UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER

THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of October 2023

 

ANTELOPE ENTERPRISE HOLDINGS LTD.

(Translation of registrant’s name into English)

 

Room 1802, Block D, Zhonghai International Center,

Hi- Tech Zone, Chengdu, Sichuan Province, PRC

Telephone +86 (28) 8532 4355

(Address of Principal Executive Office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

  Form 20-F ☒   Form 40-F ☐  

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐

 

 

 

 

 

 

EXPLANATORY NOTE

 

Antelope Enterprise Holdings Ltd. (the “Company”) is furnishing this report on Form 6-K to provide the six-month interim financial statements for the period ended June 30, 2023 and incorporate such financial statements into the Company’s registration statement referenced below.

 

This Form 6-K is hereby incorporated by reference into the registration statements on Forms F-3 of the Company (File Number 333-269618, File Number 333-260958, and File Number 333-260958), as amended, and into the registration statements on Forms S-8 of the Company (File Number 333-272024 and File Number 333-267671), as amended, and into the prospectus outstanding under the registration statements, to the extent not superseded by documents or reports subsequently filed or furnished by the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

 

 

 

 

EXHIBIT INDEX

 

Exhibit
No.
  Description
99.1   Management’s Discussion and Analysis of Financial Conditions and Operating Results
99.2   Unaudited Condensed Consolidated Financial Statements for the Six Months Ended June 30, 2023 and 2022
101.INS   Inline XBRL Instance Document
101.SCH   Inline XBRL Taxonomy Extension Schema Document
101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document
104   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

 

  ANTELOPE ENTERPRISE HOLDINGS LTD.
     
  By: /s/ Hen Man Edmund
    Hen Man Edmund
    Chief Financial Officer
     
Date: October 2, 2023    

 

 

 

Exhibit 99.1

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Overview

 

We are a British Virgin Islands limited liability company with no material operations. Our operations were conducted in China by our subsidiaries. We provide livestreaming ecommerce services, business management and information systems consulting services. In April 2023, we disposed of our legacy ceramic tile manufacturing business.

 

Livestreaming Ecommerce Business

 

Our livestreaming ecommerce business is operated in China through our 51% owned subsidiary, Hainan Kylin Cloud Services Technology Co., Ltd (“Hainan Kylin”) and its subsidiaries, Hangzhou Kylin Cloud Services Technology Co., Ltd (“Hangzhou Kylin”), Anhui Kylin Cloud Services Technology Co., Ltd (“Anhui Kylin”), and Wenzhou Kylin. We aim to provide a one-stop solution for our customers to enable them to utilize the growing sales channel of livestreaming ecommerce. We believe that livestreaming ecommerce is an important growth engine for consumer good brands as it leverages the content of livestreaming to boost customer engagement and sales as it combines instant purchasing of a featured product and audience participation through a chat function or reaction buttons. Our customers usually include consumer brand goods, merchants, and small-scale ecommerce platforms. Our product management office assesses and selects the products from our customers. We then connect with different suppliers, usually staffing agencies that have a growing and diverse pool of hosts and influencers. The hosts and influencers register and claim the tasks for livestreaming for our customers’ products via Hainan Kylin’s SaaS platform. We track the sales of products of each host on the SaaS platform and report the sales results to our customers. We have expanded our reach to second and third tier cities in China where livestreaming ecommerce has a high conversion rate.

 

Hainan Kylin’s SaaS platform also includes a job-listing page designed especially for our enterprise customers to retain and engage freelancers and independent contractors at a cost-efficient way. We expect to further develop this function of the SaaS platform to provide value-added services to our livestreaming ecommerce customers.

 

Hainan Kylin started its business in September 2021. For the six months ended June 30, 2023, Hainan Kylin comprised most of our ongoing business operations and accounted for 98.1% of our total revenue.

 

Ceramic Tile Business

 

We historically operated a ceramic tile business which are used for exterior siding and for interior flooring and design in residential and commercial buildings. We are manufacturer of ceramic tiles used for exterior siding and for interior flooring and design in residential and commercial buildings in China. The ceramic tiles, sold under the “HD” or “Hengda,” brands are available in over two thousand styles, colors and size combinations. Currently, we have five principal product categories: (i) porcelain tiles, (ii) glazed tiles, (iii) glazed porcelain tiles, (iv) rustic tiles, and (v) polished glazed tiles.

 

For the six months ended June 30, 2023, we did not produce any ceramic tiles and only had sales from our existing inventory, as compared with the six months ended June 30, 2022, when we utilized production facilities capable of producing 0.8 million square meters and generated sales from newly manufactured products.

 

Over the last two years, the Company enacted a strategic transition to pivot towards high growth technology areas which included the acquisition of a livestreaming ecommerce business. In December 2022, the Company’s Board of Directors unanimously agreed to divest its ceramic tile building materials business. A special meeting of the Company’s shareholders was held on February 21, 2023, and the shareholders approved the sale of this business. On April 28, 2023, this transaction closed, and the Company transferred its ownership of the ceramic tile manufacturing business to New Stonehenge Limited, which, as a result, assumed all of its assets and liabilities.

 

 

 

 

Business Management and Consulting Business

 

We also provide business management and consulting services which consists of computer consulting services and software development through our subsidiaries in China, including Chengdu Future and Antelope Chengdu. We diagnose difficulties in infrastructure and enterprise systems and addresses business challenges that enterprises confront by developing strategies to surmount such hurdles to ensure the healthy growth and development of our customers’ businesses. Our consulting teams have advanced technological knowledge and capabilities to implement workflow solutions via proprietary software products and services to provide our customers with customized solutions to help them solve complex business problems.

 

Impacts of COVID-19

 

We had experienced significant adverse impacts in our legacy ceramic tile business resulting from the COVID-19 pandemic and the related public health orders. The COVID-19 pandemic disrupted supply chains and affected production and sales across a range of industries as a result of quarantines, facility closures, and travel and logistics restrictions in connection with the outbreak. We experienced reduced demand for our ceramic tile products and an increased level of purchase order cancellations as a result of the COVID-19 pandemic. The impact of the COVID-19 outbreak had a material adverse impact on our operations and financial results for our legacy ceramic tile business. Our consulting income also decreased significantly due to the impact of Covid-19 pandemic. However, our livestreaming ecommerce business was not impacted by Covid-19 pandemic but realized significant growth due to its nature of internet-based business without in-person interaction. In early December 2022, China announced a nationwide loosening of its zero-COVID policy. However, the impact of COVID-19 pandemic still depends on the future developments of the coronavirus, including new information concerning the global severity of and actions taken to contain a pandemic, or the appearance of new or more severe strains of the coronavirus, which are highly uncertain and unpredictable. Therefore, while we do not expect the COVID-19 pandemic to negatively impact our business, results of operations, and financial position, the related financial impact cannot be reasonably estimated at this time.

 

Basis of Presentation

 

The following discussion and analysis of our financial condition and results of operations is based on the selected financial information as of and for the six months ended June 30, 2023 and has been prepared based on the consolidated financial statements of Antelope Enterprise Holdings Limited and its subsidiaries. The consolidated financial statements of Antelope Enterprise Holdings Limited and its subsidiaries have been prepared in accordance with IFRS as issued by the International Accounting Standards Board, or “IASB.” The consolidated financial statements have been prepared on the historical cost basis, except for derivative financial instruments that have been measured at fair value.

 

A. Operating Results

 

The following table sets forth our financial results for the six months ended June 30, 2023 and 2022, respectively:

 

RMB’000  2023   2022 
         
Net sales   309,250    118,246 
           
Cost of goods sold   262,055    116,340 
           
Gross profit   47,195    1,906 
           
Other income   2,831    1,632 
Selling and distribution expenses   (49,194)   (1,876)
Administrative expenses   (38,715)   (6,405)
Bad debt reversal   -    5,293 
Finance costs   -    (14)
Other expenses   -    (4)
           
Income (loss) before taxation   (37,883)   582 
           
Income tax expense   2    83 
           
Net income (loss from continuing operations   (37,885)   499 
           
Discontinued operations          
Gain on disposal of discontinued operations   73,846    - 
Loss from discontinued operations   (1,385)   (26,245)
           
Net income (loss)   34,576    (25,746)
           
Net income (loss) attributable to:          
Equity holders of the Company   34,613    (29,335)
Non-controlling interest   (37)   3,589 
Net income (loss)   34,576    (25,746)
           
Net income (loss) attributable to the equity holders of the Company arise from:          
Continuing operations   (37,848)   (3,090)
Discontinued operations   72,461    (26,245)

 

 

 

 

The following table shows the Company’s operations by business lines for the six months ended June 30, 2023 and 2022, respectively:

 

   For the Six Months Ended June 30, 
   2023   2022 
   RMB’000   RMB’000 
Revenues          
Discontinued operations          
Sales of tile products   2,701    16,716 
Continuing operations          
Consulting income / software   3,302    5,952 
Livestreaming ecommerce   305,948    112,293 
Total revenues   311,951    134,961 
           
Cost of revenues          
Discontinued operations          
Sales of tile products   7,557    19,026 
Continuing operations          
Consulting income / software   8,151    7,123 
Livestreaming ecommerce   253,904    109,216 
Total cost of revenues   269,612    135,365 
           
Operating costs and expenses          
Discontinued operations          
Sales of tile products   3,244    13,823 
Continuing operations          
Consulting income / software   2,584    3,275 
Livestreaming ecommerce   53,187    2,450 
Other   32,139    2,570 
Total operating costs and expenses   91,154    22,118 
           
Bad debt expense (reversal)          
Discontinued operations          
Sales of tile products   (1,000)   18,829 
Continuing operations          
Consulting income / software   -    - 
Livestreaming ecommerce   -    (5,293)
Total bad debt expense   (1,000)   13,536 
           
Other expenses          
Continuing operations          
Livestreaming ecommerce   -    4 
Total other expenses   -    4 
           
Other income          
Discontinued operations          
Sales of tile products   5,716    8,716 
Continuing operations          
Consulting income / software   74    36 
Livestreaming ecommerce   1,070    1,489 
Other   1,687    158 
Total other income   8,547    10,399 
           
Loss from operations          
Discontinued operations          
Sales of tile products   (1,384)   (26,246)
Continuing operations          
Consulting income / software   (7,359)   (4,410)
Livestreaming ecommerce   (73)   7,405 
Other   (30,452)   (2,412)
Loss from operations   (39,268)   (25,663)

 

 

 

 

Description of Selected Income Statement Items

 

Revenue from sales of livestreaming ecommerce business. Beginning in September 2021, we started to generate revenue from our livestreaming ecommerce business which is operated by Hainan Kylin and its subsidiaries. For the six months ended June 30, 2023 and 2022, respectively, we generated RMB 305.9 million (US$ 44.2 million) and RMB 112.3 million (US$ 17.3 million) in revenue from this business.

