UNITED STATES

 SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

ANNUAL REPORT PURSUANT TO SECTION

SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended August 31, 2019

 

Commission file number: 333-178210

 

SERVICE TEAM INC.

(Exact name of registrant as specified in its charter)

 

     
Wyoming   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, 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). 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 February 28, 2018, was $885,187 based on the closing price of the common stock as quoted by the Over-the-Counter Bulletin Board (the "OTC Bulletin Board")   

 

As of December 12, 2019 8,852,873,544 registrant's common stock, par value $0.001 per share, outstanding.


 

 
 

 

 

Table of Contents
 

PART I

 

ITEM 1.  BUSINESS 5
ITEM 1A.  RISK FACTORS 6
ITEM 1B.  UNRESOLVED STAFF COMMENTS 6
ITEM 2.  PROPERTIES 6
ITEM 3.  LEGAL PROCEEDINGS 6
ITEM 4.  MINE SAFETY DISCLOSURES 6


PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 7
ITEM 6. SELECTED FINANCIAL DATA 9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 10
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 10
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 37
ITEM 9A. CONTROLS AND PROCEDURES 37
ITEM 9B. OTHER INFORMATION 38


PART  III


ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 39
ITEM 11. EXECUTIVE COMPENSATION 41
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS  41
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 42
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 43

 

PART IV


ITEM 15. 		 EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES 44


 

SIGNATURES 42

 

3 
 

 

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.

 

 

4 
 

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 Fullerton, 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 disconnected, 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 650 customers. Three customers, represented more than 10%, 8%, and 6% of sales in the period ended August 31, 2019 Three customers represented 12%, 10% and 6% during the period ended August 31, 2018 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 49 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.

 

5 
 

 

Acquisition of Trade Leasing, Inc.

 

On June 5, 2013, Service Team Inc. completed a Stock Exchange Agreement with Hallmark Holdings Inc. Pursuant to the Stock Exchange Agreement, Service Team Inc. acquired 100 percent of the shares of Trade Leasing, Inc., a California corporation.  This transaction gave Service Team Inc. ownership of the business operations which included furniture, manufacturing equipment, vehicles and other assets in exchange for 4,000,000 common shares of Service Team Inc.

 

This acquisition was accounted for as an acquisition by entities under common control due to the fact that both Service Team Inc. and Trade Leasing, Inc. were and continue to be commonly held by Hallmark Holdings and its affiliates. The ownership structure of the Company did not change as a result nor did any of its officers change positions.  As the assets acquired were from an entity under common control, the assets from Trade Leasing, Inc. have been combined at historical cost for all periods presented, with no step-up in basis.

 

ITEM 1A. 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 in the building at 1818 Rosslynn Avenue Fullerton, Ca. 92831.

 

ITEM 3.  LEGAL PROCEEDINGS


None.

 

ITEM 4.  MINE SAFETY DISCLOSURES

 

Not Applicable.

6 
 


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, 2019, there were 97 active shareholders and the total shares outstanding of 8,852,873,544. The transfer agent for our common stock is Pacific Stock Transfer 6725 Via Austin Parkway Suite 300, Las Vegas, Nevada 98119.

 

The following table shows the reported high and low closing bid quotations per share for our common stock based on information provided by the OTC Bulletin Board for the periods indicated. Quotations reflect inter-dealer prices, without markup, markdown or commissions and may not represent actual transactions. 

 

Fiscal Year Ended August 31, 2019   High     Low  
Fourth Quarter   $ 0.0001     $ 0.0001  
Third Quarter   $ 0.0001     $ 0.0001  
Second Quarter   $ 0.0001     $ 0.0001  
First Quarter   $ 0.0001     $ 0.0001  


 

Fiscal Year Ended August 31, 2018   High     Low  
Fourth Quarter   $ 0.0001     $ 0.0001  
Third Quarter   $ 0.0002     $ 0/0001  
Second Quarter   $ 0.0007     $ 0.0001  
First Quarter   $ 0.0003     $ 0.0001  


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.

 

7 
 

Dividend Policy

 

We have not paid or declared any cash dividends on our common stock in the past and do not foresee doing so in the foreseeable future.  We intend to retain any future earnings for the operation and expansion of our business.  Any decision as to future payment of dividends will depend on the available earnings, the capital requirements of our Company, our general financial condition and other factors deemed pertinent by our Board of Directors.

   

Sales of Unregistered Securities 

 

From the inception (June 6, 2011) to August 31, 2011, the Company sold 6,000,000 shares to the organizers of the Company for $29,027.  

 

In the fiscal year ended August 31, 2012 the Company sold 1,707,500 shares to various individuals for $168,806. 

 

In the fiscal year ended August 31, 2013 the Company sold 359,814 shares to various individuals for $171,576. 

 

In the fiscal year ended August 31, 2014 the Company sold 118,333 shares to various individuals for $34,750. 

 

In the fiscal year ended August 31, 2015 the Company sold 40,000 shares to one individual for $4,000.

 

In the fiscal year ended August 31, 2016 the Company sold zero (0) shares.

 

In the fiscal year ended August 31, 2017, the Company sold zero (0) shares.

 

In the fiscal year ended August 31, 2018, the Company sold zero (0) shares.

 

In the fiscal year ended August 31, 2019, 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.

 

8 
 

ITEM 6.  SELECTED FINANCIAL DATA.

 

As a "smaller reporting company," as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.

  

ITEM 7.  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 $3,913,174 for the fiscal year ended August 31, 2019, compared to $3,329,876 during the fiscal year ended August 31, 2018, an increase of $583,298.  This represents an increase of 17.5 percent.  All of the sales are generated by Trade Leasing, Inc. The Service Products Division had no sales.  

 

Cost of sales increased by $424,736 from $2,723,653 to $3,148,389 which was due to increased volume during the 2019 fiscal year.  

 

Gross margins increased by $158,562 from $606,223 in 2018 to $764,785 in 2019, primarily due to the increase in revenues and cost of sales during 2019. 

 

Operating and other expenses increased by $14,607 from $643,675 to $625,938 from 2018 to 2019 primarily due to an increase in work force. 

 

Interest expense decreased by $211,688 from $331,922 to $120,234 from 2018 to 2019 primarily due to no longer financing with convertible note.

