Special Explanation from the Board of Directors of Ningbo Shenglaida Electric Co., Ltd. Regarding Non-Standard Audit Opinions
Beijing Xingchanghua Accounting Firm (General Partnership) issued a negative audit report on the financial statements of Ningbo Shenglaida Electric Co., Ltd. (hereinafter referred to as "the Company") for the year 2021 ([2022] Jinghui Xingchanghua Audit No. 010214). In accordance with the requirements of the China Securities Regulatory Commission's "Rules for the Disclosure of Information by Companies Issuing Securities to the Public No. 14 - Treatment of Non-Standard Unqualified Audit Opinions and Related Matters" and the "Shenzhen Stock Exchange Listing Rules," the board of directors provides the following special explanation regarding the matters involved in the audit opinion:
1. Matters Involved in the Negative Opinion and Auditor's Opinion
(1) Content of the Non-Standard Opinion in the Audit Report
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Going Concern: The consolidated net profit attributable to the parent company for the year 2021 was 36.9845 million yuan. As of December 31, 2021, the cumulative losses amounted to 370.9715 million yuan, and the net assets attributable to the shareholders of the parent company were 23.4337 million yuan. The subsidiary, Ningbo Shenglaida Electric Equipment Co., Ltd., has not obtained the relevant production qualifications in the power distribution industry. Along with the investor claims mentioned in Note 10 of the financial statements, this indicates significant uncertainty that may raise substantial doubts about the company's ability to continue as a going concern.
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External Cooperation Matters: As described in Note 11 of the financial statements, in January 2020, the subsidiary Ningbo Shenghuimei Trading Co., Ltd. (hereinafter referred to as Shenghuimei) signed a cooperation trade agreement with Inner Mongolia Taihe Gongsheng Agricultural Development Co., Ltd. (hereinafter referred to as Taihe Gongsheng) to engage in beef cattle breeding industry chain trade. Shenghuimei prepaid 20 million yuan for cooperation, with a year-end balance of other receivables at 19.7 million yuan. For these other receivables, we implemented audit procedures including checking contracts and payment vouchers, confirmations, checking business registration information, and reviewing bank statements of Taihe Gongsheng, but we could not obtain sufficient and appropriate audit evidence to determine whether the other receivables were executed according to the agreement, nor could we ascertain their recoverability.