UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended August 31, 20182021

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to ________

Commission file number: 000-52759

BESPOKE EXTRACTS, INC.

(Exact name of registrant as specified in its charter)

Nevada20-4743354
(State or other jurisdiction of

incorporation or organization)
(I.R.S. Employer

Identification No.)

323 Sunny Isles Blvd., Suite 700, Sunny Isles, Florida

2590 Walnut St.

Denver, CO 

33160

80205

(Address of principal executive offices)(Zip Code)

Registrant’s telephone number, including area code: (855) 633-3738

Securities registered pursuant to Section 12(b) of the Act: None.

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $0.001 per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐  No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐  No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒  No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐  No ☒

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold as of the last business day of the registrant’s most recently completed second fiscal quarter was approximately $9,757,852.$4,835,537.

As of December 14, 2018,13, 2021, there were 50,203,907251,339,621 shares of Common Stock,common stock, par value $0.001 per share, issued and outstanding.

 

 

 

Bespoke Extracts, Inc.

 

Table of Contents

 

PART I1
  
Item 1. Business1
  
Item 1A. Risk Factors.58
  
Item 1B. Unresolved Staff Comments.916
  
Item 2. Properties.916
  
Item 3. Legal Proceedings.916
  
Item 4. Mine Safety Disclosures.916
  
PART II1017
  
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities1017
  
Item 6. Selected Financial Data[Reserved.]1017
  
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.1118
  
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.1219
  
Item 8. Financial Statements and Supplementary DataF-119
  

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures.

1320
  
Item 9A. Controls and Procedures1320
  
Item 9B. Other Information.1421
  
PART IIIItem 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections1521
  
PART III22
Item 10. Directors, Executive Officers and Corporate Governance.1522
  
Item 11. Executive Compensation1723
  
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters1824
  
Item 13. Certain Relationships and Related Transactions, and Director Independence.1925
  
Item 14. Principal AccountingAccountant Fees and Services.1926
  
PART IV2027
  
Item 15. Exhibits, Financial Statement Schedules.2027
  
Signatures2128

i

 

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, we re-focused 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. 

TheSince 2017, the Company is nowhas focused on selling its proprietary line of specially-formulated, premium quality, all natural cannabidiol (CBD) products 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 distributeddirect to consumers through our direct-to-consumers ecommerce store, found at www.BespokeExtracts.com. www.bespokeextracts.com. Information on our website is not part of this report.

Under our expanded operating plan, we intend to methodically expand our product offerings to include new flavors, including manuka honey; and introduce additional form factors for our CBD formulations, including lotions and balms, depending on customer feedback and evolving consumer demand.

Recent Developments

In November 2021, new management of the future,Company was appointed and the Company began to focus on other complimentary lines of business to its CBD offerings. Under our new management team, we plan to expand the Company’s focus to regulated cannabis markets in the United States.

The Company’s expanded business plan may include the acquisition of licensed medical and recreational marijuana dispensaries, cultivation facilities and production facilities in states which allow publicly traded companies to own and operate such businesses. Depending on the markets entered and state regulation, the Company’s plan may also sell through select specialty retailers, pharmacies/include: asset purchases, management/consulting operating agreements, or similar agreements. The Company plans to use a combination of cash, shares of common or preferred stock, notes, or other financing vehicles to complete these acquisitions. There is no assurance any required financing for such acquisitions will be available on acceptable terms, or at all, or that we will complete any such acquisitions.


In addition, the acquisition of marijuana dispensaries and care providers.cultivation/manufacturing/processing facilities is subject to the approval of government authorities which license and regulate marijuana dispensaries in their applicable jurisdictions. No assurance can be given that any such approvals can be obtained.

Wonderleaf

The Company has developed a plan to potentially acquire and merge, or “roll up” direct plant-touching dispensaries, manufacturing facilities, and cannabis cultivations with a target to be one of the highest quality, craft cannabis, seed-to-sale businesses in Colorado.

Consistent with this strategy, on December 2, 2021, Bespoke Extracts Colorado, LLC (“Bespoke Colorado”), a newly formed wholly-owned subsidiary of the Company entered into an asset purchase agreement with WonderLeaf, LLC (“WonderLeaf”), and on December 7, 2021, Bespoke Colorado and WonderLeaf entered into an amendment to such asset purchase agreement (as amended, the “Wonderleaf Purchase Agreement”). Pursuant to the Wonderleaf Purchase Agreement, Bespoke Colorado agreed to purchase from WonderLeaf, and WonderLeaf agreed to sell to Bespoke Colorado, certain assets of WonderLeaf, including a license to manufacture marijuana-infused products, existing inventory, and extraction equipment and ancillary items, all as further set forth in the Purchase Agreement.

In connection with the Wonderleaf Purchase Agreement, Bespoke Colorado entered into a lease agreement (the “Lease”) with WL Holdings, Ltd. (“WL Holdings”) Pursuant to the Lease, Bespoke Colorado will lease from WL Holdings certain commercial space in Aurora, Colorado, where WonderLeaf’s business has been located, commencing upon signing of the Lease and Wonderleaf Purchase Agreement, for a term of five years, which Bespoke Colorado will have an option to renew for an additional five years.

Closing of the Wonderleaf Purchase Agreement is subject to receipt of certain governmental approvals and other customary closing conditions.

Our Business--Overview

Since the change in management and control of the Company that occurred in November 2021, we now primarily operate within the regulated cannabis industry and the CBD industry with three divisions: i) consulting and professional services, which we plan to commence offering around January 2022; (ii) the sale of CBD products through our websites; and (iii) a new business division called “Bespoke Extracts Colorado, LLC,” which, upon closing of the Wonderleaf acquisition, will be a licensed owner/operator of recreational marijuana processing facilities located in Colorado.

Business Consulting Services

We plan to offer consulting services for companies associated with the cannabis and hemp industries in all stages of development. We anticipate that our service offerings will include the following:

 1Cannabis and Hemp Business Planning. Our commercial cannabis and hemp business planning services will be structured to help those pursuing state based operational licensing to create and implement effective, long-range business plans. We will work with our clients to generate a comprehensive strategy based on market need and growth opportunities. We understand the challenges and complexities of the regulated commercial cannabis and hemp markets and we have the expertise to help client businesses thrive.


 

Cannabis and Hemp Business Growth Strategies. We will work with our clients to create competitive, forward-looking cannabis and hemp business growth strategies formulated to minimize risk and maximize potential.

Cannabis and Hemp Business Monitoring. The regulated commercial cannabis and hemp industries are constantly growing and shifting, and the ongoing monitoring of a cannabis and hemp business allows it to remain responsive to evolving consumer demands and state regulations as well as potential operations problems. We will offer fully integrated business analysis solutions. Our monitoring services will include sales tracking, market assessment, loss prevention strategies, review of operational efficiency and workflow recommendations.

The CannabisHemp-Derived CBD Market

Many states have already legalized medical cannabis,In 2014, President Barack Obama signed the 2014 Farm Bill, which essentially allowed for hemp to be grown by permitted universities and adult-use cannabis is now legal at 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 groupstate departments 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 cannabisagriculture in the U.S. even topped thosename of Oreosfederally 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 organicrecognizes hemp as an agricultural commodity, such as corn, wheat or soybeans. Consequently, demand for hemp-derived CBD products significantly increased, with the Federal 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 combined –it, including:

The hemp must contain less than 0.3% THC;

The hemp must adhere to the shared state-federal regulations; and

The hemp must be grown by a properly licensed grower.

In addition, the 2018 Farm Bill also lifted restrictions on the sale, transportation and will likely surpass salespossession of firearmshemp-derived CBD products and ammunition inallows for the nation bytransportation of hemp-derived CBD products across state lines, as long as the end of 2019.products comply with the aforementioned mandates.

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 numbernatural occurring cannabinoid in these plants.

Numerous medical studies have found that cannabinoids, including CBD and THC, provide a wealth 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 wellwellness benefits through their interaction with body cells to improve immunity and is even produced naturally in the human brain.

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/.)


 

Due

However, 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 potential side effects, such as 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 Rite Aid, 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.

IntroductoryCBD 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 iswill be our great-tasting, flavor-infused tinctures,high quality products, formulated using only premium, organic ingredients. In addition to tinctures, 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 debut showcased the following introductory products:

● ManukaHoney CBD Tincture: 1000 mg of all-natural, pure hemp-derived CBD extract infused with raw, organic, UMF16+ManukaHoney – available in a 60ml tincture;
Lemon Lime CBD Tincture for Sport: 1500 mg of all-natural, pure hemp-derived CBD extract –available in 60ml tincture;
Bacon CBD Tincture for Pets: 500 mg of all-natural, smoked bacon-flavored, pure hemp-derived CBD extract – available in 2 fluid ounce tincture with convenient spray top for dosing on pet food; and
CBD Gelcaps: 1500 mg of all-natural, pure hemp-derived CBD extract in gelcap form – containing 30 gelcaps with 50 mg each.

Our current CBD offerings primarily focus on tinctures and liquid gels.

2


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 capsules 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 oilsproducts 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. 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.

CBD Sales and Marketing

We currently sell our products through our website.website www.bespokecbd.com.

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.

3

 

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 77th 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 35th 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.

FederalCannabis Legislative Overview

Cannabidiol, or CBD, thatBelow is derived from industrial hemp plants — likea discussion of the CBD usedfederal and state-level U.S. regulatory regimes 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,those jurisdictions where we may become involved, through our subsidiaries, in the U.S., no prescriptioncannabis industry. Under the Company’s plan, the Company may be directly engaged in the manufacture, possession, sale, and distribution of cannabis in the adult-use cannabis marketplace in the State of Colorado.

The United States federal government regulates drugs in large part through the Controlled Substances Act, or CSA. Marijuana, which 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, in December 2016, the Departmenta form of U.S. Drug Enforcement Administration (“DEA”) implemented a new rule that declared CBDcannabis, is classified as a Schedule I drug, meaning it has “nocontrolled substance. As a Schedule I controlled substance, the federal Drug Enforcement Agency, or DEA, considers marijuana to have a high potential for abuse; no currently accepted medical use in treatment in the United States,States; and a lack of accepted safety for use of the drug 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 additionssupervision. According to the 2015 and 2016 Congressional Appropriations Act prohibit the DEA from going after the products produced under these programs. Moreover, the most recent versionU.S. federal government, cannabis having a concentration 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 version 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 moretetrahydrocannabinol, or THC, greater than 0.3% is marijuana. Cannabis with a THC content below 0.3% is no longer classified as hemp.

The scheduling of marijuana as a Schedule I prohibited substance. The votecontrolled substance is inconsistent with what we believe to approvebe widely accepted medical and recreational uses for marijuana by physicians, researchers, patients, and consumers. Moreover, as of February 4, 2021 and despite the 2018 Farm Billclear conflict with U.S. federal law, at least 36 states and the District of Columbia have legalized marijuana for medical use, although Mississippi’s medical cannabis legalization measure is expectedunder challenge. Fifteen of those states and the District of Columbia have legalized the adult-use of cannabis for recreational purposes, although South Dakota’s adult-use measure is subject to occur priorpotential challenge. In November 2020, voters in Arizona, Montana, New Jersey, and South Dakota voted by referendum to the end of this year.legalize marijuana for adult use, and voters in Mississippi and South Dakota voted to legalized marijuana for medical use.

4

 

Unlike in Canada, which uniformly regulates the cultivation, distribution, sale, and possession of marijuana at the federal level under the Cannabis Act (Canada), marijuana is largely regulated at the state level in the United States. State laws regulating marijuana are in conflict with the CSA, which makes marijuana use and possession federally illegal. Although certain states and territories of the United States authorize medical or adult-use marijuana production and distribution by licensed or registered entities, under United States federal law, the possession, use, cultivation, and transfer of marijuana and any related drug paraphernalia is illegal. Although our activities are compliant with the applicable state and local laws in the states in which we plan to operate, strict compliance with state and local laws with respect to cannabis may neither absolve us of liability under United States federal law nor provide a defense to any federal criminal action that may be brought against us. In 2013, as more and more states began to legalize medical and/or adult-use marijuana, the federal government attempted to provide clarity on the incongruity between federal law and these state-legal regulatory frameworks.

Until 2018, the federal government provided guidance to federal agencies and banking institutions through a series of Department of Justice memoranda. The most notable of this guidance came in the form of a memorandum issued by former U.S. Deputy Attorney General James Cole on August 29, 2013, which we refer to as the Cole Memorandum. The Cole Memorandum offered guidance to federal agencies on how to prioritize civil enforcement, criminal investigations and prosecutions regarding marijuana in all states and quickly set a standard for marijuana-related businesses to comply with. The Cole Memorandum put forth eight prosecution priorities:

1.Preventing the distribution of marijuana to minors;

2.Preventing revenue from the sale of marijuana from going to criminal enterprises, gangs and cartels;

 

Competitive Overview

3.Preventing the diversion of marijuana from states where it is legal under state law in some form to other states;

 

4.Preventing the state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity;

5.Preventing violence and the use of firearms in the cultivation and distribution of marijuana;

6.Preventing drugged driving and the exacerbation of other adverse public health consequences associated with marijuana use;

7.Preventing the growing of marijuana on public lands and the attendant public safety and environmental dangers posed by marijuana production on public lands; and

8.Preventing marijuana possession or use on federal property.

On January 4, 2018, former U.S. Attorney General Sessions rescinded the Cole Memorandum by issuing a new memorandum to all United States Attorneys, which we refer to as the Sessions Memo. Rather than establishing national enforcement priorities particular to marijuana-related crimes in jurisdictions where certain marijuana activity was legal under state law, the Sessions Memo simply rescinded the Cole Memorandum and instructed that “[i]n deciding which marijuana activities to prosecute... with the [DOJ’s] finite resources, prosecutors should follow the well-established principles that govern all federal prosecutions.” Namely, these include the seriousness of the offense, history of criminal activity, deterrent effect of prosecution, the interests of victims, and other principles.”

President Biden’s Attorney General, Merrick Garland, was confirmed by the United States Senate on March 10, 2021. It is not yet known whether the Department of Justice under President Biden and Attorney General Garland, will re-adopt the Cole Memorandum or announce a substantive marijuana enforcement policy. Attorney General Garland indicated at a confirmation hearing before the United States Senate that it did not seem to him to be a useful use of limited resources to pursue prosecutions in states that have legalized and that are regulating the use of marijuana, either medically or otherwise.

Nonetheless, there is no guarantee that state laws legalizing and regulating the sale and use of marijuana will not be repealed or overturned, or that local governmental authorities will not limit the applicability of state laws within their respective jurisdictions. Unless and until the United States Congress amends the CSA with respect to marijuana (and as to the timing or scope of any such potential amendments there can be no assurance), there is a risk that federal authorities may enforce current U.S. federal law. Currently, in the absence of uniform federal guidance, as had been established by the Cole memorandum, enforcement priorities are determined by respective United States Attorneys.


In order to participate in either the medical or recreational sides of the marijuana industry in Colorado and elsewhere, all businesses and employees must obtain badges and licenses from the state and, for businesses, local jurisdictions. Colorado issues six types of business licenses including cultivation, manufacturing, dispensing, transport, research license and testing. In addition, all owners and employees must obtain an occupational license to be permitted to own or work in a facility. All applicants for licenses undergo a background investigation, including a criminal record check for all owners and employees.

Colorado has also enacted stringent regulations governing the facilities and operations of marijuana businesses. All facilities are required to be licensed by the state and local authorities and are subject to comprehensive security and surveillance requirements. In addition, each facility is subject to extensive regulations that govern its businesses practices, which includes mandatory seed-to-sale tracking and reporting, health and sanitary standards, packaging and labeling requirements and product testing for potency and contaminants.

Laws and regulations affecting the adult-use marijuana industry are constantly changing, which could detrimentally affect our proposed operations. Local, state, and federal adult-use marijuana laws and regulations are broad in scope and subject to evolving interpretations, which could require us to incur substantial costs associated with compliance or alter our business plan. In addition, violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on our operations. It is also possible that regulations may be enacted in the future that will be directly applicable to our business. These ever-changing regulations could even affect federal tax policies that may make it difficult to claim tax deductions on our returns. We cannot predict the nature of any future laws, regulations, interpretations, or applications, nor can we determine what effect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have on our business.

Competition

We believe we possess certain competitive strengths and advantages in the industries in which we plan to operate. Our management team has significant experience in cultivation, processing and retailing of cannabis throughout regulated markets. As we execute on our strategy, we believe this expertise enables us to potentially evaluate, acquire and operate business efficiently.

Industry Knowledge. We continue to create, share and leverage information and experiences with the purpose of creating awareness and identifying opportunities to increase shareholder value. Our management team has business expertise, extensive knowledge of the cannabis industry and closely monitors changes in legislation. We work with partners who enhance the breadth of our industry knowledge.

Regulatory Compliance. The state and local laws regulating the cannabis industry change at a rapid pace. We have resources committed to ensure our operations are in compliance with all state and local laws, policies, guidance and regulations to which we are subject. We apply this compliance knowledge to our customers in order to ensure that they, too, are in full compliance.

