Cornerstone Technologies Holdings Limited — Capital/Financing Update 2021

Dec 30, 2021

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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CORNERSTONE TECHNOLOGIES HOLDINGS LIMITED 基石科技控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8391)

CONNECTED TRANSACTION IN RELATION TO SETTLEMENT OF LOAN THROUGH SUBSCRIPTION OF NEW SHARES

CONNECTED TRANSACTION IN RELATION TO SETTLEMENT OF LOAN THROUGH SUBSCRIPTION OF NEW SHARES

As at the date of this announcement, the Company as debtor is indebted to the Creditors in an aggregate amount of HK$28.1 million.

On 30 December 2021, the Company as debtor entered into the Deed with the Creditors, pursuant to which the Company has conditionally agreed to issue and allot to the Creditors (or their nominee(s)) an aggregate of 45,316,000 Subscription Shares at the Subscription Price of HK$0.62 per Subscription Share. The subscription amount payable by the Creditors under the Deed shall be satisfied by capitalizing the entire amount of the Shareholders’ Loan due to the Creditors from the Company.

The 45,316,000 Subscription Shares represent (i) approximately 7.46% of the issued share capital of the Company as at the date of this announcement; and (ii) approximately 6.94% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares, assuming that there will be no change in the authorised share capital and issued share capital of the Company between the date of this announcement and up until the Completion. The aggregate nominal value of the Subscription Shares is HK$453,160.

The Subscription Shares will be allotted and issued under the Specific Mandate to be sought for approval from the Independent Shareholders at the EGM.

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LISTING RULES IMPLICATION

The Creditors are either substantial shareholders or Directors of the Company, and are therefore connected persons of the Company under Chapter 20 of the GEM Listing Rules. Accordingly, the Subscription will constitute a connected transaction for the Company and is subject to the announcement, reporting and Independent Shareholder’s approval requirements under Chapter 20 of the GEM Listing Rules.

ESTABLISHMENT OF INDEPENDENT BOARD COMMITTEE AND APPOINTMENT OF INDEPENDENT FINANCIAL ADVISER

The Independent Board Committee comprising all the independent non-executive Directors has been established to give a recommendation to the Independent Shareholders as to whether the terms of the Subscription and the Deed are on normal commercial terms or better and fair and reasonable, whether the Subscription is in the interests of the Company and the Shareholders as a whole. An independent financial adviser will also be appointed to advise the Independent Board Committee and the Independent Shareholders in this regard.

EGM

The EGM will be convened and held for the purpose of considering and, if thought fit, approving (i) the Deed and the transactions contemplated thereunder; and (ii) the grant of the Specific Mandate to allot and issue the Subscription Shares.

A circular containing, among other things, (i) details of the Subscription and the Deed; (ii) the recommendation from the Independent Board Committee in respect of the Subscription and the Deed and the transactions contemplated thereunder; (iii) the letter of advice from the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Subscription and the Deed and the transactions contemplated thereunder; and (iv) the notice of the EGM, will be dispatched to the Shareholders as soon as practicable in accordance with the GEM Listing Rules.

CONNECTED TRANSACTION IN RELATION TO SETTLEMENT OF LOAN THROUGH SUBSCRIPTION OF NEW SHARES

As at the date of this announcement, the Company as debtor is indebted to the Creditors in an aggregate amount of HK$28.1 million.

On 30 December 2021, the Company as debtor entered into the Deed with the Creditors, pursuant to which the Company has conditionally agreed to issue and allot to the Creditors (or their nominee(s)) an aggregate of 45,316,000 Subscription Shares at the Subscription Price of HK$0.62 per Subscription Share. The subscription amount payable by the Creditors under the Deed shall be satisfied by capitalizing the entire amount of the Shareholders’ Loan due to the Creditors from the Company. Details of the terms of the Deed are summarized below:

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DEED OF SETTLEMENT OF DEBT

Date: 30 December 2021

Parties: (1) Issuer/debtor: the Company; and

(2) Creditors: Mr. Wu Jianwei as Creditor (A)

Mr. Liang Zihao as Creditor (B)

Mr. Li Man Keung Edwin as Creditor (C)

Mr. Pan Wenyuan as Creditor (D)

Subscription Shares

Pursuant to the Deed:

