What changed in this filing

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Item 1. Legal Proceedings

2021-11-10 compared with 2021-08-12 · 37 added, 17 removed, 50 unchanged (52% of the section changed)

32 unchanged sentences

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.

On September 16, 2021, the arbitration panel ruled the non-competition provisions in Mr.

Landers' employment agreement were enforceable. 

The panel reserved ruling on the scope of the restrictions contained therein pending discovery. 

The arbitration panel held that the non-compete provisions need to be reformed to more specifically set forth the competition restrictions applicable to Mr.

Landers. 

The parties attempted to confer on a mutually agreeable reformation, but were unable to reach an agreement. 

The parties are now engaging in written discovery both as to the anticipated reformation on the non-compete provision and the ultimate merits of the case.

The state court case involving Mr.

Landers is still in discovery phase. 

There is no current trial setting.

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

3 unchanged sentences

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.

Louis, Allied Platforms LLC, and Heriberto Cepeda.  

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 defendant Mr.

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

6 unchanged sentences

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.

However, additional concerns arose regarding ownership of the dispute funds.

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

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 settled the case without prejudice on September 16, 2021. 

The confidential settlement agreement provides for a release of funds by Central Bank of St.

Louis to the Plaintiff. 

We received certain risk mitigation payments totaling $156,166 pursuant to the settlement agreement. 

We also received $15,000 for our reasonable and necessary attorney fees incurred in the matter.

On September 1, 2021, KDHM, LLC sued PDS Acquisition Corp, now known as USIO Output Solutions, Inc., claiming a breach of the asset purchase agreement executed by the parties on December 14th, 2020.

The lawsuit alleges that due to a mistake, accident, or inadvertence, certain customer deposits in the amount of $317,000 were improperly transferred two us.

We believe that plaintiff's claims in the lawsuit have no merit and contradict the express terms of the asset purchase agreement.

As a result of this post sale dispute, we discovered that KDHM, LLC, and its principals, made certain misrepresentations and breached the terms of the asset purchase agreement. 

On September 28, 2021, we filed an answer generally denying plaintiff’s allegations. 

On October 5, 2021, we filed a counterclaim and third-party petition. 

Therein, we allege that neither KDHM nor its principals disclosed that KDHM was not accounting for the customer deposits in accordance with Generally Accepted Accounting Principles. 

Yet, KDHM, and third-party defendants its principals Henry Minten and Thomas Dowe, affirmatively represented and warranted in section 3.1(e) of the agreement that “[t]Annual Financial Statements and the Interim Financial Statements have been prepared from the books and records of Seller in accordance with GAAP applied on a consistent basis.” 

We also discovered that KDHM by and through its principals failed to disclose that $305,000 in additional customer deposits existed and these deposits were not conveyed to us as required by the agreement. 

KDHM, Minten and Dowe provided us with fraudulent and misleading profit and loss statements that did not disclose these additional customer deposits. 

KDHM and the defendants do not dispute that these additional customer deposits exist and that they were purchased by Usio. 

However, despite a written representation that these funds would be returned, KDHM and its principal have held these funds hostage. 

Section 2.1(b)(x) of the agreement provides that the purchased assets includes “All of Seller’s deposits from its customer, including without limitation, those customer deposits listed on Schedule 2.1(b)(xi) of the Disclosure Schedules.” 

Finally, we discovered that KDHM did not provide us with all customer lists, which are identified as purchased asset under the agreement. 

We demanded the missing customer lists, but they have yet to be provided to us per the agreement.

In our counterclaims and third-party petition, we assert causes of action for fraud, breach of contract and conversion. 

At this time, the parties have not engaged in any written discovery or depositions and no trial date has been set.

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

2 unchanged sentences

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