Web3 Meta Limited — Audit Report / Information 2020

Jan 22, 2021

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.

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MILLION STARS HOLDINGS LIMITED 萬星控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 8093)

SUPPLEMENTAL ANNOUNCEMENT IN RELATION TO THE AUDITED ANNUAL RESULTS FOR THE YEAR ENDED 30 JUNE 2020

CHARACTERISTICS OF GEM OF THE STOCK EXCHANGE OF HONG KONG LIMITED (THE ‘‘STOCK EXCHANGE’’)

GEM has been positioned as a market designed to accommodate small and mid-sized 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.

This announcement, for which the directors (the ‘‘Directors’’) of Million Stars Holdings 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 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–

The Announcement of Audited Annual Results for the Year Ended 30 June 2020 made by the Company on 30 October 2020 referred to a disclaimer of opinion to the consolidated financial statements related thereto (‘‘ Disclaimer of Opinion ’’). With regards to the context and circumstances in relation to the Disclaimer of Opinion, the Company hereby sets out further details in this supplemental announcement.

TheauditorsissuedtheDisclaimerofOpiniononthefollowingtwomatters:

(1) INTANGIBLE ASSETS

Details of the Disclaimer of Opinion for acquisition and impairment assessment of intangible assets

During the year ended 30 June 2020, the Company and its subsidiaries (the ‘‘ Group ’’) acquired certain intangible assets, including mobile applications, concession rights for the licensed mobile game applications and software relating to its internet advertising agency business and operation, with an aggregate consideration of RMB48,000,000 (approximately HK$52,668,000). These acquired intangible assets mainly generate revenue from game top-ups through licensing third-party launches, or generate revenue through licensing third-party usage.

Amongtheseintangibleassets,intangibleassetsofRMB32,000,000(approximately
HK$35,112,000)includingtheoperationrightsofanumberofmobileapplicationsand
mobilegamesofRMB24,000,000,aswellasoneofthesoftwareofRMB8,000,000,are
expectedtogeneraterevenuefortheGroupinthefuture.Priortolaunchingthese
mobileapplicationsandmobilegamesandsoftwareintothemarketandgenerating
revenue,theCompanyneedstoinvestresourcestocompletethedevelopmentthereof,
applytorelevantgovernmentauthoritiesforapprovals,seekcooperativemobilestores
andpaymentchannelproviders,andcarryoutmarketingpromotion.Afterthemobile
applicationsandmobilegamesarelaunchedintothemarket,theCompanywill
continuouslyupgradethesemobileapplicationsandmobilegamesandsoftwareand
conductmaintenanceandmarketingpromotiontherefor.

TheremainingintangibleassetsofRMB16,000,000(approximatelyHK$17,556,000)
includedothersoftwaresystemsandplatformsusedbytheGroupitself.

PursuanttoHongKongAccountingStandard36‘‘ImpairmentofAssets’’,the
managementoftheCompanyperformedimpairmentassessmentsontheGroup’s
intangibleassetsattheendofthereportingperiod(i.e.theyearended30June2020).
Theimpairmentassessmentwasperformedwithreferencetoaprofessionalvaluation
performedbyanindependentprofessionalvaluer(InternationalValuationLimited)by
comparingthecarryingamountsandtherecoverableamountsoftheintangibleassets.
Therecoverableamountoftheintangibleassetsisthehigherof(i)thefairvalueless
costsofdisposaland(ii)thevalue-in-use.

Inassessingtherecoverableamountoftheintangibleassets,themanagementofthe
Companyandtheindependentprofessionalvaluerhavetakenintoconsiderationthe
characteristicsandfutureplansofeachintangibleassettodeterminethemost
appropriatevaluationmethod.AstheCompanyhadplannedtorealizeandmaximize
thevalueoftheoperationrightsofmobileapplicationsandmobilegamesanda

–2–

softwareofacquisitioncostsofRMB32,000,000throughcommercializingand
launchingtheproductsintothemarket,itwasconsideredmostappropriatetousethe
discountedcashflowapproachtoevaluatetherecoverableamount(value-in-use)of
suchintangibleassets.Asforothersoftwaresystemsandplatformsofacquisitioncosts
ofRMB16,000,000usedbytheGroupitself,astheusethereofdidnotgeneratecash
inflowandtherewasnosimilartransactioninformationintheopenmarket,itwas
consideredmostappropriatetousethecostreplacementmethodtoevaluatethe
recoverableamount(fairvaluelesscostsofdisposal)ofsuchintangibleassets.

Thediscountedcashflowapproachwasusedtoevaluatethemobileapplicationsand
mobilegamesandasoftware.Thediscountedcashflowapproachisaprojection
preparedbythemanagementoftheCompanyofthecashinflowsandoutflows
generatedbybusinessesrelatingtotheintangibleassetsinthecomingyears.Thetiming
andamountsofsuchcashinflowsandoutflowsaresubjectmainlytothefuturebusiness
developmentrelatingtosuchintangibleassets,includingthefollowingconditions:

• (i) the development and launch of certain mobile applications and mobile games and a software will be completed pursuant to the business development plans;

• (ii) the marketing measures are effective and have the expected effects;

• (iii) the expected life cycle of the mobile applications and mobile games and software.

Therearesignificantuncertaintiesabouttheseconditionsaffectingthebusiness
developmentincluding,forinstance,theprotractedCOVID-19pandemicsituation.
However,thecashflowprojectionhasbeenmadebasedontheexistingandlatest
informationavailabletothemanagementoftheCompanyandtheirunderstandingofthe
businessatthetimeoftheacquisitions.

