Essential information｜What specifically does the New OTC Market Due Diligence investigation investigate?

Hong Kong Xintong-Today I would like to introduce to you what is specifically investigated in the due diligence of the New OTC Market? Let’s learn together! The NEEQ investigation involves many details，Include basic information about the company，Manager Survey，Business and technical situation，Investigation into horizontal competition and related party transactions，financial condition，Business development goal survey, etc.。

one、Basic company information

1. Company establishment situation: Understand the company registration time、Registered capital、Business scope、Equity structure and capital contribution，and obtain a business license、Articles of Association、evaluation report、Audit report、Capital verification report、Industrial and commercial registration documents and other information，Verify the legality of the company’s industrial and commercial registration、authenticity；Visit relevant government departments and intermediaries when necessary。
2. Historical evolution: check the company’s business license over the years、Articles of Association、Industrial and commercial registration documents，And business operation records over the years、annual inspection、Annual financial reports and other information，Investigate the company’s history，Check whether there are any remaining issues；Visit relevant government departments and intermediaries when necessary。
3. Investigate the company's major shareholders to understand the background of the major shareholders，Relationships or concerted actions between each other and related agreements；Changes in major shareholders and actual controllers in the past three years or potential changes in the future。two、Manager Survey
4. Survey on the qualifications and employment status of managers to understand the educational experience of managers、Professional qualifications、Industry experience and main achievements，And the positions and responsibilities held in the company。
5. The remuneration and part-time jobs of senior executives were obtained by reviewing the documents of the Three Meetings、Communicate with senior executives、Talk to issuer employees, etc.，Investigate the company's new compensation packages for senior executives、Equity incentive plan。
6. Management competency and diligence: Understand the regulatory compliance of other companies where the executive has served as an executive and the operations of that company，Analyze the ability of executives to manage the company。

Separately with the Chairman、General manager、Financial person in charge、Technical person in charge、The person in charge of sales (including but not limited to the above-mentioned personnel) will discuss the current situation of the company、development prospects and other issues.，Understand the competence and diligence of senior executives。By talking to executives、Check relevant information and other methods，Investigate executives’ moonlighting within or outside the company，Analyze whether the part-time job status of senior executives will affect their work efficiency、Quality makes a difference。

three、Investigation into horizontal competition and related party transactions

1. The horizontal competition situation is obtained by asking the company and its controlling shareholders or actual controllers.、On-site visits to production or sales departments, etc.，Investigate the company’s controlling shareholders or actual controllers and the actual business scope of the companies they control、Nature of business、Customer object、Substitutability with the company’s products, etc.，Determine whether it constitutes horizontal competition，And verify whether the company's controlling shareholder or actual controller has made a commitment to avoid horizontal competition and the performance of the commitment。
2. Related parties and related transactions confirm the company’s related parties and related party relationships，through conversations with company executives、Finance department talking to heads of key business units，Check the books、Related contracts、meeting minutes、Opinions of independent directors，Send a letter for confirmation，Consult a lawyer and CPA for advice，Investigate related-party transactions between the company and related parties。

Four、Business and technical situation

1. Industry conditions and competition are based on the company’s main business and industry，Understand industry regulatory systems and policy trends，Understand the market environment of the industry、market capacity、barriers to entry、supply and demand situation、competitive situation、Industry profit levels and future changes，Determine the development prospects of the industry and the favorable and unfavorable factors for industry development，Understand the major companies in the industry and their market shares，Investigate competitors，Analyze the company’s competitive position and changes in the industry。
2. Purchasing status is communicated to the purchasing department、Communication with key suppliers，Check relevant information and other methods，Investigate the market supply and demand situation of the company's main raw materials。

Obtain relevant information about the company's main suppliers (at least the top 10)，Calculate the purchase amount and proportion of major suppliers in the past three years，Determine whether there is significant reliance on individual suppliers，if exists，Whether to make alternative arrangements for the supply of important raw materials；Obtain long-term supply contracts with the aforementioned suppliers，Analyze deal terms，Determine the stability of the company's raw material supply and prices。

