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PAQ INTERNATIONAL HOLDINGS LIMITED

UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2009

Chairman's Statement

I report on the financial results for PAQ International Holdings Limited (the 'Company' or 'PAQ') and its subsidiaries (collectively referred to as the 'Group') for the six months ended 30 June 2009. PAQ is an AIM listed designer and manufacturer of branded and Original Equipment Manufacturer ('OEM') 'softwear' for electronic products and accessories. 

Operational Review 

This has been a challenging six months with business around the world suffering as a consequence of the banking collapse over the last quarter of 2008. Our operating performance was adversely affected and the Group experienced an operating loss for the six months ended 30 June 2009. 

The decrease in trade is mainly attributable to a reduction in orders from the Group's overseas customers who were likewise adversely affected and who consequentially adopted a more cautious, approach in their purchase orders. 

A major customer, Circuit City Stores Inc, filed for bankruptcy this year and they were previously one of our largest customers in the US market. Therefore, without their continuing custom the Group's revenues in the US has been significantly reduced. Also, the Group was subject to litigation concerning intellectual property which has now been dismissed although it has taken some time to resume normal client relationships in Europe given the uncertainty that the litigation created. More generally, trading has been weak across all markets and products.

The Board has decided to defer any substantial capital outlay required to expand the Group's entry into the People's Republic of China (PRC) market as anticipated until market conditions justify such a move. The Group did spend HK$3.2m for additional PPM (Property, Plant and Machinery) to fabricate new moulds as required by customers. The Group's current focus is to reduce costs and defer or terminate expansion plans until the turnover and profits of the Group allow such actions to become feasible as the Board is confident that the market will improve in the second half of 2009.

Meanwhile, the Board has explored ways of expanding the Group's operations by entering into licensing arrangements which will bring benefits to the Group with relatively low costs incurred. 

This strategy is coming close to fruition and we have entered into and are in the process of concluding a series of joint venture agreements with Fobazo.com A/S (Denmark) ('Fobazo'). Fobazo owns exclusive rights to the promotion of some of the world's most famous names in football.  Also, the Group is negotiating sub - licensing and franchise agreements that should begin to make a financial contribution to the Group in the coming year.

Financial Review

PAQ's revenue during the first half of the year 2009 was HK$13.54m as opposed to HK$44.43 m for the first half of 2008. This is a significant reduction of approximately 70% Whilst Gross Profit margins fell noticeably to 8% during this period in comparison to 18% in 2008 following increases in both production and operating costs in the PRC.

As a result, the Company recorded a loss after tax of approximately HK$3.7m in the first half of 2009 against a profit of HK$3.4m for the same period in 2008. 

Working Capital Review

The Group's capital expenditure during the first half of 2009 was HK$3.2m on additional Plant, Property and Machinery for new moulds as many customers were not prepared to pay for the mould fees for the development of new models for production. However, the Group does believe that incurring such costs nevertheless does provide a competitive advantage against our competitors.  Management expects to continue incurring capital expenditure at a similar level for the remainder of 2009. The Group finances its capital expenditure requirements primarily with cash generated from its operations. 

The Group has internal budgeting systems in place to ensure that if and when cash is committed to fund major expenditures there is sufficient cash flow to maintain the Group's daily operations and meet all of its contractual obligations. 

Although the Group has consistently maintained a very liquid position, banking facilities have nevertheless been put in place for contingency purposes. As at 30 June 2009, the Group had trade financing facilities amounting to HK$10.5m, a term loan facility amounting to HK$1m and a revolving credit line for working capital purposes amounting to HK$1.8m. The total undrawn portion of these facilities is HK$1.8m. 

The interest rates for the trade financing line range from 5.75% to 6.25% and this facility is denominated in Hong Kong Dollars. The term loan facility carries interest at a rate of 5.75% and is also denominated in Hong Kong Dollars. The revolving credit line has an interest rate of 1% plus HIBOR and is denominated in Hong Kong Dollars. It is rolled-over monthly for working capital financing.

The Group's accounting policy regarding bad debts is to provision at year end any payments which have not been settled by the customer within 360 days. Due to the global financial crisis a number of our customers have extended their payment period, therefore, our receivables collection period has increased from 152 days to 448 days. The Group has extended payment terms to those customers with whom they have maintained long working relationships. The group has received HK$5m from the outstanding receivables as at 30 June 2009 during July and August.  We are confident that the outstanding receivable amounts will continue to decrease as a result of payments from our customers in the fourth quarter of year 2009. Finally, The Group is continuing its efforts to recover HK$9.6m bad debt that was reported in our year ended 31 December 2008.  

The Group currently has no other material external debt financing in place. If and when the Group decides to raise any finance in the future, it expects to be able to utilise a variety of options, including debt financing and access to the capital markets, where necessary and available.

