Shifang Holding Limited (1831) issued a clarification announcement, referring to previous disclosures in 2022 and 2023 regarding the acquisitions of Baiming and Zhuoshi and the fulfillment of related profit guarantees.

The company explained that while audit reports from Zhongjian Certified Public Accountants initially indicated that Baiming and Zhuoshi had achieved the agreed profit targets, a subsequent on-site review by PricewaterhouseCoopers revealed discrepancies. Although cash and bank balances generally aligned with the previous audit findings, the actual payment amounts for the majority of sales contracts exceeded contracted costs plus profits.

According to the announcement, Baiming and Zhuoshi subsidized earlier sales contracts using revenue from more recent contracts, effectively treating such subsidies as marketing expenses. After incorporating these costs, the sales contracts were determined to be loss-making, indicating that the supposed profit targets were not met. As a result, Shifang Holding Limited considers the previously issued shares allocated to Baiming and Zhuoshi’s designees to constitute tangible losses for the company that must be recovered or re-placed to offset the company's losses.