Crypto Flow Technology Limited — Annual Report 2020

Mar 30, 2021

CHARACTERISTICS OF GEM OF THE STOCK EXCHANGE OF HONG KONG LIMITED (THE "STOCK EXCHANGE")

GEM has been positioned as a market designed to accommodate small and mid-sized companies to which a higher investment risk may be attached than other companies listed on the Stock Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration.

Given that the companies listed on GEM are generally small and mid-sized companies, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board of the Stock Exchange and no assurance is given that there will be a liquid market in the securities traded on GEM.

Hong Kong Exchanges and Clearing Limited and the Stock Exchange take no responsibility for the contents of this report, 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 report.

This report, for which the directors of Loto Interactive Limited (the "Company") collectively and individually accept full responsibility, includes particulars given in compliance with the Rules Governing the Listing of Securities on GEM of the Stock Exchange for the purpose of giving information with regard to the Company. The directors of the Company, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this report 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 report misleading.

CONTENTS

Page
2	Corporate Information
3	Chairman's Statement
4	Management Discussion and Analysis
11	Biographical Details of Directors and Senior Management
14	Corporate Governance Report
29	Report of the Directors
47	Environmental, Social and Governance Report
65	Independent Auditor's Report
69	Consolidated Statement of Profit or Loss and Other Comprehensive Income
71	Consolidated Statement of Financial Position
73	Consolidated Statement of Changes in Equity
74	Consolidated Statement of Cash Flows
76	Notes to the Consolidated Financial Statements
148	Five-year Financial Summary

CORPORATE INFORMATION

BOARD OF DIRECTORS

Ms. Zhang Jing* (Chairman) Mr. Yan Hao# (Chief Executive Officer) Ms. Huang Lilan# Mr. Yuan Qiang* Dr. Lu Haitian+ Mr. Lin Sen+ Mr. Huang Jian+

# Executive Director

• * Non-executive Director
• • Independent Non-executive Director

AUDIT COMMITTEE

Mr. Lin Sen (Chairman) Mr. Yuan Qiang Dr. Lu Haitian

REMUNERATION COMMITTEE

Mr. Huang Jian (Chairman) Mr. Yuan Qiang Mr. Lin Sen

NOMINATION COMMITTEE

Ms. Zhang Jing (Chairman) Dr. Lu Haitian Mr. Huang Jian

COMPLIANCE OFFICER

Mr. Yan Hao

COMPANY SECRETARY

Ms. Chow Chiu Man, Mandy

AUTHORISED REPRESENTATIVES

Mr. Yan Hao Ms. Chow Chiu Man, Mandy

REGISTERED OFFICE

P.O. Box 31119 Grand Pavilion, Hibiscus Way 802 West Bay Road Grand Cayman, KY1-1205 Cayman Islands

HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS IN HONG KONG

Units 813 & 815, Level 8, Core F Cyberport 3, 100 Cyberport Road Hong Kong

PRINCIPAL SHARE REGISTRAR

AND TRANSFER OFFICE

Suntera (Cayman) Limited Suite 3204, Unit 2A Block 3, Building D P.O. Box 1586, Gardenia Court Camana Bay Grand Cayman, KY1-1100 Cayman Islands

HONG KONG BRANCH SHARE REGISTRAR AND TRANSFER OFFICE

Computershare Hong Kong Investor Services Limited Shops 1712-1716 17th Floor, Hopewell Centre 183 Queen's Road East Wanchai Hong Kong

AUDITORS

ZHONGHUI ANDA CPA Limited Unit 701, 7th Floor, Citicorp Centre 18 Whitfield Road Causeway Bay Hong Kong

LEGAL ADVISORS

Shearman & Sterling 21st Floor, Gloucester Tower The Landmark 15 Queen's Road Central Hong Kong

PRINCIPAL BANKERS

Bank of Communications Co., Ltd., Hong Kong Branch The Industrial and Commercial Bank of China, Shenzhen Branch

STOCK CODE

The Stock Exchange of Hong Kong Limited: 8198

WEBSITE

www.lotoie.com

CHAIRMAN'S STATEMENT

TO OUR SHAREHOLDERS

On behalf of the board (the "Board") of directors (the "Directors") of Loto Interactive Limited (the "Company"), I hereby present the results of the Company and its subsidiaries (collectively referred to as the "Group") for the year ended 31 December 2020 (the "Year").

The year 2020 was an extremely challenging year for the globe. In response to these challenges, the Group strived to seek steady progress with firm belief, continued to focus on the more promising business in big data centre services, and achieved remarkable results. In 2020, the Group's big data centre services contributed revenue of HK\$379.7 million, representing a year-on-year increase of HK\$317.2 million or 5.1 times as compared to last year.

As our third big data centre in Sichuan Province, the PRC, commenced operation in late June 2020, the Group's business of big data centre services was ushered into a new stage of development. With a gross area of over 18,000 square meters, our three big data centres have a total operation capacity of providing data analysis and storage services for up to 225,000 data processors at the same time. The big data centres maintain regulatory-compliant operation with proper qualifications and have established cooperative relationship with various local subsidiaries of a leading state-owned enterprise in the power energy business. Leveraging on our geographical location, favourable local policies, technological innovation and our advantages of power supply and electricity price, we have continuously expanded the customer base of big data centre services. We have attracted a steady stream of customers which are mainly engaged in cryptocurrency mining business and have been providing a full spectrum of services to our customers, including premises, hardware support, power supply, ancillary supervision and management services. Under the backdrop of the global development in the fin-tech industry and the continuous rise in Bitcoin price, it is expected that the customers' demand for our big data centre services will remain at a high level, and we therefore have full confidence in the prospect of our business.

With a proactive attitude of exploration and a spirit of continuous innovation, the Group is determined to make bold attempts and changes despite the uncertain economic environment and policies, thereby gradually transforming from lottery business to a diversified business group with a focus on the big data centre services. We are committed to providing quality customer services across our diversified business portfolio in order to maintain our market competitiveness. We believe that through professional operation and management, our business will continue to grow and ultimately maximise the long-term shareholders' value.

Despite the changes and uncertainties in the global market, we believe that we will be able to withstand the foreseeable risks with our business strengths. In addition, the Group will continuously monitor and assess the market conditions and make timely adjustment to its business plans and development strategies from a long-term perspective in order to respond to various challenges ahead and continue to explore and seize new development opportunities.

IN APPRECIATION

On behalf of the Board, I would like to take this opportunity to express our sincere gratitude to our shareholders, customers and business partners for their continuing support and confidence in the Company. As to my fellow Board members, management team and all staff, I wish to express my heartfelt appreciation for their hard work and valuable contributions. Looking forward, we will continue to forge ahead by constantly exploring new growth drivers with concerted efforts and strive to achieve the goal of long-term and sustainable development.

Zhang Jing Chairman

Hong Kong, 30 March 2021

BUSINESS REVIEW

The Group is principally engaged in (i) provision of data analysis and storage services (the "Big Data Centre Services"), (ii) distribution of mobile gaming (the "Online Game Business") and (iii) money lending business in Hong Kong (the "Money Lending Business").

Big Data Centre Services

The Group operates three big data centres in Sichuan, the People's Republic of China (the "PRC") to provide comprehensive services including premises, hardware support, power supply, ancillary supervision and management services to our clients.

The three big data centres of the Group, commenced business in March and June 2019 and June 2020, respectively, in aggregate have a gross area of over 18,000 square meters, with a total operation capacity of providing data analysis and storage services for up to 225,000 data processors at the same time.

The services provided by these big data centres to their customers cover a full range from monitoring the average utilisation rate and working status of data processors to supervising the overall safety and security of both physical environment and internet connection within the big data centres. Each customer is provided with a monthly report on operation results of its data processors. In the event of any unusual condition reported on the data processors, the relevant customer will receive an immediate notification and follow-up inspection and maintenance services will be provided by the Group upon request. In order to ensure full-load operation of the big data centres, the Group maintains regular communication with local utility services providers in respect of resources allocation and application for increase or decrease in supply of utility.

In addition, the Group has implemented a comprehensive management software (the "Software") specifically for its big data centres. With the customised hardware installed in the big data centres, the Software provides integrated solutions for operation and maintenance management, financial management and resources allocation in cloud computing in the big data centres. The Software enables the clients to remotely monitor their data processors and obtain real-time information on the average computing capacity, CPU load and utilisation and operating time and to receive notification of unusual condition of their data processors. The Software effectively solves the common problems encountered in the operation and maintenance management of big data centres such as delayed information access, inefficient operation and maintenance, inability to quantify on-site work and inability to get access to on-site information anytime and anywhere.

During the Year, the big data centres generated revenue of approximately HK\$379.7 million and contributed 99.1% of the Group's revenue, representing a significant increase as compared to the corresponding period in 2019, which was primarily due to the commencement of operation of the third big data centre of the Group.

Online Game Business

In line with the Group's strategy for developing leisure and entertainment business, the Group engaged in the distribution of online mobile games and recorded revenue of approximately HK\$1.0 million for the Year, representing a decrease of approximately HK\$1.0 million as compared to the corresponding period in 2019. Despite of the decrease as compared to the corresponding period in 2019, the performance of the Group's online game business has shown a positive trend in the third quarter recovering from the influence of the outbreak of coronavirus in the PRC since the first quarter of 2020.

Money Lending Business

In order to leverage its corporate expertise and resources to broaden its income source, an indirect wholly-owned subsidiary of the Company, Might Winner Limited, obtained a money lender's license in January 2020. On 3 April 2020, a loan in the principal amount of HK\$30 million for a term of 24 months at an interest rate of 10% per annum, was granted to an independent third party, which contributed revenue of approximately HK\$2.3 million for the Year.

FINANCIAL REVIEW

The Group is engaged in three operating segments which are (1) Big Data Centre Services, (2) Online Game Business, and (3) Money Lending Business. The Group recorded a total revenue of approximately HK\$383.0 million during the Year (2019: HK\$64.6 million), representing a substantial increase of HK\$318.4 million or 4.9 times as compared to the corresponding period in 2019, which comprised the following:

(1) Big Data Centre Services

Revenue contributed by Big Data Centres Services in the provision of data analysis, storage services and ancillary administrative and consulting services amounted to HK\$379.7 million for the Year (2019: HK\$62.4 million).

(2) Online Game Business

Revenue generated from Online Game Business amounted to HK\$1.0 million for the Year, decreased by HK\$1.0 million as compared to the corresponding period in 2019. (2019: HK\$2.0 million).

(3) Money Lending Business

Revenue generated from Money Lending Business amounted to approximately HK\$2.3 million for the Year.

Operating Results

The Group recorded a loss of HK\$43.3 million for the Year, representing an increase of HK\$8.5 million as compared to the corresponding period in 2019 (2019: HK\$34.8 million), which was mainly attributable to the combined effect of:

• (i) increase in gross profit of approximately HK\$27.4 million for the Year as compared to the corresponding period in 2019 as a result of the commenced operation of the third big data centre;
• (ii) increase in operating expenses relating to staff cost, consulting expense, tax expense and rental expense, etc. of approximately HK\$25.4 million as compared to the corresponding period in 2019, which was mainly attributable to the expansion of Big Data Centre Services Business;
• (iii) decrease in interest income of approximately HK\$7.6 million, which was mainly due to the full repayment of outstanding loan receivables in February and April 2020; and
• (iv) increase in amortisation associated with acquired intangible assets of approximately HK\$4.6 million.

MATERIAL ACQUISITION AND DISPOSAL OF INVESTMENTS

Reference is made to the announcement of the Company dated 23 January 2020. A joint venture agreement was made between Interactive Lab Limited (a wholly-owned subsidiary of the Company) and Bee Computing (HK) Limited ("JV Partner"), pursuant to which Interactive Lab Limited and the JV Partner jointly established Happy Technology Limited (the "JV Company") which was beneficially owned as to approximate 51% by Interactive Lab Limited and approximate 49% by the JV Partner.

Subsequent to the end of the Year, on 12 January 2021, Interactive Lab Limited and the JV Partner entered into a repurchase agreement, pursuant to which the JV Partner shall repurchase the 51% interest in the JV Company held by Interactive Lab Limited. For details, please refer to the paragraph headed "IMPORTANT EVENTS AFTER THE FINANCIAL YEAR" in this report.

ADDITION TO PROPERTY, PLANT AND EQUIPMENT

During the Year, the Company made a significant investment in the amount of approximately HK\$125.5 million mainly in relation to the construction of the third big data centre, which was completed in late June 2020. The third big data center has a gross area of 10,500 square metres, with a total operation capacity of providing data analysis and storage services for up to 136,000 data processors at the same time. As of 31 December 2020, the Group is of a net asset position with property, plant and equipment of HK\$263.3 million (representing an increase of HK\$98.8 million from HK\$164.5 million as of 31 December 2019).

LOAN RECEIVABLES

An indirect wholly-owned subsidiary of the Company, Might Winner Limited, obtained a money lender's license in January 2020. On 3 April 2020, the Group entered into a loan agreement (the "Loan") with an independent third party, Bright Topper Limited (the "Borrower"), to extend a loan to the Borrower in the principal amount of HK\$30,000,000 at the interest rate of 10% per annum for a term of two years. Interests for the first 12 months shall be repaid in the first year and the principal amount and interests for remaining period shall be repaid on or before the maturity date. The repayment of the Loan was guaranteed by the director and the sole beneficial owner of the Borrower.

LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE

The Group continues to manage its balance sheet carefully and maintains conservative policies in cash and financial management. As at 31 December 2020, the Group's cash and bank balances (including bank deposits with original maturity over three months) amounted to HK\$44.3 million (2019: HK\$95.0 million), representing a decrease of HK\$50.7 million from last year. Of the cash and cash equivalents as at 31 December 2020, 45% (2019: 48%) was denominated in Renminbi, with the remaining balance in United States dollars and Hong Kong dollars.

The decrease in cash and bank balances was mainly due to (i) cash granted to a borrower under Money Lending Business amounted to HK\$30.0 million; (ii) capital contribution to the JV Company amounted to HK\$15.5 million; and (iii) prepayment of purchasing products from a connected party amounted to HK\$15.5 million which was offset by the cash flow generated from Big Data Centre Services.

The Group had no bank borrowings in 2020 (2019: Nil) and generally financed its operations with internal resources.

As at 31 December 2020, the Group's current assets exceeded its current liabilities by HK\$94.1 million (2019: HK\$150.2 million). The Group had a capital surplus of HK\$409.7 million as at 31 December 2020 (2019: HK\$342.7 million).

The gearing ratio of the Group (total borrowings divided by shareholders' funds) was nil as at 31 December 2020 (2019: 2.8%).

During the Year, the Company has alloted and issued a total of 63,164,000 ordinary shares (the "Placing Shares") to not less than six placees at the placing price of HK\$0.26 per share. The gross proceeds and net proceeds from the placing amounted to approximately HK \$16,423,000 and HK\$16,028,000, respectively. The net proceeds were used for expanding the capital base for the big data centres operations.

The Placing Shares have an aggregate nominal value of HK\$6,316,400 and the market value of the Placing Shares was HK\$19,896,660. The net price of the Placing Shares was approximately HK\$0.25 per Placing Share.

As at 31 December 2020, approximately HK\$9.61 million of the net proceeds were applied in accordance with the planned use of proceeds. The unused proceeds of approximately HK\$6.42 million are intended to be used as previously disclosed by the Company in the year 2021. The Directors are not aware of any material change or delay in the use of proceeds.

For details, please refer to the announcements of the Company dated 24 September and 9 October 2020, respectively.

OUTLOOK

With our successful experiences in the operation and management of Big Data Centres, the Group expanded into the business of proprietary cryptocurrency mining and procured 4,000 data processors in February 2020. The data processors will be placed in our big data centres to mine cryptocurrencies ourselves. It is expected that the proprietary cryptocurrency mining business will generate profitable returns and contribute to our revenue in 2021.

The Company is committed to become the industry benchmark of big data centre services in terms of the scale, regulatory qualification, stability of power system, and environmental protection. We have entered into an agreement to acquire the remaining 49% interest in the third data centre in January 2021, following the completion of which, the third data centre will become wholly owned by the Company. The Company will further improve the efficiency of investment promotion, optimize the service content including but not limited to accelerate the development of other value-added services to attract more high-quality customers and strive to increase the capacity of the big data centres, which would bring more considerable revenue to the Group. We believe that, under the new environment, we shall actively seek changes, adhere to the spirit of innovation, and leverage our core experience and corporate resources to achieve long-term benefits for the Group and our shareholders.

CHARGES ON GROUP ASSETS

None of the Group's assets were pledged as of 31 December 2020 and 2019.

EXPOSURE TO FLUCTUATIONS IN EXCHANGE RATES

As at 31 December 2020 and 2019, all assets and liabilities of the Group were denominated in Renminbi, Hong Kong dollars and United States dollars. Since the impact to foreign exchange exposure has been insignificant, no hedging or other alternatives have been implemented.

STAFF AND REMUNERATION POLICY

As at 31 December 2020, the Group had a total of 98 employees (2019: 90). For the year ended 31 December 2020, the Directors received total emoluments of approximately HK\$7.0 million (2019: HK\$9.2 million), including non-cash share-based payments to Directors of HK\$2.5 million in 2020 (2019: HK\$4.5 million). The Group continues to provide remuneration packages to employees that are in line with market practices and past performance. The Group also provides employee benefits such as mandatory provident fund, medical insurance, staff training programs and share option schemes.

CAPITAL COMMITMENT AND CONTINGENT LIABILITIES

The Group's capital commitments at the end of the reporting period are as follows:

2020	2019
HK\$'000	HK\$'000
33	75,788

As at 31 December 2020 and 2019, the Group did not have any significant contingent liabilities.

IMPORTANT EVENTS AFTER THE FINANCIAL YEAR

(a) Disposal of a non-wholly owned subsidiary

Reference is made to the announcement of the Company dated 12 January 2021. On 12 January 2021, Interactive Lab Limited (a wholly-owned subsidiary of the Company) and the JV Partner a substantial shareholder of the JV Company, entered into a repurchase agreement, pursuant to which the JV Partner shall repurchase the shares of the JV Company held by Interactive Lab Limited at the total repurchase price in the amount of US\$2 million (the "Repurchase"). As of the date of this report, the consideration for the Repurchase has been fully settled by the JV Partner and the JV Company has ceased to be a subsidiary of the Company.

(b) Issuance of subscription shares to 500.com Limited ("500.com")

Subsequent the end of the Year, the Company and 500.com, the controlling shareholder of the Company, entered into a subscription agreement on 28 January 2021, pursuant to which 500.com has conditionally agreed to subscribe for, and the Company has conditionally agreed to allot and issue an aggregate of 169,354,839 ordinary shares of the Company at the subscription price of HK\$0.62 per share (the "Subscription").

Details of the Subscription were set out in the Company's announcements and circular dated 28 January 2021, 11 February 2021 and 11 March 2021 (the "Announcements and Circular"). As of the date of this report, the Subscription has yet been completed.

(c) Acquisition of the equity interest of Ganzi Changhe Hydropower Consumption Service Co., Ltd. (the "Target")

Reference is made to the Announcements and Circular. On 28 January 2021, Loto Interactive Information Technology (Shenzhen) Limited (樂透互娛信息技術 (深圳)有限公司) (the "Purchaser"), a wholly-owned subsidiary of the Company, and Shenzhen Chengyou Technology Co., Ltd. (深圳市誠佑科技有限公司) and Mr. Guo Xiaoquan (郭筱荃) (collectively, the "Sellers") entered into an acquisition agreement, pursuant to which the Purchaser has conditionally agreed to purchase and the Sellers have conditionally agreed to sell an aggregate of 49% equity interest of the Target for a cash consideration of RMB88.2 million (the "Acquisition"). Completion of the Acquisition is conditional upon the satisfaction or waiver (as the case may be) of several conditions. As of the date of this report, the Acquisition has yet been completed.

(d) Entering into of the Services Framework Agreement

Reference is made to the announcement of the Company dated 24 March 2021. On 24 March 2021, the Target entered into a services framework agreement (the "Services Framework Agreement") with Chongqing Yusheng Information Technology Co., Ltd. (重慶宇盛信息技術有限公司), an indirect wholly-owned subsidiary of 500.com ("Chongqing Yusheng"), pursuant to which the Target will provide storage and comprehensive big data centre services in respect of the data processors placed by Chongqing Yusheng in the big data centre operated by the Target.

BIOGRAPHICAL DETAILS OF DIRECTORS AND SENIOR MANAGEMENT

BOARD OF DIRECTORS

Ms. Zhang Jing

Chairman and Non-executive Director

Ms. Zhang, aged 39, was appointed as the chairman of the Company and a non-executive Director on 2 January 2020. She is also the chairman of the nomination committee of the Company. Ms. Zhang joined 500.com Limited (NYSE stock code: WBAI), a company listed on the New York Stock Exchange and the holding company of the Company, since April 2007. She is currently the senior director of human resources of 500.com Limited and a director of certain subsidiaries of 500.com Limited. Ms. Zhang was the vice president of 500wan HK Limited, a subsidiary of 500.com Limited, from April 2017 to June 2018. From June 2008 to June 2016, she was the finance supervisor responsible for managing online platform transaction funds. Ms. Zhang has over 10 years of financial management and personnel management experiences. Ms. Zhang holds a bachelor's degree in medicine from Hubei Minzu University (formerly known as Hubei Minzu College) in 2004.

Mr. Yan Hao

Chief Executive Officer and Executive Director

Mr. Yan, aged 42, is an executive Director, chief executive officer, compliance officer and authorised representative of the Company appointed on 1 September 2020. He was an independent non-executive Director from 10 July 2017 to 7 August 2020. He was also the chairman of the remuneration committee and a member of the nomination committee of the Company from 10 July 2017 to 7 August 2020. Mr. Yan is currently a lawyer of Junzejun Law Offices. Mr. Yan currently serves as an arbitrator for the World Intellectual Property Organization, the Hong Kong International Arbitration Centre, the Shenzhen Court of International Arbitration, and the Guangzhou Arbitration Commission, respectively, as well as a panellist of the Asian Domain Name Dispute Resolution Centre. Mr. Yan obtained a bachelor of laws from Wuhan University in 2001, a master of laws from The University of Hong Kong in 2003 and a master of laws from Stanford University in 2016. Mr. Yan is qualified to practice law in the PRC and is also a registered foreign lawyer in Hong Kong.

Ms. Huang Lilan

Executive Director/Chief Financial Officer

Ms. Huang, aged 38, was appointed as an executive Director on 23 March 2018 and the chief financial officer of the Company on 6 June 2017. She is also a director of certain subsidiaries of the Company. Ms. Huang has more than a decades' experience in accounting, auditing, taxation and financial management. Prior to joining the Company, Ms. Huang served as the financial director of a subsidiary of 500.com Limited since 2011. Ms. Huang also served as senior auditor at Ernst & Young from 2006 to 2011. She received a bachelor's degree in business and finance from the University of International Business and Economics in 2005 and has been professionally certified by the Institute of Management Accountants.

BIOGRAPHICAL DETAILS OF DIRECTORS AND SENIOR MANAGEMENT

Mr. Yuan Qiang

Non-executive Director

Mr. Yuan, aged 47, was appointed as a non-executive Director on 2 January 2018. He is also a member of both the audit committee and remuneration committee of the Company. He is currently the chief financial officer of 500.com Limited. Mr. Yuan was the senior vice president of finance of 500.com Limited from July 2016 to December 2017, the vice president of finance of 500.com Limited from June 2014 to July 2016 and the financial director of 500.com Limited from March 2013 to June 2014. Mr. Yuan served as the financial manager of a subsidiary of 500.com Limited from January 2001 to March 2013. Mr. Yuan has more than 15 years of experience in accounting, financial control, corporate finance and mergers & acquisitions. Mr. Yuan obtained a bachelor's degree in financial management from Zhongnan University of Finance and Economics.

Dr. Lu Haitian

Independent Non-executive Director

Dr. Lu, aged 41, was appointed as an independent non-executive Director on 10 July 2017. He is also a member of both the audit committee and nomination committee of the Company. Dr. Lu is currently a professor in law at the School of Accounting and Finance and the director of Chinese Mainland Affairs at The Hong Kong Polytechnic University. He served at the School of Accounting and Finance in The Hong Kong Polytechnic University first as a visiting lecturer in law from September 2005 to June 2007 and later as an assistant professor in law from June 2007 to June 2012, associate professor in law from July 2012 to June 2018, and the associate dean (external relations and development) in the Facility of Business from January 2018 to January 2020. Dr. Lu has more than 15 years of experience in accounting and law. He obtained a bachelor of international economic law from Nanjing University in 2001, a master of laws from The University of Liverpool in 2002, and a Ph.D. in law from National University of Singapore in 2007. Dr. Lu is currently an independent non-executive director of K. H. Group Holdings Limited (stock code: 1557), a company listed on the Main Board of The Stock Exchange of Hong Kong Limited, an independent non-executive director of China Life Trustees Limited, and an independent non-executive director of 9F Inc. (stock code: JFU), a company listed on the Nasdaq.

Mr. Lin Sen

Independent Non-executive Director

Mr. Lin, aged 44, was appointed as an independent non-executive Director on 10 July 2017. He is also the chairman of the audit committee and a member of the remuneration committee of the Company. From June 2017 to April 2019, Mr. Lin served as the chief financial officer of 7Road Holdings Limited (stock code: 797), a company listed on the Main Board of The Stock Exchange of Hong Kong Limited. From November 2006 to January 2017, Mr. Lin served as the chief financial officer of Palm Commerce Information Technology (China) Co., Ltd. (掌信彩 通信息科技 (中國)有限公司) ("Palm Commerce"), which is a lottery service provider in the PRC. Palm Commerce is currently a subsidiary of Telling Telecommunication Holding Co., Ltd. (天音通信控股股份有限公司) (SHE stock code: 000829), a company listed on the Shenzhen Stock Exchange. From February 2001 to July 2006, Mr. Lin served as manager of PricewaterhouseCoopers International Limited. Mr. Lin obtained a bachelor's degree in international business administration from Central University of Finance and Economics (中央財經大學) in 1998 and an executive MBA from China Europe International Business School (中歐國際工商管理學院) in 2011. In 2010, Mr. Lin became a registered accountant in the PRC.

BIOGRAPHICAL DETAILS OF DIRECTORS AND SENIOR MANAGEMENT

Mr. Huang Jian

Independent Non-executive Director

Mr. Huang, aged 56, was appointed as an independent non-executive Director on 7 August 2020. He is also the chairman of the remuneration committee and a member of the nomination committee of the Company. Mr. Huang is the co-founder of Shenzhen Eerduosi Garment Co., Ltd. (深圳市鄂爾多斯服裝有限公司) and currently serves as its vice-chairman. He is also the founder of Shenzhen Jieyitang Culture Co., Ltd. (深圳皆一堂文化有限公 司) in 2012 and currently serves as its chairman of the board. Mr. Huang worked at Beijing China Resources Group from 1989 to 1992 and served as the vice general manager of the retail business group of Hong Kong China Resources Group from 1992 to 2001. Mr. Huang co-founded Shenzhen Eerduosi Garment Co., Ltd. (深圳市鄂爾 多斯服裝有限公司) in 2002 and founded Shenzhen Jieyitang Culture Co., Ltd. (深圳皆一堂文化有限公司) in 2012. Mr. Huang studied in the Department of Chemistry of Xiamen University and obtained his bachelor's degree in 1985. He further obtained a Master of Business Administration degree from Xiamen University in 1989.

SENIOR MANAGEMENT

Ms. Huang Lilan

Chief Financial Officer

(Please refer to the profile details in above section)

Mr. Liu Jibin

General Manager of Big Data Services Centre

Mr. Liu, aged 41, is the General Manager of Big Data Services Centre of our Group. He joined the Group in January 2019 and is responsible for supervising the overall operation of our blockchain data centre business unit. He has been involved in the big data centre industry since 2017 and has served as director of various companies in the big data centre industry and invested in big data centres in Xinjiang and Sichuan in his personal capacity. From 2015 to 2017, he founded Chengdu Lianyijia Information Technology Co., Ltd., a company mainly engaged in communication and e-commerce business, and served as the executive director. From 2007 to 2015, Mr. Liu founded Sichuan Moming Information Technology Co., Ltd., a company mainly engaged in call centre services, and served as the executive director. From 2002 to 2007, he worked in various branch companies of China Unicom. Mr. Liu obtained a bachelor's degree in Chinese Language and Literature from Sichuan University in 2002.

