Form 6-K BIT Mining Ltd For: Jul 30

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July 30, 2021 4:51 PM EDT

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF

THE SECURITIES EXCHANGE ACT OF 1934

For the month of July 2021

Commission File Number: 001-36206

BIT Mining Limited

Units 813 & 815, Level 8, Core F,

Cyberport 3, 100 Cyberport Road,

Hong Kong

(852) 2596 3068

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F x Form 40-F ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes ¨ No x

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A

TABLE OF CONTENTS

SIGNATURE

EX-99.1

EX-99.2

EX-99.3

EX-99.4

TABLE OF CONTENTS

Exhibit 99.1 – Loto Interactive Limited Audited Consolidated Financial Statements for the Two Years Ended 31 December 2019 and 2020

Exhibit 99.2 – Blockchain Alliance Technologies Limited Combined Financial Statements As of December 31, 2019 and 2020 and For the Years Then Ended

Exhibit 99.3 – Unaudited Pro Forma Combined Financial Information

Exhibit 99.4 – Risk Factors

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		BIT Mining Limited


		By:		/s/ Xianfeng Yang
		Name:		Xianfeng Yang
		Title:		Chief Executive Officer

Date: July 30, 2021

Exhibit 99.1

LOTO INTERACTIVE LIMITED

乐透互娱有限公司

AUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

ZHONGHUI ANDA CPA LIMITED

中匯安達會計師事務所有限公司

INDEPENDENT AUDITOR’S REPORT

TO THE DIRECTORS OF LOTO INTERACTIVE LIMITED
(Incorporated in the Cayman Islands with limited liability)

OPINION

We have audited the consolidated financial statements of Loto Interactive Limited (the “Company”) and its subsidiaries (collectively referred to as the “ Group ” ) set out on pages 5 to 54, which comprise the consolidated statement of financial position as at 31 December 2019 and 2020, and the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the each two years ended 31 December 2020, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2019 and 2020, and of its consolidated financial performance and its consolidated cash flows for each of the two years ended 31 December 2019 and 2020 in accordance with International Financial Reporting Standards ( “ IFRSs ” ) issued by the International Accounting Standards Board (the “ IASB ” ) and have been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance.

BASIS FOR OPINION

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

KEY AUDIT MATTERS

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

Property, plant and equipment

Refer to note 16 to the consolidated financial statements.

The Group tested the amount of property, plant and equipment for impairment. This impairment test is significant to our audit because the balances of property, plant and equipment of approximately HK$164,520,000 and HK$263,269,000 as at 31 December 2019 and 2020 is material to the consolidated financial statements. In addition, the Group's impairment test involves application of judgement and is based on assumptions and estimates.

- 1 -

INDEPENDENT AUDITOR’S REPORT

TO THE DIRECTORS OF LOTO INTERACTIVE LIMITED
(Incorporated in the Cayman Islands with limited liability)

Our audit procedures included, among others:

- Assessing the identification of the related cash generating units;

- Assessing the arithmetical accuracy of the value-in-use calculations;

- Comparing the actual cash flows with the cash flow projection;

- Assessing the reasonableness of the key assumptions (including revenue growth, profit margins, terminal growth rates and discount rates); and

- Checking input data to supporting evidence.

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

Goodwill

Refer to note 18 to the consolidated financial statements.

The Group is required to annually test the amount of goodwill for impairment. This annual impairment test is significant to our audit because the balances of goodwill of approximately HK$10,996,000 and HK$11,703,000 as at 31 December 2019 and 2020 is material to the consolidated financial statements. In addition, the Group’s impairment test involves application of judgement and is based on assumptions and estimates.

Our audit procedures included, among others:

- Assessing the identification of the related cash generating units;

- Assessing the arithmetical accuracy of the value-in-use calculations;

- Assessing the reasonableness of the key assumptions (including revenue growth, profit margins, terminal growth rates and discount rates); and

- Checking input data to supporting evidence.

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

Loan receivables

Refer to note 24 to the consolidated financial statements.

The Group tested the amount of loan receivables for impairment. This impairment test is significant to our audit because the balances of loan receviables of approximately HK$60,881,000 and HK$30,000,000 as at 31 December 2019 and 2020 is material to the consolidated financial statements. In addition, the Group's impairment test involves application of judgement and is based on estimates.

Our audit procedures included, among others:

- Assessing the Group's relationship and transaction history with the borrower;

- Evaluating the Group's impairment assessment;

- Assessing ageing of the debts;

- Checking subsequent settlements from the borrowers; and

- Assessing the disclosure of the Group's exposure to credit risk in the consolidated financial statements.

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

- 2 -

INDEPENDENT AUDITOR’S REPORT

TO THE DIRECTORS OF LOTO INTERACTIVE LIMITED
(Incorporated in the Cayman Islands with limited liability)

Trade receivables

Refer to note 25 to the consolidated financial statements.

The Group tested the amount of trade receivables for impairment. This impairment test is significant to our audit because the balances of trade receivables of approximately HK$19,949,000 as at 31 December 2019 is material to the consolidated financial statements. In addition, the Group’s impairment test involves application of judgement and is based on estimates.

Our audit procedures included, among others:

Assessing the Group’s procedures on granting credit limits and credit periods to customers;

Assessing the Group’s relationship and transaction history with the customers;

Evaluating the Group’s impairment assessment;

Assessing ageing of the debts;

Assessing creditworthiness of the customers;

Checking subsequent settlements from the customers; and

Assessing the disclosure of the Group’s exposure to credit risk in the consolidated financial statements.

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

RESPONSIBILITIES OF DIRECTORS FOR THE CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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

- 3 -

INDEPENDENT AUDITOR’S REPORT

TO THE DIRECTORS OF LOTO INTERACTIVE LIMITED
(Incorporated in the Cayman Islands with limited liability)

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional skepticism throughout the audit. We also:

- Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. the risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.

- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

- Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group ’ s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

- Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

- Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with Audit and Compliance Committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide Audit and Compliance Committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate treats of safeguards applied.

From the matters communicated with Audit and Compliance Committee, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor ’ s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

/s/ ZHONGHUI ANDA CPA Limited

Certified Public Accountants

Wan Ho Yuen

Audit Engagement Director

Practising Certificate Number P04309

Hong Kong, 30 April 2021

- 4 -

LOTO INTERACTIVE LIMITED

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

	Notes	2019			2020
		HK$'000			HK$'000
REVENUE	8		64,556			382,955
Cost of sales and service rendered			(51,237	)		(342,213	)
Gross profit			13,319			40,742
Interest income			8,045			444
Other income and gains	9		4,705			1,773
Selling expenses			(1,098	)		(105	)
Administrative expenses			(46,819	)		(75,178	)
Impairment of trade and other receivables			-			(1,905	)
Other expenses			(2,344	)		(4,568	)
Share of losses of associates			(9,415	)		(1,112	)
Finance costs	10		(1,269	)		(448	)
LOSS BEFORE TAX			(34,876	)		(40,357	)
Income tax credit/(expense)	12		105			(2,898	)
LOSS FOR THE YEAR	13		(34,771	)		(43,255	)
OTHER COMPREHENSIVE INCOME
Other comprehensive (loss)/income for the year, net of tax:
Items that will not be reclassified to profit or loss:
Fair value changes of equity investments at fair value through other comprehensive income			(12,696	)		(83	)
			(12,696	)		(83	)
Items that may be reclassified to profit or loss:
Exchange differences on translation of foreign operations			1,572			16,727
			1,572			16,727
OTHER COMPREHENSIVE (LOSS)/INCOME FOR THE YEAR, NET OF TAX			(11,124	)		16,644
TOTAL COMPREHENSIVE LOSS FOR THE YEAR			(45,895	)		(26,611	)
(LOSS)/PROFIT FOR THE YEAR ATTRIBUTABLE TO:
Owners of the Company			(33,618	)		(46,767	)
Non-controlling interests			(1,153	)		3,512
			(34,771	)		(43,255	)
TOTAL COMPREHENSIVE (LOSS)/INCOME FOR THE YEAR ATTRIBUTABLE TO:
Owners of the Company			(44,678	)		(31,261	)
Non-controlling interests			(1,217	)		4,650
			(45,895	)		(26,611	)
LOSS PER SHARE ATTRIBUTABLE TO OWNERS OF THE COMPANY (HK cents)	15
— Basic and diluted			(10.66	)		(14.16	)

- 5 -

LOTO INTERACTIVE LIMITED

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2019 AND 2020

	Notes	2019		2020
		HK$'000		HK$'000
NON-CURRENT ASSETS
Property, plant and equipment	16		164,520		263,269
Right-of-use assets	17		4,537		6,409
Goodwill	18		10,996		11,703
Intangible assets	19		5,655		-
Investments in associates	21		3,384		2,431
Investment in a joint venture	22		-		-
Equity investments at fair value through other comprehensive income	23		5,140		5,057
Loan receivables	24		-		30,000
			194,232		318,869
CURRENT ASSETS
Loan receivables	24		60,881		-
Trade receivables	25		19,949		8,400
Prepayments, deposits and other receivables	26		41,823		83,018
Cash and cash equivalents	27		95,030		44,252
			217,683		135,670
CURRENT LIABILITIES
Trade payables	28		24,300		4,611
Accruals and other payables	29		24,720		25,734
Lease liabilities	30		3,747		3,360
Amount due to holding company	31		1		-
Amount due to a related company	31		11,380		467
Tax payable			3,297		7,421
			67,445		41,593
NET CURRENT ASSETS			150,238		94,077
TOTAL ASSETS LESS CURRENT LIABILITIES			344,470		412,946
NON-CURRENT LIABILITIES
Lease liabilities	30		692		3,236
Deferred tax liabilities	32		1,031		-
			1,723		3,236
NET ASSETS			342,747		409,710
EQUITY
Equity attributable to owners of the Company
Share capital	33		31,586		37,902
Reserves	34		298,285		280,764
			329,871		318,666
Non-controlling interests			12,876		91,044
TOTAL EQUITY			342,747		409,710

The consolidated financial statements on pages 5 to 54 were approved and authorised for issue by the board of directors on 30 April 2021 and are signed on its behalf by:

Approved by:	/s/ Yan Hao	/s/ Zhang Jing
	Yan Hao	Zhang Jing
	Director	Director

- 6 -

LOTO INTERACTIVE LIMITED

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

	Attributable to owners of the Company
													Equity
					Share-based								investment									Non-
	Issued		Share		payment			Other			Exchange		revaluation			Accumulated						controlling
	capital		premium^#		reserve^#			reserve*^#			reserve^#		reserve^#			losses^#			Total			interests			Total equity
	HK$'000		HK$'000		HK$'000			HK$'000			HK$'000		HK$'000			HK$'000			HK$'000			HK$'000			HK$'000
At 1 January 2019		31,459		327,928		12,598			(5,255	)		2,056		126			(4,039	)		364,873			6,279			371,152
Loss for the year		-		-		-			-			-		-			(33,618	)		(33,618	)		(1,153	)		(34,771	)
Other comprehensive income/(loss) for the year		-		-		-			-			1,636		(12,696	)		-			(11,060	)		(64	)		(11,124	)
Total comprehensive income/(loss) for the year		-		-		-			-			1,636		(12,696	)		(33,618	)		(44,678	)		(1,217	)		(45,895	)

Issue of ordinary shares upon exercise of share options (Note 33(a))		127		1,266		-			-			-		-			-			1,393			-			1,393
Equity-settled share-based payment expense (Note 35)		-		-		8,283			-			-		-			-			8,283			-			8,283
Non-controlling interests arising from establishment of a new subsidiary		-		-		-			-			-		-			-			-			7,814			7,814

At 31 December 2019		31,586		329,194		20,881			(5,255	)		3,692		(12,570	)		(37,657	)		329,871			12,876			342,747
At 1 January 2020		31,586		329,194		20,881			(5,255	)		3,692		(12,570	)		(37,657	)		329,871			12,876			342,747
(Loss)/Profit for the year		-		-		-			-			-		-			(46,767	)		(46,767	)		3,512			(43,255	)
Other comprehensive income/(loss) for the year		-		-		-			-			15,589		(83	)		-			15,506			1,138			16,644
Total comprehensive income/(loss) for the year		-		-		-			-			15,589		(83	)		(46,767	)		(31,261	)		4,650			(26,611	)
Issue of shares on placement (Note 33(c))		6,316		9,712		-			-			-		-			-			16,028			-			16,028
Equity-settled share-based payment expense (Note 35)		-		-		4,028			-			-		-			-			4,028			-			4,028
Cancellation of share option scheme		-		-		(15,539	)		-			-		-			15,539			-			-			-
Non-controlling interests arising from increase in paid-up capital		-		-		-			-			-		-			-			-			78,895			78,895
Loss on deregistration of subsidiaries		-		-		-			-			-		-			-			-			(5,377	)		(5,377	)

At 31 December 2020		37,902		338,906		9,370			(5,255	)		19,281		(12,653	)		(68,885	)		318,666			91,044			409,710

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

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

- 7 -

LOTO INTERACTIVE LIMITED

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

	2019			2020
	HK$'000			HK$'000
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before tax		(34,876	)		(40,357	)
Adjustments for:
Equity-settled share-based payment expense		8,283			4,028
Depreciation		14,357			41,680
Amortisation of intangible assets		1,063			5,667
Depreciation of right-of-use assets		4,838			5,257
Share of losses of associates		9,415			1,112
Impairment of trade receivables		-			837
Impairment of other receivables		-			1,068
Interest income		(8,045	)		(444	)
Finance costs		1,269			448
Loss on disposal of items of property, plant and equipment		19			-
Rental concession		-			(833	)
Loss on deregistration of subsidiaries		-			(5,377	)
Operating cash flows before working capital changes		(3,677	)		13,086
Change in trade receivables		12,511			10,712
Change in prepayments, deposits and other receivables		(15,294	)		(42,263	)
Change in trade payables		(20,442	)		(19,689	)
Change in accruals and other payables		16,161			1,014
Cash used in operating activities		(10,741	)		(37,140	)
Income taxes paid		(203	)		(33	)
Lease interest paid		(323	)		(295	)
Net cash flows used in operating activities		(11,267	)		(37,468	)

CASH FLOWS FROM INVESTING ACTIVITIES
Withdrawal of structured notes		50,371			-
Purchase of property, plant and equipment		(176,131	)		(125,461	)
Proceeds from disposal of items of property, plant and equipment		948			-
Purchase of intangible assets		(2,125	)		-
Purchase of equity investments at fair value through other comprehensive income		(7,710	)		-
Acquisition of subsidiaries		(11,646	)		-
Interest received		4,859			444
Repayment from loan receivables		44,503			60,881
Grant of loan receivables		(11,163	)		(30,000	)
Net cash flows used in investing activities		(108,094	)		(94,136	)

- 8 -

LOTO INTERACTIVE LIMITED

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

	2019			2020
	HK$'000			HK$'000
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment to holding company		(38	)		(1	)
Advance from/(Repayment to) related parties		11,380			(10,913	)
Repayment of lease liabilities		(3,418	)		(4,130	)
Proceeds from issue of shares		-			16,423
Share issue expenses paid		-			(395	)
Contributions from non-controlling shareholders		7,814			78,895
Proceeds from exercise of share options		1,393			-
Interest paid		(946	)		(153	)

Net cash flows generated from financing activities		16,185			79,726
NET DECREASE IN CASH AND CASH EQUIVALENTS		(103,176	)		(51,878	)
Cash and cash equivalents at beginning of year		198,221			95,030
Net foreign exchange difference		(15	)		1,100

Cash and cash equivalents at end of year		95,030			44,252
ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS
Cash and bank balances		95,030			44,252

- 9 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

GENERAL INFORMATION

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

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

In the opinion of the directors of the Company, as at 31 December 2019 and 2020, the substantial shareholder of the Company is BIT Mining Limited (formerly known as 500.com Limited) ("Holding Company"), which is incorporated in the Cayman Islands and listed on the New York Stock Exchange (stock code: WBAI).

ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS

In the current period, the Group has adopted all the new and revised International Financial Reporting Standards ("IFRSs") issued by the International Accounting Standards Board (the “IASB”) that are relevant to its operations and effective for its accounting year beginning on 1 January 2019. IFRSs comprise International Financial Reporting Standards ("IFRS"); International Accounting Standards (“IAS” ); and Interpretations. The adoption of these new and revised IFRSs did not result in substantial changes to the Group’s accounting policies and amounts reported for the current year and prior years.

SIGNIFICANT ACCOUNTING POLICIES

These consolidated financial statements have been prepared in accordance with IFRSs issued by the IASB, and the applicable disclosures required by the Hong Kong Companies Ordinance.

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

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

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

(a) Consolidation

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

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

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

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

- 10 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

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

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

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

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

(b) Business combination and goodwill

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

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

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

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

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

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

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

- 11 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

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

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

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

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

(d) Joint arrangements

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

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

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

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

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LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

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

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

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

(e) Foreign currency translation

(i) Functional and presentation currency

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

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

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

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

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

(iii) Translation on consolidation

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

Assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position;

Income and expenses are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the exchange rates on the transaction dates); and

All resulting exchange differences are recognised in the foreign currency translation reserve.

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

- 13 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

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

(f) Property, plant and equipment

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

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

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

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

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

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

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

(g) Leases

The Group as lessee

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

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

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

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

(h) Recognition and derecognition of financial instruments

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

- 14 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

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

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

(i) Financial assets

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

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

Financial assets at amortised cost; and

Equity investments at fair value through other comprehensive income;

(i)   Financial assets at amortised cost

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

the assets are held within a business model whose objective is to hold assets in order to collect contractual cash; and

the contractual terms of the assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

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

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

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

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

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

(j) Loss allowances for expected credit losses

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

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

- 15 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

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

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

(k) Cash and cash equivalents

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

(l) Financial liabilities and equity instruments

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

(m) Trade and other payables

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

(n) Equity instruments

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

(o) Revenue from contracts with customers

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

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

the customer simultaneously receives and consumes the benefits provided by the Group’s performance;

the Group’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or

the Group’s performance does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date.

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

(p) Other revenue

Interest income is recognised using the effective interest method.

- 16 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

(q) Employee benefits

(i)

Employee leave entitlements

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

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

(ii)

Pension obligations

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

(iii)

Termination benefits

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

(r) Share-based payments

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

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

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

(s) Taxation

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

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

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

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

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

- 17 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

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

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

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

(t) Segment reporting

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

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

(u) Related parties

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

(a)

A person or a close member of that person’s family is related to the Group if that person:

(i)

has control or joint control over the Group;

(ii)

has significant influence over the Group; or

(iii)

is a member of the key management personnel of the Company or of a parent of the Company.

(b)

An entity is related to the Group (reporting entity) if any of the following conditions applies:

(i)

The entity and the Company are members of the same group (which means that each parent, subsidiaries and fellow subsidiaries is related to the others).

(ii)

One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).

(iii)

Both entities are joint ventures of the same third party.

(iv)

One entity is a joint venture of a third entity and the other entity is an associate of the third entity.

(v)

The entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group. If the Group is itself such a plan, the sponsoring employers are also related to the Group.

(vi)

The entity is controlled or jointly controlled by a person identified in (a).

(vii)

A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

(viii)

The entity, or any member of a group of which it is a part, provides key management personnel services to the Company or to a parent of the Company.

- 18 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

(v) Impairment of assets

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

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

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

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

(w) Provisions and contingent liabilities

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

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

(x) Events after the reporting period

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

KEY ESTIMATES

Key sources of estimation uncertainty

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

(a)

Impairment of property, plant and equipment

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

- 19 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

(b)

Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating unit to which goodwill has been allocated. The value in use calculation requires the Group to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the present value. The carrying amounts of goodwill at 31 December 2019 and 2020 were approximately HK$10,996,000 and HK$11,703,000 respectively.

(c)

Impairment of loan receivables

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

(d)

Property, plant and equipment and depreciation

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

FINANCIAL RISK MANAGEMENT

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

(a)

Foreign currency risk

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

(b)

Credit risk

At 31 December 2019 and 2020, the Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to failure to the perform an obligation by the counterparties arise from the carrying amounts of the respective recognised financial assets as stated in the consolidated statement of financial position.

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

The Group has concentration of credit risk as 89.5% and 91.3% respectively of the Group's trade receivables are due from the Group's three customers and one customer which operate in the PRC as at 31 Decemeber 2019 and 2020. The principal activities of the Group are mainly provision of big data centre services and use of storage places. In repect of these customers, given their good repayment history, the directors of the Company consider that the credit risk associated with the balances of the customers is low.

- 20 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

The Group also has concentration of credit risk as 82% of the Group's loan receivables is a loan granted to an independent third party which is secured by a personal guarantee and a collateral of 95% of the entire equity interests in another company as at 31 December 2019, and has concentration of credit risk as 100% of the Group's loan receivables is a loan granted to an independent third party which is secured by a personal guarantee and a collateral of a property in PRC as at 31 December 2020. In view of the counterparties never fail to make contractual payments, the directors of the Company consider that the credit risk associated with the balance of loan receivable is low.

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

internal credit rating;

actual or expected significant adverse changes in business, financial or economic conditions that are expected to cause a significant change to the borrower’s ability to meet its obligations;

significant changes in the value of the collateral or in the quality of guarantees or credit enhancements; and

significant changes in the expected performance and behaviour of the borrower, including changes in the payment status of borrowers.

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

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

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

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

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

(c) Liquidity risk

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

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

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

		60,401		60,401

- 21 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

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

		30,812		30,812

(d)

Interest rate risk

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

(e)

Price risk

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

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

(f)

Categories of financial instruments at 31 December 2019 and 2020

	2019		2020
	HK$'000		HK$'000
Financial assets:
Equity investments at fair value through other comprehensive income		5,140		5,057
Financial assets at amortised cost:
Loan receivables		60,881		30,000
Trade receivables		19,949		8,400
Financial assets included in prepayments, deposits and other receivables		30,656		34,114
Cash and cash equivalents		95,030		44,252

Total		211,656		121,823
Financial liabilities:
Financial liabilities at amortised cost:
Trade payables		24,300		4,611
Financial liabilities included in accruals and other payables		24,720		25,734
Amount due to the holding company		1		-
Amount due to a related company		11,380		467

Total		60,401		30,812

(g)

Fair value

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

- 22 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

FAIR VALUE MEASUREMENTS

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

Level 1 inputs: quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the measurement date.

Level 2 inputs: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 inputs: unobservable inputs for the asset or liability.

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

(a)

Disclosures of level in fair value hierarchy at 31 December 2019 and 2020:

	Fair value measurements using:		2019
	Level 1		Total
	HK$'000		HK$'000
Description
Recurring fair value measurements:
Equity investments at fair value through other comprehensive income Listed securities in United States of America ("US")		5,140		5,140

Total recurring fair value measurements		5,140		5,140

	Fair value measurements using:		2020
	Level 1		Total
	HK$'000		HK$'000
Description
Recurring fair value measurements:
Equity investments at fair value through other comprehensive income Listed securities in US		5,057		5,057

Total recurring fair value measurements		5,057		5,057

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

7.	OPERATING SEGMENT INFORMATION

(a) Reportable segments

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

- 23 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

The Group has four and three reportable segments respectively for the year ended 31 December 2019 and 2020. The segments are managed separately as each business segment offers different products and requires different business strategies. The following summary describes the operations in each of the Group’s reportable segments:

Provision of big data centre services ("Big Data Centre Services")

Distribution of mobile gaming ("Online Game Business")

Money lending business ("Money Lending Business")

Trading of lottery terminals and parts and provision of services and solutions for the distribution of lottery products ("Lottery Business")^#

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

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

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

	Big Data						Money
	Centre			Online Game			Lending			Lottery
Year ended 31 December 2019	Services			Business			Business			Business			Total
	HK$'000			HK$'000			HK$'000			HK$'000			HK$'000
Revenue from external customers		62,425			2,020			-			111			64,556
Segment profit/(loss)		6,637			(1,571	)		(45	)		(2,593	)		2,428
Depreciation		11,641			59			-			4			11,704
Additions to segment non-current assets		175,383			-			-			188			175,571
As at 31 December 2019
Segment assets		286,668			673			1,460			4,216			293,017
Segment liabilities		(56,206	)		(933	)		-			(936	)		(58,075	)

	Big Data						Money
	Centre			Online Game			Lending
Year ended 31 December 2020	Services			Business			Business			Total
	HK$'000			HK$'000			HK$'000			HK$'000
Revenue from external customers		379,658			1,017			2,250			382,925
Segment loss		(4,766	)		(982	)		(203	)		(5,951	)
Depreciation		39,087			49			-			39,136
Additions to segment non-current assets		121,661			-			-			121,661
As at 31 December 2020
Segment assets		350,053			756			32,258			383,067
Segment liabilities		(29,310	)		(2,085	)		-			(31,395	)

- 24 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

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

	2019			2020
	HK$'000			HK$'000
Revenue
Total revenue of reportable segments		64,556			382,925
Other revenue		-			30
Consolidated revenue		64,556			382,955
Profit or loss
Total profit/(loss) of reportable segment		2,428			(5,951	)
Other income/(loss)		2,087			(2,866	)
Unallocated amounts:
Share of losses of associates		(9,415	)		(1,112	)
Equity-settled share-based payment expense		(8,283	)		(4,028	)
Salaries and other benefits		(11,139	)		(14,046	)
Depreciation		(2,653	)		(2,544	)
Depreciation charge of right-of-use assets		(4,599	)		(4,641	)
Legal and consultation fee		(2,302	)		(2,264	)
Impairment of trade receivables		-			(837	)
Impairment of other receivables		-			(1,068	)
Donation		(1,000	)		(1,000	)
Consolidated loss before tax for the year		(34,876	)		(40,357	)
Assets
Total assets of reportable segments		293,017			383,067
Other assets		8,102			17,597
Unallocated amounts:
Property, plant and equipment		3,579			4,837
Right-of-use assets		3,258			5,497
Investments in associates		3,384			2,431
Equity investments at fair value through other comprehensive income		5,140			5,057
Cash and cash equivalents		44,977			19,866
Prepayments		740			16,187
Loan receivables		49,718			-
Consolidated total assets		411,915			454,539
Liabilities
Total liabilities of reportable segments		(58,075	)		(31,395	)
Other liabilities		(2,136	)		(2,078	)
Unallocated amounts:
Amount due to a shareholder of a joint venture		(2,334	)		(2,334	)
Tax payable		(3,278	)		(3,278	)
Lease liabilities		(3,345	)		(5,744	)
Consolidated total liabilities		(69,168	)		(44,829	)

(b) Geographical information

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

- 25 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

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

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

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

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

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

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

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

8. REVENUE

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

- 26 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

Disaggregation of revenue from contracts with customers:

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

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

Big Data Centre Services

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

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

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

Online Game Business

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

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

- 27 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

Lottery Business

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

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

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

9. OTHER INCOME AND GAINS

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

10. FINANCE COSTS

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

11.

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

(a) DIRECTORS' AND CHIEF EXECUTIVE'S EMOLUMENTS

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

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

- 28 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

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

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

	For the year ended 31 December 2020
			Salaries,						Equity-settled
			allowances				Pension		share-based
			and benefits				scheme		payment		Total
	Fees		in kind		Bonus^#		contributions		expense		emoluments
	HK$'000		HK$'000		HK$'000		HK$'000		HK$'000		HK$'000
Independent non-executive directors:
Dr. Lu Haitian		250		-		-		-		47		297
Mr. Lin Sen		250		-		-		-		47		297
Mr. Huang Jian¹		-		-		-		-		16		16
		500		-		-		-		110		610
Executive directors:
Ms. Huang Lilan²		250		250		21		13		234		768
		250		250		21		13		234		768
Non-executive directors:
Mr. Pan Zhengming³		-		-		-		-		94		94
Mr. Yuan Qiang		250		-		-		-		724		974
Ms. Zhang Jing⁴		250		-		-		-		354		604
		500		-		-		-		1,172		1,672
Chief executive:
Mr. Wang Bingzhong⁵		250		1,958		-		15		724		2,947
Mr. Yan Hao⁶		250		500		-		6		279		1,035
		500		2,458		-		21		1,003		3,982
		1,750		2,708		21		34		2,519		7,032

- 29 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

There were no other emoluments payable to the independent non-executive directors during these two years.

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

Notes:

Appointed on 7 August 2020.

Included in remuneration packages under the position of chief financial officer of the Company for the year ended 31 December 2020.

Resigned on 2 January 2020.

Appointed on 2 January 2020.

Resigned on 31 October 2020.

Resigned as independent non-executive director on 7 August 2020, appointed as executive director and chief executive officer on 1 September 2020.

12.

INCOME TAX

No provision for Hong Kong profits tax has been made as the Hong Kong subsidiaries did not generate any assessable profits arising in Hong Kong during these two years.

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

	2019			2020
	HK$'000			HK$'000
Current - Mainland China
Charge for the year		19			3,937
Deferred tax (note 32)		(124	)		(1,039	)

Total tax (credit)/expense for the year		(105	)		2,898

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

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

Income tax (credit)/expense		(105	)		2,898

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

- 30 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

As at 31 December 2019 and 2020, included in unrecognised tax losses are losses of HK$53,494,000 and HK$42,586,000 respectively that are allowed to be carried forward and utilised against the taxable income of subsequent years. The loss carryforward period cannot exceed 5 years and expires between 2020 and 2025. Other losses of HK$214,052,000 and HK$269,672,000 respectively as at 31 December 2019 and 2020 may be carried forward indefinitely.

