ITEM
1. FINANCIAL STATEMENTS
Bespoke Extracts, Inc.
Formerly Dimi Telematics International, Inc.
Consolidated Balance Sheets
(Unaudited)
|
|
May
31,
|
|
|
August
31,
|
|
|
|
2017
|
|
|
2016
|
|
Assets
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
Cash
|
|
$
|
158,046
|
|
|
$
|
431
|
|
Total
current assets
|
|
|
158,046
|
|
|
|
431
|
|
|
|
|
|
|
|
|
|
|
Domain
names, net of amortization of $836
|
|
|
49,349
|
|
|
|
-
|
|
Intellectual
property, net of amortization of $0 and $657, respectively
|
|
|
-
|
|
|
|
1,314
|
|
Total
assets
|
|
$
|
207,395
|
|
|
$
|
1,745
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders' Deficit
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
19,798
|
|
|
$
|
69,426
|
|
Accounts
payable - related party
|
|
|
-
|
|
|
|
14,609
|
|
Note
payable - related party
|
|
|
153,050
|
|
|
|
31,500
|
|
Convertible
note payable, net of unamortized discount $371,139
|
|
|
168,861
|
|
|
|
-
|
|
Total
current liabilities
|
|
|
341,709
|
|
|
|
115,535
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
Deficit
|
|
|
|
|
|
|
|
|
Series
A Convertible Preferred Stock, $0.001 par value, 50,000,000 authorized shares; no shares issued and outstanding as of May 31,
2017 and August 31, 2016, respectively
|
|
|
-
|
|
|
|
-
|
|
Common
stock, $0.001 par value: 800,000,000 authorized; 45,622,712 and 2,922,712 shares issued and outstanding as of May 31,
2017 and August 31, 2016, respectively
|
|
|
45,623
|
|
|
|
2,923
|
|
Common
stock payable - 200,000 shares
|
|
|
30,000
|
|
|
|
-
|
|
Additional
paid-in capital
|
|
|
7,563,087
|
|
|
|
2,310,876
|
|
Accumulated
deficit
|
|
|
(7,773,024
|
)
|
|
|
(2,427,589
|
)
|
Total
stockholders' deficit
|
|
|
(134,314
|
)
|
|
|
(113,790
|
)
|
Total
liability and stockholders' deficit
|
|
$
|
207,395
|
|
|
$
|
1,745
|
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
Bespoke Extracts, Inc.
Formerly Dimi Telematics International, Inc.
Consolidated Statements of Operations
(Unaudited)
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|
For the three months ended
|
|
|
For the nine months ended
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|
|
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May 31,
|
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May 31,
|
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May 31,
|
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|
May 31,
|
|
|
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2017
|
|
|
2016
|
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2017
|
|
|
2016
|
|
|
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|
|
|
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|
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|
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Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
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|
Selling, general and administrative expenses
|
|
$
|
16,543
|
|
|
$
|
4,869
|
|
|
$
|
30,807
|
|
|
$
|
15,662
|
|
Payroll expense
|
|
|
21,829
|
|
|
|
21,124
|
|
|
|
67,515
|
|
|
|
62,636
|
|
Professional fees
|
|
|
28,000
|
|
|
|
38,500
|
|
|
|
41,613
|
|
|
|
108,192
|
|
Consulting
|
|
|
73,750
|
|
|
|
4,675
|
|
|
|
73,750
|
|
|
|
122,584
|
|
Brand development
|
|
|
-
|
|
|
|
-
|
|
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|
10,000
|
|
|
|
-
|
|
Formula development
|
|
|
-
|
|
|
|
-
|
|
|
|
7,500
|
|
|
|
-
|
|
Compensation
|
|
|
5,088,421
|
|
|
|
-
|
|
|
|
5,088,421
|
|
|
|
-
|
|
Impairment of intellectual property
|
|
|
-
|
|
|
|
-
|
|
|
|
1,248
|
|
|
|
-
|
|
Amortization expense
|
|
|
836
|
|
|
|
33
|
|
|
|
902
|
|
|
|
99
|
|
Total
operating expenses
|
|
|
5,229,379
|
|
|
|
69,201
|
|
|
|
5,321,756
|
|
|
|
309,173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(5,229,379
|
)
|
|
|
(69,201
|
)
|
|
|
(5,321,756
|
)
|
|
|
(309,173
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
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Other expense
|
|
|
|
|
|
|
|
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|
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|
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|
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|
Interest expense
|
|
|
(9,383
|
)
|
|
|
(60
|
)
|
|
|
(12,327
|
)
|
|
|
(60
|
)
|
Amortization of debt discounts
|
|
|
(11,352
|
)
|
|
|
-
|
|
|
|
(11,352
|
)
|
|
|
-
|
|
Total
other expense
|
|
|
(20,735
|
)
|
|
|
(60
|
)
|
|
|
(23,679
|
)
|
|
|
(60
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Loss before income tax
|
|
|
(5,250,114
|
)
|
|
|
(69,261
|
)
|
|
|
(5,345,435
|
)
|
|
|
(309,233
|
)
|
Provision for income tax
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net Loss
|
|
$
|
(5,250,114
|
)
|
|
$
|
(69,261
|
)
|
|
$
|
(5,345,435
|
)
|
|
$
|
(309,233
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share: basic and diluted
|
|
$
|
(0.28
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.65
|
)
|
|
$
|
(0.11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding basic and diluted
|
|
|
18,520,538
|
|
|
|
2,923,907
|
|
|
|
8,179,122
|
|
|
|
2,815,848
|
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
Bespoke
Extracts, Inc.
