Lukang Culture (601599): Reply To Regulatory Work Letter

Stock Code: 601599 securities short: Lukang cultural Announcement No.: 2020-034

Announcement of Jiangsu Lukang culture Limited by Share Ltd's reply to the Shanghai stock exchange's supervision work letter

The board of directors and all directors of the company guarantee that there is no false record, misleading statement or major omission in the contents of this announcement, and shall bear individual and joint liabilities for the authenticity, accuracy and completeness of its contents.

The Jiangsu Lukang culture Limited by Share Ltd (hereinafter referred to as "company" or "Lukang culture") received the supervision letter on the disclosure of the periodic reports of Jiangsu Lukang culture Limited by Share Ltd issued by the Shanghai stock exchange in April 28, 2020 (letter 2020 of the Shanghai letter [0407]) (hereinafter referred to as the "supervision work letter"), according to the requirements of the supervision work letter. The company will carry out careful study and implementation of the questions raised in the supervision work together with relevant personnel.

The company disclosed its annual report 2019. Wu Yi, director of the company, said that the audit work of the Zhejiang Tianyi film and Television Company Limited (hereinafter referred to as Tianyi film and television company) had not been completed in 2019, and the financial situation and the operating results of the Tianyi film had a significant impact on the company's annual report. Wu Yi could not guarantee the authenticity, accuracy and completeness of the 2019 annual report, and there was no false record or error. A constructive statement or omission of an opinion is made, and the contents of the report are disagreed.

In view of the above, according to the provisions of article 17.1 of the stock listing rules, the following regulatory requirements are put forward for your company and its board of directors, board of supervisors and annual auditor.

Wu Yi, as a director of the company, should be diligent and conscientious in making clear opinions on the annual report of the company, and shall provide a clear basis for his so-called "Tianyi film and television" not yet complete its audit work.

Wu Yi replied:

1, as a company director, I am responsible for the listed companies and the majority of investors. I have done my best to fulfill my duty of diligence and conscientiousness within my own professional scope. I have made clear opinions on the annual reports of listed companies.

In April 27, 2020, the listed companies issued the annual report for 2019. I made a careful study of the contents of the report. I think the accountant's confirmation of the business income of the drama such as Tianyi film "where we are dreaming" should be discussed. (take the place where we started dreaming, for example, the play was completed in 2019 and sold.

It was broadcast in April 10, 2020 and has already received reimbursement, but the accountant did not make any income confirmation. Therefore, due to prudence, diligence and due diligence and responsibility for the listed companies and investors, I propose to the listed companies to postpone the issuance of the annual report and make clear opinions.

2, I think Tianyi film and television has not completed the audit work related evidence is as follows: (1) due to the new crown disease and industry downturn and other reasons, Tianyi film and television related financial personnel failed to return to work, resulting in Tianyi film failed to effectively carry out the 2019 financial decision work, part of the project revenue recognition may be affected. (2) in the 2019 year's audit process, the accountants did not discuss and analyze personally with the other executives of Tianyi film and television about their business activities in 2019.

Two, the board of directors and all directors of the company (except Wu Yiwai) and the supervisor should carefully verify the objections made by the director Wu Yi to the annual report, explain the communication on the matter in advance, and make clear whether the company's annual report needs to be amended.

Company reply:

The board of directors and all directors of the board (except Wu Yiwai) and the board of supervisors carefully verified the objections made by the director Wu Yi to the company's annual report.

(1) communication in audit process

(1) before the audit began in 2019, the company management communicated with notary Tianye. In 2019, it was the last year of the performance commitment period of Wu Yi, the former controlling shareholder of Xinyu Tianya and the former actual controller, and there was a fact that the performance pledge could not be fulfilled.

(2) according to the pretrial plan of accountants, the accountants conducted pretrial on Tianyi film and its subsidiary sunflower on 20 - 22 November 2019, and communicated with Wu Yi on the arrangement of audit work for the follow-up annual reports. The management of the company initially communicated with the accountant on the preliminary examination results, and knew that Tianyi film in 2019, 1-10 months, realized 34 million 261 thousand and 300 yuan in receipts and 8 in receivables. 2 million 367 thousand and 600 yuan, the report losses 21 million 365 thousand and 500 yuan, and may produce a combined level 8000 - 100 million yuan loss.

