Bespoke Extracts, Inc 10-Q for FY2021 Q1
Bespoke Extracts, Inc. (BSPK)
About this 10-Q
Bespoke Extracts, Inc filed this 10-Q on August 17, 2021, covering the quarter ended May 31, 2021 (FY2021 Q1).
Headline figures
Quarter ended May 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $299.57K
- compared with a net loss of $3.45M a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: May 31, 2021
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 000-52759
BESPOKE EXTRACTS, INC.
(Exact name of registrant as specified in its charter)
| Nevada | 20-4743354 | |
| (State
or other jurisdiction of incorporation) |
(IRS
Employer Identification No.) |
323 Sunny Isles Boulevard, Suite 700
Sunny Isles Beach, FL 33160
(Address of principal executive offices)
855-633-3738
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
| Emerging growth company | ☒ | ||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of August 10, 2021, there were 246,889,621 shares outstanding of the registrant’s common stock, par value $0.001.
TABLE OF CONTENTS
| Page No. | |||
| PART I - FINANCIAL INFORMATION | 1 | ||
| Item 1. | Financial Statements | 1 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 12 | |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 15 | |
| Item 4 | Controls and Procedures | 15 | |
| PART II - OTHER INFORMATION | 16 | ||
| Item 1. | Legal Proceedings | 16 | |
| Item 1A. | Risk Factors | 16 | |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 16 | |
| Item 3. | Defaults Upon Senior Securities | 16 | |
| Item 4. | Mine Safety Disclosures | 16 | |
| Item 5. | Other Information | 16 | |
| Item 6. | Exhibits | 16 | |
i
Bespoke Extracts, Inc.
Condensed Balance Sheets
| May 31, | August 31, | |||||||
| 2021 | 2020 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash | $ | 83,145 | $ | 126,603 | ||||
| Accounts receivable, net | 4,852 | 3,585 | ||||||
| Prepaid expense | 92,000 | 2,319 | ||||||
| Inventory, net | 76,857 | - | ||||||
| Total current assets | 256,854 | 132,507 | ||||||
| Furniture and equipment | 2,745 | - | ||||||
| Domain names, net of amortization of $13,305 and $10,872, respectively | 33,558 | 33,741 | ||||||
| Total assets | $ | 293,157 | $ | 166,248 | ||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | 62,136 | $ | 59,913 | ||||
| Note payable - related party | 534 | 120,000 | ||||||
| Convertible notes | 500,000 | 500,000 | ||||||
| Total current liabilities | 562,670 | 679,913 | ||||||
| Commitments and contingencies (Note 7) | ||||||||
| Stockholders’ Deficit | ||||||||
| Preferred stock, par value $0.001, 50,000,000 shares authorized, 1 share issued and outstanding as of May 31, 2021 and August 31, 2020, respectively | - | - | ||||||
| Series A Convertible Preferred Stock, $0.001 par value, 1,000 designated shares; no shares issued and outstanding as of May 31, 2021 and August 31, 2020, respectively | - | - | ||||||
| Series C Preferred Stock, $0.001 par value, 1 share designated; 1 share issued and outstanding as of May 31, 2021 and August 31, 2020, respectively, stated value $24,000. | - | - | ||||||
| Common stock, $0.001 par value: 3,000,000,000 shares authorized; 246,888,426 and 194,388,426 shares issued and outstanding as of May 31, 2021 and August 31, 2020, respectively | 246,889 | 194,389 | ||||||
| Additional paid-in capital | 19,066,135 | 17,992,635 | ||||||
| Common stock payable | - | 76,000 | ||||||
| Accumulated deficit | (19,582,537 | ) | (18,776,689 | ) | ||||
| Total stockholders’ deficit | (269,513 | ) | (513,665 | ) | ||||
| Total liabilities and stockholders’ deficit | $ | 293,157 | $ | 166,248 | ||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
1
Bespoke Extracts, Inc.
Condensed Statements of Operations
(Unaudited)
| For the three months ended | For the nine months ended | |||||||||||||||
| May 31, | May 31, | May 31, | May 31, | |||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Sales | $ | 10,117 | $ | - | $ | 21,684 | $ | 1,739 | ||||||||
| Cost of products sold | 3,186 | - | 7,202 | 1,087 | ||||||||||||
| Gross Profit | 6,931 | - | 14,482 | 652 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative expenses | 206,087 | 3,161,806 | 551,170 | 3,594,236 | ||||||||||||
| Professional fees | 22,604 | 25,367 | 85,227 | 174,153 | ||||||||||||
| Consulting | 77,000 | 24,562 | 181,500 | 158,062 | ||||||||||||
| Amortization expense of domain name | 811 | 811 | 2,433 | 2,797 | ||||||||||||
| Total operating expenses | 306,502 | 3,212,546 | 820,330 | 3,929,248 | ||||||||||||
| Loss from operations | (299,571 | ) | (3,212,546 | ) | (805,848 | ) | (3,928,596 | ) | ||||||||
| Other expense | ||||||||||||||||
| Loss on settlement of debt | - | - | - | (89,595 | ) | |||||||||||
| Interest expense and amortization of debt discount | - | (242,188 | ) | - | (535,688 | ) | ||||||||||
| Total other expense | - | (242,188 | ) | - | (625,283 | ) | ||||||||||
| Loss before income tax | (299,571 | ) | (3,454,734 | ) | (805,848 | ) | (4,553,879 | ) | ||||||||
| Provision for income tax | - | - | - | - | ||||||||||||
| Net Loss | $ | (299,571 | ) | $ | (3,454,734 | ) | $ | (805,848 | ) | $ | (4,553,879 | ) | ||||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | ||||||||||||||||
| Basic and Diluted | 246,888,426 | 111,910,165 | 225,296,851 | 105,433,560 | ||||||||||||
| LOSS PER COMMON SHARE OUTSTANDING | ||||||||||||||||
| Basic and Diluted | $ | (0.00 | ) | $ | (0.03 | ) | $ | (0.00 | ) | $ | (0.04 | ) | ||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
2
Bespoke Extracts, Inc.
