About Shandong Weigao Orthopedic Materials Co., Ltd.

Information disclosure regulatory inquiry letter for the 2023 annual report.

Reply

Dahua nuclear word [2024]0011014326

Dahua Certified Public Accountants (Special General Partnership)

Da Hua Certified Public Accountants(Special General Partnership)

About Shandong Weigao Orthopedic Materials Co., Ltd.

Response to the Information Disclosure Regulatory Inquiry Letter for the 2023 Annual Report

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1. on Shandong Weigao Orthopedic Materials Co., Ltd. 2023 1-15

Response to the information disclosure regulatory inquiry letter for the annual report.

Dahua Certified Public Accountants (Special General Partnership)

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Tel: 86(10)58350011 Fax: 86(10)58350006

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About Shandong Weigao Orthopedic Materials Co., Ltd.

Response to the Information Disclosure Regulatory Inquiry Letter for the 2023 Annual Report

Dahua nuclear word [2024]0011014326

Shanghai Stock Exchange Science and Technology Board Company Management Department:

Your "Inquiry Letter on the Supervision of Information Disclosure of the 2023 Annual Report of Shandong Weigao Orthopedic Materials Co., Ltd." has been notified. We have made a supplementary explanation on the financial matters of Shandong Weigao Orthopedic Materials Co., Ltd. (hereinafter referred to as the company or Weigao Orthopedic) mentioned in the notice, and the reply is as follows:

Question 1.: 2. The annual report discloses that the sales volume of the top five customers of the company is 208.7695 million yuan, accounting for 16.27 percent of the total annual sales. Among them, the first customer is a related party of the company, and the related sales amount is 64.6612 million yuan, accounting for 5.04 percent of the total annual sales. The 2022 Annual Report disclosed that the Company's top five customers in 2022 had no related parties and that the amount of related sales was $0. Your company is requested to:(1) provide additional disclosure of the specific names and key transactions of the top five customers in 2023, and explain the changes and reasons for the changes compared to the top five customers in 2022. (2) Supplementary explanation of the specific content of the company's related transactions with the first customer, terminal sales, refunds, whether the transaction consideration is fair, compared to 2022 transaction content and whether the transaction method has changed.

Description of 1.

(I) additional disclosure of the specific names and key transactions of the top five customers in 2023, and an explanation of the changes and reasons for the changes compared to the top five customers in 2022.

1. Additional disclosure of the specific names and key transactions of the top five customers in 2023

The specific names and key transactions of the Company's top five customers in 2023 are as follows:

No. Customer Name Transaction Content

1 Weihai Weigao Medical Products Co., Ltd. PRP, negative pressure drainage, spine, trauma, joints and other products

2 Shaanxi Pharmaceutical Holding Group Paiang Medical Devices PRP and Negative Pressure Drainage Products, Spine, Trauma and Other Products

Limited Company

3 Shanghai Hengxi Medical Technology Co., Ltd. Joint, equipment and other products

4 Fujian Kyushu Tong medical equipment limited public spine, trauma, joints and other products.

Division Quanzhou Branch

5 Zhejiang Yingte Medical Technology Co., Ltd. Spine, trauma, joint, sports medicine and other products

2. Explain the changes and reasons for the changes compared to the top five customers in 2022.

In 2023, the Company's top five customers correspond to the following transaction amounts and transaction rankings:

Is the name of the customer in order 2023 trading gold 2022 trading gold 2022

No. Related Party Amount ($million) Amount ($million) Ranking

1 Weihai Weigao Medical Products Co., Ltd. is 6,466.12 4,834.02 7

2 Shaanxi Pharmaceutical Holding Group Paiang Medical No.

Instruments Ltd. 4,620.52 3,580.49 10

3 Shanghai Hengxi Medical Technology Co., Ltd. No 3,988.41 5,272.13 5

4 Fujian Kyushu Tong medical equipment has no.

Limited company Quanzhou branch 3,052.13 5,520.90 3

5 Zhejiang Yingte Medical Technology Co., Ltd. No 2,749.77 3,870.43 9

After retrospective adjustment due to the acquisition of new students, the company's top five customers in 2022 are as follows:

Is the customer name 2022 transaction amount 2023 transaction amount

Number of related parties ($million) ($million)

1 Guangdong Jiuzhoutong Medical Products Co., Ltd. No 6,330.99 482.32

2 Does Guoyao Group Jiangsu Hongrui Medical Devices Have 5,835.35 546.43

Limited Company

3 Fujian Kyushu Tong Medical Devices Limited No 5,520.90 3,052.13.

Quanzhou Branch Company

Is the customer name 2022 transaction amount 2023 transaction amount

Number of related parties ($million) ($million)

4 Shandong Weigao Group medical polymer products are 5,323.90 256.85

Company limited by shares

5 Shanghai Hengxi Medical Technology Co., Ltd. No 5,272.13 3,988.41

Note: In early 2023, the company acquired New Life Medical under the same control, in order to ensure the comparability of 2022 and 2023 data.

