G-Resources Group Limited — Interim / Quarterly Report 2019

Feb 28, 2019

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

PALADIN LIMITED

(Incorporated in Bermuda with limited liability)

(Stock code: 495)

ANNOUNCEMENT OF INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2018

The Board of Directors (the “Board”) of Paladin Limited (the “Company”) announces the unaudited interim results of the Company and its subsidiaries (the “Group”) for the six months ended 31 December 2018.

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the six months ended 31 December 2018

NOTE Revenue 3 Other income Other (losses)/gains 4 Administrative expenses (Loss)/profit from operations Finance costs 5 Share of loss of an associate (Loss)/profit before tax Income tax expense 6 (Loss)/profit for the period 7	Six months ended 31 December 2018 2017 HK$’000 HK$’000 (Unaudited) (Unaudited) 4,341 2,157 57 2,324 (4,430) 30,572 (47,965) (24,725) (47,997) 10,328 (1,782) (1,256) (1,348) (1,497) (51,127) 7,575 – – (51,127) 7,575

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NOTE Other comprehensive income: Items that will be reclassified to profit or loss: Exchange differences on translating foreign operations Fair value gain on available-for-sale investment Other comprehensive income for the period, net of tax Total comprehensive income for the period (Loss)/profit for the period attributable to: Owners of the Company Non-controlling interests Total comprehensive income for the period attributable to: Owners of the Company Non-controlling interests (Loss)/earnings per share 8 Basic (HK cents per share) Diluted (HK cents per share)

Six months ended 31 December 2018 2017 HK$’000 HK$’000 (Unaudited) (Unaudited) (1,149) 2,447 – 780 (1,149) 3,227 (52,276) 10,802 (48,117) 9,221 (3,010) (1,646) (51,127) 7,575 (49,028) 12,448 (3,248) (1,646) (52,276) 10,802 (3.35) 0.68 (3.35) 0.52

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CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 31 December 2018

Non-current assets Investment properties Property, plant and equipment Interest in an associate Financial assets at fair value through profit or loss Available-for-sale investment Deposits placed for life insurance policies Total non-current assets Current assets Other receivables, deposits and prepayments Bank and cash balances Total current assets Current liabilities Other payables and accrued charges Due to related parties Current tax liabilities Secured bank borrowings Convertible notes Total current liabilities Net current assets Total assets less current liabilities	31 December 2018 HK$’000 (Unaudited) 634,200 207,054 1,451 52,701 – – 895,406 5,041 297,305 302,346 11,509 19,341 298 104,382 37,282 172,812 129,534 1,024,940	30 June 2018 HK$’000 (Audited) 642,170 210,186 2,799 – 13,592 36,258 905,005 7,365 332,127 339,492 12,497 24,388 298 105,779 41,359 184,321 155,171 1,060,176

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Non-current liabilities Other borrowings NET ASSETS CAPITAL AND RESERVES Share capital Reserves Equity attributable to owners of the Company Non-controlling interests TOTAL EQUITY	31 December 2018 HK$’000 (Unaudited) 8,660 1,016,280 14,361 1,007,967 1,022,328 (6,048) 1,016,280	30 June 2018 HK$’000 (Audited) 3,340 1,056,836 14,361 1,045,810 1,060,171 (3,335) 1,056,836

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 31 December 2018

1. BASIS OF PREPARATION

These condensed consolidated financial statements have been prepared in accordance with Hong Kong Accounting Standard 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) and the applicable disclosures required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”).

These condensed consolidated financial statements should be read in conjunction with the 2018 annual financial statements. The accounting policies and methods of computation used in the preparation of these condensed consolidated financial statements are consistent with those used in the annual consolidated financial statements for the year ended 30 June 2018 except as stated below.

2. ADOPTION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS

In the current period, the Group has adopted all the new and revised Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the HKICPA that are relevant to its operations and effective for its accounting year beginning on 1 July 2018. HKFRSs comprise Hong Kong Financial Reporting Standards (“HKFRS”); Hong Kong Accounting Standards (“HKAS”); and Interpretations.

