ITEM 1. BUSINESS - OVERVIEW OF OUR COMPANY
Service Team Inc. (the "Company") was incorporated pursuant to the laws of the State of Nevada on June 6, 2011. On August 22, 2017, the Company changed its state of domicile to Wyoming. The Company was organized to comply with the warranty obligations of electronic devices manufactured by companies outside of the United States. The business proved to be unprofitable and the Company discontinued its warranty and repair operations. On June 5, 2013, Service Team Inc. acquired 100 percent of the outstanding stock of Trade Leasing, Inc. for 4,000,000 shares of its common stock.
Trade Leasing, Inc., a California corporation, was incorporated on November 1, 2011, and commenced business January 1, 2013. Trade Leasing, Inc. is principally involved in the manufacturing, maintenance and repair of truck bodies. Service Team Inc. and Trade Leasing Inc. have not been involved in a bankruptcy, receivership or any similar proceeding. The acquisition of Trade Leasing Inc. is a major change in the operations of Service Team Inc. Trade Leasing is operated as a separate division of Service Team Inc.
Trade Leasing Division. This division is involved in the manufacture and repair of truck bodies. The company manufactures truck bodies that are attached to a truck chassis which consists of an engine, drive train, a frame with wheels, and in some cases, a cab. The truck chassis is manufactured by third parties that are major automotive or truck companies. These companies do not typically build specialized truck bodies. The company is also involved in other products used by the trucking industry. The company operates a complete manufacturing and repair facility in South Gate, California. The facility manufactures both custom and standard production truck bodies in approximately 70 different models designed to fill the specialized demands of the user. The vans are available for hauling dry freight or refrigerated freight. The refrigerated vans are built with two to four inches of foam insulating that is sprayed in place for hauling refrigerated products such as meats, vegetables, flowers and similar products. The Company installs different types of cooling systems in the trucks. This varies from motor driven units installed outside the van body or refrigeration units driven off the engine of the truck. Some refrigerated trucks use a system called "cold plate" where a large metal plate is cooled by power while the truck is parked. The power is then unplugged and the truck will stay cool for many hours. The Company's customers are auto dealers and users of trucks; such as dairies, food distributors and local delivery. The company has approximately 400 customers. One customer, South Bay Ford, represented more than 10% of sales in the last 12 months. The company is not dependent on a few major customers. Trade Leasing purchases raw materials from approximately 25 suppliers. There are several hundred similar suppliers of comparable materials in the local area. Trade Leasing Inc. purchases refrigeration units from Thermoking Corporation, a division of United Technologies and Carrier Corporation, a division of Ingersol Rand Corporation. The two companies represent more than 80% of the refrigeration unit market. There are several other manufactures of refrigeration units that represent a small part of the market. Trade Leasing Inc. employs 47 factory workers and five management personnel. The management personnel make all of the sales and manage the factory. The company has all of the government licenses necessary to conduct its business. These include nine different city, county and state licenses covering vehicle transportation, air quality, hazard waste (Paint), land or building use, and sales tax.
Acquisition of Trade Leasing, Inc.
On June 5, 2013, Service Team Inc. completed a Stock Exchange Agreement with Hallmark Holdings Inc. Pursuant to the Stock Exchange Agreement, Service Team Inc. acquired 100 percent of the shares of Trade Leasing, Inc., a California corporation. This transaction gave Service Team Inc. ownership of the business operations which included furniture, manufacturing equipment, vehicles and other assets in exchange for 4,000,000 common shares of Service Team Inc.
This acquisition was accounted for as an acquisition by entities under common control due to the fact that both Service Team Inc. and Trade Leasing, Inc. were and continue to be commonly held by Hallmark Holdings and its affiliates. The ownership structure of the Company did not change as a result nor did any of its officers change positions. As the assets acquired were from an entity under common control, the assets from Trade Leasing, Inc. have been combined at historical cost for all periods presented, with no step-up in basis.
ITEM 1A.
ITEM 1A. RISK FACTORS
As a "smaller reporting company," as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not Applicable.
ITEM 2.
ITEM 2. PROPERTIES
Service Team Inc. leases a manufacturing facility at 1818 Rosslynn Avenue, Fullerton, California, to manufacture its products. The facility consists of two buildings totaling 30,000 square feet on approximately two acres of land. Our principal executive offices are located at 18482 Park Villa Place, Villa Park, California 92861.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Our common stock was approved for listing on the OTC Bulletin Board under the symbol SVTE on October 9, 2012. As of August 31, 2018, there were 178 active shareholders and the total shares outstanding of 8,852,873,544. The transfer agent for our common stock is Pacific Stock Transfer 6725 Via Austin Parkway Suite 300, Las Vegas, Nevada 98119.
The following table shows the reported high and low closing bid quotations per share for our common stock based on information provided by the OTC Bulletin Board for the periods indicated. Quotations reflect inter-dealer prices, without markup, markdown or commissions and may not represent actual transactions.
Trades in our common stock may be subject to Rule 15g-9 under the Exchange Act, which imposes requirements on broker-dealers who sell securities subject to the rule to persons other than established customers and accredited investors. For transactions covered by the rule, broker-dealers must make a special suitability determination for purchasers of the securities and receive the purchaser's written agreement to the transaction before the sale.
Our shares are subject to rules applicable to "penny stock" which pertain to any equity security with a market price less than $5.00 per share or an exercise price of less than $5.00 per share. Penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, which specifies information about penny stocks and the nature and significance of risks of the penny stock market. A broker-dealer must also provide the customer with bid and offer quotations for the penny stock, the compensation of the broker-dealer, and sales person in the transaction, and monthly account statements indicating the market value of each penny stock held in the customer's account. In addition, the penny stock rules require that, prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the trading activity in our shares.
Dividend Policy
We have not paid or declared any cash dividends on our common stock in the past and do not foresee doing so in the foreseeable future. We intend to retain any future earnings for the operation and expansion of our business. Any decision as to future payment of dividends will depend on the available earnings, the capital requirements of our Company, our general financial condition and other factors deemed pertinent by our Board of Directors.
Sales of Unregistered Securities
From the inception (June 6, 2011) to August 31, 2011, the Company sold 6,000,000 shares to the organizers of the Company for $29,027.
In the fiscal year ended August 31, 2012 the Company sold 1,707,500 shares to various individuals for $168,806.
In the fiscal year ended August 31, 2013 the Company sold 359,814 shares to various individuals for $171,576.
In the fiscal year ended August 31, 2014 the Company sold 118,333 shares to various individuals for $34,750.
In the fiscal year ended August 31, 2015 the Company sold 40,000 shares to one individual for $4,000.
In the fiscal year ended August 31, 2016 the Company sold zero (0) shares.
In the fiscal year ended August 31, 2017, the Company sold zero (0) shares.
In the fiscal year ended August 31, 2018, the Company sold zero (0) shares.
Securities authorized for issuance under equity compensation plans
The Company has not reserved any securities for issuance under equity compensation plans.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
As a "smaller reporting company," as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Overview
Service Team Inc. (the "Company") was incorporated pursuant to the laws of the State of Nevada on June 6, 2011. On August 22, 2017, the Company changed its state of domicile to Wyoming. The Company was organized to comply with the warranty obligations of electronic devices manufactured by companies outside of the United States. The business proved to be unprofitable and the Company discontinued its warranty and repair operations. On June 5, 2013, Service Team Inc. acquired 100 percent of the outstanding stock of Trade Leasing, Inc. for 4,000,000 shares of its common stock.
Trade Leasing, Inc., a California corporation, was incorporated on November 1, 2011, and commenced business January 1, 2013. Trade Leasing, Inc. is principally involved in the manufacturing, maintenance and repair of truck bodies. Service Team Inc. and Trade Leasing Inc. have not been involved in a bankruptcy, receivership or any similar proceeding. The acquisition of Trade Leasing Inc. is a major change in the operations of Service Team Inc.
