SuperRobotics Limited - Interim / Quarterly Report 2016

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

SkyNet Group Limited 航空互聯集團有限公司

(Incorporated in the Cayman Islands and continued in Bermuda with limited liability)

(Stock Code: 8176)

INTERIM RESULTS ANNOUNCEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2016

CHARACTERISTICS OF THE GROWTH ENTERPRISE MARKET (“GEM”) OF THE STOCK EXCHANGE OF HONG KONG LIMITED (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.

This announcement, for which the directors (the “ Directors ” and each, a “ Director ”) of SkyNet Group Limited (the “ Company ”, together with its subsidiaries, the “ Group ”) collectively and individually accept responsibility, includes particulars given in compliance with the Rules Governing the Listing of Securities on GEM (the “ GEM Listing Rules ”) for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquires, confirm that to the best of their knowledge and belief the information contained in this announcement is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this announcement misleading.

— 1 —

INTERIM RESULTS

The board of Directors (the “ Board ”) is pleased to announce the unaudited condensed consolidated results of the Group for the three months and six months ended 30 June 2016 together with the comparative figures for the corresponding period in 2015 as follows:

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

		For the three months	For the three months	For the six months	For the six months
		ended	30 June	ended	30 June
		2016	2015	2016	2015
		*HK$’000*	HK$’000	*HK$’000*	HK$’000
	Notes	(unaudited)	(unaudited)	(unaudited)	(unaudited)
Turnover	4	11,590	10,546	24,701	20,703
Cost of sales		(16,103)	(7,973)	(44,503)	(15,362)
Gross profit		(4,513)	2,573	(19,802)	5,341
Other revenue		19	100	59	142
Selling and distribution costs		(906)	(628)	(1,656)	(905)
Administrative expenses		(9,539)	(6,380)	(18,431)	(11,226)
Loss from operations	5	(14,939)	(4,335)	(39,830)	(6,648)
Finance costs	6	(19)	(236)	(293)	(462)
Loss before taxation		(14,958)	(4,571)	(40,123)	(7,110)
Income tax expense	7	(178)	(160)	(415)	(348)
Loss for the period		(15,136)	(4,731)	(40,538)	(7,458)
Other comprehensive income/
(expenses) for the period
Item that may be subsequently
reclassified to profit or loss:
Exchange differences on translating
foreign operations		(706)	14	(10)	15
Total comprehensive expenses for
the period		(15,842)	(4,717)	(40,548)	(7,443)

— 2 —

Note Loss for the period attributable to: Owners of the Company Non-controlling interests Total comprehensive expenses for the period attributable to: Owners of the Company Non-controlling interests Loss per share 9 — Basic and diluted	For the three months ended 30 June 2016 2015 *HK$’000* HK$’000 (unaudited) (unaudited) (15,367) (5,006) 231 275 (15,136) (4,731) (16,073) (4,992) 231 275 (15,842) (4,717) HK(3.66) cents HK(6.69) cents	For the six months ended 30 June 2016 2015 *HK$’000* HK$’000 (unaudited) (unaudited) (42,134) (8,360) 1,596 902 (40,538) (7,458) (42,144) (8,345) 1,596 902 (40,548) (7,443) HK(10.04) cents HK(11.18) cents

The accompanying notes form an integral part of these unaudited condensed consolidated financial statements.

— 3 —

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Notes ASSETS Non-Current Assets Property, plant and equipment 10 Goodwill Current assets Inventories Trade receivables 11 Deposits, prepayments and other receivables 12 Restricted bank deposits Cash and cash equivalents Total assets EQUITY Capital and reserves attributable to owners of the Company Share capital – ordinary shares 13 Share capital – preferred shares 13 Reserves Equity attributable to owners of the Company Non-controlling interests Total equity	At 30 June 2016 *HK$’000* (unaudited) 33,628 18,266 51,894 3,798 4,535 24,688 12,180 107,895 153,096 204,990 41,980 3,000 52,228 97,208 2,421 99,629	At 31 December 2015 HK$’000 (audited) 25,801 18,266 44,067 2,954 5,734 30,078 12,657 116,055 167,478 211,545 41,980 3,000 94,372 139,352 825 140,177

— 4 —

Notes LIABILITIES Current liabilities Amount due to a former director Amount due to a related company Trade payables 14 Accruals and other payables Other borrowings 15 Tax payables Deposits from customers Deferred revenue Obligations under financial leases Non-current liability Obligations under finance leases Total liabilities Total equity and liabilities Net current assets Total assets less current liabilities	At 30 June 2016 *HK$’000* (unaudited) — 1,051 655 67,395 3,600 — — 24,386 8,274 105,361 — 105,361 204,990 47,735 99,629	At 31 December 2015 HK$’000 (audited) 64 16,286 179 17,006 6,271 2,487 23 24,712 4,338 71,366 2 71,368 211,545 96,112 140,179

The accompanying notes form an integral part of these unaudited condensed consolidated financial statements.

— 5 —

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the six months ended 30 June 2016

At 1 January 2016 (audited) Loss for the period Other comprehensive income for the period: Exchange differences on translating foreign operations Total comprehensive expenses for the period At 30 June 2016 (unaudited) At 1 January 2015 (audited) Loss for the period Other comprehensive expenses for the period: Exchange differences on translating foreign operations Total comprehensive expenses for the period At 30 June 2015 (unaudited)	Share capital — ordinary shares HK$’000 41,980 — — — 41,980 7,480 — — — 7,480	Share capital — preferred shares HK$’000 3,000 — — — 3,000 — — — — —	Share premium HK$’000 196,380 — — — 196,380 97,922 — — — 97,922	Contributed surplus HK$’000 27,141 — — — 27,141 27,141 — — — 27,141	Translation reserve HK$’000 192 — (10) (10) 182 11 — 15 15 26	Accumulated losses HK$’000 (129,341) (42,134) — (42,134) (171,475) (87,255) (8,360) — (8,360) (95,615)	Sub-total HK$’000 139,352 (42,134) (10) (42,144) 97,208 45,299 (8,360) 15 (8,345) 36,954	Non- controlling interests HK$’000 825 1,596 — 1,596 2,421 3,757 902 — 902 4,659	Total equity HK$’000 140,177 (40,538) (10) (40,548) 99,629 49,056 (7,458) 15 (7,443) 41,613

— 6 —

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

Net cash generated from operating activities
Net cash used in investing activities
Net cash generated/(used in) from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Effects of foreign exchange rate changes
Cash and cash equivalents at end of the period
Analysis of the balances of cash and cash equivalents
Cash at bank and on hand
Restricted bank deposits
_Less:_restricted bank deposits
Cash and cash equivalents

Six months ended
30 June
2016
2015
HK$’000
HK$’000
(unaudited)
(unaudited)
4,102
68,363
(13,516)
(879)
1,263
(448)
(8,151)
67,036
116,055
26,553
(9)
15
107,895
93,604
107,895
93,604
12,180
19,759
120,075
113,363
(12,180)
(19,759)
107,895
93,604

— 7 —

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL INFORMATION

The Company was incorporated in the Cayman Islands and with effect from 22 April 2014, the Company was deregistered in the Cayman Islands and continued in Bermuda as an exempted company with limited liability and its shares are listed on GEM of the Stock Exchange. Its ultimate holding company is Xing Hang Limited (“ Xing Hang ”), a company incorporated in the British Virgin Islands. The Company’s addresses of the registered office and the principal place of business in Hong Kong are Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda and Unit 3811, 38/F., Shun Tak Centre, West Tower, 168-200 Connaught Road Central, Hong Kong respectively.

