NOIZ Group Ltd. — Interim / Quarterly Report 2021

Nov 12, 2021

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領智金融集團有限公司

STOCK CODE 股份代號：8163

2021 第三季度報告 Third Quarterly Report

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

GEM has been positioned as a market designed to accommodate small and midsized 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.

Given that the companies listed on GEM are generally small and mid-sized companies, 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.

Hong Kong Exchanges and Clearing Limited and the Stock Exchange take no responsibility for the contents of this report, 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 report.

This report, for which the directors (the “Directors”) of Merdeka Financial Group Limited (the “Company”) collectively and individually accept full responsibility, includes particulars given in compliance with the Rules Governing the Listing of Securities on 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 report 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 report misleading.

香港聯合交易所有限公司（「聯交所」）GEM（「GEM」）的特色

GEM的定位，乃為中小型公司提供一個上市的市場，此等公司相比起其他在主板上市的公 司帶有較高投資風險。有意投資的人士應了解投資於該等公司的潛在風險，並應經過審慎 周詳的考慮後方作出投資決定。

由於GEM上市公司普遍為中小型公司，在GEM買賣的證券可能會較於主板買賣之證券承受 較大的市場波動風險，同時無法保證在GEM買賣的證券會有高流通量的市場。

香港交易及結算所有限公司及聯交所對本報告之內容概不負責，對其準確性或完整性亦不 發表任何聲明，並明確表示概不就因本報告全部或任何部分內容而產生或因倚賴該等內容 而引致之任何損失承擔任何責任。

本報告乃遵照《聯交所GEM證券上市規則》（「GEM上市規則」）的規定而刊載，旨在提供有關 領智金融集團有限公司（「本公司」）之資料；本公司各董事（「董事」）願就本報告的資料共同 及個別地承擔全部責任。董事在作出一切合理查詢後，確認就其所知及所信，本報告所載 資料在各重要方面均屬準確完備，沒有誤導或欺詐成分，且並無遺漏任何事項，足以令致 本報告或其所載任何陳述產生誤導。

UNAUDITED CONDENSED CONSOLIDATED THIRD QUARTERLY RESULTS FOR THE NINE MONTHS ENDED 30 SEPTEMBER 2021

The board (the “ Board ”) of Directors is pleased to announce that the unaudited condensed consolidated quarterly results of the Company and its subsidiaries (collectively, the “ Group ”) for the three months and the nine months ended 30 September 2021, together with the comparative unaudited figures for the corresponding periods in 2020, as follows:

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the three and nine months ended 30 September 2021

	Three months ended	Nine months ended
	30 September	30 September
	2021 2020	2021 2020
	(Unaudited) (Unaudited)	(Unaudited) (Unaudited)
	Notes HK$’000 HK$’000	HK$’000 HK$’000
	(Restated)	(Restated)
REVENUE	2 8,994 12,483	21,054 36,702
Cost of sales	(3,153) (2,847)	(5,149) (10,836)
Gross profit	5,841 9,636	15,905 25,866
Other income and gains or (losses)	3 295 1,375	2,437 669
Operating and administrative expenses	(8,831) (12,110)	(24,956) (29,784)
Reversal of impairment loss on trade
receivables	— —	61 155
Reversal of impairment loss on other
receivables Impairment loss on loans receivable	— — 16 — —	— 8,950 (352) —
Reversal of impairment loss/
(impairment loss) on finance lease
receivables (Loss)/gain on deregistration	17 — —	950 (78,049)
of subsidiaries Loss on deconsolidation of subsidiaries Finance costs	4 — — 5 (4,052) — 6 (3,002) (2,644)	(16) 1,057 (4,052) — (8,750) (10,601)
LOSS BEFORE INCOME TAX	7 (9,749) (3,743)	(18,773) (81,737)
Income tax	8 (539) (1,287)	(970) (2,579)
LOSS FOR THE PERIOD	(10,288) (5,030)	(19,743) (84,316)
Loss for the period attributable to:
Owners of the Company	(10,288) (3,331)	(20,078) (58,148)
Non-controlling interests	— (1,699)	335 (26,168)
	(10,288) (5,030)	(19,743) (84,316)
LOSS PER SHARE	HK$ HK$	HK$ HK$
— Basic and diluted	10 (0.03) (0.02)*	(0.09) (0.86)*

• Adjusted for the effect of share consolidation on 17 June 2021 and the bonus elements of the rights issue on 22 July 2021.

Third Quarterly Report 2021 • Merdeka Financial Group Limited

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CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME (Continued)

For the three and nine months ended 30 September 2021

Three months ended	Nine months ended
30 September	30 September
2021 2020	2021 2020
(Unaudited) (Unaudited)	(Unaudited) (Unaudited)
HK$’000 HK$’000	HK$’000 HK$’000
LOSS FOR THE PERIOD (10,288) (5,030)	(19,743) (84,316)
Other comprehensive income: Item that may be reclassified subsequently to profit or loss: Exchange differences arising on translation of foreign operation (9) (229)	(89) (3,209)
Release of exchange reserve upon deconsolidation of subsidiaries 14,004 —	14,004 —
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 3,707 (5,259)	(5,828) (87,525)
Total comprehensive income attributable to: Owners of the Company 3,702 (3,858)	(6,254) (60,415)
Non-controlling interests 5 (1,401)	426 (27,110)
3,707 (5,259)	(5,828) (87,525)

2 Merdeka Financial Group Limited • Third Quarterly Report 2021

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

	Notes	As at 30 September 2021 As at 31 December 2020 (Unaudited) (Audited) HK$’000 HK$’000
ASSETS AND LIABILITIES
Non-current assets
Property, plant and equipment	11	3,418 750
Statutory deposit		510 510
Goodwill Intangible assets	12 13	5,470 5,470 3,451 3,622
Right-of-use assets	14	371 3,630
Financial assets at fair value through
other comprehensive income		2,730 2,730
Financial assets at fair value through profit or loss		487 487
Total non-current assets		16,437 17,199
Current assets
Inventories		323 377
Trade receivables Prepayments, deposits and other receivables	15	4,637 15,253 7,746 8,339
Loans receivable Finance lease receivables	16 17	7,738 11,032 — —
Financial assets at fair value through profit or loss		579 1,010
Bank balances — trust accounts Bank balances and cash — general accounts	18 18	26,226 27,378 48,341 27,610
Total current assets		95,590 90,999
Current liabilities
Borrowings	19	— 851
Lease liabilities Trade payables	20 21	377 3,354 29,180 40,864
Other payables and accruals		13,810 42,801
Tax payables		1,557 559
Total current liabilities		44,924 88,429
Net current assets		50,666 2,570
Total assets less current liabilities		67,103 19,769

Third Quarterly Report 2021 • Merdeka Financial Group Limited

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CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Continued)

	As at	As at
	30 September	31 December
	2021	2020
	(Unaudited)	(Audited)
	Notes HK$’000	HK$’000
Non-current liabilities
Deferred tax liabilities	569	598
Convertible bonds	22 82,469	73,872
Total non-current liabilities	83,038	74,470
Net liabilities	(15,935)	(54,701)
EQUITY
Share capital	23 48,483	13,232
Reserves	(64,418)	(76,015)
Equity attributable to owners
of the Company	(15,935)	(62,783)
Non-controlling interests	—	8,082
Total deficiency	(15,935)	(54,701)

Merdeka Financial Group Limited • Third Quarterly Report 2021

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CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the nine months ended 30 September 2021

	Attributable to owners of the Company Issued capital Share premium Contributed surplus Equity component of convertible bonds *Share option reserve Capital reduction reserve Exchange fluctuation reserve *Fair value through other comprehensive income reserve Other reserve Accumulated losses *Total Non- controlling interests Total equity (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 2,622 993,392 66,710 22,728 25,004 163,191 (10,997) 32 (6,548) (1,400,237) (144,103) 34,739 (109,364) — — — — — — — — — (58,148) (58,148) (26,168) (84,316) — — — — — — (2,267) — — — (2,267) (942) (3,209) — — — — — — (2,267) — — (58,148) (60,415) (27,110) (87,525) 10,488 104,880 — — — — — — — — 115,368 — 115,368 — (1,552) — — — — — — — — (1,552) — (1,552) — — — (28,596) — — — — — 10,030 (18,566) — (18,566) — — — 16,016 — — — — — — 16,016 — 16,016 — — — 41,780 — — — — — 1,828 43,608 — 43,608 13,110 1,096,720 66,710 51,928 25,004 163,191 (13,264) 32 (6,548) (1,446,527) (49,644) 7,629 (42,015)
As at 1 January 2020
Comprehensive income Loss for the period Other comprehensive income Exchange difference arising on translation of foreign operation
Total comprehensive income
Issuance of shares Transaction cost for rights issue Redemption of convertible bonds Issuance of convertible bonds Modification of the terms of convertible bonds
As at 30 September 2020
As at 1 January 2021
	13,232 1,096,884 66,710 51,928 25,004 163,191 (13,824) 730 (6,548) (1,460,090) (62,783) 8,082 (54,701)
Comprehensive income (Loss)/profit for the period Other comprehensive income Exchange difference arising on translation of foreign operation Release of exchange reserve to profit or loss upon deconsolidation of subsidiaries
	— — — — — — — — — (20,078) (20,078) 335 (19,743)
	— — — — — — (180) — — — (180) 91 (89)
	— — — — — — 14,004 — — — 14,004 — 14,004
Total comprehensive income
	— — — — — — 13,824 — — (20,078) (6,254) 426 (5,828)
Issuance of shares(Note 23) Transaction cost for rights issue(Note 23) Recognition of equity-settled share-based payment Proceeds from exercise of share options Exercise of share options Deconsolidation of subsidiaries
	34,631 17,316 — — — — — — — — 51,947 — 51,947
	— (772) — — — — — — — — (772) — (772)
	— — — — 997 — — — — — 997 — 997
	620 310 — — — — — — — — 930 — 930
	— 468 — — (468) — — — — — — — —
	— — — — — — — — — — — (8,508) (8,508)
As at 30 September 2021
	48,483 1,114,206 66,710 51,928 25,533 163,191 — 730 (6,548) (1,480,168) (15,935) — (15,935)

• These reserve accounts comprised the reserve balance as presented in the condensed consolidated statement of financial position.

