The original complaint charges MicroStrategy and certain individuals with violations of the Securities Exchange Act of l934 and Rule 10b-5 promulgated thereunder. The complaint alleges that MicroStrategy and certain of its officers and directors reported materially false and misleading financial results throughout the Class Period. During l998 and l999, defendants overstated MicroStrategy's revenues and earnings by improperly recognizing revenue in connection with software sales/service contracts. On March 20, 2000, MicroStrategy admitted that its 1999 and 1998 revenues and operating results had been false due to improper timing of revenue recognition. The Company announced that it must restate its revenues for both fiscal years, which will substantially reduce is 1999 and 1998 results. The Company stated that it will reduce its l999 reported revenue from $205.3 million to between approximately $150 million and $155 million, and its results of operations from diluted net income per share of $0.15 to a diluted loss per share of between approximately $(0.43) and $(0.51). It will also reduce its reported revenues for l998 from $106.4 million to between approximately $95.9 million and $100.9 million and its results of operations from diluted net income per share of $0.08 to diluted net income per share of between approximately $0.04 and $0.01.
By Order dated June 6, 2000, the Court consolidated for all purposes the actions into this Action pursuant to Rule 42(a) of the Federal Rules of Civil Procedure.
By Order dated June 27, 2000, the Court (i) granted the motion of Akiko and
Atsukuni Minami and Local 144 Nursing Home Pension Fund to be appointed Lead Plaintiffs, and (ii) designated the law firms Milberg Weiss Bershad Hynes & Lerach LLP, and Wolf, Haldenstein, Adler, Freeman & Herz LLP as Plaintiffs’ Co-Lead Counsel.
A Consolidated Amended Class Action Complaint was filed on July 7, 2000, naming MicroStrategy, certain of its officers and directors, and PricewaterhouseCoopers LLP as defendants. The amended class action complaint alleges claims under section 10(b), section 20(a) and section 20A of the Exchange Act. The amended class action complaint does not specify the amount of damages sought.
By Order dated August 10, 2000, as subsequently amended on August 25, 2000, the Court (i) conditionally certified the Action to proceed as a class action.
By Order dated September 15, 2000, the Court denied the Defendants’ motions to dismiss the Complaint, with the exception that the Court dismissed a claim that Defendant Frank A. Ingari is liable under Section 20A of the Exchange Act, leaving Defendant Stephen S. Trundle as the sole Defendant against whom such claim remains.
According to the Forms 10-K for the fiscal year ended December 31, 2001 and for 2002, on October 23, 2000, MicroStrategy Inc., its officers and directors named as defendants, and plaintiffs' counsel entered into a settlement agreement in the consolidated class action. Under the settlement agreement, class members will receive: (1) five-year unsecured subordinated promissory notes issued by MicroStrategy having an aggregate principal amount of $80.5 million and bearing interest at 7.5% per year; (2) 2,777,778 shares of MicroStrategy class A common stock; and (3) warrants to purchase 1,900,000 shares of class A common stock at an exercise price of $40 per share with the warrants expiring five years from the date they are issued. The district court approved the settlement on April 2, 2001.
On May 21, 2001, a Stipulation and Agreement of Settlement to settle claims with remaining defendant PricewaterhouseCooper. On July 24, 2001, the settlement in the amount of $55 million was approved.