Kolin Environmental Equipment Co., Ltd. (hereinafter referred to as "the Company") and all members of the board of directors guarantee that the content of this information disclosure is true, accurate, and complete, without false records, misleading statements, or significant omissions.
On August 25, 2022, the Company received a "Notice of Case Filing" (Zheng Jian Li An Zi 0102022005) and an "Investigation Notice" (Zheng Jian Diao Cha Zi 0102022316) from the China Securities Regulatory Commission (hereinafter referred to as "CSRC") due to suspected violations of information disclosure laws. The CSRC decided to conduct a case investigation against the Company based on the "Securities Law of the People's Republic of China" and the "Administrative Penalty Law of the People's Republic of China." The Company disclosed the announcement regarding the receipt of the CSRC's case filing notice and investigation notice on August 26, 2022 (Announcement No.: 2022-095).
On December 29, 2022, the Company received an "Advance Notice of Administrative Penalty and Market Ban" (Su Zheng Jian Pen Zi [2022] No. 12) issued by the Jiangsu Regulatory Bureau of the CSRC. The specific content can be found in the announcement disclosed by the Company on December 30, 2022 (Announcement No.: 2022-158).
On February 9, 2023, the Company and relevant parties Mr. Du Jiancheng, Mr. Li Genwang, and Ms. Zhang Manxi received the "Administrative Penalty Decision" (No. [2023] 1) from the Jiangsu Regulatory Bureau of the CSRC, and on the same day, Mr. Du Jiancheng and Mr. Li Genwang received the "Market Ban Decision" (No. [2023] 1). The relevant content is announced as follows:
Main Content of the "Administrative Penalty Decision"
Kolin Environmental Equipment Co., Ltd. (hereinafter referred to as Kolin Environmental or the Company), Du Jiancheng, Li Genwang, and Zhang Manxi: According to the relevant provisions of the "Securities Law of the People's Republic of China," our bureau conducted an investigation and hearing regarding Kolin Environmental's violations of information disclosure. The facts, reasons, basis for the administrative penalty, and the rights of the parties involved were communicated to them. At the request of Kolin Environmental, Du Jiancheng, Li Genwang, and Zhang Manxi, a hearing was held on January 18, 2023, to hear the statements and defenses of the aforementioned parties and their agents. The investigation and hearing have now concluded.
It was found that the parties involved had the following illegal facts: In 2021, Kolin Environmental's subsidiary, Yiyou Le Network Technology (Beijing) Co., Ltd., conducted information technology service business, specifically new media advertising revenue, with eight companies including Xia Ke Xing (Shanghai) Advertising Co., Ltd., Zhi Xiang (Xiamen) Media Co., Ltd., Beijing Rongshan Yuanhai Network Technology Co., Ltd., Yunnan Wave Function Technology Co., Ltd., Nanjing Kalifang Information Technology Co., Ltd., Nanjing Yuanqi Interactive Technology Co., Ltd., Cha Cha Kan (Beijing) Technology Co., Ltd., and Shenzhen Kaifeng Technology Co., Ltd. The total revenue was confirmed using the gross method at 70.7254 million yuan, with costs confirmed at 67.1935 million yuan. The essence of the above transactions was recharge services, where Kolin Environmental did not bear the primary responsibility for transferring goods to customers, did not independently bear the main risks arising from the transactions, nor inventory risks, and had no independent pricing power for advertising services, acting merely as an agent. According to Article 34 of the "Accounting Standards for Enterprises No. 14 - Revenue" (Cai Kuai [2017] No. 22), Kolin Environmental should have recognized revenue of 3.532 million yuan using the net method. The use of the gross method led to an inflated operating revenue of 67.1935 million yuan and inflated operating costs of 67.1935 million yuan, accounting for 39.52% and 52.24% of the operating revenue and costs disclosed in Kolin Environmental's 2021 annual report, respectively.