–3–

Assumptions adopted in the valuations of the mobile applications and mobile games and a software of acquisition costs of RMB32 million

Thecashflowprojectionabouttheoperationrightsofmobileapplicationsandmobile
gamesandasoftwarewasbasedoncertainmajorassumptions,including:

Particulars Xiangwan Games Assistant# (享玩遊戲助手) Rentu# (認圖) Chang Game# (暢遊戲) Youliao# (有料) Huajianyin# (花間吟) Chaofan Wangzhe# (超凡王者) Daojian Jingjie# (刀劍境界) Bixue Qingtian# (碧雪情天3D) Jianxia Zhuanqi# (劍俠傳奇) Artificial Intelligence Information Filter System Software# (人工智慧資訊過濾系統 軟體)

Costs of acquisition Average annual revenue Average annual net cash inflow (after tax) Discount rate before tax Growth rate after five years RMB RMB RMB % % 4,500,000 1,988,000 690,000 21.20 3.00 2,000,000 851,000 318,000 21.20 3.00 2,000,000 1,225,000 325,000 21.10 3.00 4,000,000 1,038,000 362,000 21.10 3.00 4,000,000 1,572,000 588,000 21.20 3.00 1,500,000 1,038,000 362,000 21.10 3.00 1,500,000 950,000 377,000 21.40 3.00 2,500,000 1,274,000 558,000 20.90 3.00 2,000,000 1,128,000 512,000 21.40 3.00 8,000,000 2,602,000 2,212,000 24.20 3.00 32,000,000

–4–

Assumptions adopted in the valuations of the other software system and platforms of acquisition costs of RMB16 million

Thecostreplacementmethodwasusedtoevaluatetherecoverableamountofother
softwaresystemsandplatforms.Thecostreplacementmethodisbasedoncertainmajor
assumptions,including:

Particulars Youtu Photo Management System# (優圖圖片管理系統) Jiaying Video Management System# (佳影視頻管理系統) ALB Business Management Platform# (ALB業務管理平台) Youji Jixiao Management Platform# (優績績效管理平台)	Costs of acquisition Development time for each system/ platform# Number of technical staff members for development required for each system/ platform# Average monthly salary of each technical staff member RMB of Month of staff RMB 4,000,000 12 months 7 about 20,000 4,000,000 12 months 7 about 20,000 4,000,000 12 months 7 about 20,000 4,000,000 12 months 7 about 20,000 16,000,000

–5–

Accordingtothevaluation,thecarryingamountsofcertainintangibleassetsexceeded
theirrecoverableamounts.Onthisbasis,animpairmentlossofHK$16,129,000was
recognizedfortheyearended30June2020asfollows:

Cost At 1 July 2019 Addition Exchange differences At 30 June 2020 Accumulated amortization and impairment loss At 1 July 2019 Amortization charge for the year Impairment loss for the year Exchange differences At 30 June 2020 Carrying amount at 30 June 2020	HK$’000 — 52,668 (549) 52,119 — 3,028 16,129 (31) 19,126 32,993

Theresponsibilitiesoftheauditorsincludeobtainingsufficientandappropriateaudit
evidencetoassessthereasonablenessoftheassumptionsusedbythemanagementof
theCompanyandthefeasibilityofthebusinessplansofthecashflowprojectionforthe
impairmentassessmentsofintangibleassets.Inrespectoftheoperationrightsofmobile
applicationsandmobilegamesandasoftwareusingdiscountedcashflowapproach,the
auditorsrequestedtheCompanytoproviderelevantsupportingdocumentsofthe
businessdevelopmentplansoftheintangibleassets,suchasthebusinesscontractsor
thehistoricalrecordsofcashflowsgeneratedbytheintangibleassets,sothatthe
auditorsmayreviewwhetherthevaluationofsuchintangibleassetsbythemanagement
wasreasonable.However,certainmobileapplicationsandmobilegamesandsoftware
hadnotyetbeenlaunchedintothemarket,whichmeanstherewerelimitedhistorical
recordssubstantiatingtheestimatedcashflowprojection.Inrespectofthesoftware
systemsandplatformscurrentlyusedbytheGroupitselfwiththepotentialtobe
licensedtothirdpartiesinfuture,theauditorsrequestedtheCompanytoprovide
relevantsupportingdocumentsorinformationinrelationtothedevelopmentofsuch
intangibleassets,includingthehumanresourcesrecordsoftherequiredtechnicalstaff
fordevelopment,thequalificationsrequiredforsuchtechnicalstafffordevelopment
andrecordsofthetimerequiredforthedevelopment.However,itwasdifficultforthe
Companyasthepurchasertoobtainrecordsonthedevelopmentofrelevantintangible
assets.Therefore,asatthedateoftheauditreport,theCompanywasoftheviewthatit
wasnotfeasibleorpossibletoprocureandprovidesuchdocumentsasrequiredbythe
auditors.

–6–

Assuch,theauditorsoftheCompanyareoftheviewthat,thebusinessandoperation
informationoftherelevantintangibleassetswasinsufficienttoascertainthe
reasonablenessoftheassumptionsmadebythemanagementandthefeasibilityofthe
businessplansappliedinthecashflowprojectionoftheintangibleassets.Therefore,
theauditorsissuedtheDisclaimerofOpinionontheimpairmentassessmentofthe
Group’sintangibleassetsintheconsolidatedfinancialstatements.

Actions to remove the Disclaimer of Opinion about the intangible assets

Asdescribedinabove,duetothelackofhistoricalrecordsofbusinessdataof
intangibleassets,theauditorsareoftheopinionthatthebusinessandoperating
informationabouttheintangibleassetsisinsufficienttoascertainthereasonablenessof
theassumptionsmadebythemanagementandthefeasibilityofbusinessplansapplied
incashflowprojectionfortheintangibleassets.Havingdiscussedandcommunicated
withtheauditorsandinordertoprovidetheauditevidencerequiredbytheauditors,the
managementaimstolaunchtheintangibleassetsassoonaspractical,andtoprovide
operatingdataasareferenceforcashflowprojectionfortheyearending30June2021.
Therefore,themanagementwillformulateandimplementthefollowingactionplansto
addresstheauditor’sconcernsinordertoremovetheDisclaimerofOpinion:

• (i) Actively communicate with auditors and update them on the latest business developments and operation of certain mobile applications and software;

• (ii) Accelerate the launch of the intangible assets, and the commercialisation of the products according to the business plan;

• (iii) Formulate marketing plans and maximise the revenue-generating capabilities of applications and software;

• (iv) Collect information and input data during the whole process of operation of intangible assets, which may be used to verify cash flow projection/valuation for assessment of impairment on intangible assets.

TheCompanyhasdiscussedandagreedwithitsauditorsthattheauditqualificationin
relationtotheintangibleassetswouldberemovedfromthefinancialstatementsasof
30June2021ifthebusinessplansareimplementedandtherelevantoperationaldata,
suchashistoricalrecordsofcashflowsgeneratedbytheintangibleassets,canbe
obtainedbytheauditorsfortheyearending30June2021.

