Ernexa Therapeutics Inc. 10-K

ITEM 3. Legal Proceedings From time to time, we become subject to legal proceedings and claims, both asserted and unasserted, that arise in the ordinary course of business. Litigation in general, and securities litigation in particular, can be expensive and disruptive to normal business operations. Moreover, the results of legal proceedings are difficult to predict. An unfavorable resolution of one or more legal proceedings could materially adversely affect our business, results of operations, or financial condition. In addition, defending any claim requires resources, including cash to pay legal fees and expenses, and our limited financial resources could severely impact our ability to defend any such claim. We are not currently subject to any pending material legal proceedings, except as described below. 21 We and our directors were named as defendants in ten substantially similar actions brought by purported stockholders of ours arising out of the Merger: Henson v. NTN Buzztime, Inc. , No. 1:20-cv-08663-LGS (S.D.N.Y. filed Oct. 16, 2020); Monsour v. NTN Buzztime, Inc. , No. 1:20-cv-08755-LGS (S.D.N.Y. filed Oct. 20, 2020); Amanfo v. NTN Buzztime, Inc. , No. 1:20-cv-08747-LGS (S.D.N.Y. filed Oct. 20, 2020); Carlson v. NTN Buzztime, Inc. , No. 1:21-cv-00047-LGS (S.D.N.Y. filed Jan. 4, 2021); Finger v. NTN Buzztime, Inc. , No. 1:21-cv-00728-LGS (S.D.N.Y. filed Jan. 26, 2021); Falikman v. NTN Buzztime, Inc. , No. 1:20-cv-05106-EK-SJB (E.D.N.Y. filed Oct. 23, 2020); Haas v. NTN Buzztime, Inc. , No. 3:20-cv-02123-BAS-JLB (S.D. Cal. Oct. 29, 2020); Gallo v. NTN Buzztime, Inc. , No. 3:21-cv-00157-WQH-AGS (S.D. Cal. filed Jan. 28, 2021); Chinta v. NTN Buzztime, Inc. , No. 1:20-cv-01401-CFC (D. Del. filed Oct. 16, 2020); and Nicosia v. NTN Buzztime, Inc. , No. 1:21-cv-00125-CFC (D. Del. filed Jan. 30, 2021 ) (collectively, the “Stockholder Actions”). Brooklyn also was named as a defendant in two of the actions ( Chinta and Nicosia ). The Stockholder Actions assert claims asserting violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and Rule 14a-9 promulgated thereunder. Henson and Monsour assert additional claims for breach of fiduciary duty. The complaints allege that defendants failed to disclose allegedly material information in the Form S-4 Registration Statement filed with the SEC on October 2, 2020, including (1) certain details regarding any projections or forecasts we or Brooklyn may have made, and the analyses performed by our financial advisor, Newbridge Securities Corporation; (2) conflicts concerning the sales process; and (3) disclosures regarding whether or not we entered into any confidentiality agreements with standstill and/or “don’t ask, don’t waive” provisions. The complaints allege that these purported failures to disclose rendered the Form S-4 false and misleading. The complaints request a preliminary and permanent injunction of the Merger; rescission of the Merger if executed and/or rescissory damages in unspecified amounts; direction to the individual directors to disseminate a compliant Registration Statement; an accounting by us for all alleged damages suffered; a declaration that certain federal securities laws have been violated; and costs, including attorneys’ and expert fees and expenses. Process was served in Henson , Chinta , Amanfo , Falikman , Carlson and Gallo, but not in any of the other Stockholder Actions. Although plaintiffs request injunctive relief in their complaints, they have not filed motions for such relief. We and our directors deny any wrongdoing or liability with respect to the allegations and claims asserted, or which could have been asserted, in the Stockholder Actions , as we believe the disclosures set forth in the Form S-4 complied fully with applicable law . Nevertheless, in order to avoid nuisance, potential expense and delay, and to provide additional information to the our stockholders, we determined to voluntarily supplement the Form S-4 with further disclosures (the “Supplemental Disclosures”) on Form 8-K, which we filed with the SEC on February 26, 2021. These Supplemental Disclosures discussed, inter alia , (1) certain details regarding any projections or forecasts we or Brooklyn may have made, and the analyses performed by our financial advisor, Newbridge Securities Corporation; and (2) information regarding whether or not we entered into any confidentiality agreements with standstill and/or “don’t ask, don’t waive” provisions. We believe that as a consequence of the issuance of the Supplemental Disclosures all claims asserted in the Stockholder Actions have been rendered moot, and have requested that all plaintiffs in the Stockholder Actions dismiss their claims voluntarily (or immediately inform us if they are not willing to do so). Since the issuance of the Supplemental Disclosures, the plaintiffs in Henson , Chinta , Monsour , Amanfo , Carlson and Nicosia have voluntarily dismissed their cases. We expect the plaintiffs in the other Stockholder Actions to do the same. On March 2, 2021, the court in Haas issued an order to show cause why the case should not be dismissed for failure to prosecute. Plaintiffs in the Stockholder Actions reserve the right to seek payment by us to their attorneys of a “mootness fee” in an amount yet to be determined in connection with the issuance of the Supplemental Disclosures. On March 5, 2021, we and our directors were named as defendants in a putative class action brought by a purported stockholder in the Court of Chancery of the State of Delaware, entitled Carlson v. NTN Buzztime, Inc ., Case No. 2021-0193- (Del. Ch. filed Mar. 5, 2021). The action asserts claims for violations of Section 211(c) of the Delaware General Corporation Law and our bylaws (and a concomitant breach of fiduciary duty), alleging that we failed to conduct an annual meeting of stockholders within thirteen months of the previous annual meeting of stockholders, which took place on June 7, 2019. Plaintiff is requesting certification of a class, declaratory relief, injunctive relief to compel an annual meeting of stockholders, and fees and costs. The complaint does not yet appear to have been served upon any of the defendants. We expect this action will be rendered moot upon our holding of our special meeting of stockholders on March 15, 2021. ITEM 4. Mine Safety Disclosures Not Applicable. 22 PART II