On July 20, 2005, a Final Approval Hearing was held to determine, among other things, whether the proposed settlement should be approved as fair, reasonable and adequate. That same day, the Court issued a Final Judgment and Order granting final approval of the settlement.
Earlier, on May 21, 2001, the Court consolidated the two related shareholder suits into one class action lawsuit entitled In re Twinlab Corp. Securities Litigation and appointed Lead Plaintiffs and their choice of Lead Counsel. Lead Plaintiffs filed an Amended Consolidated Complaint on October 19, 2001, which Defendants moved to dismiss on April 25, 2002.
Prior to a ruling on Defendants’ motion, the parties agreed to settle the claims against the Defendants. Pursuant to the terms of the proposed settlement, described more fully in the Stipulation of Settlement filed with the Court on June 20, 2005, a Settlement Fund in the amount of $3,000,000 will be created for the benefit of the following class, certified by the Court on June 23, 2005 for purposes of the settlement: all persons who purchased or otherwise acquired Twinlab common stock and/or call options to purchase such shares during the period April 27, 1999 through and including November 15, 2000.
The complaint alleges that Twinlab improperly recorded sales as revenues prior to the shipment of its products in violation of generally accepted accounting principles and Twinlab's own accounting policies. The complaint further alleged that Twinlab's accounting manipulations were designed to artificially inflate the price of its common stock in order for the company and its officers and directors to benefit from a large public offering on April 8, 1998. The plaintiffs initiated the lawsuit in December 2, 1998 and filed an amended complaint on May 14, 1999. The defendants moved to dismiss the case on November 4, 1999. The motion was granted in part and denied in part. The defendants proceeded to file answers to the complaint in August and September of 2000. Ultimately, on March 9, 2001 Twinlab announced that that it had reached an agreement in principle to settle the suit.