The unaudited condensed consolidated financial statements are presented in units of thousands of Hong Kong dollars (HK$’000), unless otherwise stated, which is the same as the functional currency of the Company.

The Company’s principal activity is investment holding and the principal activities of its principal subsidiaries are the sales of beauty products and provision of therapy services and provision of in-flight WLAN and WIFI engineering and services.

2. BASIS OF PREPARATION

The unaudited condensed consolidated financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (“ HKFRSs ”), which is a collective term that includes all applicable HKFRSs, Hong Kong Accounting Standards (“ HKASs ”) and Interpretations (“ Int ”) issued by the Hong Kong Institute of Certified Public Accountants (the “ HKICPA ”), and accounting principles generally accepted in Hong Kong. In addition, the unaudited condensed consolidated financial statements include applicable disclosures required by the GEM Listing Rules and the disclosure requirements of the Companies Ordinance (Chapter 622 of the Laws of Hong Kong).

The unaudited condensed consolidated financial statements have been prepared on the historical cost basis. The accounting policies and basis of preparation adopted in the preparation of the unaudited condensed consolidated financial statements are consistent with those adopted in the audited consolidated financial statements for the year ended 31 December 2015.

The HKICPA has issued a number of new and revised standards, amendments to standards and Int (collectively referred to as “ new and revised HKFRSs ”). The Group has adopted the new and revised HKFRSs which are relevant to the Group’s operations and are mandatory for the financial year beginning on 1 January 2016. The adoption of these new and revised HKFRSs does not have any significant financial effect on the Group’s unaudited results of operations and financial position.

The Group has not early adopted the new and revised HKFRSs that have been issued but are not yet effective for the six months ended 30 June 2016.

— 8 —

3. OPERATING SEGMENTS

The Group’s reportable segments have been determined based on the information reported to the Chairman of the Board, being the chief operating decision maker, that are used for performance assessment and to make strategic decisions. The Group’s operating businesses are structured and managed separately according to the nature of their operations and the products and services they provide. Each of the Group’s reportable segments represents a strategic business unit that offers products and services which are subject to risks and returns that are different from those of other reportable segments. The Group currently has three reportable segments:

(a) Sale of beauty products
(b) Provision of therapy services
(c) Provision of in-flight WLAN and WIFI engineering and services

An analysis of the Group’s reportable segment results, assets and liabilities and other selected financial information for the six months ended 30 June 2016 and 2015 by operating segments are as follows:

Six months ended 30 June 2016

			Provision
			of in-flight
			WLAN
			and WIFI
	Sale of	Provision	engineering
	beauty	of therapy	and services
	products	services	engineering	Consolidated
	*HK$’000*	*HK$’000*	*HK$’000*	*HK$’000*
	(unaudited)	(unaudited)	(unaudited)	(unaudited)
Revenue
Segment revenue from external customers	2,146	22,555	—	24,701
Results
Segment profit/(loss)	1	7,041	(33,771)	(26,729)
Unallocated corporate expense				(13,160)
Interest income on bank deposits				23
Other income				36
Finance costs				(293)
Loss before taxation				(40,123)
Income tax expense				(415)
Loss for the period				40,538

— 9 —

At 30 June 2016

				Provision of
				in-flight
				WLAN and
		Sale of	Provision	WIFI
		beauty	of therapy	engineering
		products	services	and services	Consolidated
		*HK$’000*	*HK$’000*	*HK$’000*	*HK$’000*
		(unaudited)	(unaudited)	(unaudited)	(unaudited)
Assets
Segment assets for reportable segments		2,010	9,510	91,184	102,704
Unallocated corporate assets					102,286
Consolidated total assets					204,990
Liabilities
Segment liabilities for reportable segments		—	25,176	13,541	38,717
Unallocated corporate liabilities					66,644
Consolidated total liabilities					105,361
For six months ended 30 June 2016
			Provision
			of in-flight
			WLAN
	Sale of	Provision	and WIFI
	beauty	of therapy	engineering
	products	services	and services	Unallocated	Consolidated
	*HK$’000*	*HK$’000*	*HK$’000*	*HK$’000*	*HK$’000*
	(unaudited)	(unaudited)	(unaudited)	(unaudited)	(unaudited)
Amounts included in the measure
of segment (loss)/profit and
segment assets
Additions to property, plant and
equipment	—	1,719	11,882	621	14,222
Depreciation of property, plant and
equipment	—	770	2,960	942	4,672
Written off property, plant and
equipment	—	—	—	1,723	1,723

— 10 —

Six months ended 30 June 2015

Revenue Segment revenue from external customers Results Segment (loss)/profit Interest income on bank deposits Unallocated corporate income Unallocated corporate expenses Gain on disposal of property, plant and equipment Imputed interest on promissory notes Finance costs Loss before taxation Income tax expense Loss for the period	Sale of Provision beauty of therapy products HK$’000 (unaudited) 2,124 (126)	Provision of therapy services HK$’000 (unaudited) 18,579 4,562	Consolidated HK$’000 (unaudited) 20,703 4,436 129 1 (11,226) 12 (351) (111) (7,110) (348) (7,458)

— 11 —

At 31 December 2015

			Provision of
			in-flight
			WLAN and
	Sale of	Provision	WIFI
	beauty	of therapy	engineering
	products	services	and services	Consolidated
	HK$’000	HK$’000	HK$’000	HK$’000
	(audited)	(audited)	(audited)	(audited)
Assets
Segment assets for reportable segments	2,471	9,347	129,911	141,729
Unallocated corporate assets				69,816
Consolidated total assets				211,545
Liabilities
Segment liabilities for reportable segments	31	25,442	26,279	51,752
Unallocated corporate liabilities				19,616
Consolidated total liabilities				71,368
Six months ended 30 June 2015
	Sale of	Provision
	beauty	of therapy
	products	services	Unallocated	Consolidated
	HK$’000	HK$’000	HK$’000	HK$’000
	(unaudited)	(unaudited)	(unaudited)	(unaudited)
Amounts included in the measure of
segment profit and segment assets
Additions to property, plant and equipment	—	533	520	1,053
Depreciation of property, plant and equipment	—	960	1,393	2,353
Gain on disposal of property, plant and
equipment	—	12	—	12

— 12 —

Geographical information

The Group mainly operates in Hong Kong and the PRC. The Group’s revenue from external customers and information about its non-current assets by geographical location are detailed below:.

