The accompanying notes are an
integral part of these unaudited condensed financial statements.
The accompanying notes are an
integral part of these unaudited condensed financial statements.
The accompanying notes are an
integral part of these unaudited condensed financial statements.
The accompanying notes are an
integral part of these unaudited condensed financial statements.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. NATURE OF OPERATIONS, SIGNIFICANT ACCOUNTING
POLICIES AND GOING CONCERN
BASIS OF PRESENTATION
The accompanying unaudited condensed 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 condensed financial statements. These unaudited condensed 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 condensed 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, 2019, and the results of operations
and cash flows for the three and nine months ended May 31, 2019 and 2018. The results of operations for the nine months ended
May 31, 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 condensed
financial statements have been prepared assuming a continuation of the Company as a going concern. The Company had negative
cash flows from operations for the nine months ended May 31, 2019. This raises 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 May 31, 2019 and August 31, 2018, inventory
amounted to $52,820 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 condensed 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 2019 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 for the three
months ended May 31, 2019 because their inclusion would have been anti-dilutive. The effect of 1,890,000 warrants
and 900,000 options is anti-dilutive for the nine months ended May 31, 2019.
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 nine
months ended May 31, 2019 and 2018 amortization expense amounted to $836, $877, $2,509 and $2,509 respectively. The domain names
are being amortized over a 15 year period.
3. NOTE PAYABLE – RELATED PARTY
The changes in a note payable to a
related party consisted of the following during the nine months ended May 31, 2019 and the year ended August 31, 2018.
|
|
May 31,
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 nine months ended May 31, 2019 and the year ended August 31, 2018.
|
|
May 31,
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 $97,654 and $184,364 was recognized during the
three and nine months ended May 31, 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
note the lender was entitled to receive the greater of 5% every dollar raised by the Company through financing or every
dollar of revenue generated by the Company through the earlier of maturity date and repayment of the principal. As of May 31,
2019 and August 31, 2018 the Company has accrued $0 and $34,015, respectively. On April 22, 2019, the Company entered into an
exchange agreement with the lender. Pursuant to the exchange agreement, the lender exchanged convertible debentures of the
Company, including the convertible debenture in the original principal amounts of $540,000 referred to above and
an additional convertible debenture in the original principal amount of $120,000 described below, an aggregate
of $93,565 (including $53,790 pursuant to the $540,000 debenture and $39,775 under the $120,000 debenture) of accrued
amounts as the lender was entitled to receive under such debentures as 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 principal, and
an aggregate of 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.
|
|
May 31,
2019
|
|
|
August 31,
2018
|
|
Related Party Convertible debenture
|
|
$
|
540,000
|
|
|
$
|
540,000
|
|
Unamortized discount
|
|
|
-
|
|
|
|
(184,364
|
)
|
Conversion to common stock
|
|
|
(540,000
|
)
|
|
|
-
|
|
Related Party Convertible debenture, net of unamortized discount
|
|
$
|
-
|
|
|
$
|
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 $66,753 and $98,847 was recognized during the
three and nine months ended May 31, 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 May 31, 2019 and August
31, 2018 the Company has accrued $0 and $25,000, respectively. On April 22, 2019, the Company entered into an exchange
agreement with the lender. Pursuant to the exchange agreement, the lender exchanged the convertible debenture of the Company,
in the original principal amount of $180,000, $44,775 of accrued amounts as the lender was entitled to receive under such
debenture as 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 principal 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.
|
|
May 31,
2019
|
|
|
August 31,
2018
|
|
Related Party Convertible debenture
|
|
$
|
180,000
|
|
|
$
|
180,000
|
|
Unamortized discount
|
|
|
-
|
|
|
|
(98,847
|
)
|
Conversion to common stock
|
|
|
(180,000
|
)
|
|
|
-
|
|
Related Party Convertible debenture, net of unamortized discount
|
|
$
|
-
|
|
|
$
|
81,153
|
|
On December 13, 2017, the Company executed
a $120,000 convertible debenture with an original issue discount of $20,000 with the same lender as the holder of the $540,000
debenture referred to above. 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 $0 and $14,936 was
recognized during the three and nine months ended May 31, 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 May 31, 2019 and
August 31, 2018 the Company has accrued $0 and $20,000, respectively. On April 22, 2019, the Company entered into an exchange agreement with the lender. Pursuant to the exchange
agreement, the lender exchanged the convertible debentures of the Company, consisting of the convertible debenture in the original
principal amounts of $540,000 referred to above and the additional convertible debenture in the original principal amount of $120,000,
an aggregate of $93,565(including $53,790 pursuant to the $540,000 debenture and $39,775 under the $120,000 debenture) of accrued
amounts as the lender was entitled to receive under such debentures as 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 principal, and an aggregate of 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.
|
|
May 31,
2019
|
|
|
August 31,
2018
|
|
Related Party Convertible debenture
|
|
$
|
120,000
|
|
|
$
|
120,000
|
|
Unamortized discount
|
|
|
-
|
|
|
|
(14,936
|
)
|
Conversion to common stock
|
|
|
(120,000
|
)
|
|
|
-
|
|
Related Party Convertible debenture, net of unamortized discount
|
|
$
|
-
|
|
|
$
|
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 Preferred stock with
a par value of $0.001. 1,000 shares of Preferred stock are designated to Series A Convertible Preferred stock.
