HPL Technologies Inc. ("HPL " or the Company) is a software company. Its products enhance production in the semiconductor industry.

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 a series of material misrepresentations to the market during the Class Period, thereby artificially inflating the price of HPL securities. The Complaint alleges that throughout the Class Period, Defendants engaged in a massive fraud to, among other things, inflate HPL's revenues. The Complaint alleges that Defendant made a series of misleading statement starting on July, 31, 2001. The Complaint alleges that the press releases dated August 17, 2001, October 24, 2001, January 29, 2002, and May 9, 2002 were materially false and misleading. The Complaint alleges that the Company's Form 10-Qs for the first quarters ended June 30, 2001; September 30, 2001; and December 31, 2001 were materially false and misleading. In addition, the Complaint alleges that the Company's Form 10-K for the fiscal year ended March 31, 2002 was materially false and misleading. The Complaint alleges that each of these above referenced press releases and SEC filings materially misrepresented HPL's revenues and growth as ultimately admitted on July 19, 2002, the day the HPL announced that it had initiated an investigation into accounting irregularities. Finally, HPL announced that it had uncovered a massive accounting fraud involving "fictitious transactions" and "falsified documents." The Company said that what was reported as cash on its balance sheet "is not now, and may never have been in the Company's possession." HPL further reported that, "at least $11 million of the $13.7 million in revenue reported in the quarter ended March 31 was based on fake transactions with the Company's Japanese distributor, Canon Sales, Co." The Company said that it will restate financial results for fiscal 2002 and may restate for fiscal 2001. The Company also announced that it has fired it CEO and Chairman; Defendant David Lepejian, who apparently was a "central player" in the fraud. As a result of Defendants' materially false and misleading statements, the price of HDL common stock was inflated throughout the Class Period.

HPL has also settled its litigation in connection with the acquisition of Covalar Technologies Group, Inc. filed in Texas State Court and the acquisition of FabCentric, Inc. filed in California State Court, both of which were contingent upon the final approval of the federal securities class action litigation. The total cost to the Company in settling all of its litigation in connection with its financial restatement, previously announced on July 19, 2002, is the issuance of approximately 9,665,000 new common shares. All cash payments to be made in the settlements are being funded by directors' and officers' liability insurance.

According to a press release dated July 2, 2004, agreements in principle were reached to settle the consolidated federal securities class action pending in the United States District Court for the Northern District of California and a separate lawsuit brought in Texas state court by former shareholders of Covalar Technologies Group, Inc. Final settlement of these matters is contingent on certain conditions, including execution of formal settlement stipulations and court approval. Under the terms of the settlements, HPL expects to issue 7 million new shares of its common stock.

According to a press release dated March 14, 2005, HPL announced that the United States District Court for the Northern District of California on March 11, 2005, approved the settlement of the securities class action pending against HPL and other Defendants.