Iao Kun Group Holding Company Limited to Acquire Majority Interest in Guangzhou LiNiu Network Technology Co. Ltd.

Commences Transformation and Diversification of its Operations

HONG KONG–(BUSINESS WIRE)–Iao Kun Group Holding Company Limited (“IKGH”) (NASDAQ: IKGH), announced
today that it plans to transform the Company’s overall strategy and
begin to focus its efforts on the Chinese technology industry.

As part of this new strategy, IKGH announced today that it has entered
into an agreement to acquire 51% of Jia-Heng Industrial Ltd., the
holding company of Guangzhou LiNiu Network Technology Co. Ltd. (“LiNiu
Network”), a software technology development company that is currently
developing an electronic B2C trading platform focused on the Chinese
agricultural industry.

As consideration for the acquisition, IKGH will issue 12.484 million
ordinary shares upon the transaction’s closing, as well as cash
consideration that is contingent upon LiNiu Network achieving after-tax
income targets. The acquisition is expected to close in the first
quarter of 2017.

“Over the last few months, we have conducted an extensive review of our
operations and our business strategy in order to right-size IKGH and
find a path where we believe we can create long-term value for our
shareholders,” said Mr. Lam Man Pou, Chairman of IKGH. “After recently
completing the review, we concluded that we did not see a path forward
toward rebuilding our VIP gaming portfolio. While we will continue to
participate in the promotion of our VIP gaming room in Macau, we have no
further plans to expand our gaming operations to additional VIP rooms.”

“While conducting the review, we identified several opportunities to
diversify from the gaming sector which we believed were attractive from
a value-add standpoint,” added Chairman Lam. “After appropriate due
diligence, we made the determination to acquire a majority interest in
LiNiu Network and will be focusing our near to mid-term efforts on
successfully launching its trading platform and rapidly scaling the
business. Importantly, the acquisition requires no upfront cash payment
and firmly aligns our interests with that of LiNiu Network as the vast
majority of their consideration is dependent upon them achieving
consistently increasing after-tax profit targets over the next five
years.”

LiNiu Network is currently internally testing its LiNiu (“犁牛”) B2C
electronic trading platform, which will be focused on the Chinese
agricultural industry; in particular, helping to create solutions with
respect to the “Three Rural Issues” (agriculture / rural / farmers) to
help facilitate the future development and growth of the 900 million
people in China tied to the agricultural industry. The Chinese
government has recently focused on encouraging farmers and the rural
community to enhance their businesses through new opportunities and
investment. Through its e-commerce platform, the LiNiu Network will
cover both the production and service businesses included in “Three
Rural”, including agricultural production, information/factors/tools,
agricultural sideline products, ecotourism, agricultural finance and
market information.

Scheduled to officially launch in the first half of 2017, LiNiu
Network’s directors Wang Shun Yang and Luo Guo Rui have already
identified and connected with over 10,000 suppliers, of which more than
1,200 have already signed a letter of intent to join the platform upon
launch. LiNiu Network expects to generate revenue on the platform
through commissions, advertising and guarantee deposits.

“We are excited to be partnering with IKGH and playing a key role in
their transition into the technology industry,” said Mr. Wang. “We see a
need to create a more efficient way for individual farmers and Chinese
agricultural suppliers to conduct business with their customers, and we
believe the LiNiu Network platform is uniquely positioned to fill the
current gap.”

After-Tax Income Target

As part of the transaction, IKGH will make certain cash payments to the
current owners of LiNiu Network only if the after-tax income for LiNiu
Network is equal to or in excess of the after-tax income specified in
the below table (note, US values based on February 3, 2017 exchange rate
of $1 = RMB6.88):

                           
Year Income after-tax Cash payment
2017 RMB20 million (US $2.9 million) RMB5,412,000 (US $0.8 million)
2018 RMB80 million (US $11.6 million) RMB21,648,000 (US $3.1 million)
2019 RMB300 million (US $43.6 million) RMB81,182,000 (US $11.8 million)
2020 RMB500 million (US $72.7 million) RMB135,303,000 (US $19.7 million)
2021 RMB700 million (US $101.7 million) RMB189,425,860 (US $27.5 million)
Total RMB1.6 billion (US $232.6 million) RMB432,970,860 (US $62.9 million)
 

Cash will be paid to the current owners of LiNiu Network only when the
after-tax income target is met or exceeded. The targets will be reviewed
yearly and in aggregate at the end of the fifth year. For example, if
the aggregate after-tax income target is met after the fifth year, the
aggregate cash payment will be RMB432,970,860, even if all of the other
after-tax income targets from 2017-2020 were not met. As a
counterexample, if the after-tax income targets for 2017 and 2018 are
met and the targets from 2019, 2020 and 2021 are not met (with the
aggregate after-tax income also under the target of RMB1,600,000,000),
then the current owners would only receive the cash payments for 2017
and 2018 (a total of RMB 27,060,000 or US $3.9 million).

Forward-Looking Statements

This press release includes forward-looking statements made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform
Act of 1995 that involve risks and uncertainties. Forward-looking
statements are statements that are not historical facts. Such
forward-looking statements, based upon the current beliefs and
expectations of IKGH’s management, are subject to risks and
uncertainties, which could cause actual results to differ from the
forward-looking statements. The gaming industry is characterized by an
element of chance. Theoretical win rates for IKGH’s promotion entities’
VIP gaming room operations depend on a variety of factors, some beyond
their control. In addition to the element of chance, theoretical win
rates are also affected by other factors, including gaming patrons’
skill and experience, the mix of games played, the financial resources
of gaming patrons, the spread of table limits, the volume of bets placed
by IKGH’s promotion entities’ gaming patrons and the amount of time
gaming patrons spend on gambling — thus VIP gaming rooms’ actual win
rates may differ greatly over short time periods, such as from quarter
to quarter, and could cause their quarterly results to be volatile.
These factors, alone or in combination, have the potential to negatively
impact the VIP gaming rooms’ win rates. Investors and potential
investors should consult all of the information set forth herein and
should also refer to the risk factors set forth in IKGH’s Annual Report
on Form 20-F filed in March 2016, and other reports filed or to be filed
from time-to-time with the Securities and Exchange Commission.

About Iao Kun Group Holding Company Limited

IKGH is a holding company that currently participates in the promotion
of a VIP gaming room at the City of Dreams Macau in Cotai. In February
2017, IKGH announced its intent to diversify into non-gaming assets with
the planned acquisition of a majority interest of Guangzhou LiNiu
Network Technology Co. Ltd., which is developing an electronic trading
platform focused on the Chinese agricultural industry.

Contacts

Iao Kun Group Holding Company Limited
Ryan Yip, +853 2782 3425
ryany@ikghcl.com
or
James
Preissler, 646-450-8808
preissj@ikghcl.com