The company's 2022 customer sales are retroactively adjusted.

Weihai Weigao Medical Products Co., Ltd. (hereinafter referred to as "Medical Products") is a subsidiary of Shandong Weigao Group Medical Polymer Products Co., Ltd. (hereinafter referred to as "Weigao"). In 2023, according to Weigao's own business arrangement, Its business has been gradually carried out through its wholly-owned subsidiary medical products, that is, the procurement of related orthopedic products has been changed to medical products, the corresponding 2023 medical products instead of Weigao shares into the top five customers in 2023. Weigao shares and medical products combined, 2023 sales amount increased according to business needs.

Ltd. and Sinoparmac Jiangsu Hongrui Medical Devices Co., Ltd. in 2023, mainly due to the implementation of the procurement policy caused by the decline in the ex-factory price of products and the digestion of customer inventory.

The (II) adds a description of the specific content, terminal sales, refunds, whether the transaction consideration is fair, and whether the content and method of the transaction have changed from 2022.

1, the company and the first customer related transactions of the specific content, terminal sales.

In 2023, the company's largest customer Weigao shares and medical products sales content is mainly PRP, negative pressure drainage, spine, trauma, joints and other products.

The main sales model of the company and Weigao shares and medical products is the distribution model. Under the distribution model, the Company's products are sold to distribution partners with the appropriate qualifications, who sell the products to end-of-life medical institutions, and the distributor has no product inventory at the end of the period.

Weigao shares and medical products are distributed by the company's distributors to terminal hospitals including the Chinese People's Liberation Army General Hospital (301 Hospital), the Air Force Characteristic Medical Center, the Third Hospital of Hebei Medical University, and the Fourth Division Hospital of Xinjiang Production and Construction Corps. The terminal sales of related products are good.

2. Payment Status

From January to May 2024, Weigao shares and medical products returned in good condition, accounts receivable.

Post-period recoveries are as follows:

Unit: ten thousand yuan

No. Customer Name January-May 2024 Refund Amount

1 Weigao 465.09

2 Medical Products 3,513.63

Total 3,978.72

Amount returned as a percentage of accounts receivable at the end of the period 69.73 per cent

Weigao shares and medical products are expected to be paid back in succession, and there are no material obstacles to the recovery of the Company's related accounts receivable.

3. Whether the transaction consideration is fair

Weigao shares and medical products for the company's distributors. Under the distribution mode, the terminal hospital purchases the orthopedic medical equipment of the company through the selected distributor, and the distributor earns the price difference between the admission price and the distribution price as the source of profit. The admission price is generally determined through bidding, which is related to the policy of the region where the hospital is located, the economic level and the operation situation of the hospital. The distribution price is generally positively related to the admission price, the difference between the admission price and the delivery price is influenced by the number of distributors selected by the hospital, the responsibilities of the distributor, the type of product delivered, and the delivery settlement policy. Considering that the distribution price is directly affected by the admission price, a direct comparison of the distribution price of the related distribution and the third-party distributor will lead to some deviation, so the fairness of the related distribution price is analyzed by comparing the distribution rate (the spread between the admission price and the delivery price/the admission price).

The Company's main distribution rates (spread between admission and distribution prices/admission prices) for 2023 are as follows:

Company 2023 Distribution Rate

Weigao shares, medical products 3%-10%, mainly 3%

Major third-party distributors 1-10%,13%,15%

Considering that Weigao shares and medical products mainly assume the function of settling accounts, there is no significant difference between the Company's distribution rates and those of third-party distributors, and the relevant transaction prices are fair.

4. Whether the transaction content and transaction method have changed compared with 2022

In 2022-2023, Weigao shares and its subsidiary medical products are the company's distributors, there is no backlog of inventory, the company and its transaction content and transaction methods have not changed from 2022..

