NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
1. — NATURE OF OPERATIONS, SIGNIFICANT ACCOUNTING POLICIES AND GOING CONCERN
BASIS
OF PRESENTATION
The
accompanying unaudited consolidated financial statements of Bespoke Extracts, 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, 2018 filed with the Securities and Exchange Commission (the “SEC”)
on December 14, 2018. 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 February
28, 2019, and the results of operations and cash flows for the three and six months ended February 28, 2019 and 2018. The results
of operations for the six months ended February 28, 2019 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 unaudited consolidated financial statements have been prepared assuming a continuation of the Company as a going
concern. The Company has a working capital deficit as of February 28, 2019 and negative cash flows from operations for the
six months ended February 28, 2019. 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.
Inventory
Inventories
are stated at the lower of cost or net realizable value. Cost is determined by the first-in, first-out basis and market
being determined as the lower of replacement cost or net realizable value. The Company records inventory write-downs for estimated
obsolescence of unmarketable inventory based upon assumptions about future demand and market conditions. As of February 28, 2019
and August 31, 2018, inventory amounted to $54,184 and $61,857, respectively, which consisted of finished goods.
Revenue
Recognition
The Company recognizes revenue from product
sales to customers, distributors and resellers when products that do not require further services or installation by the Company
are shipped, when there are no uncertainties surrounding customer acceptance and when collectability is reasonably assured. Cash
received by the Company prior to shipment is recorded as deferred revenue. Sales are made to customers under terms allowing certain
limited rights of return and other limited product and performance warranties for which provision has been made in the accompanying
unaudited consolidated financial statements.
Amounts
billed to customers in sales transactions related to shipping and handling, represent revenues earned for the goods provided and
are included in net sales. Costs of shipping and handling are included in cost of products sold.
The
Company accounts for revenue in accordance with Topic 606 which was adopted at the beginning of fiscal year 2018 using the modified
retrospective method. The comparative information has not been restated and continues to be reported under the accounting standards
in effect for those periods. The Company did not recognize any cumulative-effect adjustment to retained earnings upon adoption
as the effect was immaterial.
Net
Income / Loss per Share
Basic
income / loss per share amounts are computed based on net income / loss divided by the weighted average number of common shares
outstanding. Diluted earnings per share reflect the potential dilution that could occur if potentially dilutive securities were
exercised or converted to common stock. The dilutive effect of options and warrants and their equivalent is computed by application
of the treasury stock method and the effect of convertible securities by the “if converted” method. Outstanding
options, warrants and convertible debt were excluded from the calculation of diluted income / loss per share during 2018 and 2017
because their inclusion would have been anti-dilutive.
2.
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 of $20,185 in cash and 200,000 shares of the Company’s common stock
valued at $30,000. For the three and six months ended February 28, 2019 and 2018 amortization expense amounted to $837, $796,
$1,673 and $1,632, respectively. The domain names are being amortized over a 15 year period.
3.
NOTE PAYABLE – RELATED PARTY
On
April 27, 2016, the Company issued its 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 its 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 notes payable to these related parties consisted of the following during the three months ended February 28, 2019 and
the year ended August 31, 2018.
|
|
February 28,
2019
|
|
|
August 31,
2018
|
|
Notes payable – related party at beginning of period
|
|
$
|
50
|
|
|
$
|
50
|
|
Payments on notes payable – related party
|
|
|
-
|
|
|
|
-
|
|
Borrowings on notes payable – related party
|
|
|
-
|
|
|
|
-
|
|
Note payable – related party at end of period
|
|
$
|
50
|
|
|
$
|
50
|
|
On
February 14, 2017, the Company issued to Lyle Hauser, the Company’s largest shareholder at the time, a 7% unsecured promissory
note in the amount of $30,000 which matured six months from the date of issuance. On May 31, 2018 the Company repaid the promissory
note in the amount of $30,000 and accrued interest of $2,811.
On
May 17, 2016, the Company issued to The Vantage Group Ltd. (“Vantage”), a significant shareholder at that time, a
7% unsecured promissory note in the amount of $10,000 which had an original maturity of six months from the date of issuance.
