Court Opinion

ID: 9930959
Source: CourtListenerOpinion
Date Created: 2024-02-07 21:08:56.726508+00
Date Added: 2024-06-11T12:13:33.385021
License: Public Domain

TS Falcon I, LLC v Golden Mtn. Fin. Corp.
               2024 NY Slip Op 30386(U)
                    February 1, 2024
           Supreme Court, New York County
        Docket Number: Index No. 655783/2023
                  Judge: Andrea Masley
Cases posted with a "30000" identifier, i.e., 2013 NY Slip
 Op 30001(U), are republished from various New York
 State and local government sources, including the New
  York State Unified Court System's eCourts Service.
 This opinion is uncorrected and not selected for official
                       publication.
                                                                                                                        INDEX NO. 655783/2023
  NYSCEF DOC. NO. 109                                                                                             RECEIVED NYSCEF: 02/01/2024

            SUPREME COURT OF THE STATE OF NEW YORK
            COUNTY OF NEW YORK: COMMERCIAL DIVISION PART 48
            ----------------------------------------------------------------------------------- X

             TS FALCON I, LLC,                                                                      INDEX NO.         655783/2023

                                                          Plaintiff,
                                                                                                    MOTION DATE
                                                - V -
                                                                                                    MOTION SEQ. NO.        001
             GOLDEN MOUNTAIN FINANCIAL CORP., GOLDEN
             MOUNTAIN FINANCIAL HOLDINGS CORP., and GMF
             MIDCO, LLC,                                                                             DECISION+ ORDER ON
                                                                                                           MOTION
                                                          Defendants.
            ----------------------------------------------------------------------------------- X

            HON. ANDREA MASLEY:

            The following e-filed documents, listed by NYSCEF document number (Motion 001) 4, 5, 6, 7, 8, 9, 10,
            11, 12, 13, 14, 15, 16, 17, 18, 19,20,21,22,23,24,25,50,51,52,53,54,65, 66,67
            were read on this motion to/for                                     INJUNCTION/RESTRAINING ORDER

            Upon the foregoing documents, it is

                      Plaintiff TS Falcon I, LLC moves pursuant to CPLR Article 63 for a preliminary

            injunction enjoining defendants Golden Mountain Financial Corp. (OpCo), Golden

            Mountain Financial Holdings Corp. (HoldCo) and GMF Midco, LLC (MidCo, together

            with HoldCo, Guarantors) from "(1) further breaching the Revolving Loan and Security

            Agreement, dated January 22, 2021; (2) effectuating a transaction between Defendants,

            on the one hand, and Halsa Holdings, LLC or lgaldl, Ltd [Halsa] and their affiliates, on

            the other; and (3) taking any action to dissipate Plaintiff's collateral in Defendants."

            (NYSCEF 4, Proposed OSC at 5; NYSCEF 3, Koplewicz aff ,I5.)

             655783/2023 TS FALCON I, LLC vs. GOLDEN MOUNTAIN FINANCIAL CORP. ET AL                                    Page 1 of 15
             Motion No. 001

[* 1]                                                                      1 of 15
                                                                                               INDEX NO. 655783/2023
  NYSCEF DOC. NO. 109                                                                    RECEIVED NYSCEF: 02/01/2024

            Background

                      Plaintiff is a secured lender to OpCo1, the borrower; HoldCo and MidCo are the

            guarantors. (NYSCEF 1, Complaint ,i1 .) Plaintiff holds less than 50% of OpCo's

            common stock. (Id. ,I42.) OpCo's most significant assets are deferred tax credits and

            net operating losses (collectively NOLs) which can be used by an entity with significant

            revenue to offset tax obligations subject to federal income tax limitations; defendants

            cannot sell the NOLs. (Id. ,i,i30, 46.) The NOLs are valueless unless defendants

            operate an income generating business or acquire an earning asset. (NYSCEF 44,

            Govindan 2 aff ,i9.)

                      On January 22, 2021, plaintiff entered a revolving loan and security agreement

            (Agreement) for up to $5 million with FNBC. (Id. ,i,i14- 15; NYSCEF 1, Complaint ,I27.)

            The purpose of the loan was to cover expenses for a transaction to monetize the NO Ls.