• (1) the Company has conditionally agreed to issue and allot to Creditor (A) (or its nominee(s)) 24,192,000 Subscription Shares at the Subscription Price of HK$0.62 per Subscription Share. The subscription amount payable by Creditor (A) shall be satisfied by capitalizing the amount of Debt (A) due to Creditor (A) from the Company;

• (2) the Company has conditionally agreed to issue and allot to Creditor (B) (or its nominee(s)) 13,708,000 Subscription Shares at the Subscription Price of HK$0.62 per Subscription Share. The subscription amount payable by Creditor (B) shall be satisfied by capitalizing the amount of Debt (B) due to Creditor (B) from the Company;

• (3) the Company has conditionally agreed to issue and allot to Creditor (C) (or its nominee(s)) 4,192,000 Subscription Shares at the Subscription Price of HK$0.62 per Subscription Share. The subscription amount payable by Creditor (C) shall be satisfied by capitalizing the amount of Debt (C) due to Creditor (C) from the Company; and

• (4) the Company has conditionally agreed to issue and allot to Creditor (D) (or its nominee(s)) 3,224,000 Subscription Shares at the Subscription Price of HK$0.62 per Subscription Share. The subscription amount payable by Creditor (D) shall be satisfied by capitalizing the amount of Debt (D) due to Creditor (D) from the Company.

Number of Subscription Shares

The 45,316,000 Subscription Shares represent (i) approximately 7.46% of the issued share capital of the Company as at the date of this announcement; and (ii) approximately 6.94% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares, assuming that there will be no change in the authorised share capital and issued share capital of the Company between the date of this announcement and the date of Completion. The aggregate nominal value of the Subscription Shares is HK$453,160.

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The Subscription Shares will be allotted and issued under the Specific Mandate to be sought for approval from the Independent Shareholders at the EGM.

Subscription Price

The Subscription Price is HK$0.62 per Subscription Share, and the aggregate Subscription Price of all the Subscription Shares of HK$28,095,920 payable by the Creditors shall be settled by way of capitalisation of the Shareholders’ Loan, and the remaining balance of the loan of HK$4,080.00 will be settled by cash by the Company in due course.

The Subscription Price of HK$0.62 per Subscription Share represents:

• (i) a discount of approximately 24.4% to the closing price of HK$0.82 per Share as quoted on the Stock Exchange on the date of the Deed; and

• (ii) a discount of approximately 22.1% to the average closing price of approximately HK$0.796 per Share as quoted on the Stock Exchange for the last five consecutive trading days immediately preceding the date of the Deed.

The Subscription Price was determined, among others, with reference to (i) the prevailing market price of the Shares and the market conditions; and (ii) the funding needs and financial position of the Group and was negotiated on an arm’s length basis between the Company and the Creditors.

Conditions Precedent for the Subscription of Subscription Shares for Capitalizing the Entire Amount of Debts

Completion is conditional upon the fulfilment or waiver (as the case may be) of the following conditions:

• (a) the Listing Committee of the Stock Exchange having granted the listing of, and permission to deal in, the Subscription Shares and such approval has not been revoked prior to Completion;

• (b) the necessary consents and approvals in relation to the Deed and the transactions contemplated thereunder having been obtained; and

• (c) the representation and warranties of the Company remaining true and accurate in all material respects and are not misleading as at the date of the Deed and the date of Completion.

The Creditors may waive any conditions, except the condition referred to in (a) above which may not be waived by any party to the Deed. If the above conditions are not fulfilled or waived (as the case may be) by 5:00 p.m. on 30 June 2022 (or such other date as the parties to the Deed may agree in writing), the Deed will be automatically terminated and lapsed and none of the parties to the Deed shall have any claim against the other in respect of the Subscription, save for any antecedent breaches thereof.

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Completion

Completion shall take place within ten (10) Business Days after the date of fulfillment of the conditions precedent set out in the Deed. The subscription amount payable by the Creditors shall be satisfied by capitalizing the entire amount of the Shareholders’ Loan due to the Creditors from the Company.

APPLICATION FOR LISTING

Application will be made by the Company to the Listing Committee of the Stock Exchange for the listing of and permission to deal in the Subscription Shares.

