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ROBBINS GELLER RUDMAN

& DOWD LLP

SHAWN A. WILLIAMS (213113)

Post Montgomery Center

One Montgomery Street, Suite 1800

San Francisco, CA 94104

Telephone: 415/288-4545

415/288-4534 (fax)

shawnw@rgrdlaw.com

– and –

DAVID C. WALTON (167268)

BRIAN E. COCHRAN (286202)

655 West Broadway, Suite 1900

San Diego, CA 92101

Telephone: 619/231-1058

619/231-7423 (fax)

davew@rgrdlaw.com

bcochran@rgrdlaw.com

Attorneys for Plaintiff

[Additional counsel appear on signature page.]

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

GREGG BADGER, Individually and on Behalf 

of All Others Similarly Situated,

Plaintiff,

vs.

NATUS MEDICAL INCORPORATED, 

JAMES B. HAWKINS and JONATHAN A. 

KENNEDY,

Defendants.

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Case No. 

CLASS ACTION

COMPLAINT FOR VIOLATION OF THE 

FEDERAL SECURITIES LAWS

DEMAND FOR JURY TRIAL

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Plaintiff Gregg Badger, individually and on behalf of all others similarly situated, by 

plaintiff’s undersigned attorneys, for plaintiff’s complaint against defendants, alleges the following 

based upon personal knowledge as to plaintiff and plaintiff’s own acts and upon information and 

belief as to all other matters based on the investigation conducted by and through plaintiff’s 

attorneys, which included, among other things, a review of Securities and Exchange Commission 

(“SEC”) filings by Natus Medical Incorporated (“Natus Medical” or the “Company”), as well as 

media and analyst reports about the Company and conference call transcripts. Plaintiff believes that 

substantial additional evidentiary support will exist for the allegations set forth herein after a 

reasonable opportunity for discovery.

NATURE OF THE ACTION

1. This is a securities class action on behalf of all purchasers of the common stock of 

Natus Medical between October 16, 2015 and April 3, 2016, inclusive (the “Class Period”), alleging 

violations of §§10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”).

2. Defendant Natus Medical designs, manufactures and markets newborn care and 

neurology healthcare products and services worldwide. On October 16, 2015, Natus Medical 

announced that its Argentinian subsidiary had entered into a three-year supply contract with the 

Ministry of Health of Venezuela (the “Ministry of Health”) pursuant to which the Company would 

receive $232.5 million, including $69 million in prepayments “expected” during the first quarter of 

2016, ending March 31, 2016 (the “Supply Contract”). Thereafter, on October 21, 2015, citing the 

“$232.5 million equipment and supply contract” with the Ministry of Health, Natus Medical issued a 

press release in which it increased its revenue and earnings guidance for its fiscal year ending 

December 31, 2015. The Company stated that for the fourth quarter of 2015 it had “increased its 

revenue guidance to $102.0 million to $105.0 million and guided non-GAAP earnings per share of 

$0.47 to $0.49,” and that for fiscal 2015 its “earnings guidance was increased with expected nonCase 4:17-cv-00458-JSW Document 1 Filed 01/30/17 Page 2 of 31
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GAAP earnings per share of $1.51 to $1.53” and its “revenue guidance also increased to $378 

million to $381 million compared to previous guidance of $376 million to $378 million.”

3. Unbeknownst to investors, the Supply Contract was not as defendants had publicly 

portrayed it. Specifically, defendants did not disclose: (i) that the Venezuelan government had failed 

to make tens of millions of dollars in prepayments to Natus Medical, which were required to have 

been paid beginning in October 2015; (ii) that Natus Medical had no means to effectively enforce its 

rights under the Supply Contract, as Venezuela was the exclusive forum for dispute resolution; (iii) 

that Natus Medical’s receipt of revenues pursuant to the Supply Contract was contingent on the 

outcome of Venezuelan elections; (iv) that the Supply Contract was subject to foreign currency 

exchange risks; (v) that the Supply Contract did not have the economic benefits or certitude that 

defendants had represented; and (vi) that as a result of the foregoing, Natus Medical was not on track 

to achieve the increased guidance provided by defendants and such guidance lacked a reasonable 

basis. 

4. As a result of defendants’ false and misleading statements, Natus Medical stock 

traded at artificially inflated prices during the Class Period, reaching prices above $50 per share in 

intraday trading on December 18, 2015 – an all-time high. Certain of the Company’s senior 

executives immediately cashed in, including the two defendants named herein who alone collectively 

sold more than $10.7 million worth of Natus Medical stock in the days following these 

announcements. In total, Natus Medical insiders collectively sold $14.5 million worth of their 

personally held stock to the unsuspecting public.

5. On January 11, 2016, Natus Medical issued a press release revealing that it expected 

to fall short of its fourth quarter and fiscal year 2015 guidance, and now only expected to report 

fourth quarter revenues of approximately $100 million, compared to its prior guidance of $102 

million to $105 million, and fiscal year 2015 revenues of $375.9 million, compared to its prior 

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guidance of $378 million to $381 million. The Company also disclosed that “[t]he guidance 

provided by the Company in October for the fourth quarter of 2015 included expected revenue of 

approximately $4 million under the new Venezuelan Ministry of Health contract,” but “[t]he 

Company was not able to ship product on the anticipated schedule because the prepayment under the 

contract was delayed.” The release further represented that “[t]he Company believes the delay was 

most likely due to a combination of important national elections that occurred in Argentina in 

November and Venezuela in December, Argentina’s currency devaluation in December as well as 

national Christmas holidays.” As a result, defendants stated that “[t]he Company now expect[ed] to 

receive prepayment and begin shipments in the first quarter of 2016,” and that the first quarter 2016 

“guidance include[d] $5 million of revenue from Venezuela and $60 million of revenue for [fiscal 

year 2016] guidance.” The Company also provided revenue guidance of $96.5 million to $97.5 

million for the first quarter of 2016 and $445 million to $450 million for fiscal year 2016.

6. On this revelation of a purported “delay” in the payments from the Ministry of 

Health, the price of Natus Medical common stock declined, falling from its close of $43.20 per share 

on January 8, 2016 to close at $38.25 per share on January 11, 2016, a decline of almost $5 per 

share, or 11%, on usually high trading of approximately 1.4 million shares, or more than four times 

the average daily volume over the preceding ten trading days. However, due to defendants’ 

mischaracterization of the Ministry of Health’s failure to perform as a mere “delay” and their failure 

to disclose the true terms and risks under the Supply Contract, the price of Natus Medical stock 

remained artificially inflated.

7. On January 27, 2016, Natus Medical issued a press release reaffirming that the 

revenue shortfall in the fourth quarter of 2015 was the result of a purported “delay” in receiving 

prepayments under the Supply Contract, and that Natus Medical’s guidance depended on revenues 

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from the Supply Contract. The release also disclosed unspecified “risks associated with [the 

Company’s] Venezuela contract.”