Hong Kong PRC 4. TURNOVER Sale of beauty products Provision of therapy services	Continuing operations Revenue from external customers For the six months ended 30 June 2016 For the six months ended 30 June 2015 *HK$’000* HK$’000 (unaudited) (unaudited) 24,701 20,703 — — 24,701 20,703 For the three months ended 30 June 2016 2015 *HK$’000* HK$’000 (unaudited) (unaudited) 1,280 1,436 10,310 9,110 11,590 10,546	Continuing operations Non-current assets For the six months ended 30 June 2016 For the year ended 31 December 2015 *HK$’000* HK$’000 (unaudited) (audited) 25,139 26,344 26,755 17,723 51,894 44,067 For the six months ended 30 June 2016 2015 *HK$’000* HK$’000 (unaudited) (unaudited) 2,146 2,124 22,555 18,579 24,701 20,703

— 13 —

5. LOSS FROM OPERATIONS

Loss from operations has been arrived at after charging: Depreciation on property, plant and equipment Operating lease rentals in respect of rented premises Staff costs including directors’ emoluments — salaries and other allowances — contributions to retirement benefits scheme 6. FINANCE COSTS Imputed interest on promissory notes Interest on finance leases Interest on other borrowings wholly payable within 5 years	For the three months ended 30 June 2016 2015 *HK$’000* HK$’000 (unaudited) (unaudited) 2,227 1,181 2,083 1,644 5,559 6,030 301 772 For the three months ended 30 June 2016 2015 *HK$’000* HK$’000 (unaudited) (unaudited) — 176 19 21 — 39 19 236	For the six months ended 30 June 2016 2015 *HK$’000* HK$’000 (unaudited) (unaudited) 4,672 2,353 3,287 3,148 11,647 10,750 537 913 For the six months ended 30 June 2016 2015 *HK$’000* HK$’000 (unaudited) (unaudited) — 351 170 43 123 68 293 462

— 14 —

7. INCOME TAX

Current tax expense — Hong Kong Profits Tax Deferred tax credit	For the three months ended 30 June 2016 2015 *HK$’000* HK$’000 (unaudited) (unaudited) (178) (160) — — (178) (160)	For the six months ended 30 June 2016 2015 *HK$’000* HK$’000 (unaudited) (unaudited) (415) (348) — — (415) (348)

Hong Kong Profits Tax is calculated at 16.5% of the estimated assessable profit for the six months ended 30 June 2016 (six months ended 30 June 2015: 16.5%).

The Group’s subsidiaries set up in the People’s Republic of China (the “ PRC ”) are subjected to the PRC Enterprise Income Tax at 25% for the six months ended 30 June 2016 (six months ended 30 June 2015: 25%). No provision for the PRC Enterprise Income Tax has been made for the six months ended 30 June 2016 as the PRC subsidiaries have no assessable profit (six months ended 30 June 2015: Nil).

8. INTERIM DIVIDEND

The Board does not recommend the payment of an interim dividend for the six months ended 30 June 2016 (six months ended 30 June 2015: Nil).

9. LOSS PER SHARE

Loss for the period attributable to
owners of the Company
Weighted average number of
shares for the purpose of basic
and diluted loss per shares

For the three months
ended 30 June
For the six months
ended 30 June
2016
2015
2016
2015
HK$’000
HK$’000
HK$’000
HK$’000
(unaudited)
(unaudited)
(unaudited)
(unaudited)
15,367
5,006
42,134
8,360
Number of ordinary shares
’000
’000
’000
’000
(unaudited)
(unaudited)
(unaudited)
(unaudited)
419,803
74,803
419,803
74,803

— 15 —

Diluted loss per share for the three months ended and six months ended 30 June 2016 and 2015 were the same as the basic loss per share as there were no dilutive event.

10. PROPERTY, PLANT AND EQUIPMENT

During the six months ended 30 June 2016, the Group acquired certain items of property, plant and equipment in an aggregate cost of approximately HK$14,222,000 (six months ended 30 June 2015: HK$1,053,000).

11. TRADE RECEIVABLES

The Group assesses the credit status and imposes credit limits for the customers in accordance with the Group’s credit policy. The credit limits are closely monitored and subject to periodic reviews. The Group allows credit period ranging from 0 day to 120 days to its customers. Details of the ageing analysis of trade receivables that are not considered to be impaired and based on the invoice dates are as follows:

0 – 30 days 31 – 60 days 61 – 90 days 91 – 120 days DEPOSITS, PREPAYMENT AND OTHER RECEIVABLES Deposits paid_(Note a) Prepayments Other receivables, net of impairment(Note b)_	At 30 June 2016 *HK$’000* (unaudited) 2,693 932 170 740 4,535 At 30 June 2016 *HK$’000* (unaudited) 11,574 1,808 11,306 24,688	At 31 December 2015 HK$’000 (audited) 4,022 1,565 147 — 5,734 At 31 December 2015 HK$’000 (audited) 15,667 2,798 11,613 30,078

12. DEPOSITS, PREPAYMENT AND OTHER RECEIVABLES

— 16 —

Note:

(a) On 16 December 2015, 深圳多尼卡互聯技術有限公司 (Donica Connectivity Technology Co., Ltd.) (“ Donica Connectivity ”), an indirect wholly-owned subsidiary of the Company, entered into the finance lease agreement with the lessor to lease certain connecting devices which facilitate passengers to access the information and entertainment contents through the in-flight WLAN or WIFI connection equipment (the “ Equipment ”). The Equipment was guaranteed by the amount of approximately HK$12,752,000, which provided by Century Finance Limited (“ Century Finance* ”), an indirect wholly-owned subsidiary of the Company. Details of the transaction are set out in the Company’s announcement dated 16 December 2015.
(b) On 30 April 2010, Blu Spa (Hong Kong) Limited (“ BSHK ”) entered into a sale and purchase agreement with Mr. Shum Yeung (“ Mr. Shum ”), pursuant to which BSHK had agreed to acquire (a) 70% of the entire issued share capital of an entity and (b) a shareholder’s loan to such entity at a total consideration of HK$80,000,000.

The acquisition did not proceed and the Group has entered into various deed of termination and deeds of settlement with Mr. Shum and a deed of guarantee with Dutfield International Group Company Limited (“ Dutfield ”) in relation to the repayment of the refundable deposit. As Mr. Shum defaulted in the full repayment of the refundable deposit and the accrued contractual interest despite repeated demands and requests, the Company had obtained a judgement against Mr. Shum pursuant to which it was adjudged, inter alia, that Mr. Shum shall pay to the Company the sum of HK$39,127,500 (being the amount of the outstanding and unpaid refundable deposit) together with contractual interest at the rate of 30% per annum from 1 May 2013 to 6 September 2013 and thereafter at judgement rate pursuant to s.48 of the High Court Ordinance until payment. As at 31 December 2014, the aggregate amount of the outstanding and unpaid refundable deposit and the accrued interest was approximately HK$46,500,000. Since (i) Mr. Shum failed to settle the judgement debt and the accrued interest and commenced various legal actions to prevent the Company from recovering the judgement debt and the accrued interest including a fresh legal action as announced by the Company in its announcement dated 23 January 2015; (ii) it was unclear whether and when the Company would be able to receive the judgement debt and the accrued interest in full from selling (1) the charged shares in Mr. Shum’s companies; and (2) the charged properties as those properties were held by Mr. Shum and another individual as joint tenants and subject to mortgages given that the Company did not have the information of the financial status of Mr. Shum and his companies, the amount of Mr. Shum’s interest in the charged properties and the outstanding loan amounts under the mortgages; and (iii) the ability of Dutfield to fulfil its obligations under the guarantee depended on the outcome of the legal proceedings for, inter alia, its claim for the sum of HK$141,360,000 under a loan agreement but Dutfield failed to obtain a summary judgement against the debtor and the outcome of the legal proceedings was uncertain, the Company decided to recognise an impairment on the judgement debt and the accrued interest in the aggregate amount of approximately HK$46,500,000. For further details, please refer to the Company’s announcements and the subsection headed “Litigation” in the section headed “Management Discussion and Analysis” of the annual report dated 18 September 2014 for the year ended 30 June 2014 of the Company.

