The action alleges that the defendants made material misrepresentations, or omitted to make material disclosures, during this time period concerning the efficacy, testing and market acceptance of OssaTron, the company's leading product for the treatment of heel pain. Among other things, the action charges, the defendants failed to disclose that some of the company's own tests failed to support the defendants' statements that OssaTron was more effective, safer and less costly than alternative, non-surgical treatments for heel pain.

In addition, the action alleges that the defendants misrepresented the market acceptance of OssaTron because the defendants knew, or were severely reckless in disregarding, that serious questions existed among the medical community concerning the effectiveness of extracorporeal shock wave treatment (ESWT) for heel pain, which in turn raised serious issues as to whether insurance carriers and other third-party payors would cover OssaTron procedures.

As a result, and because the company was experiencing difficulty in its billing and collection department, which further made insurance reimbursement difficult to obtain, the action claims, the company's January 28, 2003, earnings projections lacked any reasonable basis in fact when made.

When the defendants finally acknowledged that the OssaTron product was not being absorbed by the market as they had previously claimed, the market's reaction to the disclosures was swift and severe. On July 28, 2003, the market price of HealthTronics common stock tumbled over 26% in unusually heavy trading. Indeed, the price of HealthTronics common stock dropped from a high of $17.60 per share during this time period to as low as $7.76 per share on July 28, 2003.