8. Following this release, numerous analysts expressed skepticism that the Supply 

Contract would convey the economic benefits that defendants had previously reported. For instance, 

stock research analysts from William Blair stated in their January 27, 2016 research report that while 

they still held out hope that the Ministry of Health prepayments would come in, they were removing 

them from their modeling, stating in pertinent part as follows:

As the company alluded to in its prerelease, the top line fell short of original 

guidance by about $4 million due to a delay with the implementation of a recently 

signed contract with the Venezuelan Ministry of Health. . . .

Regarding Venezuela, management remains optimistic the contract will be 

executed fairly. However, it seems clear that the timing of payments and ability to 

actually record revenue from the prepayments is still uncertain and we remain 

skeptical that the full $60 million of revenue attributable to the Venezuela contract 

in 2016 will materialize this year. As a result, we continue to strongly advise 

investors to focus exclusively on the impressive performance in the base business.

The company also reiterated first-quarter guidance (revenue of $96.5 million- $97.5 million and adjusted EPS of $0.34-0.35) and 2016 guidance ($445 million- $450 million in revenues and $1.84-$1.88 in EPS), both of which include 

contribution from Venezuela. Excluding Venezuela, guidance appears to call for 

2%-4% revenue growth and EPS of around $1.67 or $1.68.

9. On this news, the price of Natus Medical stock fell once again, from its close of 

$37.15 per share on January 27, 2016 to close at $34.71 per share on January 28, 2016, a decline of 

$2.44 per share, on abnormally high trading volume. 

10. On February 29, 2016, Natus Medical filed its Annual Report on Form 10-K for fiscal 

year 2015 with the SEC (the “10-K”). The filing disclosed that, “[f]ollowing the announcement of 

[the Ministry of Health] contract, there ha[d] been elections in both Venezuela and Argentina leading 

to significant political changes in those countries” and “it [had been] reported that Venezuela [was] 

experiencing a highly inflationary economy and recessionary economic conditions,” stating that 

“[t]hese developments may impact the likelihood of the Venezuelan Ministry of Health’s following 

through with orders under the agreement, and Medix [Natus Medical’s Argentinian subsidiary] ha[d] 

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not yet received any prepayments under the agreement and no products or services ha[d] been 

shipped or provided.” The 10-K now warned that “[i]f, for these or any other reasons, the 

Venezuelan Ministry of Health does not make the required prepayments to initiate deliveries under 

the Medix agreement, we will not receive any benefit from it.” The Company finally attached a 

copy of the Supply Contract to the 10-K, which disclosed that the $69 million in prepayments by the 

Ministry of Health had been due by the end of 2015 (with more than $24 million due in October 

2015) – and thus the prepayments had been late for months – not the first quarter of 2016 as 

defendants had represented. As to Natus Medical’s ability to legally enforce the terms of the Supply 

Contract, the contract provided that it was governed solely by Venezuelan law, meaning the 

Venezuelan government could unilaterally renege on all aspects of the agreement. 

11. On this news, the price of Natus Medical stock once again declined, falling from its 

close of $37.21 per share on February 26, 2016 to close at $36.32 per share on February 29, 2016. 

However, because defendants failed to remove their prior guidance, which incorporated purportedly 

expected revenues from the Supply Contract and represented that they expected timely performance 

under the contract, the stock price remained artificially inflated. 

12. Then, on April 4, 2016, Natus Medical issued a press release pre-announcing its 

preliminary first quarter 2016 results. The release disclosed that “[r]evenue for the first quarter of 

2016 [was] expected to be approximately $87.5 million versus previous guidance of $91.5 million to 

$92.5 million, excluding revenue from the Venezuela Ministry of Health contract.” The release 

specifically disclosed that Natus Medical did not have “‘any revenue associated with the Venezuela 

Ministry of Health contract as [it] did not receive any prepayments during the quarter.’” On this 

news, the price of Natus Medical stock declined precipitously, falling from its close of $39.64 per 

share on April 1, 2016 to close at $31.84 per share on April 4, 2016, a decline of $7.80 per share, or 

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nearly 20%, on unusually high trading volume of more than 2.7 million shares, or more than eight 

times the average daily trading volume over the preceding ten trading days. 

13. When the Company finally released its first quarter 2016 results on April 20, 2016, 

defendants slashed the Company’s fiscal year 2016 guidance, finally publicly conceding that they 

could “no longer include revenue or earnings from the agreement in . . . guidance until there is more 

clarity” on Venezuela’s performance under the agreement.

14. As a result of defendants’ materially false and misleading statements, Natus Medical 

stock traded at artificially inflated prices during the Class Period. However, after the above 

revelations seeped into the market, the Company’s shares were hammered by massive sales, sending 

them down more than $19 per share, or 37%, from their Class Period high.

JURISDICTION AND VENUE

15. The claims asserted herein arise under §§10(b) and 20(a) of the Exchange Act, 15 

U.S.C. §§78j(b) and 78t(a), and Rule 10b-5, 17 C.F.R. §240.10b-5. Jurisdiction is conferred by §27 

of the Exchange Act, 15 U.S.C. §78aa.

16. Venue is proper in this district pursuant to §27 of the Exchange Act. The acts and 

transactions giving rise to the violations of law complained of occurred and Natus Medical’s 

headquarters are located in this District.

THE PARTIES

17. Plaintiff Gregg Badger purchased Natus Medical common stock during the Class 

Period as described in the Certification attached hereto and incorporated herein by reference and 

suffered damages.

18. Defendant Natus Medical, based in Pleasanton, California, designs, manufactures, 

and markets newborn care and neurology healthcare products and services worldwide. During the 

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Class Period, shares of Natus Medical traded in an efficient market on the NASDAQ under the ticker 

symbol “BABY.”

19. Defendant James B. Hawkins (“Hawkins”) is, and was at all relevant times, the 

President and Chief Executive Officer (“CEO”) of Natus Medical and a member of its Board of 

Directors.

20. Defendant Jonathan A. Kennedy (“Kennedy”) is, and was at all relevant times, the 

Executive Vice President and Chief Financial Officer of Natus Medical. 

21. Defendants Hawkins and Kennedy are referred to herein as the “Individual 

Defendants.” 

22. During the Class Period, the Individual Defendants ran Natus Medical as “hands-on” 

managers overseeing Natus Medical’s operations and finances and made the material false and 

misleading statements described herein. The Individual Defendants had intimate knowledge about 

core aspects of Natus Medical’s financial and business operations, including its major contracts and 

revenue sources, such as the Supply Contract. They were also intimately involved in deciding which

disclosures would be made by Natus Medical. Indeed, the Individual Defendants made various 

public statements for Natus Medical during the Class Period and participated in all Class Period 

investor conferences, wherein they represented to investors that they were knowledgeable on the 

topics about which they spoke.