Results of Operations
The Company had sales of $3,329,876 for the fiscal year ended August 31, 2018, compared to $3,673,673 during the fiscal year ended August 31, 2017, a decrease of $343,797. This represents a decrease of nine percent. All of the sales are generated by Trade Leasing, Inc. The Service Products Division had no sales.
Cost of sales decreased $227,062 from $2,950,715 to $2,723,653 which was due lower revenues during the 2018 fiscal year.
Gross margins decreased by $116,735 from $722,958 in 2017 to $606,223 in 2018, primarily due to the decrease in revenues and cost of sales during 2018.
Operating and other expenses decreased by $161,145 from $790,213 to $629,068 from 2017 to 2018 primarily due to lower labor expense.
Interest expense decreased by $97,803 from $429,725 to $331,922 from 2017 to 2018 primarily due to fewer convertible notes issued during 2018.
The above changes resulted in net loss of $354,767 during the 2018 fiscal year compared to a net loss of $496,980 during the 2017 fiscal year. The losses in 2018 were primarily due to stock-based compensation expense resulting from the issuance of preferred stock and interest expense from convertible debt. The losses in 2017 were primarily driven by improvements and installation of new equipment in the manufacturing operations.
Liquidity and Capital Resources
As of August 31, 2018, we had total assets of $565,212 including current assets of $379,486. We also have current liabilities of $380,053 which consist of convertible notes of $124,416, promissory notes payable of $67,092, accrued interest of $20,940, other accrued expenses of $66,575 and accounts payable of $101,030. We believe our ability to achieve commercial success and continued growth will be dependent upon our continued access to capital either through additional sale of our equity or cash generated from operations. We will seek to obtain additional working capital through the sale of our securities. We will attempt to obtain additional capital through bank lines of credit; however, we have no agreements or understandings with third parties at this time.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a "smaller reporting company," as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Our consolidated financial statements for the fiscal years ended August 31, 2018 and 2017 are attached hereto.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Service Team, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Service Team, Inc. (the Company) as of August 31, 2018 and 2017, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended August 31, 2018, and the related notes and schedules (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of August 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the two-year period ended August 31, 2018, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company suffered losses from operations which raise substantial doubt about its ability to continue as a going concern. Managements plans regarding those matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ M&K CPAS, PLLC
We have served as the Company’s auditor since 2011.
Houston, TX
November 30, 2018
SERVICE TEAM INC
CONSOLIDATED BALANCE SHEETS
AS OF AUGUST 31, 2018 AND AUGUST 31, 2017
The accompanying notes are an integral part of these consolidated financial statements.
SERVICE TEAM INC.
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE FISCAL
YEARS ENDING AUGUST 31, 2018 AND 2017
The accompanying notes are an integral part of these consolidated financial statements.
SERVICE TEAM INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS DEFICIT FOR THE YEARS
ENDED AUGUST 31, 2018 AND 2017
The accompanying notes are an integral part of these consolidated financial statements.
SERVICE TEAM INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED AUGUST 31, 2018 AND 2017
The accompanying notes are an integral part of these consolidated financial statements.
SERVICE TEAM INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2018 AND 2017
NOTE 1 - ORGANIZATION
Organization
Service Team Inc. (the "Company") was incorporated pursuant to the laws of the State of Nevada on June 6, 2011. On August 22, 2017, the Company changed the state of its domicile to Wyoming. The Company was organized to comply with the warranty obligations of electronic devices manufactured by companies outside of the United States. The business proved to be unprofitable and the Company discontinued its warranty and repair operations. On June 5, 2013, Service Team Inc. acquired 100 percent of the outstanding stock of Trade Leasing, Inc. for 4,000,000 shares of its common stock.
Trade Leasing, Inc., a California corporation, was incorporated on November 1, 2011, and commenced business January 1, 2013. Trade Leasing, Inc. is principally involved in the manufacturing, maintenance and repair of truck bodies. Service Team Inc. and Trade Leasing Inc. have not been involved in a bankruptcy, receivership or any similar proceeding. The acquisition of Trade Leasing Inc. is a major change in the operations of Service Team Inc. Trade Leasing is operated as a separate division of Service Team Inc.
The Company has established a fiscal year end of August 31.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements presented in this report are the combined financial reports of Trade Leasing, Inc. and Service Team Inc.
The Company maintains its accounting records on an accrual basis in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP").
The consolidated financial statements present the Balance Sheet, Statements of Operations, Shareholders' Deficit and Cash Flows of the Company. These consolidated financial statements are presented in United States dollars. The accompanying audited, consolidated financial statements have been prepared in accordance with the instructions to Form 10-K. All adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations for the interim periods have been made and are of a recurring nature unless otherwise disclosed herein.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Service Team Inc. and Trade Leasing, Inc. both of which are under common control and ownership. The consolidated financial statements herein contain the operations of the wholly-owned subsidiaries listed above. All significant inter-company transactions have been eliminated in the preparation of these financial statements.
Use of Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Going Concern
The Company's financial statements are prepared using the accrual method of accounting in accordance with accounting principles generally accepted in the United States of America, and have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The Company will be dependent upon the raising of additional capital through placement of our common stock in order to implement its business plan. There can be no assurance that the Company will be successful in order to continue as a going concern. The Company is funding its initial operations by issuing common shares and debt. We cannot be certain that capital will be provided when it is required.
Cash and Equivalents
Cash and equivalents include investments with initial maturities of three months or less. The Company maintains its cash balances at credit-worthy financial institutions that are insured by the Federal Deposit Insurance Corporation ("FDIC") up to $250,000. There were no cash equivalents at August 31, 2018, or August 31, 2017.
Concentration of Credit Risk
Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, are cash and cash equivalents. The Company places its cash and temporary cash investments with credit quality institutions. At times, such investments may be in excess of FDIC insurance limits.
Accounts Receivable
All accounts receivable are due thirty (30) days from the date billed. If the funds are not received within thirty (30) days the customer is contacted to arrange payment. The Company uses the allowance method to account for uncollectable accounts receivable. The Company has not established an allowance for doubtful accounts as of August 31, 2018 and August 31, 2017.
Accounts Receivable and Revenue Concentrations
The Company's wholly owned subsidiary, Trade Leasing, Inc., has more than 415 customers. Three customers represented 12%, 10% and 9% of total receivables as of August 31, 2018. Three customers represented 21%, 18%, and 12% of total receivables as of August 31, 2017.
Inventory
The Company does not own inventory; therefore, there was no inventory on hand at August 31, 2018 and 2017.
Property and Equipment
The Company purchased several major pieces of manufacturing equipment during the year 2017.
Equipment, vehicles and furniture, which are recorded at cost, consist primarily of fabrication equipment and is depreciated using the straight-line method over the estimated useful lives of the related assets (generally fifteen years or less). Costs incurred for maintenance and repairs are expensed as incurred and expenditures for major replacements and improvements are capitalized and depreciated over their estimated remaining useful lives. There was depreciation expense of $16,823 and $8,498 during the fiscal years ended August 31, 2018 or August 31, 2017.
Net property and equipment were as follows at August 31, 2018 and August 31, 2017:
Lease Commitments
Service Team Inc. leased a building at 1818 East Rosslyn Avenue, Fullerton, California 92834 effective October 1, 2015. The lease is for a period of 72 months with an option to extend the lease for an additional 72 months. The new facility is a 25,000 square foot concrete industrial building located on approximately two acres of land. This new facility is approximately double the size of the prior facility. Rent for the new facility is $10,000 per month for the first six months; and then $14,000 per month thereafter. The Company is responsible for the property taxes and insurance on the building. As of August 31, 2018, the deferred rent related to this lease was $12,333.
Our principal executive offices are located in 600 square feet in a building at 18482 Park Villa Place, Villa Park, California 92861. The space is furnished by Robert L. Cashman, a related party, at no charge.
Beneficial Conversion Features
From time to time, the Company may issue convertible notes that may contain an imbedded beneficial conversion feature. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation of a portion of the note proceeds to the fair value of warrants, if related warrants have been granted. The intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest expense over the life of the note using the effective interest method.
