Inquiry letter on Shenzhen Quanxinhao Co.Ltd(000007) 2021 Annual Report
Annual report inquiry letter [2022] No. 162 of the company Department Shenzhen Quanxinhao Co.Ltd(000007) board of directors:
On April 30, 2022, your company disclosed such announcement documents as the annual report of 2021, the announcement on the progress of the company’s participation in foreign investment of M & a funds, the announcement on the progress of litigation cases, and the announcement on the reply to the concern Letter No. [2022] 222 of the company Department of Shenzhen Stock Exchange (hereinafter referred to as the reply announcement). In the process of reviewing relevant announcements, our department has paid attention to the following matters:
1. On January 28 and April 21, 2022, our department sent attention letters to your company (company Department attention letter [2022] No. 75 and company Department attention letter [2022] No. 222) respectively, asking your company and lawyers to check and explain whether your company has the risk of recovery if Lian Weifei fails to pay 40 million yuan to Wu Haimeng and Wang Peiyan in accordance with the implementation settlement agreement. On February 16, 2022, Beijing JunZeJun (Shenzhen) law firm issued relevant verification opinions on the company department’s attention letter [2022] No. 75, “When Xinhao has completed its obligation to pay the execution payment agreed in the execution settlement agreement, Lian Weifei has breached the contract, Wu Haimeng and Wang Peiyan have the right to sue separately to claim the creditor’s rights in accordance with Article 13 of the Civil Procedure Law of the people’s Republic of China and Article 9 of the provisions of the Supreme People’s Court on several issues related to the execution settlement”. On April 28, 2022, Beijing Deheng Law firm issued relevant verification opinions on the company department’s attention letter [2022] No. 222, saying that “on the balance sheet date, the payment obligation of 40 million yuan has been transferred to Lian Weifei, and the applicants Wu Haimeng and Wang Peiyan shall not resume the execution of the new good application according to the original execution application amount of 160 million yuan”.
(1) Please explain whether there are inconsistencies in the opinions of the above lawyers on whether the company can discharge its current obligations of 40 million yuan on the balance sheet date, whether the contents of the relevant legal opinions are true, accurate and complete, and whether there are violations of Articles 3, 14 and 20 of the measures for the Administration of law firms engaging in securities legal business. Ask a lawyer to check and express clear opinions.
(2) Please explain your company’s specific verification of Wu Haimeng and Wang Peiyan’s own debt disputes and litigation, and whether the relevant creditors of Wu Haimeng and Wang Peiyan have the right to directly or indirectly claim the resumption of execution according to 160 million yuan from your company. Ask a lawyer to check and express clear opinions.
(3) The reply announcement shows that your company has the ability and willingness to pay on December 31, 2021, and the probability of paying the settlement payment in full and on time is greater than 50%. If the settlement payment is not paid in full on time, but the probability of paying overdue fine according to the contract is greater than 95%. The probability of failing to pay the settlement payment in full and on time and failing to pay the overdue fine in accordance with the contract is less than 5%. After the balance sheet date, your company signed the supplementary agreement on the implementation of the settlement agreement with Wu Haimeng and Wang Peiyan, which further agreed that your company will not bear the losses caused by any breach of contract by Lian Weifei and will not need to perform the legal supplementary payment obligation. At the same time, your company pays the remaining 90 million yuan after the balance sheet date, which comes from the guarantee payment received after the balance sheet date. Please explain the main basis for your company to make the above judgment on the probability of payment and settlement, whether it is based on the relevant facts on the balance sheet date, whether it mainly refers to the recovery of relevant funds after the balance sheet date, and whether the events after the balance sheet date are used as the basis and rationality for judging the discharge of current obligations of RMB 40 million related debts on the balance sheet date, On the balance sheet date, your company determines whether the basis for the discharge of relevant obligations is reasonable and sufficient, and whether it complies with the relevant provisions of the accounting standards for Business Enterprises No. 22 – recognition and measurement of financial instruments. The annual audit accountant shall check and give clear opinions.
2. On April 21, 2022, your company received the guarantee payment of 92 million yuan entrusted by Beijing Hongjun Asset Management Co., Ltd. (hereinafter referred to as “Beijing Hongjun”) to Hongjun Industrial Group Co., Ltd. (hereinafter referred to as “Hongjun industry”) as a credit enhancement measure for your company’s Receivable of 118 million repurchase money from Beijing Hongjun. On April 28, 2022, your company received the guarantee payment of 6 million yuan for the remaining repurchase payment of phase I and 2 million yuan for the repurchase payment of phase II of Beijing Hongjun. On the same day, Beijing Hongjun also entrusted Hongjun industry to pay your company 80 million yuan in cash as compensation and compensation for the direct economic losses caused by four litigation and arbitration cases such as Wu Haimeng and Xie Chuan. In addition, according to the consolidated cash flow statement of your company in 2021, the cash inflow and outflow from financing activities increased significantly during the reporting period, which were 143 million yuan and 847802 million yuan respectively, while the amount incurred in the same period in 2020 was 0.
