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`C.A. No._______________
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`KEVIN KULAK, for himself and
`derivatively on behalf of
`MOVADO PT TECHNOLOGIES INC.,
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`ITSHAK (“ITZIK”) ON and KEREN-OR
`ON,
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`Plaintiff,
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`v.
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`IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
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`Defendants,
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`-and-
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`MOVADO PT TECHNOLOGIES INC.,
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`Nominal Defendant.
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`VERIFIED DERIVATIVE COMPLAINT
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`Plaintiff Kevin Kulak (“Mr. Kulak” or “Plaintiff”), by and through his
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`undersigned counsel, individually and derivatively on behalf of Movado PT
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`Technologies Inc. (“Movado” or the “Company”), brings this Verified Complaint
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`against Defendants Itshak (“Itzik”) On1 and Keren-Or On (together, “Defendants”),
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`and alleges as follows:
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`1 Mr. On’s name appears as “Itshak On” on the State of Delaware’s Annual
`Franchise Tax Report for Movado PT Technologies Inc for 2021. However, Mr.
`On has also been known to spell his first name as “Itzik” and “Itzhak.”
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`EFiled: Jan 06 2023 12:10PM EST
`Transaction ID 68765577
`Case No. 2023-0011-
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`NATURE OF THE ACTION
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`1.
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`This action arises out of a deceptive scheme perpetrated by Defendants
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`that caused Plaintiff to invest substantial investment capital in Movado, a Delaware
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`corporation purportedly engaged in the business of developing products and services
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`related to occupational health monitoring, treatment, and technology. In particular,
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`beginning in 2020, Defendants made a series of fraudulent misrepresentations to Mr.
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`Kulak concerning the Company’s product capabilities, its fundraising efforts, and its
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`clients and customers in order to induce him to invest $250,000 in the Company.
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`2.
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`Defendants – siblings Itshak On and Keren-Or On – sold Movado to
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`Plaintiff as a therapeutic platform purportedly designed to create “continuity of care”
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`for patients with musculoskeletal health conditions. According to Defendants,
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`Movado’s innovative technology would revolutionize personalized therapy for
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`musculoskeletal patients through, among other things, proprietary 3D motion-
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`capture technology and artificial intelligence that would assess a patient’s condition,
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`recommend a treatment plan, and track physical therapy in real time. In
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`presentations and discussions with Mr. Kulak, Defendants touted Movado’s product
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`capabilities and client partnerships, all in an effort to induce him to invest significant
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`capital in their scheme.
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`3.
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`But Defendants’ sales pitch was founded on lies. In fact, Mr. Kulak
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`later came to learn that Movado had never developed the very technology that had
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`captured his interest and caused him to invest in the first place. Further, in order to
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`solicit additional funds from Plaintiff, Defendants repeatedly lied about the existence
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`of crucial contracts with purported clients and capital contributions by private
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`investors, all of which failed to materialize. In reality, Movado had no such
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`contracts, had not obtained the referenced investments, and was racking up
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`substantial debt – not only to lenders such as Mr. Kulak, but to employees and
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`vendors as well.
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`4.
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`Defendants maintained this fiction for nearly one year, during which
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`they sent numerous updates to Mr. Kulak concerning purported projects and
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`investments that never, in fact, materialized. As time wore on, however, Movado’s
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`investors began to actively question the Company’s financial health and go-forward
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`strategy and Defendants’ scheme quickly unraveled. Indeed, in order to conceal the
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`truth about Movado, Defendants refused investors’ repeated requests for company
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`ledgers and basic information concerning the Company’s structure and governance.
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`To date, Defendants have failed to provide financial information, despite investors’
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`repeated demands, including books and records demanded under 8 Del. C. § 220.
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`5.
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`Faced with these mounting requests, Defendants – and particularly Mr.
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`On – became increasingly aggressive towards Plaintiff and Movado’s other
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`investors, threatening litigation and making false and defamatory remarks
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`concerning Mr. Kulak to his employer and others. As the relationship between the
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`parties deteriorated, in early October 2022, Defendants abruptly announced that they
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`would be dissolving Movado, leaving the Company with approximately $1.9 million
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`in debt, and Mr. Kulak with no way to recoup his losses.
