Full opinion text
OPINION LECHNER, District Judge. This is a consolidated class action for securities fraud brought by designated lead class plaintiffs, Robert M. Gintel, et al, (the “Gintel Group”) on behalf of all persons who purchased, or otherwise acquired Milestone Scientific, Inc. (“Milestone”) common stock (collectively, the “Plaintiffs”) during the period running from 31 March 1997 to 4 June 1998 (the “Class Period”). The two count consolidated amended complaint (the “Amended Complaint”) alleges violations of Section 10(b) (“Section 10(b)”) and Section 20(a) (“Section 20(a)”) of the Securities Exchange Act of 1934 (the “Exchange Act”), as amended, 15 U.S.C. §§ 78j(b) and 78t(a), and Rule 10b-5 (“Rule 10 — b”) promulgated thereunder, 17 C.F.R. § 240.10b-5. See Anended Complaint ¶¶ 96-110, Counts 1-2. Federal question jurisdiction, pursuant to 28 U.S.C. § 1331 (“Section 1331”), is alleged based upon Section 27 of the Exchange Act, as amended 15 U.S.C. § 78aa. See id. at ¶ 1. Currently pending is a motion brought by Milestone to dismiss (the “Motion to Dismiss”) the Amended Complaint for failure to state a claim, pursuant to Rule 9(b) (“Rule 9(b)”) and Rule 12(b)(6) (“Rule 12(b)(6)”) of the Federal Rules of Civil Procedure. For the reasons set forth below, the Motion to Dismiss is granted. The thirty-eight page, 110 paragraph Amended Complaint bases the cause of action on a series of published reports, news articles and filings with the Securities and Exchange Commission (the “SEC”). At issue are the contents of several statements, including four SEC filings, an annual report, sixteen Articles in Business Wire, two articles in Bloomberg News, and several trade magazines, as well as two telephone conference calls in May and June 1998. Significantly, counsel for Plaintiffs conceded at oral argument that none of the statements quoted in the Amended Complaint from Paragraph 22 through Paragraph 99 were false or contained false data. The main thrust of the Amended Complaint appears to be the failure to adequately disclose that options were granted to certain consultants who performed tests or authored articles concerning a product manufactured by Milestone. Therefore, Plaintiffs argue that such articles were misleading. Plaintiffs contend that while such tests were reliable, they were, nevertheless, used to “hype” the stock of Milestone. As will be developed in a seriatim review of the Amended Complaint, in not one instance did counsel for Plaintiff contend during oral argument that any portion of the articles or tests quoted in the Amended Complaint was false. It appears all of the financial data included in the SEC filings or otherwise made public, as referred to in the Amended Complaint, are accurate. The only possible exception to this is the argument made by counsel for Plaintiff that the reserves for returned sales, and therefore revenue recognition, were inadequate. In addition, an argument is offered that information disclosed about backlog was also inaccurate. Nevertheless, the Plaintiffs allege nothing in the Amended Complaint to attach a fraud component to these allegations, if in fact they are correct. Upon review of the Amended Complaint, it appears the Plaintiffs allege the failure to disclose options payments to certain consultants and violations of the generally accepted accounting principles (“GAAP”) governing financial reporting in an effort to support their securities fraud claims. See generally Amended Complaint at ¶¶ 21-89. In sum, upon a review of the Amended Complaint and a full text review of the statements at issue, it appears a negative news article released near the end of the Class Period precipitated a sharp decline in the price of Milestone stock. Facts A. The Parties 1. Milestone Milestone is a Delaware corporation with its principal place of business located in 44 Kean Road, Short Hills, New Jersey. See Amended Complaint at ¶ 6. Milestone develops, manufactures, markets, and sells equipment and related disposable or consumable devices and other related products for use by dental practitioners. See id. The principal product of Milestone is the wand (the “Wand”). The Wand is a computer controlled “painless” injection system which enables a dental practitioner to more quickly and effectively deliver anesthesia to patients in certain dental applications. See id. The Wand uses a disposable needle. Milestone initially introduced the Wand during the fall 1997 American Dental Association (the “ADA”) Trade Show. See id. As a result of a favorable response at the ADA trade show, Milestone began selling units of the Wand and an initial supply of 100 disposable needle devices to distributors in or about January 1998. See id. On or about 1 March 1998, Milestone had more than 8.7 million shares of common stock outstanding. See id. Initially, the common stock was publicly traded on the NASDAQ National Market under the symbol “WAND” from 7 January 1998, until 22 April 1998. See id. at ¶¶ 6 & 50. On or about 23 April 1998 the common stock of Milestone began trading on the American Stock Exchange under the symbol “MS.” See id. at ¶¶ 6 & 62. 2. The Officer and, or, Director Defendants Leonard Osser (“Osser”) was, at all times relevant to the Class Period, Chairman of the Board of Directors and Chief Executive Officer of Milestone beginning approximately July 1991. See id. at ¶ 7. In addition, Osser was the Chief Financial Officer of Milestone until July 1997. See id. Osser was also the President of Milestone until 4 March 1998. See id. Osser signed the annual reports on Securities and Exchange Commission (the “SEC”) Form 10-K for the fiscal year ended 31 December 1996 (the “31 December 1996 SEC Form 10-K”) and 31 December 1997 (the “31 December 1997 SEC Form 10-K”). See id. In addition, Osser signed SEC Form 10-Q for the fiscal quarters ended 31 March 1997 (the “31 March 1997 SEC Form 10-Q”), 30 June 1997 (the “30 June 1997 SEC Form 10-Q”), 30 September 1997 (the “30 September 1997 SEC Form 10-Q”) and 31 March 1998 (the “31 March 1998 SEC Form 10-Q”). See id. Pat Mele, III (“Mele”) served as the Chief Financial Officer of Milestone between July 1997 and 3 April 1998, and allegedly resigned thereafter for personal reasons. See id. at ¶ 8. As the principal financial and accounting officer, Mele was responsible for the financial, treasury, and accounting functions of Milestone. See id. Mele singed the Milestone yearly report appended to the 31 December 1997 SEC Form 10-K. See id. Mele also signed the 30 September 1997 SEC Form 10-Q. See id. Daniel R. Martin (“Martin”) became the president, Chief Operating Officer and director of Milestone beginning 4 March 1998. See id. at ¶ 9. In addition, Martin was the acting Chief Financial Officer of Milestone from 4 April 1998 until 4 May 1998. See id. On or about 6 January 1999, Martin took a leave of absence to address certain medical conditions. Martin signed the 31 March 1998 SEC Form 10-Q. See id. B. Procedural History This action is a consolidation of fifteen lawsuits. The Plaintiffs filed the Amended Complaint on 28 April 1999. In response to the Amended Complaint, Milestone submitted the motion to Dismiss. Because Plaintiffs included a footnote in their Opposition Brief requesting an opportunity to file yet another amended complaint if the motion to Dismiss was granted, a telephone conference among counsel took place on 27 January 2000 (the “27 January 2000 Conference”). During the 27 