voice low i tried the issue presented on this appeal is whether a spinal products company misrepresented the success of an acquisition when it failed to disclose that it had acquired defective and obsolete inventory and  that inability to sell that product was reasonably likely to materially affect its financial performance how do we know that there is i looked in vain in the record to try to determine what the total amount of the inventory was versus going to acquire sign techs and we're going to do it to achieve a twenty percent revenue growth over time based on the cross selling opportunities well cross selling opportunities but that could mean that alpha tech was looking to  customer base as a broader market to to sell its products and maybe didn't make my question very clear but what i'm trying to figure out is what the total percentage of products that alpha tech makes versus the total of the product that scientists would otherwise be distributing trying to figure out whether this fits into the matrix scenario where that was seventy two percent bump on the total inventory of the combined companies of what i mean that eight point two million dollars may be nothing if it's a billion dollar inventory so the reason why that amount is material and is significant is because the company was touting five million dollars w conclude that it is plausible that a failure to discuss eight point two million dollars worth of worth worthless inventory was in fact material to the operations of the combined entity here on a what we do know is that the company was saying it w going to have growth driven by the inclusion of scientists rather now that was what they touted instead with there that there was a known uncertainty they sent richard reyes out and on the week of march twelfth he sent pictures back saying this textual weeding of those statements and where the misrepresentations really came out of that statement so let's talk for example about the revenue growth statement what allocation in the revenue quote statement do you think is false or misleading to meet the heightened pleading standard that's required your honor i would have two responses to that the first response is with respect to your question directly but when you talk about anticipating revenue growth it's twenty percent and it's driven by the inclusion of revenue from a company where you know you have acquired a product that is highly unlikely to be able to be sold then that makes the mature misleading not to also disclose the portion that has concern it has problems with inventory i mean that the problem in the medical field is akin to the problem in the evolution industry you have to have pedigree for these parts basically all the paperwork and documentation that show that they were manufactured according to manufacturer specifications and as i understand it there were two power boxes of documents that came from scientists which arrived along about the same time  that right that's correct and that seventy percent of it was ultimately written down right that we felt led but again i would focus first and foremost on what regulation s k said about inducing people to invest in your company it creates an affirmative obligation and this is what the video case just explained there's an affirmative obligation to state facts in the registration statement to adequately inform investors and if you look at the standard that the f c c set forth the standard is one in which if it is there is a uncertainty about whether or not you can sell about product and you can't value it before you issue the documents you still have an obligation to speak up about that uncertainty unless you're sure it won't have a material impact but what if you're still investigating the inventory to try to paperwork together and now we can sell the stuff but if your allegations in the complaint don't give us any help in determining what did the company know and when did it know it and the part started arriving very close in operations who was on a conference call with two senior director and he said we have a problem two weeks later on march twenty ninth again several weeks before the offering he got on the phone with defendant kiper as well and said this product is not worth sending back when we look effects of the known trend development or uncertainty quantified to the extent reasonably practicable so it's not it is an affirmative obligation to speak and then the event that you are uncertain it is an affirmative obligation to say what you know and to identify the fact that this trend or no uncertainty should have been revealed in mid march when with i would say march twelfth when the vice president of operations who is in charge of the integration found out was the first indication to the company that there was an uncertainty that it should be disclosing march twenty ninth one defendant kiper was on the telephone at that week i don't want to make it so much particular date that was the second time but that company had knowledge and then the product arrived it was immedia into a quarantine warehouse a quarantine warehouse by definition means it's not on the shelves and it's not yet being sold so i am clearly but i think cater for a disclosure standard that if you know you have material that is uncertain commitment impact revenue and again regulation s k has a broader standard but materiality the problem when you merge and acquire another company is that there's going to be a time period during which a consolidation of operations must occur you're not taking the position are you as a matter of law that at the very beginning of the merger and acquisition process the company has to disclose things that it doesn't find out about until later during the process are you i mean i think we should really distinguish between attendee five claim and affection eleven claim here this is a company that was using a secondary offering to induce investment in the first instance i believe that's why the standard is bought