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 Preferred stock with a par value of $0.001. 1,000 shares of Preferred stock are designated as Series A Convertible Preferred stock. 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. On September 18, 2017, the Company issued 900,000 shares of common stock in connection 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 discount to the note that is being amortized to interest expense over the life of the note. On September 22, 2017, the company issued 900,000 shares of common stock and 300,000 warrants pursuant to a stock purchase agreement for cash of $60,300. On November 10, 2017, the Company issued an aggregate of 1,400,000 shares of common stock to the holder of a related party convertible promissory note, to convert principal amount of $11,200. On November 27, 2017, the Company issued an aggregate of 1,450,000 shares of common stock to the holder of a related party 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 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, the Company entered into a securities purchase agreement with an investor which following such investment was a related party. Pursuant to the purchase agreement, upon closing on March 7, 2018, the Company issued and sold to the investor, 3,000,000 shares of common stock for an aggregate purchase price of $300,000. The Company agreed to issue additional shares of common stock to the investor for no additional consideration, in the event that, during the six month period commencing on the closing date, the Company sold common stock at a purchase price lower than $0.10, such that the total number of shares of common stock received by the investor under the purchase agreement (including the additional 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 of over $100,000 to any officer or director for a period of 12 months from the closing date. 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 were 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. 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 to the investor for no additional consideration, in the event that, during the six month period commencing on the closing date, the Company sold common stock at a purchase price lower than $0.10, such that the total number of shares of common stock received by the investor under the purchase agreement (including the additional 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 or director for a period of 12 months from the closing date. On June 11, 2018, the Company issued an aggregate of 2,000,000 shares of common stock to the holder of a convertible promissory note, dated November 14, 2016 to convert principal amount and accrued interest of $16,000. 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 and 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 Mr. Yahr's 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 August 31, 2019 the Company was obligated to issue 500,000 shares of common stock valued at $76,000. On March 20, 2019 the Company issued 500,000 shares of common stock valued at $32,950 ($0.066 per share) pursuant to a consulting agreement. The term of the agreement is one year and the Company agreed to pay the consultant $20,000 per month once it receives proceeds of financing transactions of at least $250,000. During the year ended August 31, 2019, the Company sold a total of 15,252,381 shares of common stock for proceeds of $421,250. On April 22, 2019, the Company entered into an exchange agreement with a debenture holder. Pursuant to the exchange agreement, the lender exchanged convertible debentures of the Company, consisting of convertible debentures in the original principal amounts of $540,000 and $120,000, an aggregate of $93,565 (including $53,790 pursuant to the $540,000 debenture and $39,775 under the $120,000 debenture) of accrued amounts as the lender was entitled to receive under such debentures as the greater of 5% of every dollar raised through financing or every dollar of revenue generated through the earlier of maturity date and repayment of the principal, and an aggregate of 1,000,000 warrants to purchase shares of common stock of the Company, for an aggregate of 11,000,000 newly issued shares of common stock of the Company. On April 22, 2019, the Company entered into an exchange agreement with a debenture holder. Pursuant to the exchange agreement, the holder exchanged a convertible debenture of the Company, in the original principal amount of $180,000, $44,775 of accrued amounts as the lender was entitled to receive greater of 5% of every dollar raised through financing or every dollar of revenue generated through the earlier of maturity date and repayment of the principal and 300,000 warrants to purchase shares of common stock of the Company, for an aggregate of 3,000,000 newly issued shares of common stock of the Company. On May 5, 2019 the Company issued 500,000 shares of common stock valued at $29,000 ($0.058 per share) pursuant to a consulting agreement. The term of the agreement was six months and the Company agreed to pay the consultant $2,500 per month. Effective November 11, 2019, this agreement was terminated and the Company issued an additional 4,500,000 shares of common stock. Warrants On September 18, 2017, the Company issued to related party, an $180,000 convertible debenture with an original issue discount of $60,000. The debenture had a 0% interest rate and a term of two years. In connection with the debenture, 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. On April 22, 2019, the Company entered into an exchange agreement with the lender. Pursuant to the exchange agreement, the lender exchanged the convertible debenture of the Company, in the original principal amount of $180,000, $44,775 of accrued amounts as the lender was entitled to receive under such debenture as the greater of 5% of every dollar raised through financing or every dollar of revenue generated through the earlier of maturity date and repayment of the principal and 300,000 warrants to purchase shares of common stock of the