Lancer Corporation is a manufacturer and seller of beverage dispensing products.

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. Specifically, the Complaint alleges that during the Class Period, Defendants engaged in a pattern of fraudulent conduct involving the issuance of a series of false and misleading statements. The Complaint additionally alleges that these statements were materially false and misleading because they materially described inaccurately the nature of Lancer's revenue by saying it was derived from legitimate business transactions, when in reality, substantial revenues were derived as a result of a scheme to artificially set the sales prices of Lancer's products to its customers. The goal of the scheme, the Complaint further asserts, was to manipulate the sales of fountain products. In addition, the Complaint alleges that Lancer's public statements failed to fully reveal that it had major manufacturing problems, which resulted in a high defect rate in its products. Lastly, the Complaint alleges that Lancer engaged in a fraudulent scheme with its largest customer, Coca-Cola Co. to artificially create demand for a new line of soda machine dispensers that Lancer was manufacturing for Coca-Cola to sell to its commercial customers.

Further, on January 14, 2004, Lancer announced that the Securities & Exchange Commission had launched a formal investigation into Lancer's reporting of its financial statements, revenue and cost recognition, and internal financial and accounting controls. On February 2, 2004, Lancer announced that the Company's long-standing auditor KPMG LLP had resigned. Lancer also disclosed that KPMG indicated that the reason for its resignation was that Lancer had not taken timely and appropriate remedial actions with respect to "likely illegal acts." KPMG's comments were in stark contrast to Lancer's statements on January 30, 2004, that its audit committee did not find sufficient evidence of "intentional misconduct" or "accounting irregularities." Trading of Lancer shares was halted February 2, 2004. When trading resumes, it is virtually certain that Lancer common stock will trade far below the $7.50 trading price at which it was halted. However, on July 15, 2004, the Plaintiffs voluntarily dismissed the lawsuit, without prejudice, and the case was closed.