The Board of Directors and all directors of this company hereby guarantee that the contents of this announcement do not contain any false records, misleading statements, or material omissions, and they assume legal responsibility for the truthfulness, accuracy, and completeness of its contents.

Key Information and Risk Disclosure:

● Due to the issuance by Shinewing Zhonghe Certified Public Accountants (Special General Partnership) (hereinafter referred to as “Shinewing Zhonghe”) of an audit report for the year 2023 expressing an inability to express an opinion on the financial statements of Ningxia Zhongke Biotechnology Co., Ltd. (hereinafter referred to as the “Company”), in accordance with relevant provisions of the Shanghai Stock Exchange’s Rules for the Listing of Stocks, the Company’s shares have been subject to a delisting risk alert by the Shanghai Stock Exchange effective April 30, 2024. As of now, the matters giving rise to the inability to express an opinion remain unresolved. According to Article 9.3.11 and other relevant provisions of the Shanghai Stock Exchange’s Rules for the Listing of Stocks, if the Company’s financial and regulatory conditions for the year 2024 meet the aforementioned requirements, its shares will face the risk of being delisted.

● After Ningxia Zhongke Bio-new Materials Co., Ltd. (hereinafter referred to as “Zhongke Xincai”) entered a production shutdown on February 7, 2024, in accordance with relevant provisions of the “Shanghai Stock Exchange Rules for the Listing of Stocks,” the company’s shares have been subject to an additional risk alert by the Shanghai Stock Exchange since April 8, 2024. Although Zhongke Xincai has recently resumed production and operations, whether it can achieve sustainable and normal production and business capabilities remains uncertain.

● On December 3, 2024, the company received a “Civil Complaint” from the Intermediate People’s Court of Zhanjiang City, Guangdong Province. The complaint alleges that, due to the company’s signing of a “Maximum Pledge Contract” with the Haitang Branch of Guangdong Nanyue Bank Co., Ltd., but failing to promptly fulfill the relevant deliberation procedures and information disclosure obligations, the company has violated applicable laws and regulations as well as the information disclosure requirements of the Shanghai Stock Exchange, thereby constituting an illegal guarantee. Moreover, this litigation may result in the company’s 49% equity stake in Zhongke Xincai—held as pledged collateral—being sold at a discount, auctioned off, or otherwise disposed of. If this matter is not rectified within one month, in accordance with the relevant provisions of the “Rules Governing the Listing of Stocks on the Shanghai Stock Exchange,” the company faces the risk of being subject to additional risk alerts imposed by the Shanghai Stock Exchange.

● In the first three quarters of 2024, the company’s net profit attributable to shareholders of the listed company was -479.5415 million yuan, an increase of 259.3167 million yuan year-on-year in losses. In the first three quarters of 2024, the net profit attributable to shareholders of the listed company after deducting non-recurring gains and losses was -456.8602 million yuan, an increase of 244.6352 million yuan year-on-year in losses. As of the end of the third quarter of 2024, the net assets attributable to shareholders of the listed company were -349.7652 million yuan, resulting in negative net assets at the end of the period.

● Zhongke Xincai has entered restructuring proceedings, and there is uncertainty as to whether the restructuring will succeed. If the court ultimately rules that Zhongke Xincai’s restructuring has failed, the company will face the risk of being declared bankrupt by the court. As a result, the company may lose control over Zhongke Xincai, which could have a certain impact on the company’s assets as well as its current and future profits.