            (NYSCEF 44, Govindan aff ,i12.) The parties also entered into a January 21, 2021

            agreement with defendants giving plaintiff an option to take up to an 84.9 % stake in

            OpCo on January 24, 2024. (Id. ,i,i45-48; NYSCEF 46, Subscription Agreement.)

                      On March 17, 2021, plaintiff filed a UCC statement. (NYSCEF 3, Koplewicz aff

            ,I14.) The secured collateral is described in Annex B to the Agreement which includes

            18 categories of assets; relevant here are "all general intangibles." (NYSCEF 7,

            Agreement at 21/43. 3 ) Pursuant to the Agreement, plaintiff loaned $1 million on

            January 22, 2021, $250,000 on February 8, 2022, $200,000 on December 28, 2022 and

            1
              In March 2021, when First NBC Bank Holding Company (FNBC) emerged from
            bankruptcy, FNBC became OpCo, a wholly owned subsidiary of HoldCo. (NYSCEF 1,
            Complaint ,i13.)
            2
              Shivan Govindan is defendants' "chairman." (NYSCEF 44, Govindan aff ,i1 .)
            3
              NYSCEF pagination.
                655783/2023 TS FALCON I, LLC vs. GOLDEN MOUNTAIN FINANCIAL CORP. ET AL        Page 2 of 15
                Motion No. 001

                                                             2 of 15
[* 2]
                                                                                               INDEX NO. 655783/2023
  NYSCEF DOC. NO. 109                                                                    RECEIVED NYSCEF: 02/01/2024

            $85,000 on October 25, 2023. (NYSCEF 1, Complaint ,i,i27, 38.) OpCo made a partial

            payment in March 2022, but never again. (Id. ,I29.)

                      On June 2, 2023, plaintiff sent a notice of defaults as of March 31, 2023 asserting

            a variety of defaults including failure to: "(i) pay Falcon the accrued interest owed on the

            applicable due dates since March 31, 2023, as required by Section 7(a) of the Loan

            Agreement; (ii) to use its best efforts to work diligently with the Transferor Stockholder

            to reach resolution regarding its purported transfers; (iii) to pay amounts that OpCo

            owed under a separate agreement; and (iv) hold an annual meeting of stockholders by

            January 31, 2023, as required by Section 7(b) of the Loan Agreement as reflected in

            Amendment No. 3 to the Loan Amendment." (Id. ,I32.) On June 8, 2023, plaintiff sent a

            payoff letter demanding $2 million and again on August 26, 2023 for $2,073,957. 4 (Id.

            ,i,i34, 37.) On October 26, 2023, plaintiff exercised the option to take the entire 84.9 %

            stake in OpCo. (NYSCEF 47, Option Notice.)

                      On October 30, 2023, HoldCo amended its bylaws to require wide-ranging

            disclosures for nominees to the board of directors and raised the ownership threshold

            from 10% to 47% for shareholders to call special stockholder meetings. (NYSCEF 1,

            Complaint, ,I42.) On November 15, 2023, plaintiff received a notice to stockholders for

            a December 1, 2023 meeting (Notice) at which "HoldCo will seek stockholder approval

            (i) for a cashless transaction between OpCo and affiliates of Halsa Holdings, LLC 5 (the

            'Halsa Merger'); (ii) to form a subsidiary of OpCo; (iii) for OpCo to obtain additional

            financing from a third-party lender; and (iv) to amend and restate OpCo's Certificates of

            4
              By December 8, 2023, the payoff amount grew to $3,536,425 of which approximately
            $1.5 million were from legal fees. (NYSCEF 45, December 8, 2023 Letter.)
            5
              Halsa is a California cannabis company. (NYSCEF 44, Govindan aff ,I42.)
                655783/2023 TS FALCON I, LLC vs. GOLDEN MOUNTAIN FINANCIAL CORP. ET AL        Page 3 of 15
                Motion No. 001

[* 3]                                                         3   of 15
                                                                                               INDEX NO. 655783/2023
  NYSCEF DOC. NO. 109                                                                    RECEIVED NYSCEF: 02/01/2024

            lncorporation." 6 (NYSCEF 1, Complaint ,I45.) Defendants did not obtain plaintiff's

            consent. (NYSCEF 3, Koplewicz aff ,I27.)

