CONVERTIBLE NOTES

12 Months Ended

Aug. 31, 2020

Debt Securities [Abstract]

CONVERTIBLE NOTE

NOTE 9 - CONVERTIBLE NOTES

On November 18, 2019, the Company closed a private financing with EMA Financial, LLC (“EMA Financial” or the “Holder”) by issuing a convertible note (the “Note”). The Note has an original principal amount of $250,000, and upon issuance, the Company is expected to receive net proceeds of $228,333 after subtracting an original issue discount of $21,667 per the Note agreement. This Note carries a prorated original issue discount of up to $21,667 (the “OID”), to cover the Holder’s monitoring costs associated with the purchase and sale of the Note, which is included in the principal balance of this Note.

As part of initial closing the outstanding principal amount shall be $75,000 and the Holder shall pay $68,500 of the consideration (the “First Tranche”). Out of $68,500 consideration, the Company has received $64,737 cash from EMA Financial with the remaining $3,763 spent as legal expense for note issuance and due diligence fees.

The term of this convertible note is 9 months with the maturity date on August 18, 2020. The interest rate of 10.0% per annum. Upon an event of default, the interest rate will be equal to the 24.0% per annum from the due date thereof until the same is paid. The convertible note has prepayment and conversion features. The conversion price shall equal the lower of: (i) the lowest closing price during the preceding 20 trading day period ending on the latest complete trading day prior to the Issue Date of this Note (the “Closing Price”) or (ii) 55.0% of the lowest traded price for the common stock on the principal market during the 20 consecutive trading Days on which at least 100 shares of common stock were traded including and immediately preceding the Conversion Date.

In connection with the issuance of the Note, the Company granted EMA Financial a five-year cashless warrant (the “Warrant”) to purchase 30,000 shares of common stock at an exercise price of $12.5 per share.

On December 13, 2019, the Company entered into a Securities Purchase Agreement with Peak One Opportunity Fund, L.P., a Delaware limited partnership (“Peak One” or the “Holder”), pursuant to which we issued and sold to the Peak One a convertible promissory note. The Note has an original principal amount of $235,000, and upon issuance, the Company is expected to receive net proceeds of $211,500 after subtracting an original issue discount of $23,500 per the Note agreement. This Note carries a prorated original issue discount of up to $23,500 (the “OID”), to cover the Holder’s monitoring costs associated with the purchase and sale of the Note, which is included in the principal balance of this Note.

As part of initial closing the outstanding principal amount shall be $85,000 and the Holder shall pay $76,500 of the consideration (the “First Tranche”). Out of $76,500 consideration, the Company has received $65,312 cash from Peak One with the remaining $11,188 spent as legal expense for note issuance and due diligence fees. Peak One has converted all the convertible notes into 1,096,846 common shares by July 16th, 2020.

The term of this convertible note is 1 year with the maturity date on December 09, 2020. The interest rate of 10.0% per annum. The convertible note has prepayment and conversion features. The conversion price shall equal to the lesser of (a) $10.00 or (b) Sixty percent (60%) of the lowest closing bid price (as reported by Bloomberg LP) of the Common Stock for the twenty (20) Trading Days immediately preceding the date of the date of conversion of the Debentures (provided, further, that if either the Company is not DWAC Operational at the time of conversion or the Conversion Price is less than $0.01 per share, then Sixty percent (60%) shall automatically adjust to Fifty percent (50%) of the lowest closing bid price (as reported by Bloomberg LP) of the Common Stock for the twenty (20) Trading Days immediately preceding the date of conversion of the Debenture), subject in each case to equitable adjustments resulting from any stock splits, stock dividends, recapitalizations or similar events.

In connection with the issuance of the Note, the Company granted Peak One a five-year cashless warrant (the “Warrant”) to purchase 10,000 shares of common stock at an exercise price of $10 per share. As of August 31, 2020, Peak One exercised 87% of the total warrant shares to acquire 3,250,000 common shares through cashless exercises.