Ms. Chow Chiu Man, Mandy

Company Secretary

Ms. Chow, aged 44, joined the Group in September 2004. She was appointed as the company secretary and authorised representative of the Company on 10 July 2017. She has over 15 years of experience in company secretarial affairs. Ms. Chow is a chartered secretary, a chartered governance professional and an associate of both The Hong Kong Institute of Chartered Secretaries and The Chartered Governance Institute in the United Kingdom. She holds a bachelor of business degree from Monash University and a master degree in corporate governance from The Hong Kong Polytechnic University.

CORPORATE GOVERNANCE PRACTICES

The Company recognises the importance of good corporate governance to safeguard the interest of the Company's shareholders (the "Shareholders") and achieved these by an effective board, segregation of duties with clear accountability, sound internal controls, appropriate risk assessment procedures and transparency to all the Shareholders. Throughout the year ended 31 December 2020 (the "Year"), the Company complied with all the Code Provisions of the Corporate Governance Code (the "CG Code") set out in Appendix 15 to the Rules Governing the Listing of Securities on GEM of The Stock Exchange of Hong Kong Limited (the "GEM Listing Rules"), save for the following:

Under the code provision C.1.2 of the CG Code, management should provide all members of the Board with monthly updates to enable the Board as a whole and each Director to discharge their duties. Although the management of the Company has not provided the Board with monthly updates, the Company has based on business situation, provided the Board, from time to time, with updated business information to enable the Board as a whole and each director to discharge their duties.

The Board will continue to review and monitor the corporate governance practices of the Company to ensure compliance with the CG Code and maintain high standard of corporate governance practices.

BOARD OF DIRECTORS

Composition of the Board

The composition of the Board reflects the necessary balance of skills and experience desirable for the effective leadership of the Company. The Board currently comprises seven members, including two executive Directors, two non-executive Directors and three independent non-executive Directors.

The Board members as at the date of this annual report are as follows:

Ms. Zhang Jing* (Chairman) Mr. Yan Hao# (Chief Executive Officer) Ms. Huang Lilan# Mr. Yuan Qiang* Dr. Lu Haitian+ Mr. Lin Sen+ Mr. Huang Jian+

• Executive Director

• * Non-executive Director
• • Independent non-executive Director

The biographical details of the Directors are set out on pages 11 to 13 of this annual report. An updated list of the Directors and their roles and functions is available on the websites of the Company and The Stock Exchange of Hong Kong Limited (the "Stock Exchange").

The changes to the composition of the Board and Board committees during the Year and up to the date of this report were as follows:

2 January 2020	Mr. Pan Zhengming resigned as a non-executive Director and accordingly ceased to be the chairman of the Board and a member and the chairman of the Nomination Committee
2 January 2020	Ms. Zhang Jing was appointed as a non-executive Director, the chairman of the Board and a member and the chairman of the Nomination Committee
7 August 2020	Mr. Yan Hao resigned as an independent non-executive Director and accordingly ceased to be the chairman of the Remuneration Committee and a member of the Nomination Committee
7 August 2020	Mr. Huang Jian was appointed as an independent non-executive Director, the chairman of the Remuneration Committee and a member of the Nomination Committee
1 September 2020	Mr. Yan Hao was appointed as an executive Director and an additional chief executive officer
31 October 2020	Mr. Wang Bingzhong resigned as an executive Director and a chief executive officer

Composition of the independent non-executive Directors reflects the necessary balance of skills and varied business experiences of different geographical regions and independence in their decision making for effective and constructive contribution to the Board for governance of the Company. During the Year, the Board at all times had three independent non-executive Directors (representing more than one-third of the Board) with at least one of them possessing appropriate professional qualification, or accounting or related financial management expertise.

The Company has received from each of the independent non-executive Directors an annual confirmation of independence pursuant to the independence guidelines set out in the GEM Listing Rules. The Nomination Committee and the Board, based on such confirmations consider that all independent non-executive Directors are independent.

Independent non-executive Directors are identified in all corporate communications containing the names of the Directors.

To the best knowledge of the Directors, there is no financial, business, family or other material relationships among the Directors. All of them are free to exercise their independent judgment.

Roles and Responsibilities of the Board

The Company is headed by the Board which is responsible for the leadership, control and promotion of success of the Group in the interest of the Shareholders by directing and supervising its affairs and by formulating strategic directions and monitoring the financial and management performance of the Group.

Chairman and Chief Executive Officer

The Chairman and the Chief Executive Officer positions are currently held by Ms. Zhang Jing, a non-executive Director, and Mr. Yan Hao, an executive Director, respectively.

The roles of Chairman and Chief Executive Officer are separate and held by different persons to ensure their independence, accountability and responsibility. The division of the responsibilities between the Chairman and the Chief Executive Officer has been established and set out clearly in writing. The Chairman is responsible for setting the Group's strategy and business directions, overseeing the functioning of the Board and ensuring that the Board is functioning properly. The Chief Executive Officer is an executive Director, supported by management, is responsible for managing the Group's business, including implementation of major strategies, making day-to-day decisions and managing business operations.

Appointments and Re-election of Directors

All Directors have formal letters of appointment with the Company, which set out the key terms of their appointment. Each executive Director was appointed for a term of three years while each non-executive Director and independent non-executive Director was appointed for a term of two years from the date of appointment. The term of appointment of each Director is subject to retirement by rotation and re-election at each annual general meeting in accordance with the articles of association of the Company (the "Articles") and the GEM Listing Rules.

In accordance with Article 86 (3) of the Company's Articles, any director appointed to fill a casual vacancy on the Board or, as an addition to the Board shall hold office only until the next following general meeting of the Company (in the case of filling a casual vacancy) or until the next following annual general meeting of the Company (in the case of an addition to the Board), and shall then be eligible for re-election. In accordance with Article 87 of the Company's Articles, at each annual general meeting, one-third of the Directors for the time being, or, if their number is not a multiple of three, then the number nearest to but not less than one-third, shall retire from office by rotation, provided that every Director (including those appointed for a specific term) shall be subject to retirement by rotation at least once every three years.

This year, Ms. Zhang Jing, Ms. Huang Lilan and Mr. Lin Sen will retire from office by rotation at the forthcoming annual general meeting. The Board and the Nomination Committee recommend their re-appointments. The biographies of the retiring Directors proposed to be re-elected at the annual general meeting are set out in the circular sent with this annual report to provide information to shareholders to decide on their re-elections.

Board Diversity Policy

The Company recognises and embraces the benefits of having a diverse member of the Board to uphold corporate governance. The Board has adopted its board diversity policy to set out the approach by the Company to achieve diversity on the Board. The Company considers diversity can be achieved from different age, gender, cultural and educational background, ethnicity, professional experience, skills, knowledge and length of service. All Board appointments are considered according to objective criteria, having regard to benefits of diversity, and decided on merits.

The Nomination Committee monitors the implementation of the board diversity policy and will at appropriate time set measurable objectives for achieving diversity under the board diversity policy. The Nomination Committee reviews the board diversity policy from time to time to ensure its continued effectiveness.

Nomination Policy

The Board adopted a nomination policy (the "Nomination Policy") to identify and evaluate a candidate for nomination to the Board for appointment or to the Shareholders for election as a Director. The nomination committee of the Company shall consider, among others, the following criteria in evaluating and selecting candidates for directorships:

• (a) diversity in all its aspects, including but not limited to skills, knowledge, gender, age, ethnicity, cultural and educational background, professional experience and other personal qualities of the candidate;
• (b) ability to exercise sound business judgment and possess proven achievement and experience in directorship including effective oversight of and guidance to management;
• (c) commitment of the candidate to devote sufficient time for the proper discharge of the duties of a Director. In this regard, the number and nature of offices held by the candidate in public companies or organisations, and other executive appointments or significant commitments will be considered;
• (d) potential/actual conflicts of interest that may arise if the candidate is selected;
• (e) independence of the independent non-executive director candidates must satisfy the independence requirements under the GEM Listing Rules; and
• (f) in the case of a proposed re-appointment of an independent non-executive director, the number of years he/she has already served.

Each proposed new appointment, election or re-election of a director shall be assessed and/or considered against the criteria and qualifications set out in the Nomination Policy by the Nomination Committee which shall recommend its views to the Board and/or the Shareholders for consideration and determination.

The Board will from time to time review the Nomination Policy and monitor its implementation to ensure its continued effectiveness and compliance with regulatory requirements and good corporate governance practice.

Securities Dealings by Directors and Employees

The Company has adopted its own code for dealing in the Company's securities by Directors and employees who are likely to be in possession of inside information in relation to the securities of the Company (the "Code of Securities Dealings") on terms no less exacting than the required standards set out in Rules 5.48 to 5.67 of the GEM Listing Rules. The Company has received confirmation from all Directors that they have complied with the required standards set out in the Code of Securities Dealings throughout the Year.

During the Year, letters were sent to the Directors before the commencement of the "black-out periods" in preparation for the annual, interim and quarterly results announcements to remind them that they should not deal in the securities of the Company during such periods.

Directors' Induction and Continuing Professional Development

Each newly appointed Director is provided with necessary induction and information to ensure that he/she has a proper understanding of the Company's operations and businesses as well as his/her responsibilities under relevant statutes, laws, rules and regulations. The company secretary of the Company (the "Company Secretary") from time to time provides the Directors with updates on latest development and changes in the GEM Listing Rules and other relevant legal and regulatory requirements.

The Company encourages all Directors to participate in continuous professional development to develop and refresh their knowledge and skill. During the Year and up to the date of this report, all Directors have provided their records of training they received to the Company for record and a summary of which is set out in page 22 of this report.

Board Meetings

The Board met four times during the year ended 31 December 2020. In addition, the chairman of the Board met with the independent non-executive Directors once without the presence of other Directors present during the Year.

The Board meets regularly over the Company's affairs and operations. At the Board meetings, the Directors considered and approved the financial results and budget, discussed the overall strategy as well as the operation and financial performance of the Group. The Directors either participated in the Board meetings in person, by phone or through other means of electronic communication in accordance with the Company's Articles. At least 14 days' notice of the meetings was given. Meeting agenda and accompanying Board papers were provided to all Directors at least three days in advance of every regular Board meeting. With the full support of the management of the Company, such Board papers and materials are provided in a timely manner and in a form and quality sufficient with appropriate explanation to enable the Board to prepare for the meetings and keep the Directors appraised of the latest developments and financial position of the Group.

All Directors have access to the advice and services of the Company Secretary to ensure that the Board procedures, and all applicable rules and regulations are followed. Directors are also entitled to seek independent professional advice in performing their duties at the Company's expense, where necessary.

The minutes of Board meetings record the matters discussed and decisions resolved at Board meetings. The minutes would be sent to all Directors within reasonable time after each meeting. The Company Secretary keeps full records of the meetings in accordance with applicable laws and regulations.

The Articles contain provisions requiring the Directors to abstain from voting and not to be counted in the quorum at meetings for approving transactions in which such Directors or any of their associates have a material interest. According to current Board practices, any material transaction, which involves a conflict of interest for a substantial shareholder or a Director, will be considered and dealt with by the Board at a duly convened Board meeting.

The Company has arranged appropriate liability insurance cover in respect of potential legal actions against its Directors and officers. The coverage and the amount insured are reviewed annually by the Company. In 2020, no claims under the insurance policy were made.

DELEGATION BY THE BOARD

Management Functions

The overall management and control of the Company's business are vested in its Board, which assumes responsibility for its leadership and control of the Company and is collectively responsible for promoting the success of the Company by directing and supervising the Company's affairs.

Management, under the leadership of the Chief Executive Officer, is responsible for the day-to-day management of the Group's businesses and the implementation of the strategies and policies as determined by the Board.

Where the Board delegates aspects of its management and administrative functions to the management, it gives clear directions as to the powers of management and periodically reviews the delegations to the management to ensure that they are appropriate and continue to be beneficial to the Group as a whole.

Board Committees and Corporate Governance Functions

The Board has established three Board Committees to oversee various aspects of the Group's affairs: the Audit Committee, the Nomination Committee and the Remuneration Committee. The Board Committees are governed by their respective terms of reference which clearly defined their authorities and duties and are provided with sufficient resources to discharge their duties. The chairmen of the Board Committees report regularly to the Board their work, findings and recommendations. The terms of reference of the Audit Committee, the Nomination Committee and the Remuneration Committee are available on the websites of the Company and the Stock Exchange. Chairmen and members of the committees are set out on page 2 of this annual report.

Each committee is provided with sufficient resources to perform its duties. It may seek independent professional advice at the Company's expense, where necessary.

(1) Audit Committee

The Audit Committee currently comprises one non-executive Director, namely Mr. Yuan Qiang, two independent non-executive Directors, namely Dr. Lu Haitian and Mr. Lin Sen and is chaired by Mr. Lin Sen who has substantial accounting and related financial management expertise. The Audit Committee is responsible for (i) monitoring and reviewing the effectiveness of the Group's financial reporting system and, risk management and internal control systems; (ii) reviewing the Group's financial information; and (iii) overseeing the relationship with the auditors of the Company.

During the Year, the Audit Committee held four meetings and its major tasks performed were:

• Reviewed the Group's financial results and reports on a quarterly basis;
• Reviewed the approach and methodology applied with respect to the key audit matters included in the year end auditor's report;
• Reviewed the continuing connected transactions of the Group;
• Reviewed and approved the external auditors' audit services and non-audit services fees;
• Reviewed the effectiveness of the Group's internal audit functions;
• Reviewed the Group's risk register and discussed the enhancement procedures;
• Recommended to the Board on the re-appointment of the external auditor at the 2020 AGM;
• Reviewed the adequacy and effectiveness of the risk management and internal control systems;
• Reviewed the adequacy of the resources, staff qualifications and experience, training programmes and budget of the Group's accounting, financial reporting and internal audit functions;
• Reviewed and approved the internal audit plans; and
• Reviewed the adequacy and effectiveness of the risk management and internal control systems.

None of the members of the Audit Committee is a former or existing partner of the Company's existing auditor. There was no disagreement between the Board and the Audit Committee on the selection, appointment, resignation or dismissal of the external auditors.

(2) Remuneration Committee

The Remuneration Committee currently comprises one non-executive Director, namely Mr. Yuan Qiang and two independent non-executive Directors, namely Mr. Lin Sen and Mr. Huang Jian, and is chaired by Mr. Huang Jian. A majority of the members of the Remuneration Committee consists of independent non-executive Directors. The Remuneration Committee is responsible for (i) reviewing the remuneration packages of the executive Directors and senior management; (ii) making recommendations to the Board on the Directors' fee structure; and (iii) reviewing and approving compensation-related issues.

During the Year, the Remuneration Committee held two meetings and its major tasks performed were:

• Approved the annual salary levels of executive Directors and senior management;
• Approved certain bonus payments;
• Reviewed and approved the remuneration of Directors; and
• Approved the remuneration package of the new appointed Chief Executive Officer and Directors.

Details of remuneration of the Directors, chief executive and senior management are set out in notes 11 and 38 to the consolidated financial statements.

(3) Nomination Committee

The Nomination Committee currently comprises one non-executive Director, namely Ms. Zhang Jing and two independent non-executive Directors, namely Dr. Lu Haitian and Mr. Huang Jian, and is chaired by Ms. Zhang Jing. The Nomination Committee is responsible for (i) reviewing the structure, size and composition of the Board; (ii) assessing the suitability and qualification of any proposed director candidate; (iii) assessing the independence of the Independent Non-executive Directors; (iv) making recommendation to the Board on the appointment or re-appointment of Directors; and (v) monitoring and reviewing the implementation of the Board Diversity Policy.

During the Year, the Nomination Committee held two meetings and its major tasks performed were:

• Reviewed the structure, size, composition and diversity of the Board;
• Assessed and reviewed the independence of independent non-executive Directors;
• Recommended to the Board on the re-election of retiring Directors at the annual general meeting; and
• Recommended to the Board on the appointment of Directors.

Corporate Governance Functions

The Board is responsible for performing the corporate governance duties set out in the CG Code which include (i) developing and reviewing the Company's policies and practices on corporate governance and making recommendations to the Board; (ii) reviewing and monitoring the training and continuous professional development of Directors and senior management; (iii) reviewing and monitoring the Company's policies and practices in compliance with the legal and regulatory requirements; and (iv) developing, reviewing and monitoring the code of conduct and compliance manual applicable to employees and Directors; and (v) reviewing the Company's compliance with the code provisions in the CG Code.

2020 BOARD AND COMMITTEE ATTENDANCE AND TRAINING RECORDS

The attendance of the Directors at the annual general meeting, extraordinary general meeting, Board meetings, and Board Committee meetings of the Company and training records for the Year are as follows:

	Meetings attended/eligible to attend in 2020 (Note 5)
	Board	Audit Committee	Nomination Committee	Remuneration Committee	Annual General Meeting	Extraordinary General Meeting	Type of Training
Directors
Ms. Zhang Jing* (note 1)	4/4		2/2		1/1	1/1	(A)
Mr. Wang Bingzhong# (note 2)	3/3				1/1	1/1	(A)
Mr. Yan Hao# (note 3)	4/4		2/2	2/2	1/1	1/1	(A)
Ms. Huang Lilan#	4/4				1/1	1/1	(A)
Mr. Yuan Qiang*	3/4	3/4		1/2	1/1	1/1	(A)
Dr. Lu Haitian+	4/4	4/4	2/2		1/1	1/1	(A)
Mr. Lin Sen+	4/4	4/4		2/2	1/1	1/1	(A)
Mr. Huang Jian+ (note 4)	1/1		0/0	0/0	0/0	0/0	(A)
Number of meetings held in
2020	4	4	2	2	1	1

Executive Director

* Non-executive Director

• Independent non-executive Director

Notes:

• 1. Appointed as a non-executive Director, the chairman of the Board and a member and the chairman of the Nomination Committee with effect from 2 January 2020.
• 1. Resigned as an executive Director and a chief executive officer with effect from 31 October 2020.
• 1. Resigned as an independent non-executive Director and accordingly ceased to be the chairman of the Remuneration Committee and a member of the Nomination Committee with effect from 7 August 2020; and appointed as an executive Director and an additional chief executive officer with effect from 1 September 2020.
• 1. Appointed as an independent non-executive Director, the chairman of the Remuneration Committee and a member of the Nomination Committee with effect from 7 August 2020.
• 1. Directors may attend meetings in person, by phone or through other means of electronic communication in according with the Company's Articles.
• (A) Attending seminar or briefings/perusal of materials in relation to business or Directors' duties.

COMPANY SECRETARY

The Company Secretary, Ms. Chow Chiu Man, Mandy, supports the Board and Board committees by ensuring good information flow within the Board and that the Board's policy and procedures and all applicable rules and regulations are followed. The Company Secretary is responsible for advising the Board on corporate governance matters and facilitating the induction and continuous professional development of Directors. During the Year, the Company Secretary undertook not less than 15 hours of relevant professional training to update her skills and knowledge. Her biography is set out on page 13 of this annual report under the section headed "Biographical Details of Directors and Senior Management".

ACCOUNTABILITY AND AUDIT

Financial Reporting

The Board is responsible for presenting a balanced, clear and comprehensive, assessment of the Group's performance, position and prospects in all corporate communications. Management provides the Board with quarterly updates, with a view to giving it a balanced and understandable assessment of the Group's performance, financial position and prospects to enable the Board as a whole and each Director to discharge their duties.

The Directors are responsible for the preparation of the Group's consolidated financial statements which give a true and fair view of the Group's state of affairs, results and cash flows for the year. In preparing the consolidated financial statements, the Directors have selected suitable accounting policies and applied them consistently; made prudent, fair and reasonable judgments and estimates, and prepared the consolidated financial statements on a going concern basis.

The statement of the auditors of the Company about its responsibilities on the consolidated financial statements of the Group is set out in the Independent Auditor's Report on pages 65 to 68.

The Directors are not aware of any material uncertainties relating to events or conditions that may cast significant doubt upon the Company's ability to continue as a going concern.

Risk Management and Internal Control

Responsibility

The Group upholds the highest standards of integrity and credibility across all levels of its organisation.

The Board acknowledges its responsibility for establishing and maintaining sound systems of internal control and risk management on an ongoing basis to safeguard the shareholders' investment and the Group's assets. The controls built into the risk management system are intended to manage rather than eliminate the risk of failure to achieve business objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss.

To fulfill this responsibility, the executive Directors are assigned to oversee the implementation of the Group's internal controls and risk management policy and to monitor the business and operations of business units of the Group. The Board also assigned the Audit Committee to review and supervise the financial reporting process and oversee the risk management and internal control systems of the Group.

The Board has, through the Audit Committee, conducted review of the effectiveness of the risk management and internal control systems of the Group for the Year with the assistance of an external independent consultant.

Risk Management and Internal Control

Risk management

The risk management policy provides a risk assessment framework to identify and evaluate the material business risk, operational risk, financial risk and compliance risk. The Group is committed to the identification, evaluating, and management of risks associated with its business activities through ongoing assessment of a risk register, by considering the likelihood and impact of each identified risk. For any newly identified significant risks, the Group will evaluate its financial or operational impacts to the Group and adopt mitigation measures to manage such risks. A risk assessment report has been reported to the Audit Committee and reviewed by the Board, which facilitates the Board in considering the changes in the nature and extent of significant risks, the Group's ability respond to changes in its business and the external environment, as well as management's ongoing monitoring of risks.

Internal Control

The Group's internal control system is designed to safeguard assets against misappropriation and unauthorised disposition and to manage operational risks. Review of the Group's internal controls covers major financial, operational and compliance controls. An internal control review report including the examination results of the review works covering areas such as corporate governance, finance, operations and compliance, with recommendations on the control weaknesses of the Group was duly reported to the Audit Committee and the Board for their assessment of the internal control effectiveness of the Group. For any identified control weaknesses, appropriate actions will be taken in a timely manner. All remedial actions will be regularly followed up when necessary to ensure the material control weaknesses have been duly addressed.

The Board considers that the risk management and internal control systems are effective and adequate and that the Group has complied with the code provisions relating to risk management and internal control of the CG Code.

Procedures and Internal Controls for the Handling and Dissemination of Inside Information

The Group complies with requirements of the Securities and Futures Ordinance ("SFO") and the GEM Listing Rules. The Group discloses inside information to the public as soon as reasonably practicable unless the information falls within any of the safe harbours as provided in the SFO. Before the information is fully disclosed to the public, the Group ensures the information is kept strictly confidential. If the Group believes that the necessary degree of confidentiality cannot be maintained or that confidentiality may have been breached, the Group would immediately disclose the information to the public. The Group is committed to ensuring that information contained in announcements are not false or misleading as to a material fact, or false or misleading through the omission of a material fact in view of presenting information in a clear and balanced way, which requires equal disclosure of both positive and negative facts.

Audit Committee Supervision

The Audit Committee holds the necessary meetings with the Company's chief financial officer, an external independent consultant and the external auditor to review the financial statements and auditor's reports on financial, internal control and risk management matters. The Audit Committee reports to the Board on significant internal control and risk management matters, suspected frauds or irregularities, and alleged infringement of laws, rules and regulations, which come to their attention.

The Board, through the Audit Committee, has conducted a review of the effectiveness of the Group's risk management and internal control systems for 2020 covering all material financial, operational and compliance controls and risk management functions, and considers that the systems are adequate and effective. The Board, through the Audit Committee, has also reviewed the adequacy of resources, staff qualifications and experience, training programmes and budget of the Group's accounting, internal audit and final reporting functions and considers that they are adequate.

Auditors' Remuneration

The Audit Committee is mandated to review and monitor the independence of the auditor to ensure objectivity and the effectiveness of the audit process of the financial statements in accordance with applicable standards. Members of the Audit Committee were of the view that the Company's external auditor, ZHONGHUI ANDA CPA Limited, is independent and has recommended the Board to re-appoint it as the Company's auditor at the 2021 AGM. The statement about its reporting responsibilities for the Company's financial statements is set out in the section headed "Independent Auditor's Report" on pages 65 to 68. The remuneration in respect of audit and non-audit services provided to the Group by the Company's auditors, ZHONGHUI ANDA CPA Limited and its affiliate companies for the year ended 31 December 2020 was:

Services rendered	Remuneration paid/payable HK\$'000
Audit services	720
Non-audit services (Note)	150
	870

Note: The non-audit services included the internal control review, risk assessment and other services

Compliance Officer

Mr. Yan Hao, the Chief Executive Officer and an executive Director, is the compliance officer of the Company. Please refer to his biographical details as set out in the "Biographical Details of Directors and Senior Management" in this annual report.

SHAREHOLDERS' RIGHTS

Procedures for Shareholders to Convene an Extraordinary General Meeting

Under Article 58 of the Articles, any one or more shareholders holding not less than one-tenth of the paid up capital of the Company and carrying the right of voting at the general meeting of the Company shall at all times have the right, by written requisition to the Board or the Company Secretary, to require an extraordinary general meeting to be called by the Board for the transaction of any business specified in such requisition; and such meeting shall be held within 2 months after the deposit of such requisition.

Such a requisition, specifying the shareholding information of the shareholder who made the requisition, must be signed by the shareholder and deposited at the registered office of the Company or the Company's principal place of business in Hong Kong, the details of which are provided in the "Corporate Information" section of this annual report.

If the Board does not within 21 days from the date of deposit of the requisition proceed duly to convene the meeting, the requisitionist(s) may convene the extraordinary general meeting in the same manner, and all reasonable expenses incurred by the requisitionist(s) as a result of the failure of the Board shall be reimbursed to them by the Company.

Procedures for Putting Forward Proposal at General Meetings

Shareholders are welcomed to put forward proposals relating to the operations and management of the Group to be discussed at general meetings. The proposals shall be sent to the Company Secretary by a written requisition with his/her/its detailed contact information to the Company's head office and principal place of business in Hong Kong (details of which are set out in the section headed "Corporate Information" of this annual report). Shareholders who wish to put forward a proposal should convene an extraordinary general meeting by following the procedures set out in "Procedures for Shareholders to Convene an Extraordinary General Meeting" above.

Right to Put Enquiries to the Board

Shareholders have a right to put enquiries to the Board. All enquiries should be in writing and sent to the Company Secretary at Units 813 & 815, Level 8, Core F, Cyberport 3, 100 Cyberport Road, Hong Kong or by email to info@lotoie.com.

Procedures for Nomination of Directors for Election

Under Article 88 of the Articles, shareholders are entitled to elect a person to be a Director at a general meeting. The procedures for nomination of Directors for election are available on the Company's website at www.lotoie. com.

COMMUNICATION WITH SHAREHOLDERS

Dividend Policy

The Company seeks to maintain a balance between meeting shareholders' expectations and prudent capital management with a sustainable dividend policy. The Company's dividend policy aims to allow shareholders to participate in the Company's profit and for the Company to retain adequate reserves for future growth. In proposing any dividend payout, the Company would consider various factors including the Company and the Group's actual and expected financial performance, general economic and financial conditions, business cycle of the Group and other internal or external factors that may have an impact on the business or financial performance and position of the Company; and the Company's future expansion plan.

Annual General Meeting

The Company considers the annual general meeting ("AGM") an important event, as it provides an opportunity for the Board to communicate with the shareholders. The Company supports the CG Code's principle to encourage shareholders' participation. Questioning by shareholders at the Company's AGM is encouraged and welcomed.

The Chairman, Board Committees' chairmen (or their delegates) and the Company's auditors attended the 2020 AGM and were on hand to answer questions.

Shareholders' Communication Policy

The Company Secretary responds to letters, emails and telephone enquiries from shareholders/investors. Shareholders and investors may contact the Company by email to info@lotoie.com or by mail to the Company Secretary at Units 813 & 815, Level 8, Core F, Cyberport 3, 100 Cyberport Road, Hong Kong. The website of the Company at www.lotoie.com also provides a medium to make information of the Group available to shareholders.

