EchoCath, Inc. (EchoCath) (defendant), a medical research and development company, developed ultrasound technology that allowed doctors to perform certain medical procedures more safely and efficiently. In 1996, EchoCath began an initial public offering and issued a prospectus containing cautionary language that the investment was speculative and involved high risk. EchoCath disclosed to potential investors that EchoCath planned to pursue joint ventures with other companies, but that there were no guarantees of success. EP MedSystems, Inc. (MedSystems) (plaintiff) considered making a large investment in EchoCath. Throughout the negotiations between MedSystems and EchoCath, EchoCath’s officers and directors represented that EchoCath was deep in negotiations with large corporations to develop and market its women’s products. MedSystems agreed to purchase $1,400,000 in EchoCath stock and signed a subscription agreement stating that MedSystems was relying solely on information provided in the sales materials from EchoCath. However, fifteen months after MedSystems invested, EchoCath had not entered into any contracts to market its women’s products. MedSystems brought action against EchoCath, alleging that EchoCath had made misleading oral misrepresentations in violation of federal securities laws and certain state laws to induce MedSystems to invest. EchoCath moved to dismiss the complaint, relying on the cautionary statements in the offering materials. The district court dismissed MedSystems’ complaint, finding that EchoCath’s representations were immaterial under the bespeaks-caution doctrine and that MedSystems had failed to establish scienter, reliance, or loss causation.