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6-K 1 form6-k.htm

 

 

 

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 September 2024

 

Commission File Number 001-41471

 

Graphex Group Limited

(Translation of registrant’s name into English)

 

11/F COFCO Tower 262 Gloucester Road Causeway Bay

Hong Kong

Tel: + 852 2559 9438

(Address of Principal Executive Offices)

 

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): ☐

 

 

 

 

 

Graphex Group Limited.

Form 6-K

TABLE OF CONTENTS

 

Item   Page
     
Other Information   1
     
Signatures   2
     
Exhibit Index   3

 

 

 

Other Information

 

Graphex Group Limited (NYSE American: GRFX | HKSE: 6128).

 

Graphex Group Limited (the “Company” or “we”) is an issuer with its ordinary shares listed on The Stock Exchange of Hong Kong Limited (“HKSE”). Under the Rules Governing the Listing of Securities on the HKSE (“Listing Rules”), we are required to publish, and on 26 September 2024 published on the HKSE website, our 2024 Interim Report (the “Report”). The financial statements that are included in the Report are presented in IFRS International Financial Reporting Standards. The Report notes that Crowe (HK) CPA Limited served as auditor. Such firm is engaged by the Company for services regarding our IFRS and Marcum Asia CPAs LLP continues as the Company’s certifying accountants for the financial information that will be reported by the Company in its annual report on Form 20-F.

 

We are furnishing such Report as Exhibit 99.1 of this Form 6-K, which is incorporated herein by reference.

 

1

 

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, thereunto duly authorized.

 

  GRAPHEX GROUP LIMTED
     
  By: /s/ Andross Chan
    Andross Chan
    Chief Executive Officer

 

Date: September 26, 2024

 

2

 

EXHIBIT INDEX

 

Exhibit No.   Exhibit
     
99.1*   The Company’s 2024 Interim Report *

 

* Exhibit is translated to English

 

3

EX-99.1 2 ex99-1.htm

 

Exhibit 99.1

 

2024

INTERIM REPORT

 

 

 

2 Financial Highlights 2
3 Corporate Information 3
4 Unaudited Interim Condensed Consolidated Statement of Profit or Loss 4
5 Unaudited Interim Condensed Consolidated Statement of Comprehensive Income 5
6 Unaudited Interim Condensed Consolidated Statement of Financial Position 6
8 Unaudited Interim Condensed Consolidated Statement of Changes in Equity 8
10 Unaudited Interim Condensed Consolidated Statement of Cash Flows 10
12 Notes to Unaudited Interim Condensed Consolidated Financial Statements 12
37 Management Discussion and Analysis 37
46 Other Information 46

 

 

 

FINANCIAL HIGHLIGHTS

 

FINANCIAL HIGHLIGHTS

 

    For the six months ended 30 June  
    2024     2023        
Results   HK$’000     HK$’000     Change  
Revenue   93,742       151,274       (38.0 )%
Graphene products     61,489       97,103       (36.7 )%
Landscape architecture     32,253       54,171       (40.5 )%
Catering                  
      4,682       19,269       (75.7 )%
Adjusted segment EBITDA*                        
Graphene products     7,374       16,012       (53.9 )%
Landscape architecture     (2,692 )     1,512       (278.0 )%
Catering           1,745       (100.0 )%
                         
Loss before tax     (57,303 )     (46,780 )     22.5 %
Loss attributable to owners of the parent     (54,096 )     (43,968 )     23.0 %
                         
      HK cents       HK cents          
                         
Basic loss per share attributable to ordinary equity holders of the parent     (6.00 )     (6.06 )     (1.0 )%

 

* Non-IFRS Measure

 

    At 30 June     At 31 December        
    2024     2023        
Results   HK$’000     HK$’000     Change  
Total assets     839,316       847,343       (0.9 )%
Net assets     329,247       369,638       (10.9 )%
Shareholder’s equity     329,246       369,687       (10.9 )%
Cash and bank balances     10,391       27,190       (61.8 )%
Debt   234,206       233,165       0.4 %

 

To supplement our unaudited condensed consolidated financial statements which are presented in accordance with International Financial Reporting Standards (“IFRSs”), adjusted segment EBITDA is used as an additional financial measure throughout this interim report. The financial measure is presented because it is used by management to evaluate operating performance. The Company believes that non-IFRS measure may provide useful information to help investors and others understand and evaluate the Company’s consolidated results of operations in the same manner as management and in comparing financial results across accounting periods and to those of our peer companies. However, non-IFRS financial measure does not have a standardised meaning prescribed by IFRSs and therefore may not be comparable to similar measures presented by other companies.

 

Adjusted segment EBITDA used herein is defined as earnings before interest expense, taxation, depreciation and amortisation, and excludes fair value change on financial assets at fair value through profit or loss, impairment losses of other intangible assets and property, plant and equipment, share of losses of associates, impairment/(reversal of impairment) on financial and contract assets, unallocated other income and gains and corporate expenses.

 

Please refer to note 4 to the unaudited condensed consolidated financial statements in this interim report for reconciliation of loss before tax, an IFRS measure, to adjusted segment EBITDA.

 

Graphex Group Limited Interim Report 2024 2

 

CORPORATE INFORMATION

 

BOARD OF DIRECTORS   CORPORATE WEBSITE
     
Executive Directors   www.graphexgroup.com
     
Mr. Lau Hing Tat Patrick   AUTHORISED REPRESENTATIVES
Mr. Chan Yick Yan Andross    
Mr. Qiu Bin   Mr. Kwok Ka Hei
    Mr. Chan Yick Yan Andross
Non-executive Director    
  ALTERNATES TO AUTHORISED REPRESENTATIVES
Mr. Ma Lida    
  Mr. Lau Hing Tat Patrick
Independent non-executive Directors    
  PRINCIPAL BANKERS
Ms. Tam Ip Fong Sin    
Mr. Wang Yuncai   Bank of China (Hong Kong)
Mr. Liu Kwong Sang   Bank of Communications
Mr. Tang Zhaodong   The Bank of East Asia
  The Hongkong and Shanghai Banking
COMPANY SECRETARY    
  PRINCIPAL SHARE REGISTRAR OFFICE
Mr. Kwok Ka Hei    
  Ocorian Trust (Cayman) Limited
REGISTERED OFFICE   Windward 3
  Regatta Office Park
Windward 3   P.O. Box 1350
Regatta Office Park   Grand Cayman KY1-1108
P.O. Box 1350   Cayman Islands
Grand Cayman KY1-1108    
Cayman Islands   HONG KONG SHARE REGISTRAR
     
HEADQUARTER, HEAD OFFICE AND   Tricor Investor Services Limited
PRINCIPAL PLACE OF BUSINESS   17/F, Far East Finance Centre
IN HONG KONG   16 Harcourt Road
    Hong Kong
11/F COFCO Tower  
262 Gloucester Road   ADR DEPOSITARY
Causeway Bay  
Hong Kong   Bank of New York Mellon
   
AUDIT COMMITTEE   INVESTOR RELATIONS
   
Mr. Liu Kwong Sang (Chairman)   Email: investrel@graphexgroup.com
Ms. Tam Ip Fong Sin  
Mr. Wang Yuncai   LEGAL ADVISER AS TO HONG KONG LAW
   
REMUNERATION COMMITTEE   Tso Au Yim & Yeung
   
Ms. Tam Ip Fong Sin (Chairlady)   AUDITOR
Mr. Wang Yuncai  
    Crowe (HK) CPA Limited
NOMINATION COMMITTEE  
     
Ms. Tam Ip Fong Sin (Chairlady)    
Mr. Wang Yuncai    

 

Graphex Group Limited Interim Report 2024 3

 

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS

For the six months ended 30 June 2024

 

        For the six months ended 30 June  
       

2024

    2023  
    Notes   (Unaudited)
HK$’000
    (Unaudited)
HK$’000
 
REVENUE   3     93,742       151,274  
Cost of sales   7     (63,375 )     (101,242 )
GROSS PROFIT         30,367       50,032  
Other income and gains   5     6,934       6,553  
Selling and marketing expenses         (1,230 )     (2,956 )
Administrative expenses         (75,030 )     (76,724 )
Impairment losses on financial and contract assets, net         (6,704 )     (10,705 )
Impairment losses on property, plant and equipment and other intangible asset, net         (1,859 )      
Fair value loss on financial assets at fair value through profit or loss         (3 )     (6 )
Finance costs   6     (8,978 )     (12,744 )
Share of losses of associates         (800 )     (230 )
LOSS BEFORE TAX   7     (57,303 )     (46,780 )
Income tax credit   8     3,257       5,005  
LOSS FOR THE PERIOD         (54,046 )     (41,775 )
Attributable to:                    
Owners of the parent         (54,096 )     (43,968 )
Non-controlling interests         50       2,193  
          (54,046 )     (41,775 )

LOSS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT

                   
Basic
                   
– For loss for the period   10     HK(6.00) cents      

HK(6.06) cents

 
Diluted
                   
– For loss for the period         HK(6.00) cents      

HK(6.06) cents

 

 

Graphex Group Limited Interim Report 2024 4

 

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2024

 

    For the six months ended 30 June  
    2024     2023  
   

(Unaudited)

HK$’000

    (Unaudited)
HK$’000
 
LOSS FOR THE PERIOD     (54,046 )     (41,775 )
                 
OTHER COMPREHENSIVE INCOME                
Other comprehensive income that may be reclassified to profit or loss in subsequent periods:                

Exchange differences on translation of foreign operations

    (3,706 )     (16,369 )
                 
OTHER COMPREHENSIVE INCOME FOR THE PERIOD, NET OF TAX     (3,706 )     (16,369 )
                 
TOTAL COMPREHENSIVE LOSS FOR THE PERIOD     (57,752 )     (58,144 )
                 
Attributable to:                
Owners of the parent   (57,802 )     (60,475 )
Non-controlling interests     50       2,331  
                 
      (57,752 )     (58,144 )

 

Graphex Group Limited Interim Report 2024 5

 

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2024

 

        30 June     31 December  
        2024     2023  
        (Unaudited)     (Audited)  
    Notes   HK$’000     HK$’000  
NON-CURRENT ASSETS                    
Property, plant and equipment         23,863       28,676  
Goodwill         101,939       101,939  
Other intangible assets         435,823       460,997  
Investments in associates               801  
Equity investments designated at fair value through other comprehensive income         34       34  
Prepayments, deposits and other receivables         5,122       5,157  
Deferred tax assets         3,225       3,240  
Total non-current assets         570,006       600,844  
CURRENT ASSETS                    
Inventories         16,451       13,712  
Trade and bills receivables   11     157,478       147,991  
Prepayments, deposits and other receivables         61,685       27,677  
Financial assets at fair value through profit or loss         19       23  
Contract assets         23,241       29,906  
Restricted bank deposit         45        
Cash and cash equivalents         10,391       27,190  
Total current assets         269,310       246,499  
CURRENT LIABILITIES                    
Trade payables   12     39,149       23,190  
Other payables and accruals         98,259       80,547  
Contract liabilities         40,248       38,627  
Lease liabilities         3,429       4,682  
Interest-bearing borrowings   13     150,099       135,882  
Convertible notes   15     3,798       4,158  
Tax payable         32,847       33,082  
Total current liabilities         367,829       320,168  
NET CURRENT LIABILITIES         (98,519 )     (73,669 )
TOTAL ASSETS LESS CURRENT LIABILITIES         471,487       527,175  

 

Graphex Group Limited Interim Report 2024 6

 

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2024

 

        30 June     31 December  
        2024     2023  
    Notes  

(Unaudited)

HK$’000

    (Audited)
HK$’000
 
NON-CURRENT LIABILITIES                    
Lease liabilities       13,698     14,919  
Interest-bearing borrowings   13           12,500  
Promissory note   14     63,182       61,024  
Deferred tax liabilities         65,360       69,094  
Total non-current liabilities         142,240       157,537  
NET ASSETS         329,247       369,638  
EQUITY                    
Equity attributable to owners of the parent                    
Share capital                    
– ordinary shares   16     9,711       8,980  
– preference shares   16     3,236       3,236  
Other reserves         316,299       357,471  
          329,246       369,687  
Non-controlling interests         1       (49 )
TOTAL EQUITY         329,247       369,638  

 

Graphex Group Limited Interim Report 2024 7

 

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2024

 

    Share     Preference    

Share

premium

   

Share-

based

payment

   

rights of

convertible

    Warrant     Fair value     Capital     Reserve    

Exchange

fluctuation

    Accumulated          

Non-

controlling

    Total  
    capital     shares     account*     reserve*     notes*     reserve*     reserve*     reserve*     funds*     reserve*     losses*     Total     interests     equity  
    HK$’000     HK$’000     HK$’000     HK$’000     HK$’000     HK$’000     HK$’000     HK$’000     HK$’000     HK$’000     HK$’000     HK$’000     HK$’000     HK$’000  
At 1 January 2024 As previously reported     8,980       3,236       782,438       14,764       883       19,943     (2,606 )     5       10,701       (16,420 )     (452,237 )     369,687       (49 )     369,638  
Loss for the period
                                                                (54,096 )     (54,096 )     50       (54,046 )
Other comprehensive income for the period:
                                                                                                               
Exchange differences on translation of foreign operations                                                           (3,706 )           (3,706 )           (3,706 )
Total comprehensive loss for the period                                                           (3,706 )     (54,096 )     (57,802 )     50       (57,752 )
Issue of ordinary shares                                                                                                                
upon conversion of
convertible notes
    6             438             (56 )                                         388             388  
Issue of ordinary shares                                                                                                                
under the share award
scheme
    264             11,783       (12,047 )                                                            
Issue of ordinary shares     461             4,870                                                       5,331             5,331  
Equity-settled share-based
transactions
                      11,642                                                 11,642             11,642  
At 30 June 2024 (unaudited)     9,711       3,236       799,529       14,359       827       19,943       (2,606 )     5       10,701       (20,126 )     (506,333 )     329,246       1       329,247  

 

* These reserve accounts as at 30 June 2024 comprise the consolidated other reserves of HK$316,299,000 (31 December 2023: HK$357,471,000) in the condensed consolidated statement of financial position.

