Stanford University Law School - Securities Class Action Clearinghouse

 

 

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA

 

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AVROM GART, Individually and On Behalf
of All Others Similarly Situated,

                      Plaintiff,

           - against -

ELECTROSCOPE, INC., ROBERT C.
ODELL, DAVID W. NEWTON, VERN D.
KORNELSEN, ROBERT D. TUCKER,
JOE W. TIPPETT, DONALD R.
TEMPLE, C. RANDLE VOYLES, and
JOHN G. KINNARD AND COMPANY,
INC.,

                      Defendants.

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[No. 97-1343 ADM/AJB]
[filed Jun. 4, 1997]

CLASS ACTION
COMPLAINT FOR
VIOLATIONS OF
FEDERAL SECURITIES
LAW

Plaintiff Demands a
Trial by Jury

Plaintiff, by his attorneys, for his Class Action complaint, alleges:

NATURE OF THE ACTION

1. This is a securities class action on behalf of purchasers of the common stock of Electroscope, Inc. ("Electroscope" or the "Company") in an initial public offering (the "Offering") by Electroscope made pursuant to a registration statement ("Registration Statement") and prospectus ("Prospectus") made effective June 25, 1996. That Offering was for 1,200,000 shares of common stock at $10.50 per share.

2. Electroscope was valued not for its profitability, for it had never been profitable, but for its phenomenal rate of revenue growth in a market it estimated to be $450 million annually worldwide. In its 1996 fiscal year ended March 31, 1996, less than three months before the Company's initial public offering, Electroscope grew to have net revenues of $2,173,785, a 100% growth from its fiscal 1995 net revenues of $1,084,226. That, in turn, was a 128 % growth from its fiscal 1994 net revenues of $475,778.

3. The Prospectus was full of optimism about continued growth, especially for fiscal 1997, announcing increased market acceptance and increased awareness of the Company's improved proprietary technology with its product's enhanced safety benefits, but noting that Electroscope may continue to operate at a loss for several quarters.

4. On August 13, 1996, when Electroscope filed its 1997 first fiscal quarter's Form 10-Q with the Securities and Exchange Commission (the "SEC"), the Company reported that there had been a decrease in net revenues for the quarter, and that the decrease was attributable to Valleylab, Inc. ("Valleylab"), its sales and distribution agent, making significant purchases in fiscal 1996 to stock inventory. On February 7, 1997, Electroscope filed its 1997 third fiscal quarter Form 10-Q with the SEC, and the Company revealed that the Valleylab stock-in order was substantial. In each of the three quarters since the Offering that Electroscope filed its Form 10-Q with the SEC, the Company reported diminished quarterly year-to-year net revenues.

5. Neither the fact that the stock-in sales to Valleylab were non-repetitive sales and that the growth rate shown in the Prospectus was already reversing itself, nor the reduced revenues which would be reported for the first fiscal quarter ended three business days after the Offering, were disclosed in the Prospectus. The stock, which was issued on June 25, 1996 at $10.50 per share, closed at $4.50 per share on February 7, 1997, when the facts were disclosed.

JURISDICTION AND VENUE

6. This action arises under sections 11, 12(2), and 15 of the Securities Act of 1933 (the "Securities Act"), 15 U.S.C. §§ 77k, 771, 77o.

7. This Court has jurisdiction over the subject matter of this action pursuant to section 22 of the Securities Act, 15 U.S.C. § 77v; and sections 1331 and 1337(a) of the Judicial Code, 28 U.S.C. §§ 1331, 1337(a).

8. Venue is proper in this District under section 22 of the Securities Act. The wrongs alleged in this Complaint occurred, in substantial part, in this District, including the offer and sale of securities and the preparation and dissemination to the investing public of false and misleading information, including a registration statement pursuant to which securities were offered. In addition, at all relevant times Electroscope had its principal offices in and conducted business in this District.

