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: November 30, 2017

 

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)

 

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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	☐ (Do not check if a smaller reporting company)	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 January 20, 2017, there were 33,022,712 shares outstanding of the registrant’s common stock.

 

 

 

TABLE OF CONTENTS

 

				Page No.
PART I - FINANCIAL INFORMATION
Item 1.		Financial Statements		1
Item 2.		Management’s Discussion and Analysis of Financial Condition and Plan of Operations		7
Item 3.		Quantitative and Qualitative Disclosures About Market Risk		11
Item 4		Controls and Procedures		11
PART II - OTHER INFORMATION
Item 1.		Legal Proceedings		12
Item 1A.		Risk Factors		12
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		12
Item 3.		Defaults Upon Senior Securities		12
Item 4.		Mine Safety Disclosures		12
Item 5.		Other Information		12
Item 6.		Exhibits		12

 

 

PART I

 

ITEM 1. FINANCIAL STATEMENTS 

 

Bespoke Extracts, Inc.

Consolidated Balance Sheets

(unaudited)

 

		November 30,				August 31,
		2017				2017
Assets
Current assets
Cash		$	134,643			$	87,172
Prepaid expenses			-				19,952
Inventory			100,221				-
Total current assets			234,864				107,124
Domain names, net of amortization of $2,509 and $1,673			47,676				48,512
Total assets		$	282,540			$	155,636
Liabilities and Stockholders’ Deficit
Current liabilities
Accounts payable and accrued liabilities		$	64,600			$	36,525
Deposit for future assets sales from related party			45,000				45,000
Note payable - related party			30,050				30,050
Convertible note - related party, net of unamortized discounts of $37,884 and $0			62,316				123,000
Total current liabilities			201,966				234,575
Non-current liabilities
Related party convertible notes payable, net of unamortized discounts of $440,506 and $346,837			279,494				193,163
Total non-current liabilities			279,494				193,163
Total liabilities			481,460				427,738
Stockholders’ Deficit
Series A Convertible Preferred Stock, $0.001 par value, 50,000,000 authorized shares; no shares issued and outstanding as of November 30, 2017 and August 31, 2017, respectively			-				-
Common stock, $0.001 par value: 800,000,000 authorized; 31,472,712 and 26,822,712 shares issued and outstanding as of  November 30, 2017 and August 31, 2017, respectively			31,473				26,823
Additional paid-in capital			10,013,739				8,808,161
Accumulated deficit			(10,244,132	)			(9,107,086	)
Total stockholders’ deficit			(198,920	)			(272,102	)
Total liability and stockholders’ deficit		$	282,540			$	155,636

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 

Bespoke Extracts, Inc

Consolidated Statements of Operations

(unaudited)

 

		For the three months ended
		November 30,				November 30,
		2017				2016
Operating expenses:
Selling, general and administrative expenses		$	934,745			$	8,452
Payroll expense			19,371				24,563
Professional fees			23,963				8,613
Consulting			54,585				-
Amortization expense			836				33
Total operating expenses			1,033,500				41,661
Loss from operations			(1,033,500	)			(41,661	)
Other expense
Interest expense			(103,546	)			(840	)
Total other expense			(103,546	)			(840	)
Loss before income tax			(1,137,046	)			(42,501	)
Provision for income tax			-				-
Net Loss		$	(1,137,046	)		$	(42,501	)
Net loss per common share: basic and diluted		$	(0.04	)		$	(0.01	)
Weighted average common shares outstanding basic and diluted			28,542,156				2,922,712

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 

Bespoke Extracts, Inc

Consolidated Statements of Cash Flows

(unaudited)

 

