hmvod Limited — Interim / Quarterly Report 2013

Aug 13, 2012

Tai Shing International (Holdings) Limited 泰盛國際（控股）有限公司[*]

(Incorporation in the cayman islands with limited liability)

(Stock Code: 8103)

FIRST QUARTERLY ANNOUNCEMENT FOR THE PERIOD ENDED 30TH JUNE 2012

CHARACTERISTICS OF THE GROWTH ENTERPRISE MARKET (“GEM”) OF THE STOCK EXCHANGE OF HONG KONG LIMITED (“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 (“ Directors ”) of Tai Shing International (Holdings) Limited (“ Company ”) collectively and individually accept full responsibility, includes particulars given in compliance with the Rules Governing the Listing of Securities on GEM (“ GEM Listing Rules ”) for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this announcement is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this announcement misleading.

* For identification purpose only

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HIGHLIGHTS

• Revenue for the three months ended 30th June 2012 amounted to approximately HK$15.9 million representing a decrease of approximately 39% as compared to the corresponding period in 2011.

• Loss attributable to the shareholders for the three months ended 30th June 2012 amounted to approximately HK$1.5 million (2011: loss of HK$1.3 million).

• Loss per share for the three months ended 30th June 2012 was approximately 0.48 HK cents (2011: loss per share of 0.54 HK cents).

• The Board does not recommend the payment of any dividend for the three months ended 30th June 2012.

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The board of Directors (“ Board ”) of the Company is pleased to present the unaudited condensed consolidated results of the Company and its subsidiaries (collectively the “ Group ”) for the three months ended 30th June 2012, together with the unaudited comparative figures for the corresponding period in 2011, as follows:–

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Notes Revenue 4 Cost of services Gross profit Other income Selling and distribution expenses Administrative expenses Other expenses 5 Finance costs 6 Loss before taxation Income tax expenses 7 Loss for the period 8 Other comprehensive income/(expense) for the period Exchange difference arising on translation Total comprehensive expenses for the period Loss per share – basic (HK cents) 10	Three months ended 30th June 2012 2011 HK$’000 HK$’000 15,909 26,172 (8,522) (21,453) 7,387 4,719 861 1,146 (255) (512) (9,254) (6,290) (10) – (257) (268) (1,528) (1,205) – (95) (1,528) (1,300) (72) 115 (1,600) (1,185) (0.48) (0.54)

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED RESULTS

1. GENERAL INFORMATION

The Company was incorporated in the Cayman Islands as an exempted company with limited liability under the Companies Law of the Cayman Islands. The address of its registered office is Cricket Square, Hutchins Drive P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands. The address of its principal place of business is 21/F, Malahon Centre, 10-12 Stanley Street, Central, Hong Kong. The Company’s shares are listed on GEM.

2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

The Group’s unaudited consolidated results have been prepared in accordance with Hong Kong Financial Reporting Standards (“ HKFRSs ”) issued by the Hong Kong Institute of Certified Public Accountants (“ HKICPA ”), accounting principles generally accepted in Hong Kong and the applicable disclosures required by the GEM Listing Rules and by the Hong Kong Companies Ordinance.

The Group’s unaudited consolidated results have been prepared under the historical cost convention, except that financial assets at fair value through profit or loss are carried at their fair values.

The accounting policies adopted in preparing the unaudited consolidated results for the three months ended 30th June 2012 and 2011 are consistent with those following the preparation of the Group’s annual financial statements for the year ended 31st March 2012. The consolidated results are unaudited but have been reviewed by the Company’s audit committee.

3. ADOPTION OF NEW AND REVISED HKFRSS

During the three months ended 30th June 2012, the Group has adopted all the new and revised HKFRSs issued by the HKICPA that are relevant to its operations and effective for accounting periods beginning on or after 1st January 2012. The adoption of these new and revised HKFRSs did not result in substantial changes to the Group’s accounting polices and amounts reported for the current period or prior accounting periods.

4. REVENUE

Revenue, which is also the turnover of the Group, represents the amounts arising from systems development, professional service rendered and software licensing, net of sales related taxes.

An analysis of the revenue by principal activities of the operations of the Group during the reporting periods is as follows:

Systems development Professional services fees Software licensing	UNAUDITED Three months ended 30th June 2012 2011 HK$’000 HK$’000 9,359 26,115 417 57 6,133 – 15,909 26,172	UNAUDITED Three months ended 30th June 2012 2011 HK$’000 HK$’000 9,359 26,115 417 57 6,133 – 15,909 26,172
		26,172

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5. OTHER EXPENSES

Loss on change in fair value of financial assets at fair value through profit or loss 6. FINANCE COSTS Interest on bank loans wholly repayable within one year finance lease 7. INCOME TAX EXPENSES PRC enterprise income tax	UNAUDITED Three months ended 30th June 2012 2011 HK$’000 HK$’000 10 – UNAUDITED Three months ended 30th June 2012 2011 HK$’000 HK$’000 229 211 28 57 257 268 UNAUDITED Three months ended 30th June 2012 2011 HK$’000 HK$’000 – 95

• (i) Hong Kong profit tax has not been provided for in the consolidated financial statements as there was no estimated assessable profit derived from Hong Kong during the three months ended 30th June 2012 and 2011.

