Core Viewpoint - Zhejiang Yong'an Rongtong Holdings Limited faces potential delisting from the Hong Kong GEM market due to the resignation of its auditor, which highlights significant financial internal control deficiencies and a compliance issue involving a total of 167 million yuan in prepayments [1][2][5] Financial Internal Control Collapse - The resignation of the auditor, Shinewing (HK) CPA Limited, was attributed to the company's failure to provide necessary materials for the 2024 financial audit, uncertainty in audit costs, and internal resource adjustments. The critical trigger was two non-compliant prepayments totaling 167 million yuan, which were not disclosed as required by GEM Listing Rule Chapter 20 [2][8] - The compliance issues have halted the progress of the financial audit, and if the company fails to remedy these violations by February 20, 2026, it will face delisting procedures [2][5] 1.67 Billion Yuan Payment Mystery and Related Party Transaction Concerns - The relationship between Zhejiang Yong'an and the payment recipients, Guizhou Yongli Enterprise Management Co., Ltd. and Zhejiang Yongli Industrial Group, has raised market suspicions. The similarity in names suggests potential undisclosed related party transactions or benefit transfers [3][9] - The Hong Kong Stock Exchange had previously issued additional resumption guidance to Zhejiang Yong'an regarding these compliance issues, but the company failed to rectify them, leading to the auditor's resignation [3][9] Deteriorating Operations and Liquidity Crisis - The company's main business has been declining, with a 42.67% year-on-year drop in revenue to 16.96 million yuan in the first half of 2024. Sales of woven fabrics decreased by 42.89% domestically and 37.93% in exports [4][10] - Despite achieving a net profit of 57.29 million yuan through asset sales, the core business remains under pressure, with a gross margin of only 4.81%. The liquidity situation is dire, with negative operating cash flow and a cash balance of 168 million yuan, which includes non-recurring income [4][10] Countdown to Delisting: Resumption Conditions Hard to Meet - To avoid delisting, Zhejiang Yong'an must meet three resumption conditions: rectify internal control deficiencies and disclose compliant fund transactions, publish all undisclosed financial results, and demonstrate ongoing viability. Currently, none of these conditions have been met [5][11] - The resignation of the auditor complicates the investigation into fund compliance, and the absence of an audit means the 2024 financial report cannot be published. The company's declining core business and cash flow pressures cast doubt on its ability to continue operations [5][11]