Commitments and Contingencies | NOTE 8 – COMMITMENTS AND CONTINGENCIES The Company leases space for the Retail Store. The lease is for five years and runs through September 2023. The lease calls for payments of $1,305.60 per month for the first year, with a 3% increase per year for years two through five. As of June 30, 2020, the maturities of our operating lease were as follows for the periods ended December 31: Remaining Lease Payments 2020 $ 8,186 2021 16,738 2022 17,240 2023 13,221 Total remaining lease payments 55,385 Less: imputed interest (10,938 ) Total operating lease liabilities 44,447 Less: current portion (11,649 ) Long term operating lease liabilities $ 32,798 Weighted average remaining lease term 39 months Weighted average discount rate 12 % LITIGATION On June 18, 2018, Power Up Lending Group, LTD. (“Power Up”), filed in the Supreme Court of the State of New York that Sunstock and Jason Chang (president and CFO of Sunstock and board member) and Ramnik Clair (board member of Sunstock) materially breached the October 24, 2017, December 19, 2017, and April 16, 2018 notes payable to Power Up by, in June 2018, changing Sunstock’s transfer agent in violation of the Notes and Agreements, and existing letter of instructions and authorizations, refusing to provide a replacement irrevocable letter of instruction from the newly appointed transfer agent and also failing to maintain sufficient reserves of stock so as to permit and accommodate the conversion requests of Power Up to go forward. Power Up has requested judgment against Sunstock for $160,180 with default interest, judgment against Sunstock for reasonable legal fees and costs of litigation, three judgments against Jason Chang and Ramnik Clair for $160,180 and interest for each judgment, and a temporary restraining order and a preliminary and permanent injunction directing Sunstock, Jason Chang, and Ramnik Clair to take all steps necessary and proper to permit the conversion of debt into stock and to deliver the stock to Power Up. The October 24, 2017 note payable was extinguished upon final conversion to common stock in July 2019. The December 19, 2017 note payable was extinguished upon final conversion to common stock in November 2019. The April 16, 2018 note payable was extinguished upon final conversion to common stock and payment of $24,737.65 in 2020 per below. On June 22, 2018, EMA Financial, LLC (“EMA”) sent a letter to Sunstock stating that Sunstock was in default on the June 5, 2017 note payable and the October 11, 2017 note payable to EMA. Among other defaults, the letter stated that Sunstock was in default due to refusing to provide a replacement irrevocable letter of instruction from the newly appointed transfer agent and also failing to maintain sufficient reserves of stock. The letter asked for at least $332,884. On December 26, 2018, EMA filed a lawsuit in Federal Court for breach of contract. On July 9, 2018, the attorney for Auctus Fund, LLC (“Auctus”) sent a letter to Sunstock stating that Sunstock was in default on the May 24, 2017 note payable and the October 11, 2017 note payable to Auctus. Among other defaults, the letter stated that Sunstock was in default due to changing Sunstock’s transfer agent in violation of the note, and existing letter of instructions and authorizations, refusing to provide a replacement irrevocable letter of instruction from the newly appointed transfer agent and also failing to maintain sufficient reserves of stock so as to permit and accommodate the conversion requests of Auctus to go forward. The letters asked for at least $277,397 regarding the May 24, 2017 note payable and at least $299,247 regarding the October 11, 2017 note payable. On December 26, 2018, Auctus filed a lawsuit in Federal Court for breach of contract. On July 10, 2018, the attorney for Crown Bridge Partners, LLC (“Crown Bridge”), sent a letter to Sunstock stating that Sunstock was in default on the December 8, 2017 note payable to Crown Bridge. The letter stated that Sunstock was in default due to changing Sunstock’s transfer agent in violation of the note, and existing letter of instructions and authorizations, refusing to provide a replacement irrevocable letter of instruction from the newly appointed transfer agent and also failing to maintain sufficient reserves of stock so as to permit and accommodate the conversion requests of Crown Bridge to go forward. The letter requested that Sunstock immediately contact Crown Bridge to demonstrate compliance with the note. On August 15, 