Crypto Flow Technology Limited - Capital/Financing Update 2021

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

This joint announcement appears for information purpose only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities of Loto Interactive Limited nor shall there be any sale, purchase or subscription for securities of Loto Interactive Limited in any jurisdiction in which such offer, solicitation or sale would be unlawful absent the filing of a registration statement or the availability of an applicable exemption from registration or other waiver. This joint announcement is not for release, publication or distribution in or into any jurisdiction where to do so would constitute a violation of the relevant laws of such jurisdiction.

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500.com Limited

(Incorporated in the Cayman Islands with limited liability)

(NYSE stock code: WBAI)

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Loto Interactive Limited

(Incorporated in the Cayman Islands with limited liability) (Stock Exchange Stock Code: 8198)

JOINT ANNOUNCEMENT

(1) CONNECTED TRANSACTION RELATING TO SHARE SUBSCRIPTION UNDER SPECIFIC MANDATE; (2) MAJOR TRANSACTION RELATING TO THE ACQUISITION OF THE REMAINING 49% EQUITY INTEREST OF THE TARGET;

(3) PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL OF LOTO INTERACTIVE LIMITED; AND

(4) POSSIBLE UNCONDITIONAL MANDATORY CASH OFFERS BY BOCOM INTERNATIONAL SECURITIES LIMITED FOR AND ON BEHALF OF THE OFFEROR TO ACQUIRE ALL THE ISSUED SHARES OF, AND CANCEL ALL OUTSTANDING OPTIONS OF, LOTO INTERACTIVE LIMITED

(OTHER THAN THOSE ALREADY OWNED BY OR AGREED TO BE ACQUIRED BY THE OFFEROR AND THE PARTIES ACTING IN CONCERT WITH IT)

Financial adviser to the Offeror

Independent Financial Adviser to the Listing Rules Independent Board Committee and the Takeovers Code Independent Board Committee

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THE SUBSCRIPTION

On 28 January 2021 (after trading hours of the Stock Exchange), the Company and the Subscriber entered into the Subscription Agreement, pursuant to which the Subscriber has conditionally agreed to subscribe for, and the Company has conditionally agreed to allot and issue, the Subscription Shares (i.e. an aggregate of 169,354,839 Shares) at the Subscription Price of HK$0.62 per Subscription Share. The Subscription Completion is subject to certain conditions precedent described in the section headed “Conditions precedent to the Subscription Completion” in this joint announcement.

The Subscription Shares (i.e. a total of 169,354,839 Shares) to be allotted and issued under the Subscription represent (i) approximately 44.7% of the total number of issued Shares of the Company as at the date of this joint announcement; (ii) approximately 30.9% of the total number of issued Shares of the Company as enlarged by the allotment and issue of the Subscription Shares (assuming there are no other changes to the total issued share capital of the Company from the date of this joint announcement to the Subscription Completion); and (iii) approximately 28.8% of the total number of issued Shares of the Company as enlarged by the allotment and issue of the Subscription Shares (assuming all the Options have been exercised at or prior to the Subscription Completion and there are no other changes to the total issued share capital of the Company from the date of this joint announcement to the Subscription Completion).

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

(i) a discount of approximately 10.1% to the closing price of HK$0.69 per Share as quoted on the Stock Exchange on the Last Trading Day;
(ii) a discount of approximately 11.9% to the average closing price of HK$0.704 per Share as quoted on the Stock Exchange for the last five consecutive trading days up to and including the Last Trading Day;
(iii) a discount of approximately 11.8% to the average closing price of HK$0.703 per Share as quoted on the Stock Exchange for the last 10 consecutive trading days up to and including the Last Trading Day;
(iv) a discount of approximately 11.5% to the average closing price of HK$0.7 per Share as quoted on the Stock Exchange for the last 30 consecutive trading days up to and including the Last Trading Day;
(v) a discount of approximately 28.8% over the audited consolidated net asset value attributable to the Shareholders of approximately HK$0.87 per Share as at 31 December 2019 (based on the audited consolidated net asset value attributable to the Shareholders as at 31 December 2019 (the date to which the latest audited financial results of the Group were made up) divided by 379,023,983 Shares in issue as at the date of this joint announcement); and

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(vi) a discount of approximately 20.3% over the unaudited consolidated net asset value attributable to the Shareholders of approximately HK$0.778 per Share as at 30 June 2020 (based on the unaudited consolidated net asset value attributable to the Shareholders as at 30 June 2020 divided by 379,023,983 Shares in issue as at the date of this joint announcement).

The gross proceeds of the Subscription will be approximately HK$105.0 million. The net proceeds of the Subscription are estimated to be approximately HK$103.4 million after deducting all related professional fees and other related expenses. The Company intends to use the net proceeds from the Subscription primarily for the payment of the Acquisition Consideration payable to the Sellers under the Acquisition.

As at the date of this joint announcement, the Subscriber is interested in 127,871,432 Shares, representing approximately 33.74% of the entire issued share capital of the Company, and the Subscriber is the controlling shareholder of the Company. As such, the Subscriber is a connected person of the Company under Chapter 20 of the GEM Listing Rules, and the Subscription constitutes a connected transaction of the Company under Chapter 20 of the GEM Listing Rules, and is subject to the announcement, reporting and the Listing Rules Independent Shareholder’s approval requirements under the GEM Listing Rules.

The Subscription Shares will be allotted and issued under the Specific Mandate to be sought from the Listing Rules Independent Shareholders at the EGM. Application will be made by the Company to the Stock Exchange for the granting of approval for the listing of, and permission to deal in, the Subscription Shares.

MAJOR TRANSACTION IN RELATION TO THE ACQUISITION OF THE REMAINING 49% EQUITY INTEREST OF THE TARGET

On 28 January 2021 (after trading hours of the Stock Exchange), the Purchaser, a wholly-owned subsidiary of the Company, and the Sellers entered into the Acquisition Agreement, pursuant to which the Purchaser has conditionally agreed to purchase and the Sellers have conditionally agreed to sell the Sale Interest (representing 49% equity interest of the Target) 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. The Acquisition Completion is subject to certain conditions precedent described in the section headed “Conditions precedent to the Acquisition Completion” in this joint announcement.

As one or more of the applicable percentage ratios (as defined in the GEM Listing Rules) in respect of the Acquisition are more than 25% but are all less than 100%, the Acquisition constitutes a major transaction for the Company under the GEM Listing Rules, and is therefore subject to the reporting, announcement and Shareholders’ approval requirements pursuant to Chapter 19 of the GEM Listing Rules.

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PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL

As at the date of this joint announcement, the existing authorised share capital of the Company is HK$55,000,000 divided into 550,000,000 Shares of which 379,023,983 Shares are in issue and fully paid or credited as fully paid. In light of the Subscription and in order to accommodate for future expansion and growth of the Company and to provide the Company with greater flexibility to raise funds by allotting and issuing Shares in the future as and when necessary, the Board proposes to increase the authorised share capital of the Company from HK$55,000,000 (divided into 550,000,000 Shares) to HK$65,000,000 (divided into 650,000,000 Shares) by the creation of an additional 100,000,000 Shares which shall rank pari passu in all respects with the existing Shares in issue. The Increase in Authorised Share Capital is conditional upon the passing of an ordinary resolution by the Shareholders at the EGM.

POSSIBLE UNCONDITIONAL MANDATORY CASH OFFERS

As at the date of this joint announcement, the Subscriber (i.e. the Offeror) and parties acting in concert with it (including Mr. Law, Ms. Zhang Jing, Ms. Huang Lilan, Mr. Yuan Qiang and Mr. Yan Hao) are beneficially interested in 128,192,632 Shares (representing approximately 33.82% of the issued Shares as at the date of this joint announcement). Immediately following the Subscription Completion, the Offeror and parties acting in concert with it (including Mr. Law, Ms. Zhang Jing, Ms. Huang Lilan, Mr. Yuan Qiang and Mr. Yan Hao) will be interested in (i) a total of 297,547,471 Shares, representing approximately 54.26% of the enlarged issued share capital of the Company (assuming no Options has been exercised at or prior to the Subscription Completion and there are no other changes to the total issued share capital of the Company from the date of this joint announcement to the Subscription Completion); and (ii) a total of 312,614,271 Shares, representing approximately 53.23% of the enlarged issued share capital of the Company (assuming all the Options have been exercised at or prior to the Subscription Completion and there are no other changes to the total issued share capital of the Company from the date of this joint announcement to the Subscription Completion).

Upon the Subscription Completion and pursuant to Rule 26.1 and Rule 13.5 of the Takeovers Code, the Offeror will be required to make the Share Offer to acquire all the Offer Shares and the Option Offer to cancel all the Options.

As at the date of this joint announcement, the Company has (i) 379,023,983 Shares in issue; and (ii) 38,903,600 Options conferring rights to subscribe for 38,903,600 new Shares with exercise prices ranging from HK$0.26 to HK$2.00 per Option. Save for the Options, the Company has no other outstanding convertible securities, warrants, options or derivatives in issue which may confer any rights to subscribe for, convert or exchange into Shares as at the date of this joint announcement.

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BOCOM Securities will make the Offers on behalf of the Offeror on the terms to be set out in the Composite Document to be issued in accordance with the Takeovers Code on the following basis:

The Share Offer

For each Offer Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .HK$0.75 in cash

The Share Offer will be unconditional in all aspects when made, and will not be conditional upon any minimum level of acceptances being received or any other conditions.

The Option Offer

Pursuant to Rule 13.5 of the Takeovers Code, the Offeror will make an appropriate cash offer to the holders of the Options for cancellation of all the outstanding Options, whether vested or not, by way of the Option Offer.

For cancellation of each Option with an exercise price of:

HK$0.26 (24,860,000 Options in total) . . . . . . . . . . . . . . . . . . . . . . . .HK$0.49 in cash HK$1.10 (13,643,600 Options in total) . . . . . . . . . . . . . . . . . . . . . .HK$0.0001 in cash HK$2.00 (400,000 Options in total) . . . . . . . . . . . . . . . . . . . . . . . .HK$0.0001 in cash

The Option Offer Price will be the see-through price which represents the amount by which the Share Offer Price exceeds the exercise price of the relevant Option. In respect of Option with an exercise price higher than the Share Offer Price, the Option Offer Price is at a nominal amount of HK$0.0001.

