UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended: June 30, 2022March 31, 2023

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)

2590 Walnut St.12001 E. 33rd Avenue, Unit O

Denver,Aurora, CO, 8020580010

(Address of principal executive offices)

855-633-3738

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

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

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 past 12 months, 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 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 such files).  Yes  ☒   No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐   No ☒

As of August 19, 2022,July 14, 2023, there were 450,071,11910,168,220 shares outstanding of the registrant’s common stock, par value $0.001.

TABLE OF CONTENTS

PART I

Item 1. Financial Statements. 

Bespoke Extracts, Inc.

Condensed Consolidated Balance Sheets

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

Bespoke Extracts, IncInc.

Condensed Consolidated Statements of Operations

(Unaudited)

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

Bespoke Extracts, Inc

Condensed Consolidated Statements of Cash Flows

(Unaudited)

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

Bespoke Extracts, Inc

Condensed consolidated Statement of Stockholders Equity / (Deficit)

For The Three and Six Months Ended June 30, 2022 and 2021

(Unaudited)

Bespoke Extracts, Inc.

Consolidated Statement of Stockholders Equity / (Deficit)

For The three months ended March 31, 2023 and March 31, 2022

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

Bespoke Extracts, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

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

BESPOKE EXTRACTS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022MARCH 31, 2023

(Unaudited)

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

Nature of Business Operations 

Bespoke Extracts, Inc. (the “Company”) is a Nevada corporation focused on selling its proprietary line of specially-formulated, premium quality, hemp-derived CBD products.

In November 2021, new management ofoperating in 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 United States. Through Bespoke Colorado, we operate a marijuana infused products production facility in Aurora, Colorado.

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.. On January 3, 2023, the Wonderleaf Purchase Agreement, BespokeCompany completed the acquisition of the WonderLeaf assets and the change of control was approved by the 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,Marijuana Enforcement Division for a purchase price of $225,000, to be paid in222,223 shares of common stock valued at $50,000, or $0.225 per share. At the time of the Company (including 2,500,000 shares issuable,acquisition Wonderleaf had no operations or no employees and to be held in escrow, upon execution of the WonderLeaf 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 towas not considered 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 the Wonderleaf Purchase Agreement. As of the date of filing the Company has not closed on the transaction.business. 

Basis of Presentation

The accompanying condensed consolidated unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments of a normal and recurring nature considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2022 may not necessarily be indicative of the results that may be expected for the year ended December 31, 2022.

For further information, refer to the Company’s financial statements and footnotes thereto included in the Annual Report on Form 10-K for the year ended August 31, 2021 and the Transition Report on Form 10Q-T for the transition period from September 1, 2021 to December 31, 2021.

On February 2, 2022, the Company changed its fiscal year from August 31 to December 31.

Certain prior period amounts have been reclassified to conform to the current period presentation.presentation which include common stock and additional paid in capital.

Principles of Consolidation

 
The accompanying condensed consolidated unaudited financial statements include the accounts of Bespoke Extracts, Inc., and its wholly owned subsidiary Bespoke Extracts Colorado, LLC. All inter-company balances have been eliminated.

Going Concern

The accompanying condensed consolidated unaudited financial statements have been prepared assuming a continuation of the Company as a going concern. The Company had negative cash flows from operations of $207,068 for the three months ended March 31, 2023, and a working capital deficit of $1,100,121 and an accumulated deficit of $24,324,418 as of and for the six months ended June 30, 2022.March 31, 2023. This raises substantial doubt about our ability to continue as a going concern.concern for a period of one year from the date of these financial statements.

The Company’s ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. There is no assurance that this series of events will be satisfactorily completed.

Further, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. If additional financing is not available or is not available on acceptable terms, we will have to curtail or cease our operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence. These financial statements do not include any adjustments that might arise from this uncertainty.

Use of Estimates

The preparation of consolidated 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 consolidated financial statements and accompanying notes. Significant estimates include the assumption used in the valuation of equity-based transactions, valuation of intangible assets, allowance for doubtful accounts and inventory valuation and reserves. Actual results could differ from those estimates. 