On August 15, 2016, the Company issued to Vantage a 7% unsecured promissory note in the amount of $16,000 which had an original
maturity of six months from the date of issuance. On October 27, 2016, the Company issued the same shareholder a 7% unsecured
promissory note in the amount of $10,000 which had an original maturity date of six months from the date of issuance. On November
14, 2016, the Company issued the same shareholder a 7% unsecured promissory note in the amount of $80,000 which had an original
maturity date of six months from the date of issuance. On March 31, 2017, the Company issued the same shareholder a 7% unsecured
promissory note in the amount of $7,000 which had an original maturity date of six months from the date of issuance.
On
April 17, 2017 the preceding notes issued to Vantage were amended to be convertible into common stock and to mature on April 18,
2018. The convertible notes had a fixed conversion price of $0.008. The amendments to the notes created a beneficial conversion
feature of $123,000 and amortization of the discount of $123,000 during the year ended August 31, 2018. The Company issued a total
of 10,050,000 shares of common stock to convert $80,000 principal and $400 of accrued interest into common stock and the remaining
$43,000 was exchanged with an additional $2,000 of accrued interest to purchase assets of the Company.
The
changes in notes payable to these related parties consisted of the following during the six months ended February 28, 2019 and
the year ended August 31, 2018.
|
|
February 28,
2019
|
|
|
August 31, 2018
|
|
Notes payable – related party at beginning of period
|
|
$
|
-
|
|
|
$
|
153,000
|
|
Payments on notes payable – related party
|
|
|
-
|
|
|
|
(30,000
|
)
|
Conversion
|
|
|
-
|
|
|
|
(80,000
|
)
|
Exchange for purchase of Company assets
|
|
|
-
|
|
|
|
(43,000
|
)
|
Note payables – related party at end of period
|
|
$
|
-
|
|
|
$
|
-
|
|
4.
CONVERTIBLE DEBENTURE – RELATED PARTY
On April 11, 2017, the Company executed a
$540,000 related party convertible debenture with an original issue discount of $180,000. The note had a 0% interest rate and
a term of two years, and provided that, if it were not paid in full on the due date, the note would have a 0% interest rate until
paid in full. In connection with the note, the Company issued the lender an aggregate of 2,700,000 shares of common stock and
900,000 warrants. The relative fair value of the stock ($157,509) and warrants ($44,981) aggregating $202,490 was recognized as
a discount to the note. Amortization of $99,776 and $143,132 was recognized during the three and six months ended February 28,
2019. 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 was entitled to receive
greater of 5% every dollar raised through financing or every dollar of revenue generated through the earlier of maturity date
and repayment of the principal. As of February 28, 2019 and August 31, 2018 the Company has accrued $48,265 and $34,015, respectively.
This note has been exchanged for shares of common stock of the Company. See Note 7.
|
|
February 28,
2019
|
|
|
August 31,
2018
|
|
Related Party Convertible debenture
|
|
$
|
540,000
|
|
|
$
|
540,000
|
|
Unamortized discount
|
|
|
(41,232
|
)
|
|
|
(184,364
|
)
|
Related Party Convertible debenture, net of unamortized discount
|
|
$
|
498,768
|
|
|
$
|
355,636
|
|
On August 28, 2017, the Company executed,
with a related party, an $180,000 convertible debenture with an original issue discount of $60,000. The note had a 0% interest
rate and a term of two years. In connection with the note, the Company issued the lender an aggregate of 900,000 shares of common
stock and 300,000 warrants to purchase common stock. The relative fair value of the stock and warrants aggregating $68,499 was
recognized as a discount to the note. Amortization of $16,032 and $32,094 was recognized during the three and six months ended
February 28, 2019. The conversion price of the outstanding balance was 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 debenture the lender was
entitled to receive the greater of 5% of every dollar raised through financing or every dollar of revenue generated through the
earlier of the maturity date or repayment of the principal. As of February 28, 2019 and August 31, 2018 the Company has accrued
$39,250 and $25,000, respectively. This note has been exchanged for shares of common stock of the Company. See Note 7.
|
|
February 28,
2019
|
|
|
August 31,
2018
|
|
Related Party Convertible debenture
|
|
$
|
180,000
|
|
|
$
|
180,000
|
|
Unamortized discount
|
|
|
(66,753
|
)
|
|
|
(98,847
|
)
|
Related Party Convertible debenture, net of unamortized discount
|
|
$
|
113,247
|
|
|
$
|
81,153
|
|
On December 13, 2017, the Company executed
a $120,000 convertible debenture with an original issue discount of $20,000. The debenture had a 0% interest rate and a term of
one year. In connection with the note, the Company issued the lender an aggregate of 200,000 shares of common stock and 100,000
warrants to purchase common stock. The relative fair value of the stock and warrants aggregating $32,930 was recognized as a discount
to the note. Amortization of $8,320 and $14,936 was recognized during the three and six months ended February 28, 2019.
