China Information Technology Development Limited — Capital/Financing Update 2016

Jun 28, 2016

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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(incorporated in the Cayman Islands with limited liability)

(Stock Code: 8178)

DISCLOSEABLE TRANSACTION PROPOSED DISPOSAL OF 25% ISSUED SHARE CAPITAL OF WISE VISUAL HOLDINGS LIMITED

THE DISPOSAL

The Board announces that on 28 June 2016 (after trading hours), the Vendor (a direct wholly-owned subsidiary of the Company) and the Purchaser entered into the SPA. Pursuant to the SPA, the Purchaser has conditionally agreed to acquire and the Vendor has conditionally agreed to sell the Sale Shares at the Consideration of HK$80,000,000, which shall be satisfied in cash by the Purchaser at Completion.

GEM LISTING RULES IMPLICATIONS

As the relevant percentage ratio (as defined in the GEM Listing Rules) in respect of the transaction(s) contemplated under the SPA exceed 5% but are less than 25%, the Disposal constitutes a discloseable transaction of the Company under Chapter 19 of the GEM Listing Rules.

INTRODUCTION

The Board announces that on 28 June 2016 (after trading hours), the Vendor (a direct wholly-owned subsidiary of the Company) and the Purchaser entered into the SPA. Pursuant to the SPA, the Purchaser has conditionally agreed to acquire and the Vendor has conditionally agreed to sell the Sale Shares at the Consideration of HK$80,000,000, which shall be satisfied in cash by the Purchaser at Completion.

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THE SPA

The principle terms of the SPA are as follows:

Date:

28 June 2016 (after trading hours)

Parties: (1) Vendor: Rosy Faith Investments Limited, a company incorporated in the British Virgin Islands and a wholly-owned subsidiary of the Company

(2) Purchaser: Mr. Yang Jie

To the best of the Directors’ knowledge, information and belief and having made all reasonable enquiries, the Purchaser is an Independent Third Party.

Assets to be disposed of

The Purchaser has conditionally agreed to acquire and the Vendor has conditionally agreed to sell the Sale Shares, representing 25% of the issued share capital of the Target Company, free from all encumbrances together with all rights now and hereafter attaching thereto including but not limited to all dividends paid, declared or made in respect thereof at any time on or after the Completion.

Consideration

The consideration for the sale and purchase of the Sale Shares shall be HK$80,000,000, which shall be satisfied in cash by the Purchaser at Completion.

Basis of the Consideration

The Consideration was determined after arm’s length negotiations between the Purchaser and the Vendor with reference to the historical acquisition cost of the 25% issued share capital of the Target Company of HK$80,000,000 and the reasons and benefit for the Disposal as set out in the section headed “Reasons and Benefit for the Disposal” below.

The Directors (including the independent non-executive Directors) consider that the terms and conditions of the Disposal to be fair and reasonable and are in the interests of the Company and the Shareholders.

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Conditions precedent

The Completion shall be conditional upon and subject to:

• (i) all necessary consents and approvals in relation to the SPA having been obtained by the Purchaser; and

• (ii) all necessary consents and approvals in relation to the SPA having been obtained by the Vendor and the Company.

Completion

Completion shall take place on the Completion Date. Upon Completion, the Group will cease to hold any interest in the Target Group.

INFORMATION ON THE TARGET GROUP

The Target Company is an investment holding company registered under the laws of the British Virgin Islands and the only assets and operation of which is the 100% interest in the issued share capital of the HK Subsidiary and BVI Subsidiary.

The HK Subsidiary is a company incorporated in Hong Kong with limited liability. It has 100% interest in the registered capital of WFOE in the amount of RMB10,000,000, which has been fully paid up. The BVI Subsidiary is a company incorporated in British Virgin Islands with limited liability. The HK Subsidiary and BVI Subsidiary are wholly owned by the Target as at the date of the SPA.