2018, the attorney for Crown Bridge sent another letter to Sunstock stating that Sunstock owed Crown Bridge $221,470, and that if Sunstock did not respond by August 21, 2018 in regards to payment, then a lawsuit would be filed. On March 7, 2019, the United States Court of Massachusetts issued electronic order 38 stating that the Court granted on the merits summary judgement on violation of contract claims for the plaintiffs (Auctus and EMA) and found Sunstock in default. On May 6, 2019, the United States District Court of the District of Massachusetts issued an Order to Show Cause in the case of Auctus and EMA Vs. Sunstock, Inc. The Court ordered Auctus to show cause within 21 days why the Court had jurisdiction at the outset of the case and why the Court ought not to vacate its entry of summary judgement for Auctus, EDF No. 38. The Court said that it had taken no action with regard to EMA’s claim. On May 30, 2019, the United States District Court of Massachusetts issued an order in the case of Auctus vs. Sunstock, Inc. that the Court was satisfied that Auctus compliant raised colorable securities law claims and, accordingly, the Court ruled that it had subject matter jurisdiction to enter summary judgment on Auctus’ contract claims. On June 20, 2019, Power Up filed a motion with the Supreme Court of the State of New York, County of Nassau, accepting judgement of $160,180 plus interest on the three notes with the Company. The Company believed that the interest would be that applicable to each note. In addition, Power Up included in the motion that the Company establish a reserve of 63,317,183,000 of common shares. The Company believed that Power Up was entitled to either $160,180 plus interest or to common shares, but not both. On July 29, 2019, Power Up converted $1,180 in principal and $6,480 in accrued interest of its October 21, 2017 debt into 2,070,270 shares of common stock. The total of $7,660 was be applied against the $160,180 plus interest. In October and November 2019, Power Up converted the remaining principal of $53,000 and $3,180 in accrued interest of its December 19, 2017, debt into 32.586,386 shares of common stock. In December 2019, Power Up converted the remaining principal of $53,000 of its April 16, 2018 debt into 46,503,498 shares of common stock. On January 9, 2020, $15,000 in accrued interest and default penalty were converted to 24,590,164 shares of common stock. The remaining balance of $24,737.65 was paid by the Company’s CEO, Jason Chang, on January 9, 2020. The Company issued Jason Chang 24,737,650 shares of common stock in settlement of his payment to Power Up. A Stipulation of Discontinuance was filed with the Supreme Court of the State of New York County of Nassau. On January 15, 2020, the Company reached a settlement agreement and mutual general release with Auctus and EMA, in which $425,000 cash was paid in total to both on January 31, 2020 whereby both released the Company of all claims. A Stipulation of Dismissal with Prejudice was filed with the United States District Court for the District of Massachusetts. On January 28, 2020, the Company reached a settlement and release agreement with Crown Bridge, in which $90,000 cash was paid to them on January 31, 2020, whereby Crown Bridge released the Company of all claims. A Stipulation of Dismissal has not been filed as of the date of this report. In summary of the settlements with Auctus, EMA, and Crown Bridge in January 2020, the Company recorded $776,315 gain from settlements, $891,935 reduction in loans and loan penalties, $424,118 reduction in accrued interest, and $539,738 cash payments. INDEMNITIES AND GUARANTEES The Company has made certain indemnities and guarantees, under which it may be required to make payments to a guaranteed or indemnified party, in relation to certain actions or transactions. The Company indemnifies its directors, officers, employees and agents, as permitted under the laws of the State of Delaware. In connection with its facility leases, the Company has agreed to indemnify its lessors for certain claims arising from the use of the facilities. The duration of the guarantees and indemnities varies, and is generally tied to the life of the agreement. These guarantees and indemnities do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. Historically, the Company has not been obligated nor incurred any payments for these obligations and, therefore, no liabilities have been recorded for these indemnities and guarantees in the accompanying balance sheets. |