CONDENSED
NOTES TO THE FINANCIAL STATEMENTS
May
31, 2022 and 2021
(UNAUDITED)
NOTE
1: ORGANIZATION AND NATURE OF BUSINESS
Organization
We
were incorporated in the State of Nevada on January 10, 2017 as a wholly owned subsidiary of RealBiz Media Group, Inc., a Delaware corporation
(“RealBiz”). On July 31, 2018, RealBiz effectuated our spin-off from RealBiz. Upon completion of the spin-off, RealBiz stockholders
owned 100% of the outstanding shares of ourcommon stock.
We
are engaged in the business of providing digital media and marketing services for the real estate industry. We currently generate revenue
from service fees (video creation and production and
referral fees from our LoseTheAgent.com website). At the core of our programs is our proprietary
video creation technology which allows for an automated conversion of data (text, video slices and pictures of home listings) to a video
with voice over and music. We provide video search, storage and marketing capabilities on multiple platform dynamics for web and mobile.
Once a home, personal or community video is created using our proprietary technology, it can be published to social media, email or distributed
to multiple real estate websites.
In
addition, we own and operate the web site LoseTheAgent.com,
which is a site dedicated to peer-to-peer real estate transactions between home sellers and buyers - the so called For Sale By Owner
segment. We currently have approximately 100,000 home listings across all 50 states. We monetize the website by charging fees
for both listing a home for sale and picking up possible buyers’ messages of interest. We also plan on generating additional revenues
by monetizing seller/buyer data with targeted, interested parties. The web site is fully functional and is being marketed via various
online platforms.
Products
and Services
We
currently offer the following products and services:
Enterprise
Video Production: We service large and small broker accounts in the North America Real Estate Market in compiling listings into a
Video format and distributing to those franchisor’s websites, brokers and agents and lead generation platforms 24/7. Some of these
multiyear contracts produced over 10 million video listings from 2012-2014. These volumes, however, have declined beginning in 2017.
We currently have the ability to produce over 15,000 videos per day.
The
Virtual Tour (VT): This program was developed and implemented to allow agents to access specific video based product strategies that
are designed specifically to increase the SEO rank and traffic credit to real estate franchise systems and/or their brokers.
LoseTheAgent.com:
We own and operate the web site LoseTheAgent.com, which is a site dedicated to peer-to-peer real estate transactions between home sellers
and buyers - the so called For Sale By Owner (FSBO) segment. We currently have approximately 100,000 home listings across all 50 states.
We monetize the website by charging fees for both listing a home for sale and picking up possible buyers’ messages of interest.
We also plan on generating additional revenues by monetizing seller/buyer data with targeted, interested parties. The web site is functional
and is being marketed via various online platforms.
NOTE
2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use
of Estimates
The
accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”)
for interim financial information and with the instructions to Form 10K and Article 8 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments
(all of which are of a normal recurring nature) considered necessary for a fair presentation have been included. Operating results for
the six months ended May 31, 2022 are not indicative of the results that may be expected for the year ending November 30, 2022 or for
any other future period. These unaudited financial statements and the unaudited condensed notes thereto should be read in conjunction
with the audited financial statements and notes thereto included in the Company’s Form 10-K for the year ended November 30, 2021,
filed with the Securities and Exchange Commission (the “SEC”) on December 30, 2021.
Cash
and Cash Equivalents
The
Company considers all unrestricted demand deposits, money market funds and highly liquid debt instruments with an original maturity of
less than 90 days to be cash and cash equivalents. There were no cash equivalents as of May 31, 2022, and November 30, 2021.
Property
and Equipment
All
expenditures on the acquisition for property and equipment are recorded at cost and capitalized as incurred, provided the asset benefits
the Company for a period of more than one year. Expenditures on routine repairs and maintenance of property and equipment are charged
directly to operating expense. The property and equipment are depreciated based upon its estimated useful life after being placed in
service. The estimated useful life of computer equipment is 3 years. When equipment is retired, sold or impaired, the resulting gain
or loss is reflected in earnings. The Company’s Property and Equipment are fully depreciated.
