Cover
Cover - shares | 9 Months Ended | |
Feb. 28, 2021 | Apr. 14, 2021 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Feb. 28, 2021 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2021 | |
Current Fiscal Year End Date | --05-31 | |
Entity Registrant Name | Life On Earth, Inc. | |
Entity Central Index Key | 0001579010 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 26,083,833 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Feb. 28, 2021 | May 31, 2020 |
Current Assets | ||
Cash and cash equivalents | $ 65,499 | $ 3,831 |
Total current assets | 65,499 | 3,831 |
Other Assets | ||
Total Assets | 65,499 | 3,831 |
Current Liabilities | ||
Accounts payable and accrued expenses | 2,137,608 | 1,833,205 |
Contingent liability | 220,500 | 57,273 |
Derivative liability | 136,518 | 146,715 |
Note payable - related party | 63,118 | 61,860 |
Note payable | 30,000 | |
Convertible notes payable, net of unamortized deferred financing costs of $0 and $99,683 as of February 28, 2021 and May 31, 2020, respectively | 2,301,284 | 2,164,498 |
Lines of credit | 25,302 | 26,124 |
Total current liabilities | 4,914,330 | 4,289,675 |
Total Liabilities | 4,914,330 | 4,289,675 |
Commitments and contingencies | ||
Stockholders' Equity (Deficiency) | ||
Common stock, $0.001 par value; 200,000,000 shares authorized, 20,733,012 and 13,081,380 shares issued and outstanding, as of November 30, 2020 and May 31, 2020, respectively | 20,729 | 13,081 |
Additional paid-in capital | 13,217,579 | 12,901,158 |
Accumulated deficit | (18,088,589) | (17,201,283) |
Total Stockholders' Deficiency | (4,848,831) | (4,285,844) |
Total Liabilities and Stockholders' Deficiency | 65,499 | 3,831 |
Series A Preferred Stock [Member] | ||
Stockholders' Equity (Deficiency) | ||
Preferred stock | 1,200 | 1,200 |
Series B Preferred Stock [Member] | ||
Stockholders' Equity (Deficiency) | ||
Preferred stock | 100 | |
Series C Preferred Stock [Member] | ||
Stockholders' Equity (Deficiency) | ||
Preferred stock | $ 150 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) | Feb. 28, 2021 | May 31, 2020 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, Authorized | 200,000,000 | 200,000,000 |
Common stock, Issued | 20,728,833 | 13,081,380 |
Common stock, outstanding | 20,728,833 | 13,081,380 |
Series A Preferred Stock [Member] | ||
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 |
Series B Preferred Stock [Member] | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, authorized shares | 250,000 | 250,000 |
Preferred stock, issued shares | 100,000 | |
Preferred stock, outstanding shares | 100,000 | |
Series C Preferred Stock [Member] | ||
Preferred stock, par value | $ 0.001 | |
Preferred stock, authorized shares | 250,000 | |
Preferred stock, issued shares | 150,000 | |
Preferred stock, outstanding shares | 150,000 | |
Convertible Note Payable [Member] | ||
Capitalized financing costs | $ 0 | $ 99,683 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) | 3 Months Ended | 9 Months Ended | ||
Feb. 28, 2021 | Feb. 29, 2020 | Feb. 28, 2021 | Feb. 29, 2020 | |
Income Statement [Abstract] | ||||
Sales, net | $ 11,218 | $ 25,000 | $ 64,407 | |
Cost of goods sold | (26,852) | 25,335 | 156,089 | |
Gross profit | 38,070 | (335) | (91,682) | |
Expenses: | ||||
Professional fees | 53,421 | 63,497 | 233,165 | 678,407 |
Officers compensation | 66,300 | 486,900 | ||
Salaries and benefits | 133,968 | 16,935 | 337,569 | |
Other selling, general and administrative | 10,174 | (29,856) | 60,788 | 96,096 |
Amortization | 23,000 | 69,000 | ||
Impairment of goodwill | 145,000 | |||
Impairment of intangible assets | 150,000 | |||
Total expenses | 63,595 | 256,909 | 310,888 | 1,962,972 |
Loss from operations | (63,595) | (218,839) | (311,223) | (2,054,654) |
Other income (expenses) | ||||
Change in fair value of contingent consideration | (103,091) | 85,909 | (163,227) | 325,309 |
Change in fair value of derivative liability | 66,402 | 92,060 | 10,197 | 57,130 |
Interest and financing costs | (69,821) | (212,358) | (423,053) | (640,833) |
Los from continuing operations | (170,105) | (253,228) | (887,306) | (2,313,048) |
Loss on discontinued operations | (80,838) | |||
Loss on sale of subsidiary | 893,515 | 893,515 | ||
Net loss | $ (170,105) | $ 640,287 | $ (887,306) | $ (1,500,371) |
Basic and diluted loss per share from continuing operations | $ (0.01) | $ (0.03) | $ (0.04) | $ (0.27) |
Basic and diluted loss per share from discontinued operations | (0.01) | |||
Basic and diluted loss per share from disposal of subsidiary | $ 0.10 | $ 0.10 | ||