 

Graphex Group Limited Interim Report 2024 8

 

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2024

 

    Share     Preference    

Share

premium

   

Share-

based

payment

   

rights of

convertible

    Warrant     Fair value     Capital     Reserve    

Exchange

fluctuation

    Accumulated          

Non-

controlling

    Total  
    capital     shares     account*     reserve*     notes*     reserve*     reserve*     reserve*     funds*     reserve*     losses*     Total     interests     equity  
    HK$’000     HK$’000     HK$’000     HK$’000     HK$’000     HK$’000     HK$’000     HK$’000     HK$’000     HK$’000     HK$’000     HK$’000     HK$’000     HK$’000  
At 1 January 2023                                                                                                                
As previously reported     6,835       3,236       673,303       2,940       13,006       19,943       (2,547 )     5       13,471       (7,769 )     (341,839 )     380,584       (10,742 )     369,842  
Loss for the period                                                                 (43,968 )     (43,968 )     2,193       (41,775 )
Other comprehensive                                                                                                                
income for the period:                                                                                                                
Exchange differences on translation of foreign operations                                                                         (16,507 )     138       (16,369 )
Total comprehensive loss for
the period
                                                          (16,507 )     (43,968 )     (60,475 )     2,331       58,144  
Issue of ordinary shares upon conversion of convertible notes     939                   62,314             (12,022 )                                   51,231             51,231  
Equity-settled share-based
transactions
                      2,546                                                 2,546             2,546  
At 30 June 2023
(unaudited)
    7,774       3,236       735,617       5,486       984       19,943       (2,547 )     5       13,471       (24,276 )     (385,807 )     373,886       (8,411 )     365,475  

 

* These reserve accounts as at 30 June 2023 comprise the consolidated other reserves of HK$362,876,000 (31 December 2022: HK$370,513,000) in the condensed consolidated statement of financial position.

 

Graphex Group Limited Interim Report 2024 9

 

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 30 June 2024

 

    For the six months ended 30 June  
   

2024

    2023  
    (Unaudited) HK$’000    

(Unaudited)

HK$’000

 
CASH FLOWS FROM OPERATING ACTIVITIES                
Loss before tax     (57,303 )     (46,780 )
Adjustments for:                
Finance costs     8,978       12,744  
Share of losses of associates     800       230  
Interest income     (786 )     (582 )
Amortisation and depreciation     24,826       27,187  
Dividend income from equity instruments at fair value through other comprehensive income     (65 )     (92 )
(Gain)/loss on disposal of property, plant and equipment     (177 )     106  
Impairment of property, plant and equipment, net     1,740        
Impairment of other intangible assets, net     119        
Impairment loss of trade receivables, net     3,387       3,330  
Impairment loss of contract assets, net     4,261       7,375  
Impairment loss of other receivables and other assets, net     (944 )      
Equity-settled share-based transaction     11,642       2,546  
Gain on lease termination           (2 )
Gain on settlement of other payables upon issue of ordinary shares     (560 )      
Waiver of interest on convertible notes           (1,160 )
Fair value changes on financial assets at fair value through profit or loss     3       6  
Exchange differences, net     (166 )     311  
      (4,245 )     5,219  
(Increase)/decrease in inventories     (2,850 )     7,429  
Increase in trade and bills receivables     (13,958 )     (88,232 )
Decrease/(increase) in contract assets     2,232       (4,172 )
(Increase)/decrease in prepayments, deposits and other receivables     (12,583 )     4,700  
Increase in trade payables     16,199       64,905  
Increase in other payables and accruals     12,594       5,056  
Increase/(decrease) in contract liabilities     1,857       (2,575 )
Cash used in operations     (754 )     (7,670 )
Interest received     15       46  
Income tax paid           (708 )
Net cash flows used in operating activities     (739 )     (8,332 )

 

Graphex Group Limited Interim Report 2024 10

 

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 30 June 2024

 

    For the six months ended 30 June  
   

2024

    2023  
    (Unaudited) HK$’000    

(Unaudited)

HK$’000

 
CASH FLOWS FROM INVESTING ACTIVITIES                
Interest received     17       771  
Purchases of items of property, plant and equipment     (31 )     (823 )
Proceeds from disposal of property, plant and equipment     177       2  
Repayment of a loan from a joint venture     8,690       10,630  
Loan advanced to joint ventures     (23,246 )     (13,828 )
Purchase of the other intangible asset     (10 )     (84 )
Dividend from equity instruments at fair value through other                
comprehensive income     65       92  
Placement of restricted bank deposit     (45 )      
Net cash flows used in investing activities     (14,383 )     (3,240 )
CASH FLOWS FROM FINANCING ACTIVITIES                
Proceeds from bank borrowings     7,035       5,236  
Repayment of bank borrowings     (5,108 )     (5,236 )
Proceeds from other borrowings           6,014  
Repayment of other borrowings     (110 )     (2,392 )
Interest paid     (1,041 )     (918 )
Repayment of lease liabilities     (2,363 )     (3,387 )
Dividend paid to non-controlling interests           (1,511 )
Net cash flows used in financing activities     (1,587 )     (2,194 )
NET DECREASE IN CASH AND CASH EQUIVALENTS     (16,709 )     (13,766 )
Cash and cash equivalents at beginning of period     27,190       31,470  
Effect of foreign exchange rate changes, net     (90 )     (245 )
CASH AND CASH EQUIVALENTS AT END OF PERIOD     10,391       17,459  

 

Graphex Group Limited Interim Report 2024 11

 

NOTES TO UNAUDITED INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

 

30 June 2024

 

1. CORPORATE AND GROUP INFORMATION

 

Graphex Group Limited (the “Company”) was incorporated as an exempted company with limited liability in the Cayman Islands on 25 November 2013. The registered office address of the Company is Windward 3, Regatta Office Park, P.O. Box 1350, Grand Cayman KY1-1108, Cayman Islands.

 

The principal activities of the Company and its subsidiaries (collectively referred to as the “Group”) are development and processing of graphene products, in particular, graphite anode material for lithium-ion batteries used in electric vehicles, energy storage systems and other applications. The Group is also engaged in landscape architecture and design businesses.

 

2.1 BASIS OF PREPARATION

 

The interim condensed consolidated financial statements for the six months ended 30 June 2024 have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting.

 

The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group’s annual financial statements as at 31 December 2023. These financial statements are presented in Hong Kong dollars (“HK$”) and all values are rounded to the nearest thousand except when otherwise indicated.

 

All intra-group transactions and balances have been eliminated on consolidation.

 

Going concern basis

 

The Group recorded a loss attributable to owners of the parent of HK$54,096,000 for the six months ended 30 June 2024 and net current liabilities of HK$98,519,000 as at 30 June 2024.

 

In view of the above circumstances, the directors have given careful consideration to the future liquidity and performance of the Group and its available sources of finance in assessing whether the Group will have sufficient financial resources to continue as a going concern in the foreseeable future.

 

The directors of the Company have reviewed the Group’s cash flow projection prepared by management, which includes revenue and expenditure growth of the business, working capital needs and, the continuing renewal of the banking facilities. They are of the opinion that, after taking into account the measures to be implemented and has been implemented, the Group will have sufficient working capital to finance its operation and to meet its financial obligations for at least the next twelve months from the date of approval of these interim condensed consolidated financial statements. Accordingly, the directors of the Company believe it is appropriate to prepare the interim condensed consolidated financial statements of the Group for the six months ended 30 June 2024 on a going concern basis.

 

Graphex Group Limited Interim Report 2024 12

 

NOTES TO UNAUDITED INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

 

30 June 2024

 

2.1 BASIS OF PREPARATION (Continued)

 

Going concern basis (Continued)

 

In view of these circumstances, the directors have taken various measures with an aim to improve the Group’s liquidity position. The directors have prepared a cash flow forecast of the Group for the next twelve months from the end of the reporting period taken into account the followings:

 

  (i) The Group has obtained a short-term loan facility of HK$20,000,000 for financing its working capital;
     
  (ii) The Group has taken various cost control measures to tighten the costs of operations;
     
  (iii) The Group is in serious discussions with potential investors for raising new capital by way of issuing new equity and/or debt securities; and
     
  (iv) Graphex (Shandong) New Energy Technologies Limited (the “Graphex Shandong”), being an indirect whollyowned subsidiary of the Company established for the purpose of operating a project in Nanshu Town has on 26 October 2023 received a letter of intent (“LOI”) issued by one of the four major banks of the PRC (the “Bank”) to Graphex Shandong, whereby the Bank has indicated an intention of providing banking facilities of RMB400 million for the project (the “Proposed Loan”). The LOI is non-legally binding and the granting of the Proposed Loan is subject to, amongst other things, the Bank’s further evaluation on the Proposed Loan, finalisation of the terms and conditions of the Proposed Loan and compliance with the relevant banking and other laws and regulations of the PRC.

 

Whether the Group will be able to generate adequate cash flows to continue as a going concern would depend on the successful outcome of the above measures.

 

Should the going concern assumption be inappropriate, adjustments may have to be made to write down the values of assets to their recoverable amounts, to provide for further liabilities that might arise, and to reclassify noncurrent assets and non-current liabilities as current assets and current liabilities. The effects of these adjustments have not been reflected in these interim condensed consolidated financial statements.

 

2.2 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURE

 

The accounting policies adopted in the preparation of the interim condensed consolidated financial information are consistent with those applied in the preparation of the Group’s annual consolidated financial statements for the year ended 31 December 2023, except for the adoption of new standards effective as of 1 January 2024. The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.

 

Graphex Group Limited Interim Report 2024 13

 

NOTES TO UNAUDITED INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

 

30 June 2024

 

2.2 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURE (Continued)

 

The IASB has issued a number of new or amended IFRSs that are first effective for the current accounting period of the Group:

 

Amendments to IAS 7 and IFRS 7   Supplier Finance Arrangements
Amendments to IFRS 16   Lease Liability in a Sale and Leaseback
Amendments to IAS 1   Classification of Liabilities as Current or Non-current Liabilities
Amendments to IAS 1   Non-current Liabilities with Covenants

 

Other than as noted below, the adoption of the new or amended IFRSs had no material impact on how the results and financial position for the current and prior periods have been prepared and presented. The Group has not early applied any new or amended IFRSs that is not yet effective for the current accounting period.

 

3. REVENUE

 

An analysis of revenue is as follows:

 

    For the six months ended 30 June  
    2024     2023  
   

(Unaudited)

HK$’000

    (Unaudited)
HK$’000
 
Type of goods or services                
Sales of graphene products     61,489       97,103  
Landscape architecture services     32,253       54,171  
Total Revenue     93,742       151,274  
Geographical markets                
Mainland China     79,587       138,178  
Hong Kong     12,629       12,754  
Others     1,526       342  
Total Revenue     93,742       151,274  
Timing of revenue recognition
Goods transferred at a point in time
    61,489       97,103  
Services transferred over time     32,253       54,171  
Total Revenue     93,742       151,274  

 

Graphex Group Limited Interim Report 2024 14

 

NOTES TO UNAUDITED INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

 

+30 June 2024

 

4. OPERATING SEGMENT INFORMATION

 

Information reported to the board of directors, being the chief operating decision maker (CODM), for the purposes of resources allocation and assessment of segment performance focuses on types of goods and services delivered and provided.

 

For management purposes, the Group has identified the following two (30 June 2023: three) major reportable segments. Certain segments have been aggregated to form the following reportable segments:

 

  (a) Processing and sale of graphite and graphene related products (“Graphene Products Segment”);
     
  (b) Providing landscape architecture design (“Landscape Architecture Design Segment”); and
     
  (c) The catering business focuses on operation of restaurants (“Catering Segment”).

 

Management monitors the results of the Group’s operating segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on reportable segment profit, which is a measure of adjusted profit/loss before tax. The adjusted profit/loss before tax is measured consistently with the Group’s profit/loss before tax except that finance costs, as well as head office and corporate income and expenses are excluded from such measurement.