 

The above changes resulted in net profit of $876 during the 2019 fiscal year compared to a net loss of $354,767 during the 2018 fiscal year.  The improved performance was primarily due to the increase in sales volume and the discontinuance of financing with Convertible Notes.

 

 

9 
 

 

Liquidity and Capital Resources

 

As of August 31, 2019, we had total assets of $568,638 including current assets of $396,902.   We also have current liabilities of $382,603 which consist of convertible notes of $140,232, accrued interest of $84,866, other accrued expenses of $63,521 and accounts payable of $82,564.  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 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, 2019 and 2018 are attached hereto.

 

 

TABLE OF CONTENTS

 

 

    Page
Financial Statements  
  Report of Independent Registered Public Accounting Firm 10
  Consolidated Balance Sheets as of August 31, 2019 and 2018 11
  Consolidated Statements of Operations for the years ended August 31, 2019 and 2018 12
  Consolidated Statements of Shareholders' Deficit for the years ended August 31, 2019 and 2018 13
  Consolidated Statements of Cash Flows for the years ended August 31, 2019 and 2018 14
  Notes to Consolidated Financial Statements   15

 

 

 

10 
 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 To the Board of Directors and

Stockholders of Service Team, Inc.

 

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Service Team, Inc. (the Company) as of August 31, 2019 and 2018, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the years in the two-year period ended August 31, 2019, and the related notes and schedules (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of August 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the two-year period ended August 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company suffered losses from operations which raise substantial doubt about its ability to continue as a going concern. Managements plans regarding those matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ M&K CPAS, PLLC

 

We have served as the Company’s auditor since 2011.

 

Houston, TX

December 12, 2019

 

11 
 

SERVICE TEAM INC  
CONSOLIDATED BALANCE SHEETS  
AS OF AUGUST 31, 2019, AND AUGUST 31, 2018  


 

    2019   2018
ASSETS                
Cash   $ 52,636     $ 48,855  
Accounts receivable, net     344,266       330,631  
Total current assets     396,902       379,486  
                 
Property and equipment, net     157,736       171,726  
Prepaid expenses – non-current     14,000       14,000  
                 
TOTAL ASSETS   $ 568,638     $ 565,212  
LIABILITIES & SHAREHOLDERS' (EQUITY)                
Accounts payable   $ 82,564     $ 101,030  
Loan - employee     1,300       —    
Convertible notes payable, net     —         16.584  
Convertible notes payable, net – currently in default     140,232       107,832  
Promissory note payable, net     10,120       67,092  
Accrued expenses     63,521       66,575  
Accrued interest     84,866       20,940  
TOTAL LIABILITIES     382,603       380,053  
                 
Common stock, $0.001 par value, 20,000,000,000 authorized, 8,852,873,544 and 8,852,873,544 issued and outstanding as of August 31, 2019 and 2018, respectively     8,852,874       8,852,874  
Preferred stock     150       150  
Additional paid in capital     (5,611,302 )     (5,611,302 )
Accumulated deficit     (3,055,687 )     (3,056,563 )
TOTAL SHAREHOLDERS' EQUITY     186,035       185,159  
                 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 568,638     $ 565,212  

 

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

 

12 
 

  

 SERVICE TEAM INC.

CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE FISCAL

YEARS ENDING AUGUST 31, 2019 AND 2018
 

    2019   2018
         
REVENUES   $ 3,913,174     $ 3,329,876  
                 
COST OF SALES     3,148,389       2,723,653  
                 
GROSS MARGIN     764,785       606,223  
                 
OPERATING EXPENSES                
General & administrative     625,938       612,245  
Depreciation expense     17,737       16,823  
TOTAL OPERATING EXPENSES     643,675       629,068  
                 
OPERATING LOSS     121,110       (22,845 )
                 
OTHER EXPENSE                
Interest expense     (120,234 )     (331,922 )
TOTAL OTHER EXPENSE     (120,234 )     (331,922 )
                 
NET INCOME (LOSS)   $ 876     $ (354,767 )
                 
Net earnings (loss) per common share - basic     0.00       (0.00 )
Net earnings (loss) per common share diluted     0.00       (0.00 )
Weighted average number of common shares outstanding – basic     8,852,873,544       6,775,443,901  
Weighted average number of common shares outstanding – diluted     13,354,313,544     6,775,443,901  

 
 

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

 

13 
 

SERVICE TEAM INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY FOR THE YEARS

ENDED AUGUST 31, 2019 AND 2018


 

    Common Stock   Preferred Stock   Additional
Paid In 		  Stock   Accumulated    
    Shares   Amount   Shares   Amount   Capital   Payable   Deficit   Total
Balance, August 31, 2017     2,319,879,587     $ 2,319,880       100,000     $ 100     $ 598,737     $ 4,742     $ (2,701,796 )   $ 221.663  
Shares Issued for Note Conversions     6,427,625,957       6,427,626       —        —        (6,150,363 )     —        —        277,263  
Beneficial
Conversion Feature 		    —         —         —         —         40,000       —         —         40,000  
Stock Based Compensation     —         —         50,000       50       950       —         —         1,000  
Stock Issued for Stock Payable     105,368,000       105,368       —         —         (100,626 )     (4,742 )     —         —    
Net Loss     —         —         —         —         —         —         (354,767 )     (354,767 )
Balance August 31, 2018     8,852,873,544     $ 8,852,874       150,000     $ 150     $ (5,611,302 )     —       $ (3,056,563 )   $ 185,159  
Net Income     —        —         —         —         —         —         876       876  
Balance, August 31, 2019     8,852,873,544     $ 8,852,874       150,000     $ 150     $ (5,611,302 )     —       $ (3,055,687 )   $ 186,035  

 

 

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

 

14 
 

 

SERVICE TEAM INC.  
     CONSOLIDATED STATEMENTS OF CASH FLOWS  
FOR THE FISCAL YEARS ENDED AUGUST 31, 2019 AND 2018  

 

    2019   2018
CASH FLOWS FROM OPERATING ACTIVITIES                
Net Income (Loss)   $ 876       (354,767 )
                 