Condensed Statement of Stockholders Deficit
For The Three and Nine Months Ended May 31, 2021 and 2020
Unaudited
| Series A | Series B | Series C | ||||||||||||||||||||||||||||||||||||||||||||||
| Preferred | Preferred | Preferred | Preferred | Preferred | Preferred | Common | Common | Common | ||||||||||||||||||||||||||||||||||||||||
| Shares | Par | Shares | Par | Shares | Par | Shares | Par | Stock | Accumulated | |||||||||||||||||||||||||||||||||||||||
| Outstanding | Amount | Outstanding | Amount | Outstanding | Amount | Outstanding | Amount | APIC | Payable | Deficit | Total | |||||||||||||||||||||||||||||||||||||
| Balance February 29, 2020 (Unaudited) | - | $ | - | 1 | $ | 1 | - | $ | - | 110,388,426 | $ | 110,389 | $ | 14,796,446 | $ | 76,000 | $ | (15,235,028 | ) | $ | (252,192 | ) | ||||||||||||||||||||||||||
| Options and warrant expense | - | - | - | - | - | - | - | - | 3,150,855 | - | - | 3,150,855 | ||||||||||||||||||||||||||||||||||||
| Exercise of stock options | - | - | - | - | - | - | 20,000,000 | 20,000 | - | - | - | 20,000 | ||||||||||||||||||||||||||||||||||||
| Exchange of preferred stock | - | - | (1 | ) | (1 | ) | 1 | - | - | - | 1 | - | - | - | ||||||||||||||||||||||||||||||||||
| Capital contribution of accrued salary - related party | - | - | - | - | - | - | - | - | 45,333 | - | - | 45,333 | ||||||||||||||||||||||||||||||||||||
| Net loss for the three months ended May 31, 2020 | - | - | - | - | - | - | - | - | - | - | (3,454,734 | ) | (3,454,734 | ) | ||||||||||||||||||||||||||||||||||
| Balance May 31, 2020 (Unaudited) | — | $ | — | — | $ | — | 1 | $ | — | 130,388,426 | $ | 130,389 | $ | 17,992,635 | $ | 76,000 | $ | (18,689,762 | ) | $ | (490,738 | ) | ||||||||||||||||||||||||||
| Series A | Series C | |||||||||||||||||||||||||||||||||||||||
| Preferred | Preferred | Preferred | Preferred | Common | Common | Common | ||||||||||||||||||||||||||||||||||
| Shares | Par | Shares | Par | Shares | Par | Stock | Accumulated | |||||||||||||||||||||||||||||||||
| Outstanding | Amount | Outstanding | Amount | Outstanding | Amount | APIC | Payable | Deficit | Total | |||||||||||||||||||||||||||||||
| Balance February 28, 2021 (Unaudited) | — | $ | — | 1 | $ | - | 246,888,426 | $ | 246,889 | $ | 19,066,135 | $ | - | $ | (19,282,966 | ) | $ | 30,058 | ||||||||||||||||||||||
| Net loss for the three months ended May 31, 2021 | - | - | - | - | - | - | - | - | (299,571 | ) | (299,571 | ) | ||||||||||||||||||||||||||||
| Balance May 31, 2021 (Unaudited) | — | $ | — | 1 | $ | - | 246,888,426 | $ | 246,889 | $ | 19,066,135 | $ | - | $ | (19,582,537 | ) | $ | (269,513 | ) | |||||||||||||||||||||
| Series A | Series B | Series C | ||||||||||||||||||||||||||||||||||||||||||||||
| Preferred | Preferred | Preferred | Preferred | Preferred | Preferred | Common | Common | Common | ||||||||||||||||||||||||||||||||||||||||
| Shares | Par | Shares | Par | Shares | Par | Shares | Par | Stock | Accumulated | |||||||||||||||||||||||||||||||||||||||
| Outstanding | Amount | Outstanding | Amount | Outstanding | Amount | Outstanding | Amount | APIC | Payable | Deficit | Total | |||||||||||||||||||||||||||||||||||||
| Balance August 31, 2019 | — | $ | — | — | $ | — | $ | — | $ | — | 78,155,093 | $ | 78,156 | $ | 13,950,095 | $ | 76,000 | $ | (14,135,883 | ) | $ | (31,632 | ) | |||||||||||||||||||||||||
| Preferred stock issued for the conversion of accrued salary | - | - | 1 | 1 | - | - | - | - | 23,999 | - | - | 24,000 | ||||||||||||||||||||||||||||||||||||
| Sale of common stock | - | - | - | - | 20,833,333 | 20,833 | 104,167 | - | - | 125,000 | ||||||||||||||||||||||||||||||||||||||
| Common stock issued for services | - | - | - | - | - | - | 4,500,000 | 4,500 | 36,000 | - | - | 40,500 | ||||||||||||||||||||||||||||||||||||
| Option and warrant expense | - | - | - | - | - | - | - | - | 3,467,440 | - | - | 3,467,440 | ||||||||||||||||||||||||||||||||||||
| Exercise of stock options | - | - | - | - | - | - | 20,000,000 | 20,000 | - | - | - | 20,000 | ||||||||||||||||||||||||||||||||||||
| Common stock issued with debt | - | - | - | - | 9,900,000 | 9,900 | 108,800 | - | - | 118,700 | ||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | - | - | - | - | - | - | (3,000,000 | ) | (3,000 | ) | (24,500 | ) | - | - | (27,500 | ) | ||||||||||||||||||||||||||||||||
| Exchange of preferred stock | - | - | (1 | ) | (1 | ) | 1 | - | - | - | 1 | - | - | - | ||||||||||||||||||||||||||||||||||
| Capital contribution of accrued salary - related party | - | - | - | - | - | - | - | 45,333 | - | - | 45,333 | |||||||||||||||||||||||||||||||||||||
| Beneficial conversion feature | - | - | - | - | - | - | - | - | 281,300 | - | - | 281,300 | ||||||||||||||||||||||||||||||||||||
| Net loss for the nine months ended May 31, 2020 | - | - | - | - | - | - | - | - | - | - | (4,553,879 | ) | (4,553,879 | ) | ||||||||||||||||||||||||||||||||||
| Balance May 31, 2020 (Unaudited) | — | $ | — | — | $ | — | 1 | $ | — | 130,388,426 | $ | 130,389 | $ | 17,992,635 | $ | 76,000 | $ | (18,689,762 | ) | $ | (490,738 | ) | ||||||||||||||||||||||||||
| Series A | Series C | |||||||||||||||||||||||||||||||||||||||
| Preferred | Preferred | Preferred | Preferred | Common | Common | Common | ||||||||||||||||||||||||||||||||||
| Shares | Par | Shares | Par | Shares | Par | Stock | Accumulated | |||||||||||||||||||||||||||||||||
