PART I

This Annual Report on Form 10-K may contain forward-looking statements. Such forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management and involve risks and uncertainties. Forward-looking statements include statements regarding our plans, strategies, objectives, expectations and intentions, which are subject to change at any time at our discretion. Forward-looking statements include our assessment, from time to time of our competitive position, the industry environment, potential growth opportunities and the effects of regulation. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “hopes,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions.

Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We discuss many of these risks in greater detail in “Risk Factors.” Given these uncertainties, undue reliance should not be placed on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this report. Our actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update these forward-looking statements publicly.

As used in this annual report, the terms “we”, “us”, “our”, the “Company”, “Bespoke Extracts, Inc.” and “Bespoke” mean Bespoke Extracts, Inc. unless otherwise indicated.

Item 1. Business.

Our Corporate History

We were incorporated in the State of Colorado on July 29, 1988 under the name Cine-Source Entertainment, Inc. On April 27, 2004, the Company changed its name to First Quantum Ventures, Inc. On April 13, 2006, the Company changed its name to First Quantum Ventures, Inc., and on May 5, 2006, the Company reincorporated in Nevada. On March 15, 2012, the Company changed its name to DiMi Telematics International, Inc.

In early 2017, our management team elected to suspend further investment and working capital on developing its then-existing technology and business prospects, turning its attention to the hemp-derived cannabidiol, or CBD, market. On March 10, 2017, the Company changed its name to Bespoke Extracts, Inc. to align the Company’s corporate identity with its new business plan. 

The Company is now focused on selling its proprietary line of specially-formulated, premium quality, all natural cannabidiol (CBD)hemp-derived CBD products direct to consumers through our ecommerce store, found at www.bespokeextracts.com. Information on our website is not part of this report.

We introduced our original line of CBD products in 2018; however, in the fall of 2020, we unveiled a new brand image, new website and ecommerce store and a new line-up of seven hemp-derived CBD formulations available for purchase in the form of tinctures and capsulessoftgels. We intend to methodically expand our product offerings to include new flavors, including manuka honey; and introduce additional form factors for the nutraceuticalour CBD formulations, including lotions and veterinary markets, which it introduced in mid-2018. Produced using pure, all natural, zero-THC phytocannabinoid-rich (“PCR”) hemp-derived CBD, our products are marketed as dietary supplementsbalms, depending on customer feedback and distributed through our direct-to-consumers ecommerce store, found at www.BespokeExtracts.com. In the future, we plan to also sell through select specialty retailers, pharmacies/dispensaries and care providers.

evolving consumer demand.

The CannabisHemp-Derived CBD Market

Many states have already legalized medical cannabis, and adult-use cannabis is now legal atRecreational smoking of marijuana had come to the statewide level in several major U.S. markets. According to ArcView Market Research and its research partner BDS Analytics, over the next 10 years, total sales by the legal cannabis industry will reach $57 billion by 2027, and the largest groupattention of cannabis buyers will be in North America, going from $9.2 billion in 2017 to $47.3 billion a decade later. For context, in a report released in February 2017, Arcview Market Research stated that the North American black market for cannabis is estimated to have totaled $46.4 billion in sales in 2016.Marijuana Business Factbookreports that 2017 spending on legal recreational and medical cannabis in the U.S. Federal Bureau of Narcotics and President Franklin D. Roosevelt and, despite opposition from the American Medical Association, the Marihuana Tax Act of 1937 was passed and an 80-year moratorium on hemp production began. Thirty-three years later when the Controlled Substances Act of 1970 was signed into law, marijuana was further constrained by being classified as a Schedule I narcotic and regulatory restrictions on hemp grew even topped those of Oreos and organic produce combined – and will likely surpass sales of firearms and ammunition in the nation by the end of 2019.more rigid.

Hope for revitalizing the hemp industry was ignited in 2014 when President Barack Obama signed the 2014 Farm Bill, which essentially allowed for hemp to be grown by permitted universities and state departments of agriculture in the name of federally funded research – rather than as a commercial crop. Thereafter, pro-hemp legislation received increasingly favorable bipartisan support, culminating in December 2018 with the passage of the 2018 Farm Bill, which removed industrial hemp from its listing as a Schedule I drug and recognizes hemp as an agricultural commodity, such as corn, wheat or soybeans. Consequently, demand for hemp-derived CBD products exploded, and the industry was unleashed, albeit with the government asserting certain oversight and compliance controls. Specifically, the production of hemp-derived CBD must adhere to certain regulatory mandates relating to the hemp grown to produce it, including:

In addition, the 2018 Farm Bill also lifted restrictions on the sale, transportation and possession of hemp-derived CBD products and allows for the transportation of hemp-derived CBD products across state lines, as long as the products comply with the aforementioned mandates.

According to a market study published by Grand View Research in August 2020, the global CBD oil and CBD consumer health market size was valued at $20.3 billion in 2019 and is expected to grow at a CAGR of 25.6% from 2020 to 2027. Researchers noted that “cannabidiol-based products are gaining acceptance and recognition in the health and wellness sector owing to the confirmation of therapeutic properties of cannabidiol through various scientific studies.”

