They implied they were writing code by telling the customer that "development was progressing". Could you argue this was not a lie? Yes, if you are a weasel.

well, i think i could justify it if i wanted to. but i don't want to continue down this thread, sometimes i like to argue for the sake of arguing and i think i should stop now.

i'm not really here to agree with how they went about doing things with respect to how they claim to have pitched the product.

the process that they took would work the exact same if they were completely upfront about what they were doing, though, and i think its worth learning from.