MATERIALLY FALSE AND MISLEADING

CLASS PERIOD STATEMENTS

23. The Class Period starts on October 16, 2015. On that day, Natus Medical filed a 

Current Report on Form 8-K with the SEC which stated that on October 15, 2015, the Company’s 

Argentinian subsidiary, Medix I.C.S.A (“Medix”), had entered into a supply agreement with the 

Ministry of Health “to provide medical equipment, supplies and services over a three-year period, 

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including certain third party products.” The filing purported to describe the terms of the Supply 

Agreement, stating in pertinent part as follows:

Under the terms of the Supply Agreement, products and services will be delivered

pursuant to prepayments made by the Ministry of Health. Prepayments totaling 

approximately $69 million are expected by the first quarter of 2016. Payments will 

be received in Argentine Pesos based on the current exchange rate of the U.S. dollar 

and the Argentine Peso at the time of payment. The agreement may be canceled at 

any time by the Ministry of Health except for the amount of any prepayments. If 

fully performed, the total sales under the agreement would aggregate $232.5 million.

Medix has partnered with a local distributor to provide distribution and 

technical service support to hospitals in Venezuela.

Natus expects the operating profitability over the life of the Supply 

Agreement to be similar to the company’s corporate average operating margin.

24. The Supply Contract was not attached to the Form 8-K despite the fact that Item 1.01 

of the Instructions to SEC Form 8-K and the SEC’s interpretive releases mandate the disclosure of 

the material terms of any “Material Definitive Agreement” entered into by issuers within four 

business days. These rules also expressly state that the SEC “encourage[s] companies to file the 

[contract as an] exhibit with the Form 8-K when feasible, particularly when no confidential 

treatment is requested.”1

 The Company’s description of the Supply Contract thus failed to provide

the “brief description of the terms and conditions of the agreement or amendment that are material to 

the registrant,” as required by Item 1.01 of the Instructions to Form 8-K.2

25. On October 21, 2015, Natus Medical issued a press release announcing its third 

quarter 2015 results. Defendant Hawkins commented on the results and spoke positively about the 

Supply Contract, stating in pertinent part as follows:

“I am most satisfied that we achieved a 20% non-GAAP operating profit 

margin during the quarter and am now confident that we will exceed our full year 

non-GAAP operating margin goal of 18%. We are increasingly confident that we 

can achieve and potentially exceed our long term operating margin goal of 20% in 

2016. . . . In addition to our record performance during the quarter, we recently 

 1 See Final Rule: Additional Form 8-K Disclosure Requirements and Acceleration of Filing Date, 

69 F.R. 15594, at 15597 (Mar. 25, 2004).

2 Id. at 15620.

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secured a $232.5 million, three-year agreement between our Argentina subsidiary, 

Medix, and the Venezuelan Ministry of Health. This agreement will provide over 

fifty hospitals with a broad range of obstetric and neonatal devices, supplies and 

services including more than $50 million of Medix and Natus equipment and 

supplies . . . .”

26. The release further provided the following increased “Financial Guidance”:

For the fourth quarter of 2015, the Company increased its revenue guidance 

to $102.0 million to $105.0 million and guided non-GAAP earnings per share of 

$0.47 to $0.49.

Full year 2015 earnings guidance was increased with expected non-GAAP 

earnings per share of $1.51 to $1.53. Full year 2015 revenue guidance also 

increased to $378 million to $381 million compared to previous guidance of $376 

million to $378 million.

27. Following the earnings release, Natus Medical held a conference call with analysts 

and investors to discuss the Company’s earnings and operations. During the conference call, 

defendants made additional positive statements about the Supply Contract. Defendant Hawkins 

stated in pertinent part as follows:

Last Friday we announced that Medix, our Argentine subsidiary, signed a 

three-year agreement with the Ministry of Health of Venezuela for $232.5 million to 

supply Venezuela with neonatal and obstetric equipment supplies and services. As 

stated in our filing, we are to receive three payments totaling $69 million by the 

end of the first quarter of 2016. Prepayments are to continue throughout the 

contract period as we fulfill our requirements. We expect to commence on this 

contract in our fourth quarter, but revenue is expected to be minimal in the fourth 

quarter.

28. During the conference call, defendant Hawkins concluded his prepared remarks by 

emphasizing the value of the Supply Contract to Natus Medical, stating in pertinent part as follows:

Our newborn care business continues to perform well, leveraging our leading 

newborn care products and our salesforce with our rapidly growing Peloton hearing 

screening service business, combined with the recent addition of fast-growing 

NicView, and now the large order from Venezuela, uniquely positions Natus for an 

exciting future.

29. Defendants further emphasized the purported benefits of the Supply Contract in their 

question and answer session with analysts. For example, a ROTH Capital Partners analyst asked 

defendant Hawkins to “provide a little bit more color just on how we should think about that contract 

contributing next year, both in terms of revenues and earnings, and the cadence of when those 

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prepayments expected by the first quarter will be recognized as revenues throughout 2016.” In 

response, defendant Hawkins stated that the Company’s revenue under the Supply Contract “will 

probably be fairly even throughout the three years.” Defendant Hawkins continued: “We expect to 

receive some payments here by the end of the year, to start those three payments totaling the $69 

million. And then to – most likely those would extend into the first quarter of next year.” 

Defendant Hawkins also emphasized that Natus Medical is “going to be prepaid throughout the 

entire contract. So we’ll ship after we get prepaid. We’ll get more prepayments, and it will have 

that kind of cadence.” Later in the call, defendant Kennedy claimed that the revenues under the 

Supply Contract would be frontloaded, allowing the Company to “always” be ahead: “The contract 

has a little bit heavier prepayments in the front and as it tails down, so we will always be in a 

position of being ahead.”

30. In response to another analyst question regarding how the Supply Contract would 

impact the Company’s gross profits, defendant Hawkins stated: “We believe it will carry about the

same operating profit margin that our regular business has.” Defendant Hawkins would later 

confirm that revenue from the Supply Contract had factored into the Company’s fourth quarter 2015 

guidance, stating that “we put in a couple million dollars in there,” but claiming that this estimate 

and the other forecasted economic impact of the Supply Contract was “conservative,” and that “[i]t’s 

sort of a practice of ours anyway. We’d rather be on the conservative side, and if we do better, 

great.” 

31. On the conference call, defendants Hawkins and Kennedy not only failed to disclose 

the highly contingent and unenforceable nature of the Supply Contract, they instead stated that the 

Supply Contract was likely to lead to continued business and additional revenues with the 

Venezuelan government after the three-year Supply Contract expired. For example, defendant 

Hawkins broke down the purported economic benefit of the Supply Contract as follows:

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Of Natus product itself, it’s about $50 million between Natus and Medix that it we’ll 

[sic] be supplying. Then there’s the biggest component of that will be for other 

products that we don’t manufacture. And then there’s also a service, installation, and 

training component to it that totals the $232.5 million.

