Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Nov. 30, 2019 | Jan. 14, 2020 | |
Document And Entity Information | ||
Entity Registrant Name | MCTC Holdings, Inc. | |
Entity Central Index Key | 0001413488 | |
Document Type | 10-Q | |
Document Period End Date | Nov. 30, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --08-31 | |
Document Fiscal Period Focus | Q1 | |
Is Entity a Shell Company? | false | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity File Number | 000-27039 | |
Entity Common Stock, Shares Outstanding | 15,093,128 | |
Entity Interactive Data Current | Yes | |
Entity Incorporation, State or Country Code | DE | |
Document Fiscal Year Focus | 2020 | |
Entity Emerging Growth Company | true | |
Entity Small Business | true | |
Entity Ex Transition Period | false |
CONSOLIDATED BALANCE SHEETS (Un
CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | Nov. 30, 2019 | Aug. 31, 2019 |
Current Assets: | ||
Cash | $ 64,702 | $ 152,082 |
Accounts Receivable | 5,000 | 0 |
Accounts Receivable - Related Party | 5,003 | 0 |
Inventory | 17,931 | 2,299 |
Total Current Assets | 92,636 | 152,082 |
Machinery & Equipment- Net | 12,550 | 13,248 |
Other Assets | ||
Note Receivable- Related Party | 40,000 | 40,000 |
Rent Deposit | 7,200 | 7,200 |
Stock Subscription Receivable | 65,000 | 0 |
TOTAL ASSETS | 217,386 | 214,829 |
Current Liabilities: | ||
Accounts Payable | 197,635 | 92,806 |
Accounts Payable - Related Party | 1,139 | 1,139 |
Accrued Interest | 92 | 0 |
Accrued Professional and Legal Expenses | 0 | 5,885 |
Accrued Research and Development Expenses | 0 | 6,250 |
Convertible Notes, Net of Debt Discount of $17,363 and $0, respectively | 35,971 | 33,334 |
Derivative Liability | 16,018 | 0 |
Note Payable - Related Party | 14,000 | 14,000 |
Total Current Liabilities | 264,855 | 153,414 |
Total Liabilities | 264,855 | 153,414 |
Stockholder's Deficit | ||
Preferred Stock, par value $0.0001, 10,000,000 shares Authorized, 0 shares Issued and Outstanding at November 30, 2019 and August 31, 2019 | 0 | 0 |
Common Stock, par value $0.001, 290,000,000 shares Authorized, 14,833,128 shares Issued and Outstanding at November 30, 2019 and 12,713,129 at August 31, 2019 | 1,483 | 1,253 |
Additional Paid-In Capital | 1,464,060 | 1,184,923 |
Shares to be issued | 26 | 2,840 |
Accumulated Deficit | (1,513,038) | (738,004) |
Total Stockholder's Deficit | (47,469) | 61,415 |
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIT | $ 217,386 | $ 214,829 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Nov. 30, 2019 | Aug. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Convertible Notes, Debt Discount Current | $ 17,363 | $ 0 |
Preferred stock, par or stated value per share (in dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par or stated value per share (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 290,000,000 | 290,000,000 |
Common stock, shares issued | 14,833,128 | 12,713,129 |
Common stock, shares outstanding | 14,833,128 | 12,713,129 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | |
Nov. 30, 2019 | Nov. 30, 2018 | |
Revenues: | ||
Product Sales | $ 5,003 | $ 0 |
Consulting Revenue - Related Party | 5,000 | 0 |
Total Revenue | 10,003 | 0 |
Cost of Goods Sold | 2,900 | 0 |
Gross Profit | 7,103 | 0 |
Operating Expenses: | ||
Advertising fees | 1,432 | 0 |
Consulting services | 35,883 | 0 |
Professional fees | 148,955 | 12,500 |
General and administrative expense | 187,523 | 2,261 |
Total Operating Expenses | 373,793 | 14,761 |
Operating Loss | (366,690) | (14,761) |
Other Income (Expense) | ||
Interest expense | (31,250) | (2,522) |
Changes in FV of Derivative | 12,503 | 0 |
Total Other Income (Expense) | (18,747) | (2,522) |
Net Loss | $ (385,437) | $ (17,283) |
Basic & Diluted Loss per Common Share | $ (0.03) | $ 0 |
Weighted Average Common Shares Outstanding | 12,752,506 | 12,257,640 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT - USD ($) | Class A Preferred Stock | Common Stock | Common Stock To Be Issued | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning Balance, Shares at Aug. 31, 2018 | 12,257,640 | |||||
Beginning Balance, Value at Aug. 31, 2018 | $ 1 | $ 1,226 | $ 601,825 | $ (738,004) | $ (134,953) | |
Net Loss | (17,283) | (17,283) | ||||
Ending Balance, Shares at Nov. 30, 2018 | 12,257,640 | |||||
Ending Balance, Value at Nov. 30, 2018 | $ 1,226 | 601,825 | (755,287) | (152,236) | ||
Stock based compensation | 95,670 | 95,670 | ||||
Proceeds from shares issued in private placement, Shares | 203,333 | |||||
Proceeds from shares issued in private placement, Value | $ 20 | 74,980 | 75,000 | |||
Proceeds from shares issued in private placement- to be issued, Shares | 260,000 | |||||
Proceeds from shares issued in private placement- to be issued, Value | $ 26 | 64,974 | 65,000 | |||
Discount on convertible note, Value | 20,000 | 20,000 | ||||
Stock split adjustment, shares | 188,822 | |||||
Stock split adjustment, Value | $ 19 | (19) | ||||
Net Loss | (385,437) | (385,437) | ||||
Ending Balance, Shares at Nov. 30, 2019 | 392,155 | 260,000 | ||||
Ending Balance, Value at Nov. 30, 2019 | $ 39 | $ 26 | 255,605 | (385,437) | (47,469) | |
Beginning Balance, Value at Aug. 31, 2019 | 61,415 | |||||
Net Loss | (385,437) | |||||
Ending Balance, Shares at Nov. 30, 2019 | 392,155 | 260,000 | ||||
Ending Balance, Value at Nov. 30, 2019 | $ 39 | $ 26 | $ 255,605 | $ (385,437) | $ (47,469) |
CONSOLIDATED STATEMENT OF CASH
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) - USD ($) | 3 Months Ended | |
Nov. 30, 2019 | Nov. 30, 2018 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net Loss | $ (385,437) | $ (17,283) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Non-cash interest expense | 31,158 | 0 |
Depreciation expense | 698 | 0 |
Stock based compensation | 116,553 | 0 |
Change in fair value of derivative liability | (12,503) | 0 |
Changes In: | ||
Account Receivable | (10,003) | 0 |
Inventory | (15,632) | 0 |
Accounts Payable | 104,829 | (1,070) |
Accrued Interest | 92 | 1,745 |
Accrued Interest - Related Party | 0 | 777 |
Accrued Professional and Legal Expenses | (5,885) | 0 |
Accrued R&D Expenses | (6,250) | 0 |
Accounts Payable - Related Party | 0 | 500 |
Net Cash Used in Operating Activities | (182,380) | (15,331) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Net Cash Provided by Investing Activities | 0 | 0 |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from issuance of common stock | 75,000 | 0 |
Proceeds from convertible debentures | 20,000 | 0 |
Proceeds from Note Payable - Related Party | 0 | 15,356 |
Net Cash Provided by Financing Activities | 95,000 | 15,356 |
Net (Decrease) Increase in Cash | (87,380) | 25 |
Cash at Beginning of Period | 152,082 | 4,652 |
Cash at End of Period | 64,702 | 4,677 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||
Cash paid during the year for: Interest | 0 | 0 |
Cash paid during the year for: Franchise Taxes | $ 0 | $ 0 |
Organization and Description of
Organization and Description of Business | 3 Months Ended |
Nov. 30, 2019 | |
Accounting Policies [Abstract] | |