		For the three months ended
		November 30,				November 30,
		2017				2016
Cash flows from operating activities
Net loss		$	(1,137,046	)		$	(42,501	)
Adjustments to reconcile net loss to net cash used in operating activities
Amortization expense on intangible asset			836				33
Option expense			21,585				-
Warrant expense			914,044				-
Amortization of debt discounts			119,946				-
Changes in operating assets and liabilities
Inventory			(100,221	)			-
Prepaid expense			19,952				-
Accounts payable and accrued liabilities			28,075				(13,366	)
Accounts payable - related party			-				(14,609	)
Net Cash used in operating activities			(132,829	)			(70,443	)
Cash flow from financing activities
Payment of note payable - related party			-				(5,500	)
Proceeds from sale of common stock and warrants			60,300				-
Borrowings on related party convertible debt, net OID			120,000				-
Proceeds from note payable - related party			-				90,000
Net cash provided by financing activities			180,300				84,500
Net increase in cash and cash equivalents			47,471				14,057
Cash and cash equivalents at beginning of period			87,172				431
Cash and cash equivalents at end of period		$	134,643			$	14,488
Supplemental disclosure of cash flow information
Cash paid during period for
Cash paid for interest		$	-			$	-
Cash paid for income taxes			-				-
Noncash investing and financing activities:
Discount due beneficial conversion feature		$	123,000			$	-
Stock issued for conversion of related party debt		$	22,800			$	-
Stock issued with related party debt		$	51,503			$	-
Warrants issued with related party debt		$	16,996			$	-

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 

Bespoke Extracts, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1 — BASIS OF PRESENTATION

 

The accompanying unaudited consolidated financial statements of Bespoke Extracts, Inc, a Nevada corporation (the “Company”), have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements. These unaudited consolidated financial statements and related notes should be read in conjunction with the Company’s annual report on Form 10-K for the fiscal year ended August 31, 2017. In the opinion of management, these unaudited consolidated financial statements reflect all adjustments that are of a normal recurring nature and which are necessary to present fairly the financial position of the Company as of November 30, 2017, and the results of operations and cash flows for the three months ended November 30, 2017 and November 30, 2016. The results of operations for the three months ended November 30, 2017 are not necessarily indicative of the results that may be expected for the entire fiscal year.

 

Certain prior period amounts have been reclassified to conform to current period presentation.

 

Going Concern

 

The accompanying interim consolidated financial statements have been prepared assuming a continuation of the Company as a going concern. The Company did not generate any revenues and reported a net loss of $1,137,046 for the three months ended November 30, 2017.  These conditions raise 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 repay its liabilities arising from normal business operations when they come due. There is no assurance that this series of events will be satisfactorily completed. The accompanying financial statements do not contain any adjustments that may result from the outcome of this uncertainty.

 

Inventory

 

Inventories are stated at the lower of cost or market value.  Cost is determined by the first-in, first-out basis and market being determined as the lower of replacement cost or net realizable value. The Company records inventory write-downs for estimated obsolescence of unmarketable inventory based upon assumptions about future demand and market conditions. As of November 30, 2017, inventory amounted to $100,221 which consists of $62,800 in finished goods and $37,421 in raw materials.

 

2. EQUITY

 

Common Stock

 

The Company was formed in the state of Nevada on April 13, 2006. The Company has authorized capital of 800,000,000 shares of common stock with a par value of $0.001, and 50,000,000 shares of preferred stock with a par value of $0.001.

 

On September 18, 2017, the Company issued 900,000 shares of common stock in connection with the issuance of a convertible note with a principal amount of $180,000. The relative fair value of the stock of $51,503 was recognized as a discount to the note that is being amortized to interest expense over the life of the note.

 

On September 22, 2017, the company issued 900,000 shares of common stock and 300,000 warrants pursuant to a stock purchase agreement for cash of $60,300.

 

On November 10, 2017, the Company issued an aggregate of 1,400,000 shares of common stock to the holder of a related party 7% Convertible Promissory Note, to convert principal amount of $11,200.

 

On November 27, 2017, the Company issued an aggregate of 1,450,000 shares of common stock to the holder of a related party 7% Convertible Promissory Note, to convert principal amount of $11,600.

 

 

Warrants

 

During the quarter ended November 30, 2017, warrant activity included the following: 

 

On April 11, 2017, the Company executed an $180,000 Convertible Debenture with an original issue discount of $60,000. In connection with the debenture, the Company issued the lender 300,000 common stock purchase warrants with a term of 3 years and an exercise price of $1.00. The relative fair value of the warrants of $16,996 was recognized as a discount to the debenture.

