Qinshang subsidiary wins bids for 7 smart transportation projects (including general lighting) worth 318 million yuan

Dongguan Kingsun Optoelectronic Co., Ltd. (002638.SZ) announced that its wholly-owned subsidiary, Guangdong Kingsun Smart City Technology Engineering Co., Ltd. (renamed; formerly Guangdong Kingsun Semiconductor Lighting Technology Engineering Co., Ltd., hereinafter referred to as "Kingsun Smart City Company"), received the Notice of Award in April 2020, confirming that Kingsun Smart City Engineering Company won the bid for the smart traffic engineering (including general lighting) of seven projects, such as the construction project of Kejiao Avenue (from Nanshan Road to Wangpeng Avenue).

On July 23, 2020, the Company received notice that its wholly-owned subsidiary, Qinshang Smart City Company, signed the "Shenzhen Construction Engineering Construction (Unit Price) Contract" with Shenzhen Shenshan Special Cooperation Zone Smart City Research Institute Co., Ltd. for seven smart transportation projects (including general lighting). Total contract amount: approximately RMB 318 million (tax inclusive).

Project Name: 1. Smart Traffic Engineering for KeJiao Avenue (Wangpeng Avenue to Nanshan Road) Construction Project (including general lighting); 2. Smart Traffic Engineering for KeJiao Avenue (Nanshan Road to Honghai Avenue) Construction Project (including general lighting); 3. Smart Traffic Engineering for YiCheng Avenue (Shenshan Avenue to Chuangzhi Road) Construction Project (including general lighting); 4. Smart Traffic Engineering for Shenshan Avenue Expansion and Upgrade Project (Huishan Border to Ebu Gas Station Section) (including general lighting); 5. Smart Traffic Engineering for Shenshan Avenue Expansion and Upgrade Project (Xinyuan Road to 1.5km East of Yuandun Tunnel Section) (including general lighting); 6. Smart Traffic Engineering for Chuangzhi Road and Chuangxin Avenue Construction Project (Jianshe North Road to Shanmei Greenway Section) (including general lighting); 7. Smart Traffic Engineering for Ebu Area Municipal Road Network Project (10 roads including Xinfu Road) (including general lighting).

It is reported that Qinshang's net profit attributable to shareholders of the listed company in 2019 was -373 million yuan. Therefore, on July 22, the company received an inquiry letter regarding the annual report of the SME Board. The letter stated, "Since the audited net profit attributable to shareholders of the listed company was negative for two consecutive fiscal years, 2018 and 2019, your company's stock has been subject to a delisting risk warning." The Shenzhen Stock Exchange required the listed company to provide detailed explanations for the significant losses over two consecutive years, supplement information on the operational status of Longwen Education, explain the reasons for the 10.37% decline in the gross margin of the company's education and training business, and clarify the reasons for the losses of its subsidiary Sanan Optoelectronics, as well as measures to improve profitability. Therefore, winning the bid for this project may have positive significance for Qinshang.

Qinshang stated that the total contract amount of the project accounts for 25.42% of the company's audited Revenue for 2019. The total construction period of the project is 1,387 calendar days. The aforementioned project will be implemented in phases across years. Its successful implementation will have a positive guiding effect on the company's future development and positively impact its operating performance. The aforementioned contract will not affect the independence of the company's business, and the company will not become dependent on the counterparty due to contract performance.