UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K


ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended August 31, 2017
 
Commission file number: 333-178210
 
SERVICE TEAM INC.
(Exact name of registrant as specified in its charter)
 
 
 
 
Nevada
 
61-1653214
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
  18482 Park Villa Place, Villa Park, California
 
  92861
(Address of principal executive offices)
 
(Zip Code)
 
 
 
Registrant's telephone number, including area code: 714-538-5214
 
Securities registered pursuant to Section 12(b) of the Act:  None          
 
Securities registered pursuant to Section 12(g) of the Act:  Common Stock, par value $0.001 per share
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes    No 
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15 (d) of the Act.
Yes    No 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No  
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes   No 
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer  
Accelerated filer  
Non-accelerated filer       (Do not check if a smaller reporting company)
Smaller reporting company 
Emerging growth company   ☐  
 
If  an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes   No 
 
The aggregate market value of the registrant's common stock held by non-affiliates as of November 24, 2017 by the Over-the-Counter Bulletin Board (the "OTC Bulletin Board")   
 
As of November 24, 2017, there were 4,081,950,030 shares of the registrant's common stock, par value $0.001 per share, outstanding.
 

 
 
Table of Contents
 

PART I
ITEM 1.
 BUSINESS
4
ITEM 1A.
 RISK FACTORS
5
ITEM 1B.
 UNRESOLVED STAFF COMMENTS
5
ITEM 2.
 PROPERTIES
5
ITEM 3.
 LEGAL PROCEEDINGS
5
ITEM 4.
 MINE SAFETY DISCLOSURES
5

PART II

 
ITEM 5.
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
6
ITEM 6.
SELECTED FINANCIAL DATA
7
ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
8
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
8
ITEM 8.
CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
8
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
41
ITEM 9A.
CONTROLS AND PROCEDURES
41
ITEM 9B.
OTHER INFORMATION
42

 
PART  III

ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
43
ITEM 11.
EXECUTIVE COMPENSATION
44
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
 43
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
43
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
47

PART IV

ITEM 15.
 EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
48

SIGNATURES
49

 
 
2




CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
Information contained in this annual report contains "forward-looking statements" as defined by the Private Securities Litigation Reform Act of 1995.  These forward-looking statements are contained principally in the sections titled "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business," and are generally identifiable by use of the words "may," "will," "should," "expect," "anticipate," "estimate," "believe," "intend" or "project" or the negative of these words or other variations on these words or comparable terminology.   As used herein, "we," "us," "our" and the "Company" refers to Service Team Inc. and no subsidiaries.
 
The forward-looking statements herein represent our expectations, beliefs, plans, intentions or strategies concerning future events, including, but not limited to: our future financial performance; the continuation of historical trends; the sufficiency of our cash balances for future needs; our future operations; our sales and revenue levels and gross margins, costs and expenses; the relative cost of our operation as compared to our competitors; new product introduction, entry and expansion into new markets and utilization of new sales channels and sales agents; improvements in, and the relative quality of, our technologies and the ability of our competitors to copy such technologies; our competitive technological advantages over our competitors; brand image, customer loyalty and expanding our client base; the sufficiency of our resources in funding our operations; and our liquidity and capital needs.
 
Our forward-looking statements are based on our current expectations and beliefs concerning future developments, and there can be no assurance that any projections or other expectations included in any forward-looking statements will come to pass.  Moreover, our forward-looking statements are subject to various known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. 
 
Except as required by applicable laws, we undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

 

3

PART I

 
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.


4

 
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. UNRESOLVED STAFF COMMENTS

Not Applicable.
 
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.  LEGAL PROCEEDINGS

None.
 
ITEM 4.  MINE SAFETY DISCLOSURES

Not Applicable.
 


 
5


 

PART II
 
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, 2017, there were 177 active shareholders and the total shares outstanding of 2,319,879,587. The transfer agent for our common stock is  Pacific Stock Transfer 4045 South Spencer Street, Suite 403, 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. 

 
Fiscal Year Ended August 31, 2016
 
High
   
Low
 
Fourth Quarter
 
$
0.0016
   
$
0.0015
 
Third Quarter
 
$
0.0054
   
$
0.0005
 
Second Quarter
 
$
0.0011
   
$
0.0008
 
First Quarter
 
$
0.0238
   
$
0.0002
 

Fiscal Year Ended August 31, 2017 
 
High
   
Low
 
Fourth Quarter
 
$
0.0002
   
$
0.0001
 
Third Quarter
 
$
0.0003
   
$
0.0002
 
Second Quarter
 
$
0.0007
   
$
0.0006
 
First Quarter
 
$
0.0025
   
$
0.0022
 

 
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.
  
 
6

 
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.
 
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.  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.
 
 
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 $3,673,673 for the fiscal year ended August 31, 2017, compared to $3,030,734 during the fiscal year ended August 31, 2016, an increase of $642,939.  This represents an increase of twenty-one percent.     All of the sales are generated by Trade Leasing, Inc. The Service Products Division had no sales.   Cost of sales increased $424,850 from $2,525,865 to $2,950,715 from 2016 to 2017 which was due to increase in volume of production in the year 2017.   Gross margin increased by $218,089 from $504,869 to $722,958 from 2016 to 2017 primarily due to the improvements in manufacturing during 2017.  Operating and other expenses increased by $26,604 from $635,651 to $790,213 from 2016 to 2017 primarily due to lower stock based compensation expense.  Interest and other expenses increased by $103,032 from $326,693 to $429,725 from 2016 to 2017 primarily due to higher debt balances during 2017.  The above changes resulted in net loss of $496,980 during the 2017 fiscal year compared to a net loss of $457,475 during the 2016 fiscal year.  The losses in 2016 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, 2017, we had total assets of $587,206 including current assets of $419,397.   We also have current and total liabilities of $365,543 which consist of related party convertible notes of $7,842, third party convertible notes of $110,995, accrued interest of $0, other accrued expenses of $131,708, and accounts payable of $114,998.  There is no firm date which the related party convertible note is to be  paid. It is to be repaid when we have funds available.   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.  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.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Our consolidated financial statements for the fiscal years ended August 31, 2017 and 2016 are attached hereto.

 


8

TABLE OF CONTENTS


 
 
 
Page
Financial Statements
 
 
Report of Independent Registered Public Accounting Firm
 F-2
 
Consolidated Balance Sheets as of August 31, 2017 and 2016
F-3
 
Consolidated Statements of Operations for the years ended August 31, 2017 and 2016
F-4
 
Consolidated Statements of Shareholders' Deficit for the years ended August 31, 2017 and 2016
F-5
 
Consolidated Statements of Cash Flows for the years ended August 31, 2017 and 2016
F-6
 
Notes to Consolidated Financial Statements  
F-7



 


 

9

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



 
To the Board of Directors
Service Team Inc.
 
