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11. LEGAL PROCEEDINGS
12 Months Ended
Dec. 31, 2017
Commitments and Contingencies Disclosure [Abstract]  
LEGAL PROCEEDINGS

Ken Link v. Wound Management Technologies, Inc., et al. On November 14, 2011, Ken Link instituted litigation against Wound Management Technologies, Inc. and Scott A. Haire in the District Court of Tarrant County Texas, Cause No. 342-256486-11 of the 342nd Judicial District, alleging default under the terms of a certain promissory note executed by Wound Management Technologies, Inc. and guaranteed by Scott A. Haire. Ken Link asserted at that point in time that the unpaid balance of the note, including accrued interest as of December 4, 2011, was the sum of $355,292, Mr. Link asserted that he was entitled to receive 200,000 shares of the Company’s common stock. Mr. Link was also seeking attorney’s fees and interest at 13% per annum, plus $1,000 per day. We disputed the claim, because we believed the contract was tainted by usury, and therefore, a usury counterclaim would more than offset the unpaid balance of the promissory note.

 

The note, in the original principal amount of $223,500, required the payment of interest accrued at 13% per annum; an additional one-time charge of $20,000 due on maturity; the issuance of 200,000 shares of stock as interest; and a $1,000 per day late fee for each day the principal and interest is late. It was our contention that these sums made the contract usurious and the usury claims more than offset the amount of the unpaid indebtedness. Furthermore, we filed an action for recovery of damages for usury under the Texas Finance Code for a note which was previously executed by the Company and payable to Ken Link, which was in fact paid to Mr. Link in full. In addition, Wound Management was seeking recovery of attorney’s fees pursuant to the usury provisions of the Texas Finance Code. While the amount of the promissory note remained unpaid, the counterclaims more than offset the maximum amount that could be asserted on the promissory note. The case was set for trial the week of October 21, 2013, but after three (3) days of trial before a jury, the judge declared a mistrial. Subsequently, Ken Link amended his pleadings and alleged that Wound Management Technologies, Inc. never intended to pay the $223,500 promissory note and sought damages for fraud and the loss of the benefit of the bargain relating to the shares of stock, plus interest as set forth in the note, exemplary damages, and attorney's fees. The case was subsequently reset for trial the week of December 1, 2014, and the judge again declared a mistrial. On September 4, 2015, Ken Link again amended his pleadings seeking the sums he says were owed to him resulting from the advance by him in the amount of $223,500. The case was set for trial the week of May 15, 2017. but again, after three (3) days of trial before a jury, the judge declared a mistrial.

 

The case was subsequently reset for trial the week of October 30, 2017, and during a break in the proceedings, (November 1, 2017), the Company and Ken Link entered into a binding settlement agreement, which resulted in dismissal with prejudice of all claims and counterclaims asserted in Cause No. 342-256486-11, in exchange for which the Company delivered to Ken Link 1,200,000 shares of Wound Management Technologies, Inc. common stock in total satisfaction of all obligations between the parties. As a result of this settlement, the Note Payable to Mr. Link in the amount of $223,500 was cancelled along with accrued interest in the amount of $147, 253. The fair value of the 1,200,000 shares of common stock issued was $84,000 based on the stock price when issued, the Company recognized gain on settlement of debt of $286,873.

 

Wound Management Technologies, Inc. v. Fox Lake Animal Hospital, PSP: Wound Management Technologies, Inc. instituted litigation in Cause No. 96-263918-13 in the 96th District Court of Tarrant County, Texas against Fox Lake Animal Hospital, PSP and Bohdan Rudawksi, Trustee of the Fox Lake Animal Hospital, PSP. The cause of action asserts that the loan transaction between Wound Management Technologies, Inc. and Fox Lake Animal Hospital PSP involved the collection of illegal usurious interest for the reason that while the face amount of the promissory note is $39,000, but the loan actually loaned for a 6-month period was $25,000, resulting in an interest rate in excess of the maximum rate permitted by the Texas Finance Code. Wound Management Technologies, Inc. is seeking to recover the penalties authorized by the Texas Finance Code, together with the attorney’s fees. Fox Lake Animal Hospital and Bohdan Rudawski, Trustee have filed a counterclaim where they allege there were misrepresentations by Wound Management Technologies, Inc. that would be excuse them from having to pay penalties under the Texas Finance Code for charging usurious interest. Fox Lake Animal Hospital and Bohdan Rudawski, Trustee further claim that actions asserted violates the Federal Securities Exchange Act and alleged fraud and fraud in the inducement in entering into the promissory note.

 

Wound Management Technologies, Inc. v. Bohdan Rudawski: Wound Management Technologies, Inc. instituted litigation in Cause No. 352-263856-13 in the 352nd District Court of Tarrant County, Texas against Bohdan Rudawksi. The case has been postponed until September of 2016. The cause of action asserts that the loan transaction between Wound Management Technologies, Inc. and Bohdan Rudawski involved the collection of illegal usurious interest for the reason that while the face amount of the promissory note is $156,000, but the loan actually loaned for a 6-month period was $100,000, charging an effective interest rate of over 100% which violates the provisions of the Texas Finance Code. Wound Management Technologies, Inc. is seeking to recover the penalties authorized by the Texas Finance Code, together with the attorney’s fees. Bohdan Rudawski has filed an answer and alleges there was not an absolute obligation to repay the note, attempting to defeat the usury claim. Bohdan Rudawski has further asserted that the claims violate the Federal Securities Exchange Act and allege fraud of inducement in entering into the promissory note.

 

The 352nd Judicial District Court entered an order in December, 2016 consolidating the Bohdan Rudawski case and the Fox Lake Animal Hospital case into the 352nd Court case.  The case was tried and went to the jury on March 22, 2018. The jury, in response to the question concerning the fraud counterclaim, reached a verdict that there was no fraud, therefore, a Judgment should be entered finding that the Defendants take nothing by virtue of their fraud claim.