Note G - Material Agreements

3 Months Ended

Mar. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

On January 14, 2019, the Company entered into an agreement with ASKA Electronics Co., Ltd. (“ASKA”) of China. ASKA is a manufacturer of Bluetooth headphones, sport earbuds and associated listening devices, and provides its products as an OEM and as an ODM for projects worldwide.

Under the Agreement:

ASKA will provide its design and manufacturing services in the capacity of a sub-contractor for the Company’s customers.

the Company will provide branding, sales and distribution services for existing and newly developed products that ASKA manufactures for sale in the North American market;

the Company will receive 2% of ASKA’s gross revenues resulting from the sales of ASKA’s products in North America, and

ASKA will receive up to 700,000 shares of the Company’s preferred shares, based on ASKA’s North American sales revenue for 2018 of approximately $14,000,000.

The Agreement contemplates the Company receiving a guaranteed minimum of $280,000 in gross profit for calendar year 2019.

Each Preferred Share is convertible into one share of the Company’s common stock. The Company, upon no less than thirty days written notice, may redeem the Preferred Shares at a price of $2.00 per share. The Preferred shares will automatically convert into shares of the Company’s common stock if the Company’s common stock closes at a price of $2.20 or more during any 30 consecutive trading days and if the average trading volume of the Company’s common stock during such 30 consecutive trading days is at least 10,000 shares per day. A “leak out provision” will be established such that ASKA may not sell more than 100,000 shares per month with sales per trading day limited to no more than 15% of the total trading volume that day. The closing of the transaction is subject to final Company board approval.

We signed an agreement with manufacturer and exporter Shenzhen Ferex Electrical Co., Ltd of China to manufacture and supply electrical components and systems at the end of last year. We began offering design, engineering and manufacturing services to our customers in the beginning of 2019. Currently, we have a manufacturing contract to provide these services with AfterMaster Audio Labs regarding two new products. Subject to certain financing requirements, it is anticipated that firm purchase orders, manufacturing and delivery will begin late in the second quarter or early third quarter 2019.

There were no other material changes to our contracts not previously reported.