Hvsen Biotechnology Co.Ltd(300871)
Self evaluation report on internal control in 2021
In accordance with the provisions of the basic norms of enterprise internal control and its supporting guidelines and other internal control regulatory requirements (hereinafter referred to as the “enterprise internal control normative system”), combined with Hvsen Biotechnology Co.Ltd(300871) (hereinafter referred to as the “company”) internal control system and evaluation methods, on the basis of daily and special supervision of internal control, We evaluated the effectiveness of the company’s internal control on December 31, 2021 (the benchmark date of the internal control evaluation report). 1、 Important statement
It is the responsibility of the board of directors of the company to establish, improve and effectively implement internal control, evaluate its effectiveness and truthfully disclose the internal control evaluation report in accordance with the provisions of the enterprise’s internal control standard system. Establish and implement the internal control of the board of supervisors. The management is responsible for organizing and leading the daily operation of the enterprise’s internal control. The board of directors, the board of supervisors and the directors, supervisors and senior managers of the company guarantee that there are no false records, misleading statements or major omissions in the contents of this report, and bear individual and joint legal liabilities for the authenticity, accuracy and completeness of the contents of the report.
The objective of the company’s internal control is to reasonably ensure the legal compliance of operation and management, asset safety, authenticity and integrity of financial reports and relevant information, improve operation efficiency and effect, and promote the realization of development strategy. Due to the inherent limitations of internal control, it can only provide reasonable assurance for the realization of the above objectives. In addition, as changes in circumstances may lead to inappropriate internal control or reduced compliance with control policies and procedures, there is a certain risk to speculate the effectiveness of internal control in the future according to the internal control evaluation results.
2、 Internal control evaluation conclusion
According to the identification of major defects in the company’s internal control over financial reporting, there are no major defects in the internal control over financial reporting on the benchmark date of the internal control evaluation report. The board of Directors believes that the company has maintained effective internal control over financial reporting in all major aspects in accordance with the requirements of the enterprise’s internal control standard system and relevant regulations.
According to the identification of major defects in the company’s internal control over non-financial reports, the company found no major defects in the company’s internal control over non-financial reports on the benchmark date of the internal control evaluation report.
There are no factors affecting the evaluation conclusion of the effectiveness of internal control from the base date of the internal control evaluation report to the date of issuance of the internal control evaluation report.
3、 Internal control evaluation
During the reporting period, the company continuously improved and optimized the company’s internal control system in accordance with the basic norms of enterprise internal control, the guidelines for the application of enterprise internal control and the guidelines for the self discipline supervision of Listed Companies in Shenzhen Stock Exchange No. 2 – standardized operation of GEM listed companies, so as to adapt to the changing external environment and internal management requirements.
(I) evaluation scope of internal control
According to the risk oriented principle, the company determines the main units, businesses and matters included in the evaluation scope and high-risk areas. The units included in the evaluation scope include Hvsen Biotechnology Co.Ltd(300871) and its subsidiaries Hubei Hvsen Biotechnology Co.Ltd(300871) Technology Co., Ltd., Changsha shibilong Animal Pharmaceutical Co., Ltd. and Wuhan Xinhua Star Animal Health Chain Service Co., Ltd. the total assets of the units included in the evaluation scope account for 100% of the total assets in the consolidated financial statements of the company, The total operating revenue accounts for 100% of the total operating revenue in the company’s consolidated financial statements.
The scope of internal control evaluation covers relevant businesses and matters of the company and its subsidiaries, mainly including: corporate governance and organizational structure, development strategy, human resources, social responsibility, corporate culture, capital activities, procurement business, production management, asset management, sales business, research and development, engineering projects, guarantee business, financial report, comprehensive budget Contract management, information and communication, subsidiary supervision; The high-risk areas of focus mainly include: capital activities, sales business, procurement business, financial reporting, engineering projects and contract management.
The above units, businesses and matters included in the evaluation scope and high-risk areas cover the main aspects of the company’s operation and management, and there are no major omissions.
The internal control construction and implementation of the main businesses and matters included in the evaluation scope in the current period are as follows:
1. Corporate governance and organizational structure
(1) Corporate governance
In accordance with the provisions of the company law, the securities law and the articles of association, the company has established a relatively perfect corporate governance structure. The general meeting of shareholders is the highest authority of the company, which manages and supervises the company through the board of directors. The board of directors is the company’s business decision-making and business leading body, which is responsible to the general meeting of shareholders and exercises the power of business decision-making within the scope authorized by the articles of association and the general meeting of shareholders. The board of supervisors is the supervisory body of the company, which inspects and supervises the company’s finance, the performance of directors and senior managers and the business of subsidiaries. According to the authorization of the board of directors, the management is responsible for organizing and implementing the resolutions of the general meeting of shareholders and the board of directors, and presiding over the daily operation and management of the enterprise.