| Outstanding | Amount | Outstanding | Amount | Outstanding | Amount | APIC | Payable | Deficit | Total | |||||||||||||||||||||||||||||||
| Balance August 31, 2020 | — | $ | — | 1 | $ | — | 194,388,426 | $ | 194,389 | $ | 17,992,635 | $ | 76,000 | $ | (18,776,689 | ) | $ | (513,665 | ) | |||||||||||||||||||||
| Common stock for conversion of note payable - related party | - | - | 20,000,000 | 20,000 | 230,000 | - | - | 250,000 | ||||||||||||||||||||||||||||||||
| Exchange of common stock payable | - | - | - | - | 500,000 | 500 | 75,500 | (76,000 | ) | - | - | |||||||||||||||||||||||||||||
| Sale of common stock | 32,000,000 | 32,000 | 768,000 | - | - | 800,000 | ||||||||||||||||||||||||||||||||||
| Net loss for the nine months ended May 31, 2021 | - | - | - | - | - | - | - | - | (805,848 | ) | (805,848 | ) | ||||||||||||||||||||||||||||
| Balance May 31, 2021 (Unaudited) | — | $ | — | 1 | $ | — | 246,888,426 | $ | 246,889 | $ | 19,066,135 | $ | - | $ | (19,582,537 | ) | $ | (269,513 | ) | |||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
3
Bespoke Extracts, Inc.
Condensed Statements of Cash Flows
(Unaudited)
| For the nine months ended | ||||||||
| May 31, | May 31, | |||||||
| 2021 | 2020 | |||||||
| Cash flows from operating activities | ||||||||
| Net Loss | $ | (805,848 | ) | $ | (4,553,879 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Amortization and impairment expense of domain names | 2,433 | 2,797 | ||||||
| Amortization of debt discounts | - | 535,687 | ||||||
| Bad debt expense | - | 2,981 | ||||||
| Loss on settlement of debt | 89,595 | |||||||
| Option and warrant expense | - | 3,467,440 | ||||||
| Common stock issued for services | - | 40,500 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (1,267 | ) | (165 | ) | ||||
| Inventory | (76,857 | ) | 1,907 | |||||
| Prepaid expense | (89,681 | ) | 6,137 | |||||
| Accounts payable and accrued liabilities | 2,223 | (542 | ) | |||||
| Net Cash used in operating activities | (968,997 | ) | (407,542 | ) | ||||
| Cash flows from investing activities | ||||||||
| Purchase of Url | (2,250 | ) | - | |||||
| Purchase of equipment | (2,745 | ) | - | |||||
| Net cash used in investing activities | (4,995 | ) | - | |||||
| Cash flow from financing activities | ||||||||
| Proceeds from note payable - related party | 130,534 | - | ||||||
| Proceeds from the issuance of convertible debt | - | 400,000 | ||||||
| Proceeds from exercise of stock options for cash | - | 20,000 | ||||||
| Repayment of debt | - | (120,000 | ) | |||||
| Repurchase of common stock | - | (27,500 | ) | |||||
| Sale of common stock | 800,000 | 125,000 | ||||||
| Net cash provided by financing activities | 930,534 | 397,500 | ||||||
| Net decrease in cash | (43,458 | ) | (10,042 | ) | ||||
| Cash at beginning of period | 126,603 | 10,343 | ||||||
| Cash at end of period | $ | 83,145 | $ | 301 | ||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid for interest | $ | - | $ | - | ||||
| Cash paid for income taxes | $ | - | $ | - | ||||
| Noncash investing and financing activities: | ||||||||
| Discount due beneficial conversion feature | $ | - | $ | 281,300 | ||||
| Stock issued with convertible debt | $ | - | $ | 118,700 | ||||
| Stock issued for conversion of debt - related party | $ | 250,000 | $ | - | ||||
| Capital contribution of salary - related party | $ | $ | 45,333 | |||||
| Stock issued for common stock payable | $ | 76,000 | $ | - | ||||
| Preferred stock issued for the conversion of accrued salary | $ | - | $ | 24,000 | ||||
| Assignment of URL for settlement of debt | $ | - | $ | 5,282 | ||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
NOTES TO CONDENSED FINANCIAL STATEMENTS
May 31, 2021 AND May 21, 2020
(Unaudited)
1. NATURE OF OPERATIONS, SIGNIFICANT ACCOUNTING POLICIES AND GOING CONCERN
Nature of Business Operations
Bespoke Extracts, Inc. (the “Company”) is a Nevada corporation focused on selling its proprietary line of specially-formulated, premium quality, hemp-derived CBD products.
The Company introduced its original line of CBD products in 2018. In the fall of 2020, the Company unveiled a new brand image, new website and ecommerce store and a new line-up of hemp-derived CBD formulations available for purchase in the form of tinctures, softgels and creams.
Basis of Presentation
The accompanying condensed unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments consisting of a normal and recurring nature considered necessary for a fair presentation have been included. Operating results for the three and nine months ended May 31, 2021 may not necessarily be indicative of the results that may be expected for the year ended August 31, 2021.
For further information, refer to the Company’s financial statements and footnotes thereto included in the Annual Report on Form 10-K for the year ended August 31, 2020.
Certain prior period amounts have been reclassified to conform to the current period presentation.
Going Concern
The accompanying condensed financial statements have been prepared assuming a continuation of the Company as a going concern. The Company had negative cash flows from operations, a working capital deficit and an accumulated deficit as of and for the nine months ended May 31, 2021. This raises substantial doubt about our ability to continue as a going concern.