• (ii) Under the Law of the People’s Republic of China (“PRC”) on Enterprise Income Tax (the “EIT Law”) and Implementation Regulation of the EIT Law, the standard tax rate is 25%.

In accordance with the relevant regulations, approvals from relevant local tax bureaus and Foreign Enterprise Income Tax Law in the PRC, a subsidiary of the Group, established in the PRC, was qualified as an advanced technology enterprise and was subject to a preferential Enterprise Income Tax rate of 15% (2011: 15%) which was effective from 1st January 2008 to 31st December 2010. The PRC subsidiary is subject to PRC Enterprise Income Tax at 25% starting from 1st January 2011.

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8. LOSS FOR THE PERIOD

Loss for the period is stated after charging:

	UNAUDITED	UNAUDITED
	Three months ended
		30th June
	2012	2011
	HK$’000	HK$’000
Auditors’ remuneration	125	113
Depreciation	548	565
Operating leases	49	469
Staff costs	2,922	2,890

9. DIVIDEND

The Board does not recommend the payment of any dividend for the three months ended 30th June 2012 (2011: Nil).

10. LOSS PER SHARE

The calculation of basic loss per share for the three months ended 30th June 2012 were based on the loss attributable to the shareholders of approximately of HK$1,528,000 (2011: loss of HK$1,300,000) divided by the weighted average number of 316,938,000 shares for the three months ended (2011: 238,875,000 shares) in issue during the period.

As the Group sustained a loss for the period, diluted loss per share is not presented as the potential shares arising from the exercise of the Company’s share options would decrease the loss for the three months ended 30th June 2012 and 2011 which is regarded as anti-dilutive.

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11. RESERVES

At 1st April 2011 Total comprehensive income/(expenses) for the period, net of tax Issue of shares upon – placement of shares – transaction cost attributable to placement of shares Transfer from general reserve At 30th June 2011 At 1st April 2012 Total comprehensive expenses for the period, net of tax Unlisted warrants issue expenses Convertible notes issue expenses At 30th June 2012					Unaudited
	Share premium HK$’000 256,251 – 61,386 (1,913) – 315,724 356,466 – (150) (289) 356,027	General reserve HK$’000 3,066 – – – (9) 3,057 3,057 – – – 3,057	Capital reserve HK$’000 1,200 – – – – 1,200 1,200 – – – 1,200	Share option reserve HK$’000 13,515 – – – – 13,515 12,269 – – – 12,269	Unlisted Convertible Warrants Notes HK$’000 HK$’000 – – – – – – – – – – – – – – – – 1,148 – – 15,000 1,148 15,000	Foreign currency translation Accumulated reserve losses HK$’000 HK$’000 4,275 (52,771) 115 (1,300) – – – – – 9 4,390 (54,062) 5,103 (74,305) (72) (1,528) – – – – 5,031 (75,833)	Non- Controlling Total Interest HK$’000 HK$’000 225,536 – (1,185) – 61,386 – (1,913) – – – 283,824 – 303,790 2,683 (1,600) (15) 998 – 14,711 – 317,899 2,668	Total HK$’000 225,536 (1,185)
								61,386 (1,913) –
								283,824
								306,473 (1,615)
								998 14,711
								320,567

12. LITIGATION

• (a) On 12th March 2012, a High court Action No.1861 of 2011 was commenced by Joint China Value Investment Fund Limited against the Company for a dishonoured cheque in the amount of HK$16,500,000 issued by the Company. The Company has contested the case vigorously. Having sought legal advices, the Directors believe that the Company has a strong defence against the allegation and the legal action would not result in a material loss to the Group, accordingly no provision for liabilities in this respect has been made in the consolidated financial statements.

