Coil Tubing Tech Inc (CTBG)

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WE HAVE BEEN FORCED TO BRING SUIT AGAINST OUR FORMER LARGEST SHAREHOLDER, GRIFCO INTERNATIONAL, INC., ITS PRESIDENT AND THE DEPOSITORY TRUST & CLEARING CORPORATION WHICH WILL IMPACT OUR OPERATIONS


As is more fully described below under Legal Proceedings, on July 30, 2008, the Company, Coil Tubing and our and Coil Tubing’s President, Jerry Swinford (“Plaintiffs”) filed a lawsuit against Grifco International, Inc. (“Grifco”), the Depository Trust & Clearing Corporation (DTCC/DTC ) and the President of Grifco, James Dial (“Defendants”). The case is pending as Cause No. 08-07-07397-CV in Montgomery County Texas, District Court, 9th Judicial District. The suit stems from Grifco’s stock distribution of 75,000,000 shares of Coil Tubing’s common stock in August 2007 ("Grifco Distribution").

Grifco left certain shareholders out of the Grifco Distribution and/or did not provide certain of its shareholders with the proper number of shares of Coil Tubing's common stock based on its previous disclosures and the record date of its spin-off. Additionally, there is an undisclosed number of shares outstanding held in certificate form, which were not included in the Grifco Distribution. As a result, there is uncertainty as to the identity of certain of Coil Tubing’s shareholders, as there may be additional shareholders of Grifco, which are due shares of Coil Tubing, and which should therefore participate in our Distribution, but which are not properly reflected in Coil Tubing’s shareholders reports. As part of the litigation, the Plaintiffs have sought damages and have sought declaration of the shareholders as of the record date of the distribution and our rights and obligations to those shareholders.

The Plaintiffs believe that all the Defendants were aware or should have been aware that a shortfall in the Grifco Distribution might occur, but negligently allowed the stock distribution to go forward. The failure to properly effect the Grifco Distribution was the result of the Defendants' action or inactions. As a result, the Company believes that the outcome of the litigation may be that the Company receives damages and other equitable relief. The Company does not believe that it will have any liability and/or be required to take any actions itself to address the issues related to the Grifco Distribution, but instead believes that any issues will need to be addressed directly by the Defendants.

The Company has and expects to continue to expend funds on the litigation which will negatively impact the results of its operations. The Court recently granted Plaintiffs' Temporary Injunction and denied Defendant's Motion to Dismiss. There are, however, no assurances as to the final outcome of the litigation.
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http://www.sec.gov/Archives/edgar/data/1399247/000143209309000048/coiltubings1a021309.htm