NOTE 8– COMMITMENTS & CONTINGENCIES

The Company is not currently involved in any legal proceedings that, in management’s opinion, would have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

The Company regularly assesses contingencies to determine the degree of probability and range of possible loss for potential accrual in its financial statements. An estimated loss contingency is accrued in its financial statements if it is probable that a liability has been incurred, and the amount of the loss can be reasonably estimated. Based on the Company’s assessment, it currently does not have any amount accrued as it is not a defendant in any claims or legal actions.

Whipshots

On September 8, 2021, Whipshots LLC, a Wyoming limited liability company (“Whipshots LLC”) entered into an Intellectual Property Purchase Agreement, effective August 24, 2021, with Penguins Fly, LLC, a Pennsylvania limited liability company (“Seller”). The agreement provided that Seller would sell the trademarks “Whipshotz” and “Whipshots”, the accompanying domain and social media handles of the same nomenclature, and certain intellectual property, documents, digital assets, customer data and other transferable rights under non-disclosure, non-compete, non-solicitation and confidentiality contracts benefiting the purchased intellectual property and documents (collectively, the “Acquired Assets”) to Whipshots LLC. The purchase price for the Acquired Assets will be payable to Seller, over the course of seven years, based on a sliding scale percentage of gross revenues actually received by the Company solely from the sale of Whipshots/Whipshotz Products. The payments are subject to a minimum amount in each contract year and a maximum aggregate amount. In connection with this agreement, the Company paid $58,620 through 2023 and $135,000 in 2024; the Company has accrued $291,783 to be paid pursuant to this agreement in 2025, all of which has been recorded as an indefinite-lived intangible asset for a total of $485,403.

On September 14, 2021, Whipshots Holdings, LLC (formerly Whipshots, LLC) a Delaware limited liability company (“Whipshots Holdings”), entered into a License Agreement (the “Washpoppin License Agreement”) with Washpoppin Inc., a New York corporation (“Washpoppin”). Pursuant to the Washpoppin License Agreement, Washpoppin licensed certain Licensed Property (as defined therein) of the recording artist professionally known as “Cardi B” (the “Artist”) to us. Whipshots Holdings and Washpoppin entered into an amended and restated Washpoppin License Agreement (“A&R Washpoppin License Agreement”), with an effective date of November 27, 2023. As part of the A&R Washpoppin License Agreement, in exchange for royalty rates based on Net Sales (as defined therein) during each applicable contract period, the Washpoppin warrants to cause the Artist to attend certain in person events, media interviews, participate in the development of the Licensed Products (as defined therein), and promote the Licensed Products through social media posts on the Artist’s social media platforms. We have committed to a minimum royalty payment under the A&R Washpoppin License Agreement of an aggregate of $3,300,000 subject to Washpoppin’s satisfaction of its obligations. As part of the A&R Washpoppin License Agreement, the previous unvested Whipshots Holdings shares issued to Washpoppin vesting was accelerated and additional Whipshots Holdings shares were issued to Washpoppin, resulting in a stock-based compensation expense to Whipshots Holdings of $8,627,273 during 2023.

During the years ended December 31, 2024 and 2023 the Company incurred expenses related to this agreement of approximately $1,600,000 and $1,130,000, respectively, which are recorded under marketing, general and administrative expenses on the income statement.

Soylent Share Adjustment

Pursuant to the Soylent Acquisition, the Company is expecting to issue approximately 135 million shares of common stock in connection with the Share Adjustment (as defined in Note 5) to the former owners of Soylent based upon the stock price of the Company on the Adjustment Date (as defined in Note 5). The Company engaged a third-party valuation firm to estimate the fair value of this contingent liability by performing a Monte Carlo simulation to forecast the value of the Company’s stock and the implied value of the Share Adjustment. See Note 5 – Acquisitions for further discussion. The fair value of the Share Adjustment on the Soylent Acquisition date was $36,715,800 and as of December 31, 2024, the fair value was $9,299,703.

Royalties and Licenses

The Company has contracts with some licensors that include minimum guaranteed royalty payments, which are initially recorded as an asset and as a liability at the contractual amount when no performance remains with the licensor. When performance remains with the licensor, we record guarantee payments as an asset when actually paid and as a liability when incurred, rather than recording the asset and liability upon execution of the contract.

Our minimum contractual royalty-based obligations remaining as of December 31, 2024 are approximately $20,000, $20,000, and $20,000 for each of the years ending December 31, 2025, 2026 and 2027. See Note 3 – Royalties and Licenses for further information.