The accompanying notes are an integral part of these consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AT MAY 31, 2018 (UNAUDITED)
NOTE 1 - ORGANIZATION
Organization
Service Team Inc. (the "Company") was incorporated pursuant to the laws of the State of Nevada on June 6, 2011. The Company was organized to comply with the warranty obligations of electronic devices manufactured by companies outside of the United States. The business proved to be unprofitable and the Company reduced its warranty and repair operations. On June 5, 2013, Service Team Inc. acquired Trade Leasing, Inc. for 4,000,000 shares of its common stock, a commonly held company. Trade Leasing, Inc., a California corporation, was incorporated on November 1, 2011, and commenced business January 1, 2013. Trade Leasing, Inc. is principally involved in the manufacturing, maintenance and repair of truck bodies.
The Company has established a fiscal year end of August 31.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements presented in this report are the combined financial reports of Trade Leasing, Inc. and Service Team Inc.
The Company maintains its accounting records on an accrual basis in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP).
The consolidated financial statements present the Balance Sheet, Statements of Operations, Shareholders' Deficit and Cash Flows of the Company. These consolidated financial statements are presented in United States dollars. The accompanying audited, consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q. All adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations for the interim periods have been made and are of a recurring nature unless otherwise disclosed herein.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Service Team Inc. and Trade Leasing, Inc. both of which are under common control and ownership. The consolidated financial statements herein contain the operations of the wholly-owned subsidiaries listed above. All significant inter-company transactions have been eliminated in the preparation of these financial statements.
Use of Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Going Concern
The Company's financial statements are prepared using the accrual method of accounting in accordance with accounting principles generally accepted in the United States of America, and have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The Company has an accumulated deficit as of May 31, 2018 of $3,067,432. The Company will be dependent upon the raising of additional capital through placement of our common stock in order to implement its business plan. There can be no assurance that the Company will be successful in order to continue as a going concern. The Company is funding its initial operations by issuing common shares and debt. We cannot be certain that capital will be provided when it is required.
Cash and Equivalents
Cash and equivalents include investments with initial maturities of three months or less. The Company maintains its cash balances at credit-worthy financial institutions that are insured by the Federal Deposit Insurance Corporation ("FDIC") up to $250,000. There were no cash equivalents at May 31, 2018, or August 31, 2017.
Concentration of Credit Risk
Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, are cash and cash equivalents. The Company places its cash and temporary cash investments with credit quality institutions. At times, such investments may be in excess of FDIC insurance limits.
Accounts Receivable
All accounts receivable are due thirty (30) days from the date billed. If the funds are not received within thirty (30) days the customer is contacted to arrange payment. The Company uses the allowance method to account for uncollectable accounts receivable. All accounts were considered collectable at period end and no allowance for bad debts was considered necessary.
Accounts Receivable and Revenue Concentrations
The Company's wholly owned subsidiary, Trade Leasing, Inc., has more than 300 customers. Three customers represented about 12% and 10% of total receivables as of May 31, 2018. Three customers represented 21%, 18% and 12% of total receivables as of August 31, 2017. During the nine month period ended May 31, 2018, the Company had two customers that represented 14% and 12% of total sales. During the nine month period ended May 31, 2017, the Company had one customer that represented 14% of total sales.
Inventory
The Company does not own inventory, materials are purchased as needed from local suppliers; therefore, there was no additional inventory on hand at May 31, 2018 or August 31, 2017.
Property and Equipment
Equipment, vehicles and furniture, which are recorded at cost, consist primarily of fabrication equipment and are depreciated using the straight-line method over the estimated useful lives of the related assets (generally 15 years or less). Costs incurred for maintenance and repairs are expensed as incurred and expenditures for major replacements and improvements are capitalized and depreciated over their estimated remaining useful lives. There was $12,159 of depreciation expense during the nine months ended May 31, 2018 and $5,455 of depreciation expense during the nine months ended May 31, 2017.
Net property and equipment were as follows at May 31. 2018 and August 31, 2017:
|
|
|
5/31/18
|
|
|
8/31/17
|
|
|
Equipment
|
|
$
|
372,166
|
|
|
$
|
351,988
|
|
|
Vehicles
|
|
|
15,000
|
|
|
|
15,000
|
|
|
Furniture
|
|
|
9,000
|
|
|
|
1,500
|
|
|
Leasehold improvements
|
|
|
52,827
|
|
|
|
52,827
|
|
|
Subtotal
|
|
|
448,993
|
|
|
|
421,315
|
|
|
Less: accumulated depreciation
|
|
|
(279,647
|
)
|
|
|
(267,488
|
)
|
|
Total Fixed Assets, Net
|
|
$
|
169,346
|
|
|
$
|
153,827
|
|
Lease Commitments
Service Team Inc. leases facilities at 1818 Rosslynn Avenue, Fullerton, California, to manufacture its products. The facility is leased for six and one half years at a price of $10,000 per month, for the first six months; and, $14,000 per month thereafter. Service Team Inc pays for the fire insurance and property taxes on the building estimated to be approximately $2,000 per month. The location consists of three acres of land and one building of approximately 30,000 square feet. As of May 31, 2018, the deferred rent related to this lease was $13,333.
Our principal executive offices are located in 600 square feet in a building at 18482 Park Villa Place, Villa Park, California 92861. The space is furnished by Robert L. Cashman., a related party, at no charge.
