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Item 3. Legal Proceedings

2024-03-19 compared with 2023-03-31 · 7 added, 35 removed, 2 unchanged (95% of the section changed)

Legal Proceedings

are involved in legal proceedings in the ordinary course of our business.

Although our management cannot predict the ultimate outcome

of these legal proceedings with certainty, it believes that the ultimate resolution of our legal proceedings, including any amounts we

may be required to pay, will not have a material effect on our consolidated financial statements.

September 13, 2022, Barlock Capital Management LLC, which is co-managed by Scott Kaufman, the Company’s former Co-Chief Executive

Officer and director, and is also an affiliate of Barlock 2019 Fund, LP (“Barlock”), delivered a notice of an alleged event

of default of the secured convertible debenture in the principal amount of $2,496,850 (the “Barlock Convertible Debenture”)

and a demand for payment of $5,004,978.76 (the “Notice”) to the Company.

The Notice alleged that (i) the Company’s

agreement on August 24, 2022 to issue a convertible promissory note in the principal amount of $900,000 (the “Alpha Note”)

Kaufman’s resignation as the Company’s Co-Chief Executive Officer and a director on August 8, 2022, each constituted

events of default under the Barlock Convertible Debenture.

Company strongly disagrees with the assertion that an event of default has occurred under the Barlock Convertible Debenture and notified

Kaufman and Barlock that they had previously delegated the exclusive authority to exercise remedies under the Barlock Convertible

Debenture and the related security agreement to the agent for Barlock and all other holders of such debentures as defined in such security

Accordingly, the Company has demanded a withdrawal of the Notice.

The Company maintains that the issuance of the Alpha Note

in exchange for 600,000 shares of the Company’s common stock pursuant to Section 3(a)(9) of the Securities Act of 1933 does not

constitute the incurrence of “indebtedness for borrowed money” and cannot be an event of default.

The Company also maintains

Kaufman’s voluntary resignation from his positions with the Company in the face of an investigation into potential wrongdoing,

breaches of fiduciary duties and other objectionable conduct cannot be the basis for an event of default under the Barlock Convertible

Debenture and that Barlock lacks the authority under the Barlock Convertible Debenture and the related transaction documents to declare

events of default.

it is ultimately determined that an event of default exists under the Barlock Convertible Debenture and that the Notice was properly

provided on behalf of Barlock, the outstanding principal amount of the Barlock Convertible Debenture, plus accrued but unpaid interest,

liquidated damages and other amounts owing in respect thereof through the date of acceleration will be due and payable at the (a) greater

of (i) the outstanding principal amount of the Barlock Convertible Debenture, plus all accrued and unpaid interest thereon, divided by

the conversion price on the date of Barlock’s demand for acceleration multiplied by the volume weighted average price of the Company’s

shares of common stock on such date on the date, or (ii) 130% of the outstanding principal amount of the Barlock Convertible Debenture,

plus 100% of accrued and unpaid interest thereon, and (b) all other amounts, costs, expenses and liquidated damages due in respect of

the Barlock Convertible Debenture.

Commencing five days after the occurrence of any event of default that results in the eventual acceleration

of the Barlock Convertible Debenture, the interest rate on the Barlock Convertible Debenture accrues at an interest rate equal to the

lesser of 18% per annum or the maximum rate permitted under applicable law.

Company is not involved in any disputes and does not have any litigation matters pending which the Company believes could have a materially

adverse effect on the Company’s financial condition or results of operations.

There is no action, suit, proceeding, inquiry or

investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge

of the executive officers of our Company or any of our subsidiaries, threatened against or affecting our Company, our common stock, any

of our subsidiaries or of our Company’s or our Company’s subsidiaries’ officers or directors in their capacities as

such, in which an adverse decision could have a material adverse effect.

Mine Safety Disclosures

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-K

Item 3. Legal Proceedings