According to the Company’s FORM 10-Q For The Quarterly Period Ended March 31, 2002, the court dismissed these actions without leave to amend on February 14, 2000 and the plaintiffs appealed the dismissal to the U.S. Court of Appeals for the Ninth Circuit. The appeal was taken under submission by the court of Appeals following the filing of briefs by the parties and the presentation of oral argument on July 11, 2001. On March 15, 2002, the Court of Appeals affirmed the district court’s judgment, dismissing the complaint without leave to amend. On March 28, 2002, plaintiffs filed a Petition for Rehearing in the Ninth Circuit. On April 5, 2002, the Ninth Circuit denied the plaintiffs' Petition for Rehearing.

As previously reported by the Company’s FORM 10-Q For The Quarterly Period Ended September 30, 1999, beginning in April 1999, several purported class action suits were filed in the U.S. District Court for the Northern District of California, alleging violations of the federal securities laws against the Company and certain of its officers and directors in connection with the Company's reporting of its financial results for the period ending December 31, 1998. These actions have just been commenced and no trial dates have been set. In July 1999, the Court entered orders consolidating all existing class actions into a single action and appointing a lead plaintiff and lead plaintiff's co-counsel. A consolidated amended complaint was filed in September 1999 and the individual defendants filed a motion to dismiss the complaint on October 8, 1999. The motion is scheduled for hearing by the court on January 21, 2000.

The original complaint charges FVC and certain officers and directors with violations of the Securities Exchange Act of 1934. Specifically, the complaint alleges that in order to inflate the price of FVC stock, the Company and the Individual Defendants falsely reported the Company's financial results for the fourth quarter of fiscal year 1998 through improper revenue recognition, thereby materially overstating FVC's revenue, income and earnings per share in the fourth quarter of 1998, in violation of GAAP. Furthermore, FVC's insiders sold 535,000 shares of their FVC stock for proceeds exceeding $7.3 million.

The complaint further alleges that on or around April 6, 1999, FVC disclosed that it was reducing its previously announced revenues for the fourth quarter of 1998 by approximately $7.0 to $7.5 million to defer revenue on inventory of the Company's products held by Nortel on December 31, 1998. Thus, sales for the fourth quarter of 1998 would only be approximately $4.7 to $5.2 million (as opposed to the $12.3 million in revenues previously reported) and earnings per share were being reduced from a profit of $.07 to a net loss per share of approximately $0.20 to $0.22. Contemporaneously, FVC announced that revenues for the first quarter of 1999 were expected to be significantly below analyst expectations with a significant loss for the quarter, revenues would be between $8.0 and $8.5 million, and the net loss per share between $0.20 and $0.22. Upon these disclosures, the price of FVC stock fell $10-7/16 to $6-15/16, nearly 60%, in trading of 4.85 million shares, almost 18 times the three-month daily average.