Exhibit 99.1
ANTELOPE ENTERPRISE HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
| As of June 30, 2024 | ||||||||||||
| USD’000 | As of December 31, 2023 | |||||||||||
| Notes | (Unaudited) | USD’000 | ||||||||||
| ASSETS AND LIABILITIES | ||||||||||||
| NONCURRENT ASSETS | ||||||||||||
| Property and equipment, net | ||||||||||||
| Intangible assets, net | ||||||||||||
| Right-of-use assets, net | 13 | |||||||||||
| Security deposit | ||||||||||||
| Loan receivable | 9 | |||||||||||
| Note Receivable | 20 | |||||||||||
| Total noncurrent assets | ||||||||||||
| CURRENT ASSETS | ||||||||||||
| Trade receivable | ||||||||||||
| Other receivables and prepayments | ||||||||||||
| Available-for-sale financial assets | ||||||||||||
| Due from related parties | 16 | |||||||||||
| Cash and bank balances | ||||||||||||
| Total current assets | ||||||||||||
| Total assets | ||||||||||||
| CURRENT LIABILITIES | ||||||||||||
| Trade payables | 11 | |||||||||||
| Accrued liabilities and other payables | 12 | |||||||||||
| Unearned revenue | ||||||||||||
| Amounts owed to related parties | 16 | |||||||||||
| Lease liabilities | 13 | |||||||||||
| Taxes payable | ||||||||||||
| Total current liabilities | ||||||||||||
| NET CURRENT ASSETS | ||||||||||||
| NONCURRENT LIABILITIES | ||||||||||||
| Lease liabilities | 13 | |||||||||||
| Note payable | 14 | |||||||||||
| Total noncurrent liabilities | ||||||||||||
| Total liabilities | ||||||||||||
| NET ASSETS | ||||||||||||
| EQUITY | ||||||||||||
| Reserves | 15 | |||||||||||
| Noncontrolling interest | ||||||||||||
| Total equity | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
ANTELOPE ENTERPRISE HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
| SIX MONTHS ENDED JUNE 30, | ||||||||||||
| 2024 | 2023 | |||||||||||
| Notes | USD’000 | USD’000 | ||||||||||
| Net sales | 5 | |||||||||||
| Cost of goods sold | ||||||||||||
| Gross profit | ||||||||||||
| Other income | 5 | |||||||||||
| Selling and distribution expenses | ( | ) | ( | ) | ||||||||
| Administrative expenses | ( | ) | ( | ) | ||||||||
| Finance costs | ( | ) | ||||||||||
| Other expenses | ( | ) | ||||||||||
| Loss before taxation | 6 | ( | ) | ( | ) | |||||||
| Income tax expense | 7 | |||||||||||
| Net loss for the period from continuing operations | ( | ) | ( | ) | ||||||||
| Discontinued operations | ||||||||||||
| Gain on disposal of discontinued operations | ||||||||||||
| Loss from discontinued operations | 18 | ( | ) | |||||||||
| Net income (loss) | ( | ) | ||||||||||
| Net income (loss) attributable to : | ||||||||||||
| Equity holders of the Company | ( | ) | ||||||||||
| Non-controlling interest | ( | ) | ||||||||||
| Net income (loss) | ( | ) | ||||||||||
| Net loss attributable to the equity holders of the Company arising from: | ||||||||||||
| Continuing operations | ( | ) | ( | ) | ||||||||
| Discontinued operations | ||||||||||||
| Other comprehensive loss | ||||||||||||
| Exchange differences on translation of financial statements of foreign operations | ( | ) | ( | ) | ||||||||
| Total comprehensive income (loss) | ( | ) | ||||||||||
| Total comprehensive income (loss) attributable to: | ||||||||||||
| Equity holders of the Company | ( | ) | ||||||||||
| Non-controlling interest | ( | ) | ||||||||||
| Total comprehensive income (loss) | ( | ) | ||||||||||
| Total comprehensive income (loss) arising from: | ||||||||||||
| Continuing operations | ( | ) | ( | ) | ||||||||
| Discontinued operations | ||||||||||||
| Income (loss) per share attributable to the equity holders of the Company | ||||||||||||
| Basic (USD) | 8 | |||||||||||
| — from continuing operations | ( | ) | ( | ) | ||||||||
| — from discontinued operations | ||||||||||||
| Diluted (USD) | 8 | |||||||||||
| — from continuing operations | ( | ) | ( | ) | ||||||||
| — from discontinued operations | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
ANTELOPE ENTERPRISE HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)
| Share premium | Reverse recapitalization reserve | Merger reserve | Share-based payment reserves | Statutory reserve | Capital reserve | Accumulated deficit | Currency translation reserve | Total | Noncontrolling Interest | Total Equity | ||||||||||||||||||||||||||||||||||
| USD’000 | USD’000 | USD’000 | USD’000 | USD’000 | USD’000 | USD’000 | USD’000 | USD’000 | USD’000 | USD’000 | ||||||||||||||||||||||||||||||||||
| Notes | 15 | |||||||||||||||||||||||||||||||||||||||||||
| Balance at January 1, 2024 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Net loss for the period | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Exchange difference on transaction of financial statements of foreign operations | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Total comprehensive income for the period | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Issuance of new shares for equity financing | ||||||||||||||||||||||||||||||||||||||||||||
| Warrants exercised | ||||||||||||||||||||||||||||||||||||||||||||
| Conversion of long-term notes into common shares | ||||||||||||||||||||||||||||||||||||||||||||
| Equity compensation - employee share-based compensation | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2024 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Balance at January 1, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Net loss for the period | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Exchange difference on transaction of financial statements of foreign operations | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Total comprehensive loss for the period | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Issuance of new shares for equity financing | ||||||||||||||||||||||||||||||||||||||||||||
| Conversion of long-term notes into common shares | ||||||||||||||||||||||||||||||||||||||||||||
| Equity compensation - employee share-based compensation | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
ANTELOPE ENTERPRISE HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Six Months Ended June 30, | ||||||||||||
| 2024 | 2023 | |||||||||||
| Notes | USD’000 | USD’000 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||
| Income (loss) before taxation | ( | ) | ||||||||||
| Adjustments for | ||||||||||||
| Operating lease charge | ||||||||||||
| Depreciation of property, plant and equipment | ||||||||||||
| Gain on disposal of subsidiaries | 18 | ( | ) | |||||||||
| Loan forgiveness by related party | ( | ) | ||||||||||
| Loss on convertible note | 14 | |||||||||||
| Standstill fee on note payable | ||||||||||||
| Share based compensation | 15 | |||||||||||
| Interest expense on lease liability | 13 | |||||||||||
| Amortization of OID of convertible note | 13 | |||||||||||
| Operating cash flows before working capital changes | ( | ) | ( | ) | ||||||||
| Increase in trade receivables | ( | ) | ||||||||||
| Increase in other receivables and prepayments | ( | ) | ( | ) | ||||||||
| Increase in loan receivable | ( | ) | ( | ) | ||||||||
| Increase (Decrease) in trade payables | ( | ) | ||||||||||
| Increase in unearned revenue | ||||||||||||
| Increase (Decrease) in taxes payable | ( | ) | ||||||||||
| Increase in accrued liabilities and other payables | ||||||||||||
| Cash used in operations | ( | ) | ( | ) | ||||||||
| Interest paid | ||||||||||||
| Income tax paid | ( | ) | ||||||||||
| Net cash generated from operating activities from discontinued operations | ||||||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||
| Acquisition of fixed assets | ( | ) | ( | ) | ||||||||
| Decrease in notes receivable | ||||||||||||
| Decrease in available-for-sale financial asset | ||||||||||||
| Decrease in restricted cash | ||||||||||||
| Cash disposed as a result of disposal of subsidiaries | ( | ) | ||||||||||
| Net cash used in investing activities from discontinued operations | ||||||||||||
| Net cash generated from (used in) investing activities | ( | ) | ||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||
| Payment for lease liabilities | ( | ) | ||||||||||
| Insurance of share capital for equity financing | 15 | |||||||||||
| Warrants exercised | ||||||||||||
| Proceeds from promissory note | ||||||||||||
| Repayment of promissory note | ( | ) | ||||||||||
| Advance from related parties | 16 | |||||||||||
| Net cash used in financing activities from discontinued operations | ( | ) | ||||||||||
| Net cash generated from financing activities | ||||||||||||
| NET INCREASE IN CASH & EQUIVALENTS | ||||||||||||
| CASH & EQUIVALENTS, BEGINNING OF PERIOD | ||||||||||||
| EFFECT OF FOREIGN EXCHANGE RATE DIFFERENCES | ( | ) | ( | ) | ||||||||
| CASH & EQUIVALENTS, END OF PERIOD | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
ANTELOPE ENTERPRISE HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2024
(UNAUDITED)
1. GENERAL INFORMATION
Antelope Enterprise Holdings Limited (“Antelope Enterprise” or the “Company”), formerly known as China Ceramics Co., Ltd (“CCCL”), is a British Virgin Islands company operating under the BVI Business Companies Act (2004) with its shares listed on the NASDAQ Stock Market (Ticker: AEHL). The head office of the Company is located at Room 1802, Block D, Zhonghai International Center, Hi-Tech Zone, Chengdu, Sichuan Province, the People’s Republic of China (“PRC”).
On September 18, 2023, the Company effected a one-for-ten reverse split of its issued and outstanding Class A ordinary shares.
