Litigation
During February 2005, a lawsuit was commenced in the Supreme Court of the State of New York, County of Monroe, under the caption Stephen E. Webster v. Richard Dwyer, Matthew P. Dwyer, Phillip Mistretta, Total Digital Displays, Inc., Leslie W. Kernan, Jr., Lacy Katzen LLP, et al. The plaintiff, Stephen E. Webster, previously purchased a $125,000 debenture from Total Identity Corporation and is seeking payment of the convertible debenture by alleging that he was fraudulently induced to purchase the debenture. The Company has filed various motions in its defense and in September 2005 a judgment was grant against the Company and other parties for $125,000 plus 9% interest per annum. In February of 2006 the judgment was vacated. In March of 2006 the Company’s attorneys filed a motion to withdraw as counsel, which was granted. On August 2, 2006 the Supreme Court granted a judgment against the Company for $125,000 and post judgment interest at 9%. The judgment is recorded as a current liability as of March 31, 2007.
On May 4, 2004 a judgment was granted against the Company in a lawsuit filed in the Superior Court for Orange County, California. The suit sought collection of legal fees and costs totaling $50,714 including accrued interest at the rate of 10% per annum, attorney’s fees and court costs. The judgment, which has been recorded as a liability in accounts payable, was converted into common stock of the Company during February 2007 (see Note 5).
On September 28, 2006, the Company was served with a summons filed in Supreme Court in New York, the suit is relative to the purchase agreements signed in October of 2003 and February of 2004 concerning Total Identity Systems, Inc. During January 2007 our motion to compel arbitration and stay the lawsuit was granted pending the outcome of the arbitration. During February 2007, the plaintiff appealed the decision and we are awaiting the outcome of the appeal.
F-8
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247 MGI, INC. AND SUBSIDIARIES
(FKA TOTAL IDENTITY CORPORATION AND SUBSIDIARIES)
(A DEVELOPMENT STAGE COMPANY)
Notes to the Consolidated Financial Statements
March 31, 2007 and December 31, 2006
NOTE 2 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
Litigation (Continued)
Threatened Suit
In June 2006, January 2007 and June 2007, the Company received letters from attorneys purportedly representing Dr. Martin Peskin, a former officer and director of the Company, asserting allegations arising out of loans and investments made by Dr. Peskin in the Company and other companies currently or formerly affiliated with our Chief Executive Officer. The most recent letters dispute the amount of money owed by the Company to Dr. Peskin, and assert various claims against us, our Chief Executive Officer and several of his current or former affiliates. The June 2007 attorney’s letter seeks treble damages on alleged claims of $357,500. The Company believes that its records of the amount it owes Dr. Peskin are accurate and that the amount owed to Dr. Peskin does not exceed $25,187, in part based on information previously supplied by Dr. Peskin, and the Company disputes the merits of Dr. Peskin’s claims. To date, no lawsuit has been filed.
We understand that Mr. John Loughlin is seeking to commence a lawsuit in Superior Court of the State of Rhode Island, County of Providence , under the caption John J. Loughlin II Plaintiff, vs. 247MGI, Inc. a/k/a Total Identity Corp, Defendants. We also undertand that Mr. John Loughlin, who served as our President from March 16, 2007 until May 4, 2007, is seeking a judgment for $750,000 in compensatory damages and $250,000 in punitive damages, plus interest, costs and attorneys fees. We do not believe that service has been proerly effected on us. A description of the events leading to this threatened lawsuit are described in Item 1 of this report under the caption “Description of Business; Our Current Business Model.” We have engaged counsel to defend this matter but at this stage of the proceedings, no assessment may be made as the likelihood of a favorable outcome.
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