Formerly
Dimi Telematics International, Inc.
Consolidated Statements
of Cash Flows
(Unaudited)
|
|
For
the nine months ended
|
|
|
|
May
31,
|
|
|
May
31,
|
|
|
|
2017
|
|
|
2016
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(5,345,435
|
)
|
|
$
|
(309,233
|
)
|
Adjustments
to reconcile net loss to net cash used in operating activities
|
|
|
|
|
|
|
|
|
Amortization expense
|
|
|
902
|
|
|
|
99
|
|
Amortization
of debt discount
|
|
|
11,351
|
|
|
|
-
|
|
Stock
based compensation
|
|
|
5,088,421
|
|
|
|
-
|
|
Impairment
of intellectual property
|
|
|
1,248
|
|
|
|
-
|
|
Changes
in operating assets and liabilities
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
(62,320
|
)
|
|
|
19,641
|
|
Accounts
payable - related party
|
|
|
(14,609
|
)
|
|
|
-
|
|
Accrued
interest expense
|
|
|
12,692
|
|
|
|
60
|
|
Prepaid
expense
|
|
|
-
|
|
|
|
95,375
|
|
Net
Cash used in operating activities
|
|
|
(307,750
|
)
|
|
|
(194,058
|
)
|
|
|
|
|
|
|
|
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|
Cash
flows from investing activities
|
|
|
|
|
|
|
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Proceeds
from note payable, related party
|
|
|
-
|
|
|
|
12,500
|
|
Cash
paid for domain names
|
|
|
(20,185
|
)
|
|
|
-
|
|
Net
cash used in investing activities
|
|
|
(20,185
|
)
|
|
|
12,500
|
|
|
|
|
|
|
|
|
|
|
Cash
flow from financing activities
|
|
|
|
|
|
|
|
|
Payment
of note payable - related party
|
|
|
(5,500
|
)
|
|
|
-
|
|
Proceeds
from exercise of warrants
|
|
|
4,000
|
|
|
|
-
|
|
Borrowings
on convertible debt
|
|
|
360,000
|
|
|
|
-
|
|
Proceeds
from note payable - related party
|
|
|
127,050
|
|
|
|
-
|
|
Net
cash provided by financing activities
|
|
|
485,550
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net
increase in cash and cash equivalents
|
|
|
157,615
|
|
|
|
(181,558
|
)
|
Cash
and cash equivalents at beginning of period
|
|
|
431
|
|
|
|
185,869
|
|
Cash
and cash equivalents at end of period
|
|
$
|
158,046
|
|
|
$
|
4,311
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information
|
|
|
|
|
|
|
|
|
Cash
paid during period for
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
-
|
|
|
$
|
-
|
|
Cash
paid for income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Noncash
investing and financing activities:
|
|
|
|
|
|
|
|
|
Common
stock payable issued for acquisition of domain names
|
|
$
|
30,000
|
|
|
$
|
-
|
|
Stock
issued with debt
|
|
|
157,509
|
|
|
|
-
|
|
Warrants
issued with debt
|
|
|
44,981
|
|
|
|
-
|
|
Common
stock issued for stock payable
|
|
|
-
|
|
|
|
210,000
|
|
The
accompanying notes are an integral part of these unaudited consolidated financial statements.
Bespoke
Extracts, Inc.
(formerly
DiMi Telematics International, Inc.)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
1 —BASIS OF PRESENTATION
The
accompanying unaudited consolidated financial statements of Bespoke Extracts, Inc. (formerly known as DiMi Telematics International,
Inc.), a Nevada corporation (the “Company”), have been prepared in accordance with the instructions to Form 10-Q and
do not include all of the information and footnotes required by accounting principles generally accepted in the United States
of America for complete consolidated financial statements. These unaudited consolidated financial statements and related notes
should be read in conjunction with the Company's annual report on Form 10-K for the fiscal year ended August 31, 2016. In the
opinion of management, these unaudited consolidated financial statements reflect all adjustments that are of a normal recurring
nature and which are necessary to present fairly the financial position of the Company as of May 31, 2017, and the results of
operations and cash flows for the three and nine months ended May 31, 2017 and May 31, 2016. The results of operations for the
three and nine months ended May 31, 2017 are not necessarily indicative of the results that may be expected for the entire fiscal
year.