Beneficial Conversion Features
From time to time, the Company may issue convertible notes that may contain an imbedded beneficial conversion feature. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation of a portion of the note proceeds to the fair value of warrants, if related warrants have been granted. The intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest expense over the life of the note using the effective interest method.
Fair Value of Financial Instruments
The Company adopted Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 820 on June 6, 2011. Under this FASB, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50 details the disclosures that are required for items measured at fair value.
The Company has various financial instruments that must be measured under the new fair value standard including: cash, convertible notes payable, accrued expenses, promissory notes payable, accounts receivable and accounts payable. The Company's financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows:
Level 1 – Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. The fair value of the Company's cash is based on quoted prices and therefore classified as Level 1.
Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
Level 3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.
Cash, accounts receivable, accounts payable, promissory notes, convertible notes and accrued expenses reported on the balance sheet are estimated by management to approximate fair market value due to their short term nature.
The following table presents assets and liabilities that were measured and recognized at fair value as of May 31, 2018 on a recurring basis:
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
Realized
|
|
|
Description
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Loss
|
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Total
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
The following table presents assets and liabilities that were measured and recognized at fair value as of August 31, 2017 on a recurring basis:
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
Realized
|
|
|
Description
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Loss
|
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Total
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Income Taxes
In assessing the realization of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on the level of historical operating results and the uncertainty of the economic conditions, the Company has recorded a full valuation allowance against its deferred tax assets at May 31, 2018 and August 31, 2017 where it cannot conclude that it is more likely than not that those assets will be realized.
Revenue Recognition
Trade Leasing Inc dba Delta Stag Manufacturing
Service Team Inc, 100% owned subsidiary Trade Leasing Inc dba Delta Stag Manufacturing receives orders from customers to build or repair truck bodies. The company builds the requested product. At the completion of the product the truck is delivered to the customer. If the customer accepts the product Trade Leasing Inc dba Delta Stag Manufacturing issues an invoice to the customer for the job. The invoice is entered into our accounting system and is recognized as revenue at that time.
In Trade Leasing Inc we use the completed contract method for truck bodies built, which typically have construction periods of 15 days or less. Contracts are considered complete when title has passed, the customer has accepted the product and we do not retain risks or rewards of ownership of the truck bodies. Losses are accrued if manufacturing costs are expected to exceed manufacturing contract revenue. Manufacturing expenses are primarily composed of aluminum cost, which is the largest component of our raw materials cost and the cost of labor.
Share Based Expenses
The Company accounts for the issuance of equity instruments to acquire goods and/or services based on the fair value of the goods and services or the fair value of the equity instrument at the time of issuance, whichever is more readily determinable. The Company's accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of standards issued by the FASB
.
The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor's performance is complete. In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement.
Stock Based Compensation
In December of 2004, the FASB issued a standard which applies to transactions in which an entity exchanges its equity instruments for goods or services and also applies to liabilities an entity may incur for goods or services that are based on the fair value of those equity instruments. For any unvested portion of previously issued and outstanding awards, compensation expense is required to be recorded based on the previously disclosed methodology and amounts. Prior periods presented are not required to be restated. We adopted the standard as of inception. The Company has not issued any stock options to its Board of Directors and officers as compensation for their services. If options are granted, they will be accounted for at a fair value as required by the FASB ASC 718.
Net Loss Per Share
The Company adopted the standard issued by the FASB, which requires presentation of basic earnings or loss per share and diluted earnings or loss per share. Basic income (loss) per share ("Basic EPS") is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share ("Diluted EPS") are similarly calculated using the treasury stock method except that the denominator is increased to reflect the potential dilution that would occur if dilutive securities at the end of the applicable period were exercised. During the three and nine month periods ended May 31, 2018, because the Company operations resulted in net losses, no additional dilutive securities were included in the Diluted EPS as that would be anti-dilutive to the resulting diluted earnings per share.
Recent Accounting Pronouncements
In May 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") 2017-09, Compensation — Stock Compensation (Topic 718): Scope of Modification Accounting. ASU 2017-09, which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. Per ASU 2017-9, an entity should account for the effects of a modification unless all the following are met: (1) the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification, (2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified, and (3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The current disclosure requirements in Topic 718 apply regardless of whether an entity is required to apply modification accounting under the amendments in ASU 2017-9. ASU 2017-9 is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for (1) public business entities for reporting periods for which financial statements have not yet been issued and (2) all other entities for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this ASU should be applied prospectively to an award modified on or after the adoption date. The adoption of ASU 2017-9 is not expected to have a material impact on the Company's financial statements or related disclosures.
In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350). ASU 2017-04 simplifies the subsequent measurement of goodwill by removing the second step of the two-step impairment test. The amendment requires an entity to perform its annual, or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The amendment should be applied on a prospective basis. ASU 2017-04 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company intends to early adopt the ASU in 2017.
In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)". Under this guidance, an entity is required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. This guidance offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. This guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this standard will have on our consolidated financial statements.
In May 2014 the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. Since ASU 2014-09 was issued, several additional ASUs have been issued to clarify various elements of the guidance. These standards provide guidance on recognizing revenue, including a five-step model to determine when revenue recognition is appropriate. The standard requires that an entity recognize revenue to depict the transfer of control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 will be effective for our fiscal year beginning September 1, 2018 unless we elect the earlier date of September 1, 2017. In addition, the FASB issued ASU 2016-08, ASU 2016-10, and ASU 2016-12 in March 2016, April 2016, and May 2016, respectively, to help provide interpretive clarifications on the new guidance in ASC Topic 606. The Company is currently evaluating the accounting, transition, and disclosure requirements of the standard and cannot currently estimate the financial statement impact of adoption.