(3) in March 2020, the audit institutions launched the annual on-site audit work, and from March 17th to 19, accompanied by the management staff of the Lukang cultural parent company, notarized Tianyi went to Tianyi film and television, and urged the film and television to provide the necessary audit information with the accountant, so as to carry out the necessary audit procedures. During the period, the notarial Tianyi obtained the financial account set of Tianyi film and television, and checked the accounting vouchers related to large income and receivables. After finding the bookkeeping vouchers, there was no important confirmation basis for the corresponding sales contracts, invoices, delivery records, receipts and other important evidence.

According to the communication of financial personnel, the audit project team has drawn up a list of audit data to be provided, which requires the management of film and television industry and the financial department to provide, while telling the management staff of the Lukang cultural parent company, the film and television management and financial departments promise to provide the project as soon as possible so that the project team can arrange the next on-site audit time.

(4) as of April 7, 2020, after the notarization of Tianye and the management of the Lukang cultural parent company, the management of Tianyi film and television has not been able to provide relevant audit information. At this time, due to the influence of the new crown epidemic, notary Tianyi proposed to the management of the Lukang cultural parent company according to the guidance of the CPAs on conducting audit work under the new crown pneumonia epidemic situation. The audit team cannot go to Beijing and will continue to carry out audit work in a remote way, requiring the management of the listed company to cooperate. Through the communication between the audit institutions and the management of Tianyi film and television, the following audit work can be determined to obtain audit information remotely. The audit office sent an email to Wu Yan, the financial director of Tianyi film and television company, and explicitly requested that he provide relevant audit information before April 8th, and send the mail to the chief financial officer and deputy director of Lukang cultural parent company at the same time.

After repeated urging by the management and auditing organizations of the company, Tianyi TV has provided some electronic texts related to income and investment through mail or QQ. The company's financial personnel who were responsible for the consolidated financial statements found that the contracts provided by Tianyi film were not positive texts, and their commercial nature was doubtful. Such as: the contract is not confirmed by the opponent, the gross profit margin of the film and TV business is obviously high, and the contract has not yet come into force. After discussions with the audit institutions, the management staff of the Lukang cultural parent company clearly informed the film and television management. According to the accounting standards, the relevant contracts did not have the accounting conditions for 2019, and agreed that the accountants should conduct audit adjustments. As of April 18, 2020, Tianyi film still failed to provide substantive data to prove that the relevant businesses were in line with the conditions of revenue recognition.

During the audit process, the directors and supervisors of the company continued to pay attention to the development of the audit work, and through various forms of supervision, urged the film and television to actively cooperate with the audit work. At the same time, the audit adjustment and audit procedures of Tianyi film and television were repeatedly identified with the audit institutions and the Tianyi film. The audit institutions adjusted the relevant audit adjustments for Tianyi film and television company, and approved the directors of the company (except Wu Yiwai), supervisors and Tianyi film and television management.

(two) annual report communication matters

In April 22, 2020, the company issued a notice to all directors on the twenty-ninth meeting of the Fourth Board of directors by written and telephone, including the date, place and main topics of the meeting. The company has repeatedly communicated with Wu Yi on matters related to its participation. Because its residence in Chaoyang District, Beijing is a key area of the new crown pneumonia epidemic situation. According to the epidemic prevention and control policy of the local and company locality in Chaoyang District, Mr. Wu Yi said he could not attend the company meeting. At 9:00 on April 27, 2020, the twenty-ninth meeting of the Fourth Board of directors was held in the company conference room.

Mr. Wu Yi did not attend the meeting.