We have audited the accompanying consolidated balance sheets of Service Team Inc. as of August 31, 2017 and 2016, and the related consolidated statements of operations, changes in shareholders' deficit, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Service Team Inc. as of August 31, 2017 and 2016, and the results of its operations, changes in shareholders' deficit and cash flows for the period described above in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations, which raises substantial doubt about its ability to continue as a going concern.  Management's plans regarding those matters also are 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
www.mkacpas.com
Houston, Texas
December 6, 2017




10



 

SERVICE TEAM INC
 
CONSOLIDATED BALANCE SHEETS
 
AS OF AUGUST 31, 2017 AND AUGUST 31, 2016
 



 
 
2017
   
2016
 
ASSETS
           
Cash
 
$
80,810
   
$
321,728
 
Accounts receivable, net
   
338,569
     
222,423
 
Other current assets
   
0
     
40,000
 
Total current assets
   
419,379
     
584,151
 
 
               
Property and equipment, net
   
153,827
     
53,781
 
Prepaid expenses – non-current
   
14,000
     
14,000
 
 
               
TOTAL ASSETS
 
$
587,206
   
$
651,932
 
 
               
LIABILITIES & SHAREHOLDERS' (DEFICIT)
               
Accounts payable
 
$
114,998
   
$
137,998
 
Convertible notes payable – related party, net
   
7,842
     
6,768
 
Convertible notes payable, net
   
110,995
     
34,040
 
Promissory note payable, net
   
-
     
246,387
 
Accrued expenses
   
101,485
     
104,649
 
Accrued interest
   
30,223
     
18,261
 
TOTAL LIABILITIES
   
365,543
     
548,103
 
                 
Common stock, $0.001 par value, 20,000,000,000 authorized, 2,319,879,587 and 168,671,089 issued and outstanding as of August 31, 2017 and 2016, respectively
   
2,319,880
     
168,671
 
Preferred stock
   
100
     
100
 
Stock payable
   
4,742
     
-
 
Additional paid in capital
   
598,737
     
2,139,874
 
Accumulated deficit
   
(2,701,796
)
   
(2,204,816
)
TOTAL SHAREHOLDERS' EQUITY (DEFICIT)
   
221,663
     
103,829
 
 
               
TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT)
 
$
587,206
   
$
651,932
 
 
               


The accompanying notes are an integral part of these consolidated financial statements.




11

SERVICE TEAM INC.
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE FISCAL
YEARS ENDING AUGUST 31, 2017 AND 2016


 
 
2017
   
2016
 
 
           
REVENUES
 
$
3,673,673
   
$
3,030,734
 
 
               
COST OF SALES
   
2,950,715
     
2,525,865
 
 
               
GROSS MARGIN
   
722,958
     
504,869
 
 
               
OPERATING EXPENSES
               
General & administrative
   
781,715
     
586,452
 
Depreciation expense
   
8,498
     
6,699
 
Bad debts
   
-
     
42,500
 
TOTAL OPERATING EXPENSES
   
790,213
     
635,651
 
 
               
OPERATING INCOME (LOSS)
   
(67,255
)
   
(130,782
)
 
               
OTHER INCOME (EXPENSE)
               
Interest expense
   
(429,725
)
   
(380,793
)
Gain on contingent consideration
   
-
     
54,100
 
TOTAL OTHER INCOME (EXPENSE)
   
(429,725
)
   
(326,693
)
 
               
NET LOSS
   
(496,980
)
   
(457,475
)
 
               
Weighted number of common shares outstanding – basic and diluted
   
414,378,467
     
60,099,590
 
                 
Net (loss per share – basic and diluted)
 
$
(0.00
)
 
$
(0.01
)

 
The accompanying notes are an integral part of these consolidated financial statements.

 
12

SERVICE TEAM INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS DEFICIT FOR THE YEARS
ENDED AUGUST 31, 2017 AND 2016




 
 
Common Stock
   
Preferred Stock
   
Additional
Paid In
   
Stock
   
Accumulated
       
 
 
Shares
   
Amount
   
Shares
   
Amount
   
Capital
   
Payable
   
Deficit
   
Total
 
Balance, August 31, 2015
   
13,430,624
   
$
13,431
     
100,000
   
$
100
   
$
1,612,788
   
$
-
   
$
(1,747,341
)
 
$
(99,022
)
Shares Issued for Note Conversions
   
155,240,465
     
155,240
     
-
     
-
     
144,423
     
(22,000
)
   
-
     
277,663
 
Stock Based Compensation
   
-
     
-
     
-
     
-
     
83,525
     
-
     
-
     
83,525
 
Beneficial Conversion Feature
   
-
     
-
     
-
     
-
     
299,138
     
-
     
-
     
299,138
 
Net Loss
   
-
     
-
     
-
     
-
     
-
     
-
     
(457,457
)
   
(457,457
)
Balance, August 31, 2016
   
168,671,089
   
$
168,671
     
100,000
   
$
100
   
$
2,139,874
   
$
-
   
$
(2,204,816
)
 
$
103,829
 
Shares Issued for Note Conversion
   
2,151,208,498
     
2,151,209
             
-
     
(1,943,048
)
   
4,742
     
-
     
212,902
 
Beneficial Conversion Feature
   
-
     
-
     
-
     
-
     
347,912
     
-
     
-
     
347,912
 
Stock based compensation
   
-
     
-
     
-
     
-
     
54,000
     
-
     
-
     
54,000
 
Net Loss
   
-
     
-
     
-
     
-
     
-
     
-
     
(496,980
)
   
(496,980
)
Balance, August 31, 2017
   
2,319,879,587
   
$
2,319,880
     
100,000
   
$
100
   
$
598,737
     
4,742
   
$
(2,701,796
)
 
$
221,663
 




The accompanying notes are an integral part of these consolidated financial statements.



13


 


SERVICE TEAM INC.
 
