Essence securities company limited
About Zhejiang Canaan Technology Co., Ltd.
Issue shares to specific targets in 2020.
of
Listing recommendation
Sponsor (lead underwriter)
November, 2020
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Shengming Anxin Securities Co., Ltd. (hereinafter referred to as the "sponsor") is entrusted by Zhejiang Canaan Technology Co., Ltd. (hereinafter referred to as "Canaan Technology", "Issuer", "Listed Company" or "Company") to issue this listing recommendation for the issuer’s issue of shares to specific targets in 2020 (hereinafter referred to as "this issue").
The sponsor and the sponsor representative have been honest, trustworthy, diligent and conscientious, issued the listing recommendation letter in strict accordance with the Company Law of People’s Republic of China (PRC) (hereinafter referred to as the Company Law), the Securities Law of People’s Republic of China (PRC) (hereinafter referred to as the Securities Law) and other relevant regulations of China Securities Regulatory Commission (hereinafter referred to as the China Securities Regulatory Commission) and Shenzhen Stock Exchange, and guaranteed the documents issued.
(Unless otherwise specified in this listing proposal, relevant terms have the same meanings as those in the Due Diligence Report of Sponsors of Essence Securities Co., Ltd. on Zhejiang Canaan Technology Co., Ltd. Offering Shares to Specific Objects in 2020)
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Catalogue
Shengming ….. 2
Contents ….. 3
Section 1 Basic information of the issuer ….. 5
I. Basic information about the issuer ….. 5
II. The structure of the issuer’s share capital and the major shareholders ……
Iii. Main business of the issuer ……
Iv. the issuer’s core technology and research and development ….. 9
V. Major financial data and financial indicators of the issuer during the reporting period ….. 21
VI. Main risks of the issuer ….. 23
Section 2: The situation of issuing shares to specific targets this time …… 27
I. Types and par value of shares to be issued 27
II. Issuance Method and Time ….. 27
Iii. Issuer and Subscription Method ……………….
IV. Pricing Dates, Pricing Principles and Issue Prices ….. 27
V. Number of issues 28
VI. Sale restriction period …………
VII. Arrangements for Rolling Profit ….. 29
VIII. Place of listing 29
IX. Validity of resolutions 29
X. Amount and purpose of raised funds ….. 29
Section 3 Information on Sponsors and Their Personnel ….. 31
I. Sponsor representatives of this offering ….. 31
II. Project Co-sponsors and other project team members of this offering …… 31
Section IV Explanation on whether the sponsor institution has any circumstances that may affect the fair performance of the sponsor duties …… 33
Section 5: The internal audit procedures and opinions of the sponsors on this securities issuance ….. 34
I. Internal audit procedures of the sponsor for this project ….. 34
II. Core Opinions of Sponsors on the Project ….. 34
3-3-4 Section 6 Matters that a sponsor institution should undertake in accordance with relevant regulations …… 35
Section 7 Decision-making Procedures for the Issuer’s Performance in this Issuance …… 36
I. Deliberation by the Board of Directors 36
Ii. Deliberation at the shareholders’ meeting ……………………………..
Section 8 Specific arrangements for the sponsors to continuously supervise the issuer’s securities after listing ……
Section 9 Other matters needing explanation ….. 39
Section 10 Recommendation conclusion of the sponsor institution on this securities issuance and listing ….. 40
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Section 1 Basic Information of the Issuer
I. Basic information of the issuer
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Ii. the issuer’s share capital structure and major shareholders.
As of September 30, 2020, the company’s share capital structure is as follows:
As of September 30, 2020, the shareholding of the top ten shareholders of the company is as follows:
As of September 30, 2020, the shareholding of the top ten shareholders with unlimited sales conditions of the company is as follows:
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III. Main business of the issuer
The issuer’s main business is research and development, production, sales and technical services of pharmaceutical equipment, which can provide professional, customized and integrated solutions for pharmaceutical enterprises. The products and services provided by the issuer can be mainly divided into solid preparation equipment series, powder process equipment series, fluid process equipment series, Chinese medicine extraction equipment series, intelligent warehousing and logistics system, and medical research and development services.
(a) solid preparation equipment series
Solid preparations have the advantages of high physical and chemical stability, low production cost, convenient taking and carrying, etc., and are widely used and varied in pharmaceutical preparations. The production process of solid preparation includes pretreatment, granulation, total mixing, transportation, molding and packaging. The specific products of the company’s solid preparation equipment series mainly include pharmaceutical complete machines, pharmaceutical containers and accessories, and can provide complete line equipment and solutions for three granulation processes: wet granulation, boiling granulation and dry granulation. In each period of the reporting period, the revenue of the company’s solid preparation equipment series products accounted for 74.06%, 52.19%, 45.26% and 63.96% of the company’s total revenue, respectively. During the reporting period, the revenue scale remained basically stable, and it was the product type with the highest proportion of the company’s operating income.
(II) Powder process equipment series
Powder process equipment is used for crushing, grading, mixing and tabletting drugs in the process of preparation production. Powder refers to the collection of countless solid particles. In pharmaceutical solid preparations, the commonly used particle size ranges from 1? M to about 10mm of tablets, usually 100? Particles below m are called "powder", 100? Particles above m are called "granules". Compared with solid preparations, powder preparations have the advantages of increased surface area, uniform drug content and improved solubility, so they are absorbed quickly and fully by human body. The company’s powder process equipment specifically includes crusher, ball mill, tablet press, capsule filler and other equipment, and some links.
