NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2021
(Unaudited)
NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS
Boatim Inc.. (“we”, “our, “Boatim”, the “Company”) is a for profit corporation established under the corporate laws of the State of Nevada on August 15, 2014. Its fiscal year end is August 31.
Boatim, Inc. established Boatim Europe S.L. (“Boatim Europe”) as a private limited company pursuant to the laws of Spain on December 18, 2019, with the Company having indirect control of one hundred percent of the issued and outstanding membership interests of Boatim Europe. Boatim Europe commenced operations in February 2020 and is engaged in the business of providing software development, marketing, and selling services for Boatim Inc.
We acquired and further developed the Boatim software platform which is an online boat trading marketplace that combines data-driven technology and our digital marketing capabilities to offer a rolling subscription for service model of access to the platform for the extensive market of global boat dealers.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The Company prepares its consolidated financial statements on the accrual basis of accounting. The accompanying consolidated financial statements include the accounts of the Company, and its wholly owned subsidiary. All intercompany accounts, balances and transactions have been eliminated in the consolidation as at November 30, 2021.
Basis of Presentation
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for financial information and with the instructions to Form 10-Q. They do not include all information and footnotes required by United States generally accepted accounting principles for complete financial statements. The unaudited interim financial statements should be read in conjunction with those financial statements included in the Form 10-K. In the opinion of Management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the three months ended November 30, 2021 are not necessarily indicative of the results that may be expected for the year ending August 31, 2022.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
Fixed Assets
Fixed assets are stated at historical cost less accumulated depreciation. The historical cost of acquiring an item of fixed assets includes the costs necessarily incurred to bring it to the condition and location necessary for its intended use. Costs associated with repairs and maintenance are expensed as incurred. Depreciation is provided using the straight-line method over the estimated useful lives of the assets, which are 3 years.
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients.
Fair Value of Financial Instruments
ASC 825, “Disclosures about Fair Value of Financial Instruments”, requires disclosure of fair value information about financial instruments. ASC 820, “Fair Value Measurements” defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of November 30, 2021 and August 31, 2021.
Authoritative literature provides a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement as follows:
Level 1 - Quoted market prices available in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
Level 3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.
The respective carrying values of certain on-balance-sheet financial instruments approximate their fair values. These financial instruments include cash, accounts payable, convertible notes and notes payable. Fair values were assumed to approximate carrying values for these financial instruments due to their short term maturities.
Foreign Currency
Assets and liabilities of Boatim Europe are translated into U.S. dollars at the respective rates of exchange prevailing at the end of the reporting period. Income and expense accounts are translated at average exchange rates prevailing during the reporting period. Translation adjustments resulting from this process are recorded directly in equity as accumulated other comprehensive income (loss) (“AOCI”) and will be included as income or expense only upon sale or liquidation of the underlying entity. Boatim Europe considers its local currency (EURO) as its functional currency.
In accordance with ASC Topic 830-30, “Translation of Financial Statements”, monetary asset and liability accounts are translated into the Company’s reporting currency, the US dollar, using the closing exchange rate in effect at the balance sheet date, nonmonetary accounts are translated using historical exchange rates and income and expense accounts are translated using the average exchange rate prevailing during the reporting period.
Translation of amounts from the local currency of Boatim Europe into US$ has been made at the following exchange rates:
|
|
|
November 30,
2021
|
|
|
August 31,
2021
|
|
|
Current EUR: US$ exchange rate
|
|
|
1.1288
|
|
|
|
1.1771
|
|
|
Average EUR: US$ exchange rate
|
|
|
1.1595
|
|
|
|
1.1951
|
|
Capitalized Software Development Costs
Computer software development costs related to software developed for internal use falls under the accounting guidance of ASC Topic 350-40, Intangibles Goodwill and Other–Internal Use Software, in which computer software costs are expensed as incurred during the preliminary project stage and capitalization begins in the application development stage once the capitalization criteria are met. Costs associated with post implementation activities are expensed as incurred.
