Item 3. Legal Proceedings
Item 3. Legal Proceedings
From time to time, the Company may become involved in litigation relating to claims arising out of its operations in the normal course of business. The Company is not involved in any pending legal proceeding or litigation, and, to the best of its knowledge, no governmental authority is contemplating any proceeding to which we are a party or to which any of our properties are subject, which would reasonably be likely to have a material adverse effect on the Company, other than the following:
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Umpqua Bank v. Cygnet Online, LLC, et al.; Palm Beach County Case No. 2024CA006174; Filed July 1, 2024; Additional Parties: Eric Hanig. Cygnet, a wholly owned subsidiary of the Company, is the borrower under a promissory note and business loan agreement with Umpqua Bank. Hanig, the former principal of Cygnet, entered into an unconditional guarantee with Umpqua Bank. Umpqua Bank is alleging that Cygnet and Hanig are in default and contends $3,835,975.17 is due and owed. The Company is actively engaged in defending the foregoing lawsuit.
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Get Fit Fast Supplements, LLC v. Cygnet Online, LLC, et al.; American Arbitration Association Case No. 01-24-0003-1085; Filed March 14, 2024; Additional Parties: Eric Hanig. Get Fit Fast Supplements, LLC (“GFF”) entered into an Asset Purchase Agreement with Cygnet. A portion of the purchase price was financed by Cygnet through a promissory note guaranteed by Hanig, the former principal of Cygnet. Additionally, Cygnet agreed to purchase GFF’s remaining inventory and agreed to earn out provisions whereby GFF would receive funds based on Cygnet’s future performance. The Company acquired Cygnet through a Securities Purchase Agreement, dated April 1, 2022. GFF claims damages in the amount of $3,075,859.17 based on Cygnet and Hanig’s failure to pay the full purchase price. Hanig and Cygnet separately counterclaimed against GFF for, among other things, fraudulent misrepresentations that led Cygnet and Hanig to enter into the Asset Purchase Agreement. As a result of the acquisition of Cygnet by the Company, Hanig has demanded indemnification from Upexi for the claims brought by GFF. The Company is actively engaged in defending the foregoing lawsuit.
Item 4. Mine Safety Disclosures
Not applicable.
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