Third Quarterly Report 2021 • Merdeka Financial Group Limited

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended 30 September 2021

1. BASIS OF PREPARATION AND ACCOUNTING POLICIES

The unaudited condensed consolidated quarterly results have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards (“ HKFRSs ”), which collective term includes all applicable individual HKFRSs, Hong Kong Accounting Standards (“ HKASs ”) and Interpretations issued by Hong Kong Institute of Certified Public Accountants (“ HKICPA “).

The unaudited condensed consolidated quarterly results also comply with the applicable disclosure provisions of the GEM Listing Rules.

The unaudited condensed consolidated quarterly results have been prepared under the historical cost convention except for certain financial instruments which are measured at fair values. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

The unaudited condensed consolidated quarterly results should be read in conjunction with the Group’s audited annual financial statements for the year ended 31 December 2020 (the “ 2020 Annual Report ”). The accounting policies and methods of computation adopted are consistent with those followed in the preparation of the 2020 Annual Report.

The Group has adopted the standards, amendments and interpretations that have been issued and effective for the accounting period beginning on 1 January 2021. The adoption of such standards, amendments and interpretations does not have any material financial effect on this quarterly results.

6 Merdeka Financial Group Limited • Third Quarterly Report 2021

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the nine months ended 30 September 2021

2. REVENUE AND SEGMENT REPORTING

• 2.1 Revenue represents income from financial services operations, income from corporate consulting operations and the amounts received and receivable for goods sold to outside customers, net of returns and discounts during the three months and nine months ended.

Three months ended	Nine months	ended
30 September	30 September
2021 2020	2021	2020
(Unaudited) (Unaudited)	(Unaudited) (Unaudited)
HK$’000 HK$’000	HK$’000	HK$’000
Financial services business 4,029 7,005	11,043	18,695
Corporate consulting business 1,607 2,350	4,372	5,968
Trading business 3,358 3,128	5,639	12,039
8,994 12,483	21,054	36,702

2.2 Segment reporting

(a) Reportable segments

The Group determines its operating segments based on the reports reviewed by the chief operating decision-maker that are used to make strategic decisions. The chief operating decision-maker has been identified as the Company’s executive directors.

During the period, the Group has not entered new contract with any customer in providing technical support services and sale of information technology products; as such, no revenue is recorded for this business sector. For the purpose of better assessment of individual segment performance, the assets/liabilities and performance of this business sector are grouped into “unallocated” column, therefore certain information for the year ended 31 December 2020 and the nine months ended 30 September 2020 had been re-presented to conform with current year presentation.

The Group currently has three reportable segments. The segments are managed separately as each business offers different products and services and requires different business strategies as follows:

• (a) The financial services business includes the securities brokerage business, provision of corporate finance advisory services, asset management business and money lending business;

Third Quarterly Report 2021 • Merdeka Financial Group Limited

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the nine months ended 30 September 2021

2. REVENUE AND SEGMENT REPORTING (Continued)

• 2.2 Segment reporting (Continued)

• (a) Reportable segments (Continued)

  • (b) The corporate consulting business segment is engaged in the provision of company secretarial services, accounting and financial reporting services and management consulting services; and

  • (c) The trading business segment is engaged in the trading of goods, components and accessories.

(b) Segment revenue and results

For the nine months ended 30 September 2021

Financial services business Corporate consulting business Trading business (Unaudited) (Unaudited) (Unaudited) HK$’000 HK$’000 HK$’000	Total
	(Unaudited)
	HK$’000
Segment revenue 11,043 4,372 5,639
	21,054
Segment profit/(loss) 6,718 211 (518)
	6,411
Finance costs Reversal of impairment loss on finance lease receivables Loss on deconsolidation of subsidiaries Unallocated corporate expenses Loss before income tax
	(8,622)
	950
	(4,052)
	(13,460)
	(18,773)

For the nine months ended 30 September 2020

Financial services business Corporate consulting business Trading business (Unaudited) (Unaudited) (Unaudited) HK$’000 HK$’000 HK$’000	Total (Unaudited) HK$’000 36,702 8,808 (10,363) 1,057 8,950 (78,049) (12,140) (81,737)
Segment revenue 18,695 5,968 12,039
Segment profit/(loss) 6,960 2,077 (229)
Finance costs Gain on deregistration of subsidiaries Reversal of impairment loss on other receivables Impairment loss on finance lease receivables Unallocated corporate expenses Loss before income tax

Merdeka Financial Group Limited • Third Quarterly Report 2021

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the nine months ended 30 September 2021

2. REVENUE AND SEGMENT REPORTING (Continued)

2.2 Segment reporting (Continued)

(c) Segment assets and liabilities

The following is an analysis of the Group’s assets and liabilities by reportable segments:

	30 September 31 December	30 September 31 December
	2021	2020
	(Unaudited)	(Audited)
	HK$’000	HK$’000
Segment assets
Financial services business	61,414	69,705
Corporate consulting business	12,499	11,710
Trading business	6,030	6,400
Total segment assets	79,943	87,815
Unallocated bank balances and cash	22,894	11,309
Unallocated corporate assets	9,190	9,074
Consolidated total assets	112,027	108,198
Segment liabilities
Financial services business	30,630	44,034
Corporate consulting business	153	973
Trading business	3,027	3,415
Total segment liabilities	33,810	48,422
Convertible bonds	82,469	73,872
Unallocated corporate liabilities	11,683	40,605
Consolidated total liabilities	127,962	162,899

Third Quarterly Report 2021 • Merdeka Financial Group Limited

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the nine months ended 30 September 2021

2. REVENUE AND SEGMENT REPORTING (Continued)

2.2 Segment reporting (Continued)

(d) Geographical information

For the nine months ended 30 September 2021 and 2020, the Group’s revenue from external customers is derived solely from its operations in Hong Kong (place of domicile), where all of the Group’s non-current assets are located in Hong Kong. The geographical location of external customers is based on the location at which the goods are delivered and services rendered.

(e) Major customers

Revenues from customers contributing over 10% of the total revenue of the Group are as follows:

Nine months ended	Nine months ended	Nine months ended
30 September
2021		2020
(Unaudited)	(Unaudited)
HK$’000	HK$’000
Customer A — financial services business 2,300		—
Customer B — financial services business —		7,036
Customer C — trading business —		3,859
2,300		10,895

Merdeka Financial Group Limited • Third Quarterly Report 2021

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the nine months ended 30 September 2021

3. OTHER INCOME AND GAINS OR (LOSSES)

	Three months ended	Nine months ended	Nine months ended
	30 September	30 September
	2021 2020 2021		2020
	(Unaudited) (Unaudited) (Unaudited)		(Unaudited)
	HK$’000 HK$’000 HK$’000		HK$’000
Interest income on bank deposit	1	— 4	13
Other operating income	742	20 1,921	376
Change in fair value of financial
assets at fair value through
profit or loss	(524)	— (432)	—
Gain on disposal of a
subsidiary (Note)	—	— 1	—
Gain on modification of terms
of convertible bonds Derecognition of other payable	—	— —	2,502
and promissory note	—	— —	(1,702)
Loss on redemption of
convertible bonds Gain on disposal of property,	—	— —	(2,444)
plant and equipment	—	— —	56
Waiver of other payables	19	— 722	—
Sundry income	57 1,355 221		1,868
	295 1,375 2,437		669

Note: On 26 March 2021, the Company as a vendor entered into an instrument of transfer with an independent third party, to dispose of its entire equity interest of Galaxy PAM Asset Management (Cayman Islands) Limited, a wholly-owned subsidiary, at a consideration of HK$90,000. The gain on disposal of a subsidiary amounted to HK$1,000 has been recognised in the condensed consolidated statement of profit or loss for the nine months ended 30 September 2021.

Third Quarterly Report 2021 • Merdeka Financial Group Limited

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the nine months ended 30 September 2021

4. (LOSS)/GAIN ON DEREGISTRATION OF SUBSIDIARIES

On 25 February 2021, the Group deregistrated 領智恒泰（北京）商務諮詢有限公司, an indirect wholly-owned subsidiary of the Company. Loss on deregistration of a subsidiary amounted to HK$16,000 has been recognised in the condensed consolidated statement of profit or loss and other comprehensive income for the nine months ended 30 September 2021.

On 22 May 2020, the Group deregistrated M Technology Limited and Merdeka Asset Management Limited, indirect wholly-owned subsidiaries of the Company. Gain on deregistration of subsidiaries amounted to HK$1,057,000 has been recognised in the condensed consolidated statement of profit or loss and other comprehensive income for the nine months ended 30 September 2020.

