| COMMITMENTS AND CONTINGENCIES |
TransPacific Energy Litigation
On April 28, 2014, TransPacific Energy
Inc., Karen Kahn, Alexander Goldberg, John Howard, Audrey Boston, Anne Howard (“Howard”), ACME Energy, Inc. (“Acme”),
and Samuel Sami (“Sami”) (collectively, the “Plaintiffs”) filed suit against ForceField Energy, Inc. in
the Superior Court of the State of California for the County of San Diego, in a case styled TransPacific Energy, Inc. et al. v.
ForceField Energy, Inc., Case No. 37-2014-00013110-CU-BC-CTL (Cal. Super. Ct. filed April 28, 2014) (the “Lawsuit”).
In the Lawsuit, Plaintiffs claimed various breaches by ForceField of the share exchange agreement dated May 10, 2012 between ForceField,
Acme, Apela Holdings, and ABH Holdings, and sought unspecified damages in excess of $25,000. ForceField filed a motion to compel
the Lawsuit to arbitration.
On July 14, 2014, ForceField commenced
an arbitration proceeding against TPE, Howard, Sami, and Acme (collectively, the “Respondents”) before the American
Arbitration Association in New York City styled ForceField Energy, Inc. v. TransPacific Energy, Inc., et al v. ForceField Energy,
Inc., et al, AAA Case No. 01-14-0000-9289 (the “Arbitration”). In the Arbitration, ForceField asserted various
claims for breach of the share exchange agreement, which materially harmed the value of ForceField’s investments in TPE.
Respondents filed counterclaims in the Arbitration similar in substance to the claims they asserted in the Lawsuit.
On March 5, 2015, the parties entered
into a written settlement agreement (“Agreement”) that resolved all claims and counterclaims asserted in both the Lawsuit
and the Arbitration. Pursuant to the Agreement, both the Lawsuit and the Arbitration have each been dismissed with prejudice.
Class Action and Derivative Actions
On April 17, 2015, a class action lawsuit against
the Company and its officers, Messrs. St-Julien (who as indicated below in “Note 11 – Subsequent Events,” resigned
as Chairman and from all other positions he held with the Company), Natan and Williams (Mr. Natan and Mr. Williams are collectively
referred to as the “Individual Defendants”), and certain other third parties, was filed in the United States District
Court, Southern District of New York.
Since the filing of this class action, additional
complaints have been filed seeking class status on behalf of all persons who purchased the Company’ s securities between
September 16, 2013 and April 15, 2015 (together, the “Class Actions”). The Class Actions allege the Company and the
other persons named therein violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5
promulgated thereunder. The Class Actions seek an unspecified amount of damages.
On May 13, 2015, a derivative lawsuit on
behalf of the Company was filed in the United States District Court for the Eastern District of New York against the Company’
s officers, directors and former director Messrs. St-Julien, Natan, Williams, Kebir Ratnani, Adrian Auman, and David Vanderhorst
(Messrs. Ratnani, Auman and Vanderhorst are collectively referred to as the “ Director Defendants” ). This lawsuit
seeks unspecified damages against these individuals for breaches of their fiduciary duties and unjust enrichment.
On May 29, 2015, another derivative lawsuit
(together with the prior derivative lawsuit, the “Derivative Actions”) on behalf of the Company was filed in the United
States District Court for the Southern District of New York against the Company’ s officers, directors and former director
Messrs. St-Julien, Natan, Williams, Ratnani, Auman, and Vanderhorst. This lawsuit seeks unspecified damages against these individuals
for breaches of their fiduciary duties, abuse of control, violations of Section 14 of the Securities Exchange Act of 1934, as amended,
and unjust enrichment. On or about July 13, 2015, this suit was voluntarily withdrawn and re-filed in the Eastern District of New
York.
On June 26, 2015, a motion pursuant to
28 U.S.C. § 1407 was made to the Judicial Panel for Multidistrict Litigation (the “Panel”) by a lead plaintiff
movant in the Class Actions to transfer the Class Actions and the Derivative Actions to the United States District Court for the
Eastern District of New York and to have all actions coordinated or consolidated before a single judge. The Panel will hear argument
on the motion in October 2015.
On July 22, 2015, pursuant to various motions
seeking consolidation and appointment of lead plaintiff and lead counsel, the Class Actions were consolidated before the Honorable
Naomi Reice Buchwald in the United States District Court for the Southern District of New York, who appointed a lead plaintiff
and lead counsel for the putative class.
Although the ultimate outcome of the Class
Actions and Derivative Actions cannot be determined with certainty, the Company believes that the allegations stated in the Class
Actions and Derivative Actions are without merit against the Company, Individual Defendants and Director Defendants, and the Company,
Individual Defendants and Director Defendants intend to defend themselves vigorously against all allegations set forth in the Class
Actions and Derivative Actions.
American Lighting Sellers Litigation
Pursuant to the terms of the ALD stock
purchase agreement dated as of April 25, 2014, by and among the Company and ALD and the then stockholders of the ALD
(collectively, the “Sellers”) and the Sellers’ representative, as amended to date (the “SPA”), the
Company acquired all of the issued and outstanding capital stock of ALD Sellers. On April 24, 2015, the Company failed to pay
any portion of the aggregate balance of $1,050,000 then due under the terms of Seller Notes, which resulted in the
Sellers’ representative declaring an event of default under each of the notes. On May 11, 2015 the Sellers’
representative foreclosed pursuant to Article 9 of Uniform Commercial Code, as in effect in the State of Nevada pursuant to
Nevada Revised Statutes Sections 104.9101 commenced a process of foreclosing on certain portions of the collateral.
On June 24, 2015, the Sellers’ representative,
acting for and on behalf of the Sellers, filed a complaint in the Superior Court of the State of California for the County of San
Diego, captioned Jeffrey J. Brown, in his capacity as Seller Representative vs. ForceField Energy, Inc., et al.,
Case No. 37-2015-00021180-CU-BC-CTL, seeking, among other things, the full payment of all amounts due under the notes and the cost
of collection thereof.
On July 21, 2015, the Company entered into an
amendment to the SPA with the Sellers’ representative whereby payment, compliance and certain other terms were amended (see
“Note 11 – Subsequent Events” for additional information). On August 3, 2015, the complaint was dismissed without
prejudice.
Consulting Services
ForceField has entered into various engagement
agreements for advisory and consulting services on a non-exclusive basis to obtain equity capital. In the event that the Company
completes a financing from a funding source provided by one of the consultants, then such consultant will receive a finders or
referral fee at closing ranging from five percent (5%) to ten percent (10%) of the amount received by the Company. The terms and
condition of financing are subject to Company approval. The Company has not raised in capital since April 15, 2015.
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