Exhibit 2

Unofficial Copy Office of marilyn Burgess District Clerl

Hearing January 16, 2024

REPORTER'S RECORD VOLUME 1 OF 1 VOLUMES TRIAL COURT CAUSE NO. 2024-48085

ATLANTIC WAVE HOLDINGS, ) IN THE DISTRICT COURT

LLC AND SECURE COMMUNITY,

LLC

) )

) ) HARRIS COUNTY, TEXAS

CYBERLUX CORPORATION AND )

) 7

MARK D. ) 8 SCHMIDT, INDIVIDUALLY ) 129TH JUDICIAL DISTRICT

On the 16TH day Of January, 2025, the following proceedings came on to be held in the above-titled and numbered cause before the Honorable Michael Gomez, Judge Presiding, held in Houston, Harris Counter Texas.

Proceedings reported by computerized stenotype

machine.

Unofficial Copy office of Martyn Burgess District Clerk

Hearing January 16, 2024

APPEARANCES

Mr. Travis Vargas

Unofficial Copy Office of Marilyn Burgess District Clerk

Hearing January 16, 2024

THE COURT: Court's on the record, Cause No. 2024-48085, Atlantic Wave Holdings, LLC versus Cyberlux.

Will everyone, please, introduce

MR. GRADY: Good afternoon, Your Honor.

MR. PENNETTI: Alex Pennetti for Cyberlux and Mark Schmidt.

MS. CLARK: Katharine Clark on behalf of Cyberlux and Mark Schmidt.

THE COURT : how can I help you today? MR. VARGO: Well, I believe there's a couple matters that are set for today. One is an

application of appointment of post-judgment receiver under Texas C.P. R.C. 31.002, the turnover statute. And the other one is a request for access to the premises.

unofficial Copy Office of Marilyn Burgess District.Clerk

In this case there's a written motion. There's also ample evidence inside the docket that would support the appointment of a receiver. The -- to the extent that it's deficient, we would also ask for access to a premises. Because in the debtor's response, they're saying, Well, there's no evidence attached to

Hearing January 16, 2024

Well, so we said, Okay. Well, let's go look at the premises. And then there's obviously opposition to that, as well.

So I think what the Court is going to find is that it falls within the purviews of the -- I Chink it's the Klinek case that's the Fourteenth Court of Appeals and its progeny, which really stands for the proposition that when a judgment debtor starts to put up roadblocks and hurdles to gain the information that could be attached to an application to appoint receiver, the equities of justice militate toward the appointment of a receiver.

Because you can't, on one hand, block someone from obtaining evidence for their application and then, on the other hand, file a response that says they have none.

this instance, Judge, we have supplemented to the docket their quarterly filings, which establish and show that they have an interest in the subsidiary, at least one. We have a witness that's on Zoom that is present to authenticate it, if the Court would indulge us and to the extent that you prefer not to rely on the Klinek case.

And in addition to that, we would

establish that their discovery responses are nil. We

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sent out post-judgment discovery, and we got objections and a Motion for a Protective Order to some of the discovery. That is not an excuse to provide us responses to the remainder of the discovery.

If someone -- if someone propounds 30

requests and you have objections to 22 of them, you would still have an obligation to respond to the remaining, you know, 18 or 28, whatever the math comes to there -- 28. And in this instance That was not done.

Yet, they're here resisting a receiver; 11 and we would submit that the application should be granted.

MS. CLARK: Your Honor, Katharine Clark on behalf of Cyberlux Corporation.

We dispute the statements that are in the papers before the court today, in particular that go to the heart of the matters with respect to the motion to enter property and with respect to the receiver. But I'd like to talk about the discovery first, because from our prospective, that's a watershed issue here.

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We -- it is true, the parties are in a dispute with respect to discovery, primarily because Cyberlux is a business that has contracts that involve the United States Government, the Department of Justice, and military operations in the Ukraine conflict. And so

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there's very sensitive information that the plaintiffs'

And so we have a Motion for Protective Order before the Court that is -- speaks directly to our concern. Because the parties, try as we may, have not been able to get to an agreement about what axprotective order might look like in this case.

We also, as part of that Motion for Protective Order, have disputed the scope of this discovery because it is not post-judgment. It is almost exactly the duplicate of the discovery that's pending in the active litigation matters in Virginia.

But in an effort to try to resolve discovery and make progress, we've been willing to set aside those issues with respect to scope and proceed with discovery as long as we can get some form of protective order that is relatively fulsome, Your Honor. What we proposed is essentially the form from the federal district court here in the Southern District of Texas And we just have not been able to get to an agreement.

And so from our perspective, if we can get to a resolution on the motions that are already fully briefed before Your Honor and are on submission to Your Honor, then we can have discovery proceed in

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earnest. And so that's our position with respect to

With respect to the merits of these motions --

THE COURT: So on discovery, there really no objection post -- vis-a-vis post-judgment, right? You can't make objections as long as it relates to post-judgment collection efforts, right?

So to the degree that doing merits on something else, I can see how that might be an issue. But if it's related to what do you own, the things that I would assume that they're interested in, there really is no objection that you can make, right?

So either you turn it over, or you don't. And if you don't turn it over, then it's a problem. So you can't hide your assets. To the degree that you're hiding what you own, what you have, then it's a problem because then it justifies the appointment -- well, I don't think there's any problem with an appointment of receiver.

I think the concern is on a Motion for Turnover, right. And there is some case law that makes -- that's problematic, right, in terms of turnover orders and specificity and those things -- things of that nature.

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But that being said, I do agree with the concept that, Look, if you're not telling us what you have and you're hiding your assets, then that

specificity requirement can't be met; and you can't

So it weighs against the denial of a Motion for Turnover.

So that's just sort of so I agree with those sort of guiding principles. to the -- if the

issue is, Look, we're not willing to turn over because we're concerned about them giving it to third parties, I don't have a problem with that conceptually. I don't know what the problem is on a protective order.

What's your issue?

MR GRADY: Your Honor, I can speak to this.

They did submit a protective order from the Southern District. It has an attorney's eyes only provision on there. And, you know, we don't -- I don't understand this business, and I need -- my client needs to see the documents, simple as that. But we have

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MR. GRADY: They need to see the documents from, you know, their production, you know, to see -- to make sense of it and to make decisions.

THE COURT: Why, from a collection

standpoint?

MR. GRADY: Well, for settlement purposes, I think, mainly; but, also, I think --

THE COURT: I need to understand, like -- so I understand if we're -- again, if we're just talking about your typical post-judgment discovery, which is, you know, your financial statements, your bank accounts, your stuff, then why would your client need to see that?

MR. GRADY: Well, to evaluate -- THE COURT. I mean, those actual documents.

MR. GRADY: Well, I think to evaluate the financial condation to determine the -- you know, the value --

THE COURT: What's -- I mean, again -- MR. GRADY: You're telling me they don't. THE COURT: I don't know why they need to see those specific documents.

Unofficial Copy Office of Martyn Burgess District Clerk

MR. GRADY: Right. THE COURT: If they have ten gold coins, why does your client need to see the document that says

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mean, financial statements, yes.

MR. VARGO: Judge, in this instance this is a business that frankly we're lawyers and that we don't know and our clients are engaged in a similar industry. Giving client access to the documents would provide -- at this point, in the absence of a receiver, would provide --

THE COURT: Understood. Look, so I don't have a problem with a receiver.

MR. VARGO: Yeah. THE COURT: So I think you can get a

THE COURT: So the issue is turnover,

VARGO: Okay. 18 19 right?

MR. VARGO: Certainly.

THE COURT: So the issue is -- you know, 21 22 and I know -- I know they're kind of two peas in a pod. And the turnover order is the order that they turn over nonexempt assets, right?

MR. VARGO: Correct.

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THE COURT: And generally -- the order doesn't have to be specific, but the basis for the order -- there's case law that says, You need to tell us what those nonexempt assets are before you get that

MR. VARGO: Then the exceptions.

THE COURT: And then the exception. And I 10

judgment debtor is hiding from you, won't respond to discovery, then how the heck are you supposed to know,

right? So how are the heck are you supposed to identify specific assets? hey're obviously hiding something.

So that gives the -- that lends -- that provides at least the legal basis to sort of relax that requirement of specificity. And I may not be

elaborating the -- I may not be explaining the actual legal threshold because I don't have the case in front of me, but I think both sides are probably familiar with 22 it. 23

So I don't -- we don't need to spin our wheels. Like, they just need to tell you what they have. If they're not going to tell you what they have,

I'll enter a turnover order; and you can go fight at the Court of Appeals or mandamus. But I anticipate it's -- this is common sense. This is not hard.

So if they won't turn over the stuff because you won't give them a protective order, them a protective order. If they're saying everything is attorney's eyes only, we can come back and figure those things out.

But if you're just -- again, if you need to show it to your receiver, who I assume is someone who has some sort of financial accounting or expertise, then they probably have what they need. If there's something specific that you need to know or see, then -- I just don't see where your client really needs to get

involved, right?

I can understand from a liability perspective, right, understanding causation, what kind of business they're in, that kind of thing. But I don't see why they need to see those documents.

MR. VARGO: With a receiver, the receiver

can n go collect the judgment; and I believe that we agree with you insofar as we wouldn't need to see the documents because the receiver as a neutral can handle those items.

Without a receiver, our client is in a

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position to assist us in figuring out how to target assets to use to satisfy the judgment. So that's why we would need to give our client access to documents without a receiver.

But if the Court is inclined to grant the turnover receiver, then clearly we don't needto -- our client doesn't need to see documents. It

alleviate all the concerns.

MS. CLARK: Yeah, I just need to understand -- I'd like to make at least a more specific record. Because from where I sit, I think we sit in -- we're of the same mind, that if we can get a protective order, it breaks the law fam. We can go forward with discovery.

We've had deposition dates scheduled saying, Let's just get a protective order. We'll have these depositions. We didn't get agreement on protective order. Depositions didn't proceed.

So we're not resisting discovery for the sake of resisting, Your Honor. We want to have this discovery. We want to let this proceed with respect to post-judgment collection. And that's why we brought the motions before the Court, to try to break the law jam.

So if we can get past that today,

Hearing January 16, 2024

opportunity to let them get this discovery; and if that doesn't provide them the information that they need with respect to the turnover, et cetera, then we can come back. Their Motion for Turnover then becomes properly supported.

But before today, and very different from the Klinek case, Your Honor, we have not been so resistent and obstreperous to this Court that we should be sanctioned, essentially, with a receiver being appointed.

THE COURT: Well, I don't want to conflate two things. A receiver is different from a turnover order. I understand that that prevents -- so I can appoint a receiver; and then we get to custodia legis, right? Everything becomes property of the Court. So you -- you're basically -- that's what I want to get to.

we get that. You don't have to turn anything over right now. They can identify the assets. The receiver can come back, file a Motion for Turnover. You own 20 planes. Turn those over, right? You can identify those specific assets.

But I can appoint a receiver. The Court always has the option to appoint a receiver. The concern is and where the law is -- where there are potential issues is the turnover. And there are

specific statutes that deal with that, and there's specific interpretations of those statutes that talk about the turnover of specific nonexempt assets.

And before the Court orders that those nonexempt assets be turned over, generally there has to be some sort of showing, assuming that it's contested in this case, right? And so I don't mind appointing a receiver. Now, I don't know -- I mean, it will be limited in terms of its powers; but they can get -- they 9

basically take this case from you, {the post-judgment case from you; and they'll be handling going forward.

But they're -- you know, they're

generally -- they'll set the depositions. They'll start doing post-judgment discovery, and then they'll be imbued with certain powers. But I won't order the turnover of certain assets at this point, if you want that.

MR. VARGO: What assets would you turn over if they weren't identified and if there's not a -- I'm a little lost. If you could maybe phrase it differently, so I could at least educate -- counsel with client on this.

THE COURT: Well, have you spoken to a

receiver?

MR. VARGO: I'm sorry?

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THE COURT: Have you spoken with your

MR. VARGO: I have not posed that

question. I posed, Are you willing to serve ?!

He was thinking, like most receivers -- I do receivership work, as well. So I'mvery familiar with it. You call somebody and says, Do you want a Chapter 31 turnover receivership Man Cause No. X? What's the dollar amount?

t's seven figures.

Absolutely.

That was the conversation.

THE COURT: So I just need to know with that guidance what you want to do. Do you want to get the discovery? Do you want a receiver? You want both? I'm not going to give you a turnover today, if they're willing to provide discovery subject to a protective 21 order. 22 23 24 25

MR. VARGO: So even practicing in this area, I'm not familiar with what you're referring to about getting a receiver but not a turnover. THE COURT: Typically, they're hand in

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hand; but I can give you everything but the turnover at this point of the nonexempt assets. So I can appoint a receiver to whatever it is that you want to do. Let's see.

So under 31.002, the Court may, one order the judgment debtor to turn over nonexempt property, right? That's one thing I can order.

MR. VARGO: Uh-huh.

THE COURT: Two, apply the property to the satisfaction of the judgment. That's another thing I

can order. Or, three, appoint a receiver to the

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authority to take possession nonexempt property, sell it, and pay the proceeds to the judgment creditor to the extent required to satisfy the judgment, right?

So I do those three things or, right? So I can do a turnover order, I can apply property satisfying the judgment, or I can appoint a receiver. Usually you appoint a receiver and a turnover order.