 

Segment assets exclude deferred tax assets, cash and bank balances and other unallocated head office and corporate assets as these assets are managed on a group basis.

 

Segment liabilities exclude tax payable, deferred tax liabilities and other unallocated head office and corporate liabilities as these liabilities are managed on a group basis.

 

Intersegment revenue is eliminated on consolidation. Intersegment sales and transfers are transacted with reference to the service prices used for sales made to third parties at the then prevailing market prices.

 

Graphex Group Limited Interim Report 2024 15

 

NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS

 

30 June 2024

 

4. OPERATING SEGMENT INFORMATION (Continued)

 

The following tables present revenue and profit/loss information for the Group’s operating segments for the six months ended 30 June 2024 and 2023.

 

Six months ended 30 June 2024 (Unaudited)

 

    Graphene products    

Landscape

architecture

design

    Catering (note (iii))    

 

 

Total

 
    HK$’000     HK$’000     HK$’000     HK$’000  
Segment revenue (note 3)                                
Sales to external customers     61,489       32,253             93,742  
Elimination of inter-segment sales                        
Segment results     (15,830 )     (13,058 )           (28,888 )
Reconciliations:                                
Unallocated income and gains                             1,005  
Unallocated expenses                             (19,997 )
Unallocated finance costs                             (8,216 )
Unallocated depreciation and amortisation                             (407 )
Share of losses of associates                             (800 )
Loss before tax                             (57,303 )
Adjusted segment EBITDA (note (i))     7,374       (2,692 )           4,682  

 

Six months ended 30 June 2023 (Unaudited)

 

   

 

Graphene products

    Landscape architecture design    

 

Catering (note (iii))

    Total  
   
HK$’000
   
HK$’000
   
HK$’000
   
HK$’000
 
Segment revenue (note 3)                                
Sales to external customers     97,103       54,171             151,274  
Elimination of inter-segment sales                        
Segment results     (7,790 )     (13,013 )     1,680       (19,123 )
Reconciliations:                                
Unallocated income and gains                             1,316  
Unallocated expenses                             (16,479 )
Unallocated finance costs                             (11,858 )
Unallocated depreciation and amortisation                             (406 )
Share of losses of associates                             (230 )
Loss before tax                             (46,780 )
Adjusted segment EBITDA (note (i))     16,012       1,512       1,745       19,269  

 

Graphex Group Limited Interim Report 2024 16

 

NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS

 

30 June 2024

 

4. OPERATING SEGMENT INFORMATION (Continued)

 

The following tables present assets and liabilities information for the Group’s operating segments as at 30 June 2024 and 31 December 2023.

 

30 June 2024 (Unaudited)                        
          Landscape              
    Graphene products    

architecture

design

    Catering (note (iii))     Total  
    HK$’000     HK$’000     HK$’000     HK$’000  
Segment assets     750,996       81,723             832,719  
Reconciliations:                                
Elimination of intersegment receivables                             (17,456 )
Unallocated assets                             24,053  
Total assets                             839,316  
Segment liabilities     95,602       69,941             165,543  
Reconciliations:                                
Elimination of intersegment payables                             (17,456 )
Unallocated liabilities                             361,982  
Total liabilities                             510,069  
31 December 2023 (Audited)                                

 

          Landscape              
    Graphene products     architecture
design
    Catering (note (iii))     Total  
    HK$’000     HK$’000     HK$’000     HK$’000  
Segment assets     744,222       87,663             831,885  
Reconciliations:                                
Elimination of intersegment receivables                             (15,641 )
Unallocated assets                             31,099  
Total assets                             847,343  
Segment liabilities     72,988       71,405             144,393  
Reconciliations:                                
Elimination of intersegment payables                             (15,641 )
Unallocated liabilities                             348,953  
Total liabilities                             477,705  

 

Graphex Group Limited Interim Report 2024 17

 

NOTES TO UNAUDITED INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

 

30 June 2024

4. OPERATING SEGMENT INFORMATION (Continued)

 

The following tables present other segment information for the Group’s operating segments for the six months ended 30 June 2024 and 2023.

 

Six months ended 30 June 2024 (Unaudited)

 

          Landscape              
    Graphene products    

architecture

design

   

Catering

(note (iii))

    Total  
    HK$’000     HK$’000     HK$’000     HK$’000  
Other segment information                                
Share of losses of associates unallocated                             800  
Impairment losses recognised in the statement of profit or loss                                
– Financial and contract assets           6,704             6,704  
– Property, plant and equipment and other intangible asset           1,859             1,859  
Reconciliation:                                
Unallocated                              
Total                             8,563  
Depreciation and amortisation     22,752       1,667             24,419  
Reconciliation:                                
Unallocated                             407  
Total                             24,826  
Income and gains allocated     6       5,923             5,929  
Finance costs allocated     452       310             762  
Investment in an associate unallocated                              
Capital expenditure (note (ii))           41             41  
Reconciliation:                                
Unallocated                              
Total                             41  

 

Graphex Group Limited Interim Report 2024 18

 

NOTES TO UNAUDITED INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

 

30 June 2024

4. OPERATING SEGMENT INFORMATION (Continued)

 

Six months ended 30 June 2023 (Unaudited)

 

          Landscape              
    Graphene
products
    architecture
design
    Catering
(note (iii))
   

 

Total

 
    HK$’000     HK$’000     HK$’000     HK$’000  
Other segment information                                
Share of losses of associates unallocated                             230  
Impairment losses recognised in the statement of profit or loss                                
– Financial and contract assets           10,705             10,705  
Reconciliation:                                
Unallocated                              
Total                             10,705  
Depreciation and amortisation     23,307       3,412       61       26,780  
Reconciliation:                                
Unallocated                             407  
Total                             27,187  
Income and gains allocated     2       3,185       2,050       5,237  
Finance costs allocated     495       388       3       886  
Investment in an associate unallocated                              
Capital expenditure (note (ii))     451       456             907  
Reconciliation:                                
Unallocated                              
Total                             907  

 

Graphex Group Limited Interim Report 2024 19

 

NOTES TO UNAUDITED INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

 

30 June 2024

 

4. OPERATING SEGMENT INFORMATION (Continued)

 

Notes:

 

(i) Adjusted segment EBITDA is defined as earnings before interest expense, taxation, depreciation and amortisation, and excludes fair value change on financial assets at fair value through profit or loss, impairment losses of other intangible assets and property, plant and equipment, share of losses of associates, impairment/(reversal of impairment) on financial and contract assets, unallocated other income and gains and corporate expenses.

 

A reconciliation of adjusted segment EBITDA to consolidated loss before income tax is provided as follows:

 

   

30 June 2024

(Unaudited)

    30 June 2023
(Unaudited)
 
    HK$’000     HK$’000  
Loss before tax     (57,303 )     (46,780 )
Add:                
Finance costs     8,978       12,744  
Amortisation and depreciation                
– property, plant and equipment     548       1,623  
– right-of-use assets     2,390       2,890  
– other intangible assets     21,888       22,674  
                 
EBITDA     (23,499 )     (6,849 )
                 
Impairment of property, plant and equipment, net     1,740        
Impairment of other intangible assets, net     119        
Impairment loss of trade receivables, net     3,387       3,330  
Impairment loss of contract assets, net     4,261       7,375  
Impairment loss of other receivables, net     (944 )      
Fair value changes on financial assets at fair value through profit or loss     3       6  
(Gain)/loss on disposal of items of property, plant and equipment     (177 )     106  
Share of losses of associates     800       230  
Corporate expenses                
– Directors and corporate staff salaries     9,289       8,108  
– Auditor’s remuneration     620       726  
– Legal and professional expenses     6,794       3,883  
– Publicity expenses     632       907  
– Bank charges     689       826  
– Others     1,973       2,029  
      19,997       16,479  
Unallocated income and gains                
– Dividend income from equity investments at fair value through other comprehensive income     (65 )     (92 )
– Interest income     (329 )     (126 )
– Gain on settlement of other payables upon issue of ordinary shares     (560 )      
– Waiver of interest           (1,160 )
– Others     (51 )     (30 )
      (1,005 )     (1,408 )
Adjusted segment EBITDA     4,682       19,269  

 

(ii) Capital expenditure consists of additions to property, plant and equipment and other intangible assets except for right-of-use assets.

 

(iii) On 1 August 2023 and 24 November 2023, the Group and a third party entered into two agreements, pursuant to which, the Group disposed of the entire equity interests in Yummy Food Holdings Limited (“Yummy Food”) and Thai Gallery (HK) Limited (“Thai Gallery”) and their subsidiaries at zero consideration. The disposal was completed on 24 November 2023.

 

Graphex Group Limited Interim Report 2024 20

 

NOTES TO UNAUDITED INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

 

30 June 2024

 

5. OTHER INCOME AND GAINS

 

An analysis of other income and gains is as follows:

 

   

For the six months ended 30 June

 
    2024     2023  
   

(Unaudited)

    (Unaudited)  
    HK$’000     HK$’000  
Other income                
Service income     4,969       1,659  
Dividend income from equity instruments at fair value through other comprehensive income     65       92  
Interest income     786       582  
Waiver of interest on convertible notes           1,160  
Compensation from a supplier           1,041  
Government grants (note)     291       914  
      6,111       5,448  
Gains                
Gain on lease termination           2  
Gain on settlement of other payables upon issue of ordinary shares     560        
Gain on disposal of items of property, plant and equipment     177        
Exchange difference, net     1       44  
Others     85       1,059  
      823       1,105  
      6,934       6,553  

 

  Note: Government grants were received from government departments for promoting the Group’s business in the local area. There are no unfulfilled conditions or contingencies relating to these grants.

 

6. FINANCE COSTS

 

An analysis of finance costs is as follows:

 

   

For the six months ended 30 June

 
    2024     2023  
   

(Unaudited)

HK$’000

    (Unaudited)
HK$’000
 
Interest on interest-bearing borrowings     4,621       4,383  
Interest on convertible notes     928       3,925  
Interest on promissory note     2,871       3,769  
Interest on lease liabilities     558       667  
      8,978       12,744  

 

Graphex Group Limited Interim Report 2024 21

 

NOTES TO UNAUDITED INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

 

30 June 2024

 

7. LOSS BEFORE TAX

 

The Group’s loss before tax is arrived at after charging:

 

   

For the six months ended 30 June

 
    2024     2023  
    (Unaudited)     (Unaudited)  
    HK$’000     HK$’000  
Cost of inventories sold     45,249       63,753  
Cost of services provided     18,126       37,489  
Cost of sales     63,375       101,242  
Amortisation and depreciation                
– property, plant and equipment     548       1,623  
– right-of-use assets     2,390       2,890  
– other intangible assets     21,888       22,674  
      24,826       27,187  
Research and development cost: current year expenditure     7,760       10,780  
Lease payments for leases less than 12 months     1,096       771  
Auditor’s remuneration     685       824  
Employee benefit expense (including directors and chief executive’s remuneration):                
– wages and salaries     30,938       38,371  
– equity-settled share-based payment expenses     6,194       1,907  
– pension scheme contributions (defined contribution scheme)     3,945       6,798  
– welfare and other benefits     212       375  
      41,289       47,451  
Equity-settled share-based payment for services     5,448       639  
Foreign exchange differences, net     (166 )     311  
Impairment of property, plant and equipment, net     1,740        
Impairment of other intangible assets, net     119        
Impairment loss of financial and contract assets                
Impairment loss of trade receivables, net     3,387       3,330  
Impairment loss of contract assets, net     4,261       7,375  
Impairment loss of financial assets included in other receivables and other assets, net     (944 )      
      6,704       10,705  
Fair value loss on financial assets at fair value through profit or loss     3       6  
(Gain)/loss on disposal of property, plant and equipment     (177 )     106  

 

Graphex Group Limited Interim Report 2024 22

 

NOTES TO UNAUDITED INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

 

30 June 2024

 

8. INCOME TAX

 

Hong Kong profits tax has been provided at the rate of 16.5% (2023: 16.5%) on the estimated assessable profits arising in Hong Kong during the year. Taxes on profits assessable elsewhere have been calculated at the rates of tax prevailing in the jurisdictions in which the Group operates.

 

泛亞景觀設計(上海)有限公司 continued to be granted with the qualification of High and New Technology Enterprises (“HNTE”) on 15 November 2023 and is entitled to a preferential corporate income tax rate of 15% (2023: 15%) for a period of three years ending 31 December 2025.

 

前海泛亞景觀設計(深圳)有限公司 has been provided at the rate of 15% (2023: 15%) on the estimated assessable profits as its main principal activities, of engaging in interior design and landscape, are recognised as encouraged industries in Qianhai district, Shenzhen in Mainland China.

 

黑龍江省牡丹江農墾湠奧石墨烯深加工有限公司 is qualified for High and New Technology Enterprises and is entitled to a preferential corporate income tax rate of 15% (2023: 15%) for a period of three years ended 31 December 2025.

 

Other subsidiaries located in Mainland China were subject to corporate income tax at the statutory rate of 25% for the year (2023: 25%) under the income tax rules and regulations in the PRC.