Inaddition,afterdiscussionandcommunicationbetweenthemanagementandthe
auditors,itisunderstoodthattheDisclaimerofOpinionisarisingfromthelimitationof
scopeinrelationtotheintangibleassets.IftheCompanydisposesofintangibleassets
onorbefore30June2021,theintangibleassetswillbederecognizedonthe
consolidatedstatementoffinancialpositionasat30June2021andtheCompanywill
nolongerneedtoperformimpairmentassessmentonthecarryingamountsofthe
intangibleassetsasat30June2021.Asagreedwiththeauditors,theDisclaimerof
Opinioninrelationtotheintangibleassetswillberemoveduponsuchdisposal.As
such,themanagementmayconsideralternativeproposalstorealiseintangibleassets,
including,butnotlimitedto,disposalofintangibleassets(ifapplicable)ifasuitable
acquirercanbeidentified.

–7–

Further details regarding the intangible assets

Changes in the value of inputs or assumptions or valuation methodology

Theparameters,assumptionsorvaluationmethodswhichhavechangedfromthose
adoptedinthepreviousvaluationsareasfollows:

• (i) The discount rate used to evaluate the operating rights of mobile applications and mobile games and a software (intangible assets)

Asof30June2020,thediscountratesbeforetaxusedbyInternationalValuation
Limitedintheimpairmentassessmentoftheoperatingrightsofmobileapplications
andmobilegamesandasoftwarewereapproximately20%to25%.However,the
discountrateusedinthevaluationofintangibleassetsatthetimeofacquisition
wereapproximately13%to16%.

• (ii) Valuation methods adopted in the software systems and platforms used by the Group itself

Theimpairmentassessmentofthesoftwaresystemsandplatformsasof30June
2020andthevaluationofthesoftwaresystemsandplatformsontheacquisition
dateusethecostreplacementmethodtoevaluatetherelevantvalues.Inthe
valuationofthesoftwaresystemsandplatformsontheacquisitiondate,thePRC
valuerappliedamultiplyingfactorthattakesintoaccountthefactthatthe
developmentofsuchsystemsandplatformsalsodependsuponvariousfactors
includingthetechnicalleveloftheR&DstaffandtheR&Dexperience.However,
thisfactorwasnottakenintoaccountinthevaluationasof30June2020for
impairmentassessmentoftheintangibleassetscarriedoutbyInternational
ValuationLimited,whichledtothedifferenceinvaluationresults.

Reasons for change in value of inputs or assumptions or valuation methodology from those previously adopted

Duetosuchintangibleassets,andthepartiestothetransactionsarelocatedinChina,
referencewasmadetothevaluationperformedbyaPRCvaluerwhentheconsideration
ofthetransactionsfortheseassetswasdetermined.AstheCompanywaspreparingthe
consolidatedfinancialstatementsoftheGroupasof30June2020andwasconducting
impairmentassessmentoftheseassetsinaccordancewithapplicableaccounting
standards(i.e.,HongKongAccountingStandards),ithasappointedaHongKong-based
valuertoevaluatetherecoverableamountoftheassetsinaccordancewithrelevant
valuationstandards.Therefore,theaforesaiddifferencesintheparameters,assumptions
orvaluationmethodsmayoccurascomparedwiththoseadoptedintheprevious
valuations.

–8–

In addition, discount rates are the key inputs applied in the discounted cash flow approach used in the valuation. Discount rate is a rate of return that an investor would require on an investment in the business. This rate of return should reflect a range of macroeconomic, industry, and company-specific factors that translate into the degree of perceived risk to achieve the projected results. The Capital Asset Pricing Model (‘‘ CAPM ’’), which considers several inputs of data, was applied in estimating such discount rates. To the best knowledge of the management, the effect of the outbreak of the COVID-19 is considered through the specific risk premium applied in the CAPM, which in turn has an increasing impact to the discount rates used in the discounted cash flow approach and the valuation of the intangible assets as of 30 June 2020.

Latest status of the intangible assets and implementation of the business plan

Exceptthattheacquisitionofoneofthemobileapplicationsofacquisitioncostof
RMB4,000,000wascancelledandthecarryingamountoftherelevantintangibleasset
wouldbederecognisedontheconsolidatedstatementoffinancialpositionofthe
Company,theGroup’sdevelopmentteamisactivelyworkingonfinalizingthe
remainingmobilegamesandgettingthemreadytocommercialise.Thebasicfunctions
ofthemobilegamesarecompleted,andthemobilegamesarebeingupgradedtoadd
morefeatureswhichcanenhancetheincomegeneratingability.Ifthereisno
unforeseeableanduncontrollableaccidentthatmaydelaythebusinessplanofthe
Group,themanagementscheduledtocompletetheupgradeinthefirstquarterof2021
andwillthenapplyforthegamescopyrightissuancefromtheGeneralAdministration
ofPressandPublicationwhichwilltakeapproximately3months.Themanagementis
alsoselectingtheappropriateappstoresforlaunchofthesemobilegames,suchas
HuaweiAppStore,XiaomiAppStore,BaiduMobileAssistantandothermainstream
Androidplatforms,andApple’sIOSplatform.

Thedevelopmentofthemobileapplicationshasbeenbasicallycompletedandis
currentlyundergoinginternaltesting.Themobileapplicationsarealsoexpectedtobe
launchedinthefirstquarterof2021.TheGroupplanstolaunchthesemobile
applicationsviaacloud-basedplatformthroughamajornetworkoperatorinthePRC
andwillapplytobecomearegisteredmobileapplicationsupplierapprovedbythePRC
networkoperatorwhichwilltakeapproximately3months.TheGroupwillbe
responsibleforprovidingcloud-basedapplications,productsandafter-salemaintenance
servicesthatsatisfytherequirementsofthecloud-basedplatformofthePRCnetwork
operator.TheincomefromtheusersofthePRCnetworkoperatorwillpaythefeesfor
theproducts’functionsandtheincomewillbesharedbetweentheGroupandthePRC
networkoperatoronanagreedproportion.

ThemanagementoftheGroupregularlyupdateitsauditorsaboutthelateststatusofthe
intangibleassets.Whentheintangibleassetsarelaunched,theGroupwillcollectthe
relevantdatageneratedfromtheoperationoftheseintangibleassetsforrevisingthe
cashflowprojectionsandwillprovidetheseinformationtoitsauditorsforaddressing
theaudit’sconcern.