The HK Subsidiary, BVI Subsidiary and the WFOE are focusing on solutions in big data and analytics for business intelligence and carrying on the principal business of developing and providing intelligent video recording surveillance system for security, safety alarm such as fire detection, business intelligence and process improvement. They are also engaged in cloud computing technology to achieve contextual information analysis, in order to conduct customer behavior studies in retail and merchandising industry, as well as equipment security surveillance systems improvement, which has been utilized widely in the PRC. The HK Subsidiary and the WFOE offer services and solutions on royalty and/or subscription basis through software as a service and cloud platforms. The BVI Subsidiary is holding of intellectual properties.

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FINANCIAL INFORMATION ON THE TARGET GROUP

The financial information of the Target Group for the two financial years ended 31 December 2014 and 31 December 2015 and for the 5 months ended 31 May 2016 based on its unaudited consolidated management accounts are as follows:

			For the
			5 months
	Year ended	Year ended	ended
	31 December	31 December	31 May
	2014	2015	2016
	(unaudited)	(unaudited)	(unaudited)
	HK$’000	HK$’000	HK$’000
	(approximately)	(approximately)	(approximately)
Results
Turnover	17,345	16,851	812
Net profit/(loss) before taxation	(4,936)	2,598	(802)
Net profit/(loss) after taxation	(4,936)	2,598	(802)
	As at	As at	As at
	31 December	31 December	31 May
	2014	2015	2016
	HK$’000	HK$’000	HK$’000
	(approximately)	(approximately)	(approximately)
Assets and liabilities
Total assets	16,572	18,259	17,826
Net assets/(liabilities)	(347)	2,250	1,448

For illustrative purpose, based on (i) the carrying book value of the Target Group as at 31 December 2015 of approximately HK$59,419,000 (after impairment provision of HK$22,597,000 made during the year ended 31 December 2015); (ii) the share of loss for the 5 months ended 31 May 2016 (after deducted the amortisation of intangible assets and its deferred tax) of approximately HK$1,910,000; and (iii) the Consideration of HK$80,000,000, it is estimated that the Group will record a gain of approximately HK$22,641,000 (before taxation) from the Disposal after deducting the expenses attributable to the Disposal of approximately HK$150,000. Shareholders should note that the actual amount of the gain or loss on the Disposal to be recognized in the consolidated financial statements of the Company depends on the net liability/net asset value of the Target Group as at the date of Completion and therefore may be different from the amount mentioned above.

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REASONS AND BENEFIT FOR THE DISPOSAL

The Group is principally engaged in the development and sale of computer software and hardware, the provision of system integration and related support services in the PRC.

Reference is made to the announcement of the Company dated 7 May 2015. On 7 May 2015 (after trading hours), the Vendor entered into a sale and purchase agreement to acquire the Sale Shares from an Independent Third Party at a consideration of HK$80,000,000, which was completed on 8 May 2015.

The Company has been monitoring and refining its business strategy to cope with the volatile economic condition for the long term development of the Company. The business environment for intelligent video recording surveillance system for security, has been competitive especially with the ever-evolving technology development. The Target Company had recorded negative operating results for five months ended 31 May 2016. Although the market of intelligent video recording surveillance system for security may still have potential growth in the future, with relatively large investment cost involved in order to keep up with the technological trend, the Directors are of the opinion that the business volume and the revenue contributed by those business do not match the resources deployed by and the efforts made by the Group.

In this connection, the Board intends to realize the investment in the Target Group rather than devoting further resources to the Target Group which is loss making. It is expected that the net proceeds from the Disposal will be used for general working capital of the Group.

Based on the above, the Directors consider that the terms of the Disposal are fair and reasonable, and the Disposal is in the interests of the Company and the Shareholders as a whole.

GEM LISTING RULES IMPLICATIONS

As the relevant percentage ratio (as defined in the GEM Listing Rules) in respect of the transaction(s) contemplated under the SPA exceed 5% but are less than 25%, the Disposal constitutes a discloseable transaction of the Company under Chapter 19 of the GEM Listing Rules.