Basic and diluted weighted average number of shares outstanding | 20,728,833 | 9,257,005 | 19,994,255 | 8,687,026 |
Shareholders Equity
Shareholders Equity - USD ($) | Preferred StockSeries A Preferred Stock | Preferred StockSeries B Preferred Stock [Member] | Preferred StockSeries C Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning Balance, Shares at May. 31, 2019 | 1,200,000 | 8,042,075 | |||||
Beginning Balance, Amount at May. 31, 2019 | $ 1,200 | $ 8,042 | $ 12,115,863 | $ (14,875,377) | $ (2,750,272) | ||
Issuance of common shares for services,shares | 943,374 | ||||||
Issuance of common shares services, amount | $ 943 | 666,095 | 667,038 | ||||
Issuance of common shares for deferred financing costs, shares | 64,500 | ||||||
Issuance of common shares for deferred financing costs, amount | $ 65 | 19,668 | 19,733 | ||||
Issuance of common shares for convertible debt, shares | 474,359 | ||||||
Issuance of common shares for convertible debt, amount | $ 474 | 144,526 | $ 145,000 | ||||
Common shares retired and cancelled, shares | (291,000) | 291,000 | |||||
Common shares retired and cancelled, amount | $ (291) | (261,609) | $ (261,900) | ||||
Net loss | (1,500,371) | (1,500,371) | |||||
Ending Balance, Shares at Feb. 29, 2020 | 1,200,000 | 9,311,706 | |||||
Ending Balance, Amount at Feb. 29, 2020 | $ 1,200 | $ 9,311 | 12,747,183 | (16,375,748) | (3,618,054) | ||
Beginning Balance, Shares at May. 31, 2019 | 1,200,000 | 8,042,075 | |||||
Beginning Balance, Amount at May. 31, 2019 | $ 1,200 | $ 8,042 | 12,115,863 | (14,875,377) | (2,750,272) | ||
Ending Balance, Shares at May. 31, 2020 | 1,200,000 | 13,081,380 | |||||
Ending Balance, Amount at May. 31, 2020 | $ 1,200 | $ 13,081 | 12,901,158 | (17,201,283) | (4,285,844) | ||
Beginning Balance, Shares at Nov. 30, 2019 | 1,200,000 | 9,004,014 | |||||
Beginning Balance, Amount at Nov. 30, 2019 | $ 1,200 | $ 9,003 | 12,727,491 | (17,016,035) | (4,278,341) | ||
Issuance of common shares for convertible debt, shares | 307,692 | ||||||
Issuance of common shares for convertible debt, amount | $ 308 | 19,692 | 20,000 | ||||
Net loss | 640,287 | 640,287 | |||||
Ending Balance, Shares at Feb. 29, 2020 | 1,200,000 | 9,311,706 | |||||
Ending Balance, Amount at Feb. 29, 2020 | $ 1,200 | $ 9,311 | 12,747,183 | (16,375,748) | (3,618,054) | ||
Ending Balance, Shares at May. 31, 2020 | 1,200,000 | 13,081,380 | |||||
Ending Balance, Amount at May. 31, 2020 | $ 1,200 | $ 13,081 | 12,901,158 | (17,201,283) | (4,285,844) | ||
Sale of Series B preferred shares, shares | 100,000 | ||||||
Sale of Series B preferred shares, amount | $ 100 | 99,900 | 100,000 | ||||
Sale of Series C preferred shares, shares | 150,000 | ||||||
Sale of Series C preferred shares, amount | $ 150 | 149,850 | 150,000 | ||||
Issuance of common shares for convertible debt, shares | 7,647,453 | ||||||
Issuance of common shares for convertible debt, amount | $ 7,648 | 66,671 | 74,319 | ||||
Net loss | (887,306) | (887,306) | |||||
Ending Balance, Shares at Feb. 28, 2021 | 1,200,000 | 100,000 | 150,000 | 20,728,833 | |||
Ending Balance, Amount at Feb. 28, 2021 | $ 1,200 | $ 100 | $ 150 | $ 20,729 | 13,217,579 | (18,088,569) | (4,848,831) |
Beginning Balance, Shares at Nov. 30, 2020 | 1,200,000 | 100,000 | 20,728,833 | ||||
Beginning Balance, Amount at Nov. 30, 2020 | $ 1,200 | $ 100 | $ 20,729 | 13,067,729 | (17,916,484) | (4,828,726) | |
Sale of Series C preferred shares, shares | 150,000 | ||||||
Sale of Series C preferred shares, amount | $ 150 | 149,850 | 150,000 | ||||
Net loss | (170,105) | (170,105) | |||||
Ending Balance, Shares at Feb. 28, 2021 | 1,200,000 | 100,000 | 150,000 | 20,728,833 | |||
Ending Balance, Amount at Feb. 28, 2021 | $ 1,200 | $ 100 | $ 150 | $ 20,729 | $ 13,217,579 | $ (18,088,569) | $ (4,848,831) |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Cash Flows - USD ($) | 9 Months Ended | |
Feb. 28, 2021 | Feb. 29, 2020 | |
Cash Flows From Operating Activities | ||
Net loss | $ (887,306) | $ (1,500,371) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||
Stock based compensation | 482,153 | |
Depreciation and amortization | 69,000 | |
Goodwill impairment | 145,000 | |
Impairment of intangible assets | 150,000 | |
Provision for obsolete and excess inventory | 77,765 | |
Amortization of interest and financing costs | 211,105 | 430,805 |
Share based finance costs | 67,194 | |
Provision for bad debts | 25,990 | (39,693) |
Change in fair value of contingent liability | 163,227 | (325,309) |
Change in fair value of derivative liability | (10,197) | |