 

Graphex Technologies, LLC is incorporated in the US and is subject to corporate income tax at 21%.

 

   

For the six months ended 30 June

 
    2024     2023  
    (Unaudited)     (Unaudited)  
    HK$’000     HK$’000  
Current tax:                
Hong Kong            
Mainland China            
             
Deferred tax     (3,257 )     (5,005 )
Total tax credit for the period     (3,257 )     (5,005 )

 

Graphex Group Limited Interim Report 2024 23

 

NOTES TO UNAUDITED INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

 

30 June 2024

 

9. DIVIDEND

 

The board of directors of the Company does not recommend the payment of any interim dividend (six months ended 30 June 2023: nil) for the six months ended 30 June 2024.

 

10. LOSS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT

 

The calculation of the basic loss per share amount is based on the loss for the period attributable to ordinary equity holders of the parent of HK$54,096,000 (six months ended 30 June 2023: HK$43,968,000), and the weighted average number of ordinary shares of 901,508,416 (six months ended 30 June 2023: 725,781,129) issued during the period.

 

No adjustment has been made to the basic loss per share amounts presented for the six months ended 30 June 2024 and 2023 in respect of a dilution as the impact of the convertible notes, warrants and share options outstanding had an anti-dilution effect on the basic loss per share amounts presented.

 

The calculation of basic loss per share was based on:

 

    For the six months ended 30 June  
    2024     2023  
    (Unaudited)     (Unaudited)  
    HK$’000     HK$’000  
             
Loss                
Loss attributable to ordinary equity holders of the parent     (54,096 )     (43,968 )

 

    Number of shares  
    For the six months ended 30 June  
    2024     2023  
    (Unaudited)     (Unaudited)  
             
Shares                
Weighted average number of ordinary shares in issue during the period used in the basic loss per share calculation     901,508,416       725,781,129  

 

Graphex Group Limited Interim Report 2024 24

 

NOTES TO UNAUDITED INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

 

30 June 2024

 

11. TRADE AND BILLS RECEIVABLES

 

    30 June     31 December  
    2024     2023  
   

(Unaudited)

HK$’000

    (Audited)
HK$’000
 
Trade and bills receivables     233,000       220,655  
Allowance for impairment     (75,522 )     (72,664 )
      157,478       147,991  

 

The Group’s trading terms with its customers are mainly on credit, except for new customers, where payment in advance is normally required. The credit period is two months, extending up to six months for major customers. Each customer has a maximum credit limit. The Group seeks to maintain strict control over its outstanding receivables to minimise credit risk. Overdue balances are reviewed regularly by senior management. In view of the aforementioned and the fact that the Group’s trade and bill receivables relate to a large number of diversified customers, there is no significant concentration of credit risk. The Group does not hold any collateral or other credit enhancements over its trade and bills receivables balances. Trade and bills receivables are non-interest-bearing.

 

Included in the Group’s trade and bill receivables were amounts billed of HK$157,028,000 (31 December 2023:

 

HK$78,252,000) and billable of HK$75,972,000 (31 December 2023: HK$142,403,000).

 

An ageing analysis of trade and bills receivables as at the end of the reporting period, based on the invoice date, and net of allowance for lifetime expected credit losses, is as follows:

 

    30 June     31 December  
    2024     2023  
   

(Unaudited)

HK$’000

    (Audited)
HK$’000
 
Within 6 months     58,090       75,972  
Over 6 months but within 1 year     72,924       49,715  
Over 1 year but within 2 years     26,353       20,962  
Over 2 years but within 3 years     111       1,342  
      157,478       147,991  

 

Graphex Group Limited Interim Report 2024 25

 

NOTES TO UNAUDITED INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

 

30 June 2024

 

12. TRADE PAYABLES

 

An aged analysis of trade payables as at the end of the reporting period, based on the invoice date, is as follows:

 

    30 June     31 December  
    2024     2023  
   

(Unaudited)

HK$’000

    (Audited)
HK$’000
 
Within 1 year     36,889       20,278  
Over 1 year but within 2 years     77       22  
Over 2 years but within 3 years     19       42  
Over 3 years     2,164       2,848  
      39,149       23,190  

 

The trade payables are non-interest-bearing and are normally settled within three months.

 

13. INTEREST-BEARING BORROWINGS

 

        30 June 2024 (Unaudited)  
        Effective interest rate            
    Notes   (%)     Maturity   HK$’000  
Current                        
Bank borrowing – guaranteed   (a)     3.0–3.6     2024     12,873  
Other borrowing – unsecured   (b)     3.8     On demand     1,557  
Other borrowing – unsecured   (b)     14.4     On demand     2,014  
Other borrowing – unsecured   (b)     9     2024     11,000  
Other borrowing – unsecured   (b)     15     On demand     4,000  
Other borrowing – unsecured   (b)     5     On demand     1,586  
Other borrowing – unsecured   (b)     Nil     On demand     1,697  
Current portion of corporate bonds                        
– unsecured   (c), (d) and (e)     6     2025 but     88,540  
                subject to right to demand repayment        
– unsecured   (c) and (d)     9.13–10.04     On demand     26,832  
                      150,099  
Non-current                      

 

Graphex Group Limited Interim Report 2024 26

 

NOTES TO UNAUDITED INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

 

30 June 2024

 

13. INTEREST-BEARING BORROWINGS (Continued)

 

        31 December 2023 (Audited)  
        Effective            
        interest rate            
    Notes   (%)     Maturity   HK$’000  
Current                    
Bank borrowing – guaranteed   (a)     3.6–3.8     2024     11,035  
Other borrowing – unsecured   (b)     4     On demand     1,678  
Other borrowing – unsecured   (b)     14.4     On demand     2,014  
Other borrowing – unsecured   (b)     9     2024     11,000  
Other borrowing – unsecured   (b)     15     On demand     4,000  
Other borrowing – unsecured   (b)     5     On demand     1,586  
Other borrowing – unsecured   (b)     Nil     On demand     1,697  
Current portion of corporate bonds                        
– unsecured   (c), (d) and (e)     6     2025 but subject     76,040  
                to right to demand repayment        
– unsecured   (c) and (d)     9.13–10.04     On demand     26,832  
                      135,882  
Non-current                        
Corporate bonds – unsecured   (d)     6 2025     12,500        

 

Graphex Group Limited Interim Report 2024 27

 

NOTES TO UNAUDITED INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

 

30 June 2024

 

13. INTEREST-BEARING BORROWINGS (Continued)

 

The corporate bonds recognised in the interim condensed consolidated financial statements are calculated as follows:

 

   

HK$6%

Corporate Bonds due

2021

   

HK$6%

Corporate

Bonds due 2021 and

2022

   

HK$6%

Corporate

Bonds due 2021 and

2022

   

HK$6%

Corporate Bonds due

2023

   

HK$6%

Corporate Bonds due

2025

    Total  
    HK$’000     HK$’000     HK$’000     HK$’000     HK$’000     HK$’000  
    (note (c))     (note (d))     (note (d))     (note (e))              
Carrying amount as at 1 January 2023     22,955       28,693       53,224       7,995       2,500       115,367  
Interest charged                       13       3,025       3,038  
Interest paid and interest                                                
payable included in other                                                
payables and accruals                       (8 )     (3,025 )     (3,033 )
Due date extension     (10,469 )     (19,387 )     (48,184 )     (8,000 )     86,040        
Carrying amount as at 31 December 2023     12,486       9,306       5,040               88.540       115,372  
Carrying amount as at 1 January 2024     12,486       9,306       5,040             88.540       115,372  
Interest charged                             2,649       2,649  
Interest paid and interest                                                
payable included in other                                                
payables and accruals                             (2,649 )     (2,649 )
Carrying amount as at 30 June 2024     12,486       9,306       5,040             88,540       115,372  

 

Graphex Group Limited Interim Report 2024 28

 

NOTES TO UNAUDITED INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

 

30 June 2024

 

13. INTEREST-BEARING BORROWINGS (Continued)

 

Notes:

 

(a) During the period ended 30 June 2024, the Group obtained bank borrowings of HK$7,035,000 (31 December 2023: HK$11,035,000) denominated in Renminbi, carry fixed interest rate at 3.0% and 3.6% per annum and repayable within one year. The bank borrowings were secured by a guarantee provided by the Company.

 

(b) The Group’s all other borrowings were unsecured, of which, HK$1,557,000 (31 December 2023: HK$1,678,000) was denominated in Renminbi with duration of one year from the date issued, HK$16,800,000 (31 December 2023: HK$16,800,000) was denominated in Hong Kong dollars, with duration of three months to two years from the date issued, HK$3,497,000 (31 December 2023: HK$3,497,000) was denominated in US dollars, with duration of three months from the date issued.

 

(c) The corporate bonds matured in 2021. In June 2023, certain holders of corporate bonds with aggregate carrying amount of approximately HK$10,469,000 have agreed in writing to extend the repayment date of the relevant bonds to 30 June 2025. Since the holders of the corporate bonds have right to demand immediate repayment in May 2024, the bonds have been reclassified under current liabilities. At 30 June 2024, the remaining balance of the corporate bonds of HK$12,486,000 (31 December 2023: HK$12,486,000) was repayable on demand. The corporate bonds carried coupon interest at a rate of 6%, which is accumulated daily on the 365 daily basis and payable annually.

 

(d) The Company issued corporate bonds of HK$79,500,000 and HK$37,000,000 in 2020 and 2019, respectively, which were matured in 2021 and 2022, respectively. The corporate bonds carried coupon interest at a rate of 6%, which is accumulated daily on the 365 daily basis and payable annually. During the year ended 31 December 2023, corporate bonds with aggregate nominal value of HK$67,571,000 (2022: HK$2,500,000) were extended to 2025, as agreed with the corporate bond holders. Since the holders of the corporate bonds with aggregate carrying amount of approximately HK$57,571,000 have right to demand immediate repayment in May 2024, the related bonds have been reclassified under current liabilities. As at 30 June 2024, the remaining balance of corporate bonds of HK$14,346,000 (31 December 2023: HK$14,346,000) was repayable on demand.

 

(e) On 6 January 2021, the Company issued HK$8,000,000 corporate bonds with a nominal value of HK$8,000,000, of which HK$7,440,000, after net of related transaction costs, was received in 2021. The bonds matured in 2023 and carried coupon interest at a rate of 6% per annum and payable annually. In June 2023, the holders of corporate bonds have agreed in writing to extend the repayment date of the relevant bonds to 30 June 2025. Since the holders of the corporate bonds have right to demand immediate repayment in May 2024, the bonds have been reclassified under current liabilities.

 

(f) The Company is also in serious negotiations with the corporate bond holders for extension of the remaining corporate bonds.

 

Graphex Group Limited Interim Report 2024 29

 

NOTES TO UNAUDITED INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

 

30 June 2024

 

14. PROMISSORY NOTE

 

    30 June     31 December  
    2024     2023  
    (Unaudited)     (Audited)  
    HK$’000     HK$’000  
At the beginning of the period     61,024       90,074  
Conversion to ordinary shares           (34,481 )
Effective interest charged     2,871       7,628  
Interest payable and included in other payables and accruals     (713 )     (2,197 )
At the end of the period     63,182       61,024  

 

Note: On 7 August 2019, the Group issued a 4-year unsecured promissory note with principal amount of HK$348,080,000 at 2% coupon rate, as part of the consideration for the acquisition of the entire issued share capital of Think High Global Limited. The effective interest rate was 8.4% at the date of issue. The fair value of the promissory note at acquisition date was estimated to be HK$274,552,000. The promissory note is carried at amortised cost.
     
    On 9 December 2021, the Group and the promissory note holder, which is an independent third party and not a substantial shareholder of the Company, entered into an agreement to extend the maturity date from 6 August 2023 to 6 August 2026. A gain on extension of promissory note of approximately HK$51,435,000 was recognised in profit or loss for the year ended 31 December 2021. The fair value of the promissory note of HK$263,740,000 at the date of extension was determined by the directors of the Company based on the valuation prepared by a professional qualified valuer independent to the Group, CHFT Advisory and Appraisal Ltd. The effective interest rate is 8.5% per annum.
     
    On 25 March 2022, the Company issued 323,657,534 preference shares of HK$0.01 each, with a fair value of HK$178,427,000, as consideration for full settlement of promissory note to the holder of the promissory note with a carrying amount at HK$182,100,000, resulting in a gain on derecognition of promissory note of approximately HK$3,673,000 which was credited to the consolidated profit or loss for the year ended 31 December 2022.
     
    On 11 December 2023, the Company issued 100,000,000 ordinary shares, at closing market price of HK$0.39 per ordinary share, with a fair value of HK$39,000,000, to the holder of the promissory note as consideration for full settlement of promissory note with a carrying amount at HK$34,481,000, resulting in a loss on derecognition of promissory note of approximately HK$4,519,000 which was recognised in the consolidated profit or loss for the year ended 31 December 2023. As at 30 June 2024, the holder of the promissory note held 100,000,000 ordinary shares of the Company, representing approximately 10.3% of the issued share capital of the Company.

