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Contingencies
3 Months Ended
Mar. 31, 2019
Loss Contingency [Abstract]  
Contingencies

Note 11 - 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.

 

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. The Warrant vested 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 each subsequent quarterly installment was to vest each quarter thereafter. The Company believes that Waterford is in default of its agreement, as it failed to perform or provide any services under the agreement. As such, the Company put Waterford on notice in writing that the Company did not issue shares or warrants during the third or fourth fiscal quarters of 2016 due to the default.

 

On or around January 23, 2017, the Company filed a complaint against Waterford and the Company’s Transfer Agent, in Superior Court of the State of California, County of Riverside. On February 1, 2017, the Company obtained a temporary restraining order that prohibits Waterford from (x) lifting the restricted legend from the 50,000 shares that it received in connection with signing the Agreement; (y) selling the 50,000 shares to another party; and, (z) from exercising the warrant on 93,750 shares that was issued and vested upon the execution of the Agreement. As ordered by the court, on February 9, 2017, the Company deposited a Corporate Surety Bond in the amount of $42,875 to secure the temporary restraining order. The Company agreed with Waterford to go to binding arbitration, which is currently being scheduled.

 

On or around February 27, 2017, the Company was issued a stay of the temporary restraining order barring its transfer agent from providing shares in connection with the exercise of the first Waterford warrant on 93,750 shares that was provided to Waterford in connection with the execution of the engagement letter that was executed by the parties on or around June 10, 2016. On October 12, 2018, the Waterford legal matter was settled in favor of the Company that resulted in the cancelation of Waterford’s 93,750 warrants and the cancelation of 50,000 shares of the Company’s common stock owned by Waterford.

 

On or around April 10, 2017, the Company was billed by its transfer agent (“TA”) for approximately $11,500 for legal fees (“TA Charges”) in connection with a lawsuit brought by one of the Company’s shareholders against the TA. The Company is not a named party in this litigation. The Company disputes the TA Charges, as the Company’s position is that the TA Charges are not covered under the indemnification section of the Company’s agreement with its TA. As the TA refused to provide further services, the Company paid the fees, and booked it as an expense in 2017. This matter has been resolved amicably, and the Company continues its relationship with the TA.

 

On or around January 30, 2019, RWJ Advanced Marketing, LLC, Greg Bauer, and Warren Jackson sued the Company in Superior Court of the State of California - County of Los Angeles, General District in connection with the acquisition of UGopherServices in September 2017. The case number is 19STCV03320. The lawsuit alleges breach of contract, among other causes of action. The Company answered the complaint and filed a cross-complaint against the plaintiffs in the case on or around February 15, 2019.

 

Spare CS, Inc.

 

On January 14, 2018, the Company entered into an Initial Term Agreement (the “ITA”) with Spare CS Inc. (“Spare”), a Delaware corporation, pursuant to which the Company agreed to acquire 50% of the equity of Spare. Spare is a mobile banking app that allows customers to access cash with no ATM, no debit or credit card, and no purchase required from participating merchants. During the years ended December 31, 2018, the Company terminated the ITA with Spare and wrote off the $265,000 that has been advanced to Spare. The $265,000 in included as part of the impairment of assets in the accompanying consolidated statement of operations for the year ended December 31, 2018.

 

GBT Technologies, S.A.

 

On June 12, 2018, the Company entered into a Letter of Intent (the “LOI”) with Gopher Protocol Costa Rica, S.R.L. (“Gopher CR”), a partially owned subsidiary of the Company, GBT Technologies, S.A., a Costa Rican company (“GBT”) and Tokenize-IT, S.A. (“Tokenize”). The LOI contemplates the acquisition of Tokenize by Gopher CR and the issuance of 20 million shares of common stock of the Company (the “GOPH Shares”) to Tokenize. Concurrent with the acquisition, Tokenize will enter into a joint venture agreement with GBT pursuant to which Tokenize will transfer and assign the GOPH Shares to GBT and issue equity securities of Tokenize providing GBT with 50% equity ownership in Tokenize with the balance owned by Gopher CR in consideration of GBT providing Tokenize with access to its currency trading platform that is a fully licensed and Central Bank regulated “Currency Exchange” in Costa Rica.

 

No assurance can be given that a definitive agreement will be entered into, that the appropriate governing bodies including the Company’s board of directors will approve such transactions, that the proposed transactions contemplated above will be consummated, or that Tokenize will be able to obtain adequate funds needed to fund its business plan.

