Item 1. Legal Proceedings
ITEM 1. LEGAL PROCEEDINGS
Our former placement
agent, Boustead Securities LLC, has brought a legal action against us following our communication to Boustead to unilaterally
terminate an engagement agreement under which we and Boustead had originally intended for Boustead to be engaged to act as an
exclusive underwriter in our initial public offering. To date, we have been unable to reach a settlement with Boustead. On April 30,
2021, Boustead filed a statement of claim with FINRA demanding to arbitrate the dispute, and is seeking, among other things,
monetary damages against the Company and D.A. Davidson & Co. The matter is presently scheduled to be heard before a FINRA
arbitration panel over six non-consecutive days in the months of April and May 2023. We believe that we have meritorious defenses to
any claims that Boustead may assert, and we do not believe that such claims will have a material adverse effect on our business,
financial condition or operating results. However, we have agreed to indemnify D.A. Davidson & Co. and the other underwriters
who participated in our initial public offering against any liability or expense they may incur or be subject to arising out of the
Boustead dispute. In addition, Chenlong Tan, our Chairman, President and Chief Executive Officer and a beneficial owner more than 5%
of our common stock, has agreed to reimburse us for any judgments, fines and amounts paid or actually incurred by us or an
indemnitee in connection with such legal action or in connection with any settlement agreement entered into by us or an indemnitee
up to a maximum of $3.5 million in the aggregate, with the sole source of funding for such reimbursement to come from sales of
shares then owned by Mr. Tan. For further information, see “Risk Factors – Prior to our initial public offering we
unilaterally terminated an engagement agreement with Boustead Securities LLC and may be subject to litigation in the event we are
not able to come to agreement on the amounts Boustead deems itself to be owed under such agreement ” and “Certain
Relationships and Related Transactions” in our Annual Report on Form 10-K filed with the SEC on September 28, 2022.
Other than the above, we are
not presently party to any pending or other threatened legal proceedings or claims that we believe will have a material adverse effect
on our business, financial condition or operating results, although from time to time, we may become involved in legal proceedings in
the ordinary course of business.
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