Impairment
of Long-Lived Assets
In
accordance with Accounting Standards Codification (“ASC”) 360-10, “Property, Plant, and Equipment”, the Company
periodically reviews its long- lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount
of the assets may not be fully recoverable. The Company recognizes an impairment loss when the sum of expected undiscounted future cash
flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s
estimated fair value and its book value. The Company did not impair any long-lived assets as of May 31, 2022, and November 30, 2021.
Website
Development Costs
The
Company accounts for website development costs in accordance with Accounting Standards Codification 350-50 “Website Development
Costs”. Accordingly, all costs incurred in the planning stage are expensed as incurred, costs incurred in the website application
and infrastructure development stage that meet specific criteria are capitalized and costs incurred in the day-to-day operation of the
website are expensed as incurred.
Fair
Value of Financial Instruments
ASC
topic 820, “Fair Value Measurements and Disclosures” (ASC 820) defines “fair value” as the price that would be
received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability
in an orderly transaction between market participants on the measurement date.
ASC
820 also describes three levels of inputs that may be used to measure fair value:
Level
1: Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities traded in active markets.
Level
2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level
3: Inputs that are generally unobservable. These inputs may be used with internally developed methodologies that result in management’s
best estimate of fair value.
Financial
instruments consist principally of cash, accounts payable, accrued liabilities and other current liabilities. The carrying amounts of
such financial instruments in the accompanying balance sheets approximate their fair values due to their relatively short- term nature.
The fair value of long-term debt is based on current rates at which the Company could borrow funds with similar remaining maturities.
The carrying amounts approximate fair value. It is management’s opinion that the Company is not exposed to any significant currency
or credit risks arising from these financial instruments.
Revenue
Recognition
In
May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). This standard provides a single model for
revenue arising from contracts with customers and supersedes current revenue recognition guidance. The core principle of the guidance
is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects
the consideration to which the entity expects to be entitled in exchange for those goods or services. We adopted the standard effective
December 1, 2018, with no cumulative adjustment needed as of this date. All of our revenue is generated from the United States of America.
Revenue
is recognized when all of the following criteria are met:
●Identification
of the contract, or contracts, with a customer - A contract with a customer exists when (i) we enter into an enforceable contract
with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms
related to these goods or services, (ii) the contract has commercial substance and the parties are committed to perform, and (iii) we
determine that collection of substantially all consideration to which it will be entitled in exchange for goods or services that will
be transferred is probable based on the customer’s intent and ability to pay the promised consideration.
●Identification
of the performance obligations in the contract - Performance obligations promised in a contract are identified based on the goods
or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the
goods or service either on its own or together with other resources that are readily available from third parties or from us, and are
distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises
in the contract. To the extent a contract includes multiple promised goods or services, we apply judgment to determine whether promised
goods or services are capable of being distinct and distinct in the context of the contract. If these criteria are not met the promised
goods or services are accounted for as a combined performance obligation.
●Determination
of the transaction price - The transaction price is determined based on the consideration to which we will be entitled in exchange
for transferring goods or services to the customer adjusted for estimated variable consideration, if any. We typically estimate the transaction
price impact of discounts offered to the customers for early payments on receivables or rebates based on channel partner sales achievements.
Constraints are applied when estimating variable considerations based on historical experience where applicable.
●Allocation
of the transaction price to the performance obligations in the contract - All current contracts are of a single performance obligation
thus the entire transaction price is allocated to the single performance obligation. We determine standalone selling price taking into
account available information such as historical selling prices of the performance obligation, geographic location, overall strategic
objective, market conditions and internally approved pricing guidelines related to the performance obligation.
●Recognition
of revenue when, or as, we satisfy performance obligation - We satisfy performance obligations either over time or at a point
in time as discussed in further detail below. Revenue is recognized at or over the time the related performance obligation is satisfied
by transferring a promised good or service to a customer.
Cost
of Revenues
Cost
of revenues includes costs attributable to services sold and delivered. These costs include engineering costs incurred to maintain our
networks.
