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Item 3. Legal Proceedings

2024-06-04 compared with 2023-05-26 · 69 added, 50 removed, 31 unchanged (79% of the section changed)

LEGAL PROCEEDINGS

We are subject to the legal

proceedings and claims discussed below as well as certain other legal proceedings and claims that have not been fully resolved and that

have arisen in the ordinary course of business.

Our management evaluates our exposure to these claims and proceedings individually and

in the aggregate and evaluates potential losses on such litigation if the amount of the loss is estimable and the loss is probable.

the outcome of legal proceedings and claims brought against the Company is subject to significant uncertainty.

Although management considers

the likelihood of such an outcome to be remote, if one or more of these legal matters were resolved against the Company for amounts in

excess of management’s expectations, the Company’s financial statements for that reporting period could be materially adversely

The Company settled certain matters subsequent to year end that did not individually or in the aggregate, have a material impact

on the Company’s financial condition or operating results.

We are subject to

the legal proceedings and claims discussed below as well as certain other legal proceedings and claims that have not been fully resolved

and that have arisen in the ordinary course of business.

Our management evaluates our exposure to these claims and proceedings individually

and in the aggregate and evaluates potential losses on such litigation if the amount of the loss is estimable and the loss is probable.

However, the outcome of legal proceedings and claims brought against the Company is subject to significant uncertainty.

Although management

considers the likelihood of such an outcome to be remote, if one or more of these legal matters were resolved against the Company for

amounts in excess of management’s expectations, the Company’s financial statements for that reporting period could be materially

adversely affected.

The Company settled certain matters subsequent to year end that did not individually or in the aggregate, have a

material impact on the Company’s financial condition or operating results.

In 2017, the Company’s

former COO was awarded approximately $238 in accrued salary and related charges by the California labor board.

In August 2021, the

Company reached a settlement by which the Company agreed to pay approximately $330,000, representing the principal award plus accrued

As of the time of this filing, the Company has paid approximately $271,600 toward the settlement amount.

The remaining balance

of approximately $58,400 is to be paid no later than September 1, 2023 and accrues interest of 10% per annum until paid.

Between July 2017 and March

2022, the Company was engaged in litigation with a former director, Robert Kopple, relating to more than $13 million and the current

equivalent of the approximately 23 million warrants, exercisable for seven years at a price of $0.10 per share, which Mr.

his affiliated entities (collectively the “Kopple Parties”) claimed should have been originally issued to them pursuant to

various agreements with the Company entered to between 2013-2016.

In March 2022, the Company reached a settlement with the Kopple Parties

that resolved all claims asserted against the Company without any admission, concession or finding of any fault, liability or wrongdoing

on the part of the Company.

Under the terms of the settlement, the Company agreed to pay an aggregate amount of $10 million over a period

of seven years, including $3 million initial payment to be paid in June 2022.

$150 was paid in June 2022, and the balance of the initial

payment of $2.85 million was extended to May 29, 2023, In exchange for the extension, the Company was required to pay $165,000 in extension

and forbearance fees in cash and $430,000 in accrued forbearance fees.

Beginning in January 2023, interest accrues on the unpaid balance

at a rate of 6%, compounded annually.

All amounts, including all accrued interest and deferred fees, are to be paid no later than eight

years from the date of the initial payment.

The Kopple Parties have also received seven-year warrants to purchase up to an aggregate

of approximately 3.3 million shares of our common stock at a price of $0.85 per share.

The settlement also provides for standard mutual

general release provisions and includes customary representations, warranties, and covenants, including certain increases in the amount

payable to the Kopple Parties and the right of such parties to enter judgment against the Company if the Company remains in uncured default

in its payment obligations under the settlement.

As of the date of this report, the Company has not yet paid the full $3,000,000 installment

due to Kopple, having made an initial payment of $150,000 in June 2022.

(See Part IV, Item 15, Note 9 and Note 17 to the Financial Statements).

In August 2021, the Company

reached a settlement by which the Company agreed to pay approximately $330, representing the principal award plus accrued interest.

of the time of this filing, the Company has paid the full $330 toward the settlement amount.

Between July 2017 and

March 2022, the Company was engaged in litigation with a former director, Robert Kopple, relating to more than $13 million and the

current equivalent of the approximately 23 million warrants, exercisable for seven years at a price of $0.10 per share, which Mr.

Kopple and his affiliated entities (collectively the “Kopple Parties”) claimed should have been originally issued to

them pursuant to various agreements with the Company entered to between 2013-2016.