                      Plaintiff objects to the proposed transaction with Halsa, which according to the

            Notice is cashless, forms a subsidiary to OpCo, OpCo obtains additional financing, and

            amends OpCo's certificate of incorporation, all without plaintiff's consent. (NYSCEF 1,

            Complaint ,I45.) Koplewicz asserts that "OpCo's failure to cure its defaults is an attempt

            to prevent Falcon from ( 1) taking steps to protect the collateral securing its loan and (2)

            exercising its rights as a substantial stockholder, as well as a lender to OpCo."

            (NYSCEF 3, Koplewicz ,I24.)

            This Action

                      Plaintiff initiated this action on November 22, 2023 alleging (1) breach of contract

            against defendants for failure to (i) "comply with Sections 5 and 9 of the Loan

            Agreement;" (ii) "hold an annual stockholders meeting by January 31, 2023;" (iii) "use

            best efforts to work diligently with the Transferor Stockholder to reach resolution

            regarding its purported transfers;" and (iv) for the amendment to HoldCo's "bylaws

            without Falcon's consent to, among other things, (a) require that nominations for its

            board of directors include extensive disclosures that are overly burdensome and go

            beyond those typically required for a private company and (b) make it more difficult for

            stockholders- particularly Falcon that holds ... percent of HoldCo's common stock-to

            call a special meeting of stockholders by increasing the required ownership threshold

            from ten (10) percent to forty-seven (47) percent of shares entitled to vote;" (2) breach

            6
              Defendants are also in discussions with lgadl, a Colorado cannabis company, but that
            is not mentioned in the Notice. (Id. ,I42.)
                655783/2023 TS FALCON I, LLC vs. GOLDEN MOUNTAIN FINANCIAL CORP. ET AL        Page 4 of 15
                Motion No. 001

[* 4]                                                        4   of 15
                                                                                              INDEX NO. 655783/2023
  NYSCEF DOC. NO. 109                                                                 RECEIVED NYSCEF: 02/01/2024

            of contract against the Guarantors for the same reasons; (3) anticipatory breach of

            contract against OpCo and Guarantors on the ground that defendants are seeking

            shareholder approval without consent to: "(i) enter into the Halsa Merger, pursuant to

            which it will form a subsidiary of OpCo, in violation of Sections 12(i) and 12(1); (ii)

            transfer and dissipate OpCo's NOLs and, thereby, taking action that is reasonably

            expected to impair any intangible asset of OpCo and HoldCo, in violation of Sections

            12(h) and 12(m); (iii) permit Falcon's first priority security interest to be subject to claims

            of other persons and entities, in violation of Sections 10(b) and 12(h); and (iv) to amend

            and restate OpCo's Certificate of Incorporation, in violation of Section 12(q) ;" and (4)

            indemnification. (NYSCEF 1, Complaint, ,i,i51, 54-60, 66-69.) Damages are allegedly

            $2.3 million. (Id. at 17.)

                   For injunctive relief under CPLR 6301, the movant must establish likelihood of

            success on the merits of the action; the danger of irreparable harm in the absence of a

            preliminary injunction; and a balance of equities in favor of the moving party. (Gliklad v

            Cherney, 97 AD3d 401,402 [1st Dept 2012] [citations omitted].) "A preliminary

            injunction should not be granted unless the right thereto is plain from the undisputed

            facts and there is a clear showing of necessity and justification." ( O'Hara v Corporate

            Audit Co., 161 AD2d 309, 310 [1st Dept 1990] [citations omitted].)

            Likelihood of Success

                   A cause of action for breach of contract requires plaintiff to demonstrate "the

            existence of a contract, the plaintiff's performance thereunder, the defendant's breach

            thereof, and resulting damages." (Harris v Seward Park Haus. Corp., 79 AD3d 425, 426

            [1st Dept 201 0] [citation omitted].)

             655783/2023 TS FALCON I, LLC vs. GOLDEN MOUNTAIN FINANCIAL CORP. ET AL           Page 5 of 15
             Motion No. 001

[* 5]                                                      5 of 15
                                                                                             INDEX NO. 655783/2023
  NYSCEF DOC. NO. 109                                                                 RECEIVED NYSCEF: 02/01/2024

                   Plaintiff satisfies the first requirement for a breach of contract claim: the

            Agreement is a contract between the parties and defendants are responsible for

            repayment of funds plaintiff loaned. Defendants contend that the Agreement is

            unenforceable due to plaintiff's misrepresentations to GMFC that induced GMFC to

            enter the loan under false pretenses. However, this argument is barred by the

            Agreement's integration clause (§15). (See Gen. Bank v Mark II Imports, Inc., 293

            AD2d 328, 328 [1st Dept 2002] [fraudulent inducement claim "is, as a matter of law,

            foreclosed by an integration clause"].)