Certain
prior period amounts have been reclassified to conform to current period presentation.
Going
Concern
The
accompanying financial statements have been prepared assuming a continuation of the Company as a going concern. The Company has
reported a net loss of $5,345,435 for the nine months ended May 31, 2017 and had a working capital deficit of $183,663 as
of May 31, 2017. These conditions raise substantial doubt about our ability to continue as a going concern.
The
Company’s ability to continue as a going concern is dependent upon the Company generating profitable operations in the future
and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations
when they come due. There is no assurance that this series of events will be satisfactorily completed. The accompanying financial
statements do not contain any adjustments that may result from the outcome of this uncertainty.
Research and Development
Research and development costs and brand development
costs are expensed as incurred. Development costs of product to be sold are subject to capitalization beginning when a product’s
feasibility has been established and ending when a product is available for general release to customers. In most instances, the
Company’s products are released soon after technological feasibility has been established. Costs incurred for development
are capitalized. Amortization is recorded over the estimated useful lives of the assets, generally, 5 years. For the nine months
ended May 31, 2017 the Company expensed $10,000 compared to $0 for the nine months ended May 31, 2016, for brand development.
Formula development for the nine months ended May 31, 2017 amounted to $7,500 compared to $0 for the nine months ended May 31,
2016.
2. EQUITY
Common
Stock
The
Company was formed in the state of Nevada on April 13, 2006. The Company has authorized capital of 800,000,000 shares
of common stock with a par value of $0.001, and 50,000,000 shares of preferred stock with a par value of $0.001.
On
October 1, 2015, the Board of Directors and a majority of the Company’s shareholders approved an amendment of the Company’s
Articles of Incorporation to effect a one (1) for three (3) reverse stock split of the Company’s outstanding common stock
(the “Reverse Split”). The Reverse Split became effective on December 1, 2015. As a result of the Reverse Split, each
three (3) shares of common stock issued and outstanding prior to the Reverse Split have been converted into one (1) share of common
stock. The effect of the Reverse Split has been applied retroactively throughout this quarterly report.
On
February 21, 2017, the Company recognized a stock payable of $30,000 associated with 200,000 shares committed to be issued for
the purchase of certain domain names (see Note 4).
On
March 10, 2017, the Company changed its name to Bespoke Extracts, Inc. (formerly known as DiMi Telematics International, Inc.).
On
April 11, 2017, the Company issued 2,700,000 shares of common stock in connection with the issuance of a convertible note with
a principal amount of $540,000 (see Note 6). The relative fair value of the stock of $157,509 was recognized as a discount to
the note that is being amortized to interest expense over the life of the note.
3.
WARRANTS
During
the nine months ended May 31, 2017, warrant activity included the following:
Warrants
granted on March 14, 2017, the Company entered into an employment agreement with Barry Tenzer to continue as CEO of the Company.
In connection with the employment agreement the Company issued Mr. Tenzer a warrant to purchase up to 20,000,000 share of common
stock at a per share price of $0.0001. The warrant was exercised in full on March 28, 2017. On May 22, 2017, Barry Tenzer resigned
as President and Chief Executive Officer. In connection with the resignation of Mr. Tenzer, the 20,000,000 shares of stock issued
upon the exercise of the warrants was returned to the company and cancelled and the exercise proceeds of $2,000 were returned
to Mr. Tenzer subsequent to May 31, 2017. The fair value of the warrants was determined to be $4,998,021 which was recognized
as compensation expense during the nine months ended May 31, 2017.
The
following table summarizes the warrant activity issued to Barry Tenzer during the nine months ended May 31, 2017:
|
|
Number of
Warrants
|
|
|
Weighted-Average
Price Per Share
|
|
Outstanding at August, 2016
|
|
|
-
|
|
|
$
|
-
|
|
Granted
|
|
|
20,000,000
|
|
|
|
.0001
|
|
Canceled or expired
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
20,000,000
|
|
|
|
.0001
|
|
Outstanding at May 31, 2017
|
|
|
-
|
|
|
$
|
-
|
|
O
n
May 22, 2017, the Company entered into an employment agreement with Mr. Yahr to serve as President and Chief Executive Officer
of the Company for a term of three years, unless earlier terminated pursuant to the terms of the Employment Agreement. Pursuant
to the terms of the Employment Agreement, Mr. Yahr received a warrant to purchase up to 20,000,000 shares of the Company’s
common stock at an exercise price of $0.0001 per share. The warrants were exercised in full on May 31, 2017; however, the 20,000,000
shares of the Company’s common stock were not issued to Mr. Yahr until June 10, 2017. The shares received upon the exercise
of the warrants are subject to forfeiture and vest over a service period of three years. The fair value of the award was determined
to be $10,998,105 of which $90,400 was recognized as compensation expense during the nine months ended May 31, 2017. The remaining
$10,908,265 will be recognized as compensation expense over the three year service period.
