Commitments and Contingencies |
3 Months Ended | |
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Mar. 31, 2019 | ||
| Commitments and Contingencies Disclosure [Abstract] | ||
| Commitments and Contingencies Disclosure [Text Block] |
Note 9. Commitments and Contingencies Legal Proceedings In the normal course of business or otherwise, we may become involved in legal proceedings. We will accrue a liability for such matters when it is probable that a liability has been incurred and the amount can be reasonably estimated. When only a range of possible loss can be established, the most probable amount in the range is accrued. If no amount within this range is a better estimate than any other amount within the range, the minimum amount in the range is accrued. The accrual for a litigation loss contingency might include, for example, estimates of potential damages, outside legal fees and other directly related costs expected to be incurred. On March 29, 2019, Network 1 Financial Securities Inc. (“Network One”) served a complaint against Alliance MMA. Network One alleges that Alliance breached its obligation under its agreements with Alliance to indemnify Network One for certain costs it incurred in connection with the defense and settlement of the class action litigation previously instituted against Alliance and Network One. This class action litigation has since been resolved, as previously disclosed. Network One has demanded approximately $135,000 in payment of alleged damages. The Company does not believe that it owes the amount demanded and intends to vigorously defend against these claims.
On December 19, 2018, the Company’s former CEO, Robert L. Mazzeo, who resigned on May 25, 2018, served a complaint against Alliance MMA in the United States District Court for the Southern District of NY. Mazzeo alleges that he (i) was fraudulently induced to become the CEO of the Company and (ii) entered into an employment contract with the Company and that the Company breached said alleged contract. Mazzeo seeks damages in “excess of $500,000.” The Company believes that the lawsuit is frivolous and violative of Rule 11 of the Federal Rules of Civil Procedure. The Company filed an answer to the complaint on February 5, 2019, and in addition to mounting a vigorous defense, filed counter claims alleging breach of fiduciary duty. The Company does not believe that it owes the amount demanded and intends to vigorously defend against these claims.
In August 2018, SCWorx settled a dispute with a former employee for $260,000, of which approximately $132,000 was paid in 2018 and the balance of $128,000 was accrued at December 31, 2018. The remaining balance was paid in January 2019. The employee had sued the Company in Massachusetts Superior Court for compensation under an employment agreement.Other As part of the stock offering completed in January 2018, Alliance issued warrants with a provision requiring Alliance to pay the warrant holder the Black - Scholes value of the warrant upon a fundamental transaction as defined in the SPA. On August 20, 2018, Alliance entered into a Stock Exchange Agreement with SCWorx which upon the closing in February 2019, qualified as a fundamental transaction. The holders of the warrants had thirty days to notify SCWorx of the exercise of their rights under this provision, and two holders did so in the allotted time. The Company has negotiated settlements with the warrant holders aggregating $175,000 which has been accrued at March 31, 2019.
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