MR. GRADY: So a receiver would not be able to levy bank accounts, for example? Or would they, in this order that you're --

THE COURT: I can't order the turnover -- so under -- I don't know. What year is this?

So under -- MR. VARGO: The statute hasn't changed

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since 2017, that I'm aware of. So it should be the same one.

THE COURT: Under (h), a court may enter or enforce an order under this section requires a turnover of nonexempt property without identifying in the order the specific properties subject to turnover, right? So I don't have to identify the specific property; but in order to get the turnover order, you generally have to identify the specific property, right?

That's generally how the courts of appeals have addressed it. So you generally have an affidavit that said they have these nonexempt property that are subject to turnover, and so I want an order -- a turnover that says they have to turn it over, right?

And soI guess what I -- I think the benefit -- what I think you can and generally I'm -- you know what, why don't we do it this way. Why don't you talk to your receiver and see what he wants to do and then figure out if he wants to be appointed receiver, but I don't grant a turnover.

MR. VARGO: I think his question at that point is going to be, Well, then what am I doing; and how am I compensated?

MR. GRADY: Can we pay him hourly? Could

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just thinking about the practical aspect of payment for

discovery -- but maybe we can pay them hourly to do that if that -- you know, there's no rule against that. But

we need some financial compensation. But I think it does solve the discovery probably totally.

MR. VARGO: Well, we wouldn't be paying anybody by the hour, because the judgment debtors would be paying them.

MR. GRADY: True.

THE COURT: Right.

Unofficial Copy Office of Marilyn Burgess District Clark

MS. CLARK: Your Honor, if I may, I just want to talk -- cite to a case that -- I think that the Section 31.002 (a), which is the preliminary subsection of this statute that we're all talking about today, it's the preliminary requirement to (b) and (c) and all that come next.

And that requires that there be a showing that there are nonexempt assets that can be levied. And so I think that getting a receiver in this instance puts the cart before the horse. I mean, we can have -- THE COURT: It says "or."

MS. CLARK: Excuse me?

THE COURT: It says "or."

MS. CLARK: In part (b), it does,

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as to 31.002 (h), that just because of the way that the

statute is written, it does not eliminate the

fundamental preliminary requirement that the conditions of subsection 31.002 (a) must first exist.

And that is an opinion out of the Houston First District Court of Appeals in 2008.

MR. VARGO: And the exception to that is Your Honor already stated with the Klinek case. And I can give you the citation fo purposes of the court reporter is going to be hold on. Hold on.

THE COURT. Have you identified any nonexempt property? MROVARGO: We are prepared to with our witness, and it's on the docket. So --

THE COURT: I mean, you just have to give me something.

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MR. VARGO: Sure. THE COURT: And the turnover would be limited to whatever that thing is. But you get your receiver.

MR. VARGO: It's -- THE COURT: I mean, it's -- I mean, you

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just got to tell me one thing.

MR. VARGO: Sure. It's going to be the

21, 450-square-foot facility with lease with one and a quarter years remaining.

THE COURT: So what are you seeking?

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THE COURT: I mean, no, what kind of -- MR. GRADY: Yeah, it's an LLC, I believe, Your Honor. Actually, I don't know that for sure. Your Honor, this is a -- Plaintiffs' Exhibit 2 is an operating report of Cyberlux, which is a corporation. And as a corporation, it discloses its

Hearing January 16, 2024

And so that is evidence -- some evidence, more than a scintilla, that there is nonexempt property. And so the income alone -- but they also disclose that facility that's manufacturing drones, I presume, in Spring, Texas.

And what page was that?

MR. VARGO: 28 of the PDF.

MR. GRADY : Page 28 18?

MR. GRADY : PDF 28.

MR. VARGO: s on the Court's docket. It was attached to the original petition to enforce foreign judgment. it was authenticated there.

MR GRADY: The report, the quarterly report is not

MR. VARGO:

No, no.

Yeah, plaintiff would like to offer that today, Your Honor. We intend to offer that through our witness.

MS. CLARK: Are you offering it now or -- MR. VARGO: Well, we need to call our witness and -- if we may, Your Honor.

MS. CLARK: We have significant objections

to that as evidence, Your Honor. It's a consolidated statement on its face. The parties who created that are not here, Your Honor. It's not a sworn document. It can't be authenticated. It's not self-authenticating. It's hearsay within hearsay. It's based on multiple reports, again, on its face. It was prepared for a different purpose.

If what we're talking about is admitting that evidence just to show that we have a leased facility in Spring, Texas, Your Honor, at the address described, we can stipulate to that. And I can stipulate to it from my own personal knowledge. I personally prepared the amended lease for Cyberlux and Catalyst related to that space.

THE COURT: And what do you have there?

declaration by our client, Your Honor, that demonstrates that what's in their warehouse -- it's a big warehouse 19 facility O You know, they're noncontiguous; but there's 20 waren two warehouse units, wherein drones that have been manufactured are stored. 21 22 23 24 25

And those drones are property of the United States Government. They have been prepared pursuant to a government contract, and there is an inventory of those items. And, again, Your Honor, we

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are willing to have them come on property and look at all these things; but we can't have that done without notification to our landlord, the owner of our building, and the U. S. Government or our contract counterparty.

So we'll stipulate that that is our building in terms of pursuant to a lease and that there are items inside that building, but it's our position that that property cannot be levied. It can't be executed upon. It cannot be taken, because it's not our property. So that is our positiong and we've been very clear about that, Your Honor, before today.

MR. VARGO: So given the stipulation, we move to appoint receiver She just testified and

stipulated to the asset It's the leased premises. A lease is an asset.

MS CLARK : I don't see how a lease is something that can be -- you know, you can go and levy against it; but for whatever it's worth, I mean, I -- it is what it is, Your Honor. I just -- I don't think that's what we're -- this is not productive in terms of getting to an endpoint to the case, and so -- but yeah, it's -- again, it's --

THE COURT: So -- hold on. We'll go off the record for a second.

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(Discussion held off the record)

Hearing January 16, 2024

THE COURT: The Court is back on the

So I've been tendered a copy of Plaintiffs' first set of requests for admissions to

Did they respond to that, the RRAS?

MR. PENNETTI: Sorry, Your Honor?

THE COURT: I'm assuming they responded to

MR. PENNETTI: Judge we have a Motion for Protection pending. We asked for a hearing on that.

Mr. Grady didn't give us availability. Your first availability when I asked for the hearing was actually Monday of this week, and I never got a substantive response on that. then we engaged on a variety of

other motion --

COURT: So you haven't responded to the RFAs?

MR. PENNETTI: No.

And, again, Your Honor, as Ms. Clark pointed out, those are not standard post-judgment RFAS anyways. They're outside the scope. The scope of post-judgment discovery is relevant to the collection efforts. And most of those, as you'll see, are not.

MR. VARGO: Admit that Cyberlux has not

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been awarded any direct contracts to the U. S. Government, No. 8. So it sounds like an asset to me. Just need one of these to create an asset, and they didn't respond to any of them.

MS. CLARK: Respectfully, that wou create the absence of an asset. Yeah, these are not post-judgment.

THE COURT: So is there are you asserting that -- obviously, you mentioned that the drones located at the leased premises are property of the United States Government. The nature of these

there may be other concerns related to the United States Government.

MS. CLARK: There may have been with respect to the underlying litigation, Your Honor. That I'm not privy I was not involved in the Virginia litigation, which has restarted. There are four matters pending in Virginia.

Like I say, this discovery is exactly the discovery that's been propounded there. So I don't know what it suggests. I think you can -- I have some guesses when I read it; but I honestly don't know, Your Honor. I --

THE COURT: But some of these aren't

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problematic, right? I mean, if you're trying to figure out -- admit that Catalyst Machineworks is a

MS. CLARK: Right.

THE COURT: That's not a problem.

MS. CLARK: No, it's not. And it's in our -- that's in our disclosure. I mean, there's some of this stuff that they know; and we -- Your Honor, you're right, we should have responded to the things that were not objectionable and THE COURT: And to the degree that you're going to object, you should say, you know, it's merits based -- it's --

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MS. CLARK. Right. We put our objections within our motions for protection. But, again, we should have -- best practice would definitely have been to do a separate document, Your Honor. But we have been focused on trying to get them the deuces tecum and the depositions, and that's where our areas of focus have been in our conferences. But beyond that, Your Honor, I understand.

THE COURT: And I understand some -- part of it, too, is it may be dual purpose. I mean, some of these can potentially be used in other litigation, but that's not necessarily -- you talk about the Virginia

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litigation, and I'm not familiar with it.

But if you have -- if fraudulently transferred assets, right, and they want to know what

you own, when you transferred it --

MS. CLARK: Yeah. THE COURT: Misrepresentations that were

made regarding ownership or whatever, yeah, could -- that's not necessarily -- I mean, collection is a very broad umbrella, because then he could -- potentially a receiver, they could afile fraudulent transfer claim against somebody else that you may have

transferred assets to that they would need that they would be entitled to get discovery on those issues in post-judgment discovery because it's about what you owned --

MSCLARK: Right.

THE COURT: -- and how you may have

misrepresented what you owned or how it was transferred or -- so I don't know that that's necessarily a problem. I think -- so on -- let me see.

MS. CLARK: But to the extent that they are for this dual purpose, Your Honor, or with respect to the substantive operations, the day-to-day operations of the business, or anything else, that is why we asked for -- okay. If we're going to go full scope, not

really worry so much about what these questions ask but get them the answers, then that's why the protective order became the thing that was the most important.

And so, again, Your Honor, we've submitted that. We've briefed it. It's before Your Honor, Cand -- THE COURT: So produce the lastfive years tax returns, right, that's 2. Produce letters of intent, asset purchase agreements. Produce documents of sale of assets. Produce contracts. don't know why you would need security clearances

What's the issue with the security

clearances ?

MR. VARGO: udge, I was affiliated with this case a number of hours ago. So I couldn't tell you, but what I can tell you -- what I can tell you definitively, and more important than that, that's obviously a misnomer. I don't believe that that is probative for post-judgment discovery. It's not.

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MR. GRADY: Well, I have a -- there's a specific reason behind that one. They're claiming that these drones, the U. S. Government has an interest; but really they're just producing regular drones. They're not, like, special -- you know, there's nothing special about them. That's what I understand through my client. I don't have any personal knowledge of this.

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And so we want to say, Okay. You keep hiding behind this, you know, cloak of, like, Oh, this is all secretive and the government is involved, but we don't believe that to be the case at all. And so that's what the discovery request -- as I understand it, that's why it's there, to debunk what they're claiming, to protect themselves in post-judgment.

MR. VARGO: Where you were going earlier, I mean, this pretty much -- it opens and it shuts fairly quickly with RFA No. 7, Catalyst Machineworks is a wholly-owned subsidiary of Cyberlux Corporation. That's

what we need the receiver o Let's get to selling 13 it. 14 15 16 18 19 20

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What we haven't heard at this hearing today, and what I think Your Honor wants to hear is, There's a judgment. How are you going to pay it? And why shouldn't appoint a receiver today? There are no overtures that says, Here's the amount of money we're willing to pay today. We don't need a receiver because we have a plan to start paying you, and here's what we're going to do.

We're not hearing that. What we're really hearing is, Hold on. Let's mediate and talk about it later. And besides talking about it later, let's actually start to fight and re-litigate some sort of

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Virginia matter with all of the other stuff that has nothing to do with financials.

As I stated earlier when I used the hypothetical number of 50 requests and I said 22 of them were -- let's just call it, don't need to be responded to, they still could have responded to the 28, They are not telling us where their assets are.

We have an asset right here that's ready to be sold. We're not hearing, It's far sale. Okay? We're not hearing, Why don't we jointly go sell this together. You get your judgment payoff and pay us the balance.

We're not hearing any of that. That's what we should be hearing.

MS. CLARK: Well, Your Honor, as I've said, we have paid this judgment down, from our perspective, exactly in accordance with the settlement agreement. The parties had litigation. They settled the litigation. Part of the settlement said, Here's the total we agree to settle, and we will pay it out over time And we have done that. They don't agree. notice They didn't like the timing on the payments. And so they have commenced post-judgment discovery, collection efforts. They've garnished bank accounts, half a

Hearing January 16, 2024

million dollars worth. Maybe they've applied it to the judgment. We can't tell because they keep saying, Judgment is for a million, it's for 1.2, it's for 1.4. They keep changing how much is owed to them; but we have been making payments, Your Honor THE COURT: How much do they owe you?

MR. GRADY: Your Honor, my client witness

can testify to this and also about how they've been evasive in their payments and how theyve sold their receivables to a factory company,

Mr. Will Welters he's the managing director of Atlantic Wavethe plaintiff. He's on the 33 Zoom call; and he can testify directly to this, Your Honor, if we can present him.

MR(VARGO: Off the cuff, I think I remember reading it was 1.5, if I'm not confusing with another cas

MR. GRADY: Yeah, I think that is

THE COURT: 1.5 million?

MS. CLARK: There's a letter, Your Honor,

Hearing January 16, 2024

numbers in state court; but it was the last thing that they filed before their witness and exhibit lists.

And it's a letter from counsel, J. Chapman Petersen, Esquire. And in that, he talks about the actual amounts owed under the judgment as of October 31st, 2024. For some reason they bifurcate the amounts as between Atlantic Wave Holdings at $453, 859.17 and Strikepoint at $394,504.20.