9. In connection with the acts, conduct, and other wrongs complained of herein, defendants, directly and indirectly, used the means and instrumentalities of interstate commerce and the United States mails and the facilities of the national securities markets.

THE PARTIES

10. Plaintiff Avrom Gart, on June 25, 1996, purchased 1,000 shares of Electroscope common stock sold pursuant to the Registration Statement at the offering price, $10.50 per share, as set forth in the certification accompanying his complaint, and has been damaged thereby.

11. Defendant Electroscope is a Colorado corporation with its principal office at 4828 Sterling Drive, Boulder, Colorado 80301.

12. Defendant Roger C. Odell, a co-founder of Electroscope, was, at an times relevant hereto, Chief Executive Officer, President, and Director of Electroscope. He signed the Registration Statement.

13. Defendant David W. Newton, a co-founder of Electroscope, was, at all times relevant hereto, Vice President of Research and Development and Director. of Electroscope. He signed the Registration Statement.

14. Defendant Vern D. Kornelsen was, at all times relevant hereto, Chief Financial Officer, Secretary/Treasurer, and Director of Electroscope. He signed the Registration Statement.

15. Defendants Robert D. Tucker, Joe W. Tippett, Donald R. Temple, and C. Randle Voyles were, at all times relevant hereto, Directors of Electroscope. Each of them signed the Registration Statement.

16. Defendant John G. Kinnard and Company, Inc. ("Kinnard") was the lead underwriter of the Offering. Kinnard is an "underwriter" within the meaning of the Securities Act. Pursuant to the terms of the underwriting agreement for the Offering with Electroscope, Kinnard subscribed to, subject to an overallotment allowance, 730,000 shares of Electroscope common stock.

17. The Offering was for 1,200,000 shares of Electroscope common stock. Eleven underwriters participated in the Offering of shares of Electroscope common stock to the public. After the Offering, the common stock of Electroscope traded on the Nasdaq National Market System.

PLAINTIFF'S CLASS ALLEGATIONS

18. Plaintiff brings this action on their own behalf and as a class action pursuant to rules 23(a) and 23(b)(3) of the Federal Rules of Civil Procedure on behalf of a class (the "Class") consisting of those individuals and entities who purchased Electroscope's common stock on the Offering up to and including February 7, 1997 (the "Class Period"). Excluded from the Class are defendants herein, members of the immediate family of each of the individual defendants, any subsidiary or affiliate of Electroscope, and the directors, officers and employees of Electroscope or its subsidiaries or affiliates, or any entity in which any excluded person has a controlling interest, and the legal representatives, heirs, successors and assigns of any excluded person.

19. Because 1,200,000 shares of Electroscope's common stock were issued pursuant to the Offering and actively traded on the Nasdaq National Market System, the members of the Class are so numerous that joinder of all members is impracticable. While the exact number of members of the Class can only be determined by appropriate discovery, plaintiff believes that Class members number in the thousands.

20. Plaintiff's claims are typical of the claims of the members of the Class. Plaintiff and all members of the Class sustained damages as a result of defendants' wrongful conduct complained of herein.

21. Plaintiff will fairly and adequately protect the interests of the members of the Class and has retained counsel competent and experienced in class action and securities litigation.

22. A class action is superior to other available methods for the fair and efficient adjudication of this controversy. Because the damages suffered by individual Class members may be relatively small, the expense and burden of individual litigation make it virtually impossible for Class members individually to seek redress for the wrongful conduct alleged herein.

23. Common questions of law and fact exist as to all members of the Class and predominate over any questions affecting solely individual members of the Class. Among the questions of law and fact common to the Class are:

24. Plaintiff knows of no difficulty that will be encountered in the management of this litigation that would preclude its maintenance as a class action.

25. The names and addresses of the purchasers of Electroscope common stock on the (Offering and during the Class Period are available from Electroscope's transfer agent. Notice can be provided to such record owners via first class mail using techniques and a form of notice similar to those customarily used in class actions.

