Inflated revenue has been firmly proven; revenue is nearing the “delisting threshold.” Is the change in Filinger’s ownership a transition—or a “cicada shedding its shell” escape?

On the evening of April 6, Flinger announced that it would make accounting error corrections and retrospectively adjust certain financial data included in the company’s 2021 annual financial statements through the third-quarter financial statements of 2025 and their notes. Specifically, this includes: reclassifying the fund held in Lingang Fund and the fund held in Hainan Fund from “other equity instrument investments” to “other non-current financial assets”; adjusting revenue of RMB 23.3834 million that was recognized in 2024 across periods—of which RMB 7.0346 million was adjusted to be recognized in 2023, RMB 15.1128 million was adjusted to be recognized in 2025, and RMB 1.2360 million was offset.

Flinger has committed that, for 2024, after deducting other income that is unrelated to the company’s main business or does not have commercial substance, the adjusted operating revenue will be RMB 304 million. This accounting error correction will not cause the company’s 2024 operating revenue after the deduction to fall below RMB 300 million, nor will it cause any change in the profit or loss nature of the periodic reports already disclosed.

This accounting error correction by Flinger was attributable to a regulatory penalty from a few days earlier.

On the evening of April 3, Flinger issued an announcement stating that the company and relevant personnel recently received a decision issued by the Shanghai Securities Regulatory Bureau, titled “Decision on Taking Order-to-Rectify Measures and Warning-Letter Measures Against Certain Responsible Personnel for Flinger Home Technology Co., Ltd.” (abbreviated as the “Decision”).

The “Decision” shows that the company has the following violations: revenue recognition issues at nine engineering projects that were inaccurate, misclassification of certain financial assets resulting in false statements in the annual report, and non-compliant procedures for the review of remuneration for directors and senior executives.

The situation immediately triggered market skepticism: neither the “Decision” nor the announcement on the accounting error correction disclosed in detail core information such as the specific amounts for the nine engineering projects, and the company’s adjustment amount for operating revenue for 2024 is unreasonable—has Flinger’s 2024 revenue truly reached the company’s commitment of not less than RMB 300 million?

False statements in financial reports are confirmed, raising a cascade of questions on revenue recognition

In addition to the “Decision” received in April, as early as February this year, Flinger had already received from the Shanghai Stock Exchange a regulatory inquiry letter on matters related to its performance forecast (abbreviated as the “Inquiry Letter”), regarding “Flinger Home Technology Co., Ltd.”, and provided a response on issues related to revenue recognition.

Some analysts believe that the “Decision” clearly indicates that the company’s annual report contains false statements, while the “Inquiry Letter” mainly focused on questioning revenue recognition—this suggests that the regulatory authorities have been continuously paying attention to Flinger’s financial issues.

Specifically, the “Decision” indicates that, regarding revenue recognition for engineering projects, the company recognized revenue for nine engineering projects that should not be included in 2024 revenue in the same year by using forged acceptance documents, requiring the party that is the purchaser (Party A) to cooperate in issuing acceptance documents in advance, and postponing revenue recognition through internal approval procedures, which led to false statements in the company’s 2024 annual report.

In terms of accounting treatment for financial assets, in August 2021 and December 2021, the company, first as a limited partner and then as a limited partner, invested in two fund partnerships: 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). These two financial assets do not meet the definition of equity instruments. The company recorded the fair value change gain/loss during the holding period into the “other comprehensive income” line item. The relevant accounting treatment did not comply with regulations, resulting in false statements in the company’s annual reports from 2021 to 2024.

In addition, from 2022 to 2024, the company’s directors’ remuneration had not been reviewed by the shareholders’ meeting, and the remuneration of senior management had not been approved by the board of directors and explained to shareholders (the (a) meeting), which did not comply with the relevant requirements.

The “Inquiry Letter” shows that the Shanghai Stock Exchange is highly concerned with Flinger’s operating revenue recognition and the substance of related-party transactions, and required the company to respond to the following four issues:

First, distinguish between different business segments and list, quarter by quarter, the amounts of operating revenue, their proportions, year-on-year changes, revenue recognition policies, and whether there were changes during the reporting period; and, in combination with relevant regulations, explain the compliance of revenue recognition, and whether there is any circumstance of evading the delisting risk warning by recognizing revenue in advance or across periods.

