According to SEC documents, eUniverse Inc. operates a suite of online businesses, primarily in the interactive entertainment, electronic commerce and publishing sectors.

The original Complaint alleges that Defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of material misrepresentations to the market between July 30, 2002 and May 5, 2003, thereby artificially inflating the price of eUniverse common stock. Throughout the Class Period, as alleged in the Complaint, Defendants issued numerous statements and filed quarterly reports with the SEC which described the Company's increasing financial performance. The Complaint alleges that these statements were materially false and misleading because they failed to disclose and/or misrepresented the following adverse facts, among others: (i) that the Company had materially overstated its net income and earnings per share; (ii) that the Company lacked adequate internal controls and was therefore unable to ascertain the true financial condition of the Company; and (iii) that as a result, the value of the Company's net income and financial results were materially overstated at all relevant times. On May 6, 2003, before the opening of trading, the Company shocked the market by announcing that it "intends to restate its financial statements for the second and third quarters of the year ended March 31, 2003" and possibly also for the first quarter of fiscal 2003. The Company also told investors not to rely on its reported financial results for the first three quarters of fiscal 2003. The Company attributed the need for the restatement to the "incorrect processing of certain transactions within the Company's accounting system." The Company further said that the restated financial results will differ materially from the previously reported results. Following this announcement, the NASDAQ halted trading in eUniverse shares and stated that the shares will remain halted until the Company has supplied additional information.

As disclosed by the Company’s Form 10-Q for the quarterly period ended June 30, 2005, as a result of mediation in November 2004, the parties entered into a Stipulation of Settlement in January 2005 pursuant to which the parties propose to settle the Securities Litigation for $5.5 million in cash paid by the Company’s insurance carriers. One of the Company’s insurance carriers, from whom the Company expects that approximately $1.3 million of the settlement will be paid, has reserved the right to seek reimbursement from the Company in the event it is determined that the carrier was not obligated to provide coverage for the lawsuit. The Court has preliminarily approved the settlement and formal notice of the settlement has been mailed to class members. The Court has scheduled a hearing regarding final approval of the settlement and dismissal of the lawsuit for September 19, 2005.

On September 3, 2005, the Court entered the Final Judgment and Order of Dismissal with Prejudice. The settlement was approved. On December 19, 2005, the Court entered the Amended Final Judgment and Order of Dismissal with Prejudice.