Disposal of discontiuned subsidiary | (811,383) | |
Changes in operating assets and liabilities: (Increase) decrease in: | ||
Accounts receivable | (25,990) | 53,421 |
Inventory | 118,894 | |
Prepaid expenses and other current assets | 77 | |
Changes in operating assets and liabilities: Increase (decrease) in: | ||
Accounts payable, accrued expenses and contingent liability | 305,661 | 595,763 |
Cash used by operating activities | (217,510) | (486,684) |
Cash Flows From Financing Activities | ||
Repayment of notes payable | (54,042) | |
Proceeds from notes payable | 30,000 | |
Proceeds from lines of credit, net of financing costs | 6,268 | 55,000 |
Payment of lines of credit | (7,090) | (64,833) |
Proceeds from convertible notes payable, net of financing costs | 409,240 | |
Repayment of convertible notes payable | (6,000) | |
Proceeds from sales of Series B preferred stock | 100,000 | |
Proceeds from sale of Series C preferred stock | 150,000 | |
Cash (used)/provided by financing activities | 279,178 | 339,365 |
Net Increase (decrease) in Cash and Cash Equivalents | 61,668 | (147,319) |
Cash and Cash Equivalents - beginning | 3,831 | 156,156 |
Cash and Cash Equivalents - end | 65,499 | 8,837 |
Noncash investing and financing activities: | ||
Derivative liability associated with convertible debt | 136,518 | 90,859 |
Common stock issued to satisfy accounts payable and accrued expenses | 184,885 | |
Common stock issued for convertible debt | 74,319 | 145,000 |
Common stock issued with convertible debt as financing fee | 19,733 | |
Common stock issued for sale of subsidiary | $ 62,718 |
Note 1. NATURE OF OPERATIONS AN
Note 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Feb. 28, 2021 | |
Accounting Policies [Abstract] | |
Note 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Note 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations and Basis of Presentation Life On Earth, Inc. was a brand accelerator and incubator focused on building and scaling concepts in the natural Consumer Packaged Goods (CPG) category but recently announced its change in business model to that of a software development and cloud enterprise company. The accompanying consolidated financial statements include the financial statements of the Company’s wholly owned subsidiaries, Victoria’s Kitchen, LLC (“VK”) and The Chill Group, LLC (“JC”) as well as activities in the software development industry. On June 21, 2019, the Company made the determination to shut down and discontinue its direct distribution operations namely that of its Energy Source Distributors, Inc. (“ESD”) and focus primarily on its branded portfolio. Effective November 4, 2019, ESD filed for Chapter 7 bankruptcy protection. On December 11, 2019, the Company received a final decree from the United States Bankruptcy Court ruling that a Chapter 7 bankruptcy estate for ESD had been fully administered. The results of operations of ESD for the years ended May 31, 2020 and 2019 are included herein as discontinued operations in the financial statements. The Company has recognized a gain on the disposal of ESD in the amount of $893,515 for the year ended May 31, 2020. On October 3, 2019, the Company announced its intention to expand its business as a Consumer-Packaged Goods (“CPG”) Company, and on November 2020 it has determine to pursue a change in business strategy to include the software, cloud enterprise and IoT space of the technology industry. The Company decided to pursue businesses in the software industry because it believed that it is where it would find better opportunities for its shareholders. LFER was incorporated in Delaware in April 2013 and acquired VK in October 2017, and JC in August 2018. The Company currently owns those brands though it does not currently market and sell those beverages through third party distributors although it still receives inquiries for its products primarily through online sales. The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Basis of Presentation The accompanying interim unaudited 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. Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period financial statements. These reclassifications had no effect on the previously reported net loss. 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, 2020. 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. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods and services transferred to the customer. The following five steps are applied to achieve that core principle: Step 1: Identify the contract with the customer Step 2: Identify the performance obligations in the contract Step 3: Determine the transaction price Step 4: Allocate the transaction price to the performance obligations in the contract Step 5: Recognize revenue when the company satisfies a performance obligation Because the Company’s agreements generally have an expected duration of one year or less, the Company has elected the practical expedient in ASC 606-10-50-14(a) to not disclose information about its remaining performance obligations. The Company’s performance obligations are satisfied at the point in time when products are received by the customer, which is when the customer has title and the significant risks and rewards of ownership. Therefore, the Company’s contracts have a single performance obligation (shipment of product). The Company primarily receives fixed consideration for sales of product. Shipping and handling amounts are included in cost of goods sold. Sales tax and other similar taxes are excluded from net sales. Sales are recorded net of provisions for discounts, slotting fees payable by us to retailers to stock our products and promotion allowances, which are typically agreed to upfront with the customer and do not represent variable consideration. Discounts, slotting fees and promotional allowances vary from customer to customer. The consideration the Company is entitled to in exchange for the sale of products to distributors. The Company estimates these discounts, slotting fees and promotional allowances in the same period that the revenue is recognized for products sales to customers. The amount of revenue recognized represents the amount that will not be subject to a significant future reversal of revenue. All sales to distributors and customers are generally final. In limited instances the Company may accept returned product due to quality issues or distributor terminations, in which situations the Company would have variable consideration. To date, returns have not been material. The Company’s customers generally pay within 30 days from the receipt of a valid invoice. The Company offers prompt pay discounts of up to 2% to certain customers typically for payments made within 15 days. Prompt pay discounts are estimated in the period of sale based on experience with sales to eligible customers. Early pay discounts are recorded as a deduction to the accounts receivable balance presented on the consolidated balance sheets. Use of Estimates The preparation of consolidated financial statements in conformity 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. Reclassifications Certain reclassifications have been made in prior year’s financial statements to conform to classifications used in the current year. Reverse Stock Split On November 11, 2019, the Company’s Board of Directors (the “Board”) and a majority of voting shareholders approved a reverse stock split at a ratio of one-for-five shares of common stock, without changing the par value, rights, terms, conditions, and limitations of such shares of common stock, (the “Reverse Stock Split”). The Reverse Stock Split became effective on March 25, 2020, pursuant to approval from the Financial Industry Regulatory Authority (“FINRA”), whereupon the shares of our common stock began trading on a split adjusted basis. All share and per share information has been retroactively adjusted to reflect the impact of this reverse stock split. 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 February 28, 2021, and May 31, 2020, warrants and convertible notes payable could be converted into approximately 5,638,000 and 2,779,000 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 February 28, 2021 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 only those investments which are highly liquid, readily convertible to cash, and that mature within three months from date of purchase to be cash equivalents. At February 28, 2021 and May 31, 2020, the Company had cash and cash equivalents of $65,499 and $3,831 respectively. At February 28, 2021 and May 31, 2020, cash equivalents were comprised of funds in checking accounts, savings accounts and money market funds. Accounts Receivable Our accounts receivable balance primarily includes balances from trade sales to distributors and retail customers. The allowance for doubtful accounts is our best estimate of the amount of probable credit losses in our existing accounts receivable. We determine the allowance for doubtful accounts based primarily on historical write-off experience. Account balances that are deemed