Second, list the basic information of the top ten customers for each business segment, including the customer names, related-party relationships, whether the customers are newly added in the current period, contract signing dates and amounts, revenue recognition policies, settlement cycle and credit policies, outstanding accounts receivable balances, and the status of collections as of the date of the reply letter, etc.

Third, list the basic information of the counterparties for all engineering-type businesses for the full year, including contract signing dates, project names and amounts, project acceptance timing and acceptance basis, settlement situation, outstanding accounts receivable balances, the status of collections as of the date of the reply letter, etc., and explain whether there is any circumstance of evading the 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 him, including project names, contract signing dates, pricing basis, whether the transactions are newly added in the current period, whether the revenue recognition policies are consistent with other similar non-related-party businesses, project acceptance timing and acceptance basis, project settlement situation and the resulting outstanding accounts receivable balance, the status of collections as of the date of the reply letter, and, in combination with the above content, explain the fairness and commercial substance of the relevant related-party transactions.

Flinger responded that the company complied with the relevant provisions of the “Enterprise Accounting Standards”; the revenue recognition policy had no changes during the reporting period; revenue recognition was compliant and there was no circumstance of evading the delisting risk warning by recognizing revenue in advance or across periods. The company stated that its revenue recognition policy for related parties is consistent with other similar non-related-party businesses; the pricing for the current period’s related-party transactions is fair and has commercial substance.

Revenue is closely hugging the RMB 300 million delisting “red line”

Could the change of control be a “swan escape” (shell game)?

Flinger’s performance has declined for multiple consecutive years. Its 2024 annual report shows the company achieved operating revenue of RMB 336 million, down 14.86% year over year; net profit recorded a loss of RMB 37.3071 million. According to the company’s 2025 annual performance pre-loss announcement, Flinger expects its attributable net profit for 2025 to be from -RMB 85 million to -RMB 65 million, and its net profit after deducting non-recurring items to be from -RMB 90 million to -RMB 70 million. It expects operating revenue of RMB 340 million to RMB 370 million, and operating revenue after deducting business income unrelated to the main business and income that does not have commercial substance to be RMB 330 million to RMB 360 million.

After this accounting adjustment, Flinger’s 2024 operating revenue after deducting other income unrelated to the main business or lacking commercial substance was only RMB 304 million, which is just RMB 4.15 million away from the delisting threshold.

Market concern lies in: why did neither the “Decision” nor the accounting error correction announcement disclose detailed information such as the amounts of the engineering projects? Also, generally speaking, the revenue scale of a single engineering project is not small—so why is the cross-period revenue adjustment for Flinger’s nine projects only RMB 23.3834 million? Has Flinger’s actual operating revenue in 2024 truly stayed above the RMB 300 million delisting “red line”?

In addition, given that there are no clear signs of a rebound in market demand in the home improvement industry, can the company’s operating revenue in 2025 stabilize? A large portion of the cross-period revenue (RMB 15.1128 million) was adjusted to be recognized in 2025—are the reasons sufficient? Is Flinger’s 2025 revenue recognition truly “compliant and fair,” as stated in the “Inquiry Letter” response?

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

In June 2025, Flinger announced that Anji Qing Technology Partnership Enterprise (Limited Partnership) and the actual controller, Jin Yawei, planned to acquire, from the company’s actual controller Ding Furou and his parties acting in concert, a total of 25% of Flinger’s shares (exactly below the trigger line for mandatory tender offer obligations at 30%), becoming the new controlling shareholder and actual controller of the listed company. Ding Furou’s side will still hold 19.56% of Flinger’s equity, but will commit to “forgo the pursuit of control.” At the same time, Flinger’s single largest shareholder, Flinger Holding, planned to transfer its 27.22% equity interest by agreement to Shaan GuoTou · Leyi Trust No. 267, Boyuan Dalang Fund, and Ronglian United Fund, achieving a complete exit.

