on September 5, the cross-border core building of guao technology attracted two letters of concern from the exchange. in the second reply, the attitude of the three independent directors towards the company's large-scale investment was evident.

cross-border investment attracts more attention, and three independent directors speak out: there are defects!

on September 5, guao technology (300551.SZ) replied to the exchange's concern letter for the second time on cross-border investment matters.

the company previously disclosed that it plans to join Hu Yijun, Jin Jing and Zhang Bin to transfer the total partnership share of Shanghai Haoyuan Ancient Information Management Partnership (Limited Partnership) (hereinafter referred to as Shanghai Haoyuan Ancient), which has zero paid-in capital and has not actually carried out business, from Zhou Chuanmaterial and Song Xiezhen for a consideration of zero yuan.

Guao Technology originally intended to act directly as the general partner of Shanghai Haoyuangu, but the exchange was concerned that the Partnership Law stipulated that listed companies could not become general partners. In its reply, the company interpreted this negligence as "hasty decision-making time" and subsequently established a wholly-owned subsidiary, Shanghai Guao Semiconductor Co., Ltd., which was assigned 0.01 percent of the partnership share of Shanghai Haoyuanguu and acted as a general partner.

Currently, Guao Technology, Hu Yijun, Jin Jing and Zhang Bin are limited partners of Shanghai Haoyuangu, holding 90.23 per cent, 2.44 per cent, 3.66 per cent and 3.66 per cent of the partnership, respectively. At the same time, the above-mentioned four parties will inject a total of 0.41 billion yuan into Shanghai Haoyuangu, of which the company will subscribe 0.37 billion yuan, and all the injected funds will be used to invest in Xincun Technology (Wuhan) Co., Ltd. (hereinafter referred to as "Xincun Technology").

The announcement shows that the main business of Xincun Technology is memory chips, which are incubated by the relevant scientific and technological achievements of the three-dimensional new memory project of Changjiang Advanced Storage Industry Innovation Center Co., Ltd. (hereinafter referred to as: Innovation Center).

the company said that Shanghai haoyuanguu signed an agreement with xincun technology on August 2 to increase capital and other shares. Shanghai haoyuanguu will pay 0.41 billion yuan to xincun technology as consideration for subscribing for the new angel wheel common shares. after the capital increase is completed, it will hold 31.39 percent of the shares of xincun technology. As of August 14, the company has paid 0.148 billion yuan to Shanghai Hao Yuan Gu, which will pay the money to Xincun Technology.

Wuhan keming core enterprise management partnership (limited partnership) (hereinafter referred to as keming core), Wuhan keling core enterprise management partnership (limited partnership) (hereinafter referred to as keling core) and Anji gaowei anxin technology partnership (limited partnership) are the existing shareholders of new technologies. among them, keming core and keling core are the employee shareholding platforms of new technologies. When Shanghai Haoyuanguu becomes a shareholder, the three parties will reduce their shareholdings to 27.44 per cent, 20.58 per cent and 20.58 per cent, respectively.

Also on August 2, Shanghai Haoyuangu signed the "Concerted Action Person Agreement" with Keming Core and Kolingxin, holding a total of 79.42 percent of the equity in the new technology (the error is caused by rounding), with the actual control of the new technology.

However, Guao Technology only included Shanghai Haoyuangu in the consolidated financial statements, while Xincui Technology was not included in the scope of consolidation, but used the equity method of accounting, and determined the corresponding investment income based on its profit and the company's shareholding ratio.

It is worth noting that in the reply to the second letter of concern, three independent directors of Guao Technology raised two flaws in the company.

First, Xu Wei, the expert consultant who was hired by the company to issue the technical feasibility analysis report, can be the consultant of the shareholders of the Innovation Center. Therefore, the independent directors believe that the independence of the semi-research consulting that issued the report has certain defects.

Second, the company only issued a technical feasibility analysis report at the time of this investment, but did not issue an investment feasibility analysis report. The three independent directors believe that the company also has certain flaws in the investment process.

In addition, after internal discussions on July 31, the three independent directors agreed that the investment was relatively large, and the valuation report was only based on the profit forecast report and business plan of Xincui Technology, and there were a large number of special assumptions, and these assumptions were all risk points, so the valuation report can only be used as a reference and cannot be used as a basis for investment.

moreover, the company's last round of investment (donggao project) merger and acquisition transformation has not achieved the expected effect, and the company's limited funds cannot be used for such a large-scale investment project. the project has no synergy with the company's existing business, and the company has no reserve of relevant professionals.

The response to the letter of concern came late and the underlying valuation was questioned by the exchange

on July 26, guao technology disclosed its investment in new technology for the first time, and therefore received two letters of concern from the exchange on July 28 and August 7. The company's response to the second letter of concern came late after three announcements of deferred responses.

the announcement shows that the innovation center has initiated a three-dimensional new memory project since October 2019, successfully developed China's first three-dimensional new memory prototype chip in December 2022, and is currently in the development stage of three-dimensional new memory product chips. it plans to complete the development of product chips in the fourth quarter of 2024 and strive to promote industrialization. In this regard, the exchange asked the company to explain the three-dimensional new memory product chip industrialization arrangements, the required resources, and whether the new storage technology has the ability to promote industrialization.

the company said that the three-dimensional new memory industry will be operated according to the mode of "design company (new storage technology) + production line". new storage technology has signed a cooperation confirmation letter with the government of Anji county, Huzhou city, Zhejiang province. it will adopt the mode of "local government + social capital" and invest nearly 10 billion yuan to establish storage production line (including equipment and factory buildings) to provide customized contract manufacturing services for new storage technology, other new storage foundry services are also available.

new storage technology plans to complete the technology and performance optimization of three-dimensional new storage chips in the third quarter of 2024 to meet the requirements of enterprise-level server application. in the fourth quarter of 2024, it will adopt the mode of contract manufacturing to realize small-scale mass production of chips and promote industrialization. it plans to expand production in 2025 and realize the production capacity planning of 10000 chips per month by the end of 2025.