The conversion price of the outstanding balance was 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 debenture the lender was entitled to receive the
greater of 5% of every dollar raised through financing or every dollar of revenue generated through the earlier of maturity date
and repayment of the principal. As of February 28, 2019 and August 31, 2018 the Company has accrued $34,250 and $20,000, respectively.
This note has been exchanged for shares of common stock of the Company. See Note 7.
|
|
February 28,
2019
|
|
|
August 31,
2018
|
|
Related Party Convertible debenture
|
|
$
|
120,000
|
|
|
$
|
120,000
|
|
Unamortized discount
|
|
|
-
|
|
|
|
(14,936
|
)
|
Related Party Convertible debenture, net of unamortized discount
|
|
$
|
120,000
|
|
|
$
|
105,064
|
|
5.
EQUITY
Common
Stock
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 Series
A Convertible Preferred stock with a par value of $0.001.
Between
September 1, 2018 and February 28, 2019 the Company sold a total of 8,966,667 shares of common stock for proceeds of $285,000.
On
October 13, 2018 the Company issued 1,000,000 shares of common stock for a sponsorship donation valued at $120,000.
Effective October 30, 2018, Marc Yahr resigned
from all positions with the Company including as President and Chief Executive Officer of the Company, except as a member of the
board of directors. On November 25, 2018 Mr. Yahr resigned as a member of the Company’s board of directors. On November
6, 2018, 16,000,000 shares of common stock were returned to the Company by Mr. Yahr for which the Company paid $1,600 to Marc
Yahr. This forfeiture was in accordance with the terms of this May 22, 2017 employee share based award and the forfeiture resulted
in a gain of $2,440,768 (net of the $1,600 cash paid) representing a reversal of the previously recognized expense for the unvested
portion of this freighted award.
On
October 30, 2018, the Company entered into an employment agreement with Niquana Noel pursuant to which Ms. Noel will serve as
the Company’s Chief Executive Officer and president for a term of four years, unless earlier terminated pursuant to the
terms of the employment agreement. Pursuant to the terms of the employment agreement, Ms. Noel’s annual salary is $96,000
and she 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. Ms. Noel exercised the warrant for $2,000 and was issued the 20,000,000 shares on October 31, 2018. The shares received
upon the exercise of the warrants are subject to forfeiture over a service period of four years.
Pursuant
to a securities purchase agreement entered into on June 6, 2018 the Company was obligated to issue additional shares of common
stock if the Company sold common stock at a price lower than $0.10 per share (or common stock equivalents with an exercise price
less than $0.10 per share) during the six month period following the closing of the purchase agreement, in which event the Company
was required to issue additional shares to the purchaser for no additional consideration, such that the total number of common
stock received by the purchaser will be equal to $50,000 divided by lower financing price. As of February 28, 2019 the Company
was obligated to issue 500,000 shares of common stock valued at $76,000.
Warrants
On
May 22, 2017, the Company entered into an employment agreement with Marc 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 were subject to forfeiture over a service period of three years. The fair value of the award was determined to
be $10,998,105 which will be recognized as compensation expense over the three year service period. Effective October 30,
2018, Marc Yahr resigned from all positions with the Company including as President and Chief Executive Officer of the Company
(except as director, which he resigned as on November 25, 2018). Pursuant to the agreement, Mr. Yahr agreed to return 80% of the
warrant shares to the Company if he served as CEO of the Company pursuant to the terms and conditions of the employment agreement
for a period of more than 12 months but less than 18 months. Therefore, 16,000,000 shares of common stock were forfeited to the
Company, and the Company recognized a gain on the forfeited common shares of ($2,440,768) net of $1,600 paid by the Company. As
of February 28, 2019, $0 remains to be expensed over the remaining vesting period.