On February 27, 2024, the Company entered into a stock transfer agreement with Right Fortress Limited, through which Right Fortress
Limited transferred all its equity in Million Stars US Inc (“Million Star”) to Antelope Enterprise Holdings USA Inc. Million
Star is mainly engaged in the computing power activities.
Antelope Enterprise and its subsidiaries’ corporate structure as of June 30, 2024 was as follows:
2. BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard (“IAS”) 34 Interim Financial Reporting, as issued by the International Accounting Standards Board (“IASB”). They do not include all of the information required in annual financial statements in accordance with International Financial Reporting Standards (“IFRS”), and should be read in conjunction with the audited consolidated financial statements and related footnotes on Form 20-F for the year ended December 31, 2023 as filed with the Securities and Exchange Commission. The accompanying unaudited condensed consolidated interim financial statements reflect all normal recurring adjustments which, in the opinion of management, are necessary for a fair statement of the results for the interim periods presented. Results for the six months ended June 30, 2024 are not necessarily indicative of the results expected for the full fiscal year or for any future period.
Effective January 1, 2024, the Company changed its financial statements presentation of its reporting currency from RMB to USD. Financial information for all periods presented in the filing were recast into the new reporting currency using a methodology consistent with IAS 21. Accordingly, the interim consolidated financial statements as of June 30, 2024 and December 31, 2023, and for the six months ended June 30, 2024 and 2023 were presented in USD, unless otherwise stated. They were approved for issue by the Audit Committee of the Board of Directors and the Board of Directors on September 30, 2024.
These interim financial statements have been prepared in accordance with the same accounting policies adopted in the 2023 annual financial statements, except for the change of reporting currency and accounting policy changes that are expected to be reflected in the 2024 annual financial statements. Details of any changes in accounting policies are set out in note 3.
These interim financial statements contain condensed consolidated financial statements and selected explanatory notes. The notes include an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the 2023 annual financial statements.
3. CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES
Effective January 1, 2024, the Company changed its presentation currency from RMB to USD to be more relevant to users.
Prior to January 1, 2024, the Company reported its annual and interim consolidated financial statements in RMB. In making this change in presentation currency, the Company followed the recommendations set out in IAS 21, the Effects of Change in Foreign Exchange Rates. In accordance with IAS 21, comparable financial statements for the six months ended June 30, 2023 have been restated retrospectively in the new presentation currency of USD using the current rate method.
The consolidated financial statements as of December 31, 2023 of the Company have been prepared in RMB and translated into the new presentation currency of USD using the current rate method.
The procedure under the current rate method as applied in these interim condensed unaudited consolidated financial statements is outlined as below:
| ● | balances for the six months ended June 30, 2023 reported in the Interim Condensed Unaudited Consolidated Statement of Comprehensive Income (Loss) and Interim Condensed Unaudited Consolidated Statements of Cash Flows have been translated into USD using average foreign currency rates prevailing for the period; |
| ● | balances as at and for the six months ended June 30, 2023 reported in the Interim Condensed Unaudited Consolidated Statement of Change in Equity, including share-based payment reserve, foreign currency translation reserve, deficit and share capital, have been translated into USD using historical rates; and |
| ● | basic and diluted loss per share for the six months ended June 30, 2023 have been restated to USD to reflect the change in presentation currency. |
All resulting exchange differences arising from the translation are included as separate component of other comprehensive income (loss).
The effect of the change in functional currency to USD was applied prospectively in the financial statements effective January 1, 2024. The financial position of the Company as at January 1, 2024 has been translated from RMB to USD at an exchange rate of .
All transactions for the Company are recorded in USD from January 1, 2024 and onwards. Transactions denominated in currencies other than USD are considered foreign currency transactions. Foreign currency transactions are translated into USD using the foreign currency rates prevailing at the date of the transaction. Period-end balances of monetary assets and liabilities in foreign currency are translated to USD using period-end foreign currency rates. Foreign currency gains and losses arising from the settlement of foreign currency transactions are recognized in profit or loss.
At the date of authorization of these financial statements, the IASB has issued a number of amendments, new standards and interpretations which are not yet effective for the six months ended June 30, 2024 and which have not been adopted in these financial statements. These include the following which may be relevant to the Group :
| Amendments to IFRS 10 and IAS 28 | Sale or Contribution of Assets between an Investor and its Associate or Joint Venture |
The management of the Company anticipate that the application of all the new and amendments to IFRSs will have no material impact on the consolidated financial statements in the foreseeable future.
4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of interim financial statements in conformity with IAS 34 requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses on a year to date basis. Actual results may differ from these estimates.
5. REVENUE AND OTHER INCOME
| a) | Revenue comprises the fair value of the consideration received or receivable for the sale of goods. | |
| An analysis of the Company’s revenue and other income is as follows: |
| For the six months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| USD’000 | USD’000 | |||||||
| Revenues | ||||||||
| Continuing operations | ||||||||
| Business management and consulting | ||||||||
| Livestreaming ecommerce | ||||||||
| Discontinued operations | ||||||||
| Sale of tiles (Note 18) | ||||||||
| Total revenues | ||||||||
| Other income | ||||||||
| Continuing operations | ||||||||
| Interest income | ||||||||
| Government grant | ||||||||
| Tax subsidy | ||||||||
| Loan forgiveness | ||||||||
| Discontinued operations | ||||||||
| Other income (Note 18) | ||||||||
| Total other income | ||||||||
| b) | Segment reporting |
The Company identifies operating segments and prepares segment information based on the regular internal financial information reported to the Chief Executive Officer and executive directors, who are the Company’s chief operating decision makers for their decisions about the allocation of resources to the Company’s business components and for their review of the performance of those components.
All of the Company’s operations are considered by the chief operating decision makers to be aggregated into three reportable operating segments: 1) the provision of livestreaming ecommerce industry which was acquired as part of a strategic transformation towards trending technology businesses in China to mitigate the challenging conditions in the real estate market in China, and associated industries like the Company’s legacy ceramic tile business, (2) business management and consulting; and (3) the manufacture and sale of standard to high-end ceramic tiles, which was disposed by the Company in April 2023. Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the Company’s chief operating decision makers in deciding how to allocate resources and in assessing performance.
The business of the Company is engaged entirely in the PRC. The Chief Executive Officer and executive directors regularly review the Company’s business as one geographical segment.
The following table shows the Company’s operations by business segment for the six months ended June 30, 2024 and 2023.
| For the six months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| USD’000 | USD’000 | |||||||
| Revenues | ||||||||
| Discontinued operations | ||||||||
| Sales of tile products | ||||||||
| Continuing operations | ||||||||
| Consulting income / software | ||||||||
| Livestreaming ecommerce | ||||||||
| Total revenues | ||||||||
| Cost of revenues | ||||||||
| Discontinued operations | ||||||||
| Sales of tile products | ||||||||
| Continuing operations | ||||||||
| Consulting income / software | ||||||||
| Livestreaming ecommerce | ||||||||
| Total cost of revenues | ||||||||
| Operating costs and expenses | ||||||||
| Discontinued operations | ||||||||
| Sales of tile products | ||||||||
| Continuing operations | ||||||||
| Consulting income / software | ||||||||
| Livestreaming ecommerce | ||||||||
| Other | ||||||||
| Total operating costs and expenses | ||||||||
| Bad debt expense (reversal) | ||||||||
| Discontinued operations | ||||||||
| Sales of tile products | ||||||||
| Continuing operations | ||||||||
| Consulting income / software | ||||||||
| Livestreaming ecommerce | ||||||||
| Total bad debt expense | ||||||||
| Other expenses | ||||||||
| Discontinued operations | ||||||||
| Sales of tile products | ||||||||
| Continuing operations | ||||||||
| Consulting income / software | ||||||||
| Livestreaming ecommerce | ||||||||
| Total other expenses | ||||||||
| Other income | ||||||||
| Discontinued operations | ||||||||
| Sales of tile products | ||||||||
| Continuing operations | ||||||||
| Consulting income / software | ||||||||
| Livestreaming ecommerce | ||||||||
| Other | ||||||||
| Total other income | ||||||||
| Loss from operations | ||||||||
| Sales of tile products | ( | ) | ||||||
| Consulting income / software | ( | ) | ( | ) | ||||
| Livestreaming ecommerce | ( | ) | ||||||
| Other | ( | ) | ( | ) | ||||
| Loss from operations | ( | ) | ( | ) | ||||
| As
of June 30, 2024 | As
of December 31, 2023 | |||||||
| USD’000 | USD’000 | |||||||
| Segment assets | ||||||||
| Ceramic tile products | ||||||||
| Consulting income/software | ||||||||
| Livestreaming ecommerce | ||||||||
| Others | ||||||||
| Total assets | ||||||||
6. LOSS BEFORE TAXATION
| For the six months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| USD’000 | USD’000 | |||||||
| Finance costs | ||||||||
| Interest expense on lease liability | ||||||||
| Interest expense on note payable | ||||||||
| Cost of inventories recognized as an expense (including depreciation charge of right-of-use assets for leases) | ||||||||
| Depreciation of fixed assets | ||||||||
| Depreciation charge of right-of-use assets for leases (included in the administrative expenses) | ||||||||
| Marketing and promotion expense | ||||||||
7. INCOME TAX
| For the six months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| USD’000 | USD’000 | |||||||
| Continuing operations | ||||||||
| Current Tax: | ||||||||
| PRC Income Tax Expense | | |||||||
| US Income Tax Expense | ||||||||
| Deferred tax expense | ||||||||
Discontinued operations did not incur any income tax expense for the six months ended June 30, 2024.
