|Legal matters and contingencies
In November 2010, Bluegate Corporation
filed a lawsuit against Electronic Medical Resources, LLC, ET. AL (EMR); In the C.C.C.L. No. 3 Harris County, Texas.
We filed this lawsuit claiming breach of contract for services provided. In January 2011, the defendants filed a counterclaim.
We believed the counterclaim was without merit; however, the parties agreed that they believed it to be in their mutual best interests
to eliminate further expense of litigation and the inherent risk involved with contested litigation by settling all of their disputed
and contested issues. In March 2011, all parties to both lawsuits executed a compromise settlement agreement and joint and mutual
release with no amounts due to or from any party.
In September 2010, Bluegate Corporation
received notice that a prior client of Bluegate, Renaissance Healthcare Systems, Inc. through the Chapter 7 Trustee, filed a summons
in an adversary proceeding against Bluegate Corporation while in bankruptcy under the recovery of money/property fraudulent transfer
clause, attempting to reach back two years prior to the petition date. The amount in question was $68,480, (specifically four monthly
payments Bluegate received from its client in the ordinary course of business from March 18, 2008 through June 13, 2008), plus
pre-judgment and post judgment interest, costs and attorneys fees. On November 19, 2010, an entry of default was entered. We believed
the case was without merit; however, the parties agreed that they believed it to be in their mutual best interests to eliminate
further expense of litigation and the inherent risk involved with contested litigation by settling all of their disputed and contested
issues. In March 2011, both parties executed a trustees settlement agreement for a total payment by Bluegate Corporation
of $30,000 ($20,000 due upon the execution of the agreement and ten (10) additional equal monthly installments of $1,000 each).
As of September 22, 2011, we paid $30,000 to the Trustee and received from the bankruptcy court the Unopposed Request to
Set Aside Clerks Entry of Default and Dismiss Adversary Proceeding dated September 22, 2011.