Securities code: Realcan Pharmaceutical Group Co.Ltd(002589) securities abbreviation: Realcan Pharmaceutical Group Co.Ltd(002589) Announcement No.: 2022037 Realcan Pharmaceutical Group Co.Ltd(002589)
Reply to inquiry letter of 2021 Annual Report
The company and all members of the board of directors guarantee that the information disclosed is true, accurate and complete without false records, misleading statements and major omissions.
Realcan Pharmaceutical Group Co.Ltd(002589) (hereinafter referred to as “the company” and ” Realcan Pharmaceutical Group Co.Ltd(002589) “) received the inquiry letter of 2021 annual report (hereinafter referred to as “the annual report”) issued by the management department of listed companies of Shenzhen Stock Exchange to the company on May 16, 2022 (annual report inquiry letter [2022] No. 281 of the company Department) (hereinafter referred to as “the inquiry letter”). The board of directors of the company carefully checked and replied in writing to the questions listed in the inquiry letter, The reply is now announced as follows:
1. The annual report shows that your company has lost control of Gansu Realcan Pharmaceutical Group Co.Ltd(002589) Co., Ltd. and its subsidiaries, Taiyuan Weikang Hongye Technology Co., Ltd. and its subsidiaries, Beijing jinkaihui Medical Devices Co., Ltd. and its subsidiaries since January 1, 2021 due to the failure to reach an agreement on the operation and management of the future period; Since October 1, 2021, it has lost control of Zhengzhou yuanshengji Medical Technology Co., Ltd. and its subsidiaries. In the early stage, our department has paid attention to the control rights of the above-mentioned related companies for many times. Your company’s reply to the letter of concern to Shenzhen Stock Exchange disclosed on March 24, 2021 and the announcement on the inquiry letter of the 2020 annual report of Shenzhen Stock Exchange disclosed on April 28, 2021 show that although your company has filed a lawsuit against the above-mentioned related subsidiaries due to loan disputes, your company still has actual control over them, There is no mention of any risks that may get out of control.
(1) Please disclose the specific time, detailed reasons, judgment basis and accounting treatment of finding and identifying the above subsidiaries out of control one by one, explain the specific impact of relevant matters on your company’s financial data, and whether you have timely fulfilled the review procedures and information disclosure obligations on the above matters. [reply]:
According to the annual report of the company in 2021, due to the failure to reach an agreement on the operation and management of the future period, the company has, since January 1, 2021, paid compensation to Gansu Realcan Pharmaceutical Group Co.Ltd(002589) Co., Ltd. (hereinafter referred to as “Gansu Ruikang”) and its subsidiaries, Taiyuan Weikang Hongye Technology Co., Ltd. (hereinafter referred to as “Taiyuan Weikang”) and its subsidiaries Beijing jinkaihui medical device Co., Ltd. (hereinafter referred to as “Beijing jinkaihui”) and its subsidiaries are no longer included in the scope of consolidation.
From October 1, 2021, Zhengzhou yuanshengji Medical Technology Co., Ltd. (hereinafter referred to as “Zhengzhou yuanshengji”) and its subsidiaries will no longer be included in the scope of consolidation.
Based on the needs of the group’s strategic expansion, the company acquired Taiyuan Weikang and its subsidiaries from Shanxi Ruikang Binhai medical device Co., Ltd., a wholly-owned holding subsidiary, in 2016, and completed the equity acquisition in that year. According to the acquisition agreement, the company appointed Executive Director, legal representative and financial director to Taiyuan Weikang to realize the merger of enterprises not under the same control. After the equity acquisition, in order to develop Shanxi’s local business, Realcan Pharmaceutical Group Co.Ltd(002589) invested a large amount of loan funds in Taiyuan Weikang to help it expand the local market. In 2021, based on the performance of Taiyuan Weikang and the requirements of the company’s overall fund management system, the company plans to recover part of the loan from Taiyuan Weikang. There are differences with the minority shareholders of Taiyuan Weikang on loan repayment time, interest calculation and other matters. In order to ensure the company’s recovery of Taiyuan Weikang loan, the company filed a pre litigation property preservation application for the return of Taiyuan Weikang loan on February 1, 2021, received the property preservation ruling on February 2, 2021, completed the property preservation measures, and continued to communicate with the minority shareholders of Taiyuan Weikang on the follow-up treatment plan. On February 19, 2021, in order to strengthen the management of Taiyuan Weikang, the company held the shareholders’ meeting of Taiyuan Weikang to review and approve the replacement of the executive director and legal representative of Taiyuan Weikang, but the minority shareholders of Taiyuan Weikang did not cooperate to sign and seal the resolution of the shareholders’ meeting, and applied to the competent administration for Industry and commerce to freeze the change of Taiyuan Weikang’s industrial and commercial registration, As a result, the company replaced the executive director and legal representative of Taiyuan Weikang and was unable to go through the industrial and commercial registration procedures. After further verification, the company found that some business data in the sap business management system of Taiyuan Weikang in 2021 were abnormal and the performance fell sharply. The company ordered it to rectify, but there was no effective rectification within one month. The company immediately asked Taiyuan Weikang to conduct internal audit, and Taiyuan Weikang did not cooperate. On June 13, 2021, the chairman, President and heads of legal affairs, audit, finance, operation and other departments of the company jointly held a special meeting to discuss and judge the relevant situation and subsequent treatment scheme of Taiyuan Weikang’s early violation of the acquisition agreement and the company’s management system. The meeting concluded that: (1) the management personnel currently assigned to Taiyuan Weikang have been unable to control the financial and operation policies of Taiyuan Weikang; (2) Although the company can exercise shareholders’ rights and management rights through legal proceedings and court enforcement, the litigation cycle is long, and Taiyuan Weikang’s business has lost and its performance has continued to decline since the dispute occurred; (3) There has been a fundamental difference between the company and the minority shareholders of Taiyuan Weikang. Although our company has the right to replace the relevant managers who do not implement the company’s decisions, we consider continuing cooperation, which has not met the group’s strategy and the purpose of win-win cooperation. Considering the above factors, the company decided to continue to require Taiyuan Weikang to return the loan and the minority shareholders of Taiyuan Weikang to return the equity transfer through litigation. Based on the principle of prudence, the company will no longer include Taiyuan Weikang into the scope of consolidated statements from January 1, 2021.