British Virgin Islands Profits Tax
The Company has not been subject to any taxation in this jurisdiction for the six months ended June 30, 2024 and 2023.
Hong Kong Profits Tax
US Income Tax
The
Company’s U.S. subsidiaries are subject to U.S. federal income tax rate of
PRC Income Tax
Most
subsidiaries of the Company in the PRC are subject to the enterprise income tax in accordance with “PRC Enterprise Income Tax Law”,
and the applicable income tax rate for the six months ended June 30, 2024 and 2023 is
| For the six months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| USD’000 | USD’000 | |||||||
| Loss attributable to holders of ordinary shares (USD’000): | ||||||||
| Net loss from continuing operations | ( | ) | ( | ) | ||||
| Net income from discontinued operations | ||||||||
| Weighted average number of ordinary shares outstanding used in computing basic earnings per share * | ||||||||
| Weighted average number of ordinary shares outstanding used in computing diluted earnings per share * | ||||||||
| Income (loss) per share - basic (USD) | ||||||||
| From continuing operations | ( | ) | ( | ) | ||||
| From discontinued operations | ||||||||
| Income (loss) per share - diluted (USD) ** | ||||||||
| From continuing operations | ( | ) | ( | ) | ||||
| From discontinued operations | ||||||||
| * |
| ** |
9. LOAN RECEIVABLE
From
March 31, 2023 to June 30, 2024, Anhui Zhongjun Enterprise Management Co., Ltd (“Anhui Zhongjun”) borrowed a total of $
10. NOTE RECEIVABLE
On
April 28, 2023, the Company completed the sale of Stand Best Creation Limited and its subsidiaries, Hengda and Hengdali, to New Stonehenge
Limited for a total of USD $
11. TRADE PAYABLES
| As of | ||||||||
| June 30, 2024 | December 31, 2023 | |||||||
| USD’000 | USD’000 | |||||||
| Trade payables | ||||||||
Trade
payables are denominated in Renminbi, non-interest bearing and generally settled within
12. ACCRUED LIABILITIES AND OTHER PAYABLES
| As of | ||||||||
| June 30, 2024 | December 31, 2023 | |||||||
| USD’000 | USD’000 | |||||||
| Accrued salary | ||||||||
| Accrued interest | ||||||||
| Accrued liabilities - others | ||||||||
Accrued liabilities consist mainly of accrued rental, wages and utility expenses.
The carrying value of accrued liabilities and other payables is considered to be a reasonable approximation of fair value.
13. RIGHT-OF-USE ASSETS AND LEASES LIABILITIES
(a) Amounts recognized in the consolidated statement of financial position
The carrying amounts of right-of-use assets for lease are as below:
| Net book amount at January 1, 2024 | $ | |||
| Net book amount at June 30, 2024 | $ | |||
| Net book amount at January 1, 2023 | $ | |||
| Net book amount at December 31, 2023 | $ |
The lease liabilities for continuing operations are as below:
| June 30, 2024 | December 31, 2023 | |||||||
| USD’000 | USD’000 | |||||||
| Lease liabilities - current | ||||||||
| Lease liabilities – noncurrent | ||||||||
Contractual undiscounted cash flows for the leases:
| As of December 31, 2023 | ||||||||||||
| Within one year | One to five years | Total contractual undiscounted cash flow | ||||||||||
| USD’000 | USD’000 | USD’000 | ||||||||||
(b) Amounts recognized in the consolidated income statement
The consolidated income statement shows the following amounts from continuing operations relating to leases:
| Six Months ended | ||||
| June 30, 2024 | ||||
| USD’000 | ||||
| Amortization charge of right-of-use assets | ||||
| Interest expense | ||||
| Six Months ended | ||||
| June 30, 2023 | ||||
| USD’000 | ||||
| Amortization charge of right-of-use assets | ||||
| Interest expense | ||||
The consolidated income statement shows the following amounts from discontinued operations relating to leases:
| Six Months ended | ||||
| June 30, 2023 | ||||
| Amortization charge of right-of-use assets | ||||
| Interest expense | ||||
The
total cash outflow in financing activities for leases during the six months ended June 30, 2024 and 2023 was $
The
total cash outflow in financing activities from discontinued operations for leases during the six months ended June 30, 2024 and 2023
was $ and $
14. NOTE PAYABLE
Unsecured Promissory Note in December 2022
On
December 12, 2022, the Company entered into a note purchase agreement (the “2022 Note Purchase Agreement”)
with an investor, pursuant to which the Company issued to the investor an unsecured Promissory Note of $
During
the six months ended June 30, 2024, the Company amortized OID of $
During
the six months ended June 30, 2023, the Company amortized OID of $
As
of June 30, 2024 and December 31, 2023, the outstanding principal balance of this note was $
Unsecured Promissory Note in July 2023
On
July 26, 2023, the Company entered into a note purchase agreement (“2023 Note Purchase Agreement) with an investor,
pursuant to which the Company issued to the investor an unsecured Promissory Note of $
During
the six months ended June 30, 2024, the Company amortized OID of $
Unsecured Promissory Note in January 2024
On
January 25, 2024, the Company entered into a note purchase agreement (the “2024 Note Purchase Agreement”) with
Guoxiang Hu (the “Investor”), pursuant to which the Company issued the Investor an unsecured promissory note in the principal
amount of $
Global
Pacific Securities US Inc. (“Global Pacific”) has acted as the lead advisor of the Company for the transaction contemplated
in the 2024 Note Purchase Agreement, and the Company agreed to pay Global Pacific a cash fee equal to three percent (
In addition, the Company may not assign the Note without prior written consent of the Investor. The Investor may be sold, assigned or transferred by the Investor without the Company’s prior written consent. However, in the event that the Company has identified any individual(s) or entity(ies) that is satisfactory to the Company, to purchase the Note from the Investor, the Investor agreed to use his best efforts to sell, transfer and assign the Note to such individual or entity identified by the Company within ten (10) calendar days following receipt of a written notice from the Company, at a price that equal to the outstanding balance of the Note.
Under the 2024 Note Purchase Agreement, Weilai Zhang, our CEO and Chairman of the board, agreed to enter into a share pledge agreement with the Investor, on January 25, 2024 (the “Pledge Agreement”), to pledge all Class B ordinary shares of the Company, no par value (“Class B ordinary shares”) owned by him, including any additional Class B ordinary shares issued to him while the Note is outstanding, and any proceeds thereof to secure the Company’s payment and performance of any and all obligations, liabilities and indebtedness of the Company to the Investor pursuant to the terms of the 2024 Note Purchase Agreement.
For
the six Months ended June 30, 2024, the Company record $
15. SHARE CAPITAL
On September 18, 2023, the Company effected a one-for-ten reverse split of its issued and outstanding Class A ordinary shares. The consolidated financial statements for the six months ended June 30, 2023 were retroactively restated to reflect this reverse split, unless otherwise specified.
| June 30, 2024 | December 31, 2023 | |||||||
| Number | Number | |||||||
| of shares | of shares | |||||||
| Authorized: | ||||||||
| Preferred shares, no par value | ||||||||
| Class A Ordinary shares, no par value | ||||||||
| Class B Ordinary shares, no par value | ||||||||
| June 30, 2024 | ||||
| Number | ||||
| of shares | ||||
| Outstanding and fully paid: | ||||
| Ordinary shares, no par value | ||||
| At January 1, 2024 | ||||
| Issuance of new shares for equity financing | ||||
| Warrants exercised and buy-back | ||||
| Note conversion into shares | ||||
| Equity compensation | ||||
| At June 30, 2024 | ||||
Warrants
On
February 12, 2021, the Company entered into a Securities Purchase Agreement (“2021 SPA”) with certain institutional
investors for the sale of
common shares (pre-reverse split), at a purchase price of $per share. Concurrently with the sale of the
Common Shares, pursuant to the 2021 SPA the Company also sold warrants to purchase common shares (pre-reverse split). The Company
sold the Common Shares and Warrants for aggregate gross proceeds of approximately US$
In
addition, the Placement Agent of this offering also received warrants (the “Compensation Warrants”) to purchase
up to a number of common shares equal to % of the aggregate number of shares sold in the Offering, including the warrant shares issuable
upon exercise of the Warrants, which such Compensation Warrants have substantially the same terms as the Warrants sold in the Offering,
except that such Compensation Warrants have an exercise price of $ per share and will be exercisable
| Grant date (investors and placement agent, respectively) | ||||
| Share price at date of grant (investors and placement agent, respectively) | US$ | |||
| Exercise price at date of grant (investors and placement agent, respectively) | US$ | & | ||
| Volatility | % | |||
| Warrant life | ||||
| Dividend yield | % | |||
| Risk-free interest rate | % | |||
| Average fair value at grant date | US$ | |||
On
June 10, 2021, the Company commenced a registered direct offering of securities, and executed a Securities Purchase Agreement (the
“June 2021 SPA”) with
In addition, the Company issued warrants (the “Placement Agent Warrants”) to the Placement Agent to purchase a number of common shares equal to % of the aggregate number of shares sold to the investors in this offering, as well as the warrant shares issuable upon exercise of the Warrants issued in the concurrent private placement, as additional placement agency compensation. The Placement Agent Warrants have substantially the same terms as the Investor Warrants, except that the Placement Agent Warrants will have an exercise price of $.
