Item 3. Legal Proceedings
Item
3. Legal Proceedings
From
time to time, we may be subject to claims and litigation arising in the ordinary course of business. The outcome of any litigation is
inherently uncertain. Based on the Company’s current knowledge it believes that the final outcome of the matters discussed below
will not likely, individually or in the aggregate, have a material adverse effect on its business, financial position, results of operations
or cash flows; however, in light of the uncertainties involved in such matters, there can be no assurance that the outcome of each case
or the costs of litigation, regardless of outcome, will not have a material adverse effect on the Company’s business.
On
January 30, 2024, the former President, Media filed an action against the Company and Manoj Bhargava, the former interim CEO and a principal
stockholder, alleging claims for breach of contract, failure to pay wages and defamation, among other things, in the United States District
Court of the Southern District of New York, seeking damages in an unspecified amount. On November 15, 2024, the Company has executed
a confidential settlement agreement with the former President, Media which fully resolved the matter to the satisfaction of the parties
to the litigation.
On
March 21, 2024, the former CEO and Chairman of the board of directors filed an action against the Company, members of its board of directors
and Simplify, alleging claims for retaliation, breach of contract, wrongful termination and age discrimination, among other things, in
the Superior Court of the State of California seeking damages in an amount of $20.0 million. The Company and board member Carlo Zola
filed a Cross Complaint and Answer on June 20, 2024. Apart from Mr. Zola, the remaining individual board member defendants successfully
filed a Motion to Quash Service of Summons based on lack of jurisdiction, and they have been dismissed from the case. On September 13,
2024, the former CEO and Chairman filed an Answer to the Company’s Cross Complaint.
On
April 8, 2025, the former CEO and Chairman, the Company, and Mr. Zola filed a Stipulation to allow the former CEO and Chairman to file
a First Amended Complaint, which adds a new cause of action for alleged breach of contract based upon the Company’s refusal to
advance certain attorneys’ fees to him. The Court has not yet approved the filing of the First Amended Complaint, and the Company
will respond to the First Amended Complaint in due course. The Company intends to vigorously defend itself against the allegations made
in this lawsuit.
26
On
April 1, 2024, Authentic Brands Group, LLC, ABG-SI, LLC, and ABG Intermediate Holdings 2 LLC (collectively referred to as the “ABG
Group”) filed an action against the Company and Manoj Bhargava, the former interim CEO of the Company and a principal stockholder,
alleging, among other things, breach of contract in the United States District Court of the Southern District of New York seeking damages
in the amount of $48.8 million (the alleged and disputed $3.8 million royalty fee liability and $45.0 million termination fee liability
as reflected in current liabilities from discontinued operations).
On
June 7, 2024, the Company filed a response denying ABG Group’s alleged breach of contract action and filed a counterclaim against
ABG Group and Minute Media, Inc. alleging, among other things, unfair competition, misappropriation of trade secrets, unjust enrichment,
breach of contract and tortious interference with contract. On August 2,2024, ABG Group filed an amended complaint which the Company
responded to on August 22, 2024 and subsequently filed counterclaims against ABG Group and Sportority, Inc. d/b/a Minute Media. A settlement
conference was held on December 4, 2024. On March 4, 2025, ABG Group filed a Second Amended Complaint adding allegations and additional
claims against Mr. Bhargava. The allegations and claims asserted against the Company remain substantially the same as those in ABG Group’s
original complaint filed April 1, 2024. On August 30, 2024, each of ABG, Minute Media, Inc., and Mr. Bhargava filed respective motions
to dismiss, which motions were fully briefed as of November 1, 2024. The motions remain pending with Mr. Bhargava’s motion needing
to be restated and briefed after the subsequent filing of the Second Amended Complaint. The Company intends to vigorously defend itself
against the allegations made in this lawsuit.
Item
4. Mine Safety Disclosure
Not
applicable.
Part
II.