nCoV Update: New CCP Initiatives

It appears that the CCP has just instigated additional measures for containment of the nCoV outbreak that will now affect Guangdong Province. Factories that had been originally scheduled to begin operations on Feb.3, 2020 had already been postponed for a week to Feb.10, 2020 due to the outbreak. However, we have just been informed by the local Government that factories will now only be allowed to recommence operations after the factory has been thoroughly inspected by Government health officials and approved to operate.

Our factory in Guangzhou has already applied to the local Government to perform these inspection as soon as possible. Nonetheless, it is still difficult to ascertain exactly when the inspections will actually take place. In light of this latest announcement, we cannot say for certain when the factory will be fully operational.

I have summarized the key points relating to the new approval process set forth by the CCP:

Re: Assessment Process

1. Application for starting factory operations must be submitted to the Village Government authorities between Feb.9-17, 2020.

2. The Village Health Authorities will then schedule to visit the factory in order to perform an initial inspection of the premises. (actual visitation times & dates are currently unknown).

3. If nothing out of the ordinary is found, the report is then passed onto the Town Government Health Authorities who will schedule a second visit to the factory in order perform a 2nd inspection of the premises.

4. If everything is found to be in order, the Town Government Health Authorities will notify the District Health Authorities to schedule for a FINAL INSPECTION of the factory. If everything is in order after this 3rd and last inspection, the factory will be allowed to start operations.

Re: Assessment Parameters

1. Designated manager specifically placed in charge of maintaining and overseeing Anti-Virus Measures at the factory.

2. Preventative Measures: temperature checks to be performed at least 2 times per day, records of temperature readings must be kept on file.

3. Records tracking the whereabouts of all staff over the past 2 weeks must be on file.

4. Any staff who is from or, has visited Hubei Province and/or Wuhan during the CNY holidays must be quarantined and notified to local Health Officials.

5. Protective Measures: sanitizers, hand soap, masks, mandatory disinfecting of factory premises, temperature checking stations, shoe disinfecting stations, separated quarantine area in the event that someone shows symptoms of nCoV.

6. SOP for emergency protocols in the event that someone in the factory is found to have symptoms of nCoV must be implemented.

This latest announcement by the China Government will undoubtedly cause delays throughout the entire supply chain as this new postponement applies to all: mills, trims, and other raw material suppliers, in addition to factories such as ourselves, who actually manufacture the finished products. Hence, it is extremely difficult to assess what the eventual impacts this will have on the delivery schedules of finished goods, other than the fact that delays to production are going to be imminent.

Since these latest measures set forth by the China Government have just been issued, we can only guess that the actual inspection and approval process will take somewhere between 2-6 weeks. Our factory management is currently working with the local government and will try to establish a more concrete timeline concerning this new approval process. We will do our best to keep you updated on this matter as soon as we have any new information.

AML UNITED LTD.

MANAGEMENT TEAM