Huakong Saige Receives Arbitration Award Involving Return of 50 Million Yuan in Support Funds and Recovery of 48.89 Million Yuan in Land Compensation

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Shenzhen Huakong SEG (Rights Protection) Co., Ltd. (Stock Code: 000068, Stock Abbreviation: Huakong SEG) announced on March 19, 2026, that the company received two “Arbitration Awards” issued by the Qitaihe Arbitration Commission on March 18. The awards pertain to the company’s and its subsidiaries’ arbitration cases involving agreement disputes and land disputes with the Xinxing District People’s Government of Qitaihe City and the Qitaihe Natural Resources and Planning Bureau. The final rulings require the company to return 50 million yuan in support funds in five installments and to recover land compensation of 48.89 million yuan in five installments, with an estimated asset disposal gain of about 4 million yuan.

The announcement states that this arbitration involves two related cases. First, the Xinxing District People’s Government of Qitaihe City filed for arbitration against the company and its third-tier subsidiary Heilongjiang Aoyuan New Materials Co., Ltd. (“Heilongjiang Aoyuan”) over government subsidy disputes. Second, Heilongjiang Aoyuan filed for arbitration against the Qitaihe Natural Resources and Planning Bureau over land disputes.

According to the “Arbitration Award” (Qitaihe Arbitration No. [2026] No. 24), the company and Heilongjiang Aoyuan are required to repay a total of 50 million yuan in support funds to the Xinxing District People’s Government of Qitaihe City in five installments of 10 million yuan each. The first payment should be made within 30 days of the award becoming effective (by April 17, 2026), and all payments should be completed within three months (by June 17, 2026). Additionally, both parties agree to terminate the “Qitaihe Lithium-ion Battery Anode Material Project Investment Contract” signed on December 24, 2019, and will not pursue breach of contract liabilities.

Another “Arbitration Award” (Qitaihe Arbitration No. [2026] No. 25) rules that the Qitaihe Natural Resources and Planning Bureau will recover the involved land of 271,616 square meters from Heilongjiang Aoyuan at a price of 48.89 million yuan. The land compensation will also be paid in five installments, with the first installment of 10 million yuan due by May 17, 2026, and the full amount paid by July 17, 2026. The “State-owned Construction Land Use Rights Transfer Contract” signed between the parties will be terminated upon the award’s effectiveness, with no further breach liabilities.

Regarding the impact of these rulings on the company’s finances, Huakong SEG states that it had already recognized an estimated liability of 50 million yuan in June 2025 related to the dispute with Xinxing District Government. This transaction adjustment does not affect that loss recognition. Since the relevant land has been amortized, and the recovered amount exceeds the book value, an asset disposal gain of approximately 4 million yuan is expected, subject to actual enforcement and audit results.

The company also notes that the payments for returning support funds and recovering land compensation will be carried out in a synchronized, phased manner, which is not expected to significantly impact the company’s current liquidity or daily operations. However, the progress of fund payments after arbitration depends on the performance capabilities of all parties involved; delays could pose breach risks. The company will closely monitor the enforcement of the awards and fulfill its disclosure obligations promptly.

Additionally, the announcement discloses other minor pending lawsuits and arbitration cases involving the company and its subsidiaries, with a total claimed amount of about 13.9568 million yuan. These cases do not meet the criteria for material litigation or arbitration and are not expected to have a significant impact on the company.

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