Reply to the inquiry letter on the third round of examination of the application documents for the initial public offering and listing on the gem of northern Changlong New Material Technology Co., Ltd
Sponsor:
Lead underwriter:
March, 2002
Shenzhen Stock Exchange:
On January 14, 2022, your office has received the third round of examination and inquiry letter on the application documents of northern Changlong New Material Technology Co., Ltd. for initial public offering and listing on the gem (examination and approval letter [2022] No. 010055) issued by northern Changlong New Material Technology Co., Ltd. According to your requirements, northern Changlong New Material Technology Co., Ltd. (hereinafter referred to as the “issuer” or “company”) together with Gf Securities Co.Ltd(000776) (hereinafter referred to as the “sponsor” or “sponsor”), Beijing Dacheng Law Firm (hereinafter referred to as the “issuer’s lawyer”) Lixin Certified Public Accountants (special general partnership) (hereinafter referred to as “Lixin” or “reporting accountant”) has carefully implemented the problems listed in the audit inquiry letter one by one and replied in writing as follows. Please review.
Explanation on the content, interpretation, format, supplementary and updated disclosure of the reply:
Unless the context otherwise requires, the abbreviation in this reply report has the same meaning as that in the prospectus of northern Changlong New Material Technology Co., Ltd. on initial public offering and listing on GEM (application draft) (hereinafter referred to as the “prospectus”).
The font format of the reply to this inquiry letter is as follows:
Review the questions listed in the inquiry letter in bold
Reply to the questions listed in the audit inquiry letter
Amendment and supplementary disclosure of the prospectus (in BOLD)
In this reply, if there is any difference in the mantissa after the sum of the total and the sub item values, it is caused by rounding.
catalogue
Question 1 about R & D and gem positioning 3 question 2 about capital flow verification 85 question 3 about corporate governance and internal control 119 question 4 about business model 130 question 5 about orders 154 question 6 about construction in progress 163 question 1 about R & D and gem positioning
Application documents and inquiry reply show:
(1) The issuer is a military enterprise, mainly using non-metallic composite materials as military vehicle interior materials. At present, there is no fully comparable listed company in A-share business. The issuer cannot quantify the comparison of specific performance parameters or indicators of core technology, as well as the specific basis for the issuer’s advanced level and industry leading position in China. (2) From 2018 to 2020, the issuer’s R & D expenses were 7.8553 million yuan, 11.83 million yuan and 185535 million yuan respectively, with a cumulative amount of 382388 million yuan. The cost structure changed greatly during the reporting period; The amount of other projects in the latest year and phase I accounted for 24% of R & D expenses. The issuer is engaged in 14 R & D projects, with a total budget of 152596 million yuan.
(3) The issuer’s R & D projects include military scientific research projects and independent R & D projects, mainly military scientific research projects, supplemented by independent R & D projects. During the reporting period, the issuer participated in 108 military scientific research projects, corresponding to a total R & D cost of 30.080 million yuan, corresponding to 98.62% of the total revenue during the reporting period. From 2018 to 2020, the R & D expenses of independent R & D projects were 495000 yuan, 1495800 yuan and 3575500 yuan respectively.
(4) The issuer shall include the full amount of independent R & D projects in the R & D expenses, and conduct different accounting treatments for military scientific research projects according to the signing of the contract and the actual R & D investment time. Among them, the expenses incurred after signing the R & D contract with the military shall be included in the corresponding inventory, and the income and cost shall be recognized after the products are delivered and accepted. When there is no specific amount in the R & D Contract or the company is not required to provide products, All expenses incurred in the project are included in the R & D expenses.
(5) The issuer has 10 core technologies, which are unique technologies based on the absorption and re innovation of general technologies in the industry and independently developed at the level of technical practice, focusing on the application of functional composite products. The company has obtained 48 patents, including 3 invention patents and 45 utility model patents; Invention patents are not applied to main products.
(6) Because the application of composite materials in the field of Chinese military vehicles focused by the issuer is still in the early stage, the issuer can be competent for existing military scientific research projects and realize product transformation, and has the ability to continuously obtain military scientific research projects. The issuer’s existing R & D model can meet the needs of customer product development and updating, and there is no risk of insufficient independent R & D capability. At the same time, the issuer has the risk of not continuously obtaining military scientific research projects.