Adjustments to reconcile net loss with cash provided by (used in) operations:                
Stock based compensation     —         1,000  
Depreciation expense     17,737       16,823  
Amortization of debt discount     51,822       283,281  
                 
Change In Operating Assets and Liabilities                
Accounts receivable     (13,635 )     7,938  
Prepaid expenses             —    
Accrued expenses     60,872       28,455  
Accounts payable     (18,466 )     (13,968 )
Net Cash Provided by (Used in) Operating Activities     99,206       (31,238 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES                
Cash paid for the purchase of fixed assets     (3,747 )     (34,722 )
Net Cash Used In Operating Activities     (3,747 )     (34,722 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES                
Proceeds from convertible note – related party     —         7,500  
Repayments of convertible note – related party     —         (20,000 )
Proceeds from promissory note, net of issuance costs     72,146       181,405  
Proceeds from convertible note, net of issuance costs     —         42,290  
Repayments of promissory note     (163,824 )     (177,190 )
Net Cash Provided By (Used In) Financing Activities     (91,678 )     34,005  
                 
Net Increase (Decrease) In Cash and Cash Equivalents     3,781       (31,955 )
                 
Cash at Beginning of Period   $ 48,855     $ 80.810  
                 
Cash at End of Period   $ 52,636     $ 48,855  
Supplemental Disclosures                
Interest Paid   $ 4,680     $ —    
Taxes Paid   $ —       $ —    
                 
Non-cash transactions:                
Discount due to beneficial conversion feature   $ —       $ 40,000  
Convertible debt and accrued interest converted into common shares   $ —       $ 277,263  
Shares issued for stock payable   $ —       $ 4,742  

 

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

 

15 
 

SERVICE TEAM INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2019 AND 2018


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' Equity 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.

 

16 
 

 

Principles of Consolidation

 

The accompanying consolidated financial statements include the accounts of Service Team Inc. and Trade Leasing, Inc. both of which are under common control and ownership. The consolidated financial statements herein contain the operations of the wholly-owned subsidiaries listed above. All significant inter-company transactions have been eliminated in the preparation of these financial statements. 

  

Use of Estimates

 

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period.  Actual results could differ from those estimates.
 

Going Concern

 

The Company's financial statements are prepared using the accrual method of accounting in accordance with accounting principles generally accepted in the United States of America, and have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The Company will be dependent upon the raising of additional capital through placement of our common stock in order to implement its business plan. There can be no assurance that the Company will be successful in order to continue as a going concern. The Company is funding its initial operations by issuing common shares and debt.  We cannot be certain that capital will be provided when it is required.

 

Cash and Equivalents

 

Cash and equivalents include investments with initial maturities of three months or less. The Company maintains its cash balances at credit-worthy financial institutions that are insured by the Federal Deposit Insurance Corporation ("FDIC") up to $250,000. There were no cash equivalents at August 31, 2019, or August 31, 2018.

  

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.

 

17 
 

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.  As of August 31, 2019, and 2018, the allowance for doubtful accounts was $14,310 and $0, respectively. Whilst management is confident that its customers will settle their debts, it has recorded an allowance for doubtful accounts in the amount of $14,310 as of August 31, 2019.

 

Accounts Receivable and Revenue Concentrations

 

The Company's wholly owned subsidiary, Trade Leasing, Inc., has more than 650 customers. Three customers represented 12%, 10%, and 9% of total receivables as of August 31, 2018 and three customers represented 10%, 8%, and 6% of total receivables as of August 31, 2019. 

 

Property and Equipment

  

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 $17,737 and $16,823 during the fiscal years ended August 31, 2019 or August 31, 2018.

 

Net property and equipment were as follows at August 31, 2019 and August 31, 2018:

 

    2019   2018
Equipment   $ 367,958     $ 364,211  
Vehicles     15,000       15,000  
Leasehold improvements     52,826       52,826  
Furniture     24,000       24,000  
Total fixed assets, gross     459,784       456,037  
Less: accumulated depreciation     (302,048 )     (284,311 )
Total fixed assets, net   $ 157,736     $ 171,726  


 Lease Commitments

 

Service Team Inc. leased a building at 1818 East Rosslynn 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, 2019, the deferred rent related to this lease was $8,259 and is included in accrual expenses.

 

 

18 
 

 

 

The table below discloses the Company’s future minimum lease payment obligations as of August 31,2019

 

  2020     $ 168,000  
  2021       168,000  
  2021       14,000  
    Total     $ 350,000  

 

Our principal executive offices are located in 1000 square feet in the building at 1818 East Rosslynn Ave. Fullerton, California 92834

 

Beneficial Conversion Features

 

From time to time, the Company may issue convertible notes that may contain an imbedded beneficial conversion feature. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation of a portion of the note proceeds to the fair value of warrants, if related warrants have been granted. The intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest expense over the life of the note using the effective interest method.

 

 Fair Value of Financial Instruments

 

The Company adopted Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 820 on June 6, 2011. Under this FASB, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50 details the disclosures that are required for items measured at fair value.

 

The Company has various financial instruments that must be measured under the new fair value standard including cash, convertible notes payable, accrued expenses, promissory notes payable, accounts receivable and accounts payable. The Company's financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows:

 

19 
 

 

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, 2019 on a recurring basis:

                Total
                Realized
Description   Level 1   Level 2   Level 3   Loss
Convertible notes payable, net   $ 140,232       —         —         —    
Totals   $ 140,232     $ —       $ —       $ —    



The following table presents assets and liabilities that were measured and recognized at fair value as of August 31, 2018 on a recurring basis:

                Total
                Realized
Description   Level 1   Level 2   Level 3   Loss
Convertible notes payable, net   $ 124,416       —         —         —    
Totals   $ 124.416     $ —       $ —       $ —    


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, 2019 and 2018 where it cannot conclude that it is more likely than not that those assets will be realized.

 

20 
 

 

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 the accounting system and is recognized as revenue at that time.

 

The Trade Leasing Division uses 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 the raw materials cost and the cost of labor. 

 

As described above, in accordance with the requirements of ASC 606, the Company recognizes revenue from the services to its customers for building or repairing truck bodies by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied. 