The Group has an overdraft facility of HK$11m as of 30 June 2009 compared with a HK$7.5m overdraft as of 30 June 2008. The increase was due to the purchase of plant and machinery of HK$3.2m. Going forward, the Directors believe that the Group's liquidity requirements for the foreseeable future can be satisfied; however, the Board is monitoring this situation very closely. 

Contingent Liabilities

As at 30 June 2009, the Group had no contingent liabilities and also the Group has no bad debts.

Net Current Liabilities

The net current liabilities reported of $9.1M shows a marked deterioration from the net current assets of $6.4m reported on 30 June 2008. 

The net current liabilities position is being managed according to the ability of the Group to service its working capital as set out above. The Group does expect the second half of 2009 to improve the working capital position.

Related Transactions

In comparison with 2008, amounts due from related companies increased by HK10,000 which was in relation to PAQ Concept Ltd. This represents the incorporation fee and is temporary recorded in the books as an amount due from a related company and will be recognized as investment to subsidiary and eliminated in consolidated accounts by the year end.

Dividend

The Directors are not recommending payment of an interim dividend.  

Outlook and Future Prospects

The Board is now prioritizing the strategy of licensing and joint venture arrangements and we are looking to enhance the PAQ brand by leveraging on our historical manufacturing strengths in cases and bags for electronics products and accessories. We will continue to develop our expertise in producing high quality, reliable and innovative products. The Group will also strengthen its design and development capabilities to further raise its brand profile to distinguish itself from other product suppliers.

The Board believes that the joint venture and licensing strategies referred to above have the potential to generate significant publicity, brand recognition and revenue in the lead up to the World Cup in South Africa in 2010.

Despite signs of a global recovery, we remain prudent in the current market condition and we are currently working with our customers towards developing strategies that reflect the deteriorating conditions in some markets such as reducing stock inventories and producing cheaper range of bags while deferring the implementation of any contracts that may incur a substantial financial outlay.  Notwithstanding the current poor market conditions, the Board is confident of the long term prospects of the Group.

Issue of Equity

During the period the Group has attracted further investment from a strategic investor, Noah Concept Limited. The investor subscribed to 3.15% or HK$1.5m of new ordinary shares in the Company.

Appreciation 

Finally, on behalf of the Board, I would like to thank our customers, suppliers and shareholders for their continued support of the Group and I would also like to recognize the hard work from the management team and our highly dedicated team of employees for their respective contributions to the Group. 

Kelvin Kwong Chi Yau 

Chairman and Chief Executive Officer 

30 September 2009 

Note: A copy of the interim accounts for the six months ended 30 June 2009 will be available on www.paq-intl.com

Contact 

Kelvin Yau, Chief Executive	+(852) 9135 1811
PAQ International Holdings
www.paq-intl.com
Dominique Doussot/David Newton/Jonathan Evans	+44 (0) 207 060 1760
Zimmerman Adams International Ltd

PAQ International Holdings Limited 

Unaudited consolidated income statement 

For the six months ended 30 June 2009

				Six months ended 30 June				Year ended 31 Dec
			Note	2009		2008		2008
				HK$'000		HK$'000		HK$'000
				(unaudited)		(unaudited)		(audited)
Revenue			3	13,538		44,432		76,319
Cost of sales				-12,454		-36,452		-64,923
Gross profit			3	1,084		7,980		11,396.00
Other income				112		5,663		6,621.00
Distribution costs				-172		-1,493		-2,733.00
Administrative expenses				-2,276		-3,386		-8,698.00
Other expenses				-2,036		-4,473		-15,409.00
Finance costs			4(a)	-449		-292		-655
(Loss) / Profit before tax			4	-3,737		3,999		-9,478.00
Income tax expenses			5	-		-506		0
(Loss) / Profit and total comprehensive income for the period				-3,737		3,493		-9,478.00
(Loss) / Profit and total comprehensive income
attributable to :
- owners of the Company				-3,737		2,483		-10,488.00
- minority interests				-		1,010		1,010.00
				-3,737		3,493		-9,478.00
				Cents per share		Cents per share		Cents per share
Earnings per share			6
- basis				-3.02		2.13		9.24
- diluted				N/A		2.13		9.54

