Two Rivers Water and Farming Co. (fka TURV)

[tigerpac]

GrowCo and GrowCo Partners 1, LLC v. Harding and Morris

On May 1, 2018, Wayne Harding, our Chief Executive Officer and acting Chief Financial Officer and a member of the Board of Directors, and Samuel Morris Jr., also a member of the Board of Directors, were notified of a complaint filed with the District Court, City and County of Denver, Colorado by (a) GrowCo, Inc. or GrowCo and (b) GCP Super Units, LLC, filing derivatively on behalf of GrowCo Partners 1, LLC or GCP1.

GrowCo and GCP1 are considered to be our variable interest entities under U.S. generally accepted accounting principles, which means we are deemed to control them despite not owning a majority of their equity. Because GrowCo and GCP1 are considered to be our variable interest entities, their financial statements are consolidated with ours.

Messrs. Harding and Morris serve as the common unit managers of GCP1. The complaint claims that Messrs. Harding and Morris, in serving as such managers:


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failed to conduct the business affairs of GCP1 in the best interests of GCP1;

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engaged in transactions involving conflicts of interest;

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usurped business opportunities of GCP1;

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engaged in self-dealing and transferred funds and reorganized debt to the detriment of GCP1;

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failed to comply with the operating agreement of GCP1;

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engaged in unauthorized and improper transactions on behalf of GCP1; and

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pursued a scheme to usurp the authority of parties who should be the appropriately appointed managers of GCP1.

The complaint also asserts, through derivative claims, that, while serving as GCP1 common unit managers, Messrs. Harding and Morris:


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breached their fiduciary duties;

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received unjust enrichment;

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engaged in fraudulent concealment and civil conspiracy; and

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failed to conduct the business affairs of GCP1 in the best interests of GCP1.

The complaint states that the plaintiffs have suffered economic damages, including loss of profits, in an amount to be determined at the time of trial. Further the complaint is requesting removing Messrs. Harding and Morris from all current positions as managers, and/or officers and/or board member of plaintiff entities.

Messrs. Harding and Morris have advised us that they believe that all of the claims made in the complaint are without merit and that they intend to defend vigorously against these claims.