Notes
to Condensed Consolidated Financial Statements
September
30, 2018 and 2017
(Unaudited)
Note
1. Nature of Business
Throughout
this report, the terms “our,” “we,” “us,” and the “Company” refer to LifeApps
Brands Inc., including its subsidiaries. The accompanying unaudited condensed consolidated financial statements of LifeApps
Brands Inc. at September 30, 2018 and 2017 have been prepared in accordance with generally accepted accounting principles (“GAAP”)
for interim financial statements, instructions to Form 10-Q, and Regulation S-X. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. These condensed
consolidated financial statements should be read in conjunction with the financial statements and notes thereto included
in our annual report on Form 10-K for the year ended December 31, 2017. In management’s opinion, all adjustments (consisting only
of normal recurring adjustments) considered necessary for a fair presentation to make our financial statements not misleading
have been included. The results of operations for the periods ended September 30, 2018 and 2017 presented are not necessarily
indicative of the results to be expected for the full year. The December 31, 2017 balance sheet has been derived from our audited
financial statements included in our annual report on Form 10-K for the year ended December 31, 2017.
Through
our wholly owned subsidiary LifeApps, Inc., we are a licensed developer and publisher of apps for the Apple Apps Store for iPhone,
iPod touch, iPad and iPad mini. We are also a licensed developer on both Google Play and Amazon Appstore for Android. We have
distributed apps on all three platforms.
Moving
forward we are developing a digital media network specializing in targeting highly sought-after niche demographic audiences. The
company will focus on two core businesses, an LGBT Ad Network and an LGBT Digital Network. Through our digital platform we will
aggregate content from around the world. We will create original content along with sponsored content in a 24/7 digital network.
The LGBT Ad Network will assist brands in global targeting of the LGBT demographic. The Ad Network will provide advertisers
and brands with over 300 mainstream digital platforms and a “bullseye” on this loyal, affluent and ever-expanding
audience. We will deliver to our audience with a relevant sponsored content marketing message across all spectrums of digitally
connected devices. Our unique value proposition to our audience and sponsors is the ability deliver aggregated and original content,
with emphasis on interactive content and captive video.
Note
2. Summary of Significant Accounting Policies
Going
Concern
The
accompanying financial statements have been prepared in conformity with generally accepted accounting principles (“GAAP”),
which contemplates our continuation as a going concern. We have incurred losses to date of $3,682,841 and have negative working
capital. To date we have funded our operations through advances from related parties, issuance of convertible debt, and the sale
of our common stock. We intend to raise additional funding through third party equity or debt financing. There is no certainty
that funding will be available as needed. These factors raise substantial doubt about our ability to continue operating as a going
concern. Our ability to continue our operations as a going concern, realize the carrying value of our assets, and discharge our
liabilities in the normal course of business is dependent upon our ability to raise capital sufficient to fund our commitments
and ongoing losses, and ultimately generate profitable operations.
Principles
of Consolidation
The
accompanying consolidated financial statements include the accounts of the Company and our wholly owned subsidiaries, LifeApps
Inc. and Sports One Group Inc. All material inter-company transactions and balances have been eliminated in consolidation.
LifeApps
Brands Inc.
Notes
to Condensed Consolidated Financial Statements
September
30, 2018 and 2017
(Unaudited)
Use
of Estimates
The
preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities in the balance sheets and revenues and expenses during the years reported. Actual
results may differ from these estimates.
Fair
Value Measurements:
ASC
Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), provides a comprehensive framework for measuring fair
value and expands disclosures which are required about fair value measurements. Specifically, ASC 820 sets forth a definition
of fair value and establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted
prices in active markets for identical assets and liabilities and the lowest priority to unobservable value inputs. ASC 820 defines
the hierarchy as follows:
Level
1 – Quoted prices are available in active markets for identical assets or liabilities as of the reported date. The types
of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices, such as equities
listed on the New York Stock Exchange.
Level
2 – Pricing inputs are other than quoted prices in active markets, but are either directly or indirectly observable as of
the reported date. The types of assets and liabilities in Level 2 are typically either comparable to actively traded securities
or contracts, or priced with models using highly observable inputs.