Fair Value of Financial Instruments
The Company adopted Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 820 on June 6, 2011. Under this FASB, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50 details the disclosures that are required for items measured at fair value.
The Company has various financial instruments that must be measured under the new fair value standard including: cash, convertible notes payable, accrued expenses, promissory notes payable, accounts receivable and accounts payable. The Company's financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows:
Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. The fair value of the Company's cash is based on quoted prices and therefore classified as Level 1.
Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
Level 3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.
Cash, accounts receivable, accounts payable, promissory notes and accrued expenses reported on the balance sheet are estimated by management to approximate fair market value due to their short term nature.
The following table presents assets and liabilities that were measured and recognized at fair value as of August 31, 2018 on a recurring basis:
The following table presents assets and liabilities that were measured and recognized at fair value as of August 31, 2017 on a recurring basis:
Income Taxes
In assessing the realization of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on the level of historical operating results and the uncertainty of the economic conditions, the Company has recorded a full valuation allowance against its deferred tax assets at August 31, 2018 and 2017 where it cannot conclude that it is more likely than not that those assets will be realized.
Revenue Recognition
The Trade Leasing Division receives orders from customers to build or repair truck bodies. The company builds the requested product. At the completion of the product the truck is delivered to the customer. If the customer accepts the product Trade Leasing Inc. issues an invoice to the customer for the job. The invoice is entered into our accounting system and is recognized as revenue at that time.
In the Trade Leasing Division we use the completed contract method for truck bodies built, which typically have construction periods of 15 days or less. Contracts are considered complete when title has passed, the customer has accepted the product and we do not retain risks or rewards of ownership of the truck bodies. Losses are accrued if manufacturing costs are expected to exceed manufacturing contract revenue. Manufacturing expenses are primarily composed of aluminum cost, which is the largest component of our raw materials cost and the cost of labor.
As described above, in accordance with the requirements of ASC 605-10-599, the Company recognizes revenue when (1) persuasive evidence of an arrangement exists (contracts); (2) delivery has occurred; (3) the seller's price is fixed or determinable (per the customer's contract); and (4) collectability is reasonably assured (based upon our credit policy).
Share Based Expenses
The Company accounts for the issuance of equity instruments to acquire goods and/or services based on the fair value of the goods and services or the fair value of the equity instrument at the time of issuance, whichever is more readily determinable. The Company's accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of standards issued by the FASB. The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor's performance is complete. In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement.
Stock Based Compensation
In December of 2004, the FASB issued a standard which applies to transactions in which an entity exchanges its equity instruments for goods or services and also applies to liabilities an entity may incur for goods or services that are based on the fair value of those equity instruments. For any unvested portion of previously issued and outstanding awards, compensation expense is required to be recorded based on the previously disclosed methodology and amounts. Prior periods presented are not required to be restated. We adopted the standard as of inception. The Company has not issued any stock options to its Board of Directors and officers as compensation for their services. If options are granted, they will be accounted for at a fair value as required by the FASB ASC 718.
Net Loss Per Share
The Company adopted the standard issued by the FASB, which requires presentation of basic earnings or loss per share and diluted earnings or loss per share. Basic income (loss) per share ("Basic EPS") is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share ("Diluted EPS") are similarly calculated using the treasury stock method except that the denominator is increased to reflect the potential dilution that would occur if dilutive securities at the end of the applicable period were exercised. During the years ended August 31, 2018 and 2017, the Company reported a net loss from operations. The diluted shares outstanding excludes the effect of diluted securities due to the anti-dilutive effect.
Recent Accounting Pronouncements
In May 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. ASU 2017-09, which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. Per ASU 2017-9, an entity should account for the effects of a modification unless all the following are met: (1) the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification, (2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified, and (3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The current disclosure requirements in Topic 718 apply regardless of whether an entity is required to apply modification accounting under the amendments in ASU 2017-9. ASU 2017-9 is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for (1) public business entities for reporting periods for which financial statements have not yet been issued and (2) all other entities for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this ASU should be applied prospectively to an award modified on or after the adoption date. The adoption of ASU 2017-9 is not expected to have a material impact on the Company's financial statements or related disclosures.
In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350). ASU 2017-04 simplifies the subsequent measurement of goodwill by removing the second step of the two-step impairment test. The amendment requires an entity to perform its annual, or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The amendment should be applied on a prospective basis. ASU 2017-04 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company intends to early adopt the ASU in 2017.
In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)". Under this guidance, an entity is required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. This guidance offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. This guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this standard will have on our consolidated financial statements.
In May 2014 the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. Since ASU 2014-09 was issued, several additional ASUs have been issued to clarify various elements of the guidance. These standards provide guidance on recognizing revenue, including a five-step model to determine when revenue recognition is appropriate. The standard requires that an entity recognize revenue to depict the transfer of control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Adoption of the new standard is effective for reporting periods beginning after December 15, 2017. We plan to use the modified retrospective method of adoption and will adopt the standard as of September 1, 2018, the beginning of our next fiscal year. We have completed an initial evaluation of the potential impact from adopting the new standard, including a detailed review of performance obligations for all material revenue streams. Based on this initial evaluation, we do not expect adoption will have a material impact on our financial position, results of operations, or cash flows. Related disclosures will be expanded in line with the requirements of the standard. We will continue our evaluation until our adoption of the new standard.
NOTE 3 - CAPITAL STOCK
The Company's authorized capital is 20,000,000,000 common shares with a par value of $0.001 per share and 150,000 preferred shares with a par value of $0.001 per share.
Common Shares
On February 12, 2016, the Articles of Incorporation were amended to increase the authorized shares of capital stock to 500,000,000. On December 20, 2016, the Articles of Incorporation were amended to increase the authorized share of capital stock to 1,000,000,000. On January 19, 2017, the Articles of Incorporation were amended to increase the authorized share of capital stock to 2,000,000,000. On February 16, 2017, the Articles of Incorporation were amended to increase the authorized share of capital stock to 3,000,000,000. On April 27, 2017, the Articles of Incorporation were amended to increase the authorized share of capital stock to 4,500,000,000. On June 13, 2017, the Articles of Incorporation were amended to increase the authorized share of capital stock to 8,000,000,000. On June 28, 2017, the Articles of Incorporation were amended to increase the authorized share of capital stock to 10,000,000,000. On August 22, 2017, the Company moved its state of domicile from Nevada to Wyoming, and in the process of the transfer increased its authorized common stock to 20,000,000,000.
Preferred Shares
On January 23, 2015, Service Team Inc. filed with the Secretary of State of Nevada a Certificate of Designation for 100,000 shares of Series A Preferred Stock. The Designation gives the Series A Preferred Stock 500 votes per share. Series A Preferred Stock were not entitled to receive dividends, any liquidation preference, or conversion rights. On October 16, 2015, the Designation of Preferred Stock was amended to allow Preferred Shareholders to receive dividends in an amount equal to dividends paid per share on Common Stock. On July 27, 2016, an amendment was filed to increase the voting rights of the preferred stock from 500 votes per share to 10,000 votes per share. The Series A share amendments valued according to the additional voting rights and dividend rights assigned. The value assigned to the dividend rights was derived from a model utilizing future economic value of the dividends and was $525 which was recorded on the grant date as stock based compensation. The value assigned to the voting rights was derived from a model utilizing control premiums to value the voting control of the preferred stock and was $83,000 which was recorded on the grant date as stock based compensation. On December 30, 2016 the Articles of Incorporation were amended to increase the authorized preferred shares to 150,000.
On July 25, 2017, the Articles of Incorporation were amended to increase the voting rights of preferred shares to 100,000 votes per share. The Series A share amendments valued according to the additional voting rights and dividend rights assigned. The value assigned to the dividend rights was derived from a model utilizing future economic value of the dividends and was $0 which was recorded on the grant date as stock based compensation. The value assigned to the voting rights was derived from a model utilizing control premiums to value the voting control of the preferred stock and was $54,000 which was recorded on the grant date as stock based compensation.
