Concord EYE-Q 3040 AF
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Concord EYE-Q 3040 Af - Frequently Asked Questions Digital Camera, size: 22 KB
Concord EYE-Q 3040 Af Instruction Manual
Concord EYE-Q 3040 AF
User reviews and opinions
|uddunderline||12:36am on Monday, October 18th, 2010|
|I purchased this camera for my 6 year old son. He has been taking pictures since he was 4 and I thought it would be a great X-mas gift.|
|ciaran_mcgloin||2:56am on Monday, September 6th, 2010|
|Awesome At 1st when i saw bought this camera i was not too excited because i thought it might not give out good pictures. First Review I bought this camera mainly for the price and 3.1MP although i could find no review comments on this as i searched the entire net. First Review I bought this camera for the price, even though i could find no review comments and i searched the entire web. Well here are my findings.|
|mcdragon||4:19pm on Friday, June 25th, 2010|
|Not happy with camera I bought this camera about 6 months a go. Within 2 hours of purchasing it, I was already taking pictures with it. My friend.|
|BOFH||11:34pm on Saturday, May 15th, 2010|
|3.1 megapixelsnice small sizeOnly takes 2 AA batteries Indoor picture quality poorSwitching to VIEW to see or edit a picture|
Comments posted on www.ps2netdrivers.net are solely the views and opinions of the people posting them and do not necessarily reflect the views or opinions of us.
English Franais Espaol Deutsch Italiano RETURN
Language(s) English / Espaol / Franais / Deutsch / Italiano Nederlands /
TV Option NTSC PAL PAL
TURNING THE LCD/ICONS ON AND OFF
The camera has a 1.6 LCD which can frame subjects for image and video clip capture, review stored images and video clips and to display the current camera settings.
1. Use the ( follows:
) button to toggle the LCD mode. The LCD mode changes each time the button is pressed as
LCD off LCD on with icons
Note: In order to save battery power, you may turn off the LCD display, or LCD will be automatically turned off after one minute of inactivity.
Internal Memory The camera is equipped with 7MB of internal memory, which can be used right away.
Status Memory card is not inserted. Memory card is inserted.
Memory in Use Internal Memory Memory Card
NOTE!: When the memory card is inserted, the images and video clips stored in the internal memory will be transferred automatically onto the memory card. Please insert a memory card with 7MB or greater of available memory.
Inserting the Memory Card In addition to having a 7MB internal memory, the camera can use Secure Digital (SD) memory cards to store images and video clips.
1. Open the Battery/Memory Card door. Slide the door in the direction of the arrow marked on it, and lift it open. (fig.1.1) 2. Insert the memory card as indicated by the diagram. (fig.1.2) Please insert the card in straight, not on an angle. 3. Shut the Battery/Memory Card door by sliding it in the opposite direction of the arrow marked on it, and close it securely. (fig.1.3) To eject the card, push the card in and release, then pull it out.
Note: The camera can support SD cards up to 512 MB.
If the memory card or internal memory is corrupted, the memory needs to be formatted. (p.28)
INTERNAL MEMORY/INSERTING THE MEMORY CARD
SETTING THE CAMERAS OPERATIONAL MODE
The camera has 3 operational modes Camera Mode, Review Mode and Video Clip Mode. 1. To change the camera operational mode, slide the mode switch horizontally to the corresponding position.
Camera Mode Use the camera mode setting to take pictures or to customize your camera settings for picture taking.
003/016 003/016 003/016
CAPTURE MODE Q QUALITY SETUP IMAGE SIZE SCENE SELECTION WHITE BALANCE A RETURN SELECT
CAPTURE MODE 003/016
SINGLE SHOT SELF-TIMER
Taking a picture with the LCD: 1. Set the camera to ( ) camera mode and make sure the Macro Switch is set to the ( ) Distant Mode located on the front of the camera. 2. Frame the subject in the LCD. 3. Press the shutter button half-way to activate the auto-focus lock until the green AF LED lights up. (fig.1.1) The camera will focus the lens at different distances to find the correct focus range, and you will hear a rapid click sound from the camera. 4. Press the shutter button fully to capture the image. (fig.1.2) A The camera will beep when the image is captured if sound is activated. The camera will make a click sound. When the image has been captured, the Flash Ready LED next to the viewfinder will blink to indicate that the image is being stored. A preview of the image will be displayed on the LCD for 1 second and the picture counter number displayed in the LCD will be updated.
This feature can be used to freeze the focus when the subject is not located in the center of the picture at ( ) Distant Mode. To use the focus lock: 1. Position the subject in the center of the red frame located in the LCD. (fig.1.3) 2. Press the shutter button halfway until the green Auto Focus LED lights up. (fig.1.4)
Auto Focus LED Status Blinking (fig.1.5) Steady (fig.1.6)
Description The camera is setting the focus. The subject is in focus.
3. Recompose your picture. (fig.1.7) Keep the shutter pressed half-way while recomposing the picture. 4. Press the shutter button fully to capture the picture. (fig.1.8)
Note: The AF LED will continue blinking in the following conditions: 1. There are several subjects at different distances within the focus lock area. Recompose the picture by moving the camera slightly. 2. There is no color contrast. Recompose the picture with a subject that contains 003/016 003/016 A A more color. 3. There is insufficient lighting. Increase the lighting in the surrounding area.
SETTING THE FLASH
AWB AWB AWB AWB AWB AWB
How to set the flash: 003/016 A 003/016 1. Press repeatedly until the desired indicator appears on the LCD.
Auto Flash Auto + Red-Eye Reduction Forced Flash Flash off
The camera judges if a flash is required. If the environment is too dark, the flash will fire. Use this mode to significantly reduce the occurrence of red- eye in flash photography. The camera will automatically detect when the flash is needed and the flash will fire after a short delay. Flash will fire in any lighting condition. The flash will not fire in this mode. Please use this mode if you want to capture the mood of the ambient lighting or to use the available light in places where flash photography is prohibited, such as museums. To prevent blurry pictures in low light situations, hold the camera steady when pressing the Shutter button or mount the camera on a tripod.
Description The camera will take 1 picture at a time. 003/016 A The camera will take a picture 10 seconds after the shutter button is released.
How to use Self-Timer: 1. In ( ) Camera Mode, press MENU to display the main menu. 2. Press to enter capture mode. 3. Press to highlight ( ) Self-Timer. 4. Press the OK button to set the ( ) Self-Timer. 5. Place the camera on a flat surface or tripod. 6. Use the LCD to compose the picture, and then press the Shutter button to activate the Self-Timer. The Self -timer LED will blink slowly for 7 seconds, faster for the remaining 3 seconds and then the image will be captured. The camera will beep when the self-timter is activated if sound is on. (P. 25) Note: The Self-Timer is automatically deactivated once the image is taken. To deactivate the Self-Timer before taking a picture, follow the steps above and highlight another option in the Capture Mode menu. Photography Hints Since the Self-Timer LED indicator on the front of the camera flashes, you have time to join in the photograph and know when the camera is done 003/016 a picture when the Self-Timer LED light stops blinking. taking 003/016 A A
This mode enables the camera to capture pictures in close distances.
MACRO MODE - CLOSE-UP SHOOTING
Setting Macro Mode: 1. The Macro Mode Switch is located in the front of the camera. Slide the Macro Mode Switch to ( the Macro mode. The Macro icon ( ) will be displayed on the LCD. Taking a picture in Macro Mode: 1. Frame the subject in the LCD. The best shooting distance is at 20 cm. (7.9 in.) Auto-focus is not available in Macro Mode. You can monitor the focus range through the LCD. 2. Press the Shutter button fully to take the picture. The camera will beep when the image is captured if sound is activated. Note: Pictures in Macro Mode taken beyond the recommended distance of 20cm (7 in) will be blurry.
