According to the Company’s FORM 10-K for the fiscal year ended December 31, 2003, the Plaintiff had filed an amended complaint pertaining to certain of the pleadings. In December 2003, the Company agreed to a settlement with the Plaintiff and the Plaintiff withdrew their amended lawsuit with prejudice. The settlement did not affect the Company’s results of operations, balance sheet or financial condition.
In a press release dated August 5, 2003, the Honorable Freda L. Wolfson of the United States District Court for the District of New Jersey has dismissed a securities civil action complaint against Intelli-Check, Inc. The Court's decision allows the plaintiffs to move to file an amended complaint within 30 days. The Court stated that, "If plaintiffs choose to timely move for leave to file (an) amended complaint, the Court will then consider whether the amendments would be futile."
As previously disclosed in the Company’s Form 10-Q for the quarterly period ended June 30, 2003, the class action suit was amended in November 2001 and became an individual action. On July 26, 2002, the Company filed a motion to dismiss the lawsuit. On July 30, 2003, the court granted the Company's motion to dismiss the lawsuit. The Plaintiff has 30 days in which to file an amended complaint pertaining to certain of the pleadings.
The original complaint alleges that defendants violated Sections 10 (b) and 20 (a) of the Securities and Exchange Act of 1934, and Rule 10b-5 by issuing a series of materially false and misleading statements to the market during the class period concerning its supposedly strong and growing sales thereby artificially inflating the value of the Company's stock price. In fact, sequential sales from Q4 2000 to Q1 and Q2 2001 have substantially decreased. Specifically, during the class period defendants reported materially inflated revenue for Intelli-Check by manipulating the reporting of sales and revenue in its filings with the Securities and Exchange Commission and in its press releases and failing to disclose significant competition having a material impact on the Company and the sale of its products. The defendants on May 9, 2001 announced significant increases in revenue for the second consecutive quarter when in fact shipments and sales of products had actually decreased. The defendants on August 13, 2001 announced that revenues for the second quarter of 2001 increased nearly 15 fold from the second quuarter of 2000 and 10 fold for the first six months compared with the year ago period failing to disclose a possible change in the method of accounting for distributor sales impact on revenue and deferred revenues reported in its financial statements. It is also alleged that the misleading disclosures have materially and artificially inflated the price of Intelli-Check shares thereby allowing certain of the defendants to sell shares at substantial gains and allowing the shares to close at or above $10.50 per share since September 24, 2001. If the price of Intelli-Check closes at or above $10.50 per share each day through October 19, 2001, Intelli-Check will be able to force the exercise of 979,076 stock rights at a price of $8.50 per share thereby forcing the sale of stock at an artificially inflated price. At all times relevant defendants benefited, by virtue of substantial ownership interests, through sales and otherwise, from the artificially inflated stock price and rights offering, all to the detriment of the class of short-sellers.