1. Production status Obtain company production process information，Combined with production core technology or key production links，Analyze and evaluate company production processes、Technology leadership in the industry。Obtain relevant information on the design and production capacity and historical output of the company's main products and compare them，Communicate with production department personnel，Analyze whether there are bottlenecks in each production link of the company。

Investigate whether the company's production processes comply with environmental protection regulations，Investigate the company’s investment in environmental protection over the years and possible future investment。On-site observation of the discharge of three wastes，Check whether there are pollution treatment facilities and their actual operation。4、Sales status is communicated with the person in charge of the company's sales department、Obtain reports from authoritative market research institutions and other methods，Investigate the market demand for the company's products (services)，Whether there is a stable customer base, etc.。

Combined with industry rankings、Competitors, etc.，Analyze the industry status and market share of the company's main products。Understand the company's sales to major customers (at least the top 10) as a proportion of total annual sales and the payment status。

1. Investigate patents owned by the company on core technology and R&D status，Analyze core technologies of products，Examine its technical level、Technology maturity、Technology development level and technological progress in the same industry；Verify the acquisition methods and usage of core technologies，Determine whether there are disputes or potential disputes and infringement of other people’s intellectual property rights。Pay attention to the validity period of patents and the impact on the company after expiration，And understand the company’s specific protective measures and effects。

Obtained the company's main research and development results、Projects under research、R&D goals and other information，Survey the company’s R&D over the years

cost

Proportion of main business income、The quantity and quality of independent intellectual property rights、Technical reserves, etc.，Analyze the company’s R&D capabilities。

five、financial condition

1. Basic financial data analysis based on the company's financial reports over the years，Collect financial data that reflects the company's basic financial status，like：Assets (monetary funds、accounts receivable、stock、foreign investment、intangible assets)、Liabilities (bank borrowings、accounts payable)、sales revenue、cost of sales、subsidy income、total profit、Net profit, etc.。
2. Financial ratio analysis calculates the company's gross profit margin for each year、ROA、ROE、Earnings per share etc.，Determine company profitability。Calculate the company's asset-liability ratio for each year、current ratio、quick ratio、Interest coverage ratio, etc.，Combined with the company's cash flow situation、Credit standing at the bank、Available financing channels, credit lines and contingent liabilities, etc.，Determine the company's solvency。

Calculate the company's annual asset turnover rate、Inventory turnover rate and accounts receivable turnover rate, etc.，Combined with market development、Industry competition、The issuer’s production model and logistics management、Sales model and credit sales policy, etc.，Determine the company's operating risks and ability to continue operating。3、Taxation status: Check the company’s tax information for the reporting period，Investigate the types of taxes the company enforces、tax base、Does the tax rate comply with current laws?、regulatory

Require

。

Obtain company tax incentives or financial subsidy information，Verify whether the tax benefits or financial subsidies enjoyed by the company comply with the relevant regulations of the financial management department and the tax management department，Analyze the company's dependence on tax policies and future operating performance、Impact on financial condition。

1. The profit forecast is based on the information and profit forecast assumptions used by the company to prepare the profit forecast.，Combined with the domestic and foreign economic situation、Industry development trends、market competition，Determine the reasonableness of the company’s profit forecast assumptions。Compare previous annual plans with actual completion status，Refer to company development trends、market conditions，Evaluate the company’s business plan for the forecast period、Are the investment plan and financing plan arrangements appropriate?。

Based on the understanding of the company’s production scale and existing production capacity，Analyze and evaluate the feasibility of forecast plan execution。

six、Business Development Goals Survey 1、Development strategy Obtain relevant documents of the company's medium and long-term development strategy，Includes strategic planning information、Board meeting minutes、Strategy Committee Meeting Minutes、Opinions of independent directors and other relevant documents，Analyze whether the company has established a clear、clear、specific development strategy，include strategic goals、Basis for achieving strategic goals、step、Way、Means and action plans in various aspects。