 

Graphex Group Limited Interim Report 2024 30

 

NOTES TO UNAUDITED INTERIM

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

30 June 2024

 

15. CONVERTIBLE NOTES

 

    Equity component  
   

Liability

component

   

Conversion

rights

   

Warrant

reserve

   

 

Total

 
    HK$’000     HK$’000     HK$’000     HK$’000  
As at 1 January 2023     52,983       13,006       19,943       85,932  
Effective interest for the year     3,057                   3,057  
Conversion to ordinary shares     (51,882 )     (12,123 )           (64,005 )
As at 31 December 2023     4,158       883       19,943       24,984  
Effective interest for the year     28                   28  
Conversion to ordinary shares     (388 )     (56 )           (444 )
As at 30 June 2024     3,798       827       19,943       24,568  
Current portion of convertible notes     (3,798 )                        
Non-current portion of convertible notes                              

 

Pursuant to the subscription agreement entered into between the Company and Lexinter International Inc. (“Lexinter”) on 19 January 2021 (“Subscription Agreement”), the Company shall issue the convertible notes and warrants in tranches with aggregate principal value of US$15,000,000 (equivalent to HK$116,250,000 at the fixed exchange rate of HK$7.75: US$1). The financial obligations in the convertible notes and warrants in Hong Kong dollars are fixed in accordance with the subscription agreement. The conversion rights embedded with the convertible notes are exercisable into ordinary shares at the price of HK$0.65 per ordinary share and the convertible notes bear coupon interests at the coupon rate of 5.5% per annum and will be due for repayment on the second anniversary of their respective issue dates. Warrants are exercisable from the issue date of warrants to the maturity date, which is five years from the date of issue. The share subscription rights attached to the warrants are exercisable into ordinary shares at the price of HK$0.65 per ordinary share.

 

The conversion rights embedded with the convertible notes and the warrant subscription rights are regarded as equity component as both of them meet with the fixed-for-fixed rule of IAS 32 i.e. fixed number of ordinary shares of the Company will be issued upon the exercise of the conversion rights and warrant subscription rights.

 

Graphex Group Limited Interim Report 2024 31

 

NOTES TO UNAUDITED INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

 

30 June 2024

 

15. CONVERTIBLE NOTES (Continued)

 

At the time of issuance, the Company allocated the proceeds to liability component and equity component in respect of the conversion rights of the convertible notes and warrant subscription rights as follows:

 

(i) Liability component of the convertible notes represents the present value of the contractually determined stream of future cash flows discounted at the prevailing market interest rates applicable to instruments of comparable credit status taken into account the business risk and financial risk of the Company at the issue date, and

 

(ii) Equity component in respect of conversion rights of convertible notes and warrant subscription rights represent the excess of proceeds over liability component of the convertible notes as determined in (i) above.

 

During the period ended 30 June 2024, convertible notes with principal amount of US$50,000 (equivalent to HK$387,500 at the fixed exchange rate of HK$7.75: US$1) (year ended 31 December 2023: US$7,970,000 (equivalent to HK$61,676,500 at the fixed exchange rate of HK$7.75: US$1)) were converted into 596,153 (year ended 31 December 2023: 95,026,919) ordinary shares at HK$0.65 (year ended 31 December 2023: HK$0.65) per ordinary share.

 

At 30 June 2024, there were outstanding convertible notes with aggregate principal value of US$490,000 (2023: US$540,000), which was equivalent to approximately HK$3,797,500 (2023: HK$4,185,000) at the fixed exchange rate of HK$7.75: US$1 as stipulated in the Subscription Agreement, out of which convertible notes with principal value of US$290,000 and US$200,000 was overdue since 23 August 2023 and 9 January 2024, respectively. The holder of these convertible notes has not taken any legal action against the Company.

 

At 30 June 2024, the effective interest rate of the liabilities component of the convertible notes ranged from 18.84% to 22.04% (year ended 31 December 2023: 18.83% to 22.04%).

 

At 30 June 2024, 5,842,313 (year ended 31 December 2023: 6,438,466) and 89,423,076 (year ended 31 December 2023: 89,423,076) ordinary shares are issuable under the conversion rights of the convertible notes and the warrants at HK$0.65 per ordinary share, respectively.

 

At 30 June 2024 and 31 December 2023, the entire issued capital of Think High Global Limited, which holds 100% of the Graphene Products Business, was charged in favour of Lexinter for the outstanding convertible notes and the warrants.

 

Graphex Group Limited Interim Report 2024 32

 

NOTES TO UNAUDITED INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

 

30 June 2024

 

16. SHARE CAPITAL

 

Ordinary Shares

 

    30 June     31 December  
    2024     2023  
    (Unaudited)     (Audited)  
    HK$’000     HK$’000  
Issued and fully paid                
971,136,762 (2023: 897,974,788) ordinary shares of HK$0.01 each     9,711       8,980  

 

A summary of movements in the Company’s share capital is as follows:

 

   

Number of

issued and fully paid

   

 

Nominal

value of shares

   

 

Share

premium account

 
    shares     HK$’000     HK$’000  
As at 31 December 2023 and 1 January 2024     897,974,788       8,980       607,247  
Issue of ordinary shares upon conversion of convertible notes (note (a))     596,153       6       438  
Shares granted under share award scheme (note (b))     26,476,438       264       11,783  
Issue of new ordinary shares (note (c))     46,089,383       461       4,870  
As at 30 June 2024     971,136,762       9,711       624,338  

 

Notes:

 

(a) Conversion of convertible notes

 

On 30 January 2024, convertible notes with principal amount of US$50,000 was converted into 596,153 ordinary shares at conversion price of HK$0.65 per ordinary shares.

 

(b) On 20 June 2024, the Company allotted and issued 26,476,438 ordinary shares under the Company’s share award scheme.

 

(c) On 8 May 2024 and 28 June 2024, the Company allotted and issued 2,400,000 and 43,689,383 new ordinary shares as consideration for settlement of other payables of approximately HK$429,600 and HK$5,461,000, respectively. The closing market price of the Company’s shares on the issue date was HK$0.164 and HK$0.113, respectively, per share. Gain on settlement of other payables HK$560,100 were recognised in the profit or loss for the six months ended 30 June 2024.

 

Graphex Group Limited Interim Report 2024 33

 

NOTES TO UNAUDITED INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

 

30 June 2024

 

16. SHARE CAPITAL (Continued)

 

Preference shares

 

    30 June     31 December  
    2024     2023  
   

(Unaudited)

HK$’000

    (Audited)
HK$’000
 
Issued and fully paid                
323,657,534 (2023: 323,657,534) preference shares of HK$0.01 each     3,236       3,236  

 

A summary of movements in the Company’s preference share is as follows:

 

    Number of              
    issued and              
    fully paid     Nominal     Share  
    preference     value of     premium  
    shares     shares     account  
          HK$’000     HK$’000  
As at 1 January 2024 and 30 June 2024     323,657,534       3,236       175,191  

 

Warrants

 

As at 30 June 2024, the Company had 89,423,076 (31 December 2023: 89,423,076) warrants outstanding. Each warrant entitles the registered holder the rights to subscribe one ordinary share of the Company at the exercise price of HK$0.65 per ordinary share, subject to adjustment, at any time commencing on the grant date. The warrants will expire on the fifth anniversary of the issue date.

 

Movements of the warrants during the period ended 30 June 2024 and year ended and at 31 December 2023 are as follows:

 

   

Number of

securities to

be issued upon

exercise of

    Weighted-    

Weighted

average remaining

contractual

 
    outstanding warrants     average exercise price     life in years  
          HK$        
As at 1 January 2023     89,423,076       0.65       2.5  
Issue of warrants                  
As at 31 December 2023 and 30 June 2024     89,423,076       0.65       2.0  

 

Graphex Group Limited Interim Report 2024 34

 

NOTES TO UNAUDITED INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

 

30 June 2024

 

17. MATERIAL RELATED PARTY TRANSACTIONS

 

The Group had the following material transactions with related parties during the period:

 

    For the six months ended 30 June
       

2024

   

2023

 
        (Unaudited)   (Unaudited)  
    Notes   HK$’000     HK$’000  
Contract revenue from Pubang   (i)     363       80  
Loans to                    
上海奕桂品牌管理有限公司 (“Yigui”)   (ii)     17,946       12,785  
Earthasia Worldwide Holdings Limited (“EA Trading”)   (iii)     5,300       1,043  
Repayment of loans from                    
大連鵬亞國際貿易有限公司 (“Dalian Trading”)               192  
Yigui   (ii)     7,470       10,438  
上海泰迪朋友投資管理有限公司 (“Teddy”)         1,220        
Interest income from                    
Yigui   (ii)     442       435  
EA Trading   (iii)     329       101  

 

Notes:

 

(i) The Group’s contract revenue derived from Pubang for the period ended 30 June 2024 amounted to HK$363,000 (six months ended 30 June 2023: HK$80,000).

 

(ii) The Group granted a short-term loan in aggregate of RMB16,300,000 (six months ended 30 June 2023: RMB11,330,000) to Yigui, a joint venture of the Group during the period. The interest rate was 4% (six months ended 30 June 2023: 4%) per annum. During the six month ended 30 June, 2024, Yigui repaid RMB6,785,000 (six months ended 30 June 2023: RMB9,250,000) to the Group. The outstanding balance of the loan was RMB9,515,000 as at 30 June 2024 (six months ended 30 June 2023: RMB10,710,000).

 

(iii) In 2021, the Group renewed its revolving loan facility of HK$50,000,000 granted to EA Trading, a joint venture of the Group, to support its business operation with a one-year term which was unsecured and bore interest at 12% per annum. The outstanding principal and interest were HK$10,761,000 as at 30 June 2024.

 

Graphex Group Limited Interim Report 2024 35

 

NOTES TO UNAUDITED INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

 

30 June 2024

 

18. EVENTS AFTER THE REPORTING PERIOD

 

Save as disclosed in this interim report, no material event affecting the Group has occurred after the six months ended 30 June 2024.

 

19. COMPARATIVE FIGURES

 

Certain comparative information has been restated to conform with the current period’s presentation.

 

20. APPROVAL OF THE INTERIM FINANCIAL INFORMATION

 

The financial statements were approved and authorised for issue by the board of directors on 29 August 2024.

 

Graphex Group Limited Interim Report 2024 36

 

MANAGEMENT DISCUSSION AND ANALYSIS

 

BUSINESS REVIEW

 

Amid global economic challenges in 2024, the Group set out expansion plans that will create vast opportunities and values for shareholders in the coming years. Electrification is an irreversible trend. While lithium-ion batteries play a significant role in electrification, graphite processing capabilities shall be essential because graphite is the anode material that accounts for about 25% by weight of a lithium-ion battery. The demand for graphite anode material will continue to be driven by the global development of the EV industry, energy storage infrastructures, consumer electronics, and robotics.

 

Graphene Products Business

 

For the six months ended 30 June 2024, the graphene products business contributed revenue of approximately HK$61.5 million, representing approximately 66% of the Group’s total revenue, with an adjusted segment EBITDA of approximately HK$7.4 million. Comparing to the six months ended 30 June 2023, the revenue and the adjusted segment EBITDA decreased by approximately 37% and 54% respectively. The Group looks forward to the implementation of the expansion plan in Laixi City, Shandong Province, PRC soon.

 

The demand of lithium-ion batteries remains strong, especially for EV market and energy storage market. Lithium-ion batteries use deep processed graphite as anode material and there is no commercially viable substitute. The Graphene Division of the Group specializes in the mid-stream deep processing of graphite from flake graphite into battery anode material which is essential for battery making and hence EV production now and in the foreseeable future. The expansion plan of anode material production capacity is well placed to take advantage of the growth in demand of batteries and the new battery gigafactory to be built in the next few years.

 

Graphex Group Limited Interim Report 2024 37

 

MANAGEMENT DISCUSSION AND ANALYSIS

 

Landscape Architecture Business

 

The Group maintains its market position as one of the leading landscape architecture providers predominantly in the PRC and Hong Kong. It offers landscape architecture services to clients including governments, private property developers, state-owned property developers, design services companies and engineering companies in the PRC and Hong Kong.

 

The revenue of the Group’s landscape architecture services segment decreased to approximately HK$32.2 million for the six months ended 30 June 2024, representing a decrease of approximately 41%, as compared with that of approximately HK$54.2 million for the six months ended 30 June 2023. The decrease in revenue was primarily due to the slowdown in real estate development market in China.

 

For the six months ended 30 June 2024, the Group entered into 42 new contracts with a total contract sum of approximately HK$35.5 million for projects located in the PRC and 15 new contracts with a total contract sum of approximately HK$12.1 million for projects located in Hong Kong. Geographically, approximately 75% of the new contract sum represented projects located in the PRC and approximately 25% represented projects located in Hong Kong in terms of contract sum.