Advertising
Expense
Advertising
costs are charged to expense as incurred and are included in marketing and promotions expense in the accompanying financial statements.
Advertising expense for the six months ended May 31, 2022, and May 31, 2021 were $89 and $319, respectively.
Share-Based
Compensation
The
Company computes share based payments in accordance with Accounting Standards Codification 718-10 “Compensation” (ASC 718-10).
ASC 718-10 establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods and
services at fair value, focusing primarily on accounting for transactions in which an entity obtains employees services in share-based
payment transactions. It also addresses transactions in which an entity incurs liabilities in exchange for goods and services that are
based on the fair value of an entity’s equity instruments or that may be settled by the issuance of those equity instruments. In
March 2005, the SEC issued SAB No. 107, Share-Based Payment (“SAB 107”) which provides guidance regarding the interaction
of ASC 718-10 and certain SEC rules and regulations. The Company has applied the provisions of SAB 107 in its adoption of ASC 718-10.
The Company estimates the fair value of stock options by using the Black-Scholes option pricing model. Additionally, the Company has
early adopted ASU 2018-07 during fiscal year 2019. In June 2018, the FASB issued ASU 2018-07 Compensation—Stock Compensation (Topic
718): Improvements to Nonemployee Share-Based Payment Accounting (ASU 2018-07), which simplifies the accounting for share-based payments
to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions.
Income
Taxes
The
Company accounts for income taxes in accordance with ASC 740, Accounting for Income Taxes, as clarified by ASC 740-10, Accounting for
Uncertainty in Income Taxes. Under this method, deferred income taxes are determined based on the estimated future tax effects of differences
between the financial statement and tax basis of assets and liabilities and net operating loss and tax credit carryforwards given the
provisions of enacted tax laws. Deferred income tax provisions and benefits are based on changes to the assets or liabilities from year
to year. In providing for deferred taxes, the Company considers tax regulations of the jurisdictions in which the Company operates, estimates
of future taxable income, and available tax planning strategies. If tax regulations, operating results or the ability to implement tax-planning
strategies vary, adjustments to the carrying value of deferred tax assets and liabilities may be required. Valuation allowances are recorded
related to deferred tax assets based on the “more likely than not” criteria of ASC 740.
ASC
740-10 requires that the Company recognize the financial statement benefit of a tax position only after determining that the relevant
tax authority would more likely than not sustain the position following an audit. For tax positions meeting the “more-likely-than-not”
threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of
being realized upon ultimate settlement with the relevant tax authority. The Company has applied for an extension of time to file with
the Internal Revenue Service for its most recent tax filing.
The
Company recognizes expenses for tax penalties and interest assessed by the Internal Revenue Service and other taxing authorities upon
receiving valid notice of assessments. The Company has received no such notices as of May 31, 2022.
Earnings
Per Share
Basic
earnings per share is computed by dividing net income attributable to common stockholders by the weighted average number of shares of
common stock outstanding during the period.
Diluted
earnings per share is computed by dividing net income attributable to common stockholders by the weighted average number of shares of
common stock, common stock equivalents and potentially dilutive securities outstanding during each period. Diluted loss per common share
is equal to basic because the common stock equivalents are anti-dilutive. The Company’s anti-dilutive common stock equivalents
include the following:
SCHEDULE OF ANTI-DILUTIVE SECURITIES OUTSTANDING
| |
May 31, 2022 | | |
November 30, 2021 | |
Shares on issuance of warrants outstanding | |
| 10,217,500 | | |
| 1,428,005 | |
Shares on convertible promissory notes | |
| - | | |
| 722,443 | |
Anti-dilutive securities | |
| 10,217,500 | | |
| 2,150,448 | |
Concentrations,
Risks and Uncertainties
The
Company’s operations and revenue are related to the real estate industry and its prospects for success are tied indirectly to interest
rates and the general housing and business climates in the United States. Financial instruments and related items, which potentially
subject the Company to concentration of credit risk consists primarily of cash. The Company places its cash with high credit quality
institutions. At times, such deposits may be in excess of the FDIC insurance limit of $250,000. The Company did not have cash on deposit
in excess of such limit at May 31, 2022.