Organization and Description of Business | Note 1. Organization and Description of Business MCTC Holdings, Inc. is located at 520 S Grand Avenue, Suite 320, Los Angeles, California 90071. Our telephone number is (310) 986-4929 and our website is accessible at www.cannabisglobalinc.com. Our shares of Common Stock are quoted on the OTC Markets Pink, operated by OTC Markets Group, Inc., under the ticker symbol “MCTC.” We are a research and development company focused on cannabinoid research. Our aim is to create and commercialize proprietary engineered technologies to deliver hemp extracts and cannabinoids to the human body. Additionally, we plan to develop consumer products, based on these and other proprietary technologies. Our R&D programs included the following; 1) Development of new routes and vehicles for hemp extract and cannabinoid delivery to the human body. 2) Production of unique polymeric nanoparticles and fibers for use in oral and dermal cannabinoid delivery. 3) Research and commercialization of new methodologies to isolate and/or concentrate various cannabinoids and other substances that comprise industrial hemp oil and other extracts. 4) Establishment of new methods to increase the bioavailability of cannabinoids to the human body through utilization of proven bioenhancers, including d-α-Tocopherol polyethylene glycol 1000 succinate (TPGS), which is widely used as a water-soluble vitamin E formulation. 5) Development of other novel inventions for the delivery of cannabinoids to the human body, which at this time are considered trade secrets by the Company. On August 9, 2019, our board of directors determined the Company no longer meets the definition of a Shell Company as defined in Item 1101(b) of Regulation AB ( § 229.1101(b) of this chapter), which defines a Shell Company as one that has: 1) No or nominal operations; and 2) Either: (i) No or nominal assets; (ii) Assets consisting solely of cash and cash equivalents; or (iii) Assets consisting of any amounts of cash and cash equivalents and nominal other assets. By way of the Company: 1) beginning business activities and operations, 2) hiring its CEO, 3) appointing a highly experienced board of directors, 4) retaining consultants, 5) signing two property leases, 6) approval of budgets and business plans for several initiatives, 7) production of product samples, 8) sales initiatives to prospective customers, and other related business activities, the board of directors believes such activities are qualified as non-nominal operations and therefore the board of directors declared its believe the Company is no longer defined by Item 1101(b) of Regulation AB ( § 229.1101(b) of this chapter). On August 9, 2019, the Company filed a DBA in California registering the operating name Cannabis Global. On July 1, 2019, the Company acquired Action Nutraceuticals, Inc., a company owned by our current CEO, Arman Tabatabaei. The transaction value was nominal, at only One Thousand Dollars ($1,000). Therefore, the Company believes its acquisition of Action Nutraceuticals, Inc. is not an acquisition of a significant amount of assets, or a transaction defined by 17 CFR § 229.404 - (Item 404) Transactions with related persons, promoters and certain control persons, that would require specific disclosures under the section cited. Regardless, the Company will disclose the transaction pursuant to 17 CFR § 229.404 - (Item 404) “Transactions with Related Persons, Promoters and Certain Control Persons.” No intellectual property, patents or trademarks were acquired in the transaction. On July 1, 2019, the Company entered into a 100% business acquisition with Action Nutraceuticals, Inc., a company owned by our CEO, Arman Tabatabaei. The value of the transaction value was nominal, at only One Thousand Dollars ($1,000) thus, the Company believes the business acquisition of Action Nutraceuticals, Inc. is transaction NOT defined by 17 CFR § 229.404 - (Item 404) Transactions with related persons, promoters and certain control persons that would require specific disclosure under the section cited. Regardless, of the requirements of 17 CFR § 229.404 - (Item 404) Transactions with related persons, promoters and certain control persons, the Company makes this disclosure. On or about June 27, 2018 we changed domiciles from the State of Nevada to the State of Delaware and thereafter reorganized under the Delaware Holding Company Statute Delaware General Corporation Law Section 251(g). On or about July 12, 2018, two subsidiaries were formed for the purpose of effecting the reorganization. We incorporated MCTC Holdings, Inc. and MCTC Holdings Inc. incorporated MicroChannel Corp. We then effected a merger involving the three constituents and under the terms of the merger we were merged into MicroChannel Corp., with MicroChannel Corp. surviving and our separate corporate existence ceasing. Following the merger MCTC Holdings, Inc. became the surviving publicly traded issuer and all of our assets and liabilities were merged into MCTC Holdings, Inc.’s wholly owned subsidiary MicroChannel Corp. Our shareholders became the shareholders of MCTC Holdings, Inc. on a one for one basis. On May 25, 2019, Lauderdale Holdings, LLC, a Florida limited liability company, in which former Chief Executive Officer, Garry McHenry maintains a controlling interest, sold 8,666,667 common shares of MCTC Holdings, Inc., representing approximately 70.7% of the 12,257,640 issued and outstanding shares to Messrs. Robert Hymers, Edward Manolos and Dan Nguyen, all of whom were previously unaffiliated parties. Each purchased 2,888,889 common shares for $108,333.33 each or an aggregate of $325,000, utilizing personal funds. This series of transactions constitute a change in control of the Company. The assets and liabilities of MicroChannel Corp. were spun out to Lauderdale Holdings, LLC as part of the change in control. On January 14, 2009, Octillion Corp. (Symbol: OCTL), the parent company of MicroChannel announced that it had changed its name to New Energy Technologies, Inc. (Symbol: NENE) (“New Energy”). The name change became effective on the Over-the-Counter Bulletin Board at the opening of trading on January 14, 2009. On June 24, 2008, MicroChannel announced that it initiated trading of its stocks on the OTC Bulletin Board under the stock symbol “MCTC”. On August 22, 2007, by corporate action taken by MicroChannel’s executive team and board members, the company amended its Articles of Incorporation to increase its authorized capital stock to 300,000,000 million shares of common stock, $0.0001 par value per share. As of September 25, 2007, there were 1,000,000 shares of common stock were issued and outstanding; there were no preferred shares issued and outstanding. The directors and sole shareholder have approved a forward split of their issued and outstanding shares of common stock on the basis of 538,646 for 1 for the purpose of effecting the distribution. On April 4, 2005, MultiChannel changed its name to MicroChannel Technologies Corporation. The Company’s original name was MultiChannel Technologies Corporation (“MultiChannel”) which was incorporated on February 28, 2005 under the laws of the State of Nevada (U.S.A.) and was originally formed as a wholly-owned subsidiary of Octillion Corp. (“Octillion”). Octillion (a Canadian company was trading in the OTC Markets under the symbol “OCTL”). At the time of Octillion’s existence, Octillion was a development stage technology company focused on the identificati0n, acquisition and development of emerging solar energy and solar related technologies and products. |
Going Concern Uncertainties
Going Concern Uncertainties | 3 Months Ended |
Nov. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Going Concern Uncertainties | Note 2. Going Concern Uncertainties During recent financial reporting periods, the Company began reporting revenue and has been active in reorganizing its business operations, these revenues being generated are nominal. The Company has an accumulated deficit of $1,513,038 as of November 30, 2019, and does not have positive cash flows from operating activities. The Company expects to incur additional losses as it executes its business strategy in the cannabinoid marketplace. The Company will be subject to the risks, uncertainties, and difficulties frequently encountered by early-stage companies. The Company may not be able to successfully address any or all of these risks and uncertainties. Failure to adequately do so could cause the Company’s business, results of operations, and financial condition to suffer. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance date of these financial statements. The Company’s ability to continue as a going concern is an issue due to its net losses and negative cash flows from operations, and its need for additional financing to fund future operations. Management plans to obtain necessary funding from outside sources and through the sales of Company shares. There can be no assurance that such funds, if available, can be obtained on terms reasonable to the Company. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern and do not include any adjustments that may result from the outcome of this uncertainty. Based on the Company’s current level of expenditures, management believes that cash on hand is not adequate to fund operations for the next twelve months. Management of the Company is estimating approximately $1,000,000 will be required over the next twelve months to fully execute its business strategy. These can be no assurance the Company will be able to obtain such funds. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Nov. 30, 2019 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Note 3. Summary of Significant Accounting Policies Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the amounts reported in those statements. We have made our best estimates of certain amounts contained in our consolidated financial statements. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities. However, application of our accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties, and, as a result, actual results could differ materially from these estimates. Management believes that the estimates, assumptions, and judgments involved in the accounting policies described below have the most significant impact on our consolidated financial statements. We cannot predict what future laws and regulations might be passed that could have a material effect on our results of operations. We assess the impact of significant changes in laws and regulations on a regular basis and update the assumptions and estimates used to prepare our financial statements when we deem it necessary. Derivative Instruments The fair value of derivative instruments is recorded and shown separately under current liabilities. Changes in the fair value of derivatives liability are recorded in the consolidated statement of operations under non-operating income (expense). Our Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. For stock-based derivative financial instruments, the Company uses a weighted average Binomial option-pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Action Nutraceuticals, Inc. and Aidan & Co, Inc. All intercompany balances and transactions have been eliminated in consolidation. Cash and Cash Equivalents We consider all highly liquid investments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents are held in operating accounts at a major financial institution. Inventory Inventory is primarily comprised of work in progress. Inventory is valued at cost, based on the specific identification method, unless and until the market value for the inventory is lower than cost, in which case an allowance is established to reduce the valuation to market value. As of November 30, 2019 and November 30, 2018, market values of all of our inventory were at cost, and accordingly, no such valuation allowance was recognized. Deposits Deposits is comprised of advance payments made to third parties, primarily for inventory for which we have not yet taken title. When we take title to inventory for which deposits are made, the related amount is classified as inventory, then recognized as a cost of revenues upon sale (see “Costs of Revenues” below). There were no deposits as of November 30, 2019 or November 30, 2018. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets is primarily comprised of advance payments made to third parties for independent contractors’ services or other general expenses. Prepaid services and general expenses are amortized over the applicable periods which approximate the life of the contract or service period. Accounts Receivable Accounts receivable are recorded at the net value of face amount less any allowance for doubtful accounts. On a periodic basis, we evaluate our accounts receivable and, based on a method of specific identification of any accounts receivable for which we deem the net realizable value to be less than the gross amount of accounts receivable recorded, we establish an allowance for doubtful accounts for those balances. In determining our need for an allowance for doubtful accounts, we consider historical experience, analysis of past due amounts, client creditworthiness and any other relevant available information. However, our actual experience may vary from our estimates. If the financial condition of our clients were to deteriorate, resulting in their inability or unwillingness to pay our fees, we may need to record additional allowances or write-offs in future periods. This risk is mitigated to the extent that we collect retainers from our clients prior to performing significant services. The allowance for doubtful accounts, if any, is recorded as a reduction in revenue to the extent the provision relates to fee adjustments and other discretionary pricing adjustments. To the extent the provision relates to a client's inability to make required payments on accounts receivables, the provision is recorded in operating expenses. As of November 30, 2019 and November 30, 2018, we had $0 and $0 allowance for doubtful accounts, respectively. Property and Equipment, net Property and Equipment is stated at net book value, cost less depreciation. Maintenance and repairs are expensed as incurred. Depreciation of owned equipment is provided using the straight-line method over the estimated useful lives of the assets, ranging from two to seven years. Depreciation of capitalized construction in progress costs, a component of property and equipment, net, begins once the underlying asset is placed into service and is recognized over the estimated useful life. Property and equipment are reviewed for impairment as discussed below under “Accounting for the Impairment of Long-Lived Assets.” Accounting for the Impairment of Long-Lived Assets We evaluate long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Upon such an occurrence, recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to forecasted undiscounted net cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. For long-lived assets held for sale, assets are written down to fair value, less cost to sell. Fair value is determined based on discounted cash flows, appraised values or management's estimates, depending upon the nature of the assets. We have not recorded any impairment charges related to long-lived assets during the quarter ended November 30, 2019, and November 30, 2018. Beneficial Conversion Feature If the conversion features of conventional convertible debt provides for a rate of conversion that is below market value at issuance, this feature is characterized as a beneficial conversion feature (“BCF”). We record a BCF as a debt discount pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ACF”) Topic 470-20 Debt with Conversion and Other Options Revenue Recognition For annual reporting periods after December 15, 2017, the Financial Accounting Standards Board (“FASB”) made effective ASU 2014-09 “Revenue from Contracts with Customers” to supersede previous revenue recognition guidance under current U.S. GAAP. Revenue is now recognized in accordance with FASB ASC Topic 606, Revenue Recognition. The guidance presents a single five-step model for comprehensive revenue recognition that requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Two options are available for implementation of the standard which is either the retrospective approach or cumulative effect adjustment approach. The guidance becomes effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, with early adoption permitted. We determined to implement the cumulative effect adjustment approach to our implementation of FASB ASC Topic 606, with no restatement of the comparative periods presented. We intend to apply this method to any incomplete contracts we determine are subject to FASB ASC Topic 606 prospectively. As is more fully discussed below, we are of the opinion that none of our contracts for services or products contain significant financing components that require revenue adjustment under FASB ASC Topic 606. In accordance with FASB ASC Topic 606, Revenue Recognition, we will recognize revenue when persuasive evidence of a significant financing component exists in our consulting and product sales contracts. We examine and evaluate when our customers become liable to pay for goods and services; how much consideration is paid as compared to the cash selling price of the goods or services; and, the length of time between our performance and the receipt of payment. Product Sales Revenue from product sales, including delivery fees, is recognized when an order has been obtained from the customer, the price is fixed and determinable when the order is placed, the product is shipped, and collectability is reasonably assured. Generally, we drop-ship orders to our clients with shipping-point