At that time, a reporter from the Shanghai Securities News had already noted that the transaction structure was so complex and the equity arrangements so cleverly designed, reflecting many questionable issues behind the scenes.

Given that Flinger’s financial statements contain false statements, and the rationale for adjusting revenue across periods is insufficient, it is reasonable to question whether the company’s change of control was a “swan escape” move by the former actual controller, Ding Furou, before the “dark window incident” was exposed.

Frequent chaos in related-party transactions, or hiding even more inflated income?

A senior investment banking professional believes that, beyond the income that has already been confirmed as not eligible to be recognized, Flinger may also have inflated income in 2024 by relying on related-party transactions.

The professional explained that Flinger has been trapped in problems such as loss of control in management, conflicts among shareholders, and insiders appropriating benefits. In its 2024 annual report, Flinger’s then chairman, Yourgen Flinger, stated that it could not guarantee the truthfulness, accuracy, and completeness of the contents of the report, and that this was his second time stating that he “could not guarantee” the company’s annual report.

In addition, Flinger had also violated regulations by failing to perform the approval procedures for related-party transactions as required, failing to disclose related-party transaction matters in a timely manner, and failing to disclose them in the corresponding annual periodic reports, among other unlawful and non-compliant conduct.

In September 2024, due to non-compliance in a related-party transaction concerning engineering construction matters, the Shanghai Securities Regulatory Bureau took supervision and administration measures requiring the company to rectify; it also separately took supervision and administration measures of issuing warning letters to the actual controller, the deputy chairman, Ding Furou, and the chair of the board of supervisors, Fan Bin. On January 17, 2025, the Shanghai Stock Exchange issued a disciplinary action decision letter, giving notice of criticism to Flinger and Ding Furou and Fan Bin.

The above-mentioned investment banking professional specifically pointed out that the total related-party transactions between Flinger and Shanghai Qiongge Electronic Technology Development Co., Ltd. (abbreviated as “Shanghai Qiongge”) in 2024 exceeded RMB 31.58 million. The professional said: “There were rumors years ago that in the development and operation of the Shanghai Jingxian Care Nursing Home project signed between Flinger and Shanghai Qiongge, there were difficulties. But in 2024, the related-party transaction amounts between the two were relatively large again, exceeding RMB 30 million.”

The reporter reviewed announcements and found that Shanghai Qiongge Electronic Technology Development Co., Ltd. signed with Flinger’s wholly owned subsidiary Flinger Wood Industry (Shanghai) Co., Ltd. in September 2021 the “Shanghai Jingxian Care Nursing Home Phase I Wooden Flooring Supply and Installation Engineering Construction Contract,” with a contract amount of RMB 3.5338 million; it signed in November 2022 the “Shanghai Jingxian Care Nursing Home Phase I Contracts for Supply and Installation of Wardrobes and Cabinets,” with a contract amount of RMB 20.50 million; and it signed in November 2022 the “Shanghai Jingxian Care Nursing Home Phase I Wooden Door Supply and Installation Engineering Construction Contract” with Flinger Home Technology (Jiangsu) Co., Ltd., a controlled subsidiary of Flinger, with a contract amount of RMB 10.98 million.

The above analyst also said that the related-party transactions between Flinger and Shanghai Qiongge may already have been under regulatory attention long ago.

In the inquiry letter from the Shanghai Stock Exchange regarding the company’s 2024 annual report, it shows that, within the reporting period, the combined sales amount of the company’s top five customers was RMB 97.13 million, accounting for 28.89% of total annual sales. Of this, sales to related parties were RMB 31.3514 million. The regulator required the company to provide explanations regarding the fairness and commercial substance of the related-party transactions. Public information shows that the related party is Shanghai Qiongge Electronic Technology Development Co., Ltd.

With the company entangled in regulatory penalties, market skepticism, and business difficulties, the future development outlook of Flinger following the completion of the change of control remains unclear. The Shanghai Securities News will continue to track developments.

（Source: Shanghai Securities News）