According to the Company’s FORM 10-Q For The Quarterly Period Ended September 30, 2005, one of the complaints was voluntarily dismissed by the plaintiff in that case on April 28, 2005. On May 13, 2005, the court ordered the three remaining cases to be consolidated into one case, styled Harold Read, individually and on behalf of all others similarly situated v. Input/Output, Inc, Robert P. Peebler, J. Michael Kirksey, and Michael K. Lambert. On August 26, 2005, the court ordered that the class action allegations contained in the consolidated lawsuit be stricken from the lawsuit for the plaintiffs’ failure to identify and designate a lead plaintiff in the lawsuit. On September 2, 2005, the court ordered that the former putative class action lawsuit be dismissed without prejudice
The complaint charges I/O and one or more of its officers with violations of the Securities Exchange Act of 1934. Specifically, the complaint alleges that the company failed to disclose and misrepresented the following material adverse facts which were known to defendants or recklessly disregarded by them: (1) that the integration of GXT and I/O was a significant failure; (2) that in contrast to I/O representations, GXT project pipeline lacked in volume; (3) that, in addition to the company as a whole, I/O's business development group, within the ISG group, was suffering from poor management execution; (4) that company's internal growth, due to poor management execution, remained stagnant irregardless of management's assertions otherwise; and (5) that as a result of the above, the defendants' statements about the company were lacking in any reasonable basis when made.
Furthermore, on or around January 4, 2005, I/O issued a press release wherein it announced that fourth quarter results would be significantly below the low end of the company's guidance of $0.08 per share primarily because two high margin GXT data library sales were not completed as expected. News of this shocked the market. As a result, shares of I/O fell $1.41 per share, or about 17 percent, to close at $6.90 per share on usually high trading volume.