The mistake that must not be made: the truth behind the failure of 17 companies to enter the New Third Board

Don’t think that listing 3,000 companies in one year means that every company can be listed on the New Third Board. There will always be companies that fail. Among the companies that submitted public transfer instructions to the stock transfer system from August 19, 2014 to January 1, 2015, 27 companies have not yet been successfully listed.

[[153087]]

"Understanding the New Third Board" focused on studying 17 of these companies and found that if any of the following problems exist, the company will definitely not be listed on the New Third Board:

• Equity defects: If the company has state-owned shareholders but cannot obtain the state-owned equity approval document, it fails!
• A company that is insolvent, operating in a sunset industry and has no ability to continue operating will fail!
• Industries or companies that require special qualifications cannot obtain them, and fail! For example, military enterprises cannot obtain relevant approval documents, and polluting enterprises cannot obtain environmental assessment qualifications, etc. Failure!
• Companies whose income authenticity is obviously questionable and whose financial affairs are obviously irregular, such as the online store mentioned in this article, whose income comes largely from Taobao, where the company uses the boss's personal account to collect payments. Failure!
• Companies that do not answer substantive questions about stock transfers, and companies that do not submit updated financial statements when they are out of date, are almost giving up on listing. Failure!

You must not make the above mistakes!

1. Tianqin Equipment: No military qualification, please bypass

Tianqin Equipment needed to change its overall form from a limited liability company to a joint-stock company, and submitted an application for name change to the competent authority (State Administration of Science, Technology and Industry for National Defense). On November 19, 2014, it received a certificate from the department stating that the name change procedures were in progress.

According to the Implementation Measures for Weapon Equipment Research and Production Permits, if the conditions for change are met, the State Administration of Science, Technology and Industry for National Defense will handle the change procedures within 30 days from the date of accepting the application. However, as of August 2015, the company still had not completed the process.

This question is very important. Hubei Difeng Heat Exchanger Co., Ltd., a military-industrial enterprise involved in this report, also failed to pass the test due to the same reason.

2. Xiaojin Machinery: A big explosion, blasting out of the New Third Board

On March 7, 2014, a major explosion occurred at Tangshan Kailuan (Group) Chemical Co., Ltd., which used an emulsion explosive charging machine produced by Xiaojin Machinery. The investigation report identified Xiaojin Machinery as the party responsible for the accident, and the Ministry of Industry and Information Technology issued a notice to suspend the use of Xiaojin Machinery's charging machines.

As of August 2015, Xiaojin Machinery had not substantially eliminated the negative impact of the incident on the company's operations. However, on September 28, 2015, Xiaojin Machinery resubmitted a public transfer statement.

3. Qikanghabo: Failure to renew the audit of financial statements

The company's financial statement submission is due, and the stock transfer company reminded it to conduct an extended audit, but the company did not respond.

4. Diyuan Shares: The upstream industry is sunset, and the downstream industry is not very famous

The company's upstream industries (combustible oil, coal, steel, building materials, etc.) are sunset industries, subject to industrial policy restrictions, and are at risk of being replaced by clean energy. At the same time, the company's turnover is declining and losses are continuing. The company's ability to continue operations is affected.

Another company involved in this report, Yihe Network, failed to pass the review for the same reason. Yihe Network's main business is to provide consulting services to traditional retail industries. It was rejected by the stock transfer system because its upstream industry belongs to a sunset industry, and its revenue scale is small and its net profit is low.

5. Yijunjia: The boss uses his personal account to collect payments on Taobao

The company started with the personal store of its actual controller Chen Yongmei on Taobao.com. In 2012, 2013 and 2014, the company's online sales accounted for 62.00%, 56.17% and 58.00% respectively, and Taobao was the main sales channel. Chen Yongmei had a large number of personal transactions on Taobao and collected payments with her personal account. On January 22, 2015, the company planned to stop collecting sales with her personal account on Taobao in June 2015. As of August, the company had not disclosed the latest progress of this matter.

6. Mei Shigao: When asked if his income was real, he did not answer

The stock transfer company questioned the authenticity of the company's income, but the company did not respond to the matter. The company transferred large amounts of money to individuals for batch purchases in cash, and there were cases where the purchase amount, invoice amount and voucher amount did not correspond.

7. Shenzhen-Hong Kong Environmental Protection: Failure to obtain approval documents for state-owned equity

The company’s capital contribution procedures were flawed, and it applied to the Shenzhen Municipal Finance Committee and relevant departments for approval documents, and it was expected to obtain formal approval documents in late March 2015. As of August 2015, the company had not clearly stated whether it had obtained the approval documents, and had not disclosed the latest progress of the approval documents.

This question is very important. Wuhan Zhongke Aquatic Environment Engineering Co., Ltd., which is involved in this report, also failed to pass the test due to the same reason.

8. Laigou Commercial: Insolvent

In 2013 and January-June 2014, the company's traditional retail revenue accounted for 88.80% and 89.75%, respectively. The company was insolvent (the asset-liability ratio was 107.89% and 168.80% in 2012 and 2013), with low gross profit margin and continuous losses. The traditional retail business was severely impacted by e-commerce, and the company was unable to make major adjustments in its business strategy, which affected its ability to continue operations.

Companies that are in sunset industries, insolvent, and have poor sustainable operating capabilities cannot be listed on the New Third Board. Kunming Jiyuanxing Food Co., Ltd. involved in this report also failed for the same reason.

9. Correcting the source: Some projects that have been put into production have not obtained environmental assessment qualifications

Some of the company's projects that have been put into production have not obtained environmental impact assessments. The company did not respond to the feedback from the stock transfer system on this issue, and did not disclose the progress of the subsequent environmental impact assessment procedures in the stock transfer system later.

10. Case Machinery: No response to stock transfer questions

Case Machinery has many problems, and the feedback from the stock transfer mainly focuses on the following points: the company's financial statements are about to expire, and the company is urged to extend the audit period; the company's equity is potentially unstable due to legal proceedings; and the company has not formally obtained the approval document for state-owned equity.

The above three questions are fatal, but the company chose not to answer them. However, the company resubmitted the public transfer instructions on April 30, 2015, but unfortunately, the stock exchange has not responded to it until today.

11. Zhongan Technology: No response to the stock transfer company's standard template comments

The "New Third Board Review Standards Template Opinion" provided by the Stock Transfer System did not include any inquiries regarding the company's special circumstances, and the company applied for an extension to respond. On December 10, 2014, the Stock Transfer Company urged the lead underwriter to implement the feedback, but as of August 2015, the company still had not responded.

12. Huanzi Mining: Failure to fulfill commitment on horizontal competition

The company is engaged in the iron ore concentrate sales business, and Jinfeng Mining, a company under the actual controller Su Muqing, is also engaged in this business.

Su Muqing promised to transfer Jinfeng Mining to other unrelated third parties before April 30, 2015. However, as of August 2015, the company had not disclosed in the stock transfer system whether Jinfeng Mining had been transferred to other unrelated third parties, nor had it disclosed the progress of the matter.

13. Defang Nano: Failed to obtain the approval document for state-owned equity and failed to complete the environmental assessment acceptance

Due to capital contribution defects, the company's shareholder Nanshan Technology has not yet officially obtained the approval document for state-owned equity. As of August 2015, the company has not disclosed the progress of the approval document in the stock transfer system.

At the same time, when the company disclosed the transfer instructions, the company's environmental assessment acceptance procedures were in progress. However, as of August 2015, the company had not disclosed the progress of the environmental assessment acceptance in the stock transfer system.