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Case Status:    SETTLED
On or around 09/04/2001 (Stipulation and order of dismissal (voluntary dismissal))

Filing Date: June 21, 1996

The original complaint alleges OrthoLogic Corp. develops, manufactures and markets proprietary, technologically advanced orthopaedic devices designed to enhance the healing of diseased, damaged or degenerated musculoskeletal tissue. The company's generates a majority of its revenues from the sale of its OrthoLogic 1000, a bone growth stimulation device, approved by the FDA as a healing device for specified parts of the human skeletal system. Specifically, the complaint alleges that OrthoLogic Corp. and certain of its officers and directors made certain public statements that were false and misleading because they failed to disclose certain adverse information. In particular, the complaint alleges that certain of the company's officers and directors failed to disclose (i) that the claimed healing rates of the OrthoLogic 1000 were not supported by the results of clinical data provided by the company to the FDA, (ii) that members of the company's sales force were routinely misrepresenting the approved uses and efficacy of the OrthoLogic 1000, and (iii) that the company had received a warning letter from the FDA as the result of an investigation by the FDA of the company's sales practices. The complaint alleges that the false and misleading statements were part of a scheme by the defendants which enabled various of the company's officers and directors to sell stock at artificially inflated prices. After this information was disclosed to the market, the company's stock price allegedly fell 37%. Based on these allegations, the complaint asserts violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.

As reported by the Company’s Form 10-K for the fiscal year ended December 31, 1999, on March 31, 1999, the judge in the consolidated case before the United States District Court granted the Company's Motion to Dismiss and entered an order dismissing all claims in the suit against the Company and two individual officers/directors. The judge allowed certain narrow claims based on insider trading theories to proceed against certain individual defendants. On December 21, 1999, the District Court granted plaintiffs' motion for class certification to include purchasers of common stock between June 4 through June 18, 1996, inclusive.

According to the docket, the remaining individual defendants in the action settled the case. A notice of settlement was filed on January 25, 2001, and on April 24, 2001, the Court granted the stipulation of settlement dated as of October 4, 2000. On August 31, 2001, the plaintiffs and defendants filed a stipulation for dismissal of the consolidated action. On September 28, 2001, the Court entered the Order granting the stipulation for dismissal. It was further ordered that effective upon the finality of entered on August 17, 2001, in a case filed in the Arizona Superior Court, Maricopa County, the case and the action was dismissed with prejudice.

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