Securities code: 002306 securities abbreviation: Cloud Live Technology Group Co.Ltd(002306) Announcement No.: 2022-012 Cloud Live Technology Group Co.Ltd(002306)
Reply announcement on the “letter of concern” of Shenzhen Stock Exchange
The company and all members of the board of directors guarantee that the information disclosed is true, accurate and complete without false records, misleading statements or major omissions.
Cloud Live Technology Group Co.Ltd(002306) (hereinafter referred to as ” Cloud Live Technology Group Co.Ltd(002306) ” or “the company”) received the letter of concern on Cloud Live Technology Group Co.Ltd(002306) from the management department of listed companies of Shenzhen Stock Exchange on January 26, 2022 (company department concern letter [2022] No. 58, hereinafter referred to as “concern letter 58”), which asked the company to make a written explanation on relevant issues. After receiving the letter of concern, the company attached great importance to it, verified the relevant situation and made a reply. Now the reply is announced as follows: I. The Third Quarterly Report of 2021 shows that as of September 30, 2021, your company has achieved an operating revenue of 273099100 yuan, a net profit attributable to the parent of -5695300 yuan and a net profit attributable to the parent of -9390200 yuan after deduction. Please explain the reason and rationality of the substantial increase in net profit in the fourth quarter of 2021, and whether it matches the changes in operating revenue. The annual audit accountant is requested to check the above problems and give clear opinions.
reply
1. Reasons and rationality of the company’s sharp increase in net profit in the fourth quarter of 2021
In the first three quarters of 2021, the company realized an operating income of 273099100 yuan, the net profit attributable to shareholders of listed companies was -5695300 yuan, and the net profit attributable to shareholders of listed companies after deducting non recurring profits and losses was -9390200 yuan. The net profit attributable to shareholders of Listed Companies in the previous three quarters included 18.1029 million yuan of accrued share based payment expenses. Since the performance indicators set in the second phase of the restricted stock incentive plan have not been completed, the company, in accordance with the relevant provisions of the accounting standards and in communication with the annual audit accountant, offset the second phase of share based payment expenses accrued in 2021 on the balance sheet date, involving an amount of 13.45 million yuan, resulting in a significant increase in the net profit of the company in the fourth quarter of 2021.
The reversal of the accrued share based payment expenses this time is the accounting treatment made by the company in combination with the performance assessment set up by the equity incentive plan, in accordance with the relevant provisions of the accounting standards and after communicating with the annual audit accountant, which is in line with the actual situation of the company and the relevant provisions of the accounting standards and is reasonable.
2. Does the sharp increase in net profit in the fourth quarter match the changes in operating revenue
As mentioned above, the substantial increase in the company’s net profit in the fourth quarter of 2021 is due to the reversal of the accrued share based payment expenses under the restricted stock incentive plan. After excluding the accounting treatment factors of the reversal of the share based payment expenses, the company’s actual loss in the fourth quarter of 2021 was 2-3 million yuan, which matched the changes in operating revenue. 3. Annual audit accountant’s verification opinions
After verification, the annual audit accountant believes that: according to the relevant provisions of Article 6 of the accounting standards for Business Enterprises No. 11 – share based payment: if the right can be exercised only after completing the services in the waiting period or meeting the specified performance conditions, the equity settled share based payment in exchange for employee services should be based on the best estimate of the number of exercisable equity instruments on each balance sheet date in the waiting period, According to the fair value of the equity instrument on the grant date, the services obtained in the current period shall be included in the relevant costs or expenses and capital reserve, that is, the enterprise shall estimate the number of equity instruments granted on each balance sheet date in the waiting period according to the expected satisfaction of the non market conditions in the service term conditions and performance conditions.
In the absence of cancellation of the share based payment plan, if it has been determined that the non market conditions in the service term conditions and performance conditions cannot be met, or it is expected that the non market conditions in the service term conditions and performance conditions corresponding to the unlocking batch in the future will not be met, the relevant expenses of share based payment may not be recognized in the current period, And the share based payment expenses (if any) corresponding to these batches that have been accumulated and recognized in the previous period shall be reversed. Cloud Live Technology Group Co.Ltd(002306) since the performance indicators set in the second phase of the restricted stock incentive plan have not been completed, the accrued share based payment expenses shall be reversed, which is in line with the relevant provisions of the accounting standards for business enterprises.
For details of the verification opinions, please refer to the verification opinions on the letter of concern for Cloud Live Technology Group Co.Ltd(002306) issued by Lixin Zhonglian certified public accountants.