The Company’s ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repaying its liabilities arising from normal business operations when they come due. There is no assurance that this series of events will be satisfactorily completed.
Further, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. If additional financing is not available or is not available on acceptable terms, we will have to curtail or cease our operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence. These financial statements do not include any adjustments that might arise from this uncertainty.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the accompanying financial statements and accompanying notes. Significant estimates include the assumption used in the valuation of equity-based transactions, valuation of intangible assets, allowance for doubtful accounts and inventory valuation and reserves. Actual results could differ from those estimates.
5
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid investments with original maturities of three months or less at the time of purchase. At May 31, 2021 and August 31, 2020, the Company did not have any cash equivalents.
Fair Value of Financial Instruments
The carrying amounts of cash, accounts receivable, prepaid expenses, inventory and other assets, accounts payable, accrued liabilities, note payable and convertible note payable approximate their fair values as of May 31, 2021 and August 31, 2020, respectively, because of their short-term natures and the Company’s borrowing rate of interest.
Accounts Receivable
Accounts receivable are recorded at fair value on the date revenue is recognized. The Company provides allowances for doubtful accounts for estimated losses resulting from the inability of its customers to repay their obligation. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to repay, additional allowances may be required. The Company provides for potential uncollectible accounts receivable based on specific customer identification and historical collection experience adjusted for existing market conditions. If market conditions decline, actual collection experience may not meet expectations and may result in decreased cash flows and increased bad debt expense.
The policy for determining past due status is based on the contractual payment terms of each customer, which are generally net 30 or net 60 days. Once collection efforts by the Company and its collection agency are exhausted, the determination for charging off uncollectible receivables is made. At May 31, 2021 and August 31, 2020, the Company has recorded an allowance for doubtful accounts of $2,981 and $2,981, respectively. At May 31, 2021 and August 31, 2020 included in the accounts receivable is the merchant holdback receivable balance of $3,636 and $3,585, respectively which will be remitted to the Company in the future.
Inventory
Inventories are stated at the lower of cost or net realizable value. Cost is determined by the first-in, first-out basis and net realizable value. Net realizable value is defined as sales price less cost of completion, disposition and transportation and a normal profit margin. As of May 31, 2021 and August 31, 2020, inventory amounted to $76,857 and $0, respectively, which consisted of finished goods of $72,435, and raw materials of $4,422 net of reserves. During the nine months ended May 31, 2021 the Company adjusted the reserves by $6,776 for products sold. As of May 31, 2021 and August 31, 2020 inventory reserves were $33,476 and $40,252, respectively.
Revenue Recognition
We account for revenue in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 606, “Revenue from Contracts with Customers”. Revenue is measured based on the amount of consideration that we expect to receive, reduced by discounts and estimates for credits and returns (calculated based upon previous experience and management’s evaluation). Outbound shipping charged to customers is recognized at the time the related merchandise revenues are recognized and are included in net revenues. Inbound and outbound shipping and delivery costs are included in cost of revenues.
Our products are sold through our online and telephonic channels. Revenue is recognized when control of the merchandise is transferred to the customer, which generally occurs upon shipment. Payment is typically due on the date of shipment. The Company offers a 30 day return policy on sales.
6
Stock Option Plans
Stock options and warrants issued to consultants and other non-employees as compensation for services provided to the Company are accounted for based on the fair value of the services provided or the estimated fair market value of the option or warrant, whichever is more reliably measurable, and in accordance FASB ASC 718, Compensation-Stock Compensation, including related amendments and interpretations. The related expense is recognized over the period the services are provided. Stock option compensation expense has been recognized as a component of general and administrative expenses in the accompanying financial statements for the three and nine months ended May 31, 2020. No stock option compensation expense was recognized for the three and nine months ended May 31, 2021.
Net Income / (Loss) per Share
Basic income / (loss) per share amounts are computed based on net income / (loss) divided by the weighted average number of common shares outstanding. Diluted earnings per share reflect the potential dilution that could occur if potentially dilutive securities were exercised or converted to common stock. The dilutive effect of options and warrants and their equivalent is computed by application of the treasury stock method and the effect of convertible securities by the “if converted” method. The effect of 3,000,000 warrants and 0 options as well as 500,000,000 shares issuable upon the conversion of a convertible note are anti-dilutive for the three and nine months ended May 31, 2021. The effect of 3,450,000 warrants and 81,200,000 options is anti-dilutive for the three and nine months end May 31, 2020.
2. ASSET PURCHASE AGREEMENT
On February 21, 2017, the Company purchased all right, title, interest and goodwill in or associated with certain domain names set forth in an asset purchase agreement for a total of $20,185 in cash and 200,000 shares of the Company’s common stock valued at $30,000. During the year ended August 31, 2020, the Company transferred certain URLs valued at $5,282 to an unrelated party and impaired $289 leaving a balance of $44,614 of URL’s. The domain names are being amortized over a 15 year period. During the three and nine months ended May 31, 2021, the Company recorded an amortization expense of $811 and $2,433, respectively. During the nine months ended May 31, 2020, the Company recorded an impairment expense of $289 for the expired domain names. During the three and nine months ended May 31, 2020, the Company recorded an amortization expense of $811 and $2,508 respectively.
3. NOTE PAYABLE - RELATED PARTY
On August 31, 2020, the Company issued a promissory note in the principal amount of $150,000, to Danil Pollack, the Company’s chief executive officer. $120,000 was remitted upon execution of the note and the remaining $30,000 was remitted on September 22, 2020. The note did not bear interest. On November 10, 2020, the Company entered into an exchange agreement with Mr. Pollack. Pursuant to the exchange agreement, Mr. Pollack exchanged the note for 15,000,000 shares of common stock of the Company.
During the nine months ended May 31, 2021, Mr. Pollack loaned the Company an additional $100,534 that was non-interest bearing and payable upon demand. $100,000 of this amount was subsequently deemed to be consideration for 5,000,000 shares of common stock the Company issued to Mr. Pollack on January 6, 2021.
