Joy Spreader Group Inc. — Annual Report 2015

Mar 20, 2016

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

This announcement, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the GEM Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that, to the best of their knowledge and belief, the information contained in this announcement is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this announcement misleading.

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AGTech Holdings Limited 亞博科技控股有限公司 * (incorporated in Bermuda with limited liability)

(Stock Code: 8279)

FINAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 31 DECEMBER 2015

CHARACTERISTICS OF GEM

GEM has been positioned as a market designed to accommodate companies to which a higher investment risk may be attached than other companies listed on the Stock Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors.

Given the emerging nature of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board and no assurance is given that there will be a liquid market in the securities traded on GEM.

• For identification purpose only

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FINANCIAL HIGHLIGHTS FOR THE YEAR ENDED 31 DECEMBER 2015

• Total revenue of the Group for the year under review amounted to approximately HK$301.6 million, representing an increase of approximately 42.9% over 2014 (2014: approximately HK$211.1 million). Most of the revenue was derived from lottery games and systems, hardware, distribution and ancillary services in the PRC.

• The Group recorded gross profit of approximately HK$69.2 million (2014: approximately HK$69.6 million). The gross profit margin percentage for the year under review stood at approximately 22.9%.

• The loss for the year from ordinary business (exclusive of the gain/loss on fair value) in 2015 was approximately HK$93.2 million (2014: approximately HK$187.4 million).

• Loss attributable to owners of the Company for the year under review amounted to approximately HK$280.2 million, primarily due to (i) loss on fair value of contingent consideration in relation to the acquisition of Score Value amounting to approximately HK$191.4 million mainly as a result of the substantial increase in the closing price per Share as quoted on the Stock Exchange from HK$0.9 as at the date of completion of such acquisition on 8 January 2015 to HK$2.02 as at 31 December 2015, causing the aforesaid fair value to increase from approximately HK$198.9 million as at 8 January 2015 to approximately HK$390.3 million as at 31 December 2015; (ii) the share-based payments (totalling approximately HK$35.2 million) recognised in accordance with Hong Kong Financial Reporting Standard 2 Share-based Payment for share options of the Company granted to Directors, eligible employees and other eligible participants under the Share Option Scheme of the Company; and (iii) increase in other major expenses in line with the organic growth of the Group’s business.

• The Board does not recommend the payment of a final dividend for the year.

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RESULTS

The Board announces the audited consolidated results of the Group for the year ended 31 December 2015, together with the comparative audited figures for the year ended 31 December 2014 as follows:

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the year ended 31 December 2015

Notes Revenue 4 Cost of sales and services Gross profit Investment and other income Selling and administrative expenses Share of losses of a joint venture Loss from business operations Share-based payments Net foreign exchange gain Amortisation of other intangible assets 10 Gain from change in fair value of investment properties Loss from change in fair value of contingent consideration payables Finance costs Loss before tax Income tax expense 6 Loss for the year 7 Other comprehensive income, net of income tax Items that will not be reclassified to profit or loss: Gain arising on revaluation of property transferred to investment property Items that may be reclassified subsequently to profit or loss: Translation differences on translating foreign operations Other comprehensive income for the year, net of income tax Total comprehensive income for the year	2015 HK$’000 301,630 (232,433) 69,197 4,540 (128,483) (1) (54,747) (35,192) 434 (454) 1,202 (191,402) (195) (280,354) (3,064) (283,418) – (65,200) (65,200) (348,618)	2014 HK$’000 211,051 (141,469) 69,582 4,549 (124,150) (1) (50,020) (136,279) 4 (478) – – – (186,773) (599) (187,372) 14,402 (4,645) 9,757 (177,615)

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Notes Loss attributable to: Owners of the Company Non-controlling interests Total comprehensive income attributable to: Owners of the Company Non-controlling interests Loss per Share Basic and diluted 8	2015 HK$’000 (280,222) (3,196) (283,418) (344,869) (3,749) (348,618) HK6.20 cents	2014 HK$’000 (189,184) 1,812 (187,372) (179,391) 1,776 (177,615) HK4.30 cents

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2015

Notes Non-current assets Property, plant and equipment Investment properties Goodwill 9 Other intangible assets 10 Investment in a joint venture Available-for-sale investment Deposits and prepayments Other assets Deferred tax assets 14 Current assets Inventories Trade receivables 11 Other receivables, deposits and prepayments Amount due from a joint venture Fixed deposits held at bank with original maturity over three months 12 Pledged bank deposits 12 Bank balances and cash 12 Current liabilities Trade payables 13 Accruals and other payables Amount due to a joint venture Secured bank borrowings Contingent consideration payables Current tax liabilities Net current assets Total assets less current liabilities	2015 HK$’000 11,814 52,536 1,119,289 1,742 645 – 10,204 1,695 7,500 1,205,425 56,306 29,597 75,892 11 – 15,042 231,647 408,495 36,664 47,950 650 21,982 63,503 2,264 173,013 235,482 1,440,907	2014 HK$’000 15,182 54,343 793,618 2,219 646 – 20,746 1,795 6,227
		894,776
		25,291 31,071 68,810 8 37,914 2,976 274,710
		440,780
		26,082 39,283 650 – – 414
		66,429
		374,351
		1,269,127

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Notes Non-current liabilities Provision for warranties Deferred tax liabilities 14 Contingent consideration payables Net assets Capital and reserves Share capital Reserves Equity attributable to owners of the Company Non-controlling interests Total equity	2015 HK$’000 50,002 5,576 326,806 382,384 1,058,523 9,213 1,049,992 1,059,205 (682) 1,058,523	2014 HK$’000 41,514 5,706 –
		47,220
		1,221,907
		8,880 1,209,960
		1,218,840 3,067
		1,221,907

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2015

Balance at 1 January 2014 Loss for the year Other comprehensive income for the year Total comprehensive income for the year Recognition of equity-settled share- based payments Shares issued on exercise of part of share options Lapse of share options Transfer from accumulated losses Balance at 31 December 2014 and 1 January 2015 Loss for the year Other comprehensive income for the year Total comprehensive income for the year Issue of Shares arising from acquisition Recognition of equity-settled share-based payments Shares issued on exercise of part of share options Lapse of share options Contingent consideration–shares arising from acquisition Transfer from accumulated losses Balance at 31 December 2015	Share capital HK$’000 8,697 – – – – 183 – – 8,880 – – – 68 – 265 – – – 9,213	Share premium HK$’000 1,390,983 – – – – 37,105 – – 1,428,088 – – – 30,337 – 82,172 – – – 1,540,597			Attributable to own	Attributable to own	ers of the Company	ers of the Company		Subtotal HK$’000 1,234,088 (189,184) 9,793 (179,391) 136,279 27,864 – – 1,218,840 (280,222) (64,647) (344,869) 30,405 35,192 58,826 – 60,811 – 1,059,205	Attributable to non- controlling interests HK$’000 1,291 1,812 (36) 1,776 – – – – 3,067 (3,196) (553) (3,749) – – – – – – (682)	Total HK$’000 1,235,379
			Share options reserve HK$’000 66,696 – – – 136,279 (9,424) (407) – 193,144 – – – – 35,192 (23,611) (36,176) – – 168,549	Statutory reserve HK$’000 (Note (a)) 13,864 – – – – – – 1,398 15,262 – – – – – – – – 2,927 18,189	Exchange reserve HK$’000 197,591 – (4,609) (4,609) – – – – 192,982 – (64,647) (64,647) – – – – – – 128,335	Contributed surplus HK$’000 (Note (b)) 47,191 – – – – – – – 47,191 – – – – – – – – – 47,191	Property revaluation reserve HK$’000 (Note (c)) – – 14,402 14,402 – – – – 14,402 – – – – – – – – – 14,402	Other reserve HK$’000 (Note (d)) – – – – – – – – – – – – – – – 60,811 – 60,811	Accumulated losses HK$’000 (490,934) (189,184) – (189,184) – – 407 (1,398) (681,109) (280,222) – (280,222) – – – 36,176 – (2,927) (928,082)
												(187,372) 9,757
												(177,615)
												136,279 27,864 – –
												1,221,907
												(283,418) (65,200)
												(348,618)
												30,405 35,192 58,826 – 60,811 –
												1,058,523

Notes:

• (a) In accordance with the statutory requirements in the PRC, subsidiaries of the Company registered in the PRC are required to transfer a certain percentage of their annual net income from retained profits to statutory reserve. The statutory reserve is not distributable.

• (b) The contributed surplus of the Group represents the transfer from share premium account in a prior year.

• (c) The property revaluation reserve represents cumulative gains and loss arising from the revaluation of property, plant and equipment that have been transferred to investment properties. Items included in the property revaluation reserve will not be reclassified subsequently to profit or loss.

• (d) The other reserve of the Group represents the aggregate amounts of contingent consideration – shares arising from the acquisition of Score Value Group during the year.

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1. GENERAL

The Company was incorporated in Bermuda as an exempted company with limited liability and its issued Shares have been listed on GEM.

At 31 December 2015 the Directors regard MAXPROFIT GLOBAL INC, a private limited company incorporated in the British Virgin Islands (“BVI”), as the immediate and ultimate holding company of the Company.

The Company is an investment holding company and its principal subsidiaries are mainly engaged in lottery games and systems, hardware, distribution and ancillary services in the PRC.

The consolidated financial statements are presented in HK$. The functional currency of the Company is RMB. As the Company is listed in Hong Kong, the Directors consider that it is appropriate to present the consolidated financial statements in HK$ and all values are rounded to the nearest thousand (“HK$’000”) unless otherwise stated.

2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRS”)

The Group has applied the following amendments to HKFRS issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) for the first time in the current year:

Amendments to HKAS 19 Defined Benefit Plans: Employee Contributions Amendments to HKFRS Annual Improvements to HKFRS 2010–2012 Cycle Amendments to HKFRS Annual Improvements to HKFRS 2011–2013 Cycle

The adoption of these new and revised standards, interpretation and amendments to standards have no material effect on the results and financial position of the Group.

In addition, the Company has adopted the amendments to the Rules Governing the listing of Securities on the GEM of Stock Exchange (the “GEM Listing Rule”) relating the disclosure of financial information with reference to the Hong Kong Companies Ordinance (Cap 622) during the current year. The impact on the financial statement is on the presentation and disclosure of certain information in the consolidated financial statement in long term.

The Group has not early applied the following new and revised HKFRS that have been issued but are not yet effective:

HKFRS 9 Financial Instruments[1] HKFRS 14 Regulatory Deferral Accounts[2] HKFRS 15 Revenue from Contracts with Customers[1] Amendments to HKFRS 10 and Sale or Contribution of Assets between an Investor and its Associate HKAS 28 or Joint Venture[4] Amendments to HKFRS 10, Investment Entities: Applying the Consolidation Exception[3] HKFRS 12 and HKAS 28 Amendments to HKFRS 11 Accounting for Acquisitions of Interests in Joint Operations[3] Amendments to HKAS 1 Disclosure Initiative[3] Amendments to HKAS 16 and Clarification of Acceptable Methods of Depreciation and HKAS 38 Amortisation[3] Amendments to HKAS 16 and Agriculture: Bearer Plants[3] HKAS 41 Amendments to HKAS 27 Equity Method in Separate Financial Statements[3] Amendments to HKFRS Annual Improvements to HKFRS 2012-2014 Cycle[3]

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• 1 Effective for annual periods beginning on or after 1 January 2018.

