Audit Committee's Review Opinion on the Shenzhen Stock Exchange's Inquiry Letter Regarding Modern Avenue Fashion Group Co., Ltd.'s 2025 Annual Report
In response to the "Inquiry Letter on the 2025 Annual Report of Modern Avenue Fashion Group Co., Ltd." (Company Department Annual Report Inquiry Letter [2026] No. 86) issued by the Shenzhen Stock Exchange on April 30, 2026 (hereinafter referred to as the "Inquiry Letter"), Modern Avenue Fashion Group Co., Ltd. has provided responses to the relevant questions. The Audit Committee hereby expresses its opinions on the matters related to the Inquiry Letter as follows.
[Question 1] The annual report shows that in 2025, your company achieved operating revenue of 603 million yuan, a year-on-year increase of 178.75%; net profit was -44.913 million yuan, a year-on-year increase of 27.68%; net profit after deducting non-recurring items was -62.7421 million yuan, a year-on-year decrease of 8.19%; and net cash flow from operating activities was -83.5172 million yuan, a year-on-year decrease of 605.54%.
Regarding the deduction of operating revenue and correction of accounting errors, your company deducted 115 million yuan of revenue unrelated to the main business in 2025, resulting in operating revenue of 488 million yuan after deduction. Additionally, according to the "Announcement on Correction of Prior Accounting Errors" disclosed on the same day, due to the adjustment from the gross method to the net method for some business revenues in the first three quarters of 2025, operating revenue for the first three quarters of 2025 was reduced by 79.4412 million yuan RMB.
Regarding related-party transactions, the "Announcement on the Forecast of Related-Party Transactions for 2025" disclosed by your company on May 10, 2025, shows that the estimated sales quota to related parties for products in 2025 is 80 million yuan. The annual report shows that your company's revenue from sales to related parties in 2025 was 75.1246 million yuan. However, the "Announcement on the Forecast of Daily Related-Party Transactions for 2026" disclosed by your company on January 16, 2026, shows that the cumulative revenue from sales to related parties in 2025 was 113 million yuan, indicating a contradiction between the two figures. Furthermore, your company expects sales to related parties to be 160 million yuan in 2026, a significant increase compared to 2025.
Please provide the following:
I. Provide a detailed explanation of the specific situation of operating revenue in 2025, including its breakdown by business category, revenue recognition methods, top ten customers and sales amounts, accounts receivable formation, and collection progress to date.
II. Based on the response to Question I, provide a detailed explanation of the reasons and reasonableness for the significant difference between the change in operating revenue and net profit, and operating cash flow in 2025. Confirm whether the recognition of operating revenue is true and accurate, whether the recognition policy has changed significantly compared to the same type of revenue in the past two years, and whether there is any advance recognition of revenue. Based on the year-on-year growth of relevant revenues and its reasons, analyze whether there is any uncertainty regarding your company's ability to continue as a going concern (especially regarding the sustained growth of operating revenue).
III. Based on the responses to Questions I and II, and in conjunction with the "Guidelines for Self-Regulation of Listed Companies on the Shenzhen Stock Exchange No. 1 - Business Handling (2025 Revision)," specifically address the items under "Operating Revenue Deduction Matters" to explain whether there is any operating revenue in 2025 that should be deducted, and whether the existing operating revenue deductions are complete and accurate.