Zoo Entertainment investors have filed a class action lawsuit that alleges the company made "materially false and misleading statements" in 2010.
The lawsuit, was filed by Faruqi & Faruqi LLP last month and states that Zoo Entertainment "inflated shareholder equity by over $250,000, inflated net income by 660 per cent and diluted net income per common share by 900 per cent."
Zoo Entertainment revealed in a press release in April this year that there had been errors in its financial records.
"During the company's 2010 audit, it was determined there were errors in recording certain transactions in the company's unaudited consolidated financial statements."
As a result of the release, Zoo Entertainment's stock price fell 34.3 per cent to $2.89. The lawsuit seeks damages for investors who bought stock between May 17, 2010 and April 15, 2011.
"The Company, the executive officers and their counsel have not had an opportunity to thoroughly review the class action complaint," read Zoo Entertainment's official statement.
Zoo Entertainment is based in Ohio, USA, and has published titles including Martian Panic, Jane's Hotel, Dino Strike and Mayhem 3D.
It also supports indiePub Games, a collective of independent publishers. It recently launched indiePub Mobile with EA Mobile's former development director, Rob Cassidy as director.