According to a press release dated September 14, 2010, the Complaint alleges that during the Class Period, defendants made materially false and misleading statements, and/or omitted material facts, in the joint proxy statement and prospectus (the "Joint Proxy/Prospectus") disseminated regarding the Merger, as well as in other public statements issued during the Class Period related to the Merger and SMIL. Additionally, the Complaint alleges that throughout the Class Period, defendants failed to disclose material adverse facts about SearchMedia's business, operations, and prospects. Specifically, defendants made materially false and misleading statements and/or failed to disclose that: (1) SMIL was improperly recognizing revenue; (2) certain of SMIL's accounts receivable related to sales generated primarily in the in-elevator business were uncollectible, (3) SMIL's financial results during the Class Period were materially overstated; (4) SMIL's financial results were not prepared in accordance with Generally Accepted Accounting Principles ("GAAP"); (5) SMIL lacked adequate internal and financial controls; and (6) as a result of the above, SMIL's financial statements were materially false and misleading at all relevant times.
On August 20, 2010, SearchMedia announced that the historical financial statements of SMIL for the 2007 and 2008 fiscal years would have to be restated and that the financial statements from these periods can no longer be relied upon. SearchMedia informed investors that it estimated that SMIL's revenue in 2007 and 2008 had been overstated by approximately $6 million and $25 million, respectively. As a result of this news, SearchMedia's stock plummeted almost 23% to close as $2.62 per share on August 20, 2010. The Company's stock continued its slide to close at $0.92 per share on August 23, 2010 or approximately another 35% down.
On January 27, 2011, the defendant filed a motion to transfer the action to the Southern District of Florida. The motion was granted on February 16, 2011. On April 11, 2011, the plaintiffs filed an Amended Complaint, adding certain defendants and violations. The defendants have responded by filing a motion to dismiss.
On August 2, 2011, Judge Ursula Ungaro granted the motion to substitute the lead plaintiff and appoint co-lead counsel.
On August 8, 2011, Judge Ursula Ungaro dismissed without prejudice Counts I and II of the Amended Complaint. Plaintiff has leave to file an Amended Complaint.
According to a press release dated November 11, 2011, SearchMedia Holdings Limited, one of China's leading nationwide multi-platform media companies, today announced that it reached a tentative partial settlement agreement for a securities class action lawsuit pending against the Company and a number of its current and former directors, officers and employees. The securities class action lawsuit was filed in the United States District Court for the Southern District of Florida (Murdeshwar v. SearchMedia Holdings Limited, et al., Case no. 1:11-cv-20549-KMW) against the Company and certain of its current and former officers and directors in relation to various disclosures regarding the Company's acquisition of SearchMedia International Ltd. and the financial condition of that company. The partial settlement agreement is made on behalf of the defendants who served as directors and officers of Ideation Acquisition Corp. (the "Settling Defendants") without any admission of wrongdoing on the part of the Settling Defendants and provides for a settlement fund of $2.75 million, which the Company expects to be entirely funded by its insurance carriers. The partial settlement agreement remains subject to court approval and certain other conditions including execution of a stipulation of settlement, notice to class members, and an opportunity for class members to object or opt out of the settlement. The securities class action lawsuit remains pending against other defendants who reside in China and who have not been served with the complaint and summons.
On November 30, 2011, the Settlement Agreement and the motion for preliminary approval of the settlement were filed.