Cash and Cash Equivalents

Cash and cash equivalents include all highly liquid investments with original maturities of three months or less at the time of purchase. At June 30, 2022March 31, 2023 and December 31, 2021,2022, the Company did not have any cash equivalents. The Company did not have any cash in excess of FDIC limits of $250,000 at any single bank.

Fair Value of Financial Instruments

The carrying amounts of cash, accounts receivable, prepaid expenses, inventory, fixed assets, licenses, and other assets, accounts payable, accrued liabilities, note payable and convertible note payable approximate their fair values as of June 30, 2022March 31, 2023 and December 31, 2021,2022, 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 are generally net 30 or net 60 days. Once collection efforts by the Company and its collection agency are exhausted, the determination for charging off uncollectible receivables is made. At June 30, 2022March 31, 2023 and December 31, 2021,2022, the Company has recorded an allowance for doubtful accounts of $0 and $0, respectively. At June 30, 2022 and December 31, 2021 included in the accounts receivable is the merchant holdback receivable balance of $3,636 and $3,636, respectively which will be remitted to the Company in the future.

Advances to WonderLeafInventory, Net

During the six months ended June 30, 2022 the Company advanced WonderLeaf $12,000 to cover operating expenses. The amounts are repayable upon demand.

Inventory

Inventories are stated at the lower of cost or net realizable value. Cost is determined by the first-in, first-out basis and net realizable value. Net realizable value is defined as sales price less cost of completion, disposition and transportation and a normal profit margin. As of June 30, 2022March 31, 2023 and December 31, 2021,2022, inventory amounted to $13,010 and $0 and $46,825,net of reserves, respectively, which consisted of finished goods of $79,909$13,010 and $43,574,$0, and raw materials of $0 and $3,251 net$0, respectively.

Property and equipment

Property and equipment is recorded at cost and capitalized from the initial date of reserves, respectively. Asservice. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment is retired or otherwise disposed of, June 30, 2022the cost and December 31, 2021 inventory reserves were $79,909accumulated depreciation are removed from the accounts and $33,476, respectively.any resulting gain or loss is included in the results of operations for the respective period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The Company uses other depreciation methods (generally accelerated) for tax purposes where appropriate. The estimated useful lives for significant property and equipment categories are as follows:

Schedule of Estimated useful Lives of Property and Equipment

License

License represents the Colorado license distributing cannabis. The license will be amortized over its useful life.

Revenue Recognition

We account for revenue in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 606, “Revenue from Contracts 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 is recognized at the time the related merchandise revenues are recognized and are included in net revenues. Inbound and outbound shipping and delivery costs are included in cost of revenues.

Our products are sold through our online and telephonic channels.directly to licensed marijuana dispensaries in Colorado. Revenue is recognized when control of the merchandise is transferred to the customer, which generally occurs upon shipment. Payment is typically due on the date of shipment. The Company offers a 30 day return policy onshipment [or within 15 days].

At March 31, 2023, two customers amounted to 27.5% and 31.4% amounted, or 58.9% of accounts receivable. During the year ended December 31, 2022 no customer amounted to over 10% of the total accounts receivable. During the three months ended March 31, 2023 three customers amounted to 14.4%, 15.1% and 16.4%, or 45.9% of sales for the period. During the three months ended March 31, 2022 no individual customer amounted to over 10% of tota1 sales.

Stock Based Compensation

Stock options and warrants issued to consultants and other non-employees as compensation for services provided to the Company are accounted for based on the fair value of the services provided or the estimated fair market value of the option or warrant, whichever is more reliably measurable, and in accordance with FASB ASC 718, Compensation-Stock Compensation, including related amendments and interpretations.

Reclassification

Prior gross prepaid stock compensation and additional paid in capital presented in the 10Q for the period end March 31, 2022 have been reclassified to conform with the financials filed in the December 31, 2022 10K.

