Note 12 – Subsequent Events

On August 21, 2018, the Company, at the request of Prism and  Madison Partners LLC, entered into a restructuring of its business related to Yield Endurance, Inc., a wholly-owned subsidiary of the Company (“Madison” collectively with the Company, Yield, and Prism the “Parties”). As a result, the Company entered into an agreement to convey to Madison its ownership interest in Yield, including the right to continue the business and affairs of Yield stemming from the March 2018 bitcoin transaction in which the Company sought to enter into bitcoin and other cryptocurrency lending arrangements (the “Restructuring Agreement”). Accordingly, the Restructuring Agreement amends certain terms of the Note Purchase Agreement (the “NPA”), the Confidential BTC Lending Program Participation Agreement (the “BTC Agreement”), the Account Control Agreement, the Subordination Agreement, and the Guaranty Agreement (collectively the “Former Agreements”) releasing the Company from such agreements and permitting Yield to continue in such business. Each of the Former Agreements was entered into by certain of the Parties to the Restructuring Agreement as disclosed in the Company’s Form 8-K filed with the Securities and Exchange Commission on March 14, 2018.

Pursuant to the terms of the Restructuring Agreement, the Parties agreed to modify the terms of the Former Agreements by (a) assigning to Madison all of the capital stock of Yield to provide for the continuation of the business of Yield as a subsidiary of Madison, (b) terminating the Guaranty Agreement by and between the Company and Prism, and (c) canceling 15,000,000 of the 25,000,000 warrants issued to Prism in connection with the NPA. On the Effective Date, the Company transferred its capital stock of Yield to Madison (the “Transfer”) and terminated the Guaranty Agreement, thus, the Company’s liability for the Senior Note, issued pursuant to the NPA, was extinguished upon the Transfer.

In connection with the Restructuring Agreement, the Company entered into a Securities Purchase Agreement (the “SPA”) with Madison pursuant to which the Company transferred to Madison all of the capital stock of Yield. Further, the Parties released each other from claims with respect to the original purchase of bitcoin and the Former Agreements. No payments under the BTC Agreement will be required to be made to the Company.

On October 22, 2018, the Company entered into an Exchange Agreement (the “Agreement”) with the Holders of the Company’s outstanding Secured Promissory Notes, 803,969.73 shares of Series B Convertible Preferred Stock, and 12,054,405 of the Company’s outstanding Warrants (collectively the “Securities”). In exchange for the cancellation of the Securities the Company issued the Holders a total of 2,846,356 shares of the Company’s new Series E Convertible Preferred Stock (the “Series E”).

Each share of Series E has a stated value of $0.99 and is convertible into shares of the Company’s common stock at a conversion price of $0.03 per share (subject to adjustments for stock splits, stock dividends, stock combinations, recapitalizations and similar events). The Series E contains price protection from future issuances of securities by the Company at a price below the conversion price then in effect and is redeemable upon the occurrence of certain triggering events.

On October 29, 2018, the Board of Directors of the Company concluded that the Company’s previously issued financial statements, contained within the Company’s quarterly report on Form 10-Q for the period ended May 31, 2018 should no longer be relied upon. The Financial Statements erroneously calculated the Company’s warrant derivative liability. The Company plans to amend and restate the Financial Statements to account for the Company’s error as soon as practicable. The Company’s management discussed the matters with the Company’s independent registered accounting firm.

On November 28, 2018, the Company repurchased 27,271,500 shares of the Company’s common stock (the “Shares”) from two shareholders in a series of private transactions. The Shares were repurchased by the Company for the par value of the Shares or a total of $27,271. Prior to the repurchase the Shares represented approximately 34% of the Company’s outstanding common stock.

On December 13, 2018, the Board of Directors (the “Board”) of the Company elected Michael Young to serve as Chairman of the Board, effective upon the filing of the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2018.

Mr. Young will receive $25,000 in annual compensation for his services as a director and Chairman. In connection with his appointment Mr. Young has also received five-year options to purchase 500,000 shares of the Company’s common stock (the “Options”) at the exercise price of $0.26 per share. The Options will vest in four quarterly installments over a one-year period starting on January 1, 2019.

In December 2018, Mr. Young also acquired 12 million shares of the Company’s common stock pursuant to a securities purchase agreement with David Lelong, the Chief Executive Officer and director of the Company, for a total purchase price of $120,000.

In December 2018 the Company closed on a private placement where it received proceeds of approximately $2.8 million before fees from the sale of units of common stock and warrants. In connection with the private placement the Company authorized the issuance of a total of 37,066,668 units where each unit consisted of one share of common stock and a warrant to purchase one half of a share of common stock. At December 20, 2018, a total of 35,599,987 of these shares have been issued.

In December 2018 the Company acquired a minority interest in TruPet, a limited liability company that provides nutritional food, supplements, and pet care products for dogs, cats, and horses.

We evaluated subsequent events after the balance sheet date through the date the financial statements were issued. We did not identify any additional material events or transactions occurring during this subsequent event reporting period that required further recognition or disclosure in these financial statements.