      CONSOLIDATED STATEMENTS OF CASH FLOWS
 
FOR THE FISCAL YEARS ENDED AUGUST 31, 2017 AND 2016
 

 

 
 
2017
   
2016
 
CASH FLOWS FROM OPERATING ACTIVITIES
           
Net Loss
 
$
(496,980
)
   
(457,475
)
 
               
Adjustments to reconcile net loss with cash provided by (used in) operations:
               
Stock based compensation
   
54,000
     
83,525
 
Bad debt expense
   
-
     
42,500
 
Gain on contingent consideration
   
-
     
(54,100
)
Depreciation expense
   
8,498
     
6,699
 
Amortization of deferred financing costs
   
-
     
11,986
 
Amortization of debt discount
   
351,159
     
298,286
 
 
               
Change In Operating Assets and Liabilities
               
Accounts receivable
   
116,146
     
(43,131
)
Prepaid expenses
   
40,000
     
(45,000
)
Accrued expenses
   
74,140
     
91,959
 
Accounts payable
   
(23,000
)
   
47,227
 
Net Cash Provided by (Used in) Operating Activities
   
(108,328
)
   
(17,524
)
 
               
CASH FLOWS FROM INVESTING ACTIVITIES
               
Cash paid for convertible note receivable
   
-
     
(42,500
)
Cash paid for the purchase of fixed assets
   
(108,545
)
   
(52,827
)
Net Cash Used In Operating Activities
   
(108,545
)
   
(95,327
)
 
               
CASH FLOWS FROM FINANCING ACTIVITIES
               
Proceeds from promissory note – related party
   
4,000
     
-
 
Proceeds from convertible note – related party
   
12,500
     
7,500
 
Repayments of promissory note – related party
   
(4,000
)
   
-
 
Proceeds from promissory note, net of issuance costs
   
-
     
243,750
 
Proceeds from convertible note, net of issuance costs
   
330,725
     
177,486
 
Repayments of convertible note
   
(34,770
)
   
-
 
Repayments of promissory note
   
(332,500
)
   
-
 
Net Cash Provided By (Used In) Financing Activities
   
(24,045
)
   
428,736
 
 
               
Net Increase (Decrease) In Cash and Cash Equivalents
   
(240,918
)
   
315,885
 
 
               
Cash at Beginning of Period
   
321,728
     
5,843
 
 
               
Cash at End of Period
   
80,810
     
321,728
 
 
               
Supplemental Disclosures
               
Interest Paid
   
683
     
5,472
 
Taxes Paid
   
-
     
-
 
 
               
Non-cash transactions:
               
Discount due to beneficial conversion feature
   
347,912
     
299,138
 
Convertible debt and accrued interest converted into common shares
   
205,982
     
277,663
 
Shares issued as debt discount
   
6,920
     
-
 
Shares issued for stock payable
   
-
     
22,000
 
Conversion of accrued interest into convertible debt
   
-
     
38,805
 
Conversion of accounts payable into convertible debt
   
-
     
21,500
 

The accompanying notes are an integral part of these consolidated financial statements.
 

 
14


SERVICE TEAM INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2017 AND 2016


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. 

 
 
15

 

 
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, 2017, or August 31, 2016.
  
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, 2017 and August 31, 2016.
 
Accounts Receivable and Revenue Concentrations

The Company's wholly owned subsidiary, Trade Leasing, Inc., has more than 400 customers. Three customers represented 11%, 16% and 6% of total receivables as of August 31, 2017.  Five customers represented 5%, 7%, 4%, 4% and 6% of total receivables as of August 31, 2017. Two customers represented 21%, 18% of total revenues during the year ended August 31, 2016.  Three customers represented 21%, 18% and 12% of total receivables as of August 31, 2016. 

Inventory
 
The Company does not own inventory; therefore, there was no inventory on hand at August 31, 2017 and 2016.
 
 
16


 
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 $8,498 and $6,699 during the fiscal years ended August 31, 2017 or August 31, 2016.
 
Net property and equipment were as follows at August 31, 2017 and August 31, 2016:

 
 
 
2017
   
2016
 
Equipment
 
$
351,988
   
$
243,444
 
Vehicles
   
15,000
     
15,000
 
Leasehold improvements
   
52,827
     
52,827
 
Furniture
   
1,500
     
1,500
 
Total fixed assets, gross
   
421,315
     
312,771
 
Less: accumulated depreciation
   
(267,488
)
   
(258,990
)
Total fixed assets, net
 
$
153,827
   
$
53,781
 


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, 2017, the deferred rent related to this lease was $16,333.

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.


17


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, 2017 on a recurring basis:

 
           
Total
 
 
           
Realized
 
Description
Level 1
 
Level 2
 
Level 3
 
Loss
 
Convertible note payable, related party, net
 
$
7,842
   
$
-
   
$
-
   
$
-
 
Convertible notes payable, net
   
110,995
     
-
     
-
     
-
 
Totals
 
$
118,837
   
$
-
   
$
-
   
$
-
 





18





The following table presents assets and liabilities that were measured and recognized at fair value as of August 31, 2016 on a recurring basis:

 
 
           
Total
 
 
           
Realized
 
Description
Level 1
 
Level 2
 
Level 3
 
Loss
 
Convertible notes payable, related party, net
 
$
6,768
   
$
-
   
$
-
   
$
-
 
Convertible notes payable, net
   
34,040
                         
Totals
 
$
40,808
   
$
-
   
$
-
   
$
-
 

 
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, 2017 and 2016 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.
 
 
 
19

 
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, 2017 and 2016, 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.
 
 
20


 

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, 2017, 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.
 
 
 
21


 
Share Transactions

2017

On September 1, 2016, Tangiers Investment Group LLC converted $8,257 of its Note in the amount of into 16,851,020 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

On September 14, 2016, Tangiers Investment Group LLC converted $5,937 of its Note in the amount of into 12,116,327 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

On October 18, 2016, Tangiers Investment Group LLC converted $6,869 of its Note in the amount of into 9,862,168 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

On November 8, 2016, Tangiers Investment Group LLC converted $6,523 of its Note in the amount of into 10,353,968 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

On November 10, 2016, Tangiers Investment Group LLC converted $13,710 of its Note in the amount of into 21,761,905 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

On November 21, 2016, Tangiers Investment Group LLC converted $15,000 of its Note in the amount of into 23,809,524 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
 
On December 21, 2016, Tangiers Investment Group LLC converted $4,871 of its Note in the amount of $27,500 into 10,141,347 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
 
On December 29, 2016, Tangiers Investment Group, LLC converted $4,327 of its Note in the amount of $35,934 into 8,079,514 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

On January 11, 2017, Tangiers Investment Group LLC converted $5,854 of its Note in the amount of  $35,750 into 14,055,222 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

On January 25, 2017, Tangiers Investment Group LLC converted $7,237 of its Note in the amount of $35,750 into 29,538,776 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

On January 27, 2017, Tangiers Investment Group LLC converted $5,590 of its Note in the amount of $35,750 into 22,817,633 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.
  
 
22

 
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.
 
 
23


 
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 August23, 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. 
 
 
24


 
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.