And then there's a line Item for, quote, legal fees for $371, 307.60, even though the judgment

attorney's fees; and they're $177,126.19. And that amount, Your Honor, was paid within a month of the entry 4 of that judgment.

So they claim in total, in their filings before Your Honor that $1, 219, 671.97 is due under the judgment. That's what the letter says. And then in their motion,) with respect to turnover, they say that the respondents owe a balance in the amount of $1,430.551.30.

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So what is owed under the judgment? That is a question. It is changing what they say that they're owed, why they say they're owed it. And from our perspective, Your Honor, it is roughly $800, 000. I'd have to open my computer and get to that exact

Hearing January 16, 2024

Mr. Welter.

MR. WELTER: Yes, Judge. Good morning,

MR. WELTER: Okay. So, first of all, when she talks about the -- when counsel talks about the attorney's fees, that was for the initial litigation, 21 22

The $300, 000 plus is we are -- under the settlement agreement, we are entitled to collect attorney's fees in collecting the settlement agreement. 23 24 25

I also need to correct counsel. They are not current on their payments. The reason Mr. Petersen

Hearing January 16, 2024

wrote that letter is they wired partial payments in November and December; and in the description they put,

Settlement of all litigation, to try to sneak it through and try to say that they are up to date.

But to answer your question, Judge, ur

THE COURT: And when you say the payments they made in November and Decemberf P'm assuming you didn't accept those payments?

MR. WELTER: They were wired, and we wired them straight into the trust account of the San Diego

And keep in mind, Judge, they hadn't made payments on one account that they owe us since October of 2023. They haven't made payments on the other one since May of 2024. And our attorney fees are just outrageous because every time we try to -- yesterday, for instance, we spoke to them; and they said that they wanted to try to negotiate a settlement.

And when we tried to call them back and get details on what they wanted to do, before we knew it they had filed a notice with the court saying that we

Hearing January 16, 2024

And we've literally been chasing them now

since around November of 2023.

THE COURT: On the -- MR. WELTER: On the judgment, collecting the judgment.

THE COURT: On those accounts that you're talking about, are those subsumed in that 1.4? MR. WELTER: Yes, correct, Judge. All in, all fees, all outstanding is 1.4 THE COURT: On the -- the -- so the attorney's fees that were actually granted by the court, that's what counsel was alluding to; but what you're referring to is additional attorney's fees occurred in post-judgment and collection efforts.

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WELTER: Correct, Judge. The attorney's fees that the Virginia court put in the judgment those were for attorney's fees for the initial litigation to get the judgment.

MR. WELTER: They did make a payment -- THE COURT: I'm sorry. I'm sorry. Reduce

Hearing January 16, 2024

MR. WELTER: It was. It was reduced to the judgment in the Virginia court. The judge did put the attorney's fees -- they liquidated them and put them in the judgment.

But in terms of -- so it sounds like this 300, 000-dollar figure is attorney's fees that he's expended in the course of filing different lawsuits to try to collect on this; is that right?

GRADY: Yes. I think there's another order. It's not been -- it's not part of this domestication. I mean, we just have this judgment,

THE COURT: And the judgment in this case

MR. GRADY: 1.572 -- $1,572,500. THE COURT: And is it still -- has it been reduced in any way? I mean, have they made any payments on it?

MR. GRADY: I'd have to defer on my client

THE COURT: It sounds like they made

This is domesticated Which -- is it out

MR. GRADY: Right. Originally entered in Virginia and domesticated in California and Texas.

THE COURT. So it's domesticated in two

different courts. And so you're trying to collect in 16 California and trying to collect in Texas. It sounds like they made some payments in the Virginia litigation? You mentioned they paid attorney's fees.

Has that already been accredited? MR. WELTER: Yes, Judge. The judgment was for $1.5 million in principal. And then on top of that, the Judge ordered $178, 000, I believe, in attorney's fees. And on top of that, she ordered them to pay the three times that they were sanctioned by her for not producing any documents, not one document in the initial

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And since that time, Judge, the same judge in Virginia, which they claim is -- has entered a stay, the same judge has entered an additional order, a fourth order, Judge, for another 9, 000-dollar sanction for improper -- and we can provide that judgment to you, as well, Judge.

THE COURT: Okay. So it's >- 1. 572500 was the amount of compensatory damages. There's 170 -- in addition, there was another 177, 000 in attorney's fees. Plus sanctions, I guess, for about 4, 000, roughly, and another 7,000, roughly, and then you have interest.

And so out all of that, we're down to 1.4. Is that where we're at, it looks like? Not

include --

MR.WELTER: That's correct, Judge.

THE COURT: Not including what they wired to you in california. It sounds like you didn't accept that.

MR. WELTER: No. We gave them credit for

that We gave them credit. We wrote a letter saying, We're not -- it cannot be used as a settlement, but we're going to give you credit to the outstanding balance.

THE COURT: Okay. So the 1.4 --

Hearing January 16, 2024

MR. WELTER: We gave them credit.

THE COURT: So the 1.4 includes even those

NMR. WELTER: Yes, Judge.

THE COURT: How much were those payments?

MR. WELTER: They made one payment for 7 8 approximately -- their payments were -- on one account, their payment was roughly $21, 000 a mont On the other 9 $18, 000 account, it was roughly $18,000 a month. So they made a payment in November, on November 27th, for $11, 000. And then they made -- on December 1st, they made a payment of $18,000.

But they completely ignore the other account, which was due 20 -- roughly $22,000. And that has not been paid since -- they haven't paid on that account since October of '23.

COURT: Okay. I just want to get

through the ) I think we're good, Mr. Welter. I was just trying to get a background. I want to get through the discovery real quick.

They -- do you have a copy of the

protective order?

MR. WELTER: Judge, can I say one thing about the protective order?

THE COURT: Yes.

Hearing January 16, 2024

MR. WELTER: So on the protective order -- and sorry if I'm -- I'm an attorney, as well, Judge, and just running the business as managing director.

But on the protective order, we couldn't disagree on it. So we went above and beyond. Welsaid that instead of saying -- requiring one partyuto say this is confidential, you know, and the other party

And it just made it so simple, because they're tangling the three separate state litigations together. And if we enter a protective order in this case, it's going to wind up -- we're not going to be able to admit it in another case, the documents.

So the easiest way was we gave them more than they were asking. And we said the entire deposition, everything in the deposition, will be held

Hearing January 16, 2024

confidential. And we will -- it will be held confidential for 30 days or longer until they can go to the Court and ask for and receive the appropriate remedies.

Does that make sense, Judge?

MR. GRADY: Yes, Your Honor) right here. 8

THE COURT: I know we talked about AEO.

Is there a specific issue you have with it?

MR. GRADY: Just I think it's just the AEO.

THE COURT : the added -- 13 14 MR. GRADY. I think that it's designed -- 15 so there's some -- kind of a little bit technical, but it's from the federal court. So it references, you know, ECF and filings done under seal. We probably should other than that, it's fine, Your Honor. THE COURT: Hold on.

MR. GRADY: It's in Section 9. It contemplates using PACER, basically, or the federal filing system.

THE COURT: The -- I'm going to -- I don't have my own form, but I will use the 125th's. I'm going to print it out. I'll let you guys take a look at it

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Hearing January 16, 2024

I understand there may be some disagreement on those designations, but we can probably hammer that out if we need to. I just want to documents flowing to you as soon as possible. (Brief pause)

THE COURT: I'm going to give you, like, a few minutes to take a look at this. We'll go off the record.

(Discussion held off the record)

(Recess taken)

THE COURT: Anything for the protective

MR. GRADY: Yes. Yes, Your Honor. So $ COURT: We're back on the record.

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MR. GRADY: Your Honor, the language looks fine. We discussed with our client -- they've had protective orders with attorney's eyes only in the California and, I believe, the Virginia litigation. And the production has shown, you know, records from overseas companies that are specific to their industry; and their lawyers have -- because of their lack of familiarity with the industry, they're

Hearing January 16, 2024

unable to evaluate it and -- as they've come to

what do you mean?

MR. GRADY: I mean the companies are not real, I guess, or the -- or its a sham. Maybe they're formed; but they're not actually, you know -- you know, what the financials are saying is not real. I don't know anything more than that, but -- but, yeah, I wouldn't be able you know, if you gave me some financials from an LLC in, you know, whatever, Columbia, I'm not going to know anything about if it's real or not. I mean --

THE COURT: Right. But a lot of that you could run down -- okay. A lot of that you could run down in a deposition. But on the AEO documents that you received in the California litigation, did you get those designations removed; or did you --

MR. GRADY: You know, I'd have to defer to

Hearing January 16, 2024

MR. GRADY: No -- no, Your Honor.

THE COURT: Okay. I'm going to go ahead

Counselor?

MRVARGO: Because I came out of a Judge McFarland AEO nightmare case that was a saga of seven years, particularly because this is a post-judgment scenario, I would advocate for a reversal on the burden relating to the attorney's eyes only.

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Specifically, I'd submit to the Court that I believe that the withholding party needs to file a motion to designate as attorney's eyes only, file it under seal with the Court, and set a hearing. It puts the onus on them to be drafting

Hearing January 16, 2024

motions because they're the ones withholding the

I don't think there's any issue with that. I think we would have the burden to show they're AEO at the end of the day no matter what.

THE COURT: So I -- look, it's post-judgment). I don't think I've had an AEO post-judgment discovery --

MR. VARGO: Exactly. THE COURT: -- issue, ever. So my

assumption is you're going to have very few AEO documents, unless they involve something that is a trade secret, a privilege of some sort, some sort of national security issue.

Hearing January 16, 2024

But, like, financial stuff, I can see maybe confidential or something; but AEO, I think, is going to be -- so if you're marking everything AEO and they show up and say, Hey, they marked, you know, all these documents, you know, AEO and there's nothing it's just, like, your financial statements, yeah, it's -- that's going to be -- that's goingto be a problem. So --

MR. VARGO: Like a sanctionable problem?

THE COURT : Potentially. I mean, if we're going to spend hours and hours trying to untangle a mess, the default should be there needs to be a good reason why these are marked AEO, because that's going to be a rare occurrence.

Again, you know, we're talking about the government and maybe there's government contracts and maybe there's provisions in there regarding how you make these drones or something, I don't know, but I don't think you care.

Hearing January 16, 2024

I want these unmarked as AEO, right? I assume that's not going to be what you're going to show up and say, They need to take the AEO designation on that part of this document that they gave me, right?

You're going to be focused on assets You're going to be focused on transfers. You're going to be focused on corporate governments. You're going to be focused on their stuff, where it's at leases; agreements; you know, purchases; sales? things of that nature; bank accounts.

That's where you're going to have an issue, and so -- and you're going to want to be able to show anybody who's going to do any forensic analysis. I don't know who you're going to have to follow up on -- who's going to try to figure out what's going on with this company and what they're doing here.

s not a -- I mean, it's 1.4 million. I know that's a lot, but it's not a lot a lot. Like, I mean, I don't know -- I have cases where people own a 5-million-dollar piece of property, right? You're -- we just need to kind of see what they have.

MR. VARGO: There's a reluctance to -- I

inefficiency. Basically, the receiver's fee that's going to go on top that's going to make this too much or

whatever, right? The whole purpose of discovery is to identify the assets that we're going to use -- get, use, sell to discharge the judgment.

We have an asset right here that's unequivocally and undeniable through the admissions that are in the record, an asset of the defendant. We would move for a turnover of that subsidiary asset today.

THE COURT: We can get there; but I just want to deal with this, unless you don't want discovery. MR. VARGO: I would like discovery, too; but there's an asset right there that we can sell soon, like --

MS. CLARK: Well, there's no evidence of its marketability;) but, I mean, I think we should get through this discovery point. That's what we've been trying to Your Honor.

MR. VARGO: Well, marketability is a different issue. It has value, and we would like to recognize the value to discharge our judgment.

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THE COURT: Understood. I don't want to get sidetracked. I'm just -- we're talking about stuff -- to the degree that it's post-judgment and you need -- you're going to get

Hearing January 16, 2024

compensated with attorney's fees, I'll award attorney's fees to the degree that they -- it's post-judgment.

They should be complying. They should be giving you stuff.

To the degree that you have to spend time, write motions, do that thing, I'm going to award attorney's fees, right? So you're going toget that back to the degree you can get any of that back.

But we're spending a lot of time talking about hypotheticals. Let's see what they do, and then we talk about what happens. ll go ahead and enter that order, and then we can move on discovery and then we can move on to this other stuff.

So the Court -- what are the -- so what's

MR. GRADY: Yes, Your Honor.

THE COURT: What did you want to deal with

first

MR. GRADY: Depositions.

THE COURT: So who are you looking to do

depos of?

MR. GRADY: Three witnesses; Neill

Whiteley, Phil Tucker, and Mark Schmidt. Mark Schmidt

Hearing January 16, 2024

What's the concern about Mark Schmidt?

MS. CLARK: Your Honor, we -- there's not

a concern. We've tried to come up with dates. Mr. Schmidt does travel internationally as part of his business, given the conflicts overseas right now and the nature of this business.

So we have asked that his deposition be scheduled virtually, which I think is what is in their

depositions would be virtual That's a change. They

arrange, Your Honor; but there's no issue with Mr. Schmidt, now that we've got the protective order in place, Your Hono

COURT: What's his schedule?