On January 8, 2020, the Company entered into a Securities Purchase Agreement with Crown Bridge Partners, LLC., a New York limited company (“Crown Bridge”), pursuant to which the Company issued and sold to Crown a convertible promissory note, dated January 8, 2020, in the principal amount of $121,500. Upon issuance, the Company is expected to receive net proceeds of $109,500 after subtracting an original issue discount of $12,000 per the Note agreement. This Note carries a prorated original issue discount of up to $12,000 (the “OID”), to cover the Holder’s monitoring costs associated with the purchase and sale of the Note, which is included in the principal balance of this Note.

As part of initial first tranche closing on January 8th, 2020 the outstanding principal amount shall be $40,500 and the Holder shall pay $36,500 of the consideration (the “First Tranche”). Out of $36,500 consideration, the Company has received $34,992 cash from Crown Bridge with the remaining $1,508 spent as legal expense for note issuance and due diligence fees.

As part of the second tranche closing on July 23rd, 2020 the outstanding principal amount shall be $50,000 and the Holder shall pay $47,500 of the consideration (the “Second Tranche”). Out of $47,500 consideration, the Company has received $42,987 cash from Crown Bridge with the remaining $ 4,513 spent as legal expense for note issuance and due diligence fees.

The term of this convertible note is 1 year with the maturity date on January 8, 2021. The interest rate of 10.0% per annum. Upon an event of default, the interest rate will be equal lesser (i) fifteen percent (15%) per annum or (ii) the maximum amount permitted by law from the due date thereof until the same is paid. The convertible note has prepayment and conversion features. The Conversion Price shall be the lesser of (i) the lowest closing price of the Common Stock during the previous twenty (20) Trading Day period ending on the latest complete Trading Day prior to the date of this Note or (ii) the Variable Conversion Price (as defined herein) (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events) (also subject to adjustment as further described herein). The "Variable Conversion Price" shall mean 60% multiplied by the Market Price (as defined herein) (representing a discount rate of 40%). “Market Price” means the lowest one (1) Trading Price (as defined below) for the Common Stock during the twenty (20) Trading Day period ending on the last complete Trading Day prior to the Conversion Date. “Trading Price” means, for any security as of any date, the lesser of the (i) lowest traded price and (ii) lowest closing bid price on the Over-the-Counter Pink Marketplace, OTCQB, or applicable trading market (the “Principal Market”) as reported by a reliable reporting service (“Reporting Service”) designated by the Holder (i.e. Bloomberg) or, if the Principal Market is not the principal trading market for such security, on the principal securities exchange or trading market where such security is listed or traded or, if the lowest intraday trading price of such security is not available in any of the foregoing manners, the lowest intraday price of any market makers for such security that are quoted on the OTC Markets.

In connection with the issuance of each tranche of the Note, the Company granted Crown Bridge a five-year cashless warrant (the “Warrant”) to purchase 4,680 shares of common stock at an exercise price of $12.5 per share.

On December 31, 2019, the Company closed a private financing with Auctus Capital Partners, LLC, (“Auctus” or the “Holder”) by issuing a convertible note (the “Note”). The Note has an original principal amount of $75,000 with no original discount upon issuance.

As part of initial closing the outstanding principal amount shall be $75,000 and the Holder shall pay $75,000 of the consideration (the “First Tranche”). Out of $75,000 consideration, the Company has received $59,342 cash from Auctus with the remaining $15,658 spent as legal expense for note issuance and due diligence fees.