2016
 
During September 2015, Tangiers Investment Group LLC was issued 1,990,950 shares as payment for the $22,000 of subscriptions payable accrued at August 31, 2015.
 
On November 25, 2015, Tangiers Investment Group LLC converted $8,095 of its Note in the amount of into 1,541,401 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, 2016, Tangiers Investment Group LLC converted $6,190 of its Note in the amount of into 1,695,890 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 February 3, 2016, Tangiers Investment Group LLC converted $2,876 of its Note in the amount of into 2,054,286 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 February 10, 2016, Tangiers Investment Group LLC converted $3,450 of its Note in the amount of into 2,464,286 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 March 1, 2016, Tangiers Investment Group LLC converted $3,327 of its Note in the amount of into 2,376,464 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 4, 2016, Tangiers Investment Group LLC converted $3,328 of its Note in the amount of into 2,016,964 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 4, 2016, Tangiers Investment Group LLC converted $13,000 of its Note in the amount of into 5,895,692 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 5, 2016, Tangiers Investment Group LLC converted $5,000 of its Note in the amount of into 1,883,239 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.
 
 
25


 
On April 18, 2016, Tangiers Investment Group LLC converted $13,621 of its Note in the amount of into 4,656,726 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 28, 2016, Tangiers Investment Group LLC converted $12,705 of its Note in the amount of into 4,411,458 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 18, 2016, Tangiers Investment Group LLC converted $13,870 of its Note in the amount of into 5,137,037 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 9, 2016, Tangiers Investment Group LLC converted $10,250 of its Note in the amount of into 5,061,728 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 6, 2016, Tangiers Investment Group LLC converted $7,455 of its Note in the amount of into 5,344,086 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 21, 2016, Tangiers Investment Group LLC converted $9,115 of its Note in the amount of into 6,534,050 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 29, 2016, Tangiers Investment Group LLC converted $9,100 of its Note in the amount of into 7,777,778 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 4, 2016, Tangiers Investment Group LLC converted $11,524 of its Note in the amount of into 12,663,736 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 12, 2016, Tangiers Investment Group LLC converted $8,287 of its Note in the amount of into 13,927,731 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, 2016, Tangiers Investment Group LLC converted $9,115 of its Note in the amount of into 15,319,328 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 19, 2016, Vis Vires Group converted $2,365 of its Note in the amount of into 1,341,250 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 February 1, 2016, Vis Vires Group converted $2,745 of its Note in the amount of into 1,098,000 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 February 8, 2016, Vis Vires Group converted $4,695 of its Note in the amount of into 2,471,053 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.
 
 
 
26


 
On February 18, 2016, Vis Vires Group converted $4,695 of its Note in the amount of into 2,471,053 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 February 26, 2016, Vis Vires Group converted $5,435 of its Note in the amount of into 2,470,455 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 8, 2016, Vis Vires Group converted $11,075 of its Note in the amount of into 3,572,581 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, 2016, Vis Vires Group converted $3,990 of its Note in the amount of into 1,530,556 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 February 1, 2016, LG Capital converted $2,470 of its Note in the amount of into 562,340 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 February 12, 2016, LG Capital converted $2,500 of its Note in the amount of into 379,750 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 February 29, 2016, LG Capital converted $2,485 of its Note in the amount of into 718,628 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 7, 2016, LG Capital converted $3,183 of its Note in the amount of into 1,929,169 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 14, 2016, LG Capital converted $5,101 of its Note in the amount of into 2,081,987 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 29, 2016, LG Capital converted $5,214 of its Note in the amount of into 2,128,016 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 28, 2016, LG Capital converted $5,485 of its Note in the amount of into 2,238,746 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 31, 2016, LG Capital converted $5,277 of its Note in the amount of into 1,788,901 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.
 
 
 
27

 
On April 29, 2016, LG Capital converted $13,503 of its Note in the amount of into 4,154,756 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 9, 2016, LG Capital converted $13,026 of its Note in the amount of into 4,070,512 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 February 3, 2016, JMJ Financial converted $1,435 of its Note in the amount of into 1,025,000 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 February 10, 2016, JMJ Financial converted $1,728 of its Note in the amount of into 1,234,000 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 February 12, 2016, JMJ Financial converted $1,813 of its Note in the amount of into 1,295,000 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 February 16, 2016, JMJ Financial converted $2,447 of its Note in the amount of into 1,748,000 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 1, 2016, JMJ Financial converted $2,618 of its Note in the amount of into 1,870,000 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 7, 2016, JMJ Financial converted $2,912 of its Note in the amount of into 2,080,000 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 11, 2016, JMJ Financial converted $4,125 of its Note in the amount of into 2,500,000 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 17, 2016, JMJ Financial converted $7,105 of its Note in the amount of into 2,900,000 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 March 23, 2016, JMJ Financial converted $6,928 of its Note in the amount of into 2,827,882 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, 2016, $299,138 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, 2017, the Company has not granted any stock options.
 
During 2016 and 2017 the Company did not sell any Common Shares.  The only shares issued were for Conversion of Notes.
 
 
28

 
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, 2017, the Company has not granted any stock options.
   
NOTE 4 – DEBT TRANSACTIONS
 
Promissory Note Payable – Related Party
 
On December 16, 2016, the Company issued a promissory note to U.S. Affiliated, Inc.  (a related party) 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.

Convertible Notes Payable – Related Party

R.L. Cashman

On April 17, 2017, the Company issued a convertible note to Robert Cashman (a related party) for $12,500 of cash consideration.  The note bears interest at 10%, matures on April 17, 2018, and is convertible into common stock at 50% of the average bid price of the stock during the 30 days prior to the conversion. The Company recorded a debt discount equal to $12,500 due to this conversion feature and amortized $4,658 during the year ended August 31, 2017, with a remaining debt discount balance of $7,842 as of August 31, 2017.

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.
US Affiliated
On July 31, 2014, the Company issued a convertible note to Hallmark Venture Group  Inc. (a related party) for $18,003 of cash consideration. On September 31, 2014, Hallmark Venture Group Inc. sold the note to   U S Affiliated Inc. (a related party). The note bears interest at 6%, matures on July 31, 2015, and is convertible into common stock at 50% of the closing market price of the lowest 3 trading days during the previous 25 trading days prior to conversion. The Company recorded a debt discount equal to $18,003 due to this conversion feature. The note was amended during July 2015 to mature on February 29, 2016.  During the period ended August 31, 2016, the note was sold to Tangiers and $13,572 of accrued interest was added to the note principal balance bringing the new principal balance up to $31,575.  As there was an updated conversion feature on the new note, the discount of $31,575 was recorded with the offset to additional paid in capital.  The debt discount was fully amoritzed during the period ended August 31, 2016 as a result of the conversions of the note by Tangiers. The note had accrued interest of $0 and $1,170 as of August 31, 2016 and August 31, 2015, respectively.   The debt discount had a balance at August 31, 2016 and August 31, 2015 was $0 and $0, respectively. During the year ended August 31, 2016 the holder of the note converted $31,575 of the note and interest to common stock with a remaining balance of $1,904 which the Company repaid in cash during the same period thus repaying the note in full.
 