On December 4, 2017, the Company granted 50,000 additional Series A Preferred Stock shares to Robert Cashman, a related party. The value assigned to the new shares was derived from a model utilizing control premiums to value the voting control of the preferred stock and was $1,000 which was recorded on the grant date as stock based compensation.
Share Transactions
On September 1, 2017, Crown Bridge Partners LLC converted $4,742 of its Note dated 12-21-2016 into 105,368,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On September 2, 2017, Crossover Capital LLC converted $4,975 of its Note dated 2-14-2017 into 103,000,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On September 11, 2017, Crown Bridge Partners LLC converted $5,446 of its Note dated 12-21-2016 into 121,018,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On September 12 2017, LG Capital Funding LLC Converted $6,048 of its Note dated 1-3-2017 into 120,964,400 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On September 19, 2017, Crossover Capital LLC converted $6,075 of its Note dated 2-14-2017 into 125,000,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On October 6, 2017, Crown Bridge Partners LLC converted $6,501 of its Note dated 12-21-2016 into 144,470,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On October 5, 2017, Crossover Capital LLC converted $6,925 of its Note dated 2-14-2017 into 142,000,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On October 31, 2017, Tangiers Investment Group LLC converted $4,331 of its Note dated 6-13-2016 in the amount of into 125,000,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On October 31, 2017, Tangiers Investment Group LLC converted $6,750 of its Note dated 6-13-2016 in the amount of into 192,857,143 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On November 2, 2017, LG Capital Funding LLC Converted $6,681 of its Note dated 1-3-2017 into 133,622,200 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On November 4, 2017, Crossover Capital LLC converted $8,075 of its Note dated 2-14-2017 into 165,000,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion
On November 8, 2017, Crown Bridge Partners LLC converted $7,858 of its Note dated 12-21-2016 into 174,626,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On November 14, 2017, Crown Bridge Partners LLC converted $9,421 of its Note dated 12-21-2016 into 198,242,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On November 15, 2017, Crown Bridge Partners LLC converted $7,538 of its Note dated 12-21-2016 into 167,511,777 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On November 15, 2017, Crossover Capital LLC converted $7,735 of its Note dated 2-14-2017 into 158,200,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion
On November 16, 2017, Tangiers Investment Group LLC converted $13,613 of its Note in the amount of into 396,880,466 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On November 29, 2017, JMJ Financial converted $13,270 of its Note dated 5-1-2017 into 132,700,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion
On December 5, 2017, Tangiers Investment Group LLC converted $16,769 of its Note dated 7-18-2016 into 488,892,128 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On December 6, 2017, JMJ Financial converted $4,700 of its Note dated 5-1-2017 into 94,000,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On December 13, 2017, JMJ Financial converted $19,317 of its Note dated 5-1-2017 into 129,000,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion. This conversion pays the Note in full.
On December 14, 2017, Crown Bridge Partners LLC converted $12,596 of its Note dated 12-21-2016 into 279,900,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On December 28, 2017, Tangiers Investment Group LLC converted $20,621 of its Note dated 7-18-2016 into 601,195,335 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On January 12, 2018, Crown Bridge Partners LLC converted $12,600 of its Note dated 12-21-2016 into 280,000,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On January 29, 2018, Crossover Capital LLC converted $7,325 of its Note Dated 7-24-2017 into 150,000,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On March 16, 2018, Crossover Capital LLC converted $12,325 of its Note Dated 7-24-2017 into 250,000,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On March 16, 2018, JMJ Financial converted $6,505 of its Note dated 4-28-2017 into 351,000,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On March 19, 2018, Crown Bridge Partners LLC converted $15,829 of its Note dated 12-21-2016 into 351,760,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On March 21, 2018, Tangiers Investment Group LLC converted $19,201 of its Note dated 7-18-2016 into 548,564,286 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On May 22, 2018, Tangiers Investment Group LLC converted $13,600 of its Note dated 11-10-2017 into 302,222,222 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
During the twelve-month period ended August 31, 2018, $40,000 of beneficial conversion features were recorded resulting from convertible debts issued during the same period. Please refer to Note 4 for further information regarding the discounts on the convertible debt transactions.
As of August 31, 2018, the Company has not granted any stock options.
On September 1, 2016, Tangiers Investment Group LLC converted $8,257 of its Note in the amount of into 16,851,020 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On September 14, 2016, Tangiers Investment Group LLC converted $5,937 of its Note in the amount of into 12,116,327 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On October 18, 2016, Tangiers Investment Group LLC converted $6,869 of its Note in the amount of into 9,862,168 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On November 8, 2016, Tangiers Investment Group LLC converted $6,523 of its Note in the amount of into 10,353,968 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On November 10, 2016, Tangiers Investment Group LLC converted $13,710 of its Note in the amount of into 21,761,905 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On November 21, 2016, Tangiers Investment Group LLC converted $15,000 of its Note in the amount of into 23,809,524 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On December 21, 2016, Tangiers Investment Group LLC converted $4,871 of its Note in the amount of $27,500 into 10,141,347 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On December 29, 2016, Tangiers Investment Group, LLC converted $4,327 of its Note in the amount of $35,934 into 8,079,514 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On January 11, 2017, Tangiers Investment Group LLC converted $5,854 of its Note in the amount of $35,750 into 14,055,222 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On January 25, 2017, Tangiers Investment Group LLC converted $7,237 of its Note in the amount of $35,750 into 29,538,776 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On January 27, 2017, Tangiers Investment Group LLC converted $5,590 of its Note in the amount of $35,750 into 22,817,633 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On April 10, 2017, Tangiers Investment Group LLC converted $6,085 of its Note into 34,771,429 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On April 19, 2017, Tangiers Investment Group LLC converted $6,693 of its Note into 38,245,714 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On April 26, 2017, Tangiers Investment Group LLC converted $4,417 of its Note into 42,066,667 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On May 3, 2017, Tangiers Investment Group LLC converted $4,809 of its Note into 46,262,626 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On May 10, 2017, Tangiers Investment Group LLC converted $5,290 of its Note into 50,889,851 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On May 17, 2017, Tangiers Investment Group LLC converted $5,998 of its Note into 57,700,818 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion. This conversion pays the Note in full.
On April 28, 2017, the Company issued 17,300,000 shares to Tangiers Investment Group LLC as an inducement to issue convertible debt which was valued at $6,920 based on the closing market price on the date of grant.
On June 1,2017, Tangiers Investment Group LLC converted $4,220 of its Note into 63,458,647 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On June 8, 2017, Tangiers Investment Group LLC converted $3,909 of its Note into 69,803,571 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On June 26, 2017, Tangiers Investment Group LLC converted $4,729 of its Note into 84,446,429 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On June 16, 2017, Tangiers Investment Group LLC converted $4,301 of its Note into 76,803,571 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On June 30, 2017, Tangiers Investment Group LLC converted $5,440 of its Note into 97,142,857 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On July 7, 2017, Tangiers Investment Group LLC converted $5,981 of its Note into 106,803,571 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On August 10, 2017, Tangiers Investment Group LLC converted $4,983 of its Note into 142,371,429 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On August 15, 2017, Tangiers Investment Group LLC converted $4,175 of its Note into 119,285,714 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On June 28, 2017, Crown Bridge Partners LLC converted $2.452 its Note into 42,180,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On July 24, 2017, Crown Bridge Partners LLC converted $4,108 of its Note into 58,679,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On July 31, 2017, Crown Bridge Partners LLC converted $2.156 of its Note into 61,600,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On August 8, 2017, Crown Bridge Partners LLC converted $2,371 of its Note into 67,742,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On August 23, 2017, Crown Bridge Partners LLC converted $3,964 of its Note into 88,086,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On August 28, 2017, Crown Bridge Partners LLC converted $4,742 of its Note into 92,482,000 shares of common stock which were not issued prior to August 31, 2017; therefore, they were recorded as stock payable in the amount of $4,742 as of August 31, 2017. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On August 2, 2017, LG Capital Funding LLC converted $2.950 of its Note into 61,379,400 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On August 17, 2017, LG Capital Funding LLC converted $3,750 of its Note into 78,271,200 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On August 23, 2017 L G Capital Funding LLC converted $4,200 its Note into 87,774,200 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On August 30, 2017, LG Capital Funding LLC converted $5,030 of its Note into 105,274,400 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On August 21, 2017, Crossover Capital Fund LLC converted $3,900 of its Note into 78,000,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
On August 31, 2017, Crossover Capital Fund LLC converted $5,150 of its Note into 103,000,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
During the twelve-month period ended August 31, 2017, $347,912 of beneficial conversion features were recorded resulting from convertible debts issued during the same period. Please refer to Note 4 for further information regarding the discounts on the convertible debt transactions.
