NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For
the Twenty-Six Weeks ended June 30, 2019 and July 1, 2018
(Unaudited)
NOTE
1 – HISTORY AND ORGANIZATION
Giggles
N’ Hugs, Inc. (“GIGL Inc.” or the “Company”) was originally organized on September 17, 2004 under
the laws of the State of Nevada, as Teacher’s Pet, Inc. GIGL Inc. was organized to sell teaching supplies and learning tools.
On August 20, 2010, GIGL Inc. filed an amendment to its articles of incorporation to change its name to Giggles N’ Hugs,
Inc.
On
December 30, 2011, GIGL Inc. completed the acquisition of all the issued and outstanding shares of GNH, Inc. (“GNH”),
a Nevada corporation, pursuant to a Stock Exchange Agreement. For accounting purposes, the acquisition of GNH by GIGL Inc. has
been recorded as a reverse merger. Giggles N Hugs restaurant concept brings together high-end, organic food with the play elements
and entertainment for children. Giggles N Hugs offers an upscale, family-friendly atmosphere with a play area dedicated to children
ages 10 and younger with nightly entertainment, such as magic shows, concerts, puppet shows, as well as activities and games which
include face painting, dance parties, karaoke, and arts and crafts,
The
Company adopted a 52/53 week fiscal year ending on the Sunday closest to December 31st for financial reporting purposes. Fiscal
year 2019 and 2018 consists of a year ending December 29, 2019 and December 30, 2018.
NOTE
2 – BASIS OF PRESENTATION
The
interim financial statements included herein, presented in accordance with United States generally accepted accounting principles
and stated in US Dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared
in accordance with US generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.
These
statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary
for fair presentation of the information contained therein. It is suggested that these interim financial statements be read in
conjunction with the financial statements of the Company for the year ended December 30, 2018 and notes thereto included in the
Company’s annual report on Form 10-K. The Company follows the same accounting policies in the preparation of interim reports.
The condensed consolidated balance sheet as of December 30, 2018 included herein was derived from the audited consolidated financial
statements as of that date, but does not included all disclosures, including notes, required by GAAP.
Results
of operations for the interim periods may not be indicative of annual results.
NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Going
concern
The
accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization
of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying
condensed consolidated financial statements, during the twenty-six weeks ended June 30, 2019, the Company incurred a net loss
of $279,930, used cash in operations of $23,622, and had a stockholders’ deficit of $2,158,041 as of that date. In addition,
the note payable to the Company’s landlord was in default. These factors raise substantial doubt about the Company’s
ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon the Company’s
ability to raise additional funds and implement its business plan. In addition, the Company’s independent registered public
accounting firm in its report on the December 30, 2018 financial statements has raised substantial doubt about the Company’s
ability to continue as a going concern within one year from the date that the financial statements are issued. The financial statements
do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
The
Company had cash on hand in the amount of $31,028 as of June 30, 2019. Management estimates that the current funds on hand will
be sufficient to continue operations through September 30, 2019. Management is currently seeking additional funds, primarily through
the issuance of debt and equity securities for cash to operate our business. No assurance can be given that any future financing
will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company can obtain
additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial
dilution for our stock holders, in case or equity financing.
Principles
of consolidation
The
condensed consolidated financial statements include the accounts of Giggles N Hugs, Inc., GNH, Inc., GNH CC, Inc. for restaurant
operations in Westfield Mall in Century City, California (which was closed June 30, 2016 due to a complete remodel of the Mall),
GNH Topanga, Inc. for restaurant operations in Westfield Topanga Shopping Center in Woodland Hills, California, and Glendale Giggles
N Hugs, Inc. for restaurant operations in Glendale Galleria in Glendale, California. Intercompany balances and transactions have
been eliminated. Giggles N Hugs, Inc., GNH, Inc., GNH CC, Inc., GNH Topanga, Inc., and Glendale Giggles N Hugs, Inc. will be collectively
referred herein to as the “Company”.