The board of Directors consists of four professional committees: Strategy Committee, audit committee, salary and assessment committee and Nomination Committee, which are respectively responsible for the company’s future development planning, internal audit, salary system construction and talent preparation. Among the five directors of the board of directors, two independent directors serve as the convener of the audit committee, the remuneration and assessment committee and the nomination committee. Matters involving professional fields must be submitted to the board of directors after deliberation by the professional committee, so as to facilitate the independent directors to better play their role. During the reporting period, the rights and responsibilities of each institution were clear, independent, balanced and standardized.
(2) Organizational structure
During the reporting period, combined with the company’s strategic development needs, the company improved the operation and management efficiency, optimized and adjusted the existing organizational structure, established R & D business department and e-commerce business department with independent operation mechanism, and established marketing center, centralized purchase center, production quality intelligent manufacturing center, intelligent information operation Information Center The six centers, including the financial center and human resources center, have newly established the operation management department, strengthened the functions of the quality department and the audit department, and newly established the “Huanong Huisheng Research Institute” and the pet business department. Each department of the company has clear management responsibilities and authorities, forming an internal control system in which each department takes responsibility for itself, cooperates with each other, restricts each other and is linked.
The company has established and operated the following systems: the production and operation quality management system with the production quality management specification of veterinary drugs (GMP) and the operation quality management specification of veterinary drugs (GSP) as the core, the product technology R & D and innovation system with the “Hubei veterinary drug Engineering Technology Research Center” and “Huanong Huisheng Research Institute” as the platform Human resource management system with performance management as the core and safety production management system with safety (fire) production leading group as the core. The standardized operation mode of each subsidiary and the effective operation mode of each subsidiary are formulated according to the functions and management departments of the subsidiary.
2. Development strategy
The strategy committee under the board of directors of the company provides advice and suggestions for the strategic decision-making of the board of directors, and is responsible for and reports to the board of directors. The company regularly collects and arranges the national macroeconomic and industrial policies, conducts research and Analysis on the development of the veterinary drug industry, makes full use of the development elements of the veterinary drug industry, integrates internal and external resources, actively seeks and plans new directions, Shenzhen New Industries Biomedical Engineering Co.Ltd(300832) , new projects, conducts feasibility demonstration on the proposed investment projects, and provides decision-making basis for the company’s strategic development investment.
The company has formulated three strategies of products, capital and talents, namely, providing safe, stable and efficient veterinary drug products through continuous technological innovation to escort the breeding industry and food safety; Make use of the capital market, take a global view and lay out the whole industrial chain of veterinary medicine; Build a core talent team that is young, capable, responsible and loyal to the company.
3. Human resources
The company pursues the talent concept of “people do their duty and make the best use of their talents”. It has established a relatively complete management system in the employment, training, dismissal and resignation of human resources, salary and welfare, assessment, promotion, reward and punishment, career planning and other aspects, and paid social insurance and other benefits to employees in accordance with national regulations.
During the reporting period, the company established the qualification certification and application system, organized more than 100 training sessions, and broadened the horizons and ideas of employees; The company strengthened the construction of management echelon, accelerated the introduction of talents in key positions, significantly improved the construction level of youth and specialization of talent team, and ensured the vitality of the enterprise. At the same time, the company implemented the 2021 equity incentive plan, stimulated the employees’ work enthusiasm, ensured the realization of the company’s business objectives and employees’ personal development, and laid the foundation for the company’s sustainable development.
4. Social responsibility
The company attaches importance to the performance of social responsibilities, achieves the coordination between economic and social benefits, short-term and long-term interests, self-development and social development, and realizes the healthy and harmonious development of the enterprise and employees, the enterprise and society, and the enterprise and the environment. The company has established a perfect safety production management system and emergency plan for safety accidents, attached importance to employee labor protection, and regularly carried out safety and fire-fighting training to ensure that safety measures are implemented in place.
The company strictly implements the environmental protection policy, establishes the environmental protection system, and strives to reduce the pollutant emission level through technological innovation, so as to achieve the standard emission.