During 2017 and 2018 the Company did not sell any Common Shares. The only shares issued were for Conversion of Notes.
Stock Based Compensation
We have accounted for stock-based compensation under the provisions of FASB Accounting Standards codification (ASC) 718-10-55. (Prior authoritative literature: FASB Statement 123 (R), Share-based payment.) This statement requires us to record any expense associated with the fair value of stock-based compensation. Determining fair value requires input of highly subjective assumptions, including the expected price volatility. Changes in these assumptions can materially affect the fair value estimate.
As of August 31, 2018, the Company has not granted any stock options.
NOTE 4 - DEBT TRANSACTIONS
Convertible Notes Payable - Related Party
R.L. Cashman
On April 17, 2017, the Company issued a convertible note to Robert Cashman (a related party) for $12,500 of cash consideration. The note bears interest at 10%, matures on April 17, 2018, and is convertible into common stock at 50% of the average bid price of the stock during the 30 days prior to the conversion. The Company recorded a debt discount equal to $12,500 due to this conversion feature and amortized $4,658 during the year ended August 31, 2017, with a remaining debt discount of $7,842 amortized during the year ended August 31, 2018. The note was repaid during the fiscal year ended August 31, 2018.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.0005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.
Convertible Notes Payable - Third Party
U S Affiliated Inc.
On December 16, 2016, the Company issued a promissory note to U.S. Affiliated, Inc. for $4,000 of cash consideration. The note bears interest at 10%, matures on December 16. The note was repaid during the year ended August 31, 2017 and at August 31, 2017, the balance was $0.
On May 12, 2016, the Company issued a convertible note to U.S. Affiliated, Inc. for $7,500 of cash consideration. The note bears interest at 6%, matures on September 12, 2016, and is convertible into common stock at 50% of the average bid price of the stock during the 30 days prior to the conversion. The Company recorded a debt discount equal to $7,500 due to this conversion feature and amortized $6,768 during the year ended August 31, 2016, with a remaining debt discount balance of $732 as of August 31, 2016. The note had accrued interest of $137 and $0 as of August 31, 2016 and August 31, 2015, respectively. The note was repaid in full during the six months ended February 28, 2017.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.0005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.
JMJ Financial Group
On April 28, 2017, the Company issued a convertible note to JMJ Financial Group for $55,000 of cash consideration. The note bears interest at 12%, matures on April 28, 2018, and is convertible into common stock at 50% of the lowest 3 closing market prices of the previous 20 trading days prior to conversion. The Company recorded a debt discount equal to $37,080 due to this conversion feature. The Company also recorded a $6,000 and $11,920 debt discounts due to accrued interest and origination fees required by the agreement to be accrued at the beginning of the note. The note had accrued interest of $7,222 and $2,260 as of August 31, 2018 and August 31, 2017, respectively. The debt discounts had a balance at August 31, 2017 of $36,164 and a balance of $0 at August 31, 2018. The Company recorded debt discount amortization expense of $18,836 during the year ended August 31, 2017 and $36,164 during the year ended August 31, 2018. The Company converted $31,570 of principal and $12,222 of interest into shares during the year ended August 31, 2018. This note is currently in default.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.
LG Capital Funding, LLC
On January 3, 2017, the Company issued a convertible note to LG Capital Funding LLC for $28,000 for cash consideration. The note bears interest at 8%, matures on September 3, 2017, and is convertible into common stock at 50% of the lowest 3 closing market prices of the previous 20 trading days prior to conversion. The Company recorded a debt discount equal to $26,000 due to this conversion feature. The Company also recorded a $2,000 debt discount due to issuance costs. The note had accrued interest of $84 as of August 31, 2017 and $0 at August 31, 2018. The debt discounts had a balance at August 31, 2017 of $9,589 and $0 at August 31, 2018. During the year ended August 31, 2017, $15,930 of principal and $706 of accrued interest was converted into shares; see Note 3 for more information. The Company made cash payments of $5,770, to end with a balance of $6,300 as of August 31, 2017. The note was fully converted into shares during the three months ended November 30, 2017. The Company recorded debt discount amortization expense of $18,411 during the year ended August 31, 2017 and $9,589 during the three months ended November 30, 2017. The entire balance of the Note has been converted to stock.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.
Tangiers Capital Group
On November 25, 2015, the Company issued a convertible note to Tangiers Capital Group for $38,500 of cash consideration. The note bears interest at 12%, matures on November 25, 2016, and is convertible into common stock at 50% of the lowest 3 closing market prices of the previous 20 trading days prior to conversion. The Company recorded a debt discount equal to $35,000 due to this conversion feature. The Company also recorded a $3,500 debt discount due to issuance fees. The note had accrued interest of $0 and $4,620 as of August 31, 2017 and 2016. The debt discounts had a balance at August 31, 2017 and August 31, 2016 of $0 and $9,039, respectively. The Company recorded debt discount amortization expense of $9,039 and $29,461 during the year ended August 31, 2017 and the year ended August 31, 2016, respectively. This note was fully converted into shares during the year ended August 31, 2017, see Note 3 for more information.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.
On April 15, 2016, the Company issued a convertible note to Tangiers Capital Group for $27,500 of cash consideration. The note bears interest at 10%, matures on April 15, 2017, and is convertible into common stock at 50% of the lowest 3 closing market prices of the previous 20 trading days prior to conversion. The Company recorded a debt discount equal to $25,000 due to this conversion feature. The Company also recorded a $2,500 debt discount due to issuance fees. The note had accrued interest of $0 and $2,750 as of August 31, 2017 and 2016. The debt discounts had a balance at August 31, 2017 and August 31, 2016 of $0 and $17,103, respectively. The Company recorded debt discount amortization expense of $17,103 and $10,397 during the year ended August 31, 2017 and the year ended August 31, 2016, respectively. This note was fully converted into shares during the year ended August 31, 2017, see Note 3 for more information.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.
On May 6, 2016, the Company issued a convertible note to Tangiers Capital Group for $35,750 of cash consideration. The note bears interest at 10%, matures on May 6, 2017, and is convertible into common stock at 50% of the lowest 3 closing market prices of the previous 20 trading days prior to conversion. The Company recorded a debt discount equal to $32,500 due to this conversion feature. The Company also recorded a $3,250 debt discount due to issuance fees. The note had accrued interest of $0 and $3,575 as of August 31, 2017 and 2016. The debt discounts had a balance at August 31, 2017 and August 31, 2016 of $0 and $24,290, respectively. The Company recorded debt discount amortization expense of $24,290 and $11,460 during the year ended August 31, 2017 and the year ended August 31, 2016, respectively. This note was fully converted into shares during the year ended August 31, 2017, see Note 3 for more information.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.
On June 13, 2016, the Company issued a convertible note to Tangiers Capital Group for $38,500 of cash consideration. The note bears interest at 10%, matures on June 13, 2017, and is convertible into common stock at 50% of the lowest 3 closing market prices of the previous 20 trading days prior to conversion. The Company recorded a debt discount equal to $35,000 due to this conversion feature. The Company also recorded a $3,500 debt discount due to issuance fees. The note had accrued interest of $7,272 and $10,890 and $3,850 as of November 30, 2017 and August 31, 2017. The debt discounts had a balance at November 30, 2017 and August 31, 2017 of $0 and $0, respectively. The Company recorded debt discount amortization expense of $0 and $30,167 during the three months ended November 30, 2017 and the year ended August 31, 2017, respectively. During the three months ended November 30, 2017 and the year ended August 31, 2017, $4,982 of principal and $3,743 of interest and $33,518 of principal and $4,220 of accrued interest was converted into shares, respectively; see Note 3 for more information. The note has now been fully converted as of November 30, 2017.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.