NOTE 3 – CAPITAL STOCK
The Company's authorized capital is 20,000,000,000 common shares with a par value of $0.001 per share and 150,000 preferred shares with a par value of $0.001 per share.
Common Shares
On February 12, 2016, the Articles of Incorporation were amended to increase the authorized shares of capital stock to 500,000,000. On December 20, 2016, the Articles of Incorporation were amended to increase the authorized share of capital stock to 1,000,000,000. On January 19, 2017, the Articles of Incorporation were amended to increase the authorized share of capital stock to 2,000,000,000. On February 16, 2017, the Articles of Incorporation were amended to increase the authorized share of capital stock to 3,000,000,000. On April 27, 2017, the Articles of Incorporation were amended to increase the authorized share of capital stock to 4,500,000,000. On June 13, 2017, the Articles of Incorporation were amended to increase the authorized share of capital stock to 8,000,000,000. On June 28, 2017, the Articles of Incorporation were amended to increase the authorized share of capital stock to 10,000,000,000. On August 22, 2017, the Company moved its state of domicile from Nevada to Wyoming, and increased its authorized common stock to 20,000,000,000.
Preferred Shares
On January 23, 2015, Service Team Inc. filed with the Secretary of State of Nevada a Certificate of Designation for 100,000 shares of Series A Preferred Stock. The Designation gives the Series A Preferred Stock 500 votes per share. Series A Preferred Stock were not entitled to receive dividends, any liquidation preference, or conversion rights. On October 16, 2015, the Designation of Preferred Stock was amended to allow Preferred Shareholders to receive dividends in an amount equal to dividends paid per share on Common Stock. On July 27, 2016, an amendment was filed to increase the voting rights of the preferred stock from 500 votes per share to 10,000 votes per share. The Series A share amendments valued according to the additional voting rights and dividend rights assigned. The value assigned to the dividend rights was derived from a model utilizing future economic value of the dividends and was $525 which was recorded on the grant date as stock based compensation. The value assigned to the voting rights was derived from a model utilizing control premiums to value the voting control of the preferred stock and was $83,000 which was recorded on the grant date as stock based compensation. On December 30, 2016 the Articles of Incorporation were amended to increase the authorized preferred shares to 150,000.
On July 25, 2017, the Articles of Incorporation were amended to increase the voting rights of preferred shares to 100,000 votes per share. The Series A share amendments valued according to the additional voting rights and dividend rights assigned. The value assigned to the dividend rights was derived from a model utilizing future economic value of the dividends and was $0 which was recorded on the grant date as stock based compensation. The value assigned to the voting rights was derived from a model utilizing control premiums to value the voting control of the preferred stock and was $54,000 which was recorded on the grant date as stock based compensation.
On December 4, 2017, the Company granted 50,000 additional Series A Preferred Stock shares to Robert Cashman, a related party. The value assigned to the new shares was derived from a model utilizing control premiums to value the voting control of the preferred stock and was $1,000 which was recorded on the grant date as stock based compensation.
Share Transactions
2018
On September 1, 2017, Crown Bridge Partners LLC converted $4,742 of its Note dated 12-21-2016 into 105,368,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On September 2, 2017, Crossover Capital LLC converted $4,975 of its Note dated 2-14-2017 into 103,000,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On September 11, 2017, Crown Bridge Partners LLC converted $5,446 of its Note dated 12-21-2016 into 121,018,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On September 12 2017, LG Capital Funding LLC Converted $6,048 of its Note dated 1-3-2017 into 120,964,400 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On September 19, 2017, Crossover Capital LLC converted $6,075 of its Note dated 2-14-2017 into 125,000,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On October 6, 2017, Crown Bridge Partners LLC converted $6,501 of its Note dated 12-21-2016 into 144,470,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On October 5, 2017, Crossover Capital LLC converted $6,925 of its Note dated 2-14-2017 into 142,000,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On October 31, 2017, Tangiers Investment Group LLC converted $4,331 of its Note dated 6-13-2016 in the amount of into 125,000,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On October 31, 2017, Tangiers Investment Group LLC converted $6,750 of its Note dated 6-13-2016 in the amount of into 192,857,143 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On November 2, 2017, LG Capital Funding LLC Converted $6,681 of its Note dated 1-3-2017 into 133,622,200 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On November 4, 2017, Crossover Capital LLC converted $8,075 of its Note dated 2-14-2017 into 165,000,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion
On November 8, 2017, Crown Bridge Partners LLC converted $7,858 of its Note dated 12-21-2016 into 174,626,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On November 14, 2017, Crown Bridge Partners LLC converted $9,421 of its Note dated 12-21-2016 into 198,242,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On November 15, 2017, Crown Bridge Partners LLC converted $7,538 of its Note dated 12-21-2016 into 167,511,777 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On November 15, 2017, Crossover Capital LLC converted $7,735 of its Note dated 2-14-2017 into 158,200,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion
On November 16, 2017, Tangiers Investment Group LLC converted $13,613 of its Note in the amount of into 396,880,466 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On November 29, 2017, JMJ Financial converted $13,270 of its Note dated 5-1-2017 into 132,700,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion
On December 5, 2017, Tangiers Investment Group LLC converted $16,769 of its Note dated 7-18-2016 into 488,892,128 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On December 6, 2017, JMJ Financial converted $4,700 of its Note dated 5-1-2017 into 94,000,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On December 13, 2017, JMJ Financial converted $19,317 of its Note dated 5-1-2017 into 129,000,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion. This conversion pays the Note in full.
