18th Mar 2010 18:00
18 March 2010
LED International Holdings Limited
("LED" or the "Company")
Interim Results
For the six-month ended 31 December 2009
INTRODUCTION
LED (AIM: LED) and its subsidiaries (together the "Group") specialise in the development, manufacture and sale of LED module and other LED products such as LED screens, advertising displays, outdoor signs, lamps, lighting and building illumination. The Board of Directors (the "Board") is pleased to report on the unaudited interim results of the Group for the six-month ended 31 December 2009.
OPERATING REVIEW
The global business environment has steadily recovered throughout the period under review and, like many other business, our operating performance was significantly affected by the continuing slowdown in China's domestic and export markets. The Group experienced a loss for the six-month period ended 31 December 2009. This is mainly attributable to a reduction in export and domestic sales orders from the Group's customers as a result of a general economic slowdown during the financial period, and a conservative approach over negotiating sales orders in view of the deteriorating credit quality of overseas customers.
Due to the above factors, the Board is continuing to implement measures to diversify sources of revenue and to reduce expenditure, control production costs and expand the customer base in different areas, such as overseas markets, where there is demand for higher value products. The Board considers that the overall Group's operations remain robust.
FINANCIAL REVIEW
Revenue attributable to shareholders for the six-month ended 31 December 2009 amounted to approximately HK$14,515,000 (approximately £1,247,000) and this resulted in a loss of HK$5,101,000 (approximately £438,000).
The Group had focused on substantial completion and delivery of a LED display screen to be delivered in phases during the previous financial year, ended 30 June 2009. As detailed below, no revenue on supply and installation of LED display screens was recognised in the Group's continuing operations during the financial period under review. Indeed, since September 2007, no business transactions on sales of LED signboards, LED lighting and lighting engineering has been conducted, by the Group's continuing operations.
Operating gross margin of LED element products of 10.5% was achieved during the financial period under review, lower than prior periods of 12%, due to the significant increase in costs. The increase in the Group's loss is primarily attributable to the decline in revenue generated from continuing operations following the substantial deterioration of global business environment, in particular in the LED business sector in the PRC.
In meeting its current liquidity requirements, the Group has reached the agreements with the key creditors, which would be due within twelve months from the balance sheet date, to reschedule the repayments. In the longer term, the Group has been discussing with prospective investors to obtain new working capital and meet its liquidity requirements.
In response to the intense competition in LED products in the PRC, the Group has strengthened its research and development capabilities through the acquisition of Strongbase New Shenzhen Limited ("Strongbase New") to further raise its brand profile to distinguish itself from generic LED product suppliers, as contained under the heading of Acquisition of Subsidiary below.
CONTRACT UPDATE
Since the 30 June 2009, the North Point Project had been substantially completed. The final installment of approximately HK$1,129,000 (approximately £97,000), net of deductions and retentions, due to the Company has been delayed due to certain technical issues. The Board has endeavored to resolve those technical issues with the owner of the North Point Project and the Board expects that the Company will receive this sum payable immediately upon satisfactory resolution of those technical issues before the end of the current financial year. The Company has applied its best efforts, and will continue to work hard, to coordinate with the Project owner to carry out final completion checks.
ACQUISITION OF SUBSIDIARY
On 29 July 2008, the Company acquired a 100 per cent. stake in Strongbase New, a specialist in LED and LED related products, accessories and appliances. Strongbase New has both R&D and manufacturing expertise in relation to LED related products and possesses numerous patents and other intellectual property for LED products and LED applications. Its product offering includes LED devices, displays, lighting and appliances. The acquisition of Strongbase New allows the Group to broaden its product offering to include higher specification products for both its domestic markets and international clients. It will also provide the Group with access to new intellectual property for further product development.
The aforesaid acquisition is in the process of application of legal title transfer.
DISPOSAL OF SUBSIDIARY
Following a strategic review by the Board, it was decided that an orderly disposal of Shenzhen China-LED Photo-Technology Limited ("Shenzhen LED") was the best course of action and in the best interests of shareholders. Shenzhen LED had ceased its business operations by September 2007. Production was transferred elsewhere and no trading by or through Shenzhen LED has been conducted since September 2007. Shenzhen LED previously manufactured LED screens.
The Group entered into a sale and purchase agreement with Tian Fu Kai Jia Information Company Limited ("TFKJ") on 13 April 2009 to dispose of Shenzhen LED for a consideration of RMB25 million (approximately £2,470,000) payable quarterly in four equal tranches of RMB6.25 million (approximately £617,500) commencing from the date of completion of the disposal, subject to certain conditions precedent, which include inter alia, obtaining the relevant approvals from the PRC government authorities in relation to the disposal of Shenzhen LED. The Group has instructed its legal advisors to obtain the relevant approval from the PRC government authorities in relation to the disposal and obtain a charge on 45 per cent. of capital value of certain LED Projects held by TFKJ to secure TFKJ's payment obligations.
The Board has confidence that it will resolve the settlement issue with TFKJ and the Group by the end of the year shall apply the proceeds from the disposal to its working capital in order to enhance its financial position.
FUND RAISING
Issuance of Convertible Loan Notes
On 8 September 2009, the Company issued a Convertible Loan Notes to Mr. Thomas Li, LED' Chairman, for the loan by him of a sum of HK$2,500,000 (approximately £197,000) to support the Company's working capital position. Mr. Li had lent to the Company since November 2008 a total sum of HK$9,379,000 (approximately £739,000) and it had been agreed with Mr. Li that of this sum HK$8,500,000 (approximately £670,000) would be convertible into new shares in the capital of the Company via the issue of convertible loan notes (the "Loan Notes") to him. The Loan Notes are convertible into ordinary shares of LED at a 10 per cent. discount to the volume weighted average price for the 30 days immediately preceding the date of conversion. Subsequent to 31 December 2009, Mr. Li had exercised his rights under the Loan Notes to convert into ordinary shares of LED ("Ordinary Shares") as set out below.
The outstanding loan, amounting to HK$3,379,000 (approximately £266,000) due to Mr. Li will attract interest of 4 per cent. above 3 month LIBOR.
Placing of new Ordinary Shares
On 10 February 2010, the Company placed 5,000,000 new Ordinary Shares of HK$0.10 each ("the Placing Shares") at a placing price of 1.5 pence per Placing Share, raising £75,000. The placing proceeds were used to augment LED's working capital position.
ISSUANCE OF NEW ORDINARY SHARES
The EGM was held on 26 February 2010 to authorise the Board to allot 19,320,000 Ordinary Shares in the Company so as to discharge its existing obligations in respect of the acquisition of Kepu Electronic Technology (Shenzhen) Company Limited, as announced on 1 May 2007.
DIRECTORS' DEALINGS IN SHARES
Exercise of Management Share Options
On 2 January 2010, Mr. Stephen Chan, LED's Chief Financial Officer, exercised his share options over 4,363,539 Ordinary Shares, awarded to him on 18 May 2009, at a price of HK$0.10 (approximately 1 pence) per Ordinary Share.
On 4 January 2010, Mr. Allan Leung, exercised his share options over 15,272,388 Ordinary Shares, awarded to him on 3 June 2009, at a price of HK$0.10 (approximately 1 pence) per Ordinary Share.
