Financial Performance - The company's revenue for the year ended December 31, 2024, was HKD 625,830,000, a decrease of approximately 15% compared to HKD 736,501,000 in 2023[18] - Gross profit for the year was HKD 127,437,000, an increase of about 6% from HKD 120,191,000 in the previous year[18] - The total assets of the company as of December 31, 2024, were HKD 1,066,311,000, down from HKD 1,253,923,000 in 2023[18] - The loss attributable to equity holders for the year was HKD 300,275,000, compared to HKD 394,571,000 in 2023[18] - The media and entertainment segment recorded revenue of approximately HKD 541,055,000, down from HKD 709,733,000 in 2023, with a loss of HKD 97,703,000[18] - The EBITDA for the media and entertainment segment was a loss of HKD 11,875,000, an improvement from a loss of HKD 183,598,000 in the previous year[19] Strategic Initiatives - The company is actively exploring potential business opportunities in artificial intelligence-related hardware trade to broaden its revenue sources[12] - The company has established a strategic framework focusing on high-growth opportunities in visual effects services, AI virtual human products, and AI-related hardware trade[13] - The company anticipates facing ongoing uncertainties in its operating markets through 2025 due to geopolitical tensions and inflationary pressures[12] Legal and Compliance Issues - The company faced a legal dispute regarding intellectual property rights, resulting in a court ruling that awarded the claimant $250,638 in compensatory damages and $345,098 in profit restitution related to one specific film[51] - The company is involved in ongoing litigation concerning claims of copyright infringement related to two films, with multiple opportunities to amend the claims[52] - The company has entered into a confidential settlement with a client, leading to the dismissal of claims related to six films, focusing litigation on one specific film[51] - The company is seeking insurance compensation for claims related to ongoing litigation, asserting that the insurance company initially acknowledged its obligation to defend but later denied coverage[53] - The company faced challenges in litigation, with courts dismissing most claims against its clients, reflecting a favorable outcome for the company in legal disputes[51] Technological Advancements - The company has a fully owned subsidiary in the U.S. that utilizes proprietary technology for facial image capture, indicating a focus on innovation and intellectual property development[48] - The launch of Masquerade3, a new tool that revolutionizes facial capture without markers, was announced in 2024[72] - Digital Kingdom's virtual human technology was featured at the Intel AI Summit 2024 in Jakarta, where the virtual assistant Vivi utilized Momentum Cloud to engage with attendees, becoming a highlight of the event[89] - Digital Kingdom's AI assistant was installed at the China Trust Commercial Bank's exhibition area, providing interactive financial services and personalized investment advice based on customer needs[97] Market Expansion and Collaborations - The company is collaborating with major partners like Skydance and Marvel Studios on multiple upcoming projects, indicating ongoing market expansion and strategic partnerships[42] - Digital Kingdom collaborated with ADATA to create a virtual ambassador, Mera, integrating AI technology for brand promotion[83] - The company has established a strong operational platform in China, providing visual effects production and post-production services for advertisements, TV series, and feature films[56] - Digital Kingdom's global visual effects business aims to improve overall profitability while offering competitive pricing to clients[63] Awards and Recognition - The visual effects division has been recognized with multiple awards, including a Gold Award at the Telly Awards for outstanding visual effects in the Amazon series "Fortress"[24] - The company received the "2024 Best Business Model Innovation Award" at the China Virtual Human Industry Awards[60] - The company’s leadership was recognized in the "25 Outstanding Leaders in the Media Industry" list for their commitment to technological innovation and integration of technology and art[148] Investment and Financial Management - As of December 31, 2024, the company holds intangible assets of approximately HKD 348,271,000, accounting for about 33% of total assets, with goodwill amounting to HKD 249,912,000 allocated to two cash-generating units in the media and entertainment segment[184] - The company confirmed profit-sharing from its stake in films like "Titanic" and "The Cornfield Children" under "Other Income and Gains" in its consolidated income statement[160] - The trading division recorded a revenue of approximately HKD 84,775,000 in 2023, compared to HKD 26,768,000 in 2022, indicating significant growth[173] Future Outlook - The company aims to explore further opportunities for collaboration with educational institutions by 2025[152] - The company is set to expand its operations in Hong Kong, establishing a top-tier international innovation R&D center to promote AI and virtual human technology applications across various industries[151] - The company is focusing on generative AI and its applications in the virtual human and visual effects business, driven by advancements in AI chip technology[169]