Cannabidiol, or CBD, is one of over 80 active cannabinoid chemicals140 identified cannabinoids, or plant compounds, found in cannabis is the major non-psychoactive component of the plantspecies, namely Cannabis sativa L.;(hemp plant) and Cannabis indica (marijuana plant). THC, or tetrahydrocannabinol, is proving to be an effective treatment foralso a number of health conditions affecting adults, children and pets. While U.S. companies cannot legally make medical claims about CBD or its uses, there are countless scientific research studies showing potential therapeutic indications for CBD, demonstrating that it works well with body cells to improve immunity and is even produced naturallynatural occurring cannabinoid in the human brain.these plants.

Numerous medical studies have found that cannabinoids, including CBD and THC, provide a wealth of health and wellness benefits through their interaction with the human endocannabinoid system (ECS), a complex network of cell receptors and neurotransmitters that help maintain the body’s homeostasis. According to a 2013one study, published in“modulating the British Journal of Clinical Pharmacology, CBD benefits include acting in some experimental models as an anti-inflammatory, anticonvulsant, antioxidant, antiemetic, anxiolytic and antipsychotic agent; and is therefore a potential medicinal treatment for neuroinflammation, epilepsy, oxidative injury, vomiting and nausea, anxiety and schizophrenia. Moreover, there have been dozens of other peer-reviewed studies suggesting that CBDECS activity may have therapeutic value for medical indicationspotential in almost all diseases affecting humans, including bipolar disorder,obesity/metabolic syndrome, diabetes and diabetic complications, neuro-degenerative inflammatory, cardiovascular, liver, gastrointestinal, skin diseases, pain, psychiatric disorders, cachexia, cancer, glaucoma, HIV/AIDS, Huntington’s Disease, Crohn’s Disease, Multiple Sclerosis, Parkinson’s Disease, PTSD, rheumatoid arthritischemotherapy-induced nausea and Tourette’s Syndrome.vomiting, among many others.” (Source: Pál Pacher and George Kunos, “Modulating the Endocannabinoid System in Human Health and Disease--Successes and Failures,” The FEBS Journal (U.S. National Library of Medicine, May 2013), https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3684164/.)

DueHowever, unlike CBD-based products which are non-psychoactive, have little to the growing body of published research supporting the promisingno side effects and are believed to offer tangible therapeutic benefits ofto its users, THC-based products used for recreational or medical purposes may induce psychotropic or euphoric effects on a user and have potentially serious side effects, such as extreme anxiety and paranoia. Another important distinction between the two is the fact that THC products can only be purchased in U.S. states which have legalized medical or recreational marijuana use, whereas authentic, hemp-derived CBD the demand for CBDproducts has been increasing rapidly.may be legally purchased nationwide. In fact, cannabis industry analysts at the Brightfield Groupestimate the hemp-CBD market alone could reach $22 billiontoday CBD products are being sold directly to consumers online by 2022. Between 2017manufacturers and 2018, the U.S. hemp-derived CBD market has nearly doubledresellers and in size, but the five-year growth projections for this market are now dramatically higher than they were a year ago. This is because the full legalization of hemp-derived CBD is now a realmany major and likely prospect following Republican Mitch McConnell’s proposal of the Hemp Farm Act of 2018 (the Farm Bill), which is expected to pass before the end of 2018. This legislation would clearlyspecialty retail stores, including GNC, Walgreens, The Vitamin Shoppe, CVS, pet stores, beauty salons and unambiguously legalize hemp as well as its derivatives, extractseven local convenience stores and cannabinoids, including hemp-derived CBD.gas stations.

Introductory Product Line

Generally speaking, our management believes most CBD products for oral consumption available on the market have an earthy, bitter taste that some observers suggest is reminiscent of chlorophyll. The centerpiece of our introductory retail product line is our great-tasting, flavor-infused tinctures, formulated using only premium, organic ingredients. In addition, we will also market CBD extract in capsule form. As our Company matures, we expectform, topicals, and gummies. We intend to expand our proprietary CBD products to include a much broader range of flavors and form factors.Launched in late summer 2018, our official market Our rebrand debut showcased the following introductoryflagship products:

Supply, Manufacturing and Logistics

Our management believes that some companies operating in the CBD oil industry tend to emphasize sales and quantity over quality and safety. In late February 2015,Over the past several years, the U.S. Federal Drug Administration (“FDA”) has issued several warning letters to companies who claimedfirms that their products contained CBD but, following testingmarket unapproved new drugs that allegedly contain CBD. As part of these products byactions, the FDA has tested the chemical content of cannabinoid compounds in some of the products, and many were found to not contain the levels of CBD they claimed to contain – several were found to have no CBD.

All of our flavor-infused tinctures and capsulesgel caps are formulated using pure, all natural, zero-THC phytocannabinoid-rich (“PCR”) hemp-derived CBD sourced from one of the largest, fully and vertically integrated producers of PCR hemp oil. All CBD isolates and oilsour products are authenticated by an independent third party via issuance of a Certificate of Analysis (“COA”), whichfor cannabinoid content and profile, microbiological content, heavy metal content, pesticide content, and residual solvent content. We recognize the importance of compliance and ishave partnered with one of the industry’s leading current good manufacturing practices, or CGMP certified extraction facilities. This ensures the consistency and quality of our product line and brand.

