Usio, Inc. 10-K

ITEM 3. LEGAL PROCEEDINGS. C2Go Note Receivable Under a loan and security agreement dated February 2, 2016, we loaned the principal amount of $200,000 to C2Go, Inc. with an interest rate of 10% per annum for a term of 18 months. The loan was secured by a first lien on all assets of C2Go. C2Go defaulted under the note by failing to repay the loan plus interest on August 2, 2017. On December 7, 2017, we entered into a note purchase and settlement agreement with C2Go and Mercury Investment Partners LLC. There are no assurances that we will be able to recover the remaining $145,000 principal and there are no assurances there will be any assets for us to recover from our lien on all the assets of C2Go if payment in full of the obligation is not made. The loss reserve on the note receivable as of December 31, 2020 and 2019 , was $145,000 reflecting a "more likely than not" recognition threshold. Vaden Landers On January 19, 2021, we initiated a lawsuit in Bexar County, Texas against our former Chief Revenue Officer, Vaden Landers. In the lawsuit, which is styled: Usio, Inc. v. Vaden Landers , Cause No. 2021CI01069, 407th Judicial District Court, Bexar County, Texas, we allege that Mr. Landers violated the provisions of his employment agreement dated September 1, 2017 - specifically his non-compete obligations. The state court lawsuit only seeks injunctive relief against Landers. We also instituted an action before the American Arbitration Association on February 2, 2021. Mr. Landers has refused to participate in the arbitration proceeding and has not filed an answer in the proceeding. Mr. Landers has answered the state court lawsuit, denying our allegations. Mr. Landers has also asserted counterclaim against us for breach of contract, tortious interference with contract and defamation. Mr. Landers seeks damages in excess of $1,000,000. We deny Mr. Landers’ allegations and do not believe that his counterclaims have any merit. Through our investigation, we learned that Mr. Landers committed other violations of his employment agreement and intend to pursue those claims in arbitration. Both the state court litigation and the arbitration are in their initial stages and no discovery has been conducted by the parties. Aside from the lawsuits described above, we may be involved in legal matters arising in the ordinary course of business from time to time. While we believe that such matters are currently not material, there can be no assurance that matters arising in the ordinary course of business for which we are or could become involved in litigation will not have a material adverse effect on our business, financial condition or results of operations. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. 22 Table of Contents PART II