Weisi Medical Receives SSE Inquiry Letter Over Termination of One and Delay of Two Fundraising Projects

Beijing News (Reporter Wang Kala) The original plan was to use the raised investment funds to build four projects, one of which is proposed to be terminated, and the raised investment funds will be permanently used to supplement working capital. Two other projects will be delayed by one year. On June 15, VISHEE received an inquiry letter from the Shanghai Stock Exchange, requesting an explanation for the specific reasons and rationality for terminating the investment projects. In the first quarter of this year, VISHEE's performance declined, and its stock price also dropped significantly by 49.41%.

 

 

In July 2020, VISHEE, engaged in the research and development, production, and sales of medical devices, was listed on the STAR Market. The net amount of funds raised through its initial public offering was approximately 1.063 billion yuan, with an over-subscription of 596 million yuan. Initially, VISHEE planned to use 467 million yuan of the proceeds for the construction of a research and development center, information technology projects, rehabilitation equipment assembly and debugging projects, as well as marketing services and brand building reserve funds.

 

On April 28 this year, VISHEE mentioned in its special report on the deposit and actual use of raised funds that it planned to optimize the implementation plan for the rehabilitation equipment assembly and debugging project. However, in less than two months, the project was announced to be terminated. The originally planned investment of 78.7984 million yuan (including investment income generated from the purchase of wealth management products and accumulated interest received from bank deposits) was fully allocated to replenish working capital. As of March 31 this year, VISHEE's cash funds amounted to approximately 1.352 billion yuan.

 

According to the use of raised funds disclosed by VISHEE, as of June 14, out of 467 million yuan of raised funds, approximately 111 million yuan has been used. Specifically, 48.1148 million yuan was used for the R&D center construction project, 2.3034 million yuan for the informatization construction project, and 60.7752 million yuan for marketing services and brand building reserve funds. However, no funds have been invested in the rehabilitation equipment assembly and debugging project.

 

VISHEE stated that the reason for terminating the rehabilitation equipment assembly and debugging project is that, since its listing in July 2020, the ongoing and repeated outbreaks of the COVID-19 pandemic have introduced significant uncertainties into production and operations. After reevaluation and research, it has been decided to meet current production needs by utilizing existing equipment assembly and debugging production lines in combination with external contract manufacturing. Meanwhile, the "VISHEE Medical Headquarters R&D Economic Park Project" is currently under construction. In the later stages of this project, feasibility and necessity of incorporating rehabilitation equipment assembly and debugging facilities will be assessed based on strategic planning and operational plans. If further needs arise, investment in such construction will be made through self-owned funds or other means.

 

The Shanghai Stock Exchange was not satisfied with VISHEE's explanation above, and required it to provide detailed information on the specific reasons, decision-making process, and the rationality and necessity of the termination, etc. It also requested an explanation on whether the initial public offering’s fundraising plan was imprudent or inconsistent with actual operational needs, and to explain the necessity of using the raised funds to supplement working capital based on the current financial situation, etc.

  

Will the termination of the rehabilitation equipment assembly and debugging project affect the company's core business? In response, VISHEE stated that it would not have a significant adverse impact on the operation and financial status of its existing core business.

 

 

In addition to the planned termination of the rehabilitation equipment assembly and debugging project, VISHEE Medical has also postponed the R&D center construction project and the informatization construction project by one year. The expected available time has been adjusted from September 2022 to September 2023.

 

As of June 14, VISHEE's cumulative investment in the construction of its fundraising projects amounted to approximately 111 million yuan, with an investment progress of 23.85%. Specifically, the progress of the R&D center construction project and the informatization construction project reached 24.39% and 5.15%, respectively.

 

The R&D Center Construction Project aims to enhance VISHEE's R&D and testing capabilities, supporting the performance upgrades of existing products as well as the R&D testing, prototype manufacturing, clinical trials, inspection, and registration of new products. Regarding the reasons for the delay, VISHEE stated that during the project implementation, the performance upgrades of existing products and the development of new products proceeded smoothly, with several core technologies achieving breakthrough progress. Based on the actual progress of the project and considering the internal and external environmental changes over the past two years, the overall implementation pace of the project was moderately slowed down, leading to a delay in the actual capital investment compared to the original plan.

 

The information technology construction project took into account the impact of the COVID-19 pandemic and the construction of the "VISHEE Medical Headquarters R&D Economic Park Project." VISHEE Medical appropriately slowed down the overall implementation progress of the project, resulting in a delay in the actual capital investment compared to the original plan.

 

SSE Requests VISHEE to Explain the Specific Reasons and Rationality for the Slow Progress of Two Projects, Whether Significant Changes Have Occurred in the Internal and External Environment of Project Construction, and Whether There Are Other Significant Risks That Should Be Disclosed but Have Not Been.

 

In 2021, VISHEE achieved a revenue of 430 million yuan, a year-on-year increase of 13.66%; the net profit attributable to parent company was 178 million yuan, a year-on-year increase of 23.77%. However, in the first quarter of this year, the company's performance dropped significantly, with revenue and net profit falling by 32.53% and 45.62%, respectively. In response, VISHEE mentioned at the earnings briefing that the first quarter is traditionally the off-season for the company, compounded by the impact of the pandemic, which hindered the company’s business operations. The company will firmly implement strategic upgrades, actively adjust deployments and strategies, and strive to achieve the annual equity incentive performance assessment targets.

 

However, in terms of R&D investment, VISHEE is quite generous. In 2021, its R&D investment increased by 85.26% year-on-year; in the first quarter of 2022, despite a significant decline in performance, R&D investment still increased by 53.6% year-on-year. According to an analysis report by Huaan Securities, VISHEE is expected to hit a low point in the second quarter of this year, but will gradually improve starting from the third quarter. Considering the continuous innovation of its magnetic stimulation products, it is expected that its overall gross profit margin and net profit level will remain at a relatively high level.

Proofread by Baoqing Liu