Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Aug. 31, 2018 | Oct. 17, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | Life On Earth, Inc. | |
Entity Central Index Key | 0001579010 | |
Document Type | 10-Q/A | |
Document Period End Date | Aug. 31, 2018 | |
Amendment Flag | true | |
Current Fiscal Year End Date | --05-31 | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Common Stock, Shares Outstanding | 28,387,067 | 28,284,492 |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2019 | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Amendment Description | restatement |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Aug. 31, 2018 | May 31, 2018 |
Current Assets: | ||
Cash and cash equivalents | $ 285,324 | $ 189,317 |
Accounts receivable, net of allowance for doubtful accounts of $18,000 and $14,000 as of August 31, 2018 and May 31, 2018, respectively | 290,861 | 181,551 |
Inventory | 348,108 | 338,920 |
Prepaid expenses | 53,125 | 102,243 |
Total current assets | 977,418 | 812,031 |
Other Assets: | ||
Equipment, net of accumulated depreciation of $39,234 and $30,937 as of August 31, 2018 and May 31, 2018, respectively | 103,480 | 111,777 |
Notes receivable | 38,015 | 47,909 |
Goodwill | 2,106,890 | 921,890 |
Intangible assets, net of accumulated amortization of $115,547 and $80,822 as of August 31, 2018 and May 31, 2018, respectively | 766,453 | 801,178 |
Security deposits | 22,245 | 22,245 |
Total Assets | 4,014,501 | 2,717,030 |
Current Liabilities | ||
Accounts payable and accrued expenses | 1,675,371 | 1,815,958 |
Note payable - related party | 2,000 | 2,000 |
Notes payable | 205,000 | 560,000 |
Convertible notes payable, net of unamortized deferred financing costs of $868,106 and $513,000 as of August 31, 2018 and May 31, 2018, respectively | 1,078,126 | 935,000 |
Loans payable, net of unamortized financings costs of $38,763 and $67,834 as of August 31, 2018 and May 31, 2018, respectively | 135,666 | 185,689 |
Lines of credit | 37,443 | 38,898 |
Loans payable - stockholder | 53,079 | 52,394 |
Total current liabilities | 3,186,685 | 3,589,939 |
Loans payable | 8,863 | 49,479 |
Loans payable - stockholders | 56,916 | 57,601 |
Total Liabilities | 3,252,464 | 3,697,019 |
Commitments and contingencies | ||
Stockholders' Equity (Deficiency): | ||
Series A Preferred stock, $0.001 par value; 10,000,000 shares authorized, 1,200,000 shares issued and outstanding | 1,200 | 1,200 |
Common stock, $0.001 par value; 100,000,000 shares authorized, 28,284,129 and 23,581,586 shares issued and outstanding, as of August 31, 2018 and May 31, 2018, respectively | 28,284 | 23,582 |
Additional paid in capital | 8,703,823 | 5,793,569 |
Accumulated deficit | (7,971,270) | (6,798,340) |
Total stockholders' equity (deficiency) | 762,037 | (979,989) |
Total liabilities and stockholders' equity (deficiency) | $ 4,014,501 | $ 2,717,030 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) | Aug. 31, 2018 | May 31, 2018 |
Allowance for doubful accounts | $ 18,000 | $ 14,000 |
Accumulated Depreciation | 39,234 | 30,937 |
Accumulated Amortization | $ 115,547 | $ 80,822 |
STOCKHOLDERS' EQUITY (DEFICIT) | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, authorized shares | 10,000,000 | 10,000,000 |
Preferred stock, issued shares | 1,200,000 | 1,200,000 |
Preferred stock, outstanding shares | 1,200,000 | 1,200,000 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, Authorized | 100,000,000 | 100,000,000 |
Common stock, Issued | 28,284,492 | 23,581,586 |
Common stock, outstanding | 28,284,492 | 23,581,586 |
Notes Payable [Member] | ||
Capitalized financing costs | $ 822,374 | $ 513,000 |
Loans Payable [Member] | ||
Capitalized financing costs | $ 38,763 | $ 67,834 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 3 Months Ended | |
Aug. 31, 2018 | Aug. 31, 2017 | |
Income Statement [Abstract] | ||
Sales, net | $ 1,354,134 | $ 1,036,044 |
Cost of goods sold | 1,116,761 | 818,526 |
Gross profit | 237,373 | 217,518 |
Expenses: | ||
Salaries and benefits | 189,197 | 128,363 |
Professional fees | 76,651 | 91,731 |
Consultants - share based compensation | 147,182 | 48,500 |
Travel | 35,139 | 18,929 |
Repairs and maintenance | 37,814 | 25,452 |
Rent | 34,405 | 11,363 |
Depreciation and amortization | 43,021 | 13,125 |
Advertising and promotion | 8,002 | 1,333 |
Officers' compensation | 11,156 | 9,493 |
Other | 145,728 | 63,440 |
Total expenses | 728,295 | 411,729 |
Loss from operations | (490,922) | (194,211) |
Other (expenses) | ||
Interest and financing costs | (682,008) | (335,033) |
Net loss | $ (1,172,930) | $ (529,244) |
Basic and diluted loss per share | $ (0.05) | $ (0.03) |
Basic and diluted weighted average number of shares outstanding | 25,351,437 | 18,925,515 |
Consoldiated Statement of Stock
Consoldiated Statement of Stockholders Equity (Deficit) - 3 months ended Aug. 31, 2018 - USD ($) | Common Stock | Series A Preferred Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning Balance, Shares at May. 31, 2018 | 23,581,586 | 1,200,000 | |||
Beginning Balance, Amount at May. 31, 2018 | $ 23,582 | $ 1,200 | $ 5,793,589 | $ (6,798,340) | $ (979,989) |
Issuance of common stock for services,shares | 231,773 | ||||
Issuance of common stock services, amount | $ 232 | 96,606 | 96,838 | ||
Issuance of common stock for deferred financing costs, shares | 757,500 | ||||
Issuance of common stock for deferred financing costs, amount | $ 757 | 519,782 | 520,539 | ||
Issuance of common shares for convertible debt at par value, shares | 2,077,270 | ||||
Issuance of common shares for convertible debt at par value, amount | $ 2,077 | 935,502 | 937,579 | ||
Issuance of common shares for acquisition of JCG, shares | 1,636,363 | ||||
Issuance of common shares for acquisition of JCGs, amount | $ 1,636 | 636,546 | 638,182 | ||
Contingent consideration for additional shares related to the acquisition of JCG, amount | 721,818 | 721,818 | |||
Net loss | (1,172,930) | (1,172,930) | |||
Ending Balance, Shares at Aug. 31, 2018 | 28,284,492 | 1,200,000 | |||
Ending Balance, Amount at Aug. 31, 2018 | $ 28,284 | $ 1,200 | $ 8,703,823 | $ (7,971,230) | $ 762,037 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 3 Months Ended | |
Aug. 31, 2018 | Aug. 31, 2017 | |
Cash Flows From Operating Activities | ||
Net loss | $ (1,172,930) | $ (529,244) |
Adjustments to reconcile net loss to net cash (used in) operating activities: | ||
Stock based compensation | 147,182 | 48,500 |
Depreciation and amortization | 43,021 | 13,125 |
Amortization of financing costs included in interest and financing costs | 667,073 | 287,105 |
Provision for bad debts | 4,000 | |
(Increase) decrease in: | ||
Accounts receivable | 54,390 | 6,753 |
Inventory | 62,847 | (14,863) |
Notes receivable | 9,894 | |
Prepaid expenses and other current assets | (1,227) | |
Increase (decrease) in: | ||
Accounts payable and accrued expenses | (62,341) | 344,785 |
Net cash (used in) operating activities | (248,091) | 156,161 |
Cash Flows From Investing Activities | ||
Acquisition of subsidiary, net of cash acquired | 265 | |
Net cash (used in) investment activities | 265 | |
Cash Flows From Financing Activities | ||
Repayment of loans payable | (205,000) | (155,095) |
Repayment of notes payable | (119,712) | |
Proceeds from lines of credit, net of financing costs | 20,162 | 25,088 |
Payment of lines of credit | (21,617) | (13,918) |
Proceeds from loan payable - related party | 20,000 | |
Proceeds from convertible notes payable, net of financing costs | 670,000 | |
Net cash provided by financing activities | 343,833 | (123,925) |
Net (Decrease)/ Increase in Cash and Cash Equivalents | 96,007 | 32,236 |
Cash and Cash Equivalents - beginning | 189,317 | 217,598 |
Cash and Cash Equivalents - end | 285,324 | 249,834 |
Supplemental Disclosures of Cash Flow Information | ||
Cash paid for: Interest | 15,853 | |
Noncash investing and financing activities: | ||
Common stock issued for deferred financing costs | 143,250 | |
Common stock issued for convertible debt | 150,000 | |
Common stock issued for deferred financing costs | $ 520,539 |
NATURE OF OPERATIONS AND SUMMAR
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Aug. 31, 2018 | |
Accounting Policies [Abstract] | |
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Note 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations Life On Earth, Inc. is an innovative brand accelerator, incubator and distribution platform focused on building and scaling concepts in the all-natural consumer products category. We focus on building brands within the alternative beverage space. We are a dynamic and innovative all-natural consumer packaged goods company focused on but not limited to the emerging beverage industry. We manufacture and distribute our brands through our distribution subsidiaries in New York and California. The accompanying consolidated financial statements include the financial statements of Life On Earth, Inc. (“LFER”) and its wholly owned subsidiaries, Energy Source Distributors Inc., (“ESD”), Victoria’s Kitchen, LLC (“VK”), The Giant Beverage Company, Inc. (“GBC”), and The Chill Group (“JCG”). LFER was incorporated in Delaware in April 2013 and acquired ESD in July 2016, VK in October 2017, GBC in April 2018 and JCG in August 2018. The Company currently markets and sell beverages, primarily in New York and California. Basis of Presentation The accompanying interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and applicable rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been omitted or condensed pursuant to such regulations. In the opinion of management, all adjustments considered necessary for a fair presentation of the interim periods presented have been included. All such adjustments are of a normal recurring nature. The accompanying condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and related notes included in the Company's Form 10-K/A as of May 31, 2018. Interim results are not necessarily indicative of the results of a full year. Revenue Recognition In May 2014, the FASB issued guidance codified in ASC 606 which amends the guidance in former ASC 605, “Revenue Recognition.” The core principle of the standard is to recognize revenue when control of the promised goods or services is transferred to customers in an amount that reflects the consideration expected to be received for those goods or services. The standard also requires additional disclosures around the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The Company recognizes sales of its beverage products, based on predetermined pricing, upon delivery of the product to its customers as that is when the customer obtains control of the goods. We considered several factors in determining that control transfers to the customer upon delivery of products. These factors include that legal title transfers to the customer, we have a present right to payment, and the customer has assumed the risk and rewards of ownership at the time of delivery. Payment is typically due within 30 days. The Company has no significant history of returns or refunds of its products. For the three months ending August 31, 2018 and 2017, sales of our beverage products totaled $1,354,134 and $1,036,044, respectively. All sales were to retail customers located within the United States with the majority of sales to customers in New York and California. Use of Estimates The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the consolidated balance sheets and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Net Loss Per Common Share Basic loss per share is calculated by dividing net loss by the weighted average number of common shares outstanding for the period. Diluted loss per share is calculated by dividing net loss by the weighted average number of common shares and dilutive common stock equivalents outstanding. During periods in which the Company incurs losses, common stock equivalents, if any, are not considered, as their effect would be anti -dilutive. As of August 31, 2018 and May 31, 2018, warrants and convertible notes payable could be converted into approximately 6,490,385 and 4,335,000 shares of common stock, respectively. Income Taxes The Company utilizes the accrual method of accounting for income taxes. Under the accrual method, deferred tax assets and liabilities are determined based on the differences between the financial reporting basis and the tax basis of the assets and liabilities, and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. An allowance against deferred tax assets is recognized when it is more likely than not that such tax benefits will not be realized. The Company recognizes the financial statement benefit of an uncertain tax position only after considering the probability that a tax authority would sustain the position in an examination. For tax positions meeting a “more-likely-than-not” threshold, the amount recognized in the consolidated financial statements is the benefit expected to be realized upon settlement with the tax authority. For tax positions not meeting the threshold, no financial statement benefit is recognized. The Company recognizes interest and penalties, if any, related to uncertain tax positions in income tax expense. The Company did not have any unrecognized tax benefits as of August 31, 2018 and does not expect this to change significantly over the next 12 months. Stock-Based Compensation The Company accounts for equity instruments issued to employees in accordance with ASC 718, Compensation - Stock Compensation. ASC 718 requires all share-based compensation payments to be recognized in the financial statements based on the fair value on the issuance date. Equity instruments granted to non-employees are accounted for in accordance with ASC 505, Equity. The final measurement date for the fair value of equity instruments with performance criteria is the date that each performance commitment for such equity instrument is satisfied or there is a significant disincentive for non-performance. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Accounts Receivable The Company extends credit to its customers in the normal course of business and performs ongoing credit evaluations of its customers, maintaining an allowance for potential credit losses. Uncollectible accounts are written off at the time they are deemed uncollectible. Accounts receivable is reported net of an allowance for doubtful accounts. The allowance is based on management's estimate of the uncollectible accounts receivable. As of August 31, 2018 and May 31, 2018, the allowance for doubtful accounts was $18,000 and $14,000, respectively. Inventory Inventory consists of finished goods and raw materials which are stated at the lower of cost (first-in, first-out) and net realizable value. Equipment Equipment is stated at cost. The Company provides for depreciation based on the useful lives of the assets using straight-line methods. Expenditures for maintenance, repairs, and betterments that do not materially prolong the normal useful life of an asset have been charged to operations as incurred. Upon sale or other disposition of assets, the cost and related accumulated depreciation and amortization are removed from these accounts, and the resulting gain or loss, if any, is reflected in operations. Goodwill Goodwill is deemed to have an indefinite life, and accordingly, is not amortized, but evaluated annually (or more frequently if events or changes in circumstances indicate the carrying value may not be recoverable) for impairment. The most significant assumptions, which are used in this test, are estimates of future cash flows. If these assumptions differ significantly from actual results, impairment charges may be required in the future. Advertising Advertising and promotion costs are expensed as incurred. Advertising and promotion expense amounted to $8,002 and $1,333 for the three months ended August 31, 2018 and 2017, respectively. Shipping and Handling Shipping and handling costs are included in costs of goods sold. Business combination GAAP requires that all business combinations not involving entities or businesses under common control be accounted for under the acquisition method. The Company applies ASC 805, "Business combinations", whereby the cost of an acquisition is measured as the aggregate of the fair values at the date of exchange of the assets given, liabilities incurred, and equity instruments issued. The costs directly attributable to the acquisition are expensed as incurred. Identifiable assets, liabilities and contingent liabilities acquired or assumed are measured separately at their fair value as of the acquisition date, irrespective of the extent of any non-controlling interests. The excess of (i) the total of cost of acquisition, fair value of the non-controlling interests and acquisition date fair value of any previously held equity interest in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the consolidated statements of operations and comprehensive income. The determination and allocation of fair values to the identifiable assets acquired and liabilities assumed is based on various assumptions and valuation methodologies requiring considerable management judgment. The most significant variables in these valuations are discount rates, terminal values, the number of years on which to base the cash flow projections, as well as the assumptions and estimates used to determine the cash inflows and outflows. Management determines discount rates to be used based on the risk inherent in the related activity's current business model and industry comparisons. Terminal values are based on the expected life of products and forecasted life cycle and forecasted cash flows over that period. The Company's estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Any changes to provisional amounts identified during the measurement period are recognized in the reporting period in which the adjustment amounts are determined. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”, effective for fiscal years beginning after December 15, 2018, that attempts to establish a uniform basis for recording revenue to virtually all industries’ financial statements. The revenue standard’s core principle is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration expected to be received for those goods or services. Additionally, the new guidance requires enhanced disclosure to help financial statement users better understand the nature, amount, timing and uncertainty of the revenue recorded. Effective June 1, 2018, the Company adopted Topic 606 using the modified retrospective method. The Company’s accounting policy for the new standard is based on a detailed review of its business and contracts. Based on the new guidance, the Company will continue to recognize revenue at the time its products are delivered, and therefore adoption of the standard did not have a material impact on its financial statements and is not expected to have a material impact in the future. In February 2016, the FASB issued a new accounting standard on leases. The new standard, among other changes, will require lessees to recognize a right-of-use asset and a lease liability on the balance sheet for all leases. The lease liability will be measured at the present value of the lease payments over the lease term. The right-of-use asset will be measured at the lease liability amount, adjusted for lease prepayments, lease incentives received and the lessee’s initial direct costs. The new standard is effective for annual reporting periods beginning after December 15, 2018, including interim reporting periods within those annual reporting periods. The adoption currently requires a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest period presented. In July 2018, the FASB issued ASU 2018-11 making transition requirements less burdensome. The standard provides an option to apply the transition provisions of the new standard at its adoption date instead of at the earliest comparative period presented in the Company’s financial statements. The Company is beginning its evaluation of the transition methods of the standard to determine the impact of the adoption on its financial statements. In January 2017, the FASB issued an update to the accounting guidance to simplify the testing for goodwill impairment. The update removes the requirement to determine the implied fair value of goodwill to measure the amount of impairment loss, if any, under the second step of the current goodwill impairment test. A company will perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. A goodwill impairment charge will be recognized for the amount by which the reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of the goodwill. The guidance is effective prospectively for public business entities for annual reporting periods beginning after December 15, 2019. This standard is required to take effect in the Company’s first quarter (August 2020) of our fiscal year ending May 31, 2021. We do not expect the adoption of this new guidance will have a material impact on our financial statements. Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements. |
RESTATEMENT
RESTATEMENT | 3 Months Ended |
Aug. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
RESTATEMENT | Note 2 – RESTATEMENT Stockholders’ equity (deficiency) as of August 31, 2018 has been restated as follows: Total Stockholders' Equity (deficiency) As reported $ 670,880 Adjustments recorded during the year ended May 31, 2018: Deferred financing costs related to issuance of convertible notes payable 538,334 Net financing cost associated with the issuance of convertible notes payable (663,796 ) Income tax benefit 136,890 Adjustments recorded during the quarter ended August 31, 2018: Net financing cost associated with the issuance of convertible notes payable 79,729 Restated $ 762,037 During May 2019, the Company discovered that an error was made in the accounting for the extinguishment of debt on January 26, 2018. The correction of the error resulted in the Company recording deferred financing costs in the amount of $538,334 as of May 31, 2018, reporting a decrease in interest and financing costs of $79,729 for the three months ended August 31, 2018 and reporting an increase in financing costs of $663,798 for the year ended May 31, 2018. In addition, during May 2019, the Company discovered that an error was made, in the accounting for goodwill for the GBC acquisition which did not include a component for the related deferred tax liability. The correction of this error resulted in the Company recording an income tax benefit in the amount of $136,890, for the year ended May 31, 2018. The total impact of these corrections was to increase the Company’s Stockholders’ Equity (Deficiency) by $91,157 for the three months ended August 31, 2018 and to decrease the Company’s Stockholders’ Equity (Deficiency) by $11,427 for the year ended May 31, 2018. The impact on the condensed consolidated financial statements is as follows: The condensed consolidated balance sheet as of August 31, 2018 includes an increase in goodwill of $136,890, an increase in convertible notes payable of $45,733, an increase in additional paid-in capital of $538,334, an increase in the accumulated deficit of $447,177, and an increase in stockholders’ equity (deficiency) of $91,157. The condensed consolidated statement of operations includes a decrease in interest and financing costs and net loss of $79,729 for the three months ended August 31, 2018. The condensed consolidated statement of changes in stockholders’ equity (deficiency) includes an increase in additional paid-in capital of $538,334 as of June 1, 2018 and August 31, 2018, an increase in the accumulated deficit of $526,906 and $447,177 as of June 1, 2018 and August 31, 2018, respectively, a decrease in stockholders’ equity (deficiency) of $11,427 as of June 30, 2018, and an increase in stockholders’ equity (deficiency) of $91,157 as of August 31, 2018. The condensed consolidated statement of cash flows includes a decrease in net loss of $79,729, and a decrease in amortization of interest and financing costs of $79,726 for the three months ended August 31, 2018. |
CONCENTRATIONS
CONCENTRATIONS | 3 Months Ended |
Aug. 31, 2018 | |
Risks and Uncertainties [Abstract] | |
CONCENTRATIONS | Note 3 - CONCENTRATIONS Concentration of Credit Risk The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and accounts receivable. The Company places its cash with high quality credit institutions. At times, balances may be in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limit. Cash in banks is insured by the FDIC up to $250,000 per institution, per entity. The Company routinely assesses the financial strength of its customers and, as a consequence, believes that its account receivable credit risk exposure is limited. Sales and Accounts Receivable During the three months ended August 31, 2018, sales to five customers accounted for approximately 40% of the Company’s net sales. During the three months ended August 31, 2017, sales to three customers accounted for approximately 22% of the Company’s net sales. Four customers accounted for approximately 14% of the Company’s accounts receivable as of August 31, 2018. One customer accounted for approximately 11% of the Company’s accounts receivable at May 31, 2018. |
JCG ACQUISITION
JCG ACQUISITION | 3 Months Ended |
Aug. 31, 2018 | |
Notes to Financial Statements | |