And yes, we think you’re right: after this contract expires, we do believe 

there will be a continuing relationship for supplies, other products going forward. 

So, yes, this contract was a long time in the making, and we’re very excited to have 

it and very pleased about it.

I think we had mentioned a few different times that it was a possibility, even 

when we acquired Medix five years ago, this was certainly something that we had 

thought as a possibility. And here it’s happened really bigger than we thought. So, 

very excited.

32. Continuing on the theme that the economics of the Supply Contract were “really 

bigger than we thought,” defendant Kennedy stated: 

The other comment to make about this, this isn’t the first contract with 

Venezuela that Medix has entered into. So this is a continuation of an ongoing 

relationship. While it’s lumpy, it comes over the course of several years. The orders 

are typically very large, and stretch out over many years. So when we acquired 

Medix in 2010, they had just completed, I want to say, about a $100 million deal 

with Venezuela. So there is an ongoing relationship between Medix and other 

South American countries that is valuable.

33. Later in the call, defendant Kennedy assured investors that the currency risk of 

dealing with a South American buyer was adequately addressed in the Supply Contract and that any 

such risk was “minimal,” stating in pertinent part as follows:

There is foreign exchange, no doubt. Any time you deal with the countries in South 

America, there is currency controls and there’s exchange risk. The thing that’s the 

most protective on us here is that we do get – the contract is denominated in 

dollars, and our payment is a dollar-denominated payment. So over time, we will 

be recognizing – we’re taking prepayments in a constant currency. Once we convert 

the currency into pesos to pay our vendors and employees, then we will take the 

currency risk, to the extent that that peso stays on our balance sheet.

But our intent would be to time that to go equally timed, so that as we’re 

collecting pesos we’re paying pesos, and it minimizes the currency risk. But there 

is some risk, although I’d call it minimal.

34. On November 19, 2015, defendant Hawkins presented for Natus Medical at the 

Jefferies Autumn Global Healthcare Conference. Opening his remarks, defendant Hawkins 

reiterated the guidance provided on October 21, 2015, stating in pertinent part that “[t]o look at our 

financials, which we are very proud of, we’ve been able to show very consistent revenue growth 

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over the last few years. And we have guided to almost $380 million mid guidance this year.” 

Expressly lauding the bona fides of the Supply Contract, defendant Hawkins went on to state in 

pertinent part as follows:

We also recently announced a major contract, supply agreement, with 

Venezuela where our Argentine subsidiary received a $232 million agreement to 

supply medical products and services to Venezuela over a three-year period. Not 

only is this for our products, but a variety of newborn care and obstetric products to 

service over 50 hospitals in Venezuela.

You can see that the Natus products represent about $50 million and the other 

products that we will be bringing in and then also the service, warranty, installation 

and all that is for the rest of the contract. It is a very exciting piece of business. We 

will be paid up front as we go on this business.

We are looking to get our first payment in by the end of the year, and those 

payments would continue throughout the life of the contract. It is not really good 

for Natus, but it’s great for the Venezuelan newborns that have been somewhat 

deprived of great medical care over the last number of years due to financial reasons, 

but this money has come free and it is something that we are very happy to be 

involved in.

35. In response to a question from his Jefferies host as to how confident the Company 

was that the Ministry of Health would make good on its payments under the contract, defendant 

Hawkins downplayed any risks and reaffirmed his “confidence” in Natus Medical receiving 

payment, because they had been told that the “money is set aside,” stating:

Yes, so, always a potential risk with any contract. The one thing I would say 

with this one, before we bought our subsidiary, which is located in Buenos Aires, 

which is who received this order, a company called Medix, they had received an $82 

million order maybe seven years ago and it came through just fine. The money 

showed up as expected, and it did happen. 

So, we have pretty good confidence that it should happen. We have been 

told the money is set aside, and we are looking to get our first payment here by the 

end of December.

36. Later in the call, defendant Hawkins stated that the Supply Contract would lead to 

earnings “growth” at the Company in the coming years, stating in pertinent part that “with 

Venezuela we are going to have rate growth. . . . So, we are quite happy overall of just keeping to 

what we are doing and growing the business and growing earnings.”

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37. On December 1, 2015, defendant Hawkins presented for Natus Medical at the Piper 

Jaffray Healthcare Conference. He opened his remarks by stating that “[y]ou can see that our 

revenues have been growing nicely, and we’ve guided this year to $378 million to $381 million.” 

He went on to again laud the bona fides of the Supply Contract, stating in pertinent part as follows:

Another announcement that we recently made: we have a very large order 

that we received from Venezuela totaling $232.5 million for newborn and obstetric 

equipment along with supplies and service for over 50 hospitals in Venezuela. This is 

an order that will be over three years. We have a Venezuelan partner that will be 

responsible for doing all the installation, training, and service and we’re going to be 

the ones selling our products along with purchasing other products.

As you can see from the graph here, approximately $51 million is products 

that Natus manufacturers, with the remainder being other people’s products. And that 

also then breaks down into equipment, supplies, and services, as you can see in the 

bar chart.

We look for some of these revenues to start in December. We expect to get 

our first $23 million payment in the weeks ahead and then we’ll be prepaid on all 

of this as we go forward on a rolling basis. It’s quite a big order for us and we are 

very excited to not only have it ourselves, but also for the babies and mothers in 

Venezuela.

38. During the Q&A session, defendant Hawkins gave what he called “a little more 

color” on the Supply Contract “and certainty of revenue,” without disclosing the fact that the 

Venezuelan government had already failed to make tens of millions of dollars in prepayments under 

the Supply Contract and that the Company had no means of enforcing the Supply Contract. 

Similarly, instead of disclosing the fact that the Supply Contract was contingent on political and 

economic circumstances in Venezuela, defendant Hawkins claimed that Venezuela was following 

through on a “commitment” to make the required payments, stating in pertinent part as follows: 

Sure. The question was for those that are listening on the Venezuela contract, 

a little more color on that and the certainty of revenue. How are we going to get paid 

and all of that.

Well, certainly, it’s a very interesting situation. The order has come through 

our Argentinean subsidiary, which is one of the largest, if not the largest, medical 

device company in Argentina. Argentina has a very strong relationship with 

Venezuela that Argentina historically has had a commitment: whenever they buy oil 

outside of Argentina, they buy it from Venezuela. And Venezuela has said whenever 

we buy medical devices, when appropriate, we’ll buy them through Argentina.

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And with that, there’s been this balance of trade situation that Argentina has 

bought a lot more oil than Venezuela has bought medical devices. So it’s now such 

that Venezuela is now exercising this commitment to fund the medical device 

purchases.