PAQ International Holdings Limited 

Unaudited consolidated statement of financial position

As at 30 June 2009

			Note	30 June 2009		30 June 2008	31 December 2008
				HK$'000		HK$'000	HK$'000
				(unaudited)		(unaudited)	(audited)
Non-current assets
Property, plant and equipment			7	8,231		1,774	6,341
Goodwill			8	14,227		16,675	14,227
				22,458		18,449	20,568
Current assets
Inventory				0		2,758	0
Trade and other receivables			9	16,615		25,997	18,500
Amount due from a director			17	14		0	-
Amount due from a related company			17	34		0	24
Pledged bank deposit			14	550		547	549
Bank balances and cash				141		718	189
				17,354		30,020	19,262
Current liabilities
Trade and other payables			10	8,456		10,000	6,235
Income tax liabilities				4,160		4,906	4,400
Amounts due to directors			16	1,540		0	954
Borrowings			11	12,154		8,283	12,416
Obligation under finance lease				165		353	214
				26,475		23,542	24,219
Net current liabilities				-9,121		6,478	-4,957
Total assets less current liabilities				13,337		24,927	15,611
Non-current liabilities
Borrowings			11	348		0	347
Obligation under finance lease						0	38
				348		0	385
Net assets				12,989		24,927	15,226
Capital and reserve
Share capital			12	9,707		10,085	9,400
Reserves				3,282		14,842	5,826
Total equity attributable to owners of the Company				12,989		24,927	15,226

PAQ International Holdings Limited 

Unaudited condensed consolidated statement of changes in equity

For the six months ended 30 June 2009 

			Reserves
		Share capital	Share premium	Shares to be issued	Treasury shares	Share option reserve	Merger reserve	Shareholders' contribution	Translation reserve	Retained profit / (Accumulated) losses	Sub- total	Total
		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 2008 (audited)		-	-	-	-	-	-	-	-	9,343	9,343	9,343
Profit and total comprehensive income for the period		-	-	-	-	-	-	-	35	2,483	2,518	2,518
Arising from Reorganization (Note (i))		8,100	-	-	-	-	-8,091	-	-	-	-8,091	9
Issue of shares (Note (ii))		1,300	14,160	-	-	-	-	-	-	-	14,160	15,460
Expenses incurred in connection with the issue of shares (Note (ii))		-	-9,021	-	-	-	-	9,021	-	-	-	-
Recognition of equity settled share based payments (Note (iii))		-	-670	-	-	670	-	-	-	-	-	-
Purchase of own shares and held as treasury shares		-	-	-	-6,271	-	-	-	-	-	-6,271	-6,271
Acquisition of additional interest in a subsidiary		685	3,183	-	-	-	-	-	-	-	3,183	3,868
At 30 June 2008 (unaudited)		10,085	7,652	-	-6,271	670	-8,091	9,021	35	11,826	14,842	24,927
At 1 January 2009 (audited)		9,400	4,469	4,313	-3,583	670	-8,091	9,021	172	-1,145	5,826	15,226
Loss and total comprehensive income for the period		-	-	-	-	-	-	-	-	-3,737	-3,737	-3,737
Issue of shares (Note (iv))		307	1,193	-	-	-	-	-	-	-	1,193	1,500
At 30 June 2009 (unaudited)		9,707	5,662	4,313	-3,583	670	-8,091	9,021	172	-4,882	3,282	12,989

Note: 

• The merger reserve of the Group represents the difference between the nominal value of share capital of a subsidiary acquired pursuant to Reorganization in January 2008 and the nominal value of the share capital issued by the Company as consideration for the reorganization of business under common control.

• The Company entered into an agreement with Mr. Yau Kwong Chi, Kelvin and Madam Ng Oi Chun, Patty on 28 November 2007 in connection with the expenses incurred by the Company in relation to the admission to AIM and the related placing of shares. Under the terms of this agreement, Madam Ng Oi Chun, Patty agreed to take responsibility for the payemnt of all professional fees incurred by the Company in connection with the admission to AMI and placing of shares. In return, Mr. Yau Kwong Chi, Kelvin transferred a total of 26,272,500 ordinary shares of the Company to Madam Ng Oi Chun, Patty and nominees.

• On 19 February 2008, the Company granted an option to subscribe for 1,205,166 ordinary shares of the Company to each of Zimmerman Adams International Limited, the nominated adviser and broker of the Company, and Hichens, Harrison & Co. plc, the co-broker of the Company, in connection with the placing of shares and admission to AIM. The share option will expire on 24 February 2013 and have an exercise price of GBP0.06 per share.

• On April 2009, Noah Concept Limited subscribed for 3,954,049 new ordinary shares of US$0.01 each in the Company at a price of HK$0.38 per share for a total consideration of HK$1,500,000.

PAQ International Holdings Limited

Unaudited condensed consolidated cash flow statement

For the six months ended 30 June 2009

				Six months ended 30 June				Ended 31 Dec
				2009		2008		2008
				HK$'000		HK$'000		HK$'000
				(unaudited)		(unaudited)		(audited)
Net cash from (used in) operating activities				2,453		-2,521		-4,211
Net cash used in investing activities
	Interest received			-		5		9
	Acquisition of property, plant and equipment			-3,203		-83		-6,194
	Acquisition of a subsidiary, net of cash acquired			-		-2,656		-2,656
	Acquisition of additional interest in a subsidiary			-		-9,901		-7,453
	Proceeds from disposal of property, plant and equipment							20
	Increase in pledged bank deposits			-1		-4		-6
				-3,204		-12,639		-16,280
Net cash from financing activities
	Proceeds from issue of ordinary shares			1,500		15,460		15,460
	Repayment of borrowings, net			-261		-53		2,111
	Repayment of obligation under finance lease			-87		-67		-168
	Interest paid			-449		-27		-95
				703		15,313		17,308
Net (decrease) / increase in cash and cash equivalents				-48		153		-3,183
Cash and cash equivalents at beginning of the period				189		-7,644		-7,644
Effect of foreign exchange rate movements				-		-9		37
Cash and cash equivalents at end of the period, represented by bank balances and cash				141		-7,500		-10,790