uncollectible, are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company extends credit to its customers in the normal course of business and performs ongoing credit evaluations of its customers. A significant change in demand for certain products as compared to forecasted amounts may result in recording additional provisions for obsolete inventory. Provisions for obsolete or excess inventory are recorded as cost of goods sold. As of February 28, 2021 and May 31, 2020, the allowance for doubtful accounts was $59,356 and $33,356, respectively. Inventory Inventory consists of finished goods and raw material which are stated at the lower of cost (first-in, first-out) and net realizable value and include adjustments for estimated obsolete or excess inventory. A significant change in demand for certain products as compared to forecasted amounts may result in recording additional provisions for obsolete inventory. During the year ended May 31, 2020, the Company recorded and provision for obsolete and excess inventory of $96,000, which was recorded as cost of goods sold. As of February28, 2021 and May 31, 2020, there was approximately $0 and $0 of inventory on hand, respectively. 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 approximately $2,566 and $36,642 for the nine months ended February 28, 2021 and February 29, 2020, 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. Deferred Finance Cost Deferred financing costs or debt issuance costs are costs associated with issuing debt, such as various fees and commissions paid to investment banks, law firms , Derivative Liability The Company accounts for certain instruments, which do not have fixed settlement provisions, as derivative instruments in accordance with FASB ASC 815-40, Derivative and Hedging – Contracts in Entity’s Own Equity. This is due to the conversion features of certain convertible notes payable being tied to the market value of our common stock. As such, our derivative liabilities are initially measured at fair value on the contract date and are subsequently re-measured to fair value at each reporting date. Changes in estimated fair value are recorded as non-cash adjustments within other income (expenses), in the Company’s accompanying Unaudited Condensed Consolidated Statements of Operations. Fair Value Measurements In August 2018, the FASB issued a new guidance which modifies the disclosure requirements on fair value measurements. We categorize our financial instruments into a three-level fair value hierarchy that prioritize the inputs to valuation techniques used to measure fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument. Financial assets recorded at fair value on our condensed consolidated balance sheets are categorized as follows: Level 1 inputs—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2 inputs—Significant other observable inputs (e.g., quoted prices for similar items in active markets, quoted prices for identical or similar items in markets that are not active, inputs other than quoted prices that are observable such as interest rate and yield curves, and market-corroborated inputs). Level 3 inputs—Unobservable inputs for the asset or liability, which are supported by little or no market activity and are valued based on management’s estimates of assumptions that market participants would use in pricing the asset or liability. Recent Accounting Pronouncements On February 25, 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-2, "Leases" (Topic 842), which is intended to improve financial reporting for lease transactions. This ASU requires organizations that lease assets, such as real estate and manufacturing equipment, to recognize assets and liabilities on their balance sheets for the rights to use those assets for the lease term and obligations to make lease payments created by those leases that have terms of greater than 12 months. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. This ASU also requires disclosures to help investors and other financial statement users better understand the amount and timing of cash flows arising from leases. These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. This ASU became effective for public entities beginning the first quarter 2019. During 2019 the Company sold the Giant Beverage Company which resulted in elimination of the company’s lease obligation related to that operation. The remaining lease obligation related to Energy Source Distributors which was terminated on July 31, 2019 reducing the remaining terms of the lease to 2 months. The Company has adopted ASU 