• 2 Effective for first annual HKFRS financial statements beginning on or after 1 January 2016. 3 Effective for annual periods beginning on or after 1 January 2016. 4 Effective for annual periods beginning on or after a date to be determined.

HKFRS 15 Revenue from Contracts with Customers

HKFRS 15 was issued which establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. HKFRS 15 will supersede the current revenue recognition guidance including HKAS 18 Revenue , HKAS 11 Construction Contracts and the related Interpretations when it becomes effective.

The core principle of HKFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the standard introduces a 5-step approach to revenue recognition:

• Step 1: Identify the contract(s) with a customer;

• Step 2: Identify the performance obligations in the contract;

• Step 3: Determine the transaction price;

• Step 4: Allocate the transaction price to the performance obligations in the contract; and

• Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation.

Under HKFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when “control” of the goods or services underlying the particular performance obligation is transferred to the customer. Far more prescriptive guidance has been added in HKFRS 15 to deal with specific scenarios. Furthermore, extensive disclosures are required by HKFRS 15. The directors of the Company anticipate that the application of HKFRS 15 in the future may have a material impact on the amounts reported and disclosures made in the Group’s consolidated financial statements. However, it is not practicable to provide a reasonable estimate of the effect of HKFRS 15 until the Group performs a detailed review.

The Group is in the process of making an assessment of what the impact of the other new or revised HKFRS is expected to be in the period of initial application. So far it has concluded that the adoption of them is unlikely to have a significant impact on the Group’s results of operations and financial position.

3. SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements have been prepared in accordance with HKFRS issued by the HKICPA. In addition, the consolidated financial statements include applicable disclosures required by the GEM Listing Rules and by the Hong Kong Companies Ordinance.

The consolidated financial statements have been prepared on the historical cost basis except for certain properties and financial instruments that are measured at fair values at the end of each reporting period. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

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4. REVENUE

Revenue represents the amounts received and receivable from lottery games and systems, hardware, distribution and ancillary services in the PRC for the year, and is analysed as follows:

Lottery games and systems and hardware Provision of distribution and ancillary services	2015 HK$’000 282,058 19,572 301,630	2014 HK$’000 188,522 22,529
		211,051

5. SEGMENT INFORMATION

Information reported to the Directors, being the chief operating decision maker (the “CODM”), for the purposes of resources allocation and assessment of performance focuses specifically on the revenue analysis by principal categories of the Group’s business and the profit of the Group as a whole.

Accordingly, the CODM have determined that the Group has one sole operating segment (as a professional service provider in China’s sports lottery market). The information regarding revenue derived from the principal businesses described above is set out in Note 4.

Additional disclosure in relation to segment information is not presented as the CODM assess the performance of the sole operating segment identified based on the consistent information as disclosed in the consolidated financial statements.

The total net segment income is equivalent to total comprehensive income for the year as shown in the consolidated statement of profit or loss and other comprehensive income and the total segment assets and total segment liabilities are equivalent to total assets and total liabilities as shown in the consolidated statement of financial position.

Geographical information

The Group’s operations are mainly located in the PRC.

The Group’s revenue from external customers by location of operations and information about its noncurrent assets* by location of assets are detailed below:

PRC Hong Kong Others	Revenue from external customers 2015 2014 HK$’000 HK$’000 300,689 209,513 – – 941 1,538 301,630 211,051	Non-current assets 2015 2014 HK$’000 HK$’000 1,195,342 885,753 2,583 2,796 – – 1,197,925* 888,549	Non-current assets 2015 2014 HK$’000 HK$’000 1,195,342 885,753 2,583 2,796 – – 1,197,925* 888,549
			888,549

• Non-current assets excluding deferred tax assets.

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Information about major customers

Revenue from customers of corresponding years contributing over 10% of total revenue of the Group is as follows:

Customer A Customer B	2015 HK$’000 82,220 N/A1 82,220	2014 HK$’000 43,423 21,948
		65,371

1 The corresponding customer did not contribute over 10% or more to the Group’s revenue in the respective year.

6. INCOME TAX EXPENSE

Current tax: – PRC Enterprise Income Tax (“EIT”) Under provision in prior year: – PRC EIT Deferred tax: – Current year Total income tax recognised in profit or loss	2015 HK$’000 4,464 41 (1,441) 3,064	2014 HK$’000 2,295 178 (1,874)
		599

Hong Kong Profits Tax is calculated at 16.5% of the estimated assessable profit for both years. No provision for Hong Kong Profits Tax has been made as there were no assessable profits arising in or derived from Hong Kong for both years.

北京亞博高騰科技有限公司 (Beijing AGTech GOT Technology Co., Ltd.*) (“GOT”) is subject to PRC EIT at 15% for both years as GOT is recognised as an Advanced and New Technology Enterprise under the PRC EIT Law. Other PRC subsidiaries are subject to PRC EIT at 25% for both years. Taxation arising in other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions.

• English name is for identification purposes only.

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7. LOSS FOR THE YEAR

Loss for the year has been arrived at after charging/(crediting):

Auditors’ remuneration Cost of inventories recognised as an expense (included in cost of sales and services) Provision for warranties (included in cost of sales and services) Reversal of provision for warranties (included in cost of sales and services) Impairment loss recognised on trade receivables Depreciation of property, plant and equipment Net losses/(gains) on disposals of property, plant and equipment Operating lease rentals in respect of rented premises Research and development costs Gross rental income from investment property Less: direct operating expenses from investment property that generated income during the year Employee benefits expense, including Directors’ remunerations: Fees, salaries, discretionary bonuses and other benefits Share-based payments Social security costs Contributions to retirement benefits schemes Total employee benefits expense	2015 HK$’000 1,100 176,240 14,468 (612) – 4,365 211 16,156 20,881 (3,099) 328 (2,771) 55,048 32,175 9,774 161 97,158	2014 HK$’000 950 109,105 18,224 (2,688) 227 5,700 (184) 16,375 12,953 (1,418) 131 (1,287) 43,410 37,296 8,018 181 88,905

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8. LOSS PER SHARE

The calculation of basic and diluted loss per Share is based on the loss attributable to owners of the Company for the year ended 31 December 2015 of approximately HK$280,222,000 (2014: approximately HK$189,184,000) and the weighted average number of approximately 4,522,154,000 Shares (2014: approximately 4,397,479,000 Shares) in issue during the year ended 31 December 2015.

The computation of the diluted loss per Share does not assume the exercise of the Company’s share options as the exercise would decrease the loss per Share of both current and prior years.

9. GOODWILL

COST Balance at 1 January 2014 Effect of foreign currency exchange differences Balance at 31 December 2014 and 1 January 2015 Additional amounts recognised from business combination occurred during the year Effect of foreign currency exchange differences Balance at 31 December 2015 CARRYING AMOUNTS Balance at 31 December 2015 Balance at 31 December 2014	HK$’000 796,946 (3,328) 793,618 369,503 (43,832) 1,119,289 1,119,289 793,618

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10. OTHER INTANGIBLE ASSETS

COST Balance at 1 January 2014 Effect of foreign currency exchange differences Balance at 31 December 2014 and 1 January 2015 Effect of foreign currency exchange differences Balance at 31 December 2015 AMORTISATION AND IMPAIRMENT Balance at 1 January 2014 Amortisation expense Effect of foreign currency exchange differences Balance at 31 December 2014 and 1 January 2015 Amortisation expense Effect of foreign currency exchange differences Balance at 31 December 2015 CARRYING AMOUNTS Balance at 31 December 2015 Balance at 31 December 2014	Club membership HK$’000 1,742 – 1,742 – 1,742 – – – – – – – 1,742 1,742	Capitalised development costs HK$’000 2,875 (12) 2,863 (170) 2,693 1,917 478 (9) 2,386 454 (147) 2,693 – 477	Non- competition agreements HK$’000 6,280 (26) 6,254 (372) 5,882 6,280 – (26) 6,254 – (372) 5,882 – –	Contracted Customer HK$’000 213,092 (890) 212,202 (11,720) 200,482 213,092 – (890) 212,202 – (11,720) 200,482 – –	Total HK$’000 223,989 (928) 223,061 (12,262) 210,799 221,289 478 (925) 220,842 454 (12,239) 209,057 1,742 2,219

The Directors consider that the club membership has indefinite useful life.

The amount of the capitalised development costs represents the expenditure capitalised for development of certain sports lottery products. The amount is amortised on a straight-line method over the estimated useful life of 6 years.

The amount of the non-competition agreements represents the fair value of the non-competition clause embedded in the employment contracts between top management and SYSTEK LTD and its subsidiary (“Systek Group”) upon the acquisition of Systek Group by the Group. The amount is amortised on a straight-line method over the estimated useful life of 5 years.

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The amount of the contracted customer represents the fair value of the contractual rights stated in the consultancy agreements with a principal customer of SHINING CHINA INC and its subsidiaries (“Shining China Group”) for providing consultancy services upon the acquisition of Shining China Group by the Group (the “Contracted Customer”). The amount is amortised on a straight-line method over the period of 4 to 6 years in accordance with the terms of the consultancy agreements.

11. TRADE RECEIVABLES

	2015	2014
	HK$’000	HK$’000
Trade receivables	29,597	31,071

The following is an analysis of trade receivables by age, presented based on the terms of the related contracts or the invoice/delivery date, which approximate the respective revenue recognition dates:

0 to 30 days 61 to 90 days 121 to 365 days Over 365 days	2015 HK$’000 25,646 16 3,935 – 29,597	2014 HK$’000 19,135 6,793 3,116 2,027
		31,071

The credit terms granted to customers are varied and are generally the result of negotiations between individual customers and the Group. No interest is charged on trade receivables.

12. BANK BALANCES AND CASH, PLEDGED BANK DEPOSITS AND FIXED DEPOSIT HELD AT BANK WITH ORIGINAL MATURITY OVER THREE MONTHS

Bank balances and cash comprise cash held by the Group and short-term bank deposits carry effective interest ranging from 0.001% to 3.250% per annum (2014: 0.001% to 3.600% per annum) with an original maturity of three months or less. Fixed bank deposits with original maturity over three months were withdrawn during the year.

Pledged bank deposits represent deposits held in certain designated bank accounts to secure short-term bank borrowings and letters of guarantee granted to the Group. As at 31 December 2015, these deposits carry effective interest 3.300% per annum (2014: 3.300% per annum). The pledged bank deposits will be released upon the settlement of the relevant borrowings and the release of the relevant letters of guarantee.

