Several class actions have been filed against rich media communications company First Virtual Communications, Inc. (Pink Sheets:FVCC.PK), and certain of its officers and directors by stockholders who purchased the company's common stock between March 29, 2004, and August 23, 2004. The actions claim that the defendants violated federal securities laws by issuing a series of material misrepresentations to the market over this time period, thereby artificially inflating the price of the company's securities. The stockholders seek to recover compensatory damages for the loss of value of their stock.

The lawsuit alleges that the defendants engaged in a “pump and dump” scheme that enabled company insiders to profit at the expense of class members by selling over a million shares of First Virtual securities at artificially inflated prices. The defendants allegedly issued materially false and misleading statements about the company’s financial condition and sales of its real-time rich media communications software, services, and its specialized networking hardware equipment. The action also alleges that the company mislead the investing public regarding a contract to provide the U.S. Air Force with First Virtual’s proprietary “Click to Meet” web communications infrastructure and solutions. In response to the misleading statements, the price of First Virtual stock skyrocketed 161% between February 5, 2004, and April 6, 2004, at which time certain company insiders allegedly sold over 1.98 million shares of their personally-held First Virtual stock for proceeds of more than $8.5 million.

On April 30, 2004, the defendants announced that First Virtual’s audit committee had started an investigation into certain irregular sales transactions, and that until the review was completed, the company would not be able to release its first-quarter earnings or file its Form 10-Q with the SEC. In reaction to this news, the price of First Virtual stock fell 37% from its previous day’s closing price. As a result of its failure to comply with the SEC’s filing requirements, First Virtual’s securities were also subject to delisting from the Nasdaq SmallCap market. On August 5, 2004, the defendants announced that the company had received a letter from Nasdaq which granted it a conditional temporary extension to file its first quarter 2004 report.

On August 17, 2004, the defendants disclosed that: (1) First Virtual could not meet the conditions of its temporary filing extension; (2) the company had incurred $2.1 million in expenses directly related to the investigation; (3) it was in danger of defaulting on a $3.0 million credit facility agreement; and (4) based on its profit and loss projections for the remainder of 2004, its stockholder equity would fall below Nasdaq’s listing requirements.

On August 24, 2004, before the market opened, the defendants disclosed that First Virtual’s request for an extension to comply with Nasdaq’s listing and filing requirements had been denied, and that its securities would be delisted from the Nasdaq SmallCap at the commencement of trading on August 25, 2004. In reaction to that news, First Virtual stock fell 47% from its previous trading day’s closing price, to close at $0.37 per share.

If you purchased securities issued by First Virtual Communications during the applicable period, you may request appointment by the court as a lead plaintiff if you do so by October 25, 2004. A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the court must determine that your claim is typical of the claims of other class members, and that you will adequately represent the class. Under certain circumstances, one or more class members may together serve as lead plaintiffs. Your ability to share in any recovery is not affected by the decision whether or not to serve as a lead plaintiff. You may retain any counsel of your choice to serve you in this action, or you may choose to do nothing, and remain in the class as a silent member.