BOISE (CN) – PCS Edventures!.com misled investors into believing it had secured a $7.15 million licensing deal with its distributor in the Middle East, though it knew the company did not have the money, shareholders claim in a federal class action.
Investors say the Idaho-based maker of educational products issued a press release announcing the purported deal with its Middle East distributor, PCS Middle East.
“The announcement was materially false and misleading, because PCS Middle East did not have the ability to pay $7.15 million without first obtaining a contract and receiving funds from the Kingdom of Saudi Arabia,” investors claim. “PCS Middle East did not, however, have a contract with Saudi Arabia.”
According to lead plaintiff Leslie Niederklein, the company’s serial press releases and filings with the Securities and Exchange Commission in the spring and summer of 2007 were simply a ploy intended to inflate the company’s share price.
The day after announcing the purported licensing agreement, PCS allegedly filed a Form 8-K with the SEC, formally announcing the sale and stating that full payment would be received by the company no later than May 15, 2007.
Over the next four months, the company continued to release false and misleading information about the purported agreement, according to the lawsuit.
Investors didn’t learn they were being taken for a ride until Aug. 26, 2010, when the SEC sued PCS, its board of directors and chief executives for securities fraud.
Until then, “no reasonable investor or class member could have reasonably known” that the company’s statements were false, the class claims.
Niederklein is suing PCS Edventures!.com, CEO Anthony Masher and CFO Shannon Stith on behalf of investors who bought the company’s stock between March and August 2007.
Lead counsel is Philip H. Gordon of the Gordon Law Offices.