4. CONVERTIBLE NOTE PAYABLE
On December 24, 2019, the Company entered into and closed a securities purchase agreement with an accredited investor, pursuant to which the Company issued and sold to the investor an original issue discount convertible debenture in the principal amount of $500,000, for a purchase price of $300,000. The Company also issued to the investor 5,000,000 shares of common stock valued at $55,000 ($0.005 per share). The Company recorded beneficial conversion of $245,000 due to the conversion feature. The debenture may not be converted to common stock to the extent such conversion would result in the holder beneficially owning more than 4.99% of the Company’s outstanding common stock. The debenture had an original maturity date of April 30, 2020 and was convertible into shares of common stock of the Company at an initial conversion price of $0.001, except that, if the Company failed to repay the debenture upon maturity, the conversion price would be reduced to $0.0004 (subject to adjustment for stock splits, stock dividends, and similar transactions) and the debenture would bear interest at the rate of 9% per year. The Company’s obligation to repay the debenture upon maturity was initially secured by a security interest in the Company’s inventory pursuant to a security agreement between the Company and the investor. For the year ended August 31, 2020 the Company recorded amortization of debt discount of $500,000. A portion of the debenture was subsequently sold by the original purchaser to a third party. On April 23, 2020, the Company entered into an amendment to the security agreement with the holders of the debentures. Pursuant to the security agreement amendment, the collateral under the security agreement was amended to be the Company’s URLs. The Company has also entered into five amendments to the debentures to extend the maturity date, including, most recently, an amendment entered into on August 2, 2021, to extend the maturity date to August 31, 2021.
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5. EQUITY
Common Stock and Preferred Stock
As of August 31, 2020, the Company had 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. On October 2, 2020, the Company filed a certificate of amendment to the Company’s articles of incorporation with the Secretary of State of Nevada, pursuant to which the Company increased its authorized shares of common stock from 800,000,000 to 3,000,000,000. 1,000 shares of preferred stock are designated as Series A Convertible Preferred Stock. No shares of Series A Preferred Stock are issued and outstanding as of August 31, 2020 and May 31, 2021 respectively. The Company’s Certificate of Designation of Series B Preferred Stock was withdrawn by the Company on June 30, 2020. 1 share of preferred stock is designated Series C Preferred Stock and is issued and outstanding as of August 31, 2020 and May 31, 2021, respectively. The Series C Preferred Stock has a stated value of $24,000 and entitles the holder to 51% of the total voting power of the Company’s stockholders. The Company may, in its sole discretion, redeem the Series C Preferred Stock at any time for a redemption price equal to the stated value. Upon payment of the redemption price by the Company, the Series C Preferred Stock will revert to the status of authorized but unissued preferred stock.
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 would be equal to $50,000 divided by lower financing price. As of August 31, 2020, the Company was obligated to issue 500,000 shares of common stock valued at $76,000. On January 5, 2021, the Company issued the 500,000 shares of common stock.
On August 31, 2020, the Company issued a promissory note in the principal amount of $150,000, to Danil Pollack, the Company’s chief executive officer. $120,000 was remitted upon execution of the note and the remaining $30,000 was remitted on September 22, 2020. The note did not bear interest. On November 10, 2020, the Company entered into an exchange agreement with Mr. Pollack. Pursuant to the exchange agreement, Mr. Pollack exchanged the promissory note for 15,000,000 shares of common stock of the Company.
During the nine months ended May 31, 2021, Mr. Pollack loaned the Company an additional $100,534 that was non-interest bearing and payable upon demand. $100,000 of this amount was subsequently deemed to be consideration for 5,000,000 shares of common stock the Company issued to Mr. Pollack on January 6, 2021.
On November 30, 2020, the Company entered into a securities purchase agreement with Danil Pollack. Pursuant to the purchase agreement, the Company issued and sold to Mr. Pollack 20,000,000 shares of common stock for an aggregate purchase price of $200,000.
On January 21, 2021, the Company entered into a securities purchase agreement with Danil Pollack. Pursuant to the purchase agreement, the Company issued and sold to Mr. Pollack 2,000,000 shares of common stock for an aggregate purchase price of $100,000.
On February 24, 2021, the Company entered into a securities purchase agreement with an accredited investor. Pursuant to the purchase agreement, the Company issued and sold to the investor 10,000,000 shares of common stock for an aggregate purchase price of $500,000.
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Warrants
The following table summarizes the warrant activities during the nine months ended May 31, 2021:
| Number of Warrants | Weighted- Average Price Per Share | Weighted- Average Remaining Life | |||||||||
| Outstanding at August 31, 2020 | 3,450,000 | $ | 0.56 | 2.8 years | |||||||
| Granted | - | - | |||||||||
| Canceled or expired | (450,000 | ) | 0.81 | ||||||||
| Exercised | - | - | |||||||||
| Outstanding at May 31, 2021 | 3,000,000 | $ | 0.52 | 2.41 years | |||||||
| Exercisable at May 31, 2021 | 3,000,000 | $ | 0.52 | 2.41 years | |||||||
| Intrinsic value at May 31, 2021 | $ | - | |||||||||
Options
On April 21, 2020, Danil Pollack was appointed president, chief executive officer, and chief financial officer of the Company. In connection with Mr. Pollack’s appointment, the Company entered into an employment agreement with Mr. Pollack. Pursuant to the employment agreement, Mr. Pollack will serve as the Company’s chief executive officer and president for a period of one year, which term will renew automatically for successive one year terms, subject to the right of either party to terminate the agreement at any time upon written notice. Mr. Pollack was granted the right, for a period of six months, to purchase up to 100,000,000 shares of common stock of the Company for a purchase price of $0.001 per share. The Company recognized option expense of $1,416,975 during the year ended August 31, 2020. During the year ended August 31, 2020, Mr. Pollack exercised 84,000,000 stock options for $84,000. During the nine months ended May 31, 2021, the remaining 16,000,000 stock options expired.