The
following table summarizes the warrant activity issued to Marc Yahr during the nine months ended May 31, 2017:
|
|
Number of
Warrants
|
|
|
Weighted-Average
Price Per Share
|
|
Outstanding at August, 2016
|
|
|
-
|
|
|
$
|
-
|
|
Granted
|
|
|
20,000,000
|
|
|
|
.0001
|
|
Canceled or expired
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
20,000,000
|
|
|
|
.0001
|
|
Outstanding at May 31, 2017
|
|
|
-
|
|
|
$
|
-
|
|
On
April 11, 2017, the Company executed a $540,000 Convertible Debenture with an original issue discount of $180,000. The note has
a 9% interest rate and a term of two years. In connection with the note, the Company issued the lender 900,000 warrants with a
term of 3 years and an exercise price of $1.00. The relative fair value of the warrants $44,981 was recognized as a discount to
the note.
|
|
Number of
Warrants
|
|
|
Weighted-Average
Price Per Share
|
|
Outstanding at August, 2016
|
|
|
-
|
|
|
$
|
-
|
|
Granted
|
|
|
900,000
|
|
|
|
1.00
|
|
Canceled or expired
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Outstanding at May 31, 2017
|
|
|
900,000
|
|
|
$
|
1.00
|
|
The
fair value of the warrants was estimated using the Black-Scholes option pricing model and the following range of assumptions:
|
|
|
Grant Date
|
|
Risk-free interest rate at grant date
|
|
|
1.06%
– 1.44
|
%
|
Expected stock price volatility
|
|
|
117%
– 362
|
%
|
Expected dividend payout
|
|
|
-
|
|
Expected option in life-years
|
|
|
1
– 3 years
|
|
4.
ASSET PURCHASE AGREEMENT
On
February 21, 2017, the Company purchased all right, title, interest and goodwill in or associated with certain the domain names
set forth in an asset purchase agreement for a total approximately $20,000 and 200,000 shares of the Company’s common stock
valued at $30,000. As of May 31, 2017, the stock had not been issued and a total of $30,000 common stock payable is recorded.
5.
INTELLECTUAL PROPERTY
The
Company executed an Asset Purchase Agreement on August 28, 2011 which included the acquisition of various types of intellectual
property. The Company elected to suspend further investment and working capital on developing the Company’s technology and
business prospects. The Company has recognized a loss on impairment of intellectual property in the amount of $1,248 as of May
31, 2017.
6.
NOTES PAYABLE
On
April 27, 2016, the Company issued our CEO a 7% unsecured promissory note in the amount of $2,500 which matured six months from
the date of issuance. On July 5, 2016, the Company issued our CEO a 7% unsecured note in the amount of $3,000 which matured six
months from date of issuance. On November 17, 2016, the Company repaid the principal amount of the notes, or $5,500.
The
changes in these notes payable to related party consisted of the following during the nine months ended May 31, 2017 and the year
ended August 31, 2016:
|
|
May 31,
2017
|
|
|
August 31, 2016
|
|
Notes payable – related party at beginning of period
|
|
$
|
5,500
|
|
|
$
|
-
|
|
Payments on notes payable – related party
|
|
|
(5,500
|
)
|
|
|
-
|
|
Borrowings on notes payable – related party
|
|
|
50
|
|
|
|
5,500
|
|
Convertible debenture – related party at end of period
|
|
$
|
50
|
|
|
$
|
5,500
|
|
On
May 17, 2016, the Company issued to Lyle Hauser, the Company’s largest shareholder, a 7% unsecured promissory note in the
amount of $10,000 which matured six months from the date of issuance. On August 15, 2016, the Company issued a significant shareholder
a 7% unsecured promissory note in the amount of $16,000 which matures six months from the date of issuance. On October 27, 2016,
the Company issued a significant shareholder a 7% unsecured promissory note in the amount of $10,000 which matures six months
from the date of issuance. The preceding notes have matured and remain unpaid at the quarter ended May 31, 2017. On November 14,
2016, the Company issued a significant shareholder 7% unsecured promissory note in the amount of $80,000 which matures six months
from the date of issuance. On February 17, 2017, the Company issued a significant shareholder 7% unsecured promissory note in
the amount of $30,000 which matures six months from the date of issuance. On March 31, 2017, the Company issued a significant
shareholder 7% unsecured promissory note in the amount of $7,000 which matures six months from the date of issuance.