At 31 December 2019 and 2020, no deferred tax has been recognised for withholding taxes that would be payable on the unremitted earnings that are subject to withholding taxes of the Group’s subsidiary established in Mainland China. In the opinion of the directors, it is not probable that these subsidiaries will distribute such earnings in the foreseeable future.

13.

LOSS FOR THE YEAR

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

	Notes		2019			2020
			HK$'000			HK$'000
Auditors’ remuneration				650			720
Cost of sales and service rendered				51,237			342,213
Staff costs (including directors’ remuneration):
Salaries and other benefits				14,363			27,271
Bonus				904			1,851
Pension scheme contributions				742			522
Equity-settled share option expense				8,283			4,028

				24,292			33,672
Depreciation (included in cost of sales and service rendered)				11,427			38,513
Depreciation				2,930			3,167
Depreciation charge of right-of-use assets		17		4,838			5,257
Loss on disposal of items of property, plant and equipment				19			-
Net exchange (gains)/losses				(1,098	)		1,339
Impairment of investments in associates				-			1,047
Impairment of trade receivables		25		-			837
Impairment of other receivables		26		-			1,068

14.

DIVIDEND

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

15.

LOSS PER SHARE

The calculation of the basic earnings per share amount is based on the loss for the year attributable to ordinary equity holders of the Company and the weighted average number of ordinary shares of approximately 315,513,000 and HK$330,357,000 respectively in issue during the year ended 31 December 2019 and 2020.

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

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

	2019			2020
		HK$'000			HK$'000
Loss
Loss for the purpose of calculating basic and diluted earnings per share		(33,618	)		(46,767	)

- 31 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

	2019		2020
		'000		'000
Number of shares
Weighted average number of ordinary shares in issue during the year for the purposes of the basic and diluted loss per share		315,513		330,357

16.

PROPERTY, PLANT AND EQUIPMENT


							Machinery			Furniture,
	Construction			Leasehold			and			fixtures and			Motor
	in progress			improvements			equipment			equipment			vehicles			Total
		HK$'000			HK$'000			HK$'000			HK$'000			HK$'000			HK$'000
As at 31 December 2019
COST:
At 1 January 2019		-			5,850			4,514			318			1,984			12,666
Additions		72,105			791			101,795			193			1,247			176,131
Acquisition of subsidiaries		-			-			-			17			93			110
Disposal		-			-			(390	)		(47	)		(784	)		(1,221	)
Exchange realignment		(1,269	)		(13	)		(1,795	)		(3	)		(10	)		(3,090	)

At 31 December 2019		70,836			6,628			104,124			478			2,530			184,596

ACCUMULATED DEPRECIATION:
At 1 January 2019		-			1,709			4,176			141			154			6,180
Provided during the year		-			2,439			11,649			60			209			14,357
Disposal		-			-			(99	)		(37	)		(118	)		(254	)
Exchange realignment		-			(1	)		(206	)		-			-			(207	)

At 31 December 2019		-			4,147			15,520			164			245			20,076

CARRYING AMOUNT:
At 31 December 2019		70,836			2,481			88,604			314			2,285			164,520

						Machinery		Furniture,
	Construction			Leasehold		and		fixtures and		Motor
	in progress			improvements		equipment		equipment		vehicles		Total
		HK$'000			HK$'000		HK$'000		HK$'000		HK$'000		HK$'000
As at 31 December 2020
COST:
At 1 January 2020		70,836			6,628		104,124		478		2,530		184,596
Additions		117,270			4,332		3,567		187		105		125,461
Transfer		(188,387	)		6,192		182,195		-		-		-
Exchange realignment		580			427		16,813		29		49		17,898

At 31 December 2020		299			17,579		306,699		694		2,684		327,955

ACCUMULATED DEPRECIATION:
At 1 January 2020		-			4,147		15,520		164		245		20,076
Provided during the year		-			3,310		37,949		182		239		41,680
Exchange realignment		-			63		2,856		8		3		2,930

At 31 December 2020		-			7,520		56,325		354		487		64,686

CARRYING AMOUNT:
At 31 December 2020		299			10,059		250,374		340		2,197		263,269

- 32 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

17.

LEASES AND RIGHT-OF-USE ASSETS

Disclosures of lease-related items:

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

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

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

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

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

- 33 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

18.

GOODWILL


	HK$'000
Cost
At 1 January 2019	-
Arising on acquisition of a subsidiary		10,948
Exchange realignment		48

At 31 December 2019 and 1 January 2020		10,996
Exchange realignment		707

At 31 December 2020		11,703
Carrying amount
At 31 December 2019		10,996
At 31 December 2020		11,703

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

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

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

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

As at 31 December 2019 and 2020, the Group prepares cash flow forecasts derived from the most recent financial budgets approved by the directors for the next five years with the residual period using the growth rate of 0% and 0% respectively. These rates do not exceed the average long-term growth rate for the relevant markets.

As at 31 December 2019 and 2020, the rate used to discount the forecast cash flows from the Group’s provision of big data service is 21.6% and 21.1% respectively.

- 34 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

19. INTANGIBLE ASSETS

				Data analysis
				system
	Lease benefit			(purchased)			Total
	HK$'000			HK$'000			HK$'000
COST:
At 1 January 2019		-			-			-
Additions		-			2,125			2,125
Acquisition of subsidiaries		4,598			-			4,598
Exchange realignment		14			(37	)		(23	)

At 31 December 2019 and 1 January 2020		4,612			2,088			6,700

Exchange realignment		6			134			140

At 31 December 2020		4,618			2,222			6,840

ACCUMULATED AMORTISATION:
At 1 January 2019		-			-			-
Amortisation for the year		496			567			1,063
Exchange realignment		(9	)		(9	)		(18	)

At 31 December 2019 and 1 January 2020		487			558			1,045

Amortisation for the year		4,125			1,542			5,667
Exchange realignment		6			122			128

At 31 December 2020		4,618			2,222			6,840

CARRYING AMOUNT:
At 31 December 2019		4,125			1,530			5,655
At 31 December 2020		-			-			-

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

The lease benefit was arisen from acquisition of subsidiaries.

- 35 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

20.

SUBSIDIARIES

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

				Percentage of equity
	Place of	Registered share		interests attributable to
	incorporation/	capital/		the Company						Principal
Company name	registration	issued ordinary		2019			2020			activities
Directly held:
Brighten Express Limited	Hong Kong		HK$1		100	%		100	%	Investment holding

Rising Move International Limited	BVI		US$100		100	%		100	%	Investment holding

Interactive Lab Limited	BVI		US$100		100	%		100	%	Exploring cutting-edge technologies and applications
Indirectly held:

Precious Success Holdings Limited	BVI		US$200		51	%		51	%	Investment holding

PAL Development Limited	Hong Kong		HK$250,000,000		51	%		51	%	Investment holding

Global Score Asia Limited	BVI		US$20,000		100	%		100	%	Investment holding

Trade Express Services Inc.	BVI		US$20,000		100	%		100	%	Investment holding

Rise Accord Holdings Limited	BVI		US$100		100	%		100	%	Investment holding

China Excellent Net Technology Investment Limited	Hong Kong		HK$3,194,581		95	%		95	%	Provision of services for distribution of mobile lottery products

PAL (Beijing) Information Technology Limited^*%	PRC		Nil		51	%		0	%	Provision of management services for distribution of lottery products

Beijing Hua Ying Feng Cai Technology Limited^*%	PRC		Nil		51	%		0	%	Provision of management services for distribution of lottery products

Beijing Huancai Information Technology Limited^*% ("Beijing Huancai")	PRC		Nil		52.5	%		0	%	Provision of services for distribution of mobile lottery products

Hong Kong Interactive Lab Limited	Hong Kong		HK$1		100	%		100	%	Exploring cutting-edge technologies and applications

Virtual Asset Ratings Limited	BVI		US$50,000		51	%		51	%	Exploring cutting-edge technologies and applications

- 36 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

Loto Interactive Information Technology (Shenzhen) Limited^{*^}("Loto Shenzhen")	PRC	RMB200,000,000/ RMB147,996,271	100	%	100	%	Investment holding

Shenzhen Lewanwuxian Information Technology Co., Ltd.*^# ("Shenzhen Lewanwuxian")	PRC	RMB10,000,000/ RMB5,100,000	51	%	51	%	Operating online games

Beijing Lewanwuxian Information Technology Co., Ltd.^*	PRC	RMB10,000,000/ RMB Nil	51	%	51	%	Distribution of online games

Zhejiang Keyinghuancai Information Technology Co., Ltd.^*	PRC	RMB10,000,000/ RMB Nil	100	%	100	%	Developing online games

Chengdu Keying Interactive Information Technology Limited*	PRC	RMB10,000,000/ RMB Nil	100	%	100	%	Providing data analysis, storage services and ancillary administrative and consulting services

Chengdu Yilaike Technology Co., Ltd.* ("Chengdu Yilaike")	PRC	RMB10,000,000/ RMB50,000	100	%	100	%	Providing data analysis, storage services and ancillary administrative and consulting services

Ganzi Changhe Hydropower Consumption Service Co., Ltd* ("Ganzi Changhe Hydropower")	PRC	RMB180,000,000/ RMB150,000,000	91.6	%	51	%	Providing data analysis, storage services and ancillary administrative and consulting services

Sichuan Lecaiyuntian @	PRC	RMB60,000,000/ RMB Nil	100	%	100	%	Providing data analysis, storage services and ancillary administrative and consulting services

Interactive Medical Lab Limited	BVI	US$100	100	%	100	%	Investment holding

Interactive Medical Lab	Delaware	US$100	100	%	100	%	Investment holding

Might Winner Limited	Hong Kong	HK $1	100	%	100	%	Investment holding

H.K CB. Cute Technology Co.,	Hong Kong	HK $10,000	100	%	100	%	Investment holding

Shenzhen Quanjing Financial Leasing Co., Ltd *	PRC	RMB 20,000,000/ RMB Nil	100	%	100	%	Investment holding

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

^{^} Loto Shenzhen was established in the PRC with limited liability on 14 December 2017. The registered capital of Loto Shenzhen is RMB200,000,000 of RMB147,996,271 has been paid by the Group as at 31 December 2019 and 2020.

^#Shenzhen Lewanwuxian was established in the PRC with limited liability on 14 December 2017. The registered capital of Shenzhen Lewanwuxian is RMB10,000,000 of RMB5,100,000 has been paid by the Group as at 31 December 2019 and 2020.

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

^%These companies were deregistered in the current year.

- 37 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

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

Name	Beijing Huancai			Ganzi Changhe Hydropower
	2019			2019			2020
Principal place of business/country of incorporation		PRC			PRC			PRC
% of ownership interests/voting rights held by NCI		47.5	%		8.4	%		49	%
		HK$'000			HK$'000			HK$'000

At 31 December:
Non-current assets		-			88			180,654
Current assets		6,966			94,618			27,845
Current liabilities		(3,639	)		(2,713	)		(22,128	)

Net assets		3,327			91,993			186,371
Accumulated NCI		1,580			7,727			91,322

Year ended 31 December:
Revenue		-			-			164,208
Total expenses		(876	)		(1,244	)		(155,292	)
(Loss)/Profit for the year		(2,080	)		(1,244	)		8,916
Total comprehensive (loss)/income		(2,080	)		(1,244	)		8,916
(Loss)/Profit allocated to NCI		(988	)		(104	)		3,678
Net cash generated from/(used in) operating activities		5,421			(87,572	)		22,886
Net cash generated from/(used in) investing activities		113			(88	)		(117,602	)
Net cash generated from financing activities		-			93,215			89,157
Effect of foreign exchange rate changes, net		(245	)		22			(310	)
Net increase/(decrease) in cash and cash equivalents		5,289			5,577			(5,869	)

- 38 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

21.

INVESTMENTS IN ASSOCIATES

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

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

	Place of incorporation/	Percentage of equity interests attributable to the Company
Company name	registration	2019			2020			Principal activities
ChariLot Company Limited ("ChariLot")	Hong Kong		40	%		40	%	Investment holding and provision of services for the distribution of lottery products

Guangzhou Sentai Information Technology Co., Ltd.^* ("Guangzhou Sentai")	PRC		20	%		20	%	Self-media

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

Guangzhou Sentai is a company mainly engaged in operating a self-media called 世链财经 (www.shilian.com) providing updated blockchain information.

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

Name	Guangzhou Sentai
	2019		2020
Principal place of business/country of incorporation		PRC/PRC		PRC/PRC

Principal activities		Self-media

% ownership interests/voting rights held by the Group		20%/20%

At 31 December:	HK$'000		HK$'000
Non-current assets	20,308		21,616
Current assets	5,891		6,392
Current liabilities	(5,644	)	(6,470	)

Net assets	20,555		21,538
Group's share of net assets	4,111		4,308
Goodwill	1,203		1,282
Impairment losses	(1,930	)	(3,159	)

Group's share of carrying amount of interest	3,384		2,431

- 39 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

Year ended 31 December:
Revenue	1,912		1,797
Loss from continuing operations	(741	)	(341	)
Total comprehensive loss	(741	)	(341	)

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

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

22. INVESTMENT IN A JOINT VENTURE

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

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

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

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

23. EQUITY INVESTMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

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

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

- 40 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

24. LOAN RECEIVABLES

(a) Brighten Topper Limited

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

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

(b) Yourich Inc Limited

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

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

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

During the year ended 31 December 2020, the loan receivable was fully repaid.

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

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

During the year ended 31 December 2020, the loan receivable in relation to the Convertible Note was fully repaid.

25. TRADE RECEIVABLES

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

- 41 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

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

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

		19,949		8,400

Reconciliation of loss allowance for trade receivables:

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

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

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

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

- 42 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

26. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES

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

			41,823		84,086
Impairment of other receivables			-		(1,068	)

			41,823		83,018

Notes:

	(i)	As of the report date, the balance was fully settled.
	(ii)	As of the report date, the amount of approximately HK$15,502,000 was refunded due to the cancellation of the purchase order as at 31 December 2020.

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

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

27. CASH AND CASH EQUIVALENTS

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

		95,030		44,252

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

- 43 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

28.

TRADE PAYABLES

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

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

		24,300		4,611

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

29.

ACCRUALS AND OTHER PAYABLES

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

		24,720		25,734

30.

LEASE LIABILITIES

	Lease payments						Present value of lease payments
	2019			2020			2019			2020
	HK$'000			HK$'000			HK$'000			HK$'000
Within one year		3,854			3,610			3,747			3,360
In the second to fifth years, inclusive		715			3,316			692			3,236

		4,569			6,926
Less: Future finance charges		(130	)		(330	)

Present value of lease liabilities		4,439			6,596			4,439			6,596
Less: Amount due for settlement within 12 months (shown under current liabilities)								(3,747	)		(3,360	)
Amount due for settlement after 12 months								692			3,236

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

31.

