Ahsay Backup Software Development : INTERIM RESULTS ANNOUNCEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2017 (143KB, PDF)

Ahsay Backup Software Development Company Limited

亞勢備份軟件開發有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8290) INTERIM RESULTS ANNOUNCEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2017 CHARACTERISTICS OF THE GROWTH ENTERPRISE MARKET ("GEM") OF THE STOCK EXCHANGE OF HONG KONG LIMITED (THE "STOCK EXCHANGE") GEM has been positioned as a market designed to accommodate companies to which a higher investment risk may be attached than other companies listed on the Stock Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors. Given the emerging nature of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board and no assurance is given that there will be a liquid market in the securities traded on GEM.

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

This announcement, for which the directors (the "Directors") of Ahsay Backup Software Development Company Limited (the "Company") collectively and individually accept full responsibility, includes particulars given in compliance with the Rules Governing the Listing of Securities on GEM of the Stock Exchange (the "GEM Listing Rules") for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this announcement is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this announcement misleading.

FINANCIAL HIGHLIGHTS

• The Group's revenue for the six months ended 30 June 2017 was approximately HK$28.5 million, representing an increase of approximately 8.8% when compared with that of the corresponding period in 2016.

• Segment profit from core backup business of approximately HK$1.7 million was recorded during the period as compared to the segment loss of approximately HK$3.7 million for the corresponding period in 2016.

• Loss and total comprehensive expense attributable to owners of the Company for the six months ended 30 June 2017 was approximately HK$3.9 million, representing an increase of approximately 39.7% when compared with that of the corresponding period in 2016, of which approximately HK$5.8 million incurred from information sharing services segment named "KINTIPS", offset by the segment profit from core backup business.

• Basic and diluted losses per share was HK$0.20 cents.

• The Board did not recommend the payment of any dividend for the six months ended 30 June 2017.

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2017 (UNAUDITED)

The board of Directors (the "Board") of the Company is pleased to announce the unaudited consolidated interim results of the Company and its subsidiaries (collectively, the "Group") for the six months ended 30 June 2017 together with the unaudited comparative figures for the corresponding period in 2016 as set out below.

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the six months ended 30 June 2017

Three months ended 30 June Six months ended 30 June 2017 2016 2017 2016

NOTES	HK$'000 (unaudited)	HK$'000 (unaudited)	HK$'000 (unaudited)	HK$'000 (unaudited)
Revenue	4	14,531	13,529	28,483	26,186
Cost of inventory sold	-	(43)	-	(46)
Other income	5	126	133	242	330
Other gains and losses	(1)	4	(6)	2
Staff costs and related expenses	(12,335)	(11,386)	(23,244)	(21,281)
Other expenses	(5,038)	(4,651)	(9,317)	(8,362)
Finance costs	6	-	(85)	(73)	(173)
Loss before tax	(2,717)	(2,499)	(3,915)	(3,344)
Income tax credit	7	2	415	2	556
Loss for the period	8	(2,715)	(2,084)	(3,913)	(2,788)
Other comprehensive income (expense) Items that may be reclassified subsequently to

profit or loss:

Exchange difference arising on

translation of a foreign operation 8 (12) 11 (5)

Other comprehensive income (expense) for the

period 8 (12) 11 (5)

Total comprehensive expense for the

period attributable to the owners of the Company (2,707) (2,096) (3,902) (2,793)

Losses per share 10

Basic (in HK cents)	(0.14)	(0.10)	(0.20)	(0.14)
Diluted (in HK cents)	(0.14)	(0.10)	(0.20)	(0.14)

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 30 June 2017

NOTES	30 June 2017 HK$'000 (unaudited)	31 December 2016 HK$'000 (audited)
Non-current assets Property, plant and equipment	11	991	1,015
Intangible assets	12	527	-
Rental deposits paid	13	470	470
1,988	1,485
Current assets Inventories	15	16
Trade and other receivables	13	4,078	4,640
Tax recoverable	890	890
Bank balances and cash	81,356	95,278
86,339	100,824
Current liabilities Other payables and accruals	14	5,787	7,684
Deposits and fees received in advance	15	14,961	14,599
Bank borrowings - due within one year	16	-	8,724
20,748	31,007
Net current assets	65,591	69,817
Total assets less current liabilities	67,579	71,302
Non-current liabilities Deposits and fees received in advance	15	998	778
Provision for long service payments	501	540
Deferred tax liabilities	16	18
1,515	1,336
Net assets	66,064	69,966
Capital and reserves Share capital	17	20,000	20,000
Reserves	46,064	49,966
66,064	69,666