5. LOSS ON DECONSOLIDATION OF SUBSIDIARIES

On 10 September 2021, End User Investments Limited (being a wholly-owned subsidiary of the Company), in its capacity as the sole shareholder of Blossom Height Ventures Limited (“ Blossom Height ”) resolved to wind up Blossom Height by way of member’s voluntary winding-up. Mr. Osman Mohammed Arab and Mr. Lai Wing Lun of RSM Corporate Advisory (Hong Kong) Limited, and Mr. Nathan Mills of R&H Restructuring (BVI) Limited were appointed as the joint voluntary liquidators of Blossom Height on 29 September 2021.

Following the commencement of the voluntary winding-up under the Hong Kong Companies Ordinance, the Group lost control over Blossom Height because the joint voluntary liquidators have taken over control of the operations of Blossom Height under the statutory power. Blossom Height was then ceased to be a subsidiary of the Company with effect from 29 September 2021.

Loss on deconsolidation of subsidiaries amounted to HK$4,052,000 has been recognised in the condensed consolidated statement of profit or loss and other comprehensive income for the nine months ended 30 September 2021.

Merdeka Financial Group Limited • Third Quarterly Report 2021

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the nine months ended 30 September 2021

6. FINANCE COSTS

FINANCE COSTS
	Three months ended	Nine months ended
	30 September	30 September
	2021 2020 2021			2020
	(Unaudited) (Unaudited) (Unaudited)		(Unaudited)
	HK$’000 HK$’000 HK$’000		HK$’000
Imputed interest on convertible
bonds (Note)	2,980 2,587 8,597			9,457
Imputed interest on promissory
notes	—	— —		128
Coupon interest on promissory
notes	—	— —		27
Interest on bank borrowings	14	— 103		149
Interest on other borrowings	—	13 —		678
Interest on lease liabilities	8	44 50		162
	3,002 2,644 8,750			10,601

Note: It represents the imputed interest on the liability component of the convertible bonds for both periods.

7. LOSS BEFORE INCOME TAX

Loss before income tax is arrived at after charging:

Three months ended Nine months ended
30 September 30 September
2021 2020 2021 2020
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
HK$’000 HK$’000 HK$’000 HK$’000
Depreciation expenses in respect of: Right-of-use assets 1,086 1,243 3,259 3,729
Property, plant and equipment 352 210 780 708 Amortisation of intangible assets 57 57 171 171 Staff costs (including Directors’ emoluments) 4,394 4,066 13,596 11,801

Third Quarterly Report 2021 • Merdeka Financial Group Limited

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the nine months ended 30 September 2021

8. INCOME TAX

Under the two-tiered profits tax rates regime, the first HK$2,000,000 of profits of qualifying corporations will be taxed at 8.25%, and profits above HK$2,000,000 will be taxed at 16.5%. The profits of group entities in Hong Kong that are not qualifying for the two-tiered profits tax rates regime will continue to be taxed at a flat rate of 16.5%.

The subsidiaries established in the People’s Republic of China (the “ PRC ”) are subject to enterprise income tax at tax rates of 25% for both periods ended 30 September 2021 and 2020.

Three months ended Nine months ended	Three months ended Nine months ended	Three months ended Nine months ended
30 September 30 September
2021 2020 2021		2020
(Unaudited) (Unaudited) (Unaudited)	(Unaudited)
HK$’000 HK$’000 HK$’000	HK$’000
Hong Kong profits tax: — current 548 1,296 998		2,837
Deferred tax (9) (9) (28)		(258)
539 1,287 970		2,579

9. DIVIDEND

No quarterly dividend has been paid or declared by the Company during the nine months ended 30 September 2021 (nine months ended 30 September 2020: Nil).

Merdeka Financial Group Limited • Third Quarterly Report 2021

14

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the nine months ended 30 September 2021

10. LOSS PER SHARE

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

	Three months ended	Nine months ended	Nine months ended
	30 September	30 September
	2021 2020	2021	2020
	(Unaudited) (Unaudited)	(Unaudited)	(Unaudited)
	HK$’000 HK$’000	HK$’000	HK$’000
Loss attributable to owners of the Company for the purpose of calculating basis and diluted loss per share	(10,288) (3,331)	(20,078)	(58,148)
	Number	of shares
	Three months ended	Nine months ended
	30 September	30 September
	2021 2020	2021	2020
	(Unaudited) (Unaudited)	(Unaudited)	(Unaudited)
	’000 ’000	’000	’000
	(Restated)		(Restated)
Weighted average number of
ordinary shares for the
purpose of calculating basic
and diluted loss per share	407,264 137,227	231,666	67,912

The calculation of basic loss per share for the nine months ended 30 September 2021 is based on the loss attributable to ordinary equity shareholders of the Company, and the weighted average number of 231,666,000 (nine month ended 30 September 2020: 67,912,000 adjusted for the effect of share consolidation on 17 June 2021 and the bonus elements of the rights issue on 22 July 2021) ordinary shares in issue.

Diluted loss per share amount for both periods were not presented because the impact of the exercise of the share options and convertible bonds was anti-dilutive. Potential ordinary shares are dilutive when and only when their conversion into ordinary shares would increase loss per share attributable to owners of the Company.

Third Quarterly Report 2021 • Merdeka Financial Group Limited

15

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the nine months ended 30 September 2021

11. PROPERTY, PLANT AND EQUIPMENT

During the nine months ended 30 September 2021, the Group spent approximately HK$3,448,000 in additions of leasehold improvement, computer and office equipment and motor vehicles (year ended 31 December 2020: HK$65,000).

12. GOODWILL

	HK$’000
COST:
At	1 January 2020 (audited), 31 December 2020 (audited), 1 January 2021 (audited) and 30 September 2021 (unaudited) 11,273
ACCUMULATED IMPAIRMENT LOSSES:
At	1 January 2020 (audited), 31 December 2020 (audited), 1 January 2021 (audited) and 30 September 2021 (unaudited) 5,803
NET CARRYING AMOUNT:
At	30 September 2021 (unaudited) 5,470
At	31 December 2020 (audited) 5,470

Merdeka Financial Group Limited • Third Quarterly Report 2021

16

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the nine months ended 30 September 2021

13. INTANGIBLE ASSETS

INTANGIBLE ASSETS
	Trading	Customer
	Right	Relationship	Total
	HK$’000	HK$’000	HK$’000
COST:
At 1 January 2020 (audited),
31 December 2020 (audited),
1 January 2021 (audited) and
30 September 2021 (unaudited)	5,705	1,140	6,845
ACCUMULATED AMORTISATION AND
IMPAIRMENT LOSSES:
At 1 January 2020 (audited)	1,205	190	1,395
Impairment loss for the year	1,600	—	1,600
Amortisation for the year	—	228	228
At 31 December 2020 (audited) and
1 January 2021 (audited)	2,805	418	3,223
Amortisation for the period	—	171	171
At 30 September 2021 (unaudited)	2,805	589	3,394
NET CARRYING AMOUNT:
At 30 September 2021 (unaudited)	2,900	551	3,451
At 31 December 2020 (audited)	2,900	722	3,622

Trading right have indefinite useful life and therefore no amortisation has been provided.

No impairment loss was considered during the nine months ended 30 September 2021 (year ended 31 December 2020: HK$1,600,000).

Customer relationship of HK$1,140,000 represented the intangible asset arose from the acquisition of corporate consulting business and was valued as of the respective date of acquisition by an independent qualified valuer on the basis of the excess earnings method under the income approach. The management of the Group considered customer relationship has finite useful lives and is amortised on a straight-line basis over 5 years.

There was no addition of intangible assets for the nine months ended 30 September 2021 and year ended 31 December 2020.

Third Quarterly Report 2021 • Merdeka Financial Group Limited

17

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the nine months ended 30 September 2021

14. RIGHT-OF-USE ASSETS

RIGHT-OF-USE ASSETS
	HK$’000
COST: At 1 January 2020 (audited)	15,096
Lease modification Exchange realignment	(1,832) 21
At 31 December 2020 (audited) and 1 January 2021 (audited)	13,285
Deconsolidation of subsidiaries Exchange realignment	(993) 10
At 30 September 2021 (unaudited)	12,302
ACCUMULATED DEPRECIATION: At 1 January 2020 (audited) Depreciation for the year	6,390 4,867
Lease modification Exchange realignment	(1,623) 21
At 31 December 2020 (audited) and 1 January 2021 (audited)	9,655
Depreciation for the period	3,259
Deconsolidation of subsidiaries Exchange realignment	(993) 10
At 30 September 2021 (unaudited)	11,931
NET CARRYING AMOUNT:
At 30 September 2021 (unaudited)	371
At 31 December 2020 (audited)	3,630

The right-of-use assets represent the Group’s rights to use underlying leased premises under operating lease arrangements over the lease terms, which are stated at cost less accumulated depreciation and accumulated impairment losses, and adjusted for any remeasurement of the lease liabilities.

18 Merdeka Financial Group Limited • Third Quarterly Report 2021

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the nine months ended 30 September 2021

15. TRADE RECEIVABLES

An aged analysis of the trade receivables as at the end of the reporting date, based on the invoice date and net of impairment, are as follows:

	As at 30 September 2021 (Unaudited)	As at 31 December 2020 (Audited)
	HK$’000	HK$’000
Within 30 days	3,437	14,135
31 to 60 days	433	410
61 to 120 days	253	151
Over 120 days	514	557
	4,637	15,253

As at 30 September 2021, the balance of HK$1,534,000 (31 December 2020: HK$12,829,000) represented the trade receivables arising from securities brokerage services.