* for identification purpose only

— 17 —

13. SHARE CAPITAL

Ordinary shares of HK$0.10 each (2015: HK$0.10 each) *Authorised:* At 31 December 2015 and 30 June 2016 *Issued and fully paid:* At 31 December 2015 and 30 June 2016 Preferred shares of HK$0.10 each (2015: HK$0.1 each) *Authorised:* At 31 December 2015 and 30 June 2016 *Issued and fully paid:* At 31 December 2015 and 30 June 2016	Number of shares ’000 (unaudited) 4,950,000 419,803 50,000 30,000	Amount HK$’000 (unaudited) 495,000 41,980 5,000 3,000

14. TRADE PAYABLES

The trade payables as at 30 June 2016 and 31 December 2015 are unsecured and payable within one year.

15. OTHER BORROWINGS

At 30 June 2016, non-interest bearing other borrowing with the amount of approximately HK$3,600,000 was unsecured and repayable within one year.

At 31 December 2015, interest bearing other borrowings with the amount of approximately HK$3,786,000 and HK$2,485,000 were interest bearing at 5% and 10% per annum respectively, unsecured and repayable within one year. Both interest bearing other borrowings were fully repaid during the period under review.

— 18 —

16. COMMITMENTS

The Group as lessee

At the end of the reporting periods, the Group had commitments for future minimum lease payments under non-cancellable operating leases in respect of rented premises which fall due as follows:

Within one year In the second to fifth year inclusive	At 30 June 2016 *HK$’000* (unaudited) 6,659 8,007 14,666	At 31 December 2015 HK$’000 (audited) 6,639 6,703 13,342

Operating lease payments represent rentals paid or payable by the Group for its office and retail shops premises. Leases are mainly negotiated for an average terms of one to three years.

17. MATERIAL RELATED PARTY TRANSACTIONS

Save as disclosed elsewhere in the unaudited condensed consolidated financial statements, the Group had entered into the following material related party transactions:

		For the six months	For the six months
		ended 30 June
		2016	2015
		*HK$’000*	HK$’000
Name of parties	Nature of transactions	(unaudited)	(unaudited)
Koffman Investment Limited	Interest on other borrowings	49	53
(“Koffman Investment”)(Note a)
Koffman Corporate Service Ltd	Rental expenses	—	240
(“Koffman Corporate”)(Note b)

Notes:

(a) The issued share capital of Koffman Investment is 50% owned by Mr. Yu Zhen Hua, Johnny, the current director of several subsidiaries of the Company and the former chairman of the board of directors of the Company. All interest bearing other borrowing from Koffman Investment has been fully repaid on 31 March 2016.
(b) Mr. Yu Zhen Hua, Johnny, the current director of several subsidiaries of the Company and the former chairman of the board of directors of the Company, is an ultimate beneficial owner of Koffman Corporate.

— 19 —

Compensation for key management personnel

Remuneration for key management personnel, including amounts paid to the Company’s directors and certain of the highest paid employees for the six months ended 30 June 2016 and 2015, is as follows:

Salaries and allowances Contributions to retirement benefits scheme	For the six months ended 30 June 2016 2015 *HK$’000* HK$’000 (unaudited) (unaudited) 444 850 51 9 495 859

18. LITIGATION AND CONTINGENT LIABILITIES

(a) On 23 January 2015, the Company received a writ of summons in High Court Action No. 200 of 2015 issued by Mr. Shum Yeung (“ Mr. Shum ”) as plaintiff against the Company as defendant for the following claims:
(i) the Judgment in High Court Action No. 1775 of 2012 dated 6 September 2013 (the “ Summary Judgement ”), pursuant to which the Court of First Instance of the High Court of Hong Kong (the “ Court of First Instance ”) adjudged that Mr. Shum (1) do pay the Company the sum of HK$39,128,000 together with contractual interest thereon calculated from day to day at the rate of 30% per annum from 1 May 2013 to 6 September 2013, and thereafter at judgment rate pursuant to s.48 of High Court Ordinance until payment; and (2) shall pay the Company the costs of the action including the costs of and occasioned by the Company’s application for the Summary Judgment to be taxed if not agreed, entered against Mr. Shum be set aside;
(ii) loss and damages suffered by Mr. Shum as a result of the Summary Judgement being obtained against him;
(iii) an order for discovery upon oath of all matters relating to the Summary Judgement;
(iv) an order for payment of all sums found due to Mr. Shum together with the interest thereon at such rate and for such period as the High Court may deem just pursuant to the High Court Ordinance;
(v) the costs; and
(vi) further or other relief.

— 20 —

On 30 March 2015, the Company received a statement of claim in the High Court of Hong Kong filed by Mr. Shum in relation to High Court Action No. 200 of 2015 to claim against the Company for: (i) the Summary Judgement be set aside; (ii) the loss and damages suffered by Mr. Shum as a result of the Summary Judgement against him; (iii) an order for discovery upon oath of all matters relating to the Summary Judgement; (iv) an order for payment of all sums found due to Mr. Shum together with interest thereon; and (v) costs. On 14 May 2015, the Company filed a defence to refute the statement of claim in that action on the basis, among others, that (i) Mr. Shum was bound by the Summary Judgement; and (ii) the Company denied the allegations raised against the Company by Mr. Shum in the statement of claim. Furthermore, on 10 December 2015, the Company filed an inter parties summons for an application to strike out the writ of Summons and statement of claim filed by Mr. Shum in that action. A substantive hearing of such application has been fixed to be held on 8 June 2016 (the “ Hearing ”). During the Hearing, the court allowed the Company’s application and struck out Mr. Shum’s action with an order for costs and a certificate for two counsel. The court further ordered that the amount of HK$47,767,709.60, being the outstanding indebtedness (inclusive of interest) up to 8 June 2015 under the Summary Judgment paid into court by Mr. Shum on 5 November 2015, be paid out to the Company’s solicitors (the “ 8 June 2016 Order ”).

One 16 June 2016, the Company received a notice of appeal filed by Mr. Shum as appellant in the Court of Appeal of the High Court of Hong Kong (the “ Court of Appeal ”) (on appeal from HCA No. 200 of 2015), pursuant to which Mr. Shum requested that: (i) to appeal against the 8 June 2016 Order; (ii) the Court of Appeal to order that the 8 June 2016 Order may be set aside and that the Company’s solicitor do pay back the amount of HK$47,767,709.60 into Court; and (iii) the Court of Appeal to order that the Company do pay Mr. Shum the costs of the appeal. A substantive hearing of such appeal has been fixed to be held on 10 January 2017.

19. EVENTS AFTER REPORTING PERIOD

There is no material subsequent event after the end of reporting period.

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MANAGEMENT DISCUSSION AND ANALYSIS

Business review

The Group is principally engaged in the sales of beauty products and provision of therapy services (collectively, the “ Beauty Business ”), as well as the provision of in-flight WLAN and WIFI engineering and services (the “ WIFI Business ”). For the sales of beauty products, the Group offers a variety of beauty products under the brand name “Evidens de Beauté”, and a variety of medical skincare products, including the brand “Activa”. For the provision of therapy services, the Group operates a medical skincare centre under the trade name “COLLAGEN+” at Soundwill Plaza in Causeway Bay, Hong Kong. For the WIFI Business, the Group plans to source and enter into contracts with airline companies to provide them with in-flight WLAN and WIFI engineering and services, including the provision of WLAN and WIFI equipment and technical support for installation. Depending on the mode of cooperation with the airline companies, the Group may or may not charge the airline companies for the provision of WLAN or WIFI equipment to them but may earn/share any income from the use of the WLAN or WIFI systems for advertising or shopping on the airplanes. In addition to the People’s Republic of China (the “ PRC ”), the Group has also appointed a sales representative in Singapore which will target airline companies in South-East Asia.