| Grant date (investors and placement agent, respectively) | ||||
| Share price at date of grant (investors and placement agent, respectively) | US$ | |||
| Exercise price at date of grant (investors and placement agent, respectively) | US$ | & | ||
| Volatility | % | |||
| Warrant life | ||||
| Dividend yield | % | |||
| Risk-free interest rate | % | |||
| Average fair value at grant date | US$ | |||
On
September 30, 2022, the Company commenced a registered direct offering of securities, and executed a Securities Purchase Agreement (the
“2022 SPA”) with
In addition, the Company issued warrants (the “Placement Agent Warrants”) to the Placement Agent to purchase a number of common shares equal to % of the aggregate number of shares sold to the investors in this offering, as well as the warrant shares issuable upon exercise of the Warrants issued in the concurrent private placement, as additional placement agency compensation. The Placement Agent Warrants have substantially the same terms as the Investor Warrants, except that the Placement Agent Warrants will have an exercise price of $.
| Grant date (investors and placement agent, respectively) | ||||
| Share price at date of grant (investors and placement agent, respectively) | US$ | |||
| Exercise price at date of grant (investors and placement agent, respectively) | US$ | & | ||
| Volatility | % | |||
| Warrant life | ||||
| Dividend yield | % | |||
| Risk-free interest rate | % | |||
| Average fair value at grant date | US$ | |||
On February 23, 2024, the Company entered into a certain securities purchase agreement (the “2024 SPA”) with certain investors (the “Purchasers”), pursuant to which the Company agreed to sell Class A ordinary shares, (the “Shares”), no par value each (the “Ordinary Shares”), at a per share purchase price of $(the “Offering”). The gross proceeds to the Company from this Offering are approximately $million, before deducting any fees or expenses. In a concurrent private placement, the Company also issued the investors warrants to purchase up to Shares (the “Warrants”). Each Warrant is exercisable for one Class A ordinary share. The Warrants will have an initial exercise price of $per share and will be exercisable at any time on or after the date of issuance and will expire on the fifth anniversary of the issuance date. The Company plans to use the net proceeds from this Offering for the expansion of the Company’s business in the U.S., and for general corporate purpose.
Following is a summary of the warrant activity for the six months ended June 30, 2024:
| Weighted | ||||||||||||
| Average | ||||||||||||
| Remaining | ||||||||||||
| Average | Contractual | |||||||||||
| Number of | Exercise | Term in | ||||||||||
| Warrants | Price | Years | ||||||||||
| Outstanding at December 31, 2023 | $ | |||||||||||
| Exercisable at December 31, 2023 | ||||||||||||
| Issued | — | |||||||||||
| Exercised | — | |||||||||||
| Warrants buy-back | — | |||||||||||
| Expired | — | |||||||||||
| Outstanding at June 30, 2024 | ||||||||||||
| Exercisable at June 30, 2024 | $ | |||||||||||
Equity Financing
On January 10, 2023, the Company entered into a securities purchase agreement with Mr. Weilai (Will) Zhang, the Chief Executive Officer of the Company, Mr. Ishak Han, a director of the Company, and another purchaser, pursuant to which the Company agreed to sell ordinary shares (pre-reverse split), at a per share purchase price of $. This offering was unanimously approved by the disinterested directors and the board of directors of the Company. The gross proceeds to the Company from this offering were $million, before deducting any fees or expenses.
On January 13, 2023, the Company entered into a securities purchase agreement with a certain purchaser, pursuant to which the Company agreed to sell Class A ordinary shares (pre-reverse split), at a per share purchase price of $(the public closing price of the Ordinary Shares as of January 10, 2023. The gross proceeds to the Company from this offering were approximately $million, before deducting any fees or expenses.
On March 30, 2023, the Company entered into a securities purchase agreement with five investors, pursuant to which the Company agreed to sell Class A ordinary shares (pre-reverse split), at a per share purchase price of $The gross proceeds to the Company from this Offering were approximately $million, before deducting any fees or expenses.
On August 2, 2023, the Company entered into a securities purchase agreement with an investor, pursuant to which the Company agreed to sell Class A ordinary shares (pre-reverse split), at a per share purchase price of $The gross proceeds to the Company from this offering were approximately $million, before deducting any fees or expenses.
On February 23, 2024, the Company entered into a securities purchase agreement with several investors, pursuant to which the Company agreed to sell Class A ordinary shares, at a per share purchase price of $. The gross proceeds to the Company from this offering are approximately $million, before deducting any fees or expenses. In a concurrent private placement, the Company also issued the investors warrants to purchase up to shares. Each warrant was exercisable for one Class A ordinary share. The warrants had an initial exercise price of $per share and are exercisable at any time on or after the date of issuance and will expire on the fifth anniversary of the issuance date. The warrants were fully exercised on June 28, 2024.
On March 15, 2024, the Company entered into a securities purchase agreement (with several investors, pursuant to which the Company agreed to sell Class A ordinary shares, at a per share purchase price of $The gross proceeds to the Company from this offering are approximately $million, before deducting any fees or expenses.
On May 28, 2024, the Company entered into securities purchase agreement (with certain investors pursuant to which the Company agreed to sell Class A ordinary shares, (at a per share purchase price of $The gross proceeds to the Company from this offering are approximately $, before deducting any fees or expenses.
On June 28, 2024, the Company entered into a securities purchase agreement with several investors, pursuant to which the Company agreed to sell Class A ordinary shares, (the “Shares”), at a per share purchase price of $The gross proceeds to the Company from this offering are approximately $, before deducting any fees or expenses.
Share-based Compensation
From
January 1 to June 30, 2024, the Company issued an aggregate of
From January 1 to June 30, 2024, the Company issued an aggregate of class B shares to its Chief Executive Officer as a Share Compensation expense. The fair value of shares was $ .
From
January 1 to June 30, 2024, the Company issued an aggregate of
From
January 1 to June 30, 2024, the Company issued an aggregate of
From January 1 to June 30, 2024, the Company issued aggregate of shares to its consultants or consulting firms as Share Compensation expense.
16. RELATED PARTY TRANSACTIONS
Apart from those discussed elsewhere in these condensed consolidated financial statements, the following are significant related party transactions entered into between the Company and its related parties at agreed rates:
| As of | ||||||||
| June 30, 2024 | December 31, 2023 | |||||||
| USD’000 | USD’000 | |||||||
| Liping Huang (CEO’s spouse) | ||||||||
| Lei Deng (legal representative of one of the subsidiaries) | ||||||||
| Xiaorong Yang (legal representative of one of the subsidiaries) | ||||||||
| Total | ||||||||
| As of | ||||||||
| June 30, 2024 | December 31, 2023 | |||||||
| USD’000 | USD’000 | |||||||
| Amounts owed from related parties | ||||||||
As
of June 30, 2024 and December 31, 2023, the Company had due to CEO of $
17. COMMITMENTS
(a) Capital commitments
The Company’s capital expenditures consist of expenditures on property, plant and equipment and capital contributions. Capital expenditures contracted for at the balance sheet date but not recognized in the financial statements are as follows:
| As of | ||||||||
| June 30, 2024 | December 31, 2023 | |||||||
| USD’000 | USD’000 | |||||||
| Contracted for capital commitment with respect to capital contributions to its wholly foreign owned subsidiary in the PRC: | ||||||||
| Chengdu Future | ||||||||
| Antelope Chengdu | ||||||||
| Hainan Antelope Holding | ||||||||
| Antelope Future (Yangpu) | ||||||||
| Antelope Investment (Hainan) | ||||||||
| Antelope Ruicheng Investment | ||||||||
| Hubei Kylin Cloud Service Technology | ||||||||
| Wenzhou Kylin Cloud Service Technology | ||||||||
| Jiangxi Kylin Cloud Service Technology | ||||||||
| Anhui Kylin Cloud Service
Technology | ||||||||
18. ASSETS AND LIABILITIES OF DISPOSAL GROUP
Since the ceramic tiles manufacturing business of the Company has experienced significant hurdles due to the significant slowdown of the real estate sector and the impacts of COVID-19 in China, on April 28, 2023, the Company divested of its ceramic tiles manufacturing business, which was conducted through the Company’s two subsidiaries, Jinjiang Hengda Ceramics Co., Ltd. and Jiangxi Hengdali Ceramic Materials Co., Ltd.
Jiangxi
Hengdali Ceramics is wholly owned by Jinjiang Hengda Ceramics, which is a wholly owned subsidiary of Stand Best Creation Limited, a Hong
Kong company. Stand Best Creation Limited is a wholly owned subsidiary of Success Winner Limited which is
On
December 30, 2022, Success Winner Limited, Stand Best Creation Limited and New Stonehenge Limited, a British Virgin Islands exempt
company which is not affiliate of the Company or any of its directors or officers, entered into certain share purchase agreement (the
“Disposition SPA”. Pursuant to the Disposition SPA, New Stonehenge Limited agreed to purchase Stand Best
Creation, and in exchange New Stonehenge Limited agreed to issue a 5% unsecured promissory note to Success Winner Limited
with principal amount of $
The Disposition Transaction has been approved by Company’s shareholders on February 21, 2023. The disposal of the subsidiaries for the ceramic tile manufacturing business were completed on April 28, 2023.