The Group has initially adopted HKFRS 9 Financial Instruments from 1 July 2018. A number of other new standards are effective from 1 July 2018 but they do not have a material effect on the Group’s consolidated financial statements.

HKFRS 9 Financial Instruments

HKFRS 9 replaces the provisions of HKAS 39 that relate to the recognition, classification and measurement of financial assets and financial liabilities, derecognition of financial instruments, impairment of financial assets and hedge accounting.

The adoption of HKFRS 9 from 1 July 2018 resulted in changes in accounting policies and adjustments to the amounts recognised in the financial statements. As permitted by the transitional provisions of HKFRS 9, the Group was elected not to restate comparative figures. Any adjustments to the carrying amounts of financial assets and liabilities at the date of transition were recognised in the opening accumulated profits of the current period.

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The adoption of HKFRS 9 resulted in the following changes to the Group’s accounting policies.

(a) Classification

From 1 July 2018, the Group classifies its financial assets in the following measurement categories:

• those to be measured subsequently at fair value through other comprehensive income (“FVTOCI”) or fair value through profit or loss (“FVTPL”), and

• those to be measured at amortised cost.

The classification depends on the Group’s business model for managing the financial assets and the contractual terms of the cash flows.

For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. For investments in equity instruments that are not held for trading, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investment at FVTOCI.

(b) Measurement

The Group reclassifies debt investments when and only when its business model for managing those assets changes.

At initial recognition, the Group measures a financial assets at its fair value plus, in the case of a financial assets not at FVTPL, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVTPL are expensed in profit or loss.

Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.

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Subsequent measurement of debt instruments depends on the Group’s business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the Group classifies its debt instruments:

• Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Interest income from these financial assets is included in other income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains/(losses), together with foreign exchange gains and losses. Impairment losses are presented as separate line item in the statement of profit or loss.

• FVTOCI: Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows represent solely payments of principal and interest, are measured at FVTOCI. Movements in the carrying amount are taken through other comprehensive income, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss and recognsied in other gains/(losses). Interest income from these financial assets is included in other income using the effective interest rate method. Foreign exchange gains and losses are presented in other gains/(losses) and impairment losses are presented as separate line item in the statement of profit or loss.

• FVTPL: Assets that do not meet the criteria for amoristed cost or FVTOCI are measured at FVTPL. A gain or loss on a debt investment that is subsequently measured at FVTPL is recognsied in profit or loss and presented net within other gains/(losses) in the period in which it arises.

The Group subsequently measures all equity investments at fair value. Where the Group’s management has elected to present fair value gains and losses on equity investments in other comprehensive income, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. Dividends from such investments continue to be recognised in profit or loss as other income when the Group’s right to receive payments is established.

Changes in the fair value of financial assets at FVTPL are recognised in other gains/(losses) in the statement of profit or loss as applicable. Impairment losses (and reversal of impairment losses) on equity investments measured at FVTOCI are not reported separately from other changes in fair value.

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(c) Impairment

From 1 July 2018, the Group assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at amortised cost and FVTOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk.

Set out below is the impact of the adoption of HKFRS 9 on the Group.

The following table and the accompanying notes below explain the original measurement categories under HKAS 39 and the new measurement categories under HKFRS 9 for each class of the Group’s financial assets as at 1 July 2018.

		Classification	Classification	Classification	Carrying	Carrying
		under	under		amount under	amount under
Financial assets	Note	HKAS 39	HKFRS	9	HKAS 39	HKFRS 9
					HK$’000	HK$’000
Golf club membership	(a)	Available-for-sale	FVTPL		13,592	13,592
Deposits placed for life	(b)	Loans and receivables	FVTPL		39,646	39,646
insurance policies
The impact of these changes on the Group’s equity is as			follows:
					Effect on
					investment
					revaluation
					reserve for	Effect on
				available-for-sale		accumulated
					investment	profits
			Note		HK$’000	HK$’000
Opening balance – HKAS	39				6,092	768,217
Reclassify golf club membership		from available-for-
sale to financial assets at FVTPL			(b)		(6,092)	6,092
Opening balance – HKFRS 9					–	774,309

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Notes:

• (a) Golf club membership that was previously classified as available-for-sale is now classified at FVTPL. Upon initial application of HKFRS 9, investment revaluation reserve of approximately HK$6,092,000 related to the available-for-sale investment is transferred to the opening accumulated profits at 1 July 2018.

