According to the Memorandum Opinion and Order dated January 22, 2001, U.S. District Judge Barbara M G. Lynn granted the defendants' motions to dismiss amended class action complaint. Plaintiff's claims were dismissed with prejudice, with costs taxed against plaintiff. The case was closed.
The original complaint alleges that defendants violated the federal securities laws (Sections 11, 12(a)(2) and 15 of the Securities Exchange Act of 1933) for making material misrepresentations in the Registration Statement and Prospectus that was filed with the SEC and distributed to investors. Nowhere in the Prospectus did the company disclose that its growth projections were dependent on consumers upgrading from Windows 95 to Windows 98 and failed to disclose that a disruption of Microsoft's roll out of its Windows 98 operating system could materially impact its earnings. (NASDAQ: MSFT) In fact, the Company never even mentioned Windows 98 in the Prospectus. This lack of disclosure misled investors into believing that the legal and technical problems surrounding Windows 98 would not have a material impact on the Company's bottom line. Viagrafix' defective Prospectus resulted in the Company and its founders being paid an inflated price for the shares of common stock sold in the March 4, 1998 IPO. As reported by Dow Jones on May 12, 1998, the Company disclosed that "the Windows 98 debacle had affected (its) business." Immediately thereafter, the price of ViaGrafix' stock fell precipitously, plunging over 40% from its $13 offering price to a new low of $7.75 per share. The stock price has since dropped even lower.