• (b) On 19th April 2006, a High court Action No. 858 of 2006 was commenced by Chan Kar Kui, Wong Calvin Ting Chi, Chan Wai Phan, Chan Man Wan and Kwok King Chuen (the “Plaintiffs”) against the Company for specific performance of the agreement entered into between the Plaintiffs and the Company’s former Director, To Cho Kei, on behalf of the Company, in around May/June 2000 to purchase from the Plaintiffs all their shareholdings in Epplication.Net Limited (“Epplication.Net”) at a consideration of HK$6,800,000 being twice of the actual amount that the Plaintiffs expended on Epplication.Net by way of transfer or allotment of the shares of the Company of the equivalent value, or alternatively, damages with interests and costs. The Company has filed a defence denying the allegation as the Company has no record of any agreement for the purchase of the Plaintiffs’ shareholdings in Epplication.Net and the Plaintiffs have not produced any documentary evidence to support their claim. The Plaintiffs have been dormant since the end of 2008. The Directors believe that the Company has a strong defence in this action and therefore, no provision for liabilities has been made on the consolidated financial statements.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

BUSINESS REVIEW

Revenue for the three months ended 30th June 2012 amounted to approximately HK$15.9 million representing a decrease of approximately 39% as compared to the corresponding period in 2011. Notwithstanding the increase in revenue from professional services fees from less than HK$0.1 million to approximately HK$0.42 million due to our continuous work on a large project awarded in 2011 and the revenue of software licensing of approximately HK$6.1 million (2011: nil) due to the soft-launch of the Chinese version of the InsureLink System in April 2012, the Group still recorded a decrease in revenue due to the decrease in revenue from system developments from approximately HK$26.1 million to approximately HK$9.4 million resulted from the declining demand caused by recent global economic downturn.

FINANCIAL PERFORMANCE

During the three months ended 30th June 2012, the Group recorded a revenue of HK$15.9 million (2011: HK$26 million) representing a decrease of approximately 39% as compared to that of the corresponding period in 2011. Administrative expenses increased to approximately HK$9.3 million as compared to approximately HK$6.3 million of the previous corresponding period, representing an increase of approximately 48% mainly because of the net result of (i) the increase in amortization on intangible asset of HK$4.9 million for (a) InsureLink System of Fullmark Management Limited, (b) technical knowhow of Joint Bridge Investments Limited and (c) the license of 上海景福保險經紀有限公司 (formerly know as “青島博達保險經紀有限公司”; (ii) the decrease in marketing and promotion expenses of HK$1 million resulted from the reducing activities on the promotion of InsureLink System; and (iii) the decrease in HK$0.5 million for legal and professional fee in relation to acquisition activities. Loss attributable to the shareholders was approximately HK$1.5 million (2011: loss HK$1.3 million).

FUTURE PROSPECTS

It has been the Company’s long term goal to maximize shareholders’ value. In view of the intense market competition for the Group’s existing business particularly for the security and surveillance division, the Company has been exploring business opportunities to expand the Groups’ operations and enhance its earnings.

During the period under review

• (i) on 3rd April 2012, the Company issued 57,380,000 unlisted warrants at the issue price of HK$0.02 per warrant. The holders of the warrants are entitled to subscribe at the subscription price of HK$0.19 per share (subject to adjustment) for up to HK$10,902,200 in aggregate for new shares of the Company of HK$0.05 each (i.e. up to 57,380,000 new shares). Net proceeds of approximately HK$0.75 million were received as a result and, as disclosed in the Company’s circular dated 8 February 2012, such proceeds were/are to be used as general working capital of the Group; and

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• (ii) on 3rd May 2012, the Company issued a convertible note to Mr. Wong Kwong Chau in the principal amount of HK$15,000,000, which entitles Mr. Wong (or the holder(s) of the convertible note) to exercise the rights to convert the outstanding principal amount into the shares of the Company of HK$0.05 each at the conversion price of HK$0.25 per share (subject to adjustment) Net proceeds of approximately HK$14.7 million were received as a result and, as disclosed in the Company’s announcement 19 April 2012, such proceeds were/are to be used as general working capital of the Group.

DIRECTORS’ AND CHIEF EXECUTIVE’S INTERESTS IN SECURITIES

As at 30th June 2012, the relevant interests or short positions of the Directors and chief executive of the Company in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (Chapter 571, the Laws of Hong Kong) (“SFO”)) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they have taken or deemed to have under such provisions of the SFO), or which are required, pursuant to Section 352 of the SFO, to be entered in the register maintained by the Company referred to therein, or which are required, pursuant to Rule 5.46 of the GEM Listing Rules relating to securities transactions by the Directors, to be notified to the Company and the Stock Exchange, were as follows:

Long positions in the shares and underlying shares of the Company

			Approximate
		Number of	percentage
		shares	of issued share
Name of director	Capacity	interested	capital
			(note 3)
Chan Yun Sang_(note 1)_	Beneficial owner	1,000,000	0.32%
Ip Ho Ming_(note 2)_	Interest of spouse	10,000	0.003%

Note:

1. Mr. Chan Yun Sang is an executive Director. As at 30th June 2012, Mr. Chan Yun Sang is interested in 200,000 shares of the Company and an option to subscribe up to 800,000 shares of the Company.

