The purpose of this equity transfer is to reduce the uncertainty brought to the development of the company by the continuous losses and unclear development prospects of its controlling subsidiary, Qingdao Aobo. A securities officer stated that the reason for the 1 yuan transfer is mainly due to Qingdao Aobo's insolvency and poor overall performance. Some lawyers have suggested potential tax audit risks.
On June 26th, the Science and Technology Innovation Board Daily reported (Reporter Yu Jiaxin) that Jiaocheng Ultrasonic announced last night (June 25th) that it intends to transfer 59% of the equity (corresponding to a subscribed capital of 29.5 million yuan and a paid-up capital of 2.75 million yuan) of its holding subsidiary Qingdao Aobo Intelligent Technology Co., Ltd. (referred to as "Qingdao Aobo") to Mr. Cheng Jiguo for a price of RMB 1.
The announcement mentioned that the purpose of this equity transfer is to reduce the uncertainty brought to the company's development by continuous losses and unclear development prospects of Qingdao Aobo, a subsidiary. A person from the securities department of Jiaocheng Ultrasonic stated to the Science and Technology Innovation Board Daily that the business involved in Qingdao Aobo is not Jiaocheng Ultrasonic's main business, and the transfer of equity of the target company will help Jiaocheng Ultrasonic focus on its main business.
Regarding the transfer of the subsidiary's equity for RMB 1, a person from the company's securities department told the Science and Technology Innovation Board Daily that the transfer for RMB 1 complies with regulations, mainly because Qingdao Aobo is currently insolvent and has poor overall performance.
It is understood that Qingdao Aobo is a supplier that provides automation solutions for manufacturers of new energy power batteries, engaging in the design, research and development, production and sales of automation equipment and complete sets of systems. Mr. Cheng Jiguo is the executive director and general manager of the company, holding 40% of the company's shares before the equity transfer. The securities department stated that, besides this, Cheng Jiguo is not holding any other positions in Jiaocheng Ultrasonic.
The announcement mentioned that affected by the overall market environment of the industry and litigation matters, Qingdao Aobo's market expansion and business performance are below expectations, with the losses continuously expanding and the company being insolvent. The overall business is shrinking.
In 2023 and the first quarter of 2024, Qingdao Aobo achieved operating revenues of 17.4323 million yuan and 0.2431 million yuan respectively, with net losses of 29.6147 million yuan and 3.9203 million yuan.
On the litigation side, in February of this year, Jiaocheng Ultrasonic announced that its subsidiary Qingdao Aobo had filed a lawsuit against Guangxi Jielite Intelligent Technology Co., Ltd. and Guangxi Zhongwei New Energy Technology Co., Ltd. over a contract dispute. The company stated that the defendant had been withholding payment as a third party, resulting in its inability to fulfill the contract. As of the date of this announcement, the defendant still owes the plaintiff the remaining payment of 27.3658 million yuan. The case is currently being heard.
At the same time, there are also debt liabilities involving Qingdao Aobo and Jiaocheng Ultrasonic. As of June 20th this year, Qingdao Aobo had not yet returned a total of 27.321 million yuan in amounts due to Jiaocheng Ultrasonic. After the completion of the delivery of 59% equity of Qingdao Aobo, the company will be passively providing financial support to companies outside the scope of the consolidated financial statements. Regarding the above amounts, Qingdao Aobo promised to repay the above amounts in instalments after the signing and effectiveness of the equity transfer agreement, and the repayment of the above debt would be no later than May 31st, 2027.
Regarding this, the announcement mentioned that the corresponding amount of the passive financial support will be paid in instalments, and there is a risk that the counterparty may not be able to pay the subsequent amounts in full or on schedule.
Regarding this equity transfer, Sun Yuhao, senior partner of Shanghai Haihua Yongtai Law Firm, further analyzed to the Science and Technology Innovation Board Daily reporter that it is indeed legal and common to transfer equity of an insolvent company for 1 yuan. In the process of transferring equity of a capital-deficit enterprise, the transferor and the transferee cannot include the actual negative assets of the target enterprise in the investment related accounts. Enterprises can use this to avoid income tax, but this will involve the core issue of tax inspection risk.
Looking back at Jiaocheng Ultrasonic, while the company's performance has shown a downward trend in recent years, it is also constantly exploring new businesses. Jiaocheng Ultrasonic engages in the research and development, design, production and sales of ultrasonic equipment, providing customers with ultrasonic application and intelligent equipment solutions. Since 2023, the company's performance has shown a continuous downward trend. The company had a revenue of 525 million yuan in 2023, a slight year-on-year increase of 0.52%, and a net profit attributable to the mother of 66.5444 million yuan, a year-on-year decrease of 39.97%.
In terms of a single quarter, the company had a net loss of 92.8791 million yuan in the fourth quarter of 2023; in the first quarter of this year, the net profit attributable to the mother was 1.0492 million yuan, a year-on-year decrease of 96.59%.
Regarding the decline in performance, the aforementioned person from the securities department stated that it was mainly due to the slowdown in downstream lithium-ion batteries and increasing research and development investment of the company.
The announcement mentioned that affected by the slowdown in downstream demand for lithium-ion battery industry, Jiaocheng Ultrasonic has continuously expanded its business in the fields of new energy vehicle wire harnesses, semiconductors, etc. and laid out the application of ultrasonic technology in the field of advanced packaging. In the early stage of business layout, the company has invested considerable resources in personnel, technology and other aspects. "Transfer of the equity of the target company will help the company integrate business resources, focus on its main business of ultrasonic technology, and be more conducive to the company's long-term development."