According to a press release dated November 21, 2006, pursuant to an Order of the United States District Court for the Southern District of Florida, a hearing will be held on January 26, 2007, at 9:00 a.m., before the Honorable Cecilia M. Altonaga, United States District Judge, Southern District of Florida, 301 North Miami Avenue, 4th Floor, Miami, Florida 33128, for the purpose of determining whether: (1) the proposed settlement of the claims in the Litigation for the sum of $1.5 million in cash, plus interest and other income earned thereon since the creation of the Settlement Fund, should be approved by the Court as fair, just, reasonable, and adequate; (2) thereafter, this Litigation should be dismissed with prejudice as set forth in the Stipulation of Settlement dated as of October 23, 2006 (the "Stipulation"); (3) the Plan of Allocation is fair, just, reasonable, and adequate and therefore should be approved; and (4) the application of Lead Counsel for the payment of attorneys' fees and reimbursement of costs and expenses, and the reimbursement of the Class Representatives' expenses, incurred in connection with this Litigation should be approved.
As disclosed by the Company’s FORM 10-Q for the quarterly period ended December 31, 2005, on August 20, 2002, the Company filed a motion to dismiss the complaint and in December 2002, the Company's motion was granted by the court and the complaint was dismissed. In January 2003, an amended class action complaint (the "Amended Complaint") was filed adding certain of the Company's current and former directors as defendants. The lead plaintiffs in the Amended Complaint sought to act as representatives of a class consisting of all persons who purchased the Company's Common Stock (i) issued pursuant to the Company's September 26, 2000 secondary offering (the "Secondary Offering") or (ii) during the period from September 26, 2000 through June 22, 2001, inclusive. On April 18, 2003, the Company filed a motion to dismiss the Amended Complaint and on August 27, 2004, the court dismissed all claims against the defendants related to the Secondary Offering. On September 8, 2005, the court granted the plaintiffs' motion for class certification and certified as plaintiffs all persons who purchased the Common Stock between January 18, 2001 and June 22, 2001, inclusive, and who were allegedly damaged thereby (the period January 18, 2001 through June 22, 2001 hereinafter referred to as the "Class Period"). Pursuant to a scheduling order of the court, trial in this matter is scheduled to commence on November 13, 2006.
The allegations remaining in the Amended Complaint are centered around claims that the Company failed to disclose, in periodic reports it filed with the SEC and in press releases it made to the public during the Class Period regarding its operations and financial results, that a large portion of its accounts receivable was represented by a delinquent and uncollectible balance due from then customer, KB Gear Interactive, Inc. ("KB Gear"), and that a material portion of its inventory consisted of customized components that had no alternative usage. The Amended Complaint claims that such failures artificially inflated the price of the Common Stock. The Amended Complaint seeks unspecified damages, interest, attorneys' fees, costs of suit and unspecified other and further relief from the court.
The original 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 a series of material misrepresentations to the market between January
18, 2001 and June 22, 2001, thereby artificially inflating the price of Concord
securities. The complaint alleges that, throughout the Class Period, defendants
issued a series of materially false and misleading statements which failed to
disclose that (i) no less than $15,777,000, more than 45% of the Company's
receivables, represented an unsecured and delinquent balance due from one single
customer--KB Gear; (ii) this delinquent $15,777,000 receivable balance was
uncollectible; and (iii) due to KB Gear's inability to pay for merchandise, the
Company was stuck with a large quantity of customized higher-cost specialty
components which had no alternative use and were non-salable.
The complaint further alleges that on or around June 22, 2001, the last day of the Class Period, the Company issued a press release revising its fourth quarter guidance and disclosing for the first time that: (i) excess inventory positions at many of the Company's customers and the resulting changes in their purchasing patterns have adversely affected inventory sales; (ii) the Company will record the following one-time charges against income in the quarter: $15.8 million accounts receivable provision, $4.3 million inventory provision, $1.4 million restructuring charge; and (iii) the accounts receivable provision and $2.0 million of the inventory provision relate to a financially troubled former customer of the Company with respect to which
management has concluded that workout efforts are not likely to be successful.
In response to these disclosures, the price of Concord stock plummeted over 20%
to close at $6.02.