Financial Performance - Total revenue for the year ended December 31, 2024, was HKD 625.83 million, a decrease of 15.1% compared to HKD 736.50 million in 2023[2] - Gross profit increased to HKD 127.44 million, up 6.3% from HKD 120.19 million in the previous year[2] - The company reported a loss attributable to shareholders of HKD 300.28 million, compared to a loss of HKD 394.57 million in 2023, representing a 23.9% improvement[3] - Basic and diluted loss per share was HKD 3.77, an improvement from HKD 6.48 in the previous year[3] - Total comprehensive loss for the year was HKD 312.05 million, compared to HKD 468.43 million in 2023, indicating a 33.4% reduction in losses[4] - Total revenue from external customers decreased to HKD 625,830,000 in 2024 from HKD 736,501,000 in 2023, representing a decline of approximately 15%[24] - The company reported a net loss of HKD 300,275,000 in 2024, an improvement from a net loss of HKD 394,571,000 in 2023[37] Assets and Liabilities - Non-current assets decreased to HKD 561.33 million from HKD 533.20 million in 2023, reflecting a slight increase of 5.3%[5] - Current assets decreased significantly to HKD 504.98 million from HKD 720.73 million, a decline of 30%[5] - Total liabilities decreased to HKD 644.30 million from HKD 746.59 million, a reduction of 13.7%[5] - The company's equity attributable to shareholders decreased to HKD 502.92 million from HKD 671.47 million, a decline of 25.1%[5] - Cash and cash equivalents decreased to HKD 400.12 million from HKD 635.85 million, a decrease of 37%[5] - The total assets decreased to HKD 1,066,311,000 in 2024 from HKD 1,253,923,000 in 2023, a decline of approximately 15%[23] Revenue Breakdown - Revenue from visual effects and post-production services was HKD 518.24 million, down 25.7% from HKD 697.17 million in the previous year[15] - Revenue from virtual human services increased to HKD 22.81 million, up 81.6% from HKD 12.57 million in 2023[15] - Semiconductor memory chip sales generated HKD 79.56 million, a significant increase from HKD 26.77 million in the prior year[15] - E-sports product sales amounted to HKD 4.94 million, marking the first revenue recorded in this category[15] - Revenue from the media and entertainment segment totaled HKD 541.06 million, down from HKD 709.73 million in 2023[16] - Revenue from the trade segment was HKD 84.78 million, up from HKD 26.77 million in the previous year[16] Expenses and Costs - The cost of sales and services decreased to HKD 498,393,000 in 2024 from HKD 616,310,000 in 2023, representing a reduction of approximately 19.1%[32] - Total employee costs decreased to HKD 484,773,000 in 2024 from HKD 619,316,000 in 2023, a decline of about 21.7%[32] - Non-cash expenses included depreciation and amortization of HKD 47,620,000, down from HKD 62,954,000 in 2023[68] Impairments and Fair Value - A goodwill impairment loss of HKD 44,746,000 was recognized for the post-production cash-generating unit for the year ended December 31, 2023, due to a decrease in project numbers[44] - An impairment loss of HKD 104,423,000 was recognized for film rights due to lower-than-expected box office performance, with the asset's recoverable amount determined based on value-in-use calculations[46] - The company recorded a fair value gain of HKD 6,031,000 on financial assets measured at fair value through profit or loss in 2024, compared to a loss of HKD (8,318,000) in 2023[22] Investments and Acquisitions - The company acquired 248,431 shares of asknet Solutions AG for approximately HKD 34,586,000, representing about 19% of the issued share capital at the time of acquisition[51] - The group acquired 260,000 and 5,000 shares of Highlight Event and Entertainment AG (HLEE) for approximately EUR 7,064,000 (about HKD 66,405,000) and EUR 150,000 (about HKD 1,403,000) respectively, representing approximately 3.01% of HLEE's issued shares as of May 6, 2021[52] Future Outlook and Strategy - The company anticipates that the new accounting standards will have a significant impact on the presentation and disclosure of several items in the financial statements[11] - The company anticipates a cash flow growth rate of 1.5% to 2.5% beyond the budget period, consistent with industry long-term growth rates[42] - The group plans to enhance its virtual human business by developing new services and products, including AI capabilities and multi-language features[152] - The group aims to expand its project collaborations in Europe and India while strengthening its U.S. project lineup in the visual effects market[152] Operational Developments - Digital Domain's visual effects team received multiple award nominations for their work on the series "Fortress," including a Telly Award and a Visual Effects Society Award[70][71] - The company is currently producing visual effects for several high-profile projects, including the Marvel series "Echo," set to premiere on January 9, 2024, and the film "Spider-Woman," which will be released on February 14, 2024[72][77] - Digital Kingdom is collaborating with Skydance Games to develop and launch the action-adventure game "Marvel 1943: The Rise of Hydra"[80] Technology and Innovation - The virtual human team participated in multiple events, including the launch of the exclusive development tool Masquerade3, which eliminates the need for markers on performers' faces, revolutionizing the facial capture process[94] - Digital Kingdom showcased innovative AI virtual human solutions at the AI Expo in Taiwan, including an AI health consultant capable of interpreting InBody reports and providing health advice in Mandarin and Taiwanese[95] - The company achieved content security certification from Walt Disney Studios Motion Pictures and Marvel Studios, emphasizing its commitment to data security in the entertainment industry[89] Corporate Governance and Compliance - The audit committee has reviewed the group's full-year performance for the fiscal year ending December 31, 2024[159] - The preliminary performance announcement has been verified by the company's auditor, confirming consistency with the group's consolidated financial statements[160] - The annual report will be distributed to shareholders and is available on the company's and the stock exchange's websites[161]

DIGITAL F DOMAIN DIGITAL DOMAIN HOLDINGS LIMITED 數字王國集團有限公司 (旅百萬建駐用成立之有限公司) 2024 中期報告 數字王國集團有限公司（「本公司」）董事會（分別為「董事」及「董事會」）謹此公佈本公司及其附屬公司（「本集團」）截 至二零二四年六月三十日止六個月（「回顧期間」）之未經審核綜合中期業績，連同二零二三年同期之比較數字如下︰ 簡明綜合損益表－未經審核 截至二零二四年六月三十日止六個月 | --- | --- | --- | --- | |------------------------------------------------------------------------------|-------|----------------------------------------------|-------------------------| | | 附註 | 截至六月三十日止六個月 \n二零二四年 千港元 | 二零二三年 千港元 | | | | | | | 收入 銷售及提供服務之成本 | 4 | 264,888 (226,377) | ...