Use
of estimates
The
preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates
and assumptions used by management including assumptions made in impairment analysis of fixed assets, accruals of potential liabilities,
valuation of derivative liabilities and equity securities issued for services and realization of deferred tax assets. Actual results
could differ from those estimates.
NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue
The
Company recognized revenue in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606), (ASC 606). The underlying
principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to
be collected. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contract(s),
which includes (1) identifying the contract(s) or agreement(s) with a customer, (2) identifying our performance obligations in
the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance
obligations, and (5) recognizing revenue as each performance obligation is satisfied.
Under
ASC 606, revenue is recognized when performance obligations under the terms of a contract are satisfied, which occurs for the
Company upon shipment or delivery of products or services to our customers based on written sales terms, which is also when control
is transferred. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring the products
or services to a customer.
Leases
Prior
to January 1, 2019, the Company accounted for leases under ASC 840, Accounting for Leases. Effective January 1, 2019, the Company
adopted the guidance of ASC 842, Leases, which requires an entity to recognize a right-of-use asset and a lease liability for
virtually all leases. The Company adopted ASC 842 using a modified retrospective approach. As a result, the comparative financial
information has not been updated and the required disclosures prior to the date of adoption have not been updated and continue
to be reported under the accounting standards in effect for those periods. The adoption of ASC 842 on January 1, 2019 resulted
in the recognition of operating lease right-of-use assets of $911,966 and, liabilities for operating leases of $1,462,835. As
part of the entry to record the lease liability, the Company removed approximate $133,833 of deferred rent and $417,000 of landlord
lease incentives that existed as of December 31, 2018. There was no cumulative-effect adjustment to accumulated deficit necessary.
See Note 9 for further information regarding the adoption of ASC 842.
Loss
per common share
Net
loss per share is provided in accordance with ASC Subtopic 260-10. We present basic loss per share (“EPS”) and diluted
EPS on the face of statements of operations. Basic EPS is computed by dividing reported losses by the weighted average shares
outstanding. Except where the result would be anti-dilutive to income from continuing operations, diluted earnings per share has
been computed assuming the conversion of the convertible long-term debt and the elimination of the related interest expense, and
the exercise of stock options and warrants. Loss per common share has been computed using the weighted average number of common
shares outstanding during the year. For the period ended June 30, 2019, the assumed conversion of convertible notes payable and
the exercise of 52,964,917 stock warrants, and 115,000 options to acquire shares of common stock are anti-dilutive due to the
Company’s net losses and are excluded in determining diluted loss per share.
NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Stock-based
compensation
The
Company periodically issues stock options and warrants to employees and non-employees in non-capital raising transactions for
services and for financing costs. The Company accounts for stock option and warrant grants issued and vesting to employees based
on the authoritative guidance provided by the Financial Accounting Standards Board whereas the value of the award is measured
on the date of grant and recognized over the vesting period. The Company accounts for stock option and warrant grants issued and
vesting to non-employees in accordance with the authoritative guidance of the Financial Accounting Standards Board (FASB) whereas
the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance
commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Non-employee
stock-based compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances
where there are no future performance requirements by the non-employee, option grants are immediately vested, and the total stock-based
compensation charge is recorded in the period of the measurement date.
The
fair value of the Company’s stock option and warrant grants is estimated using the Black-Scholes Option Pricing model, which
uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options or warrants,
and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes Option Pricing model
and based on actual experience. The assumptions used in the Black-Scholes Option Pricing model could materially affect compensation
expense recorded in future periods.
The
Company also issues restricted shares of its common stock for share-based compensation programs to employees and non-employees.
The Company measures the compensation cost with respect to restricted shares to employees based upon the estimated fair value
at the date of the grant, and is recognized as expense over the period, which an employee is required to provide services in exchange
for the award. For non-employees, the Company measures the compensation cost with respect to restricted shares based upon the
estimated fair value at the measurement date which is either a) the date at which a performance commitment is reached, or b) at
the date at which the necessary performance to earn the equity instruments is complete.