–9–

Impact to the existing operation and assets if the Company decided to proceed with the disposal of intangible assets

TheGroupprovidesinternetadvertisingagencyservicestoitscustomersinthePRC
andoverseasthroughmainstreaminternetplatforms.TheGrouphasbeenaffectedtoan
extentbythemacroeconomicenvironmentdownturnofChina,theslowdownofgames
copyrightissuanceandincreaseincompetitionintheinternetadvertisingindustrysince
2019.Therefore,asaneffortandstrategytocontinuestrengtheningthecurrentbusiness
whileconstantlyseekingoutfuturegrowthopportunitiesinordertocreatesynergies
withthecurrentbusinessaswellasdiversifyingthelineofbusinessoftheCompany,
theGrouphasbeenengaginginstrategicmovesandactionsbyinvestingincompanies
inthesameindustryandacquiringoperatingrightsforsomemobileapps,mobilegames
andcommercialsoftware.Themanagementbelievesthattherelationshipwithits
customersandtheexperienceintheinternetadvertisingservicesbusinessoftheGroup
canfurtherenhancetheGroup’scapabilityingeneratingmorerevenueandprofitas
wellasmanagingitsbusinessrisksinthefuture.

COVID-19outbreakhassevereimpactsonmostplayersoftheindustryintheworld
since2020.AmidthepandemictheGroup’scustomersoftheinternetadvertising
businesshavestartedtighteningtheirbudgetsonmarketingandadvertisingactivities.
Toadapttotheevolvingbusinessenvironment,theGroupproactivelyadjustsits
businessthroughstrengtheningtheselectionofcustomerstoensurethatquality
customersareprioritisedinanappropriatewaysothatresourcesoftheCompanyare
usedtobestservethebusinessneedsofthesequalitycustomers,whilecertain
customerswithrelativelylowmarginareservedbytheCompanyinanappropriate
mannerbutalsoinlinewiththeirprofiles.Asaresult,theGroupreportedarevenueof
HK$47,924,000andgrossprofitofHK$2,723,000forthethreemonthsended30
September2020fromtheexistingbusiness.Thegrossmarginhassignificantly
increasedto5.68%forthethreemonthsended30September2020from1.96%forthe
yearended30June2020.ThemanagementoftheCompanyisconfidentthatasthe
epidemicrecedes,theglobaleconomyandtheadvertisingbusinessoftheGroupwill
graduallyrecoverandimprove.

Theacquisitionsoftheintangibleassetsandtheinvestmentinassociateduringtheyear
ended30June2020werethestrategicplansoftheGrouptoexpanditsbusiness
portfolioandenabletheGrouptoaccesstoanewcustomerbase.Thedisposalofthe
intangibleassetswouldnotaffecttheoperationoftheexistingadvertisingbusiness.

–10–

Details of the intangible assets

Wehavesetoutthedetailsinatabularformatasbelow:

Purchaser Seller Relationship Purchase Date Particulars Valuation method DRHD* Beijing Xiangwan Technology Co., Ltd.# (北京享玩科技有限公司) Independent third party 16-Dec-19 Xiangwan Games Assistant# (享玩遊戲助手) mobile application/ game Discounted cash flow approach DRHD Beijing Xiangwan Technology Co., Ltd. Independent third party 31-Jan-20 Rentu# (認圖) mobile application/ game Discounted cash flow approach DRHD Beijing Xiangwan Technology Co., Ltd. Independent third party 10-Feb-20 Chang Game# (暢遊戲) mobile application/ game Discounted cash flow approach DRHD Beijing Changrao Technology Co., Ltd.# (北京暢饒科技有限公司) Independent third party 19-Dec-19 Youliao# (有料) mobile application/ game Discounted cash flow approach DRHD Beijing Changrao Technology Co., Ltd. Independent third party 03-Jan-20 Huajianyin# (花間吟) mobile application/ game Discounted cash flow approach

Exchange rate @ 1.0973 Exchange rate @ 1.09615 Costs of acquisitions Valuation amounts as per valuation reports as at 30 June 2020 Carrying amounts as at 30 June 2020 RMB HK$ RMB RMB HK$ 4,500,000 4,938,000 3,245,000 3,245,000 3,557,000 2,000,000 2,194,000 1,511,000 1,511,000 1,656,000 2,000,000 2,194,000 1,560,000 1,560,000 1,710,000 8,500,000 9,326,000 4,000,000 4,389,000 1,730,000 1,730,000 1,896,000 4,000,000 4,389,000 2,762,000 2,762,000 3,028,000 8,000,000 8,778,000

Exchange rate Exchange rate @ 1.0973 @ 1.09615 Valuation amounts as per valuation reports as at Purchase 30 June Carrying amounts Purchaser Seller Relationship Date Particulars Valuation method Costs of acquisitions 2020 as at 30 June 2020 RMB HK$ RMB RMB HK$ DRHD Beijing Yuexiang Xindong Independent 10-Dec-19 Chaofan Wangzhe[#] (超 mobile application/ Discounted cash 1,500,000 1,646,000 1,730,000 1,412,500 1,548,000 Technology Co., Ltd.[#] third party 凡 王者 ) game flow approach ( 北京樂享欣動 科 技有 限 公 司 ) DRHD Beijing Yuexiang Xindong Independent 24-Jan-20 Daojian Jingjie[#] ( 刀劍 mobile application/ Discounted cash 1,500,000 1,646,000 1,803,000 1,425,000 1,562,000 Technology Co., Ltd. third party 境界 ) game flow approach DRHD Beijing Yuexiang Xindong Independent 24-Jan-20 Bixue Qingtian[#] (碧雪 mobile application/ Discounted cash 2,500,000 2,743,000 2,755,000 2,375,000 2,603,000 Technology Co., Ltd. third party 情 天 3D) game flow approach DRHD Beijing Yuexiang Xindong Independent 19-Feb-20 Jianxia Zhuanqi[#] ( 劍俠 mobile application/ Discounted cash 2,000,000 2,195,000 2,403,000 1,917,000 2,101,000 Technology Co., Ltd. third party 傳奇 ) game flow approach 7,500,000 8,230,000 SHWX ** Lansha Xunxi Technology Independent 07-Jan-20 Artificial Intelligence Software Discounted cash 8,000,000 8,778,000 7,670,000 6,830,000 7,488,000 (Shanghai) Co., Ltd.[#] third party Information Filter flow approach ( 藍 沙訊息 技 術( 上 海) System Software[#] 有 限公 司 ) ( 人工智 慧資訊 過 濾 系統軟 體)