On
January 22, 2018, the Company entered into a sales representation agreement for a term of six months. Pursuant to the agreement
the Company agreed to issue the nonemployee sales representative warrants to purchase 10,000 shares of common stock per month
(an aggregate of 60,000 warrants) with an exercise price of $0.50, with a term of three years. The warrants shall be exercisable
at any time on or after the six (6) month anniversary of each issuance date, at his election, in whole or in part, by means of
a cashless exercise. During the three and six months ended February 28, 2019 the Company recognized a gain of ($197) and $(32,061),
respectively due to a remeasurement of this nonemployee award.
On
February 22, 2018, the Company entered into a consulting agreement for a term of one year. Pursuant to the agreement the
Company agreed to issue the nonemployee consultant warrants to purchase 10,000 shares of common stock per month (an aggregate
of 120,000 warrants) with an exercise price of $0.40, exercisable for cash only for a period of three years commencing six
months form the issuance date. During the three and six months ended February 28, 2019 the Company recognized a gain /
(expense) of $321 and $(57,382), respectively due to a remeasurement of this nonemployee award.
On
March 2, 2018 the Company entered into a management agreement with Global Corporate Management, LLC. Pursuant to this agreement,
the Company agreed to pay $4,000 and to issue 150,000 common stock purchase warrants per month (an aggregate of 3,600,000
warrants) with an exercise price of $0.50, exercisable commencing six months after issuance for a period of 5 years. During
the three and six months ended February 28, 2019 the Company recognized a (gain) / expense of $(8,363) and $(1,273,049), respectively
due to a remeasurement of this nonemployee award.
On
April 16, 2018 The Company entered into a consulting agreement with Dr. David Hellman for marketing and promotion services. The
term is 1 year with payment of 50,000 warrants each month to purchase common stock with an exercise price of $0.60. However, if
the consultant generates more than $10,000 in monthly sales, the warrants will have an exercise price of $0.30, and if the consultant
generates more than $20,000 in monthly sales, the warrants may be exercised on a cashless basis. Additionally, the Company agreed
to pay to the consultant 10% of retail sales and 5% of wholesale sales. On July 11, 2018 the Company terminated the agreement.
On August 1, 2018 the Company entered into a new consulting agreement with Dr. Hellman. The term is 1 year with payment of 60,000
warrants each month (an aggregate of 720,000 warrants) to purchase common stock with an exercise price of $0.60. The warrants
may be exercised on a cashless basis. During the three and months ended February 28, 2019 the Company recognized a (gain)
/ expense of $8,225 and $(107,618), respectively due to a remeasurement of this nonemployee award.
On October 30, 2018, the Company entered into
an employment agreement with Ms. Noel pursuant to which Ms. Noel will serve as the Company’s Chief Executive Officer and
president for a term of four years, unless earlier terminated pursuant to the terms of the employment agreement. Pursuant to the
terms of the employment agreement, Ms. Noel’s annual salary is $96,000 and she 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. Ms. Noel exercised the warrant and was issued
the 20,000,000 shares on October 31, 2018. The fair value of this award was determined to be $2,598,138 of which $162,384 and
$216,512 was recognized during the three and six months ended February 28, 2019, respectively. Unamortized expense at February
28, 2019 is $2,381,627. The shares received upon the exercise of the warrants are subject to forfeiture over a service period
of four years. The shares will be required to be returned to the Company as follows and the Company accounts for forfeitures when
they occur:
Ms.
Noel shall return 80% of the common stock to the Company if she is not serving as Chief Executive Officer of the Company pursuant
to the terms and conditions of her employment agreement as of October 2019 (the first anniversary of the employment agreement);
Ms.
Noel shall return 60% of the common stock to the Company if she is not serving as the Chief Executive Officer of the Company pursuant
to the terms and conditions of the employment agreement as of the second anniversary of the employment agreement (October, 2020);
Ms.
Noel shall return 40% of the common stock to the Company if she is not serving as Chief Executive Officer of the Company pursuant
to the terms and conditions of the employment agreement as of the third anniversary of the employment agreement (October 2021);
Ms.