AMOUNT DUE TO HOLDING COMPANY/A RELATED COMPANY

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

- 44 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

32.	DEFERRED TAX LIABILITIES

	The movements in deferred tax liabilities are as follows:

	Fair value
	adjustments
	arising from
	acquisition of
	subsidiaries			Total
	HK$'000			HK$'000
At 1 January 2019		-			-
Acquisition of subsidiaries		1,150			1,150
Credited to profit or loss		(124	)		(124	)
Exchange realignment		5			5

At 31 December 2019 and 1 January 2020		1,031			1,031
Credited to profit or loss		(1,039	)		(1,039	)
Exchange realignment		8			8
At 31 December 2020		-			-

33.

SHARE CAPITAL

	2019		2020
	HK$'000		HK$'000
Authorised
550,000,000 ordinary shares of HK$0.1 each		55,000		55,000
		2019		2020
		HK$'000		HK$'000
Issued and fully paid:
315,859,983 and 379,023,983 ordinary shares respectively of HK$0.1 each		31,586		37,902
A summary of movements in the Company’s share capital is as follows:

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

- 45 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

Note:

(a)

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

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

(b)

A share consolidation has taken place on 28 May 2020. that every ten issued and unissued existing shares of HK$0.01 each in the share capital of the Company has been consolidated into one consolidated share of HK$0.1 each in the share capital of the Company.

(c)

A placing has taken place on 9 October 2020. A total of 63,164,000 placing shares have been placed at the placing price of HK$0.26 per placing share. The gross proceeds and net proceeds from the placing amounted to approximately HK$16,423,000 and HK$16,028,000, respectively.

34.

RESERVES

(a)

Group

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

(b)

Company

						Equity
			Share-based			investment
	Share		payment			revaluation			Accumulated
	premium		reserve			reserve			losses			Total
	HK$'000		HK$'000			HK$'000			HK$'000			HK$'000
At 1 January 2019		327,928		12,598			-			(4,797	)		335,729
Loss for the year		-		-			-			(31,547	)		(31,547	)
Issue of ordinary shares upon exercise of
share options		1,266		-			-			-			1,266
Equity-settled share-based payment expense		-		8,283			-			-			8,283
Fair value changes of equity investments at
fair value through other comprehensive income		-		-			(2,570	)		-			(2,570	)

At 31 December 2019 and 1 January 2020		329,194		20,881			(2,570	)		(36,344	)		311,161
Loss for the year		-		-			-			(30,512	)		(30,512	)
Issue of ordinary shares upon exercise of
share options		9,712		-			-			-			9,712
Equity-settled share-based payment expense		-		4,028			-			-			4,028
Cancellation of share option		-		(15,539	)		-			15,539			-
Fair value changes of equity investments at
fair value through other comprehensive income		-		-			(83	)		-			(83	)
At 31 December 2020		338,906		9,370			(2,653	)		(51,317	)		294,306

- 46 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

(c)

Nature and purpose of reserves

(i)

Share premium account

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

(ii) Share-based payment reserve

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

(iii)

Exchange reserve

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

35.

SHARE-BASED PAYMENTS

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

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

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

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

(a)

Purpose of the schemes

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

(b)

Participants of the schemes

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

- 47 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

(c)

Total number of shares available for issue under the schemes

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

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

(d)

Maximum entitlement of each participant under the schemes

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

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

(e)

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

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

(f)

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

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

(g)

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

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

(h)

The basis of determining the exercise price

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

(i)

The remaining life of the scheme

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

- 48 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

The 2012 Share Option Scheme

Movements of the share options under the 2012 Share Option Scheme during the year ended 31 December 2019 and 2020 are set out below:

											Outstanding at					Share																		Share price at
Category of	Outstanding at		Granted during		Reclassified			Exercise during			31.12.2019 &		Reclassified on			consolidation on			Cancelled during			Granted during		Reclassified on			Lapsed during			Outstanding at		Date of grant of		date of grant of		Exercise price of
participants	1.1.2019		the year		during the year			the year			1.1.2020		2.1.2020⁵			28.5.2020			the year⁶			the year		1.9.2020⁷			on 23.11.2020⁸			31.12.2020		share options		share options⁹		share options⁹
																																		HK$		HK$
Director¹		84,000,000		-		-			-			84,000,000		(5,000,000	)		(71,100,000	)		(7,900,000	)		-		-			-			-		05.01.2018		1.87		2.00
Director²		-		84,000,000		-			-			84,000,000		(1,332,000	)		(74,401,200	)		-			-		-			-			8,266,800		01.04.2019		1.10		1.10
Director³		-		-		-			-			-		-			-			-			10,900,000		3,100,000			-			14,000,000		10.08.2020		0.26		0.26

Sub-total:		84,000,000		84,000,000		-			-			168,000,000		(6,332,000	)		(145,501,200	)		(7,900,000	)		10,900,000		3,100,000			-			22,266,800
Employees¹		1,800,000		-		300,000			-			2,100,000		-			(1,890,000	)		(210,000	)		-		-			-			-		05.01.2018		1.87		2.00
Employees²		-		800,000		300,000			-			1,100,000		-			(990,000	)		-			-		-			-			110,000		01.04.2019		1.10		1.10
Employees³		-		-		-			-			-		-			-			-			900,000		-			-			900,000		10.08.2020		0.26		0.26

Sub-total:		1,800,000		800,000		600,000			-			3,200,000		-			(2,880,000	)		(210,000	)		900,000		-			-			1,010,000
Others¹		67,600,000		-		(300,000	)		-			67,300,000		5,000,000			(65,070,000	)		(6,830,000	)		-		-			-			400,000		05.01.2018		1.87		2.00
Others²		-		70,300,000		(300,000	)		(12,664,000	)		57,336,000		1,332,000			(52,801,200	)		-			-		-			(600,000	)		5,266,800		01.04.2019		1.10		1.10
Others³		-		-		-			-			-		-			-			-			13,660,000		(3,100,000	)		(600,000	)		9,960,000		10.08.2020		0.26		0.26

Sub-total:		67,600,000		70,300,000		(600,000	)		(12,664,000	)		124,636,000		6,332,000			(117,871,200	)		(6,830,000	)		13,660,000		(3,100,000	)		(1,200,000	)		15,626,800
Total:		153,400,000		155,100,000		-			(12,664,000	)		295,836,000		-			(266,252,400	)		(14,940,000	)		25,460,000		-			(1,200,000	)		38,903,600
Weighted average
exercise price
(HK$)		0.20		0.11					0.11			0.16								2.00			0.26					0.68			0.57
Share options
exercisable		51,108,000										141,228,000																			17,344,800

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

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

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

The category “Others” represents consultants of the Group. Consultants are individuals who rendered consultancy services in respect of the business development to the Group without receiving any compensation.

The Group granted share options to them for recognising their services similar to those rendered by employees of the Group.

To better reflect Mr. Pan Zhengming’s resignation as non-executive director on 2 January 2020, and Ms. Zhang Jing's appointment as non-executive director on 2 January 2020, the type of participant has been reclassified from directors to others, and from others to directors respectively.

14,940,000 share options granted to the options holders were cancelled in accordance with the terms of the share option scheme adopted by the Group on 18 May 2012.

To better reflect Mr. Yan Hao's appointment as independent non-executive director and chief executive officer on 1 September 2020, the type of participant has been reclassified from others to directors.

Mr. Pan Zhengming’s appointment as consultant has been terminated on 23 November 2020. 1,200,000 outstanding share options granted to him were lapsed on the same date.

The share price at date of grant of share options and the exercise price of share options have ebeen adjusted to reflect the Share Consolidation.

- 49 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

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

	2019			2020
Weighted average share price (HK$)		1.10			0.26
Weighted average exercise price (HK$)		1.10			0.26
Expected volatility		75.86	%		87.11	%
Risk free rate		1.40	%		0.27	%
Expected dividend yield		0.00	%		0.00	%

The total fair values of the share options granted in 2019 and 2020 were at amount of approximately HK$7,914,000 and HK$4,014,000 respectively. During the year ended 31 December 2019 and 2020, an amount of approximately HK$8,283,000 and HK$4,028,000 respectively were recognised as equity-settled share option expense.

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

During the year ended 31 December 2019, none of the share options were lapsed due to termination of a consultant and none of the share options were cancelled under the 2012 Share Option Scheme.

During the year ended 31 December 2020, 1,200,000 of the share options were lapsed due to termination of a consultant and 14,940,000 of the share options were cancelled under the 2012 Share Option Scheme.

36.

NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS

(a)

Acquisition of subsidiaries

(i)

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

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

Net assets acquired:	HK$'000
Prepayments, deposits and other receivables		702
Bank and cash balances		82
Trade and other payables		(645	)
Other tax assets		935
		1,074
Gain on bargain purchase		(1,074	)
		-
Satisfied by:

Cash (in RMB1)		-

Total consideration transferred		-

Net cash inflow arising on acquisition:
Cash consideration paid (in RMB1)		-
Cash and cash equivalents acquired		(82	)
		(82	)

- 50 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

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

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

(ii)

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

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

Net assets acquired:	HK$'000
Property, plant and equipment		110
Intangible assets		4,598
Trade receivables		23,187
Prepayments, deposits and other receivables		11,423
Bank and cash balances		3,195
Trade and other payables		(37,185	)
Current tax liabilities		(203	)
Deferred tax liabilities		(1,150	)

		3,975
Goodwill		10,948

		14,923
Satisfied by:
Cash		14,923

Total consideration transferred		14,923
Net cash outflow arising on acquisition:
Cash consideration paid		14,923
Cash and cash equivalents acquired		(3,195	)
		11,728

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

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

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

- 51 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

(b) Changes in liabilities arising from financing activities

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

										Total
										liabilities
				Amount due			Amount due			from
	Lease			to a related			to holding			financing
	liabilities			company			company			activities
	HK$'000			HK$'000			HK$'000			HK$'000
At 1 January 2019		-			-			39			39
Change in cash flows		(3,741	)		11,380			(38	)		7,601
Non-cash changes
- impact of first adoption of IFRS 16		7,857			-			-			7,857
- Interest charges		323			-			-			323

At 31 December 2019 and 1 January 2020		4,439			11,380			1			15,820
Change in cash flows		(4,425	)		(10,913	)		(1	)		(15,339	)
Non-cash changes
- additions		7,081			-			-			7,081
- interest charges		295			-			-			295
- rental concession		(833	)		-			-			(833	)
- exchange differences		39			-			-			39

At 31 December 2020		6,596			467			-			7,063

37.

CAPITAL COMMITMENTS

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

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

38.

RELATED PARTY TRANSACTIONS

(a)

Compensation of key management personnel of the Group:

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

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

- 52 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

39. STATEMENT OF FINANCIAL POSITION OF THE COMPANY

	2019		2020
	HK$'000		HK$'000
NON-CURRENT ASSETS
Property, plant and equipment		3,554		4,821
Investments in subsidiaries		2		2
Right-of-use assets		3,258		5,497
Equity investments at fair value through other comprehensive income		5,140		5,057

		11,954		15,377
CURRENT ASSETS
Loan receivables		49,718		-
Prepayments, deposits and other receivables		5,209		2,640
Amount due from subsidiaries		246,994		327,350
Cash and cash equivalents		42,802		19,248

		344,723		349,238
CURRENT LIABILITIES
Accruals and other payables		1,617		1,171
Lease liabilities		3,345		2,760
Amount due to subsidiaries		8,967		25,030
Amount due to holding company		1		-
Amount due to related parties		-		462

		13,930		29,423
NET CURRENT ASSETS		330,793		319,815
TOTAL ASSETS LESS CURRENT LIABILITIES		342,747		335,192
NON-CURRENT LIABILITIES
Lease liabilities		-		2,984
		-		2,984
NET ASSETS		342,747		332,208
EQUITY
Share capital		31,586		37,902
Reserves		311,161		294,306

TOTAL EQUITY		342,747		332,208

- 53 -

LOTO INTERACTIVE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TWO YEARS ENDED 31 DECEMBER 2019 AND 2020

40.

EVENTS AFTER THE END OF THE REPORTING PERIOD

(a)

On 12 January 2021, the Group and a shareholder (the “JV Partner”) of a non-wholly owned subsidiary (“JV Company”), holding 49% of the equity interest in the JV Company, entered into a repurchase agreement, pursuant to which the JV Partner shall repurchase the shares of the JV Company held by the Group at the total repurchase price in the amount of US$2 million.

(b)

On 28 January 2021, the Group and Holding Company entered into a subscription agreement, pursuant to which Holding Company has agreed to subscribe for, and the Company has conditionally agreed to allot and issue an aggregate of 169,354,839 shares (the “Subscription Share”) at the price of HK$0.62 per Subscription Share.

(c)

On 28 January 2021, the Group and two parties (the “Seller”), who hold 49% equity interest of Ganzi Changhe Hydropower, entered into an acquisition agreement (the “Acquisition Agreement”), pursuant to which the Group has agreed to purchase and the Sellers have conditionally agreed to sell the 49% equity interest of Ganzi Changhe Hydropower for a cash consideration of RMB88.2 million (equivalent to approximately HK$105.8 million) in accordance with the terms and conditions of the Acquisition Agreement.

41.