Recent
Accounting Standards
Recent
accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public
Accountants, and the Securities and Exchange Commission are not believed by management to have a material impact on the Company’s
present or future consolidated financial statements.
NOTE
4 – PROPERTY AND EQUIPMENT
Property
and equipment consisted of the following at:
|
|
June 30, 2019
|
|
|
December 30, 2018
|
|
Leasehold improvements
|
|
$
|
1,889,027
|
|
|
$
|
1,889,027
|
|
Fixtures and equipment
|
|
|
60,310
|
|
|
|
60,310
|
|
Computer software and equipment
|
|
|
270,364
|
|
|
|
267,372
|
|
Property and equipment, total
|
|
|
2,219,701
|
|
|
|
2,216,709
|
|
Less: accumulated depreciation
|
|
|
(1,810,863
|
)
|
|
|
(1,708,865
|
)
|
Property and equipment, net
|
|
$
|
408,838
|
|
|
$
|
507,844
|
|
Depreciation
and amortization expense for the thirteen weeks and twenty-six weeks ended June 30, 2019 were $49,751 and $101,998, respectively,
and for the thirteen weeks and twenty-six weeks ended July 1, 2018 were $58,516 and $120,150, respectively. Repair and maintenance
expense for the thirteen weeks and twenty-six weeks ended June 30, 2019 were $12,712 and $25,818, respectively, and for thirteen
weeks and twenty-six weeks ended July 1, 2018 were $14,959 and $30,518, respectively.
Management
assesses the carrying value of property and equipment whenever events or changes in circumstances indicate that the carrying value
may not be recoverable. If there is indication of impairment, management prepares an estimate of future cash flows expected to
result from the use of the asset and its eventual disposition. If these cash flows are less than the carrying amount of the asset,
an impairment loss is recognized to write down the asset to its estimated fair value. For the periods ended June 30, 2019 and
December 30, 2018, there were no indications of further impairment based on management’s assessment of these assets.
NOTE
5 – NOTE PAYABLE FROM LESSOR – In Default
On
February 12, 2013, the Company entered into a $700,000 Promissory Note Payable Agreement with GGP Limited Partnership (“Lender”)
to be used by the Company for a portion of the construction work to be performed by the Company under the lease by and between
the Company and Glendale II Mall Associates. On March 1, 2015, the Company and the lender renegotiated the terms of the Promissory
Note and agreed to a new note with a principal balance due of $683,316. As part of the new agreement, the Lender waived principal
and interest payments for two years beginning March 1, 2015.
On
August 12, 2016 the Company entered into a third amendment on its lease at The Glendale Galleria. The amendment covered several
areas, including adjustment to percentage rent payable, reduced the minimum rent payable, along with the payment and principal
of Promissory Note. The Promissory Note was adjusted to a balance due of $763,261 from $683,316, with no interest, payable in
equal monthly instalments of $5,300 through maturity of Note on May 31, 2028. The Company imputed interest using a discount rate
of 10% to determine a fair value of the note of $443,521. As of June 30, 2019, and December 30, 2018 the balance of note payable
net of unamortized note discount was $420,881 and $420,881 respectively.
The
lender under the Note is GGP Limited Partnership (GGP). GGP is an affiliate of Glendale II Mall Associates, the lessor of the
Company’s Glendale Mall restaurant location. In accordance with the note agreement, an event of default would occur if the
Borrower defaults under the lease between the Company and Glendale II Mall Associates. Upon the occurrence of an event of default,
the entire balance of the Note payable and accrued interest would become due and payable, and the balance due becomes subject
to a default interest rate (which is 5% higher than the defined interest rate). As of June 30, 2019, the Company was delinquent
in its payments to GGP under the note, and as such, the Note has been reflected as currently due and disclosed as in default.