MS. CLARK: I'm sorry. Say that again,

MS. CLARK: What is his schedule? I don't know; and he is overseas right now, Your Honor. So I

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Hearing January 16, 2024

outside the range of the dates we had proposed in

complete -- I'm just guessing. I don't speak with Mr. Schmidt. That's not my client contact.

THE COURT : your client contact? MS. CLARK: speak with their outside 13 14 15 16 17 18 19 20

in-house counsel, Mr. Charles Watts. And so I have access to Mr. Watts don't know how much access he has to his schedule immediately, but he could tell me the answers to the questions you're asking.

THE COURT: When would you like his

deposition?

MR. GRADY: In the next 30 days, Your Honor. And we would like it in person, as well. 21 22 23 24 25

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MS. CLARK: I just think that's going to be difficult, but -- I mean, and I don't understand the necessity, especially given what we've lived through through COVID. A deposition is a deposition, but --

Hearing January 16, 2024

THE COURT: Is there a reason why you want

MS. CLARK: Your Honor, I'm sorry. I have to object because he has maligned not only at my client this entire hearing on baseless accusations, but me personally. I'm an officer of the court. I practice in state court. I practice in federal court. That's not the kind of lawyer that I am.

So I object to the way that he's characterizing me as a lawyer and our client here today. 33 We're going to conduct ourselves pursuant to the rules in any deposition that is scheduled.

MRVARGO: I'm not sure what she heard, and I wasn't referring to her. I said my prior experience in another case led me to a desire to have in-person depositions. I've never met these people in

I've frankly never even heard their names before today, and I have no reason to believe that they have any issues going on ethically. So I'm not casting any aspersions or direction.

THE COURT: Besides the coaching, do you have any other issues? And I get it, right. You don't

know who's in the room. There's all these other issues.

And so, it's not necessarily about Crying to get the words right. I mean, it's about -% and that's going to be used at trial in front of a jury to convince them that this person violated a legal duty, right? So those concerns are probably not as important.

MR. VARGO: I understand. You asked why, and I was answering the question

THE COURT: I get it. And I'm not naive. But here, outside that general concern, is there any other need?

MR. GRADY : No, Your Honor. That's the main concern.

THE COURT: Okay. Assuming this person is not local, they're -- they don't live here. If you want it sounds like it may be a little bit of a burden for them to appear. I assume you want them to appear here in person; is that right?

MR. GRADY: Yes, Houston, Your Honor. THE COURT: You're pretty sure he can appear via Zoom within the next 30 days?

MS. CLARK: Yes, Your Honor. I can't

Hearing January 16, 2024

imagine why we couldn't find a time and a date in 30 days that we can present him. We've been able to do that each time we've gone out looking for dates.

THE COURT: Okay. And let me table whether it's in person or not for a moment. Who are the other two folks?

MR. GRADY: Neill Whiteley and Phillip

MR. GRADY: So there's been some confusion or -- you know, we asked opposing counsel, you know, their capacities and were told different things at different times. I've got notes. Cz

THE COURT: I'm sorry. Whiteley's

relationship, again, is what?

GRADY: Well, we believe that they're executives of Cyberlux and that they're represented by same counsel over here.

THE COURT: Is that true?

MS. CLARK: No, Your Honor. And

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MR. PENNETTI: It's been our understanding they've been consultants. I've conveyed that consistently ever since this started. Both of them were

Hearing January 16, 2024

THE COURT: Early this year?

MR. PENNETTI: It was Jan 5 is when they

THE COURT: Okay. And then on -- these are pending, right? These motions are pending?

MR. PENNETTI: Correct.

THE COURT: What Is the concern --

understanding that they're not here, or it doesn't look

MS. CLARK: Here today or you mean in the area? They are actually local.

PENNETTI: I think they might be local to Houston

THE COURT: Okay. What's the concern about their appearance?

MR. PENNETTI: Oh, I don't think there is

Hearing January 16, 2024

THE COURT: Okay. So you're fine with

THE COURT: Okay. So 30 days, they can

MR. GRADY: Written discovery. We've got requests for production, request for admissions. I believe we have interrogatories, too.

PENNETTI: That's right.

THE COURT: So I have RFAs 1 through 31. Any of these you find highly problematic that you can't answer yes or no?

MR. PENNETTI: Based on my recollection, no. But let me -- I don't remember any that are highly problematic. The ones that I point out, No. 9 references a government contract. And while I think my clients did reference that contract online, I'm not sure

Hearing January 16, 2024

to the extent that there's any confidentiality regarding cancellation of the contract. So, I mean, that's the only piece that I point out.

THE COURT: Right. I mean, I don't think they're going to spend a lot of time on this. Ites just a question of --

THE COURT: So you can't really use --

MR. PENNETTI I think we're okay, Judge.

THE COURT: Okay. So we're good on the RFAS.

On the request for production, you have 18; is that right? Or am I missing a page?

MR. PENNETTI: 18.

THE COURT: Any of these that are a

problem

And then --

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MR. PENNETTI: The tax returns, Judge.

THE COURT: Why are the tax returns a problem?

MR. PENNETTI: Confidentiality. I mean, I

Hearing January 16, 2024

agree with you they're entitled to the financial statements and other documents that show assets, but tax

MR. VARGO: There's nothing confidential about tax returns in a post-judgment instance. S talking about pre-judgment.

THE COURT: Yeah, they're entitled to your tax returns, assuming they're a defendant,

MR. VARGO: Correct.

MS. CLARK: I mean, have objections that are made to these pending before Your Honor. And I don't know if you're wanting us to go through those objections, if they're per the rules or -- THE COURT. You didn't file any objections to these, right? didn't respond with objections?

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MS(CLARK: Yes -- we did respond with objections, Your Honor, in our pleadings, yes. And very specifically,) especially with respect to requests for production and the interrogatories. Because we understood that those were their most important asks. yes, we have responded to these with our objections. S

THE COURT: There are no objections to these specific requests that you served on the other side; is that right?

MR. PENNETTI: That's right.

Hearing January 16, 2024

THE COURT: Okay. I understand you filed a Motion for Protection saying, Hey, we don't want to produce documents; and we object to some of this stuff. But you didn't file -- that doesn't count.

MS. CLARK: Well, okay, but we did Rot

THE COURT: The only thing that counts

MS. CLARK: We did not serve it on them in that format, Your Honor; but they got served with our response that had a detailed objection to these requests per the rules.

THE COURT : The only thing that counts is responses to requests for production and the objections that you make therein

MS CLARK : Okay.

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THE COURT: If you didn't do that, then you didn't object. It's not any motions you file with me. It's the actual objections you made to their discovery requests.

MR. PENNETTI: Judge, I understand. The only note I'd make is under 192.6, it expressly says a Motion for Protection, we're not waiving objections. That's expressly in the rule.

MR. VARGO: But there are no objections.

Hearing January 16, 2024

MR. PENNETTI: Again, by filing a Motion for Protection, you don't waive your objections. That's what I'm saying is in the rule.

MR. VARGO: Right. And the rule would contemplate a circumstance where you file a Motion for Protection to object to these other objections, too. We didn't see any of those objections.

THE COURT: Where in 192. 6 MR. PENNETTI: I'm pulling it up, Judge.

Sorry for the delay.

192.9 (a). It's the fifth line, end of the

PENNETTI: Well, I agree with that. THE COURT: I mean, at least on the face of -- based on that statement.

MR. PENNETTI: Based on that statement; but based on that statement, it doesn't require us to assert anything because of the motion pending, so long as we have basis -- bases.

MR. VARGO: I think 197, 198 require you to assert the objection, whatever the Texas rule

relating to RFPs is.

196.3, subject to any objections stated in the response. There's none stated in the response.

196.3 (a), time for production on RFPS.

THE COURT: Understood. And the rules

Generally, it's required that you file a response. So the protection and the motion doesn't -- you can't assert you -- I mean, you can; but it's supplement to whatever you've asserted in your response to the actual discovery requests. It's not in lieu of, generally.

Now, there may be specific instances and certain circumstances where you may be okay, like time, manner, place, that kind of thing. Maybe you get to do that. But, generally, if you have a substantive objection to the actual motion -- to their discovery response, you need to put it in the discovery response.

You can't just not file anything and then file a motion or serve a response and say, I made a motion. I didn't want to produce documents because I'm objecting to this stuff. That's not going to be

THE COURT: Okay. So you're fine with

THE COURT: if T: Okay. So it looks like we're

good with 18.

Do we have anything else?

MR. GRADY: The site inspection.

THE COURT: Where are we on the site

MR. PENNETTI: The only thing I'd say is what's important with that is we'd have to have some sort of protocol) It can be very basic, a record of who's there, whether there's going to be photographs, videos taken, a provision for exchange of those, and then the fact that the inspection and anything collected -- data collected there is subject to the protective order, and that's all we ask.

THE COURT: So why does the landlord need

to know?

MR. PENNETTI: So I would say as a practical perspective liability, I think the landowner would want to know of third parties who aren't tenants on the property; but that's just --

THE COURT: I mean, don't you're saying that when somebody visits, you let the landlord know?

MR. PENNETTI: Well I would characterize it differently from a visit, Judge, but point taken.

THE COURT: The only reason I -- I'm fine with you -- if you give the landlord notice. What I'm concerned with is if the landlord says no, right? And then we're going to come back and say, Well, the landlord said he didn't want them on the property.

well, I don't know why that would be an issue. I would need to know why -- I guess you can tell whoever you want that these folks are going to come

subject to a -- or pay a visit subject to an order, if you want. But just like any invitee, it seems out of the ordinary to say, Hey, we got to get the landlord's permission for someone who's going to -- to visit our property.

Definitely the tenant because they're the

Hearing January 16, 2024

has a suit against the landlord; and I'm, like, We need to let the tenant know. We need to see if they have an objection before we go in their apartment or the

But I don't really see -- I don't really

MR. VARGO: Can we specifically enumerate what the protocol is again?

MR. GRADY: Well, so in our order we do provide some provisions that -- photographs and videos, limit it to three hours. We would ask to get it done very soon in case, you know, they could theoretically move, you know, property out in advance of the inspection.

And so we feel -- and we do feel that's a potential real risk. My client is concerned about that, certainly. And so we'd like to get it done immediately, like tomorrow. I mean, we're just going to walk around and take photos; and there's no -- you know, no risky

Hearing January 16, 2024

business here. I mean, it's just --

MR. PENNETTI: Right.

THE COURT: Where they live.

MR. GRADY: Right. Yeah.

THE COURT: This is --

MR. PENNETTI: think that's generally okay. We just want it to be subject of the protective order in terms of what pictures and photos are taken for purposes of whatever property in there might be subject to a -- is subject to a government subcontract. That's really it.

The only thing I'd ask in timing, Judge, I'm probably going to be asked to go in person. I live up in the DFW area. And next Sunday, I leave for New York for expert depositions. I return Thursday morning. So I'd ask that we not schedule it during that time frame, but otherwise --

MR. GRADY: Well, Your Honor, he -- I mean, you don't need counsel there. And that gives them

Hearing January 16, 2024

MR. PENNETTI: I don't really think this

THE COURT: Where's the warehouse?

MR. GRADY: In Spring, Texas.

THE COURT: Can you desepibe it for me,

please?

MR. PENNETTI: It's/a --

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THE COURT: Is it -- are people officed

there or is it just a storage warehouse?

MR. PENNETTI: Predominantly storage.

MS. CLARK: I think -- yeah, I think at one time it had manufacturing capability; but at this point my understanding is that it's primary storage of the produced product.

Hearing January 16, 2024

THE COURT: So that's where they store things. No business goes on there?

MS. CLARK: Yeah, they store the product that is subject to the contract, right. That's my understanding. I've never been there. I don't know, but that's my understanding.

THE COURT: So there's no oneofficing there?

MS. CLARK: No, I think there is someone who offices there, Your Honor.

MR. PENNETTI: I don't know. MS. CLARK: I

THE COURT : there may be someone who offices there?

MS. CLARK: Right. Right. I think they have a little -- for example, I don't know where :selected: Mr. Tucker and Mr. Whiteley office; but my understanding is that if someone were to office there, it would be those two gentlemen. So I don't know if they have a hybrid situation. I just don't know those details, Your Honor.

THE COURT: A and D?

unofficial copy Office of Marilyn Burgess District Clark

MS. CLARK: Yes, Your Honor. 24 25

MR. PENNETTI: Two separate buildings.

Hearing January 16, 2024

THE COURT: Okay.

MS. CLARK: I believe it's A and D. I didn't negotiate the lease. So -- but yeah, whatever they are; but there's two.

THE COURT: Okay. So them visiting wouldn't really be a disruption.

MS. CLARK: I don't think it disruption to the operations, as we know them, Your Honor, at all. I think the concern is it's a government issue. We want to make sure we're not breaching anything as it relates to the government. We don't want to get sideways, so that's our issue with notice.

THE COURT. So they want to go tomorrow. MS. CLARK: I've lost track of what day we are.

THE COURT: Thursday.

MR. PENNETTI: Your Honor, if the client

approves® can --

THE COURT: Can you call your client?

MR. PENNETTI: Sure. THE COURT: If it's just a storage area --

MR. PENNETTI: No, I understand.

THE COURT: You want to take a five-minute

Unofficial Copy Office of Markyn Burgess District Clerk

Hearing January 16, 2024

MR. PENNETTI: If you don't mind, Judge. THE COURT: Yeah. Let's see if we can get

You're available tomorrow?