The term of this convertible note is 9 months with the maturity date on September 30, 2020. The interest rate of 10.0% per annum. Upon an event of default, the interest rate will be equal the lesser of (i) twenty-four percent (24%) per annum and (ii) the maximum amount permitted under law from the due date thereof until the same is paid. The convertible note has prepayment and conversion features. The conversion price is the lesser of: (i) the lowest closing price of the Common Stock during the previous twenty (20) Trading Day period ending on the latest complete Trading Day prior to the date of this Note, and (ii) the Variable Conversion Price (as defined herein) (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The “Variable Conversion Price” shall mean 60% multiplied by the Market Price (as defined herein) (representing a discount rate of 40%). “Market Price” means the lowest Trading Price (as defined below) for the Common Stock during the twenty (20) Trading Days on which at least 100 shares of Common Stock were traded including and immediately preceding the Conversion Date. “Trading Price” means, for any security as of any date, the lowest trade price on the OTC Pink, OTCQB or applicable trading market as reported by a reliable reporting service (“Reporting Service”) designated by the Holder or, if the OTC Pink is not the principal trading market for such security, the trading price of such security on the principal securities exchange or trading market where such security is listed or traded or, if no trading price of such security is available in any of the foregoing manners, the average of the trading prices of any market makers for such security that are listed in the “pink sheets” by the National Quotation Bureau, Inc.

On February 13, 2020, the Company closed a private financing with East Capital Investment Corporation (“East Capital” or the “Holder”) by issuing a convertible note (the “Note”). The Note has an original principal amount of $50,000 with no original discount upon issuance.

As part of initial closing the outstanding principal amount shall be $50,000 and the Holder shall pay $50,000 of the consideration (the “First Tranche”). Out of $50,000 consideration, the Company has received $43,492 cash from EMA Financial with the remaining $6,508 spent as legal expense for note issuance and due diligence fees.

The term of this convertible note is 1 year with the maturity date on February 13,2021. The interest rate of 10.0% per annum. The convertible note has prepayment and conversion features. The conversion price shall equal to a price which is a 40% discount to the lowest trading price in the ten (10) days prior to the day that the Holder requests conversion, unless otherwise modified by mutual agreement between the Parties.

On February 19, 2020, the Company closed a private financing with Fidelis Capital, LLC, (“Fidelis” or the “Holder”) by issuing a convertible note (the “Note”). The Note has an original principal amount of $50,000 with no original discount upon issuance.

As part of initial closing the outstanding principal amount shall be $50,000 and the Holder shall pay $50,000 of the consideration (the “First Tranche”). Out of $50,000 consideration, the Company has received $43,487 cash from Fidelis with the remaining $6,513 spent as legal expense for note issuance and due diligence fees.

The term of this convertible note is 1 year with the maturity date on February 19, 2021. The interest rate of 10.0% per annum. The convertible note has prepayment and conversion features. The conversion price shall equal to a price which is a 40% discount to the lowest trading price in the ten (10) days prior to the day that the Holder requests conversion, unless otherwise modified by mutual agreement between the Parties.

On March 12, 2020, the Company closed a private financing with Armada Capital Partners, LLC, (“Armada” or the “Holder”) by issuing a convertible note (the “Note”). The Note has an original principal amount of $38,500 and an original issue discount of $3,500 per the Note agreement.

As part of initial closing the outstanding principal amount shall be $38,500 and the Holder shall pay $35,000 of the consideration (the “First Tranche”). Out of $35,000 consideration, the Company has received $32,992 cash from Fidelis with the remaining $2,008 spent as legal expense for note issuance and due diligence fees.

The term of this convertible note is 1 year with the maturity date on March 12, 2021. The interest rate of 10.0% per annum. The convertible note has prepayment and conversion features. The conversion price shall equal to a price which is a 40% discount to the lowest trading price in the ten (10) days prior to the day that the Holder requests conversion, unless otherwise modified by mutual agreement between the Parties. In connection with the issuance of the Armada Note, the Company granted Armada a five-year cashless warrant (the “Warrant”) to purchase 4,200 shares of the Company’s common stock at an exercise price of $12.50 per share.

