NOTE 17. COMMITMENTS AND CONTINGENCIES

Legal Matters

The Company is involved in litigation claims arising in the ordinary course of business. Legal fees and other costs associated with such actions are expensed as incurred. In addition, the Company assesses, in conjunction with its legal counsel, the need to record a liability for litigation and contingencies. The Company reserves for costs relating to these matters when a loss is probable, and the amount can be reasonably estimated.

On May 10, 2018, Vista Capital Investments, LLC (“Vista”) filed suit against the Company for breach of contract and breach of the implied covenant of good faith and fair dealing arising out of a securities purchase agreement and a convertible note in the principal amount of $275 in the Superior Court of California for the county of San Diego. Vista alleges damages in excess of $9,000 stemming from the Company’s purported dilutive issuances of Company common stock. Vista was the holder of a convertible note for which there was no prior Board authorization See Note 2). The Company and Vista reached a tentative settlement framework (subject to final documentation), following which the court dismissed this matter without prejudice.

On March 28, 2019, the Company obtained a temporary restraining order against Nevada Agency and Transfer Company (“NATCO”) in the Second Judicial District Court for the State of Nevada, enjoining NATCO, the Company’s transfer agent, from processing or issuing any conversion requests submitted on behalf of convertible noteholders whose notes were determined to have been issued without requisite Board approval (See Item 1, Recent Developments “Internal Investigation”). The Company obtained a preliminary injunction on April 11, 2019 and filed an amended complaint on January 23, 2020 adding Michael Palleschi (the Company’s former CEO) and certain related parties as defendants, seeking (among other damages) a declaratory judgment that the shares of Company stock issued to Mr. Palleschi and related parties were unauthorized and to compel the return of these shares to the Company’s authorized capital stock. The matter remains pending in Nevada and has been delayed as a result of COVID-19.

On April 11, 2019, the Company received a demand for arbitration, which was filed with the American Arbitration Association (AAA), Case No. 01-19-0001-0962, on behalf of Michael Palleschi, the Company’s former CEO, alleging a breach of his employment agreement and seeking $11,300 in damages. The Company has asserted counterclaims and affirmative defenses to Mr. Palleschi’s claims and intends to vigorously defend this matter. Discovery is pending. This matter has been placed in abeyance, to be reopened upon motion and payment of panel deposit.

On June 26, 2019, Efraim Barenbaum filed a shareholder derivative suit in the United States District Court for the Southern District of New York against certain of the Company’s former directors and executive officers, alleging claims for breaches of fiduciary duties, unjust enrichment, waste, and violations of Section 14 of the Securities Exchange Act of 1934. The Company was named as a nominal defendant only. The Company filed a motion to dismiss the complaint on September 23, 2019. In response to the motion, the plaintiff filed an amended complaint on November 1, 2019, but the causes of action remained equally deficient. Having found the claims in the amended complaint also to be baseless, the Company filed a motion to dismiss that pleading as well on January 27, 2020. Motion practice is ongoing. On September 30, 2020, the court dismissed the plaintiff’s compliant with prejudice.

On August 17, 2019, Auctus Fund, LLC (“Auctus”) filed suit against the Company alleging, among other things, breach of contract and violations of state and federal securities laws, arising out of a securities purchase agreement and a convertible note in the principal amount of $525. Auctus is the holder of a convertible note for which there was no prior Board authorization. The Company denies any alleged wrongdoing and intends to vigorously defend against these claims. The matter is pending in the United States District Court for the District of Massachusetts. The parties are presently engaged in settlement discussions.

On November 5, 2019, St. George Investments LLC (“St. George”) filed suit against the Company in the Third Judicial District Court for Salt Lake County in the state of Utah to compel arbitration, alleging, among other things, breach of contract arising out of a securities purchase agreement and convertible note in the principal amount of $2,315. St. George is the holder of a convertible note for which there was no prior Board authorization. The Company is vigorously defending its interests in this matter. On June 4, 2020, the Company learned that the arbitrator, following a hearing on St. George’s motion for partial summary judgment, granted St. George’s motion and requested relief of approximately $2.7 million. The Company believes the arbitrator’s decision is inconsistent with the underlying facts and applicable law and has filed papers to vacate the arbitration award, among other relief. There has been no decision rendered on the briefs and the matter remains pending.

On November 26, 2019, David Lethem, the Company’s former CFO, filed a complaint against the Company in the 20^th Judicial Circuit Court for Lee county in the State of Florida for breach of contract arising out of a transition, separation and general release agreement. The Company filed a counterclaim to rescind the agreement based on fraudulent inducement. Discovery is ongoing in this case and the Company continues to vigorously defend its interests in this matter.

On January 3, 2020, CBRE, Inc. (“CBRE”) filed suit against the Company’s subsidiary, CrossLayer, Inc., for breach of contract arising out of a program participation agreement in the Superior Court of the state of Delaware. CBRE is alleging damages of $1,333. The Company considers CBRE’s claims to be without merit and has engaged counsel who is vigorously disputing this matter. On April 29, 2020, CBRE filed a notice of voluntary dismissal without prejudice. This matter is, effectively, closed.

On June 5, 2020, certain former directors of the Company (Christopher Ferguson, Luisa Ingargiola, Brad Mitchell, and Patrick O’Hare) filed suit against the Company in the District Court for Clark County in the State of Nevada to recover indemnification costs arising out of indemnification agreements. The Company denies any alleged wrongdoing and is defending its interests in this matter. The Company continues to assess and discuss terms of a possible settlement.

On September 29, 2020, a class action lawsuit was filed in the United States District Court for the Eastern District of Michigan against Vision Property Management, LLC and related entities, including the Company and US Home Rentals LLC, as successor defendants, in connection with claims arising out of various regulations, including the Fair Housing Act, the Michigan Consumer Protection Act, and the Truth in Lending Act. The Company is evaluating this action and intends to vigorously defend its interests in this matter.

Additionally, there are legal proceedings arising out of the legacy Vision business that implicate certain of our existing rental properties. Most of these matters have either settled or are close to settling based on an agreed upon settlement structure. The Company has accrued $1,240 in legal settlement expense in its Consolidated Balance Sheets as part of its current liabilities and on its Statement of Operations as part of its general and administrative total.