Contingencies

9 Months Ended

Sep. 30, 2016

Loss Contingency [Abstract]

Contingencies

Note 10 - Contingencies

Legal Proceedings

From time to time, the Company may be involved in various litigation matters, which arise in the ordinary course of business.  There is currently no litigation that management believes will have a material impact on the financial position of the Company.

In connection with the registration of GopherInside as a trademark, Intel Corporation has requested that the Company abandons the trademark in lieu of potential confusion with their trademark Intel Inside. The Company has taken the initial steps necessary to alleviate any concern Intel may have associated with mobile or computer platforms. Furthermore, the Company holds the opinion that GopherInside is by merit different from “Intel + Inside” as two separate words. Additionally, a simple online search yields 1,189 live non-Intel marks that include the word “INSIDE.”  The Company learned that Intel filed on February 2, 2016 said Notice of Opposition to the trademark application. The Company decided not to object and agreed to abandon this trademark.

Warrants Liability

On June 10, 2016, the Company entered into a consulting agreement with Waterford Group LLC ("Waterford") pursuant to which the Company engaged Waterford to provide sales and marketing consulting and advisory services to the Company in consideration of 100,000 shares of restricted common stock of the Company (the "Shares") and a common stock purchase warrant (the "Warrant") to acquire 750,000 shares of restricted common stock of the Company at an exercise price of $2.25 per share for a period of five (5) years. 50,000 of the Shares were issued to Waterford upon the execution of the Agreement, worth $12,999, which such initial shares cover Q2 2016, and the Company will issue 12,500 Shares to Waterford on a quarterly basis thereafter. The Warrant vests on a quarterly basis in eight (8) equal quarterly installments each in the amount of 93,750 shares each quarter during the term of the Agreement. The first quarterly installment vested upon the execution of the Agreement and covers Q2 2016 and each subsequent quarterly installment vests each quarter thereafter. The warrant has been recorded as adjusting equity during this quarter. The Company believes that this agreement is in default, as the counterparty failed to perform. As such, in the third fiscal quarter, the Company did not issue the 12,500 shares or the portion of the Warrant due this fiscal quarter on 93,750 shares, and does not intend to issue those items until Waterford performs under the agreement. The Company has recorded a warrant expense of $37,480 in the current quarter.

Stock Options – Advisory Board

In connection with the Company's desire to retain highly qualified individuals to advise the Company with respect to certain aspects of its business, the Company has adopted an Advisory Board Charter, effective September 1, 2016, and has appointed four (4) members to its newly created Advisory Board, in order to advise the Company on the roll-out of its technologies, including its Guardian Patch "GOPHERINSIGHT™" circuit prototype device (the "Patch"). Each of the Company's Advisory Board members are seasoned veterans of the technology industry and are considered experts in their respective fields. All of the Advisory Board members hold PhD's from prestigious universities and are reputable figures within academia. The Advisory Board will advise the Company on a wide variety of technological issues, including R&D matters such as integrated circuit reliability and design concepts, EDA (Electronic Design Automation) software architecture and automation algorithms. In addition, each Advisory Board member's prior experience and current rolls in key technology industry positions will provide the Company with vastly more knowledge in the areas of mobile technology, physics and advanced mathematics. The Company's CTO, Dr. Danny Rittman, will serve as Chairman of the Advisory Board.

Advisory Board members will receive remuneration in the form of cash ($3,000 per quarter) and stock options in consideration of serving as Advisory Board members and each Advisory Board member's term will be one (1) year from the date of appointment or until a successor is duly elected. The Company intends to indemnify each Advisory Board member against any liability incurred while serving as an Advisory Board member. Each of the four members entitle to 100,000 Five years Stock Options with exercise price of $2.50 per share. Option shall vest as to (i) 40,000 shares upon the date hereof and (ii) in three (3) equal tranches of 20,000 shares every six (6) months.

The Advisory board will commence its function in the next quarter.

Trademarks

The Company received through Dr. Rittman, a Notice of Allowance for the "GOPHERINSIGHT" and "GOPHERNET" trademark applications (the "Trademark Applications") owned by Dr. Rittman, but considered to be Company property as the trademarks fall under the exclusive license agreement. The Notices of Allowance indicate that the USPTO has approved both Trademark Applications, providing the Company with the exclusive right to use the Trademarks in association with the goods listed in the Trademark Applications.