On December 14, 2017, Crown Bridge Partners LLC converted $12,596 of its Note dated 12-21-2016 into 279,900,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On December 28, 2017, Tangiers Investment Group LLC converted $20,621 of its Note dated 7-18-2016 into 601,195,335 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On January 12, 2018, Crown Bridge Partners LLC converted $12,600 of its Note dated 12-21-2016 into 280,000,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On January 29, 2018, Crossover Capital LLC converted $7,325 of its Note Dated 7-24-2017 into 150,000,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On March 16, 2018, Crossover Capital LLC converted $12,325 of its Note Dated 7-24-2017 into 250,000,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On March 16, 2018, JMJ Financial converted $6,505 of its Note dated 4-28-2017 into 351,000,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On March 19, 2018, Crown Bridge Partners LLC converted $15,829 of its Note dated 12-21-2016 into 351,760,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On March 21, 2018, Tangiers Investment Group LLC converted $19,201 of its Note dated 7-18-2016 into 548,564,286 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On May 22, 2018, Tangiers Investment Group LLC converted $13,600 of its Note dated 11-10-2017 into 302,222,222 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
During the nine-month period ended May 31, 2018, $40,000 of beneficial conversion features were recorded resulting from convertible debts issued during the same period. Please refer to Note 4 for further information regarding the discounts on the convertible debt transactions.
As of May 31, 2018, the Company has not granted any stock options.
During 2017 and 2018 the Company did not sell any Common Shares. The only shares issued were for Conversion of Notes.
2017
On September 1, 2016, Tangiers Investment Group LLC converted $8,257 of its Note in the amount of into 16,851,020 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On September 14, 2016, Tangiers Investment Group LLC converted $5,937 of its Note in the amount of into 12,116,327 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On October 18, 2016, Tangiers Investment Group LLC converted $6,869 of its Note in the amount of into 9,862,168 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On November 8, 2016, Tangiers Investment Group LLC converted $6,523 of its Note in the amount of into 10,353,968 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On November 10, 2016, Tangiers Investment Group LLC converted $13,710 of its Note in the amount of into 21,761,905 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On November 21, 2016, Tangiers Investment Group LLC converted $15,000 of its Note in the amount of into 23,809,524 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On December 21, 2016, Tangiers Investment Group LLC converted $4,871 of its Note in the amount of $27,500 into 10,141,347 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On December 29, 2016, Tangiers Investment Group, LLC converted $4,327 of its Note in the amount of $35,934 into 8,079,514 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On January 11, 2017, Tangiers Investment Group LLC converted $5,854 of its Note in the amount of $35,750 into 14,055,222 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On January 25, 2017, Tangiers Investment Group LLC converted $7,237 of its Note in the amount of $35,750 into 29,538,776 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On January 27, 2017, Tangiers Investment Group LLC converted $5,590 of its Note in the amount of $35,750 into 22,817,633 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On April 10, 2017, Tangiers Investment Group LLC converted $6,085 of its Note into 34,771,429 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On April 19, 2017, Tangiers Investment Group LLC converted $6,693 of its Note into 38,245,714 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On April 26, 2017, Tangiers Investment Group LLC converted $4,417 of its Note into 42,066,667 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On May 3, 2017, Tangiers Investment Group LLC converted $4,809 of its Note into 46,262,626 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On May 10, 2017, Tangiers Investment Group LLC converted $5,290 of its Note into 50,889,851 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On May 17, 2017, Tangiers Investment Group LLC converted $5,998 of its Note into 57,700,818 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion. This conversion pays the Note in full.
On April 28, 2017, the Company issued 17,300,000 shares to Tangiers Investment Group LLC as an inducement to issue convertible debt which was valued at $6,920 based on the closing market price on the date of grant.
During the nine-month period ended May 31, 2017, $163,080 of beneficial conversion features were recorded resulting from convertible debts issued during the same period. Please refer to Note 4 for further information regarding the discounts on the convertible debt transactions.
Stock Based Compensation
We have accounted for stock based compensation under the provisions of FASB Accounting Standards codification (ASC) 718-10-55. (Prior authoritative literature: FASB Statement 123 (R), Share-based payment.) This statement requires us to record any expense associated with the fair value of stock based compensation. Determining fair value requires input of highly subjective assumptions, including the expected price volatility. Changes in these assumptions can materially affect the fair value estimate.
NOTE 4 – DEBT TRANSACTIONS
Convertible Notes Payable – Related Party
R.L. Cashman
On April 17, 2017, the Company issued a convertible note to Robert Cashman (a related party) for $12,500 of cash consideration. The note bears interest at 10%, matures on April 17, 2018, and is convertible into common stock at 50% of the average bid price of the stock during the 30 days prior to the conversion. The Company recorded a debt discount equal to $12,500 due to this conversion feature and amortized $4,658 during the year ended August 31, 2017, with a remaining debt discount balance of $7,842 as of August 31, 2017. During the nine months ended May 31, 2018, the Company amortized $7,842, to end the quarter with a balance of $0. This note was repaid during the period ended May 31, 2018.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.0005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.