The Option Offer will be extended to all Optionholders in accordance with the Takeovers Code. The Option Offer will be unconditional in all respects when made and will not be conditional upon any minimum level of acceptances being received or any other conditions. Following acceptance of the Option Offer, the Options together with all rights attaching thereto will be entirely cancelled and renounced.

The Offeror intends to finance the consideration payable under the Offers by its internal resources. BOCOM (Asia), as the financial adviser to the Offeror, is satisfied that sufficient financial resources are available to the Offeror to satisfy the maximum cash consideration payable upon full acceptance of the Offers.

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Value of the Offers

As at the date of this joint announcement, there are 379,023,983 Shares in issue and 38,903,600 Options. As at the date of this joint announcement, the Offeror and parties acting in concert with it (including Mr. Law, Ms. Zhang Jing, Ms. Huang Lilan, Mr. Yuan Qiang and Mr. Yan Hao) are interested in 128,192,632 Shares, representing approximately 33.82% of the entire issued share capital of the Company.

Upon the Subscription Completion and assuming no Options has been exercised prior to the making of the Offers, there will be 548,378,822 Shares in issue. Save for (i) 297,226,271 Shares already owned by the Offeror, and (ii) the Excluded Shares, (a) 214,195,351 Shares will be subject to the Share Offer and the value of the Share Offer will be HK$160,646,513.3 (assuming that there will be no change in the total share capital of the Company prior to the making of the Offers, save for the Subscription); and (b) the total consideration required to satisfy the cancellation of all the outstanding Options (excluding the Excluded Options) will be approximately HK$7,135,327.7.

Upon the Subscription Completion and assuming all Options has been exercised in full (excluding the Excluded Options) before the close of the Offers, there will be 572,215,622 Shares in issue. Save for (i) 297,226,271 Shares already owned by the Offeror; and (ii) the Excluded Shares, 238,032,151 Shares will be subject to the Share Offer and the value of the Offers and maximum cash consideration payable will be HK$178,524,113.3.

Based on the foregoing, the aggregate cash consideration payable by the Offeror under the Offers (assuming no Options are exercised and full acceptances under the Offers) will be approximately HK$167,781,841. The aggregate cash consideration payable by the Offeror under the Offers (assuming all Options are exercised in full and full acceptances under the Offers) will be approximately HK$178,524,113.3.

IRREVOCABLE UNDERTAKINGS IN RELATION TO THE OFFERS

On 27 and 28 January 2021, each of (i) the executive and non-executive Directors (being Ms. Zhang Jing, Mr. Yan Hao, Ms. Huang Lilan and Mr. Yuan Qiang), (ii) Mr. Law, a party acting in concert with the Offeror, and (iii) three individual Shareholders (including Ms. Mak Lam, Mr. Li Qi and Mr. Mei Siyuan) has executed the Irrevocable Undertakings pursuant to which each of them has irrevocably undertaken not to accept the Share Offer or the Option Offer (as applicable) and he/she will not or/ and will procure not to sell, transfer or dispose of any Shares or Options held by each of them or rights to such Shares or Options to third parties prior to completion, termination or withdrawal of the Offers. Accordingly, a total of 36,957,200 Shares and 15,066,800 Options are subject to the Irrevocable Undertakings. The Irrevocable Undertakings shall cease to be binding upon the earliest of (i) the date when the Offers close for acceptances; (ii) the date when the Offers lapse; (iii) the time when the Offeror announces that the Offers will not proceed; (iv) the date when the Offers are withdrawn in the circumstances permitted under the Takeovers Code; (v) the date when the Offer Period ends; or (vi) when an offer with a higher offer price is made. The aforementioned circumstances are the only instances under which the Irrevocable Undertakings shall cease to be binding.

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LISTING RULES INDEPENDENT BOARD COMMITTEE AND TAKEOVERS CODE INDEPENDENT BOARD COMMITTEE

Pursuant to Rule 20.37 of the GEM Listing Rules, the Listing Rules Independent Board Committee comprising all the independent non-executive Directors who have no direct or indirect interest in the Subscription (which include Dr. Lu Haitian, Mr. Lin Sen and Mr. Huang Jian) has been established to advise the Listing Rules Independent Shareholders on the Subscription Agreement and the transactions contemplated thereunder.

Pursuant to Rule 2.1 and Rule 2.8 of the Takeovers Code, the Takeovers Code Independent Board Committee comprising all non-executive Directors who have no direct or indirect interest in the Offers (which include Dr. Lu Haitian, Mr. Lin Sen and Mr. Huang Jian) has been established to advise the Independent Shareholders and the Optionholders as to whether the terms of the Offers are fair and reasonable and as to their acceptance.

INDEPENDENT FINANCIAL ADVISER

The Independent Financial Adviser has been appointed by the Company (with approval from the Listing Rules Independent Board Committee and the Takeovers Code Independent Board Committee) to advise (i) the Listing Rules Independent Board Committee and the Listing Rules Independent Shareholders on the Subscription Agreement and the transactions contemplated thereunder; and (ii) the Takeovers Code Independent Board Committee, the Independent Shareholders and the Optionholders in relation to the Offers and in particular as to whether the Offers are fair and reasonable and as to the acceptance of the Offers.

EGM AND DESPATCH OF CIRCULAR

The EGM will be convened and held for the purposes of considering and, if thought fit, approving, among other things, the Subscription Agreement and the transactions contemplated thereunder, the allotment and issue of the Subscription Shares, the granting of the Specific Mandate, the Acquisition Agreement and the transactions contemplated thereunder and the Increase in Authorised Share Capital.

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A circular containing, among other things, (i) further details of the Subscription Agreement and the transactions contemplated thereunder and the granting of the Specific Mandate; (ii) a letter from the Listing Rules Independent Board Committee containing its recommendations to the Listing Rules Independent Shareholders in respect of the Subscription Agreement and the transactions contemplated thereunder; (iii) a letter from the Independent Financial Adviser to the Listing Rules Independent Board Committee and the Listing Rules Independent Shareholders containing its recommendation in respect of the Subscription Agreement and the transactions contemplated thereunder; (iv) further details of the Acquisition Agreement and the transactions contemplated thereunder; (v) further details about the Increase in Authorised Share Capital; (vi) a notice convening the EGM; and (vii) other information as required under the GEM Listing Rules, is expected to be despatched to the Shareholders on or before 22 February 2021.

COMPOSITE DOCUMENT

Subject to the Subscription Completion, if the Offers are made, it is the intention of the Offeror and the Company that the offer document from the Offeror and the offeree board circular from the Company be combined into a Composite Document and be jointly despatched by the Offeror and the Company to the Independent Shareholders and the Optionholders in accordance with the requirements of the Takeovers Code after the Subscription Completion takes place. In accordance with Rule 8.2 of the Takeovers Code, the Composite Document containing, among other things, (i) the terms and details of the Offers (including the expected timetable), (ii) a letter of recommendation from the Takeovers Code Independent Board Committee to the Independent Shareholders and the Optionholders in respect of the Offers, and (iii) a letter of advice from the Independent Financial Adviser to the Takeovers Code Independent Board Committee, the Independent Shareholders and the Optionholders in relation to the Offers, together with the relevant forms of acceptance and transfer, are required to be despatched to the Independent Shareholders and the Optionholders within 21 days of the date of this joint announcement or such later date as the Executive may approve.

However, as the making of the Offers is subject to the Subscription Completion, which in turn is subject to satisfaction of the respective Subscription Conditions which are not expected to be satisfied within 21 days of this joint announcement, the Offeror will make an application to the Executive under Note 2 to Rule 8.2 of the Takeovers Code for the Executive’s consent to extend the deadline for despatch of the Composite Document to a date within 7 days upon the Subscription Completion or 31 March 2021 (whichever date is earlier) or such other date as the Executive may approve.

Further announcement(s) will be made by the Offeror and the Company on the timing of the despatch of the Composite Document.

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WARNING: THE SUBSCRIPTION AND THE ACQUISITION ARE INTER-CONDITIONAL UPON EACH OTHER. AS THE SUBSCRIPTION COMPLETION AND THE ACQUISITION COMPLETION IS SUBJECT TO THE SATISFACTION OF THE SUBSCRIPTION CONDITIONS AND THE ACQUISITION CONDITIONS, RESPECTIVELY, THE SUBSCRIPTION AND/ OR THE ACQUISITION MAY OR MAY NOT PROCEED. IN ADDITION, THE OFFERS WILL ONLY BE MADE IF THE SUBSCRIPTION COMPLETION TAKES PLACE. ACCORDINGLY, THE OFFERS MAY OR MAY NOT BE MADE. THE ISSUE OF THIS JOINT ANNOUNCEMENT DOES NOT IN ANY WAY IMPLY THAT THE OFFERS WILL BE MADE. SHAREHOLDERS, OPTIONHOLDERS AND POTENTIAL INVESTORS OF THE COMPANY ARE ADVISED TO EXERCISE EXTREME CAUTION WHEN DEALING IN THE RELEVANT SECURITIES OF THE COMPANY. PERSONS WHO ARE IN DOUBT AS TO THE ACTION THEY SHOULD TAKE SHOULD CONSULT A LICENSED SECURITIES DEALER OR REGISTERED INSTITUTION IN SECURITIES, BANK MANAGER, SOLICITOR, PROFESSIONAL ACCOUNTANT OR OTHER PROFESSIONAL ADVISERS.

THE SUBSCRIPTION

Set out below is a summary of the principal terms of the Subscription Agreement.

The Subscription Agreement

Date:

28 January 2021 (after trading hours of the Stock Exchange)

Parties:

(1) the Company (as the issuer); and
(2) 500.com Limited (as the Subscriber).

