A lawsuit has been commenced in the United States District Court for the Northern District of California on behalf of those persons who acquired the common stock of Hybrid Networks, Inc. (NASDAQ:HYBR) ("Hybrid" or the "Company") between November 12, 1997 and June 17, 1998 (the "Class Period"), including those persons who acquired Hybrid stock in connection with the Company's November 1997 initial public offering (the "IPO").

The action charges Hybrid, certain of Hybrid's officers and directors, and Hybrid's investment bankers with violating the federal securities laws. Specifically, the price of Hybrid's stock following the IPO shot up to more than $24 per share based on defendants' assurances of, among other things, continued strong revenue growth. Hybrid was not in fact generating any real revenue growth, but was instead shipping product and booking sales on orders for which the Company knew it could not or would not collect.

Six months after the IPO, Hybrid was forced to admit that it was unable to file its Report on Form 10-Q for Q1 FY98 due to an ongoing review of the effects of "continuing accounts receivable collection and product return issues." Hybrid further announced shortly thereafter that its CFO resigned and also admitted that actual sales for Q1 FY98 were overstated by 350%, while Hybrid's losses were understated by 30%. These revelations caused the price of Hybrid's stock to drop to approximately $3-1/2 per share, a decline of 85% from its post-IPO high.

On June 18, 1998, Hybrid also announced that its independent auditors notified the Company that the auditors' reports with respect to Hybrid's financial statements as of December 31, 1997 and for the year then ended, should no longer be relied upon and that the auditors' consent included with the Company's Registration Statement on Form S-4, filed with the SEC on May 7, 1998 in connection with Hybrid's pending acquisition of Pacific Monolithics, Inc., was being withdrawn. NASDAQ halted trading on Hybrid's stock following this announcement.

If you purchased during the class period, you are automatically a class member and you need do nothing further at this time to protect your rights. If and when the Court awards any compensation based on damages to the class, notice will be given to the class, at which point you will be given the option to opt out of the award or participate in the award. If you choose to participate in the award, any compensation awarded will be divided among the members of the class under court supervision and on a proportionate basis determined by the loss incurred by each class member.
If you did not purchase or otherwise acquire stock during the class period, but simply held the stock, you are not eligible to participate in the suit. Also excluded from the class are the defendants, officers and directors of the company, members of their immediate families and their legal representatives, heirs, successors or assigns and any entity in which any defendant has or had a controlling interest.

Update

This case has been settled. The Claims Administrator for this litigation is Gilardi & Co. LLC. The deadline for submitting a proof of claim was August 16, 2002. If you would like further information about the settlement or would like to download a copy of the Notice of Pendency and Settlement of Class Action and Settlement Hearing, please go to www.gilardi.com or call (415) 461-0410.

If you have any further questions, please feel free to contact us.