A class action alleged that China Organic misled investors by (1) improperly announcing the sale of a subsidiary in 2008, when the transaction was actually completed in the second half of 2009; (2) knowingly or recklessly disregarding the reality that the Company’s disclosure controls were ineffective; and (3) knowingly or recklessly disregarding the fact that the 2008 Form 10-K overstated pre-tax income by about US$3m (net income was US$17m).
Despite CNOA’s restatements and officer resignations, on May 17, 2011, the Company announced that it would be filing its Form 10-Q five days late and misled the market to believe that it would ultimately be in compliance with the Securities Exchange Act of 1934’s reporting requirements. However, once the market realized that the Company would not make the requisite filings, CNOA’s common stock dropped to $0.01 per share. CNOA was delisted in 2013.
Lawsuit: CHINA ORGANIC AGRICULTURE, INC. CNOA SECURITIES STOCK FRAUD, 25 Jan 2012
China Organic Agriculture: Annual Report 2008