Costs capitalized during the application development stage include external direct costs of materials and services consumed in developing or obtaining internal-use software. During the three months ended November 30, 2021 and for the fiscal year ended to August 31, 2021, a total of $0 and $321,562 in software development costs has been incurred, respectively.
Impairment of Long-Lived Assets
The Company’s long-lived assets, including intangibles, are reviewed for impairment whenever events or changes in circumstances indicate that the historical-cost carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the asset by comparing the undiscounted future net cash flows expected to result from the asset to its carrying value. If the carrying value exceeds the undiscounted future net cash flows of the asset, an impairment loss is measured and recognized. An impairment loss is measured as the difference between the net book value and the fair value of the long-lived asset. Long-lived assets were evaluated for impairment and the Company recorded impairment loss on Capitalized software development costs of $0 during the three months ended November 30, 2021 and 2020, respectively.
Leases
As of September 1, 2019, the Company adopted the provisions of “Accounting Standards Codification Topic 842 Leases (ASC 842)” using the modified retrospective basis for all agreements
The Company recognizes a right-of-use asset and lease liability for all financing and operating leases with terms greater than twelve months. The lease liability is measured based on the present value of the lease payments not yet paid. The right-of-use asset is measured based on the initial measurement of the lease liability adjusted for any direct costs incurred upon commencement of the lease. The right-of-use assets are amortized on a straight-line basis over the lease term, and are tested for impairment in a manner consistent with the other long-lived assets held by the Company.
Use of Estimates
The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Management makes its best estimate of the outcome for these items based on information available when the financial statements are prepared. Actual results could differ from those estimates.
Basic and Diluted Loss Per Share
The Company computes earnings (loss) per share in accordance with ASC 260-10-45 “Earnings per Share”, which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic earnings (loss) per share is computed by dividing net earnings (loss) available to common stockholders by the weighted average number of outstanding common shares during the period. Diluted earnings (loss) per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive earnings (loss) per share excludes all potential common shares if their effect is anti-dilutive. For the three months ended November 30, 2021 and 2020 [LG2], potential dilutive instruments were anti-dilutive due to the Company’s net losses.
Stock Based Compensation
The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors and non-employees (effective September 1, 2019), the fair value of the award is measured on the grant date. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period. Stock-based compensation expense is recorded by the Company in the same expense classifications in the consolidated statements of operations, as if such amounts were paid in cash.
Recent Accounting Pronouncements
On December 18, 2019, the FASB issued ASU 2019-12, which modifies ASC 740 to simplify the accounting for income taxes. The ASU’s amendments are based on changes that were suggested by stakeholders as part of the FASB’s simplification initiative (i.e., the Board’s effort to reduce the complexity of accounting standards while maintaining or enhancing the helpfulness of information provided to financial statement users. This ASU was adopted by the Company on September 1, 2021. The Company evaluated and concluded that the adoption did not have a material impact on the Company’s financial position, results of operations or cash flows.
In May 2021, the FASB issued ASU 2021-04 in response EITF consensus. This ASU addresses how the issuer should account for modifications or exchanges of Freestanding Equity Classified Written Call Options. Freestanding written call options (such as warrants) are sometimes issued to enhance the marketability of a company’s debt or common stock offering. Some of these warrants are classified as equity in the issuer’s financial statements but are not accounted for as either stock compensation or derivatives. US GAAP does not address how the issuer should account for modifications of these instruments. The FASB has approved an EITF consensus to fill that void. Under the new guidance, if the modification does not change the instrument’s classification as equity, the company that issued the warrants accounts for the modification as an exchange of the original instrument for a new instrument. In general, if the fair value of the ‘new’ instrument is greater than the fair value of the ‘original’ instrument, the excess is recognized based on the substance of the transaction, as if the issuer had paid cash. The new rule is effective for fiscal years beginning after December 15, 2021 for both public and private companies. Transition is prospective. Early adoption is permitted, as discussed further below. The Company is evaluating whether this will have any impact of on its consolidated financial statements.