2. Mr. Ip Ho Ming is an executive Director.

3. As at 30th June 2012, the issued share capital of the Company is 316,938,145 shares.

Save as disclosed above, as at 30th June 2012, none of the Directors or chief executive of the Company or their respective associates had any interests or short positions in the shares, underlying shares of equity derivative and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which would have to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they are taken or deemed to have under such provisions of the SFO), or which were required to

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be kept under Section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to the minimum standards of dealing by the Directors of listed issuers as referred to in Rule 5.46 of the GEM Listing Rules.

SUBSTANTIAL SHAREHOLDERS

So far as is known to the Directors, as at 30th June 2012, the following persons had an interest or short positions in the shares or underlying shares of the Company as recorded in the register required to be kept under Section 336 of the SFO:–

Long positions in shares and underlying shares of the Company

				Approximate
			Number of	percentage of
Name of shareholder	Capacity	shares interested		shareholding
				(note 1)
Wong Kwong Chau	Beneficial owner_(note 2)_		61,500,000	19.40%
Chiu Wai Shing	Beneficial owner		35,544,000	11.21%
Gui Zuhai	Beneficial owner		19,970,000	6.30%
Resuccess Investments Limited	Beneficial owner_(note 3)_		15,890,000	5.01%
Tsinghua Tongfang Co. Limited	Interest of controlled corporation_(note 3)_		15,890,000	5.01%

Notes:

1. As at 30th June 2012, the issued share capital of the Company is 316,938,145 shares.

2. Wong Kwong Chau is interested in 1,500,000 shares of the Company and a convertible note entitling him to subscribe up to 60,000,000 shares of the Company.

3. Resuccess Investments Limited is a company incorporated in the British Virgin Islands with limited liability and is wholly-owned by Tsinghua Tongfang Co. Limited. Accordingly, Tsinghua Tongfang Co. Limited is interested or deemed to be interested in the 15,890,000 shares held by Resuccess Investments Limited pursuant to Part XV of the SFO.

Save as disclosed above, as at 30th June 2012, the Directors were not aware of any other person who had an interest or short position in the shares or underlying shares of the Company as recorded in the register required to be kept under Section 336 of the SFO.

DIRECTORS’ INTERESTS IN CONTRACTS

No contracts of significance in relation to the Group’s business to which the Group was a party and in which a director of the Group had a material interest, whether directly or indirectly, subsisted at the three months ended 30th June 2012 or at any time during such period.

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DIRECTORS’ COMPETING INTERESTS

As of 30th June 2012, none of the Directors, substantial shareholders or their respective associates (as defined under the GEM Listing Rules) had any business or interest in a business which competes or may compete with the business of the Group.

AUDIT COMMITTEE

The Company has established an audit committee on 18th May 2000 with written terms of reference in compliance with the requirements as set out in Rules 5.28 to 5.30 of the GEM Listing Rules. The primary duties of audit committee are to review and supervise the financial reporting process and internal control system of the Group and to provide advice and comments to the Board.

The audit committee comprises three independent non-executive directors, namely, Mr. Tang Sze Lok, Mr. Xu Jingbin, Ms. Hu Yun and Mr. Tang Sze Lok is the chairman of the audit committee.

The audit committee has reviewed the unaudited consolidated results of the Group for the three months ended 30th June 2012 and has provided advice and comments thereon.

BOARD PRACTICES AND PROCEDURES

Up to the three months period ended 30th June 2012, the Company has complied with the board practices and procedures as set out in Rules 5.34 to 5.45 of the GEM Listing Rules.

COMPLIANCE WITH CODE ON CORPORATE GOVERNANCE PRACTICES

The Company has complied with the code provisions as set out in the Code on Corporate Governance Practices contained in Appendix 15 of the GEM Listing Rules throughout the period under review.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES

During the three months period under review, neither the Company nor any of its subsidiaries had purchased, sold or redeemed any of the Company’s listed securities.

On behalf of the Board Chan Yun Sang Chairman and Executive Director

Hong Kong, 13th August 2012

• for identification purpose only

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As at the date hereof, the Board comprises the following directors:

Executive Directors:

Mr. Chan Yun Sang (Chairman)

Mr. Han Fangfa Ms. Ju Lijun Mr. Liu Bo Ms. Huang Miaochan Mr. Ip Ho Ming

Ms. Wong Sau Wai Serena

Non-executive Directors:

Dr. Pan Jin Mr. Dai Yuanxin

Independent non-executive Directors:

Mr. Tang Sze Lok Mr. Xu Jingbin Ms. Hu Yun

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

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