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Number of Subscription Shares

As at the date of this joint announcement, the Company has a total number of 379,023,983 Shares in issue. The Subscription Shares (i.e. a total of 169,354,839 Shares) to be allotted and issued under the Subscription represent:

(1) approximately 44.7% of the total number of issued Shares as at the date of this joint announcement;
(2) approximately 30.9% of the issued Shares of the Company as enlarged by the allotment and issue of the Subscription Shares (assuming there are no other changes to the total issued share capital of the Company from the date of this joint announcement to the Subscription Completion); and
(3) approximately 28.8% of the issued Shares of the Company as enlarged by the allotment and issue of the Subscription Shares (assuming all the Options have been exercised at or prior to the Subscription Completion and there are no other changes to the total issued share capital of the Company from the date of this joint announcement to the Subscription Completion).

Based on the closing price of the Shares of HK$0.69 per Share on 27 January 2021, the Subscription Shares have a market value of approximately HK$116.9 million. Based on the nominal value of HK$0.1 per Share, the aggregate nominal value of the Subscription Shares is HK$16,935,483.9.

Ranking of the Subscription Shares

The Subscription Shares, when issued and fully paid, shall rank pari passu in all respects with the Shares already in issue at the date of allotment and in particular will rank in full for all dividends and all other distributions declared, made or paid at any time after the date of allotment and issue.

Subscription Price

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

(i) a discount of approximately 10.1% to the closing price of HK$0.69 per Share as quoted on the Stock Exchange on the Last Trading Day;
(ii) a discount of approximately 11.9% to the average closing price of HK$0.704 per Share as quoted on the Stock Exchange for the last five consecutive trading days up to and including the Last Trading Day;
(iii) a discount of approximately 11.8% to the average closing price of HK$0.703 per Share as quoted on the Stock Exchange for the last 10 consecutive trading days up to and including the Last Trading Day;

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(iv) a discount of approximately 11.5% to the average closing price of HK$0.7 per Share as quoted on the Stock Exchange for the last 30 consecutive trading days up to and including the Last Trading Day;
(v) a discount of approximately 28.8% over the audited consolidated net asset value attributable to the Shareholders of approximately HK$0.87 per Share as at 31 December 2019 (based on the audited consolidated net asset value attributable to the Shareholders as at 31 December 2019 (the date to which the latest audited financial results of the Group were made up) divided by 379,023,983 Shares in issue as at the date of this joint announcement); and
(vi) a discount of approximately 20.3% over the unaudited consolidated net asset value attributable to the Shareholders of approximately HK$0.778 per Share as at 30 June 2020 (based on the unaudited consolidated net asset value attributable to the Shareholders as at 30 June 2020 divided by 379,023,983 Shares in issue as at the date of this joint announcement).

The Subscription Price was determined after arm’s length negotiations between the Company and the Subscriber with reference to the prevailing market price of the Shares, the recent trading volume of the Shares and the prospects of the Group. Mr. Yan Hao, an executive Director (excluding Ms. Zhang Jing, Ms. Huang Lilan and Mr. Yuan Qiang who will abstain from giving their view on the Subscription Agreement and the transactions contemplated thereunder as they hold positions in the Subscriber, and members of the Listing Rules Independent Board Committee who will express their views after considering the advice of the Independent Financial Adviser), considers that the Subscription Price is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Conditions precedent to the Subscription Completion

Subscription Completion shall be conditional upon the following Subscription Conditions having been satisfied:

(1) the passing of an ordinary resolution by the Listing Rules Independent Shareholders at the general meeting of the Company for approving the Specific Mandate and the allotment and issue of the Subscription Shares by the Company in accordance with the applicable law (including the GEM Listing Rules);
(2) the Listing Committee of the Stock Exchange granting approval for the listing of, and permission to deal in, the Subscription Shares on the Stock Exchange and such approval and permission remaining in full force and effect;
(3) the passing of an ordinary resolution by the Shareholders at the general meeting of the Company for approving the Increase in Authorised Share Capital;

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(4) all necessary governmental approvals, consents, filings and reports for the Subscription Completion having been obtained or duly filed (as applicable) by the Company;
(5) all necessary governmental, shareholders’ and the third parties’ approvals, consents, filings and reports for the Subscription Completion having been obtained or duly filed (as applicable) by the Subscriber; and
(6) the transactions contemplated by the Acquisition Agreement having become unconditional in accordance with its terms (other than any condition relating to the Subscription Agreement having become unconditional).

Pursuant to the Subscription Agreement, the Subscription Conditions are not capable of being waived by the Company or the Subscriber. In respect of condition (4), save for the approval of the Listing Rules Independent Shareholders and the Stock Exchange set out in conditions (1) and (2), the Company does not foresee any other mandatory governmental approvals, consents, filings and reports for the Subscription Completion. In respect of condition (5), the Subscriber does not foresee necessary governmental, shareholders’ and the third parties’ approvals, consents, filings and reports required for the Subscription Completion.

Consideration for the Subscription Shares

The total consideration for the Subscription Shares payable in cash by the Subscriber shall be approximately HK$105 million. The Subscriber intends to fund the consideration payable under the Subscription Agreement with its internal resources.

Subscription Completion

The Subscription Completion shall take place within ten (10) Business Days after the satisfaction of all the Subscription Conditions (or such other date as the Subscriber and the Company may mutually agree in writing).

In the event that the Subscription Completion does not take place by the Subscription Long Stop Date, the Company and the Subscriber shall then consult each other and discuss a later date for the satisfaction of the Subscription Conditions and the Subscription Completion as the Company and the Subscriber may agree in writing. In the event that the Company and the Subscriber cannot agree to a later date, either the Company or the Subscriber shall be entitled to terminate the Subscription Agreement by written notice to the other party and the Subscription Agreement and all rights and obligations of the Company and the Subscriber thereunder shall cease and terminate save for accrued rights and obligations of the Company and the Subscriber under the Subscription Agreement.

Specific Mandate

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

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Application for listing

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

Fund raising exercises of the Company in the past 12 months

The equity fund raising activities conducted by the Company during the past twelve months immediately preceding the date of this joint announcement are set out below:

					Expected
					timeline for
				Actual use of	utilizing the
				proceeds as	remaining
				at the date	balance of net
Date of	Fund raising	Net proceeds	Proposed use	of this joint	proceeds from
announcement	activity	raised	of proceeds	announcement	the placing
24 September	Placing of	HK$16.03 million	Expanding the	Approximately	Remaining
2020	new Shares		capital base	HK$9.61	balance of
	under general		for the big	million has	approximately
	mandate		data centers	been used for	HK$6.42
	(completed		operations of	expanding the	million is
	on 9 October		the Group	capital base	expected to be
	2020)			for the big	fully utilized by
				data centers	end of 2021
				operations of
				the Group

Use of proceeds and the reasons and benefits for the Subscription

The gross and net issue price per Share from the Subscription will be approximately HK$0.62 and HK$0.61, respectively. Based on the closing price of approximately HK$0.69 per Share on the Last Trading Day as compared to the Subscription Price of HK$0.62 per Share, there will be a value dilution on the theoretical price of the Shares of approximately 3.1%.

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As of the date of this joint announcement, the Company does not have sufficient financial capacity for the Acquisition. Accordingly, the Group proposes to conduct the Subscription to raise fund for settling the Acquisition Consideration of RMB88.2 million (equivalent to approximately HK$105.8 million) payable under the Acquisition Agreement while maintaining a sufficient level of general working capital of the Group. Mr. Yan Hao, an executive Director (excluding Ms. Zhang Jing, Ms. Huang Lilan and Mr. Yuan Qiang who will abstain from giving their view on the Subscription Agreement and the transactions contemplated thereunder as they hold positions in the Subscriber, and members of the Listing Rules Independent Board Committee who will express their views after considering the advice from the Independent Financial Adviser), considers that the Subscription Agreement was entered into in the ordinary and usual course of business of the Group and are on normal commercial terms, and that the terms of the Subscription are fair and reasonable and in the interests of the Shareholders as a whole.

Implications under the GEM Listing Rules

MAJOR TRANSACTION RELATING TO THE ACQUISITION OF THE REMAINING 49% EQUITY INTEREST OF THE TARGET

The Acquisition Agreement

Set out below is a summary of the principal terms of the Acquisition Agreement.

Date:

28 January 2021

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Parties:

(1) 樂透互娛信息技術 ( 深圳 ) 有限公司 (Loto Interactive Information Technology (Shenzhen) Limited*) (as the Purchaser)
(2) 深圳市誠佑科技有限公司 (Shenzhen Chengyou Technology Co., Ltd.), as the Seller A
(3) Mr. Guo Xiaoquan ( 郭筱荃 ), as the Seller B

Each of the Sellers and the ultimate beneficial owners of Seller A are third parties independent of the Company and its connected persons (as defined in the GEM Listing Rules). Each of the Sellers and the ultimate beneficial owners of Seller A are not a Shareholder and do not hold any Shares in the Company.

The Sale Interest

The Purchaser has conditionally agreed to acquire, and the Sellers have conditionally agreed to sell, the Sale Interest, which represents an aggregate of 49% of the equity interest of the Target (as to 39% of the equity interest of the Target from the Seller A and 10% of the equity interest of the Target from the Seller B). Further information regarding the Target is set out in the section headed “Information about the parties to the Acquisition – the Target” below.

The Acquisition Consideration

The Acquisition Consideration for the Sale Interest is RMB88.2 million (equivalent to approximately HK$105.8 million) in cash. The Acquisition Consideration shall be payable by the Purchaser to the Sellers in the following manner:

(a) a refundable first payment of RMB52.92 million (equivalent to approximately HK$63.5 million) or 60% of the Acquisition Consideration (the “ First Payment ”) shall be paid to the Sellers in cash within five Business Days after the Acquisition Completion; and
(b) the remaining balance in the sum of RMB35.28 million (equivalent to approximately HK$42.3 million) or 40% of the Acquisition Consideration shall be paid to the Sellers in cash within five Business Days following the date on which the industry and commercial registration relating to the transfer of the Sale Interest from the Sellers to the Purchaser having been completed.

The Acquisition Consideration will be funded by the net proceeds raised by the Company through the Subscription.