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC did not or in management’s opinion will not have a material impact on the Company’s present or future consolidated financial statements.
NOTE 3 – GOING CONCERN
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. However, the Company had no revenues for the three months ended November 30, 2021 and incurred recurring losses. In addition, the Company had a negative working capital as of November 30, 2021 and has not completed its efforts to establish a stable source of revenues sufficient to cover operating costs over an extended period of time. Therefore, there is substantial doubt about the Company’s ability to continue as a going concern.
Management anticipates that the Company will be dependent, for the near future, on borrowings from related party to fund operating expenses. In light of management’s efforts, there are no assurances that the Company will be successful in any of its endeavors or become financially viable and continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty.
NOTE 4 – RELATED PARTY TRANSACTIONS
Mr. Robert Glass, a lawyer, is providing services free of charge from time to time, such services involving advice on accounting matters and processing of information for reporting services.
During the fiscal year ended August 31, 2021, Cayo Ventures GmbH (“Cayo”), a related party, advanced a total of $1,216,420 to the Company. Cayo is owned by the former majority shareholder and former officer, Mr. Yves Toelderer. On June 07, 2021 and June 08, 2021, the Company issued convertible notes in the amount of $696,000 and $441,000 to two unrelated parties, in exchange for their assumption of related party loans owed to Cayo for the same amounts. There was no gain or loss on extinguishment recorded on the old Cayo Venture loan. During the three months ended November 30, 2021 and 2020, Cayo Ventures advanced the Company a total of $192,541 and $490,212, respectively. As of November 30, 2021 and August 31, 2021, the Company owed a total of $619,992 and 427,451, respectively, to Cayo, which includes $2,833 owed to Yves Toelderer. These loans are unsecured, non-interest bearing and due on demand.
On June 1, 2020, the Company entered into services agreement with Mr. Wolfgang Tippner, as Chief Executive Officer. The agreement calls for a sign-on bonus of $24,000, payable within 6 months from the date of the agreement and a cash compensation for his services of $8,000 per month. During the three months ended November 30, 2021 and August 31, 2020, a total of $0 has been paid to Mr. Tippner, respectively. . As of November 30, 2021 and August 31, 2021, $120,000 in accrued compensation remains outstanding.
On July 1, 2020, the Company entered into a service agreement with Mr. Patrick Burkert, as Chief Marketing Officer. The agreement calls for a sign on bonus of 500,000 shares of restricted common stock, of which 50,000 shares are due within two weeks of the date of the agreement, 200,000 shares after 6 months, and the remaining shares after 12 months. He will also receive a base salary of €144,000 per year. In addition, Mr. Burkert is eligible to receive a performance bonus equal to 50% of his base salary, based upon targets set by the board of directors of the Company. None of the bonus has been earned to date. Mr. Patrick Burkert resigned as a member of the Board of Directors on February 12, 2021. During the three months ended November 30, 2021 and 2020, a total of $0 and $38,794,respectively, has been paid to Mr. Burkert in cash compensation. As of November 30, 2021 and August 31, 2021, $0 in accrued cash compensation remains outstanding.
On January 1, 2021, the Company entered into a service agreement with Mr. Benjamin Salter, as Director and Chief Financial Officer. The agreement calls for a sign on bonus of options for 500,000 shares of common stock at a strike price of $0.10 per share. See Note 10. The options must be exercised within 15 months from the date of the agreement and can be executed no earlier as follows: 50,000 within two weeks of the date of the agreement, 200,000 shares after 6 months, and the remaining shares after 12 months. The agreement calls for a base salary of Swiss francs (CHF) 150,000 per year, increasing to CHF 180,000, payable in increments of CHF 15,000 per month from April 1, 2021 onward. In addition, Mr. Salter is eligible to receive a performance bonus equal to 50% of his base salary, based upon targets set by the board of directors of the Company. During the three months ended November 30, 2021 a total of $43,992 has been paid to Mr. Salter in cash compensation. As of November 30, 2021 and August 31, 2021, $87,889 and $78,679 in accrued cash compensation remains outstanding, respectively. As of August 31, 2021, there was $0 earned or accrued for a performance-based bonus. Mr. Salter resigned as a member of the Board of Directors and as CFO on March 19, 2021 but continues with the Company heading business development and operations in Europe.