The Group entered into the Cooperation Agreement with an airline company (the “ Airline ”) on 3 December 2015, pursuant to which the Group has agreed to provide and install in-flight WLAN and WIFI connection equipment in an agreed number of the Airline’s aircraft in return for sharing certain income generated from the use of the in-flight WLAN and WIFI connection equipment by passengers with a guaranteed minimum payment to the Airline. For the period under review, the Group has completed the installation of in-flight WLAN and WIFI equipment on the contracted aircrafts and is still in the process of developing its own software platform and applying for certifications and approvals which are necessary for the Group to engage in in-flight WLAN and WIFI connection equipment design and manufacturing business in the PRC. As such, a gross loss of HK$33.8 million have been recognised for provision of the WIFI Business for the six months ended 30 June 2016.

Despite facing an adverse macro-economic conditions in Hong Kong, the performance of the Beauty Business as a whole has met the expectation of the Board. During the period under review, the Group continued to provide deep retail discounts and focused to sales as high volume but low cost wholesales for the beauty products under the brand name “Evidens de Beauté”. Furthermore, the Group adhered to the measure of reducing fixed overheads and did not renew the tenancy agreement of the beauty centre at Lyndhust Terrace upon its expiration on 31 March 2016. Consequently, comparing with the corresponding period in 2015, the gross loss incurred from the operation under the brand name “Evidens de Beauté” has been improved by 86.87% for the six months ended 30 June 2016.

— 22 —

Financial review

During the period under review, the Group recorded a turnover of approximately HK$24.7 million, representing an increase of approximately 19.3% as compared with the corresponding period in 2015, of which approximately HK$2.1 million (2015: approximately HK$2.1 million) and approximately HK$22.6 million (2015: approximately HK$18.6 million) were generated from the sales of beauty products and provision of therapy services respectively. China Honest Enterprises Limited (“ China Honest ”), a 51% owned subsidiary of the Company, was the major revenue contributor of the Group.

During the period under review, China Honest contributed approximately HK$23.1 million (2015: approximately HK$19.0 million) to the turnover of the Group, representing approximately 93.5% of the total turnover, of which approximately HK$0.6 million (2015: approximately HK$0.8 million) and HK$22.5 million (2015: approximately HK$18.2 million) were generated from the sales of beauty products and provision of therapy services respectively. The revenue generated from the sales of beauty products and provision of therapy services under the brand name “Evidens de Beauté” were approximately HK$1.5 million (2015: approximately HK$1.3 million) and approximately HK$0.1 million (2015: approximately HK$0.4 million) respectively.

The negative gross margin was approximately 80.2% (2015: positive gross margin of approximately 25.8%). China Honest contributed gross profit of approximately HK$8.1 million to the Group, while the operations under the brand name “Evidens de Beauté” recorded a gross loss of approximately HK$0.1 million. The negative gross margin is mainly due to the gross loss of HK$27.9 million incurred by the WIFI Business as the Group is still in the process of developing its own software platform.

Other income of approximately HK$0.1 million (2015: approximately HK$0.1 million) was mainly contributed by the interest income on bank deposits.

The selling and distribution costs was approximately HK$1.7 million for the six months ended 30 June 2016 (2015: approximately HK$0.9 million), representing an increase of 88.9% over the corresponding period in 2015. Such increase was mainly attributed to the advertising and promotion expenses of approximately HK$1.0 million and approximately HK$0.7 million incurred by the Beauty Business and the WIFI Business respectively during the period under review.

The administrative expenses was approximately HK$18.4 million for the six months ended 30 June 2016 (2015: approximately HK$11.2 million), representing an increase of 64.3% over the last corresponding period. Such increase was mainly attributed to (i) increase in legal and professional fee of approximately HK$3.2 million; (ii) increase in staff costs of approximately HK$0.5 million due to increase in number of staff relating to the WIFI Business; (iii) increase in travelling expense of approximately HK$1.3 million from the WIFI Business; and (iv) increase in written off plant and equipment of approximately HK$1.7 million.

The finance costs for the six months ended 30 June 2016 of approximately HK$0.3 million (2015: approximately HK$0.5 million) was mainly attributed to the loan interest expenses paid to Pure Profit Holdings Limited of approximately HK$0.2 million.

— 23 —

The consolidated loss attributable to owners of the Company amounted to approximately HK$42.1 million for the six months ended 30 June 2016 (2015: approximately HK$8.4 million). Such loss was mainly attributed to the loss incurred by the WIFI Business.

LIQUIDITY AND FINANCIAL RESOURCES

As at 30 June 2016, the Group had total assets of approximately HK$205.0 million (31 December 2015: approximately HK$211.5 million), including cash and cash equivalents of approximately HK$107.9 million (31 December 2015: approximately HK$116.1 million).

During the period under review, the Group financed its operation with internally generated cash flows and proceeds from the issuance of the subscription shares under the subscription agreement entered into by the Company on 17 February 2015.

USE OF PROCEEDS FROM ISSUANCE OF SUBSCRIPTION SHARES

As at 30 June 2016, the Group has utilized approximately HK$102.6 million out of the fund raised from issuance of subscription shares. The use of proceeds from the subscription are mainly attributable to purchase of property, plant and equipment of approximately HK$30.0 million, operating expense and development costs of approximately HK$58.6 million and legal and professional fees relating to the subscription of approximately HK$14.0 million.

BORROWINGS

At 30 June 2016, the total borrowings, including other borrowings and obligations under finance lease, of the Group amounted to approximately HK$11.9 million (31 December 2015: approximately HK$10.6 million), representing:

(i) the obligations under finance leases of approximately HK$8.3 million, which is interest bearing at 1.2% per annum and secured by a deposit from Century Finance Limited and the Group’s title to the leased assets; and
(ii) a loan of approximately HK$3.6 million advanced by Koffman Investment Limited, a company which is 50% owned by Mr. Yu Zhen Hua, Johnny (the current director of several subsidiaries of the Company and the former chairman of the board of directors of the Company), which is non-interest bearing, unsecured and repayable within one year.

SHARE CAPITAL

During the six months ended 30 June 2016, there was no movement in the Company’s issued share capital.

— 24 —

GEARING RATIO

The gearing ratio, expressed as percentage of total borrowings over total assets, was approximately 5.8% for the six months ended 30 June 2016 (31 December 2015: approximately 5.0%). The increase in gearing ratio is mainly due to increase in obligations under finance lease of approximately HK$3.9 million.

PLEDGED OF ASSETS

As at 30 June 2016, the Group’s restricted bank deposits of approximately HK$12.2 million (as at 31 December 2015: approximately HK$12.7 million) were deposits held at banks in respect of credit card and instalment sales arrangement of its sale of beauty products and provision of therapy services business.

FOREIGN EXCHANGE RISK

The Group has not used any foreign currency derivative instruments to hedge its exposure to foreign exchange risk. However, the management monitors closely the exposures and will consider hedging the exposures should the need arise.

