Note 10 — Legal Proceedings

On April 11, 2019, the Company entered into an asset purchase agreement (the “APA”) with Pathion Holdings, Inc., a Delaware corporation, and Pathion, Inc., a Delaware corporation (together “Pathion”) to sell certain assets (the “PPSA Assets”) related to the Company’s PPSA™ / Power Conversion Systems business (“PPSA Business”). The purchase price consisted of $500,000 in cash and 150,000 shares of the common stock of Pathion Holdings, Inc. Pursuant to the Purchase Agreement, Pathion would also assume certain liabilities relating to the PPSA Business.

On June 13, 2019, the Company filed a petition in the district court of the 250th Judicial District in Travis County, naming Pathion and certain Pathion officers as defendants.  The petition asserts breach of the APA and the related Sublease Agreement for failure by Pathion to pay any cash amounts due thereunder, and fraudulent inducement as Pathion and the individual defendants misrepresented Pathion’s financial position and its stock value.  The petition also requests a declaratory judgment that Pathion has no rights to the PPSA Assets.

On July 15, 2019, Pathion filed a general denial to our petition. 

On July 22, 2019, the Company filed a motion for partial summary judgment on its declaratory judgment action and for severance. Pathion responded to the motion for summary judgment on August 6, 2019.  That same day, Pathion filed a counterclaim, and requested injunctive relief and a declaratory judgment.  The Company denies Pathion’s assertions in the counterclaim and expects to vigorously defend against such claims.

On August 13, 2019, the court conducted a hearing on the Company’s motion for summary judgment during which the court took the matter under advisement and indicated that the court would issue a ruling during the week of August 19, 2019.

At this time, the Company is unable to estimate the possible gain or loss, if any, related to this proceeding.