On April 1, 2021, the Company entered into an independent contractor agreement with Mr. Salter, as Head of Operations. The agreement calls for a monthly payment of CHF 14,000 per month with CHF 8,000 to be paid in cash and the balance of $6,000 to be deferred on a monthly basis up to an amount not exceeding CHF 70,000 with payment terms to be decided by the Company. In addition, Mr. Salter is to receive options for 25,000 shares of common stock each month at a strike price of $0.10 per share with a term of 15 months. The Company agreed to also make a cash payment to Mr. Salter on exercise of his options of $2,500. During the year ended August 31, 2021, the Company recognized $31,331 of stock-based compensation expense for the options granted under this agreement. During the three months ended November 30, 2021 a total of $26,480 in cash compensation was paid to Mr. Salter under this agreement, and $19,840 of stock options were granted. On January 1, 2022, Mr. Salter resigned as head of business development and operations in Europe.
On March 19, 2021, the Company entered into a service agreement with Mr. Mario Beckles, as Director and Chief Financial Officer, commencing on April 1, 2021. The agreement calls for cash compensation in the amount of $3,000 per month to be paid monthly. During the three months ended November 30, 2021 a total of $6,000 has been paid to Mr. Beckles in cash compensation. As of November 30, 2021 and August 31, 2021, $7,500 and $4,500 unpaid cash compensation is outstanding, respectively.
On June 22, 2021, the Company entered into an employment agreement with Mr. Joseph Johnson, as a member of the Board of Directors and as Chief Executive Officer. The agreement provides for a base salary of $250,000 per year, subject to an inflationary increase using the US Consumer Price Index. The agreement also provides for an annual incentive bonus equal to 200% of his base salary and a sign on bonus of 1,000,000 shares of unrestricted common stock which will be fully vested with a service period of six (6) months from the date of the agreement. In addition, Mr. Johnson is eligible to receive a performance bonus equal to 1,000,000 fully vested shares of common stock for each net liquid $1,000,000 in equity raised by the Company during his first six (6) months of tenure as CEO, up to a maximum of 5,000,000 shares.. During the three months ended November 30, 2021 a total of $62,499 was earned but unpaid to Mr. Johnson and $225,000 in stock based compensation has been earned but not issued to Mr. Johnson to date. As of November 30, 2021, there was $0 earned or accrued for the incentive-based bonus. As of November 30, 2021 and August 31, 2021, $83,332 and $20,833 unpaid cash compensation is outstanding, respectively.
NOTE 5 – LEASES
On February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842). The ASU introduces a new leasing model for both lessees and lessors. Topic 842 provides guidance in how to identify whether a lease arrangement exists. Management has evaluated its leasing arrangements and has classified these as operating leases. Additionally, the lease terms of each of our office leases are short term in nature, however, the Company elected to apply ASC Topic 842 to these leases, because we intend to renew each lease for terms longer than 12 months. As a result of the adoption of ASC Topic 842, the Company recognized a right-of-use asset and operating lease liabilities based on the present value of the minimum rental payments.
Operating Lease Obligations
On August 1, 2019, the Company entered into an office lease for a six person office space located at Marina Port Vell Carrer de l'Escar, 26, 08039 Barcelona Spain with OneCoWork. The lease calls for rent payments of €2,340 plus VAT in monthly payments. The lease begins August 01, 2019, is month to month with a six month permanency clause, of which management intends to renew. On April 30, 2021, the Company terminated this six person office lease and it was not renewed. As a result of the early termination of this lease, the Company wrote off $6,842 in remaining operating lease obligation and right of use asset on April 30, 2021, in accordance with ASC Topic 842.