Recently
Issued Accounting Standards
The
Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not
believe that there are any other new accounting pronouncements that have been issued and not implemented that might have a material impact
on its financial position or results of operations.
NOTE
3: GOING CONCERN
The
accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business.
At
May 31, 2022, the Company had working capital of $8,070, an accumulated deficit of $997,064 and a net loss of $381,002 for the six months
ended May 31, 2022. It is management’s opinion that these facts raise substantial doubt about the Company’s ability to continue
as a going concern for a period of twelve months from the date of this filing, without additional debt or equity financing. The financial
statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts nor to the amounts
and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
In
order to meet its working capital needs through the next twelve months and to fund the growth of our business, the Company may consider
plans to raise additional funds through the issuance of additional shares of common or preferred stock and or through the issuance of
debt instruments. Although the Company intends to obtain additional financing to meet our cash needs, the Company may be unable to secure
any additional financing on terms that are favorable or acceptable to it, if at all.
COVID-19
Update
In
March 2020, the World Health Organization declared the COVID-19 outbreak to be a global pandemic. The pandemic has had significant impacts
around the globe and in many locations in which we operate. While the impacts have not caused a material adverse financial impact to
our business to date, the future impacts remain uncertain. The extent to which the COVID-19 pandemic may impact our business going forward
will depend on numerous evolving factors that we cannot reliably predict. The effect, if any, of the COVID-19 pandemic would not be fully
reflected in our results of operations and overall financial performance until future periods.
As
of May 31, 2022, COVID-19 has not had a material impact on our results of operations or financial condition.
Note
4: PROPERTY AND EQUIPMENT
At
May 31, 2022 and November 30, 2021, the Company’s property and equipment are as follows:
SCHEDULE OF PROPERTY AND EQUIPMENT
| |
Estimated Life (in years) | | |
May 31,
2022 | | |
November 30, 2021 | |
| |
| | |
| | |
| |
Office equipment | |
| 3 | | |
$ | 82,719 | | |
$ | 82,719 | |
Less: accumulated depreciation | |
| | | |
| (82,719 | ) | |
| (82,719 | ) |
| |
| | | |
| | | |
| | |
Property and equipment,
net | |
| | | |
$ | - | | |
$ | - | |
The
Company’s fixed assets are fully depreciated.
NOTE
5: ACCOUNTS PAYABLE AND ACCRUED EXPENSES
The
Company’s accounts payable and accrued expenses are as follows:
SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES
| |
May 31, 2022 | | |
November 30, 2021 | |
Trade payables and accruals | |
$ | 99,501 | | |
$ | 102,000 | |
| |
| | | |
| | |
Total accounts payable and accrued expenses | |
$ | 99,501 | | |
$ | 102,000 | |
NOTE
6: RELATED PARTY TRANSACTIONS
Convertible
Promissory Notes
During
the six months ended May 31, 2022, Mr. Aliksanyan, our Chief Executive Officer and board member, Mr. Grbelja, our Chief Financial Officer
and board member, and Mr. McLeod, our Secretary and board member, converted promissory notes for common stock as part of a Note Conversion
and Warrant Amendment Agreement (See Note 7 and Note 9).
Common
Stock Purchase Warrants
On
February 4, 2022, the Company issued 5,075,000
common stock warrants to its officers and directors.
Each warrant is convertible into 1
share of common stock with an exercise price
of $0.0925.
The warrants expire on February 4, 2027. Pursuant to the terms of the Common Stock Purchase Warrants, 1/4th of the total number of shares
underlying the warrants will vest and become exercisable on the first anniversary of the date of issuance, and an additional l/12th of
the total number of remaining shares underlying the warrants will vest and become exercisable on each of the monthly anniversaries thereafter,
in each case, so long as the holder continues to be a service provider of the Company. The foregoing vesting schedule is subject to acceleration
in the event of the service provider’s death, disability, termination without cause or a change in control of the Company. There
was $135,333
of related party stock based compensation included in general and administrative expenses and $676,667
of related party unvested stock based compensation expense as of May 31, 2022 which will be recognized through February 28, 2024.