 

Share Based Expenses

 

The Company accounts for the issuance of equity instruments to acquire goods and/or services based on the fair value of the goods and services or the fair value of the equity instrument at the time of issuance, whichever is more readily determinable. The Company's accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of standards issued by the FASB. The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor's performance is complete. In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement.

 

Stock Based Compensation

 

In December of 2004, the FASB issued a standard which applies to transactions in which an entity exchanges its equity instruments for goods or services and also applies to liabilities an entity may incur for goods or services that are based on the fair value of those equity instruments. For any unvested portion of previously issued and outstanding awards, compensation expense is required to be recorded based on the previously disclosed methodology and amounts. Prior periods presented are not required to be restated. The company 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.

 

 

21 
 

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.

 

    For the Years Ended
August 31,
    2019   2018
         
Basic earnings (loss) per common share Numerator:     0.00       0.00  
Net income (loss) available to common shareholders Denominator:    $ 876     $ (354,767 )
Weighted average common shares outstanding     8,852,873,544       6,775,443,901  
                 
Basic earnings (loss) per common share    $ 0.00     $ (0.00 )
                 
Diluted earnings (loss) per common share Numerator:    $ 876     $ (354,767 )
Net income (loss) available to common shareholders Denominator:                
Weighted average common shares outstanding     8,852,873,544       6,775,443,901  
Convertible Debt     4,501,640,000       —    
Adjusted weighted average common shares outstanding     13,354,313,544       6,775,443,901  
                 
Diluted earnings (loss) per common share    $ 0.00     $ (0.00 )

 

 

22 
 

Recent Accounting Pronouncements

 

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842): Accounting for Leases. This update requires that lessees recognize right-of-use assets and lease liabilities that are measured at the present value of the future lease payments at lease commencement date. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee will largely remain unchanged and shall continue to depend on its classification as a finance or operating lease. The Company has performed a comprehensive review in order to determine what changes were required to support the adoption of this new standard. The Company will adopt the ASU and related amendments on September 1, 2019 and expects to elect certain practical expedients permitted under the transition guidance. The Company will elect the optional transition method that allows for a cumulative-effect adjustment in the period of adoption and will not restate prior periods. Under the new guidance, the Company’s lease will continue to be classified as operating. During the first quarter of fiscal 2020, the Company will complete its implementation of its processes and policies to support the new lease accounting and reporting requirements. Based on the Company’s operating lease as of September 1, 2019, the Company preliminarily estimates the impact of the adoption of ASU 2016-02 to increase both its total assets and total liabilities in the range of $850,000 to $1,050,000. The adoption of this ASU is not expected to have a significant impact on our Consolidated Statements of Operations or Cash Flows. The Company continues to finalize the implementation of the new processes and the assessment of the impact of this adoption on its consolidated financial statements; therefore, the preliminary estimated impacts disclosed can change, and the final impact will be known once the adoption is completed during the first quarter of fiscal 2020.

 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), to clarify the principles of recognizing revenue and create common revenue recognition guidance between U.S. GAAP and International Financial Reporting Standards. Under ASU 2014-09, revenue is recognized when a customer obtains control of promised goods or services and is recognized at an amount that reflects the consideration expected to be received in exchange for such goods or services. In addition, ASU 2014-09 requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The ASU is effective for fiscal years beginning after December 15, 2017. The new revenue standard is principle based and interpretation of those principles may vary from company to company based on their unique circumstances. It is possible that interpretation, industry practice, and guidance may evolve as companies and the accounting profession work to implement this new standard. The implementation of this standard did not have a material effect on the Company’s results of operations.

 

In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, current U.S. GAAP requires the performance of procedures to determine the fair value at the impairment testing date of assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, the amendments under this ASU require the goodwill impairment test to be performed 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. The ASU becomes effective for the Company on January 1, 2020. The amendments in this ASU will be applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed.

 

In August 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-15, Statement of Cash Flows (Topic 230). The update addresses eight specific cash flow issues and is intended to reduce diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This update is effective for reporting periods beginning after December 15, 2017, including interim periods within the reporting period. Adoption of ASU 2016-15 did not have a material effect on our financial statements.

 

23 
 

 

 

In May 2017, the FASB issued ASU No. 2017-09, Stock Compensation - Scope of Modification Accounting, which provides guidance on which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The ASU requires that an entity account for the effects of a modification unless the fair value (or calculated value or intrinsic value, if used), vesting conditions and classification (as equity or liability) of the modified award are all the same as for the original award immediately before the modification. The ASU became effective for the Company on January 1, 2018 and will be applied to an award modified on or after the adoption date. Adoption of ASU 2017-09 did not have a material effect on the Company’s financial statements.

 

Effective June 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied. For the comparative periods, revenue has not been adjusted and continues to be reported under ASC 605 — Revenue Recognition. Under ASC 605, revenue is recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) the performance of service has been rendered to a customer or delivery has occurred; (3) the amount of fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably assured. There was no impact on the Company’s financial statements as a result of adopting ASC 606.

 

 

There are various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

  

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.

 

24 
 

Preferred Shares

 

On January 23, 2015, Service Team Inc. filed with the Secretary of State of Nevada a Certificate of Designation for 100,000 shares of Series A Preferred Stock.  The Designation gives the Series A Preferred Stock 500 votes per share.   Series A Preferred Stock were not entitled to receive dividends, any liquidation preference, or conversion rights.  On October 16, 2015, the Designation of Preferred Stock was amended to allow Preferred Shareholders to receive dividends in an amount equal to dividends paid per share on Common Stock.  On July 27, 2016, an amendment was filed to increase the voting rights of the preferred stock from 500 votes per share to 10,000 votes per share. The Series A share amendments valued according to the additional voting rights and dividend rights assigned. The value assigned to the dividend rights was derived from a model utilizing future economic value of the dividends and was $525 which was recorded on the grant date as stock based compensation.  The value assigned to the voting rights was derived from a model utilizing control premiums to value the voting control of the preferred stock and was $83,000 which was recorded on the grant date as stock based compensation.  On December 30, 2016 the Articles of Incorporation were amended to increase the authorized preferred shares to 150,000.