 
 
29


 
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.
 
On July 31, 2014, the Company issued a convertible note to Hallmark Venture Group Inc. (a related party) for $14,315 of cash consideration. On September 30, 2014, Hallmark Venture Group Inc. sold the note to U S Affiliated Inc. (a related party).  The note bears interest at 6%, matures on July 31, 2015, and is convertible into common stock at 50% of the closing market price of the lowest 3 trading days during the previous 25 trading days prior to conversion. The Company recorded a debt discount equal to $14,315 due to this conversion feature. The note was amended during July 2015 to mature on February 29, 2016.  During the year ended August 31, 2016, the note was sold to Tangiers and $10,799 of accrued interest was added to the note principal balance bringing the new principal balance up to $25,114.  As there was an updated conversion feature on the new note, the discount of $25,114 was recorded with the offset to additional paid in capital.  The debt discount was fully amortized during the year ended August 31, 2016 as a result of the conversions of the note by Tangiers. The note had accrued interest of $0 and $930 as of August 31, 2016 and August 31, 2015, respectively.  The debt discount had a balance at August 31, 2016 and August 31, 2015 of $0 and $0, respectively.  During the year ended August 31, 2016 the holder of the note converted $25,114 of the note and interest to common stock thus repaying the note in full.
 
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.
 
On May 12, 2016, the Company issued a convertible note to U.S. Affiliated, Inc.  (a related party) 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.

Convertible Notes Payable – Third Party
 
Vis Veres Group

 
On July 2, 2015, the Company issued a convertible note to Vis Veres Group for $38,000 of cash consideration.  The note bears interest at 8%, matures on April 7, 2016, 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 $35,000 due to this conversion feature. The Company also recorded a $3,000 debt discount due to accrued interest required by the agreement to be accrued at the beginning of the note. The note had accrued interest of $0 and $500 as of August 31, 2016 and August 31, 2015, respectively.  During the year ended August 31, 2016, Vis Veres Group had converted the note into common shares within the terms of the agreement, therefore, there was no gain or loss recognized as a result of these conversions. The debt discounts had a balance at August 31, 2016 and August 31, 2015 of $0 and $29,857, respectively. The Company recorded debt discount amortization expense of $29,857 and $8,143 during the year ended August 31, 2016 and the year ended August 31, 2015, respectively.   As the note has been fully converted, it is considered paid in full as of August 31, 2016.
 
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.


30



 
JMJ Financial Group
On July 21, 2015, the Company issued a convertible note to JMJ Financial Group for $27,778 of cash consideration.  The note bears interest at 12%, matures on July 21, 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 $22,500 due to this conversion feature. The Company also recorded a $5,278 debt discount due to accrued interest required by the agreement to be accrued at the beginning of the note. The note had accrued interest of $0 and $374 as of August 31, 2016 and August 31, 2015, respectively.  During the year ended August 31, 2016, JMJ Financial had converted  the note into common shares within the terms of the agreement, therefore, there was no gain or loss recognized as a result of these conversions. The debt discounts had a balance at August 31, 2016 and August 31, 2015 of $0 and $24,667, respectively. The Company recorded debt discount amortization expense of $24,667 and $3,111 during the year ended August 31, 2016 and the year ended August 31, 2015, respectively.   As the note has been fully converted, it is considered paid in full as of August 31, 2016.

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 28, 2017, the Company issued a convertible note to JMJ Financial Group for $55,000 of cash consideration.  The note bears interest at 12%, matures on April 28, 2018, and is convertible into common stock at 50% of the lowest 3 closing market prices of the previous 20 trading days prior to conversion. The Company recorded a debt discount equal to $37,080 due to this conversion feature. The Company also recorded a $6,000 and $11,920 debt discounts due to accrued interest and origination fees required by the agreement to be accrued at the beginning of the note. The note had accrued interest of $2,260 as of August 31, 2017.  The debt discounts had a balance at August 31, 2017 of $36,164. The Company recorded debt discount amortization expense of $18,836 during the year ended August 31, 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.
 
LG Capital Funding, LLC
On July 15, 2015, the Company issued a convertible note to LG Capital Funding LLC for $26,500 of cash consideration.  The note bears interest at 8%, matures on July 15, 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 $25,000 due to this conversion feature. The Company also recorded a $1,500 debt discount due to accrued interest required by the agreement to be accrued at the beginning of the note. The note had accrued interest of $0 and $273 as of August 31, 2016 and August 31, 2015, respectively.  During the year ended August 31, 2016, LG Capital converted the note into common shares within the terms of the agreement, therefore, there was no gain or loss recognized as a result of these conversions. The debt discounts had a balance at August 31, 2016 and August 31, 2015 of $0 and $23,097, respectively. The Company recorded debt discount amortization expense of $23,097 and $3,403 during the year ended August 31, 2016 and the year ended August 31, 2015, respectively.   As the note has been fully converted, it is considered paid in full as of August 31, 2016.
 
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.
 
 
31

 
On April 10, 2016, the Company issued a convertible note to LG Capital Funding LLC for $26,500 of cash consideration.  The note bears interest at 8%, matures on July 15, 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 $25,000 due to this conversion feature. The Company also recorded a $1,500 debt discount due to accrued interest required by the agreement to be accrued at the beginning of the note. The note had accrued interest of $0 and $0 as of August 31, 2016 and August 31, 2015, respectively.  During the year ended August 31, 2016, LG Capital converted the note into common shares within the terms of the agreement, therefore, there was no gain or loss recognized as a result of these conversions. The debt discounts had a balance at August 31, 2016 and August 31, 2015 of $0 and $0, respectively. The Company recorded debt discount amortization expense of $26,500 and $0 during the year ended August 31, 2016 and the year ended August 31, 2015, respectively.   As the note has been fully converted, it is considered paid in full as of August 31, 2016.

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 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.  The debt discounts had a balance at August 31, 2017 of $9,589.  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 Company recorded debt discount amortization expense of $18,411 during the year ended August 31, 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.