On July 17, 2020, the Company closed a private financing with EMA Financial, LLC (“EMA Financial” or the “Holder”) by issuing a convertible note (the “Note”). The Note has an original principal amount of $50,000, and upon issuance, carries a prorated original issue discount of up to $2,500 (the “OID”), to cover the Holder’s monitoring costs associated with the purchase and sale of the Note, which is included in the principal balance of this Note.

As part of initial closing the outstanding principal amount shall be $50,000 and the Holder shall pay $47,500 of the consideration. Out of $47,500 consideration, the Company has received $42,987 cash from EMA Financial with the remaining $4,513 spent as legal expense for note issuance and due diligence fees.

The term of the convertible note is 1 year with the maturity date on July 17, 2021. The interest rate of 10.0% per annum. Upon an event of default, the interest rate will be equal to the 24.0% per annum from the due date thereof until the same is paid. The convertible note has prepayment and conversion features. The conversion price shall equal the lower of: (i) the lowest closing price during the preceding 20 trading day period ending on the latest complete trading day prior to the Issue Date of this Note (the “Closing Price”) or (ii) 60.0% of the lowest traded price for the common stock on the principal market during the 20 consecutive trading immediately preceding the Conversion Date.

On July 24, 2020, the Company closed a private financing with Power Up Lending Group Ltd., (“Power up” or the “Holder”) by issuing a convertible note (the “Note”). The Note has an original principal amount of $130,000 with no original discount upon issuance.

As part of initial closing the outstanding principal amount shall be $130,000 and the Holder shall pay $130,000 of the consideration (the “First Tranche”). Out of $130,000 consideration, the Company has received $116,079 cash from EMA Financial with the remaining $13,921 spent as legal expense for note issuance and due diligence fees.

The term of this convertible note is 1 year with the maturity date on July 24, 2021. The interest rate of 10.0% per annum. Upon an event of default, the interest rate will be equal to the 22.0% per annum from the due date thereof until the same is paid. The convertible note has prepayment and conversion features. The conversion price shall equal the lower of: (i) the lowest closing price during the preceding 20 trading day period ending on the latest complete trading day prior to the Issue Date of this Note (the “Closing Price”) or (ii) 60.0% of the lowest traded price for the common stock on the principal market during the 20 consecutive trading immediately preceding the Conversion Date.

On August 18, 2020, the Company closed another private financing with Power Up Lending Group Ltd., (“Power up” or the “Holder”) by issuing a convertible note (the “Note”). The Note has an original principal amount of $63,000 with no original discount upon issuance.

As part of closing the outstanding principal amount shall be $63,000 and the Holder shall pay $63,000 of the consideration (the “Second Tranche”). Out of $63,000 consideration, the Company has received $54,939 cash from EMA Financial with the remaining $8,061 spent as legal expense for note issuance and due diligence fees.

The term of this convertible note is one year with the maturity date on August 18, 2021. The interest rate of 10.0% per annum. Upon an event of default, the interest rate will be equal to the 22.0% per annum from the due date thereof until the same is paid. The convertible note has prepayment and conversion features. The conversion price shall equal the lower of: (i) the lowest closing price during the preceding 20 trading day period ending on the latest complete trading day prior to the Issue Date of this Note (the “Closing Price”) or (ii) 60.0% of the lowest traded price for the common stock on the principal market during the 20 consecutive trading immediately preceding the Conversion Date.

The below table summarizes all the convertible notes issued during the year ended August 31, 2020.