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`6. Mr. Kulak brings this action to redress the harm caused by Defendants’
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`unlawful practices, and brings claims for: (1) fraudulent inducement arising from
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`Defendants’ numerous false representations; and (2) breach of the duties of good
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`faith, due care, and loyalty owed to the Company and its shareholders, caused by
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`Defendants’ false and deliberate misrepresentations and omissions to shareholders.
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`THE PARTIES
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`7.
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`Plaintiff Kevin Kulak is an individual and citizen and resident of
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`Darien, Connecticut, and a stockholder and debtholder of Movado.
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`8.
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`Upon information and belief, Defendant Itshak On is an individual and
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`citizen and resident of Tel Aviv, Israel. At all times relevant hereto, Mr. On has
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`been a controlling stockholder of Movado and has served as Chairman of the
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`Company’s Board.
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`9.
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`Defendant Keren-Or On is the sister of Mr. On and, upon information
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`and belief, is an individual and citizen and resident of Tel Aviv, Israel. At all times
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`relevant hereto, Ms. On has been a controlling stockholder of Movado and has served
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`as the Company’s co-Chief Executive Officer.
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`10. Defendant Movado PT Technologies Inc. is a Delaware corporation
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`with its principal place of business in Tel-Aviv, Israel. The Delaware registered
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`agent for Movado is Harvard Business Services, Inc., 16192 Coastal Highway,
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`Lewes, Delaware 19958.
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`STATEMENT OF FACTS
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`A. Mr. On Approaches Mr. Kulak with an Investment Opportunity
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`11. Upon information and belief, Defendants, along with several of their
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`acquaintances, founded Movado – then known as Sironaphysio Ltd., or “Sirona” –
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`in 2020. Mr. On served as the Company’s Chairman of the Board of Directors, and
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`Ms. On served as the Company’s co-Chief Executive Officer.
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`12. Defendants also were controlling stockholders in the Company. Upon
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`information and belief, Mr. On owned approximately 14% of Movado, and Ms. On
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`owned approximately 22% of Movado. Mr. On and Ms. On have used their joint
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`holdings to exercise control over the Company.
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`13. Mr. Kulak first met Mr. On in 2018, in connection with a potential
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`investment in one of Mr. On’s other ventures, a company called Specta, Inc.
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`(“Specta”), which, upon information and belief, is also now insolvent. Following
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`Mr. Kulak’s investment in Specta, in early 2020, Mr. On pitched Mr. Kulak on
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`Movado, which purportedly offered an AI-based, mobile-only therapeutic platform
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`monitoring and treatment of patients with musculoskeletal health conditions.
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`14. According to Mr. On, Movado already had a functioning application,
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`accessible through a user’s mobile phone. This application purportedly used an
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`“autonomous therapeutic platform” which, among other things, applied artificial
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`intelligence and 2D and 3D motion-tracking technology to, via an easy-to-use
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`smartphone app, visually analyze a user’s condition, provide recommendations for
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`therapy, and track and assess a user’s training (including by measuring repetitive
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`movements).
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`15.
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`In connection with his pitch, on June 5, 2020 and July 19, 2020, Mr.
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`On sent Mr. Kulak presentations concerning Movado (then Sirona) and its functional
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`capabilities. See Exhibits A, B. This presentation included the following
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`representations:
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`Movado’s application utilized artificial intelligence to provide a
`clinical assessment of a user’s condition and develop and deliver
`personalized therapy. See, e.g., Ex. A at 4 (“Autonomous Care via
`Mobile-Phone” “[m]easures and analyzes key physical attributes of
`users and delivers personalized action plans”); id. at 5 (Movado
`utilizes “deep learning, human posture and motion video analysis” to
`provide, among other things, “[o]bjective musculoskeletal analysis to
`detect injuries and future complications” and provide “[c]ontinuous
`progress monitoring versus goals and physical assessment”); Ex. B at
`6 (“AI and Machine Vision Based Objective Assessment”); id.
`(“Highly accurate joint tracing for objective assessment and live
`tracking”).
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`Movado’s mobile phone application could “visually monitor[] the user
`to keep track of repetitions, correct posture and motion.” See, e.g.,
`Ex. A. at 14; see also id. at 5 (image of application purporting to show
`monitoring of squat repetitions).
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`Movado’s application utilized both 2D and 3D technology. See Ex.
