The parties have reached a tentative $1 million settlement of several class actions filed against Internet gambling operation Gaming Lottery Corporation (GLC) and certain of its officers and directors by stockholders who purchased the company's common stock, or the common stock of Laser Friendly, Inc. between February 1, 1995, and May 24, 1996. The actions claim that the defendants violated federal securities laws by issuing a series of material misrepresentations to the market over this time period, thereby artificially inflating the price of the company's securities. To recover under the settlement, a completed proof of claim postmarked no later than February 14, 2004, must be mailed to the claims administrator.

In 1995 and 1996, GLC was an Ontario corporation that manufactured and supplied products for the lottery, pari-mutuel, bingo, and charitable gaming markets, operating through subsidiaries in Ontario and the United States and its stock was traded on the Toronto Stock Exchange and on the NASDAQ National Market. GLC was known as Laser Friendly until July 1995. Lottery supply companies are subject to rigorous regulation by various state gaming commissions. On February 1, 1995, GLC’s predecessor, Laser Friendly, announced that it had completed the acquisition of Special Manufacturing Inc., subject to receipt of regulatory approval for the requisite gaming licenses.

The defendants allegedly issued a series of false and misleading statements that led investors to believe that GLC had received Washington State Gambling Commission approval to acquire the Special Manufacturing gaming business in Bellevue, Washington. The action alleges that GLC was not able to obtain regulatory approval to operate or acquire Specialty Manufacturing because it failed to identify the individual investors in the investment funds that had purchased stock in GLC private placements that were the source of funding for that acquisition and another acquisition. The stockholders also allege that GLC illegally acquired and secretly operated Specialty Manufacturing, notwithstanding the lack of Washington State Gambling Commission approval, and improperly consolidated Specialty Manufacturing’s operating results in GLC’s publicly reported financial statements resulting in an overstatement of its financial condition.

The action goes on to allege that the defendants made materially false and misleading statements concerning a subsequent proposed acquisition of Trade Products, Inc., also a Washington State gaming company, in that they failed to disclose that the Specialty Manufacturing acquisition had not yet been approved by the Washington State Gambling Commission, and that approval had been placed in jeopardy by their alleged unlawful operation of Specialty Manufacturing and issues relating to the source of funds for the acquisitions. On April 2, 1996, GLC announced that it planned to divest itself of all of its subsidiaries engaged in the manufacturing of lottery tickets and related paper-based gaming businesses. Thereafter, in April 1996, the Washington State Gambling Commission commenced proceedings that enjoined GLC’s allegedly unlawful operation of Specialty Manufacturing. On May 23, 1996, GLC released a first quarter 1997 financial statement that excluded the revenue of its paper-based subsidiaries because of its previously announced intent to divest itself of those businesses.

The settlement will not be effective until the court grants it final approval. The court has scheduled a hearing on the matter for February 4, 2004.