Exercise of Convertible Loan Notes
On 4 January 2010, Mr. Thomas Li had exercised his rights under the Loan Note Instrument and Subscription Agreement dated 8 September 2009 to convert HK$8,500,000 (approximately £685,000) Loan Notes into 37,845,058 Ordinary Shares at a conversion price of approximately HK$0.22 (1.80 pence) per Ordinary Share.
Directors' dealings
On 5 January 2010, Mr. Thomas Li acquired, from his brother, Mr. Lee Man Bun, 16,025,000 Ordinary Shares at a price of HK$0.12 (1 pence) per Ordinary Share, demonstrating his confidence in the Company's future prospects.
On 15 January 2010, Thomas Li and Stephen Chan acquired 10,095,927 Ordinary Shares and 3,856,461 Ordinary Shares respectively at a price of HK$0.1899 (1.5 pence) per Ordinary Share respectively demonstrating their continuing confidence in the Company's future prospects.
Thomas Li and Stephen Chan now hold 63,965,985 Ordinary Shares and 8,220,000 Ordinary Shares respectively, representing 24.92 per cent. and 3.20 per cent. respectively of the Issued Share Capital. The Issued Share Capital now consists of 256,658,489 Ordinary Shares.
BOARD CHANGES
Mr. Dennis Ow, Deputy Chief Executive Officer, resigned from the Board with effect from 21 February 2010.
DIVIDEND
The Directors are not recommending payment of a dividend for the period under review and the Board is committed to an ongoing review of the Company's dividend policy.
PROSPECTS
The Board remains confident in the Group's long-term growth potential and considers that the overall operations of the Group remain sound. Our expertise in the LED sector, as well as our focus on high value added products, can help the Group to focus on the niche markets such as LED based lighting products, integrated with solar energy saving solutions, consumed primarily in domestic and overseas household markets, and variable speed signs for China's highways and road network.
The Group is also looking to develop higher value-added LED products, such as the LED traffic lighting business although competition is keen, and to focus on areas where demand will remain strong. One key objective is to further develop our expertise in producing high quality, reliable and innovative LED products and solutions, and we will exploit this expertise in the LED sector to explore business opportunities in the LED related media business. China has a comparatively low per capita spending in outdoor advertising and, coupled with the Chinese government's determination to maintain domestic consumption in 2010, we believe there are good opportunities for the Group to enter the outdoor media market and to leverage its LED products and established relationships with leading media players. Apart from the huge opportunities in the domestic outdoor media market, the Group endeavours to exploit its own quality expertise in the overseas outdoor media market, where its spending has been recovering after the financial tsunami.
APPRECIATION
Finally, on behalf of the Board, I would like to thank our customers, suppliers and shareholders for their continued support of LED International Holdings Limited. I would also like to acknowledge the hard work of the management and all the staff for their contribution and dedication to the Company.
Thomas Li
Executive Chairman
For further information:
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LED International Holdings Limited |
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Stephen Chan, Chief Financial Officer |
+852 2243 3100 |
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Strand Hanson Limited |
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James Harris / James Spinney |
+44 (0) 207 049 3494 |
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Notes to Editors:
LED International Holdings Limited and its subsidiaries specialise in the development, manufacture and sale of low powered / low maintenance LED screens and other LED products such as outdoor signs, lamps, lighting and building illumination. The screens are manufactured in a 'building block' format to a specific design, which allows screens to be assembled to suit a customer's size and definition specifications.
This design also ensures that the screens are relatively easy to transport and assemble. Based in Hong Kong, the Company's primary market has been the People's Republic of China ("PRC"), but it has also supplied end products to Macau, Japan and the USA. Part of the Company's strategy in 2007 was to widen its customer base to markets outside PRC.
The Company was originally listed on AIM, a market operated by the London Stock Exchange, on 23 October 2006. For more information, please visit: http://www.led-intl.com
LED INTERNATIONAL HOLDINGS LIMITED
CONSOLIDATED INCOME STATEMENT
FOR THE SIX-MONTH ENDED 31 DECEMBER 2009
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Note |
Six-month ended 31 December 2009 |
Six-month ended 31 December 2008 |
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(Unaudited) |
(Unaudited) |
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HK$'000 |
HK$'000 |
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Continuing operations |
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Turnover |
3 |
14,515 |
36,759 |
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Cost of sales |
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(12,993) |
(32,203) |
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Gross profit |
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1,522 |
4,556 |
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Other income |
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105 |
180 |
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Distribution costs |
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(205) |
(364) |
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Administrative expenses |
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(5,727) |
(4,768) |
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Other operating expenses |
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(605) |
(1,560) |
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Loss from operations |
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(4,910) |
(1,956) |
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Finance costs |
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(191) |
(145) |
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Loss before taxation |
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(5,101) |
(2,101) |
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Income tax |
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- |
- |
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Loss for the period from continuing operations |
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(5,101) |
(2,101) |
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Discontinued operation |
4 |
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Loss for the period from discontinued operation |
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- |
- |
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Loss for the period |
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(5,101) |
(2,101) |
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Loss per share |
5 |
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From continuing and discontinued operations |
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- Basic and diluted (HK cents per share) |
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(2.39) |
(1.2) |
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From continuing operations |
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- Basic and diluted (HK cents per share) |
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(2.39) |
(1.2) |
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LED INTERNATIONAL HOLDINGS LIMITED
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2009
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Note |
At 31 December 2009 |
At 30 June 2009 |
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(Unaudited) |
(Audited) |
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HK$'000 |
HK$'000 |
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Non-current assets |
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Property, plant and equipment |
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10,223 |
8,951 |
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Goodwill |
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12,832 |
12,832 |
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23,055 |
21,783 |
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Current assets |
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Inventories |
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4,252 |
4,156 |
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Trade and other receivables |
11(c)(ii) |
15,025 |
13,514 |
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Cash and cash equivalents |
7 |
366 |
320 |
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19,643 |
17,990 |
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Non-current assets classified as held for sale |
4 |
33,942 |
33,942 |
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53,585 |
51,932 |
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Current liabilities |
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Trade and other payables |
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24,584 |
18,604 |
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Amount due to a director |
11(b) |
11,966 |
9,923 |
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Current taxation |
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1,480 |
1,476 |
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38,030 |
30,003 |
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Liabilities directly associated with non-current assets classified as held for sale |
4 |
22,800 |
22,800 |
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60,830 |
52,803 |
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Net current liabilities |
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(7,245) |
(871) |
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NET ASSETS |
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15,810 |
20,912 |
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CAPITAL AND RESERVES |
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Equity attributable to equity holders of the Company |
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Share capital |
8 |
19,418 |
19,418 |
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Reserves |
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(15,033) |
(9,931) |
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Amount recognised directly in equity relating to non-current assets held for sale |
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11,425 |
11,425 |
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TOTAL EQUITY |
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15,810 |
20,912 |
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LED INTERNATIONAL HOLDINGS LIMITED
CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX-MONTH ENDED 31 DECEMBER 2009
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Note |
Six-month ended 31 December 2009 |
Six-month ended 31 December 2008 |
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(Unaudited) |
(Unaudited) |
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HK$'000 |
HK$'000 |
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Operating activities |
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Loss before taxation: |
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Continuing operations |
