Zhong Yang Technology Announces Modification of Company’s Capital Utilization Plan for 3rd Domestic Unsecured Corporate Bond Conversion

Declaration

1.Date of the board of directors resolution for the change:2022/03/17
2.Effective registration date of the original plan:2021/12/15
3.Resolution date of additional issuance of the original plan:2022/03/17
4.Reason for the change:The raised funds were originally expected to be used
to repay the first domestic secured conversion of corporate bonds and the
second domestic unsecured conversion of corporate bond holders to execute
the put-back rights of  $652,500,000, but the corporate bond holders did
not On January 2, 2011 and January 3, 2011, the sell-back reference date was
exercised. Considering the gradual expansion of operations and the increase
in demand for bank loans in the future, it was planned to change the original
fund-raising plan to enrich working capital. to reduce reliance on financial
institutions.It can increase the stability of long-term funds, improve the
financial structure, reduce interest expenses, and improve the company's
mid- and long-term competitiveness.
5.Content of each and every successive previously changed plan for raising
of funds before and after change:
Fund utilization plan before the change:
Repay the funds required by the holders of the first domestic secured
convertible corporate bonds and the second domestic unsecured convertible
corporate bond holders to execute the put-back right, with a total raised
capital of $501,500 thousands.
Post-change capital utilization plan: Enhancing working capital
                                      2022Q2  $180,000 thousands
                                      2022Q3  $180,000 thousands
                                      2022Q4  $141,500 thousands
6.Projected timetable for execution:After changing the operation plan, it is
expected to be fully implemented in 2022Q4.
7.Projected completion date:2022Q4
8.Projected possible benefits:In order to cope with the gradual expansion of
operations, the company intends to use the raised funds of $501,500 thousands
to enrich its working capital instead of borrowing from financial
institutions to meet its working capital needs. If all of the above capital
needs are paid for by bank borrowings, calculated based on the average
borrowing rate of the Company's financing from financial institutions
of approximately 1.21%, it is estimated that the interest expense in 2022
and the following years can be saved to $2,392 thousands and $6,068 thousands
respectively.
9.Difference from original projected benefits:The estimated capital cost
saved after the change is not much different from that before the change.
Considering the future operating conditions, it will help to reduce the
proportion of borrowings from financial institutions and improve the
company's financial structure, so as to comply with the long-term and stable
operation principle.
10.Effect of the current change on shareholder equity:NA
11.Abstract of the original lead underwriter's appraisal opinion:
(1)Necessity and rationality of plan changes
   The company's third domestic unsecured conversion of corporate bonds
   has raised a total of RMB 501,500,000. The funds were originally
   expected to be used to repay the first domestic secured conversion of
   corporate bonds and the second domestic unsecured conversion of corporate
   bonds. The capital required to execute the put-back right was $652,500
   thousands. It was originally assessed that the bondholders would exercise
   the put-back right considering the low probability of exercising the right
   of conversion in the future. As of the sell-back base date (January 3,
   2022), The company's share price was $54.7, which was still 49.54%
   and 47.90% between the conversion prices of $81.8 and $80.9 for the first
   domestic secured conversion of corporate bonds and the second domestic
   unsecured conversion of corporate bonds. The holders of the first secured
   convertible corporate bonds and the second domestic unsecured convertible
   corporate bonds did not exercise their sell-back rights on January 2, 2022
   and January 3, 2022, the benchmark date for sell-back. The exercise of
   rights was not as expected,Considering the gradual expansion of operations
   and the increasing demand for borrowing from banks in the future, the
   company plans to change the original fundraising plan to enrich working
   capital in order to reduce its reliance on financial institutions. In
   addition to increasing long-term capital stability and improving financial
   structure, It can also reduce interest expenses and improve the company's
   medium and long-term competitiveness. To sum up, the company's change
   plan is mainly due to changes in the objective environment, and the
   company's focus is on the effective use of funds in order to reduce the
   company's capital cost. Therefore, its contingency measures for changing
   the capital plan should include: its necessity and rationality.
(2)The rationality of the estimated benefit achieved after the plan change
   In order to cope with the gradual expansion of operations, the company
   used the funds raised this time to enrich its working capital of
   $501,500 thousands, replacing part of bank financing, in order to reduce
   its dependence on financial institutions, in addition to increasing
   long-term capital stability and sound financial In addition to the
   structure, it can reduce interest expenses and improve the company's
   medium and long-term competitiveness. If the above-mentioned capital
   needs are met by bank borrowings, the company's average borrowing rate
   for financing from financial institutions is approximately 1.21%, and it
   is estimated that in 20111 and subsequent years, the interest expense can
   be saved to $2,392 thousands and $6,068 thousands respectively. To sum
   up, the company's capital application plan, estimated progress and
   possible benefits of the change in this capital application plan are
   still reasonable and feasible.
12.Any other matters that need to be specified:NA

Carol M. Barragan