According to the law firm press release, the complaint charges, throughout the Class Period, Defendants maintained that SinoHub's internal controls over financial reporting were effective. However, as evidenced by the Company's correspondence with the U.S. Securities and Exchange Commission regarding the Company's internal controls, Defendants knowingly or recklessly implemented, or ignored the existence of, ineffective internal controls which ultimately resulted in the use of improper accounting procedures and the overstatement of the Company's financial statements and future earnings potential.
On May 16, 2011, to the surprise of investors, the Company announced it would be restating its Form 10-K for 2010 and Form 10-Qs for all three quarters in 2010 due to material misstatements of liabilities and expenses, and significant deficiencies in internal control. The market reacted negatively to the news and on May 16, 2011, SinoHub's stock price dropped from an opening price of $1.76 per share to a closing price of $1.36, a 23% decline in one trading day.
Thereafter, on March 30, 2012, the Company released its Form 10-K Annual Report for 2011, which revealed that SinoHub had not experienced any revenue growth during the year. SinoHub's stock price responded accordingly, closing at $0.54 per share on March 30, 2012 after opening that day at $0.63 per share, a single day decline of 16%. The complaint alleges, however, SinoHub continued to represent in its Form 10-K for 2011 that the Company had remediated its internal control problems and that SinoHub's internal controls were now "effective."
On August 14, 2012, the Company shocked investors when it announced that it would be unable to file its Quarterly Report on Form 10-Q for June 30, 2012 within the prescribed time period. The Company stated that it expected to file the report within an extension period. Upon the disclosure of this information, and over the next three trading days, SinoHub's stock declined approximately 26% on unusually high trading volume. Finally, on August 21, 2012, the last day of the Class Period, SinoHub announced that it would not file its Form 10-Q within the extension period as a result of a delay in the Company's retrieval of information requested by the
Company's auditors to confirm prior-period sales. The Company announced results for the quarter ended June 30, 2012, stating that it had suffered a net loss of $2.7 million. Over the next three trading days SinoHub's stock price dropped by 20%. The Company's stock has now been delisted by the NYSE.
On March 1, 2013, the Court issued an Order consolidating cases, appointing lead plaintiff, and approving the selection of lead counsel.
On September 16, 2013, the plaintiffs filed an Amended Complaint.
On June 26, 2015, the parties filed a Stipulation of Settlement. This Settlement was preliminarily approved by the Court on July 22. On November 13, the Court granted final approval of the Settlement and dismissed this case with prejudice.