2、 On January 1, 2022, your company disclosed the announcement on the proposed appointment of an accounting firm, which said that it planned to appoint Lixin Zhonglian Certified Public Accountants (special general partnership) (hereinafter referred to as “Lixin Zhonglian certified public accountants”) as the financial statements and internal control audit institution of your company in 2021. Lixin Zhonglian certified public accountants has been subject to supervision and management measures seven times in recent three years due to its professional behavior, involving 12 persons. Among them, Dongsong, the project partner of your company, who plans to sign, was issued a warning letter on June 11, 2021 for violating Articles 52 and 53 of the measures for the administration of information disclosure of listed companies (Order No. 40 of the CSRC). The former accounting firm of your company is Dahua Certified Public Accountants (special general partnership) (hereinafter referred to as “Dahua certified public accountants”). Please your company:
(I) verify with Dahua certified public accountants and make supplementary disclosure on the specific reasons for the replacement of Dahua certified public accountants and whether the communication between the previous and subsequent accountants is well done. The audit committee and independent directors of your company are requested to verify the reasons for the change of accounting firm and whether there are other reasons or matters leading to the change of accounting firm.
reply:
1. Specific reasons for the company’s new accounting firm
Upon deliberation and approval by the board of directors on December 31, 2021, the company plans to employ Lixin Zhonglian Certified Public Accountants (special general partnership) (hereinafter referred to as “Lixin Zhonglian”) as the company’s 2021 financial statement and internal control audit institution, and Dahua Certified Public Accountants (special general partnership) is not appointed as the company’s 2021 financial statement audit and internal control audit institution. After verification and according to relevant communication and feedback, the specific reasons for the new accounting firm are supplemented:
(1) On December 8, 2020, with the approval of the third extraordinary general meeting of shareholders in 2020, the company hired Dahua Certified Public Accountants (special general partnership) as the audit institution of the company’s financial statements in 2020. The employment period is one year. As of December 31, 2021, the contract period between the company and Dahua certified public accountants has expired;
(2) Dahua certified public accountants Co., Ltd. considers that it undertakes more audit and reserve projects and has tight human resources. In order to ensure the normal progress of the company’s annual audit, after communicating with the company, it will no longer undertake the company’s audit business in 2021.
(3) By the end of December 2021, the company is planning to develop into the ultra precision metal stamping parts business, which is the newly expanded manufacturing business of the company. Among the 20 audit projects of listed companies served by Lixin Zoomlion in 2020, its manufacturing customers account for 60%. The professional experience and time of its auditors can meet the needs of the company’s business development and audit.
Therefore, considering the actual situation of the company’s future business development and audit needs, in order to ensure the smooth progress of the audit work in 2021, the company decided to appoint Lixin Zoomlion as the company’s financial statements and internal control audit institution in 2021, and the term of appointment is also one year.
2. Communication between previous and subsequent Accountants
Before this engagement, the company fully communicated with the accountant of Dahua certified public accountants, the audit institution in 2020, and both parties expressed their understanding and support. Then, the company contacted and communicated with Lixin Zhonglian about the engagement of him as the audit institution of the company in 2021. Lixin Zhonglian confirmed that there was no objection to the engagement. The previous and subsequent accountants have done a good job in relevant communication in accordance with the relevant requirements of the auditing standards for Chinese certified public accountants No. 1153 – communication between former certified public accountants and subsequent accountants.
As mentioned above, the company hired Lixin to contact the expiration of the contract with the former audit institution, the large number of audit and reserve projects, the shortage of human resources, and the comprehensive consideration of future business development and audit needs. There are no other reasons or events leading to the change of the accounting firm.
3. Opinion of the board of Auditors
After verifying the relevant materials, the Audit Committee believes that the accounting firm hired by the company this time is due to the expiration of the contract period between the company and the former audit institution, the large number of audit and reserve projects undertaken by the company, the shortage of human resources, and the future business development and audit needs of the comprehensive company, which is in line with the actual situation, and there are no other reasons or matters leading to the change of accounting firm this time.
4. Opinions of independent directors
After verifying the relevant information, the independent director believes that the accounting firm hired by the company this time is due to the expiration of the contract period between the company and the former audit institution, the large number of audit and reserve projects undertaken by the company, the shortage of human resources, and the future business development and audit needs of the comprehensive company, which is in line with the actual situation, and there are no other reasons or matters leading to the change of accounting firm this time.
(II) explain whether Lixin Zhonglian certified public accountants has sufficient time to ensure the smooth implementation of annual audit projects and the full implementation of key audit procedures, and whether the relevant audit and review procedures comply with the relevant provisions of the auditing standards for Chinese certified public accountants to ensure audit quality.
reply:
Before undertaking the audit project of the company’s annual report in 2021, Lixin Zhonglian certified public accountants had communicated with the company and made a preliminary investigation. In the fourth quarter of 2021, Lixin Zhonglian certified public accountants undertook the audit business of the company’s equity sale of subsidiaries, and had a further understanding of the company’s business operation and financial accounting mode, It will have a positive impact on its subsequent undertaking of the company’s 2021 financial statements and internal control audit business and improving audit efficiency.