                   Likewise, the Agreement is not void under GOL §5-501 (6)(b) --New York's

            criminal usury laws-which applies to loans under $2.5 million. Here, the amount due is

            $3.5 million, including legal fees which plaintiff is permitted to add to the amount due.

            (NYSCEF 7, Agreement §13.) In any case, though the principal amount loaned to date

            is under $2.5 million, plaintiff agreed to loan up to $5 million. (See SpecFin Mgmt. LLC

            v Elhadidy, 201 AD3d 31, 42 [3rd Dept 2021] [usury laws inapplicable where lender

            agreed to provide up to $2.5 million but only advanced $370,472.13].) Finally, these

            highly sophisticated and well-represented parties, who negotiated for 60 days (NYSCEF

            66, Koplewicz ,TB), are not the intended beneficiaries of this provision - "borrowers who

            need or deserve protection." (NML Capital v Republic of Argentina, 621 F3d 230, 239

            [2d Cir 201 O].)

                   Defendants contend that plaintiff is preventing defendants from monetizing the

            NOLs by rejecting all of defendants' proposed transactions and failing to propose any

            transactions-effectively asserting that plaintiff breached first. (NYSCEF 44, Govindan

             655783/2023 TS FALCON I, LLC vs. GOLDEN MOUNTAIN FINANCIAL CORP. ET AL          Page 6 of 15
             Motion No. 001

[* 6]                                                      6   of 15
                                                                                               INDEX NO. 655783/2023
  NYSCEF DOC. NO. 109                                                                    RECEIVED NYSCEF: 02/01/2024

            aff ,i,i19, 23, 39.) Plaintiff counters that it brought Halsa to the bargaining table.

            (NYSCEF 66, Koplewicz aff ,I7.)

                       A movant cannot establish a likelihood of success on the merits where there are

            "sharp issues of fact." (Res. Bd. of Mgrs. of the Columbia Condo. v Alden, 178 AD2d

            121, 123 [1st Dept 1991]; see also Sussman Educ., Inc. v Gorenstein, 175 AD3d 1188,

            1189-90 [1st Dept 2019] [holding that it was an improvident exercise of the court's

            discretion to grant a preliminary injunction where parties raised "sharp issues of fact"

            concerning defendant's alleged breaches].) However, while the purported issue of fact

            here-whether plaintiff breached the Agreement first by failing to cooperate in finding an

            appropriate transaction - would typically preclude a preliminary injunction, defendants

            do not contradict plaintiff's assertion that plaintiff has in fact cooperated. 7 In his sur-

            reply affidavit, Colon discusses the two years of negotiations with defendants.

            (NYSCEF __ , Colon aff ,i,i4, 5.) In Govindan's sur-reply affidavit, he states that he has

            known Halsa for several years and began discussing a merger in 2021. (NYSCEF __ ,

            Govindan aff ,I4.) However, neither Colon nor Govindan dispute that plaintiff introduced

            defendant to Halsa.

                      As to defendants' breach, it is undisputed that defendants have failed to make

            payments required by §5 of the Agreement, failed to hold an annual stockholder

            7
             On the record on December 21, 2023, the court invited defendants to submit an
            agreement as defendants' statements as to what the transaction would look like were
            amorphous, and thus, insufficient. Instead, defendants submitted the affidavits of
            Christoper Colon, Halsa's CEO, and Govindan, neither of which annexed an agreement
            or even a term sheet. The affiants merely repeat, with more details, their aspirations.
            Admittedly, there is no funder which would pay off plaintiff's loan. (NYSCEF __ ,
            Govindan aff ,i,i8-9; NYSCEF __ Colon aff ,i10.) Accordingly, the court treats the
            affidavits as sur replies. Defendants shall file the Govindan and Colon affidavit in
            NYSCEF. Plaintiff shall file its December 26, 2023 letter in NYSCEF.
                655783/2023 TS FALCON I, LLC vs. GOLDEN MOUNTAIN FINANCIAL CORP. ET AL         Page 7 of 15
                Motion No. 001

[* 7]                                                         7   of 15
                                                                                            INDEX NO. 655783/2023
  NYSCEF DOC. NO. 109                                                                 RECEIVED NYSCEF: 02/01/2024

            meeting by January 31, 2023, failed to use best efforts to work diligently with the

            Transferor Stockholder to reach resolution regarding transfers, and amended their

            bylaws without plaintiff's consent. Therefore, at this stage on this record, it appears that

            plaintiff will likely succeed on its first cause of action.