COMMITMENTS

As at 30 June 2016, the Group had operating lease commitments and capital commitments of approximately HK$14.7 million (as at 31 December 2015: approximately HK$13.3 million) and approximately HK$Nil (as at 31 December 2015: HK$8.3 million), respectively.

EMPLOYEES

At 30 June 2016, the Group had 90 employees. Total staff costs for the period ended 30 June 2016 amounted to approximately HK$12.2 million (for the six months ended 30 June 2015: approximately HK$11.7 million). Their remuneration, promotion and salary review are assessed based on job responsibilities, work performance, professional experiences and the prevailing industry practices. The employees in Hong Kong joined the mandatory provident fund scheme and the employees in the PRC joined the national statutory social security insurance scheme.

SINGIFICANT INVESTMENT

The Group did not enter into any new significant investment during the six months ended 30 June 2016.

— 25 —

MATERIAL ACQUISITION AND DISPOSAL OF SUBSIDIARIES, ASSOCIATES AND AFFILIATED COMPANIES

There is no material acquisition and disposal of subsidiaries associates and affiliated companies during the six months ended 30 June 2016.

FURTURE PLAN FOR MATERIAL INVESTMENTS AND CAPITAL ASSETS

Save as disclosed in this announcement, the Group does not have any concrete plan for material investments or capital assets for the coming year.

OUTLOOK

The in-flight WIFI service business in the PRC are still at the start-up stage. State-owned Chinese airlines have started in-flight WIFI service trials but such in-flight WIFI services have not yet been put into mass commercial use. With the increasing number of flights and internet users in the PRC, the Company believes that there will be a considerable demand of in-flight WIFI services. WIFI connection and telecommunication have become a trend in ground-air connectivity for European and American airlines in recent years. The European Union has already approved in-flight cell phone calls, SMS, and email services in its airspace. Various countries are paying increasing attention to this market.

As the majority of the PRC’s air passengers are now frequent flyers, the Company believes that inflight WIFI services will become an increasingly influential factor for many passengers when making flight purchase decisions and therefore it is expected that Chinese airline companies will allocate more resources to introduce new innovative services, such as in-flight shopping, through in-flight WIFI services that enhance passengers’ travel experience. As such, the Company believes that there are good opportunities to develop business relating to the WIFI Business in the PRC which will facilitate the provision of in-flight WLAN or WIFI connections.

Most analysts have projected that the economy in both the PRC and Hong Kong in the coming year would show an unsteady and slowdown growth and that the outlook is gloomy. The Directors do not expect any significant growth in the Group’s sales of beauty products and provision of therapy services in 2016. In addition, the management will cautiously monitor the market, adopt appropriate measures and business strategies in response to changing market conditions.

DIRECTORS’ AND CHIEF EXECUTIVE’S INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY OR ANY ASSOCIATED CORPORATIONS

As at 30 June 2016, the interests and short positions of the Directors or the 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 (the “ SFO ”)), which were required to be notified to the Company and the Stock Exchange pursuant to Divisions

— 26 —

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 were required, pursuant to Section 352 of the SFO, to be recorded in the register referred to therein, or as otherwise were required to be notified to the Company and the Stock Exchange pursuant to Rules 5.46 to 5.68 of the GEM Listing Rules were as follows:

Long and short positions in the ordinary shares and underlying shares of the Company

				Interest in		Approximate
Name of Director/			Interest in	underlying	Total interest	percentage of
chief executive	Nature of interests	Notes	shares	shares	in shares	shareholding
			(Note 1)	(Note 1)	_(Note 1) _	(Notes 1 and 3)
Mr. Cai Zhaoyang	Interest of controlled	2, 3 and 4	397,504,349(L)	30,000,000(L)	427,504,349(L)	101.83%(L)
	corporation		179,921,200(S)		179,921,200(S)	42.86%(S)

Notes:

“L” represents long position in shares or underlying shares of the Company and “S” represents short position in shares or underlying shares of the Company.
Xing Hang Limited (“ Xing Hang ”) is ultimately owned as to 82.5% by Mr. Cai Zhaoyang, 7.5% by Mr. Lin Fan, 3.75% by Ms. Xu Yaping, 3.75% by Mr. Guo Pengcheng and 2.5% by Mr. Chen Jie, which in turn directly holds long positions in 427,504,349 shares of the Company and short positions in 179,921,200 shares of the Company. Accordingly, Mr. Cai Zhaoyang is deemed to be interested in the long positions in 427,504,349 shares and short positions in 179,921,200 shares of the Company.
As at 30 June 2016, Xing Hang held 179,925,549 shares of the Company and was deemed to be interested in an aggregate of 247,578,800 shares of the Company (comprising 217,578,800 ordinary shares and 30,000,000 preferred shares of the Company) held by High Aim Global Limited (“ High Aim ”), Goldenland, Silver Empire Holding Limited (“ Silver Empire ”), Truly Elite Limited (“ Truly Elite ”), First Bonus International Limited (“ First Bonus ”) and Eternity Investment Limited (“ Eternity ”) under Sections 317 and 318 of the SFO. Accordingly, Mr. Cai Zhaoyang is deemed to be interested in the long positions in 427,504,349 shares of the Company.
Pursuant to a term loan agreement (the “ Term Loan Agreement ”) entered into between Xing Hang (as borrower) and Success Far Holdings Limited (“ Success Far ”) (as lender) on 17 February 2015, a deed of charge and assignment in relation to the 179,921,200 shares of the Company had been executed by Xing Hang (as chargor) in favour of Success Far (as chargee, pursuant to which 179,921,200 shares of the Company have been charged by Xing Hang to Success Far as security under the Term Loan Agreement). Accordingly, Xing Hang acquired short positions in respect of such 179,921,200 shares of the Company.
The percentage is calculated on the basis of 419,803,000 shares of the Company in issue as at 30 June 2016.

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Save as disclosed above, as at 30 June 2016, so far as is known to any Directors or chief executive of the Company, none of the Directors and chief executives of the Company had any interests or short positions in any shares, underlying shares and debenture of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which would have to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO), or which were recorded in the register required to be kept by the Company pursuant to Section 352 of the SFO, or which were required, pursuant to Rules 5.46 to 5.68 of the GEM Listing Rules, to be notified to the Company and the Stock Exchange.

SUBSTANTIAL SHAREHOLDER’S INTERESTS AND SHORT POSITIONS IN SHARES AND UNDERLYING SHARES OF THE COMPANY

As at 30 June 2016, so far as is known to the Directors and the chief executive of the Company, the interests and shorts positions of the persons or corporations (other than the Directors and the chief executive of the Company) in the shares and underlying shares of the Company as recorded in the register to be kept by the Company pursuant to Section 336 of the SFO.