Exchange rate Exchange rate @ 1.0973 @ 1.09615 Valuation amounts as per valuation reports as at Purchase 30 June Carrying amounts Purchaser Seller Relationship Date Particulars Valuation method Costs of acquisitions 2020 as at 30 June 2020 RMB HK$ RMB RMB HK$ DRHD Shenzhen Yidao Network Associate of 14-Jan-20 Youtu Photo Software Cost replacement 4,000,000 4,389,000 1,333,000 1,333,000 1,461,000 Co., Ltd.[[#]] the Group Management method (深圳深圳圳 譯道網絡有道網絡有網絡有有 限公公 司 ) System[[#]] (優圖圖優圖圖圖圖 片管理系統管理系統理系統系統統 ) DRHD Shenzhen Yidao Network Associate of 12-Feb-20 Jiaying Video Software Cost replacement 4,000,000 4,389,000 1,333,000 1,333,000 1,461,000 Co., Ltd. the Group Management method System[[#]] ( 佳 影視頻視頻頻 管理系統理系統系統統 ) 8,000,000 8,778,000 DRHD Beijing Ouye Network Independent 30-Dec-19 ALB Business Software Cost replacement 4,000,000 4,389,000 1,333,000 1,333,000 1,461,000 Technology Co., Ltd.[#] third party Management method ( 北京毆耶網絡 科 技有 限 Platform[#] 公 司 ) (ALB業 務管理平台 ) DRHD Beijing Ouye Network Independent 13-Feb-20 Youji Jixiao Software Cost replacement 4,000,000 4,389,000 1,333,000 1,333,000 1,461,000 Technology Co., Ltd. third party Management method Platform[#] (優 績績效管理平台 ) 8,000,000 8,778,000 48,000,000 52,668,000 32,993,000

DRHD Shenzhen Yidao Network Associate of 14-Jan-20 Youtu Photo Software Co., Ltd.[[#]] the Group Management (深圳深圳圳 譯道網絡有道網絡有網絡有有 限公公 司 ) System[[#]] (優圖圖優圖圖圖圖 片管理系統管理系統理系統系統統 ) DRHD Shenzhen Yidao Network Associate of 12-Feb-20 Jiaying Video Software Co., Ltd. the Group Management System[[#]] ( 佳 影視頻視頻頻 管理系統理系統系統統 )

• Beijing Dongrun Hudong Technology Company Limited, which is a subsidiary of the Group

• ** Shanghai Wanxing Network Technology Limited, which is a subsidiary of the Group

• For identification only

(2) INVESTMENT IN ASSOCIATE

Details of the Disclaimer of Opinion for purchase price allocation, share of result, share of net assets and impairment assessment relating to the Company’s interests in Yidao Network

On 30 August 2019, Beijing Dongrun Hudong Technology Company Limited* ( 北京東 潤 互動 科 技有 限公 司 ) (‘‘ Beijing Dongrun ’’), a wholly-owned subsidiary of the Company, entered into a capital increase and subscription agreement with Shenzhen Yidao Network Co., Ltd.* (深圳 譯道網絡有 限公 司 ) (the ‘‘ Target Company ’’, a company incorporated in the PRC with limited liability) and Mr. Feng Tao, the sole shareholder of the Target Company, pursuant to which, Beijing Dongrun subscribed for the increase in the registered capital of the Target Company by RMB50,000,000 (equivalent to approximately HK$55,720,000) in cash. Upon completion, the Target Company will be held as to 35% by Beijing Dongrun and 65% by Mr. Feng Tao. The subscription was subsequently completed on 28 October 2019. For details, please refer to the disclosable transaction announcement dated 30 August 2019.

PursuanttoHongKongAccountingStandard28(2011)‘‘InvestmentinAssociatesand
JointVentures’’,themanagementoftheCompanycompleteditspurchaseprice
allocationrelatingtotheacquisitionofYidaoNetworkduringtheyear,andaccounted
fortheshareofitsresultsusingtheequitymethod.

PursuanttoHongKongAccountingStandard36‘‘ImpairmentofAssets’’,the
managementoftheCompanyperformedanimpairmentassessmentwithreferencetoa
valuationusingdiscountedcashflowapproachperformedbyanindependent
professionalvaluer(InternationalValuationLimited)bycomparingthecarryingamount
andtherecoverableamountoftheinvestmentintheassociateattheendofthereporting
period(i.e.theyearended30June2020).

Inassessingtherecoverableamountoftheinvestmentintheassociate,themanagement
oftheCompanyandtheindependentprofessionalvalueruseddiscountedcashflow
approachtoassesstherecoverableamountoftheinvestmentintheassociate.Asthe
associatewasinoperationandhadhistoricaloperatingdataforreference,itwas
consideredmostappropriatetousethediscountedcashflowapproachtoassessthe
recoverableamount(value-in-use)oftheseintangibleassets.

ThediscountedcashflowapproachisaprojectionbythemanagementoftheCompany
ofthecashinflowsandoutflowsgeneratedbybusinessesrelatingtotheassociateinthe
comingyears.Thetimingandamountsofthesecashinflowsandoutflowsaresubject
mainlytothefuturebusinessdevelopmentoftheinvestmentintheassociate,including
thefollowingconditions:

• (i) the marketing measures are effective and have the expected effects

–14–

(ii)Therearenomajoradversefactorsaffectingtheoperationoftheassociates

Thereremaingreatuncertaintiesabouttheseoperatingassumptionsaffectingthe
businessdevelopmentoftheassociateincluding,forinstance,theprotractedCOVID-19
pandemicsituation.However,thecashflowprojectionhasbeenbasedonthelatest
informationobtainedbythemanagementoftheCompanyfromYidaoNetworkaswell
asitsunderstandingofthebusiness.