`A. at 13 (providing a “competitive analysis” that touts Movado as
`having “2D/3D Digital Therapeutics for Chronic Disease”); Ex. B. at
`16 (same); Ex. A at 14 (“True 3D MSK Analysis”); id. (“The only 2D
`and 3D real-time, mobile solution for MSK conditions.”); Ex. B at 17
`(same); Ex. A at 18 (providing revenue forecast for 3D program in
`U.S.); id. at 21 (“The only 2D and 3D real-time, cost effective,
`mobile-only solution for MSK conditions”); see also id. at 8
`(representing that pilots utilizing Movado’s 3D technology would be
`employed in the U.S. market in May 2021); Ex. B at 14 (“3D
`Autonomous Patient Centric Care”).
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`16. Defendants repeated these representations in various presentations and
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`communications sent to Mr. Kulak throughout 2020.
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`17.
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`In addition to touting Movado’s unique technology, on or about
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`October 15, 2020, Defendants represented to Mr. Kulak that this technology had
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`been successfully tested at a “case study” conducted in Israel.
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`18. As Mr. Kulak would later come to learn, these representations were
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`false. In fact, Movado’s application did not utilize artificial intelligence to provide
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`automated clinical assessments, develop a personalized therapeutic action plan, and
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`analyze user workouts. The application was incapable of measuring repetitions, and
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`it did not utilize 3D technology – because, in fact, Movado had not developed any
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`3D technology for its application whatsoever. And, consistent with these falsehoods,
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`the Israeli case study was not conducted using any technology, but instead involved
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`manual in-person or video assessments conducted by live physical therapists.
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`19. Defendants concealed all of this from Mr. Kulak, knowing that if the
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`truth were revealed about Movado’s technology development efforts – that they had
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`in fact developed no useable technology – he would never invest. And indeed, based
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`on Defendants’ glowing representations about Movado’s “secret sauce” and future
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`prospects, on September 15, 2020, Mr. Kulak entered into a Convertible Loan
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`Agreement (the “September 2020 CLA”) with Movado, pursuant to which Mr.
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`Kulak loaned $100,000 to the Company.
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`20. Under the terms of the September 2020 CLA, which by its terms is
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`governed by Delaware law, Mr. Kulak’s initial loan would be converted into shares
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`in the Company upon the earlier of (1) the occurrence of certain specified conditions
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`precedent, or (2) December 31, 2023. In the event of certain insolvency events, Mr.
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`Kulak’s loan would become immediately due and payable.
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`21. Mr. On signed the agreement on behalf of Movado, and listed his title
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`as “Chairman of the Board.”
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`B. Defendants Fraudulently Induce Mr. Kulak to Invest Additional
`Capital
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`22. Shortly after making his initial investment, Mr. On approached Mr.
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`Kulak with a request for additional capital. According to Mr. On, this capital was
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`needed to conduct field research, pay a software developer, Impressico, in India, and
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`continue pilots (i.e. short-term agreements that could potentially lead to longer-term
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`arrangements) that Movado had purportedly entered into with clients.
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`23.
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`In connection with this request, Mr. On sent Mr. Kulak glowing updates
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`about Movado’s growing success, including significant additional capital that he had
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`secured from other private investors, as well as new clients and pilots that Movado
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`had obtained.
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`24. For example, on or about September 27, 2020, Keren-Or On sent an e-
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`mail to Mr. Kulak and others representing that Movado was in the process of raising
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`$4 million, and that $3 million had already been committed by investors. Several
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`days later, on September 29, 2020, Mr. On sent Mr. Kulak a list of individuals and
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`entities who had purportedly committed to investing a cumulative $3,750,000 in
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`Movado. These investors included Halogen Ventures, Cometa VC, and two
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`individual investors.
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`25. Upon information and belief, none of these persons or entities had
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`committed to investing in, or actually did invest in, Movado. Instead, Defendants
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`touted these false commitments in an effort to induce Mr. Kulak and others to invest
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`additional funds in the Company.
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`26. As noted above, during this time, Defendants also falsely represented
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`and grossly overstated Movado’s business relationship with potential clients.
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`27. For example, in October 2020, Defendants represented to Mr. Kulak
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`that Movado had signed an agreement for a pilot with Mercado Libre, Inc.
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`(“MercadoLibre”), an Argentine company that operates online marketplaces across
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`Latin America.
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`28.
