Shenzhen Changfang Group Co.Ltd(300301) : Announcement on the company’s outstanding losses exceeding one third of the total paid in share capital

Securities code: Shenzhen Changfang Group Co.Ltd(300301) securities abbreviation: Shenzhen Changfang Group Co.Ltd(300301) Announcement No.: 2022029 Shenzhen Changfang Group Co.Ltd(300301)

With regard to the announcement that the company’s outstanding losses exceed one-third of the total paid in share capital, the company and all members of the board of directors guarantee that the information disclosed is true, accurate and complete without false records, misleading statements or major omissions.

Shenzhen Changfang Group Co.Ltd(300301) (hereinafter referred to as “the company”) held the 20th meeting of the 4th board of directors on April 29, 2022, deliberated and adopted the proposal on the company’s outstanding losses exceeding one third of the total paid in share capital, which needs to be submitted to the general meeting of shareholders for deliberation. The specific situation is hereby announced as follows: I. overview of the situation

According to the audit of Dahua Certified Public Accountants (special general partnership), as of December 31, 2021, the undistributed profit in the consolidated financial statements of the company was -78747776805 yuan, the unrecovered loss was -78747776805 yuan, the paid in share capital of the company was 790108769 yuan, and the unrecovered loss of the company exceeded one third of the total paid in share capital.

2、 Reasons for losses in 2021

1. In 2021, due to the better prevention and control effect of covid-19 epidemic in China than that in the world, manufacturing orders increased to a certain extent in the first half of the year. However, in the second half of the year, with the emergence of the new variant virus and the impact of the longer transportation period of foreign goods, coupled with the repeated epidemic, many people’s income has been greatly affected, consumer confidence has been greatly impacted, consumption has been degraded and the dynamic sales of terminal products have generally slowed down, and the overall market has declined significantly.

2. In 2021, as the impact of China’s real estate regulation began to play a role gradually, the growth rate of China’s real estate market slowed down, and a large number of land was sold out, which led to a significant reduction in its demand for lighting lamps, resulting in a phased overcapacity in China’s LED packaging and application capacity, resulting in the company’s need to face greater pressure of price competition. In addition, some products of the company are positioned at the low end, and the gross profit margin of products is low.

3. Affected by the Sino US trade war, the prices of some raw materials, such as plastic particles, silica gel, phosphor, copper and lithium battery, have increased by varying degrees, resulting in an increase in the production cost of the company’s products and a decrease in the gross profit margin. 4. During the reporting period, due to the long disposal time of the company’s Huizhou Industrial Park and subject to capital constraints, the R & D of the company’s high-end light source products and the development of energy storage business were not as expected.

5. During the reporting period, the company’s provision for impairment of assets such as goodwill, equipment and inventory increased significantly compared with the previous period.

3、 Countermeasures

1. The company will expand the R & D and production of full spectrum LED packaging, expand the markets of plant lighting, health lighting and intelligent lighting, look for development opportunities in new application fields of LED and cultivate new business growth points. Increase the development and sales of intelligent lighting, health lighting and energy storage products, and promote the upgrading and iteration of off grid products to light health, intelligence, multi-function and new fashion. The company will make use of the global channel resources and profound accumulation of R & D and innovation ability to expand new application fields of LED, actively seek market opportunities in other segments and enhance the company’s sustainable competitiveness.

2. Adhering to the concept of lean manufacturing and scientific management, the company will further improve the level of manufacturing and inventory; In terms of capital management, we will continue to optimize asset allocation, improve asset operation efficiency, strengthen inventory and accounts receivable management, ensure the timely return of funds, accelerate capital turnover and give full play to capital efficiency. At the same time, actively use the rich financing tools in the capital market to provide sufficient financial support for the operation and development of the company.

3. Further improve the level of corporate governance and ensure the scientificity and standardization of the requirements of governance system; Improve the working mechanism of internal control and give full play to the supervision function of the audit committee and the internal audit department; Continue to strengthen the construction of internal control, optimize the internal control process, eliminate hidden dangers, control risks and promote the healthy development of the company. According to the company law, the articles of association and other relevant provisions, this matter needs to be submitted to the general meeting of shareholders for deliberation.

It is hereby announced.

Shenzhen Changfang Group Co.Ltd(300301) board of directors

April 29, 2022

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