Counterparties	Issuance date	Maturity  date	Principal Amount		Purchase Price		Discount on Note issuance		Note issuance costs		Proceeds Received (USD)
EMA Financial	November 18, 2019	August 18, 2020	$	75,000	$	68,500	$	6,500	$	18,763	$	64,737
Peak One Opportunity	December 9, 2019	December 9, 2022	$	85,000	$	76,500	$	8,500	$	11,188	$	65,312
Crown Bridge (Tranche I)	January 8, 2020	January 8, 2021	$	40,500	$	36,500	$	4,000	$	1,508	$	34,992
Auctus Fund Note	December 31, 2019	September 30, 2020	$	75,000	$	75,000	$	—	$	15,658	$	59,342
East Capital	February 13, 2020	February 13, 2021	$	50,000	$	50,000	$	—	$	6,508	$	43,492
Fidelis Capital	February 19, 2020	February 19, 2021	$	50,000	$	50,000	$	—	$	6,513	$	43,487
Armada Partners	March 12, 2020	March 12, 2021	$	38,500	$	35,000	$	3,500	$	2,008	$	32,992
EMA Financial	July 17, 2020	July 17, 2021	$	50,000	$	47,500	$	2,500	$	4,513	$	42,987
Crown Bridge (Tranche II)	July 23, 2020	July 23, 2021	$	40,500	$	36,500	$	4,000	$	2,208	$	34,292
Power Up Lending (Tranche I)	July 24, 2020	July 24, 2021	$	130,000	$	130,000	$	—	$	13,921	$	116,079
Power Up Lending  (Tranche II)	August 18, 2020	August 18, 2021	$	63,000	$	63,000	$	—	$	8,061	$	54,939
			$	697,500	$	668,500	$	29,000	$	90,853	$	592,647

The following table summarizes the convertible note and derivative liability in the balance sheet at August 31, 2020:

Balance, August 31, 2019	$	—
Principal	$	436,046
Discount on Note issuance	$	(75,074)
Accrued interest expense	$	13,365
Derivative liability	$	64,584
Balance, August 31, 2020	$	438,921

The Company valued its derivatives liability using Monte Carlo simulation. Assumptions used as of August 31, 2020 include (1) risk-free interest rates of 0.12% - 0.17%, (2) expected equity volatility of 64.4% - 82.9%, (3) zero dividends, (4) discount for lack of marketability of 30% (5) remaining terms and conversion prices as set forth in the convertible note agreement, and (6) the common stock price of the underlying share on the valuation date of August 31, 2020.

The Company recognizes loss due to convertible feature of $ 64,584 in the income statement for the year ended August 31, 2020.

The Holders converted convertible notes to common shares throughout Q4 of FY2020 as below:

EMA Financial: 

Conversion date	Principal Amount Converted		Interest Amount Converted		Conversion value		Closing Fee		Ending principal balance		Conversion Price		Converted Shares
June 2, 2020		4,775		—		4,775		1,000		70,225	$	3.85000		1,500
June 22, 2020		3,040		—		3,040		1,000		67,185	$	0.80800		5,000
June 25, 2020		3,433		—		3,433		1,000		63,753	$	0.17730		25,000
July 1, 2020		5,000		—		5,000		1,000		58,753	$	0.12000		50,000
*July 7, 2020		8,660		—		8,660		1,000		65,093	$	0.06440		150,000
July 9, 2020		7,050		—		7,050		1,000		58,043	$	0.03220		250,000
July 14, 2020		5,000		—		5,000		1,000		53,043	$	0.02000		300,000
July 16, 2020		5,900		—		5,900		1,000		47,143	$	0.02000		345,000
July 20, 2020		6,200		—		6,200		1,000		40,943	$	0.02000		360,000
July 21, 2020		7,440		—		7,440		1,000		33,503	$	0.02000		422,000
July 24, 2020		7,298		—		7,298		1,000		26,205	$	0.01844		450,000
August 3, 2020		5,864		—		5,864		1,000		20,341	$	0.01320		520,000
August 10, 2020		9,560		—		9,560		1,000		10,781	$	0.01320		800,000
August 21, 2020		5,496		—		5,496		1,000		5,285	$	0.00812		800,000
Total		84,716		—		84,716		14,000						4,478,500

*On July 7,2020, $8,660 of the EMA Financial convertible note was converted to 150,000 shares of common stock at a conversion price $ 0.0644, 55% of the lowest trading price in the 20 days prior to the conversion dates. Additional most-favored-nation (MFN) principal of $15,000 was triggered when the conversion price is lower than $0.1. Therefore, the remaining EMA Financial convertible note principle balance was $65,093, including $15,000 MFN principal.