Convertible Notes Payable – Third Party
U S Affiliated Inc.
On December 16, 2016, the Company issued a promissory note to U.S. Affiliated, Inc. for $4,000 of cash consideration. The note bears interest at 10%, matures on December 16. The note was repaid during the year ended August 31, 2017 and at August 31, 2017, the balance was $0.
On May 12, 2016, the Company issued a convertible note to U.S. Affiliated, Inc. for $7,500 of cash consideration. The note bears interest at 6%, matures on September 12, 2016, and is convertible into common stock at 50% of the average bid price of the stock during the 30 days prior to the conversion. The Company recorded a debt discount equal to $7,500 due to this conversion feature and amortized $6,768 during the year ended August 31, 2016, with a remaining debt discount balance of $732 as of August 31, 2016. The note had accrued interest of $137 and $0 as of August 31, 2016 and August 31, 2015, respectively. The note was repaid in full during the six months ended February 28, 2017.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.0005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.
JMJ Financial Group
On April 28, 2017, the Company issued a convertible note to JMJ Financial Group for $55,000 of cash consideration. The note bears interest at 12%, matures on April 28, 2018, and is convertible into common stock at 50% of the lowest 3 closing market prices of the previous 20 trading days prior to conversion. The Company recorded a debt discount equal to $37,080 due to this conversion feature. The Company also recorded a $6,000 and $11,920 debt discounts due to accrued interest and origination fees required by the agreement to be accrued at the beginning of the note. The note had accrued interest of $2,260 and $0 as of August 31, 2017 and May 31, 2018, respectively. The debt discounts had a balance at August 31, 2017 of $36,164 and a balance of $0 at May 31, 2018. The Company recorded debt discount amortization expense of $18,836 during the year ended August 31, 2017 and $36,164 during the nine month period ended May 31, 2018. The Company converted $31,570 of principal and $12,222 of interest into shares during the nine month period ended May 31, 2018.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.
LG Capital Funding, LLC
On January 3, 2017, the Company issued a convertible note to LG Capital Funding LLC for $28,000 for cash consideration. The note bears interest at 8%, matures on September 3, 2017, and is convertible into common stock at 50% of the lowest 3 closing market prices of the previous 20 trading days prior to conversion. The Company recorded a debt discount equal to $26,000 due to this conversion feature. The Company also recorded a $2,000 debt discount due to issuance costs. The note had accrued interest of $84 as of August 31, 2017 and $0 at November 30, 2017. The debt discounts had a balance at August 31, 2017 of $9,589 and $0 at November 30, 2017. During the year ended August 31, 2017, $15,930 of principal and $706 of accrued interest was converted into shares; see Note 3 for more information. The Company made cash payments of $5,770, to end with a balance of $6,300 as of August 31, 2017. The note was fully converted into shares during the three months ended November 30, 2017. The Company recorded debt discount amortization expense of $18,411 during the year ended August 31, 2017 and $9,589 during the three months ended November 30, 2017. The entire balance of the Note has been converted to stock.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.
Tangiers Capital Group
On November 25, 2015, the Company issued a convertible note to Tangiers Capital Group for $38,500 of cash consideration. The note bears interest at 12%, matures on November 25, 2016, and is convertible into common stock at 50% of the lowest 3 closing market prices of the previous 20 trading days prior to conversion. The Company recorded a debt discount equal to $35,000 due to this conversion feature. The Company also recorded a $3,500 debt discount due to issuance fees. The note had accrued interest of $0 and $4,620 as of August 31, 2017 and 2016. The debt discounts had a balance at August 31, 2017 and August 31, 2016 of $0 and $9,039, respectively. The Company recorded debt discount amortization expense of $9,039 and $29,461 during the year ended August 31, 2017 and the year ended August 31, 2016, respectively. This note was fully converted into shares during the year ended August 31, 2017, see Note 3 for more information.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.
On April 15, 2016, the Company issued a convertible note to Tangiers Capital Group for $27,500 of cash consideration. The note bears interest at 10%, matures on April 15, 2017, and is convertible into common stock at 50% of the lowest 3 closing market prices of the previous 20 trading days prior to conversion. The Company recorded a debt discount equal to $25,000 due to this conversion feature. The Company also recorded a $2,500 debt discount due to issuance fees. The note had accrued interest of $0 and $2,750 as of August 31, 2017 and 2016. The debt discounts had a balance at August 31, 2017 and August 31, 2016 of $0 and $17,103, respectively. The Company recorded debt discount amortization expense of $17,103 and $10,397 during the year ended August 31, 2017 and the year ended August 31, 2016, respectively. This note was fully converted into shares during the year ended August 31, 2017, see Note 3 for more information.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.
On May 6, 2016, the Company issued a convertible note to Tangiers Capital Group for $35,750 of cash consideration. The note bears interest at 10%, matures on May 6, 2017, and is convertible into common stock at 50% of the lowest 3 closing market prices of the previous 20 trading days prior to conversion. The Company recorded a debt discount equal to $32,500 due to this conversion feature. The Company also recorded a $3,250 debt discount due to issuance fees. The note had accrued interest of $0 and $3,575 as of August 31, 2017 and 2016. The debt discounts had a balance at August 31, 2017 and August 31, 2016 of $0 and $24,290, respectively. The Company recorded debt discount amortization expense of $24,290 and $11,460 during the year ended August 31, 2017 and the year ended August 31, 2016, respectively. This note was fully converted into shares during the year ended August 31, 2017, see Note 3 for more information.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.