APPROVAL OF FINANCIAL STATEMENTS

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

- 54 -

Exhibit 99.2

Blockchain Alliance Technologies Limited

Combined Financial Statements

As of December 31, 2019 and 2020 and For the Years Then Ended

Index

	Pages

Independent Auditor’s Report	2

Combined Statements of Financial Position	3

Combined Statements of Profit/(Loss) and Other Comprehensive Income/(Loss)	4

Combined Statements of Changes in Net Parent Investment	5

Combined Statements of Cash Flows	6

Notes to Combined Financial Statements	7-16

Page 1

INDEPENDENT AUDITOR’S REPORT

Board of Directors and Shareholders

BIT Mining Limited

Report on the Financial Statements

We have audited the accompanying combined financial statements of Blockchain Alliance Technologies Limited and its subsidiaries, which comprise the combined balance sheets as of December 31, 2020 and 2019, and the related combined statements of profit/(loss) and other comprehensive income/(loss), changes in net parent investment, and cash flows for the years then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board ; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of Blockchain Alliance Technologies Limited and its subsidiaries as of December 31, 2020 and 2019, and the results of their operations and their cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

/s/ Malonebailey LLP

Houston, Texas

July 30, 2021

Page 2

Combined Statements of Financial Position

(Amounts in U.S. Dollars)

	As of January 1, 2019		As of December 31, 2019		As of December 31, 2020
Assets
Cryptocurrencies	$	7,719,451	$	10,132,917	$	9,516,569
Other receivables		47,442		36,126		116,195
Total Current Assets		7,766,893		10,169,043		9,632,764

Intangible assets		696,191		696,191		696,191
Total Assets	$	8,463,084	$	10,865,234	$	10,328,955

Liabilities and Net Parent Investment
Current Liabilities
Trade payable	$	4,218,692	$	5,879,917	$	5,836,954
Trade payable – related party		629,869		300,728		531,189
Other payable and accruals		13,257		93,238		3,183,830
Total Current Liabilities		4,861,818		6,273,883		9,551,973

Total Liabilities		4,861,818		6,273,883		9,551,973

Net Parent Investment
Net parent investment		3,601,266		4,591,351		776,982
Total Net Parent Investment		3,601,266		4,591,351		776,982

Total Liabilities and Net Parent Investment	$	8,463,084	$	10,865,234	$	10,328,955

The accompanying notes are an integral part of these combined financial statements

Page 3

Combined Statements of Profit (Loss) and Other Comprehensive Income (Loss)

(Amounts in U.S. Dollars)

	For the Years Ended December 31,
	2019			2020
Revenues	$	1,131,041,156		$	1,250,250,601
Cost of revenues		1,119,678,303			1,263,951,414
Gross Profit / (Loss)		11,362,853			(13,700,813	)

Selling expenses		(1,134,982	)		(1,545,514	)
General and administrative expenses		(4,585,686	)		(4,620,284	)
Impairment loss of cryptocurrencies		(1,289,980	)		(172,055	)
Net gain on disposal of cryptocurrencies		3,068,431			1,852,725
Other operating loss		(46,875	)		(6,954	)

Profit / (Loss) Before Income Tax		7,373,761			(18,192,895	)

Income tax expense		-			-
Net Profit / (Loss)		7,373,761			(18,192,895	)

Other comprehensive income		-			-

Total Comprehensive Income/ (Loss)	$	7,373,761		$	(18,192,895	)

The accompanying notes are an integral part of these combined financial statements

Page 4

Combined Statements of Changes in Net Parent Investment

(Amounts in U.S. Dollars)

	Total Net Parent Investment
Balance, January 1, 2019	$	3,601,266
Profit for the year		7,373,761
Net distribution to parent		(6,383,676	)
Balance, December 31, 2019	$	4,591,351
Loss for the year		(18,192,895	)
Net contribution from parent		14,378,526
Balance, December 31, 2020	$	776,982

The accompanying notes are an integral part of these combined financial statements

Page 5

Combined Statements of Cash Flows

(Amounts in U.S. Dollars)

	For the Years Ended December 31,
	2019			2020
CASH FLOWS FROM OPERATING ACTIVITIES
Profit/(loss) for the year	$	7,373,761		$	(18,192,895	)
Adjustments for:
Revenue recognized on acceptance of cryptocurrencies		(962,217,021	)		(825,621,240	)
Impairment loss of cryptocurrencies		1,289,980			172,055
Gain on disposal of cryptocurrencies		(3,068,431	)		(1,852,725	)
Changes in non-cash working capital items:
Other receivables		11,316			(80,069	)
Trade payable		885,704,023			776,007,022
Trade payable – related party		62,875,991			58,215,447
Other payable and accruals		79,981			271,820
CASH USED IN OPERATING ACTIVITIES		(7,950,400	)		(11,080,585	)

CASH FLOWS FROM FINANCING ACTIVITY
Net contribution from parent		7,950,400			11,080,585
CASH PROVIDED BY FINANCING ACTIVITY		7,950,400			11,080,585

NET CHANGE IN CASH		-			-

CASH AT BEGINNING OF YEAR		-			-
CASH AT END OF YEAR	$	-		$	-

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest	$	-		$	-
Cash paid for income taxes	$	-		$	-

The accompanying notes are an integral part of these combined financial statements

Page 6

Nature of Operations

Blockchain Alliance Technologies Limited (the "Company") was incorporated under the law of British Virgin Islands (“BVI”) on March 11, 2020 under the name of “Bitmain Group Limited”, which was changed to the current name on February 19, 2021. The Company is a holding company. The Company and its subsidiaries (together, the “Group”) principally operates a cryptocurrency mining pool under the brand of BTC.com after the reorganization completed on April 15, 2021 (the “Reorganization”).

Through the Reorganization, Bitdeer Technologies Holding Company (“Bitdeer”) transferred the entire mining pool business and ownership of and registration right to the domain name btc.com (the “Transferred Business”), which was previously operated as part of Straitdeer Pte. Ltd. (formerly, Bitmaintech Pte. Ltd.) and its subsidiaries, subsidiaries of Bitdeer, to Blockchain Alliance HK Limited, wholly-owned subsidiary of the Company, and its wholly-owned subsidiary Beijing Guixinyanghang Technologies Limited, a Company incorporated under the Laws of the People’s Republic of China (“PRC”). After the Reorganization, Blockchain Alliance Technologies Holding Company (“Blockchain Alliance Holding”), a Cayman Island company and the 100% shareholder of the Company, was held by the group of shareholders of Bitdeer. The Reorganization is a transaction among entities under common control. As a result, the transaction is accounted for as if it occurred during the earliest period presented.

On February 16, 2021, BIT Mining Ltd. (“BIT”) entered into a share exchange agreement, which was further amended on April 15, 2021, with Blockchain Alliance Holding, pursuant to which, BIT agreed to issue an aggregate of 44,353,435 Class A ordinary shares to Blockchain Alliance Holding in exchange for the entire outstanding share capital of the Company. BIT and Blockchain Alliance Holding also agreed that, in the twelve-month period from April 1, 2021 to March 31, 2022, if the Transferred Business records net operating profit, BIT shall issue additional Class A ordinary shares to Blockchain Alliance Holding at par value and a maximum of 22,176,718 additional Class A ordinary shares shall be issuable. If the Transferred Business records net operating loss, BIT shall be entitled to repurchase certain Class A ordinary shares held by Blockchain Alliance Holding at par value and a maximum of 4,435,344 Class A ordinary shares shall be subject to such repurchase arrangement.

On April 15, 2021, the first closing of the transactions contemplated by the share exchange agreement was completed and the entire mining pool business operated under BTC.com have been transferred to BIT.

Summary of Significant Accounting Policies

Basis of Presentation and Principles of Combination

The accompanying Combined Financial Statements are for the Transferred Business that was transferred to the Group during the Reorganization mentioned in Note 1. Stand-alone financial statements have not historically been prepared for the Transferred Business. The Combined Financial Statements are prepared in conformity with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and Interpretations issued by the International Financial Reporting Standards Interpretations Committee (“IFRIC”). The Combined Financial Statements, except for the combined statements of cash flows, are prepared on the accrual basis. The measurement basis used is historical cost, except for certain accounts which are measured using the basis mentioned in the relevant notes herein.

In accordance with IFRS, certain situations require management to make estimates based on judgments and assumptions, which may affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. They also may affect the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates upon subsequent resolution of identified matters. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Combined Financial Statements are disclosed in Note 3.

Page 7

Transactions between the combined companies and the balances and unrealized gains or losses arising from intra-group transactions have been eliminated in the preparation of the Combined Financial Statements.

These are the first financial statements of the Group prepared in accordance with IFRS. The Group applied IFRS 1 “First-time Adoption of International Financial Reporting Standards” (“IFRS 1”) in preparing these financial statements. Since the Group has not previously prepared any financial statements, no reconciliations from previous GAAP to IFRS are required. The same accounting policies have been applied during the 2019 and 2020 financial periods.

Basis of Carve-out

The Combined Financial Statements of the Transferred Business include all assets and liabilities that have been determined to be directly attributable to Transferred Business. All transactions between the Transferred Business and Bitdeer have been included as related party transactions in these Combined Financial Statements and considered to be effectively settled at the time the transaction is recorded. The total net effect of the settlement of these transactions is reflected within net parent investment in the combined statements of financial position. Such transactions, except for those conducted in the form of cryptocurrencies, are presented in the combined statements of cash flows as financing activity.

The Combined Financial Statements of the Transferred Business also include all revenues and costs directly attributable to the Transferred Business. These include costs charged to the Transferred Business by Bitdeer for certain supporting functions and services in the normal course of business. These costs have been allocated on a basis considered reasonable by management using either specific identification or proportional allocations based on headcount or other reasonable methods of allocation. Income tax expense was estimated based on statutory tax rate, adjusted as appropriate for the effects of known non-taxable and non-deductible items reported in the combined statements of profit (loss) and other comprehensive income (loss) as described above. However, the Combined Financial Statements of the Transferred Business may not reflect the actual costs that would have been incurred and may not be indicative of the Transferred Business’s combined results, financial position, and cash flows had it operated as a separate, stand-alone entity during the periods presented.

Cost Allocations

The Combined Financial Statements of the Transferred Business include general corporate expenses of Bitdeer that have been allocated to the Transferred Business for certain support functions provided on a centralized basis, such as accounting and finance, treasury, audit, legal, information technology, human resources, facilities, employee benefits and compensation, and research and development (“R&D”) activities. These costs have been allocated on a basis considered reasonable by management using either specific identification or proportional allocations based on headcount or other reasonable methods of allocation. The net expenses resulted from the cost allocations were immaterial in the years ended December 31, 2019 and 2020.

Net Parent Investment

The Transferred Business did not comprise a separate legal entity or group of entities during the years ended December 31, 2019 and 2020. Therefore, it is not meaningful to present share capital or an analysis of reserves. Changes in net assets attributed to Bitdeer are presented separately in the combined statements of changes in net parent investment through the line item “net contribution from / (distribution to) parent”.

Presentation and Functional Currency

Items included in the Combined Financial Statements are measured using the currency of the primary economic environment in which the Group operates (“the functional currency”). During the years ended December 31, 2019 and 2020, the primary operations of the Group were conducted in Singapore and US dollar (“$”) was considered as the functional currency. The Combined Financial Statements were presented in US dollar unless otherwise stated.

Page 8

Revenue Recognition

The Group operates its mining pool, BTC.com, to enable providers of computing power (“pool participants”) to participate in crypto-mining activities in an efficient manner in the blockchain network, in exchange for a fee (“pool operator fee”) for its coordination efforts as the pool operator. The Group receives all the mining rewards, and then allocates mining rewards to each pool participant net of the pool operator fees based on the sharing mechanism predetermined. The mining rewards include the block rewards and the transaction verification fees related to the transactions included in the block.

The Group recognizes mining pool revenue by analogy to IFRS 15 “Revenue from contracts with customers”. Income is classified by the Group as revenue when it arises from the provision of services in the ordinary course of the business. Revenue is recognized when control over service is transferred to the customer, at the amount of promised consideration to which the Group is expected to be entitled, excluding those amounts collected on behalf of third parties. Revenue excludes value added tax or other sales taxes and is after deduction of trade discount, if any.

Mining pool revenue is recognized by applying the following five steps:

1)        Identify the contract with the customer

2)        Identify the performance obligations in the contract

3)        Determine the transaction price

4)        Allocate the transaction price to the performance obligations in the contract

5)        Recognize revenue when, or as, the performance obligation is satisfied

The Group makes an analogy to IFRS 15 and treats the blockchain network as the “customers” for the purposes of IFRS 15 with which the Company contracts with under “whitepaper”, or general rules of the network. Providing computing power in cryptocurrency transaction verification services is an output of the Group’s ordinary activities. The provision of providing such computing power is the only performance obligation in the Group’s contracts with the blockchain network. The transaction consideration the Group receives, if any, is noncash consideration, which the Group measures at fair value on the date received, which is not materially different than the fair value at contract inception or the time the Group has earned the award from the blockchain network. The consideration is all variable. Because it is not probable that a significant reversal of cumulative revenue will not occur, the consideration is constrained until the Group successfully places a block and receives confirmation of the consideration it will receive, at which time revenue is recognized. There is no significant financing component in these transactions.

Fair value of the cryptocurrency award received is determined using the quoted price of the related cryptocurrency at the time of receipt.

Gross basis revenue

The Group recognizes the mining pool revenue on a gross basis. It coordinates all the computing power within the mining pool, delivers such aggregated computing power to the blockchain network, collects centrally all mining rewards and distributes them in accordance with the predetermined sharing mechanisms. The Group has control over the pool participants’ computing power. Although the pool participants can enter and exit the pool at will and deploy whatever qualifying types of mining machines, during the mining process, the Group dictates the tasks and the participants’ mining machines merely follow the allocation prescribed by the Group. As a result, the Group is primarily responsible for fulfilling the promise to provide the specified service. Further, under existing sharing mechanisms, the Group is exposed to the risk that actual block rewards may differ from expected rewards, therefore, bears the inventory risk before the specified service has been transferred to a customer.

Page 9

Since there are currently no accounting standards under IFRS or alternative accounting framework that specifically address cryptocurrencies, management has exercised significant judgment in determining the appropriate accounting treatment for cryptocurrencies held or recognized as revenues. In the event authoritative guidance is enacted by the IASB or IFRIC, the Group may be required to change its policies, which could have an effect on the Group’s financial position and results from operations.

Cost of Revenues

Cost of revenues consists primarily of the mining rewards allocated to each pool participant in exchange for their computing power contributed to the mining pool. The mining rewards allocated to the pool participants include both the block rewards as well as the transaction verification fees related to the transactions included in the block, depending on the sharing mechanism chosen by individual pool participants. Cost of revenue also consists of other direct costs related to providing the mining pool service such as server fees and labor for maintaining the mining pool service.

Cryptocurrencies

Cryptocurrencies consist of cryptocurrency denominated assets and are included in current assets. The Group accounts for the cryptocurrencies primarily received from operation of the mining pool as intangible assets with indefinite useful life in its statements of financial position. The Group adopts the cost model to account for its cryptocurrencies and reviews their impairment at each reporting date in accordance with IAS 38 “Intangible assets”. The Group accounts for cryptocurrencies at cost, instead of revaluing cryptocurrencies at their fair value on each reporting date, because the latter model is subject to inherent and substantial volatility in the value of cryptocurrencies from time to time.

Cryptocurrencies are carried at the spot rate they were earned at. Cost is calculated using the weighted average method. Gains or losses arising from the disposal of cryptocurrencies are determined as the difference between the fair value and the carrying amount of the cryptocurrencies and are recognized in the statements of profit or loss on the date of disposal. The fair value is determined using the daily open price from level 2 price aggregator websites.

At each reporting date, the Group reviews the carrying amounts of its cryptocurrencies to determine whether there is any indication that those cryptocurrencies have suffered an impairment loss. A cryptocurrency’s carrying amount is written down immediately to its fair value if the carrying amount is greater than its fair value. The impairment loss is reversed and the carrying amount of a cryptocurrency is increased when the fair value increased, but not above the amount that it would have been without the prior impairment loss.