As at 31 December 2015, bank balances and cash of approximately HK$184,520,000 (2014: approximately HK$203,299,000) were denominated in RMB which are not freely convertible into other currencies.

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13. TRADE PAYABLES

The following is an analysis of trade payables by age based on the invoice date:

0 to 30 days 31 to 60 days 61 to 90 days 91 to 120 days 121 to 365 days Over 365 days	2015 HK$’000 25,174 2,274 1,707 178 6,943 388 36,664	2014 HK$’000 25,550 – 21 454 – 57
		26,082

The credit period is ranging from 30 to 120 days. The Group has financial risk management policies in place to ensure that all payables are paid within the credit timeframe. Trade payables are non-interestbearing.

14. DEFERRED TAXATION

The following are the deferred tax assets and liabilities recognised and movements thereon during the current and prior years:

Deferred tax assets

Balance at 1 January 2014 Effect of foreign currency exchange differences Credit to profit or loss Balance at 31 December 2014 and 1 January 2015 Effect of foreign currency exchange differences Credit to profit or loss Balance at 31 December 2015	Provision for warranties HK$’000 4,590 (21) 1,658
	6,227 (354) 1,627
	7,500

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Deferred tax liabilities

Balance at 1 January 2014 Effect of foreign currency exchange differences Charge to other comprehensive income upon reclassification as investment properties Credit to profit or loss Balance at 31 December 2014 and 1 January 2015 Effect of foreign currency exchange differences Credit to profit or loss Balance at 31 December 2015	Accelerated tax depreciation HK$’000 4,399 (30) (4,153) (216) – – – –	Investment properties HK$’000 – 16 5,690 – 5,706 (316) 186 5,576	Total HK$’000 4,399 (14) 1,537 (216) 5,706 (316) 186 5,576

Under the EIT Law of the PRC, withholding tax is imposed on dividends declared in respect of profits earned by the PRC subsidiaries from 1 January 2008 onwards. Deferred taxation has not been provided for in the consolidated financial statements in respect of temporary differences attributable to the profits earned by the PRC subsidiaries amounting to approximately HK$144,963,000 (2014: approximately HK$76,254,000) as the Group is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future.

At the end of the reporting period, the Group has estimated unused tax losses of approximately HK$257,176,000 (2014: approximately HK$220,108,000) available for offsetting against future profits of the companies in which the losses arose. Included in the estimated unused tax losses are losses of approximately HK$31,008,000 (2014: approximately HK$19,506,000) that will expire within 5 years. Other estimated unused tax losses of approximately HK$226,167,000 (2014: approximately HK$200,602,000) may be carried forward indefinitely. No deferred tax asset has been recognised in respect of these estimated unused tax losses due to unpredictability of future profit streams.

15. DIVIDEND

The Board does not recommend the payment of a final dividend for the year (2014: nil).

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DISCUSSION AND ANALYSIS OF THE GROUP’S RESULTS AND BUSINESS

About the Group

AGTech Holdings Limited was incorporated in Bermuda and its shares are listed on the GEM of the Stock Exchange. The Group is an integrated lottery technology and services company in the PRC lottery market. As at the date of this announcement, the Group has a team of over 200 employees, and the footprint of the Group’s lottery business covers multiple provinces and municipalities across the PRC.

The Group’s vision and strategy is to be a fully integrated service provider for the PRC lottery industry. Its principal business activities comprise:

• (i) Games and systems: the development and supply of lottery games, related software and underlying supporting systems;

• (ii) Hardware: the development, sale and maintenance of lottery hardware (terminals and other lottery-related equipment);

• (iii) Distribution: the sales and distribution of lottery games; and

• (iv) Ancillary Services: the provision of ancillary services.

The Group is committed to applying international management concepts and advanced technologies to the PRC lottery industry along the entire value chain, covering lottery systems, lottery hardware, lottery games, internet and mobile smart phone systems and distribution, wireless network and streaming media, thereby providing the PRC’s lottery authorities and millions of lottery players in the PRC with professional and integrated lottery services.

The Group is an associate member of each of the World Lottery Association (WLA) and the Asia Pacific Lottery Association (APLA).

Corporate Strategy and Objectives

Our long-term objectives are to maintain a leading position as an integrated service provider in the PRC lottery market. We will continue to support both of the PRC’s legal lottery operators, namely the Welfare Lottery and the Sports Lottery, in this respect. In order to achieve these objectives, we are committed to bringing together international and domestic industry expertise, technologies, management, skills and infrastructure into the PRC lottery market both through the existing and any new remote channels. Our Group has been working with various world-renowned strategic partners in these efforts for many years.

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INDUSTRY OVERVIEW

The PRC’s Lottery Market Achieved Sales of over RMB367 billion in 2015

PRC annual lottery sales in 2015 were the second highest on record. According to data published by the MOF, total lottery sales reached approximately RMB368 billion for the year. Although sales showed an annual decrease of approximately 3.8%, according to figures published by Sina.com, the lotteries were still able to distribute approximately RMB98 billion to good causes during the year.

Total Lottery Sales 2011-2015 (RMB billion)

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----- Start of picture text -----

382
368
309
262
222
2011 2012 2013 2014 2015
CAGR: 13.5%
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Source: MOF

The significant change in the trajectory of lottery ticket sales growth between 2014 and 2015 is attributable to the strong and decisive action taken by the authorities to prohibit all unauthorised remote lottery ticket sales activity during the year. This policy was announcement by the MOF and seven other ministries of the PRC government in April 2015 (the “Announcement of Eight Ministries”). The policy is ongoing and is seen as a precursor to a more clearly regulated operation, management and distribution model. In the internet and mobile channels, it is widely expected that selected lottery products will gain approvals for trial sales in certain provinces in future.

Looking over a longer time horizon, as shown in the above chart, the lottery has delivered a compound annual growth rate (“CAGR”) of approximately 13.5% during the past five years. This growth has been driven by a number of factors including growth in disposable income, increased prize payout ratios, the introduction of more appealing products as well as changes to the retail distribution network through the nascent interface between the retail network and remote channels (prior to the cessation of such interface in 2015).

– 19 –

Despite the impressive size of the lottery industry in the PRC, compared with other countries, the PRC’s lottery participation rates are at a relatively low level. Official figures show rates of lottery betting participation in China estimated at around 7.5% in recent years, well below those of developed markets such as Hong Kong and the United States. This low penetration of regulated products is driven by a number of factors which include constraints on distribution with respect to the quality and location of lottery stores and the nascent stage of development of the remote channel, gaps in terms of the breadth of certain products (e.g. sports betting) and, particularly for the products with higher play frequency such as sports betting, virtual sports betting and high frequency games, payout ratios which are not sufficiently high to effectively compete with the illegal market.

The PRC authorities are committed to channeling the existing vast underground gaming revenues away from the illegal market and into the legal and regulated lottery network. This process is already underway and is a vital step to ensure that the vulnerable in society are adequately protected, that the potential for corruption is minimised and that the funding available for good causes can increase. Through further initiatives such as continued increases in prize payout ratios, the introduction of new rapid-draw lottery and virtual sports betting games, further expansion of the sports betting network and the planned development of online and mobile distribution systems, the PRC lottery authorities will make the regulated lottery even more competitive and appealing to consumers and thereby ensure its rapid but responsible growth.

Industry Highlights

There are two legal lottery operators in the PRC: the national welfare lottery (Welfare Lottery) and the national sports lottery (Sports Lottery).

The Welfare Lottery and the Sports Lottery have five main product categories: lotto type lottery game product that are either traditional in nature with a daily or weekly draw pattern as well as modern high frequency games featuring multiple draws per hour (“Lotto”), sport betting (“Sports”), video lottery terminals (“VLT”), a keno product (“Keno”) and instant scratch cards (“Scratch”). Of these products, Lotto and Scratch have been common to both lottery operators for some years. Historically, VLT has only been permitted in the Welfare Lottery although a trial VLT product was launched in the Sports Lottery during 2015. At present, only the Sports Lottery is permitted to offer Sports (i.e. the sports betting product).

Total Lottery Sales by Lottery (2015)

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45% 2015
55%
Welfare Sports
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Source: MOF

– 20 –

Market Share of Sales by Major Game Type (2015)

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----- Start of picture text -----

0%
8%
12%
2015
64%
16%
Lotto Sports VLT Scratch Keno
----- End of picture text -----

Source: MOF

In 2015, with the exception of VLT, all of the lottery products suffered year on year sales declines. The product categories most impacted by the authorities’ April 2015 action were Lotto and Sports. VLT did not benefit from internet distribution in the past which may explain its relatively resilient performance. The Scratch product has been in a pattern of decline for several years.

Lottery Sales Growth Rates Comparison by Product (2014–2015)

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----- Start of picture text -----

12.5%
-4.2%
-4.9%
-11.9%
Sports VLT Lotto Scratch
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* KENO excluded due to deminimus sales volumes Source: MOF

– 21 –

With no substantial VLT contribution and a unique exposure to the product of sports betting, it is not surprising that in absolute terms the Sports Lottery posted larger declines than the Welfare Lottery in terms of both growth rates and absolute ticket values.

Lottery Sales Bridge 2014–2015: By Product (RMB billion)

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----- Start of picture text -----

382.4
4.7
37.5
367.9
(12.6)
(4.1)
(2.6)
2014 Lotto Sports VLT Scratch 2015
----- End of picture text -----

* KENO grouped with Lotto due to deminimus sales volumes

Source: MOF

Lottery Sales Bridge 2014–2015: By Lottery (RMB billion)

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----- Start of picture text -----

382.4
(4.5)
367.9
(10.0)
2014 Welfare Sports 2015
----- End of picture text -----

Source: MOF

– 22 –

Performance by Major Product Type (excludes KENO)

1. Sports

Only the Sports Lottery is permitted to offer the Sports product.

There are two main game categories within Sports, single match betting and traditional football betting. Whilst both formats permit betting on FIFA Category A soccer matches (for example the English Premiership, European Champions League, the FIFA World Cup, etc.), single match betting differs from the traditional football betting category in two respects. Traditional football betting obliges the player to predict the outcome of every forthcoming match in a given period whereas in single match betting players can bet on just one event. In addition, single match betting players are not restricted to football betting since they can also bet on the United States’ NBA basketball tournament. Within the single match betting category there are two game sub-types: Jing Cai, a product allowing pool or pari-mutuel betting on single matches or fixed odds betting on more than one match (multiples or accumulators) and Beijing single match (available in Beijing, Tianjin and Guangdong province only) where all bets (singles or accumulators) are pari-mutuel in nature.

Sales of the Sports product declined by approximately 4.2% year on year due to the absence of the FIFA World Cup (held in 2014) and the authorities actions to ban remote sales during the year. Considering that Sports grew by 82% in 2014, the 4.2% decline represents a relatively robust performance and over a multi-year period Sports as a category remains a high growth product.

While traditional football betting declined by 22.5% in the period, Jing Cai betting grew by approximately 13.1% and single match betting now accounts for approximately 88% of the entire Sports category. The single match product and its fixed odds prize structure is clearly particularly popular with Chinese players. Lucky Racing and e-Ball lottery also feature a fixed odds betting model and this gives us confidence that the roll-out of these virtual lottery games is likely to prove successful.

