Tailin Biology: Raised Funds Management System

Zhejiang Tailin Biotechnology Co., Ltd.

Raised funds management system

Chapter 1 General Principles

Article 1 In order to standardize the management of raised funds of Zhejiang Tailin Biotechnology Co., Ltd. (hereinafter referred to as the "Company"), improve the efficiency of the use of raised funds, and effectively protect the interests of investors, in accordance with the "Company Law of the People's Republic of China", "Securities Law of the People's Republic of China" and "Measures for the Registration and Management of Initial Public Offerings" This system is formulated based on the actual situation of the company, such as the "Measures for the Registration and Management of Securities Issuance by Listed Companies", the "Supervisory Rules for Fund Raising by Listed Companies", the "Shenzhen Stock Exchange GEM Stock Listing Rules" (hereinafter referred to as the "Listing Rules"), the "Shenzhen Stock Exchange Self-Regulatory Guidelines for Listed Companies No. 2 - Standardized Operations of GEM Listed Companies" (hereinafter referred to as the "Standardized Operation Guidelines"), and the "Articles of Association of Zhejiang Tailin Biotechnology Co., Ltd." (hereinafter referred to as the "Articles of Association").

Article 2 The term "raised funds" as mentioned in this system refers to the funds raised by a company from investors through the issuance of stocks and their derivatives and used for specific purposes, but does not include funds raised by the company's implementation of equity incentive plans.

Article 3 The company's board of directors shall fully demonstrate the feasibility of the investment project with raised funds, be convinced that the investment project has good market prospects and profitability, effectively prevent investment risks, and improve the efficiency of the use of raised funds.

Article 4 The company shall establish and improve the internal control system for the storage, management, use, change of use, supervision and accountability of raised funds, clarify the hierarchical approval authority, decision-making procedures, risk control measures and information disclosure requirements for the use of raised funds, and standardize the use of raised funds.

The company's board of directors should continue to pay attention to the storage, management and use of raised funds, effectively prevent investment risks, and improve the efficiency of the use of raised funds.

Article 5 Directors and senior managers of a company shall be diligent and responsible to ensure the safety of funds raised by the company, and shall not control the company to change the use of raised funds without authorization or in disguised form.

Article 6 If an investment project with raised funds is implemented through a subsidiary of the company or other enterprises controlled by the company, the company shall ensure that the subsidiary or other enterprises controlled by the company comply with this system.

Chapter 2 Deposit of Raised Funds

Article 7 The company shall carefully select a commercial bank and open a special account for raised funds (hereinafter referred to as the "special account"). The raised funds shall be deposited in a special account approved by the board of directors for centralized management. The special account shall not store non-raised funds or use them for other purposes.

If the company has more than two financings, it shall set up separate special accounts for raised funds.

Article 8 The company shall sign a three-party supervision agreement with the sponsor institution and the commercial bank where the raised funds are deposited (hereinafter referred to as the "commercial bank") within one month after the raised funds are in place. After the agreement is signed, the company can use the raised funds. The agreement should at least include the following:

(1) The company shall centrally deposit the raised funds in a special account for raised funds;

(2) The special account for raised funds, the investment projects of raised funds involved in the special account, and the deposit amount;

(3) If the company’s cumulative withdrawals from the special account at one time or within 12 months exceed RMB 50 million or 20% of the net raised funds, the company and the commercial bank shall promptly notify the sponsor or independent financial advisor;

(4) The commercial bank shall provide the company with a bank statement of the special account for raised funds every month, and send a copy to the sponsor or independent financial consultant;

(5) Sponsors or independent financial advisors can go to commercial banks to inquire about the special account information for raised funds at any time;

(6) The supervision responsibilities of the sponsor institution or independent financial adviser, the notification and cooperation responsibilities of the commercial bank, and the supervision methods of the sponsor institution or independent financial adviser and the commercial bank on the use of funds raised by the company;

(7) The rights, business and liability for breach of contract of the company, commercial bank, sponsor institution or independent financial consultant;

(8) If the commercial bank fails to issue statements or notify the special account of large withdrawals to the sponsor or independent financial consultant in a timely manner three times, or fails to cooperate with the sponsor or independent financial consultant in inquiring and investigating the special account information, the company may terminate the agreement and cancel the special account for raised funds.