Financial Performance - For the six months ended June 30, 2024, the company reported revenue of HKD 264,888 thousand, a decrease of 36% compared to HKD 414,577 thousand in the same period of 2023[1]. - The gross profit for the same period was HKD 38,511 thousand, down 46% from HKD 71,831 thousand year-on-year[1]. - The company recorded a loss before tax of HKD 113,299 thousand, an improvement from a loss of HKD 268,574 thousand in the prior year[1]. - The net loss attributable to the company's shareholders was HKD 109,428 thousand, compared to HKD 197,557 thousand in the previous year, reflecting a 44.5% reduction in losses[1]. - The total comprehensive loss for the period was HKD 113,184 thousand, a decrease from HKD 266,559 thousand in the same period last year[2]. - The company reported a basic loss attributable to shareholders of HKD 109,428,000 for the six months ended June 30, 2024, compared to a loss of HKD 197,557,000 for the same period in 2023, reflecting a 44.5% improvement[20]. - The media and entertainment segment recorded revenue of approximately HKD 208,279,000, down from HKD 414,577,000 in the previous year, with a loss of about HKD 79,879,000[43]. Assets and Liabilities - Non-current assets amounted to HKD 599,005 thousand, an increase from HKD 533,196 thousand as of December 31, 2023[3]. - Current liabilities totaled HKD 464,324 thousand, compared to HKD 397,934 thousand at the end of 2023, indicating a rise in financial obligations[4]. - The total assets of the group as of June 30, 2024, amounted to HKD 1,234,580, a slight decrease from HKD 1,253,923 as of December 31, 2023[14]. - The total liabilities of the group as of June 30, 2024, were HKD 715,406, down from HKD 746,590 at the end of 2023, reflecting a reduction of approximately 4.2%[15]. - The group’s total liabilities to assets ratio improved from 59.7% at the end of 2023 to approximately 57.9% as of June 30, 2024[15][14]. Cash Flow and Financing - The company reported a net cash outflow from operating activities of HKD 143,577 thousand for the six months ended June 30, 2024, compared to HKD 29,349 thousand in the same period of 2023[5]. - The company generated cash flow from financing activities of HKD 128,467,000, down from HKD 408,411,000 in the previous year, indicating a significant reduction in financing activities[6]. - The net cash used in investing activities was HKD 161,555,000, compared to HKD 47,991,000 in the prior year, reflecting increased investment expenditures[6]. - The company’s cash and cash equivalents were HKD 528,678 thousand, down from HKD 635,854 thousand at the end of 2023, reflecting a decrease in liquidity[3]. - The company has utilized bank financing of $19,000,000 (approximately HKD 148,356,000) from two U.S. banks, with $6,000,000 (approximately HKD 46,849,000) successfully refinanced for three years until 2026[80]. Investments and Strategic Initiatives - The company acquired 10,000,000 shares of Youngtimers AG for USD 7,000,000 (approximately HKD 54,571,000) in June 2024, indicating a strategic investment in the media and e-commerce sector[25]. - The company sold its shares in asknet for USD 3,000,000 (approximately HKD 23,453,000) in June 2024, reflecting a strategic divestment from this investment[25]. - The company has identified suitable business partners for DRAM trading, which has resumed and generated revenue in a challenging business environment[72]. - The company is actively seeking financing and collaboration opportunities in the virtual human technology sector while recruiting suitable talent globally[59]. - The company is exploring applications of AI virtual humans in gaming hardware with XPG, a subsidiary of ADATA Technology[87]. Operational Developments - The company has established a strong operational platform in China through Digital Kingdom China, focusing on visual effects and post-production services for advertising and film projects[56]. - Digital Kingdom China has delivered visual effects and color grading projects for titles such as "The Year of the Flower" and "Longing for Love Season 2" in the current year[56]. - The company continues to provide post-production and production services for top brands, including 3i, AITO, BYD, and L'Oréal, among others[57]. - Digital Kingdom received the "2024 Best Business Model Innovation Award" at the China Virtual Human Industry Awards hosted by iiMedia Consulting in April 2024[57]. - The company has completed visual effects for various upcoming projects, including Marvel's "Echo," which premiered in January 2024[51]. Legal and Compliance Issues - The U.S. subsidiary has faced litigation regarding disputed intellectual property, with a jury trial set to begin on December 4, 2023, concerning claims for $250,638 in compensatory damages and $345,098 in profit restitution[54]. - The U.S. subsidiary has adopted alternative technologies following a court ruling that awarded ownership of the disputed intellectual property to the claimant[54]. - The company has agreed to indemnify clients for claims arising from the use of technology that was not properly licensed, leading to demands for acknowledgment of liability[55]. - The company has maintained compliance with corporate governance codes, with the CEO also serving as the acting chairman[89]. Market Conditions and Future Outlook - The global economic environment remains unstable due to high interest rates and geopolitical risks, which may impact operational costs and consumer demand[86]. - The Hollywood industry continues to face challenges from strikes led by unions in 2023, causing delays in production for clients in 2023 and 2024[86]. - The group is adopting prudent business strategies, including cost control and adjustments to business direction and product mix, while seeking new opportunities[86]. - The company plans to enhance its virtual human business by expanding its product and service offerings, including AI capabilities and multilingual features[87].

