RAVE RESTAURANT GROUP, INC. 10-Q

Item 1. Legal Proceedings On January 6, 2020, the Company’s former Chief Executive Officer, Scott Crane, filed suit in the U.S. District Court for the Eastern District of Texas alleging various claims in connection with the Company’s termination of his employment in July 2019. In general, the suit asserted that the Company terminated Mr. Crane for the purpose of depriving him of certain equity compensation that would otherwise have become due to him on October 15, 2019. The case proceeded to a jury trial, which resulted in a verdict in favor of Crane on his breach of contract claim. On February 9, 2022, the Court entered a $1.9 million judgment against the Company inclusive of attorney fees, court costs and pre-judgment interest. The Company has filed an appeal of the judgment to the Fifth Circuit Court of Appeals. There are three possibilities upon decision by the Fifth Circuit Court of Appeals: the judgment could be affirmed; the judgment could be reversed and the matter sent for a new trial; or, the judgment could be reversed and judgment entered in favor of the Company. Due to the range of possible decisions by the Fifth Circuit Court of Appeals, it is impossible to predict the ultimate outcome at this time. The Company is subject to other claims and legal actions in the ordinary course of its business. The Company believes that all such claims and actions currently pending against it are either adequately covered by insurance or would not have a material adverse effect on the Company’s annual results of operations, cash flows or financial condition if decided in a manner that is unfavorable to the Company. Item 1A. Risk Factors Not required for a smaller reporting company.