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(5,101) |
(2,101) |
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Discontinued operation |
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- |
- |
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Adjustments for: |
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Interest income |
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- |
(1) |
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Interest expenses |
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191 |
57 |
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Depreciation of property, plant and equipment |
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1,353 |
1,488 |
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Amortisation of intangible assets |
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- |
25 |
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Loss on disposal of property, plant and equipment |
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- |
9 |
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Operating loss before movement in working capital |
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(3,557) |
(523) |
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(Decrease) / Increase in inventories |
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(96) |
1,077 |
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Decrease in trade and other receivables |
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(1,511) |
(10,776) |
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Increase in trade and other payables |
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5,983 |
8,482 |
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Increase in amount due to a director |
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2,043 |
- |
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Net cash generated from / (used in) operating activities |
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2,862 |
(1,740) |
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Investing activities |
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Payment for purchase of property, plant and equipment |
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(2,628) |
(869) |
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Acquisition of a subsidiary, net cash acquired |
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- |
(1,815) |
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Proceeds from disposal of property, plant and equipment |
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- |
8 |
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Interest received |
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- |
1 |
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Net cash generated used in investing activities |
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(2,628) |
(2,675) |
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Financing activities |
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Proceeds from issue of ordinary shares |
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- |
4,692 |
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Interest paid |
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(191) |
(57) |
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Net cash (used in) / generated from financing activities |
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(191) |
4,635 |
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Net increase in cash and cash equivalents |
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43 |
220 |
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Cash and cash equivalents at beginning of the period |
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428 |
322 |
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Effect of foreign exchange rate changes |
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3 |
(114) |
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Cash and cash equivalents at end of the period |
7 |
474 |
428 |
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LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE INTERIM FINANCIAL INFORMATION
FOR THE SIX-MONTH ENDED 31 DECEMBER 2009
1. GENERAL INFORMATION
LED International Holdings Limited (the "Company") was domiciled and incorporated in Hong Kong with limited liability under the Hong Kong Companies Ordinance. The registered office and principal place of business of the Company is located at Suite 911, 9/F Exchange Tower, 33 Wang Chiu Road, Kowloon Bay, Kowloon.
The principal activities of the Company are investment holding, and supply and install of LED display screens. The principal activities of its subsidiaries are set out in Note 6 to the interim financial information.
On 23 October 2006, the Company was admitted to trading on the Alternative Investment Market ("AIM") of the London Stock Exchange.
The interim financial information is presented in Hong Kong dollars ("HK$"), which is the same as the functional currency of the Company, and all values are rounded to the nearest thousand except when otherwise indicated.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Statement of compliance
The interim financial information has been prepared in accordance with all applicable International Financial Reporting Standards ("IFRSs"), which collective term includes all applicable individual International Financial Reporting Standards, International Accounting Standards and Interpretations and comply with the AIM Rules issued by the London Stock Exchange. In addition, the interim financial information includes applicable disclosures required by the Hong Kong Companies Ordinance. A summary of the significant accounting policies adopted by the Group is set out below.
(b) Basis of preparation of interim financial information
The interim financial information for the six-month ended 31 December 2009 comprises the Company and its subsidiaries (together referred to as the "Group").
The measurement basis used in the preparation of the interim financial information is the historical cost basis except that non-current assets held for sale are stated at the lower of carrying amount and fair value less costs to sell.
The preparation of interim financial information in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE INTERIM FINANCIAL INFORMATION
FOR THE SIX-MONTH ENDED 31 DECEMBER 2009
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b) Basis of preparation of interim financial information (continued)
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
Judgements made by management in the application of IFRSs that have significant effect on the interim financial information and major sources of estimation uncertainty are discussed in Note 16.
Going concern
The Group incurred a consolidated net loss from continuing operations attributable to the equity holders of the Company of approximately HK$5,101,000 for the six-month ended 31 December 2009 and, as of that date, the Group had consolidated net current liabilities from its continuing operations of approximately HK$18,387,000. The Group is currently undertaking a number of measures to improve its liquidity and financial position. The interim financial information has been prepared on a going concern basis, the validity of which depends upon the ongoing financial support from the Company's substantial shareholder to finance the Group's future working capital for its continuing operations.
During the six-month ended 31 December 2009 and subsequently, management has taken measures to improve the liquidity and financial position of the Group as follows:
1. The Group has been discussing with prospective investors to obtain new working capital;
2. The management has taken action to tighten cost controls over various operating and general and administrative expenses; and
3. On 8 September 2009, the Company issued a Convertible Loan Notes to Mr. Thomas Li for the loan by him of a sum of HK$2,500,000 to support the Company's working capital position. It had been agreed with Mr. Li that of this loan HK$8,500,000 would be convertible into new shares in the capital of the Company via the issue of convertible loan notes (the "Loan Notes") to him. The Loan Notes are convertible into ordinary shares of LED. Subsequent to 31 December 2009, Mr. Li had exercised his rights under the Loan Notes to convert into ordinary shares of LED. The outstanding loan, amounting to HK$3,379,000 due to Mr. Li attracts interest of 4 per cent. above 3 month LIBOR.
Accordingly, the directors are of the opinion that it is appropriate to prepare the interim financial information for the six-month ended 31 December 2009 on a going concern basis notwithstanding the Group's liquidity and financial position as at 31 December 2009. However, if these measures were not to be successful or insufficient, or if the going concern basis were not be appropriate, adjustments would have to be made to write down the value of assets to their recoverable amounts, to provide for further liabilities which might arise and to reclassify non-current assets as non-current liabilities as current assets and current liabilities respectively. The effect of these adjustments has not been reflected in the interim financial information.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE INTERIM FINANCIAL INFORMATION
FOR THE SIX-MONTH ENDED 31 DECEMBER 2009
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(c) Subsidiaries
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account.
An investment in a subsidiary is consolidated into the interim financial information from the date that control commences until the date that control ceases. Intra-group balances and transactions and any unrealised profits arising from intra-group transactions are eliminated in full in preparing the interim financial information. Unrealised losses resulting from intra-group transactions are eliminated in the same way as unrealised gains but only to the extent that there is no evidence of impairment.
3. TURNOVER
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Six-month ended 31 December 2009 |
Six-month ended 31 December 2008 |
|
|
(Unaudited) |
(Unaudited) |
|
|
HK$'000 |
HK$'000 |
|
|
|
|
|
Continuing operations |
|
|
|
Supply and install of LED displays screens |
- |
20,611 |
|
Sales of LED element products |
14,515 |
16,148 |
|
|
|
|
|
Discontinued operation (Note 4) |
|
|
|
Sales of LED signboards, LED lighting and lighting engineering |
- |
- |
|
|
|
|
|
|
14,515 |
36,759 |
The principal activities of the Group are assembly and manufacturing of LED element products, LED displays screens, LED signboards, LED lighting and lighting engineering.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE INTERIM FINANCIAL INFORMATION
FOR THE SIX-MONTH ENDED 31 DECEMBER 2009
4. DISCONTINUED OPERATION
On 11 February 2009, the Group entered into a preliminary sale and purchase agreement to dispose of its entire interest in a wholly owned subsidiary, Shenzhen China-LED Photo-Technology Limited ("Shenzhen LED" or the "Disposal Group"). The consideration is determined by reference to their net asset value as stated in the PRC statutory financial statements as at 15 February 2009, prepared under generally accepted accounting principles in the People's Republic of China. Accordingly, the assets and liabilities of Shenzhen LED were classified as held for sale as at 31 December 2009 and stated at the lower of the carrying amount and fair value less costs to sell. Pursuant to extraordinary general meeting passed on 3 April 2009, the Group entered into the sale and purchase agreement on 13 April 2009. Up to the date of this report, the PRC Government's approval of transfer of legal title of Shenzhen LED has not yet been granted.
