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Ault Alliance Inc (AMEX:AULT) subsidiary Ault Lending, which owns around 28.2% of Singing Machine Co Inc (NASDAQ:MICS) shares, filed a derivative lawsuit against Singing Machine CEO Gary Atkinson and other directors.
Notably, Ault Lending alleged a breach of fiduciary duties related to MICS' recent sale of around 2.197 million shares (representing 34% of the outstanding shares) to Regalia Ventures, LLC and Stingray Group, Inc.
The complaint alleges that the Director defendants violated their fiduciary duties in approving the transaction at an inadequate price following a deeply flawed process led by MICS' CEO.
The act resulted in two directors, Jay B. Foreman and Mathieu Peloquin, having a total ownership interest of 43.2% in MICS through affiliates.
Ault Lending seeks a declaration that the director defendants breached their fiduciary duties and that Stingray and Regalia Ventures aided and abetted those breaches. Ault Lending also seeks the court to rescind the transaction and an award of damages and payment of expenses.
Milton "Todd" Ault, III, founder and Executive Chairman of Ault Alliance and MICS' Executive Chairman said, "It is extremely unfortunate that Singing Machine's CEO and the other directors supporting him decided to approve this outrageous transaction giving them de facto control over the Singing Machine. We tried to work constructively with other board members to address issues at Singing Machine, and only filed this lawsuit after it became clear that we do not have good faith partners. Make no mistake, we intend to take any and all actions necessary to protect the interests of our fellow stockholders."
Also Read: Ault Alliance Targets $230M-$240M Revenue In FY24 Amid Strong Growth, Stock Gains
Price Action: AULT shares are trading higher by 0.81% at $0.0998 premarket on the last check Wednesday.
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