Subsequent Events

9 Months Ended

Apr. 30, 2018

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 13 – SUBSEQUENT EVENTS

Promissory Notes

On May 1, 2018, Shift8 Technologies, Inc. ("Shift8") entered into a promissory note for $525,000 with an effective annual interest rate of 8% and a maturity date of April 30, 2020. With a principal payment of $100,000 due on June 1, 2018 and a principal payment of $280,823 due on April 30, 2020. Payment are based on a 60-month repayment schedule. The promissory note is secured by a Pledge and Escrow Agreement, whereby Shift8 agreed to pledge 51% of the securities owned in T3 until the principal payment is paid in full. In conjunction with the promissory note, the Company issued 3-year warrants to purchase 75,000 shares of common stock at an exercise price of $0.50 per share. At time of issuance the company recognized approximately $20,000 in warrant expense using Black-Scholes valuation. In June 2018, Shift8 in accordance to the terms of the promissory note made a principal payment of $100,000.

On May 1, 2018, Shift8 Technologies, Inc. ("Shift8") entered into a Stock Purchase Agreement ('SPA"), whereby in an exchange for $250,000, Shift8 agreed to sell to the buyer 199,900 shares of common stock equivalent to 19.99% of the issued and outstanding common share of Shift8 Technologies, Inc.

On May 1, 2018, Shift8 entered into a promissory note for $275,000 with an effective annual interest rate of 0% with an interest and principal payment of $6,000 per month and shall continue perpetuity until the entire principal amount is paid in full. The promissory note is guaranteed to the lender by 15% of the stock owned by Shift8 in T3, the secured interest will continue until the principal balance is paid in full. In conjunction with the promissory note, the Company issued 3-year warrants to purchase 100,000 shares of common stock at an exercise price of $0.50 per share.

On May 1, 2018, Shift8 entered into a promissory note for $150,000 with an effective annual interest rate of 3% and a maturity date of May 7, 2018. On May 4, 2018 the promissory note was paid in full.

Convertible Promissory Note

On May 30, 2018, the Company entered into a securities purchase agreement with Firstfire Global Opportunities Fund, LLC, a Delaware limited liability company (“Firstfire”). Under the agreement, we issued Firstfire a $305,556 principal amount of a convertible promissory note for a cash purchase price of $275,000 ( “Promissory note"), bearing interest at a rate of 6% per annum, with maturity on the first anniversary of the date of issuance. The Company paid Firstfire $2,500 for legal and compliance fees. The Company recorded the legal fees and other cost for a total of $30,400 as a discount to the Promissory note and they will be amortized over the term to interest expense. In connection with the execution of the securities purchase agreement, we issued 125,000 shares of our common stock to Firstfire as a commitment fee. At issuance, the Company recognized a non-cash expense for $58,750 for the market value of the shares issued to Firstfire.

The Promissory note provides Firstfire with the option to convert at any time on or after the 180th calendar day after the issue date, to convert all or any portion of the then outstanding and unpaid principal amount and interest under the Promissory note into shares of Common Stock of the Company at a conversion price for each share of Common Stock equal to the lower of (i) $0.50 (the "Fixed Conversion Price") , or (ii) 65% of the lowest closing bid price of the Company’s Common Stock during the twenty (20) consecutive trading day period immediately preceding the trading day that the Company receives a Notice of Conversion (the “Alternate Conversion Price”)

The Company may Prepay at any time prior to the 180th calendar day after the funding of the Promissory note all or part of the outstanding principal balance, with the exception of any portion thereof which is the subject of a previously-delivered notice of conversion, prior to the maturity date for an amount equal to: (i) if the prepayment date is 90 days or less from the date of issuance, 105% of the sum of the principal amount to be prepaid plus accrued interest, if any; (ii) if the prepayment date is greater than or equal to 91 days from the date of issuance and less than or equal to 120 days from the date of issuance, 110% of the sum of the principal amount to be prepaid plus accrued interest, if any; (iii) if the prepayment date is greater than or equal to 121 days from the date of issuance and less than or equal to 180 days from the date of issuance, 115% of the sum of the principal amount to be prepaid plus accrued interest, if any.

In the event of default, the note shall become immediately due and paid in full in an amount (the “Default Amount”) equal to the principal amount then outstanding plus accrued interest through the date of full repayment multiplied by 150%. The holder may, at its sole discretion, determine to accept payment part in Common Stock and part in cash.

