Joy Spreader Group Inc. - Interim / Quarterly Report 2012

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited (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 (the “Directors”) of AGTech Holdings Limited (the “Company”) collectively and individually accept full responsibility, includes particulars given in compliance with the Rules Governing the Listing of Securities on the Growth Enterprise Market (“GEM”) of the Stock Exchange (the “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, there are no other matters the omission of which would make any statement herein or this announcement misleading.

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AGTech Holdings Limited 亞博科技控股有限公司 []*

(incorporated in Bermuda with limited liability)

(Stock Code: 8279)

INTERIM RESULTS ANNOUNCEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2012

CHARACTERISTICS OF GEM OF THE STOCK EXCHANGE

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

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

For identification purpose only

HIGHLIGHTS

Total revenue of the Group for the Six-Month Period amounted to approximately HK$99.3 million, an increase of approximately HK$55.7 million or 127.6% from the corresponding period in 2011. The substantial increase of total revenue of the Group was mainly attributable to the new subsidiary GOT upon its complete acquisition by the Group in December 2011. All revenue was derived from provision of sports lottery management and marketing consultancy services and gaming technologies (game software, systems, hardware and terminals) business in the PRC.
Gross profit of the Group amounted to approximately HK$47.6 million, an increase of approximately HK$14.2 million or 42.5% over the corresponding period in 2011. This was mainly attributable to the contribution from the new subsidiary GOT.
Loss attributable to owners of the Company for the Six-Month Period amounted to approximately HK$27.2 million, primarily due to (i) the share-based payment expense (totalling approximately HK$4.6 million for the Six-Month Period) as a result of the adoption of Hong Kong Financial Reporting Standard 2 Share-based Payment for share options of the Company granted to Directors, eligible employees and other eligible participants under the Share Option Scheme of the Company; and (ii) the amortisation of other intangible assets (totalling approximately HK$19.2 million for the Six-Month Period).
The Board does not recommend the payment of an interim dividend for the Six-Month Period.

INTERIM RESULTS

The board of directors (the “Board”) of AGTech Holdings Limited (the “Company”) is pleased to announce the unaudited consolidated results of the Company and its subsidiaries (collectively the “Group”) for the three months ended 30 June 2012 (the “Three-Month Period”) and the six months ended 30 June 2012 (the “Six-Month Period”), together with the comparative unaudited figures for the corresponding period in 2011 as follows:

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED) For the Three-Month Period and the Six-Month Period

Notes Revenue 2 Cost of sales and services Gross profit Investment and other income Selling and administrative expenses Share of profit/(loss) of an associate (Loss)/profit from business operations Share-based payments Net foreign exchange loss Amortisation of other intangible assets Finance cost Loss before tax Income tax credit/(expense) 3 Loss for the period 4 Loss attributable to: Owners of the Company Non-controlling interests Loss per share Basic and diluted 5	Three months ended 30 June 2012 2011 *HK$* HK$ 56,950,675 24,136,320 (34,478,938) (5,243,786) 22,471,737 18,892,534 217,474 250,721 (26,008,034) (16,009,709) – 240,885 (3,318,823) 3,374,431 (3,486,851) (2,631,688) (134,082) (35,490) (8,702,527) (10,630,548) (519,004) (700,467) (16,161,287) (10,623,762) 1,266,286 (1,084,929) (14,895,001) (11,708,691) (15,417,531) (10,372,878) 522,530 (1,335,813) (14,895,001) (11,708,691) HK 0.401 cent HK 0.281 cent	Six months ended 30 June 2012 2011 *HK$* HK$ 99,286,667 43,621,640 (51,648,057) (10,200,464) 47,638,610 33,421,176 999,176 535,715 (51,281,738) (32,790,333) – (194,578) (2,643,952) 971,980 (4,628,398) (5,293,443) (134,631) (21,316) (19,152,363) (20,983,252) (2,074,687) (700,467) (28,634,031) (26,026,498) 2,760,412 (393,690) (25,873,619) (26,420,188) (27,215,162) (23,645,590) 1,341,543 (2,774,598) (25,873,619) (26,420,188) HK 0.708 cent HK 0.641 cent

Loss for the period Other comprehensive income, net of income tax Translation differences on translating foreign operations Total comprehensive income for the period Total comprehensive income attributable to: Owners of the Company Non-controlling interests Total comprehensive income for the period	Three months ended 30 June 2012 2011 *HK$* HK$ (14,895,001) (11,708,691) (133,107) 17,802,809 (15,028,108) 6,094,118 (15,550,751) 7,386,741 522,643 (1,292,623) (15,028,108) 6,094,118	Six months ended 30 June 2012 2011 *HK$* HK$ (25,873,619) (26,420,188) 4,563,841 21,523,026 (21,309,778) (4,897,162) (22,670,150) (2,164,689) 1,360,372 (2,732,473) (21,309,778) (4,897,162)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 30 June 2012

Notes Non-current assets Property, plant and equipment Goodwill Other intangible assets Deposits and prepayments Other assets Deferred tax assets Current assets Inventories Trade receivables 7 Other receivables, deposits and prepayments Pledged bank deposit 8 Bank balances and cash Current liabilities Trade payables 9 Accruals and other payables Secured bank borrowing 10 Current tax liabilities Net current assets Total assets less current liabilities Non-current liabilities Provision for warranties Deferred tax liabilities Net assets Capital and reserves Share capital Reserves Equity attributable to owners of the Company Non-controlling interests Total equity	Unaudited As at 30 June 2012 *HK$* 55,550,105 772,141,826 3,366,954 19,984,586 1,746,032 2,916,152 855,705,655 23,975,683 65,790,380 58,758,847 1,381,456 109,444,138 259,350,504 10,190,087 17,826,597 – 118,980 28,135,664 231,214,840 1,086,920,495 18,229,698 4,763,457 22,993,155 1,063,927,340 7,687,907 1,054,277,720 1,061,965,627 1,961,713 1,063,927,340	Audited As at 31 December 2011 HK$ 60,645,058 767,997,278 22,413,061 24,600,112 1,736,660 3,138,691 880,530,860 24,226,521 81,015,011 73,393,994 26,612,786 132,378,464 337,626,776 14,590,727 25,572,307 61,150,000 4,695,301 106,008,335 231,618,441 1,112,149,301 20,707,471 10,833,110 31,540,581 1,080,608,720 7,687,907 1,072,319,472 1,080,007,379 601,341 1,080,608,720