The results and cash flows of the discontinued operation included in the consolidated income statement and the consolidated cash flow statement are as follows:
|
|
Six-month ended 31 December 2009 |
Six-month ended 31 December 2008 |
|
|
(Unaudited) |
(Unaudited) |
|
|
HK$'000 |
HK$'000 |
|
|
|
|
|
Results of discontinued operation |
|
|
|
Turnover - sales of goods (Note 3) |
- |
- |
|
Cost of sales |
- |
- |
|
|
|
|
|
Gross loss |
- |
- |
|
Other income |
- |
- |
|
Distribution costs |
- |
- |
|
Administrative expenses |
- |
- |
|
Other operating expenses |
- |
- |
|
|
|
|
|
Loss from operation |
- |
- |
|
Finance costs |
- |
- |
|
|
|
|
|
Loss before taxation |
- |
- |
|
Income tax |
- |
- |
|
|
|
|
|
Loss for the period from discontinued operation |
- |
- |
|
|
|
|
|
Cash flows from discontinued operation |
|
|
|
Net cash inflow from operating activities |
- |
- |
|
Net cash inflow from investing activities |
- |
- |
|
Net cash inflow from financing activities |
- |
- |
|
|
|
|
|
Net cash inflow from discontinued operation |
- |
- |
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE INTERIM FINANCIAL INFORMATION
FOR THE SIX-MONTH ENDED 31 DECEMBER 2009
4. DISCONTINUED OPERATION (CONTINUED)
The major classes of assets and liabilities comprising the Disposal Group classified as held for sale as at 31 December 2009 are as follows:
|
|
At 31 December 2009 |
At 30 June 2009 |
|
|
(Unaudited) |
(Audited) |
|
|
HK$'000 |
HK$'000 |
|
|
|
|
|
Non-current assets classified as held for sale |
|
|
|
Property, plant and equipment |
5,953 |
5,953 |
|
Trade and other receivables |
14,067 |
14,067 |
|
Amounts due from related companies |
13,814 |
13,814 |
|
Cash and cash equivalents |
108 |
108 |
|
|
|
|
|
Total |
33,942 |
33,942 |
|
|
|
|
|
Liabilities directly associated with non-current assets classified as held for sale |
|
|
|
Trade and other payables |
4,744 |
4,744 |
|
VAT payable |
17,236 |
17,236 |
|
Current taxation |
820 |
820 |
|
|
|
|
|
Total |
22,800 |
22,800 |
5. LOSS PER SHARE
From continuing and discontinued operations
The calculation of basic and diluted loss per share is based on the consolidated loss attributable to equity holders of the Company for the six-month ended 31 December 2009 of approximately HK$5,101,000 (2008: HK$2,101,000) and the weighted average number of shares in issue during the period of 213,497,000 shares (2008: 181,609,000 shares). As there was antidilutive effect of potential dilutive shares in the period not accounted for, diluted loss per share equal the basic loss per share.
From continuing operations
Basic and diluted loss per share are calculated by dividing the consolidated loss attributable to equity holders of the Company from continuing operations for the six-month ended 31 December 2009 of approximately HK$5,101,000 (2008: HK$2,101,000) by the weighted average number of shares in issue during the period of 213,497,000 shares (2008: 181,609,000 shares). As there was antidilutive effect of potential dilutive shares in the period not accounted, diluted loss per share from continuing operations equal the basic loss per share from continuing operations.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE INTERIM FINANCIAL INFORMATION
FOR THE SIX-MONTH ENDED 31 DECEMBER 2009
6. SUBSIDIARIES
The details of the subsidiaries at 31 December 2009 are as follows:
|
Name of company |
Place of incorporation/ establishment and operation |
Particulars of issued share capital/ registered capital |
Proportion of ownership interests held by the Company |
Principal activities |
|
|
|
|
|
|
|
LED International (Far East) Limited |
Hong Kong |
10,002 ordinary shares of HK$1 each |
100% (Direct) |
Investment holding |
|
|
|
|
|
|
|
Shenzhen China-LED Photo-Technology Limited |
The People's Republic of China |
Registered capital of RMB50,000,000 |
100% (Indirect) |
Assembly and production of LED signboards, LED lighting and lighting engineering |
|
|
|
|
|
|
|
Kepu Electronic Technology (Shenzhen) Company Limited |
The People's Republic of China |
Registered capital of RMB6,000,000 |
100% (Indirect) |
Manufacturing of LED element products |
|
|
|
|
|
|
|
LED International Green Energy Corporation Limited |
Hong Kong |
1 ordinary share of HK$1 |
100% (Direct) |
Provision for energy savings project |
|
|
|
|
|
|
|
LED International Energy Conservation Holdings Limited |
British Virgin Islands |
1 ordinary share of US$0.1 |
100% (Direct) |
Investment holding |
|
|
|
|
|
|
|
LED International Media Holdings Limited |
British Virgin Islands |
1 ordinary share of US$0.1 |
100% (Direct) |
Investment holding |
|
|
|
|
|
|
|
LED International Outdoor Media Limited |
Hong Kong |
1 ordinary share of HK$1 |
100% (Indirect) |
Provision for outdoor media programs and projects |
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE INTERIM FINANCIAL INFORMATION
FOR THE SIX-MONTH ENDED 31 DECEMBER 2009
7. CASH AND CASH EQUIVALENTS
|
|
At 31 December 2009 |
At 30 June 2009 |
|
|
(Unaudited) |
(Audited) |
|
|
HK$'000 |
HK$'000 |
|
|
|
|
|
Cash and cash equivalents in the consolidated balance sheet |
366 |
320 |
|
Cash and cash equivalents classified as held for sale (Note 4) |
108 |
108 |
|
|
|
|
|
Cash and cash equivalents in the consolidated cash flow statement |
474 |
428 |
Cash and cash equivalents include an amount of approximately HK$472,000 (30 June 2009: HK$344,000) denominated in Chinese Yuan Renminbi ("RMB"). RMB is not freely convertible into foreign currencies and the remittance of funds out of the Mainland China is subject to exchange restrictions imposed by the PRC government.