On
May 5, 2022, Mr. Aliksanyan, our Chief Executive Officer and board member, Mr. Grbelja, our Chief Financial Officer and board member,
and Mr. McLeod, our Secretary and board member, exercised their warrants to purchase common stock. A total of 130,505 warrants were exercised
at an exercise price of $0.02 per share.
Common
Stock Purchase Warrant Amendments
On
May 26, 2022 the Company amended the 2019 and 2022 warrant agreements to reduce the exercise price from $0.20 and $0.0925, respectively,
to $0.062 per share. Mr. Aliksanyan, our Chief Executive Officer and board member, Mr. Grbelja, our Chief Financial Officer and board
member, and Mr. McLeod, our Secretary and board member, had 5,875,000 warrants outstanding as of May 31, 2022 that were included in the
amended agreements. There was no adjustment to the fair value of the 2019 and 2022 warrants as
a result of the warrant modifications. See Note 7.
Restricted
Stock Awards
On
February 4, 2022, the Company issued 825,000 shares of restricted common stock to its officers
and directors at a price per share of $0.0925, the fair market value at the date of issuance. Pursuant to the terms of the Restricted
Stock Award Agreements, the restricted common stock vests in a series of eight (8) successive equal
quarterly installments beginning on the date of grant, provided that the grantee continuously provides services to the Company
as an employee, officer, director, contractor or consultant through the applicable vesting date. The foregoing vesting schedule is subject
to acceleration in the event of the service provider’s death, disability, termination without cause, or a change in control of
the Company. There was $22,000 of related party stock based compensation included in general and administrative expenses and $110,000
of related party unvested restricted stock based compensation expense as of May 31, 2022 that will be recognized through February 28,
2024.
NOTE
7: STOCKHOLDERS’ DEFICIT
The
total number of shares of all classes of stock that the Company shall have the authority to issue is 275,000,000 shares
consisting of: 250,000,000 shares
of common stock with a $0.0001 par
value per shares; and 25,000,000 shares
of preferred stock, par value $0.0001 per
share. On May 31, 2019, we filed a certificate of designation with the Secretary of State of the State of Nevada to create a new
class of preferred stock designated as the Series A Convertible Preferred Stock. The holders of Series A Convertible Preferred Stock
are entitled to receive dividends in an amount equal to any dividends or other Distribution on the Common Stock. The holders of
Series A Convertible Preferred Stock are entitled to be paid out of the Available Funds and Assets, in preference to any payment or
distribution of any Available Funds and Assets on any shares of Common Stock or subsequent preferred stock, an amount per share
equal to the Original Issue Price of the Series A Convertible Preferred Stock plus all declared but unpaid dividends on the Series A
Convertible Preferred Stock. Each
share of Series A Convertible Preferred Stock is convertible, at the option of the holder thereof, at any time after the issuance of
such share, into one (1) share of Common Stock.
As of May 31, 2022, there were 6,008,080 shares
of common stock issued and outstanding, of which 1,145,833 shares
are restricted stock issued but not yet vested, and zero shares
of Series A Convertible Preferred Stock issued and outstanding.
Common
Stock
On
February 4, 2022, the Company issued 1,375,000 shares of restricted common stock at $0.0925 per share to its officers, contracted consultants
and professionals. Pursuant to the terms of the Restricted Stock Award Agreements, the restricted common stock vests
in a series of eight (8) successive equal quarterly installments beginning on the date of grant, provided that the grantee continuously
provides services to the Company as an employee, officer, director, contractor or consultant through the applicable vesting date. The
foregoing vesting schedule is subject to acceleration in the event of the service provider’s death, disability, termination without
cause, or a change in control of the Company. There was $36,667 of stock based compensation included in general and administrative expense
and $183,333 of unvested restricted stock based compensation expense as of May 31, 2022 that will be recognized through May 31, 2024.