 

On May 22, 2017, the Company entered into an employment agreement with Marc Yahr to serve as President and Chief Executive Officer of the Company for a term of three years, unless earlier terminated pursuant to the terms of the Employment Agreement. Pursuant to the terms of the Employment Agreement, Mr. Yahr received a warrant to purchase up to 20,000,000 shares of the Company’s common stock at an exercise price of $0.0001 per share. The warrants were exercised in full on May 31, 2017; however, the 20,000,000 shares of the Company’s common stock were not issued to Mr. Yahr until June 10, 2017. The shares received upon the exercise of the warrants are subject to forfeiture and vest over a service period of three years. The fair value of the award was determined to be $10,998, which will be recognized as compensation expense over the three year service period.  Warrant expense for the three months ended November 30, 2017 totaled $914,044.

 

The fair value of the warrants was estimated using the Black-Scholes option pricing model and the following range of assumptions: 

 

			Grant Date		November 30, 2017
Risk-free interest rate at grant date			1.06% - 1.44%		1.06% - 1.49%
Expected stock price volatility			117% - 362%		117% - 362%
Expected dividend payout			-		-
Expected option in life-years			1 - 3 years		1 - 3 years

 

3. ASSET PURCHASE AGREEMENT

 

On August 29, 2017, the Company received $45,000 as a deposit from a significant shareholder toward the purchase price on an agreement that is currently being negotiated with VMI Acquisitions, LLC for purchase of certain of our Company’s assets. The agreement is anticipated to be completed in January 2018.

 

4. NOTES PAYABLE – RELATED PARTY

 

On April 27, 2016, the Company issued to the Company’s CEO a 7% unsecured promissory note in the amount of $2,500 which matured six months from the date of issuance. On July 5, 2016, the Company issued to the Company’s CEO a 7% unsecured note in the amount of $3,000 which matured six months from date of issuance. On November 17, 2016, the Company repaid the principal amount of the notes, or $5,500. As of November 30. 2017, there is a remaining balance on the note of $50.

 

On May 17, 2016, the Company issued to Lyle Hauser, the Company’s largest shareholder, a 7% unsecured promissory note in the amount of $30,000 which matured six months from the date of issuance. As of November 30, 2017 the outstanding balance on the note is $30,000

 

5. CONVERTIBLE DEBENTURE – RELATED PARTY

 

On August 15, 2016, the Company issued to Vantage Group, a significant shareholder, a 7% unsecured promissory note in the amount of $16,000 which had an original maturity of six months from the date of issuance. On October 27, 2016, the Company issued a significant shareholder a 7% unsecured promissory note in the amount of $10,000 which had an original maturity date of six months from the date of issuance. The preceding notes have matured and remain unpaid at the quarter ended November 30, 2017. On November 14, 2016, the Company issued a significant shareholder a 7% unsecured promissory note in the amount of $80,000 which an original maturity date of six months from the date of issuance. On February 17, 2017, the Company issued a significant shareholder a 7% unsecured promissory note in the amount of $30,000 which had an original maturity date of six months from the date of issuance. On March 31, 2017, the Company issued a significant shareholder a 7% unsecured promissory note in the amount of $7,000 which had an original maturity date of six months from the date of issuance.

 

 

On April 17, 2017 the notes issued to Vantage Group were amended to be convertible into common stock to mature on April 18, 2018. The convertible notes have a fixed conversion price of $0.008 The amendments to the notes has created a Beneficial Conversion Feature of $123,000 and amortization of the discount of $68,116. On November 27, 2017, the Company issued an aggregate of 1,450,000 shares of common stock to the holder of a 7% Convertible Promissory Note, dated November 14, 2016 to convert principal amount of $11,600. On November 10, 2017, the Company issued an aggregate of 1,400,000 shares of common stock to the holder of a 7% Convertible Promissory Note, dated November 14, 2016 to convert principal amount of $11,200. As of November 30, 2017 a total of $22,800 has been converted.

 

		November 30, 2017
Convertible debenture		$	100,200
Unamortized discount			(37,884	)
Convertible debenture, net of unamortized discount		$	62,316

 

On April 11, 2017, the Company executed a $540,000 Convertible Debenture with an original issue discount of $180,000. The debenture has a 0% interest rate and a term of two years. In connection with the debenture, the Company issued the lender an aggregate of 2,700,000 shares of common stock and 900,000 common stock purchase warrants. The relative fair value of the stock and warrants aggregating $202,490 was recognized as a discount to the note. Amortization of $29,342 was recognized during the three months ended November 30, 2017. The conversion price of the outstanding balance is the lesser of $3.00 or 40% of the volume weighted average price of the 30 days at date of conversion; not to be less than $1.00. In connection with the debenture the lender is entitled to receive the greatest of 5% every dollar raised through financing or every dollar of revenue generated through the earlier of maturity date and repayment of the principal.