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The equipment can be used in common with solid preparation equipment series. In each period of the reporting period, the income of the company’s powder process equipment series products accounted for 9.80%, 9.56%, 13.13% and 6.42% of the company’s total income, respectively, and the income scale increased year by year, and the proportion in the income structure was relatively stable.
(III) Fluid process equipment series
Fluid process equipment system is used to clean and disinfect pharmaceutical equipment and purify pharmaceutical water, which has a key impact on drug quality and safety. The company can provide customers in the biological preparation and pharmaceutical industries with comprehensive solutions for fluid process systems that meet the cGMP requirements of China, EU, WHO and the United States, and the specific products include pharmaceutical water equipment, engineering, pharmaceutical liquid preparation systems and other fluid process equipment. In each period of the reporting period, the income of the company’s fluid process equipment series products accounted for 3.48%, 18.35%, 19.30% and respectively.
11.60%, while the income scale is growing rapidly, its proportion in the company’s business structure is also increasing.
(4) Series of traditional Chinese medicine extraction equipment
Traditional Chinese medicine extraction equipment is suitable for the extraction and concentration of traditional Chinese medicine, and can also be used for the extraction and concentration of effective components of other natural products. The company can provide customers with automatic whole-line solutions for traditional Chinese medicine extraction. The specific products mainly include extraction tanks, purification and separation equipment, mixing tanks, filters, double-effect self-circulation vacuum evaporation and concentration systems, etc. In each period of the reporting period, the income of the company’s Chinese medicine extraction equipment series products accounted for 6.84%, 5.93% of the company’s total income respectively.
4.51% and 3.70%, the scale is relatively stable.
(E) Intelligent warehousing and logistics system
The company can provide customers with professional comprehensive solutions of intelligent logistics system, including industrial automation production line, intelligent three-dimensional warehouse, intelligent warehouse logistics management system, etc., which can realize intelligent operation of sorting, conveying, handling, feeding, stacking and warehousing for enterprise material management. The company’s intelligent logistics system can be widely used in medicine, food and beverage, express delivery, e-commerce, third-party warehousing, communication and other industries. At present, it has established stable cooperative relations with many well-known corporate customers such as Hongri Pharmaceutical and Shentong Express. In each period of the reporting period, the proportion of the company’s intelligent warehousing and logistics system business income to the company’s total income was as follows
4.59%, 12.12%, 14.77% and 11.64%, the income scale is growing rapidly and the proportion of income continues to increase.
(6) Other equipment series
The company’s other equipment series are mainly all kinds of equipment products that can be used in other businesses such as beer brewing. In each period of the reporting period, the sales revenue of other equipment series of the company accounted for 0.36% of the company’s total revenue respectively.
1.05%, 1.95% and 1.25%, the scale is relatively small.
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(7) Pharmaceutical R&D services
Since 2019, the company has taken Bixun Medicine, a wholly-owned grandson company, as the main platform, and relied on the company’s technological advantages in the field of preparation equipment to provide pharmaceutical research and development services for pharmaceutical enterprise customers, so as to further enhance the service ability for customers’ all-round needs. The specific business includes consistency evaluation service of chemical solid preparations, technical development service of improved and innovative drugs and technical improvement and quality standard improvement service of traditional Chinese medicine solid preparations. By the end of the reporting period, the company has initially formed a relatively complete pharmaceutical R&D and testing system. The existing pharmaceutical R&D service customers include Tianan Pharmaceutical, Haosen Pharmaceutical, Sunflower Pharmaceutical and other large pharmaceutical enterprises. This business is an important strategic focus of the company’s shift from production to service. From January to September in 2019 and 2020, the company’s pharmaceutical R&D service business achieved revenue of 379,700 yuan and 2,380,800 yuan respectively. It is expected that the pharmaceutical R&D service business will become one of the company’s important performance growth points in the future.
Iv. the issuer’s core technology and research and development.
(A) the source and application of core technologies
According to the characteristics and development trend of pharmaceutical equipment industry, the company mainly obtains core technologies through independent research and development and foreign cooperative research and development. After years of development and key layout, the company has initially possessed strong research and development capabilities and technical strength.
By the end of the reporting period, the company’s products won 2 national excellent patent awards; The company’s R&D projects are listed in 2 national key new product plans and 7 national torch plan projects. The company independently drafted 6 industry standards, with 494 valid authorized patents, and its technical strength is in the forefront of the industry. Through continuous training and accumulation, the company has established a research and development team with outstanding technology and rich experience. The company has more than 250 R&D personnel, and the core members of the team have been engaged in R&D work in the company for many years, which is relatively stable and the company has strong R&D strength.
During the reporting period, the products and services provided by the company can be mainly divided into solid preparation equipment series, powder process equipment series, fluid process equipment series, traditional Chinese medicine extraction equipment series, intelligent warehousing and logistics system, and medical research and development services. Among them, the main products of the company’s solid preparation equipment series business include wet granulation series, boiling drying granulation series, dry granulation series, mixing series, coating series, lifting series, cleaning series and other products. During the reporting period, the core technologies involved in various products of the company are as follows:
Canaan Science and Technology issues stock application documents and listing recommendation letters to specific targets.
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Canaan Science and Technology issues stock application documents and listing recommendation letters to specific targets.
