UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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Item 8.01. Other Events
Final Court Approval of Derivative Litigation
Background
As previously disclosed, on June 15, August 21, September 30, 2020 and April 8, 2022, a series of shareholder derivative cases were filed against us (as nominal defendant) and certain of our directors (Marc S. Schessel, Charles K. Miller, Steven Wallitt and Robert Christie (the “Director Defendants”)) in the United States District Court for the Southern District of New York, New York State Supreme Court and the Chancery Court in Delaware. Each of the lawsuits alleged that the Director Defendants named therein breached their fiduciary duties to the Company, including by misleading investors in connection with our April 13, 2020 press release with respect to the sale of COVID-19 rapid test kits, failing to correct false and misleading statements and failing to implement proper disclosure and internal controls.
Settlement Agreement
On December 24, 2021, the Company and the Director Defendants entered into a binding agreement with the shareholder derivative plaintiffs to settle the derivative litigation (the “Settlement”). Under the terms of this agreement, (i) the insurers for the Director Defendants will make a cash payment to legal counsel for the shareholder derivative Plaintiffs to cover their legal fees and (ii) the Company will adopt certain corporate governance reforms, including adopting resolutions to address corporate transparency, further enhancing board independence, further enhancement of the CFO position, amendment of the audit committee charter, revisions to nominating committee and compensation committee charters and other similar enhancements, and addressing Company polices, within 60 days of court approval of the settlement, in exchange for which all parties will be released from all claims related to the derivative class action litigation. This agreement provides that the parties will negotiate in good faith to enter into a definitive settlement agreement within thirty days, which agreement will be subject to court approval. On February 15, 2022, the Company and the Director Defendants entered into a stipulation of settlement (subject to Court approval) with the shareholder derivative plaintiffs to settle the Consolidated Derivative Action as well as another derivative action,
Class Action Settlement Agreement
On December 20, 2021, the Company and Mr. Schessel entered into a binding agreement with the Plaintiff to settle the litigation. Under the terms of this agreement, (i) the insurers for the Company and Schessel will make a cash payment to the Plaintiff and (ii) the Company will issue $600,000 worth of common stock to the class Plaintiffs, in exchange for which all parties will be released from all claims related to the securities class action litigation. This agreement provides that the parties will negotiate in good faith to enter into a definitive settlement agreement within thirty days, which agreement will be subject to court approval. Once the Company issues the $600,000 worth of stock, the Company believes it will have satisfied its obligations with respect to the payment of the $750,000 accrued retention liability applicable to its D&O insurance policy.
Final Court Approval
On June 29, 2022, the U.S. District Court for the Southern District of New York (the “Court”) gave final approval of the Settlement resolving three shareholder derivative lawsuits involving the Company. In accordance with the Court’s Order Approving Settlement, the Company is issuing this Form 8-K and making disclosure of the Settlement and related documents to its shareholders. The terms of the derivative settlement are described in the Settlement documents which are filed as Exhibits to this Current Reports on Form 8-K as filed with the SEC on April 8, 2022.
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Final Court Approval of Class Action Litigation
Background
As previously disclosed, on April 29, May 27, June 23, 2020 and December 27, 2021, a series of securities class action cases were filed in the United States District Court for the Southern District of New York against us and our former CEO. All three lawsuits alleged that our company and our former CEO misled investors in connection with our April 13, 2020 press release with respect to the sale of COVID-19 rapid test kits. These three class actions were consolidated on September 18, 2020 and Daniel Yannes was designated lead plaintiff. A consolidated Amended Complaint was filed on October 19, 2020. The action was captioned Daniel Yannes, individually and on behalf of all others similarly situated, Plaintiff (“Plaintiff”) vs. SCWorx Corp. and Marc S. Schessel (“Schessel”), Defendants.
Settlement Agreement
On December 20, 2021, the Company and Mr. Schessel entered into a binding agreement with the Plaintiff to settle the litigation. Under the terms of this agreement, (i) the insurers for the Company and Schessel will make a cash payment to the Plaintiff and (ii) the Company will issue $600,000 worth of common stock to the class Plaintiffs, in exchange for which all parties will be released from all claims related to the securities class action litigation. This agreement provides that the parties will negotiate in good faith to enter into a definitive settlement agreement within thirty days, which agreement will be subject to court approval. Once the Company issues the $600,000 worth of stock, the Company believes it will have satisfied its obligations with respect to the payment of the $750,000 accrued retention liability applicable to its D&O insurance policy.
Final Court Approval
On June 29, 2022, the U.S. District Court for the Southern District of New York (the “Court”) gave final approval of the Settlement resolving the class action litigation involving the Company. In accordance with the Court’s Order Approving Settlement, the Company is issuing this Form 8-K and making disclosure of the Settlement and related documents to its shareholders.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits:
| Exhibit No. | Description | |
| 10.1 | Stipulation of Settlement (incorporated by reference to Exhibit 1.01 to the Company’s 8-K filed with the SEC on April 8, 2022) | |
| 99.1 | Press Release dated July 6, 2022 | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL). |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| SCWorx Corp. | ||
| Dated: July 6, 2022 | By: | /s/ Timothy A. Hannibal |
| Timothy A. Hannibal | ||
| President and Chief Executive Officer | ||
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