or for what one mu disclose and so there is this affirmative obligation and the video talks about why section eleven is different we believe it's different as well and i think the company here we have read probably was aware of these problems as early as the week of march twelfth over a month before hand and all they had to say was we have acquired some inventory or a substantial amount of inventory that is defective or in quarantine we are uncertain about the ability to sell it and if we are unable to sell the inventory it may would have been would be your position that that would still have to be disclosed no your honor as a good question there is some point at which the management needs to make the determination that they have a problem that's not going to materially impact revenue back to my question about the lack of knowledge as to what the valuation of this is or use and how it relates to the sales of the combined entity and i don't see anything in your complaint that address when there's a new nonstarter teenie and to give investors she was soliciting to invest the opportunity to understand why results may differ down the road and that the obligation that we think would buy a lated in violation of section eleven here thank you the panel undoubtedly knows item three o three of regulation as k applies to the registration statement in the prospectus statements it does not apply to any other state so the relevant time frame judge t when you asked is not march to august the relevant time frame is from the last week in march the first week and april when the strike hyper was on this telephone call until april sixteenth which is the were serious problems with indian tory so as i look at the revenue growth statement i think that a search common points out during mergers and acquisitions there are going to be unseated problems and if the statements are general such  as well we back that there is synergistic relationship because of the similarity in products weeks back cross out and opportunities we expect to have access to markets that we otherwise wouldn't have all that is fine but what about the representation charge of operations and he's the only one who's alleged to have any detail view of this went to the east coast authority of scientists and reviewed some inventory the allegations of the complaint are completely opaque as to what inventory he reviewed  and as the district court pointed out in language that they quoted from the complaint it simply says that all of the inventory he saw so we don't even know what portion of the inventory that was in the east coast warehouse out the square footage of the westchester pennsylvania warehouse with about twenty five hundred square feet that compares to twenty one thousand nine hundred square feet of warehouse the silver tea in france roughly a tenth of the total overall inventory so in terms of judge coleman's question the only thing that we do know from the complaint is that mr ray's went to a warehouse that that is roughly one tenth the size of their total saw some inventory which is unspecified and that with respect to the portion of that east coast inventory that he saw noted that much was missing documentation and was broken that's as much as we know from this complaint your honor now that does not rise to the level of an item three or three reportable uncertainty in the april sixteenth prospect that the company issued risk warnings and those risk warnings talked about the potential that if a company was on a needle to integrate the two companies that that could impact it revenue projections so with respect to what was actually sad about revenue and you can take a look at the oxford asset management case which is the eleventh circuit your honor and they take us on if the if the uncertainty that is alleged is nothing more than the general uncertainty that is already been disclosed and that's not even an unknown uncertainty that's the first part of the test the second part of the test is it has to be known that it will have a material impact on the company's financial condition or results of operation and how is it that on the basis of this complaint which says virtually nothing about the amount of inventory there were the role of that inventory in the revenue projections that to which they assign there were nothing there to robin to complain about those issues how is it that that can be unknown uncertainty that is known at the time to have a material impact on the company's results of operations it doesn't come close to meeting the standard in item three o three this is a matter of days i'd also point out your honor that as your honor pointed out when ms ryder was was speaking  company by the superiors by his by the three levels above him to bring the alleged defective inventory back to carlsbad so that the company could actually review whether they could find the documentation whether they could fix broken parts this is well as judge clientle put it out in the run county case this is the stuff of business this is what businesses do they they work with issues particularly in a merger which is which has lots of messiness to it typically and with two big companies and argue that the company knew within the meaning of item three zero three four days after this alleged telephone conference that it had an uncertainty that made to the head a reasonable likelihood of materially threatening its performance i just think it's to play fast and loose with with the factual on or let me point something else out there is a complete disconnect between the plaintiffs alleged item three o three non disclosure and their loss causation theory paragraph ninety four encapsulates what they say the corrective disclosure is what the truth when the truth came to the market this was the truth and what was the truth it doesn't say anything about product inventory it talks about disk well taken integrating the company which of other things that are mentioned but there's no mention of the word inventory