In March 2022, the Company reached a settlement

with the Kopple Parties that resolved all claims asserted against the Company without any admission, concession or finding of any

fault, liability or wrongdoing on the part of the Company.

Under the terms of the settlement, the Company agreed to pay an aggregate

amount of $10 million over a period of seven years, including $3 million initial payment to be paid in June 2022.

$150 was paid in

June 2022, and the balance of the initial payment of $2.85 million was extended to May 29, 2023, In exchange for the extension, the

Company was required to pay $165 in extension and forbearance fees in cash and $430 in accrued forbearance fees.

January 2023, interest accrues on the unpaid balance at a rate of 6%, compounded annually.

All amounts, including all accrued

interest and deferred fees, are to be paid no later than eight years from the date of the initial payment.

The Kopple Parties have

also received seven-year warrants to purchase up to an aggregate of approximately 3.3 million shares of our common stock at a price

of $0.85 per share.

The settlement also provides for standard mutual general release provisions and includes customary

representations, warranties, and covenants, including certain increases in the amount payable to the Kopple Parties and the right of

such parties to enter judgment against the Company if the Company remains in uncured default in its payment obligations under the

During the year ended February

29, 2024, the note was amended multiple times to extend the payment dates of the balance of the initial payment of $2,850, originally

due in June 2022, and the first installment payment of $1,000, originally due in June 2023 (collectively, the “past due principal”).

As a result of these amendments, the Company incurred additional extension and forbearance fees totaling $450 and adjustment to principal

balance of $23 that was recorded as part of interest expense.

As of February 29, 2024, outstanding principal balance amounted to $10,938,

including the $3,850 past due principal (see below).

In March 2024, the Company

and Kopple again amended the note payable.

The amendment (i) replaced the requirement to pay the $3,850 past due principal balance with

the requirement to pay $2,000 due December 15, 2024, effectively extending the payment of $1,850 to future periods;

(ii) increased the

stated interest rate to 10%;

(iii) added a fee of $15 monthly until the Company makes a principal payment of $2 million by December 2024;

(iv) effective August 30, 2024, the Company will grant Kopple a conversion right that gives Kopple the option to be able to convert the

note payable into equity of the Company at a conversion price of the lower of $1.00 per share or 50% of the 10 day volume weighted average

price of the Company’s common stock;

(v) during Fiscal 2025, will require the Company to pay 20% of all collected revenues within

10 days of the end of each fiscal quarter;

(vi) will require the Company to pay Kopple 20% of any amount raised in new capital in the

form of equity, debt or convertible debt above $3.5 million;

(vii) reduces the exercise price of the warrants granted to Kopple in March

2022 from $0.85 per share to $0.50 per share;

and (vii) extends the warrant expiration date from March 8, 2029, to March 31, 2031.

The Company will account for this amendment in the first quarter ended March 31, 2024, for fiscal year 2025.

On March 26, 2019, various

12 unchanged sentences

On July 8, 2019 the Court of Chancery entered final judgment in favor of the

stockholder plaintiffs, confirming that (a) Ronald Buschur, Si Ryong Yu and William Anderson had been validly removed by the holders of

a majority of the Company’s outstanding stock acting by written consent (b) Ms.

stockholder plaintiffs, confirming that (a) Ronald Buschur, Si Ryong Yu and William Anderson had been validly removed by the holders

of a majority of the Company’s outstanding stock acting by written consent (b) Ms.

Lempert had been validly

elected by the holders of a majority of the Company’s outstanding stock acting by written consent, and (c) the Company’s Board

of Directors validly consists of Cipora Lavut, David Mann, Robert Lempert, Gary Douglas and Salvador Diaz-Versón, Jr.

of prior management’s unsuccessful opposition to this stockholders’ action filed in the Court of Chancery, such stockholders

may be potentially entitled to recoup their litigation costs from the Company under Delaware’s corporate benefit doctrine and/or

other legal provisions.

elected by the holders of a majority of the Company’s outstanding stock acting by written consent, and (c) the Company’s

Board of Directors validly consists of Cipora Lavut, David Mann, Robert Lempert, Gary Douglas and Salvador Diaz-Versón, Jr.

a result of prior management’s unsuccessful opposition to this stockholders’ action filed in the Court of Chancery, such

stockholders may be potentially entitled to recoup their litigation costs from the Company under Delaware’s corporate benefit doctrine

and/or other legal provisions.

To date, no final determination has been made as to the amount of recoupment, if any, to which such stockholders

11 unchanged sentences

MINE SAFETY DISCLOSURES

Not applicable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 3. Legal Proceedings