According to the eighty-second provision of the securities law, the directors, supervisors and senior managers of listed companies should sign written confirmation opinions on the periodic reports, and the directors should ensure that the listed companies disclose information in a timely and fair manner, and the information disclosed is true, accurate and complete. At the end of the twenty-ninth meeting of the Fourth Board of directors, the Secretary of the board of directors of the company made a number of telephone interviews with Wu Yi on the annual report of 2019 alone, seeking Wu Yi's opinion on the annual report and asking him to make written comments. Wu Yi did not agree with the previous audit adjustments for many times and said he would not comment. The Secretary of the board of directors of the company repeatedly told him that he should perform the duties of directors, diligently and conscientiously, and issued written opinions in accordance with the relevant provisions of the securities law. Mr. Wu Yi finally disagreed with the audit results of Tianyi film on the day of the evening of 20 days after the board of directors, and published his views on the company's annual objections in 2019. The board of directors and all directors of the board (except Wu Yiwai) and the supervisor conducted a comprehensive understanding and examination of the annual report of the company in 2019, and repeated the assessment of Wu Yi's unfinished audit work. It was considered that the audit institutions had already carried out the necessary audit procedures for Tianyi film and television, and the contracts provided only by the providence film and television management department did not meet the income recognition conditions. The contract is recognised as the operating income in 2019 and the corresponding operating costs shall be carried forward. Other expenses and assets impairment losses shall be stipulated in accordance with the accounting standards for enterprises. The approved financial statements of the Tianyi film and television can fairly reflect the financial situation of Tianyi film and television in December 31, 2019 and the operating results and cash flows of the 2019 year, which can be incorporated into the consolidated statements of the parent company. The standard unqualified audit report issued by the company (Su Gong W[2020]A630) can truly reflect the financial and operating results of the company. The company's annual report 2019 objectively reflects the company's financial situation and operating results for the whole year of 2019. There is no false record, misleading statement or major omission in the information contained in the company's annual report. The annual report of the company does not need to be amended.

Three, invite the company to examine the accountant's opinions on the annual report issued by the director Wu Yi, and specify clearly whether the audit procedures performed by the Tianyi film and television company are compliant, whether the audit evidence obtained is sufficient, and whether the audit opinions are accurate.

The accountant explains:

(1) compliance with the audit procedures performed by Tianyi film and television

After undertaking the 2019 year audit business of Lukang culture, the Institute has communicated with the management of the company. When formulating the audit plan, the project group combines the understanding of the company's affiliate's film and TV situation in the past annual audit process, aiming at the last year of Tianyi film and television performance in the 2019 performance compensation period.

To achieve specific goals or expectations and manipulate the inherent risks of revenue recognition, we take the income of the company's film and television subsidiary as a key audit item, and make the subsidiary Tianyi television an important part of the audit. Before the audit, members of the project group are required to know the audit plan, maintain the necessary professional skepticism in the process of collecting and evaluating audit evidence, appoint people with experience in the audit of the film and television industry, provide guidance and supervision to other members of the project team, and strengthen the quality check of the project.

1, formulate overall audit plan and strategy.

In response to the company's performance commitments for Tianyi film and television 2019, the project team will, in formulating the audit plan, "create a false increase in revenue for the purpose of achieving performance commitments". The "priority of management over the internal control" is a special risk case. The key areas of the field of film and TV are identified as areas where there may be a higher risk of misstatement. It includes: accounting items that are subject to subjective judgment by the management, abnormal accounting statements, and accounting statements and accounting statements that have direct and significant impact on the overall accounting statements. Large or abnormal economic operations occurred before and after the deadline.

Based on our analysis of the unaudited financial statements provided by Tianyi television and the audit experience in the previous year, we plan to focus on the following aspects: Monetary Fund, accounts receivable, prepayment, inventory, accounts payable, operating income, operating costs and so on.

2. Pre trial and internal control test phase

According to the audit plan, the project group previewed the Tianyi film and its subsidiary sunflower on 20-22 November 2019, and communicated with the management of Tianyi film and television on the further audit work of the follow-up annual report. In the pre-trial stage, we implemented risk assessment procedures for Tianyi film and television, including understanding the audited units and their environment, understanding the internal control of the audited units, understanding and evaluating the circulation of money funds, the purchase and payment cycle, the sales and collection cycle, the financing and investment cycle, the circulation of fixed assets, the wage and personnel circulation, and the circulation, financing and investment of sales and receivables. The internal control test procedure was implemented by capital cycle and money capital cycle.

During the pre-trial period, an analysis was made on the 2019 October report of Tianyi film and television, focusing on the receipt of accounts receivable and the recognition of the income of the film and television drama. According to the October report of Tianyi film, only 1-10 yuan of operating income was achieved in the month of 34 million 261 thousand and 300, and the receivables were refunded by 82 million 367 thousand and 600 yuan. The report shows net profit of -2136.55 million yuan, while Tianyi film performance compensates Lukang's cultural commitment 2019 yuan Tianyi film net profit is 150 million yuan. According to our professional judgement, Tianyi film and television may not honor its performance commitments in 2019, and it is expected that it will generate a loss of 8000 to 100 million yuan. We have made preliminary communication with the Lukang cultural management and the film and television administration.