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`In particular, on or about October 1, 2020, Mr. On informed Mr. Kulak
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`that Movado would be conducting a pilot with Mercado Libre. Mr. On continued
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`that Mercado Libre was a “tier one client (70b market cap) applicable to all logistics
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`and retail,” and that this was a “[g]reat start” for the Company. Later that month,
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`on October 23, 2020, Ms. On represented to various individuals, including Mr.
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`Kulak, that the pilot with Mercado Libre would commence in just a few short weeks,
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`on November 9. The next day, Mr. On excitedly advised Mr. Kulak that Mercado
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`Libre’s pilot had increased in size, “from 500 (of 6000) to 6000.”
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`29. Additionally, on October 11, 2020, Mr. On sent Mr. Kulak a document
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`which represented that Movado would be commencing a two-month pilot at
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`Walmart in December that would cover 10,000 individuals. Mr. On further
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`represented that Movado would be commencing a two-month pilot at AXA Seguros,
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`S.A. de C.V. (“AXA”), the Mexico-based insurance company and an affiliate of the
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`worldwide AXA family of companies, in January 2021, that would cover 1,000
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`individuals.
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`30. Notably, the October 11, 2020 document sent by Mr. On to Mr. Kulak
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`also reiterated the false representation that Movado provided “highly accurate 3D
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`body tracking and automated live feedback” and that this 3D technology had already
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`been “[d]eveloped.” Several days later, on October 16, 2020, Mr. On texted Mr.
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`Kulak that Movado would be “resuming the 3d data by big scale by end of the
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`month.” Mr. Kulak responded that this was “Great news!”
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`31. Further, on October 24, 2020, Mr. On represented to Mr. Kulak and
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`other investors that Movado would have an “[e]nd of January commercial
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`agreement” with AXA, MetLife, Walmart Mexico, and Manpower (an employment
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`agency).
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`32. Upon information and belief, however, each of these representations
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`was false – Movado never entered into pilot agreements with Mercado Libre, AXA,
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`Metlife, Walmart, or Manpower. But Defendants concealed this truth from Mr.
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`Kulak, instead continuing to falsely tout Movado’s purported partnerships in order
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`to give the illusion of success and solicit additional funding from Mr. Kulak.
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`33. Additionally, and unbeknownst to Plaintiff at the time, upon
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`information and belief, on or about September 29, 2020, a lawsuit was filed in Tel
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`Aviv – Yafo District Court (case number 59843-09-20) against Defendants and
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`Sironaphysio Ltd., which was ultimately resolved through mediation settlement over
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`one year later, in November 2021. The existence of this lawsuit against Defendants
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`and the Company was never disclosed to Mr. Kulak, either prior to his investment
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`or at any time thereafter.
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`34. Based on these false representations concerning Movado’s investors
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`and business relationships, as well as Defendants’ failure to disclose the ongoing
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`litigation against themselves and the Company in Israel, on November 18, 2020, Mr.
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`Kulak entered into a second Convertible Loan Agreement with Movado (the
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`“November 2020 CLA” and, together with the September 2020 CLA, the “Loan
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`Agreements”), pursuant to which he loaned an additional $150,000 to the Company.
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`35. Under the terms of the November 2020 CLA, which by its terms is
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`governed by Delaware law, Mr. Kulak’s $150,000 loan and any accrued interest
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`would be converted into shares in the Company upon the earlier of (1) the occurrence
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`of certain specified conditions precedent, or (2) December 31, 2021. In the event of
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`certain insolvency events, Mr. Kulak’s loan would become immediately due and
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`payable.
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`36. On November 30, 2020, Mr. Kulak also entered into a Joinder to
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`Movado’s Founders Agreement, pursuant to which the Company issued him 26,338
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`Ordinary Shares in Movado.
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`37. Over the next year, the Defendants continued to misrepresent Movado’s
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`prospects and financial condition, updating Mr. Kulak on the status of agreements
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`and projects with various clients and investors that did not, in fact, exist.
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`38.
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`In reality, Defendants were burning through the funding from their prior
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`investment rounds at an alarming rate. Indeed, upon information and belief (and
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`unbeknownst to Plaintiff), Defendants had spent almost all of the funding previously
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`raised on employee salaries, rather than research and development or other
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`expenditures that would help Movado succeed.
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`C. Defendants Continue to Falsely Represent the Company’s
`Condition and Attempt to Solicit Additional Funding
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`39. Upon information and belief, by fall 2021, Movado was desperately in
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`need of cash. As such, in late September 2021, Defendants announced a new round
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`of funding, and asked Movado’s current investors, including Mr. Kulak, to solicit
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`interest from other individuals.
