Item 3. Legal Proceedings
Item
3. Legal Proceedings
On
September 27, 2019, iGalen International Inc., which was at that time one of our majority-owned subsidiaries, and iGalen Inc., its wholly-owned
subsidiary, filed a complaint in the Superior Court of the State of California, County of San Diego, Central Division, against Gara Group,
Inc., a Delaware corporation, and certain affiliated or related entities, including the Chief Executive Officer of the Gara Group (collectively
these entities are referred to herein as the “Gara Group”). A similar complaint had been filed in Utah on September 26, 2019,
but subsequently re-filed in California. The complaint, as amended on October 24, 2019, enumerates causes of action for breach of contract,
breach of covenant of good faith and fair dealing and intentional interference with economic relations.
iGalen
Inc. and Gara Group are parties to a Specialized Services Agreement, dated March 29, 2017 (the “Specialized Services Agreement”).
iGalen Inc. contracted with Gara Group to provide for services that include, among other things, (i) product fulfillment; (ii) software
development and maintenance of an onsite “Platform,” which includes a company website and interactive portal referred to
as the “Back Office”; and (iii) managing iGalen’s social media sites. The Gara Group had previously claimed that iGalen
Inc. owed Gara Group certain amounts, including (i) $125,000 for “Back Office Fees”; (ii) $150,000 for “Speaking Fees”;
and (iii) $67,299 for services related to iGalen’s merchant account, back office, and shipping fulfillment, invoiced on August
28 and 31, and September 15, 2019. iGalen Inc.’s amended complaint notes that no provision in the Specialized Services Agreement
allows for the particular “Back Office Fees” of $125,000 and that no provision in the Specialized Services Agreement allows
for the so-called “Speaking Fees” of $150,000. Gara Group cut off services to iGalen following iGalen’s indication
that it was disputing the amounts owed. iGalen’s amended complaint notes that the actions of Gara Group and Mr. Gara have caused,
and continue to cause, iGalen to suffer substantial harm by, among other things, making it so iGalen was unable to communicate with distributors
via its website and Back Office, fulfill orders made by distributors, or pay commission to distributors. iGalen is seeking damages.
On
October 10, 2019, Gara Group filed a complaint in the Superior Court of the State of California, County of San Diego, Central Division
against iGalen International Inc., iGalen Inc., Alset International Limited, Chan Heng Fai, Dr. Rajen Manicka and David Price, an executive
of iGalen Inc. Gara Group’s complaint for damages asserts that the Gara Group is entitled to general damages of $9,000,000 and
liquidated damages of $50,000,000. Gara Group filed an amended complaint filed on March 13, 2020. The court dismissed Kosta Gara from
the iGalen suit and dismissed a cause of action for intentional interference with economic relations on January 14, 2022. The court set
a trial date of April 7, 2023. iGalen International Inc. was sold by one of the Company’s subsidiaries on December 30, 2020.
On
April 13, 2022, the parties to these lawsuits entered into a settlement agreement, resolving these matters.
In
addition, from time to time, during the normal course of our businesses, we may be subject to various litigation claims and legal disputes,
including in the area of intellectual property (e.g., trademarks, copyrights and patents). Our intellectual property rights extend to
our technology, business processes and the content on our website. We use the intellectual property of third parties in marketing and
providing our services through contractual and other rights. Despite our efforts, from time to time, third parties may allege that we
have violated their intellectual property rights.
Although
the results of claims, lawsuits and proceedings in which we may be involved cannot be predicted with certainty, we do not currently believe
that the final outcome of the matters discussed above will have a material adverse effect on our business, financial condition or results
of operations. However, defending and prosecuting any such claims is costly and may impose a significant burden on our management and
employees. In addition, we may receive unfavorable preliminary or interim rulings in the course of litigation, and there can be no assurances
that favorable final outcomes will be obtained. With regard to intellectual property matters which may arise, if we are unable to obtain
an outcome which sufficiently protects our rights, successfully defends our use or allows us time to develop non-infringing technology
and content or to otherwise alter our business practices on a timely basis in response to the claims against us, our business, prospects
and competitive position may be adversely affected.
35
Item
4. Mine Safety Disclosures
Not
applicable.
PART
II