) to set
A 003/016 003/016
AWB AWB AWB AWB AWB
Image Resolution determines the size of a captured image. Higher resolution images contain more details and have larger file sizes.
3 2M 1M V
IMAGE SIZE SCENE SELECTION WHITE BALANCE RETURN SELECT
2048 x x x x 384
Images Stored on 7MB memory (approx.):
3.1MP (2048 x 1536) 26
2MP (1600 x 1200) 42
1MP (1024 x 768)
Note: There is a time limit for each video clip. The time will vary depending on the amount of available memory space. The alloted amount of recording time will appear on the top right hand corner of the screen. The video clip capture will stop automatically when it reaches its time limit. Video Clip Information Resoluton: QVGA (320 x 240) Frame rate: 15fps File Format: AVI (Motion Picture) Note: The Flash Ready LED will turn red when the camera is storing the video clip. Do not open the battery door or turn the camera off while recording, or the video clip may not be stored.
Note: Higher capacity memory cards can take longer video clips. The Flash, Menu and LCD on/off buttons are deactivated in this mode. The focus and the digital zoom cannot change during recording.
REVIEWING YOUR FILES
Using Review Mode In ( ) review mode, you can review your stored pictures and video clips through the LCD. Using REVIEW mode: 1. Slide the Mode Switch towards ( ). 2. Press or to scroll through each file. The file type and frame counter will be displayed on the LCD. File Indication JPEG AVI File Type Still Picture Video Clip
Number of the total pictures/video clips Number of the current pictures/video clips
How to review a video clip: 1. In ( ) Review Mode, press and to scroll through the stored A pictures and video clips. Only the first image of the video clip is shown. 2. When a video clip (AVI) is displayed on the LCD, press the OK button to play.
press OK to view Video
28 SEC SEC 28
003/016 001/003 001/003
ENLARGING STORED PICTURES
In ( ) Review Mode, you can enlargeAWB section of your stored picture to take a closer look at the subject on a the LCD. This feature is for viewing purposes only and it will not enhance the stored picture.
How to enlarge: 1. In ( ) Review Mode, press or to scroll through the stored pictures and video clips. 2. While viewing a stored still image, press the OK button to use the "Enlargement" feature. Press the OK button again to get different magnifications in the following order.
2x Enlargement 4x Enlargement Normal Mode
3. In 2x and 4x mode, you may press Resolution 2048 x x x x 384
to navigate in the picture.
Maximum Enlargement 4x 2x 2x No zoom
REVIEWING VIDEO CLIPS
USING THE DELETE MENU
DELETE ONE DELETE ALL
Are You Sure?
DELETE FILE THUMBNAIL SETUP RETURN SELECT
RETURN SELECT YES NO
Using the Delete Menu in Review mode: 1. Turn the camera on. 2. Set the Mode Switch to ( ). 3. Press the MENU button to display the main menu. 4. Press to enter the Delete submenu. 5. To exit the menu, press. 6. Press the MENU button to return to the ( ) Main Menu.
Once a file is deleted, it cannot be recovered.
DELETE FILE THUMBNAIL SETUP
003/016 1. When Delete File is highlighted, press to enter the Delete File submenu. A 2. In the Delete File menu, press when Delete One is highlighted. 3. The next screen will display the stored pictures and video clips as thumbnails. Press , , , to highlight the file you want to delete. AWB 4. Press the OK button to select. 5. The next screen will read "Are You Sure?" press or to highlight No or Yes. 6. Press the OK button to select. 001/003 If No is selected, no change will be made, and you will return003/016 001/003 to the Delete 28 SEC A 003/016 A A One thumbnail view. If Yes is selected, the selected file will be deleted. Press the Menu button to exit Delete Mode.
DELETING YOUR FILES
Once all files are deleted, they cannot be recovered.
DELETE 001/003 FILE
How to delete all files: AWB 003/016 003/016 A A A A AWB 1. Press when Delete File is highlighted to enter the Delete File submenu. 003/016 A 2. In the Delete File menu, press when Delete All is highlighted. 3. The next screen will read "DELETE ALL?" press or to highlight No or Yes. AWB AWB AWB AWB 4. Press the OK button to select. AWB If No is selected, no change will be made, and you will return to the Delete File Menu. If Yes is selected, the next screen will read, "Are you sure?" 003/016 003/016 A A 5. Press 28 SEC to select No or Yes. Press 001/003 to select. OK 001/003 If No is selected, no change will be made, and you will return to the Delete File Menu. If Yes is selected, ALL FILES will be deleted.
USING THUMBNAIL MODE
How to view your files: 003/016 003/016 003/016 003/016 A A 1. When the thumbnail menu is highlighted in the ( ) Review Mode, press button to have nine thumbnail images or video clips appear at once on the LCD display. 2. Press to highlight a picture or video clip. When the Navigation Arrow Button is pressed up in the top row of thumbnails, the previous 9 files will be AWB AWB AWB AWB displayed When the Navigation Arrow Button is pressed down in the bottom row of thumbnails, the next 9 files will be displayed. 3. Press the OK button to view the enlarged picture or video clip.
003/016 003/016 003/016 003/016
CUSTOMIZING THE CAMERA SETTINGS
SET AUTO OFF TIME
2 MIN 3 MIN
SET AUTO OFF TIME TV OPTION LANGUAGE OPTION RESTORE DEFAULT LCD BRIGHTNESS RETURN SELECT
NTSC P PAL
RETURN RETURN SELECT
FORMAT SOUND CAMERA INFO
LCD BRIGHTNESS SETUP
FW REV: FW P/N DATE: COMMENT: RETURN 1.0.8 P 2F0062-01 10/10/03 RS
Using the Setup menu: 1. Turn the camera on. 2. Set the mode switch to ( ) or ( ). 3. Press the MENU button to display the main menu. 4. Press until Setup is highlighted. 5. Press to enter the Setup submenu. 6. In the Setup menu, press to highlight the option you wish to customize. 7. Press to enter the submenu of the highlighted option. 8. Use the Navigation Arrow Buttons to adjust the setting and press the OK button to select. The camera will beep when you press the OK button for feature selection if sound is on. 9. Press to return to the previous menu OR press the MENU button to exit.
Setup Menu and Features
Setup Setting Set Auto Off Time TV Option Language Option
Options 2min. 3min. NTSC, PAL English, Franais, Espaol, Deutsch, Italiano, Nederlands, ,
Description This feature enables the camera to automatically turn off when it is idle. Sets the mode the camera needs to adapt to your TV. (Page 43) Sets the language in your camera. (Page.27)
Restore Default LCD Brightness Format Sound
Sets all camera settings to the factory default. (Page 29) Sets the LCD brightness level. (Page 27)
Formats the internal memory or the memory card by deleting all files. (Page 28) The camera will beep when you press the shutter button for shooting, or the OK button for feature selection through menu navigation. (Page 25) Displays the camera version information. This is for information purposes only.
FW Version FW Part No. Date Comment
CUSTOMIZING THE CAMERA SETTINGS CUSTOMIZING
SETTING THE AUTO OFF TIME
EV COMPENSATIION SETUP
Notes: The default setting is 1 minute for LCD off (cannot be changed) and 2 minutes for camera off to conserve battery power. Turn the camera back on by pressing the Power Button or the Shutter Button.
To set the Language: 1. In the Setup menu, press until Language is highlighted. 2. Press to enter the Language submenu. 3. Press to highlight the desired language. 4. Press the OK button to set.
SETTING THE LCD BRIGHTNESS
How to set the LCD Brightness: 1. In the Setup menu, press until LCD Brightness is highlighted. 2. Press to display the LCD Brightness bar on the LCD. 3. Press / to adjust the brightness. 4. Press the OK button to select. The camera will return to picture taking mode or review mode.