2. annual audit accountant's verification opinion

(I) verification procedures

① Obtain the company's sales schedule, by customer statistics 2023 and 2022 sales.

Income;

② Review the company's sales revenue details, check the sales contracts with the top five customers, and understand the company's business cooperation with them;

③ Access to basic information about the Company's top five customers in 2023 and 2022 through public channels,

Understand the basic situation of the above customers;

④ Interviews with relevant personnel of the company to find out the reasons for the changes in the top five customers, whether the main business has changed and whether there is a risk of losing major customers;

⑤ Check the terms of the sales contracts of the top five customers to assess the appropriateness of the company's judgment regarding the timing of revenue recognition and verify that the credit policy is consistent with actual implementation;

⑥ Correspondence with the top five customers on sales amounts and accounts receivable balances, preparation of variance reconciliations and verification of supporting evidence for discrepancies in response letters, and implementation of alternative procedures for non-response letters;

⑦ Statistics of the top five customers after the period, check whether there is overdue accounts receivable.

⑧ For the related parties of the top five customers, analyze whether their sales model, pricing model, settlement method and credit policy have changed during the reporting period, and analyze whether there are significant differences between their related sales business and non-related customers of the Company's similar products;

⑨ For the related parties of the top five customers, obtain their ending inventory and analyze the reasonableness of their inventory levels.

(II) verification opinions

After verification, the annual audit accountant believes that the company's top five customers in 2023 are higher than the top five in 2022.

The change of the customer has objective and real reasons and is reasonable. The consideration for the Company's transaction with its first customer is fair and has not changed materially from the content and manner of the transaction in 2022.

Question 1. on business operations 3, annual report disclosure, the company's inventory at the end of 2023

The book value was $753.7792 million, up 13.07 from the beginning of the period. The balance of inventory depreciation reserve was 56.4881 million yuan, up 73.46 from the beginning of the period, mainly for inventory depreciation reserve. Your company is requested to:(1) present the age structure of each category of inventory and explain the reasons why the company has increased its inventory levels of raw materials, work-in-progress, and goods in stock. (2) Explain the capacity utilization rate of the company's main production lines, whether there is idle capacity, and explain the company's main construction in progress design and construction capacity, whether there is a risk of overcapacity. (3) Describe the main components of inventory raw materials and goods in stock, and detail the process and adequacy of the provision for inventory impairment, taking into account the decline in sales of major products, changes in orders in hand and post-period sales.

Description of 1.

(I) list the inventory age structure of each category and explain the reasons why the company increased the inventory level of raw materials, products in stock, goods in stock, etc.

At the end of 2023, the age of the Company's inventory was as follows:

Unit: ten thousand yuan

Item Opening Closing Ending Inventory Aging

Balance Balance within 1 year 1-2 years 3 years or more

Raw material 9,379.83 11,711.46 8,477.51 1,522.39 814.19

In products 5,637.21 6,175.24 6,175.24

Inventory 53,673.53 62,108.92 36,071.09 15,218.94 6,553.16

Working materials 985 909.56 720.48 54.20 118.28

Issuing a 69.45 69.45 for commodity 215.08

27.30 on 52.20 24.90 of consigned processing materials 27.30

Total 69,918.08 81,026.83 51,538.67 16,822.84 7,485.64

In 2023, the market demand for orthopaedic products increased after the collection of reported volume, and the limited capacity of suppliers led to a longer procurement cycle for imported raw materials, in order to meet the demand for supply in the post-collection market, a moderate increase in raw material inventory.

In 2023, the national orthopedic high-value consumables with volume procurement was fully implemented, under the background of centralized procurement, the market expanded rapidly and market demand increased, based on market sales forecasts, considering the raw material procurement cycle and product processing cycle, in order to meet market supply demand, the company moderately increased inventory of goods and in-product inventory. In the first quarter of 2024, the company's product sales grew faster, and the sales growth rate of spine, joints and other products was higher than the inventory growth rate at the end of 2023.

The company's production model is gradually changing from inventory-based production to a "sales-based" production model based on digital operations. The company is promoting the digital transformation of lean production, building a comprehensive standardized, digital and intelligent lean manufacturing system driven by efficiency, optimizing the production process and improving the manufacturing process. On the one hand, it reduces the inventory backlog and optimizes the company's inventory, on the other hand, it promotes the improvement of operational efficiency, realizes "fast delivery" and improves customer satisfaction.