The money is being [sic] that we are receiving for this purchase is all in US 

dollars. And there always is some potential currency risk as we transfer those dollars 

into Argentine pesos to do the purchasing and delivering of product. But overall, 

over this three-year period, we are convinced it’s going to be a good piece of 

business for us.

It will have average corporate margins of 18% to 20%. And although the 

gross profits won’t be near that, but the bottom line operating margin should be the 

same. So we are quite encouraged. We’re expecting to get payment here in the next 

few weeks and looking for this to kick off, Bill.

39. The statements referenced above in ¶¶23 and 25-38 were materially false and 

misleading because they failed to disclose the following material facts that were known to 

defendants and recklessly disregarded by them:

(a) the Venezuelan government had failed to make tens of millions of dollars in 

prepayments to Natus Medical under the Supply Contract, $24 million of which was required to have 

been paid in October 2015; 

(b) Natus Medical had no means to effectively enforce its rights under the Supply 

Contract, as Venezuela was the exclusive forum for dispute resolution; 

(c) Natus Medical’s receipt of revenues under the Supply Contract was contingent 

on the outcome of Venezuelan elections; 

(d) the Supply Contract was subject to foreign currency exchange risks; 

(e) the Supply Contract did not have the economic benefits or certitude that 

defendants had represented; and

(f) as a result of the forgoing, Natus Medical was not on track to achieve the 

increased guidance defendants had led the market to believe the Company was on track to achieve 

during the Class Period and such guidance lacked a reasonable basis. 

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40. On January 11, 2016, Natus Medical issued a release announcing its first quarter and 

fiscal year 2016 financial guidance, which revealed that Venezuela had not made expected payments 

under the Supply Contract due to a purported “delay,” causing Natus Medical to miss its earnings 

guidance:

For the full year 2016, the Company expects to report revenue of $445 

million to $450 million and non-GAAP earnings per share of $1.84 to $1.88. For the 

first quarter of 2016, the Company expects to report revenue of $96.5 million to 

$97.5 million and non-GAAP earnings per share of $0.34 to $0.35, an increase of 

10% to 13% over the first quarter of 2015 non-GAAP earnings per share of $0.31.

The Company expects to report revenue of approximately $100.0 million for 

the fourth quarter of 2015, compared to prior guidance of $102.0 million to $105.0 

million and full year 2015 revenue of $375.9 million compared to prior guidance of 

$378.0 million to $381.0 million. The guidance provided by the Company in 

October for the fourth quarter of 2015 included expected revenue of approximately 

$4 million under the new Venezuelan Ministry of Health contract. The Company 

was not able to ship product on the anticipated schedule because the prepayment 

under the contract was delayed. The Company believes the delay was most likely 

due to a combination of important national elections that occurred in Argentina in 

November and Venezuela in December, Argentina’s currency devaluation in 

December as well as national Christmas holidays. The Company now expects to 

receive prepayment and begin shipments in the first quarter of 2016. The first 

quarter 2016 guidance includes $5 million of revenue from Venezuela and $60 

million of revenue for the full year guidance.

41. On this revelation, the price of Natus Medical common stock declined, falling from 

its close of $43.20 per share on January 8, 2016 to close at $38.25 per share on January 11, 2016, a 

decline of almost $5, or 11%, on usually high trading of approximately 1.4 million shares, or more

than four times the average daily volume over the preceding ten trading days. 

42. However, due to defendants’ mischaracterization of the Ministry of Health’s failure to 

perform as a mere “delay” and their failure to disclose the true terms and risks under the Supply 

Contract, the stock price remained artificially inflated. For instance, stock analyst Roth Capital 

Partners’ January 12, 2016 “Company Note” stated in pertinent part that “[w]hile Venezuela remains 

an uncertainty, management is confident shipments will begin in 1Q,” referring to a mere “delay 

with its Venezuela contract.” Similarly, on January 20, 2016, Roth Capital Partners sent a “FLASH 

NOTE” to its brokerage customers entitled “BABY 4Q Preview: Preannouncement Should Leave 

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Little Surprise,” in which it claimed to have received the following additional reassurances from 

Natus Medical’s management:

• . . . Based on our discussions, management remains confident the contract 

should begin this quarter after political elections in Argentina and Venezuela, 

along with the Argentinian currency devaluation, all of which occurred in 

4Q, caused the delay.

• Management has assumed it will receive Venezuelan prepayments by the end 

of February and begin shipping on the contract thereafter, which would allow 

Natus to record ~$5 million of revenues in 1Q and remain on track with the 

$60 million revenue assumption imbedded in its 2016 guidance.

43. On January 27, 2016, Natus Medical issued a press release reaffirming that the 

revenue shortfall in the fourth quarter of 2015 was a result of the purported “delay” in receiving 

prepayments under the Supply Contract, and that Natus Medical’s guidance depended on revenues 

from the Supply Contract. The release also disclosed unspecified “risks associated with our 

Venezuela contract.”

44. Later that day, when Natus Medical held a conference call with analysts and investors 

to discuss the press release, defendant Hawkins again acknowledged that, “[a]s previously 

announced, the guidance . . . provided in October 2015 included expected revenue of approximately 

$4 million under the new $232 million Venezuela Ministry of Health contract to supply neonatal and 

obstetric equipment,” but claimed that the Company “did not ship product on the anticipated 

schedule because the prepayment under the contract was delayed.” Later in the call, discussing 

guidance, defendant Hawkins confirmed that “[t]he first-quarter revenue guidance include[d] 

approximately $5 million from the Venezuela contract” and that the “[f]ull-year revenue guidance 

include[d] approximately $60 million from the Venezuela contract.” Defendant Hawkins concluded 

his opening remarks by emphasizing that “the large order from Venezuela uniquely positions Natus 

for an exciting future.”

45. Later on the call, when asked by an analyst “[w]hat gives you confidence that that 

contract will begin this quarter,” defendant Hawkins reiterated that he was “very confident that this 

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business will happen.” Hawkins also responded “yes” to an analyst questioning whether it was 

“safe to assume guidance implies about $0.20 in earnings from Venezuela this year.” He later 

stated, “We look to grow, hopefully, faster than we’ve guided, and also earnings.”

46. Defendant Kennedy provided a similar confidence in the economic benefits of the 

Supply Contract, stating in response to an analyst’s question: “The operating piece we can pretty 

much predict. If I had a gun to my head and had to predict, it’s probably in the mid-40%s for a 

gross profit margin, and Jim said just under 20% for the operating.”

47. Following the release and conference call, numerous analysts expressed skepticism 

that the Supply Contract would convey the economic benefits that defendants had previously 

reported. For instance, stock research analysts from William Blair stated in their January 27, 2016 

research report that while they still held out hope the Ministry of Health prepayments would come 

in, they were removing them from their modeling, stating in pertinent part as follows:

As the company alluded to in its prerelease, the top line fell short of original 

guidance by about $4 million due to a delay with the implementation of a recently 

signed contract with the Venezuelan Ministry of Health. . . .