1. Formatting deletes all pictures and video clips from the memory. 2. Removing the card during formatting may damage the card. 3. Selecting the formatting feature while there is no memory card in the camera, will cause the internal memory to format. All pictures and video clips on the internal memory will be lost.
1. 2. 3. 4.
In the Setup menu, press until Format is highlighted. Press to enter the Format submenu. Press to highlight No or Yes. Press the OK button to select. If No is selected, no change will be made, and you will return to the Main Menu. If Yes is selected, ALL FILES will be deleted.
Note: If MEMORY ERROR! is displayed on the LCD screen, this indicates that the internal memory or the memory card is corrupted. Please format the memory to continue.
FORMATTING THE INTERNAL MEMORY OR THE MEMORY CARD
RESTORE THE CAMERA TO FACTORY DEFAULT SETTINGS
RESTORE THE CAMERA T O FACTORY DEFAULT SETTINGS RESTORE FACTORY DEFAULT
To restore the default settings in your camera: 1. Press when Restore Default is highlighted in the camera. 2. Press to select No or Yes. When No is selected, no change is made. When Yes is selected, the Default settings will be restored. Please refer to the table below for the default settings.
DEFAULT STATUS Auto Flash Normal 2048 x 1536 OFF Auto Min. ON Center
S Scene Selection
EV Compensation Auto Off Sound LCD Brightness
The camera will beep when you press the shutter button for shooting, or the OK button for feature selection through menu navigation. (Page 25)
SOFTWARE INSTALLATION GUIDE
The software that comes with the Concord Eye-Q 3040AF includes driver, reader, and photo editor programs. These programs transfer the pictures or video clips from your camera to your computer, and enable you to view them on your computer screen. The following are the computer system requirements for these programs to be installed. Computer System Requirements Windows 133MHz Pentium MMX processor or equivalent (300MHz Pentium II or better recommended) Microsoft Windows 98SE, Windows Me, Windows 2000 Professional, Windows XP Home / Professional / Media Center 275MB free hard disk space (extra 30MB for Adobe Acrobat Reader 5 and 65MB for Microsoft DirectX 9.0 if required) 64MB of RAM (128MB or more recommended) Minimum 800 x 600 display with 16-bit color (1024 x 768 with 24-bit color or better recommended) USB Port CD-ROM Drive Macintosh Mac OS 9.0, 9.1, 9.2, 9.3 and X or later Power PC-based 32MB of RAM 640 x 480 display with Thousands of colors (Millions of colors recommended) Built-In USB Port
Installation Requirements The installer will automatically detect which software applications need to be installed or if they are not necessary. Please read the installation requirements before proceeding with the installation process.
System Install Camera Driver Install DirectX 9 Install ArcSoft PhotoImpression Install Adobe Acrobat Reader 5 Camera automatically detected by the computer (no driver installation required)
Windows 98SE X X X
X X X X
SOFTWARE INSTALLATION GUIDE SOFTWARE INSTALLATION
USING THE INSTALLER SPLASH SCREEN
The installer will automatically detect which software applications need to be installed or if they are not necessary. This will be indicated by the buttons on the splash screen that appears when the CD-ROM is inserted into the computer:
Color Yellow ( Gray ( ) )
Description Required or highly recommended to install. Already installed or not necessary
NOTE: Do not connect the camera to your computer before the camera drivers and Microsoft DirectX 9 installation is completed.
Step 1 Step 2 Step 3 Step 4
Make sure your camera is powered off and not connected to the computer. Make sure the computer is powered on and Windows 98SE is running. Close any other applications or software you may be running. Insert the CD-ROM included in your cameras packaging into your computers CD-ROM Drive. NOTE: If the installer does not start automatically within 30 seconds after the CD-ROM has been inserted, click on "My Computer" either on the Desktop or in the Start Menu and locate the CD-ROM Drive. Double click on the CD-ROM Drive icon for installation and proceed to Step 5.
Select the language. Click [OK].
The installation screen will appear. Click on Install Camera Drivers.
Click [Next >].
The next dialog will prompt you to select the components that will be installed. USB Mass Storage Driver and DirectX 9 will be preselected. The files will be saved in the Concord Eye-Q 3040AF directory automatically. OR You may change the default folder by clicking [Browse] and selecting a different folder in your computer. Click [Next >].
INSTALLING THE DRIVER AND DIRECTX 9 WINDOWS 98SE
Install progress bar
The next screen will begin the DirectX setup. Select "I accept the agreement " then Click [Next >].
Click [Finish]. Your computer will automatically reboot.
Make sure your camera is powered off and not connected to the computer. Make sure the computer is powered on and Windows 2000 is running. Close any other applications or software you may be running. Insert the CD-ROM included in your cameras packaging into your computers CD-ROM Drive. NOTE: If the installer does not start automatically within 30 seconds after the CD-ROM has been inserted, click on "My Computer" either on the Desktop or in the Start Menu and locate the CD-ROM Drive. Double click on the CD-ROM Drive icon for installation and proceed to Step 5.
Error Messages on the LCD indicate if the memory is full or if there is a problem with the memory.
Note: If the internal memory or the memory card is corrupted, the LCD will read ERROR! The memory needs to be formatted. Please format all files to continue. (Page 28)
CAMERA Cannot turn on the camera. Batteries were not installed correctly. Install batteries correctly using the direction indicators indicators on the edge of the top of the battery compartment. Replace batteries. Close the battery compartment properly. Press the reset button on the back of the camera with a pointed object such as a pen, then power the camera off then on. Replace the batteries with new ones. Your camera comes with an Auto Time Off setting, so if the camera is inactive for a certain amount of time, it powers off to conserve battery power. Please refer to the Time-Out section on page 27 to set your time limit. Increase the lighting in the surrounding area when taking picture and video clips. Clean the lens with a soft cloth. See the Camera Maintenance section. Stand at least 3.3 ft. (1m) for the Distant Mode away from the subject. And at Macro Mode stand 0.66ft (20cm) away from the subject. Move the subject further away from the camera. Change the camera setting to Auto Flash. See p.12. Decrease exposure compensation. See p.18. Move the subject closer to the camera, or move the camera closer to the subject. Turn the flash On. Change the subject's position. Increase the exposure compensation. See p.18. This is normal as your cameras electronic light sensor is programmed to only fire the flash when needed. Turn the flash to Auto flash. Verify that the Ready LED has stopped blinking before taking a picture.
Batteries are dead or weak. Battery compartment door was not closed correctly. The camera/buttons do not work. The camera turns off during usage. The camera needs to be reset.
The batteries are drained of power. The Auto time off setting is too short.
PICTURES/VIDEO CLIPS Picture/Video clip has poor image quality. Poor Lighting. Lens is dirty. Subject too close.
TAKING PICTURES Flash picture taken is too light. Subject is too close. The flash is not needed. Lighting condition is too bright. Flash Picture taken is too dark. The subject is too far away for the flash to be affective. Flash is not on. The subject is in front of a bright light. Lighting condition is too dark. Flash did not work. There was sufficient flash for the picture and the flash did not fire. This happens when the camera is set to Auto Flash. Cameras flash has been turned off. Flash did not charge.
The LCD screen looks milky and/or scratched. The LCD is not displaying anything.
Protective plastic film still in place on the camera. LCD is turned off. The battery level is low.
Cannot playback stored video clips on the computer. Camera is not responding during picture download to the PC.
Video playback files are missing.