Peak One:

Conversion date	Principal Amount Converted		Interest Amount Converted		Conversion value		Closing Fee		Ending principal balance		Conversion Price		Converted Shares
June 22, 2020		10,000		—		10,000		—		75,000	$	1.21200		8,250
June 25, 2020		10,000		—		10,000		—		65,000	$	0.31800		31,446
June 29, 2020		10,000		—		10,000		—		55,000	$	0.21660		46,168
July 1, 2020		10,000		—		10,000		—		45,000	$	0.18000		55,555
July 7, 2020		10,000		—		10,000		—		35,000	$	0.12000		83,333
July 9, 2020		10,000		—		10,000		—		25,000	$	0.06012		166,333
July 13, 2020		10,000		—		10,000		—		15,000	$	0.04860		205,761
July 15, 2020		7,500		—		7,500		—		7,500	$	0.03000		250,000
July 16, 2020		7,500		—		7,500		—		—	$	0.03000		250,000
Total		85,000		—		85,000		—						1,096,846

Auctus Capital Partners:

Conversion date	Principal Amount Converted		Interest Amount Converted		Conversion value		Closing Fee		Ending principal balance		Conversion Price		Converted Shares
July 9, 2020		3,180		3,760		6,941		750		71,820	$	0.03006		255,841
July 15, 2020		3,738		118		3,857		750		68,081	$	0.01500		307,100
July 17, 2020		4,649		37		4,686		750		63,433	$	0.01500		362,400
August 3, 2020		4,117		295		4,413		750		59,315	$	0.00990		521,500
August 25, 2020		6,130		358		6,488		750		53,185	$	0.00609		1,188,499
August 27, 2020		7,855		29		7,884		750		45,330	$	0.00609		1,417,693
August 31, 2020		12,036		50		12,085		750		33,295	$	0.00609		2,107,596
Total		41,705		4,648		46,353		5,250						6,160,629

Crown Bridge (Tranche I):

Conversion date	Principal Amount Converted		Interest Amount Converted		Conversion value		Closing Fee		Ending principal balance		Conversion Price		Converted Shares
July 17, 2020		4,375		—		4,375		1,250		36,125	$	0.02250		250,000
August 3, 2020		2,834		—		2,834		1,250		33,291	$	0.01485		275,000
August 24, 2020		6,438		—		6,438		1,250		26,853	$	0.00905		850,000
August 26, 2020		5,986		—		5,986		1,250		20,867	$	0.00905		800,000
Total		19,633		—		19,633		5,000						2,175,000

East Capital:

Conversion date	Principal Amount Converted		Interest Amount Converted		Conversion value		Closing Fee		Ending principal balance		Conversion Price		Converted Shares
August 27, 2020		5,300		2,100		7,400		—		44,700	$	0.01218		607,553
August 28, 2020		18,100		200		18,300		—		26,600	$	0.01218		1,502,463
Total		23,400		2,300		25,700		—						2,110,016

Fidelis Capital:

Conversion date	Principal Amount Converted		Interest Amount Converted		Conversion value		Closing Fee		Ending principal balance		Conversion Price		Converted Shares
August 25, 2020		9,000		—		9,000		—		41,000	$	0.01218		738,916
Total		9,000				9,000		—						738,916

Armada Partners:

Conversion date	Principal Amount Converted		Interest Amount Converted		Conversion value		Closing Fee		Ending principal balance		Conversion Price		Converted Shares
August 26, 2020		13,000		1,743		14,743		500		25,500	$	0.01215		1,254,494
Total		13,000				14,743		500						1,254,494