The
following table summarizes the carrying value of the assets and liabilities of disposal group at the closing date of disposal. The Company
recorded USD
| As
of April 28, 2023 | ||||
| USD’000 | ||||
| Right-of-use assets, net | ||||
| Inventories, net | ||||
| Trade receivables, net | ||||
| Other receivables and prepayments | ||||
| Cash and bank balances | ||||
| Accrued liabilities and other payables | ( | ) | ||
| Amounts owed to related parties | ( | ) | ||
| Lease liabilities | ( | ) | ||
| Taxes payable | ( | ) | ||
The financial performance and cash flow information of disposed group for the six months ended June 30, 2023 was as following:
| Six
Months Ended June 30, 2023 | ||||
| USD’000 | ||||
| Financial performance | ||||
| Net sales | ||||
| Cost of goods sold | ||||
| Gross loss | ( | ) | ||
| Other income | ||||
| Selling and distribution expenses | ( | ) | ||
| Administrative expenses | ( | ) | ||
| Bad debt Reversal (expense) | ||||
| Finance costs | ( | ) | ||
| Loss before taxation | ( | ) | ||
| Gain on disposal of discontinued operations | ||||
| Income tax expense | ||||
| Net loss for the year from discontinued operations | ||||
| Cash flow information | ||||
| Net cash generated from operating activities from discontinued operations | ||||
| Net cash used in investing activities from discontinued operations | ||||
| Net cash used in financing activities from discontinued operations | ( | ) | ||
| Net (decrease) increase in cash and cash equivalents from discontinued operations | ( | ) | ||
19. SUBSEQUENT EVENTS
The Company has evaluated all events that have occurred subsequent to June 30, 2024 through the date that the consolidated financial statements were issued. Management has concluded that the following subsequent events required disclosure in the financial statements:
On July 31, 2024, the Company entered into a securities purchase agreement an investor, a registered direct offering an aggregate of Class A ordinary shares, of the Company. The gross proceeds from this offering, were approximately $million, before offering expenses. The Company intends to use the net proceeds received from the Offering for general working capital purposes.
Exhibit 99.2
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
We are a British Virgin Islands limited liability company with no material operations. Our operations were conducted in China by our subsidiaries. We provide livestreaming ecommerce services, business management and information systems consulting services. In April 2023, we disposed of our legacy ceramic tile manufacturing business.
Livestreaming Ecommerce Business
Our livestreaming ecommerce business is operated in China through our 51% owned subsidiary, Hainan Kylin Cloud Services Technology Co., Ltd (“Hainan Kylin”) and its subsidiaries, Hangzhou Kylin Cloud Services Technology Co., Ltd (“Hangzhou Kylin”), Anhui Kylin Cloud Services Technology Co., Ltd (“Anhui Kylin”), and Wenzhou Kylin. We aim to provide a one-stop solution for our customers to enable them to utilize the growing sales channel of livestreaming ecommerce. We believe that livestreaming ecommerce is an important growth engine for consumer good brands as it leverages the content of livestreaming to boost customer engagement and sales as it combines instant purchasing of a featured product and audience participation through a chat function or reaction buttons. Our customers usually include consumer brand goods, merchants, and small-scale ecommerce platforms. Our product management office assesses and selects the products from our customers. We then connect with different suppliers, usually staffing agencies that have a growing and diverse pool of hosts and influencers. The hosts and influencers register and claim the tasks for livestreaming for our customers’ products via Hainan Kylin’s SaaS platform. We track the sales of products of each host on the SaaS platform and report the sales results to our customers. We have expanded our reach to second and third tier cities in China where livestreaming ecommerce has a high conversion rate.
Hainan Kylin’s SaaS platform also includes a job-listing page designed especially for our enterprise customers to retain and engage freelancers and independent contractors at a cost-efficient way. We expect to further develop this function of the SaaS platform to provide value-added services to our livestreaming ecommerce customers.
Hainan Kylin started its business in September 2021. For the six months ended June 30, 2024, Hainan Kylin comprised most of our ongoing business operations and accounted for 100% of our total revenue.
Ceramic Tile Business
We historically operated a ceramic tile business which are used for exterior siding and for interior flooring and design in residential and commercial buildings. We are manufacturer of ceramic tiles used for exterior siding and for interior flooring and design in residential and commercial buildings in China. The ceramic tiles, sold under the “HD” or “Hengda,” brands are available in over two thousand styles, colors and size combinations. Currently, we have five principal product categories: (i) porcelain tiles, (ii) glazed tiles, (iii) glazed porcelain tiles, (iv) rustic tiles, and (v) polished glazed tiles.
For the six months ended June 30, 2023, we did not produce any ceramic tiles and only had sales from our existing inventory.
Over the last two years, the Company enacted a strategic transition to pivot towards high growth technology areas which included the acquisition of a livestreaming ecommerce business. In December 2022, the Company’s Board of Directors unanimously agreed to divest its ceramic tile building materials business. A special meeting of the Company’s shareholders was held on February 21, 2023, and the shareholders approved the sale of this business. On April 28, 2023, this transaction closed, and the Company transferred its ownership of the ceramic tile manufacturing business to New Stonehenge Limited, which, as a result, assumed all of its assets and liabilities.
Business Management and Consulting Business
We also provide business management and consulting services which consists of computer consulting services and software development through our subsidiaries in China, including Chengdu Future and Antelope Chengdu. We diagnose difficulties in infrastructure and enterprise systems and addresses business challenges that enterprises confront by developing strategies to surmount such hurdles to ensure the healthy growth and development of our customers’ businesses. Our consulting teams have advanced technological knowledge and capabilities to implement workflow solutions via proprietary software products and services to provide our customers with customized solutions to help them solve complex business problems.
Basis of Presentation
The following discussion and analysis of our financial condition and results of operations is based on the selected financial information as of and for the six months ended June 30, 2024 and has been prepared based on the consolidated financial statements of Antelope Enterprise Holdings Limited and its subsidiaries. The consolidated financial statements of Antelope Enterprise Holdings Limited and its subsidiaries have been prepared in accordance with IFRS as issued by the International Accounting Standards Board, or “IASB.” The consolidated financial statements have been prepared on the historical cost basis, except for derivative financial instruments that have been measured at fair value.
| A. | Operating Results |
The following table sets forth our financial results for the six months ended June 30, 2024 and 2023, respectively:
| USD’000 | 2024 | 2023 | ||||||
| Net sales | 43,462 | 44,636 | ||||||
| Cost of goods sold | 39,969 | 37,824 | ||||||
| Gross profit | 3,493 | 6,812 | ||||||
| Other income | 651 | 409 | ||||||
| Selling and distribution expenses | (3,130 | ) | (7,100 | ) | ||||
| Administrative expenses | (6,863 | ) | (5,588 | ) | ||||
| Finance costs | (537 | ) | - | |||||
| Other expenses | (139 | ) | - | |||||
| Loss before taxation | (6,525 | ) | (5,467 | ) | ||||
| Income tax expense | 2 | - | ||||||
| Net loss from continuing operations | (6,527 | ) | (5,467 | ) | ||||
| Discontinued operations | ||||||||
| Gain on disposal of discontinued operations | - | 10,659 | ||||||
| Loss from discontinued operations | - | (200 | ) | |||||
| Net income (loss) | (6,527 | ) | 4,992 | |||||
| Net income (loss) attributable to: | ||||||||
| Equity holders of the Company | (6,635 | ) | 4,997 | |||||
| Non-controlling interest | 108 | (5 | ) | |||||
| Net income (loss) | (6,527 | ) | 4,992 | |||||
| Net income (loss) attributable to the equity holders of the Company arise from: | ||||||||
| Continuing operations | (6,635 | ) | (5,462 | ) | ||||
| Discontinued operations | - | 10,459 | ||||||
The following table shows the Company’s operations by business lines for the six months ended June 30, 2024 and 2023, respectively:
| For the six months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| USD’000 | USD’000 | |||||||
| Revenues | ||||||||
| Discontinued operations | ||||||||
| Sales of tile products | - | 390 | ||||||
| Continuing operations | ||||||||
| Consulting income / software | - | 477 | ||||||
| Livestreaming ecommerce | 43,462 | 44,159 | ||||||
| Total revenues | 43,462 | 45,026 | ||||||
| Cost of revenues | ||||||||
| Discontinued operations | ||||||||
| Sales of tile products | - | 1,091 | ||||||
| Continuing operations | ||||||||
| Consulting income / software | 64 | 1,177 | ||||||
| Livestreaming ecommerce | 39,904 | 36,647 | ||||||
| Total cost of revenues | 39,968 | 38,915 | ||||||
| Operating costs and expenses | ||||||||
| Discontinued operations | ||||||||
| Sales of tile products | - | 468 | ||||||
| Continuing operations | ||||||||
| Consulting income / software | 139 | 373 | ||||||
| Livestreaming ecommerce | 3,641 | 7,676 | ||||||
| Other | 6,750 | 4,639 | ||||||
| Total operating costs and expenses | 10,530 | 13,156 | ||||||
| Bad debt expense (reversal) | ||||||||
| Discontinued operations | ||||||||
| Sales of tile products | - | 144 | ||||||
| Continuing operations | ||||||||
| Consulting income / software | - | - | ||||||
| Livestreaming ecommerce | - | - | ||||||
| Total bad debt expense | 144 | |||||||
| Other expenses | ||||||||
| Discontinued operations | ||||||||
| Sales of tile products | - | - | ||||||
| Continuing operations | ||||||||
| Consulting income / software | - | - | ||||||
| Livestreaming ecommerce | 139 | - | ||||||
| Total other expenses | 139 | - | ||||||
| Other income | ||||||||
| Discontinued operations | ||||||||
| Sales of tile products | - | 825 | ||||||
| Continuing operations | ||||||||
| Consulting income / software | - | 11 | ||||||
| Livestreaming ecommerce | 446 | 154 | ||||||
| Other | 205 | 244 | ||||||
| Total other income | 651 | 1,234 | ||||||
| Loss from operations | ||||||||
| Sales of tile products | - | (200 | ) | |||||
| Consulting income / software | (212 | ) | (1,062 | ) | ||||
| Livestreaming ecommerce | 224 | (11 | ) | |||||
| Other | (6,537 | ) | (4,395 | ) | ||||
| Loss from operations | (6,525 | ) | (5,668 | ) | ||||
Description of Selected Income Statement Items
Revenue from sales of livestreaming ecommerce business. Beginning in September 2021, we started to generate revenue from our livestreaming ecommerce business which is operated by Hainan Kylin and its subsidiaries. For the six months ended June 30, 2024 and 2023, respectively, we generated $ 43.5 million and $ 44.2 million in revenue from this business.