Level
3 – Significant inputs to pricing that are unobservable as of the reporting date. The types of assets and liabilities included
in Level 3 are those with inputs requiring significant management judgment or estimation, such as complex and subjective models
and forecasts used to determine the fair value of financial transmission rights.
Our
financial instruments consist of cash, short-term trade receivables, prepaid expenses, payables, accruals and convertible notes
payable. The carrying values of cash and cash equivalents, short-term trade receivables, prepaid expenses, payables, and accruals
approximate fair value because of the short-term maturities of these instruments. The fair value of notes payable approximated
to their carrying value as generally their interest rates reflected our effective annual borrowing rate.
Intangibles
Intangibles,
which include websites and databases acquired, internet domain name costs, and customer lists, are being amortized over the expected
useful lives which we estimate to be three to five years. In accordance with Financial Accounting Standards Board (“FASB”),
Accounting Standards Codification (“ASC”) Topic 350
Intangibles – Goodwill and Other
(“ASC 350”),
the costs to obtain and register internet domain names were capitalized.
LifeApps
Brands Inc.
Notes
to Condensed Consolidated Financial Statements
September
30, 2018 and 2017
(Unaudited)
Derivative
Financial Instruments:
We
do not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. We evaluate all of our financial
instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative
financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value
and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based
derivative financial instruments, we used a Black-Scholes valuation model to value the derivative instruments at inception and
on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded
as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance
sheet as current or non-current based on whether net-cash settlement or conversion of the instrument could be required within
12 months of the balance sheet date.
Revenue
Recognition
ASC
Topic
606, “
Revenue from Contracts with Customers”
establishes principles
for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s
contracts to provide goods or services to customers.
Revenues
are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration
that the Company expects to receive in exchange for those goods or services. The Company applies the following five steps in order
to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
|
●
|
identify
the contract with a customer;
|
|
●
|
identify
the performance obligations in the contract;
|
|
●
|
determine
the transaction price;
|
|
●
|
allocate
the transaction price to performance obligations in the contract; and
|
|
●
|
recognize
revenue as the performance obligation is satisfied.
|
Revenue
is currently derived primarily from the sale of sports and fitness apparel and equipment, and software applications designed for
use on mobile devices such as smart phones and tablets.
We
sell our software directly via Internet download through third party agents. We recognize revenue when payment is received from
the agent. Payment is received net of commission paid to the agent, usually 70% to us and 30% to the agent. We record the net
amount received as revenue.
We
plan to publish and sell digital magazines through the internet. Magazines can be purchased as individual volumes or as a subscription.
To date we have not had any subscription sales.
Cost
of Revenue
Cost
of revenue includes the cost of amounts paid for articles, photography, editorial and production cost of the magazine and ongoing
web hosting costs. Cost of revenue related to product sales includes the direct cost of those products sold.
Rent
Expense
We
recognize rent expense on a straight-line basis over the reasonably assured lease term as defined in ASC Topic 840, Leases (“ASC
840”). Our lease is short term and will be renewed on a month to month basis. Rent expense was $0 and $363 for the three
months ended September 30, 2018 and 2017, respectively and $255 and $3,975 for the nine months ended September 30, 2018 and 2017,
respectively.
LifeApps
Brands Inc.
Notes
to Condensed Consolidated Financial Statements
September
30, 2018 and 2017
(Unaudited)
Stock-Based
Compensation
Stock-based
compensation is presented in accordance with the guidance of ASC Topic 718,
Compensation – Stock Compensation
(“ASC
718”). Under the provisions of ASC 718, companies are required to estimate the fair value of share-based payment awards
on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest
is recognized as expense over the requisite service periods in our consolidated statements of operations.
