The operation was not in compliance with regulations, and the parent company lost 1.5 billion due to the huge sales.

Nearly 400 sites were blocked, resulting in a loss of 1.5 billion yuan

Affected by the Zebao Technology account ban wave, its parent company Xinghui shares did not perform well last year. The report shows that Xinghui shares' revenue in 2021 was only 3.66 billion yuan. In 2019, Xinghui shares' revenue was 3.491 billion yuan. By 2020, its figure doubled to 5.523 billion yuan. From this point of view, Xinghui shares' current revenue can be said to have returned to two years ago.

Not only did the revenue cut in half, Xinghui shares also failed to recover their costs, with a total loss of 1.524 billion yuan last year, and net profit attributable to the parent company fell 800% from the previous year. To describe its performance last year in one sentence, it was busy for a whole year, but lost both the wife and the army.

On the same day that the financial report was released, Xinghui shares turned on the "eye protection" mode in the stock market. As of the close of the day, its stock price fell by 7.46%; the closing price was 5.21 yuan, a new low.

How big is the impact of Zebao Technology?

Since June 16, 2021, as Amazon further increased the intensity of supervision of operating rules, Zebao Technology's RAVPower, Taotronics, VAVA, Anjou, Sable, and Hootoo brand stores have been suspended by Amazon due to improper operations. As of December 31, 2021, the number of Zebao Technology sites suspended by Amazon has reached 367. As of the date of disclosure of the annual report, the relevant stores have not yet returned to normal.

Affected by this, Zebao Technology's revenue on Amazon in 2021 was only 1.972 billion yuan, a decrease of 55.76% from 4.459 billion yuan in the previous year. The relevant stores froze funds of 32.23 million yuan and fully made provisions for bad debts. An impairment provision of 680 million yuan was made for Zebao Technology's goodwill and an impairment provision of 420 million yuan for inventory.

After the Amazon account blocking incident, Zebao Technology adopted measures such as online multi-platform operation strategy, increased offline channel promotion efforts, and optimized personnel and organizational structure to respond.

Since the second half of 2021, Zebao Technology has begun to gradually reduce its dependence on Amazon's single platform, accelerating the promotion of its "multi-platform, multi-channel" business strategy, and expanding online sales and independent site sales on third-party platforms such as Walmart, eBay, Rakuten, and Newegg.

At the same time, we will increase the promotion of offline channels and continue to explore offline markets in Japan, the Middle East, Latin America, Eastern Europe and other regions.

There is also personnel adjustment. In order to adapt to the new business plan, Xinghui Co., Ltd. pointed out in its October announcement that the company optimized the Amazon operation team based on actual operating conditions, and on the other hand, recruited talents who are good at operating other e-commerce platforms. As of September 30, 2021, the number of employees in Zebao Technology was 757, a decrease of 201 from June 2021.

Under these measures, Zebao Technology achieved operating income of 617 million yuan through non-Amazon channels such as independent stations, Walmart, and offline channels, an increase of 96.02% from 315 million yuan in 2020; the proportion of total cross-border e-commerce revenue was 23.46%, an increase of more than ten percentage points year-on-year. At present, the number of registered users of the independent station is 870,000, and the average order consumption amount during the reporting period is approximately 596.37 yuan.

Among them, the revenues from offline channels, independent sites, and other third-party platforms were 400 million yuan, 119 million yuan, and 87.03 million yuan, respectively.

Judging from these data, Zebao Technology has indeed reduced its dependence on Amazon's single platform. In 2020, Amazon's cross-border e-commerce performance contribution rate reached 93.4%, and now it has dropped to 76.54%. But it is obvious that the current results are not outstanding, and the 300 million yuan increase in revenue from other channels is far from making up for the 2 billion yuan gap from Amazon.

By this year, Zebao Technology has not yet recovered. In the first quarter of 2022, its cross-border e-commerce business achieved operating income of 318 million yuan, only 29.18% of the same period last year, with a loss of 27.05 million yuan.

Founder of Zebao Technology sued for owing nearly 50 million yuan in taxes

In the decline of performance At the same time, Zebao Technology was also exposed to owe nearly 50 million yuan in taxes to the United States, Germany and France.

In February, Star Emblem Co., Ltd. disclosed detailed information in the "Announcement on the Reply to the Shenzhen Stock Exchange's Letter of Concern", as follows (Note: the following "STK USA", "Sun Valley Hong Kong" and "ZBT Company" are all subsidiaries of Zebao Technology):

According to a notice issued by the U.S. Customs and Border Protection to STK USA on July 3, 2019, STK USA defaulted on tax payments from June 3, 2015 to December 4, 2015, resulting in a loss of $340,000 in actual tax revenue for the U.S. government. Therefore, Zebao Technology needs to pay the tax and a fine of $1.84 million.

However, two years later, STK USA received another "tax debt bill". According to the tax settlement agreement signed by STK USA and the Washington State Department of Taxation on June 7, 2021, as of April 30, 2017, STK USA owed unpaid retail taxes, business taxes, additional penalties and interest of $703,000, but eventually exempted $153,000. In other words, Zebo Technology needs to pay $550,000 in taxes.

In addition to the United States, Zebao Technology also owes some in Europe. On March 18, 2021, Xinghui Co., Ltd. disclosed the "Announcement on the Second-level Subsidiary Receiving the Tax Payment Notice from the French Public Finance Directorate General". The French tax department determined that the company's second-level subsidiary Sun Valley Hong Kong had not fully declared VAT taxes from January 2015 to August 2019, and therefore issued a tax payment notice to Sun Valley Hong Kong, with a total amount of 4.95 million euros.

In Germany, according to the tax arrears notices issued by the German tax authorities to ZBT on March 17 and May 7, 2021, ZBT owed 196,400 euros in business tax, 65,065 euros in business tax interest, and 1,962.5 euros in late payment fees from 2011 to 2015.

Some companies have paid part of the above taxes in 2021. However, Xinghui Co., Ltd. believes that the nearly 50 million yuan in taxes should be paid by Sun Caijin, the founder of Zebao Technology, and his concerted actors, and other 7 parties who bet on the restructuring performance, and filed a civil lawsuit for this reason.

The reason given by Xinghui Shares is: According to Article 15.2 of the Agreement on Issuing Shares and Paying Cash to Purchase Assets signed by the company and 27 counterparties including Sun Caijin (hereinafter referred to as "Party B"), "This transaction does not change the target company's tax subject, and the target company shall still bear tax obligations in accordance with relevant tax regulations. If the target company incurs any tax obligations that are not disclosed in the audit report, asset appraisal report or other legal documents of this transaction due to undisclosed events that occurred before the valuation base date, Party B shall bear them, and each party of Party B shall bear its corresponding part in accordance with the proportion of equity held by each party in the target company at the time of signing this agreement, and the performance commitment party shall bear joint and several liability for the above responsibilities."

It can be said that the closure of Zebao Technology's store and the tax arrears have sounded the alarm for the majority of sellers. Illegal operations will bring a series of adverse effects, including store closures, frozen funds, disrupted sales plans, etc. On the other hand, evading taxes is only a temporary "pleasure". If discovered, you may have to pay a fine, which is not worth the loss.

Big Sell

Loss

Compliance