The
changes in notes payable to related party consisted of the following during the nine months ended May 31, 2017 and the year ended
August 31, 2016:
|
|
May 31,
2017
|
|
|
August 31, 2016
|
|
Notes payable – related party at beginning of period
|
|
$
|
26,000
|
|
|
$
|
-
|
|
Payments on notes payable – related party
|
|
|
-
|
|
|
|
-
|
|
Borrowings on notes payable – related party
|
|
|
127,000
|
|
|
|
26,000
|
|
Convertible debenture – related party at end of period
|
|
$
|
153,000
|
|
|
$
|
26,000
|
|
On
April 11, 2017, the Company executed a $540,000 Convertible Debenture with an original issue discount of $180,000. The note has
a 9% interest rate and a term of two years. In connection with the note, the Company issued the lender an aggregate of 2,700,000
shares and 900,000 warrants. The relative fair value of the stock and warrants aggregating $202,490 was recognized as a discount
to the note. Amortization of $11,351 was recognized during the nine months ended May 31, 2017. The conversion price of the outstanding
balance is the lesser of $3.00 or 40% of the volume weighted average price of the 30 days at date of conversion; not to be less
than $1.00. In connection with the note the lender is entitled to receive the greater of 5% every dollar raised through financing
or every dollar of revenue generated through the earlier of maturity date and repayment of the principle.
|
|
May 31,
2017
|
|
Convertible debenture
|
|
$
|
540,000
|
|
Unamortized discount
|
|
|
(371,139
|
)
|
Convertible debenture, net of unamortized discount
|
|
$
|
168,861
|
|
7.
EMPLOYMENT AGREEMENT
On
March 14, 2017, the Company entered into a two year employment agreement with Barry Tenzer to continue as CEO of the Company.
In connection with the employment agreement the Company issued Mr. Tenzer a warrant to purchase up to 20,000,000 share of
common stock at a per share price of $0.0001. The warrant was exercised in full on March 28, 2017. The shares of common stock
underlying the warrant were issued on April 6, 2017.
On
May 22, 2017, Barry Tenzer resigned as President and Chief Executive Officer of Bespoke Extracts, Inc. Mr. Tenzer’s resignation
was not the result from any disagreement with the Company, any matter related to the Company’s operations, policies or practices,
the Company’s management or the Board. In connections with the resignation of Mr. Tenzer his stock issued from his employment
agreement has been returned to the company subsequent to May 31, 2017.
On
May 22, 2017, the Board of Directors of the Company appointed Marc Yahr as President and Chief Executive Officer of the Company
and as a member of the Company’s Board. There are no family relationships between Mr. Yahr and any of our other officers
and directors.
O
n
May 22, 2017, the Company entered into an employment agreement with Mr. Yahr pursuant to which Mr. Yahr will serve as President
and Chief Executive Officer of the Company for a term of three years, unless earlier terminated pursuant to the terms of the Employment
Agreement. Pursuant to the terms of the Employment Agreement, Mr. Yahr received a warrant to purchase up to 20,000,000 shares
of the Company’s common stock at an exercise price of $0.0001 per share. The warrants were exercised in full on May 31,
2017; however, the 20,000,000 shares of the Company’s common stock were not issued to Mr. Yahr until June 10, 2017.
8.
RELATED PARTY TRANSACTIONS
We
currently lease approximately 500 square feet of general office space at 290 Lenox Avenue, New York, NY 10027 from our Executive
Vice President – Business Development.
On
April 27, 2016, the Company issued our CEO two 7% unsecured promissory note in the aggregate amount of $5,500 which notes matured
six months from the date of issuance. Both notes have been paid off and the remaining principal amount is $0.
On
May 17, 2016, the Company issued to Lyle Hauser, the Company’s largest shareholder, a 7% unsecured promissory note in the
amount of $10,000 which matured six months from the date of issuance. The note has matured and remains unpaid at the quarter ended
May 31, 2017.
On
August 15, 2016, the Company issued a significant shareholder a 7% unsecured promissory note in the amount of $16,000 which matures
six months from the date of issuance. The note has matured and remains unpaid at the quarter ended May 31, 2017.
As
of August 31, 2016, the Company had an outstanding payable of $14,609 to the CEO. The payable is unsecured, due on demand and
bears no interest. As of May 31, 2017 the accounts payable – related party has been paid and currently has a balance of
$0.
On
October 27, 2016 the Company issued a significant shareholder a 7% unsecured promissory notes totaling $10,000 which matures six
months from the date of issuance. The note has matured and remains unpaid at the quarter ended May 31, 2017
One
November 14, 2016 the Company issued a significant shareholder a 7% unsecured promissory note totaling $80,000 which matures six
months from the date of issuance.
On
February 17, 2017, the Company issued a significant shareholder a 7% unsecured promissory note in the amount of $30,000 which
matures six months from the date of issuance.
On
March 31, 2017, the Company issued a significant shareholder 7% unsecured promissory note in the amount of $7,000 which matures
six months from the date of issuance.
9.
