Bursa Announcement

Type	Reply to Query
Reply to Bursa Malaysia's Query Letter - Reference ID	IQL-11082020-00005
Subject	Proposed acquisition of 20,000 ordinary shares representing the entire equity interest in HK Aerospace Beidou New Energy Industry Technology Co Ltd ("HK Aerospace") for a total purchase consideration of USD25.0 million
Description	SINO HUA-AN INTERNATIONAL BERHAD ("HUAAN") PROPOSED ACQUISITION OF 20,000 ORDINARY SHARES REPRESENTING THE ENTIRE EQUITY INTEREST IN HK AEROSPACE FOR A TOTAL PURCHASE CONSIDERATION OF USD25.0 MILLION - REPLY TO QUERY FROM BURSA MALAYSIA SECURITIES BERHAD ("BURSA SECURITIES") DATED 11 AUGUST 2020
Query Letter Contents	We refer to HUAAN’s announcement dated 7 August 2020 in respect of the aforesaid matter. In this connection, kindly furnish Bursa Securities with the following additional information for public release: 1) To state the reason(s) for the termination of the subscription agreement dated 3 July 2020. 2) HK Aerospace and its subsidiaries’ date of commencement of business operations. 3) To state the estimated total cost for the purchase, installation and commissioning of the new equipment and the source of fund. 4) To quantify the estimated financial commitment from HUAAN to purchase the new equipment. 5) To state whether the new equipment to be purchased will be installed in HK Aerospace or otherwise. 6) To state the expected production capacity and output of the products before and after the commission of the new equipment. 7) To state whether HK Aerospace has control over Guangxi Aerospace Beidou New Energy Industry Technology Co Ltd. 8) The principal markets for the products and services. 9) HK Aerospace Group’s audited financial information (past 3 years or since incorporation, whichever is the later) and the latest interim results, if available, stating the turnover, profit before tax, profit after tax and non-controlling interest and where there is any material fluctuation in turnover or profits in any of the years, an explanation for the fluctuation. 10) The basis of arriving at the total purchase consideration of USD25 million. 11) The justifications for the total purchase consideration of USD25 million. 12) A statement as to whether the profit guarantee provided is realistic, taking into consideration the historical performance and future prospects of HK Aerospace. 13) Details of HUAAN’s rights of recourse in the event the profit guarantee is not met. 14) In relation to the liabilities to be assumed, to elaborate/clarify on “except those incurred in the ordinary course of business”. 15) To state the details of the risks associated with the business and operations of HK Aerospace Group and its mitigating factors. 16) To incorporate the prospects of HK Aerospace Group. 17) To state the effect on earnings per share for the financial year ending 31 December 2020 and 2021. 18) To state whether the proposed acquisition of HK Aerospace will trigger diversification in operations pursuant to Paragraph 10.13 of the Main Market Listing Requirements Please furnish Bursa Securities with your reply within one (1) market day from the date hereof. Yours faithfully Listing Regulation cc: Market Surveillance Dept. Securities Commission (via fax)

(Unless otherwise defined, capitalised terms used in this announcement shall have the same meaning as those given to them in the initial announcement made on 7 August 2020.)

Reference is made to the Company’s announcement made on 7 August 2020 and the query of Bursa Securities dated 12 August 2020 in relation to the Proposed Acquisition of 20,000 Ordinary Shares representing the Entire Equity Interest in HK Aerospace for a Total Purchase Consideration of USD25.0 million.

The Board of Directors of Hua-An wishes to furnish the following additional information on the query raised by Bursa Securities on the aforementioned matter as requested by Bursa Securities.

3) To state the estimated total cost for the purchase, installation and commissioning of the new equipment and the source of fund.

4) To quantify the estimated financial commitment from HUAAN to purchase the new equipment.

5) To state whether the new equipment to be purchased will be installed in HK Aerospace or otherwise.

6) To state the expected production capacity and output of the products before and after the commission of the new equipment.

The Board of Directors of Hua-An wishes to clarify that the above questions are not applicable given the fact that the new SPA executed on 7 August 2020 does not contemplate any funding of capex of HK Aerospace. The Board of Directors would like to advise that it has inadvertently overlooked the necessity to delete certain sentence in Clause 4.2 in the SPA signed on 7 August 2020 which were evidently related to the stipulations of the Subscription Agreement signed on 3 July 2020 which have been rescinded on 7 August 2020. Pursuant therefrom, the Vendors and Purchaser have agreed to rectify the stipulations in Clause 4.2 of the SPA signed on 7 August 2020 to read as follows:

SPA signed on 7 August 2020

Rectification

Clause 4.2

In consideration of the Purchaser entering into this agreement, the Vendors hereby jointly and severally guarantee that a minimum profit after taxation of the Company for the first financial year shall be USD 3 million [UNITED STATES DOLLAR THREE MILLION ONLY] (“the Guaranteed Profit”). The target date to achieve the Guaranteed Profit shall be 12 months upon Completion. The parties agree that the first 4 months shall be allotted for the purchase, installation and commissioning of new equipment to increase production and the subsequent 12 months shall be allotted for the actual production, marketing and selling of the products of the Business.

9) HK Aerospace Group’s audited financial information (past 3 years or since incorporation, whichever is the later) and the latest interim results, if available, stating the turnover, profit before tax, profit after tax and non-controlling interest and where there is any material fluctuation in turnover or profits in any of the years, an explanation for the fluctuation.

The Board of Directors also wishes to clarify that the revenue in 2018 was primarily generated from the IOT project for armored vehicles in China which was completed in that year. The focus of the Company was redirected to the development and subsequent sales of its energy storage solutions namely the super batteries and ultra-capacitors in year 2019. Therefore, the revenue was significantly lower compared to that of preceding year. The revenue generated from the sales of its energy storage solutions has started to gain traction in year 2020 which resulted in a significant increase in its revenue for that year, as evidenced in the revenue recorded in the first 5 months of 2020.

This announcement is dated 17 August 2020.

Proposed acquisition of 20,000 ordinary shares representing the entire equity interest in HK Aerospace Beidou New Energy Industry Technology Co Ltd ("HK Aerospace") for a total purchase consideration of USD25.0 million