 

On July 25, 2017, the Articles of Incorporation were amended to increase the voting rights of preferred shares to 100,000 votes per share. The Series A share amendments valued according to the additional voting rights and dividend rights assigned. The value assigned to the dividend rights was derived from a model utilizing future economic value of the dividends and was $0 which was recorded on the grant date as stock based compensation.  The value assigned to the voting rights was derived from a model utilizing control premiums to value the voting control of the preferred stock and was $54,000 which was recorded on the grant date as stock based compensation.

 

On December 4, 2017, the Company granted 50,000 additional Series A Preferred Stock shares to Robert Cashman, a related party.  The value assigned to the new shares was derived from a model utilizing control premiums to value the voting control of the preferred stock and was $1,000 which was recorded on the grant date as stock based compensation.

   

Share Transactions

2019

There were no share transactions in 2019.

 

2018

On September 1, 2017, Crown Bridge Partners LLC converted $4,742 of its Note dated 12-21-2016 into 105,368,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

 

On September 2, 2017, Crossover Capital LLC converted $4,975 of its Note dated 2-14-2017 into 103,000,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

 

25 
 

On September 11, 2017, Crown Bridge Partners LLC converted $5,446 of its Note dated 12-21-2016 into 121,018,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

 

On September 12, 2017, LG Capital Funding LLC Converted $6,048 of its Note dated 1-3-2017 into 120,964,400 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

 

On September 19, 2017, Crossover Capital LLC converted $6,075 of its Note dated 2-14-2017 into 125,000,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

 

On October 6, 2017, Crown Bridge Partners LLC converted $6,501 of its Note dated 12-21-2016 into 144,470,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

 

On October 5, 2017, Crossover Capital LLC converted $6,925 of its Note dated 2-14-2017 into 142,000,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

 

On October 31, 2017, Tangiers Investment Group LLC converted $4,331 of its Note dated 6-13-2016 in the amount of into 125,000,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

 

On October 31, 2017, Tangiers Investment Group LLC converted $6,750 of its Note dated 6-13-2016 in the amount of into 192,857,143 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

 

On November 2, 2017, LG Capital Funding LLC Converted $6,681 of its Note dated 1-3-2017 into 133,622,200 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

 

On November 4, 2017, Crossover Capital LLC converted $8,075 of its Note dated 2-14-2017 into 165,000,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion

 

On November 8, 2017, Crown Bridge Partners LLC converted $7,858 of its Note dated 12-21-2016 into 174,626,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

 

26 
 

On November 14, 2017, Crown Bridge Partners LLC converted $9,421 of its Note dated 12-21-2016 into 198,242,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

 

On November 15, 2017, Crown Bridge Partners LLC converted $7,538 of its Note dated 12-21-2016 into 167,511,777 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

 

On November 15, 2017, Crossover Capital LLC converted $7,735 of its Note dated 2-14-2017 into 158,200,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion

 

On November 16, 2017, Tangiers Investment Group LLC converted $13,613 of its Note in the amount of into 396,880,466 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

 

On November 29, 2017, JMJ Financial converted $13,270 of its Note dated 5-1-2017 into 132,700,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion

 

On December 5, 2017, Tangiers Investment Group LLC converted $16,769 of its Note dated 7-18-2016    into 488,892,128 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

 

On December 6, 2017, JMJ Financial converted $4,700 of its Note dated 5-1-2017 into 94,000,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

 

On December 13, 2017, JMJ Financial converted $19,317 of its Note dated 5-1-2017 into 129,000,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.  This conversion pays the Note in full.

 

On December 14, 2017, Crown Bridge Partners LLC converted $12,596 of its Note dated 12-21-2016 into 279,900,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

 

On December 28, 2017, Tangiers Investment Group LLC converted $20,621 of its Note dated 7-18-2016    into 601,195,335 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

 

27 
 

On January 12, 2018, Crown Bridge Partners LLC converted $12,600 of its Note dated 12-21-2016 into 280,000,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

 

On January 29, 2018, Crossover Capital LLC converted $7,325 of its Note Dated 7-24-2017 into 150,000,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

 

On March 16, 2018, Crossover Capital LLC converted $12,325 of its Note Dated 7-24-2017 into 250,000,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

 

On March 16, 2018, JMJ Financial converted $6,505 of its Note dated 4-28-2017 into 351,000,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

 

On March 19, 2018, Crown Bridge Partners LLC converted $15,829 of its Note dated 12-21-2016 into 351,760,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

 

On March 21, 2018, Tangiers Investment Group LLC converted $19,201 of its Note dated 7-18-2016 into 548,564,286 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

 

On May 22, 2018, Tangiers Investment Group LLC converted $13,600 of its Note dated 11-10-2017 into 302,222,222 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

 

During the twelve-month period ended August 31, 2018, $40,000 of beneficial conversion features were recorded resulting from convertible debts issued during the same period.  Please refer to Note 4 for further information regarding the discounts on the convertible debt transactions.

 

As of August 31, 2018, the Company has not granted any stock options.
 

During 2018 and 2019 the Company did not sell any Common Shares.  The only shares issued were for Conversion of Notes.

  

Stock Based Compensation

We have accounted for stock-based compensation under the provisions of FASB Accounting Standards codification (ASC) 718-10-55.  (Prior authoritative literature:  FASB Statement 123 (R), Share-based payment.)  This statement requires us to record any expense associated with the fair value of stock-based compensation.  Determining fair value requires input of highly subjective assumptions, including the expected price volatility.  Changes in these assumptions can materially affect the fair value estimate.

 

As of August 31, 2019, the Company has not granted any stock options.

   

 

28 
 

 

 

NOTE 4 – DEBT TRANSACTIONS


Convertible Notes Payable – Related Party

 

R.L. Cashman

 

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

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.0005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.

  

Convertible Notes Payable – Third Party

 

JMJ Financial Group

 

On April 28, 2017, the Company issued a convertible note to JMJ Financial Group for $55,000 of cash consideration.  The note bears interest at 12%, matures on April 28, 2018, and is convertible into common stock at 50% of the lowest 3 closing market prices of the previous 20 trading days prior to conversion. The Company recorded a debt discount equal to $37,080 due to this conversion feature. The Company also recorded a $6,000 and $11,920 debt discounts due to accrued interest and origination fees required by the agreement to be accrued at the beginning of the note. The note had accrued interest of $7,222 as of August 31, 2019 and August 31, 2018, respectively.  The debt discounts had a balance at August 31, 2019 and 2018 of $0.  The Company recorded debt discount amortization expense of $0 during the year ended August 31, 2019 and $36,164 during the year ended August 31, 2018.   The Company converted $31,570 of principal and $12,222 of interest into shares during the year ended August 31, 2018.  This note is currently in default.