In the regulated cannabis industry, we believe we have significant competition from a range of private and public market participants.

Given the rapid growth of the U.S. CBD oil industry,and regulated cannabis industries, hundreds of companies have entered the market.respective markets. 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 33160.2590 Walnut St., Denver, CO. Our Internetcorporate internet website is www.BespokeExracts.com.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.2 full-time employees.


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 and Industry

We have a history of operating losses, have a working capital deficit as of August 31, 2021, and we may not achieve or maintain profitability in the future.

 

As of August 31, 2021, we have an accumulated deficit of $19,742,266, a stockholders’ deficit of $418,242, and a working capital deficit of $453,735. We incurred a net loss of $7,609,558$965,577 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 $427,540.2021. 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.

  

5

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:

Successfully execute our business strategy to establish the “Bespoke Extracts” brand and reputation as a well-managed enterprise committed to delivering premium quality and cost-effective CBD products to the nutraceutical and veterinary markets;products;

Respond to competitive developments;

Execute value-focused pricing strategies that position our tinctures and gelcaps as premium, great tasting, all-natural CBD products offered at a competitive price;

Effectively and efficiently market and sell our introductory line of CBD products through the development of multi-channel distribution strategies focused on direct-to-consumerstrategies; and distribution through wholesale venues including specialty retailers, pharmacies, dispensaries and physician’s and veterinarian offices;

Attract, integrate, retain and motivate qualified personnel.

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.  

do.  

6

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,Michael Feinsod, to a substantial extent. The loss of Ms. NoelMr. Feinsod 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 canWe may be no assurance that we will be ableunable to successfully compete against these other manufacturers.

The COVID-19 pandemic may negatively affect our business.

The COVID-19 pandemic is having widespread, rapidly evolving, and unpredictable impacts on global society, economies, financial markets, and business practices. The continuing impacts of COVID-19 are highly unpredictable and could be significant, and may have an adverse effect on our business, operations and our future financial performance, including by causing delays and constraints in manufacturing and shipping of our products. 

We may be subject to the risks associated with future acquisitions , which may increase our capital requirements, dilute our shareholders, cause us to incur debt or assume contingent liabilities, and subject us to other risks.

As part of our overall business strategy, the Company may pursue select strategic acquisitions.

Although the Company will assess the risks inherent in a particular target business which it may acquire, this assessment may not result in the identification of all risks that a target business may encounter. Furthermore, some of those risks may be outside of the Company’s control, meaning that the Company can do nothing to control or reduce the chances that those risks will adversely impact a target business.

Any such future acquisitions, if completed, may expose the Company to additional potential risks, including risks associated with:

increased operating expenses and cash requirements;
 7 
the assumption of additional indebtedness or contingent liabilities;

the issuance of our equity securities;
assimilation of operations, intellectual property and products of an acquired company, including difficulties associated with integrating new personnel;
the diversion of our management’s attention from our existing product programs and initiatives in pursuing such a strategic merger or acquisition;
retention of key employees, the loss of key personnel and uncertainties in our ability to maintain key business relationships; and
risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing productsand our inability to generate revenue from acquired products sufficient to meet our objectives in undertaking the acquisition or even to offset the associated acquisition and maintenance costs.

U.S.Cannabis remains illegal under federal law. 

Despite the development of a cannabis industry legal under state laws, state laws legalizing medicinal and foreign regulation and enforcement may adversely affect the implementation of marijuana laws and regulations and may negatively impact our revenue and profit or we may be violating the Controlled Substances Act or other U.S. federal, state or foreign laws.

Currently, 32 states and the District of Columbia permit some form of whole-plantrecreational adult cannabis use and cultivation either for medical or recreational use. During the midterm electionsare 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 or 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. Underconflict with the federal Controlled Substances Act, (the “CSA”), the policywhich classifies cannabis as a Schedule I controlled substance and regulations ofmakes cannabis use and possession illegal on a national level. The United States Supreme Court has ruled that it is the federal government that has the right to regulate and its agencies is thatcriminalize cannabis, has noeven for medical benefit,purposes, and a range of activities including cultivation andthus federal law criminalizing the use of cannabis preempts state laws that legalize its use.


A prior U.S. administration attempted to address the inconsistent treatment of cannabis under state and federal law in the Cole Memorandum which Deputy Attorney General James Cole sent to all U.S. Attorneys in August 2013 that outlined certain priorities for the Department of Justice (“DOJ”) relating to the prosecution of cannabis offenses. The Cole Memorandum provided that enforcing federal cannabis laws and regulations in jurisdictions that have enacted laws legalizing cannabis in some form and that have also implemented strong and effective regulatory and enforcement systems to control the cultivation, processing, distribution, sale and possession of cannabis conduct in compliance with those laws and regulations was not a priority for the DOJ. The DOJ did not provide (and has not provided since) specific guidelines for what regulatory and enforcement systems would be deemed sufficient under the Cole Memorandum. On January 4, 2018, U.S. Attorney General Jeff Sessions formally issued the Sessions Memorandum, which rescinded the Cole Memorandum effective upon its issuance. The Sessions Memorandum stated, in part, that current law reflects “Congress’ determination that cannabis is prohibited. Untila dangerous drug and cannabis activity is a serious crime”, and Mr. Sessions directed all U.S. Attorneys to enforce the laws enacted by Congress amendsand to follow well-established principles when pursuing prosecutions related to cannabis activities.. It is not yet known whether the CSADepartment of Justice under President Biden and Attorney General Garland, will re-adopt the Cole Memorandum or announce a substantive marijuana enforcement policy. Attorney General Garland indicated at a confirmation hearing before the United States Senate that it did not seem to him to be a useful use of limited resources to pursue prosecutions in states that have legalized and that are regulating the use of marijuana, either medically or otherwise. There can be no assurance that the federal government will not enforce federal laws relating to cannabis in the future. The uncertainty of federal enforcement practices going forward and the inconsistency between federal and state laws and regulations presents major risks for our business and operations. Any such change in the federal government’s enforcement of federal laws could cause significant financial damage to us and our stockholders.

Under federal law, and more specifically the federal Controlled Substances Act, the possession, use, cultivation and transfer of cannabis is illegal. It is also federally illegal to advertise the sale of cannabis, or to sell paraphernalia designed or intended primarily for use with cannabis, unless the paraphernalia is authorized by federal, state, or local law. Our business involves the cultivation, production and sale of cannabis and cannabis products, and, therefore, violates federal law. Further, we provide services to customers that are engaged in the business of possession, use, cultivation and/or transfer of cannabis. As a result, law enforcement authorities, in their attempt to regulate the illegal use of cannabis, may seek to bring an action or actions against us, including, but not limited to, a claim of aiding and abetting another’s criminal activities. The federal aiding and abetting statute provides that anyone who “commits an offense against the United States or aids, abets, counsels, commands, induces or procures its commission, is punishable as a principal.” 18 U.S.C. §2(a). As a result of such an action, we may be forced to cease operations and our investors could lose their entire investment. Such an action would have a material negative effect on our business and operations.

If the Federal Government were to change its enforcement practices, or were to expend its resources enforcing existing federal laws on those involved in the cannabis industry, such action could have a materially adverse effect on our operations, our customers or the executive branch deschedulessales of our products up to and including a complete cessation of our business.

It is possible that additional federal or reschedulesstate legislation could be enacted in the future that would prohibit us or our clients from selling cannabis, and if such legislation were enacted, the demand for our products and services, and those of our clients, likely would decrease, causing revenues to decline. Further, additional government disruption in the cannabis industry could cause potential customers and users to be reluctant to use our products and services, which would be detrimental to us. We cannot predict the nature of any future laws, regulations, interpretations or applications, nor can we determine what effect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have on our business.

Our business is dependent on state laws pertaining to the cannabis industry.

The federal Controlled Substances Act classifies cannabis as a Schedule I controlled substance and makes cannabis use and possession illegal on a national level. The U.S. Supreme Court has ruled that it is the federal government that has the right to regulate and criminalize cannabis, even for medical purposes, and thus federal law criminalizing the use of cannabis preempts state laws that legalize its use. While there appears to be ample public support for favorable legislative action to legalize cannabis use and possession, numerous factors may impact or negatively affect the legislative process(s) within the various states we have or may in the future have business interests in. Any one of these factors could slow or halt use of cannabis, which would negatively impact our business.


The voters or legislatures of states in which cannabis has already been legalized could potentially repeal applicable laws which permit the operation of both medical and retail cannabis businesses. These actions might force businesses, including our own and those of our clients, to cease operations in one or more states entirely.

We are required to comply concurrently with federal, state and local laws in each jurisdiction where we operate or to which we sell our products.

Various federal, state and local laws, regulations and guidelines govern our business in the jurisdictions in which we operate or propose to operate, or to which we export or propose to sell our products, including laws and regulations relating to health and safety, conduct of operations and the production, management, transportation, storage and disposal of our products and of certain material used in our operations. Compliance with each set of these laws, regulations and guidelines requires concurrent compliance with other complex federal, state and local laws, regulations and guidelines. These laws, regulations and guidelines change frequently and may be difficult to interpret and apply. Compliance with these laws, regulations and guidelines requires the investment of significant financial and managerial resources, and a determination that we are not in compliance with these laws, regulations and guidelines could harm our reputation and brand image and have a material adverse effect on our prospects, business, financial condition and results of operations. Moreover, it is impossible for us to predict the cost or effect of such laws, regulations or guidelines upon our future operations. Changes to these laws, regulations and guidelines could negatively affect our competitive position within our industry and the markets in which we operate, and there is no assurance that various levels of government in the jurisdictions in which we operate will not pass legislation or regulation or issue guidelines that adversely impacts our business.

Our business is subject to a variety of U.S. laws, many of which are unsettled and still developing, and which could subject us to claims or otherwise harm our business.

We are subject to a variety of state and federal laws in the United States. In the United Stated, despite cannabis having been legalized for medical use in many states, and for adult recreational use in a number of states, cannabis meeting the definition of “marijuana” continues to be categorized as a Schedule I controlled substance under the federal Controlled Substances Act. Following the passage of HB19-1090 in Colorado, we have elected to move into plant-touching operations in addition to non-plant-touching operations. As a public company involved in direct plant-touching activities, we may face additional scrutiny from the U.S. federal government or other regulatory agencies. Such scrutiny, and any investigation of our operations related to plant-touching activities, could have a material adverse impact on our prospects, business, financial condition and results of operations.

We are or will be subject to risks related to unsafe concentration of heavy metals and other contaminants in our cannabis and nutrient products, and associated inconsistent treatment under state law.

Cannabis plants may absorb heavy metals and other contaminants from the soil that they grow in. Nutrient products are made from ingredients that may contain heavy metals and other contaminants. Heavy metals and contaminants are naturally found in the earth’s crust but may also be present as a result of, for example, pesticide use. Some contaminants, like heavy metals, are toxic to humans at even low concentrations. If our raw materials contain contaminants, they may transfer to our products. If the level of contaminants in our products exceeds permissible or safe levels, it may result in loss of inventory and possible harm to consumers of the products, which may expose us, among other things, to monetary losses, product liability claims and reputational risk.

In addition, state regulation of testing for, and permissible levels of, contaminants in cannabis products varies, making compliance difficult and costly.

We will be subject to risks inherent in an agricultural business, including the risk of crop failure.

We will be in the cannabis industry, which is an agricultural process. As such, our business will be subject to the risks inherent in the agricultural business, including risks of crop failure presented by weather, insects, plant diseases and similar agricultural risks that might affect us or our clients.


The cannabis industry and market are relatively new in the United States, and this industry and market may not continue to exist or develop as anticipated or we may ultimately be unable to succeed in this industry and market.

The cannabis industry and market are relatively new, and our success depends on our ability to operate our business successfully and attract and retain clients. In addition to being subject to general business risks applicable to a business involving an agricultural product and a regulated consumer product, we need to continue to build brand awareness of our brand in the cannabis industry and make significant investments in our business strategy and production capacity. These investments include introducing new products and services into the markets in which we operate, adopting quality assurance protocols and procedures and undertaking regulatory compliance efforts. These activities may not promote our business as effectively as intended, or at all, and we expect that our competitors will undertake similar investments to compete with us for market share. Competitive conditions, consumer preferences and spending patterns in this industry and market are relatively unknown and may have unique characteristics that differ from other existing industries and markets and that may cause our efforts to further our business to be unsuccessful or to have undesired consequences. As a result, we may not be successful in our efforts to operate our business or attract and retain clients or to develop new products and services and produce and distribute these products and services to the markets in which we operate or to which we export in time to be effectively commercialized, or these activities may require significantly more resources than we currently anticipate in order to be successful.

We, or the cannabis industry more generally, may receive unfavorable publicity or become subject to negative consumer or investor perception. 

We believe that the cannabis industry is highly dependent upon positive consumer and investor perception regarding the benefits, safety, efficacy and quality of the cannabis distributed to consumers. The perception of the cannabis industry and cannabis products, currently and in the future, may be significantly influenced by scientific research or findings, regulatory investigations, litigation, political statements, media attention and other publicity (whether or not accurate or with merit) both in the United States and in other countries relating to the consumption of cannabis products, including unexpected safety or efficacy concerns arising with respect to cannabis products or the activities of industry participants. There can be no assurance that future scientific research, findings, regulatory proceedings, litigation, media attention or other research findings or publicity will be favorable to the cannabis market or any particular cannabis product or will be consistent with earlier publicity. Adverse future scientific research reports, findings and regulatory proceedings that are, or litigation, media attention or other publicity that is, perceived as less favorable than, or that questions, earlier research reports, findings or publicity (whether or not accurate or with merit) could result in a significant reduction in the demand for our cannabis products or those of our clients, which would affect our business. Further, adverse publicity reports or other media attention regarding the safety, efficacy and quality of cannabis or our products specifically, or associating the consumption of cannabis with illness or other negative effects or events, could adversely affect us. This adverse publicity could arise even if the adverse effects associated with cannabis products resulted from consumers’ failure to use such products legally, appropriately or as directed.

Certain events or developments in the cannabis industry more generally may impact our reputation. 

Damage to our reputation can result from the actual or perceived occurrence of any number of events, including any negative publicity, whether true or not. As we anticipate becoming a producer and distributor of cannabis, which is a controlled substance in the United States that has previously been commonly associated with various other narcotics, violence and criminal activities, there is a risk that federal authorities may enforce current federal law. Enforcementour business might attract negative publicity. There is also a risk that the actions of the CSA by federal authorities could impair the Company’s business;other companies and could even force the Company to cease operating entirelyservice providers in the cannabis industry. The risk of strict federal enforcementindustry may negatively affect the reputation of the CSAindustry as a whole and thereby negatively impact our reputation. The increased usage of social media and other web-based tools used to generate, publish and discuss user generated content and to connect with other users has made it increasingly easier for individuals and groups to communicate and share negative opinions and views in lightregards to our activities and the cannabis industry in general, whether true or not. We do not ultimately have direct control over how we or the cannabis industry is perceived by others. Reputational issues may result in decreased investor confidence, increased challenges in developing and maintaining community relations and present an impediment to our overall ability to advance our business strategy and realize on our growth prospects.


The cannabis industry could face strong opposition from other industries.

We believe that established businesses in other industries may have a strong economic interest in opposing the development of congressionalthe cannabis industry. Cannabis may be seen by companies in other industries as an attractive alternative to their products, including recreational cannabis as an alternative to alcohol and medical cannabis as an alternative to various commercial pharmaceuticals. Many industries that could view the emerging cannabis industry as an economic threat are well established, with vast economic and federal and state lobbying resources. It is possible that companies within these industries could use their resources to attempt to slow or reverse legislation legalizing cannabis. Any inroads these companies make in halting or impeding legislative initiatives that would not be beneficial to the cannabis industry could have a detrimental impact on our business or our clients’ business and, in turn, on our operations.

Businesses involved in the cannabis industry, and investments in such businesses, are subject to a variety of laws and regulations related to money laundering, financial recordkeeping and proceeds of crimes.

Investments in the U.S. cannabis industry are subject to a variety of laws and regulations that involve money laundering, financial recordkeeping and proceeds of crime, including the Bank Secrecy Act, as amended by the USA Patriot Act, other anti-money laundering laws, and any related or similar rules, regulations or guidelines, issued, administered or enforced by governmental authorities in the United States. In February 2014, the Financial Crimes Enforcement Network (“FinCEN”) of the Treasury Department issued a memorandum (the “FinCEN Memo”) providing guidance to banks seeking to provide services to cannabis-related businesses. The FinCEN Memo outlines circumstances under which banks may provide services to cannabis-related businesses without risking prosecution for violation of U.S. federal money laundering laws. It refers to supplementary guidance that Deputy Attorney General Cole issued to U.S. federal prosecutors relating to the prosecution of U.S. money laundering offenses predicated on cannabis-related violations of the federal Controlled Substances Act and outlines extensive due diligence and reporting requirements, which most banks have viewed as onerous. The FinCEN Memo currently remains in place, but it is unclear at this time whether the current administration will continue to follow the guidelines of the FinCEN Memo. Such requirements could negatively affect our ability and the ability of our clients to establish and maintain banking connections.

