EQUITY | 5. EQUITY Common Stock The Company has authorized capital of 800,000,000 shares of common stock with a par value of $0.001, and 50,000,000 shares of Series A Convertible Preferred stock with a par value of $0.001. Between September 1, 2018 and February 28, 2019 the Company sold a total of 8,966,667 shares of common stock for proceeds of $285,000. On October 13, 2018 the Company issued 1,000,000 shares of common stock for a sponsorship donation valued at $120,000. Effective October 30, 2018, Marc Yahr resigned from all positions with the Company including as President and Chief Executive Officer of the Company, except as a member of the board of directors. On November 25, 2018 Mr. Yahr resigned as a member of the Company’s board of directors. On November 6, 2018, 16,000,000 shares of common stock were returned to the Company by Mr. Yahr for which the Company paid $1,600 to Marc Yahr. This forfeiture was in accordance with the terms of this May 22, 2017 employee share based award and the forfeiture resulted in a gain of $2,440,768 (net of the $1,600 cash paid) representing a reversal of the previously recognized expense for the unvested portion of this freighted award. On October 30, 2018, the Company entered into an employment agreement with Niquana Noel pursuant to which Ms. Noel will serve as the Company’s Chief Executive Officer and president for a term of four years, unless earlier terminated pursuant to the terms of the employment agreement. Pursuant to the terms of the employment agreement, Ms. Noel’s annual salary is $96,000 and she received a warrant to purchase up to 20,000,000 shares of the Company’s common stock at an exercise price of $0.0001 per share. Ms. Noel exercised the warrant for $2,000 and was issued the 20,000,000 shares on October 31, 2018. The shares received upon the exercise of the warrants are subject to forfeiture over a service period of four years. Pursuant to a securities purchase agreement entered into on June 6, 2018 the Company was obligated to issue additional shares of common stock if the Company sold common stock at a price lower than $0.10 per share (or common stock equivalents with an exercise price less than $0.10 per share) during the six month period following the closing of the purchase agreement, in which event the Company was required to issue additional shares to the purchaser for no additional consideration, such that the total number of common stock received by the purchaser will be equal to $50,000 divided by lower financing price. As of February 28, 2019 the Company was obligated to issue 500,000 shares of common stock valued at $76,000. Warrants On May 22, 2017, the Company entered into an employment agreement with Marc Yahr to serve as President and Chief Executive Officer of the Company for a term of three years, unless earlier terminated pursuant to the terms of the employment agreement. Pursuant to the terms of the employment agreement, Mr. Yahr received a warrant to purchase up to 20,000,000 shares of the Company’s common stock at an exercise price of $0.0001 per share. The warrants were exercised in full on May 31, 2017; however, the 20,000,000 shares of the Company’s common stock were not issued to Mr. Yahr until June 10, 2017. The shares received upon the exercise of the warrants were subject to forfeiture over a service period of three years. The fair value of the award was determined to be $10,998,105 which will be recognized as compensation expense over the three year service period. Effective October 30, 2018, Marc Yahr resigned from all positions with the Company including as President and Chief Executive Officer of the Company (except as director, which he resigned as on November 25, 2018). Pursuant to the agreement, Mr. Yahr agreed to return 80% of the warrant shares to the Company if he served as CEO of the Company pursuant to the terms and conditions of the employment agreement for a period of more than 12 months but less than 18 months. Therefore, 16,000,000 shares of common stock were forfeited to the Company, and the Company recognized a gain on the forfeited common shares of ($2,440,768) net of $1,600 paid by the Company. As of February 28, 2019, $0 remains to be expensed over the remaining vesting period. On January 22, 2018, the Company entered into a sales representation agreement for a term of six months. Pursuant to the agreement the Company agreed to issue the nonemployee sales representative warrants to purchase 10,000 shares of common stock per month (an aggregate of 60,000 warrants) with an exercise price of $0.50, with a term of three years. The warrants shall be exercisable at any time on or after the six (6) month anniversary of each issuance date, at his election, in whole or in part, by means of a cashless exercise. During the three and six months ended February 28, 2019 the Company recognized a gain of ($197) and $(32,061), respectively due to a remeasurement of this nonemployee award. On February 22, 2018, the Company entered into a consulting agreement for a term of one year. Pursuant to the agreement the Company agreed to issue the nonemployee consultant warrants to purchase 10,000 shares of common stock per month (an aggregate of 120,000 warrants) with an exercise price of $0.40, exercisable for cash only for a period of three years commencing six months form the issuance date. During the three and six months ended February 28, 2019 the Company recognized a gain / (expense) of $321 and $(57,382), respectively due to a remeasurement of this nonemployee award. On March 2, 2018 the Company entered into a management agreement with Global Corporate Management, LLC. Pursuant to this agreement, the Company agreed to pay $4,000 and to issue 150,000 common stock purchase warrants per month (an aggregate of 3,600,000 warrants) with an exercise price of $0.50, exercisable commencing six months after issuance for a period of 5 years. During the three and six months ended February 28, 2019 the Company recognized a (gain) / expense of $(8,363) and $(1,273,049), respectively due to a remeasurement of this nonemployee award. On April 16, 2018 The Company entered into a consulting agreement with Dr. David Hellman for marketing and promotion services. The term is 1 year with payment of 50,000 warrants each month to purchase common stock with an exercise price of $0.60. However, if the consultant generates more than $10,000 in monthly sales, the warrants will have an exercise price of $0.30, and if the consultant generates more than $20,000 in monthly sales, the warrants may be exercised on a cashless basis. Additionally, the Company agreed to pay to the consultant 10% of retail sales and 5% of wholesale sales. On July 11, 2018 the Company terminated the agreement. On August 1, 2018 the Company entered into a new consulting agreement with Dr. Hellman. The term is 1 year with payment of 60,000 warrants each month (an aggregate of 720,000 warrants) to purchase common stock with an exercise price of $0.60. The warrants may be exercised on a cashless basis. During the three and months ended February 28, 2019 the Company recognized a (gain) / expense of $8,225 and $(107,618), respectively due to a remeasurement of this nonemployee award. On October 30, 2018, the Company entered into an employment agreement with Ms. Noel pursuant to which Ms. Noel will serve as the Company’s Chief Executive Officer and president for a term of four years, unless earlier terminated pursuant to the terms of the employment agreement. Pursuant to the terms of the employment agreement, Ms. Noel’s annual salary is $96,000 and she received a warrant to purchase up to 20,000,000 shares of the Company’s common stock at an exercise price of $0.0001 per share. Ms. Noel exercised the warrant and was issued the 20,000,000 shares on October 31, 2018. The fair value of this award was determined to be $2,598,138 of which $162,384 and $216,512 was recognized during the three and six months ended February 28, 2019, respectively. Unamortized expense at February 28, 2019 is $2,381,627. The shares received upon the exercise of the warrants are subject to forfeiture over a service period of four years. The shares will be required to be returned to the Company as follows and the Company accounts for forfeitures when they occur: Ms. Noel shall return 80% of the common stock to the Company if she is not serving as Chief Executive Officer of the Company pursuant to the terms and conditions of her employment agreement as of October 2019 (the first anniversary of the employment agreement); Ms. Noel shall return 60% of the common stock to the Company if she is not serving as the Chief Executive Officer of the Company pursuant to the terms and conditions of the employment agreement as of the second anniversary of the employment agreement (October, 2020); Ms. Noel shall return 40% of the common stock to the Company if she is not serving as Chief Executive Officer of the Company pursuant to the terms and conditions of the employment agreement as of the third anniversary of the employment agreement (October 2021); Ms. Noel shall return 20% of the Common Stock to the Company if she is not serving as the Chief Executive Officer of the Company pursuant to the terms and conditions of the Employment Agreement as of the fourth anniversary of the employment agreement (October, 2022); The following table summarizes the warrant activities during the six months ended February 28, 2019 and the year ended August 31, 2018, respectively: Number of Warrants Weighted- Average Price Per Share Outstanding at August 31, 2018 2,830,000 $ 0.79 Granted 20,660,000 0.02 Canceled or expired - - Exercised (20,000,000 ) 0.00 Outstanding at February 28, 2019 3,490,000 $ 0.74 Exercisable at February 28, 2019 2,810,000 $ 0.79 Intrinsic value at February 28, 2019 and August 31, 2018 $ - $ - 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 six months ended February 28, 2019 Risk-free interest rate at grant date 1.11% -2.92% Expected stock price volatility 159% - 251% Expected dividend payout - Expected option in life-years .7 - 6.0 years OPTIONS On July 26, 2017 the Company granted a nonemployee options to purchase 2,200,000 shares of common stock. The options have a three year term. 1,000,000 options were immediately exercisable on the date of issuance with an exercise price of $0.001 and the remaining 1,200,000 options vest over a period of three years at an exercise price of $1.00. On July 26, 2017, 1,000,000 shares were exercised. During the three and six months ended February 28, 2019 the Company recognized a gain of $(7,419) and $(376,250), respectively. Number of Weighted- Outstanding at August 31, 2018 1,200,000 $ 1.00 Granted - - Canceled or expired - - Exercised - - Outstanding at February 28, 2019 1,200,000 $ 1.00 Exercisable at February 28, 2019 900,000 1.00 Intrinsic value at February 28, 2019 and August 31, 2018 $ - $ - |