January 2000 Telephone Conference, the Plaintiffs were advised that if, after review of the Motion to Dismiss and the Moving and Reply Briefs, they wanted to again amend the Amended Complaint, they should so advise the court on 1 February 2000. See 27 January 2000 Telephone Conference. The Plaintiffs were advised that leave to again amend the Amended Complaint would be granted, if requested. See id. The Plaintiffs were also advised that if they declined the opportunity to amend the Amended Complaint and if the Motion to Dismiss was granted, no further opportunity to amend would be permitted. See id. By letter, dated 1 February 2000, (the “1 February 2000 Letter”) counsel for Plaintiffs indicated to the court that Plaintiffs would not seek to further amend the Amended Complaint. See 1 February 2000 Letter; see also Shane v. Fauver, 213 F.3d 113, 116 (3d Cir.2000). Finally, at the request of the court, oral argument was scheduled for 2 March 2000 (the “2 March 2000 Oral Argument”). See generally 2 March 2000 Tr. At the conclusion of the 2 March 2000 Oral Argument, the parties were asked to submit additional legal memoranda regarding the allegations contained in paragraph 89(a) — (j) of the Amended Complaint. See id. at 86. Specifically, counsel were requested to submit such memoranda on or before 16 March 2000. See id. Counsel were further asked to submit reply memoranda on or before 22 March 2000. See id. C. Background The Amended Complaint alleges the Defendants, in an effort to increase and maintain an artificially high market price for Milestone securities, violated Section 10(b) and Section 20(a) of the Exchange Act by failing to promptly disseminate accurate and truthful information in connection with the operations, business, products, markets, management, earnings and the present and future business prospects of Milestone. See Amended Complaint at ¶¶ Ills. Specifically, the Amended Complaint alleges the Defendants manipulated the contents of various quarterly reports, SEC filings, press releases and presentations to security analysts pertaining to the viability of Milestone. See id. In this regard, the Amended Complaint further alleges the Defendants misrepresented the results of the operations of Milestone and concealed adverse material information regarding the finances and financial condition of Milestone. See id. It appears, however, upon review of the Amended Complaint and the transcript of the 2 March 2000 Oral Argument, that the securities fraud claims of the Plaintiffs center primarily on the failure to disclose options to certain consultants. 1. The Statements Concerning Anesthetic Effect The Amended Complaint alleges the Defendants, beginning on 31 March 1997, issued materially false and misleading statements concerning the Wand which caused investors to purchase Milestone common stock at artificially inflated prices. See id. at ¶ 15, 21. a. The 31 December 1996 SEC Form 10-K The 31 December 1996 SEC Form 10-K, filed with the SEC on 31 March 1997, detailed the merits and clinical test results of the Wand. The Amended Complaint relied on the 31 December 1996 SEC Form 10-K which states: The Wand more quickly anesthetizes by eliminating the need for preliminary pain blocking injections and the waiting time required to see if this injection has taken effect before further anesthetic injections.... Although many dentists sometimes give painless injections, it is almost impossible for them to do so regularly using conventional techniques.... A pre-production prototype of “The Wand (TM)” has been clinically tested on over 1,000 patients. Ninety-six percent of those tested report a “painless” or significantly less painful procedure than standard procedures. Id. at ¶ 22 (quoting the 31 December 1996 SEC Form 10-K) (bolding added). Significantly, counsel for Plaintiffs conceded at oral argument that nothing in this statement was false. See 2 March 2000 Tr. at 44:14-25, 45:1-13 (The court: “If you turn to paragraph 22, please, is there anything in that [31 December 1996 SEC Form 10-K] statement that you quoted there, those three excerpts, that [was] false?” Counsel: “The fact that they’re saying that the [W]and anesthetizes. At that point in time.” ... The court: “It doesn’t say that.” ... “The [W]and does not an-esthesize, does it? It delivers, it’s a delivery system.” Counsel: “Yes, that’s right.” The court: “So the wand does not cause anesthesia in the area, it delivers the anesthesia.” Counsel: “Right.”) b. The 1996 Annual Report In addition, the Amended Complaint further relied on the 1996 annual report (the “1996 Annual Report”), which was disseminated on or about 31 March 1997. The Plaintiffs quoted a portion of the 1996 Annual Report which contains a statement by Dr. Stanley F. Malamed (“Malamed.”): Our primary research and finding — to put it in non-clinical terms — is that the vast majority of patients tested reported either a ‘more comfortable,’ or ‘less painful’ injection experience than any other local anesthetic injection method currently available. In the majority of test cases, the patient described the Wand as ‘pain free.’ Id. at ¶ 23 (quoting the 1996 Annual Report in turn reporting Malamed) (bolding added). Again, counsel for Plaintiffs conceded at oral argument that nothing in this statement was false. See 2 March 2000 Tr. at 45:15-16 (The court: “All right. Paragraph 23, anything false in that?” Counsel: “No....”) The Amended Complaint alleges these two statements were materially misleading when issued because Milestone failed to disclose that Malamed had not succeeded in using the Wand to anesthetize patients. See id. at ¶ 24. In this regard, the Amended Complaint alleges that on 20 May 1998, Osser, as quoted by Bloomberg News, admitted that at the time Malamed conducted his study, the Wand did not anesthetize patients: “[The Wand] was painless, but they didn’t achieve anesthesia.” Id. At oral argument, however, counsel conceded that Malamed did not test for anesthesia. See 2 March 2000 Tr. at 46:14-16 (The court: “To try to suggest that [ ] Malamed was testing for anesthesia is, frankly, false. He did not do that, did he?” Counsel: “No.”) c. The U April 1997 Press Release Milestone issued a press release on 4 April 1997, (the “4 April 1997 Press Release”) over the Business Wire announcing its intention to introduce the Wand later in the year. See id. at ¶ 26. The Amended Complaint quoted from the 4 April 1997 Press Release which in turn quoted Osser as stating: “In ‘The Wand’ we are developing a product which both our clinical and market research indicates will have a lasting impact on the medical and dental fields. Essentially, we now have the financing, the foundation product lines, the distribution and the management team in place to rapidly grow a large medical ‘Milestone’ proprietary medical and dental equipment and disposable products. We intend to grow quickly. In just this last year, we have come a long way.” Id. (quoting the 4 April 1997 Press Release). (bolding added). Again, counsel for Plaintiffs conceded at oral argument that there was nothing false or misleading in the above-quoted language. See 2 March 2000 Tr. at 46:18-20 (The court: “All right. Paragraph 26, is there anything wrong in that? I am talking about the quotation that you put in there.” Counsel: “No.”). d. The 21 May 1997 Press Release Milestone issued a press release on 21 May 1997, over the Business Wire, announcing the USC School of