According to the Company's FORM 10-Q for the quarterly period ended June 30, 2002, on February 4, 2002, a securities class action lawsuit entitled Michael Keskinen v. Regeneration Technologies, Inc. et al., No. 1:02-CV9 MMP-WW was filed in the United States District Court, Northern District of Florida Gainesville Division, against the Company and certain of its current and former officers and directors. Since the Keskinen lawsuit was filed, a number of additional securities class action lawsuits were filed in the U.S. District Court for the Northern District of Florida based upon the same alleged facts. All of the class action suits that were served upon the Company have now been voluntarily dismissed by the plaintiffs without prejudice.
The Complaint alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, by issuing materially false and misleading statements to the market. Specifically, throughout the Class Period, defendants made highly positive statements regarding the Company's financial results. RTI reported quarter after quarter of "record" financial results and strong revenue growth which caused the price of RTI securities to trade as high as $12.82 per share during the Class Period. These statements were allegedly false and misleading because the Company failed to take a charge to earnings to recognize worthless inventory.
The complaint further alleges that on or around February 2, 2002, RTI shocked the market by announcing that the Company was delaying its fourth quarter and year end results for fiscal year 2001 while "management completes its evaluation of certain inventory issues." The Company also announced that its Chief Financial Officer Richard Allen and Vice President of Marketing and Sales James Abraham are leaving the Company, effective immediately. The Company further announced that it is "evaluating whether these issues may affect RTI's previously reported financial results" and although "RTI's annual results have not been finalized, company officials expect to report a loss for both the quarter and the year." In response to the news the price of RTI stock plunged more than 50% from$10.15 on January 31, 2002 to $5.19 on February 1, 2002.