Tokos Medical to Settle Suit by Shareholders for $10 Million

Tokos Medical Corp. said Tuesday it has agreed to pay $10 million in cash and stock to settle a shareholders’ lawsuit.

The company, which provides home care for women with high-risk pregnancies, accounted for part of the settlement by taking a $4.3-million charge against its earnings in the second quarter. Tokos previously had set aside reserves for a possible settlement.

The federal district court in Santa Ana must approve the settlement.

Plaintiffs in the class-action lawsuit had bought stock from March, 1990, when the company went public, to March, 1993. They alleged that the company and certain officers committed fraud and violated federal securities laws by making false and misleading statements about the firm’s operations and results. In settling the suit, the company and its officers admitted no wrongdoing.

The company also said Tuesday that it lost $6.3 million, or 36 cents a share, in the second quarter, compared with a loss of $306,000, or 2 cents a share, in the same period last year. In addition to the lawsuit-settlement charge, the company wrote off $530,000, or 3 cents a share, for costs associated with a cost-cutting program.

Second-quarter revenue dropped 16% to $22.1 million from $26.4 million.

Officials attributed the drop to waning sales of its services for high-risk pregnancies through physicians’ offices. Meanwhile, the company is trying to build a broader line of services for women with normal pregnancies and new babies to be sold through managed-care organizations.

In the first six months, Tokos reported a loss of $8.7 million, or 50 cents a share, versus a loss of $2.5 million, or 14 cents a share, a year ago. Revenue dropped 11% to $45.9 million, from $51.4 million.