– 15 –

Basis of the Acquisition Consideration

The Acquisition Consideration was arrived at after arm’s length negotiations between the parties to the Acquisition Agreement and primarily determined with reference to, among other things, the following factors:

(a) the historical business operation and financial performance of the Target;
(b) the future business prospects of the Target;
(c) trading multiples of comparable companies in the market;
(d) the net asset value attributable to the Sale Interest as at 31 December 2020; and
(e) the benefits to be derived by the Group upon the Acquisition Completion as described under the section headed “Reasons for and benefits of the Acquisition” in this joint announcement.

Having considered the factors above, the Directors (excluding Ms. Zhang Jing, Ms. Huang Lilan and Mr. Yuan Qiang who will abstain from giving their view on the Acquisition Agreement and the transactions contemplated thereunder as they hold positions in the Subscriber and considering that the Subscription and the Acquisition are inter-conditional upon each other) consider that the Acquisition Consideration is fair and reasonable and the Acquisition is in the interests of the Company and the Shareholders as a whole.

Conditions precedent to the Acquisition Completion

Acquisition Completion shall be conditional upon the following Acquisition Conditions having been satisfied or waived (as the case may be):

(i) the transactions contemplated by the Subscription Agreement having become unconditional in accordance with its terms (other than any condition relating to the Acquisition Agreement having become unconditional);
(ii) the passing of an ordinary resolution by the Shareholders at the EGM for approving the Acquisition Agreement and the transactions contemplated thereunder in accordance with the applicable law (including the GEM Listing Rules);
(iii) all necessary approvals, consents, waivers and/or authorizations required by the relevant governmental, regulatory authorities and other third parties (if any) (save for the industry and commercial registration relating to the transfer of the Sale Interest from the Sellers to the Purchaser) having been obtained;
(iv) the representations and warranties made by the Sellers under the Acquisition Agreement being true, accurate and not misleading in all respects and with no material omission, and that no events have occurred that would result in any breach of such sellers’ warranties or any clauses of the Acquisition Agreement as at the Acquisition Completion; and

– 16 –

(v) each of the Sellers and the Purchaser having obtained all necessary acknowledgements, consents and approvals in respect of the Acquisition Agreement and the transactions contemplated thereunder, and such acknowledgements, consents and approvals having remained in full force and effect upon the Acquisition Completion.

The Purchaser may at any time prior to the Acquisition Long Stop Date waive in writing Acquisition Condition (iv). Apart from Acquisition Condition (iv), none of the Acquisition Conditions is capable of being waived by the Purchaser or the Sellers. As at the date of this joint announcement, save for the approval of the Shareholders set out above in condition (ii) and the industry and commercial registration relating to the transfer of the Sale Interest, the Company does not foresee any other mandatory approvals, consents, waivers and/or authorizations required to be obtained prior to the Acquisition Completion in respect of condition (iii).

The Sellers shall arrange for the industry and commercial registration procedure relating to the transfer of the Sale Interest from the Sellers to the Purchaser within five Business Days following the date of First Payment (or such other date as the Purchaser and the Sellers may mutually agree in writing). In the event that the industry and commercial registration procedure cannot be completed for any reasons, the Seller shall return the First Payment in full without interest to the Purchaser within two Business Days after the receipt of written notice from the Purchaser and the Acquisition Agreement shall be terminated forthwith.

In the event that the Acquisition Completion does not take place by the Acquisition Long Stop Date, the Purchaser and the Sellers can delay the Acquisition Completion to a later date in writing. In the event that the Purchaser and the Sellers cannot agree to a later date, either the Purchaser or the Sellers shall be entitled to terminate the Acquisition Agreement by written notice to the other party, and all rights and obligations of the Purchaser and the Sellers thereunder shall cease and terminate save for accrued rights and obligations of the Purchaser and the Sellers under the Acquisition Agreement.

After making reasonable enquiry with its PRC legal adviser, the Company understands that the industry and commercial registration relating to the transfer of the Sale Interest is procedural in nature and the Company does not currently expect to encounter any legal obstacle in completing the registration. In arriving at the aforementioned view, the Company has made due diligence and online public searches against the Sellers and the Sale Interest and it is not aware of any Encumbrance over the Sale Interest or any legal proceedings and claims against the Sellers and the Sale Interest as of the date of this joint announcement. Upon the Acquisition Completion,the Subscription Completion would also have taken place as they are inter-conditional, and the Offers will proceed, and it is the intention of the Offeror to proceed to make the Offers even in the unlikely event that the industry and commercial registration in relation to the Acquisition is not successful.

– 17 –

The Acquisition Completion

The Acquisition Completion shall take place within ten (10) Business Days after the satisfaction or waiver (as the case may be) of all the Acquisition Conditions (or such other date as the Purchaser and the Sellers may mutually agree in writing). The Company intends the Acquisition Completion shall take place on the same day of the Subscription Completion.

Financial effect of the Acquisition on the Group

As at the date of this joint announcement, the Group is interested in 51% of the equity interest of the Target. Upon Completion, the Target will become an indirect wholly-owned subsidiary of the Company and its financial results, assets and liabilities of will continue to be consolidated in the consolidated financial statements of the Group.

Information about the parties to the Acquisition

The Purchaser is a company established in the PRC with limited liability on 14 December 2017 and its principal business activity is the provision of information technology and other technical services in connection with the big data centre. The Purchaser is an indirect wholly-owned subsidiary of the Company.

The Seller A is a company established in the PRC with limited liability on 17 April 2019 and its principal business activity is data processing and provision of application software services. It is ultimately beneficially owned by Yang Yajun ( 楊亞軍 ) as to 94% and Wang Yi ( 王毅 ) as to 6%. Each of the Seller A and its beneficial owner are independent of the Company and its connected persons (as defined in the GEM Listing Rules).

The Seller B is an individual and he is independent of the Company and its connected persons (as defined in the GEM Listing Rules).

The Target

The Target is a company established in the PRC with limited liability on 25 April 2019 and its principal business activity is data processing and provision of application software services. As at the date of this joint announcement, the Target is an indirect 51%-owned subsidiary of the Company, and the remaining 39% and 10% equity interest in the Target is held by Seller A and Seller B, respectively. As at the date of this joint announcement, the registered capital of the Target is RMB180 million, among which RMB150 million has been paid up.

– 18 –

The table below sets out selected financial information of the Target based on unaudited financial statements for the period since its incorporation and up to 31 December 2019 and for the year ended 31 December 2020:

	For the period
	since incorporation
	and up to	For the year ended
	31 December 2019	31 December 2020
	(unaudited,	(unaudited,
	approximately RMB)	approximately RMB)
Net (loss)/profit before and after tax	(1.1) million	10.2 million
	(equivalent to	(equivalent to
	approximately	approximately
	HK$(1.3) million)	HK$12.2 million)

The unaudited net asset value of the Target is approximately RMB159.2 million (equivalent to approximately HK$191.0 million) as at 31 December 2020.

Pursuant to Rule 10 of the Takeovers Code, disclosure of unaudited financial information of the Target shall constitute profit forecasts and should be reported on in accordance with Rule 10 of the Takeovers Code, and the reports must be included in this joint announcement in accordance with Rule 10.4 of the Takeovers Code. Pursuant to Rules 19.58 (7) and 19.58 (8) of the GEM Listing Rules, the Company is required to disclose the above financial information relating to the Target in this joint announcement. Due to the time constraint in issuing this joint announcement in compliance with Chapter 19 of the GEM Listing Rules, the parties have encountered practical difficulties in meeting the reporting requirements under Rule 10 of the Takeovers Code for the purpose of this joint announcement. The financial information of the Target does not meet the standard required under Rule 10 of the Takeovers Code. Shareholders and potential investors of the Company are advised to exercise caution in placing reliance on the financial information for the Target in assessing the merits and demerits of the Acquisition. The audited financial information of the Target will be disclosed in the circular relating to the Acquisition to be despatched to the Shareholders when the audit process is completed. Shareholders should note that there may be differences between the unaudited financial information relating to the Target as presented in this joint announcement and the audited financial information to be presented in the circular to be issued by the Company to the Shareholders.

Reasons for and benefits of the Acquisition

The Group is principally engaged in (i) the provision of data analysis and storage services; (ii) the distribution of mobile gaming; and (iii) the money lending business in Hong Kong.

– 19 –

The Target was incorporated in 2019 and has commenced its operation of big data center service since mid of 2020. Taking into account the increasing demand for big data center services in the PRC and the marketing effort in promoting its services by the Target, the Target recorded unaudited net profit after tax for the year ended 31 December 2020 of approximately RMB10.2 million. By acquiring an additional 49% equity interest in of the Target, the Target will become a wholly-owned subsidiary of the Company and the Group will be entitled to the entire profit of the Target. The Acquisition will enable the Company to obtain full management control of the Target, thereby achieving an improvement in management operational efficiency. On the other hand, the Group possesses expertise in data center business and has customer base in the PRC. The Directors believe that the Acquisition is in line with the Company’s business development strategy and will achieve commercial synergies to the existing principal business of the Group, which in turn bring satisfactory returns to the Company and its Shareholders as a whole in the future. The Acquisition represents a good opportunity to fully consolidate the shareholding in the Target and will improve the flexibility of the Group in driving the future growth of the Target.

In view of the above, the Directors (excluding Ms. Zhang Jing, Ms. Huang Lilan and Mr. Yuan Qiang who will abstain from giving their view on the Acquisition Agreement and the transactions contemplated thereunder as they hold positions in the Subscriber and considering that the Subscription and the Acquisition are inter-conditional upon each other) are of the view that the terms of the Acquisition Agreement are on normal commercial terms and are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Implications under the GEM Listing Rules

PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL

– 20 –

EGM and Despatch of Circular

With respect to the Subscription Agreement and the transactions contemplated thereunder, the Subscriber and its associates and those who are interested in the Subscription Agreement and the transactions contemplated thereunder will be required to abstain from voting on the resolution in relation to the Subscription Agreement and the transactions contemplated thereunder at the EGM.

With respect to the Acquisition Agreement and the transactions contemplated thereunder, taking into account that the Subscription and the Acquisition are inter-conditional upon each other, the Subscriber and its associates will abstain from voting on the resolution(s) approving the Acquisition Agreement and the transactions contemplated thereunder at the EGM.

