Inquiry letter on Xgd Inc(300130) application for issuing convertible corporate bonds to unspecified objects
Audit letter [2021] No. 020314 Xgd Inc(300130) :
In accordance with the relevant provisions of the securities law, the measures for the administration of the registration of securities issuance of companies listed on the gem (for Trial Implementation) (hereinafter referred to as the registration measures), and the rules for the examination and approval of securities issuance and listing of companies listed on the gem of Shenzhen stock exchange, the examination and approval authority of the issuance and listing of Xgd Inc(300130) (hereinafter referred to as the issuer or the company) reviewed the application documents for issuing convertible corporate bonds to unspecified objects, and formed the following audit questions:
1. In each period of the reporting period, the company’s comprehensive gross profit margin was 31.99%, 28.13%, 26.98% and 22.10% respectively, showing a gradual downward trend; Among them, the gross profit margin of acquiring business was 30.12%, 17.83%, 19.63% and 14.33% respectively, with a decrease greater than that of comparable companies in the same industry. According to the application materials, after the “96 fee reform”, the charging mode of bank card acquiring business was changed from fixed rate to market-oriented pricing. Under the environment of fierce market competition, the company’s acquiring service rate gradually declined.
During the reporting period, the company’s foreign revenue was 131.5501 million yuan, 21.1553 million yuan, 286.6427 million yuan and 380.5935 million yuan respectively, accounting for 5.67%, 6.99%, 10.89% and 14.78% of the operating revenue respectively; The amount of government subsidies included in the current profit and loss is 26.2257 million yuan, 58.7899 million yuan, 67.0141 million yuan and 65.8387 million yuan respectively, with a large amount; The withdrawal proportion of inventory falling price reserves was 5.54%, 18.77%, 13.31% and 5.25% respectively, showing a downward trend. At the end of each reporting period, the book value of the company’s accounts receivable was 33246600 yuan, 471423200 yuan, 403108300 yuan and 517400800 yuan respectively, accounting for 7.99%, 13.98%, 11.94% and 13.87% of the total assets respectively. In the last year and the first period, the company reversed bad debt reserves of 3.569 million yuan and 12.6886 million yuan respectively.
The issuer is requested to supplement: (1) explain the reasons for the change of the company’s gross profit margin in combination with the change trend of the company’s various business or product revenues, rates or prices, costs and expenses, and the situation of comparable companies in the same industry; (2) Explain whether the industry development trend has a significant impact on the company’s production and operation and the implementation of raised investment projects, and whether the company has sufficient cash flow to pay the principal and interest of corporate bonds in the future; (3) Analyze the impact of international economic environment, covid-19 epidemic situation and exchange rate fluctuation on overseas sales and what countermeasures the company has in combination with the changes of foreign income and future business layout during the reporting period; (4) Explain the continuity of the government subsidy policy and its impact on the company’s operating performance in combination with the business model, the detailed composition of government subsidies in each period and the situation of comparable companies in the same industry; (5) Explain the reasons and rationality for the large fluctuation of the provision for falling price of goods in the reporting period in combination with the detailed composition of inventories, changes in stock age, the basis for the recognition of net realizable value and the situation of comparable companies in the same industry; (6) explain the reasons and rationality for the large amount of accounts receivable in combination with the business model and the situation of comparable listed companies in the same industry; (7) The details of the reversal of bad debt reserves in the latest year, including the reasons for the formation of bad debt reserves, the reasons for the reversal after the current period and the compliance of relevant accounting treatment. The issuer is requested to supplement and disclose the risks involved in (1) (3) (4) (5) (6). The sponsor and accountant are requested to check and express clear opinions.
2. As of September 30, the book value of the company’s goodwill was 792.5285 million yuan, It is mainly the acquisition of Zhejiang Zhongzheng Intelligent Technology Co., Ltd. (hereinafter referred to as Zhongzheng intelligent) and Changsha Gongxin Chengfeng Information Technology Service Co., Ltd (hereinafter referred to as Gongxin Chengfeng) and other four companies. At the end of the last three years, the amount of goodwill impairment loss accrued by the company was 9.5159 million yuan, 193.7719 million yuan and 106.9413 million yuan respectively. In 2019 and 2020, the amount of goodwill impairment was large, accounting for 44.90% and 52.83% of the total consolidated profits respectively.
The issuer is requested to supplement: (1) explain and disclose the adequacy of the provision for goodwill impairment in combination with the specific methods and parameters of goodwill impairment test and the performance of the underlying assets in the reporting period, and whether there is any risk of further goodwill impairment in the future; (2) At the time of acquisition, the acquiree evaluates whether there is any difference between the predicted income and profit and the actual situation according to the income method, and explains the reasons and rationality of the difference; (3) the reasons and rationality of withdrawing goodwill impairment after the performance commitment period of Zhongzheng intelligence and Gongxin Chengfeng, and whether there is any situation of cross period recognition of income or cost.