Earnings
per share
We
calculate earnings per share in accordance with ASC Topic 260
Earnings Per Share
, which requires a dual presentation of
basic and diluted earnings per share. Basic earnings per share are computed using the weighted average number of shares outstanding
during the fiscal year. Diluted earnings per share represent basic earnings per share adjusted to include the potentially dilutive
effect of outstanding stock options and warrants. The diluted earnings per share were not calculated because we recorded net losses
for the periods ended September 30, 2018 and 2017, and the outstanding stock options and warrants are anti-dilutive. Weighted
average shares outstanding would have increased by approximately 2,893,000 and 11,065,000 for the periods ended September 30,
2018 and 2017 on a fully diluted basis.
Recent
Pronouncements
From
time to time, new accounting pronouncements are issued that we adopt as of the specified effective date. We believe that the impact
of recently issued standards that are not yet effective may have an impact on our results of operations and financial position.
In
February 2016, the FASB issued ASU No. 2016-02,
Leases
, to improve financial reporting about leasing transactions. This
ASU will require organizations that lease assets (“lessees”) to recognize a lease liability and a right-of-use asset
on its balance sheet for all leases with terms of more than twelve months. A lease liability is a lessee’s obligation to
make lease payments arising from a lease, measured on a discounted basis and a right-of-use asset represents the lessee’s
right to use, or control use of, a specified asset for the lease term. The amendments in this ASU simplify the accounting for
sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. This ASU leaves the
accounting for the organizations that own the assets leased to the lessee (“lessor”) largely unchanged except for
targeted improvements to align it with the lessee accounting model and Topic 606, Revenue from Contracts with Customers.
The
amendments in ASU 2016-02 are effective for fiscal years beginning after December 15, 2018, including interim periods within those
fiscal years. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases)
must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest
comparative period presented in the financial statements. The modified retrospective approach would not require any transition
accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full
retrospective transition approach. The Company is evaluating the potential impact of ASU 2016-02 on its Consolidated Financial
Statements.
LifeApps
Brands Inc.
Notes
to Condensed Consolidated Financial Statements
September
30, 2018 and 2017
(Unaudited)
Other
accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption
until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.
Note
3. Related Party Transactions – Officer and Shareholder Advances
Parties,
which can be a corporation or an individual, are considered to be related if we have the ability, directly or indirectly, to control
the other party or exercise significant influence over the other party in making financial and operating decisions. Companies
are also considered to be related if they are subject to common control or common significant influence.
Advances
due to related parties represent cash advances, salary accruals, notes payable, and amounts paid on our behalf by an officer and
shareholders of the Company. These advances are non-interest bearing, short term in nature and due on demand. The balance at
September
30, 2018 and December 31, 2017 was $10,974 and $7,675, respectively. Notes payable to related
parties at
September
30, 2018 and December 31, 2017 totaled $17,885 and $17,585,
respectively with a 2% annual interest rate. Currently the company has defaulted on all of their related party loan obligations.
Forbearance has been granted by the related parties on all loans. Salary accruals for the three-month periods ended
September
30, 2018 and 2017 amounted to $81,000 and $37,500 respectively. Salary accruals for the
nine
-month periods ended
September
30,
2018 and 2017 amounted to $243,000 and $112,500, respectively. Net cash advances amounted to $3,599 and $48,510, respectively
for the periods ended
September
30, 2018 and 2017. Total unpaid accrued salary
was $844,154 and $601,154 as of
September
30, 2018 and December 31, 2017, respectively.
On
December 19, 2017 we entered into an Employment Services Agreements with our Chief Executive Officer and our President and an
Executive Management Consulting Agreement with our former Chief Executive Officer. The Agreements have a two-year term and are
subject to automatic renewal for successive periods of one year unless either we or the counterparties give the other written
notice of intention to not renew at least 30 days prior to the end of the existing term. The Agreement with our current and former
Chief Executive Officers provide for base compensation of $150,000 and a base annual salary of $24,000 for our President. The
compensation payments are payable in bi-weekly installments. In the event any of the payments are not made within 30 days of the
due date, they will accrue interest at the rate of 10% per annum.
LifeApps
Brands Inc.