3. Substantive testing phase

On March 2020 17-19, the project team, accompanied by Lukang's cultural management personnel, went to Tianyi film and television for the 2019 year audit substantive test. According to the audit plan, we obtained the financial account set of Tianyi film and television, and implemented necessary audit procedures such as inquiry, analysis, inventory and spot checks. After checking the accounting vouchers related to large amounts of income, investment and receivables, it was found that there was no significant original basis for sales contracts, invoices, delivery records, investment contracts and payment vouchers. After the financial communication with Tianyi film and television, the project team has drawn up a list of audit information to be provided, which requires the financial supply of Tianyi film and television, and the management of the film and TV industry also promises to provide it as soon as possible. After that, the project team has maintained telephone communication with Tianyi film and television, so as to arrange the next on-site audit time.

After the project group and Lukang cultural management staff urged many times, as of April 7, 2020, the management of Tianyi film and television has not been able to provide relevant audit information. At this time, due to the influence of the new crown epidemic, Beijing issued a restrictive notice to enter and leave Beijing. In this case, the project group was guided by the CIC's "implementation of audit work under the new crown pneumonia epidemic situation". "To adjust the audit plan and audit method of Tianyi film and television. Fully communicate with the management of Tianyi film and television, confirm the follow-up audit work and obtain the audit information remotely. The project team sent an email to Wu Yan, the financial director of Tianyi film and television company, and explicitly requested that he provide relevant audit information before April 8th, and mail it to the Lukang cultural finance director and the secretaries of the parent company at the same time.

In April 8, 2020, Tianyi film and television did not provide relevant audit information. Under the coordination of the telephone calls of the project group and the coordination of Lukang culture, Tianyi TV has provided some electronic texts of income and investment related contracts through mail or QQ. After auditing, we found that these contracts were not official texts, and their commercial nature was doubtful. Such as: the other party has not signed the confirmation, the gross profit margin of the film and television business is obviously high, and the contract has not yet come into force. The project team clearly informed the film and television management of heaven and earth. The relevant contracts provided by Tianyi film and television did not have the conditions for accounting treatment, and could not be used as the basis for entry in 2019.

As of April 18, 2020, due to the fact that the disclosure date of the Lukang cultural Yearbook (the first appointment time is April 25th, the application for change to April 28th) is getting closer and closer. Tianyi TV has not yet provided substantive audit evidence, which has brought great pressure to the audit work. In order to ensure the smooth completion of the audit work and the timely disclosure of annual reports by the listed companies, the project team and the Lukang culture management layer and Providence shadow We have fully communicated with the governance layer, detailed informed the audit adjustment items and audit results of Tianyi film and television, and obtained the approval of Lukang cultural directors (except Wu Yiwai), supervisors, management and Tianyi film and television administrative layer (except Wu Yi).

While focusing on the above income and investment confirmation basis, the project team has also implemented the following audit procedures:

1) for TV drama sales revenue and cost confirmation procedures, the contract is based on the contract, the detail test procedure is adopted, and the cut-off is concerned; the film revenue is paid attention to the authenticity of the income. Besides the detailed test, the authenticity of the income is judged by the analytical test procedure. The income recognition methods of different derivative income are different in time. A specific analysis is made; the embedded advertisement recognizes the income at once according to the agreed amount after obtaining the license to play the license; when the patch advertisement is broadcast, it confirms the revenue according to the contract; 2) checking the inventory impairment test, the proportion of the total assets of the film and television enterprises in "light assets" is higher. To check whether there is any change in product due to various factors, or if the marketability of the product becomes weaker, or after the completion of the film and television works, it fails to pass the examination or failure of the competent department, so as to check the rationality and adequacy of the inventory price drop.

3) for accounts receivable, we should focus on checking accounts receivable contracts and collecting vouchers, and at the same time, we will verify the balance at the end of the contract, combined with the contract review, understand the reasons for not recovering, and check whether the impairment provision is correct.

4) for prepayment, the prepaid payment contract and payment voucher are mainly examined. Meanwhile, the prepaid movie and TV production section of the final balance is also verified. Combined with the contract review, check whether there is a long-term payment of advance payment, understand the reasons for the long term accounting and check whether the accounting process is correct.

5) in conjunction with the detailed balance of prepaid payments and other items, to investigate whether there is any accounting for the same transaction payable at the same time as the account payable and prepaid, the abnormal balance or other payments not related to the purchase. A large amount of accounts payable shall be verified and checked for supporting vouchers. An alternate audit procedure shall be implemented for accounts payable which have not been credited or not answered, and the bank statements shall be checked after checking the bank transfer records and the company contract records to check whether there is any amount inconsistent with the contract or suppliers (service providers).