2. VLT

Video lottery terminals are networked self-service lottery terminals that facilitate rapid play of themed, graphically-rich lottery games that are not available for play via the other product categories. Published figures suggest that the Welfare Lottery has an installed base of approximately 40,000 such terminals in approximately 1,700 VLT halls across the PRC. Although extremely popular and growing rapidly, due to its relatively low base, the overall contribution to national lottery sales from the VLT product remains modest. Sales in 2015 were approximately RMB43 billion, representing approximately 12% of the national market.

– 23 –

3. Lotto

Lotto contributed sales of approximately RMB236 billion during the year and remains by far the largest category in the PRC market. The annual decline in sales of 12.1% marks a significant reversal in trend from the previous year’s positive growth rate of approximately 17.7%. In recent years, the growth of the Lotto category has been driven by modern high (draw) frequency games (HFG). In 2015, whilst performing better than the traditional daily or weekly draw games, HFG also saw sales declines. The overall trend of decline in Lotto is likely to be related to the enforcement action with respect to the remote sales of lottery products.

We expect both the Welfare Lottery and the Sports Lottery to seek to continue to exploit the relative popularity of HFG. Since Lucky Racing, AGT’s proprietary game, is classified as a high frequency game we believe that our Virtual Sports Lottery business could benefit from this trend through the planned roll-out of Lucky Racing to more province(s) in the PRC or via new to be approved distribution channels, for example.

4. Scratch

In 2015, sales of Scratch tickets were approximately RMB30.3 billion, a decline of approximately 4.1% from the previous year. Sales of the Scratch product are exhibiting a multi-year downward trend. Scratch accounted for approximately 8% of the total lottery market in 2015 compared to approximately 9% and approximately 11% in the preceding two years. The increase in the payout ratio of other products such as HFG has created an attractive substitutable product in the market. In addition, the paper scratch product, like traditional draw based games in the Lotto category, is a relatively mature product in the PRC lottery market.

– 24 –

BUSINESS REVIEW

Games and Systems

The development and supply of lottery games, related software and underlying supporting systems

The Games & Systems division has a reserve of rich and attractive lottery game content in various product categories designed to fulfill the demands of the lottery market and the lottery players.

Virtual Lottery Games

AGT, our 51%-owned joint venture with Ladbroke Group (one of the world’s largest sports betting companies) supplies the country’s only virtual sports lottery platform to the China Sports Lottery and has successfully launched two virtual sports games in the country. AGT’s motor racing-themed virtual game Lucky Racing (“幸運賽車”) was launched in Hunan province in 2011 while its football themed game e-Ball Lottery (“e球彩”) was launched in Jiangsu province during 2013. Since both games are approved lottery products as defined by MOF, we believe that both Lucky Racing and e-Ball Lottery could be introduced via the internet and mobile channel across the country (subject to regulatory approval) where we would expect them to be highly popular.

During 2015, the Group continued to supply its virtual sports lottery games “e-Ball Lottery” and “Lucky Racing” to the launch provinces of Jiangsu and Hunan respectively. “e-Ball Lottery” is a football-themed virtual sports lottery game with a 69% payout ratio. Like Lucky Racing, e-Ball Lottery is a NSLAC-approved and fully operational lottery game and has been launched in China’s largest Sports Lottery province. E-Ball Lottery continues to operate smoothly. In close cooperation with our customer and the relevant lottery authorities in China, we are continually optimising the game and we are encouraged by the potential of this game. Like Lucky Racing, we aim to roll out e-Ball Lottery to more PRC province(s) in China in due course. Virtual sports lottery is now an established and diversified game category and is fully accepted by the PRC lottery market.

Lucky Racing and e-Ball Lottery are virtual sports lottery games that are broadcast to lottery shops via a central computer and cable television, allowing customers to bet on computer generated car races or football matches respectively. The betting options are like those typically offered for live car racing or live football matches in other countries. Lucky Racing has become a very popular lottery game in Hunan Sports Lottery. Our technical partners at the Sports Lottery have completed the technical preparation work of the national high frequency game platform and have satisfied the technical requirements necessary to carry our Lucky Racing to other provinces beyond Hunan and we target the game to be supplied to more PRC province(s).

– 25 –

To date, Lucky Racing and e-Ball Lottery have been successfully launched in traditional dedicated Sports Lottery shops and the games are targeted to be deployed to more province(s) via this channel. In addition, in due course, the games could be deployed in selected leisure venues (such as coffee shops and restaurants) and, as approved lottery products, the games have the potential to expand nationwide through other remote channels such as mobile and internet.

Other Categories

In addition to virtual lottery games, the Group has launched a number of strategic initiatives to introduce new types of lottery games in the PRC, including a mobile smart phone lottery game and system, a high frequency numbers-based lottery game, and other game categories new to the PRC. The Group intends to introduce these new products to the market in the future, subject to the relevant regulatory approvals.

The Group plans to continue to work with international partners for research and development of various types of self-developed, creative and new lottery games that are suitable to cater for the evolving tastes of China’s lottery players.

Hardware

The development, sale and maintenance of lottery hardware (terminals and other lotteryrelated equipment)

Through its subsidiaries, GOT and the Shenzhen Subsidiary of Score Value, AGTech’s hardware division supplies both the Welfare Lottery and Sports Lottery and has lottery hardware deployed in multiple provinces, cities and municipalities of the PRC. The Shenzhen Subsidiary of Score Value is a leading manufacturer and supplier of paper scratch card sales hardware (instant ticket verification terminals, “IVT(s)”) while GOT is a leading manufacturer and supplier of traditional lottery terminals as well as IVTs with international as well as domestic sales.

– 26 –

During 2015, GOT recorded another significant milestone by being selected as an authorised IVT supplier by the NSLAC. IVT is a handheld data collection device which is a critical component in the printed instant scratch card business. It provides various functions with respect to instant scratch cards including the collection and transmission of logistics data as well as the collection and verification of sales and rewards data. There are approximately 90,000 IVT devices deployed in the China Sports Lottery market at present. The admission test and supplier qualification evaluation for IVTs were organised by the NSLAC to, for the first time, publicly select qualified nationwide equipment suppliers for the supply of IVTs. According to the requirements of the NSLAC, any future addition and/or replacement of IVTs shall only be supplied by the selected IVT suppliers which have passed the admission test, and this requirement applies to all sports lottery administration centres in all provinces, autonomous regions and municipalities across the country. This development is of great significance in GOT’s continuous effort to increase its product lines and further broaden its product diversification.

Overall, 2015 has seen relatively weak ordering in the lottery hardware market in the PRC. However, it is anticipated that the slow pace of ordering will be a temporary feature. We are continuing to pursue international opportunities for our hardware and currently the Group is in active discussions with a number of potential international customers and/or distributors and we have machines live or on trial in markets such as South Africa, Cyprus, the United Kingdom, Italy, Austria and Canada.

Thanks to the anticipated rapid technology development of the PRC, the Group believes that effective R&D activities are essential to ensure that the Groups’ hardware business remains up-to-date and equipped with competitive technology. The Group’s hardware division plans to continue to focus on R&D, maintain its domestic market share, grow its international sales and to broaden its product spectrum with new hardware ranges such as VLT which would be suitable for both domestic and international users.

Distribution

The sales and distribution of lottery games

The Group continues to closely monitor policy developments with respect to the government approval of lottery sales via internet and mobile and continues to operate two offline shops for the sale and distribution of lottery games. To date, in line with the relevant lottery regulations, the Group has not conducted any internet lottery sales or maintained any website to conduct such sales.

In the internet channel, the authorities are working on a national (as opposed to provincial) internet distribution system. It is anticipated that sales of the Group’s approved games, “Lucky Racing” and “e-Ball Lottery”, could benefit strongly when such a system is introduced.

– 27 –

With respect to mobile smart phones, as evidenced by the recent MOF relevant policies, China’s lottery market has begun to activate the trial sale of new types of mobile phone lottery games in various provinces. The Group is well positioned to actively participate in this market in various aspects.

With the Group’s valuable PRC internet service provider and PRC internet content provider experience, as well as its excellent business track record and relationships, the Group has established close cooperation with the various potential domestic and international technology and distribution partners and is committed to providing a full range of support and services to localise and develop the PRC’s mobile lottery systems and games.

Services

The provision of ancillary services

The Group has been providing ancillary services to the PRC provincial lottery authorities since early 2007. In this time, we have provided a wide range of products and services to our provincial clients to assist them in growing sales and improving operations in an efficient manner. Our services include consulting, marketing, training and channel management.

Over many years, the track record of this division as a reliable supplier of quality lottery services to the provincial Sports Lottery authorities in China has been an important enabler of the Group’s strategy, cementing the Group’s first class relationships and reputation across the country.

The Services business’ contribution to Group revenue is currently modest. However, in light of the Group’s valuable experience, solid background as well as its trusting cooperative relationships built up with various provincial lottery administration and distribution authorities over the years, together with new lottery technologies/terminals to be introduced and new developments in the new internet/mobile channel business, it is expected that new opportunities for the Services business will emerge. We are currently exploring and building new business co-operations and business models in this area.

– 28 –

BUSINESS OUTLOOK

Policy development plays a crucial role in facilitating the stable development of the PRC lottery industry as demonstrated by the impact of the Announcement of Eight Ministries. The Directors expect that during 2016 the PRC lottery industry will see further significant policy developments including the introduction of relevant laws and regulations (particularly related to internet and mobile distribution) which will further regulate and professionalise lottery supervision. Thanks to many years of accurately interpreting national regulations and policies, AGTech has successfully grasped industry trends and formulated a consistent, longterm strategy for business development. Providing full-service solutions across game software and systems, hardware and distribution, we are a fully integrated lottery technology and service provider. We have a track record of working with international lottery technology and services companies to localise and customise games for the PRC, setting us apart in a market where the demand for sophisticated technology is rising with respect to new games, systems, hardware and distribution channels. We believe that the Group is very well placed to capture opportunities arising from the evolution of PRC lottery policy.

Although the Group has not conducted any online lottery sales or maintained any website to conduct such sales in the past, the Group has been closely monitoring policy developments with respect to the government approval of lottery sales via internet and mobile channels for many years. In light of the proven potential of the mobile and internet channels and the reported comments of senior Lottery Agency and regulator officials at a recent annual lottery strategy meeting regarding the lottery’s active pursuit of preparatory work for an internet sales pilot scheme, we believe that new online and mobile channels for lottery sales in the PRC are likely to be approved. We believe that any new games and systems that will be approved for online sales will require robust and scalable technology in order to deliver effective and efficient monitoring and control systems. We consider that the Group is well positioned to participate in these areas.

