Reply to the second round of examination and inquiry letter on the application documents for initial public offering and listing on the gem of greebo (Jiangsu) Co., Ltd
Sponsor (lead underwriter)
(Building 4, No. 66 Anli Road, Chaoyang District, Beijing)
Shenzhen Stock Exchange:
According to the requirements of the second round examination and inquiry letter on the application documents for initial public offering and listing on the gem of greebo (Jiangsu) Co., Ltd. (hereinafter referred to as the “inquiry letter”) issued by your exchange on November 7, 2021, China Securities Co.Ltd(601066) (hereinafter referred to as ” China Securities Co.Ltd(601066) ” securities “,” sponsor “or” sponsor “) is the sponsor (lead underwriter) of greebo (Jiangsu) Co., Ltd. (hereinafter referred to as” greebo “,” issuer “or” company “) for the initial public offering of shares and listing on the gem, Together with the issuer and its lawyer, Zhejiang Tiance law firm (hereinafter referred to as “Tiance law firm” and “issuer’s lawyer”) and the reporting accountant Ernst & Young Huaming Certified Public Accountants (special general partnership) (hereinafter referred to as “Ernst & young accountant” and “reporting accountant”) and other relevant parties, based on the principles of diligence, honesty and trustworthiness, Carefully discuss, verify and implement the questions raised in the inquiry letter one by one, and reply and explain them one by one.
Explanation on the content, interpretation, format, supplementary and updated disclosure of the reply:
1. Unless otherwise specified, the abbreviations or terms used in the reply to this inquiry letter are consistent with the prospectus of greebo (Jiangsu) Co., Ltd. on initial public offering of shares and listing on GEM (application draft);
2. Any discrepancy between the mantissa of the total count and the mantissa of the sum of the listed values in the reply to this inquiry letter is caused by rounding;
The questions listed in the inquiry letter are in bold (not bold)
Responses to the questions listed in the inquiry letter (not bold)
Quote the contents of the original prospectus in Song typeface (not bold)
Amendments and supplements to the prospectus (BOLD)
The prospectus makes supplementary disclosure on the reply contents required to be disclosed in the inquiry letter. Considering the completeness of the reply in the inquiry letter, there are duplicates in the reply to different questions. Therefore, in the supplementary disclosure of the prospectus, considering the context and readability of the prospectus, the repeated contents are properly merged and abridged, and rearranged according to the number in the prospectus.
catalogue
Question 1: about the historical evolution and the identification of the actual controller 4 question 2: related parties and related party transactions 41 question 3: Disputes over intellectual property rights and other aspects 48 question 4: about industry and business Question 5: on administrative punishment 62 question 6: about the non IPO agreement Question 7: about income verification 69 question 8: about changes in sales of key customers 95 question 9: about the prepaid expenses for related party customers Stihl 109 question 10: about procurement and cost Question 11: about gross profit margin Question 12: about inventory Question 13: about share based payment one hundred and fifty
Question 1: about the historical evolution and the identification of the actual controller
The application materials and the reply to the previous audit inquiry show that:
(1) In February 2005, Chen ningyun, the actual controller of the issuer, increased the capital of the issuer by US $5.53954 million, and the relevant capital increase was paid by hksr on its behalf;
(2) In September 2020, the company acquired 100% equity of Vicat plastics, gton automobile, hksr and aegis hexeng garden, forming a business merger under the same control. Among them, Vicat plastics, gton automobile, hksr and aegis are subsidiaries of ghhk, the controlling shareholder of the issuer; Xusheng garden is a subsidiary controlled by the actual controller Chen Yin and his spouse Su Qing;
(3) In 2016, during Chen Yin’s indirect acquisition of greebo group through greenworks holdings, the debt owed by greenworks holdings to long shining in HK $152357170 (corresponding to US $19.642 million) and outstanding interest were formed; In 2020, in the process of equity structure adjustment and restructuring with the issuer as the main body of domestic IPO, greebo group formed a debt of US $25 million and outstanding interest owed by ghhk to Zama. In this regard, greenworks holdings pledged 10% of the total share capital of ghhk to Zama to guarantee the performance of the debt, and Chen Yin provided guarantee for the above debt within a maximum of US $10 million;