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Canaan Science and Technology issues stock application documents and listing recommendation letters to specific targets.
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Canaan Science and Technology issues stock application documents and listing recommendation letters to specific targets.
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Canaan Science and Technology issues stock application documents and listing recommendation letters to specific targets.
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Canaan Science and Technology issues stock application documents and listing recommendation letters to specific targets.
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Canaan Science and Technology issues stock application documents and listing recommendation letters to specific targets.
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Among them, seven products or projects, such as wet mixing granulator, multifunctional boiling granulator, hopper mixer, lifting feeder, modular pharmaceutical flexible production line equipment and dry granulator, have been included in the "National Torch Plan"; Two projects, wet mixing granulator with tangent paddle, fluidized bed automatic control system for solid preparation and its control method, won the 17th China Patent Excellence Award; Three products, such as hopper mixer, lifting feeder and automatic cleaning system, have been rated as national key new products; Seven products or projects, such as multifunctional boiling granulator, hopper mixer, on-line cleaning of automatic cleaning machine, perforated coating machine, dry granulator, wet mixing granulator and vacuum feeder, have been rated as provincial-level industrial new products in Zhejiang Province. Three products or projects, such as wet mixing granulator, modular pharmaceutical flexible production line and hopper automatic cleaning machine, have won the second prize of scientific and technological progress in Zhejiang Province; Two products, such as hopper lift mixer and dry granulator, have won the third prize of scientific and technological progress in Zhejiang Province.
(II) R&D investment
The company is fully aware of the importance of continuous innovation to the company’s performance growth and long-term development. In order to ensure the leading edge in technology, in recent years, with the strengthening of the company’s strength, the company has continuously increased its investment in new product research and development and technological improvement, and the research and development expenses have increased year by year, and the investment ratio has been rising.
During the reporting period, the company’s R&D investment details are as follows:
Unit: ten thousand yuan,%
(III) Foreign technical cooperation
1. R&D cooperation with Wenzhou University
(1) Cooperate with Wenzhou University to develop the project of "Research on Intelligence and System Integration of Wet Granulation Production Line"
In June 2017, the company signed a technical cooperation agreement with Wenzhou University to jointly develop the project of "Research on Intelligence and System Integration of Wet Granulation Production Line", and the cooperation project has been completed. The company has obtained patents through the research and development of this project as follows:
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According to the Cooperation Agreement signed by both parties, the research and development results produced by this cooperation are enjoyed by the company and do not belong to the joint patent.
(2) Entrust Wenzhou University to develop the project "Research on Intelligent Servo Dry Granulation and System Integration"
In September 2019, the company signed a technology development contract with Wenzhou University. The company entrusts Wenzhou University to develop the project "Research on Intelligent Servo Dry Granulation and System Integration". As of the date of signing this recommendation, the cooperation has not been completed. The company obtained the following patents through the research and development of this project:
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According to the agreement between the two parties, the research and development results produced by this cooperation are enjoyed by the company and do not belong to the joint patent.
2. Cooperative research and development with Wenzhou Pump and Valve Engineering Research Institute of Lanzhou University of Technology
(1) Entrusted Wenzhou Pump and Valve Engineering Research Institute of Lanzhou University of Technology to develop the "automatic welding fixture" project. From September 2018 to June 2019, the company entrusted Wenzhou Pump and Valve Engineering Research Institute of Lanzhou University of Technology to develop the "automatic welding fixture" project, and the cooperation project has been completed. The company obtained the following patents through the research and development of this project:
According to the Technology Development (Entrustment) Contract signed by the company and Wenzhou Pump and Valve Engineering Research Institute of Lanzhou University of Technology, the achievements of technology development are shared by both parties, and the company is the first patentee. The company has no right restrictions on the use of technology development achievements.
(2) Entrust Wenzhou Pump and Valve Engineering Research Institute of Lanzhou University of Technology to develop the project of "Recovery of Drying Heat Energy of Pharmaceutical Equipment"
From September 2018 to December 2019, the company entrusted Wenzhou Pump and Valve Engineering Research Institute of Lanzhou University of Technology to develop the project of "Dry Heat Recovery of Pharmaceutical Equipment", and the cooperation project has been completed. The company obtained the following patents through the research and development of this project:
According to the Technical Development (Entrustment) Contract signed by the company and Wenzhou Pump and Valve Engineering Research Institute of Lanzhou University of Technology, the technical development achievements are shared by both parties, and the company is the first patentee, so there is no right restriction on the use of the technical development achievements.
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(4) Information on R&D personnel
1. Composition of R&D personnel
By September 30, 2020, the total number of technical R&D personnel in the company was 257, accounting for% of the total number of employees.
17.92%, including 4 core technicians, as follows:
Mr. Wu Wutong, born in 1985, has a bachelor’s degree, and is a top-notch young talent for scientific and technological innovation in Wenzhou. He has participated in the research and development of automatic cleaning machine for medicinal hopper, FBW series multifunctional boiling granulator, LG dry granulator and other products. The products he participated in the research and development won the first set of products in key areas of equipment manufacturing industry in Zhejiang Province, the first prize of industrial new products in Zhejiang Province, the second prize of science and technology in Zhejiang Province and the first prize of science and technology in Wenzhou City, and won more than 60 patents, including 6 invention patents.