Shareholders' enquiries and concerns will be forwarded to the Board and/or relevant Board Committees of the Company, where appropriate, to answer the shareholders' questions.

Shareholders can also contact Computershare Hong Kong Investor Services Limited, the share registrar of the Company, if they have any enquiries about their shareholdings.

CONSTITUTIONAL DOCUMENTS

During the Year, there was no change in the Company's constitutional documents.

The directors (the "Directors") of the Company present their report together with the audited consolidated financial statements of the Company and its subsidiaries (collectively the "Group") for the year ended 31 December 2020 (the "Year").

PRINCIPAL ACTIVITIES AND BUSINESS REVIEW

The Company acts as an investment holding company. The activities of its principal subsidiaries, associates and joint venture are set out in notes 20, 21 and 22 respectively to the consolidated financial statements.

An analysis of the Group's performance for the Year by operating segments is set out in note 7 to the consolidated financial statements.

Further discussion and analysis of these activities as required by Schedule 5 to the Companies Ordinance, including a fair review of the Group's business, an indication of likely future development in the Group's business as well as particulars of important events affecting the Group that have occurred since the end of the Year can be found in the "Chairman's Statement" and the "Management Discussion and Analysis" set out on page 3 and pages 4 to 10 respectively of this annual report. An analysis of the Group's performance during the Year using financial key performance indicators is set out in the Group's Five-year Financial Summary on page 148 of this annual report. A description of the principal risks and uncertainties facing the Group, discussions on the Group's environmental policies and performance, the compliance with the relevant laws and regulations that have a significant impact on the Group and the account of the Group's key relationships with its employees, suppliers and customers are set out in the sections headed "Key Risks and Uncertainties", "Environmental Policies and Performance", "Compliance with the Relevant Laws and Regulations" and "Relationships with Employees, Suppliers and Customers" on pages 29 to 31. The above discussions form part of the business review as contained in this report of the Directors.

KEY RISKS AND UNCERTAINTIES

Risk relating to the PRC economy fluctuations

The Group's business operations are materially based in the People's Republic of China (the "PRC") and its products and services are primarily sold and provided for customers in PRC. The Group is exposed to the risks associated with the change in PRC overall economic conditions.

An outbreak of disease such as COVID-19 could potentially disrupt the Group's business operations. Such disease outbreak could lead to a decrease in the level of economic activity in affected districts or movement restriction imposed by government, which could adversely affect the Group's business and results of operations.

Besides, the global investment market has experienced fluctuations in 2020 due to the outbreak of COVID-19. The unstable stock market atmosphere can adversely affect the fair value of equity investments of the Group and thus affect the Group's financial performance and results of operations.

Risk relating to the supply of and price volatility in electric power

The Group consumes considerable amounts of electricity in operating its big data service centres. The electricity costs incurred by the Group are substantial. In order to provide stable supply of power in the big data centres at competitive costs, the Group has established cooperative relationship with various local subsidiaries of a leading state-owned enterprise in the power energy business in PRC. The Group is charged variable unit prices for supply of electricity during different seasons to reflect its average power supply costs. In the event that the Group is unable to secure new agreements with the utilities suppliers, there is no assurance of a stable and inexpensive electricity supply and the Group's future costs of operation could be adversely affected.

In addition, potential electricity supply interruption at big data centres may occur due to damages of electric power transmission facilities, construction defects and errors in operation. Any electricity interruption may adversely affect the Group's results of operations.

Risk relating to system continuity

As an operator of the big data centres, the Group provides the premises, hardware support, power supply and ancillary supervision and management service to customers. The Group has also developed a software which enables its customers to remotely monitor their data processors and obtain real-time information such as the average computing capacity and operating time. It involves receiving, storage and processing personal information and other privacy data. Any system failure or computer virus attack may result in operational disruption and breach of data privacy. The Group's business and operation results would be adversely affected.

Risk relating to extraordinary events such as natural hazards

The big data centres of the Group are strategically located near the rivers and rural areas for the benefits of obtaining cost effective energy generated by hydroelectric power plants and safeguarding the big data centres from relative ease of assess. However, if any natural hazards such as earthquakes, flooding and landslide occur at or near the big data centres, the Group's business, operation results and financial performance could be adversely affected due to the damages of facilities, loss of data processors and operating interruption.

ENVIRONMENTAL POLICIES AND PERFORMANCE

The Group recognises the importance of environmental sustainability against modern ecological challenges. The Group strives to minimise its impact on the environment by saving electricity and encouraging recycling of office supplies and other materials. During the Year, the Group has not been the subject of any environmental claims, lawsuits, penalties or disciplinary actions.

More information are provided in the Environmental, Social and Governance Report on pages 47 to 64.

COMPLIANCE WITH THE RELEVANT LAWS AND REGULATIONS

The Group has adopted internal control measures to monitor the continuous compliance with relevant laws and regulations such as the Companies Law of the Cayman Islands, the Companies Ordinance (Chapter 622 of the Laws of Hong Kong), the Securities and Futures Ordinance, the GEM Listing Rules and other laws and regulations implemented in relevant jurisdictions. During the Year, as far as the Board is concerned, the Group has complied in material aspects with the relevant laws and regulations that have a significant impact on the business and operation of the Group during the Year.

The Group continues to commit to comply with the relevant laws and regulations.

RELATIONSHIPS WITH EMPLOYEES, SUPPLIERS AND CUSTOMERS

The Group understands that employees are valuable assets. The Group provides competitive remuneration package to attract and retain the best people. The Group regularly reviews the remuneration package of employees and makes necessary adjustments taking into account the prevailing market conditions.

The Group also understands the importance of maintaining good relationship with its suppliers and customers. The Group has established long term business relationship with the suppliers which ensures delivering constantly high standards of quality in the products and services. The Group maintains close relationship with the customers to fulfil their immediate and long-term need. During the Year, there was no material and significant dispute between the Group and its suppliers and/or customers.

RESULTS AND DIVIDENDS

The results of the Group for the Year and the Group's financial position as at 31 December 2020 are set out in the consolidated financial statements on pages 69 to 70 and pages 71 to 72 respectively.

The Directors do not recommend the payment of a final dividend for the Year (2019: Nil).

CLOSURE OF REGISTER OF MEMBERS

The annual general meeting of the Company is scheduled to be held on Friday, 7 May 2021. For determining the entitlement to attend and vote at the annual general meeting, the register of members of the Company will be closed from Tuesday, 4 May 2021 to Friday, 7 May 2021 (both days inclusive), during which period no share transfers will be registered. In order to be eligible to attend and vote at the above annual general meeting, all transfer forms accompanied by relevant share certificates must be lodged with the Company's branch share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong for registration no later than 4:30 p.m. on Monday, 3 May 2021.

FIVE-YEAR FINANCIAL SUMMARY

A summary of the published results, assets and liabilities of the Group for the last five financial years is set out on page 148 of this annual report. This summary does not form part of the audited consolidated financial statements.

PROPERTY, PLANT AND EQUIPMENT

Details of movements in the property, plant and equipment of the Group during the Year are set out in note 16 to the consolidated financial statements.

SHARE CAPITAL

Details of movements in the Company's share capital during the Year are set out in note 33 to the consolidated financial statements.

PRE-EMPTIVE RIGHTS

There are no provisions for pre-emptive rights under the Company's Articles of Association (the "Articles") or the laws of the Cayman Islands in relation to issue of shares by the Company.

DISTRIBUTABLE RESERVES

As at 31 December 2020, the Company's reserves available for distribution to the shareholders of the Company are approximately HK\$294,306,000 (2019: HK\$311,161,000) as calculated in accordance with the provisions of the Companies Law of the Cayman Islands.

MAJOR CUSTOMERS AND SUPPLIERS

In 2020, the Group's largest customer accounted for 19% (2019: 33%) of the Group's total revenue. The five largest customers of the Group in 2020 comprised 70% (2019: 77%) of the Group's total revenue.

In 2020, the Group's largest supplier accounted for 56% (2019: 47%) of the Group's total purchases. The five largest suppliers in 2020 comprised 97% (2019: 98%) of the Group's total purchases.

At no time during the Year did a Director, a close associate of a Director or a shareholder of the Company (which to the knowledge of the Directors owns more than 5% of the Company's share capital) has an interest in any of the Group's five largest suppliers or customers.

DIRECTORS

The Directors during the Year and up to the date of this report are:

Ms. Zhang Jing* (Chairman) (appointed on 2 January 2020) Mr. Pan Zhengming* (resigned on 2 January 2020) Mr. Wang Bingzhong# (resigned on 31 October 2020)

Ms. Huang Lilan# Mr. Yuan Qiang* Dr. Lu Haitian+ Mr. Lin Sen+

Mr. Yan Hao# (Chief Executive Officer) (resigned on 7 August 2020 and then appointed on 1 September 2020)

Mr. Huang Jian+ (appointed on 7 August 2020)

Executive Director

* Non-executive Director

• Independent non-executive Director

In accordance with Article 87 of the Articles, Ms. Zhang Jing, Ms. Huang Lilan and Mr. Lin Sen, being Directors longest in office since their last election, shall retire from office by rotation at the forthcoming annual general meeting and are eligible to offer themselves for re-election.

The Company has received annual confirmation from each of the independent non-executive Directors concerning his independence of the Company and considers that each of the independent non-executive Directors is independent of the Company.

DIRECTORS' AND SENIOR MANAGEMENT'S BIOGRAPHIES

Biographical details of the Directors and the senior management of the Company are set out on pages 11 to 13 of this annual report.

DIRECTORS' SERVICE CONTRACTS

None of the Directors proposed for re-election at the forthcoming annual general meeting of the Company has a service contract which is not determinable by the Group within one year without payment of compensation (other than statutory compensation).

PERMITTED INDEMNITY PROVISION

Pursuant to the Articles, each Director shall be entitled to be indemnified out of the assets and profits of the Company against all actions, costs, charges, losses, damages and expenses which he/she may incur or sustain in or about the execution of the duties of his/her office or otherwise in relation thereto, save for matters in respect of his fraud or dishonesty. The Company has taken out insurance against the liability and costs associated with defending any proceedings which may be brought against Directors of the Group.

DIRECTORS' MATERIAL INTERESTS IN TRANSACTIONS, ARRANGEMENTS OR CONTRACTS

Save as disclosed above, there were no transaction, arrangement or contract of significance in relation to the Company's business which was entered into between the Company or any of its subsidiaries was a party and in which a Director or an entity connected with a Director had a material interest, whether directly or indirectly, subsisted during or at the end of the Year.

DIRECTORS' RIGHTS TO ACQUIRE SHARES OR DEBENTURES

Save as disclosed in the section headed "Share Option Scheme" of this report, at no time during the Year was the Company, or any of its holding companies, subsidiaries or fellow subsidiaries, a party to any arrangements to enable the Directors to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.

DIRECTORS' AND CHIEF EXECUTIVE'S INTERESTS IN SHARES, UNDERLYING SHARES AND DEBENTURES

As at 31 December 2020, the interests and short positions of each Director and chief executive of the Company and their respective associates in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance ("SFO")), as recorded in the register maintained by the Company pursuant to Section 352 of the SFO, or as otherwise notified to the Company and The Stock Exchange of Hong Kong Limited (the "Stock Exchange") pursuant to the required standard of dealings by the Directors as referred to in Rule 5.46 of the GEM Listing Rules, were as follows:

(I) Long positions in the shares and underlying shares of the Company

(a) Ordinary shares of the Company

		Approximate percentage of total
Name of Director	Number of ordinary shares held	issued shares of the Company
	(Notes 2 & 3)	(Note 1)
Ms. Zhang Jing	137,200	0.04%

(b) Share options granted by the Company

		Approximate
	Number of	percentage
	underlying	of total
	shares held	issued shares
	pursuant to	of the
Name of Director	share options	Company
	(Notes 2 to 4)	(Note 1)
Ms. Zhang Jing	3,566,800	0.94%
Mr. Yan Hao	3,300,000	0.87%
Ms. Huang Lilan	2,000,000	0.53%
Mr. Yuan Qiang	6,200,000	1.64%
Dr. Lu Haitian	400,000	0.11%
Mr. Lin Sen	400,000	0.11%
Mr. Huang Jian	200,000	0.05%

Notes:

• 1. As at 31 December 2020, the total number of issued shares of the Company was 379,023,983.
• 1. This represents interests held by the relevant Director as beneficial owner.
• 1. As disclosed in the Company's announcement dated 24 April 2020, the Board proposed to put forward to the shareholders of the Company (the "Shareholders") a proposal of the share consolidation (the "Share Consolidation") on the basis that every ten (10) issued and unissued existing shares of a par value of HK\$0.01 each in the share capital of the Company be consolidated into one (1) consolidated share of a par value of HK\$0.10 each in the share capital of the Company (the "Proposed Resolution"). The Proposed Resolution was duly passed by the Shareholders by way of poll at the extraordinary general meeting of the Company held on 26 May 2020. All the conditions precedent of the Share Consolidation have been fulfilled and the Share Consolidation has become effective on 28 May 2020. The board lot size for trading on the Stock Exchange remains as 4,000 shares. Details of the Share Consolidation were disclosed in the Company's announcements dated 24 April 2020, 8 May 2020 and 26 May 2020 and the circular of the Company dated 11 May 2020.
• 1. Details of share options granted to the Directors pursuant to the share option scheme of the Company are set out in the "Share Option Scheme" section of this report and note 35 to the consolidated financial statements.
• (II) Long positions in the shares and underlying shares of associated corporations of the Company 500.com Limited ("500.com") (a listed holding company of the Company)

		Approximate percentage of total issued and outstanding
	Number of	shares of
Name of Director	ADS held (Note 2)	500.com (Note 1)
Ms. Zhang Jing Ms. Huang Lilan Mr. Yuan Qiang	3,481 5,151 34,706	0.01% 0.01% 0.08%

(a) American depository shares ("ADS") of 500.com

(b) American depository shares options ("ADS Options") and awarded shares granted by 500.com

				Approximate
				percentage
	Number of			of total
	underlying			issued and
	shares held	Number of		outstanding
	pursuant to	awarded		shares of
Name of Director	ADS Options	shares held	Total	500.com
	(Notes 2 & 3)	(Notes 2 & 4)		(Note 1)
Ms. Zhang Jing	49,200	–	49,200	0.11%
Ms. Huang Lilan	15,500	–	15,500	0.03%
Mr. Yuan Qiang	26,667	50,000	76,667	0.17%

Notes:

• 1. As at 31 December 2020, the total number of issued and outstanding shares of 500.com was 44,789,892.
• 1. This represents interests held by the relevant Director as beneficial owner.
• 1. Details of the 49,200 ADS Options held by Ms. Zhang Jing are as follows:
• 19,200 ADS Options granted on 8 April 2011 at exercise price of US\$2.00 may be exercised from 8 April 2015 to 7 April 2021
• 5,000 ADS Options granted on 19 June 2014 at exercise price of US\$10.00 may be exercised from 19 June 2015 to 19 June 2021
• 10,000 ADS Options granted on 19 June 2014 at exercise price of US\$10.00 may be exercised from 19 June 2016 to 19 June 2021
• 15,000 ADS Options granted on 19 June 2014 at exercise price of US\$10.00 may be exercised from 19 June 2017 to 19 June 2021

Details of the 15,500 ADS Options held by Ms. Huang Lilan are as follows:

• 167 ADS Options granted on 19 June 2014 at exercise price of US\$10.00 may be exercised from 19 June 2015 to 19 June 2021
• 2,000 ADS Options granted on 19 June 2014 at exercise price of US\$10.00 may be exercised from 19 June 2016 to 19 June 2021
• 8,333 ADS Options granted on 19 June 2014 at exercise price of US\$10.00 may be exercised from 19 June 2017 to 19 June 2021
• 5,000 ADS Options granted on 19 June 2014 at exercise price of US\$10.00 may be exercised from 19 June 2018 to 19 June 2021

Details of the 26,667 ADS Options held by Mr. Yuan Qiang are as follows:

• 1,667 ADS Options granted on 19 June 2014 at exercise price of US\$10.00 may be exercised from 19 June 2016 to 19 June 2021
• 25,000 ADS Options granted on 19 June 2014 at exercise price of US\$10.00 may be exercised from 19 June 2017 to 19 June 2021
• 1. Details of the 50,000 awarded shares held by Mr. Yuan Qiang are as follows:
• 50,000 awarded shares granted on 21 December 2020 will vest on 21 December 2020

Save as disclosed above, as at 31 December 2020, none of the Directors or chief executive of the Company and their respective associates had any interests or short positions in any shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) as recorded in the register maintained by the Company pursuant to Section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to the required standard of dealings by the Directors.

SHARE OPTION SCHEME

At the annual general meeting of the Company held on 18 May 2012, the shareholders of the Company approved the adoption of a new share option scheme (the "2012 Share Option Scheme"), under which the Directors may grant options to eligible persons to subscribe for the Company's shares, subject to the terms and conditions stipulated therein. The 2012 Share Option Scheme will expire on 17 May 2022.

As the Share Consolidation had taken effect on 28 May 2020, adjustments were made to the exercise prices and the number of shares of the Company falling to be issued in respect of the outstanding share options in accordance with the terms and conditions of the 2012 Share Option Scheme and the GEM Listing Rules.

A summary of the principal terms of the 2012 Share Option Scheme are set out in note 35 to the consolidated financial statements.

Movements of share options granted under the 2012 Share Option Scheme during the Reporting Period are set out below:

	Number of share options
Type of participants	As at 1 January 2020	Granted during the Year (Note 6)	Reclassified during the Year (Note 12)	Exercised during the Year	Lapsed During the Year	Cancelled during the Year (Note 5)	As at 31 December 2020	Date of grant	Exercise price (HK\$)	Exercise period (Note)
Directors
Ms. Zhang Jing
(Note 7)	–	–	100,000	–	–	(100,000)	–	05.01.2018	2.00	2
	–	–	466,800	–	–	–	466,800	01.04.2019	1.10	3
	–	3,100,000	–	–	–	–	3,100,000	10.08.2020	0.26	4
	–	3,100,000	566,800	–	–	(100,000)	3,566,800

				Number of share options
	As at 1	Granted during	Reclassified during the	Exercised	Lapsed	Cancelled during the	As at 31		Exercise	Exercise
Type of	January	the Year	Year	during the	During the	Year	December	Date of	price	period
participants	2020	(Note 6)	(Note 12)	Year	Year	(Note 5)	2020	grant	(HK\$)	(Note)
Mr. Pan Zhengming
(Note 8)	600,000	–	(600,000)	–	–	–	–	05.01.2018	2.00	2
	600,000	–	(600,000)	–	–	–	–	01.04.2019	1.10	3
	1,200,000	–	(1,200,000)	–	–	–	–
Mr. Yan Hao
(Note 10)	200,000	–	–	–	–	(200,000)	–	05.01.2018	2.00	2
	200,000	–	–	–	–	–	200,000	01.04.2019	1.10	3
	–	–	3,100,000	–	–	–	3,100,000	10.08.2020	0.26	4
	400,000	–	3,100,000	–	–	(200,000)	3,300,000
Mr. Wang
Bingzhong
(Note 11)	3,100,000	–	–	–	–	(3,100,000)	–	05.01.2018	2.00	2
	3,100,000	–	–	–	–	–	3,100,000	01.04.2019	1.10	3
	–	3,100,000	–	–	–	–	3,100,000	10.08.2020	0.26	4
	6,200,000	3,100,000	–	–	–	(3,100,000)	6,200,000
Ms. Huang Lilan	1,000,000	–	–	–	–	(1,000,000)	–	05.01.2018	2.00	2
	1,000,000	–	–	–	–	–	1,000,000	01.04.2019	1.10	3
	–	1,000,000	–	–	–	–	1,000,000	10.08.2020	0.26	4
	2,000,000	1,000,000	–	–	–	(1,000,000)	2,000,000
Mr. Yuan Qiang	3,100,000	–	–	–	–	(3,100,000)	–	05.01.2018	2.00	2
	3,100,000 –	– 3,100,000	– –	– –	– –	– –	3,100,000 3,100,000	01.04.2019 10.08.2020	1.10 0.26	3 4
	6,200,000	3,100,000	–	–	–	(3,100,000)	6,200,000

		Number of share options
	As at 1	Granted during	Reclassified during the	Exercised	Lapsed	Cancelled during the	As at 31		Exercise	Exercise
Type of	January	the Year	Year	during the	During the	Year	December	Date of	price	period
participants	2020	(Note 6)	(Note 12)	Year	Year	(Note 5)	2020	grant	(HK\$)	(Note)
Dr. Lu Haitian	200,000	–	–	–	–	(200,000)	–	05.01.2018	2.00	2
	200,000 –	– 200,000	– –	– –	– –	– –	200,000 200,000	01.04.2019 10.08.2020	1.10 0.26	3 4
	400,000	200,000	–	–	–	(200,000)	400,000
Mr. Lin Sen	200,000	–	–	–	–	(200,000)	–	05.01.2018	2.00	2
	200,000	–	–	–	–	–	200,000	01.04.2019	1.10	3
	–	200,000	–	–	–	–	200,000	10.08.2020	0.26	4
	400,000	200,000	–	–	–	(200,000)	400,000
Mr. Huang Jian (Note 9)	–	200,000	–	–	–	–	200,000	10.08.2020	0.26	4
	–	200,000	–	–	–	–	200,000
Sub-total:	16,800,000	10,900,000	2,466,800	–	–	(7,900,000)	22,266,800
Employees	210,000	–	–	–	–	(210,000)	–	05.01.2018	2.00	2
	110,000 –	– 900,000	– –	– –	– –	–	110,000 900,000	01.04.2019 10.08.2020	1.10 0.26	3 4
Sub-total:	320,000	900,000	–	–	–	(210,000)	1,010,000
Others (Note 14)	6,730,000	–	500,000	–	–	(6,830,000)	400,000	05.01.2018	2.00	2
	5,733,600	–	133,200	–	(600,000)	–	5,266,800	01.04.2019	1.10	3
	–	13,660,000	(3,100,000)	–	(600,000)	–	9,960,000	10.08.2020	0.26	4
Sub-total:	12,463,600	13,660,000	(2,466,800)	–	(1,200,000)	(6,830,000)	15,626,800
Total:	29,583,600	25,460,000	–	–	(1,200,000)	(14,940,000)	38,903,600

Notes:

• 1. The exercise prices and number of the outstanding share option have been adjusted to reflect the Share Consolidation. The exercise prices and number of the share options which were exercised or lapsed before the effective date of the Share Consolidation have also been adjusted for purpose of comparison.
• 1. The share options granted on 5 January 2018 are divided into 3 tranches exercisable from 5 January 2018, 5 January 2019 and 5 January 2020 respectively to 4 January 2028.
• 1. The share options granted on 1 April 2019 are divided into 3 tranches exercisable from 1 April 2019, 1 April 2020 and 1 April 2021 respectively to 31 March 2029.
• 1. The share options granted on 10 August 2020 are divided into 3 tranches exercisable from 10 August 2020, 10 August 2021 and 10 August 2022 respectively to 9 August 2030.
• 1. On 10 August 2020, a total of 14,940,000 share options which were granted to the Directors, certain employees and consultants of the Company on 5 January 2018 (the "2018 Share Options") were cancelled in accordance with the terms of the 2012 Share Option Scheme.
• 1. On 10 August 2020, the Company offered to grant a total of 25,460,000 new share options to the Directors, certain employees and consultants of the Company, part of which serve as replacement share options to the cancelled 2018 Share Options.
• 1. Ms. Zhang Jing was appointed as a non-executive Director and the chairman of the Company with effect from 2 January 2020.
• 1. Mr. Pan Zhengming resigned as a non-executive Director and the chairman of the Company with effect from 2 January 2020.
• 1. Mr. Huang Jian was appointed as an independent non-executive Director with effect from 7 August 2020.
• 1. Mr. Yan Hao was resigned as an independent non-executive Director on 7 August 2020 and then was appointed as an executive Director and the chief executive officer of the Company with effect from 1 September 2020.
• 1. Mr. Wang Bingzhong resigned as an executive Director and a chief executive officer with effect from 31 October 2020.
• 1. To better reflect certain grantee's position in relation to the Group, their respective types of participant have been reclassified from others to Directors or from Directors to others as appropriate.
• 1. During the Reporting Period, no share options were exercised under the 2012 Share Option Scheme.
• 1. The category "Others" represents the consultants of the Group. Consultants are individuals who rendered consultancy services in respect of the business development to the Group without receiving any compensation. The Group granted share options to them for recognising their services similar to those rendered by employees of the Group.

DIRECTORS' INTERESTS IN COMPETING BUSINESS

During the Year, none of the Directors, the controlling shareholder of the Company and their respective close associates (as defined in the GEM Listing Rules) had interest in any business which competes or may compete with the business of the Group and any other conflicts of interest with the Group.

CONTINUING CONNECTED TRANSACTIONS

1. On 15 May 2017, Beijing Huancai Information Technology Ltd. (北京環彩信息技術有限公司) ("Beijing Huancai"), a subsidiary of the Company, entered into a purchase agreement (the "Purchase Agreement") with Wu Sheng Computer Technology (Shanghai) Co., Ltd. (伍盛計算機科技 (上海)有限公司) ("Wu Sheng"), pursuant to which, Beijing Huancai agreed to purchase from Wu Sheng the lottery terminals and parts for a term of three years commencing from 15 May 2017 and ending on 14 May 2020. Wu Sheng is an indirect wholly-owned subsidiary of GoReward Limited ("GoReward"), which is owned as to 50.002% by Global Crossing Holdings Ltd. and 49.998% by Intralot International Limited ("Intralot"). Intralot also holds 49% of Precious Success Holdings Limited ("Precious Success"), a subsidiary of the Company. Intralot is therefore a connected person of the Company under the GEM Listing Rules by virtue of its being a substantial shareholder of Precious Success. Wu Sheng, being a subsidiary of GoReward, is an associate of Intralot and, therefore, is also a connected person of the Company under the GEM Listing Rules.

In view of the substantial change of the product models that Beijing Huancai requires, Beijing Huancai and Wu Sheng agreed to enter into the Purchase Agreement to supersede the previous purchase agreement entered into between Beijing Huancai and Wu Sheng on 22 October 2014.

The entering into of the Purchase Agreement and the transactions contemplated thereunder constituted continuing connected transactions of the Company. Further details of the transactions were set out in the announcement of the Company dated 15 May 2017.

As at the date of this report, the Purchase Agreement has expired and has not been renewed.

1. On 3 August 2018, Loto Interactive Information Technology (Shenzhen) Limited ("Loto Shenzhen"), an wholly-owned subsidiary of the Company, entered into the cooperation agreement (the "Cooperation Agreement") pursuant to which, Loto Shenzhen conditionally agreed to provide the services to Shenzhen E-Sun Sky Network Technology Co., Ltd. (深圳市易訊天空網絡技術有限公司) ("E-Sun Sky") subject to the terms and conditions provided therein for the period from the 8 October 2018 to 5 March 2021. E-Sun Sky is a wholly-owned subsidiary of 500.com Limited, which is interested in 1,278,714,329 shares of the Company, representing approximately 40.48% of the total issued share capital of the Company, and is a controlling shareholder of the Company. Accordingly, E-Sun Sky is a connected person of the Company pursuant to the GEM Listing Rules and the transactions contemplated under the Cooperation Agreement constituted continuing connected transactions of the Company under the GEM Listing Rules.

Further details of the transactions were disclosed in the announcement dated 12 September 2018 and the circular dated 14 September 2018. The Cooperation Agreement, the transactions contemplated thereunder and the proposed annual caps had been duly passed by way of poll at the extraordinary general meeting held on 8 October 2018.

1. On 15 May 2020, Happy Technology Limited ("Happy Technology"), an indirect non wholly-owned subsidiary of the Company, entered into the framework purchase agreement with Whalechip Co., Ltd. ("Whalechip") whereby Happy Technology shall purchase the supercomputing devices or other similar products from Whalechip. The framework purchase agreement has a term of one year commencing from 15 May 2020, during which, the purchase cap will be US\$2,000,000 (equivalent to approximately HK\$15,502,900). Whalechip is owned by Mr. Yan as to 36%. Mr. Yan is a director of Happy Technology, a non wholly-owned subsidiary of the Company, and therefore a connected person at the subsidiary level as defined in the GEM Listing Rules. Mr. Yan is the beneficial owner of 36% equity interest in Whalechip. Hence, Whalechip is an associate of Mr. Yan and therefore also a connected person at the subsidiary level as defined under the GEM Listing Rules.