On July 18, 2016, the Company issued a convertible note to Tangiers Capital Group for $27,500 of cash consideration. The note bears interest at 10%, matures on July 18, 2017, and is convertible into common stock at 50% of the lowest 3 closing market prices of the previous 20 trading days prior to conversion. The Company recorded a debt discount equal to $25,000 due to this conversion feature. The Company also recorded a $2,500 debt discount due to issuance fees. The note had accrued interest of $0 and $8,401 and as of August 31, 2018 and August 31, 2017. The debt discounts had a balance at August 31, 2018 and August 31, 2017 of $0 and $0, respectively. The Company recorded debt discount amortization expense of $24,185 and $3,315 during the year ended August 31, 2017 and the year ended August 31, 2016, respectively. $27,500 of principal and $39,694 of interest were converted into shares during the year ended August 31, 2018; see Note 3 for further information.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.
On November 10, 2017, Service Team Inc issued a 12% Convertible Promissory Note payable to Tangiers Investment Group LLC (the "Investor") in the principal amount of $23,000. The Note, which is due on November 10, 2018, was funded by the Investor in the sum of $20,000 and $3,000 was retained by the Investor through an original issue discount or "OID" for due diligence and legal expense related to this transaction. The Note is convertible into shares of the Registrant's common stock, par value $0.001, at a conversion price of 50% of the lowest trading price of the Company's common stock during the 25 consecutive trading days prior to the date on which Holder elects to convert all or part of the Note. The Company recorded a $20,000 discount due to the beneficial conversion feature. During the year ended August 31, 2018, $18,526 of discount amortization was recorded, to result in a remaining debt discount balance of $4,474 as of August 31, 2018. Accrued interest at August 31, 2018 was $2,760.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.
On February 27, 2018, Service Team Inc issued a 12% Convertible Promissory Note payable to Tangiers Investment Group LLC (the "Investor") in the principal amount of $23,000. The Note, which is due on February 27, 2019, was funded by the Investor in the sum of $20,000 and $3,000 was retained by the Investor through an original issue discount or "OID" for due diligence and legal expense related to this transaction. The Note is convertible into shares of the Registrant's common stock, par value $0.001, at a conversion price of 50% of the lowest trading price of the Company's common stock during the 25 consecutive trading days prior to the date on which Holder elects to convert all or part of the Note. The Company recorded a $20,000 discount due to the beneficial conversion feature and a $3,000 discount due to the original issue discount. During the year ended August 31, 2018, $11,658 of discount amortization was recorded, to result in a remaining debt discount balance of $11,342 as of August 31, 2018. Accrued interest at August 31, 2018 was $2,760.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.
Iconic Holdings LLC
On July 10, 2017, the Company issued a convertible note to Iconic Holdings of $34,993 for consideration of certain machine tools. The note bears interest at 10%, matures on July 10, 2018, and is convertible into common stock at 50% of the lowest 3 closing market prices of the previous 20 trading days prior to conversion. The Company recorded a debt discount equal to $31,812 due to this conversion feature. The Company also recorded a $3,181 debt discount due to issuance fees. The note had accrued interest of $3,499 as of August 31, 2017 and $5,206 as of August 31, 2018. The debt discounts had a balance at August 31, 2017 of $25,118 and $0 as of August 31, 2018. The Company recorded debt discount amortization expense of $9,875 during the year ended August 31, 2017 and $25,118 during the year ended August 31, 2018. This note is currently in default.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.
Power Up Lending Group, LTD.
On December 15, 2016, the Company issued a convertible note to Power Up Lending Group, LTD. for $33,000 of cash consideration. The note bears interest at 8%, matures on September 30, 2017, and is convertible into common stock at 55% of the lowest 3 closing market prices of the previous 15 trading days prior to conversion. The Company recorded a debt discount equal to $30,000 due to this conversion feature. The Company also recorded a $3,000 debt discount due to issuance fees. The Company paid the note in full during the year ended August 31, 2017, such that the ending balance at August 31, 2017 was $0.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.
Crown Bridge Partners, LLC.
On December 21, 2016, the Company issued a convertible note to Crown Bridge Partners, LLC. for $42,500 of cash consideration. The note bears interest at 6%, matures on December 21, 2017, and is convertible into common stock at 55% of the lowest 3 closing market prices of the previous 20 trading days prior to conversion. The Company recorded a debt discount equal to $36,000 due to this conversion feature. The Company also recorded a $6,500 debt discount due to issuance fees. The note had accrued interest of $0 as of August 31, 2017 and August 31, 2018. The debt discounts had a balance at August 31, 2017 of $13,041 and $0 at August 31, 2018. The Company recorded debt discount amortization expense of $29,459 during the year ended August 31, 2017 and $13,041 during the year ended August 31, 2018. During the year ended August 31, 2017, $10,954 of principal and $13,502 of interest were converted into shares and during the year ended August 31, 2018, principal of $31,546 and interest of $5,217 was converted into shares; see Note 3 for more information.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.
On June 12, 2017, the Company issued a convertible note to Crown Bridge Partners, LLC. for $63,750 of cash consideration. The note bears interest at 6%, matures on June 12, 2018, and is convertible into common stock at 55% of the lowest 3 closing market prices of the previous 20 trading days prior to conversion. The Company recorded a debt discount equal to $52,600 due to this conversion feature. The Company also recorded a $11,150 debt discount due to issuance fees. The note had accrued interest of $838 as of August 31, 2017 and $363 as of August 31, 2018. The debt discounts had a balance at August 31, 2017 of $49,777 and $0 at August 31, 2018. The Company recorded debt discount amortization expense of $13,973 during the year ended August 31, 2017 and $49,682 during the year ended August 31, 2018. The Company converted $39,524 in principal and $1,500 in accrued interest into shares during the year ended August 31, 2018; see Note 3 for more information. This note is currently in default.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.
Crossover Capital Fund, LLC
On February 14, 2017, the Company issued a convertible note to Crossover Capital Fund, LLC for $40,000 of cash consideration. The note bears interest at 10%, matures on February 14, 2018, and is convertible into common stock at 50% of the lowest 3 closing market prices of the previous 20 trading days prior to conversion. The Company recorded a debt discount equal to $34,000 due to this conversion feature. The Company also recorded a $6,000 debt discount due to issuance fees. The note had accrued interest of $0 as of August 31, 2017 and August 31, 2018. The debt discounts had a balance at August 31, 2017 of $18,301 and $0 at August 31, 2018. The Company recorded debt discount amortization expense of $21,699 during the year ended August 31, 2017 and $18,301 during the year ended August 31, 2018. During the year ended August 31, 2018 principal of $32,487 and interest of $1,298 was converted into shares; see Note 3 for more information.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.
On July 24, 2017, the Company issued a convertible note to Crossover Capital Fund, LLC for $40,000 of cash consideration. The note bears interest at 10%, matures on July 24, 2018, and is convertible into common stock at 50% of the lowest 3 closing market prices of the previous 20 trading days prior to conversion. The Company recorded a debt discount equal to $40,000 due to this conversion feature. The note had accrued interest of $416 as of August 31, 2017 and $2,821 at August 31, 2018. The debt discounts had a balance at August 31, 2017 of $35,836 and $0 at August 31, 2018. The Company recorded debt discount amortization expense of $4,164 during the year ended August 31, 2017 and $35,836 during the year ended August 31, 2018. During the year ended August 31, 2018, the Company converted $17,106 in principal and $2,544 of accrued interest into shares; see Note 3 for more information. This note is currently in default.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.