Financial Performance - Total revenue for the year ended December 31, 2023, was HKD 736,501,000, a decrease of 23.2% compared to HKD 958,651,000 in 2022[3] - Gross profit for the year was HKD 120,191,000, down 44.6% from HKD 216,862,000 in the previous year[3] - The company reported a net loss of HKD 475,776,000 for 2023, compared to a net loss of HKD 215,265,000 in 2022, representing an increase in losses of 120.7%[4] - Basic and diluted loss per share for the year was HKD 6.48, compared to HKD 4.24 in 2022[4] - Total comprehensive loss for the year was HKD 468,433,000, compared to HKD 217,816,000 in the previous year[6] - The company reported a pre-tax loss of HKD 394,571,000, compared to a loss of HKD 206,320,000 in the previous year, indicating a worsening of approximately 91.1%[50] - The loss attributable to equity holders of the company for the year was HKD 394,571,000, compared to a loss of HKD 206,320,000 in 2022[95] Revenue Breakdown - Revenue from visual effects production and post-production services was HKD 697,167,000 in 2023, down 25.3% from HKD 933,714,000 in 2022[23] - Revenue from virtual human services decreased to HKD 12,566,000 in 2023 from HKD 23,935,000 in 2022, representing a decline of 47.5%[23] - Revenue from the United States market was HKD 249,928,000 in 2023, down 21.0% from HKD 316,265,000 in 2022[25] - Revenue from Canada decreased to HKD 391,306,000 in 2023 from HKD 546,929,000 in 2022, a decline of 28.5%[25] - Media Entertainment segment revenue decreased to HKD 709,733,000 in 2023 from HKD 958,651,000 in 2022, a decline of approximately 26%[31] Assets and Liabilities - Non-current assets decreased to HKD 533,196,000 from HKD 763,285,000 in 2022, a decline of 30.1%[8] - Current assets increased significantly to HKD 720,727,000 from HKD 266,418,000, an increase of 170.5%[8] - The company's total liabilities decreased slightly to HKD 746,590,000 from HKD 736,684,000 in 2022[8] - The company's equity attributable to owners increased to HKD 671,473,000 from HKD 375,757,000, an increase of 78.7%[8] - The group's total assets increased to HKD 1,253,923,000 in 2023 from HKD 1,029,703,000 in 2022[35] Impairment and Fair Value - The company reported a fair value loss on financial assets measured at fair value through profit or loss of HKD 8,318,000, compared to a loss of HKD 24,430,000 in 2022[3] - The group reported a goodwill impairment loss of HKD (44,746,000) in 2023, with no such loss reported in 2022[31] - The company recognized an impairment loss of HKD 104,423,000 related to film rights due to lower-than-expected box office performance, which is the primary source of net cash inflow from films[70] Employee and Operational Costs - Total employee costs decreased to HKD 619,316,000 from HKD 787,257,000, a reduction of approximately 21.4%[45] - The cost of sales and services decreased to HKD 616,310,000 from HKD 741,789,000, a reduction of approximately 16.9%[45] Strategic Initiatives and Future Outlook - The company plans to apply new accounting standards and amendments upon their effective date, with no significant impact expected on liability classification[17] - The company is actively seeking strategic partnerships and financing opportunities in the virtual human technology sector[124] - The company is investing significant financial and human resources into ongoing research and development of new technologies, including the establishment of an AI-generated content (AIGC) research lab[193] - The company plans to continue evaluating the cost structure, responsibilities, and operational performance of studios in North America and Asia to enhance efficiency and reduce production costs[192] Legal and Compliance Matters - A jury awarded $250,638 in compensatory damages to the claimant in a legal dispute regarding disputed intellectual property[113] - The court dismissed a new lawsuit against the company regarding copyright infringement, ruling that the claims did not constitute a valid cause of action[115] - The company has complied with the corporate governance code, except for certain items during the fiscal year[197] Market Conditions and Challenges - The group anticipates continued market volatility in 2024 due to geopolitical tensions and economic uncertainties[190] - The Hollywood industry faces challenges due to a strike that began on May 2, 2023, causing production delays for clients[190]

n DIGITAL DOMAIN | --- | --- | --- | --- | |------------------------------------------------|-------|----------------------------------------------|-------------------------| | | 附註 | 截至六月三十日止六個月 \n二零二三年 千港元 | 二零二二年 千港元 | | 收入 銷售及提供服務之成本 | 4 | 414,577 (342,746) | 482,726 (412,125) | | | | | | | 毛利 | | 71,831 | 70,601 | | 其他收入及收益 | | 28,653 | 4,882 | | 銷售及分銷開支 | | (1,819) | (1,794) | | 行政開支及其他經營開支淨額 | | (339,464) | (175,782) | | 財務費用 | 5 | (18,206) | (12,196) | | 透過損益按公平價值計量之金融資產之公平價值虧損 | 12 | (12,068) | (7, ...

Financial Performance - For the six months ended June 30, 2023, the company's revenue was HKD 414,577,000, a decrease of approximately 14.1% compared to HKD 482,726,000 for the same period in 2022[38]. - The gross profit for the same period was HKD 71,831,000, an increase of approximately 1.7% from HKD 70,601,000 in 2022[38]. - The loss attributable to equity holders for the period was HKD 197,557,000, compared to a loss of HKD 118,458,000 in 2022[38]. - The media and entertainment segment recorded revenue of HKD 414,577,000 and a loss of approximately HKD 195,872,000 for the period, compared to a loss of HKD 78,805,000 in 2022[39]. - The segment's EBITDA for the six months ended June 30, 2023, was a loss of HKD 6,382,000, compared to a profit of HKD 21,480,000 in 2022[39]. - The company reported a loss before tax of HKD 268,574,000, which is a 110.5% increase from a loss of HKD 127,264,000 in the same period last year[153]. - Total comprehensive loss for the period was HKD 266,559,000, compared to HKD 144,059,000 in the prior year, reflecting a 85.5% increase in losses[154]. - The company reported a basic and diluted loss per share of HKD 4.032, compared to HKD 2.667 in the previous year[153]. Assets and Liabilities - The total assets as of June 30, 2023, amounted to HKD 1,261,182,000, compared to HKD 1,029,703,000 as of December 31, 2022[38]. - The company's total liabilities and equity structure remains stable, with no significant transfers between fair value levels reported during the period[16]. - The total amount of trade payables, other payables, and accrued liabilities as of June 30, 2023, was HKD 197,817,000, compared to HKD 193,558,000 as of December 31, 2022[29]. - The company's