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Item 3. Legal Proceedings

2022-03-31 compared with 2021-04-12 · 75 added, 66 removed, 5 unchanged (97% of the section changed)

LEGAL PROCEEDINGS

From time to time, we may become

involved in various lawsuits and legal proceedings, which arise in the ordinary course of business.

However, litigation is subject to

inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm business.

On August 6, 2020, the Company,

John and Miller and certain affiliated entities filed a lawsuit in the United States District Court, Southern District of New

York against Robert Koch, Bedford Investment Partners, LLC, Kaizen Advisors, LLC and certain other unnamed defendants.

The lawsuit alleges

time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business.

litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may

harm business.

August 6, 2020, the Company, Messrs.

John and Miller and certain affiliated entities filed a lawsuit in the United States District Court,

Southern District of New York against Robert Koch, Bedford Investment Partners, LLC, Kaizen Advisors, LLC and certain other unnamed defendants.

The lawsuit alleges that Mr.

Koch and the other defendants are attempting to extort the Company and Messrs.

John and Miller to issue the defendants shares

of the Company’s common stock which they claim are owed to them.

The Company asserts that they have no oral or written agreement

Koch or any of his affiliates that entitle him to shares of the Company’s common stock.

The Company’s complaint seeks

actual damages in the amount of $5,000,000 and punitive damages in the amount of $5,000,000.

In response, the defendants filed their answer

and asserted a counter claim repeating the same claims that caused the Company to file their suit.

Subsequently, the Company moved for

judgement on the pleadings to dismiss the defendant’s counterclaim in its entirety.

That motion has been fully briefed and is pending

adjudication.

The Company intends to vigorously contest the claims.

On July 6, 2020, Brian Menke (the

Plaintiff ”) brought an action in Nevada District court seeking to enforce a judgement that he had obtained in 2012

against Krista Whitley, the former owner and manager of Magical Beasts LLC., in the amount of $250,000.

In July 2020, the Plaintiff brought

a claim in Nevada State Court to impute such judgement to the Company’s wholly owned subsidiary, Magical Beasts, LLC.

6, 2020, the court imputed the judgement to Magical Beasts and advised the Company that before paying any funds to Ms.

Whitley, they must

first satisfy the judgement to the Plaintiff.

John and Miller to issue

the defendants shares of the Company’s common stock which they claim are owed to them.

The Company asserts that they have no oral

or written agreement with Mr.

Koch or any of his affiliates that entitle him to shares of the Company’s common stock.

The Company’s

complaint seeks actual damages in the amount of $5,000,000 and punitive damages in the amount of $5,000,000.

In response, Mr.

Bedford Investment Partners, LLC (together, the “Koch Parties”) filed their answer and counterclaim, repeating the same claims

that caused the Company to file the lawsuit.

On October 6, 2020, the Company moved for judgment on the pleadings to dismiss the defendants’

counterclaim in its entirety.

On April 24, 2021, the Company’s motion was granted and all counterclaims were dismissed with prejudice,

except the breach-of-contract and unjust enrichment claims.

On June 04, 2021 the Koch Parties filed a Second Amended Counterclaim, re-alleging

their previous breach-of-contract and unjust enrichment counterclaims.

On June 25, 2021, the Company filed a motion to dismiss defendants’

Second Amended Counterclaim, which the parties briefed in summer 2021.

On February 14, 2022, the court dismissed all of the Koch Parties’

counterclaims except to the extent that they alleged unjust enrichment against Jupiter and Mr.

On March 22, 2022, the Parties engaged

in a Settlement Conference before The Honorable Sarah L.

Cave, which did not resolve the case.

On March 25, 2022, The Honorable Lewis

Liman granted Jupiter and Mr.

John permission to move for summary judgment dismissing the Koch Parties’ unjust enrichment counterclaim,

and scheduled a jury trial to begin no earlier than November 14, 2022.

July 6 , 2020, Brian Menke (the “Plaintiff”) filled a lawsuit in Nevada court seeking to enforce a judgement that he had

obtained in 2012 against Krista Whitley, the former owner and manager of Magical Beasts LLC., in the amount of $250,000.

In July 2020,

the Plaintiff brought a claim in Nevada State Court to impute such judgement to the Company’s wholly owned subsidiary, Magical

On August 6, 2020, the court imputed the judgement to Magical Beasts and advised the Company that before paying any funds

Whitley, they must first satisfy the judgement to the Plaintiff.

