According to the docket, the final settlement hearing was held on March 19, 2004. At the hearing, U.S. District Judge Kenneth A. Marra approved the class action settlement. The Court entered the Final Judgment and Order on March 22, 2004. All pending motions were denied as moot, and the case was closed.
By the Notice of Proposed Settlement, a proposed settlement has been reached by the plaintiffs and defendants. The proposed settlement creates a cash fund in the amount of $5,600,000.00, which will accrue interest pursuant to the provisions of §2.1 of the Stipulation until it is distributed to the Class. Based upon Lead Counsel's estimate of the number of shares entitled to participate in the Settlement, the average loss per share is $0.17 and the average distribution per share, should all eligible shares participate, would be approximately 10% of damages, or $0.017 per share, before deduction of Court approved fees and expenses. However, the actual recovery from this fund for each individual will depend on a number of variables, including the number of Claimants, the number of shares purchased, the expense of administering the claims process, and the timing of the purchases and sales, if any.
If the Settlement is approved by the Court, counsel for the Lead Plaintiffs will apply to the Court for attorneys' fees of no greater than 30% of the settlement proceeds (including any interest earned thereon) and reimbursement of out-of-pocket expenses not to exceed $150,000.00 both to be paid from the Settlement Fund. If the amount requested by counsel is approved by the Court, the average cost per share would be approximately $0.005.
As reported by the Company’s Form 10-K/A No. 3, for the fiscal year ended December 31, 2003, on May 20, 2002, a purported securities fraud class action was filed against the Company and one of the Company’s directors. In the following weeks, fourteen virtually identical complaints were consolidated into a single action, In re Applied Digital Solutions Litigation, which was filed in the United States District Court for the Southern District of Florida. In March 2003, the Company entered into a memorandum of understanding to settle the pending lawsuit.
The original Complaint alleges Applied Digital and certain of its officers and directors with violations of sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and rule 10b-5 of the Securities and Exchange Commission. Among other things, plaintiff claims that defendants disseminated a series of materially false and misleading statements regarding the nature of Applied Digital's revenue recognition practices and the lack of proper accounting controls at certain of the Company's subsidiaries. The Complaint charges that defendants were in possession of materially adverse information about the Company's improper accounting practices but failed to disclose the information to investors for more than two years, causing Applied Digital's stock price to become artificially inflated, inflicting enormous damages on investors.