2016-2 Leases which did not have material impact on Company’s financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments: Credit Losses (“ASU 2016-13”), which changes the impairment model for most financial instruments, including trade receivables from an incurred loss method to a new forward-looking approach, based on expected losses. The estimate of expected credit losses will require entities to incorporate considerations of historical information, current information and reasonable and supportable forecasts. This ASU became effective for fiscal years beginning after December 15, 2019. and must be adopted using a modified retrospective transition approach. The adoption of ASU 2016-13 did not have a material impact on Company’s 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 took effect in the Company’s first quarter (August 2020) of our fiscal year ending May 31, 2021. The adoption of this new guidance did not have a material impact on our financial statements. In November 2018, the FASB issued new guidance to clarify the interaction between the authoritative guidance for collaborative arrangements and revenue from contracts with customers. The new guidance clarifies that, when the collaborative arrangement participant is a customer in the context of a unit-of-account, revenue from contracts with customers guidance should be applied, adds unit-of-account guidance to collaborative arrangements guidance, and requires, that in a transaction with a collaborative arrangement participant who is not a customer, presenting the transaction together with revenue recognized under contracts with customers is precluded. The Company does not have any collaborative arrangements or revenue from contracts and therefore Topic 808 does not have a material impact on our consolidated 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. |
Note 2 - BASIS OF REPORTING AND
Note 2 - BASIS OF REPORTING AND GOING CONCERN | 9 Months Ended |
Feb. 28, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Note 2 - BASIS OF REPORTING AND GOING CONCERN | Note 2 - BASIS OF REPORTING AND GOING CONCERN The accompanying unaudited 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 $18,100,000, has a working capital deficiency of approximately $4,800,000 and a net capital deficiency of approximately $4,800,000, which, among other factors, raises substantial doubt about the Company's ability to continue as a going concern. As of February 28, 2021, the Company did not have sufficient cash on hand to fund operations for the next 12 months. The ability of the Company to continue as a going concern is dependent upon management's plans to raise additional capital from the sale of stock and receive additional loans from third parties and related parties. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might be required should the Company be unable to continue as a going concern. |
Note 3 - CONCENTRATIONS
Note 3 - CONCENTRATIONS | 9 Months Ended |
Feb. 28, 2021 | |
Risks and Uncertainties [Abstract] | |
Note 3 - 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 February 28, 2021, the Company recorded no customer sales. During the nine months ended February 28, 2021, sales to 1 customer accounted for approximately 100% of the Company’s net sales. During the nine months ended February 29, 2020, sales to 5 customers accounted for approximately 87% of the Company’s net sales. These five customers accounted for 38%, 13%, 12%, 12% and 12% of the Company’s net sales, respectively. During the three months ended February 29, 2020, sales to 1 customer accounted for approximately 100% of the Company’s net sales. Three customers accounted for approximately 68% of the Company’s accounts receivable as of February 28, 2021. These three customers accounted for 44%, 13%, and 11% of the Company’s accounts receivable, respectively. Five customers accounted for approximately 70% of the Company’s accounts receivable as of February 29, 2020. These five customers accounted for 19%, 17%, 13%,11% and 10% of the Company’s accounts receivable, respectively. |
Note 4 - FAIR VALUE MEASUREMENT
Note 4 - FAIR VALUE MEASUREMENTS | 9 Months Ended |
Feb. 28, 2021 | |
Fair Value Disclosures [Abstract] | |
