According to the firm's 10-K filing dated April 1, 2002, in March 2001, the Company announced that it reached an agreement in principle to settle a shareholder securities class action lawsuit that was pending against the Company and certain of its officers and directors before the United States District Court for the Eastern District of New York (the "Court"). The lawsuit alleged that the Company and the other defendants violated the securities laws by making material misstatements and failing to state material facts about the Company's business and financial condition, among other things, in securities act filings and public statements. The class of plaintiffs included all buyers of the Company's stock from April 8, 1998 through February 24, 1999, other than the defendants and certain related parties. The Court approved the settlement in February 2002. Pursuant to the settlement, the Company has agreed to pay $26 million, all of which is covered by the Company's existing insurance.

The Complaint charges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by, among other things, making materially false and misleading statements about the demand for the Company's products and production problems with the Company's new product line, Twinlab TrueHerbs. On November 30, 1998, Twinlab shocked the market by announcing that fourth quarter results would fall far below Wall Street estimates. Following this disclosure, Twinlab common stock plummeted by 28%, to close at just $13 per share on December 1, 1998.