JCG ACQUISITION | Note 4 – JCG ACQUISITION To support the company’s strategic initiatives, the Company acquired JCG and the JCG brands. Effective August 2, 2018, the Company entered into an agreement (the “JCG Agreement”) to acquire all of the outstanding stock of JCG in exchange for 1,636,363 shares of the Company’s restricted common stock valued at $0.39 per share for a total value of approximately $638,000. If these shares are trading below $0.30 after August 2, 2019, the Company will issue additional shares so that the value of the 1,636,363 shares plus these additional shares, with a floor price of $0.20, will be equal to $900,000. The JCG Agreement also provides for the issuance of 850,000 warrants for the purchase of common stock with a two-year term and an exercise price of $0.85 with a value of approximately $9,400. The JCG Agreement also provides for an additional 1,090,909 shares of restricted common stock to be issued when the gross revenues of the JCG brands reach $900,000 in a twelve-month period. The JCG Agreement also provides for additional shares of restricted common stock, with a market value of $500,000 on the date of issuance, to be issued when the gross revenues of the JCG brands reach $3,000,000 in a twelve-month period, and again when the gross revenues of the JCG brands reach $5,000,000 in a twelve-month period. The JCG Agreement also provides for the issuance of the restricted common stock and warrants to the shareholders of JCG on a pro rata basis according to their respective percentage of ownership as of August 2, 2018. The restricted common stock may not be transferred, sold, gifted, assigned, pledged, or otherwise disposed of, directly or indirectly, for a period of twelve months (the “Lock-Up Period”). After the Lock-Up Period, the maximum shares that may be sold by each restricted common stockholder during any given one-day period shall be 5% of their total holdings or no more than 20% of the average trading volume of the preceding 30 days, whichever is less. The Company has determined the value of the contingent shares and warrants, in excess of the initial 1,636,363 shares, to be approximately $722,000, for a total purchase price value of approximately $1,360,000. The Company has not received a summary of the shareholders of JCG as of August 2, 2018 and, as a result, has not issued any shares or warrants as of October 19, 2018. The purchase price of $1,360,000 has been recorded by the Company and is included in Accrued expenses at August 31, 2018. The following table summarizes the allocation of the purchase price to the fair values of the assets acquired and liabilities assumed at the date of acquisition: Issuance of 1,636,363 shares of common stock with an estimated fair value of $.39 per share $ 638,182 Contingent consideration for additional shares and warrants (included in additional paid-in capital) 721,818 Total purchase consideration $ 1,360,000 Cash $ 265 Accounts receivable 167,700 Inventory 72,035 Accounts payable (65,000 ) Goodwill 1,185,000 Net assets acquired $ 1,360,000 The goodwill acquired will be amortized over fifteen (15) years for tax purposes. From the date of acquisition through August 31, 2018, JCG generated sales of approximately $21,000, cost of goods sold of approximately $16,000, and a net loss of approximately $17,000. The following table presents the unaudited pro forma condensed consolidated statements of operations for the three months ended August 31, 2018: LFER JCG ProForma Adjustments Notes ProForma Combined Sales, net $ 1,332,946 $ 162,158 $ — $ 1,495,104 Cost of goods sold 1,100,342 96,458 1,196,800 Gross profit 232,604 65,700 298,304 Operating expenses 706,138 96,440 802,578 Net Loss before other expenses (473,534 ) (30,740 ) (504,274 ) Other expenses (761,737 ) — (761,737 ) Net Loss $ (1,235,271 ) $ (30,740 ) $ — $ (1,266,011 ) See accompanying notes to the condensed consolidated unaudited proforma financial information. Life On Earth, Inc. Notes to the Unaudited Pro Forma Condensed Consolidated Financial Information Proforma Note 1. — Basis of presentation The unaudited pro forma condensed consolidated financial statements are based on Life On Earth, Inc.’s (the “Company”, “LFER”) historical consolidated financial statements as adjusted to give effect to the acquisition of JCG as if it had occurred on June 1, 2018. Proforma Note 2 —Purchase price allocation The unaudited pro forma condensed financial information includes various assumptions, including those related to the purchase price allocation of the assets acquired and liabilities assumed from JCG based on management’s best estimates of fair value. |
GBC ACQUISITION
GBC ACQUISITION | 3 Months Ended |
Aug. 31, 2018 | |
Notes to Financial Statements | |
GBC ACQUISITION | Note 5 – GBC ACQUISITION To support the company’s strategic initiatives, the Company acquired GBC for its distribution capabilities in the New York metropolitan region. Effective April 26, 2018, the Company acquired all of the outstanding stock of GBC for total consideration of $730,092, of which, $108,079 was paid in cash and $622,013 was paid by the issuance of 1,455,000 shares of the Company’s common stock at $0.4275 per share. If, after 12 months from the date of the closing, the shares are trading below twenty ($0.20) cents per share, the Company shall issue 485,000 additional shares as additional stock consideration. The Company has determined the value of these contingent shares to be di minimis. In conjunction with the closing, the stockholders of GBC are subject to the provisions of a non-competition/non-solicitation/non-disclosure agreement. One of the former stockholders of GBC has been appointed as the Company’s General Manager pursuant to a 2-year employment agreement. At April 26, 2018, the fair value of the assets acquired and liabilities assumed from GBC were as follows: Assets: Cash $ 118,941 Accounts receivable 36,365 Inventory 79,283 Equipment 65,925 Notes receivable 61,344 Goodwill 726,890 Customer list 507,000 $ 1,595,748 Liabilities: Accounts payable $ 402,700 Intercompany loans 116,071 Deferred tax liability 136,890 Line of credit 15,833 Loans payable 194,162 $ 865,656 Net Assets Acquired $ 730,092 The estimated useful life of the customer list is five (5) years. Amortization expense of $25,350 was recorded during the three months ended August 31, 2018. The estimated useful life of the equipment is five (5) years. Depreciation expense of $4,546 was recorded during the three months ended August 31, 2018. See Note 6 for the unaudited pro forma condensed consolidated statements of operations for the three months ended August 31, 2017. |
VK ACQUISITION
VK ACQUISITION | 3 Months Ended |
Aug. 31, 2018 | |
Notes to Financial Statements | |
VK ACQUISITION | Note 6 – VK ACQUISITION To support the Company’s strategic initiatives, the Company acquired VK and the VK brands. Effective October 19, 2017, the Company acquired 100% of the outstanding membership interests of VK, for 312,500 restricted shares of the Company’s common stock at a price of $0.40 per share for a total consideration of $125,000. At October 19, 2017, the fair value of the assets acquired and liabilities assumed from VK were as follows: Cash $ 1,355 Accounts receivable 13,024 Inventory and work in process 40,564 Accounts payable (16,343 ) Notes payable (108,600 ) Goodwill 195,000 Net assets acquired $ 125,000 See Note 6 for the unaudited pro forma condensed consolidated statements of operations for the three months ended August 31, 2017. |
UNAUDITED CONDENSED CONSOLIDATE
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL INFORMATION | 3 Months Ended |
Aug. 31, 2018 | |
Business Combinations [Abstract] | |
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL INFORMATION | Note 7 – UNAUDITED CONDENSED CONSOLIDATED FINANCIAL INFORMATION Life On Earth, Inc. Unaudited ProForma Condensed Consolidated Financial Information for the three months ended August 31, 2017 LFER VK GBC ProForma Adjustments ProForma Combined Sales, net $ 1,036,044 $ 45,274 $ 779,279 $ — $ 1,860,597 Cost of goods sold 818,526 30,140 695,720 — 1,544,386 Gross profit 217,518 15,134 83,559 — 316,211 Operating expenses 411,729 8,188 95,423 15,175 a 530,515 Net loss before other expenses (194,211 ) 6,946 (11,864 ) (15,175 ) (214,304 ) Other expenses, net (335,033 ) (1,443 ) (4,597 ) — (341,073 ) Net loss $ (529,244 ) $ 5,503 $ (16,461 ) $ (15,175 ) $ (555,377 ) See accompanying notes to the condensed consolidated unaudited proforma financial information. Life On Earth, Inc. Notes to the Unaudited ProForma Condensed Consolidated Financial Information ProForma Note 1. — Basis of presentation The unaudited pro forma condensed consolidated financial statements are based on Life On Earth, Inc.’s (the “Company”, “LFER”) historical consolidated financial statements as adjusted to give effect to the acquisitions of VK and GBC as if they had occurred on June 1, 2017. ProForma Note 2 —Purchase price allocation The unaudited pro forma condensed financial information includes various assumptions, including those related to the purchase price allocation of the assets acquired from VK and GBC based on management’s best estimates of fair value. Proforma Note 3 — Pro Forma adjustment The pro forma adjustments are based on our estimates and assumptions that are subject to change. The following adjustments have been reflected in the unaudited pro forma condensed consolidated financial information: (a) Reflects the depreciation related to the acquired property and equipment and the amortization of the intangible assets acquired. Proforma Note 4 — Commitments In connection with the acquisition of GBC, the Company assumed a lease for approximately 5,250 square feet of office and warehouse space located in Staten Island, New York at a base rent of $8,500 per month. The lease terminates on April 26, 2023, in addition, the Company entered into an employment agreement, beginning April 26, 2018, with a general manager for a period of two years at a cost of $75,000, per year. |
GOODWILL
GOODWILL | 3 Months Ended |
Aug. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL | Note 8 - GOODWILL Goodwill represents the excess of the purchase price over the fair value of the net assets acquired from JCG, VK and GBC as disclosed in Notes 3, 4 and 5. The changes in the carrying amount of goodwill for the three months ended August, 2018 and for the year ended May 31, 2018 were as follows: Three months ended Year ended Balance at beginning of the period/year $ 921,890 $ — Acquisition of GBC (Note 4) — 726,890 Acquisition of VK (Note 5) — 195,000 Acquisition of JCG (Note 3) 1,185,000 — Balance at the end of the period/year $ 2,106,890 $ 921,890 Goodwill resulting from the business acquisitions completed in the three months ended August 31, 2018 and in the year ended May 31, 2018 have been allocated to the financial records of the acquired entity. For the three months ended August 31, 2018 and for the year ended May 31, 2018, the Company did not recognize goodwill impairment. As of August 31, 2018 and May 31, 2018, there had not been any accumulated goodwill impairment recognized. |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 3 Months Ended |
Aug. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
INTANGIBLE ASSETS | Note 9 – Intangible assets as of August 31, 2018 and May 31, 2018 are summarized as follows: August 31, 2018 May 31, 2018 Intangible assets: Intangible assets to be amortized: Business relationships and customer lists $ 882,000 $ 882,000 Less: accumulated amortization: Intangible assets to be amortized: Business relationships and customer lists 115,547 80,822 Net book value at the end of the period/year $ 766,453 $ 801,178 The Company’s intangible assets are tested for impairment if impairment indicators arise. The Company amortizes its intangible assets using the straight-line method over a period ranging from 5-10 years. Amortization expense for the three months ended August 31, 2018 and 2017 was approximately $34,245 and $9,375, respectively. The annual estimated amortization expense for intangible assets for the five succeeding years is as follows: For the twelve months ended August 31, 2019 $ 138,900 2020 138,900 2021 138,900 2022 138,900 2023 105,083 Thereafter 105,770 $ 766,453 |
LOANS PAYABLE - STOCKHOLDERS
LOANS PAYABLE - STOCKHOLDERS | 3 Months Ended |
Aug. 31, 2018 | |
Notes to Financial Statements | |
LOANS PAYABLE - STOCKHOLDERS | Note 10 - LOANS PAYABLE – STOCKHOLDERS In connection with the acquisition of GBC, the Company entered into a loan agreement with the former owners of GBC in the amount of $109,995. The former owners of GBC became stockholders of the Company when the acquisition of GBC was completed. The loan bears interest at 7% per annum, requires monthly payments of principal and interest totaling $4,925, and matures in April 2020, at which time all unpaid principal and interest is due. The loan is secured by all of the assets of GBC. At August 31, 2018 and May 31, 2018 the outstanding balance of the loan was $109,995. As of August 31, 2018, future principal payments of the loan were approximately as follows: For the twelve months ended August 31, 2019 $ 53,079 2020 56,916 $ 109,995 |
NOTES PAYABLE - RELATED PARTY
NOTES PAYABLE - RELATED PARTY | 3 Months Ended |
Aug. 31, 2018 | |
Notes to Financial Statements | |