6) check the vouchers, such as bank statements, cash journal, large capital payment authorization, audit approval, payment and other key capital activities management links, pay attention to the company's financial dealings with related parties and employees, as well as bank vouchers, approval records, and other raw data to check whether there is a large abnormal cash receipts and payments.

7) check the approval documents, contracts, invoices, payment of bank returns and check the amount of payment, whether the payee is in conformity with the contract agreement, the invoice records, and whether the accounts are handled correctly.

In April 26, 2020, after carrying out the necessary audit procedures, the project team once again communicated with the cultural management in Lukang, and sent a communication letter with the governance layer to Tianyi TV, which clearly expressed our conclusion. We have implemented the necessary auditing procedures for Tianyi film and television, and made audit adjustments to accounting items which do not have the conditions of entry according to accounting standards. We believe that after the examination, the financial statements of Tianyi film and television can be fair.

Reflecting the financial situation of Tianyi film and television in December 31, 2019 and its operating results and cash flows in 2019, it can be incorporated into the consolidated statements of the parent company. Lukang culture management and Tianyi film and Television Administration (except Wu Yi) explicitly expressed their support.

(two) sufficiency of audit evidence obtained

After auditing, the main audit adjustments for Tianyi film and television are as follows:

Unit: 10000 yuan

In the process of auditing the Tianyi film and television, auditors have implemented the necessary audit procedures and obtained sufficient audit evidence according to the ledger data, original financial statements, relevant contracts and vouchers provided by Tianyi television.

1, operating income and cost adjustment instructions

We examined the income related vouchers of Tianyi film and television. The auditors compared the revenues and operating costs recorded by the company with the contracts provided by Tianyi television, and found that the company and its counterparties (customers and suppliers) did not perform the contract as agreed, and failed to fulfill their contractual obligations in accordance with the agreed terms and amount of payment. There is no corresponding record of payment. Auditors have great doubts about whether such sales contracts and procurement contracts can be carried out reliably, and consider that the relevant income and cost do not have the terms of entry in 2019. Based on the principle of prudence, the auditors did not confirm this, and adjusted the income of 123 million 347 thousand and 400 yuan, which cost 50 million 940 thousand and 200 yuan.

2, financial cost adjustment instructions

We scrutinize the relevant vouchers of interest rates of Tianyi film and television, including the interest expense basis of the parent company, the loan contract for the bank and the external third party's loan agreement. The interest payable on the books of Tianyi film and television is re examined according to the contract interest rate and interest days, and auditors are rechecked and re calculated according to the above interest.

Members found that Tianyi film and TV 2019 had insufficient interest payments, and the interest cost was 26 million 579 thousand and 800 yuan.

3, adjustment of credit impairment losses

1) spot checks found that Tianyi film and television accounts receivable 246 million yuan into a joint investment in film and television drama. After reviewing the relevant contracts by the auditors, it was found that the contracts provided by Tianyi TV and the book data were inconsistent. The commercial nature of such contracts is doubtful. We believe that if the agreement on accounts receivable to deduct investment is able to carry out significant uncertainties, the 2019 year does not have the conditions for entry. The accounts receivable will be transferred back to the joint venture investment of movie and TV series, and the expected credit loss will be 31 million 169 thousand and 400 yuan at the time of its original occurrence. 2) the audit found that the original financial statements of Tianyi film and television did not prepare bad debt provision for receivables. In the course of audit, we compiled an aging analysis table according to the inertial accounting policy of Tianyi film and television, and calculated and calculated the impairment loss of 71 million 144 thousand and 100 yuan based on the expected credit loss rate.

4. Statement of income tax adjustment

The auditor can identify deductible income tax assets based on the deductible temporary differences (including bad debt preparation, inventory depreciation preparation and interest and issuance fees). At the time of audit, it is possible to obtain taxable income that can be used to offset the deductible temporary difference. We confirm that the deferred income tax assets arising from deductible temporary differences reduce the deferred income tax expense by 25 million 115 thousand yuan.