NOTE
6 – CONVERTIBLE NOTE PAYABLE
On
August 24, 2015, the Company entered into an unsecured Note Payable Agreement with an investor for which the Company issued a
$50,000 Convertible Note Payable, which accrues interest at a rate of 5% per annum and matured on August 31, 2016. The Lender
may also convert all or a portion of the Note Payable at any time into shares of common stock at a price of $0.10 per share. By
oral agreement with the lender, the maturity date was extended, and the note is now considered to be due on demand.
NOTE
7 – COMMON STOCK
Issuance
of Common Stock
During
the twenty-six weeks ended June 30, 2019, the Company granted and issued 450,000 shares of restricted common stock with a fair
value of $4,650 for services.
During
the twenty-six weeks ended June 30, 2019, the Company issued 50,000 shares of common stock at fair value of $350 for an employee.
Employee
Stock Options
The
following table summarizes the changes in the options outstanding at June 30, 2019, and the related prices for the shares
of the Company’s common stock issued to employees of the Company under a non-qualified employee stock option plan.
|
|
Stock
|
|
|
Weighted Average
|
|
|
|
Options
|
|
|
Exercise Price
|
|
Outstanding, December 31, 2017
|
|
|
115,000
|
|
|
$
|
4.50
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Outstanding, April 1, 2018
|
|
|
115,000
|
|
|
$
|
4.50
|
|
Exercisable, April 1, 2018
|
|
|
115,000
|
|
|
$
|
4.50
|
|
As
of June 30, 2019, the stock options had no intrinsic value.
There
were no options granted during the fiscal quarter ended June 30, 2019, and there was no stock-based compensation expense in connection
with options granted to employees.
NOTE
8 – COMMON STOCK (CONTINUED)
Warrants
On
January 1, 2019, the Company entered into employee agreements with three individuals. In accordance with the agreements, the employees
are to receive warrants of 32,997,000 at an exercise price of $0.0001. The Company calculated the fair value of the warrants to
be $230,979 based on the stock price at the date of grant. During the period ended June 30, 2019, the Company amortized $118,990
of this amount as an expense which is included in general and administrative costs on the accompanying statement of operations.
As of June 30, 2019 the remaining unamortized balance was $111,990 which will be amortized over the remainder of the year.
The
following table summarizes the changes in the warrants outstanding at June 30, 2019, and the related prices.
A
summary of the Company’s warrants as of June 30, 2019 is presented below:
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Exercise
|
|
|
|
Warrants
|
|
|
Price
|
|
Outstanding, December 30, 2018
|
|
|
19,967,917
|
|
|
$
|
0.07
|
|
Granted
|
|
|
32,997,000
|
|
|
|
0.007
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Outstanding, June 30, 2019
|
|
|
52,964,917
|
|
|
$
|
0.03
|
|
Exercise, June 30, 2019
|
|
|
52,964,917
|
|
|
$
|
0.03
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
Weighted
|
|
Range of
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
|
|
|
Average
|
|
Exercise
|
|
Number
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Number
|
|
|
Exercise
|
|
Prices
|
|
Outstanding
|
|
|
Price
|
|
|
Life
|
|
|
Exercisable
|
|
|
Price
|
|
$0.01 ~ $0.37
|
|
|
19,967,917
|
|
|
$
|
0.03
|
|
|
|
2.08
|
|
|
|
19,967,917
|
|
|
$
|
0.72
|
|
|
|
|
32,997,000
|
|
|
|
0.0001
|
|
|
|
9.50
|
|
|
|
32,997,000
|
|
|
|
0.0001
|
|
|
|
|
52,964,917
|
|
|
|
|
|
|
|
11.58
|
|
|
|
52,964,917
|
|
|
|
|
|
The
intrinsic value of the warrants outstanding as of June 30, 2019 was $167,000.