NOTES PAYABLE - RELATED PARTY | Note 11 – NOTES PAYABLE – RELATED PARTY In June 2017, the Company issued a demand note in the amount of $20,000 to a related party. The note is unsecured, bears interest at 15% and matured October 2017. During October 2017, the Company repaid $18,000 of the note. During the three months ended August 31, 2018, the Company recorded interest expense of $1,761. At August 31, 2018 and May 31, 2018, the unpaid principal balance of the loan was $2,000. As of August 31, 2018 the unpaid principal balance no longer continues to accrue interest and the lender has not demanded payment. |
NOTES PAYABLE
NOTES PAYABLE | 3 Months Ended |
Aug. 31, 2018 | |
Debt Disclosure [Abstract] | |
NOTES PAYABLE | Note 12 – NOTES PAYABLE In July 2016, the Company entered into a Senior Secured Revolving Credit Facility Agreement (the “Credit Facility”) with TCA Global Credit Master Fund L.P. (“TCA”) for a total amount of $7.5 million. ESD is Corporate Guarantor to the Credit Facility. Under the terms of the Credit Facility, the Company paid advisory fees to TCA in the amount of $350,000, through the issuance of 374,332 shares of common stock. On July 5, 2016, the Company borrowed $650,000 from the Credit Facility and used the proceeds to acquire ESD for $450,000; payoff a note payable in the amount of $32,534; $74,466 was used to pay vendors for inventory purchases and $93,000 was paid to TCA for closing fees. The Credit Facility had a maturity date of December 27, 2017. The Credit Facility required fees and interest only payments at 12% during the first two months. Principal payments began in the third month. At the maturity date, all unpaid principal and interest was due. The advisory fees and closing fees totaling $443,000 were recognized as deferred financing costs. In June 2018, the Company and TCA mutually agreed to settle the debt for a total amount of $560,000, of which $410,000 is to be paid in cash in 6 equal monthly installments of $68,333 beginning in June 2018 and $150,000 to be paid with shares of the Company’s common stock. As of August 31, 2018 and May 31, 2018, the outstanding balance was $205,000 and $560,000, respectively. As of August 31, 2018, future principal payments of the note payable were approximately as follows: For the twelve months ending August 31, 2019 $ 205,000 |
CONVERTIBLE NOTES PAYABLE
CONVERTIBLE NOTES PAYABLE | 3 Months Ended |
Aug. 31, 2018 | |
Notes to Financial Statements | |
CONVERTIBLE NOTES PAYABLE | Note 13 – CONVERTIBLE NOTES PAYABLE During the quarter ended November 30, 2016, the Company entered into Convertible Promissory Note Agreements (The “Convertible Notes”) with seven (7) individuals (“Holders”) pursuant to which they purchased the Company’s unsecured fixed price convertible promissory notes in the aggregate principal amount of $803,000. The Convertible Notes carry interest at the rate of 5% per annum and mature at various dates through November 7, 2017. The Convertible Notes were issued with a 10% original issue discount. As additional consideration for the purchase of the Convertible Notes, the Company has issued an aggregate of 1,790,000 shares of its common stock to the Holders, during March 2017. Pursuant to the Convertible Notes, the Company issued common stock purchase warrants (The “Warrants“). The Warrants allow the Holders to purchase up to an aggregate of 730,000 shares of the Company’s common stock at an exercise price of $0.85 per share until September 30, 2021. Also, under the terms of the Convertible Notes, the Company and the Holders entered into a registration rights agreement covering the 1,790,000 shares issued. Pursuant to the terms of the registration rights agreement, the Company has filed a registration statement with the U.S. Securities and Exchange Commission covering up to an aggregate of 6,033,131 shares of the Company’s common stock. The registration became effective on March 29, 2017. On September 20, 2017 and upon maturity, the Company repaid one Convertible Note Holder the principal amount of $440,000 and, accrued and unpaid interest in the amount of $21,156. In addition, the Company purchased 1,100,000 shares of treasury stock from the Holder for $63,844 and subsequently the shares were cancelled. On November 6, 2017 and upon maturity, the Company repaid two Convertible Note Holders the aggregate principal amount of $165,000 and, accrued and unpaid interest in the amount of $8,747. During November 2017, the Company and the remaining four Convertible Note Holders agreed to extend the maturity date of their respective Convertible Notes to September 30, 2018. In July 2018, the Company and one Convertible Note Holder agreed to convert the outstanding principal balance of $110,000 and related accrued interest of $10,648 into 804,557 shares of the Company’s common stock. As of August 31, 2018 and May 31, 2018, the outstanding balance was $88,000 and $110,000, respectively. In November 2017, the Company borrowed $20,000 from a related party. The note matured in May 2018, bore interest at 7% per annum and was convertible into common stock of the Company at a fixed price of $0.15 per share. As additional consideration for the issuance of the convertible note, the Company issued 40,000 shares of the Company’s common stock on March 1, 2018. As a result of this transaction the Company recorded a deferred finance cost of $20,000, all of which was amortized during the year ended May 31, 2018. In June 2018, the note was converted into 133,333 shares of the Company’s common stock. On September 25, 2017, the Company entered into a note purchase agreement (“NPA”), pursuant to which the Company issued a 7% secured promissory note (“SPN”) in the principal amount of $650,000 (the “650K Note”), which matures on March 25, 2019. As additional consideration for the issuance of the SPN, the Company issued 1,500,000 restricted shares of the Company’s common stock at $0.20 per share, which was recorded as a deferred finance cost. The deferred finance cost is being amortized over the life of the SPN. On November 3, 2017, the NPA was amended and an additional 7% SPN was issued to the purchaser in the principal amount of $175,000 (the “$175K Note”), which matures on May 3, 2019. As additional consideration for the issuance of the $175K Note, the Company issued 800,000 restricted shares of the Company’s common stock at $0.42 per share, which was recorded as a deferred finance cost. The deferred finance cost is being amortized over the life of the SPN. Both SPN’s are secured by a continuing security interest in substantially all assets of the Company. Under the terms of the NPA, the Company was required to pay a consulting fee of $65,000 to the purchaser. In November 2017, the purchaser agreed to and accepted from the Company, 433,333 shares of the Company’s common stock, which shares were issued at $0.40 per share, in lieu of payment of the consulting fee, which was recorded by the Company as a deferred finance cost. The deferred finance cost is being amortized over the life of the SPN’s. On January 26, 2018, the Company entered into a NPA, pursuant to which the Company issued a Note in the amount of $125,000 (the “Note Purchase”). The Note bears interest at 7% per annum and matures on January 26, 2019. In connection with the NPA, the Company and the Purchaser also entered into a Side Letter, pursuant to which, as additional consideration for the NPA, the Company agreed to (i) pay to the Purchaser, the first $125,000 in cash proceeds received by the Company in connection with a NPA from third parties unaffiliated with the Purchaser (the “Cash Payment”) shall be used to reduce the amount due to the Purchaser under the $175K Note , and (ii), with certain exceptions, not issue any shares of common stock or other securities convertible into shares of common stock unless and until the Cash Payment has been made in full. As of August 31, 2018 and May 31, 2018, the outstanding balance was $125,000. As further consideration for the Note Purchase, the Company entered into an agreement to amend certain SPN’s (the “Note Amendment”), pursuant to which the $175K Note and the $650K Note (together, the “Old Notes”) were amended to provide the Purchaser with the ability to convert the principal amount of such Old Notes, together with accrued interest thereon, into shares of the Company’s common stock (the “Conversion Shares”). Pursuant to the Note Amendment, the conversion price shall be equal to $0.30, subject to adjustments as set forth in the Note Amendment, and the number of Conversion Shares issuable upon conversion of the Old Notes shall be equal to the outstanding principal amount and accrued but unpaid interest due under the terms of the Old Notes to be converted, divided by the Conversion Price. As of August 31, 2018 and May 31, 2018, the outstanding balance was $737,500 and $825,000, respectively. In July 2018, the Company (i) issued 500,000 common shares to note holder at a conversion price of $0.175 per share, to cancel $87,500 of principal amount due by the Company regarding the $175K Note; (ii) issued 300,000 shares at $0.175 per share to the note holder representing 100,000 shares per month penalty for the 3 month period from February 2018 through April 2018; (iii) paid the note holder an aggregate of $19,250 representing 4 months of accrued interest due by the Company from January 2018 through April 30, 2018 regarding the $650K and the $175K Notes; and, (iv) shall issue 196,677 shares to the note holder representing the remainder of interest due through December 31, 2018, representing $4,302 per month due on the total principal amount due of $737,500. As a result of these transactions, the Company recorded finance costs of $151,250 and $143,250, during the three months ended August 31, 2018 and for the year ended May 31, 2018, respectively. The Note Amendment has been treated as an extinguishment of the old notes and an issuance of new notes. As a result of this transaction the Company recorded deferred financing costs on the New Notes, and the $125,000 note purchases of $538,335, of which $94,750 was amortized during the three months ended August 31, 2018. Accrued and unpaid interest expense on the NPA of $15,859 was recorded by the Company during the three months ended August 31, 2018, and is reported as accounts payable and accrued expenses. In connection with the acquisition of VK, the Company assumed a promissory note in the amount of $108,600. The note accrued interest at an annual rate of 6.5% and matured on March 31, 2018. During the year ended May 31, 2018, the Company recorded interest expense of $1,883. In December 2017, the Company made a principal payment of $5,000. On January 26, 2018, the Company entered into a Note Exchange Agreement (the “NEA”) with the owner of the promissory note assumed from VK, pursuant to which the owner agreed to cancel the promissory note in exchange for a new secured convertible promissory note (the “Note”) in the aggregate principal amount equal to $103,000, the outstanding balance. On February 14, 2018, the owner of the promissory note elected to convert the Note into 343,333 shares of the Company’s common stock. In February 2018, the company offered a note purchase agreement, in the aggregate amount of up to $700,000 (the “Note Offering”). Notes issued under the Note Offering shall mature one year from the date of issuance (the “Maturity Date”), shall accrue interest at the simple rate of 7% per annum, and are convertible, at the holder’s option, prior to the Maturity Date into that number of shares of the Company’s common stock, equal to the lower of (i) $0.30 per share of common stock, or (ii) that number of shares of common stock equal to the average closing price of the Company’s common stock as reported on the OTC Markets for the preceding 30 trading days prior to the date of conversion, multiplied by 0.65 (the “Conversion Price”); provided, however, in the event the Conversion Price is calculated based on (ii) above, the Conversion Price shall not be lower than $0.20 per share of common stock. All amounts due under the terms of the Notes shall be secured by a continuing security interest in substantially all of the assets of the Company. In March 2018, the Company issued secured convertible promissory notes to four (4) investors under the terms of the Note Offering in the aggregate amount of $220,000. As a result of these transactions the Company recorded deferred finance costs in the aggregate amount of $76,117, of which $19,004 and $16,674 was amortized during the three months ended August 31, 2018 and for the year ended May 31, 2018, respectively. During the three months ended August 31, 2018, the Company recorded interest expense of $3,850. As of August 31, 2018, the outstanding balance was $220,000. In May 2018, the Company offered a NPA, in the aggregate amount of up to $500,000 (the “2nd Note Offering”) and, as of August 31, 2018, issued secured convertible promissory notes to nineteen (19) investors under the terms of the 2nd Note Offering in the aggregate amount of $730,000. Notes issued under the 2 nd nd As a result of this transaction, the Company recorded deferred finance costs in the aggregate amount of $513,776, of which, $89,009 and $539 was amortized during the three months ended August 31, 2018 and during the year ended May 31, 2018, respectively. As of August 31, 2018, the outstanding balance was $730,000. As of August 31, 2018, future principal payments of the convertible notes payable were approximately as follows: For the twelve months ending August 31, 2019 $ 1,900,500 |