TheassociateoftheCompanywasresponsibleinpreparingthecashflowforecastin
accordancewiththeirbestunderstandingandestimateforthefuturebusinessofthe
associate.TheCompanyobtainedsuchforecastfromtheassociate,discussedthe
businessplanwiththeassociateandreviewedthelatestmanagementaccountsand
majorbusinessagreements.TheCompanyalsodiscussedwithitsvaluerregardingthe
useofdiscountrates.ThemanagementoftheCompanyhasuseditsbestendeavourin
makingtheassumptions.Themajorassumptionsareasbelow:

Averageannualrevenue:approximatelyRMB71,500,000

Averageannualnetcashinflow:approximatelyRMB15,000,000

Discountratebeforetax:approximately22%

Growthrate:3%

Accordingtothevaluation,100%shareoftheassociatewasvaluedatRMB84,000,000
(i.e.RMB29,400,000orHK$32,162,000wasattributabletotheproportionofthe
Group’sownershipinterestinYidaoNetwork)asat30June2020.Thecarryingamount
oftheinvestmentintheassociateexceededitsrecoverableamount.Onthisbasis,an
impairmentlossofHK$23,856,000wasrecognizedfortheyearended30June2020as
follows:

Cost of investments in associates Share of post-acquisition results and other comprehensive income, net of dividend received Impairment loss recognized for the year Exchange differences Carrying amount at 30 June 2020	HK$’000 55,720 1,223 (23,856) (925) 32,162

Theresponsibilitiesoftheauditorsincludedobtainingsufficientandappropriateaudit
evidencetoassessthereasonablenessoftheassumptionsusedbythemanagementof
theCompanyandthefeasibilityofthebusinessplansofthecashflowprojectionforthe
impairmentassessmentoftheinvestmentintheassociate.

–15–

TheauditorsrequestedtheCompanytoprovidedetailedsupportinginformationin
respectoftheincomeandexpenditurerecognizedbyYidaoNetwork,suchas:

• (i) Customer orders of Yidao Network;

• (ii) Approval from the customers of Yidao Network to execute the customer orders to launch advertisement;

• (iii) Regular performance reports in relation to advertisement placed through Yidao Network;

• (iv) Records in relation to the consumptions of prepayments within the relevant media platforms of Yidao Network.

Asaminorityshareholderoftheassociate,theGroupwasprovidedbytheassociate
withitsmanagementaccountsandotherbasicfinancialdataonaregularbasis.Atthe
beginningoftheaudit,theassociatewasstillcooperativeinhelpingtheGroup’saudit.
However,themanagementoftheassociatewasnotexperiencedindealingwiththe
HongKongauditors.Duringtheaudit,theassociateindicatedthattoomuchauditdata
wasrequiredtobeprovidedwithinsuchashorttime.ThemanagementoftheCompany
hasuseditsbestendeavourstoprocuretheassociatetoprovidetherelevantdocuments
asrequiredbytheauditors,butastheprocesscontinuedtheassociatebecamelessand
lessresponsiveorcooperativeinprovidingallthedocumentsanddatawhichtheauditor
requestedinthisprocess.

TheGrouphasnocontrolovertheassociate.Therefore,theGroupencountered
difficultyinrequestingtheassociatetoprovideallrelevantsupportinginformationand
documentsrelatingtotheassociateasrequestedbytheauditors.Therefore,asofthe
dateoftheauditreport,theCompanycametotheviewthatitwasnotfeasibleor
possibletoprocuretheassociatetoprovideallthedocumentsanddatarequestedbythe
auditors.

Assuch,theauditorsoftheCompanyareoftheopinionthattheauditorsareunableto
determinewhetherallassetsandliabilitiesrelatingtoYidaoNetworkhavebeen
identifiedastheprovidedinformationanddocumentsrelatingtotheassociateare
limited,andtheauditorsarealsounabletosatisfythemselveswiththemanagement’s
assumptionsonYidaoNetworkduringthecourseofthepurchasepriceallocationwhen
calculatingthegoodwillarisingfromtheacquisitionofYidaoNetwork.Therefore,the
auditorsissuedDisclaimerofOpinionontheGroup’sassociatesintheconsolidated
financialstatements.

–16–

Actions to remove the Disclaimer of Opinion about the investment in associate

Aspreviouslymentioned,duetothelackofdataanddocumentsbecauseofthe
associate’srefusaltocontinuouslyandcomprehensivelyprovideallthedataand
documentsrequestedbytheauditors,theauditorsareoftheopinionthattheavailable
informationisinsufficienttoascertainthereasonablenessofthekeyassumptionsmade
bythemanagementandthefeasibilityofthebusinessplanappliedtothecashflow
projectionofYidaoNetwork.Havingdiscussedandcommunicatedwiththeauditors
andinordertoprovidetheauditevidencerequiredbytheauditors,themanagement
shallformulateandimplementthefollowingactionplanstoaddresstheauditor’s
concernsinordertoremovetheDisclaimerofOpinion:

• (i) Actively communicate with auditors and update them on the latest business developments and operation of the associate;

• (ii) Establish appropriate reporting procedures with the associate so that the associate needs to report financial information and other related documents to the Company in a timely and proper manner, especially the data and documents specifically requested by the auditors for the purpose of impairment assessment with regards to the associate;

• (iii) Closely monitor the operation of the associate to ensure the implementation of the business plan.

TheCompanyhasdiscussedandagreedwithitsauditorsthattheauditqualificationin
relationtotheinvestmentinassociatewouldberemovedfromthefinancialstatements
asof30June2021iftheyareabletoobtainsufficientinformationanddatarelatingto
theGroup’sinvestmentinassociate.

Asmentionedpreviously,themanagementoftheassociatewasnotexperiencedin
dealingwiththeHongKongauditorsandtoomuchauditdatawasrequiredtobe
providedwithinsuchatimeperiod.Asaresult,theCompanybelievesthatearly
communicationwithitsassociateandtheexperiencelearnedinlastauditarehelpfulin
gettingtheassociatereadyfortheauditfortheyearended30June2021.Inaddition,
theCompanyhaswrittentoexpressconcernandrequestedtheassociatetocooperate
withtheauditorsoftheCompanyinthefuture.Otherwise,theCompanymayconsider
disposingitsinterestintheassociate.