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`40. As part of Defendants’ aggressive campaign to convince Mr. Kulak to
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`bring another investor in to fund $500,000 to Movado, Mr. On falsely represented
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`that Movado had obtained substantial funding commitments from other private
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`investors. For example, on September 26, 2021, Mr. On informed Mr. Kulak that a
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`private angel investor, David Lee, would be extending a convertible loan agreement
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`to Movado. Likewise, on October 1, 2021, Mr. On represented that a private
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`individual and well-known orthopedic surgeon was wiring $135,000 to Movado
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`“now,” and would be investing an additional $270,000 later, “with others.” And on
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`October 6, 2021, Mr. On represented to Mr. Kulak that he had secured “$1-1.6MM
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`from other private angels.” Upon information and belief, none of these investments
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`actually occurred.
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`41. On October 6, 2021, Mr. On also represented to Mr. Kulak that Movado
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`would be imminently signing agreements with certain doctor and hospital networks,
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`including SELECT Medical and Northside Hospital, and that it would be entering a
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`reselling agreement with Giddy, which Mr. On represented had certain exclusive
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`contracts with the U.S. Department of Veteran Affairs. As with Movado’s other
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`purported “clients,” these agreements never materialized.
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`42. Around this time, however, Mr. Kulak began to suspect that Defendants
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`had been misrepresenting Movado’s financial condition and customer base.
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`43.
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`In particular, in early December 2021, another investor in Movado sent
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`Mr. On an e-mail updating Mr. On concerning his discussions with potential
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`investors, and requested certain basic information that he could share with these
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`prospects. This information included Movado’s most recent balance sheet, the
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`company’s organizational structure, and a statement concerning how past
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`investments had been used and how this next round of funding would be used.
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`44. Mr. On’s response raised numerous red flags. For example, Mr. On
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`flatly refused to provide the Company’s balance sheet to this investor, and continued
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`to reject further requests for these financials, claiming that he had no obligation to
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`provide this information.
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`45. Mr. On also offered only vague and ambiguous statements concerning
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`how the money being raised had been, and would be, used at the Company. Indeed,
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`for the first time since Mr. Kulak invested, Mr. On revealed that all of the funds
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`raised thus far were being spent on “R&D salaries and cloud expenses.”
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`46. Mr. On also made confusing and conflicting statements about how the
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`Company was structured, who was running the Company, and the identity of the
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`Company’s shareholders and their respective holdings.
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`47. Mr. On also disclosed that Movado had a “Service Provider
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`Agreement” with an Israeli company, Movado PT Technologies Ltd. (“Movado
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`Israel”), which charged Movado a monthly fee for undisclosed services. However,
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`he declined further requests to disclose the terms of this arrangement, as well as his
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`involvement, if any, with Movado Israel.
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`48. Ultimately, Mr. On’s confusing, contradictory, and obstructive
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`exchanges with this investor raised significant concerns for Mr. Kulak.
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`D. Mr. Kulak Learns the Truth about Movado’s Purported
`Technology
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`49. Following these troubling communications, Mr. Kulak began to
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`consider alternative means to salvage his investment. This included, among other
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`ideas, purchasing Movado’s intellectual property.
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`50. On or around March 7, 2022, Mr. On sent an e-mail to investors,
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`including Plaintiff, stating that Defendants had decided to shut down Movado. He
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`further noted that Movado was looking to sell the Company’s intellectual property,
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`and asked interested parties to contact him.
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`51. Following this e-mail, Fizio Health Inc. (“Fizio Health”) – at which Mr.
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`Kulak serves on the Board of Directors – began conducting diligence on Movado’s
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`intellectual property in connection with a potential asset purchase. Fizio Health
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`never signed any confidentiality or non-disclosure agreement or any other binding
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`commercial agreement with Movado.
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`52. As part of that diligence, Mr. Kulak learned a shocking truth: Movado
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`did not possess the capability to monitor repetitive motions, it did not possess and
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`utilize AI to analyze and annotate user workouts, and it had not developed the 3D
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`technology that Defendants had repeatedly touted to Mr. Kulak. In other words, the
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`Movado mobile phone application had none of the unique and critical monitoring
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`and treatment functionality that Defendants had repeatedly touted to Mr. Kulak and
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`the Company’s other investors.