 

The number of new contracts and contract sum entered by the Group compared with last reporting period are set out as follows:

 

Six months ended 30 June   No. of new contracts   Contract sum
        (HK$’million)
2024     57     47.6
2023     44     38.4

 

The new contract sum increased to approximately HK$47.6 million for the six months ended 30 June 2024, representing an increase of approximately 24%, as compared with that of approximately HK$38.4 million for the last reporting period.

 

Catering Business

 

Since the outbreak of COVID-19 pandemic, the Group had decisively shut down certain catering management businesses to avoid any operating risks under the unprecedented market conditions. The Group ceased all the remaining catering business and completed the disposal of the entire segment in 2023.

 

Upon the cessation of the catering business, the Group intended not to restart any catering business in the future, thereby eliminated any risk of incurring operating loss and such other adverse impacts associated with the pandemic and economic downturn.

 

Graphex Group Limited Interim Report 2024 38

 

FINANCIAL REVIEW

 

Revenue

 

The Group’s total revenue decreased to approximately HK$93.7 million in first half of 2024, compared with HK$151.3 million for the six months ended 30 June 2023, representing year-on-year decrease of approximately 38%. The decrease was mainly attributable to the less favourable market and economic environment.

 

The graphene products segment contributed revenue of approximately HK$61.5 million, representing a decrease of approximately 37%, compared with HK$97.1 million for the six months ended 30 June 2023. The landscape architecture segment contributed revenue of approximately HK$32.2 million, representing a decrease of approximately 40%, compared with HK$54.2 million for the six months ended 30 June 2023.

 

Cost of sales

 

Cost of sales decreased to approximately HK$63.4 million for the six months ended 30 June 2024, representing a decrease of approximately 37%, as compared with that of approximately HK$101.2 million for the same period in 2023.

 

Cost of sales mainly represented cost of inventories in respect of graphene products business and project staff cost in respect of landscape architecture segment. The decrease in cost of sales was generally in line with the decrease in revenue derived from the graphene products segment and landscape architecture segment.

 

Gross profit and gross profit margin

 

Gross profit decreased to approximately HK$30.3 million for the six months ended 30 June 2024, representing a decrease of approximately 39%, as compared with that of approximately HK$50 million for the same period in 2023.

 

Gross profit margin decreased to approximately 32% for the six months ended 30 June 2024, as compared with that of approximately 33% for the same period in 2023. The slight decrease was mainly attributable to the decrease in the gross profit margin in the graphene segment.

 

Selling and marketing expenses

 

Selling and marketing expenses decreased to approximately HK$1.2 million for the six months ended 30 June 2024, representing a decrease of approximately 60%, as compared with that of approximately HK$3 million for the same period in 2023. The decrease was mainly attributable to the decrease in revenue in the graphene segment.

 

Administrative expenses

 

Administrative expenses decreased to approximately HK$75.0 million for the six months ended 30 June 2024, representing a decrease of approximately 2%, as compared with that of approximately HK$76.7 million for the same period in 2023. The decrease was a combined effect of (i) the increase of shares-based payment under the 2023 Share Award Scheme; (ii) the decrease in the overall salaries of the Group which is attributable to the cost control measures implemented; (iii) the decrease of R&D expenses which is in line with the decreased revenue; (iv) the decrease of depreciation and amortisation due to the impairment of property, plant and equipment of landscape architecture design segment recognised during the six month ended 30 June 2024; and (v) the fluctuation of exchange rate in RMB.

 

Graphex Group Limited Interim Report 2024 39

 

MANAGEMENT DISCUSSION AND ANALYSIS

 

Impairment loss on financial and contract assets

 

The impairment loss, which represented impairment loss of trade receivables, contract assets, and other receivables, decreased to approximately HK$6.7 million for the six months ended 30 June 2024, representing a decrease of approximately 37%, as compared with that of approximately HK$10.7 million for the same period in 2023. The decrease mainly reflected the Group’s decrease in credit loss under the post-Covid period which the Group improved its collectability on financial and contract assets related to landscape architecture segment.

 

Net loss

 

As a result of the foregoing, the loss attributable to owners of the Company was approximately HK$54.1 million for the six months ended 30 June 2024, as compared with that of a loss attributable to owners of the Company of approximately HK$44.0 million for the same period in 2023.

 

Liquidity, financial resources and gearing

 

The Group’s objectives for capital management are to safeguard the Group’s ability to continue as a going concern in order to maintain an optimal capital structure and reduce the cost of capital, while maximizing the return to shareholders through improving the debt and equity balance.

 

   

As at

30 June 2024

 

As at

31 December 2023

    HK$’000   HK$’000
Current assets     269,310       246,499  
Current liabilities     367,829       320,168  
Current ratio     0.73 x     0.77 x

 

The current ratio of the Group at 30 June 2024 was approximately 0.73 times as compared to that of approximately 0.77 times at 31 December 2023 as a result of the conversion of convertible notes.

 

At 30 June 2024, the Group had total cash and bank balances of approximately HK$10.4 million (31 December 2023: HK$27.2 million).

 

At 30 June 2024, the Group’s gearing ratio (represented by total interest-bearing bank and other borrowings at the end of the period divided by total equity at the end of the respective period multiplied by 100%) was approximately 65.9% (31 December 2023: 57.8%).

 

The capital structure of the Company mainly comprises issued ordinary shares, preference shares and debt securities. As of 30 June 2024, the Company had outstanding issued corporate bonds with the carrying amount of approximately HK$115.4 million, issued promissory notes of approximately HK$63.2 million, issued convertible notes (as liability) of approximately HK$3.8 million, 971,136,762 ordinary shares and 323,657,534 preference shares in issue.

 

Graphex Group Limited Interim Report 2024 40

 

Contingent liabilities

 

The Group had no significant contingent liabilities as at 30 June 2024.

 

Pledge of assets

 

On 19 January 2021, Think High Global Limited, an indirect wholly-owned subsidiary of the Company established under the laws of the British Virgin Islands, which directly holds 100% of the equity interest of the graphene products business was charged in favour of Lexinter International Inc., a corporation incorporated under the laws of the Province of Ontario which is wholly owned by Jeffrey Abramovitz, an individual carrying Canadian nationality, who shall subscribe the convertible notes and warrants issued by the Company in the aggregate principal amount of US$15,000,000 pursuant to the subscription agreement and supplemental agreement entered into on 19 January 2021 and 24 May 2021 respectively.

 

More details of the pledge were set out in the announcements of the Company dated 19 January 2021 and 24 May 2021, and circular of the Company dated 30 June 2021.

 

Capital commitment

 

At 30 June 2024 and 31 December 2023, the Group had the following capital commitments at the end of the reporting period:

 

   

As at 30 June

2024

  As at 31 December
2023
    HK$’000   HK$’000
Contracted, but not provided for:
           
Acquisition of property, plant and equipment     5,719       5,760  

 

On 20 September 2022, the Company entered into the Cooperation Agreement with the Jixi Mashan Government relating to the cooperation in connection with the Company’s intended strategic investment for setting up graphite deep processing and production facilities located in the Jixi (Mashan) Graphite Industrial Park with an intended annual output of 30,000 metric tons of high-purity spherical graphite and 10,000 metric tons of battery anode materials to promote the rapid development of the regional graphite new material industry. The Company intends to carry out this project in two phases, with the first phase of this project for the setting up graphite deep processing and production facilities with an annual output capacity of 20,000 metric tons of high-purity spherical graphite and the second phase of this project for the setting up graphite deep processing and production facilities with an annual output capacity of 10,000 metric tons of high-purity spherical graphite and 10,000 metric tons of battery anode materials. It is estimated that the Company’s total investment in the first phase of this project will be not less than RMB200 million. The Company intends to fund the first phase of this project by the Group’s internal resources and/or bank borrowings and/or future fund-raising exercise. At the reporting period end, no contract for the construction of the plant and/or the equipment for this project was entered into.

 

Graphex Group Limited Interim Report 2024 41

 

MANAGEMENT DISCUSSION AND ANALYSIS

 

On 19 July 2023, the Company entered into the Cooperation Agreement with the Nanshu Town Government pursuant to which the Company and the Nanshu Town Government intended to have a cooperation in the “Graphite Anode Material Project” in Laixi City Nanshu Town New Material Industrial Park which is situated in Nanshu Town, Laixi City, Shandong Province, the PRC. Subject to obtaining all approval from the PRC government, the Company will set up the factory plants for the manufacturing of lithium-ion battery anode materials in the Park. The Company can apply for the relevant policy subsidies of “Several Preferential Measures for Investment Promotion in Laixi City (Trial)” (Xifa [2023] No. 1) after meeting the relevant requirements. The first phase of the Project, if materialized, is expected to be completed and put into operation in September 2024. It is estimated that the Company’s total investment will be around RMB1,000 million. The Company intends to fund the first phase of this project by the Group’s internal resources and/or bank borrowings and/ or future fund-raising exercise. On 10 January 2024, a subsidiary of the Company entered into a lease agreement for the factory buildings for an aggregate term of 10 years for which the total rental payment will be RMB58,872,000 (equivalent to HK$65,936,000).

 

Foreign exchange exposure

 

The Group mainly operates and invests in Hong Kong and the PRC but most of the transactions are denominated and settled in HKD and RMB. No significant foreign currency risk has been identified for the financial assets in the PRC as they were basically denominated in a currency same as the functional currencies of the group entities to which these transactions relate. Nevertheless, the Directors will closely monitor the Group’s foreign currency position and consider natural hedge technique to manage its foreign currency exposures by non-financial methods, managing the transaction currency, leading and lagging payments, receivable management, etc. Save for meeting working capital needs, the Group only holds minimum foreign currency.

 

Human resources and employees’ remuneration

 

As at 30 June 2024, the Group had 249 employees. Employees are remunerated according to nature of the job, market trend, and individual performance. Employee bonus is distributable based on the performance of the respective subsidiaries and the employees concerned.

 

The Group offers competitive remuneration and benefit package to employees. Employee benefits include mandatory provident fund, employee pension schemes in the PRC, contributions to social security system, medical coverage, insurance, training and development programs. As to defined contribution schemes, there is no forfeited contribution available for the Group to reduce its existing level of contributions to the retirement benefit scheme during the year.

 

During the period ended 30 June 2024, the Group had maintained a number of share schemes at the Company and subsidiary levels in order to recognise the contributions by selected eligible participants who are directors, officers, employees and service providers of the Group and to provide them with incentives for the continual operation and development of the Group and/or attract suitable personnel to join the Group.

 

Graphex Group Limited Interim Report 2024 42

 

ADVANCES TO AN ENTITY

 

As disclosed in the announcements of the Company dated 20 September 2016, 24 January 2017, 8 December 2017, 25 June 2019 and 1 December 2021 (the “Announcements”), the Company as the Lender entered into a loan agreement (the “Loan Agreement”) on 1 December 2021 with the borrower pursuant to which the Lender agreed to provide an unsecured revolving loan facility (the “Revolving Loan Facility”) in the amount of HK$50,000,000 at an interest rate of 12% per annum during the availability period from 1 January 2022 to 31 December 2024. Subject to the terms and conditions, the Revolving Loan Facility can be drawn down at any time for one year during the availability period. Set out below are the principal terms of the loan agreement:

 

Fourth Renewal Agreement

 

Date of agreement:   1 December 2021
     
Borrower:   Earthasia Worldwide Holdings Limited
     
Revolving facility amount:   Up to HK$50,000,000
     
Interest rate per annum:   12%
     
Availability period:   1 January 2022 to 31 December 2024
     
Repayment term:   One year
     
Repayment:   Borrower shall repay the interests with the principal amount at loan maturity.
     
Early repayment:   The Borrower may prepay all or any part of a drawdown prior to the maturity date without penalty. Any prepayment of a drawdown will refresh the available amount of the Revolving Loan Facility for drawing. Any early repayment shall first settle all interests accrued.
     
Collateral:   Nil
     
Other terms and conditions:   The Lender shall have absolute discretion as to whether to make available any sum for any drawdown under the loan agreement.

 

The advance was made on the basis of the Company’s credit assessments on the Borrower’s financial strength, repayment history and the tenure of the advance. The Company considered that the risks and return involved in the advance to the Borrower are justifiable. For further details, please refer to the Announcements. As of 30 June 2024, there was an outstanding loan balance of approximately HK$10.8 million due from the Borrower to the Company.

 

Graphex Group Limited Interim Report 2024 43

 

MANAGEMENT DISCUSSION AND ANALYSIS

 

In relation to the provision of financial assistance by the Company to the Borrower, a combined statement of financial position of the Borrower group as at 30 June 2024 required to be disclosed under Rule 13.22 of Chapter 13 of the Listing Rules is set out below:

 

    30 June 2024
    HK$’000

Cash and cash equivalents

    260  
Other current assets     8,482  

Current assets

    8,742  

Non-current assets

     
Current liabilities     57,857  
Non-current liabilities     1,134  

Net assets/(deficiency in assets)

    (50,249 )

Reconciliation to the Group’s interests in the joint venture:

       
Proportion of the Group’s ownership     30 %
Carrying amount of the investment      

Revenue

    19,661  
Interest expense     (2,045 )
Profit for the period     (1,971 )
Profit and total comprehensive income for the period     (1,971 )

 

SIGNIFICANT INVESTMENTS HELD, MATERIAL ACQUISITIONS AND DISPOSALS OF SUBSIDIARIES, AND FUTURE PLANS FOR MATERIAL INVESTMENTS OR CAPITAL ASSETS

 

Save for those disclosed in this interim report, there were no other significant investments held, nor were there material acquisitions or disposals of subsidiaries during the period under review. Apart from those disclosed in this interim report, there was no plan authorised by the Board for other material investments or additions of capital assets at the date of this interim report.

