Item 1. Legal Proceedings
ITEM 1. LEGAL PROCEEDINGS.
A stipulation for judgment was filed by Carmel Solutions, Inc. (Carmel) in the Superior Court of California, Orange County, in accordance with, and upon our default of, a settlement agreement we entered into with Carmel on May 5, 2009, and a judgment was entered against us on October 26, 2009 in the amount of $72,852, plus accruing interest from that date at the rate of $20 per day and post judgment costs incurred in enforcing the judgment.
We are a defendant in a pending legal proceeding filed by AT&T on December 11, 2009 in the U.S District Court of the District of Connecticut. This suit alleges one cause of action for breach of contract. The Complaint claims that we owe money for services rendered, that we subsequently entered into a settlement agreement with AT&T to settle the amount owed to AT&T, and that we failed to make any payments due under such settlement agreement. AT&T was granted an automatic entry of judgment against us in the amount of $440,672 plus interest, attorney’s fees and costs. In December of 2010, AT&T obtained an Order of Garnishment against one of our bank accounts in the amount of $510,525, $76,653 of which was actually garnished. We are currently attempting to further negotiate with AT&T.
We are also one of a number of defendants in a pending legal proceeding filed by First Citizens Bank & Trust, Inc. on June 17, 2010 in the Superior Court of Fulton County, Georgia. This suit alleges five causes of action, three of which relate to the breach of Flint’s loan agreement entered into with the Georgian Bank in the principal amount of $500,000 plus interest, attorney’s fees and costs. We did not respond within the time period allowed. A motion for default judgment was filed on October 11, 2010 against Flint for the amount of $200,000 plus interest, attorney’s fees and costs.
Bill Burbank, our previous President and COO, filed a lawsuit against us in the 15th Judicial Circuit in Palm Beach County, Florida on September 22, 2010. This suit alleges one cause of action for breach of agreement. The Complaint claims that we entered into a settlement agreement with Bill Burbank to settle the amount owed to him, and that we failed to make the first payment due under such settlement agreement. Mr. Burbank sought and received a judgment for damages in the amount of $190,000 plus interest, attorney’s fees and costs.
On October 25, 2010, China Voice Holding Corp. filed a lawsuit against us in the 15th Judicial Circuit in Palm Beach County, Florida. This suit alleges one cause of action for breach of contract. The complaint claims that we entered into a settlement agreement with CHVC to settle the amount owed to it, and that we failed to make the first monthly payment due under such settlement agreement. CHVC sought and received a judgment for damages in the amount of $82,742 plus pre-judgment interest of 18% per annum starting September 1, 2010, plus $500,000 as an additional liquidated damage, post judgment interest, costs and attorney’s fees.
On November 10, 2010, Abovenet Communications filed a Complaint against Flint in US District Court for the Southern District of New York, alleging breach of contract and seeking $87,761 in damages, plus interest, attorney’s fees and costs.
On November 24, 2010, Tom Davis filed a Demand for Arbitration alleging a breach of the settlement agreement by and among Mr. Davis and Flint, and seeking damages in the amount of $2,230,000.
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Because Thermocredit has a first priority secured interest against all of Flint’s assets, Flint expects that Thermocredit will stop the actual collection on any of these judgments, and management hopes to be able to negotiate further with these plaintiffs and come to a reasonable settlement.
We are also a party to other legal proceedings in the normal course of business. Based on evaluation of these matters and discussions with counsel, we believe that liabilities arising from these matters will not have a material adverse effect on the consolidated results of our operations or financial position.
Due to the regulatory nature of the industry, the Company periodically receives and responds to various correspondence and inquiries from state and federal regulatory agencies. Management does not expect the outcome on these inquiries to have a material impact on our operations or financial condition.
ITEM 1A. RISK FACTORS.
Not Applicable to Smaller Reporting Companies.