Ningbo Luzhong New Materials Trading Co., Ltd. entered into an agreement to acquire a 55% stake in Ningbo Hongyuan Construction Co., Ltd. from Chanhigh Holdings Limited (SEHK:2017) for CNY 35 million on March 14, 2022. Post completion, Chanhigh will hold a 45% stake in Ningbo Hongyuan Construction. Within two working days after signing the Equity Transfer Agreement, Ningbo Luzhong New Materials Trading shall pay a deposit of 10% of the consideration to the bank account designated by Chanhigh.

Withing two days of the transfer of deposit, both the parties shall sign the relevant documents for the transfer of equity interest. Within two days after signing the Transfer Documents, Ningbo Luzhong New Materials Trading shall pay the remaining 90% of the consideration. The deposit of CNY 3.5 million made by Ningbo Luzhong New Materials Trading shall be treated as termination fees in the event of breach of contract by Ningbo Luzhong New Materials Trading.

In case Chanhigh breaches the contract, it will have to pay back the double of the said deposit. If the payment is not made in time, the unpaid part shall bear an interest at 0.1% of the day for each overdue day as the liability for breach of contract. For the year ended December 31, 2021, Ningbo Hongyuan Construction posted revenues of approximately CNY 49.3 million, Total Assets of approximately CNY 110 million and Net Assets of approximately CNY 62.7 million and net loss of approximately CNY 3.2 million.

The proceeds arising from the transaction shall be used as general working capital.