or destination terms. For any shipments with destination terms, the Company defers revenue until delivery to the customer. Given the facts that (1) our customers exercise discretion in determining the timing of when they place their product order; and, (2) the price negotiated in our product sales is fixed and determinable at the time the customer places the order, we are not of the opinion that our product sales indicate or involve any significant customer financing that would materially change the amount of revenue recognized under the sales transaction, or would otherwise contain a significant financing component for us or the customer under FASB ASC Topic 606. Costs of Revenues Our policy is to recognize the costs of revenue in the same manner in conjunction with revenue recognition. Costs of revenues include the costs directly attributable to revenue recognition and include compensation and fees for services, travel and other expenses for services and costs of products and equipment. Selling, general and administrative expenses are charged to expense as incurred. Stock-Based Compensation Restricted shares are awarded to employees and entitle the grantee to receive shares of restricted common stock at the end of the established vesting period. The fair value of the grant is based on the stock price on the date of grant. We recognize related compensation costs on a straight-line basis over the requisite vesting period of the award, which to date has been one year from the grant date. We had no stock-based compensation during the year ended November 30, 2019. Income Taxes We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns in accordance with applicable accounting guidance for accounting for income taxes, using currently enacted tax rates in effect for the year in which the differences are expected to reverse. We record a valuation allowance when necessary to reduce deferred tax assets to the amount expected to be realized. For the quarterly reporting periods ending November 30, 2018, and November 30, 2019, we incurred no income taxes and had no liabilities related to federal or state income taxes. Loss Contingencies From time to time the Company is subject to various legal proceedings and claims that arise in the ordinary course of business. On at least a quarterly basis, consistent with ASC 450-20-50-1C, if the Company determines that there is a reasonable possibility that a material loss may have been incurred, or is reasonably estimable, regardless of whether the Company accrued for such a loss (or any portion of that loss), the Company will confer with its legal counsel, consistent with ASC 450. If the material loss is determinable or reasonably estimable, the Company will record it in its accounts and as a liability on the balance sheet. If the Company determines that such an estimate cannot be made, the Company's policy is to disclose a demonstration of its attempt to estimate the loss or range of losses before concluding that an estimate cannot be made, and to disclose it in the notes to the financial statements under Contingent Liabilities. Net Income (Loss) Per Common Share |
Net Loss Per Share
Net Loss Per Share | 3 Months Ended |
Nov. 30, 2019 | |
Earnings Per Share [Abstract] | |
Net Loss Per Share | Note 4. Net Loss Per Share During the financial reporting period ending November 30, 2019, the Company recorded a net loss of $385,437, which equals a loss of $0.03 on both a basic and fully diluted basis, per common share. |
Notes Receivable - Related Part
Notes Receivable - Related Party | 3 Months Ended |
Nov. 30, 2019 | |
Notes to Financial Statements | |
Notes Receivable - Related Party | Note 5. Notes Receivable – Related Party On May 25, 2019, the Company issued two notes payable to Company directors Edward Manolos and Dan Nguyen, each in the amount of $16,666,67. The notes, which do not have a defined due date, outline a 5% per annum interest rate. These notes are additionally described herein in Footnote 5- Notes Receivable, Related Party and in the footnote outlining Related Party Transactions. These notes are additionally described herein in Footnote 6- Notes to Shareholders, Related Party and in the footnote outlining Related Party Transactions. Because of Mr. Manolos’ and Mr. Nguyen’s associations as directors, the Company believes these transactions are defined by 17 CFR § 229.404 - (Item 404) Transactions with related persons, promoters and certain control persons, which would require specific disclosures under the section cited. On July 9, 2019, the Company, through its Action Nutraceuticals subsidiary, loaned, Split Tee, LLC (“Split Tee”), a venture associated with Director Edward Manolos, $20,000 to engage in an exploratory research project. An additional $20,000 was supplied to Split Tee on August 23, 2019. The loans carry interest at the rate of 10% per annum and are due in one year for issuance. In addition, The Company, via Action Nutraceuticals subsidiary, invoiced Split Tee $5,000 as a consulting fee. Because of Mr. Manolos’ association as a director, the Company believes these transactions are defined by 17 CFR § 229.404 - (Item 404) Transactions with related persons, promoters and certain control persons, which would require specific disclosures under the section cited. |
Note Payable to Shareholder
Note Payable to Shareholder | 3 Months Ended |
Nov. 30, 2019 | |
Debt Disclosure [Abstract] | |
Note Payable to Shareholder | Note 6. Note Payable to Shareholders On May 25, 2019, the Company issued two notes payable to Company directors Edward Manolos and Dan Nguyen, each in the amount of $16,666,67. The notes, which do not have a defined due date, outline a 5% per annum interest rate. These notes are additionally described herein in Footnote 5- Notes Payable, Related Party and in the footnote outlining Related Party Transactions. Because of Mr. Manolos’ and Mr. Nguyen’s associations as directors, the Company believes these transactions are defined by 17 CFR § 229.404 - (Item 404) Transactions with related persons, promoters and certain control persons, which would require specific disclosures under the section cited. |
Stock Subscription Receivable
Stock Subscription Receivable | 3 Months Ended |
Nov. 30, 2019 | |
Notes to Financial Statements | |
Stock Subscription Receivable | Note 7. Stock Subscription Receivable On November 26, 2019, the Company received $65,000 in advance related to the sale of 260,000 registered common shares to an accredited investor. While $65,000 was received on November 26, 2019, the agreement was not signed until December 2, 2019 and thus as of the end of the reporting period, November 30, 2019, the Company had not issued the 260,000 shares to the investors. The $65,000 was booked as a Stock Subscription Receivable. These underlying shares were issued during December of 2019 and will be reflected in the quarterly financial reporting period ending February 2020 and are listed herein in the Subsequent Events footnote. |
Related Party
Related Party | 3 Months Ended |
Nov. 30, 2019 | |
Related Party | |
Related Party | Note 8. Related Party In October 2017 – August 31, 2018, the Company incurred a related party debt in the amount of $10,000 to an entity related to the legal custodian of the Company for professional fees. As of August 31, 2018, this balance was forgiven and was included as part of the $168,048 Cancellation of Debt Income on the Statement of Operations. In November 30, 2017 – August 31, 2018, the Company issued a $35,554 in multiple notes payable to an entity related to the legal custodian of the Company. The notes payable bear interest at an annual rate of 10% and is convertible to common shares of the Company at $0.0001 per share. On May 8, 2018, $13,000 of the principal balance on notes payable were converted to common stock. The remaining principal balance was forgiven and included as Cancellation of Debt Income on the Income Statement for the year ended August 31, 2019. In March 2018 and May 2018, a legal custodian of the Company funded the Company $600 in advances. On August 31, 2018, this amount was reclassified as a note payable, that bears interest at an annual rate of 10% and is payable upon demand. In connection with the above notes, the Company recognized a beneficial conversion feature of $27,954, representing