Note 11. Commitments and Contingencies

Litigation and legal proceedings

Significant judgment is required to determine both the likelihood of there being any potential liability and the estimated amount of a loss related to the Company’s legal matters. Based on the Company’s current knowledge, the Company’s management believes that the amount or range of a potential loss from its outstanding legal matters will not, either individually or in the aggregate, have a material adverse effect on its business, consolidated financial position, results of operations or cash flows. However, the outcome of such legal matters is inherently unpredictable and subject to significant uncertainties. The Company evaluated the matters described below, and assessed the probability and likelihood of the occurrence of liability. Based on management’s estimates, the Company recorded $745, which is included in accounts payable, accrued expenses, and other current liabilities in the condensed consolidated balance sheet as of September 30, 2017.

The Company expenses legal fees in the period in which they are incurred.

Cordial

Effective October 2014, XpresSpa terminated its former Airport Concession Disadvantaged Business Enterprise (“ACDBE”) partner, Cordial Endeavor Concessions of Atlanta, LLC (“Cordial”), in several store locations at Hartsfield-Jackson Atlanta International Airport.

On January 3, 2017, XpresSpa filed a lawsuit in the Supreme Court of the State of New York, County of New York against Cordial and several related parties. The lawsuit alleges breach of contract, unjust enrichment, breach of fiduciary duty, fraudulent inducement, fraudulent concealment, tortious interference, and breach of good faith and fair dealing related to XpresSpa’s former partnership with Cordial as XpresSpa’s ACDBE partner in several store locations at Hartsfield-Jackson Atlanta International Airport (the “Cordial Litigation”). On March 3, 2017, XpresSpa filed a first amended complaint against Cordial. On April 5, 2017, Cordial filed a motion to dismiss the Cordial Litigation. On September 12, 2017, the Court held a hearing on the motion to dismiss.

On January 4, 2017, XpresSpa filed a lawsuit in the United States District Court for the Southern District of New York against its former attorney, Kevin Ross, and his law firm, alleging malpractice, unjust enrichment, breach of fiduciary duty, fraudulent inducement, fraudulent concealment, tortious interference, and promissory estoppel related to XpresSpa’s former partnership with Cordial, as well as XpresSpa’s engagement of Kevin Ross as its attorney (the “Ross Litigation”). On March 17, 2017, XpresSpa filed a First Amended Complaint against the defendants. On June 2, 2017, the Ross Defendants filed their answer.

Both the Cordial Litigation and Ross Litigation are pending before the respective courts.

In re Chen et al.

On March 16, 2015, four former employees of XpresSpa who worked at locations in John F. Kennedy International Airport and LaGuardia Airport filed a putative class and collective action wage-hour litigation in the United States District Court for the Eastern District of New York, claiming that they and other spa technicians were misclassified, and that overtime was unpaid. On September 23, 2016, the Court conditionally certified the class. The parties held a mediation on February 28, 2017 and reached an agreement on a settlement in principle. On September 6, 2017, the parties entered into a settlement agreement. On September 15, 2017, the parties filed a motion for settlement approval with the Court; this motion is pending. In October 2017, XpresSpa paid the agreed-upon settlement amount to the settlement claims administrator, to be held in escrow pending a fairness hearing and final approval by the Court.

Other

XpresSpa is involved in various other claims and legal actions that arise in the ordinary course of business. The Company does not believe that the ultimate resolution of these actions will have a material adverse effect on XpresSpa’s financial position, results of operations, liquidity, or capital resources. However, a significant increase in the number of these claims, or one or more successful claims under which the Company incurs greater liabilities than the Company currently anticipates, could materially adversely affect the Company’s business, financial condition, results of operations and cash flows.

The Company’s intellectual property operating segment is engaged in litigation, for which no liability is recorded, as the Company does not expect a material negative outcome.

On November 6, 2017, Moreton Binn and Marisol F, LLC, former shareholders of XpresSpa, filed a lawsuit against the Company and its directors alleging that the defendants engaged in securities violations, misrepresentation, and various other allegations regarding the Company’s acquisition of XpresSpa. The Company is currently in the process of evaluating the claims.