The issuer is requested to disclose the risks involved in (1).
The sponsor and accountant are requested to check and express clear opinions.
3. The company’s main business income mainly includes payment services and merchant services (acquiring services), sales of electronic payment products, sales of biometric products, credit audit services and others. This raised investment project is “merchant service digital platform construction project” It is planned to build consumer marketing platform, member rights mall platform, open platform, application market, big data analysis engine and other Internet platforms.
The issuer is requested to supplement: (1) whether the existing businesses of the issuer and its subsidiaries and the current raised investment project include businesses directly facing individual users; if so, please explain the specific situation; (2) whether the issuer, its subsidiaries and the current raised investment project provide, participate in or jointly operate Internet platform businesses such as websites and apps with customers, and whether they belong to “Operators in the field of platform economy” specified in the anti monopoly guide of the anti monopoly Commission of the State Council on the field of platform economy (hereinafter referred to as the anti monopoly Guide) , whether the competition of the issuer, its subsidiaries and the industry involved in this raised investment project is fair, orderly, legal and compliant, and whether there are unfair competition situations such as monopoly agreement, restriction of competition and abuse of market dominant position, and according to the relevant national anti-monopoly regulations, Whether the issuer has business concentration meeting the reporting standards and whether it has fulfilled the reporting obligations (3) whether the issuer, its subsidiaries and this raised investment project provide customers with relevant services for personal data storage and operation, whether there is any situation of collecting and storing personal data, mining relevant data and providing value-added services, whether there is any situation of making profits from the collected and stored personal data, and explain whether they have obtained corresponding qualifications and the specific situation of providing services; (4) Whether the above businesses of the issuer are subject to relevant penalties.
The sponsor and the issuer’s lawyers are requested to check and express clear opinions, and issue a special verification report on whether the issuer has not violated the provisions of the anti trust guidelines and other relevant documents. 4. The total amount of funds to be raised from the issuance of convertible corporate bonds to unspecified objects is no more than RMB 900 million, Among them, 630 million yuan was used for merchant payment service expansion project (hereinafter referred to as project I), 120 million yuan was used for merchant service digital platform construction project (hereinafter referred to as Project II), and 150 million yuan was used to supplement working capital. In the latest period, the issuer’s monetary capital was 1.514 billion yuan.
During the reporting period, the capacity utilization rate of the issuer’s electronic payment products was 76.70%
75.41%, 78.57% and 76.50%. Project I plans to purchase 2.4 million POS machines and lay them. The gross profit margin of the issuer’s acquiring service in the latest period is 14.33%, and the estimated average gross profit margin in the first production period of the project is 36.41%. It is estimated that 360000, 540000 and 900000 new merchants will be added in the first, second and third years after the end of the construction period. Project 2 plans to build a digital intelligent service platform around the merchant service system. In the calculation of liquidity demand, the issuer expects the income growth rate to reach 20% in the next two years. According to the application materials, the value-added telecommunications business license held by the issuer will expire on May 9, 2022, and the payment business license will expire on June 26, 2022.
The issuer is requested to supplement: (1) explain the specific contents of the raised investment project in concise language, including but not limited to profit model, end customers, market reserves, software and hardware composition, application fields, cooperation, etc; (2) Explain the rationality of this financing scale in combination with the issuer’s monetary fund holding and use plan, asset liability ratio, financial investment, unused bank credit line, business scale and business growth; (3) Whether the issuer applies for relevant business qualification review and its progress, whether there are substantive obstacles, if the review fails, what countermeasures or alternative measures are available; (4) When the capacity of electronic payment products is not fully utilized, the reasons and rationality of outsourcing in project 1, whether there are differences between the purchased products and the issuer’s existing products, and whether the situation is in line with industry practices; (5) In combination with the industry development trend, technical iteration, market capacity, competitors, target customers, similar projects in the same industry, changes in the issuer’s income and gross profit margin, explain the rationality of the estimated number of new businesses and benefit calculation of project I. in combination with the current market development situation, development plan, on-hand orders, etc., explain the purchase with the raised funds of 630 million yuan Rationality of 2.4 million POS machines, whether there is risk of idle assets, and whether there is major uncertainty in the implementation of raised investment projects; (6) Whether the Project II implementation entity has all the business qualifications and licenses required for the implementation of the raised investment project and future business operation; (7) quantitatively analyze the impact of the new depreciation and amortization of the raised investment project on the future business performance; (8) Explain the basis and rationality of revenue growth forecast in combination with the issuer’s performance growth in recent three years, orders in hand, industry development trend and comparable companies in the same industry.