  PAQ International Holdings Limited

Notes to the condensed consolidated interim financial information

For the six months ended 30 June 2009

1.     BASIS OF PREPARATION

    The condensed consolidated interim financial information have been prepared in accordance with International Accounting Standard 34 ('IAS 34'), Interim Financial Reporting.

    The condensed consolidated interim financial information are presented in Hong Kong Dollars ('HKD'), which is the same as the funciational currency of the Company.

2.    PRINCIPAL ACCOUNTING POLICIES

The condensed consolidated interim financial information have been prepared on the historical cost basis.

The accounting policies used in the condensed consolidated interim financial information are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2008 except as described below.

In the current interim preiod, the Group has applied, for the first time, the following new and revised standards, amendments and interpretations ('new and revised IFRSs') which are effective for the Group's financial year beginning on 1 January 2009.

IAS 1 (Revised 2007)	Presentation of Financial Statements
IAS 23 (Revised 2007)	Borrowing costs
IAS 32 & 1 (Amendments)	Puttable Financial Instruments and Obligations Arising on Liquidation
IFRS 1 (Amendment)	Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate
IFRS 2 (Amendment)	Vesting Conditions and Cancellations
IFRS 7 (Amendment)	Improving Disclosures about Financial Instruments
IFRS 8	Operating Segments
IFRIC 9 & IAS 39 (Amendments)	Embedded Derivatives
IFRIC 13	Customer Loyalty Programmes
IFRIC 15	Agreements for the Construction of Real Estate
IFRIC 16	Hedges of a Net Investment in Foreign Operation
IFRSs (Amendments)	Improvements to IFRSs issued in 2008, except for the amendment to IFRS 5 that is effective for annual periods beginning or after 1 July 2009
IFRSs (Amendments)	Improvements of IFRSs issued in 2009 in relation to the amendment to paragraph 80 of IAS 39

IAS 1 (Revised 2007) Presentation of Financial Statements

IAS 1 (Revised 2007) has introduced a number of terminology changes, including revised titles for the condensed consoldiated interim financial information, and has resulted in a number of changes in presentation and disclosure. However, IAS 1 (Revised 2007) had no impact on the reported results or financial position the Group.

        IAS 23 (Revised 2007) Borrowing Costs

In previous years, the Group expensed all borrowing costs that were directly attributable to the acquisition, construction or production of an qualifying asset when they were incurred. IAS 23 (Revised 2007) removes the option available under the previous version of the Standard to recognize all borrowing costs as expenses immediately and requires all such borrowing costs to be capitalized as part of the cost of the qualifying asset. The Group has applied the revised accounting policy prospectively. The application of IAS 23 (Revised 2007) had no impact on the reported results or financial position of the Group.

IFRS 7 (Amendment) Improving Disclosures about Financial Instruments

IFRS 7 (Amendment) increases the disclosure requirements about fair value measurement and amends the disclosure about liquidity risk. The amendment introduces a three-level hierarchy for fair value measurement disclosures about financial instruments and requires some specific quantitative disclosures for those instruments classified in the lowest level in the hierarchy. These disclosures will help to improve comparability between entities about the effects of fair value measurements. In addition, the amendment clarifies and enhances the existing requirements for the disclosure of liquidity risk primarily requiring a separate liquidity risk analysis for derivative and non-derivative financial liabilities. It also requires a maturity analysis for financial assets where the information is needed to understand the nature and context of liquidity risk. The Group will make additional relevant disclosures in its financial statements ending 31 December 2009.

IFRS 8 Operating Segments

IFRS 8 requires segment disclosure to be based on the way that the Group's chief operating decision maker regards and manages the Group, with the amounts reported for each reportable segment being the measures reported to the Group's chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters. This contrasts with the presentation of segment information in prior years which was based on a disaggregation of the Group's financial statements into segments based on related products and services and on geographical areas. The adoption of IFRS 8 has resulted in the presentation of segment information in a manner that is more consistent with internal reporting provided to the Group's most senior executive management, and has resulted in additional reportable segments being identified and presented (See note 3). As this is the first period in which the Group has presented segment information in accordance with IFRS 8, additional explanation has been included in the condensed consolidated interim financial information which explains the basis of preparation of the information. Corresponding amounts have also been provided on a basis consistent with the revised segment information.