(4) In 2016, Stihl international subscribed for 35% equity of ghhk for us $149 million in cash; In September 2020, ghhk repurchased 35% equity held by Stihl international at a price of US $50.2 million in cash and RMB 90.790870 million;
(5) In September 2020, Chen Yin, greenworks holdings, ghhk, Stihl international and Zama signed a series of transaction documents:
① The master framework agreement stipulates that before ghhk’s promissory note debt to Zama has not been paid off or the issuer’s successful IPO, the following matters shall be subject to the prior consent of Stihl: ghhk disposes of its shares held by the issuer, the issuer and its company make decisions on dividend distribution and cash dividend, ghhk purchases the securities of the issuer and its subsidiaries, and the issuer and its subsidiaries reduce, increase capital Allotment of shares, liquidation, merger, division, reaching settlement arrangements with creditors, borrowing from financial institutions or providing guarantees, large transaction and acquisition, etc;
② According to the non IPO agreement, if the issuer is unable to complete the listing on the stock exchange in China before September 30, 2022 due to relevant reasons, Stihl international has the right to change the shares of the issuer;
(6) In November 2020, the issuer submitted explanations to the competent tax authorities on ghhk’s repurchase of 7000 ordinary shares of ghhk held by Stihl international and capital reduction, and Zama’s capital increase to greebo, and obtained the notice on tax matters issued by the third tax branch of Changzhou Taxation Bureau of the State Administration of taxation, The competent tax department has not issued opinions on whether to verify the collection.
Please the issuer:
(1) Explain the source of funds of the issuers that Chen Yin and other enterprises under his control have invested in shares in the past, as well as the financial status and funds of the controlling shareholders and actual controllers at the time of the above-mentioned investment; Demonstrate the recognition and basis of the actual control right of ghhk, the direct controlling shareholder, and greenworks holdings, the indirect controlling shareholder of the issuer;
(2) Explain the specific contribution of Chen ningyun to the issuer and its relevant subsidiaries (including but not limited to capital, technology, personnel, customer acquisition, market development, etc.) since the establishment of the issuer and its important holding subsidiaries. According to the relevant provisions on the identification of actual controllers in the Q & A on the review of initial public offering on the gem of Shenzhen Stock Exchange, Further analyze the accuracy and rationality of the identification of the actual controller, whether there are equity holding or other interest arrangements between Chen Yin and other enterprises controlled by Chen Yin and Chen ningyun, whether chenningyun and its close relatives hold relevant rights and interests of the issuer, whether the ownership of the shares of the issuer held by the actual controller is clear and whether the control right is stable;
(3) Explain the total assets, operating income or profit of the reorganized party involved in the business combination under the same control at the end of the accounting year before the reorganization, the amount of the corresponding subjects of the issuer before the reorganization, and calculate the proportion of the total assets, operating income and total profit of the reorganized party in the corresponding items of the issuer before the reorganization; Demonstrate whether the issuer complies with the provisions of the opinions on the application of securities and Futures Law No. 3 one by one; Whether the accounting treatment of all parties involved in the reorganization complies with the relevant provisions of the accounting standards for business enterprises; The pricing basis of relevant equity or asset transactions, and the differences and reasons between the book value of relevant equity or assets and the assessed value;
(4) The list shows the specific conditions of large amount of creditor’s rights and debts formed between the actual controller Chen Yin and other enterprises controlled by Chen ningyun and other enterprises controlled by Chen ningyun, as well as with Stihl and other enterprises controlled by Stihl (including Zama, the second largest shareholder of the issuer), as well as the transfer, exemption and settlement of the above creditor’s rights and debts, and fully demonstrates the transfer, exemption and settlement of relevant creditor’s rights and debts Reasons for exemption, commercial rationality, legality and compliance;
