According a press release dated April 28, 2011, the complaint charges HQS and certain of its officers and executives with violations of the the Securities Exchange Act of 1934. HQS describes itself as "an integrated aquaculture and aquatic product processing company, with operations based in the environmentally pristine island province of Hainan, in China's South Sea."
The complaint alleges that, throughout the Class Period, defendants failed to disclose material adverse facts about the Company's true financial condition, business and prospects. Specifically, the complaint alleges: (i) that a substantial portion of the Company's revenues were overstated; (ii) that HQS' financial statements were not fairly presented in conformity with U.S. Generally Accepted Accounting Principles and were materially false and misleading; (iii) that HQS was operating with material deficiencies in its system of internal control over its financial reporting; and (iv) that, based on the foregoing, defendants lacked a reasonable basis for their positive statements about the Company, its prospects and growth.
On March 16, 2011, the Company announced in a press release that it would file a Notification of Late Filing on Form 12b-25 with the SEC, allowing it to postpone the filing of its annual report on Form 10-K for fifteen calendar days, or until April 1, 2011. The Company disclosed that it "fully expected" to file the Form 10-K by the April 1, 2011 deadline.
After the close of the market on April 1, 2011, investors were shocked to discover that HQSM was still out of compliance with federal laws and AMEX listing standards, causing trading in the Company's shares to be suspended by the AMEX. HQSM shares closed trading on April 1, 2011 at $2.78 per share. The Company's shares were then suspended from further trading, and have not resumed trading since.
In a letter dated April 6, 2011 (which was filed as an Exhibit to the Company's Form 8-K filed on April 11, 2011), the Chairman of HQSM's audit committee of the board of directors, Andrew Intrader, abruptly resigned, and disclosed some of the previously undisclosed problems that were going on behind the scenes at HQSM. Director Intrader noted how the CEO of the Company had blocked the Company's independent auditors from reviewing data necessary to audit the reported sales and revenues of HQSM. As a result, Director Intrader felt "compelled by conscience" to resign his position as audit committee chairman and as a director of the Company.
To this date, the Company has still not filed its financial reports, is still out of compliance with federal law and AMEX regulations, and has never resumed trading.
On September 28, 2011, the Court issued an Order denying plaintiffs' motion for reconsideration of the Court's earlier order to stay discovery in the state court action.
On September 30, 2011, plaintiffs entered a Notice of Appeal to the US Court of Appeals for the 9th Circuit from the earlier Order granting motions to stay state court discovery and the Order denying motion for reconsideration.
On November 22, 2011, the plaintiffs filed their first amended complaint.
On September 28, 2012, the parties entered into a Stipulation of Settlement. On November 1, the Court issued an Order for Notice and Hearing in connection with the Settlement.
On March 21, 2013, the Court issued an Order and Final Judgment closing this case. This was followed on the same day by an Order awarding attorneys' fees and expenses.