Dentistry had proposed to use the Wand and offered to perform ongoing clinical research on any future dental products developed by Milestone. See id. at ¶ 28. The Amended Complaint relied on the 21 May 1997 Press Release which quoted T. Howard Landes-man, Dean of the USC School of Dentistry, as stating: “My initial observations of the product are very positive and lead me to believe that the injection device could revolutionize the way in which local anesthetic is administered both in dentistry and medicine. Though more human subjects research is still needed to prove product efficacy, I would like the USC School of Dentistry to be the first school in the nation to use the Wand.” Id. (quoting 21 May 1997 Press Release) (bolding added). Again, counsel conceded that there was nothing about Landesman’s comments that was false. See 2 March 2000 Tr. at 46:24-47:3. (The Court: “Paragraph [28] is there anything about Landesman’s comments that are quoted .there that [were] false?” Counsel: “I don’t believe so.”) e. The 11 August 1997 Press Release On or about 11 August 1997, Milestone reported its second quarter and six month results over the Business Wire (the “11 August 1997 Press Release”). See id. at ¶29. In addition, the 11 August 1997 Press Release announced the intention of Milestone to launch the Wand at the ADA convention between 18-21 October 1997. See id. The Amended Complaint quoted the 11 August 1997 Press Release which in turn quoted Osser as stating: “The results for the quarter and six months are as anticipated and reflect the substantial upfront costs in launching ... the Wand.... ” :|s ‡ ❖ 4* ❖ ‡ “We expect a good reception at our launch at the October 18-21,1997 American Dental Association convention in Washington, DC and are optimistic that machine and disposable sales will grow rapidly after the introduction.” Id (quoting the 11 August 1997 Press Release). Again, Counsel for Plaintiffs conceded at oral argument that nothing in this statement was false. See 2 March 2000 Tr. at 47:14-18 (The court: “Paragraph 29 in the quote at the last sentence, it talks about, ‘We expect a good reception and are optimistic about machine and disposable sales.’ Anything false about that?” Counsel: “No.”). The Amended Complaint alleges that because these press releases were made prior to tests indicating the Wand could anesthetize patients, they were misleading. The Amended Complaint, moreover, alleges the press releases successfully “hyped” the Wand, and as a result, Milestone common stock experienced a steady climb. See id. at ¶ 30. The comments from Landesman point out that they were “initial observations” that the Wand “could revolutionize the way in which local anesthesia is administered.” These comments were public and all would affect the market. The company pointed out that it was “developing” a product which “more quickly anesthetizes” and that a “pre-production prototype” was tested. The testing resulted in a “painless” or “significantly less painful” procedure in contrast to standard procedures. Milestone pointed out that the patients who were tested reported a “more comfortable” or “less painful” injection experience. There is nothing in the Amended Complaint or the statements attributed to the company, as quoted in the Amended Complaint, which indicates that the Wand anesthetized patients rather than being the delivery procedure for it. It is clearly stated that the Wand is a delivery system. 2. The Options to Consultants and Related Statements The Amended Complaint further alleges Milestone caused, inter alia, materially misleading statements, articles, reports and SEC filings to be disseminated regarding the “excitement” and, or, “acceptance” of the Wand among dental practitioners. See id. at ¶¶ 31-77. For example, the Amended Complaint alleges Milestone privately entered into consulting agreements with various dental practitioners. See id. at ¶¶ 31-54. The Plaintiffs allege Milestone would compensate said consultants with stock options in return for subsequently published articles concerning the clinical success of the Wand. See id. It appears Milestone referenced these articles as evidence of the impending success of the Wand. The Amended Complaint, however, alleges the failure of Milestone to disclose that the authors of the favorable articles were compensated with stock options was materially misleading because the “studies ..., were in fact, bought and paid for promotional materials.” See id. at ¶ 57. The Amended Complaint further alleges Milestone common stock experienced significant gains in response to the favorable publications. See e.g. id. at ¶ 35. During the 2 March 2000 Oral Argument, these articles were the subject of extended discussion. See 2 March 2000 Oral Argument at pp. 31-53. Significantly, counsel for Plaintiffs conceded that there was nothing in any of these articles that was false. See id. at 31:15-17. Moreover, counsel stated that there is neither reason nor basis to suggest that any or all of these authors conspired to do anything other than make fair statements in the articles so authored. Id. at pp. 18-23. In this regard, counsel conceded that in addition to the fact that there was nothing in any of the articles that is false, “there was nothing to suggest that any of these authors did anything, other than what they were suppose to do.” Id. at 31:24-32:2. Counsel for Plaintiffs conceded at oral argument that the Amended Complaint does not contain any factual basis for the allegation that the consultants authored “promotional materials.” See id. 38:17-25, 39:1-2 (the court: “[S]how me one fact in this [Amended] [C]omplaint that substantiates that conclusory comment that these were not really studies, but, in fact, bought and paid for promotional materials.”.... Counsel: “I don’t think that there is a fact, your Honor.”). With regard to the allegation that the studies were bought and paid for promotional materials, counsel for Plaintiffs stated: “[W]e don’t have that information ... that they were hired to write promotional pieces.” See 2 March 2000 Tr. at 33:21-23. More to the point, in response to the question: “[D]o you have any facts to suggest that the studies done in these three articles that were in the New York State Dental Journal, Compendium on October, 1997 or Compendium, February, 1998 were not, in fact, studies but paid for promotional materials?” Counsel for Plaintiffs responded: “We allege no such fact.” Id. at 53:15-20. a. The New York State Dental Journal Article Mark Hochman (“Hochman”), an assistant professor at the State University of New York at Stony Brook School of Dental Medicine, authored a favorable article concerning the Wand that appeared in the August/September 1997 New York State Dental Journal (“NYSDJ”) (the “NYSDJ Article”). See id. at ¶31. The NYSDJ Article described a fifty patient clinical study, involving a prototype of the Wand (the “Prototype”). It found the Prototype was “two to three times less painful than the manual injection.” See id. (quoting the NYSDJ Article). The Amended Complaint alleges the NYSDJ Article was materially misleading because it failed to disclose Hochman signed a consulting contract with Milestone on or before 26 July 1997. See id. at ¶ 32. Hochman received stock options to purchase 50,000 shares of Milestone common stock exercisable three to five years from the issue date. See id. Pursuant to the consulting contract, Hochman held the position of