                   The Guarantors guaranteed payment only and their promise to pay is irrevocable

            and unconditional. (NYSCEF 7, Agreement §9.) Defendants fail to address plaintiff's

            claim which constitutes waiver. Therefore, plaintiff will likely succeed on the guarantee

            in the second cause of action.

                   The indemnification provision clearly provides that defendants are responsible for

            legal fees to enforce the Agreement. (NYSCEF 7, Agreement §13.) Defendants fail to

            address this argument which constitutes waiver. Therefore, plaintiff will likely succeed

            on its indemnification claim.

                   "An anticipatory breach of a contract ... can be either a statement by the obligor

            to the obligee indicating that the obligor will commit a breach that would of itself give the

            obligee a claim for damages for total breach or a voluntary affirmative act which renders

            the obligor unable or apparently unable to perform without such a breach." (Princes

            Point LLC v Muss Dev. L.L.C., 30 NY3d 127, 133 [2017] [internal quotation marks and

            citations omitted].) Holdco's Notice unequivocally demonstrates its intent to seek: (1)

            stockholder approval for the cashless Halsa Merger, (2) additional financing from a

            third-party lender, and (3) to amend and restate OpCo's Certificates of Incorporation.

            However, HoldCo has not requested plaintiff's written consent to the Halsa Merger, as

            required by §12 of the Agreement. Therefore, plaintiff is likely to succeed on its third

            cause of action.

             655783/2023 TS FALCON I, LLC vs. GOLDEN MOUNTAIN FINANCIAL CORP. ET AL         Page 8 of 15
             Motion No. 001

[* 8]                                                      8   of 15
                                                                                             INDEX NO. 655783/2023
  NYSCEF DOC. NO. 109                                                                 RECEIVED NYSCEF: 02/01/2024

            Irreparable Harm

                   Plaintiff asserts that dissipation of the value of the NOLs will cause irreparable

            harm to plaintiff.   Defendants challenge plaintiff's irreparable injury. First, defendants

            assert that plaintiff can be compensated by money damages which precludes

            irreparable injury. However, plaintiff asserts that its collateral will be dissipated by the

            Halsa transaction which can be an exception to the bar against a preliminary injunction

            when money damages are available.

                    "[A] secured creditor does have a legally recognized interest in preventing

            dissipation of encumbered property" which constitutes irreparable harm. (White Oak

            Commercial Finance, LLC v EIA Inc., 2023 WL 4149527, *7, 2023 NY Slip Op

            32088(U), 11 [Sup Ct, NY County 2023], citing Winchester Glob. Tr. Co. v Donovan, 58

            AD3d 833, 834 [2d Dept 2009] ["holding that injunctive relief was properly granted as

            the uncontrolled disposition of assets 'would threaten to render ineffectual any judgment

            which the plaintiff might obtain' in an action by a secured party to set aside allegedly

            fraudulent conveyances made 'in derogation of the plaintiffs perfected security

            interest"']; see also Goldman Sachs Bank USA v Schreiber, 2022 WL 60650, *3 [Sup

            Ct, NY County 2022] [granting preliminary injunction enjoining the transfer of assets

            where plaintiff, a secured creditor, sought to prevent a dissipation of collateral, and the

            sale of such assets in direct contravention of agreements would cause irreparable harm

            "by taking away the value of the collateral"].)

                   It is undisputed that the purpose of the Halsa transaction is to monetize the

            NOLs, but that means that the NOL's will be used to offset Halsa's revenue which

             655783/2023 TS FALCON I, LLC vs. GOLDEN MOUNTAIN FINANCIAL CORP. ET AL         Page 9 of 15
             Motion No. 001

[* 9]                                                      9   of 15
                                                                                                INDEX NO. 655783/2023
  NYSCEF DOC. NO. 109                                                                    RECEIVED NYSCEF: 02/01/2024

            necessarily decreases the NOLs. Therefore, plaintiff has stated irreparable harm if the

            NOLs are plaintiff's encumbered property.

