Wellgistics Health, Inc. Commitments Disclosure

NOTE 13. COMMIMENTS AND CONTINGENCIES

 

From time to time, the Company is involved in legal proceedings arising from the normal course of business activities. The Company, in conjunction with its legal counsel, assesses the need to record a liability for litigation or loss contingencies. A liability is recorded when and if it is determined that such a liability for litigation or loss contingencies is both probable and estimable.

 

Although the results of legal proceedings and claims cannot be predicted with certainty, the Company is not currently a party to any legal proceedings, which would, individually or in the aggregate, have a material adverse effect on its results of operations, cash flows, or financial position.

 

Legal Matters

 

On August 21, 2024, Blythe Global Advisors, LLC filed a demand for arbitration against the Company and the Chairman of the Board for breach of contract, breach of the implied covenant of good faith and fair dealing, and breach of personal guaranty. Blythe claims to have performed accounting services for the Company in the amount of $377,947 for which it has not been paid and that Ajjarapu personally guaranteed payment of Blythe’s invoices. The Company has answered the arbitration demand and is vigorously defending the matter.

 

Relatedly, in early 2025, Wellgistics, LLC, Wood Sage, LLC, Alliance Pharma Solutions, LLC, and Community Specialty Pharmacy, LLC, all subsidiaries of the Company, sued Blythe Global Advisors, LLC in the Circuit Court of the Thirteenth Judicial Circuit in and for Hillsborough County, Florida, asserting state statutory claims of improper UCC-1 filings, tortious interference with business relationships, slander of title, and state RICO violations. The Company claims that Blythe improperly filed a UCC-1 against the assets of these subsidiaries, when it only had a right file such a lien against the Company and that the filing impeded Wellgistics, LLC’s ability to secure a necessary credit line, causing substantial damages. Blythe filed a motion to dismiss that remains pending. The Company is vigorously prosecuting its claims.

 

Wellgistics, LLC is a defendant in a legal proceeding initiated by Lifsa Drugs LLC in the United States District Court for the District of New Jersey. The complaint alleges that Wellgistics, LLC failed to make payment for certain pharmaceutical products supplied by the plaintiff and seeks damages of approximately $420,460, together with interest, legal fees, and other related costs.

 

The matter pertains to purchases of goods made by Wellgistics, LLC in the ordinary course of business. Accordingly, the underlying amount relating to such purchases has already been recorded as a liability in the Company’s books and is included within Accounts payable in the accompanying consolidated balance sheet as of December 31, 2025. At this stage of the proceedings, the outcome of the litigation cannot be reasonably predicted. Management, in consultation with legal counsel, is currently evaluating the claim and the potential exposure, if any, beyond the amount already recorded. The Company will continue to monitor developments related to this matter and will record any additional provision, if required, when the likelihood of loss becomes probable and reasonably estimable.

 

Dispute with Former Management

 

On October 10, 2025, the Company initiated litigation in the Circuit Court of the Thirteenth Judicial Circuit in and Hillsborough County, Florida against certain former officers and/or directors of the Company (collectively, the “Former Management Parties”). The complaint asserts claims including, among others, breach of the fiduciary duty of loyalty, breach of contract, tortious interference with a contract, tortious interference with business relationships, and other applicable claims, arising out of the Former Management Parties’ efforts to threaten harm the Company as leverage to force the retraction of a vote of the majority shareholders.

 

On December 10, 2025, Defendants filed a motion to compel arbitration of all claims in the suit. The Company does not agree that all the claims in the suit are subject to mandatory arbitration, and filed an opposition to that motion on December 22, 2025. A hearing is currently scheduled on the motion to compel arbitration for April 27, 2026.

 

While the Company believes it has meritorious claims, litigation is inherently uncertain, and there can be no assurance regarding the outcome or timing of resolution.

 

In January 2026, the Company has also served a notice of claims against the Former Management Parties for misrepresentations and omissions of material fact in connection with an acquisition of certain limited liability company membership interests, which that resulted in, among other things, supposed promises of equity and related arrangements to such individuals. The Company intends to seek, among other relief, rescission and cancellation of any purported commitments related to or resulting from the misrepresentations and omissions, as well as related equitable and monetary remedies.

 

As of December 31, 2025, obligations associated with these arrangements are reflected as liabilities on the Company’s consolidated balance sheet in the aggregate amount of approximately $17,500,000.

 

Because the potential resolution of this matter may result in a gain contingency, no amounts have been recognized in the accompanying consolidated financial statements for any potential recovery or reduction of the recorded liability. If the Company prevails in the litigation, all or a portion of the recorded liability may be reversed in a future period. The Company will continue to evaluate this matter and will adjust the related liability, if appropriate, based on developments in the litigation.

 

Guarantee Obligation

 

On March 12, 2025, Tollo Health, LLC, Tollo Health Inc., and Gerald Commissiong (collectively, the “Borrowers”) entered into a Revolving Credit Agreement and issued a Revolving Credit Note to Testing123, LLC (the “Lender”) in the original principal amount of up to $750,000. The obligations of the Borrowers were secured pursuant to a Pledge and Security Agreement and guaranteed by the Company under a Corporate Guaranty.

 

Pursuant to the Transaction Documents, the initial advance of $444,600 was funded on March 12, 2025. The term of the loan for this draw was two months, maturing on May 12, 2025, and bore interest at 5% per month, compounding monthly. Upon default, the interest rate increased to 10% per month, also compounding monthly. Failure to pay any amount when due constituted an event of default under the Note.

 

The Borrowers defaulted on their payment obligations, thereby triggering the Company’s liability as guarantor. On July 25, 2025, the Company satisfied its obligations under the Guaranty and paid $640,647—representing principal and accrued interest—directly to Testing123, LLC. Of the total guarantee payment, $500,000 was subsequently recovered through an offset against an existing accounts payable balance, resulting in a net loss on guarantee of $140,647, which is included in general and administrative expenses in the consolidated statements of operations for the year ended December 31, 2025.

 

Vendor Demand Letter

 

The Company and certain of its subsidiaries have received demand letters from various vendors requesting payment for goods and services previously provided. The aggregate amount referenced in these demand letters is approximately $2.2 million. Of this amount, approximately $1.5 million relates to obligations that are already recorded within accounts payable in the accompanying consolidated balance sheet as of the reporting date. The remaining $0.7 million relates to claims asserted by certain vendors that are not recorded as liabilities in the accompanying consolidated financial statements. Based on management’s evaluation of the underlying matters in accordance with ASC 450, Contingencies, the Company has determined that a loss related to these claims is not probable as of the reporting date. Accordingly, no liability has been recognized for these amounts. The Company is currently in the process of initiating appropriate legal responses with respect to these claims.