Install Microsoft DirectX 9. (p.36)
VIEWING VIDEO CLIPS ON THE COMPUTER (WINDOWS 98SE/2000)
INSTALLING SOFTWARE AND DRIVERS The operating system may not be allocating adequate resources to download the pictures. The Mini-USB cable is not plugged into the camera. The Mini-USB cable is not plugged into the computer. The computer is not powered on. Cannot transfer pictures to the computer. The New Hardware Wizard cannot locate drivers. (Windows 98SE) The Software is not installed on the computer. Software is not fully or correctly installed on the computer. Reset the camera by pressing the reset button with a pointed object such as a pen. Reboot the computer. Check that the Mini-USB cable is plugged into the camera. Check that the USB cable is plugged into the computer. Turn your computer on. Disconnect the Mini-USB cable from the camera and the computer. Install the camera software and drivers. (p.34) Disconnect the Mini-USB cable from the camera and the computer. Uninstall the software: Start-Settings-Control PanelAdd/ Remove Programs. Re-install the camera drivers. (See p.34) Purchase a certified SD card. Reformat the card. Caution: Formatting erases all pictures on the card. p.27 Insert a card into the card slot. See p.8
SD CARDS The camera does not recognize your SD Card. The card may not be SD certified. The card may be corrupted.
No card is inserted in the camera.
You can get help from our troubleshooting section, FAQ on our website or by contacting a customer support representative. Troubleshooting Section If you need help with your camera, refer to the Troubleshooting section of this manual on page 45. Website Customer Support/FAQ Please visit our customer support website at www.concord-camera.com to view the Frequently Asked Questions (FAQ) by clicking the appropriate camera model picture in the Camera Support Section. Most support issues are answered in the FAQ section. You can also E-mail us by clicking the E-mail address link to the customer support center in the Camera Support Section. Customer Support Before You E-mail or Call us If you have questions concerning the operation of the camera or software installation, you can speak to or email a customer service representative. Please have the following information available: Camera Information: Name of camera model Camera Serial Number Camera Info in camera (page 26): FW Version FW Part Number Date Comment For Camera Support please contact: Toll Free in the US and Canada: (866) 522-6372 Monday Friday 8:00am 8:00pm Saturday: 9am 5pm Sunday: 12pm 4pm Web: www.concord-camera.com For Camera Support via E-mail, please contact us at www.concord-camera.com. Toll: +31-53-4829779 Monday Friday 09:00 18:00 Saturday & Sunday: closed (Central European Time) For ArcSoft Technical Support on Photo Editing Software, please contact: In the USA and Canada: ArcSoft, Inc. 46601 Fremont Blvd. Fremont, CA 94538 Monday Friday 8:30AM - 5:30PM (PST) Tel: (510) 440-9901 Fax: (510) 440-1270 Web: www.arcsoft.com E-mail: email@example.com In Europe: Arcsoft, Inc. Unit, Shannon Industrial Estate Shannon, Co. Clare, Ireland Tel: +353 (0) Fax: +353 (0) E-mail: firstname.lastname@example.org Computer Information: Operating System Processor Speed (MHz) Computer Make and Model Amount of memory Exact Error message received CD-ROM Part Number
REGULATORY INFORMATION REGULAT ORY INFORMATION
FCC INFORMATION FCC WARNING: This equipment meets the limits for a Class B digital device, pursuant to Part 15 of FCC rules. Only the cable supplied with the camera should be used. Operation with other cables is likely to result in interference to radio and TV reception and could void the users authorization to operate this equipment. This device complies with Part 15 of the FCC Rules. Operation is subject to the following two conditions: This device may not cause harmful interference. This device must accept any interference received, including interference that may cause undesired operation. Tested to comply with FCC standards for HOME OR OFFICE USE Changes or modifications not expressly approved by the manufacturer may void the users authority to operate this equipment. USER INFORMATION NOTE: This equipment has been tested and found to comply with the limits for a class B digital device, pursuant to Part 15 of the FCC Rules. These limits are designed to provide reasonable protection against harmful interference in a residential installation. This equipment generates, uses and can radiate radio frequency energy and, if not installed and used in accordance with the instructions, may cause harmful interference to radio communications. However, there is no guarantee that interference will not occur in a particular installation. If this equipment does cause harmful interference to radio or television reception, which can be determined by turning the equipment on and off, the user is encouraged to try to correct the interference by one or more of the following measures: Reorient or relocate the receiving antenna. Increase the separation between the equipment and receiver. Connect the equipment into an outlet on a circuit different from that to which the receiver is connected. Consult the dealer or an experienced radio/TV technician for help.
VCCI INFORMATION This is a Class B product, to be used in a domestic environment, based on the Technical Requirement of the Voluntary Control Council for Interference (VCCI) from Information Technology Equipment. If this is used near a radio or television receiver in a domestic environment, it may cause radio interference. Please install and use the equipment according to this instruction manual. - This product is in conformity with Directive 89/336/EEC.
Concord, Concord Eye-Q and the Concord Eye-Q logo are registered trademarks or trademarks of Concord Camera Corp., in the United States and/or other countries. Microsoft and Windows are either registered trademarks or trademarks of Microsoft Corporation in the United States and/or other countries. Mac and Macintosh are registered trademarks or trademarks of Apple Computer, Inc. in the U.S. and other countries. All other brands and product names are either registered trademarks or trademarks of their respective owners. Ver. 1.1
d. the earnings guidance was materially false and misleading because it was predicated upon Concord's continued failure to comply with GAAP (particularly as it related to Concord's failure to adjust the carrying value of its inventory to the lower of cost or market as required by Accounting Research Bulletin No. 43, and due to Concord's failure to comply with the revenue recognition provisions set forth in FASB Statement No. 48 as discussed below) and because it concealed the fact that the guidance included a planned partial write-off of the Company's nondisclosed and non-reserved-for excess, obsolete and otherwise impaired inventory, and that the total of the Company's excess, obsolete and otherwise impaired inventory approximated 512.5 million as of August 14, 2003 and would be written off against earnings, not at once, as required, but incrementally, during Concord's 2004 fiscal year. e. defendants concealed the fact that Concord had infringed upon Kodak patent s and by infringing upon Kodak patents : (I) Concord was liable to Kodak for a material amount of royalties ; (ii) Concord had violated the terms of its agreement with Kodak, thereby permitting Kodak to cancel the agreement (which was to run through February 2006) without penalty, and (iii) Concord would lose a key customer forever and would be stuck with a huge inventory of parts and purchase commitments to acquire parts that it would not be able to use, triggering the need to take inventoryrelated charges against earnings of no less than $6 million. Concord 's Improper Accounting Practice s 30. It is the practice in some industries for customers to be given the right to return a product to the seller under certain circumstances. Concord followed such a practice. Its customers were given a blanket right to return digital cameras purchased from Concord, on a no questions asked basis. 31. The GAAP which governs revenue recognition when the right of return exists (FASB Statement No. 48; a/k/a SFAS No. 48) observes that : "Arrangements in which customers buy products for resale with the right to return products often are referred to as guaranteed sales." FASB Statement No. 48 specifies criteria for recognizing revenue on guaranteed sales (sales in which a -10-