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2017

Share capital	Share premium	Capital reserve	Translation reserve	Accumulated losses	Total
HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000
(note i)
At 1 January 2017 (audited)	20,000	72,435	4,097	(35)	(26,531)	69,966
Loss for the period	-	-	-	-	(3,913)	(3,913)
Other comprehensive income for the period

Exchange difference arising on translation

of a foreign operation - - - 11 - 11

Total comprehensive income (expense)

for the period - - - 11 (3,913) (3,902)

At 30 June 2017 (unaudited)	20,000	72,435	4,097	(24)	(30,444)	66,064
At 1 January 2016 (audited)	20,000	72,435	4,097	(18)	(15,430)	81,084
Loss for the period Other comprehensive expense for the period Exchange difference arising on translation of a foreign operation	- -	- -	- -	- (5)	(2,788) -	(2,788) (5)
Total comprehensive expense for the period	-	-	-	(5)	(2,788)	(2,793)
At 30 June 2016 (unaudited)	20,000	72,435	4,097	(23)	(18,218)	78,291

Note i: Capital reserve refers to the equity movement arising from the transfer of equity interest to the Group from Mrs. Chong Li Sau Fong, Mr. Chong Siu Pui and Mr. Chong Siu Ning (the "Controlling Shareholders"), and the deemed capital contribution from the waiver of Controlling Shareholders during the Group Reorganisation in 2015, as defined in note 2 of the Group's annual consolidated financial statements for the year ended 31 December 2016 (the "2016 Financial Statements").

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 30 June 2017

Six months ended 30 June

2017 HK$'000 (unaudited)	2016 HK$'000 (unaudited)
Operating activities Loss for the period	(3,913)	(2,788)
Adjustments for: Income tax credit	(2)	(556)
Impairment loss recognised on intangible assets	1,056	-
Depreciation of property, plant and equipment	192	128
Bank interest income	(213)	(329)
Interest expenses	73	173
Operating cash flows before movements in working capital	(2,807)	(3,372)
Decrease in inventories	1	22
Decrease in trade and other receivables	562	2,438
Decrease in other payables and accruals	(1,897)	(362)
(Decrease) increase in provision for long service payments	(39)	324
Increase in deposits and fees received in advance	582	155
Cash used in operations Income taxes paid	(3,598) -	(795) -
Net cash used in operating activities	(3,598)	(795)
Investing activities Additions of intangible assets	(1,583)	-
Purchase of property, plant and equipment	(168)	(188)
Bank interest income	213	329
Net cash (used in) from investing activities	(1,538)	141
Financing activities Interest paid	(73)	(173)
Repayment of bank borrowings	(8,724)	(701)
Cash used in financing activities	(8,797)	(874)
Net decrease in cash and cash equivalents	(13,933)	(1,528)
Cash and cash equivalents at 1 January	95,278	104,311
Effect of foreign exchange rate changes	11	(5)
Cash and cash equivalents at 30 June, represented by bank balances and cash	81,356	102,778

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2017

1. GENERAL

   The Company was incorporated in the Cayman Islands on 10 April 2015 as an exempted company and registered in the Cayman Islands with limited liability under the Companies Law, Cap. 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands. The Company's shares were first listed on the Growth Enterprise Market (the "GEM") of The Stock Exchange of Hong Kong Limited (the "Stock Exchange") on 8 October 2015 (the "Listing").

   The Company is an investment holding company and its subsidiaries are principally engaged in the provision of online backup software solutions to clients via internet.

   The condensed consolidated financial statements are presented in Hong Kong dollars ("HK$"), which is the same as the functional currency of the Company.

2. BASIS OF PREPARATION

   The condensed consolidated financial statements have been prepared in accordance with Hong Kong Accounting Standard 34 Interim Financial Reporting issued by the Hong Kong Institute of Certified Public Accountants as well as the applicable disclosure requirements of Chapter 18 of the Rules Governing the Listing of Securities on the GEM of the Stock Exchange.

   The amounts included in these condensed consolidated financial statements have been computed in accordance with accounting policies which conform with Hong Kong Financial Reporting Standards ("HKFRSs") issued by the Hong Kong Institute of Certified Public Accountants (the "HKICPA") that is applicable to interim periods. However, it does not contain sufficient information to constitute an interim financial statements as defined in HKFRSs.

   The condensed consolidated financial statements should be read in conjunction with the 2016 Financial Statements.

3. PRINCIPAL ACCOUNTING POLICIES

   The accounting policies used in the preparation of these condensed consolidated financial statements are consistent with those used in the preparation of the 2016 Financial Statements except for the new policy for capitalising the development cost as intangible assets. The accounting policy for research and development expenditure is set out as below.