Note 4 - FAIR VALUE MEASUREMENTS | Note 4 – FAIR VALUE MEASUREMENTS We follow the provisions of ASC 820-10, Fair Value Measurements and Disclosures Topic Financial assets and liabilities recorded on the accompanying condensed consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows: Level 1 – Unadjusted quoted prices in active markets that are accessible to the reporting entity at the measurement date for identical assets and liabilities. Level 2 – Inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 – Inputs include the following: • Quoted prices for similar assets and liabilities in active markets • Quoted prices for identical or similar assets or liabilities in markets that are not active • Observable inputs other than quoted prices that are used in the valuation of the assets or liabilities (i.e., interest rate and yield curve quotes at commonly quoted intervals) • Inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 – Unobservable inputs for the asset or liability (i.e., supported by little or no market activity). Level 3 inputs include management’s own assumption about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk). The level in the fair value hierarchy within which the fair value measurement is classified is determined based upon the lowest level of input that is significant to the fair value measurement in its entirety. Certain of the Company’s financial instruments are not measured at fair value on a recurring basis but are recorded at amounts that approximate their fair value due to their liquid or short-term nature, such as cash and cash equivalents, accounts payable and accrued expenses and notes payable. The carrying value of our contingent liability approximated the fair value as of February 28, 2021 in considering Level 1 inputs within the hierarchy. The carrying value of our derivative liability as of February 28, 2021 approximated the fair value in considering Level 3 inputs within the hierarchy. The Company’s derivative liability is measured at fair value using the Black Scholes valuation methodology. For the nine months ended February 28, 2021 the following inputs were utilized to derive the fair value of our derivative liability: February 28, 2021 Risk free interest rate 0.05 % Expected dividend yield 0 Expected term (in years) 1 Expected volatility 18.25 % The following tables set forth by level, within the fair value hierarchy, the Company’s financial instruments carried at fair value as of February 28, 2021 and May 31, 2020: February 28, 2021 Level 1 Level 2 Level 3 Total Contingent liability $ 220,500 $ — $ — $ 220,500 Derivative liability — — 136,518 136,518 Total $ 220,500 $ — $ 136,518 $ 357,018 May 31, 2020 Level 1 Level 2 Level 3 Total Contingent liability $ 57,273 $ — $ — $ 57,273 Derivative liability — — 146,715 146,715 Total $ 57,273 $ — $ 146,715 $ 203,988 |
Note 5 - ESD DISCONTINUED OPERA
Note 5 - ESD DISCONTINUED OPERATIONS | 9 Months Ended |
Feb. 28, 2021 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Note 5 - ESD DISCONTINUED OPERATIONS | Note 5 – ESD DISCONTINUED OPERATIONS On June 21, 2019 the Company shut down the ESD operation to further concentrate its efforts and available resources on its core brands it acquired. On November 4, 2019, ESD filed for Chapter 7 bankruptcy protection. On December 11, 2019, the Company received a final decree from the United States Bankruptcy Court that a Chapter 7 bankruptcy estate for ESD had been fully administered. As a result, the Company discharged approximately $851,000 in accounts payable and accrued expenses and recorded a gain on the disposal of discontinued subsidiary in the amount of $891,000 during the year ended May 31, 2020. Accordingly, the results of operations for ESD have been reclassed to discontinued operations for the three and nine months ended February 29, 2020. The Company recognized a loss from discontinued operations of $80,838 for the three and nine months ended February 29, 2020, related to the ESD operations. Below are the results from discontinued operations for the ended February 28, 2021 and February 29, 2020 for ESD: For the three months ended February 28, For the three months ended February 29, For the nine months ended February 28, For the nine months ended February 29, 2021 2020 2021 2020 Sales, net $ — $ — $ — $ 5,911 Cost of goods sold — — — 16,303 Gross profit — — — (10,392 ) Operating expenses — — — 33,321 Loss from operations — — — (43,713 ) Other expenses: Interest and finance costs — — — (8,075 ) Loss on sale of fixed assets — — — (29,050 ) Net loss $ — $ — $ — $ (80,838 ) The table below summarizes the net liabilities of the discontinued operations of ESD that were discharged during the nine months ended February 29, 2020: Liabilities Accounts payable and accrued expenses $ 851,481 Lines of credit 42,034 Total Liabilities $ 893,515 |
Note 6 - JCG ACQUISITION
Note 6 - JCG ACQUISITION | 9 Months Ended |