The company strictly implemented the regulations on the administration of veterinary drugs, formulated a complete production quality management system and work flow guided by the code for the quality management of veterinary drug production, defined the internal control processes of production, quality assurance, logistics, warehousing and other business links, and realized the risk control of the main business links of production and operation, It ensures the compliance, legality and efficiency of production and operation business. The quality department is responsible for the quality supervision and quality control of the whole process of product production: inspect all raw materials, auxiliary materials, packaging materials, semi-finished products and finished products; Participate in the audit of suppliers; Be responsible for product complaint and product recall; Responsible for verification and self inspection, and formulated management documents such as quality management system, material quality standard and inspection operation procedures to minimize the quality risk of products and provide safe and effective products for the animal husbandry industry. 5. Corporate culture
The company has established the enterprise spirit of “returning to knowledge, self-improvement, prospering virtue and establishing business” to guide the development of the enterprise. The company attaches great importance to the construction of corporate culture. Under the leadership of a sincere, United, dedicated and efficient management team, and through years of cultural precipitation, the company has built a complete corporate culture system covering corporate spirit, corporate mission and other contents. During the official account, the company actively organized more than 20 enterprises’ cultural activities in various forms, such as the annual commemorative meeting of the listed companies, the signing ceremony of the strategic cooperation between the Huaren and Hui Sheng research institutes, and the operation of the brand activity “Hui Sheng reading club”. Through the WeChat public number, WeChat tiktok and jorkey numbers, the company’s positive and upward corporate culture is spread across the board and through many channels.
6. Control activities
(1) Financial activities
In terms of fund-raising, according to the latest laws, regulations and the articles of association, the company has re formulated the fund-raising management system, which makes detailed provisions on the special account storage, use, change, management, supervision and information disclosure of the raised funds, standardizes the management of fund-raising and use, and ensures the legitimacy and efficiency of fund-raising activities. During the reporting period, the company issued convertible corporate bonds, and the independent directors, the board of directors, the board of supervisors and the general meeting of shareholders strictly performed their corresponding responsibilities, and the procedures were legal and compliant. The company signed the tripartite supervision agreement on raised funds with the recommendation institution and the special account storage bank to ensure that the raised funds are used for special purposes. The Audit Department of the company regularly conducted special inspection on the raised funds, and there was no misappropriation or occupation.
As of December 31, 2021, the board of directors of the company has prepared a special report on the storage and use of the raised funds in 2021. The annual report audit institution and the recommendation institution have issued special assurance reports and verification opinions respectively. The storage, management and use of the raised funds of the company meet the requirements of laws and regulations. During the reporting period, the company did not find any illegal use of raised funds.
In terms of investment, the board of directors of the company revised the foreign investment management system to strictly regulate the approval authority and procedures, risk control measures, information disclosure and accountability, standardize the investment behavior of the management company and its holding subsidiaries, establish an effective risk prevention mechanism, and realize the scientization and standardization of investment decision-making. During the reporting period, the company found no illegal investment.
In terms of capital operation, the company strengthens the management of the whole process of capital operation by formulating financial management system, capital management system and other systems, coordinates the capital needs of internal institutions in the process of production and operation, and improves the efficiency of capital operation; By formulating financial expenditure management system, expense reimbursement management system and other systems, strengthen the accounting system control of working capital, and strictly standardize the revenue and expenditure conditions, procedures and approval authority of funds. During the reporting period, the opening, cancellation and use of bank accounts of the company and its subsidiaries strictly implemented the management system, with complete approval procedures and standardized and complete data, so as to ensure the efficient and safe management of bank accounts. The financial center of the company and the financial department of its subsidiaries are responsible for the settlement of relevant operating funds, with strict control levels, clear rights and responsibilities and perfect accounting procedures.
(2) Procurement business
The company has formulated a series of control systems such as procurement management system, bidding procurement management system and supplier audit management system, established supplier evaluation and access processes, and established a supplier audit committee composed of personnel from quality department, audit department, production department and procurement department to audit the qualification of main raw and auxiliary materials and packaging materials manufacturers, Determine the list of qualified suppliers, so as to standardize the material procurement behavior of the company, strengthen the material procurement management of the company, reduce the procurement cost, and improve the transparency of material procurement and capital use efficiency. Through in-depth market analysis and material cost structure analysis, the company makes inquiry and price comparison analysis on each cost composition to obtain the most reasonable purchase price and purchase quality.
The company strictly implements the purchase requisition, procurement, acceptance, audit and payment processes of materials, engineering projects and equipment to prevent capital loss and credit loss.
(3) Production management
The company implements the production management mode of combining sales with safety inventory. The sales department puts forward the monthly sales plan every month, and the production department formulates the next month’s production plan according to the sales plan, inventory and main equipment capacity. At the same time, for the main products with large sales volume, the production department shall reasonably arrange production and ensure safety inventory according to historical experience and market demand.
According to the production management system, material management system, health management system, equipment management system and other systems, the production department has made specific requirements for the management of production plan, operation procedures of technological process, health management of personnel, selection and acceptance of equipment, use, repair and maintenance, etc. The production department is responsible for managing the production process of specific products and supervising the safe production. At the same time, it is responsible for the GMP management of veterinary drugs and checking the implementation of the plan. The quality department shall formulate a series of management measures according to the quality management system, including the selection of raw and auxiliary material suppliers, sampling and production process supervision
