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In response to the "Inquiry Letter" issued by the Shanghai Stock Exchange on August 10, Huatie Emergency (603300.SH) gave a detailed reply nine days later, including the "Reply Announcement of Zhejiang Huatie Emergency Equipment Technology Co., Ltd. on the Inquiry Letter on Media Reports", "Special Explanation on Financial and Accounting Issues", "Legal Opinion", etc.
Affected by the real-name report of EBON International (EBON.US) on August 8, the secondary market share price of Huatie Emergency has continued to be sluggish. Since August, the share price of Huatie Emergency has hit the limit one after another. As of writing, the decline this month is 39.35%, while the stock price has risen by 1.79% in the past five days.
In the reply letter dated August 19, Huatie Emergency explained all the inquiries in detail and disclosed the operating results related to Bitcoin mining leasing.
Detailed disclosure: No Yibang report was made
On August 8, Hu Dong, chairman of Yibang International, reported in his real name that Huatie Emergency was suspected of financial fraud, suspected of serious illegal disclosure, and actual controller Hu Danfeng was suspected of embezzlement. On August 10, the Shanghai Stock Exchange sent an inquiry letter to Zhejiang Huatie Emergency Equipment Technology Co., Ltd. regarding media reports. The inquiry mainly included: regarding the contract dispute with Yibang International, disclosure of the relationship between Newbo Industrial and the company's actual controller Hu Danfeng, whether Newbo Industrial signed for the relevant servers on behalf of Huatie Emergency; regarding the undisclosed custody fees of more than 30 million yuan in 2018, the accountant needs to express his opinion; regarding the actual controller Hu Danfeng and his spouse Pan Qian opening a Bitcoin account, and using the mining machines purchased by the company to participate in mining and then appropriated it for themselves, the lawyer needs to express his opinion.
In response to the above inquiries, Huatie Emergency gave a detailed response.
On August 17, Deloitte Touche Tohmatsu Certified Public Accountants (Special General Partnership) made a detailed response to the custody fees in the second item of the inquiry letter. After verification, the total custody fees paid by Xinjiang Huatie Heng'an Building Safety Technology Co., Ltd. (later renamed Zhejiang Qirui Machinery Equipment Co., Ltd., hereinafter referred to as Huatie Heng'an Company), a subsidiary of Huatie Emergency, to the custodian in 2018 amounted to 54.6379 million yuan, of which 51.0813 million yuan was paid to Beijing Borui Space-Time Communication Culture Co., Ltd., 1.26 million yuan was paid to Lixian Youdu Technology Co., Ltd., and 2.2966 million yuan was paid to Shihezi Tiandingyun Network Technology Co., Ltd., which is consistent with the amount in the media report.
The server hosting contract, hosting period, unit price and statement of account were verified by an accountant and there was no understating of hosting fees.
On August 18, Grandall Law Firm (Hangzhou) issued a legal opinion on the third inquiry item of the "Inquiry Letter" "About the issue of occupational embezzlement". After the law firm interviewed Hu Danfeng and Pan Qian, logged on to the BTC.com website to verify that Pan Qian's mobile phone number did not exist, and confirmed that it was not a Bitcoin wallet registration number but a Bitcoin mining pool account, Hu Danfeng and Pan Qian's email content and bank statements, it was found that Hu Danfeng and Pan Qian had not violated the interests of the listed company by embezzling the listed company's Bitcoin. It was emphasized that since Bitcoin is a virtual encrypted digital currency with good anonymity, the means of verification are limited.
On August 19, in response to the first item of the "Inquiry Letter" "Dispute Contract with Ebang International", Huatie Emergency said that in May 2018, Zhejiang Qirui Machinery Equipment Co., Ltd. (formerly known as Xinjiang Huatie Heng'an Building Safety Technology Co., Ltd., hereinafter referred to as "Huatie Heng'an") and Ebang Technology signed a product sales contract, stipulating that Huatie Heng'an (Party A) purchased 80,000 cloud computing servers from Ebang Technology (Party B) for a total price of RMB 403.2 million. After receiving 24,000 mining machines, Huatie Emergency leased them to others, but due to the decline in Bitcoin prices and the high power consumption of the mining machines delivered by Ebang Technology compared with similar products on the market, Huatie Heng'an suffered serious losses and decided not to perform the contract in June. The payment for 24,000 mining machines has been paid to Ebang Technology in four installments, totaling approximately RMB 120.96 million. The remaining 56,000 mining machines were signed by Chen Baoqing of Newbo Industrial.