The adoption of the other new and revised IFRSs has had no material effect on the reported results and financial position of the Group for the current or prior accounting periods. Accordingly, no prior period adjustment has been recognized.

The Group has not early applied the following new or revised standards, amendments or interpretations that have been issued but are not yet effective:

IFRSs (Amendments)	Amendment to IFRS 5 as part of Improvements to IFRSs issued in May 2008 (note 1)
IFRSs (Amendments)	Improvements to IFRSs issued in April 2009 (note 2)
IAS 27 (Revised 2008)	Consolidated and Separate Financial Statements (note 1)
IAS 39 (Amendment)	Eligible Hedged Items (note 1)
IFRS 1 (Amendment)	Additional Exemptions for First-time Adopters (note 4)
IFRS 2 (Amendment)	Group Cash-settled Share-based Payment Transactions (note 4)
IFRS 3 (Revised 2008)	Business Combinations (note 1)
IFRIC 17	Distributions of Non-cash Assets to Owners (note 1)
IFRIC 18	Transfers of Assets from Customers (note 3)

Note:

1. Effective for annual periods beginning on or after 1 July 2009.

2. Amendments that are effective for annual periods beginning on or after 1 July 2009 or 1 January 2010, as appropriate.

3. Effective for transfers on or after 1 July 2009.

4. Effective for annual periods beginning or or after 1 January 2010.

The adoption of IFRS 3 (Revised 2008) may affect the Group's accounting for business combinations for which the acquisition dates are on or after 1 January 2010. IAS 27 (Revised 2008) will affect the accounting treatment for changes in the Group's ownership interest in a subsidiary. The directors of the Company anticipate that the application of other new and revised standards, amendments or interpretations will have no material impact on the results and the financial position of the Group.

3. SEGMENT INFORMATION

The Group has adopted IFRS 8 Operating Segments with effect from 1 January 2009. IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Group's chief operating decision maker in order to allocate resources to segments and to assess their performance.

In prior years, on segment information is presented as the Group is principally engaged in the manufacturing and distributing branded softwear for branded electronic products and accessories which comprise a single business segment. However, information reported to the Group's cheif operating decision maker for the purposes of resource allocation and performance assessment focuses more specifically on the following geographical location of customers. The Group's reportable segments under IFRS 8 are therefore as follows:

                (a)     Europe

(b)     PRC

(c )     United States of America

(d)     Australia

(e)     Others

The following is an analysis of the Group's revenue and results by operating segment for the period under review:

For the six months ended 30 June 2009

								United States
				Europe		PRC		of America		Australia		Others		Consolidated
				HK$'000		HK$'000		HK$'000		HK$'000		HK$'000		HK$'000
Revenue
External sales				654		282		11,606		116		880		13,538
Segment profit				281		121		252		50		380		1,084
Unallocated income														112
Unallocated expenses														-4,484
Finance costs														-449
Loss before tax														-3,737
For the six months ended 30 June 2008
								United States
				Europe		PRC		of America		Australia		Others		Consolidated
				HK$'000		HK$'000		HK$'000		HK$'000		HK$'000		HK$'000
Revenue
External sales				6,512		167		29,357		868		7,528		44,432
Segment profit				1,172		30		5,267		156		1,355		7,980
Interest income														5
Other unallocated income														5,658
Unallocated expenses														-9,352
Finance costs														-292
Profit before tax														3,999

Segment profit represents the gross profit earned by each segment. This is the measure reported to board of directors for the purposes of resource allocation and performance assessment.  4.    (LOSS) / PROFIT BEFORE TAX

