Item 1. Legal Proceedings
ITEM
1. LEGAL PROCEEDINGS
The Company is engaged ongoing litigation with FFS
Data Corporation (“FFS”) in the Supreme Court of the State of New York, County of New York relating to a breach of contract
in connection with the Acquired Merchant Portfolio whereby the Company is making a claim to recover the purchase price of the Acquired
Merchant Portfolio and FFS is seeking the balance of the purchase price of the Acquired Merchant Portfolio. In addition, in connection
with the litigation with FFS, the Company has also filed an action in the District Court of the 42 nd Judicial District,
Taylor County, Texas against Clear Fork Bank, N.A., f/k/a First National Bank Albany/Breckenridge (the “Bank”), the payment
processing bank for the Acquired Merchant Portfolio, for damages the Company suffered as a result of it having to cease processing transactions
for the merchants underlying the Acquired Merchant Portfolio. The Bank has filed a counterclaim for purported overdrafts by the Company
in connection with the transactions processed since the acquisition of the Acquired Merchant Portfolio by the Company. e District Court
of the 42nd Judicial District, Taylor County, Texas. The Texas action is currently in discovery, and the Company has amended its pleading
in that action to assert additional causes of action and to add additional individual defendants. In the New York action, discovery has
been completed and the parties are submitting their respective motions for summary judgment by September 11, with opposition papers due
on October 16 and reply papers due on November 13. FFS also commenced an action in the Supreme Court of the State of New York seeking
indemnification for legal fees it incurred in defending an action in Hawaii. Such action is currently in the discovery phase with
deposition to be held in September. Earlier this year, PLS Checking Cashing commenced an action in the Supreme Court, State of
New York, County of New York against the Company and the Bank alleging that they failed to remit payment to it of approximately $125,000.
The Company has cross-claimed against the Bank, and the Bank has yet to respond to the cross-claims.
DMINT is currently in a contract dispute with
a contractor. The Company has paid $100,000 to the contractor for work completed and materials provided and returned materials to offset
the potential liability of approximately $444,000. The Company has recorded just over $315,000 in accounts payable related to the matter.
The matter continues to be in discovery; however, the parties continue to discuss settlement. The parties are working on a payment schedule
but have been unable to agree on terms to date.
Other than discussed above, there are no
material claims, actions, suits, proceedings, or investigations that are currently pending or, to the Company’s knowledge, threatened
by or against the Company or respecting its operations or assets, or by or against any of the Company’s officers, directors, or
affiliates
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