Mr. Xie Zhongze, born in 1945, bachelor degree, senior engineer. He has presided over MD series hopper cleaning machines and other projects (the second prize of Wenzhou Science and Technology Progress Award, the first set of products in Zhejiang Province, and national key new products) and FZ boiling granulator (the key technological innovation project in Zhejiang Province), and participated in the design and development of modular pharmaceutical flexible production line equipment (the national key torch plan project, the major science and technology project in Zhejiang Province, and the second prize of Zhejiang Science and Technology Progress Award). He is currently a member of the 4th Expert Committee of China Pharmaceutical Equipment Industry Association and the 3rd National Pharmaceutical Equipment Standardization Technical Committee, and has obtained 6 patents, including 1 invention patent.
Mr. Wang Changyong, born in 1982, bachelor degree, engineer. Participated in the research and development of drum coating machine (the first set of products in Zhejiang Province), cutting granulator, wet mixing granulator and other products, and obtained 20 patents, including 1 invention patent.
Mr. Zhang lei, born in 1975, bachelor degree, senior engineer. The wet mixing granulator, which participated in the design and development, won the second prize of Zhejiang Science and Technology in 2008. In 2017, he was awarded the title of famous teacher in Wenzhou, and in 2019, he was selected as the leading talent of scientific and technological innovation in Wenzhou. Participated in compiling an industry standard, published 5 papers, and obtained more than 50 patents, including 9 invention patents.
In 2019, the remuneration received by the above-mentioned core technicians from the company is as follows:
Unit: 10,000 yuan
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2. Changes of core technical personnel in the last two years
In the last two years, the company’s core technical personnel have not changed. In order to prevent and eliminate potential disputes between service inventions and non-patented technologies, the company and its subsidiaries have signed a Supplementary Agreement with employees who lead or participate in technology research and development, stipulating that the intellectual property rights formed by service inventions and creations belong to the company, and employees have the obligation to keep confidential the company’s business secrets. The above measures effectively prevent ownership disputes and infringement disputes caused by technical information leakage.
V. Main financial data and financial indicators of the issuer during the reporting period
(a) a brief financial report
1. Briefly consolidate the balance sheet
Unit: 10,000 yuan
2. Brief consolidated income statement
Unit: 10,000 yuan
3. Brief consolidated cash flow statement
Unit: 10,000 yuan
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(II) Main financial indicators
1, profitability indicators
2, solvency indicators
3, asset turnover ability index
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VI. Main risks of the issuer
(A) Industry policy risks
The company’s main business is research and development, production, sales and technical services of pharmaceutical equipment. The pharmaceutical equipment manufacturing industry mainly involved in the company’s business belongs to one of the six development areas promoted by the "Guidelines for the Development Planning of Pharmaceutical Industry (2016 Edition)" and is strongly supported by the national industrial policy. In the future, with the deepening of China’s medical and health system reform, the policy orientation of the pharmaceutical industry will be adjusted and improved, and the policy environment of the pharmaceutical equipment industry may undergo major changes. If the company can’t adjust its business strategy in time to adapt to the changes in market rules and regulatory policies brought about by the reform of the medical and health system, it will have an adverse impact on the company’s operation.
(B) Market competition intensifies risks
The company’s specific business segments can be subdivided into solid preparation equipment series, powder process equipment series, fluid process equipment series, traditional Chinese medicine extraction equipment series, intelligent warehousing and logistics system, and medical research and development services. Although the company’s products and services have certain advantages in the same industry and have established long-term cooperative relations with a number of well-known domestic or international pharmaceutical, health care products, food and logistics enterprises, with the gradual improvement of the overall development level of the domestic pharmaceutical equipment industry, the market competition faced by the company in related business fields may intensify.
If the company can’t keep the advanced technology and production level, increase the breadth and depth of its sales and service network, or make mistakes in its development strategy and competitive strategy, the company’s market share may decline and its competitiveness may decrease, and these adverse changes may adversely affect the company’s operating performance.
(3) Investment risks of investment projects with raised funds
The funds raised by this stock issue to specific targets will be invested in the construction projects of intelligent logistics system production center, pharmaceutical liquid distribution system production center, pharmaceutical R&D service platform upgrade and expansion project, headquarters base construction project and supplementary company working capital. The raised funds investment projects have been carefully and fully studied and demonstrated, and it is expected to produce good economic benefits. The implementation of these projects will effectively improve the company’s technical level and overall production capacity in the pharmaceutical equipment business field, which is conducive to the company’s rational layout of business boards.
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Block, integrate superior resources, enhance core competitiveness and improve profitability. However, if the construction of this fund-raising investment project fails to be completed on time and in quality due to unforeseen factors, or the downstream market undergoes major adverse changes during the construction investment period, and the expected income of the fund-raising investment project cannot be realized as scheduled, it will directly affect the company’s future profitability. In addition, if the company can’t effectively implement the relevant measures to digest the new capacity, or the relevant measures can’t achieve the expected results, the company may face the risk that the new capacity can’t be digested, which will adversely affect its operating performance.
(D) Management risk of business scale expansion
After the completion of this issue of shares to specific targets, with the arrival of raised funds and the implementation of raised funds investment projects, the company’s business scale will be further expanded, and the requirements for management level will be improved. Although the company has accumulated some management experience and trained a group of managers with outstanding ability in the years of development, with the expansion of the company’s business scale, it will become a new challenge for the company to introduce and train all kinds of management talents to match the company’s development trend, optimize the original operation system and management model in time, and establish more effective decision-making procedures and internal control systems. If the company can’t effectively solve the management problems and properly resolve the management risks in the development process, it will adversely affect the company’s production and operation.