															Six months ended 30 June
											Note				2009		2008
															HK$'000		HK$'000
(Loss) / Profit before tax has been arrived at:
After charging:
(a)	Finance costs:
	Interest on finance leases														8		9
	Interest on bank loans														58		14
	Interest on bank overdrafts														375		265
	Interest on discounted bills														8		4
															449		292
(b)	Staff costs, excluding directors' remuneration:										(i)
	Salaries, wages and other benefits														1,395		3,795
	Retirement scheme contributions														40		140
															1,435		3,935
(c )	Other items:
	Directors' remuneration				- fees										-		-
					- other emoluments										780		599
					- retirement scheme contributions										-		4
	Cost of inventories										(ii)				12,454		36,452
	Depreciation on property, plant and equipment														1,313		364
	Minimum lease payment under operating lease														180		595
	- rented premises
	Net foreign exchange losses														6		425
	Impairment loss on other receivables														-		1,526
	Research and development costs														162		243
	Note:
	(i)	Staff costs include approximately HK$162,000 (for the six months ended 30 June 2008: HK$243,000) relating to research and development costs disclosed separately in Note 4(c ).
	(ii)	Cost of inventories includes approximately HK$159,000 (for the six months ended 30 June 2008: HK$2,310,000) relating to operating lease charges, staff costs and depreciation, which are included in the respective total amounts disclosed separately above or Note 4(b) for each of these types of expenses.
After crediting:
Interest income															-		5
5.  INCOME TAX EXPENSES
															Six months ended 30 June
															2009		2008
															HK$'000		HK$'000
Current tax - Hong Kong Profits Tax															-		506
No provision for income tax has been made for the Company and group entities established in the Cayman Islands and Hong Kong as they have no assessable income during the interim period.
The provision of Hong Kong profits tax is calculated by applying the estimated annual effective tax rate of 16.5% for the six months ended 30 June 2008.
Pursuant to the relevant laws and regulations in the People's Republic of China ('PRC'), the Group's PRC subsidiary is exempted from PRC enterprise income tax for the two years from the first profit-making year and thereafter is entitled to a 50% relief from PRC enterprise income tax for the following three years. The PRC subsidiary was in its [ third ] profit-making year for the six months ended 30 June 2009.
6.  EARNINGS PER SHARE
(a)	Basis earnings per share
	The calculation of basis earnings per share is based on the profit attributable to owners of the Company of approximately HK$3,737,000 (for the six months ended 30 June 2008: HK$2,483,0000 and the weighted average number of 123,714,604 ordinary shares (for the six months ended 30 June 2008: 116,352,458 shares, after assuming the completion of the Reorganization on 1 January 2007) in issue during the interim period.
(b)	Diluted (loss) / earnings per share
	Diluted loss per share has not been presented for the six months ended 30 June 2009 because the exercise price of the Company's options was higher than the average market price of the Company's shares during that period when they were outstanding. No diluted earnings per share have been presented for the six months ended 30 June 2008 because the options outstanding during that period had an anti-dilutive effect on the basis earnings per share.
7.  MOVEMENT IN PROPERTY, PLANT AND EQUIPMENT
During the six months ended 30 June 2009, the Group spent HK$3,203,000 (for the six months ended 30 June 2008: HK$83,000) on the acquisition of property, plant and equipment.
8.  GOODWILL
															30 June		31 December
															2009		2008
															HK$'000		HK$'000
COST
Opening net book amount															14,227		-
Acquired on acquisition of a subsidiary															-		14,227
Closing net book amount															14,227		14,227
On 18 January 2008, PAQ Manufacturing Limited, a wholly owned subsidiary of the Company, acquired 51% equity interest in Plato Leatherware Company Limited at a cash consideration of HK$2,448,000.
The net liabilities acquired on 18 January 2008 and the goodwill arising are as follows:
																	Acquiree's
																	carrying
																	amounts before
																	combination
																	and fair value
																	HK$'000
Net assets/(liabilities) acquired:
Property, plant and equipment																	5
Trade and other receivables																	4,338
Bank and cash balances																	6
Trade and other payables																	-5,603
Bank overdrafts																	-214
Net liabilities acquired																	-1,468
Goodwill																	3,916
																	2,448
Total consideration satisfied by:
Cash																	2,448
Net cash outflow arising on acquisition:
Cash consideration paid																	2,448
Bank balances and cash, bank overdrafts acquired																	208
																	2,656
On 11 June 2008, PAQ Manufacturing Limited further acquired the remaining 49% equity interests in Plato Leatherware Company Limited at a cash consideration of approximately HK$9,901,000 and 8,772,000 issued shares of the Company. Plato Leatherware Company Limited became a wholly owned subsidiary of the Company thereafter.
Pursuant to the sale and purchase agreement in relation to the acquisition of the remaining 49% equity interests in Plato Leatherware Company Limited, a part of cash consideration of HK$2,448,000 for the acquisition was contingent on the fund raising by the Company after admission to the AIM by means of share placement on or before 1 May 2009. Management of the Company considered that the fund raising exercise was not probable and did not include the aforesaid cash consideration of HK$2,448,000 in the cost of acquisition at the acquisition date. Subsequent to the date of acquisition of the remaining 49% equity interest in Plato Leatherware Company Limited and up to 1 May 2009, no fund raising by the Company occurred.
