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Note 12 - Subsequent Events | 3 Months Ended
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Mar. 31, 2023
Notes to Financial Statements |
Subsequent Events [Text Block] |
Note 12 | Subsequent Events
Settlement of Litigation On April 28, 2023, WaveDancer, Inc. (the “Company”) and Jeffrey Gerald, the individual from whom the Company purchased all the outstanding shares of Gray Matters, Inc. (“GMI”), executed an agreement to settle pending litigation between them (the “Settlement Agreement”). On January 25, 2023, Gerald, as the result of the termination of his employment, filed a lawsuit against the Company for one year’s severance of $150,000 and benefits to which he claimed he was entitled under his employment agreement with the Company. He had also claimed an anticipatory breach of the payment of $1,500,000 of deferred consideration otherwise due him on December 10, 2023, under the Stock Purchase Agreement between him and the Company and an anticipatory breach to release from escrow 436,481 shares of the Company’s common stock which are held in escrow for application against potential indemnity claims under the Stock Purchase Agreement. The Company filed an answer denying Gerald’s claims. In addition, the Company filed a counterclaim seeking damages from Gerald associated with the acquisition transaction and arising under the Stock Purchase Agreement. The principal terms of the Settlement Agreement are:
| (a) | All amounts due to Gerald related to the GMI acquisition, including the $1,500,000 of deferred consideration, are deemed satisfied and such obligations are extinguished;
| (b) | The Company will release from escrow 436,481 shares of the Company’s common stock 90 days after the date of the Settlement Agreement;
| (c) | The Company will pay Gerald $25,000 as reimbursement for legal costs; and,
| (d) | Gerald and the Company agreed to mutual general releases of one another.
As a result of the settlement, the Company estimates that in the second quarter of 2023 it will recognize a gain on extinguishment of debt, net of expenses, of $1,410,576.

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- Definition The entire disclosure for significant events or transactions that occurred after the balance sheet date through the date the financial statements were issued or the date the financial statements were available to be issued. Examples include: the sale of a capital stock issue, purchase of a business, settlement of litigation, catastrophic loss, significant foreign exchange rate changes, loans to insiders or affiliates, and transactions not in the ordinary course of business. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 855 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//855/tableOfContent Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 855 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147483399/855-10-50-2 + Details
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