NOTE
9 – LEASES
Prior
to January 1, 2019, the Company accounted for leases under ASC 840,
Accounting for Leases
. Effective January 1, 2019, the
Company adopted the guidance of ASC 842,
Leases,
which requires an entity to recognize a right-of-use asset and a lease
liability for virtually all leases. The Company adopted ASC 842 using a modified retrospective approach. As a result, the comparative
financial information has not been updated and the required disclosures prior to the date of adoption have not been updated and
continue to be reported under the accounting standards in effect for those periods. The adoption of ASC 842 on January 1, 2019
resulted in the recognition of operating lease right-of-use assets of $911,997 and lease liability of $1,462,835.As part
of the entry to record the lease liability, the Company removed $133,833 of deferred rent and $417,000 of landlord lease incentives
that existed as of December 31, 2018. There was no cumulative-effect adjustment to accumulated deficit necessary.
On
August 12, 2016, the Company entered into a third amendment on its lease at The Glendale Galleria. The amendment covered
several areas, including adjustment to percentage rent payable, reduced the minimum rent payable and payment and principal of
the Promissory Note payable to GGP. The Promissory Note was adjusted to a balance due of $763,262 from $683,316, with zero percent
interest, payable in equal monthly instalments of $5,300 through maturity of Note on May 31, 2028, creating a gain on extinguishment
of the old note of $220,68 (see Note 5). The change in the payment terms of the lease caused a change in the previously calculated
deferred rent of $69,614. For reporting purposes, the Company determined that since the GGP Promissory Note and the related revision
of the lease were agreed to at the same time, that the change in the lease payment terms and the reduced rent, and the issuance
of the new note are directly related. In addition, past due rent of $164,987 was forgiven. As such the gain on the termination
of the note of $220,686, the adjustment to the deferred rent in the aggregate amount of $69,614, and the forgiveness of past due
rent of $164,987, resulting in an aggregate gain of $455,287 had been deferred, and is being amortized on the straight-line basis
over the remaining life of the lease as an adjustment to rent expense. The balance of the deferred gain was $298,086 as of June
30, 2019.
During
the period ended June 30, 2019, $34,394 of deferred gain was amortized and offset to rent expense, resulting in a remaining deferred
gain balance of $298,086 as of June 30, 2019 which will be amortized as an offset to rent expense over the remainder of the lease.
NOTE
9 – LEASES (CONTINUED)
Lease
Obligations
The
Company has operating lease agreements for Topanga and Glendale and with remaining lease terms of 3.8 years and 4.42 years, respectively.
Operating lease right-of-use (“ROU”) assets and liabilities are recognized at commencement date based on the present
value of lease payments over the lease term. ROU assets represent our right to use an underlying asset for the lease term and
lease liabilities represent our obligation to make lease payments arising from the lease. Generally, the implicit rate of interest
in arrangements is not readily determinable and the Company utilizes its incremental borrowing rate in determining the present
value of lease payments. The Company’s incremental borrowing rate is a hypothetical rate based on its understanding of what
its credit rating would be. The operating lease ROU asset includes any lease payments made and lease incentives were removed.
The balance of the right of use asset at June 30, 2019 was $822,339, net of accumulated amortization of $51,593.