The aged analysis of the trade receivables that are not considered to be impaired is as follows:

	As at	As at
	30 September	31 December
	2021	2020
	(Unaudited)	(Audited)
	HK$’000	HK$’000
Not impaired	4,637	15,253

Receivables that were not impaired relate to customers for whom there were no recent history of default. The Group does not hold any collateral over these balances.

Third Quarterly Report 2021 • Merdeka Financial Group Limited

19

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the nine months ended 30 September 2021

16. LOANS RECEIVABLE

	As at	As at
	30 September	31 December
	2021	2020
	(Unaudited)	(Audited)
	HK$’000	HK$’000
Gross	loan and interest receivables 8,330	11,272
Less:	Provision for impairment loss (592)	(240)
	7,738	11,032

As at 30 September 2021, loans receivable with gross principal amount of HK$7,904,000 (31 December 2020: HK$11,204,000) in aggregate and related gross interest receivables of HK$426,000 (31 December 2020: HK$68,000) were due from two (31 December 2020: three) independent third parties. These loans are interest-bearing at rates ranging from 12% to 15% (31 December 2020: 10% to 15%) per annum and was repayable within twelve months from the end of the reporting period and therefore were classified as current assets as at 30 September 2021 and 31 December 2020.

As at 30 September 2021, the Group hold collateral over loans receivable with gross principal amount of nil (31 December 2020: HK$6,000,000). Impairment loss of HK$352,000 (year ended 31 December 2020: HK$240,000) has been recognised in the condensed consolidated statement of profit or loss and other comprehensive income for the nine months ended 30 September 2021.

Merdeka Financial Group Limited • Third Quarterly Report 2021

20

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the nine months ended 30 September 2021

17. FINANCE LEASE RECEIVABLES

			As at 30 September 2021 As at 31 December 2020 (Unaudited) (Audited) HK$’000 HK$’000
Gross Less:	finance Provision	lease receivables for impairment loss	— 168,518 — (168,518)
			— —

Amount receivable under finance leases

			Present value of
	Minimum	lease payment	minimum lease payment
	As at	As at	As at As at
	30 September	31 December	30 September 31 December
	2021	2020	2021 2020
	(Unaudited)	(Audited)	(Unaudited) (Audited)
	HK$’000	HK$’000	HK$’000 HK$’000
Within one year	—	182,899	— 168,518
Unearned finance income	—	(14,381)	N/A N/A
Present value of minimum
lease payment	—	168,518	— 168,518
Less: Provision for
impairment loss	—	(168,518)	— (168,518)
	—	—	— —

The interest rate inherent in the leases was fixed at the contract date for the entire lease term. The interest rates of the above finance leases is 5.83% per annum as at 31 December 2020.

Third Quarterly Report 2021 • Merdeka Financial Group Limited

21

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the nine months ended 30 September 2021

17. FINANCE LEASE RECEIVABLES (Continued)

Amount receivable under finance leases (Continued)

Finance lease receivable balances were secured over the equipment held by the lessee. The Group was not permitted to sell or repledge the collateral in the absence of default by the leasee. Following the appointment of liquidators of Blossom Height, the Group has ceased the business of finance leasing service in the PRC.

For the nine months ended 30 September 2021, reversal of impairment loss of HK$950,000 has been recognised in the condensed consolidated statement of profit or loss and other comprehensive income (year ended 31 December 2020: impairment loss of HK$78,049,000).

18. BANK BALANCES AND CASH

BANK BALANCES AND CASH
As at	As at
30 September	31 December
2021	2020
(Unaudited)	(Audited)
HK$’000	HK$’000
Bank balances — trust accounts (Note) 26,226	27,378
Bank balances and cash — general accounts 48,341	27,610
74,567	54,988

Note: The Group receives and holds money deposited by clients in the course of the conduct of the regulated activities. These clients money are maintained in one trust bank account and bear interest at commercial rates. The Group has recognised the corresponding accounts payable to respective clients.

As at 30 September 2021, the Group’s bank balances and cash — general accounts amounted to approximately HK$48,341,000 (31 December 2020: approximately HK$27,610,000), approximately HK$73,000 was denominated in RMB and of approximately HK$48,268,000 was denominated in Hong Kong dollars (31 December 2020: approximately HK$78,000 and approximately HK$27,532,000 respectively).

22 Merdeka Financial Group Limited • Third Quarterly Report 2021

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the nine months ended 30 September 2021

19. BORROWINGS

BORROWINGS
	As at	As at
	30 September 31 December
	2021	2020
	(Unaudited)	(Audited)
	HK$’000	HK$’000
Bank borrowings, unsecured	—	851
	—	851

At 31 December 2020, the abovementioned bank borrowings is charged at a fixed rate of 5.75% per annum.

20. LEASE LIABILITIES

LEASE LIABILITIES
	As at 30 September 2021 (Unaudited)	As at 31 December 2020 (Audited)
	HK$’000	HK$’000
Minimum lease payments due
— Within one year	378	3,407
	378	3,407
Less: future finance charges	(1)	(53)
Present value of lease liabilities	377	3,354

Third Quarterly Report 2021 • Merdeka Financial Group Limited

23

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the nine months ended 30 September 2021

20. LEASE LIABILITIES (Continued)

LEASE LIABILITIES(Continued)
As at	As at
30 September	31 December
2021	2020
(Unaudited)	(Audited)
HK$’000	HK$’000
Within one year 377	3,354
377	3,354

21. TRADE PAYABLES

An aged analysis of trade payables as at the end of reporting date based on the invoice date/contractual term, are as follows:

	As at 30 September 2021 (Unaudited)	As at 31 December 2020 (Audited)
	HK$’000	HK$’000
Within 30 days	27,822	39,506
31 to 60 days	—	—
61 to 120 days	—	134
Over 120 days	1,358	1,224
	29,180	40,864

As at 30 September 2021, the balance of HK$27,822,000 (31 December 2020: HK$39,295,000) represented the trade payables arising from securities brokerage services.

24 Merdeka Financial Group Limited • Third Quarterly Report 2021

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the nine months ended 30 September 2021

22. CONVERTIBLE BONDS

The movement of the liability component of the convertible bonds was as follows:

	Notes	As at 30 September 2021 As at 31 December 2020 (Unaudited) (Audited) HK$’000 HK$’000
At beginning of the period/year		73,872 116,344
Interest charged		8,597 12,136
Issuance of convertible bonds Modification of the term of convertible	1	— 25,492
bonds Redemption of convertible bonds	2 3	— (46,110) — (33,990)
		82,469 73,872

Notes:

1. On 10 January 2020, the Company entered into the subscription agreement (as supplemented by the supplemental agreement dated 20 March 2020) with Team Sunny International Holdings Limited (“ Team Sunny ”), a company incorporated in the British Virgin Islands and is wholly-owned by Mr. Wong Hin Shek, the substantial shareholder of the Company, pursuant to which Team Sunny conditionally agreed to subscribe and the Company conditionally agreed to issue the convertible bonds (“ Team Sunny CB ”) in the principal amount of HK$39,805,651 (which are convertible into conversion shares at the conversion price of HK$0.110 per conversion share (subject to adjustments)) for the settlement of the outstanding debt due from the Company to Mr. Wong of HK$39,805,651. The subscription amount payable by Team Sunny under the subscription agreement shall be satisfied by way of offsetting (i) the principal amount of HK$8,000,000 under a promissory note issued by the Company in 2019 (the “ 2019 PN ”) and payable by the Company to Mr. Wong (which will be assigned to Team Sunny by Mr. Wong at the completion of the subscription to facilitate the set-off); and (ii) the outstanding principal amount and part of the accrued interest in an aggregate amount of HK$31,805,651 under Mr. Wong’s facilities payable by the Company to Mr. Wong (which will be assigned to Team Sunny by Mr. Wong at the completion of the subscription to facilitate the set-off). Details were set out in the Company’s announcements dated 10 January 2020, 20 March 2020, 14 April 2020 and 21 May 2020 and the Company’s circular dated 27 March 2020.

On 17 June 2021, upon the effective of the share consolidation on the basis that every ten issued and unissued shares of the Company (the “ Share(s) ”) of par value of HK$0.01 each in the share capital of the Company be consolidated into one consolidated share of par value of HK$0.1 each, the conversion price of Team Sunny CB adjusted to HK$1.100 per conversion share.

Third Quarterly Report 2021 • Merdeka Financial Group Limited

25

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the nine months ended 30 September 2021

22. CONVERTIBLE BONDS (Continued)

Notes: (Continued)

1. (Continued)

On 22 July 2021, the Company completed a rights issue (the “ 2021 Rights Issue ”) and allotted and issued 346,310,897 Shares, on the basis of five (5) rights share for every two (2) Shares held on 28 June 2021 at the subscription price of HK$0.15 per rights share. Upon the completion of the 2021 Rights Issue, the conversion price of Team Sunny CB was adjusted to HK$0.903 per conversion share.

1. On 10 January 2020, the Company and the holder(s) (“ CB Holders ”) of the convertible bonds issued by the Company on 12 August 2008 (the “ 2008 CBs ”) entered into the fourth supplemental deed, pursuant to which the Company and the CB Holders conditionally agreed to amend certain terms of the 2008 CBs such that (a) the maturity date of the 2008 CBs be extended for a further term of three years from 13 August 2020 to 12 August 2023; and (b) the conversion price of the 2008 CBs be revised from HK$0.95 per conversion share to HK$0.110 per conversion share with effect from 13 August 2020 (subject to adjustments). Save for the above amendments, all other terms of the 2008 CBs shall remain unchanged and valid. Details were set out in the Company’s announcements dated 10 January 2020, 20 March 2020 and 14 April 2020 and the Company’s circular dated 27 March 2020.

