According to the Company’s FORM 10-K For The Fiscal Year Ended March 31, 2005, on or about May 27, 2003, the District Court granted, with prejudice, the
defendants' motions to dismiss the amended and consolidated class action
complaint. On June 24, 2003, the plaintiffs filed a notice of appeal. In
November 2004, the United States Circuit Court of Appeals for the 6th Circuit
affirmed the decision of the District 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 materially false and misleading statements concerning the Company's financial results that had the effect of artificially inflating the price of Atchison common stock during the Class Period. Specifically, on March 20, 2002, Corrpro announced that it had discovered accounting irregularities causing the Company's consolidated operating income before taxes through December 31, 2001 to be inflated by between $4.5 and $5.3 million. In addition, the Company announced that as a result of these "irregularities," it is expected to have to take a charge to pre-tax earnings in the Company's fiscal fourth quarter ending March 31, 2002 of between $5.3 and $6.7 million. The irregularities are alleged to have occurred at the Company's Australian subsidiary and appear to date back to at least calendar year 2000. Corrpro "expects" that it will have to restate its audited financial statements for the March 31, 2001 fiscal year as well as unaudited financial results for the first nine months through December 31, 2001 of its fiscal year ending March 31, 2002. The Company also admitted that, due to the irregularities and likely restatement, Corrpro will be in default under the financial covenants of its senior secured credit agreement and its senior note facility. Upon default, Corrpro's lenders may accelerate repayment of principal which could have a material adverse impact on the Company's liquidity, its financial position and/or its ability to operate as a going concern. The Company also announced that it had replaced its CFO, the fourth CFO the Company had employed in the past three years.