Notes
to Condensed Consolidated Financial Statements
September
30, 2018 and 2017
(Unaudited)
The
Agreements contain customary termination provisions including terminations with or without cause, for good reason or voluntarily,
non-competition and non-solicitation provisions, and an inventions and patents provision which provides that all the work produced
by the counterparties, which is created, designed, conceived or developed by them in the course of their employment under the
Agreements belong to us. Effective as of January 1, 2018, the agreements were modified to remove the conversion right provisions.
During
the three and nine month periods ended September 30, 2018 we recorded interest accruals of $5,736 and $7,976 related to the agreements.
Note
4.
Note Payable
Notes
payable to two unrelated third parties amounted to $28,000 at
September
30, 2018 and $20,000 to a single unrelated third party at December 31, 2017 with an interest
rates of 2% and 7% per annum. One of the notes in the amount of $18,000 at September 30, 2018 is past due and is, therefore, in
default. The other note in the amount of $10,000 provides for the issuance of 775,000 shares of common stock as additional interest
due at maturity.
Note
5. Convertible Note Payable
On
March 6, 2018, we executed a Promissory Note (the “2018 Note”) to an unrelated entity and received an aggregate of
$32,000. The Note has an initial term of one year and provides for an original issue discount of $3,000, which is being amortized
over the initial term. The note carries face interest rates of 12% per annum. The Lender has the right, at any time and/or after
180 days at their election to convert all or part of the outstanding and unpaid principal and accrued interest into shares of
our common stock. The conversion price is 58% of a two-day average of the lowest trading price in the 15 range of trading days
prior the conversion. The Notes provide for additional penalties if we cannot deliver the underlying common stock on a timely
basis.
We
evaluated the terms of the conversion features of the convertible note in accordance with ASC Topic No. 815 - 40, Derivatives
and Hedging - Contracts in Entity’s Own Stock and determined it is indexed to the Company’s common stock and that the conversion
features meet the definition of a liability and therefore bifurcated the conversion feature and accounted for it as a separate
derivative liability.
We
valued the conversion feature at origination of the Note at $55,118 using the Black Scholes valuation model with the following
assumptions: dividend yield of zero, 1 year to maturity, risk free interest rate of 3.03% and annualized volatility of 298.79%.
$32,000 of the value assigned to the derivative liability was recognized as a debt discount on the convertible debenture. The
debt discount was recorded as reduction (contra-liability) to the convertible Note and is being amortized over the initial term
of the convertible Note. The balance of $23,118 of the value assigned to the derivative liability was recognized as origination
interest on the derivative liability and expensed on origination.
To
determine the fair value of our embedded derivatives, management evaluates assumptions regarding the probability of certain future
events. Other factors used to determine fair value include our period end stock price, historical stock volatility, risk free
interest rate and derivative term. The fair value recorded for the derivative liability varies from period to period. This variability
may result in the actual derivative liability for a period either above or below the estimates recorded on our consolidated financial
statements, resulting in significant fluctuations in other income (expense) because of the corresponding non-cash gain or loss
recorded.
During
the quarter ended September 30, 2018, the company became subject to a penalty assessment of $17,500 due to a loan covenant violation.
Such amount has been expensed as additional interest. Additionally, the fair value of the derivative liability associated with
the penalty amounted to $29,265 and has been recorded as additional interest expense.
Also,
during the quarter ended September, the lender exercised conversion rights pursuant to the loan agreement and converted $8,000
of the loan principal into 1,777,778 shares of common stock. The company recognized an aggregate of $10,375 of shareholder equity
as a result of the conversion based of a fair value calculation at the conversion date and related adjustments to remaining loan
discounts applicable to the converted loan amount.
LifeApps
Brands Inc.
Notes
to Condensed Consolidated Financial Statements
September
30, 2018 and 2017
(Unaudited)
We
value the derivative liability at the end of each accounting period with the difference in value recognized as gain or loss. At
September
30, 2018 we determined
the valuation using the Black-Sholes valuation model with the following assumptions: dividend yield of zero, .44 years to maturity,
risk free interest rate of 2.49% and annualized volatility of 143%. We recognized $26,625 and $34,127 of income for the change
in value of the derivative for the three- and nine-month periods ended
September
30,
2018. Interest expense for the
nine
- month period ended
September
30,
2018 includes $52,453 of origination interest, amortization of debt discounts of $24,273 and interest accrual of $2,400.