The Company analyzed the Promissory note for derivative accounting consideration and determined that the embedded conversion option qualified as a derivative instrument, due to the variable conversion price. Therefore, as of the date of the Promissory note, the company recognized a debt discount of $305,556 and recorded a $227,243 charge to noncash interest expense. In addition, the Company recognized $499,743 in derivative liability as of the date of the Promissory note.

Equipment Financing Agreement

In May 2018, the Company acquired various servers under an equipment financing agreement (the “Financing Agreement”) in the principal amount of $37,196, with 36 monthly principal and interest payments of $1,174, and 8.50% implied interest rate. The Financing Agreement is secured by the equipment.

Employee Stock Options

In May 2018, the Company granted 420,000 stock options to purchase common shares to various employees with an exercise price of $0.45 per share and a term of 5 years. The options vest equally over a period of three (3) years. The options have a fair market value of $160,200.

The fair market value of all options issued was determined using the Black-Scholes option pricing model which used the following assumptions:

Expected dividend yield	0.00	%
Expected stock price volatility	162.72	%
Risk-free interest rate	2.78	%
Expected term	5.0 years

Other Matters

On May 31, 2018, the Company issued an aggregate of 40,000 shares of common stock for $20,000 and 3-year warrants to purchase 7,500 shares of common stock at an exercise price of $0.50 per share.

On June 7, 2018, the Company issued an aggregate of 40,000 shares of common stock for $20,000 and 3-year warrants to purchase 7,500 shares of common stock at an exercise price of $0.50 per share.

Business Acquisition

On May 2, 2018, the Company closed on the Merger Agreement with T3 Communications, Inc. to increase its customer base and obtain higher efficiency of its existing infrastructure. Upon closing, all extension fees of $1,495,000 were credited towards the purchase price.

The total purchase price was $3,211,945, the acquisition was accounted for under the purchase method of accounting, with the Company identified as the acquirer. Under the purchase method of accounting, the aggregate amount of consideration assumed by the Company was allocated to cash, customer contracts acquired, current assets, property plant and equipment and assumed payables based on their estimated fair values as of May 2, 2018. Allocation of the purchase price is preliminary and based on the best estimates of management.

The following information summarizes the allocation of the fair values assigned to the assets and liabilities at the purchase date. The allocation of fair values is preliminary and is subject to change in the future during the measurement period.

	(in thousands)
	T3
Cash	$	250
Accounts receivable		323
Intangible assets and Goodwill		2,569
Property and equipment, net		568
Other Assets		329
Total identifiable net assets	$	4,039
Less: liabilities assumed		(827	)
Total Purchase price	$	3,212

The Company incurred approximately $160,000 in costs associated with the acquisition. These included legal, and accounting. The Company expensed these cost during the nine months ended April 30, 2018.

Proforma

The following schedule contains pro-forma consolidated balance sheet as of April 30, 2018 and the results of operations for the nine months ended April 30, 2018 and 2017 as if the acquisition occurred on August 1, 2016. The pro forma results of operations are presented for informational purposes only and are not indicative of the results of operations that would have been achieved if the acquisition had taken place on August 1, 2016, or of results that may occur in the future.

	As of April 30, 2018
	As Reported			Adds			Pro Forma
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	727		$	(353	)	$	374
Accounts receivable		8			323			331
Other current assets		37			329			366
Escrow Deposits related to acquisition		1,495			(1,495	)		-
Total current assets	$	2,267		$	(1,196	)	$	1,071
LONG-TERM ASSETS:
Intangible assets, net		268			2,569			2,837
Property and equipment, net		85			568			653
Total assets	$	2,620		$	1,941		$	4,561
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable & accrued liabilities	$	1444		$	741		$	2,185
Current debt net of discount		1,530			1,200			2,730
Other long term liabilities		547			-			547
Long term debt		500			-			500
Total liabilities		4,021			1,941			5,962
Total stockholders' deficit		(1,401	)		-			(1,401	)
Total liabilities and stockholders' deficit	$	2,620		$	1,941		$	4,561

	Nine months ended April 30,
	As 2018						As 2017
	Reported			Pro Forma			Reported			Pro Forma
Revenue	$	403		$	4,247		$	137		$	3,995
Income (loss) from operations		(2,452	)		(2,236	)		(1,556	)		(1,367	)
Net income (loss)	$	(2,547	)	$	(2,425	)	$	(1,556	)	$	(1,676	)
Earnings (loss) per common share-Basic and Diluted	$	(0.26	)	$	(0.25	)	$	(0.26	)	$	(0.28	)