Core Viewpoint - Tian Sheng Pharmaceutical Group Co., Ltd. (referred to as "Tian Sheng Pharmaceutical") has been penalized by the China Securities Regulatory Commission (CSRC) for inflating profits and failing to disclose related party transactions in its annual reports, resulting in a total fine of 4.99 million yuan for the company and 22 individuals, including the controlling shareholder Liu Qun [2][5]. Group 1: Financial Misconduct - Tian Sheng Pharmaceutical inflated its total profit by 175 million yuan and 47.9 million yuan in the 2017 and 2018 annual reports, respectively, through the use of off-the-books funds [3]. - The company also inflated its procurement costs for traditional Chinese medicine, resulting in a profit reduction of 82.58 million yuan and 19.09 million yuan for the same years, leading to a net profit inflation of 92.20 million yuan and 28.82 million yuan, which accounted for 30.21% and 20.61% of the reported profits for those years [3][4]. Group 2: Related Party Transactions - Tian Sheng Pharmaceutical failed to disclose related party transactions amounting to 481 million yuan and 48.63 million yuan for 2017 and 2018, respectively, which represented 15.08% and 1.49% of the net assets at the end of those periods [4]. - The company did not include its subsidiary, Chongqing Taihong Construction Engineering Co., Ltd., in its consolidated financial statements, nor did it disclose transactions with companies controlled by Liu Qun [4]. Group 3: Legal and Financial Consequences - The CSRC has ordered Tian Sheng Pharmaceutical to correct its disclosures and has imposed fines, including 600,000 yuan for the company and 900,000 yuan for Liu Qun [5]. - Tian Sheng Pharmaceutical has reported continuous losses over the past six and a half years, with a cumulative loss of 1.09 billion yuan, and its revenue has been declining since 2018 [6][7]. - The company’s stock has been under risk warnings since June 5, 2019, due to the controlling shareholder's involvement in fund misappropriation, and additional warnings will be implemented starting September 15, 2025, due to false financial disclosures [8].