Net Income / (Loss) per Share

Basic income / (loss) per share amounts are computed based on net income / (loss) divided by the weighted average number of common shares outstanding. Diluted earnings per share reflect the potential dilution that could occur if potentially dilutive securities were exercised or converted to common stock. The dilutive effect of options and warrants and their equivalent is computed by application of the treasury stock method and the effect of convertible securities by the “if converted” method. The effect of 25,333,500219,556 warrants and 46,072,8741,023,842 options is anti-dilutive for the three and six months ended June 30, 2022March 31, 2023 as they are not in the money. The effect of 3,000,000562.967 warrants and 01,022,842 options as well as 500,000,000 shares issuable upon the conversion of a convertible note, is anti-dilutive for the three and six months ended June 301, 2021.March 31, 2022 as they are not in the money. 

Reverse Stock Split

On December 5, 2022 the Company approved an amendment to its articles of incorporation to effect a 45-to-1 reverse split of our common stock effective January 13, 2023. All prior equity amounts have been presented to reflect this split.

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.

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.

2. ASSET PURCHASE AGREEMENT

On February 21, 2017,January 3, 2023, the Company purchased all right, title, interest and goodwill in or associated with certain domain names set forth in an asset purchase agreement for a total of $20,185 in cash and 200,000 sharescompleted the acquisition of the Company’sWonderLeaf assets for 222,223 shares of common stock valued at $30,000. During$50,000, or $0.225 per share. At the year ended August 31, 2020,time of acquisition Wonderleaf had no operations or no employees and was not considered a business. 

Pursuant to ASU 2017-01 and ASC 805, the Company transferred certain URLs valued at $5,282analyzed the business of Wonderleaf to an unrelated party and impaired $289 leaving a balance of $44,614 of URLs. The domain names are being amortized over a 15 year period. During the year ended August 31, 2021,determine if the Company recorded an amortization expense of $3,244. During the year ended August 31, 2020,acquired a business or acquired assets. Based on this analysis, the Company determined that it acquired assets. No goodwill was recorded since the purchase was accounted for as an impairment expenseasset purchase. In accordance with ASC 805, the fair value of $289 for the expired domain names. Duringassets acquired is based on either the threefair value of the consideration given or the fair value of the assets acquired, whichever is more clearly evident, and six months ended June 30, 2022thus, more reliably measurable. The Company used the market price of the 222,223 common shares issued of $50,000 as the fair value of the assets acquired since this value was more clearly evident, and 2021,thus, more reliably measurable than the fair value of the license and fixed assets acquired.

Company management determined if the Company recordedacquired a business or acquired assets. The FASB issued new guidance (ASU 2017-01) that changed the definition of a business to assist entities with evaluating when a set of transferred assets and activities is a business. The guidance requires an amortization expenseentity to evaluate if substantially all of $0, $0, $3,060the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and $3,871, respectively.activities is not a business. The guidance also requires a business to include at least one substantive process and narrows the definition of outputs by more closely aligning it with how outputs are described in ASC 606. Under the new guidance, an entity first determines whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this threshold is met, the set is not a business. If it’s not met, the entity then evaluates whether the set meets the requirement that a business include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. Under the ASU, a set is not a business when substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets.

In connection with a stock purchase agreement (see note 9), on October 28, 2021, 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 pursuantPursuant to a cancellation and satisfaction of debenture agreement entered into between805-10-55-83, the Company first considered the guidance in paragraphs 805-10-55-5A through 55-5C. The identifiable assets that could be recognized in the purchase only included the license and fixed assets. Accordingly, the Debenture holder. In exchange for cancellationtransaction was not considered a business.

The monetary value of the debt owed under the Debenture,222,223 shares is deemed by the Company transferredto be $50,000 in accordance with Accounting Standards Codification (“ASC”) 805-50-30 “Business Combinations”, the Company determined that if the consideration paid is not in the form of cash, the measurement may be based on either (i) the cost which is measured based on the fair value of the consideration given or (ii) the fair value of the assets (or net assets) acquired, whichever is more clearly evident and thus more reliably measurable. No goodwill should be recorded since the WPA was accounting for as an asset purchase. The Company determined that the fair value of the common shares issued was a better indicator which is more reliably measurable.

