Henan Huaying Agricultural Development Co.Ltd(002321)
Special statement of the board of directors on the elimination of the impact of matters involved in non-standard audit opinions in 2020
Asia Pacific (Group) Certified Public Accountants (special general partnership) audited the consolidated and company's financial statements of Henan Huaying Agricultural Development Co.Ltd(002321) (hereinafter referred to as "the company" or "the company") on December 31, 2020 and 2020, and issued an audit report with No. [Ya Kuai Shen Zi (2021) No. 01360012] unable to express an opinion. In accordance with the relevant provisions of China Securities Regulatory Commission and Shenzhen Stock Exchange, the company has prepared the special statement on the elimination of the impact of matters related to non-standard audit opinions in Henan Huaying Agricultural Development Co.Ltd(002321) 2020. The elimination of the impact of matters involved in the previous non-standard audit opinions is described as follows:
1、 Matters involved in non-standard opinions in 2020 audit report
1. Sustainable management
As stated in "II. Preparation basis of financial statements (II) continuous operation" in the notes to the financial statements, the net profit attributable to the parent company in 2020 was -941310007 yuan, the net profit attributable to the parent company was negative for two consecutive years, and the financial situation of the company deteriorated. Due to the litigation related matters of the company, many bank accounts were frozen, large assets were forcibly auctioned by the court, and the due debts and some employees' wages could not be paid. These events or circumstances indicate that there are significant uncertainties in the sustainable operation ability of Huaying agriculture. As stated in "II. Preparation basis of financial statements (II) going concern" in the notes to the financial statements, Huaying agriculture disclosed the improvement measures taken by the management for the above matters, but we still have doubts about the uncertainty of its going concern ability.
2. Nature, authenticity and recoverability of other receivables
As stated in the notes to the financial statements "VI. notes to items of consolidated financial statements (V) other receivables 1. Other receivables (3) disclosure by classification of provision for bad debts", as of December 31, 2020, the balance of other receivables for which Huaying agriculture made provision for expected credit losses by portfolio was 132680331006 yuan and the balance of provision for bad debts was 7593771143 yuan; Among them, for other receivables of 107404000052 yuan, the expected credit loss of 5370200003 yuan is withdrawn according to 5%. For this amount, Huaying agriculture did not provide the basis for the withdrawal proportion of expected credit loss, so we were unable to evaluate the rationality and sufficiency of the withdrawal, and did not obtain sufficient evidence of the recoverability, nature and commercial essence of the above other receivables. Therefore, we cannot determine whether it is necessary to adjust other receivables, credit impairment losses and other items in the financial statements, nor can we determine the amount to be adjusted.
3. Major inventory disposal
As stated in "VI. notes to consolidated financial statements (XXXVII) operating income and operating costs" in the notes to the financial statements, the main business cost of Huaying agriculture in 2020 was 351489401338 yuan, of which 16538857147 yuan was the cost carry forward caused by the deterioration of inventory goods; As stated in "VI. notes to consolidated financial statements (49) non operating expenses" in the notes to the financial statements, Huaying agriculture incurred an inventory loss of 10128205983 yuan in 2020. As Huaying agriculture failed to further provide complete information, we were unable to implement further audit procedures or substitute audit procedures to obtain sufficient and appropriate audit evidence to confirm the authenticity of the above two transactions and whether they have commercial substance. Therefore, we cannot determine whether it is necessary to adjust non operating expenses, operating costs and other items in the financial statements, nor can we determine the amount to be adjusted.
4. Litigation and estimated liabilities
(1) External guarantee: as stated in "Xi. Commitments and contingencies (II) contingencies 1. External guarantee of the company" in the notes to the financial statements, Huaying agriculture guarantees an amount of 16921194071 yuan for external individuals in its own name.
(2) Hangzhou Jinhong sanniao down products Co., Ltd. v. Hangzhou Huaying Xintang down products Co., Ltd. as described in "Xi. Commitments and contingencies (II) contingencies 2" in the notes to the financial statements, Hangzhou Jinhong sanniao down products Co., Ltd. sued Hangzhou Huaying Xintang down products Co., Ltd., a subsidiary of Huaying agriculture, to Hangzhou intermediate people's Court on June 17, 2020, It is requested to order Hangzhou Huaying Xintang down products Co., Ltd. to deliver the houses, buildings, land use rights, structures and equipment assets involved under the asset restructuring agreement, pay liquidated damages and bear legal fees and preservation fees, with a total amount of about 27223800 yuan. If Hangzhou Huaying Xintang down products Co., Ltd. loses the lawsuit, there will be large asset disposal transactions and liquidated damages losses. As of the date of the audit report, the case has not been adjudicated.