SUBSEQUENT EVENTS
As of June 10, 2017, the Company issued an
aggregate of 40,000,000 shares of common stock pursuant to the exercise of warrants for proceeds of $4,000.
On
June 29, 2017, the Company issued 200,000 shares of common stock committed to be issued for the purchase of certain domain names
(see Note 4).
On
June 29, 2017, in connection with the resignation of Mr. Tenzer, the 20,000,000 shares of stock issued upon the exercise of the
warrants was returned to the Company and cancelled and the exercise proceeds of $2,000 were returned to Mr. Tenzer.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
We
and our representatives may from time to time make written or oral statements that are “forward-looking,” including
statements contained in this Quarterly Report and other filings with the SEC, reports to our stockholders and news releases. All
statements that express expectations, estimates, forecasts or projections are forward-looking statements. In addition, other written
or oral statements which constitute forward-looking statements may be made by us or on our behalf. Words such as “expect,”
“anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,”
“project,” “forecast,” “may,” “should,” and variations of such words and similar
expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance
and involve risks, uncertainties and assumptions which are difficult to predict. Therefore, actual outcomes and results may differ
materially from what is expressed or forecasted in or suggested by such forward-looking statements. We undertake no obligation
to update or revise any of the forward-looking statements after the date of this Quarterly Report to conform forward-looking statements
to actual results. Important factors on which such statements are based are assumptions concerning uncertainties, including but
not limited to, uncertainties associated with the following:
|
●
|
Inadequate
capital and barriers to raising the additional capital or to obtaining the financing needed to implement our business
plans;
|
|
|
|
|
●
|
Our
failure to earn revenues or profits;
|
|
|
|
|
●
|
Inadequate
capital to continue business;
|
|
|
|
|
●
|
Volatility
or decline of our stock price;
|
|
|
|
|
●
|
Potential
fluctuation in quarterly results;
|
|
|
|
|
●
|
Rapid
and significant changes in markets;
|
|
|
|
|
●
|
Litigation
with or legal claims and allegations by outside parties; and
|
|
|
|
|
●
|
Insufficient
revenues to cover operating costs.
|
The
following discussion should be read in conjunction with the financial statements and the notes thereto which are included in this
Quarterly Report. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual
results may differ substantially from those anticipated in any forward-looking statements included in this discussion as a result
of various factors.
Overview
Cine-Source
Entertainment, Inc. (the “Old Corporation”) a Colorado corporation, was formed on July 29, 1988. Pursuant to a Plan
of Merger dated February 24, 2004, the Old Corporation filed Articles and Certificate of Merger with the Secretary of State of
the State of Colorado merging the Old Corporation into Cine-Source Entertainment, Inc. (the “Surviving Corporation”),
a Colorado corporation. A previous controlling stockholder group of the Old Corporation arranged the merger for business reasons
that did not materialize. On April 26, 2004, the Surviving Corporation effectuated a 1 for 200 reverse stock split. The name of
the Surviving Corporation was changed to First Quantum Ventures, Inc., on April 27, 2004. On April 13, 2006, the Surviving Corporation
formed a wholly owned subsidiary, a Nevada corporation named First Quantum Ventures, Inc., and on May 5, 2006 merged the Surviving
Corporation with and into this subsidiary, referred to herein as DTII.
The
Share Exchange qualified as a transaction exempt from registration or qualification under the Securities Act of 1933, as amended
(the “Securities Act”), and under the applicable securities laws of each jurisdiction where any of the stockholders
reside.
On
March 15, 2012, the Company changed its name to DiMi Telematics International, Inc.
On
April 16, 2012, the Company issued a 1 for 1 stock dividend to current stockholders whereby the Company issued an additional 33,959,744
shares of common stock. On May 16, 2012, the Company issued an additional 1 for 1 stock dividend to current stockholders
whereby an additional 71,286,155 shares were issued. The dividends were also applied to outstanding warrants. The Company
has reflected the dividends as splits, which have been retroactively reflected in the financial statements.
In
early 2017, our management team elected to suspend further investment and working capital on developing the Company’s
technology and business prospects, turning its attention to prevailing new business opportunities in other high growth
industries; namely the hemp-derived cannabidiol (“CBD”) market. On March 10, 2017, the Company changed its name
to Bespoke Extracts, Inc. (formerly known as DiMi Telematics International, Inc.) to align the Company’s corporate identity with its
new business plan.
The
Company is now focused on bringing to market a proprietary line of premium, quality, all natural CBD products in the forms of
tinctures, capsules, drops and edibles for the nutraceutical and veterinary markets. Produced using pure, all natural, zero-THC
phytocannabinoid-rich (“PCR”) hemp-derived isolate, our products will be marketed as dietary supplements through wholesale
channels and direct-to-consumers via our retail ecommerce store found at www.bespokeextracts.com.