The Company assigned a value of $10,000 to the holder certain domain names valued at $32,748. (See Notes 3licenses and 6.)$40,000 to the fixed assets acquired.

3. INVENTORY EARN-OUT

As described in Notes 2 and 6,Note 9, 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, 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. As of June 30,December 31, 2022 no amounts havehad been paid. The inventory earn-out agreement was amended on November 11, 2022 such that the final payment under the inventory earn out was increased to $90,000 (less any payments previously made) and was due February 28, 2023. During the three months ended March 31, 2023 the amount was paid.

4. NOTE RECEIVABLE

On January 19, 2022 the Company loaned WonderLeaf $10,000, pursuant to a promissory note. The note bears interest at 5.0%5% annually and matures on January 18, 2023. Accrued interest amounted to $236 at June 30, 2022.

On February 8, 2022 the Company loaned WonderLeaf $10,000, pursuant to a promissory note. The note bears interest at 5.0%5% annually and matures on February 8, 2023. Accrued

On October 25, 2022 the Company loaned WonderLeaf $25,000, pursuant to a promissory note. The note bears interest at 5% annually and matures on February 8, 2023.

As of December 31, 2022 accrued interest on the notes receivable amounted to $195 at June 30, 2022.$931.

At December 31, 2022 the Company recorded a reserve of $45,931 for the promissory notes and accrued interest.

5.Note 5 – Furniture and equipment.

Machinery and equipment consisted of the following at:

Schedule of Machinery and Equipment

Depreciation expense for the three months ended March 31, 2023 and March 31, 2022 were $1,785 and $0 respectively.

6. NOTE PAYABLE -– RELATED PARTY

During the sixthree months ended June 30, 2022,March 31, 2023, Michael Feinsod, the Company’s chief executive officer, was repaid $2,500.loaned the Company an additional $227,000. As of March 31, 2023 and December 31, 2022 the amount owed Michael Feinsod is $692,500 and $415,500, respectively. All loans are payable upon demand.

6. CONVERTIBLE NOTE PAYABLE

On December 24, 2019, the Company entered into and closed a securities purchase agreement with an accredited investor, pursuant to which the Company issued and sold to the investor an original issue discount convertible debenture in the principal amount of $500,000, for a purchase price of $300,000. The Company also issued to the investor 5,000,000 shares of common stock valued at $55,000 ($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 outstanding common stock. The debenture had an original maturity date of April 30, 2020 and was convertible into shares of common stock of the Company at an initial conversion price of $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 Company’s obligation to repay the debenture upon maturity was initially secured by a security interest in the Company’s inventory pursuant to a security agreement between the Company and the investor. For the year ended August 31, 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 also entered into six amendments to the debentures, including to increase the conversion price to $0.05, 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 debenture holder converted $100,000 into 2,000,000 shares of common stock at a price of $0.05 per share. As of June 30, 2022, there is no convertible debt outstanding.

On October 28, 2021, in connection with a stock purchase agreement, 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. In exchange for cancellation of the debt owed under the Debenture, the Company transferred to the holder certain domain names valued at $32,748 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, 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. The Company recorded a gain on the extinguishment of debt $292,252. 

7. LEASES

In connection with the WonderleafWonderLeaf Purchase Agreement, Bespoke Colorado entered into a lease agreement (the “Lease”) with WL Holdings, Ltd. (“WL Holdings”) in December 2021. 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. Monthly rent under the Lease will start at $6,000. The Lease grants the Company an option to purchase the property for $600,000. The Company has not decided whether it will exercise either option.