On June 13, 2016, the Company issued a convertible note to Tangiers Capital Group for $38,500 of cash consideration. The note bears interest at 10%, matures on June 13, 2017, and is convertible into common stock at 50% of the lowest 3 closing market prices of the previous 20 trading days prior to conversion. The Company recorded a debt discount equal to $35,000 due to this conversion feature. The Company also recorded a $3,500 debt discount due to issuance fees. The note had accrued interest of $7,272 and $10,890 and $3,850 as of November 30, 201 and August 31, 2017. The debt discounts had a balance at November 30, 2017 and August 31, 2017 of $0 and $0, respectively. The Company recorded debt discount amortization expense of $0 and $30,167 during the three months ended November 30, 2017 and the year ended August 31, 2017, respectively. During the three months ended November 30, 2017 and the year ended August 31, 2017, $4,982 of principal and $3,743 of interest and $33,518 or principal and $4,220 of accrued interest was converted into shares, respectively; see Note 3 for more information. The note has now been fully converted as of November 30, 2017.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.
On July 18, 2016, the Company issued a convertible note to Tangiers Capital Group for $27,500 of cash consideration. The note bears interest at 10%, matures on July 18, 2017, and is convertible into common stock at 50% of the lowest 3 closing market prices of the previous 20 trading days prior to conversion. The Company recorded a debt discount equal to $25,000 due to this conversion feature. The Company also recorded a $2,500 debt discount due to issuance fees. The note had accrued interest of $0 and $8,401 and as of May 31, 2018 and August 31, 2017. The debt discounts had a balance at May 31, 2018 and August 31, 2017 of $0 and $0, respectively. The Company recorded debt discount amortization expense of $24,185 and $3,315 during the year ended August 31, 2017 and the year ended August 31, 2016, respectively. $27,500 of principal and $39,694 of interest were converted into shares during the nine months ended May 31, 2018; see Note 3 for further information.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.
On November 10, 2017, Service Team Inc issued a 12% Convertible Promissory Note payable to Tangiers Investment Group LLC (the "Investor") in the principal amount of $23,000. The Note, which is due on November 10, 2018, was funded by the Investor in the sum of $20,000 and $3,000 was retained by the Investor through an original issue discount or "OID" for due diligence and legal expense related to this transaction. The Note is convertible into shares of the Registrant's common stock, par value $0.001, at a conversion price of 50% of the lowest trading price of the Company's common stock during the 25 consecutive trading days prior to the date on which Holder elects to convert all or part of the Note. The Company recorded a $20,000 discount due to the beneficial conversion feature. During the nine months ended May 31, 2018, $12,729 of discount amortization was recorded, to result in a remaining debt discount balance of $10,271 as of May 31, 2018. Accrued interest at May 31, 2018 was $511.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.
On February 27, 2018, Service Team Inc issued a 12% Convertible Promissory Note payable to Tangiers Investment Group LLC (the "Investor") in the principal amount of $23,000. The Note, which is due on February 27, 2019, was funded by the Investor in the sum of $20,000 and $3,000 was retained by the Investor through an original issue discount or "OID" for due diligence and legal expense related to this transaction. The Note is convertible into shares of the Registrant's common stock, par value $0.001, at a conversion price of 50% of the lowest trading price of the Company's common stock during the 25 consecutive trading days prior to the date on which Holder elects to convert all or part of the Note. The Company recorded a $20,000 discount due to the beneficial conversion feature and a $3,000 discount due to the original issue discount. During the nine months ended May 31, 2018, $5,860 of discount amortization was recorded, to result in a remaining debt discount balance of $17,140 as of May 31, 2018. Accrued interest at May 31, 2018 was $767.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.
Iconic Holdings LLC
On July 10, 2017, the Company issued a convertible note to Iconic Holdings of $34,993 for consideration of certain machine tools. The note bears interest at 10%, matures on July 10, 2018, and is convertible into common stock at 50% of the lowest 3 closing market prices of the previous 20 trading days prior to conversion. The Company recorded a debt discount equal to $31,812 due to this conversion feature. The Company also recorded a $3,181 debt discount due to issuance fees. The note had accrued interest of $3,499 as of August 31, 2017 and $6,124 as of May 31, 2018. The debt discounts had a balance at August 31, 2017 of $25,118 and $0 as of May 31, 2018. The Company recorded debt discount amortization expense of $9,875 during the year ended August 31, 2017 and $25,118 during the nine months ended May 31, 2018.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.
Power Up Lending Group, LTD.
On December 15, 2016, the Company issued a convertible note to Power Up Lending Group, LTD. for $33,000 of cash consideration. The note bears interest at 8%, matures on September 30, 2017, and is convertible into common stock at 55% of the lowest 3 closing market prices of the previous 15 trading days prior to conversion. The Company recorded a debt discount equal to $30,000 due to this conversion feature. The Company also recorded a $3,000 debt discount due to issuance fees. The Company paid the note in full during the year ended August 31, 2017, such that the ending balance at August 31, 2017 was $0.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.
