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
Nature
of Business Operations
Bespoke
Extracts, Inc. (the “Company”) is a Nevada corporation focused on marketing and selling 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, which it introduced in mid-2018. Produced using pure, all natural, zero-THC phytocannabinoid-rich (“PCR”)
hemp-derived isolate, the Company markets its products as dietary supplements through its retail ecommerce store found at www.bespokeextracts.com.
In the future, the Company also intends to sell its products through wholesale channels.
Basis
of Presentation
The
accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted
in the United States for interim information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by accounting principles generally accepted in the United States for complete
financial statements. In the opinion of management, all adjustments consisting of a normal and recurring nature considered necessary
for a fair presentation have been included. Operating results for the nine-month period ended May 31, 2020 may not necessarily
be indicative of the results that may be expected for the year ending August 31, 2020.
For
further information, refer to the Company’s financial statements and footnotes thereto included in the Annual Report on Form 10-K
for the year ended August 31, 2019.
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 had
negative cash flows from operations, a working capital deficit and an accumulated deficit for the nine months ended and as of
May 31, 2020. 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 repaying its liabilities arising from normal business operations
when they come due. There is no assurance that this series of events will be satisfactorily completed.
Further,
if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities
may have rights, preferences or privileges senior to those of existing holders of our common stock. If additional financing is
not available or is not available on acceptable terms, we will have to curtail or cease our operations. The financial statements
do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification
of liabilities that might be necessary in the event the Company cannot continue in existence. These financial statements do not
include any adjustments that might arise from this uncertainty.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in the accompanying financial statements and accompanying
notes. Significant estimates include the assumption used in the valuation of equity-based transactions, valuation of intangible
assets, allowance for doubtful accounts and inventory valuation and reserves. Actual results could differ from those estimates.
Cash
and Cash Equivalents
Cash
and cash equivalents include all highly liquid investments with original maturities of three months or less at the time of purchase.
At May 31, 2020 and August 31, 2019, the Company did not have any cash equivalents.
Fair
Value of Financial Instruments
The
carrying amounts of cash, accounts receivable, prepaid expenses and other assets, accounts payable, accrued liabilities and convertible
note payable approximate their fair values as of May 31, 2020 and August 31, 2019, respectively, because of their short-term natures.
Accounts
Receivable
Accounts
receivable are recorded at fair value on the date revenue is recognized. The Company provides allowances for doubtful accounts
for estimated losses resulting from the inability of its customers to repay their obligation. If the financial condition of the
Company’s customers were to deteriorate, resulting in an impairment of their ability to repay, additional allowances may
be required. The Company provides for potential uncollectible accounts receivable based on specific customer identification and
historical collection experience adjusted for existing market conditions. If market conditions decline, actual collection experience
may not meet expectations and may result in decreased cash flows and increased bad debt expense.
The
policy for determining past due status is based on the contractual payment terms of each customer, which are generally net 30
or net 60 days. Once collection efforts by the Company and its collection agency are exhausted, the determination for charging
off uncollectible receivables is made. At May 31, 2020 and August 31, 2019 the Company has recorded an allowance for doubtful
accounts of $2,981 and $0, respectively.
Inventory
Inventories
are stated at the lower of cost or net realizable value. Cost is determined by the first-in, first-out basis and net
realizable value. Net realizable value is defined as sales price less cost of completion, disposition and transportation and a
normal profit margin. As of May 31, 2020 and August 31, 2019, inventory amounted to $1,264 and $3,171, respectively, which consisted
of finished goods. During the year ended August 31, 2019 the Company reserved $52,332 for slow moving inventory. No additional
reserve was recorded during the nine months ended May 31, 2020.
Revenue
Recognition
Net
revenue is measured based on the amount of consideration that we expect to receive, reduced by discounts and estimates for credits
and returns (calculated based upon previous experience and management’s evaluation). Outbound shipping charged to customers
is recognized at the time the related merchandise revenues are recognized and are included in net revenues. Inbound and outbound
shipping and delivery costs are included in cost of revenues. Net revenues exclude sales and other similar taxes collected from
customers.
Our
products are sold through our online and telephonic channels. Revenue is recognized when control of the merchandise is transferred
to the customer, which generally occurs upon shipment. Payment is typically due on the date of shipment. The Company offers a
14 day return policy on sales.