We may be unable to seek the protection of the bankruptcy courts.

There is an argument that the federal bankruptcy courts cannot provide relief for parties who engage in cannabis or cannabis-related businesses. Recent bankruptcy rulings have denied bankruptcies for cannabis dispensaries upon the justification that businesses cannot violate federal law and then claim the benefits of federal bankruptcy for the same activity judicial holdings, and statedupon the justification that courts cannot ask a bankruptcy trustee to take possession of, and distribute cannabis assets as such action would violate the federal policy, including enforcement priorities, remains uncertain.Controlled Substances Act. Therefore, due to our cannabis-related business, we may not be able to seek the protection of the bankruptcy courts and this could materially affect our financial performance and/or our ability to obtain or maintain credit.

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.


 

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:

variations in our quarterly operating results;

announcements that our revenue or income are below analysts’ expectations;

general economic slowdowns;

8

sales of large blocks of our common stock; and

announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments.

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 beneficially owns the majority of the voting power of our shareholders.
 

As the managing member of the holder of our outstanding share of Series C Preferred Stock, our chief executive officer, Michael Feinsod, has 51% of the voting power of the Company’s shareholders.  As a result, Mr. Feinsod 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, 2018.2021. 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.2590 Walnut St, Denver, CO. Our monthly rent is $116$1,300 under a lease that terminates in June 2019.month-to-month lease.  We believe that our existing facilities are suitable and adequate to meet our current business requirements.

Our-wholly owned subsidiary, Bespoke Extracts Colorado, LLC leases commercial space in Aurora, CO, under a 5 year lease that commenced December 2021 (with an option to renew for an additional five year term). Monthly rent starts at $6,000.

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.

 

9


 

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, 2018,13, 2021, there were approximately 353308 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

None. 

Item 6. Selected Financial Data.[Reserved.]

Not required for smaller reporting companies.

 

10


 

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 Statementsfinancial 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 introducingsell a proprietary line of specially-formulated, premium quality, all natural cannabidiol (CBD) products 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 distributeddirect to consumers through our direct-to-consumers ecommerce store, found at www.BespokeExtracts.com. www.bespokeextracts.com. Information on our website is not part of this report.

Under our expanded operating plan, we intend to methodically expand our product offerings to include new flavors, including manuka honey; and introduce additional form factors for our CBD formulations, including lotions and balms, depending on customer feedback and evolving consumer demand.

In November 2021, new management of the future,Company was appointed and the Company began to focus on other complimentary lines of business to its CBD offerings. Under our new management team, we also plan to our products through select specialty retailers, pharmacies/dispensariesexpand the Company’s focus to regulated cannabis markets in the United States.

Results of Operations for the years ended August 31, 2021 and care providers.August 31, 2020

Sales

 

RESULTS OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 2018 AND AUGUST 31, 2017.

Sales

Sales during the year ended August 31, 20182021 were $15,919$35,566 compared to $0$8,054 for the year ended August 31, 2017. During2020. The increase in sales was primarily a result of increased marketing of the year ended August 31, 2018 the Company began sellingCompany’s new line-up of hemp-derived CBD products and shipping its CBD products.sales of older products at reduced prices.

 

Selling, General and AdministrativeOperating Expenses

 

Selling, general and administrative expenses for the years ended August 31, 20182021 and August 31, 2017 totaled $6,769,7232020 were $640,880 and $6,332,332,$3,647,610, respectively. Stock based compensation which is primarily comprised of the expense for warrants issued to our former Presidents and Chief Executive Officers, was includedIncluded in selling, general and administrative expenses, option and totaled $6,508,991warrant expense for the years ended August 31, 2021 and $6,285,695,August 31, 2020 was $0 and $3,467,440, respectively which was primarily due to the fair value re-measurement of warrants and options, and the issuance of options to our then-President and CEO. Stock-based compensation for the years ended August 31, 2021 and August 31, 2020 were $0 and $40,500, respectively which was a result of common stock issued for services. Professional fees were $105,950 and $185,603, respectively for the years ended August 31, 2082021 and 2017. PayrollAugust 31, 2020. The decrease in expenses was due to reduced legal and accounting fees as the Company streamlined operations. Consulting expense amounted to $24,389was $237,500 and $91,986 respectively$184,062, for the years ended August 31, 2082021 and 2017. The reduction in expense was due to a reduction in full time employees. Consulting amounted to $185,523 and $105,750 respectively for the years ended August 31, 208 and 2017.2020, respectively. The increase was primarily due to brandingadditional consulting agreements for sales and marketing performed by consultants hired during the year ended August 31, 2018.2021. Amortization expense of domain names for the yearsyear ended August 31, 20182021 and 2017August 31, 2020 was $3,346$3,244 and $1,739$2,797, respectively. Amortization expense is

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 relationthe original principal amount of $200,000 (the “November 2019 Debenture”). Pursuant to a URL purchasethe Repayment Agreement, the Company paid the holder $120,000, and transferred certain URLs valued at $5,282 to the holder, and the prior year’s amortization isNovember 2019 Debenture was deemed paid in full. The Company recognized a loss on settlement of debt of $89,595 during the expensing of intellectual property.year ended August 31, 2020.

 

Interest Expense and Amortization of Debt Discount

 

Interest expense on promissory notes for the years ended August 31, 2082021 and 2017,August 31, 2020 was $419,000$0 and $63,311,$535,688 respectively. The increase ofdecrease in 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 that had been converted to common stock or fully amortized during the year ended August 31, 2020.

 

Net Loss

 

For the reasons stated above, our net loss for the year ended August 31, 2018 totaled $7,609,5582021 was $965,577, or $(0.21)$0.00 per share, an increase of $930,061 compared to a net loss for the year ended August 31, 20172020 of $6,679,497$4,640,806, or ($0.48)$0.04 per share.

11

 

LIQUIDITY AND CAPITAL RESOURCESLiquidity and Capital Resources

 

As of August 31, 2018,2021, we had cash and cash equivalents of $79,784.$11,177. Net cash used in operating activities for the year ended August 31, 20182021 was $747,688.$1,040,965. Our current liabilities as of August 31, 2018 totaled $566,174 consisting2021 were $542,762 and consisted of accounts payable and accrued liabilities of $105,424,$42,228, notes payable- related party of $534 and a convertible note payables-net, unamortizedpayable of $500,000. As of August 31, 2020, we had cash of $126,603. Net cash used in operating activities for the year ended August 31, 2020 was $465,240. The increase in net cash used in operating activities during the year ended August 31, 2021 compared to August 31, 2020 was a result of the Company purchasing new inventory and an increase in prepaid expenses, partially offset by the increase in accounts payable and accrued liabilities.


During the year ended August 31, 2021, the Company raised $800,000 from the sale of common stock. During the year ended August 31, 2021 the Company received a total of $130,534 of loans from our then-Chief Executive Officer. During the year ended August 31, 2020, the Company raised $125,000 from the sale of common stock. During the year ended August 31, 2020, the Company received a total of $400,000, net of original issue discounts, from the sale of $460,700.a convertible note and repaid $120,000. During the year ended August 31, 2020 the Company repurchased $27,500 of common stock and received $84,000 from the exercise of stock options.

 

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, 20182021 and had an accumulateda working capital deficit of $16,716,644 as ofat August 31, 2018. These conditions raise significant2021. 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 and convertible debt securities. Our primary use of capital has been for professional fees and selling, 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.

 

OFF-BALANCE SHEET ARRANGEMENTSIn 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 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 below and in Note 1 to our financial statements appearing elsewhere in this report.   

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.

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.

Income Taxes

We utilize the asset and liability method of accounting for income taxes. We recognize deferred tax liabilities or assets for the expected future tax consequences of temporary differences between the book and tax basis of assets and liabilities. We regularly assess the likelihood that our deferred tax assets will be recovered from future taxable income. We consider projected future taxable income and ongoing tax planning strategies in assessing the amount of the valuation allowance necessary to offset our deferred tax assets that will not be recoverable. We have recorded and continue to carry a full valuation allowance against our gross deferred tax assets that will not reverse against deferred tax liabilities within the scheduled reversal period. If we determine in the future that it is more likely than not that we will realize all or a portion of our deferred tax assets, we will adjust our valuation allowance in the period we make the determination. We expect to provide a full valuation allowance on our future tax benefits until we can sustain a level of profitability that demonstrates our ability to realize these assets.

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

 

Not required for a smaller reporting company.companies.

 

12

Item 8. Financial Statements.


 

Item 8. Financial Statements and Supplementary Data.

CONTENTSPAGE NO.
Report of Independent Registered Public Accounting FirmF-2
Consolidated Balance SheetsF-3
Consolidated Statements of OperationsF-4
Consolidated Statement of Owners EquityF-5
Consolidated Statements of Cash FlowsF-6
Notes to Consolidated Financial StatementsF-7 - F-19

 


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, 20182021 and 2017, and2020, 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, 2021, 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, 20182021 and 2017,2020, and the results of theirits operations and theirits cash flows for the years then ended August 31, 2021 and 2020, 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, the 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.

Critical Audit Matters

The critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. We determined that there are no critical audit matters.

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

www.malonebailey.com

We have served as the Company'sCompany’s auditor since 2016.2019. 

Houston, TexasBoynton Beach, Florida

December 14, 2018

13, 2021

F-2


Bespoke Extracts, Inc.

Consolidated Balance Sheets

  August 31,  August 31, 
  2018  2017 
Assets      
Current assets      
Cash $79,784  $87,172 
Accounts receivable  2,004   - 
Prepaid expense  30,976   19,952 
Inventory  61,857   - 
Total current assets  174,621   107,124 
         
Domain names, net of amortization of $5,019 and $1,673  45,166   48,512 
Total assets $219,787  $155,636 
         
Liabilities and Stockholders’ Deficit        
Current liabilities        
Accounts payable and accrued liabilities $105,424  $36,525 
Deposit for future assets sales from related party  -   45,000 
Convertible notes - related parties, net unamortized discounts $199,300 and $5,019, respectively  460,700   123,000 
Note payable - related party  50   30,050 
Total current liabilities  566,174   234,575 
         
Non-current liabilities        
Related party convertible note payable, net of unamortized discounts $98,847 and $346,837  81,153   193,163 
Total non-current liabilities  81,153   193,163 
Total liabilities  647,327   427,738 
         
Stockholders’ Deficit        
Series A Convertible Preferred Stock, $0.001 par value, 50,000,000 authorized shares; no shares issued and outstanding as of August 31, 2018 and August 31, 2017, respectively  -   - 
Common stock, $0.001 par value: 800,000,000 authorized;42,902,712 and 26,822,712 shares issued and outstanding as of August 31, 2018 and August 31, 2017, respectively  42,903   26,823 
Additional paid-in capital  16,246,201   8,808,161 
Accumulated deficit  (16,716,644)  (9,107,086)
Total stockholders’ deficit  (427,540)  (272,102)
Total liabilities and stockholders’ deficit $219,787  $155,636 

  August 31,  August 31, 
  2021  2020 
       
Assets        
Current assets        
Cash $11,177  $126,603 
Accounts receivable, net  5,262   3,585 
Prepaid expense  24,329   2,319 
Inventory, net  48,259   - 
Total current assets  89,027   132,507 
         
Furniture and equipment  2,745   - 
Domain names, net of amortization of $14,116 and $10,872, respectively  32,748   33,741 
Total assets $124,520  $166,248 
         
Liabilities and Stockholders’ Deficit        
Current liabilities        
Accounts payable and accrued liabilities $42,228  $59,913 
Note payable - related party  534   120,000 
Convertible notes  500,000   500,000 
Total current liabilities  542,762   679,913 
         
Commitments and contingencies (Note 7)  -   - 
         
Stockholders’ Deficit        
Preferred stock, par value $0.001, 50,000,000 shares authorized, 1 share issued and outstanding as of August 31, 2021 and August 31,2020, respectively  -   - 
Series C Preferred Stock, $0.001 par value, 1 share designated;  1 share issued and outstanding  as of August 31, 2021 and August 31, 2020, respectively, stated value $24,000.  -   - 
Common stock, $0.001 par value: 3,000,000,000 authorized; 246,888,426 and 194,388,426 shares  issued and outstanding as of August 31, 2021 and August 31, 2020, respectively  246,889   194,389 
Additional paid-in capital  19,077,135   17,992,635 
Common stock payable  -   76,000 
Accumulated deficit  (19,742,266)  (18,776,689)
Total stockholders’ deficit  (418,242)  (513,665)
Total liabilities and stockholders’ deficit $124,520  $166,248 

The accompanying notes are an integral part of these consolidated financial statements.


Bespoke Extracts, Inc.Inc

Consolidated Statements of Operations

  For the year ended 
  August 31,  August 31, 
  2018  2017 
       
Sales $11,944  $- 
Sales - related party  3,975   - 
Total Sales  15,919   - 
         
Cost of products sold  (22,925)  - 
Gross Profit  (7,006)  - 
         
Operating expenses:        
Selling, general and administrative expenses  6,769,723   6,332,332 
Payroll expense  24,389   91,986 
Professional fees  132,342   65,631 
Consulting  185,523   105,750 
Promotion  68,229   - 
Brand development  -   10,000 
Formula development  -   7,500 
Impairment of intellectual property  -   1,248 
Amortization expense  3,346   1,739 
Total operating expenses  7,183,552   6,616,186 
         
Loss from operations  (7,190,558)  (6,616,186)
         
Other expense        
Interest expense  (419,000)  (63,311)
Total other expense  (419,000)  (63,311)
         
Loss before income tax  (7,609,558)  (6,679,497)
Provision for income tax  -   - 
Net Loss $(7,609,558) $(6,679,497)
         
Net loss per common share: basic and diluted $(0.21) $(0.48)
         
Weighted average common shares outstanding basic and diluted  35,408,438   13,814,767 
  For the year ended 
  August 31,  August 31, 
  2021  2020 
       
Sales $35,566  $8,054 
Cost of products sold  13,569   3,505 
Gross Profit  21,997   4,549 
         
Operating expenses:        
Selling, general and administrative expenses  640,880   3,647,610 
Professional fees  105,950   185,603 
Consulting  237,500   184,062 
Amortization expense of domain name  3,244   2,797 
Total operating expenses  987,574   4,020,072 
         
Loss from operations  (965,577)  (4,015,523)
         
Other expense        
Loss on settlement of debt  -   (89,595)
Interest expense and amortization of debt discount  -   (535,688)
Total other expense  -   (625,283)
         
Loss before income tax  (965,577)  (4,640,806)
Provision for income tax  -   - 
Net Loss $(965,577) $(4,640,806)
         
         
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING        
Basic and Diluted  232,158,289   118,851,176 
         
LOSS PER COMMON SHARE OUTSTANDING        
Basic and Diluted $(0.00) $(0.04)

The accompanying notes are an integral part of these consolidated financial statements.