Did Newbo Industrial sign for the 56,000 mining machines on behalf of Huatie Hengan? During the period of the incident, Hu Danfeng's sister Hu Yueting did not hold any position in Newbo Industrial, and there was no financial transaction. Chen Baoqing of Newbo Industrial confirmed that it was indeed Newbo Industrial that signed for the machines, and there was no signing on behalf of others.
At this point, Huatie Emergency has fully responded to the "Inquiry Letter" from the Shanghai Stock Exchange and disclosed relevant data.
Bitcoin mining rental business has high profits
Huatie Emergency disclosed that Huatie Hengan's bitcoin mining machine leasing business operations were mainly concentrated in the second half of 2018, with a gross profit margin of 19.29%. In actual operations, Huatie Hengan adopted a combination of pure leasing and leasing plus trusteeship.
Among them, the income of the pure leasing model was 16,223,245.80 yuan, with a net profit of 23.54%, and the income of the leasing and trusteeship model was 24,068,551.40 yuan, with a net profit of 7.28%. The actual operating gross profit margin of Huatie Hengan from June 2018 to December 2018 was 19.29%.
The "4418.895748 bitcoins" in the Yibang International report were all sold by the operator for related expenses between June 2018 and February 2019. The five bitcoin addresses circulated on the Internet were opened by Chen Baoqing.
During the operation period, the mining machine lessees included Shanghai Xinding Metal Materials Co., Ltd., Xiangyin Xiangyitong Cloud Storage Network Technology Co., Ltd., and Yiyang Xiangyitong Cloud Storage Network Technology Co., Ltd., with a total of 36,500.00 units rented.
The difference between the settlement income of 101.7798 million yuan agreed in the contract and the final settlement amount of 61.48 million yuan was 40.2998 million yuan, and the operating income of Huatie Hengan's leasing business finally totaled 53 million yuan. Since August 2018, due to the decline in Bitcoin prices and the backwardness of mining machine computing power, the lessee's mining income could not cover the costs such as rent. After negotiation between the two parties, a sales discount was given on the basis of the settlement price agreed in the contract. Based on the actual situation, the company made an impairment provision of 142.5501 million yuan for Huatie Hengan's 2018 fixed assets.
Regarding the equity transfer of Huatie Hengan, Huatie Emergency disclosed that the company held the 18th meeting of the third board of directors on March 26, 2019 and agreed to transfer 100% of the equity of the target company held by the company and Hangzhou Yuming to Mr. Chen Wanlong. The book net assets of Huatie Hengan are 12.1036 million yuan, and the final transfer price is 12.28 million yuan. There is no situation of transferring Huatie Hengan shares at a low price.
In simple terms, the cost of purchasing mining machines by Huatie Hengan was RMB 120.96 million. With an operating profit of 19.29%, Huatie Hengan reduced related expenses by RMB 40.2998 million because the lessee suffered losses after leasing. The final mining operating income was RMB 53 million, resulting in a large loss. One reason was that the number of mining machines leased was less than 24,000 units, and the other was the reduction of lessee fees. Combining various reasons, an impairment loss of RMB 142.5501 million was finally recorded.
Huatie Emergency admitted that from 2015 to 2018, the company continued to explore new development directions to avoid the uncertainty brought about by fluctuations in demand in the new construction market. Combined with the rising popularity of the Bitcoin market at the time and the company's many years of leasing management experience, the company decided to expand the Bitcoin "mining machine" leasing business. Due to the company's insufficient understanding of Bitcoin, insufficient due diligence, and failure to fully analyze the high risk of the mining machine leasing business, the mining machine leasing business suffered serious losses in the subsequent operation process. In 2019, the company successively divested the Bitcoin "mining machine" leasing business and financial leasing, commercial factoring and other similar financial businesses.
According to a previous report by China Times, on August 15, the press conference scheduled by Ebang International was postponed several times after the intervention of relevant regulatory authorities and was finally cancelled. Will the "mining machine gate" storm between Huatie Emergency and Ebang International come to an end with the reply letter issued by Huatie Emergency to the inquiry letter of the Shanghai Stock Exchange? |
