Note 15 - Legal Proceedings

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Legal Matters and Contingencies [Text Block]

Note

15.

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 its 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,

the Company initiated a lawsuit in Bexar County, Texas against its 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, the Company alleges that Mr. Landers violated the provisions of his employment agreement dated

September 1, 2017 -

specifically that Mr. Landers violated his non-compete obligations. The state court lawsuit only seeks injunctive relief against Mr. Landers.  The Company 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 the Company's allegations.  Mr. Landers has also asserted counterclaim against the Company for breach of contract, tortious interference with contract and defamation.  Mr. Landers seeks damages in excess of

$1,000,000.

  The Company denies Mr. Landers' allegations and does

not

believe that his counterclaims have any merit.

Through its investigation, the Company has learned that Mr. Landers committed other violations of his employment agreement and intends 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, the Company

may

be involved in legal matters arising in the ordinary course of business from time to time. While the Company believes that such matters are currently

not

material, there can be

no

assurance that matters arising in the ordinary course of business for which the Company is or could become involved in litigation will

not

have a material adverse effect on our business, financial condition or results of operations.