INFORMATION ON THE PARTIES

The Group

The Company is an investment holding company and its subsidiaries are principally engaged in the provision of printing, typesetting and translation services and electric vehicle charging business in Hong Kong.

The Creditors

Creditor (A) is a substantial shareholder, interested in approximately 235,603,225 Shares, representing approximately 38.76% of the total number of issued Shares of the Company, and is therefore a connected person of the Company under Chapter 20 of the GEM Listing Rules.

Creditor (B) is a substantial shareholder, interested in approximately 235,603,225 Shares, representing approximately 38.76% of the total number of issued Shares of the Company, and is therefore a connected person of the Company under Chapter 20 of the GEM Listing Rules.

Creditor (C) is an executive Director, and is therefore a connected person of the Company under Chapter 20 of the GEM Listing Rules.

Creditor (D) is an executive Director, and is therefore a connected person of the Company under Chapter 20 of the GEM Listing Rules.

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R E A S O N S A N D B E N E F I T S F O R T H E L O A N C A P I T I L I S A T I O N T H R O U G H SUBSCRIPTION OF NEW SHARES UNDER SPECIFIC MANDATE

On 20 December 2021, each of the Creditors seperately entered into a loan agreement with the Company, pursuant to which the Creditors each granted a loan with an aggregate principal amount of HK$28.1 million to the Company. The parties agreed that the amount of HK$28,095,920 of the Shareholders’ Loan shall be capitalized as part of the consideration for the Subscription upon Completion. Accordingly, the remaining balance under the Shareholders’ Loan (after the loan capitalised through subscription of new Shares) will be settled by cash by the Company pursuant to the terms of the Shareholders’ Loan as supplemented by the Deed. It shows the confidence and support of the substantial shareholders and Directors towards the long-term development of the Company.

USE OF PROCEEDS

It is expected that the gross proceeds from the Subscription will be approximately HK$28.1 million. After deducting related professional fees and all related expenses to be borne by the Company under the Subscription, the net proceeds from the Subscription will amount to approximately HK$28.0 million. The Company intends to use the net proceeds to settle the Shareholders’ Loan.

EQUITY FUND RAISING ACTIVITIES OF THE COMPANY IN THE PAST TWELVE MONTHS

The following is the equity fund raising activity conducted by the Company in the past 12 months immediately before the date of this announcement:

Date of		Net proceeds	Intended use
announcement	Fund raising activity	raised	of net proceeds	Actual use of net proceeds
15 December 2020 and	Placing of 49,625,000	Approximately	(i) EV charging	Fully utilised in accordance
4 January 2021	new Shares under	HK$19.35	business	with the intended use
	general mandate	million	development;
			(ii) Commercial and
			financial printing
			business operation;
			and
			(iii) Working capital
			and general
			corporate purposes

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Date of		Net proceeds	Intended use
announcement	Fund raising activity	raised	of net proceeds	Actual use of net proceeds
15 December 2020,	Subscription of	Approximately	(i) EV charging	Fully utilised in accordance
22 January 2021,	69,625,000 new Shares	HK$27.8 million	business	with the intended use
10 February 2021 and	under specific mandate		development;
10 March 2021
			(ii) Commercial and
			financial printing
			business operation;
			and
			(iii) Working capital
			and general
			corporate purposes
29 November 2021 and	Subscription of	Approximately	Working capital and	HK$0.4 million is utilised in
6 December 2021	8,000,000 new Shares	HK$4.92 million	general corporate	accordance with the intended
	under general mandate		purposes	use

EFFECTS ON SHAREHOLDING STRUCTURE OF THE COMPANY

As at the date of this announcement, the Company has 607,790,541 Shares in issue. The following is a table illustrating the shareholding structure of the Company (i) as at the date of this announcement; and (ii) immediately after Completion, assuming that there will be no change in the total number of Shares in issue (other than the issue of the Subscription Shares) between the date of this announcement and the date of Completion:

			Immediately	Immediately
	As at the date		after completion
	of this announcement		of the Subscription
	Number of	Approx.% of	Number of	Approx.% of
	Shares	shareholding	Shares	shareholding
Controlling Shareholder,
Substantial Shareholders and Directors
Global Fortune Global Limited_(Note)_	235,603,225	38.76%	235,603,225	36.08%
Glorytwin Limited	81,000,000	13.33%	81,000,000	12.40%
Mr. Lau Wai Yan Lawson	30,302,703	4.99%	30,302,703	4.64%
Mr. Pan Wenyuan	23,872,000	3.93%	27,096,000	4.15%
Mr. Li Man Keung Edwin	19,112,613	3.14%	23,304,613	3.57%
Creditor (A)	0	0%	24,192,000	3.70%
Creditor (B)	0	0%	13,208,000	2.10%

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Public Shareholders Other public Shareholders Total	As at the date of this announcement Number of Shares Approx.% of shareholding 217,900,000 35.85% 607,790,541 100.00%	Immediately after completion of the Subscription Number of Shares Approx.% of shareholding 217,900,000 33.36% 653,106,541 100.00%

Note:

As at the date of this announcement, Global Fortune Global Limited is owned as to 51% by Creditor (A) and 49% by Creditor (B). Creditor (A) and Creditor (B) are deemed to be interested in the shares in which Global Fortune Global Limited is interested under SFO respectively.

LISTING RULES IMPLICATION

The Creditors are either substantial shareholders or Directors of the Company, and are therefore connected persons of the Company under Chapter 20 of the GEM Listing Rules. Accordingly, the Subscription will constitute a connected transaction for the Company and is subject to the announcement, reporting and Independent Shareholder’s approval requirements under Chapter 20 of the GEM Listing Rules.

In accordance with the GEM Listing Rules, the Creditors and its associates will be required to abstain from voting on the resolution(s) to approve the Subscription and the transactions contemplated thereunder at the EGM. Save as disclosed above, to the best of the knowledge, information and belief of the Directors, no other Shareholder has a material interest in the transactions contemplated under the Subscription and the Deed and will be required to abstain from voting on the resolution(s) to approve the Subscription and the Deed and the transactions contemplated thereunder at the EGM.

ESTABLISHMENT OF INDEPENDENT BOARD COMMITTEE AND APPOINTMENT OF INDEPENDENT FINANCIAL ADVISER

The Independent Board Committee comprising all the independent non-executive Directors has been established to give a recommendation to the Independent Shareholders as to whether the terms of the Subscription and the Deed are on normal commercial terms or better and fair and reasonable, whether the Subscription is in the interests of the Company and the Shareholders as a whole. An independent financial adviser will also be appointed to advise the Independent Board Committee and the Independent Shareholders in this regard.

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EGM

The EGM will be convened and held for the purpose of considering and, if thought fit, approving (i) the Deed and the transactions contemplated thereunder; and (ii) the grant of the Specific Mandate to allot and issue the Subscription Shares.

A circular containing, among other things, (i) details of the Subscription and the Deed; (ii) the recommendation from the Independent Board Committee in respect of the Subscription and the Deed and the transactions contemplated thereunder; (iii) the letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the Subscription and the Deed and the transactions contemplated thereunder; and (iv) the notice of the EGM, will be dispatched to the Shareholders as soon as practicable in accordance with the GEM Listing Rules.

Completion is subject to the satisfaction of the conditions precedent in the Subscription and the Deed. As the Subscription may or may not proceed, Shareholders and potential investors are advised to exercise caution when dealing in the securities of the Company.

DEFINITIONS

In this announcement, unless the context otherwise requires, the following expressions have the following meanings:

• “associate(s)” has the meaning ascribed to it under the GEM Listing Rules “Board” the board of Directors “Business Day(s)” any day on which the Stock Exchange is open for the business of dealing in securities

• “Company” Cornerstone Technologies Holdings Limited, a company incorporated in the Cayman Islands with limited liability whose issued Shares are listed on GEM (stock code: 8391)

• “Completion” completion of the Subscription in accordance with the terms and conditions of the Deed

• “connected person(s)” has the meaning ascribed to it under the GEM Listing Rules “Creditor (A)” Mr. Wu Jianwei, a non-executive Director and a substantial shareholder of the Company

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• “Creditor (A)’s the agreement dated 20 December 2021 entered into between Creditor (A) Loan Agreement” and the Company in respect of Debt (A)

• “Creditor (B)” Mr. Liang Zihao, an executive Director, a substantial shareholder and co-chairman of the Company

• “Creditor (B)’s the agreement dated 20 December 2021 entered into between Creditor (B) Loan Agreement” and the Company in respect of Debt (B)