LOANS PAYABLE
LOANS PAYABLE | 3 Months Ended |
Aug. 31, 2018 | |
Notes to Financial Statements | |
LOANS PAYABLE | Note 14 – LOANS PAYABLE In July 2016, the Company entered into an agreement (the “Purchase and Sale Agreement”) with ESBF California LLC (“ESBF”). Under the terms of the agreement, the Company received $197,370 of cash proceeds from ESBF and agreed to repay the amount of $266,000 secured by future sales proceeds. In March 2017, the Company entered into a second Purchase and Sale Agreement with ESBF. Under the terms of the second agreement, the Purchase and Sale Agreement entered into in July 2016 was paid in full and the Company received $131,370 of cash proceeds from ESBF in exchange for a loan payable in the amount of $266,000 secured by future sales proceeds. In January 2018, the Company entered into a third Purchase and Sale Agreement with ESBF. Under the terms of the third agreement, the Purchase and Sale Agreement entered into in March 2017 was paid in full in the amount of $24,180 and the Company received approximately $170,000 of cash proceeds from the Buyer in exchange for a loan payable in the amount of $272,000 secured by future sales proceeds. In addition, the Company paid a management fee of $6,000 to complete this transaction. The difference between the aggregate of the Purchase and Sale Agreement pay-off, the management fee and the cash received and the cash to be paid from future sales proceeds of $272,000 was recognized as financing costs which has been capitalized and is being amortized over the repayment period. This amount has been reflected as a direct reduction of the loan payable in the accompanying condensed consolidated balance sheets. During the three months ended August 31, 2018, the Company made payments aggregating $77,714. The Company is obligated to make payments equal to 15% of future receipts estimated to be approximately 63 payments of $1,177 to ESBF each business day until the full amount of the future sales proceeds is repaid. The Company recognized amortization expense of $21,025 for the three months ended August 31, 2018. As of August 31, 2018 and May 31, 2018, the outstanding balance was $74,260 and $151,974, respectively. In April 2018, the Company entered into an agreement (“Purchase and Sale Agreement”) with Premium Business Services LLC (“PBS”). Under the terms of the agreement, the Company received $60,000 of cash proceeds from PBS in exchange for a loan payable in the amount of $81,000, secured by future sales proceeds. The difference between the aggregate of the Purchase and Sale Agreement pay-off and the cash to be paid from future sales proceeds of $81,000 was recognized as capitalized financing costs and is being amortized over the repayment period. This amount has been reflected as a direct reduction of the loan payable in the accompanying consolidated balance sheets. During the three months ended August 31, 2018, the Company has made payments aggregating $27,857. The Company is obligated to make approximately 99 payments of $429 to PBS each business day until the full amount of the future sales proceeds is repaid. The Company recognized amortization expense of $8,047 for the three months ended August 31, 2018. As of August 31, 2018 and May 31, 2018, the outstanding balance was $42,429 and $70,286, respectively. In connection with the acquisition of GBC, the Company acquired a loan payable with the US Small Business Administration in the amount of $135,812. In April 2018, the Company repaid $60,000 in accordance with the acquisition. The loan bears interest at prime plus 2.75% per annum, matures on December 31, 2020, and is guaranteed by both of the former owners of GBC. Minimum monthly payments of principal and interest amount to $4,383. The loan balance at August 31, 2018 and May 31, 2018 was $57,321 and $68,560, respectively. In connection with the acquisition of GBC, the Company acquired a bank loan with a balance due of $12,182 for a delivery vehicle. The loan matures in April 2020 and bears interest at 7% per annum. The monthly payments are $578. As of August 31, 2018 and May 31, 2018, the outstanding balance of the auto loan is $9,282 and $12,182, respectively. As of August 31, 2018, future principal payments of loans payable were approximately as follows: For the twelve months ending August 31, 2019 $ 174,000 2020 9,000 $ 183,000 |
LINES OF CREDIT
LINES OF CREDIT | 3 Months Ended |
Aug. 31, 2018 | |
Notes to Financial Statements | |
LINES OF CREDIT | Note 15 – LINES OF CREDIT In connection with the acquisition of GBC, the Company acquired a $15,833 credit line with a small business lender which has no expiration date and bears interest at 10.25%. The facility is guaranteed by one of the former stockholders of GBC. At August 31, 2018 and May 31, 2018, the outstanding balance was $13,468 and $16,044, respectively. In April 2017, the Company entered into a credit line with a small business lender that allows the Company to borrow up to $35,000 and bears interest at 94% per annum. The facility requires weekly payments of principal and interest. At August 31, 2018 and May 31, 2018, the outstanding balance was $23,975 and $22,854, respectively. On September 26, 2017, the Company entered into a revolving credit note (the “Revolver”), providing for borrowings of up to $750,000 at an annual interest rate of 7%. Amounts due under the terms of the Revolver are convertible, at the option of the holder, into shares of the Company’s common stock equal to the principal and accrued interest due on the date of conversion divided by $1.50. As of August 31, 2018 and May 31, 2018, the Company has not made any borrowings from the Revolver. As of August 31, 2018, the future principal payments of our lines of credit were as follows: For the twelve months ending August 31, 2019 $ 37,443 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Aug. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | Note 16 - COMMITMENTS AND CONTINGENCIES In connection with the acquisition of ESD, the Company assumed a lease for approximately 13,000 square feet of warehouse space located in Gilroy, California at a base rent of $5,248 per month. The lease terminates on June 30, 2021. In connection with the acquisition of GBC, the Company assumed a lease for approximately 5,250 square feet of office and warehouse space located in Staten Island, New York at a base rent of $8,500 per month. The lease provides for annual increases of 2.5% over a period of six years and terminates on April 26, 2023. In addition, the Company entered into an employment agreement with a stockholder, beginning April 26, 2018, for a period of two years at a cost of $75,000, per year. Rent expense for the three months ended August 31, 2018 and 2017 totaled $34,405 and $11,363, respectively. |
INCOME TAXES
INCOME TAXES | 3 Months Ended |
Aug. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | Note 17 - INCOME TAXES The deferred tax asset consists of the following: August 31, 2018 May 31, 2018 Net operating loss carryforward $ 1,641,000 $ 1,374,000 Stock based compensation 489,000 449,000 Intangible Assets (136,890 ) (136,890 ) Valuation allowance (1,993,110 ) (1,686,110 ) Deferred tax asset, net $ — $ — For the three months ended August 31, 2018 and for the year ended May 31, 2018, the valuation allowance increased by approximately $307,000 and $660,000, respectively. On December 22, 2017, the enactment date, the Tax Cuts and Jobs Act ("Act") was signed into law. The Act enduringly reduces the top corporate tax rate from 35 percent to a flat 21 percent beginning January 1, 2018 and eliminates the corporate Alternative Minimum Tax. The Company has adjusted its deferred tax calculations to reflect this reduction in its tax rate. The deferred tax asset differs from the amount computed by applying the statutory federal and state income tax rates to the loss before income taxes. The sources and tax effects of the differences are as follows: August 31, 2018 May 31, 2018 Federal Rate 21 % 21 % State Rate 6 % 6 % Valuation Allowance -27 % -27 % Effective income tax rate 0 % 0 % As of August 31, 2018, the Company has net operating loss carryforwards of approximately $7,971,000 to reduce future federal and state taxable income. The Company currently has no federal or state tax examinations in progress, nor has it had any federal or state examinations since its inception. All of the Company's tax years are subject to federal and state tax examinations. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 3 Months Ended |
Aug. 31, 2018 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | Note 18 - RELATED PARTY TRANSACTIONS The Company had leased office space on a month to month basis from the Company's Chief Operating Officer and stockholder for $750 per month. The lease terminated in March 2018. |
GOING CONCERN
GOING CONCERN | 3 Months Ended |
Aug. 31, 2018 | |
Accounting Policies [Abstract] | |
GOING CONCERN | Note 19 - GOING CONCERN The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred losses from inception of approximately $7,971,000 and has a working capital deficiency of approximately $2,209,000 as of August 31, 2018. Management believes these conditions raise substantial doubt about the Company's ability to continue as a going concern for the twelve months following the date condensed consolidated financial statements are issued. Management intends to finance operations over the next twelve months through borrowings from related parties, existing lenders, and others. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Aug. 31, 2018 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | Note 20 - SUBSEQUENT EVENTS Subsequent to August 31, 2018, the Company issued 102,575 shares of its common stock valued at approximately $40,000 or financing and services. |
NATURE OF OPERATIONS AND SUMM_2
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Aug. 31, 2018 | |
Accounting Policies [Abstract] | |
Nature of Operations | Nature of Operations Life On Earth, Inc. is an innovative brand accelerator, incubator and distribution platform focused on building and scaling concepts in the all-natural consumer products category. We focus on building brands within the alternative beverage space. We are a dynamic and innovative all-natural consumer packaged goods company focused on but not limited to the emerging beverage industry. We manufacture and distribute our brands through our distribution subsidiaries in New York and California. The accompanying consolidated financial statements include the financial statements of Life On Earth, Inc. (“LFER”) and its wholly owned subsidiaries, Energy Source Distributors Inc., (“ESD”), Victoria’s Kitchen, LLC (“VK”), The Giant Beverage Company, Inc. (“GBC”), and The Chill Group (“JCG”). LFER was incorporated in Delaware in April 2013 and acquired ESD in July 2016, VK in October 2017, GBC in April 2018 and JCG in August 2018. The Company currently markets and sell beverages, primarily in New York and California. |
Basis of Prersentation | Basis of Presentation The accompanying interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and applicable rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been omitted or condensed pursuant to such regulations. In the opinion of management, all adjustments considered necessary for a fair presentation of the interim periods presented have been included. All such adjustments are of a normal recurring nature. The accompanying condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and related notes included in the Company's Form 10-K as of May 31, 2018. Interim results are not necessarily indicative of the results of a full year. |
Revenue Recognition | Revenue Recognition In May 2014, the FASB issued guidance codified in ASC 606 which amends the guidance in former ASC 605, “Revenue Recognition.” The core principle of the standard is to recognize revenue when control of the promised goods or services is transferred to customers in an amount that reflects the consideration expected to be received for those goods or services. The standard also requires additional disclosures around the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The Company recognizes sales of its beverage products, based on predetermined pricing, upon delivery of the product to its customers as that is when the customer obtains control of the goods. We considered several factors in determining that control transfers to the customer upon delivery of products. These factors include that legal title transfers to the customer, we have a present right to payment, and the customer has assumed the risk and rewards of ownership at the time of delivery. Payment is typically due within 30 days. The Company has no significant history of returns or refunds of its products. For the three months ending August 31, 2018 and 2017, sales of our beverage products totaled $1,354,134 and $1,036,044, respectively. All sales were to retail customers located within the United States with the majority of sales to customers in New York and California. |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the consolidated balance sheets and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. |
