HISTORY, REORGANIZATION AND CORPORATE STRUCTURE

Transcription

1 OVERVIEW We are a leading mobile game publisher in China with a focus on the high-growth segment of SLG games. Our business commenced in 2013 through the establishment of Youmin by our two founders Mr. Liu and Mr. Zhu (the Founders ) and we have officially launched 40 games since then. In 2014, with the official launch of SLGs titled Tank Frontline ( ) and Three Heroes ( ), we became a pioneer in China s SLG mobile games publishing industry. To diversify our game genres, we officially launched our first major MMORPG game, Romance of Stars ( ) in Our product portfolio has since expanded to include Super Fleet ( ), The Age of Rome ( ), Wartime ( ) and My Duty ( ), which are key contributors to our revenue during the Track Record Period. To take advantage of the PRC market demands, in December 2013, our Founders, Mr. Liu, our executive Director and Controlling Shareholder and Mr. Zhu, our chief operating officer and our substantial Shareholder, established our PRC Operating Entity, Youmin through Guangzhou Shengxia, a company which was then wholly-owned by Mr. Liu and Mr. Zhu as to 70% and 30%, respectively, with their own savings, to engage in mobile games publishing business in the PRC. For further details of the background and experience of our Founders, please refer to the Directors and Senior Management section in this document. Our Company was incorporated in the Cayman Islands on January 9, 2018 as an exempted company with limited liability. KEY MILESTONES The following is a summary of our Group s key business development milestones: Year Event 2013 Youmin, our PRC Operating Entity, was established by our Founders in December 2014 Our flagship SLG game, Tank Frontline ( ) was officially launched in July which established our leading position in the segment of SLG games 2014 Our SLG game, Three Heroes ( ) was officially launched in December 2015 Our SLG game, Super fleet ( ) was officially launched in July 2016 Our first major MMORPG game, Romance of Stars ( ), was officially launched in January 2016 Monthly gross billings of our Group exceeded RMB100 million in February 2016 Became one of the first game publishers to use WeChat Moments as its marketing channel in March, which is now widely recognized as a highly effective marketing channel 2016 Monthly gross billings of our flagship SLG game, Tank Frontline ( ) exceeded RMB60 million by the end of April 104

2 Year Event 2016 Accumulative gross billings of our flagship SLG game, Tank Frontline ( ), exceeded RMB1 billion by the end of December 2017 Our registered users exceeded 100 million in January 2017 Our MMORPG game, Romance of Stars ( ), was granted Top Ten Best Sellers Award by Aligames ( ) in March 2017 Our SLG game, My Duty ( ) was granted the Most Anticipated Game Award by Toutiao ( ) in July 2017 Accumulative gross billings of our SLG game, Tank Frontline ( ), exceeded RMB1.5 billion by the end of December 2018 We were granted the Emerging Partner Award by Tencent Myapp ( ) in January OUR MAJOR PRC OPERATING ENTITIES Our PRC Operating Entities are the entities which principally affected the results, assets or liabilities of our Group. The following table sets out the details of our major PRC Operating Entities which have actual operations and financial contributions to our Group as of the Latest Practicable Date: PRC Operating Entities Date of establishment Principal business activities Interest Direct shareholder(s) Youmin December 3, 2013 Internet culture operations Miyuan December 24, 2013 Internet culture operations Guangzhou December 30, 2013 Internet culture operations Binjie November 4, 2014 Internet culture operations Registered Shareholders Youmin Youmin Youmin Our business was primarily carried out by the above four PRC Operating Entities which were controlled by our Controlling Shareholders. Pursuant to the Contractual Arrangements in March 2018, the PRC Operating Entities were accounted for as our wholly-owned subsidiaries. Youmin Youmin was established by our Founders through their wholly-owned entity, Guangzhou Shengxia (which was then owned as to 70% by Mr. Liu and 30% by Mr. Zhu) on December 3, Miyuan Miyuan was established on December 24, 2013 and ultimately wholly-owned by Mr. Liu and Mr. Zhu, which was subsequently transferred to Youmin on October 20, 2015 and has since been wholly-owned by Youmin. 105