Our proprietary in-store games, Lucky Racing Game and e-Ball Lottery, remain successful, live and fully approved. Due to the decline in national lottery sales of the traditional lottery products seen during 2015, we anticipate an increased urgency within the lottery to push new products to the stores and we believe that this may likely lead to both Lucky Racing Game and e-Ball Lottery expanding beyond their launch provinces in due course. It is possible that these games could benefit also from online and mobile lottery channel sales approvals in the future.

– 29 –

On the topic of hardware, we believe that developments in the PRC lottery market are likely to demand new and more sophisticated hardware solutions that can be deployed as bundled products involving the supply of hardware that is integrated with lottery games and underlying supporting systems and which would benefit from a revenue sharing model. In light of our leading positions in point of sale and handheld terminals as well as our first class international partnerships and long track-record in the PRC lottery market, we believe that AGTech is very well positioned to take advantage of such new opportunities in hardware.

Subsequent to the end of the 2015 reporting period, as disclosed in the announcement of the Company dated 4 March 2016, on 4 March 2016, the Company had entered into a subscription agreement under which Ali Fortune Investment Holding Limited (“Ali Fortune”) (a company indirectly owned as to 60% by Alibaba Group Holding Limited (“Alibaba”) and as to 40% by Zhejiang Ant Small and Micro Financial Services Group Co., Ltd. (“Ant Financial”)) will subscribe for HK$2,388,000,000 of new shares and convertible bonds in AGTech. Upon completion of the transaction, AGTech will become the exclusive lottery business platform of Alibaba and Ant Financial and Ali Fortune will become the Company’s largest Shareholder. If completed, we believe that the transaction will enhance AGTech’s ability to develop and expand our existing lottery business and in particular we expect that our mobile and internet lottery business will benefit from significant potential synergies resulting from the cooperation with Alibaba and Ant Financial.

Taken together with the continuing underlying revenue growth potential of the PRC lottery business, the numerous catalysts for strategic growth outlined above suggest a very positive outlook for the Group for 2016 and beyond.

– 30 –

REVIEW OF OPERATING RESULTS

Revenue and Profitability

Revenue of the Group for the year under review amounted to approximately HK$301.6 million (2014: approximately HK$211.1 million), representing an increase of approximately 42.9% over 2014. Most of the revenue was derived from lottery games and systems, hardware, distribution and ancillary services in the PRC. The increase in revenue for the year under review was mainly due to the sales of newly added hardware and technical services.

During the year under review, the Group recorded gross profit of approximately HK$69.2 million (2014: approximately HK$69.6 million). The gross profit margin percentage stood at approximately 22.9% (2014: approximately 33.0%). The decrease in gross profit margin percentage was mainly due to competition in the lottery hardware market.

The loss for the year from ordinary business (exclusive of the gain/loss on fair value) in 2015 was approximately HK$93.2 million (2014: approximately HK$187.4 million).

Loss attributable to owners of the Company for the year under review increased to approximately HK$280.2 million (2014: approximately HK$189.2 million), primarily due to (i) a loss on fair value of contingent consideration in relation to the acquisition of Score Value amounting to approximately HK$191.4 million mainly as a result of the substantial increase in the closing price per Share as quoted on the Stock Exchange from HK$0.9 as at the date of completion of such acquisition on 8 January 2015 to HK$2.02 as at 31 December 2015, causing the aforesaid fair value to increase from approximately HK$198.9 million as at 8 January 2015 to approximately HK$390.3 million as at 31 December 2015; (ii) sharebased payments of approximately HK$35.2 million (2014: approximately HK$136.3 million) as a result of share options of the Company granted to Directors, eligible employees and other eligible participants under the Share Option Scheme during the year under review; and (iii) increase in other major expenses in line with the organic growth of the Group’s business.

Liquidity and financial resources

Net bank balances and cash (defined as total bank balances and cash and pledged bank deposits less total bank borrowings) as at 31 December 2015 were approximately HK$224.7 million (2014: approximately HK$315.6 million). The total assets and net current assets of the Group as at 31 December 2015 were approximately HK$1,613.9 million and approximately HK$235.5 million respectively (2014: approximately HK$1,335.6 million and approximately HK$374.4 million respectively). Current liabilities of the Group as at 31 December 2015 were approximately HK$173 million (2014: approximately HK$66.4 million). As at 31 December 2015, the Group has available banking facilities denominated in HK$ and RMB of up to HK$65 million and RMB30.0 million respectively. Total bank borrowings of the Group as at 31 December 2015 were approximately HK$22.0 million (2014: Nil). The liquidity ratio (defined as current assets divided by current liabilities) of the Group as at 31 December 2015 was approximately 2.36 (2014: 6.6) which continuously reflected adequacy of financial resources of the Group.

– 31 –

Capital structure and foreign exchange risk

During the year under review, the Group financed its capital requirements through its equity, bank borrowings, its internally generated cash flows as well as the proceeds from the previous fund raising exercise and from the exercising by grantees of the share options granted under the Share Option Scheme. The gearing ratio (defined as bank borrowings divided by equity) of the Group as at 31 December 2015 was 0.02 (2014: nil).

As at 31 December 2015, the bank borrowings of the Group comprised:

• (a) HK$11.6 million denominated in HK$, bearing interests at Hong Kong dollar lending prime rate plus 2.3% per annum, and was secured by the Group’s pledged bank deposit of RMB10.0 million (equivalent to approximately HK$12.0 million), with maturity date on 3 June 2016; and

• (b) RMB8.7 million (equivalent to approximately HK$10.4 million) denominated in RMB, bearing interests at 4.35% per annum, and was secured by the property owned by a subsidiary of the Company in the PRC, with maturity date on 8 December 2016.

As at 31 December 2015, majority of the Group’s bank deposits were denominated in HK$ and RMB. Since all of its revenue-generating operations, monetary assets and liabilities of the Group are conducted or transacted substantially in HK$ and RMB, which is not freely convertible into foreign currencies, the Group faced minimal foreign exchange risk during the year under review. The Group had neither foreign currency hedging activities nor any financial instruments for hedging purposes during the year under review.

Contingent liabilities and capital commitment

As at 31 December 2015, the Group did not have any material contingent liabilities and capital commitment.

Significant investments, material acquisitions and disposals during the year under review

During the year under review, the Purchaser completed the acquisition of a 100% equity interest in Score Value (the “Acquisition”) on 8 January 2015 and as a result, Score Value has become a wholly-owned subsidiary of the Company and the results, assets and liabilities of the Score Value Group have been consolidated into the financial statements of the Group during the year under review. Further details of the Acquisition can be found in the Circular and on page 60 of the annual report of the Company for the year ended 31 December 2014.

– 32 –

Goodwill arising from the Acquisition

Consideration transferred and to be transferred:

(a) Initial consideration paid: • in cash • by way of consideration shares (being 33,783,783 Shares valued at the published closing price of HK$0.90 per Share as quoted on the Stock Exchange on 8 January 2015) (b) Deferred consideration payable: • fair value of cash assessed as at 8 January 2015 in respect of profit guarantees provided by vendors of Score Value (“Profit Guarantees”) (see_Note (ii)below) • by way of consideration shares in respect of the Profit Guarantees (being 33,783,784 Shares valued at the published closing price of HK$0.90 per Share as quoted on the Stock Exchange on 8 January 2015) • fair value of cash assessed as at 8 January 2015 in respect of other deferred consideration (see_Note (ii)_below) • by way of consideration shares in respect of other deferred consideration (being 101,351,351 Shares valued at the published closing price of HK$0.90 per Share as quoted on the Stock Exchange on 8 January 2015) (c) Contingent consideration payable by way of bonus options (being the fair value of the bonus options assessed as at 8 January 2015 using the binominal model (see_Note (i) below))

HK$’000 109,125 30,405 40,029 30,405 45,934 91,217 52,133

399,248

Note (i):

The valuation of the bonus options has been undertaken by using the binominal model, of which significant inputs are as follows:

Number of Shares to be issued upon exercise of the bonus options in full	166,666,666
Closing price per Share as quoted on the Stock Exchange on 8 January 2015	HK$0.90
Exercise price	HK$1.80
Expected volatility	69.75%
Effective life of the bonus options	3.85 years
Risk-free interest rate	1.131%
Dividend yield	Nil

Note (ii)

Fair value of cash was assessed as at 8 January 2015 for the above deferred consideration payable at approximately HK$86.0 million (after discounting the face value of the total cash deferred consideration payable of HK$100.0 million to its present value), which is different from the face value of cash at HK$100.0 million as reported in the Company’s interim report for the six months ended 30 June 2015.

– 33 –

Assets acquired and liabilities recognised at the date of acquisition (i.e. the date of completion of such acquisition on 8 January 2015) are as follows:

Non-current assets Property, plant and equipment Current assets Inventories Trade receivables Other receivables, deposits and prepayments Bank balances and cash Current liabilities Trade payables Accruals and other payables Current tax liabilities Net assets Goodwill arising from acquisition: Considerations transferred and to be transferred Less: net assets acquired Goodwill Net cash outflow arising from acquisition: Consideration paid in cash Less: cash and cash equivalents acquired

HK$’000 1,752 30,777 25 1,857 53,368 (24,671) (32,294) (1,069) 29,745 399,248 (29,745) 369,503 109,125 (53,368) 55,757

Save for the Acquisition disclosed above, there were no significant investments, material acquisitions and disposals that constituted “notifiable transactions” under Chapter 19 of the GEM Listing Rules during the year under review.

– 34 –

(i) Downward adjustment to consideration for the Acquisition

As disclosed in the announcement of the Company dated 8 January 2015 (the “Completion Announcement”), the Purchaser completed the Acquisition on 8 January 2015 (the “Completion”), and pursuant to a supplemental agreement dated 8 January 2015 in respect of the Acquisition, in the event that the vendors of Score Value fail to satisfy their undertaking to collect outstanding receivables totalling RMB24.3 million (the “Outstanding Receivables”) of a subsidiary of Score Value on or before 1 April 2015, the Company or the Purchaser shall deduct the amount of the Outstanding Receivables which remains outstanding as of 1 April 2015 from the Fourth Tranche Initial Consideration (as defined in the Completion Announcement) of HK$52.5 million payable in cash to the vendors on or before 30 June 2015.

As of 1 April 2015, all the Outstanding Receivables remained outstanding. Accordingly, the Company deducted RMB24.3 million (equivalent to HK$30,375,000 at the exchange rate of RMB1 to HK$1.25 as agreed in the aforesaid supplemental agreement) from the Fourth Tranche Initial Consideration of HK$52.5 million, and a net amount of HK$22,125,000 in cash was paid to the vendors of Score Value on 30 June 2015. As full impairment losses in respect of these long Outstanding Receivables had been made in the accounts of the Score Value Group before the Completion, there was no adverse financial impact of the failure to collect such receivables on the financial statements of the Group.

During the year under review, the total initial consideration for the Acquisition that was paid and issued by the Company to the vendors of Score Value comprised HK$109,125,000 in cash and 33,783,783 Consideration Shares (as defined in the Circular).

