Item 1. Legal Proceedings
Item 1. Legal Proceedings
Former Officers
On September 10, 2021, Stephen Goodman, Mark Banash,
and David Singer (the “ Former Officers ”), all former officers and employees of the Company, commenced suit against
the Company in Arizona Superior Court, Maricopa County. The complaint alleges the Company breached the rights of the Former Officers in
connection with Series D preferred stock issued to the Former Officers. The Company intends to defend itself against the allegations asserted
in the Former Officers’ complaint. if the case progresses the Company will file countersuits against all plaintiffs.
More Capital, LLC
On June 29, 2021, More Capital, LLC (“ More ”)
commenced suit against the Company, et al., in the 4th Judicial District (Hennepin County District Court) (Minnesota), alleging the Company
breached the terms and conditions of a convertible promissory note and accompanying securities purchase agreement More and the Company
entered into on August 20, 2018.
On July 20, 2021, the Company filed a motion to
dismiss More’s complaint, arguing that the claims asserted against the Company fail to state a claim upon which relief can be granted.
The Company intends to defend itself against
the allegations asserted in More’s complaint and interpose the defenses provided under the Exchange Act, including but not limited
to asserting that More is an unregistered dealer acting in violation of Section 15(a) of the Exchange Act and, pursuant to Section 29(b)
of the Exchange Act, the Company interposing its right to rescind the unlawful securities contracts in their entirety and, furthermore,
seek rescissionary damages for any unlawful securities transactions effected by More. The Company contends that its arguments are brought
in good faith, particularly in light of recent SEC enforcement actions and the SEC’s ongoing investigation against More, among
other parties, for violations of federal securities laws, including violations of Section 15(a) of the Exchange Act. See U.S. Securities
and Exchange Commission v. Carebourn Capital, LP et al, Case No. 1:20-cv-07162 (N.D. Ill.).
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