09:34     LINEFAN TECH<08166> - Quarterly Results Announcement (2)            

                                                                              
    Saved as mentioned above, the accounting policies and                     
    basis of preparation adopted for the presentation of the                  
    quarterly financial statements are consistent with those                  
    adopted by the Group in its annual financial statements                   
    for the year ended 31 December 2004.                                      
                                                                              
    2. Turnover                                                               
                                                                              
    Turnover represents sales values of KM software systems                   
    and voice portal software less discounts and value added                  
    tax.                                                                      
                                                                              
                                                                              
    3. Income tax expenses                                                    
                                                                              
    The Group 's primary operations are carried out in the                    
    PRC. The general tax rate for corporation in the PRC is                   
    33%. However, in accordance with the applicable                           
    enterprise income tax law of the PRC, Beijing Linefan                     
    Technology Company Limited ("Beijing Linefan"), one of                    
    the Group 's operating subsidiaries in the PRC is entitled                
    to exemption for income tax for its first two profitable                  
    years of operations and a 50% relief on the income tax                    
    that would otherwise be charged for the succeeding three                  
    years. The income tax exemption period of Beijing Linefan                 
    expired in the year ended 31 December 2001. No provision                  
    for PRC income tax has been made for the period as Beijing                
    Linefan has incurred a loss. Moreover, Unlimited Business                 
    Opportunity Communication Technology Company Limited                      
    ("UBO"), another PRC operating subsidiary of the Group,                   
    was officially recognised as Hi-Tech Enterprise by the                    
    Beijing Municipal Government in November 2001, and                        
    therefore is eligible to receive preferential treatment                   
    in form of a concession tax rate of 15% . It is also eligible             
    for full exemption from income tax for its first three                    
    years of operations. No provision for PRC income tax has                  
    been made for the period as UBO incurred a loss.  For the                 
    other PRC subsidiaries of the Group, they have all                        
    incurred losses and no provision for PRC income tax are                   
    required for the period. These losses can be carried                      
    forward to offset against future profits for a period of                  
    five years.                                                               
                                                                              
    No provision for Hong Kong Profits Tax has been made in                   
    the financial statements since the Company 's Hong Kong                   
    subsidiary has made no assessable profit for the period.                  
                                                                              
    No deferred asset has been recognised due to the                          
    unpredictability of future profit streams.                                
                                                                              
    4. Loss per share                                                         
                                                                              
                                              For the three months            
                                                 ended 31 March               
                                             2005               2004          
                                          (Unaudited)       (Unaudited)       
                                            HK$'000            HK$'000        
                                                                              
    Loss for the period for the purpose of                                    
     the basic loss per share                   2,717           3,188         
                                                                              
    Weighted average number of ordinary shares for                            
     the purpose of diluted loss per share  1,570,664,600   1,069,951,780     
                                                                              
    The computation of diluted earnings per share for the                     
    period ended 31 March 2005 does not assume the exercise                   
    of the Company's outstanding options as the exercise price                
    of those options is higher than the average market price                  
    of shares.