• “Creditor (C)” Mr. Li Man Keung Edwin, an executive Director

• “Creditor (C)’s the agreement dated 20 December 2021 entered into between Creditor (C) Loan Agreement” and the Company in respect of Debt (C)

• “Creditor (D)” Mr. Pan Wenyuan, an executive Director

• “Creditor (D)’s the agreement dated 20 December 2021 entered into between Creditor (D) Loan Agreement” and the Company in respect of Debt (D)

• “Creditors” collectively Creditor (A), (B), (C) and (D)

• “Debt (A)” the principal amount owing to Creditor (A) by the Company in the amount of HK$15,000,000 pursuant to the Creditor (A)’s Loan Agreement

• “Debt (B)” the principal amount owing to Creditor (B) by the Company in the amount of HK$8,500,000 pursuant to the Creditor (B)’s Loan Agreement

• “Debt (C)” the principal amount owing to Creditor (C) by the Company in the amount of HK$2,600,000 pursuant to the Creditor (C)’s Loan Agreement

• “Debt (D)” the principal amount owing to Creditor (D) by the Company in the amount of HK$2,000,000 pursuant to the Creditor (D)’s Loan Agreement

• “Deed” the deed of settlement of debt dated 30 December 2021 entered into between the Company and the Creditors for the issue and subscription of the Subscription Shares at the Subscription Price

• “Director(s)” director(s) of the Company

• “EGM” the extraordinary general meeting of the Company to be convened and held to consider and, if thought fit, approve (i) the Deed and the transactions contemplated thereunder; and (ii) the grant of the Specific Mandate to allot and issue the Subscription Shares

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• “GEM” GEM operated by the Stock Exchange “GEM Listing Rules” the Rules Governing the Listing of Securities on GEM “Group” the Company and its subsidiaries “HK$” Hong Kong dollars, the lawful currency of Hong Kong “Hong Kong” the Hong Kong Special Administrative Region of the People’s Republic of China

• “Independent Board an independent committee of the Board comprising all the independent Committee” non-executive Directors

• “Independent Shareholder(s) other than those that are required under the GEM Listing Shareholders” Rules to abstain from voting on the resolution(s) to be proposed at the EGM

• “Independent Third third party(ies) independent of the Company and its connected persons Party(ies)”

• “Loan Agreements” collectively Creditor (A)’s Loan Agreement, Creditor (B)’s Loan Agreement, Creditor (C)’s Loan Agreement and Creditor (D)’s Loan Agreement

• “SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

• “Share(s)” ordinary share(s) with a nominal value of HK$0.01 each in the share capital of the Company

• “Shareholder(s)” holder(s) of the Share(s)

• “Shareholders’ Loan” the total outstanding amount owing to the Creditors by the Company in respect of the Loan Agreements in the aggregate amount of approximately HK$28,100,000 as at the date of the Deed

• “Specific Mandate” the specific mandate to be sought from the Independent Shareholders at the EGM and to be granted to the Board for the allotment and issue of the Subscription Shares

• “Stock Exchange” The Stock Exchange of Hong Kong Limited

• “Subscription” the subscription of the Subscription Shares by the Creditors pursuant to the Deed

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“Subscription Price”

HK$0.62 per Subscription Share

“Subscription Shares”

an aggregate of 45,316,000 Shares to be issued and allotted by the Company to the Creditors pursuant to the Deed

“%”

per cent

By Order of the Board Cornerstone Technologies Holdings Limited LIANG Zihao

Co-Chairman and Executive Director

Hong Kong, 30 December 2021

As at the date of this announcement, the executive Directors are Mr. LIANG Zihao, Mr. SAM WENG WA Michael, Mr. LI Man Keung Edwin, Mr. LAU Wai Yan Lawson and Mr. PAN Wenyuan, the non-executive Director is Mr. WU Jianwei and the independent non-executive Directors are Mr. TAM Ka Hei Raymond, Mr. YUEN Chun Fai and Ms. ZHU Xiaohui.

This announcement, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the GEM Listing Rules 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 remain on the “Latest Listed Company Information” page of the GEM website at www.hkgem.com for at least seven days after the date of publication and on the Company’s website at www.cstl.com.hk.

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