Tangiers Capital Group
On February 5, 2015, the Company issued a convertible note to Tangiers Capital Group for $55,000 of cash consideration.  The note bears interest at 10%, matures on February 5, 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 $22,000 due to this conversion feature. The Company also recorded a $5,000 debt discount due to issuance fees. The note had accrued interest of $0 and $3,119 as of August 31, 2016 and August 31, 2015, respectively.  During the year ended August 31, 2016, Tangiers Capital had converted the note into common shares within the terms of the agreement, therefore, there was no gain or loss recognized as a result of these conversions.  $22,000 of the conversion was recorded as subscription payable at August 31, 2015, and then the shares were subsequently issued during 2016. The debt discounts had a balance at August 31, 2016 and August 31, 2015 of $0 and $7,656, respectively. The Company recorded debt discount amortization expense of $7,656 and $19,344 during the year ended August 31, 2016 and the year ended August 31, 2015, respectively.  As the note has been fully converted, it is considered paid in full as of August 31, 2016.
 
 
32


 
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 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.
 
 
33

 
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 $10,890 and $3,850 as of August 31, 2017 and 2016.  The debt discounts had a balance at August 31, 2017 and August 31, 2016 of $0 and $30,167, respectively. The Company recorded debt discount amortization expense of $30,167 and $8,333 during the year ended August 31, 2017 and the year ended August 31, 2016, respectively.  During the year ended August 31, 2017, $33,518 or principal and $4,220 of accrued interest 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 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 $8,401 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 $24,185, 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.

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 for $34,993  for  a 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.  The debt discounts had a balance at August 31, 2017 of $25,118. The Company recorded debt discount amortization expense of $9,875 during the year ended August 31, 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.

 
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.
 
 
34


 
  
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.   The debt discounts had a balance at August 31, 2017 of $13,041.    The Company recorded debt discount amortization expense of $29,459 during the year ended August 31, 2017. During the year ended August 31, 2017, $10,954 of principal and $13,502 of interest were 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.   The debt discounts had a balance at August 31, 2017 of $49,777.    The Company recorded debt discount amortization expense of $13,973 during the year ended August 31, 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.

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.   The debt discounts had a balance at August 31, 2017 of $18,301.  The Company recorded debt discount amortization expense of $21,699 during the year ended August 31, 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 June 13, 2017, the Company issued a convertible note to Crossover Capital Fund, LLC for $41,000 of cash consideration.  The note bears interest at 10%, matures on June 13, 2018, and is convertible into common stock at 50% of the lowest 3 closing market prices of the previous 20 trading days prior to conversion. The Company recorded a debt discount equal to $41,000 due to this conversion feature. The note had accrued interest of $887 as of August 31, 2017.   The debt discounts had a balance at August 31 2017 of $32,126.    The Company recorded debt discount amortization expense of $8,874 during the year ended August 31, 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 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.   The debt discounts had a balance at August 31 2017 of $35,836.    The Company recorded debt discount amortization expense of $4,164 during the year ended August 31, 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.

 
35


 
Robert Knudsen
On December 2, 2015, the Company issued a convertible note to Robert Knudsen for $21,500 of accounts payable that was converted into this convertible note.  The note bears interest at 12% and is due on demand, and is convertible into common stock at 45% of the lowest trading bid price during the 30 days prior to conversion. The Company recorded a debt discount equal to $21,500 due to this conversion feature. The note had accrued interest of $0 as of August 31, 2016.  The debt discounts had a balance at August 31, 2016 and August 31, 2015 of $0 and $0, respectively. The Company recorded debt discount amortization expense of $21,500 and $0 during the year ended August 31, 2016 and the year ended August 31, 2015, respectively.

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.
 
NOTE 5 - RELATED PARTY TRANSACTIONS
 
Promissory Note Payable – Related Party
 
On December 16, 2016, the Company issued a promissory note to U.S. Affiliated, Inc.  (a related party) 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.
 
Convertible Note Receivable – Related Party
 
During the fiscal year ended August 31, 2016, the Company advanced cash of $42,500 in the form of notes receivable to Hallmark Venture Group, Inc., which is a Company formerly controlled by the CEO and President of Service Team, Inc.  Amounts were advanced as follows: $7,500 on April 7, 2016, $5,000 on April 12, 2016, $25,000 on May 12, 2016, and $5,000 on August 22, 2016.  Each loan amount is due to be paid back after the maturity date of 1 year has passed.   The amounts loaned are convertible into shares of Hallmark Venture Group at the rate of 45% times the market price which is defined as the lowest three closing bids for the common stock during the three-trading day period ending one trading day prior to the date of the conversion notice. As Hallmark Venture Group did not have the funds to repay the amounts nor the credit worthiness to ensure repayment in accordance with the terms of the notes receivable, the Company fully reserved the note receivable with a $42,500 charge to the allowance for doubtful accounts resulting in a net zero balance for the convertible note receivable as of August 31, 2016.
 
 
36


 
Convertible Notes Payable – Related Party
 
R.L. Cashman

On April 17, 2017, the Company issued a convertible note to Robert Cashman (a related party) for $12,500 of cash consideration.  The note bears interest at 10%, matures on April 17, 2018, and is convertible into common stock at 50% of the average bid price of the stock during the 30 days prior to the conversion. The Company recorded a debt discount equal to $12,500 due to this conversion feature and amortized $4,658 during the year ended August 31, 2017, with a remaining debt discount balance of $7,842 as of August 31, 2017.
 
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.
US Affiliated
On July 31, 2014, the Company issued a convertible note to Hallmark Venture Group  Inc. (a related party) for $18,003 of cash consideration. On September 31, 2014, Hallmark Venture Group Inc. sold the note to   U S Affiliated Inc. (a related party). The note bears interest at 6%, matures on July 31, 2015, and is convertible into common stock at 50% of the closing market price of the lowest 3 trading days during the previous 25 trading days prior to conversion. The Company recorded a debt discount equal to $18,003 due to this conversion feature. The note was amended during July 2015 to mature on February 29, 2016.  During the period ended August 31, 2016, the note was sold to Tangiers and $13,572 of accrued interest was added to the note principal balance bringing the new principal balance up to $31,575.  As there was an updated conversion feature on the new note, the discount of $31,575 was recorded with the offset to additional paid in capital.  The debt discount was fully amortized during the period ended August 31, 2016 as a result of the conversions of the note by Tangiers. The note had accrued interest of $0 and $1,170 as of August 31, 2016 and August 31, 2015, respectively.   The debt discount had a balance at August 31, 2016 and August 31, 2015 was $0 and $0, respectively. During the year ended August 31, 2016 the holder of the note converted $31,575 of the note and interest to common stock with a remaining balance of $1,904 which the Company repaid in cash during the same period thus repaying the note in full.

