According to the Notice of Pendency and Proposed Settlement date January 26, 2007, the settlement is in the amount of $5.7 million. The settlement hearing is set for May 7, 2007, at 10:00 AM before Judge Susan R. Bolton.
On August 18, 2006, a notice of settlement was filed by all parties, and on October 6, 2006, a Stipulation of Settlement was filed. On December 16, 2006, the Court entered the Order Preliminarily Approving Settlement and Providing for Notice.
As disclosed by the Company’s Form 10-Q for the quarterly period ended July 1, 2006, on July 22, 2004, July 29, 2004, August 6, 2004 and August 20, 2004, shareholder class action lawsuits entitled McJimsey v. White Electronic Designs Corporation, et al. (Case No. CV04-1499-PHX-SRB), Afework v. White Electronic Designs Corporation, et al (Case No. CV04-1558-PHX-JWS), Anders v. White Electronic Designs Corporation, et al. (Case No. CV04-1632-PHX-JAT), and Sammarco v. White Electronic Designs Corporation, et al. (Case No. CV04-1744-PHX-EHC), respectively, were filed in the United States District Court for the District of Arizona against the Company and certain of its current and former officers and directors (the “defendants”). The actions were consolidated and the Wayne County Employees’ Retirement System was appointed as lead plaintiff. A consolidated complaint was filed on or about February 14, 2005. The defendants’ motions to dismiss that complaint were granted on February 14, 2006. The plaintiffs filed an amended complaint on April 17, 2006 (the “Complaint”). Like the dismissed complaint, the new Complaint alleges, among other things, that between January 23, 2003 and June 9, 2004, the Company made false and misleading statements concerning its financial results and business, and issued a misleading registration statement and prospectus in connection with the Company’s July 2003 secondary offering. The Complaint seeks unspecified monetary damages. Defendants filed a motion to dismiss the new Complaint in June 2006. The plaintiffs’ response to the motion is due in August 2006.
The original complaint charges White Electronic and certain of its officers and directors with violations of the Securities Exchange Act of 1934. White Electronic provides semiconductor products for the wired and wireless communication industry. The Company’s products include high density memory products and multi-chip modules for data communications providers. White Electronic also designs and manufactures flat panel displays for commercial and military aircrafts and ordnance delivery systems.
The complaint alleges that during the Class Period, defendants issued materially false and misleading statements regarding White Electronic’s increasing revenues and long-term growth prospects. In truth and in fact, however, defendants knew or recklessly disregarded that White Electronic’s increasing revenues and earnings could not be sustained and that orders for sales of the Company’s microelectronic products for use in military weapons and procurement programs had been declining since at least the second quarter of fiscal 2003. Defendants failed to disclose that the declines marked a long-term change in priorities by the U.S. military following the build-up of orders prior to the armed conflict in Iraq.
On June 9, 2004, White Electronic issued a press release announcing its forecast for the third quarter of fiscal 2004, the period ending July 3, 2004. The Company announced that it expected net sales to be between 25 million, far short of analysts’ consensus estimates of approximately $30 million in net sales for the third quarter 2004. Following this news, the Company’s stock plummeted 83 cents or 13.9% to $5.16 per share, on extremely heavy trading volume.