non-current assets decreased to HKD 649,637,000 from HKD 763,285,000 year-on-year[156]. - Current liabilities increased to HKD 413,671,000, compared to HKD 424,880,000 in the previous year[156]. - The net asset value increased to HKD 472,454,000 from HKD 293,019,000 year-on-year, indicating a significant improvement in financial position[156]. - The group reported a total liability of HKD 788,728, an increase from HKD 736,684, indicating rising financial obligations[180]. Cash Flow and Financing - As of June 30, 2023, the company's cash and cash equivalents amounted to HKD 366,883,000, a significant increase from HKD 36,480,000 as of December 31, 2022[19]. - The company's total cash and bank balances as of June 30, 2023, are approximately HKD 484,493,000, with bank borrowings amounting to approximately HKD 166,206,000[135]. - The net cash generated from financing activities was HKD 408,411,000, a significant improvement from HKD (27,930,000) in the same period last year[160]. - Cash used in operating activities was HKD 29,349,000, slightly improved from HKD 31,148,000 in the previous year[158]. - The company has secured bank financing of $16,000,000 (approximately HKD 125,386,000) from two U.S. banks, with $15,822,000 (approximately HKD 123,990,000) already utilized[130]. Investments and Loans - The company provided a loan of USD 3,000,000 (equivalent to HKD 23,510,000) to a joint venture, with an interest rate ranging from 8% to 12%[2]. - The company has approximately HKD 196,371,000 in other loans, including a $3,500,000 (approximately HKD 27,065,000) loan that is unsecured and interest-free[134]. - The company has received a loan of CAD 60,000 (approximately HKD 355,000) under the COVID-19 emergency loan program, which is unsecured and due for repayment by December 31, 2025[130]. Operational Highlights - Digital Domain 3.0, Inc. completed visual effects for multiple films, including "Ant-Man and The Wasp: Quantumania," which was released in February 2023[42]. - The visual effects team also worked on "My Vampire Friend," released in April 2023, and "Extraction 2," released in June 2023[42]. - The company is involved in multiple projects, including upcoming films from Legendary Pictures and Sony Pictures[52]. - The company has faced legal challenges regarding disputed intellectual property but has adopted alternative technologies[61]. - Ongoing litigation may impact the company's operations, with hearings scheduled for December 4, 2023[64]. Market and Strategic Outlook - The company anticipates continued volatility in global markets due to inflation and recession concerns, with major economies like the US, EU, and China showing signs of slowdown[141]. - The Hollywood industry is facing significant challenges due to strikes, with the Writers Guild of America (WGA) strike starting on May 2, 2023, leading to production delays for several clients[142]. - The company is adopting a cautious business strategy, focusing on cost control and adjusting its product mix while seeking new opportunities in visual effects and virtual human businesses[144]. - Significant investment in research and development is ongoing, particularly in artificial intelligence-generated content (AIGC) to improve visual effects and post-production capabilities[145]. - The company expresses confidence in creating long-term sustainable value for all stakeholders despite external uncertainties[145].

Financial Performance - Revenue for the six months ended June 30, 2022, was HKD 482,726,000, an increase of 16.4% compared to HKD 414,663,000 for the same period in 2021[1] - Gross profit for the same period was HKD 70,601,000, representing a gross margin of 14.6%, up from HKD 63,856,000 in 2021[1] - The net loss attributable to the company for the period was HKD 118,458,000, compared to a loss of HKD 103,796,000 in the previous year, indicating a 14.0% increase in losses[1] - Total comprehensive loss for the period was HKD 144,059,000, compared to HKD 125,754,000 in the prior year, reflecting a 14.5% increase[2] - The basic and diluted loss per share for the period was HKD 2.736, compared to HKD 2.563 in the previous year, reflecting a 6.8% increase in loss per share[1] - The company reported a pre-tax loss of HKD 127,264,000 for the six months ended June 30, 2022, compared to a loss of HKD 122,066,000 in the same period of 2021[6] - The total comprehensive income for the period was a loss of HKD 125,754,000, compared to a loss of HKD 108,377,000 in the previous year[5] - The company reported a loss attributable to shareholders of HKD 118,458,000 for the six months ended June 30, 2022, compared to a loss of HKD 103,796,000 in the same period of 2021, representing an increase in loss of approximately 14.3%[38] Assets and Liabilities - Non-current assets as of June 30, 2022, totaled HKD 792,650,000, slightly up from HKD 787,076,000 at the end of 2021[3] - Current liabilities increased to HKD 404,988,000 from HKD 341,369,000, indicating a rise of 18.6%[3] - The company's total equity decreased to HKD 366,775,000 from HKD 510,786,000, a decline of 28.2%[3] - Total assets as of June 30, 2022, amounted to HKD 1,123,694,000, down from HKD 1,200,099,000 as of December 31, 2021[59] - The company’s trade receivables as of June 30, 2022, were HKD 60,346,000, down from HKD 65,000,000[31] - Contract assets increased to HKD 29,290,000 from HKD 24,558,000, indicating a growth of 19.4%[31] - Contract liabilities rose to HKD 103,967,000 from HKD 86,707,000, reflecting an increase of 19.8%[31] Cash Flow - The net cash used in operating activities was HKD 31,148,000, slightly improved from HKD 34,481,000 in the previous year[7] - The company recorded a net cash outflow from investing activities of HKD 25,887,000, compared to HKD 172,200,000 in the prior year[7] - Cash and cash equivalents decreased by HKD 84,965,000, while cash at the beginning of the period was HKD 130,455,000, resulting in a closing balance of HKD 42,560,000[7] - The company’s total cash and bank balance was approximately HKD 160,701,000[120] Segment Performance - The total revenue from customer contracts in the media entertainment segment for the six months ended June 30, 2022, was HKD 482,726,000, an increase of 16.4% from HKD 414,663,000 in 2021[25] - Revenue from visual effects and post-production services was HKD 464,197,000, up from HKD 379,971,000, reflecting a growth of 22.2%[25] - Revenue from virtual human and virtual reality services, along with 360-degree digital capture technology, decreased to HKD 17,527,000 from HKD 31,980,000, a decline of 45.1%[25] - The company reported a loss of HKD 72,747,000 