Based on the needs of the group’s strategic expansion, the company acquired Beijing jinkaihui and its subsidiaries from Beijing Huakang times Pharmaceutical Co., Ltd., a wholly-owned holding subsidiary, in 2018, and completed the equity acquisition in that year. According to the acquisition agreement, the company appointed Executive Director, legal representative and financial director to Beijing jinkaihui to realize the merger of enterprises not under the same control. After the equity acquisition, in order to develop local business in Beijing, Realcan Pharmaceutical Group Co.Ltd(002589) provided loan capital support to Beijing jinkaihui to help it expand the local market. In 2021, based on the performance of Beijing jinkaihui and the requirements of the company’s overall fund management system, the company plans to recover part of the loan from Beijing jinkaihui. There are differences with the minority shareholders of Beijing jinkaihui on loan repayment time, interest calculation and other matters. In order to ensure the company’s recovery of Beijing jinkaihui’s loan, the company filed an application for property preservation before the return of loan in February 2021, received the notice of property preservation on March 1, 2021, completed the property preservation measures, and continued to communicate with the minority shareholders of Beijing jinkaihui on the follow-up disposal plan. After further verification, the company found that Li Peng, a minority shareholder of Beijing jinkaihui, had privately engraved official seal and job occupation. The company reported the case to the police station of Fengtai District Science and Technology Park on March 26, 2021. On May 25, 2021, Li Peng, a minority shareholder, was criminally filed by Fengtai branch of Beijing Public Security Bureau for suspected job occupation. At the same time, the verification found that some business data in SAP Business Management System of Beijing jinkaihui in 2021 were abnormal, There was a sharp decline in business, and the company ordered it to rectify, but there was no effective rectification within one month. The company immediately requested an internal audit of Beijing jinkaihui, but Beijing jinkaihui did not cooperate.
On June 13, 2021, the chairman, President and heads of legal, audit, finance, operation and other departments of the company jointly held a special meeting to discuss and judge the relevant situation and follow-up treatment scheme of Taiyuan Weikang’s early violation of the acquisition agreement and the company’s management system. The meeting concluded that: (1) the management personnel currently assigned by the company to Beijing jinkaihui have been unable to effectively control the financial and operation policies of Beijing jinkaihui; (2) Although the company can exercise shareholders’ rights and management rights through legal proceedings and court enforcement, the litigation cycle is long, and Beijing jinkaihui’s business has lost and its performance has continued to decline since the dispute occurred; (3) There has been a fundamental difference between the company and the minority shareholders of Beijing jinkaihui, and the minority shareholders of Beijing jinkaihui have been filed for criminal crimes. Although our company has the right to replace the managers who do not implement the company’s decisions, the continued cooperation does not meet the group’s strategy and the purpose of win-win cooperation. Considering the above factors, the company decided to continue to require Beijing jinkaihui to return the loan and the minority shareholders of Beijing jinkaihui to return the equity transfer through litigation. Based on the principle of prudence, the company will no longer include Beijing jinkaihui into the scope of consolidated statements from January 1, 2021.
