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Item 3. Legal Proceedings

2023-04-03 compared with 2022-03-31 · 39 added, 66 removed, 14 unchanged (88% of the section changed)

LEGAL PROCEEDINGS

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.

Company may be subject to legal proceedings and claims arising from contracts or other matters from time to time in the ordinary course

Management is not aware of any pending or threatened litigation where the ultimate disposition or resolution could have

a material adverse effect on its financial position, results of operations or liquidity.

August 6, 2020, the Company, Messrs.

1 unchanged sentence

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.

The lawsuit alleged that Mr.

Koch and the other defendants were 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 with Mr.

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

the defendants shares of the Company ’ s

common stock which they claim are owed to them.

The Company asserted that they have no oral or written agreement with Mr.

of his affiliates that entitle him to shares of the Company ’ s

common stock.

The Company ’ s

1 unchanged sentence

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.

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, and claiming damages of over $10 million.

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 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.

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.

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 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

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.

On March 25, 2022, The Honorable Lewis J.

Liman granted

Jupiter and Mr.

John permission to move for summary judgment dismissing the Koch Parties ’

unjust enrichment counterclaim;

the parties briefed that motion in spring 2022.

On January 30, 2023, Judge Liman largely granted Jupiter and Mr.

motion, eliminating all of the Koch Parties ’ remedy

theories except for their restitution claim for transferring the domain www.cbdbrands.net to Jupiter.

In doing so, Judge Liman suggested

that a jury could find that the Koch Parties would be fully compensated if the parties simply unwound the domain transfer, or that the

jury might quantify the website ’ s

value by looking to the amounts that the Koch Parties had paid for other, similar websites:

between $12.17 and $65.98.

After Judge Liman

issued this order, the Parties settled all claims and Jupiter and Mr.

John filed a proposed order of dismissal of all claims with prejudice.

On February 17, 2023, Judge Liman so-ordered that proposed order and closed the case.

MINE SAFETY DISCLOSURES.

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