F-4


Bespoke Extracts, Inc.Inc

Consolidated StatementStatements of Owners Equity (Deficit)Cash Flows

  Preferred  Preferred  Common  Common     Common       
  Shares  Par  Shares  Par     Stock  Accumulated    
  Outstanding  Amount  Outstanding  Amount  APIC  Payable  Deficit  Total 
August 31, 2016  -  $-   2,922,712  $2,923  $2,310,876  $-  $(2,427,589) $(113,790)
   -   -                         
Stock issued with related party debt      -   2,700,000   2,700   154,809   -   -   157,509 
   -                             
Stock issued for asset purchase      -   200,000   200   29,800   -   -   30,000 
   -                             
Issuance of warrants and options for compensation  -   -   -   -   6,285,695   -   -   6,285,695 
                                 
Exercise of options and warrants      -   41,000,000   41,000   (36,000)  -   -   5,000 
   -                             
Warrants issued with related party debt      -   -   -   44,981   -   -   44,981 
   -                             
Forfeiture of stock issued through warrant exercise      -   (20,000,000)  (20,000)  18,000   -   -   (2,000)
   -                             
Net loss  -   -   -   -   -   -   (6,679,497)  (6,679,497)
August 31, 2017  -   -   26,822,712   26,823   8,808,161   -   (9,107,086)  (272,102)
                                 
Sale of common stock  -   -   4,900,000   4,900   455,400   -   -   460,300 
                                 
Conversion of debt to common stock  -   -   10,050,000   10,050   70,350   -   -   80,400 
                                 
Common stock issued with debt  -   -   1,100,000   1,100   78,349   -   -   79,449 
                                 
Warrants issued with related party debt  -   -   -       21,980   -   -   21,980 
                                 
Beneficial conversion feature on convertible debt  -   -   -   -   123,000   -   -   123,000 
                                 
Stock based compensation  -   -   30,000   30   6,508,961   -   -   6,508,991 
                                 
Sale of assets to related parties  -   -   -   -   180,000   -   -   180,000 
                                 
Net loss  -   -   -   -   -   -   (7,609,558)  (7,609,558)
August 31, 2018  -  ��-   42,902,712   42,903   16,246,201   -   (16,716,644)  (427,540)

  For the year ended 
  August 31,  August 31, 
  2021  2020 
Cash flows from operating activities        
Net Loss $(965,577) $(4,640,806)
Adjustments to reconcile net loss to net cash used in operating activities        
Amortization and impairment expense of domain names  3,244   2,797 
Amortization of debt discounts  -   535,688 
Bad debt expense  -   2,981 
Loss on settlement of debt      89,595 
Option and warrant expense  -   3,467,440 
Common stock issued for services  -   40,500 
Changes in operating assets and liabilities:        
Accounts receivable  (1,677)  (114)
Prepaid expense  (22,010)  15,318 
Inventory  (48,259)  3,171 
Accounts payable and accrued liabilities  (6,686)  18,190 
Net Cash used in operating activities  (1,040,965)  (465,240)
         
Cash flows from investing activities        
Purchase of Url  (2,250)  - 
Purchase of equipment  (2,745)  - 
Net cash used in investing activities  (4,995)  - 
         
Cash flow from financing activities        
Proceeds from note payable - related party  130,534   120,000 
Proceeds from the issuance of  convertible debt  -   400,000 
Proceeds from exercise of stock options for cash  -   84,000 
Repayment of debt  -   (120,000)
Repurchase of common stock  -   (27,500)
Sale of common stock  800,000   125,000 
Net cash provided by financing activities  930,534   581,500 
         
Net (decrease) / increase in cash  (115,426)  116,260 
Cash at beginning of year  126,603   10,343 
Cash at end of year $11,177  $126,603 
         
Supplemental disclosure of cash flow information        
Cash paid for interest $-  $- 
Cash paid for income taxes $-  $- 
         
Noncash investing and financing activities:        
Discount due beneficial conversion feature $-  $281,300 
Stock issued with convertible debt $-  $118,700 
Stock issued for conversion of debt - related party $250,000  $- 
Capital contribution of accrued salary - related party $11,000  $45,333 
Stock issued for common stock payable $76,000  $- 
Preferred stock issued for the conversion of accrued salary $-  $24,000 
Assignment of URL for settlement of debt $-  $5,282 

The accompanying notes are an integral part of these consolidated financial statements.

F-5


Bespoke Extracts, Inc.Inc

Consolidated StatementsStatement of Cash FlowsStockholders’ Deficit

For The Years Ended August 31, 2021 and 2020

  Series A  Series B  Series C                   
  Preferred  Preferred  Preferred  Preferred  Preferred  Preferred  Common  Common  Additional  Common       
  Shares  Par  Shares  Par  Shares  Par  Shares  Par  Paid-in  Stock  Accumulated    
  Outstanding  Amount  Outstanding  Amount  Outstanding  Amount  Outstanding  Amount  Capital  Payable  Deficit  Total 
                                     
Balance August 31, 2019  -  $-   -  $-  $            $         -   78,155,093  $78,156  $13,950,095  $76,000  $(14,135,883) $(31,632)
                                                 
Preferred stock issued for the conversion of accrued salary  -   -   1   1           -   -   23,999   -   -   24,000 
                                                 
Sale of common stock  -   -   -   -           20,833,333   20,833   104,167   -   -   125,000 
                                                 
Exercise of stock options  -   -   -   -       -   84,000,000   84,000   -   -   -   84,000 
                                                 
Common stock issued for services  -   -   -   -       -   4,500,000   4,500   36,000   -   -   40,500 
                                                 
Option and warrant expense  -   -   -   -       -   -   -   3,467,440   -   -   3,467,440 
                                                 
Common stock issued with debt  -   -   -   -           9,900,000   9,900   108,800   -   -   118,700 
                                                 
Repurchase of common stock  -   -   -   -       -   (3,000,000)  (3,000)  (24,500)  -   -   (27,500)
                                                 
Exchange of preferred stock  -   -   (1)  (1)  1   -   -   -   1   -   -   - 
                                                 
Capital contribution of accrued salary - related party  -   -   -   -       -   -       45,333   -   -   45,333 
                                                 
Beneficial conversion feature  -   -   -   -       -   -   -   281,300   -   -   281,300 
                                                 
Net loss for the year ended August 31, 2020  -   -   -   -   -   -   -   -   -   -   (4,640,806)  (4,640,806)
                                                 
Balance August 31, 2020       —  $     $             -   1  $-   194,388,426  $194,389  $17,992,635  $76,000  $(18,776,689) $(513,665)

 

  For the year ended 
  August 31,  August 31, 
  2018  2017 
Cash flows from operating activities      
Net loss $(7,609,558) $(6,679,497)
Adjustments to reconcile net loss to net cash used in operating activities        
Amortization expense  3,346   1,739 
Amortization of debt discounts  353,119   35,653 
Option expense amortized  -   - 
Stock based compensation  6,508,991   6,285,695 
Impairment of intellectual property  -   1,248 
Changes in operating assets and liabilities        
Accounts receivable  (2,004)  - 
Inventory  (61,857)  - 
Prepaid expense  (11,024)  (19,952)
Accounts payable and accrued liabilities  71,299   (32,901)
Accounts payable - related party  -   (14,069)
Net Cash used in operating activities  (747,688)  (422,084)
         
Cash flows from investing        
Proceeds from sale of assets to related parties  90,000   45,000 
Cash paid for domain names  -   (20,185)
Net cash provided by investing activities  90,000.00   24,815 
         
Cash flow from financing activities        
Payment of note payable - related party  (30,000)  (5,500)
Proceeds from exercise of warrants  -   3,000 
Borrowings on related party convertible debt  220,000   360,000 
Proceeds from note payable - related party  -   127,050 
Sale of common stock and warrants  460,300   - 
Net cash provided by financing activities  650,300   484,550 
         
Net increase / (decrease) in cash and cash equivalents  (7,388)  87,281 
Cash and cash equivalents at beginning of period  87,172   431 
Cash and cash equivalents at end of period $79,784  $87,712 
         
Supplemental disclosure of cash flow information        
Cash paid during period for        
Cash paid for interest $11,626  $- 
Cash paid for income taxes  -   - 
         
Noncash investing and financing activities:        
Common stock payable issued for acquisition of domain names $-  $30,000 
Discount due beneficial conversion feature $123,000  $- 
Stock issued for conversion of debt - related party $80,000  $157,509 
Stock issued with related party debt $79,449   - 
Warrants issued with related party debt $21,980   44,981 
Related party note and accrued interest exchanged for purchase of assets $45,000   - 
  Series A  Series C                   
  Preferred  Preferred  Preferred  Preferred  Common  Common  Additional  Common       
  Shares  Par  Shares  Par  Shares  Par  Paid-in  Stock  Accumulated    
  Outstanding  Amount  Outstanding  Amount  Outstanding  Amount  Capital  Payable  Deficit  Total 
Balance August 31, 2020  -  $-   1  $        -   194,388,426  $194,389  $17,992,635  $76,000  $(18,776,689) $(513,665)
                                         
Common stock for conversion of note payable - related party  -   -                   20,000,000   20,000   230,000   -   -   250,000 
                                         
Exchange of common stock payable  -   -   -   -   500,000   500   75,500   (76,000)  -   - 
                                         
Sale of common stock                  32,000,000   32,000   768,000   -   -   800,000 
                                         
Capital contribution of accrued salary - related party  -   -   -   -   -   -   11,000   -   -   11,000 
                                         
Net loss for the year ended August 31, 2021  -   -   -   -   -   -   -   -   (965,577)  (965,577)
Balance  August 31, 2021         -  $        -   1  $-   246,888,426  $246,889  $19,077,135  $-  $(19,742,266) $(418,242)

The accompanying notes are an integral part of these consolidated financial statements.

F-6


 

Bespoke Extracts, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

August 31, 2021 and 2020

 

NOTE 1 —1. NATURE OF OPERATIONS, SIGNIFICANT ACCOUNTING POLICIES AND GOING CONCERN

 

Nature of Business Operations

 

Cine-Source Entertainment,Bespoke Extracts, Inc. (the “Old Corporation”“Company”) a Colorado corporation, was formed on July 29, 1988. Pursuant to a Plan of Merger dated February 24, 2004, the Old Corporation filed Articles and Certificate of Merger with the Secretary of State of the State of Colorado merging the Old Corporation into Cine-Source Entertainment, Inc. (the “Surviving Corporation”), a Colorado corporation. A previous controlling stockholder group of the Old Corporation arranged the merger for business reasons that did not materialize. On April 26, 2004, the Surviving Corporation effectuated a 1 for 200 reverse stock split. The name of the Surviving Corporation was changed to First Quantum Ventures, Inc., on April 27, 2004. On April 13, 2006, the Surviving Corporation formed a wholly owned subsidiary,is a Nevada corporation named First Quantum Ventures, Inc., and on May 5, 2006 merged the Surviving Corporation with and into this subsidiary.

On March 15, 2012, the Company changed its name to DiMi Telematics International, Inc.

On April 16, 2012, the Company issued a 1 for 1 stock dividend to current stockholders whereby the Company issued an additional 33,959,744 shares of common stock.  On May 16, 2012, the Company issued an additional 1 for 1 stock dividend to current stockholders whereby an additional 71,286,155 shares were issued. The dividends were also applied to outstanding warrants.  The Company has reflected the dividends as splits, which have been retroactively reflected in the financial statements.

In early 2017, our management team elected to suspend further investment and working capital on developing the Company’s technology and business prospects, turning its attention to prevailing new business opportunities in other high growth industries; namely the hemp-derived cannabidiol (“CBD”) market. On March 10, 2017, the Company changed its name to Bespoke Extracts, Inc. to align the Company’s corporate identity with its new business plan.

The Company is now focused on marketing and selling aits proprietary line of specially-formulated, premium quality, all naturalhemp-derived CBD productsproducts.

In November 2021, new management of the Company was appointed and the Company began to focus on other complimentary lines of business to its CBD offerings. Under our new management team, we plan to expand the Company’s focus to regulated cannabis markets 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.United States.

 

Principles of Consolidation

The accompanying financial statements present on a consolidated basis the accounts of Bespoke Extracts, Inc. (formerly DiMi Telematics International, Inc.), a Nevada corporation (the “Company”). All significant intercompany accounts and transactions have been eliminated in consolidation.

Certain prior period amounts have been reclassified to conform to current period presentation.

Major Customers

Sales to one customer, who is the spouse of one of the Company’s significant shareholders, amounted to 24% of sales for the year ended August 31, 2018. 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.

Going Concern

 

The accompanying financial statements have been prepared assuming a continuation of the Company as a going concern. The Company has reportedhad negative cash flows from operations, a net lossworking capital deficit and an accumulated deficit as of $7,609,558and for the year ended August 31, 2018 and had a working capital deficit of $391,553 as of August 31, 2018. These conditions raise2021. 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 repayrepaying 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 accompanying financial statements do not containinclude 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 may resultmight arise from the outcome of this uncertainty.

 

F-7

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

 

For purposes of these financial statements, cashCash and cash equivalents includesinclude all highly liquid debt instrumentsinvestments with maturityoriginal maturities of three months or less than three months.at the time of purchase. At August 31, 2021 and August 31, 2020, the Company did not have any cash equivalents.

 

ConcentrationsFair Value of Credit RiskFinancial Instruments

 

Financial instrumentsThe carrying amounts of cash, accounts receivable, prepaid expenses, inventory and related items,other assets, accounts payable, accrued liabilities, note payable and convertible note payable approximate their fair values as of August 31, 2021 and August 31, 2020, respectively, because of their short-term natures and the Company’s borrowing rate of interest.


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 potentially subjectare 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 August 31, 2021 and August 31, 2020, the Company has recorded an allowance for doubtful accounts of $2,981 and $2,981, respectively. At August 31, 2021 and August 31, 2020 included in the accounts receivable is the merchant holdback receivable balance of $3,636 and $3,585, respectively which will be remitted to concentrations of credit risk, consist primarily of cash and cash equivalents. Thethe Company places its cash and temporary cash investments with high credit quality institutions. At times, such investments may be in excess of the FDIC insurance limitfuture.

 

Intellectual Property

Intellectual property is stated at cost. When retired or otherwise disposed, the related carrying value and accumulated amortization are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. Minor additions and renewals are expensed in the year incurred. Major additions and renewals are capitalized and depreciated over their estimated useful lives being 3 years up to 15 years.

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 obsolescenceNet realizable value is defined as sales price less cost of unmarketable inventory based upon assumptions about future demandcompletion, disposition and market conditions.transportation and a normal profit margin. As of August 31, 2018,2021 and August 31, 2020, inventory amounted to $61,857$48,259 and $0, respectively, which consisted of finished goods.goods of $45,008, and raw materials of $3,251 net of reserves. During the year ended August 31, 2021 the Company adjusted the reserves by $6,776 for products sold. As of August 31, 2021 and August 31, 2020 inventory reserves were $33,476 and $40,252, respectively.

 

Income Taxes

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

The Company records net deferred tax assets to the extent the Company believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. A valuation allowance is established against deferred tax assets that do not meet the criteria for recognition. In the event the Company were to determine that it would be able to realize deferred income tax assets in the future in excess of their net recorded amount, the Company would make an adjustment to the valuation allowance which would reduce the provision for income taxes.

The Company follows the accounting guidance which provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized initially and in subsequent periods. Also included is guidance on measurement, recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

Revenue Recognition

 

The Company recognizesWe account for revenue in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 606, “Revenue from product salesContracts with Customers”. 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 distributors and resellers when products that do not require further services or installation byis recognized at the Companytime the related merchandise revenues 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.

F-8

Amounts billed to customers in sales transactions related to shipping and handling, represent revenues earned for the goods providedrecognized and are included in net sales. Costs ofrevenues. Inbound and outbound shipping and handlingdelivery costs are included in cost of products sold.revenues.

 

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 accounts for revenue in accordance with Topic 606 which was adopted at the beginning of fiscal year 2018 using the modified retrospective method. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company did not recognize any cumulative-effect adjustment to retained earnings upon adoption as the effect was immaterial. The adoption of these standards did not haveoffers a material impact30 day return policy on the Company’s consolidated statements of operations during the year ended August 31, 2018.sales.

 

Stock Based CompensationOption Plans

 

The Company accounts for all compensation related to stock, options or warrants using a fair value based method whereby compensation cost is measured at the grant date for employee awards and upon a commitment date or completion of services for nonemployee awards based on the value of the award and is recognized over the service period, which is usually the vesting period. The Company uses the Black-Scholes pricing model to calculate the fair value ofStock options and warrants issued to both employeesconsultants and non-employees. Stock issuedother non-employees as compensation for compensation is valued usingservices provided to the market priceCompany are accounted for based on the fair value of the stock onservices provided or the dateestimated fair market value of the option or warrant, whichever is more reliably measurable, and in accordance FASB ASC 718, Compensation-Stock Compensation, including related agreement.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 of general and administrative expenses in the accompanying financial statements for the years ended August 31, 2020 and 2021. Stock option compensation expense was recognized for the years ended August 31, 2021 and 2020 was $0 and $3,467,440, respectively.

 

Net LossIncome / (Loss) per Share

 

Basic lossincome / (loss) per share amounts are computed based on net lossincome / (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,The effect of 3,000,000 warrants and 0 options as well as 500,000,000 shares issuable upon the conversion of a convertible debt were excludednote are anti-dilutive for the year ended August 31, 2021. 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 16,000,000 options is anti-dilutive for the year ended August 31, 2020 as well as 500,000,000 shares issuable upon the conversion of a convertible note. 


Recent accounting pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that are adopted by the Company as of the specified effective date.

Adopted during the year ended August 31, 2021

Financial Instruments—Credit Losses

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The new standard requires that financial assets measured at amortized cost be presented at the net amount expected to be collected and separately measure an allowance for credit losses that is deducted from the calculationamortized cost basis of diluted loss per share during 2018 and 2017 because their inclusion wouldthose financial assets. The Company adopted the new standard on September 1, 2020; however, it did not have been anti-dilutive.a significant impact on the Company’s financial statements.

 

Management EstimatesIncome Taxes

 

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The presentationnew standard includes several provisions that simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and increasing consistency and clarity for the users of financial statements in conformity with generally acceptedstatements. The Company early adopted the new standard on September 1, 2020; however, it did not have a significant impact on the Company’s financial statements.

Income Taxes

We utilize the asset and liability method of accounting principles requires management to make estimatesfor income taxes. We recognize deferred tax liabilities or assets for the expected future tax consequences of temporary differences between the book and assumptions that affect the reported amountstax basis of assets and liabilitiesliabilities. We regularly assess the likelihood that our deferred tax assets will be recovered from future taxable income. We consider projected future taxable income and disclosure of contingent assets and liabilities atongoing tax planning strategies in assessing the dateamount of the financial statementsvaluation allowance necessary to offset our deferred tax assets that will not be recoverable. We have recorded and continue to carry a full valuation allowance against our gross deferred tax assets that will not reverse against deferred tax liabilities within the reported amountsscheduled reversal period. If we determine in the future that it is more likely than not that we will realize all or a portion of revenues and expenses duringour deferred tax assets, we will adjust our valuation allowance in the reported period. Actual results could differ from those estimates.period we make the determination. We expect to provide a full valuation allowance on our future tax benefits until we can sustain a level of profitability that demonstrates our ability to realize these assets. At August 31, 2021, we carried a valuation allowance of $1,193,000 against our net deferred tax assets.