At
September
30,
2018 the balance of the Note is comprised of the following:
Face amount of Note
|
|
$
|
44,500
|
|
Original issue discount
|
|
|
(1,290
|
)
|
Debt discount
|
|
|
(8,205
|
)
|
|
|
$
|
35,005
|
|
Note
6. Stockholders’ Equity
During
the
nine
-month
period ended
September
30, 2018 we issued 3,000,000 shares of common stock in connection
with consulting agreements with two unrelated entities. The shares were valued at the respective trading prices of our common
stock on the dates the agreements were signed.
During
the quarter ended September 30, 2018 an unrelated third party purchased 2,000,000 shares of common stock for $10,000 in cash at
$.05 per share and made a loan to the company in the amount of $10,000. The loan provided for a stock grant of 750,000 shares
of common stock.
Also,
as described in Note 5, the company issued 1,777,778 shares of common stock pursuant to a debt-to-equity conversion.
Additionally,
we recorded $146,966 of amortization of deferred officer compensation during the
nine
-month period ended
September
30, 2018.
Note
7. Options
Stock
based compensation expense for options for the periods ended September 30, 2018 and 2017 amounted to $0 and $7,312.
LifeApps
Brands Inc.
Notes
to Condensed Consolidated Financial Statements
September
30, 2018 and 2017
(Unaudited)
The
following is a summary of stock options issued pursuant to the plan:
|
|
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual
Term
(in years)
|
|
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
|
|
|
|
|
Outstanding
January 1, 2018
|
|
|
|
17,246,688
|
|
|
$
|
0.0056
|
|
|
|
3.4
|
|
|
|
—
|
|
Granted
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Exercised
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Cancelled
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Outstanding September
30, 2018
|
|
|
|
17,246,688
|
|
|
$
|
0.0056
|
|
|
|
2.70
|
|
|
$
|
—
|
|
Exercisable September
30, 2018
|
|
|
|
17,246,688
|
|
|
$
|
0.0056
|
|
|
|
2.70
|
|
|
$
|
—
|
|
Stock
based compensation expense for options for the periods ended
September
30, 2018 and 2017 amounted to $0 and $7,312. There will be no additional compensation expense
recognized in future periods.
LifeApps
Brands Inc.
Notes
to Condensed Consolidated Financial Statements
September
30, 2018 and 2017
(Unaudited)
Note
8. Outstanding Warrants
There
were no warrants issued during the periods ended
September
30, 2018 and 2017. The 400,000 previously outstanding warrants expired on September
20, 2017.
Note
9. Income Taxes
On
December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the “Act”) resulting in significant modifications
to existing law. The Company has completed a review of the accounting for the effects of the Act during the quarter ended December
31, 2017. The Company’s financial statements for the period ended
September
30, 2018 reflect certain effects of the Act which includes a reduction in the corporate
tax rate from 34% to 21% as well as other changes.
Income
tax provision (benefit) for the periods ended
September
30, 2018 and 2017, is summarized below:
|
|
2018
|
|
|
2017
|
|
Current:
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
—
|
|
|
$
|
—
|
|
State
|
|
|
—
|
|
|
|
—
|
|
Total current
|
|
|
—
|
|
|
|
—
|
|
Deferred:
|
|
|
|
|
|
|
|
|
Federal (21% tax rate in 2018)
|
|
|
(104,600
|
)
|
|
|
(19,400
|
)
|
State
|
|
|
(27,400
|
)
|
|
|
(3,100
|
)
|
Total deferred
|
|
|
(132,000
|
)
|
|
|
(22,500
|
)
|
Valuation allowance
|
|
|
132,000
|
|
|
|
22,500
|
|
Total provision
|
|
$
|
—
|
|
|
$
|
—
|
|
The
provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before
provision for income taxes.