• (b) Deposits placed for life insurance policies that were previously classified as loans and receivables and carried at amortised cost are now classified as FVTPL since the contractual cash flows do not consist solely of payments of principal and interest on the principal amount outstanding. The directors of the Company estimated that the fair value of deposits placed for life insurance policies upon initial application of HKFRS 9 approximates the amount as measured at amortised cost.

3. REVENUE AND SEGMENT INFORMATION

Revenue represents the aggregate of the amounts received and receivable for rental income from investment properties.

The Group has two operating segments as follows:

• Property investment: rental income from leasing out the properties; and

• Research and development: conducting research and development, software and hardware design for the manufacture and sale of a range of high technology products such as portable x-ray systems, advanced algorithm and software solutions, image sensors etc.

The Group’s reportable segments are strategic business units that offer different products and services. They are managed separately because each business requires different technology and marketing strategies.

Segment profits or losses do not include certain other income, fair value changes of convertible notes, impairment loss on interest in an associate, share of losses of an associate and unallocated corporate expenses.

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Six months 31 December 2018: Revenue from external customers Segment loss Unallocated expenses Unallocated income Six months 31 December 2017: Revenue from external customers Segment profit Unallocated expenses Unallocated income	Property investment HK$’000 (Unaudited) 4,341 (7,253) Property investment HK$’000 (Unaudited) 2,157 26,054	Research and development HK$’000 (Unaudited) – (21,764) Research and development HK$’000 (Unaudited) – –	Total HK$’000 (Unaudited) 4,341 (29,017) (22,167) 57 (51,127) Total HK$’000 (Unaudited) 2,157 26,054 (20,662) 2,183 7,575

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4. OTHER (LOSSES)/GAINS

Fair value (losses)/gains on investment properties Fair value losses on financial assets at fair value through profit or loss Fair value gain on convertible notes	Six months ended 31 December 2018 2017 HK$’000 HK$’000 (Unaudited) (Unaudited) (7,970) 28,820 (537) – 4,077 1,752 (4,430) 30,572	Six months ended 31 December 2018 2017 HK$’000 HK$’000 (Unaudited) (Unaudited) (7,970) 28,820 (537) – 4,077 1,752 (4,430) 30,572
		30,572

5. FINANCE COSTS

Interest on bank borrowings Interest on other borrowings Interest on bank overdrafts	Six months ended 31 December 2018 2017 HK$’000 HK$’000 (Unaudited) (Unaudited) 1,750 1,255 16 – 16 1 1,782 1,256	Six months ended 31 December 2018 2017 HK$’000 HK$’000 (Unaudited) (Unaudited) 1,750 1,255 16 – 16 1 1,782 1,256
		1,256

6. INCOME TAX EXPENSE

No provision for income tax expense is required since the Group has no assessable profit for the six months ended 31 December 2018 (2017: Nil).

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7. (LOSS)/PROFIT FOR THE PERIOD

The Group’s (loss)/profit for the period is arrived at after charging/(crediting):

	Six months	ended
	31 December
	2018	2017
	HK$’000	HK$’000
	(Unaudited)	(Unaudited)
Bank interest income	57	22
Depreciation	(3,148)	(3,359)
Interest income from deposits placed for life insurance policies	–	1,829

8. (LOSS)/EARNINGS PER SHARE

The calculation of basic and diluted (loss)/earnings per share is based on the following:

Earnings (Loss)/earnings for the purpose of calculating basic (loss)/earnings per share Fair value gain on convertible notes (Loss)/earnings for the purpose of calculating diluted (loss)/earnings per share	Six months ended 31 December 2018 2017 HK$’000 HK$’000 (Unaudited) (Unaudited) (48,117) 9,221 – (1,752) (48,117) 7,469

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Number of shares Weighted average number of ordinary shares used in basic (loss)/earnings per share calculation Effect of dilutive potential ordinary shares arising from convertible notes outstanding Weighted average number of ordinary shares used in diluted (loss)/earnings per share calculation	Six months ended 31 December 2018 2017 (Unaudited) (Unaudited) 1,436,106,716 1,351,640,370 – 75,306,185 1,436,106,716 1,426,946,555	Six months ended 31 December 2018 2017 (Unaudited) (Unaudited) 1,436,106,716 1,351,640,370 – 75,306,185 1,436,106,716 1,426,946,555
		1,426,946,555

For the six months ended 31 December 2017, the weighted average number of ordinary shares for the purpose of calculating basic earnings per share has been taken into account the ordinary shares repurchased from the market in May 2017 and subsequently cancelled in July 2017.

Dilutive earnings per share for the six months ended 31 December 2017 did not assume the exercise of share options granted by the Company because the exercise prices of those options were higher than the average market price of the Company.

For the six months ended 31 December 2018, the conversion of the Company’s outstanding convertible notes and the effect of all potential ordinary shares arising from share options would be anti-dilutive. Diluted loss per share was the same as the basis loss per share for the six months ended 31 December 2018.

9. DIVIDEND

No dividend was paid or proposed by the Group during the six months ended 31 December 2018 (2017: Nil), nor has any dividend been proposed since the end of the reporting period.

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BUSINESS REVIEW AND PROSPECTS

Properties Investment

Turnover of the Group for the six months ended 31 December 2018 under review comprising rental income from its investment properties amounted to approximately HK$4 million (2017: HK$2 million).

The Group will continue to seek and explore investment opportunities to strength its investment portfolios.

Research and development

The Group actively expands its business to cover a broader spectrum in the field of high technology products. The Group together with an independent third party established an associate known as Imagica Technology Inc. which is owned as to 49% by the Group and established 4 subsidiaries namely, Next Level A.I. Solutions, LLC., Navigs Oy, Pexray Oy and Dynim Oy to conduct research and development, software and hardware design for the manufacture and sales of a range of high technology products including:

• portable x-ray systems used in inspection devices for security and counter terrorism applications;

• accurate positioning and image sensing technologies to be integrated into semiautomated agriculture vehicles and advanced driver assistance systems (ADAS);

• advanced algorithm and software solutions used in ADAS, for example, systems for identifying objects, vehicles and people in difficult lighting conditions, forward collision warning systems, lane departure and driver awareness systems, and for surveillance and intelligent traffic markets, for example, advance camera and video systems for traffic monitoring purpose; and

• image sensors such as line scan sensors used in spectroscopy and document scanners, and other sensors used in security applications.

Looking forward, the Group’s corporate strategy will gradually expand its focus from property investment to high technology development. The Group look forward to all potential opportunities to expand its high technology business in different areas and diversity the investments.

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Grant of options

The Company granted an aggregate of 126,000,000 options under the Company’s Share Option Scheme on 9 November 2018.

LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE

As at 31 December 2018, net current assets of the Group were approximately HK$130 million. The current ratio was 1.75. The bank balances and cash were approximately HK$297 million.

As at 31 December 2018, the Group has outstanding liabilities of approximately HK$181 million comprising (i) other payables and accrued charges of approximately HK$12 million, (ii) amounts due to related parties of approximately HK$19 million, (iii) bank loans of approximately HK$104 million and (iv) convertible notes of approximately HK$37 million and (v) other borrowings of approximately HK$9 million. The bank borrowings are on floating interest rates basis.

The majority of the Group’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 Group has no significant exposure to exchange fluctuation and does not hedge against foreign exchange risk.