On December 1, 2019, the Company entered into an office lease for a nine person office space located at Marina Port Vell Carrer de l'Escar, 26, 08039 Barcelona Spain with OneCoWork. The lease calls for rent payments of €3,120 plus VAT in monthly payments. The lease begins December 1, 2019, is month to month with a six month permanency clause, of which management intends to renew. On April 30, 2021, the Company ended this nine person office lease and entered into an 8 person lease contract on May 1, 2021. As a result of the early termination of this lease, the Company wrote off $27,318 in remaining operating lease obligation on April 30, 2021, in accordance with ASC Topic 842. This new lease calls for rent payments of €1,800 plus VAT in monthly payments. In addition, the lease also includes the use of a flexible work desk for an additional €150 plus VAT. The lease begins May 1, 2021, is month to month with no permanency clause, of which management intends to renew for 24 months. Management has evaluated this new leasing arrangement and has classified this as an operating lease and has accounted for it as a separate new lease contract due to the changes that were noted in this lease. The Company has elected to apply ASC Topic 842 to this lease, because we intend to renew this lease for a term longer than 12 months. As a result of the adoption of ASC Topic 842, the Company has recognized a right-of-use asset of $68,397 and operating lease liability of $68,397 on this lease.
On April 20, 2020, the Company entered into an office lease for a six-person office space located at Marina Port Vell Carrer de l'Escar, 26, 08039 Barcelona Spain with OneCoWork. The lease calls for rent payments of €2,550 plus VAT in monthly payments. The lease begins April 20, 2020 is month to month with a six month permanency clause, of which management intends to renew. On April 30, 2021, the Company terminated this six-person office lease and it was not renewed. As a result of the early termination of this lease, the Company wrote off $41,859 in remaining operating lease obligation on April 30, 2021, in accordance with ASC Topic 842.
The Company has recorded operating lease expense in the amount of $7,078 and $29,307 during the three months ended November 30, 2021 and 2020, respectively As of November 30, 2021, the Company had $47,851 ($55,743, August 31, 2021) in Right of Use Asset and $45,104 (55,743, August 31, 2021) Operating lease liability. As of November 30, 2021, the discount rate for these leases is 2.04% and the weighted average remaining term is 17 months.
Future minimum operating lease payments at November 30, 2021 consist of:
|
2021
|
|
$
|
-
|
|
|
2022
|
|
|
24,062
|
|
|
2023
|
|
|
21,388
|
|
|
Total minimum lease payments
|
|
|
45,450
|
|
|
Less: present value discount
|
|
|
(346
|
)
|
|
Present value of minimum lease payments
|
|
|
45,104
|
|
|
Current portion of operating lease obligation
|
|
|
23,716
|
|
|
Operating Lease obligation, less current portion
|
|
$
|
21,388
|
|
NOTE 6 – LOAN PAYABLE
On February 11, 2021, the Company received a short-term loan from an unrelated third party in the amount of $20,000. The loan is unsecured, has no maturity date and is non-interest bearing. On August 28, 2020, this loan was assigned to an unrelated third party for the full amount of the loan. The loan is also unsecured, has not maturity and is non-interest. As of November 30, 2021 and August 31, 2021, $20,000 remains outstanding.
NOTE 7 – CONVERTIBLE NOTES
On July 21, 2020, the Company issued convertible notes in the amount of $500,000 and $560,000 to two unrelated parties, in exchange for their assumption of the December 8, 2018 note and related party loans owed to Cayo for the same amounts. (See Note 4). The notes do not bear interest and matured on January 22, 2021. The first note in the amount of $500,000 is convertible into common shares at the rate equivalent to 70% of the Company’s 30-day average stock price prior to conversion. The second note in the amount of $560,000 is convertible into common stock at the rate equivalent to 80% of the Company’s 30-day average stock price prior to conversion.