product may be returned, whether as a matter of contract or as a matter of existing practice, either by the ultimate customer or by a party who resells the product to others). It states, i f a company sells its product but gives the buyer the right to return the product, revenue from the sales transaction is permitted to be recognized at time of sale only if "the amount offuture returns can be reasonabtr estimated. " 32. As stated above, GAAP (FASB Statement No. 48) prohibits the recognition o f revenue in instances where products are sold on a guaranteed sales basis (i.e., sales were subject to the right of return) and the amount of future returns cannot be reasonably estimated. For the reasons discussed below, at all relevant times, Concord could not reasonably estimate the amount of future returns and was, therefore, precluded from recognizing revenue upon the sale of returnable products to its customers. 33. Several confidential witnesses stated that Concord sold its products to retailers such as Wal-Mart on a guaranteed sales basis with a de facto blanket return privilege. Accordingly, these retail customers never took any risk because, if they were unable to sell the products purchased from Concord, they would return it and receive a refund or a credit towards other purchases. 34. As stated by these confidential witnesses, throughout the Class Period, the Compan y had been introducing new products which had no track record. Although the Company hoped for a favorable market acceptance, there was no way to know whether the new products would sell. Moreover , these new product introductions were subject to rapid obsolescence because they were introduced during a pe riod when technology was changing so fast that , by the time a company had introduced a particular product , the competition had introduced a similar improved product at a lower price. Accordingly, there was no way for Concord to estimate reasonably the magnitude of product retu rn s on its new products pursuant to its guaranteed sales arrangements. 35. Concord was, therefore , precluded from recognizing revenue at the time of sale, and was permitted by GAAP (FASB Statement No. 48) to recognize revenue only -%~ hen the return privilege has substantially expired." In contravention of GAAP, throughout the Class Peri od, the
Company recognized revenue upon the sale of its returnable products and established de minimrr/s provisions for returns. 36. Moreover, according to CW4, an accountant who worked at Concord during the Class Period and was intimately familiar with Concord's books and records and discussed Concord's accounting issues with Ernst & Young's audit partner Bill Shillington and Ernst & Young's audit manager Jesus Socorro : "Concord's cameras were not serialized" (they did not have serial numbers on them) and, therefore, when cameras were returned for credit by a retail customer (i.e. Wal-Mart -which was "the customer that returned the most digital cameras") there was no way of determining when the cameras were sold to that customer. 37. Additionally, CW4 stated that because the price at which Concord sold its camera s (particularly digital cameras) tended to drop over time (due to technological advances) "there was no way of determining whether the customer returning the camera was returning one that it had purchased at the higher initial price or whether the customer returning the camera was returning one that it had purchased at the lower discounted price. There was no way of tracking when a customer bought it. " 38. When asked how Concord handled the issuance of credits associated with the retur n of cameras, CW4 stated : "It would involve a lot of research to try to determine the correct amount" and "the effort was not worth it." Therefore, Concord "accepted the amounts that the customer deducted from current invoices" as the amount that was credited. In the words of CW4 : "The customer claimed an amount and took a deduction ; Concord accepted it because there ww as no way of knowing if it was right or wrong." 39. CW4 described a situation wherein Concord had (a) no way of associating any particular sale with any particular return (paragraph 36) ; (b) no way of enforcing any return policy (i.e., permitting credit for the return of merchandise only within 30, 60 or 90 days)(paragraph 37) ; and (c) no way of legitimately disputing customer claims for credit (paragraph 38).
40. In view of the inability to associate sales with returns, the amount of future returns associated with any given sale was not reasonably estimable. Therefore, defendants were required by GAAP (FASB Statement No. 48, as discussed above) to recognize revenue only when the return privilege had substantially expired. Concord did not adhere to this GAAP. Instead, throughout the Class Period, Concord improperly recognized revenue upon sale and established de 1inimis provisions for returns for which there was no basis. 41. CW4 stated that "everyone knew that it [the non-control over credits due to the nonserialization of cameras] was a big problem." CW4 discussed this problem with "supply, sales, accounting, everyone." When asked whether defendants knew of the problem, CW4 stated that they did, and commented that "It is still under discussion now." (August 11, 2005 ) 42. CW5, a highly placed individual in supply chain management at Concord during th e Class Period, stated that "when a camera had been sold, and was later returned to Concord, there Was no way of determining when the camera had been sold, to whom, and at what price." CW3, an Accounting Supervisor at Concord during the Class Period, confirmed this statement as follows : "None of the cameras manufactured and sold by Concord Camera bore serial numbers. As a result, whenever a camera was returned by a customer, there was no way of determining when the camera was sold, or for what price. " 43. Additionally, according to CW3 : "Whenever Wal-Mart returned cameras to Concord ,
they would obtain a Return Authorization, and Wal-Mart themselves would calculate the amount of credit they were owed for the returned cameras." CW3 further stated that "rather than Concord sending a refund check for the returned cameras, Wal-Mart merely deducted the credit for the returned cameras from its next Concord Camera invoice, and paid the amount of invoice, less the credit." CW5 confirmed this, stating that it was Wal-Mart's practice to just deduct from the next invoice sent by Concord to Wal-Mart the amount it had calculated as the price Wal-Mart had paid for the returned cameras.
44. These statements were echoed by yet another confidential witness, CW2, a Concord employee during the Class Period who was responsible for inventory management including receiving, invoicing and reconciliation. CW2 stated: Concord Camera had an open return policy for its customers, meaning that any product could be returned, at any time, for any reason. The cameras sold by Concord Camera did not bear serial numbers, and when cameras were returned to Concord by their customers such as Wal-Mart, there was no way of determining when the camera was purchased, or the price paid when it was purchased. 45. CW4 stated that "everyone knew that it [the non-control over credits due to the nonserialization of cameras ] was a big problem (paragraph 41)." CW4 discussed this problem with "supply, sales , accounting, everyone." When asked whether defendants Lambert , King, Press. Finkbeiner , knew of the problem , CW4 stated that they did, and commented that "It is still under discussion now." (August 11, 2005 ) 46. According to CW4 , who frequently discussed Concord ' s computerized accountin g
the second quarter of Fiscal 2005") prior to the 42 month contractual expiration. In addition. the fiscal 2003 Form 10-K was materially false and misleading because it failed to disclose that : a. Concord had infringed upon Kodak patents. b. By infringing upon Kodak patents, Concord was liable to Kodak for a materia l amount of royalties. c. By infringing upon Kodak patents, Concord had violated the terms of it s agreement with Kodak, thereby permitting Kodak to cancel the agreement (which was to run throug h February 2006) without penalty. d. By infringing upon Kodak patents, Concord would lose a key custome r forever. e. Because Kodak would cancel its agreement with Concord, Concord woul d be stuck with a huge inventory of parts and purchase commitments to acquire parts that it no longe r would need or be able to use ; that an inventory-related charge to earnings of no less than S6 millio n would be required. 80. The fiscal 2003 Form 10-K stated the following with regard to Concord's accountin g policies and the financial statements which were materially impacted by them : a. "The accompanying consolidated financial statements have been prepared i n accordance with accounting principles generally accepted in the United States and include th e accounts of the Company and its subsidiaries." b. "Revenues are recognized when title and risk of loss are transferred to th e customer, which is generally when the product is shipped. Net sales includes a provision for return s based on historical trends in product returns." c. "Inventories, the majority of which are raw materials, components an d work-in-progress, are stated at the lower of cost or market value and are determined on a first-in , first-out basis. Work- in-progress and component inventory costs include materi als, labor, an d manufacturing overhead. The Company records lower of cost or market value adjustments fo r -21-