 

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. ForDuring the yearsyear ended August 31, 20182020, the Company transferred certain URLs valued at $5,282 to an unrelated party and 2017 amortization expense amounted to $3,346 and $1,739, respectively.impaired $289 leaving a balance of $44,614 of URL’s. The domain names are being amortized over a 15 year period. During the year ended August 31, 2021, the Company recorded an amortization expense of $3,244. During the year ended August 31, 2020, the Company recorded an impairment expense of $289 for the expired domain names. During the year ended August 31, 2020, the Company recorded an amortization expense of $2,508.

 


3. NOTE PAYABLE - RELATED PARTY

 

On April 27, 2016,August 31, 2020, the Company issued our CEO a 7% unsecured promissory note in the principal amount of $2,500 which matured six months from$150,000, to Danil Pollack, the dateCompany’s then-chief executive officer. $120,000 was remitted upon execution of issuance.the note and the remaining $30,000 was remitted on September 22, 2020. The note did not bear interest. On July 5, 2016,November 10, 2020, the Company entered into an exchange agreement with Mr. Pollack. Pursuant to the exchange agreement, Mr. Pollack exchanged the note for 15,000,000 shares of common stock of the Company.

During the year ended August 31, 2021, Mr. Pollack loaned the Company an additional $100,534 that was non-interest bearing and payable upon demand. $100,000 of this amount was subsequently deemed to be consideration for 5,000,000 shares of common stock the Company issued our CEO a 7% unsecured note in the amount of $3,000 which matured six months from date of issuance. to Mr. Pollack on January 6, 2021.

4. CONVERTIBLE NOTE PAYABLE

On November 17, 2016,6, 2019, the Company repaidentered 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 notes, or $5,500.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. 

 

F-9

The changes in these notes payable to this related party consistedOn December 24, 2019, the Company entered into an agreement (the “Repayment Agreement”) with the holder of the followingamended 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 $35,688 was recorded during the year ended August 31, 2018 and2020. The Company recognized a loss on settlement of debt of $89,595, during the year ended August 31, 2017:2020.

 

  August 31,
2018
  August 31,
2017
 
Notes payable – related party at beginning of period $      50  $5,500 
Payments on notes payable – related party  -   (5,550)
Borrowings on notes payable – related party  -   50 
Note payable – related party at end of period $50  $50 

On February 14, 2017,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 Lyle Hauser,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 ($0.005 per share). The Company recorded beneficial conversion of $245,000 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 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 tooutstanding common stock. 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 whichdebenture had an original maturity date of six months from the dateApril 30, 2020 and was convertible into shares of issuance. On November 14, 2016,common stock of the Company issued the same shareholder a 7% unsecured promissory note in the amount of $80,000 which hadat 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 fixedinitial conversion price of $0.008.$0.001, except that, if the Company failed to repay the debenture upon maturity, the conversion price would be reduced to $0.0004 (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 amendmentsCompany’s obligation to repay the notes createddebenture upon maturity was initially secured by a beneficial conversion feature of $123,000security interest in the Company’s inventory pursuant to a security agreement between the Company and amortization of the discount of $123,000 duringinvestor. For the year ended August 31, 2018.2020 the Company recorded amortization of debt discount of $500,000. A portion of the debenture was subsequently sold by the original purchaser to a third party. On April 23, 2020, the Company entered into an amendment to the security agreement with the holders of the debentures. Pursuant to the security agreement amendment, the collateral under the security agreement was amended to be the Company’s URLs. The Company issuedalso also entered into six amendments to the debentures, including to increase the conversion price to $0.50, and to extend the maturity date, including an amendment entered into on August 2, 2021, to extend the maturity date to August 31, 2021. In September 2021, a total of 10,050,000debenture holder converted $100,000 into 2,000,000 shares of common stock to convert $80,000 principal and$400at a price 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 year ended August 31, 2018 and 2017.

  August 31,
2018
  August 31, 2017 
Notes payable – related party at beginning of period $153,000  $26,000 
Payments on notes payable – related party  (30,000)  - 
Conversion  (80,000)  - 
Exchange for purchase of Company assets  (43,000)  - 
Borrowings on notes payable – related party  -   127,000 
Note payables – related party at end of period $-  $153,000 

F-10

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 has a 0% interest rate and a term of two years. If the note is not paid in full on the due date, the note will have a 0% interest rate until paid in full.$0.05 per share. In connection with a stock purchase agreement, dated October 28, 2021, all amounts due and payable under the note,remaining outstanding debenture were forgiven pursuant to a cancellation and satisfaction of debenture agreement entered into between the Company issuedand the lender an aggregate of 2,700,000 shares of common stock and 900,000 warrants. The relative fair valuedebenture holder (the “Debt Cancellation Agreement”). In exchange for cancellation of the stock ($157,509) and warrants ($44,981) aggregating $202,490 was recognized as a discountdebt owed under the debenture, the Company transferred to the note. Amortization of $162,473 was recognized duringholder certain domain names and agreed to pay the year endedholder, beginning December 1, 2021, and on a monthly basis through August 31, 2018. The conversion price of the outstanding balance is the lesser of $3.00 or2022, 40% of the volume weighted average priceoperating profit generated from sale of the 30 days at date of conversion; not to be less than $1.00. In connection with the note the lender is entitled to receive greater of 5% every dollar raised through financing or every dollar of revenue generated through the earlier of maturity date and repaymentexisting CBD inventory of the principal. Company (the “Inventory Earn Out”), and on August 31, 2022, to make a final payment equal to an amount of $75,000 minus the total of the monthly payments made under the Inventory Earn Out.


5. EQUITY

Common Stock and Preferred Stock

As of August 31, 20182020, the Company has accrued $34,015.

  August 31,
2018
  August 31,
2017
 
Related Party Convertible debenture $540,000  $540,000 
Unamortized discount  (184,364)  (346,837)
Related Party Convertible debenture, net of unamortized discount $355,636  $193,163 

On September 18, 2017, the Company executed, with a related party, an $180,000 convertible debenture with an original issue discount of $60,000. The note has 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 $29,652 was recognized during the year ended August 31, 2018. The conversion price of the outstanding balance is the lesser of $3.00 or 40% of the volume weighted average price of the 30 days at date of conversion; not to be less than $1.00. In connection with the debenture the lender is 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 August 31, 2018 the Company has accrued $25,000.

  August 31,
2018
 
Convertible debenture $180,000 
Unamortized discount  (98,847)
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. The debenture has 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 $37,994 was recognized during the year ended August 31, 2018. The conversion price of the outstanding balance is the lesser of $3.00 or 40% of the volume weighted average price of the 30 days at date of conversion; not to be less than $1.00. In connection with the debenture the lender is entitled to receive the greatest of 5% every dollar raised through financing or every dollar of revenue generated through the earlier of maturity date and repayment of the principal, as of August 31, 2018 the Company has accrued $20,000.

  August 31,
2018
 
Convertible debenture $120,000 
Unamortized discount  (14,936)
Convertible debenture, net of unamortized discount $105,064 

F-11

5. EQUITY

Common Stock

The Company hashad authorized capital of 800,000,000 shares of common stock with a par value of $0.001, and 50,000,000 shares of preferred stock with a par value of $0.001.

On April 11, 2017,October 2, 2020, the Company issued 2,700,000filed a certificate of amendment to the Company’s articles of incorporation with the Secretary of State of Nevada, pursuant to which the Company increased its authorized shares of common stock from 800,000,000 to 3,000,000,000. 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 August 31, 2020 and August 31, 2021 respectively. The Company’s 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 and is issued and outstanding as of August 31, 2020 and August 31, 2021, 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.

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 lower financing price. As of August 31, 2020, the Company was obligated to issue 500,000 shares of common stock valued at $76,000. On January 5, 2021, the Company issued the 500,000 shares of common stock.

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 6.

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.

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 issuance ofCompany 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 note with adebenture (which was amended and restated on November 11, 2019) in the principal amount of $540,000 (see$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 4)4.


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 relative fairCompany also issued to the investor 5,000,000 shares of common stock valued at $55,000 ($0.005 per share).

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.

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 $157,509the Company.

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.

On August 31, 2020, the Company issued a promissory note in the principal amount of $150,000, to Danil Pollack, the Company’s then-chief executive officer. $120,000 was recognized as a discountremitted upon execution of the note and the remaining $30,000 was remitted on September 22, 2020. The note did not bear interest. On November 10, 2020, the Company entered into an exchange agreement with Mr. Pollack. Pursuant to the exchange agreement, Mr. Pollack exchanged the promissory note that is being amortized to interest expense over the lifefor 15,000,000 shares of common stock of the note.Company.

 

During the year ended August 31, 2017,2021, Mr. Pollack loaned the Company issued an aggregateadditional $100,534 that was non-interest bearing and payable upon demand. $100,000 of 40,000,000 common shares pursuantthis amount was subsequently deemed to exercise of options and warrantsbe consideration for proceeds of $5,000. During the year ended August 31, 2017 20,000,000 shares were cancelled and returned to the Company along with the return of the $2,000 exercise price.

On September 18, 2017, the Company issued 900,0005,000,000 shares of common stock in connectionthe Company issued to Mr. Pollack on January 6, 2021.

On November 30, 2020, the Company entered into a securities purchase agreement with the issuance of a convertible note with a principal amount of $180,000. The relative fair value of the stock of $51,503 was recognized as a discountDanil Pollack. Pursuant to the note that is being amortizedpurchase agreement, the Company issued and sold to interest expense over the life of the note.

On September 22, 2017, the company issued 900,000Mr. Pollack 20,000,000 shares of common stock and 300,000 warrants pursuant tofor an aggregate purchase price of $200,000.

On January 21, 2021, the Company entered into a stocksecurities purchase agreement for cash of $60,300.

On November 10, 2017,with Danil Pollack. Pursuant to the purchase agreement, the Company issued an aggregate of 1,400,000and sold to Mr. Pollack 2,000,000 shares of common stock to the holderfor an aggregate purchase price of a related party 7% convertible promissory note, to convert principal amount of $11,200.$100,000.

 

On November 27, 2017, the Company issued an aggregate of 1,450,000 shares of common stock to the holder of a related party 7% convertible promissory note, to convert principal amount of $11,600.

On December 28, 2017, the Company issued an aggregate of 1,550,000 shares of common stock to the holder of a 7% convertible promissory note, dated November 14, 2016 to convert principal amount of $12,400.

On December 13, 2017, the Company issued an aggregate of 200,000 shares of common stock with a relative fair value of $27,946 to the holder of a $120,000 convertible debenture with an original issue discount of $20,000. The debenture has a 0% interest rate and a term of one year.

On March 5, 2018,February 24, 2021, the Company entered into a securities purchase agreement with an investor which following such investment was a related party.accredited investor. Pursuant to the purchase agreement, upon closing on March 7, 2018, the Company issued and sold to the investor 3,000,00010,000,000 shares of common stock for an aggregate purchase price of $300,000. The Company agreed to issue additional shares of common stock (the “Make-Good Shares”) to the investor for no additional consideration, in the event that, during the six month period commencing on the closing date, the Company sells common stock at a purchase price lower than $0.10 (the “Subsequent Financing Price”), such that the total number of shares of common stock received by the investor under the purchase agreement (including the Make-Good Shares and the initial shares) will be equal to the total purchase price of $300,000 divided by such lower Subsequent Financing Price. In addition the Company agreed not to pay cash compensation over $100,000 to any Officer of Director.

On March 9, 2018, the Company issued an aggregate of 1,780,000 shares of common stock to the holder of a 7% convertible promissory note, dated November 14, 2016 to convert principal amount of $14,240.

On March 9, 2018, he Company entered into and closed an asset purchase agreement with VMI Acquisitions, LLC (“VMI”), pursuant to which the Company sold to VMI the Company’s proprietary Machine-to-Machine communications solution and certain other intellectual property for a purchase price of $180,000. $135,000 of the purchase price was paid by members of VMI in cash and had previously been deposited with the Company. The remaining $45,000 of the purchase price was paid in the form of a reduction in outstanding debt and reimbursements of expenses owed to a member of VMI. Certain members of VMI are noteholders and/or shareholders of the Company. At the time of the sale the intellectual property had a book value of $0. As the parties were considered significant shareholders and related parties, the consideration of $180,000 was recorded as a capital contribution.$500,000.

 

F-12


 

On May 15, 2018 the Company issued 500,000 shares of common stock to an investor for a purchase price of $50,000, and on May 29, 2018, the Company issued 1,870,000 shares of common stock upon conversion of a convertible note in the amount of $14,960. The Company agreed to issue additional shares of common stock (the “Make-Good Shares”) to the investor for no additional consideration, in the event that, during the six month period commencing on the closing date, the Company sells common stock at a purchase price lower than $0.10 (the “Subsequent Financing Price”), such that the total number of shares of common stock received by the investor under the purchase agreement (including the Make-Good Shares and the initial shares) will be equal to the total purchase price of $50,000 divided by such lower Subsequent Financing Price. In addition the Company agreed not to pay cash compensation over $100,000 to any Officer of Director.

On June 11, 2018, the Company issued an aggregate of 2,000,000 shares of common stock to the holder of a 7% Convertible Promissory Note, dated November 14, 2016 to convert principal amount and accrued interest of $16,000.

On June 15, 2018, the Company issued 500,000 shares of common stock pursuant to a stock purchase agreement for cash of $50,000.

On August 29, 2018 the Company issued 30,000 shares of common stock for services valued at $44,400.

Warrants

During the year ended August 31, 2017, warrant activity includes the following:

On March 14, 2017, the Company entered into an employment agreement with Barry Tenzer to continue as CEO of the Company. In connection with the employment agreement the Company issued Mr. Tenzer a warrant to purchase up to 20,000,000 share of common stock at a per share price of $0.0001. The warrant was exercised in full on March 28, 2017. On May 22, 2017, Barry Tenzer resigned as President and Chief Executive Officer. In connection with the resignation of Mr. Tenzer, the 20,000,000 shares of stock issued upon the exercise of the warrants was returned to the company and cancelled and the exercise proceeds of $2,000 were returned to Mr. Tenzer. The fair value of the warrants was determined to be $4,998,021 which was recognized as compensation expense during the year ended August 31, 2017.

During the year ended August 31, 2018, warrant activity included the following:

On September 18, 2017, the Company executed an $180,000 convertible debenture with an original issue discount of $60,000. In connection with the debenture, the Company issued the lender 300,000 common stock purchase warrants with a term of 3 years and an exercise price of $1.00. The relative fair value of the warrants of $16,996 was recognized as a discount to the debenture.

On December 13, 2017, the Company issued 100,000 warrants to McGlothin Holdings Ltd. The relative fair value of the warrants of $4,984 was recognized as a discount to the debenture.

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.  Warrant expense under this award for the year ended August 31, 2018 totaled $3,633,532; the warrant expense under this award for the year ended August 31, 2017 totaled $1,014,489. As of August 31, 2018, $6,359,316 remains to be expensed over the remaining vesting 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).

 

F-13

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”. The fair value of this award was determined to be $58,816 of which $51,635 was recognized during the year ended August 31, 2018.

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. The fair value of this award was determined to be $106,663 of which $65,005 was recognized during the year ended August 31, 2018.

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 with an exercise price of $0.50, exercisable commencing six months after issuance for a period of 5 years. The fair value of this award was determined to be $3,419,925 of which $1,457,561 was recognized during the year ended August 31, 2018. During the year ended August 31, 2020 the Company recognized a gain of ($3,378) due to a remeasurement of this nonemployee award. On March 2, 2019 the agreement was terminated.

 

On March 20,April 16, 2018, the Company entered into a 12 month 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 will immediately issue 50,000 common stock purchase warrants to purchase common stock at an exercise price of $.30 per share. As of August 31, 2018, Patagonia Global Trading, LLC, had not signed any customers and had not earned any warrants. The Company agreed to pay a total commission rate of 10% of the gross sale amount to be paid in the form of cash and or warrants to purchase shares of common stock of the Company.

On April 16, 2018 The Company entered into a consulting agreement with Dr. David Hellman for marketing and promotion services. The term iswas 1 year with payment of 50,000 warrants each month to purchase common stock with an exercise price of $0.60. However, if the Consultantconsultant generates more than $10,000 in monthly sales, the Warrants willwarrants would have an exercise price of $.30, and if the Consultantconsultant generates more than $20,000 in monthly sales, the Warrants maywarrants could be exchanged in “cashless exercise”.exercised on a cashless basis. Additionally, the Company shallagreed to 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 consultant. The term iswas 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.

On April 11, 2017, the Company executed a $540,000 convertible debenture with an original issue discount of $180,000. In connection with the note, the Company issued the lender 900,000 warrants with a term of 3 years and an exercise price of $1.00. The relative fair value of the warrants $44,981 was recognized as a discount to the note.