Stock
Option Plans
Stock
options and warrants issued to consultants and other non-employees as compensation for services provided to the Company are accounted
for based on the fair value of the services provided or the estimated fair market value of the option or warrant, whichever is
more reliably measurable, and in accordance FASB ASC 718, Compensation-Stock Compensation, including related amendments
and interpretations. The related expense is recognized over the period the services are provided. Stock option compensation expense
has been recognized as a component general and administrative expenses in the accompanying financial statements for the three
and nine months ended May 31, 2020 and May 31, 2019.
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. The effect of
3,450,000 warrants and 81,200,000 options is anti-dilutive for the three and nine months end May 31, 2020. The effect of 3,330,000
warrants and 1,200,000 options is anti-dilutive for the three and nine months ended May 31, 2019.
Change
of Control
On
April 16, 2020, Niquana Noel sold 1 outstanding share of Series C Preferred Stock of the Company to Danil Pollack for $24,000
in a private transaction. The Series C Preferred Stock entitles the holder to 51% of the voting power of the Company’s stockholders,
and the stock sale thus resulted in a change in control of the Company.
Recent
Accounting Pronouncements
In
February 2016, the FASB issued ASU 2016-02, Leases, which will amend current lease accounting to require lessees to recognize
(i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted
basis, and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of,
a specified asset for the lease term. ASU 2016-02 does not significantly change lease accounting requirements applicable to lessors;
however, certain changes were made to align, where necessary, lessor accounting with the lessee accounting model. This standard
was effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.
The
adoption of ASU 2016-02 did not have an impact on our balance sheet, results of operations or balance sheets as we currently do
not have any long term corporate office and equipment leases.
2.
ASSET PURCHASE AGREEMENT
On
February 21, 2017, the Company purchased all right, title, interest and goodwill in or associated with certain 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, 2020 amortization expense amounted to $811 and $2,508, respectively. For
the three and nine months ended May 31, 2019 amortization expense amounted to $836 and $2,509, respectively. The domain names
are being amortized over a 15 year period. During the nine months ended May 31, 2020, the Company recorded an impairment expense
of $289 for expired domain names.
On
December 24, 2019, the Company repaid a note holder $120,000, and transferred certain URLs valued at $5,282 to the holder (See
note 3.)
3.
CONVERTIBLE NOTE PAYABLE
On
November 6, 2019, the Company entered into and closed a securities purchase agreement with an accredited investor, pursuant to
which, the Company issued and sold to the investor an original issue discount convertible debenture (which was amended and restated
on November 11, 2019) in the principal amount of $200,000, for a purchase price of $100,000, resulting in an original issue discount
of $100,000. The Company also issued to the investor 4,900,000 shares of common stock valued at $63,700 ($0.013 per share). As
amended, the debenture had a maturity date of August 1, 2020 and was convertible into shares of common stock of the Company at
a conversion price of $0.006, provided that, if the Company failed to repay the debenture upon maturity, the conversion price
would be reduced to $0.001 (subject to adjustment for stock splits, stock dividends and similar transactions) and the debenture
would bear interest at the rate of 9% per year. The Company recorded beneficial conversion of $36,300 due to the conversion feature.
The debenture could not be converted to common stock to the extent such conversion would result in the holder beneficially owning
more than 4.99% of the Company’s outstanding common stock. The Company’s obligation to repay the debenture upon maturity
was secured by a security interest in the Company’s URLs pursuant to a security agreement between the Company and the investor.
On
December 24, 2019, the Company entered into an agreement (the “Repayment Agreement”) with the holder of the amended
and restated original issue discount convertible debenture issued by the Company on November 11, 2019, in the original principal
amount of $200,000 (the “November 2019 Debenture”). Pursuant to the Repayment Agreement, the Company paid the holder
$120,000, and transferred certain URLs valued at $5,282 to the holder, and the November 2019 Debenture was deemed paid in full.
The amortization of debt discount of $0 and $35,688, respectively were recorded during the three and nine months ended May 31,
2020. The Company recognized a loss on settlement of debt of $0 and $89,595, respectively during the three and nine months ended
May 31, 2020.