On October 12, 2020, the Company, Ms.

Whitley and the Plaintiff reached an agreement whereby

the Company and Ms.

Whitley agreed that of the $1,000,000 payable by the Company to Ms.

Whitley in connection with its acquisition of

Magical Beasts, the first $336,450 would be paid to the Plaintiff.

In November, the Company made a cash payment of $300,000 to the Plaintiff

and issued 8,500 shares of its common stock valued at $36,450.

Plaintiff agreed to withdraw the case against Magical Beasts without prejudice

and the matter is now settled.

On January 25, 2021, the Company entered into an Omnibus

Amendment to:

(1) the Confidential Membership Interest Purchase Agreement, dated February 21, 2020;

(2) the Sales Distributor Agreement,

dated February 21, 2020;

and (3) the Executive Employment Agreement, dated March 31, 2020 (the “

Agreements ”).

to the Omnibus Amendment, the parties (i) acknowledge that the Company has fully satisfied its obligation of $334,000 to the Plaintiff

Whitley’s judgment creditors;

(ii) agree that in satisfaction of the remaining balance due to Ms.

Whitley under the Agreements,

she is to be paid $150,000 in cash instead of $650,000 and, starting April 1, 2020, shall be entitled to individually market and sell

the Bella line of products remaining in the Company’s inventory, as identified in the Omnibus Amendment, and the Company will relinquish

its rights to the Bella brand;

(iii) agree that the number of shares issuable upon exercise of the common stock purchase options granted

Whitley and the Plaintiff

reached a settlement agreement whereby the Company agreed that of the $1,000,000 payable to Ms.

Whitley, the first $334,000 be paid to

the Plaintiff.

Whitley in turn agreed that such payments would be applied to the $1,000,000 owed to Ms.

Whitley that was to be paid

from the proceeds of the offering and the Plaintiff agreed to withdraw the case against Magical Beasts without prejudice.

January 25, 2021, the Company entered into an Omnibus Amendment to:

(1) the Confidential Membership Interest Purchase Agreement, dated

February 21, 2020;

(2) the Sales Distributor Agreement, dated February 21, 2020;

and (3) the Executive Employment Agreement, dated March

31, 2020 (the “Agreements”).

Pursuant to the Omnibus Amendment, the parties (i) acknowledge that the Company has fully satisfied

its obligation of $334,000 to the Plaintiff as Ms.

Whitley’s judgment creditors;

(ii) agree that in satisfaction of the remaining

balance due to Ms.

Whitley under the Agreements, she is to be paid $150,000 in cash;

(iii) agree that starting April 1, 2020, shall be

entitled to individually market and sell the Bella line of products remaining in the Company’s inventory, as identified in the

Omnibus Amendment, and the Company will relinquish its rights to the Bella brand;

(iv) agree that the number of shares issuable upon

exercise of the common stock purchase options granted to Ms.

Whitley under the Agreements shall be reduced from 250,000 to 185,000, Ms.

Whitely may utilize a cashless exercise feature to exercise

such options, subject to a six (6) month holding period on the shares, and Ms.

Whitley shall not be permitted to sell an amount of shares

in any week which exceeds 10% of the Company’s total weekly trading volume in the prior week;

(iv) agree that Ms.

Whitley’s

Employment Agreement shall terminate on March 31, 2021 and shall not renew;

and (v) acknowledge that Ms.

Whitley has been paid $5,541.50

for unreimbursed expenses on or about December 30, 2020.

There will be no adverse impact to the financial statements or financial position

of the company related to this matter given the offset of the balance of the $1,000,000 note payable already recorded.

Whitely may utilize a cashless exercise feature to exercise such options, subject to a six (6) month holding period on the shares, and

Whitley shall not be permitted to sell an amount of shares in any week which exceeds 10% of the Company’s total weekly trading

volume in the prior week;

(v) agree that Ms.

Whitley’s Employment Agreement shall terminate on March 31, 2021 and shall not renew;

and (vi) acknowledge that Ms.

Whitley has been paid $5,541 for unreimbursed expenses on or about December 30, 2020;

and (vii) the balance

of the note due Whitley be forgiven.

a result of the above, the Company recognized a gain of $669,200 comprised of the forgiveness of debt of $691,500 and the write-off of

the unamortized portion of Whitley’s non-compete agreement of $22,300.

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