The company should promptly announce the main contents of the tripartite agreement after it is signed.

If a company implements an investment project through its holding subsidiary, a tripartite agreement shall be signed by the company, the holding subsidiary that implements the investment project, a commercial bank and a sponsor or an independent financial consultant, and the company and its holding subsidiary shall be regarded as a common party.

If the three-party agreement is terminated early before the expiration of the validity period, the company shall sign a new agreement with the relevant parties within one month from the date of termination of the agreement and make a timely announcement.

Chapter 3 Use of Raised Funds

Article 9 A company shall use raised funds prudently, ensure that the use of raised funds is consistent with the commitments in the prospectus or prospectus, and shall not arbitrarily change the investment direction of raised funds or change the use of raised funds in disguised form.

Companies should truly, accurately and completely disclose the actual use of raised funds. When circumstances arise that seriously affect the normal progress of the planned use of raised funds, the company shall make a timely announcement.

Article 10 Except for financial enterprises, the raised funds shall not be used to carry out financial investments such as entrusted financial management (except cash management), entrusted loans, and high-risk investments such as securities investment and derivatives investment, and shall not be invested directly or indirectly in companies whose main business is the purchase and sale of securities.

The company shall not use the raised funds for pledge or other investments that change the purpose of the raised funds in a disguised manner.

Article 11 The company shall ensure the authenticity and fairness of the use of raised funds, prevent the raised funds from being occupied or misappropriated by controlling shareholders, actual controllers and other related parties, and take effective measures to prevent related parties from using raised funds to invest in projects to obtain improper benefits.

If the company discovers that the controlling shareholders, actual controllers and other related parties have appropriated the raised funds, it shall promptly request the return of the raised funds and disclose the reasons for the relevant events, the impact on the company, the repayment and rectification plan and the rectification progress. The board of directors shall investigate the legal liability of the relevant entities in accordance with the law.

Article 12 If any of the following situations occurs in an investment project with raised funds, the company shall re-evaluate the feasibility, expected income, etc. of the raised investment project and decide whether to continue to implement the project:

(1) There are major changes in the market environment involved in the investment project with raised funds;

(2) After the raised funds are received, the investment project with raised funds is shelved for more than one year;

(3) The completion period of the latest investment plan of raised funds has exceeded and the investment amount of raised funds has not reached 50% of the relevant plan amount;

(4) Other abnormal situations occur in investment projects with raised funds.

If the company has the circumstances specified in the preceding paragraph, it shall disclose it in a timely manner. If it needs to adjust its investment plan for raised funds, it shall disclose the adjusted investment plan for raised funds at the same time. If it involves changing the investment project of raised funds, the relevant review procedures for changing the use of raised funds shall apply.

Article 13 When a company uses raised funds for the following matters, it shall be reviewed and approved by the board of directors, and the sponsor or independent financial advisor shall issue a clear consent opinion:

(1) Use raised funds to replace self-owned funds that have been invested in investment projects with raised funds in advance;

(2) Use temporarily idle raised funds for cash management;

(3) Use temporarily idle raised funds to temporarily supplement working capital;

(4) Change the use of raised funds;

(5) Change the implementation location of investment projects with raised funds;

(6) Adjust the planned progress of investment projects with raised funds;

(7) Use surplus funds to raise funds;

(8) Use of super-raised funds.

If a company changes the purpose of raised funds, uses over-raised funds, or uses surplus raised funds to meet the standards for review by the shareholders' meeting, it must also be reviewed and approved by the shareholders' meeting.

Article 14 After the company completes a single or all investment projects with raised funds, if the company uses the remaining raised funds (including interest income) for other purposes, and the amount is less than 5 million yuan and less than 5% of the net raised funds of the project, it may be exempted from the procedures specified in Article 13, and its use shall be disclosed in the annual report. If the use of surplus raised funds (including interest income) reaches or exceeds 10% of the net raised funds of the project and is higher than 10 million yuan, it must also be reviewed and approved by the shareholders' meeting.

