According to the docket, the judge granted the defendants' motion to dismiss the case on February 14, 2007 and followed that with an order to close the case on April 4, 2007. The plaintiffs have not filed an appeal.
On October 26, 2006, the Court entered the order consolidating several class actions. On November 1, 2006, the Court entered the Order appointing the Haugh Group as Lead Plaintiff and Approving Haugh Group's choice of Lead Counsel. On November 8, 2006, the plaintiffs filed a Consolidated Amended Class Action Complaint. The defendants have responded by filing a motion to dismiss the Consolidated Amended Class Action Complaint on December 1, 2006.
The original lawsuit claims that Parlux, its Chief Executive, and its Chief Financial Officer violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. Further, the lawsuit alleges that throughout the Class Period, defendants issued highly positive statements in an effort to create the impression that Parlux's revenues were growing and the Company was well positioned to generate strong profits. In response, Parlux stock traded at over $37 per share (prior to a stock split) during the Class Period. Starting in June 2006, the truth about the Company's declining sales and accounting issues were revealed in a series of disclosures indicating that: (1) contrary to prior public statements, Parlux's sales were declining materially, including sales to related parties; and (2) the Company suffered from internal control issues with respect to its financial reporting, causing Parlux to delay the filing of its Annual Report on Form 10-K for the year ended March 31, 2006, and delaying its quarterly report on Form 10-Q for the quarter ending June 30, 2006. Prior to revealing this information, defendants and Company insiders sold over $13 million worth of their Parlux holdings.
The complaint further alleges that on or around August 10, 2006, the Company issued yet another shocking announcement, that Parlux's profit for the quarter ended June 30, 2006 would be far less than the investing public had been led to believe, due mainly to lower sales to U.S. department stores and related parties. On this news, Parlux stock plunged from $8.16 a share to $4.78, a drop of over 40% on unusually high volumes of over 5 million shares traded -- vastly higher than the Company's average trading volume of around 1.1 million shares traded.