DEFINITIONS

In this announcement, the following expressions shall have the meanings set out below unless the context requires otherwise:

“Board”

the board of Directors;

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“BVI Subsidiary”	Wise Visual Surveillance Apps IPR Ltd., a company incorporated in
	British Virgin Islands with limited liability and wholly owned by the
	Target;
“Company”	China Information Technology Development Limited（中國信息科技
	發展有限公司）, a company incorporated in the Cayman Islands with
	limited liability and the issued Shares of which are listed on GEM;
“Completion”	completion of the Disposal in accordance with the terms and conditions
	of the SPA;
“Completion Date”	not more 14 days after the date of SPA or such other date as may be
	agreed in writing between the Vendor and the Purchaser;
“Connected Person(s)”	has the meaning ascribed to it in the GEM Listing Rules;
“Consideration”	the consideration for the Disposal of HK$80,000,000 payable by the
	Purchaser to the Vendor in accordance with the terms of the SPA;
“Director(s)”	the director(s) of the Company;
“Disposal	the proposed disposal of the Sale Shares pursuant to the terms and
	conditions of the SPA;
“GEM”	the Growth Enterprise Market of the Stock Exchange;
“GEM Listing Rules”	the Rules Governing the Listing of Securities on GEM;
“Group”	the Company and its subsidiaries;
“HK Subsidiary”	Wise Visual Technology Limited（威視科技有限公司）, a company
	incorporated in Hong Kong with limited liability and wholly owned by
	the Target;
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC;

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“Independent Third	the independent third party who is, to the best of the Directors’
Party”	knowledge, information and belief, having made all reasonable
	enquiries, independent of and not connected with the Company and the
	Connected Person(s) of the Company;
“PRC”	The People’s Republic of China, which for the purpose of this
	announcement, excludes Hong Kong, Macau Special Administrative
	Region of the PRC and Taiwan;
“Purchaser”	Yang Jie;
“Sale Shares”	2,500 issued and fully paid up or credited as fully paid up ordinary
	shares of US$1.00 each in the capital of the Target Company,
	representing 25% of the issued share capital of the Target Company;
“Share(s)”	ordinary share(s) of HK$0.10 each in the share capital of the Company;
“Shareholder(s)”	the shareholder(s) of the Company;
“SPA”	the sale and purchase agreement dated 28 June 2016 entered into
	between the Vendor and the Purchaser in relation to the Disposal;
“Stock Exchange”	The Stock Exchange of Hong Kong Limited;
“Target Company”	Wise Visual Holdings Limited（威視控股有限公司）, a company
	incorporated in the British Virgin Islands with limited liability;
“Target Group”	together, the Target Company, the BVI Subsidiary, the HK Subsidiary
	and the WFOE;
“Vendor”	Rosy Faith Investments Limited（盛信投資有限公司）, a company
	incorporated in the British Virgin Islands with limited liability and a
	wholly-owned subsidiary of the Company;
“WFOE”	威視創建科技（北京）有限公司, a wholly foreign owned enterprise in
	the PRC established by the HK Subsidiary;
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong;

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“US$”

United States dollars, the lawful currency of the United States of America; and

“%”

per cent.

By order of the Board China Information Technology Development Limited Tse Chi Wai

Executive Director and Company Secretary

Hong Kong, 28 June 2016

As at the date of this announcement, the Board comprises Mr. Wong Kui Shing, Danny (Chairman and Chief Executive Officer), Mr. Tse Chi Wai, Ms. Wu Jingjing, Mr. Takashi Togo and Mr. Wong Chi Yung as executive Directors; Mr. Hung Hing Man, Mr. May Tai Keung, Nicholas and Dr. Chen Shengrong as independent non-executive Directors.

This announcement, for which the Directors of the Company collectively and individually accept full responsibility, includes particulars given in compliance with the Rules Governing the Listing of Securities on the Growth Enterprise Market (the “GEM”) of the Stock Exchange for the purpose of giving information with regard to the Company.

The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this announcement is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this announcement misleading. This announcement will be available on the Company’s website http://www.chinainfotech.com.hk and will remain on the “Latest Company Announcement” page on the GEM website at http://www.hkgem.com for at least 7 days from the date of its posting.

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