Supplemental balance sheet information related to leases was as follows:

Lease term and discount rate were as follows:

The component of lease costs was as follows:

Supplemental disclosures of cash flow information related to leases were as follows:

Maturities of lease liabilities were as follows as of June 30, 2022:March 31, 2023:

8. EQUITY

Common Stock and Preferred Stock

On December 5, 2022 the Company approved an amendment to its articles of incorporation to effect a 45-to-1 reverse split of our common stock effective January 13, 2023. All prior amounts equity amounts have been presented to reflect this reverse split.

As of June 30, 2022March 31, 2023 and December 31, 2021,2022, the Company’s authorized capital stock consists of 3,000,000,000 shares of common stock, par value $0.001, and 50,000,000 shares of preferred stock, par value $0.001. 1,000 shares of preferred stock are designated as Series A Convertible Preferred Stock. No shares of Series A Preferred Stock are issued and outstanding as of June 30, 2022March 31, 2023 and December 31, 2021,2022, 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 June 30, 2022March 31, 2023 and December 31, 2021,2022, respectively. The Series C Preferred Stock has a stated value of $24,000 and entitles the holder to 51% of the total voting power of the Company’s stockholders. The Company may, in its sole discretion, redeem the Series C Preferred Stock at any time for a redemption price equal to the stated value. Upon payment of the redemption price by the Company, the Series C Preferred Stock will revert to the status of authorized but unissued preferred stock. 

On October 28, 2021,January 3, 2023, the Company entered into a stock purchase agreement with Danil Pollack (the Company’s then-chief executive officer), and Infinity Management, LLC (“Infinity”). Pursuant tocompleted the purchase agreement, uponacquisition of the closing thereof on November 19, 2021, Mr. Pollack sold to Infinity, 50,000,000WonderLeaf assets for 222,223 shares of common stock of the Company and one 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.valued at $50,000, or $0.225 per share.

The purchase agreement further provided for Infinity to make a capital contribution to the Company of $4,792 to cover payment of the amounts due to certain creditors of the Company, as set forth in the purchase agreement. The amount was paid on January 18, 2022.

On December 2, 2021, 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 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 the Wonderleaf Purchase Agreement. On June 30, 2022, Bespoke Extracts Colorado, LLC entered into amendment No. 2 to the asset purchase agreement, dated December 2, 2021, between Bespoke Colorado and WonderLeaf, LLC. Pursuant to the amendment, the “Termination Date” under the asset purchase agreement was extended to August 30, 2022. As of the date of filing the Company has not closed on the transaction.

On December 14, 2021, the board of directors of the Company adopted the Company’s 2021 Equity Incentive Plan (the “2021 Plan”), pursuant to which up to an aggregate of 300,000,0006,666,667 shares of common stock are available for issuance. Awards under the plan may include options (including incentive stock options and non-qualified stock options), stock appreciation rights, restricted stock, restricted stock units, performance share awards, or other equity-based awards, each as defined under the 2021 Plan. Options awarded under the 2021 Plan are to have an exercise price of not less than 100% of issued shares sub events the fair market value of the common stock on the grant date and a term of not more than ten years from the option grant date.

On December 14, 2021, the Company entered into an employment agreement with Hunter Garth. Pursuant to the employment agreement, Mr. Garth will serve as the Company’s president and will receive a base monthly salary of $8,000. The Company also granted to Mr. Garth, pursuant to the Company’s 2021 Equity Incentive Plan, 22,500,000500,000 shares of restricted common stock valued at $675,000 ($0.031.35 per share), which will vestvested one year from the date of grant. During the three and six monthsyear ended June 30,December 31, 2022 the Company recorded $168,287 and $334,725, respectively of$675,000 a prepaid expenses associated with the stock based compensation. During the years ended December 31, 2022 and 2021 the amount was amortized $643,562 and $31,438, respectively.

