Inflated revenue is “proven” with solid evidence. Revenue is nearing the delisting “red line.” Filinger changes hands—an actual transformation, or just a “cicada shedding its shell”?

| \| \| \| — \| \| 　　Zhou Heng, map-making \| | | — | — | — | — | — | — |

◎Reporter Guo Chenglin, Zheng Weihang

On the evening of April 6, Felinger announced that it would correct certain accounting errors and make retrospective adjustments to some financial data involved in the company’s 2021 annual financial statements and the notes thereto through the third quarter of 2025. Specifically, this includes: reclassifying the held Lingang Fund and Hainan Fund from “Investments in Other Equity Instruments” to “Other Non-current Financial Assets”; adjusting across periods the revenue of RMB 23.3834 million recognized in 2024, including RMB 7.0346 million adjusted to be recognized in 2023, RMB 15.1128 million adjusted to be recognized in 2025, and RMB 1.2360 million offset.

Felinger pledges that for fiscal year 2024, the company’s operating revenue, after adjusting the amount excluding other income unrelated to its main business or lacking commercial substance, is RMB 304 million. This accounting error correction will not cause the company’s operating revenue, after the exclusion in 2024, to fall below RMB 300 million, nor will it cause any change in the profit/loss nature of the periodic reports already disclosed by the company.

This accounting error correction and retrospective adjustment by Felinger stems from regulatory penalties from a few days ago.

On the evening of April 3, Felinger announced that the company and relevant personnel have recently received a decision issued by the Shanghai Securities Regulatory Bureau, titled “Decision on Taking Rectification Measures against Felinger Home Furnishing Technology Co., Ltd. and Taking Warning Letter Measures against Relevant Responsible Persons” (abbreviated as “the Decision”).

The Decision shows that the company has the following violations: revenue recognition inaccuracies in nine engineering projects, false record-keeping in the annual report caused by inaccurate classification of some financial assets, and non-compliant deliberation procedures for remuneration of directors and senior executives.

This situation immediately triggered market doubts: neither the Decision nor the accounting error correction announcement disclosed in detail core information such as the specific amounts for the nine engineering projects, and the company’s adjustment amount to operating revenue for 2024 is unreasonable. Did Felinger’s 2024 revenue truly reach the company’s commitment of not less than RMB 300 million?

False financial statement disclosures confirmed as facts

Revenue recognition faces a chain of inquiries

In addition to the Decision received in April, as early as February this year, Felinger had already received from the Shanghai Stock Exchange a regulatory work letter regarding “Relevant Matters Concerning the Performance Forecast of Felinger Home Furnishing Technology Co., Ltd.” (abbreviated as “the Work Letter”), and replied regarding the issue of revenue recognition.

Some analysts believe that the Decision clearly indicates that the company’s annual report contains false record-keeping, while the Work Letter mainly focuses on questioning revenue recognition. This shows that the regulatory authorities are continuously paying attention to Felinger’s financial issues.

Specifically, the Decision shows that in terms of revenue recognition for engineering projects, the company recognized revenue for the current year for nine engineering projects that should not be included in 2024 revenue by using forged acceptance documents, requiring the party that is the contract counterparty to cooperate in issuing acceptance documents in advance, and delaying revenue recognition through internal approval procedures, resulting in the company’s 2024 annual report containing false record-keeping.

In terms of accounting treatment of financial assets, in August and December 2021, the company, as a limited partner, invested in Shanghai Lingang New Area Sci-Tech Innovation Phase I Industrial Equity Investment Fund Partnership Enterprise (Limited Partnership) and Hainan Province Key Industrial Investment Development Fund Partnership Enterprise (Limited Partnership), respectively. These two financial assets do not meet the definition of equity instruments. The company recorded changes in fair value in profit or loss to the “Other Comprehensive Income” account during the holding period; the related accounting treatment does not comply with regulations, resulting in false record-keeping in the annual reports from 2021 to 2024.

In addition, from 2022 to 2024, the company’s directors’ remuneration was not deliberated and approved by the shareholders’ meeting, and senior executives’ remuneration was not approved by the board of directors and explained to the shareholders’ meeting, which does not comply with relevant regulations.

The Work Letter indicates that the Shanghai Stock Exchange is highly concerned about Felinger’s operating revenue recognition and the substance of related-party transactions, and requires the company to provide responses to the following four items.

