According to the press release dated December 2, 2011, the complaint charges the Company, certain of its officers and directors and the underwriters of the Offerings with violations of the Securities Act of 1933 and the Securities Exchange Act of 1934.
The complaint alleges that, during the Class Period, defendants issued materially false and misleading statements regarding the Company’s business and prospects. Specifically, defendants misrepresented and/or failed to disclose the following adverse facts: (a) neither demand nor sales of the Company’s products were as robust as represented; (b) stores owned by the Company’s largest retail customers did not carry the Company’s products so the Company was not generating any revenue from those locations; (c) the Company’s growth and business prospects were heavily dependent upon the ability of the Company’s two largest customers to sell products from other, unrelated companies before those customers would order products from the Company; (d) the Company’s primary retail customers would not be in a position to order any of the Company’s products until after those retail customers cleared out other inventory sitting on their shelves, including inventory related to products sold by competitors to the Company; (e) the Company’s largest retail customers had delayed promotions of the Company’s products, which negatively impacted the Company’s sales; (f) the Company’s growth rate had slowed and would be slower for the rest of 2011, if not beyond; (g) the Company would not meet the financial guidance it provided to investors; and (h) as a result of the foregoing, defendants’ positive statements about the Company were lacking in a reasonable basis of fact and were materially false and misleading when made.
On August 10, 2011, the Company announced its financial results for the second quarter of 2011, the period ended June 30, 2011. For the quarter, the Company reported a net loss of $2.0 million or a loss of $0.10 per share, compared to Company’s projections in May 2011 of earnings ranging from a loss of $0.03 to a gain of $0.02 per share and analyst projections of a gain of $0.07 per share. The Company also revised downward its financial projections for the third and fourth quarters of 2011 and provided guidance for the full year of 2012. Following the Company’s announcements on August 10, 2011, the price of the Company’s common stock collapsed from $13.92 per share on August 9, 2011 to close at $5.40 per share on August 10, 2011 – a one day decline of $8.52 per share, or 61% – on extremely heavy volume.
On April 13, 2012, the Court issued an Order appointing lead plaintiff and approving the selection of lead counsel.
On June 22, 2012, the plaintiffs filed their amended complaint.
On August 14, 2013, the Court issued an Order granting the defendants' motions to dismiss.