(3) Default events of interest bearing liabilities
As stated in "Xi. Commitments and contingencies (II) contingencies 2" in the notes to the financial statements, as of December 31, 2020, the total default amount of interest bearing liabilities of Huaying agriculture was about 1.491 billion yuan, and the amount of notes payable due and unpaid was about 194885 million yuan; This may result in huge penalty interest and liquidated damages.
2、 Explanation on the elimination of the impact of matters involved in non-standard opinions in 2020 audit report
(I) measures taken to eliminate the impact of matters involved in non-standard opinions
The board of directors, the board of supervisors and the management of the company attach great importance to the matters involved in the above non-standard opinions, and actively take measures to solve and eliminate the impact of relevant matters. In May 2021, the company was applied by the creditor to Xinyang intermediate people's Court (hereinafter referred to as "Xinyang intermediate people's court")
In June 2021, Xinyang intermediate people's court made the decision "(2021) Yu 15 Po Shen No. 4-1" and approved the company to enter the pre reorganization stage. In the process of the company's pre reorganization, the company actively cooperated with Xinyang intermediate people's court and the reorganization manager to carry out relevant work, organized the creditor's rights declaration, verification and evaluation institutions to evaluate the company's relevant assets, fully promoted the implementation of the company's pre reorganization plan, and laid a solid foundation for entering the reorganization.
On November 20, 2021, Xinyang intermediate people's court made a civil ruling "(2021) Yu 15 Po Shen No. 4", ruling to accept the reorganization application of the company, and appointed Beijing Jindu (Shenzhen) law firm and Zhongqin Wanxin Certified Public Accountants (special general partnership) Henan Branch as the managers during the reorganization of the company. After the company entered the reorganization procedure, through the vote of the relevant creditor meeting of the company, Xinyang intermediate people's court made the civil ruling "(2021) Yu 15 Po No. 6-1" on December 22, 2021, which approved the company's reorganization plan, and the company's reorganization entered the implementation stage of the reorganization plan. The manager, the company, restructuring investors and relevant parties actively promote the implementation of the company's restructuring plan.
As of December 31, 2021, the company, the manager and the reorganization investors have signed the reorganization investment agreement and received the investment funds; The manager has deposited the shares into the securities account designated by the manager. Based on the above, the board of Directors believes that the major uncertainties in the implementation process and results of the company's reorganization plan have been eliminated, and there are no substantive obstacles to the completion of the implementation of the reorganization plan.
After the completion of restructuring, with the resolution of the debt crisis and the support of restructuring investors for the company's business development, the company will gradually restore its profitability and return to a benign and steady development track.
(II) description of eliminating the influence of non-standard opinions
1. Matters for which opinions cannot be expressed 1:
On November 20, 2021, Xinyang intermediate people's court made a civil ruling "(2021) Yu 15 Po Shen No. 4", ruling to accept the reorganization application of the company, and appointed Beijing Jindu (Shenzhen) law firm and Zhongqin Wanxin Certified Public Accountants (special general partnership) Henan Branch as the managers during the reorganization of the company. After the company entered the reorganization procedure, through the vote of the relevant creditor meeting of the company, Xinyang intermediate people's court made the civil ruling "(2021) Yu 15 Po No. 6-1" on December 22, 2021, which approved the company's reorganization plan, and the company's reorganization entered the implementation stage of the reorganization plan. The manager, the company, restructuring investors and relevant parties actively promote the implementation of the company's restructuring plan.
As of December 31, 2021, the company, the manager and the reorganization investors have signed the reorganization investment agreement and received the investment funds; The manager has deposited the shares into the securities account designated by the manager. Based on the above, the board of Directors believes that the major uncertainties in the implementation process and results of the company's reorganization plan have been eliminated, and there are no substantive obstacles to the completion of the implementation of the reorganization plan. By implementing the reorganization plan, the company effectively resolved the burden of historical debt, and laid a good foundation for the company to return to the track of healthy development by disposing of some inefficient and loss making assets. After the completion of the company's reorganization, it will help to improve the company's asset liability structure, enhance the company's profitability and promote the company to return to the track of healthy and sustainable development. Therefore, the impact of the matter that cannot be expressed has been eliminated.
