Complaint Alleges Director Defendants Breached Fiduciary
Duties by Approving Stock Sale to Affiliates of Directors Jay
Foreman and Mathieu Peloquin at an Inadequate Price and Engaged in
a Deeply Flawed Process
Asks Court to Rescind the Transaction and Award
Damages
Ault Alliance, Inc. (NYSE American: AULT), a diversified holding
company (“Ault Alliance” or the “Company”), today
announced that its subsidiary Ault Lending, LLC (“Ault
Lending”), which owns approximately 28.2% of the shares of The
Singing Machine Company, Inc. (NASDAQ: MICS) (“Singing
Machine” or “MICS”), has initiated a derivative lawsuit
by filing a verified complaint (the “Complaint”) alleging
breach of fiduciary duties relating to Singing Machine’s recent
sale of an aggregate of 2,197,802 shares, amounting to 34% of the
shares outstanding, to Regalia Ventures, LLC and Stingray Group,
Inc. (TSE: RAY.A).
Ault Lending alleges that the director defendants violated their
fiduciary duties of care and loyalty in approving the transaction
at an inadequate price following a deeply flawed process led by
Singing Machine CEO Gary Atkinson, resulting in two directors, Jay
B. Foreman and Mathieu Peloquin, through affiliates, holding a
collective 43.2% ownership stake in MICS. The Complaint details the
actions of Mr. Atkinson and the other defendant directors in the
lead-up to the transaction, which Ault Lending believes demonstrate
poor corporate governance and bad faith at every step: rushed
negotiations run by interested parties; failure to conduct an
appropriate market check and obtain an opinion from a financial
advisor; refusal to appoint a special committee of independent
directors to review and approve a related party transaction;
improper exclusion of certain directors from board communications;
inadequate notice of board meetings; refusal to engage on potential
superior proposals; deciding votes cast by interested directors
over the objection of other board members, and ultimately approval
of a massively-dilutive transaction on financial terms detrimental
to Singing Machine and its stockholders, but favorable to the
directors who obtained the shares.
Ault Lending is seeking (i) declarations that the director
defendants breached their fiduciary duties to stockholders, and
that Stingray and Regalia Ventures aided and abetted those
breaches, (ii) for the court to rescind the transaction; and (iii)
an award of damages and payment of expenses.
Milton “Todd” Ault, III, founder and Executive Chairman of Ault
Alliance and Executive Chairman of the Singing Machine, stated, “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.”
The Complaint was filed on December 21, 2023 in the Delaware
Chancery Court (Case No. 2023-1282) against (i) Singing Machine,
(ii) Chief Executive Officer and director Gary Atkinson, Vice
President of Global Sales and Marketing and director Bernardo Melo,
and directors Jay B. Foreman, Harvey Judkowitz, Joseph Kling, and
Mathieu Peloquin, (iii) Stingray Group, Inc., an affiliate of Mr.
Peloquin, and (iv) Regalia Ventures, LLC, an entity owned and
controlled by Mr. Foreman.
For more information on Ault Alliance and its subsidiaries, Ault
Alliance recommends that stockholders, investors, and any other
interested parties read Ault Alliance’s public filings and press
releases available under the Investor Relations section at
www.Ault.com or at www.sec.gov.
About Ault Alliance, Inc.
Ault Alliance, Inc. is a diversified holding company pursuing
growth by acquiring undervalued businesses and disruptive
technologies with a global impact. Through its wholly and
majority-owned subsidiaries and strategic investments, Ault
Alliance owns and operates a data center at which it mines Bitcoin
and offers colocation and hosting services for the emerging
artificial intelligence ecosystems and other industries, and
provides mission-critical products that support a diverse range of
industries, including a metaverse platform, oil exploration, crane
services, defense/aerospace, industrial, automotive,
medical/biopharma, consumer electronics, hotel operations and
textiles. In addition, Ault Alliance extends credit to select
entrepreneurial businesses through a licensed lending subsidiary.
Ault Alliance’s headquarters are located at 11411 Southern
Highlands Parkway, Suite 240, Las Vegas, NV 89141;
www.Ault.com.
Forward-Looking Statements
This press release contains “forward-looking statements” within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. These forward-looking statements generally include
statements that are predictive in nature and depend upon or refer
to future events or conditions, and include words such as
“believes,” “plans,” “anticipates,” “projects,” “estimates,”
“expects,” “intends,” “strategy,” “future,” “opportunity,” “may,”
“will,” “should,” “could,” “potential,” or similar expressions.
Statements that are not historical facts are forward-looking
statements. Forward-looking statements are based on current beliefs
and assumptions that are subject to risks and uncertainties.
Forward-looking statements speak only as of the date they are
made, and the Company undertakes no obligation to update any of
them publicly in light of new information or future events. Actual
results could differ materially from those contained in any
forward-looking statement as a result of various factors. More
information, including potential risk factors, that could affect
the Company’s business and financial results are included in the
Company’s filings with the U.S. Securities and Exchange Commission,
including, but not limited to, the Company’s Forms 10-K, 10-Q and
8- K. All filings are available at www.sec.gov and on the Company’s
website at www.Ault.com.
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Ault Alliance Investor Contact: IR@Ault.com or
1-888-753-2235
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