 

Revenue from sales of ceramic tile products. We historically generated revenue from the sales of ceramic tiles, including porcelain tiles, glazed porcelain tiles, glazed tiles, rustic tiles and polished glazed tiles, net of rebates and discounts. For the six months ended June 30, 2023 and 2022, respectively, we generated RMB 2.7 million (US$ 0.4 million) and RMB 16.7 million (US$ 2.6 million) in revenue from this business.

 

Revenue from business management and information system consulting services. We also generated revenue from business management consulting, information system technology consulting services, including the sales of software use rights for digital data deposit platforms and asset management systems. For the six months ended June 30, 2023 and 2022, we generated RMB 3.3 million (US$ 0.5 million) and RMB 6.0 million (US$ 0.9 million).

 

Cost of revenues.

 

Cost of revenues for livestreaming ecommerce. Cost of sales for the livestreaming ecommerce was RMB 253.9 million (US$ 36.6 million) and RMB 109.2 million (US$ 16.9 million) for the six months ended June 30, 2023 and 2022, mainly consisting of professional costs for outsourcing technology services.

 

Cost of revenues for tile products. Cost of revenues for tile products consists of costs directly attributable to production, including the cost of clay, color materials, glaze materials, coal, salaries for staff engaged in production activity, electricity, depreciation, packing materials and related expenses. For the six months ended June 30, 2023 and 2022, we had cost of revenues related to tile products of RMB 7.6 million (US$1.1 million) and RMB 19.0 million (US$ 2.9 million), respectively.

 

Cost of revenues for business management and information system consulting services. For the six months ended June 30, 2023 and 2022, we had cost of revenues related to business management and consulting income of RMB 8.2 million (US$ 1.2 million) and RMB 7.1 million (US$ 1.1 million), which mainly consisted of professional costs for outsourcing technology services.

 

Other income and other expenses. Other income consists of interest income, foreign exchange gain/loss, gain on disposal of equipment and rental income by leasing out one of its production lines. Other expenses primarily consist of the loss on disposal of equipment and the depreciation by leasing out one of our production lines.

 

Selling and distribution expenses. Selling and distribution expenses consist of payroll, travel expenses, transportation and advertising expenses incurred by our selling and distribution team.

 

Administrative expenses. Administrative expenses consist primarily of R&D expense, employee remuneration, payroll taxes and benefits, general office expenses and depreciation. We expect administrative expenses to remain constant as compared to the prior year.

 

Income taxes. Our subsidiaries in the PRC are subject to the PRC Enterprise Income Tax Law, and the applicable income tax rate pursuant to such law for the six months ended June 30, 2023 and 2022 is 25% for Hengda, Hengdali and Hainan Kylin Cloud Services Technology, and 5% for Chengdu Future, Antelope Chengdu, Anhui Kylin Cloud Services Technology and Hangzhou Kylin Cloud Services Technology.

 

 

 

 

Results of Operations

 

Six Months Ended June 30, 2023 Compared to the Six Months Ended June 30, 2022

 

Revenue from livestreaming ecommerce.

 

For the six months ended June 30, 2023 and 2022, revenue from the livestreaming ecommerce was RMB 305.9 million (US$ 44.2 million) and RMB 112.3 million (US$ 17.3 million), representing an increase of RMB 193.7 million, or 172%. The significant increase was because the rapid growth of livestreaming industry ecommerce in China, and our clientele base increased as well. In the first six months of 2023, the Company had business engagements with more than 50 clients, which represented an increase of nearly 20 clients compared to the same period in 2022. Among these clients, the top five major clients generated revenue of RMB 160 million in the first half of the year. Additionally, the Company added a new promotional service application DOU+, which contributed an additional revenue of over RMB 38.0 million (US$ 5.5 million) by selling the customized DOU+ application to customers. DOU+ is a live broadcast room targeting tool that has been designed by Douyin, the short-video platform that currently has largest number of users in China (the mainland Chinese counterpart of TikTok). DOU+ is a tool provided to anchors on Douyin that can effectively increase the exposure, interaction and popularity of the live broadcast room, which helps merchants solve the problem of having only a small number of people in the live broadcast room. We sell customized DOU+ applications to our customers that specifically fits their needs at a preferential price.

 

Revenue from sales of tile products.

 

Revenue from sales of tile products was RMB 2.7 million (US$ 0.4 million) for the six months ended June 30, 2023, compared to RMB 16.7 million (US$ 2.6 million) for the six months ended June 30, 2022, representing a decrease of RMB 14.0 million, or 83.8%. The decrease in revenue was primarily due to the continued slow real estate and construction industry in China.

 

Revenue from business management and information system consulting services.

 

Revenue from business management and information system consulting services was RMB 3.3 million (US$ 0.5 million) for the six months ended June 30, 2023, compare to RMB 6.0 million (US$ 0.9 million) for the six months ended June 30, 2022, representing a decrease of RMB 2.7 million or 45%. The decrease in revenue was primarily due to the decreased sales of Chengdu Future. Due to intense market competition and lack of efficient marketing and promotional efforts, Chengdu Future was unable to attract and obtain new customers for the six months ended June 30, 2023, and this segment only generated revenue from the service contracts that were previously entered into. In addition, management focused more attention and allocated more resources to the livestreaming ecommerce segment.

 

Cost of revenues for livestreaming ecommerce.

 

Cost of sales for the livestreaming ecommerce was RMB 253.9 million (US$ 36.6 million) and RMB 109.2 million (US$ 16.9 million) for the six months ended June 30, 2023 and 2022. For the six months ended June 30, 2023 and 2022, our cost of sales mainly consisted of professional costs for outsourcing technology services. The increase in the cost of revenues for our livestreaming ecommerce resulted from the rapid growth of this business. In addition, the cost for customized DUO+ application sales was RMB 37.0 million (US$ 5.3 million).

 

Cost of revenues for sales of tile products.

 

Cost of revenues for sales of tile products was RMB 7.6 million (US$ 1.1 million) for the six months ended June 30, 2023 compared to RMB 19.0 million (US$ 2.9 million) for the six months ended June 30, 2022, representing a decrease of RMB 11.5 million, or 60.0%. The decrease in cost of sales was primarily due to this segments discontinued operations.

 

 

 

 

Cost of sales for business management and information system consulting services.

 

Cost of sales for business management and consulting services was RMB 8.2 million (US$ 1.2 million) and RMB 7.1 million (US$ 1.1 million) for the six months ended June 30, 2023 and 2022.

 

Gross profit for livestreaming ecommerce. Gross profit for the livestreaming ecommerce was RMB 52.0 million (US$ 7.5 million) and RMB 3.1 million (US$ 0.5 million) for the six months ended June 30, 2023 and 2022.

 

Gross loss for sales of tile products. Gross loss for the tile products was RMB 4.9 million (US$ 0.7 million) and RMB 2.3 million (US$ 0.4 million) for the six months ended June 30, 2023 and 2022.

 

Gross loss for business management and consulting. Gross loss for the business management and consulting services was RMB 4.8 million (US$ 0.7 million) and RMB 1.2 million (US$ 0.2 million) for the six months ended June 30, 2023 and 2022.

 

Other income. Other income for the six months ended June 30, 2023 was RMB 2.8 million (US$ 0.4 million), as compared to RMB 1.7 million (US$ 0.2 million) for the same period of 2022. For the six months ended June 30, 2023, other income mainly consists of a government grant of RMB 307,000, interest income of RMB 530,000, loan forgiveness of RMB 1.2 million and other income RMB 834,000.

 

For both 2023 and 2022, we had other income from the discontinued operation of RMB 5.7 million (US$ 0.8 million) and RMB 8.7 million (US$1.3 million), which were mainly attributable to the income from leasing out one of the production lines from our Hengdali facility pursuant to an eight-year lease contract.

 

Selling and distribution expenses. Selling and distribution expenses were RMB 49.2 million (US$ 7.1 million) for the six months ended June 30, 2023, compared to RMB 1.9 million (US$ 0.3 million) for the six months ended June 30, 2022, representing an increase of RMB 47.3 million, or 2,522.3%. The increase in selling and distribution expenses was primarily due to an increased advertising and promotion expense of RMB 44.6 million, an increased commission expense of RMB 2.6 million, and an increased travel expense of RMB 0.1 million, due to the significant growth of our livestreaming ecommerce business. For the six months ended June 30, 2023 and 2022, we had selling and distribution expenses RMB 1.5 million (US$ 0.2 million) and RMB 3.0 million (US$ 0.5 million) from our discontinued operations.

