Flash Sports & Media Holdings, Inc. 10-Q

ITEM 1. LEGAL PROCEEDINGS From time to time, we become involved in or are threatened with legal disputes. While most of these disputes are not likely to have a material effect on our business, financial condition, or operations, the following matters are deemed by the Company to be material either due to the costs of litigation or the potential negative impacts to the Company should these matters not be resolved in our favor: ● Great Green Theory – Emerald filed a lien and brought a suit in the Superior Court of Berkshire, Massachusetts to foreclose on the lien against Great Green Theory Land, LLC and Great Green Theory Cultivation, LLC who are the owners of the land and a construction project in Lee, Massachusetts. Emerald is claiming breach of contract and quantum merit against Great Green Theory for failure to pay approximately $1,326,286.28 in payment applications, of which approximately half of that amount is due and owning to subcontractors on the project. Great Green Theory has filed counterclaims against Emerald claiming liquidated damages of approximately $1,010,000 for alleged unjustifiable delays on the project and alleging construction defects in the project. o Account Receivable of $500,000 acquired in Emerald transaction – The selling Emerald shareholders have agreed to indemnify and defend the Company for any litigation or judgement stemming from this lawsuit. The Company has recorded the full $500,000 as a receivable on the opening balance sheet as of the date of the acquisition. o Legal Costs to collect the Account Receivable of $500,000 – The Company has agreed to split the legal costs of this claim until the funds are recovered or until the claim of liquidated damages is relieved. Total estimated legal costs associated with this claim are approximately $250,000. The Company recorded 50% of this amount as a liability on the opening balance sheet as of the date of the acquisition. ● Pullar – urban-gro’s former Chief Financial Officer, George Pullar filed a suit in the District Court of Boulder County, Colorado against urban-gro and Bradley Nattrass, in his capacity as urban-gro’s CEO, claiming breach of fiduciary duty. urban-gro has since been dismissed without prejudice from the suit. The remaining claim stems from a settlement agreement with Mr. Pullar and allegations that Mr. Natrrass failed to share enough non-public material information about urban-gro’s plans for fundraising that would have impacted Mr. Pullar’s decision to enter into the settlement agreement. urban-gro’s director and officer liability insurance carrier has indicated coverage is available to Mr. Nattrass for this suit. We believe we have substantial defenses to the claim asserted in this lawsuit and intend to vigorously defend this action. ● Crest Ventures, LLC – We have been sued in a putative breach of contract case in the District Court for Arapahoe County, Colorado. The allegations in the action are based on a claim that Crest Ventures, LLC is entitled to commission compensation on the February 2021 uplisting of our common stock to the Nasdaq Capital Market. We believe we have substantial defenses to the claim asserted in this lawsuit and intend to vigorously defend this action. ● Sunflower Bank – We have filed a lawsuit against Sunflower Bank related to fraudulent wire transfers of approximately $5.1 million that were made from our accounts at Sunflower Bank in October 2021. As of the date of this Report, $1.8 million of these funds have been returned to us. We are suing Sunflower Bank for the remaining $3.3 million as we believe that Sunflower Bank failed to follow industry standard procedures designed to prevent such a theft and is therefore liable for the unrecovered balance. We expect Sunflower Bank, Sunflower Bank’s insurers, and/or our insurer to reimburse us for the remaining balance. ITEM 1A. RISK FACTORS We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. MINE SAFETY DISCLOSURE Not Applicable.