On December 14, 2021, the Company entered into an employment agreement with Michael Feinsod, the Company’s chief executive officer and chairman. Pursuant to the employment agreement, Mr. Feinsod will continue to serve as the Company’s chief executive officer and chairman and will receive a base monthly salary of $10,000. The Company also granted to Mr. Feinsod, pursuant to the Company’s 2021 Equity Incentive Plan, 45,000,0001,000,000 shares of restricted common stock valued at $1,350,000 ($0.031.35 per share), which will vestvested one year from the date of grant. During the three and six monthsyear ended June 30,December 31, 2022 the Company recorded $336,575 and $669,452, respectively$1,350,000 of prepaid expenses associated with the stock based compensation. During the years ended December 31, 2022 and 2021 the amount was amortized $1,287,123 and $62,877, respectively. As of December 31. 2022 and 2021 the Company recorded a prepaid stock award of $0 and $1,287,123, respectively.

During the six monthsyear ended June 30,December 31, 2022, the Company entered into and closed securities purchase agreements with investors pursuant to which the Company issued and sold to the investors an aggregate of 68,890,0001,530,897 shares of common stock and warrants to purchase an aggregate of 17,222,5001,530,897 shares of common stock, for an aggregate purchase price of $344,450. The warrants expireexpired June 30, 2023 and havehad an exercise price of $0.05.$2.25.

Effective August 1, 2022, the Company issued an aggregate of 266,667 shares of common stock to employees and consultants for services, including 155,556 shares that vest immediately, 55,556 shares that vested one year from the grant date, and 55,556 shares that will vest two years from the grant date. During the year ended December 31, 2022 the Company recorded an expense $1,104,928. For the three months ended March 31, 2023 the Company recorded an expense of $21,544. As of March 31, 2023 and December 31, 2022 the Company had a prepaid stock award of $58,569 and $80,113.

Warrants

During the sixfour months ended June 30,December 31, 2021, the Company entered into and closed securities purchase agreements with investors pursuant to which the Company issued and sold to the investors an aggregate of 50,000,000 shares of common stock and warrants to purchase an aggregate of 12,500,000 shares of common stock, for an aggregate purchase price of $250,000 with offering costs of $10,000 for legal expenses. The warrants had a term of one year and an exercise price of $2.25.

During the year ended December 31, 2022, the Company entered into and closed securities purchase agreements with investors pursuant to which the Company issued and sold to the investors an aggregate of 68,890,0001,530,887 shares of common stock and warrants to purchase an aggregate of 17,222,500382,722 shares of common stock, for an aggregate purchase price of $344,450. The warrants expireexpired June 30, 2023 and havehad an exercise price of $0.05.$2.25.

The following table summarizes the warrant activities during the sixthree months ended June 30, 2022:March 31, 2023:

Options

On December 14, 2021, the Company entered into an employment agreement with Hunter Garth, wherein the Company granted to Mr. Garth, pursuant to the Company’s 2021 Equity Incentive Plan, ten-year options to purchase 15,000,000333,333 shares of common stock at an exercise price of $0.06$2.70 (representing a 120% premium over the closing price of the common stock on December 13, 2021). One-third of the options will vest on each yearly anniversary of the date of grant. The options were valued at $450,000 using a Black-Scholes pricing model. During the three and six months ended June 30,ending March 31, 2023 and 2022 the Company recorded $67,797$30,811 and $135,594$97,797 respectively of expenses associated with the vesting of these stock options. (See notes 9 and 10).

On December 14, 2021, the Company entered into an employment agreement with Michael Feinsod, wherein the Company granted to Mr. Feinsod, pursuant to the Company’s 2021 Equity Incentive Plan, ten-year options to purchase 30,000,000666,667 shares of common stock at an exercise price of $0.06$2.70 (representing a 120% premium over the closing price of the common stock on December 13, 2021). One-third of the options will vest on each yearly anniversary of the date of grant. The Optionsoptions were valued at $900,000 using a Black-Scholes pricing model. During the three and six months ended June 30,March 31, 2023 and 2022 the Company recorded $61,621 and $135,594, and $271,188respectively of expenses associated with the vesting of these stock options. (See notes 9 and 10).

On December 14, 2021, the Company issued to a consultant options to purchase 1,000,00022,222 shares of common stock at an exercise price of $0.03.$1.35. The options vest over a period of 3 months and have a term of 10 years. The options were valued at $30,000 using a Black-Scholes pricing model. During the three and six months ended June 30,March 31, 2023 and 2022 the Company recorded $0 and $24,900, respectively of expenses associated with the vesting of these stock options.