   Intangible assets

   Internally-generated intangible assets - research and development expenditure

   Expenditure on research activities is recognised as an expense in the period in which it is incurred.

   An internally-generated intangible asset arising from development activities (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated:

   • the technical feasibility of completing the intangible asset so that it will be available for use or sale;

   • the intention to complete the intangible asset and use or sell it;

   • the ability to use or sell the intangible asset;

   • how the intangible asset will generate probable future economic benefits;

   • the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and

   • the ability to measure reliably the expenditure attributable to the intangible asset during its development.

     The amount initially recognised for internally-generated intangible asset 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 recognised, development expenditure is recognised 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 amortisation and accumulated impairment losses (if any), on the same basis as intangible assets that are acquired separately.

     The condensed consolidated financial statements have been prepared on the historical cost basis. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

     In the current interim period, the Group has applied, for the first time, the following amendments to HKFRSs issued by the HKICPA that are relevant for the preparation of the Group's condensed consolidated financial statements:

     Amendments to HKAS 7 Disclosure Initiative

     Amendments to HKAS 12 Recognition of Deferred Tax Assets for Unrealised Losses Amendments to HKFRSs Annual Improvements to HKFRSs 2014-2016 Cycle

     The application of the above amendments to HKFRSs in the current interim period had no material effect on the amounts reported and/or disclosures set out in these condensed consolidated financial statements.

4. REVENUE AND SEGMENT INFORMATION

Information reported to the directors of the Company (the "Directors"), being the chief operating decision maker ("CODM"), for the purpose of resources allocation and assessment of segment performance focuses on types of goods or services delivered or provided. No operating segments identified by the CODM have been aggregated in arriving at the reportable segments of the Group. During the six months ended 30 June 2017, the Group had no material change in segment assets and segment liabilities.

In particular, the Group's operating segments under HKFRS 8 Operating Segments are as follows:

Online backup software and other services segment

• Software license sales and leasing, provision of software upgrades and maintenance services, sales of hardware devices, and provision of other services

  Information sharing services segment

• Provision of information sharing services

During the year ended 31 December 2016, the Group started a new segment of information sharing services. Such segment is engaged in the provision of information sharing services in Hong Kong via an online smartphone platform.

Segment revenue and result

The Group's revenue represents the amount received and receivable for software license sales and leasing, provision of software upgrades and maintenance services, sales of hardware devices, provision of information sharing services and other services during the period, net of discounts and sales related taxes.

Segment results represent the profit earned by each segment without allocation of other income and other gains and losses that are not directly attributable to segments as disclosed in the below table. This is the measure reported to the CODM for the purposes of resources allocation and performance assessment.

The following is an analysis of the Group's revenue and results by reportable and operating segment of online backup software services and information sharing services:

For the six months ended 30 June 2017 (unaudited) Online backup software and other services Information sharing services Total

HK$'000 HK$'000 HK$'000

Segment revenue - External

Software license sales and leasing 15,842 - 15,842 Software upgrades and maintenance services fee 11,372 - 11,372 Other services fee 1,067 - 1,067 Information sharing services income - 202 202

Total revenue 28,281 202 28,483 Segment results 1,705 (5,856) (4,151)

Unallocated incomes and expenses

Other income 242

Other gains and losses (6)

Loss before tax (3,915)

For the six months ended 30 June 2016 (unaudited)

Online backup software and other services

Information

sharing services Total

HK$'000 HK$'000 HK$'000

Segment revenue - External

Software license sales and leasing 15,438 - 15,438 Software upgrades and maintenance services fee 10,282 - 10,282 Other services fee 420 - 420

Sales of hardware devices 46 - 46

Total revenue 26,186 - 26,186 Segment results (3,676) - (3,676) Unallocated incomes and expenses

Other income 330

Other gains and losses 2

Loss before tax (3,344)

5.	OTHER INCOME	Three months	ended 30 June	Six months ended 30 June
2017 HK$'000 (unaudited)	2016 HK$'000 (unaudited)	2017 2016 HK$'000 HK$'000 (unaudited) (unaudited)
Bank interest income	98	132	213 329
Others	28	1	29 1
126	133	242 330
6.	FINANCE COSTS
Three months 2017 HK$'000 (unaudited)	ended 30 June 2016 HK$'000 (unaudited)	Six months ended 30 June 2017 2016 HK$'000 HK$'000 (unaudited) (unaudited)
Interests on bank loans	-	85	73 173
7.	INCOME TAX CREDIT
Three months 2017 HK$'000 (unaudited)	ended 30 June 2016 HK$'000 (unaudited)	Six months ended 30 June 2017 2016 HK$'000 HK$'000 (unaudited) (unaudited)
Current tax:

Hong Kong Profits Tax - - - - Deferred tax (2) (415) (2) (556)

(2) (415) (2) (556)

The Group is not subject to any income tax in the Cayman Islands and the BVI pursuant to the rules and regulations in those jurisdictions.