Through its proprietary engineering process, our American-based supplier isolates and removes any unwanted compounds – while creating the maximum potency level of phytocannabinoids and terpenes – cold, enclosed and continuous manufacturing processes prevents the degradation of natural molecules during extraction and purification. Made and derived from non-GMO, USA-grown hemp, itsour PCR hemp oil and isolate powder are subjected to a rigorous testing system – both in-house and verified through independent, third party labs – which ensures accurate levels of phytocannabinoids and confirms the absencelevels of THC. Our products contain only the highest level of naturally derived CBD, more than 99.5% pure, and never contain anymore than 0.3% THC.

We believe that a key differentiator of our finished products is the superb quality of ingredients we source from the industry’s leading suppliers, each of whom we have carefully vetted and qualified.

For instance, raw Mānuka honey used in our products is imported directly from the north island of New Zealand from a supplier which has been supplying quality bee products since 1974. Mānuka honey is believed to be one of the most unique and beneficial forms of honey in the world and may carry the industry’s highest UMF^®16+ rating, distinguishing it as superior high-grade Manuka.world. Produced by bees that pollinate the native Manuka bush, possible Mānuka honey uses range from healing sore throats and digestive illnesses to curing Staph infections and gingivitis. All other flavorings infused in our products – including our all-natural, organic lemon lime flavor used in our Bespoke Sport offering -- are also sourced from reputable suppliers.

Fulfillment of orders from our online customers is managed by a well-established third-party logistics partner.

Sales and Marketing

We currently sell our products through our website.

Management believesWe believe that the traditional retail environment is currently experiencing notable economic instability due largely to the global shift in consumer purchasing behaviors – with online shopping/ecommerce sites rapidly overtaking brick-and-mortar stores as consumer preferred shopping venues. In view of this retailing reality, we have adopted a Direct-to-Consumer sales model that is anchored by an ecommerce website whereby we educate, sell and ship our CBD products directly to consumers. In addition, we also plan to market our CBD products on a wholesale basis to select specialty retailers, dispensaries and physicians.

Our marketing initiatives include the use of social marketing, social influence marketing, direct response marketing, inbound marketing, email marketing, Search Engine Optimization (“SEO”) and content marketing, among other proven strategies to generate and convert sales prospects into loyal, satisfied customers. We will also explore utilizing coupon and deal sites to drive traffic to our website and retailers, as well as participate in select industry conferences to promote our brand and build greater awareness of our products among prospective business partners and consumers.

Other brand-building tactics include a sports marketing and sponsorship strategy that has initially focused on Extreme Sports, motor racing and other high action sports athletes, teams and events, with the underpinning goal of generating consumer awareness of our high-performance Lemon-Lime Sport CBD brand by fans and athletes. In March 2018, we were a titled sponsor of sportsbike racer Robertino Pietri who took third place at the 77^th annual running of the DAYTONA 200; and in October 2018, we were a title sponsor of motorcycle racer Sean Dylan Kelly who competed in and won first place at the 35^th Annual Race of Champions at Daytona International Speedway.

The Difference Between Hemp and Marijuana

Both marijuana and hemp come from the same species of plant called “Cannabis Sativa L.” However, cultivators of the cannabis plant have manipulated it over the years to encourage specific traits to become dominant. Cannabis plants contain unique compounds called cannabinoids. Current research has revealed over 80 different cannabinoids thus far, but management believes THC is the most well-known and is credited with causing the marijuana high.While marijuana plants contain high levels of THC, hemp contains very little of the psychoactive chemical. The foregoing is one of the differences which distinguishes hemp from marijuana. 

Hemp was originally cultivated nearly 10,000 years ago in what is modern day Taiwan. Ancient cultivators of the cannabis plant recognized that it was dioecious, meaning that it had dual characteristics. Cultivators grew one variety of the cannabis plant to be tall and durable. This became what we now call industrial hemp. Upon discovering that the flower buds of the cannabis plant had psychoactive effects, cultivators began separating the hemp plants from the flowering plants in order to isolate their “medicinal” characteristics.

Scientifically, we now know that industrial hemp plants tend to produce high levels of the cannabinoid CBD, while producing low amounts of THC. Conversely, the marijuana plant produces high THC levels and low CBD levels. This chemical difference dictates the way we use the cannabis plant for medicinal and dietary supplemental purposes.

Federal Legislative Overview

Cannabidiol, or CBD, that is derived from industrial hemp plants — like the CBD used in all products currently being produced or to be produced by Bespoke Extracts — is deemed by the FDA to be a dietary supplement, not a medication. Consequently, in the U.S., no prescription is required to obtain CBD and it can be legally purchased and consumed in all 50 states (and in 40 countries around the world).