On 17 June 2021, upon the effective of the share consolidation on the basis that every ten issued and unissued Shares of par value of HK$0.01 each in the share capital of the Company be consolidated into one consolidated share of par value of HK$0.1 each, the conversion price of 2008 CBs adjusted to HK$1.100 per conversion share.

On 22 July 2021, the Company completed the 2021 Rights Issue and allotted and issued 346,310,897 Shares, on the basis of five (5) rights share for every two (2) Shares held on 28 June 2021 at the subscription price of HK$0.15 per rights share. Upon the completion of the 2021 Rights Issue, the conversion price of 2008 CB was adjusted to HK$0.90 per conversion share.

1. On 29 June 2020, the Company has made a partial redemption in the principal amount of HK$55,000,000 on part of the 2008 CBs.

Merdeka Financial Group Limited • Third Quarterly Report 2021

26

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the nine months ended 30 September 2021

23. SHARE CAPITAL

SHARE CAPITAL
		Number of
		shares	Amount
	Notes	in ’000	HK$’000
Authorised:
At 1 January 2020, 31 December 2020 and
1 January 2021
Ordinary shares of HK$0.01 each		20,000,000	200,000
Share consolidation	1	(18,000,000)	—
At 30 September 2021
Ordinary shares of HK$0.1 each		2,000,000	200,000
Issued and fully paid:
At 1 January 2020
Ordinary shares of HK$0.01 each		262,200	2,622
Issuance of shares upon rights issue	4	1,048,803	10,488
Issuance of shares upon exercise of share
options	5	12,240	122
At 31 December 2020 and 1 January 2021
Ordinary shares of HK$0.01 each		1,323,243	13,232
Issuance of shares upon exercise of share
options	2	62,000	620
Share consolidation	1	(1,246,719)	—
Issuance of shares upon rights issue	3	346,311	34,631
At 30 September 2021
Ordinary shares of HK$0.1 each		484,835	48,483

Third Quarterly Report 2021 • Merdeka Financial Group Limited

27

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the nine months ended 30 September 2021

23. SHARE CAPITAL (Continued)

Notes:

1. Pursuant to an ordinary resolution passed in the extraordinary general meeting of the Company on 15 June 2021, every ten issued and unissued Shares of HK$0.01 each were consolidated into one consolidated share of the Company of HK$0.1 each with effective on 17 June 2021.

2. During the nine months ended 30 September 2021, share options to subscribe for 62,000,000 ordinary Shares were exercised. The net consideration was HK$930,000 of which HK$620,000 was credited to share capital account and the balance of HK$310,000 was credited to the share premium account. An amount of HK$468,000 was transferred from share option reserve account to share premium account upon the exercise of the share options.

3. On 22 July 2021, the Company completed the 2021 Rights Issue and allotted and issued 346,310,897 Shares, on the basis of five (5) rights share for every two (2) Shares held on 28 June 2021 at the subscription price of HK$0.15 per rights share. Gross 2021 Rights Issue proceeds of HK$51,947,000 of which HK$34,631,000 was credited against share capital and the remaining proceeds of HK$17,316,000 was after offsetting the share issuance costs of HK$772,000 were credited against the share premium account.

4. On 22 June 2020, the Company completed a rights issue (the “ 2020 Rights Issue ”) on the basis of four rights shares for every one Shares held on 28 May 2020 at the subscription price of HK$0.110 per rights share and allotted and issued 1,048,802,876 Shares. Gross 2020 Rights Issue proceeds of HK$115,368,000 of which HK$10,488,000 was credited against share capital and the remaining proceeds of HK$104,880,000 after offsetting the share issuance costs of HK$1,552,000 were credited against the share premium account.

5. On 20 November 2020, share options to subscribe for 12,240,000 ordinary Shares were exercised. The net consideration was HK$184,000 of which HK$122,000 was credited to share capital account and the balance of HK$62,000 was credited to the share premium account. An amount of HK$102,000 was transferred from share option reserve account to share premium account upon the exercise of the share options.

Merdeka Financial Group Limited • Third Quarterly Report 2021

28

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the nine months ended 30 September 2021

24. RELATED PARTY TRANSACTIONS

Save as disclosed in elsewhere to the unaudited condensed consolidated financial statements, the Group has the following related party transactions.

			Three months ended	Nine months ended	Nine months ended	Nine months ended
			30 September	30 September
			2021 2020 2021			2020
Name of			(Unaudited) (Unaudited) (Unaudited)		(Unaudited)
related party	Relationship	Nature of transaction	HK$’000 HK$’000 HK$’000		HK$’000
Wong Hin Shek	Director	Loan interest charged	—	13 —		678
		Commission income from
		dealing
		in securities	1	— 68		—
			1	13 68		678
Related companies	Common	Corporate consulting
	director	service income	120	— 801		—
		Commission income from
		dealing in securities	—	— 9		—
			120	— 810		—

Total compensation paid to key management personnel during the nine months ended 30 September 2021 amounted to HK$2,327,000 (nine months ended 30 September 2020: HK$814,000).

Third Quarterly Report 2021 • Merdeka Financial Group Limited

29

MANAGEMENT DISCUSSION AND ANALYSIS

FINANCIAL AND BUSINESS REVIEW

During the nine months ended 30 September 2021, the Group is principally engaged in (i) financial services business including securities brokerage services, provision of corporate finance advisory services, asset management business and money lending services; (ii) corporate consulting business including company secretarial services, accounting and financial reporting services and management consulting services; and (iii) trading business.

Blossom Height and its subsidiaries (“ Blossom Height Group ”) were principally engaged in the financial leasing business. As the performance of the financial leasing business continued sluggish, on 10 September 2021, End User Investments Limited (being a wholly-owned subsidiary of the Company), in its capacity as the sole shareholder of Blossom Height resolved to wind up Blossom Height by way of member’s voluntary winding-up. Mr. Osman Mohammed Arab and Mr. Lai Wing Lun of RSM Corporate Advisory (Hong Kong) Limited, and Mr. Nathan Mills of R&H Restructuring (BVI) Limited were appointed as the joint voluntary liquidators of Blossom Height on 29 September 2021. Following the appointment of liquidators, Blossom Height ceased to be a subsidiary of the Company and the financial results of Blossom Height was deconsolidated from that of the Group.

For the nine months ended 30 September 2021, the Group recorded revenue of approximately HK$21.1 million (nine months ended 30 September 2020: approximately HK$36.7 million). Loss for the period attributable to owners of the Company was approximately HK$20.1 million (nine months ended 30 September 2020: approximately HK$58.1 million). Basic and diluted loss per Share was approximately HK$0.09 (nine months ended 30 September 2020: approximately HK$0.86). The net loss of the Group for the nine months ended 30 September 2021 of approximately HK$19.7 million was mainly attributable to the net off effect of (i) the absence of reversal of impairment loss on other receivables of approximately HK$9.0 million; (ii) the absence of impairment loss on finance lease receivables of approximately HK$78.0 million; and (iii) a loss on deconsolidation of subsidiaries of approximately HK$4.1 million.

Should the reversal of impairment loss on other receivables and impairment loss on finance lease receivables be excluded, the net loss of the Group for the nine months ended 30 September 2020 would be approximately HK$15.2 million. The net loss of approximately HK$19.7 million for the nine months ended 30 September 2021 represented a slightly increase as compared to the net loss of approximately HK$15.2 million for the nine months ended 30 September 2020.

Merdeka Financial Group Limited • Third Quarterly Report 2021

30

FINANCIAL AND BUSINESS REVIEW (Continued)

Financial services business

The revenue for the nine months ended 30 September 2021 of the financial services business was approximately HK$11.0 million (nine months ended 30 September 2020: approximately HK$18.7 million) and a segment profit of approximately HK$6.7 million (nine months ended 30 September 2020: approximately HK$7.0 million). The slightly decrease in revenue was mainly due to reduction in the value and volume of transactions in the businesses of corporate finance advisory and asset management services that the business opportunities were much diminished during the current uncertain economic environment caused by the coronavirus (“ COVID-19 ”) pandemic.

During the nine months ended 30 September 2021, the corporate financial advisory services and assets management services generated revenue of approximately HK$6.3 million and HK$2.8 million respectively (nine months ended 30 September 2020: HK$10.1 million and HK$7.6 million respectively), represented approximately 29.9% and 13.3% of the total revenue of the Group respectively. Both businesses of corporate financial advisory services and assets management services continuously generated stable revenue stream and contributed operating profit to the Group.

As at 30 September 2021, the Group had loans receivable with gross principal amount of approximately HK$7.9 million (31 December 2020: HK$11.2 million). The Group recorded interest income from loans receivable of approximately HK$1.1 million for the nine months ended 30 September 2021 (nine months ended 30 September 2020: HK$0.07 million).

The loan portfolio comprises loans to independent third party borrowers with term ranging from 5 months to 12 months and interest rate from 12% to 15% per annum.

The Group has adopted a credit policy to manage its money lending business which includes compliance with all applicable laws and regulations, credit assessment on potential borrower and his/its assets, the credibility of the potential borrower, the necessity in obtaining collaterals and determination of suitable interest rate to reflect the risk level of the provision of loan.