for the media entertainment segment, an improvement from a loss of HKD 81,177,000 in the previous year[26] - Total assets for the media entertainment segment increased to HKD 931,808,000 from HKD 905,319,000, representing a growth of 2.9%[26] - Total liabilities for the media entertainment segment rose to HKD 650,411,000 from HKD 581,029,000, an increase of 11.9%[26] Investments and Acquisitions - The company acquired 248,431 shares of asknet Solutions AG for approximately HKD 34,586,000, representing about 19% of the total issued shares at the time of acquisition[42] - The company also purchased shares of Highlight Event and Entertainment AG for a total of approximately HKD 67,808,000, which accounted for about 3.01% of the total issued shares post-acquisition[43] - The fair value of listed equity securities held by the company decreased from HKD 70,151,000 as of December 31, 2021, to HKD 57,532,000 as of June 30, 2022, indicating a loss of HKD 12,619,000[44] Corporate Governance and Management - The company has complied with the corporate governance code except for the roles of chairman and CEO not being separated[146] - Mr. Jiang Yingchun resigned as a non-executive director effective March 31, 2022, and Mr. Li Weiqiang was appointed as a non-executive director on the same date[148] - The audit committee has reviewed the interim report for the review period[148] - The company is seeking suitable candidates to fill the vacancy of the chairman position[146] Strategic Focus and Future Outlook - The company is strategically focusing resources on visual effects and virtual human core businesses, exploring new projects in competitive markets[126] - The company plans to continue developing new technologies to enhance interaction between virtual humans and various platforms, including customer service and education[126] - The company acknowledges the ongoing economic uncertainties and is adopting a conservative business strategy, including cost control measures[124] - The company continues to seek strategic partnerships and funding opportunities in the virtual human technology sector, expanding its talent pool globally[88]

Financial Performance and Challenges - Digital Domain's revenue in 2021 was significantly impacted by the COVID-19 pandemic, particularly due to the Delta and Omicron variants, which led to global economic disruptions and lockdowns[13] - Revenue from continuing operations increased by 44% to HKD 864,214,000 in 2021 compared to HKD 601,301,000 in 2020[20] - Gross profit from continuing operations rose by 92% to HKD 123,965,000 in 2021 from HKD 64,730,000 in 2020[20] - Total assets decreased to HKD 1,200,099,000 as of December 31, 2021, from HKD 1,497,250,000 in 2020[20] - Loss attributable to shareholders from continuing operations was HKD 722,004,000 in 2021, compared to HKD 584,205,000 in 2020[20] - Media and entertainment division recorded a loss of HKD 398,994,000 in 2021, including impairment losses on goodwill and intangible assets of HKD 232,472,000[22] - EBITDA for the media and entertainment division was a loss of HKD 304,737,000 in 2021, compared to a loss of HKD 432,222,000 in 2020[23] - Impairment losses on goodwill and intangible assets for the media and entertainment division were HKD 232,472,000 in 2021, down from HKD 305,119,000 in 2020[22] - The company anticipates continued challenges in the business environment for 2022, with unpredictable changes expected in the coming months[15] - The company impaired investments in 3Glasses Group and Digital Domain Space by HKD 163.6 million and HKD 37 million respectively, due to poor performance and strategic refocusing[168] - The group's intangible assets amounted to HKD 533.994 million, representing approximately 44% of total assets as of December 31, 2021[172] - The goodwill allocated to the visual effects production cash-generating unit was HKD 208.691 million, with a recoverable amount of HKD 107.731 million[175] - The average growth rate assumption for the visual effects production unit over a five-year budget period is 12.1%, down from 19.3% in the previous year[175] - The pre-tax discount rate for the visual effects production unit increased to 18.6% from 17.6% in the previous year[175] - The 360-degree cash-generating unit's growth prospects are heavily dependent on the recovery of demand in tourism, sports, concerts, and other mass events, which remain severely impacted by pandemic-related restrictions[174] - The company adopted a conservative approach in forecasting cash inflows for cash-generating units, using higher success discounts and reducing projections for credible and possible projects compared to the previous year[174] - The goodwill allocated to the post-production cash-generating unit is approximately HKD 85,186,000 as of December 31, 2021, with a provision of HKD 48,874,000 based on its recoverable amount[177] - The post-production cash-generating unit's key assumptions include a 16.4% average growth rate over a five-year budget period and a pre-tax discount rate of 17.4%[177] - The 360-degree cash-generating unit recorded a total impairment loss of HKD 232,472,000 in 2021, including HKD 16,170,000 for goodwill and HKD 216,302,000 for intangible assets[178] - The 360-degree cash-generating unit's key assumptions include a 4.0% average growth rate over a five-year budget period and a pre-tax discount rate of 17.0%[178] Global Expansion and Strategic Transactions - Digital Domain expanded its global footprint in 2021 with several transactions aimed at entering the European market, marking a significant milestone in its global business strategy[15] - The company formed Digital Domain Capital Partners S.