Jiangsu Huifeng Bio-Agriculture Co., Ltd.
Announcement on Adjusting the Payment Deadline for "Nongyiwang" Performance Compensation
The company and the entire board of directors guarantee the truthfulness, accuracy, and completeness of the information disclosed, and that there are no false records, misleading statements, or material omissions.
I. Basic Situation
On August 24, 2021, the Company signed the "Equity Transfer Agreement" with Yancheng Nongyi Investment Management Partnership (Limited Partnership) to acquire 81.4107% of the equity of Yancheng Nongyi held by Nongyi E-commerce (Beijing) Co., Ltd. (hereinafter referred to as "Nongyiwang"). The industrial and commercial transfer of Nongyiwang's equity was completed on December 27, 2021. According to the "Equity Transfer Agreement," Yancheng Nongyi promised that the cumulative net profit of Nongyiwang for the five years from 2021 to 2025 would not be less than RMB 100 million. If, upon expiration of the commitment period, the cumulative actual net profit was less than 80% of the total promised amount (excluding 80%), the compensation obligor would pay cash compensation to the Company. The compensation amount was calculated as: Compensation Amount = (Average Annual Performance Achieved - Average Actual Annual Performance Achieved) × 8.5 × 81.4107%.
According to the special audit confirmation by a third-party accounting firm, the cumulative net profit of Nongyiwang for the period 2021-2025 did not meet the promised standard, triggering the performance compensation obligation. The compensation obligor is required to pay a total performance compensation of RMB 16,718.38 million to the Company.
II. Reasons for Nongyiwang's Failure to Meet Performance Commitments and the Compensation Obligor's Application for Payment Extension
(I) Core Objective Factors for Nongyiwang's Failure to Meet Performance Targets
- Macroeconomic Environment and Blocked Distribution Channels
During the commitment period, macroeconomic fluctuations and the impact of public health events led to difficulties in agricultural material distribution in counties and fulfillment of spring plowing sales. Platform transaction volume declined; logistics and operating costs increased, extending repayment cycles, and upstream supply chains became unstable, resulting in significant operating pressure.
- Core Products Encountered Large-Scale Patent Infringement
The Company's proprietary patented products were imitated and produced by multiple manufacturers, leading to a continuous decline in core product sales and gross profit margins, severely compressing profitability.
- Continuous Increase in Upstream Procurement Costs
The processing costs of core suppliers' formulations increased. There was limited room to adjust prices downstream, causing the gross profit margin to drop significantly from 52.19% to 11.50%, weakening profitability.
- Extension of Production Qualification Renewal, Leading to Suspension of Key Product Sales
The renewal of the pesticide production license was delayed due to environmental impact assessment approval delays. The subsequent delay in obtaining the new license and the failure to renew the licenses for two high-profit core products resulted in their forced delisting, directly impacting sales revenue.
(II) Realistic Reasons for the Compensation Obligor's Application for Payment Extension