                      Second, defendants challenge whether the NOLs are collateral under the

            Agreement, and, if not, then dissipation of the NOLs will not irreparably harm plaintiff.

            Defendants argue that plaintiff's UCC filing 8 did not securitize the NOLs because it

            cannot file a UCC on NOLs. Relying on City of Chicago v Michigan Beach Housing Co-

            op, 242 Ill App3d 636 (App Court, First Dist, Second Div 1993), defendants assert that

            NOLs are not general intangibles under the UCC. In City of Chicago, Chicago sued a

            cooperative building to which Chicago had loaned funds in exchange for a security

            interest in the building. (Id.) Chicago sought to recoup syndication funds from the

            limited partnership that subsequently acquired the building based on Chicago's security

            interest in the building. (Id.) The Illinois Court held that

                      "the tax credits at issue cannot serve as collateral because they are not general
                      intangible personal property. Tax credits, as Randall instructs us, have no
                      independent value in and of themselves; instead, they are an incidental benefit
                      that investors receive when they purchase a security evidencing their interest in a
                      limited partnership. The investors cannot transfer or sell the tax credits separate
                      from the security itself. The limited partnership did not 'sell' the tax credits to the
                      investors; the tax credits remain exactly where they resided before the sale of the
                      securities, in the limited partnership. Accordingly, it is clear that the NTC
                      defendants in this case did not purchase and do not own tax credits; instead,
                      they bought and now possess securities which gave them an interest in the
                      Michigan Beach Limited Partnership."

            8
             The UCC statement provides: "[t]his financing statement covers the following
            collateral: All assets of the Debtor whether now existing or hereafter arising or
            acquired." (NYSCEF 9, UCC Statement.)
                655783/2023 TS FALCON I, LLC vs. GOLDEN MOUNTAIN FINANCIAL CORP. ET AL         Page 10 of 15
                Motion No. 001

[* 10]                                                       10 of 15
                                                                                            INDEX NO. 655783/2023
  NYSCEF DOC. NO. 109                                                                 RECEIVED NYSCEF: 02/01/2024

            (Id. at 647.)   In Randall v Loftsgaarden, 478 US 647 (1986), which addressed whether

            tax credits constitute income under §12(2) of the Securities Act of 1933, the U.S.

            Supreme Court found that

                   "[t]he tax benefits attributable to ownership of a security initially take the form of
                   tax deduction credits. These have no value in themselves; the economic benefit
                   to the investor-the true 'tax benefit'-arises because the investor may offset tax
                   deductions against income received from other sources or use tax credits to
                   reduce the taxes otherwise payable on account of such income. Unlike
                   payments in cash or property received by virtue of ownership of a security-such
                   as distributions or dividends in stock, interest on bonds, or a limited partner's
                   distributed share of the partnership's capital gains or profits-the 'receipt' of tax
                   deductions or credits is not itself a taxable event, for the investor has received no
                   money or other 'income' within the meaning of the Internal Revenue Code.

                   ******
                   Respondents essentially ask us to treat tax benefits as a separate asset that is
                   acquired when a limited partner purchases a share in a tax shelter partnership.
                   But the legal form of the transaction does not reflect this treatment. Petitioners
                   purchased securities, thereby acquiring freely alienable rights to any income that
                   accrued to them by virtue of their ownership. They did not, however, also
                   acquire a separate, freely transferable bundle of tax losses that would have value
                   apart from petitioners' status as partners. For obvious reasons, tax deductions
                   and tax credits are not, in the absence of a statutory provision to the contrary,
                   freely transferable from one person to another if wholly severed from the property
                   ... to which they relate .... Accordingly, we decline to treat these tax losses as
                   so much property created by the promoters of the partnership."

            (Id. at 656-57, 666-67 [emphasis added].)