(V) Risk of profit decline caused by depreciation and amortization of new assets.
As of September 30, 2020, the book value of the company’s fixed assets was 207,625,400 yuan, and the book value of intangible assets was 79,457,300 yuan. The total amount of funds to be raised this time is no more than 450 million yuan (including the principal amount). After the project is completed, the company will add a large amount of long-term assets, and correspondingly increase depreciation and amortization. Therefore, if the fund-raising project fails to produce benefits as scheduled or the actual income is significantly lower than expected, the company will face the risk of profit decline due to the increase in depreciation and amortization of new assets.
(VI) Risks related to international business
Since January, 2020, the novel coronavirus epidemic has gradually spread around the world, showing the characteristics of fast spread, wide spread and long duration. At present, significant progress has been made in domestic epidemic control, and socio-economic and production activities are recovering in an orderly manner, but the epidemic is still spreading in many countries around the world. In addition to the epidemic, the international community also has the changing trend of slow global economic growth and declining stability of the international situation.
In each period of the reporting period, the company’s international business income was 31,142,600 yuan, 31,960,500 yuan, 40,227,400 yuan and 42,587,600 yuan respectively, accounting for 7.00%, 5.52% and 5.72% of the current operating income respectively.
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And 7.05%. Under the influence of the global novel coronavirus epidemic, the slowdown of economic growth and the decline of the stability of the international situation, the company’s progress in exploring the international market has certain risks. If the international economic situation deteriorates, resulting in a decline in market demand, it will adversely affect the company’s production and operation.
(VII) Risk of impairment of goodwill
During the reporting period, the company expanded its business field through endogenous development and extended mergers and acquisitions, and formed a certain scale of goodwill in the process of mergers and acquisitions. By the end of the reporting period, the balance of the company’s book goodwill was RMB 85,735,000, which was formed by the acquisition of two holding subsidiaries, Canaan Lemite and Canaan Feiqi. As of the date of signing this recommendation, the business of the above-mentioned subsidiaries has developed steadily and operated well, and there is no sign of impairment of the company’s book goodwill. In the future, if the operating conditions of the above subsidiaries fail to meet expectations, the company will face the risk of profit decline due to impairment of book goodwill.
(8) The risk that the immediate return will be diluted.
After the completion of this issuance, the total share capital and net assets of listed companies will increase to a certain extent, and the overall capital strength of listed companies will be improved. Listed companies will take advantage of this opportunity to raise funds to rationally arrange business segments, integrate superior resources, enhance core competitiveness and improve profitability. However, it takes a certain period from the time when the raised funds are put into use to the time when the fundraising project is put into production and benefits are generated. Before the fundraising project generates benefits, the shareholder return still depends on the company’s existing business foundation. Due to the increase of the company’s total share capital, the company’s earnings per share index may decline after issuing shares to a specific target, and there is a risk of diluting the company’s immediate return in the year of issuing shares to a specific target.
(9) The risk that the dividends of the original shareholders are reduced and the voting rights are diluted.
After the completion of this issue of shares to a specific target, the company’s share capital will increase, and the shareholding ratio of the original shareholders will decrease. The undistributed profits accumulated before this issue will be shared by the new and old shareholders after the completion of this issue in proportion to the shares after the issue, so there is a risk that the dividends of the original shareholders will be reduced and the voting rights will be diluted.
(10) Examination and approval risks
This issue has been reviewed and approved by the board of directors and shareholders’ meeting of the company, and it still needs to be reviewed and approved by Shenzhen Stock Exchange and approved by China Securities Regulatory Commission. After completing the above examination and approval procedures, the company will apply to Shenzhen Stock Exchange and Shenzhen Branch of China Securities Depository and Clearing Co., Ltd. for stock issuance, registration and listing, and complete the approval procedures for all the shares issued to specific targets. There are uncertainties as to whether the above-mentioned reporting items can be approved and approved for registration, and when they can be approved and approved for registration.
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(11) Risk of stock price fluctuation
The company has always strictly followed the requirements of relevant laws and regulations, standardized the company’s behavior, disclosed important information comprehensively, fairly, timely and accurately, and reduced the investment risk of shareholders as much as possible. However, the reasons for the stock price fluctuation are very complicated. The stock price is not only affected by the company’s development prospects and profitability, but also closely related to investors’ psychological expectations, the relationship between stock supply and demand, the national macroeconomic situation and the international political and economic situation. The company’s stock price may fluctuate deviating from the value due to the changes of the above factors. Therefore, investors may suffer losses due to stock market fluctuations when investing in the company’s stock.
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The second quarter of this issue of shares to specific objects.
1. Types and par values of shares to be issued
The shares issued this time are RMB ordinary shares (A shares) listed in China, with a par value of RMB 1.00 per share.
Second, the way and time of issuance
The shares issued this time are all issued to specific targets. The company will choose an appropriate time to issue shares to a specific target within the validity period of the decision made by the China Securities Regulatory Commission to approve the registration.