(three) audit opinion

In the audit process of Tianyi film and television, we identified the major risk of misreporting, implemented the necessary audit procedures, and obtained sufficient audit evidence. The audit results were fully communicated with Lukang's cultural management and Tianyi film and television management (except Wu Yi), and they were recognized. We believe that the adjusted financial statements of Tianyi film and television after the audit have been compiled in accordance with the accounting standards of enterprises in all major respects, which reflects the financial situation of Tianyi film in December 31, 2019 and the operating results and cash flows in 2019.

Four, my department is concerned that Wu Yi, director of the board, issued written confirmation opinions on the annual report and raised the above objection. However, he did not participate in the twenty-ninth meeting of the Fourth Board of directors of the company. He asked the company and Wu Yi respectively to explain whether the board meeting fulfilled the corresponding order and formed an effective resolution according to the law.

Company reply:

In April 22, 2020, the company issued a notice to all directors on the twenty-ninth meeting of the Fourth Board of directors by written and telephone, including the date, place and main topics of the meeting. The company has repeatedly communicated with Wu Yi on matters related to participation. However, because its domicile place is Wuhan city of Hubei Province, its work and residence, Beijing Chaoyang District belongs to the key area of new crown pneumonia epidemic. Mr. Wu Yi's health code is red code. According to the epidemic prevention and control policy of Beijing local and company location, Wu Yi said he could not attend the company meeting.

At 9:00 a.m. on April 27, 2020, the twenty-ninth meeting of the Fourth Board of directors was held in the company's conference room. At the meeting, the directors should arrive at 9 people, reaching 7 people. Among them, Qiu Yu, director of the board, entrusted Qian Wenlong, director of the board, to attend the meeting and to exercise the right to vote. Wu Yi, the director, was unable to attend the meeting for any reason. The meeting was presided over by Qian Wenlong, chairman of the board. The directors attending the meeting communicated and discussed the motion considered by the board of directors, and passed all the motions with 8 votes, 0 votes against and 0 abstentions.

According to the articles of association and the rules of procedure of the board of directors, the board of directors issued a notice of the meeting and held a board meeting at the scene. 7 directors of the board attended the meeting at the scene (another director Qiu Yu entrusted the director Qian Wenlong to attend the meeting and voted for it). More than half of the directors attended the board meeting, and the directors with the right to vote (8 All the members deliberated and passed resolutions and the resolution of the board of directors was approved by more than half of all the directors.

According to the eighty-second provision of the new securities law, directors, supervisors and senior managers of listed companies should sign written confirmation opinions on periodic reports. Dong Jiangao should ensure that listed companies disclose information in a timely and fair manner, and the information disclosed is true, accurate and complete. So after the meeting, the company solicit the director Wu Yi's opinion on the 2019 annual report and asks for written comments.

The company held that: the convening and deliberation of the decision-making process of the board of directors is in conformity with the provisions of the internal rules and regulations of the articles of association and the rules of the board of directors, and the procedure is lawful and compliant. The resolution of the board of directors formed by the meeting is lawful and effective.

Wu Yi replied:

In April 22, 2020, I received the notice of the twenty-ninth meeting of the Fourth Board of directors, which was sent by the board of directors of the listed company. Because my residence was located in Wuhan, Hubei, and in April 2020, my work was at the time the highest risk level in the country, Chaoyang District, Beijing (the health code was red code), so the travel restrictions were not allowed to be present at the scene.

Counsel verification opinion:

According to the information and instructions provided by the company, the board of directors issued a notice of the meeting in advance and held a board meeting on the spot; 7 directors attended the board meeting at the scene, and another director Qiu Yu entrusted Qian Wenlong, director of the board, to attend the meeting and to vote for the majority. The proposal has been approved by more than half of all directors. Wu Yi, who was unable to attend this meeting for any reason and did not delegate his presence, was deemed to have waiver of the right to vote at this meeting. His objection to some of the motions and the absence of participation did not affect the validity of the resolution of the board.

Accordingly, the lawyers of this institute believe that the convening and voting procedures of the above-mentioned board of directors comply with the relevant provisions of the company law and other internal laws and regulations as well as the internal rules and regulations of the articles of association and the rules of the board of directors. Therefore, this resolution of the board of directors is lawful and effective.

To sum up, our lawyer believes that the twenty-ninth meeting of the Fourth Board of directors of the company has carried out the corresponding convening procedure according to law, and the resolution of the board of directors is effective.

Notice hereby.

Jiangsu Lukang culture Limited by Share Ltd board of directors

May 8, 2020