On September 22, 2020, the Board approved the issuance of up to $5,000,000 in new convertible notes, in multiple tranches, convertible at maturity into common shares. During the second, third and fourth fiscal quarters ended August 31, 2021 the Company has received tranches of $62,500, $45,000, $60,000, $110,000, $130,000, $83,000 and $48,100, respectively from unrelated parties under this facility. The note in the amount of $62,500 matures on March 31, 2021 and is convertible into common stock at the rate equivalent to 80% of the Company’s 30-day average stock price prior to conversion. The note in the amount of $45,000 matures on June 22, 2021, the note in the amount of $60,000 matures on July 22, 2021, the note in the amount of $110,000 matures on August 22, 2021, the note in the amount of $130,000 matures on September 22, 2021, the note in the amount of $48,100 matures on October 1, 2021 and the note in the amount of $83,000 matures on October 1, 2021; these notes are convertible into common stock at the rate equivalent to 80% of the Company’s 30-day average stock price prior to conversion but no less than $0.10 value per share of common stock.
Due to these provisions, the embedded conversion option of the notes issued under the September 22, 2020 issuances do not qualify for derivative accounting under ASC 815-15, Derivatives and Hedging.
On January 10, 2021 the holder of the note in the amount of $500,000 converted $500,000 of its note into 578,681 shares of common stock and the unamortized discount at the date of conversion of $27,838 was written off to interest expense.
On January 10, 2021 the holder of the note in the amount of $560,000 converted $560,000 of its note into 567,108 shares of common stock and the unamortized discount at the date of conversion of $22,439 was written off to interest expense.
On April 23, 2021 the holder of the note in the amount of $62,500 converted $62,500 of its note into 135,038 shares of common stock.
On June 7, 2021 and June 8, 2021, the Company issued convertible notes in the amount of $696,000 and $441,000 to two unrelated parties, in exchange for their assumption of related party loans owed to Cayo for the same amounts. These notes are convertible into common stock at the rate equivalent to 80% of the Company’s 30-day average stock price prior to conversion but no less than $0.10 value per share of common stock. Due to these provisions, the embedded conversion option does not qualify for derivative accounting under ASC 815-15, Derivatives and Hedging.
A summary of value changes to the notes for the three months ended November 30, 2021 is as follows:
|
Carrying value of Convertible Notes at August 31, 2021
|
|
$
|
1,613,556
|
|
|
New principal
|
|
|
-
|
|
|
Total principal
|
|
|
1,613,556
|
|
|
Less: conversion of principal
|
|
|
-
|
|
|
Less: discount related to fair value of the embedded conversion feature
|
|
|
-
|
|
|
Less: discount related to original issue discount
|
|
|
-
|
|
|
Add: amortization of discount
|
|
|
-
|
|
|
Carrying value of Convertible Notes at November 30, 2021
|
|
$
|
1,613,556
|
|
NOTE 8 – COMMON STOCK
On October 26, 2021, the Company issued 875,000 common shares to an unrelated third party vendor for marketing services valued at $0.415 per share for a total $363,126.
On November 12, 2021, the Company issued 1,055,556 common shares to an unrelated third party vendor for marketing services valued at $0.36 per share for a total $380,000. As of November 30, 2021, and August 31, 2020, a total of 53,711,394 and 51,780,838 shares of common stock were issued and outstanding, respectively.
NOTE 9 - SHARE-BASED COMPENSATION
Stock Options
During the three months ended November 30, 2021, the Company granted options for the purchase of the Company’s common stock to certain employees and consultants as consideration for services rendered. The terms of the stock option grants are determined by the Company’s Board of Directors. The Company’s stock options generally vest upon the one-year anniversary date of the grant and have a maximum term of fifteen months.
