Portal Software, Inc. ("Portal" or the Company) offers billing and revenue management software products.

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 materially false and misleading statements to the market throughout the Class Period, statements which had the effect of artificially inflating the market price of the Company's securities. Specifically, the Complaint alleges that Defendants issued numerous public statements concerning Portal's revenue growth, product and marketing initiatives, and increasing revenues and profits while failing to disclose that demand for the Company's products was materially declining. Prior to the disclosure of this adverse information to the market, the Company completed a public offering of Portal common stock, raising over $56 million in net proceeds and the individual Defendants, as well as other high-level executives of Portal, sold their personally held Portal common stock to the unsuspecting public, reaping proceeds of more than $4.8 million.

As alleged in the Complaint, the Class Period commences on May 20, 2003, the date on which the Company issued a press release announcing its first quarter financial results, for the period ending May 2, 2003 (the "May 2nd Press Release"). In addition to announcing the Company's financial results, as alleged in the Complaint, Defendants represented in the May 2nd Press release, among other things that: (a) "We are the only company in our market reporting increasing revenues and quarter-to-quarter product license growth."; and (b) that the Company would "return to pro forma profitability [excluding certain acquisition costs] and positive cash flow operations within the current fiscal year." Then, as alleged in the Complaint, in the June 2003 issue of Worldwide Telecom, Portal announced that eircom, an Ireland-based provider of fixed telecommunications, had successfully implemented Portal's convergent billing platform, Infranet. On August 19, 2003, as alleged in the Complaint, Portal
issued a press release announcing its financial results for the second quarter of 2003, the period ending August 1, 2003 (the "August 19th Press Release"). The Company reported revenues of $33.2 million for the second quarter. On September 12, 2003, Portal announced that it had priced a public offering of more than 22 million shares of its common stock, raising more than $56 million for the Company. In connection with the offering, Portal filed a registration statement with the SEC which included, among other things, positive representations concerning the Company's business and its core product, Infranet.

The Complaint further alleges that the statements referenced above, in addition to others alleged in the Complaint, were each materially false and misleading when made as they misrepresented and/or omitted the following adverse facts which then existed and disclosure of which was necessary to make the statements made not false and/or misleading, including: (a) that the Company's sales and marketing efforts were not performing well and the Company was experiencing declining demand for its products and services; (b) that the Company was experiencing an adverse and material lengthening of product sales cycles and a material increase in deferred revenues; (c) that due to continuing and severe problems with the Company's core products, the Company was unable to service its existing customers, causing additional erosion of the Company's revenue streams; and (d) as a result of the foregoing, Defendants lacked a reasonable basis for their earnings projections at all times.

The Class Period ends on November 13, 2003. On that date, Portal issued a press release announcing that it expected net losses of $0.36 - 0.40 per share for the third quarter fiscal 2004 versus prior earnings guidance of net profits of $0.04 per share. Defendants cited contract delays and revenue recognition deferrals. Market reaction to Defendants' belated disclosures was swift and severe. In after-hours trading on November 13, 2003, the price of Portal common shares fell more than 42.5% to open at $8.77 per share on November 14, 2003, and have decreased more than 51% from a Class Period high of $17.93 per share reached less than a month before on October 15, 2003.

According to the Company’s FORM 10-K for the fiscal year ended January 28, 2005, several similar class actions were consolidated on February 4, 2004 and a lead Plaintiff and lead Plaintiff’s Counsel were appointed on March 25, 2004. On May 24, 2004, the lead Plaintiff filed a consolidated amended Complaint alleging violations of Section 10(b) and Section 20(a) of the Securities Exchange Act of 1934, as amended, arising from allegations that during the Class Period, Portal recognized revenue improperly and failed to disclose declining demand for its products and services. The consolidated amended Complaint seeks damages in an unspecified amount. The Defendants moved to dismiss this Complaint on July 6, 2004 and the hearing on the motion was scheduled for September 30, 2004.

On September 23, 2004, the lead Plaintiff filed a motion for leave to file an amended Complaint and requested continuance of the hearing to allow them time to prepare a proposed amended Complaint. The court allowed the Plaintiff 60 days to file a motion for leave to amend, along with the required proposed amendment and took the original hearing date off calendar. The lead Plaintiff’s motion for leave to amend and the proposed amended Complaint were due to be filed by or about November 29, 2004. Lead Plaintiff filed a second amended Complaint on November 29, 2004. The second amended Complaint purports to add a new Plaintiff that may have purchased shares in, or traceable to, the September 2003 secondary offering and to add claims under Sections 11 and 12(a) of the Securities Act on the basis that the registration statement for the secondary offering contained allegedly material misstatements or omissions. The Defendants moved to strike the second amended Complaint on December 2, 2004. On December 7, 2004 the Court set a briefing schedule for the motion to strike. Plaintiffs filed a motion for leave to amend on December 22, 2004, correcting their failure to file the motion concurrent with the proposed second amended Complaint.

Defendants filed an opposition to the motion for leave to amend on January 6, 2005. A hearing on Defendants’ motion to strike on Plaintiffs’ motion for leave to amend was held on January 27, 2005. On March 10, 2005, the court granted Plaintiffs’ motion for leave to amend and terminated as moot Defendants’ motions to dismiss the consolidated amended Complaint and to strike the improperly filed consolidated second amended Complaint. The Defendants moved to dismiss the consolidated second amended Complaint on April 15, 2005. On May 19, 2005, Plaintiffs filed their third consolidated amended Complaint. The Defendants moved to dismiss the third consolidated amended Complaint on June 2, 2005, and a hearing on this motion was conducted on July 7, 2005. On August 10, 2005, the Court issued an order granting Defendants’ motion to dismiss the third consolidated amended Complaint as to all asserted claims and allowing Plaintiffs leave to file a fourth consolidated amended Complaint on or before October 11, 2005.

As summarized by the same SEC filing, on October 11, 2005, Plaintiffs filed their fourth consolidated amended Complaint. Defendants filed a motion to dismiss the fourth consolidated amended Complaint on December 9, 2005. Plaintiffs filed an opposition to Defendants’ motion to dismiss on February 8, 2006 and Defendants’ reply brief in support of the motion to dismiss was filed on March 8, 2006. A hearing on the motion to dismiss took place on March 23, 2006 and an opinion will be issued at a later date.

According to the Order issued by U.S. District Judge Vaughn R. Walker, on August 17, 2006, the court denies Defendants’ motion to dismiss Plaintiffs’ claims under sections 11, 12(a)(2) and 15 of the ’33 Act and grants Defendants’ motion to dismiss Plaintiffs’ claims under sections 10(b)and 20(a) of the ‘34 Act. Because Plaintiffs have amended their claims four times but still have not satisfied the PSLRA’s heightened pleading requirements, Plaintiffs’ claims under the ‘34 Act are hereby dismissed with prejudice. The parties are instructed to appear before the court to discuss what issues, if any, remain in this litigation on October 3, 2006.

On May 3, 2007, a Stipulation of Settlement was filed, establishing a settlement fund in the amount of $3,250,000 in cash.

On June 30, 2007, the Court approved preliminarily the proposed settlement and plan of allocation. The hearing on final approval of settlement is set for September 6, 2007.

On November 26, 2007, U.S. District Judge Vaughn R. Walker signed the Order granting the motion for final approval of the Settlement, granting approval of the plan of allocation and granting an award of costs and attorneys' fees.