2. Matters for which opinions cannot be expressed 2:
For other receivables involving 107404000052 yuan of the company, the expected credit loss of 5370200003 yuan will be withdrawn at 5% in 2020. The essence of this matter is to express opinions on the rationality and sufficiency of the provision of credit impairment loss of other receivables, the recoverability, nature and authenticity of other receivables. Other receivables involved in the matter for which opinions cannot be expressed have been included in the disposal scope of non retained assets in the company's reorganization plan. In this year, the company accrued credit impairment loss according to the difference between the book value of the amount and the auction value. Up to now, the asset has been disposed in accordance with the provisions of the reorganization plan, so the impact of the matter for which opinions cannot be expressed has been eliminated.
3. Matters for which opinions cannot be expressed 3:
For major inventory disposal matters, the company provides inventory counting records at the place of storage, agreement on inventory disposal, internal inventory disposal approval process, delivery records of goods and inspection certificates of third-party inspection institutions. Moreover, the amount of inventory items in the balance sheet in 2020 is presented correctly. The company has provided sufficient and appropriate evidence of inventory disposal. The impact of inventory disposal on the financial statements of this year has been eliminated, so the impact of this item that cannot express opinions has been eliminated. 4. Matters for which opinions cannot be expressed 4:
(1) Unable to express opinions on Item 4 (1):
This matter is actually the external guarantee of the company. Through self inspection, the company deliberated and adopted the proposal on the company's plan to provide guarantee for contract farmers at the 49th meeting of the sixth board of directors on January 19, 2021, which plans to provide guarantee of no more than 120 million yuan for 134 contract farmers; On June 29, 2021, the voting results of the 52nd meeting of the sixth board of directors of the company considered and approved the proposal on the company's plan to provide guarantee for the loan of contract farmers and breeding supply chain customers, which plans to provide guarantee of no more than 100 million yuan for the loan of contract farmers and breeding supply chain customers. The reorganization plan of the company has been voted by the creditors, and the secured creditor's rights have been declared and ruled. The secured creditor's rights ruled by the company according to the declaration are included in the profits and losses and liabilities of the current year, so the impact of this matter that cannot express opinions has been eliminated.
(2) Unable to express opinions on Item 4 (2):
In the case of Hangzhou Jinhong sanniao down products Co., Ltd. v. Hangzhou Huaying Xintang down products Co., Ltd. (hereinafter referred to as "Hangzhou Huaying"), the civil judgment of first instance was dated March 30, 2021, which ruled that Hangzhou Huaying lost the lawsuit, continued to perform the asset restructuring agreement and paid liquidated damages of 1508586900 yuan. After the judgment, Hangzhou Huaying appealed to Zhejiang Provincial High Court, which upheld the original judgment on July 16, 2021. According to the company's self inspection, this event is an adjustment event after the balance sheet date, and the estimated liabilities shall be accrued in 2020. Therefore, the company increased its non operating expenses by 1508586900 yuan and its estimated liabilities by 1508586900 yuan in 2020. Therefore, the influence of the matter that cannot express opinions has been eliminated.
(3) Unable to express opinions on Item 4 (3):
For the default of interest bearing liabilities due, in order to effectively resolve the debt risk, the company was ruled to enter the reorganization stage by Xinyang intermediate people's court in November 2021. The reorganization plan was approved by the relevant creditors' meeting. Xinyang intermediate people's court ruled to approve the company's reorganization plan on December 22, 2021, and the company's reorganization entered the implementation stage of the reorganization plan. This year, the company and the manager made less provision for loan interest, penalty interest and liquidated damages in 2020 in combination with the creditor's declaration and confirmation of creditor's rights. After calculation, in 2020, the financial expenses will be increased by 19058111271 yuan, the accounts payable in the growth period will be increased by 12662519106 yuan, other accounts payable will be increased by 2088205869 yuan, and the interest payable will be increased by 4307386296 yuan. According to the reorganization plan, the company has paid off the paid off shares and cash to the creditors. Therefore, the influence of the matter that cannot express opinions has been eliminated.
To sum up, the impact of the matters involved in the audit report in 2020 has been eliminated.
It is hereby explained.
Henan Huaying Agricultural Development Co.Ltd(002321) board of directors April 28, 2022