The following table summarizes the option activities during the Six months ended June 30, 2022:

9. RELATED PARTY TRANSACTIONS

On April 21, 2020, Danil Pollack was appointed president, chief executive officer, and chief financial officer ofThe following table summarizes the Company. In connection with Mr. Pollack’s appointment,option activities during the Company entered into an employment agreement with Mr. Pollack. Pursuant to the employment agreement, Mr. Pollack agreed to serve as the Company’s chief executive officer and president for a period of one year, which term would renew automatically for successive one year terms, subject to the right of either party to terminate the agreement at any time upon written notice. Mr. Pollack was granted the right, for a period of six months, to purchase up to 100,000,000 shares of common stock of the Company for a purchase price of $0.001 per share.  

On 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. 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. Mr. Pollack elected to forgive $11,000 of salary during four months ended December 31, 2021 and the amount was recordedyear ended December 31, 2022:

The future expense as a capital contribution.of March 31, 2023 is $420,381.

On October 28, 2021, the Company entered into a stock purchase agreement with Danil Pollack, and Infinity Management, LLC. Pursuant to the purchase agreement, upon the closing thereof on November 19, 2021, Mr. Pollack sold to Infinity, 50,000,000 shares of the 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. The purchase agreement further provided for Infinity to make a capital contribution to the Company of $4,792 to cover payment of the amounts due to certain creditors of the Company, as set forth in the purchase agreement. The amount was paid on January 18, 2022.9. RELATED PARTY TRANSACTIONS

In connection with the purchase agreement, and effective upon the closing thereunder, Mr. Michael Feinsod, the managing member of Infinity, was appointed as the chief executive officer and chairman of the board of directors of the Company, Mr. Hunter Garth was appointed as a director, as well as chief strategy officer of the Company, and Mr. Pollack resigned from all positions with the Company, including as president, CEO, chief financial officer and director of the Company.  

On December 14, 2021, the Company entered into an employment agreement with Hunter Garth. Pursuant to the employment agreement, Mr. Garth will serve as the Company’s president and will receive a base monthly salary of $8,000. The Company also granted to Mr. Garth, pursuant to the Company’s 2021 Equity Incentive Plan, 22,500,000500,000 shares of restricted common stock, which will vestvested one year from the date of grant, and ten-year options to purchase 15,000,000333,333 shares of common stock at an exercise price of $0.06$2.70 (representing a 120% premium over the closing price of the common stock on December 13, 2021). One-third of the options will vest on each yearly anniversary of the date of grant. In the event that Mr. Garth is terminated without cause or resigns with good reason (each as defined in the employment agreement), he will be entitled to his monthly base salary for twelve months following such termination.

On December 14, 2021, the Company entered into an employment agreement with Michael Feinsod, the Company’s chief executive officer and chairman. Pursuant to the employment agreement, Mr. Feinsod will continue to serve as the Company’s chief executive officer and chairman and will receive a base monthly salary of $10,000. The Company also granted to Mr. Feinsod, pursuant to the Company’s 2021 Equity Incentive Plan, 45,000,0001,000,000 shares of restricted common stock, which will vestvested one year from the date of grant, and ten-year options to purchase 30,000,000666,667 shares of common stock at an exercise price of $0.06$2.70 (representing a 120% premium over the closing price of the common stock on December 13, 2021). One-third of the options will vest on each yearly anniversary of the date of grant. In the event that Mr. Feinsod is terminated without cause or resigns with good reason (each as defined in the employment agreement), he will be entitled to his monthly base salary for twelve months following such termination.

During the six months ended June 30, 2022, Michael Feinsod, the Company’s chief executive officer, was repaid $2,500.

During the year ended December 31, 2022, Michael Feinsod, the Company’s chief executive officer, advanced the Company $415,500 and was repaid $2,500 for operations. During the three months ended March 31, 2023 Michael Feinsod advanced an additional $277,000. The loans are non-interest bearing and payable upon demand. (See Note 6.)