Interests and short positions in the ordinary shares or underlying ordinary shares of the Company

				Interest in
			Interest in	underlying	Total interest	Approximate
Name of			shares of the	shares of the	in shares of the	percentage of
shareholder	Nature of interests		Company	Company	Company	shareholding
		Notes	(Note 1)	(Note 1)	(Note 1)	(Notes 1 and 13)
Eternity	Interest of controlled corporation	5	397,500,000(L)	30,000,000(L)	427,500,000(L)	101.83%(L)
	and concert party agreement
Xing Hang	Beneficial owner and concert party	6	397,504,349(L)	30,000,000(L)	427,504,349(L)	101.83%(L)
	agreement
			179,921,200(S)		179,921,200(S)	42.86%(S)
Success Far	Security interest	7	179,921,200(L)	—	179,921,200(L)	42.86%(L)
Goldenland	Beneficial owner and concert party	8	397,500,000(L)	30,000,000(L)	427,500,000(L)	101.83%(L)
	agreement
Liu Jin	Interest of controlled corporation	8	397,500,000(L)	30,000,000(L)	427,500,000(L)	101.83%(L)
	and concert party agreement
Xue Siman	Interest of controlled corporation	8	397,500,000(L)	30,000,000(L)	427,500,000(L)	101.83%(L)
	and concert party agreement
Silver Empire	Beneficial owner and concert party	9	397,500,000(L)	30,000,000(L)	427,500,000(L)	101.83%(L)
	agreement
Genius Earn	Interest of controlled corporation	9	397,500,000(L)	30,000,000(L)	427,500,000(L)	101.83%(L)
	and concert party agreement

— 28 —

				Interest in
			Interest in	underlying	Total interest	Approximate
Name of			shares of the	shares of the	in shares of the	percentage of
shareholder	Nature of interests		Company	Company	Company	shareholding
		Notes	(Note 1)	(Note 1)	(Note 1)	(Notes 1 and 13)
Liu Xiaolin	Interest of controlled corporation	9	397,500,000(L)	30,000,000(L)	427,500,000(L)	101.83%(L)
	and concert party agreement
Truly Elite	Beneficial owner and concert party	10	397,500,000(L)	30,000,000(L)	427,500,000(L)	101.83%(L)
	agreement
Yeung Heung	Interest of controlled corporation	10	397,500,000(L)	30,000,000(L)	427,500,000(L)	101.83%(L)
Yeung	and concert party agreement
High Aim	Beneficial owner and concert party	11	397,500,000(L)	30,000,000(L)	427,500,000(L)	101.83%(L)
	agreement
Ko Chun Shun,	Interest of controlled corporation	11	397,500,000(L)	30,000,000(L)	427,500,000(L)	101.83%(L)
Johnson	and concert party agreement
First Bonus	Beneficial owner and concert party	12	397,500,000(L)	30,000,000(L)	427,500,000(L)	101.83%(L)
	agreement
Reorient Limited	Interest of controlled corporation	12	397,500,000(L)	30,000,000(L)	427,500,000(L)	101.83%(L)
	and concert party agreement
REORIENT Group	Interest of controlled corporation	12	397,500,000(L)	30,000,000(L)	427,500,000(L)	101.83%(L)
Limited	and concert party agreement

Notes:

“L” represents long position in shares or underlying shares of the Company and “S” represents short position in shares or underlying shares of the Company.
On 17 February 2015, the Company and the Subscribers, namely Xing Hang, Goldenland, Silver Empire, Truly Elite, High Aim and First Bonus entered into the Subscription Agreement pursuant to which the Subscribers conditionally agreed to subscribe for, and the Company conditionally agreed to allot and issue, a total of 375,000,000 Subscription Shares of the Company, comprising 345,000,000 Ordinary Subscription Shares and 30,000,000 Preferred Shares to the Subscribers, at an issue price of HK$0.4 per Subscription Share.
Upon completion of the Subscription on 6 November 2015, Xing Hang became the controlling shareholder (as defined under the GEM Listing Rules) of the Company. Pursuant to Rule 26.1 of the Takeovers Code, Xing Hang made an unconditional mandatory cash offer (the “ Offer ”). Kingston Securities Limited (“ Kingston Securities ”) made the Offer on behalf of Xing Hang to acquire all the issued shares of the Company at an offer price of HK$4.07 per offer share (other than the Excluded Shares (as defined below)). The Offer was closed on 11 December 2015 and Xing Hang had received valid acceptances in respect of a total of 4,349 offer shares under the Offer.

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Goldenland, Silver Empire, Truly Elite, High Aim and First Bonus are considered concert parties with Xing Hang. Eternity, being the controlling shareholder (as defined under the GEM Listing Rules) of the Company prior to the completion of the Subscription, has undertaken to Xing Hang not to accept the Offer in respect of the 36,500,000 shares of the Company held by Eternity (the “ Excluded Shares ”) (the “ Lock-Up Undertaking ”) and the Subscribers have undertaken to Eternity, among other things, not to sell their respective holdings in the Subscription Shares within one year after completion of the Subscription or during the period which Eternity remains directly or indirectly interested in 22,490,150 shares of the Company (representing 5.0% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares (assuming that there is no adjustment to the conversion price of the conversion shares in accordance with the terms of the Preferred Shares and that there is no other change in the number of shares in issue)) or more (whichever period is shorter) (the “ Subscribers’ Lock-up Undertaking ”). In view of these undertakings entered into between Eternity and the Subscribers, Eternity is regarded as a concert party with the Subscribers.
New Cove Limited (“ New Cove ”) is interested in 52,500,000 shares of the Company. As New Cove is an indirect wholly-owned subsidiary of Eternity, Eternity is deemed to be interested in such 52,500,000 shares. In addition, as Eternity is considered a concert party with the Subscribers under Section 317 of the SFO in view of the Subscribers’ Lock-Up Undertaking. Eternity is deemed to be interested in the Subscription Shares. As such, Eternity is deemed to be interested in all the shares of the Company in which each of the Subscribers is or is deemed to be interested.
Xing Hang is ultimately owned as to 82.5% by Mr. Cai Zhaoyang, 7.5% by Mr. Lin Fan, 3.75% by Ms. Xu Yaping, 3.75% by Mr. Guo Pengcheng and 2.5% by Mr. Chen Jie. Pursuant to the Subscription Agreement, Xing Hang subscribed for 179,921,200 Ordinary Subscription Shares. Pursuant to the Term Loan Agreement, a share charge has been given by Xing Hang in favour of Success Far over the 179,921,200 Ordinary Subscription Shares issued to Xing Hang under the Subscription. Accordingly, Xing Hang acquired a short position in respect of such 179,921,200 shares. Subsequently on 11 December 2015, Xing Hang further acquired a total of 4,349 shares of the Company upon completion of the Offer. As Xing Hang is a controlled corporation (as defined in Part XV of the SFO) of Mr. Cai Zhaoyang, Mr. Cai Zhaoyang is deemed to have acquired a short position in such 179,921,200 shares and is also deemed to be interested all the shares in which Xing Hang is or is deemed to be interested. Further, as Xing Hang is a concert party with the other Subscribers and with Eternity under Section 317 of the SFO in view of the Subscribers’ Lock-Up Undertaking, Xing Hang is deemed to be interested in all the shares of the Company in which each of the other Subscribers and Eternity is or is deemed to be interested.
In accordance with the Term Loan Agreement entered into between Xing Hang and Success Far, which is owned as to approximately 20.85% by Silver Empire, 22.93% by Truly Elite, 25% by Goldenland and 31.22% by High Aim, pursuant to which Success Far provided a facility to Xing Hang and Xing Hang gave a share charge in favour of Success Far over the 179,921,200 Ordinary Subscription Shares issued to Xing Hang under the Subscription. As such, Success Far is deemed to be interested in the 179,921,200 shares of the Company.
Goldenland is ultimately owned as to 50% by Mr. Liu Jin and 50% by Ms. Xue Siman. Accordingly, each of Mr. Liu Jin and Ms. Xue Siman is deemed to be interested in all the shares of the Company in which Goldenland is or is deemed to be interested. Pursuant to the Subscription Agreement, Goldenland subscribed for 45,396,178 Ordinary Subscription Shares. As Goldenland is a concert party with the other Subscribers and with Eternity under Section 317 of the SFO in view of the Subscribers’ Lock-Up Undertaking, Goldenland is deemed to be interested in all the shares of the Company in which each of the other Subscribers and Eternity is or is deemed to be interested.