Income Taxes

The Group’s operations have historically been included in the income tax filings of Bitdeer. The provision for income taxes in the Group’s Combined Financial Statements is based on a separate return methodology using the asset and liability approach of accounting for income taxes. Under this approach, the provision for income taxes represents income taxes paid or payable (or received or receivable) for the current year plus the change in deferred taxes during the year. Deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid, and result from differences between the financial and tax bases of the Group’s assets and liabilities and are adjusted for changes in tax rates and tax laws when enacted. Current and deferred taxes are recognized in profit or loss except to the extent that it relates to items recognized directly in equity or other comprehensive income.

Page 10

Current tax is recognized and measured at the amount expected to be recovered from or payable to the taxation authorities based on the income tax rates enacted or substantively enacted at the end of the reporting period and includes any adjustment to taxes payable in respect of previous years.

Deferred tax is recognized on any temporary differences between the carrying amounts of assets and liabilities in the Combined Financial Statements and the corresponding tax bases used in the computation of taxable earnings. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the asset is realized and the liability is settled.

Deferred tax assets are recognized to the extent future recovery is probable. At each reporting period end, deferred tax assets are reduced to the extent that it is no longer probable that sufficient taxable earnings will be available to allow all or part of the asset to be recovered.

Provisions for taxes are made using the best estimate of the amount expected to be paid based on a qualitative assessment of all relevant factors. The Group reviews the adequacy of these provisions at the end of the reporting period. However, it is possible that at some future date an additional liability could result from audits by taxing authorities. Where the final outcome of these tax-related matters is different from the amounts that were initially recorded, such differences will affect the tax provisions in the period in which such determination is made.

New Standards and Interpretations Not Yet Adopted

Certain new accounting standards and interpretations have been published that are not mandatory for the reporting periods presented and have not been early adopted by the Group. These standards are not expected to have a material impact on the Group in the current or future reporting periods and on foreseeable future transactions.

Significant Accounting Estimates and Judgments

In preparing these Combined Financial Statements, management has made judgements and estimates that affect the application of the Business’s accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis.

Carve-out financial statements

The carve-out adjustments required the Group to perform certain allocations and estimates which were based on the judgments and assumptions of the management. These carve-out adjustments involved subjective judgments as to the determination of reasonable methods of allocation.

In particular, the Group estimated and assumed the allocation of assets and liabilities, revenues and costs, as presented in Note 2.

The Group applied the foregoing methods, assumptions, judgments and estimates on a consistent basis for all of the periods presented in the Combined Financial Statements. It is possible that other companies, given the same information, may have reached different reasonable conclusions.

Page 11

Cryptocurrencies accounting

The Group accounts for the cryptocurrencies primarily received from operation of the mining pool as intangible assets with indefinite useful life in its statements of financial position. The indefinite-lived judgment is because, at the time of assessment, there is no foreseeable limit to the period over which such assets are expected to generate cash flows. Cryptocurrencies are carried at the spot rate they were earned at and reviewed for impairment at each reporting date. The cryptocurrency market is still a new market and is highly volatile; historical prices are not necessarily indicative of future value; a significant change in the market prices for cryptocurrencies would have a significant impact on the Group’s earnings and financial position. Fair value is determined by taking the daily open price from level 2 price aggregator websites.

Impairment of cryptocurrencies

The Group evaluates the cryptocurrencies every reporting period to determine whether there are any indications of impairment. If any such indication exists, which is often judgmental, a formal estimate of recoverable amount is performed and an impairment loss is recognized to the extent that the carrying amount exceeds the recoverable amount. The recoverable amount is measured at the higher of fair value less costs to sell and value in use. The evaluation for indications of impairment includes consideration of both external and internal sources of information, including such factors as the relationship between mining rewards and the required computing power, cryptocurrency prices, technological changes and industry environment.

The estimates and assumptions are subject to risk and uncertainty; hence, there is the possibility that changes in circumstances will alter these projections, which may impact the recoverable amount of the cryptocurrencies. In such circumstances some or all of the carrying value of the assets may be further impaired or the impairment reversed with the impact recorded in profit and loss.

Taxation

The determination of the Company’s tax expense for the period and deferred tax assets and liabilities involves significant estimation and judgement by management. In determining these amounts, management interprets tax legislation primarily in Singapore and makes estimates of the expected timing of the reversal of deferred tax assets and liabilities. The taxation authorities may interpret legislation differently. These differences may affect the final amount of taxes. The Company provides for such differences where known based on management’s best estimate of the probable outcome of these matters.

Page 12

Cryptocurrencies

The amounts represented the cryptocurrencies held by the Group as of December 31, 2019 and 2020. The continuity of cryptocurrencies was as follows:

	December 31, 2019			December 31, 2020
	$			$
Cost:
Beginning balances		11,182,765			11,422,897
Cryptocurrencies mined		962,217,021			825,621,240
Cryptocurrencies distributed to pool participants		(946,189,874	)		(831,513,351	)
Net cryptocurrencies received from/(distributed to) parent		(14,334,076	)		3,297,941
Deposit received		-			2,818,772
Others		(1,452,939	)		(1,958,822	)
Ending balances		11,422,897			9,688,677

Impairment:
Beginning balances		(3,463,314	)		(1,289,980	)
Addition		(1,289,980	)		(172,055	)
Disposals		3,463,314			1,289,927

Ending balances		(1,289,980	)		(172,108	)

Net book value:
Beginning balances		7,719,451			10,132,917
Ending balances		10,132,917			9,516,569

Related Party Transactions

The Group has, from time to time, distributed cryptocurrencies earned from the operation of the mining pool to Bitdeer, the parent before the Reorganization. Bitdeer also distributed cryptocurrencies to the Group to support the operation of the mining pool and settled payables related to operating expenses on behalf of the Group. During the years ended December 31, 2019 and 2020, the Group has made distribution to Bitdeer and received contribution from Bitdeer in form of cryptocurrencies in the amount of $14,334,076 and $3,297,941, respectively. In addition, Bitdeer has settled payables on behalf of the Group in the amount of $7,950,400 and $11,080,585 for the years ended December 31, 2019 and 2020, respectively. The transactions were included in the combined statements of changes in net parent investment through the line item “net contribution from / (distribution to) parent”.

During the years ended December 31, 2019 and 2020, Bitdeer, as a pool participant, contributed computing power to the mining pool of the Company in exchange for the mining rewards in the amount of $62,875,991 and $58,215,447, respectively, which were included in cost of revenues. The balance of trade payable to related party was $300,728 and $531,189 as of December 31, 2019 and 2020, respectively, which represents the mining rewards payable to the related party.

During the years ended December 31, 2019 and 2020, a portion of the Group’s cryptocurrencies was held under custody of a related party under common control. Further see Note 8.

Key management personnel remuneration

Under IAS 24 “Related parties”, remuneration paid to key management personnel must be disclosed. Since the Group has not had a separate management team during the periods presented the following table presents the share of employee benefits of Bitdeer’s key management allocated to the Group and recognized in the Combined Financial Statements. The share of key management remuneration benefits attributable to the Group was determined using an allocation key based on the time spent on the operation.

Page 13

Key management remuneration allocated to the Group is as follows:

	For the years ended December 31,
	2019		2020
Salary expense and bonus	$	188,895	$	575,976

Concentration of Suppliers

For the years ended December 31, 2019 and 2020, suppliers accounted for 10% of more of the Group’s costs were as follows:

	For the years ended December 31,
Supplier	2019			2020
A		15	%		32	%
B		-			11	%

Income Taxes

Singapore

The Group primarily operated in Singapore. According to Singapore's tax regulations, there is no corporate income tax obligations when the entities obtain cryptocurrencies from mining or during the period of holding of cryptocurrencies with fair value of cryptocurrencies fluctuates. Under the current regulations, profits tax in Singapore is generally assessed at the rate of 17% of taxable income. As there is no taxable income in fiscal years 2019 and 2020, no provision for Singapore income tax has been made in the financial statements.

Unrecognized deferred tax assets

Deferred tax assets have not been recognized in respect of the following item, because it is not probable that future taxable profit will be available against which the Group can use the benefits therefrom.

	2019				2020
		Gross amount		Tax effect		Gross amount		Tax effect
	$		$		$		$
Tax losses		13,988,506		2,378,046		20,161,258		3,427,414
		13,988,506		2,378,046		20,161,258		3,427,414

Tax losses for which no deferred tax asset was recognized never expire under current Singapore’s tax regulations.

Page 14

The reconciliations of the statutory income tax rate and the effective income tax rate are as follows:

	For the years ended December 31,
	2019			2020
Singapore statutory income tax rate		17	%		17	%
Items non-deductible for income tax purposes		(49	)%		2	%
Unrecognized deferred income tax assets		32	%		(19	)%

Total		—			—

Financial Instruments and Risk Management

Fair value

Financial instruments recorded at fair value are classified using a fair value hierarchy that reflects the significance of inputs used in making the measurements. The hierarchy is summarized as follows:

Level 1: Unadjusted quoted prices in active markets for identical assets and liabilities;

Level 2: Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly from observable market data; and

Level 3: Inputs that are not based on observable market data

As of December 31, 2019 and 2020, there were no financial assets or liabilities measured at fair value. The carrying amounts of the Company’s financial assets and liabilities, such as other receivables, trade payable and other payable and accruals approximate their fair value due to the short-term nature of these instruments. Cryptocurrencies are initially measured at cost and subsequently adjusted for any impairment losses. Impairment exists when the carrying amount exceeds its fair value, which is measured using the quoted price of the cryptocurrency at the time its fair value is being measured. The quoted prices for various types of cryptocurrencies are from price aggregator websites, which are regarded as level 2 inputs.

Cryptocurrency risk

Cryptocurrency prices are affected by various forces including global supply and demand, interest rates, exchange rates, inflation or deflation and the global political and economic conditions. The profitability of the Group is directly related to the current and future market price of cryptocurrencies; in addition, the Group may not be able liquidate its holdings of cryptocurrencies at its desired price if required. A decline in the market prices for cryptocurrencies could negatively impact the Group’s future operations. The Group has not hedged the conversion of any of its sales of cryptocurrencies.

Cryptocurrencies have a limited history and the fair value historically has been very volatile. Historical performance of cryptocurrencies is not indicative of their future price performance. The Group’s cryptocurrencies currently primarily consist of bitcoin.

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group manages liquidity risk by maintaining sufficient cash and cryptocurrencies to ensure that it is able to meet its obligations as and when they fall due. The Group manages Company-wide cash and cryptocurrencies projections centrally and regularly updates projections for changes in business and fluctuations caused in cryptocurrency prices. The contractual maturities of trade and other payables are less than three months. In recent years, the cryptocurrency markets experienced wide fluctuations in price which have not necessarily been related to the operating performance, underlying asset values or prospects of such companies. There can be no assurance that continual fluctuations in price will not occur.

Page 15

Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Group. The Group’s credit risk primarily arises from cryptocurrencies held under custody of a related party under common control. To limit exposure to credit risk relating to cryptocurrencies under custody, the Group evaluates system security design of the custody service provider and regularly reviews the exposure of cryptocurrencies held in custody. The Group has further implemented internal controls to ensure the appropriate access to the cryptocurrencies under custody. The Group expects that there is no significant credit risk from non-performance by the related party. However, there is no assurance that loss of cryptocurrencies would not occur and the related losses would not be significant if such incidents occur. As of December 31, 2019 and 2020, $638,500 and $4,335,434 of the cryptocurrencies were held under custody by the related party under common control, respectively.

Supplemental Cash Flow Information

The non-cash investing and financing activities are as follows:

	For the Years Ended December 31,
	2019		2020
Distribution to parent in form of cryptocurrencies	$	14,334,076	$	-
Contribution from parent in form of cryptocurrencies		-		3,297,941
Deposit received in form of cryptocurrencies		-		2,818,772

10.

Expenses by Nature

Operating expenses by nature are as follows:

	For the Years Ended December 31,
	2019			2020
Payroll expense	$	2,120,845		$	3,165,153
Server fee		2,106,320			1,687,419
Handling fees		562,813			315,439
Advertising and entertainment expenses		181,234			138,169
Amortization and depreciation		70,049			289,918
Office expense		89,189			177,887
Travelling expense		154,858			55,561
Hosting fee		77,276			59,771
Rent expense		65,285			123,554
Impairment loss of cryptocurrencies		1,289,980			172,055
Net gain on disposal of cryptocurrencies		(3,068,431	)		(1,852,725	)
Others		339,674			159,881
Total	$	3,989,092		$	4,492,082

11.

Subsequent Events

The Group has evaluated transactions that occurred as of the issuance of these Combined Financial Statements, for purposes of disclosure of unrecognized subsequent events.

Page 16

Exhibit 99.3

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

On March 31, 2021, the Company completed the subscription for 169,354,839 shares of Loto Interactive Limited (HKEX: 08198) (“Loto Interactive”), at a price of HK$0.62 per share for a total consideration of HK$105 million (US$13.5 million) in cash (the "Share Subscription"). The Company’s ownership of Loto Interactive thereby increased to 54.2%, and Loto Interactive became a subsidiary of the Company.

On April 15, 2021, the Company announced the first closing of its previously announced transactions contemplated by the share exchange agreement, as amended (the "Share Exchange Agreement"), dated February 16, 2021, with Blockchain Alliance Technologies Holding Company ("Blockchain Alliance Holding"). Pursuant to the Share Exchange Agreement, the Company has issued an aggregate of 44,353,435 Class A ordinary shares of par value US$0.00005 per share of the Company (the "Class A Ordinary Shares") to Blockchain Alliance Holding in exchange for the entire outstanding share capital of Blockchain Alliance Technologies Limited ("Blockchain Alliance") held by Blockchain Alliance Holding. In accordance with the Share Exchange Agreement, the entire mining pool business of Bitdeer Technologies Holding Company ("BitDeer") operated under BTC.com, including the domain name BTC.com and the cryptocurrency wallet of BTC.com (collectively, the "BTC.com Pool Businesses") have now been transferred to the Company.

We refer the two acquired companies, Loto Interactive and the Blockchain Alliance, collectively as “the acquired companies”, and the corresponding transactions collectively as “Acquisitions”.

On July 23, 2021, Loto Interactive Information Technology (Shenzhen) Co., Ltd. (“Loto Shenzhen”), a subsidiary of Loto Interactive, terminated all contractual arrangements with Zhejiang Keying Huancai Information Technology Co., Ltd. (“Zhejiang Keying”), a VIE primarily engaged in the provision of data analysis and storage services in connection with our pre-existing cryptocurrency mining operations in China. The shareholders of Zhejiang Keying entered into an equity transfer agreement with Loto Shenzhen to transfer all of Zhejiang Keying’s equity interests to Loto Shenzhen. As of the date of this current report, Zhejiang Keying is in the process of completing the business registration of equity changes. The shareholders of Zhejiang Keying also executed a letter of undertaking in favor of Loto Shenzhen and undertook to transfer all assets held by Zhejiang Keying to Loto Shenzhen in the event that the equity transfer could not be completed. The Company believes that the completion of the business registration of the equity changes of Zhejiang Keying is probable and Loto Shenzhen still effectively controls Zhejiang Keying based on the above arrangements despite the termination of the VIE arrangements. Accordingly, the termination of the VIE arrangements with Zhejiang Keying was not reflected in the following unaudited pro forma financial information.