 

Graphex Group Limited Interim Report 2024 44

 

PROSPECTS

 

We believe electrification is a manageable path to sustainability of the world. Therefore the demand of rechargeable batteries shall increase as the application ends increase. The battery technologies may advance, and new battery system may emerge. However, lithium-ion batteries will still be the most stable and cost-effective device for energy storage in the coming years. And lithium-ion batteries will still be using graphite anode material. We focus on the production of graphite anode materials for various needs of battery chemistry. We have set a five-year plan to invest in the expansion of production capacity, research development, and new battery system.

 

We recognize the importance of producing battery anode material in a responsible and environmentally friendly manner. We are conscience of the increasing environmental and social expectations and requirements coming from international and national regulations, laws makers, as well as the customers, the communities, the business partners, and all the shareholders. We regularly assess the current ESG measures and constantly find ways to improve the ESG standard and strengthen sustainability.

 

Graphex Group Limited Interim Report 2024 45

 

OTHER INFORMATION

 

DISCLOSURE OF INTERESTS

 

Directors’ and Chief Executive’s Interests and Short Positions in Shares, Underlying Shares and Debentures of the Company and its associated corporations

 

As at 30 June 2024, the interests and short positions of the Directors and chief executive of the Company in the shares, underlying shares and debentures of the Company or any of the associated corporations (within the meaning of Part XV of the SFO) which (i) are required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under such provisions of the SFO); or (ii) are required, pursuant to section 352 of the SFO, to be entered in the register as referred to therein; or (iii) are required, pursuant to the Model Code, to be notified to the Company and the Stock Exchange are as follows:

 

Long position in the Shares and underlying Shares

 

        Number of Shares   Number of underlying Shares held under the Share       Approximate % of

Name of Director

  Capacity   Personal interest   Family interest   Corporate interest   Other interest  

Option

Scheme

  Total   shareholding
                                 
Chan Yick Yan Andross   Beneficial owner, interest of controlled corporation     4,214,000       —         93,716,887       —         —         97,930,887       10.08 %
Lau Hing Tat Patrick   Beneficial owner, interest of spouse, interest of controlled corporation     9,212,000       —         46,003,444       —         —         55,215,444       5.69 %

 

Notes:

 

1. Such interests are held by CYY Holdings Limited, a company incorporated in the British Virgin Islands, of which Mr. Chan Yick Yan Andross is interested in the entire issued share capital.

 

2. Such interests are held by LSBJ Holdings Limited, a company incorporated in the British Virgin Islands, of which Mr. Lau Hing Tat Patrick is interested in the entire issued share capital.

 

Graphex Group Limited Interim Report 2024 46

 

Long position in the shares of associated corporations of the Company

 

Name of director  

Name of associated

corporation

  Nature of interest  

Number of shares

and class of shares held

 

Approximate % of

shareholding

                 
Chan Yick Yan Andross  

Earthasia (International)

Limited

  Beneficial owner   50 (ordinary shares)   0.98%
                 
Lau Hing Tat Patrick  

Earthasia (International)

Limited

  Beneficial owner   50 (ordinary shares)   0.98%

 

Saved as disclosed above, as at 30 June 2024, none of the Directors and the chief executive of the Company had any interests or short positions in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO), which would have to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they have taken or deemed to have taken under such provisions of the SFO), or which were required, pursuant to Section 352 of the SFO, or which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code.

 

Substantial Shareholders’ Interests and Short Positions in Shares and Underlying Shares

 

As at 30 June 2024, so far as the Directors and chief executive of the Company are aware, other than the interests of the Directors and chief executive of the Company as disclosed in the section titled “Directors’ and chief executive’s interests and short positions in shares, underlying shares and debentures of the Company and its associated corporations”, the following persons had interests or short positions in the shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or which were recorded in the register required to be kept by the Company under Section 336 of the SFO, or as otherwise notified to the Company and the SEHK.

 

Graphex Group Limited Interim Report 2024 47

 

OTHER INFORMATION

 

Long position in the shares

 

Name of shareholder

  Capacity/nature of interest   Number of Shares   Approximate % of shareholding
 The Bank of New York Mellon Corporation   Interest of controlled corporation     266,834,348       27.48 %
The Bank of New York Mellon   Beneficial owner     266,834,348       27.48 %
CYY Holdings Limited1   Beneficial owner     93,716,887       9.65 %
PBLA Limited2   Beneficial owner     75,123,669       7.74 %
Pubang Landscape Architecture (HK) Company Limited2   Interest of controlled corporation     75,123,669       7.74 %
Pubang Landscape Architecture Company Limited2   Interest of controlled corporation     75,123,669       7.74 %

 

Notes:

 

1. CYY Holdings Limited is 100% beneficially owned by Mr. Chan Yick Yan Andross. Accordingly, Mr. Chan Yick Yan Andross is deemed to be interested in the shares of the Company held by CYY Holdings Limited under the SFO.

 

2. PBLA Limited is 100% beneficially owned by Pubang Landscape Architecture (HK) Company Limited, which is in turn 100% beneficially owned by Pubang Landscape Architecture Company Limited. Accordingly, each of Pubang Landscape Architecture (HK) Company Limited and Pubang Landscape Architecture Company Limited is deemed to be interested in the Shares held by PBLA Limited under the SFO.

 

Graphex Group Limited Interim Report 2024 48

 

Short position in the shares

 

Name of shareholder

 

Capacity/nature

of interest

  Number of Shares   Approximate % of shareholding
             
The Bank of New York Mellon Corporation   Interest of controlled corporation     259,626,720       26.73 %
                     
The Bank of New York Mellon   Beneficial owner     259,626,720       26.73 %

 

DIRECTORS’ INTERESTS IN COMPETING INTERESTS

 

Save as Mr. Ma Lida, our non-executive Director nominated by Pubang Landscape Architecture Co., Ltd., who is required to declare his conflict of interests and barred from participation or voting on issue if there is any potential conflict of interest between the Group and Pubang Landscape Architecture Co., Ltd., the Directors are not aware of any business or interest of the Directors, the controlling shareholder and their respective associates (as defined under the Listing Rules) that compete or may compete with the business of the Group and any other conflict of interest which any such person has or may have with the Group during the six months ended 30 June 2024.

 

CHANGES IN INFORMATION OF DIRECTORS

 

There is no change in the information of the Directors to be disclosed pursuant to Rule 13.51B(1) of the Listing Rules.

 

SHARE OPTION SCHEME

 

A share option scheme (the “Share Option Scheme”) was adopted by the Company on 3 June 2014 and became effective on 25 June 2014.

 

The Board has resolved to terminate the existing share option scheme on 9 January 2023.

 

All the options forfeited before expiry of the Share Option Scheme will be treated as lapsed options which will not be added back to the number of shares available to be issued under the Share Option Scheme.

 

The number of shares that may be issued in respect of the share options granted under the Share Option Scheme is 9,677,692 Shares, representing approximately 1.1% of the weighted average number of Shares issued and outstanding for the period ended 30 June 2024.

 

Graphex Group Limited Interim Report 2024 49

 

OTHER INFORMATION

 

A summary of the movements of the outstanding share options during the six months ended 30 June 2024 are as follows:

 

                        Number of Share Options        

Grantees

  Date of   Vesting   Exercisable  

Exercise

 

As at

          Cancelled/   As at
Employee(s)   grant   date   period  

price (HK$)

  1/1/2024   Granted   Exercised   Lapsed   30/6/2024
Other employee(s)   28/1/2021   28/1/2021   28/1/2021 to 27/1/2026                0.65       9,677,692       —         —         —         9,677,692  

 

Notes:

 

1. The closing price of the Shares immediately before the date on which the options were granted was HK$0.6.

 

2. No share options were cancelled or lapsed during the reporting period.

 

Save as disclosed above, at no time during the period under review was the Company or its subsidiaries a party to any arrangement that enabled the Directors or any of their associates to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.

 

2023 SHARE AWARD SCHEME

 

On 9 January 2023, the Company terminated the existing Share Option Scheme and Share Award Scheme and adopted the 2023 Share Award Scheme with effective from 6 February 2023 in order to provide eligible participants with equity incentives.

 

Graphex Group Limited Interim Report 2024 50

 

Summary of the 2023 Share Award Scheme

 

1. Purposes (i) to attract talents, suitable personnel and entities that are eligible participants;
     
    (ii) to award certain selected participants with awarded shares for accepting their appointments, employments or engagement by the Group and related entities; (iii) to recognize the contributions by certain selected participants and to provide them with incentives in order to retain them for the continual operation, development and growth of the Group and related entities; and (iv) to improve or create sense of connection and/or loyalty of certain selected participants to the Group and related entities
     
2. Qualifying participants (i) Any director and employee of the Group or its subsidiaries; (ii) Any director and employee of the related entities of the Group; and (iii) Any person who provided services to the Group on a continuing or recurring basis
     
3. Maximum number of shares Not exceeding 10% of the shares of the Company in issue as at the date of adoption of the 2023 Share Award Scheme (i.e. 68,349,307 shares)
     
4. Maximum entitlement of each participant Not exceed 1% of the issued share capital of the Company from time to time
     
5. Vesting period Subject to the terms and condition of the 2023 Share Award Scheme and the fulfillment of all vesting conditions to the vesting of the awarded Shares on such selected employee as specified in the grant notice and in accordance with the vesting schedule (if any) as set out therein
     
6. The amount payable on acceptance of the award Nil
     
7. The remaining life of the scheme It shall be valid and effect for a period of 10 years commencing on 6 February 2023

 

On 12 June 2023, the Board resolved to grant an aggregate of 35,231,235 shares, which represented approximately 4.53% of the Company’s shares in issue at that date, to three employees and eight service providers. 3,754,797 of these shares were vested on 15 June 2023. The closing price of the shares immediately before the grant date was HK$0.425 each share. The fair value of the 35,231,235 shares awarded on the grant date was valued at HK$0.455 each share which was determined based on closing market price of the Company on grant date.

 

Graphex Group Limited Interim Report 2024 51

 

OTHER INFORMATION

 

On 24 July 2023, the Board resolved to grant an aggregate of 22,990,000 shares, which represented approximately 2.94% of the Company’s shares in issue at that date, to three directors and thirteen employees. 6,800,000 of these shares were vested on 24 July 2023. The closing price of the shares immediately before the grant date was HK$0.47 each share. The fair value of the 22,990,000 shares awarded on the grant date was valued at HK$0.46 each share which was determined based on closing market price of the Company on the grant date.

 

On 14 December 2023, the Board resolved to grant an aggregate of 10,128,072 shares, which represented approximately 1.13% of the Company’s shares in issue at that date, to twelve employees. The closing price of the shares immediately before the grant date was HK$0.375 each share. The fair value of the 10,128,072 shares awarded on the grant date was valued at HK$0.38 each share which was determined based on closing market price of the Company on the grant date.

 

As disclosed above, a total of 68,349,307 shares awards were granted to certain Grantees under the 2023 Share Award Scheme, and among which a total of 15,094,797 shares awards were granted to the Directors and senior management. Out of the aforesaid 15,094,797 share awards were granted to the Directors and senior management, 10,554,797 shares awards were granted to 2 senior management with the vesting period less than 12 months from the date of grant.

 

There is no performance target attached with the shares awards granted under the 2023 Share Award Scheme which, however, are subject to general clawback mechanism that if a grantee ceases to be a participant on the grounds that he has committed any act of fraud or dishonesty or serious misconduct, or has been declared or adjudged to be bankrupt, or has been convicted of any criminal offence or has been convicted for any offence under any securities laws or regulations in Hong Kong, that relevant share awards made to such grantee shall automatically be cancelled.

 

The Remuneration Committee has noted that the 2023 Share Award Scheme is intended to attract talents, suitable personnel and entities who will accept awarded shares as part of their remuneration, compensation or payment packages for the development and growth of the businesses of the Group; to award certain selected participants with award shares for accepting their appointments, employments or engagement by the Group; to provide certain participants with incentives in order to retain them for the continual operation, development and growth of the Group and to improve or create sense of connection and/or loyalty of certain selected participants to the Group. In recommending the grant of those share awards to the selected participants and determining the number of share awards and the relevant vesting periods for the share awards to be granted, the Remuneration Committee has considered factors such as (i) whether they were considered as talent and personnel that could contribute to the development and growth of the business of the Group that the Company would want to recruit with reference to their industry experience, tenure and roles with the Group; (ii) the remuneration of them including the grant of share awards as part of their remuneration packages as an incentive offered by the Group as compared with those offered by the industry peers in order to attract them in joining the Group; (iii) whether they would accept award shares as part of their remuneration or compensation package and as inducement for them to accept any offer for appointment; (iv) the business synergy and opportunities that might be brought by them to the Group; and (v) whether the share awards could further motivate their performances for the benefit of the businesses of the Group.