 

Administrative expenses. Administrative expenses were RMB 38.7 million (US$ 5.6 million) for the six months ended June 30, 2023, compared to RMB 6.4 million (US$ 1.0 million) for the six months ended June 30, 2022, representing an increase of RMB 32.3 million, or 504.4%. The increase in administrative expenses was primarily due to an increase in (i) stock compensation expense of RMB 19.7 million, (ii) an RMB 0.1 million increase in research and development expenses, (iii) an RMB 2.8 million increase in payroll expenses, (iv) an RMB 1.4 million increase in audit fee, (v) an RMB 2.6 million increase in professional fee, (vi) an RMB 1.2 million increase in business appraisal fee, (vii) an RMB 2.5 million increase in business entertainment and promotion expense resulting from our new subsidiaries and increased sales, (ix) an RMB 0.5 million increase in travel expense (x) an RMB 0.3 million increase in Nasdaq listing fee, (xi) an RMB 0.3 million increase in rent expense, (xii) an RMB 0.3 million increase in the annual meeting fee, and (xiii) an RMB 0.6 million increase in other G&A expenses due to the increased expense resulting from our new subsidiaries. For the six months ended June 30, 2023 and 2022, we had administrative expenses of RMB 1.4 million (US$ 0.2 million) and RMB 10.1 million (US$ 1.6 million) from discontinued operations.

 

Bad debt expense (reversal). Bad debt reversal was RMB nil (US$ nil) for the six months ended June 30, 2023, compared to RMB 5.3 million (US$ 0.8 million) for the six months ended June 30, 2022. We recognize a loss allowance for expected credit loss on our financial assets, primarily on trade receivables, which are subject to impairment under IFRS 9, Financial Instruments, first effective for year 2018. We believe that we have undertaken appropriate measures to resolve the bad debt expense. For the six months ended June 30, 2023 and 2022, we have bad debt reversal of RMB 1.0 million (US$ 0.1 million) and bad debt expense of RMB 18.8 million (US$ 2.9 million) from discontinued operations.

 

 

 

 

Finance costs. Finance costs were RMB nil (US$ nil) for the six months ended June 30, 2023, compared to RMB 14,000 (US$ 2,161) for the six months ended June 30, 2022. The decrease was mainly due to the decrease of interest expense on lease liabilities. We adopted IFRS 16 during the year ended December 31, 2019, and recognized lease liabilities in relation to leases which had previously been classified as “operating leases”. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate as of January 1, 2019. The difference between the actual payment and lease liabilities was the interest expense. For the six months ended June 30, 2023 and 2022, we had a financial cost of RMB 0.3 million (US$ 42,290) and RMB 0.7 million (US$ 0.1 million) from discontinued operations.

 

Income (loss) before taxation. Loss before taxation was RMB 37.9 million (US$ 5.5 million) for the six months ended June 30, 2023, as compared to an income before taxation of RMB 582,000 (US$ 90,000) for the six months ended June 30, 2022. The increase in loss before taxation was mainly due to an increase in selling and distribution expense, increased administrative expenses, and a decrease in the reversal of the bad debt expense of our continued operations, which was partly offset by increased gross profit as described above. For the six months ended June 30, 2023 and 2022, we had a loss before taxation of RMB 1.4 million (US$ 0.2 million) and RMB 26.2 million (US$ 4.1 million) from discontinued operations. In addition, we had a RMB 73.8 million (US$ 10.6 million) gain from disposal of our tile subsidiaries.

 

Income taxes. We incurred an income tax expense of RMB 2,000 (US$ 300) for the six months ended June 30, 2023 compared to an income tax expense of RMB 83,000 (US$ 13,000) for the six months ended June 30, 2022. Our PRC statutory enterprise income tax rate was 25% for the six months ended June 30, 2023 and 2022.

 

Net loss attributable to equity holders of the Company. Net loss attribute to equity holders of the Company from continued operations was RMB 37.9 million (US$ 5.5 million) for the six months ended June 30, 2023, as compared to a loss attributable to the Company’s shareholders of RMB 3.1 million (US$ 0.5 million) for the six months ended June 30, 2022. The increase in net loss attributable to shareholders in 2023 was attributable to the reasons described above. For the six months ended June 30, 2023 and 2022, we had income attributable to equity holders of the Company of RMB 72.5 million (US$ 10.5 million) and loss of RMB 26.2 million (US$ 4.1 million) from discontinued operations.

 

Net income (loss) attributed to non-controlling interest. Net loss attributed to non-controlling interest was RMB 37,000 (US$ 5,000) and net income of RMB 3.6 million (US$ 0.6 million) for the six months ended June 30, 2023 and 2022. The non-controlling interest represents the 49% ownership of Hainan Kylin and its subsidiaries.

 

B. Liquidity and Capital Resources

 

The following table presents a summary of our cash flows and beginning and ending cash balances for the six months ended June 30, 2023 and 2022:

 

RMB (‘000)  2023   2022 
Net cash generated from (used in) operating activities   (38,565)   7,623 
Net cash generated from / (used in) investing activities   2,185    (8,567)
Net cash generated from financing activities   39,159    (12,030)
Net cash flow   2,779    (12,974)
Cash and cash equivalents at beginning of year   4,242    27,880 
Effect of foreign exchange rate differences   (3,881)   97 
Cash and cash equivalents at end of year   3,140    15,003 

 

We have historically financed our liquidity requirements mainly through operating cash flow, bank loans and issuance of new shares. We believe that we will generate sufficient cash from operations to meet our needs for the next twelve months.

 

However, we may sell additional equity or obtain credit facilities to enhance our liquidity position or to increase our cash reserve for future acquisitions and capital equipment expenditures. The sale of additional equity would result in further dilution of our equity to our shareholders. The incurrence in indebtedness would result in increased fixed obligations and could result in operating covenants that would restrict our operations. We cannot provide assurance that financing will be available in amounts or on terms acceptable to us, if at all.

 

 

 

 

On January 10, 2023, the Company entered into a certain securities purchase agreement with Mr. Weilai (Will) Zhang, the Chief Executive Officer of the Company, Mr. Ishak Han, a director of the Company, and another sophisticated purchaser, pursuant to which the Company agreed to sell 1,625,000 ordinary shares (pre-reverse split), at a per share purchase price of $0.80. The offering was unanimously approved by the disinterested directors and the board of directors of the Company. The gross proceeds to the Company from this offering are $1.3 million, before deducting any fees or expenses. The Company plans to use the net proceeds from this offering for the expansion of its social ecommerce business and general corporate purposes. The offering closed on January 12, 2023.

 

On January 13, 2023, the Company entered into a certain securities purchase agreement with a certain purchaser, pursuant to which the Company agreed to sell 1,234,568 ordinary shares (pre-reverse split), at a per share purchase price of $0.81, the closing price of the Ordinary Shares on the Nasdaq Capital Market as of January 10, 2023. The gross proceeds to the Company from this Offering are approximately $1 million, before deducting any fees or expenses. The Company plans to use the net proceeds from this offering for the expansion of its social ecommerce business and for general corporate purposes.

 

On March 30, 2023, the Company entered into a certain securities purchase agreement with five sophisticated investors, pursuant to which the Company agreed to sell 5,681,820 Class A ordinary shares (pre-reverse split), at a per share purchase price of $0.88. The gross proceeds to the Company from this offering are approximately $5 million, before deducting any fees or expenses. The Company has issued the Shares on April 12, 2023 and the Offering was closed on the same day as all closing conditions were satisfied. The Company plans to use the net proceeds from this offering for general corporate purposes.

 

Cash flows from operating activities.

 

Our net cash used in operating activities was RMB 38.6 million (US$ 5.6 million) for the six months ended June 30, 2023, an increase of RMB 46.2 million as compared to a cash inflow of RMB 7.6 million for the six months ended June 30, 2022. The increase of cash outflow was mainly due to an increase in cash outflow on loan receivables of RMB 32.5 million, an increase in cash outflow on other receivables and prepayments of RMB 15.2 million, decreased cash inflow on trade receivables of RMB 4.9 million, increased cash outflow from trade payables of RMB 4.1 million, and an increase in operating cash outflow before working capital changes of RMB 6.8 million, which were partly offset by a decrease in cash outflow from unearned revenue of RMB 8.7 million, a decrease in cash outflow on accrued liabilities and other payables of 2.7 million. Also, there was cash inflow from operating activities of RMB 14.1 million and RMB 8.4 million from our discontinued operations for the six months ended June 30, 2023 and 2022, respectively.

 

Cash flows from investing activities.

 

Net cash generated from investing activities for the six months ended June 30, 2023 was RMB 2.2 million (US$ 0.3 million), compared to a cash outflow of RMB 8.6 million for the six months ended June 30, 2022. The decrease in cash outflow was mainly due to the decrease in restricted cash.

 

Cash flows from financing activities.

 

Net cash generated from financing activities was RMB 39.2 million (US$ 5.7 million) for the six months ended June 30, 2023, compared to net cash used in financing activities of RMB 12.0 million for the six months ended June 30, 2022, primarily due to an increase in the issuance of share capital by RMB 53.1 million for the six months ended June 30, 2023, which was partly offset by a decrease in capital contribution from noncontrolling interest of RMB 2.5 million. For the six months ended June 30, 2023 and 2022, net cash used in financing activities includes a cash outflow of RMB 14.3 million (US$ 2.1 million) and RMB 14.3 million from our discontinued operations, respectively.