MR. GRADY : Yeah, somebody, sure.

THE COURT: I mean, that's what you asked

for.

MR. GRADY: Right. No, we will make sure that -- yeah, no problem. Yeah, absolutely.

THE COURT :

unofficial Copy Office of Martyn Burgess District, Clerk

Bunsel, I apologize. If for

some reason he's not available, kind of figure out why and then what the availability is after. And then I don't know what that is. I'm assuming it's sometime next week. I understand that you may have some issues.

You said when? This Sunday you're

leaving?

VENIREPERSON: I leave Sunday, and I return Thursday morning.

THE COURT: Do you have -- I assume you have co-counsel or --

MS. CLARK: We could find someone who might be able to come, Your Honor. We don't have a huge

Hearing January 16, 2024

MR. PENNETTI: I'll make the call, Judge.

THE COURT: Okay. We'll take a short

(Recess taken)

MR. PENNETTI: Judge, I texted, e-mailed, and called him twice. He hasn't responded yet.

THE COURT: Counselor, did you want to say anything?

MR. VARGO: Isit all day. It's a habit to want to stand up.

THE COURT. Do you see any issue with -- if I do it within the next three business days; is that fine?

GRADY: That's fine, Your Honor.

THE COURT: Like, Friday or early next

ix office MR. PENNETTI: I think we can work that

out

Unofficial Copy Office of Marilyn Burgess District Clerk

THE COURT: Okay. MR. GRADY: Your Honor, there's one thing that I -- it's my fault. There's two additional witnesses. We didn't notice them yet. We were

Hearing January 16, 2024

Robinson, too. So we -- and that's it. That's all the depositions. I forgot to mention those. My apologies.

THE COURT: That's fine. But you haven't

noticed them yet, right?

MR. GRADY: We have not. We were

discussing dates and trying to arrange :

THE COURT: I'll just see if you folks can work it out, and then the assumption is that they'll provide you dates soon. And then you'll find a date within the next -- within a reasonable time period. MR. GRADY : Okay .

THE COURT: If they don't provide dates, then we can have a conversation about it. But I'll let you work together first.

GRADY: Will do, Your Honor.

THE COURT: Okay. Let me go ahead and -- how much time did you need to respond to the discovery requests ?

MR. PENNETTI: Judge, may I have

two weeks?

THE COURT: Is that fine? Fourteen days?

MR. GRADY : Fourteen days, calender days?

THE COURT: Yes.

Hearing January 16, 2024

I'm going to put January 29th. For the inspection, by January 29th -- oh, I'm sorry. By

Okay. So we are -- you requested a writ of execution. Have you -- have you tried to --

MR. GRADY: We got possession of it, and I believe it got FedEx'd to the constable in Spring, you Sering, yo

MR. GRADY : Huh?

say no.

MR. GRADY: What? No?

MR. VARGO: No, it hasn't been executed.

MR. GRADY : Oh, it hasn't been -- oh, I'm

sorry. I'm sorry. It hasn't been executed. I'm getting a little tired. Sorry.

THE COURT: Okay. So you have an application for turnover after judgment to appoint

receiver. We talked a little bit about why before. So you have an outstanding -- or you believe an outstanding judgment debt for about 1.4 million; is that right?

THE COURT: Why is it that you need a 25 receiver?

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Hearing January 16, 2024

MR. GRADY: Well, the other side has shown that they have been evasive with discovery; but, also -- of course, we have discovery orders today; but more importantly, they've dissipated assets. They had an agreement in place with us that they would give a

MR. GRADY: Exactly ur Honor.

THE COURT: When was that entered into?

MR. GRADY : It was entered into, I think, current -- around the time of the judgment, which is in June of '23. And then was informed by my client, who could speak in greater detail, but that they learned about this either in October or November about the sale -- they had sold the receivables to the factor much earlier in (24, I believe in March, and then -- but we did not find out until late, you know, in the fall.

THE COURT: So you entered into a

settlement agreement June 15th?

MR. GRADY: Yes, that sounds right, Your Honor.

THE COURT: Okay. So right after you got

Hearing January 16, 2024

MR. GRADY: Yeah, around the time. I

THE COURT: Because it says the judgment was entered on June 23rd.

MR. GRADY: Right. That sounds accurate,

MR. VARGO: Well, in response to your question, one of the reasons we would need a receiver, as counsel pointed out, there's an issue with potential marketability. And given that's the case, number one, it would behoove us to put a receiver in place that was able to assist with the marketing efforts.

They've expressed grave concern relating to these alleged confidential issues, attorney's eyes only type scenarios I can't think of any better

scenario than to have a court-appointed receiver, neutral, selling the assets that they're complaining about that are in need of this heightened protection.

THE COURT: Okay. And so what are those assets that you have identified that you think they're subject to turnover?

MR. VARGO: Well, for one, it's the subsidiary that owns the contents of this facility that we're going to inspect. That would be the low hanging fruit. Beyond that, obviously, a receiver makes it much

Hearing January 16, 2024

more economical to levy accounts as opposed to filing, you know, however many garnishment lawsuits with service on banks, liability for attorney's fees, banks, et cetera. That's an issue.

The relief allowed by Section 31. 002 (b) , therefore, may be granted only when the conditions of Section 31.002 (a) exists. And that's in the case that I cited, Your Honor, earlier, which is Tanner versus McCarthy, 274 S. W. 3d 311. And we cite to that case in

Hearing January 16, 2024

And so, Your Honor, if we're talking about 3 4 5 the receivership under the turnover statute, we believe that the predicate has not been laid. We believe there's no evidence. There's no evidence of nonexempt assets. While there may be evidence with respect to a 6 7 lease in Spring, Texas, that holds property there's no 8 evidence with respect to whether that property is 9 nonexempt, whether they've attempted Levy, whether they can execute on it. It's just not Before Your Honor today. And so we would say that this request for receiver is extremely premature.

And when I look, Your Honor, to their proposed order appointing a receiver, it doesn't seem to me that what they're really asking for is a turnover receiver. What they're asking for is a receiver who will come in and take over the business, including changing the locks, including opening the mail, including messaging every single creditor that we might have or excuse me, vendor that we might have that would owe us money, et cetera.

So they want to be able to, essentially, take over the business, run it for the purpose only of liquidating to this judgment, and no matter whether they have evidence of what we have or don't have, et cetera.

Hearing January 16, 2024

And I think, Your Honor, that is highly inappropriate, far outside the turnover statute. And so we don't think a receiver of any kind is needed.

The other thing, Your Honor, is that with respect to, like, if we're talking about efficiency, which I'm not aware of a receiver being able to appointed for efficiency sake, but if that's the case, these -- this is not their first time trying to look for assets of Cyberlux.

They have issued garnishments. They have garnished -- I think I mentioned this at the top of the hearing -- half a million dollars in money that our client needed to operate its business. So they have already been doing a lot of this work. They already have access to the banks, as far as I understand, know where they are.

This is a process that's -- they're just repeating here in Texas, we believe, for harassment. But nevertheless, Your Honor, I just don't see how a convenience argument makes any sense when we're talking about receivership.

And if Mr. Welter does come back to the virtual stand, Your Honor, he has told Cyberlux that it's his intention to put them out of business. And we think that's what's really going on with respect to a

Hearing January 16, 2024

receiver. And if you look at their form of receivership order, that's what I see.

So we absolutely believe that there is no evidence in this record that would support a receiver of any kind, not a receiver with respect to the turnover statute, and not for the purposes of simple convenience.

MR. VARGO: So with that, Judge, I don't

MR. WELTER: That's not Drue, Judge. THE COURT: No one has asked you anything, Mr. Welter. So --

MR. WELTER: sorry.

MR. VARGO:

think that counsel just made

Unofficial Copy Office of Marilyn Burgess District, Clark

a wonderful argument for having a receiver. What she just said, just to repeat it, was that our client has gone to great lengths to collect judgments unsuccessfully against these people; and she --

MS. CLARK: That is not what I said. That is not what I said. $500, 000 is not insignificant effort

THE COURT: Counselor -- will you please let him finish, Counselor?

MR. VARGO: I let her speak. I'm sorry, Judge.

She made it very clear that my client had

Hearing January 16, 2024

worked tirelessly to discharge judgments and done so at a very great expense unsuccessfully. That is a hallmark of a receivership.

As far as the evidence that's on -- that's on file, we covered this probably ad nauseam by now; but RFA No. 7, this is a subsidiary. It is in the record. We're even getting ordered to go look at the assets of the entity that is the asset.

that we could even make the argument that there's nothing being discussed that would satisfy 31.002, because she clearly stipulated that there was a lease on the record. It is a contractual right. A contractual right is an asset.

There discussion and an admission in the record that the subsidiary company is an asset of the judgment debtor. We know where the assets are. We know what they are. We're seeking a turnover of the assets that can be liquidated for discharge of the judgment. It's really just that simple.

And as I stated before -- and, obviously, if this is the direction that Your Honor wants to go -- we are scheduling depositions and inspections to go identify additional assets that we can go take when we already have evidence here today of an asset that we can

Hearing January 16, 2024

go take and use and sell for the discharge of the

I would submit that we don't have to do that. If they want to pay the judgment, we can provide them a payoff. If they don't want to pay the judgment, then that's what the legal process is for; and that's why we're here today.

There have been zero overtures of payment. Instead, what we're hearing is contesting the amount

items of inspections or depositions in the future to continue identifying assets but not actually doing anything to sell them to satisfy this judgment.

THE COURT. And so what evidence do you have to support?

MR. VARGO: RFA No. 7 is an admission that their subsidiary company is an asset of the defendant. That's all we need for today. We're even having discussions and admissions of stipulations. This is their asset. It is their company. It's their subsidiary company. We have a receiver in the courtroom. That should be the end of the inquiry.

If they want to the pay the judgment, let's give them seven days to pay the judgment. If they don't want to pay the judgment, then let's get the legal

Hearing January 16, 2024

THE COURT: Would you like to call anybody to testify in support of the application

What's his name? MR. GRADY: William Welter, managing

director of plaintiff entitie

THE COURT : Ir. Welter, are you there? 13

MR. WELTER: Yes, Judge. Before we get

started, I'm having problem with hearing. So can you

COURT: Yeah -- hold on. I guess while we're waiting for him to log back on, on your application, do you have any evidence to support the application? Unoation?

THE COURT: Okay. So you don't have anything that's been filed for the Court to consider?

MR. VARGO: We have the discovery

Und icil Copy Office Of Marilyn Burgess District Clark

Hearing January 16, 2024

responses, which is the admission of the same company that's the subsidiary that he's going to authenticate these records as a belt and suspenders.

So there's the admission, and we're putting on a witness to authenticate the quarterly report.

THE COURT: Right. But -- MR. VARGO: The quarter report says the

Unofficial Copy office Marilyn Burgess District Ckel

MS. CLARK: Your Honor, I'm still not clear how they're going to get this statement that is the quarterly report into the report. But what we're talking about is Catalyst, and is it a subsidiary. Yes, it is. It is a subsidiary.

the only thing they're asking for a receiver over is our interest -- is Cyberlux' interest in Catalyst and that's all we're here about today, I need to understand it.

Is that what they're asking the Court for that? That's the limited ask? Because their receivership order is so much more broad; and that's maybe where I'm misunderstanding, Your Honor.

MR. VARGO: Well, under the plain language

of 31.002, we don't have to identify every single asset that we're trying to use to discharge the judgment. It's --

MS. CLARK: I think I've said it twice for the record, but I'll just remind Your Honor that The case law is very clear that 31.002 (a) has to be complied with before the Court can enter an order assisting the judgment creditor or else it can be dismissed as an abuse of discretion.

And so there has to benot just evidence, but I believe the court says substantive -- evidence of substantive and probative character. required in order to support this type -- the turnover order and the receivership order. They go -- as you said earlier, Your Honor, they go hand in hand.

VARGO: And that would be an admission and a quarterly report that they originated and adopted and published.

MS. CLARK: Your Honor, if they're asking for it to be admitted as evidence, I have objections; and I'll state those.

THE COURT: Mr. Welter?

I'm sorry? Hold on a second.

(Brief pause)

THE COURT: Mr. Welter?

Hearing January 16, 2024

MR. WELTER: Yes, Judge. Can you hear me? THE COURT: I can. I think -- can you

MR. WELTER: When counsel speaks from the table, I can hear them fine. It's just when they stand.

THE COURT: Yeah, the microphones are in front of them.

But you're not getting any reverb, and you

MR. WELTER: I can hear you fine, Judge.

THE COURT: Can we test?

VARGO: Yes. Can you hear me?

MR. WELTER: Whoever just spoke, I can

unofficial Copy Office of Marilyn Burgess Suiche CHIK

MR. PENNETTI: Can you hear us?

MR. WELTER: Yes.

THE COURT: Okay. Let's -- it's supposed to be piping through here, through the Court's speakers.

William Welter - January 16, 2024 Direct Examination by Mr. Vargo

I think Mr. Welter is getting a little bit of that. We're getting a little bit of reverb.

But in any event, let's see if we make that work for right now.

THE COURT : Yes.

MR. VARGO: Let's see if we can make it work.

Do we need to swear in the witness? THE COURT: Hold on a second. Let me ... (Discussion held off the record)

THE COURT: You may proceed, Counselor.