The Group has performed credit risk assessment before granting the loans by (a) reviewing the financial information of the potential borrower; and (b) performing an assessment on the financial condition of the potential borrower and its shareholder (for enterprises), such as the type and value of assets owned by the potential borrower.

The Group also assesses and decides the necessity and the value of security/collateral for granting of each loan, whether to an individual or enterprise, on a case by case basis considering factors, including but not limited to, the repayment history, results of public search towards the borrower, the value and location of the assets owned by the borrower and the financial condition of the borrower.

Third Quarterly Report 2021 • Merdeka Financial Group Limited

31

FINANCIAL AND BUSINESS REVIEW (Continued)

Corporate consulting business

The corporate consulting business recorded a revenue of approximately HK$4.4 million (nine months ended 30 September 2020: approximately HK$6.0 million) and a segment profit of approximately HK$0.2 million (nine months ended 30 September 2020: approximately HK$2.1 million) during the nine months ended 30 September 2021. The decrease in segment profit was mainly due to slightly reduction in the volume of transactions in the corporate consulting business under the current uncertain economic climate caused by the outbreak of COVID-19.

Trading business

The revenue of the trading business for the nine months ended 30 September 2021 was approximately HK$5.6 million (nine months ended 30 September 2020: approximately HK$12.0 million) and a segment loss of approximately HK$0.5 million (nine months ended 30 September 2020: approximately HK$0.2 million). The decrease in revenue was mainly due to the cross border restriction imposed by the Hong Kong Government, the number of customers, especially those from the PRC, dropped dramatically.

Financial assets at fair value through profit or loss

In December 2020, the Group has purchased a listed security investment with an aggregate investment cost of approximately HK$1.0 million.

As at 30 September 2021, the Group manage a listed security investment with fair value of approximately HK$0.6 million (31 December 2020: HK$1.0 million). The Board is always cautious of the prospects of the trading performance of the Group’s portfolio of listed securities investments.

Details of the listed security investment as at 30 September 2021 and 31 December 2020 and losses for the nine months ended 30 September 2021 and 2020 are as below:

Losses for the nine months ended 30 September 2021

		Realised	Unrealised	Dividend
Name of listed securities	Stock code	losses	losses	received
		HK$’000	HK$’000	HK$’000
Evergrande Property Services Group	6666	—	(432)	—
Limited

Merdeka Financial Group Limited • Third Quarterly Report 2021

32

FINANCIAL AND BUSINESS REVIEW (Continued)

Financial assets at fair value through profit or loss as at 30 September 2021

							Approximate
							Percentage to
		Brief	Number	Proportion			total assets
Name of listed		description of	of shares	of shares	Investment	Market	value of
securities	Stock code	the business	held	held	cost	value	the Group
					HK$’000	HK$’000
Evergrande Property	6666	Integrated	113,000	0.001%	995	579	0.5%
Services Group		commercial
Limited		properties
		service
		business

Losses for the nine months ended 30 September 2020

		Realised	Unrealised	Dividend
Name of listed securities	Stock code	losses	losses	received
		HK$’000	HK$’000	HK$’000
Evergrande Property Services Group	6666	—	—	—
Limited

Financial assets at fair value through profit or loss as at 31 December 2020

							Approximate
							Percentage to
		Brief	Number of	Proportion			total assets
Name of listed		description of	shares	of shares	Investment	Market	value of
securities	Stock code	the business	held	held	cost	value	the Group
					HK$’000	HK$’000
Evergrande Property	6666	Integrated	113,000	0.001%	995	1,010	0.9%
Services Group		commercial
Limited		properties
		service
		business

Third Quarterly Report 2021 • Merdeka Financial Group Limited

33

OUTLOOK

Financial services business

The Group will continue to expand the clients base and establish a strong track record in order to strengthen the businesses of corporate financial advisory services, asset management services and money lending services in the coming future. For the securities brokerage services business, the Group will explore the involvement in the share placement activities to enhance its revenue stream. Furthermore, the Group will continue to explore new business opportunities in financial technology industry (“ Fin-tech ”) to capture the potential growth of the booming of Fin-tech to create synergy effect with the Group’s existing financial services business, including the securities brokerage services, corporate finance advisory services, money lending services and asset management services.

Corporate consulting business

Given the worldwide awareness of corporate governance, the Group anticipates the demand from Hong Kong listed issuers requesting for professional services in relation to corporate governance matters and compliance with the appropriate local rules governing the listed companies in Hong Kong and other relevant legal and regulatory requirements will persist.

Trading business

The business environment for retail trade was continued to be more difficult and challenging in the near term. The Board has taken various proactive measures, including but not limited to, develop an online platform of trading of goods, components and accessories, to minimise the impact of COVID-19 on the trading business operations.

CONVERTIBLE BONDS

2008 Convertible Bonds

On 10 January 2020, the Company and the CB Holders entered into the fourth supplemental deed, pursuant to which the Company and the CB Holders conditionally agreed to amend certain terms of the 2008 CBs such that (a) the maturity date of the 2008 CBs be extended for a further term of three years from 13 August 2020 to 12 August 2023; and (b) the conversion price of the 2008 CBs be revised from HK$0.95 per conversion share to HK$0.110 per conversion share with effect from 13 August 2020 (subject to adjustments). Save for the above amendments, all other terms of the 2008 CBs shall remain unchanged and valid. The amendments on 2008 CBs took effect on 18 May 2020.

On 29 June 2020, the Company made a partial redemption in the principal amount of HK$55,000,000 on part of the 2008 CBs.

Merdeka Financial Group Limited • Third Quarterly Report 2021

34

CONVERTIBLE BONDS (Continued)

2008 Convertible Bonds (Continued)

On 17 June 2021, upon the effective of the share consolidation on the basis that every ten issued and unissued Shares of par value of HK$0.01 each in the share capital of the Company be consolidated into one consolidated share of par value of HK$0.10 each, the conversion price of 2008 CBs adjusted to HK$1.10 per conversion share.

On 22 July 2021, the Company completed the 2021 Rights Issue and allotted and issued 346,310,897 Shares, on the basis of five (5) rights share for every two (2) Shares held on 28 June 2021 at the subscription price of HK$0.15 per rights share. Upon the completion of the 2021 Rights Issue, the conversion price of 2008 CB was adjusted to HK$0.90 per conversion share.

As at 30 September 2021, the Company had 2008 CBs with principal amount of HK$69.1 million conferring rights to convert into a total of 76,742,221 Shares with the conversion price of HK$0.90 per conversion share.

Team Sunny Convertible Bonds

On 10 January 2020, the Company entered into the subscription agreement (as supplemented by the supplemental agreement dated 20 March 2020) with Team Sunny, pursuant to which Team Sunny conditionally agreed to subscribe and the Company conditionally agreed to issue the convertible bonds in the principal amount of HK$39,805,651 (which are convertible into conversion shares at the conversion price of HK$0.110 per conversion share (subject to adjustments)) for the settlement of the outstanding debt due from the Company to Mr. Wong Hin Shek of HK$39,805,651. The subscription amount payable by Team Sunny under the subscription agreement shall be satisfied by way of offsetting (i) the principal amount of HK$8,000,000 under the 2019 PN and payable by the Company to Mr. Wong, an executive Director, the Chairman and the Chief Executive Officer of the Company (which will be assigned to Team Sunny by Mr. Wong at the completion of the subscription to facilitate the setoff); and (ii) the outstanding principal amount and part of the accrued interest in an aggregate amount of HK$31,805,651 under Mr. Wong’s facilities payable by the Company to Mr. Wong (which will be assigned to Team Sunny by Mr. Wong at the completion of the subscription to facilitate the set-off).

On 21 May 2020, the subscription took place and the Team Sunny CB in the principal amount of HK$39,805,651 were issued to Team Sunny.

Third Quarterly Report 2021 • Merdeka Financial Group Limited 35

CONVERTIBLE BONDS (Continued)

Team Sunny Convertible Bonds (Continued)

On 17 June 2021, upon the effective of the share consolidation on the basis that every ten issued and unissued Shares of par value of HK$0.01 each in the share capital of the Company be consolidated into one consolidated share of par value of HK$0.1 each, the conversion price of Team Sunny CB adjusted to HK$1.10 per conversion share.

On 22 July 2021, the Company completed the 2021 Rights Issue and allotted and issued 346,310,897 Shares, on the basis of five (5) rights share for every two (2) Shares held on 28 June 2021 at the subscription price of HK$0.15 per rights share. Upon the completion of the 2021 Rights Issue, the conversion price of Team Sunny CB was adjusted to HK$0.903 per conversion share.

As at 30 September 2021, the Company had Team Sunny CB with principal amount of HK$39.8 million conferring rights to convert into a total of 44,081,562 Shares with the conversion price of HK$0.903 per conversion share.

DIVIDENDS

The Board resolved not to recommend the payment of any dividend for the nine months ended 30 September 2021 (nine months ended 30 September 2020: Nil).

FINANCIAL RESOURCES, LIQUIDITY AND GEARING

As at 30 September 2021, the Group recorded cash and bank balances (included trust accounts) amounting to approximately HK$74.6 million (31 December 2020: approximately HK$55.0 million) and the net current assets value was approximately HK$50.7 million (31 December 2020: approximately HK$2.6 million).

The Group’s gearing ratio as at 30 September 2021 was approximately 0.74 (31 December 2020: approximately 0.69), being a ratio of total interest-bearing debts, includes bank borrowings and convertible bonds of approximately HK$82.5 million (31 December 2020: approximately HK$74.7 million) to the total assets of approximately HK$112.0 million (31 December 2020: approximately HK$108.2 million).