As of May 31, 2022, 229,167 shares of restricted stock had vested and is included in total common shares outstanding. 1,145,833 shares
of restricted stock remain unvested and will be expensed in the future, however as of March 31, 2022 are considered outstanding as the holder of these shares have all legal and
voting rights as shareholders.
On
February 7, 2022, our existing noteholders exercised their conversion rights and were issued 678,180 shares of common stock at $0.07
and 630,029 shares of common stock at $0.035 for a total value of $69,554. As an incentive
to convert their notes, three noteholders agreed to a modification where they converted a portion of their notes at $0.035 per common
share. The share price at the time of the conversion was $0.177 which resulted in a loss on debt extinguishment of $55,712,
which is included in the loss on extinguishment of debt of $72,198 on the Statement of Operations as of May 31, 2022.
On
February 28, 2022, the company issued 1,287,500 shares of its common stock at $0.08 in exchange for $67,000 in cash and a stock subscription
receivable of $36,000. The $36,000 of the stock subscription receivable was received in March 2022.
On
May 11, 2022, our remaining noteholders exercised their conversion rights and were issued 29,066 shares of common stock at $0.07 for
a total value of $2,050.
Common
Stock Purchase Warrants
2021
Warrants
In
June 2021, the Company issued an additional 80,000 warrants pursuant to the Securities Purchase
Agreement and issuance of convertible notes in the amount of $16,000. The warrants have an exercise price of $0.10 per share and
the warrants vest immediately and expire on December 31, 2022. The grant date fair value was zero.
In
September 2021, the Company issued an additional 18,005 warrants pursuant to the Securities Purchase
Agreement and issuance of convertible notes in the amount of $3,601. The warrants have an exercise price of $0.10 per share and
the warrants vest immediately and expire on December 31, 2022. The grant date fair value was zero.
2022
Warrants
In
January 2022, the Company issued an additional 100,000 warrants pursuant to the Securities Purchase
Agreement and issuance of convertible notes in the amount of $20,000. The warrants have an exercise price of $0.10 per share and
the warrants vest immediately and expire on December 31, 2022. The Company recorded $6,275 of interest expense for these awards during
the six months ended May 31, 2022.
On
February 4, 2022, the Company issued 9,025,000 common stock warrants to its officers, contracted consultants and professionals. Each
warrant is convertible into 1 share of common stock with an exercise price of $0.0925. The warrants expire on February 4, 2027. Pursuant
to the terms of the Common Stock Purchase Warrants, 1/4th of the total number of shares underlying the warrants will vest and become
exercisable on the first anniversary of the date of issuance, and an additional l/12th of the total number of remaining shares
underlying the warrants will vest and become exercisable on each of the monthly anniversaries thereafter, in each case, so long as
the holder continues to be a service provider of the Company. The foregoing vesting schedule is subject to acceleration in the event
of the service provider’s death, disability, termination without cause or a change in control of the Company. There was $240,667
of stock based compensation expense included in general and administrative expenses as of May 31, 2022 and $1,203,333 of unvested
stock based compensation which will be recognized through February 28, 2024.
On
February 7, 2022, the Company and the purchasers under the Securities Purchase Agreement executed
Note Conversion and Warrant Amendment Agreements pursuant to which they amended the common stock purchase warrants issued pursuant to
the Securities Purchase Agreement, dated December 10, 2020, to reduce the exercise price per share from $0.10 per share to $0.02 per
share for 217,500 warrants. As a result of the warrant modification in conjunction with the note conversion, $16,486 was recorded as
a loss on extinguishment of debt for the six months ended May 31, 2022, which is included
in the loss on extinguishment of debt of $72,198 on the Statement of Operations.
On
May 5, 2022, a portion of our existing common stock warrant holders exercised their purchase right to purchase 335,505 common stock warrants
for $6,710.
On
May 26, 2022, the Company executed a Warrant Amendment Agreement pursuant to which they amended the common stock purchase warrants issued
pursuant to the 2019 warrants and 2022 warrants, reducing the exercise price per share from $0.20 and $0.0925, respectively, to $0.062.
There was no adjustment to the fair value of the 2019 and 2022 warrants as a result of the warrant modifications.