Save as aforementioned, no other Shareholder has a material interest in the Subscription Agreement, the Acquisition Agreement and the respective transactions contemplated thereunder or the Increase in Authorised Share Capital and therefore no other Shareholder is required to abstain from voting at the EGM on the relevant resolutions.

– 21 –

POSSIBLE UNCONDITIONAL MANDATORY CASH OFFERS

The Share Offer and the Option Offer

BOCOM Securities will make the Offers on behalf of the Offeror on the terms to be set out in the Composite Document to be issued in accordance with the Takeovers Code on the following basis:

The Share Offer

For each Offer Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$0.75 in cash

The Offer Price of HK$0.75 per Offer Share was determined with reference to the historical Share price performance prior to the Last Trading Day as well as after considering the attractiveness of the Offer Price to the Independent Shareholders.

– 22 –

The Share Offer will be extended to all Independent Shareholders in accordance with the Takeovers Code. The Offer Shares to be acquired under the Share Offer shall be fully paid and free from all Encumbrances and together with all rights attaching to them, including without limitation, the right to receive all dividends and distributions declared, paid or made, if any, on or after the date on which the Share Offer is made, being the date of despatch of the Composite Document.

As at the date of this joint announcement, no dividend has been paid or declared by the Company and it is advised by the Board that the Company has no intention to make, declare or pay any future dividend or make other distributions until the close of the Share Offer.

The Share Offer will be unconditional in all aspects when made, and will not be conditional upon any minimum level of acceptances being received or any other conditions.

The Option Offer

For cancellation of each Option with an exercise price of:

HK$0.26 (24,860,000 Options in total) . . . . . . . . . . . . . . . . . . . . . . . . . HK$0.49 in cash

HK$1.10 (13,643,600 Options in total) . . . . . . . . . . . . . . . . . . . . . . . HK$0.0001 in cash HK$2.00 (400,000 Options in total) . . . . . . . . . . . . . . . . . . . . . . . . . HK$0.0001 in cash

Comparisons of value

The Share Offer Price of HK$0.75 per Offer Share represents:

(i) a premium of approximately 8.7% to the closing price of HK$0.69 per Share as quoted on the Stock Exchange on the Last Trading Day;

– 23 –

(ii) a premium of approximately 6.5% to the average closing price of HK$0.704 per Share as quoted on the Stock Exchange for the last five consecutive trading days up to and including the Last Trading Day;
(iii) a premium of approximately 6.7% to the average closing price of HK$0.703 per Share as quoted on the Stock Exchange for the last 10 consecutive trading days up to and including the Last Trading Day;
(iv) a premium of approximately 7.1% to the average closing price of HK$0.7 per Share as quoted on the Stock Exchange for the last 30 consecutive trading days up to and including the Last Trading Day;
(v) a discount of approximately 13.8% over the audited consolidated net asset value attributable to the Shareholders of the Company of approximately HK$0.87 per Share as at 31 December 2019 (based on the audited consolidated net asset value attributable to the Shareholders as at 31 December 2019 (the date to which the latest audited financial results of the Group were made up) divided by 379,023,983 Shares in issue as at the date of this joint announcement); and
(vi) a discount of approximately 3.6% over the unaudited consolidated net asset value of the Company of approximately HK$0.778 per Share as at 30 June 2020 (based on the unaudited consolidated net asset value attributable to the Shareholders as at 30 June 2020 divided by 379,023,983 Shares in issue as at the date of this joint announcement).

Highest and lowest Share prices

During the six-month period prior to commencement of the Offer Period and up to and including the Last Trading Day, the highest closing price of the Shares was HK$0.8 per Share as quoted on the Stock Exchange on 9 December 2020 and 25 November 2020 and the lowest closing price of the Shares was HK$0.23 per Share as quoted on the Stock Exchange on 25 August 2020.

Value of the Offers

– 24 –

Confirmation of financial resources available for the Offers

Save for entering into the Subscription Agreement, the Offeror intends to finance the consideration payable under the Offers by its internal resources. BOCOM (Asia), as the financial adviser to the Offeror, is satisfied that sufficient financial resources are available to the Offeror to satisfy the maximum cash consideration payable upon full acceptance of the Offers.

Dealing and interest in the Company’s securities

Save for the series of on market purchases of the Shares conducted by Mr. Law as further particularized in the table below, the Offeror and parties acting in concert with it (including Mr. Law, Ms. Zhang Jing, Ms. Huang Lilan, Mr. Yuan Qiang and Mr. Yan Hao) have not dealt in the Shares, options, derivatives, warrants or other securities convertible into Shares during the six-month period prior to the date of this joint announcement up to the date of this joint announcement.

– 25 –

Date of purchase October 16, 2020 October 21, 2020 October 30, 2020 October 30, 2020 November 3, 2020 November 5, 2020 November 9, 2020 December 4, 2020 Total	Number of Shares purchased Purchase price per Share (HK$) Aggregate consideration (HK$) 20,000 0.56 11,293 12,000 0.58 7,088 64,000 0.59 37,862 20,000 0.57 11,431 20,000 0.62 12,494 16,000 0.60 9,691 12,000 0.60 7,289 20,000 0.75 15,096 184,000 112,244

Other arrangements

The Offeror confirms that, save for the Subscription Agreement, as at the date of this joint announcement:

(i) save as disclosed in the section headed “Shareholding Structure of the Company” in this joint announcement, none of the Offeror and/or parties acting in concert with it owns or has control or direction over any voting rights or rights over the Shares or convertible securities, warrants, options or derivatives of the Company;
(ii) save for the Irrevocable Undertakings, the Offeror and/or parties acting in concert with it have not received any irrevocable commitment to accept or not to accept the Offers;
(iii) there is no outstanding derivative in respect of the securities in the Company which has been entered into by the Offeror and/or any person acting in concert with it;
(iv) there is no arrangement (whether by way of option, indemnity or otherwise) of any kind referred to in Note 8 to Rule 22 of the Takeovers Code in relation to the shares of the Offeror or the Shares and which might be material to the Offers;
(v) there is no agreement or arrangement to which the Offeror and/or parties acting in concert with it is a party which relates to circumstances in which it may or may not invoke or seek to invoke a pre-condition or a condition to the Offers;
(vi) there are no relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company which the Offeror and/or parties acting in concert with it has borrowed or lent;

– 26 –

(vii) save for the consideration under the Subscription Agreement, there is no other consideration, compensation or benefit in whatever form paid or to be paid by the Offeror or any party acting in concert with it (including Mr. Law, Ms. Zhang Jing, Ms. Huang Lilan, Mr. Yuan Qiang and Mr. Yan Hao) to the Company or any party acting in concert with it or any Shareholder;
(viii) save for the Irrevocable Undertakings, there is no other understanding, arrangement or agreement in connection with the Offers or special deal (as defined under Rule 25 of the Takeovers Code) between the Offeror and parties acting in concert with it (including Mr. Law, Ms. Zhang Jing, Ms. Huang Lilan, Mr. Yuan Qiang and Mr. Yan Hao) on the one hand, and the Company and any party acting in concert with it on the other hand; and
(ix) save for the Irrevocable Undertakings, there is no other agreement, arrangement or understanding (including any compensation arrangement) in connection with the Offers or special deal (as defined under Rule 25 of the Takeovers Code) existing between (1) any Shareholder or recent Shareholder; and (2)(a) the Offeror and any party acting in concert with it (including Mr. Law, Ms. Zhang Jing, Ms. Huang Lilan, Mr. Yuan Qiang and Mr. Yan Hao) or (b) the Company, its subsidiaries or associated companies, or (c) any Directors or recent Directors.

Settlement of consideration

Settlement of the consideration in respect of acceptances of the Offers will be made as soon as possible but in any event within seven (7) Business Days of the date on which duly completed form(s) of acceptance and the relevant documents of title of Shares or the Options (as the case may be) are received by the Offeror to render each such acceptance complete and valid pursuant to Rule 20.1 and Note 1 to Rule 30.2 of the Takeovers Code.

No fractions of a cent (HK$) will be payable and the amount of cash consideration payable to an Independent Shareholder or an Optionholder (as the case may be) who accepts the Share Offer or the Option Offer (as the case may be) will be rounded up to the nearest cent (HK$).

Availability of the Offers

The Offeror intends to make the Offers available to all Independent Shareholders and all Optionholders, including those with a registered address in a jurisdiction outside Hong Kong. The availability of the Offers to persons with a registered address in a jurisdiction outside Hong Kong may be affected by the laws of the relevant overseas jurisdictions. The making of the Offers to persons with a registered address in a jurisdiction outside Hong Kong may be prohibited or limited by the laws or regulations of the relevant jurisdictions. Such overseas Independent Shareholders and/or Optionholders with a registered address in a jurisdiction outside Hong Kong should inform themselves about and observe any applicable legal or regulatory requirements in their own jurisdictions in connection with the acceptance of the Offers (including the obtaining of any governmental or other consent which may be required or the compliance with other necessary formalities and the payment of any transfer or other taxes due by such overseas Independent Shareholders and/or Optionholders in respect of such jurisdictions).

– 27 –

Any acceptance by the Independent Shareholders and/or Optionholders with a registered address in a jurisdiction outside Hong Kong will be deemed to constitute a representation and warranty from such overseas Independent Shareholders and/or Optionholders to the Offeror that the local laws and requirements have been complied with. Such overseas Independent Shareholders and/or Optionholders should consult their respective professional advisers if in doubt.

Effect of accepting the Offers

By accepting the Share Offer, the Independent Shareholders will sell their tendered Shares to the Offeror free from all Encumbrances and together with all rights attaching to them including the right to receive in full all dividends and other distributions, if any, declared, made or paid on or after the date on which the Share Offer is made, being the date of despatch of the Composite Document.

By accepting the Option Offer, the Optionholders will agree to the cancellation of their tendered Options and all rights attached thereto with effect from the date on which the Option Offer is made, being the date of despatch of the Composite Document.

Pursuant to the 2012 Share Option Scheme, if the Offers are unconditional, the Optionholders of the 2012 Share Option Scheme shall be entitled to exercise their Options (to the extent not already exercised) at any time thereafter and up to the close of such offer and after which the Options shall lapse automatically. Optionholders should note that the Board has confirmed that it will exercise its discretion provided under the terms of the 2012 Share Option Scheme to the effect that, upon the close of such offer, no Option will be cancelled or lapsed solely as a result of the making of the Offers.