Guao Technology previously said that the Innovation Center exclusively licensed the new 3D storage-related technology and intellectual property rights to Xincun Technology in writing, valid for 5 years. In this regard, the exchange requires the company to supplement the disclosure of the price of the authorization, and whether the relevant authorization is revocable.

the company replied that after the new storage technology officially mass produces three-dimensional new memory products and forms sales revenue, it will pay the license fee (1.5 for the first generation of products and 1% for the second generation of products) in the form of sales revenue commission. the above license fee will be paid until the license is revoked or the new storage technology purchases relevant intellectual property rights as agreed, the two parties agreed to make a demand for intellectual property purchase in the year or before the industrialization scale of the three-dimensional new memory reaches 10000 pieces/month.

The revocation of the licensing conditions will only be triggered when the new technology fails to pay the license fee as agreed, or fails to sign an intellectual property transfer contract with the innovation center and pay the corresponding transfer fee within five years after the license due to the new technology.

In addition, the Innovation Center has a total of more than 100 personnel related to the 3D new memory project, of which 101 core technicians have signed labor contracts with Xincun Technology to continue the research and development and industrialization of the project.

According to the valuation entrustment contract, as of May 31, 2023, the valuation of 100 per cent of the shareholders' equity of New Deposit Technology was $0.918 billion. After negotiation, the company invested in Xincun Technology at a valuation of 0.896 billion yuan. In this regard, the exchange asked the appraiser to explain whether the valuation process considers the renewal of authorization, the failure of industrialization research and development, the progress is not as expected and other risks.

and the company believes that the new storage technology continues to obtain authorization, the new memory industrialization research and development are more likely to succeed as scheduled, so the above risks are not taken into account.

After receiving the letter of concern, Guao Technology announced on August 14 that it intends to jointly invest with Xincun Technology to set up a project company, which is positioned as a module packaging and testing service company.

The transformation of the main business loss is difficult

the "donggao project" mentioned by the sole director of the company is donggao (Guangdong) technology development co., ltd. (hereinafter referred to as "donggao technology"), a securities investment consulting service provider. guao technology acquired 51% of its equity in December 2021, with a transaction consideration of 187.68 million yuan. after deducting the impact of profit and loss during the transition period, the combined consideration is 185.5184 million yuan, forming goodwill of 187.4635 million yuan.

although the sole director said that "the last round of investment (donggao project) merger and transformation has not achieved the expected effect", the company said in response to the exchange's signing of relevant agreements and implementation of foreign investment in the past three years that donggao technology's operating income accounted for 71% of the company's total operating income in 2022, and this investment met the company's expectations.

In addition to East Hi-Tech, the company signed the Strategic Cooperation Framework Agreement with Fudan Microelectronics (688385.SH) in June 2021, but no specific cooperation agreement has been signed so far. The company explained that it was due to the difficulties encountered in developing the market for its digital RMB products.

starting from December 2022, the company has signed several agreements on the acquisition of Changzhou bitai technology co., ltd (hereinafter referred to as "bitai technology"). however, the audit and evaluation of bitai technology cannot be successfully completed at present, resulting in the stagnation of the acquisition. the deposit of 18 million yuan paid by the company is also under communication.

in December 2022, the company signed the "equity transfer intention agreement" with shengduoli information technology co., ltd. to acquire the remaining 40% equity of the holding subsidiary Shanghai qianyu information technology co., ltd. (hereinafter referred to as Shanghai qianyu). On August 2, 2023, the Company announced an acquisition consideration of $70.12 million.

The Exchange is concerned that as of April 30, 2023, the base date of the appraisal, the book value of the owner's equity included in the scope of the appraisal was 18.7726 million yuan, the valuation was 177.7993 million yuan, and the appreciation rate reached 847.12. In April 2020, the company acquired a 60% stake in Shanghai Qian Yu, at which time the underlying valuation was 43.2 million yuan. In this regard, the exchange requires the company to explain the reasons and rationality of the high value-added rate of Shanghai Qian Yu's valuation and the substantial increase compared with the previous one.

Guao Technology replied that the number of customers and orders for Shanghai Qian Yu's on-market software, options and futures market-making software in 2020-2022 have all increased significantly compared to 2018-2019, and total sales have also increased significantly.

It is reported that Guao Technology is a financial equipment manufacturer, with Shanghai Qian Yu as an entry point, the acquisition of East High-tech, in-depth securities information services. However, the company suffered its first performance loss in 2022 after listing, with a net profit of -32.0133 million yuan for the current period.

As of the end of June 2023, the Company had approximately $0.62 billion in monetary funds on its books. However, the company said that it would use its own funds to pay a total of 0.44 billion yuan for investment in Xincui Technology and Shanghai Qian Yu. Part of it is the self-owned funds formed after all the supplementary working capital raised in the private placement is used.