 

Graphex Group Limited Interim Report 2024 52

 

The Remuneration Committee considered that for those share awards granted with the vesting period less than 12 months from the date of grant is appropriate and necessary to enable the Company to provide competitive terms and conditions to valuable talent for the development and growth of the Group’s Graphene Products Business. It is necessary to enable the Company to offer competitive employment package to the grantees in order to retain valuable and loyal talent and to attract the talent and suitable personnel who will accept award shares as part of his/her remuneration, compensation or payment packages in accepting to stay on and continue his/her employment with the Group to further promote the development and growth of the Group’s businesses, to improve or create sense of connection and/or loyalty of him/her to the Group and to provide incentive to him/her to continue to work for the success and improve the performance of the Group and thus it could align the interest of the grantees with the Company and its shareholders as a whole.

 

Accordingly, having taken into account the factors above, the Remuneration Committee considered that notwithstanding the absence of performance targets, the shorter vesting period and the limited clawback mechanism, the share awards granted during the year ended 31 December 2023 can incentivize the grantees to strive for the future development of the Company which was in line with the purpose of 2023 Share Award Scheme.

 

During the six months ended 30 June 2024, there was no share awards granted under the 2023 Share Award Scheme.

 

During the six months ended 30 June 2024, the number of unvested awards granted under the 2023 Share Award Scheme at the beginning and end of the reporting period was 56,794,510 and 27,818,072, respectively. No award granted under the 2023 Share Award Scheme was cancelled or lapsed in accordance with the terms of the 2023 Share Award Scheme during the reporting period.

 

During the six months ended 30 June 2024, the equity-settled share-based compensation under the 2023 Share Award Scheme of HK$11,642,000 is included in employee benefit expenses and professional expenses.

 

Details of the 2023 Share Award Scheme are set out in the Company’s announcement dated 9 January 2023, 12 June 2023, 24 July 2023 and 14 December 2023 and circular dated 12 January 2023.

 

The number of award shares available for grant under the 2023 Share Award Scheme at the beginning and end of the six months ended 30 June 2024 were nil.

 

The number of shares that may be issued in respect of the share awards granted under the 2023 Share Award Scheme is 31,818,072 Shares, representing approximately 3.5% of the weighted average number of Shares issued and outstanding for the six months ended 30 June 2024.

 

Graphex Group Limited Interim Report 2024 53

 

OTHER INFORMATION

 

A summary of the movements of the share awards during the period ended 30 June 2024 are as follows:

 

            Number of Share Awards     Actual issued/ allotted  
Grantees   Date of Grant   Vesting date   As at 1/1/2024     Granted     Vested    

Cancelled/

Lapsed

    As at 30/6/2024     As at 30/6/2024  

Directors(note 1)

Lau Hing Tat Patrick

  24/7/2023   23/7/2024     680,000                                          –             680,000        
Chan Yick Yan Andross   24/7/2023   23/7/2024     680,000                         680,000        
Qiu Bin   24/7/2023   23/7/2024     680,000                         680,000        
                                                         
Employees(note 2)                                                        
  12/6/2023
  1/2/2024
    500,000             500,000(note 3)                    
    12/6/2023
  1/5/2024
    500,000             500,000(note 3)                    
    12/6/2023
  1/8/2024
    500,000                         500,000        
    12/6/2023
  1/11/2024
    500,000                         500,000        
    12/6/2023
  1/2/2025
    500,000                         500,000        
    12/6/2023
  11/6/2024
    1,000,000            

1,000,000(note 3)

 

                   
    24/7/2023   23/7/2024     14,150,000                         14,150,000        
    14/12/2023   13/12/2024     10,128,072                         10,128,072        
                                                         

Service providers(note 4)

 

                                                       
Wang Yi
  12/6/2023
  11/6/2024
    2,000,000            

2,000,000(note 3)

 

                  2,000,000  
Greg McKenzie
  12/6/2023
  11/6/2024
    2,000,000            

2,000,000(note 3)

 

                  2,000,000  
Tom Rooney
  12/6/2023
  11/6/2024
    2,000,000            

2,000,000(note 3)

 

                   
Corrales Trading Ltd
  12/6/2023
  11/6/2024
    6,500,000            

6,500,000(note 3)

 

                  6,500,000  
Chad Management Group Inc.   12/6/2023
  11/6/2024
    976,438             976,438(note 3)                   976,438  
Lyons Capital, LLC
  12/6/2023
  11/6/2024
    6,500,000            

6,500,000(note 3)

 

                  6,500,000  
Onyx Relations Corp.
  12/6/2023
  11/6/2024
    6,000,000            

6,000,000(note 3)

 

                  6,000,000  
Redchip Companies, Inc.
  12/6/2023
  11/6/2024
    1,000,000            

1,000,000(note 3)

 

                  1,000,000  
                                                  56,794,510             28,976,438             27,818,072       25,976,438  

 

Notes:

 

1. Director Grantees refer to the directors of the Company or its subsidiaries.

 

2. Employee Grantees refer to the employees of the Company or its subsidiaries.

 

3. The weighted average closing price of the shares immediately before the vesting date was HK$0.135 each share.

 

4. Service providers refer to persons or companies who provide services to the Group on a continuing or recurring basis in their ordinary and usual course of business which are in the interests of the long-term growth of the Group.

 

Graphex Group Limited Interim Report 2024 54

 

EIL SHARE AWARD SCHEME

 

On 19 January 2021, Earthasia (International) Limited, an indirect wholly-owned subsidiary of the Company, also adopted a share award scheme (the “EIL Share Award Scheme”). Details of the EIL Share Award Scheme were set out in the announcements of the Company dated 19 January 2021.

 

Summary of the EIL Share Award Scheme

 

1. Purposes to recognise the contributions made or to be made by certain participants and to provide them with incentives in order to retain them for the continual operation and development of EIL Group and to attract suitable personnel for further development of the EIL Group
     
2. Qualifying participants (i) any individual being an employee (including without limitation any director) of any member of the EIL Group; (ii) any agent or consultant to the EIL Group; and (iii) any business or joint venture partner, contractor, any party providing advisory, consultancy, professional services to the EIL Group, or any other persons who have contributed or may contribute to the operation and development of the EIL Group
     
3. Maximum number of shares Not exceeding 10% of the shares of EIL (“EIL Shares”) in issue as at the date of adoption of the EIL Share Award Scheme (i.e. 500 EIL Shares)
     
4. Maximum entitlement of each participant Not exceed 1% of the issued share capital of EIL from time to time
     
5. Vesting period Subject to the terms and conditions of the EIL Share Award Scheme and the fulfillment of all vesting conditions to the vesting of the awarded EIL Shares on such participant as specified in the EIL Share Award Scheme and the grant notice
     
6. The amount payable on acceptance of the award HK$1.00 per awarded EIL Share
     
7. The remaining life of the scheme It shall be valid and effect for a period of 10 years commencing on 19 January 2021

 

During the period ended 30 June 2024, no EIL share awards granted. No unvested EIL share awards were outstanding as at 30 June 2024.

 

During the period ended 30 June 2024, no equity-settled share-based compensation under the Scheme is included in employee benefit expenses.

 

The number of award EIL Shares available for grant under the EIL Share Award Scheme at the beginning and end of the period ended 30 June 2024 were 400 EIL Shares and 400 EIL Shares respectively.

 

During the period ended 30 June 2024, EIL was not a principal subsidiary of the Company within the meaning of Rule 17.14 of the Listing Rules.

 

Graphex Group Limited Interim Report 2024 55

 

OTHER INFORMATION

 

MAXIMUM NUMBER OF SHARES

 

The maximum aggregate number of Shares that may be issued in respect of all the share options and awards that granted by the Company under all the share schemes is 41,495,764 Shares, representing approximately 4.6% of the weighted average number of Shares issued and outstanding for the period ended 30 June 2024.

 

COMPLIANCE WITH CORPORATE GOVERNANCE CODE

 

The Company has complied with the applicable code provisions as set out in the Corporate Governance Code (the “CG Code”) stated in Appendix C1 to the Listing Rules during the six months ended 30 June 2024. The Company reviews its corporate governance practices regularly to ensure compliance with the CG Code.

 

In connection with the public offering of the ADSs, the Company adopted corporate governance requirements of the NYSE American.

 

COMPLIANCE WITH MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS

 

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) as set out in Appendix C3 of the Listing Rules as the code of conduct regarding securities transactions by the Directors of the Company. Having made specific enquiries to all Directors, all of them confirmed that they had complied with the required standard set out in the Model Code during the six months ended 30 June 2024.

 

PURCHASE, SALES OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES

 

During the six months ended 30 June 2024, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s listed securities.

 

AUDIT COMMITTEE

 

The Company has established the Audit Committee to review and supervise the financial reporting process and internal Control procedures of the Group with written terms of reference in compliance with Rule 3.21 of the Listing Rules and the CG Code. The Audit Committee consists of three members namely, Mr. Liu Kwong Sang (an independent non- executive Director), Ms. Tam Ip Fong Sin (an independent non-executive Director) and Mr. Wang Yuncai (an independent non-executive Director). The chairman of the Audit Committee is Mr. Liu Kwong Sang.

 

REVIEW OF INTERIM RESULTS

 

The Group’s interim results for the six months ended 30 June 2024 have not been reviewed by external auditor but have been reviewed by the audit committee of the Company that the preparation of such results complied with the applicable accounting standards and requirements as well as the Listing Rules and that adequate disclosures have been made.

 

Graphex Group Limited Interim Report 2024 56

 

INTERIM DIVIDEND

 

The Board does not recommend the payment of an interim dividend for the six months ended 30 June 2024 (six months ended 30 June 2023: nil).

 

FORWARD-LOOKING STATEMENTS

 

This interim report contains statements that constitute “forward-looking statements”, for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995, including statements regarding the Company’s future plans and prospects.

 

Forward-looking statements may be identified by words or phrases such as “may”, “will”, “expect”, “anticipate”, “aim”, “estimate”, “intend”, “plan”, “believe”, “likely”, “potential”, “continue” or other similar expressions. The Company has based these forward-looking statements largely on the Company’s current expectations and projections about future events that it believes may affect its financial condition, results of operations, business strategy and financial needs. These forward-looking statements include statements relating to:

 

The Company’s goals and strategies;
   
The Company’s future business development, financial conditions and results of operations;
   
Fluctuations in prices, interest rates and other factors that may increase the Company’s costs significantly;
   
The Company’s expectations regarding demand for and market acceptance of its products and services;
   
Competition in the Company’s industry;
   
Relevant government policies and regulations relating to the Company’s industry, including governmental policies in the Peoples Republic of China as well as other governmental or sovereign risk factors related to the Peoples Republic of China and its relationship with the United States;
   
The Company’s ability to continue to diversify its manufacturing and operations in the U.S. and globally;
   
The growth of the renewable energy sector; and
   
The U.S. and global economy including any recession or other adverse economic factors that limit the ability of the Company’s customers to purchase its products, including such customer’s ability to continue investment in the renewable energy sector.

 

These forward-looking statements involve various risks and uncertainties. Although the Company believes that its expectations expressed in these forward-looking statements are reasonable, the Company’s expectations may later be found to be incorrect. The Company’s actual results could be materially different from the Company’s expectations. Important risks and factors that could cause the Company’s actual results to be materially different from the Company’s expectations.

 

Graphex Group Limited Interim Report 2024 57

 

OTHER INFORMATION

 

The Company’s forward-looking statements are based, in part, on certain data and information that it obtained from various government and private sources. Statistical data obtained from these sources may include projections based on a number of assumptions. The Company’s industry may not grow at the rate projected by these sources, or at all. Failure of the Company’s markets to grow at the projected rate may have a material and adverse effect on the Company’s businesses and the market price of the Company’s ordinary shares and the ADSs. In addition, the rapidly changing nature of the Company’s markets may result in significant uncertainties for any projections or estimates relating to the Company’s growth prospects or future condition. Furthermore, if any one or more of the assumptions underlying the market data are later found to be incorrect, actual results may differ from the projections based on these assumptions. You should not place undue reliance on these forward-looking statements.

 

The forward-looking statements made in this interim report relate only to events or information as of the date on which the statements are made in this interim report. Except as required by law, the Company does not undertake an obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this interim report and the other information about the Company that is available publicly, completely and with the understanding that the Company’s actual future results may be materially different from what the Company expects.

 

APPRECIATION

 

Finally, we would like to express our gratitude to the Shareholders, business partners, subconsultants and customers for their continuous support. We would also like to thank our dedicated staff for their contributions to the success of the Group.

 

Lau Hing Tat Patrick

 

Chairman

 

Hong Kong, 29 August 2024

 

Graphex Group Limited Interim Report 2024 58