excess, obsolete or slow-moving invento ry based on changes in customer demand , technological developments or other economic factors. " 81. Each of the foregoing statements were materially false and misleading because the Company's fi nancial statements did not comply with GAAP , specifically the provisions of FASB Statement No. 48 and Accounting Research Bulletin No. 43, as pa rt iculari zed above. 82. The fi scal 2003 Form 10-K also contained ce rt ifications by defendants Lampert an d Finkbeiner as required by Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934, as amended, and certifications pursuant to 18 U.S.C. Section 1350, as adopted in Section 906 of the Sarbanes-Oxley Act of 2002. These certifications were materially false and misleadin g because, contrary to the representations of defendants Lampert and Finkbeiner, the fiscal 2003 Form 10-K as particularized herein : a. contained untrue statements of material fact (i.e, that Concord's financial statements had been prepared in accordance with GAAP ; that net sales included a provision for returns based on historical trends in product returns ; and that inventories were stated at the lower of cost or market value). b. omitted to state material facts necessary to make the statements made, in ligh t
95. The September 27, 2003 Form 10-Q contained certifications by defendants Lamper t and Finkbeiner which were substantially similar to the ones which were contained in the fiscal Form 10-K ; they were materially false and misleading for substantially the same reasons as specifie d above. 96. The false and misleading statements were made, in part, to induce the Company' s principal lender to increase the Company's borrowing capability. As later revealed in Concord's December 27, 2003 Form 10-Q : "During the Second Quarter Fiscal 2004, the Compan}'s Hong Kong subsidiary increased its overall borrowing capacity by $2.5 million." The more than 10`0 increase in borrowing capacity (from $23.5 million to $26 million) was material. Defendant King's Undisclosed Departure from Concor d 97. As of mid-November 2003, based upon his intimate knowledge of Concord' s operations which he acquired in his key position of influence and control, defendant King knew that : a. there was a great deal of excess inventory of cameras being accumulated i n Concord's warehouses in Florida, China, and London ; b. there was a great deal of obsolete 1.3 megapixel digital cameras in Concord' s warehouses in Florida, China, and London ; c. excess, obsolete and otherwise impaired inventory which aggregate d approximately $12.1 million would be written off against earnings, incrementally, during th e remainder of Concord's 2004 fiscal year ; d. Concord's Eye-Q 3340z digital camera with a three-megapixel sensor and 3 x optical zoom , which was introduced in August , was not selling and therefore Concord w ould be stuck with a huge quantity of additional materially impaired inventory ; e. a material portion of the excess, obsolete and other ise impaired inventory had been carried on Concord's books for between one to two years after it stopped selling withou t having been marked down on the books and records of Concord ;
Concord was always behind the competition when it came to technological
innovations, improved products, and sales ; g. the reported sales and earnings, as reflected in the fiscal 2003 Form 10-K and the September 27, 2003 Form I 0-Q, were materially misstated due to Concord's failure to adjust the carrying value of its inventory to the lower of cost or market, and due to Concord's failure to comply with the revenue recognition provisions set forth in generally accepted accounting principles (Accounting Research Bulletin No. 43 and FASB Statement No. 48) ; h. defendant Lampert's August 14, 2003 comments concerning the "bette r margin in terms of dollars and in percentage" associated with the Company's newest 3 me-apixel CCD camera were materially false and misleading because, as later revealed by defendant Lampert during the Company's February 5, 2004 conference call, "the development. was not completed in a reasonable time so as to provide for low-cost, high-quality, high-volume manufacturing. And as a consequence, resulted in a negative impact to our gross profits and margins during the second quarter"; defendant King's August 14, 2003 comments regarding the new ERP syste m were materially false and misleading because, even with a state of the art ERP system, Concord could not achieve improved functionality and reporting capabilities due, at least in part, to Concord's woefully deficient inventory system and its non-serialization of its cameras ; j. the August 14, 2003 earnings guidance was materially false and misleadin g because it was predicated upon Concord's continued failure to comply with GAAP (particularly as it related to Concord's failure to adjust the carrying value of its inventory to the lower of cost or market as required by Accounting Research Bulletin No. 43, and due to Concord's failure to comply with the revenue recognition provisions set forth in FASB Statement No. 48 as discussed above) and because it concealed the fact that the guidance included a planned partial write-off of the Company's non-disclosed and non-reserved-for excess, obsolete and otherwise impaired inventory ;
104. On January 17, 2004, The Miami Herald carried a story which confirmed that the Concord Eye-Q 3340z was introduced in August 2003 and that it was a flop from the outset. The article stated :
The Hollywood-based camera maker Concord Camera had high hopes for its Concord Eye-Q 3340z digital camera when it was introduced in August.
But the camera, which originally retailed for S199 and featured a three-megapixel sensor and 3x optical zoom, was a bust. Brian King, Concord 's senior executive vice president, speculated the camera's nonextending Z oom lens confused customers. "It didn 't give the impression of a zoom camera, when it was, " King said.
Even lowering the price to $169 didn't spur sales. Ultimately, Concord was forced to slash the price below what it cost to make. Concord now no longer makes the 3340z. The 3340z's flop contributed to a disappointing quarter for Concord. The period ended Dec. 27 traditionally is the firm's busiest. On Friday, it projected it would lose from $2 million to $2.5 million, or 7 to 9 cents a share, for the three months. That's far off earlier guidance given by Concord : a net profit of S5.2 million to S6.2 million, or 17 to 21 cents a share. The shortfall caused Concord's stock to tumble $1.02, or 13 percent, to close at S6.60 on Friday. It wasn't all bad news, though. "Even though this is a decidedly disappointing quarter, we still had the best quarter in the company 's history from a revenue standpoint , " King said. It expects to book $65 million in revenuefor the quarter, up from $61.8 million for the same period a year earlier, but short of the $70 million to $75 million expected. Concord reported that it would take an approximately S2.5 million write-down for inventory and tooling related to the 3340z and other cameras. King conceded that Concord has stumbled from time to time but said it has consistently grown earnings through the years.
"Clearly, as a small company we are susceptible to singular events and occurrences that have an immediate impact on earnings , "King said. " We look at this quarter as an aberration in the path toward continued growth and profitability. "
105. On January 17, 2004, The South Florida Sun-Sentinel carried a story which confirmed that the Concord Eye-Q 3340z was introduced in August and that it was a flop from the beginning. The article stated : Hollywood-based Concord Camera Corp., said Friday that lagging digital camera sales and lower selling prices means it will likely report a second quarter loss of between $2 million and $2.5 million, or between 7 cents and 9 cents per share. Earlier it had anticipated a profit of between S5.2 million and $6.5 million, or 17 cents and 21 cents per share, for the quarter.
substantially the same reasons that the January 16, 2004 press release was materially false and misleading as specified above. 113. On February 5, 2004, Concord held a conference call during which financial information substantially identical to the financial information set forth in the February 5, 2004 press release was reiterated. This financial information set forth in the February 5 press release and conference call was materially false and misleading for the reasons specified in ~,] 29-3 5, 48-50, and 82 above. 114. During the conference call, the $3.1 million inventory charge and the issue of Concord's inventory quality was addressed as follows : UNIDENTIFIED SPEAKER : oh, sure. This is actually Jill (indiscernible) calling from Amherst (ph) Advisors. Most of my questions have been asked, but back on the inventory issue that you talked about on the 3 megapixel CCD. Was this a quality issue or more a lack of demand'? IRA LAMPERT: The latter. UN ID ENTIFIED SPEAKER : Okay, so lack of demand for the product. IRA LAMPERT : Quality was not the issue. We hate to throw away great components -- literally what we're doing.
IKE GALLO : Ira, are you comfortable with the inventory position where it is today? Even with the write-off of I think around $3 million in the quarter of obsolete inventory, it was basically flat, I guess down slightly from where it was in the third quarter. And you're headed into, obviously, your typically seasonally softest sales period of the year. How comfortable are you that the inventory position is okay so that we can expect not to see any further write-downs in inventory ?
