According to the Company’s FORM 10-Q for the quarterly period ended September 30, 2004, on June 21, 2004 Avatar moved for an order dismissing the action in its entirety, on the grounds of failure to state a claim, failure to plead with the requisite particularity and lack of standing. Plaintiff did not file a response to Avatar’s motion to dismiss. On October 12, 2004, the court entered an order dismissing the complaint in its entirety with prejudice as to the named plaintiff.
The Complaint alleges that defendants violated Sections 12(a)(2) and 15 of the Securities Act of 1933. Specifically, the case is brought in connection with Avatar's July 1, 2003 announcement of its redemption of $60 million of the $94,429 million in aggregate principal amount of Notes outstanding. The Notes were convertible, at any time prior to maturity, to shares of Avatar common stock at a conversion price of $31.80 per share or Avatar could redeem the Notes at its option at specified prices. Because Avatar is a real estate company, the true value of its real estate holdings is critical to Noteholders in making a decision whether to have their Notes redeemed for cash, or whether to exchange those Notes for shares of Avatar's common stock. The Company's public documents state that its real estate is valued at the lower of cost or market value. Plaintiff alleges that Noteholders are unable to make an informed decision whether to convert their Notes to Avatar common stock or allow them to be redeemed because defendants failed to disclose the basis on which the Company's land inventories are valued. The Complaint seeks disclosure of this material information or damages that flow from the failure to disclose it.
NOTE: The class includes all persons or entities who hold 7% convertible subordinated notes due April 1, 2005 sold by Avatar Holdings Inc.