Please state your name.

(Technical difficulties)

Unofficial Copy Caffice of Mariiyn Burgess District Clark

William Welter - January 16, 2024 Direct Examination by Mr. Vargo

THE WITNESS: I'm sorry, Judge. The

THE COURT: That's fine. Let's try that. THE WITNESS: Let me try to do that (Brief pause)

MR. WELTER: I can hearS & hear you perfectly, Judge, now. THE COURT: I know, but there may be some reverb on our side.

You want to try it, Counselor.

Q (By Mr. Vargo) What is your affiliation with

(Technical difficulties)

(Brief pause)

Q (By Mr. Vargo) Okay. You're on a speakerphone and you're pointed toward the gallery. The judge is behind you. So make sure you're speaking up for the count reporter and the Judge, please.

A Okay. 23

Q All right. What is your affiliation to this

case?

A

I am the legal counsel and also the managing

William Welter - January 16, 2024 Direct Examination by Mr. Vargo

THE COURT: Can he introduce himself for the record, please?

MR. VARGO: Yes.

Q (By Mr. Vargo) Just introduce yourselfA@s far as the company affiliation, et cetera.

A Okay. My name is William Welter. And I am on the side of Atlantic Wave Holdings and Secure Community.

Q And that's the judgment creditor, correct?

A Yes.

Q All right.

THE COURT: What is his position there?

Q (By Mr. Vargo) And what is your position there,

List Exhibits Atlantic that are three pages and 66 21 pages? 22 A I am. 23 24 25

Unoficial copy Office of Marryn Burgess district Clerk

Q All right. In preparation for today, are you familiar with the documents that were filed on January 16, 2025, titled Plaintiffs' Hearing Exhibit

Q All right. Could you please turn to Exhibit 2 of the 66-page PDF document that was filed with the Court, please?

William Welter - January 16, 2024 Direct Examination by Mr. Vargo

A Okay.

Q And tell us what you're looking at.

A The disclosure statement pursuant to the Pink -- Pink basic disclosure guidelines, Cyberlux

Q Okay. Hold on just a moment.

THE COURT: You have a copy of that, I'm

MR. VARGO: I do. It's filed in the

THE COURT: Does opposing counsel have a

MR. PENNETTA We have a copy.

MR. VARGOS All right.

MS. CLARK: Well, Your Honor, excuse me.

MR. VARGO: Yeah, no problem. Here you On the docket, it's the one that's 66 pages. 21 22 23 24 25

MS. CLARK: Okay. Thank you.

MR. VARGO: Yes.

Q (By Mr. Vargo) Okay. Sir, so on -- let me pull this thing back up.

Unofficial topy Office of Marilyn Burgess District Clerk

William Welter - January 16, 2024 Direct Examination by Mr. Vargo

All right. On page 10 of the PDF, it

says, Exhibit 2, amended quarterly report 9/30/24; is 3 that right?

A

Page 10, did you say?

Q Yes, page 10 of the PDF.

A Okay. I don't have the PDF, but I have the

Q All right.

A It's Cyberlux Corporation, that front page, I think you're referring to.

Q Yes. Okay. So that's the next page, which is page 11 of 66.

Can you tellus what document you're looking at?

Unofficial Copy Office of Marilyn Burgess District. Clerk

A It's the disclosure statement pursuant to the Pink basic disclosure guidelines, Cyberlux Corporation, amended quarterly report for the period ending September 30,) 2024, filed on November 14th, 2024.

Q Di'd where did you obtain this document? From the OTC Markets.

All right. Can you -- for those of us in the 21 22 courtroom that aren't familiar with that, can you explain what the OTC Markets are? 23 24 25

A The OTC Markets is a pseudo-governmental agency, quite like the NASDAQ or The Dow would be,

William Welter - January 16, 2024 Direct Examination by Mr. Vargo

except the OTC Markets regulate a different market,

Q And so when you said you got it from the OTC Markets, did you physically go there; or how did you come into possession of the document?

A I went to OTC Markets website, and Ixdownloaded the -- and printed the annual report.

Q And can you explain in a little bit more detail how you went about doing that?

A Okay. So you go -- you go to -- first of all, it's a penny stock. So -- and they're on the OTC 12 13 14 Markets. So you go to the OfC Market website. And then in the upper left-hand corner, you will type in the ticker symbol, which is C-Y-B-L. And you'll hit 15 "enter."

And that will bring you to a whole separate section that's dedicated just to that ticker . And there's a menu where you can choose a variety of actions." If you go -- I think it's the fifth one over, it's "disclosures." And you punch on that, and then your -- the screen populates with all of their filings.

They're required to make filings every quarter, no more than 45 days after the end of each quarter.

Q As -- in connection with your business, are you

William Welter - January 16, 2024 Direct Examination by Mr. Vargo

A I believe Mr. Grady downloaded it himself from the website and then I also sent him a copy, but I believe the copy from the website -- the OTC Markets website comes out much clearer. Youed have to ask him which one he used, whether it was mine or whether it was

Q I understand.

A Same document, though.

Q So let's turn to -- in my PDF, it's page 28;

Can you turn to that one, please?

A I'm there.

Q "All right. And it says, Issuer's facilities.

Can you tell us, who is the issuer in this 21

A Cyberlux Corporation.

Q Is that the judgment debtor?

A Yes, that's the judgment debtor, correct.

Q All right. So can you tell us what's helpful

anofficial Copy Office of Marilyn Burgess District Clerk

William Welter - January 16, 2024 Direct Examination by Mr. Vargo

or important concerning Section 5 on page 18 of 46?

A Well, it -- in this section, it details the different companies that are involved with Cyberlux. It talks about their -- what is located at each facility. And primarily to Texas, it says, Catalyst Machineworks has its offices and manufacturing facilities Located at 21631 Road, Spring, Texas 77488. And then it goes on to say This is a 21, 450-foot square-foot facility, with a renewable three-year lease, with one and a quarter year remaining.

Q Is this document a true and correct copy of the disclosure that you downloaded from the OTC's website?

A Yes.

Q All right. I see the next paragraph down there refers to "our Datron World Communications subsidiary." Is that what it says there?

CLARK: Your Honor, I object. The

document speaks for itself --

A That is correct.

MR. CLARK: -- and it's not in evidence,

THE COURT: That's fine.

MR. VARGO: I move to admit the

disclosure.

THE COURT: You're seeking to move what,

William Welter - January 16, 2024 Direct Examination by Mr. Vargo

specifically?

MR. VARGO: The disclosure, I move to admit it into evidence for purposes of the hearing.

THE COURT: So you're moving to admit as, I'm assuming, your Exhibit --

MR. VARGO: My Exhibit 2 that'sxon the

THE COURT: You want to call it Exhibit 2?

MR. VARGO: Let's call 10 Exhibit 2.

THE COURT: Okay. Plaintiffs' Exhibit 2,

which is the -- hold on one second. Let me get the the amended quarterly report for the period ending September 30th, 2024; is that right?

MR. VARGOS 53

Yes.

THE COURT: And this is disclosure statement pursuant to the Pink basic disclosure guidelines?

MR. VARGO: Yes.

THE COURT : Any objections?

Unofficial Copy office of Marilyn Burgess District, Clerk

MS. CLARK: Yes, Your Honor. We object to this being admitted into evidence. The -- I'm not quibbling with the source of this document. I think that the plaintiffs have shown chain of custody with respect to this particular document and where it came from.

William Welter - January 16, 2024 Direct Examination by Mr. Vargo

The issue with it being admitted into evidence is that it's hearsay, and it's hearsay within hearsay. It's a document that's signed, but it's not sworn. It's a document that expressly is a report that's based on a summary of information.

And in particular, when we get to the financial statements, Your Honor, it's consolidated information, which this document discloses is related to not only Cyberlux, which is the judgment debtor, but also multiple subsidiaries.

So it is impossible, from the face of this document, for purposes of this hearing, to understand who owns what. And it's hearsay within hearsay. They have not presented an exception to that, Your Honor. It should not be admitted for today's purpose.

It will confuse the trier of fact, which is you, Your Honor, because it is something that we can look at; but it's impossible to discern its full

THE COURT: Okay. So just --

MS. CLARK: -- from the face of it.

THE COURT: So hearsay -- the concern with hearsay is the truth of the matter asserted. Here, this is a public filing, right --

MS. CLARK: Your Honor --

William Welter - January 16, 2024 Direct Examination by Mr. Vargo

THE COURT: -- on a market that's

certified on the -- I guess OTC Market or Pink Sheet. I

know there's different markets, but over-the-counter market. And I don't know -- I guess this is a public

THE COURT: They're regulated by the

familiar. But at the very least, it's certified, right,

THE COURT. And it says, Based on my knowledge, this disclosure statement does not contain any untrue statements of material fact, right?

CLARK: Absolutely, Your Honor.

The issue is -- from my perspective, is that this is a summary of information that none of us here in the courtroom, the lawyers, have seen. And so it's hard for me to defend against the data that's in here, whether it's true or not. It's backward looking, and it's consolidated.

And so for today's purpose, what their

THE COURT : And David Downing? 13 MS. CLARK: course. 14 15 16 17 18 19 20 21 22

Unofficial Copy Office of Marilyn Burgess District Clerk

judgment debtor owns. And this document does not show that, if we're talking about the financial statements. It is made for a different purpose.

And that's why I think it's confusing, Your Honor. This is made to comply with GAAP, and it's made to comply with the disclosures that the OTC Markets require. And so it's not the laser precision that this type of, let's appoint a receiver and get someone to come and take your stuff, is designed for.

And that's my concern, Your Honor. THE COURT: Understood. I don't think

there's -- I don't think the trustworthiness here is an issue.

MS. CLARK: I don't -- yes. I didn't mean to suggest that.

THE COURT: So the hearsay objection is overruled. I understand you have a concern about the weight and perhaps that it's unfairly prejudicial -- MS. CLARK: Yes. THE COURT: -- because we don't completely understand what this stuff means and -- but that's something we can talk about and you'll have an opportunity to elaborate on.

You can continue.

So Plaintiffs' Exhibit 2 is admitted into

William Welter - January 16, 2024 Cross-Examination by Ms. Clark

(Plaintiffs' Exhibit No. 2 was offered and admitted into evidence)

MR. VARGO: Thank you.

For purposes of the witness, pass

witness.

THE COURT: Nothing else?

MR. VARGO: No, Judge.

MS. CLARK: I need to me up there, 10 right, Your Honor?

Q All right. Are you able to hear me?

Unofficial copy Office of MartynBurgess District Cker

William Welter - January 16, 2024 Cross-Examination by Ms. Clark

MS. CLARK: Your Honor, I'm going to

THE COURT: Sustained.

She hasn't posed a question. So until then, please don't say anything.

Q (By Ms. Clark) I just wanted to direct your Sect

Do you remember talking to your attorney

about that, sir?

A For the address of Cyberlux or their Spring, Texas, facility?

Q Spring, Texas, sir.

A Yes, I remember that.

Q I'm trying to go get to that page.

Have you ever visited the facility in

So you don't know what's inside it, right?

A I do not. We've been trying to find out for about a year and -- with no -- no --

MS. CLARK: Your Honor, I'm going to

Unofficial Copy Office of Marilyn Burgess District Clerk

William Welter - January 16, 2024 Cross-Examination by Ms. Clark

THE COURT: Please just answer the

THE WITNESS: Sorry, Judge.

Q (By Ms. Clark) You don't know what's inside the

facility, right?

A No.

Q Same with respect to Datron World Communications, that was listed at a 995 Joshua Way, Vista, California.

Have you ever visited that facility?

A No.

Q Do you know what's inside that?

A No.

Inofficial Copy Office Of Marilyn Burgess Strict Clerk

Q Now, I believe that you stated that you're familiar with the Virginia amended final order and judgment, right? A I am

Q And in that order, it talks about an amount of $1, 572, 500 'being due, correct?

Let me get a copy of that so I can answer you, if you don't mind waiting for just a second.

MS. CLARK: Your Honor, I'm not sure if we can show that with the way that this is all working out; but we -- THE COURT: I think he has a copy.

William Welter - January 16, 2024 Cross-Examination by Ms. Clark

MS. CLARK: Okay. Okay. THE COURT: The amended and final order.

So --

MS. CLARK: Okay.

A I'm having trouble finding it, but I know the judgment pretty well. And if you want to -- I don't want to hold you up any further. If you want to go forward. I cannot find a copy on my computer of the judgment for some reason.

Q (By Ms. Clark) Well, sir, so within the judgment it talks about specifically that there is an amount of $177, 126.19 for reasonable attorney's fees.

Do you remember that part of the judgment?

A I do. Q Okay.

MRVARGO: Objection, relevance. THE COURT: It's overruled.

I'll let her --

MR. VARGO: All right. THE COURT: -- for right now.

(By Ms. Clark) And you were talking with the

Court earlier. My understanding is that that amount of $177, 126.19 has been paid; is that true?

A I don't mean to interrupt you, but I have found a copy of it.

Unofficial Copy Office of Marilyn Burgess District. Clerk

William Welter - January 16, 2024 Cross-Examination by Ms. Clark

Q Okay. Good.

A

Of the judgment.

Q I'm at part C on -- I believe it's the second

A Okay.

Q Do you see the --

A It starts off with that "The plaintiffs"?

Q Yes.

A Okay. Yes, I do see that.

