Item 3. Legal Proceedings
ITEM 3. LEGAL PROCEEDINGS
On October 30, 2020, the former owners of
Cloudburst filed a Complaint in the Circuit Court of Fairfax County, Commonwealth of Virginia, styled, Andrea Suzara Bennett and
Adam W. Bennett Plaintiffs v. KAE Holdings, Inc., Case No. 2020 17025. In the Complaint, plaintiffs alleged the following counts:
Breach of Contract — Andrea Bennett and Breach of Contract — Adam Bennett. Plaintiffs are
seeking compensatory damages in the aggregate amount of approximately $1,000,000 plus interest. On January 15, 2021, we answered the
Complaint, denied the allegations, and alleged certain counterclaims: (i) Breach of Contract — all Counterclaim
Defendants, (ii) Fraudulent Inducement — All Counterclaim Defendants, and (iii) Breach of
Contract — Adam Bennett. We are seeking damages in an amount to be determined at trial, but no less than
$2,800,000, recission of the promissory notes that we issued in connection with our purchase of Cloudburst from the plaintiffs,
punitive damages of $350,000, and temporary and permanent injunctive relief. On April 20, 2022, we settled the litigation for a
payment of $200,000 in exchange for the Counterclaim Defendants to us for cancellation (i) the $900,000 promissory notes and (ii)
186,048 shares of our common stock, which we had issued to them in connection with their sale of Cloudburst to us in April 2019. As of the date of this Annual Report, this case has been settled.
24
On February 1, 2024, JPI Technologies, LLC filed
a complaint in the Circuit Court of Fairfax County, Virginia, styled JPI Technology, LLC, Plaintiff, v. Axxum Technologies, LLC, Defendant ,
Case No. 2024-01774. Plaintiff alleged the breach of a settlement agreement and sought damages in the amount of $126,000. Subsequent
to the date of filing of the Complaint, Defendant (a wholly-owned subsidiary of ours) has made certain payments to Plaintiff in connection
with the Settlement Agreement and denies that it owes the amount alleged in the Complaint. In connection with the settlement agreement,
Defendant executed and delivered a Judgment Order in the unpaid settlement amount, interest thereon at the annual rate of 6%, and attorneys’
fees and costs. As of the date of this Annual Report, this case has been settled.
On March 21, 2024, Unique Funding Solutions LLC filed
a complaint in the Circuit Court of Fairfax County, Virginia, styled Unique Funding Solutions LLC, Plaintiff v. Cycurion, Inc., d/b/a
fka Cyber Secure Solution, Axxum Technologies LLC, Cycurion Innovation, Inc., Cloudburst Security LLC, Emmit Jones McHenry, Kurt, McHenry,
and Avin McCoy , Case No. CL2024-0004073. Plaintiff alleged that the entity defendants entered into a future receipts/receivables
agreement with Plaintiff, pursuant to which the entity Defendants became obligated to pay to Plaintiffs approximately $490,000. Plaintiff
also alleged that the individual Defendants personally guaranteed the obligations of the entity Defendants. Plaintiff further alleged
that all Defendants defaulted in the performance of their respective agreements, which became the subject of a settlement agreement in
the amount of approximately $430,000, with a weekly payment schedule. Defendants deny the allegations set forth in the complaint and
the matter is now in the discovery phase of litigation. As of the date of this Annual Report, this case has been settled.
On July 29, 2024, Object3, LLC initiated an arbitration
proceeding with the American Arbitration Association, styled Object3, LLC, Claimant, v. Cloudburst Security, LLC, Respondent ,
Case No. 01-24-0006-9906. The Claimant made claims for unpaid consulting services and associated costs, fees, and interest for the prior
12-month period in the aggregate amount of approximately $228,000. Defendant (a wholly-owned subsidiary of ours) denies that it owes
such amount to Claimant. The arbitration is in the early stages and, as of the date of this Annual Report, we are in negotiations to settle this case.
We know of no other material pending legal proceedings
to which we or any of our subsidiaries is a party or to which any of our assets or properties, or the assets or properties of any of
our subsidiaries, are subject and, to the best of our knowledge, no adverse legal activity is anticipated or threatened. In addition,
we do not know of any such proceedings contemplated by any governmental authorities.
We know of no material proceedings in which any of
our directors, officers, or affiliates, or any registered or beneficial stockholder is a party adverse to us or any of our subsidiaries
or has a material interest adverse to us or any of our subsidiaries.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
PART II