The following table summarizes the option activities during the nine months ended May 31, 2021:
| Number of Options | Weighted- Average Price Per Share | Weighted- Average Remaining Life | |||||||||
| Outstanding at August 31, 2020 | 16,000,000 | $ | .001 | 0.9 years | |||||||
| Granted | - | - | |||||||||
| Canceled or expired | (16,000,000 | ) | .001 | ||||||||
| Exercised | - | - | |||||||||
| Outstanding at May 31, 2021 | - | $ | - | ||||||||
| Exercisable at May 31, 2021 | - | $ | - | ||||||||
6. RELATED PARTY TRANSACTIONS
On September 30, 2020, the Company entered into an amendment to the Company’s employment agreement, dated April 22, 2020, with Danil Pollack, the Company’s chief executive officer. Pursuant to the amendment, the Company will pay Mr. Pollack an annual salary of $48,000. The Company may also in its discretion pay additional compensation to Mr. Pollack at any time as a bonus. On April 27, 2021, the Company entered into an amendment to the Company’s employment agreement with Mr. Pollack. Pursuant to the amendment, the Company will pay Mr. Pollack an annual salary of $66,000 effective April 1, 2021. The Company may also in its discretion pay additional compensation to Mr. Pollack at any time as a bonus.
On August 31, 2020, the Company issued a promissory note in the principal amount of $150,000, to Danil Pollack. $120,000 was remitted upon execution of the note and the remaining $30,000 was paid on September 22, 2020. The note did not bear interest. On November 10, 2020, the Company entered into an exchange agreement with Mr. Pollack. Pursuant to the exchange agreement, Mr. Pollack exchanged this note for 15,000,000 shares of common stock of the Company.
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During the nine months ended May 31, 2021, Mr. Pollack loaned the Company an additional $100,534 that was non-interest bearing and payable upon demand. $100,000 of this amount was subsequently deemed to be consideration for 5,000,000 shares of common stock the Company issued to Mr. Pollack on January 6, 2021.
On November 30, 2020, the Company entered into a securities purchase agreement with Mr. Pollack. Pursuant to the purchase agreement, the Company issued and sold to Mr. Pollack 20,000,000 shares of common stock for an aggregate purchase price of $200,000.
On January 21, 2021, the Company entered into a securities purchase agreement with Danil Pollack. Pursuant to the purchase agreement, the Company issued and sold to Mr. Pollack 2,000,000 shares of common stock for an aggregate purchase price of $100,000.
7. COMMITMENTS AND CONTINGENCIES
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 would be equal to $50,000 divided by lower financing price. As of November 30, 2020 and August 31, 2020, the Company was obligated to issue 500,000 shares of common stock valued at $76,000 which is included in the common stock payable in the accompanying balance sheet. On January 5, 2021, the Company issued 500,000 shares of common stock.
On April 21, 2020, Danil Pollack was appointed president, chief executive officer, and chief financial officer of the Company. In connection with Mr. Pollack’s appointment, the Company entered into an employment agreement with Mr. Pollack. On September 30, 2020, the Company entered into an amendment to the employment agreement. Pursuant to the amendment, the Company will pay Mr. Pollack an annual salary of $48,000. The Company may also in its discretion pay additional compensation to Mr. Pollack at any time as a bonus. On April 27, 2021, the Company entered into an amendment to the Company’s employment agreement with Mr. Pollack. Pursuant to the amendment, the Company will pay Mr. Pollack an annual salary of $66,000 effective April 1, 2021. The Company may also in its discretion pay additional compensation to Mr. Pollack at any time as a bonus.
On October 13, 2020, the Company entered into a consulting agreement with Yaniv Rozen pursuant to which the Company engaged Mr. Rozen to serve as the Company’s chief operating officer on a consultant/independent contractor basis. Mr. Rozen was permitted to engage in other business activities while serving as the Company’s chief operating officer. On July 1, 2021, Yaniv Rozen resigned as chief operating officer of the Company.
Pursuant to the consulting agreement, the Company agreed to pay Mr. Rozen a fee of $3,000 per month.
The Company also agreed to issue to Mr. Rozen shares of common stock, and increase such monthly fee, as follows:
| ● | Within five business day of the end of the fourth quarter of 2020, (i) if the Company’s average sales were at least $50,000 per month, for such quarter, the Company would issue to Mr. Rozen 500,000 shares of common stock; or (ii) if the Company’s average sales were at least $100,000 per month for such quarter, the Company would issue to Mr. Rozen 750,000 shares of common stock; |
| ● | Within five business day of the end of the first quarter of 2021, (i) if the Company’s average sales were at least $100,000 per month for such quarter, the Company would issue to Mr. Rozen 750,000 shares of common stock, or (ii) if the Company’s average sales were at least $150,000 per month for such quarter, the Company would issue to Mr. Rozen 1,000,000 shares of common stock, and would increase Mr. Rozen’s fee to $5,000 per month effective commencing at the end such quarter; |
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| ● | Within five business days of the end of the second quarter of 2021, (i) if the Company’s average sales were at least $200,000 per month, for such quarter, the Company would issue to Mr. Rozen 1,500,000 shares of common stock, or (ii) if the Company’s average sales were at least $300,000 per month, for such quarter, the Company would issue to Mr. Rozen 2,000,000 shares of common stock; and |
| ● | Within five business days of the end of the third quarter of 2021, (i) if the Company’s average sales were at least $300,000 per month, for such quarter, the Company would issue to Mr. Rozen 2,000,000 shares of common stock; or (ii) if the Company’s average sales were at least $500,000 per month, for such quarter, the Company would issue to Mr. Rozen 3,000,000 shares of common stock, and would increase Mr. Rozen’s fee to $7,000 per month effective commencing at the end such quarter. |
As of July 1, 2021, Mr. Rozen’s resignation date, there was no common stock owed to Mr. Rozen as the quarterly target sales were not met.
The COVID-19 pandemic may negatively affect our operations, including by limiting access to our facilities, customers, management, and professional advisors, and causing delays and constraints in manufacturing and shipping of our products. These factors, in turn, may negatively impact our operations, financial condition and demand for our products, and our ability to raise capital on acceptable terms, or at all.
8. MAJOR CUSTOMERS
At May 31, 2021 and August 31, 2020, no individual customer amounted to over 10% of total accounts receivable. During the three and nine months ended May 31, 2021 and May 31, 2020 no individual customer amounted to over 10% of total sales.
