What changed in this filing

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Item 1. Legal Proceedings

2023-02-09 compared with 2022-08-11 · 46 added, 16 removed, 16 unchanged (79% of the section changed)

Legal Proceedings

Please refer to “Item 3.

Legal Proceedings”

in our 2021 Annual Report on Form 10-K 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, 2022 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.

5 unchanged sentences

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

The Wells Notices related to, among other things, the Company’s reporting of its financial performance for its fiscal year ended September 30, 2016, certain disclosures related to executive compensation, and its previous acquisition of ApplianceSmart.

On August 2, 2021, the SEC filed a civil complaint (the “SEC Complaint”) in the United States District Court for the District of Nevada naming the Company and two of its executive officers as defendants (collectively, the “Defendants”).

A Wells Notice is neither a formal charge of wrongdoing nor a final determination that the recipient has violated any law.

The Wells Notices informed the Company and the Executives that the SEC Staff has made a preliminary determination to recommend that the SEC file an enforcement action against the Company and each of the Executives to allege certain violations of the federal securities laws.

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.

The Company cooperated fully with the SEC inquiry and provided a response to the SEC on October 26, 2018.

The SEC Complaint alleges various financial, disclosure, and reporting violations related to income and earnings per share, purported undisclosed stock promotion and trading, and undisclosed executive compensation from 2016 through 2018.

5 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 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 Defendants, filed their motions with the court to dismiss the complaint.

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

The Defendants filed their reply 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 a ruling on 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 above, on October 13, 2021, a hearing was held to consider approval of the Disclosure Statement filed by ApplianceSmart in conjunction with its bankruptcy proceedings.

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

On Feb 28, 2022, the court approved ApplianceSmart’s plan for reorganization (the “Plan”), discharging ApplianceSmart of certain debts according to the Plan resulting in the Company recording a gain of approximately $11.4 million, which includes a write-off or adjustment of approximately $11.5 million on the settlement of debts and other liabilities, offset by payments subject to the bankruptcy that were not included as debtor-in-possession liabilities of approximately $149,000.

On October 1, 2021, the Company Defendants and third party-defendants moved to dismiss the complaint.

On September 7, 2022, the court denied the Company Defendants’

motion to dismiss but granted one of the third-party defendant’s motions to dismiss, granting the SEC leave to file an amended complaint.

On September 21, 2022, the SEC filed an amended complaint to which the Company Defendants filed an answer on October 11, 2022, denying liability.

One third-party defendant moved to dismiss the amended complaint.

The court subsequently entered a discovery scheduling order and the parties exchanged initial disclosures.

On February 1, 2023, the court denied the third-party defendant’s motion to dismiss the amended complaint.

The parties have agreed to participate in a mediation and to continue the remainder of discovery until after the mediation, scheduled to take place in April 2023.

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

On August 13, 2021, Daniel E.

Sieggreen, individually and on behalf of all others similarly situated, filed a class action complaint for violation of federal securities laws in the United States District Court for the District of Nevada, naming as defendants the Company and the two executive officers named in the SEC Complaint.

The allegations asserted are similar to those in the SEC Complaint.

Among other relief, the complaint seeks damages in connection with the purchases and sales of the Company’s securities between December 28, 2016 and August 3, 3021.

As of December 17, 2021, the judge granted a stipulation to stay proceedings pending the resolutions of the motions to dismiss in the SEC Complaint.

On February 1, 2023, the final motion to dismiss relating to the SEC Complaint was denied, which was subsequently noticed in the Sieggreen action on February 2, 2023.

As a result, the plaintiff in this action has until on or about April 3, 2023 to file an amended complaint.

The Company and its executives anticipate moving to dismiss the amended complaint as they strongly dispute and deny the allegations at issue in this case and intend to continue to defend themselves vigorously against these claims.

Holdback Matter

On October 10, 2022, a representative for the former shareholders of Precision Industries, Inc.

filed a civil complaint in the Court of Chancery of the State of Delaware.

The complaint alleges that the Company violated the terms of an agreement and plan of merger dated July 14, 2020, by failing to pay the shareholders a certain indemnity holdback of $2,500,000.

Plaintiff alleges that it effectuated service of the complaint on Company, but the Company did not receive notification of the action until it received an Application for Default Judgment filed with the court on December 26, 2022.

On December 28, 2022, the court issued a letter order questioning its jurisdiction over the matter and directed plaintiff’s counsel to submit briefing as to why it believes jurisdiction is proper.

Plaintiff filed its brief on January 13, 2023.

The court has not ruled as to whether it will exercise jurisdiction over the matter.

The Company’s counsel has had contacted plaintiff’s counsel regarding the case and advised that the Company denies the allegations waged against it in the complaint and that it will abide by the court’s ruling on the threshold jurisdictional issue.

The case will proceed once the court rules on the jurisdictional issue at which point the Company will vigorously defend against these claims.

Wage and Hour Matter

On July 27, 2022, Irma Sanchez, a former employee Elite Builder Services, Inc.

(“Elite Builders”) (see Note 17 above), filed a class action complaint against Elite Builders in the Superior Court of California, County of Alameda.

The complaint alleges that Elite Builders failed to pay all minimum and overtime wages, failed to provide lawful meal periods and rest breaks, failed to provide accurate itemized wage statements, and failed to pay all wages due upon separation as required by California law.

The complaint was later amended as a matter of right on October 4, 2022.

Sanchez has put the Labor & Workforce Development Agency on notice to exhaust administrative remedies and enable her to bring an additional claim under the California Labor Code Private Attorneys General Act, which permits an employee to assert a claim for violations of certain California Labor Code provisions on behalf of all aggrieved employees to recover statutory penalties.

A Motion for Change of Venue to Stanislaus County was filed by Elite Builders on December 7, 2022.

The hearing on the motion was heard on February 8, 2023.

The Company believes that Ms.

Sanchez’s claims lack merit and intends to vigorously defend this action.

The Company is currently unable to estimate the range of possible losses associated with this proceeding since no discovery has commenced and the scope of class is not yet known.

Ri sk Factors

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