8. SHARE CAPITAL
(a) Authorised and issued share capital
|
|
At 31 December 2009 |
|
At 30 June 2009 |
||
|
|
(Unaudited) |
|
(Audited) |
||
|
|
No. of shares |
HK$'000 |
|
No. of shares |
HK$'000 |
|
Authorised: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares of HK$0.10 each |
200,000,000 |
20,000 |
|
200,000,000 |
20,000 |
|
|
|
|
|
|
|
|
Issued and fully paid: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares of HK$0.10 each ("Ordinary Shares") |
|
|
|
|
|
|
At beginning of period |
194,177,504 |
19,418 |
|
148,460,420 |
14,846 |
|
Issue of new shares |
- |
- |
|
45,717,084 |
4,572 |
|
|
|
|
|
|
|
|
At end of period |
194,177,504 |
19,418 |
|
194,177,504 |
19,418 |
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE INTERIM FINANCIAL INFORMATION
FOR THE SIX-MONTH ENDED 31 DECEMBER 2009
8. SHARE CAPITAL (CONTINUED)
(a) Authorised and issued share capital (continued)
On 29 July 2008, the Company issued 16,025,000 Ordinary Shares of HK$0.10 each at HK$0.156 per Ordinary Share as a partial consideration for acquisition of Strongbase New Shenzhen Limited as set out in Note 12 to the interim financial information.
On 9 September 2008, the Company issued 29,692,084 Ordinary Shares of HK$0.10 each at HK$0.158 per Ordinary Share for cash to increase working capital of the Company.
On 2 January 2010, Mr. Stephen Chan, LED's Chief Financial Officer, exercised his share options over 4,363,539 Ordinary Shares, awarded to him on 18 May 2009, at a price of HK$0.10 per Ordinary Share.
On 4 January 2010, Mr. Allan Leung, exercised his share options over 15,272,388 Ordinary Shares, awarded to him on 3 June 2009, at a price of HK$0.10 per Ordinary Share.
On 4 January 2010, Mr. Thomas Li had exercised his rights under the Loan Note Instrument and Subscription Agreement dated 8 September 2009 to convert HK$8,500,000 Loan Notes into 37,845,058 Ordinary Shares at a conversion price of approximately HK$0.22 (1.80 pence) per Ordinary Share.
On 10 February 2010, the Company placed 5,000,000 new Ordinary Shares of HK$0.10 each ("the Placing Shares") at a placing price of 1.5 pence per Placing Share, raising £75,000. The placing proceeds were used to augment LED's working capital position.
The EGM was held on 26 February 2010 to authorise the Board to allot 19,320,000 Ordinary Shares in the Company so as to discharge its existing obligations in respect of the acquisition of Kepu Electronic Technology (Shenzhen) Company Limited, as announced on 1 May 2007.
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All Ordinary Shares rank equally with regards to the Company's residual assets.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE INTERIM FINANCIAL INFORMATION
FOR THE SIX-MONTH ENDED 31 DECEMBER 2009
8. SHARE CAPITAL (CONTINUED)
(b) Terms of unexpired and unexercised share options and warrants at the balance sheet date
|
|
|
At 31 December 2009 |
|
At 30 June 2009 |
|
|
|
Exercise |
(Unaudited) |
|
(Audited) |
|
|
Exercise period |
price |
Number |
|
Number |
|
|
|
|
|
|
|
|
|
16 October 2006 to 15 October 2011 |
10.00 pence |
2,737,401 |
|
2,737,401 |
|
|
16 October 2006 to 15 October 2011 |
12.50 pence |
2,737,401 |
|
2,737,401 |
|
|
16 October 2007 to 15 October 2011 |
10.00 pence |
456,234 |
|
456,234 |
|
|
16 October 2008 to 15 October 2011 |
10.00 pence |
456,234 |
|
456,234 |
|
|
16 October 2009 to 15 October 2011 |
10.00 pence |
456,233 |
|
456,233 |
|
|
18 May 2009 to 3 June 2019 |
10.00 HK cents |
4,363,539 |
|
4,363,539 |
|
|
3 June 2009 to 3 June 2019 |
10.00 HK cents |
17,454,158 |
|
17,454,158 |
|
|
30 December 2009 to 27 May 2012 |
10.00 HK cents |
2,181,770 |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
30,842,970 |
|
28,661,200 |
Each option and warrant entitles the holder to subscribe for one Ordinary Share in the Company. Further details of these options and warrants are set out in Note 9 to the interim financial information.
(c) Capital management
The Group's primary objectives when managing capital are to safeguard the Group's ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, by pricing products and services commensurately with the level of risk and by securing access to finance at a reasonable cost.
The Group actively and regularly reviews and manages its capital structure to maintain a balance between the higher shareholder returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position, and makes adjustments to the capital structure in light of changes in economic conditions.
The Group monitors its capital structure on the basis of a gearing ratio, which is the Group's total liabilities divided by the Group's total assets. The Group's policy is to keep the gearing ratio at a reasonable level. The Group's gearing ratio as at 31 December 2009 was 0.79 (30 June 2009: 0.72).
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE INTERIM FINANCIAL INFORMATION
FOR THE SIX-MONTH ENDED 31 DECEMBER 2009
9. EQUITY SETTLED SHARE-BASED TRANSACTIONS
(a) The terms and conditions of the grants that existed during the six-month ended 31 December 2009 are as follows:
|
|
Number of instruments |
Vesting conditions |
Contractual life of options |
|
Options granted to management (Note (ii)): |
|
|
|
|
- on 16 October 2006 |
4,562,336 |
One year from the date of grant |
5 years |
|
- on 16 October 2006 |
4,562,336 |
Two years from the date of grant |
5 years |
|
- on 16 October 2006 |
4,562,337 |
Three years from the date of grant |
5 years |
|
- on 18 May 2009 |
4,363,539 |
- |
10.04 years |
|
- on 3 June 2009 |
17,454,158 |
- |
10 years |
|
|
|
|
|
|
Options granted to Corporate Synergy Plc (Note (iii)): |
|
|
|
|
- on 16 October 2006 |
5,474,802 |
- |
5 years |
|
|
|
|
|
|
Warrants granted to Strand Hanson Limited (Note (iv)): |
|
|
|
|
- on 30 December 2009 |
2,181,770 |
- |
2.42years |
|
|
|
|
|
|
Total share options and warrants granted |
43,161,278 |
|
|
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE INTERIM FINANCIAL INFORMATION
FOR THE SIX-MONTH ENDED 31 DECEMBER 2009
9. EQUITY SETTLED SHARE-BASED TRANSACTIONS (CONTINUED)
(b) Movements in the number of share options and warrants outstanding and their related weighted average exercise prices attributable to Strand Hanson Limited, Corporate Synergy Plc and the management of the Group as grantees of the warrant instrument issued and share option scheme operated by the Company are as follows:
|
|
At 31 December 2009 |
|
At 30 June 2009 |
||
|
|
(Unaudited) |
|
(Audited) |
||
|
|
Weighted average exercise price |
Number of options and warrants |
|
Weighted average exercise price |
Number of options and warrants |
|
|
(pence) |
(Note (i)) |
|
(pence) |
(Note (i)) |
|
|
|
|
|
|
|
|
Outstanding at beginning of the period |
3.22 |
28,661,200 |
|
10.36 |
19,161,811 |
|
|
|
|
|
|
|
|
Granted during the period |
0.80 |
2,181,770 |
|
0.80 |
21,817,697 |
|
|
|
|
|
|
|
|
Lapsed during the period |
|
- |
|
10.00 |
(12,318,308) |
|
|
|
|
|
|
|
|
Outstanding at end of the period |
3.05 |
30,842,970 |
|
3.22 |
28,661,200 |
|
|
|
|
|
|
|
|
Exercisable at end of the period |
3.05 |
30,842,970 |
|
3.11 |
28,204,966 |
* The 12,318,308 share options granted under the share options scheme lapsed upon the resignation of the management of the Group.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE INTERIM FINANCIAL INFORMATION
FOR THE SIX-MONTH ENDED 31 DECEMBER 2009
9. EQUITY SETTLED SHARE-BASED TRANSACTIONS (CONTINUED)
The share options and warrants outstanding as at 31 December 2009 have the following remaining contractual lives and exercise prices:
|
|
At 31 December 2009 |
|
At 30 June 2009 |
||
|
|
(Unaudited) |
|
(Audited) |
||
|
Exercise price |
Number of options and warrants outstanding |
Weighted average remaining contractual life |
|
Number of options and warrants outstanding |
Weighted average remaining contractual life |
|
|
|
|
|
|
|
|
10.00 pence |
4,106,102 |
1.8 |
|
4,106,102 |
2.3 |
|
12.50 pence |
2,737,401 |
1.8 |
|
2,737,401 |
2.3 |
|
10.00 HK cents |
21,817,697 |
9.4 |
|
21,817,697 |
9.9 |
|
10.00 HK cents |
2,181,770 |
2.42 |
|
- |
- |
|
|
|
|
|
|
|
|
Outstanding at end of the period (Note (v)) |
30,842,970 |
7.2 |
|
28,661,200 |
8.1 |
Notes:
(i) The number of options and warrants represents the number of Ordinary Shares in the Company into which the options and warrants are exercisable.