 

Cash and bank balances were RMB 3.1 million (US$ 0.4 million) as of June 30, 2023, as compared to RMB 3.9 million as of December 31, 2022.

 

 

 

 

As of June 30, 2023, our total outstanding bank loan amounts were nil.

 

There were no commitments for advertising and insurance expenditure as of June 30, 2023.

 

In our opinion, our working capital, including our cash, income and cash flows from operations, and short-term borrowings, is sufficient for our present requirements.

 

However, we may sell additional equity or obtain credit facilities to enhance our liquidity position or to increase our cash reserve for future acquisitions and capital equipment expenditures. The sale of additional equity would result in further dilution of our equity to our shareholders. The incurrence in indebtedness would result in increased fixed obligations and could result in operating covenants that would restrict our operations. We cannot provide assurance that financing will be available in amounts or on terms acceptable to us, if at all.

 

Credit Management

 

Credit terms from our suppliers

 

Our typical credit terms from our major vendors are from 1 to 4 months after the service have been delivered.

 

Our average trade payables’ turnover for our livestreaming ecommerce for the six months ended June 30, 2023 and 2022 are as follows:

 

   2023   2022 
Trade payables (RMB’000)   2,594    422 
Trade payables turnover (days) (1)   2    0.3 

 

(1) The average trade payables’ turnover is computed based on the formula: (simple average opening and closing trade payables balance, net of value-added tax in facial year / purchases) × 181 days.

 

Capital Expenditures

 

Historically, our capital expenditures primarily consist of expenditures on property, plant and equipment. The capital expenditures for the six months ended June 30, 2023 and 2022 were RMB 500,000 and RMB 11,000, respectively.

 

Contractual Obligations

 

Our contractual obligations consist mainly of debt obligations, operating lease obligations and other purchase obligations and commitments, and will be paid off with our cash flow from operations. The following table sets forth a breakdown of our contractual obligations (including both interest and principal cash flows) as of June 30, 2023:

 

   Payment Due by Period 
       Less
than 1
   1-3   3-5   More
than 5
 
   Total   year   years   years   years 
Short-term debt obligations                    
Promissory note   9,268    9,268    -         
Total   9,268    9,268    -         

 

Off-Balance Sheet Arrangements

 

We do not have any outstanding off-balance arrangements and have not entered into any transactions that are established for the purpose of facilitating off-balance sheet arrangements.

 

 

 

 

Impact of Inflation

 

The general annual inflation rate in China was approximately 2.0% in 2022, and 2.1% in 2023 according to the National Bureau of Statistics. Our results of operations may be affected by inflation, particularly rising prices for energy, labor costs, raw materials and other operating costs. See “Item 3. Key Information — Risk Factors — Risks relating to our business. If China’s inflation increases or the prices of energy or raw materials increase, we may not be able to pass the resulting increased costs to our customers and this may adversely affect our profitability or cause us to suffer operating losses.”

 

FINANCIAL RISK MANAGEMENT

 

We are exposed to financial risks arising from our operations and the use of financial instruments. The key financial risks included credit risk, liquidity risk, interest rate risk, foreign currency risk and market price risk.

 

We do not hold or issue derivative financial instruments for trading purposes or to hedge against fluctuations, if any, in interest rates and foreign exchange rates.

 

  (i) Credit risk

 

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to us. Our exposure to credit risk arises primarily from bank balances and trade receivables. For trade receivables, we adopt the policy of dealing only with customers of appropriate credit history to mitigate credit risk. For other financial assets, we adopt the policy of dealing only with high credit quality counterparties.

 

As we do not hold any collateral, the maximum exposure to credit risk for each class of financial assets is the carrying amount of that class of financial assets presented on the consolidated statements of financial position.

 

Cash and bank balances

 

Our bank deposits are placed with reputable banks in the PRC, Hong Kong and the United States. The credit exposure of our cash and bank balances (excluding restricted cash) as of June 30, 2023 and December 31, 2022 were RMB 3,140,000 and RMB 3,936,000, respectively.

 

  (ii) Liquidity risk

 

Liquidity risk is the risk that we will encounter difficulty in raising funds to meet commitments associated with financial instruments. Liquidity risk may result from an inability to sell a financial asset quickly at close to its fair value.

 

Our exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. Our objective is to maintain a balance between continuity of funding and flexibility through the use of stand-by credit facilities.

 

The table below summarizes the maturity profile of the liabilities based on contractual undiscounted payments:

 

   As of June 30, 2023 
       More than 1     
       year but less     
   Within 1 year   than 5 years   Total 
   RMB’000   RMB’000   RMB’000 
Trade payables   2,594        2,594 
Amounts owed to related parties   131        131 
Note payable   9,268    -    9,268 
Total   11,993    -    11,993 

 

 

 

 

  (iii) Interest rate risk

 

Interest rate risk is the risk that the fair value or future cash flows of our financial instruments will fluctuate because of changes in market interest rates.

 

Our interest-bearing bank deposits and borrowings were nil as of June 30, 2023.

 

  (iv) Foreign currency risk

 

Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. Currency risk arises when transactions are denominated in foreign currencies.

 

Our operations are primarily conducted in the PRC. All the sales and purchases transactions are denominated in RMB. As such, our operations are not exposed to exchange rate fluctuation.

 

As of June 30, 2023 and December 31, 2022, nearly all of our monetary assets and monetary liabilities were denominated in RMB except certain bank balances and other payables which were denominated in US dollars and HKD.

 

C. Research and development, patents and licenses, etc.

 

We focus our research and development efforts on developing innovative Kylin-Cloud service platform.

 

Costs associated with research activities are expensed in profit or loss as they incur. Costs that are directly attributable to development activities are recognized as intangible assets if, and only if, all of the following have been demonstrated:

 

  (i) the technical feasibility of completing the intangible asset so that the asset will be available for use or sale;

 

  (ii) the intention to complete the intangible asset and use or sell it;

 

  (iii) the ability to use or sell the intangible asset;

 

  (iv) how the intangible asset will generate probable future economic benefits;

 

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

 

  (vi) the ability to measure reliably the expenditure attributable to the intangible asset during its development.

 

The amount initially recognized for internally generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally generated intangible asset can be recognized, development expenditure is recognized in profit or loss in the period in which it is incurred.

 

Subsequent to initial recognition, internally generated intangible assets are reported at cost less accumulated amortization and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.

 

Gains and losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognized in profit or loss when the asset is derecognized.

 

 

 

 

D. Critical Accounting Policies and Judgment

 

The preparation of the condensed consolidated interim financial statements, which have been prepared in accordance with International Accounting Standard (“IAS”) as issued by the International Accounting Standards Board (“IASB”), requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Estimates and judgments are continually evaluated and are based on historical experiences and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results may materially differ from these estimates under different assumptions or conditions.

 

  Critical accounting estimates and assumptions

 

We make estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The key sources of estimation uncertainty and key assumptions concerning the future at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

 

Useful lives and impairment assessment of property, plant and equipment

 

Property, plant and equipment are stated at cost less accumulated depreciation and identified impairment losses. The estimation of useful lives impacts the level of annual depreciation expenses recorded. Property, plant and equipment are evaluated for possible impairment on a specific asset basis or in groups of similar assets, as applicable. This process requires management’s estimate of future cash flows generated by each asset or group of assets. For any instance where this evaluation process indicates impairment, the relevant asset’s carrying amount is written down to the recoverable amount and the amount of the write-down is charged against profit or loss.

 

Useful lives and impairment assessment of investment property

 

Investment properties are stated at cost less accumulated depreciation and identified impairment losses. The estimation of useful lives impacts the level of annual depreciation expenses recorded. Investment properties are evaluated for possible impairment on a specific asset basis or in groups of similar assets, as applicable. This process requires management’s estimate of future cash flows generated by each asset or group of assets. For any instance where this evaluation process indicates impairment, the relevant asset’s carrying amount is written down to the recoverable amount and the amount of the write-down is charged against profit or loss.

 

Impairment loss recognized in respect of property, plant and equipment

 

As of June 30, 2023, the net carrying amount of property, plant and equipment was approximately RMB 1,327,000 (2022: RMB 1,006,000). No impairment loss was recognized for the six months ended June 30, 2023 and 2022. Determining whether property, plant and equipment are impaired requires an estimation of the recoverable amount of the property, plant and equipment. Such an estimate was based on certain assumptions which are subject to uncertainty and might materially differ from the actual results.

 

Impairment loss recognized in respect of investment property

 

As of June 30, 2023, the carrying amount of investment property was nil (2022: nil). No impairment loss was recognized for the six months ended June 30, 2023 and 2022. Determining whether an investment property is impaired requires an estimate of the recoverable amount of the investment property. Such an estimate was based on certain assumptions which are subject to uncertainty and might materially differ from the actual results.

 

Impairment loss recognized in respect of land use rights

 

As of June 30, 2023, the carrying amounts of land used rights was nil (2022: nil). No impairment loss were recognized against the original carrying amount of land use rights for the six months ended June 30, 2023 and 2022, respectively. Determining whether land use rights are impaired requires an estimate of the recoverable amount of the land use rights. Such an estimate was based on certain assumptions which are subject to uncertainty and might materially differ from the actual results.

