ACCOUNTANTS REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE DIRECTORS OF FIRMSTONE HOLDINGS LIMITED AND RED SUN CAPITAL LIMITED

The following is the text of a report set out on pages I-1 to I-67, received from the Company s reporting accountants, Deloitte Touche Tohmatsu, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this document. ON HISTORICAL FINANCIAL INFORMATION TO THE DIRECTORS OF FIRMSTONE HOLDINGS LIMITED AND RED SUN CAPITAL LIMITED Introduction We report on the historical financial information of Firmstone Holdings Limited (the Company ) and its subsidiaries (together the Group ) set out on pages I-4 to I-67, which comprises the consolidated statements of financial position as at 31 December 2016 and 2017, the statement of financial position of the Company as at 31 December 2017, and the consolidated statements of profit or loss and other comprehensive income, the consolidated statements of changes in equity and the consolidated statements of cash flows for each of the two years ended 31 December 2017 (the Track Record Period ) and a summary of significant accounting policies and other explanatory information (together, the Historical Financial Information ). The Historical Financial Information set out on pages I-4 to I-67 forms an integral part of this report, which has been prepared for inclusion in the document of the Company dated [date] (the Document ) in connection with the initial [REDACTED] of shares of the Company on GEM of The Stock Exchange of Hong Kong Limited (the Stock Exchange ). Directors responsibility for the Historical Financial Information The directors of the Company are responsible for the preparation of Historical Financial Information that gives a true and fair view in accordance with the basis of preparation and presentation set out in Note 2 to the Historical Financial Information, and for such internal control as the directors of the Company determine is necessary to enable the preparation of Historical Financial Information that is free from material misstatement, whether due to fraud or error. Reporting accountants responsibility Our responsibility is to express an opinion on the Historical Financial Information and to report our opinion to you. We conducted our work in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 200 Accountants Reports on Historical Financial Information in Investment Circulars issued by the Hong Kong Institute of Certified Public Accountants ( HKICPA ). This standard requires that we comply with ethical standards and plan and perform our work to obtain reasonable assurance about whether the Historical Financial Information is free from material misstatement. I-1

Our work involved performing procedures to obtain evidence about the amounts and disclosures in the Historical Financial Information. The procedures selected depend on the reporting accountants judgement, including the assessment of risks of material misstatement of the Historical Financial Information, whether due to fraud or error. In making those risk assessments, the reporting accountants consider internal control relevant to the entity s preparation of Historical Financial Information that gives a true and fair view in accordance with the basis of preparation and presentation set out in Note 2 to the Historical Financial Information in order to design procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Our work also included evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors of the Company, as well as evaluating the overall presentation of the Historical Financial Information. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Opinion In our opinion the Historical Financial Information gives, for the purposes of the accountants report, a true and fair view of the Group s consolidated financial position as at 31 December 2016 and 2017, of the Company s financial position as at 31 December 2017, and of the Group s consolidated financial performance and consolidated cash flows for the Track Record Period in accordance with the basis of preparation and presentation set out in Note 2 to the Historical Financial Information. Report on matters under the Rules Governing the Listing of Securities on GEM of the Stock Exchange and the Companies (Winding Up and Miscellaneous Provisions) Ordinance Adjustments In preparing the Historical Financial Information, no adjustments to the Underlying Financial Statements as defined on page I-4 have been made. I-2

Dividends We refer to Note 12 to the Historical Financial Information which contains information about the dividends paid by the Company s subsidiaries and states that no dividends have been paid by the Company in respect of the Track Record Period. [Deloitte Touche Tohmatsu] Certified Public Accountants Hong Kong [Date] I-3