associate clinical director of Milestone. See id. at ¶ 31. The Amended Complaint further alleges the receipt of stock options by Hochman and the failure to disclose his financial connection to Milestone in the NYSDJ Article rendered his judgment suspect. See id. at ¶ 32. In addition, the Amended Complaint alleges the failure of Hochman to disclose his connection to Milestone in the NYSDJ Article violated the publishing policy of NYSDJ requiring the disclosure of any financial, economic, or professional interest that may influence positions presented in articles published by the NYSDJ. See id. The Amended Complaint, moreover, alleges Milestone favorably referred to the NYSDJ Article in its 1997 annual report (the “1997 Annual Report”), attached to the 31 December 1997 SEC Form 10-K for the fiscal year ended 31 December 1997 (the “1997 SEC Form 10-K”), filed with the SEC on 31 March 1998. See id. Significantly, counsel for Plaintiff stated at oral argument there was nothing in this NYSDJ article that was false. See 2 March 2000 Tr. at 49:19-21. (The court: “I again go back to the point that there is nothing in the article that’s false, correct?” Counsel: “That’s correct.”) b. The J September 1997 Press Release The 4 September 1997 press release (the “4 September 1997 Press Release”) issued by Milestone over the Business Wire indicated that the USC School of Dentistry, “one of the largest dental schools in the nation,” was purchasing the Wand for use by its dental students. The Amended Complaint relied on the 4 September 1997 Press Release which quoted Osser as stating: “We are very excited about the introduction of the Wand as it will have an enormous, positive effect on how practitioners administer local anesthesia.” Id. at ¶ 33 (citing 4 September 1997 Press Release). The Amended Complaint alleges the 4 September 1997 Press Release was materially misleading because the statement did not disclose Malamed, the chairman of the Anesthesia and Dentistry Department at the USC school of Dentistry, had a financial interest in Milestone in light of his earlier receipt of Milestone common stock options. See id. at ¶ 34. The Amended Complaint alleges that: “Landesman said he ‘knew Malamed was associated with Milestone, but not that he had received options.’ ” Amended Complaint at ¶ 34. However, when counsel for Plaintiff was asked: [I]s there anything that Malamed said to Landesman that was false or is there any indication from Landesman that had he known about the additional facts of the Malamed association with Milestone, including the option, he would not have taken Malamed’s recommendation? Counsel for Plaintiffs responded: “We don’t say that, Your Honor.” Id. at 50:10-16. c. The 1997 Compendium Article Hochman and Mark Friedman (“Friedman”), an associate professor at the USC School of Dentistry and a Milestone clinical director, co-authored an article “praising the Wand.” See Amended Complaint at ¶ 36. The article was published in the October 1997 issue of Compendium (the “1997 Compendium Article”), a journal published by Dental Learning Systems Co. The 1997 Compendium Article is alleged to have been materially misleading at the time it was published because neither the 1997 Compendium Article, nor Hochman nor Friedman disclosed the financial interests of Hochman and Friedman in Milestone. See id. at ¶ 37. However, as previously indicated, counsel for Plaintiffs conceded that Plaintiffs asserted no facts or allegations that this article, or indeed any of the articles referenced in the Amended Complaint, were “paid-for” promotional materials. See 2 March 2000 Tr. 53:15-20; Id. at 38:17-39:2; Id. at 33:14-23; Id. 32:9-18. d. The 3 November 1997 Press Release On 3 November 1997, Milestone reported over the Business Wire that in response to the introduction of the Wand at the ADA Conference, it had received numerous orders for the Wand from full service dental dealers (the “3 November 1997 Press Release”). See id. at ¶¶ 38^11. The Amended Complaint quoted portions of the 3 November 1997 Press release: [T]he Company has received orders for approximately 8,000 units for the Wand (TM) since its introduction on October 18th at the American Dental Association conference in Washington, DC. 5j{ $ sji % # In addition to the disposables included in these orders, over 3,000 additional disposables have been ordered by Wand distributors including Henry Shein (Sullivan), Patterson Dental, Meer Dental and the American Dental Cooperative (ADC) Member Companies. These orders represent an aggregate total of over $5 million to the Company. Milestone expects to start fulfilling these orders in mid December.... Id. at ¶ 41 (quoting the 3 November 1997 Press Release). Again, counsel for Plaintiffs conceded at oral argument that nothing in the quoted portions of the 3 November 1997 Press Release concerning distributors was false. See 2 March 2000 Tr. at 51:20-24, 52:1-3 (The court: “Paragraph 38, is there anything false about the reports of Milestone about their full-service dental dealers, Henry Shein, Paterson Dental, Mere Dental and American Dental Cooperative?” Counsel: “No.” The court: “Paragraph 41 in the quote you have there, is there anything false in that?” Counsel: “No.”). In addition, the Amended Complaint cited to the 3 November 1997 Press Release which quoted Osser as stating: “We are very excited over the reaction of dentists at the ADA conference. It only serves to further our belief in how the Wand will advance the delivery of anesthesia in dentistry. We are very pleased with the amount of orders we have for the Wand so far and expect even more orders in the ensuing months.” Id. at ¶ 42 (quoting the 3 November 1997 Press Release) (bolding added). Again, counsel for Plaintiffs conceded at oral argument that nothing in the above-quoted statement was false. See 2 March 2000 Tr. at 52:4-6 (The Court: “Paragraph 42 in the quote, is there anything false?” Counsel: “No.”). e. The 30 September 1997 SEC Form 10-Q On or about 14 November 1997, Milestone filed with the SEC the 30 September 1997 Form 10-Q. See Amended Complaint at ¶ 44. The Amended Complaint quoted portions of the 30 September 1997 SEC Form 10-Q: Revenues for the three months ended September 30, 1997 were $670,896 compared to $47,471 for the same period a year ago. For the nine months ended September 30, 1997, revenues were $2,305,460 compared to $154,856.... The net loss for the quarter and nine months ended September 30, 1997 were $1,312,095, or $(0.23) per share on weighted average shares outstanding or 5,797,931 and $3,164,523 or $(0.16) per share on weighted average shares outstanding of 4,610,000 and $1,366,572 or $(0.30) per share on weighted average shares outstanding of 4,557,333 for the comparable periods a year earlier, respectively. Id. at ¶ 44. (quoting the 30 September 1997 SEC Form 10-Q). Again, counsel for Plaintiffs conceded during oral argument that nothing in the above-quoted statement was false. See 2 March 2000 Tr. at 7-9 (The court: “Paragraph 44, is there anything in there that is false?” Counsel: “No.”). f. The 17 November 1997 Press Release On 17 November 1997, Milestone reported over the Business Wire that since its introduction, the Wand has been met with tremendous excitement and acceptance (the “17 November 1997 Press Release”). See Amended Complaint at ¶45. The Amended Complaint relied on the 17 November 1997 Press Release which quoted Osser as stating: “As the company that