Huamao Technology's main business does not involve photoresist, and its photoresist revenue in the first half of the year was 43.9 billion yuan

On August 19, Huamao Technology issued an announcement stating that the company's main business does not involve photoresist business; its overseas investment company Xuzhou Bokang had a net loss of 8.5443 million yuan in the first half of the year, and its photoresist business revenue was 4.3986 million yuan.

Huamao Technology said that the company's main business is the development, production and sales of automotive passive safety system components, and its products cover passive safety system components such as automotive airbag fabrics, airbag bags and seat belts. At present, the company's main business does not involve photoresist monomers, pharmaceutical intermediates and photoresist business, and does not engage in the production, research and development, and sales of photoresist-related products. It does not have the qualifications, equipment, technology, personnel, customers, and production capabilities to produce photoresist-related products.

Dongyang Kaiyang is a partnership established by the company. As a limited partner, the company holds 89.80% of the shares of Dongyang Kaiyang. Xuzhou Bokang Information Chemicals Co., Ltd. (hereinafter referred to as "Xuzhou Bokang") is a joint venture company invested by the company through Dongyang Kaiyang. This investment in Dongyang Kaiyang totaled RMB 800 million, which is the company's industrial investment and has no synergy with the company's main business. Dongyang Kaiyang holds 26.73% of the equity of Xuzhou Bokang, which is a joint venture relationship. It only has the right to nominate one of the eight directors of Xuzhou Bokang's board of directors. Dongyang Kaiyang is currently unable to decide on important matters of Xuzhou Bokang alone, and the listed company does not participate in the daily production and operation of Xuzhou Bokang.

Huamao Technology stated that this outbound investment does not constitute a matter of the company's control over Xuzhou Bokang. Its actual controller, Mr. Fu Zhiwei, has no affiliation with the company. The company has no direct business dealings with Xuzhou Bokang and other shareholders. At present, there is no situation where Xuzhou Bokang achieves backdoor listing through this transaction. After this investment, Xuzhou Bokang will not be included in the scope of the company's consolidated financial statements, but will be listed in the long-term equity investment account of the company's consolidated financial statements.

The announcement shows that Xuzhou Bokang's main revenue currently comes from photoresist monomers and pharmaceutical intermediates businesses. From January to June 2021, photoresist monomers, pharmaceutical intermediates, chemical raw material trade, and photoresist accounted for 43.02%, 23.52%, 28.93%, and 4.53% of its operating income, respectively.

From January to June 2021, Xuzhou Bokang's revenue from photoresist business was 4.3986 million yuan. Nearly half of the revenue came from a single customer, and the remaining customer orders were relatively scattered. Currently, there is no direct business dealings between Xuzhou Bokang and its shareholders.

In addition, the performance commitments made by Xuzhou Bokang to the previous round of investors have not been fulfilled, and there is a risk that this performance commitment cannot be fulfilled. From January to June 2021, Xuzhou Bokang's net profit was -8.5443 million yuan. According to the "Shareholders Agreement", Xuzhou Bokang's commitment for its 2021 performance is to achieve a net profit of no less than 115 million yuan. There is a large difference between the net profit that Xuzhou Bokang has achieved in the first half of 2021 and the above performance commitment.

At the same time, according to the "Shareholders Agreement", if Xuzhou Bokang's cumulative net profit in the three years from 2021 to 2023 fails to achieve 80% of the promised target total profit (536 million yuan), the relevant obligors will need to compensate investors for performance or fulfill their repurchase obligations. Therefore, the possibility that the performance in 2021 will not meet the standards will not directly trigger performance compensation and repurchase obligations.

Huamao Technology stated that Dongyang Kaiyang obtained investment dividend income through its equity participation in Xuzhou Bokang, and the investment period is relatively long. The realization of investment income is highly uncertain, and there is a risk that the company will not be able to achieve cash flow returns in the short term.