Crown Bridge Partners, LLC.
On December 21, 2016, the Company issued a convertible note to Crown Bridge Partners, LLC. for $42,500 of cash consideration. The note bears interest at 6%, matures on December 21, 2017, and is convertible into common stock at 55% of the lowest 3 closing market prices of the previous 20 trading days prior to conversion. The Company recorded a debt discount equal to $36,000 due to this conversion feature. The Company also recorded a $6,500 debt discount due to issuance fees. The note had accrued interest of $0 as of August 31, 2017 and February 28, 2018. The debt discounts had a balance at August 31, 2017 of $13,041 and $0 at February 28, 2018. The Company recorded debt discount amortization expense of $29,459 during the year ended August 31, 2017 and $13,041 during the six months ended February 28, 2018. During the year ended August 31, 2017, $10,954 of principal and $13,502 of interest were converted into shares and during the three months ended November 30, 2017 principal of $31,546 and interest of $5,217 was converted into shares; see Note 3 for more information.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.
On June 12, 2017, the Company issued a convertible note to Crown Bridge Partners, LLC. for $63,750 of cash consideration. The note bears interest at 6%, matures on June 12, 2018, and is convertible into common stock at 55% of the lowest 3 closing market prices of the previous 20 trading days prior to conversion. The Company recorded a debt discount equal to $52,600 due to this conversion feature. The Company also recorded a $11,150 debt discount due to issuance fees. The note had accrued interest of $838 as of August 31, 2017 and $2,207 as of May 31, 2018. The debt discounts had a balance at August 31, 2017 of $49,777 and $2,096 at May 31, 2018. The Company recorded debt discount amortization expense of $13,973 during the year ended August 31, 2017 and $47,682 during the nine months ended May 31, 2018. The Company converted $39,524 in principal and $1,500 in accrued interest into shares during the nine months ended May 31, 2018; see Note 3 for more information.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.
Crossover Capital Fund, LLC
On February 14, 2017, the Company issued a convertible note to Crossover Capital Fund, LLC for $40,000 of cash consideration. The note bears interest at 10%, matures on February 14, 2018, and is convertible into common stock at 50% of the lowest 3 closing market prices of the previous 20 trading days prior to conversion. The Company recorded a debt discount equal to $34,000 due to this conversion feature. The Company also recorded a $6,000 debt discount due to issuance fees. The note had accrued interest of $0 as of August 31, 2017 and November 30, 2017. The debt discounts had a balance at August 31, 2017 of $18,301 and $0 at November 30, 2017. The Company recorded debt discount amortization expense of $21,699 during the year ended August 31, 2017 and $18,301 during the three months ended November 30, 2017. During the three months ended November 30, 2017 principal of $32,487 and interest of $1,298 was converted into shares; see Note 3 for more information.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.
On June 13, 2017, the Company issued a convertible note to Crossover Capital Fund, LLC for $41,000 of cash consideration. The note bears interest at 10%, matures on June 13, 2018, and is convertible into common stock at 50% of the lowest 3 closing market prices of the previous 20 trading days prior to conversion. The Company recorded a debt discount equal to $41,000 due to this conversion feature. The note had accrued interest of $887 as of August 31, 2017 and $3,962 at May 31, 2018. The debt discounts had a balance at August 31, 2017 of $32,126 and $1,460 at May 31, 2018. The Company recorded debt discount amortization expense of $8,874 during the year ended August 31, 2017 and $30,666 during the nine months ended May 31, 2018.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.
On July 24, 2017, the Company issued a convertible note to Crossover Capital Fund, LLC for $40,000 of cash consideration. The note bears interest at 10%, matures on July 24, 2018, and is convertible into common stock at 50% of the lowest 3 closing market prices of the previous 20 trading days prior to conversion. The Company recorded a debt discount equal to $40,000 due to this conversion feature. The note had accrued interest of $416 as of August 31, 2017 and $872 at May 31, 2018. The debt discounts had a balance at August 31, 2017 of $35,836 and $5,918 at May 31, 2018. The Company recorded debt discount amortization expense of $4,164 during the year ended August 31, 2017 and $29,918 during the nine months ended May 31, 2018. During the nine months ended May 31, 2018, the Company converted $17,106 in principal and $2,544 of accrued interest into shares; see Note 3 for more information.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.
Promissory Notes Payable – Third Party
On Deck Capital
On August 23, 2016, the Company issued a promissory note to On Deck Capital for $243,750 of cash consideration. The note bears interest at 33%, matures on May 20, 2017. The Company recorded a debt discount equal to $82,500 due to the unpaid interest which was added to the principal balance to be repaid during the 9 month note. The Company also recorded a $6,250 debt discount due to origination fees due at the beginning of the note. During the years ended August 31, 2017 and 2016, the company amortized $86,121 and $2,637 of the debt discounts into interest expense leaving a remaining total debt discount on the note of $0 as of August 31, 2017. On June 2, 2017, the Company paid this Note in full.
Forward Financing
On December 11, 2017, the Company issued a promissory note to Forward Financing for $61,405 of cash consideration. The note bears interest at 41%, matures on June 20, 2018. The Company recorded a debt discount equal to $26,579 due to the unpaid interest which was added to the principal balance to be repaid during the 6 month note. During the nine months ended May 31, 2018, the company amortized $26,579 of the debt discount into interest expense leaving a remaining total debt discount on the note of $0 as of May 31, 2018. During the nine months ended May 31, 2018, the Company repaid $87,984 in principal on the note in cash leaving a net balance on the note of $0.