However, inIn December 2016, the Department of U.S. Drug Enforcement Administration (“DEA”) implemented a new rule that declared CBD as a Schedule I drug, meaning it has “no currently accepted medical use in the United States, a lack of accepted safety for use under medical supervision and a high potential for abuse.” While numerous industry insiders have expressed concerns about the DEA’s new ruling, it is widely believed that the agency would struggle to make CBD illegal under current laws, thanks to multiple protections put in place by Congress as part of the 2014 Farm Bill. Moreover, subsequent additions to the 2015 and 2016 Congressional Appropriations Act prohibit the DEA from going after the products produced under these programs. Moreover, the most recent version of the legislation to legalize growing hemp was introduced in April 2018 with Senate Majority Speaker Mitch McConnell as the primary sponsor, which quickly evolved into the Senate’s Agriculture Improvement Act of 2018 (2018 Farm Bill). On December 3, 2018, House and Senate leaders announced that they had come to an agreement on the reconciled versionpassing of the 2018 Farm Bill, which – for the first time ever – includes a provision to lift the federal government’s longstanding ban on the commercial production of industrial hemp. It also amends the Federal Controlled Substance Act of 1970 so that industrial hemp containing no more than 0.3% THC is no longer classifiednow recognized as a Schedule I prohibited substance. The vote to approvean agricultural commodity, such as corn, wheat or soybeans. Historically, hemp was an underpinning of American agriculture from the 2018 Farm Bill17^th century through the early 1900’s. This recent change in modern policy is expected to occur priorrestore the legacy of American hemp production as a prolific and highly sustainable crop staple.

Research published in 2019 by consumer data firm MRI-Simmons estimated that 3.7 million U.S. adults were CBD consumers, and roughly 64 million Americans – or 26% of the nation – have reported trying CBD in the last two years. (Source:https://www.marketwatch.com/story/64-million-americans-have-tried-cbd-and-now-the-fda-says-it-could-cause-liver-damage-2019-11-27.) Due to this escalating demand from consumers for CBD as a natural remedy for a myriad of health conditions affecting adults, children and pets, CBD has grown into a multi-billion dollar industry over a few short years; growing from a $550,000 market in 2014 to $7.1 billion in 2019 and is further expected to climb to $9.3 billion by the end of this year.2020. (Source: Grand View Research, https://www.grandviewresearch.com/industry-analysis/cannabidiol-cbd-market.))

Competitive Overview

Given the rapid growth of the U.S. CBD oil industry, hundreds of companies have entered the market. Consequently, the market is becoming highly competitive and we believe to compete in the market requires ensuring the quality and integrity of product offerings. Certain of our competitors have substantially greater financial, distribution, and marketing resources, as well as greater brand awareness than us, and there can be no assurance we will be able to successfully compete. 

Our Headquarters

Our corporate headquarters is located at 323 Sunny Isles Boulevard, Suite 700, Sunny Isles Beach, Florida 33160. Our Internet website is www.BespokeExracts.com. The contents of the website are not part of this report.

Employees

As of the date of the filing of this report, we have 1 employee, who is full-time.one full-time employee.

Item 1A. Risk Factors.Factors

An investment in the Company’s common stock involves a high degree of risk. In determining whether to purchase the Company’s common stock, an investor should carefully consider all of the material risks described below, together with the other information contained in this report before making a decision to purchase the Company’s securities. An investor should only consider purchasing the Company’s securities if he or she can afford to suffer the loss of his or her entire investment.

Risk Related to our Business.Business

We have a history of operating losses, have a working capital deficit as of November 30, 2020, and we may not achieve or maintain profitability in the future.

As of August 31, 2020, we have an accumulated deficit of $18,776,689 a stockholders’ deficit of $513,665, and a working capital deficit of $547,406. We incurred a net loss of $7,609,558$4,640,806 for the year ended August 31, 2018. As of August 31, 2018, we have an accumulated deficit of $16,716,644 and a stockholders’ deficit of $427,540.2020. We may never achieve profitability or generate significant revenues.

We will need to raise additional capital, which may not be available.

We anticipate that we will need to raise additional capital to execute our business plan and maintain and expand our operations. Additional capital may not be available to us on acceptable terms, or at all. If we are unable to raise additional capital, our business may be harmed and we may need to curtail or cease operations.

We have a limited operating history that impedes our ability to evaluate our potential future performance and strategy.

We began sales of our products in mid-2018. Our limited operating history makes it difficult for us to evaluate our future business prospects and make decisions based on estimates of our future performance. To address these risks and uncertainties, we must do the following:

Our business strategy may not be successful and we may not successfully address these risks. In the event that we do not successfully address these risks, our business, prospects, financial condition and results of operations may be materially and adversely affected.

Our operating results may fluctuate significantly based on customer acceptance of our products. As a result our period-to-period comparisons of our results of operations are unlikely to provide a good indication of our future performance.

Management expects that we will experience substantial variations in our net sales and operating results from quarter to quarter due to customer acceptance of our products. If customers do not accept our products, our sales and revenue will either fail to materialize or decline, resulting in a reduction in our operating income or possible increase in losses.

If we do not successfully develop and commercialize additional products, and services, or if such products and services are developed but not successfully commercialized, we could lose revenue opportunities.