F-14

The following table summarizes the warrant activities during During the year ended August 31, 2018, and 2017, respectively:

  Number of
Warrants
  Weighted-
Average
Price
Per Share
 
Outstanding at August 31, 2016  -  $- 
Granted  40,900,000   0.02 
Canceled or expired  (40,000,000)  - 
Exercised  -   - 
Outstanding at August 31, 2017  900,000  $1.00 
Granted  1,930,000   0.69 
Canceled or expired  -   - 
Exercised  -   - 
Outstanding at August 31, 2018  2,830,000  $0.79 
Exercisable at August 31, 2018  1,610,000  $1.00 
         
Intrinsic value at August 31, 2018 $538,500     

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 year ended August 31, 2018
Risk-free interest rate at grant date1.52% -2.70%
Expected stock price volatility183% - 362%
Expected dividend payout-
Expected option in life-years2.5 - 6.5 years

Grant Date
For the year ended August 31, 2017
Risk-free interest rate at grant date1.06% - 1.44%
Expected stock price volatility117% - 362%
Expected dividend payout-
Expected option in life-years1 - 3 years

OPTIONS

On July 26, 20172020 the Company grantedrecognized a gain of ($1,905) due to a remeasurement of this nonemployee options to purchase 2,200,000 shares of common stock.award. The options havewarrants may be exercised on a three year term. 1,000,000 options are 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. The aggregate fair value of the award as of August 31, 2018 was determined to be $1,112,547 and forcashless basis.  During the year ended August 31, 2018 option expense2020 the Company recognized totaled $1,000,820. The aggregate fair valuea gain of the award as($1,905) due to a remeasurement of August 31, 2017 was determined to be $485,248 and for the year ended August 31, 2017 option expense recognized totaled $273,185.this nonemployee awards.

 

  Number of Options  Weighted-
Average
Price Per Share
 
Outstanding at August 31, 2016      - 
Granted  2,200,000   .55 
Exercised  1,000,000   .001 
Canceled or expired  -   - 
Addition due to ratchet trigger  -   - 
Outstanding at August 31, 2017  1,200,000  $1.00 
Granted  -   - 
Canceled or expired  -   - 
Exercised  -   - 
Outstanding at August 31, 2018  1,200,000  $1.00 
Exercisable at August 31, 2018  600,000   1.00 
Intrinsic value at August 31, 2018 $-     

F-15

6. RELATED PARTY ASSET PURCHASE AGREEMENT

On August 29, 2017, the Company received $82,750 as a deposit from a significant shareholder toward the purchase price on an agreement that was being negotiated with VMI Acquisitions, LLC for purchase of certain of the Company’s assets as well as the payment of $7,500 of expenses on behalf of the Company. The remaining $45,000 of the purchase price was paid in the form of a reduction in outstanding debt and reimbursements of expenses owed to a member of VMI. Certain members of VMI are noteholders and/or shareholders of the Company and related parties. The agreement was completed and closed on March 9, 2018.  As the parties were considered significant shareholder the consideration of $180,000 was recorded as a capital contribution. At the time of the sale the intellectual property had a book value of $0.

7. EMPLOYMENT AGREEMENT

On March 14, 2017, the Company entered into a two year employment agreement with Barry Tenzer to continue as CEO of the Company. In connection with the employment agreement the Company issued Mr. Tenzer a warrant to purchase up to 20,000,000 share of common stock at a per share price of $0.0001. The warrant was exercised in full on March 28, 2017. The shares of common stock underlying the warrant were issued on April 6, 2017.

On September 6, 2017, Barry Tenzer resigned as President and Chief Executive Officer of the Company. In connection with the resignation of Mr. Tenzer his stock issued pursuant to his employment agreement was returned to the Company.

On May 22, 2017, the Board of Directors of the Company appointed Marc Yahr as President and Chief Executive Officer of the Company and as a member of the Company’s Board.

On May 22, 2017,October 30, 2018, the Company entered into an employment agreement with Mr. YahrNiquana Noel pursuant to which Mr. YahrMs. Noel would serve as President andthe Company’s Chief Executive Officer of the Companyand president for a term of threefour years, unless earlier terminated pursuant to the terms of the employment agreement. Pursuant to the terms of the employment agreement, Mr. YahrMs. 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 warrantsfair value of this award was determined to be $2,598,138 of which $0 and $2,055,748 were exercised in full onrecognized during the years ended August 31, 2017.2021 and 2020, respectively. Unamortized expense at August 31, 2020 is $0. 

 

The following table summarizes the warrant activities during the years ended August 31, 2021 and 2020:

  Number of
Warrants
  Weighted-
Average
Price Per
Share
  Weighted-
Average
Remaining
Life
 
Outstanding at August 31, 2019  3,450,000   0.56   3.8 
Granted  -   -   - 
Canceled or expires  -   -   - 
Exercised  -  -     
Outstanding at August 31, 2020  3,450,000   0.56   2.8 years 
Granted  -   -     
Canceled or expired  (450,000)  0.81     
Exercised  -   -     
Outstanding at August 31, 2021  3,000,000  $0.52   2.16 years 
Exercisable at August 31, 2021  3,000,000  $0.52   2.16 years 
Intrinsic value at August 31, 2021     $-     

Options

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 option expense of $1,416,975 during the year ended August 31, 2020. During the year ended August 31, 2020, Mr. Pollack exercised 84,000,000 stock options for $84,000. During the year ended August 31, 2021, the remaining 16,000,000 stock options expired.


The following table summarizes the option activities during the years ended August 31, 2021 and 2020:

  Number of
Options
 
  Weighted-
Average
Price Per
Share
 
  Weighted-
Average
Remaining
Life
 
 
Outstanding at August 31, 2019  1,200,000   1.00   1.9 years   
Granted  100,000,000   .001     
Canceled or expired  (1,200,000)  1.00     
Exercised  (84,000,000)  .001     
Outstanding at August 31, 2020  16,000,000  $.001   0.9 years   
Granted  -   -     
Canceled or expired  (16,000,000)  .001     
Exercised   -   -     
Outstanding at August 31, 2021  -  $            -     
Exercisable at August 31, 2021  -  $-     

The fair value of the options was estimated using the Black-Scholes option pricing model and the following range of assumptions:

Grant

Date

For the year ended August 31, 2020
Risk-free interest rate at grant date.15%
Expected stock price volatility262%
Expected dividend payout-
Expected life (in years).25

6. RELATED PARTY TRANSACTIONS

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.

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 5.

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. During the year ended August 31, 2020 Mr. Pollack exercised 84,000,000 stock options for $84,000. On November 2, 2021, effective July 1, 2021 Mr. Pollack waived all compensation owed to him by the Company as of such date through the date of his resignation as the Company’s chief executive officer. See Note 5.


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.

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. .

On April 20, 2020, the Company entered into a letter agreement with Niquana Noel. Pursuant to the letter agreement, Ms. Noel waived any and all accrued but unpaid compensation owed to her (which was equal to $45,333) 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.

On August 31, 2020, the Company issued a promissory note in the principal amount of $150,000, to Danil Pollack, the Company’s then-chief executive officer. Upon execution of the note, $120,000 was remitted and the remaining $30,000 was paid on September 22, 2020. The note did not bear interest and had a maturity date of November 30, 2020. On November 10, 2020, the Company entered into an exchange agreement with Mr. Pollack. Pursuant to the exchange agreement, Mr. Pollack exchanged the promissory note for 15,000,000 shares of common stock of the Company.

On September 30, 2020, the Company entered into an amendment to the Company’s employment agreement, dated April 22, 2020, with Danil Pollack, the Company’s then-chief executive officer. Pursuant to the amendment, the Company agreed to pay Mr. Pollack an annual salary of $48,000. On April 27, 2021, the Company entered into an amendment to the Company’s employment agreement with Mr. Pollack. Pursuant to the amendment, the Company agreed to pay Mr. Pollack an annual salary of $66,000 effective April 1, 2021. The Company could also in its discretion pay additional compensation to Mr. Pollack at any time as a bonus.

During the year ended August 31, 2021, Mr. Pollack loaned the Company an additional $100,534 that was non-interest bearing and payable upon demand. $100,000 of this amount was subsequently deemed to be consideration for 5,000,000 shares of common stock the Company issued to Mr. Pollack on January 6, 2021.

On November 30, 2020, the Company entered into a securities purchase agreement with Mr. Pollack. Pursuant to the purchase agreement, the Company issued and sold to Mr. Pollack 20,000,000 shares of common stock for an aggregate purchase price of $200,000.

On January 21, 2021, the Company entered into a securities purchase agreement with Danil Pollack. Pursuant to the purchase agreement, the Company issued and sold to Mr. Pollack 2,000,000 shares of common stock for an aggregate purchase price of $100,000.

7. 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 would be equal to $50,000 divided by lower financing price. As of August 31, 2020, 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 January 5, 2021, the Company issued 500,000 shares of common stock.


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. On September 30, 2020, the Company entered into an amendment to the employment agreement. Pursuant to the amendment, the Company agreed to pay Mr. Pollack an annual salary of $48,000. On April 27, 2021, the Company entered into an amendment to the Company’s employment agreement with Mr. Pollack. Pursuant to the amendment, the Company agreed to pay Mr. Pollack an annual salary of $66,000 effective April 1, 2021. The Company may also in its discretion pay additional compensation to Mr. Pollack at any time as a bonus. Mr. Pollack elected to forgive $11,000 of salary during the year ended August 31, 2021, the amount was recorded as a capital contribution.

On October 13, 2020, the Company entered into a consulting agreement with Yaniv Rozen pursuant to which the Company engaged Mr. Rozen to serve as the Company’s chief operating officer on a consultant/independent contractor basis. Mr. Rozen was permitted to engage in other business activities while serving as the Company’s chief operating officer. On July 1, 2021, Yaniv Rozen resigned as chief operating officer of the Company.

Pursuant to the consulting agreement, the Company agreed to pay Mr. Rozen a fee of $3,000 per month.

The Company also agreed to issue to Mr. Rozen shares of common stock, and increase such monthly fee, as follows:

Within five business day of the end of the fourth quarter of 2020, (i) if the Company’s average sales were at least $50,000 per month, for such quarter, the Company would issue to Mr. Rozen 500,000 shares of common stock; or (ii) if the Company’s average sales were at least $100,000 per month for such quarter, the Company would issue to Mr. Rozen 750,000 shares of common stock;

Within five business day of the end of the first quarter of 2021, (i) if the Company’s average sales were at least $100,000 per month for such quarter, the Company would issue to Mr. Rozen 750,000 shares of common stock, or (ii) if the Company’s average sales were at least $150,000 per month for such quarter, the Company would issue to Mr. Rozen 1,000,000 shares of common stock, and would increase Mr. Rozen’s fee to $5,000 per month effective commencing at the end such quarter;

Within five business days of the end of the second quarter of 2021, (i) if the Company’s average sales were at least $200,000 per month, for such quarter, the Company would issue to Mr. Rozen 1,500,000 shares of common stock, or (ii) if the Company’s average sales were at least $300,000 per month, for such quarter, the Company would issue to Mr. Rozen 2,000,000 shares of common stock; and

Within five business days of the end of the third quarter of 2021, (i) if the Company’s average sales were at least $300,000 per month, for such quarter, the Company would issue to Mr. Rozen 2,000,000 shares of common stock; or (ii) if the Company’s average sales were at least $500,000 per month, for such quarter, the Company would issue to Mr. Rozen 3,000,000 shares of common stock, and would increase Mr. Rozen’s fee to $7,000 per month effective commencing at the end such quarter.

As of July 1, 2021, Mr. Rozen’s resignation date, there was no common stock owed to Mr. Rozen as the quarterly target sales were not met.

The COVID-19 pandemic may negatively affect our operations, including by limiting access to our facilities, customers, management, and professional advisors, and 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.


8. MAJOR CUSTOMERS

At August 31, 2021 and August 31, 2020, no individual customer amounted to over 10% of total accounts receivable. During the years ended August 31, 2021 and August 31, 2020 no individual customer amounted to over 10% of total sales. 

9. INCOME TAXES

 

On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act (the “TCJA”) that significantly reforms the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). The TCJA, among other things, contains significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, effective as of January 1, 2018; limitation of the tax deduction for interest expense; limitation of the deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks, in each case, for losses arising in taxable years beginning after December 31, 2017 (though any such tax losses may be carried forward indefinitely); modifying or repealing many business deductions and credits, including reducing the business tax credit for certain clinical testing expenses incurred in the testing of certain drugs for rare diseases or conditions generally referred to as “orphan drugs”; and repeal of the federal Alternative Minimum Tax (“AMT”).

F-16

The staff of the Securities and Exchange Commission issued Staff Accounting Bulletin No. 118 to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the TCJA. In connection with the initial analysis of the impact of the TCJA, the Company remeasured its deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. The remeasurement of the Company’s deferred tax assets and liabilities was offset by a change in the valuation allowance.

FASB ASC 740,Income Taxes,requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. After consideration of all the evidence, both positive and negative, management has determined that a full valuation allowance of $601,979approximately $1,193,000 and $733,911$959,000 against its net deferred taxes is necessary as of August 31, 20182021 and 2017,2020, respectively.

 

At August 31, 20182021 and August 31, 2017,2020, respectively, the Company had $2,844,565 and $2,097,117, respectively,approximately $3,156,000 of U.S. net operating loss carryforwards remaining, which expire beginning in 2017.2032. At August 31, 2021 and August 31, 2020, the Company had approximately $2,081,000 and $1,120,000, respectively that can be carried forward indefinitely.

 

As a result of certain ownership changes, the Company may be subject to an annual limitation on the utilization of its U.S. net operating loss carryforwards pursuant to Section 382 of the Internal Revenue Code. A study to determine the effect, if any, of this change, has not been undertaken.

Tax returns for the years ended August 31, 2021, 2020, 2019, 2018, 2017, 2016, 2015, and 20142017 are subject to examination by the Internal Revenue Service.

 

A reconciliation of the Company’s income taxes to amounts calculated at the federal statutory rate is as follows for the years ended August 31:

 

  2018  2017 
       
Federal statutory taxes  (35.00)%  (35.00)%
Change in tax rate estimate  14.00%  - 
Change in valuation allowance  21.00%  35.00%
   -%  -%
  2021  2020 
       
Federal and state statutory taxes  (25.00)%  (25.00)%
Change in tax rate estimate  -%  -%
Permanent differences  .28%  22.5%
Change in valuation allowance  24.72%  2.50%
   -%  -%

 

The valuation allowance for deferred tax assets as of August 31, 2018 and 2017 was $601,978 and $733,991 respectively.  In assessing the recovery of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible. Management considers the scheduled reversals of future deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. As a result, management determined it was more likely than not the deferred tax assets would not be realized as of August 31, 20182021 and 20172020 and recorded a full valuation allowance.

 

Reconciliation between the statutory rate and the effective tax rate is as follows at August 31:

  2018  2017 
Federal statutory tax Reconciliation rate  (21.0)%  (35.0)%
Permanent difference and other  -   - 

F-17

Components of net deferred tax assets, including a valuation allowance, are as follows at August 31st:31:

 

  2018  2017 
Deferred tax assets:      
Net operating loss  597,359   734,291 
Valuation allowance  (597,359)  (734,291)
Total deferred tax assets $-  $- 
  2021  2020 
Deferred tax assets:      
Inventory impairment $9,533  $11,129 
Bad debt expense  756   756 
Net operating loss carryforward  1,182,448   946,775 
Total deferred tax assets  1,192,737   958,660 
Valuation allowance  (1,192,737)  (958,660)
Total net deferred tax assets $-  $- 

 


A reconciliation of the expected income tax benefit at the U.S. Federal income tax rate to the income tax benefit actually recognized for the years ended August 31, 20182021 and 20172020 is set forth below:

 

  2018  2017 
       
Net loss  (2,663,345)  (2,337,824)
Non-deductible expenses and other  1,441,043   2,212,472 
Effect due to decrease in tax rates  1,359,234   - 
Change in valuation allowance  (136,932)  (125,352)
Benefit from income taxes $-  $- 
  2021  2020 
       
Net loss $(236,776) $(1,176,212)
Non-deductible expenses and other  2,699   1,059,717 
Change in valuation allowance  234,077   116,495 
Benefit from income taxes $-  $- 

 

9. RELATED PARTY TRANSACTIONSAs a result of certain ownership changes, the Company may be subject to an annual limitation on the utilization of its U.S. net operating loss carryforwards pursuant to Section 382 of the Internal Revenue Code. A study to determine the effect, if any, of this change, has not been undertaken.

10. SUBSEQUENT EVENTS

 

On May 17, 2016, the Company issued to Lyle Hauser, who was then the Company’s largest shareholder,In September 2021 a 7% unsecured promissory note in the amountdebenture holder converted $100,000 of $10,000 which matured six months from the datea convertible debenture into 2,000,000 shares of issuance. The note has matured and remains unpaidcommon stock at August 31, 2017.a price of $0.05 per share.