Article 15 If a company uses raised funds to replace self-raised funds that have been invested in investment projects with raised funds in advance, the replacement shall, in principle, be implemented within six months after the raised funds are transferred into the special account.

During the implementation of investment projects with raised funds, in principle, payment should be made directly with raised funds. If it is really difficult to pay directly with raised funds in matters such as paying personnel salaries, purchasing overseas products and equipment, etc., the replacement can be implemented within 6 months after payment with the original self-raised funds.

The replacement matter shall be reviewed and approved by the company's board of directors, the sponsor shall issue a clear opinion, and the company shall disclose relevant information in a timely manner.

If the company has disclosed in the issuance application documents that it intends to use raised funds to replace pre-invested self-raised funds and the pre-invested amount is determined, it shall make an announcement before the replacement is implemented.

Article 16 A company may conduct cash management of temporarily idle raised funds, and cash management shall be implemented through a special account for raised funds or a publicly disclosed special settlement account for products. If cash management is implemented through a product-specific settlement account, the account shall not store non-raised funds or be used for other purposes. The implementation of cash management shall not affect the normal progress of the investment plan of raised funds. When opening or canceling a product-specific settlement account, the company shall make a timely announcement. Cash management products should meet the following criteria:

(1) Products with high security such as structured deposits and certificates of deposit must not be non-principal guaranteed;

(2) The liquidity is good, and the product term shall not exceed twelve months;

(3) Cash management products are not allowed to be pledged.

Article 17 If a company uses idle raised funds for cash management, it shall promptly announce the following content after the board meeting:

(1) Basic information on the funds raised this time, including the time of raising, amount of funds raised, net amount of funds raised and investment plan, etc.;

(2) The use, idle status and reasons of the raised funds, whether there is any disguised change in the use of the raised funds and measures to ensure that the normal progress of the raised funds projects will not be affected;

(3) The issuer, type, investment scope, term, quota, income distribution method, estimated annualized rate of return (if any) of the cash management product, and the board of directors’ specific analysis and explanation of the safety and liquidity of the cash management product;

(4) Opinions issued by the sponsor or independent financial consultant.

When a company discovers that the financial status of an investment product issuer has deteriorated, or that the invested products are facing losses, etc., it shall promptly disclose risk warning announcements to the outside world and explain the risk control measures taken by the company to ensure the safety of funds.

If a company uses temporarily idle raised funds for cash management and any situation occurs that may harm the interests of the company and investors, it should promptly disclose the relevant progress and planned countermeasures.

Article 18 If a company uses temporarily idle raised funds to temporarily replenish working capital, it shall do so through a special account of raised funds, and shall be limited to production and operations related to its main business, and shall meet the following conditions:

(1) Shall not change the use of raised funds in any disguised manner or affect the normal progress of the investment plan of raised funds;

(2) The funds raised last time used to temporarily supplement working capital have been returned;

(3) A single temporary replenishment of working capital shall not exceed 12 months;

(4) Idle raised funds shall not be used directly or indirectly for securities investment, derivatives trading and other high-risk investments.

Article 19 If a company uses temporarily idle raised funds to temporarily supplement working capital, it shall promptly announce the following content after deliberation and approval by the board of directors:

(1) Basic information on the funds raised this time, including the time when the funds are received, the amount of funds raised, the net amount of funds raised and the investment plan, etc.;

(2) The use of raised funds, idle conditions and reasons;

(3) Reasons for insufficient working capital, the amount and period of idle raised funds to replenish working capital;

(4) The amount of financial expenses expected to be saved by using idle raised funds to replenish working capital, whether there is any disguised change in the investment direction of raised funds, and measures to ensure that the normal progress of the raised funds projects will not be affected;

(5) Opinions issued by the sponsor or independent financial consultant;

(6) Other contents required by the Shenzhen Stock Exchange (hereinafter referred to as the “Shenzhen Stock Exchange”).

