NOTE 16 – COMMITMENTS AND CONTINGENCIES

Contingent Payments

On December 1, 2016, we acquired substantially all of the operating assets of CCI. As part of the purchase price of the operating assets of CCI, there is a cash payment of $500,000 contingent upon a future offering and earn out payments for all sales of CCI and RGNP products sold via CCI sales channels for the 2017, 2018, 2019 and 2020 calendar years. The estimated fair value of the contingent payments totaled $424,511 and was recognized as a liability in the accompanying consolidated balance sheets as of December 31, 2016 (Successor). During the year ended December 31, 2017 (Successor), ASK Gold and CCI each earned $41,534 of earn out payments for a total of $83,068. In addition, the Company paid $95,020 in reimbursement expenses (“Reimbursement Expenses”) that were the responsibility of CCI and will be applied against current and future earn out payments to CCI. The Company applied $41,534 of earn out payments owed to CCI against the Reimbursement Expenses for a net balance of $53,486 owed by CCI to the Company as of December 31, 2017 that is recorded in estimated fair value of contingent payments, net in the accompanying consolidated balance sheets. As of December 31, 2017 (Successor), estimated fair value of contingent payments, net was $287,957.

Consulting Agreement

On October 10, 2017, the Company entered into a marketing agreement with a third party. The agreement expires October 9, 2018 (“Initial Term”), has a base compensation of $100,000, payable $12,500 quarterly, and provides for royalties at ten percent (10%) of the Net Revenues from the ION collection, as defined. If during the Initial Term, the Company’s net revenue from the sales of the ION collection exceed the $100,000 base compensation, then the agreement shall automatically be extended for two years. In conjunction with the agreement, the Company issued 1,000,000 restricted common shares to the consultant, valued at $180,000 (based on our stock price on the date of grant), and recorded as marketing expenses in Operating expenses in the Consolidated Statements of Operations. In additional, 500,000 restricted common shares shall be issued at the end of the Initial Term, and should the agreement be extended, the Company shall an additional 1,350,000 restricted common shares. In addition, the Company agreed to donate five percent (5%) of the Net Revenues from the ION collection to mutually agreeable disaster relief funds.

Operating Leases

The Company has month-to month leases for its headquarters and its sales and marketing office. The total rent is approximately $3,200 per month.

The Company’s customer service and distribution facility is located at 1933 S. Broadway. Los Angeles, California. This facility is subleased at $7,834 per month through CCI for a period of eighteen months. On March 1, 2017, the Company gave ninety day written notice to terminate the sublease with no costs to terminate the lease. Beginning June 1, 2017, the Company leases its customer service and distribution facility on a month-to-month basis for $4,000 per month from a third party.

Rent expense was approximately $99,679 and $95,603 for the year ended December 31, 2017 (Successor), and for the one month ended December 31, 2016 (Successor) plus the eleven months ended November 30, 2016 (Predecessor), respectively.

Legal

From time to time, various lawsuits and legal proceedings may arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any legal proceedings or claims that it believes will have a material adverse effect on its business, financial condition or operating results.

Guarantees

The Company’s Convertible Notes payable are collateralized by substantially all of the Company’s assets and are personally guaranteed by the Company’s CEO and Australian Sapphire Corporation, a shareholder of the Company which is wholly-owned by the Company’s CEO.