(1) Please explain whether Beijing Hongjun entrusts Hongjun industry to pay your company 80 million yuan in cash, which is consistent with the notice of assistance in execution issued to it by Futian District People’s Court of Shenzhen
(2021) Yue 0304 Zhi No. 33227 and (2021) Yue 0304 Zhi No. 33228 are contrary to the relevant requirements, and whether the relevant funds are at risk of being reversed, frozen or enforced. Ask a lawyer to check and express clear opinions.
(2) Please go through the verification of the specific capital source of the guarantee payment of RMB 100 million and cash of RMB 80 million paid by Hongjun industry to your company, as well as the specific use purpose and time after your company receives the relevant funds, and explain whether the above-mentioned funds come directly or indirectly from your company and its directors in combination with the details of the cash flow of financing activities during the reporting period (including but not limited to the background, amount, time, object and related relationship, etc.) Supervisors, senior managers and top ten shareholders, whether your company needs to return or return relevant funds in disguised form in the future, and whether your company and other interested parties have other agreements or potential arrangements in this regard. Ask lawyers and annual audit accountants to check and express clear opinions.
(3) Please fully explain that Beijing Hongjun entrusts Hongjun industry to pay your company 80 million yuan in cash as the background, main consideration and rationality of your company’s compensation and compensation for direct economic losses caused by Wu Haimeng, Xie Chuan and other four litigation and arbitration cases, whether your company, Beijing Hongjun and Hongjun industry have signed relevant agreements or contracts, whether they are the expression of their true intention, whether they are compliant and have come into force, How to connect and implement the relevant agreements and arrangements signed with the previous parties, whether there are conflicts and contradictions, whether there is the risk of cancellation, the specific impact of relevant matters on your company’s 2021 financial statements, the main considerations for your company and relevant parties to reach the above arrangements before the disclosure of the 2021 annual report, and whether there is a situation to avoid delisting risk. Independent directors, lawyers and annual audit accountants of your company are requested to check and express clear opinions.
3. The annual report shows that in 2021, your company achieved operating income of 2025458 million yuan, net profit attributable to shareholders of listed company (hereinafter referred to as “net profit”) of 399706 million yuan, net profit attributable to shareholders of listed company after deducting non recurring profits and losses (hereinafter referred to as “net profit after deducting non recurring profits and losses”) of 12.117 million yuan, net cash flow from operating activities of – 487061 million yuan, with year-on-year changes of 348.64%, 132.52% and 730.10% respectively -1,349.99%。 During the reporting period, your company’s main revenue came from the newly established Yancheng xinchengford Automobile Sales Service Co., Ltd. (hereinafter referred to as “xinchengford”) and the newly acquired Jiangmen Duhe Paper Technology Co., Ltd. (hereinafter referred to as “Duhe paper”), and the operating revenue was 569689 million yuan after deducting the new vehicle sales revenue of 1006168 million yuan, trade revenue of 449226 million yuan and waste material sales revenue of 37500 yuan in 2021. According to the first quarterly report of 2022, your company achieved an operating income of RMB Guizhou Changzheng Tiancheng Holding Co.Ltd(600112) million, a net profit of -4.4439 million and a net profit of -1.2216 million after deduction, with year-on-year changes of 356.18%, – 244.63% and – 151.20% respectively.
(1) Please explain the details of new automobile sales and related services and trade business during the reporting period, including but not limited to the names of major customers and suppliers, related relationships, transaction amount, etc., and explain whether its operation is significantly different from the industry average level and reasonable in combination with relevant business operation mode, revenue recognition policy, gross profit margin, net profit, cash flow from operating activities and other major financial data, Whether the revenue recognition and cost accounting during the reporting period are true, accurate and complete, and whether there is any false increase in revenue or profit. The annual audit accountant shall check and give clear opinions.
(2) The amount of overseas income of Duhe paper’s trade business in 2021 was 448663 million yuan. Please explain the main sales objects, related relationships, countries or regions of overseas income during the reporting period, and ask the annual audit accountant to explain in detail the audit procedures, coverage, proportion and verification conclusions adopted for the verification of the company’s overseas income, and whether sufficient and reasonable audit evidence has been obtained.
(3) Please explain the reason and rationality of the inconsistency between the operating cash flow and the change trend of operating revenue and net profit during the reporting period, whether the sales policy and credit policy of various businesses have changed, and whether there is a large difference with comparable companies in the same industry, the reason and rationality.