the intrinsic value of the conversion features at the time of issuance. This beneficial conversion feature was accreted to interest expense during the year ended August 31, 2018. On May 25, 2019, the Company issued two notes payable to Company directors Edward Manolos and Dan Nguyen for loans made to the Company, each in the amount of $16,666,67 for a total balance of $33,334. The notes bear interest at 5% per annum and do not have a fixed payment schedule or maturity date. These notes are additionally described herein in Footnote 6 - Notes Payable. On July 9, 2019, the Company, through its Action Nutraceuticals subsidiary, loaned, Split Tee, LLC (“Split Tee”), a venture associated with Director Edward Manolos, $20,000 to engage in an exploratory research project. An additional $20,000 was supplied to Split Tee on August 23, 2019. The loans carry interest at the rate of 10% per annum and are due in one year for issuance. In addition, The Company, via Action Nutraceuticals subsidiary, invoiced Split Tee $5,000 as a consulting fee. Because of Mr. Manolos’ association as a director, the Company believes these transactions are defined by 17 CFR § 229.404 - (Item 404) Transactions with related persons, promoters and certain control persons, which would require specific disclosures under the section cited. During the quarterly financial period ending November 30, 2019, the Company recorded $5,000 in consulting revenue associated with a Related Party, Edward Manolos. Mr. Manolos is a Related Party by way of his position as a director of the Company and due to his partial ownership of the contracted consulting organization to which services have been offered. |
Income Taxes
Income Taxes | 3 Months Ended |
Nov. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 9. Income Taxes Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets at August 31, 2019 and November 30, 2019, are as follows: November 30, 2019 August 31, Deferred tax assets: Net operating loss carryforwards $ 385,437 $ 212,618 Capitalized research and development ------- - Research and development credit carry forward 1,963 1,963 Total deferred tax assets 387,400 214,581 Less: valuation allowance (387,400 ) (214,581 ) Net deferred tax asset $ — $ — The net increase in the valuation allowance for deferred tax assets was $172,819 for the three months ended November 30, 2019. The Company evaluates its valuation allowance on an annual basis based on projected future operations. When circumstances change and this causes a change in management’s judgment about the realizability of deferred tax assets, the impact of the change on the valuation allowance is reflected in current operations. For federal income tax purposes, the Company has net U.S. operating loss carry forwards at November 30, 2019 available to offset future federal taxable income, if any, of $1,127,601 which will fully expire by the fiscal year ended August 31, 2039. Accordingly, there is no current tax expense for the three months ended November 30, 2019. In addition, the Company has research and development tax credit carry forwards of $1,923 at November 30, 2019, which are available to offset federal income taxes and fully expire by November 30, 2039. The utilization of the tax net operating loss carry forwards may be limited due to ownership changes that have occurred as a result of sales of common stock. The effects of state income taxes were insignificant for the three months ended November 30, 2019 and November 30, 2018. |
Convertible Note Payable
Convertible Note Payable | 3 Months Ended |
Nov. 30, 2019 | |
Notes to Financial Statements | |
Convertible Note Payable | Note 10 – Convertible Note Payable On November 6, 2019, the Company issued a convertible promissory note in the principal amount of $20,000 along with 26,667 three-year warrants exercisable at $3.50 per share in exchange for proceeds of $20,000. The note matures May 6, 2020 and bears interest at the rate of 7% per annum, payable at maturity. Commencing thirty (30) days following the issuance date, the noteholder shall have the right to convert all or any part of the outstanding and unpaid principal balance of the note, at any time, into shares of common stock of the Company at a conversion price equal to the lower of (i) $0.75 per share; or (ii) 80% of the average of the previous twenty (20) trading day closing prices of the Company’s common stock, subject to adjustment. As a result of the issuance of the warrants as well as the beneficial conversion feature, upon issuance, the Company recognized total debt discount of $20,000, which is being amortized to interest expense over the term of the note. The Company is prohibited from effecting a conversion of the note to the extent that, as a result of such conversion, the noteholder, together with its affiliates, would beneficially own more than 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to the issuance of shares of common stock upon conversion of the note. As of November 30, 2019, the carrying value of the note was $2,637, net of debt discount of $17,363. |
Derivative Liability and Fair V
Derivative Liability and Fair Value Measurements | 3 Months Ended |
Nov. 30, 2019 | |
Notes to Financial Statements | |
Derivative Liability and Fair Value Measurements | NOTE 11 – DERIVATIVE LIABILITY AND FAIR VALUE MEASUREMENTS Upon the issuance of certain convertible notes payable, the Company determined that the features associated with the embedded conversion option embedded in the notes payable should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares would be available to settle all potential future conversion transactions. At the issuance date of the convertible note payable, the Company estimated the fair value of the embedded derivatives of $28,521 using the Black-Scholes Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 398.53%, (3) weighted average risk-free interest rate of 1.60%, (4) expected life of three years and (5) estimated fair value of the Company’s common stock of $1.07 per share. On November 30, 2019, the Company estimated the fair value of the embedded derivative of $16,018 using the Black-Scholes Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 394.12%, (3) weighted average risk-free interest rate of 1.61%, (4) expected life of 2.94 years, and (5) estimated fair value of the Company’s common stock of $0.55 per share. The Company adopted the provisions of ASC 825-10, Financial Instruments (“ASC 825-10”). ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value: ● Level 1 — Observable inputs that reflect quoted market prices (unadjusted) for identical assets and liabilities in active markets; ● Level 2 — Observable inputs, other than quoted market prices, that are either directly or indirectly observable in the marketplace for identical or similar assets and liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets and liabilities; and ● Level 3 — Unobservable inputs that are supported by little or no market activity that are significant to the fair value of assets or liabilities. All items required to be recorded or measured on a recurring basis are based upon Level 3 inputs. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement. The Company recognizes its derivative liabilities as Level 3 and values its derivatives using the methods discussed below. While the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values using the methods discussed are that of volatility and market price of the underlying common stock of the Company. As of November 30, 2019, the Company did not have any derivative instruments that were designated as hedges. Items recorded or measured at fair value on a recurring basis in the accompanying financial statements consisted of the following items as of November 30, 2019 and August 31, 2019: November 30, Quoted Significant Significant Derivative liability $ 16,018 $ - $ - $ 16,018 August 31, Quoted Significant Significant Derivative liability $ - $ - $ - $ - The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities for the three months ended November 30, 2019: Balance, August 31, 2019 $ - Transfers in due to issuance of convertible promissory notes 28,521 Transfers out due to conversions of convertible promissory notes - Mark to market to November 30, 2019 (12,503 ) Balance, November 30, 2019 $ 16,018 Gain on change in derivative liability for the three months ended November 30, 2019 $ 12,503 Fluctuations in the Company’s stock price are a primary driver for the changes in the derivative valuations during each reporting period. As the stock price increases for each of the related derivative instruments, the value to the holder of the instrument generally increases, therefore increasing the liability on the Company’s balance sheet. Additionally, stock price volatility is one of the significant unobservable inputs used in the fair value measurement of each of the Company’s derivative instruments. The simulated fair value of these liabilities is sensitive to changes in the Company’s expected volatility. Increases in expected volatility would generally result in higher fair value measurement. A 10% change in pricing inputs and changes in volatilities and correlation factors would not result in a material change in our Level 3 fair value. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Nov. 30, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 12. Subsequent Events On December 30, 2019, The Company sold a convertible note to an accredited investor. The $63,000 note calls for annualized interest of 10% and is due on December 20, 2020. The note converts in common shares at 40% discount. This note is attached as an exhibit hereto. On December 16, 2019, the Company’s board of directors by unanimous written consent caused the authorization of ten million (10,000,000) shares of preferred stock, par value $0.0001 per share, of the Company ("Preferred Stock") in one or more series, and expressly authorized the Board of Directors of the Company (the "Board"), subject to limitations prescribed by law, to provide, out of the unissued shares of Preferred Stock, for series of Preferred Stock, and, with respect to each such series, to establish and fix the number of shares to be included in any series of Preferred Stock and the designation, rights, preferences, powers, restrictions, and limitations of the shares of such series. Additionally, the Board of Directors authorized the designation of eight million (8,000,000) preferred shares as “Series A Preferred Stock” and resolved to issue the Series A Preferred Stock to the directors of the corporation pro rata. The Series A Preferred Stock is not convertible into any other form of Securities, including common shares, of the Company. Holders of Series A Preferred Stock shall be entitled to fifty (50) votes for every Share of Series A Preferred Stock beneficially owned as of the record date for any shareholder vote or written consent. A copy of the Certificate of Designation is attached as an exhibit hereto. On December 2, 2019, the Company signed an agreement to sell 260,000 registered common shares to an accredited investor. On November 26, 2019, the Company received $65,000 in advance of the signing agreement. The $65,000 was booked as a Stock Subscription Receivable. The underlying shares were issued during December of 2019 and will be reflected in the quarterly financial reporting period ending February 2020. See Note 7 to Financial Statements. The stock purchase agreement is attached hereto. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Nov. 30, 2019 | |
Accounting Policies [Abstract] | |
Derivative Instruments | Derivative Instruments The fair value of derivative instruments is recorded and shown separately under current liabilities. Changes in the fair value of derivatives liability are recorded in the consolidated statement of operations under non-operating income (expense). Our Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. For stock-based derivative financial instruments, the Company uses a weighted average Binomial option-pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. |
Consolidation | Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Action Nutraceuticals, Inc. and Aidan & Co, Inc. All intercompany balances and transactions have been eliminated in consolidation. |
Cash and Cash Equivalents | Cash and Cash Equivalents We consider all highly liquid investments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents are held in operating accounts at a major financial institution. |
Inventory | Inventory Inventory is primarily comprised of work in progress. Inventory is valued at cost, based on the specific identification method, unless and until the market value for the inventory is lower than cost, in which case an allowance is established to reduce the valuation to market value. As of November 30, 2019 and November 30, 2018, market values of all of our inventory were at cost, and accordingly, no such valuation allowance was recognized. |
Deposits | Deposits Deposits is comprised of advance payments made to third parties, primarily for inventory for which we have not yet taken title. When we take title to inventory for which deposits are made, the related amount is classified as inventory, then recognized as a cost of revenues upon sale (see “Costs of Revenues” below). There were no deposits as of November 30, 2019 or November 30, 2018. |
Prepaid Expenses and Other Current Assets | Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets is primarily comprised of advance payments made to third parties for independent contractors’ services or other general expenses. Prepaid services and general expenses are amortized over the applicable periods which approximate the life of the contract or service period. |
Accounts Receivable | Accounts Receivable Accounts receivable are recorded at the net value of face amount less any allowance for doubtful accounts. On a periodic basis, we evaluate our accounts receivable and, based on a method of specific identification of any accounts receivable for which we deem the net realizable value to be less than the gross amount of accounts receivable recorded, we establish an allowance for doubtful accounts for those balances. In determining our need for an allowance for doubtful accounts, we consider historical experience, analysis of past due amounts, client creditworthiness and any other relevant available information. However, our actual experience may vary from our estimates. If the financial condition of our clients were to deteriorate, resulting in their inability or unwillingness to pay our fees, we may need to record additional allowances or write-offs in future periods. This risk is mitigated to the extent that we collect retainers from our clients prior to performing significant services. The allowance for doubtful accounts, if any, is recorded as a reduction in revenue to the extent the provision relates to fee adjustments and other discretionary pricing adjustments. To the extent the provision relates to a client's inability to make required payments on accounts receivables, the provision is recorded in operating expenses. As of November 30, 2019 and November 30, 2018, we had $0 and $0 allowance for doubtful accounts, respectively. |
Property and Equipment, net | Property and Equipment, net Property and Equipment is stated at net book value, cost less depreciation. Maintenance and repairs are expensed as incurred. Depreciation of owned equipment is provided using the straight-line method over the estimated useful lives of the assets, ranging from two to seven years. Depreciation of capitalized construction in progress costs, a component of property and equipment, net, begins once the underlying asset is placed into service and is recognized over the estimated useful life. Property and equipment are reviewed for impairment as discussed below under “Accounting for the Impairment of Long-Lived Assets.” |
Accounting for the Impairment of Long-Lived Assets | Accounting for the Impairment of Long-Lived Assets We evaluate long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Upon such an occurrence, recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to forecasted undiscounted net cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. For long-lived assets held for sale, assets are written down to fair value, less cost to sell. Fair value is determined based on discounted cash flows, appraised values or management's estimates, depending upon the nature of the assets. We have not recorded any impairment charges related to long-lived assets during the quarter ended November 30, 2019, and November 30, 2018. |