Our future success will depend, in part, on our ability to expand our product offerings. To that end we have engaged in the process of identifying new product opportunities to provide additional products and related services to our customers.opportunities. The processes of identifying and commercializing new products is complex and uncertain, and if we fail to accurately predict customers’ changing needs and preferences, our business could be harmed. We have already and may have to continue to commit significant resources to commercializing new products before knowing whether our investments will result in products the market will accept. Furthermore, we may not execute successfully on commercializing those products because of errors in product planning or timing, technical hurdles that we fail to overcome in a timely fashion, or a lack of appropriate resources. This could result in competitors providing those solutions before we do and a reduction in net sales and earnings.  

The success of new products will depend on several factors, including proper new product definition, timely completion, and introduction of these products, differentiation of new products from those of our competitors, and market acceptance of these products. There can be no assurance that we will successfully identify additional new product opportunities, develop and bring new products to market in a timely manner, or achieve market acceptance of our products or that products and technologies developed by others will not render our products or technologies obsolete or noncompetitive.

We may have difficulties managing our Company’s growth, which could lead to higher operating losses, or we may not grow at all.

If we succeed in growing our business, such growth could strain our human and capital resources, potentially leading to higher operating losses. Our ability to manage operations and control growth will be dependent upon our ability to raise and spend capital to successfully attract, train, motivate, retain and manage new employees and continue to update and improve our management and operational systems, infrastructure and other resources, financial and management controls, and reporting systems and procedures. Should we be unsuccessful in accomplishing any of these essential aspects of our growth in an efficient and timely manner, then management may receive inadequate information necessary to manage our operations, possibly causing additional expenditures and inefficient use of existing human and capital resources or we otherwise may be forced to grow at a slower pace that could slow or eliminate our ability to achieve and sustain profitability. Such slower than expected growth may require us to restrict or cease our operations and go out of business.

Loss of our chief executive officer could limit our growth and negatively impact our operations.

We depend upon our president and chief executive officer, Niquana Noel,Danil Pollack, to a substantial extent. The loss of Ms. NoelMr. Pollack could have a material adverse effect on our business, results of operations or financial condition.

We will be required to attract and retain top quality talent to compete in the marketplace.

We believe our future growth and success will depend in part on our ability to attract and retain highly skilled managerial, product development, sales and marketing, and finance personnel. We may not succeed in attracting and retaining such personnel. Shortages in qualified personnel could limit our ability to increase sales of existing products and services and launch new product and service offerings.

Our inability to effectively protect our intellectual property would adversely affect our ability to compete effectively, our revenue, our financial condition, and our results of operations.

We may be unable to obtain intellectual property rights to effectively protect our branding, products, and other intangible assets. Our ability to compete effectively may be affected by the nature and breadth of our intellectual property rights. While we intend to defend against any threats to our intellectual property rights, there can be no assurance that any such actions will adequately protect our interests. If we are unable to secure intellectual property rights to effectively protect our branding, products, and other intangible assets, our revenue and earnings, financial condition, or results of operations could be adversely affected.

Our industry is highly competitive, and we have less capital and resources than many of our competitors, which may give them an advantage in developing and marketing products similar to ours or make our products obsolete.

We are involved in a highly competitive industry where we compete with various other nutraceutical companies which offer products similar to the products we sell. These competitors may have far greater resources than we do, giving our competitors an advantage in developing and marketing products similar to ours or products that make our products obsolete. While we believe we are better equipped to customize products for the cannabis market and advise growers on appropriate products to maximize crop yield as compared to traditional nutraceuticals, there can be no assurance that we will be able to successfully compete against these other manufacturers.

U.S. federal, state and foreign regulation and enforcement may adversely affect the implementation of marijuana laws and regulations andThe COVID-19 pandemic may negatively impactaffect our revenue and profit or we may be violating the Controlled Substances Act or other U.S. federal, state or foreign laws.business.

Currently, 32 statesThe COVID-19 pandemic is having widespread, rapidly evolving, and the Districtunpredictable impacts on global society, economies, financial markets, and business practices. The continuing impacts of Columbia permit some form of whole-plant cannabis use and cultivation either for medical or recreational use. During the midterm elections in November 2018, two more states voted to legalize medical marijuana use (Missouri and Utah) while one more voted to legalize recreational use (Michigan). Forty-seven states allow orCOVID-19 are considering legislation to allow the possession and use of non-psychoactive CBD oil for some medical conditions only. There are efforts in many other states to begin permitting cannabis use and/or cultivation in various contexts, and it has been reported that eleven states are actively considering bills to permit recreational use or to decriminalize the use of marijuana. Nevertheless, the federal government continues to prohibit cannabis in all its forms as well as its derivatives. Under the federal Controlled Substances Act (the “CSA”), the policy and regulations of the federal government and its agencies is that cannabis has no medical benefit, and a range of activities including cultivation and use of cannabis is prohibited. Until Congress amends the CSA or the executive branch deschedules or reschedules cannabis under it, there is a risk that federal authorities may enforce current federal law. Enforcement of the CSA by federal authorities could impair the Company’s business;highly unpredictable and could even force the Company to cease operating entirelybe significant, and may have an adverse effect on our business, operations and our future financial performance, including by causing delays and constraints in the cannabis industry. The riskmanufacturing and shipping of strict federal enforcement of the CSA in light of congressional activity, judicial holdings, and stated federal policy, including enforcement priorities, remains uncertain.our products.

