STOCKHOLDERS' EQUITY

6 Months Ended

Apr. 30, 2018

Preferred Stock

The Company has authorized 15,000,000 preferred shares with a par value of $0.0001 per share. The Board of Directors is authorized to divide the authorized shares of Preferred Stock into one or more series, each of which shall be so designated as to distinguish the shares thereof from the shares of all other series and classes.

Series A Preferred Stock

The Company has designated 4,600,000 shares of Series A Convertible Preferred Stock. The Series A Preferred Stock may convert into Common Stock at a rate equal to 10 shares of common stock for each share of Series A Preferred stock. Each Series A Preferred shareholder is entitled to vote, on par with the Common shareholders, one (1) vote for each share of Common Stock into which a Series A Preferred share may be converted. In the event that any cash dividend on the Common Stock is declared by the Board, the Board shall simultaneously declare a dividend for each share of Series A Preferred Stock in an amount equal to the product of (i) the per share dividend declared and to be paid in respect of each share of Common Stock and (ii) the amount of common stock the Series A Preferred Stock is convertible into under the designation.

As at April 30, 2018 and October 31, 2017, the Company had 4,600,000 shares of Series A Preferred Stock issued and outstanding.

Series B Preferred Stock

The Company has designated 8,000,000 shares of Series B Preferred Stock, with a face value of $1.00 per share. The Series B Preferred Stock has no conversion rights or no voting rights. The shareholders of the Series B Preferred will be entitled to a payment of $200 per pound that the Company harvests from its cultivation operations, which is divided by the outstanding shares of the Series B preferred shares.

As at April 30, 2018 and October 31, 2017, the Company had no shares of Series B Preferred Stock issued and outstanding.

Series C Preferred Stock

The Company has designated 500,000 shares of Series C Convertible Preferred Stock. The Series C Preferred Stock has no voting rights. The Series C Preferred Stock may convert into Common Stock at a rate equal to 10 shares of common stock for each share of Series C Preferred stock. Each Series C Preferred shareholder is entitled to vote, on par with the Common shareholders, one (1) vote for each share of Common Stock into which a Series C Preferred share may be converted. In the event that any cash dividend on the Common Stock is declared by the Board, the Board shall simultaneously declare a dividend for each share of Series C Preferred Stock in an amount equal to the product of (i) the per share dividend declared and to be paid in respect of each share of Common Stock and (ii) the amount of common stock the Series C Preferred Stock is convertible into under the designation.

As at April 30, 2018 and October 31, 2017, the Company had no shares of Series C Preferred Stock issued and outstanding.

Common Stock

As a result of an amendment to the Company’s Articles of Incorporation filed with the Colorado Secretary of State’s office on March 14, 2018, SIGO has authorized 27,000,000 common shares with a par value of $0.0001 per share. Each Common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholders of the corporation is sought.

During the six months ended April 30, 2018, the Company issued 500,000 shares of common stock for $50,000 recorded as subscription received at October 31, 2017.

On February 20, 2018, the Company issued 15,000 shares of common stock valued at $31,500 to Auctus Funds, LLC as partial repayment for the convertible note issued on February 1, 2018.

As at April 30, 2018 and October 31, 2017, the Company had 5,386,771 and 4,871,771 shares of Common Stock issued and outstanding, respectively.

Warrants Exercisable to Common Shares

The below table summarizes the activity of warrants exercisable for common shares during the six months ended April 30, 2018:

	Number of Shares		Weighted- Average Exercise Price
Balances as of October 31, 2017		-	$	-
Granted		211,883		1.90
Exercised		-		-
Forfeited		-		-
Balances as of April 30, 2018		211,883	$	1.90

The fair value of each warrant on the date of grant is estimated using the Black-Scholes option valuation model. The following weighted-average assumptions were used for options granted during the period ended April 30, 2018:

	Six months ended
	April 30,
	2018
Exercise price	$	1.90
Remaining contractual term		5
Expected average volatility	280% - 293%
Expected dividend yield		-
Risk-free interest rate	2.60% - 2.79%

The following table summarizes information relating to outstanding and exercisable warrants as of April 30, 2018:

Warrants Outstanding

Warrants Exercisable

Weighted Average

Number

Remaining Contractual

Weighted Average

Number

Weighted Average

of Shares

life (in years)

Exercise Price

of Shares

Exercise Price

211,883

4.79

1.90

211,883

1.90

Aggregate intrinsic value is the sum of the amounts by which the quoted market price of the Company’s stock exceeded the exercise price of the warrants at April 30, 2018 for those warrants for which the quoted market price was in excess of the exercise price (“in-the-money” warrants). As of April 30, 2018, the aggregate intrinsic value of warrants outstanding was approximately $0 based on the closing market price of $0.8395 on April 30, 2018.

The Company determined that the warrants qualify for derivative accounting as a result of the related issuances of convertible notes, which led to no explicit limit to the number of shares to be delivered upon future settlement of the conversion options (see Note 6).

Additional Paid in Capital

During the six months ended April 30, 2018, the Company’s officer contributed additional paid in capital in the amount of $78,493.

Sunset Island Group 10-Q