IRA LAMPERT : Let me answer the question by providing information and then I will comment on my level of comfort. Number one, the inventory contains a lot of components, and a reason the inventory contains a lot of components -- and probably more so than ordinarily -- is because of what we believe is a lot of demand for components that come from very limited amounts of -- limited supply base. By way of example, sensors and optical components. So as a consequence, we probably have components that we have bought that would be out of our normal supply chain cycle so as to meet our demands that we see by forecast. That is number one. Number two, obviously, our inventories are a little higher than we would have expected because sales attainment in the second quarter was not what we anticipated. Having said that, we addressed the issue with the one particular product, and mostly in components, that we thought was a subject of some problems. And we just took -34-
described above, various witnesses who were intimately familiar with Concord's inventory accounting system stated that during the fiscal quarter ended December 27, 2003 Concord's inventory accounting system was "known by everyone to be inaccurate, (paragraph 61)" Concord's inventory controls were woefully deficient (paragraph 61), and defendants Lampert, Press, and Finkbeiner turned a "blind eye" (paragraph 46) to the inventory problems.
124. The purported change in accounting methodology was a subterfuge which justifie d a partial write-down of Concord's overstated inventory without properly identifying the write-dow n as a belated charge to earnings to write off a portion of Concord's excess, obsolete and otherwis e impaired inventory. The representation that Concord was updating its information systems and -37-
capturing additional information also falsely led the investment community to believe that Concord was improving its computerized inventory capabilities when, in fact, this was untrue. 125. The December 27, 2003 Form 10-Q stated that the Company's principal lender had granted the Company "an aggregate of approximately $26.0 million in borrowing capacity under various financing and revolving credit facilities." 126. The December 27, 2003 Form l0-Q contained certifications by defendants Lampert and Finkbeiner which were substantially similar to the ones which were contained in the fiscal 2003 Form 10-K ; they were materially false and misleading for substantially the same reasons as specified above. 127. The false and misleading statements were made, in part, to induce the Company' s principal lender to increase the Company's borrowing capability. As later revealed in Concord's July 3, 2004 Form 10-K, the Company's Hong Kong subsidiary increased its overall borrowing capacity by $12.3 million. The more than 47% increase in borrowing capacity (from S26 million to $38.3 million) was material. Significantly, the July 3, 2004 Form 10-K stated : "Due to recent losses, the level of reliance on our credit facility could increase and, as a result, create liquidity issues for the Company due to funding and debt service requirements. " Affirmative Misrepresentations Regarding Defendant King Issued By Defendant s
128. On February 11, 2004, Concord issued a press release announcing that Concord was scheduled to present at the Roth Capital Partners 16th Annual Growth Stock Conference on Wednesday, February 18, 2004. The press release referred to defendant King as the Concord "contact" person at "954-331-4200."
from certain customers and the estimation of sales returns and allowances." What Concord described as "errors" caused a material 16% overstatement of reported net sales ("Net sales for the Third Quarter Fiscal 2004 were $28.3 million." -- March 27, 2004 Form 10-Q). 146. Additionally, the May 11, 2004 press release was materially false and misleading because it continued to conceal the material information and failed to correct the prior material misstatements which are particularized above. 147. According to CWI, the statement in the May 11, 2004 press release that price decline s in digital camera markets negatively impacted Concord's digital camera inventory. causing them to write off between $6 million and $7 million "was not accurate." According to this witness : "The real reason Concord Camera had to write off those amounts was its excessive old and obsolete inventory of 1.3 megapixel digital Concord Cameras which would not sell due to competitors selling higher megapixel cameras for the same price." 148. CW3 confirmed this stating that, contrary to the May 11, 2004 press release whic h
attributed Concord's write-offs to recent price declines in the digital camera market, the write-off was due to Concord's inability to sell its obsolete Cameras. This witness stated that in late 2003 and early 2004, sales of Concord's cameras were declining. The problem was that Concord was not keeping up with the competition in terms of higher megapixel and better quality, and as a result, was unable to sell its older digital cameras.
149. Concord issued another press release on May 11, 2004, announcing the departure of defendant King effective as of July 1, 2004. The press release stated that "effective July 1, 2004 Brian King will be separating from the Company. Mr. King currently serves as Concord's Senior Executive Vice President. " 150. The foregoing press release, though making the belated partial disclosure of King's separation from the Company, was materially false and misleading because it led the investment community to believe that defendant King was still serving as Concord's Senior Executive Vice President and Assistant Secretary and would continue to do so until the fiscal year end, when thi s -42-
was not true. As noted above, defendant King later admitted that he had terminated his employmen t with Concord on January 1, 2004. 151. The price of Concord stock dropped precipitously on this announcement, from a clos e of $4.62 on May 10, 2004 to a close of $3.04 on May 1 l , 2004 and $2.94 on May 12, 2004. Volum e on May 11, 2004 and May 12, 2004 was 3,300,700 and 1,272,100, respectively, a huge increase ove r the stock' s average daily volume. 152. Following the announcements, on May 12, 2004, Roth Capital Partners LLC lowere d its rating on Concord to "Neutral" from "Buy" and its 12-month price target to S3.00 from S9.00. The stock dropped to $3.04 on May 11, 2004 from a close of S4.62 on May 10, 2004 on heav y volume of 3,301, 000 shares. 153. On May 13, 2004, defendant King sold 75,000 shares of Concord stock at a n artificially inflated price of $2.70 per share to $2.724 per share, reaping proceeds of approximatel y $203,000.00. 154. On May 14, 2004, defendant King sold 104,000 shares of Concord stock at a n artificially inflated price of $2.685 per share to $2.7554 per share, reaping proceeds of approximatel y $283,000.00. Concord ' s False And Misleading May 17, 2004 Press Releas e 155. On May 17, 2004, Concord issued a press release repo rt ing financial results for th e
third quarter and nine months of fiscal 2004 ended March 27, 2004. It stated :
For the third quarter ended March 27, 2004 ("Third Quarter Fiscal 2004"), net sales were $28.3 million, a 22.0% decrease from the same quarter last year. Net (loss) was $(17.6) million, or $(0.61) per share.The Third Quarter Fiscal 2004 loss includes the impact of a significant reduction in the carrying values of certain digital camera and component inventory of $6.8 million related to recent volatility in the digital camera market, resulting from recent price declines and pricing reductions by the Company's competitors and excess inventory levels at its customers. In addition, the Third Quarter Fiscal 2004 loss includes unfavorable production variances due to lower than expected production volumes and manufacturing inefficiencies which created significant under absorption of manufacturing labor and overhead costs.
Commenting on the financial results, Ira B. Lampert, Concord's Chairman, Chief Executive Officer and President, said, "Concord's net sales for the third quarter of fiscal 2004 of $28.3 million were below the guidance we issued in February of S30 million to $35 million, primarily due to pricing pressures for digital cameras, lower unit sales for all products and increases in estimated sales returns and allowances. Recent price declines in the digital camera market have negatively impacted the net realizable value of digital camera and component inventory and, in response to market conditions, the Company has significantly lowered the carrying value of this inventory and reduced its net deferred tax assets. 156. The fi nancial representations in the May 17, 2004 press release were mate ri ally false and misleading because they were predicated upon Concord 's continued failure to comply with GAAP ( particularly as it related to Concord ' s failure to adjust the carrying value of its inventory to the lower of cost or market as required by Accounting Research Bulletin N o. 43, and due to Concord ' s failure to comply with the revenue recognition provisions set fo rt h in FASB Statement No. 48 as discussed above). 157. Additionally , the May 17, 2004 press release was mate ri ally false and misleadin g because it failed to correct the prior material misstatements and because it concealed substantially the same facts which were concealed in preiously specified documents and press releases as discussed above. Concord ' s False And Misleading March 27, 2004 Form 10-0 Filed On May 17, 158. On May 17, 2004, Concord filed its Form I 0-Q for the quarterly period ended \larc h 27, 2004 with the SEC ("the March 27, 2004 Form 10-Q"). This document, which was signed by defendant Finkbeiner, reflected substantially the same financial information which was presented in the May 17, 2004 press release. It was materially false and misleading for substantially the same reasons that the May 17, 2004 press release was materially false and misleading, as specified above. 159. The March 27, 2004 Form 10-Q also incorporated, by reference, the representations regarding Concord's accounting policies which are specified above ("For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended June 28, 2003."). Additionally, it stated the
The new standard cost approach was made possible by the Company's efforts to update its information systems and capture additional information related to its standard costs of manufacturing. Management believes the new method of applying manufacturing labor and overhead costs to inventories improves the matching of costs incurred to manufacture the product with their flow through the production process. Under APB Opinion No. 20, Accounting Changes, this accounting change is considered to be a change in accounting estimate inseparable from a change in accounting method. If the Company had not changed its method of applying manufacturing labor and overhead costs to inventory during the First Quarter Fiscal 2004 : (i) cost of products sold and net loss in the Third Quarter Fiscal 2004 would have been $1.0 million and $0.9 million lower ($0.03 per diluted common share), respectively ; and (ii) cost of products sold and net loss in Fiscal 2004 YTD would have been $3.3 million and $2.9 million lower ($0.10 per diluted common share), respectively.