Regarding Venezuela, management remains optimistic the contract will be 

executed fairly. However, it seems clear that the timing of payments and ability to 

actually record revenue from the prepayments is still uncertain and we remain 

skeptical that the full $60 million of revenue attributable to the Venezuela contract 

in 2016 will materialize this year. As a result, we continue to strongly advise 

investors to focus exclusively on the impressive performance in the base business.

The company also reiterated first-quarter guidance (revenue of $96.5 million-

$97.5 million and adjusted EPS of $0.34-0.35) and 2016 guidance ($445 million-

$450 million in revenues and $1.84-$1.88 in EPS), both of which include 

contribution from Venezuela. Excluding Venezuela, guidance appears to call for 

2%-4% revenue growth and EPS of around $1.67 or $1.68.

48. On this news, the price of Natus Medical stock fell once again, from its close of 

$37.15 per share on January 27, 2016 to close at $34.71 per share on January 28, 2016, a decline of 

$2.44 per share, on abnormally high trading volume. 

49. On February 29, 2016, Natus Medical filed the 10-K, disclosing that, “[f]ollowing the 

announcement of [the Ministry of Health] contract, there ha[d] been elections in both Venezuela and 

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Argentina leading to significant political changes in those countries” and “it [had been] reported that 

Venezuela [was] experiencing a highly inflationary economy and recessionary economic 

conditions,” stating that “[t]hese developments may impact the likelihood of the Venezuelan 

Ministry of Health’s following through with orders under the agreement, and Medix ha[d] not yet 

received any prepayments under the agreement and no products or services ha[d] been shipped or 

provided.” The 10-K now warned that “[i]f, for these or any other reasons, the Venezuelan Ministry 

of Health does not make the required prepayments to initiate deliveries under the Medix agreement, 

we will not receive any benefit from it.”

50. The Company finally attached a copy of the Supply Contract to the 10-K, which 

disclosed that the $69 million in prepayments by the Ministry of Health were due by the end of 2015, 

including more than $24 million that was due in October 2015 – and thus the prepayments had been 

past due for months – not the first quarter of 2016 as defendants had represented. As to Natus 

Medical’s ability to legally enforce the terms of the Supply Contract, the Supply Contract provide 

that “all aspects relative to the interpretation, application, performance and compliance of this 

Agreement, shall be ruled by the Laws of the Bolivarian Republic of Venezuela and they have 

chosen the City of Caracas as their special domicile for such effects.” This choice of law provision 

rendered the Supply Contract essentially unenforceable by Natus Medical against the Venezuelan 

government.3

 

51. On this news, the price of Natus Medical stock once again declined, falling from its 

close of $37.21 per share on February 26, 2016 to close at $36.32 per share on February 29, 2016. 

 3 For example, the International Commission of Jurists (“ICJ”) has identified “key deficiencies in 

the Venezuelan legal system, which threaten the rule of law,” and issued a 2014 report which 

documented “failures by the authorities, as well as interference, intimidation, arbitrary suspensions 

and other pressures, that have undermined the independence and impartiality of the country’s judges 

and prosecutors, and the ability of lawyers to be effective and independent in upholding people’s 

rights.” ICJ, Venezuela: weak legal system threatens democracy (June 5, 2014), 

https://www.icj.org/venezuela-weak-legal-system-threatens-democracy-and-human-rights-reforms- urgently-needed-new-report-says/ (last visited Jan. 26, 2017).

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However, because defendants failed to remove their prior guidance, which incorporated purportedly 

expected revenues from the SupplyContract and represented that they expected timely performance 

under the contract, the stock price remained artificially inflated.

52. On a March 14, 2016, defendants Hawkins and Kennedy presented at the ROTH 

investor conference call. On the call, defendant Hawkins conceded that analysts could discount the 

expected revenues from the Supply Contract, but stated “we really believe this is going to happen.” 

However, instead of the misleading confidence and certainty that he had previously conveyed 

regarding the Supply Contract, Hawkins acknowledged that “trying to handicap exactly when, with 

all the changes going on in both governments, Ministry of Health, oil prices, it has made it very 

difficult.” Later in the call, he characterized Venezuela as being, “quote, in the toilet,” and stated 

that the Company had “an agent there that is the number one distributor and supplier of product in 

Venezuela who we rely upon to really give us this feedback.” 

53. Then, on April 4, 2016, Natus Medical issued a press release pre-announcing its 

preliminary first quarter 2016 results. The release disclosed that “[r]evenue for the first quarter of 

2016 [was] expected to be approximately $87.5 million versus previous guidance of $91.5 million to 

$92.5 million, excluding revenue from the Venezuela Ministry of Health contract.” The release 

revealed that Natus Medical did not have “‘any revenue associated with the Venezuela Ministry of 

Health contract as [it] did not receive any prepayments during the quarter.’”

54. On this news, the price of Natus Medical stock declined precipitously, falling from its 

close of $39.64 per share on April 1, 2016 to close at $31.84 per share on April 4, 2016, a decline of 

$7.80 per share, or nearly 20%, on unusually high trading volume of more than 2.7 million shares, or 

more than eight times the average daily trading volume over the preceding ten trading days.

55. When the Company finally released its first quarter 2016 results on April 20, 2016, 

defendants slashed the Company’s fiscal year 2016 guidance, finally publicly conceding that they 

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could “no longer include revenue or earnings from the agreement in . . . guidance until there is more 

clarity” on Venezuela’s performance under the agreement.

NO SAFE HARBOR

56. Natus Medical’s “Safe Harbor” warnings accompanying its reportedly forwardlooking statements (“FLS”) issued during the Class Period were ineffective to shield those 

statements from liability. Because most of the false and misleading statements related to existing 

facts or conditions, the Safe Harbor has no applicability. To the extent that known trends should 

have been included in the Company’s financial reports prepared in accordance with GAAP, they are 

excluded from the protection of the statutory Safe Harbor. 15 U.S.C. §78u-5(b)(2)(A).

57. The defendants are also liable for any false or misleading FLS pleaded because, at the 

time each FLS was made, the speaker knew the FLS was false or misleading and the FLS was 

authorized and/or approved by an executive officer and/or director of Natus Medical who knew that 

the FLS was false. In addition, the FLS were contradicted by existing, undisclosed material facts 

that were required to be disclosed so that the FLS would not be misleading. Finally, most of the 

purported “Safe Harbor” warnings were themselves misleading because they warned of “risks” that 

had already materialized or failed to provide any meaningful disclosures of the relevant risks.