(ii) The Company's management option agreement is established for the purpose of providing incentives to the directors and employees of the Group. On 16 October 2006, 13,687,009 share options were granted at an exercise price of 10 pence per Ordinary Share to the Group's management ("Management Options"). Pursuant to the management option agreement, the share options shall be exercised as follows: (a) the first third of the shares may be subscribed for following the first anniversary of admission to AIM on 23 October 2006; (b) the second third of the shares may be subscribed for following the second anniversary of admission to AIM on 23 October 2006; and (c) the final third of the shares may be subscribed for following the third anniversary of admission to AIM on 23 October 2006.
On 18 May and 3 June 2009, 4,363,539 share options and 17,454,158 share options were granted for nil consideration to the Group's management ("New Management Options") at an exercise price of 10 HK cents per Ordinary Share respectively. New Management Options shall be exercised in whole or in part at any time in the period of 10.04 years from the date of grant on 18 May 2009 and of 10 years from the date of grant on 3 June 2009 respectively.
On 2 January 2010, Mr. Stephen Chan, LED's Chief Financial Officer, exercised his share options over 4,363,539 Ordinary Shares, awarded to him on 18 May 2009, at a price of HK$0.10 per Ordinary Share.
On 4 January 2010, Mr. Allan Leung, exercised his share options over 15,272,388 Ordinary Shares, awarded to him on 3 June 2009, at a price of HK$0.10 per Ordinary Share.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE INTERIM FINANCIAL INFORMATION
FOR THE SIX-MONTH ENDED 31 DECEMBER 2009
9. EQUITY SETTLED SHARE-BASED TRANSACTIONS (CONTINUED)
(iii) Under the option agreement entered into with Corporate Synergy Plc dated 16 October 2006, 5,474,802 share options were granted to Corporate Synergy Plc ("CS Options") in settlement of their corporate finance fees and commissions at an exercise price of 10 pence per Ordinary Share in respect of the first 2,737,401 shares and at an exercise price of 12.5 pence per Ordinary Share in respect of the remaining 2,737,401 shares. The options granted shall be exercised in whole or in part at any time in the period of 5 years from the date of admission to AIM on 23 October 2006.
(iv) Under the engagement mandate signed with Strand Hanson Limited, the Company engaged the services of Strand Hanson Limited to act as the Company's Nominated Adviser and broker for the purposes of the AIM rules. In addition to a cash fee, the Company issued a warrant instrument to subscribe for the Ordinary Shares of LED at an exercise price of 10 HK cents. The warrants granted shall be exercised in whole of in part at any time before 27 May 2012.
(v) At 31 December 2009, the number of shares in respect of which options and warrants had been granted and remained outstanding under the option agreements and warrant instrument was 30,842,970 (30 June 2009: 28,661,200), representing approximately 15.9% (30 June 2009: 14.7%) of the issued shares of the Company at that date.
(c) Fair value of share options and warrants and assumptions
The Company has not engaged any independent professional valuer to determine the Company's fair value of its shares as at the balance sheet date. Based on previous experiences on valuation of the Company's business, the management expects the fair value of warrant instrument issued close to its fair value of the Company's shares at the date of grant. Accordingly, there is no material financial impact arising from equity settled share-based transactions during the financial period under review. For the purpose of preparation of the interim financial information, the estimates and assumptions adopted in previous financial year are still applicable.
The fair value of services received in return for share options and warrants granted is measured by reference to the fair value of share options and warrants granted. The estimate of the fair value of the share options and warrants granted was measured based on the Black-Scholes option pricing model. The inputs into the model were as follows:
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE INTERIM FINANCIAL INFORMATION
FOR THE SIX-MONTH ENDED 31 DECEMBER 2009
9. EQUITY SETTLED SHARE-BASED TRANSACTIONS (CONTINUED)
(c) Fair value of share options and warrants and assumptions (continued)
|
|
Share options granted on |
||||
|
|
3 June 2009 |
18 May 2009 |
16 October 2006 |
16 October 2006 |
16 October 2006 |
|
|
New Management Options |
New Management Options |
Management Options |
CS Options |
CS Options |
|
Fair value at measurement date |
13.567 HK cents |
6.269 HK cents |
0.3571 to 0.3759 Pence |
0.2308 Pence |
0.3763 Pence |
|
Share price |
16.445 HK cents |
7.735 HK cents |
4.236 Pence |
4.236 Pence |
4.236 Pence |
|
Exercise price |
10.00 HK cents |
10.00 HK cents |
10.00 Pence |
12.50 Pence |
10.00 Pence |
|
Expected volatility |
131.16% |
125.36% |
32.05% |
32.05% |
32.05% |
|
Expected life |
5 years |
5.02 years |
3 to 4 years |
2.5 years |
2.5 years |
|
Risk-free rate |
2.64% |
2.42% |
4.99% to 5.06% |
4.89% |
4.89% |
|
Expected dividend yield |
- |
- |
- |
- |
- |
The expected volatility is based on the historic volatility (calculated based on the weighted average remaining life of the share options), adjusted for any expected changes to future volatility based on publicly available information. Changes in the subjective input assumptions could materially affect the fair value estimate.
10. FINANCIAL RISK MANAGEMENT
Exposure to credit, liquidity, interest rate and foreign currency risks arises in the normal course of the Group's business. The Group's exposure to these risks and the financial risk management policies and practices used by the Group to manage these risks are described below.
