*ST Changyao Receives Administrative Penalty for Three Consecutive Years of Financial Fraud; Stock Will Be Delisted

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*ST Changyao (Rights Protection) (Stock Code: 300391) announced on March 18th that the company and relevant parties have received the “Administrative Penalty Decision” issued by the China Securities Regulatory Commission. It was found that the company’s 2021 to 2023 annual reports contained false records, with cumulative inflated operating income exceeding 730 million yuan and inflated total profits exceeding 168 million yuan. This constitutes a major illegal violation leading to mandatory delisting, and the company’s stock will be terminated from listing.

The announcement shows that subsidiaries Hubei Changjiangyuan Pharmaceutical Co., Ltd. and Hubei Xinfeng Pharmaceutical Co., Ltd. confirmed revenue between 2021 and 2023 by creating false inbound and outbound warehouse documents, without actual sales transactions. Additionally, in 2022, the company failed to reasonably recognize losses on the Changjiang Weichuang Traditional Chinese Medicine City Trading Center project, further distorting financial data.

Specifically, from 2021 to 2023, *ST Changyao respectively inflated operating income by 215.32 million yuan, 283.74 million yuan, and 233.63 million yuan, accounting for 9.12%, 17.57%, and 19.51% of the disclosed operating income for those periods; inflated total profits by 56.40 million yuan, 63.38 million yuan, and 43.70 million yuan, representing 35.62%, 88.23%, and 6.42% of the disclosed total profits. In 2022, due to unreasonably recognized losses on the project, it inflated profits by 4.55 million yuan, accounting for 6.34% of the disclosed total profits.

The China Securities Regulatory Commission imposed administrative penalties on 14 responsible personnel, including a fine of 5 million yuan and lifelong securities market ban on the former General Manager and Director Luo Ming; Yang Zhenghui, who was responsible for sales and procurement, was fined 3 million yuan and banned from the securities market for 10 years. The other 12 responsible personnel (including former Chairmen, CFOs, Independent Directors, etc.) were fined between 1 million and 3 million yuan.

According to the “Shenzhen Stock Exchange ChiNext Board Listing Rules,” *ST Changyao’s annual report financial indicators have been falsely recorded for three consecutive years, constituting a major illegal violation leading to mandatory delisting. The company’s stock will be terminated from listing. The company’s board of directors has sincerely apologized to investors and reminds them to be cautious of investment risks.

*ST Changyao stated that it will strictly fulfill its information disclosure obligations in accordance with laws and regulations, and relevant company information will be based on announcements published in designated media.

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