According to the firm's 10-KSB filing dated 03/28/2000, on September 26, 1999, the Court issued an opinion and order dismissing with prejudice three of the five claims asserted by the plaintiffs and further dismissing the remaining two claims without prejudice to the plaintiffs filing a second amended consolidated complaint within thirty (30) days of the date of the Court's opinion and order. The plaintiffs failed to serve a second amended consolidated complaint, and as a result, in November 1999, a final judgment was entered dismissing the consolidated complaint in its entirety.
As reported by the same SEC filing, during March and April 1998, six complaints, each alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, were filed by a total of eight shareholders, on behalf of themselves and all others similarly situated, against the Company and certain of its officers and directors in the United States District Court for the Southern District of New York. Each of the complaints alleged that the defendants, among other things, misrepresented material information about the Company's financial results and prospects, and its customer relationships. In October 1998, a consolidated complaint on behalf of the plaintiffs was served upon the Company. In December 1998, a motion was made on behalf of the Company to dismiss each of the claims asserted against the Company in the consolidated complaint.
The original complaint asserted that Hudson and the named officers and directors violated the Securities Exchange Act of 1934 by making false and misleading statements which had the effect of overstating the Company's gross profits, gross margins and earnings. The action was filed by a purchaser of Hudson shares who alleges that the market price of the stock was artificially inflated during the Class Period as a result of the misrepresentations and omissions. On June 26, 1997, Hudson issued a press release announcing that its previous projections of growth and profits would not be realized and that the Company would incur substantial losses for the three and six months periods ended June 30, 1997. On Aug. 15, 1997, the Company revealed that it would be restating its financial statements for the first quarter of 1997. On the same day, the Company filed a restated quarterly report which further revealed that rather than achieving net earnings as previously announced, the Company had incurred a net loss in that period of over $600,000. The restated quarterly report also revealed that the Company had materially overstated gross profits over interim financial periods throughout 1996. Following these announcements, the price of Hudson common stock closed down, trading at levels below $4.00 per share, and declining 73% from a Class Period high of $11.75 per share.