● Zhongke Xincai is a core subsidiary within the scope of the company’s consolidated financial statements. Following Zhongke Xincai’s entry into reorganization proceedings, the administrator will fulfill the relevant duties in accordance with the court’s requirements and in compliance with the provisions of the Enterprise Bankruptcy Law. However, at present, the company remains the controlling shareholder of Zhongke Xincai and thus retains voting rights as well as certain decision-making powers over the subsequent reorganization process and the voting on the draft reorganization plan. Moreover, Zhongke Xincai’s reorganization is being carried out based on an overall plan and coordinated arrangement that involves the joint reorganization of the company and its subsidiaries under a unified scheme—rather than as an isolated event. If, according to the company’s original plan, the company can enter reorganization proceedings and complete the reorganization simultaneously with its subsidiaries under a unified scheme, Zhongke Xincai will continue to be the company’s controlling subsidiary, and this will not affect the company’s ability to consolidate it when preparing the consolidated financial statements. Should the court ultimately decide not to accept the company’s reorganization application this year, or should the court rule that the company’s or its subsidiary’s reorganization has been unsuccessful, or should the company or its subsidiary be declared bankrupt by the court, the company may, depending on the actual circumstances, face the risk of losing its equity stake in the subsidiary. In such a case, the company would no longer be able to include Zhongke Xincai in its consolidated financial statements. The above assessment has been made by the company’s management based on the overall plan and arrangements for the coordinated reorganization of the company and its subsidiaries; the final determination will be subject to the opinion of the annual audit accountants.

● The entry of a subsidiary into reorganization proceedings does not necessarily mean that the company itself has entered reorganization proceedings. Currently, the company remains in the pre-reorganization phase, and there is still uncertainty as to whether this pre-reorganization effort will succeed. Should the company’s pre-reorganization prove successful, the court will, in accordance with the law, review whether to accept the formal reorganization application. According to Article 9.4.1 of the “Shanghai Stock Exchange Rules for the Listing of Stocks,” if the court legally rules to accept the company’s application for reorganization, conciliation, or bankruptcy liquidation, the company’s stock will be subject to a combined risk alert for delisting following the acceptance of the reorganization application. However, it remains uncertain whether the company will actually enter reorganization proceedings, and there is also uncertainty regarding whether the reorganization will ultimately succeed. If the court ultimately rules that the company’s reorganization is unsuccessful, the company will face the risk of being declared bankrupt by the court. Should the company be declared bankrupt, it will undergo bankruptcy liquidation, and pursuant to Article 9.4.15 of the “Shanghai Stock Exchange Rules for the Listing of Stocks,” its stock will face the risk of being delisted. Regardless of whether the company enters reorganization proceedings, it will continue to actively carry out its daily production, operations, and management activities on the basis of its current situation.

● On October 30, 2024, the company and its actual controller, Mr. Yu Jianming, received two “Notice of Filing” letters (No.: CSRC Filing No. 0342024005 and CSRC Filing No. 0342024006) issued by the China Securities Regulatory Commission (hereinafter referred to as “CSRC”). The CSRC has decided to initiate an investigation into the company and Mr. Yu Jianming due to suspected violations of information disclosure regulations. As of now, the company has not yet received any conclusive opinions from the CSRC. There is a possibility that the company’s self-examination results may not fully align with the findings of the CSRC’s investigation. Investors are advised to pay close attention to any subsequent risks.

● As of the date of this announcement, the company’s total debt stands at RMB 1.805 billion, of which the total amount of overdue debt is RMB 1.602 billion and the amount of debt involved in litigation is RMB 1.824 billion. With the exception of the bank accounts of its subsidiary, Hua Hui Environmental Protection, and its wholly-owned subsidiary, Ningxia Tianfu, most of the company’s bank accounts, as well as those of Hengli International Trade and the activated carbon branch of Hua Hui Environmental Protection, have been frozen. Although all of Zhongke Xincai’s bank accounts have now been unfrozen, the company currently suffers from a severe shortage of funds and liquid assets needed to repay its debts. Given the extremely high level of debt risk at present, the company’s ability to continue operating is facing serious negative impacts. It is unable to pay its maturing debts and clearly lacks the financial capacity to do so, thus meeting the legal requirements for bankruptcy.

● As the company’s audited net profits for the three consecutive fiscal years from 2021 to 2023—whichever is lower, before or after deducting non-recurring gains and losses—were all negative, and the 2023 audit report indicated uncertainty regarding the company’s going concern, in accordance with relevant provisions of the “Shanghai Stock Exchange Rules for the Listing of Stocks,” the Shanghai Stock Exchange has imposed an additional risk alert on the company’s shares. As of the date of this announcement, the aforementioned “additional risk alert” has not yet been lifted.