Merdeka Financial Group Limited • Third Quarterly Report 2021

36

USE OF PROCEEDS FROM 2020 RIGHTS ISSUE

The Company completed the 2020 Rights Issue on 22 June 2020, pursuant to which the Company has issued 1,048,802,876 Shares as rights shares at HK$0.110 per rights share on the basis of four rights shares for every one Share held on 28 May 2020. The net proceeds from the 2020 Rights Issue (after deducting the expenses) were approximately HK$110.8 million. The net subscription price per rights share after deducting the related expenses of the 2020 Rights Issue was approximately HK$0.106.

The intended and actual use of the net proceeds from the 2020 Rights Issue is stated as below:

Amount
HK$ million	Intended use	Actual use
55.00	Repayment of the 2008 CBs to	Fully utilised as intended
	Mr. Cheung Wai Yin, Wilson
12.64	Repayment of the Mr. Cheung	Fully utilised as intended
	Wai Yin, Wilson advance to the
	Company
14.86	Repayment of the promissory	Fully utilised as intended
	notes issued by the Company
	on 4 April 2014
28.30	General working capital and	Fully utilised as intended
	future investment
110.80

USE OF PROCEEDS FROM 2021 RIGHTS ISSUE

The Company completed the 2021 Rights Issue on 22 July 2021, pursuant to which the Company has issued 346,310,897 Shares as rights shares at HK$0.15 per rights share on the basis of five (5) rights share for every two (2) Shares held on 28 June 2021. The net proceeds from the 2021 Rights Issue (after deducting the expenses were approximately HK$49.79 million. The net subscription price per rights share after deducting the related expenses of the 2021 Rights Issue was approximately HK$0.144.

Third Quarterly Report 2021 • Merdeka Financial Group Limited

37

USE OF PROCEEDS FROM 2021 RIGHTS ISSUE (Continued)

The intended and actual use of the net proceeds as at 30 September 2021 from the 2021 Rights Issue is stated as below:

Amount

Amount
HK$ million	Intended use	Actual use
28.89	Repayment of the promissory	Approximately HK$10.89
	notes issued by the Company	million has not been utilised as
	on 21 April 2015	at 30 September 2021 and the
		amount of HK$10.89 million
		was fully utilised for the
		repayment in October 2021
7.93	Repayment of the loan	Fully utilised as intended
	indebted to Mr. Lau Chung
	Yan by the Company
12.97	General working capital and	Approximately HK$9.42 million
	future investment	has not been utilised and is
		expected to be used as
		intended within 12 months
49.79

PLEDGE OF ASSETS

As at 30 September 2021, the Group had no pledged assets (31 December 2020: Nil).

CAPITAL STRUCTURE

During the nine months ended 30 September 2021, 62,000,000 share options of the Company (the “ Share Options ”) were exercised.

On 17 June 2021, the Company implemented a share consolidation (the “ Share Consolidation ”) on the basis that every ten issued and unissued Shares of HK$0.01 each were consolidated into one consolidated share of the Company of HK$0.1 each.

On 22 July 2021, the Company completed the 2021 Rights Issue and allotted and issued 346,310,897 Shares, on the basis of five (5) rights shares for every two (2) Share held on 28 June 2021 at the subscription price of HK$0.15 per rights share.

Merdeka Financial Group Limited • Third Quarterly Report 2021

38

CAPITAL STRUCTURE (Continued)

Save as disclosed, the Company had no changes in capital structure during the nine months ended 30 September 2021.

INVESTMENT POSITION AND PLANNING

Rights Issue on the basis of five (5) rights shares for every two (2) share held on 28 June 2021

On 22 July 2021, the Company completed the 2021 Rights Issue and allotted and issued 346,310,897 Shares, on the basis of five (5) rights shares for every two (2) Share held on 28 June 2021 at the subscription price of HK$0.15 per rights share. The net proceeds raised from the 2021 Rights Issue were approximately HK$49.79 million.

Details were set out in the Company’s announcements dated 12 April 2021, 3 May 2021, 15 June 2021, 29 June 2021 and 21 July 2021, the Company’s circular dated 25 May 2021 and the Company’s prospectus dated 29 June 2021.

Acceptance of offers for the renewal of leasing of office premises

On 2 August 2021, each of the Company and Merdeka Credit Limited, an indirect wholly-owned subsidiary of the Company, entered into the offer letters (the “ Offer Letters ”) in relation to an acceptance of terms in respect of the intended renewal of leasing of Rooms 1107–1110, Wing On Centre, 111 Connaught Road Central, Hong Kong for a term of three years commencing on 1 November 2021 and ending on 31 October 2024.

Details were set out in the Company’s announcement dated 2 August 2021.

Winding up of Blossom Height Ventures Ltd

On 10 September 2021, End User Investments Limited, a wholly-owned subsidiary of the Company, in its capacity as the sole shareholder of Blossom Height resolved to wind up Blossom Height by way of member’s voluntary winding-up. Mr. Osman Mohammed Arab and Mr. Lai Wing Lun of RSM Corporate Advisory (Hong Kong) Limited, and Mr. Nathan Mills of R&H Restructuring (BVI) Limited were appointed as the joint voluntary liquidators of Blossom Height on 29 September 2021.

Details were set out in the Company’s announcement dated 10 September 2021.

Third Quarterly Report 2021 • Merdeka Financial Group Limited

39

EMPLOYEES AND REMUNERATION POLICIES

As at 30 September 2021, the Group employed 35 staff (31 December 2020: 40). The Group’s remuneration policy is based on principle of equality, motivating performance-oriented and market-competitiveness. Remuneration packages are normally reviewed on an annual basis. Apart from salary payments, other staff benefits included provident fund contributions, medical insurance coverage and performance related to bonuses. A share option scheme is also established to reward and motivated the employees of the Group.

CONNECTED TRANSACTIONS

Saved as disclosed, the Company did not have any other connected transactions which were subject to the reporting requirements under Chapter 20 of the GEM Listing Rules for nine months ended 30 September 2021.

SHARE OPTION SCHEME

The Company operates a share option scheme (the “ Share Option Scheme ”) approved and adopted by the shareholders of the Company (the “ Shareholder ”) in an extraordinary general meeting on 30 December 2020. Unless otherwise cancelled or amended, the Share Option Scheme will remain in force for a period of 10 years from the date of its adoption. Apart from the Share Option Scheme, the Company has no other share option scheme currently in force.

During the period for the nine months ended 30 September 2021, a total of 132,320,000 Share Options were granted and a total of 62,000,000 Share Options were exercised under the Share Option Scheme. Save and except for the aforesaid, no Share Option was granted, exercised, cancelled, expired or lapsed during the period.

Merdeka Financial Group Limited • Third Quarterly Report 2021

40

SHARE OPTION SCHEME (Continued)

Details of the movements of the Share Options under the Share Option Scheme and the Old Share Option Scheme (as defined below) during the period were as follows:

Grantees/Capacity

Number of Share Options Outstanding as at 1 January 2021 Granted during the period Exercised during the period Cancelled/ Lapsed during the period Adjusted during the period upon effective of the Share Consolidation Adjusted during the period upon effective of the Rights Issue Outstanding as at 30 September 2021 Date of grant Exercise period Price of the Shares before the date of grant Exercise price (Note 3) (Note 2) (Note 1) Per Share Per Share

Executive Director Ms. Tsang Kwai Ping Independent non-executive Directors Ms. Ng Ka Sim, Casina Mr. Wong Wing Kit Ms. Yeung Mo Sheung, Ann Employees and other eligible participants Employees of the Group Other eligible participants

— 9,000,000 (9,000,000) — — — — 20/1/2021 20/1/2021– 19/1/2026 0.014 0.132 — 1,000,000 — — (900,000) 13,513 113,513 20/1/2021 20/1/2021– 19/1/2026 0.014 0.132 — 1,000,000 — — (900,000) 13,513 113,513 20/1/2021 20/1/2021– 19/1/2026 0.014 0.132 — 1,000,000 — — (900,000) 13,513 113,513 20/1/2021 20/1/2021– 19/1/2026 0.014 0.132 — 33,000,000 (1,000,000) — (28,800,000) 432,430 3,632,430 20/1/2021 20/1/2021– 19/1/2026 0.014 0.132 35,854 (Note 4) — — — (32,269) 484 4,069 30/5/2012 30/5/2012– 29/5/2022 0.017 293.647 — 87,320,000 (52,000,000) — (31,788,000) 477,296 4,009,296 20/1/2021 20/1/2021– 19/1/2024 0.014 0.132

Notes:

1. The exercise price of the Share Options is subject to adjustment in the case of capitalisation issue, rights issue, subdivision or consolidation of the Shares, or other similar changes in the Company’s share capital.

2. The price of the Shares before the date of the grant of the Share Options is the closing price of the Shares as quoted on the Stock Exchange on the trading day immediately before the date on which the Share Options were granted.

3. The weighted average closing price of the Shares immediately before the dates on which the Share Options were exercise was approximately HK$0.0224 per Share.

4. Share Options under the old share option scheme of the Company (the “ Old Share Option Scheme ”) which adopted by the Company on 3 May 2012 and terminated in an extraordinary general meeting on 30 December 2020.