9. SUBSEQUENT EVENTS
On July 1, 2021, Yaniv Rozen resigned as chief operating officer of the Company. See Note 7.
On August 2, 2021, the Company entered into amendments (“Amendment No. 6”) with the holders of the Company’s original issue discount convertible debentures, with an original issuance date of December 24, 2019, as amended by amendment No. 1 thereto, dated May 28, 2020, amendment No. 2 thereto, dated August 21, 2020, amendment No. 3 thereto, dated December 10, 2020, Amendment No. 4 thereto, dated January 15, 2021, and Amendment No. 5 thereto, dated April 2, 2021, in the aggregate outstanding principal amount of $500,000. Pursuant to Amendment No. 6, the maturity date of the debentures was extended to August 31, 2021.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
We and our representatives may from time to time make written or oral statements that are “forward-looking,” including statements contained in this Quarterly Report and other filings with the SEC, reports to our stockholders and news releases. All statements that express expectations, estimates, forecasts or projections are forward-looking statements. In addition, other written or oral statements which constitute forward-looking statements may be made by us or on our behalf. Words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” “project,” “forecast,” “may,” “should,” and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in or suggested by such forward-looking statements. We undertake no obligation to update or revise any of the forward-looking statements after the date of this Quarterly Report to conform forward-looking statements to actual results, except as may be required under applicable law. Important factors on which such statements are based are assumptions concerning uncertainties, including but not limited to, uncertainties associated with the following:
| ● | Inadequate capital and barriers to raising the additional capital or to obtaining the financing needed to implement our business plans; |
| ● | Our failure to earn revenues or profits; |
| ● | Inadequate capital to continue business; |
| ● | Volatility, lack of liquidity or decline of our stock price; |
| ● | Potential fluctuation in quarterly results; |
| ● | Rapid and significant changes in markets; |
| ● | Insufficient revenues to cover operating costs; and |
| ● | The effect of the COVID-19 pandemic on our operations, including as it may limit access to our facilities, customers, management, and professional advisors, and negatively impact demand for our products, and ability to raise capital on acceptable terms or at all. |
The following discussion should be read in conjunction with the financial statements and the notes thereto which are included in this Quarterly Report.
Overview
The Company sells a proprietary line of specially-formulated, premium quality, hemp-derived CBD products direct to consumers through our ecommerce store, found at www.bespokeextracts.com. The Company introduced its original line of CBD products in 2018. In the fall of 2020, we unveiled a new brand image, new website and ecommerce store and a new line-up of hemp-derived CBD formulations available for purchase in the form of tinctures, softgels and creams.
Results of Operations for the three months ended May 31, 2021 and May 31, 2020
Sales
Sales during the three months ended May 31, 2021 were $10,117 compared to $0 for the three months ended May 31, 2020. The increase in sales was primarily a result of increased marketing of the Company’s new line-up of hemp-derived CBD products and the sale of older products at reduced prices.
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Operating Expenses
Selling, general and administrative expenses for the three months ended May 31, 2021 and May 31, 2020 were $206,087 and $3,161,806, respectively. Included in selling, general and administrative expenses, option and warrant expense for the three months ended May 31, 2021 and May 31, 2020 was $0 and $3,150,855, respectively which was primarily due to the fair value re-measurement of warrants and options, and the issuance of options to our President and CEO. Professional fees were $22,604 and $25,367, respectively for the three months ended May 31, 2021 and May 31, 2020, respectively. The decrease was due to reduced legal and accounting fees as the Company streamlined operations. Consulting expense was $77,000 and $24,562, respectively for the three months ended May 31, 2021 and May 31, 2020, respectively. The increase was primarily due to additional consulting agreements for sales and marketing during the three months ended May 31, 2021. Amortization expense of domain names for the three months ended May 31, 2021 and May 31, 2020 was $811 and $811 respectively.
Interest Expense and Amortization of Debt Discount
Interest expense on promissory notes for the three months ended May 31, 2021 and May 31, 2020 was $0 and $242,188, respectively. The decrease in interest expense was due to the amortization expense for the warrants and beneficial conversion associated with those notes that had been converted to common stock or fully amortized during the three months ended May 31, 2020.
Net Loss
For the reasons stated above, our net loss for the three months ended May 31, 2021 was $299,571, or $0.00 per share, compared to a net loss for the three months ended May 31, 2020 of $3,454,734, or $0.03 per share.
Results of Operations for the nine months ended May 31, 2021 and May 31, 2020
Sales
Sales during the nine months ended May 31, 2021 were $21,684 compared to $1,739 for the nine months ended May 31, 2020. The increase in sales was primarily a result of increased marketing of the Company’s new line-up of hemp-derived CBD products and sales of older products at reduced prices.
Operating Expenses
Selling, general and administrative expenses for the nine months ended May 31, 2021 and May 31, 2020 were $551,170 and $3,594,236, respectively. Included in selling, general and administrative expenses, option and warrant expense for the nine months ended May 31, 2021 and May 31, 2020 was $0 and $3,467,440, respectively which was primarily due to the fair value re-measurement of warrants and options, and the issuance of options to our President and CEO. Stock-based compensation for the nine months ended May 31, 2021 and May 31, 2020 were $0 and $40,500, respectively which was a result of common stock issued for services. Professional fees were $85,227 and $174,153, respectively for the nine months ended May 31, 2021 and May 31, 2020, respectively. The decrease in expenses was due to reduced legal and accounting fees as the Company streamlined operations. Consulting expense was $181,500 and $158,062, for the nine months ended May 31, 2021 and May 31, 2020, respectively. The increase was primarily due to additional consulting agreements for sales and marketing during the nine months ended May 31, 2021. Amortization expense of domain names for the nine months ended May 31, 2021 and May 31, 2020 was $2,433 and $2,508, respectively.
