Special Explanation by the Board of Directors Regarding Matters Related to the Audit Report with No Opinion Expressed
Shenzhen Tangtang Accounting Firm (General Partnership) (hereinafter referred to as "Tangtang Accounting Firm") issued an audit report with no opinion for the company's 2020 financial report (Tangtang Special Audit Letter [2021] No. 012). The relevant matters are explained as follows:
1. Specific Content of the Audit Report Regarding No Opinion Expressed
(1) Basis for No Opinion Expressed
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Significant Uncertainty Regarding Going Concern As stated in Note 6, 27 of the financial statements, Steyr Company has incurred significant losses for four consecutive years from 2017 to 2020, with a net asset value of -17,001,700 yuan. Additionally, numerous significant litigation matters have led to the freezing of multiple bank accounts, including basic accounts, and the freezing or sealing of equity investments, properties, and production equipment, resulting in a near halt of the main business operations. Furthermore, the failure to recover performance compensation from major shareholders indicates significant uncertainties that may cast doubt on Steyr Company's ability to continue as a going concern. We were unable to obtain sufficient and appropriate audit evidence to determine whether the financial statements for 2020, prepared on a going concern basis, are appropriate.
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Inability to Determine Beginning Balances and Prior Year Figures The 2019 financial statements of Steyr Company were issued with no opinion. Due to the inability to provide relevant information, we could not perform necessary audit procedures, thus we cannot confirm the accuracy, completeness, and authenticity of the balances as of December 31, 2019, and the figures for the year 2019.
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Investment in Hubei Steyr Industrial Fund As described in Note 6, 7, (3) of the financial statements, Steyr Company recognized its investment in Hubei Steyr Industrial Fund (initial investment cost of 90 million yuan) as having significant influence, measured using the equity method. However, the investee has ceased operations as of the report date, and Steyr Company has fully provided for impairment on this investment. During the audit, we could not obtain sufficient and appropriate evidence to verify whether Steyr Company has control, joint control, or significant influence over Hubei Steyr Industrial Fund. Additionally, as the fund has matured but not liquidated, we cannot determine the applicability of the long-term equity investment criteria chosen by Steyr Company, nor could we obtain sufficient and appropriate audit evidence to verify the correctness of the end-of-period valuation of the investment.
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Recoverable Amount of Trust Investments As stated in Note 6, 8 of the financial statements, after the court ruled to terminate the trust contract of the "Fangzheng Dongya • Tiansheng Combination Investment Collective Trust Plan," Steyr Company still holds equity in the trust property "Yuhuan Deyue Investment Co., Ltd." Given that the shareholder information of Yuhuan Deyue Investment Co., Ltd. has not been changed in the business registration, we cannot determine whether Steyr Company holds equity in Yuhuan Deyue Investment Co., Ltd. Steyr Company fully provided for impairment on the trust investment of 130 million yuan in the 2019 fiscal year, and the book value of the trust investment at the end of 2020 is zero. During the audit, we could not obtain sufficient and appropriate evidence to verify the end-of-period book value of this trust investment and the estimated recoverable amount.
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Debt Restructuring Income As stated in Note 6, 35 of the financial statements, Steyr Company recognized debt restructuring income of 99,904,400 yuan based on the debt restructuring agreement with Jinse Muxian and Hehe Assets. We could not obtain sufficient evidence to verify the authenticity and reasonableness of the commercial substance of the debt restructuring.