After the completion of the acquisition of the remaining 49% equity interests in Plato Leatherware Company Limited on 11 June 2008, the goodwill arising is as follows:
																	HK$'000
Purchase consideration:
Cash consideration																	7,453
Fair value of 8,772,000 shares of the Company to be issued (Note)																	3,868
																	11,321
Acquisition of additional interest in a subsidiary from a minority
shareholder																	-1,010
Goodwill arising																	10,311
Goodwill arising from acquisition on 18 January 2008 - shown as above																	3,916
Total goodwill																	14,227
Note:
At 31 December 2008, the consideration of 8,772,000 shares of the Company for the acquisition had not yet been issued and therefore the fair value of 8,772,000 shares to be issued for the acquisition had been recognized as 'shares to be issued' in the equity. Shares to be issued was based the published price of the Company's shares as quoted on the AIM on 11 June 2008.
9.  TRADE AND OTHER RECEIVABLES
															30 June		31 December
															2009		2008
															HK$'000		HK$'000
Trade receivables															7,566		9,240
Less:	Allowance for doubtful debts														-630		-630
															6,936		8,610
Other receivables															11,984		18,847
Prepayments and deposits															554		278
															12,538		19,125
Less:	Allowance for doubtful debts														-2,859		-9,235
															9,679		9,890
															16,615		18,500
An ageing analysis of trade receivables (net of allowance for doubtful debts) at the end of the interim / reporting period is as follows:
															30 June		31 December
															2009		2008
															HK$'000		HK$'000
Less than 1 month past due															3,800		6,811
1 month to 3 months past due															-658		1,223
More than 3 months but less than 1 year past due															3,790		576
Over 1 year past due															4		-
Amounts past due															6,936		8,610
Trade receivables are due upon the date of billing.
10.  TRADE AND OTHER PAYABLES
															30 June		31 December
															2009		2008
															HK$'000		HK$'000
Trade payables															3,785		1,668
Other payables and accrued charges															3,411		3,471
Deposits received															1,260		1,096
															8,456		6,235
An ageing analysis of trade payables at the end of the interim / reporting period is as follows:
															30 June		31 December
															2009		2008
															HK$'000		HK$'000
Less than 1 month															2,010		457
1 month to 3 months															622		5
Over 3 months but less than 1 year															613		1,206
Over 1 year															540		-
															3,785		1,668
The average credit period on purchase of goods is 30 days.
11.  BORROWINGS
															30 June		31 December
											Note				2009		2008
															HK$'000		HK$'000
Secured:
Bank overdrafts											(a)				11,056		10,979
Bank loans											(a)				946		1,284
Unsecured:
Other loans											(b)(i)				500		500
															12,502		12,763
At the end of the interim / reporting period, the bank borrowings were repayable as follows:
															30 June		31 December
															2009		2008
															HK$'000		HK$'000
Within one year or on demand															12,154		12,416
After 1 year but within 2 years															348		347
															12,502		12,763
Less:	Amounts due within one year shown under current liabilities														-12,154		-12,416
															348		347
Note:
(a)	The Group's interest-bearing borrowings bear interest ranging from 5.75% to 6.25% (for the year ended 31 December 2008: 6% to 6.25%) per annum. The details of security of borrowings are disclosed in Note 14.
(b)	(i)	Pursuant to an agreement entered into between the Company and Ms. Ho Wing Yee ('Ms. Ho'), an independent third party, on 17 June 2008, Ms. Ho agreed to advance to the Company a sum of HK$500,000 (the '1st Loan'). The 1st Loan is unsecured, interest-free and has no fixed terms of repayment. The 1st Loan is convertible at the option of the lender into ordinary shares of the Company. The conversion rights attached to the 1st Loan can be exercised at any time after the expiry of one month from the date of the agreement and the conversion price of the 1st Loan is HK$0.442 per share.
	(ii)	Pursuant to an agreement entered into between the Company and Mr. Ng Ngai Hung ('Mr. Ng'), an independent third party, on 23 June 2008, Mr. Ng agreed to advance to the Company a sum of HK$445,000 (the '2nd Loan'). The 2nd Loan is unsecured, interest-free and has no fixed terms of repayment. The 2nd Loan is convertible at the option of the lender into ordinary shares of the Company. The conversion rights attached to the 2nd Loan can be exercised at any time after the expiry of one month from the date of agreement and the conversion price of the 2nd Loan is HK$0.445 per share.
		During the year ended 31 December 2008, Mr. Ng exercised the conversion rights to convert the 2nd Loan into 1,000,000 shares of the Company. Up to the date of issuance of these condensed consolidated interim financial information, the Company is yet to complete the relevant procedures to convert the 2nd Loan into shares of the Company and therefore the sum of HK$445,000 was treated as 'Shares to be issued' included in the reserves of the Company.
SHARE CAPITAL
														Number of
											Note			shares			Amount
																	HK$'000
At 1 January 2008											(a)			1			-
Sub-division of the par value											(b)			9			-
of ordinary shares of US$0.10
to US$0.01 each
