ENC Digital Technology (603869.SH) and related parties have received the administrative penalty decision.

ENC Digital Technology (603869.SH) Announcement: On December 27, 2024, the company received the "Administrative Penalty Decision" (No. [2024]5) issued by the Guangxi Regulatory Bureau of the China Securities Regulatory Commission. The relevant situation is announced as follows: After investigation, Xinzhi Cognitive Technology was found to have the following illegal facts: Xinzhi Cognitive Technology's annual reports for 2019, 2020, and 2021 contained false information. From 2019 to 2021, Xinzhi Cognitive Technology's subsidiaries, including Bokang Intelligent Information Technology Co., Ltd., Xinzhi Cognitive Data Services Co., Ltd. (referred to as Data Services), and Xinzhi Cognitive Data Operations Co., Ltd., conducted system integration and product sales business with 19 companies such as Shenzhen Dade Technology Holding Co., Ltd., Zhejiang Jinzhilu Information Technology Co., Ltd., and Shanghai Yitu Network Technology Co., Ltd. In some projects where contracts were not actually executed and products were not delivered as stated, revenue was recognized, and related sales receipts were not genuine. These actions resulted in false reporting of operating income and total profits in Xinzhi Cognitive Technology's annual reports for 2019, 2020, and 2021. Specifically, the 2019 annual report falsely increased operating income by 882,424,780.91 yuan, accounting for 27.34% of the disclosed operating income at the time, and falsely increased total profits by 99,716,945.34 yuan, accounting for 43.70% of the disclosed total profits at the time; the 2020 annual report falsely increased operating income by 68,140,121.81 yuan, accounting for 5.80% of the disclosed operating income at the time, and falsely increased total profits by 17,683,447.07 yuan, accounting for 26.34% of the disclosed total profits at the time; the 2021 annual report falsely increased operating income by 68,825,524.45 yuan, accounting for 7.35% of the disclosed operating income at the time, and falsely increased total profits by 14,055,785.84 yuan, accounting for 159.81% of the disclosed total profits at the time. Based on the facts, nature, circumstances, and social harm of the illegal acts of the parties involved, in accordance with Article 197, Paragraph 2 of the Securities Law, the Regulatory Bureau decided: 1. Xinzhi Cognitive Technology Co., Ltd. is ordered to make corrections, given a warning, and fined 8.5 million yuan; 2. Zhang Yadong is given a warning and fined 4.3 million yuan; 3. Zhang Yanfeng and Zhang Tao are given warnings and fined 3.2 million yuan each; 4. Yang Rui and Xie Xin are given warnings and fined 2.1 million yuan each; 5. Wang Xi is given a warning and fined 1.5 million yuan. Zhang Yadong, as the former chairman of Xinzhi Cognitive Technology, organized and played a major role in the above-mentioned illegal activities, which were serious in nature. Zhang Tao, as the former director of Xinzhi Cognitive Technology, chairman of the subsidiary Data Services, and director at the time, organized the above-mentioned illegal activities, which were serious in nature. Zhang Yanfeng, as the former vice president, secretary of the board of directors, and CFO of Xinzhi Cognitive Technology, was aware of and involved in the above-mentioned illegal activities, which were serious in nature. In accordance with Article 221 of the Securities Law, the "Provisions on Prohibiting Entry into the Securities Market" (CSRC Order No. 115) revised in 2015, and the revised "Provisions on Prohibiting Entry into the Securities Market" (CSRC Order No. 185) in 2021, the Regulatory Bureau decided: Zhang Yadong is subject to a 6-year ban from the securities market, while Zhang Tao and Zhang Yanfeng are each subject to a 3-year ban from the securities market.