The
sources and tax effects of the differences as of
September
30, 2018 and 2017 are as follows:
|
|
2018
|
|
|
2017
|
|
Income tax provision at the
federal statutory rate
|
|
|
21.0
|
%
|
|
|
34.0
|
%
|
State income taxes, net of federal benefit
|
|
|
5.5
|
%
|
|
|
5.5
|
%
|
Increase in valuation
allowance
|
|
|
(26.5
|
%)
|
|
|
(39.5
|
%)
|
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Components
of the net deferred income tax assets at
September
30, 2018 and December 31, 2017 were as follows:
|
|
2018
|
|
|
2017
|
|
Net operating loss carryovers
(adjusted for revised tax rate)
|
|
$
|
496,100
|
|
|
$
|
364,100
|
|
Valuation allowance
|
|
|
(496,100
|
)
|
|
|
(364,100
|
)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
In
accordance with ASC 740, at
September
30,
2018 and December 31, 2017 we determined that a valuation allowance should be recognized against deferred tax assets because,
based on the weight of available evidence, it is more likely than not (i.e., greater than 50% probability) that some portion or
all of the deferred tax asset will not be realized in the future. We recognized a reserve of 100% of the amounts of the deferred
tax benefit in the amount of $496,100 and $364,100, respectively.
LifeApps
Brands Inc.
Notes
to Condensed Consolidated Financial Statements
September
30, 2018 and 2017
(Unaudited)
As
of
September
30,
2018, we had cumulative net operating loss carry forwards of $2,236,900 which expire from 2032 through 2038.
There
are open statutes of limitations for taxing authorities in federal and state jurisdictions to audit our tax returns from 2010
through the current period. Our policy is to account for income tax related interest and penalties in income tax expense in the
consolidated statement of operations. There have been no income tax related interest or penalties assessed or recorded.
Note
11. Subsequent Events
On
October 25, 2018 we issued 1,000,000 shares to Sterling Financial Consultants LLC for accounting, tax and advisory
services.
On
December 5, 2018 we issued an aggregate of 2,750,000 shares of our restricted common stock to one person pursuant to (i) an August
7, 2018 $10,000 promissory note, as amended, due on February 15, 2019 (750,000 shares) and (ii) a $10,000 Securities Purchase
Agreement dated August 7, 2018 (2,000,000 shares). The shares were deemed to have been issued as of August 7, 2018.
On
December 5, 2018 we issued 10,946,688 shares of our restricted common stock to Robert Gayman pursuant to the exercise of (i) 6,000,000
stock options at an exercise price of $0.0026 per share or an aggregate of $15,600, and (ii) 4,946,688 stock options at an exercise
price of $0.01 per share or an aggregate of $49,467, the payment for which was made by making a corresponding deduction to amounts
owed by us to Mr. Gayman.
On
December 5, 2018 Robert Gayman forgave $531,487.12 of the amount due to him by us for services rendered. On December 5, 2018 we
issued 500,000 shares to our corporate counsel in consideration of its deferment, on a temporary basis, of legal fees due to it
by us for services rendered.
On
November 1, 2018 we entered into an Employment Services Agreement (the “Roan Agreement”) with Lawrence Roan pursuant
to which Mr. Roan is serving as our Executive Director. The Roan Agreement has a 63-month term and is subject to automatic renewal
for successive periods of one year unless either we or Mr. Roan gives the other written notice of intention to not renew at least
30 days prior to the end of the existing term. The Roan Agreement provides for a base annual salary of $100,000 and a two-year
severance period in the event the Roan Agreement is terminated by us without cause or by Mr. Roan for good reason. Mr. Roan’s
base salary payments are payable in bi-weekly installments. The Roan Agreement contains customary termination provisions including
terminations with or without cause, for good reason or voluntarily, non-competition and non-solicitation provisions, and an inventions
and patents provision which provides that all of the work produced by Mr. Roan, which is created, designed, conceived or developed
by Mr. Roan in the course of his employment under the Roan Agreement belongs to us.
On
November 1, 2018 the Management contracts for Bobby Blair and Brian Neal and the Consultant contract for Robert Gayman were amended
to remove the deferred payment salary conversion feature.