 

		November 30, 2017
Convertible debenture		$	540,000
Unamortized discount			(371,495	)
Convertible debenture, net of unamortized discount		$	222,505

 

On September 18, 2017, the Company executed, with a related party, an $180,000 Convertible Debenture with an original issue discount of $60,000. The note has a 0% interest rate and a term of two years. In connection with the note, the Company issued the lender an aggregate of 900,000 shares of common stock and 300,000 warrants to purchase common stock. The relative fair value of the stock and warrants aggregating $68,499 was recognized as a discount to the note. Amortization of $5,488 was recognized during the three months ended November 30, 2017. The conversion price of the outstanding balance is the lesser of $3.00 or 40% of the volume weighted average price of the 30 days at date of conversion; not to be less than $1.00. In connection with the debenture the lender is entitled to receive the greater of 5% of every dollar raised through financing or every dollar of revenue generated through the earlier of the maturity date or repayment of the principal.

 

		November 30, 2017
Convertible debenture		$	180,000
Unamortized discount			(123,011	)
Convertible debenture, net of unamortized discount		$	56,989

 

6. SUBSEQUENT EVENTS

 

On December 29, 2017, the Company issued an aggregate of 1,550,000 shares of common stock to the holder of a 7% Convertible Promissory Note, dated November 14, 2016 to convert principal amount of $12,400.

 

In December 2017, the Company received an additional $82,750 as a deposit from a significant shareholders toward the purchase price on an agreement that is currently being negotiated with VMI Acquisitions, LLC for purchase of certain of the Company’s assets. The agreement is anticipated to be completed by the end of January 2018.

 

 

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 or decline of our stock price;
	●	Potential fluctuation in quarterly results;
	●	Rapid and significant changes in markets;
	●	Litigation with or legal claims and allegations by outside parties; and
	●	Insufficient revenues to cover operating costs.

 

The following discussion should be read in conjunction with the financial statements and the notes thereto which are included in this Quarterly Report.

 

Overview

 

Cine-Source Entertainment, Inc. (the “Old Corporation”) a Colorado corporation, was formed on July 29, 1988. Pursuant to a Plan of Merger dated February 24, 2004, the Old Corporation filed Articles and Certificate of Merger with the Secretary of State of the State of Colorado merging the Old Corporation into Cine-Source Entertainment, Inc. (the “Surviving Corporation”), a Colorado corporation. The name of the Surviving Corporation was changed to First Quantum Ventures, Inc., on April 27, 2004. On April 13, 2006, the Surviving Corporation formed a wholly owned subsidiary, a Nevada corporation named First Quantum Ventures, Inc., and on May 5, 2006 merged the Surviving Corporation with and into this subsidiary.

 

On March 15, 2012, the Company changed its name to DiMi Telematics, International, Inc.

 

In early 2017, our management team elected to suspend further investment and working capital on developing the Company’s technology and business prospects, turning its attention to prevailing new business opportunities in other high growth industries; namely the hemp-derived cannabidiol (“CBD”) market. On March 10, 2017, the Company changed its name to Bespoke Extracts, Inc. (formerly known as DiMi Telematics, Inc.) to align the Company’s corporate identity with its new business plan.

 

The Company is now focused on bringing to market a proprietary line of premium, quality, all natural CBD products in the forms of tinctures, capsules, drops and edibles for the nutraceutical and veterinary markets. Produced using pure, all natural, zero-THC phytocannabinoid-rich (“PCR”) hemp-derived isolate, our products will be marketed as dietary supplements through wholesale channels and direct-to-consumers via our retail ecommerce store found at www.bespokeextracts.com.

 

 

Plan of Operations

 

Launched in the fourth quarter of 2017, our introductory retail line of premium CBD extracts comes in the form of tinctures and includes:

 

●

All-Natural, Pure Hemp-Derived CBD Extract with raw Mānuka Honey – available in 1 oz. and will retail at $129.

 

●

All-Natural, Pure Hemp-Derived CBD Extract for Pets with bacon flavoring – available in 1 oz. and will retail at $69.

