Securities Class Action Suit Commenced against Majesco Entertainment Company (Nasdaq: COOL), its Directors, and Certain Underwri
September 14 2005 - 6:02PM
PR Newswire (US)
PHILADELPHIA, Sept. 14 /PRNewswire/ -- Barrack, Rodos & Bacine
today issued the following: The Denver Employees Retirement Plan
commenced a class action in the United States District Court for
the District of New Jersey on behalf of all persons, other than
defendants, who purchased shares of Majesco Entertainment Company
("Majesco" or the "Company") common stock issued pursuant to the
prospectus and registration statement ("Registration Statement")
filed with the Securities and Exchange Commission in connection
with the Company's January 26, 2005 public offering of six million
shares of common stock at a price of $12.50 per share (the
"Offering"). The complaint charges the Company, its directors, and
certain underwriter banks with violations of Sections 11, 12, and
15 of the Securities Act of 1933, 15 U.S.C. Sections 77k, 77l, and
77o. The complaint alleges that defendants made materially false
and misleading statements in the Registration Statement about the
Company's financial results, operations and sales, including its
expected results for fiscal year 2005. Specifically, the complaint
alleges that the defendants falsely reported Majesco's financial
results for 2004 by inflating its capitalized software costs,
under-accruing for bad debt expense, and overstating operating
income thereby. Defendants also reported, without a basis, that for
2005 Majesco would bring in $175-$185 million in revenue and
operating income of $16-$18 million. The Registration Statement
failed to disclose that Majesco reported on its balance sheet
capitalized costs associated with product development at an
inflated value. The Registration Statement further failed to
disclose that the Company failed to accrue reserves for risky
accounts receivables that were not likely to be paid and that the
Company could not factor with its normal accounts receivable
servicing vendor. The Registration Statement further failed to
adequately disclose that the Company would need to substantially
increase price protection and other allowances offered to
customers, and, therefore, the related accruals, to create customer
demand in 2005. The Registration Statement also failed to disclose
that Majesco had engaged in huge channel stuffing initiatives to
achieve 2004 goals and that, as a result, defendants possessed
information that the Company would be facing weak sales across all
product lines throughout 2005. The complaint also sets forth
additional material misrepresentations in the Registration
Statement, including misstatements and omissions that were
necessary to make the statements that were contained in the
Registration Statement not misleading. The complaint seeks to
recover damages on behalf of all persons who purchased Majesco
securities pursuant to the Registration Statement for the Offering.
On July 12, 2005, Majesco drastically lowered its guidance for its
fiscal year 2005, cutting its expected results from $175 to $185
million of net revenues and $16 to $18 million of operating income
downward to between $120 million and $125 million in net revenues
and an operating loss of $16 million to $19 million. Additionally,
the Company announced that its Chief Executive Officer, Carl
Yankowski, had resigned his position. This news shocked the market.
Shares of Majesco fell $3.33 per share, or 48.33 percent, on
unusually high volume, on July 13, 2005, to close at $3.56 per
share. The stock has since dropped further due to subsequent
announcements. Barrack, Rodos & Bacine has extensive experience
in prosecuting investor class actions involving false registration
statements. Barrack, Rodos & Bacine has prosecuted securities,
antitrust and consumer class actions for more than 25 years. The
firm has offices in Philadelphia, San Diego, New York and New
Jersey and has been designated lead counsel by federal and state
courts across the country in large, complex cases. For more
information about Barrack, Rodos & Bacine, please visit their
website at http://www.barrack.com/. If you purchased Majesco common
stock sold in the Company's January 26, 2005 Offering described
above, you may, no later than September 16, 2005, move the Court to
serve as lead plaintiff of the Class, if you so choose. In order to
serve as lead plaintiff, however, you must meet certain legal
requirements. If you wish to discuss this action or have any
questions concerning this case or your rights or interests, please
contact Leslie Bornstein Molder, Esquire, Barrack, Rodos &
Bacine, 3300 Two Commerce Square, 2001 Market Street, Philadelphia,
PA 19103, , 215-963-0600, fax number 215-963-0838. DATASOURCE:
Barrack, Rodos & Bacine CONTACT: Leslie Bornstein Molder,
Esquire of Barrack, Rodos & Bacine, +1-215-963-0600, or fax
+1-215-963-0838, Web site: http://www.barrack.com/
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