(II) explain the capacity utilization rate of the company's main production lines, whether there is idle capacity, and explain the company's main construction in progress design and construction capacity, whether there is a risk of overcapacity

Is there a risk of overcapacity in the production line-orthopaedic capacity utilization rate?

Spine 74.5% None

Trauma 75.1% None

Joint 78.0% None

Sports Medicine and Tissue Repair 86.5% None

The capacity utilization rate of the company's main products is relatively reasonable. The Company will reasonably arrange the capacity construction process of construction in progress according to the Company's sales, market expectations and capacity utilization.

A (III) description of the main components of inventory raw materials and inventory commodities, and a detailed description of the inventory impairment provision process and adequacy, taking into account the decline in sales of major products, changes in orders in hand and post-period sales.

1, explain the main composition of inventory raw materials and inventory goods.

The company's raw materials are mainly ceramic ball heads and linings, medical titanium, special stainless steel, ultra-high molecular weight polyethylene, cobalt chromium molybdenum, implant-grade PEEK materials and joint blanks, accounting for about 75% of the total amount of raw materials..

The company's inventory of goods are mainly spinal, trauma and joint orthopedic implant medical devices, sports medicine and tissue repair products, accounting for about 80% of the total inventory of goods.

2, combined with the decline in sales of major products, on-hand orders and post-period sales changes, a detailed description of the inventory impairment provision process and adequacy.

In 2024 and the same quarter, the Company's sales volume was as follows:

Major Product Units 2023 Inventory Quarter 2024 Quarter 2023 Quarter 2024 Quarter 2024

Measure sales sales volume growth ratio

Spine million 200.64 84.87 51.51 64.77 percent

Traumatic 298.03 93.67 74.97 24.94

Ten thousand pieces of joint 40.9414.70 9.10 61.54 percent

Sports medicine and tissue repair million 17.34 8.68 5.22 66.46 percent

The Company's product sales grew faster in the first quarter of 2024 than in the same period, with sales of spine, joints and other products growing faster than inventory growth at the end of 2023; sales of sports medicine and tissue repair products grew faster. Sports medicine products are expected to start in June 2024 to implement the collection results, the company's sports medicine products bid in good condition.

Specific methods for testing corporate inventories for impairment:

On the balance sheet date, on the basis of inventory checking, the company conducts impairment test on the inventory according to the following methods: after inventory checking, check whether there is damaged, unsalable or used inventory, if there is such inventory, the net realizable value of the inventory is determined to be zero; Finished products and other commodities directly used for sale, in the normal production and operation process, the net realizable value of the inventory is determined by subtracting the estimated sales expenses and relevant taxes from the estimated market price of the inventory; the net realizable value of the commissioned processing materials and raw materials that need to be processed is determined by subtracting the estimated cost to be incurred upon completion, estimated sales expenses and relevant taxes from the estimated market price of the finished products produced in the normal production and operation process; the net realizable value of finished goods and goods issued for sales orders that have been signed is calculated on the basis of the order price.

The physical and chemical properties of the company's products are stable, and most of the products will not fail due to long storage age. For long-term inventory commodities, the company will focus on analysis and technical appraisal of inventory commodities that are more than one year old, have not been consumed in the last year or are not expected to be fully consumed in the next three years when accruing inventory depreciation of inventory commodities. The company will predict the future consumption of products in combination with market conditions, product replacement and other factors, and judge the sluggish inventory that cannot be consumed in the next three years due to product iteration or market trend, for inventory goods that can be consumed normally, the Company determines its net realizable value by subtracting the estimated selling price of the inventory goods from the estimated selling expenses and related taxes, and if the net realizable value is lower than the cost of the inventory goods, the difference is made for inventory decline. The company conducts inventory

Impairment tests were performed, and inventory declines were fully accounted for in the event of a decline in value.

The Company's inventory decline at the end of 2022 and 2023 was as follows:

Item Inventory decline at the end of 2023 ($million) Inventory decline at the end of 2022 ($million)

Raw material 306.55 389.24

In the product

Inventory 5,251.35 2,773.50

Issuing Goods

Commissioned processing materials

Working capital material 91.02 93.26

Total 5,648.91 3,256.00

At the end of 2022 and 2023, the company will target certain types of products due to market competition or more.

Full provision for decline in value of inventories was made in case of decline in value of new generations, and full provision was also made for decline in value of some raw materials and working materials due to decline in net realizable value.

