Item 3. Legal Proceedings
ITEM 3. LEGAL PROCEEDINGS
On August 7, 2018, we commenced an action
against North Empire LLC, or North Empire, in the Supreme Court of the State of New York, County of New York for breach of a Securities
Purchase Agreement or Agreement in which we are seeking damages in an amount to be determined at trial, but in no event less than
$616,000. On August 2, 2018, North Empire filed a Summons with Notice against us, also in the same Court, in which they allege
damages in an amount of $11.4 million arising from an alleged breach of the Agreement. On September 6, 2018, North Empire filed
a Notice of Discontinuance of the action it had filed on August 2, 2018. On September 27, 2018, North Empire filed an answer and
asserted counterclaims in the action commenced by us against them, alleging that we failed to deliver stock certificates to North
Empire causing damage to North Empire in the amount of $10,958,589. North Empire also filed a third-party complaint against our
CEO and now former Chairman of the Board asserting similar claims against them in their individual capacities. On October 17,
2018, we filed a reply to North Empire’s counterclaims. On November 15, 2018, our CEO and now former Chairman of the Board
filed a motion to dismiss North Empire’s third-party complaint. On January 6, 2020, the Court granted the motion and dismissed
the third-party complaint. Discovery has been completed and both parties have filed motions for summary judgment in connection with the claims and counterclaims. We intend
to vigorously defend any claims made by North Empire.
In addition to the
above, from time to time, we may become in involved in lawsuits as well as subject to various legal proceedings, claims, threats
of litigation, and investigations in the ordinary course of business. While certain matters to which we are a party may specify
the damages claimed, such claims may not represent reasonably possible losses. Given the inherent uncertainties of litigation,
the ultimate outcome of these matters cannot be predicted at this time, nor can the amount of possible loss or range of loss,
if any, be reasonably estimated.
An unfavorable outcome
on any litigation matters could require us to pay substantial damages or could prevent us from selling certain of our products.
As a result, a settlement of, or an unfavorable outcome on, any of the matters referenced above or other litigation matters could
have a material adverse effect on our business, results of operations and financial condition.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
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