FACTS

26. This is a securities class action on behalf of a class consisting of those individuals and entities who purchased the common stock of Electroscope pursuant to a Registration Statement filed with the SEC on or about May 28, 1996 and which became effective on or about June 25, 1996. The Registration Statement was a registration statement within the meaning of the Securities Act.

27. The Registration Statement contained a Prospectus, which was filed with the SEC on or about June 25, 1996, and was distributed in connection with the sale of Electroscope common stock. The Prospectus was a prospectus within the meaning of the Securities Act. The Registration Statement and Prospectus contained materially false and misleading information or omitted to state material information about Electroscope's net revenues and growth for the fiscal year ended March 31, 1996 and for the Company's prospects for growth.

28. Shares of Electroscope's common stock are "securities" within the meaning of the Securities Act. The Registration Statement covered the sale to the public of 1,200,000 shares of common stock at $10.50 per share, with proceeds to Electroscope of approximately $11,592,000. Electroscope's common stock is listed and traded on the Nasdaq National Market System under the symbol "ESCP."

THE PROSPECTUS

29. Electroscope designs, manufactures, and sells medical devices used in electrostatic surgery, including an "electrosurgical shielding system and integrated electrosurgical instruments." (Prospectus at 3.) There are many advantages of electrostatic surgery, but they do not come without risk, one of those risks being stray electrical current causing unseen bums, infections, and perforations that can, in some instances, cause death. Electroscope claims that its products reduce that risk.

The Company's Electroshield Monitoring System protects the surgical patient against stray electrical energy that can cause injury by actively and continuously monitoring current flow from the electrosurgical generator through the electrosurgical instrument. The Electroshield Monitoring System allows surgeons to perform, more safely and more efficaciously, a broad range of surgical procedures using laproscopic (a type of minimally invasive surgery, or "MIS") monopolar electrosurgery.

(Prospectus at 3.)

a. Revenue growth and prospects.

30. Throughout the Prospectus Electroscope describes, in glowing terms, its products, market, and growth. It first describes its market and its products, reporting that, although electrostatic surgery has been around since the early 1900s, Electroscope's products solve a fundamental flaw in previous product designs, an inability to control stray electrical current that causes bums, infections and perforations. The Company claimed that with the advent of minimally invasive surgical techniques, the worldwide market for its products is $450 million annually.

31. In its 1996 fiscal year ended less than three months before the Company's initial public offering, Electroscope grew to have net revenues of $2,173,785, a 100% growth from its fiscal 1995 net revenues of $1,084,226. That, in turn, was a 128 % growth from its fiscal 1994 net revenues of $475,778, a 357 % growth rate in its previous last two years. (Prospectus at 13.)

32. At the heart of Electroscope's sales strategy is its "Distribution Agreement" with Valleylab.

Valleylab Relationship

To penetrate quickly and effectively the market for electrosurgical equipment, the Company entered into a Distribution Agreement in September 1995 with Valleylab, Inc., a part of the Hospital Products Group of Pfizer, Inc. Valleylab is recognized as a leader in the electrosurgical products market.

The company was attracted to Valleylab as a distributor because of Valleylab's reputation for patient safety and user education in the electrosurgical market, Valleylab's global distribution capability, and Valleylab's large installed customer base. Valleylab has approximately 60 U.S.-based sales representatives who are trained to sell electrosurgical generators and accessories.

The Company has granted Valleylab the exclusive worldwide right to market, sell and distribute the Company's products, and Valleylab has agreed to purchase the products from the Company at certain transfer prices and to purchase certain minimum quantities from the Company to maintain exclusivity. The Distribution Agreement is exclusive until December 31, 1996 and, if Valleylab meets its purchase requirements in each year of the agreement, continues to be exclusive during its term, ending June 30, 1999....

(Prospectus at 25 (emphasis added).)

