Re: 1/13/06 - [UCSY] UCSY 10K: Legal Matters
ITEM 3.
LEGAL MATTERS
On October 11, 1999, we issued a convertible unsecured debenture for $740,000 to Credit Bancorp. The terms of this convertible unsecured debenture are 7% interest per annum payable, semiannually on the last day of February and September, with the principal due September 30, 2002. All amounts of unpaid principal and accrued interest of this debenture are convertible at any time at the conversion price of $1,600 per share of unregistered, restricted shares of our common stock. Credit Bancorp has agreed to convert principal and accrued interest owing on the debenture into 483 shares of our common stock.
A receiver has been appointed to administer the affairs of Credit Bancorp. We have been informed that the appointed receiver denies that such a conversion request was made and that the principal amount and accrued interest of the debenture are due. We currently carry the 483 share obligation in our equity under escrowed shares. No provision for debenture and accrued interest have been made in our financial statements, as we believe the receiver’s claim is unfounded and the company will prevail. The matter remains unresolved at September 30, 2005.
On August 7, 2003, Electric Gas & Technology of Dallas, Texas (“ELGT”), published a press announcement claiming that a complaint and $60 million lawsuit had been filed in Federal court in Texas, and also stating that we had infringed on their patents. We filed a counter claim in the United States District Court, Southern District of Florida, case number 03-22196-Civ-Seitz, disputing ELGT’s claims of patent infringement. On November 24, a settlement agreement was reached under which ELGT assigned to us all of ELGT’s equity ownership interest in Air Water Technologies, Inc. (“AWT”). This included all ELGT and AWT’s right, title and interest in U.S. Patent No. 4,255,937 and all enhancements thereto, and all ELGT and AWT’s right, title and interest to the copyright and trademarks describing the technology in the U.S. Patent, and the Trademark known as “Watermaker”, and all ELGT and AWT’s right, title and interest in U.S. Patent No. 5,553,459. This transfer to UCSY and AirWater Corporation is equal to 92% of the outstanding stock (controlling interest) of AWT and includes all of the US and Global business, as well as all the appertaining Patents, Trademarks and Licenses.
In January 2005, we received the stock (92%) of AWT. we received AWT with no assets or liabilities, other than the rights, title and interest in the patents noted above.
LYCOS Inc.
In June 2004, we filed a lawsuit in the United States District Court, Southern District of Florida, against Lycos, Inc, and its parent Terra Networks, Inc, and a business segment, Raging Bull, for $300 million. The lawsuit relates to charges for commercial fraud, Cyberstalking and illegal and unauthorized use of the company’s commercial name and logo. The defendants filed various motions to remove the cases out of Florida to Massachusetts, which the Florida courts agreed to. As of August 9, 2005, the litigation has now been moved to Boston Massachusetts where a federal judge has been appointed to this case for further consideration and trial.
In a related but separate action, we filed a civil “RICO” (Racketeering Influenced Criminal Organization) lawsuit in the Circuit Court for the 11th Judicial Circuit, Miami-Dade County, Florida (case number 05-175-CA-09) against a number of related defendants including RipOffReport.com, BadBusinessBureau.com et al., in an action against the defendants under various legal theories for both substantial monetary damages and injunctive relief arising from malicious posting and communications made by defendants in an effort to damage the reputation of our companies.
The defendants are fighting jurisdiction, and the case is still pending in the court.
CNN
On January 14, 2005 we filed a law suit in the U.S. District Court, Southern District of Florida (Miami), (Docket #05-CV-20047), against Turner Broadcasting System, Inc., Cable News Network, Inc. “CNN” and Wolf Blitzer for $100 million. The law suit has been brought for defamation under Florida law. CNN attorneys have contested this case, filed various motions, and the judge closed the case in March 2005, and recommended sanctions against us. We have however filed various appeals, and the case is still pending decisions of the higher courts. Relating to this matter, we issued a press release inviting any shareholder who had trading losses in our stock during the period November 1, 2001 through the present, to join in our filing of a class action suit against Lycos, et al.