(ii) Performance and developments of the Score Value Group after completion of the Acquisition

For the year ended 31 December 2015, the Score Value Group has achieved strong sales performance and contributed to the significant growth in sales of the Group during the year ended 31 December 2015. The Shenzhen Subsidiary of Score Value recorded audited net profit after taxation of approximately RMB20.6 million (equivalent to approximately HK$24.6 million) for the year ended 31 December 2015, which exceeded the 2015 profit guarantee of not less than RMB20 million provided by the vendors of Score Value as described in the Circular.

– 35 –

(iii) Status of outstanding deferred consideration for the Acquisition and fulfillment of 2015 profit guarantee

Pursuant to the sale and purchase agreement in respect of the Acquisition (the “Acquisition Agreement”), the Company or the Purchaser shall be required to pay deferred consideration in a maximum amount of HK$300 million to the vendors of Score Value upon fulfilment of certain pre-conditions at a later stage, including obtaining the approval of the relevant PRC government authority for the lottery game to be supplied by a subsidiary of Score Value (“Game Approval Pre-condition”) and meeting the profit guarantees of an average of RMB20.0 million (equivalent to approximately HK$23.9 million) per year provided by such vendors in respect of the Shenzhen Subsidiary of Score Value for each of the three financial years ended 31 December 2015 and ending 31 December 2016 and 2017 as described in the paragraph headed “Deferred Consideration” on pages 9 and 10 of the Circular.

As of the date hereof, the Game Approval Pre-condition has not yet been fulfilled but the parties to the Acquisition Agreement have mutually agreed to extend the deadline for fulfilment of such pre-condition to 31 March 2016. Accordingly, the First Deferred Consideration, Second Deferred Consideration and Third Deferred Consideration as described under the paragraph headed “Deferred Consideration” on page 9 of the Circular have not been paid to the vendors of Score Value.

In addition, for the year ended 31 December 2015, the Shenzhen Subsidiary of Score Value recorded audited net profit after taxation of approximately RMB20.6 million (equivalent to approximately HK$24.6 million), which exceeded the 2015 profit guarantee of not less than RMB20 million provided by the vendors of Score Value as described in the Circular. Accordingly, the Purchaser or the Company shall pay to such vendors a further amount of HK$30 million which shall be satisfied as to HK$15 million in cash and as to HK$15 million by the Company allotting and issuing 10,135,135 Consideration Shares to the vendors of Score Value within fifteen business days after the issue of the audit report of the Shenzhen Subsidiary of Score Value for the year ended 31 December 2015. Such Consideration Shares are not subject to any lock-up restriction.

The Company will make further announcement(s) in due course when the status of other outstanding deferred consideration settlements can be ascertained.

– 36 –

Employees’ information and remuneration policies

As at 31 December 2015, the Group had 239 (2014: 218) employees in Hong Kong and the PRC. Total staff costs (excluding Directors’ emoluments) for the year ended 31 December 2015 amounted to approximately HK$41.4 million (2014: approximately HK$33.2 million).

The Group’s remuneration policies are formulated on the basis of performance and experience of individual employees and are in line with local market practices. In addition to salary, the Group also offers to its employees other fringe benefits including year-end bonus, discretionary bonus, share options under the Share Option Scheme, contributory provident fund, social security fund, medical benefits and training.

Charges on Group’s assets

As at 31 December 2015, bank deposits of approximately HK$15.0 million (2014: HK$3.0 million) was held in designated bank accounts to secure bank borrowings totalling approximately HK$22.0 million and letters of guarantee granted to the Group. The pledged bank deposits will be released upon the settlement of the relevant borrowings and the release of the relevant letters of guarantee granted to the Group.

Property owned by a subsidiary of the Company in the PRC was pledged with a PRC bank to secure bank borrowings totalling RMB8.7 million (equivalent to approximately HK$10.4 million) as at 31 December 2015.

Save as disclosed above, as at 31 December 2015, there was no charge on the assets of the Group.

Future plans for material investments and acquisition of capital assets

As at 31 December 2015, there was no specific plan for material investments and acquisition of capital assets that is required to be disclosed pursuant to Rule 17.10 of the GEM Listing Rules and the inside information provisions under Part XIVA of the SFO.

Significant changes to financial position

Inventories as at 31 December 2015 was approximately HK$56.3 million (2014: HK$25.3 million), with inventory turnover period decreased from 93 days in 2014 to 63 days in 2015. Trade receivables as at 31 December 2015 was approximately HK$29.6 million (2014: HK$31.1 million), with debtor turnover period decreased from 59 days in 2014 to 36 days in 2015. It reflects the Group’s more stringent control on working capital management.

The increase in current tax liabilities from approximately HK$0.4 million as at 31 December 2014 to approximately HK$2.2 million as at 31 December 2015 was due to the increase in assessable profits of certain subsidiaries of the Company in the PRC.

– 37 –

Goodwill of the Group significantly increased to approximately HK$1,119.3 million as at 31 December 2015 (as at 31 December 2014: approximately HK$793.6 million), primarily due to the additional goodwill arising from the acquisition of Score Value of approximately HK$369.5 million as disclosed in the paragraph headed “Goodwill arising from the Acquisition” above.

For the year under review, a loss on fair value of the contingent consideration in relation to the acquisition of Score Value amounting to approximately HK$191.4 million was recorded mainly as a result of the substantial increase in the closing price per Share as quoted on the Stock Exchange from HK$0.9 as at the date of completion of such acquisition on 8 January 2015 to HK$2.02 as at 31 December 2015, causing the aforesaid fair value to increase from approximately HK$198.9 million as at 8 January 2015 to approximately HK$390.3 million as at 31 December 2015.

Significant event after the reporting period

As disclosed in the announcement of the Company dated 4 March 2016 (the “Subscription Announcement”) and the announcement of the Company dated 16 March 2016, on 4 March 2016, the Company entered into a subscription agreement (“Subscription Agreement”) with, among others, Ali Fortune Investment Holding Limited (the “Subscriber”), which is indirectly owned as to 60% by Alibaba Group Holding Limited and as to 40% by Zhejiang Ant Small and Micro Financial Services Group Co., Ltd.. Pursuant to the Subscription Agreement, the Company has conditionally agreed to allot and issue to the Subscriber, and the Subscriber has conditionally agreed to subscribe for:

• (i) an aggregate of 4,817,399,245 new Shares (the “Subscription Shares”) (representing approximately 98.4% of the issued share capital of the Company as at the date hereof and approximately 49.6% of the issued share capital of the Company as enlarged by the allotment and issuance of the Subscription Shares) at a subscription price of HK$0.3478 per Share; and

• (ii) convertible bonds of the Company in the aggregate principal amount of HK$712,582,483 (the “Convertible Bonds”), which shall entitle the bondholders to subscribe for up to 2,346,908,765 Shares (the “Conversion Shares”) at an adjusted initial conversion price of HK$0.3036 per Share (subject to adjustments pursuant to the terms of the Convertible Bonds).

(The subscription for the Subscription Shares and the Conversion Bonds is referred to as the “Subscription” hereinafter.)

The Company will allot and issue the Subscription Shares and, upon conversion of the Convertible Bonds, the Conversion Shares under a specific mandate to be approved by the independent Shareholders at a special general meeting of the Company (“SGM”).

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, the Subscriber and its ultimate beneficial owners are parties independent of the Company and the connected persons (as defined under the GEM Listing Rules) of the Company.

– 38 –

The Convertible Bonds bear no interest on the principal amount. However, if the Company shall pay any dividend in cash or scrip to the Shareholders, each bondholder shall be entitled to be paid interest in respect of that dividend as if the Convertible Bonds held by such bondholder have been converted into Shares in full at the applicable conversion price.

The Convertible Bonds may be converted by the Subscriber in full or in part at any time during the period on or after the issuance date of the Convertible Bonds and up to the maturity date (which is the third anniversary of the date of issuance of such bonds), provided that, following such conversion, (i) at least 25% of the Company’s total number of issued Shares are held by the public (as defined under the GEM Listing Rules); and (ii) the Company is otherwise in compliance with the public float requirements under Rule 11.23(7) of the GEM Listing Rules.

On the other hand, the Company may, by giving prior written notice to the bondholders, require all (but not any one) of the bondholders to convert their Convertible Bonds into Shares in full at any time on or after the issuance date of the Convertible Bonds and up to a date no later than five business days prior to the aforesaid maturity date, provided that, following such conversion, (i) at least 25% of the Company’s total number of issued Shares are held by the public (as defined under the GEM Listing Rules); and (ii) the Company is otherwise in compliance with the public float requirements under Rule 11.23(7) of the GEM Listing Rules.

Following the occurrence of a special event as set out in the bond instrument in respect of the Convertible Bonds, such as change of control, each bondholder will have the right to require the Company to redeem in whole but not in part such bondholder’s Convertible Bonds at 112 per cent. of the principal amount of such Convertible Bonds.

The aggregate nominal value of the 4,817,399,245 Subscription Shares to be issued under the Subscription Agreement is approximately HK$9,634,798. The subscription price of HK$0.3478 per Share and the conversion price of HK$0.3036 per Share under the Subscription represents a discount of approximately 82.5% and approximately 84.7% respectively to the closing price of HK$1.99 per Share as quoted on the Stock Exchange on 4 March 2016, being the date of the Subscription Agreement.

The aggregate amount of the consideration for the Subscription Shares and the Convertible Bonds receivable by the Company are HK$1,675,417,517 and HK$712,582,483, respectively, totalling HK$2,388,000,000 which shall be payable by the Subscriber in cash at completion of the Subscription (“Completion”). The net proceeds, after taking into account the estimated expenses in relation to the Subscription, would be approximately HK$2,380,000,000, representing a net price of approximately HK$0.3322 per Subscription Share.

The net proceeds from the Subscription will be used to fund the existing operations and future development of the Company’s existing principal businesses. In particular, the proceeds of the Subscription are intended to be allocated for each of the business segments and for general corporate purposes as stated in the section headed “USE OF PROCEEDS” in the Subscription Announcement.

– 39 –

Having considered the various factors stated in the section headed “REASONS FOR THE SUBSCRIPTION” in the Subscription Announcement, the Directors (excluding the members of the independent board committee who will express their opinion after considering the advice of the independent financial adviser as to the fairness and reasonableness of the terms of the Subscription and the Whitewash Waiver (as defined below)) consider that the terms of the Subscription are fair and reasonable and on normal commercial terms and the entering into of the Subscription Agreement is in the interests of the Company and the Shareholders as a whole.

The Group financed its operations primarily with internally generated cash flows, bank borrowings as well as the proceeds from the fund raising exercise and from the exercising by grantees of the share options granted under the Share Option Scheme. Assuming Completion will take place, the cash position of the Group will be substantially strengthened by approximately HK$2,380,000,000 immediately upon Completion.

In order for the Company to carry out the Subscription and to fulfill its pre-existing obligations involving the issue of Shares, the Board proposes to increase the Company’s authorised share capital from HK$20,000,000 (divided into 10,000,000,000 Shares) to HK$40,000,000 (divided into 20,000,000,000 Shares) by the creation of an additional 10,000,000,000 Shares, subject to the approval of the Shareholders at the SGM.

