According to the Company’s Form 10-KSB for the year ended December 31, 2002, subsequent cases alleging substantially the same claims, and also filed in the same court, were consolidated before the same judge. The defendants entered into an amended settlement agreement with the class for all matters, and the court approved the amended settlement agreement in 2001. The Company and other defendants denied the liability claims as part of the amended settlement, but believed that settling the cases quickly was in the best interests of the Company in order for management to more effectively proceed with its strategic business plans. Under the amended settlement agreement, the Company paid, in 2002, $50,000 in cash and, in 2003, will issue 519,125 shares, which were equal to $950 thousand in value on the determination date.
The original complaint charges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10-b(5) by rendering false and misleading statements and/or omissions concerning the present and future financial condition and business prospects of the company, as well as the financial benefits that would enure to On-Point and its shareholders. Specifically, the defendants published false and misleading financial statements, including financial statements that overstated fiscal year 1997 earnings by approximately $1.4 million, or approximately 800%, fiscal year 1997 revenues by approximately $3 million, fiscal year 1998 earnings by approximately $2.1 million, and fiscal year 1998 revenue by approximately $1.6 million. The defendants also failed to disclose that there were substantial operating losses for fiscal year 1998, and that the Company's accounting practices throughout the Class Period failed to conform with generally accepted accounting principles ("GAAP").