On October 1, 2001, the Court entered the Order by U.S. District Judge Donald L. Graham granting the motion to dismiss the second amended complaint with prejudice. The case was closed. According to the Order, the court held that Plaintiffs failed to allege improper revenue recognition with the particularity required by federal law, and failed to allege facts giving rise to a strong inference of scienter.

As summarized by the the Company’s FORM 10-Q for the quarterly period ended August 31, 2001, the Court entered an order on September 26, 1999 consolidating seven purported class action lawsuits and appointing lead plaintiffs and lead plaintiffs' counsel. On November 8, 1999, the lead plaintiffs filed a consolidated complaint. The Company filed a Motion to Dismiss the consolidated complaint and the Court granted that motion on August 3, 2000. The plaintiffs filed a Second Amended and Consolidated Complaint on September 1, 2000, essentially re- alleging the violations of Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5 promulgated thereunder. The Company filed a Motion to Dismiss plaintiffs' Second Amended and Consolidated Complaint on November 2, 2000. On September 28, 2001, the Court entered an order and judgment to dismiss the consolidated complaint with prejudice, and closed the consolidated action for administrative purposes.

The original complaint charges defendants with violations of Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5 promulgated thereunder by issuing a series of materially false and misleading statements concerning the Company's financial condition and results of operations, specifically concerning its results of operations and the Company's investment in Topp Telecoms, Inc. Because of the issuance of a series of false and misleading statements, the price of CellStar common stock was artificially inflated during the Class Period.