The issuer is requested to make supplementary disclosure of the risks involved in (3) (5) (6) (7) (8). The sponsor is requested to check and give a clear opinion, the issuer’s lawyer is requested to check (3) and give a clear opinion, and the accountant is requested to check (2) (5) (7) 5. During the reporting period, the issuer and its subsidiaries were subject to administrative penalties for many times. On August 27, 2020, Jialian payment, a subsidiary of the issuer, was fined 9.41 million yuan by Shenzhen Central Branch of the people’s Bank of China for violating the measures for the administration of payment services of non-financial institutions.
In combination with the relevant laws and regulations on which the punishment is based, the issuer is requested to explain whether the administrative punishment received by the issuer and its subsidiaries during the reporting period constitutes a major illegal act seriously damaging the legitimate rights and interests of investors or the social and public interests by referring to the second question of the examination and answer of securities issuance and listing of companies listed on GEM, Whether the internal control system of the issuer and its subsidiaries is effectively implemented, and whether this issuance complies with the provisions of Article 11 of the registration measures.
The sponsor and the issuer’s lawyer shall check and express clear opinions.
6. According to the application materials, the text of the convertible bond prospectus does not agree on the breach of contract, liability for breach of contract and its bearing method. The issuer is requested to supplement whether the disclosure of the situation of breach of this convertible bond and the relevant contents of the liability for breach of Contract comply with the relevant provisions of the measures for the administration of convertible corporate bonds.
The sponsor and the issuer’s lawyer shall check and express clear opinions.
7. According to the application materials, the convertible bonds issued this time shall be placed preferentially to the original shareholders of the company, and the original shareholders have the right to waive the right to place.
The issuer is requested to supplement and disclose whether the shareholders or directors, supervisors and senior executives holding more than 5% of the shares of the listed company participate in the issuance and subscription of convertible bonds; If yes, whether there are plans or arrangements to reduce the shares of listed companies or issued convertible bonds within six months before and after the subscription of convertible bonds. If not, please issue a commitment and disclose.
The sponsor and the issuer’s lawyer shall check and express clear opinions.
8. According to the application materials, when designing the investment project of the raised funds and planning the total investment of the raised funds, the company has deducted 97 million yuan of financial investment to be implemented in advance in accordance with the relevant regulatory requirements.
By the end of September 2021, the issuer had other current assets of RMB 123.1693 million, other equity instrument investment of RMB 84.8507 million, other non current assets of RMB 1.4406 million and long-term equity investment of RMB 11.9405 million. Among them, the issuer’s foreign investment includes Shanghai Heqian Electronic Technology Co., Ltd. (hereinafter referred to as Shanghai Heqian).
The issuer is requested to supplement: (1) since the first six months of the relevant board of directors of this offering, the company has implemented or plans to implement the specific situation of financial investment, and in combination with the company’s main business, disclose whether it holds a large amount of financial investment (including financial business) at the end of the latest period, and whether it complies with the Q & A on securities issuance and listing of companies listed on GEM Requirements for financial investment and financial business; (2) Up to now, the equity structure of Shanghai Heqian, the time point of the issuer’s previous capital contributions, the amount subscribed and paid in, and the future capital contribution plan; (3) Whether the business scope of the issuer and its subsidiaries and joint-stock companies involves business types related to real estate development, whether they are currently engaged in real estate development business, whether they have real estate development qualification, whether they hold residential land, commercial land and commercial real estate, if so, please explain the way and background of obtaining the above real estate and land, and the development, use plan and plan of relevant land Whether the arrangement involves real estate development, operation, sales and other businesses.
The sponsor shall check and give clear opinions, and the lawyer of the issuer shall check (3) and give clear opinions.
The issuer is requested to rewrite the important risk factors closely related to the offering and the issuer itself in the tips on major events on the title page of the prospectus, and sort them according to the importance of the information required for investors to make value judgments and investment decisions.
Please implement the above questions one by one and submit the reply to the inquiry letter within 15 working days. The reply content shall be disclosed in the form of temporary announcement, and relevant documents shall be submitted through the issuance and listing review business system of the exchange after disclosure. The matters required to be disclosed in this inquiry letter shall be supplemented in the updated prospectus and marked in bold italics, except for exemption as required; The matters required to be explained are the contents of the inquiry reply and need not be added to the prospectus. The sponsor shall submit the updated prospectus together with the reply to this inquiry. In addition to the contents required to be disclosed in this inquiry letter, any modification to the prospectus shall be reported to the exchange first.
The reply of the issuer, the sponsor and the securities service institution to the examination and inquiry of the exchange is an integral part of the application documents for issuance and listing, and the issuer, the sponsor and the securities service institution shall ensure that the reply is true, accurate and complete.
