According to the docket, on July 10, 2002, the defendants filed motions to dismiss the Consolidated Amended Complaint. On October 3, 2002, the Court entered the Order signed by U.S. District Judge James C. Cacheris granting the motions to dismiss the Consolidated Amended Complaint. The plaintiffs had 10 days from the date of the Order to filed a Second Consolidated Amended Complaint but did not do so. The case is closed.
As previously reported by the Company’s FORM 10-Q for the quarterly period ended: March 31, 2002, on February 21, 2002, a complaint was filed in the United States District Court for the Eastern District of Virginia against the Company and certain of its current and former officers and directors. The plaintiffs in this action purport to act on behalf of a class of other shareholders. The complaint alleges violations of the federal securities laws in connection with the Company’s initial public offering and subsequent public statements. Thereafter, substantially similar complaints were filed in the same court. On May 10, 2002, the Court consolidated all the shareholder complaints against the Company and appointed several people to be the lead plaintiffs.
The original Complaint alleges that defendants violated Sections 11 and 15 of the Securities Act of 1933 by issuing a materially false and misleading Prospectus
and Registration Statement ("Prospectus") in connection with the Company's
initial public offering ("IPO"), and that defendants violated Sections 10(b) and
20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of material misrepresentations to the market
between October 5, 2000 and February 12, 2002, thereby artificially inflating the price of Advanced Switching securities. On October 5, 2000, Advanced
Switching completed its IPO pursuant to a Prospectus in which it represented
that it had signed a $24 million contract with Qwest Communications, Inc.
("Qwest"), that its A-4000 product was being shipped and that its A-4500 product
would be available in 2001. In fact, as alleged in the complaint, at the time of the IPO, the Prospectus concealed that Advanced Switching's largest customer was having significant problems with Advanced Switching products, another significant customer had informed the Company it was over-inventoried and that the agreement with Qwest was contingent on Advanced Switching complying with terms the Company could not complete. Moreover, the Company had not even started on the A-4500 such that it was impossible that this product would be available in 2001. Later, subsequent to the IPO, defendants issued statements which asserted that customers were deploying the A-4000, which, as alleged in the complaint, did not occur, and that Advanced Switching offered DS-O to OC-192 capability which, in fact, the Company had not been able to offer. On February 5, 2001, the Company issued a press release announcing that it would be liquidated, which as alleged in the complaint, was essentially an admission that it had been a complete failure as a public company because the A-4500 had not been made available in 2001 and the Qwest contract had failed due to Advanced Switching's inability to meet the terms of the contract. Finally, on February 12, 2002, the Company announced that a major customer had asked for a $17 million refund due to a defective product being shipped.