 

On August 15, 2016, the Company issued a significant shareholder a 7% unsecured promissory note in the amount of $16,000 which matures six months from the date of issuance. The notes has matured and remains unpaid at the quarter ended August 31, 2017.

As of August 31, 2016, the Company had an outstanding payable of $14,609 to the CEO. The payable is unsecured, due on demand and bears no interest. As of August 31, 2017 the accounts payable – related party has been paid and currently has a balance of $0.

On October 27, 2016 the Company issued a significant shareholder 7% unsecured promissory notes totaling $10,000 which matures six months from the date of issuance. The notes has matured and remains unpaid at August 31, 2017.

One November 14, 2016 the Company issued a significant shareholder a 7% unsecured promissory note totaling $80,000 which matures six months from the date of issuance.

On February 17, 2017, the Company issued a significant shareholder a 7% unsecured promissory note in the amount of $30,000 which matures six months from the date of issuance.

On March 31, 2017, the Company issued a significant shareholder 7% unsecured promissory note in the amount of $7,000 which matures six months from the date of issuance.

On April 11, 2017, the Company executed a $540,000 convertible debenture with an original issue discount of $180,000. The note has a 0% interest rate and a term of two years. If the note is not paid in full on the due date, the note will have a 0% interest rated until paid in full. In connection with the note, the Company issued the lender an aggregate of 2,700,000 shares and 900,000 warrants.

On August 29, 2017, the Company received $45,000 as a deposit from a significant shareholder toward the purchase price on an agreement that was being negotiated with VMI Acquisitions, LLC for purchase of certain of our Company’s assets.

During the year ended August 31, 2018 sales to a customer, who is the spouse of one of the Company’s significant shareholders, amounted to $3,975.

F-18

10. COMMITMENTS AND CONTINGENCIES

On January 22, 2018,28, 2021, 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 tostock 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 SetupDanil Pollack (the Company’s then-chief executive officer), and Infinity Management, 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.

On February 22, 2018, the Company entered into a consulting agreement for a term of one year.(‘Infinity”). Pursuant to the purchase agreement, upon the Company agreedclosing thereof on November 19, 2021, Mr. Pollack sold to issue the nonemployee consultant warrants to purchase 10,000Infinity, 50,000,000 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.

On March 2, 2018 the Company entered into a two year management agreement with Global Corporate Management, LLC. Pursuant to this agreement, the Company 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).

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 will immediately issue 50,000 common stock purchase warrants to purchase common stock at an exercise price of $.30 per share.   As of May 31, 2018 Patagonia Global Trading, LLC, had not signed any customers and had not earned any warrants. The Company agreed to pay a total commission rate of 10% of the gross sale amount to be paid in the form of cash and or warrants to purchase shares of common stock of the Company and 1 share of Series C preferred stock of the Company for cash consideration of $40,000. The Series C Preferred Stock Infinity acquired represents 51% of the voting power of the Company’s capital stock, and therefore the transaction resulted in a change-in-control of the Company.

 

On April 16, 2108 The purchase agreement further provided for Infinity to make a capital contribution to the Company entered into a consulting agreement with Dr. David Hellman for marketing and promotion services. The term is 1 year withof $4,792.29 to cover payment of 50,000 warrantsthe amounts due to purchase common stock with an exercise pricecertain creditors 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%as set forth in the purchase agreement.

In connection with the purchase agreement, and effective upon the closing thereunder, Mr. Michael Feinsod, the managing member of retail salesInfinity, was appointed as the chief executive officer and 5%chairman of wholesale sales. On July 11, 2018the board of directors of the Company, terminated the agreement. On August 1, 2018Mr. Hunter Garth was appointed as a director, as well as chief strategy officer of 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.

11. SUBSEQUENT EVENTS

Between September 1, 2018 and December 14, 2018 the Company sold a total of 2,300,000 shares of common stock for proceeds of $135,000.

On October 13, 2018 the Company issued 1,000,000 shares of common stock for a sponsorship.

Effective October 30, 2018, Marc YahrMr. Pollack resigned from all positions with the Company, including as Presidentpresident, CEO, chief financial officer and Chief Executive Officerdirector of the Company.

In connection with the purchase agreement, a convertible debenture with an original issue date of December 24, 2019, as amended by Amendment No. 1 thereto, dated May 28, 2020, Amendment No. 2 thereto, dated August 21, 2020, Amendment No. 3 thereto, dated December 10, 2020, Amendment No. 4 thereto, dated January 15, 2021, Amendment No. 5 thereto, dated April 2, 2021, and Amendment No. 6 thereto, dated August 2, 2021 (as amended, the “Debenture”) with an original principal amount of approximately $400,000 was terminated, and all amounts due and payable thereunder forgiven pursuant to a cancellation and satisfaction of debenture agreement entered into between the Company and the Debenture holder (the “Debt Cancellation Agreement”). In exchange for cancellation of the debt owed under the Debenture, the Company transferred to the holder certain domain names and agreed to pay the holder, beginning December 1, 2021, and on a monthly basis through August 31, 2022, 40% of the operating profit generated from sale of the existing CBD inventory of the Company except as(the “Inventory Earn Out”), and on August 31, 2022, to make a memberfinal payment equal to an amount of $75,000 minus the total of the board of directors. On November 25, 2018 Mr. Yahr resigned as his position as a member board of directors. On November 6, 2018 Mr. Yahr returned 16,000,000 shares of common stock tomonthly payments made under the treasury.Inventory Earn Out.  

 

Effective October 30, 2018, the BoardOn December 2, 2021, Bespoke Extracts Colorado, LLC (“Bespoke Colorado”), a newly formed wholly-owned subsidiary of Directors of the Company appointed Niquana Noel as President and Chief Executive Officer of the Company.

Effective October 30, 2018, the Company entered into an employmentasset purchase agreement with Ms. NoelWonderLeaf, LLC (“WonderLeaf”), and on December 7, 2021, Bespoke Colorado and WonderLeaf entered into an amendment to such asset purchase agreement (as amended, the “WonderLeaf Purchase Agreement”). Pursuant to the Wonderleaf Purchase Agreement, Bespoke Colorado agreed to purchase from WonderLeaf, and WonderLeaf agreed to sell to Bespoke Colorado, certain assets of WonderLeaf, including a license to manufacture marijuana-infused products, existing inventory, and extraction equipment and ancillary items, all as further set forth in the Wonderleaf Purchase Agreement, for a purchase price of $225,000, to be paid in shares of common stock of the Company (including 2,500,000 shares issuable, and to be held in escrow, upon execution of the Purchase Agreement, and an additional $150,000 of common stock that will be valued based on the volume weighted average price of the common stock, subject to a floor of $0.02 per share and a ceiling of $0.04 per share), provided that, the purchase price for the inventory will be 90% of the wholesale value of the regulated marijuana portion of the inventory and the packaging corresponding thereto set forth on the inventory accounting statement to be prepared pursuant to which Ms. Noelthe Wonderleaf Purchase Agreement.

In connection with the Wonderleaf Purchase Agreement, Bespoke Colorado entered into a lease agreement (the “Lease”) with WL Holdings, Ltd. (“WL Holdings”) Pursuant to the Lease, Bespoke Colorado will serve aslease from WL Holdings certain commercial space in Aurora, Colorado, where WonderLeaf’s business has been located, commencing upon signing of the Company’s Chief Executive OfficerLease and presidentWonderleaf Purchase Agreement, for a term of fourfive years, unless earlier terminated pursuantwhich Bespoke Colorado will have an option to renew for an additional five years. Monthly rent under the termsLease will start at $6,000.

Closing of the employment agreement. PursuantWonderLeaf Purchase agreement is subject to the termsreceipt of the employment agreement, Ms. Noel’s annual salary is $96,000certain governmental approvals and she received a warrant to purchase up to 20,000,000 shares ofother customary closing conditions.

On November 29, 2021, Michael Feinsod, the Company’s common stock at an exercise price of $0.0001 per share. Ms. Noel exercisedchief executive officer, loaned the warrantCompany $25,000. The loan does not bear interest and was issued the 20,000,000 sharesis payable on October 31, 2018.demand.

 

F-19

On December 3, 2021, Michael Feinsod loaned the Company $15,000. The loan does not bear interest and is payable on demand.


Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

 

None.

 

Item9A. Controls and Procedures.

 

Evaluation of Disclosure and Control Procedures

 

Management of the Company conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) pursuant to Rule 13a-15 under the as of the end of the period covered by this report. The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s (the “SEC”) rules and forms and that such information is accumulated and communicated to management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

Based on this evaluation, management concluded that the design and operation of our disclosure controls and procedures are not effective due to the following material weaknesses:

 

Our chief executive officer also functions as our chiefprincipal financial officer.  As a result, our officersofficer may not be able to identify errors and irregularities in the financial statements and reports.

We were unable to maintain full segregation of duties within our financial operations due to our reliance on limited personnel in the finance function.  While this control deficiency did not result in any audit adjustments to our financial statements, it could have resulted in a material misstatement that might have been prevented or detected by a segregation of duties.

Documentation of all proper accounting procedures is not yet complete.

 

To the extent reasonably possible given our limited resources, we intend to take measures to cure the aforementioned weaknesses, including, but not limited to, increasing the capacity of our qualified financial personnel to ensure that accounting policies and procedures are consistent across the organization and that we have adequate control over financial statement disclosures.

Management’s Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted in the United States.

 

Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

13

Our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of August 31, 20182021 based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013).

 


A material weakness is defined within the Public Company Accounting Oversight Board’s Auditing Standard No. 5 as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

 

In conducting his evaluation, our officer noted the following material weaknesses in our internal controls over financial reporting:

 

While certain accounting procedures have been adopted, compliance with such procedures has been inconsistent.

● The board of directors has not established an Audit Committee.  Accordingly, the entire board, rather than an independent body, has reviewed our financial statements.

● Segregation procedures could be improved by strengthening cross approval of various functions, including cash disbursements and internal audit procedures where appropriate.

 

As a result of these deficiencies in our internal controls, our officer concluded that our internal control over financial reporting was not effective. 

 

To the extent reasonably possible given our limited resources, we intend to take measures to cure the aforementioned weaknesses, including, but not limited to, increasing the capacity of our qualified financial personnel to ensure that accounting policies and procedures are consistent across the organization and that we have adequate control over financial statement disclosures.

This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. The Company’s internal control over financial reporting was not subject to attestation by the Company’s independent registered public accounting firm pursuant to rules of the SEC that permit the Company to provide only management’s report in this annual report.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(t) and 15d-15(f) under the Exchange Act, during the fourth quarter of the fiscal year ended August 31, 20182021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information.

None.

 

14

None.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.  


 

 

PART III

Item 10. Directors, Executive Officers, and Corporate Governance.

 

Niquana Noel servesOur executive officers and directors are as follows:

NameAgeTitle
Michael Feinsod50Chief Executive Office and Chairman of the Board of Directors
Hunter Garth32Chief Strategy Officer and Director 

Michael Feinsod has served as our chief executive officer president, chief financial officer, and sole director.

Ms. Noel, 37, has served as the Company’s president, chief executive officer and chief financial officer since October 30, 2018, and as our directorchairman since November 25, 2018. Ms. Noel also previously served as operations manager at2021. Mr. Feinsod is the Company. Ms. Noel is a proven entrepreneurial executive with expertise in operations, finance and accounting, SEC reporting and compliance, staffing, marketing and corporate governance. Ms. Noel has spent nearly two decades working with privately-held and publicly-traded micro and small cap companies. Since 2008, Ms. Noel has been a keymanaging member of Infinity Capital, LLC, an investment management company he founded in 1999. Mr. Feinsod was executive chairman of the leadership teamboard of General Cannabis from August 2014 through July 2020, and was a director of The Kingstone Companies, Inc. from 2008 through June 2015. From 2006 through 2013, he served in various executive positions at Hash Labs Inc. (formerly MedeFile International, Inc.), and hasAmeritrans Capital Corporation, a business development company. Mr. Feinsod served as its chief operating officer since May 2018 and as a director of Hash Labs Inc. since August 2013. Ms. NoelAmeritrans from December 2005 until July 2013 and served as a director of its subsidiary, Elk Associates Funding Corporation, from December 2005 until April 2013. Previously, Mr. Feinsod served as an investment analyst and portfolio manager at Mark Boyar & Company, Inc. He is admitted to practice law in New York and served as an associate in the Corporate Law Department of Paul, Hastings, Janofsky & Walker LLP. Mr. Feinsod holds a J.D. from Fordham University School of Law and a B.A. from George Washington University. We believe that Mr. Feinsod’s corporate finance, legal and executive-level experience, as well as his service on the boards of other public companies, give him the qualifications and skills to serve as one of our directors.

Hunter Garth has served as our chief executivestrategy officer and director and director since November 2021. Mr Garth was most recently was the vice president of Hash Labs Inc.corporate development for General Cannabis Corporation from January 20142019 to May 2018.July 2020, a position in which he was responsible for developing and sourcing M&A activity in the cannabis industry. Prior to servingthat, he was the managing director of Iron Protection Group, a security company that he founded in 2013 and sold in March 2015 to General Cannabis Corporation. Mr. Garth served in the U.S. Marine Corps from October 2008 to October 2012 in multiple roles, including infantry squad leader and instructor with the USMC Special Operations Training Group. Mr. Garth attended the University of West Florida. We believe that capacity, Ms. Noel servedMr. Garth’s industry and management-level experience qualifies him to serve as operations managerone of Hash Labs Inc. from 2008. Early in Ms. Noel’s career while working for a serial entrepreneur, she was charged with overseeing daily business operations for interests ranging from the ownership and operation of cemeteries in Maryland, Virginia and Florida; to the ownership and operation of exotic, high performance auto dealerships and auto accessory businesses in south Florida.our directors.

 

Terms of Office

 

Our directors are appointed for one year terms in accordance with our charter documents and hold office until the earlier of (i) the next annual meeting of our shareholders, (ii) until they are removed from the board or (iii) until they resign.

 

Family Relationships

 

None.

 

Involvement in Certain Legal Proceedings

 

During the past ten years, none of our current directors or executive officers has been:

 

the subject of any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

convicted in a criminal proceeding or is subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or any Federal or State authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities;


found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law.

15

  

the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of (a) any Federal or State securities or commodities law or regulation; (b) any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or (c) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

 

Delinquent Section 16(a) Beneficial Ownership Reporting ComplianceReports

 

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s officers and directors, and certain persons who own more than 10% of a registered class of the Company’s equity securities (collectively, “Reporting Persons”), to file reports of ownership and changes in ownership (“Section 16 Reports”) with the Securities and Exchange Commission (the “SEC”). Based solely on its review of the copies of such Section 16 Reports received by the Company, all Section 16(a) filing requirements applicable to the Company’s Reporting Persons during and with respect to the fiscal year ended August 31, 2018 have been2021 were complied with on a timely basis.basis, except that a Form 3 was not filed by Yaniv Rozen.

  

Board Committees

 

We have not established any committees of the board of directors due to the small size of the Company and the board. We do not have an audit committee financial expert because we do not have the resources to retain one.

  

Board Leadership Structure and Role on Risk Oversight

Niquana Noel is presently the only board member.

Our board is primarily responsible for overseeing our risk management processes. The board receives and reviews periodic reports from management, auditors, legal counsel, and others, as considered appropriate regarding the Company’s assessment of risks. The board focuses on the most significant risks facing the Company and the Company’s general risk management strategy, and also ensures that risks undertaken by the Company are consistent with the board’s appetite for risk. While the board oversees the Company’s risk management, management is responsible for day-to-day risk management processes. We believe this division of responsibilities is the most effective approach for addressing the risks facing the Company and that our board leadership structure supports this approach. Ms. Noel’s operational experience qualifies her to serve on our board of directors. 

Stockholder Communication with the Board of Directors

 

Stockholders may send communications to our board of directors by writing to Bespoke Extracts, Inc., 323 Sunny Isles Blvd., Suite 700, Sunny Isles, Florida, 33160, Attention: Corporate Secretary.Chief Executive Officer.

 

Code of Ethics

 

The Company has adopted a Code of Ethics that applies to the Company’s chief executive officer. Any person may obtain a copy of our Code of Ethics, without charge, by mailing a request to the Company at the address appearing on the front page of this Annual Report on Form 10-K or by viewing it on our website found at www.BespokeExtracts.com.

www.bespokeextracts.com.

16

 

Item 11. Executive Compensation.

 

Summary Compensation Table

The following table summarizes all compensation to our chief executive officerofficers during the years ended August 31, 20182021 and August 31, 2017. No other officer received compensation of more than $100,000 during such periods.

Name and Principal Position Year  Salary  Bonus  Stock
Awards
  Option
Awards
  Non-Equity
Incentive
Plan
Compensation
  Nonqualified
Deferred
Compensation
Earnings
  All Other
Compensation
  Total 
(a) (b)  (c)  (d)  (e)  (f)  (g)  (h)  (i)  (j) 
Marc Yahr  2018   0   --   --   --   --   --   --   0 
Former CEO, President (1)  2017   21,000   --   --   --   --   --   --   21,000 
                                     
Barry Tenzer
Former CEO and
  2018   --   --   --   --   --   --   --   -- 
President (2)  2017   63,000   --   --   --   --   --   --   63,000 

(1) Mr. Yahr resigned as president and2020. Our chief executive officer of the Company on October 30, 2018.

