aaiPharma, Inc. is a specialty pharmaceutical development company.

The original Complaint charges aaiPharma and certain of its officers with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder. Specifically, the Complaint alleges that throughout the Class Period, Defendants issued numerous statements to the market concerning the Company's financial results, which failed to disclose and/or misrepresented the following adverse facts, among others: (1) that the Company's core business plan was deteriorating; (2) that the Company was unloading inventory onto wholesalers in order to make sales; (3) that the aforementioned practice was necessary because the Company needed to keep its stock price up in order to fend off a third party suitor; (4) that the Company was improperly recognizing revenue, in violation of Generally Accepted Accounting Principles ("GAAP"), from sales that were not complete; and (5) as a result, the Company's financial results were materially inflated at all relevant times.

The Complaint further alleges that on February 5, 2004, aaiPharma announced that the Company expected net revenues to be between $340 million and $355 million for 2004. Diluted earnings per share for 2004 were expected to remain, as previously disclosed, between $1.45 and $1.52. Based on current trends, milestones achieved and other developments, the Company expected to generate earnings of $0.27 to $0.30 per diluted share during the first quarter of 2004. Additionally, the Company announced that it was setting aside money to pay for refunds on older medicines after an unusually high return rate in the fourth quarter. On news of this, shares of aaiPharma fell 23 percent, or $6.36 per share to close at $21.24 per share on extremely heavy volume.

Note: According to a press release dated February 24, 2004, the class period for the first Complaint filed was expanded to include purchases of aaiPharma’s securities from April 24, 2002 through February 4, 2004, inclusive.

According to a press release dated March 1, 2004, since filing the suit, aaiPharma has appointed an independent committee to investigate what the Company has now admitted were 'sales abnormalities in the Company's Brethine(R) and Darvoct(tm) product lines during the second half of 2003.'

As disclosed by the Company’s FORM 10-Q for the quarterly period ended September 30, 2005, the Company, certain of its current and former officers and directors, and its former independent registered public accountants have been named as Defendants in purported stockholder class action lawsuits alleging violations of federal securities laws. These lawsuits were filed beginning in February 2004 and were pending in the U.S. District Court for the Eastern District of North Carolina. By order dated April 16, 2004, the district court consolidated the securities lawsuits into one consolidated action, and on February 11, 2005 the Plaintiffs filed a consolidated amended Complaint. The amended securities Complaint asserts claims arising under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 there under on behalf of a class of purchasers of the Company’s common stock during the period from April 24, 2002 through and including June 15, 2004 (the “Class Period”). The securities Complaints allege generally that the Defendants knowingly or recklessly made false or misleading statements during the Class Period concerning the Company’s financial condition and that the Company’s financial statements did not present its true financial condition and were not prepared in accordance with generally accepted accounting principles. The amended securities Complaint seeks certification as a class action, unspecified compensatory damages, attorneys’ fees and costs, and other relief. The Company's response was originally due by May 26, 2005. However, this case has been automatically stayed as a result of the commencement of the Chapter 11 Cases. No discovery occurred in this case. No trial date was set in this litigation. The Company believes that the claims asserted in the securities litigation are subject to subordination under section 510(b) of the Bankruptcy Code, and as such, the Plan treats these claims as “Old Equity Interests,” as defined in the Plan, which receive no distributions.

On August 30, 2006, an Amended Stipulation Settlement Agreement was filed to settle the ERISA claims with the individual Defendants. That day, the Court entered the Order and Final Judgment settling those claims.

According to the docket, Judge Dever submitted an order granting preliminary approval of a partial settlement in the case. The "Directors & Officers" pleading group have agreed to pay $7,550,000 into a settlement fund. Due to aaiPharma's bankruptcy filing in May 2005, the Company is no longer a party in the case. This class action is still pending against third party Defendant Ernst & Young, who refiled their motions to dismiss once the settlement was approved.

In a press release dated July 25, 2007, a hearing was scheduled for October 2, 2007 before the Honorable James C. Dever III, United States District Judge, at the Alton Lennon Federal Building in Wilmington, North Carolina, for the purpose of determining: (1) whether the proposed partial settlement of the claims in the Litigation against the Settling Defendants for the sum of $7,550,000 in cash, plus accrued interest, should be approved by the Court as fair, just, reasonable, and adequate.

On October 2, 1007, the Court entered the Partial Final Judgment and Order of Dismissal with Prejudice signed by U.S. District Judge James C. Dever III. According to the Order, the Court hereby approves the settlement set forth in the Stipulation of Partial Settlement and finds that said settlement is, in all respects, fair, reasonable, and adequate to the Class and each of the Settling Parties. The Court hereby dismisses, as to the Settling Defendants. The Court finds that the Plan of Allocation set forth in the Notice of Pendency and Proposed Partial Settlement of Class Action is fair and reasonable and the Court hereby approves the Plan of Allocation. The Court awards lead Counsel attorneys' fees of 30% of the Settlement Fund and awards reimbursement of expenses in an aggregate amount of $233,168.26 to be paid from the Settlement Fund.

According to an article dated November 13, 2007, Judge James Denver III tossed Ernst & Young LLP from the mostly settled suit last Tuesday, almost three years after the firm was named as a Defendant in the amended class action in eastern North Carolina and almost two years after it asked to be dismissed. He didn't allow the Plaintiffs, led by SEIU Pension Plans Master Trust, to amend their Complaint, and he confirmed his order with a Friday judgment.