Acceptance of the Offers will be irrevocable and not capable of being withdrawn, except as permitted under the Takeovers Code.

Hong Kong stamp duty

Seller’s Hong Kong ad valorem stamp duty arising in connection with acceptances of the Share Offer will be payable by the relevant Shareholders at a rate of 0.1% of (i) the market value of the Offer Shares; or (ii) the consideration payable by the Offeror in respect of the relevant acceptances of the Share Offer, whichever is higher, and the amount of such duty will be deducted from the cash amount payable by the Offeror to the relevant Shareholders accepting the Share Offer. The Offeror will arrange for payment of the seller’s Hong Kong ad valorem stamp duty on behalf of the relevant Independent Shareholders accepting the Share Offer and will pay the buyer’s Hong Kong ad valorem stamp duty in connection with the acceptance of the Share Offer and the transfer of the Shares in accordance with the Stamp Duty Ordinance (Chapter 117 of the Laws of Hong Kong).

No stamp duty is payable in connection with the acceptances of the Option Offer.

– 28 –

Taxation advice

Independent Shareholders and Optionholders are recommended to consult their own professional advisers if they are in any doubt as to the taxation implications of accepting or rejecting the Offers. None of the Offeror and/or parties acting in concert, the Company, BOCOM (Asia), BOCOM Securities and their respective directors, officers, agents or associates or any other person involved in the Offers accepts any responsibility for any taxation effects on, or liabilities of, any persons as a result of their acceptance or rejection of the Offers.

IRREVOCABLE UNDERTAKINGS IN RELATION TO THE OFFERS

On 27 and 28 January 2021, each of (i) the executive and non-executive Directors (being Ms. Zhang Jing, Mr. Yan Hao, Ms. Huang Lilan and Mr. Yuan Qiang), (ii) Mr. Law, a party acting in concert with the Offeror, and (iii) three individual Shareholders (including Ms. Mak Lam, Mr. Li Qi and Mr. Mei Siyuan) has executed the Irrevocable Undertakings pursuant to which each of them has irrevocably undertaken not to accept the Share Offer or the Option Offer (as applicable) and he/she will not or/and will procure not to sell, transfer or dispose of any Shares or Options held by each of them or rights to such Shares or Options to third parties prior to completion, termination or withdrawal of the Offers. Accordingly, a total of 36,957,200 Shares and 15,066,800 Options are subject to the Irrevocable Undertakings. The Irrevocable Undertakings shall cease to be binding upon the earliest of (i) the date when the Offers close for acceptances; (ii) the date when the Offers lapse; (iii) the time when the Offeror announces that the Offers will not proceed; (iv) the date when the Offers are withdrawn in the circumstances permitted under the Takeovers Code; (v) the date when the Offer Period ends; or (vi) when an offer with a higher offer price is made. The aforementioned circumstances are the only instances under which the Irrevocable Undertakings shall cease to be binding.

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SHAREHOLDING STRUCTURE OF THE COMPANY

The table below sets out the shareholding structure of the Company (i) as at the date of this joint announcement; (ii) immediately upon Subscription Completion but before the Offers are made (assuming none of the Options have been exercised at or prior to Subscription Completion); and (iii) immediately upon Subscription Completion but before the Offers are made (assuming all of the Options have been exercised at or prior to Subscription Completion):

			Immediately upon Subscription	Immediately upon Subscription	Immediately upon Subscription	Immediately upon Subscription
			Completion	but before the	Completion	but before the
			Offers are made (assuming none		Offers are made (assuming all
			of the Options have been		of the Options have been
	As at the date of this joint		exercised at or prior to the		exercised at	or prior to the
Shareholders	announcement		Subscription Completion)		Subscription Completion)
	Number	(approximately)	Number	(approximately)	Number	(approximately)
	of Shares	%	of Shares	%	of Shares	%
The Offeror and parties acting in
concert with it
The Offeror	127,871,432	33.74	297,226,271	54.20	297,226,271	50.61
Ms. Zhang Jing	137,200	0.04	137,200	0.03	3,704,000	0.63
Mr. Yan Hao	–	–	–	–	3,300,000	0.56
Ms. Huang Lilan	–	–	–	–	2,000,000	0.34
Mr. Yuan Qiang	–	–	–	–	6,200,000	1.06
Mr. Law	184,000	0.05	184,000	0.03	184,000	0.03
Independent non-executive Directors
Dr. Lu Haitian	–	–	–	–	400,000	0.07
Mr. Lin Sen	–	–	–	–	400,000	0.07
Mr. Huang Jian	–	–	–	–	200,000	0.03
Individual Shareholders under the
Irrevocable Undertakings (other
than the parties acting in concert
with the Offeror)
Ms. Mak Lam	15,160,000	4.00	15,160,000	2.76	15,160,000	2.58
Mr. Li Qi	15,160,000	4.00	15,160,000	2.76	15,160,000	2.58
Mr. Mei Siyuan	6,316,000	1.67	6,316,000	1.15	6,316,000	1.08
Other public Shareholders	214,195,351	56.01	214,195,351	39.06	237,032,151	40.35
Total	379,023,983	100.00	548,378,822	100.00	587,282,422	100.00

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Notes:

(i) Given each of Ms. Zhang Jing, Ms. Huang Lilan and Mr. Yuan Qiang holds positions in the Subscriber and that Mr. Yan Hao is an executive Directors of the Company who has a close working relationship with the aforementioned Directors and is privy to the discussion and negotiation of the Subscription with the Offeror, they are presumed to be parties acting in concert with the Offeror.
(ii) Mr. Law is a former director, chairman and chief executive officer of the Offeror and is a party acting in concert with the Offeror.
(iii) Certain percentage figures included in this table have been subject to rounding adjustments. Figures shown as totals may not be an arithmetic aggregation of the figures preceding them.

FUTURE INTENTIONS OF THE OFFEROR REGARDING THE GROUP

The Offeror intends to continue with the Group’s existing principal business. Leveraging the experience of the Offeror in the investment and online lottery sectors, the Offeror will also continue to explore possible business opportunities appropriate to the Group’s business and operations with a view to enhance the value of the Group. Upon the close of the Offers, the Offeror will conduct a detailed review of the operations of the Group and formulate business strategies for the Group’s long-term development. As at the date of this joint announcement, the Offeror has no intention to discontinue the employment of the employees or to dispose of or re-deploy the assets of the Group.

Board composition

As at the date of this joint announcement, the Board comprises two executive Directors, namely Mr. Yan Hao and Ms. Huang Lilan, two non-executive Directors, namely, Ms. Zhang Jing and Mr. Yuan Qiang, and three independent non-executive Directors, namely, Dr. Lu Haitian, Mr. Lin Sen and Mr. Huang Jian.

The Offeror did not propose to nominate any new Directors to the Board. Meanwhile, the Offeror has no intention to make any change to the composition of the Board as at the date of this joint announcement.

Public float and maintaining the listing status of the Company

The Offeror intends to maintain the listing of the Shares on the GEM after the close of the Offers. The Offeror will undertake to the Stock Exchange to take appropriate steps to ensure that sufficient public float exists in the Company’s shares.

– 31 –

COMPOSITE DOCUMENT

Further announcement(s) will be made by the Offeror and the Company on the timing of the despatch of the Composite Document.

Independent Shareholders, Optionholders and potential investors of the Company should note that the Takeovers Code Independent Board Committee has yet to consider and evaluate the Offers. This joint announcement is made in compliance with the Takeovers Code for the purpose of, among other things, informing the Independent Shareholders and the Optionholders of the fact that the Company has been informed that the Offers will be made pursuant to Rule 26.1 and Rule 13.5 of the Takeovers Code. The Independent Shareholders and the Optionholders are encouraged to read the Composite Document carefully, including the advice of the Independent Financial Adviser to the Takeovers Code Independent Board Committee and the recommendation from the Takeovers Code Independent Board Committee to the Independent Shareholders and the Optionholders in respect of the Offers, before deciding whether or not to accept the Offers.

– 32 –

INFORMATION ON THE PARTIES

Information on the Group

The Group is principally engaged in (i) the provision of data analysis and storage services; (ii) the distribution of mobile gaming; and (iii) the money lending business in Hong Kong.

Set out below is a summary of the consolidated financial information of the Group for the two financial years ended 31 December 2018 and 31 December 2019, as well as for the six months ended 30 June 2020:

			Six months
	Year ended 31 December		ended 30 June
	2018	2019	2020
	Audited	Audited	Unaudited
	(HK$’000)	(HK$’000)	(HK$’000)
Revenue	6,034	64,556	128,734
Loss before taxation	(34,781)	(34,876)	(32,937)
Loss after taxation	(34,781)	(34,771)	(32,365)
Loss attributable to the owners of the
Company	(34,087)	(33,618)	(30,116)

The unaudited consolidated net assets of the Group as at 30 June 2020 was approximately HK$372,884,000.

Further financial information of the Group will be set out in the Composite Document to be despatched to the Independent Shareholders.

Information on the Offeror

The Offeror is a company incorporated in the Cayman Islands with limited liability and the shares of which are traded on the New York Stock Exchange under the ticker symbol “WBAI” since 2013.

As at the date of this joint announcement, the single largest beneficial owner of the Offeror is Tsinghua Unigroup International Co., Ltd., which owns 32.59% of voting rights of the Offeror, based on its 2020 annual report, and is ultimately controlled by Mr. Zhao Weiguo.

– 33 –

The Offeror is an online sports lottery service provider in the PRC. The Offeror offers a comprehensive and integrated suite of online lottery services, information, user tools and virtual community venues to its users. The Offeror was among the first companies to provide online lottery services in the PRC, and is one of the two entities that is authorised by the PRC Ministry of Finance to provide online lottery sales services on behalf of China Sports Lottery Administration Centre, the government authority in charge of the issuance and sale of sports lottery products in the PRC. The Offeror is also actively exploring blockchain related business opportunities. As at 27 January 2021, the Offeror’s market capitalisation was approximately US$607 million.

