Audit Report
Grant Thornton (Special General Partnership)
Audit Report No. Zhi Tong Audit (2026) 441A009217
To all shareholders of Hainengda Communication Co., Ltd.:
1. Audit Opinion
We have audited the financial statements of Hainengda Communication Co., Ltd. (hereinafter referred to as "the Company"), including the consolidated and company balance sheets as of December 31, 2025, the consolidated and company income statements, consolidated and company cash flow statements, consolidated and company statements of changes in equity, and related notes to the financial statements. We believe that the attached financial statements are prepared in accordance with the Accounting Standards for Business Enterprises in all material respects and fairly present the consolidated and company financial position of Hainengda as of December 31, 2025, as well as the consolidated and company operating results and cash flows for the year 2025.
2. Basis for Audit Opinion
We conducted our audit in accordance with the auditing standards for certified public accountants in China. The section "Responsibilities of Certified Public Accountants for the Audit of Financial Statements" in the audit report further elaborates on our responsibilities under these standards. In accordance with the independence requirements of the Code of Ethics for Certified Public Accountants and the Independence Standards for Public Interest Entities (as applicable), we are independent of Hainengda and have fulfilled our other ethical responsibilities. We believe that the audit evidence we obtained is sufficient and appropriate to provide a basis for our audit opinion.
3. Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the period. These matters were addressed in the context of our audit of the financial statements as a whole and in forming our opinion thereon, and we do not express a separate opinion on these matters.
(1) Provision for Significant Litigation and Contingent Liabilities
For detailed information disclosure, please refer to notes 2, 3, 25, 5, 37, 58, and 13, 2(1) of the financial statements.
Description of the Matter
The Company is involved in a lawsuit regarding trade secrets and copyright infringement with Motorola Solutions Malaysia SDN. BHD. and MOTOROLA SOLUTIONS, INC. (hereinafter referred to as "the lawsuit"), which commenced in a U.S. court on November 6, 2019. On March 5, 2020, the U.S. court issued a first-instance judgment; on July 3, 2024, the U.S. Seventh Circuit Court of Appeals supported the Company's claims regarding extraterritorial jurisdiction and allocation of copyright, while maintaining the first-instance judgment on other aspects, including copyright statute of limitations and trade secrets, and remanded the case to the first-instance court to recalculate the compensation amount for the copyright portion. On August 22, 2025, the U.S. court found that Hainengda's H series products infringed, and the Company calculated the licensing fee and interest to be $110 million. In January 2025, the Company reached an agreement with the U.S. Department of Justice, which was approved by the court, and based on this, the Company recognized a provision of $60 million. In March 2026, the U.S. court ruled on the agreement previously reached with the U.S. Department of Justice, ordering the Company to pay $50 million to the U.S. government. Based on the judgment results, Hainengda recognized the difference between the forecasted amount and the previously accrued amount as a provision and included it in the 2025 current profit and loss, amounting to 710 million RMB. The amount of the provision requires the management of Hainengda (hereinafter referred to as "management") to make judgments using accounting estimates; the litigation compensation may have a significant impact on the Company's liquidity, thus we identified this matter as a key audit matter.