By the Order and Final Judgment entered on October 31, 2001, the settlement and the Plan of Allocation are approved, and the litigation is dismissed with prejudice. A separate order shall be entered to approve co-lead counsel’s applications for fees and reimbursement of expenses.
On July 19, 2000, the Court for the United States District Court for the Central District of California consolidated the 31 related cases pending against eConnect, Inc. and other named defendants. The Court appointed two individual shareholders to serve as Lead Plaintiffs and represent the other class members in the prosecution of this case. Plaintiffs filed their Consolidated Amended Complaint on September 11, 2000. On June 6, 2001, the parties agreed to settle the case and filed a Stipulation of Settlement with the Court. Pursuant to the terms of the Stipulation of Settlement, a Settlement Fund in the amount of $350,000 cash will be established for distribution to the class as well as warrants to purchase 5 million shares of eConnect common stock exercisable over ten year period from the date of issuance. By Order dated June 14, 2001, the Court preliminarily approved the Settlement.
The original complaint alleges that, during the Class Period, defendants made false and misleading statements and/or omissions concerning the financial condition and business prospects of the Company, as well as the financial benefits that would enure to EConnect and its shareholders, while disregarding information which would have been of material importance to any reasonable shareholder. For example, the complaint alleges that defendants failed to disclose: (a) that, contrary to EConnect's November 23, 1999 press release, EConnect had never acquired Top Sports SA; (b) that, contrary to EConnect's February 22, 2000 press release, EConnect was not generating anywhere near $10,000 a day from its PowerClick division's network of websites; (c) that, contrary to EConnect's February 28, 2000 press release, EConnect did not have a strategic alliance with Empire Financial Group, Inc.; and (d) that, contrary to the implication of EConnect's February 29, 2000 SEC filing, EConnect did not have an agreement to use an internet cash payment system developed by SafeTpay.
The complaint further alleges that since the disclosure of these, and other, adverse facts would have caused a severe collapse in the price of the Company's stock, defendants set out on a scheme to conceal these facts in order to artificially inflate EConnect's stock price. The Company's common stock traded as high as $21 on March 9, 2000, and was maintained at these allegedly inflated levels until the SEC halted trading in the shares on March 13, 2000 in view of suspicion that the Company was issuing false and misleading press releases to artificially inflate the Company's share price.
EConnect is a provider of a merchant portal, powerclick.com, that features over 200 merchant listings aimed at generating revenues based on fees per click. Also, EConnect has "internet cash payment portals" which aim to sign up merchants and generate revenues through merchant application fees, listing fees, affiliate link fees and transaction fees. Additionally, EConnect is in the business of developing hardware and software systems designed to enable online remote, credit and ATM card based transactions, such as those used for online gambling.