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED) For the Six-Month Period

Attributable to owners of the Company

Balance at 1 January 2012 Loss for the period Other comprehensive income for the period Total comprehensive income for the period Recognitions of equity-settled share-based payments Shares issued on exercise of part of share options Lapse of share options Transfer from accumulated losses Balance at 30 June 2012 Balance at 1 January 2011 Loss for the period Other comprehensive income for the period Total comprehensive income for the period Recognitions of equity-settled share-based payments Shares issued on exercise of part of share options Lapse of share options Transfer to accumulated losses Balance at 30 June 2011	Share capital HK$ 7,687,907 – – – – – – – 7,687,907 7,356,321 – – – – 23,968 – – 7,380,289	Share premium HK$ 1,174,554,927 – – – – – – – 1,174,554,927 1,076,602,404 – – – – 17,417,433 – – 1,094,019,837	Share options reserve HK$ 132,388,040 – – – 7,850,272 – (5,783,491) – 134,454,821 188,193,324 – – – 5,971,842 (14,807,237) (678,399) – 178,679,530	Statutory reserve HK$ 5,999,326 – – – – – – 697,743 6,697,069 3,134,905 – – – – – – (567,672) 2,567,233	Exchange reserve HK$ 158,026,661 – 4,545,012 4,545,012 – – – – 162,571,673 125,681,032 – 21,480,901 21,480,901 – – – – 147,161,933	Contributed surplus HK$ 47,191,476 – – – – – – – 47,191,476 47,191,476 – – – – – – – 47,191,476	Accumulated losses HK$ (445,840,958) (27,215,162) – (27,215,162) – – 2,561,617 (697,743) (471,192,246) (408,907,047) (23,645,590) – (23,645,590) – – – (1,610,222) (434,162,859)	Subtotal HK$ 1,080,007,379 (27,215,162) 4,545,012 (22,670,150) 7,850,272 – (3,221,874) – 1,061,965,627 1,039,252,415 (23,645,590) 21,480,901 (2,164,689) 5,971,842 2,634,164 (678,399) (2,177,894) 1,042,837,439	Attributable to non- controlling interests HK$ 601,341 1,341,543 18,829 1,360,372 – – – – 1,961,713 2,924,638 (2,774,598) 42,125 (2,732,473) – – – – 192,165	Total HK$ 1,080,608,720 (25,873,619) 4,563,841
										(21,309,778)
										7,850,272 – (3,221,874) –
										1,063,927,340

										1,042,177,053 (26,420,188) 21,523,026
										(4,897,162)
										5,971,842 2,634,164 (678,399) (2,177,894)
										1,043,029,604

CONDENSED CONSOLIDATED CASHFLOW (UNAUDITED) For the Six-Month Period

Net cash generated by/(used in) operating activities
Net cash generated by/(used in) investing activities
Net cash (used in)/generated by financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Effect of foreign exchange rate changes
Cash and cash equivalents at the end of the period
Analysis of balances of cash and cash equivalents
Bank balances and cash

Six months ended
30 June
2012
2011
HK$
HK$
15,969,368
(3,578,925)
24,962,513
(38,940,936)
(63,555,261)
62,674,166
(22,623,380)
20,154,305
132,378,464
140,867,489
(310,946)
2,327,426
109,444,138
163,349,220
109,444,138
163,349,220

Notes:

(1) BASIS OF PREPARATION OF THE ACCOUNTS

The unaudited condensed consolidated accounts have been prepared in accordance with the requirements of the Rules Governing the Listing of Securities on the Growth Enterprise Market (“GEM”) of the Stock Exchange (the “GEM Listing Rules”), accounting principles generally accepted in the Hong Kong Special Administrative Region of the People’s Republic of China (“Hong Kong”) which include Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards and Interpretations issued by Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

The condensed consolidated accounts have not been audited by the Company’s auditors, but have been reviewed and commented on by the Company’s audit committee. The principal accounting policies and methods of computation used in preparing these results are consistent with those used in preparing the Group’s audited financial statements for the year ended 31 December 2011.

The HKICPA has issued a number of new and revised Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards and Interpretations (the “new and revised HKFRS”).

The Group has not early adopted the new and revised HKFRS that have been issued but are not yet effective, the Group is in the process of assessing the impact of these new and revised HKFRS on the financial performance and financial position of the Group.

(2) REVENUE AND SEGMENT INFORMATION

Revenue represents the amounts received and receivable from provision of sports lottery management and marketing consultancy services and gaming technologies (game software, systems, hardware and terminals) business in the People’s Republic of China (“China” or the “PRC”) during the Three-Month Period and the SixMonth Period and is analysed as follows:

Provision of sports lottery management and marketing consultancy services Provision of gaming technologies (game software, systems, hardware and terminals)	Three months ended 30 June 2012 2011 (unaudited) (unaudited) *HK$* HK$ 22,134,633 24,136,320 34,816,042 – 56,950,675 24,136,320	Six months ended 30 June 2012 2011 (unaudited) (unaudited) *HK$* HK$ 45,266,054 43,621,640 54,020,613 – 99,286,667 43,621,640	Six months ended 30 June 2012 2011 (unaudited) (unaudited) *HK$* HK$ 45,266,054 43,621,640 54,020,613 – 99,286,667 43,621,640
			43,621,640

The Group’s revenue and assets were mainly derived from and related to the Lottery business in the PRC while other segments were immaterial. Hence, no geographical segment information is presented.