● As of the date of this announcement, the company and its subsidiaries are involved in multiple lawsuits arising from disputes over loan agreements, equity transfer agreements, sales contracts, construction project contracts, liability disputes related to false statements in securities, and agency contracts. Given that some of these lawsuits are at various stages—such as cases that have been concluded but not yet executed, cases that have been concluded but not fully executed, cases that remain pending, or cases that have been filed but have not yet gone to trial—we currently cannot accurately determine their impact on the company’s current-period or future-period profits.

● Shanghai Zhongneng Enterprise Development (Group) Co., Ltd. (hereinafter referred to as “Shanghai Zhongneng”) holds 200,000,000 shares of the company, representing 29.20% of the company’s total share capital. As of the date of this announcement, the number of shares pledged by Shanghai Zhongneng is 200,000,000, and these shares have been frozen, accounting for 100% of the total shares held by Shanghai Zhongneng.

● The company’s stock has risen by the daily limit for two consecutive trading days, with a cumulative increase of 10.45%. As of December 31, 2024, the stock’s price range was 0.00%, and its turnover rate was 1.11%. Recently, the company’s stock prices have experienced significant fluctuations. Investors are advised to pay close attention to the risks associated with trading in the secondary market.

● Currently, there have been no significant changes in the company’s fundamentals, nor is there any material information that should have been disclosed but has not been. However, the trading price of the company’s stock has experienced substantial fluctuations. We urge all investors to invest rationally and pay close attention to investment risks.

The company’s stock has hit the daily upper limit for two consecutive trading days, with a cumulative increase of 10.45%. As of December 31, 2024, the stock’s price range was 0.00%, and the turnover rate stood at 1.11%. Recently, the company’s stock prices have experienced significant fluctuations. Investors are advised to pay close attention to the risks associated with trading in the secondary market.

Given the recent significant fluctuations in the company’s stock trading price, we would like to issue the following risk warning regarding the company’s stock trading:

I. Uncertainty Risks Associated with the Restructuring of Subsidiaries

Zhongke Xincai has entered restructuring proceedings, and there is uncertainty as to whether the restructuring will succeed. If the court ultimately rules that Zhongke Xincai’s restructuring has failed, the company will face the risk of being declared bankrupt by the court. As a result, the company may lose control over Zhongke Xincai, which could have a certain impact on the company’s assets as well as its current and future profits.

II. Uncertainty Risk Regarding the Inclusion of Subsidiaries in the Consolidated Financial Statements

Zhongke Xincai is a core subsidiary within the scope of the company’s consolidated financial statements. Following Zhongke Xincai’s entry into reorganization proceedings, the administrator will fulfill the relevant duties in accordance with the court’s requirements and in compliance with the provisions of the Enterprise Bankruptcy Law. However, at present, the company remains the controlling shareholder of Zhongke Xincai and thus retains voting rights and certain decision-making powers regarding the subsequent reorganization process and the voting on the draft reorganization plan. Moreover, Zhongke Xincai’s reorganization is being carried out based on an overall plan and coordinated arrangement for the joint reorganization of the company and its subsidiaries, implemented simultaneously under a unified scheme—this is not an isolated event. If, according to the company’s original plan, the company can enter reorganization proceedings and complete the reorganization together with its subsidiaries under a unified scheme, Zhongke Xincai will continue to remain a controlling subsidiary of the company, and this will not affect the company’s ability to consolidate it into its consolidated financial statements. Should the court ultimately decide not to accept the company’s reorganization application this year, or should the court rule that the company’s or its subsidiary’s reorganization has failed, or should the company or its subsidiary be declared bankrupt by the court, the company may, depending on the actual circumstances, face the risk of losing its equity stake in the subsidiary. In such a case, the company would no longer be able to include Zhongke Xincai in its consolidated financial statements. The above assessment has been made by the company’s management based on the overall plan and arrangements for the coordinated reorganization of the company and its subsidiaries; the final determination will be subject to the opinion of the annual audit accountants.

