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Item 1. Legal Proceedings

2021-08-12 compared with 2021-05-13 · 55 added, 19 removed, 12 unchanged (86% of the section changed)

1 unchanged sentence

Vaden Landers

On January 19, 2021, we initiated a lawsuit in Bexar County, Texas against our former Chief Revenue Officer, 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:

Vaden Landers , Cause No.

2021CI01069, 407th Judicial District Court, Bexar County, Texas, we allege that Mr.

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 that Mr.

1 unchanged sentence

The state court lawsuit only seeks injunctive relief against Mr.

The Company also instituted an action before the American Arbitration Association on February 2, 2021.

Landers initially refused to participate in the arbitration proceeding.

After hearings in Bexar County state court proceeding, all of the parties' claims, excluding Mr.

Lander's claims for defamation and tortious interference with contract, were ordered to be heard by the American Arbitration Association.

Landers’ allegations and do not believe that his counterclaims have any merit.

Landers. 

We also instituted an action before the American Arbitration Association on February 2, 2021.

Landers initially refused to participate in the arbitration proceeding. 

After hearings in Bexar County state court proceeding, all of the parties' claims, excluding Mr.

Lander's claims for defamation and tortious interference with contract, were ordered to be heard by the American Arbitration Association. 

We deny Mr.

Landers’

allegations and do not believe that his counterclaims have any merit.

On or about April 27, 2021, Mr.

Landers filed his Answering Statement and Counterclaim against Usio in the arbitration proceeding.

Landers alleged a variety of defenses to Usio's claim that Landers violated the non-compete provisions of his employment agreement.

Landers also asserts a counterclaim for a declaratory judgment finding the non-compete provisions are unenforceable.

Landers further alleges that Usio breached the terms of his employment agreement because Mr.

Landers filed his answering statement and counterclaim against us in the arbitration proceeding.

Landers alleged a variety of defenses to our claim that Landers violated the non-compete provisions of his employment agreement. 

Landers also asserted a counterclaim for a declaratory judgment finding the non-compete provisions are unenforceable. 

Landers further alleged that we breached the terms of his employment agreement because Mr.

Landers' resignation was for good reason thus entitling Mr.

Landers to deferred compensation.

Landers' allegations.

Through our investigation, we have learned that Mr.

Landers committed other violations of his employment agreement and intends to pursue those claims in arbitration.

Landers to deferred compensation. 

We deny Mr.

Landers' allegations. 

Through our investigation, we have learned that Mr.

Landers committed other violations of his employment agreement and we intend to pursue those claims in arbitration. 

Both the state court litigation and the arbitration are in their initial stages.

Usio recently served Mr.

Landers with a request for production of documents in the Bexar County state court proceeding, but he has not responded at this time.

We have obtained certain documents from Mr.

Landers in the state court proceeding. 

Additional written discovery will be required before any depositions are taken in the state court litigation.

In the arbitration, the parties have both submitted motions to the arbitration panel on the initial legal question of whether the non-compete is enforceable. 

The arbitration panel held a Zoom hearing on this initial legal question on August 6, 2021. 

Once the panel renders a decision on the initial legal question, the arbitration will continue to the merits of USIO’s claims and the counterclaims raised by Mr.

Landers in the arbitration. 

We anticipate that the arbitration panel will render its initial decision within 30 days of the August 6, 2021 hearing.

We consider the risk of loss as remote related to this lawsuit.

World Health Merchants, LLC and Laitan Group, LLC  

On July 21, 2021, a lawsuit was filed against us in Bexar County, Texas by two former merchants, World Health Merchants, LLC and Laitan Group, LLC.

Three additional defendants were named in the lawsuit:

Central Bank of St.

Louis, Allied Platforms LLC, and Heriberto Cepeda. 

The lawsuit is styled:

WORLD HEALTH MERCHANTS, LLC, a Delaware limited liability company, LAITAN GROUP, LLC, an Illinois limited liability company v.

a Texas Corporation, USIO OUTPUT SOLUTIONS, INC., a Texas corporation, CENTRAL BANK OF ST.

LOUIS, a State chartered bank, ALLIED PLATFORMS, LLC, a Nevada limited liability company;

HERIBERTO CEPEDA, an individual and DOES 1 through 20 ;

Cause No 2021CI14615, pending in the 57 th Judicial District Court of Bexar County, Texas.

The World Health lawsuit concerns the processing of certain transactions by us for the Plaintiff merchants, which were referred to us by Allied Platforms, LLC, and Mr.

Cepeda pursuant to a referral agent agreement by and between us and Allied Platforms, LLC. 

After initial concerns arose regarding the Plaintiffs’

transactions, we, pursuant to the applicable sub merchant processing agreement, terminated the processing of transactions for Plaintiffs.

Pursuant to the same agreement, we retained certain funds for the purposes of processing returns.

After termination of the sub merchant processing agreement, Plaintiffs repeatedly demanded the return of all monies, which are in the custody of Defendant, Central Bank of St.

We requested documentation from Plaintiffs to substantiate the true nature of the transactions.

The initial documentation provided to us raised additional concerns regarding the transactions.

After we retained counsel, additional demands were made for the return of the subject funds.

However, additional concerns arose regarding ownership of the dispute funds when one of the current attorneys for Plaintiffs submitted a demand letter to us claiming the funds, or a portion thereof, belonged to third parties with no contractual privity with us.

Based on the conflicting demands and claims of ownership, we retained the funds pending further information.

After the third-party demand was purportedly withdrawn, our counsel requested additional information from various attorneys claiming to represent Plaintiffs.

No further information or documents were provided, and Plaintiff subsequently filed the lawsuit.

In the Lawsuit, Plaintiffs assert causes of action against us for negligence, breach of contract, money had and received, unjust enrichment and conversion claiming damages in excess of $1,000,000.

We deny any and all liability to Plaintiffs.

We consider the risk of loss as remote related to this lawsuit.

Aside from these proceedings 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.

RISK FACTORS.

There have been no material changes from risk factors previously disclosed in our annual report on Form 10-K for the fiscal year ended December 31, 2020 , as filed with the Securities and Exchange Commission on March 30, 2021.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Legal Proceedings