HISTORICAL FINANCIAL INFORMATION OF THE GROUP Preparation of Historical Financial Information Set out below is the Historical Financial Information which forms an integral part of this accountants report. The consolidated financial statements of the Group for the Track Record Period, on which the Historical Financial Information is based, have been prepared in accordance with the accounting policies which conform with Hong Kong Financial Reporting Standards ( HKFRSs ) issued by the HKICPA, and were audited by us in accordance with Hong Kong Standards on Auditing issued by the HKICPA ( Underlying Financial Statements ). The Historical Financial Information is presented in Hong Kong dollar ( HK$ ) and all values are rounded to the nearest thousand () except when otherwise indicated. I-4

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Year ended 31 December 2016 2017 NOTES Revenue... 6 151,445 169,935 Costofsales... (104,239) (122,374) Grossprofit... 47,206 47,561 Other income... 7 398 5,165 Other(losses)gains,net... 8 (900) 2,231 Selling and distribution expenses... (9,125) (13,571) Administrative expenses... (13,776) (17,336) [REDACTED] expenses... (3,341) Finance costs... 9 (2,191) (1,625) Profitbeforetaxation... 21,612 19,084 Income tax expense... 10 (5,426) (4,424) Profit for the year... 11 16,186 14,660 Other comprehensive (expense) income for the year Item that may be reclassified subsequently to profit or loss: Exchange differences arising on translation of foreign operations... (38) 9 Total comprehensive income for the year... 16,148 14,669 Profit (loss) for the year attributable to: Owners of the Company... 16,678 15,147 Non-controlling interests... (492) (487) 16,186 14,660 Total comprehensive income (expense) for the year attributable to: Owners of the Company... 16,640 15,156 Non-controlling interests... (492) (487) 16,148 14,669 Earnings per share Basic (HK cents)... 15 2.78 2.52 I-5

STATEMENTS OF FINANCIAL POSITION The Group As at 31 December The Company As at 31 December 2016 2017 2017 NOTES Non-current assets Investment in a subsidiary... 36 8,958 Plant and equipment... 16 3,512 2,303 Payment for a life insurance policy. 17 5,521 5,604 Other receivables... 19 1,122 1,027 Pledged bank deposit... 22 3,000 3,022 13,155 11,956 8,958 Current assets Inventories... 18 494 1,392 Trade and other receivables... 19 40,157 47,144 94 Amounts due from customers forcontractwork... 20 3,308 14,765 Amount due from a director... 21 16,994 3,917 12 Amounts due from related companies... 21 8,866 5,676 Pledged bank deposits... 22 7,497 4,506 Bank balances and cash... 22 3,002 11,845 80,318 89,245 106 Current liabilities Trade and other payables... 23 46,489 58,311 2,534 Amounts due to customers for contractwork... 20 1,681 2,779 Amounts due to related companies. 21 2,264 626 Amount due to a subsidiary... 21 914 Amount due to a director... 21 1,445 1,332 Tax payable... 6,724 9,563 Bank overdrafts... 22 4,486 Bank and other borrowings... 24 22,212 7,699 85,301 80,310 3,448 Net current (liabilities) assets... (4,983) 8,935 (3,342) Total assets less current liabilities. 8,172 20,891 5,616 I-6

The Group As at 31 December The Company As at 31 December 2016 2017 2017 NOTES Capital and reserves Share capital... 25 524 Reserves... 35 5,953 20,891 5,616 6,477 20,891 5,616 Non-controlling interests... (40) 6,437 20,891 5,616 Non-current liability Loans from non-controlling shareholders of a subsidiary... 26 1,735 8,172 20,891 5,616 I-7