III. Uncertainty Risks of Corporate Reorganization

The entry of a subsidiary into reorganization proceedings does not necessarily mean that the company itself is entering reorganization proceedings. Currently, the company remains in the pre-reorganization phase, and there is still uncertainty as to whether this pre-reorganization effort will succeed. If the company’s pre-reorganization is successful, the court will, in accordance with the law, review whether to accept the formal reorganization application. Whether the company will actually enter reorganization proceedings remains uncertain, and so does the ultimate success of the reorganization. Should the court ultimately rule that the company’s reorganization has failed, the company will face the risk of being declared bankrupt by the court. If the company is declared bankrupt, it will be subject to bankruptcy liquidation. According to Article 9.4.15 of the “Rules for Stock Listing on the Shanghai Stock Exchange,” the company’s shares will then face the risk of being delisted. Regardless of whether the company enters reorganization proceedings, it will continue to actively carry out its daily production, operations, and management activities based on its current foundation.

IV. Risks of Filing a Case and Imposing Penalties

On October 30, 2024, the company and its actual controller, Mr. Yu Jianming, received two “Notice of Filing” letters (No. SEC Filing No. 0342024005 and SEC Filing No. 0342024006) issued by the China Securities Regulatory Commission (CSRC). The CSRC has decided to initiate an investigation into the company and Mr. Yu Jianming due to suspected violations of information disclosure regulations. As of now, the company has not yet received any conclusive opinions from the CSRC. There is a possibility that the company’s self-examination results may not fully align with the findings of the CSRC’s investigation. Investors are advised to pay close attention to any subsequent risks.

V. Risk of Non-compliant Guarantees

On December 3, 2024, the company received from the Intermediate People's Court of Zhanjiang City, Guangdong Province, the “Civil Complaint” (2024) Yue 08 Min Chu No. 106 and the “Summons from the Intermediate People's Court of Zhanjiang City, Guangdong Province,” along with other relevant legal documents. The company signed a “Maximum Pledge Contract” with the Haitang Branch of Guangdong Nanyue Bank Co., Ltd.; however, it failed to promptly fulfill the required deliberation procedures and information disclosure obligations, thereby violating applicable laws and regulations as well as the information disclosure requirements of the Shanghai Stock Exchange, constituting an illegal guarantee. Moreover, the 49% equity stake in Zhongke Xincai, which serves as the pledged collateral, faces the risk of being valued at a discount, auctioned off, or sold due to this litigation. If the company fails to rectify the situation within one month, in accordance with the relevant provisions of the “Rules Governing the Listing of Stocks on the Shanghai Stock Exchange,” there is a risk that the Shanghai Stock Exchange may impose additional risk alerts on the company.

VI. Corporate Debt and Operational Risks

As of the date of this announcement, the company’s total debt amounted to RMB 1.805 billion, of which the total amount of overdue debt was RMB 1.602 billion, and the amount of debt involved in litigation reached RMB 1.824 billion. With the exception of the bank accounts of its subsidiary, Hua Hui Environmental Protection, and its wholly-owned subsidiary, Ningxia Tianfu, most of the company’s bank accounts, as well as those of Hengli International Trade and the activated carbon branch of Hua Hui Environmental Protection, have been frozen. Although the bank accounts of Zhongke New Materials have all been unfrozen, the company currently suffers from a severe shortage of funds and liquid assets needed for debt repayment. Given the extremely high level of debt risk at present, the company’s ability to continue operating is facing serious negative impacts. It is unable to repay its maturing debts and clearly lacks the financial capacity to do so, thus meeting the legal requirements for bankruptcy.

VII. Risks Associated with Losses in Performance

In the first three quarters of 2024, the company’s net profit attributable to shareholders of the listed company was -479.5415 million yuan, an increase of 259.3167 million yuan year-on-year in losses. In the first three quarters of 2024, the net profit attributable to shareholders of the listed company after deducting non-recurring gains and losses was -456.8602 million yuan, with losses increasing by 244.6352 million yuan year-on-year. In the third quarter of 2024, the net assets attributable to shareholders of the listed company were -349.7652 million yuan, and the net assets at the end of the period were negative.

VIII. Risks of Delisting Risk Warnings

Due to the fact that Xin Yongzhong issued an audit report for the company’s 2023 financial statements expressing an inability to express an opinion, in accordance with the relevant provisions of the “Shanghai Stock Exchange Rules for the Listing of Stocks,” the company’s shares have been subject to a delisting risk alert by the Shanghai Stock Exchange effective April 30, 2024. Furthermore, pursuant to Article 9.4.1 of the “Shanghai Stock Exchange Rules for the Listing of Stocks,” if the court legally accepts the company’s application for reorganization, conciliation, or bankruptcy liquidation, the company’s shares will be subject to a cumulative delisting risk alert following the acceptance of the reorganization application.