 

 

 

 

Income tax

 

The Company has exposure to income taxes in the PRC. Significant judgment is required in determining the provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Company recognizes liabilities for expected tax issues based on estimates of whether additional taxes will be due. When the final tax outcome of these matters is different from the amounts that were initially recognized, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

 

Impairment of financial assets (trade receivables)

 

The Company recognizes a loss allowance for expected credit loss (“ECL”) on financial assets which are subject to impairment under IFRS 9 (including trade and other receivables, amounts due from related parties, restricted cash, bank balances and cash). The amount of ECL is updated at each reporting date to reflect changes in credit risk since initial recognition.

 

Lifetime ECL represents the ECL that will result from all possible default events over the expected life of the relevant instrument. In contrast, 12-month ECL (“12m ECL”) represents the portion of lifetime ECL that is expected to result from default events that are possible within 12 months after the reporting date. Assessment are done based on the Company’s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current conditions at the reporting date as well as the forecast of future conditions.

 

The Company applies the IFRS 9 simplified approach to measure ECL which uses a lifetime ECL for all trade receivables. The ECL on these assets are assessed individually for debtors with significant balances and/or collectively using a provision matrix with appropriate groupings.

 

For all other instruments, the Company measures the loss allowance equal to 12m ECL, unless when there has been a significant increase in credit risk since initial recognition, the Company recognizes lifetime ECL. The assessment of whether lifetime ECL should be recognized is based on significant increases in the likelihood or risk of a default occurring since initial recognition.

 

The Company recognized bad debts reversal of RMB nil and RMB 5.3 million for the six months ended June 30, 2023 and 2022, respectively. The Company’s discontinued operation recognized bad debts reversal of RMB 1.0 million and bad debts expense of RMB 18.8 million for the six months ended June 30, 2023 and 2022.

 

Share-based payment transaction

 

The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair value for share-based payment transactions requires determining the most appropriate valuation model which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the stock option, volatility and dividend yield, and the assumptions as to these components.

 

 

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Exhibit 99.2

 

ANTELOPE ENTERPRISE HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 

       As of June 30,
2023
   As of December 31,
2022
 
   Notes   RMB’000   RMB’000 
             
ASSETS AND LIABILITIES               
NONCURRENT ASSETS               
Property and equipment, net        1,327                             1,006 
Intangible assets, net        5    6 
Right-of-use assets, net        -    469 
Note Receivable   10    58,744    - 
Total noncurrent assets        60,076    1,481 
                
CURRENT ASSETS               
VAT receivables        463    142 
Due from related party   15    242    - 
Loan receivables   9    32,470    - 
Other receivables and prepayments        27,759    19,180 
Available-for-sale financial assets        7,651    8,523 
Restricted cash        -    2,069 
Cash and bank balances        3,140    3,936 
Total current assets        71,725    33,850 
                
Assets classified as held for sale        -    74,675 
                
Total assets        131,801    110,006 
                
CURRENT LIABILITIES               
Trade payables   11    2,594    3,079 
Accrued liabilities and other payables   12    856    799 
Unearned revenue        391    - 
Amounts owed to related parties   15    131    1,291 
Note payable   13    9,268    - 
Lease liabilities        -    328 
Taxes payable        77    582 
Total current liabilities        13,317    6,079 
                
NET CURRENT ASSETS        58,408    27,771 
                
NONCURRENT LIABILITIES               
Lease liabilities        -    157 
Note payable   13    -    8,775 
Total noncurrent liabilities        -    8,932 
                
Liabilities directly associated with assets classified as held for sale        -    88,530 
                
Total liabilities        13,317    103,541 
                
NET ASSETS        118,484    6,465 
                
EQUITY               
Share capital   14    3,532    1,288 
Reserves        109,571    (241)
Noncontrolling interest        5,381    5,418 
                
Total equity        118,484    6,465 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

 

ANTELOPE ENTERPRISE HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

 

                
       SIX MONTHS ENDED JUNE 30, 
       2023   2022 
   Notes   RMB’000   RMB’000 
             
Net sales   5    309,250    118,246 
                
Cost of goods sold        262,055    116,340 
                
Gross profit        47,195    1,906 
                
Other income   5    2,831    1,682 
Selling and distribution expenses        (49,194)   (1,876)
Administrative expenses        (38,715)   (6,405)
Bad debt reversal        -    5,293 
Finance costs   6    -    (14)
Other expenses        -    (4)
                
Income (loss) before taxation   7    (37,883)   582 
                
Income tax expense   7    2    83 
                
Net income (loss) for the period from continuing operations        (37,885)   499 
                
Discontinued operations   17           
Gain on disposal of discontinued operations        73,846    - 
Loss for the period from discontinued operations        (1,385)   (26,245)
                
Net income (loss) for the period        34,576    (25,746)
                
Net income (loss) attributable to :               
Equity holders of the Company        34,613    (29,335)
Non-controlling interest        (37)   3,589 
Net income (loss) for the period        34,576    (25,746)
                
Net income (loss) attributable to the equity holders of the Company arise from:               
Continuing operations        (37,848)   (3,090)
Discontinued operations        72,461    (26,245)
                
Other comprehensive loss               
Exchange differences on translation of financial statements of foreign operations        (4,145)   114 
                
Total comprehensive income (loss) for the period        30,431    (25,632)
                
Total comprehensive income (loss) attributable to:               
Equity holders of the Company        30,468    (29,221)
Non-controlling interest        (37)   3,589 
Total comprehensive income (loss) for the period        30,431    (25,632)
                
Total comprehensive loss attributable to the equity holders of the Company arise from:               
Continuing operations        (42,030)   613 
Discontinued operations        72,461    (26,245)
                
Loss per share attributable to the equity holders of the Company               
Basic (RMB)   8           
— from continuing operations        (23.44)   (5.14)
— from discontinued operations        44.88    (43.65)
Diluted (RMB)   8           
— from continuing operations        (23.44)   (5.14)
— from discontinued operations        36.51    (43.65)

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

 

ANTELOPE ENTERPRISE HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

 

                                                             
   Share
capital
   Share
premium
   Reverse
recapitalization
reserve
   Merger
reserve
   Share-based
payment
reserves
   Statutory
reserve
   Capital
reserve
   Retained
earnings
   Currency
translation
reserve
   Total   Noncontrolling
Interest
   Total
Equity
 
   RMB’000   RMB’000   RMB’000   RMB’000   RMB’000   RMB’000   RMB’000   RMB’000   RMB’000   RMB’000   RMB’000   RMB’000 
Notes    Note 14                                                         
                                                             
Balance at January 1, 2023           1,288          762,767     (507,235)          58,989                  130,093        135,343           61,266         (640,738)   (726)    1,047    5,418            6,465
                                                             
Net income (loss) for the period   -    -    -    -    -    -    -    34,613    -    34,613    (37)   34,576 
Exchange difference on transaction of financial statements of foreign operations   -    -    -    -    -    -    -    -    (4,145)   (4,145)   -    (4,145)
Total comprehensive income for the period   -    -    -    -    -    -    -    34,613    (4,145)   30,468    (37)   30,431 
Issuance of new shares for equity financing   1,486    51,449    -    -         -    -    -    -    52,935    -    52,935 
Equity compensation - employee share-based compensation   753    -    -    -    27,756    -    -    -    -    28,509    -    28,509 
Conversion of long-term notes into common shares   4    140    -    -    -    -    -    -    -    144    -    144 
Balance at June 30, 2023   3,531    814,356    (507,235)   58,989    157,849    135,343    61,266    (606,125)   (4,871)   113,103    5,381    118,484 
                                                             
Balance at January 1, 2022   943    757,318    (507,235)   58,989    127,982    135,343    61,266    (582,820)   (924)   50,862    (1,306)   49,556 
Net income (loss) for the period   -    -    -    -    -    -    -    (29,335)   -    (29,335)   3,589    (25,746)
Exchange difference on transaction of financial statements of foreign operations   -    -    -    -    -    -    -    -    114    114    -    114 
Total comprehensive loss for the period   -    -    -    -    -    -    -    (29,335)   114    (29,221)   3,589    (25,632)
Issuance of new shares for equity financing   -    -    -    -    -    -    -    -    -    -    -    - 
Additional paid in capital   -    -    -    -    -    -    -    -    -    -    2,450    2,450 
Equity compensation - employee share-based compensation   21    -    -    -    1,004    -    -    -    -    1,025    -    1,025 
Transfer to statutory reserves        -    -    -    -    -    -    -    -    -    -    - 
Balance at June 30, 2022   964    757,318    (507,235)   58,989    128,986    135,343    61,266    (612,155)   (810)   22,666    4,733    27,399 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

 

ANTELOPE ENTERPRISE HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

                
       Six Months ended June 30, 
       2023   2022 
   Notes   RMB’000   RMB’000 
             
CASH FLOWS FROM OPERATING ACTIVITIES:               
Income (loss) before taxation        (37,883)   582 
Adjustments for               
Operating lease charge        -    163 
Depreciation of property, plant and equipment        179    126 
Loan forgiveness by related party   15    (1,160)   - 
Loss on convertible note   13    34    - 
Reversal of bad debt of trade receivables        -    (5,293)
Share based compensation   14    28,510    1,025 
Interest expense on lease liability   6    -    14 
Amortization of OID of convertible note   13    151    - 
Operating cash flows before working capital changes        (10,169)   (3,383)
Decrease in trade receivables        -    4,952 
Decrease (Increase) in other receivables and prepayments        (9,177)   6,054 
Increase in loan receivables        (32,470)   - 
Increase (Decrease) in trade payables        (485)   3,565 
Increase (Decrease) in unearned revenue        391    (8,357)
Decrease in taxes payable        (734)   (942)
Increase (Decrease) in accrued liabilities and other payables        56    (2,647)
Cash used in operations        (52,588)   (758)
Interest paid        -    - 
Income tax paid        (95)   (25)
Net cash generated from operating activities from discontinued operations        14,118    8,406 
                