à r.l. (DDCP) in Luxembourg, with an investment of HKD 187,800,000 (approximately EUR 20,000,000) for a 60% stake, while DKF invested HKD 125,200,000 (approximately EUR 13,333,000) for a 40% stake[120] - The company acquired an additional 40% stake in DDCP for EUR 13,333,000 (approximately HKD 123,648,000), making DDCP a wholly-owned subsidiary[121] - DDCP invested EUR 3,709,000 (approximately HKD 34,586,000) to acquire 19% of asknet Solutions AG's ordinary shares, which later diluted to 7.6% due to a capital increase[123] - DDCP invested EUR 7,214,000 (approximately HKD 67,808,000) to acquire 3.01% of Highlight Event and Entertainment AG's bearer shares, which later diluted to 2.8% due to a capital increase[127] - The company's virtual human technology, including the virtual Teresa Teng, is being developed for applications in entertainment, education, and lifelong learning, with potential expansion into the European market[126][129] Virtual Human and Visual Effects Innovations - Digital Domain's visual effects and virtual human technologies have been widely recognized, with its art team winning over 100 international awards, including Oscars and BAFTAs[7] - The company's visual effects team won multiple awards, including a Telly Award for the "A Storm is Coming" trailer for "Ghost of Tsushima"[29] - The virtual human team received a Technical Achievement Award at the 11th Annual Lumiere Awards[34] - The visual effects team delivered 350 shots for the Marvel Studios series "WandaVision," which premiered in January 2021[48] - The team produced nearly 500 shots for two episodes of the series "Loki," which aired in June 2021[48] - The company completed visual effects for the final season of the Netflix series "Lost in Space" Season 3[48] - The team is working on the upcoming Marvel Studios series "Ms. Marvel," set to release in 2022[48] - The company provided visual effects for the Marvel Studios film "Spider-Man: No Way Home," which premiered in December 2021[44] - The team is currently working on the Marvel Studios film "Ant-Man and the Wasp: Quantumania," set to release in 2023[44] - The company delivered visual effects for the Warner Bros. film "The Conjuring: The Devil Made Me Do It"[61] - The team completed 121 final touches for Activision Blizzard's "Call of Duty" series[61] - The company produced visual effects for NBCUniversal's "La Brea" promotional trailer, including one fully CGI shot and three live-action/CGI hybrid shots[61] - The team created an 8-minute "Apex Legends" short film for EA/Respawn, blending design, CGI, 2.5D graphics, and traditional animation[62] - Digital Domain collaborated with 72andSunny and the NFL to recreate Vince Lombardi's virtual human for the Super Bowl LV ad "AS ONE," utilizing their patented Charlatan software and 2D Flame compositing[63] - Digital Domain provided motion capture and animation direction for Arc Games' "Perfect World" trailer and worked with Facebook/Oculus on mixed reality footage for Beatsaber[64] - The company produced 30-second, 15-second, and 6-second ads for Apple's NBA 2K22 and created localized versions of Barkley/AMC's ad[64] - Digital Domain began production on eToro's 2022 Super Bowl ad, simulating crowds flying through the air[64] - Digital Domain China provided visual effects and post-production services for films and series, including "WandaVision," "Hi, Mom" (Dolby Vision), and "Loki" Season 1[71] - The company worked with top brands such as Adidas, BMW, Coca-Cola, Huawei, Mercedes-Benz, and Tencent Games for post-production and production services[77] - Digital Domain China contributed to visual effects for upcoming projects like "Doctor Strange in the Multiverse of Madness" and "Black Adam"[76] - Digital Domain China expanded its services to include virtual reality/360-degree video production and creative services for ads and films[71] - The virtual human business in North America and Greater China has participated in multiple events, including presentations and demonstrations at major industry conferences[91] - The virtual human team has made progress in multiple projects, including collaborations with advertising/gaming and new media teams, and has developed new technologies like Charlatan and Masquerade 2.0[94] - Digital Kingdom is collaborating with a major theme park client to create real-time virtual humans based on a long-standing movie series, with attractions set to open in 2024[94] - The virtual human team has tested Charlatan software for mask replacement during the COVID-19 pandemic and has used it to enhance resolution for Time Magazine and other projects[94] - Digital Kingdom's visual arts and technological innovations have been recognized with recent awards, including a silver award at DAwards2021 and the "Pioneer in Visual Effects" award from New Film Field[87] - The reality show "Future New World" featuring Digital Kingdom's Beijing studio has garnered over 21.532 million views on Tencent Video[86] - Digital Kingdom collaborated with ITEC Entertainment Corporation to create a Pepper's Ghost-like experience at the Billy Graham Library in North Carolina, USA, using virtual human technology including the Charlatan technique[96] - Digital Kingdom produced real-time video content for Studio Wildcard's game "Ark 2," including creating photo-realistic faces for Vin Diesel's character "Santiago" and another female lead[96] - Since 2018, Digital Kingdom has developed multiple proprietary virtual human characters/IPs, including Sandra, EVE, Irene, Sabrina, and M.E., and invested in R&D to enhance interaction between virtual humans and audiences[96] - In February 2021, Digital Kingdom designed a virtual host for Cheng Uei Precision Industry Co.'s online employee recognition event, engaging employees across Greater China, Myanmar, India, and the US[103] - In March 2021, BMW Taiwan featured Digital Kingdom's CEO and virtual human "Elbor" in an ad for "THE NEW 5," utilizing real-time motion capture and rendering technology[103] - In April 2021, virtual human M.E. starred in a 360-degree video game for JJ Paradise's Drifter 360˚ online game[104] - Starting September 2021, Taishin Bank introduced virtual tellers "Miss Rose" and "Mr. Sun" using next-gen Virtual Teller Machines (VTMs) for zero-contact services[105] - Digital Kingdom filed a provisional patent application in the US for a "Method for Tracking Facial Expressions and Neural Network Training Method," enhancing its competitive edge in virtual human technology[105] - In 2021, Digital Kingdom collaborated with an undisclosed AAA game company to produce a high-quality game with over 30 hours of facial and motion capture using its Masquerade 2.0 technology, set for release in 2022[108] - Digital Kingdom partnered with Lucas Foster to produce "Children of the Corn," a film adaptation of Stephen King's novel, shot in Australia during the pandemic and set for global release in 2022[117] - Virtual Teresa Teng's holographic concert in Chongqing's Hongyadong Scenic Area continues to attract audiences with immersive experiences[132] - Virtual Teresa Teng performed at the opening of "AMBI SPACE ONE" using 5G technology for remote interaction with the host and audience[137] - Virtual Teresa Teng collaborated with singer Zhou Shen at Jiangsu TV's New Year's Eve concert, performing 3 songs and creating a significant online buzz[141] - Beijing Xugu, a joint venture of the company, focuses on virtual human projects in mainland China, leveraging digital human technology for live streaming and commercial expansion[143] - Virtual IPs