The audited consolidated financial information of the Offeror is as follows:

Net revenue Loss before income tax Net loss Total assets Total liabilities Total shareholders’ equity	Year ended 31 December 2018 2019 RMB’000 RMB’000 126,089 39,688 (491,339) (661,928) (459,394) (654,286) As at 31 December 2018 2019 RMB’000 RMB’000 1,246,584 695,779 111,634 111,861 1,105,562 569,069

GENERAL

Listing Rules Independent Board Committee and Takeovers Code Independent Board Committee

– 34 –

Independent financial adviser

Disclosure of dealings

In accordance with Rule 3.8 of the Takeovers Code, associates of the Company and the Offeror (including but not limited to a person who owns or controls 5% or more of any class of relevant securities (as defined in paragraphs (a) to (d) in Note 4 to Rule 22 of the Takeovers Code) of the Company or the Offeror) are hereby reminded to disclose their dealings in any securities of the Company pursuant to the requirements of the Takeovers Code.

The full text of Note 11 of Rule 22 of the Takeovers Code is reproduced below pursuant to Rule 3.8 of the Takeovers Code:

“Responsibilities of stockbrokers, banks and other intermediaries

Stockbrokers, banks and others who deal in relevant securities on behalf of clients have a general duty to ensure, so far as they are able, that those clients are aware of the disclosure obligations attaching to associates and other persons under Rule 22 and that those clients are willing to comply with them. Principal traders and dealers who deal directly with investors should, in appropriate cases, likewise draw attention to the relevant Rules. However, this does not apply when the total value of dealings (excluding stamp duty and commission) in any relevant security undertaken for a client during any 7-day period is less than HK$1 million.

This dispensation does not alter the obligation of principals, associates and other persons themselves to initiate disclosure of their own dealings, whatever total value is involved.

Intermediaries are expected to co-operate with the Executive in its dealings enquiries. Therefore, those who deal in relevant securities should appreciate that stockbrokers and other intermediaries will supply the Executive with relevant information as to those dealings, including identities of clients, as part of that co-operation.”

– 35 –

W A R N I N G : T H E S U B S C R I P T I O N A N D T H E A C Q U I S I T I O N A R E INTER-CONDITIONAL UPON EACH OTHER. AS THE SUBSCRIPTION COMPLETION AND THE ACQUISITION COMPLETION IS SUBJECT TO THE SATISFACTION OF THE SUBSCRIPTION CONDITIONS AND THE ACQUISITION CONDITIONS, RESPECTIVELY, THE SUBSCRIPTION AND/ OR THE ACQUISITION MAY OR MAY NOT PROCEED. IN ADDITION, THE OFFERS WILL ONLY BE MADE IF THE SUBSCRIPTION COMPLETION TAKES PLACE. ACCORDINGLY, THE OFFERS MAY OR MAY NOT BE MADE. THE ISSUE OF THIS JOINT ANNOUNCEMENT DOES NOT IN ANY WAY IMPLY THAT THE OFFERS WILL BE MADE. SHAREHOLDERS, OPTIONHOLDERS AND POTENTIAL INVESTORS OF THE COMPANY ARE ADVISED TO EXERCISE EXTREME CAUTION WHEN DEALING IN THE RELEVANT SECURITIES OF THE COMPANY. PERSONS WHO ARE IN DOUBT AS TO THE ACTION THEY SHOULD TAKE SHOULD CONSULT A LICENSED SECURITIES DEALER OR REGISTERED INSTITUTION IN SECURITIES, BANK MANAGER, SOLICITOR, PROFESSIONAL ACCOUNTANT OR OTHER PROFESSIONAL ADVISERS.

DEFINITIONS

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

“2012 Share Option the share option scheme adopted by the Company pursuant Scheme” to an ordinary resolution passed by the Shareholders on 18 May 2012
“Acquisition” the acquisition of the Sale Interest by the Purchaser pursuant to the Acquisition Agreement
“Acquisition the acquisition agreement entered into by and among the Agreement” Purchaser and the Sellers on 28 January 2021 in relation to the Acquisition
“Acquisition the completion of the Acquisition in accordance with the Completion” terms and conditions of the Acquisition Agreement
“Acquisition the conditions precedent to the Acquisition Completion, as Conditions” more particularly set out in the section headed “Conditions precedent to the Acquisition Completion”
“Acquisition the consideration of RMB88.2 million (equivalent to Consideration” approximately HK$105.8 million) payable by the Purchaser to the Sellers pursuant to the Acquisition Agreement for the Acquisition

– 36 –

“Acquisition Long Stop 28 July 2021 (or such later date as the Purchaser and the Date” Sellers may agree in writing)
“acting in concert”

has the meaning ascribed to it in the Takeovers Code

“associate(s)” has the meaning ascribed to it under the GEM Listing Rules
“Board” the board of Directors
“BOCOM (Asia)” BOCOM International (Asia) Limited, a corporation licensed by the SFC to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO, being the financial adviser to the Offeror
“BOCOM Securities” BOCOM International Securities Limited, a corporation licensed to carry on Type 1 (dealing in securities), Type 2 (dealing in futures contracts), Type 4 (advising on securities) and Type 5 (advising on futures contracts) regulated activities under the SFO, being the agent making the Offers on behalf of the Offeror
“Business Day(s)” means any day (other than a Saturday, Sunday or public holiday) on which banks are open for general banking business in Hong Kong and the PRC
“Company” Loto Interactive Limited, a company incorporated in the Cayman Islands with limited liability, whose shares are listed on GEM (stock code: 8198)
“Composite Document” the composite offer and response document to be jointly issued by the Offeror and the Company to the Independent Shareholders and the Optionholders in connection with the Offers in accordance with the Takeovers Code
“connected person” has the meaning ascribed to it under the GEM Listing Rules
“Director(s)” the director(s) of the Company
“EGM” an extraordinary general meeting of the Company to be held and convened for the purpose of approving, among other things, the Subscription Agreement and the transactions contemplated thereunder, the Specific Mandate, the Acquisition Agreement and the transactions contemplated thereunder as well as the Increase in Authorised Share Capital (or any adjournment thereof)

– 37 –

“Encumbrances”

includes any option, right to acquire, right of pre-emption, mortgage, charge, pledge, lien, hypothecation, title retention, right of set off, claim, counterclaim, trust arrangement or other security, any equity or restriction (including any restriction imposed under the Companies Ordinance (Chapter 622 of the Laws of Hong Kong) or other adverse rights and interests of all kinds and descriptions)
“Excluded Options” 3,566,800 Options held by Ms. Zhang Jing, 3,300,000 Options held by Mr. Yan Hao, 2,000,000 Options held by Ms. Huang Lilan and 6,200,000 Options held by Mr. Yuan Qiang immediately after the Subscription Completion, in the aggregate number of 15,066,800 Options
“Excluded Shares” 137,200 Shares held by the Ms. Zhang Jing, 184,000 Shares held by Mr. Law, 15,160,000 Shares held by Ms. Mak Lam, 15,160,000 Shares held by Mr. Li Qi and 6,316,000 Shares held by Mr. Mei Siyuan immediately after the Subscription Completion, in the aggregate number of 36,957,200 Shares
“Executive” the Executive Director of the Corporate Finance Division of the SFC or any delegate of the Executive Director
“First Payment” has the meaning as ascribed to it under the section headed “The Acquisition Agreement – The Acquisition Consideration”
“GEM” GEM operated by the Stock Exchange
“GEM Listing Rules” the Rules Governing the Listing of Securities on GEM
“Group” the Company and its subsidiaries
“HK$” Hong Kong dollar, the lawful currency of Hong Kong
“Hong Kong” the Hong Kong Special Administrative Region of the PRC
“Increase in Authorised the proposed increase in authorised share capital of the Share Capital” Company from HK$55,000,000 (divided into 550,000,000 Shares) to HK$65,000,000 (divided into 650,000,000 Shares) by the creation of an additional 100,000,000 Shares

– 38 –

“Independent Financial Adviser”
Octal Capital Limited, a licensed corporation permitted under the SFO to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities, and being the independent financial adviser appointed for the purpose of advising (i) the Listing Rules Independent Board Committee and the Listing Rules Independent Shareholders in respect of the Subscription Agreement and the granting of the Specific Mandate; and (ii) the Takeovers Code Independent Board Committee, the Independent Shareholders and the Optionholders in respect of the Offers and as to their acceptance
“Independent the Shareholders other than the Offeror and the parties acting Shareholder(s)” in concert with it
“Irrevocable the deed of irrevocable undertakings dated 27 and 28 Undertakings” January 2021 pursuant to which each of (i) the executive and non-executive Directors (being Ms. Zhang Jing, Mr. Yan Hao, Ms. Huang Lilan and Mr. Yuan Qiang), (ii) Mr. Law, a party acting in concert with the Offeror, and (iii) three individual Shareholders (including Ms. Mak Lam, Mr. Li Qi and Mr. Mei Siyuan) has irrevocably undertaken not to accept the Share Offer or the Option Offer (as applicable) and he/she will not or/and will procure not to sell, transfer or dispose of any Shares or Options held by each of them or rights to such Shares or Options to third parties prior to completion, termination or withdrawal of the Offers, as described in the section headed “Irrevocable Undertakings in relation to the Offers” in this joint announcement
“Last Trading Day”
27 January 2021, being the last trading day for the Shares prior to the publication of this joint announcement
“Listing Rules an independent committee of the Board comprising all Independent Board the independent non-executive Directors who have no Committee” direct or indirect interest in the Subscription, established for the purpose of advising the Listing Rules Independent Shareholders on the Subscription Agreement and the transactions contemplated thereunder
“Listing Rules the Shareholders other than (i) the Subscriber and its Independent associates and (ii) all other parties (if any) who are involved Shareholders” in or interested in the Subscription Agreement and the transactions contemplated thereunder

– 39 –

“Mr. Law”

Mr. Man San Law, a former director, chairman and chief executive officer of the Offeror and is a party acting in concert with the Offeror