just recently launched the Wand (TM), a revolutionary new approach to giving ‘painless’ injections in dentistry, the results to date, understandably, do not reflect the tremendous excitement and acceptance that the Wand (TM) has received. We are gratified by the enthusiastic endorsement of the Wand (TM) as evidenced by the 8000 orders valued at $5 million that were booked as a result of the recent American Dental Association convention in Washington, DC. With ramp up of production under way and distributors arrangements in place with the leading distributors of dental equipment and supplies, we are looking forward to broad acceptance and usage of the Wand.” Id (quoting the 17 November 1997 Press Release) (bolding added). Again, counsel for Plaintiffs conceded at oral argument that nothing in this statement was false. See 2 March 2000 Tr. at 52:10-12 (The court: “Paragraph 45, anything in that quote that [was] false?” Counsel: “No.”). The Amended Complaint alleges the 30 September 1997 SEC Form 10-Q, 3 November 1997 Press Release and 17 November 1997 Press Release were materially misleading because Milestone “failed to disclose that a substantial amount of the ‘excitement’ and ‘acceptance’ generated about the Wand was a result of the articles written by consultants to whom Milestone awarded stock options and whose interests were thereby tainted.”, Amended Complaint at ¶ 46. g. The 6 & 7 Januavy 1998 Press Releases The Amended Complaint alleges that on or about 6 January 1998, Milestone issued a press release (the “6 January 1998 Press Release”) over the Business Wire announcing Milestone had commenced shipment of the driver units of the Wand on 22 December 1997. See id. at ¶ 49. Again, Counsel for Plaintiffs conceded at oral argument that nothing in the quoted portion of the 6 January 1998 Press Release was false. See 2 March 2000 Tr. at 52:16-19 (The court: “Paragraph 49, anything in there that [was] false, the attribution you’re giving to the company of the report over the business wire?” Counsel: “No.”). In addition, the Amended Complaint alleges that on 7 January 1998, Milestone issued another press release (the “7 January 1998 Press Release”) over the Business Wire announcing Milestone common stock was accepted for trading on the NASDAQ under the symbol WAND. See Amended Complaint at ¶ 50. The Plaintiffs relied on a portion of the 7 January 1998 Press Release which quoted Osser as stating: “Trading on the NASDAQ National Market will provide our stockholders and prospective stockholders with easier access to market information about Milestone. Acceptance for trading on the NASDAQ National Market is also further recognition of the continued growth and development of Milestone.” Id. (quoting the 7 January 1998 Press Release). Again, counsel for Plaintiffs conceded at oral argument that nothing in the quoted portion of the 7 January 1998 Press Release was false. See 2 March 2000 Tr. at 52:20-22 (The court: “Paragraph 50, anything in there that [was] false?” Counsel: “No.”). h. The 19 February 1998 Press Release The Plaintiffs allege that on 19 February 1998, Milestone issued a press release (the “19 February 1998 Press Release”) over the Business Wire indicating Milestone would exhibit the Wand at the Chicago Mid-winter Dental Conference beginning on 19 February 1998 and ending on 22 February 1998. See Amended Complaint at ¶ 51. The Plaintiffs relied, in part, on the 19 February 1998 Press Release which also contained significant financial data regarding Milestone: To date, Milestone has received orders for over 11,000 units of the Wand of which over 2,700 have been shipped. In addition to the 1.1 million disposable [needles] included with these orders, 400,000 additional disposables have been shipped to Wand distributors including Sullivan-Shein, Patterson Dental, Meer Dental and the American Dental Cooperative (ADC) Member Companies. ❖ ‡ ❖ ‡ $ Milestone is adding additional manufacturing capacity in April, tripling capacity from 140,000 disposables per week to over 400,000 disposables per week. The Company expects to increase manufacturing capacity by the third quarter to over 5 million disposables per month. The reaction from dentists using the Wand is overwhelmingly positive. See id. (quoting the 19 February 1998 Press Release). Again, counsel for Plaintiffs conceded at oral argument that nothing in the quoted portion of the 19 February 1998 Press Release was false. See 2 March 2000 Tr. at 52:28-24 (The court: “[Anything in Paragraph] Fifty-one [that was false]?” Counsel: “No.”). i.The 1998 Compendium Article In February 1998, Michael Krochak (“Krochak”), a director of the Dental Phobia Clinic at Mount Sinai Medical Center in New York City, authored an article appearing in the Compendium (the “1998 Compendium Article”) and published by the NYSDJ, stating the Wand reduced patient anxiety. See Amended Complaint at ¶ 52. The Plaintiffs allege the 1998 Compendium Article was materially misleading when issued in February 1998 because Milestone did not disclose the options it granted to Krochak. See id. at ¶ 53. Again, counsel for Plaintiffs conceded at oral argument that nothing in the quoted portion of the 1998 Compendium Article about the Wand reducing patient anxiety was false. See 2 March 2000 Tr. at 52:25, 58:1-3 (The court: “Paragraph 52, the comment by Krochak in his article stating that the [W]and would reduce patient anxiety, anything about that which [was] false?” Counsel: “No.”), j.The 80 March 1998 Press Release Milestone issued a press release on 30 March 1998 (the “30 March 1998 Press Release”) over the Business Wire announcing its fourth quarter and year ended results for the period ended 31 December 1997. See Amended Complaint at ¶ 55. The 30 March 1998 Press Release contained significant financial data concerning Milestone: Its revenues, net loss and loss per share were $2,854,000, $7,438,000 and $1.21 in the year ended December 31, 1997 as compared to $302,000, $1,950,000 and $0.43 in the prior year. In the fourth quarter ended December 31, 1997 revenues, net loss and loss per share were $551,000, $4,262,000 and $0.52 as compared to $147,000, $582,000 and $0.13 in the prior year. * * * * * ^ The principal reason for the increase in losses were costs associated with research and development in connection with the completion of the Wand(TM), marketing and personnel costs relating to the launch of the Wand(TM) and, to a lesser extent, the “SplaterFree” prophy angle and a non-cash charge in connection with the acquisition of the minority interest in Princeton PMC, a joint venture marketing affiliate established in 1996. After reflecting these losses, Milestone’s financial position continues to be strong with more than $15,000,000 in cash, cash equivalents and treasury bills at year-end and virtually no debt. Leonard Osser, Chairman and Chief Executive officer, stated “1997 represents a year of tremendous progress for the Company. Development work was completed on the Want(TM), the product was launched and marketing efforts commenced. Milestone also established distribution for the Wand(TM) through leading domestic distributors of dental products including Henry Shein (Sullivan), Patterson Dental, Meer Dental and the American Dental Cooperative (ADC) Member Companies. The Company is currently operating ahead of budget and on a profitable basis.” Id. (quoting the 30 March 1998 Press Release). Again, counsel for Plaintiffs conceded