The entering into of the framework purchase agreement and the transactions thereunder (including the purchase cap) constitute continuing connected transactions of the Company. Further details of the transactions were set out in the announcement of the Company dated 15 May 2020.

All the independent non-executive Directors have reviewed the above three Continuing Connected Transactions and confirmed that they have been entered into (i) in the ordinary and usual course of business of the Group; (ii) on normal commercial terms; and (iii) in accordance with the relevant agreements on terms that are fair and reasonable and in the interests of the Company and its shareholders as a whole.

The Company's auditor was engaged to report on the above three Continuing Connected Transactions in accordance with the Hong Kong Standard on Assurance Engagements 3000 "Assurance Engagements Other Than Audits or Reviews of Historical Financial Information" and with reference to Practice Note 740 "Auditor's Letter on Continuing Connected Transactions under the Hong Kong Listing Rules" issued by the Hong Kong Institute of Certified Public Accountants. The auditors have issued their unqualified letter containing his findings and conclusions in respect of the Continuing Connected Transactions disclosed by the Company in the annual report in accordance with Rule 20.38 of the GEM Listing Rules. A copy of the auditor's letter has been provided by the Company to the Stock Exchange.

RELATED PARTY TRANSACTIONS

During the Year, the Group entered into certain transactions with "related parties" as defined under the applicable accounting standards. These related party transactions, which are disclosed in note 38 to the consolidated financial statements, did not fall under the definition of connected transactions or continuing connected transaction under the GEM Listing Rules,

CONTROLLING SHAREHOLDER'S INTERESTS IN SIGNIFICANT CONTRACTS

Save as disclosed above, at no time during the Year had the Company or any of its subsidiaries, and the controlling shareholder or any of its subsidiaries entered into any contract of significance or any contract of significance for the provision of services by the controlling shareholder or any of its subsidiaries to the Company or any of its subsidiaries.

SUBSTANTIAL SHAREHOLDERS' INTERESTS IN SHARES, UNDERLYING SHARES AND DEBENTURES

As at 31 December 2020, the interests and short postions of the persons (other than the Directors and chief executive of the Company) in the shares and underlying shares of the Company which were notified to the Company and the Stock Exchange pursuant to Divisions 2 and 3 of Part XV of the SFO or required to be recorded in the register required to be kept by the Company under section 336 of the SFO were as follows:

Long positions in the shares of the Company

			Approximate percentage of total
Name	Capacity	Number of shares held	issued shares of the Company (Note)
500.com Limited	Beneficial owner	127,871,432	33.74%

Note:

As at 31 December 2020, the total number of issued shares of the Company was 379,023,983.

Save as disclosed above, as at 31 December 2020, the Company has not been notified of any other interests or short positions in the shares or underlying shares of the Company which had been recorded in the register required to be kept under Section 336 of the SFO.

EQUITY-LINKED AGREEMENTS

Other than the share option scheme of the Company as disclosed in the "Share Options Scheme" section of this report, no equity-linked agreements that will or may result in the Company issuing shares or that require the Company to enter into any agreements that will or may result in the Company issuing shares were entered into by the Company during the Year or subsisted at the end of the Year.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY'S LISTED SECURITIES

During the Year, neither the Company nor any of its subsidiaries has purchased, sold or redeemed any of the Company's listed securities.

MANAGEMENT CONTRACTS

Save for employment contracts, no other contracts concerning the management and/or administration of the whole or any substantial part of the business of the Company were entered into by the Company during the Year or subsisted at the end of the Year.

SUFFICIENCY OF PUBLIC FLOAT

Based on the information that is publicly available to the Company and within the knowledge of the Directors, as at the date of this report, the Company has maintained the prescribed public float under the GEM Listing Rules.

CORPORATE GOVERNANCE

Information on the Company's corporate governance practices is set out in the Corporate Governance Report on pages 14 to 28 of this annual report.

EMOLUMENT POLICY

The employees of the Group are selected, remunerated and promoted on the basis of their merit, qualifications and competence.

The emoluments of the Directors are decided by the Remuneration Committee, having regard to the Company's operating results, individual performance and comparable market standards. Particulars of the emoluments of Directors on a named basis for the Year are set out in note 11 to the consolidated financial statements.

The Company has adopted the share option scheme as an incentive to Directors, employees and consultants. Details of the scheme are set out in note 35 to the consolidated financial statements.

AUDIT COMMITTEE

The Company has an Audit Committee, which was established for the purposes of reviewing and providing supervision over the Group's financial reporting process and overseeing the Group's risk management and internal controls. It also reviews the effectiveness of the audit process and risk evaluation.

The Audit Committee, made up of a non-executive Director and two independent non-executive Directors, met four times during the Year. At the meetings, the Audit Committee reviewed the accounting principles and practices adopted by the Group, the quarterly, the interim and the annual reports of the Group and discussed with management the auditing, risk management, internal controls and financial reporting matters.

CHARITABLE CONTRIBUTIONS

During the Year, the Group had made approximately HK\$1,952,000 charitable and/or other donations.

AUDITORS

Ernst & Young resigned as the auditors of the Company with effect from 10 January 2019 and ZHONGHUI ANDA CPA Limited, following the resignation of Ernst & Young, has appointed as the new auditors of the Company with effect from 1 February 2019. The appointment of the new auditors of the Company was approved by the shareholders of the Company at an extraordinary general meeting held on 1 February 2019.

The consolidated financial statements for the year ended 31 December 2020 have been audited by ZHONGHUI ANDA CPA Limited, who will retire and, being eligible, offer themselves for re-appointment at the forthcoming annual general meeting of the Company. A resolution for the re-appointment of ZHONGHUI ANDA CPA Limited as the auditors of the Company will be proposed at the forthcoming annual general meeting of the Company.

On behalf of the Board

Yan Hao Chief Executive Officer and Executive Director

Hong Kong, 30 March 2021

ABOUT THIS REPORT

Loto Interactive Limited (the "Company") and its subsidiaries (collectively referred to as the "Group" or "we") is pleased to present its report on the environmental, social, and governance (the "ESG") aspects, in accordance with the guidelines of Appendix 20 to the Rules Governing the Listing of Securities on GEM (the "GEM Listing Rules") of The Stock Exchange of Hong Kong Limited (the "Stock Exchange"). This environmental, social and governance report (the "ESG Report") covers the overall performance of the Group in ESG aspects during the period from 1 January 2020 to 31 December 2020 (the "Reporting Period" or the "Year").

The Group highly values the importance of making appropriate disclosure of corporate information to all the investors and the shareholders of the Company and believes that high level of transparency is the key to building confidence with the investors. Therefore, in this ESG Report, it highlighted the sustainable achievements in the following areas to give the stakeholders a better understanding of what the Group has done to protect the environment and promote social harmony:

ESG Aspects	Issues
Environmental	– Emissions – Use of Resources – The Environment and Natural Resources
Social
Employment and Labour Practices	– Employment – Health and Safety – Development and Training – Labour Standards
Operating Practices	– Supply Chain Management – Product Responsibility – Anti-corruption
Community Investment	– Social Responsibility

For details of corporate governance, please refer to the "Corporate Governance Report" as set out on pages 14 to 28.

The Group is committed to maintaining a sustainable development of its business as well as supporting environmental protection and the communities where it operates. The Company is an investment holding company. Its subsidiaries are principally engaged in (i) provision of data analysis and storage services (the "Big Data Centre Services"); (ii) distribution of mobile gaming (the "Online Game Business"); and (iii) money lending business in Hong Kong (the "Money Lending Business").

In the Year, the Group operates three big data centres in Sichuan, the People's Republic of China (the "PRC"). The construction of the third big data centre of the Group was completed in late June 2020. The big data centres provide the premises, hardware support, power supply and ancillary supervision and management services to clients.

This report will focus on the environmental and social aspects of the office in Hong Kong and the office and big data centres located in Sichuan, the PRC.

STAKEHOLDER ENGAGEMENT

The Group recognises the ESG Report as an important measure to showcase its efforts in sustainable development. In realising sustainable development, the Group is devoted to strike a balance of the interests among various stakeholders, such as government and regulatory authorities, investors and shareholders, suppliers, customers, employees, work partners as well as the community. The Company is searching for every opportunity to understand and engage its stakeholder to ensure improvement can be implemented to its products and services. The Group strongly believes its stakeholders play a crucial role in sustaining the success of its business.

The existing communication mechanism with stakeholders of the Group is set forth as below:

Stakeholders	Probable Points of Concern	Communication and Response
The Stock Exchange	• Compliance with GEM Listing Rules	• Meetings, training, workshops and
	• Timely and accurate announcements	programs • Website updates and announcements
Government	• Compliance with laws and regulations	• Interaction and visits and compliance operation
	• Preventing tax evasion	• Tax returns and other information
Suppliers	• Payment schedule	• Fufillment of payment obligation
	• Business ethics and credibility	• Performing contracts in accordance with the law
	• Supply stability	• Site investigation

Stakeholders	Probable Points of Concern	Communication and Response
Investors and shareholders	• Corporate governance • Business strategies • Performance and investment returns	• Optimising internal control and risk management • Organising and participating in seminars, interviews and shareholders' meetings • Issuance of financial reports or
		operation reports for investors and analysts
Media and Public	• Corporate governance	• Issuance of newsletters on the Company's website
	• Environmental protection	• Using environmental protection and energy saving equipment
	• Human rights	• Providing equal employment opportunities
Customers	• Service quality, service delivery schedule, reasonable prices and service value	• Quality products and services
	• Customer information security	• Personal data protection
Employees	• Rights and benefits of employees	• Conducting union activities
	• Training and development	• Training, interviews with employees and internal memos
	• Compensation, work hours, and	• Setting up employee suggestion
	working environment	boxes
	• Occupational health and safety	• Conducting regular occupational health and safety training to increase staff awareness
Community	• Community environment • Employment opportunities • Community development, and social	• Developing community activities • Providing employment opportunities • Employee voluntary activities and
	welfare	community welfare subsidies and donations

MATERIALITY ASSESSMENT

In the Year, the Company undertook its annual materiality assessment exercise, which includes conducting interviews and/or surveys with internal and external stakeholders to identify the most significant operating, environmental and social impacts towards its business.

Materiality matrix for Environmental, Social and Governance Aspects

Environmental
---------------

• 1. Greenhouse gas emissions
• 1. Energy consumption 3. Water consumption
• 1. Waste
• 1. Saving energy measures
• 1. Use of raw materials and
• packaging materials 7. Utilisation of energy resources
• 1. Use of chemicals
• 1. Local community engagement
• 1. Community investment
• 1. Occupational health and safety 12. Labour standards in supply
• chain
• 1. Training and development
• 1. Employee welfare 15. Inclusion and equal opportunities
• 1. Talent attraction and retention

Environmental Social Operating practices

• 1. Economic value generated
• 1. Corporate governance
• 1. Anti-corruption
• 1. Supply chain management
• 1. Customer satisfaction
• 1. Customer privacy

ENVIRONMENTAL

The Group understands that the greenhouse gases, sewage, solid wastes and other pollutants generated in its daily operation cause damage to the environment and it is the responsibility of all corporations to ensure that emission of pollutants and consumption of resources are minimised and carbon footprints are produced. For such purpose, the Group has identified the following goals to reduce consumption of resources:

Goals

• Reducing emission of carbon dioxide
• Reducing consumption of resources
• Reducing production of waste

A1 Emissions

During the Reporting Period, the Group has completed the construction of the third big data centre in Sichuan, the PRC. The three big data centres in aggregate have a gross floor area of over 18,000 square metres. As an operator of the big data centres, the Group provides storage places, hardware support, power supply, ancillary supervision and management services to customers.

Electricity consumed by the big data centres and offices and fuels consumed by motor vehicles are the main sources of nitrogen oxides ("NOX"), sulphur oxides ("SOX") and particulate matter ("PM") and greenhouse gas ("GHG") emissions.

The Group recognises that the use of electricity contributes to the emission of air pollutants and greenhouse gas. Since the operation of big data centres requires consumption of enormous amount of energy and electricity, the Group has taken conscious efforts to select operating location. The Group has developed location strategy to build the big data centres near hydroelectric plants where it can utilise renewable energy sources. In addition, energy efficient fans and wet curtain paper in the data centres as cooling facilities to maintain the centres at an ideal temperature in order to prevent the data processors and network technology equipment from overheating.

The Group owns 7 motor vehicles which are strictly used for transporting management team members, guests and clients and business activities. Most of the vehicles are running on unleaded automotive fuel, which is, in comparison to other fuels, cleaner and emitting less pollutant into the air. All vehicles are under regular maintenance check to enhance fuel consumption efficiency, ensure road safety and keep carbon dioxide emission at a minimum.

For air conditioning in offices, the Group encourages its employees to set the air conditioners at the most comfortable temperature and switch them off when it is not necessary so as to reduce emission of greenhouse gases. The Group has also put notices at eye-catching areas in the offices to remind the employees about energy saving in the course of business. Air conditioners installed at the office are centrally controlled by the office building, and are automatically switched off from 8 pm until 8 am of the following day.

The key environmental performance indicators of the Group's emissions in the Year are shown in the table below:

Environmental Indicators	Unit	2020	2019
Emissions
Nitrogen oxides (NOX) emissions	Kg	15.34	9.26
Sulphur oxides (SOX) emissions	Kg	0.29	0.22
Particulate matter (PM) emissions	Kg	1.12	0.68
Greenhouse gas Emissions
Direct emissions from use of motor vehicles	Kilogram of Carbon	53,418	40,214
(Scope 1)	dioxide equivalent
	("Kg of CO2e")
Indirect emissions from electricity consumption
(Scope 2)	Kg of CO2e	884,085,951* (Note 1)	328,419,905
Other indirect emissions from water
consumption and disposal of paper waste at
landfills (Scope 3)	Kg of CO2e	1,090*	3,611
Total GHG emissions	Kg of CO2e	884,140,459 (Note 1)	328,463,730
Floor area	Square meter ("M2")	18,574 (Note 2)	7,720 (Note 3)
GHG emissions intensity	Kg of CO2e/M2	47,601	42,547

• Note 1: The significant increase in indirect emissions from electricity consumption as compare with last year due to the commencement of operation of the third big data centre since June 2020 and thus increase the consumption of electricity.
• Note 2: The total floor area in 2020 includes the floor areas of Hong Kong office, Sichuan office and the 3 big data centres and staff dormitory in Sichuan, the PRC.
• Note 3: The total floor area in 2019 includes the floor areas of Hong Kong office, Sichuan office, the 2 big data centres and an apartment in Sichuan, the PRC.
• * The emission factor is sourced from the Central China Grid in 2019 and sustainability report 2019 of HK Electric Investments. The figures are calculated in accordance with the "Reporting Guidance on Environmental KPIs".

No hazardous waste is generated in the operations of the offices and big data centres. Non-hazardous waste produced from the operations of the Group is mainly comprised of general office consumables and obsolete electronic equipment and parts.

Environmental Indicators	Unit	2020	2019
Waste
Non-hazardous wastes produced in total Intensity of non-hazardous wastes produced	Kg	96,000	N/A (Note 1)
per square meter of floor area	Kg/M2	5.17	N/A
Hazardous wastes produced in total Intensity of hazardous wastes produced per	Kg	N/A	N/A
square meter of floor area	Kg/M2	N/A	N/A

Note 1: Due to the limitation on data collection and the non-hazardous wastes produced by the Group is minimal; therefore, no relevant figure is quantified.

Solid waste of the Group is mainly produced in the daily business operation, including defective or obsolete electric cords and cables and processor unit cooling fans, daily paper consumption, office paper waste and food waste made by employees. All domestic waste is collected and disposed by the property management office of the office buildings on a regular basis.

The Group is committed to reducing waste production. The Group encourages the employees to recycle stationery and reduce waste with an aim to prevent waste production at the initial stage. Moreover, the Group has adopted a digital operation method to centralise all documents and regularly educates its employees about environmental protection. For example, the employees are encouraged to go paperless as much as possible by liming print outs communicating via e-mail as opposed to fax, required to print double-sided, reuse paper printed single-sided and set up recycling bins to minimise the disposal of wastes in order to save and reduce the use of paper and other natural resources.

The Group has established appropriate measures for disposal of computers and related products such as printers and toner cartridges. In case it is necessary to dispose of an item, the Group encourages its employees to collect and classify the waste before disposing so as to reduce the negative impact on the environment.

During the Reporting Period, the Group complied with national and local laws and regulations relating to environmental protection and pollutant emissions during its course of operation, including but not limited to, Air Pollution Control Ordinance (Cap.311) and Waste Disposal Ordinance (Cap.354) in Hong Kong and the Environmental Protection Law of the PRC. The Group was not aware of any material non-compliance with the relevant laws and regulations that have a significant impact relating to air and greenhouse gas emissions, discharges into water and land, generation of hazardous and non-hazardous waste. In addition, there was no fine or non-monetary sanction for non-compliance with relevant laws and regulations had been reported in the Year.

A2 Use of Resources

The Group acknowledges that its business activities have impact to the environment. The Group strives to achieve efficient utilization of resources and attaches great importance to employees' environmental awareness, and thus has put forth a number of initiatives with the goal of "green office", educating employees about how to fully utilise the resources and save energy. The Group aims at maximising the efficiency of its resources in commercial aspect while eliminating waste and contributing to the society in social aspect.

The Group also embraces its responsibility in environmental protection throughout the course of daily business operation and office administration. Apart from adhering to the principle of recycling and reducing use, the Group is committed to creating green offices to minimise the impact on the environment.

The Group has introduced green office and operation practices to reduce the energy consumption and enhance the efficiency of use of resources. A summary of the practices is shown as below:

• Electricity consumed by big data centres is generated from renewable energy source;
• Installing environmental protection and energy-saving equipment such as evaporative cooling pads in big data centres in order to reduce the electricity consumption;
• Adopting double-sided printing and promoting use of recycled paper;
• Widespread adoption of multi-function photocopiers (with printing, scanning and fax functions);
• Switching off unused lights and electric appliances to reduce energy consumption;
• Keeping the room temperature at a comfortable level and switching off the air conditioners when not necessary;
• Requiring employees to turn their computers and other devices to the sleep mode or switch them off when leaving the office; and
• Conducting regular maintenance for office equipment (such as air conditioners, computers, lights, refrigerators and paper shredders) to ensure normal operation.

The Group has installed energy efficient fans and wet curtain paper in the big data centres as cooling facilities to maintain the centres at an ideal temperature. The wet curtain paper utilise the natural water aiming to achieve energy saving.

Daily water consumption by the employees in offices during business hours is very limited. The domestic sewage of the Group does not include hazardous wastewater and is directly discharged to the municipal sewer pipeline. As the Group operates in office premises of which both of the water supply and discharge are solely controlled by the building management of the office premises, it is considered that provision of water withdrawal and discharge data or sub-meter for individual occupant not feasible. However, in order to build the awareness on water conservation, the Group promotes water saving practices in the workplace. It encourages employees to use resources properly in order to save water resource.

The major use of resources of the Group is electricity consumption for offices and big data centres. The below table shows the key environmental performance indicators regarding the Group's use of resources during the Year are shown in the table below:

Environmental Indicators	Unit	2020	2019
Use of resources
Electricity consumption in total	kWh	1,545,461,222 (Note 1)	541,670,099
Diesel consumption in total	kWh	29,509	10,061
Petrol consumption in total	kWh	160,363	135,010
Energy consumption in total	kWh	1,545,651,094	541,815,170
Energy consumption intensity	kWh/M2	83,216	70,183
(per square meter of floor area)
Water consumption in total	Cubic metre ("M3")	1,168 (Note 1)	566
Water consumption intensity	M3/M2	0.06	0.07
(per square meter of floor area)
Packaging materials used for	Kg	N/A	N/A
finished products (Note 2)
Packaging materials consumption intensity	Kg/unit produced	N/A	N/A

Note 1: The significant increase in electricity consumption as compare with last year due to the commencement of operation of the third big data centre since June 2020. Water consumption has also increased accordingly.

Note 2: No packaging material is consumed by the Group.

During the Reporting Period, the Group adopted a series of initiatives for efficient energy use and energy conservation. Details of such measures and the related results achieved are listed as follows:

Energy saving measures	Details and results achieved
Installation of evaporative cooling pad	The Group has installed wet curtain paper in the big data centres as cooling facilities to maintain the centres at an ideal temperature to reduce energy consumption.
Water conservation	The evaporative cooling pad installed in big data centres using same natural water which can reduce electricity consumption for processing water.

A3 The Environment and Natural Resources

The Group aims to conserve natural resources and is concerned with the environmental impact of its activities. As an ongoing commitment to good corporate citizenship, the Group recognises the responsibility in minimising the negative environmental impact of its business operations and its investment portfolio, in order to achieve a sustainable development for generating long-term values to its stakeholders and community as a whole.

The Group encourages all employees to participate in different kinds of recycling activities and minimizing the use of natural resources. The Group regularly assesses the environmental risks of its business, review the environmental practices and adopt preventive measures as necessary to reduce the risks, and ensure the compliance with relevant laws and regulations.

SOCIAL

EMPLOYMENT AND LABOUR PRACTICES

B1 Employment

Human Resources Practices

Employees are regarded as the greatest and valuable assets and core competitive advantage of the Company and also provide driving force for the continuous innovation of the Company. The Group strives to attract and retain talent. The Group has developed a written human resources policy and staff manual to govern the recruitment, promotion, discipline, working hours, leaves and other benefits of its employees, in accordance with the relevant laws and regulations.

The Group offers competitive remuneration packages to its employees, with discretionary bonuses issued based on individual performance and its business performance. A wide range of benefits including comprehensive medical and life insurance and retirement schemes are also provided to employees.

Equal Opportunity

The Company respects cultural and individual diversity. It believes that no one should be treated less favourably on his/her personal characteristics (i.e. gender, pregnancy, marital status, disability, family status, race, etc.). Opportunities for employment, training and career development are equally opened to all qualified employees.

Employee Structure

As at 31 December 2020, the Group had a total of 98 employees (As at 31 December 2019: 90 employees). The distribution of workforce classified by different catalogues is as follows:

Turnover rate by gender:	Turnover rate (Note 1)
Gender
Male	99%
Female	62%
Turnover rate by age:
Age
Under 30 years old	133%
30-50 years old	59%
Over 50 years old	200%

Note 1: The employee turnover rate is calculated based on the number of employees who cease employment during the Reporting Period divided by the number of employees at the end of 2020 in each category.

During the Reporting Period, the Group has strictly complied with all applicable laws and regulations of labour practices, including but not limited to the (i) Employment Ordinance (Cap.57); (ii) Minimum Wage Ordinance (Cap.608); (iii) Employees' Compensation Ordinance (Cap.282); (iv) Labour Law of the PRC; and (v) Law of the PRC on Employment Contracts. In addition, there was no report of heavy fines or sanctions as the result of non-compliance with relevant laws and regulations.

B2 Health and Safety

The Group is committed to providing and maintaining a safe, healthy, and hygienic workplace for all employees. To foster and maintain a good, comfortable and healthy working environment, the Group has implemented a series of policies:

• Provide tailored-made safety training to the staff in carrying out the electrical works and machines;
• Provide and ensure the use of appropriate tools and personal protective equipment such as safety helmets to enable them to perform their task safely;
• Post safety procedures/signs and operation instructions in the office(s) and data centre sites;
• Exercise adequate monitoring and effective supervision to ensure that the safety precautionary measures are strictly implemented;
• Maintain obstruction-free emergency exits in the workplace;
• Provide sufficient light at the workplace;
• Provide a workplace with moderate temperature; and
• Conduct regular safety inspection and training of fire prevention.

In order to manage environmental and social risks of the operation at data centre sites, the Group has implemented Safety Policy & Procedures《安全制度及流程》and《電力安監部管理制度》covering the areas including (i) operation and working safely; (ii) safe electrical work practices; (iii) reporting incidents that have led or may led to damage or injury; and (iv) health and safety education and training policies.

The Company installed protective screens on monitors to reduce eye damage that may be caused by computer screens. Employees also constantly reminds each other to maintain appropriate viewing distance between their eyes and computer screens, maintain good posture when working and do stretching exercises during rest breaks.

The Group has installed closed-circuit televisions (the "CCTV") at the big data centres. All these security systems and CCTV are controlled by the security team worked at the big data centre sites.

In response to the COVID-19 pandemic, the Group has been closely monitoring and following the policies and advice from local government and strictly implementing enhanced control measures at its workplaces to safeguard the hygiene and safety of the employees, including but not limited to:

• (i) establishing a contingency working team, reporting to general manager, to coordinate and reinforce prevention measures and ensure communication of accurate and up-to-date information with all employees;
• (ii) suspending construction works of the third big data centre temporarily in early 2020;
• (iii) cancelling all planned commercial and site visits;
• (iv) implementing work-from-home or job/shift arrangement and assignment of alternate work duties;
• (v) requiring employees who have travelled from specified high risk places within 14 days to have compulsory quarantine and provide health certificate before resume work;
• (vi) establishing mandatory body temperature screening procedures;
• (vii) providing disposable protective face masks and hand sanitizer for its employees; and
• (viii) conducting regular disinfection of offices and catering areas.

The Group strictly regulates the operation of its business to ensure the compliance with local laws and regulations relating to health and safety during the course of operation. During the Reporting Period, no serious work injury incidents and none of work-related fatalities occurred in the Group. The Group was not aware of any material non-compliance with the relevant laws and regulations of Hong Kong and the PRC including but not limited to Occupational Safety and Health Ordinance of Hong Kong (Cap.509) and Work-Related Injury Insurance Regulation of the PRC that have a significant impact on the Group relating to providing a safe working environment and protecting employees from occupational hazards of the Group in the Year.

No non-compliance with law that resulted in significant fines or sanctions had been reported in the Year.

B3 Development and Training

The Group acknowledges the importance of training for the development of its employees as well as the Group. To help nurture professional talents and to promote overall efficiency, increase the morale and loyalty of the employees, the Group encourages and supports its employees in personal and professional training, through sponsoring training programmes, seminars, workshops and conferences, as well as reimbursement for external training courses to enhance their competencies in performing their jobs effectively and efficiently. The Group believes this is a mutually beneficial practice for achieving both personal and corporate goals as a whole.

B4 Labour Standards

The Group strictly abides by the labour laws in the PRC and Hong Kong, including the Labour Law of the PRC, the Labour Contract Law of the PRC, Employment Ordinance of Hong Kong, and other related labour laws and regulations in the PRC and Hong Kong. To combat against illegal employment of child labour, underage workers and forced labour, the human resources department is responsible for recruitment requires the job applicants to provide valid identity documents prior to confirmation of employment, to ensure that all applicants are lawfully employable. The human resources department is responsible for monitoring and ensuring the compliance of the relevant laws and regulations including those that prohibit child labour and forced labour.

During the Reporting Period, the Group was not aware of any material non-compliance with the relevant laws and regulations including but not limited to the (i) Labour Law of the PRC; (ii) Law of the PRC on Employment Contracts; (iii) the Law of the PRC on the Protection of Minors; (iv) the Provisions on the Prohibition of Using Child Labour; (v) Employment Ordinance (Hong Kong); and (vi) Employment of Children Regulations (Hong Kong) that preventing from employment of child or forced labour by the Group. In addition, there was no fine or non-monetary sanction for non-compliance with relevant laws and regulations had been reported in the Year.

OPERATING PRACTICES

B5 Supply Chain Management

The Group attaches importance to integrity and has the same requirements for suppliers and partners. The Group will only choose reputable suppliers and partners with good business records, satisfactory products and services quality, and will not simply consider the cost. The Group strictly monitors the procurement process to ensure that there is no interests transfer or corruption of any kind.

