Jiangsu Lopal Tech. Group Announces Retrospective Adjustment of Financial Data Following Business Combination Under Common Control

Key Points of the Announcement

• Retrospective adjustment of financial data following the acquisition of Shandong Meiduo Technology Company Limited, classified as a business combination under common control.
• Significant revisions to 2024 financial statements, including assets, liabilities, equity, income, and cash flow details.
• Transaction completed on January 21, 2025: Shandong Meiduo became a wholly-owned subsidiary, consolidated into Lopal Tech’s financial statements.
• Adjustments made to prior-period financials as if the combined entity had existed since initial control by the ultimate controlling party.
• Board and Audit Committee approval, confirming compliance with Chinese accounting standards and no harm to shareholder interests.

Details of the Transaction and Rationale

Jiangsu Lopal Tech. Group Co., Ltd. (Stock Code: 2465) announced a major retrospective adjustment to its financial data in relation to its acquisition of Shandong Meiduo Technology Company Limited. The acquisition, approved in March 2024, involved purchasing 100% of Shandong Meiduo’s equity from Lopal International Holdings Co., Ltd. for RMB 100,539,200, along with a capital injection of RMB 50,000,000 post-completion.

The process included a supplemental agreement to delay the equity transfer and payment pending completion of Shandong Meiduo’s ongoing project, with the final transfer and payment executed in January 2025. Upon completion, Shandong Meiduo became a wholly-owned subsidiary and was included in Lopal Tech’s consolidated accounts.

According to Accounting Standards for Business Enterprises No. 20, this is classified as a business combination under common control, since both companies are controlled by Mr. Shi Junfeng. This classification requires restatement of prior-period financials as if the combination had always existed, affecting opening balances and comparative figures.

Impact on Financial Statements

1. Consolidated Balance Sheet Adjustments (As of December 31, 2024)

• Total assets increased by RMB 246.22 million to RMB 16.06 billion.
• Total liabilities rose by RMB 156.72 million to RMB 12.03 billion.
• Total shareholders’ equity rose by RMB 89.50 million to RMB 4.02 billion.
• Major line-item increases:
  • Fixed assets up by RMB 54.23 million
  • Construction in progress up by RMB 109.75 million
  • Right-of-use assets up by RMB 39.21 million
  • Inventories, trade receivables, prepayments, and other receivables all saw notable increases

2. Consolidated Income Statement Adjustments (2024)

• Total revenue increased by RMB 4.00 million to RMB 7.68 billion.
• Total costs increased by RMB 14.63 million to RMB 8.29 billion.
• Net loss widened by RMB 9.30 million to RMB 808.30 million.
• Net loss attributable to shareholders increased from RMB 635.67 million to RMB 644.97 million.
• Basic earnings per share decreased by RMB 0.01 to -1.11, diluted EPS by RMB 0.02 to -1.11.

3. Consolidated Cash Flow Statement Adjustments (2024)

• Net cash from operating activities decreased by RMB 21.07 million to RMB 798.40 million.
• Net cash used in investing activities increased by RMB 13.98 million to RMB 1.03 billion.
• Net cash used in financing activities decreased by RMB 9.37 million to RMB 240.69 million.
• Ending cash and cash equivalents increased by RMB 2.14 million to RMB 2.51 billion.

Shareholder Impact and Price-Sensitive Information

• This adjustment is material: Investors should note the significant restatement of prior-period financials, which could affect perceptions of profitability, asset base, and leverage ratios.
• Net loss widened: The company’s loss for 2024 is now RMB 808.30 million, larger than previously reported—a potentially negative signal for share price in the short term.
• Balance sheet strengthened: Total assets and equity have increased, which may be viewed positively regarding company scale and capital strength.
• EPS revision: Both basic and diluted earnings per share have been adjusted downward, which may influence valuation metrics.
• Business combination rationale: The board and audit committee confirmed the compliance and fairness of the adjustments, with no impairment to shareholder interests, especially minority shareholders.
• Potential for share price movement: Investors should closely review these changes, as both the increased losses and expanded asset base could have divergent impacts on market sentiment.

Board and Audit Committee Statements

The board of directors and the audit committee have reviewed and approved the retrospective adjustment, confirming its compliance with accounting standards and regulatory requirements. They assert that the financial statements now more accurately reflect the company’s true financial position and performance. No harm to shareholder interests was identified.

Conclusion

The retrospective adjustment of financial statements following the acquisition of Shandong Meiduo Technology Company Limited is a significant event for Jiangsu Lopal Tech. Group Co., Ltd. Investors and shareholders should carefully consider the revised financials, especially the increased net loss and enhanced asset base, when evaluating the company’s value and prospects.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own research or consult professional advisors before making investment decisions. All data is based on company disclosures and may be subject to further updates or revisions.

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