 

Generally speaking, most CBD products for oral consumption available on the market have an earthy, bitter taste that some observers suggest is reminiscent of chlorophyll. The centerpiece of the Company’s introductory line of great-tasting tinctures is our formulation which infuses pure, raw, all-natural, un-pasteurized Mānuka honey into our hemp-derived CBD extract.

 

Our Mānuka honey, imported directly from New Zealand, is one of the most unique and beneficial forms of honey in the world and carries the industry’s highest Unique Manuka Factor (UMF^®) 16+ rating, distinguishing it as superior high grade Mānuka. Legislated by the UMF Honey Association (http://www.umf.org.nz/), the UMF rating system provides for a quality trademark and grading system identifying natural unadulterated Mānuka honey that has a special unique natural property found only in some strains of Mānuka honey. High grade (10+) Mānuka honey contains a high concentration of methylglyoxal, giving the honey its superior antibiotic quality. Produced by bees that pollinate the native Mānuka bush, general Mānuka honey uses range from healing sore throats and digestive illnesses to curing Staph infections and gingivitis.

 

In 1982, researchers at the New Zealand University of Waikato discovered that Mānuka honey has a considerably higher level of enzymes than regular honey. (http://www.waikato.ac.nz/news/archive.shtml?article=1087). These enzymes create a natural hydrogen peroxide that works as an antibacterial. The Company’s tinctures are infused with superior high grade, raw Mānuka honey, further enhancing the potential health benefits offered by the CBD isolate we use, and delivering a delicious tasting experience for consumers.

 

Planned Expansion of Product Line

 

By the spring of 2018, presuming market conditions are favorable, we expect to expand our retail product offerings to include new flavored options of tinctures and drops, as well as introducing our formulations in the form of capsules, sprays and edibles, such as gummies and chewable candies.

 

Commitment to Excellence in Supply, Manufacturing and Logistics

 

A key differentiator of our finished products is the superb quality of ingredients we source from the industry’s leading suppliers, each of whom we have carefully vetted and qualified.

 

It is important to note that the CBD oil industry has attracted a whole host of ’snake oil-like’ salesmen who are intent on capitalizing on rising consumer demand for CBD products; however their primary motive is merely profit, not quality, much less safety. In fact, in late February 2015, the U.S. Federal Drug Administration (“FDA”) issued several warning letters to companies who claimed that their products contained CBD, but following testing of these products by the FDA were found to have no CBD whatsoever, much less high quality, pure and/or organic CBD.

 

All of the Company’s flavor-infused tinctures and drops are created using our formulations with pure, all natural CBD isolate sourced from a leading supplier which sends each batch of CBD isolate it produces to a third party for purity and safety verification prior to shipping to our manufacturer in Colorado. CBD isolate contains no THC, so products made using this product are not psychotropic and do not produce the “high” associated with THC products. Committed to sustainable agriculture, Isodiol sources its hemp-derived CBD from only non-GMO crops grown without pesticides, herbicides or insecticides. Moreover, its purification plant and processes are International Organization for Standardization (“ISO”) 9001 certified and Good Manufacturing Practice (“GMP”) certified, reflecting our shared commitment to following only industry-best standards.

 

Raw Mānuka honey used in our products is imported directly from Graham Cammells Honey located on the north island of New Zealand which has been supplying quality bee products since 1974.

 

Fulfillment of orders from our online customers is managed by a third-party logistics partner also based in the state of Colorado.

 

Development Status and Go-to-Market Strategy

 

We believe he traditional retail environment is currently experiencing notable economic instability due largely to the global shift in consumer purchasing behaviors – with online shopping/ecommerce sites rapidly overtaking brick-and-mortar stores as consumer preferred shopping venues. In view of this retailing reality, we have adopted a Direct-to-Consumer sales model that will be anchored by a high impact, visually stunning, content-rich ecommerce website whereby we will educate and sell and ship our CBD products directly to consumers.

 

 

Our marketing initiatives will include the use of social marketing, direct response marketing, inbound marketing, email marketing, Search Engine Optimization and content marketing, among other proven strategies. We will also explore utilizing coupon and deal sites to drive traffic to our website and participate in select industry conferences to promote our brand and build greater awareness of our products among prospective business partners and consumers.

 

Critical Accounting Policies and Estimates

 

he presentation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.