III. Issuer and Subscription Method
The target of this stock issue is not more than 35 specific investors (inclusive) who meet the requirements set by the China Securities Regulatory Commission, including securities investment fund management companies, securities companies, trust companies, finance companies, insurance institutional investors, qualified foreign institutional investors and other legal persons, natural persons or other qualified investors who meet the requirements set by the China Securities Regulatory Commission. Among them, securities investment fund management companies, securities companies, qualified foreign institutional investors and RMB qualified foreign institutional investors subscribe for more than two products managed by them, which are regarded as one issue object; Trust companies, as issuers, can only subscribe with their own funds.
The board of directors is authorized by the shareholders’ general meeting to negotiate with the sponsor (lead underwriter) according to the bidding results in accordance with the relevant regulations of China Securities Regulatory Commission and Shenzhen Stock Exchange after the application for this issuance has been approved by Shenzhen Stock Exchange and the China Securities Regulatory Commission has made a decision to approve the registration. If the laws and regulations of the state have new regulations on the issue target of issuing shares to specific targets, the company will make adjustments according to the new regulations.
All issuers subscribe for the shares issued this time in cash at the same price.
4. Pricing benchmark date, pricing principle and issue price
The pricing benchmark date of this issue of shares to a specific object is the first day of the issue period of this issue of shares to a specific object.
The issue price of this issue of shares to a specific object is not less than 80% of the average trading price of the company’s shares in the 20 trading days before the pricing benchmark date. Average trading price of the company’s shares 20 trading days before the pricing benchmark date = pricing benchmark.
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Total trading volume of the company’s shares in the 20 trading days before/the total trading volume of the company’s shares in the 20 trading days before the pricing benchmark.
During the period from the pricing base date to the issue date of this issue, if the company issues dividends, bonus shares or capitalization, the issue price will be adjusted accordingly. The adjustment formula is as follows:
Pay cash dividends: P=P
-D
Dividend or capitalization: P=P
/（1+N）
At the same time: P=(P
-D）/（1+N）
Among them, P
In order to adjust the pre-issue price, D pays cash dividends per share, N pays dividends per share or increases the share capital, and P is the adjusted issue price.
After the company’s application for this issue has been approved by Shenzhen Stock Exchange and the China Securities Regulatory Commission has made a decision to approve the registration, the board of directors will negotiate with the sponsor institution (lead underwriter) according to the provisions of relevant laws, regulations and documents and the investors’ subscription quotation.
V. Number of issues
The number of shares issued to a specific object this time is determined by dividing the total amount of raised funds by the issue price, and it shall not exceed 30% of the total share capital of the company before this issuance. As of the date of signing this recommendation, the company’s total share capital is 257,224,900 shares. According to this calculation, the number of shares issued to specific targets this time does not exceed 77,167,470 shares (including the number). The final number of issues will be determined by the board of directors of the company through consultation with the sponsor (lead underwriter) of this issue according to the authorization of the company’s general meeting of shareholders and the actual situation at the time of issuance after the China Securities Regulatory Commission has made a decision to approve the registration of this issue.
During the period from the announcement date of the resolution of the board of directors issued to a specific object to the issuance date, if the company’s shares are changed due to bonus shares or capitalization, the upper limit of the number of shares issued to a specific object will be adjusted according to the relevant regulations of the China Securities Regulatory Commission, as follows:
Dividend or capitalization: Q=Q
×（1+N）
Where: q
In order to adjust the number of issued shares before, n is the number of bonus shares or capitalization shares per share, and q is the adjusted number of issued shares.
Sixth, the restricted sale period
After the completion of this issue of shares to a specific object, the shares subscribed by a specific investor shall be from the date of the end of the issue.
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It shall not be transferred within six months, and shall be implemented according to the relevant regulations of China Securities Regulatory Commission and Shenzhen Stock Exchange after the end of the sales restriction period.
After the issuance of shares to a specific target, the company’s shares increased due to the company’s share offering, capitalization of capital reserve or share allotment shall also comply with the above-mentioned restricted sale period arrangement. The share transfer after the end of the lock-up period will be implemented in accordance with relevant laws and regulations and the relevant provisions of China Securities Regulatory Commission and Shenzhen Stock Exchange.
Seven, the arrangement of accumulated profits
After the completion of this issue of shares to a specific target, the undistributed profits accumulated before this issue will be shared by the new and old shareholders after the completion of this issue in proportion to the shares after the issue.
VIII. Place of listing
The shares issued to specific targets this time will be listed and traded on Shenzhen Stock Exchange.
IX. Validity of the resolution
The resolution to issue shares to specific targets is valid for 12 months from the date of deliberation and approval by the shareholders’ meeting.
X. Amount and use of raised funds
The total amount of funds raised by this stock issue to a specific target does not exceed 450 million yuan (including the number), and it is intended to be used for the following projects after deducting the issuance expenses:
Unit: 10,000 yuan
Before the funds raised in this issuance are in place, the company will invest with self-raised funds first according to the actual situation of the projects invested by the raised funds, and replace them after the raised funds are in place. After the raised funds are in place, if the actual net amount of raised funds after deducting the issuance expenses is less than the total amount of raised funds to be invested, the raised funds will be invested in this issuance.
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Within the scope of capital projects, the company will adjust and finally decide the specific investment projects, order and specific investment amount of each project according to the actual amount of funds raised and the priorities of the projects. The insufficient funds raised will be solved by the company itself. After verification, the sponsor believes that the issuer’s issuance plan complies with the Company Law, the Securities Law, the Measures for the Registration of Growth Enterprise Market and other relevant laws and regulations.