Promissory Notes Payable - Third Party
On Deck Capital
On August 23, 2016, the Company issued a promissory note to On Deck Capital for $243,750 of cash consideration. The note bears interest at 33%, matures on May 20, 2017. The Company recorded a debt discount equal to $82,500 due to the unpaid interest which was added to the principal balance to be repaid during the 9 month note. The Company also recorded a $6,250 debt discount due to origination fees due at the beginning of the note. During the years ended August 31, 2017 and 2016, the company amortized $86,121 and $2,637 of the debt discounts into interest expense leaving a remaining total debt discount on the note of $0 as of August 31, 2017. On June 2, 2017, the Company paid this Note in full.
Forward Financing
On December 11, 2017, the Company issued a promissory note to Forward Financing for $61,405 of cash consideration. The note bears interest at 41%, matures on June 20, 2018. The Company recorded a debt discount equal to $26,579 due to the unpaid interest which was added to the principal balance to be repaid during the 6 month note. During the year ended August 31, 2018, the company amortized $26,579 of the debt discount into interest expense leaving a remaining total debt discount on the note of $0 as of August 31, 2018. During the year ended August 31, 2018, the Company repaid $87,984 in principal on the note in cash leaving a net balance on the note of $0. As of August 31, 2018; this note was repaid in full.
IOU Financial
On March 30, 2018, the Company issued a promissory note to IOU Financial for $120,000 of cash consideration. The note bears interest at 32%, matures on March 30, 2019. The Company recorded a debt discount equal to $38,630 due to the unpaid interest which was added to the principal balance to be repaid during the 12 month note. During the year ended August 31, 2018, the company amortized $16,299 of the debt discount into interest expense leaving a remaining total debt discount on the note of $22,331 as of August 31, 2018. During the year ended August 31, 2018, the Company repaid $69,206 in principal on the note in cash leaving a balance on the note of $89,424 owed as of August 31, 2018.
NOTE 5- RELATED PARTY TRANSACTIONS
Convertible Note Payable - Related Party
On April 17, 2017, the Company issued a convertible note to Robert Cashman (a related party) for $12,500 of cash consideration. The note bears interest at 10%, matures on April 17, 2018, and is convertible into common stock at 50% of the average bid price of the stock during the 30 days prior to the conversion. The Company recorded a debt discount equal to $12,500 due to this conversion feature and amortized $4,658 during the year ended August 31, 2017, with a remaining debt discount of $7,842 amortized during the year ended August 31, 2018. The note was repaid during the fiscal year ended August 31, 2018.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.0005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.
Office Lease
Our principal executive offices are located in 600 square feet in a building at 18482 Park Villa Place, Villa Park, California 92861. The space is furnished by Robert L. Cashman, a related party, at no charge.
Preferred Stock Issued for Services
On July 25, 2017, the Articles of Incorporation were amended to increase the voting rights of preferred shares to 100,000 votes per share. The Series A share amendments valued according to the additional voting rights and dividend rights assigned. The value assigned to the dividend rights was derived from a model utilizing future economic value of the dividends and was $0 which was recorded on the grant date as stock-based compensation. The value assigned to the voting rights was derived from a model utilizing control premiums to value the voting control of the preferred stock and was $54,000 which was recorded on the grant date as stock-based compensation.
On December 4, 2017, the Company granted 50,000 additional Series A Preferred Stock shares to Robert Cashman, a related party. The value assigned to the new shares was derived from a model utilizing control premiums to value the voting control of the preferred stock and was $1,000 which was recorded on the grant date as stock-based compensation.
NOTE 6 - INCOME TAXES
The Company accounts for income taxes under standards issued by the FASB. Under those standards, deferred tax assets and liabilities are recognized for future tax benefits or consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided for significant deferred tax assets when it is more likely than not that such assets will not be realized through future operations.
No provision for federal income taxes has been recorded due to the available net operating loss carry forwards of approximately $896,914 will expire in various years through 2032. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the future tax loss carry forwards.
The actual income tax provisions differ from the expected amounts calculated by applying the statutory income tax rate to the Company's loss before income taxes. The components of these differences are as follows at August 31, 2018 and August 31, 2017:
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Operating Leases
Service Team Inc. leased a building at 1818 East Rosslyn Avenue, Fullerton, California 92834 effective October 1, 2015. The lease is for a period of 72 months with an option to extend the lease for an additional 72 months. The new facility is a 25,000 square foot concrete industrial building located on approximately two acres of land. This new facility is approximately double the size of the prior facility. Rent for the new facility is $10,000 per month for the first six months; and then $14,000 per month thereafter. The Company is responsible for the property taxes and insurance on the building. As of August 31, 2018, the deferred rent related to this lease was $12,333.
Our principal executive offices are located in 600 square feet in a building at 18482 Park Villa Place, Villa Park, California 92861. The space is furnished by Robert L. Cashman., a related party, at no charge.
NOTE 8 - SUBSEQUENT EVENTS
Management has evaluated subsequent events according to the requirements of ASC 855, and there are currently no subsequent events to report.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 (the "Exchange Act") is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management to allow timely decisions regarding required disclosure.
As required by paragraph (b) of Rules 13a-15 or 15d-15 under the Exchange Act, our management, with the participation of our president (our principal executive officer) and our chief financial officer (our principal financial officer and principal accounting officer) evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this annual report, being August 31, 2018.
Based on this evaluation, these officers concluded that, as of August 31, 2018, these disclosure controls and procedures were not effective to ensure that the information required to be disclosed by our company in reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities Exchange Commission. The conclusion that our disclosure controls and procedures were not effective was due to the presence of material weaknesses in internal control over financial reporting as identified below under the heading "Management's Report on Internal Control over Financial Reporting." Management anticipates that such disclosure controls and procedures will not be effective until the material weaknesses are remediated.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.
Management's Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. The term "internal control over financial reporting" is defined as a process designed by, or under the supervision of, an issuer's principal executive and principal financial officers, or persons performing similar functions, and effected by the issuer's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
(1)
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer; and
(2)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only inaccordance with authorizations of management and directors of the issuer.
Under the supervision of our president, being our principal executive officer, and our chief financial officer, being our principal financial officer and principal accounting officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of August 31, 2018 using the criteria established in Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. Based on this evaluation, our management concluded our internal control over financial reporting was not effective as at August 31, 2018.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our company's annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of our internal control over financial reporting as of August 31, 2018, we determined that there were control deficiencies that constituted material weaknesses which are indicative of many small companies with small staff, such as:
(1)
inadequate segregation of duties and effective risk assessment; and
(2)
insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both generally accepted accounting principles in the United States and guidelines of the Securities and Exchange Commission.
(3)
inadequate closing process to ensure all material misstatements are corrected in the financial statements. This was evidenced by the fact that there were audit adjustments of the financial statements.
These control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements could not have been prevented or detected on a timely basis. As a result of the material weaknesses described above, we concluded that we did not maintain effective internal control over financial reporting as of August 31, 2018, based on criteria established in Internal Control Integrated Framework issued by COSO. Our management is currently evaluating remediation plans for the above deficiencies. During the period covered by this annual report on Form 10-K, we have not been able to remediate the weaknesses described above. However, we plan to take steps to enhance and improve the design of our internal control over financial reporting.
ITEM 9B.
ITEM 9B. OTHER INFORMATION.
None
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Directors and Executive Officers
The following table sets forth the names of the members of the Company's Board of Directors, Executive Officers, and the position with the Company held by each.
Robert L. Cashman
President, Director, Chief Executive Officer
Robert L. Cashman
Chief Financial Officer, and Chief Accounting Officer
Each director is elected to hold office for a one-year period or until the next annual meeting of shareholders and until his/her successor has been qualified and elected following the one-year of service. The Officers serve at the discretion of the Company's directors. There are no understandings between any of the directors or officers of the Company or any other person pursuant to which any officer or director was or is to be selected as an officer or director.
Management's Biographies
The following is a brief account of business experience for each director and executive officer of the Company.