A
summary of the Company’s outstanding common stock warrants as of May 31, 2022 is as follows:
SCHEDULE OF COMMON STOCK WARRANTS OUTSTANDING
| |
| | |
Weighted | | |
| |
| |
| | |
Average | | |
| |
| |
| | |
Exercise | | |
Intrinsic | |
| |
Warrants | | |
Price | | |
Value | |
Outstanding, November 30, 2021 | |
| 1,428,005 | | |
$ | 0.176 | | |
$ | 0.00 | |
Warrants granted and issued | |
| 9,125,000 | | |
$ | 0.092 | | |
$ | 0.00 | |
Warrants exercised | |
| (335,505 | ) | |
$ | 0.020 | | |
$ | 0.00 | |
Outstanding, May 31, 2022 | |
| 10,217,500 | | |
$ | 0.089 | | |
$ | 0.00 | |
| |
| | | |
| | | |
| | |
Common stock issuable upon exercise of warrants | |
| 10,217,500 | | |
$ | 0.089 | | |
$ | 0.00 | |
The
following table summarizes information about common stock warrants outstanding at May 31, 2022:
SCHEDULE OF COMMON STOCK WARRANTS OUTSTANDING AND WARRANT EXERCISABLE
Warrants Outstanding | |
Warrants Exercisable |
Number Outstanding at | |
Weighted Average | |
Weighted Average | | |
Number Exercisable at | |
Weighted Average | |
May 31, 2022 | |
Remaining Life | |
Exercise Price | | |
May 31, 2022 | |
Exercise Price | |
10,217,500 | |
3.34 Years | |
$ | 0.062 | | |
1,192,500 | |
$ | 0.062 | |
The
Company estimates the fair value of each award on the date of grant using a Black Scholes valuation model that uses the following assumptions
for warrants modified during the six month period ended May 31, 2022:
SCHEDULE OF ASSUMPTION OF BLACK-SCHOLES OPTION PRICING MODEL
Expected volatility | |
| 658 | % |
Expected dividends | |
| 0 | % |
Expected term (in years) | |
| 5 years | |
Risk-free rate | |
| 2.7 | % |
NOTE
8: CONTINGENCIES
On
August 17, 2018, we entered into employment agreements with Alex Aliksanyan, our former Chief Executive Officer and a director, and Thomas
M. Grbelja, our Chief Financial Officer, Secretary and a director.
Pursuant
to the employment agreement with Alex Aliksanyan (the “Aliksanyan Employment Agreement”), Mr. Aliksanyan agreed to serve
as our Chief Executive Officer, and we agreed to pay Mr. Aliksanyan an annual base salary of $120,000 per year. The
initial term of the Aliksanyan Employment Agreement is 12 months and may be extended by
mutual agreement between us and Mr. Aliksanyan. On or about August 28, 2018, we entered into an oral agreement with Mr. Aliksanyan,
as memorialized by a First Amendment to Employment Agreement dated September 25, 2018, pursuant to which Mr.
Aliksanyan agreed to continue receiving his 2017 annual salary of $36,000 per year in exchange for continued employment and our
agreement to adopt an employee stock option plan or similar plan for compensating, incentivizing, retaining and attracting employees
prior to June 30, 2019, from which Mr. Aliksanyan would be eligible to receive equity securities
from time to time in the discretion of our board of directors. On April 17, 2020, we terminated the employment of Alex Aliksanyan as
our Chief Executive Officer, effective as of April 20, 2020. On April 20, 2020, we and Mr. Aliksanyan entered into that certain Separation
and Release of Claims Agreement, dated April 20, 2020, whereby Mr. Aliksanyan terminated his Employment Agreement, dated August 17, 2018,
as amended, and provided a release of claims to us in exchange for a lump sum payment equal to $1,500, representing one month of his
base salary.