(4) In combination with the foregoing, please explain the business logic and rationality of your company’s new related business during the reporting period, whether it is conducive to enhancing the company’s sustainable operation ability and safeguarding the interests of shareholders of listed companies. Independent directors are requested to check and express clear opinions.
(5) Please explain the reason and rationality of increasing income without increasing profit in the first quarter of 2022 in combination with the industry development status, market environment, cost and expense change trend of various businesses your company is engaged in, and whether there is a situation of cross period recognition of relevant costs and expenses in 2021 to 2022. The annual audit accountant shall check and give clear opinions.
6. According to the annual report, the ending book balance of your company’s accounts receivable was 134578 million yuan, a significant increase year-on-year, and the bad debt provision proportion was 0.5%, including 110299 million yuan receivable from Wande Industrial (HK) Limited. Please explain the relationship between Wande Industrial (HK) Limited and your company, the reasons for the formation and rationality of large accounts receivable, the expected recovery arrangement, whether there are overdue payments up to now, whether there are significant adverse changes in its payment capacity and willingness, and whether the provision for relevant bad debts is reasonable and prudent. The annual audit accountant shall check and give clear opinions.
7. The annual report shows that the ending book balance of your company’s inventory goods is 253478 million yuan, and the provision for inventory falling price is 3500600 yuan. Please explain the specific composition and storage location of your company’s inventory goods, and explain whether there are signs of impairment of the inventory goods and whether the inventory falling price reserves are reasonably accrued in combination with the sales price of orders, contracts or similar products in the market. The annual audit accountant shall check and give clear opinions.
8. According to the annual report, the ending balance of other equity investment instruments of your company is 202568 million yuan, including 19.04 million yuan for Hainan Hong Kong Macao Information Industry Co., Ltd. and 1.2168 million yuan for Dalian Peking University Technology (Group) Co., Ltd. The change in fair value of other equity instrument investment transferred to other comprehensive income during the reporting period was -3.218 million yuan.
(1) Please explain the equity ratio, specific impact and investment purpose of your company to the above-mentioned invested unit, take it as the reason and specific basis for accounting for other equity instruments, whether the relevant accounting treatment is in line with the provisions of the accounting standards for business enterprises, and whether there is any situation to avoid the adverse impact of the loss and value reduction of the investment object on the net profit.
(2) In combination with the above-mentioned main financial data, production and operation of the investment object, explain the accounting process and recognition basis of its fair value, whether it is fair and reasonable, and whether it complies with the relevant provisions of the accounting standards for business enterprises.
(3) Please explain the reason and rationality that the dividend income and accumulated profits in the “investment in other equity instruments” are 0, and whether the relevant data and information are filled in completely and accurately.
The annual audit accountant shall check and give clear opinions.
9. Your company confirmed the default interest expense of RMB 113232 million in 2021 and the overdue interest loss of RMB -2.7312 million in the first quarter of 2022. Please explain the background of the above default / overdue interest expenses, and analyze whether the company has liquidity risk and whether there are other situations that may lead to compensation liability, contingent liabilities, implicit liabilities and undisclosed debts, which may have an impact on the company’s normal production and operation activities and sustainable operation ability in combination with your company’s debt due within the year, estimated litigation and arbitration compensation expenses and operating cash flow, And the countermeasures that the company has taken and plans to take, and fully remind the relevant risks.
10. Please list the litigation and arbitration matters involved by your company as of the end of the reporting period, including but not limited to the type of litigation (including arbitration), interested parties, causes of litigation, creditor’s rights and liabilities and guarantee liabilities involved, litigation progress and execution, provision of estimated liabilities, etc., and explain whether the disclosure of contingencies is accurate and complete, and whether full consideration is given to the potential losses that may be caused by relevant matters, Whether the provision of relevant estimated liabilities is reasonable and prudent shall be checked by the annual audit accountant and give clear opinions.
11. According to the award (2016) SZZZ No. 2123 and (2019) szgz No. 3032 and 3032 issued by Shenzhen Arbitration Commission and Shenzhen International Arbitration Court, Lian Weifei should repay Xie Chuan’s loan principal and liquidated damages totaling more than 100 million yuan. Your company is jointly and severally liable for the above debts and has paid 3934 Qingdao Baheal Medical Inc(301015) yuan to the applicant for enforcement in 2019. In May and June 2021, Shenzhen intermediate court rejected your company’s application for revoking (2019) Shenzhen Arbitration No. 3032 and No. 3032. According to the annual report, Lian Weifei and Lin Huiyun, as the respondent of Shenzhen International Arbitration Court’s (2019) Shenguo arbitration No. 3032 and 3033 cases, have applied to Shenzhen intermediate people’s court for cancellation of the above arbitration award, and the relevant cases have been heard on August 6, 2021,
