Item 3. Legal Proceedings
ITEM
3. LEGAL PROCEEDINGS
The
Company is currently not involved in any litigation that it believes could have a material adverse effect on its financial condition
or results of operations.
Currently
Pending Litigation
In
April 2021, Eric Marquez, the former Secretary/Treasurer and Chief Financial Officer of the Company, and certain other plaintiffs, filed
a lawsuit against Cipherloc Corporation and Michael De La Garza, Cipherloc’s former Chief Executive Officer and President, in the
20 th Judicial District for Hays County, Texas (Case No. 20-0818). The lawsuit alleges causes of action for fraud against Mr.
De La Garza (for misrepresentations allegedly made by Mr. De La Garza); breach of contract, for alleged breaches of Mr. Marquez’s
alleged oral employment agreement, which Mr. Marquez claims required Cipherloc pay him cash and shares of stock; unjust enrichment; quantum
meruit; and rescission of certain stock purchases made by certain of the plaintiffs, as well as declaratory relief and fraud. Damages
sought exceed $1,000,000. The Company believes Cipherloc made all required payments and delivered the stock to the plaintiffs. The case
is currently being defended by the Company. The Company believes it has meritorious defenses to the allegations, and the Company intends
to continue to vigorously defend against the litigation.
Litigation
Settled During the Year Ended September 30, 2022
In
December 2017, Robert LeBlanc filed a petition against Cipherloc and Michael De La Garza, Cipherloc’s former Chief Executive Officer
and President, in the 20th Judicial District for Hays County, Texas (Case No. 18-0005). Mr. LeBlanc sought damages against Cipherloc
exceeding $1 million, but less than $10 million. On May 19, 2022, Mr. LeBlanc entered into a joint settlement agreement with Cipherloc,
Cipherloc’s directors and officer’s liability carrier, and Mr. De La Garza. As part of this settlement agreement, Cipherloc
paid Mr. LeBlanc $109,432 in cash and issued him 200,000 shares of Cipherloc’s common stock in exchange for his release of Cipherloc
from all past and future liabilities associated with this matter.
ITEM
4. MINE SAFETY DISCLOSURES
Not
applicable.
32
PART
II
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