Chalkis Health Industry Co.Ltd(000972) : special explanation of the board of directors on the matters involved in the unqualified audit report with significant uncertainty of continuous operation in 2021

Chalkis Health Industry Co.Ltd(000972) board of directors

Significant uncertainty of the company’s going concern in 2021

Special description of matters involved in unqualified audit report

ZTE Cai Guanghua Certified Public Accountants (special general partnership) issued an unqualified audit report (ZTE Cai Guang Hua Shen Hui Zi (2022) No. 204004) on the 2021 financial report of Chalkis Health Industry Co.Ltd(000972) (hereinafter referred to as “the company”). According to the relevant requirements of China Securities Regulatory Commission and Shenzhen stock exchange, the board of directors of the company explained the matters involved in the audit report as follows:

1、 Basic information of matters involved in the audit report

According to the special note on Issuing unqualified opinions with significant uncertainty of going concern in the audit report of Chalkis Health Industry Co.Ltd(000972) 2021 issued by ZTC Guanghua Certified Public Accountants (special general partnership) (ZTC Guanghua Shenhui Zi (2022) No. 204004), the reasons and basis for issuing unqualified opinions with significant uncertainty of going concern in the company’s 2021 financial report are as follows:

The net profit of the company in 2021 was -10058010165 yuan, and the net profit attributable to the shareholders of the parent company was -10052018708 yuan. These events or circumstances indicate that there are major uncertainties that may lead to major doubts about the company’s ability to continue as a going concern. This matter does not affect the audit opinion issued.

The above contents shall not affect the issued audit opinion. The auditor reminds users of the financial statements to pay attention to this matter.

2、 Opinions of the board of directors on matters involved in the audit report

The board of directors of the company believes that it understands and agrees with the auditor’s unqualified audit report with significant uncertainty of going concern. The above explanatory notes remind users of the financial statements that the matter has no material impact on the company’s financial status and operating results during the reporting period, and there is no violation of accounting standards, systems and relevant information disclosure norms.

3、 Specific measures to eliminate the matter and its impact

(I) business policy: transformation and upgrading, improving quality and efficiency, and healthy development.

(II) production plan: 80000 tons of large package ketchup; 200000 bottles of lycopene.

(III) business objective: turn losses into profits.

(IV) business countermeasures and measures to be taken by the company in 2022

1. We should unswervingly uphold the party’s leadership over state-owned enterprises and improve and strengthen the central role of Party committees in leadership. We will do a solid job in Party building, take the initiative to shoulder responsibilities, earnestly perform responsibilities and fulfill responsibilities in a down-to-earth manner. Unite and lead all Party members, cadres and employees of the company, dare to take responsibility and act actively, promote the company to get out of difficulties as soon as possible, and realize transformation, upgrading and healthy development.

2. Fully resume the company’s tomato industry production. In recent years, the overall price of ketchup has warmed up. At the same time, the industry has taken measures such as limiting production and ensuring price. Small enterprises have gradually withdrawn from the market due to the bad situation. It is expected that the situation of ketchup industry will continue to improve in the future. Therefore, in order to ensure the sustainable operation of the company’s main tomato business, the company has improved the organizational structure of its wholly-owned subsidiary Xinjiang Zhongji Red Tomato Industry Co., Ltd. in 2021, and has resumed the output, cost plan, talent reserve, equipment maintenance and other work of each production plant. At the same time, the company has adjusted and optimized the structure of tomato products, organized and restored the production, processing and sales of high value-added lycopene health products, as well as the preparation of small package ketchup, with a view to consolidating and developing the “red industry” of tomato.

3. According to the general requirements of deepening the reform and development of state-owned enterprises, we will strive to improve the modern enterprise system and improve the efficiency of capital operation, implement the functions and powers of the board of directors of the company in terms of executive selection, performance assessment and salary management according to law, and actively explore the medium and long-term incentive mechanism and employee shareholding of the company, so as to provide mechanism and institutional guarantee for the sustainable and healthy development of the company.

4. According to the requirements of the company’s industrial development and marketization, continue to improve the talent training system and talent introduction mechanism, constantly optimize the talent structure, strive to improve the management level of the company’s management team and the overall quality of the staff, and improve the talent incentive means and performance appraisal system to provide talent guarantee for the company’s industrial development.

5. The company will make full use of the financing function and Restructuring Effect of the capital market, increase the anti risk ability through transformation and upgrading, realize the simultaneous development of multiple industries, give better play to the leading role of leading enterprises, create new profit growth points for the company, improve the profitability of main business and enhance the core competitiveness of the company.

Chalkis Health Industry Co.Ltd(000972) board of directors March 24, 2022

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