FARO Technologies, Inc. is a world market leader in portable computer-aided measurement arms and laser tracker sales.

The original Complaint alleges Defendants violated federal securities laws by issuing a series of materially false statements. Specifically, FARO repeatedly issued false and misleading quarterly and annualized financial guidance throughout the Class Period knowing of the deficient and defective state of one or more of its controls and systems, with an adverse impact on its inventory accounting, order fulfillment and financial statements. It is further alleged that even though Defendants quietly placed a resource management system into operation, Defendants continued to conceal their deficient and defective controls and practices, causing the newly implemented system to supply false and erroneous information to the Company's departments and functions, with a continued direct, adverse impact on order fulfillment and corporate earnings.

The complaint further alleges that on or around November 3, 2005, FARO announced its third quarter of 2005 financial results. The results revealed that FARO had incurred a pre-tax $1.6 million adjustment cost for inventory costing and consumption variances related to the implementation of a new enterprise resource planning ("ERP") system and that FARO had not met growth targets. On this news, the price of FARO stock plummeted $5.88, from its closing price of $22.38 on November 3, 2005, to finally close on November 7, 2005, at $16.50, for a two-day loss of 26.38%.

According to the Company’s FORM 10-Q for the quarterly period ended September 30, 2006, on December 6, 2005, the first of four essentially identical class action securities fraud lawsuits were filed against the Company and certain officers of the Company. On April 19, 2006, the four lawsuits were consolidated, and Kornitzer Capital Management, Inc. was appointed as the lead Plaintiff. On May 16, 2006, Kornitzer filed its Consolidated Amended Class Action Complaint against the Company and the individual Defendants. The amended complaint also names Grant Thornton LLP, the Company’s independent registered public accounting firm, as an additional Defendant. The Company filed a Motion to Dismiss the amended complaint on July 31, 2006. On August 30, 2006, Kornitzer filed its memorandum in opposition to the Company’s Motion to Dismiss. On September 15, 2006, the parties’ counsel presented oral argument on the Motion to Dismiss to the court. The court has not ruled on the Motion to Dismiss.

In a press release dated February 8, 2007, FARO announced that the U.S. District Court for the Middle District of Florida has dismissed a class action securities fraud complaint filed against the Company, with leave to file an amended Complaint. On January 12, 2007, a U.S. magistrate judge issued a Report and Recommendation that the Complaint be dismissed, as against all Defendants, with leave to re-plead. As to FARO and the individual Defendants, the Report and Recommendation primarily was based on the magistrate judge's findings that the Complaint failed to adequately allege: (i) scienter (i.e., intentionally fraudulent or severely reckless conduct) with respect to certain claims; and (ii) that certain supposed misrepresentations or omissions actually caused economic loss. On February 3, 2007, the Court adopted the Report and Recommendation, and set a February 22, 2007 deadline for the Plaintiff to file a Second Amended Complaint to attempt to state claims "in a fashion sufficient to establish each claim".

On February 22, 2007, the Plaintiff filed a Consolidated Second Amended Class Action Complaint. The Defendants responded by filing motions to dismiss the Consolidated Second Amended Class Action Complaint.

In a press release dated August 8, 2007, FARO announced that a U.S. Magistrate judge for the Middle District of Florida issued a Report and Recommendation to the U.S. District Court for the Middle District of Florida to enter an order denying FARO's and certain FARO officer's Motion to Dismiss the second amended consolidated securities class action complaint filed against FARO and certain FARO officers. The U.S. District Court has not yet ruled on the Report and Recommendation or the Motion to Dismiss.

On September 18, 2007, the Court issued the Order adopting the August 7, 2007 Report and Recommendation. According to the Order, the FARO Defendants’ Motion to Dismiss the Consolidated Second Amended Class Action Complaint, filed on May 11, 2007, is denied. Defendant Grant Thornton LLP’s Motion to Dismiss Consolidated Second Amended Class Action Complaint With Prejudice, filed on May 11, 2007, is granted.

According to a press release dated February 26, 2008, FARO announced that it has entered into a Memorandum of Understanding to settle the consolidated class action securities fraud lawsuit pending against FARO and certain of its current and former officers and directors in the United States District Court for the Middle District of Florida (the "Securities Litigation"). Pursuant to the Memorandum of Understanding, which is subject to certain conditions, the issuer of the Company's directors and officers insurance policy will pay $6.875 million into a settlement fund that will be distributed to members of a class of all persons who purchased the Company's common stock from April 15, 2004 through March 15, 2006 and to the lead Plaintiff's counsel and also will be used to pay various costs. The Memorandum of Understanding provides that the parties to the Securities Litigation will file with the court a Stipulation and Agreement of Settlement seeking the court's preliminary and final approval of the terms of the proposed settlement. If the Court approves the settlement, a judgment will be entered dismissing the Securities Litigation, with prejudice, as against each Defendant.

A press release dated on July 14, 2008 stated that FARO has settled for $6,875,000 due to its securities fraud class action lawsuit filed in the U.S. District Court for the Middle District Court of Florida. A hearing was held before the Honorable Judge Anne C. Conway, of United States District Court for the Middle District of Florida, at 9:00 a.m., on October 3, 2008, to determine whether the proposed settlement and the Plan of Allocation of settlement proceeds should be approved as fair, reasonable, and adequate, to consider the application of Plaintiffs' counsel for attorneys' fees and reimbursement of expenses, and to consider the application for reimbursement of expenses of the lead Plaintiff.