According to a press release dated July 28, 2011, the Company and certain of the Company's current and former executive officers violated federal securities laws.
In 2009, the Company acquired a target company and in consideration for the acquisition issued 1 million shares of common stock in exchange for media credits valued at $9,997,134. The Complaint alleges that throughout the Class Period defendants new or recklessly disregarded that their public statements concerning the Company’s business, operations and prospects were materially false and misleading.
Specifically, the plaintiffs allege that the defendants made false and/or misleading statements and/or failed to disclose: (1) that the media credits acquired by the Company in connection with the acquisition were substantially overvalued; (2) that the Company was improperly accounting for acquisitions; (3) that, as such, the
Company's financial results were not prepared in accordance with Generally Accepted Accounting Principles ("GAAP"); (4) that the Company lacked adequate internal and financial controls; and (5) that, as a result of the above, the Company's financial statements were materially false and misleading at all relevant times.
On May 21, 2010, the Company disclosed that its previously issued financial statements for the 2009 fiscal year and third quarter should no longer be relied upon due to the accounting treatment and related disclosures of two acquisitions completed in 2009, and the valuation of media credits acquired by the Company through the issuance of common stock. On this news, shares declined $0.65 per share, more than 21%, to close on May 21, 2010, at $2.40 per share, on heavy volume, and further declined $0.80 per share, more than 33%, to close on May 24, 2010, at $1.60 per share, also on heavy volume.
On July 20, 2011, the Company disclosed that the staff of the United States Securities and Exchange Commission's ("SEC") Division of Enforcement issued a "Wells Notice" indicating that the staff intended to recommend that the SEC file a civil lawsuit alleging that the Company violated certain provisions of the federal securities laws. The Company indicated its belief that the proposed lawsuit related to the Company's restated financial statements for the 2009 fiscal year and third Page 1 quarter, and that the staff may also recommend naming one or more current and former officers of the Company as defendants. On this news, shares of the Company declined $0.62 per share, nearly 24%, to close on July 21, 2011, at $2.00 per share, on unusually heavy volume.
On May 11, 2012, the Court issued an order appointing lead plaintiff and approving the selection of lead counsel.
On July 10, 2012, the plaintiffs filed an Amended Complaint.
The parties entered into a Stipulation of Settlement on August 8, 2013. The Settlement was preliminarily approved on December 18, 2014. On April 28, 2015, the Court issued an Order granting final approval of the Settlement and dismissing this case.