3 Guangzhou Guangzhou was established on December 30, 2013 and ultimately wholly-owned by Mr. Liu and Mr. Zhu, which was subsequently transferred to Youmin on October 20, 2015 and has since been wholly-owned by Youmin. Binjie Binjie was established by Mr. Wu Junjie on November 4, 2014 which was subsequently transferred to Youmin on October 14, 2015 and has since been wholly-owned by Youmin. SIGNIFICANT SHAREHOLDING CHANGES OF OUR PRC OPERATING ENTITIES DURING THE TRACK RECORD PERIOD Since the incorporation of Youmin, it has undergone the following significant shareholding changes. Youmin In order to provide further capital to strengthen our development and support our capital needs and at the same time to incentivize certain key employees by allowing them to own equity interests in our Group, on October 15, 2015, pursuant to the share transfer agreements entered into between Guangzhou Shengxia and each of Mr. Liu, Mr. Zhu, Mr. Wu Junjie, Zhuhai Sangu and Zhuhai Jugu, Guangzhou Shengxia as the then sole shareholder of Youmin transferred 70%, 13%, 2%, 10% and 5% equity interests in Youmin to Mr. Liu, Mr. Zhu, Mr. Wu Junjie, Zhuhai Sangu and Zhuhai Jugu, at the consideration of RMB16,957,400, RMB3,149,200, RMB484,500, RMB2,422,500 and RMB1,211,200, respectively. The consideration was determined with reference to the then registered capital of Youmin after arm s length negotiation and was fully settled by the respective parties in October, Upon completion of such transfers, Guangzhou Shengxia no longer held any equity interest in Youmin. On January 12, 2017, Mr. Cai Wenhang, Aotuo Investment, Youmin and all of its then shareholders entered into a capital increase and equity transfer agreement, pursuant to which the registered capital of Youmin was increased from RMB20,000,000 to RMB20,942,408. Mr. Cai Wenhang and Aotuo Investment injected RMB54,000,000 and RMB81,000,000, respectively into Youmin and upon completion of such capital injection, Mr. Cai Wenhang and Aotuo Investment were interested in 1.80% and 2.70% interest of Youmin. On the same date, Mr. Liu also transferred 1.40% and 2.10% of his equity interest in Youmin to Mr. Cai Wenhang and Aotuo Investment at the consideration of RMB42,000,000 and RMB63,000,000, respectively. The consideration was determined with reference to the future prospects of Youmin and based on arm s length negotiation, and was fully settled by the respective parties on February 22, Upon completion of such transfers, Youmin was held as to 63.35% by Mr. Liu, 12.41% by Mr. Zhu, 1.91% by Mr. Wu Junjie, 9.55% by Zhuhai Sangu, 4.78% by Zhuhai Jugu, 4.80% by Aotuo Investment and 3.20% by Mr. Cai Wenhang. Mr. Cai Wenhang and Aotuo Investment are Independent Third Parties and as far as our Directors are aware and save as disclosed above, they do not have any past or present relationship (other than being shareholders of Youmin at the time) among themselves. 106

4 Mr. Cai Wenhang and Aotuo Investment (the Exit Shareholders ) subsequently decided to divest their interest in Youmin Network in early 2018 due to their personal financial needs. On January 13, 2018, a capital reduction agreement was entered into by Youmin and all of its then shareholders (including the Exit Shareholders). Since January 25, 2018, the Exit Shareholders had ceased to be shareholders of Youmin. Accordingly, the registered capital of Youmin was reduced from RMB20,942,408 to RMB19,267,015 which was achieved by way of repurchase by Youmin from the Exit Shareholders at the consideration of RMB105,630,726 to Mr. Cai Wenhang and RMB158,185,206 to Aotuo Investment, respectively. The said consideration of the repurchase represented the fair value of the interests held by the Exit Shareholders. As a result of the capital reduction, Youmin was held as to 68.86% by Mr. Liu, 13.49% by Mr. Zhu, 2.08% by Mr. Wu Junjie, 10.38% by Zhuhai Sangu and 5.19% by Zhuhai Jugu. According to our PRC legal advisers, the PRC aspects of the repurchase and capital reduction were in full compliance with the laws and regulations of the PRC and the articles of association of Youmin. CORPORATE REORGANIZATION Corporate structure immediately before the Reorganization Upon completion of shareholding changes above, the corporate structure of our Group immediately prior to the Reorganization is set out in the following chart. Mr. Liu Mr. Wu Mr. Zhu Zhuhai Jugu Junjie (1) Zhuhai Sangu (2) 68.86% 13.49% 2.08% 5.19% 10.38% Youmin Kuoyou Jieba Yiguo Binjie Feimiao Shanghai Miyuan Guangzhou Notes: 1. Zhuhai Jugu is held as to 50% by Mr. Liu, 30% by Mr. Zhu and 20% by Feidian Game, which in turn is held as to 6.67% by Feidian Investment and 93.33% by 11 natural persons who are Independent Third Parties. 2. Zhuhai Sangu is held as to 50% by Mr. Wu Junjie, our executive Director and vice president, 30% by Ms. Li Nini, our vice president, 10% by Mr. Cui Lei, our employee, and 10% by Mr. Wang Zaicheng, our executive Director. To optimize the management of our business and in preparation for the [REDACTED], we have undertaken various steps for the Reorganization. The Reorganization involved the following major steps: 1. Incorporation of Our Company Our Company was incorporated as an exempted company with limited liability in the Cayman Islands on January 9, At the time of its incorporation, our Company had an authorized share capital of US$50,000 divided into 1,000,000,000 shares of US$ each, a total of 95,000,000 shares were fully paid up, and issued to each of the then shareholders of Youmin (except the 107