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`53. Mr. Kulak also learned the truth about the purported “case study”
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`conducted in Israel – a case study which, contrary to ongoing representations by
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`Defendants, involved no technology whatsoever, but was instead conducted by live
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`physical therapists using paper assessments.
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`54. Upon learning that Movado’s purported intellectual property either did
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`not exist or was effectively worthless, and that Movado had no commercially viable
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`technology or trade secrets, Fizio Health ceased negotiations with Defendants. Mr.
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`Kulak, in turn, requested the immediate return of his $250,000 investment.
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`55. Mr. On refused Mr. Kulak’s request, and instead sent numerous e-mails
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`to Mr. Kulak and other Movado investors disparaging Mr. Kulak and threatening
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`litigation.
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`56. Shortly thereafter, on October 6, 2022, Mr. On e-mailed Movado’s
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`lenders, including Mr. Kulak, advising them that he was shutting down the
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`Company, leaving Movado with approximately $1.9 million in debt.
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`57. That same day, Mr. Kulak’s counsel sent Defendants a letter describing
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`the misrepresentations and falsehoods alleged herein, and demanding, pursuant to 8
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`Del. C. § 220, copies of certain of the Company’s books and records including
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`financial statements, general ledgers, and any documents relating to the use of the
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`Company’s capital and the payment of executive salaries.
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`58. Defendants did not respond to Mr. Kulak. Instead, shortly thereafter,
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`Mr. On sent an unsolicited e-mail to Mr. Kulak’s employer, G Squared, referencing
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`the letter sent by Mr. Kulak’s counsel and making disparaging remarks about Mr.
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`Kulak.
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`DERIVATIVE ALLEGATIONS
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`59.
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`In addition to his direct claims, Mr. Kulak brings this action
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`derivatively for the benefit of Movado to redress injuries suffered by Movado as a
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`direct result of the breaches of fiduciary duty by Mr. and Ms. On.
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`4860-6893-1912, v. 1
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`60. Mr. Kulak has been a shareholder of Movado since November 30, 2020,
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`throughout the course of wrongful conduct by the Defendants alleged herein.
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`61. Mr. Kulak will adequately and fairly represent the interests of Movado
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`and its stockholders in enforcing and prosecuting its rights and has retained counsel
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`competent and experienced in derivative litigation.
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`DEMAND FUTILITY
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`62. Plaintiff has not demanded that the Board of Movado bring this action,
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`because, upon information and belief, Mr. On is the Chairman of the Board and the
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`sole director of Movado.
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`63. The allegations in the Complaint are all related to fraudulent
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`misrepresentations and omissions made by Mr. On and his sister, Ms. On. Both Mr.
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`and Ms. On face a substantial likelihood of liability arising from their misconduct
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`and are, therefore, deemed interested and unable to make an impartial decision
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`regarding demand.
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`64.
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` Thus, upon information and belief, such demand is excused as futile
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`given that Mr. On is incapable of making an impartial decision regarding this
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`litigation given that all counts challenge the actions of Mr. and Ms. On.
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`CAUSES OF ACTION
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`COUNT I: FRAUDULENT INDUCEMENT
`By Plaintiff Individually Against Defendants Itshak On and Keren-Or On
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`65. Plaintiff incorporates paragraphs 1-64 as if fully set forth herein.
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`4860-6893-1912, v. 1
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`66. Prior to Plaintiff’s investments in Movado and continuing thereafter,
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`Defendants Itshak On and Keren Or-On made numerous misrepresentations and
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`omissions to Plaintiff, including:
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`a.
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`Fraudulently misrepresenting that Movado possessed 3D
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`technology, that it was capable of counting repetitive movements, and
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`that its technology had been assessed in an Israeli case study;
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`b.
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`Fraudulently misrepresenting material facts concerning
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`Movado’s financial health and prospects, including by fraudulently
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`misrepresenting the Company’s agreements with purported customers;
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`c.
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`Fraudulently misrepresenting the status of investments in
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`Movado by other investors; and
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`d.
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`Failing to disclose the existence of material pending litigation
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`against Defendants and the Company in Israel.
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`67. The representations and omissions detailed above and more fully herein
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`by Defendants were false, Defendants knew said representations were false when
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`they made them, and Defendants made said representations with the intent of
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`inducing Plaintiff to enter into the Loan Agreements and invest $250,000 in the
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`Company.