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Silver Empire is wholly-owned by Genius Earn Limited (“ Genius Earn ”) which is in turn whollyowned by Mr. Liu Xiaolin. Accordingly, Genius Earn is deemed to be interested in all the shares of the Company in which Silver Empire is or is deemed to be interested. Further, Mr. Liu Xiaolin is deemed to be interested in all the shares of the Company in which Genius Earn is or is deemed to be interested. Pursuant to the Subscription Agreement, Silver Empire subscribed for 37,861,665 Ordinary Subscription Shares. As Silver Empire is a concert party with the other Subscribers and with Eternity under Section 317 of the SFO in view of the Subscribers’ Lock-Up Undertaking, Silver Empire is deemed to be interested in all the shares of the Company in which each of the other Subscribers and Eternity is or is deemed to be interested.
Truly Elite is wholly-owned by Mr. Yeung Heung Yeung. Accordingly, Mr. Yeung Heung Yeung is deemed to be interested in all the shares of the Company in which Truly Elite is or is deemed to be interested. Pursuant to the Subscription Agreement, Truly Elite subscribed for 41,628,921 Ordinary Subscription Shares. As Truly Elite is a concert party with the other Subscribers and with Eternity under Section 317 of the SFO in view of the Subscribers’ Lock-Up Undertaking, Truly Elite is deemed to be interested in all the shares of the Company in which each of the other Subscribers and Eternity is or is deemed to be interested.
High Aim is wholly-owned by Mr. Ko Chun Shun, Johnson. Accordingly, Mr. Ko Chun Shun, Johnson is deemed to be interested in all the shares of the Company in which High Aim is or is deemed to be interested. Pursuant to the Subscription Agreement, High Aim subscribed for 26,697,946 Ordinary Subscription Shares and 30,000,000 Preferred Shares. As High Aim is a concert party with the other Subscribers and with Eternity under Section 317 of the SFO in view of the Subscribers’ Lock-Up Undertaking, High Aim is deemed to be interested in all the shares of the Company in which each of the other Subscribers and Eternity is or is deemed to be interested.
First Bonus is a wholly-owned subsidiary of Reorient Limited, a company incorporated in the British Virgin Islands with limited liability and is wholly-owned by REORIENT Group Limited, a company incorporated in Hong Kong with limited liability and the shares of which are listed on the Main Board of the Stock Exchange. Accordingly, Reorient Limited is deemed to be interested in all the shares of the Company in which First Bonus is or is deemed to be interested. Further, REORIENT Group Limited is deemed to be interested in all the shares of the Company in which Reorient Limited is or is deemed to be interested. Mr. Ko Chun Shun, Johnson is an executive director and the controlling shareholder of REORIENT Group Limited. Accordingly, he is deemed to be interested in all the shares of the Company in which REORIENT Group Limited is or is deemed to be interested. Pursuant to the Subscription Agreement, First Bonus subscribed for 13,494,090 Ordinary Subscription Shares. As First Bonus is a concert party with the other Subscribers and with Eternity under Section 317 of the SFO in view of the Subscribers’ lock-Up Undertaking, First Bonus is deemed to be interested in all the shares of the Company in which each of the other Subscribers and Eternity is or is deemed to be interested.
The percentage is calculated on the basis of 419,803,000 Shares in issue as at 30 June 2016.

Save as disclosed above, as at 30 June 2016, so far as is known to the Directors and the chief executive of the Company, and based on the public records filed on the website of the Stock Exchange and records kept by the Company, no other persons or corporations (other than the Directors and the chief executive of the Company) has interests or short positions in the shares or underlying shares of the Company as recorded in the register required to be kept by the Company pursuant to Section 336 of the SFO.

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SECURITIES TRANSACTIONS BY DIRECTORS

The Company has adopted its own codes of conduct regarding Directors’ and relevant employees’ securities transactions, namely “Code for Securities Transactions by Directors” and “Code for Securities Transactions by Relevant Employees”, both of which apply to all Directors and relevant employees of the Company on terms no less exacting than the required standard of dealings set out in Rules 5.48 to 5.67 of the GEM Listing Rules.

Having made specific enquiry with each of the Directors, all Directors have confirmed that they have complied with such code and the required standard of dealings on Directors’ securities transactions during the six months ended 30 June 2016.

COMPETING INTERESTS

As at 30 June 2016, none of the Directors, substantial shareholders of the Company nor any of their respective close associates (as defined in the GEM Listing Rules) has any interest in a business which causes or may cause any significant competition with the business of the Group.

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

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

AUDIT COMMITTEE

The Board has established an audit committee (the “ Audit Committee ”) with written terms of reference in compliance with Rules 5.28 to 5.29 of the GEM Listing Rules. As at the date of this announcement, the Audit Committee comprises three independent non-executive Directors, namely, Mr. Chu Kin Wang, Peleus (chairman), Mr. Tam B Ray, Billy and Mr. Tse Joseph. The Audit Committee has reviewed the unaudited condensed consolidated interim results of the Group for the six months ended 30 June 2016 and has provided advice and comments thereon.

CODE ON CORPORATE GOVERNANCE PRACTICES

The Stock Exchange issued the Corporate Governance Code (the “ CG Code ”) contained in Appendix 15 of the GEM Listing Rules which sets out the principles and the code provisions which listed issuers are expected to apply and comply.

Save as disclosed below, during the period under review and up to the date of this announcement, the Company has applied the principles as set out in the CG Code that are considered to be relevant to the Company and has complied with most of the code provisions of the CG Code:

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Insurance for potential legal actions against the Directors

Code provision A.1.8 of the CG Code stipulates that the Company should arrange appropriate insurance to cover potential legal actions against its directors. During the period under review, the Company is still arranging for appropriate liability insurance for the Directors for indemnifying their liabilities arising from corporate activities.

Chairman and Chief Executive

Code provision A.2.1 of the CG Code stipulates that the roles of chairman and chief executive should be separate and should not be performed by the same individual.

Due to practical necessity of the Group’s corporate operating structure, the roles of the chairman and the chief executive officer are both performed by Mr. Cai Zhaoyang who is overseeing the operation and management of the Group. The Board believes that this structure will not impair the balance of power and authority between the Board and the management of the Company.

By Order of the Board SkyNet Group Limited Cai Zhaoyang Executive Director, Chairman and Chief Executive Officer

Hong Kong, 11 August 2016

As at the date of this announcement, the Board comprises three executive Directors, namely Mr. Cai Zhaoyang, Mr. Chan Kin Wah, Billy, and Mr. Lee Chan Wah; and three independent non-executive Directors, namely Mr. Tam B Ray, Billy, Mr. Chu Kin Wang, Peleus and Mr. Tse Joseph.

This announcement will remain on the “Latest Company Announcements” page of the GEM website at http://www.hkgem.com for a minimum period of 7 days from the date of its publication and on the Company’s website at http://www.skynetgroup.com.hk.

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