Risks Related to our Common Stock

There is a limited trading market for our common stock, and investors may find it difficult to buy and sell our shares.

Our common stock is not listed on any national securities exchange. Accordingly, investors may find it more difficult to buy and sell our shares than if our common stock was traded on an exchange. Although our common stock is quoted on the OTCQB,OTC Pink, it is an unorganized, inter-dealer, over-the-counter market which provides significantly less liquidity than the Nasdaq Capital Market or other national securities exchange. Further, prior to July 2018 there was minimal reported trading in our common stock, and any significant trading volume in our common stock may not be sustained. These factors may have an adverse impact on the trading and price of our common stock.

Our issuance of common stock upon conversion of outstanding convertible debentures may depress the price of our common stock.

We have outstanding convertible debentures in the aggregate outstanding principal amount of $500,000, which are convertible into common stock at a conversion price of $0.001 per share, or a conversion price of $0.0004 following an event of default on the debentures. Our issuance of shares of common stock upon conversion of outstanding convertible debentures could result in substantial dilution to our stockholders, which may have a negative effect on the price of our common stock.

The market price of our common stock is, and is likely to continue to be, highly volatile and subject to wide fluctuations.

The market price of our common stock is highly volatile and could be subject to wide fluctuations in response to a number of factors that are beyond our control, including:

Our common stock is considered a “penny stock” and is subject to additional sale and trading regulations that may make it more difficult to buy or sell.

Our common stock is considered a “penny stock” and securities broker-dealers participating in sales of our common stock are subject to the “penny stock” regulations set forth in Rules 15g-2 through 15g-9 promulgated under the Exchange Act. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.

We do not intend to pay dividends on our common stock for the foreseeable future.

We have paid no dividends on our common stock to date and we do not anticipate paying any dividends to holders of our common stock in the foreseeable future. While our future dividend policy will be based on the operating results and capital needs of the business, we currently anticipate that we will retain any earnings to finance our future expansion and for the implementation of our business plan. A lack of a dividend can further affect the market value of our common stock and could significantly affect the value of any investment in the Company.

Our chief executive officer owns the majority of the voting power of our shareholders.

As the holder of our outstanding share of Series C Preferred Stock, our chief executive officer, Danil Pollack, has 51% of the voting power of the Company’s shareholders.  As a result, Ms. Pollack has the ability to control all matters submitted to shareholders, and his interests may differ from those of other shareholders.

Additional stock offerings in the future may dilute then-existing shareholders’ percentage ownership of the Company.

Given our plans and expectations that we will need additional capital and personnel, we mayanticipate that will need to issue additional shares of common stock or securities convertible or exercisable for shares of common stock, which may include including convertible notes, preferred stock, stock options or warrants. The issuance of additional securities in the future will dilute the percentage ownership of then-current stockholders.

The rights of the holders of common stock may be impaired by the potential issuance of preferred stock.

Our board of directors has the right, without stockholder approval, to issue preferred stock with voting, dividend, conversion, liquidation or other rights which could adversely affect the voting power and equity interest of the holders of common stock, which could be issued with the right to more than one vote per share, and could be utilized as a method of discouraging, delaying or preventing a change of control. The possible negative impact on takeover attempts could adversely affect the price of our common stock.

Failure to achieve and maintain internal controls in accordance with Sections 302 and 404 of the Sarbanes-Oxley Act of 2002 could have a material adverse effect on our business and stock price.

Our management has determined that we do not have not effective disclosure controls and procedures, or internal control over financial reporting as of August 31, 2018.2020. Effective internal controls are necessary for us to produce reliable financial reports and are important in the prevention of financial fraud. If we cannot produce reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and there could be a material adverse effect on our stock price.

Item 1B. Unresolved Staff Comments.

Not required for a smaller reporting company.

Item 2. Properties.

We maintain our principal office at 323 Sunny Isles Boulevard, Suite 700, Sunny Isles Beach, Florida 33160 square feet of office space.Florida. Our monthly rent is $116 under a lease that terminates in June 2019.2021. We believe that our existing facilities are suitable and adequate to meet our current business requirements.

Item 3. Legal Proceedings.

We are not party to, and our property is not the subject of, any material legal proceedings.

Item 4. Mine Safety Disclosures.

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. 

Our common stock quoted on the OTCQBOTC Pink under the symbol “BSPK.”. Any over-the-counter market quotations for our common stock on the OTC Pink reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

Holders

As of December 12, 2018,16, 2020, there were approximately 353 holders of record of our common stock, which excludes those stockholders holding stock in street name.

Dividend Policy

We have not declared or paid cash dividends on our common stock in the past, and we do not anticipate that we will pay cash dividends our common stock in the foreseeable future. We currently intend to retain and reinvest future earnings, if any, to finance our operations.

Repurchases of Equity Securities.Securities

None. 

Securities authorized for issuance under equity compensation plans

None.