Net Loss Per Common Share | Net Loss Per Common Share Basic loss per share is calculated by dividing net loss by the weighted average number of common shares outstanding for the period. Diluted loss per share is calculated by dividing net loss by the weighted average number of common shares and dilutive common stock equivalents outstanding. During periods in which the Company incurs losses, common stock equivalents, if any, are not considered, as their effect would be anti -dilutive. As of August 31, 2018 and May 31, 2018, warrants and convertible notes payable could be converted into approximately 6,490,385 and 4,335,000 shares of common stock, respectively. |
Income Taxes | Income Taxes The Company utilizes the accrual method of accounting for income taxes. Under the accrual method, deferred tax assets and liabilities are determined based on the differences between the financial reporting basis and the tax basis of the assets and liabilities, and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. An allowance against deferred tax assets is recognized when it is more likely than not that such tax benefits will not be realized. The Company recognizes the financial statement benefit of an uncertain tax position only after considering the probability that a tax authority would sustain the position in an examination. For tax positions meeting a “more-likely-than-not” threshold, the amount recognized in the consolidated financial statements is the benefit expected to be realized upon settlement with the tax authority. For tax positions not meeting the threshold, no financial statement benefit is recognized. The Company recognizes interest and penalties, if any, related to uncertain tax positions in income tax expense. The Company did not have any unrecognized tax benefits as of August 31, 2018 and does not expect this to change significantly over the next 12 months. |
Stock-Based Compensation | Stock-Based Compensation The Company accounts for equity instruments issued to employees in accordance with ASC 718, Compensation - Stock Compensation. ASC 718 requires all share-based compensation payments to be recognized in the financial statements based on the fair value on the issuance date. Equity instruments granted to non-employees are accounted for in accordance with ASC 505, Equity. The final measurement date for the fair value of equity instruments with performance criteria is the date that each performance commitment for such equity instrument is satisfied or there is a significant disincentive for non-performance. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. |
Accounts Receivable | Accounts Receivable The Company extends credit to its customers in the normal course of business and performs ongoing credit evaluations of its customers, maintaining an allowance for potential credit losses. Uncollectible accounts are written off at the time they are deemed uncollectible. Accounts receivable is reported net of an allowance for doubtful accounts. The allowance is based on management's estimate of the uncollectible accounts receivable. As of August 31, 2018 and May 31, 2018, the allowance for doubtful accounts was $18,000 and $14,000, respectively. |
Inventory | Inventory Inventory consists of finished goods and raw materials which are stated at the lower of cost (first-in, first-out) and net realizable value. |
Equipment | Equipment Equipment is stated at cost. The Company provides for depreciation based on the useful lives of the assets using straight-line methods. Expenditures for maintenance, repairs, and betterments that do not materially prolong the normal useful life of an asset have been charged to operations as incurred. Upon sale or other disposition of assets, the cost and related accumulated depreciation and amortization are removed from these accounts, and the resulting gain or loss, if any, is reflected in operations. |
Goodwill | Goodwill Goodwill is deemed to have an indefinite life, and accordingly, is not amortized, but evaluated annually (or more frequently if events or changes in circumstances indicate the carrying value may not be recoverable) for impairment. The most significant assumptions, which are used in this test, are estimates of future cash flows. If these assumptions differ significantly from actual results, impairment charges may be required in the future. |
Advertising | Advertising Advertising and promotion costs are expensed as incurred. Advertising and promotion expense amounted to $8,002 and $1,333 for the three months ended August 31, 2018 and 2017, respectively. |
Shipping and Handling | Shipping and Handling Shipping and handling costs are included in costs of goods sold. |
Business Combination | Business combination GAAP requires that all business combinations not involving entities or businesses under common control be accounted for under the acquisition method. The Company applies ASC 805, "Business combinations", whereby the cost of an acquisition is measured as the aggregate of the fair values at the date of exchange of the assets given, liabilities incurred, and equity instruments issued. The costs directly attributable to the acquisition are expensed as incurred. Identifiable assets, liabilities and contingent liabilities acquired or assumed are measured separately at their fair value as of the acquisition date, irrespective of the extent of any non-controlling interests. The excess of (i) the total of cost of acquisition, fair value of the non-controlling interests and acquisition date fair value of any previously held equity interest in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the consolidated statements of operations and comprehensive income. The determination and allocation of fair values to the identifiable assets acquired and liabilities assumed is based on various assumptions and valuation methodologies requiring considerable management judgment. The most significant variables in these valuations are discount rates, terminal values, the number of years on which to base the cash flow projections, as well as the assumptions and estimates used to determine the cash inflows and outflows. Management determines discount rates to be used based on the risk inherent in the related activity's current business model and industry comparisons. Terminal values are based on the expected life of products and forecasted life cycle and forecasted cash flows over that period. The Company's estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Any changes to provisional amounts identified during the measurement period are recognized in the reporting period in which the adjustment amounts are determined. |
Recent Pronouncements | Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”, effective for fiscal years beginning after December 15, 2018, that attempts to establish a uniform basis for recording revenue to virtually all industries’ financial statements. The revenue standard’s core principle is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration expected to be received for those goods or services. Additionally, the new guidance requires enhanced disclosure to help financial statement users better understand the nature, amount, timing and uncertainty of the revenue recorded. Effective June 1, 2018, the Company adopted Topic 606 using the modified retrospective method. The Company’s accounting policy for the new standard is based on a detailed review of its business and contracts. Based on the new guidance, the Company will continue to recognize revenue at the time its products are delivered, and therefore adoption of the standard did not have a material impact on its financial statements and is not expected to have a material impact in the future. In February 2016, the FASB issued a new accounting standard on leases. The new standard, among other changes, will require lessees to recognize a right-of-use asset and a lease liability on the balance sheet for all leases. The lease liability will be measured at the present value of the lease payments over the lease term. The right-of-use asset will be measured at the lease liability amount, adjusted for lease prepayments, lease incentives received and the lessee’s initial direct costs. The new standard is effective for annual reporting periods beginning after December 15, 2018, including interim reporting periods within those annual reporting periods. The adoption currently requires a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest period presented. In July 2018, the FASB issued ASU 2018-11 making transition requirements less burdensome. The standard provides an option to apply the transition provisions of the new standard at its adoption date instead of at the earliest comparative period presented in the Company’s financial statements. The Company is beginning its evaluation of the transition methods of the standard to determine the impact of the adoption on its financial statements. In January 2017, the FASB issued an update to the accounting guidance to simplify the testing for goodwill impairment. The update removes the requirement to determine the implied fair value of goodwill to measure the amount of impairment loss, if any, under the second step of the current goodwill impairment test. A company will perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. A goodwill impairment charge will be recognized for the amount by which the reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of the goodwill. The guidance is effective prospectively for public business entities for annual reporting periods beginning after December 15, 2019. This standard is required to take effect in the Company’s first quarter (August 2020) of our fiscal year ending May 31, 2021. We do not expect the adoption of this new guidance will have a material impact on our financial statements. Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements. |
RESTATEMENT (Tables)
RESTATEMENT (Tables) | 3 Months Ended |
Aug. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
RESTATEMENT | Total Stockholders' Equity (deficiency) As reported $ 670,880 Adjustments recorded during the year ended May 31, 2018: Deferred financing costs related to issuance of convertible notes payable 538,334 Net financing cost associated with the issuance of convertible notes payable (663,796 ) Income tax benefit 136,890 Adjustments recorded during the quarter ended August 31, 2018: Net financing cost associated with the issuance of convertible notes payable 79,729 Restated $ 762,037 |
JCG ACQUISITION (Tables)
JCG ACQUISITION (Tables) | 3 Months Ended |
Aug. 31, 2018 | |
Notes to Financial Statements | |
Fair value of the assets acquired and liabilities from JCG | Issuance of 1,636,363 shares of common stock with an estimated fair value of $.39 per share $ 638,182 Contingent consideration for additional shares and warrants (included in additional paid-in capital) 721,818 Total purchase consideration $ 1,360,000 Cash $ 265 Accounts receivable 167,700 Inventory 72,035 Accounts payable (65,000 ) Goodwill 1,185,000 Net assets acquired $ 1,360,000 |
Pro forma condensed consolidated statements from JCG | LFER JCG ProForma Adjustments Notes ProForma Combined Sales, net $ 1,332,946 $ 162,158 $ — $ 1,495,104 Cost of goods sold 1,100,342 96,458 1,196,800 Gross profit 232,604 65,700 298,304 Operating expenses 706,138 96,440 802,578 Net Loss before other expenses (473,534 ) (30,740 ) (504,274 ) Other expenses (761,737 ) — (761,737 ) Net Loss $ (1,235,271 ) $ (30,740 ) $ — $ (1,266,011 ) See accompanying notes to the condensed consolidated unaudited proforma financial information. |
GBC ACQUISITION (Tables)
GBC ACQUISITION (Tables) | 3 Months Ended |
Aug. 31, 2018 | |
Notes to Financial Statements | |
GBC Acquisition | Assets: Cash $ 118,941 Accounts receivable 36,365 Inventory 79,283 Equipment 65,925 Notes receivable 61,344 Goodwill 726,890 Customer list 507,000 $ 1,595,748 Liabilities: Accounts payable $ 402,700 Intercompany loans 116,071 Deferred tax liability 136,890 Line of credit 15,833 Loans payable 194,162 $ 865,656 Net Assets Acquired $ 730,092 |
VK ACQUISITIONS (Tables)
VK ACQUISITIONS (Tables) | 3 Months Ended |
Aug. 31, 2018 | |
Vk Acquisitions | |
Fair value of assets acquired and liabilities assumed from VK | Cash $ 1,355 Accounts receivable 13,024 Inventory and work in process 40,564 Accounts payable (16,343 ) Notes payable (108,600 ) Goodwill 195,000 Net assets acquired $ 125,000 |
UNAUDITED CONDENSED CONSOLIDA_2
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL INFORMATION (Tables) | 3 Months Ended |
Aug. 31, 2018 | |
Business Combinations [Abstract] | |