Q Okay. And so that amounts that $177, 126.19, is

it your testimony that that amount has been paid?

A I believe it has.

Q What about the next line down that talks about -- it talks about them as sanctions, $3, 895 and 300 -- excuse me, $67842.50.

Do you see those amounts?

A I know for sure those have been paid, because the Judge ordered those paid.

Q " okay. And so are you familiar with a

A I am. He's one of our attorneys in Virginia.

Q Okay. And are you aware of a letter that he

wrote to a Jimmy F. Robinson on January 22nd, 2024?

A I am. Q Okay. So -- and did you -- do you know that

William Welter - January 16, 2024 Cross-Examination by Ms. Clark

your counsel used that -- attached that letter in a

A He did not prepare it for today's proceedings.

Q I'm sorry. I meant your Texas counsel had submitted it to the Court, along with the filing for today's proceeding.

Do you know that?

A He submitted it for today's hearings, but he did not prepare it for today's hearings.

Q And if I said that, I misspoke. That was not my intention. Okay.

A That's okay.

Q So -- and in that letter -- have you seen that letter?

Q Okay. And in that letter, it has a breakdown.

Unoteakdown Did you provide a breakdown of amounts to Mr. Petersen?

A No. There's two points. I worked with Mr. Petersen's office. I also worked with 24 25

Mr. Keathley's [phonetic] office, but the -- I think

Undsicial copy office of Marilyn Burgess District Clerk

where you're off on the numbers is that -- those numbers are as of October 31st, number one. And they didn't include the interest, and they didn't include the ongoing attorney's fees.

So I think that's where your numbers) may be off a little bit. Because those numbers are as at October 31st everything that we could tabulate, and they're not as January 16th.

Does that make sense?

Q I hear what you're sayings but I want to I familiar -- well, are you familiar with the line items in terms of the amounts owed, how it's broken down in this letter dated December 2nd from Mr. Petersen?

A Yes, I am,

Q Okay. And so there's a line item that says, Legal fees, $371, 307. 66. Do you see that -- or do you know that that number was listed?

A I take your word for it. I don't have the document, but that sounds about right.

Q Okay. Where is this $371,307.60 in the form of order from Virginia that we looked at?

A It's not. Where you'll find that is in the settlement agreement, where it says that upon breach, we are allowed attorney's fees for -- to collect the -- on

MS. CLARK: Your Honor, I pass the 2

MR. WELTER: Judge, can I add one thing to

that last sentence?

MR. WELTER: All right. Thank you. 7

THE COURT: Did you have any questions?

MR. VARGO: No, Judge.

any other evidence?

THE COURT : Okay. Any other witnesses or

MR. VARGO: No

THE COURT : Kay.

Okay. So what -- so where are we at now?

MR. VARGO: Plaintiffs move for entry of an application to appointment a receiver.

THE COURT: Yes, please.

MS. CLARK: Your Honor, we object to the

appointment of a receiver. The statutory prerequisites

Unofficial Copy Office of Marilyn Burgess District Clerk

William Welter - January 16, 2024 Cross-Examination by Ms. Clark And there's no other evidence,

Your Honor -- before Your Honor with respect to what

property Cyberlux would have that is not subject to other levy or attachment and is in need of aid from this Court by virtue of appointment of a receiver. And the statute is very specific on what it needs. The case law is pretty strenuous that a requirement has to be met. It can't just be a generic list of property. It needs to be what property is

there, how do you know it, what is - is it exempt. Those are the things that need to be shown, Your Honor.

And if you don't meet the standard for turnover, then you're not going to be able to get a receiver. And that s what we would say with respect to -- with respect to the appointment of a receiver under the turnover statute.

What we have, Your Honor, is -- essentially, is arguments of counsel. And the cases are very clear, we cite them in our papers, that that is not enough.

Your Honor, I also would like to say that if you are going to appoint a receiver, that the order has to be -- just like anytime a receiver is appointed, it must be very specific. And the statute language is

very clear and direct on what the receiver needs to --

It's -- appoint a receiver with the authority to take possession of the nonexempt property, sell it, and pay the proceeds to the judgment creditor to the extent required to satisfy the judgment.

So knowing what is nonexempt property is

important. Understanding what amount is outstanding pursuant to the judgment is important So that if a receiver is appointed, he or she can do their job, and the receivership report needs to be specific.

The order that's been proposed by plaintiffs is exceedingly broad. It talks about all property, bring it to me, marshal your assets, and then I'll decide what to do with it. And that's just not the situation we're here in. We are going to have discovery, Your Honor. It's in a very short period. And we're going to get on with it.

And so we think that there is not a basis under the statute to appoint a receiver under the

turnover statute, and there's not a general basis for a receiver. That's a very serious act, Your Honor. And so we would just ask that you deny their application.

MR. VARGO: This isn't a new judgment.

some payment. That hasn't happened. There's a place

They have the assets. They don't qualify.

As counsel put it, this judgment creditor did an exhaustive amount of garnishments on banks unsuccessfully to satisfy the judgment. This is stereotypical time that you would need a receiver. The assets that are identified are in Exhibit 2. It's on page 18 of 46. We need not go any further. It's in evidence.

Catalyst Machineworks is a subsidiary. Datron World Communications, a subsidiary.

THE COURT: What are -- what kind of

entities are those corporations?

MR. VARGO: Well, whether they're corporations or they're LLCs, even -- THE COURT: Don't you need a charging

order for LLC?

MR. VARGO: Yes, but they would still be enough to satisfy the turnover requirement. And in that

William Welter - January 16, 2024 Cross-Examination by Ms. Clark

instance, under the case law, a receiver is the perfect vehicle to monitor the charging order, because the

So what it says -- it says what it says in the document. But whether they can use them for -- and monetize them, we don't know that today. Are we going to know that in 30 days? Yes. And so there will be a lot more for a receiver, if one is going to be appointed O'to do when he or she can be directed with actualfacts about whether it can be sold, is it pledged to someone else.

I'm not saying that it is, Your Honor. And I'm not trying to quibble. But this is what I view as the statute requirement, and so that's why I'm pointing it out.

William Welter - January 16, 2024 Cross-Examination by Ms. Clark

THE COURT: So they just got to show that you own some property, right? Not readily ex- --

MR. VARGO: We have to establish that they own property.

THE COURT: -- executable. Then the burden shifts to them to show that it's exempt

MR. VARGO: To which they're a business entity, and Chapter 42 doesn't identify exempt property for that.

MS. CLARK: That's not the only statute that applies here, Your Honor. That is just not. MR. VARGO: We then what exception are they availing themselves under?

Unofficial Copy Office of Martyn Burgess District Clerk

COURT: But I don't have any evidence

MS. CLARK: Well, Your Honor, actually you do with respect to Datron. And that's in this

disclosure statement. It talks about that there are -- it indicates that -- I'm sorry, Your Honor. I have to find where it was.

MR. VARGO: Respectfully, just because

something has a lien doesn't mean you can't execute on

it. It means that you execute on it and satisfy the secured lender. We can't just execute on it and not pay

off the secured lender. That's how you execute on secured property.

MS. CLARK: I think it depends on what the documents say, Your Honor, and how it's pledged, who holds the stock, for example. It's just complicated. And what I'm trying to avoid is a bunch of, Well, who has possession or where's it going to be and what do we do with it and once they get it, what happens.

I think that there needs to be some sort of order so that Cyberlux can continue to operate its business and have money that it needs to operate and also, by operating, generate funds that can continue to pay on the judgment Because the testimony was that the amount -- that the judgment has been reduced. That's what the testimony was.

THE COURT: So, I mean -- and I'm not insensitive to potential turnover or receivers hampering your ability to operate as a going concern and potentially pay off. I know the receiver would be sensitive to that. Everybody wants to get paid.

But I don't think those discussions have been had, right?

MS. CLARK: No. We've been spending all our time just trying to get ready for today and we -- I think the parties -- the most they could do is say, Let's try mediation and --

THE COURT: And I'm

MS. CLARK: So, no,I don't think the discussions have been had.

THE COURT : understand, Counselor. And I appreciate that you've just been brought on; but this is not a new judgment, for your client, right? So I'm not -- I'm talking about your client when I --

CLARK: Yes. No, no, no.

THE COURT: And I'm not --

MS. CLARK: That's what I was speaking to, whose "talked about it.

Unotalked

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THE COURT: And I appreciate your position as counsel being difficult, but I'm trying to -- we're really just talking about the judgment debtor here, what have they done since the judgment was entered -- MS. CLARK: Right.

William Welter - January 16, 2024 Cross-Examination by Ms. Clark

THE WITNESS: -- back in 2023 or in

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THE COURT: Right. But it's out of

Virginia.

MS. CLARK: Exactly. Exactly. And there's multiple proceedings pending there, yes THE COURT: And so if Virginia says, Hey, this is -- you know, there's a problem with my judgment, then the court obviously will suspend here --

MS. CLARK: Understood

THE COURT : - because that's what I'm relying on; but until that happens, there's no way for this Court to navigate, you know, those sorts of issues when this is not a domestic judgment out of this court.

So all I can do is take a foreign judgment that's currently not superseded and allow the normal legal process to pave through. We probably have enough, you know. The issue is it gets a little bit problematic) If that's all we have, then that's all we can turn over. And so I would need to have an amended

order presented to the Court regarding that specific --

MR. VARGO: So specific to the Datron and the other entity that are identified?

THE COURT: Correct, whatever you have

evidence for.

MR. VARGO: Okay.

William Welter - January 16, 2024 Cross-Examination by Ms. Clark

THE COURT: The -- the other thing is I think there's been some recent case law regarding receiver fees that you might want to take a look at.

MR. VARGO: I'm familiar. It's a presumptive fee, and there's a subsequent hearing

THE COURT: Yeah. MR. VARGO: He needs to talk about his time and the factors.

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MS. CLARK: Right now, Your Honor, it speaks to a 25 percent cap to be earned on everything that is taken and sold And the case law, as I recall, Your Honor, talks about the resume being required of the receiver to understand their qualifications to even serve and then to look at what is appropriate, because it has to be reasonable.

And so right now I do not think that the ordernas it's written, takes into account that case 21 law. 22 MR. VARGO: We'll file an amended order, and we'll address those two items. If she's got concerns about the qualifications, can I call Mr. 23 24 25 Berleth to talk about his qualifications?

William Welter - January 16, 2024 Cross-Examination by Ms. Clark

MS. CLARK: It's not my request. So my

THE COURT: Is there -- is there other things in the order that you have concerns about? scout?

MS. CLARK: Yes.

THE COURT: We talked a Dittle bit about discovery, and you've agreed to produce that within the next 14 days.

THE COURT : the degree that the order discusses that, it needs to be amended to reflect the current understandings from this hearing regarding the discovery requests.

there anything else?

MS. CLARK: Your Honor, can I ask a clarifying question about that? Because I -- I think that discovery is pursuant to motions that are pending, and I had envisioned that we would submit -- or review an order from the motions with respect to discovery that were previously pending, and then that's where the order to produce would come in and that the -- with respect to this order appointing receiver and to

William Welter - January 16, 2024 Cross-Examination by Ms. Clark

compel discovery, that the discovery piece would be struck from this receiver order that they have proposed.

THE COURT: I mean, it really doesn't matter to me. I don't know if it matters to you. MS. CLARK: Okay. Well, I just MR. VARGO: Well, the document request that's attached to the turnover order, I can appreciate that perhaps Your Honor wants to limit the turnover for now to the two entities that have been identified as far

THE COURT: I agree. I guess the question is -- you already have pending discovery. The Court has just ordered i. I don't know where the overlap is. I don't know what, you know -- and I have a bunch of windows open. So I was looking at it, and I moved away. I can go back and look through it.

I assume there's some overlap; and it may say it needs to be produced in five days, that kind of thing. But maybe we can kind of figure out -- if that's duplicative of what's already been ordered, we've already had discussions on that.

William Welter - January 16, 2024 Cross-Examination by Ms. Clark

MR. VARGO: I can cut out any duplicative

stuff; but, I mean, I would submit that the RFPs that

are attached -- I say "RFPs, " the requests for documents related to the debtor that we ordered be produced, this is, you know, elementary-type stuff. Where are your bank accounts? What are your assets?

THE COURT: Right. And so Itunderstand there's a continuing obligation and whatnot. That's fine. Why don't you take a look at that. And you can take a look at the form.

MR. VARGO: I can condense it and cut it down and obviously send an MS Word to your staff so you can -- with copy to counsely of course.

MS. CLARK: Your Honor, I really think it's important to go through this order. Because this is an extreme remedy to have a receiver appointed to just come in and open our mail, change our locks.

THE COURT: So is that the plan, or what's

And so why don't you introduce yourself for the record.

MR. BERLETH: Your Honor, may I approach? THE COURT: Yes.

MR. BERLETH: My name is Robert Berleth.

standing of the Texas Association of Turnover Receivers.

I am also a member of good standing in the National

Association of Federal Equity Receivers. I've been a receiver exclusively for nearly my entire law practice.

This Court has appointed me. Many Other courts in both this building and the federal courthouse across the street -- or down the street have appointed me. I exclusively practice in receivership and collections law.

So their fears of the receiver coming in and, you know, kicking in doors and changing locks is -- while the language is there, is grossly misinterpreted. The reality is, is that a good receiver many times can facilitate the settlement payments. I can find some assets and say, Look , here you've got these assets. If you want to, you know, turn these assets over or we can leverage them regain the settlement and start working on that again.

