Dot Hill may have fudged its financial numbers by incorrectly classifying expesnes to manipulate cost of goods sold and may have improperly recognized revenue to boost financial forecasts.

Securities fraud class action against Dot Hill and certain of its officers and directors with violations of the Securities Exchange Act of 1934.

THe class action complaint alleges Dot Hill concealed the following:

(i) Dot Hill's accounting department suffered from material weaknesses and deficiencies and lacked the necessary staff and resources to perform its required functions;

(ii) Dot Hill's inadequate internal accounting process and controls enabled Dot Hill management to manipulate the Costs of Goods Sold and routinely and inappropriately misclassify "expenses";

(iii) Dot Hill lacked effective internal controls in its financial reporting process; and

(iv) Dot Hill falsely reported its Q1-Q3 04 financial results by improperly recognizing revenue and by improperly recording expenses.

On February 3, 2005, Dot Hill announced its preliminary Q4 04 financial results and that it would be restating its 2004 unaudited financial results due to a data entry error that Dot Hill attributed to material weaknesses in its internal controls. The Dot Hill also stated that it had "identified other errors pertaining to the quarters ended March 31, 2004, June 30, 2004 and September 30, 2004 that it deems immaterial, including: the incorrect classification of certain product costs as operating expenses, the failure to eliminate corresponding revenue and cost of goods sold entries and the presence of duplicate entries."

This securities class action was filed on behalf of all persons who purchased the common stock of Dot Hill Systems Corp between April 23, 2003 and February 3, 2005, inclusive.