33. The Prospectus further touted Electroscope's growth strategy to "Rapidly Penetrate the Market -- Capitalize on the extensive distribution network and installed customer base of the Company's sole distributor, Valleylab, to penetrate rapidly both the U.S. and international markets for electrosurgical equipment and instruments." (Prospectus at 12 (emphasis in original).)

34. Later in the Prospectus, in the Notes To Financial Statements, the Company again describes its relationship with Valleylab.

Distribution Agreement

On September 8, 1995 [during the 1996 third fiscal quarter], the Company signed a distribution agreement (the "Distribution Agreement") with Valleylab, Inc., a part of Hospital Products Group of Pfizer Inc. ("Valleylab"), pursuant to which Valleylab paid a non-refundable fee of $150,000, placed a non-cancelable purchase order for $400,000 of articulated electrosurgical instruments, and agreed to other terms and conditions, some of which are discussed below. In exchange, the Company granted to Valleylab the exclusive right to promote, sell and distribute its products worldwide, subject to certain conditions.

(Prospectus at F-7.)

35. The Prospectus was materially false and misleading because it failed to disclose that in order to implement the Distribution Agreement Valleylab had purchased hundreds of thousands of dollars of Electroscope's products during the 1996 third fiscal quarter as a one time stock-in order.

b. Financial results.

36. The Prospectus contains audited financial results for Electroscope's fiscal year ended March 31, 1994, 1995, and 1996. The Prospectus also contains a "Report of Independent Public Accountants,' (Prospectus at F-2), a so-called clean opinion letter, certifying that the audit was conducted in accordance with generally accepted auditing standards ("GAAS") and that the accompanying financial statements were "present fairly, in all material respects, the financial position of Electroscope, Inc. as of March 31, 1995 and 1996, ... in conformity with generally accepted accounting principles." (Id.) Audits conducted in accordance with GAAS include a review of quarterly financial information.

37. In fiscal 1994, the Prospectus reported net revenues of $475,778, which grew 128 % to $1,084,226 in fiscal 1995. The Company attributed that rapid rate of growth "to increased market acceptance and awareness of the product line, as well as increased sales of fixed-tip electrosurgical instruments and sheaths." (Prospectus at 16.)

38. In fiscal 1996 the Company's phenomenal rate of growth continued, with net revenues increasing 100% from fiscal 1995 to $2,173,785. Again, the Company attributed its growth "to increased market acceptance," but it went further:

The increase [in net revenues] in Fiscal Year 1996 was due to increased market acceptance and awareness of the Company's Electroshield Monitoring System, some of which may be attributed to the Company's arrangement with Valleylab, which has led to increased sales of the Company's Electroshield Monitoring System, electrosurgical instruments and adaptive sheaths, as well as the introduction of new products.

(Prospectus at 15.)

39. The above statement was materially false and misleading because while Company attributed "some" of its increased sales in fiscal 1996 to its arrangement with Valleylab, when in fact most if not all of the increased sales were attributable to those sales, especially stock-in sales. The fiscal 1996 net revenues reported in the Prospectus were in no way indicative of customer demand or of ongoing sales. During the third fiscal quarter of 1996 ending December 31, 1995, the first quarter after it signed the Distribution Agreement with Valleylab, Electroscope's net revenues were $823,000, materially higher than its second fiscal quarter net revenues of $479,350, and its first fiscal quarter net revenues of $528,366. The reason for the huge atypical increase in sales became clear when Electroscope admitted, on February 7, 1997, in a press release it issued over the PRNewswire, that its third quarter 1996 net revenues "were significantly higher due to an initial stock-in order from a marketing partner."

40. In addition, although the Prospectus was made effective June 25, 1996, a mere three business days before the end of Electroscope's 1997 first fiscal quarter ending June 30, 1996, the Company failed to comment on the net revenues that were, by then, almost complete.

