COMMITMENTS AND CONTIGENCIES

12 Months Ended

Dec. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTIGENCIES

NOTE 7 - COMMITMENTS AND CONTINGENCIES

Operating Lease

The Company entered into a lease agreement for office space commencing December 1, 2015 through November 30, 2018. The lease was guaranteed by various members of Management. The monthly rent under the lease agreement is as follows:

December 1, 2017 November 30, 2018 $ 7,072

The Company entered into a lease agreement for office space commencing November 15, 2018. The monthly rent under the lease agreement is as follows:

November 15, 2018 November 14, 2019	$	5,443
November 15, 2019 November 14, 2020	$	5,606

The month December 15, 2018 – January 14, 2019 is a free rent month per the terms of the agreement.

Total rent expense for the years ended December 31, 2019 and 2018 was $84,763 and $101,663, respectively.

On November 29, 2018, the Company entered into an option to purchase its current facility under the terms and conditions of the lease along with a $50,000 deposit. The option to purchase the facility was never executed and per the terms of the September 26, 2019 settlement and mutual release agreement the $50,000 deposit will be returned, with $25,000 returned on October 8, 2019 and the balance of $25,000 was returned on February 18, 2020.

Per the terms of the lease agreement for office space, the lessor executed an option to terminate the lease effective February 18, 2020.

See Note 10 for subsequent events.

Litigation

Shareholder Lawsuit

In March 2016, a significant shareholder (“Plaintiff”) of the Company filed a lawsuit against the Company in the state of California alleging breach of contract, fraud and negligent misrepresentation based on supposed oral promises in 2013 to give Plaintiff’s company shares in exchange for stocks in another company and a 2014 consulting agreement. The Company strongly disputed all claims made in the lawsuit. On April 20, 2017, the Company filed an answer that denied each and every purported allegation and cause of action and further denied that they caused any damage or loss. The Company reached an agreement resulting in a voluntary dismissal of the civil case on July 5, 2017. The Plaintiff was not able to fulfill the proper documentation within the allotted 180 days and the 3,450,000 shares of AppTech Corp stock were properly cancelled in 2019.

Former Shareholders Lawsuits

In April 2014, a shareholder of AppTech filed a lawsuit against the Company in the State of Washington claiming breach of contract related to the sale / transfer of unregistered shares at the time of AppTech acquisition. On August 13, 2014, the Company notified the transfer agent and placed a ’Stop Order’ on the shares. The shareholder claims that the 2.5 million shares received are unrestricted and should be reflected as such. On August 19, 2014, the Company filed a motion to dismiss the lawsuit. The lawsuit was dismissed on October 31, 2014.

In November 2017, two shareholders of AppTech, one who previously filed the 2014 lawsuit in the State of Washington, filed another lawsuit against the Company in the State of California, claiming the same accusations as the previously filed lawsuit which was dismissed. The lawsuit has been transferred to the United States District Court for the Southern District of California. The Company filed the defendants answer, affirmative defenses and counter claims. Management believes that the Plaintiff misrepresented and misled AppTech during the merger. The court has encouraged the parties to settle. Even though the Company believes the lawsuit is without merit and will vigorously defend, the Company has made several offers to settle. On December 19, 2019, the Company entered into a settlement and release agreement. The Company has recorded the liability as of December 31, 2019 for the total obligation of $240,000 to be paid out over three years beginning February 15, 2020. The 2019 impact is recorded in other expenses. A stipulation for dismissal of action has been filed with the courts. The first payment of $20,000 due February 15, 2020 has been paid timely.

Former Board of Director Member Lawsuit

In July 2018, a former Board of Director’s member filed a lawsuit, in the United States District Court for the Southern District of California, alleging various claims for relief. The Company reached an agreement, with no consideration paid that resulted in a voluntary dismissal with prejudice and dismissed all claims on November 14, 2018.

Former Landlord Lawsuit

In September 2018, the landlord for our former office space lease filed a limited civil lawsuit against the Company in the State of California. The Company reached an agreement that resulted in a stipulation for judgment on October 28, 2018. The stipulated judgment was for $42,432 including attorney fees and court costs plus interest for which the Company recorded as a liability as of December 31, 2018. The stipulated judgment was paid in full on August 16, 2019.

Patent Acquisition Lawsuit

In September 2018, a complaint was filed in San Diego superior court for a breach of contract arising from a written agreement for the purchase of a judgment to which AppTech was not a party. The purchase of the judgment was part of the transaction to acquire the patents. AppTech substantially performed under the agreement but the second agreement to extend the final payment was executed under duress. On October 26, 2018, the Company filed an answer that denied each and every purported allegation and cause of action and further denied that they caused any damage or loss. On December 3, 2019, the Company entered into a conditional settlement providing the terms of the conditional settlement have been completed by October 1, 2020. The conditional settlement amount of $150,000 is paid in monthly installments of $15,000. The installments, due the end of each month, have been paid through February 2020.

Significant Contract

In January 2019, the Company entered into an agreement with a broker dealer to provide capital raising activities. Under the terms of the agreement the broker dealer is to make a minimum of $90,000 in advisory fees. In addition, there are various other provisions within the agreement which include a 10% placement fee, warrants to purchase common stock, a 4% transaction fee, etc.

Employee versus Contractor Classification

The Company compensates various individuals as consultants. Annually, these consultants are issued Form 1099s for amounts paid to them. In addition, these consultants do not have arrangements in which specify compensation payable to them. The Company risks potential tax and legal actions if these consultants are deemed to be employees by governmental agencies.