(a) Credit risk
The Group's credit risk is primarily attributable to trade and other receivables. Management has a credit policy in place and the exposures to these credit risks are monitored on an ongoing basis.
In respect of trade receivables, individual credit evaluations are performed on all customers requiring credit over a certain amount. These evaluations focus on the customers' past history of making payments when due and current liability to pay, and take into account information specific to the customer as well as pertaining to the economic environment in which the customers operates. Trade receivables are due within 30 to 90 days from the date of billing. Normally, the Group does not obtain collateral from customers.
The Group's exposure to credit risk is influenced mainly by the individual characteristics of each customer rather than the industry or country in which the customers operate and therefore significant considerations of credit risk primarily arise when the Group has significant exposure to individual customers.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE INTERIM FINANCIAL INFORMATION
FOR THE SIX-MONTH ENDED 31 DECEMBER 2009
10. FINANCIAL RISK MANAGEMENT (CONTINUED)
(a) Credit risk (continued)
The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet after deducting any impairment allowance. The Group does not provide any guarantees which would expose the Group or the Company to credit risk.
(b) Liquidity risk
The Group's policy is to regularly monitor its current and expected liquidity requirements to ensure that it maintains sufficient reserves of cash to meet its liquidity requirements in the short and longer term.
In meeting its current liquidity requirements, the Group has reached the agreements with the key creditors, which would be due within twelve months from the balance sheet date, to reschedule the repayments. In the longer term, the Group has been discussing with prospective investors to obtain new working capital and meet its liquidity requirements.
(c) Interest rate risk
Other than the amount due to a director, the Group has no other significant interest bearing assets and liabilities. The Group's income and operating cash flows are substantially independent of changes in market interest rates.
(d) Foreign currency risk
The Group has minimal exposure to foreign currency risk as most of its business transactions, assets and liabilities are denominated in a functional currency of the operations (i.e. Hong Kong dollars and Chinese Yuan Renminbi). The Group currently does not have a foreign currency hedging policy in respect of foreign currency transactions, assets and liabilities. The Group monitors its foreign currency exposure closely and considers hedging significant foreign currency exposure should the need arise.
(e) Fair values
The carrying amounts of the Group's financial instruments carried at cost or amortised cost are not materially different from their fair values as at 31 December 2009.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE INTERIM FINANCIAL INFORMATION
FOR THE SIX-MONTH ENDED 31 DECEMBER 2009
11. MATERIAL RELATED PARTY TRANSACTIONS
(a) Key management personnel remuneration
Remuneration for key management personnel of the Group is as follows:
|
|
|
Six-month ended 31 December 2009 |
Six-month ended 31 December 2008 |
|
|
|
(Unaudited) |
(Unaudited) |
|
|
|
HK$'000 |
HK$'000 |
|
|
|
|
|
|
Short-term employee benefits |
|
1,724 |
1,004 |
|
Equity-settled share-based payment expenses |
|
- |
- |
|
|
|
|
|
|
|
|
1,724 |
1,004 |
(b) Issue of Convertible Notes to a Director
Pursuant to a Loan Note Instrument and Subscription Agreement entered into between the Company (the "Issuer") and Li Li Xin Thomas (the "Subscriber"), the Subscriber has advanced HK$9,379,000 (the "Loan Advance") to the Issuer and the Issuer has authorised the creation and issue of HK$8,500,000 interest bearing loan notes due 2011 convertible into Ordinary Shares of the Issuer (the "Convertible Notes"). The Convertible Notes bear interest at a rate of the 3 month London Interbank Offered Rate (the "LIBOR") plus 2% per annum. The Issuer has issued, and the Subscriber subscribed for the Convertible Notes in the aggregate principal of HK$6,000,000 on 8 September 2009 (the "Issue Date") as partial settlement of the Loan Advance and the balance of the Loan Advance, being HK$3,379,000, with effect from 8 September 2009 carries interest at LIBOR plus 4% per annum and is payable on 7 September 2011 (the "Maturity Date"). Pursuant to the terms and conditions of the Convertible Notes, the Convertible Notes are convertible into new shares of the Company at a conversion price per share equal to 90% of the closing trading price of the shares on the date of receipt of notice of conversion by the Issuer subject to a minimum conversion price of £0.018 per share. The Convertible Notes are convertible at any time from the Issue Date to 7 days before the Maturity Date. The Convertible Notes will be redeemed at 100% of the outstanding principal amount plus any accrued interest up to the date of repayment of the Loan Advance.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE INTERIM FINANCIAL INFORMATION
FOR THE SIX-MONTH ENDED 31 DECEMBER 2009
11. MATERIAL RELATED PARTY TRANSACTIONS (CONTINUED)
(c) Other related party transactions
In addition to the transactions and balances disclosed elsewhere in the interim financial information, the Group had the following significant transactions with related parties during the six-month period:
|
|
|
Six-month ended 31 December 2009 |
Six-month ended 31 December 2008 |
|
|
|
(Unaudited) |
(Unaudited) |
|
|
Note |
HK$'000 |
HK$'000 |
|
|
|
|
|
|
Sales of raw materials and finished goods to Shenzhen Fu Shi Jia Electronic Technology Company Limited |
(i), (ii) |
3,988 |
4,484 |
|
|
|
|
|
Notes:
(i) Sales to related companies were made at similar terms as the Group granted to other customers.
(ii) The amount due from the related company amounted to approximately HK$1,196,000 at 31 December 2009 (30 June 2009: HK$4,920,000), which is included in trade receivables in the interim financial information. One of the key management personnel of the Company's subsidiary, Kepu Electronic Technology (Shenzhen) Company Limited ("Kepu"), has beneficial interests in this related company. Subsequent to the balance sheet date, the Board appointed an independent management personnel replacing the concerned key personnel of Kepu.
12. ACQUISITION OF SUBSIDIARY
On 29 July 2008, the Company acquired a 100 per cent stake in Strongbase New Shenzhen Limited ("Strongbase New"), a specialist in LED and LED related products, accessories and appliances. Strongbase New has both R&D and manufacturing expertise in relation to LED related products and possesses numerous patents and other intellectual property for LED products and LED applications. Its product offering includes LED devices, displays, lighting and appliances. The acquisition of Strongbase New allows the Group to broaden its product offering to include higher specification products for both its domestic markets and international clients. It will also provide the Group with access to new intellectual property for further product development.
The aforesaid acquisition is in the process of application of legal title transfer.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE INTERIM FINANCIAL INFORMATION
FOR THE SIX-MONTH ENDED 31 DECEMBER 2009
13. COMMITMENTS
(a) Capital commitments outstanding at 31 December 2009 not provided for in the interim financial information were as follows:
|
|
At 31 December 2009 |
At 30 June 2009 |
|
|
(Unaudited) |
(Audited) |
|
|
HK$'000 |
HK$'000 |
|
Contracted but not provided for |
|
|
|
- Property, plant and equipment |
2,658 |
2,658 |
|
- Project development |
7,643 |
7,643 |
|
- Acquisition of Strongbase New (Note) |
1,000 |
1,000 |
|
|
|
|
Note:
On 21 July 2008, the Company entered into an agreement to acquire the entire issued share capital of Strongbase New from a related company, Strongbase Electronic Factory Limited, at a consideration of HK$5,500,000. Mr. Lee Man Bun, a substantial shareholder of the Company, has beneficial interests in this related company. Strongbase New is a specialist in research and development and production of LED related products.