ADDITIONAL SCIENTER ALLEGATIONS

58. As alleged herein, defendants acted with scienter in that defendants knew that the 

public documents and statements issued or disseminated in the name of the Company were 

materially false and misleading; knew that such statements or documents would be issued or 

disseminated to the investing public; and knowingly and substantially participated or acquiesced in 

the issuance or dissemination of such statements or documents as primary violations of the federal 

securities laws. As set forth elsewhere herein in detail, defendants, by virtue of their receipt of 

information reflecting the true facts regarding Natus Medical, their control over, and/or receipt or 

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modification of Natus Medical’s allegedly materially misleading misstatements and/or their 

associations with the Company which made them privy to confidential proprietary information 

concerning Natus Medical, participated in the fraudulent scheme alleged herein.

59. Meanwhile, defendants’ false and misleading statements artificially inflated the price 

of Natus Medical stock, which reached all-time highs of over $50 per share during the Class Period. 

While the price of Natus Medical stock was artificially inflated, certain of the Company’s senior 

executives and directors cashed in, selling hundreds of thousands shares of their personally held 

Natus Medical stock at fraud-inflated prices, including defendants Hawkins and Kennedy, who sold 

228,958 shares and received more than $10.7 million in gross proceeds:

DEFENDANT DATE SHARES SOLD PRICE

GROSS 

PROCEEDS

Kennedy 10/27/15 10,496 $45.75 $480,192

Kennedy 10/28/15 18,462 $45.70 $843,713

Hawkins 10/28/15 56,189 $45.89 $2,578,513

Hawkins 10/29/15 6,162 $45.89 $282,774

Hawkins 10/30/15 37,649 $45.53 $1,714,159

Hawkins 11/10/15 15,731 $48.12 $756,976

Hawkins 11/12/15 26,758 $47.32 $1,266,189

Hawkins 11/25/15 14,103 $48.86 $689,073

Hawkins 11/27/15 43,408 $49.17 $2,134,371

Totals: 228,958 $10,745,960

APPLICABILITY OF PRESUMPTION OF RELIANCE:

FRAUD-ON-THE-MARKET DOCTRINE

60. At all relevant times, the market for Natus Medical common stock was an efficient 

market for the following reasons, among others:

(a) Natus Medical stock met the requirements for listing, and was listed and 

actively traded on the NASDAQ, a highly efficient and automated market;

(b) According to the Company’s Form 10-Q filed on November 3, 2016, the 

Company had more than 32.9 million shares outstanding as of October 28, 2016. During the Class 

Period, on average, 330,000 shares of Natus Medical stock were traded on a daily basis, 

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demonstrating a very active and broad market for Natus Medical stock and permitting a very strong 

presumption of an efficient market;

(c) Natus Medical was qualified to file a less comprehensive Form S-3 

registration statement with the SEC that is reserved, by definition, to well-established and largely 

capitalized issuers for whom less scrutiny is required;

(d) as a regulated issuer, Natus Medical filed periodic public reports with the 

SEC;

(e) Natus Medical regularly communicated with public investors via established 

market communication mechanisms, including regular disseminations of press releases on the 

national circuits of major newswire services, the Internet and other wide-ranging public disclosures, 

such as communications with the financial press and other similar reporting services;

(f) Natus Medical was followed by many securities analysts who wrote reports 

that were distributed to the sales force and certain customers of their respective firms during the 

Class Period and each of these reports was publicly available and entered the public marketplace; 

and

(g) unexpected material news about Natus Medical was rapidly reflected in and 

incorporated into the Company’s stock price during the Class Period.

61. As a result of the foregoing, the market for Natus Medical common stock promptly 

digested current information regarding Natus Medical from publicly available sources and reflected 

such information in Natus Medical’s stock price. Under these circumstances, all purchasers of Natus 

Medical common stock during the Class Period suffered similar injury through their purchase of 

Natus Medical common stock at artificially inflated prices, and a presumption of reliance applies.

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LOSS CAUSATION

62. During the Class Period, as detailed herein, defendants made false and misleading 

statements and omitted material information concerning Natus Medical’s business and prospects and 

engaged in a scheme to deceive the market. By artificially inflating and manipulating the price of 

Natus Medical stock, defendants deceived plaintiff and the Class and caused them losses when the 

truth was revealed. When defendants’ prior misrepresentations and fraudulent conduct became 

apparent to the market, this caused Natus Medical’s stock price to fall precipitously as the prior 

artificial inflation came out of the stock price. As a result of their purchases of Natus Medical stock 

during the Class Period, plaintiff and other members of the Class suffered economic loss, i.e., 

damages, under the federal securities laws.

CLASS ACTION ALLEGATIONS

63. This is a class action on behalf of all purchasers of Natus Medical common stock 

during the Class Period (the “Class”). Excluded from the Class are defendants and their families, the 

officers and directors of the Company, at all relevant times, members of their immediate families and 

their legal representatives, heirs, successors or assigns, and any entity in which defendants have or 

had a controlling interest.

64. Common questions of law and fact predominate and include: (a) whether defendants 

violated the Exchange Act; (b) whether defendants omitted and/or misrepresented material facts; (c) 

whether defendants knew or recklessly disregarded that their statements were false; (d) whether the 

price of Natus Medical common stock was artificially inflated during the Class Period; and (e) the 

extent of and appropriate measure of damages.

65. Plaintiff’s claims are typical of those of the Class. Prosecution of individual actions 

would create a risk of inconsistent adjudications. Plaintiff will adequately protect the interests of the 

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Class. A class action is superior to other available methods for the fair and efficient adjudication of 

this controversy.

COUNT I

For Violation of §10(b) of the Exchange Act

and Rule 10b-5 Against All Defendants

66. Plaintiff repeats and realleges the above paragraphs as though fully set forth herein.

67. Throughout the Class Period, defendants, in pursuit of their scheme and continuous 

course of conduct to inflate the market price of Natus Medical common stock, had the ultimate 

authority for making, and knowingly or recklessly made, materially false or misleading statements or 

failed to disclose material facts necessary to make the statements made, in light of the circumstances 

under which they were made, not misleading.

68. During the Class Period, defendants, and each of them, carried out a plan, scheme, 

and course of conduct using the instrumentalities of interstate commerce and the mails, which was 

intended to and, throughout the Class Period did: (a) artificially inflate and maintain the market price 

of Natus Medical common stock; (b) deceive the investing public, including plaintiff and other Class 

members, as alleged herein; (c) cause plaintiff and other members of the Class to purchase Natus 

Medical common stock at inflated prices; and (d) cause them losses when the truth was revealed 

over time. In furtherance of this unlawful scheme, plan and course of conduct, defendants, and each 

of them, took the actions set forth herein, in violation of §10(b) of the Exchange Act and Rule 10b-5, 

17 C.F.R. §240.10b-5. 

69. In addition to the duties of full disclosure imposed on defendants as a result of their 

affirmative false and misleading statements to the investing public, defendants had a duty to 

promptly disseminate truthful information with respect to Natus Medical’s operations and 

performance that would be material to investors in compliance with the integrated disclosure 

provisions of the SEC, including with respect to the Company’s revenue and earnings trends, so that 

Case 4:17-cv-00458-JSW Document 1 Filed 01/30/17 Page 25 of 31
COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS - 25 -

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the market price of the Company’s common stock would be based on truthful, complete and accurate 

information. 

