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After waiting in line for IPO for more than a year, Sikan Technology (Hangzhou) Co., Ltd. (hereinafter referred to as "Sikan Technology") will face the IPO test on August 2. It is also the first company to go to the meeting after the "Eight Measures on Deepening the Reform of the Science and Technology Innovation Board to Serve Technological Innovation and the Development of New Productivity" (hereinafter referred to as "Eight Measures on Deepening the Reform of Science and Technology Innovation"), and the answer to whether the company can obtain the approval of the Listing Committee will be revealed at that time. Behind the A-share market, Sikan Technology's sales expense rate is higher than that of its peers and the litigation incidents in the past have been questioned by regulators. In response to relevant issues, Sikan Technology accepted an interview with a Beijing Business Daily reporter on August 1.

Meeting on August 2

According to information disclosed on the official website of the Shanghai Stock Exchange, the 18th Listing Review Committee meeting of 2024 is scheduled to be held on August 2 to review the initial public offering of Sirkan Technology.

The prospectus shows that ScanTech is a global provider of integrated 3D visual digital solutions. Its main business is the research and development, production and sales of 3D visual digital products and systems. The company's prospectus was approved on June 16, 2023, and entered the inquiry stage on July 15 of the same year. After two rounds of inquiries, the company has the opportunity to go to the meeting.

On June 19 this year, the China Securities Regulatory Commission issued eight measures to deepen reforms in science and technology innovation, further deepening reforms, enhancing inclusiveness of new industries, new business models and new technologies, and giving full play to the functions of the capital market. Sikan Technology's first IPO to be listed at the board meeting is also the first after the release of the eight measures to deepen reforms in science and technology innovation.

It should be pointed out that during this IPO, the amount of funds raised by Scan Technology has also changed. The company originally planned to raise approximately 851 million yuan. However, in June this year, the company held the 14th meeting of the first board of directors and the second extraordinary general meeting of shareholders in 2024, and respectively reviewed and approved the "Proposal on Adjusting the Amount of Funds Raised and Investment Projects" (hereinafter referred to as the "Adjustment of Fundraising Proposal"). After the adjustment, the company adjusted the marketing and service network base construction project in the original fundraising project to be solved by the company's own funds, and it will no longer be a fundraising project.

The latest fundraising amount of Scantech is about 569 million yuan, which is 282 million yuan less than the company's initial fundraising amount of 851 million yuan. The latest fundraising projects include 3D visual digital products and automated detection system capacity expansion projects, R&D center base construction projects, and replenishment of working capital. Investment and financing expert Xu Xiaoheng told the Beijing Business Daily that the adjustment of fundraising by IPO companies may be due to adjustments in the planning of fundraising projects, but this situation is generally the focus of regulatory attention, and companies need to explain in detail the reasons for the changes in fundraising projects.

On August 1, ScanTech said in an interview with Beijing Business Daily that the company's financing this time mainly focuses on improving the production capacity of product lines and strengthening talent and innovation cultivation. The implementation of the "3D visual digital products and automated detection system capacity expansion project" will improve the production capacity of major product lines and significantly improve the automation, refinement and digitalization of the company's production lines through the purchase of advanced equipment. The R&D center base construction project aims to meet the R&D resource needs faced by business development, and meet the higher requirements for R&D sites such as the increase in the proportion of tracking and automated products and the development trend of ultra-long-distance measurement.

Sales expense ratio is higher than that of peers

The prospectus shows that Sirkan Technology's sales expense ratio has been rising year by year and is much higher than comparable companies in the same industry. This issue has also been the focus of regulatory scrutiny.

Data shows that from 2021 to 2023, the sales expense ratio of Sikan Technology was 19.51%, 21.35% and 22.13% respectively. In the prospectus, Sikan Technology listed four comparable companies in the same industry, namely, Xinlin 3D, Polylite, Opto, and Lingyun Opto. The average sales expense ratios of the above companies during the reporting period were 13.89%, 15.23% and 15.48% respectively.

It is not difficult to see that Sikan Technology's sales expense ratio is much higher than the average of comparable companies in the same industry.

In addition, the management expenses of ScanTech are also rising year by year, which are about 10.171 million yuan, 14.1792 million yuan and 17.0901 million yuan in 2021-2023 respectively. ScanTech said that the company's management expenses are mainly composed of employee salaries, intermediary service fees, equity incentive fees, office expenses, etc.

In response to the situation that the sales expense ratio is higher than that of comparable companies in the same industry, the regulator has also required Sikan Technology to explain the reasons and rationality of the higher sales expense ratio based on the company's customer acquisition methods, new customer development, and the high proportion of distribution income. Sikan Technology told the Beijing Business Daily reporter that during the reporting period, the company's sales expense ratio was higher than that of comparable companies in the same industry mainly because the proportion of the company's sales staff and the average salary of sales staff were higher than the average level of comparable companies in the same industry.

Financial commentator Zhang Xuefeng told the Beijing Business Daily that an IPO's sales expense ratio being higher than its peers is not a necessary obstacle during the review, as long as the company can explain in detail the reasons for the high sales expense ratio and it is reasonable.

Behind the effort to list on the A-share market, ScanTech's performance has also been growing steadily. From 2021 to 2023, the company achieved operating income of approximately RMB 161 million, RMB 206 million, and RMB 272 million, respectively; the corresponding attributable net profits were approximately RMB 67.544 million, RMB 77.635 million, and RMB 114 million, respectively.

Past lawsuits have been settled

During the critical period of its IPO, ScanTech was involved in a new lawsuit, but the two parties signed a settlement agreement in January this year.

According to the prospectus of Scantronics, on October 12, 2023, Patent Armory Inc. filed a complaint with the Marshall Division of the Eastern District Court of Texas, United States, claiming that the company infringed its patents numbered US7256899 and US7336375, and requested the court to rule on the validity of the patents and the company's infringement of the above patents, and to order the company to compensate the plaintiff for losses (but did not specify the amount of losses). Upon inquiry, the above patents were purchased by Patent Armory Inc. from a third-party natural person and will expire within three years.

The above-mentioned lawsuit has also attracted regulatory attention. In its inquiry letter, the Shanghai Stock Exchange asked Scan Technology to explain the basic situation and main business of Patent Armory Inc., and whether it has any affiliated relationship or historical disputes with the company; to fully analyze whether the plaintiff's claims are valid based on the scope of protection of the patents involved and technical features, and to conduct a comprehensive self-examination of whether the company's product technology involves the use of the patented technology involved; and to fully calculate the adverse effects that may be caused to the company's business, technology, finance, etc. if the above-mentioned lawsuit is lost, and whether it will constitute a significant adverse impact on the company's continued operation.

On August 1, ScanTech also told the Beijing Business Daily that in January 2024, in order to save overseas litigation costs, the company signed a settlement agreement with Patent Armory Inc. The company paid US$25,000 to Patent Armory Inc. At the same time, Patent Armory Inc. promised not to file any lawsuits or compensation claims against the company based on patents under the settlement agreement (including all patents registered in the U.S. Patent and Trademark Office system).

Patent Armory Inc. filed a motion to withdraw the lawsuit on January 11, 2024, U.S. time, and the court made a ruling approving the withdrawal of the case on January 13, 2024.

Beijing Business Daily reporter Ma Huanhuan and Ran Lili