On 29 July 2008, the Company issued 16,025,000 Ordinary Shares of HK$0.10 each at HK$0.156 as a partial consideration of HK$2,500,000. A partial consideration of HK$2,000,000 was paid in cash to the seller during the year ended 30 June 2009. The remaining balance of consideration HK$1,000,000 will be paid in cash within 3 years from the completion of the acquisition. At the date of this report, the aforesaid acquisition is in the process of application of legal title transfer.
(b) At 31 December 2009, the total future minimum lease payments under non-cancellable opening leases are payable as follows:
|
|
At 31 December 2009 |
At 30 June 2009 |
|
|
(Unaudited) |
(Audited) |
|
|
HK$'000 |
HK$'000 |
|
|
|
|
|
Within one year |
220 |
264 |
|
After one year but within five years |
370 |
- |
|
|
|
|
|
|
590 |
264 |
Operating lease payments represent rentals payable by the subsidiaries for the manufacturing plants and office premises. Leases are negotiated, and rentals fixed, for an average term from one to three years. No arrangements have been entered into for contingent rental payments.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE INTERIM FINANCIAL INFORMATION
FOR THE SIX-MONTH ENDED 31 DECEMBER 2009
14. CONTINGENT LIABILITIES
From 2006 onwards, the Group's subsidiary, Shenzhen China-LED Photo-Technology Limited ("Shenzhen LED"), qualified as a small-scale VAT taxpayer by Shenzhen Municipal Nanshan District State Tax Bureau under the PRC tax laws and continues to be subject to 6% VAT on its taxable sales revenue. VAT is payable when the right to receive sale proceeds is established when delivery of goods is made to the buyer. The Group has been delaying reporting and paying VAT to the state tax bureau since 2006 and has carried a VAT payable of approximately HK$17,236,000, equivalent to RMB15,177,000 (30 June 2009: HK$17,236,000, equivalent to RMB15,177,000) as at 31 December 2009. According to the tax laws, a penalty may be charged up to a maximum of five times the VAT tax liability plus late payment interest of 0.05% per day on unpaid VAT amounts may be imposed by the state tax bureau. In addition, those persons involved could be severely punished subject to criminal proceedings. In the absence of any reliable information on penalties and/or late payment interest that the state tax bureau may charge against the Group, the directors of the Company are unable to estimate the amounts potentially payable for the late payment of VAT as at 31 December 2009.
15. NON-ADJUSTING POST BALANCE SHEET EVENTS
(a) Placing of new Ordinary Shares
On 10 February 2010, the Company placed 5,000,000 new Ordinary Shares of HK$0.10 each ("the Placing Shares") at a placing price of 1.5 pence per Placing Share, raising £75,000. The placing proceeds were used to augment LED's working capital position.
(b) Issuance of new Ordinary Shares
The EGM was held on 26 February 2010 to authorise the Board to allot 19,320,000 Ordinary Shares in the Company so as to discharge its existing obligations in respect of the acquisition of Kepu Electronic Technology (Shenzhen) Company Limited, as announced on 1 May 2007.
(c) Directors' dealings in shares
(i) Exercise of Management Share Options
On 2 January 2010, Mr. Stephen Chan, LED's Chief Financial Officer, exercised his share options over 4,363,539 Ordinary Shares, awarded to him on 18 May 2009, at a price of HK$0.10 per Ordinary Share.
On 4 January 2010, Mr. Allan Leung, exercised his share options over 15,272,388 Ordinary Shares, awarded to him on 3 June 2009, at a price of HK$0.10 per Ordinary Share.
(ii) Exercise of Convertible Loan Notes
On 4 January 2010, Mr. Thomas Li had exercised his rights under the Loan Note Instrument and Subscription Agreement dated 8 September 2009 to convert HK$8,500,000 Loan Notes into 37,845,058 Ordinary Shares at a conversion price of approximately HK$0.22 (1.80 pence) per Ordinary Share.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE INTERIM FINANCIAL INFORMATION
FOR THE SIX-MONTH ENDED 31 DECEMBER 2009
15. NON-ADJUSTING POST BALANCE SHEET EVENTS (CONTINUED)
(d) Board changes
Mr. Dennis Ow, Deputy Chief Executive Officer, resigned from the Board with effect from 21 February 2010.
16. KEY SOURCES OF ESTIMATION UNCERTAINTY
Note 9 contains information about the assumptions and their risk factors relating to the fair value of share options and warrants granted. Other key sources of estimation uncertainty are as follows:
(a) Impairment of property, plant and equipment and intangible assets
The Group assesses annually whether property, plant and equipment and intangible assets have any indication of impairment in accordance with the relevant accounting policies. If such indication exists, the recoverable amounts of the assets would be determined by reference to value in use and net selling price. Value in use is determined using the discounted cash flow method. Owing to inherent risks associated with estimations in the timing and magnitude of the future cash flows and net selling prices, the estimated recoverable amount of the assets may be different from its actual recoverable amount and profit or loss could be affected by accuracy of the estimations.
(b) Impairment of trade and other receivables
If circumstances indicate that the carrying amount of trade and other receivables may not be recoverable, the assets may be considered impaired and an impairment loss may be recognised. The carrying amounts of trade and other receivables are reviewed periodically in order to assess whether the recoverable amounts have declined below the carrying amounts. The recoverable amount of trade and other receivables is the estimated future cash flows discounted at the current market rate of return of similar assets. The Group uses all readily available information in determining an amount that is a reasonable approximation of the recoverable amount.
(c) Income taxes
The Group is subject to income taxes mainly in the PRC. Significant estimates are required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will affect the income tax provisions in the period in which such determination is made.
LED INTERNATIONAL HOLDINGS LIMITED
NOTES TO THE INTERIM FINANCIAL INFORMATION
FOR THE SIX-MONTH ENDED 31 DECEMBER 2009
16. KEY SOURCES OF ESTIMATION UNCERTAINTY (CONTINUED)
(d) Allowance for slow-moving inventories
An allowance for slow-moving inventories is made based on the ageing and estimated net realisable value of inventories. The assessment of the allowance amount involves judgement and estimates. Where the actual subsequent outcome is different from the original estimate, such difference will affect the carrying value of inventories and any allowance charge or write-back in the period in which the estimate has been changed.
(e) Construction contracts
Revenue and profit recognition on an uncompleted project is dependent on estimating the total outcome of the construction contract, as well as the work done to date. Based on the Group's recent experience and the nature of the construction activity undertaken by the Group, the Group makes estimates of the point at which it considers the work is sufficiently advanced such that the costs to complete and revenue can be reliably estimated. As a result, until this point is reached the amount due to a customer for contract work will not include profit or loss which the Group may eventually realise from the work done to date. In addition, actual outcomes in terms of total cost or revenue may be higher or lower than estimated at the balance sheet date, which would affect the revenue and profit recognised in future years as an adjustment to the amounts recorded to date.
- End of Notes -
Related Shares:
Led International Holdings