Understand competitors’ development strategies through various channels，Compare the company's growth strategies with those of its competitors，and the company’s industry、market、Conduct in-depth analysis of competition, etc.，Investigate whether the company's development strategy is reasonable、feasible。

1. The implementation and realization of development plans over the years obtain the company’s development plans over the years、Annual reports and other information，Investigate the implementation and realization of plans for each year，Analyze the feasibility of senior management’s business plans and their ability to implement them。
2. Business philosophy and business model Obtain the company's business philosophy、Information about the business model，By and with the sponsor、Executives and Employees、main suppliers、Main sales customer conversations and other methods，Understand the company's business philosophy and business model，Analyze company business philosophy、The impact of business model on company management and development。
3. Business development goals: Obtain the company's development plan and business development goals for the next two to three years and their basis.，Investigate future industry development trends and market competition conditions，Investigate whether the company's future development goals are consistent with its development strategy；Analyzing companies in management、product、personnel、technology、market、Investment and Financing、mergers and acquisitions、Are there any specific plans for internationalization?，Are these plans consistent with the company's future development goals?，Whether it has good achievability；Analyze risks existing in the implementation of future development goals；Analyze the relationship between the company's future development goals and specific plans and existing business。

seven、Financing application analysis by reviewing the company's decision-making documents on financing projects、Project feasibility study report、Government departments’ relevant industry catalogs and other methods，According to the environmental protection of the project、Arrangements for land, etc.，Combined with the current investment status of other similar companies in similar projects、Product market capacity and its changes，Whether the company’s financing project complies with national industrial policies and environmental protection

Require

、Analyze the feasibility of technology and market as well as the certainty of project implementation.；Analyze whether the amount of financing is related to the size of the company、Main business、Actual funding requirements、Fund utilization capabilities match the company’s business development goals；Check whether the company prudently predicts project benefits，Have the benefits before and after reaching capacity been explained separately?，and estimated production time，Forecasting basis、Is the basis reasonable?。

eight、Investigation of risk factors and other important matters 1、Risk factors via website、government documents、Professional newspapers and periodicals、Understand the industrial policies of the company's industry through multiple channels such as reports from professional organizations、future development direction，with company executives、financial staff、Technicians waiting to talk，Obtain relevant information on major changes in the company's past operating performance or previous major events，And refer to the major changes that have occurred in companies in the same industry，Combined with corporate governance、R&D、purchase、Production、Sale、invest、Financing、Fund Raising Project、Surveys on industries and other aspects，Analyze the main factors that may have an adverse impact on the company's performance and ongoing operations and the main impacts these factors may bring。

Risks that have a significant impact on the company，Special verification should be carried out。2、For major contracts, a written statement must be issued by the company’s senior management.、Confirmation to the counterparty of the contract、Talk to relevant people、Consulting intermediaries and other methods，Verify whether the company’s major contracts are genuine、Are all provided?，and check whether the contract terms are legal、Are there potential risks?。

Compare the company’s authority regulations on entering into internal contracts，Verify whether the contract was concluded in compliance with internal approval procedures、Whether to make decisions beyond authority，Analyze the likelihood of performance of major contracts，Attention due to inability to perform the contract、The impact that breach of contract and other matters have or may have on the company。

1. Litigation and guarantee situations shall be reported through written statements issued by senior executives.、Check the contract、Visit relevant regulatory agencies、Talk to executives or finance people、Consulting intermediaries and other methods，Verify all external guarantees of the company (including mortgages、pledge、Guarantee, etc.) contract，Investigate the company and its controlling shareholders or actual controllers、Holding subsidiaries、Whether there are major lawsuits or arbitrations involving senior executives and core technical personnel as parties and whether the company’s senior executives and core technical personnel are involved in criminal proceedings，Evaluate whether it has a significant impact on the company's operations。

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