Since the board of directors of the company considered the employment of Lixin Zhonglian, on the one hand, the company arranged the functional departments such as the Secretary office, the finance department, the internal audit and legal department and the human resources department to speed up the collection and sorting of relevant basic data in 2021. On the other hand, the company actively communicated with accountants and reasonably arranged auditors to enter the company in advance to carry out on-site audit; In addition, during the reporting period, the company’s main businesses were catering group meals and Internet game business promotion and operation. The business scale was small and the business was not complex, and there was more than two months from the scheduled disclosure date of the 2021 annual report (March 18, 2022) from the date of deliberation and approval by the board of directors. Therefore, Lixin Zhonglian certified public accountants has sufficient time to ensure the smooth implementation of annual audit projects and the full implementation of key audit procedures.
As of tomorrow, the audit of the company by Lixin Zhonglian certified public accountants is in progress. Lixin Zhonglian certified public accountants undertakes and undertakes business in accordance with the requirements of the auditing standards for certified public accountants and the code of professional ethics, and issues an audit report based on the audit evidence obtained and the implementation results of the audit procedures. (III) explain whether Lixin Zhonglian certified public accountants has professional competence, whether your company has formed relevant arrangements or consensus with Lixin Zhonglian Certified Public Accountants on the opinion type of the company’s 2021 audit report in advance, and whether there is a situation of purchasing audit opinions.
reply:
Lixin Zhonglian certified public accountants was established on October 31, 2013. At the end of 2020, there were 40 partners, 327 certified public accountants and 112 certified public accountants who signed the audit report of securities service business. After inquiry, the total audited income in 2020 was 300.1301 million yuan. In addition, after consulting the official website of the Ministry of Finance and the instructions issued by Lixin Zhonglian, Lixin Zhonglian has the qualifications of securities and Futures and the professional competence to provide audit services for listed companies.
It is verified that the annual audit project service fee signed between the company and Lixin Zhonglian is consistent with the annual audit project service fee signed between the company and Dahua certified public accountants in 2020. There is no relevant arrangement or consensus with Lixin Zhonglian on the opinion type of the company’s 2021 audit report in advance, and there is no case of purchasing audit opinions.
3、 In response to the inquiry letter of the 2020 annual report, your company said that the top five suppliers have no affiliated relationship with the company and its subsidiaries and are not affiliated parties of the company. However, some recent media reports show that the registered address of relevant suppliers is close to your subsidiary, and the telephone number is the same as your subsidiary. Please further check whether the top five suppliers of your company in 2020 and 2021 have related relationships with your company and its subsidiaries, whether there are non related transactions, and whether there are fictitious operating revenues or profits. The annual audit accountant is requested to check the above problems and give clear opinions.
reply:
1. Some media reported clarification on the proximity of relevant suppliers’ registered address and the same telephone code number
After receiving this letter of concern, the company paid close attention to it and then reported to the media that Hainan Chunshi culture and Technology Co., Ltd. (hereinafter referred to as “Hainan Chunshi”), Hainan Guangyi Network Technology Co., Ltd. (hereinafter referred to as “Hainan Guangyi”), Hainan beluga Network Technology Co., Ltd. (hereinafter referred to as “Hainan beluga”) Hainan yuewan mutual Entertainment Network Technology Co., Ltd. (hereinafter referred to as “Hainan yuewan”) and other four suppliers sent letters to inquire about their similar registration places and the same industrial and commercial reserved telephone numbers. The above four units explained the relevant situation and confirmed that they had no implicit relationship with Chongqing Weiyin, a subsidiary of the company; In addition, although the actual office of Hangzhou red grapefruit Network Technology Co., Ltd. mentioned by the media is similar to that of the company’s subsidiaries and the reserved contact information is the same as that of Hainan beluga, the company has no business dealings with the company and its subsidiaries, does not know each other and has not been able to inquire by letter. The relevant information after the inquiry is as follows:
(1) With regard to the same or similar registered addresses of relevant suppliers (Hainan Chunshi, Hainan Guangyi, Hainan beluga and Hainan yuewan): the shareholders of relevant suppliers are senior people who have been engaged in the game industry for many years, forming a certain business ecosystem. After industry exchanges, they know that they can enjoy certain preferential policies if they register and establish a company in Hainan Ecological Software Park, Therefore, the company was uniformly entrusted to register and establish a company in Hainan Ecological Software Park, and the park uniformly provided the registered address. Therefore, the registered addresses of relevant suppliers are the same or similar. The registered addresses of the above three units are 3001, floor 2, building A17, Hainan Ecological Software Park, high tech Industrial Demonstration Zone, Laocheng Town, Chengmai County, Hainan Province, The registered address of Hainan Guangyi is Laoshan, Hainan Province