Recent Sales of Equity Securities

On August 5, 2020, the Company issued 20,000,000 shares of common stock to Danil Pollack, the Company’s chief executive officer, upon exercise of Mr. Pollack’s right to purchase shares granted under Mr. Pollack’s employment agreement, at an exercise price of $0.001 per share.

On August 12, 2020, the Company issued 21,000,000 shares of common stock to Danil Pollack, upon exercise of Mr. Pollack’s right to purchase shares granted under Mr. Pollack’s employment agreement, at an exercise price of $0.001 per share. In connection with the foregoing, the Company relied upon the exemption from registration provided by Section 4(a)(2) under the Securities Act of 1933, as amended, for transactions not involving a public offering.

Item 6. Selected Financial Data.

Not required for smaller reporting companies.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion highlights the principal factors that have affected our financial condition and results of operations as well as our liquidity and capital resources for the periods described. This discussion should be read in conjunction with our Consolidated Financial Statements and the related notes included in Item 8 of this Form 10-K. This discussion contains forward-looking statements. Please see the explanatory note concerning “Forward-Looking Statements” in Part I of this Annual Report on Form 10-K and Item 1A. Risk Factors for a discussion of the uncertainties, risks and assumptions associated with these forward-looking statements. The operating results for the periods presented were not significantly affected by inflation.

Overview

We were incorporated in the State of Colorado on July 29, 1988 under the name Cine-Source Entertainment, Inc. On April 27, 2004, the Company changed its name to First Quantum Ventures, Inc. On April 13, 2006, the Company changed its name to First Quantum Ventures, Inc., and on May 5, 2006, the Company reincorporated in Nevada. On March 15, 2012, the Company changed its name to DiMi Telematics International, Inc.

In early 2017, our management team elected to suspend further investment and working capital on developing its then-existing technology and business prospects, turning its attention to the hemp-derived cannabidiol, or CBD, market. On March 10, 2017, the Company changed its name to Bespoke Extracts, Inc. to align the Company’s corporate identity with its new business plan.

The Company is now focused on introducingsells a proprietary line of specially-formulated, premium quality, all natural cannabidiol (CBD)hemp-derived CBD products direct to consumers through our ecommerce store, found at www.bespokeextracts.com. Bespoke Extracts’ original line of CBD products were introduced to market in 2018; however, in the fall of 2020, we unveiled a new brand image, new website and ecommerce store and a new line-up of seven new hemp-derived CBD formulations available for purchase in the form of tinctures and capsules for the nutraceutical and veterinary markets, which it introduced in mid-2018. Produced using pure, all natural, zero-THC phytocannabinoid-rich (“PCR”) hemp-derived CBD, our products are marketed as dietary supplements and distributed through our direct-to-consumers ecommerce store, found at www.BespokeExtracts.com. In the future, we alsosoftgels.

We plan to methodically expand our products through select specialty retailers, pharmacies/dispensariesproduct offerings to include new flavors, including manuka honey; and care providers.introduce additional form factors for our CBD formulations, including, lotions and balms, depending on customer feedback and evolving consumer demand.

RESULTS OF OPERATIONS FOR THE YEAR ENDED AUGUSTResults of Operations for the years ended August 31, 2018 AND AUGUST2020 and August 31, 2017.2019

Sales

Sales during the year ended August 31, 20182020 were $15,919$8,054 compared to $0$62,103 for the year ended August 31, 2017. During2019. The reduction in sales was primarily a result of decreased marketing of the year ended August 31, 2018 the Company began selling and shipping its CBDCompany’s products.

Selling, General and AdministrativeOperating Expenses

Selling, general and administrative expenses for the years ended August 31, 20182020 and 2019 were $3,647,610 and $(3,510,759), respectively. Option and warrant expense for the years ended August 31, 2020 and August 31, 2017 totaled $6,769,7232019 was $3,467,440 and $6,332,332, respectively. Stock based compensation$(1,403,625), respectively which iswas primarily compriseddue to the fair value re-measurement of warrants and options, and the expense for warrants issuedissuance of options to our former Presidentsnew President and Chief Executive Officers,CEO. Stock-based compensation for the year ended August 31, 2020 and August 31, 2019 was included$40,500 and $181,950, respectively which was a result of common stock issued for services. The Company recorded a gain of $(2,440,768) which was a result of a reduction in selling, generalexpense from forfeited common shares during the year ended August 31, 2019. Professional fees were $185,603 and administrative, and totaled $6,508,991 and $6,285,695,$200,720, respectively for the years ended August 31, 2082020 and 2017. PayrollAugust 31, 2019. The decrease in expenses was due to reduced legal and accounting fees as the Company streamlined operations. Consulting expense amounted to $24,389was $184,062 and $91,986$283,150 respectively for the years ended August 31, 2082020 and 2017.August 31, 2019, respectively. The reduction in expensedecrease was primarily due to a reduction in full time employees. Consulting amounted to $185,523final payment of fees for branding and $105,750 respectivelymarketing services performed by consultants during the year ended August 31, 2020 which were expensed throughout the year ended August 31, 2019. Amortization expense and impairment of domain names for the years ended August 31, 2082020 and 2017.August 31, 2019 was $2,797 and $3,345, respectively which was a result of amortization of domain names.