The following unaudited pro forma combined financial information of the Company and the acquired companies is presented to illustrate the estimated effects of the Acquisitions and Disposition described below (collectively, “Adjustments” or “Pro Forma Adjustments”).

The unaudited pro forma combined balance sheet as of December 31, 2020 combines the historical consolidated balance sheet of the Company and the consolidated or combined balance sheet of the acquired companies, and disposes the historical balance sheet of VIE subsidiaries, after giving effect to the Acquisitions and Disposition as if it had occurred on December 31, 2020. The unaudited pro forma statement of operations for the year ended December 31, 2020 combines the historical consolidated statement of comprehensive loss of the Company and the consolidated or combined statement of profit or loss and other comprehensive income or loss of the acquired companies and eliminates the historical operating results of the VIE subsidiaries, after giving effect to the Acquisitions and Disposition as if it had occurred on January 1, 2020. These unaudited pro forma combined balance sheet and unaudited pro forma combined statement of operations are referred to collectively as the “pro forma financial information.”

The pro forma financial information should be read in conjunction with the accompanying notes. In addition, the pro forma financial information is derived from and should be read in conjunction with the following historical financial statements and accompanying notes of the Company and the acquired companies:

(i) audited consolidated financial statements as of and for the fiscal year ended December 31, 2020 and the related notes included in the annual report on Form 20-F for the year ended December 31, 2020 filed by the Company and

(ii) audited consolidated financial statements of Loto Interactive Limited as of and for the year ended December 31, 2020 and the related notes included as Exhibit 99.1 to this Current Report on Form 6-K filed July 30, 2021 and

(iii) audited combined financial statements of Blockchain Alliance Technologies Limited as of and for the year ended December 31, 2020 and the related notes included as Exhibit 99.2 to this Current Report on Form 6-K filed July 30, 2021.

Unaudited Pro Forma Combined Balance Sheet

(Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$"))

	As of December 31, 2020
	BIT Mining Limited Historical			Loto Interactive Historical		Blockchain Alliance Historical		Pro Forma Adjustments for Acquisitions			Notes	Pro forma Adjustments for Disposition (a)			Pro Forma Combined			Pro Forma Combined
	RMB			RMB		RMB		RMB				RMB			RMB			US$*
ASSETS
Current assets:
Cash and cash equivalents		308,676			37,242		-		(88,106	)	A		(194,510	)		63,302			9,701
Restricted cash		3,829			-		-		-				(1,242	)		2,587			396
Cryptocurrencies		-			-		62,095		65,665		A		-			127,760			19,579
Trade receivables		-			7,069		-		-				-			7,069			1,083
Amounts due from related parties		368			817		-		-				(368	)		817			125
Prepayments and other current assets, net		22,980			69,052		758		-				360,662			453,452			69,495
Total current assets		335,853			114,180		62,853		(22,441	)			164,542			654,987			100,379

Non-current assets:
Equity investments at fair value through other comprehensive income		-			4,256		-		(4,256	)	D		-			-			-
Property and equipment, net		19,779			221,567		-		(48,823	)	A		(15,181	)		177,342			27,179
Intangible assets, net		2,398			-		4,543		515,793		A		(1,229	)		521,505			79,924
Deposits		1,479			-		-		-				(424	)		1,055			162
Long-term investments		99,972			2,046		-		(62,729	)	A, D		(35,192	)		4,097			628
Right-of-use assets		9,327			5,394		-		-				(9,327	)		5,394			827
Other non-current assets		1,665			25,248		-		-				(1,665	)		25,248			3,869
Goodwill		-			9,849		-		23,537		A		-			33,386			5,117
Total non-current assets		134,620			268,360		4,543		423,522				(63,018	)		768,027			117,706
TOTAL ASSETS		470,473			382,540		67,396		401,081				101,524			1,423,014			218,085

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Trade payables		-			3,880		38,086		22,750		A		-			64,716			9,918
Trade payables – related party		-			-		3,466		3,489		A		-			6,955			1,066
Amount due to a related company		-			393		-		-				-			393			60
Accrued expenses and other current liabilities		69,361			21,658		20,774		137,289		A		(49,158	)		199,924			30,640
Income tax payable		549			6,245		-		-				-			6,794			1,041
Operating lease liabilities - current		3,710			2,828		-		-				(3,710	)		2,828			433
Total current liabilities		73,620			35,004		62,326		163,528				(52,868	)		281,610			43,158

Non-current liabilities:
Long-term payables		526			-		-		-				(526	)		-			-
Operating lease liabilities - non-current		5,807			2,724		-		-				(5,807	)		2,724			417
Total non-current liabilities		6,333			2,724		-		-				(6,333	)		2,724			417
TOTAL LIABILITIES		79,953			37,728		62,326		163,528				(59,201	)		284,334			43,575

Shareholders’ Equity:
Class A ordinary shares		151			-		-		14		A		-			165			25
Class B ordinary shares		-			-		-		-				-			-			-
Additional paid-in capital		2,602,883			-		-		456,372		A		(34,336	)		3,024,919			463,589
Treasury shares		(143,780	)		-		-		-				-			(143,780	)		(22,035	)
Accumulated deficit and statutory reserve		(2,183,918	)		-		-		-				185,200			(1,998,718	)		(306,317	)
Accumulated other comprehensive income		128,441					-		-				(3,396	)		125,045			19,164
Share Capital		-			31,899		-		(31,899	)	A		-			-			-
Reserves					236,291		-		(236,291	)	A		-			-			-
Net parent investment		-			-		5,070		(5,070	)	A		-			-			-
Total BIT Mining Limited shareholders’ equity		403,777			268,190		5,070		183,126				147,468			1,007,631			154,426
Noncontrolling interests		(13,257	)		76,622		-		54,427		A		13,257			131,049			20,084
Total shareholders' equity		390,520			344,812		5,070		237,553				160,725			1,138,680			174,510
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		470,473			382,540		67,396		401,081				101,524			1,423,014			218,085

Unaudited Pro Forma Combined Statements of Operations
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”),
except for number of shares, per share (or ADS) data)

	For the Year Ended December 31, 2020
	BIT Mining Limited Historical			Loto Interactive Historical			Blockchain Alliance Historical			Pro forma Adjustments for Acquisitions			Note	Pro forma Adjustments for Disposition (b)			Pro Forma Combined			Pro Forma Combined
	RMB			RMB			RMB			RMB				RMB			RMB			US$*
Net Revenues		21,815			340,332			8,619,353			-				(6,886	)		8,974,614			1,375,420

Operating costs and expenses:
Cost of services		(16,774	)		(304,124	)		(8,713,807	)		(41,814	)	B		2,884			(9,073,635	)		(1,390,595	)
Sales and marketing		(16,748	)		(93	)		(10,655	)		-				8,845			(18,651	)		(2,858	)
General and administrative		(152,541	)		(68,503	)		(31,854	)		217		C		53,874			(198,807	)		(30,469	)
Service development		(30,201	)		-			-			-				16,830			(13,371	)		(2,049	)
Total operating expenses		(216,264	)		(372,720	)		(8,756,316	)		(41,597	)			82,433			(9,304,464	)		(1,425,971	)
Other operating income		5,518			1,576			-			(217	)	C		(1,833	)		5,044			773
Government grant		891			-			-			-				(741	)		150			23
Other operating expenses		(2,752	)		(4,060	)		(48	)		-				874			(5,986	)		(917	)
Impairment loss of cryptocurrencies								(1,186	)						-			(1,186	)		(182	)
Net gain on disposal of cryptocurrencies		-			-			12,773			-				-			12,773			1,958
Operating loss		(190,792	)		(34,872	)		(125,424	)		(41,814	)			73,847			(319,055	)		(48,896	)
Other income (expense), net		748			-			-			(74	)	D		(449	)		225			34
Interest income		9,093			394			-			(129	)	C		(7,429	)		1,929			296
Finance costs		-			(398	)		-			129		C		-			(269	)		(41	)
(Loss) gain from equity method investments		(10,798	)		(988	)		-			13,284		C		(2,060	)		(562	)		(86	)
Gain on previously held equity investments		-			-			-			33,945		A		-			33,945			5,202
Impairment of long-term investments		(33,001	)		-			-			33,001		C		-			-			-
Loss before income tax		(224,750	)		(35,864	)		(125,424	)		38,342				63,909			(283,787	)		(43,491	)
Income taxes benefits (expense)		3,654			(2,576	)		-			-				(3,445	)		(2,367	)		(363	)
Net loss		(221,096	)		(38,440	)		(125,424	)		38,342				60,464			(286,154	)		(43,854	)
Less: net (loss) income attributable to noncontrolling interests		2,130			3,121			-			(20,727	)	E		(2,130	)		(17,606	)		(2,698	)
Net loss attributable to BIT Mining Limited		(223,226	)		(41,561	)**		(125,424	)		59,069				62,594			(268,548	)		(41,156	)
Other comprehensive loss
Share of other comprehensive loss of an equity method investee		(1,218	)		(74	)		-			1,292		C, D		-			-			-
Foreign currency translation (loss) gain		(11,825	)		14,865			-			-				(14,289	)		(11,249	)		(1,724	)
Other comprehensive (loss) income, net of tax		(13,043	)		14,791			-			1,292				(14,289	)		(11,249	)		(1,724	)
Comprehensive loss		(234,139	)		(23,649	)		(125,424	)		39,634				46,175			(297,403	)		(45,578	)
Less: Comprehensive (loss) income attributable to noncontrolling interests		2,130			4,132			-			(14,963	)	E		(2,130	)		(10,831	)		(1,660	)
Comprehensive loss attributable to BIT Mining Limited		(236,269	)		(27,781	)**		(125,424	)		54,597				48,305			(286,572	)		(43,918	)

Weighted average number of Class A and Class B ordinary shares outstanding:
Basic		430,011,263									44,353,435							474,364,698			474,364,698
Diluted		430,011,263									44,353,435							474,364,698			474,364,698

Losses per share attributable to BIT Mining Limited-Basic and Diluted
Net loss		(0.52	)															(0.57	)		(0.09	)

Losses per ADS***attributable to BIT Mining Limited-Basic and Diluted
Net loss		(5.19	)															(5.66	)		(0.87	)

*This statements contains translations of certain Renminbi amounts into U.S. dollars at specified rates solely for the convenience of readers. Unless otherwise noted, all translations from Renminbi to U.S. dollars were made at the exchange rate of RMB6.5250 to US$1.00, as set forth in the H.10 statistical release of the Federal Reserve Board on December 31, 2020.

**Amount attributable to Loto Interactive’s shareholders.

*** American Depositary Shares, which are traded on the NYSE. Each ADS represents ten Class A ordinary shares of the Company.

NOTES TO UNAUDITED PRO FORMA COMSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The pro forma financial information was prepared in conformity with Article 11 of Regulation S-X. The pro forma financial information for acquisitions was prepared using the acquisition method of accounting in accordance with Accounting Standards Codification 805, “Business Combinations” (“ASC 805”) and was derived from the audited historical financial statements of the Company and the acquired companies.

The pro forma financial information has been prepared by the Company for illustrative and informational purposes only in accordance with Article 11. The pro forma financial information is not necessarily indicative of what the Company’s consolidated statement of comprehensive loss or consolidated balance sheet actually would have been had the Acquisitions, Disposition and other Adjustments been completed as of the dates indicated or will be for any future periods. The pro forma financial information does not purport to project the Company’s future financial position or results of operations following the completion of the Acquisitions and Disposition.

The Company is still in the process of performing a full review of the acquired companies’ accounting policies to determine if there are any additional material differences that require modification or reclassification of the acquired companies’ revenues, expenses, assets or liabilities to conform to the Company’s accounting policies and classifications. As a result of that review, the Company may identify differences between the accounting policies of the companies that, when conformed, could have a material impact on the pro forma financial information.

2. Consideration and Purchase Price

Consideration and Purchase Price of Loto Interactive

Before the Share Subscription, the Company previously held 127,871,432 shares of Loto Interactive and the ownership of Loto Interactive was 33.74%. On March 31, 2021, the Company completed the subscription for 169,354,839 shares of Loto Interactive, at a price of HK$0.62 per share for a total consideration of HK$105 million (US$13.5 million) in cash. The Company’s ownership of Loto Interactive thereby increased to 54.2%.

Concurrently with the completion of the Share Subscription, Loto Interactive has completed its acquisition of the remaining equity interests in its indirectly held subsidiary, Ganzi Changhe Hydropower Consumption Service Co., Ltd. (“Ganzi Changhe Data Center”), for a total consideration of approximately RMB88.2 million (approximately US$13.6 million) in cash.

The following table presents the calculation of preliminary purchase consideration:

	RMB
		(in thousands)
Re-measurement of the fair value of previously-held equity interest		66,985
Purchase price at acquisition close on March 31, 2021		88,106
Fair value of non-controlling shareholders		131,049
Total allocated purchase price		286,140

Consideration and Purchase Price of Blockchain Alliance

Pursuant to the Share Exchange Agreement, the Company has issued an aggregate of 44,353,435 Class A ordinary shares to Blockchain Alliance Holding in exchange for the entire outstanding share capital of Blockchain Alliance. The following calculated purchase price based on the market value of the Company’s Class A ordinary shares on April 15, 2021.

	RMB
		(in thousands)
Fair value of Class A ordinary shares at acquisition close on April 15, 2021		456,386
Estimate of post-closing adjustments		99,064
Total allocated purchase price		555,450

Given that the purchase price is subject to certain post-closing valuation adjustment terms as provided in the Share Exchange Agreement (estimates of which are included in the table above), the final transaction consideration to be paid by the Company assumed for the purpose of this pro forma financial information may not reflect the ultimate purchase price that the Company will have to pay for the Acquisition of Blockchain Alliance.

Furthermore, the allocation of the consideration is preliminary and pending finalization of various estimates, inputs and analyses. Since this pro forma financial information has been prepared based on preliminary estimates of consideration and fair values attributable to the Acquisitions, the actual amounts eventually recorded in accordance with the acquisition method of accounting, including the identifiable intangibles and goodwill, may differ materially from the information presented.

3. The allocation of the purchase price

The following table presents the preliminary purchase price allocation of the assets acquired and the liabilities assumed as if the Acquisitions occurred on December 31, 2020.

