Special Explanation by the Board of Directors Regarding Non-Standard Unqualified Audit Opinions
ZTE Certified Public Accountants (Special General Partnership) audited the financial condition and operating results of Deao General Aviation Co., Ltd. for the year 2021 and issued an audit report with a qualified opinion on April 28, 2022. In accordance with the relevant regulations, including the "Rules for the Disclosure of Information by Companies Issuing Securities to the Public No. 14 - Handling of Non-Standard Unqualified Opinions and Related Matters" and the "Shenzhen Stock Exchange Listing Rules (2022 Revision)," the board of directors provides the following explanations regarding the matters involved in the audit opinion:
I. Basis for the Qualified Opinion
(1) Significant Receivables from Unfulfilled Transactions
- On September 8, 2020, the 19th meeting of the 5th board of directors of Deao General Aviation approved the proposal regarding the signing of product sales and service contracts with related parties. In September 2020, Deao General Aviation signed a product sales and service contract with Shenzhen Zhongyou International Education Technology Co., Ltd. (hereinafter referred to as Zhongyou International) for the "Multidimensional Intelligent Learning Space Future Classroom Interactive System," with a total contract price of 99,000,000.00 yuan. In the same year, Deao General Aviation signed a purchase and sale contract for teaching projection system equipment with Beijing Yishu Technology Co., Ltd. (hereinafter referred to as Beijing Yishu), with a total contract price of 74,600,000.00 yuan, and prepaid 48,490,000.00 yuan. In 2020, Beijing Yishu delivered part of the products, and Deao General Aviation sold part of the products to Zhongyou International, recognizing sales revenue of 7,008,849.53 yuan. In 2021, due to quality issues with the products and services provided by Beijing Yishu, the contract could not continue to be executed. As of December 31, 2021, Deao General Aviation had an outstanding receivable from Zhongyou International of 4,950,000.00 yuan for the sale of 2020 products, which had not been recovered by the report date. The prepaid procurement amount for the terminated purchase and sale contract with Beijing Yishu, which should be refunded, amounted to 42,546,200.00 yuan, and this amount had not been recovered by the report date.
- In April 2021, Deao General Aviation signed a home appliance sales contract with Suzhou Xueliguan Education Technology Co., Ltd. for a contract price of 8,864,410.00 yuan. In the same year, Deao General Aviation signed a procurement contract with Guangzhou Fengji Automation Equipment Co., Ltd. (hereinafter referred to as Guangzhou Fengji) for a contract amount of 7,960,667.00 yuan, and prepaid 7,164,600.30 yuan. As of the report date, Guangzhou Fengji had not delivered the products.
(2) Investigation by the China Securities Regulatory Commission
On February 17, 2022, Deao General Aviation received a "Notice of Investigation" (CSRC Case No. 0062022008) from the China Securities Regulatory Commission, as the company was suspected of violating information disclosure regulations. The investigation is still ongoing and has not reached a final conclusion.