The Group is subject to Hong Kong Profits Tax at a rate of 16.5% for both periods, and no provision for Hong Kong Profits Tax has been made as the Group has no assessable profits arising in Hong Kong.

1. LOSS FOR THE PERIOD Three months ended 30 June Six months ended 30 June

   2017 HK$'000 (unaudited)	2016 HK$'000 (unaudited)	2017 HK$'000 (unaudited)	2016 HK$'000 (unaudited)
   charging (crediting): Directors' emoluments	2,262	2,123	4,524	4,241
   Other staff costs - Salaries, allowances and benefits in kind and performance and other bonuses	9,797	8,033	18,461	14,957
   - Retirement benefits scheme contributions,
   excluding directors' contributions	279	271	581	510
   Long-term employee benefit expenses	(91)	409	(590)	492
   Total directors' and staff costs	12,247	10,836	22,976	20,200
   Staff related expenses	88	550	268	1,081
   Staff costs and related expenses	12,335	11,386	23,244	21,281
   Research and development costs#
   Amounts incurred	3,078	-	6,836	-
   Less: capitalised development cost (note 12)	-	-	(1,583)	-
   Amounts included in staff costs and
   related expenses	3,078	-	5,253	-
   Auditor's remuneration*	250	500	500	900
   Advertising and marketing expenses*	1,032	859	2,716	1,789
   Impairment loss recognised on
   intangible assets*	1,056	-	1,056	-
   Legal and professional fees*	528	783	873	1,419
   Depreciation of property, plant and equipment*	97	65	192	128
   Foreign exchange (gains) losses, net	(1)	4	(6)	2

   Loss for the period has been arrived at after

   * Included in other expenses

   # The Group's research and development expenditure incurred and recognised fully as expense are mainly employee related costs. In the opinion of the Directors, the employees who are engaged in research and development activities are also responsible for provision of maintenance services to the existing customers of the Group in daily operation. For the period ended 30 June 2016, the total staff costs attributable to these employees who performed the above functions were approximately HK$6,916,000. Given there is no reliable basis to allocate these staff costs directly attributable to research and development activities, any arbitrary allocation of such expense for disclosure of research and development expense is considered misleading.

   For the period ended 30 June 2017, with the update on the Group's internal system interfaces, time spent on the research and development activities can be separated out and allocated to research and development costs. In addition, as set out in note 12, certain research and development costs are recognised as intangible assets during the period.

2. DIVIDENDS

   The board of directors did not recommend payment of interim dividend for the six months ended 30 June 2017 (30 June 2016: nil).

3. LOSSES PER SHARE

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

   Three months ended 30 June Six months ended 30 June
   2017 HK$'000 (unaudited)	2016 HK$'000 (unaudited)	2017 HK$'000 (unaudited)	2016 HK$'000 (unaudited)
   (2,715)	(2,084)	(3,913)	(2,788)
   Three months ended 30 June Six months ended 30 June
   2017 '000	2016 '000	2017 '000	2016 '000

   Losses per share

   Loss for the purpose of basic and diluted losses per share for the period attributable to the owners of the Company

   Number of shares

   Weighted average number of ordinary shares for the purpose of basic and

   diluted losses per share 2,000,000 2,000,000 2,000,000 2,000,000

   No diluted losses per share was presented as there was no potential ordinary share outstanding during both periods.

4. PROPERTY, PLANT AND EQUIPMENT

   During the current interim period, the Group spent approximately HK$168,000 (six months ended 30 June 2016: HK$188,000) on property, plant and equipment, mainly including leasehold improvement and furniture, fixtures and equipment.

5. INTANGIBLE ASSETS

The intangible assets represent the capitalised development costs incurred in developing new features of the online backup software. The capitalised development costs are mainly employee related costs directly attributable to development activities. There has been no amortisation of the amount as at 30 June 2017 as the new features of online backup software are in the trial process stage. The new features is launched in July 2017 and the corresponding development cost starts to be amortised in July 2017. The intangible assets have definite useful lives and are amortised on a straight-line basis over one year. During the period ended 30 June 2017, the Directors reviewed the carrying amount of the Group's intangible assets and identified that the recoverable amounts are less than the carrying amounts with a change of estimation of useful life of intangible assets from three years to one year. Accordingly, the carrying amounts of the intangible assets are reduced to their recoverable amounts and an impairment loss of HK$1,056,000 has been recognised in profit and loss for the six months ended 30 June 2017.