First, distinguish different business segments and list, quarter by quarter, operating revenue amounts, their proportions, year-over-year changes, the revenue recognition policy, and whether any changes occurred during the reporting period. Also, in light of relevant regulations, explain the compliance of revenue recognition and whether there is any situation of avoiding delisting risk warning by recognizing revenue in advance or across periods.

Second, list the basic information of the top ten customers in each business segment, including customer names, related-party relationships, whether any customers were added in the current period, the contract signing dates and amounts, revenue recognition policy, settlement cycle and credit policy, the balance of accounts receivable, and the status of collections as of the date of the return letter, etc.

Third, list the basic information of all engineering-type businesses for the full year, including the counterparty information, contract signing dates, project names and amounts, the timing of project acceptance and the basis for acceptance, settlement status, the balance of accounts receivable, the status of collections as of the date of the return letter, etc., and state whether there is any situation of avoiding delisting risk warning by recognizing revenue in advance or across periods.

Fourth, provide, transaction by transaction, specific details of related-party transactions conducted during the full year with the former actual controller and the related entities controlled by it, including project names, contract signing dates, pricing basis, whether it is a newly added transaction in the current period, whether the revenue recognition policy and other similar non-related business are consistent, the timing of project acceptance and the basis for acceptance, project settlement status and the formation of accounts receivable balances, and collection status as of the date of the return letter. Also, in light of the foregoing content, explain the fairness and commercial substance of the related-party transactions.

Felinger responded that: the company follows the relevant provisions of the Accounting Standards for Enterprises; there were no changes in the revenue recognition policy during the reporting period; revenue recognition is compliant; and there is no situation of avoiding delisting risk warning by recognizing revenue in advance or across periods. The company’s revenue recognition policy for related parties is consistent with other similar non-related businesses. The pricing for related-party transactions in the current period is fair and the transactions have commercial substance.

Operating revenue stays tightly around the RMB 300 million delisting “red line”

Would the change of controller be a “shell game”?

Felinger’s performance has been declining for many consecutive years. Its 2024 annual report shows that: the company achieved operating revenue of RMB 336 million, down 14.86% year over year; and net profit/loss was a loss of RMB 37.3071 million. According to the company’s 2025 annual performance pre-loss announcement, Felinger expects its 2025 net profit attributable to shareholders to be between -RMB 85 million and -RMB 65 million, and net profit after excluding non-recurring items to be between -RMB 90 million and -RMB 70 million. It expects operating revenue of RMB 340 million to RMB 370 million. After deducting business income unrelated to its main business and income that lacks commercial substance, operating revenue is expected to be between RMB 330 million and RMB 360 million.

After this accounting adjustment, Felinger’s operating revenue for 2024 after deducting other income unrelated to its main business or lacking commercial substance is only RMB 304 million, just RMB 4.15 million above the delisting red line.

Market concerns lie in: why did neither the Decision nor the accounting error correction announcement disclose detailed information such as the amounts of the engineering projects? And generally, the revenue volume of a single engineering project is not small; why did Felinger’s cross-period revenue adjustments for nine projects amount to only RMB 23.3834 million? Did Felinger’s actual operating revenue in 2024 truly stay above the RMB 300 million delisting “red line”?

In addition, with no clear signs of recovery in market demand in the home renovation industry, can the company’s operating revenue in 2025 stabilize? Most cross-period revenue (RMB 15.1128 million) was adjusted to be recognized in 2025; are the reasons sufficient? Is the company’s revenue recognition in 2025 truly “compliant and fair” as shown in the company’s response to the Work Letter?

More intriguingly, under the shadow of financial doubts and the sword of delisting, in mid-2025 Felinger suddenly planned a change of controller and completed it quickly in September.

In June 2025, Felinger announced that Anji Qingke Technology Partnership Enterprise (Limited Partnership) and the actual controller Jin Yawei plan to acquire, totaling 25% of the shares of Felinger held by Ding Furu and persons acting in concert with him as the company’s former actual controller (exactly below the trigger line of the mandatory tender offer obligation of 30%), becoming the new controlling shareholder and the new actual controller of the listed company. Meanwhile, Ding Furu’s side still holds 19.56% of Felinger’s shares, but commits to “waive the pursuit of control.” At the same time, Felinger’s single largest shareholder, Felinger Holding, plans to transfer its 27.22% stake by agreement to Shaanxi Guotou · Leying Trust No. 267, Boyuan Dairong Fund, and Ronglian Fund, thereby achieving a complete exit.

