Legal Question in Securities Law in New York

False & Misleading Press Releases

A public (pink sheets) firm offered to acquire my company for restricted stock. They issued a public press release that a letter of intent was issued with regard to this transaction, however no letter was ever signed by both parties, and no formal contract was ever signed between my firm and the other firm. They publically stated on websites, sales & marketing materials, etc. that my firm was a ''wholly owned subsidiary'' of their firm. I am looking to legally disolve my relationship with this firm, they are looking to gain access to my financial records for the period of time from their press release, which I believe is false and misleading. The other firm issued me shares of restricted stock, which I have agreed to return and have cancelled. This relationship started over a year ago, the other firm has agreed to sign an agreement allowing my firm to sever ties with them, is there any legal reason why I would need to provide my financial records to them, I am very uncomfortable doing so. Thank you for your advice.


Asked on 8/31/04, 7:58 pm

3 Answers from Attorneys
Lawrence R. Gelber Lawrence R. Gelber, Attorney at Law

Re: False & Misleading Press Releases

It is unclear from your question precisely what your relationship is with the "other firm." You say they offered to acquire you for restricted stock, which they appeared to provide. You say you are looking to dissolve your relationship, which could suggest that you may have one.

If the press releases were indeed false, you may want to explore certain protective measures to protect you from any possible allegations that you participated in false press releases.

You may or may not have an obligation to the other company, depending on other variables that are not expressed in your question. However, a question exists as to what lengths they are prepared to go to obtain the information they seek. If the stock was indeed canceled, you have certain arguments regarding the nature of the relationship and the other company's alleged rights.

I do advise that you consult a lawyer. You may contact me, Lawrence R. Gelber, at 718 638 2383 for further discussion. Please visit my website at www.GelberLaw.com.

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Answered on 9/02/04, 11:54 am
Asi Kirmayer Kirmayer PLLC

Re: False & Misleading Press Releases

Just because no letter of intent or written contract was signed, does not mean that that there is no contract in place. There is very little to prevent a verbal agreement for the purchase of stock in your company from being binding.

It is not clear from your question whether you received the restricted stock in an unrelated transaction or whether it was supposed to represent the payment for your company.

Your question regarding the financial statements is highly dependent on whether your acts and course of conduct gave rise to some sort of legal relationship. If there is a relationship that needs to be dissolved, the other company may well have a right to receive your financial statements. If there is no relationship at all, they have no right.

I would suggest you hire an attorney qualified to advise you on this matter.

You may reach me at (212) 695-6400 for further advice.

Best of luck.

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Answered on 9/01/04, 12:16 pm
Scott Ziegler Ziegler, Ziegler & Associates LLP

Re: False & Misleading Press Releases

We would need additional information. Under what circumstances would they have issued you shares if you had not agreed to be acquired etc. If you wish, you can contact Chris Brennan of our office and he can discuss assisting you in this matter. He can be reached at 212-319-7600.

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Answered on 8/31/04, 8:14 pm


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