7,797,518) (14,728,822) 2012 2011 259,763,430 259,763,430
		2011 259,763,430

No diluted loss per share is presented as the Company did not have any potential dilutive ordinary shares outstanding at the end of each reporting period.

27

Notes to the Consolidated Financial Statements[(Cont’d)]

For the year ended 30 June 2012

12. PROPERTY, PLANT AND EQUIPMENT

COST At 1 July 2010 Additions Disposals Exchange realignment At 30 June 2011 Exchange realignment At 30 June 2012 DEPRECIATION AND IMPAIRMENT At 1 July 2010 Provided for the year Eliminated on disposals Impairment loss recognised in profit or loss (note) Exchange realignment At 30 June 2011 Provided for the year Exchange realignment At 30 June 2012 CARRYING VALUES At 30 June 2012 At 30 June 2011	Motor vehicles HK$ 221,747 – – 25,569 247,316 – 247,316 81,307 11,675 – 136,212 18,122 247,316 – – 247,316 – –	Furniture, fixture and equipment HK$ 11,325 7,228 (920) 618 18,251 (441) 17,810 768 2,586 (26) – 53 3,381 3,505 (141) 6,745 11,065 14,870	Computer HK$ 228,942 62,824 (43,428) 10,842 259,180 (196) 258,984 69,379 52,594 (34,380) 30,828 8,356 126,777 63,371 (85) 190,063 68,921 132,403	Machineries HK$ 472,047 – (93,401) 48,907 427,553 – 427,553 170,461 43,902 (49,295) 229,572 32,913 427,553 – – 427,553 – –	Total HK$ 934,061 70,052 (137,749) 85,936 952,300 (637) 951,663 321,915 110,757 (83,701) 396,612 59,444 805,027 66,876 (226) 871,677 79,986 147,273

Note: Amount represented carrying amounts of motor vehicles, computers and machineries owned by LLC RPC Sensoris. Due to cessation of the research projects of this subsidiary and the physical damage of the motor vehicles during the year ended 30 June 2011, impairment loss on the carrying amount of respective property, plant and equipment was recognised accordingly.

28

Notes to the Consolidated Financial Statements[(Cont’d)]

For the year ended 30 June 2012

12. PROPERTY, PLANT AND EQUIPMENT (Cont’d)

The above items of property, plant and equipment are depreciated on a straight-line basis at the following rates per annum:

Motor vehicles	20%
Furniture, fixture and equipment	10 – 20%
Computers	50%
Machineries	15-25%

13. AMOUNTS DUE FROM (TO) GROUP COMPANIES

The amounts are unsecured, interest-free and repayable on demand.

14. AMOUNT DUE TO A DIRECTOR

The amount is unsecured, interest-free and repayable on demand.

15. SHARE CAPITAL

Nominal value per share HK$ Authorised: At 1 July 2010, 30 June 2011 and 30 June 2012 0.01 Issued and fully paid: At 1 July 2010, 30 June 2011 and 30 June 2012 0.01	Number of shares 259,763,430 259,763,430	Amount HK$ 2,597,634
		2,597,634

29

Notes to the Consolidated Financial Statements[(Cont’d)]

For the year ended 30 June 2012

16. OPERATING LEASE

At the end of the reporting period, the Group had contracted with landlords for the following future minimum lease payments.

The Group as lessee

Within one year In the second to fifth years inclusive	2012 HK$ 323,734 136,285 460,019	2011 HK$ 560,530 486,956
		1,047,486

The minimum lease payments under operating lease recognised as an expense for the year is HK$552,000 (2011: HK$897,000). Operating lease payments represent rentals payable by the Group for certain of its office properties. Leases are negotiated for an average term of 2 years.

17. PARTICULARS OF PRINCIPAL SUBSIDIARIES

Particulars of the subsidiaries of the Company are as follows:

			Proportion of
			nominal value of
			issued share
	Place of		capital directly held
	incorporation/	Nominal value	by the Company
	registration	of issued	at 30 June
Name of subsidiary	and operation	share capital	2011 and 2012	Principal activities
Sensors Integration	Malaysia	Malaysian	100%	Scientific development
Technology (M)		Ringgit 1.00
SDN BHD
LLC RPC Sensoris	Russia	Russion	100%	Inactive
		Rouble 1.00
Unified Color Technologies,	USA	United States	100%	Scientific development
LLC		Dollar 1.00

18. RELATED PARTY TRANSACTIONS

The management of the Company regards the key management as the two directors and their emoluments are set out in note 10.

30