On
December 24, 2019, the Company entered into and closed a securities purchase agreement with an accredited investor, pursuant to
which, the Company issued and sold to the investor an original issue discount convertible debenture in the principal amount of
$500,000, for a purchase price of $300,000. The Company also issued to the investor 5,000,000 shares of common stock valued at
$55,000 ($.005 per share). The Company recorded beneficial conversion of $245,000 due to the conversion feature. The debenture
may not be converted to common stock to the extent such conversion would result in the holder beneficially owning more than 4.99%
of the Company’s outstanding common stock. The debenture had an original maturity date of April 30, 2020 and is convertible
into shares of common stock of the Company at a conversion price of $0.001, except that, if the Company fails to repay the debenture
upon maturity, the conversion price will be reduced to $0.0004 (subject to adjustment for stock splits, stock dividends, and similar
transactions) and the debenture will bear interest at the rate of 9% per year. The Company’s obligation to repay the debenture
upon maturity was initially secured by a security interest in the Company’s inventory pursuant to a security agreement between
the Company and the investor. For the three and nine months ended May 31, 2020 the Company recorded amortization of debt discount
of $242,188 and $500,000 respectively. On April 23, 2020, the Company entered into an amendment to the security agreement, dated
December 24, 2019 the Security Agreement Amendment, between the Company and the holder of the Company’s original issue discount
convertible debenture, dated December 24, 2019. Pursuant to the security agreement amendment, the collateral under the security
agreement was amended to be the Company’s URLs. The security agreement Amendment was entered into with The Vantage Group
Ltd., as the purchaser of the debenture from the original holder. Vantage is owned by Lyle Hauser, an adviser to the Company and
formerly a significant stockholder of the Company. On May 28, 2020, the Company entered into an amendment to the original issue
discount convertible debenture, dated December 24, 2019, between the Company and The Vantage Group Ltd., the holder of the debenture.
Pursuant to the debenture amendment, the maturity date of the debenture was extended to August 31, 2020.
4.
EQUITY
Common
Stock and Preferred 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 as Series A Convertible Preferred Stock. No shares
of Series A Preferred Stock are issued and outstanding as of May 31, 2020 and August 31, 2019, respectively. 1 share of preferred
stock was designated Series B Preferred Stock. 0 shares of Series B Preferred Stock are issued and outstanding as of May 31, 2020
and August 31, 2019, respectively. The Certificate of Designation of Series B Preferred Stock was withdrawn by the Company on
June 30, 2020. 1 share of preferred stock is designated Series C Preferred Stock. 1 share and 0 shares of Series C Preferred Stock
are issued and outstanding as of May 31, 2020 and August 31, 2019, respectively. The Series C Preferred Stock has a stated value
of $24,000 and entitles the holder to 51% of the total voting power of the Company’s stockholders. The Company may, in its
sole discretion, redeem the Series C Preferred Stock at any time for a redemption price equal to the stated value. Upon payment
of the redemption price by the Company, the Series C Preferred Stock will revert to the status of authorized but unissued preferred
stock.
On
October 30, 2018, the Company entered into an employment agreement with Niquana Noel pursuant to which Ms. Noel would 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 was $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 were subject to forfeiture over a service period of four years. See “Warrants” below.
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, 2020, the Company was
obligated to issue 500,000 shares of common stock valued at $76,000.
On
October 3, 2019, the Company entered into a letter agreement with Niquana Noel, the Company’s then-chief executive officer.
Pursuant to the agreement, Ms. Noel exchanged $24,000 in accrued but unpaid compensation owed to her by the Company for one share
of newly created Series B Preferred Stock of the Company. Ms. Noel subsequently exchanged this one share of Series B Preferred
for 1 one share of newly created Series C Preferred Stock. See Note 5.
In
connection with the letter agreement, on October 3, 2019, the Company filed a Certificate of Designation of Series B Preferred
Stock with the Secretary of State of Nevada. Pursuant to the Certificate of Designation, the Company designated one share of its
preferred stock as Series B Preferred Stock. See “Common Stock and Preferred Stock” above.
On
October 14, 2019, the Company entered into and closed a securities purchase agreement with an accredited investor pursuant to
which the Company issued and sold to the investor 20,833,333 shares of common stock for a purchase price of $125,000.
In
November 2019, 3,000,000 shares of common stock were returned to the Company for cancellation and the Company paid $27,500 in
connection with a settlement agreement.
On
November 6, 2019, the Company entered into and closed a securities purchase agreement with an accredited investor, pursuant to
which, the Company issued and sold to the investor an original issue discount convertible debenture (which was amended and restated
on November 11, 2019) in the principal amount of $200,000, for a purchase price of $100,000, resulting in an original issue discount
of $100,000. The Company also issued to the investor 4,900,000 shares of common stock valued at $63,700, ($0.013 per share). See
Note 3.
Effective
November 11, 2019, the Company issued 4,500,000 shares of common stock pursuant to a consulting agreement valued at $40,500 ($0.009
per share).
On
December 24, 2019, the Company entered into and closed a securities purchase agreement with an accredited investor, pursuant to
which, the Company issued and sold to the investor an original issue discount convertible debenture in the principal amount of
$500,000, for a purchase price of $300,000. The Company also issued to the investor 5,000,000 shares of common stock valued at
$55,000 ($.005 per share).