Before the expiration date of supplementary working capital, the company should return this part of the funds to the special account for raised funds and make an announcement within 2 trading days after all the funds are returned. If the company expects to be unable to return this part of the funds to the special account for raised funds on time, it shall perform the review procedures in accordance with the requirements of the preceding paragraph before the expiration date and make a timely announcement. The announcement shall include the whereabouts of the funds, the reasons why they cannot be returned, the reasons and deadlines for continued use to supplement working capital, etc.

Article 20 The company shall, based on the company's development plan and actual production and operation needs, properly arrange the use plan for the portion of the actual net raised funds that exceeds the planned amount of raised funds (hereinafter referred to as "excess funds"). The excess raised funds should be used for projects under construction and new projects, repurchasing the company's shares and canceling them in accordance with the law. The company shall clarify the specific use plan of the excess raised funds at the latest when the entire raised investment project of the same batch is completed, and put it into use according to the plan. The use of super-raised funds shall be resolved by the board of directors in accordance with the law, and the sponsor shall issue clear opinions and submit them to the shareholders' meeting for review. Companies should timely and fully disclose relevant information such as the necessity and rationality of using excess raised funds.

If a company uses super-raised funds to invest in projects under construction or new projects, it should also fully disclose the construction plan, investment cycle, rate of return and other information of the relevant projects. If the project involves related transactions, asset purchases, external investments, etc., it should also perform review procedures and information disclosure obligations in accordance with Chapter 7 of the Listing Rules and other provisions.

Article 21 If the company really needs to use temporarily idle over-raised funds for cash management or temporary supplement of working capital, it shall explain the necessity and rationality. If a company uses temporarily idle over-raised funds for cash management or temporary supplement of working capital, the amount, time limit and other matters shall be reviewed and approved by the board of directors, the sponsor shall issue a clear opinion, and the company shall disclose relevant information in a timely manner.

The company should prepare a special report on the storage, management and use of raised funds in the year to explain the use of excess raised funds and the use plan for the next year.

Chapter 4 Change of Use of Raised Funds

Article 22 If the company has the following circumstances, it will be deemed to have changed the purpose of the raised funds:

(1) Cancel or terminate the original investment project with raised funds, implement new projects or permanently replenish working capital;

(2) Change the implementation entity of the investment project with raised funds (except when the implementation entity changes between the company and its wholly-owned subsidiary);

(3) Change the implementation method of investment projects with raised funds;

(4) Other circumstances determined by the China Securities Regulatory Commission and the Shenzhen Stock Exchange as changes in the use of raised funds.

Article 23 The company's board of directors shall select new investment projects scientifically and prudently, conduct feasibility analysis on new investment projects with raised funds, and ensure that the investment projects have good market prospects and profitability, can effectively prevent investment risks, and improve the efficiency of the use of raised funds.

Article 24 If the company plans to change the investment project with raised funds into a joint venture, it shall carefully consider the necessity of the joint venture on the basis of fully understanding the basic situation of the joint venture parties. The company should hold a controlling stake to ensure effective control over the investment projects with raised funds.

Article 25 If the entity implementing the investment project with raised funds changes between the company and its wholly-owned subsidiary, or if it only involves a change in the implementation location of the investment project with raised funds, it will not be regarded as a change in the purpose of the raised funds, and a resolution will be made by the board of directors without the need to go through the shareholders' meeting review procedures. The sponsor should express a clear opinion on this, and the company should disclose relevant information in a timely manner.

Chapter 5 Management and Supervision of the Use of Raised Funds

Article 26 The company's board of directors shall comprehensively check the progress of the investment projects with raised funds every half year, issue special reports on the deposit and use of raised funds for semiannual and annual periods, and disclose them together with the periodic reports until the raised funds are used up and there is no use of raised funds during the reporting period. Relevant special reports shall include the basic situation of the raised funds and the storage, management and use of funds specified in these Guidelines.