Noel shall return 20% of the Common Stock to the Company if she is not serving as the Chief Executive Officer of the Company pursuant
to the terms and conditions of the Employment Agreement as of the fourth anniversary of the employment agreement (October, 2022);
The
following table summarizes the warrant activities during the six months ended February 28, 2019 and the year ended August 31,
2018, respectively:
|
|
Number of Warrants
|
|
|
Weighted- Average Price Per Share
|
|
Outstanding at August 31, 2018
|
|
|
2,830,000
|
|
|
$
|
0.79
|
|
Granted
|
|
|
20,660,000
|
|
|
|
0.02
|
|
Canceled or expired
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
(20,000,000
|
)
|
|
|
0.00
|
|
Outstanding at February 28, 2019
|
|
|
3,490,000
|
|
|
$
|
0.74
|
|
Exercisable at February 28, 2019
|
|
|
2,810,000
|
|
|
$
|
0.79
|
|
Intrinsic value at February 28, 2019 and August 31, 2018
|
|
$
|
-
|
|
|
$
|
-
|
|
The
fair value of the warrants was estimated using the Black-Scholes option pricing model and the following range of assumptions:
|
|
Grant Date
|
For the six months ended February 28, 2019
|
|
|
Risk-free interest rate at grant date
|
|
1.11% -2.92%
|
Expected stock price volatility
|
|
159% - 251%
|
Expected dividend payout
|
|
-
|
Expected option in life-years
|
|
.7 - 6.0 years
|
OPTIONS
On July 26, 2017 the Company granted a nonemployee
options to purchase 2,200,000 shares of common stock. The options have a three year term. 1,000,000 options were immediately exercisable
on the date of issuance with an exercise price of $0.001 and the remaining 1,200,000 options vest over a period of three years
at an exercise price of $1.00. On July 26, 2017, 1,000,000 shares were exercised. During the three and six months ended February
28, 2019 the Company recognized a gain of $(7,419) and $(376,250), respectively.
|
|
Number of
Options
|
|
|
Weighted-
Average
Price Per
Share
|
|
Outstanding at August 31, 2018
|
|
|
1,200,000
|
|
|
$
|
1.00
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Canceled or expired
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Outstanding at February 28, 2019
|
|
|
1,200,000
|
|
|
$
|
1.00
|
|
Exercisable at February 28, 2019
|
|
|
900,000
|
|
|
|
1.00
|
|
Intrinsic value at February 28, 2019 and August 31, 2018
|
|
$
|
-
|
|
|
$
|
-
|
|
6.
COMMITMENTS AND CONTINGENCIES
On
January 22, 2018, the Company entered into a sales representation agreement to manage and solicit orders in a set territory, the
United States, with an initial term of six months. The sales representative shall be compensated 6% of the net sales and three
year warrants monthly to purchase 10,000 shares of common stock at an exercise price of $0.50. Warrants may be exercised after
six month anniversary of issuance date.
On
February 1, 2018 the Company entered into a consulting agreement with Optimal Setup LLC for a term of one year to advise the Company
on search engine optimization and digital marketing. Optimal Setup LLC shall receive monthly for services performed $2,500 and
10,000 warrants for common stock exercisable for cash price of $0.40. Warrants may be exercised after six month anniversary date.
The warrants were granted on February 22, 2018.
On
March 2, 2018 the Company entered into a two year management agreement with Global Corporate Management, LLC (“GCM”).
Pursuant to this agreement, the Company agreed to pay $4,000 and to issue 150,000 common stock purchase warrants (exercise price
of $0.50, 5 year term, exercisable 6 months after issuance). The Company shall pay to GCM a commission equal to 10% of all
sales every month. The commission will be paid only for the sales which have closed and cash has been paid to the Company. As
of February 28, 2019 GCM has not earned any commissions.
On
March 20, 2018 the Company entered into a consulting agreement with Patagonia Global Trading, LLC. Upon execution of this agreement
and upon the consultant signing their first customer, acceptable by the Company, and for services rendered, the Company agreed
to issue 50,000 common stock purchase warrants to purchase common stock at an exercise price of $0.30 per share. As of November
30, 2018 Patagonia Global Trading, LLC, had not signed any customers and had not earned any warrants. The Company agreed to pay
a total commission rate of 10% of the gross sale amount to be paid in the form of cash or warrants to purchase shares of common
stock of the Company at a purchase price of $0.30 per share, exercisable 6 months after issuance. The commission will be paid
on net sales from protected accounts and the consultant will be issued warrants on net invoices that are paid in full and money
is received.