Preliminary purchase price allocation of Loto Interactive

	RMB
		(in thousands)
Assets
Cash and cash equivalents		37,242
Trade receivable		7,069
Amounts due from related parties		817
Prepayments and other current assets		69,052
Property and equipment, net		172,744
Long-term investments		6,302
Right-of-use assets		5,394
Other non-current assets		25,248
		323,868
Liabilities
Accounts payables		3,880
Amount due to a related company		393
Accrued expenses and other current liabilities		21,658
Income tax payable		6,245
Operating lease liabilities - current		2,828
Operating lease liabilities - non-current		2,724
		37,728
Total allocated purchase price		286,140

Preliminary purchase price allocation of Blockchain Alliance

	RMB
	(in thousands)
Assets
Cryptocurrencies		127,760
Prepayments and other current assets		758
Intangible assets, net		520,336
Goodwill		33,386
		682,240
Liabilities
Trade payable		60,836
Trade payable – related party		6,955
Accrued expenses and other current liabilities		58,999
		126,790
Total allocated purchase price		555,450

The business combination accounting is not yet final and the amounts assigned to the assets acquired and the liabilities assumed are provisional. Therefore, this may result in future adjustments to the provisional amounts as new information is obtained about the facts and circumstances that existed at the acquisition date. The final purchase price allocation will be determined when the Company has completed the detailed valuations and necessary calculations. The final allocation could differ materially from the preliminary allocation used in the pro forma adjustments.

4. Pro Forma Adjustments for Acquisitions

A. Reflects the preliminary purchase price allocation recorded, and the elimination of the acquired companies’ net assets balances in accordance with the acquisition method of accounting.

B. Represents adjustments provided on depreciation and amortization for property and equipment and finite intangible assets based on the preliminary purchase price allocation. Property and equipment have been depreciated on a straight-line basis over their estimated useful lives. Intangible assets having a finite life have been amortized on a straight-line basis over their estimated useful lives.

C. Represents the elimination of internal transactions between Loto Interactive and the Company during the year of 2020.

D. Reflects the adjustments to conform the accounting and presentation of certain equity investments to the accounting and presentation of the Company.

E. Reflects the adjustments provided on net loss attributable to the non-controlling interest and comprehensive loss attributable to non-controlling interest based on the net loss and comprehensive loss of Loto Interactive and the percentage of ownership of the non-controlling interest.

5. Pro Forma Adjustments for Disposition

(a) Reflects the derecognition of the assets and liabilities of the lottery business-related VIEs.

(b) Reflects the elimination of revenues and expenses associated with the operations of the lottery business-related VIEs.

Exhibit 99.4

Risk Factors

This section includes material updates in certain risks relating to us since April 14, 2021 the date of our annual report on Form 20-F for the year ended December 31, 2020 (the “Annual Report”). This section is a supplement to and should be read in conjunction with the section titled “Risk Factors” included in the Annual Report.

Adverse changes in the regulatory and policy environment in China and overseas markets where we operate could make it illegal to acquire, own, hold, sell, or use bitcoin, ether, or other cryptocurrencies, participate in the blockchain or utilize similar bitcoin assets in China or other countries, or negatively affect our ability to carry out the expansion of overseas operations, which would materially and adversely affect our business, financial condition and results of operations.

Our blockchain and cryptocurrency mining business could be significantly affected by, among other things, the regulatory and policy developments in China and overseas jurisdictions where we operate, such as the United States and Kazakhstan. Governmental authorities are likely to continue to issue new laws, rules and regulations governing the blockchain and cryptocurrency industry we operate in and enhance enforcement of existing laws, rules and regulations. For example, the People’s Bank of China (the “PBOC”), Ministry of Industry and Information Technology, State Administration for Industry and Commerce, China Banking Regulatory Commission, China Securities Regulatory Commission and China Insurance Regulatory Commission issued “Announcement on Preventing Token Fundraising Risks” on September 4, 2017, prohibiting all organizations and individuals from engaging in initial coin offering transactions. On May 21, 2021, the Financial Stability and Development Committee of the PRC State Council mentioned the need to resolutely crack down on bitcoin mining and trading activities. On June 18, 2021, the “Notice of the Sichuan Provincial Development and Reform Commission and the Sichuan Provincial Energy Administration on the Cleanup and Shutdown of Virtual Currency Mining Projects” required electricity companies within Sichuan Province to close down power supply to businesses involved in bitcoin and cryptocurrency mining. On June 19, 2021, one of our indirectly held subsidiaries, Ganzi Changhe Hydropower Consumption Service Co. Ltd. (“Ganzi Changhe Data Center”), received notice from State Grid Sichuan Ganzi Electric Power Co., Ltd. (the “Power Supplier”), informing Ganzi Changhe Data Center that its power supply would be suspended, effective June 19, 2021. Ganzi Changhe Data Center has since suspended its operations. Data centers in Sichuan, including the Ganzi Changhe Data Center, contributed approximately 3% of our total revenues in the month of May 2021. Furthermore, on June 21, 2021, the PBOC was reported to have held interviews with certain financial institutions in China, and stressed that banks and other financial institutions in China shall strictly implement the “Guarding Against Bitcoin Risks” and the “Announcement on Preventing Token Fundraising Risks” and other regulatory requirements, diligently fulfill their customer identification obligations, and shall not provide account opening, registration, trading, clearing, settlement and other services related to blockchain and cryptocurrency business.

We had begun the development of our overseas operations before these recent regulatory and policy developments in China. In light of these developments in China, we are in the process of moving our pre-existing China operations overseas. We may be subject to restrictions relating to the transfer of cryptocurrency mining machines out of China, as China has recently strengthened regulations on exports of goods, technology and services. Specifically, for computers and related components used in cryptocurrency mining machines, exporting enterprises should carefully evaluate whether the mining machines, their components, and any data or information contained therein are subject to export restrictions, and therefore are required to go through relevant export licensing procedures before such mining machines can be transported out of China. The relevant restrictions that apply to the transfer of cryptocurrency mining machines by us include, but are not limited to, the Catalogue of Goods Prohibited from Export, the Catalogue of Goods Subject to Export License Management, the Catalogue of Technologies Prohibited from Export and Restricted from Export in China, the Catalogue for the Administration of Import and Export Licenses of Dual-use Items and Technologies, and other applicable export control catalogues and lists. In addition, since most of our mining machines are second-hand equipment, we may also be required to evaluate, inspect and dispose of the relevant stored information or data to comply with relevant data security regulations before moving such machines to overseas markets. If we are deemed to have violated export restrictions or data security regulations in China or otherwise become subject to government interferences, we may be subject to administrative penalties or criminal investigation by relevant government authorities and our operation migration to overseas may be delayed, interrupted or compromised.

Recently, we have adopted the development strategy to focus on the overseas expansion of our blockchain and cryptocurrency mining operations. In May 2021, we entered into a binding investment term sheet to invest in a cryptocurrency mining data center in Texas, the United States, and a binding investment term sheet with a Kazakhstan-based company to jointly invest in a cryptocurrency mining data center in Kazakhstan. As of the date of this current report, we have delivered mining machines with a theoretical maximum total hash rate capacity of 292.7 PH/s to Kazakhstan. However, we cannot assure you that the government authorities in these overseas markets will not adopt new laws and regulations in the future to restrict blockchain and cryptocurrency business.

Some jurisdictions, including China, restrict various uses of cryptocurrencies, including the use of cryptocurrencies as a medium of exchange, the conversion between cryptocurrencies and fiat currencies or between cryptocurrencies, the provision of trading and other services related to cryptocurrencies by financial institutions and payment institutions, and initial coin offerings and other means of capital raising based on cryptocurrencies. We cannot assure you that these jurisdictions will not enact new laws or regulations that further restrict activities relate to cryptocurrencies.

In addition, cryptocurrencies may be used by market participants for black market transactions, to conduct fraud, money laundering and terrorism-funding, tax evasion, economic sanction evasion or other illegal activities. As a result, governments may seek to regulate, restrict, control or ban the mining, use, holding and transferring of cryptocurrencies. We may not be able to eliminate all instances where other parties use cryptocurrencies mined by us to engage in money laundering or other illegal or improper activities. We cannot assure you that we will successfully detect and prevent all money laundering or other illegal or improper activities which may adversely affect our reputation, business, financial condition and results of operations. In addition, as mining activities employ sophisticated and high-powered computing devices that require large amounts of electricity to operate, future developments in the regulation of energy consumption, including possible restrictions on energy usage in the jurisdictions where we sell our products, may also affect our business operations and the demand for bitcoins and other cryptocurrencies mined by us. Our business, financial condition and results of operations may be materially and adversely affected by these adverse changes in the regulatory and policy environment in in the markets where we operate our blockchain and cryptocurrency mining operations.

We have been subject to a variety of PRC laws and other obligations regarding cybersecurity and data protection, and any failure to comply with applicable laws and obligations or exposure to government interference actions could have a material and adverse effect on our business, financial condition and results of operations; and the future offering of our securities may be subject to additional disclosure requirements and review that the U.S. Securities and Exchange Commission may adopt for companies with China-based operations.

We have been subject to PRC laws relating to the collection, use, sharing, retention, security, and transfer of confidential and private information, such as personal information and other data. These laws apply not only to third-party transactions, but also to transfers of information between us, E-Sun Sky Computer (Shenzhen) Co., Ltd., our wholly foreign-owned enterprise in China (“WFOE”), our variable interest entities (“VIEs”), and our VIEs’ subsidiaries, and among us, our WFOE, our VIEs, and our VIEs’ subsidiaries, and other parties with which we have commercial relations. These laws and their interpretations and enforcement continue to develop and are subject to change, and the PRC government may adopt other rules and restrictions in the future.

Pursuant to the PRC Cybersecurity Law, which was promulgated by the Standing Committee of the National People’s Congress on November 7, 2016 and took effect on June 1, 2017, personal information and important data collected and generated by a critical information infrastructure operator in the course of its operations in China must be stored in China, and if a critical information infrastructure operator purchases internet products and services that affects or may affect national security, it should be subject to cybersecurity review by the Cyberspace Administration of China (“CAC”). Due to the lack of further interpretations, the exact scope of “critical information infrastructure operator” remains unclear. On July 10, 2021, the CAC publicly issued the “Cybersecurity Review Measures” (Revised Draft for Comments) aiming to, upon its enactment, replace the existing Measures for Cybersecurity Censorship. The draft measures extend the scope of cybersecurity reviews to data processing operators engaging in data processing activities that affect or may affect national security, including listing in a foreign country. If the enacted version of the draft measures mandates clearance of cybersecurity review and other specific actions to be completed by companies like us, we face uncertainties as to whether such clearance can be timely obtained, or at all. In connection with our lottery business in China, we processed users’ personal data (including name, address, age, bank details and lottery purchase history) as part of our business, which could subject us to cybersecurity review.

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We have previously conducted our lottery business in China through a series of contractual arrangements with Shenzhen Youlanguang Science and Technology Co., Ltd., Shenzhen E-Sun Network Co., Ltd., and Shenzhen Guangtiandi Science and Technology Co., Ltd. (collectively, the “lottery business-related VIEs”), and their respective shareholders. Since March 31, 2021, we also consolidated the financial results of Zhejiang Keying Huancai Information Technology Co., Ltd. (“Zhejiang Keying”), a VIE primarily engaged in the provision of data analysis and storage services in connection with our pre-existing cryptocurrency mining operations in China, through its contractual arrangement with Loto Interactive Information Technology (Shenzhen) Co., Ltd. (“Loto Shenzhen”), which is indirectly controlled by us after the completion of our acquisition of the majority interest of Loto Interactive Limited on March 31, 2021. On July 23, 2021, we announced our decision to dispose of our Chinese lottery related business, and we effectively terminated all of our contractual arrangements with our lottery business-related VIEs and Zhejiang Keying. On the same date, the shareholders of Zhejiang Keying entered into an equity transfer agreement with Loto Shenzhen to transfer all of Zhejiang Keying’s equity interests to Loto Shenzhen. The shareholders of Zhejiang Keying also executed a letter of undertaking in favor of Loto Shenzhen, and undertook to transfer all assets held by Zhejiang Keying to Loto Shenzhen in the event that the equity transfer could not be completed due to restrictions on foreign investment in or operation of blockchain and cryptocurrency mining-related business in China. As of the date of this current report, we are in the process of completing the disposal of our lottery business-related VIEs and deconsolidating their financial results from our consolidated financial statement, completing the relevant business registration changes for unwinding the VIE structures of our lottery business-related VIEs and Zhejiang Keying, and completing the transfer of equity interests of Zhejiang Keying to Loto Shenzhen. We cannot assure you that any of the aforementioned actions can be completed in a timely or liability-free manner or at all. Any instance of non-compliance with the PRC cybersecurity and data protection laws and foreign investment laws and regulations, including any prior non-compliance involving the former VIEs and their subsidiaries, could result in penalties or other significant legal liabilities.

The lottery business-related VIEs contributed RMB6.9 million (US$1.1 million) and RMB2.7 million (US$0.4 million) in 2020 and the three months ended March 31, 2021, accounting for 31.6% and 13.6 % of our total revenue for the periods, respectively. In addition, the lottery business-related VIEs incurred a net loss of RMB60.5 million (US$9.3 million) and RMB8.5 million (US$0.8 million) for 2020 and the three months ended March 31, 2021, respectively. As of March 31, 2021, total assets held by the lottery business-related VIEs represented RMB93.4 million (US$14.3 million), or 7.2%, of our total assets, and net debt held by VIEs was RMB229.6 million (US$35.0 million). We cannot assure you that the disposal of the lottery business-related VIEs and unwinding of VIE arrangements with such VIEs and Zhejiang Keying will be completed as anticipated in a timely and liability-free manner or that no dispute or liability will arise during or following such disposal and unwinding process, or that such disposal and unwinding will not adversely affect our overall results of operations and financial condition. In addition, during the process of disposing of the lottery business-related VIEs and the unwinding of the VIE structure of Zhejiang Keying, and after such process is completed, we cannot guarantee that we will not continue to be subject to PRC regulatory inspection and/or review relating to cybersecurity, especially when there remains significant uncertainty as to the scope and manner of the regulatory enforcement and/or the possible government interferences that we may be exposed to. If we become subject to cybersecurity inspection and/or review by CAC or other PRC authorities or are required by them to take any specific actions, it could cause suspension or termination of the future offering of our securities, disruptions to our operations, result in negative publicity regarding our company, and divert our managerial and financial resources. We may also be subject to fines or other penalties, which could materially and adversely affect our business, financial condition, and results of operations. Furthermore, although we have suspended our blockchain and cryptocurrency mining business in China and are in the process of disposing of our Chinese lottery related business, in light of the recent regulatory and policy developments in China and government actions taken by the PRC government, including possible imposition of restrictions and/or approval requirements on China-based companies raising capital offshore, the future offering of our securities may be subject to additional disclosure requirements and review that the U.S. Securities and Exchange Commission or other regulatory authorities in the United States may adopt for companies with China-based operations.

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