The Group’s bank borrowings were secured by leasehold land and buildings of approximately HK$197 million and deposit placed for a life insurance policy of approximately HK$18 million.

The Group’s gearing ratio as determined by total debt divided by total assets was approximately 15%.

SIGNIFICANT INVESTMENTS, ACQUISITIONS AND DISPOSALS

During the six months ended 31 December 2018, the Group had no material acquisitions and disposals of subsidiaries.

As at 31 December 2018, the Group had no material investment.

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EMPLOYEES AND REMUNERATION POLICIES

As at 31 December 2018, the Group employed a total of 37 employees. They were remunerated according to market conditions.

CONTINGENT LIABILITIES

As at 31 December 2018, there was a contingent liability in respect of a legal proceeding against the Company. No specific claim amount has been specified in the application of this claim. In the opinion of the directors, the claim was remote and no provision has been made in the consolidated financial statements.

INTERIM DIVIDEND

The Directors of the Company do not recommend the payment of any interim dividend for the six months ended 31 December 2018.

PURCHASE, SALE AND REDEMPTION OF SHARES

During the period, neither the Company nor any of its subsidiaries purchased, sold or redeemed interest in any of the Company’s listed shares.

AUDIT COMMITTEE

The interim results for the six months ended 31 December 2018 has not been audited by the Group’s auditor, but the Audit Committee has reviewed with management the accounting principles and practices adopted by the Company, and discussed internal control and financial reporting matters including the review of the unaudited interim results for the six months ended 31 December 2018.

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CORPORATE GOVERNANCE

During the period, the Company had complied with the relevant provisions set out in the Corporate Governance Code (the “Code”) based on the principles set out in Appendix 14 to the Listing Rules, save for the following:

• the non-executive directors and independent non-executive directors are not appointed for a specific term in accordance with code provision A.4.1 of the Code, but are subject to retirement by rotation and re-election at the annual general meeting of the Company in accordance with the provisions of the bye-laws of the Company.

• under code provision A.6.7 of the Code, independent non-executive directors and other non-executive directors should attend general meetings of the Company. Certain independent non-executive directors of the Company were unable to attend the annual general meeting of the Company as they had other business commitment.

• under the Code provision A.2.1, the roles of the chairman and chief executive officer should be separated and should not be performed by the same individual. Dr. Oung Shih Hua, James is the Chairman of the Company and the Company currently does not appoint any new Chief Executive Officer. In the opinion of the Board, Dr. Oung temporarily acts as the role of the Chief Executive Officer. The Board considers that the present structure provides the Group with strong and consistent leadership and allows for efficient and effective business planning and execution.

– code provision A.5.6 requires that the nomination committee should have a policy concerning diversity of board members. The Company does not consider it necessary to have a policy concerning diversity of board members. Board appointments are based on merit, in the context of the skills, experience and expertise that the selected candidates will bring to the Board. While the Company is committed to equality of opportunity in all aspects of its business and endeavours to ensure that its Board has the appropriate balance of skills, experience and diversity of perspectives, the Company does not consider a formal board diversity policy will provide measurable benefits to enhance the effectiveness of the Board.

The Company will review the current bye-laws as and when it becomes appropriate in future.

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PUBLICATION OF INTERIM RESULTS AND INTERIM REPORT

The interim results announcement is available for viewing on the website of the Stock Exchange and on the website of the Company at http://www.aplushk.com/clients/00495paladin/. The interim report of the Company will be despatched to the shareholders of the Company in due course.

By order of the Board Paladin Limited Oung Shih Hua, James Chairman

Hong Kong, 28 February 2019

As at the date of this announcement, the board of directors of Paladin Limited comprises:

Oung Shih Hua, James (Executive director) Chan Chi Ho (Non-executive director) Yuen Chi Wah (Non-executive director) Au Chik Lam Alexander (Independent non-executive director) Liu Man Kin Dickson (Independent non-executive director) Luo Rongxuan (Independent non-executive director)

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