The
following is related to leases for the period:
|
|
At June 30,
2019
|
|
Operating Leases
|
|
|
|
|
Long-term right-of-use assets, net
|
|
$
|
822,339
|
|
|
|
|
|
|
Short-term operating lease liabilities
|
|
$
|
328,018
|
|
Long-term operating lease liabilities
|
|
|
987,638
|
|
Total operating lease liabilities
|
|
$
|
1,315,656
|
|
The
Company’s total lease payment is as follows:
2019
|
|
|
219,796
|
|
2020
|
|
|
452,956
|
|
2021
|
|
|
469,398
|
|
2022
|
|
|
279,077
|
|
2023
|
|
|
151,172
|
|
Total lease payments
|
|
|
1,572,398
|
|
Less: note discount
|
|
|
(256,742
|
)
|
Present value of lease liabilities
|
|
$
|
1,315,656
|
|
NOTE
10 – COMMITMENTS AND CONTINGENCIES
Employment
Agreements
Sean
Richards
: On January 1, 2019, we entered into an employment agreement with Sean Richards, pursuant to which Mr. Richards agreed
to devote all of his working time to our business as our Chief Operating Officer and we agreed to pay Mr. Richards an annual base
salary of $101,500, plus a onetime bonus of warrants exercisable for 1,000,000 shares of our common stock issued for a ten-year
period with an exercise price of $0.0001 per share. In addition, we also agreed to pay the monthly premiums for health care coverage
for Mr. Richards and the other members of his immediate family up to a maximum of $15,000 per year. Mr. Richards will receive
an annual bonus in cash of up to $10,000, in our sole discretion and based on mutually agreed upon financial performance goals.
The
employment agreement also contains covenants prohibiting Mr. Richards from competing with us during his employment, and from (i)
competing with us in California and in any other states where we provide management services relating to our business, (ii) soliciting
any of our employees or consultants and (iii) disparaging the Company or any of our officers, directors, employees or agents for
a period of two years after his employment ends. The employment agreement also contains customary confidentiality provisions.
The employment agreement may be terminated by either party for any reason at any time.
Joey
Parsi
: On January 1, 2019, we entered into an employment agreement with Joey Parsi, pursuant to which Mr. Parsi agreed to
devote a majority of his working time to our business as our Co-Chief Executive Officer and we agreed to pay Mr. Parsi an annual
base salary of $225,000, plus a onetime bonus of warrants exercisable for 25,997,000 shares of our common stock issued for a ten-year
period with an exercise price of $0.0001 per share. In addition, we also agreed to pay the monthly premiums for health care coverage
for Mr. Parsi and the other members of his immediate family. Mr. Parsi will receive an annual bonus in cash of up to $175,000,
in our sole discretion and based on mutually agreed upon financial performance goals. Mr. Parsi will also be entitled to reimbursement
for all ordinary and reasonable expenses incurred in the performance of his duties for the Company, including for a company car,
lap top computer and cell phone. Mr. Parsi will also be entitled to six weeks of vacation annually.
The
employment agreement may be terminated by either party for any reason at any time. If Mr. Parsi’s employment is terminated
by the Company with or without cause, Mr. Parsi will be entitled to receive a severance payment in the amount of 12 months of
his base salary plus all unvested options, warrants and shares.
The
employment agreement also contains covenants prohibiting Mr. Parsi from disparaging the Company or any of our officers, directors,
employees or agents for a period of two years after his employment ends. The employment agreement also contains customary confidentiality
provisions.
Philip
Gay
: On January 1, 2019, we entered into an employment agreement with Philip Gay effective as of April 1, 2018, pursuant to
which Mr. Gay agreed to serve as our Co-Chief Executive Officer and we agreed to pay Mr. Gay an annual base salary consisting
of warrants exercisable for 6,000,000 shares of our common stock issued for a ten-year period with an exercise price of $0.0001
per share. These warrants will be paid on each anniversary date of Mr. Gay’s employment and each annually grant will vest
at the rate of twenty-five percent (25%) per calendar quarter. Mr. Gay will also be entitled to reimbursement for all ordinary
and reasonable expenses incurred in the performance of his duties for the Company, and he will receive an annual bonus in cash
of up to $75,000, in our sole discretion and based on mutually agreed upon financial performance goals. If Mr. Gay’s employment
is terminated by the Company with or without cause, all unvested equity, options and equity grants will be cancelled.
The
employment agreement with Mr. Gay also contains customary confidentiality provisions and may be terminated by either party for
any reason at any time.
Litigation
As
of June 30, 2019, there was no material outstanding litigation.
NOTE
11 – SUBSEQUENT EVENTS
On
July 18, 2019, the Company issued 150,000 common stock for services, with a fair value of $1,200.