Recently, Damon Inc., aka Damon Motorcycles, released its 10-K filings, which are meant to provide investors and others with an overview and outlook of the company's business dealings. For the most part, only weirdo financiers look at these things, as they're slogs to get through and filled with boring business jargon that doesn't matter to enthusiasts and the general public. But this being Damon, a company with a history of being the messiest of messes around, I couldn't not take a look.
And one particular passage caught my eye.
In the Challenges and Risk section of the 10-K report, there's a heading labeled as "Legal Risks," to which it stated that "The company is involved in legal proceedings, including claims brought by former executives, which could materially harm its business, financial condition, operating results, and cash flows." This, however, is the first I'd heard about any sort of lawsuits leveled at the company, and the term "former executives" had my interest piqued.
With a quick search, RideApart found a host of lawsuits brought to bear on Damon, and one of the more interesting ones was the lawsuit brought by a financier named Andy DeFrancesco. And folks, there's some interesting history between Damon and DeFrancesco, and far more intrigue going on in the Damon hemisphere.
And again, supposedly the company still has reservation holders for its ever-forthcoming all-electric motorcycle lineup. Something the company recently stated that it was going back to the drawing board for.
First off, here's why DeFrancesco has filed litigation against Damon. According to StockWatch, the suit is tied to “over $3.2-million worth of stock. Mr. DeFrancesco claims that Damon was supposed to issue him the shares as compensation for services. Despite repeated demands, the company has refused to issue the stock, Mr. DeFrancesco claims."
Basically, DeFrancesco claims that he rendered services to Damon, which he states were "advising on financing and other operational aspects", and the company was supposed to then give him $1.6 million worth of stock, as well as another $1.6 million to his company, DeFrancesco Motor Sport. But Damon never did, which is why he wants that money. The lawsuit was filed on April 11 in Vancouver and the case is ongoing.
But Damon and DeFrancesco have a long relationship, one that hasn't really been made public knowledge save for a few outings between the two.
Now, I originally included a whole section about Damon and DeFrancesco's relationship in my original reporting on the company's goings on. But it was subsequently cut after the company fired its CEO and Founder, Jay Giraud, lost its CTO, Derek Dorresteyn, let go its CMO, Amber Spencer (who is also Giraud's fiancée), and nearly went bankrupt before bringing back its co-founder, Dominique Kwong, to fill the vacant CEO spot. Honestly, there just wasn't enough room to fit it all, and it was merely an aside to the overall story of the business. But since this lawsuit came to life, here's the story on DeFrancesco and Damon, and the intriguing intermingling of the two.
Though Damon received a host of investments throughout its life from multiple sources, including personal, VC, and others, one particular investment of note came from House of Lithium. The name sounds like a nondescript EV investment fund, but it was actually part of Andrew DeFrancesco’s SOL Global Investment Corp’s empire.
According to Crunchbase, SOL Global, along with Benevolent Global and Zirmania Investments, first dropped $18.2 million in convertible notes in 2021. Then, later that year, House of Lithium put in $37.9 million into the company through a Series B funding drive.
For those unfamiliar with DeFrancesco, he’s an investor who made his name in pushing investment deals in the marijuana business in both the U.S. and Canada. But DeFrancesco has routinely found himself in a rather precarious limelight with two investment firms alleging double-dealing between DeFrancesco’s real estate holdings, as well as his marijuana companies, and more recently, with the U.S. SEC.
Though DeFrancesco resigned from SOL Global in 2022, he remains a principal investor, and only last year, he saw a $3 million fine levied against him by the SEC.
“On July 5, 2023, the U.S. District Court for the Southern District of New York entered a final judgment on consent against Andrew DeFrancesco, the former Chairman of Cool Holdings, Inc.,” says the SEC filing, adding, “For his role in a scheme involving false statements and omissions of material information in filings with the Commission, as well as a fraudulent pump-and-dump of Cool Holdings' stock.”
The filing went on, stating, “The final judgment ordered him to pay disgorgement and prejudgment interest in the amount of $1,276,070.49, and a civil penalty of $1,737,224.52. Andrew DeFrancesco was also barred from serving as an officer or director of a public company.” The judgment, however, also includes that DeFrancesco won’t have to admit to any wrongdoing. But again, he can't serve on any board as an executive or director due to the findings by the SEC.
DeFrancesco's relationship with Damon went much further, though.
You see, DeFrancesco’s son, Devlin, raced in IndyCar, where Damon was Devlin's team’s chief sponsor for a period. Title sponsor liveries, though, aren’t cheap. Yet, Damon's Jay Giraud is quoted in the release of becoming Devlin's title sponsor. “Devlin shares the bold and unstoppable fighting spirit we have infused into our motorcycles and it’s an honor to back him as he represents a new generation of high-performance race car drivers,” said Giraud in the 2022 press release, adding, “We’re proud to have our name on the No. 29 car.”
Devlin, however, left IndyCar in 2023, but has since returned this year with Rahal Letterman Lanigan Racing after losing his seat at Andretti Steinbrenner Racing.
As for what comes next, that's unclear. Multiple lawsuits are being leveled at Damon Inc., but DeFrancesco's is one of the bigger ones of the bunch. There's also one about back rent, and one from founder Jay Giraud that we'll get into in a future story. But given the precariousness of the business before these lawsuits were filed, including recently announcing that the company was down to just 13 employees—two of which are contractors—from a height of around 100, a non-existent manufacturing facility, and millions in debt, things aren't looking great at Damon.
We reached out to Damon Inc. for comment on the proceedings, but have yet to hear back at the time of publishing. We’ll update this post, as well as our other coverage on these lawsuits, if and when we hear back.
