Julong Co., Ltd. (hereinafter referred to as "the Company" or "Julong") guarantees that the content of this information disclosure is true, accurate, and complete, with no false records, misleading statements, or significant omissions.
The audit firm (special general partnership) issued an audit report with no opinion on the Company's 2021 financial statements. According to relevant regulations, including the "Rules for the Disclosure of Information by Companies Issuing Securities No. 14 - Handling of Non-standard Opinions and Related Matters" and the "Shenzhen Stock Exchange GEM Listing Rules," the board of directors provides the following explanations regarding the matters involved in the audit opinion:
1. Content of the Audit Report with No Opinion
We were commissioned to audit the financial statements of Julong Co., Ltd., including the consolidated and parent company balance sheets as of December 31, 2021, the consolidated and parent company income statements, cash flow statements, changes in equity, and related financial statement notes. We do not express an audit opinion on the attached financial statements of Julong Co., Ltd. Due to the significance of the matters described in the "Basis for No Opinion" section, we were unable to obtain sufficient and appropriate audit evidence to form the basis for an audit opinion on the financial statements.
2. Basis for No Opinion
(1) Bank Deposit Confirmation Matters
As stated in the financial statement note "Fourteen, Other Important Matters (5) Bank Deposit Confirmation Matters," as of December 31, 2021, the consolidated bank deposit balance of Julong was 350.66 million yuan. We implemented confirmation and other audit procedures we deemed necessary; however, due to the impact of the COVID-19 pandemic, we were unable to perform confirmation procedures for bank deposits totaling 10.71 million yuan, of which 9.73 million yuan was related to the Shanghai area and 0.97 million yuan was related to overseas areas. Additionally, we issued confirmations but did not receive responses for bank deposits totaling 7.77 million yuan, including 1.02 million yuan from domestic banks and 6.75 million yuan from overseas banks. We also did not receive responses regarding the illegal guarantee matters related to Zheshang Bank for the year 2021 and prior years, preventing us from obtaining sufficient and appropriate audit evidence to assess the accuracy of the bank deposit amounts and the completeness of guarantees and other matters.
(2) Illegal External Guarantees and Related Party Fund Occupation Matters
As stated in the financial statement note "Fourteen, Other Important Matters (2) Fund Occupation and Repayment Situation," Julong provided guarantees using the time deposits of its subsidiaries, Julong Self-service and Julong Rongchuang, for related companies controlled by the controlling shareholder and its related parties, resulting in a fund occupation of 355.97 million yuan. Additionally, 97.50 million yuan was occupied through transferring debugging currency to personal accounts, and 69.55 million yuan was occupied through payments to related companies controlled by the controlling shareholder. As of the date of this audit report, there remains 288.19 million yuan (including receivable interest of 30.78 million yuan) of non-operating funds occupied by the controlling shareholder that have not been recovered, with significant uncertainty regarding the recoverable amount. Furthermore, due to significant deficiencies in prior internal controls that have not been fully resolved, we were unable to obtain sufficient and appropriate audit evidence to assess the completeness of the external guarantee matters, the recoverability of the remaining amounts occupied by the controlling shareholder and related parties, the reasonableness of impairment losses, and their potential impact on the financial statements.