at oral argument that nothing in this statement on which they relied was false. See 2 March 2000 Tr. at 53:7-9 (The court: “Paragraph 55, there are three quoted paragraphs there. Anything false?” Counsel: “No.”). k.The 81 December 1997 SEC Form 10-R As mentioned, Milestone filed its 31 December 1997 Form 10-K, signed by Osser and Mele, with the SEC on 31 March 1998. See e.g. Amended Complaint at ¶ 56. The Amended Complaint alleges the 31 December 1997 SEC Form 10-K reiterates the results previously announced in the 30 March 1998 Press Release. See id. The 31 December 1997 SEC Form 10-K states: The Company began shipping system kits consisting of the Wand(TM) driver unit, 100 disposable hand pieces, an instructional video tape and other instructional material in January 1998. Prior thereto pre-production prototype of the Wand(TM) had been clinically tested in over 1,000 patients. Ninety-six percent of those tested reported a “painless” or significantly less painful procedure than standard procedures. Three separate additional studies were conducted on various aspects of the Wand(TM) operation. These have been published in major dental publications and have helped establish acceptance and credibility within the dental community. Id. (quoting the 31 December 1997 SEC Form 10-K) (emphasis in the Amended Complaint, bolding added). Significantly, Counsel for Plaintiffs conceded at oral argument that nothing in this statement was false. See 2 March 2000 Tr. at 53:10-12 (The court: “Paragraph 56 in the quoted paragraph, anything false?” Counsel: “No.”). The Amended Complaint, however, alleges the 31 December 1997 SEC Form 10-K and the 30 March 1998 Press Release were materially misleading because the “acceptance” and “credibility” referenced in the statements failed to disclose the studies which were so helpful to Milestone were actually “bought and paid for promotional materials.” See Amended Complaint at ¶ 57. In addition, the 31 December 1997 SEC Form 10-K indicated Milestone retained the services of various consultants and compensated the consultants with Milestone stock options. See id. at ¶ 58. The Amended Complaint alleges the 31 December 1997 SEC Form 10-K stated: During 1996 and 1997, the Company granted stock option to a director and various consultants to purchase 35,000 and 164,000 shares of common stock, respectively, at prices ranging from $5,125 to $6.50 per share. The options expire in three to five years depending on the option, vest over two to three years and contain certain antidilution provisions. See id. Again, counsel for Plaintiffs conceded at oral argument that nothing in this statement was false. See 2 March 2000 Tr. at 53:21-22 (The court: “Paragraph 58, anything false?” Counsel: “False, no.”). It is alleged the statements concerning the retention of consultants in exchange for stock options was materially misleading because the statements did not disclose Friedman, Hochman and Krochak were the individuals who received the Milestone common stock options. See Amended Complaint at ¶ 59. 1. The May 1998 Press Release and J May 1998 Conference Call Milestone issued a press release on 4 May 1998 (the “4 May 1998 Press Release”) over the Business Wire announcing its results for the first fiscal quarter ended 31 March 1998. See id. at ¶ 64. The 4 May 1998 Press Release stated: Revenues for the three months ended March 31, 1998 were $5,260,149 compared to $760,123 for the same period a year ago. The net income for the first quarter ended March 31,1998 was $358,-079, or $0.04 per share on weighted average shares outstanding of 8,733,873, compared to a loss of $(696,028), or $(0.14) per share on weighted average shares outstanding of 4,840,527 for the comparable period a year earlier. During the first quarter of 1998 the Company delivered 7,311 Wand(TM) system kits to distributors and 817,000 disposable components. This represents net sales of $4,760,069 for the first three months of the fiscal year. •I* •!' The Company has a number of letters-of-intent from foreign distributors who are interested in bringing the Wand to the European, South American and Pacific Rim markets. Mr. Daniel R. Martin, President and COO of Milestone Scientific, said, “we are pleased with the demand and reorders from our distributors. The additional manufacturing capacity for the disposable units is in place and production levels are now at 2.5 million per month.” ‡ ‡ ‡ ‡ ‡ $ Mr. Leonard A. Osser, Chairman and CEO of Milestone Scientific, noted, “the Wand’s acceptance by the dental com- ' munity has been extremely gratifying and resulted in the need to significantly increase our production capacity. Milestone now has in place the resources to assure the dentist of prompt delivery of his order. The production ramp up has proceeded smoothly and by midyear we expect to have in place the production capacity to produce enough system kits and disposable components to satisfy our aggressive placement projections. The confidence that this revolutionary approach to painless dentistry will be an integral part of the dentist’s practice in years to come.” Id. (quoting the 4 May 1998 Press Release) (bolding added). Again, counsel for Plaintiffs conceded at oral argument that nothing in this quote upon which Plaintiffs relied was false. See 2 March 2000 Tr. at 54:23-25, 54:1 (The court: “Paragraph 64, anything false in that quote? That’s a long quote, it goes on to the next page.” Counsel: “Right, no.”). Milestone also conducted a conference call on 4 May 1998 (the “4 May 1998 Conference Call”) with investors to discuss first quarter results. See Amended Complaint at ¶ 65. It is alleged that during the 4 May 1998 Conference Call, Martin falsely represented the full 5,000 backlog of orders, placed as of 31 March 1998, had been shipped. See id. The Amended Complaint alleges this representation was false and misleading because the 5,000 backlog of orders had not been shipped and many of the previously placed orders had been cancelled. See id. In addition, during the 4 May 1998 Conference Call, Milestone indicated sales to distributors would have been higher had Milestone been able to fill the back orders placed by those distributors. See id. The Amended Complaint alleges the statement regarding inventory was materially false and misleading because sales to distributors could not have been higher due to an actual “glut of inventory” rather than a low level of inventory on the part of the distributors. See id. at ¶ 66. The Amended Complaint further alleges the statement pertaining to inventory was materially false and misleading because Milestone was “aware or recklessly disregarded that dentists double and triple-ordered from various distributors in an effort to cut down the month-long wait it took to receive the product.” Id. Finally, during the 4 May 1998 Conference Call, Martin stated Milestone did not know the rate of returns for the Wand because it was “hard to keep track of returns to distributors.” See id. (citing the 4 May 1998 Conference Call). Despite not knowing the total percentage of Wand returns, it is alleged Martin further stated that only approximately 200 Wands had been returned to Milestone in the first fiscal quarter. See id. In addition, the Amended Complaint alleges Martin indicated Milestone had reserves for 10% of Wand returns and the reserves were carried as a reduction in revenue. See id. at ¶ 67. See also 2 March 2000 Tr. at 68:5-11 (The court: “Paragraph 67, second sentence, ‘although he did not know the total percentage of returns, Defendant Martins stated that only approximately 200[W]ands had been returned to the company in the first quarter and of those, 25% were returned unopened,’ anything false in that [sentence]?” Counsel: “In that sentence, no, Your Honor.”) m. The J June 1998 Press Release The Plaintiffs allege that on or about 4 June 1998, Harriot Tabuteau, an analyst for NationsBane Montgomery Securities, changed a previous estimate for the sales and income loss of Milestone because distributor Henry Schein, Inc. reduced purchases for the Wand from 2,600 to 900 for the fiscal quarter ended 30 June 1998 (the “4 June 1998 Report”). See Amended Complaint at ¶ 69. The Amended Complaint also alleges the 4 June 1998 Report predicted a revenue shortfall of approximately $1 million dollars. See id. On or about 4 June 1998, Milestone issued a press release (the “4 June 1998 Press Release”) over the Business Wire confirming Wand order cancellations would cost Milestone $1.2 million in sales. See id. The Amended Complaint alleges that in an attempt to soften the impact of the 4 June 1998 Report, Milestone issued the 4 June 1998 Press Release which quoted Martin as stating: “Sullivan-Schein, Patterson Dental, Meer Dental and the American Dental Cooperative are promoting the Wand to their customers and have been publicly very positive about the product. In fact additional distributors have asked to distribute the Wand. We believe any delays are short term and are not indicative of the eventual success of the Wand.” * :|s * $ * * “Milestone is now in the position of providing the Wand to distributors in a just-in-time fashion. This is the result of our success in ramping up the supply of Wand system kits and disposable components towards the end of the first quarter. Having product readily accessible from the Company allows distributors to maintain small stocks of product, while using Milestone’s warehouse instead of their own.” Id. at ¶ 70 (quoting the 4 June 1998 Press Release). As mentioned, Counsel for Plaintiffs conceded at oral argument that the statements concerning the distributors were not false. See 2 March 2000 Tr. at 52:23-24 (The court: “[Anything in Paragraph] Fifty-one [that is false]?” Counsel: “No.”). See also id. at 68:14-16 (The court: “We already covered Paragraph 70, didn’t we? Is there anything false in 70?” Counsel: “I believe we covered it, Your Honor.”); See also id. at 65:21-23 (The court: “Paragraph 70, is there anything wrong in that quoted paragraph?” Counsel: “No there isn’t....”). n. The 5 June 1998 Conference Call On 5 June 1998, Milestone conducted a conference call with investors to discuss the recent volatility of the pricing of Milestone common stock (the “5 June 1998 Conference Call”). See Amended Complaint at ¶ 71. During the 5 June 1998 Conference Call, Milestone stated it had shipped 2,600 units of the Wand by April 1998. See id. at ¶ 73. In addition, Milestone stated that as of May 1998, it had shipped an additional 1,100 units, for a total of 3,700 units rather than the full 5,000 backlog of orders as previously indicated during the 4 May 1998 Conference Call. See id. Finally, Milestone acknowledged its prior statements had “certainly contributed to investor confusion and misunderstanding.” Id. (citing the 5 May 1998 Conference Call). The Amended Complaint alleges the Defendants were “fully aware, or were reckless in failing to know” that Milestone had overstated acceptance of the Wand. See id. at ¶ 75. The Plaintiffs contend the Defendants were similarly “fully aware, or were reckless in failing to know” Milestone common stock was trading at inflated prices. Finally, the Amended Complaint alleges Defendants issued the allegedly false and misleading statements in order to maintain “substantial salaries, earn bonuses and long term compensation based upon the fictitious results they created.” See id. 3. The Asserted Violations of GAAP The Amended Complaint, moreover, alleges Milestone violated GAAP, and therefore filed materially false and misleading financial statements with the SEC for the fiscal first quarter ended 31 March 1998. See generally id. at ¶¶ 78-89. a. The 5 May 1998 SEC Form 10-Q On or about 5 May 1998, Milestone filed with the SEC its Form 10-Q for the first quarter ended 31 March 1998 (the “5 May SEC Form 10-Q”). See id. at ¶ 78. The Amended Complaint alleges the 5 May 1998 SEC Form 10-Q failed to disclose the reserve policy of Milestone for returns of the Wand. See id. at ¶ 79. In addition, the Plaintiffs allege, inter alia, because of the limited sales experience of Milestone and the limited time the Wand was available on the market, Milestone was required to disclose in the 31 March 1998 SEC Form 10-Q that the arbitrary 10% reserve figure used for the fiscal first quarter ended 31 March 1998, could not be relied upon for the fiscal second quarter ended 30 June 1998. See id. Specifically, the Amended Complaint alleges “SEC Regulation SX” requires all financial statements filed with the SEC conform with GAAP and financial statements not in conformity with GAAP are “presumed to be misleading or inaccurate.” See id. at ¶ 83 (citing 17 C.F.R. § 210.401(a)(1)). In addition, the Amended Complaint alleges the Statements of Financial Accounting. Standards No. 48 (“FAS 48”), issued by the Financial Accounting Standards Board, is encompassed in GAAP. See id. at ¶ 85. It appears FAS 48 governs the disclosure of revenue based on future returns of a product. FAS 48 states: If an enterprise sells its product but gives the buyer the right to return the product, revenue from the sales transaction shall be recognized at the time of sale only if all of the following conditions are met: f. The amount of future returns can be reasonably estimated. * * * * * sH The ability to make a reasonable estimate of the amount of future returns depends on many factors and circumstances that will vary from one case to the next. However, the following factors may impair the ability to make a reasonable estimate: c. Absence of historical experience with similar types of sales of similar products, or inability to apply such experience because of changing circumstances, for example, changes in the selling enterprise’s marketing policies or relationships with its customers. Id. at ¶ 86 (quoting ¶¶ 6 & 8 respectively, of FAS 48). The Amended Complaint alleges Milestone violated FAS 48 and, therefore, violated GAAP by recognizing sales of the Wand system kits to distributors in the 31 March 1998 SEC Form 10-Q. See id. at ¶ 88. In this regard, the Plaintiffs allege Milestone admitted it could not predict the number of returns from Wand system kits shipped in the fiscal first quarter ended 31 March 1998. See id. In addition, Milestone did not have the “historical experience with similar types of sales” to make a reasonable estimate of future returns because shipment of the Wand began in or about January 1998, and ramp-up occurred in or about March 1998. See id. The Amended Complaint alleges the 31 March 1998 SEC Form 10-Q failed to “disclose that defendants had used a reserve for Wand returns of 10% and what the basis for that reserve was, and that the reserve would likely be insufficient for returns in the second quarter....” Id. Finally, the Amended Complaint alleges that during the Class Period, the financial statements of Milestone violated the following principles