IOU Financial
On March 30, 2018, the Company issued a promissory note to IOU Financial for $120,000 of cash consideration. The note bears interest at 32%, matures on March 30, 2019. The Company recorded a debt discount equal to $38,630 due to the unpaid interest which was added to the principal balance to be repaid during the 12 month note. During the nine months ended May 31, 2018, the company amortized $6,562 of the debt discount into interest expense leaving a remaining total debt discount on the note of $32,068 as of May 31, 2018. During the nine months ended May 31, 2018, the Company repaid $27,804 in principal on the note in cash leaving a net balance on the note of $130,826.
NOTE 5- RELATED PARTY TRANSACTIONS
Convertible Notes Payable – Related Party
R.L. Cashman
On April 17, 2017, the Company issued a convertible note to Robert Cashman (a related party) for $12,500 of cash consideration. The note bears interest at 10%, matures on April 17, 2018, and is convertible into common stock at 50% of the average bid price of the stock during the 30 days prior to the conversion. The Company recorded a debt discount equal to $12,500 due to this conversion feature and amortized $4,658 during the year ended August 31, 2017, with a remaining debt discount balance of $7,842 as of August 31, 2017. During the nine months ended May 31, 2018, the Company amortized $7,842, to end the quarter with a balance of $0. This note was repaid during the period ended May 31, 2018.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.0005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.
Office Lease
Our principal executive offices are located in 600 square feet in a building at 18482 Park Villa Place, Villa Park, California 92861. The space is furnished by Robert L. Cashman, a related party, at no charge.
Preferred Stock Issued for Services
On July 25, 2017, the Articles of Incorporation were amended to increase the voting rights of preferred shares to 100,000 votes per share. The Series A share amendments valued according to the additional voting rights and dividend rights assigned. The value assigned to the dividend rights was derived from a model utilizing future economic value of the dividends and was $0 which was recorded on the grant date as stock based compensation. The value assigned to the voting rights was derived from a model utilizing control premiums to value the voting control of the preferred stock and was $54,000 which was recorded on the grant date as stock based compensation.
On December 4, 2017, the Company granted 50,000 additional Series A Preferred Stock shares to Robert Cashman, a related party. The value assigned to the new shares was derived from a model utilizing control premiums to value the voting control of the preferred stock and was $1,000 which was recorded on the grant date as stock based compensation.
NOTE 6 – INCOME TAXES
The Company accounts for income taxes under standards issued by the FASB. Under those standards, and liabilities are recognized for future tax benefits or consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided for significant deferred tax assets when it is more likely than not that such assets will not be realized through future operations.
No provision for federal income taxes has been recorded due to the net operating loss carry forwards totaling approximately $917,587 as of May 31, 2018, that will be offset against future taxable income. The available net operating loss carry forwards of approximately $917,587 will expire in various years through 2038. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the future tax loss carry forwards.
|
|
|
5/31/18
|
|
|
8/31/17
|
|
|
Net tax loss carry-forwards
|
|
$
|
917,587
|
|
|
$
|
826,428
|
|
|
Statutory rate
|
|
|
21
|
%
|
|
|
34
|
%
|
|
Expected tax recovery
|
|
|
192,693
|
|
|
|
280,986
|
|
|
Change in valuation allowance
|
|
|
(192,693
|
)
|
|
|
(280,986
|
)
|
|
Income tax provision
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of deferred tax asset:
|
|
|
|
|
|
|
|
|
|
Non capital tax loss carry forwards
|
|
$
|
192,693
|
|
|
$
|
280,986
|
|
|
Less: valuation allowance
|
|
|
(192,693
|
)
|
|
|
(280,986
|
)
|
|
Net deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
NOTE 7 – COMMITMENTS AND CONTINGENCIES
Contingent Consideration
During the period from November 29, 2011 until June 1, 2012, the Company sold 541,000 shares to various individuals for a total cash consideration of $54,100. The funds were used for operating capital of the Company including rent and payroll. Our rescission offer covers twenty-five shareholders (25) for a total of 541,000 shares originally sold for $54,100. During the three-month period ended November 30, 2015, as the rescission offer expired, the $54,100 was reversed from the liability resulting in a gain in other income and expense of $54,100 as the Company is no longer required to return funds to investors. In addition, the Company has not been requested by any investor to repay funds from these stock sales during the period from November 29, 2011 through June 1, 2012.
Litigation
None.
Operating Leases
Service Team Inc. leases facilities at 1818 Rosslynn Avenue, Fullerton, California, to manufacture its products. The facility is leased for six and one half years at a price of $10,000 per month, for the first six months; and, $14,000 per month thereafter. Service Team Inc pays for the fire insurance and property taxes on the building estimated to be approximately $2,000 per month. The location consists of three acres of land and one building of approximately 30,000 square feet. As of May 31, 2018, the deferred rent related to this lease was $13,333.
Our principal executive offices are located in 600 square feet in a building at 18482 Park Villa Place, Villa Park, California 92861. The space is furnished by Robert L. Cashman, a related party, at no charge.
NOTE 8 – SUBSEQUENT EVENTS
The Company has evaluated subsequent events from the balance sheet date through the date the financial statements were issued and has determined that there are no events to disclose.