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.

On July 31, 2014, the Company issued a convertible note to Hallmark Venture Group Inc. (a related party) for $14,315 of cash consideration. On September 30, 2014, Hallmark Venture Group Inc. sold the note to U S Affiliated Inc. (a related party).  The note bears interest at 6%, matures on July 31, 2015, and is convertible into common stock at 50% of the closing market price of the lowest 3 trading days during the previous 25 trading days prior to conversion. The Company recorded a debt discount equal to $14,315 due to this conversion feature. The note was amended during July 2015 to mature on February 29, 2016.  During the year ended August 31, 2016, the note was sold to Tangiers and $10,799 of accrued interest was added to the note principal balance bringing the new principal balance up to $25,114.  As there was an updated conversion feature on the new note, the discount of $25,114 was recorded with the offset to additional paid in capital.  The debt discount was fully amortized during the year ended August 31, 2016 as a result of the conversions of the note by Tangiers. The note had accrued interest of $0 and $930 as of August 31, 2016 and August 31, 2015, respectively.  The debt discount had a balance at August 31, 2016 and August 31, 2015 of $0 and $0, respectively.  During the year ended August 31, 2016 the holder of the note converted $25,114 of the note and interest to common stock thus repaying the note in full.
 
 
37


 
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.
 
On May 12, 2016, the Company issued a convertible note to U.S. Affiliated, Inc.  (a related party) 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.
 
Preferred Stock Issued for Services
 
On October 16, 2015, the Designation of Preferred Stock for the Series A shares 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 Series A 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 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.
 
Lease Commitments
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 6 – CONVERTIBLE NOTES RECEIVABLE
 
During the fiscal year ended August 31, 2016, the Company advanced cash of $42,500 in the form of notes receivable to Hallmark Venture Group, Inc., which is a Company formerly controlled by the CEO and President of Service Team, Inc.  Amounts were advanced as follows: $7,500 on April 7, 2016, $5,000 on April 12, 2016, $25,000 on May 12, 2016, and $5,000 on August 22, 2016.  Each loan amount is due to be paid back after the maturity date of 1 year has passed.   The amounts loaned are convertible into shares of Hallmark Venture Group at the rate of 45% times the market price which is defined as the lowest three closing bids for the common stock during the three-trading day period ending one trading day prior to the date of the conversion notice. As Hallmark Venture Group did not have the funds to repay the amounts nor the credit worthiness to ensure repayment in accordance with the terms of the notes receivable, the Company fully reserved the note receivable with a $42,500 charge to the allowance for doubtful accounts resulting in a net zero balance for the convertible note receivable as of August 31, 2016.
 
 
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NOTE 7 – 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 $826,428 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, 2017 and August 31, 2016:

 
 
2017
   
2016
 
 Net tax loss carry-forwards
 
$
826,428
   
$
734,607
 
 Statutory rate    
   
34
%
   
34
%
 Expected tax recovery
   
280,986
     
249,766
 
 Change in valuation allowance
   
(280,986
)
   
(249,766
)
 Income tax provision
 
$
-
   
$
-
 
 
               
 Components of deferred tax asset:
               
 Non capital tax loss carry forwards 
 
$
280,986
   
$
249,766
 
 Less: valuation allowance   
   
(280,986
)
   
(249,766
)
 Net deferred tax asset 
 
$
-
   
$
-
 

 
NOTE 8 – 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, 2016, the deferred rent related to this lease was $20,333.
 
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.
 
 
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NOTE 9 – SUBSEQUENT EVENTS

On September 1, 2016, Crown Bridge Partners LLC converted $4,741.56 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 7, 2016, Crossover Capital LLC converted $5,150.00 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 $5,445.81 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 7, 2016, Crossover Capital LLC converted $5,150.00 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 October 5, 2017, Crossover Capital LLC converted $7,100.00 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 October 6, 2017, Crown Bridge Partners LLC converted $6,501.15 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 November 2, 2017, LG Capital Funding LLC Converted $6,300.00 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 $8,250.00 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 November 14,2017, Tangiers Investment Group, LLC converted $13,062.25 of its Note Dated 6-13-16 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 15,2017, Crossover Capital LLC converted $7,910.00 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 15,2017, Crown Bridge Partners LLC converted $7,538.03 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 10, 2017, Service Team Inc issued a 12% Convertible Promissory Note payable to Tangiers Investment Group LLC (the "Investor") in the principal amount of $115,000. 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.
 
 
40

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.  
 
None.

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, 2017.

Based on this evaluation, these officers concluded that, as of August 31, 2017, 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 in accordance with authorizations of management and directors of the issuer.
 
 
 
41

 
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, 2017 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, 2017.

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, 2017, 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, 2017, 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. OTHER INFORMATION.
 
None.

42


PART III

 
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).
 
 
43

 
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.  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.
 
 
44

 
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.  
 
Present Ownership
 
Common Shares
   
Percent of Total
Outstanding
 
Hallmark Holdings Inc.**
   
1,000,000
     
0.006
%
TOTAL  OFFICERS, DIRECTORS AND CONTROL PERSONS
   
1,000,000
     
0.006
%
 
** 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.   

Present Ownership
 
Preferred Shares
   
Percent of Total
Outstanding
 
Hallmark Holdings Inc.**
   
100,000
     
100
%
TOTAL  OFFICERS, DIRECTORS AND CONTROL PERSONS
   
100,000
     
100
%

** Robert L. Cashman is a beneficial owner of Hallmark Holdings, Inc.
 
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
 
Transactions with Related Persons.
Robert L. Cashman, President and Chief Executive Officer of Service Team Inc., supplies office space for the executive office of the Company at no charge.

Convertible Notes Payable – Related Party
 
R.L. Cashman

On May 15, 2016, the Company issued a convertible note to Robert L. Cashman (a related party)  for $9,000 of cash consideration.  The note bears interest at 6%, matures on May 15,2018 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 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.
 