of fair financial reporting: (1) The principal that financial reporting should provide information that is useful to present and potential investors and creditors and other users in making rational investment, credit and similar decisions. (citing Financial Accounting Standards Board (“FASB”) Concepts No. 1). (2) The principle that financial reporting should provide information about an enterprise’s financial performance during a period (citing FASB Statement of Concepts No. 1). (3) The principle that financial reporting should be reliable in that it represents what it purports to represent (citing FASB Statement of Concepts 2). (4) The principle of completeness, which means that nothing material is left out of the information that may be necessary to ensure that it validly represents underlying events and conditions (Id.). (5) The principle that conservatism be used as a prudent reaction to uncertainty to try to ensure that uncertainties and risks inherent in business situations are adequately considered. (Id.). (6) The principle that disclosure of accounting policies should identify and describe the accounting principles followed by the reporting entity and the methods of applying those principles that materially affect the financial statements. (Accounting Principles Board Opinions (“APB”), Opinion No. 22). (7) The principle that losses be accrued for when a loss contingency, then disclosure of the contingency shall be made when there is at least a reasonable possibility that a loss or an additional loss may have been incurred, (citing Statement of Financial Accounting Standards No. 5). (8) The principle that contingencies and other uncertainties that affect the fairness of presentation of financial data at an interim date shall be disclosed in interim reports in the same manner required for annual reports (citing APB Opinion No. 28). (9) The principle that management should provide commentary relating to the effects of significant events upon the interim financial results (citing APB Opinion No. 28). (10) The principle that management should provide commentary relating to the effects of significant events upon the interim financial results (APB Opinion No. 28). Id. at ¶ 89 (citing various principles of GAAP). 4. The Asserted Misrepresentations, Omissions and Scienter The Amended Complaint alleges the Defendants knew or recklessly disregarded the fact that the public documents and statements they issued on behalf of Milestone were materially false and misleading. See id. at ¶ 95. The Amended Complaint further alleges the Defendants knew or recklessly disregarded that public statements and, or, documents would be issued or disseminated to the investing public. See id. The Plaintiffs also contend the Defendants knowingly or recklessly participated in, or acquiesced, the issuance and, or, dissemination of said statements and, or, documents. See id. In addition, the Amended Complaint alleges the Defendants had motive and opportunity to inflate the price of Milestone stock. For example, the Amended Complaint alleges Osser sold 500,000 shares of Milestone stock during the Class Period in excess of 5.3 million dollars. See id. at ¶ 91. In addition, following the completion of the financial statements for each year, commencing with 1998, Milestone would grant Osser an additional option to purchase up to 50,000 shares of Milestone common stock, in 10,000 share increments, for each $400,000 of net income in excess of $2,500,000. See id. at ¶ 92. Finally, the Plaintiffs contend the Defendants knew or recklessly failed to know Milestone granted thousands of options to purchase Milestone common stock to practitioner consultants Friedman, Malamed, Hochman and Krochak. See id. at ¶ 94. The Amended Complaint further alleges the Defendants knew or recklessly failed to know the “reserve policy” set for the Wand returns would be inaccurate for the second quarter ended 30 June 1998. See id. Discussion A. Standard For Dismissal Under Rule 12(b)(6), Rule 9(b) and 15 U.S.C. § 78u-i et seq. A court may dismiss a complaint pursuant to Rule 12(b)(6) for failure to state a claim where it appears beyond doubt that no relief could be granted under any set of facts which could be proved consistent with the allegations. See Hartford Fire Ins. Co. v. California, 509 U.S. 764, 811, 113 S.Ct. 2891, 125 L.Ed.2d 612 (1993); Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984); Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); Weiner v. Quaker Oats Co., 129 F.3d 310, 315 (3d Cir.1997); Unger v. National Residents Matching Program, 928 F.2d 1392, 1395 (3d Cir.1991); Markowitz v. Northeast Land Co., 906 F.2d 100, 103 (3d Cir.1990); Ransom v. Marrazzo, 848 F.2d 398, 401 (3d Cir.1988). Because granting a motion under Rule 12(b)(6) can result in a dismissal at an early stage of a case, all allegations of a plaintiff must be taken as true and all reasonable factual inferences drawn in his or her favor. See Gomez v. Toledo, 446 U.S. 635, 636, 100 S.Ct. 1920, 64 L.Ed.2d 572 (1980); Weiner, 129 F.3d at 315; In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1420 (3d Cir.1997); Piecknick v. Pennsylvania, 36 F.3d 1250, 1255 (3d Cir. 1994); Jordan v. Fox, Rothschild, O’Brien & Frankel, 20 F.3d 1250, 1261 (3d Cir. 1994); Shapiro v. UJB Fin. Corp., 964 F.2d 272, 279-80 (3d Cir.), cert. denied, 506 U.S. 934, 113 S.Ct. 365, 121 L.Ed.2d 278 (1992); Schrob v. Catterson, 948 F.2d 1402, 1405 (3d Cir.1991); Unger, 928 F.2d at 1395; Markowitz v. Northeast Land Co., 906 F.2d 100, 103 (3d Cir.1990); Melikian v. Corradetti, 791 F.2d 274, 277 (3d Cir.1986). A complaint should not be dismissed unless it appears beyond doubt that “the facts alleged in the complaint, even if true, fail to support the claim.” Ransom, 848 F.2d at 401; see also Shapiro, 964 F.2d at 279-80. Legal conclusions made in the guise of factual allegations, however, are given no presumption of truthfulness. See Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986); Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir.1997) (“[A] court need not credit a complaint’s ‘bald assertions’ or ‘legal conclusions’ when deciding a motion to dismiss”); Haase v. Webster, 807 F.2d 208, 215 (D.C.Cir.1986), vacated on other grounds, 835 F.2d 902 (D.C.Cir.1987); Briscoe v. LaHue, 663 F.2d 713, 723 (7th Cir.1981), aff'd, 460 U.S. 325, 103 S.Ct. 1108, 75 L.Ed.2d 96 (1983); Western Mining Council v. Watt, 643 F.2d 618, 626 (9th Cir.), cert. denied, 454 U.S. 1031, 102 S.Ct. 567, 70 L.Ed.2d 474 (1981); Bermingham v. Sony Corp. of Am., 820 F.Supp. 834, 846 (D.N.J.1992), aff'd, 37 F.3d 1485 (3d Cir.1994). A District Court reviewing the sufficiency of a complaint has a limited role. “The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support his [or her] claims.” Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974); In re Burlington Coat Factory, 114 F.3d at 1420; Bermingham, 820 F.Supp. at 846. Generally, when conducting such an inquiry, a District Court generally may not consider any material beyond the pleadings. See In re Burlington Coat Factory, 114 F.3d at 1426; Pension Benefit Guar. Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir.1993), cert. denied, 510 U.S. 1042, 114 S.Ct. 687, 126 L.Ed.2d 655 (1994); Wallace v. Systems & Computer Tech. Corp., No. 95-6303, 1997 WL 602808, at *5 (E.D.Pa. Sept. 23, 1997); Gannon v. Continental Ins. Co., 920 F.Supp. 566, 574 (D.N.J.1996). A District Court, however, may properly ref