Immediately upon Completion, assuming that the Convertible Bonds are not converted and there is no other change in the issued share capital of the Company, the Subscriber (together with parties acting in concert with it (as defined in the Hong Kong Code on Takeovers and Mergers (“Takeovers Code”))) will hold 4,817,399,245 Shares, representing approximately 98.4% of the issued share capital of the Company as at the date hereof and approximately 49.6% of the issued share capital of the Company as enlarged by the allotment and issuance of the Subscription Shares.

Immediately upon Completion, assuming that the Convertible Bonds are converted in full at the adjusted initial conversion price of HK$0.3036 per Conversion Share and there is no other change in the issued share capital of the Company, the Subscriber (together with parties acting in concert with it (as defined in the Takeovers Code)) will in aggregate be interested in 7,164,308,010 Shares, representing approximately 146.3% of the issued share capital of the Company as at the date hereof and approximately 59.4% of the issued share capital of the Company as enlarged by the allotment and issuance of the Subscription Shares and the Conversion Shares.

In respect of both the Subscription Shares and the Conversion Shares, the Subscriber will make an application to the Executive Director of the Corporate Finance Division of the Securities and Futures Commission (or any delegate of such Executive Director)(the “Executive”) for a waiver from its obligation under Rule 26.1 of the Takeovers Code to make a mandatory general offer to the Shareholders for all the issued Shares and other securities of the Company not already owned or agreed to be acquired by the Subscriber and parties acting in concert with it (the “Whitewash Waiver”). The Whitewash Waiver (in respect of both the Subscription Shares and the Conversion Shares), if granted by the Executive, will be subject to, among other things, approval by the independent Shareholders at the SGM by way of a poll.

– 40 –

As at the date hereof, Completion has not taken place yet and is still subject to fulfilment or waiver (as the case may be) of a number of conditions precedent as set out in the section headed “Conditions of the Subscription” in the Subscription Announcement, including approval by independent Shareholders at the SGM for the Subscription and the Whitewash Waiver, and the granting of the Whitewash Waiver by the Executive. As such, the Subscription may or may not proceed. Further announcement(s) will be made by the Company to update Shareholders on the progress of the Subscription.

Fund raising exercise and use of proceeds

As disclosed in the announcements of the Company dated 6 May 2013 and 21 May 2013, the Company completed on 21 May 2013:

• (i) a placing of 406,521,739 Shares at the placing price (“Placing Price”) of HK$0.345 each under general mandate (“Placing”) to not less than six independent individual, corporate, professional and/or institutional investors (“Placees”); and

• (ii) the grant of an option (“Option”) under general mandate to Rainwood Resources Limited, entitling it to subscribe for up to 212,879,224 Shares at an exercise price of HK$0.40 per Share (subject to adjustments) over an exercisable period of three years.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, (i) the Placees (including Rainwood Resources Limited) and their respective ultimate beneficial owners (if any) were third parties independent of and were not connected with the Company and its connected persons (as defined in the GEM Listing Rules); and (ii) none of the Placees and their respective associates became a Substantial Shareholder (as defined in the GEM Listing Rules) of the Company immediately upon completion of the Placing.

The aggregate nominal value of the 406,521,739 Shares under the Placing was approximately HK$813,043. The Placing Price represents a discount of approximately 19.8% to the closing price of HK$0.43 per Share as quoted on the Stock Exchange on 3 May 2013, being the date of agreement in respect of the Placing. The net Placing Price, after taking into account the commission for and expenses of the Placing, was approximately HK$0.34 per Share. The net proceeds of the Placing received by the Company amounted to approximately HK$138 million (“Placing Proceeds”), and the Option was exercised in full by Rainwood Resources Limited on 16 March 2016. The Placing Proceeds together with the aggregate exercise price received by the Company as a result of the exercise of the Option in full amounted to approximately HK$223 million.

The Group financed its operations primarily with internally generated cash flows, bank borrowings as well as the proceeds from the Placing and from the exercising by grantees of the share options granted under the Share Option Scheme. Primarily due to the Placing Proceeds raised, the bank balances and cash of the Group increased from HK$137,666,360 as at 31 December 2012 to HK$295,017,209 as at 30 June 2013, thus strengthening the working capital position of the Group.

– 41 –

As disclosed in the aforesaid announcement dated 6 May 2013, the Directors considered it beneficial for the Group to raise funds through the Placing. The Placing represented a good opportunity to raise additional general working capital for future business development of the Group, and would enhance the capital and Shareholders’ base of the Company, thereby increasing the liquidity of the Shares. In addition, the Placing Proceeds were intended to be used for business development, working capital of the Group, and/or investments undertaken or to be made by the Group should suitable investment opportunities arise including, but not limited to, investment opportunities in relation to any entertainment, hotel and/or leisure related business in Macau (collectively, the “Intended Usage”).

The actual usage of the Placing Proceeds has been as follows:

Remaining Aggregate balance of Placing amount used Proceeds as at the during period last date of the Period under review under review Purpose of usage period under review since completion of the approximately for working capital approximately Placing on 21 May 2013 HK$37 million of the Group HK$101 million up to and including 31 December 2013 from 1 January 2014 approximately for working capital approximately up to and including HK$14 million of the Group HK$87 million 31 December 2014 from 1 January 2015 approximately for investment in Nil up to and including HK$87 million 100% equity 31 December 2015 interest in Score Value Limited as disclosed in the Circular and for working capital of the Group

• The remaining balance was placed in the bank savings account of the Company.

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CHANGE OF INDEPENDENT NON-EXECUTIVE DIRECTORS

During the year under review, Mr. Wang Ronghua and Mr. Hua Fengmao retired as independent non-executive Directors with effect from the conclusion of the Company’s 2015 annual general meeting which was held on 5 May 2015. The Company appointed Mr. Feng Qing and Dr. Gao Jack Qunyao as independent non-executive Directors and members of the audit, nomination and remuneration committees of the Company with effect from 4 May 2015 and 6 May 2015 respectively.

CHANGE OF EXECUTIVE DIRECTORS

During the year under review, Mr. Robert Geoffrey Ryan resigned as executive Director with effect from 1 May 2015, but remained as Head of Gaming of the Group. The Company appointed Mr. Cheng Guoming as executive Director and Chief Financial Officer of the Company with effect from 6 May 2015.

CHANGE OF COMPANY SECRETARY, AUTHORISED REPRESENTATIVE AND MEMBER OF THE CORPORATE GOVERNANCE COMMITTEE

During the year under review, Mr. Lai Yick Fung resigned on 1 April 2015, and Ms. Lo Kei Chi was appointed with effect from 12 May 2015, as the company secretary, authorised representative, and member of the corporate governance committee of the Company.

AUDIT COMMITTEE

The audit committee of the Company comprises three independent non-executive Directors, namely, Ms. Monica Maria Nunes, Mr. Feng Qing and Dr. Gao Jack Qunyao. The audited consolidated financial statements of the Group for the year ended 31 December 2015 have been reviewed and commented on by the audit committee.

DIRECTORS’ SECURITIES TRANSACTIONS

The Company adopted a code of conduct regarding Directors’ securities transactions on terms no less exacting than the required standard of dealings as set out in Rules 5.48 to 5.67 of the GEM Listing Rules. The Company had made specific enquiry of all Directors and was not aware of any non-compliance with the required standard of dealings and its code of conduct regarding Directors’ securities transactions during the year under review.

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

– 43 –

SHARE OPTIONS

A new share option scheme of the Company was approved by the Shareholders at the special general meeting held on 23 December 2014 and was adopted by the Company on the same date in place of the former share option scheme of the Company adopted on 18 November 2004 (which had expired on 17 November 2014).

Under the Share Option Scheme adopted by the Company on 23 December 2014, the total number of Shares which may be issued upon exercise of all options granted under such scheme (and other share option schemes of the Company, if any) shall not exceed the “scheme mandate limit” of 443,431,786 Shares (being 10% of the Shares in issue on the date of the special general meeting of the Company held on 23 December 2014 for the purpose of, among other things, approving such scheme).

During the year ended 31 December 2015, options in respect of 52,200,000 Shares, 72,944,800 Shares and 300,312,280 Shares (totalling 425,457,080 Shares) were granted on 20 January 2015, 1 June 2015 and 7 July 2015 respectively to Directors, eligible employees and other eligible participants under the Share Option Scheme. Closing prices of the Shares immediately before 20 January 2015, 1 June 2015 and 7 July 2015 were HK$0.92 per Share, HK$0.87 per Share and HK$1.03 per Share respectively. No options were cancelled but options in respect of 321,776,500 Shares were lapsed during the year ended 31 December 2015. As at 31 December 2015, the total number of Shares still available for issue under the Share Option Scheme (excluding, for the purpose of calculating the “scheme mandate limit”, any options granted under the Share Option Scheme adopted on 23 December 2014 but lapsed in accordance with the terms of such scheme) shall be 19,774,706 Shares, representing approximately 0.4% (2014: 9.99%) of the Company’s issued share capital as at that date.

As a result of the options exercised during the year ended 31 December 2015, 166,134,764 Shares were issued by the Company, and the Company received a total cash consideration of approximately HK$58.8 million in respect of such option exercises. The weighted average closing price of the Shares immediately before the dates on which these options were exercised is HK$0.9106 per Share.

As at 31 December 2015, the number of Shares in respect of which options had been granted and remained outstanding under the Share Option Scheme was 702,099,025 (2014: 730,769,426), representing approximately 15.2% (2014: 16.5%) of the Company’s issued share capital as at that date.

– 44 –

CORPORATE GOVERNANCE PRACTICES

The Board is committed to maintaining high standards of corporate governance in order to uphold the transparency of the Group and safeguard interests of the Shareholders.

The Company has adopted the applicable code provisions in the Corporate Governance Code and Corporate Governance Report (the “Code”) as set out in Appendix 15 of the GEM Listing Rules. The Company has applied the principles of the Code in different respects, including but not limited to:

• the frequency and proper conduct of Board meetings;

• the well-balanced composition of the Board, with independent non-executive Directors representing not less than one-third of the total number of Directors;

• the proper procedures for appointment and re-election of Directors;

• the annual review of individual Directors’ contributions to the Group, the status of each Director’s work commitments outside of the Group, and the years of service of each independent non-executive Directors;

• the establishment of an audit committee to review the financial reporting, risk management and internal controls of the Group and the enhanced communications between the audit committee and the auditors of the Company through meetings held for the pre-audit planning and the annual results of the Group without the presence of other Directors;

• the establishment of a remuneration committee to review the remuneration policy and other remuneration-related matters for the Group;

• the establishment of a nomination committee to formulate a policy concerning diversity in the Board and a nomination policy, make recommendations to the Board on any proposed appointment of Directors and assess the independence of the independent nonexecutive Directors on a regular basis;

• the establishment of a corporate governance committee to assist the Board in performing the corporate governance duties as required under the Code;

• the establishment of a risk management and internal control committee to assist the Board in discharging its ongoing responsibility to oversee the Group’s risk management and internal control systems;

• the provision of briefing or training (at the expense of the Company) on the relevant requirements of the GEM Listing Rules (including the Code) and the Securities and Futures Ordinance to all newly appointed Directors and to the entire Board as and when there are new changes to such rules and regulations;

– 45 –

• the provision of insurance coverage for Directors’ liabilities;

• the timely supply of sufficient information to Directors for matters seeking their approval or opinions;

• the timely publications of announcements, circulars, annual, interim and quarterly results and reports (collectively referred to as the “Publications”) to keep the Shareholders posted of the latest business developments and financial performance of the Group;

• the holding of an annual general meeting each year to meet with the Shareholders and answer their enquiries; and

• the timely updating of the Company’s official website with the latest Publications of the Company and the provision of a platform for communications with the Shareholders and investors through such website.