US Affiliated
On July 31, 2014, the Company issued a convertible note to Hallmark Venture Group  inc. (a related party) for $18,003 of cash consideration. On September 31, 2014, Hallmark Venture Group Inc. sold the note to   U S Affiliated Inc. (a related party). The note bears interest at 6%, matures on July 31, 2015, and is convertible into common stock at 50% of the closing market price of the lowest 3 trading days during the previous 25 trading days prior to conversion. The Company recorded a debt discount equal to $18,003 due to this conversion feature. The note was amended during July 2015 to mature on February 29, 2016.  During the period ended August 31, 2016, the note was sold to Tangiers and $13,572 of accrued interest was added to the note principal balance bringing the new principal balance up to $31,575.  As there was an updated conversion feature on the new note, the discount of $31,575 was recorded with the offset to additional paid in capital.  The debt discount was fully amoritzed during the period ended August 31, 2016 as a result of the conversions of the note by Tangiers. The note had accrued interest of $0 and $1,170 as of August 31, 2016 and August 31, 2015, respectively.   The debt discount had a balance at August 31, 2016 and August 31, 2015 was $0 and $0, respectively. During the year ended August 31, 2016 the holder of the note converted $31,575 of the note and interest to common stock with a remaining balance of $1,904 which the Company repaid in cash during the same period thus repaying the note in full.
 
 
45

 
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.

On July 31, 2014, the Company issued a convertible note to Hallmark Venture Group Inc. (a related party) for $14,315 of cash consideration. . On September 30, 2014, Hallmark Venture Group Inc. sold the note to U S Affiliated Inc. (a related party).  The note bears interest at 6%, matures on July 31, 2015, and is convertible into common stock at 50% of the closing market price of the lowest 3 trading days during the previous 25 trading days prior to conversion. The Company recorded a debt discount equal to $14,315 due to this conversion feature. The note was amended during July 2015 to mature on February 29, 2016.  During the year ended August 31, 2016, the note was sold to Tangiers and $10,799 of accrued interest was added to the note principal balance bringing the new principal balance up to $25,114.  As there was an updated conversion feature on the new note, the discount of $25,114 was recorded with the offset to additional paid in capital.  The debt discount was fully amoritzed during the year ended August 31, 2016 as a result of the conversions of the note by Tangiers. The note had accrued interest of $0 and $930 as of August 31, 2016 and August 31, 2015, respectively.  The debt discount had a balance at August 31, 2016 and August 31, 2015 of $0 and $0, respectively.  During the year ended August 31, 2016 the holder of the note converted $25,114 of the note and interest to common stock thus repaying the note in full.

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.

 
On May 12, 2016, the Company issued a convertible note to U.S. Affiliated, Inc.  (a related party) 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 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.
 
Promissory Note – Related Party

On August 25, 2011, the Company entered into a loan agreement with Hallmark Venture Group, Inc., with no maturity date or interest rate. During the year ended August 31, 2015, the Company repaid net funds of $27,158.  During the year ended August 31, 2015, the Company has imputed interest at a reasonable rate of 10 percent totaling $683.  As of August 31, 2015 the loan was paid in full.


46


Preferred Stock Issued for Services

On January 20, 2015, the Company authorized and issued 100,000 shares of Series A Preferred Stock to be granted to Hallmark Holdings  Inc. (a related party) in exchange for services. The 100,000 shares grant the holder to have the right to vote on all shareholder matters equal to 500 votes per share. The Series A shares were valued according to the additional voting rights assigned. The value assigned to the voting rights was derived from a model utilizing control premiums to value the voting control of the preferred stock. The value assigned to the Series A shares was $499,000 and was recorded on the grant date as stock based compensation.  
 
On October 16, 2015, the Designation of Preferred Stock for the Series A shares 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 Series A preferred stock  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 $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 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.

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 $33,000 for the fiscal year ended August 31, 2017, and $30,000 for the fiscal year ended August 31, 2016.
 
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, 2017, and $0 for the fiscal year ended August 31, 2016.
 
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, 2017 and 2016.
 
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, 2017 and $0 for the fiscal year ended August 31, 2016.

47

PART IV

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

 
 
 
Page
Financial Statements
 
 
Report of Independent Registered Public Accounting Firm
 F-2
 
Consolidated Balance Sheets as of August 31, 2017 and 2016
F-3
 
Consolidated Statements of Operations for the years ended August 31, 2017 and 2016 
F-4
 
Consolidated Statements of Shareholders' Deficit for the years ended August 31, 2017 and 2016  
F-5
 
Consolidated Statements of Cash Flows for the years ended August 31, 2017 and 2016  
F-6
 
Notes to Consolidated Financial Statements  
F-7
 
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.*
 
 
101
Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets at August 31, 2017 and August 31, 2016,  (ii) the Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended August 31, 2017 and 2016, (iii) the Consolidated Statements of Stockholders' Equity for the years ended August 31, 2017 and 2016, (iv) Consolidated Statements of Cash Flows for the years ended August 31, 2017 and 2016 and (v) the notes to the Consolidated Financial Statements. *

* Filed herewith.  

48


 
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
 
December 6, 2017
 
 
(principal executive officer)
 
 
 
 
 
 
 
/s/ Robert L Cashman
 
Secretary, Chief Financial Officer, Chief Accounting Officer
 
December 6, 2017
 
 
 
 
 
 
 
 
 
 



 


 

 
 

 
49
 
 
 
Exhibit 31.1
 
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
 
 
I,  Robert L. Cashman certify that:
 
1. I have reviewed this report on Form 10-K of Service Team Inc.;
 
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
 
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
 
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation: and
 
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
 
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
 
Date: December 6, 2017
 
 
/s/ Robert L. Cashman
By:  Robert L. Cashman
Chief Executive Officer and President
Principal Executive Officer

 
 
 
 
Exhibit 31.2

I,  Robert L. Cashman certify that:
 
1. I have reviewed this report on Form 10-K of Service Team Inc..;
 
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
 
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
 
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation: and
 
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
 
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
 
Date: December 6, 2017
 
 
/s/ Robert L. Cashman
By: Robert L. Cashman, 
Chief Financial Officer
Principal Financial and Accounting Officer
 
Exhibit 32.1
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
 
I, Robert L. Cashman, Chief Executive Officer, of Service Team Inc., a Nevada corporation (the "Company"), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
 
(1) The report on Form 10-K of Service Team Inc. (the "Registrant") for the fiscal year ended August 31, 2017 (the "Report") which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
(2) Information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
 
Date: December 6, 2017
 
/s/ Robert L. Cashman
Name: Robert L. Cashman
Title:    Chief Executive Officer and President
Principal Executive Officer
 
 
 
 
 

        Exhibit 32.2
 
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 
I, Robert L. Cashman, Chief Financial Officer and PRincipal Financial and Accounting Officer of Service Team Inc.,  a Nevada corporation (the "Company"), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
 
(1) The report on Form 10-K of Service Team Inc. (the "Registrant") for the fiscal year ended August 31, 2017 (the "Report") which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
(2) Information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
 
Date: December 6, 2017



/s/ Robert L. Cashman
Name: Robert L. Cashman
Title:    Chief Financial Officer
Principal Financial and Accounting Officer