In addition, the Group hopes that suppliers and partners have similar practices in respect of environmental protection, employment, operating practice and other aspects with us. If the Group identifies any violation of the relevant environmental protection, employment and other laws, it will immediately suspend the cooperation with such suppliers and partners. The Group will also evaluate the products and services provided by the supplier, check whether the supplier has fulfilled the product liability, report the relevant information to the relevant departments and management, and replace the supplier if necessary.

In the Year, the major suppliers for operations of big data centres are supply of electricity, electronic and IT equipment. The Group has signed agreements with its electricity suppliers which are mainly the local subsidiaries of the state-owned enterprise in stringent compliance with contractual requirements and applicable laws including Electric Power Law of the PRC and Regulations on Supply and Use of Electric Power. In order to ensure full-load operation of the big data centres, the Group maintains regular communication with local utility service providers in respect of resources allocation and application for increase or decrease in utility supply.

During the Reporting Period, the Group was not aware that any key suppliers had any significant actual and potential negative impact on business ethics, environmental protection, human rights and labour practices, nor any of them had any non-compliance incident in respect of human rights issues.

B6 Product Responsibility

The Group is principally engaged in the provision of data analysis and storage services and distribution of mobile gaming. The provision of data analysis and storage services covering a full range from monitoring the average utilisation rate and working status of data processors to supervising the overall safety and security of both physical environment and internet connection in the big data centres. The Group adheres to the highest standards of business ethics, while policies to assure that products and services responsibility are securely in place. These ethics underpin how the Group conducts business with its customers. Each customer is provided with a monthly report on operation results of its data processors. In the event of any unusual condition reported on the data processors, the relevant customer will receive an immediate notification and follow-up inspection and maintenance services upon request. The Group's comprehensive management software for the operation of big data centres enables its customers to remotely monitor their data processors and obtain real-time information on the average computing capacity and utilization and operating time of their data processors.

The safety and quality of the products and services are the Group's primary strategic objective. The Group consistently reassesses the relevance of, and continually refines, its standards throughout the entire services and supply chain.

The Group strictly abides by the provisions of the law and attaches great importance to the privacy of personal data to resolutely maintain and protect personal information. Only personal information needed for the business are collected and used subject to purposes mentioned in the course of collection unless with agreement from customers. The Group will not transfer or disclose any personal data to any entities other than the members of the Group without the consent, unless otherwise required by the laws or notification is given to customers in advance.

During the Reporting Period, the Group was not aware of any material non-compliance of laws and regulations that have a significant impact relating to the quality, health and safety and privacy matters relating to products and services provided. No significant fines had been reported in the Year.

B7 Anti-corruption

The Group aims to maintain the highest standards of openness, uprightness and accountability and all its staff are expected to observe the highest standards of ethical, personal and professional conduct. The Group does not tolerate corruption, bribery, extortion, money-laundering and other fraudulent activities in connection with any of its business operations.

In addition to the code of conduct on anti-bribery and anti-corruption, the Group has implemented a whistleblowing policy for encouraging the reporting of suspected business irregularities. Ongoing review of the effectiveness of the internal control systems is conducted on a regular basis in preventing the occurrence of corruption activities.

The Group is not aware of any material non-compliance with the Anti-Unfair Competition Law of the PRC, Prevention of Bribery Ordinance of Hong Kong and other applicable laws and regulations that has a significant impact relating to bribery, extortion, fraud and money laundering in the Year. In addition, there was no report of heavy fines or sanctions as the result of non-compliance with relevant laws and regulations.

B8 Community Investment

As a corporate citizen, the Group promotes social contributions throughout its staff to the local communities in which it operates. The Group places great emphasis on cultivating social responsibility awareness among its staff and encouraging them to better serve our community at work and during their personal time. The Group will try to maximise its social investments as possible in order to create a more favourable environment for the community and the business.

During the Reporting Period, the Group donated medical and safety related supplies including N95 medical masks, hand sanitizer and safety gear, worth approximately HK\$0.9 million to local government and 300 protective gear to local medical staff during the outbreak of COVID-19.

TO THE SHAREHOLDERS OF LOTO INTERACTIVE LIMITED

(Incorporated in the Cayman Islands with limited liability)

OPINION

We have audited the consolidated financial statements of Loto Interactive Limited (the "Company") and its subsidiaries (collectively referred to as the "Group") set out on pages 69 to 147, which comprise the consolidated statement of financial position as at 31 December 2020, and the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2020, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards ("HKFRSs") issued by the Hong Kong Institute of Certified Public Accountants (the "HKICPA") and have been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance.

BASIS FOR OPINION

We conducted our audit in accordance with Hong Kong Standards on Auditing ("HKSAs") issued by the HKICPA. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the HKICPA's Code of Ethics for Professional Accountants (the "Code"), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

KEY AUDIT MATTERS

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Property, plant and equipment

Refer to note 16 to the consolidated financial statements.

The Group tested the amount of property, plant and equipment for impairment. This impairment test is significant to our audit because the balance of property, plant and equipment of approximately HK\$263,269,000 as at 31 December 2020 is material to the consolidated financial statements. In addition, the Group's impairment test involves application of judgement and is based on assumptions and estimates.

Our audit procedures included, among others:

• Assessing the identification of the related cash generating units;
• Assessing the arithmetical accuracy of the value-in-use calculations;
• Comparing the actual cash flows with the cash flow projection;
• Assessing the reasonableness of the key assumptions (including revenue growth, profit margins, terminal growth rates and discount rates); and
• Checking input data to supporting evidence.

We consider that the Group's impairment test for property, plant and equipment is supported by the available evidence.

Goodwill

Refer to note 18 to the consolidated financial statements.

The Group is required to annually test the amount of goodwill for impairment. This annual impairment test is significant to our audit because the balance of goodwill of approximately HK\$11,703,000 as at 31 December 2020 is material to the consolidated financial statements. In addition, the Group's impairment test involves application of judgement and is based on assumptions and estimates.

Our audit procedures included, among others:

• Assessing the identification of the related cash generating units;
• Assessing the arithmetical accuracy of the value-in-use calculations;
• Assessing the reasonableness of the key assumptions (including revenue growth, profit margins, terminal growth rates and discount rates); and
• Checking input data to supporting evidence.

We consider that the Group's impairment test for goodwill is supported by the available evidence.

Loan receivables

Refer to note 24 to the consolidated financial statements.

The Group tested the amount of loan receivables for impairment. This impairment test is significant to our audit because the balance of loan receviables of approximately HK\$30,000,000 as at 31 December 2020 is material to the consolidated financial statements. In addition, the Group's impairment test involves application of judgement and is based on estimates.

Our audit procedures included, among others:

• Assessing the Group's relationship and transaction history with the borrower;
• Evaluating the Group's impairment assessment;
• Assessing ageing of the debts;
• Checking subsequent settlements from the borrowers; and
• Assessing the disclosure of the Group's exposure to credit risk in the consolidated financial statements.

We consider that the Group's impairment test for loan receivables is supported by the available evidence.

OTHER INFORMATION

The directors are responsible for the other information. The other information comprises all the information in the Company's annual report, but does not include the consolidated financial statements and our auditor's report thereon.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

RESPONSIBILITIES OF DIRECTORS FOR THE CONSOLIDATED FINANCIAL STATEMENTS

The directors are responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with HKFRSs issued by the HKICPA and the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal control as the Directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the directors are responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

AUDITOR'S RESPONSIBILITY FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. We report our opinion solely to you, as a body, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with HKSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

A further description of our responsibilities for the audit of the consolidated financial statements is located at the HKICPA's website at: http://www.hkicpa.org.hk/en/standards-and-regulations/standards/auditing-assurance/ auditre/

This description forms part of our auditor's report.

ZHONGHUI ANDA CPA Limited Certified Public Accountants Wan Ho Yuen

Audit Engagement Director Practising Certificate Number P04309

Hong Kong, 30 March 2021

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the year ended 31 December 2020

		2020	2019
	Notes	HK\$'000	HK\$'000
REVENUE	8	382,955	64,556
Cost of sales and service rendered		(342,213)	(51,237)
Gross profit		40,742	13,319
Interest income		444	8,045
Other income and gains	9	1,773	4,705
Selling expenses		(105)	(1,098)
Administrative expenses		(75,178)	(46,819)
Impairment of trade and other receivables		(1,905)	–
Other expenses		(4,568)	(2,344)
Share of losses of associates		(1,112)	(9,415)
Finance costs	10	(448)	(1,269)
LOSS BEFORE TAX		(40,357)	(34,876)
Income tax (expense)/credit	12	(2,898)	105
LOSS FOR THE YEAR	13	(43,255)	(34,771)
OTHER COMPREHENSIVE INCOME
Other comprehensive income/ (loss) for the year, net of tax:
Items that will not be reclassified to profit or loss:
Fair value changes of equity investments at fair value through
other comprehensive income		(83)	(12,696)
		(83)	(12,696)
Items that may be reclassified to profit or loss:
Exchange differences on translation of foreign operations		16,727	1,572
		16,727	1,572
OTHER COMPREHENSIVE INCOME/ (LOSS) FOR THE YEAR,
NET OF TAX		16,644	(11,124)
TOTAL COMPREHENSIVE LOSS FOR THE YEAR		(26,611)	(45,895)

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the year ended 31 December 2020

		2020	2019
	Notes	HK\$'000	HK\$'000
(LOSS)/PROFIT FOR THE YEAR ATTRIBUTABLE TO:
Owners of the Company		(46,767)	(33,618)
Non-controlling interests		3,512	(1,153)
		(43,255)	(34,771)
TOTAL COMPREHENSIVE (LOSS)/INCOME FOR THE YEAR ATTRIBUTABLE TO: Owners of the Company Non-controlling interests		(31,261) 4,650	(44,678) (1,217)
		(26,611)	(45,895)
LOSS PER SHARE ATTRIBUTABLE TO OWNERS OF THE COMPANY (HK cents)	15

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2020

		2020	2019
	Notes	HK\$'000	HK\$'000
NON-CURRENT ASSETS
Property, plant and equipment	16	263,269	164,520
Right-of-use assets	17	6,409	4,537
Goodwill	18	11,703	10,996
Intangible assets	19	–	5,655
Investments in associates	21	2,431	3,384
Investment in a joint venture	22	–	–
Equity investments at fair value through
other comprehensive income	23	5,057	5,140
Loan receivables	24	30,000	–
		318,869	194,232
CURRENT ASSETS
Loan receivables	24	–	60,881
Trade receivables	25	8,400	19,949
Prepayments, deposits and other receivables	26	83,018	41,823
Cash and cash equivalents	27	44,252	95,030
		135,670	217,683
CURRENT LIABILITIES
Trade payables	28	4,611	24,300
Accruals and other payables	29	25,734	24,720
Lease liabilities	30	3,360	3,747
Amount due to holding company	31	–	1
Amount due to a related company	31	467	11,380
Tax payable		7,421	3,297
		41,593	67,445
NET CURRENT ASSETS		94,077	150,238
TOTAL ASSETS LESS CURRENT LIABILITIES		412,946	344,470
NON-CURRENT LIABILITIES
Lease liabilities	30	3,236	692
Deferred tax liabilities	32	–	1,031
		3,236	1,723
NET ASSETS		409,710	342,747

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2020

		2020	2019
	Notes	HK\$'000	HK\$'000
EQUITY
Equity attributable to owners of the Company
Share capital	33	37,902	31,586
Reserves	34	280,764	298,285
		318,666	329,871
Non-controlling interests		91,044	12,876
TOTAL EQUITY		409,710	342,747

The consolidated financial statements on pages 69 to 147 were approved and authorised for issue by the board of directors on 30 March 2021 and are signed on its behalf by:

Approved by:

Yan Hao Huang Lilan Director Director

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2020

				Attributable to owners of the Company
	Issued	Share	Share based payment	Other	Exchange	Equity investment revaluation	Accumulated		Non controlling	Total
	capital HK\$'000	premium# HK\$'000	reserve# HK\$'000	reserve*# HK\$'000	reserve# HK\$'000	reserve# HK\$'000	losses# HK\$'000	Total HK\$'000	interests HK\$'000	equity HK\$'000
At 1 January 2019	31,459	327,928	12,598	(5,255)	2,056	126	(4,039)	364,873	6,279	371,152
Loss for the year	–	–	–	–	–	–	(33,618)	(33,618)	(1,153)	(34,771)
Other comprehensive income/(loss) for the year	–	–	–	–	1,636	(12,696)	–	(11,060)	(64)	(11,124)
Total comprehensive income/(loss)
for the year	–	–	–	–	1,636	(12,696)	(33,618)	(44,678)	(1,217)	(45,895)
Issue of ordinary shares upon exercise
of share options (Note 33(a))	127	1,266	–	–	–	–	–	1,393	–	1,393
Equity-settled share-based payment expense (Note 35)	–	–	8,283	–	–	–	–	8,283	–	8,283
Non-controlling interests arising from establishment of a new subsidiary	–	–	–	–	–	–	–	–	7,814	7,814
At 31 December 2019	31,586	329,194	20,881	(5,255)	3,692	(12,570)	(37,657)	329,871	12,876	342,747
At 1 January 2020	31,586	329,194	20,881	(5,255)	3,692	(12,570)	(37,657)	329,871	12,876	342,747
(Loss)/Profit for the year	–	–	–	–	–	–	(46,767)	(46,767)	3,512	(43,255)
Other comprehensive income/ (loss) for the year	–	–	–	–	15,589	(83)	–	15,506	1,138	16,644
Total comprehensive income/ (loss) for the year	–	–	–	–	15,589	(83)	(46,767)	(31,261)	4,650	(26,611)
Issue of shares on placement
(Note 33(c))	6,316	9,712	–	–	–	–	–	16,028	–	16,028
Equity-settled share-based payment expense (Note 35)	–	–	4,028	–	–	–	–	4,028	–	4,028
Cancellation of share option
scheme Non-controlling interests arising	–	–	(15,539)	–	–	–	15,539	–	–	–
from increase in paid-up capital	–	–	–	–	–	–	–	–	78,895	78,895
Loss on deregistration of subsidiaries	–	–	–	–	–	–	–	–	(5,377)	(5,377)
At 31 December 2020	37,902	338,906	9,370	(5,255)	19,281	(12,653)	(68,885)	318,666	91,044	409,710

* Other reserve represents the difference between the adjustment to non-controlling interests and the consideration paid arising in equity transactions.

These reserve accounts comprise the consolidated reserves in the consolidated statement of financial position.

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December 2020

	2020	2019
	HK\$'000	HK\$'000
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before tax	(40,357)	(34,876)
Adjustments for:
Equity-settled share-based payment expense	4,028	8,283
Depreciation	41,680	14,357
Amortisation of intangible assets	5,667	1,063
Depreciation of right-of-use assets	5,257	4,838
Share of losses of associates	1,112	9,415
Impairment of trade receivables	837	–
Impairment of other receivables	1,068	–
Interest income Finance costs	(444) 448	(8,045) 1,269
Loss on disposal of items of property, plant and equipment	–	19
Rental concession	(833)	–
Loss on deregistration of subsidiaries	(5,377)	–
Operating cash flows before working capital changes	13,086	(3,677)
Change in trade receivables	10,712	12,511
Change in prepayments, deposits and other receivables	(42,263)	(15,294)
Change in trade payables	(19,689)	(20,442)
Change in accruals and other payables	1,014	16,161
Cash used in operating activities	(37,140)	(10,741)
Income taxes paid	(33)	(203)
Lease interest paid	(295)	(323)
Net cash flows used in operating activities	(37,468)	(11,267)
CASH FLOWS FROM INVESTING ACTIVITIES
Withdrawal of structured notes	–	50,371
Purchase of property, plant and equipment	(125,461)	(176,131)
Proceeds from disposal of items of property, plant and equipment	–	948
Purchase of intangible assets	–	(2,125)
Purchase of equity investments at fair value through other comprehensive income	–	(7,710)
Acquisition of subsidiaries	–	(11,646)
Interest received	444	4,859
Repayment from loan receivables	60,881	44,503
Grant of loan receivables	(30,000)	(11,163)
Net cash flows used in investing activities	(94,136)	(108,094)

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December 2020

	2020	2019
	HK\$'000	HK\$'000
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment to holding company	(1)	(38)
(Repayment to)/Advance from related parties	(10,913)	11,380
Repayment of lease liabilities	(4,130)	(3,418)
Proceeds from issue of shares	16,423	–
Share issue expenses paid	(395)	–
Contributions from non-controlling shareholders	78,895	7,814
Proceeds from exercise of share options	–	1,393
Interest paid	(153)	(946)
Net cash flows generated from financing activities	79,726	16,185
NET DECREASE IN CASH AND CASH EQUIVALENTS	(51,878)	(103,176)
Cash and cash equivalents at beginning of year	95,030	198,221
Net foreign exchange difference	1,100	(15)
Cash and cash equivalents at end of year	44,252	95,030
ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash and bank balances	44,252	95,030

For the year ended 31 December 2020

1. GENERAL INFORMATION

Loto Interactive Limited (the "Company") is a public limited company incorporated in the Cayman Islands and its shares have been listed on the Growth Enterprise Market ("GEM") of the Stock Exchange of Hong Kong Limited (the "Stock Exchange") since 17 May 2002. The addresses of the registered office and principal place of business of the Company are disclosed in the corporate information section of the annual report.

The Company is an investment holding company. The principal activities of its subsidiaries are set out in note 20 to the consolidated financial statements.

In the opinion of the directors of the Company, as at 31 December 2020, the substantial shareholder of the Company is 500.com Limited ("Holding Company"), which is incorporated in the Cayman Islands and listed on the New York Stock Exchange (stock code: WBAI).

2. ADOPTION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS

In the current year, the Group has adopted all the new and revised Hong Kong Financial Reporting Standards ("HKFRSs") issued by the Hong Kong Institute of Certified Public Accountants (the "HKICPA") that are relevant to its operations and effective for its accounting year beginning on 1 January 2020. HKFRSs comprise Hong Kong Financial Reporting Standards ("HKFRS"); Hong Kong Accounting Standards ("HKAS"); and Interpretations. The adoption of these new and revised HKFRSs did not result in substantial changes to the Group's accounting policies and amounts reported for the current year and prior years.

3. SIGNIFICANT ACCOUNTING POLICIES

These consolidated financial statements have been prepared in accordance with HKFRSs issued by the HKICPA, accounting principles generally accepted in Hong Kong and the applicable disclosures required by the Rules Governing the Listing of Securities on the GEM of The Stock Exchange and by the Hong Kong Companies Ordinance.

These consolidated financial statements have been prepared under the historical cost convention, as modified by investments which are carried at their fair values.

The preparation of consolidated financial statements in conformity with HKFRSs requires the use of certain key assumptions and estimates. It also requires the directors to exercise its judgments in the process of applying the accounting policies. The areas where assumptions and estimates are significant to these consolidated financial statements, are disclosed in note 4 to the consolidated financial statements.

For the year ended 31 December 2020

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

The significant accounting policies applied in the preparation of these consolidated financial statements are set out below.

(a) Consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries made up to 31 December. Subsidiaries are entities over which the Group has control. The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The Group has power over an entity when the Group has existing rights that give it the current ability to direct the relevant activities, i.e. activities that significantly affect the entity's returns.

When assessing control, the Group considers its potential voting rights as well as potential voting rights held by other parties, to determine whether it has control. A potential voting right is considered only if the holder has the practical ability to exercise that right.

Subsidiaries are consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date the control ceases.

The gain or loss on the disposal of subsidiaries that results in a loss of control represents the difference between (i) the fair value of the consideration of the sale plus the fair value of any investment retained in that subsidiaries and (ii) the Company's share of the net assets of that subsidiaries plus any remaining goodwill relating to that subsidiaries and any related foreign currency translation reserve.

Intragroup transactions, balances and unrealised profits are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Non-controlling interests represent the equity in subsidiaries not attributable, directly or indirectly, to the Company. Non-controlling interests are presented in the consolidated statement of financial position and consolidated statement of changes in equity within equity. Non-controlling interests are presented in the consolidated statement of profit or loss and other comprehensive income as an allocation of profit or loss and total comprehensive income for the year between the non-controlling shareholders and owners of the Company.

Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling shareholders even if this results in the non-controlling interests having a deficit balance.

For the year ended 31 December 2020

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

(a) Consolidation (continued)

Changes in the Company's ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions (i.e. transactions with owners in their capacity as owners). The carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to the owners of the Company.

(b) Business combination and goodwill

The acquisition method is used to account for the acquisition of a subsidiary in a business combination. The cost of acquisition is measured at the acquisition-date fair value of the assets given, equity instruments issued, liabilities incurred and contingent consideration. Acquisition-related costs are recognised as expenses in the periods in which the costs are incurred and the services are received. Identifiable assets and liabilities of the subsidiary in the acquisition are measured at their acquisition-date fair values.

The excess of the cost of acquisition over the Company's share of the net fair value of the subsidiary's identifiable assets and liabilities is recorded as goodwill. Any excess of the Company's share of the net fair value of the identifiable assets and liabilities over the cost of acquisition is recognised in consolidated profit or loss as a gain on bargain purchase which is attributed to the Company.

In a business combination achieved in stages, the previously held equity interest in the subsidiary is remeasured at its acquisition-date fair value and the resulting gain or loss is recognised in consolidated profit or loss. The fair value is added to the cost of acquisition to calculate the goodwill.

If the changes in the value of the previously held equity interest in the subsidiary were recognised in other comprehensive income (for example, equity investments at fair value through other comprehensive income), the amount that was recognised in other comprehensive income is recognised on the same basis as would be required if the previously held equity interest were disposed of.

Goodwill is tested annually for impairment or more frequently if events or changes in circumstances indicate that it might be impaired. Goodwill is measured at cost less accumulated impairment losses. The method of measuring impairment losses of goodwill is the same as that of other assets as stated in the accounting policy (v) below. Impairment losses of goodwill are recognised in consolidated profit or loss and are not subsequently reversed. Goodwill is allocated to cash-generating units that are expected to benefit from the synergies of the acquisition for the purpose of impairment testing.

The non-controlling interests in the subsidiary are initially measured at the non-controlling shareholders' proportionate share of the net fair value of the subsidiary's identifiable assets and liabilities at the acquisition date.

For the year ended 31 December 2020

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

(c) Associates

Associates are entities over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of an entity but is not control or joint control over those policies. The existence and effect of potential voting rights that are currently exercisable or convertible, including potential voting rights held by other entities, are considered when assessing whether the Group has significant influence. In assessing whether a potential voting right contributes to significant influence, the holder's intention and financial ability to exercise or convert that right is not considered.

Investment in an associate is accounted for in the consolidated financial statements by the equity method and is initially recognised at cost. Identifiable assets and liabilities of the associate in an acquisition are measured at their fair values at the acquisition date. The excess of the cost of acquisition over the Group's share of the net fair value of the associate's identifiable assets and liabilities is recorded as goodwill. The goodwill is included in the carrying amount of the investment and is tested for impairment together with the investment at the end of each reporting period when there is objective evidence that the investment is impaired. Any excess of the Group's share of the net fair value of the identifiable assets and liabilities over the cost of acquisition is recognised in consolidated profit or loss.

The Group's share of an associate's post-acquisition profits or losses is recognised in consolidated profit or loss, and its share of the post-acquisition movements in reserves is recognised in the consolidated reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group's share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. If the associate subsequently reports profits, the Group resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised.

The gain or loss on the disposal of an associate that results in a loss of significant influence represents the difference between (i) the fair value of the consideration of the sale plus the fair value of any investment retained in that associate and (ii) the Group's share of the net assets of that associate plus any remaining goodwill relating to that associate and any related accumulated foreign currency translation reserve. If an investment in an associate becomes an investment in a joint venture, the Group continues to apply the equity method and does not remeasure the retained interest.

Unrealised profits on transactions between the Group and its associates are eliminated to the extent of the Group's interests in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.

For the year ended 31 December 2020

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

(d) Joint arrangements

A joint arrangement is an arrangement of which two or more parties have joint control. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. Relevant activities are activities that significantly affect the returns of the arrangement. When assessing joint control, the Group considers its potential voting rights as well as potential voting rights held by other parties, to determine whether it has joint control. A potential voting right is considered only if the holder has the practical ability to exercise that right.

A joint arrangement is either a joint operation or a joint venture. A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.

In relation to its interest in a joint operation, the Group recognises in its consolidated financial statements, its assets, including its share of any assets held jointly; its liabilities, including its share of any liabilities incurred jointly; its revenue from the sale of its share of the output arising from the joint operation; its share of the revenue from the sale of the output by the joint operation; and its expenses, including its share of any expenses incurred jointly, in accordance with the HKFRSs applicable to the particular assets, liabilities, revenues and expenses.

Investment in a joint venture is accounted for in the consolidated financial statements by the equity method and is initially recognised at cost. Identifiable assets and liabilities of the joint venture in an acquisition are measured at their fair values at the acquisition date. The excess of the cost of acquisition over the Group's share of the net fair value of the joint venture's identifiable assets and liabilities is recorded as goodwill. The goodwill is included in the carrying amount of the investment and is tested for impairment together with the investment at the end of each reporting period when there is objective evidence that the investment is impaired. Any excess of the Group's share of the net fair value of the identifiable assets and liabilities over the cost of acquisition is recognised in consolidated profit or loss.

The Group's share of a joint venture's post-acquisition profits or losses is recognised in consolidated profit or loss, and its share of the post-acquisition movements in reserves is recognised in the consolidated reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group's share of losses in a joint venture equals or exceeds its interest in the joint venture, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the joint venture. If the joint venture subsequently reports profits, the Group resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised.

For the year ended 31 December 2020

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

(d) Joint arrangements (continued)

The gain or loss on the disposal of a joint venture that results in a loss of joint control represents the difference between (i) the fair value of the consideration of the sale plus the fair value of any investment retained in that joint venture and (ii) the Group's share of the net assets of that joint venture plus any remaining goodwill relating to that joint venture and any related accumulated foreign currency translation reserve. If an investment in a joint venture becomes an investment in an associate, the Group continues to apply the equity method and does not remeasure the retained interest.

Unrealised profits on transactions between the Group and its joint ventures are eliminated to the extent of the Group's interests in the joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group.

(e) Foreign currency translation

(i) Functional and presentation currency

The consolidated financial statements are presented in Hong Kong dollars, which is the Company's presentation currency. The functional currency of the Company is Renminbi. The directors consider that choosing Hong Kong dollars as the presentation currency best suits the needs of the shareholders and investors.

(ii) Transactions and balances in each entity's financial statements

Transactions in foreign currencies are translated into the functional currency on initial recognition using the exchange rates prevailing on the transaction dates. Monetary assets and liabilities in foreign currencies are translated at the exchange rates at the end of each reporting period. Gains and losses resulting from this translation policy are recognised in profit or loss.

Non-monetary items that are measured at fair values in foreign currencies are translated using the exchange rates at the dates when the fair values are determined.

When a gain or loss on a non-monetary item is recognised in other comprehensive income, any exchange component of that gain or loss is recognised in other comprehensive income. When a gain or loss on a non-monetary item is recognised in profit or loss, any exchange component of that gain or loss is recognised in profit or loss.

For the year ended 31 December 2020

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

(e) Foreign currency translation (continued)

(iii) Translation on consolidation

The results and financial position of all the Group entities that have a functional currency different from the Company's presentation currency are translated into the Company's presentation currency as follows:

• Assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position;
• Income and expenses are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the exchange rates on the transaction dates); and
• All resulting exchange differences are recognised in the foreign currency translation reserve.

On consolidation, exchange differences arising from the translation of the net investment in foreign entities and of borrowings are recognised in the foreign currency translation reserve. When a foreign operation is sold, such exchange differences are recognised in consolidated profit or loss as part of the gain or loss on disposal.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

(f) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are recognised in profit or loss during the period in which they are incurred.

For the year ended 31 December 2020

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

(f) Property, plant and equipment (continued)

Depreciation of property, plant and equipment is calculated at rates sufficient to write off their cost less their residual values over the estimated useful lives on a straight-line basis. The principal annual rate are as follows:

Leasehold improvement	20% – 75%
Machinery and equipment	20% – 33.33%
Furniture, fixtures and equipment	20% – 50%
Motor vehicles	10% – 20%

The residual values, useful lives and depreciation method are reviewed and adjusted, if appropriate, at the end of each reporting period.