Loss on settlement of debt
On December 24, 2019, the Company entered into an agreement (the “Repayment Agreement”) with the holder of the amended and restated original issue discount convertible debenture issued by the Company on November 11, 2019, in the original principal amount of $200,000 (the “November 2019 Debenture”). Pursuant to the Repayment Agreement, the Company paid the holder $120,000, and transferred certain URLs valued at $5,282 to the holder, and the November 2019 Debenture was deemed paid in full. The Company recognized a loss on settlement of debt of $89,595 during the nine months ended May 31, 2020.
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Interest Expense and Amortization of Debt Discount
Interest expense on promissory notes for the nine months ended May 31, 2021 and May 31, 2020 was $0 and $535,688 respectively. The decrease in interest expense was due to the amortization expense for the warrants and beneficial conversion associated with those notes that had been converted to common stock or fully amortized during the nine months ended May 31, 2020.
Net Loss
For the reasons stated above, our net loss for the nine months ended May 31, 2021 was $805,848, or $0.00 per share, compared to a net loss for the nine months ended May 31, 2020 of $4,553,879, or $0.04 per share.
Liquidity and Capital Resources
As of May 31, 2021, we had cash of $83,145. Net cash used in operating activities for the nine months ended May 31, 2021 was $968,997. Our current liabilities as of May 31, 2021 were $562,670 and consisted of accounts payable and accrued liabilities of $62,136, notes payable- related party of $534 and a convertible note payable of $500,000. As of August 31, 2020, we had cash of $126,603. Net cash used in operating activities for the nine months ended May 31, 2020 was $407,542. The increase in net cash used in operating activities during the nine months ended May 31, 2021 compared to May 31, 2020 was a result of the Company purchasing new inventory and an increase in prepaid expenses, partially offset by the increase in accounts payable and accrued liabilities.
During the nine months ended May 31, 2021, the Company raised $800,000 from the sale of common stock. During the nine months ended May 31, 2021 the Company received a total of $130,534 of loans from our Chief Executive Officer. During the nine months ended May 31, 2020, the Company raised $125,000 from the sale of common stock. During the nine months ended May 31, 2020, the Company received a total of $400,000, net of original issue discounts, from the sale of a convertible note and repaid $120,000. During the nine month ended May 31, 2020 the Company repurchased $27,500 of common stock and received $20,000 from the exercise of stock options.
The unaudited condensed financial statements included in this report have been prepared assuming a continuation of the Company as a going concern. The Company had negative cash flows from operations for the nine months ended May 31, 2021 and the year ended August 31, 2020 and had a working capital deficit at May 31, 2021 and August 31, 2020. This raises substantial doubt about our ability to continue as a going concern.
We have not generated positive cash flows from operating activities. Our primary source of capital has been from the sale of equity and convertible debt securities. Our primary use of capital has been for professional fees and selling, general and administrative costs. We have no committed sources of capital and will need to raise additional capital to continue and expand our operations. Additional capital may not be available on terms acceptable to us, or at all.
In addition, the COVID-19 pandemic may negatively affect our operations, including by limiting access to our facilities, customers, management, and professional advisors, and by causing delays and constraints in manufacturing and shipping of our products. These factors, in turn, may negatively impact our operations, financial condition and demand for our products, and our ability to raise capital on acceptable terms, or at all.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
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Critical accounting policies and estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the reported periods. The more critical accounting estimates include estimates related to revenue recognition and accounts receivable allowances. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results, which are described in Note 1 to our unaudited condensed financial statements appearing elsewhere in this report.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not required for smaller reporting companies.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Management of the Company conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms, and (ii) accumulated and communicated to our management, including our chief executive officer and chief financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Based on this evaluation, our management has concluded that the design and operation of our disclosure controls and procedures are not effective since the following material weaknesses exist:
| ● | Our chief executive officer also functions as our chief financial officer. As a result, our officer may not be able to identify errors and irregularities in the financial statements and reports; |
| ● | We were unable to maintain full segregation of duties within our financial operations due to our reliance on limited personnel in the finance function. While this control deficiency did not result in any audit adjustments to our financial statements, it could have resulted in a material misstatement that might have been prevented or detected by a segregation of duties; and |
| ● | Documentation of all proper accounting procedures is not yet complete. |
To the extent reasonably possible given our limited resources, we intend to take measures to cure the aforementioned weaknesses, including, but not limited to, increasing the capacity of our qualified financial personnel to ensure that accounting policies and procedures are consistent across the organization and that we have adequate control over financial statement disclosures.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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We are not currently a party to, nor are any of our property currently the subject of, any material legal proceedings.
Not required for smaller reporting companies.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
No disclosure required.
None.
| Exhibit No. | Description | |
| 31.1 | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* | |
| 32.1 | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002** | |
| 101.INS | XBRL Instance Document* | |
| 101.SCH | XBRL Taxonomy Extension Schema Document* | |
| 101.CAL | XBRL Taxonomy Calculation Linkbase Document* | |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document* | |
| 101.LAB | XBRL Taxonomy Label Linkbase Document* | |
| 101.PRE | XBRL Taxonomy Presentation Linkbase Document* |
| * | Filed herewith. |
| ** | Furnished herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| BESPOKE EXTRACTS, INC. | ||
| Dated: August 17, 2021 | By: | /s/ Danil Pollack |
Danil Pollack Chief Executive Officer and Chief Financial Officer | ||
| (Principal
Executive Officer, Principal Financial Officer and Principal Accounting Officer) | ||
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Exhibit 31.1
CERTIFICATION
PURSUANT TO
18 U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Danil Pollack, certify that:
| 1) | I have reviewed this Quarterly Report on Form 10-Q of Bespoke Extracts, Inc. (the “registrant”); |
| 2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by the report; |
| 3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report; |
| 4) | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5) | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involved management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| /s/ Danil Pollack | |
| Danil Pollack | |
| Chief Executive Officer
and Chief Financial Officer (Principal Executive Officer and Principal Financial Officer) | |
| August 17, 2021 |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Bespoke Extracts, Inc., as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), I, Danil Pollack, the Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in such Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| /s/ Danil Pollack | |
| Danil Pollack | |
| Chief Executive Officer and Chief Financial Officer | |
| (Principal Executive Officer and Principal Financial Officer) | |
| Dated: August 17, 2021 |