According to the Company’s FORM 10-K for the fiscal year ended March 31, 2000, on October 19, 1999, the securities class action litigation that had been filed during fiscal 1999 against the Company and certain of its officers by Israel H. Buck et al. was dismissed with prejudice by the United States District Court for the Eastern District of Pennsylvania. No appeal of the dismissal was filed by the plaintiffs within the required time period.
In the suit, shareholders allege that company officials made a series of misleading statements in connection with the July 1998 acquisition by defendant Piercing Pagoda Inc. of 104 stores previously owned by Sedgwick Sales Inc. Just three months after the acquisition, the suit said, Piercing Pagoda announced that it would be declaring lower-than-expected second-quarter results due to difficulties it experienced in integrating the Sedgwick stores into its chain. It also announced that its sales at those stores were lower than expected.
Specifically, the suit alleges Piercing Pagoda officials made four misleading statements in press releases and in the company's 1998 10-K regarding the Sedgwick acquisition. The first, they said, occurred when the company claimed that the new stores would "complement [Piercing Pagoda's] current geographic mix" and that the acquisition "underscores [the company's] commitment to finding desirable real estate opportunities." The second was the company's claim that it "believes it can successfully apply its prior experience opening new stores and integrating the previous acquisitions to this purchase." The third was the announcement on July 2, 1998, that "the process of transitioning these stores to the company's format was begun earlier this week and all should be operating under [Piercing Pagoda's] banner by this weekend." Finally, the suit said the company falsely asserted that "in addition to evaluating malls in which it does not operate stores, the company continually evaluates malls where its stores are located to determine whether net sales volumes warrant another kiosk in such malls."