According to a press release dated November 15, 2007, the company announced that it reached a settlement in principle with the plaintiffs in the securities law class action litigation pending in the U.S. District Court for the District of Connecticut, In Re Flight Safety Technologies, Inc. Securities Litigation, Civil Action No. 3:04-CV-1175 (CFD). Under the terms of the agreement in principle, all claims against all of the defendants will be dismissed without presumption or admission of liability or wrongdoing. A one time settlement payment of $1.2 million will be made to the plaintiff class by or on behalf of the defendants. The company has agreed to contribute $135,000 of the $1.2 million settlement. The settlement is subject to a number of conditions, including negotiation and execution of appropriate settlement documents between the parties, preliminary and final court approval and other factors.
On October 19, 2005, the Court entered the Order signed by U.S. District Judge Christopher F. Droney appointing lead plaintiffs and lead counsel. On December 23, 2005, a Consolidated Amended Complaint was filed. The defendants responded by filing a motion to dismiss the Consolidated Amended Complaint on February 28, 2006. As of August 2, 2007 the judge has not ruled of the pending motions.
The original complaint charges that Flight Safety and certain of its officers and directors violated Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934, and state common laws by making a series of materially false and misleading statements concerning the SOCRATES Wake Vortex Detector.
More specifically, the complaint alleges that defendants issued materially false and misleading statements throughout the Class Period that had the effect of artificially inflating the market price of the Company's securities. The statements made by the defendants during the class period were materially false and misleading because they failed to disclose and misrepresented the following adverse facts: (i) the technology behind the proprietary Socrates product had long been in the research and development stage and at no time during the Class Period was there an adequate basis for concluding that the technology was any closer to viability than it had been in the past; (ii) prior tests of the Socrates technology, including the "proof of principle" test conducted by the Volpe Center, a research division of the U.S. Department of Transportation, at the JFK airport in 1998 found that the results of the Socrates were unsuccessful. No subsequent advancement in Socrates technology or related study has demonstrated that the findings in the Volpe report still do not hold true today. It is telling that Congress has funded the Socrates research against the advice of the FAA and NASA; (iii) there is no clea! r demand or market that exists now, or that is foreseeable, for the Socrates technology. Whether there is such a need for such a sensor is still undetermined by the FAA; (iv) even if Socrates had potential to be viable, the product and Company face significant competition from other, better understood sensors; and (v) Socrates is unlikely ever to be a viable commercial product given its unreliability, lack of development progress and competing technologies.