What changed in this filing

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Item 1. Legal Proceedings

2022-02-10 compared with 2021-08-16 · 14 added, 33 removed, 17 unchanged (73% of the section changed)

Legal Proceedings

Please refer to ‘‘Item 3.

Legal Proceedings’’

in our Annual Report on Form 10-K for the year ended September 30, 2020 for information regarding material pending legal proceedings.

Please refer to "Item 3.

Legal Proceedings" in our Annual Report on Form 10-K for the year ended September 30, 2021 for information regarding material pending legal proceedings.

Except as set forth therein and below, there have been no new material legal proceedings and no material developments in the legal proceedings previously disclosed.

9 unchanged sentences

The violations are brought under Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5;

Sections 13(a), 13(b)(2)(B) and 13(b)(5) of the Exchange Act and Rules 12b-20, 13a-1, 13a-14, 13a-13, Rule 13b2-1, 13b2-2;

Sections 13(a), 13(b)(2)(B) and 13(b)(5) of the Exchange Act and Rules 12b-20, 13a-1, 13a-14, 13a-13, 13b2-1, 13b2-2;

Section 14(a) of the Exchange Act and Rule 14a-3;

2 unchanged sentences

The foregoing is only a general summary of the SEC Complaint, which may be accessed on the SEC’s website at https://www.sec.gov/litigation/litreleases/2021/lr25155.htm.

The Defendants strongly dispute and deny the allegations and intend to vigorously defend themselves against the claims.

Class Action and Shareholder Derivative Lawsuit

On August 13, 2021, Daniel E.

Sieggreen filed a individually and on behalf of all others similarly situated (the "Sieggreen Class Action"), filed a class action complaint for violations of federal securities laws in the United States District Court for the District of Nevada naming the Defendants, seeking to recover damages for alleged violations under Sections 10(b) and 20(a) the Exchange Act.

The complaint alleges that the Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company's business, operations, and prospects.

The Defendants dispute and deny the allegations and intend to vigorously defend themselves against the claims.

ApplianceSmart Holdings

On August 4, 2020, Valassis filed suit against ApplianceSmart Holdings in the State of Michigan, Third Judicial Circuit, Wayne County, alleging, among other things, breach of contract and account stated and seeking damages of approximately $700.

On June 21, 2021, ApplianceSmart Holdings and Valassis entered into a Confidential Settlement Agreement and Release pursuant to which, among other things, ApplianceSmart Holdings caused $10,000 to be paid to Valassis in exchange for dismissal of this litigation with prejudice.

In addition, Valassis released ApplianceSmart Holdings, ApplianceSmart, the Company and all of their respective subsidiaries and affiliates from all other claims Valassis may have, including in connection with the Chapter 11 Case.

The Company continues to assert that the SEC’s pursuit of this matter will not result in any benefit to investors and instead will only serve as a distraction from its core business activities.

On October 1, 2021, the Company, filed a motion with the court to dismiss the complaint.

The SEC filed its response opposing the motion on November 1, 2021.

The defendants filed their reply responses to the SEC’s opposition on November 15, 2021.

The motions to dismiss are now under submission and the court has not yet scheduled a hearing date.

Pursuant to the automatic stay of proceedings under the Private Securities Litigation Reform Act, all discovery has been stayed pending the motions to dismiss.

The Defendants strongly dispute and deny the allegations and intend to continue to defend themselves vigorously against the claims.

ApplianceSmart Bankruptcy and Other ApplianceSmart Litigation Matters

As stated in Item 2 and Note 14 above, on December 9, 2019, ApplianceSmart filed a voluntary petition in the United States Bankruptcy Court for the Southern District of New York seeking relief under Chapter 11 of the Bankruptcy Code.

On December 14, 2021, a hearing was held to confirm ApplianceSmart’s plan for reorganization (the “Plan”).

A final decree is expected upon the full satisfaction of the Plan, at which time ApplianceSmart will emerge from Chapter 11.

Ri sk Factors

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

However, in light of the SEC Complaint, the Company provides the following additional risk factor, which supplements the risk factors previously disclosed by the Company in Part I, Item 1A, Risk Factors, of the 2020 10-K .

Our previously disclosed SEC investigation has resulted in the filing by the SEC of the SEC Complaint and at least one shareholder derivative class action, which could divert management's focus, and/or result in substantial litigation expense .

Adverse developments in our ongoing proceeding and/or future legal proceedings could have a material adverse effect on our business, reputation, financial condition, results of operations or stock price.

On February 21, 2018, the Company received a subpoena from the Securities and Exchange Commission (“SEC”) and a letter from the SEC stating that it is conducting an investigation.

On October 1, 2018, the Company received a letter from the SEC requesting information regarding a potential violation of Section 13(a) of the Securities Exchange Act of 1934, based upon the timing of the

Company’s Form 8-K filed on February 14, 2018.

On August 12, 2020, three of the Company’s corporate executive officers (together, the “Executives”) each received a “Wells Notice”

from the Staff of the SEC relating to the Company’s SEC investigation.

On October 7, 2020, the Company received a “Wells Notice”

from the Staff of the SEC relating to the Company’s previously-disclosed SEC investigation.

On August 2, 2021, the SEC Complaint was filed and, on August 13, 2021, the Sieggreen Class Action was filed.

We may be subject to additional investigations, arbitration proceedings, audits, regulatory inquiries and similar actions, including matters related to intellectual property, employment, securities laws, disclosures, tax, accounting, class action and product liability, as well as regulatory and other claims related to our business and our industry, which we refer to collectively as legal proceedings.

We cannot predict the outcome of any particular proceeding, or whether ongoing investigations, will be resolved favorably or ultimately result in charges or material damages, fines or other penalties, enforcement actions, bars against serving as an officer or director, or practicing before the SEC, or civil or criminal proceedings against us or members of our senior management.

Legal proceedings in general, and securities and class action litigation and regulatory investigations in particular, can be expensive and disruptive.

Our insurance, to the extent maintained, may not cover all claims that may be asserted against us and we are unable to predict how long the legal proceedings to which we are currently subject will continue.

An unfavorable outcome of any legal proceeding may have an adverse impact on our business, financial condition and results of operations, prospects, or our stock price.

Any proceeding could negatively impact our reputation among our stakeholders.

Furthermore, publicity surrounding ongoing legal proceedings, even if resolved favorably for us, could result in additional legal proceedings against us, as well as damage our image.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Legal Proceedings