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY Attributable to owners of the Company Share capital Capital reserve Other reserve Translation reserve Retained profits Total Noncontrolling interests Total (note i) (note ii) At 1 January 2016... 524 11,313 11,837 11,837 Profit (loss) for the year... 16,678 16,678 (492) 16,186 Exchange differences arising on translation of foreign operations. (38) (38) (38) Total comprehensive (expense) income for the year... (38) 16,678 16,640 (492) 16,148 Dividends recognised as distribution (Note 12)... (22,000) (22,000) (22,000) Capital injection from noncontrolling shareholders... 215 215 Deemed contribution from non-controlling shareholders (Note 26)... 237 237 At 31 December 2016... 524 (38) 5,991 6,477 (40) 6,437 Profit (loss) for the year... 15,147 15,147 (487) 14,660 Exchange differences arising on translation of foreign operations. 9 9 9 Total comprehensive income (expense) for the year... 9 15,147 15,156 (487) 14,669 Acquisition of 43% equity interest in Clei (HK) Limited ( Clei (HK) )... 237 (979) (742) 527 (215) Arising from the Reorganisation (Note 2)... (524) 524 At 31 December 2017... 524 237 (29) 20,159 20,891 20,891 Notes: (i) The capital reserve as at 31 December 2017 represented the differences between the nominal amount of the share capital issued by the Company and the issued share capital of Firmstone Mobili, Firmstone Building, Firmstone Marble, Kingberg and Firmstone Furniture (as defined in Note 2) pursuant to the Reorganisation (as defined and detailed in Note 2) when the Company became the holding company of the Group upon completion of the Reorganisation on 4 December 2017. (ii) Other reserve represents the fair value adjustments recognised in equity as deemed contribution from non-controlling shareholders for the loans from non-controlling shareholders bearing lower-than-market interest rate as disclosed in Note 26. I-8

CONSOLIDATED STATEMENTS OF CASH FLOWS Year ended 31 December 2016 2017 OPERATING ACTIVITIES Profitbeforetaxation... 21,612 19,084 Adjustments for: Allowance for doubtful debts... 845 55 Amortisation of prepaid life insurance premium... 11 28 Bank interest income... (5) (36) Depreciation of plant and equipment... 1,186 1,764 Fair value changes on derivative financial instruments... 135 Finance costs... 2,191 1,625 (Gain) loss on disposal of plant and equipment... (10) 63 Interest income from payment for a life insurance policy... (79) (185) Operating cash flows before movements in working capital.. 25,886 22,398 Decrease (increase) in inventories... 610 (898) Increase in trade and other receivables... (22,034) (6,872) Increase in amounts due from customers for contract work.. (294) (11,457) Decrease in amounts due from related companies... 1,418 Increase in trade and other payables... 8,415 11,826 (Decrease) increase in amounts due to customers forcontractwork... (1,649) 1,098 Net movement in derivative financial instruments... (103) Cash generated from operations... 12,249 16,095 Hong Kong Profits Tax paid... (1,601) (1,585) NET CASH FROM OPERATING ACTIVITIES... 10,648 14,510 INVESTING ACTIVITIES Advance to a director... (49,740) (7,962) Advances to related companies... (9,261) (7,982) Placement of pledged bank deposits... (8,031) (527) Payment for a life insurance policy... (5,425) Purchase of plant and equipment... (2,739) (2,784) Repayment from a director... 45,369 19,925 Repayment from related companies... 4,946 11,172 Withdrawal of pledged bank deposits... 4,308 3,496 Proceeds from disposal of plant and equipment... 78 2,166 Interest received... 5 36 NET CASH (USED IN) FROM INVESTING ACTIVITIES.. (20,490) 17,540 I-9

Year ended 31 December 2016 2017 FINANCING ACTIVITIES New bank borrowings raised... 7,812 New other borrowings raised... 7,000 Advances from related companies... 3,248 3,285 Loans from non-controlling shareholders of a subsidiary... 1,935 Repayment to loans from non-controlling shareholders of a subsidiary... (850) Advance from a director... 462 871 Capital injection from non-controlling shareholders... 215 Acquisition of additional interest in a subsidiary... (215) Repayment of other borrowings... (8,500) (10,000) Repayment of bank borrowings... (4,094) (4,513) Interestpaid... (2,149) (1,401) Repayment to related companies... (986) (4,923) Repayment to a director... (17) (984) NET CASH FROM (USED IN) FINANCING ACTIVITIES.. 4,926 (18,730) NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS... (4,916) 13,320 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR... 3,470 (1,484) EFFECT OF FOREIGN EXCHANGE RATE CHANGES... (38) 9 CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR... (1,484) 11,845 Represented by: Bank balances and cash... 3,002 11,845 Bank overdrafts... (4,486) (1,484) 11,845 I-10