Please the issuer:
(1) Explain the R & D expenditure amount of independent R & D projects and military scientific research projects in each period of the reporting period; In combination with the requirements of Article 26 of the accounting standards for business enterprises – revenue and 2-8 of the guidelines for the application of regulatory rules – Accounting No. 2, explain whether the inclusion of the expenses incurred after signing the scientific research contract with the military into the inventory or R & D expenses meets the above requirements.
(2) In combination with the update iterations of main products in the reporting period, explain the reasons and future trend of less independent R & D investment in each period of the reporting period, whether it is sufficient to support the product update iterations, whether there is a risk of significant decline in the issuer’s future performance, and the impact of the above situation on the issuer’s sustainable operation ability, In the “tips on major issues” section of the prospectus, it fully reveals the risk of competitiveness decline caused by insufficient independent R & D investment and product renewal iteration on the ability of sustainable operation.
(3) Explain whether the R & D mainly depends on military scientific research projects, whether they meet the industry characteristics, and whether the R & D ability of the issuer matches the main products, R & D personnel, fixed assets, business scale, etc; In combination with the above situation, explain whether the issuer lacks the ability to continuously obtain military scientific research projects.
(4) In combination with the orders in hand, the number of R & D projects being engaged and the small budget amount, the classification shows whether the R & D investment of the issuer is sufficient to support the continuous acquisition of military scientific research projects, whether the relevant basis is sufficient, and whether the issuer has the risk of insufficient independent R & D capacity and technology elimination.
(5) Explain whether the collection and accounting of R & D expenses among various projects are accurate, and the reasons and rationality for the large changes in the structure of R & D expenses during the reporting period; The number and average salary of R & D personnel corresponding to employee salary in R & D expenses, the per capita salary of R & D positions and other positions, the salary comparison of R & D personnel of comparable companies in the same industry, the positions of subordinate departments and main work contents, and whether there is a situation in which R & D personnel are mixed with production personnel, or R & D personnel have both management functions; The main contents of direct investment, the corresponding relationship between the collected goods and the R & D project, and whether there is a mix of production and R & D materials; Specific accounting details of other items, background and rationality of other expenses, related internal control and implementation.
(6) contract industry can be compared with companies or public information, indicating that the advanced characteristics of the issuer’s core technology, the quantitative analysis of the specific performance parameters or indicators of the core technology, the less number of invention patents, the characteristics of the industry, the specific circumstances and income contribution of the patent application, and whether the invention patents have the core competitiveness.
(7) Explain whether the non-metallic composite interior has obvious advantages and disadvantages compared with the original soft package interior, engineering plastic interior, metal cabinet and wood interior, whether it conforms to the development trend of the industry, whether the relevant basis is sufficient, and how the issuer forms its own core technology based on the absorption and re innovation of general technology in the industry; Whether the issuer’s core technology is at the advanced level in China and in the leading position in the industry. If there is no objective and authoritative basis, please delete similar expressions in the prospectus.
(8) deleting redundant or useless information or lacking authoritative and objective information in the prospectus, providing practical and sufficient evidence to discuss its advanced technology. And fully explain whether the issuer meets the requirements for the positioning of the gem in documents such as the measures for the administration of the registration of initial public offering of shares on the gem (for Trial Implementation), the review rules for the issuance and listing of shares on the gem of Shenzhen Stock Exchange, and the Interim Provisions on the application and recommendation of enterprises on the gem of Shenzhen Stock Exchange.
Ask the sponsor and the reporting accountant to express clear opinions on questions (1) – (6), and ask the lawyer of the sponsor and the issuer to express clear opinions on questions (7) and (8).
The sponsor is requested to further improve and submit special opinions on whether the issuer meets the positioning of gem.
[reply] 1. Explain the amount of R & D expenditure of independent R & D projects and military scientific research projects in each period of the reporting period; In combination with the requirements of Article 26 of the accounting standards for business enterprises – revenue and 2-8 of the guidelines for the application of regulatory rules – Accounting No. 2, explain whether the inclusion of the expenses incurred after signing the scientific research contract with the military into the inventory or R & D expenses meets the above requirements.