Inaddition,afterdiscussionandcommunicationbetweenthemanagementandthe
auditors,itisunderstoodthattheDisclaimerofOpinionisarisingfromthelimitationof
scopeinrelationtotheinvestmentinassociate.IftheCompanydisposesofitonor
before30June2021,theinvestmentinassociatewillbederecognizedonthe
consolidatedstatementoffinancialpositionasat30June2021andtheCompanywill
nolongerneedtoperformimpairmentassessmentonthecarryingamountofthe
investmentinassociateasat30June2021.Asagreedwiththeauditors,theDisclaimer
ofOpinioninrelationtotheinvestmentinassociatewillberemoveduponsuch
disposals.Assuch,themanagementmayconsideralternativeproposalstorealisethe
investmentintheassociate,including,butnotlimitedto,disposaloftheassociate(if
applicable)ifasuitableacquirercanbeidentified.

–17–

Upondisposingtheinterestintheassociate,correspondingbalanceofHK$32,162,000
recognisedontheconsolidatedstatementoffinancialpositionasof30June2020will
bederecognised.Theconsiderationreceivedandreceivablewillberecognisedasan
assetontheconsolidatedstatementoffinancialpositionfortheyearending30June
2021.

Further details regarding the investment in associate

Changes in the value of inputs or assumptions or valuation methodology

Theparameters,assumptionsorvaluationmethodswhichhavechangedfromthose
adoptedinthepreviousvaluationsareasfollows:

• (i) The discount rate used to evaluate the interest in associate

Asof30June2020,thepre-taxdiscountratesusedbyInternationalValuation
Limitedintheimpairmentassessmentoftheinvestmentinassociatewas
approximately22%.However,thediscountrateusedinthevaluationofinvestment
inassociateatthetimeofacquisitionwasapproximately15%.

• (ii) The average estimated annual net cash inflow used to evaluate the interest in associate

Asof30June2020,averageestimatedannualnetcashinflowusedinthe
impairmentassessmentoftheinvestmentinassociatewasapproximatelyRMB15
million.However,theaverageestimatedannualnetcashinflowusedinthe
valuationofinvestmentinassociateatthetimeofacquisitionwasapproximately
RMB15.5million.

Reasons for change in value of inputs or assumptions or valuation methodology from those previously adopted

Duetosuchinterestinassociate,andsincethepartiestothetransactionsarelocatedin
China,referencewasmadetothevaluationperformedbyaPRCvaluerwhenthe
considerationofthetransactionsfortheseassetswasdetermined.AstheCompanywas
preparingtheconsolidatedfinancialstatementsoftheGroupasof30June2020and
wasconductingimpairmentassessmentoftheseassetsinaccordancewithapplicable
accountingstandards(i.e.,HongKongAccountingStandards),ithasappointedaHong
Kong-basedvaluertoevaluatetherecoverableamountoftheassetsinaccordancewith
relevantvaluationstandards.Therefore,theaforesaiddifferencesintheparameters,
assumptionsorvaluationmethodsmayoccurascomparedwiththoseadoptedinthe
previousvaluations.

Inaddition,discountratesarethekeyinputsappliedinthediscountedcashflow
approachusedinthevaluation.Discountrateisarateofreturnthataninvestorwould
requireonaninvestmentinthebusiness.Thisrateofreturnshouldreflect
macroeconomic,industry,andcompany-specificfactorsthattranslateintothedegreeof
perceivedrisktoachievetheprojectedresults.TheCAPM,whichconsidersseveral
inputsofdata,wasappliedinestimatingsuchdiscountrates.Tothebestknowledgeof
themanagement,theeffectoftheoutbreakoftheCOVID-19isconsideredthroughthe

–18–

specificriskpremiumappliedintheCAPM,whichinturnhasanincreasingimpactto
thediscountratesusedinthediscountedcashflowapproachandthevaluationofthe
investmentinassociateasof30June2020.

The Board’s consideration of the acquisition of interest in Yidao Network

ThedirectorsoftheCompanyinitiallystartedconsideringacquiringYidaoNetwork
basedonthefactthatasitwasoneofTencent’sadvertisingserviceprovidersandhad
othermajorcustomersbesidesTencent,coupledwiththerapidgrowthofitsadvertising
revenue,theCompany’sacquisitionofYidaoNetworkwouldenabletheCompanyto
indirectlysecurebusinessfromTencent,andeventodirectlyobtainthepromotionand
advertisingbusinessforTencent’sgamesinthefuture.ThedirectorsoftheCompany
consideredacquiringintangibleassetsbasedonthepromotionofsuchgamesand
applicationsinthefuture,fromwhichtheCompanywouldnotonlyreceiveadvertising
andpromotionrevenue,butalsosecureshareofrevenuefromgames,thereby
expandingthebusinessscaleoftheGroup.

ThedirectorsandsubstantialshareholdersoftheCompanydidnothaveanyconflictsof
interestinsuchtransactions,andtherelevantsubsidiarieshavebeenapprovedto
conducttheaforesaidacquisitions.WhiletheCompanywaspreparingtodevelopthe
acquiredintangibleassetsbusiness,theCOVID-19pandemicbrokeoutinChina,which
hindereditsoriginaldevelopmentplan.Thissaid,theCompanyexpectsthatthe
developmentprocesswillbecompletedinthefirsthalfof2021iftheCOVID-19
pandemicsituationisputundercontrol.

AUDIT COMMITTEE’S VIEWS REGARDING THE DISCLAIMER OF OPINION

On29October2020,theauditcommitteeoftheCompanyheldameeting,atwhichtheaudit
conclusionsdrawnbytheauditorswerediscussed.Theauditcommitteereviewedthe
valuationreportofintangibleassetsandinvestmentinassociateaswellasthekeyoperating
assumptionsappliedtherein,suchasthediscountrateandgrowthrate.Ms.TianYuanwas
invitedtopresenttotheauditcommitteeinthemeetingasamanagementrepresentativeand
answeredquestionsfromtheauditcommittee.

Afterthediscussion,theauditcommitteeagreedthekeyassumptionsandvaluationresults
adoptedinthevaluationreportonintangibleassets.Inaddition,theauditcommitteealso
understoodthattheauditorsissuedDisclaimerofOpinioninrelationtotheintangibleassets
duetothelackofhistoricaloperatingdata.