                   The court finds defendants' cases distinguishable. In the City of Chicago,

            Chicago's security interest in the building could not be expanded to include tax credits

            which were attached to defendants' subsequent partnership securities. Likewise, in

            Randall, petitioners purchased securities with tax credits attached to them and the case

            did not involve the UCC. Here, the circumstances are significantly different, and thus,

             655783/2023 TS FALCON I, LLC vs. GOLDEN MOUNTAIN FINANCIAL CORP. ET AL        Page 11 of 15
             Motion No. 001

                                                          11 of 15
[* 11]
                                                                                            INDEX NO. 655783/2023
  NYSCEF DOC. NO. 109                                                                 RECEIVED NYSCEF: 02/01/2024

            the court finds that the NOLs constitute general intangibles which are very clearly the

            intended collateral under the Agreement and were secured by the UCC statement.

                   This is a case about NOLs. Defendants concede that

                   "[t]he value of GMFC's NOLs can only be realized by GMFC and under
                   certain limited conditions, such as, by operating a taxable income-
                   generating business or acquiring a significant earning asset base. Without
                   such a business, GMFC's NOLs will remain unutilized and Golden
                   Mountain remains completely dependent on the Falcon to fund its
                   operations through the Loan Agreement."

            (NYSCEF 44, Govindan aff ,I38.) Defendants acknowledge that their "most valuable

            assets are GMFC's NOLs." (Id.; see also NYSCEF 50, Defendants' MOL at 10.)

            Indeed, the NOLs are effectively defendants' only asset. According to plaintiffs

                   "OpCo does not engage in any significant business operations or have any
                   revenue streams. Thus, the Company's most significant asset from which it
                   could reasonably expect to realize value and pursuant to which Falcon could
                   recoup its loan proceeds are the NOLs. The NOLs are of significant value
                   because, subject to certain federal income tax limitations, they can be used by an
                   entity with significant revenue to offset its tax obligations. Accordingly, it is a
                   significant asset that could serve as consideration for a potential transaction with
                   a company with significant revenue streams that would not only provide value to
                   its stockholders but also enable Falcon to be repaid in full."

            (NYSCEF 1, Complaint ,I46.)

                   The court is guided, as it must be, by the Agreement. Annex B describes the

            Collateral as follows: "All General Intangibles" and "all other personal property and

            rights of every kind." (NYSCEF 7, Agreement Annex B (g), (r) at 21/43.) Annex B also

            provides that should "the definition of any category and type of collateral" be "expanded

            by the UCC," then that expanded definition applies to this Agreement. (Id.) Under

            Article 9 of the UCC, a "general intangible" is "any personal property, including things in

            action, other than accounts, chattel paper, commercial tort claims, deposit accounts,

            documents, goods, instruments, investment property, letter-of-credit rights, letters of
             655783/2023 TS FALCON I, LLC vs. GOLDEN MOUNTAIN FINANCIAL CORP. ET AL        Page 12 of 15
             Motion No. 001

[* 12]                                                    12 of 15
                                                                                                INDEX NO. 655783/2023
  NYSCEF DOC. NO. 109                                                                   RECEIVED NYSCEF: 02/01/2024

            credit, money, and oil, gas, or other minerals before extraction. The term includes

            payment intangibles and software. (UCC § 9-102[42].) The UCC classifies property

            into three categories: (i) real property, (ii) fixtures, and (iii) personal property, but the

            NOLs are clearly neither real property nor fixtures, necessarily making them personal

            property.

                   Defendants also insist there will be no irreparable harm because plaintiff's loan

            will be paid as a condition of the Halsa transaction. Without the loan, plaintiff will have

            no securitized assets, and thus, the NOLs cannot be dissipated from plaintiff's

            perspective. As discussed above and on the record on December 21, 2023, the court

            has no evidence of such an agreement, other than the aspirational statements from

            defendants. Moreover, there is no evidence that the parties have located funding to pay

            off the loan. ( See NYSCEF __ , Colon aff ,i10.)

                   Finally, plaintiff has established nonspeculative irreparable harm from

            defendants' corporate governance changes and changes to the bylaws. (See

            Broadway Assocs v Park Royal Owners, Inc., 2002 NY Misc LEXIS 2114, *11-12 [Sup

            Ct, NY County 2002] [holding that "[a] corporate shareholder who has been wrongfully

            denied the fundamental right to vote their shares and gain representation on the board

            of directors is presumed to be threatened with irreparable harm" where the corporate

            electoral process is tainted.]; see also Bank of NY Co v Irving Bank Corp, 139 Misc 2d

            665 [Sup Ct, NY County 1988].)