Net cash generated from (used in) operating activities        (38,565)   7,623 
                
CASH FLOWS FROM INVESTING ACTIVITIES:               
Acquisition of fixed assets        (500)   (11)
Acquisition of intangible assets        -    (6)
Decrease in available-for-sale financial asset        872    - 
Decrease (Increase) in restricted cash        2,069    (8,550)
Cash disposed as a result of disposal of subsidiaries   17    (256)   - 
Net cash used in investing activities from discontinued operations        -    - 
                
Net cash generated from (used in) investing activities        2,185    (8,567)
                
CASH FLOWS FROM FINANCING ACTIVITIES:               
Payment for lease liabilities        -    (177)
Insurance of share capital for equity financing   14    53,075    - 
Increase of additional paid in capital        -    2,450 
Advance from related parties   15    387    - 
Net cash used in financing activities from discontinued operations        (14,303)   (14,303)
                
Net cash generated from (used in) financing activities        39,159    (12,030)
                
NET INCREASE (DECREASE) IN CASH & EQUIVALENTS        2,779    (12,974)
CASH & EQUIVALENTS (INCLUDING CASH CLASSIFIED AS HELD FOR SALE OF RMB 306,000), BEGINNING OF PERIOD        4,242    27,880 
EFFECT OF FOREIGN EXCHANGE RATE DIFFERENCES        (3,881)   97 
                
CASH & EQUIVALENTS, END OF PERIOD        3,140    15,003 
                
ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS:               
Cash and cash equivalents        3,140    11,807 
Cash and cash equivalents included in assets classified as held for sale        -    3,196 
CASH & EQUIVALENTS, END OF YEAR        3,140    15,003 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

 

ANTELOPE ENTERPRISE HOLDINGS LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2023

(UNAUDITED)

 

1. GENERAL INFORMATION

 

Antelope Enterprise Holdings Limited (“Antelope Enterprise” or the “Company”), formerly known as China Ceramics Co., Ltd (“CCCL”), is a British Virgin Islands company operating under the BVI Business Companies Act (2004) with its shares listed on the NASDAQ Stock Market (“symbol: AEHL”). Its predecessor company, China Holdings Acquisition Corp. (“CHAC”), was incorporated in Delaware on June 22, 2007, and was organized as a blank check company for the purpose of acquiring, through a stock exchange, an asset acquisition or other similar business combination, or controlling, through contractual arrangements, an operating business, that has its principal operations in Asia. The Company was organized to have no operations and no assets or liabilities of consequence outside of its investments in its operating subsidiaries. The   head office of the Company is located at Room 1802, Block D, Zhonghai International Center, Hi-Tech Zone, Chengdu, Sichuan Province, the People’s Republic of China (“PRC”).

 

On September 18, 2023, the Company effected a one-for-ten reverse split of its issued and outstanding Class A ordinary shares. The consolidated financial statements as of June 30, 2023 and December 31, 2022, and for the six months ended June 30, 2023 and 2022 were retroactively restated to reflect this reverse split.

 

Antelope Enterprise and its subsidiaries’ corporate structure as of June 30, 2023 was as follows:

 

 

 

 

 

2. BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The accompanying unaudited condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard (“IAS”) 34 Interim Financial Reporting, as issued by the International Accounting Standards Board (“IASB”). They do not include all of the information required in annual financial statements in accordance with International Financial Reporting Standards (“IFRS”), and should be read in conjunction with the audited consolidated financial statements and related footnotes on Form 20-F for the year ended December 31, 2022 as filed with the Securities and Exchange Commission. The accompanying unaudited condensed consolidated interim financial statements reflect all normal recurring adjustments which, in the opinion of management, are necessary for a fair statement of the results for the interim periods presented. Results for the six months ended June 30, 2023 are not necessarily indicative of the results expected for the full fiscal year or for any future period.

 

These interim financial statements are presented in RMB, unless otherwise stated. They were approved for issue by the Audit Committee of the Board of Directors and the Board of Directors on October 2, 2023.

 

These interim financial statements have been prepared in accordance with the same accounting policies adopted in the 2022 annual financial statements, except for the accounting policy changes that are expected to be reflected in the 2023 annual financial statements. Details of any changes in accounting policies are set out in note 3.

 

These interim financial statements contain condensed consolidated financial statements and selected explanatory notes. The notes include an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the 2021 annual financial statements.

 

3. CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES

 

At the date of authorization of these financial statements, the IASB has issued a number of amendments, new standards and interpretations which are not yet effective for the six months ended June 30, 2023 and which have not been adopted in these financial statements. These include the following which may be relevant to the Group:

 

Amendments to IFRS 10 and IAS 28  Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

 

The management of the Company anticipate that the application of all the new and amendments to IFRSs will have no material impact on the consolidated financial statements in the foreseeable future.

 

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

 

The preparation of interim financial statements in conformity with IAS 34 requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses on a year to date basis. Actual results may differ from these estimates.

 

 

 

 

5. REVENUE AND OTHER INCOME

 

  a) Revenue comprises the fair value of the consideration received or receivable for the sale of goods.
     
  An analysis of the Company’s revenue and other income is as follows:

 

           
   For the six months ended June 30, 
   2023   2022 
   RMB’000   RMB’000 
Revenues          
Continuing operations          
Business management and consulting   3,302    5,952 
Livestreaming ecommerce   305,948    112,294 
           
Discontinued operations          
Sale of tiles (Note 17)   2,701    16,715 
           
Total revenues   311,951    134,961 
           
Other income          
Continuing operations          
Interest income   530    163 
Government grant   307    632 
Tax subsidy   -    887 
Loan forgiveness   1,160    - 
Other income   834    - 
           
Discontinued operations          
Other income (Note 17)   5,716    8,717 
Total other income   8,547    10,399 

 

  b) Segment reporting

 

The Company identifies operating segments and prepares segment information based on the regular internal financial information reported to the Chief Executive Officer and executive directors, who are the Company’s chief operating decision makers for their decisions about the allocation of resources to the Company’s business components and for their review of the performance of those components.

 

All of the Company’s operations are considered by the chief operating decision makers to be aggregated into three reportable operating segments: 1) the provision of livestreaming ecommerce industry which was acquired as part of a strategic transformation towards trending technology businesses in China to mitigate the challenging conditions in the real estate market in China, and associated industries like the Company’s legacy ceramic tile business, (2) business management and consulting; and (3) the manufacture and sale of standard to high-end ceramic tiles, which was disposed by the Company in April 2023. Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the Company’s chief operating decision makers in deciding how to allocate resources and in assessing performance.

 

The business of the Company is engaged entirely in the PRC. The Chief Executive Officer and executive directors regularly review the Company’s business as one geographical segment.

 

 

 

 

The following table shows the Company’s operations by business segment for the six months ended June 30, 2023 and 2022.

 

           
   For the six months ended June 30, 
   2023   2022 
   RMB’000   RMB’000 
Revenues          
Discontinued operations          
Sales of tile products   2,701    16,716 
Continuing operations          
Consulting income / software   3,302    5,952 
Livestreaming ecommerce   305,948    112,293 
Total revenues   311,951    134,961 
           
Cost of revenues          
Discontinued operations          
Sales of tile products   7,557    19,026 
Continuing operations          
Consulting income / software   8,151    7,123 
Livestreaming ecommerce   253,904    109,216 
Total cost of revenues   269,612    135,365 
           
Operating costs and expenses          
Discontinued operations          
Sales of tile products   3,244    13,823 
Continuing operations          
Consulting income / software   2,584    3,275 
Livestreaming ecommerce   53,187    2,450 
Other   32,139    2,570 
Total operating costs and expenses   91,154    22,118 
           
Bad debt expense (reversal)          
Discontinued operations          
Sales of tile products   (1,000)   18,829 
Continuing operations          
Consulting income / software   -    - 
Livestreaming ecommerce   -    (5,293)
Total bad debt expense   (1,000)   13,536 
           
Other expenses          
Discontinued operations          
Sales of tile products   -    - 
Continuing operations          
Consulting income / software   -    - 
Livestreaming ecommerce   -    4 
Total other expenses   -    4 
           
Other income          
Discontinued operations          
Sales of tile products   5,716    8,716 
Continuing operations          
Consulting income / software   74    36 
Livestreaming ecommerce   1,070    1,489 
Other   1,687    158 
Total other income   8,547    10,399 
           
Loss from operations          
Sales of tile products   (1,384)   (26,246)
Consulting income / software   (7,359)   (4,410)
Livestreaming ecommerce   (73)   7,405 
Other   (30,452)   (2,412)
Loss from operations   (39,268)   (25,663)

 

 

 

 

           
   As of June 30,
2023
   As of December 31,
2022
 
Segment assets          
Ceramic tile products   -    74,675 
Consulting income/software   57,284    15,924 
Livestreaming ecommerce   14,236    15,004 
Others   60,281    4,403 
Total assets   131,801    110,006 

6. LOSS BEFORE TAXATION

 

           
   For the six months ended June 30, 
   2023   2022 
   RMB’000   RMB’000 
Finance costs          
Interest expense on lease liability   293    753 
Cost of inventories recognized as an expense (including depreciation charge of right-of-use assets for leases)   7,557    19,025 
Depreciation of fixed assets   178    132 
Depreciation charge of right-of-use assets for leases (included in the administrative expenses)   -    163 
Research and development costs   294    806 
Staff costs (including key management personnel remuneration)   6,244    5,962 

 

For the six months ended June 30, 2023, the cost of inventories recognized as expense included staff costs of RMB 191,000 (for the six months ended June 30, 2022, this figure was RMB 1.6 million), depreciation and amortization expense (including a depreciation charge of right-of-use assets) of RMB 4.3 million (for the six months ended June 30, 2022, this figure was also RMB 6.4 million).