Based on the needs of the group’s strategic expansion, the company acquired Gansu Ruikang and its subsidiaries by Realcan Pharmaceutical Group Co.Ltd(002589) in 2016, and completed the equity acquisition in that year. According to the acquisition agreement, the company appointed Executive Director, legal representative and financial director to Gansu Ruikang to realize the merger of enterprises not under the same control. After the equity acquisition, in order to develop the local business in Gansu, Realcan Pharmaceutical Group Co.Ltd(002589) provided loan capital support to Gansu Ruikang to help it expand the local market. At the beginning of 2021, in order to strengthen the management of Gansu Ruikang, the company asked Gansu Ruikang to launch the SAP system, but Gansu Ruikang failed to implement it. At the same time, based on the performance of Gansu Ruikang and the requirements of the company’s overall fund management system, the company plans to recover part of the loan from Gansu Ruikang. There are differences with the minority shareholders of Gansu Ruikang on loan repayment time, interest calculation and other matters. In order to ensure the company’s recovery of Gansu Ruikang’s loan, the company filed an application for property preservation before returning the loan in February 2021, received the notice of property preservation on March 15, 2021, completed the property preservation measures, and continued to communicate with the minority shareholders of Gansu Ruikang on the follow-up disposal plan. After that, the company further checked and found that Gansu Ruikang’s performance fell sharply in 2021. The company requested an internal audit of Gansu Ruikang, but Gansu Ruikang did not cooperate. On June 13, 2021, the chairman, President and heads of legal, audit, finance, operation and other departments of the company jointly held a special meeting to discuss and judge the relevant situation and follow-up treatment scheme of Taiyuan Weikang’s early violation of the acquisition agreement and the company’s management system. The meeting found that: (1) the management personnel currently assigned by the company to Gansu Ruikang have been unable to effectively control the financial and operation policies of Gansu Ruikang; (2) Since the dispute occurred, Gansu Ruikang has lost a lot of business and its performance has continued to decline; (3) There has been a fundamental difference between the company and the minority shareholders of Gansu Ruikang. Although our company has the right to replace the managers who do not implement the company’s decisions, considering continuing cooperation, it has not met the group’s strategy and the purpose of win-win cooperation. Considering the above factors, the company decided to continue to require Gansu Ruikang to refund the loan through litigation. Based on the principle of prudence, the company will no longer include Gansu Ruikang in the scope of consolidated statements from January 1, 2021.
Based on the needs of the group’s strategic expansion, the company acquired Zhengzhou yuanshengji and its subsidiaries from Henan Ruikang Pharmaceutical Co., Ltd., a wholly-owned holding subsidiary, in 2017, and completed the equity acquisition in that year. According to the acquisition agreement, the company appointed Executive Director, legal representative and financial director to Zhengzhou yuanshengji to realize the merger of enterprises not under the same control. Since January 2021, the company and its subsidiaries in Zhengzhou have been ordered to make a significant rectification of the abnormal business performance of Jiyuan’s intelligent equipment management system. Since October 2021, the company and its subsidiaries in Zhengzhou have been ordered to conduct internal audit, but the performance of Jiyuan’s intelligent equipment management system has declined significantly. Since October 2021, the company and its subsidiaries in Zhengzhou have been ordered to make a significant rectification, Zhengzhou yuanshengji and its subsidiaries do not cooperate. Therefore, the management of the company believes that: (1) the management personnel currently assigned to Zhengzhou yuanshengji can no longer effectively control the financial and operating policies of Zhengzhou yuanshengji and its three subsidiaries; (2) Since the problem occurred, Zhengzhou yuanshengji has lost a lot of business and its performance has continued to decline; (3) There has been a fundamental difference between the company and the minority shareholders of Zhengzhou yuanshengji. Although our company has the right to replace the managers who do not implement the company’s decisions, considering continuing cooperation, it has not met the group’s strategy and the purpose of win-win cooperation. Considering the above factors,
Based on the principle of prudence, the company will no longer include Zhengzhou yuanshengji into the scope of consolidated statements from October 1, 2021.
The company’s loss of control over the above-mentioned company has the following impact on the financial statements:
Amount: Yuan
Company name investment income
Taiyuan Weikang Hongye Technology Co., Ltd. and its subsidiaries 95295297
Beijing Kaihui Medical Instrument Co., Ltd. -9801200 and its subsidiaries
Gansu Realcan Pharmaceutical Group Co.Ltd(002589) Co., Ltd. 36063556
Zhengzhou yuanshengji Medical Technology Co., Ltd. and its subsidiaries 138451551
Total -18 Beijing Shougang Co.Ltd(000959) 7
According to the provisions of the Listing Rules of Shenzhen Stock Exchange, the matters of sub companies not included in the scope of merger in the above table do not meet the standards of major matters that need to be submitted to the board of directors for deliberation or need to be disclosed through temporary announcement.
(2) The accounting firm is requested to explain in detail the audit procedures and audit evidence obtained for the uncontrolled matters of the above subsidiaries, explain what signs or evidence are found to be sufficient to indicate that the relevant subsidiaries have lost control, and explain the specific time when the relevant signs or evidence are found according to the definition of “control” in the accounting standards for business enterprises. If the relevant evidence is found after the reply to the inquiry letter of our department, please explain the reason and compliance of determining the out of control time point as January 1, 2021, whether there is any misstatement of the out of control time point and leading to the misstatement of the consolidation scope of the financial statements, explain the impact of the matter on the appropriateness of the audit opinion of the financial report, and whether there is any situation of replacing the non unqualified opinion with the standard unqualified opinion; Check and explain whether the company has weak control or improper management over its subsidiaries during the reporting period, and control with its subsidiaries
