Item 1. Legal Proceedings
ITEM 1. LEGAL PROCEEDINGS
With respect to legal proceedings that arise in
the ordinary course of business, when the Company becomes aware of a claim or potential claim, it assesses the likelihood of any loss
or exposure. In accordance with authoritative guidance, the Company records loss contingencies in its financial statements only for matters
in which losses are probable and can be reasonably estimated.
On September 21, 2023, we were served with a complaint
(the “Complaint”) filed in the Supreme Court of the State of New York, County of New York, Commercial Division (the “Court”)
under Index Number 654633/2023, by Joseph Gunnar, LLC, an investment broker-dealer located in New York City (“Gunnar”), and
Lucosky Brookman LLP, the attorneys for Gunnar during the relevant period (collectively the “Plaintiffs”), suing the Company,
Gareth Sheridan (our CEO and a director), Serguei Melnik, (our President and a director),Vitalie Botgros (a stockholder of the Company),
TII Jet Services LDA (an aircraft leasing firm, “Jet Services”) and Wolf Blitz, Inc. (a consulting company, “Wolf Blitz”),
collectively the “Defendants”.
The Complaint alleges, in multiple counts, damages
resulting from the Company’s termination in or about July 2023 of an April 6, 2023 engagement letter between Gunnar and the Company,
(the “Engagement Letter”), that contemplated a public offering of our common stock to be underwritten and sold by Gunnar as
the sole underwriter. Subsequently, the Company, due to market conditions and prior to executing an underwriting agreement or similar
commitment as to the terms of the offering with Gunnar, declined to proceed with the offering and accordingly terminated the Engagement
Agreement in July 2023.
The Complaint alleges claims for damages against:
(1) the Company, Gareth Sheridan and Serguei Melnik (the “Company Defendants”) for breach of contract due to the Company’s
failure to proceed with the offering; (2) the Company Defendants for fraudulently inducing Gunnar to enter into the Engagement Letter;
(3) the Company Defendants for fraudulent statements made in connection with the contemplated offering; (4) the Company Defendants for
fraudulent concealment of pursuit of alternative financing during the engagement period under the Engagement Letter; (5) Jet Services,
Vitalie Botgros and Wolf Blitz for tortious interference resulting from discussions concerning alternative financing during the engagement
period; (6) Jet Services, Vitalie Botgros, and Wolf Blitz for tortious interference with a prospective business opportunity; (7) the Company
Defendants for negligent misrepresentation; and (8) against the Defendants other than Jet Services for promissory estoppel as to promises
purportedly made to complete the offering.
Further, Gunnar seeks an award of actual and compensatory
damages in an amount exceeding $500,000, as well as exemplary and punitive damages, while Lucosky Brookman LLP seeks attorneys’
fees, costs and expenses pursuant to indemnification obligations under the Engagement Letter.
Additionally, the Company believes the Engagement
Letter is unenforceable and, even if enforceable, was properly terminated by the Company under the terms of the Engagement Letter and
the market conditions under which the Engagement Letter was terminated.
On or about November 2, 2023, legal counsel for
the Company filed an Answer, Affirmative Defenses and Counterclaims with the Court in response to the Complaint. The Company vigorously
denied the claims asserted against it and asserted the following counterclaims with their Answer: Intentional interference with prospective
economic advantage, consumer fraud, breach of fiduciary duty, breach of contract (damages in the amount of $1,000,000 were requested on
each of the preceding counterclaims) and a declaratory judgment affirming that Gunnar’s actions constituted gross negligence or
willful misconduct, and the Company’s termination of the Engagement Letter on such grounds was proper pursuant to its terms.
Plaintiffs have denied the allegations surrounding
the Company’s counterclaims and asserted their own affirmative defenses against the counterclaims, and argue that they have the
right to be reimbursed for attorneys’ fees, costs and expenses incurred in responding to the counterclaims.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.