 

Intellectual Property

  

Intellectual property is stated at cost. When retired or otherwise disposed, the related carrying value and accumulated amortization are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. Minor additions and renewals are expensed in the year incurred. Major additions and renewals are capitalized and depreciated over their estimated useful lives being 3 years up to 15 years.

 

Revenue Recognition

 

The Company intends to recognize revenue on four basic criteria which must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded.

 

Stock Based Compensation

 

The Company accounts for all compensation related to stock, options or warrants using a fair value based method whereby compensation cost is measured at the grant date for employee awards and upon a commitment date or completion of services for nonemployee awards based on the value of the award and is recognized over the service period, which is usually the vesting period. The Company uses the Black-Scholes pricing model to calculate the fair value of options and warrants issued to both employees and non-employees. Stock issued for compensation is valued using the market price of the stock on the date of the related agreement.

 

Employees

 

As of November 30, 2017, the Company employed no full time and no part time employees other than its Chief Executive Officer.

 

 

Results of Operation for the Three Months Ended November 30, 2017 and November 30, 2016.

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses for the three months ended November 30, 2017 and November 30, 2016 totaled $20,791 and $8,452, respectively. Payroll expense amounted to $19,371 and $24,563 for the three months ended November 30, 2017 and November 30, 2016, respectively. Consulting amounted to $33,000 and $0 for the three months ended November 30, 2017 and November 30, 2016. Warrant expense totaled $914,044 for warrants issued to the Company’s CEO in 2017. Option expense totaled $21,585 for options issued in 2017.

 

Amortization Expense

 

Amortization expense for the three months ended November 30, 2017 and November 30, 2016 totaled $836 and $33, respectively. Amortization expense is in relation to recent URL purchase, prior year amortization is the expensing of intellectual property and the iPhone application.

 

Interest Expense

 

Interest expense on promissory notes for the three months ended November 30, 2017 and November 30, 2016, was $103,546 and $840, respectively.   During the three months ended November 30, 2017.

 

Net Loss

 

For the reasons stated above, our net loss for the three months ended November 30, 2017 totaled $1,137,046 or $(0.04) per share, an increase of $1,094,545 compared to a net loss for the three months ended November 30, 2016 of $42,501, or ($0.01) per share. A significant portion of the net loss for the 2017 period was due to recognition of warrant expense in the amount of $914,044.

 

LIQUIDITY AND CAPITAL RESOURCES

 

As of November 30, 2017, we had cash and cash equivalents of $134,643. Net cash used in operating activities for the three months ended November 30, 2017 was approximately $132,829. Our current liabilities as of November 30, 2017 totaled $201,966 consisting of accounts payable and accrued liabilities of $64,600, deposit of $45,000, note payable related party $30,050 and convertible note payables, net of $62,316.

 

The accompanying financial statements have been prepared assuming a continuation of the Company as a going concern. The Company has reported a net loss of $1,137,046 for the three months ended November 30, 2017 and had an accumulated deficit of $10,244,132 as of November 30, 2017. These conditions raise significant doubt about our ability to continue as a going concern.

 

We have not generated positive cash flows from operating activities. The primary source of capital has been from the sale of equity securities. Our primary use of capital has been for professional fees and general and administrative costs. Our working capital requirements are expected to increase in line with the growth of our business.

 

 

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.

 

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:

 

	●	Since inception our chief executive officer also functions as our chief financial officer. As a result, our officers 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.

 

 

PART II – OTHER INFORMATION

 

ITEM 1.

LEGAL PROCEEDINGS

 

We are not currently a party to, nor is any of our property currently the subject of, any pending legal proceeding that will have a material adverse effect on our business.

 

ITEM 1A.

RISK FACTORS

 

Not required for smaller reporting companies.

 

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None.

 

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

 

As of November 30, 2017, the Company is in default on $30,000 in promissory notes issued to a significant shareholder, due to failure to make payment when due.

 

ITEM 4.

MINE SAFETY DISCLOSURES

 

No disclosure required.

 

ITEM 5.

OTHER INFORMATION

 

None.

 

ITEM 6.

Exhibits

 

Exhibit No.		Description
31.1		Certification of the Chief Executive Officer 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.

 

 

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: January 22, 2018	By:	/s/ Marc Yahr
		Marc Yahr President and Chief Executive Officer
		(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)