Plan
of Operations
To
be launched in September 2017, our introductory retail line of premium CBD extracts will come in the form of tinctures and include:
|
●
|
All-Natural,
Pure Hemp-Derived CBD Extract with raw Mānuka Honey – available in 2 oz. and
will retail at $129.
|
|
●
|
All-Natural,
Pure Hemp-Derived CBD Extract for Pets with bacon flavoring – available in 2 oz.
and will retail at $69.
|
Generally
speaking, most CBD products for oral consumption available on the market have an earthy, bitter taste that some observers suggest
is reminiscent of chlorophyll. The centerpiece of the Company’s introductory line of great-tasting tinctures is our formulation
which infuses pure, raw, all-natural, un-pasteurized Mānuka honey into our hemp-derived CBD extract.
Our
Mānuka honey, imported directly from New Zealand, is one of the most unique and beneficial forms of honey in the world and
carries the industry’s highest Unique Manuka Factor (UMF
®
) 16+ rating, distinguishing it as superior high
grade Mānuka. Legislated by the UMF Honey Association (
http://www.umf.org.nz/
),
the UMF rating system provides for a quality trademark and grading system identifying natural unadulterated Mānuka honey
that has a special unique natural property found only in some strains of Mānuka honey. High grade (10+) Mānuka honey
contains a high concentration of methylglyoxal, giving the honey its superior antibiotic quality. Produced by bees that pollinate
the native Mānuka bush, general Mānuka honey uses range from healing sore throats and digestive illnesses to curing
Staph infections and gingivitis.
In
1982, researchers at the New Zealand University of Waikato discovered that
Mānuka
honey
has a considerably higher level of enzymes than regular honey. (http://www.waikato.ac.nz/news/archive.shtml?article=1087).
These enzymes create a natural hydrogen peroxide that works as an antibacterial. The Company’s tinctures are infused with
superior high grade, raw
Mānuka
honey, further enhancing the potential health
benefits offered by the CBD isolate we use, and delivering a delicious tasting experience for consumers.
Planned
Expansion of Product Line
By
the fall of 2017, presuming market conditions are favorable, we expect to expand our retail product offerings to include new flavored
options of tinctures and drops, as well as introducing our formulations in the form of capsules, sprays and edibles, such as gummies
and chewable candies.
Commitment
to Excellence in Supply, Manufacturing and Logistics
A
key differentiator of our finished products is the superb quality of ingredients we source from the industry’s leading suppliers,
each of whom we have carefully vetted and qualified.
It
is important to note that the CBD oil industry has attracted a whole host of ‘snake oil-like’ salesmen who are intent
on capitalizing on rising consumer demand for CBD products; however their primary motive is merely profit, not quality, much less
safety. In fact, in late February 2015, the U.S. Federal Drug Administration (“FDA”) issued several warning letters
to companies who claimed that their products contained CBD, but following testing of these products by the FDA were found to have
no CBD whatsoever, much less high quality, pure and/or organic CBD.
All
of the Company’s flavor-infused tinctures and drops are created using our formulations with pure, all natural CBD
isolate sourced from a leading supplier which sends each batch of CBD isolate it produces to a third party for purity and
safety verification prior to shipping to our manufacturer. CBD isolate contains no THC, so products made using this product
are not psychotropic and do not produce the “high” associated with THC products. Committed to sustainable
agriculture, our manufacturer sources its hemp-derived CBD from only non-GMO crops grown without pesticides, herbicides or
insecticides. Moreover, its purification plant and processes are International Organization for Standardization
(“ISO”) 9001 certified and Good Manufacturing Practice (“GMP”) certified, reflecting our shared
commitment to following only industry-best standards.
Raw
Mānuka
honey used in our products is imported directly from
Graham
Cammells Honey located on the north island of New Zealand which has been supplying quality bee products since 1974.
Fulfillment
of orders from our online customers is managed by a third-party logistics partner.
Development
Status and Go-to-Market Strategy
Few
will argue that the traditional retail environment is currently experiencing notable economic instability due largely to the global
shift in consumer purchasing behaviors – with online shopping/ecommerce sites rapidly overtaking brick-and-mortar stores
as consumer preferred shopping venues. In view of this retailing reality, we have adopted a Direct-to-Consumer sales model that
will be anchored by a high impact, visually stunning, content-rich ecommerce website whereby we will educate and sell and ship
our CBD products directly to consumers.
Our
marketing initiatives will include the use of social marketing, direct response marketing, inbound marketing, email marketing,
Search Engine Optimization and content marketing, among other proven strategies. We will also explore utilizing coupon and deal
sites to drive traffic to our website and participate in select industry conferences to promote our brand and build greater awareness
of our products among prospective business partners and consumers.
Employees
As
of May 31, 2017, the Company employed no full time and no part time employees other than its Chief Executive Officer.
Results
of Operation for the Three Months Ended May 31, 2017 and May 31, 2016.