Beneficial Conversion Feature | Beneficial Conversion Feature If the conversion features of conventional convertible debt provides for a rate of conversion that is below market value at issuance, this feature is characterized as a beneficial conversion feature (“BCF”). We record a BCF as a debt discount pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ACF”) Topic 470-20 Debt with Conversion and Other Options |
Revenue Recognition | Revenue Recognition For annual reporting periods after December 15, 2017, the Financial Accounting Standards Board (“FASB”) made effective ASU 2014-09 “Revenue from Contracts with Customers” to supersede previous revenue recognition guidance under current U.S. GAAP. Revenue is now recognized in accordance with FASB ASC Topic 606, Revenue Recognition. The guidance presents a single five-step model for comprehensive revenue recognition that requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Two options are available for implementation of the standard which is either the retrospective approach or cumulative effect adjustment approach. The guidance becomes effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, with early adoption permitted. We determined to implement the cumulative effect adjustment approach to our implementation of FASB ASC Topic 606, with no restatement of the comparative periods presented. We intend to apply this method to any incomplete contracts we determine are subject to FASB ASC Topic 606 prospectively. As is more fully discussed below, we are of the opinion that none of our contracts for services or products contain significant financing components that require revenue adjustment under FASB ASC Topic 606. In accordance with FASB ASC Topic 606, Revenue Recognition, we will recognize revenue when persuasive evidence of a significant financing component exists in our consulting and product sales contracts. We examine and evaluate when our customers become liable to pay for goods and services; how much consideration is paid as compared to the cash selling price of the goods or services; and, the length of time between our performance and the receipt of payment. |
Product Sales | Product Sales Revenue from product sales, including delivery fees, is recognized when an order has been obtained from the customer, the price is fixed and determinable when the order is placed, the product is shipped, and collectability is reasonably assured. Generally, we drop-ship orders to our clients with shipping-point or destination terms. For any shipments with destination terms, the Company defers revenue until delivery to the customer. Given the facts that (1) our customers exercise discretion in determining the timing of when they place their product order; and, (2) the price negotiated in our product sales is fixed and determinable at the time the customer places the order, we are not of the opinion that our product sales indicate or involve any significant customer financing that would materially change the amount of revenue recognized under the sales transaction, or would otherwise contain a significant financing component for us or the customer under FASB ASC Topic 606. |
Costs of Revenues | Costs of Revenues Our policy is to recognize the costs of revenue in the same manner in conjunction with revenue recognition. Costs of revenues include the costs directly attributable to revenue recognition and include compensation and fees for services, travel and other expenses for services and costs of products and equipment. Selling, general and administrative expenses are charged to expense as incurred. |
Stock-Based Compensation | Stock-Based Compensation Restricted shares are awarded to employees and entitle the grantee to receive shares of restricted common stock at the end of the established vesting period. The fair value of the grant is based on the stock price on the date of grant. We recognize related compensation costs on a straight-line basis over the requisite vesting period of the award, which to date has been one year from the grant date. We had no stock-based compensation during the year ended November 30, 2019. |
Income Taxes | Income Taxes We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns in accordance with applicable accounting guidance for accounting for income taxes, using currently enacted tax rates in effect for the year in which the differences are expected to reverse. We record a valuation allowance when necessary to reduce deferred tax assets to the amount expected to be realized. For the quarterly reporting periods ending November 30, 2018, and November 30, 2019, we incurred no income taxes and had no liabilities related to federal or state income taxes. |
Loss Contingencies | Loss Contingencies From time to time the Company is subject to various legal proceedings and claims that arise in the ordinary course of business. On at least a quarterly basis, consistent with ASC 450-20-50-1C, if the Company determines that there is a reasonable possibility that a material loss may have been incurred, or is reasonably estimable, regardless of whether the Company accrued for such a loss (or any portion of that loss), the Company will confer with its legal counsel, consistent with ASC 450. If the material loss is determinable or reasonably estimable, the Company will record it in its accounts and as a liability on the balance sheet. If the Company determines that such an estimate cannot be made, the Company's policy is to disclose a demonstration of its attempt to estimate the loss or range of losses before concluding that an estimate cannot be made, and to disclose it in the notes to the financial statements under Contingent Liabilities. |
Net Income (Loss) Per Common Share | Net Income (Loss) Per Common Share We report net income (loss) per common share in accordance with FASB ASC 260, “Earnings per Share”. This statement requires dual presentation of basic and diluted earnings with a reconciliation of the numerator and denominator of the earnings per share computations. Basic net income (loss) per share is computed by dividing net income attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period and excludes the effects of any potentially dilutive securities. Diluted net income (loss) per share gives effect to any dilutive potential common stock outstanding during the period. The computation does not assume conversion, exercise or contingent exercise of securities that would have an anti-dilutive effect on earnings. |
Income Taxes (Tables)
Income Taxes (Tables) | 3 Months Ended |
Nov. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Deferred income taxes | Significant components of the Company’s deferred tax assets at August 31, 2019 and November 30, 2019, are as follows: November 30, 2019 August 31, Deferred tax assets: Net operating loss carryforwards $ 385,437 $ 212,618 Capitalized research and development ------- - Research and development credit carry forward 1,963 1,963 Total deferred tax assets 387,400 214,581 Less: valuation allowance (387,400 ) (214,581 ) Net deferred tax asset $ — $ — |
Derivative Liability and Fair_2
Derivative Liability and Fair Value Measurements (Tables) | 3 Months Ended |
Nov. 30, 2019 | |
Notes to Financial Statements | |
Fair Value, Assets Measured on Recurring Basis | Items recorded or measured at fair value on a recurring basis in the accompanying financial statements consisted of the following items as of November 30, 2019 and August 31, 2019: November 30, Quoted Significant Significant Derivative liability $ 16,018 $ - $ - $ 16,018 August 31, Quoted Significant Significant Derivative liability $ - $ - $ - $ - |
Summary of changes in fair value of Level 3 financial liabilities | The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities for the three months ended November 30, 2019: Balance, August 31, 2019 $ - Transfers in due to issuance of convertible promissory notes 28,521 Transfers out due to conversions of convertible promissory notes - Mark to market to November 30, 2019 (12,503 ) Balance, November 30, 2019 $ 16,018 Gain on change in derivative liability for the three months ended November 30, 2019 $ 12,503 |
Organization and Description _2
Organization and Description of Business (Details Narrative) - $ / shares | 1 Months Ended | |||||