9. Risk of Delisting

Since April 30, 2024, the company’s shares have been subject to a delisting risk alert issued by the Shanghai Stock Exchange. According to Article 9.3.11 and other relevant provisions of the “Shanghai Stock Exchange Rules for the Listing of Stocks,” if the company’s financial or regulatory circumstances in fiscal year 2024 meet the aforementioned requirements, its shares will face the risk of being delisted. The company has entered into a pre-restructuring procedure, and there is also a potential risk that, should the restructuring fail, the company could be declared bankrupt. If the company is declared bankrupt, it will undergo bankruptcy liquidation, and pursuant to Article 9.4.15 of the “Shanghai Stock Exchange Rules for the Listing of Stocks,” its shares will again face the risk of being delisted.

X. Risks related to other risk warnings

(1) Following the suspension of production at Zhongke Xincai on February 7, 2024, in accordance with relevant provisions of the “Shanghai Stock Exchange Rules for the Listing of Stocks,” the company’s shares have been subject to an additional risk alert by the Shanghai Stock Exchange since April 8, 2024. Although Zhongke Xincai has recently resumed production and operations, whether it can achieve sustainable and normal production and business capabilities remains uncertain.

(2) Since the company’s audited net profits for the three consecutive fiscal years from 2021 to 2023—whichever is lower, before and after deducting non-recurring gains and losses—were all negative, and the audit report for 2023 indicated uncertainties regarding the company’s ability to continue operating, in accordance with relevant provisions of the “Shanghai Stock Exchange Rules for the Listing of Stocks,” the Shanghai Stock Exchange has imposed an additional risk alert on the company’s shares. As of the date of this announcement, the aforementioned “additional risk alert” has not yet been lifted.

XI. Risks Involving Litigation Matters

As of the date of this announcement, the company and its subsidiaries are involved in multiple lawsuits arising from disputes over loan agreements, equity transfer agreements, sales contracts, construction project contracts, securities misrepresentation liability disputes, and agency agreements. Given that some of these lawsuits are either in the stage of being concluded but not yet executed, in the stage of being concluded but not fully executed, still pending trial, or have been filed but have not yet reached the trial stage, it is currently impossible to accurately assess their impact on the company’s current-period or future-period profits.

12. Risks Associated with Pledging Shares by the Controlling Shareholder

Shanghai Zhongneng holds 200,000,000 shares of the company, representing 29.20% of the company’s total share capital. As of the date this announcement is disclosed, the number of shares pledged by Shanghai Zhongneng is 200,000,000, and these shares have been frozen, accounting for 100% of the total shares held by Shanghai Zhongneng.

13. Risks of Secondary Market Trading

Over the past two trading days, the company’s stock has risen by the daily limit for consecutive sessions, with a cumulative increase of 10.45%. Currently, there have been no significant changes in the company’s fundamentals, nor is there any material information that should have been disclosed but remains undisclosed. Given the substantial fluctuations in the company’s stock price, we urge all investors to adopt a rational investment approach and pay close attention to investment risks.

According to relevant data from the CSI Index and the China Association of Securities Industry, as of December 31, 2024, the price-to-book ratio for the “Chemical Raw Materials and Chemical Products Manufacturing” industry—where the company operates—was 1.88. Based on calculations using industry classification data from the China Association of Securities Industry, the company’s own price-to-book ratio stood at 14.32, significantly higher than the industry average. Investors are advised to invest rationally and pay close attention to investment risks.

The company designates the Shanghai Securities Journal and the Securities Times as its official media for information disclosure, and the website of the Shanghai Stock Exchange (www.sse.com.cn) as its official website for information disclosure. Information released by the company shall be based on the announcements published in the aforementioned designated media and website. Investors are kindly advised to pay attention to investment risks.

Hereby announced.

Ningxia Zhongke Biotechnology Co., Ltd.

Board of Directors

January 1, 2025