On
March 25, 2020, Company entered into a letter agreement with Niquana Noel, the Company’s chief executive officer. Pursuant
to the agreement, Ms. Noel exchanged 1 share of Series B Preferred Stock of the Company for one share of newly created Series
C Preferred Stock of the Company.
In
connection with the letter agreement, on March 25, 2020, the Company filed a Certificate of Designation of Series C Preferred
Stock with the Secretary of State of Nevada. Pursuant to the Certificate of Designation, the Company designated one share of its
preferred stock as Series C Preferred Stock. The Series C Preferred Stock has a stated value of $24,000 and entitles the holder
to 51% of the total voting power of the Company’s stockholders. The Company may, in its sole discretion, redeem the Series
C Preferred Stock at any time for a redemption price equal to the stated value. The Series C Preferred Stock has a liquidation
preference equal to the stated value, does not provide the holder with any dividend rights and is not convertible to common stock.
On April 16, 2020, Niquana Noel sold 1 outstanding share of Series C Preferred Stock of the Company to Danil Pollack for $24,000
in a private transaction. The Series C Preferred Stock entitles the holder to 51% of the voting power of the Company’s stockholders,
and the stock sale thus resulted in a change in control of the Company.
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 during
the nine months ended May 31, 2019. As of May 31, 2019, $0 remains to be expensed over the remaining vesting period.
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, 2020 the Company recognized a gain of $0 and $(3,378), respectively due to a remeasurement
of this nonemployee award. 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 $.30, and if the consultant
generates more than $20,000 in monthly sales, the warrants may be exchanged in “cashless exercise”. Additionally,
the Company shall pay 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 to purchase common stock with an exercise price of $0.60. The warrants may be exercised on a cashless basis.
A total of $256,038 warrant expense in relation to this award was recognized during the year ended August 31, 2018. During the
three and nine months ended May 31, 2020 the Company recognized an expense / (gain) of $0 and ($1,905), respectively due to a
remeasurement of this nonemployee award. 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 Niquana Noel pursuant to which Ms. Noel would 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 was $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 $160,040 and $321,868 and was recognized during the three and nine months ended May 31,
2020. The fair value of this award was determined to be $2,598,138 of which $1,733,880 and $2,055,748 was recognized during the
three and nine months ended May 31, 2020, respectively. During the three and nine months ended May 31, 2019 $162,272 and $378,784
was recognized, respectively.
On
April 20, 2020, the Company entered into a letter agreement with Niquana Noel, the Company’s then-chief executive officer.
Pursuant to the letter agreement, Ms. Noel waived $45,333 of accrued but unpaid compensation owed to her in exchange for the right
to retain all 20,000,000 shares of common stock of the Company Ms. Noel had acquired upon exercise of warrants, notwithstanding
provisions of the warrant agreement that would have required her to return certain shares to the Company in the event of her resignation.
The
following table summarizes the warrant activities during the nine months ended May 31, 2020:
|
|
Number of
Warrants
|
|
|
Weighted-
Average
Price Per
Share
|
|
|
|
|
|
|
|
|
Outstanding at August 31, 2019
|
|
|
3,330,000
|
|
|
$
|
0.56
|
|
Granted
|
|
|
120,000
|
|
|
|
0.60
|
|
Cancelled or expired
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Outstanding at May 31, 2020
|
|
|
3,450,000
|
|
|
$
|
0.56
|
|
Exercisable at May 31, 2020
|
|
|
3,450,000
|
|
|
$
|
0.56
|
|
Intrinsic value at May 31, 2020
|
|
|
|
|
|
$
|
-
|
|
The
fair value of the warrants was estimated using the Black-Scholes option pricing model and the following range of assumptions:
|
|
Grant
Date
and
Re-measurement
Date
|
For
the nine month ended May 31, 2020
|
|
|
Risk-free
interest rate at grant date
|
|
1.30%
- 1.62%
|
Expected
stock price volatility
|
|
314%
- 394%
|
Expected
dividend payout
|
|
-
|
Expected
life (in years)
|
|
2.50
– 4.50
|
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 four (4) semiannual installments or every six (6) months until July 26, 2019 at an exercise
price of $1.00. As of May 31, 2020 all the options were fully vested. During the three and nine months ended May 31, 2019
the Company recognized an expense / (gain) of $91,939 and $(284,311), respectively.
