According to a press release dated June 24, 2011, Plaintiffs allege that the Defendant released false and misleading statements and financial disclosures regarding purchases during the Class Period. The Complaint alleges violations of Section 10(b) of the Exchange Act and Rule 10b-5 along with Section 20(a) of the Exchange Act.
On June 17, 2011, following a report by an analyst questioning the truth of statements concerning certain acquisitions by the Defendant, the company management admitted that the company’s previously announced acquisition of 13 chicken breeding farms did not really take place. This adverse news caused analysts to place the Defendant’s ratings under review and remove its prior financial projections on the company. The Defendant’s share price dropped precipitously as a result and trading in its shares has been halted by NASDAQ.
On June 23, 2011, the Defendant announced its auditor had resigned because of “management’s misrepresentation and failure to disclose material facts surrounding certain acquisition transactions and off balance sheet related party transactions.” Moreover, the auditor stated that its audited financial statements of the Defendant for the year ended December 31, 2010 should no longer be relied upon and that the auditor no longer will be associated with the financial statements.
A similar, purported class action complaint was also filed in the U.S. District Court for the Central District of California.
On October 5, 2011, the Court in the Southern District of Florida issued an Order of Dismissal pursuant to Plaintiff's Notice of Voluntary Dismissal without prejudice. The Defendant still faces a case for violations of the federal securities laws against the Defendant in the Central District of California.
According to the press release, the allegations in the Central District of California are as follows, this action is brought on behalf of all purchasers of the securities of Yuhe International, Inc. between December 31, 2009, and June 17, 2011, inclusive (the “Class Period”). The Complaint charges the Company and certain of its executive officers with violations of sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and S.E.C. Rule 10b-5. The Complaint alleges that throughout the Class Period defendants made false and/or misleading statements and/or failed to disclose that, among other things: (1) that the Company had failed to execute a purchase agreement for Yuhe’s announced purchase of 13 breeder farms from Weifang Dajiang Corporation (“Weifang”); (2) that the Company had not completely paid both the initial amount and remaining balance, totaling more than $12 million, of the agreement’s total consideration to Weifang; (3) that the Company lacked adequate internal and financial controls; and (4) that, as a result of the foregoing, the Company's statements were materially false and misleading at all relevant times.
On March 5, 2013, the Court denied the Defendants’ motions to dismiss, with the exception of granting dismissal of the Section 11 claim against the Underwriter Defendants, granting dismissal of the Section 10(b) claim against an individual defendant, and granting dismissal of the Section 12(a)(2) and Section 11 claims of all subclass members whose Yuhe shares are only traceable to the second offering. Dismissal was without prejudice, except as to the Section 12(a)(2) claims.
On April 4, 2013, the Plaintiffs filed a Second Consolidated Amended Complaint.
On January 6, 2014, the parties entered into a Stipulation of Settlement. The Court preliminarily approved the Settlement on March 7. On June 10, the Court issued Orders awarding Attorneys' Fees and Litigation Expenses, approving the Plan of Allocation, and entering Final Judgment.