indeed research director of the entire e r for statements about problems with the inventory  connected to the august two thousand and ten alleged practice disclosure we could find none clearly mr piper did speak about the utility and the benefit to alpha tac of getting access to scienti actually i think it's called a stock keeping unit your honor it's like a barcode that's used to identify physical inventory or frankly intangible issues as well and tangible product to get this information loaded into their computer exactly and what's interesting about it from our point of view your honor is that you don't load information about inventory in your computer i must a computer unless they're under the tories salable it's the opposite of what the plaintiff the ledge here there's no doubt that that in february of two thousand and twelve the company announced that there was going to be a write up of eight point two million dollars of inventory that occurred long after the august of two thousand and ten corrected disclosure and there's no indication in that disclosure that there were problems with the inventory that were creating any issues in terms of you know the company's ability to consolidation and integration consolidation refers to the consolidation of scientific physical location in the carlsbad operation and we submit that's a fairly standard used in business of the word consolidation integration of course is a much longer process and as mystical in mergers and as i said before it's messy it's meant to put two companies together particular to international companies mr piper never said that integration was complete that's quite frankly and respectfully to my colleagues on the left a fabrication you will search in vain for any statement by mr piper that he ever said that integration was completed he said that he was pleased with the state of the integration as of a certain point in time but your honor they don't challenge that statement that's not a statement that they claim was untrue so just for the  talking about the twenty percent revenue growth projection i believe and she noted that was a statement from december of two thousand and nine that's also not as much a statement that they challenge what we find popping up in their a the district court ruled on them and of course the plaintiff the appellants have waived any challenge to to any other statements that's well known and well recognized by this cour standard brody makes very clear that that's not the law of the circuit riegel makes very clear that's not the law of the circuit and supreme court in our macare just recently reaffirmed that section eleven is not a full disclosure statute and so  i suggest to the panel that this risers focus on item three zero three is tantamount to an acknowledgment that if she can't should mourn the claimant in under item three or three she has no  an extremely high pleading bar with respect to an emissions case in particular the bar that it says is not mere negligence not even gross negligence but an extreme departure from the standard of care and the plaintiffs would have this court leap from whatever it is that one takes from mr ray or through those allegations for days before the product is first shipped would have this great lead to a finding that the defendant acted in a manner that reflects an extreme departure from ordinary care and we respectfully submit your honors that they can't get their thank you thank you good morning i want to quickly address the idea that i haven't time spoken about regulation ask a and i don't three or three which if violated is a violation of section eleven so i don't want to leave the panel with a misunderstanding that i have abandoned section eleven claims altogether but we are going to rely on our papers on some arguments that i will not have time to get to the important thing to me about regulation s k in primary part defensive argue that it doesn't apply to an s three form and i think it really be a mistake of law to let that be the case for mastery is a way for companies to officially issue offerings that allows them to incorporate by reference their ten k forms which can include the management discussion so to the extent that somehow they don't have to update that with a known on certainty would be allowing a company to issue a form astore and avoid liability under the securities laws and that should not be the holding if you look at the silver strength case that we cited in the first first circuit it cites back to a sharp haste also in the first circuit that has a very fulsome discussion of why form s three has the same disclosure obligations under item three or three of regulation as  secondly i wanted to address mr reyes in more detail to say that he is the person that al protectress to send out not once but twice to assess the inventory he came came back with a report and somehow being asked to not treat that as a credible report or not one that they relied upon even though he told the highest level officials at the company even though we have a confidential witness who tells us this is senior buyer that they discuss these issues constantly and they larger company than scientists alpha tech was the largest company i believe them sign to go you're getting dangerously close to boil five percent or you know we don't believe that we believe that the eight point two million dollars that was ultimately written off with in large part related to the think it goes back to the fundamental question of whether it was the fault for misleading statements made if you repeat your preceding problems on a very small percentage of the inventory that the total company that you were trying to acquire this is a chair sitting in a warehouse and it couldn't be sold nobody would care but they also wouldn't be discussing it constantly and we wouldn't have a sales manager saying he was unable to sell the product sell the product so we wouldn't have reports that seventy percent was written off and that no scienti