 

7. INCOME TAX

 

         
   For the six months ended June 30, 
   2023   2022 
   RMB’000   RMB’000 
Continuing operations          
Current Tax:          
PRC Income Tax Expense   2    83 
Deferred tax expense        
 Total income tax   2    83 

 

Discontinued operations did not incur any income tax expense for the six months ended June 30, 2023 and 2022.

 

British Virgin Islands Profits Tax

 

The Company has not been subject to any taxation in this jurisdiction for the six months ended June 30, 2023 and 2022.

 

Hong Kong Profits Tax

 

The subsidiaries in Hong Kong are subject to tax charged on Hong Kong sourced income, the corporate tax rate in Hong Kong is a two-tier one starting with the year of assessment 2018/2019 (from April 1 2018): the tax is 8.25% (7.5% for unincorporated companies) on the first 2 million HKD of taxable profits and 16.5% (15% for unincorporated companies) for the rest of the profits. No Hong Kong profits tax has been provided as the Company has no assessable profit arising in Hong Kong for the six months ended June 30, 2023 and 2022.

 

 

 

 

PRC Income Tax

 

Most subsidiaries of the Company in the PRC are subject to the enterprise income tax in accordance with “PRC Enterprise Income Tax Law” (“EIT Law”), and the applicable income tax rate for the six months ended June 30, 2023 and 2022 is 25%. Both Antelope Holdings (Chengdu) Co., Ltd (“Antelope Chengdu”) and Chengdu Future Talented Management and Consulting Co, Ltd (“Chengdu Future”) are subject to 2.5% preferential income tax rate for the six months ended June 30, 2023 and 2022.

 

8. LOSS PER SHARE

 SCHEDULE OF LOSS PER SHARE

           
   For the six months ended June 30, 
   2023   2022 
   RMB’000   RMB’000 
Loss attributable to holders of ordinary shares (RMB’000):          
Net loss from continuing operations   (37,848)   (3,090)
Net income (loss) from discontinued operations   72,461    (26,245)
Weighted average number of ordinary shares outstanding used in computing basic earnings per share *   1,614,471    601,314 
Weighted average number of ordinary shares outstanding used in computing diluted earnings per share *   1,984,646    601,314 
Income (loss) per share – basic (RMB)          
From continuing operations   (23.44)   (5.14)
From discontinued operations   44.88    (43.65)
Income (loss) per share - diluted (RMB) **          
From continuing operations    (23.44)   (5.14)
From discontinued operations    36.51    (43.65)

 

*The number of shares reflected the one-for-ten reverse split effective on September 18, 2023.

 

**Warrants to purchase Class A ordinary shares are not included in the diluted loss per share calculations when their effect is antidilutive. For the six months ended June 30, 2023 and 2022, 370,175 shares and 135,316 shares, respectively, on a weighted average basis of potential Class A ordinary shares related to outstanding Class A ordinary shares warrants were excluded from the calculation of diluted net loss per share as such shares are antidilutive when there is a loss.

 

9. LOAN RECEIVABLE

 

From March 31, 2023 to June 27, 2023, Anhui Zhongjun Enterprise Management Co., Ltd (“Anhui Zhongjun”) borrowed a total of RMB 32,470,000 from Antelope Enterprise Holdings (Chengdu) Co., Ltd. This loan will be repaid in installments over a period of three years from the date of disbursement. The   Company will charge an interest at each year end based on the bank’s commercial loan interest rate.

 

10. NOTE RECEIVABLE

 

On April 28, 2023, the Company completed the sale of Stand Best Creation Limited and its subsidiaries, Hengda and Hengdali, to New Stonehenge Limited for a total of RMB 58,744,000 (equivalent to USD $8,500,000). New Stonehenge Limited has agreed to make the payment in four equal installments on a date that falls 48 months after the effective date of the transaction, with an annual interest rate of 5%. For the six months ended June 30, 2023, the Company record interest income of RMB 491,000.

 

 

 

 

11. TRADE PAYABLES

 

         
   As of 
   June 30, 2023   December 31, 2022 
   RMB’000   RMB’000 
Trade payables   2,594    3,079 

 

Trade payables are denominated in Renminbi, non-interest bearing and generally settled within 120-day terms. All of the trade payables are expected to be settled within one year. The carrying value of trade payables is considered to be a reasonable approximation of fair value.

 

12. ACCRUED LIABILITIES AND OTHER PAYABLES

 

           
   As of 
   June 30, 2023   December 31, 2022 
   RMB’000   RMB’000 
Accrued salary   458    402 
Others   398    397 
Accrued Liabilities and other payables   856    799 

 

As of December 31, 2022, total accrued liabilities and other payables of discontinued operations was RMB 19,197,000 (Note 17).

 

Accrued liabilities consist mainly of accrued rental, wages and utility expenses.

 

The carrying value of accrued liabilities and other payables is considered to be a reasonable approximation of fair value.

 

13. NOTE PAYABLE

 

Unsecured Promissory Note in December 2022

 

On December 12, 2022, the Company entered into a Note Purchase Agreement with an investor, pursuant to which the Company issued to the Purchaser an unsecured Promissory Note of $1,332,500, for $1,250,000 in gross proceeds. The Note included an original issue discount (“OID”) of $62,500 along with $20,000 for investor’s fees, costs and other transaction expenses in connection with the issuance of the note. The OID was recognized as a debt discount is amortized over the life of the note. The Note bears interest at 8% per annum compounding daily, and has a term of 18 months. All outstanding principal and accrued interest on the Note will become due and payable eighteen (18) months after the purchase price of the Note is delivered by Purchaser to the Company (the “Purchase Price Date”). The Company may prepay all or a portion of the Note at any time by paying 120% of the outstanding balance elected for pre-payment. The Investor has the right to redeem the Note at any time six (6) months after the Purchase Price Date (the “Redemption Start Date”), subject to maximum monthly redemption amount of $200,000. The Company should pay the applicable redemption amount in cash to the Investor within three (3) Trading Days following the investor’s delivery of a redemption notice. At the end of each month following the Redemption Start Date, if the Company has not reduced the Outstanding Balance by at least $200,000, then by the fifth (5th) day of the following month, the Company must pay in cash to the Investor the difference between $200,000 and the amount actually redeemed in such month or the Outstanding Balance will automatically increase by one percent (1%) as of such fifth (5th) day. Under the Note Purchase Agreement, while the Note is outstanding, the Company agreed to keep adequate public information available and maintain its Nasdaq listing. Upon the occurrence of a Trigger Event (as defined in the Note), the Investor shall have the right to increase the balance of the Note by fifteen percent (15%) for Major Trigger Event (as defined in the Note) and five percent (5%) for Minor Trigger Event (as defined in the Note). In addition, the Note provides that upon occurrence of an Event of Default, the interest rate shall accrue on the outstanding balance at the rate equal to the lesser of twenty-two percent (22%) per annum or the maximum rate permitted under applicable law.

 

 

 

 

During the six months ended June 30, 2023 and 2022, the Company amortized OID of RMB 144,337 (US: $20,833) and recorded RMB 362,877 (US: $52,376) interest expense on this Note and the Company and Lender exchanged these Partitioned Notes of RMB 108,770 (US: $15,000) for the delivery of 22,751 Class A ordinary shares. The Company recorded RMB 34,330 (US: $4,955) loss on conversion of these notes in 2022. As of June 30, 2023 and December 31, 2022, the outstanding principal balance of this note was RMB 9,267,694 (US: $1,278,073, net of unamortized OID of $39,427) and RMB 8,775,000 (US: $1,272,240, net of unamortized OID of $60,260).

 

14. SHARE CAPITAL

 

On September 18, 2023, the Company effected a one-for-ten reverse split of its issued and outstanding Class A ordinary shares. The consolidated financial statements as of June 30, 2023 and December 31, 2022, and for the six months ended June 30, 2023 and 2022 were retroactively restated to reflect this reverse split, unless otherwise specified.

 

   As of 
   June 30, 2023   December 31, 2022 
   Number   US$   Number   US$ 
   of shares   ‘000   of shares   ‘000 
Authorized:                    
Ordinary shares of US$ 0.024 each   200,000,000    4,800    200,000,000    4,800 

 

   June 30, 2023 
   Number   RMB 
   of shares   ‘000 
Outstanding and fully paid:          
Ordinary shares of US$ 0.024 each          
At January 1, 2023   805,785    1,288 
Issuance of new shares for equity financing   854,139    1,486 
Conversion of Long-term notes into common shares   2,275    4 
Issuance of new shares – share-based compensation to CEO and CFO   53,262    93 
Issuance of new shares – share-based compensation to Directors   168,000    292 
Issuance of new shares – share-based compensation to Employee   211,721    369 
At June 30, 2023 *   2,095,182    3,532 

 

*The number of shares reflected the one-for-ten reverse split effective on September 18, 2023.