Issue of shares upon											(c )			103,850,000			8,100
Reorganization
Issue of shares upon placing											(d)			16,666,667			1,300
Issue of shares for acquisition											(e)			8,772,000			685
of additional interest in a subsidiary
At 30 June 2008														129,288,677			10,085
At 1 January 2009														120,516,677			9,400
Issue of shares											(f)			3,954,049			306
At 30 June 2009														124,470,726			9,706
Note:
(a)	The Company was incorporated on 23 November 2007, on which date the authorized share capital was US$50,000 divided into 500,000 ordinary shares of US$0.10 each, 1 of which was issued at par for cash.
(b)	On 18 January 2008, (i) issued and unissued shares of the Company were sub-divided into 10 shares of US$0.01 each such that the authorized share capital of the Company became US$50,000 divided into 5,000,000 ordinary shares; and (ii) the authorized share capital of the Company was increased to US$3 million by the creation of 295,000,000 new ordinary shares.
(c )	On 18 January 2008, the Company underwent the Reorganization and acquired the entire equity interests in PAQ Manufacturing Limited, a company incorporated in Hong Kong, through the issue of 103,850,000 ordinary shares of US$0.01 each to Mr. Yau Kwong Chi, Kelvin and Mr. Edmund Lui.
(d)	On 25 February 2008, 16,666,667 new ordinary shares of US$0.01 each of the Company were issued at GBP0.06 per share by way of placing of shares.
(e)	On 11 June 2008, the Group acquired the remaining 49% equity interests in Plato Leatherware Company Limited at a cash consideration of approximately HK$9,901,000 and 8,772,000 issued shares of the Company.
(f)	On April 2009, Noah Concept Limited subscribed for 3,954,049 new ordinary shares of US$0.01 each in the Company at a price of HK$0.38 per share for a total consideration of HK$1,500,000.
All the new shares issued during the financial period rank pari passu in all respects with the existing shares of the Company.
13. BANKING FACILITIES
At the end of the interim period, the Group had general banking facilities granted by banks to the extent of approximately HK$13,300,000 (as at 31 December 2008: HK$13,300,000). The Group's bank borrowings and other banking facilities were secured by:
(a)	Personal guarantees provide by Mr. Edmund Lui and Mr. Yau Kwong Chi, Kelvin, directors of the Company;
(b)	Pledge of fixed deposits of the Group and a close family member of a director of PAQ Manufacturing Limited, a wholly owned subsidiary of the Company; and
(c )	Pledge of a property of a related company, Triple Grand Limited. Mr. Yau Kwong Chi, Kelvin, director of the Company, had the beneficial interests in Triple Grand Limited.
14. COMMITMENTS
At the end of the interim / reporting period, the total future minimum lease payments under non-cancelable operating leases were payable as follows:
															30 June		31 December
															2009		2008
															HK$'000		HK$'000
Within 1 year															907		991
After 1 year but within 5 years															431		1,338
															1,338		2,329
Operating leases related to rental premises with lease terms of between two to five years. None of the leases includes contingent rentals.
16. CONTINGENT LIABILITIES
PAQ Manufacturing Limited, a wholly owned subsidiary of the Company, was one of the defendants in a pending litigation and dispute arising from the ownership of a copyright with a supplier. The supplier's claims against the defendants are mainly for damages in resepct of the defendants' acts of copyright infringement. No provision in relation to this claim has been made in this condensed consolidated interim financial information, as legal adviser indicates that it is not probable that a significant liability will arise. There were no contingent liabilities as at 31 December 2008 and 30 June 2009.
17. RELATED PARTY TRANSACTIONS
(a)	Save as disclosed elsewhere in the condensed consolidated interim financial information, the Group had the following significant related party transactions during the interim period:
															Six months ended 30 June
											Note				2009		2008
															HK$'000		HK$'000
	Licensing income received from Riverstone										(i)				-		500
	Manufacturing Limited ('Riverstone')
	Management income received from Riverstone										(ii)				-		14
(b)	Key management compensation amounted to approximately HK$780,000 for the six months ended 30 June 2009 (for the six months ended 30 June 2008: HK$603,000).
															Six months ended 30 June
															2009		2008
															HK$'000		HK$'000
	Salaries and other short-term benefits														780		599
	Post-employment benefits														-		4
															780		603
	Total remuneration is included in directors' remuneration (Note 4(c )).
(c )	At the end of the interim / reporting period, the Group had the following balances with related parties:
															30 June		31 December
											Note				2009		2008
															HK$'000		HK$'000
	Amount due from a director
		Poon Chi Man									(iii)				14		-
	Maximum balance due from Poon Chi Man														14		-
	Amount due from a related company
		One Plus Manufacturing Limited ('One Plus')									(iv)				34		24
	Maximum balance due from One Plus														34		24
	Amounts due to directors										(iii)				1,540		954
	(i)	The licensing income was charged at prices and terms mutually agreed by both parties.
	(ii)	The management income was charged on a cost reimbursement basis.
	(iii)	The amount(s) due is/are unsecured, interest-free and has/have no fixed terms of repayment.
	(iv)	One Plus is related to the Group by virtue of the interests of Mr. Edmund Lui and Mr. Yau Kwong Chi, Kelvin. The share capital of One Plus is directly held by Mr. Edmund Lui and Mr. Yau Kwong Chi, Kelvin, directors of the Company. The amount due is unsecured, interest-free and has no fixed terms of repayment.

ENDIR CKKKDKBKDCCN