 

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 $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.

 

LG Capital Funding, LLC

 

On January 3, 2017, the Company issued a convertible note to LG Capital Funding LLC for $28,000 for cash consideration.  The note bears interest at 8%, matures on September 3, 2017, and is convertible into common stock at 50% of the lowest 3 closing market prices of the previous 20 trading days prior to conversion. The Company recorded a debt discount equal to $26,000 due to this conversion feature. The Company also recorded a $2,000 debt discount due to issuance costs. The note had accrued interest of $84 as of August 31, 2017 and $0 at August 31, 2018.  The debt discounts had a balance at August 31, 2017 of $9,589 and $0 at August 31, 2018.  During the year ended August 31, 2017, $15,930 of principal and $706 of accrued interest was converted into shares; see Note 3 for more information. The Company made cash payments of $5,770, to end with a balance of $6,300 as of August 31, 2017.   The note was fully converted into shares during the year ended August 31, 2018.  The Company recorded debt discount amortization expense of $18,411 during the year ended August 31, 2017 and $9,589 during the year ended August 31, 2018.   The entire balance of the Note has been converted to stock.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.

 

Tangiers Capital Group

 

On June 13, 2016, the Company issued a convertible note to Tangiers Capital Group for $38,500 of cash consideration.  The note bears interest at 10%, matures on June 13, 2017, and is convertible into common stock at 50% of the lowest 3 closing market prices of the previous 20 trading days prior to conversion. The Company recorded a debt discount equal to $35,000 due to this conversion feature. The Company also recorded a $3,500 debt discount due to issuance fees. The note had accrued interest of $7,272 and $10,890 and $3,850 as of August 31, 2018 and August 31, 2017 respectively.   The debt discounts had a balance at August 31, 2018 and August 31, 2017 of $0 and $0, respectively. The Company recorded debt discount amortization expense of $0 and $30,167 during the year ended August 31, 2018 and the year ended August 31, 2017, respectively.  During the year ended August 31,2018 and the year ended August 31, 2017, $4,982 of principal and $3,743 of interest and $33,518 of principal and $4,220 of accrued interest was converted into shares, respectively; see Note 3 for more information.  The note was fully converted to stock as of August 31, 2018.

 

30 
 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.

 

On July 18, 2016, the Company issued a convertible note to Tangiers Capital Group for $27,500 of cash consideration.  The note bears interest at 10%, matures on July 18, 2017, and is convertible into common stock at 50% of the lowest 3 closing market prices of the previous 20 trading days prior to conversion. The Company recorded a debt discount equal to $25,000 due to this conversion feature. The Company also recorded a $2,500 debt discount due to issuance fees. The note had accrued interest of $0 and $8,401 and as of August 31, 2018 and August 31, 2017.  The debt discounts had a balance at August 31, 2018 and August 31, 2017 of $0 and $0, respectively. The Company recorded debt discount amortization expense of $24,185 and $3,315 during the year ended August 31, 2017 and the year ended August 31, 2016, respectively.  $27,500 of principal and $39,694 of interest were converted into shares during the year ended August 31, 2018; The entire balance of the note has been converted to stock.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.

 

On November 10, 2017, Service Team Inc issued a 12% Convertible Promissory Note payable to Tangiers Investment Group LLC (the "Investor") in the principal amount of $23,000. The Note, which is due on November 10, 2018, was funded by the Investor in the sum of $20,000 and $3,000 was retained by the Investor through an original issue discount or "OID" for due diligence and legal expense related to this transaction. The Note is convertible into shares of the Registrant's common stock, par value $0.001, at a conversion price of 50% of the lowest trading price of the Company's common stock during the 25 consecutive trading days prior to the date on which Holder elects to convert all or part of the Note.  The Company recorded a $20,000 discount due to the beneficial conversion feature.  During the year ended August 31, 2019 and August 31, 2018, $18,526 and $4,474 of discount amortization was recorded, to result in a remaining debt discount balance of $0 and $4,474 as of August 31, 2019 and August 31, 2018.  Accrued interest at August 31, 2019 and August 31, 2018 was $11,186 and $2,760 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.

 

31 
 

On February 27, 2018, Service Team Inc issued a 12% Convertible Promissory Note payable to Tangiers Investment Group LLC (the "Investor") in the principal amount of $23,000. The Note, which is due on February 27, 2019, was funded by the Investor in the sum of $20,000 and $3,000 was retained by the Investor through an original issue discount or "OID" for due diligence and legal expense related to this transaction. The Note is convertible into shares of the Registrant's common stock, par value $0.001, at a conversion price of 50% of the lowest trading price of the Company's common stock during the 25 consecutive trading days prior to the date on which Holder elects to convert all or part of the Note.  The Company recorded a $20,000 discount due to the beneficial conversion feature and a $3,000 discount due to the original issue discount.   During the year ended August 31, 2019 and August 31, 2018, $11,342 and $11,658 of discount amortization was recorded respectively, to result in a remaining debt discount balance of $11,342 and as of August 31, 2018 and $0 as of August 31, 2019  Accrued interest at August 31, 2019 and August 31, 2018 was $19,237 and $2,760 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 of $34,993 for consideration of certain machine tools.  The note bears interest at 10%, matures on July 10, 2018, and is convertible into common stock at 50% of the lowest 3 closing market prices of the previous 20 trading days prior to conversion. The Company recorded a debt discount equal to $31,812 due to this conversion feature. The Company also recorded a $3,181 debt discount due to issuance fees. The note had accrued interest of $37,471 as of August 31, 2019 and $5,206 as of August 31, 2018.  The debt discounts had a balance of $0 as of August 31,2019 and August 31, 2018. The Company recorded debt discount amortization expense of $0 during the year ended August 31, 2019 and $25,118 during the year ended August 31, 2018.  This note is currently in default.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.