Revenue from sales of ceramic tile products. We historically generated revenue from the sales of ceramic tiles, including porcelain tiles, glazed porcelain tiles, glazed tiles, rustic tiles and polished glazed tiles, net of rebates and discounts. For the six months ended June 30, 2023, respectively, we generated $ 0.4 million in revenue from this business.
Revenue from business management and information system consulting services. We also generated revenue from business management consulting, information system technology consulting services, including the sales of software use rights for digital data deposit platforms and asset management systems. For the six months ended June 30, 2024 and 2023, we generated $ nil and $ 0.5 million.
Cost of revenues.
Cost of revenues for livestreaming ecommerce. Cost of sales for the livestreaming ecommerce was $ 39.9 million and $ 36.6 million for the six months ended June 30, 2024 and 2023, mainly consisting of professional costs for outsourcing technology services.
Cost of revenues for tile products. Cost of revenues for tile products consists of costs directly attributable to production, including the cost of clay, color materials, glaze materials, coal, salaries for staff engaged in production activity, electricity, depreciation, packing materials and related expenses. For the six months ended June 30, 2023, we had cost of revenues related to tile products of $1.1 million respectively.
Cost of revenues for business management and information system consulting services. For the six months ended June 30, 2024 and 2023, we had cost of revenues related to business management and consulting income of $ 64,000 and $ 1.2 million, which mainly consisted of professional costs for outsourcing technology services.
Other income and other expenses. Other income consists of interest income, foreign exchange gain/loss, gain on disposal of equipment and rental income by leasing out one of its production lines. Other expenses primarily consist of the loss on disposal of equipment and the depreciation by leasing out one of our production lines.
Selling and distribution expenses. Selling and distribution expenses consist of payroll, travel expenses, transportation and advertising expenses incurred by our selling and distribution team.
Administrative expenses. Administrative expenses consist primarily of R&D expense, employee remuneration, payroll taxes and benefits, general office expenses and depreciation. We expect administrative expenses to remain constant as compared to the prior year.
Income taxes. Our subsidiaries in the PRC are subject to the PRC Enterprise Income Tax Law, and the applicable income tax rate pursuant to such law for the six months ended June 30, 2024 and 2023 is 25% for Hainan Kylin Cloud Services Technology, and 5% for Chengdu Future, Antelope Chengdu, Anhui Kylin Cloud Services Technology, Wenzhou Kylin Cloud Services Technology and Hangzhou Kylin Cloud Services Technology. The Company’s U.S. subsidiaries is subject to U.S. income tax rate of 21% and New York state corporate income tax with rates ranging from 6.5% to 7.25%.
Results of Operations
Six Months Ended June 30, 2024 Compared to the Six Months Ended June 30, 2023
Revenue from livestreaming ecommerce.
For the six months ended June 30, 2024 and 2023, revenue from the livestreaming ecommerce was $ 43.4 million and $ 44.2 million, representing a decrease of $ 1.2 million, or 3%. The decrease was mainly due to a) the loss of a few major clients, we adjusted our business strategy and focus on expanding new consumers in order to minimize the customer concentration risk, b) current year RMB to USD exchange rate depreciation when we converted the Company’s FS from RMB into USD. For the six Months ended June 30, 2024, we have added new clients to compensate for fluctuations with our major clients. For the first half of 2024, we’ve expanded our portfolio to include a range of mid-tier clients. While their individual sales volumes may not be as good as those of our top clients, this diversification helps to mitigate our market and customer concentration risk. Additionally, since some of these clients are still in the beginning stages of collaboration, their business volume just started to grow, it will take time from those mid-tier clients to develop and increase the sales volume they can create. In the first half of 2024, we had business engagements with more than 70 clients, which represented an increase of nearly 20 clients compared to the same period in 2023. Among these clients, the top five major clients generated revenue of $26.5 million in the first half of the year. DOU+ is a live broadcast room targeting tool that has been designed by Douyin, the short-video platform that currently has largest number of users in China (the mainland Chinese counterpart of TikTok). DOU+ is a tool provided to anchors on Douyin that can effectively increase the exposure, interaction and popularity of the live broadcast room, which helps merchants solve the problem of having only a small number of people in the live broadcast room. We sell customized DOU+ applications to our customers that specifically fit their needs at a preferential price. DOU+ revenue for the six months ended June 30, 2024 and 2023 was $2.2 million and $5.5 million.
Revenue from sales of tile products.
Revenue from sales of tile products was $ 0.4 million for the six months ended June 30, 2023. We disposed our tile segment in April 2023.
Revenue from business management and information system consulting services.
Revenue from business management and information system consulting services was $ nil for the six months ended June 30, 2024, compare to $ 0.5 million for the six months ended June 30, 2023, representing a decrease of $ 0.5 million or 100%. The decrease in revenue was primarily due to intense market competition and lack of efficient marketing and promotional efforts, the Company was unable to attract and obtain new customers for the six months ended June 30, 2024,. In addition, management focused more attention and allocated more resources to the livestreaming ecommerce segment.
Cost of revenues for livestreaming ecommerce.
Cost of revenues for the livestreaming ecommerce was $ 39.9 million and $ 36.6 million for the six months ended June 30, 2024 and 2023. For the six months ended June 30, 2024 and 2023, our cost of revenues mainly consisted of professional costs for outsourcing technology services. The increase in the cost of revenues for our livestreaming ecommerce resulted from the changes with our major clients, we adjusted our business strategy and focus on expanding new customers. However, there is a certain adaptation and training period for the new customers, which directly led to increased costs such as increased training costs, additional management and support costs. In addition, the cost for customized DUO+ application sales were $ 1.8 million and $ 5.3 million for the six months ended June 30, 2024 and 2023.
Cost of revenues for sales of tile products.
Cost of revenues for sales of tile products was $ 1.1 million for the six months ended June 30, 2023.
Cost of sales for business management and information system consulting services.
Cost of sales for business management and consulting services was $ 64,000 and $ 1.2 million for the six months ended June 30, 2024 and 2023.
Gross profit for livestreaming ecommerce. Gross profit for the livestreaming ecommerce was $ 3.6 million and $ 7.5 million for the six months ended June 30, 2024 and 2023.
Gross loss for sales of tile products. Gross loss for the tile products was $ 0.7 million for the six months ended June 30, 2023.
Gross loss for business management and consulting. Gross loss for the business management and consulting services was $ 64,000 and $ 0.7 million for the six months ended June 30, 2024 and 2023.
Other income. Other income for the six months ended June 30, 2024 was $ 0.7 million, as compared to $ 0.4 million for the same period of 2023. For the six months ended June 30, 2024, other income mainly consisted of interest income of $213,000 and other income of $438,000. For the six months ended June 30, 2023, other income mainly consisted of a government grant of $ 45,000, interest income of $ 77,000, loan forgiveness of $167,000 and other income $120,000.
For six months ended June 30, 2023, we had other income from the discontinued operation of $ 0.8 million, which were mainly attributable to the income from leasing out one of the production lines from our Hengdali facility pursuant to an eight-year lease contract.
Selling and distribution expenses. Selling and distribution expenses were $ 3.1 million for the six months ended June 30, 2024, compared to $ 7.1 million for the six months ended June 30, 2023, representing a decrease of $ 4.0 million, or 55.9%. The decrease in selling and distribution expenses was primarily due to a decreased advertising and promotion expense of $3.5 million, and decreased commission expense of $ 0.5 million. For the six months ended June 30, 2023, we had selling and distribution expenses $ 0.2 million from our discontinued operations.
Administrative expenses. Administrative expenses were $ 6.9 million) for the six months ended June 30, 2024, compared to $ 5.6 million for the six months ended June 30, 2023, representing an increase of $1.3 million, or 22.8%. The increase in administrative expenses was primarily due to an increase in (i) stock compensation expense of $ 0.8 million, (ii) an $0.5 million increase in professional expenses. For the six months ended June 30, 2023, we had administrative expenses of $ 0.2 million from discontinued operations.
Finance costs. Finance costs were $ 0.5 million for the six months ended June 30, 2024, compared to $ nil for the six months ended June 30, 2023. The increase was mainly due to the increase of interest expense on lease liabilities and increase of interest expense on note payable.
Loss before taxation. Loss before taxation was $ 6.5 million for the six months ended June 30, 2024, as compared to loss before taxation of $ 5.5 million for the six months ended June 30, 2023. The increase in loss before taxation was mainly due to an increase in administrative expenses which was partly offset by decreased in selling and distribution expense as described above. For the six months ended June 30, 2023, we had a loss before taxation of $ 0.2 million from discontinued operations. In addition, we had a $ 10.6 million gain from disposal of our tile subsidiaries.