NOTES TO THE HISTORICAL FINANCIAL INFORMATION 1. GENERAL The Company was incorporated in the Cayman Islands under the Companies Law of Cayman Islands as an exempted company with limited liability on 3 August 2017. The Company s immediate and ultimate company is Total Focus International Limited ( Total Focus ), a limited liability company incorporated in the British Virgin Islands (the BVI ) which is owned by the Controlling Shareholders as defined in Note 2. The addresses of the registered office and principle place of business are stated in the Corporate Information section of the document of the Company dated [ ] (the Document ). The Company is an investment holding company. The principal activities of the Group is the provision of supply and installation of fixtures and furniture, decoration materials and fitting-out projects and supply of fixtures and furniture and decoration materials. The principal activities of the subsidiaries are set out in Note 36. 2. REORGANISATION AND BASIS OF PREPARATION AND PRESENTATION OF HISTORICAL FINANCIAL INFORMATION The Historical Financial Information has been prepared based on the accounting policies set out in Note 4 which conform with HKFRSs issued by the HKICPA and principles of merger accounting (under Accounting Guideline 5 Merger Accounting for Common Control Combinations ( AG5 )) issued by the HKICPA. During the Track Record Period, the companies now comprising the Group were jointly controlled by two individuals, namely Mr. Woo Chun Yu, Adolf ( Mr. Woo ) and Ms. Cheung Sau Chu ( Mrs. Woo ), the spouse of Mr. Woo, collectively referred to as the Controlling Shareholders. On 14 February 2018, the Controlling Shareholders have reiterated their agreement in writing that, in respect of the arrival and/or execution of all decisions, including but not limited to financial, management and operational matters of the companies now comprising the Group, they have always been acting in concert. In the preparation for the proposed [REDACTED] of the Company s shares on GEM of the Stock Exchange (the [REDACTED] ), the companies now comprising the Group underwent a group reorganisation (the Reorganisation ) as more fully explained in the section headed History, Development and Reorganisation in the Document which involved a) acquisition of all the I-11

non-controlling interests; b) transferred the entire equity interests of the companies now comprising the Group to Quality Prospect Limited ( Quality Prospect ), a company incorporated in the BVI, and c) insertion of Total Focus and the Company between the Controlling Shareholders and Quality Prospect. Upon completion of the Reorganisation on 4 December 2017, the Company became a holding company of the companies now comprising the Group. Except for the equity interests held by the non-controlling shareholders, all equity interests in Clei (HK), Firmstone Mobili Limited (previously known as Dada (Hong Kong) Limited) ( Firmstone Mobili ), Firmstone Building Materials Limited (previously known as LPI Limited) ( Firmstone Building ), Firmstone Marble Limited (previously known as Firmstone International Limited) ( Firmstone Marble ), Kingberg Inc Limited ( Kingberg ), Kingberg Trading (Shanghai) Limited* ( ( ) ) ( Kingberg (Shanghai) ), Firmstone Furniture (Macau) Limited (previously known as Dada (Macau) Limited) ( Firmstone Furniture ), Jax Interior Products Limited ( Jax Interior ) and Firmstone Contracting Limited ( Firmstone Contracting ) are wholly owned by the Controlling Shareholders during the Track Record Period. Since Clei (HK), Firmstone Mobili, Firmstone Building, Firmstone Marble, Kingberg, Kingberg (Shanghai), Firmstone Furniture, Jax Interior and Firmstone Contracting were under common control by the Controlling Shareholders, the equity transfer of these companies as stated above have been accounted for as a business combination involving entities under common control using the principles of merger accounting in accordance with AG 5 issued by the HKICPA as if the transfers had been completed on 1 January 2016. Total Focus is the ultimate holding company of the Company after the Reorganisation and not forming part of the Group. The Group comprising the Company and its subsidiaries resulting from the Group Reorganisation is regarded as a continuing entity. Accordingly, the Historical Financial Information has been prepared as if the Company had always been the holding company of the Group. In applying AG 5, the consolidated statements of profit or loss and other comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows for the Track Record Period have been prepared to present the results and cash flows of the companies now comprising the Group, as if the group structure upon the completion of the Group Reorganisation except for the equity interests held by the non-controlling shareholders had been in existence throughout the Track Record Period or since the respective date of incorporation, where there is a shorter period. The consolidated statement of financial position of the Group as at 31 December 2016 has been prepared to present the assets and liabilities of the companies now comprising the Group as if the current group structure except for the equity interests held by the non-controlling shareholders has been in existence at those dates, taken into account the respective dates of incorporation. * for identification purpose only I-12

