The original Complaint charges FX Energy and certain of its officers and directors with violations of the Securities Exchange Act of 1934. FX Energy is an independent energy company with activities concentrated within the upstream oil and gas industry. More specifically, the Complaint alleges that the Company failed to disclose and misrepresented the following material adverse facts which were known to defendants or recklessly disregarded by them: (1) that the methods used to estimate the Company's potential reserves were flawed and defective; (2) that that given the Company's erroneous methodology for determining reserves, the Company's future business prospects were inherently uncertain and unachievable; (3) that the Company's estimated reserve numbers varied by orders of magnitude for the Company's Sroda, Zaniemysl and Winna Gora sites, and that their estimates were lacking in any reasonable basis; (4) that the Company lacked adequate internal controls; and (5) that, as a result of the foregoing, the Company's statements about its financial well-being and future business prospects were lacking in any reasonable basis when made.
The complaint further alleges that on December 20, 2005, the Company shocked investors when it reported that its Lugi-1 well was determined to be "uneconomic," and that the well would be plugged and abandoned. The head of the Company's technical team stated that "[u]ntil the well results are better understood, the impact of the well on the major Rusocin ? Lugi pinchout play can not be fully determined." On this news, the Company's shares fell $2.34 per share, or 21.5 percent, to close on December 20, 2005 at $8.55 per share, on unusually heavy trading volume.
Then on January 5, 2006, the Company again shocked investors when it announced that a drill stem test on the Company's Sroda-5 well in western Poland tested gas and brine. Additonally, the Company indicated that additional drilling would need to take place before the commerciality of the well could even be determined. On this news, the Company's shares fell an additional $2.19 per share, or over 26.5 percent, to close on January 5, 2006 at $6.07 per share, also on unusually heavy trading volume.
On December 18, 2007, Judge Dale A. Kimball issued the Order granting the motion to consolidate cases. On January 18, 2008, several motions to appoint lead plaintiff and for approval of selection of lead counsel were filed by plaintiffs. On February 7, 2008, the Court entered the Order from Judge Kimball granting the motion to appoint FX Energy Investor Group’s motion for appointment as Lead Plaintiff and approval of selection of Lead Counsel. According to the Order, Scott + Scott, LLP, and Schatz Nobel Izard, P.C., were selected as Co-Lead Counsel. On April 21, 2008, a Consolidated Complaint for Violations of Federal Securities Laws was filed. On June 20, 2008, the defendants responded by filing a motion to dismiss the Consolidated Complaint. On June 25, 2009, Judge Clark Waddoups signed the Order and Memorandum Decision granting the defendants’ motion to dismiss for failure to state a claim.