5 Exit Shareholders) through their owned BVI holding companies. The Company was then held as to 71.45% by LJ, 15.05% by ZYB, 7.27% by ACERY, 3.11% by LNN, 1.04% by CuiL, 1.04% by KW, and 1.04% by LY. 2. Incorporation of other Offshore Companies FT Entertainment was incorporated in the BVI on January 10, 2018, as a direct wholly-owned subsidiary of our Company. Finger Tango Hong Kong was incorporated in Hong Kong on January 17, 2018, as a direct wholly-owned subsidiary of FT Entertainment. 3. Establishment of the RSU Scheme With a view of formalizing our grant and our proposal to grant share incentives to eligible management and employees of our Group, we approved and adopted a RSU Scheme on February 28, 2018, pursuant to which, 5,000,000 Shares of US$ each ( RSU Shares ) (representing 5% of the capital of our Company immediately before the completion of the [REDACTED] or [REDACTED] of the capital of our Company immediately following the completion of the [REDACTED]) were issued to the RSU Nominee on March 22, 2018, who held the RSU Shares for the benefit of eligible management and employees pursuant to the RSU Scheme. Upon completion of the issue and allotment of the RSU Shares, the total issued shares of our Company was increased to 100,000,000, and our Company was held as to approximately 67.88% by LJ, 14.30% by ZYB, 6.90% by ACERY, 2.95% by LNN, 0.99% by CuiL, 0.99% by KW, 0.99% by LY and 5.00% by the RSU Nominee. As of the Latest Practicable Date, the RSUs in respect of an aggregate of 36,000,000 Shares, representing approximately 1.80% of the total issued share capital of the Company immediately following the completion of the [REDACTED] (without taking into account any Shares which may be issued upon the exercise of the [REDACTED] and the Share Option Scheme), had been granted pursuant to the RSU Scheme. For details and principal terms of the RSU Scheme, please refer to Appendix IV Statutory and General Information D. RSU Scheme and Share Option Scheme. 4. Establishment of WFOE On March 16, 2018, Binyou was established in the PRC as a wholly-foreign owned enterprise with a registered capital of RMB15,000,000 and wholly-owned by Finger Tango Hong Kong. 5. Entering into of the Contractual Arrangements In order to comply with relevant PRC laws and regulations and maintain effective control over all of our operations, on March 24, 2018, Binyou entered into various agreements which constitute the Contractual Arrangements with the PRC Operating Entities and their direct shareholders, pursuant to which our Group is able to gain effective control over, and receive all economic benefits arising from the business of our PRC Operating Entities. Please refer to the section headed Contractual Arrangements in this document for further details of the Contractual Arrangements. 108

6 CORPORATE STRUCTURE Corporate structure after Reorganization and before the [REDACTED] The following chart depicts the shareholding and beneficial ownership structure of our Group immediately following the Reorganization and prior to the completion of the [REDACTED]: LJ (2) ZYB (2) ACERY (2) LNN (2) CuiL (2) KW (2) LY (2) RSU Nominee 67.88% 14.30% 6.90% 2.95% 0.99% 0.99% 0.99% 5% Our Company FT Entertainment FingerTango Hong Kong Binyou VIE agreements Youmin (1) Kuoyou Jieba Yiguo Binjie Feimiao Shanghai Miyuan Guangzhou Notes: 1. For shareholding structure of Youmin, please refer to Corporate structure immediately before the Reorganization in this section. 2. LJ, ZYB, ACERY, LNN, CuiL, KW and LY are wholly owned by Mr. Liu, Mr. Zhu, Mr. Wu Junjie, Ms. Li Nini, Mr. Cui Lei, Mr. Wang Zaicheng and Ms. Lu Yan, respectively. 109