ROBERT L. CASHMAN-VICE PRESIDENT, SECRETARY, DIRECTOR, CHIEF FINANCIAL OFFICER, CHIEF ACCOUNTING OFFICER
Mr. Robert L. Cashman has a diverse background and brings a wealth of experience to the Service Team Inc. organization. A brief outline of his employment background is as follows:
1956-1960
Management Trainee/Field Representative, Aetna Casualty & Surety Company (first job out of college). Worked in various departments in the insurance company.
1960-1972
President/Owner, Security Plus Life Insurance Company. Organized Security Plus Life Insurance Company. The company wrote credit life and disability insurance on various types of loans.
1972-1982
ITT Corporation. Sold Security Plus Life Insurance Company to ITT and worked for ITT in their Acquisition Department involved in numerous acquisitions and public offerings.
1982-1992
President/Owner, Pacific Envelope Company. Manufacturer and printer of envelopes and publisher of weekly newspapers. Sold the company in 1992.
1992-2005
President, Owner, Charleston Group. Business consulting firm. Consulting on all types of business issues.
2005- Present
President, Service Team Inc. Chief Executive Office of the Company.
Mr. Cashman has received some prestigious awards from the business community including membership in the Young Presidents Organization, and the INC Magazine Hall of Fame.
Mr. Cashman has also received numerous awards for his continued involvement in civic activities including a member of the Orange County Airport Commission (24 years), operators of the John Wayne Airport, serving on the Governing Board of the local and national YMCA (12 years), and a long-term involvement with the Boy Scouts of America on both the local and national basis. He has served on the City of Anaheim's Work Force Development Board, the city agency that allocates federal funding for educational programs in the city. Mr. Cashman served as an aviation officer (pilot) in the Korean War, owns and flies his own airplane and serves on the boards of several aviation organizations. He is a graduate of the University of California, Los Angeles (UCLA).
Legal Proceedings
None.
CORPORATE GOVERNANCE
Director Independence
At the present time, we have one director who is an "insider." Director, Robert L. Cashman, also serves as President, Secretary, and Chief Financial Officer. We are currently recruiting outside directors who have some knowledge of our business. New directors are nominated by either of the present directors and voted on by the Board of Directors. Each director is elected to hold office for a one year period or until the next Annual Meeting of Shareholders and until his/her successor has been qualified and elected following the one year of service. We have not adopted a formal code of ethics as we only have two officers and directors and will adopt a code of ethics when we have appointed independent directors. The Officers serve at the discretion of the Company's directors. There are no understandings between any of the directors or officers of the Company or any other person pursuant to which any officer or director was or is to be selected as an officer or director. Robert L. Cashman serves as Chairman and Secretary of the Board.
The Board of Directors has held five Special Directors' Meetings since the inception of the Company. All the directors attended all of the meetings. It is a policy of the Company that all Board Members attend all Board Meetings and the Annual Meeting.
Committees
At the present time, the Board of Directors serves as an Audit Committee, Nominating Committee and Compensation Committee. None of these committees have had any meetings since the inception of the Company. It is planned that as we add independent Board Members we will activate these committees.
NOMINATING COMMITTEE: Director Robert L. Cashman participates in consideration of director nominees. At the present time Service Team is too small to warrant a Nominating Committee.
AUDIT COMMITTEE: We do not have a separate Audit Committee or a Financial Expert as defined in Rule S-K, Rule 407. The Board of Directors serves as the Audit Committee.
COMPENSATION COMMITTEE: The Board of Directors acts as the Compensation Committee. The directors feel Service Team is too small to have a Compensation Committee at this time. As additional directors are appointed, a formal Compensation Committee will be established.
SHAREHOLDER COMMUNICATIONS: Shareholders may send written communications on the Company's web site: www.serviceteam.com
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
Service Team Inc. has made no provisions for paying cash or non-cash compensation to its officers and directors. No salaries are being paid at the present time to our officers and directors and none have been paid or owed from inception to date. At present we do not have a stock incentive plan in place. We have not granted any options to our officers and directors.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following table sets forth the beneficial ownership of common stock of the Company by the officers and directors, as a group.
** Robert L. Cashman is a beneficial owner of Hallmark Holdings, Inc.
The following table sets forth the beneficial ownership of Preferred stock of the Company by the officers and directors, as a group.
** Robert L. Cashman is a beneficial owner of Hallmark Holdings, Inc.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Convertible Note Payable - Related Party
On April 17, 2017, the Company issued a convertible note to Robert Cashman (a related party) for $12,500 of cash consideration. The note bears interest at 10%, matures on April 17, 2018, and is convertible into common stock at 50% of the average bid price of the stock during the 30 days prior to the conversion. The Company recorded a debt discount equal to $12,500 due to this conversion feature and amortized $4,658 during the year ended August 31, 2017, with a remaining debt discount of $7,842 amortized during the year ended August 31, 2018. The note was repaid during the fiscal year ended August 31, 2018.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.0005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.
Office Lease
Our principal executive offices are located in 600 square feet in a building at 18482 Park Villa Place, Villa Park, California 92861. The space is furnished by Robert L. Cashman, a related party, at no charge.
Preferred Stock Issued for Services
On July 25, 2017, the Articles of Incorporation were amended to increase the voting rights of preferred shares to 100,000 votes per share. The Series A share amendments valued according to the additional voting rights and dividend rights assigned. The value assigned to the dividend rights was derived from a model utilizing future economic value of the dividends and was $0 which was recorded on the grant date as stock-based compensation. The value assigned to the voting rights was derived from a model utilizing control premiums to value the voting control of the preferred stock and was $54,000 which was recorded on the grant date as stock-based compensation.
On December 4, 2017, the Company granted 50,000 additional Series A Preferred Stock shares to Robert Cashman, a related party. The value assigned to the new shares was derived from a model utilizing control premiums to value the voting control of the preferred stock and was $1,000 which was recorded on the grant date as stock-based compensation.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
Audit Fees. The aggregate fees billed by M&K CPAS, PLLC for professional services rendered for the audit of our annual financial statements included in our Annual Report on Form 10-K and the reviews of the financial statements included in our quarterly reports on Form 10-Q totaled $39,000 for the fiscal year ended August 31, 2018, and $33,000 for the fiscal year ended August 31, 2017.
Audit-Related Fees. The aggregate fees billed by our independent accounting firm related to assurance and related services totaled $0 for the fiscal year ended August 31, 2018, and $0 for the fiscal year ended August 31, 2017.
Tax Fees. The aggregate fees billed by our independent accounting firm for professional services rendered for tax compliance, tax advice and tax planning totaled $0 for the fiscal years ended August 31, 2018 and 2017.
All Other Fees. The aggregate of all other fees for services provided by our independent accounting firm were $0 for the fiscal year ended August 31, 2018 and $0 for the fiscal year ended August 31, 2017.
PART IV
ITEM 15.
ITEM 15. EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES.
The following documents are filed as part of this report:
1. Consolidated Financial Statements
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
2. Consolidated Financial Statement Schedules
None.
3. Exhibits
3.1
Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Company's registration statement on Form S-1 filed on November 29, 2011).
3.2
Bylaws (incorporated by reference to Exhibit 3.1 to the Company's registration statement on Form S-1 filed on November 29, 2011).
10.3
Agreement Between Trade Leasing and Service Team Inc. filed on Form 8-K June 15, 2013
31.1
Certification of Principal Executive Officer pursuant to Rule 13a-14(a).*
31.2
Certification of Principal Financial Officer pursuant to Rule 13a-14(a).*
32.1
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350.*
32.2
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350.*
Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets at August 31, 2018 and August 31, 2017, (ii) the Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended August 31, 2018 and 2017, (iii) the Consolidated Statements of Stockholders' Equity for the years ended August 31, 2018 and 2017, (iv) Consolidated Statements of Cash Flows for the years ended August 31, 2018 and 2017 and (v) the notes to the Consolidated Financial Statements. *
* Filed herewith.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURE
TITLE
DATE
/s/ Robert L. Cashman
President, Chief Executive Officer
November 30, 2018
(principal executive officer)
/s/ Robert L Cashman
Secretary, Chief Financial Officer, Chief Accounting Officer
November 30, 2018