3. ADOPTION OF NEW AND REVISED HKFRSs For the purpose of preparing and presenting the Historical Financial Information for the Track Record Period, the Group has consistently applied the HKFRSs, which are effective for the accounting periods beginning on 1 January 2017 throughout the Track Record Period. New and revised HKFRSs in issue but not yet effective The Group has not early applied the following new and revised HKFRSs that have been issued but are not yet effective: HKFRS 9 Financial Instruments 1 HKFRS 15 Revenue from Contracts with Customers and the Related Amendments 1 HKFRS 16 Leases 2 HKFRS 17 Insurance Contracts 4 HK(IFRIC) Int 22 Foreign Currency Transactions and Advance Consideration 1 HK(IFRIC) Int 23 Uncertainty over Income Tax Treatments 2 Amendments to HKFRS 2 Classification and Measurement of Share-based Payment Transactions 1 Amendments to HKFRS 4 Applying HKFRS 9 Financial Instruments with HKFRS 4 Insurance Contracts 1 Amendments to HKFRS 9 Prepayment Features with Negative Compensation 2 Amendments to HKFRS 10 and HKAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture 3 Amendments to HKAS 28 Long-term Interests in Associates and Joint Ventures 2 Amendments to HKAS 28 As part of the Annual Improvements to HKFRSs 2014 2016 Cycle 1 Amendments to HKAS 40 Transfers of Investment Property 1 Amendments to HKFRSs Annual Improvements to HKFRSs 2015 2017 Cycle 2 1 Effective for annual periods beginning on or after 1 January 2018. 2 Effective for annual periods beginning on or after 1 January 2019. 3 Effective for annual periods beginning on or after a date to be determined. 4 Effective for annual periods beginning on or after 1 January 2021. I-13

HKFRS 9 Financial Instruments HKFRS 9 introduces new requirements for the classification and measurement of financial assets, financial liabilities, general hedge accounting and impairment requirements for financial assets. Key requirements of HKFRS 9 which are relevant to the Group are: all recognised financial assets that are within the scope of HKFRS 9 are required to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. Debt instruments that are held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets, and that have contractual terms that give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding, are generally measured at fair value through other comprehensive income ( FVTOCI ). All other financial assets are measured at their fair value at subsequent accounting periods. In addition, under HKFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss. in relation to the impairment of financial assets, HKFRS 9 requires an expected credit loss model, as opposed to an incurred credit loss model under HKAS 39. The expected credit loss model requires an entity to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition. In other words, it is no longer necessary for a credit event to have occurred before credit losses are recognised. Based on the Group s financial instruments and risk management policies as at 31 December 2017, the directors of the Company anticipate the following potential impact on initial application of HKFRS 9: Classification and measurement Payment for a life insurance policy as disclosed in Note 17 will be classified as financial assets at fair value through profit or loss as contractual right to cash flows do not represent contractual cash flows that are solely payments of principal and interest on the principal outstanding. Upon initial application of HKFRS 9, the directors of the Company do not anticipate a fair value gain or loss I-14