Income taxes. We incurred an income tax expense of $ 2,000 for the six months ended June 30, 2024 compared to an income tax expense of $ nil for the six months ended June 30, 2023. Our PRC statutory enterprise income tax rate was 25% for the six months ended June 30, 2024 and 2023. Our U.S. federal corporate income tax rate was 21% and New York state corporate income tax was ranging from 6.5% to 7.25%.
Net loss attributable to equity holders of the Company. Net loss attribute to equity holders of the Company from continued operations was $ 6.5 million for the six months ended June 30, 2024, as compared to a loss attributable to the Company’s shareholders of $ 5.5 million for the six months ended June 30, 2023. The increase in net loss attributable to shareholders in 2024 was attributable to the reasons described above. For the six months ended June 30, 2023, we had income attributable to equity holders of the Company of $ 10.5 million from discontinued operations.
Net income (loss) attributed to non-controlling interest. Net income attributed to non-controlling interest was $ 108,000 and net loss of $ 5,000 for the six months ended June 30, 2024 and 2023, respectively. The non-controlling interest represents the 49% ownership of Hainan Kylin and its subsidiaries.
| B. | Liquidity and Capital Resources |
The following table presents a summary of our cash flows and beginning and ending cash balances for the six months ended June 30, 2024 and 2023:
| USD (‘000) | 2024 | 2023 | ||||||
| Net cash used in operating activities | (7,160 | ) | (5,567 | ) | ||||
| Net cash generated from / (used in) investing activities | (266 | ) | 316 | |||||
| Net cash generated from financing activities | 10,125 | 5,652 | ||||||
| Net cash flow | 2,699 | 401 | ||||||
| Cash and cash equivalents at beginning of period | 536 | 612 | ||||||
| Effect of foreign exchange rate differences | (913 | ) | (560 | ) | ||||
| Cash and cash equivalents at end of period | 2,322 | 453 | ||||||
We have historically financed our liquidity requirements mainly through operating cash flow, bank loans and issuance of new shares. We believe that we will generate sufficient cash from operations to meet our needs for the next twelve months.
However, we may sell additional equity or obtain credit facilities to enhance our liquidity position or to increase our cash reserve for future acquisitions and capital equipment expenditures. The sale of additional equity would result in further dilution of our equity to our shareholders. The incurrence in indebtedness would result in increased fixed obligations and could result in operating covenants that would restrict our operations. We cannot provide assurance that financing will be available in amounts or on terms acceptable to us, if at all.
On January 10, 2023, the Company entered into a certain securities purchase agreement with Mr. Weilai (Will) Zhang, the Chief Executive Officer of the Company, Mr. Ishak Han, a director of the Company, and another sophisticated purchaser, pursuant to which the Company agreed to sell 1,625,000 ordinary shares (pre-reverse split), at a per share purchase price of $0.80. The offering was unanimously approved by the disinterested directors and the board of directors of the Company. The gross proceeds to the Company from this offering are $1.3 million, before deducting any fees or expenses. The Company plans to use the net proceeds from this offering for the expansion of its social ecommerce business and general corporate purposes. The offering closed on January 12, 2023.
On January 13, 2023, the Company entered into a certain securities purchase agreement with a certain purchaser, pursuant to which the Company agreed to sell 1,234,568 ordinary shares (pre-reverse split), at a per share purchase price of $0.81, the closing price of the Ordinary Shares on the Nasdaq Capital Market as of January 10, 2023. The gross proceeds to the Company from this Offering are approximately $1 million, before deducting any fees or expenses. The Company plans to use the net proceeds from this offering for the expansion of its social ecommerce business and for general corporate purposes.
On March 30, 2023, the Company entered into a certain securities purchase agreement with five sophisticated investors, pursuant to which the Company agreed to sell 5,681,820 Class A ordinary shares (pre-reverse split), at a per share purchase price of $0.88. The gross proceeds to the Company from this offering are approximately $5 million, before deducting any fees or expenses. The Company has issued the Shares on April 12, 2023 and the Offering was closed on the same day as all closing conditions were satisfied. The Company plans to use the net proceeds from this offering for general corporate purposes.
On August 2, 2023, the Company entered into a certain securities purchase agreement with an investor, pursuant to which the Company agreed to sell 2,083,333 Class A ordinary shares (pre-reverse split), at a per share purchase price of $0.48 (the “Offering”). The gross proceeds to the Company from this Offering are approximately $1 million, before deducting any fees or expenses. The Company has issued the Class A ordinary shares on August 2, 2023 and the Offering was closed on the same day as all closing conditions were satisfied. The Company plans to use the net proceeds from this Offering for general corporate purposes.
On February 23, 2024, the Company entered into a certain securities purchase agreement (the “SPA”) with certain investors (the “Purchasers”), pursuant to which the Company agreed to sell 1,300,000 Class A ordinary shares, (the “Shares”), no par value each (the “Ordinary Shares”), at a per share purchase price of $1.00 (the “Offering”). The gross proceeds to the Company from this Offering are approximately $1.30 million, before deducting any fees or expenses. In a concurrent private placement, the Company also issued the investors warrants to purchase up to 1,300,000 Shares (the “Warrants”). Each Warrant is exercisable for one Class A ordinary share. The Warrants will have an initial exercise price of $1.10 per share and will be exercisable at any time on or after the date of issuance and will expire on the fifth anniversary of the issuance date. The Company plans to use the net proceeds from this Offering for the expansion of the Company’s business in the U.S., and for general corporate purpose.
On March 15, 2024, the Company entered into certain securities purchase agreement (the “SPA”) with certain investors (the “Purchasers”), pursuant to which the Company agreed to sell 1,727,941 Class A ordinary shares, (the “Shares”), no par value each (the “Ordinary Shares”), at a per share purchase price of $1.36 (the “Offering”). The gross proceeds to the Company from this Offering are approximately $2.35 million, before deducting any fees or expenses. The Company plans to use the net proceeds from this Offering for the expansion of the Company’s business in the U.S., including the recruitment of personnel in the U.S. and for general corporate purpose.
On May 28, 2024, the Company entered into certain securities purchase agreement (the “SPA”) with certain investors (the “Purchasers”), pursuant to which the Company agreed to sell 102,041 Class A ordinary shares, (the “Shares”), no par value each (the “Ordinary Shares”), at a per share purchase price of $0.98 (the “Offering”). The gross proceeds to the Company from this Offering are approximately $100,000, before deducting any fees or expenses. The Company plans to use the net proceeds from this Offering for the expansion of the Company’s business in the U.S., including the recruitment of personnel in the U.S. and for general corporate purpose.
On June 28, 2024, the Company entered into certain securities purchase agreement (the “SPA”) with certain investors (the “Purchasers”), pursuant to which the Company agreed to sell 108,085 Class A ordinary shares, (the “Shares”), no par value each (the “Ordinary Shares”), at a per share purchase price of $1.602 (the “Offering”). The gross proceeds to the Company from this Offering are approximately $250,000, before deducting any fees or expenses. The Company plans to use the net proceeds from this Offering for the expansion of the Company’s business in the U.S., including the recruitment of personnel in the U.S. and for general corporate purpose.
Cash flows from operating activities.
Our net cash used in operating activities was $ 7.2 million for the six months ended June 30, 2024, an increase of $ 1.6 million as compared to $ 5.6 million for the six months ended June 30, 2023. The increase of cash outflow was mainly due to an increase in cash outflow on loan receivables of $ 0.9 million, an increase in cash outflow on other receivables and prepayments of $ 0.9 million, and increased cash outflow on trade receivables of $ 1.5 million which were partly offset by a decrease in operating cash outflow before working capital changes of $ 0.6 million, a decrease in cash outflow from trade payable of $ 0.7 million, a decrease in cash outflow on accrued liabilities and other payables of $ 0.8 million, a decrease in cash outflow on taxes payable of $ 0.6 million, and increased cash inflow on unearned revenue of $ 0.9 million. Also, there was cash inflow from operating activities of $ 2.0 million from our discontinued operations for the six months ended June 30, 2023.
Cash flows from investing activities.
Net cash used in investing activities for the six months ended June 30, 2024 was $ 0.3 million, compared to a cash inflow of $ 0.3 million for the six months ended June 30, 2023. The increase in cash outflow was mainly due to the acquisition of fixed assets of $ 1.8 million, which was partly offset by collection of note receivable of $ 1.5 million and decrease in restricted cash of $ 99,000.
Cash flows from financing activities.
Net cash generated from financing activities was $ 10.1 million for the six months ended June 30, 2024, compared to $ 5.7 million for the six months ended June 30, 2023, primarily due to an increase in the proceeds from warrants exercised by $1.2 million and increase in proceeds from promissory note by $4.6 million, which was partly offset by decreased equity financing by $3.4 million for the six months ended June 30, 2024 comparing with the six month ended June 30, 2023. For the six months ended June 30, 2023, net cash used in financing activities includes a cash outflow of $ 2.1 million from our discontinued operations, respectively.
Cash and bank balances were $ 2.3 million as of June 30, 2024, as compared to $0.5 million as of December 31, 2023.
As of June 30, 2023, our total outstanding note payable amounts were $6.2 million.
There were no commitments for advertising and insurance expenditure as of June 30, 2024.
