Item 1. Legal Proceedings
All material pending legal proceedings to which the Registrant is a party and
proceedings which have been terminated are described in the notes to financial
statements included elsewhere herein and in the Company's Annual Report on
Form 10-K for the year ended December 31, 1998 and Quarterly Report on Form
10-Q for the quarterly period ended March 31,1999. In addition thereto, the
Company has filed a Complaint, against one identified and five anonymous
internet posters for Libel, Tortious Interference with Business Relations and
Civil Conspiracy, in the United States District Court for the Middle District
of Florida. The Complaint, entitled Hitsgalore.com, Inc. v. Janice Shell, et
al., Case NO. 99-1387-CIV-T-26C, seeks damages in excess of twenty million
dollars. The Complaint alleges that, beginning at least as early as May 1999,
the Defendants intentionally and maliciously published and republished a
variety of false and defamatory statements about Hitsgalore.com, Inc. in a
nationwide "cybersmear" campaign on electronic bulletin boards on the
internet. These statements either explicitly stated or implied that the
Company engaged in illegitimate, illegal, dishonest, fraudulent and criminal
business operations, when, in truth and fact, the Defendants knew or should
have known that such statements were false and libelous per se. At the present
time, the Company is seeking to ascertain the identity of the anonymous
Defendants through discovery.
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