POST-OFFERING REVELATIONS

41. On July 22, 1996, Electroscope announced in a press release it issued over the PRNewswire, that for its first fiscal quarter ended June 30, 1996, three business days after the Offering, that net revenues were only $413,642. On August 13, 1996, Electroscope filed its 1996 first fiscal quarter Form 10-Q with the SEC (the "1997 First Quarter 10-Q") and for the first time stated that its net revenues of $413,642 had declined 22% from $528,366 for the same period the year before. The 1997 First Quarter 10-Q also reported that the decrease in net revenues was "attributable to reduced sales to Valleylab for the three months ended June 30, 1996 resulting from Valleylab making significant stocking purchases prior to March 31, 1996." (1997 First Quarter 1O-Q at 12.)

42. The Prospectus was materially false and misleading because the fiscal 1996 financial results reported in the Prospectus, specifically the 1996 net revenues with its 100% growth over the prior year, were inflated by one time stock-in sales that could not, and would not, be repeated. What was not revealed was the magnitude or the timing of the stock-in sales.

43. On October 30, 1996, Electroscope filed its 1997 second fiscal quarter Form 10-Q with the SEC (the "1997 Second Quarter 10-Q") for the quarter ending September 30, 1996, and stated that its net revenues of $359,287 had continued to decline, 25 % for the quarter, from $479,350 for the same period the year before.

44. In the 1997 Second Quarter 10-Q, Electroscope also announced, for the first time, that the much ballyhooed Valleylab would fail to meet its minimum purchase requirement for calendar year 1996, and that, pursuant to the terms of its Distribution Agreement, the Valleylab-Electroscope relationship would become non-exclusive in 1997. Valleylab's purchases of Electroscope products had been negatively impacted by "the Company's transition to a new generation of products designed to deal with human engineering issues and a delay in the documentation by Valleylab in accordance with the Distribution Agreement." (1997 Second Quarter 10-Q at 8.)

45. The Prospectus was materially false and misleading because it failed to include any warning that a "transition to a new generation of products" was to begin six days after the Offering, (the Offering was on June 25, 1996 and the fiscal third quarter began on July 1, 1996). The boilerplate risk warnings of the difficulty of new product development are not sufficient given the imminent new product introduction and substantial impact, including obsolescence, that new products have on existing products and sales. In fact, the Prospectus specifically stated that no "transition" was contemplated. Under the heading "Strategy" the Company stated its strategy was to

Develop New Products and Applications -- Continue to expand the number of instrument styles offered by the Company utilizing the Electroshield Monitoring System. Expand the application of the Active Electrode Monitoring (AEM) technology by assessing additional surgical applications and equipment that could benefit from such technology.

(Prospectus at 22-23 (emphasis in original).)

Nevertheless, the Company began a "transition to a new generation of products" six days after the Offering.

46. On February 7, 1997, Electroscope filed its 1996 third fiscal quarter Form 10-Q with the SEC (the "1997 Third Quarter 10-Q") and reported that its net revenues of $378,887 had again declined, this time 54%, from $823,000 for the same period the year before. The same day, in a press release it issued over the PRNewswire the Company announced that its prior year's third quarter net revenues of $823,000 "were significantly higher due to an initial stock-in order from a marketing partner." The marketing partner reported in the Company's February 7, 1997 press release, in fact Electroscope's only reported marketing partner, was Valleylab.

47. The above statements closed the Class Period when they alerted the investing public to the fact that the Prospectus was materially false and misleading because the fiscal 1996 financial results reported in the Prospectus were inflated by a huge one time stock-in order. The magnitude of the stock-in order had only become apparent for the first time when the 1997 Third Quarter 10-Q revealed the previous year's third quarter net revenues. By the time the Registration Statement and Prospectus were made effective, that "initial stock-in order' had occurred almost six months earlier.

48. With the publication of the fiscal 1997 Third Quarter 10-Q, the quarterly net revenues for fiscal 1996 were revealed for the first time. It became apparent that net revenues since the fiscal 1996 third quarter ended December 31, 1995, with its huge one tune stock-in order to Valleylab, there had been a total reversal of revenue growth. That reversal was not disclosed in the Prospectus.