Pursuant
to the employment agreement with Thomas M. Grbelja (the “Grbelja Employment Agreement”), Mr. Grbelja agreed to serve as our
Chief Financial Officer, devoting a minimum of 50% of his time and attention to his duties as Chief Financial Officer. We agreed to pay
Mr. Grbelja an annual base salary of $70,000 per year. The initial term of the Grbelja Employment
Agreement is 12 months and may be extended by mutual agreement between us and Mr. Grbelja.
On or about August 28, 2018, we entered into an oral agreement with Mr. Grbelja, as memorialized by a First Amendment to Employment Agreement
dated September 25, 2018, pursuant to which Mr. Grbelja agreed to continue receiving his 2017 annual salary of $24,000 per year in exchange
for continued employment and our agreement to adopt an employee stock option plan or similar plan for compensating, incentivizing, retaining
and attracting employees prior to June 30, 2019, from which Mr. Grbelja would be eligible to receive equity securities from time to time
in the discretion of our board of directors.
On
February 4, 2022, we entered into a Settlement Agreement with each of Alex Aliksanyan, our Chief Executive Officer and Director, William
McLeod, our Secretary and Director, and Thomas Grbelja, our Chief Financial Officer and Director, pursuant to which, among other things,
each of the foregoing individuals terminated all agreements with us, including any effective employment agreements, and released us of
any and all claims he may have had against us, including for owed but unpaid compensation, and we agreed to issue to each such individual
a new compensation package consisting of restricted common stock and warrants to purchase common stock.
NOTE
9: CONVERTIBLE PROMISSORY NOTES PAYABLE
From
December 10, 2020 through January 27, 2021, we entered into a Securities Purchase Agreement, by and among us and the purchasers named
thereunder, pursuant to which we issued to each of seven investors a Senior Convertible Promissory Note in the principle amount of up
to $10,000 (each, a “Note” and collectively, the “ Notes”) and a Common Stock Purchase Warrant to purchase up
to 50,000 shares of our common stock at an exercise price of $0.10 per share (each, a “Warrant”, and collectively, the “Warrants”).
The investors included Alex Aliksanyan, a Director, Thomas M. Grbelja, our Treasurer, Secretary and a Director and William McLeod, our
Chief Executive Officer and Director.
The
Notes bear interest at the rate of 10.0% per annum and mature on July 31, 2022. We may agree with the noteholders from time to time to
accept loan advances under the Notes up to the principal amount of the Notes. As of the date of this filing, the investors have made
aggregate loan advances under the Notes of $47,160, which includes an additional $16,000 that was advanced under the existing agreement
on or about June 20, 2021 and an additional $3,601 during September 2021. In January 2022 an additional advance of $20,000 under the
existing agreement.
Pursuant
to the terms of the Notes, the holders of the Notes have the right, at their option, at any time, to convert the principal amount of
the Notes, and any accrued interest, into our common stock at a conversion of $0.07 per share. However, each holder of a Note will not
have the right to convert any portion of his Note if the holder (together with his affiliates) would beneficially own in excess of 9.99%
of the number of shares of our common stock outstanding immediately after giving effect to the conversion, as such a percentage ownership
is determined in accordance with the terms of the Note. Each holder has the right to waive the foregoing conversion limitations, in whole
or in part, upon and effective after 61 days prior written notice to us.
On
February 7, 2022, the existing noteholders exercised their conversion rights and were issued 679,534 common shares at $0.07 for a total
value of $47,567. Three noteholders agreed to a modification where they converted a portion of their notes at $0.035 per share and were
issued 628,238 common shares for a total value of $21,988. See Note 6 and Note 7 for additional disclosure.
On
May 11, 2022, our remaining noteholders exercised their conversion rights and were issued 29,066 shares of common stock at $0.07 for
a total value of $2,050. There are no convertible notes outstanding as of May 31, 2022.
NOTE
10: PAYCHECK PROTECTION PROGRAM/SBA LOAN
In
March 2021, the Company obtained an additional Paycheck Protection Program (2) loan and the SBA Economic Development Incentive Loan in
the amount of $15,077 from the SBA.
The
Company applied for and received forgiveness from the SBA in December 2021 in the amount of $15,077. The Company recorded the gain on
forgiveness of this loan as a component of other income.