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 May 31, 2019 the Company was obligated to issue 500,000 shares
of common stock valued at $76,000.
On March 20, 2019 the Company issued 500,000
shares of common stock valued at $32,950 ($0.066 per share) 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 May 31, 2019,
the Company sold a total of 5,585,714 shares of common stock for proceeds of $120,500.
On April 22, 2019, the Company entered
into an exchange agreement with a debenture holder. Pursuant to the exchange agreement, the lender exchanged convertible debentures
of the Company, consisting of convertible debenture in the original principal amounts of $540,000 and $120,000, an aggregate of
$93,565 (including $53,790 pursuant to the $540,000 debenture and $39,775 under the $120,000 debenture) of accrued amounts as
the lender was entitled to receive under such debentures as 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 principal, and an aggregate of 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 a debenture holder. Pursuant to the exchange agreement, the holder exchanged a convertible
debenture of the Company, in the original principal amount of $180,000, $44,775 of accrued amounts as 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 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.
On May 5, 2019 the Company issued 500,000
shares of common stock valued at $29,000 ($0.058 per share) pursuant to a consulting agreement. The term of the agreement is six
months and the Company agreed to pay the consultant $2,500 per month.
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.
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 nine months ended May 31, 2019 the Company recognized an expense / (gain) of $0 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 nine months ended May 31, 2019 the Company recognized an expense / (gain) of $1,582 and $(55,800),
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 nine months ended
May 31, 2019 the Company recognized a (gain) / expense of $(179,422) and $(1,452,203), respectively due to a remeasurement of this nonemployee
award. On March 2, 2019 the agreement was terminated.
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 nine months ended May 31, 2019 the Company
recognized an expense / (gain) of $12,499 and $(95,119), 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
$162,272 and $378,784 was recognized during the three and nine months ended May 31, 2019, respectively. Unamortized expense at
May 31, 2019 is $2,219,354. 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 30, 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 30, 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 30, 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 30, 2022);
The following table summarizes the warrant
activities during the nine months ended May 31, 2019:
|
|
Number of
Warrants
|
|
|
Weighted-
Average
Price Per
Share
|
|
Outstanding at August 31, 2018
|
|
|
2,830,000
|
|
|
$
|
0.79
|
|
Granted
|
|
|
21,800,000
|
|
|
|
0.04
|
|
Canceled or expired
|
|
|
(1,300,000
|
)
|
|
|
1.00
|
|
Exercised
|
|
|
(20,000,000
|
)
|
|
|
0.00
|
|
Outstanding at May 31, 2019
|
|
|
3,330,000
|
|
|
$
|
0.56
|
|
Exercisable at May 31, 2019
|
|
|
1,890,000
|
|
|
$
|
0.52
|
|
Intrinsic value at May 31, 2019
|
|
|
|
|
|
$
|
-
|
|
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 nine months
ended May 31, 2019
|
|
|
Risk-free
interest rate at grant date
|
|
1.45% -
2.99%
|
Expected stock price
volatility
|
|
295% - 770%
|
Expected dividend
payout
|
|
-
|
Expected option
in life-years
|
|
2.5 - 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 nine months
ended May 31, 2019 the Company recognized an expense / (gain) of $91,939 and $(284,311), 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 May 31, 2019
|
|
|
1,200,000
|
|
|
$
|
1.00
|
|
Exercisable at May 31, 2019
|
|
|
900,000
|
|
|
$
|
1.00
|
|
Intrinsic value at May 31, 2019
|
|
|
|
|
|
$
|
-
|
|
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 May 31, 2019 GCM has not earned any
commissions. On March 2, 2019, the agreement was terminated.
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 May 31, 2019, 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. As of May 31,
2019 the agreement has expired.
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 May 31, 2019 Seidman Food Brokerage, Inc. has not earned any commissions and the agreement has expired.
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 May 31, 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.
On March 20, 2019 the Company issued 500,000
shares of common stock valued at $32,950 ($0.066 per share) 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.
On May 5, 2019 the Company issued 500,000
shares of common stock valued at $29,000 ($0.058 per share) pursuant to a consulting agreement. The term of the agreement is six
months and the Company agreed to pay the consultant $2,500 per month.
7. SUBSEQUENT EVENTS
In June 2019 the Company issued and sold
to an accredited investor 175,000 shares of common stock for a purchase price of $5,250.
In June 2019 the Company issued and sold
to an accredited investor 525,000 shares of common stock for a purchase price of $10,500.
On July 19, 2019 the Company entered into
a non-binding preliminary term sheet with Cannasaver Corp. (“Cannasaver”). The term sheet contemplates that the Company
will acquire Cannasaver for aggregate consideration of $25,000,000, 80% of which will be in the form of common stock of the Company,
and the remaining 20% of which will be in cash, it being recognized that the Company will need to raise such funds from investors.
The completion of this acquisition will be subject to entering into definitive agreements and the satisfaction of customary closing
conditions, and there is no assurance such transaction will be completed. Cannasaver is partially owned by Lyle Hauser, who is
a former significant stockholder of the Company and is an adviser to the Company.