Proforma Acquisition | Life On Earth, Inc. Unaudited ProForma Condensed Consolidated Financial Information for the three months ended August 31, 2017 LFER VK GBC ProForma Adjustments ProForma Combined Sales, net $ 1,036,044 $ 45,274 $ 779,279 $ — $ 1,860,597 Cost of goods sold 818,526 30,140 695,720 — 1,544,386 Gross profit 217,518 15,134 83,559 — 316,211 Operating expenses 411,729 8,188 95,423 15,175 a 530,515 Net loss before other expenses (194,211 ) 6,946 (11,864 ) (15,175 ) (214,304 ) Other expenses, net (335,033 ) (1,443 ) (4,597 ) — (341,073 ) Net loss $ (529,244 ) $ 5,503 $ (16,461 ) $ (15,175 ) $ (555,377 ) See accompanying notes to the condensed consolidated unaudited proforma financial information. |
GOODWILL (Tables)
GOODWILL (Tables) | 3 Months Ended |
Aug. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill | Three months ended Year ended Balance at beginning of the period/year $ 921,890 $ — Acquisition of GBC (Note 4) — 726,890 Acquisition of VK (Note 5) — 195,000 Acquisition of JCG (Note 3) 1,185,000 — Balance at the end of the period/year $ 2,106,890 $ 921,890 |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 3 Months Ended |
Aug. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets | August 31, 2018 May 31, 2018 Intangible assets: Intangible assets to be amortized: Business relationships and customer lists $ 882,000 $ 882,000 Less: accumulated amortization: Intangible assets to be amortized: Business relationships and customer lists 115,547 80,822 Net book value at the end of the period/year $ 766,453 $ 801,178 |
Amortization expense for intangible assets | For the twelve months ended August 31, 2019 $ 138,900 2020 138,900 2021 138,900 2022 138,900 2023 105,083 Thereafter 105,770 $ 766,453 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 3 Months Ended |
Aug. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Deferred Tax Asset | August 31, 2018 May 31, 2018 Net operating loss carryforward $ 1,641,000 $ 1,374,000 Stock based compensation 489,000 449,000 Intangible Assets (136,890 ) (136,890 ) Valuation allowance (1,993,110 ) (1,686,110 ) Deferred tax asset, net $ — $ — |
Statutory Rate | August 31, 2018 May 31, 2018 Federal Rate 21 % 21 % State Rate 6 % 6 % Valuation Allowance -27 % -27 % Effective income tax rate 0 % 0 % |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 3 Months Ended | ||
Aug. 31, 2018 | Aug. 31, 2017 | May 31, 2018 | |
Accounting Policies [Abstract] | |||
Sales, net | $ 1,354,134 | $ 1,036,044 | |
Allowance for doubtful accounts | 18,000 | $ 14,000 | |
Advertising and promotion expense | $ 8,002 | $ 1,333 |
RESTATEMENT - Prior Period Adju
RESTATEMENT - Prior Period Adjustment (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
Aug. 31, 2018 | May 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Stockholders' equity (deficiency), as reported | $ 670,880 | |
Deferred financing costs related to issuance of convertible notes payable | 538,334 | |
Net financing cost associated with the issuance of convertible notes payable | 79,729 | $ (663,796) |
Tax benefit | 136,890 | |
Stockholders' equity (deficiency) | 762,037 | (979,989) |
Change in stockholder's equity | $ 91,157 | $ (11,427) |
CONCENTRATIONS (Details)
CONCENTRATIONS (Details) | 3 Months Ended | 12 Months Ended | |
Aug. 31, 2018 | Aug. 31, 2017 | May 31, 2018 | |
Sales [Member] | |||
Number of customers | 5 | 3 | |
Concentration risk | 40.00% | 22.00% | |
Accounts Receivable [Member] | |||
Number of customers | 4 | 1 | |
Concentration risk | 14.00% | 11.00% |
JCG ACQUISITION (Details)
JCG ACQUISITION (Details) | 3 Months Ended |
Aug. 31, 2018USD ($)$ / sharesshares | |
Business Combination, Separately Recognized Transactions [Line Items] | |
Shares issued for acquisition, amount | $ 638,182 |
Contingent consideration for additional shares related to the acquisition of JCG, amount | $ 721,818 |
JCG [Member] | |
Business Combination, Separately Recognized Transactions [Line Items] | |
Shares issued for acquisition, shares | shares | 1,636,363 |
Price per share | $ / shares | $ 0.39 |
Cash | $ 265 |
Accounts receivable | 167,700 |
Inventory and work in process | 72,035 |
Accounts payable | (65,000) |
Goodwill | 1,185,000 |
Net assets acquired | $ 1,360,000 |
JCG ACQUISITION (Details) (Pare
JCG ACQUISITION (Details) (Parenthetical) | 3 Months Ended |
Aug. 31, 2018 | |
JCG [Member] | |
Terms | If these shares are trading below $0.30 after August 2, 2019, the Company will issue additional shares so that the value of the 1,636,363 shares plus these additional shares, with a floor price of $0.20, will be equal to $900,000. The JCG Agreement also provides for the issuance of 850,000 warrants for the purchase of common stock with a two-year term and an exercise price of $0.85 with a value of approximately $9,400. The JCG Agreement also provides for an additional 1,090,909 shares of restricted common stock to be issued when the gross revenues of the JCG brands reach $900,000 in a twelve-month period. The JCG Agreement also provides for additional shares of restricted common stock, with a market value of $500,000 on the date of issuance, to be issued when the gross revenues of the JCG brands reach $3,000,000 in a twelve-month period, and again when the gross revenues of the JCG brands reach $5,000,000 in a twelve-month period. The JCG Agreement also provides for the issuance of the restricted common stock and warrants to the shareholders of JCG on a pro rata basis according to their respective percentage of ownership as of August 2, 2018. The restricted common stock may not be transferred, sold, gifted, assigned, pledged, or otherwise disposed of, directly or indirectly, for a period of twelve months (the “Lock-Up Period”). After the Lock-Up Period, the maximum shares that may be sold by each restricted common stockholder during any given one-day period shall be 5% of their total holdings or no more than 20% of the average trading volume of the preceding 30 days, whichever is less. The Company has determined the value of the contingent shares and warrants, in excess of the initial 1,636,363 shares, to be approximately $722,000, for a total purchase price value of approximately $1,360,000 |
JCG ACQUISITION - Proforma Cond
JCG ACQUISITION - Proforma Condensed Consolidated Statements (Details) | 3 Months Ended |
Aug. 31, 2018USD ($) | |
LFER [Member] | |
Product sales, net | $ 1,332,946 |
Cost of goods sold | 1,100,342 |
Gross income | 232,604 |
Operating expenses | 706,138 |
Net loss before other expenses | (473,534) |
Other expenses, net | (761,737) |
Net (loss) | (1,235,271) |
JCG [Member] | |
Product sales, net | 162,158 |
Cost of goods sold | 96,458 |
Gross income | 65,700 |
Operating expenses | 96,440 |
Net loss before other expenses | (30,740) |
Other expenses, net | |
Net (loss) | (30,740) |
Proforma [Member] | |
Product sales, net | |
Net (loss) | |
Proforma Combined[Member] | |
Product sales, net | 1,495,104 |
Cost of goods sold | 1,196,800 |
Gross income | 298,304 |
Operating expenses | 802,578 |
Net loss before other expenses | (504,274) |
Other expenses, net | (761,737) |
Net (loss) | $ (1,266,011) |
GBC ACQUISITION - GBC Acquisiti
GBC ACQUISITION - GBC Acquisition (Details) - USD ($) | 3 Months Ended | |
Aug. 31, 2018 | Aug. 31, 2017 | |
Business Combination, Separately Recognized Transactions [Line Items] | ||
Shares issued for acquisition, amount | $ 638,182 | |
Depreciation Expense | 43,021 | $ 13,125 |
GBC Acquisition [Member] | ||
Business Combination, Separately Recognized Transactions [Line Items] | ||
Purchase price | 730,092 | |
Cash paid for purchase | 108,079 | |
Shares issued for acquisition, amount | $ 622,013 | |
Shares issued for acquisition, shares | 1,455,000 | |
Price per share | $ 0.4275 | |
Terms | If, after 12 months from the date of the Closing, the shares are trading below twenty ($0.20) cents per share, then the Company shall issue 485,000 additional shares | |
Addtional shares for acquisition | 485,000 | |
Useful life | 5 years | |
Amortization Expense | $ 25,350 | |
Useful life | 5 years | |
Depreciation Expense | $ 4,546 |
GBC ACQUISITION (Details Narrat
GBC ACQUISITION (Details Narrative) - GBC Acquisition [Member] | Aug. 31, 2018USD ($) |
Business Combination, Separately Recognized Transactions [Line Items] | |
Cash | $ 118,941 |
Accounts receivable | 36,365 |
Inventory | 79,283 |
Euqipment | 65,925 |
Notes Receivable | 61,344 |
Goodwill | 726,890 |
Customer list | 507,000 |
Total Assets | 1,595,748 |
Accounts payable | 402,700 |
Intercompany loans | 116,071 |
Deferred tax liability | 136,890 |
Line of credit | 15,833 |
Loans payable | 194,162 |
Total Liabilities | 865,656 |
Total Net Assets Acquired | $ 730,092 |
ACQUISITION OF VK (Details)
ACQUISITION OF VK (Details) - USD ($) | 3 Months Ended | |
Aug. 31, 2018 | May 31, 2018 | |
Business Combination, Separately Recognized Transactions [Line Items] | ||
Shares issued for acquisition, amount | $ 638,182 | |
VK [Member] | ||
Business Combination, Separately Recognized Transactions [Line Items] | ||
Ownership | 100.00% | |
Net Liabilties assumed | $ 70,000 | |
Shares issued for acquisition, shares | 625,000 | |
Price per share | $ 0.20 | |
Shares issued for acquisition, amount | $ 125,000 | |
Useful life | 10 years | |
Amortization expense | $ 8,938 | |
Cash | $ 1,355 | |
Accounts receivable | 13,024 | |
Inventory and work in process | 40,564 | |
Accounts payable | (16,343) | |
Notes payable | (108,600) | |
Goodwill | $ 195,000 | |
Net assets acquired | $ 125,000 |
UNAUDITED CONDENSED CONSOLIDA_3
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL INFORMATION (Details) | 3 Months Ended |
Aug. 31, 2018USD ($) | |
LFER [Member] | |
Sales, net | $ 1,036,044 |
Cost of goods sold | 818,526 |
Gross income | 217,518 |
Operating expenses | 411,729 |
Net loss before other expenses | (194,211) |
Other expenses, net | (335,033) |
Net (loss) | (529,244) |
VK [Member] | |
Sales, net | 45,274 |
Cost of goods sold | 30,140 |
Gross income | 15,134 |
Operating expenses | 8,188 |
Net loss before other expenses | 6,946 |
Other expenses, net | (1,443) |
Net (loss) | 5,503 |
GBC [Member] | |
Sales, net | 779,279 |
Cost of goods sold | 695,720 |
Gross income | 83,559 |
Operating expenses | 95,423 |
Net loss before other expenses | (11,864) |
Other expenses, net | (4,597) |
Net (loss) | (16,461) |
Proforma Adjustments [Member] | |
Sales, net | |
Cost of goods sold | |
Gross income | |
Operating expenses | 15,175 |
Net loss before other expenses | (15,175) |
Net (loss) | (15,175) |
Proforma Combined [Member] | |
Sales, net | 1,860,597 |
Cost of goods sold | 1,544,386 |
Gross income | 316,211 |
Operating expenses | 530,515 |
Net loss before other expenses | (214,304) |
Other expenses, net | (341,073) |
Net (loss) | $ (555,377) |
UNAUDITED CONDENSED CONSOLIDA_4
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL (Details Narrative) | 3 Months Ended |
Aug. 31, 2018USD ($) | |
Notes to Financial Statements | |
Rent Expense | $ 8,500 |
Employment Agreement | $ 75,000 |
GOODWILL (Details)
GOODWILL (Details) - USD ($) | Aug. 31, 2018 | May 31, 2018 |
Indefinite-lived Intangible Assets [Line Items] | ||
Goodwill | $ 2,106,890 | $ 921,890 |
Acquisition GBC [Member] | ||
Indefinite-lived Intangible Assets [Line Items] | ||
Goodwill | 726,890 | |
Acquisition VK [Member] | ||
Indefinite-lived Intangible Assets [Line Items] | ||
Goodwill | $ 195,000 | |
Acquisition JCG [Member] | ||
Indefinite-lived Intangible Assets [Line Items] | ||
Goodwill | $ 1,185,000 |
INTANGIBLE ASSETS - Intangible
INTANGIBLE ASSETS - Intangible Assets (Details) - USD ($) | Aug. 31, 2018 | May 31, 2018 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Business relationships and customer lists | $ 882,000 | $ 882,000 |
Accumulated Amortization | 115,547 | 80,822 |
Customer lists, net of accumulated amortization of $80,822 and $35,625 as of May 31, 2018 and 2017, respectively | $ 766,453 | $ 801,178 |
INTANGIBLE ASSETS (Details Narr
INTANGIBLE ASSETS (Details Narrative) - USD ($) | 3 Months Ended | |
Aug. 31, 2018 | Aug. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization Expense | $ 34,245 | $ 9,375 |
INTANGIBLE ASSETS - Amortizatio
INTANGIBLE ASSETS - Amortization expense for intangible assets (Details) | Aug. 31, 2018USD ($) |
Goodwill and Intangible Assets Disclosure [Abstract] | |
2019 | $ 138,900 |
2020 | 138,900 |
2021 | 138,900 |
2022 | 138,900 |
2023 | 105,083 |
Thereafter | $ 105,770 |
LOANS PAYABLE - GBC STOCKHOLDER
LOANS PAYABLE - GBC STOCKHOLDER (Details Narrative) - GBC Stockholder Loan [Member] - USD ($) | 3 Months Ended | |
Aug. 31, 2018 | May 31, 2018 | |
Proceeds from notes payable | $ 109,995 | |
Interest rate | 7.00% | |
Payment on loans | 4,925 | |
Loan balance | $ 109,995 |
NOTES PAYABLE - RELATED PARTY (
NOTES PAYABLE - RELATED PARTY (Details Narrative) - Note Related Party [Member] | 1 Months Ended |
Jun. 30, 2017USD ($) | |
Debt Instrument [Line Items] | |
Issue date | Jun. 1, 2017 |
Maturity date of loan | May 31, 2018 |
Proceeds from notes payable | $ 20,000 |