162. The foregoing representations were materially false and misleading because, as described above, various witnesses who were intimately familiar with Concord's inventory accounting system stated that during the fiscal quarter ended March 27, 2004 Concord's inventory accounting system was "known by everyone to be inaccurate (paragraph 61)," Concord's inventory controls were woefully deficient (paragraph 61), and defendants Lampert, Press, and Finkbeiner turned a "blind eye" to the inventory problems (paragraph 46). 163. The purported change in accounting methodology was a subterfuge which justifie d a partial write-down of Concord's overstated inventory without properly identifying the write-down as a belated charge to earnings to write off a portion of Concord's excess, obsolete and otherwise impaired inventory. The representation that Concord was updating its information systems and capturing additional information also falsely led the investment community to believe that Concord was improving its computerized inventory capabilities when, in fact, this was untrue. 164. The March 27, 2004 Form 10-Q stated that the Company's principal lender had granted the Company "an aggregate of approximately $26.0 million in borrowing capacity under various financing and revolving credit facilities."
generally applicable to the entire Class. Among the questions of law and fact common to the Clas s are : a. whether the federal secu ri ties laws were violated by defendants' acts as alleged herein ; b. whether the Company's publicly disseminated releases and statements during the Class Period omitted and/or misrepresented material facts and whether defendants breached an y duty to convey material facts or to correct material facts previously disseminated ; c. whether defendants participated in and pursued the fraudulent scheme o r course of business complained of, d. whether the defendants acted willfully, with knowledge or recklessly, i n omitting and/or misrepresenting material facts ; e. whether the market prices of Concord common stock and other Concor d securities during the Class Period were artificially inflated due to the material non-disclosures and o r misrepresentations complained of herein ; an d f. whether the members of the Class have sustained damages and, if so, wha t is the appropriate measure of damages. COUNT I
For Violations Of Section 10(b) Of The 1934 Act And Rule 10b-5 Promulgate d
Thereunder Against All Defendant s 211. Lead Plaintiff repeats and realleges the allegations set forth above as though fully se t forth herein. This claim is asserted against defendants Concord and the Individual Defendants. 212. During the Class Period, Concord, Lampert, Press, Finkbeiner and King, and each o f them, carried out a plan, scheme and course of conduct which was intended to and, throughout the Class Period, did : (i) deceive the investing public, including plaintiff and other Class members, as alleged herein ; (ii) artificially inflate and maintain the market price of Concord common stock ; and (iii) cause plaintiff and other members of the Class to purchase Concord stock at artificially inflate d -61-
prices. In furtherance of this unlawful scheme, plan and course of conduct, defendants Concord and the Individual Defendants, and each of them, took the actions set forth herein. 213. These defendants : (a) employed devices, schemes, and artifices to defraud, (b) made untrue statements of material fact and/or omitted to state material facts necessay to make the statements not misleading ; and (c) engaged in acts, practices and a course of business which operated as a fraud and deceit upon the purchasers of the Company's common stock in an effort to maintain artificially high market prices for Concord common stock in violation of Section 10(b) of the Exchange Act and Rule lOb-5. These defendants are sued as primary participants in the wrongful and illegal conduct charged herein. These defendants are also sued herein as controlling persons of Concord, as alleged below. 214. In addition to the duties of full disclosure imposed on defendants as a result of thei r making of affirmative statements and reports, or participation in the making of affirmative statements and reports to the investing public, they each had a duty to promptly disseminate truthful information that would be material to investors in compliance with the integrated disclosure provisions of the SEC as embodied in SEC Regulation S-X (17 C.F.R. 210.01 et seq.) and S-K (17 C.F.R. 229.10 et seq.) and other SEC regulations, including accurate and truthful information ww ith respect to the Company's operations, financial condition and performance so that the market prices of the Company's publicly traded securities would be based on truthful, complete and accurate information. 215. Concord, Lampert, Press, Finkbeiner and King, individually and in concert, directl y and indirectly, by the use of means or instrumentalities of interstate commerce and/or of the mails, engaged and participated in a continuous course of conduct to conceal adverse material information about the business, business practices, performance, operations and future prospects of Concord as specified herein. These defendants employed devices, schemes and artifices to defraud, while in possession of material adverse non-public information and engaged in acts, practices, and a course of conduct as alleged herein in an effort to assure investors of Concord's value and performance an d -62-
knowledge by deliberately refraining from taking those steps necessary to discover whether those statements were false or misleading. 218. As a result of the dissemination of the materially false and misleading information and failure to disclose material facts, as set forth above, the market price of Concord's common stock was artificially inflated during the Class Period. In ignorance of the fact that the market price of Concord's shares was artificially inflated, and relying directly or indirectly on the false and misleading statements made by defendants, or upon the integrity of the market in which the securities trade, and/or on the absence of material adverse information that was known to or recklessly disregarded by defendants but not disclosed in public statements by defendants during the Class Period, plaintiff and the other members of the Class acquired Concord common stock during the Class Period at artificially inflated high prices and were damaged thereby. 219. At the time of said misrepresentations and omissions, plaintiff and other members o f the Class were ignorant of their falsity, and believed them to be true. Had plaintiff and the other members of the Class and the marketplace known of the true performance, business practices, future prospects and intrinsic value of Concord, which were not disclosed by defendants, plaintiff and other members of the Class would not have purchased or otherwise acquired their Concord securities during the Class Period, or, if they had acquired such securities during the Class Period, they would not have done so at the artificially inflated prices which they paid. 220. By virtue of the foregoing, Concord and each of the Individual Defendants violated Section 10(b) of the Exchange Act and Rule I Ob-5 promulgated thereunder. 221. As a direct and proximate result of defendants' wrongful conduct, plaintiff and the other members of the Class suffered damages in connection with their purchases of the Company's securities during the Class Period.
COUNT I I For Violations Of Section 20(a) Of The 1934 Act Against Individual Defendant s 222. Plaintiff repeats and realleges the allegations set forth above as if set forth fully herein. This claim is asserted against Individual Defendants. 223. The Individual Defendants were and acted as controlling persons of Concord within the meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their high-level positions with the Company, participation in and/or awareness of the Company's operations and or intimate knowledge of the Company's actual performance, Lampert, Press, Finkbeiner and King had the power to influence and control and did influence and control, directly or indirectly, the decisionmaking of the Company, including the content and dissemination of the various statements which plaintiff contends are false and misleading. Lampert, Press, Finkbeiner and King were provided 'ti ith or had unlimited access to copies of the Company's reports, press releases, public filings and other statements alleged by plaintiff to be misleading prior to and/or shortly after these statements were issued and had the ability to prevent the issuance of the statements or cause the statements to be corrected.
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