 

On February 12, 2021, the Company entered into a Securities Purchase Agreement with certain institutional investors for the sale of 588,235 common shares (pre-reverse split), at a purchase price of $3.57 per share. Concurrently with the sale of the Common Shares, pursuant to the Purchase Agreement the Company also sold warrants to purchase 588,235 common shares (pre-reverse split). The Company sold the Common Shares and Warrants for aggregate gross proceeds of approximately US$2.1 million, before commissions and expenses. The five-year Warrants will be immediately exercisable at an exercise price equal to $3.57 per share, and will terminate on the five-year anniversary of the initial exercise date of the Warrants. The net proceeds from the transactions will be approximately US$1.86 million, after deducting certain fees due to the placement agent and the Company’s estimated transaction expenses, and will be used for working capital and general corporate purposes.

 

In addition, the Placement Agent of this offering also received five-year warrants (the “Compensation Warrants”) to purchase up to a number of common shares equal to 5% of the aggregate number of shares sold in the Offering, including the warrant shares issuable upon exercise of the Warrants, which such Compensation Warrants have substantially the same terms as the Warrants sold in the Offering, except that such Compensation Warrants have an exercise price of $4.46 per share and will be exercisable six months from the effective date of this offering and will terminate on the five year anniversary of the effective date of this offering.

 

 

 

 

 

Grant date (investors and placement agent, respectively)   February 17, 2021 
Share price at date of grant (investors and placement agent, respectively)   US$4.45 
Exercise price at date of grant (investors and placement agent, respectively)   US$3.57 & 4.46 
Volatility    107%
Warrant life    5 years 
Dividend yield    0%
Risk-free interest rate    0.57%
Average fair value at grant date   US$3.54 

 

On June 10, 2021, the Company commenced a registered direct offering of securities, and executed a Securities Purchase Agreement (“SPA”) with three institutional accredited investors pursuant to which it sold 913,875 of the Company’s common shares (pre-reverse split) at the per share price of $3.48 (which was priced in excess of the average of the five-day closing price for the Company’s common shares preceding execution of the SPA, which was $3.42). In a concurrent private placement, the Company sold to such investors warrants to purchase 913,875 common shares (the “Investor Warrants”). The Investor Warrants have an exercise price per share of $3.42, subject to adjustment, and have a term of five years. The transactions yielded gross proceeds to the Company of $3,180,285, before the payment of commissions and expenses.

 

In addition, the Company issued warrants (the “Placement Agent Warrants”) to the Placement Agent to purchase a number of common shares equal to 5.0% of the aggregate number of shares sold to the investors in this offering, as well as the warrant shares issuable upon exercise of the Warrants issued in the concurrent private placement, as additional placement agency compensation. The Placement Agent Warrants have substantially the same terms as the Investor Warrants, except that the Placement Agent Warrants will have an exercise price of $4.35.

 

Grant date (investors and placement agent, respectively)   June 14, 2021 
Share price at date of grant (investors and placement agent, respectively)   US$3.15 
Exercise price at date of grant (investors and placement agent, respectively)   US$3.42 & 4.35 
Volatility    115%
Warrant life    5 years 
Dividend yield    0%
Risk-free interest rate    0.80%
Average fair value at grant date   US$2.50 

 

On September 30, 2022, the Company commenced a registered direct offering of securities, and executed a Securities Purchase Agreement (the “SPA”) with two institutional accredited investors pursuant to which it sold 1,666,667 of the Company’s common shares (pre-reverse split) at the per share price of $0.60. In a concurrent private placement, the Company sold to such investors warrants to purchase 1,666,667 common shares (pre-reverse split) (the “Investor Warrants”). The Investor Warrants have an exercise price per share of $0.82, subject to adjustment, and have a term of five years. The transactions yielded gross proceeds to the Company of $1,000,000, before the payment of commissions and expenses. The offering was closed on October 4, 2022.

 

In addition, the Company issued warrants (the “Placement Agent Warrants”) to the Placement Agent to purchase a number of common shares equal to 5.0% of the aggregate number of shares sold to the investors in this offering, as well as the warrant shares issuable upon exercise of the Warrants issued in the concurrent private placement, as additional placement agency compensation. The Placement Agent Warrants have substantially the same terms as the Investor Warrants, except that the Placement Agent Warrants will have an exercise price of $0.75.

 

 

 

 

Grant date (investors and placement agent, respectively)  October 4, 2022 
Share price at date of grant (investors and placement agent, respectively)  US$0.58 
Exercise price at date of grant (investors and placement agent, respectively)  US$0.82 & 0.75 
Volatility   104%
Warrant life   5 years 
Dividend yield   0%
Risk-free interest rate   3.96%
Average fair value at grant date  US$0.43 

 

On January 10, 2023, the Company entered into a certain securities purchase agreement (the “SPA”) with Mr. Weilai (Will) Zhang, the Chief Executive Officer of the Company, Mr. Ishak Han, a director of the Company, and another sophisticated purchaser (collectively, the “Purchasers”), pursuant to which the Company agreed to sell 1,625,000 ordinary shares (pre-reverse split), par value $0.024 per share (the “Ordinary Shares”), at a per share purchase price of $0.80 (the “Offering”). This Offering was unanimously approved by the disinterested directors and the board of directors of the Company. The gross proceeds to the Company from this Offering are $1.3 million, before deducting any fees or expenses. The Company plans to use the net proceeds from this Offering for the expansion of its social ecommerce business and for general corporate purposes. The Offering closed on January 12, 2023.

 

On January 13, 2023, the Company entered into a certain securities purchase agreement (the “SPA”) with a certain purchaser (collectively, the “Purchasers”), pursuant to which the Company agreed to sell 1,234,568 Class A ordinary shares (pre-reverse split), par value $0.024 per share (the “Ordinary Shares”), at a per share purchase price of $0.81 (the “Offering”), the closing price of the Ordinary Shares on the Nasdaq Capital Market as of January 10, 2023. The gross proceeds to the Company from this Offering are approximately $1 million, before deducting any fees or expenses. The Company plans to use the net proceeds from this Offering for the expansion of its social ecommerce business and for general corporate purposes.

 

On March 30, 2023, the Company entered into a certain securities purchase agreement (the “SPA”) with five sophisticated investors (collectively, the “Purchasers”), pursuant to which the Company agreed to sell 5,681,820 Class A ordinary shares (pre-reverse split), no par value (the “Ordinary Shares”), at a per share purchase price of $0.88 (the “Offering”). Upon closing of this offering, these two beneficial owners of the Purchasers will have approximately 15.15% of the total voting power of the Company, and the Company’s CEO and Chairman, Weilai (Will) Zhang, will have about 52.13% of the total voting power of the Company. The gross proceeds to the Company from this Offering are approximately $5 million, before deducting any fees or expenses. The Company has issued the Class A ordinary shares on April 12, 2023 and the Offering was closed on the same day as all closing conditions were satisfied. The Company plans to use the net proceeds from this Offering for general corporate purposes.

 

Following is a summary of the warrant activity for the six months ended June 30, 2023:

           Weighted 
           Average 
           Remaining 
       Average   Contractual 
   Number of   Exercise   Term in 
   Warrants   Price   Years 
Outstanding at December 31, 2022   370,175   $21.7    4.02 
Exercisable at December 31, 2022   370,175    21.7    4.02 
Issued            
Exercised            
Expired            
Outstanding at June 30, 2023 *   370,175    21.7    3.52 
Exercisable at June 30, 2023 *   370,175   $21.7    3.52 

 

*The number of shares reflected the one-for-ten reverse split effective on September 18, 2023

 

 

 

 

Share-based Compensation

 

From January 1 to June 30, 2023, the Company issued an aggregate of 45,365 shares (pre-reverse split) to its Chief Financial Officer as share compensation expense. The fair value of 45,365 shares was RMB 326,309.

 

From January 1 to June 30, 2023, the Company issued an aggregate of 487,251 shares (pre-reverse split) to its former and current Chief Executive Officer as a share compensation expense. The fair value of 487,251 shares was RMB 2,936,777.

 

From January 1 to June 30, 2023, the Company issued an aggregate of 1,680,000 shares (pre-reverse split) to its directors as a share compensation expense. The fair value of 1,680,000 shares was RMB 7,187,489.

 

From January 1 to June 30, 2023, the Company issued an aggregate of 2,117,211 shares (pre-reverse split) to its employees as a share compensation expense. The fair value of 2,117,211 shares was RMB 18,059,565.

 

15. RELATED PARTY TRANSACTIONS

 

Apart from those discussed elsewhere in these condensed consolidated financial statements, the following are significant related party transactions entered into between the Company and its related parties at agreed rates:

 

   June 30, 2023   December 31, 2022 
   As of 
   June 30, 2023   December 31, 2022 
   RMB’000   RMB’000 
Amounts owed to related parties   131    1,291 

 

As of June 30, 2023 and December 31, 2022, the Company had a loan of RMB Nil and US$ 167,000 (equivalent to RMB 1,160,000), respectively, payable to Sound Treasure Limited, an affiliate of Mr. Huang Jia Dong and a shareholder of the Company. This loan is interest free, unsecured and repayable on demand. The loan was forgiven during the six months ended June 30, 2023.

 

As of June 30, 2023, and December 31, 2022, the Company had a loan of US $20,000 (equivalent to RMB 131,000) and of US $20,000 (equivalent to RMB 131,000), respectively, payable to Mr. Alex Ng, who is the executive director of the Company. This loan is interest free, unsecured and repayable on demand.

 

   June 30, 2023   December 31, 2022 
   As of 
   June 30, 2023   December 31, 2022 
   RMB’000   RMB’000 
Amounts owed from related parties   242    -