Company, for an aggregate of 3,000,000 newly issued shares of common stock of the Company (see Note 4). On December 13, 2017, the Company issued 100,000 warrants to a lender. The relative fair value of the warrants of $4,984 was recognized as a discount to the debenture. On April 22, 2019, the Company entered into an exchange agreement with the lender. Pursuant to the exchange agreement, the lender exchanged the convertible debentures of the Company, consisting of the convertible debenture in the original principal amount of $540,000 referred to below and the additional convertible debenture in the original principal amount of $120,000, an aggregate of $93,565 (including $53,790 pursuant to the $540,000 debenture and $39,775 under the $120,000 debenture) of accrued amounts as the lender was entitled to receive under such debentures as the greater of 5% of every dollar raised through financing or every dollar of revenue generated through the earlier of maturity date and repayment of the principal, and an aggregate of 1,000,000 warrants to purchase shares of common stock of the Company, for an aggregate of 11,000,000 newly issued shares of common stock of the Company (see Note 4). On April 11, 2017, the Company issued a $540,000 related party convertible debenture with an original issue discount of $180,000. The note had 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 of common stock and 900,000 warrants. During the year ended August 31, 2019, 900,000 warrants were exchanged for common stock (see Note 4). 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. During the year ended August 31, 2019 the Company recognized a gain of ($30,227) 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. 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. During the year ended August 31, 2019 the Company recognized a gain of ($55,935) 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 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, 2019 the Company recognized a gain of ($1,332,332) due to a remeasurement of this nonemployee award. On March 2, 2019 the agreement was terminated. On March 20, 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. As of August 31, 2019, the agreement has expired. On April 16, 2018, the Company entered into a consulting agreement with Dr. David Hellman for marketing and promotion services. The term is 1 year with payment of 50,000 warrants each month to purchase common stock with an exercise price of $0.60. However, if the Consultant generates more than $10,000 in monthly sales, the Warrants will have an exercise price of $.30, and if the Consultant generates more than $20,000 in monthly sales, the Warrants may be exchanged in "cashless exercise". Additionally, the Company shall pay 10% of retail sales and 5% of wholesale sales. On July 11, 2018 the Company terminated the agreement. On August 1, 2018 the Company entered into a new consulting agreement with Dr. Hellman. The term is 1 year with payment of 60,000 warrants each month to purchase common stock with an exercise price of $0.60. The warrants may be exercised on a cashless basis. A total of $256,038 warrant expense in relation to this award was recognized during the year ended August 31, 2018. During the year ended August 31, 2019 the Company recognized a gain of ($217,402) due to a remeasurement of this nonemployee award. 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 the award for the year ended August 31, 2018 totaled $3,633,532. 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. 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 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 $542,390 was recognized during the year ended August 31, 2019. Unamortized expense at August 31, 2019 is $2,055,748. 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 would have been required to return 80% of the common stock to the Company if she was not serving as Chief Executive Officer of the Company pursuant to the terms and conditions of her employment agreement as of October 30, 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 30, 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 30, 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 30, 2022); The following table summarizes the warrant activities during the years ended August 31, 2018 and 2019: Number of Weighted- Outstanding at August 31, 2017 900,000 $ 1.00 Granted 1,930,000 0.69 Cancelled or expired - Exercised - - Outstanding at August 31, 2018 2,830,000 $ 0.79 Granted 21,800,000 0.04 Canceled or expired (1,300,000 ) 1.00 Exercised / Exchanged (20,000,000 ) 0.00 Outstanding at August 31, 2019 3,330,000 $ 0.56 Exercisable at August 31, 2019 2,550,000 $ 0.52 Intrinsic value at August 31, 2019 $ - The fair value of the warrants was estimated using the Black-Scholes option pricing model and the following range of assumptions: Grant Date and Re-measurement Date For the year ended August 31, 2019 Risk-free interest rate at grant date 1.45% - 2.99% Expected stock price volatility 330% - 788% Expected dividend payout - Expected life in years 2.5 - 6.0 years Grant Date and Re-measurement Date For the year ended August 31, 2018 Risk-free interest rate at grant date 1.52% -2.70% Expected stock price volatility 183% - 362% Expected dividend payout - Expected life in years 2.5 - 6.5 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 options were exercised. During the year ended August 31, 2019 the Company recognized a gain of $(310,119) due to the re-measurement of this non employee award. During the year ended August 31, 2018 the Company recognized an expense of $1,000,820. Number of Weighted- 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 Granted - - Canceled or expired - - Exercised - - Outstanding at August 31, 2019 1,200,000 $ 1.00 Exercisable at August 31, 2019 1,200,000 $ 1.00 Intrinsic value at August 31, 2019 $ - Re-measurement Date For the year ended August 31, 2019 Risk-free interest rate at grant date 1.50% - 2.78% Expected stock price volatility 207% - 394% Expected dividend payout - Expected life in years 1.0 - 3.0 years |