May 25, 2019 | Sep. 25, 2007 | Nov. 30, 2019 | Nov. 26, 2019 | Aug. 31, 2019 | Aug. 22, 2007 | |
Accounting Policies [Abstract] | ||||||
Common stock, par or stated value per share (in dollars per share) | $ 0.001 | $ 0.001 | $ 0.0001 | |||
Common stock, shares authorized | 290,000,000 | 290,000,000 | 300,000,000,000,000 | |||
Common stock, shares issued | 1,000,000 | 14,833,128 | 260,000 | 12,713,129 | ||
Common stock, shares outstanding | 1,000,000 | 14,833,128 | 12,713,129 | |||
Preferred stock, shares issued | 0 | 0 | 0 | |||
Preferred stock, shares outstanding | 0 | 0 | 0 | |||
Forward split | 538,646 for 1 | |||||
Controlling interest description | Lauderdale Holdings, LLC, a Florida limited liabiblity company, in which former Chief Executive Officer, Garry McHenry maintains a controlling interest, sold 8,666,667 common shares of MCTC Holdings, Inc., representing approximately 70.7% of the 12,257,640 issued and outstanding shares to Messrs. Robert Hymers, Edward Manolos and Dan Nguyen, all of whom were previously unaffiliated parties. Each purchased 2,888,889 common shares for $108,333.33 each or an aggregate of $325,000, utilizing personal funds. This series of transactions constitute a change in control of the Company. The assets and liabilities of MicroChannel Corp. were spun out to Lauderdale Holdings, LLC as part of the change in control. |
Going Concern Uncertainties (De
Going Concern Uncertainties (Details Narrative) - USD ($) | Nov. 30, 2019 | Aug. 31, 2019 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Accumulated Deficit | $ (1,513,038) | $ (738,004) |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | |
Nov. 30, 2019 | Nov. 30, 2018 | |
Accounting Policies [Abstract] | ||
Deposits | $ 0 | $ 0 |
Allowance for doubtful accounts | 0 | 0 |
Impairment charges | 0 | 0 |
Stock-based compensation | 0 | 0 |
Income taxes | $ 0 | $ 0 |
Net Loss Per Share (Details Nar
Net Loss Per Share (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | |
Nov. 30, 2019 | Nov. 30, 2018 | Nov. 30, 2019 | |
Earnings Per Share [Abstract] | |||
Net loss | $ (385,437) | $ (17,283) | $ (385,437) |
Basic and diluted basis per common share | $ (0.03) | $ 0 |
Notes Receivable - Related Pa_2
Notes Receivable - Related Party (Details Narrative) - USD ($) | Jul. 09, 2019 | Nov. 30, 2019 | Aug. 31, 2019 | Aug. 23, 2019 | May 25, 2019 |
Notes Receivable | $ 40,000 | $ 40,000 | |||
Edward Manolos | |||||
Note Payable | $ 1,666,667 | ||||
Interest Rate | 5.00% | ||||
Dan Nguyen | |||||
Note Payable | $ 1,666,667 | ||||
Interest Rate | 5.00% | ||||
Split Tee | |||||
Notes Receivable | $ 20,000 | $ 20,000 | |||
Interest rate | 10.00% | ||||
Consulting fee | $ 5,000 |
Note Payable to Shareholder (De
Note Payable to Shareholder (Details Narrative) | May 25, 2019USD ($) |
Edward Manolos | |
Note Payable | $ 1,666,667 |
Interest Rate | 5.00% |
Dan Nguyen | |
Note Payable | $ 1,666,667 |
Interest Rate | 5.00% |
Stock Subscription Receivable (
Stock Subscription Receivable (Details Narrative) - USD ($) | 1 Months Ended | |||
Nov. 26, 2019 | Nov. 30, 2019 | Aug. 31, 2019 | Sep. 25, 2007 | |
Notes to Financial Statements | ||||
Common stock issued | 260,000 | 14,833,128 | 12,713,129 | 1,000,000 |
Advances | $ 65,000 | |||
Stock Subscription Receivable | $ 65,000 |
Related Party (Details Narrativ
Related Party (Details Narrative) - USD ($) | Jul. 09, 2019 | May 08, 2018 | Nov. 26, 2019 | Nov. 30, 2019 | Nov. 30, 2018 | May 31, 2018 | Aug. 31, 2018 | Aug. 31, 2019 | Aug. 23, 2019 | May 25, 2019 |
Notes Payable, Related Party | $ 14,000 | $ 14,000 | ||||||||
Gain on Debt Cancellation | 168,048 | |||||||||
Advances | $ 65,000 | |||||||||
Accrued interest | 92 | 0 | ||||||||
Beneficial conversion feature | $ 27,954 | |||||||||
Notes Receivable | $ 40,000 | $ 40,000 | ||||||||
Consulting revenue | $ 5,000 | |||||||||
Split Tee | ||||||||||
Notes Receivable | $ 20,000 | $ 20,000 | ||||||||
Interest rate | 10.00% | |||||||||
Consulting fee | $ 5,000 | |||||||||
Legal Custodian | ||||||||||
Notes Payable, Related Party | $ 10,000 | |||||||||
Legal Custodian One | ||||||||||
Notes Payable, Related Party | $ 35,554 | |||||||||
Interest rate | 10.00% | |||||||||
Conversion Price | $ 0.0001 | |||||||||
Conversion of Stock, Amount Converted | $ 13,000 | |||||||||
Legal Custodian Two | ||||||||||
Notes Payable, Related Party | $ 600 | |||||||||
Interest rate | 10.00% | |||||||||
Advances | $ 600 | |||||||||
Accrued interest | $ 0 | |||||||||
Dan Nguyen | ||||||||||
Note Payable | $ 1,666,667 | |||||||||
Interest Rate | 5.00% | |||||||||
Edward Manolos | ||||||||||
Note Payable | $ 1,666,667 | |||||||||
Interest Rate | 5.00% |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | Nov. 30, 2019 | Aug. 31, 2019 |
Deferred tax assets: | ||
Net operating loss carryforward | $ 269,532 | $ 212,618 |
Capitalized research and development | 0 | 0 |
Research and development credit carry forward | 1,963 | 1,963 |
Total deferred tax assets | 271,495 | 214,581 |
Less: valuation allowance | (271,495) | (214,581) |
Net deferred tax asset | $ 0 | $ 0 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | 3 Months Ended | ||
Nov. 30, 2019 | Nov. 30, 2018 | Aug. 31, 2019 | |
Income Tax Disclosure [Abstract] | |||
Net increase in the valuation allowance of deferred tax assets | $ 56,914 | ||
Operating loss carry forwards | $ 1,127,601 | ||
Operating Loss Carryforwards, Expiration Date | Aug. 31, 2039 | ||
Current tax expense | $ 0 | $ 0 | |
Research and development credit carry forward | $ 1,963 | $ 1,963 |
Convertible Note Payable (Detai
Convertible Note Payable (Details Narrative) - USD ($) | Nov. 06, 2019 | Nov. 30, 2019 |
Interest expense | $ 20,000 | |
Carrying value | 2,637 | |
Debt discount | $ 17,363 | |
Convertible Promissory Note | ||
Principal amount | $ 20,000 | |
Warrants exercisable | 26,667 | |
Exercisable Price | $ 3.50 | |
Proceeds from Warrant Exercises | $ 20,000 | |
Warrant expiration date | May 6, 2020 | |
Interest rate | 7.00% |
Derivative Liability and Fair_3
Derivative Liability and Fair Value Measurements (Details) - USD ($) | Nov. 30, 2019 | Aug. 31, 2019 |
Derivative liability | $ 16,018 | $ 0 |
Fair Value, Inputs, Level 1 [Member] | ||
Derivative liability | 0 | 0 |
Fair Value, Inputs, Level 2 [Member] | ||
Derivative liability | 0 | 0 |
Fair Value, Inputs, Level 3 [Member] | ||
Derivative liability | $ 16,018 | $ 0 |
Derivative Liability and Fair_4
Derivative Liability and Fair Value Measurements (Details 1) | 3 Months Ended |
Nov. 30, 2019USD ($) | |
Notes to Financial Statements | |
Balance at beginning | $ 0 |
Transfers in due to issuance of convertible promissory notes | 28,521 |
Transfers out due to conversions of convertible promissory notes | 0 |
Mark to market | (12,503) |
Balance at end | 16,018 |
Gain on change in derivative liability | $ 12,503 |
Derivative Liability and Fair_5
Derivative Liability and Fair Value Measurements (Details Narrative) - Convertible Promissory Note - USD ($) | Nov. 06, 2019 | Nov. 30, 2019 |
Fair value of embedded derivatives | $ 28,521 | $ 16,018 |
Dividend yield | 0.00% | 0.00% |
Expected volatility | 398.53% | 394.12% |
Weighted average risk-free interest rate | 1.60% | 1.61% |
Expected life (in years) | 3 years | 2 years 11 months 8 days |
Estimated fair value of common stock | $ 1.07 | $ 0.55 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - USD ($) | 1 Months Ended | ||||||
Dec. 30, 2019 | Nov. 26, 2019 | Dec. 16, 2019 | Dec. 02, 2019 | Nov. 30, 2019 | Aug. 31, 2019 | Sep. 25, 2007 | |
Preferred stock, par or stated value per share (in dollars per share) | $ 0.0001 | $ 0.0001 | |||||
Preferred stock, shares authorized | 10,000,000 | 10,000,000 | |||||
Common stock issued | 260,000 | 14,833,128 | 12,713,129 | 1,000,000 | |||
Advances | $ 65,000 | ||||||
Stock Subscription Receivable | $ 65,000 | ||||||
Subsequent Event [Member] | |||||||
Preferred stock, par or stated value per share (in dollars per share) | $ 0.0001 | ||||||
Preferred stock, shares authorized | 10,000,000 | ||||||
Subsequent Event [Member] | Accredited Investor [Member] | |||||||
Convertible debt | $ 63,000 | ||||||
Interest rate | 10.00% | ||||||
Due date | Dec. 20, 2020 | ||||||
Subsequent Event [Member] | Series A Preferred Stock [Member] | |||||||
Preferred stock, shares authorized | 8,000,000 | ||||||
Common stock issued | 260,000 |