(2) Mr. Tenzer resigned as president and chiefis our only named executive officer for whom compensation disclosure is required.


Name and Principal

Position (a)

 

Year

(b)

  

Salary

(c)

  

Bonus

(d)

  

Stock

Awards

(e)

  

Option

Awards

(f)

  

Non-Equity

Incentive

Plan

Compensation

(g)

  

Nonqualified

Deferred

Compensation

Earnings

(h)

  

All Other

Compensation

(i)

  

Total

(j)

 
Danil Pollack  2021  $44,500           --                        $44,500 
Former CEO, President (1)  2020       --   --  $1,416,571(3)      --   --  $1,416,571 
                                     
Niquana Noel  2021   --           --               -- 
Former CEO and President(2)  2020       --   --  $2,055,748(4)  --   --  $20,000  $2,075,748 

(1)Mr. Pollack was appointed as president and chief executive officer of the Company on April 21, 2020 and resigned on November 19, 2021.

(2)Ms. Noel was appointed as president and chief executive officer of the Company on May 22, 2017.

Employment Agreements

Effective October 30, 2018 and served until April 21, 2020.

(3)Pursuant to Mr. Pollack’s employment agreement, he was granted the right, for a period of six months, to purchase up to 100,000,000 shares of common stock for a purchase price of $0.001 per share. The Company recognized an expense of $1,416,975 during the year ended August 31, 2020.

(4)Pursuant to Ms. Noel’s employment agreement, she received a warrant to purchase up to 20,000,000 shares of 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 $2,055,748 was recognized during the fiscal year ended August 31, 2020.

Employment Agreements

On April 21, 2020, the Company entered into an employment agreement with Ms. Noel pursuantDanil Pollack, and on September 30, 2020, and April 27, 2021, the employment agreement was amended. Pursuant to which Ms. Noel willthe employment agreement, Mr. Pollack was to serve as the Company’s chief executive officer and president. Ms. Noel will serve as president and chief executive officer of the Company for a period of one year, which term of four years, unless earlier terminated pursuantwill renew automatically for successive one year terms, subject to the termsright of either party to terminate the employment agreement.agreement at any time upon written notice. Pursuant to the terms of the employment agreement, Ms. Noel’sas amended, the Company agreed to pay Mr. Pollack an annual salary is $96,000 per yearof $66,000, and she received warrantsMr. Pollack was granted the right, for a period of six months, to purchase up to 20,000,000100,000,000 shares of the Company’s common stock at an exercisefor a purchase price of $0.0001$0.001 per share. Ms. Noel has exercisedMr. Pollack resigned from all positions with the warrants and has been issued the shares. The shares will be required to be returned to the Issuer as follows:

Ms. Noel will return 80% of the shares to the Issuer if she is not serving as chief executive officer of the Issuer pursuant to her employment agreement as of October 30, 2019 (the first anniversary of the employment agreement);

Ms. Noel will return 60% of the shares to the Issuer if she is not serving as chief executive officer of the Issuer pursuant to her employment agreement as of October 30, 2020 (the second anniversary of the employment agreement);

Company on November 19, 2021.

17

  

Ms. Noel will return 40% of the shares to the Issuer if she is not serving as chief executive officer of the Issuer pursuant to her employment agreement as of October 30, 2021 (the third anniversary of the employment agreement); and

Ms. Noel will return 20% of the shares to the Issuer if she is not serving as chief executive officer of the Issuer pursuant to her employment agreement as of October 30, 2022 (the fourth anniversary of the employment agreement).

Outstanding Equity Awards at Fiscal Year-End

 

None.

 

Compensation of Directors

 

No director of the Company received any compensation for serving as director of the Company during the year ended August 31, 2018.2021.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 

As of December 14, 2018 we had 50,203,907 shares of common stock issued and outstanding. The following table sets forth information known to us relating to the beneficial ownership of such sharesour common stock as of such dateDecember 13, 2021 by:

 

(1)each person who is known by us to be the beneficial owner of more than 5% of our outstanding voting stock;

 

(2)each director;

each named executive officer;officer and director; and

 

(3)all named executive officers and directors as a group.

 


Unless otherwise indicated, the business address of each person listed is care of Bespoke Extracts, Inc., at 323 Sunny Isles Blvd.2590 Walnut St., Suite 700, Sunny Isles, Florida 33160.Denver, CO 80205. The percentages in the table are based on 251,889,621 shares of common stock outstanding as of December 13, 2021, and have been calculated on the basis of treating as outstanding for a particular person, all shares of our common stock outstanding on that date and all shares of our common stock issuable to that holder in the event of exercise of outstanding options, warrants, rights or conversion privileges owned by that person at that date which are exercisable within 60 days of December 12, 2018.13, 2021. Except as otherwise indicated, the persons listed below have sole voting and investment power with respect to all shares of our common stock owned by them.

 

Name of Beneficial Owner Amount of Beneficial Ownership  Percent of Class 
Executive Officers and Directors:      
Niquana Noel  20,000,000   39.8%
Officers and Directors as a group (1 person):  20,000,000   39.8%
5% Holders:        
McGlothlin Holdings, Ltd. (1)  5,222,667   10.1%
Marc Yahr (2)  4,000,000   8.0%
  Amount of    
  Beneficial  Percent of 
Name of Beneficial Owner Ownership  Class 
Executive Officers and Directors:      
Michael Feinsod(1)  50,000,000   19.8%
Hunter Garth  0   -- 
Officers and Directors as a group (2 persons):  50,000,000   19.8%
5% Holders:        
Danil Pollack(2)  76,000,000   30.2%
Infinity Management, LLC (1)  50,000,000   19.8%
McGlothlin Holdings, Ltd. (3)  14,562,667   5.8%

 

(1)Includes 660,000 shares issuable upon conversion of a debenture and 1,000,000 shares issuable upon exercise of warrants. McGlothlin Holdings, Ltd.’s address is PO Box 590, Luling, Texas, 78649, and its control person is Stan McGlothlin.
(2)The address of Marc Yahr is 1005 Kane Concourse Ste 207-1, Bay Harbour Islands FL 33154-2117.

(1) Represents shares held by Infinity Management, LLC (“Infinity”). The managing member of Infinity is Michael Feinsod. He has voting and dispositive power of these shares. Infinity also owns our 1 outstanding share of Series C Preferred Stock, which entitles the holder to 51% of the voting power of the Company’s stockholders.

 

(2) Mr. Pollack’s address is 8750 Jane Street, Unit 4B, Concord, ON Canada L4K 2M9

(3) McGlothlin Holdings, Ltd.’s address is PO Box 590, Luling, TX 78649. Mr. Stan McGlothlin holds voting and dispositive power over these shares. Share information for this stockholder is derived from a Schedule 13D filed by it on June 26, 2019.

Equity Compensation Plan Information.

 

None. 

 

18

Item 13. Certain Relationships and Related Transactions, and Director Independence.

 

Certain Relationships and Related Transactions.

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.

 

On May 17, 2016,March 25, 2020, the Company entered into a letter agreement with Niquana Noel. Pursuant to the agreement, Ms. Noel exchanged one share of Series B Preferred Stock of the Company for one share of newly created Series C Preferred Stock of the Company.

On April 20, 2020, the Company entered into a letter agreement with Niquana Noel. Pursuant to the letter agreement, Ms. Noel waived any and all 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.


From June 2020 to August 2020, the Company issued and sold to The Vantage Group Ltd. (“Vantage”),Danil Pollack, the Company’s then-chief executive officer, an entity owned by Lyle Hauser, who was thenaggregate of 84,000,000 shares of common stock, for a greater than 5% stockholder,purchase price of $0.001 per share, upon exercise of the right to purchase granted to Mr. Pollack under Mr. Pollack’s employment agreement (see “Executive Compensation”).

On August 31, 2020, the Company issued a 7% promissory note in the principal amount of $10,000 which$150,000, to Danil Pollack. Upon execution of the note, $120,000 was remitted and the remaining $30,000 was paid on September 22, 2020. The note did not bear interest and had an original maturity of six months from the date of issuance. On August 15, 2016, the Company issued to Vantage a 7% 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 to Vantage a 7% 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 to Vantage a 7% 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 to Vantage a 7% 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 notes were amended to be convertible into common stock and to mature on April 18, 2018, with a conversion price of $0.008.  

On February 17, 2017, the Company issued to Vantage, a 7% promissory note in the amount of $30,000 which matured six months from the date of issuance.30, 2020. This note has been repaid.

On April 11, 2017, the Company executed a $540,000 convertible debenture with an original issue discount of $180,000 issued to McGlothlin Holdings, Ltd. (“McGlothlin”), a greater than 5% stockholder of the Company. The note has a 0% interest rate and a term of two years. In connection with the note, the Company issued the lender an aggregate of 2,700,000 shares and 900,000 warrants. The conversion price of the outstanding balance is the lesser of $3.00 or 40% of the volume weighted average price of the 30 days at date of conversion; not to be less than $1.00. This debenture remains outstanding.

On September 18, 2017, the Company issued a $180,000 convertible debenture with an original issue discount of $60,000 to Alneil Associates, which was then a greater than 5% stockholder. The note has a 0% interest rate and a term of two years. In connection with the note, the Company issued the lender an aggregate of 900,000subsequently exchanged for 15,000,000 shares of common stock, and 300,000 warrants to purchase common stock.as described below.

 

On December 13, 2017,November 10, 2020, the Company executed a $120,000 convertible debenture issuedentered into an exchange agreement with Danil Pollack. Pursuant to McGlothlin withthe exchange agreement, Mr. Pollack exchanged an original issue discount of $20,000. The debenture has a 0% interest rate and a term of one year. The conversion priceoutstanding promissory note of the Company in the outstanding balance is the lesserprincipal amount 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 Company$150,000 for 15,000,000 newly issued to McGlothinlin an aggregate of 200,000 shares of common stock and 100,000 warrants to purchase common stock. This debenture is outstanding.of the Company.

 

During the year ended August 31, 2018,On November 30, 2020, the Company had sales of $3,975entered into a securities purchase agreement with Danil Pollack. Pursuant to the spouseagreement, the Company issued and sold to Mr. Pollack 20,000,000 shares of Stan McGlothin, whocommon stock for an aggregate purchase price of $200,000.

On January 21, 2021, the Company entered into a securities purchase agreement with Danil Pollack. Pursuant to the purchase agreement, the Company issued and sold to Mr. Pollack 2,000,000 shares of common stock for an aggregate purchase price of $100,000.

On November 2, 2021, Danil Pollack waived all compensation owed to him by the Company as of such date through the date of his resignation as the Company’s chief executive officer.

On November 29, 2021, Michael Feinsod, the Company’s chief executive officer, loaned the Company $25,000. The loan does not bear interest and is the owner of McGlothlin, a greater than 5% stockholder ofpayable on demand.

On December 3, 2021, Michael Feinsod loaned the Company $15,000. The loan does not bear interest and is payable on demand.

 

Director Independence.

 

Niquana NoelNeither of our directors is our sole director and does not qualifyindependent as an independent directordefined under the Nasdaq listing standards.

Item 14. Principal AccountingAccountant Fees and Services.

 

The following table shows the fees that were billed to the Company by its independent auditor, Liggett & Webb, P.A. for professional services rendered in 2020 and 2021.

Fiscal Year Audit Fees  Audit- Related Fees  Tax Fees All Other Fees 
2020 – Liggett & Webb, P.A. $30,000  $-  $4,000 $     - 
2021 - Liggett & Webb, P.A. $31,000  $    - $750 $- 

Audit fees. Audit fees represent fees for professional services performed by for the fiscalaudit of our annual financial statements and the review of our quarterly financial statements, as well as services that are normally provided in connection with statutory and regulatory filings or engagements.

Audit-related fees. Audit-related fees represent fees for assurance and related services performed that are reasonably related to the performance of the audit or review of our financial statements.

Tax Fees. Liggett & Webb, P.A. received $750 and $4,000 for providing tax services relating to preparation of certain tax returns for us during the year ended August 31, 2021 and 2020, respectively.

All other fees. Liggett & Webb, P.A., did not receive any other fees from us for the years ended August 31, 2018 and 2017.2021 or 2020.

 

Fiscal Year Audit Fees Audit-Related
Fees
 Tax Fees All Other Fees 
2018  23,500 $   -    -   
2017 $16,000 $- $- $     - 

The board of directors serves as the audit committee of the Company. The board of directors on an annual basis reviews audit and non-audit services performed by the independent registered public accounting firm. All audit and non-audit services are pre-approved by the board of directors, which considers, among other things, the possible effect of the performance of such services on the auditors’ independence. The board of directors has considered the role of MaloneBailey LLPLiggett & Webb, P.A. in providing services to us for the fiscal year ended August 31, 20182021 and has concluded that such services are compatible with MaloneBailey LLP’sLiggett & Webb, P.A.’s independence as the Company’s independent registered public accounting firm.

 

19


 

 

PART IV

Item 15. Exhibits, Financial Statement Schedules.

 

(a)

 

(1) Our financial statements are listed on page F-1 of this annual report.

 

(2) Financial statement schedules: None.

 

(b)  Exhibits.

 

Exhibit No. Description
3.1 Articles of Incorporation (incorporated by reference to Form 10-SB filed August 10, 2007)
3.2 Articles and Certificates of Merger (incorporated by reference to Form 10-SB filed August 10, 2007)
3.3 Certificate of Amendment to Articles of Incorporation (incorporated by reference to 8-K filed March 19, 2012)
3.4 Certificate of Amendment to Articles of Incorporation (incorporated by reference to 8-K filed March 5, 2014)
3.5 Certificate of Amendment to Articles of Incorporation (incorporated by reference to 8-K filed December 3, 2015)
3.6 Articles of Merger (incorporated by reference to 8-K filed March 10, 2017)
3.7 Certificate of Designation of Series A Preferred Stock (incorporated by reference to 8-K filed June 14, 2012)
3.8Certificate of Amendment to Articles of Incorporation (incorporated by reference to 8-K filed October 7, 2020)
3.9Certificate of Designation of Series C Preferred Stock (incorporated by reference to 8-K filed March 26, 2020)
3.10Bylaws (incorporated by reference to Form 10-SB filed August 10, 2007)
10.14.1 Description of Registrant’s Securities (incorporated by reference to 10-K filed December 18, 2020)
10.1Asset Purchase Agreement, dated March 9, 2018,December 2, 2021, between the CompanyBespoke Extracts Colorado, LLC and VMI Acquisitions,WonderLeaf, LLC (incorporated by reference to 8-K filed March 14, 2018)December 8, 2021)
10.2 SecuritiesAmendment No. 1 to Asset Purchase Agreement dated March 5, 2018 between the CompanyBespoke Extracts Colorado, LLC and Purchaser named thereinWonderLeaf, LLC (incorporated by reference to 8-K filed MarchDecember 8, 2018)2021)
14.110.3 Code of Ethics*Lease, dated December 2, 2021, between Bespoke Extracts Colorado, LLC and WL Holdings, Ltd. (incorporated by reference to 8-K filed December 8, 2021)

31.1

14.1
 

Code of Ethics (incorporated by reference to 10-K filed December 14, 2018)

21.1Subsidiaries: Bespoke Extracts Colorado, LLC (Colorado)
31.1Certification pursuant to Section 302 of the Sarbanes-Oxley Act*

32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
101 Inline XBRL Document Set for the consolidated financial statements and accompanying notes in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.
101.INS104 Inline XBRL Instance Document*
101.SCHfor the cover page of this Annual Report on Form 10-K, included in the Exhibit 101 Inline XBRL Taxonomy Extension Schema Document*
101.CALXBRL Taxonomy Calculation Linkbase Document*
101.DEFXBRL Taxonomy Extension Definition Linkbase Document*
101.LABXBRL Taxonomy Label Linkbase Document*
101.PREXBRL Taxonomy Presentation Linkbase Document*Document Set.

* Filed herewith 

  

*20Filed herewith

**Furnished herewith.


 

SIGNATURES

 

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

  

 BESPOKE EXTRACTS, INC.
  
Dated:  December 14, 201813, 2021By:/s/ Niquana NoelMichael Feinsod
  Niquana NoelMichael Feinsod
  

Chief Executive Officer and

Chief Financial Officer

(principal executive officer,

principal financial officer and

principal accounting officer)

  

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

SIGNATURE TITLE DATE
     
/s/ Niquana NoelMichael Feinsod Chief Executive Officer
Chief Financial Officer and Director
 December 14, 201813, 2021
Niquana Noel

Michael Feinsod

 (principal executive, financial and accounting officer)  
/s/ Hunter GarthDirectorDecember 13, 2021

Hunter Garth

 

21

 

28

iso4217:USD xbrli:shares