(5) In combination with the financial situation, capital situation and whether there are large debts due and outstanding of the controlling shareholder and actual controller of the issuer, explain the basis for ghhk, greenworks holdings and Chen Yin to have the financial ability to repay debts due, and analyze whether there is a major debt repayment crisis and deterioration of credit situation of the controlling shareholder and actual controller, Whether there are disputes with creditors, whether there is a risk of losing the issuer’s control right due to bankruptcy or debt enforcement, whether there are major ownership disputes that may lead to the change of control right, and fully remind the relevant risks;
(6) Check and fully disclose whether the issuer is occupied by non operating funds, whether the issuer’s internal control system is sound and effectively implemented, and how to effectively protect the rights and interests of small and medium-sized investors;
(7) In combination with the relevant transactions and evaluation, ghhk’s operating performance and Book Asset amount, explain the reasons and rationality for the large difference between the price of ghhk shares subscribed by Stihl international in 2016 and the price of shares repurchased by ghhk in September 2020, and further analyze the pricing fairness of relevant transactions, Whether it involves the transfer or transfer of commercial interests; Explain whether ghhk borrowed US $25 million from Zama, a wholly-owned subsidiary of Stihl international, to buy back 35% of the equity held by Stihl international, comply with the relevant provisions of Hong Kong Law on “Hong Kong companies must comply with relevant solvency provisions for share repurchase”, whether there are violations of laws and regulations, and demonstrate ghhk, greenworks holdings Whether Chen Yin is in violation of laws and regulations such as taxes payable and unpaid. If so, please disclose the specific situation and prompt the relevant risks;
(8) In combination with the provisions on the issuer’s equity, corporate governance, production and operation and other matters in the main framework agreement, non IPO agreement and other relevant transaction agreements, Stihl and other enterprises under its control have made contributions to the issuer’s assets, personnel, technology, customer acquisition and market expansion, Before and after greebo group introduced Stihl’s investment, the issuer obtained relevant information from Stihl’s orders (including but not limited to transaction amount, transaction content, unit price, gross profit margin, etc.), demonstrated the reason and rationality that Stihl and other enterprises controlled by it and Zama were not identified as the actual controller of the issuer, and how the issuer ensured the effectiveness of its corporate governance and internal control. The sponsor, the reporting accountant and the lawyer of the issuer are requested to express their clear opinions.
reply:
1、 Explain the source of funds of the issuers that Chen Yin and other enterprises under his control have invested in shares in the past, as well as the financial status and funds of the controlling shareholders and actual controllers at the time of the above-mentioned investment; Argumentation issuer
The recognition of the actual control right of ghhk, the direct controlling shareholder, and greenworks holdings, the indirect controlling shareholder, and their basis;
(I) information about Chen Yin and other enterprises under his control’s previous shareholding in issuers and their sources of funds
Since the establishment of greebo Co., Ltd. in July 2002, Chen Yin and ghhk, an enterprise controlled by Chen Yin, have taken shares in the issuer by means of capital contribution and equity transfer. The methods, investment amount and capital sources of the previous shares in the issuer are as follows:
Serial No. time: capital source of transaction consideration increased by investor / transferee
Contribution amount of the mode party
Chen Yin was established in 2002 (Feng Song contributed 255000 yuan, which was mainly self owned and self raised funds, and Yun held it on behalf of Yun in January and July)
2003 equity Chen Yin (held by Chen Shu 120000 yuan, mainly self owned and self raised funds, transferred to Jun in February and November)
In 2004, the equity of Chen Yin was 125000 yuan, which was mainly transferred from self owned and self raised funds in March and July
The payable equity transfer consideration ghhk (the debt formed by Chen has been transferred to Yin through greenworks holdings, and 2016