Construction in progress represents plant and machinery pending installation, and is stated at cost less impairment losses. Depreciation begins when the relevant assets are available for use.

The gain or loss on disposal of property, plant and equipment is the difference between the net sales proceeds and the carrying amount of the relevant asset, and is recognised in profit or loss.

(g) Leases

The Group as lessee

Leases are recognised as right-of-use assets and corresponding lease liabilities when the leased assets are available for use by the Group. Right-of-use assets are stated at cost less accumulated depreciation and impairment losses. Depreciation of right-of-use assets is calculated at rates to write off their cost over the shorter of the asset's useful life and the lease term on a straight-line basis. The principal annual rates are as follows:

Land use rights	50%
Land and buildings	33.33% – 58.53%

Right-of-use assets are measured at cost comprising the amount of the initial measurement of the lease liabilities, lease payments prepaid, initial direct costs and the restoration costs. Lease liabilities include the net present value of the lease payments discounted using the interest rate implicit in the lease if that rate can be determined, or otherwise the Group's incremental borrowing rate. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease term so as to produce a constant periodic rate of interest on the remaining balance of the lease liability.

For the year ended 31 December 2020

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

(g) Leases (continued)

The Group as lessee (continued)

Payments associated with short-term leases and leases of low-value assets are recognised as expenses in profit or loss on a straight-line basis over the lease terms. Short-term leases are leases with an initial lease term of 12 months or less. Low-value assets are assets of value below US\$5,000.

(h) Recognition and derecognition of financial instruments

Financial assets and financial liabilities are recognised in the statement of financial position when the Group becomes a party to the contractual provisions of the instruments.

Financial assets are derecognised when the contractual rights to receive cash flows from the assets expire; the Group transfers substantially all the risks and rewards of ownership of the assets; or the Group neither transfers nor retains substantially all the risks and rewards of ownership of the assets but has not retained control on the assets. On derecognition of a financial asset, the difference between the asset's carrying amount and the sum of the consideration received is recognised in profit or loss.

Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged, cancelled or expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid is recognised in profit or loss.

For the year ended 31 December 2020

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

(i) Financial assets

Financial assets are recognised and derecognised on a trade date basis where the purchase or sale of an asset is under a contract whose terms require delivery of the asset within the timeframe established by the market concerned, and are initially recognised at fair value, plus directly attributable transaction costs except in the case of investments at fair value through profit or loss. Transaction costs directly attributable to the acquisition of investments at fair value through profit or loss are recognised immediately in profit or loss.

Financial assets of the Group are classified under the following categories:

• Financial assets at amortised cost; and
• Equity investments at fair value through other comprehensive income;

(i) Financial assets at amortised cost

Financial assets (including trade and other receivables) are classified under this category if they satisfy both of the following conditions:

• the assets are held within a business model whose objective is to hold assets in order to collect contractual cash; and
• the contractual terms of the assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

They are subsequently measured at amortised cost using the effective interest method less loss allowance for expected credit losses.

(ii) Equity investments at fair value through other comprehensive income

On initial recognition, the Group can make an irrevocable election (on an instrumentby-instrument basis) to designate investments in equity instruments that are not held for trading as at fair value through other comprehensive income.

Equity investments at fair value through other comprehensive income are subsequently measured at fair value with gains and losses arising from changes in fair values recognised in other comprehensive income and accumulated in the equity investment revaluation reserve. On derecognition of an investment, the cumulative gains or losses previously accumulated in the equity investment revaluation reserve are not reclassified to profit or loss.

Dividends on these investments are recognised in profit or loss, unless the dividends clearly represent a recovery of part of the cost of the investment.

For the year ended 31 December 2020

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

(j) Loss allowances for expected credit losses

The Group recognises loss allowances for expected credit losses on financial assets at amortised cost. Expected credit losses are the weighted average of credit losses with the respective risks of a default occurring as the weights.

At the end of each reporting period, the Group measures the loss allowance for a financial instrument at an amount equal to the expected credit losses that result from all possible default events over the expected life of that financial instrument ("lifetime expected credit losses") for trade receivables, or if the credit risk on that financial instrument has increased significantly since initial recognition.

If, at the end of the reporting period, the credit risk on a financial instrument (other than trade receivables) has not increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to the portion of lifetime expected credit losses that represents the expected credit losses that result from default events on that financial instrument that are possible within 12 months after the reporting period.

The amount of expected credit losses or reversal to adjust the loss allowance at the end of the reporting period to the required amount is recognised in profit or loss as an impairment gain or loss.

(k) Cash and cash equivalents

For the purpose of the statement of cash flows, cash and cash equivalents represent cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term highly liquid investments which are readily convertible into known amounts of cash and subject to an insignificant risk of change in value. Bank overdrafts which are repayable on demand and form an integral part of the Group's cash management are also included as a component of cash and cash equivalents.

(l) Financial liabilities and equity instruments

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument under HKFRSs. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities and equity instruments are set out below.

For the year ended 31 December 2020

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

(m) Trade and other payables

Trade and other payables are stated initially at their fair value and subsequently measured at amortised cost using the effective interest method unless the effect of discounting would be immaterial, in which case they are stated at cost.

(n) Equity instruments

Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.

(o) Revenue from contracts with customers

Revenue is measured based on the consideration specified in a contract with a customer with reference to the customary business practices and excludes amounts collected on behalf of third parties. For a contract where the period between the payment by the customer and the transfer of the promised product or service exceeds one year, the consideration is adjusted for the effect of a significant financing component.

The Group recognises revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. Depending on the terms of a contract and the laws that apply to that contract, a performance obligation can be satisfied over time or at a point in time. A performance obligation is satisfied over time if:

• the customer simultaneously receives and consumes the benefits provided by the Group's performance;
• the Group's performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or
• the Group's performance does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date.

If a performance obligation is satisfied over time, revenue is recognised by reference to the progress towards complete satisfaction of that performance obligation. Otherwise, revenue is recognised at a point in time when the customer obtains control of the product or service.

(p) Other revenue

Interest income is recognised using the effective interest method.

For the year ended 31 December 2020

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

(q) Employee benefits

(i) Employee leave entitlements

Employee entitlements to annual leave and long service leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave and long service leave as a result of services rendered by employees up to the end of the reporting period.

Employee entitlements to sick leave and maternity leave are not recognised until the time of leave.

(ii) Pension obligations

The Group contributes to defined contribution retirement schemes which are available to all employees. Contributions to the schemes by the Group and employees are calculated as a percentage of employees' basic salaries. The retirement benefit scheme cost charged to profit or loss represents contributions payable by the Group to the funds.

(iii) Termination benefits

Termination benefits are recognised at the earlier of the dates when the Group can no longer withdraw the offer of those benefits and when the Group recognises restructuring costs and involves the payment of termination benefits.

(r) Share-based payments

The Group issues equity-settled share-based payments to certain directors, employees and consultants.

Equity-settled share-based payments to directors and employees are measured at the fair value (excluding the effect of non market-based vesting conditions) of the equity instruments at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest and adjusted for the effect of non market-based vesting conditions.

Equity-settled share-based payments to consultants are measured at the fair value of the services rendered or if the fair value of the services rendered cannot be reliably measured, at the fair value of the equity instruments granted. The fair value is measured at the date the Group receives the services and is recognised as an expense.

For the year ended 31 December 2020

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

(s) Taxation

Income tax represents the sum of the current tax and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit recognised in profit or loss because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences, unused tax losses or unused tax credits can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised, based on tax rates that have been enacted or substantively enacted by the end of the reporting period. Deferred tax is recognised in profit or loss, except when it relates to items recognised in other comprehensive income or directly in equity, in which case the deferred tax is also recognised in other comprehensive income or directly in equity.

The measurement of deferred tax assets and liabilities reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

For the year ended 31 December 2020

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

(t) Segment reporting

Operating segments and the amounts of each segment item reported in the financial statements are identified from the financial information provided regularly to the Group's most senior executive management for the purpose of allocating resources and assessing the performance of the Group's various lines of business.

Individually material operating segments are not aggregated for financial reporting purposes unless the segments have similar economic characteristics and are similar in respect of the nature of products and services, the nature of productions processes, the type or class of customers, the methods used to distribute the products or provide the services, and the nature of the regulatory environment. Operating segments which are not individually material may be aggregated if they share a majority of these criteria.

(u) Related parties

A related party is a person or entity that is related to the Group.

• (a) A person or a close member of that person's family is related to the Group if that person:
• (i) has control or joint control over the Group;
• (ii) has significant influence over the Group; or
• (iii) is a member of the key management personnel of the Company or of a parent of the Company.
• (b) An entity is related to the Group (reporting entity) if any of the following conditions applies:
• (i) The entity and the Company are members of the same group (which means that each parent, subsidiaries and fellow subsidiaries is related to the others).
• (ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).
• (iii) Both entities are joint ventures of the same third party.
• (iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.

For the year ended 31 December 2020

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

(u) Related parties (continued)

• (b) An entity is related to the Group (reporting entity) if any of the following conditions applies: (continued)
• (v) The entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group. If the Group is itself such a plan, the sponsoring employers are also related to the Group.
• (vi) The entity is controlled or jointly controlled by a person identified in (a).
• (vii) A person identified in (a) (i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).
• (viii) The entity, or any member of a group of which it is a part, provides key management personnel services to the Company or to a parent of the Company.

(v) Impairment of assets

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets except goodwill, investments and receivables to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of any impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pretax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset or cashgenerating unit is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset or cashgenerating unit in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

For the year ended 31 December 2020

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

(w) Provisions and contingent liabilities

Provisions are recognised for liabilities of uncertain timing or amount when the Group has a present legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditures expected to settle the obligation.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow is remote.

(x) Events after the reporting period

Events after the reporting period that provide additional information about the Group's position at the end of the reporting period or those that indicate the going concern assumption is not appropriate are adjusting events and are reflected in the financial statements. Events after the reporting period that are not adjusting events are disclosed in the notes to the financial statements when material.

4. KEY ESTIMATES

Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

(a) Impairment of property, plant and equipment

Property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets exceeds its recoverable amount. The recoverable amount is determined with reference to the present value of estimated future cash flows. Where the future cash flows are less than expected or there are unfavourable events and change in facts and circumstance which result in revision of future estimate cash flows, a material impairment loss may arise.

For the year ended 31 December 2020

4. KEY ESTIMATES (continued)

Key sources of estimation uncertainty (continued)

(b) Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating unit to which goodwill has been allocated. The value in use calculation requires the Group to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the present value. The carrying amount of goodwill at the end of the reporting period was approximately HK\$11,703,000.

(c) Impairment of loan receivables

The Group makes impairment loss for loan receivables based on assessments of the recoverability of the loan receivables, including the current creditworthiness and the past collection history of each borrower. Impairments arise where events or changes in circumstances indicate that the balances may not be collectible. The identification of impairment loss requires the use of judgement and estimates. Where the actual result is different from the original estimate, such difference will impact the carrying value of the loan receivables and impairment loss expenses in the year in which such estimate has been changed.

(d) Property, plant and equipment and depreciation

The Group determines the estimated useful lives, residual values and related depreciation charges for the Group's property, plant and equipment. This estimate is based on the historical experience of the actual useful lives and residual values of property, plant and equipment of similar nature and functions. The Group will revise the depreciation charge where useful lives and residual values are different to those previously estimated, or it will write-off or write-down technically obsolete or non-strategic assets that have been abandoned or sold.

For the year ended 31 December 2020

5. FINANCIAL RISK MANAGEMENT

The Group's activities expose it to a variety of financial risks: foreign currency risk, credit risk, liquidity risk, interest rate risk and price risk. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance.

(a) Foreign currency risk

The Group has minimal exposure to foreign currency risk as most of its business transactions, assets and liabilities are principally denominated in the functional currencies of the Group entities. The Group currently does not have a foreign currency hedging policy in respect of foreign currency transactions, assets and liabilities. The Group will monitor its foreign currency exposure closely and will consider hedging significant foreign currency exposure should the need arise.

(b) Credit risk

At 31 December 2020, the Group's maximum exposure to credit risk which will cause a financial loss to the Group due to failure to the perform an obligation by the counterparties arise from the carrying amounts of the respective recognised financial assets as stated in the consolidated statement of financial position.

In order to minimise credit risk, the directors have delegated a team to be responsible for the determination of credit limits, credit approvals and other monitoring procedures. In addition, the directors review the recoverable amount of each individual trade debt regularly to ensure that adequate impairment losses are recognised for irrecoverable debts. In this regard, the directors consider that the Group's credit risk is significantly reduced.

The Group has concentration of credit risk as 91.3% (2019: 89.5%) of the Group's trade receivables are due from the Group's three customers (2019: one customer) which operate in the PRC. The principal activities of the Group are mainly provision of big data centre services and use of storage places. In respect of these customers, given their good repayment history, the directors of the Company consider that the credit risk associated with the balances of the customers is low.

The Group also has concentration of credit risk as 100% (2019: 82%) of the Group's loan receivables is a loan granted to an independent third party which is secured by a personal guarantee and a collateral of a property in PRC (2019: personal guarantee and a collateral of 95% of the entire equity interests in another company). In view of the counterparty never fail to make contractual payments, the directors of the Company consider that the credit risk associated with the balance of loan receivable is low.

For the year ended 31 December 2020

5. FINANCIAL RISK MANAGEMENT (continued)

(b) Credit risk (continued)

The Group considers whether there has been a significant increase in credit risk of financial assets on an ongoing basis throughout each reporting period by comparing the risk of a default occurring as at the reporting date with the risk of default as at the date of initial recognition. It considers available reasonable and supportive forwarding-looking information. Especially the following information is used:

• internal credit rating;
• actual or expected significant adverse changes in business, financial or economic conditions that are expected to cause a significant change to the borrower's ability to meet its obligations;
• significant changes in the value of the collateral or in the quality of guarantees or credit enhancements; and
• significant changes in the expected performance and behaviour of the borrower, including changes in the payment status of borrowers.

A significant increase in credit risk is presumed if a debtor is more than 30 days past due in making a contractual payment. A default on a financial asset is when the counterparty fails to make contractual payments within 60 days of when they fall due.

Financial assets are written off when there is no reasonable expectation of recovery, such as a debtor failing to engage in a repayment plan with the Group. The Group normally categorises a loan or receivable for write off when a debtor fails to make contractual payments greater than 360 days past due. Where loans or receivables have been written off, the Group, if practicable and economical, continues to engage in enforcement activity to attempt to recover the receivable due.

For the year ended 31 December 2020

5. FINANCIAL RISK MANAGEMENT (continued)

(b) Credit risk (continued)

The Group uses two categories for non-trade loan receivable which reflect their credit risk and how the loan loss provision is determined for each of the categories. In calculating the expected credit loss rates, the Group considers historical loss rates for each category and adjusts for forward looking data.

Category	Definition	Loss provision
Performing	Low risk of default and strong capacity to pay	12 month expected losses
Non-performing	Significant increase in credit risk	Lifetime expected losses

All of these loans are considered to have low risk and under the 'Performing' category because they have a low risk of default and have strong ability to meet their obligations.

(c) Liquidity risk

The Group's policy is to regularly monitor current and expected liquidity requirements to ensure that it maintains sufficient reserves of cash to meet its liquidity requirements in the short and longer term.

The maturity analysis, based on undiscounted cash flows, of the Group's financial liabilities is as follows:

	Less than 1 year	Total
	HK\$'000	HK\$'000
At 31 December 2020
Trade payables	4,611	4,611
Accruals and other payables	25,734	25,734
Amount due to a related company	467	467
	30,812	30,812

For the year ended 31 December 2020

5. FINANCIAL RISK MANAGEMENT (continued)

(c) Liquidity risk (continued)

	Less than 1 year HK\$'000	Total HK\$'000
At 31 December 2019
Trade payables	24,300	24,300
Accruals and other payables	24,720	24,720
Amount due to holding company	1	1
Amount due to a fellow subsidiary	11,380	11,380
	60,401	60,401

(d) Interest rate risk

The management of the Group considered that the overall interest rate risk is not significant as the fluctuation of the interest rates on bank balance is considered minimal. Accordingly, no sensitivity analysis is prepared and presented.

(e) Price risk

The Group's equity investments at fair value through other comprehensive income are measured at fair value at the end of each reporting period. Therefore, the Group is exposed to equity security price risk. The directors manage this exposure by maintaining a portfolio of investments with difference risk profiles.

At 31 December 2020, if the share prices of the investments increase/decrease by 10%, the equity investment revaluation reserve would have been approximately HK\$506,000 (2019: HK\$514,000) higher/lower, arising as a result of the fair value gain/loss of the investments.

For the year ended 31 December 2020

5. FINANCIAL RISK MANAGEMENT (continued)

(f) Categories of financial instruments at 31 December 2020

	2020	2019
	HK\$'000	HK\$'000
Financial assets:
Equity investments at fair value through
other comprehensive income	5,057	5,140
Financial assets at amortised cost:
Loan receivables	30,000	60,881
Trade receivables	8,400	19,949
Financial assets included in prepayments, deposits and
other receivables	34,114	30,656
Cash and cash equivalents	44,252	95,030
Total	121,823	211,656
Financial liabilities:
Financial liabilities at amortised cost:
Trade payables	4,611	24,300
Financial liabilities included in accruals and other payables	25,734	24,720
Amount due to the holding company	–	1
Amount due to a related company	467	11,380
Total	30,812	60,401

(g) Fair value

Except as disclosed in note 23 to the consolidated financial statements, the carrying amounts of the Group's financial assets and financial liabilities as reflected in the consolidated statement of financial position approximate their respective fair values.

For the year ended 31 December 2020

6. FAIR VALUE MEASUREMENTS

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following disclosures of fair value measurements use a fair value hierarchy that categorises into three levels the inputs to valuation techniques used to measure fair value:

Level 1 inputs:	quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the measurement date.
Level 2 inputs:	inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 inputs:	unobservable inputs for the asset or liability.

The Group's policy is to recognise transfers into and transfers out of any of the three levels as of the date of the event or change in circumstances that caused the transfer.

(a) Disclosures of level in fair value hierarchy at 31 December 2020:

	Fair value measurements
	using:	2020
Description	Level 1	Total
	HK\$'000	HK\$'000
Recurring fair value measurements: Equity investments at fair value through other comprehensive income
Listed securities in United States of America ("US")	5,057	5,057
Total recurring fair value measurements	5,057	5,057

For the year ended 31 December 2020

6. FAIR VALUE MEASUREMENTS (continued)

(a) Disclosures of level in fair value hierarchy at 31 December 2020: (continued)

Fair value
measurements
using:	2019
Level 1	Total
HK\$'000	HK\$'000
5,140	5,140
5,140	5,140

The total gains/losses recognised in other comprehensive income are presented in fair value changes of equity investments at fair value through other comprehensive income in the statement of profit or loss and other comprehensive income.

7. OPERATING SEGMENT INFORMATION

(a) Reportable segments

The chief operating decision-maker has been identified as the board of directors. The board of directors reviews the Group's internal reporting in order to assess performance and allocate resources. The Group determines its operating segments based on the reports reviewed by the chief operating decision-maker that are used to make strategic decisions.

The Group has three (2019: four) reportable segments. The segments are managed separately as each business segment offers different products and requires different business strategies. The following summary describes the operations in each of the Group's reportable segments:

• Provision of big data centre services ("Big Data Centre Services")
• Distribution of mobile gaming ("Online Game Business")
• Money lending business ("Money Lending Business")
• Trading of lottery terminals and parts and provision of services and solutions for the distribution of lottery products ("Lottery Business")#

• In the opinion of the directors, Lottery Business was no longer a reportable segment of the Group in 2020 since both the performance and the resources allocated were minimal to the Group.

For the year ended 31 December 2020

7. OPERATING SEGMENT INFORMATION (continued)

(a) Reportable segments (continued)

The accounting policies of the operating segments are the same as those described in note 3 to the consolidated financial statements. Segment profits or losses do not include dividend income, and gains or losses from investments and derivative instruments. Segment assets do not include amounts due from related parties, investments and derivative instruments. Segment liabilities do not include convertible loans and derivative instruments. Segment non-current assets do not include financial instruments, deferred tax assets, post-employment benefit assets and rights arising under insurance contracts.

(i) Information about reportable segment profit or loss, assets and liabilities:

		Big Data	Online	Money
Year ended 31 December 2020		Centre Services HK\$'000	Game Business HK\$'000	Lending Business HK\$'000	Total HK\$'000
Revenue from external customers Segment loss Depreciation		379,658 (4,766) 39,087	1,017 (982) 49	2,250 (203) –	382,925 (5,951) 39,136
Additions to segment non-current assets		121,661	–	–	121,661
As at 31 December 2020
Segment assets		350,053	756	32,258	383,067
Segment liabilities		(29,310)	(2,085)	–	(31,395)
	Big Data	Online	Money
Year ended	Centre	Game	Lending	Lottery
31 December 2019	Services	Business	Business	Business	Total
	HK\$'000	HK\$'000	HK\$'000	HK\$'000	HK\$'000
Revenue from external customers	62,425	2,020	–	111	64,556
Segment profit/(loss)	6,637	(1,571)	(45)	(2,593)	2,428
Depreciation	11,641	59	–	4	11,704
Additions to segment
non-current assets	175,383	–	–	188	175,571
As at 31 December 2019
Segment assets	286,668	673	1,460	4,216	293,017
Segment liabilities	(56,206)	(933)	–	(936)	(58,075)

For the year ended 31 December 2020

7. OPERATING SEGMENT INFORMATION (continued)

(a) Reportable segments (continued)

(ii) Reconciliations of reportable segment revenue, profit or loss, assets and liabilities:

	2020 HK\$'000	2019 HK\$'000
Revenue
Total revenue of reportable segments	382,925	64,556
Other revenue	30	–
Consolidated revenue	382,955	64,556
Profit or loss
Total (loss)/profit of reportable segment	(5,951)	2,428
Other (loss)/income	(2,866)	2,087
Unallocated amounts:
Share of losses of associates	(1,112)	(9,415)
Equity-settled share option expense	(4,028)	(8,283)
Salaries and other benefits	(14,046)	(11,139)
Depreciation	(2,544)	(2,653)
Depreciation charge of right-of-use assets	(4,641)	(4,599)
Legal and consultation fee	(2,264)	(2,302)
Impairment of trade receivables	(837)	–
Impairment of other receivables	(1,068)	–
Donation	(1,000)	(1,000)
Consolidated loss before tax for the year	(40,357)	(34,876)
Assets
Total assets of reportable segments	383,067	293,017
Other assets	17,597	8,102
Unallocated amounts:
Property, plant and equipment	4,837	3,579
Right-of-use assets	5,497	3,258
Investments in associates	2,431	3,384
Equity investments at fair value through
other comprehensive income	5,057	5,140
Cash and cash equivalents	19,866	44,977
Prepayments	16,187	740
Loan receivables	–	49,718
Consolidated total assets	454,539	411,915

For the year ended 31 December 2020

7. OPERATING SEGMENT INFORMATION (continued)

(a) Reportable segments (continued)

(ii) Reconciliations of reportable segment revenue, profit or loss, assets and liabilities: (continued)

	2020 HK\$'000	2019 HK\$'000
Liabilities
Total liabilities of reportable segments	(31,395)	(58,075)
Other liabilities	(2,078)	(2,136)
Unallocated amounts:
Amount due to a shareholder of a joint venture	(2,334)	(2,334)
Tax payable	(3,278)	(3,278)
Lease liabilities	(5,744)	(3,345)
Consolidated total liabilities	(44,829)	(69,168)

(b) Geographical information

The Group's operations are carried out in the PRC and revenue from external customers based on the location of goods and services delivered is derived from the PRC.

The following is an analysis of the non-current assets, analysed by the geographical area in which the assets are located:

	2020 HK\$'000	2019 HK\$'000
Non-current assets, excluding financial assets
The PRC except Hong Kong	273,479	182,255
Hong Kong	10,318	6,812
British Virgin Island ("BVI")	15	25
	283,812	189,092

For the year ended 31 December 2020

7. OPERATING SEGMENT INFORMATION (continued)

(c) Information about major customers

Revenue from major customers, each of whom amounted to 10% or more of the total revenue, is set out below:

	2020	2019
	HK\$'000	HK\$'000
Customer A	73,407	N/A#
Customer B	63,167	N/A#
Customer C	56,243	21,250
Customer D	42,455	N/A#
Customer E	N/A*	11,624
Customer F	N/A*	7,889
	235,272	40,763

All the revenue are generated from Big Data Centre Services segment.

• Revenue from customer A, B and D were less than 10% of the Group's revenue for the year ended 31 December 2019.

• * Revenue from customer E and F were less than 10% of the Group's revenue for the year ended 31 December 2020.

8. REVENUE

	2020	2019
	HK\$'000	HK\$'000
Provision of services and solutions for the distribution of lottery
products	30	111
Distribution of mobile gaming	1,017	2,020
Provision of big data centre services	379,658	62,425
Revenue from contracts with customers	380,705	64,556
Interest income	2,250	–
Total revenue	382,955	64,556

For the year ended 31 December 2020

8. REVENUE (continued)

Disaggregation of revenue from contracts with customers:

	Big Data	Online
	Centre	Game	Lottery	2020
Segments	Services	Business	Business	Total
	HK\$'000	HK\$'000	HK\$'000	HK\$'000
Geographical markets
The PRC	379,658	1,017	30	380,705
Major products/service
Provision of big data centre services	379,658	–	–	379,658
Distribution of mobile gaming Provision of services and solutions for	–	1,017	–	1,017
the distribution of lottery products	–	–	30	30
	379,658	1,017	30	380,705
Timing of revenue recognition
At a point in time	–	1,017	30	1,047
Over time	379,658	–	–	379,658
	379,658	1,017	30	380,705

For the year ended 31 December 2020

8. REVENUE (continued)

	Big Data	Online
	Centre	Game	Lottery	2019
Segments	Services	Business	Business	Total
	HK\$'000	HK\$'000	HK\$'000	HK\$'000
Geographical markets
The PRC	62,425	2,020	111	64,556
Major products/service
Provision of big data centre services	62,425	–	–	62,425
Distribution of mobile gaming	–	2,020	–	2,020
Provision of services and solutions for the distribution of lottery products	–	–	111	111
	62,425	2,020	111	64,556
Timing of revenue recognition
At a point in time	–	2,020	111	2,131
Over time	62,425	–	–	62,425
	62,425	2,020	111	64,556

Big Data Centre Services

The Group operates big data centres (the "Big Data Centres") in People's Republic of China, providing data analysis, storage services and ancillary administrative and consulting services.

Revenue generated from the Big Data Centres consists of services fees and/or rental income charged on the users for provision of big data centre services and use of storage places.

Services income is rendered and there is no unfulfilled obligation that could affect the customer's acceptance of the service.

For the year ended 31 December 2020

8. REVENUE (continued)

Online Game Business

The Group is in cooperation with various reputable companies in the online game industry to distribute online mobile games.

Revenue is recognised when the control of the goods is transferred to customers.

Lottery Business

The Group sells lottery terminals and parts to the customers. Sales are recognised when control of the products has transferred, being when the products are delivered to a customer, there is no unfulfilled obligation that could affect the customer's acceptance of the products and the customer has obtained legal titles to the products.

Sales to customers are normally made with credit terms of 60 days. For new customers, deposits or cash on delivery may be required. Deposits received are recognised as a contract liability.

A receivable is recognised when the products are delivered to the customers as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.

