FDG Electric Vehicles : Announcements and Notices - Discloseable Transaction – Deemed Disposal of Certain Shareholding Interests in a Subsidiary

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FDG Electric Vehicles Limited

五龍電動車（集團）有限公司

(Incorporated in Bermuda with limited liability)

(Stock Code: 729)

DISCLOSEABLE TRANSACTION

DEEMED DISPOSAL OF CERTAIN SHAREHOLDING INTERESTS

IN A SUBSIDIARY

THE CONVERTIBLE PROMISSORY NOTE

On 14 June 2019 (after trading hours), Chanje, a non-wholly owned subsidiary of the Company, and the Investor entered into the Convertible Promissory Note, pursuant to which and in consideration for the Principal Amount, (i) Chanje has agreed to pay to the Investor or its nominee the Promised Sum pursuant to the terms thereof; and (ii) the Investor is granted with the Optional Conversion Right upon receipt of the Principal Amount in full by Chanje.

LISTING RULES IMPLICATIONS

Following the exercise of the Optional Conversion Right and the allotment and issue of the shares of the Common Stock by Chanje to the Investor, the Group's shareholding interest in Chanje will be reduced from 94.74% to 88.82% (assuming (i) there is no other change in the issued share capital of Chanje; and (ii) the Convertible Promissory Note is fully converted on the date falling on the first anniversary of the date of the Convertible Promissory Note), which will constitute a deemed disposal pursuant to Rule 14.29 of the Listing Rules. As one of the applicable percentage ratios (as defined under the Listing Rules) in respect of the Deemed Disposal is more than 5% and all of the applicable percentage ratios are less than 25%, the Deemed Disposal constitutes a discloseable transaction of the Company pursuant to Chapter 14 of the Listing Rules.

THE CONVERTIBLE PROMISSORY NOTE

On 14 June 2019 (after trading hours), Chanje, a non-wholly owned subsidiary of the Company, and the Investor entered into the Convertible Promissory Note, pursuant to which and in consideration for the Principle Amount, (i) Chanje has agreed to pay to the Investor or its nominee the Promised Sum pursuant to the terms thereof; and (ii) the Investor is granted with the Optional Conversion Right upon receipt of the Principal Amount in full by Chanje.

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Key terms of the Convertible Promissory Note are set out below:

Total Principal	: US$20,000,000, to be transferred from the Investor to Chanje in
Amount	cash in accordance with the following manner:
	(i)	US$1,000,000 to be directly transferred to Chanje upon
		execution of the Convertible Promissory Note; and
	(ii)	US$19,000,000 to be transferred to the Escrow Account
		within 2 business days of the execution of the Convertible
		Promissory Note, and the following instalment payment
		amount shall be released from the Escrow Account to
		Chanje in accordance with the following schedule:
			Release Date	Instalment Payment
					Amount
		1.	17 June 2019	US$4,000,000
		2.	1	July 2019	US$1,400,000
		3.	1	August 2019	US$2,100,000
		4.	1	September 2019	US$1,800,000
		5.	1	October 2019	US$1,900,000
		6.	1	November 2019	US$2,000,000
		7.	1	December 2019	US$2,000,000
		8.	1	January 2020	US$1,300,000
		9.	1	February 2020	US$1,300,000
		10.	1	March 2020	US$1,200,000
		The first two instalment payments above will be released
		directly from the Escrow Account to Chanje; each of the
		subsequent instalment payments thereafter will only be
		released after further written agreement between the
		Investor and Chanje. Chanje shall be entitled to all
		interests accrued in the Escrow Account.
Interest Rate	: 10% per annum, computed on the basis of the actual number of
	days elapsed and a year of 360 days.

The interest rate is determined based on arm's length negotiation between the Investor and Chanje taking into account that the Principal Amount shall be provided by the Investor to Chanje without any security arrangement.