(3) INCOME TAX

Income tax for the Six-Month Period represents the net amount of deferred taxation credit of approximately HK$4.7 million and PRC profits tax of approximately HK$2.0 million.

(4) LOSS FOR THE PERIOD

Loss for the period has been arrived at after charging/(crediting):

	Three months ended	Three months ended	Six months ended	Six months ended
	30 June		30 June
	2012	2011	2012	2011
	(unaudited)	(unaudited)	(unaudited)	(unaudited)
	*HK$*	HK$	*HK$*	HK$
Cost of inventories recognised as expenses	19,378,298	–	29,430,438	–
Provision for warranties	1,908,895	–	3,343,032	–
Share-based payment	3,486,851	2,631,688	4,628,398	5,293,443
Amortisation of other intangible assets	8,702,527	10,630,548	19,152,363	20,983,252
Depreciation of property, plant and equipment	2,242,711	1,558,124	5,251,491	3,235,273
Bank interest income	(334,853)	(250,713)	(1,073,174)	(535,707)
Finance cost	519,004	700,467	2,074,687	700,467
Operating lease rentals in respect of rented premises	2,150,809	1,280,851	4,232,488	2,475,774
Staff cost (including Directors’ remunerations)	12,232,844	7,590,792	24,624,622	15,134,857

(5) LOSS PER SHARE

The calculation of basic and diluted loss per share for the Three-Month Period and the Six-Month Period is based on the unaudited loss attributable to owners of the Company of HK$15,417,531 and HK$27,215,162 respectively (for the three months and six months ended 30 June 2011: net loss of HK$10,372,878 and HK$23,645,590 respectively), and the weighted average number of 3,843,953,375 ordinary shares in issue during both the Three-Month Period and the Six-Month Period (for the three months and six months ended 30 June 2011: 3,688,664,621 and 3,686,965,058 ordinary shares in issue respectively).

The computation of the diluted loss per share does not assume the exercise of the Company’s share options as the exercise would decrease the loss per share for both periods.

(6) DIVIDEND

The Board does not recommend the payment of an interim dividend for the Six-Month Period (2011: Nil).

(7) TRADE RECEIVABLES

As at 30 June 2012, the aged analysis of the Group’s trade receivables is as follows:

0 to 30 days 31 to 60 days 61 to 90 days 91 to 120 days 121 to 365 days Over 365 days	As at 30 June 2012 *HK$* 60,708,630 275,828 296,099 2,601,017 1,698,067 210,739 65,790,380	As at 31 December 2011 HK$ 63,511,642 2,084,076 5,876,461 1,687,740 2,677,563 5,177,529 81,015,011

(8) PLEDGED BANK DEPOSITS

As at 30 June 2012, pledged bank deposit represent letter of guarantee in respect of certain sales contracts with customers. The pledged bank deposit will be released upon the release of the letter of guarantee.

(9) TRADE PAYABLES

As at 30 June 2012, the aged analysis of the Group’s trade payables is as follows:

0 to 30 days 31 to 60 days 61 to 90 days 91 to 120 days 121 to 365 days Over 365 days	As at 30 June 2012 *HK$* 9,623,689 152,378 5,902 95,497 240,099 72,522 10,190,087	As at 31 December 2011 HK$ 13,588,021 – – – 945,688 57,018 14,590,727

(10) SECURED BANK BORROWING

As at 30 June 2012, there was no charge on the Group’s assets (as at 31 December 2011: HK$61,150,000). The loan of RMB50.0 million obtained in May 2011 (equivalent to approximately HK$61.2 million) was repaid in full during the Six-Month Period.

MANAGEMENT DISCUSSION AND ANALYSIS

About the Group

The Group is the largest professional services provider in China’s sports lottery market in terms of both business scope and geographic coverage, as well as the largest sports lottery terminal and system provider in the PRC. Leveraging on its advanced research and development capabilities and cooperation with top international and domestic lottery and gaming enterprises, the Group is committed to becoming a leading lottery technology group.

The Group is principally engaged in (i) gaming technologies (game software, systems, hardware and terminals); (ii) lottery management; and (iii) online and phone lottery distribution. The Group is committed to applying international best practice and advanced technologies to the lottery industry in various areas such as paper tickets, internet, mobile phone, video, wireless network and streaming media, thereby providing sports lottery authorities and millions of lottery players in China with professional, integrated lottery services.

Over the past six years, the Group has demonstrated a strong track record of delivery, successfully building a uniquely balanced, complementary suite of businesses that now occupy leading positions in the key verticals of the Chinese sports lottery market. This growth is testament to the quality and depth of the Group’s relationships with industry regulators and officials at both a national and a provincial level, as well as the quality of its management, employees, technology and partners. Through Asia Gaming Technologies Limited (“AGT”), the Group’s joint venture with Ladbroke Group, the Group has developed and successfully launched China’s only nationally-approved virtual fixed odds sports betting game, “Lucky Racing”.

The Group has a team of over 200 professionals and the footprint of its sports lottery business now covers 80% of the provinces and municipalities across China. The Group is a member of the World Lottery Association (WLA) and the Asia Pacific Lottery Association (APLA).