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`68.
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`In making the decision to enter into the Loan Agreements, Plaintiff
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`relied upon the representations and omissions of Defendants described above.
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`4860-6893-1912, v. 1
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`69. Plaintiff was unaware of
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`the falsity of
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`the aforementioned
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`representations at the time they were made and reasonably, foreseeably, and
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`justifiably relied on Defendants’ statements. Had Plaintiff known of the falsity of
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`Defendants’ misrepresentations, as well as the existence of the lawsuit against
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`Defendants and the Company, Plaintiff would not have invested in Movado.
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`70. As a direct and proximate result of said reliance by Plaintiff on the false
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`representations and omissions by Defendants, Plaintiff suffered damages including,
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`but not limited to, special damages and general damages in an amount according to
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`proof with appropriate interest thereon.
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`COUNT II: BREACH OF FIDUCIARY DUTIES
`By Plaintiff Derivatively Against Defendants Itshak On and Keren-Or On
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`71. Plaintiff incorporates paragraphs 1-70 as if fully set forth herein.
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`72. Defendants Itshak On and Keren-Or On served as Chairman of the
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`Board of Movado and Movado’s Co-Chief Executive Officer, respectively, and
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`therefore owe fiduciary duties to Movado of good faith, due care, and loyalty. Mr.
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`and Ms. On also owed fiduciary duties as controlling shareholders in the Company.
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`73. Defendants breached their fiduciary duties of good faith, due care, and
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`loyalty to the Company and its shareholders by the following actions, among others:
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`a.
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`Deliberately, knowingly, and intentionally misrepresenting
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`Movado’s technological capabilities in direct communications with
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`investors and shareholders;
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`4860-6893-1912, v. 1
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`b.
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`Deliberately, knowingly, and intentionally misinforming
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`Movado’s shareholders about the business of the Company in direct
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`communications with shareholders, including with respect to
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`Movado’s financial health, current and prospective business, and
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`existing and future clients;
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`c.
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`Failing to disclose the existence of material pending litigation
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`against Defendants and the Company in Israel;
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`d.
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`Elevating personal or outside interests of the interest of
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`Movado’s shareholders, including by engaging in undisclosed self-
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`dealing with an affiliate company, Movado Israel; and
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`e.
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`Acting with a purpose other than that of advancing the best
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`interests of the Company.
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`74. As a direct result of Defendants’ breach of their fiduciary duties,
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`Movado and its shareholders have been damaged in an amount to be determined at
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`trial. Plaintiff lacks adequate information to fully assess the damage because
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`Defendants have refused to provide him and other investors with up-to-date and
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`accurate financial and business information for Movado.
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`75. Defendants’ deliberate misrepresentations, omissions, and other
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`misconduct was fraudulent, malicious, oppressive, and done in reckless and
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`conscious disregard of the rights and interests of Movado and its shareholders,
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`4860-6893-1912, v. 1
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`constituting despicable conduct. Accordingly, Movado and its shareholders are
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`entitled to punitive damages.
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`4860-6893-1912, v. 1
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`PRAYER FOR RELIEF
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`Wherefore, Plaintiff respectfully prays for judgment as follows:
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`a. Money damages to compensate Plaintiff for his losses, including
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`the amount of Plaintiff’s total investment in Movado;
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`b.
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`Judgment in favor of Movado with respect to the claims of
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`breach of fiduciary duty;
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`c.
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`An award of costs and disbursements of this action, including
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`reasonable attorneys’ and experts’ fees, costs, and expenses;
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`Interest at the maximum rate provided by law; and
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`Such other and further relief as this Court deems just and proper.
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`d.
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`e.
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`OF COUNSEL:
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`SEWARD & KISSEL LLP
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`Jack Yoskowitz
`Laura E. Miller
`One Battery Park Plaza
`New York, New York 10004
`(202) 574-1200
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`Dated: January 6, 2023
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` PRICKETT, JONES & ELLIOTT, P.A.
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`By: /s/ J. Clayton Athey
`J. Clayton Athey (#4378)
`Seth T. Ford (#7051)
`1310 N. King Street
`Wilmington, Delaware 19801
`(302) 888-6500
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`Attorneys for Plaintiff
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`4860-6893-1912, v. 1
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`23
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