Furthermore,astothevaluationoftheinvestmentinYidaoNetwork,thescopeoftheaudit
waslimitedbecauseYidaoNetworkdidnotfullycooperateinprovidingalltheinformation
requestedbytheauditors.TheauditcommitteeindicatedthatgivenYidaoNetwork’s
reluctanceinfullycooperatingandtheensuinglackofinformationinthisrespect,itwas
unabletoverifyorconfirmthekeyassumptionsinvolvedinthefuturedevelopmentplan
providedbyYidaoNetwork,suchassalesgrowthrateandsalesgrossprofitmargin,and
thatitunderstoodthattheauditorsissuedtheDisclaimerofOpinioninrelationtothe
investmentinassociateduetolimitedscopeoftheaudit.Theauditcommitteeagreedwith
themanagement’spositionandrequestedtheCompany’smanagementtoexerciseitsrights
towardsYidaoNetworkinaccordancewiththeCompanyLawofthePeople’sRepublicof

–19–

China 中 華 人 民共和國公 司 法 (‘‘ the Company Law of the PRC ’’) which allows shareholders of a company to review its books and records, and continued to request the company to cooperate with the Group in future audit requirements.

COMMUNICATIONS WITH THE AUDITORS

AsdescribedintheunauditedannualresultsannouncementoftheCompanypublishedonthe
websiteoftheHongKongStockExchangeon30September2020,duetotheoutbreakof
theCOVID-19pandemic,theCompany’splanforaudithasbeendelayed,andtheauditors
alsofailedtocompletetherelevantauditwork.Therefore,theBoardwasunabletoconclude
whethertheauditorswerelikelytoissuetheDisclaimerofOpinion.

TheCompanyunderstoodinaroundmid-Octoberthattheauditorswerelikelytoissuethe
DisclaimerofOpinionontheconsolidatedfinancialstatementsasof30June2020.The
Companyimmediatelycommunicatedwiththeauditorstodevelopanunderstandingofthe
reasonsforsuchpossibilityandtoseekasolution.However,attheendofOctober,the
auditorsresolvedtomaintaintheDisclaimerofOpinionafterdiscussionwiththeCompany.
Therefore,theCompanypublishedtheauditedannualresultsannouncementfortheyear
ended30June2020on30October2020,disclosingthedetailsofthemattersinvolvedinthe
non-standardreporttomeetthedisclosurerequirementsunderGEMListingRule18.50(8).

WHEN THE COMPANY BECAME AWARE OF THE IMPAIRMENTS ON INTANGIBLE ASSETS AND INTEREST IN YIDAO NETWORK

Before acquiring intangible assets and the associate, the Company appointed Beijing Lixin Runde Asset Appraisal Firm ( 北京立信 潤德資 產 評 估事務所 ) to evaluate the intangible assets and Yidao Network to be acquired. The purchase price was determined based on the valuation results.

BasedontheduediligenceandassessmentconductedbytheCompanyatthetimeofthe
acquisition,andthefurtherdiscussionsandconsiderationsofthedirectors,theCompanydid
notanticipateanycircumstancesoreventswhichwouldresultinimpairment.TheCompany
wasonlyawareoftheimpairmentfortheintangibleassetsandtheinvestmentinassociate
whenthevaluerpreparedthedraftvaluationreportfortheCompanyinmid-October2020.

IMPACTS OF THE COVID-19 PANDEMIC

Thefollowingauditprocedureswerenotcompletedby30September2020:

1. Confirmations from some customers, suppliers and banks have not been received;

2. Interview procedures with some customers have not been completed; and

3. The reviews of the impairment assessment on the intangible assets and investments in associates have not been completed.

TheGrouphasmajoroperationsinBeijing,NanjingandXinjianginthePRC.Certain
customersandsuppliersarealsolocatedinthePRC.Meanwhile,thecoreauditteam
members,whowereresponsibleforconductingtheauditproceduresinrelationtotheaudit
ofthefinancialstatementsfortheyearended30June2020,wereinHongKong.

–20–

DuetothespreadoftheCOVID-19pandemicandthetravelrestrictionimplementedbythe
government,itisnotfeasiblefortheauditorstoobtaincertainconfirmationsinperson.
Instead,theCompanyanditsauditorscouldonlyfollowupwiththereturnofthe
confirmationsthroughemailsandphonecalls,whichwaslessefficientthanattendingin
persontoobtainresponsesfromcertaincustomers,suppliers,andbanksoftheGroup.Also,
duetoreboundofthepandemicinXinjiang,allcouriersanddeliveryserviceswere
suspendedduringJulyandAugust2020.Asaresult,completionoftherelevantaudit
procedureswasdelayed.

Inaddition,duetothesocialdistancingpracticetoencountertheCOVID-19outbreak,
certaincustomersrequestedtodefercertaininterviewprocedures.

Similarly,COVID-19alsoimpactedtheworkingconditionofthestaffoftheGroupandits
associate,i.e.somestaffadopteda‘‘work-from-home’’practice,whichimpactedthe
efficiencyinpreparinginformationforthevaluationfortheimpairmentassessmentsofthe
intangibleassetsandinvestmentsinassociates.Asaresult,thepreparationandfinalization
oftheimpairmentassessmentswerealsodelayed.

Asaresult,theauditorsweredelayedinperformingtheaboverelatedauditproceduresand
theCompanywasunabletocompletetheannualauditby30September2020,andtherefore
hadtodelaythepublishoftheauditedannualreport.

Recently,thefourthwaveoftheCOVID-19hadsevereimpactstoChina,HongKongand
someoverseascountries.Meanwhile,theGroupismainlyoperatinginthemainlandChina
wherethepandemicismoreundercontrol.Evenifthepandemiccontinuestoworsen,itmay
slightlydelaythebusinessplanoftheGroupforafewweekssuchthattheintangibleassets
wouldbelaunchedintheearlysecondquarterof2021.Ifthereisnootherunforeseeable
anduncontrollableeventthatmaydelaythebusinessplanoftheGroup,theCompanyis
confidentinimplementingthebusinessplansasplannedsuchthattheDisclaimerofOpinion
couldberemovedinthecomingyear.

By Order of the Board Million Stars Holdings Limited Zhu Yongjun Chairman and Chief Executive Officer

Hong Kong, 22 January 2021

As at the date hereof, the Board comprises Mr. Zhu Yongjun and Ms. Tian Yuan as executive Directors; and Mr. Chen Ce, Ms. Zhu Minli and Ms. Jiang Ying as independent nonexecutive Directors.

This announcement will remain on the GEM website at http://www.hkgem.com on the ‘‘Latest Company Announcements’’ page for at least 7 days from the day of its publication and on the website of the Company at http://www.millionstars.hk.

–21–