Interest rate | 15.00% |
Principal payment on loans | $ 18,000 |
Accrued and unpaid interest | 1,239 |
Loan balance | $ 2,000 |
NOTES PAYABLE (Details)
NOTES PAYABLE (Details) | May 31, 2018USD ($) |
NotesPayableMember | |
2019 | $ 205,000 |
NOTES PAYABLE (Details Narrativ
NOTES PAYABLE (Details Narrative) - USD ($) | 12 Months Ended | |||||
Jun. 30, 2018 | Jun. 30, 2017 | Aug. 31, 2018 | May 31, 2018 | Jul. 31, 2016 | Jul. 05, 2016 | |
Notes payable | $ 205,000 | $ 560,000 | ||||
Credit Line [Member] | ||||||
Credit line available | $ 7,500,000 | |||||
Credit line allocated for use | $ 1,600,000 | $ 650,000 | ||||
Advisory Fee | $ 350,000 | |||||
Shares issued for advisory fees | 374,000 | |||||
Interest rate | 12.00% | |||||
Debt amount satisfied | $ 560,000 | $ 358,714 | ||||
Debt Payments | 410,000 | |||||
Monthly payments | 68,333 | |||||
Deferred financing costs | 443,000 | |||||
Shares issued for debt, amount | $ 150,000 | |||||
ESD [Member] | ||||||
Credit line allocated for use | 450,000 | |||||
GHS Secured Loan [Member] | ||||||
Credit line allocated for use | 32,534 | |||||
Vendors [Member] | ||||||
Credit line allocated for use | 74,466 | |||||
TCA Closing Fees [Member] | ||||||
Credit line allocated for use | $ 93,000 |
CONVERTIBLE NOTES PAYABLE (Deta
CONVERTIBLE NOTES PAYABLE (Details) | Aug. 31, 2018USD ($) |
Notes Payable[Member] | |
2019 | $ 1,900,500 |
CONVERTIBLE NOTES PAYABLE (De_2
CONVERTIBLE NOTES PAYABLE (Details Narrative 1) - USD ($) | 2 Months Ended | 3 Months Ended | 12 Months Ended | |
Aug. 31, 2018 | Aug. 31, 2018 | Aug. 31, 2017 | May 31, 2018 | |
Debt Instrument [Line Items] | ||||
Amortization of financing costs included in interest and financing costs | $ 667,073 | $ 287,105 | ||
Convertible Notes [Member] | ||||
Debt Instrument [Line Items] | ||||
Issue date | Nov. 30, 2016 | |||
Maturity date of loan | Nov. 7, 2017 | |||
Convertible debt | $ 803,000 | $ 803,000 | ||
Interest rate | 5.00% | 5.00% | ||
Original issue discount, percentage | 10.00% | |||
Issuance of common stock for debt, shares | 1,790,000 | |||
Conversion rate per share | $ .65 | $ .65 | ||
Warrants | 730,000 | |||
Warrant price per share | $ 0.85 | $ 0.85 | ||
Shares authorized | 6,033,131 | 6,033,131 | ||
Notes Payable[Member] | ||||
Debt Instrument [Line Items] | ||||
Maturity date of loan | Sep. 20, 2017 | |||
Principal payment on loans | $ 440,000 | |||
Interest payment on loans | 21,156 | |||
Issuance of common stock for debt, amount | $ 63,844 | |||
Stock repurchased and cancelled | 1,100,000 | |||
Two Convertible Note Holders [Member] | ||||
Debt Instrument [Line Items] | ||||
Maturity date of loan | Nov. 6, 2017 | |||
Principal payment on loans | $ 165,000 | |||
Accrued and unpaid interest | $ 8,747 | |||
One Convertible Note Holders [Member] | ||||
Debt Instrument [Line Items] | ||||
Maturity date of loan | Jul. 1, 2018 | |||
Accrued and unpaid interest | $ 10,648 | |||
Issuance of common stock for debt, amount | $ 110,000 | |||
Issuance of common stock for debt, shares | 804,557 | |||
Loan balance | $ 88,000 | $ 88,000 | $ 110,000 | |
Related Party Note Payable [Member] | ||||
Debt Instrument [Line Items] | ||||
Issue date | Nov. 1, 2017 | |||
Maturity date of loan | May 1, 2018 | |||
Convertible debt | $ 20,000 | 20,000 | ||
Deferred financing costs | $ 20,000 | $ 20,000 | ||
Interest rate | 7.00% | 7.00% | ||
Issuance of common stock for debt, shares | 133,333 | |||
Conversion rate per share | $ 0.15 | $ 0.15 | ||
Related Party Note Payable [Member] | ||||
Debt Instrument [Line Items] | ||||
Maturity date of loan | Mar. 1, 2018 | |||
Issuance of common stock for debt, shares | 40,000 | |||
NPA[Member] | ||||
Debt Instrument [Line Items] | ||||
Issue date | Sep. 25, 2017 | |||
Maturity date of loan | Mar. 25, 2019 | |||
Convertible debt | $ 650,000 | $ 650,000 | ||
Interest rate | 7.00% | 7.00% | ||
Issuance of common stock for debt, shares | 1,500,000 | |||
Share Price | $ 0.20 | $ 0.20 | ||
Loan balance | $ 125,000 | $ 125,000 | 125,000 | |
NPA Amended [Member] | ||||
Debt Instrument [Line Items] | ||||
Issue date | Nov. 1, 2017 | |||
Maturity date of loan | Mar. 25, 2019 | |||
Convertible debt | $ 175,000 | $ 175,000 | ||
Interest rate | 7.00% | 7.00% | ||
Issuance of common stock for debt, shares | 800,000 | |||
Share Price | $ 0.42 | $ 0.42 | ||
Loan balance | $ 737,000 | $ 737,000 | 825,000 | |
NPA Additional Terms [Member] | ||||
Debt Instrument [Line Items] | ||||
Issue date | Jul. 1, 2018 | |||
Amortization of financing costs included in interest and financing costs | $ 151,250 | 143,250 | ||
Issuance of common stock for debt, amount | $ 87,500 | |||
Issuance of common stock for debt, shares | 500,000 | |||
Conversion rate per share | $ 0.175 | $ 0.175 | ||
NPA Additional Terms [Member] | ||||
Debt Instrument [Line Items] | ||||
Interest payment on loans | $ 19,250 | |||
Issuance of common stock for debt, shares | 300,000 | |||
NPA Additional Terms [Member] | ||||
Debt Instrument [Line Items] | ||||
Principal payment on loans | $ 4,302 | |||
Issuance of common stock for debt, amount | $ 737,500 | |||
Issuance of common stock for debt, shares | 196,677 | |||
Note Amendment [Member] | ||||
Debt Instrument [Line Items] | ||||
Convertible debt | $ 538,333 | $ 538,333 | ||
Deferred financing costs | 94,750 | 94,750 | ||
Interest payment on loans | $ 15,859 | |||
Secured Convertible Promissory NoteMember] | ||||
Debt Instrument [Line Items] | ||||
Issue date | Mar. 1, 2018 | |||
Convertible debt | 220,000 | $ 220,000 | ||
Deferred financing costs | 76,117 | 76,117 | ||
Interest payment on loans | 3,850 | |||
Amortization of financing costs | $ 19,004 | 16,674 | ||
Note Purchasing Agreement 2nd Offering [Member] | ||||
Debt Instrument [Line Items] | ||||
Issue date | May 1, 2018 | |||
Convertible debt | 730,000 | $ 730,000 | ||
Proceeds from notes payable | 500,000 | |||
Deferred financing costs | $ 513,776 | $ 513,776 | ||
Interest rate | 7.00% | 7.00% | ||
Conversion rate per share | $ 0.30 | $ 0.30 | ||
Amortization of financing costs | $ 89,009 | $ 539 | ||
Loan balance | $ 730,000 | $ 730,000 | ||
NPA Consulting Fees [Member] | ||||
Debt Instrument [Line Items] | ||||
Share Price | $ 0.40 | |||
Consulting fee | $ 65,000 | |||
Issuance of common stock for consulting fees, shares | 433,333 | |||
NPA #2 [Member] | ||||
Debt Instrument [Line Items] | ||||
Issue date | Jan. 26, 2018 | |||
Convertible debt | $ 125,000 | |||
Interest rate | 7.00% |
CONVERTIBLE NOTES PAYABLE - VK
CONVERTIBLE NOTES PAYABLE - VK Acqusition (Details Narrative 2) - Victoria Kitchen, LLC [Member] - USD ($) | 1 Months Ended | 12 Months Ended |
Dec. 31, 2017 | May 31, 2018 | |
Note payable assumed | $ 108,600 | |
Interest rate | 6.50% | |
Interest payment on loans | $ 1,883 | |
Principal payment on loans | $ 5,000 | |
Terms | (i) $0.30 per share of Common Stock, or (ii) that number of shares of Common Stock equal to the average closing price of the Company’s Common Stock as reported on the OTC Markets for the preceding 30 trading days prior to the date of conversion, multiplied by 0.65 (the “<i>Conversion Price</i>”); <i>provided, however</i>, in the event the Conversion Price is calculated based on (ii) above, the Conversion Price shall not be lower than $0.20 per share of Common Stock. | |
Conversion rate per share | $ 0.30 | |
Note payable | $ 103,000 | |
Issuance of common stock for debt, amount | $ 700,000 | |
Issuance of common stock for debt, shares | 343,333 |
LOANS PAYABLE (Details)
LOANS PAYABLE (Details) | Aug. 31, 2018USD ($) |
Debt, Current [Abstract] | |
2019 | $ 174,000 |
2020 | 9,000 |
Future principal payments of loans payable | $ 183,000 |
LOANS PAYABLE (Details Narrativ
LOANS PAYABLE (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended |
Aug. 31, 2018 | May 31, 2018 | |
Debt Instrument [Line Items] | ||
Amortization Expense | $ 79,729 | $ (663,796) |
Loans Payable | $ 135,666 | 185,689 |
Purchase Rights Purchase and Sale Agreement [Member] | ||
Debt Instrument [Line Items] | ||
Issue date | Jul. 15, 2016 | |
Proceeds from notes payable | $ 197,370 | |
Convertible debt | 266,000 | |
Deferred financing costs | 272,000 | |
Unamortized financing costs | 49,058 | |
Periodic loan payment | 77,714 | |
Interest payment on loans | $ 1,177 | |
Number of payments | 63 | |
Amortization Expense | $ 21,025 | |
Loans Payable | $ 74,260 | |
Third Purchase Rights Purchase and Sale Agreement [Member] | ||
Debt Instrument [Line Items] | ||
Issue date | Jan. 31, 2018 | |
Proceeds from notes payable | $ 170,000 | |
Convertible debt | 272,000 | |
Principal payment on loans | 24,180 | |
Loan costs | $ 6,000 | |
Purchase and Sale Agreement [Member] | ||
Debt Instrument [Line Items] | ||
Issue date | Apr. 1, 2018 | |
Proceeds from notes payable | $ 60,000 | |
Principal payment on loans | 27,857 | |
Interest payment on loans | $ 429 | |
Number of payments | 99 | |
Issuance of common stock for debt, amount | $ 81,000 | |
Amortization Expense | 8,047 | |
Loans Payable | 42,429 | 70,286 |
GBC Loan Payable [Member] | ||
Debt Instrument [Line Items] | ||
Proceeds from notes payable | 135,812 | |
Convertible debt | 60,000 | |
Periodic loan payment | 4,383 | |
Loans Payable | 57,321 | 68,560 |
GBC Bank Loan Payable [Member] | ||
Debt Instrument [Line Items] | ||
Proceeds from notes payable | 12,182 | |
Periodic loan payment | 578 | |
Loans Payable | $ 9,282 | $ 12,182 |
LINE OF CREDIT (Details)
LINE OF CREDIT (Details) | Aug. 31, 2018USD ($) |
Line of Credit [Member] | |
Future principal payments - 2019 | $ 37,443 |
LINE OF CREDIT (Details Narrati
LINE OF CREDIT (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended |
Aug. 31, 2018 | May 31, 2018 | |
Line of credit | $ 37,443 | $ 38,898 |
GBC Line of Credit[Member] | ||
Credit Line facility | $ 30,833 | |
Interest rate | 10.25% | |
Line of credit | $ 13,468 | 16,044 |
Line of Credit [Member] | ||
Issue date | Jul. 1, 2017 | |
Interest rate | 9.40% | |
Line of Credit [Member] | ||
Credit Line facility capacity | $ 35,000 | |
Line of credit | 23,975 | $ 22,854 |
Future principal payments | $ 37,443 | |
Revolver [Member] | ||
Issue date | Sep. 26, 2017 | |
Credit Line facility | $ 750,000 | |
Interest rate | 7.00% | |
Terms | Amounts due and owing under the terms of the Revolver are convertible, at the option of the holder, into that number of shares of the Company’s Common Stock equal to the principal and accrued interest due under the terms of the Revolver on the date of conversion divided by $1.50 |
SBA LOAN (Details Narrative)
SBA LOAN (Details Narrative) - SBA Loan [Member] - USD ($) | 12 Months Ended | ||
May 31, 2018 | May 31, 2020 | May 31, 2019 | |
Interest payment on loans | $ 135,812 | ||
Interest rate | 2.75% | ||
Principal payment on loans | $ 4,383 | ||
Loan balance | $ 68,650 | ||
Future principal payments | $ 10,745 | $ 49,815 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details Narrative 1) - USD ($) | 3 Months Ended | |
Aug. 31, 2018 | Aug. 31, 2017 | |
Rent Expense, monthly | $ 8,500 | |
Rent expense. paid | 34,405 | $ 11,363 |
ESD [Member] | ||
Rent Expense, monthly | 5,248 | |
GBC [Member] | ||
Rental Obligation | 75,000 | |
Rent Expense, monthly | $ 8,500 |
INCOME TAXES - Tax Benefit (Det
INCOME TAXES - Tax Benefit (Details) - USD ($) | Aug. 31, 2018 | May 31, 2018 |
Deferred tax asset | ||
Net operating loss carryforward | $ 1,641,000 | $ 1,374,000 |
Stock based compensation | 489,000 | 449,000 |
Intangible Assets | (136,890) | (136,890) |
Valuation Allowance | (1,993,110) | (1,686,110) |
Deferred tax asset, net |
INCOME TAXES - Statutory Rate (
INCOME TAXES - Statutory Rate (Details) | 3 Months Ended | 12 Months Ended |
Aug. 31, 2018 | May 31, 2018 | |
Effective Income Tax Rate Reconciliation | ||
Federal Rate | 21.00% | 21.00% |
State Rate | 6.00% | 6.00% |
Valuation allowance | (27.00%) | (27.00%) |
Effective income tax rate | 0.00% | 0.00% |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended |
Aug. 31, 2018 | May 31, 2018 | |
Income Tax Disclosure [Abstract] | ||
Net operating loss carry forward | $ 7,971,000 | |
Valuation allowance | $ 307,000 | $ 660,000 |
Expiration date | May 31, 2037 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | 3 Months Ended | |
Aug. 31, 2018 | Aug. 31, 2017 | |
Leases rent, per month | $ 34,405 | $ 11,363 |
Chief Operating Officer and stockholder [Member] | ||
Leases rent, per month | $ 750 | |
Lease terminated | Mar. 31, 2018 |
GOING CONCERN (Details Narrativ
GOING CONCERN (Details Narrative) | 3 Months Ended |
Aug. 31, 2018USD ($) | |
Accounting Policies [Abstract] | |
Net loss | $ 7,971,000 |
Working capital deficiency | $ 2,209,000 |
SUBSEQUENT EVENTS (Details Narr
SUBSEQUENT EVENTS (Details Narrative) - USD ($) | 2 Months Ended | 3 Months Ended |
Oct. 19, 2018 | Aug. 31, 2018 | |
Subsequent Event [Line Items] | ||
Issuance of common stock services, amount | $ 96,838 | |
Subsequent Event [Member] | ||
Subsequent Event [Line Items] | ||
Issuance of common shares for services, shares | 102,575 | |
Issuance of common stock services, amount | $ 40,000 |