Selling,
General and Administrative Expenses
Selling,
general and administrative expenses for the three months ended May 31, 2017 and May 31, 2016 totaled $16,543 and $4,869, respectively.
Payroll expense amounted to $21,829 and $21,124 for the three months ended May 31, 2017 and May 31, 2016, respectively. Impairment
of intellectual property amounted to $1,248 and $0 for the three months ended May 31, 2017 and May 31, 2016. Stock based compensation
amounted to $5,088,421 and $0 for the three months ended May 31, 2017 and May 31, 2016, respectively. Stock based compensation
is an expense related to the issuances of warrants to the CEO. See Note 3.
Amortization
Expense
Amortization
expense for the three months ended May 31, 2017 and May 31, 2016 totaled $836 and $33, respectively. Amortization expense is in
relation to recent URL purchase, prior year amortization is the expensing of intellectual property and the iPhone application.
Amortization
of Debt Discount
Amortization
of debt discount for the three months ended May 31, 2017 and May 31, 2016 totaled $11,352 and $0 respectively. Discount on debenture
is in relation to the issuance of a note payable in connection with a stock stale. See Note 6.
Interest
Expense
Interest
expense on promissory notes for the three months ended May 31, 2017 and May 31, 2016, was $9,383 and $60, respectively. The
Company entered into four unsecured promissory notes with related parties. See Note 6.
Net
Loss
For
the reasons stated above, our net loss for the three months ended May 31, 2017 totaled $5,250,114 or $(0.28) per share, an increase
of $5,180,853 compared to a net loss for the three months ended May 31, 2016 of $69,261, or ($0.02) per share. The majority of
the additional loss is due to recognition of stock based expense totaling $5,088,421.
Results
of Operation for the Nine Months Ended May 31, 2017 and May 31, 2016.
Selling,
General and Administrative Expenses
Selling,
general and administrative expenses for the nine months ended May 31, 2017 and May 31, 2016 totaled $30,807 and $15,662, respectively.
Payroll expense amounted to $67,515 and $62,636 for the nine months ended May 31, 2017 and May 31, 2016, respectively. Brand Development
amounted to $10,000 and $0 for the nine months ended May 31, 2017 and May 31, 2016. Formula development amounted to $7,500 and
$0 for the nine months ended May 31, 2017 and May 31, 2016. Brand and Formula development is in relation to the change in business
operations to the CBD market. Impairment of intellectual property amounted to $1,248 and $0 for the nine months ended May 31,
2017 and May 31, 2016. Stock based compensation amounted to $5,088,421 and $0 for the nine months ended May 31, 2017 and May 31,
2016, respectively. Stock based compensation is an expense related to the issuances of warrants to the CEO. See Note 3.
Amortization
Expense
Amortization
expense for the nine months ended May 31, 2017 and May 31, 2016 totaled $902 and $99, respectively. Amortization expense is in
relation to recent URL purchase, prior year amortization is the expensing of intellectual property and the iPhone application.
Amortization
of Debt Discount
Amortization
of debt discount for the nine months ended May 31, 2017 and May 31, 2016 totaled $11,352 and $0 respectively. Discount on debenture
is in relation to the issuance of a note payable in connection with a stock stale. See Note 6.
Interest
Expense
Interest
expense on promissory notes for the nine months ended May 31, 2017 and May 31, 2016, was $12,327 and $60, respectively. The
Company entered into four unsecured promissory notes with related parties. See Note 6.
Net
Loss
For
the reasons stated above, our net loss for the nine months ended May 31, 2017 totaled $5,345,435 or $(0.65) per share, an increase
of $5,036,202 compared to a net loss for the nine months ended May 31, 2016 of $309,233, or ($0.11) per share. The majority of
the additional loss is due to recognition of stock based expense totaling $5,088,421.
LIQUIDITY
AND CAPITAL RESOURCES
As
of May 31, 2017, we had cash and cash equivalents of $158,046. Net cash used in operating activities for the nine months ended
May 31, 2017 was approximately $308,068 our current liabilities as of May 31, 2017 totaled $341,709 consisting of accounts payable
and accrued liabilities of $19,798 note payable of $168,861 and note payables of $153,050. We have net negative working capital
of $183,663 as of May 31, 2017.
The
accompanying financial statements have been prepared assuming a continuation of the Company as a going concern. The Company has
reported a net loss of $5,345,435 for the nine months ended May 31, 2017 and had an accumulated deficit of $7,773,024 as of May
31, 2017. These conditions raise significant doubt about our ability to continue as a going concern.
We
have not generated positive cash flows from operating activities. The primary source of capital has been from the sale of equity
securities. Our primary use of capital has been for professional fees and general and administrative costs. Our working capital
requirements are expected to increase in line with the growth of our business.
OFF-BALANCE
SHEET ARRANGEMENTS
We
have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures
or capital resources.