“Offers”

the Share Offer and the Option Offer

“Offer Period”
28 January 2021 until (i) the date when the Offers close for acceptances; (ii) the date when the Offers lapse; (iii) the time when the Offeror announces that the Offers will not proceed (if the Subscription Completion does not take place as a result of the Subscription Conditions not having been satisfied on or before the Subscription Long Stop Date); or (iv) the date when the Offers are withdrawn in the circumstances permitted under the Takeovers Code
“Offer Share(s)”
- all the Share(s) in issue, other than those already owned or agreed to be subscribed for by the Offeror and the parties acting in concert with it
“Offeror” or
“Subscriber”
500.com Limited, a company incorporated in the Cayman Islands with limited liability and the shares of which are listed on the New York Stock Exchange under the ticker symbol “WBAI”
“Options” the outstanding share options granted by the Company pursuant to the 2012 Share Option Scheme
“Optionholder(s)”
holder(s) of the Options
“Option Offer”
the possible unconditional mandatory cash offer to be made by BOCOM Securities on behalf of the Offeror upon the Subscription Completion for the cancellation of the Options in accordance with the Takeovers Code
“Option Offer Price”
the price at which the Option Offer will be made, which is (i) the “see-through” price, being the amount by which the Share Offer Price exceeds the relevant exercise price of the relevant Option, or (ii) a nominal amount of HK$0.0001 in respect of Options the exercise price of which is higher than the Share Offer Price, for the cancellation of each Option held by the Optionholders
“RMB”
Renminbi, the lawful currency of the PRC

– 40 –

“PRC” the People’s Republic of China (which, for the purpose of this joint announcement, excludes Hong Kong, the Macau Special Administrative Region and Taiwan)

“Purchaser” 樂透互娛信息技術 ( 深圳 ) 有限公司 (Loto Interactive Information Technology (Shenzhen) Limited), a wholly-owned subsidiary of the Company, being the purchaser of the Sale Interest under the Acquisition Agreement
“Sale Interest” 49% of the equity interest of the Target “Seller A” 深圳市誠佑科技有限公司 (Shenzhen Chengyou Technology Co., Ltd.), being one of the sellers to the Acquisition Agreement which holds 39% equity interest in the Target as at the date of this joint announcement
“Seller B” Mr. Guo Xiaoquan ( 郭筱荃 ), being one of the sellers to the Acquisition Agreement who holds 10% equity interest in the Target as at the date of this joint announcement
“Sellers” collectively, the Seller A and the Seller B
“SFC” the Securities and Futures Commission of Hong Kong
“SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
“Share(s)” ordinary shares of HK$0.1 each in the issued share capital of the Company
“Shareholder(s)” holder(s) of the Shares “Share Offer” the possible unconditional mandatory cash offer for the Offer Shares to be made by BOCOM Securities on behalf of the Offeror upon the Subscription Completion in accordance with the Takeovers Code
“Share Offer Price” HK$0.75 per Offer Share in respect of the Share Offer “Specific Mandate” the specific mandate proposed to be sought from the Listing Rules Independent Shareholders at the EGM to issue the Subscription Shares to the Subscriber
“Stock Exchange” The Stock Exchange of Hong Kong Limited

– 41 –

“Subscription”

the subscription of the Subscription Shares by the Subscriber pursuant to the Subscription Agreement

“Subscription Agreement”
the subscription agreement dated 28 January 2021 entered into between the Company and the Subscriber in relation to the Subscription
“Subscription Completion”
the completion of the Subscription in accordance with the terms and conditions of the Subscription Agreement
“Subscription Conditions”

the conditions precedent to the Subscription Completion, as more particularly set out in the section headed “Conditions precedent to the Subscription Completion”

“Subscription Long Stop Date”
28 July 2021, being the date falling six (6) months after the date of the Subscription Agreement (or such other date as the Company and the Subscriber may agree in writing)
“Subscription Price”
HK$0.62 per Subscription Share
“Subscription Share(s)” an aggregate of new 169,354,839 Shares to be allotted and issued by the Company and to be subscribed by the Subscriber pursuant to the terms and conditions of the Subscription Agreement
“subsidiaries”
has the meaning ascribed to it under the GEM Listing Rules
“Target”
甘孜州長河水電消納服務有限公司 (Ganzi Changhe Hydropower Consumption Service Co., Ltd.), a company established in the PRC with limited liability
“Takeovers Code” the Hong Kong Code on Takeovers and Mergers as amended from time to time
“Takeovers Code Independent Board Committee”
an independent committee of the Board comprising all the non-executive Directors who have no direct or indirect interest in the Offers, established for the purpose of advising the Independent Shareholders and the Optionholders in respect of the Offers and in particular as to whether the terms of the Offers are fair and reasonable and as to acceptance of the Offers
“%”

per cent

– 42 –

In this joint announcement, amounts denominated in RMB have been translated into HK$ at the rate of RMB1 = HK$1.2. Such conversion rates are for illustration purposes only and should not be construed as representations that the amounts in question have been, could have been or could be converted at any particular rate or at all.

By order of the board of directors By order of the Board of 500.com Limited Loto Interactive Limited Wu Shengwu Yan Hao Director Chief Executive Officer and Executive Director

Hong Kong, 28 January 2021

As at the date of this joint announcement, the Board of Directors comprises Ms. Zhang Jing[] (Chairman), Mr. Yan Hao[#] (Chief Executive Officer), Ms. Huang Lilan[#] , Mr. Yuan Qiang, Dr. Lu Haitian[+] , Mr. Lin Sen[+] and Mr. Huang Jian [+] .

Executive Director

Non-executive Director

Independent non-executive Director

This joint announcement, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the GEM Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this joint announcement (other than the information relating to the Offeror and parties acting in concert with it and the future intentions of the Offeror regarding the Group) 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 joint announcement misleading.

The Directors jointly and severally accept full responsibility for the accuracy of the information contained in this joint announcement (other than information relating to the Offeror and parties acting in concert with it and the future intentions of the Offeror regarding the Group) and confirm, having made all reasonable inquiries, that to the best of their knowledge, opinions expressed in this joint announcement (other than those expressed by the Offeror and parties acting in concert with it) have been arrived at after due and careful consideration and there are no other facts not contained in this joint announcement, the omission of which would make any statement in this joint announcement misleading.

– 43 –

As at the date of this joint announcement, the directors of the Offeror are Mr. Wu Shengwu, Mr. Yu Bo, Mr. Sun Qian; the independent directors are Dr. Deng Honghui, Mr. Wei Yu and Ms. Wong, Yan Ki Angel. All directors of the Offeror jointly and severally accept full responsibility for the accuracy of the information contained in this joint announcement including the information on the Offeror’s future intentions regarding the Group (other than information relating to the Group) and confirm, having made all reasonable inquiries, that to the best of their knowledge, opinions expressed in this joint announcement (other than those expressed by the Group) have been arrived at after due and careful consideration and there are no other facts not contained in this joint announcement, the omission of which would make any statement in this joint announcement misleading.

This joint announcement will remain on the “Latest Company Announcements” page of the GEM website at www.hkgem.com for at least seven days from the date of its posting and on the website of the Company at www.lotoie.com.

In the case of inconsistency, the English text of this joint announcement shall prevail over the Chinese text.

– 44 –

AI assistant

Crypto Flow Technology Limited — Capital/Financing Update 2021

51323_rns_2021-01-28_2420761e-723e-4aa4-ab27-ae0012bfeff3.pdf

Loto Interactive Limited

JOINT ANNOUNCEMENT

Financial adviser to the Offeror

THE SUBSCRIPTION

MAJOR TRANSACTION IN RELATION TO THE ACQUISITION OF THE REMAINING 49% EQUITY INTEREST OF THE TARGET

PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL

POSSIBLE UNCONDITIONAL MANDATORY CASH OFFERS

The Share Offer

The Option Offer

Value of the Offers

IRREVOCABLE UNDERTAKINGS IN RELATION TO THE OFFERS

LISTING RULES INDEPENDENT BOARD COMMITTEE AND TAKEOVERS CODE INDEPENDENT BOARD COMMITTEE

INDEPENDENT FINANCIAL ADVISER

EGM AND DESPATCH OF CIRCULAR

COMPOSITE DOCUMENT

THE SUBSCRIPTION

The Subscription Agreement

Date:

Parties:

Number of Subscription Shares

Ranking of the Subscription Shares

Subscription Price

Conditions precedent to the Subscription Completion

Consideration for the Subscription Shares

Subscription Completion

Specific Mandate

Application for listing

Fund raising exercises of the Company in the past 12 months

Use of proceeds and the reasons and benefits for the Subscription

Implications under the GEM Listing Rules

MAJOR TRANSACTION RELATING TO THE ACQUISITION OF THE REMAINING 49% EQUITY INTEREST OF THE TARGET

The Acquisition Agreement

Date:

Parties:

The Sale Interest

The Acquisition Consideration

Basis of the Acquisition Consideration

Conditions precedent to the Acquisition Completion

The Acquisition Completion

Financial effect of the Acquisition on the Group

Information about the parties to the Acquisition

The Target

Reasons for and benefits of the Acquisition

Implications under the GEM Listing Rules

PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL

EGM and Despatch of Circular

POSSIBLE UNCONDITIONAL MANDATORY CASH OFFERS

The Share Offer and the Option Offer

The Share Offer

The Option Offer

Comparisons of value

Highest and lowest Share prices

Value of the Offers

Confirmation of financial resources available for the Offers

Dealing and interest in the Company’s securities

Other arrangements

Settlement of consideration

Availability of the Offers

Effect of accepting the Offers

Hong Kong stamp duty

Taxation advice

IRREVOCABLE UNDERTAKINGS IN RELATION TO THE OFFERS

SHAREHOLDING STRUCTURE OF THE COMPANY

FUTURE INTENTIONS OF THE OFFEROR REGARDING THE GROUP

Board composition

Public float and maintaining the listing status of the Company

COMPOSITE DOCUMENT

INFORMATION ON THE PARTIES

Information on the Group

Information on the Offeror

GENERAL

Listing Rules Independent Board Committee and Takeovers Code Independent Board Committee

Independent financial adviser

Disclosure of dealings

“Responsibilities of stockbrokers, banks and other intermediaries

DEFINITIONS

“Encumbrances”

Crypto Flow Technology Limited Capital/Financing Update 2021