relating to the payment for a life insurance policy would be adjusted to the retained profits as at 1 January 2018 as they considered the carrying amount of the payment for a life insurance policy at 31 December 2017 approximate to its fair value upon initial application of HKFRS 9. All other financial assets and financial liabilities will continue to be measured on the same bases as are currently measured under HKAS 39. Impairment In general, the directors of the Company anticipate that the application of the expected credit loss model of HKFRS 9 will result in earlier provision of credit losses which are not yet incurred in relation to the Group s financial assets measured at amortised costs and other items that subject to the impairment provisions upon application of HKFRS 9 by the Group. Based on the assessment by the directors of the Company, if the expected credit loss model were to be applied by the Group, the accumulated amount of impairment loss to be recognised by Group as at 1 January 2018 would be slightly increased as compared to the accumulated amount recognised under HKAS 39 mainly attributable to expected credit losses provision on trade receivables. Such further impairment recognised under expected credit loss model would reduce the opening retained profits and increase the deferred tax assets at 1 January 2018. HKFRS 15 Revenue from Contracts with Customers HKFRS 15 was issued which establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. HKFRS 15 will supersede the current revenue recognition guidance including HKAS 18 Revenue, HKAS 11 Construction Contracts and the related interpretations when it becomes effective. The core principle of HKFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the standard introduces a 5-step approach to revenue recognition: Step 1: Identify the contract(s) with a customer Step 2: Identify the performance obligations in the contract Step 3: Determine the transaction price Step 4: Allocate the transaction price to the performance obligations in the contract I-15

Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation Under HKFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when control of the goods or services underlying the particular performance obligation is transferred to the customer. Far more prescriptive guidance has been added in HKFRS 15 to deal with specific scenarios. Furthermore, extensive disclosures are required by HKFRS 15. In 2016, the HKICPA issued classifications to HKFRS 15 in relation to the identification of performance obligations, principal versus agent considerations, as well as licensing application guidance. The directors of the Company have assessed the impact on application of HKFRS 15. The Group recognises revenue from the following major sources: Supply and installation of fixtures and furniture, decoration materials and fitting-out projects Supply of fixtures and furniture and decoration materials The directors of the Company have preliminarily assessed the performance obligations for each type of revenue source and accordingly, revenue will be recognised for each of these performance obligations when control over the corresponding goods and services is transferred to the customer. In addition, the directors of the Company do not anticipate that the application of HKFRS 15 will have a material impact on the timing and amounts of revenue recognised. As regards the construction contracts related to the supply and installation of fixtures and furniture, decoration materials and fitting-out projects, the directors of the Company have specifically considered HKFRS 15 s guidance on contract combinations, contract modifications arising from variation orders, variable consideration, and the assessment of whether there is a significant financing component in the contracts, particularly taking into account the reason for the difference in timing between the transfer of control of goods and services to the customer and the timing of the related payments. The directors of the Company have assessed that revenue from this type should be continued to recognise over time as the customer controls the goods and services during the course of supply and installation performed by the Group. Furthermore, the directors of the Company consider that the input method and/or output method, as appropriate, currently used to measure the progress towards complete satisfaction of these performance obligations will continue to be appropriate under HKFRS 15 and will not have a significant impact on the timing of revenue. I-16