 

On September 14, 2018, the Company entered into an Exclusive Intellectual Property License and Royalty Agreement (the “GBT License Agreement”) with GBT, a fully compliant and regulated cryptocurrency exchange platform that currently operates in Costa Rica as a decentralized cryptocurrency platform, pursuant to which, among other things, the Company granted to GBT an exclusive, royalty-bearing right and license relating intellectual property relating to systems and methods of converting electronic transmissions into digital currency as reflected in that certain patent filed with the United Stated Patent and Trademark Office on or about June 14, 2018 (EFS ID: 32893586; Application Number: 16008069; Type: Utility under 35 USC 111(a); Confirmation Number: 6787)(collectively, the “Digital Currently Technology”). Pursuant to the GBT License Agreement, the Company granted GBT an exclusive worldwide license to use the Digital Currency Technology to make, use, sell, lease or otherwise commercialize and dispose of products and devices utilizing the Digital Currently Technology.

 

Under the terms of the GBT License Agreement, the Company is entitled to receive a royalty payment of 2% of gross revenue of each licensed product sold by GBT during the period starting in which revenue is first generated using the licensed products and continuing for five years thereafter. Upon signing the GBT License Agreement, GBT paid the Company $300,000 which is nonrefundable. The Company has recognized the $300,000 as revenue during the years ended December 31, 2018. Upon GBT making available for sale (the “Commercial Event”) an ICO (Initial Coin Offering) (the “Coin”), GBT will make a payment to the Company in the amount of $5,000,000. Further, upon the Commercial Event, GBT will grant the Company the ability to acquire 30% of the Coin at a 30% discount of such offering price of the Coin. The GBT License Agreement commenced as of the signing date and, unless terminated in accordance with the termination provisions of the GBT License Agreement, shall remain in force until the expiration of the patent pertaining to the Digital Currency Technology; provided that the right to use trade secrets shall survive the expiration of the GBT License Agreement provided the Company has not terminated. Prior to the signing of the GBT License Agreement, GBT advanced $200,000 to the Company, which the parties have agreed will be applied toward the $5,000,000 fee when it becomes due. The $200,000 is recorded as unearned revenue at December 31, 2018 in the accompanying consolidated balance sheet.

 

On March 9, 2019, the Company entered into a Non-Binding Letter of Intent (“LOI”)for general terms upon which our respective Board of Directors or similar governing body will adopt a definitive share exchange agreement (the “Agreement”), and recommend that the GBT Shareholders enter into the Agreement whereby Gopher will purchase all of the outstanding securities of GBT Technologies (the “GBT Securities”) from the GBT Shareholders for consideration consisting of shares of the Company. This LOI sets forth the basic terms of the share purchase transaction and reflects the current, good faith intentions of Gopher, GBT Technologies and the GBT Shareholders with respect thereto. No assurance can be given that a definitive agreement will be entered into, that the appropriate governing bodies including the Company’s Board of Directors will approve such transactions, that the proposed transactions contemplated above will be consummated, or that GBT will be able to obtain adequate funds needed to fund its business plan

 

On April 24, 2019, the Company and GBT agreed that the aggregate purchase price to be paid by Company on the Closing Date (if it takes place) shall be 156,000 shares of Series H Convertible Preferred Stock of Gopher (the “GOPH Preferred Shares”) and 100,000,000 shares of common stock of Gopher (the “GOPH Common Shares” and together with the GOPH Preferred Shares, the “Securities”). The GOPH Preferred Shares shall (i) have a stated value of $500 per share, (ii) shall having voting rights on an as converted basis, (iii) liquidation rights at 100% of the stated value, (iv) be convertible into common stock at a conversion price of $0.50 per share and (v) shall be convertible to the extent that the Company has available authorized, unissued shares of common stock and thereafter upon the Company either implementing a reverse split or increasing its authorized shares of common stock. The number of shares of common stock to be issued upon conversion of the GOPH Preferred Shares will be determined by multiplying the number of GOPH Preferred Shares to be converted by the stated value and dividing such product by the conversion price. For example, if all of the GOPH Shares are to be converted, the number of shares of common stock to be issued shall be equal to 156,000 multiplied by $500 which product is divided by $0.50 resulting in 156,000,000 shares of common stock to be issued. The issuance of the Securities will be exempt from the registration requirements of the Securities Act of 1933, as amended (the “1933 Act”), pursuant to an exemption provided by Section 4(a)(2) thereunder, and/or Regulation D promulgated under the 1933 Act.

 

GBT agrees as part of the LOI to table/pend its ICO efforts of WISE, until closing or until Gopher’s board will obtain a legal opinion about the implication on Gopher and GBT Technologies post-closing in lieu of US regulator opinion or position about ICO’s.