Third Quarterly Report 2021 • Merdeka Financial Group Limited

41

DIRECTORS’ AND CHIEF EXECUTIVE’S INTERESTS IN SECURITIES OF THE COMPANY

As at 30 September 2021, the interests and 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 (Cap. 571 of the Laws of Hong Kong) (the “ SFO ”) which were required to be notified to the Company and the Stock Exchange under Divisions 7 and 8 of Part XV of the SFO (including any interests or short positions which they are taken or deemed to have under such provisions of the SFO) or as recorded in the register required to be kept under Section 352 of the SFO, or which were required to be notified to the Company and the Stock Exchange pursuant to the required standard of dealings by Directors as referred to in rules 5.46 to 5.67 of the GEM Listing Rules, were as follows:

Long positions in the Shares and underlying Shares

					Approximate
					percentage
					of the total
					issued share
			Number of		capital of the
	Nature of interest/	Number of	underlying		Company(Note 2)
Name of Director	Capacity	Shares held	Shares held	Total	(%)
Mr. Wong Hin Shek(Note 1)	Controlled corporation	136,755,500	105,192,673	241,948,173	49.90
Mr. Cheung Wai Yin, Wilson	Beneficial owner	5,578	—	5,578	0.001
Ms. Tsang Kwai Ping	Beneficial owner	900,000	—	900,000	0.19
Ms. Ng Ka Sim, Casina	Beneficial owner	—	113,513	113,513	0.02
Mr. Wong Wing Kit	Beneficial owner	—	113,513	113,513	0.02
Ms. Yeung Mo Sheung, Ann	Beneficial owner	—	113,513	113,513	0.02

Notes:

(1) The interest is held by Team Sunny, a company incorporated in the British Virgin Islands owned as to 100% by Mr. Wong Hin Shek.

• (2) The percentage has been calculated based on 484,835,256 Shares in issue as at 30 September 2021.

Merdeka Financial Group Limited • Third Quarterly Report 2021

42

DIRECTORS’ AND CHIEF EXECUTIVE’S INTERESTS IN SECURITIES OF THE COMPANY (Continued)

Long positions in the Shares and underlying Shares (Continued)

Save as disclosed above and so far as is known to the Directors, at 30 September 2021, none of the Directors and chief executive of the Company had any interests or short positions in the Shares, underlying Shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange under Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO) or as recorded in the register required to be kept under Section 352 of the SFO, or which were required to be notified to the Company and the Stock Exchange pursuant to the required standard of dealings by Directors as referred to in rules 5.46 to 5.67 of the GEM Listing Rules.

DIRECTORS’ RIGHTS TO ACQUIRE SHARES OR DEBENTURES

Save as disclosed under the sections headed “Directors’ and Chief Executive’s Interests in Securities of the Company” and “Share Option Scheme” above, at no time during the period for the nine months ended 30 September 2021 was the Company or any of its subsidiaries or associated corporations, a party to any arrangement to enable the Directors and chief executive of the Company (including their respective spouse and children under 18 years of age) to acquire benefits by means of the acquisition of the shares or underlying shares in, or debentures of, the Company or any of its associated corporations.

SUBSTANTIAL SHAREHOLDERS’ AND OTHER PERSON’S INTERESTS IN SECURITIES OF THE COMPANY

As at 30 September 2021, the following persons (other than the Directors or chief executive of the Company) had interests or short positions in the Shares or underlying Shares 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 as recorded in the register required to be kept under section 336 of the SFO:

Long positions in the Shares and underlying Shares:

						Approximate
						percentage
						of the total
						issued share
				Number of		capital of the
		Nature of interest/	Number of	underlying		Company (Note 2)
Name	of Shareholder	Capacity	Shares held	Shares held	Total	(%)
Team	Sunny(Note 1)	Beneficial owner	136,755,500	105,192,673	241,948,173	49.90

Third Quarterly Report 2021 • Merdeka Financial Group Limited

43

SUBSTANTIAL SHAREHOLDERS’ AND OTHER PERSON’S INTERESTS IN

SECURITIES OF THE COMPANY (Continued)

Long positions in the Shares and underlying Shares: (Continued)

Notes:

• (1) The interest is held by Team Sunny, a company incorporated in the British Virgin Islands owned as to 100% by Mr. Wong Hin Shek.

• (2) The percentage has been calculated based on 484,835,256 Shares in issue as at 30 September 2021.

Save as disclosed above, the Directors and chief executive of the Company are not aware that there is any party who, as at 30 September 2021, had an interest or short position in the Shares or underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or as recorded in the register required to be kept by the Company under section 336 of the SFO.

DIRECTORS’ INTERESTS IN COMPETING BUSINESS

Ms. Tsang Kwai Ping, an executive Director, is a director of Bridgeharbour (HK) Management Service Company Limited (“ BMSCL ”), a company incorporated in Hong Kong with limited liability which is principally engaged in the provision of company secretarial services for nonlisted Hong Kong companies in Hong Kong. The business of BMSCL competes or is likely to compete, either directly or indirectly of the company secretarial services business of the Group. To safeguard the Group’s interest, Ms. Tsang has irrevocably and unconditionally provided the Company an undertaking in accordance with the terms and conditions under outside interests and non-competition undertaking set out in her service agreement.

As the Board is independent of the board of the aforesaid company and maintains three independent non-executive Directors, the Group operates its businesses independently of, and at arm’s length from, the businesses of the aforesaid company.

For the nine months ended 30 September 2021, save as disclosed above, no other Directors or their respective associates (as defined in the GEM Listing Rules) had any interest in a business which competes or is likely to compete, either directly or indirectly, with the business of the Group.

Merdeka Financial Group Limited • Third Quarterly Report 2021

44

MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS

The Company has not adopted a code of conduct nor established written guidelines regarding the securities transactions by the Directors and relevant employees of the Company but has applied the principles of the required standard of dealings set out in rules 5.48 to 5.67 of the GEM Listing Rules (the “ Required Standard of Dealings ”).

All Directors have confirmed, following the specific enquiry by the Company, that they have complied with the Required Standard of Dealings throughout the period and up to the date of this report.

PURCHASE, SALE OR REDEMPTION OF THE LISTED SECURITIES

Neither the Company, nor any of its subsidiaries has purchased, sold or redeemed any of the Company’s listed securities during the period for the nine months ended 30 September 2021.

COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE

Throughout the period ended 30 September 2021, to the best knowledge of the Board, the Company has applied the principles and complied with all the applicable code provisions set out in the Corporate Governance Code in Appendix 15 of the GEM Listing Rules except for the deviation from code provision A.2.1 which is explained below:

The code provision A.2.1 provides that the roles of chairman and chief executive should be separated and should not be performed by the same individual. Mr. Wong Hin Shek currently assumes the roles of both the Chairman and the Chief Executive Officer. The Board considered (1) Mr. Wong has substantial experience that is essential to fulfilling the role of the Chairman, at the same time, he has the appropriate management skills and business acumen that are the prerequisites for assuming the role of the Chief Executive Officer in the day-to-day management of the Group; (2) having the same individual in both roles as the Chairman and the Chief Executive Officer could ensure the leadership consistency and could make and implement the overall strategy of the Group more effectively; and (3) the current structure of the Board does not compromise the balance of power and authority between the Board and the management of the Company. The Board will regularly review the effectiveness of this structure to ensure that it is appropriate to the Group’s circumstances.

Third Quarterly Report 2021 • Merdeka Financial Group Limited 45

AUDIT COMMITTEE

The Company has established the audit committee of the Company (the “ Audit Committee ”) with specific written terms of reference formulated in accordance with the requirements of the GEM Listing Rules. The main duties of the Audit Committee are to (i) review the quarterly, halfyearly and annual results of the Group; (ii) review the risk management and internal control systems, the effectiveness of the internal audit function of the Group; and (iii) ensure the objectivity and credibility of the Company’s financial reporting and internal control procedures as well as to maintain an appropriate relationship with the external auditor of the Company.

As at the date of this report, the Audit Committee comprises of three independent nonexecutive Directors, namely Ms. Ng Ka Sim, Casina, Mr. Wong Wing Kit and Ms. Yeung Mo Sheung, Ann, with at least one of whom has professional qualifications or accounting or related financial management expertise as required in rule 5.05(2) of the GEM Listing Rules.

The Audit Committee has reviewed with the senior management of the Company the unaudited condensed consolidated quarterly results of the Group for the nine months ended 30 September 2021 and this report, and was of the opinion that such results and this report had complied with the applicable accounting standards, the requirements under the GEM Listing Rules and other applicable legal requirements and that adequate disclosures had been made.

By order of the Board MERDEKA FINANCIAL GROUP LIMITED Wong Hin Shek Chairman and Chief Executive Officer

Hong Kong, 11 November 2021

As at the date of this report, the executive Directors are Mr. Wong Hin Shek (Chairman and Chief Executive Officer), Mr. Cheung Wai Yin, Wilson and Ms. Tsang Kwai Ping, the independent non-executive Directors are Ms. Ng Ka Sim, Casina and Mr. Wong Wing Kit and Ms. Yeung Mo Sheung, Ann.

This report will remain on the GEM website at http://www.hkgem.com on the “Latest Listed Company Information” page for at least seven days from the day of its publication and posting and will be published and remains on the website of the Company at http://www.merdeka.com.hk.

Merdeka Financial Group Limited • Third Quarterly Report 2021

46

Merdeka Financial Group Limited

Room 1108, 11th Floor, Wing On Centre, 111 Connaught Road Central, Central, Hong Kong Tel: 852 2115 7600 Fax: 852 2115 7660

領智金融集團有限公司 香港中環干諾道中111號永安中心11樓1108室 電話：852 2115 7600 傳真：852 2115 7660

www.merdeka.com.hk

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