Industry Overview

According to information published by the Ministry of Finance of the PRC, in the first half of 2012, the PRC lottery market has continued its rapid growth with lottery sales reaching RMB129.1 billion, an increase of approximately 27.6% against the corresponding period in 2011. Of this, sports lottery amounted to approximately RMB53.9 billion (accounting for 41.8% of total lottery sales), an increase of approximately 27.8% against the corresponding period in 2011, while welfare lottery amounted to approximately RMB75.2 billion (accounting for 58.2% of total lottery sales), an increase of approximately 27.5% against the corresponding period in 2011.

At the beginning of the year, upon the approval of the State Council, principals from the Ministry of Finance, the Ministry of Civil Affairs and the General Administration of Sport of China signed an order to release the “Implementing Rules for the Regulations on the Administration of Lotteries” (the “Rules”), following which the Rules came into force on 1 March 2012. Not only does the release of the Rules suggest the determination of the central government to crack down on illegal lotteries, but it also indicates that the Chinese government may start to deal with the issuance of licenses for online and mobile lottery distribution. The Directors believe that such initiatives will bring significant new business opportunities for the Group to further expand its business via more innovative lottery games and distribution channels in the future.

The robust growth of the PRC sports lottery during the period under review was predominantly driven by an increased prize payout ratio in certain provinces, adoption of new game rules, an increase in points of sales, as well as increased marketing efforts. In aggregate across the sports lottery market as a whole, high frequency games (i.e. lotto games with high frequency draw characteristics) and Jing Cai (競彩) (i.e. sports betting games involving sports such as football and basketball) were the best performing game types. In light of the government’s initiatives to continue to facilitate lottery industry development, it is expected that China’s lottery sales will continue to enjoy explosive growth and that China will therefore maintain its status as the world’s most rapidly growing lottery market.

Business Review

For the Six-month Period, the Group achieved significant growth in total revenue and gross profit. In the past year, the Group achieved certain important milestones by launching China’s first national government-approved rapid-draw virtual fixed odds sports betting lottery platform and its first game, “Lucky Racing”, and completed the acquisitions of GOT and Silvercreek. The Group has successfully created a balanced business with leading positions across the main sports lottery verticals in China and brought together international and domestic industry expertise, technologies, management, skills and infrastructure. The integration and optimisation of these businesses is well underway and the Group expects that this foundation will enable sustainable and profitable growth in the future as well as generating attractive returns to shareholders.

Gaming Technologies Business

Virtual Fixed Odds Sports Betting

During the period under review, the virtual sports betting game “Lucky Racing” has exceeded RMB550 million in total sales, an increase of 9.6% quarter on quarter. The game has been rolled out to about 1,700 lottery shops (of which over 1,400 shops are fully operational) in Hunan province.

Sales performance of the game is satisfactory, in-line with and in some instances exceeding the expectations of the Chinese authorities. With enormous interest from players in this form of virtual betting (simulated rapid racing), the Group has been in active discussion with several provinces to seek the opportunity to launch the system and game in more provinces or cities. During the period under review, the game was successfully launched in traditional dedicated sports lottery shops and leisure venues (such as coffee shops and restaurants). It is expected that the game has the potential to expand nationwide in terms of retail betting shops and the other media channels such as mobile, internet and Internet Protocol Television (IPTV) (subject to the necessary approvals).

“Lucky Racing” and the underlying betting transaction system are supplied by AGT, the Group’s majority-owned joint venture with Ladbroke Group (a world leader in betting and gaming markets, based in the United Kingdom). This game is a virtual betting game that is broadcast to lottery shops via a central computer and cable television, allowing customers to bet on computer generated car races (Formula One style) with similar betting options to horse racing such as win, place (first two), first three or accumulator style bets. The approval by the central Chinese regulators for this form of betting is a milestone in China, and the game’s acceptance by lottery players strongly indicates that this new market segment could take significant market share. In addition, with more exciting and entertaining game features, a higher prize return ratio and higher drawing frequency, this game could also grow the overall market by attracting the burgeoning group of middle to highincome players and introduce a new form of social gaming to the PRC lottery public.

Virtual sports fixed odds betting is a rapidly growing and key revenue contributor for gaming operators in the United Kingdom, greater Europe, the United States of America and Australia, and represent a solid model of mature market success to be imported into China’s lottery market.

Gaming Hardware and Technology Development

Upon completion of the acquisition of GOT in December 2011, GOT has become a whollyowned subsidiary of the Group. This transformed the Group into the largest sports lottery terminal and system provider in the PRC. In addition, it helps to drive the overall vision and long-term strategy for the Group to develop new technologies to meet the increasing demand from the PRC government.

Currently, GOT is the only authorised sports lottery terminal and system provider in the PRC which possesses its own research and development centre. With advanced technologies and innovation capabilities, GOT has successfully developed an extensive sales network in 26 provinces in China and maintained its leading market share of 50% in China. After over 10 years of development, GOT has developed a reputable brand in the PRC’s sports lottery and commercial information products fields, and was appraised by the General Administration of Sport of China as an “Outstanding Company Contributing to Sports Lottery”. Because of GOT’s various competitive advantages, the Directors believe that GOT is very well positioned to introduce new sports lottery projects for the Chinese government in the future.

In addition, during the period under review, the Group’s other gaming technology projects and strategic business developments have sustained good momentum. The Group is committed to delivering world-class innovative solutions to satisfy the requirements of the Chinese authorities and entertainment needs of the lottery public, and has continuously devoted efforts and resources on research and development of gaming technologies. During the period under review, the Group has continued its focus on several business development projects such as self-service terminals, portable terminals, as well as other new lottery technologies. The Group’s international strategic partners for these projects are amongst the world’s foremost operators in their respective fields. Outside of its domestic, Chinese market, the Group believes that GOT has significant potential to develop an international business and this will be an increasing focus of the Group in the future.