2. Annual Auditing Accountant's Opinion

(I) verification procedures

Audit procedures performed on inventory:

① Obtain the company's inventory closing schedule, inventory age schedule and closing inventory sheet, and review the company's inventory age, storage location, inventory status and other information;

② Monitor the company's inventory, check the status of the inventory, observe and record whether there is damage, scrap, long-term unused, etc., to determine whether there are signs of impairment of the inventory;

③ Interviews with relevant personnel of the company to understand the reasons and reasonableness of the changes in inventories at the end of each period;

④ Obtain the company's post-period sales schedule to understand the post-period sales of the closing inventory;

⑤ Communicate with the management to understand the process and basis of the company's preparation for inventory decline, and analyze whether the company's management's judgment on inventory decline is reasonable in the light of the company's product market sales; at the same time, obtain the company's inventory decline provision table, and re-measure, analyze and check it.

Whether the parameters used for inventory decline are reasonable and verify the accuracy and reasonableness of the Company's provision for inventory decline;

Audit procedures performed for fixed assets:

① Understand the fixed asset cycle internal control during the reporting period and test the operational effectiveness of the related internal control;

② Interviews with the company's fixed asset management and financial personnel to understand the company's criteria for identifying idle assets and whether there are idle assets and the reasons for them;

③ Obtain a list of the company's fixed assets and perform monitoring procedures, pay attention to the use of fixed assets during the monitoring process, check the quantity and model of fixed assets, observe the appearance and use of assets, etc., and check the relevant title certificates and the storage status of assets and whether there is idle, etc;

④ Understand the method and basis of the Company's provision for impairment of fixed assets, and obtain the fixed asset impairment calculation table for review.

(II) verification opinions

Upon verification, the annual audit accountant concluded that:

① Reasonable increase in the company's closing inventory compared to the beginning of the period;

② There is no idle capacity in the Company's main production lines and there is no risk of overcapacity in the Company;

③ The Company's provision for inventory impairment is in accordance with the provisions of the industry accounting standards, and the provision for inventory impairment is more adequate.

Question 2. on the attributes of the 4, annual report disclosure, the company at the end of 2023 R & D.

332 people, an increase of 13.31 over the same period in 2022. But the total compensation of R & D personnel

46.1757 million yuan, a decrease of 7.57 from the same period in 2022, and the average compensation of research and development personnel increased from

170500 yuan reduced to 139100 yuan. Your company is requested to:(1) make additional disclosure of the new research and development personnel and their major participation in research and development projects during the period, taking into account the background and educational structure of the research and development personnel, and disclose the number, percentage and average salary of the company's research and development personnel after excluding the impact of the new consolidated subsidiaries during the period. (2) Explain the reasons and reasonableness of the increase in the number of R & D personnel, but the decrease in the total compensation of R & D personnel, and explain whether the Company's criteria for identifying R & D personnel have changed in 2023, and whether there is any inclusion of non-R & D personnel compensation in R & D expenses. (3) Explain the reasons why there are no new projects under research, and explain the company's subsequent research and development project plan, the amount of research and development to be invested and the main research and development strategy, taking into account the changes in the educational structure of the research and development personnel and the future research and development direction.

Description of 1.

(1) Combined with the background and educational structure of R & D personnel, additional disclosure of the new R & D personnel and the main participation in R & D projects during the period, and disclosure of the number, proportion and average salary of the company's R & D personnel after excluding the impact of the new consolidated subsidiaries during the period.

262 R & D personnel at the end of 2022 and 332 R & D personnel at the end of 2023, a year-on-year increase

70 people, mainly due to the impact of quantum medical and newborn medical and table. Among them, the new research and development personnel are divided according to academic qualifications as follows:

No. Number of educational background (person) Percentage

1 Doctoral students 1 1.43%

2 Master's degree students 11 15.71%

3 Undergraduate 35 50.00%

4 Junior College 23 32.86 per cent

Total 70 100.00%

Among them, the new R & D personnel are divided according to their participation in R & D projects as follows:

Number of participants in the project (person) Percentage

1 "Magnesium alloy, porous tantalum, ceramics and other new materials, personalized products, orthopedics 13 18.57%

Research and development projects in the field of rehabilitation exploration, medical interaction and technical cooperation "and so on.

Number of participants in the project (person) Percentage

2 "Plasma surgical equipment and its electrodes, disposable fiber ring stapler, 7 10.00%

Research and development of orthopedic active minimally invasive surgical equipment such as disposable grinding drill

"Integrated platelet-rich preparation suit, suit for the preparation of platelet-rich plasma."