The following summarizes the stock option activity for the three months ended November 30, 2021:
|
|
|
Options
Outstanding
|
|
|
Weighted-Average
Exercise Price
|
|
|
Balance as of August 31, 2021
|
|
|
175,000
|
|
|
$
|
0.10
|
|
|
Grants
|
|
|
75,000
|
|
|
|
0.10
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
Balance as of November 30, 2021
|
|
|
250,000
|
|
|
$
|
0.10
|
|
The total share-based compensation expense in connection with issuance of stock options recognized during the three months ended November 30, 2021 was $19,840. The fair value of each stock option is estimated on the date of grant using the Black-Scholes-Merton option pricing model with the following weighted average assumptions for stock options granted during the three months ended November 30, 2021:
|
Expected term (years)
|
|
1.25 years
|
|
|
Expected stock price volatility
|
|
144-154
|
%
|
|
Weighted-average risk-free rate
|
|
0.10-0.20
|
%
|
|
Expected dividend
|
|
|
-
|
|
Volatility is a measure of the amount by which a financial variable such as share price has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. The Company estimates expected volatility giving primary consideration to the historical volatility of its common stock. The risk-free interest rate is based on the published yield available on U.S. Treasury issues with an equivalent term remaining equal to the expected life of the stock option. The expected lives of the stock options represent the estimated period of time until exercise or forfeiture and are based on the simplified method of using the mid-point between the vesting term and the original contractual term.
The following summarizes certain information about stock options vested and expected to vest as of November 30, 2021:
|
|
|
Number of
Options
|
|
|
Weighted-Average
Remaining
Contractual Life
(in Years)
|
|
|
Weighted-Average
Exercise
Price
|
|
|
Outstanding
|
|
|
250,000
|
|
|
|
0.83
|
|
|
$
|
0.10
|
|
|
Exercisable
|
|
|
250,000
|
|
|
|
0.83
|
|
|
$
|
0.10
|
|
|
Expected to vest
|
|
|
0
|
|
|
|
0.83
|
|
|
$
|
0.10
|
|
Restricted Stock Awards
The following summarizes the restricted stock activity for the three months ended November 30, 2021:
|
|
|
|
|
|
Weighted-Average
|
|
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Balance as of August 31, 2021
|
|
|
450,000
|
|
|
$
|
1.25
|
|
|
Shares of restricted stock granted
|
|
|
-
|
|
|
|
-
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
Cancelled
|
|
|
-
|
|
|
|
1.25
|
|
|
Balance as of November 30, 2021
|
|
|
450,000
|
|
|
$
|
1.25
|
|
|
|
|
November 30,
|
|
|
August 31,
|
|
|
Number of Restricted Stock Awards
|
|
2021
|
|
|
2021
|
|
|
Vested
|
|
|
450,000
|
|
|
|
450,000
|
|
|
Non-vested
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
450,000
|
|
|
|
450,000
|
|
As of November 30, 2021 and August 31, 2021, there was unrecognized compensation cost of $0, related to non-vested share-based compensation, respectively, which is expected to be recognized over the next year. In addition, none of the restricted share awards presented above has been issued or outstanding as of November 30, 2021.
NOTE 10 – SUBSEQUENT EVENTS
On January 4, 2022, the Company received $217,500 in exchange for a December 20, 2021 secured convertible note in the amount of $275,000 from an unrelated third party, This note, was issued with a $27,500 original issue discount, a $27,500 one time interest charge and a $2,500 charge for legal fees. The note matures 12 months after the issuance date and bears a 10% interest rate. The note is convertible at any time at a fixed price of $0.13 or the finalized price in a Reg A offering and in the event of default notice a conversion price of $0.01 per share. In addition the Company issued to the note holder 2,750,000 common stock as commitment shares as well as 1,100,000 warrants shares to purchase common stock at a exercise price of $0.25 per share.
On January 7, 2022, the Company received $143,166 in exchange for a December 22, 2021 secured convertible note in the amount of $166,666 from an unrelated third party, This note, was issued with a $16,666 original issue discount, $3,333 one commission charge and a $3,500 charge for legal fees. The note matures eight months from the date of issuance and bears a 5% interest rate. The note is convertible at any time at a fixed price of $0.15 or the finalized price in a Reg A offering and in the event of default notice a conversion price of $0.01 per share In addition the Company issued to the note holder 456,621 common stock as commitment shares as well as 277,778 warrants shares to purchase common stock at a exercise price of $0.30 per share.