On
April 21, 2020, Danil Pollack was appointed president, chief executive officer, and chief financial officer of the Company. In
connection with Mr. Pollack’s appointment, the Company entered into an employment agreement with Mr. Pollack. Pursuant to
the employment agreement, Mr. Pollack will serve as the Company’s chief executive officer and president for a period of
one year, which term will renew automatically for successive one year terms, subject to the right of either party to terminate
the agreement at any time upon written notice. Mr. Pollack was granted the right, for a period of six months, to purchase up to
100,000,000 shares of common stock of the Company for a purchase price of $0.001 per share. The Company recognized an expense
of $1,416,975 during the three and nine months ended May 31, 2020. On May 22, 2020 Mr. Pollack exercised 20,000,000 stock options
for $20,000.
|
|
Number of
Options
|
|
|
Weighted-
Average
Price Per
Share
|
|
Outstanding at August 31, 2019
|
|
|
1,200,000
|
|
|
$
|
1.00
|
|
Granted
|
|
|
100,000,000
|
|
|
|
.001
|
|
Canceled or expired
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
(20,000,000
|
)
|
|
|
.001
|
|
Outstanding at May 31, 2020
|
|
|
81,200,000
|
|
|
$
|
.02
|
|
Exercisable at May 31, 2020
|
|
|
81,200,000
|
|
|
$
|
.02
|
|
Intrinsic value at May 31, 2020
|
|
|
|
|
|
$
|
1,280,000
|
|
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 month ended May 31, 2020
|
|
|
|
|
Risk-free interest rate at grant date
|
|
|
.15
|
%
|
Expected stock price volatility
|
|
|
262
|
%
|
Expected dividend payout
|
|
|
-
|
|
Expected life (in years)
|
|
|
.50
|
|
5.
RELATED PARTY TRANSACTIONS
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. See Note
4.
On
October 30, 2018, the Company entered into an employment agreement with Niquana Noel pursuant to which Ms. Noel would 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. See Note 4.
On
April 21, 2020, Danil Pollack was appointed president, chief executive officer, and chief financial officer of the Company. In
connection with Mr. Pollack’s appointment, the Company entered into an employment agreement with Mr. Pollack. Pursuant to
the employment agreement, Mr. Pollack will serve as the Company’s chief executive officer and president for a period of
one year, which term will renew automatically for successive one year terms, subject to the right of either party to terminate
the agreement at any time upon written notice. Mr. Pollack was granted the right, for a period of six months, to purchase up to
100,000,000 shares of common stock of the Company for a purchase price of $0.001 per share. On May 22, 2020 Mr. Pollack exercised
20,000,000 stock options for $20,000. See Note 4.
On
March 25, 2020, Company entered into a letter agreement with Niquana Noel, the Company’s then-chief executive officer. Pursuant
to the agreement, Ms. Noel exchanged 1 share of Series B Preferred Stock of the Company for one share of newly created Series
C Preferred Stock of the Company. See Note 4.
In
connection with the letter agreement, on March 25, 2020, the Company filed a Certificate of Designation of Series C Preferred
Stock with the Secretary of State of Nevada. Pursuant to the Certificate of Designation, the Company designated one share of its
preferred stock as Series C Preferred Stock. See Note 4.
6.
COMMITMENTS AND CONTINGENCIES
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, 2020 and August 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.
The
COVID-19 pandemic may negatively affect our operations, including by limiting access to our facilities, customers, management,
and professional advisors. These factors, in turn, may negatively impact our operations, financial condition and demand for our
products, and our ability to raise capital on acceptable terms, or at all.
7.
MAJOR CUSTOMERS
There
are concentrations of credit risk with respect to accounts receivables due to the amounts owed by one customer at August 31, 2019
whose balance represented approximately 28%, of total accounts receivables. As of May 31, 2020, no customer amounted to over 10%
of accounts receivable. During the three and nine months ended May 31, 2020, no individual customer amounted to over 10% of total
sales. During the three and nine months ended May 31, 2019, no individual customer amounted to over 10% of total sales. The loss
of business from one or a combination of the Company’s significant customers, or an unexpected deterioration in their financial
condition, could adversely affect the Company’s operations.
8.
SUBSEQUENT EVENTS
On
June 19, 2020, the Company issued 23,000,000 shares of common stock, for a purchase price of $0.001 per share to Danil Pollack,
the Company’s chief executive officer, for aggregate gross proceeds of $23,000. The Company issued such shares upon Mr.
Pollack’s exercise of his right to purchase granted under Mr. Pollack’s employment agreement.
On
June 30, 2020, the Company filed a Certificate of Withdrawal of Certificate of Designation with the Secretary of State of Nevada,
pursuant to which the Company withdrew its Series B Preferred Stock.