Item 1. Legal Proceedings
Item
1. Legal Proceedings
Legal
case with FT Global Litigation
In
January 2021, FT Global Capital, Inc. (“FT Global”), a former placement agent of the Company filed a lawsuit against the
Company in the Superior Court of Fulton County, Georgia. FT Global served the complaint upon the Company in January 2021. In
the complaint, FT Global alleges claims, most of which attempt to hold the Company liable under legal theories that relate back to an
alleged breach of an exclusive placement agent agreement between FT Global and the Company in July 2020 which had a term of three months.
FT Global claims that the Company failed to compensate FT Global for securities purchase transactions between December 2020 and April
2021, pursuant to the terms of the expired exclusive placement agent agreement. Allegedly, the exclusive placement agent agreement
required the Company to pay FT Global for capital received during the term of the agreement and for the 12-month period following the
termination of the agreement involving any investors that FT Global introduced and/or wall-crossed to the Company. However, the
Company believes the securities purchase transactions at issue did not involve the one investor which FT Global introduced or wall-crossed
to the Company during the term of the agreement. FT Global claims approximately $7,000,000 in damages and attorneys’ fees.
The Company timely removed the case to the United
States District Court for the Northern District of Georgia (the (“Court) on February 9, 2021 based on diversity of jurisdiction.
On March 9, 2021, the Company filed a motion to dismiss based on FT Global’s failure to state a claim which is pending before the
Court. On March 23, 2021, FT Global filed its response to the Company’s motion to dismiss. FT Global argues that the Court
should deny the Company’s motion to dismiss. However, if the Court is inclined to grant the Company’s motion to dismiss,
FT Global requested that the Court permit it to file an amended complaint. On April 8, 2021, the parties filed a Joint Preliminary
Report and Discovery Plan. On April 12, 2021, the Court approved the Joint Preliminary Report and Discovery Plan and issued a Scheduling
Order placing this case on a six-month discovery tract. On April 30, 2021, the Company served FT Global with its Initial Disclosures.
On May 6, 2021, FT Global served the Company with its Initial Disclosures. On May 17, 2021, FT Global served the Company with its
First Amended Initial Disclosures. On November 10, 2021, the Court entered an Order granting the Company’s motion to dismiss
FT Global’s fraud claim and breach of contract claim as to the disclosure of its confidential and proprietary information.
The Court denied the Company’s motion to dismiss FT Global’s i) breach of contract claim for failure to pay FT Global pursuant
to the terms of the exclusive placement agent agreement; ii) claim for breach of the covenant of good faith and fair dealing; and iii)
claim for attorney’s fees, and the court concluded that additional information can be obtained through discovery. The
Company will timely file an answer and defenses to FT Global’s complaint which is due on November 24, 2021. The Company will
continue to vigorously defend the action against FT Global.
Item
1A. Risk Factors
Not
applicable.
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