3 indication expansion, visualization of high unobstructed negative pressure drainage suit "and other PRP and negative 26 37.14%

Research and development of pressure series products

4 Field technical research and development personnel, mainly engaged in "new product sample trial production, production of 24 34.29.

Product commissioning, process validation "and other research and development of new product conversion work.

Total 70 100.00%

Excluding the new consolidated subsidiary, the total number of research and development personnel was 299, accounting for 15.48, the total salary was 30.8138 million yuan, and the average salary was 103100 yuan.

(II) explain the reasons and reasonableness of the increase in the number of R & D personnel, but the decrease in the total compensation of R & D personnel, and explain whether the Company's criteria for identifying R & D personnel in 2023 have changed and whether there is any inclusion of non-R & D personnel compensation in R & D expenses

According to the company's salary structure and performance appraisal system, the salary of R & D personnel mainly includes two parts: "basic salary + performance salary". Performance salary implements a strict result-oriented performance appraisal system, that is, the proportion of performance salary is determined based on the completion of the company's overall performance, so as to stimulate the enthusiasm of employees and the sense of teamwork, and according to the company's overall performance in 2023

As a result of the assessment, the performance salary of research and development personnel in 2023 is less than that in 2022. Company R & D 2023

The criteria for the identification of personnel have not changed.

In summary, there are reasonable business reasons for the decline in the Company's total compensation of R & D personnel in 2023, and there is no inclusion of non-R & D personnel compensation in R & D expenses.

(III) explain the reasons why there are no new projects under research, and combine the learning of the research and development staff.Changes in the historical structure, future research and development direction, etc., explain the company's subsequent research and development project plan, the amount of research and development to be invested and the main research and development strategy.

In 2023, the company added 4 new research and development projects, the main research direction is new materials, active equipment.

preparation, regeneration and rehabilitation and other fields.

With the changes in policies in the orthopaedic industry such as centralized procurement, the company will carry out layout research and development projects in the fields of sports medicine, 3D printing, craniofacial repair and other orthopaedic and extracorporeal consumables, endoscope and energy platform and other orthopaedic active equipment, expansion of tissue repair and orthopaedic rehabilitation applications, domestic substitution of imported raw materials, new materials and new therapies.

In addition, in the face of the objective environment of the centralized mining environment, the company needs to further improve the process and reduce the cost, research and development personnel for specialized process improvement of the technical work demand also increased. In line with process improvement and the above-mentioned new product research and development, in 2023, the company's new research and development personnel, bachelor's degree or above accounted for 67.14, the new research and development personnel education structure is reasonable.

In terms of the amount of research and development to be invested, the company's own and raised investment funds are sufficient to ensure the exploration of new areas and the implementation of new projects.

According to the implementation of R & D projects with new expansion layout in the future, the R & D center will continue to supplement R & D personnel with corresponding specialties and matching knowledge, enhance R & D innovation capability, accelerate upstream R & D, continuously build competitive barriers, enrich its own innovative product line, product portfolio and clinical application, and promote profit growth.

The 2. asked the annual audit accountant's opinion on question 4 (2).

(I) verification procedures

① Interviews with the company's R & D leaders to understand the overall R & D process and related internal controls, evaluate internal controls related to R & D expenditures, and perform walk-through and control tests;

② Obtain a list of the company's R & D personnel and take a sample to check the academic qualifications of the corresponding personnel and see if they match the positions and positions;

③ Ask the company's management about the reasons for changes in the company's R & D personnel and R & D investment;

④ Obmet the company's R & D project schedule and R & D expense schedule, number of R & D personnel

Statistics, an analysis of the company's research and development expenses and the salaries and salaries of research and development personnel;

⑤ Obtain and check contracts, project initiation reports, information related to the progress of R & D projects, etc. related to R & D projects; obtain and view details of R & D expenses, and select samples to perform detailed tests.

(II) verification opinions

After verification, the annual audit accountant believes that the number of research and development personnel of the company has increased, but the decline in the total salary of research and development personnel is reasonable and consistent with the actual situation of the company. The Company's criteria for identifying research and development personnel in 2023 have not changed.

Dahua Certified Public Accountants of China (Special General Partnership):

Zhang Xuguang

Beijing, China Certified Public Accountants:

Zhang Yingying

June 23, 2004