Lottery Management Business

The Group’s lottery management business is performing in-line with expectations with stable sales and gross profits. Lottery management services primarily comprise: direct and franchise retail shop management, lottery sales through partnerships with major retailers (like supermarkets, convenience stores and so forth) as well as lottery sales, marketing and promotion management.

Through years of remarkable services and proactive participation, the Group has improved its operational efficiency and effectiveness and built up solid delivery infrastructure: talent/skills, management expertise, provincial offices etc. and is well-equipped to execute large multidisciplinary/diverse projects for the lottery authorities in the PRC. The strength and track record of the lottery management business as a reliable supplier of quality lottery products and services in the PRC’s sports lottery market has been and continues to be a key enabler of the Group’s strategy.

Online and Phone Lottery Distribution Business

Following the completion of the acquisition of Silvercreek in December 2011, the Group has continued to closely monitor policy development with respect to the government approval of lottery sales via internet and phone. As Silvercreek is one of the most competitive phone and mobile lottery service providers in China capable of providing lottery organisations with comprehensive phone and mobile betting solutions, the Board believes that the acquisition helped the Group strengthen its technology development capability, team expertise and operational experience in the field of phone lottery, thereby equipping the Group well to react promptly when opportunities arise. Currently, the Group is qualified to apply for mobile/internet licenses and is well positioned to exploit this market opportunity as and when it becomes available.

Business Outlook

With continued improvement in revenue performance, the Directors are optimistic about the outlook for the business and excited about the growth opportunities they see ahead. The Board believes that, in the second half of this year, the business will continue to enjoy rapid growth and achieve further significant milestones. Firstly, following the successful launch of “Lucky Racing” virtual sports betting in Hunan province, the Group expects positive developments as it progresses the rollout of the game to more provinces across China and through other distribution channels. Secondly, the Group expects solid progress in its efforts to develop and introduce more exciting new games and content to the Chinese sports lottery market. Thirdly, the Group continues to closely monitor the prospective online and mobile lottery distribution business and is well equipped to react quickly in response to any new development of government policies. Finally, the Group will endeavor to expand the existing sales networks of GOT both domestically and overseas where there are significant opportunities.

Following the implementation of the Rules on 1 March 2012, the Directors believe that the Chinese government will start to deal with the issuance of licenses for online and mobile lottery distribution. As a prudent lottery group which has been providing legitimate lottery products and services in compliance with the regulations and rules of the Chinese government, and in light of its Silvercreek acquisition, the Group is well positioned to react to such a regulatory change. The Directors believe that such a development would bring great opportunities for the Group to further expand its business into more innovative lottery games and distribution channels in the future.

Taken together with the continuing underlying revenue growth of the sports lottery business in China, the multiple potential areas of expansion outlined above suggest a very positive outlook for the Group for the rest of the year and beyond.

Looking ahead, the Group will continue to explore new business opportunities and forge more strategic business alliances, with a view to increasing its market share and ultimately maximizing returns for shareholders. The Board strongly believes that the solid business foundations, strong customer and government relationships as well as the quality of international gaming partnerships enjoyed by the Group, ideally position it to reach new heights when market opportunities emerge in the rapidly growing sports lottery industry.

Financial Performance Review

For the Six-Month Period, the Group made approximately HK$99.3 million in revenue, a two-fold increase against the corresponding period in 2011, gross profit for the Six-Month Period amounted to approximately HK$47.6 million, an increase of approximately HK$14.2 million or 42.5% from the corresponding period in 2011. The substantial increase of total revenue and gross profit of the Group was mainly attributable to the new subsidiary GOT upon its complete acquisition by the Group in December 2011. All the revenue was derived from provision of sports lottery management and marketing consultancy services and gaming technologies (game software, systems, hardware and terminals) business in the PRC.

The Group’s selling and administrative expenses for the Six-Month Period was approximately HK$51.3 million, representing an increase of approximately HK$18.5 million or 56.4% against the corresponding period in 2011. The increase was mainly due to general increase in staff cost in the PRC and the additional operating expenses from the new subsidiaries, GOT and Silvercreek.

Loss attributable to owners of the Company for the Six-Month Period amounted to approximately HK$27.2 million primarily due to the amortisation of other intangible assets (totalling approximately HK$19.2 million for the Six-Month Period) and the share-based payment expense (totalling approximately HK$4.6 million for the Six-Month Period).

Capital resources, liquidity and gearing ratio

Net cash and bank balances as at 30 June 2012 were approximately HK$109.4 million. The total assets and net current assets of the Group as at 30 June 2012 were approximately HK$1,115.1 million and approximately HK$231.2 million respectively.

The Group financed its operations primarily with internally generated cashflows as well as the proceeds from previous fund raising exercises and from the exercising by grantees of the share options granted under the share option scheme.

The gearing ratio (determined as the proportion of bank borrowing to equity) of the Group as at 30 June 2012 was nil (as at 31 December 2011: 0.057). The liquidity ratio (defined as current assets over current liabilities) of the Group as at 30 June 2012 was approximately 9.2 (as at 31 December 2011: 3.2), continuously reflecting adequacy of financial resources.

Charges on the Group’s assets

As at 30 June 2012, there was no charge on the Group’s assets (as at 31 December 2011: HK$61,150,000).

Foreign exchange exposure

As at 30 June 2012, the Group held cash and bank deposits denominated in Hong Kong Dollars and Renminbi. Since all of its revenue-generating operations, monetary assets and liabilities of the Group are conducted or transacted substantially in Hong Kong Dollars and Renminbi, which is not freely convertible into foreign currencies, the Group faced minimal exchange rate risk during the period.

Employees’ information

As at 30 June 2012, the Group had 227 employees (30 June 2011: 143) in Hong Kong and the PRC. Total staff costs (excluding directors’ remunerations) for the Six-Month Period amounted to approximately HK$19.8 million.