70. Defendants had actual knowledge of the misrepresentations and omissions of material 

facts set forth herein or acted with reckless disregard for the truth in that they failed to ascertain and 

disclose such facts, even though such facts were either known or readily available to them.

71. 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 Natus Medical common 

stock was artificially inflated during the Class Period. In ignorance of the fact that the market price 

of Natus Medical common stock was artificially inflated, and relying upon the integrity of the 

market in which the shares traded, plaintiff and other members of the Class purchased Natus Medical 

stock during the Class Period at artificially high prices and, when the truth was revealed, were 

damaged thereby.

72. Had plaintiff and the other members of the Class and the marketplace known of the 

true facts, which were knowingly or recklessly concealed by defendants, plaintiff and the other 

members of the Class would not have purchased their Natus Medical shares during the Class Period, 

or if they had purchased such shares during the Class Period, they would not have done so at the 

artificially inflated prices which they paid.

73. By virtue of the foregoing, defendants Natus Medical and the Individual Defendants 

have violated §10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder, 17 C.F.R. 

§240.10-5.

COUNT II

For Violation of §20(a) of the Exchange Act

Against All Defendants

74. Plaintiff repeats and realleges the above paragraphs as though fully set forth herein.

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75. The Individual Defendants had control over Natus Medical and made the materially 

false and misleading statements and omissions on behalf of Natus Medical within the meaning of 

§20(a) of the Exchange Act as alleged herein. By virtue of their share ownership, executive and 

board positions and stock ownership, and their culpable participation, as alleged above, the 

Individual Defendants had the power to influence and control and did, directly or indirectly, 

influence and control the decision making of the Company, including the content and dissemination 

of the various statements which plaintiff contends were false and misleading. The Individual 

Defendants were provided with or had unlimited access to the Company’s internal reports, press 

releases, public filings, and other statements alleged by plaintiff to be misleading prior to or shortly 

after these statements were issued, and had the ability to prevent the issuance of the statements or 

cause them to be corrected.

76. In particular, the Individual Defendants had direct involvement in and responsibility 

over the day-to-day operations of the Company and, therefore, are presumed to have had the power 

to control or influence the particular transactions giving rise to the securities violations as alleged 

herein. Natus Medical had the power to control and influence, and did control and influence, the 

Individual Defendants and all of its employees. 

77. By reason of such wrongful conduct, Natus Medical and the Individual Defendants 

are liable pursuant to §20(a) of the Exchange Act. 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 common stock during the Class Period.

PRAYER FOR RELIEF

WHEREFORE, plaintiff prays for judgment as follows:

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A. Determining that this action is a proper class action, designating plaintiff as Lead 

Plaintiff and certifying plaintiff as a Class representative under Rule 23 of the Federal Rules of Civil 

Procedure and plaintiff’s counsel as Lead Counsel;

B. Awarding compensatory damages in favor of plaintiff and the other Class members 

against all defendants, jointly and severally, for all damages sustained as a result of defendants’ 

wrongdoing, in an amount to be proven at trial, including interest thereon;

C. Awarding plaintiff and the Class their reasonable costs and expenses incurred in this 

action, including counsel fees and expert fees; and

D. Awarding such other and further relief as the Court may deem just and proper.

JURY DEMAND

Plaintiff demands a trial by jury.

DATED: January 30, 2017 ROBBINS GELLER RUDMAN

& DOWD LLP

SHAWN A. WILLIAMS

s/ Shawn A. Williams

SHAWN A. WILLIAMS

Post Montgomery Center

One Montgomery Street, Suite 1800

San Francisco, CA 94104

Telephone: 415/288-4545

415/288-4534 (fax)

ROBBINS GELLER RUDMAN

& DOWD LLP

DAVID C. WALTON

BRIAN E. COCHRAN 

655 West Broadway, Suite 1900

San Diego, CA 92101

Telephone: 619/231-1058

619/231-7423 (fax)

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ROBBINS GELLER RUDMAN

& DOWD LLP

SAMUEL H. RUDMAN

MARY K. BLASY

58 South Service Road, Suite 200

Melville, NY 11747

Telephone: 631/367-7100

631/367-1173 (fax)

JOHNSON & WEAVER, LLP

FRANK J. JOHNSON

PHONG L. TRAN

600 West Broadway, Suite 1540

San Diego, CA 92101

Telephone: 619/230-0063

619/255-1856 (fax)

Attorneys for Plaintiff

I:\Admin\CptDraft\Securities\Cpt Natus Medical.docx

Case 4:17-cv-00458-JSW Document 1 Filed 01/30/17 Page 29 of 31
CERTIFICATION OF PLAINTIFF PURSUANT 

TO THE FEDERAL SECURITIES LAWS

I, Gregg Badger, declare the following as to the claims asserted, or to be asserted, under 

the federal securities laws:

1. I have reviewed the complaint with my counsel and authorize its filing.

2. I did not acquire the securities that are the subject of this action at the direction of 

plaintiff’s counsel or in order to participate in any private action or any other litigation under the 

federal securities laws.

3. I am willing to serve as a representative party on behalf of the class, including 

testifying at deposition or trial, if necessary.

4. I made the following transactions during the Class Period in the securities that are 

the subject of this action.

Acquisitions:

Date Acquired

Number of Shares

Acquired

Acquisition Price Per

Share

March 2, 2016 140 35.47

March 10, 2016 343 37.70

Sales:

5. I will not accept any payment for serving as a representative party beyond my 

pro-rata share of any recovery, except reasonable costs and expenses – such as lost wages and 

travel expenses – directly related to the class representation, as ordered or approved by the Court 

pursuant to law.

DocuSign Envelope ID: 0F0718E7-FCAD-4E68-A290-3E63C5B7E46D Case 4:17-cv-00458-JSW Document 1 Filed 01/30/17 Page 30 of 31
6. I have not sought to serve or served as a representative party for a class in an 

action under the federal securities laws within the past three years, except if detailed below:

I declare under penalty of perjury under the laws of the United States of America that the

foregoing is true and correct.

Executed this 27th day of January, 2017.

__________________________________________

Gregg Badger

DocuSign Envelope ID: 0F0718E7-FCAD-4E68-A290-3E63C5B7E46D Case 4:17-cv-00458-JSW Document 1 Filed 01/30/17 Page 31 of 31