9. OTHER INCOME AND GAINS

	2020 HK\$'000	2019 HK\$'000
Gain on bargain purchase	–	1,074
Waiver of consideration payables	–	2,233
Net exchange gains	–	1,098
Rental concession	833	–
Wage subsidies from employment support scheme	756	–
Others	184	300
	1,773	4,705

For the year ended 31 December 2020

10. FINANCE COSTS

	2020	2019
	HK\$'000	HK\$'000
Lease interests	295	323
Interests on other borrowings	–	682
Interests on amount due to a related company	153	264
	448	1,269

11. DIRECTORS', CHIEF EXECUTIVE'S AND FIVE HIGHEST PAID INDIVIDUAL EMOLUMENTS

(a) Directors' and Chief Executive's Emoluments

Directors' and chief executive's remuneration for the year, disclosed pursuant to the applicable GEM Rules, and section 383(1)(a), (b), (c) and (f) of the Hong Kong Companies Ordinance and Part 2 of the Companies (Disclosure of Information about Benefits of Directors) Regulation, is as follows:

	2020	2019
	HK\$'000	HK\$'000
Fees	1,750	1,750
Other emoluments
Salaries, allowances and benefits in kind	2,708	2,650
Bonus	21	282
Pension scheme contributions	34	31
Equity-settled share-based payment expense	2,519	4,501
	7,032	9,214

For the year ended 31 December 2020

11. DIRECTORS', CHIEF EXECUTIVE'S AND FIVE HIGHEST PAID INDIVIDUAL EMOLUMENTS (continued)

(a) Directors' and Chief Executive's Emoluments (continued)

The emoluments of each director and the chief executive, on a named basis, are set out below:

For the year ended 31 December 2020
				Equity
	Salaries,			settled
	allowances		Pension	share-based
	and benefits		scheme	payment	Total
Fees	in kind	Bonus#	contributions	expense	emoluments
HK\$'000	HK\$'000	HK\$'000	HK\$'000	HK\$'000	HK\$'000
					297
					297
–	–	–	–	16	16
500	–	–	–	110	610
250	250	21	13	234	768
250	250	21	13	234	768
–	–	–	–	94	94
250	–	–	–	724	974
250	–	–	–	354	604
500	–	–	–	1,172	1,672
250	1,958	–	15	724	2,947
250	500	–	6	279	1,035
500	2,458	–	21	1,003	3,982
					7,032
	250 250 1,750	– – 2,708	– – 21	– – 34	47 47 2,519

For the year ended 31 December 2020

11. DIRECTORS', CHIEF EXECUTIVE'S AND FIVE HIGHEST PAID INDIVIDUAL EMOLUMENTS (continued)

(a) Directors' and Chief Executive's Emoluments (continued)

	For the year ended 31 December 2019
					Equity
		Salaries,			settled
		allowances		Pension	share-based
		and benefits		scheme	payment	Total
	Fees	in kind	Bonus#	contributions	expense	emoluments
	HK\$'000	HK\$'000	HK\$'000	HK\$'000	HK\$'000	HK\$'000
Independent non-executive
directors:
Dr. Lu Haitian	250	–	–	–	107	357
Mr. Yan Hao	250	–	–	–	107	357
Mr. Lin Sen	250	–	–	–	107	357
	750	–	–	–	321	1,071
Executive directors:
Ms. Huang Lilan2	250	250	82	13	536	1,131
	250	250	82	13	536	1,131
Non-executive directors:
Mr. Pan Zhengming3	250	–	–	–	322	572
Mr. Yuan Qiang	250	–	–	–	1,661	1,911
	500	–	–	–	1,983	2,483
Chief executive:
Mr. Wang Bingzhong5	250	2,400	200	18	1,661	4,529
	250	2,400	200	18	1,661	4,529
	1,750	2,650	282	31	4,501	9,214

There were no other emoluments payable to the independent non-executive directors during the year (2019: Nil).

The bonus is approved by the Remuneration Committee, having regard to the individual's contribution to the Group.

For the year ended 31 December 2020

11. DIRECTORS', CHIEF EXECUTIVE'S AND FIVE HIGHEST PAID INDIVIDUAL EMOLUMENTS (continued)

(a) Directors' and Chief Executive's Emoluments (continued)

Notes:

• 1. Appointed on 7 August 2020.
• 1. Included in remuneration packages under the position of chief financial officer of the Company for the year ended 31 December 2020.
• 1. Resigned on 2 January 2020.
• 1. Appointed on 2 January 2020.
• 1. Resigned on 31 October 2020.
• 1. Resigned as independent non-executive director on 7 August 2020, appointed as executive director and chief executive officer on 1 September 2020.

(b) Five Highest Paid Individual Emoluments

The five highest paid employees of the Group during the year included two directors and two chief executives (2019: three directors and the chief executive), details of whose remuneration are included in note 11 (a) above. Details of the remuneration for the year of the remaining one (2019: one) highest paid employee who is neither a director nor chief executive of the Company is as follows:

	2020	2019
	HK\$'000	HK\$'000
Salaries, allowances and benefits in kind	2,400	600
Bonus	200	50
Pension scheme contributions	17	18
Equity-settled share-based payment expense	–	27
	2,617	695

The number of non-director and non-chief executive highest paid employees whose remuneration fell within the following bands is as follows:

	Number of employees
	2020	2019
Nil – HK\$1,000,000	–	1
HK\$2,500,000 – HK\$3,000,000	1	–

For the year ended 31 December 2020

12. INCOME TAX

No provision for Hong Kong profits tax has been made as the Hong Kong subsidiaries did not generate any assessable profits arising in Hong Kong during the year (2019: Nil).

Pursuant to the PRC Corporate Income Tax Law effective on 1 January 2008, the PRC subsidiaries are subject to corporate income tax ("CIT") at a statutory rate of 25% (2019: 25%) on their respective taxable income for the year ended 31 December 2020. Taxes on profits assessable elsewhere have been calculated at the rates of tax prevailing in the countries in which the Group operates.

	2020 HK\$'000	2019 HK\$'000
Current – Mainland China
Charge for the year	3,937	19
Deferred tax (note 32)	(1,039)	(124)
Total tax expense/ (credit) for the year	2,898	(105)

The reconciliation between the income tax expense/ (credit) and the product of profit before tax multipled by the statutory rates for the countries (or jurisdictions) is as follows:

	2020	2019
	HK\$'000	HK\$'000
Loss before tax	(40,357)	(34,876)
Tax at the weighted average tax rate of 16.5% to 25%
(2019: 16.5% to 25%)	(6,586)	(6,118)
One-off tax deduction	–	(75)
Loss attributable to a joint venture and associates	278	2,354
Tax effect of income that is not taxable	(875)	(2,325)
Tax effect of expenses that are not deductible	2,241	1,627
Tax effect of tax losses not recognised	7,840	4,432
Income tax expense/ (credit)	2,898	(105)

At 31 December 2020, the Group had unused tax losses of HK\$312,258,000 (2019: HK\$267,546,000) available to offset against future taxable profits. No deferred tax asset has been recognised in respect of unused tax losses due to the unpredictability of future profit streams.

For the year ended 31 December 2020

12. INCOME TAX (continued)

Included in unrecognised tax losses are losses of HK\$42,586,000 (2019: HK\$53,494,000) that are allowed to be carried forward and utilised against the taxable income of subsequent years. The loss carryforward period cannot exceed 5 years and expires between 2021 and 2025. Other losses of HK\$269,672,000 (2019: HK\$214,052,000) may be carried forward indefinitely.

At 31 December 2020, no deferred tax has been recognised for withholding taxes that would be payable on the unremitted earnings that are subject to withholding taxes of the Group's subsidiary established in Mainland China. In the opinion of the directors, it is not probable that these subsidiaries will distribute such earnings in the foreseeable future.

13. LOSS FOR THE YEAR

The Group's loss for the year is arrived at after charging/ (crediting):

	2020		2019
	Notes	HK\$'000	HK\$'000
Auditors' remuneration		720	650
Cost of sales and service rendered		342,213	51,237
Staff costs (including directors' remuneration):
Salaries and other benefits		27,271	14,363
Bonus		1,851	904
Pension scheme contributions		522	742
Equity-settled share option expense		4,028	8,283
		33,672	24,292
Depreciation (included in cost of sales and service
rendered)		38,513	11,427
Depreciation		3,167	2,930
Depreciation charge of right-of-use assets	17	5,257	4,838
Loss on disposal of items of property, plant and equipment		–	19
Net exchange losses/(gains)		1,339	(1,098)
Impairment of investments in associates		1,047	–
Impairment of trade receivables	25	837	–
Impairment of other receivables	26	1,068	–

14. DIVIDEND

The Directors do not recommend the payment of any dividend for each of the years ended 31 December 2020 and 2019.

For the year ended 31 December 2020

15. LOSS PER SHARE

The calculation of the basic earnings per share amount is based on the loss for the year attributable to ordinary equity holders of the Company and the weighted average number of ordinary shares of approximately 330,357,000 (2019: 315,513,000 (Restated)) in issue during the year.

No adjustment has been made to the basic loss per share amounts presented for the year ended 31 December 2020 and 2019 in respect of a dilution as the impact of the share options outstanding had an anti-dilutive effect on the basic loss per share amounts presented.

The calculation of the basic and diluted earnings per share is based on the following:

	2020	2019
	HK\$'000	HK\$'000
Loss
Loss for the purpose of calculating basic and diluted earnings
per share	(46,767)	(33,618)
	2020	2019
	'000	'000
		(Restated)
Number of shares
Weighted average number of ordinary shares in issue during the
year for the purposes of the basic and diluted loss per share	330,357	315,513

For the year ended 31 December 2020

16. PROPERTY, PLANT AND EQUIPMENT

			Machinery	Furniture,
	Construction	Leasehold	and	fixtures and	Motor
	in progress	improvements	equipment	equipment	vehicles	Total
	HK\$'000	HK\$'000	HK\$'000	HK\$'000	HK\$'000	HK\$'000
As at 31 December 2020
COST:
At 1 January 2020	70,836	6,628	104,124	478	2,530	184,596
Additions	117,270	4,332	3,567	187	105	125,461
Transfer	(188,387)	6,192	182,195	–	–	–
Exchange realignment	580	427	16,813	29	49	17,898
At 31 December 2020	299	17,579	306,699	694	2,684	327,955
ACCUMULATED DEPRECIATION:
At 1 January 2020	–	4,147	15,520	164	245	20,076
Provided during the year	–	3,310	37,949	182	239	41,680
Exchange realignment	–	63	2,856	8	3	2,930
At 31 December 2020	–	7,520	56,325	354	487	64,686
CARRYING AMOUNT:
At 31 December 2020	299	10,059	250,374	340	2,197	263,269

For the year ended 31 December 2020

16. PROPERTY, PLANT AND EQUIPMENT (continued)

	Construction	Leasehold	Machinery and	Furniture, fixtures and	Motor
	in progress	improvements	equipment	equipment	vehicles	Total
	HK\$'000	HK\$'000	HK\$'000	HK\$'000	HK\$'000	HK\$'000
As at 31 December 2019
COST:
At 1 January 2019	–	5,850	4,514	318	1,984	12,666
Additions	72,105	791	101,795	193	1,247	176,131
Acquisition of subsidiaries	–	–	–	17	93	110
Disposal	–	–	(390)	(47)	(784)	(1,221)
Exchange realignment	(1,269)	(13)	(1,795)	(3)	(10)	(3,090)
At 31 December 2019	70,836	6,628	104,124	478	2,530	184,596
ACCUMULATED DEPRECIATION:
At 1 January 2019	–	1,709	4,176	141	154	6,180
Provided during the year	–	2,439	11,649	60	209	14,357
Disposal	–	–	(99)	(37)	(118)	(254)
Exchange realignment	–	(1)	(206)	–	–	(207)
At 31 December 2019	–	4,147	15,520	164	245	20,076
CARRYING AMOUNT:
At 31 December 2019	70,836	2,481	88,604	314	2,285	164,520

For the year ended 31 December 2020

17. LEASES AND RIGHT-OF-USE ASSETS

Disclosures of lease-related items:

	2020	2019
	HK\$'000	HK\$'000
At 31 December:
Right-of-use assets
– Land use rights	112	235
– Land and buildings	6,297	4,302
	6,409	4,537
Lease commitments of short-term leases	14	112

The maturity analysis, based on undiscounted cash flows, of the Group's lease liabilities is as follows:

– Less than 1 year	3,610	3,854
– Between 1 and 2 years	2,916	477
– Between 2 and 5 years	400	238
	6,926	4,569

For the year ended 31 December 2020

17. LEASES AND RIGHT-OF-USE ASSETS (continued)

	2020	2019
	HK\$'000	HK\$'000
Year ended 31 December:
Depreciation charge of right-of-use assets
– Land use rights	132	26
– Land and buildings	5,125	4,812
	5,257	4,838
Lease interests	295	323
Expenses related to short-term leases	32	1,143
Expenses related to leases of low-value assets that are not short-term leases	–	18
Total cash outflow for leases	4,457	4,902
Additions to right-of-use assets	7,081	9,371

The Group leases various land use rights and land and buildings. Lease agreements are typically made for fixed periods of 2 to 3 years. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants and the leased assets may not be used as security for borrowing purposes.

For the year ended 31 December 2020

18. GOODWILL

	HK\$'000
Cost
At 1 January 2019	–
Arising on acquisition of a subsidiary	10,948
Exchange realignment	48
At 31 December 2019 and 1 January 2020	10,996
Exchange realignment	707
At 31 December 2020	11,703
Carrying amount
At 31 December 2020	11,703
At 31 December 2019	10,996

Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units ("CGUs") that are expected to benefit from that business combination. The carrying amount of goodwill had been allocated as follows:

	2020 HK\$'000	2019 HK\$'000
Provision of big data service:
Sichuan Lecaiyuntian Internet Technology Co., Ltd * ("Sichuan Lecaiyuntian")	11,703	10,996

* The company registered as limited liability company under PRC law and the English name is for identification only.

The recoverable amounts of the CGUs are determined on the basis of their fair value less costs of disposal using discounted cash flow method. The key assumptions for the discounted cash flow method are those regarding the discount rates, growth rates and budgeted gross margin and revenue during the period. The Group estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGUs. The growth rates are based on long-term average economic growth rate of the geographical area in which the businesses of the CGUs operate. Budgeted gross margin and revenue are based on past practices and expectations on market development.

The Group prepares cash flow forecasts derived from the most recent financial budgets approved by the directors for the next five years with the residual period using the growth rate of 0% (2019: 0%). This rate does not exceed the average long-term growth rate for the relevant markets.

The rate used to discount the forecast cash flows from the Group's provision of big data service is 21.1% (2019: 21.6%).

For the year ended 31 December 2020

19. INTANGIBLE ASSETS

		Data analysis
		system
	Lease benefit	(purchased)	Total
	HK\$'000	HK\$'000	HK\$'000
COST:
At 1 January 2019	–	–	–
Additions	–	2,125	2,125
Acquisition of subsidiaries	4,598	–	4,598
Exchange realignment	14	(37)	(23)
At 31 December 2019 and 1 January 2020	4,612	2,088	6,700
Exchange realignment	6	134	140
At 31 December 2020	4,618	2,222	6,840
ACCUMULATED AMORTISATION:
At 1 January 2019	–	–	–
Amortisation for the year	496	567	1,063
Exchange realignment	(9)	(9)	(18)
At 31 December 2019 and 1 January 2020	487	558	1,045
Amortisation for the year	4,125	1,542	5,667
Exchange realignment	6	122	128
At 31 December 2020	4,618	2,222	6,840
CARRYING AMOUNT:
At 31 December 2020	–	–	–
At 31 December 2019	4,125	1,530	5,655

The Group's data analysis system is acquired for supporting the Big data service business.

The lease benefit was arisen from acquisition of subsidiaries.

For the year ended 31 December 2020

20. SUBSIDIARIES

Particulars of the subsidiaries at the end of the reporting period are as follows:

Company name	Place of incorporation/ registration	Registered share capital/ issued ordinary	Percentage of equity interests attributable to the Company	Principal activities
Directly held:
Brighten Express Limited	Hong Kong	HK\$1	100%	Investment holding
Rising Move International Limited	BVI	US\$100	100%	Investment holding
Interactive Lab Limited	BVI	US\$100	100%	Exploring cutting-edge technologies and applications
Indirectly held:
Precious Success Holdings Limited ("Precious Success")	BVI	US\$200	51%	Investment holding
PAL Development Limited	Hong Kong	HK\$250,000,000	51%	Investment holding
Global Score Asia Limited	BVI	US\$20,000	100%	Investment holding
Trade Express Services Inc.	BVI	US\$20,000	100%	Investment holding
Rise Accord Holdings Limited	BVI	US\$100	100%	Investment holding
China Excellent Net Technology Investment Limited	Hong Kong	HK\$3,194,581	95%	Provision of services for distribution of mobile lottery products
PAL (Beijing) Information Technology Limited*%	PRC	Nil	0%	Provision of management services for distribution of lottery products
Beijing Hua Ying Feng Cai Technology Limited*%	PRC	Nil	0%	Provision of management services for distribution of lottery products

For the year ended 31 December 2020

20. SUBSIDIARIES (continued)

Company name	Place of incorporation/ registration	Registered share capital/ issued ordinary	Percentage of equity interests attributable to the Company	Principal activities
Beijing Huancai Information Technology Limited*% ("Beijing Huancai")	PRC	Nil	0%	Provision of services for distribution of mobile lottery products
Hong Kong Interactive Lab Limited	Hong Kong	HK\$1	100%	Exploring cutting-edge technologies and applications
Virtual Asset Ratings Limited	BVI	US\$50,000	51%	Exploring cutting-edge technologies and applications
Loto Interactive Information Technology (Shenzhen) Limited*^ ("Loto Shenzhen")	PRC	RMB200,000,000/ RMB147,996,271	100%	Investment holding
Shenzhen Lewanwuxian Information Technology Co., Ltd.*# ("Shenzhen Lewanwuxian")	PRC	RMB10,000,000/ RMB5,100,000	51%	Operating online games
Beijing Lewanwuxian Information Technology Co., Ltd.*	PRC	RMB10,000,000/ RMB Nil	51%	Distribution of online games
Zhejiang Keyinghuancai Information Technology Co., Ltd.*	PRC	RMB10,000,000/ RMB Nil	100%	Developing online games
Chengdu Keying Interactive Information Technology Limited*	PRC	RMB10,000,000/ RMB Nil	100%	Providing data analysis, storage services and ancillary administrative and consulting services
Chengdu Yilaike Technology Co., Ltd.* ("Chengdu Yilaike")	PRC	RMB10,000,000/ RMB50,000	100%	Providing data analysis, storage services and ancillary administrative and consulting services
Ganzi Changhe Hydropower Consumption Service Co., Ltd* ("Ganzi Changhe Hydropower")	PRC	RMB180,000,000/ RMB150,000,000	51%	Providing data analysis, storage services and ancillary administrative and consulting services

For the year ended 31 December 2020

20. SUBSIDIARIES (continued)

			Percentage of
Company name	Place of incorporation/ registration	Registered share capital/ issued ordinary	equity interests attributable to the Company	Principal activities
Sichuan Lecaiyuntian @	PRC	RMB60,000,000/ RMB Nil	100%	Providing data analysis, storage services and ancillary administrative and consulting services
Interactive Medical Lab Limited	BVI	US\$100	100%	Investment holding
Interactive Medical Lab Corporation	Delaware	US\$100	100%	Investment holding
Might Winner Limited	Hong Kong	HK\$1	100%	Investment holding
H.K CB. Cute Technology Co., Limited	Hong Kong	HK\$10,000	100%	Investment holding
Shenzhen Quanjing Financial Leasing Co., Ltd *	PRC	RMB20,000,000/ RMB Nil	100%	Investment holding

• * The companies registered as limited liability companies under PRC law and the English name is for identification only.
• ^ Loto Shenzhen was established in the PRC with limited liability on 14 December 2017. The registered capital of Loto Shenzhen is RMB200,000,000 of RMB147,996,271 has been paid by the Group as at 31 December 2020.

• Shenzhen Lewanwuxian was established in the PRC with limited liability on 14 December 2017. The registered capital of Shenzhen Lewanwuxian is RMB10,000,000 of RMB5,100,000 has been paid by the Group as at 31 December 2020.

• @ Sichuan Lecaiyuntian was established in the PRC with limited liability on 21 February 2019. The registered capital of Sichuan Lecaiyuntian is RMB60,000,000 of Nil has been paid by the Group as at 31 December 2020.

% These companies were deregistered in the current year.

For the year ended 31 December 2020

20. SUBSIDIARIES (continued)

The following table shows information of subsidiaries that have non-controlling interests ("NCI") material to the Group. The summarised financial information represents amounts before inter-company eliminations.

	Beijing
Name	Huancai	Ganzi Changhe Hydropower
	2019	2020	2019
Principal place of business/country of
incorporation	PRC	PRC/PRC
% of ownership interests/voting rights
held by NCI	47.5%	49%/8.4%
	HK\$'000	HK\$'000	HK\$'000
At 31 December:
Non-current assets	–	180,654	88
Current assets	6,966	27,845	94,618
Current liabilities	(3,639)	(22,128)	(2,713)
Net assets	3,327	186,371	91,993
Accumulated NCI	1,580	91,322	7,727
Year ended 31 December:
Revenue	–	164,208	–
Total expenses	(876)	(155,292)	(1,244)
(Loss)/Profit for the year	(2,080)	8,916	(1,244)
Total comprehensive (loss)/income	(2,080)	8,916	(1,244)
(Loss)/Profit allocated to NCI	(988)	3,678	(104)
Net cash generated from/(used in)
operating activities	5,421	22,886	(87,572)
Net cash generated from/(used in)
investing activities	113	(117,602)	(88)
Net cash generated from financing activities	–	89,157	93,215
Effect of foreign exchange rate changes, net	(245)	(310)	22
Net increase/(decrease) in cash and
cash equivalents	5,289	(5,869)	5,577

For the year ended 31 December 2020

21. INVESTMENTS IN ASSOCIATES

	2020	2019
	HK\$'000	HK\$'000
Unlisted investments
Share of net assets	4,308	4,111
Goodwill	1,282	6,990
	5,590	11,101
Impairment losses	(3,159)	(7,717)
	2,431	3,384

Particulars of the associates at the end of the reporting period are as follows:

	Place of incorporation/	Percentage of equity interests attributable to the Company
Company name	registration	2020	2019 Principal activities
ChariLot Company Limited ("ChariLot")	Hong Kong	40%	40% Investment holding and provision of services for the distribution of lottery products
Guangzhou Sentai Information Technology Co., Ltd.* ("Guangzhou Sentai")	PRC	20%	20% Self-media

* The companies registered as limited liability companies under PRC law and the English name is for identification only.

Guangzhou Sentai is a company mainly engaged in operating a self-media called 世鏈財經 (www.shilian. com) providing updated blockchain information.

For the year ended 31 December 2020

21. INVESTMENTS IN ASSOCIATES (continued)

The following table shows information of associates that are material to the Group. These associates are accounted for in the consolidated financial statements using the equity method. The summarised financial information presented is based on the HKFRS financial statements of the associates.

Name		Guangzhou Sentai
	2020	2019
Principal place of business/country of incorporation	PRC/PRC	PRC/PRC
Principal activities		Self-media
% ownership interests/voting rights held by the Group		20%/20%
	HK\$'000	HK\$'000
At 31 December:
Non-current assets	21,616	20,308
Current assets	6,392	5,891
Current liabilities	(6,470)	(5,644)
Net assets	21,538	20,555
Group's share of net assets	4,308	4,111
Goodwill Impairment losses	1,282 (3,159)	1,203 (1,930)
Group's share of carrying amount of interest	2,431	3,384
Year ended 31 December:
Reveune	1,797	1,912
Loss from continuing operations	(341)	(741)
Total comprehensive loss	(341)	(741)

For the year ended 31 December 2020

21. INVESTMENTS IN ASSOCIATES (continued)

The Group has discontinued the recognition of its share of losses of the associate ChariLot because of the share of losses of the associate exceeded the Group's interest in the associate and the Group has no obligation to take up further losses. The amounts of the Group's unrecognised share of losses of the associate for the year and cumulatively, are as follows:

	2020	2019
	HK\$'000	HK\$'000
Unrecognised share of losses of an associate for the year	–	–
Accumulated unrecognised share of losses of an associate	(290)	(290)

22. INVESTMENT IN A JOINT VENTURE

Particulars of the Group's joint venture is as follows:

	Place of incorporation	Class of	Proportion of ownership interest held by the Group		Proportion of voting rights held by the Group		Principal
Company name	and operation	shares held	2020	2019	2020	2019	activities
PALTECH Company Limited	Hong Kong	Ordinary	60%	60%	60%	60%	Inactive

The following table illustrates the aggregate financial information of the Group's joint venture that is not individually material:

	2020	2019
	HK\$'000	HK\$'000
Cumulative unrecognised share of total comprehensive loss of
joint venture	(210)	(210)

For the year ended 31 December 2020

23. EQUITY INVESTMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

	2020 HK\$'000	2019 HK\$'000
Equity security, at fair value Listed outside Hong Kong – company A	5,057	5,140
Analysed as:
Non-current assets	5,057	5,140

The above investments are intended to be held for the medium to long-term. Designation of these investments as equity investments at fair value through other comprehensive income can avoid the volatility of the fair value changes of these investments to the profit or loss.

24. LOAN RECEIVABLES

(a) Brighten Topper Limited

On 3 April 2020, the Company granted a loan (the "Loan A") to an independent third party, Brighten Topper Limited ("Brighten Topper"), in the principal amount of HK\$30,000,000 at the interest rate of 10% per annum for a term of two years. The interest for the first twelve months (being HK\$3,000,000) shall be paid by Brighten Topper on or before 2 April 2021. The Loan A was guaranteed by Ms. Li Xue ("Ms. Li"), a director and sole beneficial owner of Brighten Topper and was secured by a property in PRC held by Ms. Li and any rights and interests derived thereof.

In the opinion of the directors, as at 31 December 2020, the fair value of the collateral approximated to RMB40,085,000 (equivalent to approximately HK\$47,627,000). The Group seeks to maintain strict monitoring over the loan receivable and the financial performance of Brighten Topper. Overdue balances will be regularly reviewed by senior management.

For the year ended 31 December 2020

24. LOAN RECEIVABLES (continued)

(b) Yourich Inc Limited

On 18 October 2017, the Company granted a loan (the "Loan B") to an independent third party, Yourich Inc Limited (the "Yourich Inc"), in the principal amount of HK\$99,000,000 at the interest rate of 6% per annum for a term of two years. The interest for the first twelve months (being HK\$5,940,000) shall be paid by Yourich Inc on the drawdown date and made out of and deducted from the proceeds of the principal of the Loan B. The Loan B was guaranteed by Ms. Liu He ("Ms. Liu"), a director and sole beneficial owner of Yourich Inc and was secured by 95% of the entire equity interests in Artix Investment Co., Ltd. (the "Target") held by Ms. Liu and any rights and interests derived thereof.

The principal amount of the Loan B together with all accrued and unpaid interests shall be repayable in full upon expiry of two years after the drawdown date. Yourich Inc may prepay the principal amount of the Loan B in full at any time before the maturity date together with corresponding interest accrued. However, if the principal amount of the Loan B is prepaid before the expiry of the first twelve months after the drawdown date, the interest paid for the first twelve months shall not be returned to the Yourich Inc.

In the opinion of the directors, as at 31 December 2018, the fair value of the collateral approximated to HK\$142,170,000. The Group seeks to maintain strict monitoring over the loan receivable and the financial performance of Yourich Inc. Overdue balances will be regularly reviewed by senior management.

As at 31 December 2019, the loan receivable of approximately HK49,718,000 was still outstanding.

During the year, the loan receivable was fully repaid.

(c) Shenzhen Chipchain Technologies Co., Ltd.

As at 19 June 2019, the Group entered into a convertible note arrangement (the "Convertible Note Agreement") with Shenzhen Chipchain Technologies Co., Ltd. (the "Convertible Note Issuer"), pursuant to which the Group agreed to grant to the Convertible Note Issuer a convertible note (the "Convertible Note") in the principal amount of RMB10,000,000 (equivalent to approximately HK\$11,163,000) at an interest rate of 8% per annum for a term of six (6) months, during which the Group is entitled to convert the Convertible Note into 3.33% of the equity interest in the Convertible Note Issuer (the "Conversion").

As at maturity date, the Group did not exercise the right of Conversion and the Convertible Note was subsequently classified under loan receivable. As at 31 December 2019, the loan receivable of the Convertible Note Issuer was at the amount of approximately HK\$11,163,000.

During the year, the loan receivable in relation to the Convertible Note was fully repaid.

