LakeShore Biopharma provides update on ongoing investigation involving Yi Zhang

LakeShore Biopharma (LSB) announced that the Shenyang Municipal Public Security Bureau in China has initiated criminal investigations into actions taken by former chairman of the board of directors Yi Zhang. The Company has uncovered evidence suggesting that Yi Zhang, during his tenure in key executive roles, misappropriated corporate assets for personal gain and mismanaged the Company, resulting in significant financial losses over past several years, thereby seriously harming the interests of shareholders of the Company. In response to these revelations, by March 2024, the Company took decisive action to remove Yi Zhang from all executive positions within the Company and its subsidiaries, in accordance with the Company’s Memorandum and Articles of Association effective at that time and relevant laws. This action was necessary to mitigate the damage caused by Yi Zhang and his associates. Under the new leadership, the Company’s financial and operational performance has seen a marked improvement. The Company has achieved smooth operations, secured second position in China’s Rabies vaccine market and reaffirmed the full year financial guidance through Fiscal Year 2025 ended March 31, 2025. In March 2024, Yi Zhang, despite having been dismissed, exploited his temporary control over the Company’s Seal to forge contracts and falsify debts to entities controlled by him. Using these documents, he initiated a case with the Kaifeng Arbitration Commission, leading to the freezing of assets and bank accounts of the Company’s wholly-owned subsidiary, Liaoning Yisheng Biopharma Co., Ltd., causing substantial operational challenges. The new management team swiftly secured additional financing to maintain business continuity and has taken comprehensive internal and external initiatives to reassure employees, customers, distributors, suppliers, and financial partners regarding the recent developments described above and to underscore the stability and ongoing operations of the business. The Company also promptly challenged the unfounded claims filed by Yi Zhang at the Kaifeng Arbitration Commission, and is confident that these baseless claims will be dismissed, allowing for the release of the frozen assets.