In early December 2005, the 11th circuit court of appeals ruled against the CNN Motions, and dismissed the application for sanctions.
J.J. Reidy & Company Inc.
In January 2005, we received a termination notice from J.J. Reidy & Company, Inc., the AirWater patent holders allegedly terminating the Global License Agreement that was entered into in March 2003, alleging Breach of Contract. The company has filed an action in the U.S. District Court for the Southern District of Florida (case # 05-20650-CIV-Jordan/Klein), seeking Declamatory relief from the court, determining its rights, status and legal relations as well as Money Judgment against J.J. Reidy & Company. Meanwhile, J.J. Reidy & Company had already made a court filing in Boston, Massachusetts, in December 2004, (even prior to issuing the notice of termination) in an effort to claim jurisdiction. We filed motions with the Boston court contesting jurisdiction. No provision has been made in our financial statements, as we believe the claim is unfounded and the company will prevail. Pending resolution of the court proceedings, we have discontinued royalty or any other payments to J.J. Reidy & Company, Inc. By recent court ruling, all discovery had been stayed pending the courts ruling in relation to jurisdiction. The Boston court recently ruled that it had jurisdiction over the case. The matter is now continuing in Boston.
James Coughlin
On January 21, 2005, we filed a lawsuit against James Coughlin, internet alias “IrishJim44,” for claims totaling $18 million. The lawsuit has been filed in Federal Court in the Southern District of Florida. The claims are for defamation against the company and the chairman Michael Zwebner, as posted on the internet. The defendant filed a Motion to dismiss citing lack of jurisdiction in Florida. In April 2005, the court dismissed the case citing the reason of lack of personal jurisdiction over the defendant. The company is appealing the decision, based on new evidence (affidavit of third party) showing the defendant was employed in Florida and therefore the court should reverse its decision. The Florida court denied the request for further consideration. We re-filed the lawsuit in the federal court of San Diego California. The court after hearing motions to dismiss for lack of jurisdiction and lateness of filing, ruled to dismiss the case. We filed an appeal, and the matter is currently sub-judice in the federal appeals court.
OTHER INTERNET DEFENDANTS
We had earlier filed a lawsuit against 2 Internet posters in state court in Miami Florida claiming the defendants use of tortious speech to interfere with the Company’s business interests and its business affairs. As a result of the action, and the failure of either of the 2 defendants to appear in court, we obtained a default order and subsequently a default judgment. During this reporting period, one of the defendants appeared in court by phone, and subjected himself to the court’s jurisdiction. He then filed several motions both to dismiss and to vacate the default judgment and also filed to cancel the permanent injunction. These motions were denied by the court, but the Permanent Injunction was altered to be a Temporary Injunction, pending further resolution of the case. During the proceedings, LYCOS INC filed a motion to insert themselves into the case as an Intervenor. This was allowed by the Judge. Further motions by LYCOS to attempt to dismiss both the case and to vacate the injunction were denied by the court. Numerous motions and countermotions have been filed and heard, and the injunction against the defendants remains in place. Depositions and discovery are continuing. As of December 2005, the matter continues in court.
HAFFER
In June 2005, we were served with a law suit filed in San Francisco state court claiming $77,000 in back pay due to Douglas Haffer, the previous President of the company. We have defended the action and issued and filed certain counter-claims. As of December 2005, the litigation continues. We do not believe there are any merits to this claim.
AQUAIR Inc.
The company filed suit in Superior Court of the State of California, Orange County, against RG GLOBALLIFESTYLES, INC. AQUAIR INC, and LOU KNICKERBOCKER, an individual, all of Irvine, California. The lawsuit as filed is for defamation, intentional interference with prospective economic advantage, and false advertising. The company is seeking damages in excess of $10 million. As of December 2005, the company is in discovery stages of the litigation.
secinfo.com
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Legal expense
2005 - 585,986
2004 - 322,482
Salaries
2005 - 170,405
2004 - 313,458
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