Nonoka and Class Monitor Xiao Ai collaborated with Wanglaoji for a live-streamed "Super Lucky New Year Goods" event, driving significant traffic and sales[145] - Virtual IP Class Monitor Xiao Ai served as the first virtual host at the 8th China Youth Network Spring Festival Gala, achieving real-time interaction with live hosts and guests[149] - Class Monitor Xiao Ai released 6 customized red envelope covers during the Spring Festival, with 1,180 purchased and distributed, achieving over 700,000 exposures and 260,000 red packet openings[150] - The company partnered with Alibaba's DAMO Academy to develop a next-generation intelligent virtual host service, enabling 24-hour live-streamed e-commerce, becoming the first virtual human technology team in mainland China to integrate with DAMO's intelligent platform[150] - Digital Kingdom collaborated with Alibaba DAMO Academy in June 2021 on the "Sign Language Motion Capture Production Project," capturing hundreds of sign language motions and aiming to expand to thousands, with the goal of creating a "visual dictionary" using virtual human motion capture technology[154] - The virtual character "Class Monitor Xiao Ai" appeared at 2021 ChinaJoy in July 2021, showcasing its charm and technical features to thousands of players both on-site and online[154] - "Class Monitor Xiao Ai" partnered with CCTV 10's educational program "Traveling with Books" in August 2021, serving as a "virtual team leader" to guide students through cultural and historical sites[154] - "Class Monitor Xiao Ai" participated in the sixth season of CCTV's classic poetry program "Chinese Poetry Conference" in April 2021, serving as the first "virtual question presenter" and achieving a cumulative exposure of over 15 million[154] - "Class Monitor Xiao Ai" released 392 videos on WeChat Video Channel by December 31, 2021, with a total exposure of 21.96 million, ranking 14th on the New Rank's maternal and child blogger list[154] - Beijing Xugu won the "2021 Belt and Road Cultural and Creative Competition Most Potential Award" in September 2021 for its virtual idol "Class Monitor Xiao Ai" in the education field[157] - "Class Monitor Xiao Ai" performed as the "Special National Style Star Promoter" at the "Yu Meng" 2022 China International Fashion Show in September 2021, showcasing traditional Chinese culture[157] Investments and Financial Transactions - The company invested $25,000,000 (approximately HKD 196,213,000) in Mango International Group Limited in 2018, with the investment classified as "financial assets at fair value through other comprehensive income." By December 31, 2021, the fair value of this investment was zero[118] - The company issued 6,814,760,000 new shares at HKD 0.05 per share, raising HKD 340,738,000 in gross proceeds, representing approximately 20% of the issued share capital before the subscription[180] - The company issued 2,400,000,000 new shares at HKD 0.065 per share, raising HKD 156,000,000 in gross proceeds, representing approximately 5.87% of the issued share capital before the subscription[184] - The company implemented a share consolidation, merging every 10 existing shares into 1 consolidated share, and adjusted the par value from HKD 0.01 to HKD 0.10 per share[185] - The company's total issued shares as of December 31, 2021, were 4,329,027,625 shares with a par value of HKD 0.01 per share[186] - The company granted 980,060,000 share options at an exercise price of HKD 0.098 per share, with 4,657,000 options exercised and 14,076,000 options canceled or lapsed since the grant date[187] - The company granted a total of 78,000,000 share options on May 6, 2015, with an exercise price of HK$1.32 per share[188] - On January 29, 2016, the company granted 379,500,000 share options with an exercise price of HK$0.413 per share[190] - On June 22, 2016, the company granted 100,000,000 share options with an exercise price of HK$0.495 per share[190] - On July 29, 2016, the company granted 50,000,000 share options with an exercise price of HK$0.566 per share[191] - On February 13, 2017, the company granted 300,000,000 share options with an exercise price of HK$0.469 per share[191] - On April 24, 2019, the company granted 130,000,000 share options with an exercise price of HK$0.130 per share[192] - On May 21, 2020, the company granted 478,000,000 share options with an exercise price of HK$0.046 per share, of which 170,000 were exercised and 2,000,000 were canceled or lapsed[192] - The company raised approximately HK$340,538,000 through the issuance of 6,814,760,000 shares, with net proceeds allocated to forming joint ventures (HK$187,800,000), media and entertainment division (HK$103,000,000), and general working capital (HK$49,738,000)[197] - The company raised approximately HK$155,500,000 through the issuance of 2,400,000,000 shares, with net proceeds allocated to restructuring European operations (HK$124,800,000) and general working capital (HK$30,700,000)[197] - As of December 31, 2021, the company had bank financing of US$15,000,000 (approximately HK$116,948,000) from two US banks, with US$14,858,000 (approximately HK$115,841,000) utilized, secured by the company's time deposits[198] Legal and Intellectual Property Issues - The company faced legal disputes over intellectual property rights related to facial image technology, with ongoing litigation and mediation efforts[68][69][70] - The company's U.S. subsidiary adopted alternative technologies following a court ruling on disputed intellectual property rights[68] Virtual Reality and Metaverse Initiatives - 3Glasses Group's self-developed virtual reality device, the 3Glasses X1S smart glasses, won the prestigious "German iF Design Award" in April 2021, becoming the only Chinese VR product to receive this award[165] - 3Glasses Group's 3Link technology successfully connected the X1S to 15 models of 5G phones, enabling multi-device and multi-system connectivity[165] - 3Glasses accumulated over 700,000 fans on Kuaishou, with 10 popular short videos exceeding 10 million views each and a total cumulative view count surpassing 450 million[166] - 3

D BIGITAL DIGITAL DOMAIN HOLDINGS LIMITED 數 字 王 國 集 團 有 限 公 司 （ 於百慕達註冊成立之有限公司 ) 團 咸與創意啟迪 中期報告 2 0 2 1 數字王國集團有限公司（「本公司」）董事會（分別為「董事」及「董事會」）謹此公佈本公司及其附屬公司（「本集團」）截 至二零二一年六月三十日止六個月（「回顧期間」）之未經審核綜合中期業績，連同二零二零年同期之比較數字如下︰ 簡明綜合損益表－未經審核 截至二零二一年六月三十日止六個月 | --- | --- | --- | --- | |------------------------------------------------|-------|------------------------------------------------|----------------------------------| | | 附註 | 截至六月三十日止六個月 \n二零二一年 \n千港元 | 二零二零年 \n千港元 \n（經重列） | | | | | | | 持續經營業務 | | | | | 收入 | 4 | 414, ...