Yanhua Smartech Group (002178.SZ) announced that it held the third (extraordinary) meeting of the sixth board of directors on June 27, 2024 to deliberate and pass the Proposal on Liquidation and Cancellation of the Controlling Subsidiary, Shanghai Putuo Yanhua Small Loan Co., Ltd.

It is reported that since 2018, up to now, 87.5 million yuan of principal of the loans issued by Yanhua Small Loan Co. has not been recovered; the above-mentioned loans mainly occurred before Yanhua Small Loan Co. was incorporated into the consolidated financial statements of the listed company. During the annual audit process after Yanhua Small Loan Co. was incorporated into the consolidated financial statements of the listed company, the accountant reviewed the capital trend of the loans after they were issued and found that the above-mentioned funds were used by Shanghai Yanhua High-tech Co., Ltd. (hereinafter referred to as "Shanghai Gaoke") and Shanghai Yanshi Enterprise Management Consulting Co., Ltd. (hereinafter referred to as "Yanshi Enterprise Management Consulting") through letter evidence, fund penetration verification, and so on. Shanghai Gaoke and Yanshi Enterprise Management Consulting were identified as the actual borrowers of the funds, which constituted the appropriation of funds from Yanhua Small Loan Co. Among them, Shanghai Gaoke still owes a principal of 57.5 million yuan, and Yanshi Enterprise Management Consulting still owes a principal of 30 million yuan.

This liquidation and cancellation of Yanhua Small Loan Co. is partly because the main assets of Shanghai Gaoke and Yanshi Enterprise Management Consulting are the equity of Yanhua Small Loan Co., and liquidation and cancellation can offset part of the debt with equity, which is conducive to recovering their debt as soon as possible. On the other hand, lending business is not within the main business scope of the listed company, and Yanhua Small Loan Co. has stopped operating for several years, making a negligible contribution to the profit of the listed company. During the subsequent liquidation period, the remaining debt of Yanhua Small Loan Co. owed by Shanghai Gaoke and Yanshi Enterprise Management Consulting will be continued to be recovered by the liquidation team. Considering that the business license of Shanghai Gaoke and Yanshi Enterprise Management Consulting has been revoked, it is expected to be difficult to recover the remaining debt. The company has fully provisioned for bad debts for items that are expected to be difficult to recover in previous years and does not need to make separate provision for bad debts if the remaining debt cannot be recovered. If all or part of the remaining debt can be successfully recovered, it will have a positive impact on the profit of the listed company. The estimated liquidation expenses (such as litigation expenses, property transfer expenses, etc.) that may arise from this liquidation are not expected to exceed 3 million yuan and will correspondingly reduce profits.