Robbins Umeda LLP today announced that a class action has been commenced in the United States District Court for the Central District of California (the "Court") on behalf of purchasers of SearchMedia Holdings Limited, formerly Ideation Acquisition Corp. ("SearchMedia" or "Ideation" or the "Company") (AMEX: IDI), common stock during the period between April 1, 2009 and August 20, 2010.
Ideation was a blank-check company formed for the purpose of acquiring one or more businesses through a merger, capital stock exchange, asset acquisition, or other similar business combination. On October 30, 2009, Ideation completed the acquisition of SearchMedia International Limited ("SMIL") (a purported nationwide multi-platform media company in China) and changed its name to SearchMedia (the "Merger"). The Company is based in Beverly Hills, California.
The complaint charges SearchMedia and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Specifically, the complaint alleges that the Company issued material misstatements and/or omissions in the joint proxy statement and prospectus dated October 5, 2009, and other public statements during the class period related to the Merger and SMIL.
According to the complaint, the Company made false and/or misleading statements and/or failed to disclose that: (i) SMIL was improperly recognizing revenue; (ii) certain of SMIL's accounts receivable related to sales generated primarily in the in-elevator business were uncollectible and, as a result, SMIL's financial results were overstated; (iii) SMIL's financial results were not prepared in accordance with Generally Accepted Accounting Principles; and (iv) SMIL lacked adequate internal and financial controls.On August 20, 2010, the Company 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 should no longer be relied upon. SearchMedia also indicated that it estimated that revenue in 2007 and 2008 had been overstated by approximately $6 million and $25 million, respectively. Upon this news, the Company's stock fell nearly 23%, to close on August 20, 2010, at $2.62 per share. Over the next few days, SearchMedia's stock continued to decline and closed at $1.70 per share on August 23, 2010, a 50% decline from the closing price of $3.40 per share on August 19, 2010.