[issuer’s reply]
(I) explain the amount of R & D expenses of independent R & D projects and military scientific research projects in each period of the reporting period. The R & D expenses of the issuer’s independent R & D projects and military scientific research projects from 2018 to 2021 are as follows:
20212020 20192018
Proportion of project amount to R & D expense amount to R & D expense amount to R & D expense amount to R & D expense (10000 yuan) proportion to R & D expense (10000 yuan) proportion to R & D expense (10000 yuan)
Independent research and development 310.95 13.12% 357.55 19.27% 149.58 12.64% 190.52 24.25% projects
Military scientific research 154250 65.10% 110510 59.56% 795.69 67.26% 545.51 69.45% projects
Daily test 516.14 21.78% 392.70 21.17% 237.73 20.10% 49.50 6.30% inspection
R & D expenses 236959 100.00% 185535 100.00% 118300 100.00% 785.53 100.00% total
It can be seen from the above table that the issuer will conduct independent research and development after deducting the R & D expenses incurred in daily test and inspection
Projects and military scientific research projects, mainly military scientific research projects; From 2018 to 2021, military scientific research
The proportion of project R & D expenditure in the total R & D expenditure is 69.45%, 67.26%, 59.56% and 65.10% respectively.
(II) in combination with Article 26 of the accounting standards for business enterprises – income and the guidelines for the application of regulatory rules – Accounting
According to the requirements of 2-8 of No. 2, the expenses incurred after signing the scientific research contract with the military are included in inventory or R & D
Does the fee meet the above requirements
The expenses incurred by the issuer after signing the scientific research contract shall be included in the corresponding inventory after the product is delivered and accepted
Recognize revenue and cost.
1. Comply with the requirements of Article 26 of the accounting standards for business enterprises – income
Article 26 of the accounting standards for business enterprises – income stipulates: “the costs incurred by an enterprise in performing a contract are not
If it falls within the scope of other accounting standards for business enterprises and meets the following conditions at the same time, it shall be recognized as the cost of contract performance
Consider an asset:
(I) the cost is directly related to a current or expected contract, including direct labor and direct labor
Materials, manufacturing expenses (or similar expenses), costs clearly borne by the customer and costs incurred solely due to the contract
Other costs;
(II) the cost increases the resources used by the enterprise to fulfill its performance obligations in the future;
(III) the cost is expected to be recovered. “
After the issuer signs the scientific research contract with the customer, the expenses incurred are directly related to the contract, and the expenses incurred are
It increases the resources used by the company to fulfill its performance obligations in the future, and is expected to sell scientific research products to customers in the future
Therefore, the expenses incurred after signing the scientific research contract with the customer are included in the inventory, which meets the requirements of the accounting standards for business enterprises – income.
2. Comply with the provisions of 2-8 in the guidelines for the application of regulatory rules – Accounting No. 2
2-8 in the guidelines for the application of regulatory rules – Accounting No. 2 stipulates: “The enterprise signs a contract with the customer to develop and produce customized products for the customer. The customer puts forward the product R & D demand to the enterprise, and the enterprise carries out product design and R & D according to the customer demand. After the product R & D is successful, the enterprise produces customized products for the customer according to the purchase quantity agreed in the contract. For the R & D expenditure incurred in the process of performing the customer contract of the above customized products, if the enterprise cannot control the relevant R & D achievements, for example, the R & D achievements can only be used If it is used for this contract and cannot be used for other contracts, the enterprise shall deal with it in accordance with the provisions of contract performance cost in the income standard, and finally include it in the operating cost. If, after comprehensively considering historical experience, industry practices, laws and regulations and other factors, the enterprise has sufficient evidence that it can control relevant R & D achievements and is expected to bring economic benefits, the enterprise shall capitalize the qualified R & D expenditure in accordance with the relevant provisions of the intangible assets standard. “
The scientific research contract signed between the issuer and the customer is mainly for the customer’s R & D and production of customized products. The expenses incurred after signing the scientific research contract belong to the expenses incurred in the process of performing the customer contract of customized products, and the issuer’s research results can be applied to other contracts of similar products. The issuer can control the relevant research results, However, the expected inflow of economic benefits brought by the R & D achievements in the future is uncertain (the number and amount of contracts related to the product that can be signed in the future are uncertain), so it is not