  

32 
 

Crown Bridge Partners, LLC.

 

On December 21, 2016, the Company issued a convertible note to Crown Bridge Partners, LLC.  for $42,500 of cash consideration.  The note bears interest at 6%, matures on December 21, 2017, and is convertible into common stock at 55% of the lowest 3 closing market prices of the previous 20 trading days prior to conversion. The Company recorded a debt discount equal to $36,000 due to this conversion feature. The Company also recorded a $6,500 debt discount due to issuance fees. The note had accrued interest of $0 as of August 31, 2017 and August 31, 2018.   The debt discounts had a balance at August 31, 2017 of $13,041 and $0 at August 31, 2018.    The Company recorded debt discount amortization expense of $29,459 during the year ended August 31, 2017 and $13,041 during the year ended August 31, 2018. During the year ended August 31, 2017, $10,954 of principal and $13,502 of interest were converted into shares and during the year ended August 31, 2018, principal of $31,546 and interest of $5,217 was converted into shares. The entire balance of this note has been converted to stock.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.

 

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 $1,817 as of August 31, 2019 and $363 as of August 31, 2018.   The debt discounts had a balance of $0 at August 31, 2019 and August 31, 2018.    The Company recorded debt discount amortization expense of $ 0 during the year ended August 31, 2019 and $49,682 during the year ended August 31, 2018.  The Company converted $39,524 in principal and $1,500 in accrued interest into shares during the year ended August 31, 2018; see Note 3 for more information.  This note is currently in default.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.

 

Crossover Capital Fund, LLC

 

On February 14, 2017, the Company issued a convertible note to Crossover Capital Fund, LLC for $40,000 of cash consideration.  The note bears interest at 10%, matures on February 14, 2018, and is convertible into common stock at 50% of the lowest 3 closing market prices of the previous 20 trading days prior to conversion. The Company recorded a debt discount equal to $34,000 due to this conversion feature. The Company also recorded a $6,000 debt discount due to issuance fees. The note had accrued interest of $0 as of August 31, 2017 and August 31, 2018.   The debt discounts had a balance at August 31, 2017 of $18,301 and $0 at August 31, 2018.  The Company recorded debt discount amortization expense of $21,699 during the year ended August 31, 2017 and $18,301 during the year ended August 31, 2018.  During the year ended August 31, 2018 principal of $32,487 and interest of $1,298 was converted into shares. The entire value of the note has been converted to stock.

 

33 
 

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 $7,917 as of August 31, 2019 and $2,821 at August 31, 2018.   The debt discounts had a balance at August 31, 2019 and August 31, 2018 of $0. The Company recorded debt discount amortization expense of $0 during the year ended August 31, 2019 and $35,836 during the year ended August 31, 2018.  During the year ended August 31, 2018, the Company converted $17,106 in principal and $2,544 of accrued interest into shares; see Note 3 for more information.  This note is currently in default.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.00005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.

 

Promissory Notes Payable – Third Party

 

IOU Financial

 

On March 30, 2018, the Company issued a promissory note to IOU Financial for $120,000 of cash consideration.  The note bears interest at 32% and matures on March 30, 2019. The Company recorded a debt discount equal to $38,630 due to the unpaid interest which was added to the principal balance to be repaid during the 12 month note.  During the year ended August 31, 2018, the company amortized $16,299 of the debt discount into interest expense leaving a remaining total debt discount on the note of $22,331 as of August 31, 2018.  During the year ended August 31, 2018, the Company repaid $69,206 in principal on the note in cash leaving a balance on the note of $73,200 owed as of August 31, 2018.  During the year ended August 31, 2019, the company amortized $22,331 of the debt discount into interest expense leaving a remaining total debt discount on the note of $0 as of August 31, 2019.  During the year ended August 31, 2019, the Company repaid $89,424 in principal on the note in cash leaving a balance on the note of $0 owed as of August 31, 2019.

 

On January 22, 2019, the Company issued a promissory note to IOU Financial for $75,000 of cash consideration.  The note bears interest at 32%, matures on October 23, 2019.  The Company recorded a debt discount equal to $16,954 due to the unpaid interest which was added to the principal balance to be repaid during the 9 month note.  During the year ended August 31, 2019, the company amortized $13,675 of the debt discount into interest expense leaving a remaining total debt discount on the note of $3,279 as of August 31, 2019.  The proceeds of the loan were used to pay $27,244 to IOU Financial to pay the note dated March 30, 2018 in full.  And the remaining amount $47,776 was added to working capital.  During the period ended August 31, 2019, the Company repaid $74,400 in principal on the note in cash leaving a balance on the note of $16,999 owed as of August 31, 2019 This note was paid in full on December 12, 2019.

 

 

34 
 

NOTE 5- RELATED PARTY TRANSACTIONS


Convertible Note Payable – Related Party

 

Preferred Stock Issued for Services

 

On July 25, 2017, the Articles of Incorporation were amended to increase the voting rights of preferred shares to 100,000 votes per share. The Series A share amendments valued according to the additional voting rights and dividend rights assigned. The value assigned to the dividend rights was derived from a model utilizing future economic value of the dividends and was $0 which was recorded on the grant date as stock-based compensation.  The value assigned to the voting rights was derived from a model utilizing control premiums to value the voting control of the preferred stock and was $54,000 which was recorded on the grant date as stock-based compensation.

 

On December 4, 2017, the Company granted 50,000 additional Series A Preferred Stock shares to Robert Cashman, a related party.  The value assigned to the new shares was derived from a model utilizing control premiums to value the voting control of the preferred stock and was $1,000 which was recorded on the grant date as stock-based compensation.
 

NOTE 6 – INCOME TAXES

 

The Company accounts for income taxes under standards issued by the FASB. Under those standards, deferred tax assets and liabilities are recognized for future tax benefits or consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided for significant deferred tax assets when it is more likely than not that such assets will not be realized through future operations.

 

No provision for federal income taxes has been recorded due to the available net operating loss carry forwards of approximately $844,216 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.