            Balance of Equities

                   "In order for a preliminary injunction to issue it must be shown that the irreparable

            injury to be sustained by the plaintiff is more burdensome to it than the harm caused to

             655783/2023 TS FALCON I, LLC vs. GOLDEN MOUNTAIN FINANCIAL CORP. ET AL            Page 13 of 15
             Motion No. 001

[* 13]                                                    13 of 15
                                                                                                  INDEX NO. 655783/2023
  NYSCEF DOC. NO. 109                                                                     RECEIVED NYSCEF: 02/01/2024

            defendant through imposition of the injunction." (Nassau Roofing & Sheet Metal Co.,

            Inc. vFacilitiesDev. Corp., 70AD2d 1021, 1022 [3d Dept 1979] [citation omitted].)

            Plaintiff asserts that its collateral will be impaired without the preliminary injunction.

            Defendants challenge whether plaintiff will be harmed at all. Defendants' argument

            presumes that the loan will be paid in full, but as discussed above, the court has no

            such evidence. Certainly, granting the preliminary injunction will impede the Halsa

            transaction, but it will not interfere with finding another transaction, nor restructuring the

            Ha Isa transaction in such a way that plaintiff would consent. Therefore, the court finds

            that the equities favor plaintiff.

                      Finally, while the court accepts defendants' recitation of the procedural history of

            the Delaware actions involving plaintiff's rights as a shareholder and option holder under

            Delaware law, defendants do not request any relief or offer any law applicable to this

            preliminary injunction motion. Instead, defendants assert that they intend to move for a

            stay of this action in favor of the Delaware action. Therefore, there is nothing before the

            court on which the court can determine that the Delaware action precludes this action.

                      Accordingly, it is

                      ORDERED that the parties shall file in NYSCEF the affidavits and letter sent to

            the court by email on December 26, 2023; and it is further

                      ORDERED that plaintiff's motion for a preliminary injunction is granted; and it is

            further

                      ORDERED that the undertaking is fixed in the sum of $3.5 million conditioned

            that the plaintiff, if it is finally determined that he it was not entitled to an injunction, will

             655783/2023 TS FALCON I, LLC vs. GOLDEN MOUNTAIN FINANCIAL CORP. ET AL              Page14of15
             Motion No. 001

[* 14]                                                    14 of 15
                                                                                                    INDEX NO. 655783/2023
  NYSCEF DOC. NO. 109                                                                         RECEIVED NYSCEF: 02/01/2024

            pay to defendants all damages and costs which may be sustained by reason of this

            injunction; and it is further

                    ORDERED that defendants, their agents, servants, employees and all other

            persons acting under the jurisdiction, supervision and/or direction of defendant, are

            enjoined and restrained, during the pendency of this action, from doing or suffering to

            be done, directly or through any attorney, agent, servant, employee or other person

            under the supervision or control of defendant or otherwise, any of the following acts: (1)

            further breaching the Revolving Loan and Security Agreement, dated January 22, 2021;

            (2) effectuating a transaction between Defendants, on the one hand, and Halsa

            Holdings, LLC or lgaldl, Ltd and their affiliates, on the other; and/or (3) taking any action

            to dissipate Plaintiff's collateral in Defendants; and it is further

                    ORDERED that the parties are directed to submit the December 21, 2023

            transcript by filing it in NYSCEF and emailing the court; and it is further

                    ORDERED that counsel are directed to appear for a preliminary conference on

            February 20, 2024 at 10 AM unless the parties file a PC order on consent prior to that

            date.

                     2/1/2024
                      DATE                                                        ANDREA MASLEY, J.S.C.
             CHECK ONE:                     CASE DISPOSED                 NON-FINAL DISPOSITION

                                            GRANTED         □ DENIED      GRANTED IN PART          □ OTHER
             APPLICATION:                   SETTLE ORDER                  SUBMIT ORDER

             CHECK IF APPROPRIATE:          INCLUDES TRANSFER/REASSIGN    FIDUCIARY APPOINTMENT    □ REFERENCE

             655783/2023 TS FALCON I, LLC vs. GOLDEN MOUNTAIN FINANCIAL CORP. ET AL                Page 15 of 15
             Motion No. 001

[* 15]                                                      15 of 15