AS AND FOR A
FIRST CLAIM FOR RELIEF

Against All Defendants
(Section 11, Securities Act)

49. Plaintiff incorporates by reference the allegations of paragraphs 1 through 48 of this Complaint as if fully set forth herein.

50. This Count is brought by plaintiff pursuant to section 11 of the Securities Act, 15 U.S.C. § 77k, on behalf of the Class against all defendants. It does not sound in fraud.

51. The Registration Statement of which the Prospectus was a part and which became effective on or about June 25, 1996, was materially false and misleading, contained untrue statements of material facts, omitted to state other facts necessary to make the statements therein not misleading, and failed to disclose adequately material facts as set forth above.

52. Plaintiff acquired shares of Electroscope on the Offering and issued pursuant to the Registration Statement.

53. Plaintiff and the other members of the Class who acquired Electroscope common stock issued pursuant or traceable to the Registration Statement did not know of the material omissions or misleading statements in the Registration Statement when such stock was acquired.

54. Electroscope is the registrant for the Offering and issued and participated in the issuance of materially false and misleading statements to the investing public which were contained in the Registration Statement, of which the Prospectus was a part. As the issuer of the shares sold in the Offering, Electroscope is strictly liable to plaintiff and the other members of the Class for those material misrepresentations and omissions.

55. Roger C. Odell, David W. Newton, Vern D. Kornelsen, Robert D. Tucker, Joe W. Tippett, Donald R. Temple, and C. Randle Voyles signed the Registration Statement, either personally, or through an attorney-in-fact.

56. Kinnard is an underwriter with respect to the stock sold in the Offering within the meaning of the Securities Act.

57. By reason of the foregoing, pursuant to Section 11 of the Securities Act, each defendant is liable to plaintiff and the other members of the Class for the difference between the price paid for the Electroscope common stock bought and either the current value of such stock if currently held by plaintiff or the Class member, or the price at which such stock was disposed of in the market if disposed of before the commencement of this action.

58. This action is being brought within one year of the violations of section 11 of the Securities Act.

AS AND FOR A
SECOND CLAIM FOR RELIEF

Against Defendant Kinnard
(Section 12(2), Securities Act)

59. Plaintiff incorporates by reference the allegations of paragraphs 1 through 58 of this Complaint as if fully set forth herein.

60. This Count is brought by plaintiff pursuant to Section 12(2) of the Securities Act, 15 U.S.C. 771, on behalf of the Class against Kinnard. It does not sound in fraud

61. Kinnard sold or offered to sell Electroscope stock pursuant to the Registration Statement, of which the Prospectus was a part, which included untrue statements of material fact and omitted material facts required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, as set forth above.

62. Plaintiff and the other members of the Class who acquired Electroscope common stock issued pursuant or traceable to the Registration Statement did not know of the material omissions or misleading statements in the Registration Statement when such stock was acquired, and were injured thereby.

63. By reason of the foregoing, pursuant to section 12(2) of the Securities Act, Kinnard is liable to plaintiff and the other members of the Class who bought Electroscope stock on the Offering from an underwriter, and plaintiff and each such member of the Class are entitled to rescind their purchase and recover the consideration that they paid for such stock (less any income received thereon) or, if the member of the Class no longer owns such stock, for damages.

64. Plaintiff and other Class members who still hold Electroscope stock hereby tender their shares of Electroscope stock to defendants. Class members who have sold their Electroscope stock are entitled to rescissory damages.

65. This action is being brought within one year of the violations of Section 12(2) of the Securities Act.

AS AND FOR A
THIRD CLAIM FOR RELIEF

Against Defendant Odell
(Section 15, Securities Act)

66. Plaintiff incorporates by reference the allegations of paragraphs 1 through 65 of this Complaint as if fully set forth herein.