I've worked on many, many settlements. I'm working on one for Judge Garrison and Judge Roth right now on a very complex six-style case -- or six separate cases that are all coming together and working conglomerate.

So I pride myself on also working quasi mediator and trying to get these parties together and

get this case back on track without the need for

hearings with multiple lawyers long after the sun has gone down.

And then also I'd like to apologize about

THE COURT. That's fine.

So I guess the present intention is not to the take over the business or the property?

BERLETH: Correct. I will work with counsel for the debtor. I work with counsel for the creditor I will bring everybody together, Hey, look,

Unofficial Copy Office of Mamyn Burgess District Clerk

If the creditor says, Hey, Look, we just want to get back on the payment plan and the debtor has a way of doing that, then I can come back to His Honor with an agreed order hopefully in a few weeks.

William Welter - January 16, 2024 Cross-Examination by Ms. Clark

If the debtor, you know, digs in and starts hiding, moving, liquidating, pilfering assets,

then I have the language necessary by His Honor's order

that I can actually go and turn on a dime. And that's

one of the advantages of the receiver, is I don'tChave

I'm hoping that's not the case. I want to work with counsel. I want to get this case done and off of your bench.

THE COURT : Counselor.

MS. CLARK. I don't have -- I mean, what is the fee that you would be seeking in this case?

MR( BERLETH: My fee is assigned by the Court. If I can solve it very quickly -- I had a case just a few weeks ago where I literally sent two letters; and the fee proposed at 25 percent would have been, like, 4$350, 000. And I greatly, greatly reduced that. The court would have reduced it if I hadn't. So the Court will always have the final say on my fee.

I am your arm, Your Honor. I work for you. If you say I earned a penny, I earned a penny. If you say I earned a million dollars, well, I appreciate

William Welter - January 16, 2024 Cross-Examination by Ms. Clark

addition to. However, many times in a settlement, it turns out that the creditor is actually the one paying the receiver because they want to go back on the settlement; and the creditor ends up paying the receiver.

MR. BERLETH: If they want to fight about it and they want to drag us up and down the appellate ladder four times -- you know, I can tell youxfrom personal experience that is the exact same order that I use in 90 percent of my cases. It's been up and down the appellate ladder more times than could count.

Unofficial Copy Office &f Marilyn Burgess Distycker

Most of the appellate Paw that you're going to find challenging that order has my name on it. So I'm comfortable with the language in that order. I'm comfortable with all of the, you know, reasonableness of that order. And it's been used by, almost verbatim, federal courts and state courts in this county and around the state nearly verbatim.

COURT: Anything else?

MS. CLARK: Not for this gentleman, no. MR. VARGO: No, Judge.

THE COURT: Thank you, Counselor.

MR. BERLETH: May I be excused,

THE COURT: Yes. Have a good day. So I'm going to -- MS. CLARK: Your Honor, can I please make

a record with respect to objecting to this form of order? Because I was not done, and I really want a record on this.

THE COURT: Okay. So before you do that, the Court is going to grant the application and appoint a receiver. We need to -- we talked about fixing the order and amending it to address the concerns that were 8 raised before. And so what the Court currently has is not what I'm going to enter.

I don't know specifically what your objection -- if you have additional objections than we've already discussed.

MS. CLARK: Yes . THE COURT. Yes, you want to go ahead and elaborate on those?

MS CLARK: Yes, I would, Your Honor. receiver statute states that the Court

may appoint a receiver with the authority to take possession of the nonexempt property, sell it, and pay the proceeds to the judgment creditor to the extent required to satisfy the judgment.

Panoficial Copy Office of Marilyn Burgess District Clark,

That's what the statute says. This order does not do that. This order allows the receiver lots of powers. And, basically, he can go on a wild goose chase, look at everything. What's the point of the

William Welter - January 16, 2024 Cross-Examination by Ms. Clark

discovery that we just spent three hours on,

He can go -- he's going to get all

documents or records, including financial records related to any property not described in this form of order that is in the actual or constructive possession 7 or control of the respondents. He's going to get all financial -- and that's with respect to Mr. Schmidt, who they haven't presented any evidence of any assets. So Mr. Schmidt needs to be struck in the order.

He's supposed to collect records on all financial bank accounts, et cetera, all securities, all real property, all safety deposits, all cash, all negotiable instruments all causes of action, all contract rights, allaccounts receivable, and tangible property.

I thought what we were talking about, Your Honor, is that this receiver is going to talk to -- look at the assets they presented proof of, which is with respect to a lease at the facility in Spring, Texas, and the Datron -- the ownership of a subsidiary by the name of Datron.

This talks about anything in the whole wide world, and he's going to be able to take custodia legis of that. I don't think that they have met that on

this record, Your Honor. I think that well exceeds the

And then with respect to additional

powers, Your Honor, in addition to the powers of the receiver set forth herein, the receiver shall have the following rights, authority, and power with respect to the respondent's property.

So he can collect all accounts receivable, all rents due. He can change the locks. He can open any mail. He can redirect delivery of the mail. He can endorse and cash all checks. He can hire a real estate broker.

Inofficial Copy Office of Marilyn Burgess district Clerk

And so if -- it's just not -- it's not in compliance with the statute, this form of order. And it is very oppressive to our client's ability to run its business. So --

William Welter - January 16, 2024 Cross-Examination by Ms. Clark

MR. VARGO: e's.

THE COURT. So they're only seeking a turnover regarding the company. So in the amended order he'll be removed

CLARK: A turnover order that does not identify specific nonexempt property that's subject to the order - this is in the Burns versus Miller case that talks about the order needing to be specific,

Elnoficial Copy Office of Marilyn Burgess District Clerk.

William Welter - January 16, 2024 Cross-Examination by Ms. Clark

wanted them to limit it. That doesn't change the

MS. CLARK: Your Honor, I don't disagree with that. I just wanted to -- on the discovery piece, as I've said, we want to give them discovery. We have our protective order. You've given us two weeks. I

just don't -- when things are blended together, I feel like it creates ambiguity when there doesn't have to be. THE COURT: Right.

MS. CLARK: But I don't mean to -- THE COURT: But this order shouldn't be a surprise, right? I mean, these orders kind of read the same. And so there's cases -- I mean, there's probably some cases that deal with this. But if you can find a case that says, Hey,Cthey can't change the locks, then

William Welter - January 16, 2024 Cross-Examination by Ms. Clark

ability to run its business. That's how this reads, and that's not what we're doing here.

We are talking about two assets that they say that they've identified and giving free range and power over everything anywhere in the world that this company might have and having the receiver guess what he might want to do with that.

THE COURT: Counselor. MR. VARGO: Well, you heard Mr. Berleth

say there's an easy way and there's a hard way. He's trying to get the easy way. He's seeking their

cooperation. Obviously, if he has to come back to seek additional authority every time, by the time he gets the additional authority, the opportunity is gone. That doesn't mean that he has to exercise the authority immediately. far as the locks, I mean, as she just stated, taking a debtor out of possession, yes, it's specifically tailored to a situation where you have a warehouse storage facility and things may go missing pretty quickly. Until he assesses the threats at the premises that he has been entrusted with, he may need to change the locks. That doesn't mean that he wouldn't say, Okay, here's what we're looking at.

I mean, if he shows up and there's a

reasonably small amount of property that's going to be sold that's not going to satisfy the judgment, he needs to absolutely sequester that, keep it safe, and make sure that he has the ability to sell it.

A

that I went to South Texas one time and dealt with 23 locomotives. I had to get a special court order out of Harris County to specifically sequester the property in place and hold an auction within 48 hours.

Well, there was a lot of heavy equipment. It was 2 miles from the borde All types of circumstances come up that would require very heightened authority. In this instance, that doesn't mean he has 15 to use it.

MS CLARK: We're not talking about -- they identified leasehold rights and stock. We are not talking about) the property that's inside it, which they state is owned by a subsidiary, we state is owned by the government. So we're talking about stock. We're talking about leasehold rights. So that's where I have the issue.

THE COURT: Right.

Mr. Berleth, you're not going to sell

William Welter - January 16, 2024 Cross-Examination by Ms. Clark

MR. BERLETH: Your Honor, you know, my

history is military. I formally held a top secret

clearance. I'm familiar with what the military and the government's, you know, property rights are. And I have no intention of going across those lines.

And, again, and just to kind ofvassuage some of the fears of the debtor here, you know, there's three steps to selling a real property. The first is, is that, you know, I would have to come back to you and 10 say, Okay, Judge, I found this real property. I'm going to ask to engage a broker. Let's just say it's a boat, real property --

THE COURT: Understood. Here, they're potentially about -- there's drones that potentially they have -- MR(BERLETH: Yeah, I'm familiar with Cyberlux.

THE COURT: Yeah. So I think -- you know, I'm being a little bit rhetorical; but I -- to the degree if the Court felt that you were exceeding or being unreasonable, these folks can come back and say, Look --

unofficial Copy Office of Marilyn Burgess District Clerk

MR. BERLETH: Absolutely. THE COURT: -- Mr. Berleth is -- he's run amuck and he's crossing lines, he's being unreasonable

William Welter - January 16, 2024 Cross-Examination by Ms. Clark

My understanding is that you obviously -- you have these powers, but that's not the first that's not what the present intent is to goin there and create issues. You want to make sure that this debtor is able to do whatever they need to do to pay the debt, keep their business.

But you -- we also understand that they haven't paid it up to this point; and so they need to understand that you're serious about working this out and that if they don't, then there may be some consequences. And you may have to do things that are -- that they may not like for you to do.

BERLETH: Correct, Your Honor.

THE COURT: But, you know, that's a function of, you know, debt collection. But that's not the first, maybe not the second or the third, but it may ultimately be what needs to happen. And to the degree

that you have to undertake these steps where you take these things over or take possession of things, you're obviously very -- you're sophisticated enough to know that there may be security interests, liens, other

property interests. They deal with the government. The

And so I assume you're going to try to clear all that up and make sure you're doing the Fight thing as it relates to that kind of property. MR. BERLETH: Correct, Your Honor. I have not been as successful in this courthouse by being unreasonable.

THE COURT: Again, and some of this is rhetorical; but we're just having this conversation on the record so there's no misunderstandings. And you -- I'm sure you're -- I'm sure this is not anything that is a problem; but just so we're clear, we've had this discussion before and so there's no surprises. And I'm sure you'll try to do everything in an appropriate way going forward So with that, I think we're spinning our ttle bit.

wheels MOTTICKittie MS. CLARK: Your Honor, respectfully, I do not want to walk out of this courtroom without understanding the order with respect to the receiver.

Does he have to have a bond? What is the language going to look like so that I can inform my client, at a minimum, how to get ready for the disruption that is

about to occur at their business and so that we can decide what proper legal remedy we're going to seek. And so I just don't want to leave it to, Okay, they'll e-mail the Court an order. The Court sees it. The Court signs it. It may or may not hit electronic docket. Sometimes it takes us a week to even see an order.

So I do not want to leave this courtroom without seeing this order. It's a very, very extreme remedy. And for us to ask to have an order written out -- if we're going to interlineate it, fine. I would ask for a recess so that we can go through. They can do that, present it to Your Honor; and we can see what it looks like today.

Because I don't -- I know how it is when we get out of the courtroom, especially these hearings that are so long, and we all forget exactly where these tweaks are supposed to be and somebody heard it one way, another person heard it another. So that is my chief concer especially if we're going to have these wide range of powers.

So I hear what the receiver is saying. I totally respect that but I also understand what my job is going to be and I need to be able to do that.

THE COURT: I've heard your request.

We're not going to stay here and interlineate an amended

You will need to submit an amended order, and you'll need to submit it to the other side. And I ask that you confer --

MR. VARGO: Sure. Yes.

THE COURT: -- and -- on thatorder, just kind of identify any changes you made, and then give them an opportunity to provide any feedback. But once you've done that, you can submit it

And then if you have any objections, you can submit those objections How long is going to take, do you think, to amend the order?

MR. VARGO: I believe we'd have the amended order tomorrow and circulate it to them.

THE COURT: Okay. And then I'll give you until Monday to make any objections. And then at that point the Court will enter the order by Tuesday.

MS. CLARK: Thank you, Your Honor. I

THE COURT: Is there anything else?

MR. GRADY: No, Your Honor.

MR. VARGO: I'll be down here tomorrow. I

unofficial copy afive of Marilyn' Burgess District Clerk

Hearing January 16, 2024

THE COURT : Sounds good. Have a good day.

(END OF TODAY'S PROCEEDINGS)

Unofficial Copy Office of Marilyn Burgess District Clerk

Hearing January 16, 2024

I, Jennifer Gajevsky, Official Court Reporter in and for the 129th District Court of Harris, State of Texas, do hereby certify that the above and foregoing contains a true and correct transcription

in the above-styled and numbered cause, all of which occurred in open court in chambers and were reported by me.

I further certify that this Reporter's Record of the proceedings truly, and correctly reflects the exhibits, if any, offered by the respective parties.

Unofficial Copy Office & Marilyn Burgess District Clark

/s/ Jennifer Gajevsky

Jennifer Gajevsky, CSR Texas CSR 9250

Official Court Reporter

129th District Court Harris County, Texas 201 Caroline Houston, Texas 77002 Expiration: 2/2026