During the year under review, the Company complied with the Code except for the following deviations:

• (a) under the Code provision A.2.1, the roles of chairman and CEO should be separate and should not be performed by the same individual. The roles of chairman and CEO of the Company were performed by the executive Director, Mr. Sun Ho, during the year under review. The Company considered that the combination of the roles of chairman and CEO could effectively formulate and implement the strategies of the Company. The Company considered that under the supervision of its Board and its independent non-executive Directors, a balancing mechanism existed so that the interests of the Shareholders were adequately and fairly represented. The Company considered that there was no imminent need to change the arrangement;

• (b) under the Code provision A.4.2, every Director should be subject to retirement by rotation at least once every three years. However, pursuant to the Bye-laws, the chairman of the Company shall not be subject to retirement by rotation or be taken into account in determining the number of Directors to retire in each year. During the year under review, the chairman of the Board was not subject to retirement by rotation, as the Board considered that the continuity of the office of the chairman provided the Group with strong and consistent leadership and was of great importance to the smooth operations of the Group;

• (c) under the Code provision A.2.7, the chairman of the Board should at least annually hold meetings with the non-executive Directors (including independent non-executive Directors) without the executive Directors’ presence. During the year under review, the chairman of the Board did not hold such kind of private meetings with the nonexecutive Directors. The chairman of the Board considered that it was unnecessary as it would be more transparent to let the non-executive Directors speak out their views to all executive Directors in the full Board meetings which would be held at least four times a year. Besides, the chairman of the Board, being an executive Director himself, always welcomes all non-executive Directors to directly communicate with him via his email or phone to discuss any matters of the Company from time to time;

– 46 –

• (d) under the Code provision A6.6, each Director should disclose to the Company, among other things, an indication of the time involved by him/her in his/her offices held in other public companies or organisations and other significant commitments. During the year under review, no such disclosure was made by the Directors to the Company. As the Board had adopted a new corporate governance practice that each Director’s contributions to the Group were reviewed and discussed at the Board meeting annually (the “Annual Contributions Review”), the Board considered that assessing the time spent by each Director on his/her commitments outside the Group was not necessary for the purposes of the Annual Contributions Review and that the disclosure of the time spent by a Director in performing his/her duties did not necessarily indicate accurately the efficiency of such Director and the effectiveness of his/her work, and may therefore be misleading;

• (e) under the Code provision B.1.2, the remuneration committee should review and recommend to the Board for approval of the specific remuneration packages of senior management. The remuneration committee of the Company had reviewed its scope of duties and considered that the delegated responsibility to review and recommend to the Board to approve the specific remuneration packages of senior management should be vested in the executive Directors who have a better understanding of the level of expertise, experience and performance expected of the senior management in the daily business operations. Notwithstanding the foregoing, the remuneration committee would continue to be primarily responsible for the review and recommendation of the remuneration packages of the Directors;

• (f) under the Code provision B.1.5, the Company should disclose details of any remuneration payable to members of senior management by band in its annual report. The Company did not make such disclosure in its annual report as the Board considered that (i) the remuneration of any newly appointed “chief executive” (as defined under the GEM Listing Rules) would have already been disclosed in the announcement previously issued by the Company in respect of such appointment in accordance with GEM Listing Rule 17.50(2)(g); (ii) the five highest paid employees within the Group had already been disclosed in the notes to the consolidated financial statements of the Group in the annual report, and (iii) giving further details of remuneration for each and every senior management staff would result in particulars of excessive length and no additional value to the Shareholders, whilst at the same time may impair the flexibility of the Group in its negotiations of remuneration packages for senior management staff (especially those who are not Directors or chief executives of the Group and hence are not supposed to be subject to the aforesaid disclosure requirement under GEM Listing Rule 17.50(2) (g)) should it need to find replacement staff or recruit additional senior personnel in the future;

– 47 –

• (g) under the Code provision A.6.7, independent non-executive Directors and other nonexecutive Directors should attend general meetings of the Company and develop a balanced understanding of the views of the Shareholders. An annual general meeting (“AGM”) was held by the Company during the year on 5 May 2015. The former independent non-executive Directors, Mr. Wang Ronghua and Mr. Hua Fengmao, were absent from the AGM as they were to retire from the Board on the date of the AGM; and

• (h) under the Code provision E.1.2, the chairman of the Board should attend the AGM. During the year under review, the chairman of the Board, Mr. Sun Ho, was unable to attend the AGM held on 5 May 2015 as he was away on a business trip on that date. Mr. Sun had to attend overseas business meetings with business partner and customers in early May 2015 to accommodate the customers’ availability, which was informed and confirmed by the customers only after the Company had published the notice of the AGM. In order not to disrupt the original timetable fixed for the AGM, another executive Director, Mr. Bai Jinmin, was assigned to chair the AGM in place of Mr. Sun to answer any queries from Shareholders.

(The above deviations (a) to (f) were similarly disclosed on pages 29 and 30 of the Company’s annual report for the year ended 31 December 2014, and the above deviations (g) and (h) were new ones that took place during the year under review. All the above deviations (a) to (h) were similarly disclosed on pages 33 to 35 of the Company’s interim report for the six months ended 30 June 2015.)

INTERESTS IN COMPETING BUSINESS

None of the Directors, controlling shareholder of the Company and their respective associates had an interest in a business, which competes or may compete with the businesses of the Group.

PURCHASE, REDEMPTION OR SALE OF LISTED SECURITIES OF THE COMPANY

During the year under review, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the listed securities of the Company.

SUFFICIENCY OF PUBLIC FLOAT

As at the date of this announcement, based on information that is publicly available to the Company and within the knowledge of the Directors, the Company maintained sufficient public float of the Shares, representing no less than 25% of the total issued Shares as required under the GEM Listing Rules.

– 48 –

DEFINITIONS

In this announcement, unless the context otherwise requires, the following words and expressions shall have the following meanings when used herein:

“AGT”	Asia Gaming Technologies Limited, a company
	incorporated in Hong Kong and is an indirect
	wholly-owned subsidiary of the Company
“Board”	means the board of Directors
“Bye-laws”	means the bye-laws of the Company
“CEO”	means chief executive officer
“Circular”	means the circular of the Company dated 8
	December 2014
“Company” or “AGTech”	means AGTech Holdings Limited, a company
	incorporated in Bermuda as an exempted company
	with limited liability and its issued Shares are listed
	on GEM
“Director(s)”	means the director(s) of the Company
“GEM”	means the Growth Enterprise Market of the Stock
	Exchange
“GEM Listing Rules”	means the Rules Governing the Listing of Securities
	on GEM
“GOT”	m e a n s北京亞博高騰科技有限公司( B e i j i n g
	AGTech GOT Technology Co., Ltd.*), a company
	incorporated in the PRC with limited liability and is
	an indirect wholly-owned subsidiary of the Company
“Group”	means the Company and its subsidiaries
“Hong Kong”	means the Hong Kong Special Administrative
	Region of the PRC
“Macau”	means the Macau Special Administrative Region of
	the PRC
“MOF”	means the Ministry of Finance of China
“NSLAC”	means the National Sports Lottery Administration
	Centre of the PRC

– 49 –

“PRC” or “China”

• “province(s)”

• “Purchaser”

• “Score Value”

• “Score Value Group”

• “SFO”

• “Share Option Scheme”

• “Share(s)”

• “Shareholder(s)”

• “Shenzhen Subsidiary”

• “Silvercreek”

• “Sports Lottery”

• “Stock Exchange”

• “Welfare Lottery”

means the People’s Republic of China which, for the purpose of this announcement, excludes Hong Kong, Macau and Taiwan

• m e a n s p r o v i n c e ( s ) , m u n i c i p a l i t y ( i e s ) a n d autonomous region(s) of the PRC unless otherwise specified, and “provincial” shall be construed accordingly

• means Silvercreek Technology Holdings Limited, which is a wholly-owned subsidiary of the Company

• means Score Value Limited which is an indirect wholly-owned subsidiary of the Company following completion of its acquisition on 8 January 2015

• means Score Value Limited and its subsidiaries

• means the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

• means the share option scheme of the Company adopted on 18 November 2004 (or, after its expiry on 17 November 2014, the share option scheme of the Company adopted on 23 December 2014)

• means ordinary share(s) of HK$0.002 each in the share capital of the Company

• means holder(s) of the Share(s)

• means Shenzhen Zoom Read Tech Co., Ltd.*, a company incorporated in the PRC with limited liability and is an indirect wholly-owned subsidiary of Score Value

• means 深圳市銀溪數碼技術有限公司 (Shenzhen Silvercreek Digital Technology Co., Ltd.*), a company incorporated in the PRC with limited liability and is an indirect wholly-owned subsidiary of the Company

means the national sports lottery of China

• means The Stock Exchange of Hong Kong Limited

means the national welfare lottery of China

– 50 –

“HK$” Hong Kong dollars, the lawful currency of Hong Kong “RMB” Renminbi, the lawful currency of the PRC “US$” United States dollars, the lawful currency of the United States of America “%” per cent

Notes:

1. In this announcement, the exchange rate of HK$1.194 to RMB1.00 has been used for reference only.

2. The English translation of the Chinese company names in this announcement are included for reference only and should not be regarded as the official English translation of such Chinese company names.

3. In the event of any inconsistency, the English text of this announcement shall prevail over the Chinese text.

4. For identification purposes only

By order of the Board AGTech Holdings Limited Sun Ho Chairman & Chief Executive Officer

Hong Kong, 18 March 2016

As at the date of this announcement, the Board comprises (i) Mr. Sun Ho, Mr. Bai Jinmin, Mr. Liang Yu and Mr. Cheng Guoming as executive Directors; (ii) Mr. Ho King Fung, Eric as non-executive Director; and (iii) Ms. Monica Maria Nunes, Mr. Feng Qing and Dr. Gao Jack Qunyao as independent non-executive Directors.

This announcement will remain on the “Latest Company Announcements” page of the GEM website operated by the Stock Exchange at www.hkgem.com for at least seven days from the day of its posting and will be published on the website of the Company at www.agtech.com.

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