67. This Count is brought by plaintiff pursuant to Section 15 of the Securities Act 15 U.S.C.77o, on behalf of the Class against Odell. It does not sound in fraud.

68. The Prospectus, in a section entitled "Control by Management," states that:

Upon completion of this Offering, the current officers and directors will beneficially own approximately 38.6% of the issued and outstanding shares of Common Stock. As a result of such ownership and because holders of Common Stock do not have cumulative voting rights, Management may have the ability to elect or remove all members of the Board of Directors, thereby controlling the affairs and management of the Company and having the power to approve most actions requiring shareholder approval. Such a level of ownership can have the effect of delaying, defending or preventing a change in control of the Company and can adversely affect the voting and other rights of the other holders of common stock. See "Principal Shareholders."

(Prospectus at 9.)

69. After completion of the Offering, Odell owned 923,114 shares, 17.4%, of the outstanding common stock of Electroscope.

70. Odell acted as a controlling person of Electroscope within the meaning of Section 15 of the Securities Act as alleged herein. By virtue of his high-level positions, participation in and/or awareness of the Company's operations and/or intimate knowledge of the Company's financial condition, products and the actual progress of its development and marketing efforts, Odell had the power to influence and control and did influence and control, directly or indirectly, the decision-making of the Company, including the content and dissemination of the Prospectus which plaintiff contends are false and misleading.

71. Pursuant to Section 15 of the Securities Act, by virtue of his positions as controlling person, Odell is liable jointly and severally with and to the same extent as the Company for the Company's aforesaid violations of Section 11 of the Securities Act. As a direct and proximate result of Odell's wrongful conduct, plaintiffs and other members of the Class suffered damages in connection with their purchases of the Company's securities during the Class Period.

PRAYER FOR RELIEF

WHEREFORE, plaintiff, on behalf of himself and the Class, prays for judgment as follows:

DEMAND FOR TRIAL BY JURY

Pursuant to rule 38(b) of the Federal Rules of Civil Procedure, plaintiff hereby demands trial by jury of all issues.

Dated: June 2, 1997

HELLMUTH & JOHNSON P.A.

                      /s/
By:_______________________________
     Randal Steinmeyer, Esq.
300 Cabriole Center
9531 West 78th Street
Eden Prairie, MN 55344-8006
(612) 941-4005

I. Stephen Rabin, Esq.
Marvin L. Frank, Esq. RABIN & PECKEL LLP
275 Madison Avenue
New York, New York 10016
(212) 682-1818

Leo W. Desmond, Esq.
LAW OFFICES OF LEO W. DESMOND
2161 Palm Beach Lakes Blvd.
Suite 204
West Palm Beach, Florida 33409
(561) 712-8000

Attorneys for plaintiff




CERTIFICATE OF PLAINTIFF

I. Avrom Gart, do hereby certify that

I have reviewed the within complaint and authorized its filing.

I did not purchase the shares of common stock of Electroscope, Inc. ("Electroscope") that are the subject of the complaint at the direction of my counsel or in order to participate in any private action arising under the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995.

I am willing to serve as a representative party on behalf of a class, including providing testimony at deposition and trial, if necessary.

During the Class Period I engaged in the following transaction involving the common stock of Electroscope:

TRANSACTION TRADE DATE NO. OF SHARES PRICE/SHARE
Purchase 6/25/96 1,000 $10.50
Sale 7/8/96 1,000 $9.75

I am seeking to serve as a representative party on behalf of a class in one other action brought under the federal securities laws that was filed during the three-year period preceding the date of this certification.

I will not accept any payment for serving as a representative party on behalf of the Class beyond my pro rata share of any recovery, except such reasonable costs and expenses (including lost wages) directly relating to the representation of the Class and my activities in the lawsuit, as ordered or approved by the Court.

Nothing herein shall be construed to be or constitute a waiver of my attorney-client privilege.

I certify under penalty of perjury that the foregoing is true and correct.

Executed on June 3, 1997.

/s/
_______________________________
AVROM GART