 

35 
 

 

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, 2019 and August 31, 2018:

 

    2019     2018  
 Net tax loss carry-forwards   $ 844,216     $ 896,914  
 Statutory rate         21%       21%  
 Expected tax recovery     177,285       188,352  
 Change in valuation allowance     (177,285)       (188,352)  
 Income tax provision   $ -     $ -  
                 
 Components of deferred tax asset:                
 Non capital tax loss carry forwards    $ 177,285     $ 188,352  
 Less: valuation allowance        (177,285)       (188,352)  
 Net deferred tax asset    $ -     $ -  

 

 NOTE 7 – COMMITMENTS AND CONTINGENCIES

 

Operating Leases

 

Service Team Inc. leased a building at 1818 East Rosslynn 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, 2019, the deferred rent related to this lease was $8,259 and is included in accrued expenses.

NOTE 8 – SUBSEQUENT EVENTS


Management has evaluated subsequent events according to the requirements of ASC 855, and there are currently no subsequent events to report.

 

36 
 

 

 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, 2019.

 

Based on this evaluation, these officers concluded that, as of August 31, 2019 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. 

 

37 
 

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.

 

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, 2019 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, 2019.

  

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, 2019, 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, 2019, 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

 

38 
 

 

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.

 

Karen J. Fowler 

President, Director, Chief Executive Officer

 

Karen J. Fowler 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.

 

Karen J. Fowler, President and Sole Director

Karen J. Fowler has been employed by Service Team Inc, aka, Trade Leasing, Inc for the past 16 years. She has worked in various jobs, including bookkeeping, purchasing, human resources and cash management. She is responsible for all administrative functions in her current duties including accounting, payroll and various reporting requirements of several government entities, including Department of Motor Vehicles, Environmental Protection Agency, Southern California Air Quality District and Financial Reporting.

 

Ms. Fowler attended Orange Coast College and Tulsa Junior College studying accounting, business management and computer science. She has worked for several CPA firms and manufacturing companies before joining Service Team Inc.

 

Karen Fowler is a single mom with two adult sons and five grandchildren.

 

She is an avid horsewoman and enjoys riding her horses.

 

 Legal Proceedings

 None.

 

39 
 

 

 

CORPORATE GOVERNANCE

 

Director Independence

At the present time, we have one director who is an "insider."  Director, Karen J. Fowler, 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.  Karen J. Fowler 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 Karen J. Fowler 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

 

40 
 

ITEM 11.  EXECUTIVE COMPENSATION.

 

Service Team Inc. has made no provisions for paying cash or non-cash compensation to its officers and directors.  No salaries are being paid at the present time to our officers and directors and none have been paid or owed from inception to date. At present we do not have a stock incentive plan in place.  We have not granted any options to our officers and directors.

  

ITEM 12.  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

 
**Robert L. Cashman Revocable Trust     150,000       100 %
TOTAL  OFFICERS, DIRECTORS AND CONTROL PERSONS     150,000       100 %

 

** Kim C. Cashman is the sole executor of the Robert L. Cashman Revocable Trust.

 

41 
 

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

 

Convertible Note Payable – Related Party

 

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

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the conversion price floor and, as such, does not constitute a derivative liability as the Company has sufficient authorized shares and a conversion floor of $0.0005. In the event that the authorized shares were not sufficient, the Company has obtained authorization from a majority of shareholders such that the appropriate number of shares will be available or issuable for settlement to occur.

 

Preferred Stock Issued for Services

 

On July 25, 2017, the Articles of Incorporation were amended to increase the voting rights of preferred shares to 100,000 votes per share. The Series A share amendments valued according to the additional voting rights and dividend rights assigned. The value assigned to the dividend rights was derived from a model utilizing future economic value of the dividends and was $0 which was recorded on the grant date as stock-based compensation.  The value assigned to the voting rights was derived from a model utilizing control premiums to value the voting control of the preferred stock and was $54,000 which was recorded on the grant date as stock-based compensation.

 

On December 4, 2017, the Company granted 50,000 additional Series A Preferred Stock shares to Robert Cashman, a related party.  The value assigned to the new shares was derived from a model utilizing control premiums to value the voting control of the preferred stock and was $1,000 which was recorded on the grant date as stock-based compensation.

 

On May 5, 2019, Robert L. Cashman resigned as an Officer and Director of the Company. Mr. Cashman placed the Service Team Inc. Preferred “A” shares into the Robert L. Cashman Revocable Trust. The Trust was created on October 5, 2016. Kim C. Cashman is the sole trustee of the Trust.

  

42 
 

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 $32,000 for the fiscal year ended August 31, 2019, and $39,000 for the fiscal year ended August 31, 2018.

 

Audit-Related Fees. The aggregate fees billed by our independent accounting firm related to assurance and related services totaled $0 for the fiscal year ended August 31, 2018, and $0 for the fiscal year ended August 31, 2019.

 

Tax Fees. The aggregate fees billed by our independent accounting firm for professional services rendered for tax compliance, tax advice and tax planning totaled $0 for the fiscal years ended August 31, 2018 and 2019.

 

All Other Fees. The aggregate of all other fees for services provided by our independent accounting firm were $0 for the fiscal year ended August 31, 2018 and $0 for the fiscal year ended August 31, 2019.

 

 

43 
 

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 11
  Consolidated Balance Sheets as of August 31, 2019 and 2018 12
  Consolidated Statements of Operations for the years ended August 31, 2019 and 2018  13
  Consolidated Statements of Shareholders' Deficit for the years ended August 31, 2019 and 2018  14
  Consolidated Statements of Cash Flows for the years ended August 31, 2019 and 2018   15
  Notes to Consolidated Financial Statements   16

 

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, 2019 and August 31, 2018,  (ii) the Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended August 31, 2019 and 2018, (iii) the Consolidated Statements of Stockholders' Equity for the years ended August 31, 2019 and 2018, (iv) Consolidated Statements of Cash Flows for the years ended August 31, 2019 and 2018 and (v) the notes to the Consolidated Financial Statements. *

 

* Filed herewith.  

 

44 
 

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/ Karen J. Fowler   President, Chief Executive Officer   December 12, 2019
    (principal executive officer)    
         
/s/ Karen J. Fowler   Secretary, Chief Financial Officer, Chief Accounting Officer   December 12, 2019
         

 

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