The Group’s remuneration policies are formulated on the basis of performance and experience of individual employees and are in line with the local market practices. In addition to salary, the Group also offers to its employees other fringe benefits including year-end bonus, share option scheme, contributory provident fund, medical benefits and training.

DIRECTORS’ AND CHIEF EXECUTIVES’ INTERESTS AND SHORT POSITIONS IN SHARES OF HK$0.002 EACH IN THE CAPITAL OF THE COMPANY (“SHARES”), UNDERLYING SHARES AND DEBENTURES

As at 30 June 2012, the interests and short positions of the Directors and chief executives 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 (“SFO”)), which were required (a) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); (b) pursuant to Section 352 of the SFO, to be entered in the register referred to therein; or (c) pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules relating to securities transactions by Directors, to be notified to the Company and the Stock Exchange, were as follows:

a. Interests in ordinary Shares:

Number of Shares

				Approximate
	Personal	Corporate		percentage
Name of Director	interest	interest	Total	held
Mr. Sun Ho	27,078,000	2,006,250,000	2,033,328,000	52.90%
		(Note 1)
Mr. Robert Geoffrey Ryan	3,347,750	–	3,347,750	0.09%
Mr. Bai Jinmin	6,687,500	44,876,600	51,564,100	1.34%
		(Note 2)
Mr. Liang Yu	6,187,500	–	6,187,500	0.16%
Ms. Yang Yang	414,375	–	414,375	0.01%
Mr. Wang Ronghua	2,275,000	–	2,275,000	0.06%
Mr. Hua Fengmao	1,355,000	–	1,355,000	0.04%

Notes:

These 2,006,250,000 Shares were held in the name of MAXPROFIT GLOBAL INC, as MAXPROFIT GLOBAL INC is beneficially and wholly-owned by Mr. Sun Ho, an executive Director and chairman & chief executive officer (“CEO”) of the Company, Mr. Sun was deemed to be interested in such Shares.
These 44,876,600 Shares were held in the name of Fine Bridge International Limited. Fine Bridge International Limited is beneficially and wholly-owned by HB Resources Investment Limited, which in turn is beneficially and wholly-owned by Mr. Bai Jinmin, an executive Director of the Company. Accordingly, HB Resources Investment Limited and Mr. Bai were deemed to be interested in such Shares.

b. Long position in the underlying Shares in respect of the share options of the Company (which were regarded as unlisted physically settled equity derivatives):

Number of underlying Shares entitled (in respect of share options of the Company)

								Approximate
					Granted	Exercised		percentage of
		Exercise		As at	during the	during the		issued share
	Date of	price per	Exercisable	1 January	Six-Month	Six-Month	As at	capital of
Name of Director	grant	Share	period	2012	Period	Period	30 June 2012	the Company
		*(HK$)*
Mr. Robert	9-10-2008	0.2198	9-10-2009 –	6,687,500	–	–	6,687,500	0.17%
Geoffrey Ryan			8-10-2013
	21-12-2011	0.2900	21-12-2012 –	21,264,000	–	–	21,264,000	0.55%
			20-12-2016
Mr. Bai Jinmin	9-10-2008	0.2198	9-10-2009 –	6,687,500	–	–	6,687,500	0.17%
			8-10-2013
	21-12-2011	0.2900	21-12-2012 –	21,264,000	–	–	21,264,000	0.55%
			20-12-2016
Mr. Liang Yu	9-10-2008	0.2198	9-10-2009 –	6,687,500	–	–	6,687,500	0.17%
			8-10-2013
	21-12-2011	0.2900	21-12-2012 –	21,264,000	–	–	21,264,000	0.55%
			20-12-2016
Ms. Yang Yang	9-10-2008	0.2198	9-10-2009 –	668,750	–	–	668,750	0.017%
			8-10-2013
	21-12-2011	0.2900	21-12-2012 –	2,000,000	–	–	2,000,000	0.052%
			20-12-2016
Mr. Wang Ronghua	21-12-2011	0.2900	21-12-2012 –	2,000,000	–	–	2,000,000	0.052%
			20-12-2016
Mr. Hua Fengmao	21-12-2011	0.2900	21-12-2012 –	2,000,000	–	–	2,000,000	0.052%
			20-12-2016
Mr. Kwok Wing Leung	21-12-2011	0.2900	21-12-2012 –	2,000,000	–	–	2,000,000	0.052%
Andy			20-12-2016

Note: A portion of the option representing 25% of the total underlying Shares entitled under such option shall be vested in the grantee of the option in each of the 4 years during the exercisable period. If the grantee does not exercise such portion of the option within one year after it has been vested in him/her, such portion of the option will lapse.

Save as disclosed above, as at 30 June 2012, none of the Directors or chief executives of the Company had any interests or short positions in the Shares, underlying Shares (in respect of share options of the Company which were regarded as unlisted physically settled equity derivatives) and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO), which (a) 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 and short positions which they were taken or deemed to have under such provisions of the SFO); or (b) were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein; or (c) were required, pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules relating to securities transactions by Directors, to be notified to the Company and the Stock Exchange.

SUBSTANTIAL SHAREHOLDERS’ INTERESTS IN SHARES AND UNDERLYING SHARES AND DEBENTURES

As at 30 June 2012, so far as was known to the Directors or chief executives of the Company, the following persons (not being Directors or chief executives of the Company) had, or were deemed to have, interests and long positions in the Shares or underlying Shares which would fall to be disclosed under the provisions of Divisions 2 and 3 of Part XV of the SFO or, were expected, directly or indirectly, to be interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group or held any option in respect of such capital and recorded in the register kept by the Company pursuant to section 336 of the SFO:

Interests in the Shares:

			Approximate
			percentage of
			issued share
		Number of	capital of the
Name of shareholder	Capacity	Shares held	Company
MAXPROFIT GLOBAL INC	Beneficial owner_(Note)_	2,006,250,000	52.19%
TIG ADVISORS LLC	Investment manager	261,400,000	6.80%

Note: As disclosed above, Mr. Sun Ho was deemed to be interested in these 2,006,250,000 Shares by virtue of his interest in MAXPROFIT GLOBAL INC.