7 Corporate structure immediately following the [REDACTED] The following chart depicts the shareholding and beneficial ownership structure of our Group immediately following the completion of the [REDACTED], assuming that the [REDACTED] Option is not exercised and without taking into account of any Shares which may be issued under the Share Option Scheme: LJ (2) ZYB (2) ACERY (2) LNN (2) CuiL (2) KW (2) LY (2) RSU Nominee Other Public [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] Our Company FT Entertainment FingerTango Hong Kong Binyou VIE agreements Youmin (1) Kuoyou Jieba Yiguo Binjie Feimiao Shanghai Miyuan Guangzhou Notes: 1. For shareholding structure of Youmin, please refer to Corporate structure immediately before the Reorganization in this section. 2. LJ, ZYB, ACERY, LNN, CuiL, KW and LY are wholly owned by Mr. Liu, Mr. Zhu, Mr. Wu Junjie, Ms. Li Nini, Mr. Cui Lei, Mr. Wang Zaicheng and Ms. Lu Yan, respectively. PRC LEGAL COMPLIANCE M&A Rules Our PRC legal advisers have confirmed that the share transfers, the Reorganizations, acquisitions and disposals in respect of the PRC Operating Entities in our Group as described above have been properly and legally completed and all regulatory approvals have been obtained in accordance with PRC laws and regulations. According to the Regulations on Merger with and Acquisition of Domestic Enterprises by Foreign Investors ( ) (the M&A Rules ) jointly issued by the MOFCOM, the State-owned Assets Supervision and Administration Commission of the State Council, the SAT, the CSRC, SAIC and the SAFE on August 8, 2006, effective as of September 8, 2006 and amended on June 22, 2009, a foreign investor is required to obtain necessary approvals when it (i) acquires the equity of a domestic enterprise so as to convert the domestic enterprise into a foreigninvested enterprise; (ii) subscribes the increased capital of a domestic enterprise so as to convert the 110

8 domestic enterprise into a foreign-invested enterprise; (iii) establishes a foreign-invested enterprise through which it purchases the assets of a domestic enterprise and operates these assets; or (iv) purchases the assets of a domestic enterprise, and then invests such assets to establish a foreign invested enterprise. The M&A Rules, among other things, further purport to require that an offshore special vehicle, or a special purpose vehicle, formed for listing purposes and controlled directly or indirectly by PRC companies or individuals, shall obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle s securities on an overseas stock exchange, especially in the event that the special purpose vehicle acquires shares of or equity interests in the PRC companies in exchange for the shares of offshore companies. Our PRC Legal Advisers are of the opinion that prior CSRC approval for this [REDACTED] is not required because Binyou was incorporated as a wholly foreign-owned enterprise without involving acquisition of the equity or assets of a PRC domestic company, as such term is defined under the M&A Rules, which was in compliance with the M&A Rules. Other than Binyou, all of our PRC Operating Entities have been wholly owned by PRC citizens since their dates of incorporation, and as such, the M&A Rules are not applicable. SAFE Circular 37 Pursuant to the Circular of the SAFE on Foreign Exchange Administration of Overseas Investment, Financing and Round-trip Investments Conducted by Domestic Residents through Special Purpose Vehicles ( ) (the SAFE Circular 37 ), promulgated by SAFE, a PRC resident must register with the local SAFE branch before he or she contributes assets or equity interests in an overseas special purpose vehicle (the Overseas SPV ) that is directly established or indirectly controlled by the PRC resident for the purpose of conducting investment or financing. Pursuant to the Circular of the SAFE on Further Simplification and Improvement in Foreign Exchange Administration on Direct Investment ( ) (the SAFE Circular 13 ), promulgated by SAFE and became effective on June 1, 2015, the power to accept SAFE registration was delegated from local SAFE to local banks where the assets or interest in the domestic entity was located. As advised by our PRC Legal Advisers, our shareholders (as PRC Residents as defined under the applicable provisions under SAFE Circular 37) have completed the registration under the SAFE Circular 37 on February 22,