Dongguan HuaLi Industries (603038.SH) and related parties received a warning letter from the Guangdong Securities Regulatory Bureau.

Dongguan HuaLi Industries (603038.SH) issued an announcement that the company recently received the Administrative Regulatory Measures Decision [2024]185 issued by the Guangdong Regulatory Bureau of the China Securities Regulatory Commission - "Decision on Issuing a Warning Letter to Dongguan HuaLi Industries Co., Ltd., Tan Hongru, Tan Xujie, He Quanhong, Xie Zhikun, Lu Xuqiu, and Sun Ai'ai". Upon inspection, the company has the following issues: Firstly, after a careful assessment of the substance of the relevant trade business model, Dongguan HuaLi Industries adjusted the revenue recognition method for some trade business in the first three quarters of 2022 from the gross method to the net method. As a result, accounting errors were corrected in the first quarter, half-year, and third-quarter reports of 2022. After adjustment, the company's operating revenue for the first quarter, half-year, and first three quarters of 2022 decreased by 16.9072 million yuan, 84.1675 million yuan, and 108.6959 million yuan respectively, and operating costs decreased by the same amounts. The accounting treatment of trade business in the company's pre-adjustment 2022 quarterly and annual reports does not comply with relevant provisions of "Enterprise Accounting Standard No. 14 - Revenue," Article 34. Secondly, in 2022, Dongguan HuaLi Industries acted as a purchasing agent for a construction company for concrete, steel, and pile materials, with a sales amount of 27.354 million yuan, sales costs of 24.0235 million yuan, and the company recognized operating revenue of 3.3305 million yuan using the net method. Upon investigation, it was found that this business was essentially a fund financing business in the form of trade, with occasional and special characteristics, but the company recognized it as operating revenue and did not disclose it as non-recurring profit and loss. The above situation does not comply with relevant provisions of "Enterprise Accounting Standard No. 22 - Recognition and Measurement of Financial Instruments," Article 66, "Regulations on the Preparation of Financial Reports of Companies Issuing Securities" (Revised in 2023) Article 79, and "Interpretation Announcement No. 1 on the Disclosure of Financial Information of Companies Issuing Securities - Non-recurring Profit and Loss" Article 4. Thirdly, when Dongguan HuaLi Industries conducted an impairment test on the goodwill of Fujian Shangrun Investment Management Co., Ltd., it did not fully consider the impact of subsequent events on the company's revenue, leading to an under-provision of 1.6928 million yuan for impairment of goodwill in 2023. The above situation does not comply with relevant provisions of "Enterprise Accounting Standard No. 8 - Asset Impairment," Article 11. The above situations have resulted in inaccurate financial data disclosed in Dongguan HuaLi Industries' relevant periodic reports, violating Article 3, Paragraph 1 of the "Regulations on the Management of Information Disclosure by Listed Companies" (CSRC Order No. 182). Former director Tan Hongru, former general manager CKH HOLDINGS, former chairman He Quanhong, former chairman Tan Xujie, general manager Xie Zhikun, former CFO Lu Xuqiu, and CFO Sun Ai'ai failed to fulfill their duties diligently and responsibly in accordance with Articles 4 and 51 of the "Regulations on the Management of Information Disclosure by Listed Companies," bearing primary responsibility for the above violations. Tan Hongru, Tan Xujie, Xie Zhikun, and Lu Xuqiu are primarily responsible for the first and second violations, while He Quanhong and Sun Ai'ai are primarily responsible for the third violation. In accordance with Article 51, Paragraph 3 and Article 52 of the "Regulations on the Management of Information Disclosure by Listed Companies," the Guangdong Regulatory Bureau has decided to issue a warning letter to the company, Tan Hongru, Tan Xujie, He Quanhong, Xie Zhikun, Lu Xuqiu, and Sun Ai'ai as an administrative regulatory measure.