Financing Common Share Expense

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 would be equal to $50,000 divided by the lower financing price. During the year ended August 31, 2019, the Company was obligated to issue 500,000 shares of common stock valued at $76,000, and recorded the amount as financing common share expense as compared to none in the comparable period in 2020.

Loss on settlement of debt

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 increaseamortization of debt discount of $35,687 was primarily due to branding and marketing performed by consultants hiredrecorded during the year ended August 31, 2018. Amortization expense for2020. The Company recognized a loss on settlement of debt of $89,595 during the yearsyear ended August 31, 2018 and 2017 was $3,346 and $1,739 respectively. Amortization expense is in relation to a URL purchase and the prior year’s amortization is the expensing of intellectual property.2020.

Interest Expense and Amortization of Debt Discount

Interest expense and amortization of debt discount on promissory notes for the years ended August 31, 2082020 and 2017,August 31, 2019 was $419,000$535,688 and $63,311,$357,473, respectively. The increase of interest expense was due to the issuance of additional notes during the year ended August 31, 2018 and the amortization expense for the warrants and beneficial conversion associated with those notes.notes issued during the year ended August 31, 2020.

Net LossIncome / (Loss)

For the reasons stated above, our net loss for the year ended August 31, 2018 totaled $7,609,5582020 was ($4,640,806), or $(0.21)($0.04) per share, an increase of $930,061 compared to a net lossincome for the year ended August 31, 20172019 of $6,679,497$2,580,761, or ($0.48)$0.04 per share.

LIQUIDITY AND CAPITAL RESOURCESLiquidity and Capital Resources

As of August 31, 2018,2020, we had cash and cash equivalents of $79,784.$126,603. Net cash used in operating activities for the year ended August 31, 20182020 was $747,688.$465,240. Our current liabilities as of August 31, 2018 totaled $566,174 consisting2020 were $679,913 and consisted of accounts payable and accrued liabilities of $105,424,$59,913, notes payable related party $120,000 and a convertible note payables-net, unamortizedpayable of $500,000. As of August 31, 2019, we had cash and cash equivalents of $10,343. Net cash used in operating activities for the year ended August 31, 2019 was $492,691.

During the year ended August 31, 2020, the Company raised $125,250 from the sale of common stock compared to $421,250 for the year ended August 31, 2019. During the year ended August 31, 2020, the Company received a total of $400,000, net of original issue discounts from sale of $460,700.a convertible note and repaid $120,000 as compared to none during the year ending August 31, 2019. During the year ended August 31, 2020, the Company repurchased $27,500 of common stock. During the year ended August 31, 2020 the Company received $84,000 from the exercise of options compared to $2,000 from the exercise of options for the year ended August 31, 2019.

The accompanying financial statements included in this report have been prepared assuming a continuation of the Company as a going concern. The Company reported a net loss of $7,609,558had negative cash flows from operations for the year ended August 31, 20182020 and had an accumulateda working capital deficit of $16,716,644 as ofat August 31, 2018. These conditions raise significant2020. This raises substantial doubt about our ability to continue as a going concern.

We have not generated positive cash flows from operating activities. TheOur primary source of capital has been from the sale of equity securities. Our primary use of capital has been for professional fees and general and administrative costs. We have no committed sources of capital and will need to raise additional capital to continue and expand our operations. Additional capital may not be available on terms acceptable to us, or at all.

In addition, the COVID-19 pandemic may negatively affect our operations, including by limiting access to our facilities, customers, management, and professional advisors, and by causing delays and constraints in manufacturing and shipping of our products. 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.

OFF-BALANCE SHEET ARRANGEMENTSOff-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical accounting policies and estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the reported periods. The more critical accounting estimates include estimates related to revenue recognition and accounts receivable allowances. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results, which are described in Note 1 to our financial statements appearing elsewhere in this report.   

Item 7A. Quantitative and Qualitative DisclosureDisclosures About Market Risk.

Not required for a smaller reporting company.

companies.

Item 8. Financial Statements and Supplementary Data.Statements.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors ofand Stockholders’ of:

Bespoke Extracts, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Bespoke Extracts, Inc. and its subsidiary (collectively, the(the “Company”) as of August 31, 20182020 and 2017, and2019, the related consolidated statements of operations, changes in stockholders’ deficit and cash flows for each of the two years thenin the period ended August 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of August 31, 20182020 and 2017,2019, and the results of theirits operations and theirits cash flows for the years then ended August 31, 2020 and 2019, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph – Going Concern Matter

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, theThe Company has suffered recurring lossesnegative cash flows from operations, a working capital deficit and has a net capital deficiency that raisesan accumulated deficit. These factors raise substantial doubt about itsthe Company's ability to continue as a going concern. Management'sManagement’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB"(“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal controlcontrols over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ MaloneBailey, LLPLiggett & Webb, P.A.

LIGGETT & WEBB, P.A.

Certified Public Accountants

www.malonebailey.com

We have served as the Company'sCompany’s auditor since 2016.

Houston, Texas2019.

Boynton Beach, Florida

December 14, 201818, 2020

Bespoke Extracts, Inc.

Consolidated Balance Sheets