In our opinion, our working capital, including our cash, income and cash flows from operations, and short-term borrowings, is sufficient for our present requirements.
However, we may sell additional equity or obtain credit facilities to enhance our liquidity position or to increase our cash reserve for future acquisitions and capital equipment expenditures. The sale of additional equity would result in further dilution of our equity to our shareholders. The incurrence in indebtedness would result in increased fixed obligations and could result in operating covenants that would restrict our operations. We cannot provide assurance that financing will be available in amounts or on terms acceptable to us, if at all.
Credit Management
Capital Expenditures
Historically, our capital expenditures primarily consist of expenditures on property, plant and equipment. The capital expenditures for the six months ended June 30, 2024 and 2023 were $1.8 million and $ 72,000, respectively.
Contractual Obligations
Our contractual obligations consist mainly of debt obligations, operating lease obligations and other purchase obligations and commitments, and will be paid off with our cash flow from operations. The following table sets forth a breakdown of our contractual obligations (including both interest and principal cash flows) as of June 30, 2024:
| Payment Due by Period | ||||||||||||||||||||
| Less than 1 | 1-3 | 3-5 | More than 5 | |||||||||||||||||
| Total | year | years | years | years | ||||||||||||||||
| Short-term debt obligations | — | — | — | — | — | |||||||||||||||
| Promissory note | 6,245 | 6,245 | — | — | — | |||||||||||||||
| Total | 6,245 | 6,245 | — | — | — | |||||||||||||||
Off-Balance Sheet Arrangements
We do not have any outstanding off-balance arrangements and have not entered into any transactions that are established for the purpose of facilitating off-balance sheet arrangements.
Impact of Inflation
The general annual inflation rate in China was approximately 3.2% in 2023, and 2.1% in 2023 according to the National Bureau of Statistics. Our results of operations may be affected by inflation, particularly rising prices for energy, labor costs, raw materials and other operating costs. See “Item 3. Key Information — Risk Factors — Risks relating to our business. If China’s inflation increases or the prices of energy or raw materials increase, we may not be able to pass the resulting increased costs to our customers and this may adversely affect our profitability or cause us to suffer operating losses.”
FINANCIAL RISK MANAGEMENT
We are exposed to financial risks arising from our operations and the use of financial instruments. The key financial risks included credit risk, liquidity risk, interest rate risk, foreign currency risk and market price risk.
We do not hold or issue derivative financial instruments for trading purposes or to hedge against fluctuations, if any, in interest rates and foreign exchange rates.
| (i) | Credit risk |
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to us. Our exposure to credit risk arises primarily from bank balances and trade receivables. For trade receivables, we adopt the policy of dealing only with customers of appropriate credit history to mitigate credit risk. For other financial assets, we adopt the policy of dealing only with high credit quality counterparties.
As we do not hold any collateral, the maximum exposure to credit risk for each class of financial assets is the carrying amount of that class of financial assets presented on the consolidated statements of financial position.
Cash and bank balances
Our bank deposits are placed with reputable banks in the PRC, Hong Kong and the United States. The credit exposure of our cash and bank balances (excluding restricted cash) as of June 30, 2024 and December 31, 2023 were $ nil and $ nil, respectively.
| (ii) | Liquidity risk |
Liquidity risk is the risk that we will encounter difficulty in raising funds to meet commitments associated with financial instruments. Liquidity risk may result from an inability to sell a financial asset quickly at close to its fair value.
Our exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. Our objective is to maintain a balance between continuity of funding and flexibility through the use of stand-by credit facilities.
The table below summarizes the maturity profile of the liabilities based on contractual undiscounted payments:
| As of June 30, 2024 | ||||||||||||
| More than 1 | ||||||||||||
| year but less | ||||||||||||
| Within 1 year | than 5 years | Total | ||||||||||
| USD’000 | USD’000 | USD’000 | ||||||||||
| Trade payables | 639 | — | 639 | |||||||||
| Amounts owed to related parties | 53 | — | 53 | |||||||||
| Lease liability | 117 | 227 | 344 | |||||||||
| Note payable | 6,245 | — | 6,245 | |||||||||
| Total | 7,054 | 227 | 7,281 | |||||||||
| (iii) | Interest rate risk |
Interest rate risk is the risk that the fair value or future cash flows of our financial instruments will fluctuate because of changes in market interest rates.
Our interest-bearing bank deposits and borrowings were nil as of June 30, 2024.
| (iv) | Foreign currency risk |
Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. Currency risk arises when transactions are denominated in foreign currencies.
Our operations are primarily conducted in the PRC. All the sales and purchases transactions are denominated in RMB. As such, our operations are not exposed to exchange rate fluctuation.
As of June 30, 2024 and December 31, 2023, nearly all of our monetary assets and monetary liabilities were denominated in RMB except certain bank balances and other payables which were denominated in US dollars and HKD.
| C. | Research and development, patents and licenses, etc. |
We focus our research and development efforts on developing innovative Kylin-Cloud service platform.
Costs associated with research activities are expensed in profit or loss as they incur. Costs that are directly attributable to development activities are recognized as intangible assets if, and only if, all of the following have been demonstrated:
| (i) | the technical feasibility of completing the intangible asset so that the asset will be available for use or sale; |
| (ii) | the intention to complete the intangible asset and use or sell it; |
| (iii) | the ability to use or sell the intangible asset; |
| (iv) | how the intangible asset will generate probable future economic benefits; |
| (v) | the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and |
| (vi) | the ability to measure reliably the expenditure attributable to the intangible asset during its development. |
The amount initially recognized for internally generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally generated intangible asset can be recognized, development expenditure is recognized in profit or loss in the period in which it is incurred.
Subsequent to initial recognition, internally generated intangible assets are reported at cost less accumulated amortization and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
Gains and losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognized in profit or loss when the asset is derecognized.
| D. | Critical Accounting Policies and Judgment |
The preparation of the condensed consolidated interim financial statements, which have been prepared in accordance with International Accounting Standard (“IAS”) as issued by the International Accounting Standards Board (“IASB”), requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Estimates and judgments are continually evaluated and are based on historical experiences and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results may materially differ from these estimates under different assumptions or conditions.
| Critical accounting estimates and assumptions |
We make estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The key sources of estimation uncertainty and key assumptions concerning the future at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:
Useful lives and impairment assessment of property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and identified impairment losses. The estimation of useful lives impacts the level of annual depreciation expenses recorded. Property, plant and equipment are evaluated for possible impairment on a specific asset basis or in groups of similar assets, as applicable. This process requires management’s estimate of future cash flows generated by each asset or group of assets. For any instance where this evaluation process indicates impairment, the relevant asset’s carrying amount is written down to the recoverable amount and the amount of the write-down is charged against profit or loss.
Useful lives and impairment assessment of investment property
Investment properties are stated at cost less accumulated depreciation and identified impairment losses. The estimation of useful lives impacts the level of annual depreciation expenses recorded. Investment properties are evaluated for possible impairment on a specific asset basis or in groups of similar assets, as applicable. This process requires management’s estimate of future cash flows generated by each asset or group of assets. For any instance where this evaluation process indicates impairment, the relevant asset’s carrying amount is written down to the recoverable amount and the amount of the write-down is charged against profit or loss.
Impairment loss recognized in respect of property, plant and equipment
As of June 30, 2024, the net carrying amount of property, plant and equipment was approximately $1,946,000 (2023: $161,000). No impairment loss was recognized for the six months ended June 30, 2024 and 2023. Determining whether property, plant and equipment are impaired requires an estimation of the recoverable amount of the property, plant and equipment. Such an estimate was based on certain assumptions which are subject to uncertainty and might materially differ from the actual results.
Income tax
The Company has exposure to income taxes in the PRC. Significant judgment is required in determining the provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Company recognizes liabilities for expected tax issues based on estimates of whether additional taxes will be due. When the final tax outcome of these matters is different from the amounts that were initially recognized, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.
Impairment of financial assets (trade receivables)
The Company recognizes a loss allowance for expected credit loss (“ECL”) on financial assets which are subject to impairment under IFRS 9 (including trade and other receivables, amounts due from related parties, restricted cash, bank balances and cash). The amount of ECL is updated at each reporting date to reflect changes in credit risk since initial recognition.
Lifetime ECL represents the ECL that will result from all possible default events over the expected life of the relevant instrument. In contrast, 12-month ECL (“12m ECL”) represents the portion of lifetime ECL that is expected to result from default events that are possible within 12 months after the reporting date. Assessment are done based on the Company’s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current conditions at the reporting date as well as the forecast of future conditions.
The Company applies the IFRS 9 simplified approach to measure ECL which uses a lifetime ECL for all trade receivables. The ECL on these assets are assessed individually for debtors with significant balances and/or collectively using a provision matrix with appropriate groupings.
For all other instruments, the Company measures the loss allowance equal to 12m ECL, unless when there has been a significant increase in credit risk since initial recognition, the Company recognizes lifetime ECL. The assessment of whether lifetime ECL should be recognized is based on significant increases in the likelihood or risk of a default occurring since initial recognition.
The Company recognized bad debts reversal of $ nil and $ nil for the six months ended June 30, 2024 and 2023, respectively. The Company’s discontinued operation recognized bad debts reversal of $ 144,000 for the six months ended June 30, 2023.
Share-based payment transaction
The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair value for share-based payment transactions requires determining the most appropriate valuation model which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the stock option, volatility and dividend yield, and the assumptions as to these components.