If there is a discrepancy between the actual investment progress of an investment project using raised funds and the investment plan, the company shall explain the specific reasons. If the actual annual use of raised funds for investment projects differs by more than 30% from the most recently disclosed raised funds investment plan, the company shall adjust the raised funds investment plan and disclose the most recent annual raised funds investment plan, current actual investment progress, adjusted annual investment plan, and reasons for changes in the investment plan in special reports and periodic reports on the storage and use of raised funds.

If an investment project with raised funds is not expected to be completed within the original time limit and the company intends to postpone the implementation, it shall be reviewed and approved by the board of directors in a timely manner, and the sponsor shall issue a clear opinion on this. The company should promptly disclose the specific reasons for failure to complete the project on time, explain the current storage and accounting situation of the raised funds, whether there are any circumstances that affect the normal progress of the plan to use the raised funds, the expected completion time and installment investment plan, measures to ensure on-schedule completion after extension, and other information.

Article 27 If the company has used raised funds in the current year, it shall, while conducting the annual audit, hire an accounting firm to conduct a special review of the actual investment projects, actual investment amount, actual investment time and project completion level, etc., and reasonably verify whether the special report issued by the board of directors has been prepared in accordance with the "Guidelines for Standardized Operations" and relevant format guidelines and whether it truthfully reflects the actual storage and use of the annual raised funds, and provide verification conclusions. The company shall disclose the verification conclusion in the annual special report on the deposit and use of raised funds.

If the assurance conclusion is a "reserved conclusion", "negative conclusion" or "unable to reach a conclusion", the company's board of directors shall analyze the reasons for the conclusion raised by the certified public accountant in the assurance report, propose corrective measures and disclose them in the annual report.

Article 28 Sponsors shall, in accordance with the provisions of the "Measures for the Administration of the Sponsorship Business of Securities Issuance and Listing", conduct continuous supervision over the storage, management and use of funds raised by the company. If any abnormality is discovered during the continuous supervision, on-site inspections shall be carried out in a timely manner. And conduct an on-site investigation on the storage and use of the company's raised funds at least every six months. If a sponsor institution discovers any abnormality during continuous supervision and on-site inspection, it shall report it to the CSRC dispatched office and the Shenzhen Stock Exchange in a timely manner. After the end of each fiscal year, the sponsor or independent financial consultant shall issue a special verification report on the deposit and use of the company's annual raised funds. The company shall disclose the special verification conclusions in the annual special report on the deposit and use of raised funds.

When an accounting firm conducts an annual audit, it shall issue an assurance report on the storage, management and use of funds raised by listed companies. If an accounting firm issues a "reserved conclusion", "negative conclusion" or "unable to draw a conclusion" on the storage and use of raised funds by an accounting firm, the sponsor or independent financial consultant shall also carefully analyze the reasons why the accounting firm raised the above assurance conclusion in its inspection report and provide clear verification opinions.

If a sponsor institution or independent financial consultant discovers that a company or a commercial bank has failed to perform the tripartite agreement as agreed, or if it discovers major violations or major risks in the company's management of raised funds during an on-site inspection of the company, it shall report and disclose it to the Shenzhen Stock Exchange in a timely manner.

Chapter 6 Supplementary Provisions

Article 29 If a company, its controlling shareholders, actual controllers, directors, senior managers, or sponsors violate the provisions of this system, the Shenzhen Stock Exchange will impose penalties based on the severity of the case in accordance with the relevant provisions of the Listing Rules.

Article 30 Unless clearly marked, the terms "above" and "within" in this system include the original number, and the terms "more than", "less than" and "lower than" do not include the original number.

Article 31 Matters not covered in this system shall be implemented in accordance with the relevant national laws, regulations and the company's articles of association; if this system conflicts with the relevant laws, regulations and articles of association that are promulgated or revised in the future and the company's articles of association revised in accordance with legal procedures, the provisions of the relevant laws, regulations and the company's articles of association shall be implemented.

Article 32 This system is formulated by the board of directors, reviewed and approved by the shareholders' meeting, and the company's board of directors is responsible for interpretation. The same applies to modifications to this system.