According to the 10-K filing of Presstek, Inc. for the fiscal year ended December 30, in March 2000, the Company entered into an agreement with the plaintiffs in
several class actions lawsuits consolidated under the common caption "Bill
Berke, et al. v. Presstek, Inc., et al." in the United States District Court,
District of New Hampshire to settle the class action lawsuit. The Company also
executed a memorandum of understanding with respect to the settlement of the
derivatives lawsuits, filed on behalf of the Company, one in the Chancery Court
of the State of Delaware and the other in the United States District Court,
District of New Hampshire. Under the terms of the class action settlement, $22.0
million, in the form of 1,245,246 shares of the Company's common stock, will be
paid to the class.
Presstek, Inc. develops and markets non-photographic digital imaging technologies and system architecture primarily to the graphic arts imaging industries. On February 27, 1996, Presstek announced FY1995 results of $27.6 million in revenues, a 67% increase over FY1994, and net income of $2.86 million, a 50% increase. Accountants BDO Seidman gave an unqualified opinion to Presstek's financial statements. Plaintiffs allege that in fact the 1995 audited financial statements did not comply with GAAP in that they grossly overstated the Company's net income. According to plaintiffs, Presstek has three employee Stock Option Plans. Under GAAP, the exercise of an option should not create an earnings benefit, due to related tax benefits, on a corporation's Statement of Operations. Rather, these benefits should be recorded as Paid-in Capital. Plaintiffs claim that defendants in fact improperly recorded stock option exercise tax benefits as a reduction in income taxes. Where the Company recorded a $220,000 provision for income taxes, plaintiffs assert it should have recorded a $1.513 million provision for income taxes. Defendants purportedly made the same accounting mistake in the Company's first quarter 10-Q for 1996, making no provision for income taxes where they should have recorded a $770,000 tax liability. On June 18, 1996, Presstek admitted the mistake in its 10-Q and stated that it would revise net income to reflect the $770,000 in taxes. The complaints also assert that defendants engaged in insider trading and thereby raised a total of $28,379,425 in proceeds during the class period. Based on these allegations, plaintiffs allege violations of sections 10(b) and 20(a) of the 1934 Securities Exchange Act and Rule 10b-5 promulgated thereunder.