According to the Company’s FORM 10-Q for the quarterly period ended June 30, 2004, on June 16, 2004, the Fifth Circuit affirmed the June 13, 2003 judgment of the District Court. In addition, on July 15, 2004, the Fifth Circuit denied the plaintiff's request for a rehearing.
Previously, according to the same SEC filing, certain purported class action complaints alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 thereunder were filed against the Company and certain of its officers and directors in 1998. These complaints were filed in the United States District Court for the Southern District of Texas (the "District Court") in Houston, Texas and were consolidated on May 29, 1998. On March 30, 1999, the District Court granted the defendants' motion to dismiss and dismissed the case with prejudice. The plaintiffs filed an appeal. On September 25, 2001, the United States Fifth Circuit Court of Appeals (the "Fifth Circuit") affirmed the dismissal of all claims except one; the Fifth Circuit reversed the District Court's dismissal of a claim concerning the Company's disclosure about a patent relating to VASOMAX(R). On June 13, 2003, the District Court granted the defendants' motion for summary judgment as to that last remaining claim, and entered a judgment dismissing the case with prejudice. The plaintiffs filed an appeal.
The original Complaint names Zonagen and certain of the Company's officers and directors as defendants, alleging that these parties violated Sections 10(b) and 20(a) of the Exchange Act, as well as SEC Rule 10b-5 promulgated thereunder, by originating a series of materially misleading statements and omissions concerning the Company's business prospects and its intellectual property rights with regard to its purported impotency drug, Vasomax, and a purportedly proprietary adjuvant, which the defendants called ImmuMax. Specifically, Plaintiff alleges that the defendants misrepresented the patent protection which the Company enjoyed with respect to Vasomax, and misrepresented that the Company had developed a new adjuvant, ImmuMax, when this compound was actually a previously patented adjuvant called Chitosan. On November 18, 1997, a third party issued a press release revealing that Zonagen did not have patent protection for its Vasomax product. This disclosure, and subsequent disclosures concerning the Company's products and intellectual property rights sent Zonagen's share prices plummeting, from a Class Period high of $44 1/8 on October 13, 1997 to a low of $14 15/16 on January 12, 1998.