Apart from providing more extensive disclosures on the Group s revenue transactions, the directors of the Company do not anticipate that the application of HKFRS 15 will have a significant impact on the financial position and/or financial performance of the Group. HKFRS 16 Leases HKFRS 16 introduces a comprehensive model for the identification of lease arrangements and accounting treatments for both lessors and lessees. HKFRS 16 will supersede HKAS 17 Leases and the related interpretations when it becomes effective. HKFRS 16 distinguishes lease and service contracts on the basis of whether an identified asset is controlled by a customer. Distinctions of operating leases and finance leases are removed for lessee accounting, and is replaced by a model where a right-of-use asset and a corresponding liability have to be recognised for all leases by lessees, except for short-term leases and leases of low value assets. The right-of-use asset is initially measured at cost and subsequently measured at cost (subject to certain exceptions) less accumulated depreciation and impairment losses, adjusted for any remeasurement of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at that date. Subsequently, the lease liability is adjusted for interest and lease payments, as well as the impact of lease modifications, amongst others. Upon application of HKFRS 16, lease payments in relation to lease liability will be allocated into a principal and an interest portion which will be presented as financing cash flows. In contrast to lessee accounting, HKFRS 16 substantially carries forward the lessor accounting requirements in HKAS 17, and continues to require a lessor to classify a lease either as an operating lease or a finance lease. Furthermore, extensive disclosures are required by HKFRS 16. As at 31 December 2017, the Group has non-cancellable operating lease commitments of HK$3,194,000 as disclosed in Note 29. A preliminary assessment indicates that these arrangements will meet the definition of a lease. Upon application of HKFRS 16, the Group will recognise a right-of-use asset and a corresponding liability in respect of all these leases unless they qualify for low value or short-term leases. In addition, the Group currently considers refundable rental deposits paid of HK$1,620,000 as rights under leases to which HKAS 17 applies. Based on the definition of lease payments under HKFRS 16, such deposits are not payments relating to the right to use the underlying assets, I-17

accordingly, the carrying amounts of such deposits may be adjusted to amortised cost and such adjustments are considered as additional lease payments. Adjustments to refundable rental deposits paid would be included in the carrying amount of right-of-use assets. Furthermore, the application of new requirements may result in changes in measurement, presentation and disclosure as indicated above. Except as described as above, the directors of the Company anticipate that the application of other new and revised HKFRSs will have no material impact on the Group s financial performance and financial positions and/or the disclosures to the consolidated financial statements of the Group in foreseeable future. 4. SIGNIFICANT ACCOUNTING POLICIES The Historical Financial Information had been prepared in accordance with the accounting policies set out below which conform with HKFRSs issued by the HKICPA. In addition, the Historical Financial Information includes applicable disclosure required by the Rules Governing the Listing of Securities on GEM of the Stock Exchange ( GEM Listing Rules ) and by the Hong Kong Companies Ordinance. The Historical Financial Information has been prepared on the historical cost basis. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in the Historical Financial Information is determined on such a basis, except for leasing transactions that are within the scope of HKAS 17 Leases, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in HKAS 2 Inventories or value in use in HKAS 36 Impairment of Assets. I-18

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and Level 3 inputs are unobservable inputs for the asset or liability. The principal accounting policies are set out below. Basis of consolidation The Historical Financial Information incorporates the financial statements of the Company and entities controlled by the Company and its subsidiaries. Control is achieved when the Company: has power over the investee; is exposed, or has rights, to variable returns from its involvement with the investee; and has the ability to use its power to affect its returns. The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statements of profit or loss and other comprehensive income from the date the Group gains control until the date when the Group ceases to control the subsidiary. Profit or loss and each item of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. I-19

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group s accounting policies. All intragroup assets, liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. Changes in the Group s ownership interests in existing subsidiaries Changes in the Group s ownership interests in existing subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group s relevant components of equity and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries, including re-attribution of relevant reserves between the Group and the non-controlling interests according to the Group s and the non-controlling interests proportionate interests. Any difference between the amount by which the non-controlling interests are adjusted, and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company. Investment in a subsidiary Investment in a subsidiary is included in the statement of financial position of the Company at cost less any identified impairment loss. Merger accounting for business combination involving businesses under common control The Historical Financial Information incorporates the financial statements items of the combining businesses in which the common control combination occurs as if they had been combined from the date when the combining businesses first came under the control of the controlling party. The net assets of the combining businesses are combined using the existing book values from the controlling party s perspective. No amount is recognised in respect of goodwill or bargain purchase gain at the time of common control combination. The consolidated statements of profit or loss and other comprehensive income include the results of each of the combining businesses from the earliest date presented or since the date when the combining businesses first came under the common control, where this is a shorter period, regardless of the date of the common control combination. I-20