Save as disclosed above, as at 30 June 2012, the Directors or chief executives of the Company were not aware of any other substantial shareholder (not being a Director or chief executive of the Company) who had, or was deemed to have, interests or short positions in the Shares, underlying Shares and debentures of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO; or who was expected, directly or indirectly, to be interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group or held any option in respect of such capital and recorded in the register kept by the Company pursuant to section 336 of the SFO.

INTERESTS OF OTHER PERSONS

As at 30 June 2012, apart from the interests in the Shares, underlying Shares and debentures of the Company and its associated corporations held by the Directors, chief executives and substantial shareholders of the Company stated above, there were no other persons with interests recorded in the register of the Company required to be kept under section 336 of the SFO.

INTERESTS IN COMPETING BUSINESS

During the Six-Month period, none of the Directors or the controlling shareholder of the Company had an interest in a business, which competed or might compete with the business of the Group.

AUDIT COMMITTEE

The audit committee of the Company comprises three independent non-executive Directors, namely, Mr. Kwok Wing Leung Andy, Mr. Wang Ronghua and Mr. Hua Fengmao. The unaudited consolidated results of the Group for the Six-Month Period have been reviewed and commented on by the audit committee.

CORPORATE GOVERNANCE

The Board is committed to maintaining high standards of corporate governance in order to uphold the transparency of the Group and safeguard interests of the shareholders of the Company.

During the Six-Month Period, the Company has adopted the code provisions and certain recommended best practices in the Code on Corporate Governance Practices (effective until 31 March 2012) and Corporate Governance Code and Corporate Governance Report (effective from 1 April 2012) as set out in Appendix 15 of the GEM Listing Rules, except that:

under the code provision A.2.1, the roles of chairman and CEO should be separate and should not be performed by the same individual. The roles of chairman and CEO of the Company were performed by the executive Director, Mr. Sun Ho, during the Six-Month Period. The Company considered that the combination of the roles of chairman and CEO could effectively formulate and implement the strategies of the Company. The Company considered that under the supervision of its Board and its independent non-executive Directors, a balancing mechanism existed so that the interests of shareholders were adequately and fairly represented. The Company considered that there was no imminent need to change the arrangement; and
under the code provision A.4.2, every Director should be subject to retirement by rotation at least once every three years. During the Six-Month period, the chairman of the Board was not subject to retirement by rotation, as the Board considered that the continuity of the office of the chairman provided the Group with strong and consistent leadership and was of great importance to the smooth operations of the Group.

Corporate Governance Committee

The Corporate governance committee was established on 23 March 2012 with written terms of reference. The corporate governance committee is to assist the Board in performing the corporate governance duties as required under the Corporate Governance Code and Corporate Governance Report as set out in Appendix 15 to the GEM Listing Rules. The committee is also provided with sufficient resources enabling it to perform its duties. The corporate governance committee comprises two persons, namely, the Chairman Mr. Sun Ho and the Company Secretary Mr. Wong Wai Sing.

REQUIRED STANDARD OF DEALINGS REGARDING SECURITIES TRANSACTIONS BY DIRECTORS

The Company has adopted the required standard of dealings regarding securities transactions by Directors set out in Rules 5.48 to 5.67 of the GEM Listing Rules as its code of conduct for dealings in securities of the Company by the Directors (the “Code of Conduct”). Having made specific enquiry of all Directors, all Directors confirmed that they have complied with the required standard of dealings set out in the Code of Conduct during the Six-Month Period.

SHARE OPTION SCHEME

During the Six-Month Period, no options were granted by the Company pursuant to its share option scheme. During the Six-Month Period, no options were exercised and options for 43,514,000 Shares were lapsed. As at 30 June 2012, there were options for 280,781,000 Shares remained outstanding.

The following table discloses details and movements of the Company’s share options held by Directors, eligible employees and eligible participants of the Group under the share option scheme of the Company during the Six-Month Period:

				Outstanding			Cancelled/	Outstanding
		Exercise		as at	Granted	Exercised	lapsed	as at
		price		1 January	during the	during the	during the	30 June
Name	Date of grant	per Share	Exercisable period	2012	period	period	period	2012
		*HK$*
Directors:
Mr. Robert Geoffrey Ryan	9 October 2008	0.2198	9 October 2011 – 8 October 2012	3,343,750	–	–	–	3,343,750
			9 October 2012 – 8 October 2013	3,343,750	–	–	–	3,343,750
	21 December 2011	0.2900	21 December 2012 – 20 December 2013	5,316,000	–	–	–	5,316,000
			21 December 2013 – 20 December 2014	5,316,000	–	–	–	5,316,000
			21 December 2014 – 20 December 2015	5,316,000	–	–	–	5,316,000
			21 December 2015 – 20 December 2016	5,316,000	–	–	–	5,316,000
Mr. Bai Jinmin	9 October 2008	0.2198	9 October 2011 – 8 October 2012	3,343,750	–	–	–	3,343,750
			9 October 2012 – 8 October 2013	3,343,750	–	–	–	3,343,750
	21 December 2011	0.2900	21 December 2012 – 20 December 2013	5,316,000	–	–	–	5,316,000
			21 December 2013 – 20 December 2014	5,316,000	–	–	–	5,316,000
			21 December 2014 – 20 December 2015	5,316,000	–	–	–	5,316,000
			21 December 2015 – 20 December 2016	5,316,000	–	–	–	5,316,000