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Maturity Date	:	The earliest of (i) the date falling on the first anniversary of the
		date of the Convertible Promissory Note; and (ii) when
		automatically deemed or declared due and payable by the Investor
		upon the occurrence of an Event of Default (the "Maturity
		Date").
Guarantee	:	In consideration for the Investor entering into the Convertible
		Promissory Note, the Company has agreed to unconditionally
		guarantee to the Investor the prompt and full payment of all
		monetary obligations of Chanje under the Convertible Promissory
		Note.
Prepayment	:	Chanje shall have the right to prepay the Convertible Promissory
		Note, in whole but not in part.
Event of Default	:	Upon the occurrence and during the continuance of any of the
		following events of default (an "Event of Default"), the Investor
		shall be entitled to declare the Convertible Promissory Note to be
		immediately due and payable:
		(a) Chanje has failed to pay any principal of or interest owing on
		the Convertible Promissory Note when due;
		(b) Chanje has commenced a voluntary bankruptcy, insolvency
		proceedings or other proceedings seeking liquidation,
		reorganization or other relief with respect to itself or its debts;
		or
		(c) Chanje or any of its subsidiaries has commenced any
		involuntary bankruptcy or insolvency proceedings.
Conversion Price	:	US$6,957.00 per share, subject to adjustment for any stock
		dividend, stock split, stock combination, reorganization,
		recapitalization, reclassification or other similar event with
		respect to the Common Stock.
		The Conversion Price is determined based on arm's length
		negotiation between Chanje and the Investor having taking into
		account the current financial position and future business
		prospects of Chanje.

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Conversion	:	Subject to Chanje having received the Principal Amount in full,
		the Investor shall be entitled to the following conversion right:
		(a) Automatic conversion upon equity financing
		Upon the closing by Chanje of a bona fide equity financing
		transaction resulting in proceeds to Chanje of at least
		US$20,000,000, then the entire outstanding Promised Sum
		shall be automatically converted into such number of shares of
		the Common Stock equal to the outstanding Promised Sum
		divided by the Conversion Price.
		(b) Optional Conversion Right
		At any time and from time to time prior to the repayment or
		conversion of all amounts due under the Convertible
		Promissory Note, the Investor shall have the right and option,
		at its election, to convert all (or part of, subject to the approval
		of Chanje) of the Principal Amount then outstanding with any
		accrued interest into that number of fully-paid and non-
		assessable shares of Common Stock equal to the quotient
		obtained by dividing (i) the Principal Amount with any
		accrued interest being converted by (ii) the Conversion Price
		(the "Optional Conversion Right"); provided, however, that
		the Investor shall not be permitted to exercise the Optional
		Conversion Right at any time prior to the Maturity Date
		unless (1) approved by the board of directors of Chanje or (2)
		such conversion is following receipt of a prepayment notice.
		Upon conversion of the Convertible Promissory Note into the
		Common Stock or any prepayment of the Convertible Promissory
		Note, any remaining unreleased instalment payments in the
		Escrow Account shall be immediately transferred to Chanje at
		Chanje's discretion.
Completion

Following the exercise of the Optional Conversion Right and the allotment and issue of the shares of the Common Stock by Chanje to the Investor, the Group's shareholding interest in Chanje will be reduced from 94.74% to 88.82% (assuming (i) there is no other change in the issued share capital of Chanje; and (ii) the Convertible Promissory Note is fully converted on the date falling on the first anniversary of the date of the Convertible Promissory Note). Chanje will remain as a subsidiary of the Company, and its financial results will remain consolidated with the accounts of the Group.

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Impact on the shareholding structure before and after the exercise of the Optional Conversion Right

Assuming (i) there is no other change in the issued share capital of Chanje; and (ii) the Convertible Promissory Note is fully converted on the date falling on the first anniversary of the date of the Convertible Promissory Note, the following table shows the shareholding structure of Chanje before and after the allotment and issue of shares of the Common Stock as a result of the exercise of the Optional Conversion Right:

	Before the allotment and		After the allotment and
	issue of shares of the		issue of shares of the
	Common Stock as a result		Common Stock as a result
	of the exercise of the		of the exercise of the
	Optional Conversion Right		Optional Conversion Right
	Number of shares	%		Number of shares	%
	of the Common				of the Common
	Stock				Stock
The Company (through its wholly	45,000	94.74	45,000	88.82
owned subsidiaries)
FDG EBT (U.S.) Limited (a	2,500	5.26	2,500	4.93
company under the employee
benefit trust established by the
Company)
The Investor	-	-	3,166	6.25
Total	47,500	100.00	50,666	100.00

INFORMATION ON THE GROUP

The Group is an electric vehicle manufacturer, which primarily engages in (i) research and development, design, manufacture and sale of electric vehicles; (ii) research and development, production and sale of lithium-ion batteries and related products; (iii) leasing of electric vehicles; (iv) research and development, manufacture and sale of cathode materials for lithium-ion batteries; and (v) direct investments.

INFORMATION ON CHANJE

Chanje is principally engaged in the sale and distribution of electric vehicles in the US.

According to the unaudited financial statements of Chanje prepared in accordance with the Hong Kong Financial Reporting Standards, the financial information of Chanje for the two preceding financial years is set out below:

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