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Item 3. Legal Proceedings

2022-03-10 compared with 2021-03-04 · 36 added, 131 removed, 10 unchanged (94% of the section changed)

1 unchanged sentence

Securities Litigation

On September 23, 2020, Carone Cobden filed a putative class action

complaint against the Company, former Chief Executive Officer David

Norris (“Norris”), Chief Financial Officer James A.

On November 15, 2021, the Hon.

Gee of the United States District Court for the Central District of California (the “

Court ”) granted the motion to dismiss filed by the Company, David Norris (“

Norris ”), James A.

Barnes (“

Barnes ”) and President Thomas Smith

Smith ”) in the United States District Court for

the Central District of California, docketed as Case No.

2-20-cv-08760-DMG-PVCx (the “

Complaint ”). The

Cobden Complaint alleges that the named defendants, in their

capacities as officers of the Company, knowingly made false or

misleading statements or omissions regarding trials of the

Company’s BolaWrap product conducted by the Los Angeles

Police Department (the “

BolaWrap Pilot

Program ”). 

Cobden Complaint also alleges that the conduct of the named

defendants artificially inflated the price of the Company’s

traded securities, and that the disclosure of certain adverse

information to the public led to a decline in the market value of

the Company’s securities.  The Cobden Complaint

further alleges violations of Sections 10(b) and 20(a) of the

Exchange Act, and Rule 10b-5 promulgated thereunder, and defines

the class period as July 31, 2020 through September 23,

2020.  

On October 1, 2020, Joseph Mercurio filed a second putative class

action complaint against the Company, Norris, Smith, and Barnes in

the same court, which contains substantially the same factual

allegations and legal claims as set forth in the Cobden Complaint,

and is docketed as Case No.

2-20-cv-09030-DMG-PVCx (the

Complaint ”).  On October 15, 2020, Paula

Earley filed a third putative class action complaint against the

Company, Smith, Norris, Barnes, Chief Strategy Officer Mike Rothans

Rothans ”), and former Chief Executive Officer Marc

Thomas (“

Thomas ”) in the same court, which contains many of

the same factual allegations and legal claims as set forth in the

Cobden and Mercurio Complaints, but defines the class period as

April 29, 2020 through September 23, 2020, and alleges additional

false or misleading statements in connection with BolaWrap and the

BolaWrap Pilot Program (the “

Complaint ”). 

Earley Complaint is docketed as Case No.

2-20-cv-09444-DMG-PVCx.  

On November 3, 2020, the Hon.

Gee consolidated

the three above-mentioned cases under the

caption 

Barnes ”), Thomas Smith (“

Smith ”), Mike Rothans (“

Rothans ”) and Marc Thomas (“

Thomas ”) (collectively, “

Defendants ”) in the action captioned 

In re Wrap Technologies, Inc.

Securities Exchange Act Litigation , Case No.

20-8760-DMG (PVCx) (the

Action ”). 

January 7, 2021, the Court appointed a lead plaintiff in the

Securities Action, who designated its attorneys as lead

counsel. 

On January 21, 2021, Judge Gee ordered that a

consolidated amended complaint be filed in the Securities Action on

or before March 12, 2021, with defendants’

motion to dismiss

to be filed on or before April 26, 2021, and a hearing on the

motion to dismiss to be held on July 23, 2021. 

believes that the complaints underlying the Securities Action are

without merit and intends to vigorously defend against the claims

raised therein.

Securities Exchange Act Litigation  (the “

Securities Action ”).

 The Court granted Defendants’

motion on the grounds that the complaint failed to identify any statement by Defendants that was either false or made with scienter.

Concurrently, the Court granted Plaintiff leave to file a second amended complaint on or before December 6, 2021, noting that a failure to file a second amended complaint by that date would result in dismissal of the Securities Action with prejudice. On December 20, 2021, following Plaintiff’s failure to file a second amended complaint, the Court dismissed the Securities Action with prejudice. 

Shareholder Derivative Litigation

On November 13, 2020, Naresh Rammohan filed a shareholder

derivative action in the United States District Court for the

Central District of California against Smith, Barnes, Rothans,

Thomas, Norris, Scot Cohen, Patrick Kinsella, Michael Parris, and

Wayne Walker, alleging unjust enrichment, breach of fiduciary duty,

waste of corporate assets, and contribution claims under the

Securities Exchange Act of 1934, docketed as Case No.

On November 13, 2020, Naresh Rammohan filed a shareholder derivative action in the United States District Court for the Central District of California against Smith, Barnes, Rothans, Thomas, and Norris, as well as directors Messrs.

Scot Cohen, Patrick Kinsella, Michael Parris, and Wayne Walker, alleging unjust enrichment, breach of fiduciary duty, waste of corporate assets, and contribution claims under the Securities Exchange Act of 1934, docketed as Case No.

