Item 1. Legal Proceedings
ITEM 1. LEGAL PROCEEDINGS
Litigation Matters
The Company is involved in litigation arising
from other matters in the ordinary course of business. We are regularly subject to claims, suits, regulatory and government investigations,
and other proceedings involving labor and employment, commercial disputes, and other matters. Such claims, suits, regulatory and government
investigations, and other proceedings could result in fines, civil penalties, or other adverse consequences.
Certain of these outstanding matters include
speculative, substantial or indeterminate monetary amounts. We record a liability when we believe that it is probable that a loss has
been incurred and the amount can be reasonably estimated. If we determine that a loss is reasonably possible and the loss or range of
loss can be estimated, we disclose the reasonably possible loss. We evaluate developments in our legal matters that could affect the amount
of liability that has been previously accrued, and the matters and related reasonably possible losses disclosed, and make adjustments
as appropriate. Significant judgment is required to determine both likelihood of there being a loss and the estimated amount of a loss
related to such matters.
Arena Litigation
Arena Investors, LP (ROI Litigation)
On May 30, 2024, Arena Investors, LP (“Arena”),
in its capacity as collateral agent for five noteholders, filed a Complaint (the “ROI Complaint”) in the Supreme Court of
the State of New York, County of New York against the Company and ROI, in action captioned Arena Investors, LP v. Ault Alliance, Inc.
and RiskOn International, Inc. , Index No. 652792/2024.
The ROI Complaint asserts a cause of action
for breach of contract against the Company based on a Guaranty, dated April 27, 2023, and entered into, amongst others, the Company and
Arena, and seeks damages in the amount of in excess of $3.75 million, plus interest, attorneys’ fees, costs, expenses, and disbursements.
The ROI Complaint also asserts a cause of
action for breach of contract against ROI based on an alleged breach of that certain Security Agreement, dated April 27, 2023, and entered
into among ROI and Arena. In connection with this cause of action, Arena seeks, among other things, costs and expenses from the Company
and ROI.
On July 31, 2024, the Company and ROI filed
a motion to dismiss seeking to partially dismiss the ROI Complaint, as against the Company, and to dismiss the ROI Compliant, in its entirety,
as against ROI.
On or about January 21, 2025, the Court
entered an order denying the part of the motion which sought partial dismissal of the ROI Complaint, as against Company, and granting
the part of the motion which sought dismissal of the ROI Complaint, in its entirety, as against ROI.
On February 18, 2025, the Company filed
an Answer to the ROI Complaint and asserted numerous affirmative defenses.
Based on the Company’s assessment
of the facts underlying the claims, the uncertainty of litigation, and the preliminary stage of the case, the Company cannot reasonably
estimate the potential loss or range of loss that may result from this action. Notwithstanding, the Company has recorded the unpaid portion
of the notes. An unfavorable outcome may have a material adverse effect on the Company’s business, financial condition and results
of operations.
Other Litigation Matters
With respect to our other outstanding matters,
based on our current knowledge, we believe that the amount or range of reasonably possible loss will not, either individually or in aggregate,
have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows. However, the outcome
of such matters is inherently unpredictable and subject to significant uncertainties.
11
ITEM 1A. RISK FACTORS
There are no updates or changes
to the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2024.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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