As of March 31, 2023 Michael Feinsod is owed a total of $105,000 of accrued salary and accounts payable of $78,936.

10. COMMITMENTS AND CONTINGENCIES

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. Mr. Pollack elected to forgive $11,000 of salary during four months ended December 31, 2021; the amount was recorded as a capital contribution. Mr. Pollack resigned on November 19, 2021.

In connection with thea stock purchase agreement, on October 28, 2021, 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 (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. The inventory earn-out agreement was amended on November 11, 2022 (see Note 3) such that the final payment under the inventory earn out was increased to $90,000 (less any payments previously made) and was due February 28, 2023. During the three months ended March 31, 2023 the amount was paid.

On December 14, 2021, the Company entered into an employment agreement with Hunter Garth. Pursuant to the employment agreement, Mr. Garth will serve as the Company’s president and will receive a base monthly salary of $8,000. The Company also granted to Mr. Garth, pursuant to the Company’s 2021 Equity Incentive Plan, 22,500,000500,000 shares of restricted common stock, which will vestvested one year from the date of grant, and ten-year options to purchase 15,000,000333,333 shares of common stock at an exercise price of $0.06$2.70 (representing a 120% premium over the closing price of the common stock on December 13, 2021). One-third of the options will vest on each yearly anniversary of the date of grant. In the event that Mr. Garth is terminated without cause or resigns with good reason (each as defined in the employment agreement), he will be entitled to his monthly base salary for twelve months following such termination.

On December 14, 2021, the Company entered into an employment agreement with Michael Feinsod, the Company’s chief executive officer and chairman. Pursuant to the employment agreement, Mr. Feinsod will continue to serve as the Company’s chief executive officer and chairman and will receive a base monthly salary of $10,000. The Company also granted to Mr. Feinsod, pursuant to the Company’s 2021 Equity Incentive Plan, 45,000,0001,000,000 shares of restricted common stock, which will vestvested one year from the date of grant, and ten-year options to purchase 30,000,000666,667 shares of common stock at an exercise price of $0.06 (representing a 120% premium over the closing price of the common stock on December 13, 2021). One-third of the options will vest on each yearly anniversary of the date of grant. In the event that Mr. Feinsod is terminated without cause or resigns with good reason (each as defined in the employment agreement), he will be entitled to his monthly base salary for twelve months following such termination.

11. MAJOR CUSTOMERS

At June 30, 2022 and December 31, 2021, no individual customer amounted to over 10% of total accounts receivable. During the three and six months ended June 30, 2022, one individual customer amounted to over 10% of total sales. During the three and six ended June 30, 2021, no individual customer amounted to over 10% of total sales.

12. SUBSEQUENT EVENTS

On August 11, 2022,the Company and Bespoke Extracts Colorado LLC (“Bespoke Colorado”), a wholly-owned subsidiary of the Company entered into an asset purchase agreement (the “Purchase Agreement”) with Osiris, LLC doing business as Best Day Ever (“BDE”) and Michael Gurtman. Pursuant to the Purchase Agreement,purchase agreement, Bespoke Colorado agreed to purchase from BDE, and BDE agreed to sell to Bespoke Colorado, the assets of BDE, including certain licenses. The Company also agreed to assume certain leases, all as further set forth in the Purchase Agreement.purchase agreement. As consideration for the acquisition of the assets, the Company willagreed to issue 125,000,0002,777,778 shares of common stock at the closing of the transaction.

Closing of the Purchase Agreement ispurchase agreement was subject to receipt of certain governmental approvals and other customary closing conditions.

Effective August 1, 2022, the Company issued an aggregate of 12,000,000 shares of common stock to employees and consultants for services, including 7,000,000 shares that vest immediately, 2,500,000 shares that will vest one year from the grant date, and 2,500,000 shares that will vest two years from the grant date. The purchase agreement was terminated on November 18, 2022.