disc drives that met the requirements of Maxtor's customers; and Maxtor's obligation to purchase StorMedia's media was contingent upon StorMedia's product meeting Maxtor's specifications and functional requirements.  After entering into the supply agreement with Maxtor, from November 17, 1995 until at least May 24, 1996,  StorMedia's media repeatedly failed to perform adequately, failed to meet Maxtor's functional requirements and failed to meet Maxtor's specifications, ultimately causing Maxtor itself to lose substantial business opportunities.  Cerion received notice that it was about to lose StorMedia as a customer, due to StorMedia's inability to produce, from Cerion substrates discs, media that met industry standards and Maxtor's requirements.  Prior to the offering, Cerion also was informed by its second largest customer, HMT, that it planned to reduce its orders from Cerion, becauseStorMedia's sales, and consequently Cerion's own, were contingent upon Maxtor's acceptance of StorMedia's products.  Prior to the offering, StorMedia repeatedly failed to conform its products to Maxtor's specifications.  By April of 1995, plaintiffs allege, StorMedia lacked the resources and ability to fulfill its supply obligations to Maxtor.  Cerion had failed to disclose that, prior to the offering, its business arrangement with StorMedia was about to be cancelled due to the problems StorMedia was encountering with Maxtor.

Additionally, Cerion's registration statement and prospectus also failed to disclose that Cerion was facing material reductions for orders of its substrates because HMT, developing in-house manufacture of the product, was drastically reducing its orders, materially impacting Cerion's ultimate viability.

The subject complaint adequately alleged that Cerion's registration statement and prospectus misled investors as to