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Section III Information on Sponsors and Their Personnel
I. Sponsor representative of this offering
The sponsor appointed Mr. Wu Yiming and Ms. Yang Su as the sponsor representatives of this offering. The practice of the above two sponsor representatives is as follows:
Mr. Wu Yiming: Executive General Manager and Sponsor Representative of the Investment Banking Department of Essence Securities Co., Ltd. The main projects he presided over or participated in included: initial public offering of shares of Canaan Technology and its listing on GEM, initial public offering and listing of shares of State Inspection Group, asset reorganization of Xinghu Technology, purchase of assets of Orient Network, issuance of shares of Xinghu Technology to specific targets, issuance of shares of Orient Network to specific targets, issuance of shares of Canaan Technology to specific targets, perennial financial adviser of China Wenfa, and acquisition of financial adviser of Guangxin Group.
Mr. Wu Yiming has not been punished in any form by the regulatory authorities since his practice.
Ms. Yang Su: Executive General Manager and Sponsor Representative of the Investment Banking Department of Essence Securities Co., Ltd. The main projects that he presided over or participated in were: Chihong Zinc Germanium IPO and listing, Guanhao High-tech IPO and listing, Hongta Securities IPO and listing, Jimin Pharmaceutical IPO and listing, Changjiu Logistics IPO and listing, Guojian Group IPO and listing, Xinghu Technology Asset Restructuring, Oriental Network Asset Purchase, build peak chemical Major Asset Restructuring, Xinning Logistics Major Asset Restructuring, Yunda Science and Technology Stock Reform and Pacific Securities Reorganization and Listing, China Resources Biochemical Stock Reform and Stock Issue to Specific Objects, Valin Steel Stock Issue to Specific Objects, ruitai Science and Technology Stock Issue to Specific Objects, Rizhao Port Stock Issue to Specific Objects, Xinghu Science and Technology Stock Issue to Specific Objects, Oriental Network Stock Issue to Specific Objects and other projects.
Ms. Yang Su has not been punished by the regulatory authorities in any form since her practice.
II. Project co-sponsors and other project team members of this issuance
The sponsor has appointed Mr. Ren Yan as the project co-organizer of this offering. The practice of project co-organizers is as follows:
Mr. Ren Yan: Vice President of Investment Banking Department of Essence Securities Co., Ltd., Master of Accounting. In 2017, he joined Essence Securities and began to engage in investment banking business, with the qualification of securities industry practitioners (certificate number: S1450117070153). He mainly participated in the reorganization of Xinghu technology assets, the issuance of convertible bonds by Changjiu Logistics, the initial public offering and listing of Harbin Sanlian, and the reorganization of Yunda technology assets. Since his practice, Mr. Ren Yan has not been punished in any form by the regulatory authorities.
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Other members of the project team: Mr. Wang Lubing, Mr. Hu Mingxing, Mr. Peng Xueyi, Mr. Chen Zhigang and Mr. Huang Yiting.
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The fourth section is about whether the sponsor institution has any circumstances that may affect the fair performance of the sponsor duties.
Description of
1. The sponsor institution and its controlling shareholder, actual controller and important related party do not hold the shares of the issuer or its controlling shareholder or important related party;
2. The issuer or its controlling shareholder, actual controller or important related party does not hold the shares of the sponsor and its controlling shareholder, actual controller or important related party;
3. The sponsor representatives, their spouses, directors, supervisors and senior managers of this sponsor institution do not own shares of the issuer or its controlling shareholders and important related parties, or hold positions in the issuer or its controlling shareholders and important related parties;
4. The sponsor representative, the person in charge of the sponsorship business, the person in charge of the core, the person in charge of the sponsorship business department and other sponsors of this sponsor institution have no interest in the issuer and its related parties, and there is no situation that prevents them from making independent professional judgments;
5. The sponsor institution and its controlling shareholders, actual controllers and important related parties have no major business dealings with the issuer or its controlling shareholders, actual controllers and important related parties, such as mutual guarantee or financing;
6. There is no other relationship or interest between the sponsor and the issuer.
This recommendation institution shall independently and impartially perform its recommendation duties in accordance with relevant laws and regulations and the Articles of Association.
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Section 5: Internal audit procedures and opinions of the sponsors on this securities issuance
I. Internal audit procedures of the sponsor for this project.
The sponsor’s internal audit procedures for the issuer’s current issuance project mainly include: the project team understands the situation on the spot and conducts due diligence, and issues an application report for project establishment; The investment banking project review committee will hold a project review meeting and vote on the project; The Quality Control Department and the Kernel Department conduct on-site audit and review the full set of application documents and sponsorship working papers; The kernel department shall carry out the verification procedure for the person in charge of the sponsorship business department, the sponsor representative and other relevant personnel of the project; The kernel committee held a kernel meeting, put forward kernel feedback and voted. The working meeting of the core committee for securities issuance application was held on October 27th, 2020 in the video conference room of Anxin Securities Co., Ltd., 27th floor, Allianz Building, Futian District, Shenzhen. Seven members of the core group attended the meeting, and the members of the core committee discussed in depth the major issues related to this issuance. After listening to the explanations of the issuer’s representatives and the project team on the problems found in the kernel, the relevant certification materials were consulted; Finally, whether the issuer passed the kernel this time was voted. After voting by the participating core members, Canaan Science and Technology passed the core of this sponsor.