The list of goods contained in the GOPHERNET trademark application is:

Communications software for connecting microchips; Computer hardware, namely, wireless network extenders; Computer hardware, namely, wireless network repeaters; Computer networking hardware; Computer programs for connecting remotely to computers or computer networks; Computer programs for searching remotely for content on computers and computer networks; Microchip cards; Microchips; Mobile computing and operating platforms consisting of data transceivers, wireless networks and gateways for collection and management of data; Radio receivers and transmitters for monitoring and controlling light emitting diodes in a network of street lights and for processing emergency signals transmitted to individual street lights.

The list of goods contained in the GOPHERINSIGHT trademark application is:

Chip carriers, namely, semiconductor chip housings; Semiconductor chip sets; Semiconductor chip sets for use in mobile microchip and software system; Semiconductor chips; Semiconductor devices; Semiconductor power elements; and Semiconductors.

On July 29, 2016, the staff of the Atlanta Regional Office of the U.S. Securities and Exchange Commission (the "SEC" and the "Commission") advised the Company in a telephone conversation, followed by a written “Wells” notice, that it is has made a preliminary determination to recommend that the Commission file an enforcement action against the Company alleging violations of Section 13(a) of the Securities and Exchange Act of 1934 and Rules 13a-11, 13a-13 and 12b-20 thereunder. A Wells Notice is neither a formal allegation of wrongdoing nor a finding that any violations of law have occurred. Rather, it provides the Company with an opportunity to respond to issues raised by the Commission and offer its perspective prior to any SEC decision to institute proceedings. These proceedings could result in the Company being subject to an injunction and cease and desist order from further violations of the securities laws as well as monetary penalties of disgorgement, pre-judgment interest and a civil penalty.

Though the Company is not certain, it believes the Wells notice was issued as a result of the Company's failure to disclose within four business (4) days on Form 8-K a material event regarding an unregistered sale of the Company's securities (the "Material Event"). The Company subsequently reported the Material Event in its filings under the Securities Exchange Act of 1934, as amended, and has continued to include specific disclosure in connection with the Material Event in all of its subsequent quarterly filings with the SEC.

The Company is unable to predict the outcome of the investigation, any potential enforcement actions or any other impact on the Company that may arise as a result of such investigation. The Company has not established a liability for this matter, because it believes that the probability of loss related to this matter and an estimate of the amount of loss, if any, are not determinable at this time. An adverse judgment or action of the SEC could have a material adverse effect on the financial condition, results of operations and/or cash flows of the Company and their ability to raise funds in the future.

On September 20, 2016, the Company filed an amended and restated 10-Q for the period ended June 30, 2014 with the SEC. The relevant portion of the restatement is summarized below:

On June 16, 2014, the Company entered into a set of agreements (collectively, the “Blackbridge Agreement”) with Blackbridge, a financial services firm. The Company and Blackbridge were discussing an equity line of credit, and the Company agreed to pay Blackbridge a commitment fee of 90,000,000 shares, and also issued a convertible note for $90,000 having a 5% interest rate that matures on December 16, 2014. The note can be converted after the maturity date. The conversion price is 90% multiplied by the market price, which is defined in the agreement as the lowest of the daily trading price for the common stock during the twenty (20) trading day period ending on the latest complete trading day prior to the conversion date.

The Company computed the fair value of the conversion feature at the commitment date, based on the following management assumptions:

Expected dividends	0	%
Expected volatility	374	%
Expected term: conversion feature	183 days
Risk free interest rate	-0.079	%

The fair value of the embedded conversion option on the commitment date was $82,210. In the second quarter, which was 14 days after the commitment date, the Company should have recorded amortization expense of the debt discount of $6,289 on its income statement in the second quarter of 2014. In addition, at June 30, 2014, the Company should have recorded $344 of additional interest expense on its income statement in the second quarter of 2014. The book value of the (net) note payable on the balance sheet at 6/30/14 should have been the face value of the note less the unamortized debt discount at that point, which was $75,921, and including the $344 of interest expense: $14,424.

At June 30, 2014, we remeasured the value of the derivative liability, according to the following assumptions:

Expected dividends	0	%
Expected volatility	373	%
Expected term: conversion feature	169 days
Risk free interest rate	-0.070	%

The fair value of the embedded derivative at the commitment date was therefore remeasured to be $126,184. The difference of $43,974 was recorded as a change in the fair market value of the embedded derivative, and the derivative liability on the balance sheet was increased to $126,184. On the income statement, the earnings number at June 30, 2014 should have decreased by $140,608. On the statement of cash flows, cash flows used by operations should have decreased by $90,000, which was offset by increased borrowings under a note payable in cash flows from financing.

As of September 30, 2016, the Company has prepaid 12 months of legal services in shares, valued at $675,946.