Punishments for violations and illegal disclosures of information in sci-tech innovation announced

Kechuang Information (300730.SZ): Penalties for violations and illegal conduct in information disclosure are now in effect. Recently, Kechuang Information disclosed that it received an “Administrative Penalty Decision” issued by the Hunan Securities Regulatory Bureau. Three individuals who were in charge of the company at the time were promptly given warnings and fined a total of RMB 3.7 million. Combined with the company’s worsening performance, Kechuang Information is facing dual tests on both compliance and operations.

This penalty stems from a contract fraud case involving an amount exceeding RMB 100 million. In July 2024, Kechuang Information announced that in April 2023, the company signed two contracts with Dayou Digital Technology (Beijing) Co., Ltd. (hereinafter “Dayou Technology”), with a combined amount of RMB 111 million. However, after Dayou Technology paid two installments totaling RMB 88.926 million for goods, it did not make any further payments. During the company’s collection efforts, it discovered suspected illegal and criminal conduct. On April 2024, it reported the case to the public security authorities in Changsha and the case was filed.

The case involves the sale of servers and application software between the two companies. In 2023, Kechuang Information, while clearly knowing that it “does not have control over the goods” in this business, still violated regulations by recognizing revenue using the gross amount method. At the same time, during the preparation of the company’s consolidated financial statements, the company incorrectly adjusted the amounts for the above business, resulting in the company’s 2023 interim report being seriously inaccurate—overstating operating revenue by RMB 46.3202 million, accounting for 33.57% of the operating revenue disclosed for the period; overstating operating costs by RMB 32.6016 million, accounting for 33.57% of the operating costs disclosed for the period; and overstating profits by RMB 12.7921 million, accounting for 71.94% of the total profit disclosed for the period. On April 27, 2024, Kechuang Information made corrections to the company’s prior financial data.

In light of the above violations and illegal conduct, the Hunan Securities Regulatory Bureau issued a warning to Kechuang Information and imposed a fine of RMB 1.5 million. It separately imposed fines of RMB 0.8 million on Fei Yaoping, then chairman, and Li Jie, then general manager and chief financial officer, and imposed a fine of RMB 0.6 million on Long Zhong, then finance manager, for a total penalty of RMB 3.7 million. According to data from Tonghuashun, Fei Yaoping and Li Jie are currently still serving in their original positions at the company.

In addition to the administrative penalty issued by the securities regulator, the Shenzhen Stock Exchange on March 17 also issued a disciplinary punishment decision of censure and criticism to the company and the three individuals involved. Kechuang Information stated that, according to the circumstances identified in the “Administrative Penalty Decision,” the company’s violations in information disclosure do not involve circumstances of mandatory delisting or other risk warnings. All the company’s business operations and activities are being carried out normally.

Apart from compliance loopholes, Kechuang Information is also facing a difficult situation of continuously worsening performance. In 2023, the company’s net profit attributable to shareholders was a loss of RMB 162 million, a year-on-year plunge of 775.19%. In 2024, the company’s net profit attributable to shareholders was a loss of RMB 63.823 million. By the end of January 2026, the company’s 2025 annual performance forecast showed that it was expected to post a loss of RMB 120 million to RMB 160 million in net profit attributable to shareholders, which means the company may suffer consecutive losses for three years. In addition, the company’s cash flow is tightening. Kechuang Information’s 2025 third-quarter report shows that although the net cash flow from operating activities for the first three quarters improved year-on-year, it is still negative, at approximately RMB -102 million. Meanwhile, the company’s monetary funds dropped sharply from RMB 101 million at the beginning of the year to RMB 39.4147 million, a decrease of more than 60%.