On November 18, 2020, the core members who reviewed the securities issuance application reviewed the completeness and compliance of the issuer’s application documents after correction. After voting by the members of the core, Canaan Technology’s application for this stock issue passed the internal audit of this sponsor.
II. Core opinions of the sponsor on this project
This issuance application complies with the Securities Law, relevant regulations of China Securities Regulatory Commission and relevant business rules of Shenzhen Stock Exchange, and agrees to be recommended to China Securities Regulatory Commission and Shenzhen Stock Exchange as a sponsor.
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Section VI Matters that Sponsors Should Commit According to Relevant Regulations The sponsors have conducted due diligence and prudent verification on the issuer, its controlling shareholders and actual controllers in accordance with laws and regulations and relevant regulations of China Securities Regulatory Commission and Shenzhen Stock Exchange, fully understood the issuer’s operating conditions, risks and problems it faces, and fulfilled corresponding internal audit procedures. Through due diligence and careful verification of the application documents, Essence Securities made the following commitments:
1. There are sufficient reasons to believe that the issuer complies with laws and regulations and the relevant provisions of China Securities Regulatory Commission and Shenzhen Stock Exchange on the issuance and listing of securities;
2. There are sufficient reasons to believe that there are no false records, misleading statements or major omissions in the issuer’s application documents and information disclosure materials;
3. There are sufficient reasons to believe that the basis for the issuer and its directors to express their opinions in the application documents and information disclosure materials is sufficient and reasonable;
4. There are sufficient reasons to believe that there is no substantial difference between the application documents and information disclosure materials and the opinions expressed by securities service institutions;
5. Ensure that the designated sponsor representative and the relevant personnel of the sponsor have been diligent and conscientious, and conducted due diligence and prudent verification on the issuer’s application documents and information disclosure materials;
6. Ensure that there are no false records, misleading statements or major omissions in the recommendation letter and other documents related to the performance of recommendation duties;
7. Ensure that the professional services provided to the issuer and the professional opinions issued comply with laws, administrative regulations, provisions of the China Securities Regulatory Commission and industry norms;
8. Voluntary acceptance of the regulatory measures adopted by the China Securities Regulatory Commission in accordance with the Measures for the Administration of Securities Issuance and Listing Sponsorship;
9. Other matters stipulated by the China Securities Regulatory Commission;
10. Commitment to voluntarily accept the self-regulatory supervision of Shenzhen Stock Exchange.
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Section VII Decision-making Procedures for the Issuer’s Performance in this Issuance
Upon verification, the issuer has fulfilled the Company Law, the Securities Law, the Measures for the Registration of Growth Enterprise Market and the decision-making procedures stipulated by Shenzhen Stock Exchange. The details are as follows:
I. Deliberation by the Board of Directors
On September 8, 2020, the 17th meeting of the fourth board of directors of the company reviewed and approved the relevant proposal on this issue of shares to a specific target. Based on the overall work arrangement of this issue of shares to a specific target, the company decided not to hold a shareholders’ meeting to consider the issues related to this issue of shares to a specific target.
On September 24th, 2020, the 18th meeting of the 4th Board of Directors of the Company deliberated and passed the Proposal on Holding the Second Extraordinary General Meeting of Shareholders in 2020, and requested that the relevant proposal on this issue of shares to specific targets be submitted to the shareholders’ meeting for deliberation.
Second, the shareholders’ meeting for deliberation
On October 19, 2020, the second extraordinary shareholders’ meeting of the company in 2020 reviewed and approved the relevant proposals on this issue of shares to specific targets, and approved this issue of shares to specific targets and related matters.
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Section VIII Specific arrangements for the sponsor institution to continuously supervise the issuer’s securities after listing. The duration of this continuous supervision is the remaining time of the year when the securities are listed and the next two complete fiscal years. The specific arrangements for continuous supervision are as follows:
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Section 9 Other matters that need to be explained There are no other matters that need to be explained.
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Section 10 Recommendation conclusion of the sponsor institution on this securities issuance and listing
This issuance application complies with laws and regulations and relevant regulations of China Securities Regulatory Commission and Shenzhen Stock Exchange. In accordance with laws and regulations and the relevant regulations of China Securities Regulatory Commission and Shenzhen Stock Exchange, the sponsor has conducted due diligence and prudent verification on the issuer, its controlling shareholder and actual controller, fully understood the issuer’s operating conditions, risks and problems it faces, fulfilled the corresponding internal audit procedures, and supported the corresponding sponsorship work papers. The sponsor believes that the application of Canaan Technology to issue shares to specific targets complies with the Company Law, the Securities Law and other laws and regulations and the relevant regulations of China Securities Regulatory Commission and Shenzhen Stock Exchange; Essence Securities agrees to be the sponsor of Canaan Technology’s offering of shares to specific targets and listing on Shenzhen Stock Exchange, and bear the corresponding responsibilities of the sponsor.
(There is no text below)
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(This page has no text, and it is the signature page of Essence Securities Co., Ltd.’ s Listing Proposal for Zhejiang Canaan Technology Co., Ltd. to Issue Shares to Specific Objects in 2020)
Project co-organizer (signature):
Renyan
Sponsor representative (signature):
Wu Yiming Yang Su
Kernel leader (signature):
Liao Xiaofei
Person in charge of sponsorship business (signature):
Qinchong
Legal representative and chairman (signature):
Huang yanxun
Essence securities company limited
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