2:20-cv-10444-DMG-PVCx (the “

Complaint ”). 

Rammohan Complaint names the Company as a nominal defendant and

recites many of the allegations set forth in the Securities Action

relating to the BolaWrap Pilot Program. 

On January 20, 2021,

Ray Westerman filed a second derivative complaint in the same court

against the same parties, alleging breach of fiduciary duty and

contribution claims under the Securities Exchange Act of 1934,

docketed as Case No.

2:21-cv-00550-DMG-PVCx (the

Complaint ”). 

January 22, 2021, Jesse Lowe filed a third derivative complaint in

the same court against the same parties, alleging breach of

fiduciary duty and asserting various claims under the Securities

Exchange Act of 1934, docketed as Case No.

2:21-cv-00597-DMG-PVCx

(the “

Complaint ”).  

The above-mentioned derivative cases (collectively, the

Actions ”) each been have

been transferred to Judge Gee as cases related to the Securities

Action. 

On January 27, 2021, Judge Gee issued an order to

show cause why the Derivative Actions should not be consolidated

under the caption 

Rammohan Complaint ”). The Company is named as a nominal defendant.

On January 20, 2021, Ray Westerman filed a second derivative complaint in the same court against the same parties, alleging breach of fiduciary duty and contribution claims under the Securities Exchange Act of 1934, docketed as Case No.

2:21-cv-00550-DMG-PVCx (the “

Westerman Complaint ”).

On January 22, 2021, Jesse Lowe filed a third derivative complaint in the same court against the same parties, alleging breach of fiduciary duty and asserting various claims under the Securities Exchange Act of 1934, docketed as Case No.

2:21-cv-00597-DMG-PVCx (the “

Lowe Complaint ”). 

On January 27, 2021, Judge Gee entered an order to show cause why the derivative actions should not be consolidated and stayed pending the resolution of the Securities Action, given the “apparent substantial overlap”

between the cases.

On February 16, 2021, Judge Gee issued an order consolidating the derivative actions under the caption 

In re Wrap Technologies, Inc.

Shareholder Derivative Litigation , Case No.

2:20-10444-DMG-PVCx and stayed pending

the resolution of the anticipated motion to dismiss in the

Securities Action. 

On February 5, 2021, the parties in the

Derivative Actions responded jointly to the order to show cause,

stipulating that the case should be consolidated and stayed as

suggested by the Court.

 We believe that the Derivative

Actions will be consolidated and stayed by the Court. 

the Securities Action, the Company believes that the Derivative

Actions are without merit and intends to vigorously defend against

the claims raised therein. 

become subject to other legal proceedings, as well as demands and

claims that arise in the normal course of our business, including

claims of alleged infringement of third-party patents and other

intellectual property rights, breach of contract, employment law

violations, and other matters and matters involving requests for

information from us or our customers under federal or state law.

Such claims, even if not meritorious, could result in the

expenditure of significant financial and management resources.

make a provision for a liability relating to legal matters when it

is both probable that a liability has been incurred and the amount

of the loss can be reasonably estimated.

These provisions are

reviewed and adjusted to include the impacts of negotiations,

estimated settlements, legal rulings, advice of legal counsel, and

other information and events pertaining to a particular matter.

December 31, 2020 we had no provision for liability under existing

unfavorable outcome on any litigation matters could require payment

of substantial damages, or, in connection with any intellectual

property infringement claims, could require us to pay ongoing

royalty payments or could prevent us from selling certain of our

As a result, a settlement of, or an unfavorable outcome

on, any of the matters referenced above or other litigation matters

or legal proceedings could have a material adverse effect on our

business, operating results, financial condition and cash

2:20-10444-DMG-PVCx, (the “

Derivative Action ”), and stayed the Derivative Action at least until the resolution of the Securities Action, which has been dismissed with prejudice. The Company believes that the Derivative Action is without merit and will vigorously defend against the claims raised therein.

Other Legal Proceeding Information

We may become subject to other legal proceedings, as well as demands and claims that arise in the normal course of our business, including claims of alleged infringement of third-party patents and other intellectual property rights, breach of contract, employment law violations, and other matters and matters involving requests for information from us or our customers under federal or state law.

Such claims, even if not meritorious, could result in the expenditure of significant financial and management resources.

We make a provision for a liability relating to legal matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

These provisions are reviewed and adjusted to include the impacts of negotiations, estimated settlements, legal rulings, advice of legal counsel, and other information and events pertaining to a particular matter.

At December 31, 2021 we had no provision for liability under existing litigation.

An unfavorable outcome on any litigation matters could require payment of substantial damages, or, in connection with any intellectual property infringement claims, could require us to pay ongoing royalty payments 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 or legal proceedings could have a material adverse effect on our business, operating results, financial condition and cash flows.

MINE SAFETY DISCLOSURES

1 unchanged sentence

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