At that time, a reporter from Shanghai Securities News noted that due to the complexity of the transaction structure and the cleverness of the equity arrangements, this deal reflected many suspicious issues behind the scenes (see this newspaper’s June 5, 2025 and July reports: “Five Questions about Felinger’s Suspicious Change-of-Controller Transaction” and “Further Inquiry into Felinger’s Announcement ‘Clear but Not Clear’”).

Given that Felinger’s financial statements contain false record-keeping, and the reasons for adjusting revenue across periods are insufficient, it is reasonably open to question whether the company’s change of controller was a “shell game” carried out by its former actual controller Ding Furu before the “exposure of wrongdoing.”

Troubled related-party transaction practices frequently arise

Or is there hidden further overstatement of revenue?

A senior investment banking professional told the reporter that, beyond the already confirmed income that should not be accrued, Felinger may also have engaged in conduct of overstating revenue by relying on related-party transactions in 2024.

The source explained that Felinger is trapped in issues such as loss of management control, shareholder infighting, and insiders encroaching on benefits. In its 2024 annual report, the company’s then chairman, Yugen Felinger, stated that it could not guarantee the authenticity, accuracy, and completeness of the report contents, and that this was his second time to state that he “could not guarantee” the company’s annual report.

In addition, Felinger had previously violated regulations by failing to fulfill the deliberation procedures for related-party transactions, failing to timely disclose related-party transaction matters, and failing to disclose them in corresponding annual periodic reports.

In September 2024, due to non-compliant related-party transactions regarding engineering construction matters, the Shanghai Securities Regulatory Bureau took supervisory and administrative measures requiring the company to make rectifications, and took supervisory and administrative measures of issuing warning letters against the actual controller, deputy chairman Ding Furu, and the chairman of the board of supervisors, Fan Bin, respectively. On January 17, 2025, the Shanghai Stock Exchange issued a disciplinary action decision letter, publicly criticizing Felinger and Ding Furu and Fan Bin.

The above investment banking professional specifically mentioned that the combined related-party transactions between Felinger and Shanghai Qiongge Electronic Technology Development Co., Ltd. (abbreviated as “Shanghai Qiongge”) totaling more than RMB 31.58 million occurred in 2024. “There were rumors years ago in the market that, in the development and operations of the Shanghai Jingxian Care Home project signed between Felinger and Shanghai Qiongge, there were difficulties, but in 2024 the related-party transaction amounts between the two were again relatively large, exceeding RMB 30 million.”

After checking the announcements, the reporter found that: Shanghai Qiongge signed with Felinger’s wholly-owned subsidiary Felinger Wood Industry (Shanghai) Co., Ltd. on September 2021 the “Construction Contract for Supply and Installation of Wood Flooring for the Phase I Shanghai Jingxian Care Home,” with a contract amount of RMB 3.5338 million; it signed with Felinger’s wholly-owned subsidiary Felinger Smart Home (Shanghai) Co., Ltd. in November 2022 the “Supply and Installation Contract for Cabinets, Wardrobes, etc. for Phase I of Shanghai Jingxian Care Home,” with a contract amount of RMB 20.50 million; and it signed with Felinger’s controlling subsidiary Felinger Home Furnishing Technology (Jiangsu) Co., Ltd. in November 2022 the “Construction Contract for Supply and Installation of Interior Doors for Phase I of Shanghai Jingxian Care Home,” with a contract amount of RMB 10.98 million.

The above investment banking professional said that related-party transactions between Felinger and Shanghai Qiongge may have already been on the regulatory authorities’ radar long ago.

An inquiry letter from the Shanghai Stock Exchange concerning Felinger’s 2024 annual report shows that, in the five largest customer sales in its reporting period, the total sales amounted to RMB 97.13 million, accounting for 28.89% of the company’s total annual sales. Among them, sales to related parties amounted to RMB 31.3514 million. The regulatory authorities required the company to explain the fairness and commercial substance of related-party transactions. Public information shows that this related party is Shanghai Qiongge.

With Felinger mired in regulatory penalties, market doubts, and operational difficulties, the future development prospects of Felinger after completing the change of controller remain unclear. The Shanghai Securities News will continue to track developments.

A wealth of information and precise interpretations are all available in the Sina Finance APP