On April 16, 2018 the Company entered into
a consulting agreement with Dr. David Hellman for marketing and promotion services. The term is 1 year with payment of 50,000
warrants to purchase common stock with an exercise price of $0.60. However, if the consultant generates more than $10,000 in monthly
sales, the warrants will have an exercise price of $0.30, and if the consultant generates more than $20,000 in monthly sales,
the warrants may be exchanged in “cashless exercise”. Additionally, the Company agreed to pay to the consultant 10%
of retail sales and 5% of wholesale sales. On July 11, 2018 the Company terminated the agreement. On August 1, 2018 the Company
entered into a new consulting agreement with Dr. Hellman. The term is 1 year with payment of 60,000 warrants to purchase common
stock with an exercise price of $0.60. The warrants may be exercised on a cashless basis.
In
May 2018 the Company entered into an agreement with Seidman Food Brokerage Inc., pursuant to which the Company appointed Seidman
Food Brokerage, Inc. as its non-exclusive regional sales and marketing representative for the company’s product line for
12 months. The broker will be paid a monthly commission equal to the greater of (1) 5% of collected sales for all invoices generated
for CBD products available from their product line for human consumption for a particular month or (2) solely with respect to
the first six months of the term of the agreement. As of February 28, 2019 Seidman Food Brokerage, Inc. has not earned any commissions.
Pursuant
to a securities purchase agreement dated March 5, 2018, in the event that, in the six month period commencing on the closing date
of such purchase agreement, the Company were to sell common stock at a price lower than $0.10 per share (or common stock equivalents
with a conversion or exercise price lower than $0.10 per share (each as adjusted for stock splits, stock dividends, and similar
transactions, the “Subsequent Financing Price”), the Company was required to promptly issue additional shares of common
stock to the purchaser for no additional consideration, such that the total number of shares of common stock received by the purchaser
under the Agreement would be equal to the total purchase price of $300,000 divided by such lower subsequent financing price. The
Company also agreed that it would not pay total cash compensation of more than $100,000 to any director, officer or employee of
the Company for a period of 12 months from the closing date.
Pursuant
to a securities purchase agreement dated March 21, 2018, in the event that, in the six month period commencing on the closing
date of such purchase agreement, the Company were to sell common stock at a price lower than $0.10 per share (or common stock
equivalents with a conversion or exercise price lower than $0.10 per share (each as adjusted for stock splits, stock dividends,
and similar transactions), the Company was required to promptly issue additional shares of common stock to the purchaser for no
additional consideration, such that the total number of shares of common stock received by the purchaser under the Agreement would
be equal to the total purchase price of $50,000 divided by such lower subsequent financing price. The Company also agreed that
it would not pay total cash compensation of more than $100,000 to any director, officer or employee of the Company for a period
of 12 months from the closing date.
Pursuant
to a securities purchase agreement entered into on June 6, 2018 the Company was obligated to issue additional shares of common
stock if the Company sold common stock at a price lower than $0.10 per share (or common stock equivalents with an exercise price
less than $0.10 per share) during the six month period following the closing of the purchase agreement, in which event the Company
was required to issue additional shares to the purchaser for no additional consideration, such that the total number of common
stock received by the purchaser will be equal to $50,000 divided by lower financing price. The Company also agreed that it would
not pay total cash compensation of more than $100,000 to any director, officer, or employee of the Company for a period of 12
months from the closing date. As of February 28, 2019 the Company was obligated to issue 500,000 shares of common stock valued
at $76,000 which is included in the common stock payable in the accompanying balance sheet.
7.
SUBSEQUENT EVENTS
On March 20, 2019 the Company issued 500,000
shares of common stock pursuant to a consulting agreement. The term of the agreement is one year and the Company agreed to pay
the consultant $20,000 per month once it receives proceeds of financing transactions of at least $250,000.
Between April 1, 2019 to April 12, 2019, the
Company sold a total of 5,300,000 shares of common stock for proceeds of $110,500.
On April 22, 2019, the Company entered into
an exchange agreement with McGlothlin Holdings, Ltd. (“McGlothlin”). Pursuant to the exchange agreement, McGlothlin
exchanged convertible debentures of the Company, in the original principal amounts of $540,000 and $120,000, respectively, and
1,000,000 warrants to purchase shares of common stock of the Company, for an aggregate of 11,000,000 newly issued shares of common
stock of the Company.
On
April 22, 2019, the Company entered into an exchange agreement with Alneil Associates (“Alneil”). Pursuant to the
exchange agreement, Alneil exchanged a convertible debenture of the Company, in the original principal amount of $180,000, and
300,000 warrants to purchase shares of common stock of the Company, for an aggregate of 3,000,000 newly issued shares of common
stock of the Company.