For the year ended 31 December 2020

25. TRADE RECEIVABLES

	2020	2019
	HK\$'000	HK\$'000
Trade receivables	9,237	19,949
Less: impairment of trade receivables	(837)	–
	8,400	19,949

An aging analysis of the trade receivables as at the end of the reporting period, based on the invoice date and net of provisions, is as follows:

	2020	2019
	HK\$'000	HK\$'000
Within 30 days	7,250	18,994
31 days to 90 days	1,124	117
91 days to 180 days	4	–
181 days to 365 days	17	1
Over 1 year	5	837
	8,400	19,949

Reconciliation of loss allowance for trade receivables:

	2020	2019
	HK\$'000	HK\$'000
At 1 January	–	–
Increase in loss allowance for the year	837	–
At 31 December	837	–

The Group's trading terms with its customers are usually on credit, in some instances where payment in advance is required. The credit period is generally two months for two major customers. Each customer has a maximum credit limit. The Group seeks to maintain strict control over its outstanding receivables and has a credit control department to minimise credit risk. Overdue balances are reviewed regularly by senior management. The Group does not hold any collateral or other credit enhancements over its trade receivable balances.

For the year ended 31 December 2020

25. TRADE RECEIVABLES (continued)

The Group applies the simplified approach under HKFRS 9 to provide for expected credit losses using the lifetime expected loss provision for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. The expected credit losses also incorporate forward looking information.

	Current HK\$'000	Less than 1 month past due HK\$'000	1-3 months past due HK\$'000	3-6 months past due HK\$'000	6-12 months past due HK\$'000	Over 1 year past due HK\$'000	Total HK\$'000
At 31 December 2020
Weighted average
expected loss rate	0.00%	0.00%	0.00%	0.00%	0.00%	100.00%
Receivable amount	8,287	87	4	17	5	837	9,237
Loss allowance	–	–	–	–	–	837	837
At 31 December 2019
Weighted average
expected loss rate	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%
Receivable amount	18,906	88	117	–	1	837	19,949
Loss allowance	–	–	–	–	–	–	–

26. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES

		2020	2019
	Notes	HK\$'000	HK\$'000
Other receivables		2,436	3,139
Other receivable from a shareholder of a subsidiary	(i)	15,549	–
Other tax assets		24,264	9,741
Interest receivables		–	3,186
Deposits for the construction in progress		–	11,163
Utility deposits		16,254	12,782
Other deposits		943	386
Prepayments	(ii)	24,640	1,426
		84,086	41,823
Impairment of other receivables		(1,068)	–
		83,018	41,823

Notes:

(i) As of the report date, the balance was fully settled.

(ii) As of the report date, the amount of approximately HK\$15,502,000 was refunded due to the cancellation of the purchase order.

For the year ended 31 December 2020

26. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES (continued)

The movement in the impairment of other receivables are as follows:

	2020	2019
	HK\$'000	HK\$'000
At 1 January	–	–
Impairment losses recognised	1,068	–
At 31 December	1,068	–

27. CASH AND CASH EQUIVALENTS

	2020	2019
	HK\$'000	HK\$'000
Cash and cash equivalents	44,252	95,030
Cash and cash equivalents denominated in:
USD	19,688	31,392
RMB (Note)	19,983	45,532
HK\$	4,581	18,106
	44,252	95,030

Note: Conversion of RMB into foreign currencies is subject to the PRC's Foreign Exchange Control Regulations.

28. TRADE PAYABLES

The aging analysis of trade payables, based on the date of receipt of goods, is as follows:

	2020	2019
	HK\$'000	HK\$'000
Within 30 days	1,057	23,793
31 to 90 days	2,702	122
91 to 180 days	194	385
181 to 365 days	63	–
Over 1 year	595	–
	4,611	24,300

The average credit period on purchases of goods is 60 days.

For the year ended 31 December 2020

29. ACCRUALS AND OTHER PAYABLES

	2020	2019
	HK\$'000	HK\$'000
Other payables	3,697	3,423
Construction cost payables	5,025	–
Amount due to a shareholder of a joint venture	2,334	2,334
Deposit received from customers	12,091	17,996
Accruals	2,587	967
	25,734	24,720

30. LEASE LIABILITIES

				Present value of
		Lease payments		lease payments
	2020	2019	2020	2019
	HK\$'000	HK\$'000	HK\$'000	HK\$'000
Within one year	3,610	3,854	3,360	3,747
In the second to fifth years, inclusive	3,316	715	3,236	692
	6,926	4,569
Less: Future finance charges	(330)	(130)
Present value of lease liabilities	6,596	4,439	6,596	4,439
Less: A mount due for settlement
within 12 months
(shown under current liabilities)			(3,360)	(3,747)
Amount due for settlement after
12 months			3,236	692

At 31 December 2020, the average effective borrowing rate was 5.3% (2019: 5.4%). Interest rates are fixed at the contract dates and thus expose the Group to fair value interest rate risk.

For the year ended 31 December 2020

31. AMOUNT DUE TO HOLDING COMPANY/A RELATED COMPANY

The advances are unsecured, interest-free and repayable on demand.

32. DEFERRED TAX LIABILITIES

The movements in deferred tax liabilities are as follows:

	Fair value adjustments arising from acquisition of subsidiaries	Total
	HK\$'000	HK\$'000
At 1 January 2019	–	–
Acquisition of subsidiaries	1,150	1,150
Credited to profit or loss	(124)	(124)
Exchange realignment	5	5
At 31 December 2019 and 1 January 2020	1,031	1,031
Credited to profit or loss	(1,039)	(1,039)
Exchange realignment	8	8
At 31 December 2020	–	–

For the year ended 31 December 2020

33. SHARE CAPITAL

	2020	2019
	HK\$'000	HK\$'000
Authorised
550,000,000 (2019: 550,000,000 (Restated)) ordinary shares of
HK\$0.1 (2019: HK\$0.1 (Restated)) each	55,000	55,000
	2020	2019
	HK\$'000	HK\$'000
Issued and fully paid:
379,023,983 (2019: 315,859,983 (Restated)) ordinary shares of
HK\$0.1 (2019: HK\$0.1 (Restated)) each	37,902	31,586

A summary of movements in the Company's share capital is as follows:

	Number of shares in issue	Share Capital HK\$'000
At 1 January 2019	3,145,935,836	31,459
Share options exercised (Note (a))	12,664,000	127
At 31 December 2019 and 1 January 2020	3,158,599,836	31,586
Share consolidation (Note (b))	(2,842,739,853)	–
Placing of new shares (Note (c))	63,164,000	6,316
At 31 December 2020	379,023,983	37,902

Note:

(a) In 2019, the subscription rights attaching to 12,664,000 share options were exercised at the subscription price of HK\$0.11 per share, resulting in the issue of 12,664,000 new shares of HK\$0.01 each, for a total cash consideration, before expenses, of approximately HK\$1,393,000.

Details of the Company's share option scheme and the share options issued under the scheme are included in note 35 to the financial statements.

• (b) A share consolidation has taken place on 28 May 2020. that every ten issued and unissued existing shares of HK\$0.01 each in the share capital of the Company has been consolidated into one consolidated share of HK\$0.1 each in the share capital of the Company.
• (c) A placing has taken place on 9 October 2020. A total of 63,164,000 placing shares have been placed at the placing price of HK\$0.26 per placing share. The gross proceeds and net proceeds from the placing amounted to approximately HK\$16,423,000 and HK\$16,028,000, respectively.

For the year ended 31 December 2020

34. RESERVES

(a) Group

The amounts of the Group's reserves and movements therein are presented in the consolidated statement of profit or loss and other comprehensive income and consolidated statement of changes in equity.

(b) Company

			Equity
		Share-based	investment
	Share	payment	revaluation	Accumulated
	premium	reserve	reserve	losses	Total
	HK\$'000	HK\$'000	HK\$'000	HK\$'000	HK\$'000
At 1 January 2019	327,928	12,598	–	(4,797)	335,729
Loss for the year	–	–	–	(31,547)	(31,547)
Issue of ordinary shares upon
exercise of share options	1,266	–	–	–	1,266
Equity-settled share-based
payment expense	–	8,283	–	–	8,283
Fair value changes of equity
investments at fair value
through other comprehensive
income	–	–	(2,570)	–	(2,570)
At 31 December 2019 and
1 January 2020	329,194	20,881	(2,570)	(36,344)	311,161
Loss for the year	–	–	–	(30,512)	(30,512)
Issue of ordinary shares upon
exercise of share options	9,712	–	–	–	9,712
Equity-settled share-based
payment expense	–	4,028	–	–	4,028
Cancellation of share option	–	(15,539)	–	15,539	–
Fair value changes of equity
investments at fair value
through other comprehensive
income	–	–	(83)	–	(83)
At 31 December 2020	338,906	9,370	(2,653)	(51,317)	294,306

For the year ended 31 December 2020

34. RESERVES (continued)

(c) Nature and purpose of reserves

(i) Share premium account

Under the Companies Law of the Cayman Islands, the funds in the share premium account of the Company are distributable to the shareholders of the Company provided that immediately following the date on which the dividend is proposed to be distributed, the Company will be in a position to pay off its debts as they fall due in the ordinary course of business.

(ii) Share-based payment reserve

The share-based payment reserve represents the fair value of the actual or estimated number of unexercised share options granted to employees and consultants of the Group recognised in accordance with the accounting policy adopted for equity-settled share-based payments in note 3 to the consolidated financial statements.

(iii) Exchange reserve

The exchange reserve comprises all foreign exchange differences arising from the translation of the consolidated financial statements of foreign operations. The reserve is dealt with in accordance with the accounting policies set out in note 3 to the consolidated financial statements.

35. SHARE-BASED PAYMENTS

The Company operates a share option scheme for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Group's operations and to encourage the participants to work towards enhancing the value of the Company and its shares for the benefit of the Company and its shareholders as a whole.

The share option scheme which was adopted by the shareholders of the Company on 20 April 2002 expired on 20 April 2012 (the "Old Share Option Scheme"). Following the expiry of the Old Share Option Scheme, the shareholders of the Company adopted a new share option scheme on 18 May 2012 (the "2012 Share Option Scheme"). Under the 2012 Share Option Scheme, the directors of the Company may, at their discretion, grant to any participants share options to subscribe for the Company's shares, subject to the terms and conditions stipulated therein. Notwithstanding the expiry of the Old Share Option Scheme, the share options which had been granted during the life of the Old Share Option Scheme shall continue to be valid and exercisable in accordance with their terms of issue.

On 17 August 2017, the board of directors resolved that (i) the cancellation of an aggregate of 3,408,599 share options granted but not exercised under the Old Share Option Scheme; and (ii) the cancellation of an aggregate of 113,042,871 share options granted but not exercised under the 2012 Share Option Scheme, subject to the written consent of the option holders to cancel their respective share options ("Resolution").

For the year ended 31 December 2020

35. SHARE-BASED PAYMENTS (continued)

The following is a summary of the principal terms of the 2012 Share Option Scheme:

(a) Purpose of the schemes

The purpose of the 2012 Share Option Scheme is to provide incentives and rewards to eligible participants for their contribution to the Group and to attract, retain and motivate high-caliber eligible participants to work towards enhancing the value of the Company and its shares for the benefit of the Company and its shareholders as a whole.

(b) Participants of the schemes

The participants of the 2012 Share Option Scheme shall be (1) any full time or part time employees of the Group (including any executive or non-executive directors of the Company or any of its subsidiaries) and (2) any suppliers, consultants, agents and advisers.

(c) Total number of shares available for issue under the schemes

The total number of shares which may be issued upon exercise of all share options to be granted under the 2012 Share Option Scheme and any other schemes of the Company must not in aggregate exceed 10% of the shares in issue on the respective dates of approval of each of the schemes. The 10% limit may be refreshed with the approval by ordinary resolution of the Company's shareholders.

The maximum number of shares which may be issued upon exercise of all outstanding share options granted and yet to be exercised under the 2012 Share Option Scheme and any other schemes of the Company must not exceed 30% of the shares in issue from time to time.

(d) Maximum entitlement of each participant under the schemes

The total number of shares issued and to be issued upon exercise of the share options granted or to be granted to each participant (including exercised, cancelled and outstanding options) in any twelve-month period must not exceed 1% of the shares in issue unless the same is approved by the Company's shareholders in general meeting.

In addition, for any grant of share options to a substantial shareholder and/or an independent non-executive director of the Company or any of their respective associates, and where the total number of the shares issued and to be issued upon exercise of all options granted or to be granted to such person in any twelve-month period exceed 0.1% of the shares in issue and with an aggregate value in excess of HK\$5 million, then the proposed grant is also subject to the approval of the Company's shareholders in general meetings.

For the year ended 31 December 2020

35. SHARE-BASED PAYMENTS (continued)

(e) The period within which the shares must be taken up under an option

The period during which an option may be exercised is determined by the board of directors at its absolute discretion, save that such period shall not be longer than 10 years from the date of grant.

(f) The minimum period for which an option must be held before it can be exercised

As determined by the board of directors upon the grant of an option.

(g) The amount payable on acceptance of an option and the period within which payments shall be made

Under the 2012 Share Option Scheme, the acceptance of an offer of the grant of the share options must be made within 28 days from the date of grant and HK\$1.00 is payable on acceptance of the grant of options.

(h) The basis of determining the exercise price

The exercise price is determined by the board of directors which shall be at least the highest of (i) the closing price of the shares as stated in the Stock Exchange's daily quotations sheet on the date when an option is offered; (ii) a price being the average of the closing prices of the shares as stated in the Stock Exchange's daily quotations sheets for the five business days immediately preceding the date on which an option is offered; and (iii) the nominal value of the share.

(i) The remaining life of the scheme

The 2012 Share Option Scheme shall be valid and effective for a period of ten years from the date of adoption until 17 May 2022.

For the year ended 31 December 2020

35. SHARE-BASED PAYMENTS (continued)

The 2012 Share Option Scheme

Movements of the share options under the 2012 Share Option Scheme during the year ended 31 December 2020 are set out below:

Category of participants	Outstanding at 1.1.2019	Granted during the year	Reclassified during the year	Exercise during the year	Outstanding at 31.12.2019 & 1.1.2020	Reclassified on 2.1.20205	Share consolidationon on 28.5.2020	Cancelled during the year6	Granted during the year	Reclassified on 1.9.20207	Lapsed during on 23.11.20208	Outstanding at 31.12.2020	Date of grant of share options	Share price at date of grant of share options9 HK\$	Exercise price of share options9 HK\$
Director1	84,000,000	–	–	–	84,000,000	(5,000,000)	(71,100,000)	(7,900,000)	–	–	–	–	05.01.2018	1.87	2.00
Director2	–	84,000,000	–	–	84,000,000	(1,332,000)	(74,401,200)	–	–	–	–	8,266,800	01.04.2019	1.10	1.10
Director3	–	–	–	–	–	–	–	–	10,900,000	3,100,000	–	14,000,000	10.08.2020	0.26	0.26
Sub-total:	84,000,000	84,000,000	–	–	168,000,000	(6,332,000)	(145,501,200)	(7,900,000)	10,900,000	3,100,000	–	22,266,800
Employees1	1,800,000	–	300,000	–	2,100,000	–	(1,890,000)	(210,000)	–	–	–	–	05.01.2018	1.87	2.00
Employees2	–	800,000	300,000	–	1,100,000	–	(990,000)	–	–	–	–	110,000	01.04.2019	1.10	1.10
Employees3	–	–	–	–	–	–	–	–	900,000	–	–	900,000	10.08.2020	0.26	0.26
Sub-total:	1,800,000	800,000	600,000	–	3,200,000	–	(2,880,000)	(210,000)	900,000	–	–	1,010,000
Others1	67,600,000	–	(300,000)	–	67,300,000	5,000,000	(65,070,000)	(6,830,000)	–	–	–	400,000	05.01.2018	1.87	2.00
Others2	–	70,300,000	(300,000)	(12,664,000)	57,336,000	1,332,000	(52,801,200)	–	–	–	(600,000)	5,266,800	01.04.2019	1.10	1.10
Others3	–	–	–	–	–	–	–	–	13,660,000	(3,100,000)	(600,000)	9,960,000	10.08.2020	0.26	0.26
Sub-total:	67,600,000	70,300,000	(600,000)	(12,664,000)	124,636,000	6,332,000	(117,871,200)	(6,830,000)	13,660,000	(3,100,000)	(1,200,000)	15,626,800
Total:	153,400,000	155,100,000	–	(12,664,000)	295,836,000	–	(266,252,400)	(14,940,000)	25,460,000	–	(1,200,000)	38,903,600
Weighted average exercise
price (HK\$)	0.20	0.11		0.11	0.16			2.00	0.26		0.68	0.57
Share options exercisable	51,108,000				141,228,000							17,344,800

1 The share options granted on 5 January 2018 are divided into 3 tranches exercisable from 5 January 2018, 5 January 2019 and 5 January 2020 respectively to 4 January 2028.

2 The share options granted on 1 April 2019 are divided into 3 tranches exercisable from 1 April 2019, 1 April 2020 and 1 April 2021 respectively to 31 March 2029.

3 The share options granted on 10 August 2020 are divided into 3 tranches exercisable from 10 August 2020, 10 August 2021 and 10 August 2022 respectively to 9 August 2030.

For the year ended 31 December 2020

35. SHARE-BASED PAYMENTS (continued)

The 2012 Share Option Scheme (continued)

• 4 The category "Others" represents consultants of the Group. Consultants are individuals who rendered consultancy services in respect of the business development to the Group without receiving any compensation. The Group granted share options to them for recognising their services similar to those rendered by employees of the Group.
• 5 To better reflect Mr. Pan Zhengming's resignation as non-executive director on 2 January 2020, and Ms. Zhang Jing's appointment as non-executive director on 2 January 2020, the type of participant has been reclassified from directors to others, and from others to directors respectively.
• 6 14,940,000 share options granted to the options holders were cancelled in accordance with the terms of the share option scheme adopted by the Group on 18 May 2012.
• 7 To better reflect Mr. Yan Hao's appointment as independent non-executive director and chief executive officer on 1 September 2020, the type of participant has been reclassified from others to directors.
• 8 Mr. Pan Zhengming's appointment as consultant has been terminated on 23 November 2020. 1,200,000 outstanding share options granted to him were lapsed on the same date.
• 9 The share price at date of grant of share options and the exercise price of share options have been adjusted to reflect the Share Consolidation.

The fair values of share options granted in 2020 were calculated using the Binomial Tree model. The inputs into the model are as follows:

	2020	2019
Weighted average share price (HK\$)	0.26	1.1 (Restated)
Weighted average exercise price (HK\$)	0.26	1.1 (Restated)
Expected volatility	87.11%	75.86%
Risk free rate	0.27%	1.40%
Expected dividend yield	0.00%	0.00%

The total fair values of the share options granted in 2020 were at amount of approximately HK\$4,014,000 (2019: HK\$7,914,000). During the year, an amount of approximately HK\$4,028,000 (2019: HK\$8,283,000) was recognised as equity-settled share option expense.

The Group recognised equity-settled share-based payment expenses at a total of HK\$4,028,000 (2019: HK\$8,283,000), included in which of HK\$Nil (2019: HK\$Nil) was recognised immediately as accelerated vesting due to the cancellation of share options for the year ended 31 December 2020 in relation to share options granted by the Company in the prior years.

During the year ended 31 December 2020, 1,200,000 (2019: none) of the share options were lapsed due to termination of a consultant and 14,940,000 (2019: none) of the share options were cancelled under the 2012 Share Option Scheme.

For the year ended 31 December 2020

36. NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS

(a) Acquisition of subsidiaries

(i) On 5 March 2019, the Group obtained control of Chengdu Yilaike by acquiring the 100% issued share capital of Chengdu Yilaike for a total consideration of RMB1 which is comprised of a cash consideration RMB1. Chengdu Yilaike was engaged in Big Data Centre Services during the year of acquisition. The acquisition is for the purpose of expanding Group's contribution in big data service markets and the anticipated future operating synergies from the combination.

The fair value of the identifiable assets and liabilities of Chengdu Yilaike acquired as at its date of acquisition is as follows:

	HK\$'000
Net assets acquired:
Prepayments, deposits and other receivables	702
Bank and cash balances	82
Trade and other payables	(645)
Other tax assets	935
	1,074
Gain on bargain purchase	(1,074)
	–
Satisfied by:
Cash (in RMB1)	–
Total consideration transferred	–
Net cash inflow arising on acquisition:
Cash consideration paid (in RMB1)	–
Cash and cash equivalents acquired	(82)
	(82)

Chengdu Yilaike contributed approximately Nil and HK\$1,749,000 to the Group's revenue and loss for the year respectively for the period between the date of acquisition and the end of year 2019.

If the acquisition had been completed on 1 January 2019, total Group revenue for the year ended 31 December 2019 would have been HK\$69,074,000, and loss for the year ended 31 December 2019 would have been HK\$32,686,000. The proforma information is for illustrative purposes only and is not necessarily an indication of the revenue and results of operations of the Group that actually would have been achieved had the acquisition been completed on 1 January 2019, nor is intended to be a projection of future results.

For the year ended 31 December 2020

36. NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS (continued)

(a) Acquisition of subsidiaries (continued)

(ii) On 22 November 2019, the Group obtained control of Sichuan Lecaiyuntian by acquiring the 100% issued share capital of Sichuan Lecaiyuntian for a total consideration of RMB13,426,000 which is comprised of a cash consideration approximately RMB13,426,000. Sichuan Lecaiyuntian was engaged in Big Data Centre Services during the year of acquisition. The acquisition is for the purpose of expanding Group's contribution in big data service markets and the anticipated future operating synergies from the combination.

The fair value of the identifiable assets and liabilities of Sichuan Lecaiyuntian acquired as at its date of acquisition is as follows:

110
4,598
23,187
11,423
3,195
(37,185)
(203)
(1,150)
3,975
10,948
14,923
14,923
14,923
14,923
(3,195)
11,728

The goodwill arising on the acquisition of Sichuan Lecaiyuntian is attributable to the anticipated profitability of the distribution of the Group's services in the big data services markets and the anticipated future operating synergies from the combination.

For the year ended 31 December 2020

36. NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS (continued)

(a) Acquisition of subsidiaries (continued)

(ii) (continued)

Sichuan Lecaiyuntian contributed approximately HK\$32,723,000 and HK\$2,890,000 to the Group's revenue and profit for the year respectively for the period between the date of acquisition and the end of year 2019.

If the acquisition had been completed on 1 January 2019, total Group revenue for the year ended 31 December 2019 would have been HK\$173,573,000, and loss for the year ended 31 December 2019 would have been HK\$28,526,000. The proforma information is for illustrative purposes only and is not necessarily an indication of the revenue and results of operations of the Group that actually would have been achieved had the acquisition been completed on 1 January 2019, nor is intended to be a projection of future results.

(b) Changes in liabilities arising from financing activities

The following table shows the Group's changes in liabilities arising from financing activities during the year:

		Amount due	Amount due	Total liabilities from
	Lease	to a related	to holding	financing
	liabilities	company	company	activities
	HK\$'000	HK\$'000	HK\$'000	HK\$'000
At 1 January 2019	–	–	39	39
Change in cash flows	(3,741)	11,380	(38)	7,601
Non-cash changes
– impact of first adoption of
HKFRS 16	7,857	–	–	7,857
– Interest charges	323	–	–	323
At 31 December 2019 and
1 January 2020	4,439	11,380	1	15,820
Change in cash flows	(4,425)	(10,913)	(1)	(15,339)
Non-cash changes
– additions	7,081	–	–	7,081
– interest charges	295	–	–	295
– rental concession	(833)	–	–	(833)
– exchange differences	39	–	–	39
At 31 December 2020	6,596	467	–	7,063

For the year ended 31 December 2020

37. CAPITAL COMMITMENTS

The Group's capital commitments at the end of the reporting period are as follows:

	2020 HK\$'000	2019 HK\$'000
Property, plant and equipment Contracted, but not provided for	33	75,788

38. RELATED PARTY TRANSACTIONS

(a) Compensation of key management personnel of the Group:

	2020 HK\$'000	2019 HK\$'000
Fees, salaries, allowances, bonus and benefits in kind	4,479	4,682
Pension scheme contributions	34	31
Equity-settled share-based payment expense	2,519	4,501
	7,032	9,214

Further details of directors' and chief executive's emoluments are included in note 11 to the consolidated financial statements.

For the year ended 31 December 2020

39. STATEMENT OF FINANCIAL POSITION OF THE COMPANY

	2020	2019
	HK\$'000	HK\$'000
NON-CURRENT ASSETS
Property, plant and equipment Investments in subsidiaries	4,821 2	3,554 2
Right-of-use assets	5,497	3,258
Equity investments at fair value through
other comprehensive income	5,057	5,140
	15,377	11,954
CURRENT ASSETS
Loan receivables	–	49,718
Prepayments, deposits and other receivables	2,640	5,209
Amount due from subsidiaries	327,350	246,994
Cash and cash equivalents	19,248	42,802
	349,238	344,723
CURRENT LIABILITIES
Accruals and other payables	1,171	1,617
Lease liabilities Amount due to subsidiaries	2,760 25,030	3,345 8,967
Amount due to holding company	–	1
Amount due to related parties	462	–
	29,423	13,930
NET CURRENT ASSETS	319,815	330,793
TOTAL ASSETS LESS CURRENT LIABILITIES	335,192	342,747
NON-CURRENT LIABILITIES Lease liabilities	2,984	–
	2,984	–
NET ASSETS	332,208	342,747
EQUITY Share capital	37,902	31,586
Reserves	294,306	311,161
TOTAL EQUITY	332,208	342,747

For the year ended 31 December 2020

40. EVENTS AFTER THE END OF THE REPORTING PERIOD

• (a) On 12 January 2021, the Group and a shareholder (the "JV Partner") of a non-wholly owned subsidiary ("JV Company"), holding 49% of the equity interest in the JV Company, entered into a repurchase agreement, pursuant to which the JV Partner shall repurchase the shares of the JV Company held by the Group at the total repurchase price in the amount of US\$2 million.
• (b) On 28 January 2021, the Group and Holding Company entered into a subscription agreement, pursuant to which Holding Company has agreed to subscribe for, and the Company has conditionally agreed to allot and issue an aggregate of 169,354,839 shares (the "Subscription Share") at the price of HK\$0.62 per Subscription Share.
• (c) On 28 January 2021, the Group and two parties (the "Seller"), who hold 49% equity interest of Ganzi Changhe Hydropower, entered into an acquisition agreement (the "Acquisition Agreement"), pursuant to which the Group has agreed to purchase and the Sellers have conditionally agreed to sell the 49% equity interest of Ganzi Changhe Hydropower for a cash consideration of RMB88.2 million (equivalent to approximately HK\$105.8 million) in accordance with the terms and conditions of the Acquisition Agreement.

41. APPROVAL OF FINANCIAL STATEMENTS

These consolidated financial statements were approved and authorised for issue by the board of directors of the Company on 30 March 2021.

FIVE-YEAR FINANCIAL SUMMARY

The following is a summary of the audited results and of the assets and liabilities of the Group for the five years ended 31 December 2020.

	Year ended 31 December
	2020	2019	2018	2017	2016
	HK\$'000	HK\$'000	HK\$'000	HK\$'000	HK\$'000
RESULTS
Revenue	382,955	64,556	6,034	48,827	60,281
Loss for the year	(43,255)	(34,771)	(34,781)	(18,573)	(2,912)
Attributable to:
Owners of the Company	(46,767)	(33,618)	(34,087)	(17,929)	(2,303)
Non-controlling interests	3,512	(1,153)	(694)	(644)	(609)
	(43,255)	(34,771)	(34,781)	(18,573)	(2,912)

	At 31 December
	2020	2019	2018	2017	2016
	HK\$'000	HK\$'000	HK\$'000	HK\$'000	HK\$'000
ASSETS AND LIABILITIES
Total assets	454,539	411,915	389,940	429,586	439,949
Total liabilities	(44,829)	(69,168)	(18,788)	(34,585)	(27,400)
Non-controlling interests	(91,044)	(12,876)	(6,279)	(6,597)	(7,900)
Total equity attributable to
owners of the Company	318,666	329,871	364,873	388,404	404,649