				Outstanding			Cancelled/	Outstanding
		Exercise		as at	Granted	Exercised	lapsed	as at
		price		1 January	during the	during the	during the	30 June
Name	Date of grant	per Share	Exercisable period	2012	period	period	period	2012
		*HK$*
Mr. Liang Yu	9 October 2008	0.2198	9 October 2011 – 8 October 2012	3,343,750	–	–	–	3,343,750
			9 October 2012 – 8 October 2013	3,343,750	–	–	–	3,343,750
	21 December 2011	0.2900	21 December 2012 – 20 December 2013	5,316,000	–	–	–	5,316,000
			21 December 2013 – 20 December 2014	5,316,000	–	–	–	5,316,000
			21 December 2014 – 20 December 2015	5,316,000	–	–	–	5,316,000
			21 December 2015 – 20 December 2016	5,316,000	–	–	–	5,316,000
Ms. Yang Yang	9 October 2008	0.2198	9 October 2011 – 8 October 2012	334,375	–	–	–	334,375
			9 October 2012 – 8 October 2013	334,375	–	–	–	334,375
	21 December 2011	0.2900	21 December 2012 – 20 December 2013	500,000	–	–	–	500,000
			21 December 2013 – 20 December 2014	500,000	–	–	–	500,000
			21 December 2014 – 20 December 2015	500,000	–	–	–	500,000
			21 December 2015 – 20 December 2016	500,000	–	–	–	500,000
Mr. Wang Ronghua	21 December 2011	0.2900	21 December 2012 – 20 December 2013	500,000	–	–	–	500,000
			21 December 2013 – 20 December 2014	500,000	–	–	–	500,000
			21 December 2014 – 20 December 2015	500,000	–	–	–	500,000
			21 December 2015 – 20 December 2016	500,000	–	–	–	500,000
Mr. Hua Fengmao	21 December 2011	0.2900	21 December 2012 – 20 December 2013	500,000	–	–	–	500,000
			21 December 2013 – 20 December 2014	500,000	–	–	–	500,000
			21 December 2014 – 20 December 2015	500,000	–	–	–	500,000
			21 December 2015 – 20 December 2016	500,000	–	–	–	500,000
Mr. Kwok Wing Leung	21 December 2011	0.2900	21 December 2012 – 20 December 2013	500,000	–	–	–	500,000
Andy			21 December 2013 – 20 December 2014	500,000	–	–	–	500,000
			21 December 2014 – 20 December 2015	500,000	–	–	–	500,000
			21 December 2015 – 20 December 2016	500,000	–	–	–	500,000
Eligible employees and	other eligible participants:
	9 October 2008	0.2198	9 October 2011 – 8 October 2012	28,734,375	–	–	(1,687,500)	27,046,875
			9 October 2012 – 8 October 2013	29,984,375	–	–	(1,687,500)	28,296,875
	6 July 2010	0.300	6 July 2011 – 5 July 2012	125,000	–	–	–	125,000
			6 July 2012 – 5 July 2013	1,000,000	–	–	–	1,000,000
			6 July 2013 – 5 July 2014	1,000,000	–	–	–	1,000,000
			6 July 2014 – 5 July 2015	1,000,000	–	–	–	1,000,000
	30 March 2011	0.330	30 March 2012 – 29 March 2013	4,350,000	–	–	(500,000)	3,850,000
			30 March 2013 – 29 March 2014	4,350,000	–	–	(500,000)	3,850,000
			30 March 2014 – 29 March 2015	4,350,000	–	–	(500,000)	3,850,000
			30 March 2015 – 29 March 2016	4,350,000	–	–	(500,000)	3,850,000

Name Date of grant Exercise price per Share Exercisable period *HK$* 21 December 2011 0.2900 21 December 2012 – 20 December 2013 21 December 2013 – 20 December 2014 21 December 2014 – 20 December 2015 21 December 2015 – 20 December 2016 Total Exercisable at the end of the period Weighted average exercise price of the outstanding share option	Outstanding as at 1 January 2012 38,132,000 38,132,000 38,132,000 38,132,000 324,295,000 39,225,000 HK$0.2750		Granted during the period – – – – –		Exercised during the period – – – – –		Cancelled/ lapsed during the period (9,534,750) (9,534,750) (9,534,750) (9,534,750) (43,514,000)	Outstanding as at 30 June 2012 28,597,250 28,597,250 28,597,250 28,597,250 280,781,000	Outstanding as at 30 June 2012 28,597,250 28,597,250 28,597,250 28,597,250 280,781,000
									280,781,000

									41,387,500

									HK$0.2733

PURCHASE, REDEMPTION OR SALE OF LISTED SECURITIES OF THE COMPANY

During the Six-Month Period, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the listed securities of the Company.

For illustration purposes, figures in RMB in this announcement have been translated into HK$ at the exchange rate of RMB1 = HK$1.230.

By order of the Board AGTech Holdings Limited SUN Ho Chairman & CEO

Hong Kong, 10 August 2012

As at the date of this announcement, the Board comprises (i) Mr. Sun Ho, Mr. Robert Geoffrey Ryan, Mr. Bai Jinmin and Mr. Liang Yu as executive Directors; (ii) Ms. Yang Yang as non-executive Director; and (iii) Mr. Wang Ronghua, Mr. Hua Fengmao and Mr. Kwok Wing Leung Andy as independent non-executive Directors.

This announcement will remain on the “Latest Company Announcement” page of the GEM website operated by the Stock Exchange at www.hkgem.com for at least seven days from the day of its posting and will be published on the website of the Company at www.agtech.com.