Revenue recognition Revenue is measured at the fair value of the consideration received or receivable, net of discounts given to customers. Revenue is recognised when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the Group and when specific criteria have been met for each of the Group s activities, as described below. Revenue from supply of fixtures and furniture and decoration materials is recognised when the goods are delivered and titles have passed. Service income is recognised when services are rendered. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset s net carrying amount on initial recognition. Supply and installation of fixtures and furniture, decoration materials and fitting-out projects When the outcome of supply and installation of fixtures and furniture, decoration materials and fitting-out projects can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the end of the reporting period, measured based on the proportion that contract costs incurred for work performed to date relative to the estimated total contract costs, or the surveys of work performed to date relative to the estimated total contract revenue, to the extent that the management of the Company would consider that be more representative of stage of completion. Variations in contract work and claims are included to the extent that the amount can be measured reliably and its receipt is considered probable. When the outcome of supply and installation of fixtures and furniture, decoration materials and fitting-out projects cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that it is probable will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. I-21

When contract costs incurred to date plus recognised profits less recognised losses exceed progress billings, the surplus is shown as amounts due from customers for contract work. For contracts where progress billings exceed contract costs incurred to date plus recognised profits less recognised losses, the surplus is shown as the amounts due to customers for contract work. Amounts received before the related work is performed are included in the consolidated statements of financial position, as a liability, as other payables. Amounts billed for work performed but not yet paid by the customer are included in the consolidated statements of financial position under trade and other receivables. Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. The Group as lessee Operating lease payments are recognised as an expense on a straight-line basis over the lease term. Foreign currencies In preparing the financial statements of each individual group entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recognised at the rates of exchanges prevailing on the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are recognised in profit or loss in the period in which they arise. For the purposes of presenting the Historical Financial Information, the assets and liabilities of the Group s foreign operations are translated into the presentation currency of the Group (i.e. HK$) using exchange rates prevailing at the end of each reporting period. Income and expenses items are translated at the average exchange rates for the period. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity under the heading of translation reserve (attributed to non-controlling interests as appropriate). I-22

Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. Short-term employee benefits Short-term employee benefits are recognised at the undiscounted amount of the benefits expected to be paid as and when employees rendered the services. All short-term employee benefits are recognised as an expense unless another HKFRS requires or permits the inclusion of the benefit in the cost of an asset. A liability is recognised for benefits accruing to employees (such as wages and salaries and annual leave) after deducting any amount already paid. Retirement benefits costs Payments to the Mandatory Provident Fund Scheme (the MPF Scheme ) and state-managed retirement benefit schemes are recognised as an expense when employees have rendered service entitling them to the contributions. Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before taxation as reported in the consolidated statements of profit or loss and other comprehensive income because of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of each reporting period. Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the Historical Financial Information and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary I-23

differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of each reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of each reporting period, to recover or settle the carrying amount of its assets and liabilities. Current and deferred tax are recognised in profit or loss. Plant and equipment Plant and equipment are stated at cost less subsequent accumulated depreciation and subsequent accumulated impairment losses, if any. Depreciation is recognised so as to write off the cost of assets less their residual values over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. I-24

An item of plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss. Impairment on assets other than financial assets At the end of each reporting period, the Group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the relevant asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset (or cash-generating unit) for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss. Inventories Inventories are stated at the lower of cost and net realisable value. Costs of inventories are determined on a first-in, first-out method. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale. I-25

Financial instruments Financial assets and financial liabilities are recognised when a group entity becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Financial assets The Group s financial assets are classified as loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Effective interest method The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Interest income is recognised on an effective interest basis for debt instruments. Loans and receivables Loans and receivables are non-derivative financial assets with fixed and determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables (including payment for a life insurance policy, trade and other receivables, amount(s) due from a director/related companies, pledged bank deposits and bank balances and cash) are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables, where the recognition of interest would be immaterial. I-26