Feb. 28, 2021 | |
Business Combinations [Abstract] | |
Note 6 - JCG ACQUISITION | Note 6 – 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 327,293 shares of the Company’s restricted common stock valued at $1.95 per share for a total value of approximately $638,000. If these shares are trading below $1.50 after August 2, 2019, the Company would be required to issue additional shares so that the value of the 327,293 shares plus these additional shares, with a floor price of $1.00, will be equal to $900,000. On August 2, 2019, the 12-month anniversary of the acquisition of JCG the Company determined that the Company’s stock price closed below the contractual floor for remeasurement of the purchase consideration and additional consideration was due to the sellers. During the year ended May 31,2019, the Company accrued approximately $383,000 to reflect the fair value of the contingent consideration related to the acquisition. During the three months ended February 28, 2021, the Company recorded an other in the amount of $103,091 expense for the change in the fair value of the contingent liability, and during the three months ended February 29, 2020, the Company recorded the other income of $85,900 for the change in the fair value of the contingent liability, respectively. As of February 28, 2021,The contingent shares have not been issued. The JCG Agreement also provides for the issuance of a warrant for 200,000 shares of common stock with a two-year term and an exercise price of $4.25 with a value of approximately $9,400. The JCG Agreement also provides for an additional 218,182 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 further 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 327,293 shares, to be approximately $722,000, for a total purchase price value of approximately $1,360,000. The warrants expired on August 2, 2020. 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 327,293 shares of common stock with an estimated fair value of $1.95 per share $ 638,182 Contingent consideration for additional shares (included in additional paid-in capital) 684,641 Warrants to purchase additional shares 37,177 Total purchase consideration $ 1,360,000 Cash $ 265 Accounts receivable 167,700 Inventory 72,035 Accounts payable (65,000 ) Intangibles - Trademarks and copyrights 1,185,000 Total consideration $ 1,360,000 The intangibles relate to trademarks and copyrights acquired in the JC acquisition and are being amortized over a 5-year period. During the three and six months ended November 30, 2020 the Company recorded amortization expense of $0 and $0, respectively, related to the JC intangibles. During the three and six months ended November 30, 20219 the Company recorded amortization expense of $145,000 and $145,000, respectively, related to the JC intangibles. The Company recorded an impairment charge of $725,000 against the intangibles recorded related to the acquisition of JCG during the year ended May 31, 2019 and recorded an impairment charge of $299,000 during the year ended May 31, 2020. The balance of the intangibles related to the JC acquisition as of February 28, 2021 was $0. |
Note 7 -_INTANGIBLE ASSETS
Note 7 - INTANGIBLE ASSETS | 9 Months Ended |
Feb. 28, 2021 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Note 7 - INTANGIBLE ASSETS | Note 7 – INTANGIBLE ASSETS Intangible assets as of February 28, 2021 and May 31, 2020 were as follows: February 28, 2021 May 31, 2020 Intangible assets: Trademarks and copyrights $ — $ 460,000 Less: accumulated amortization: Trademarks and copyrights (1) — 161,000 Less: Impairment — 299,000 Net book value at the end of the year $ — $ — _________ (1) is net of amortization of intangible assets related to the ESD acquisition which have been reclassified to discontinued operations as of May 31, 2020 on the condensed consolidated balance sheet. Amortization expense for the three and nine months ended February 28, 2021 was $0 and $0, respectively. Amortization expense for the three and nine months ended February 29, 2020 was $23,000 and $69,000, respectively. |
Note 8 - GOODWILL
Note 8 - GOODWILL | 9 Months Ended |
Feb. 28, 2021 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Note 8 - GOODWILL | Note 8 - GOODWILL Goodwill represents the excess of the purchase price over the fair value of the net assets acquired from VK. The changes in the carrying amount of goodwill for the nine months ended February 28, 2021 and the year ended May 31, 2020 were as follows: February 28, 2021 May 31, 2020 Balance – beginning $ — $ 195,000 Less-impairment — 195,000 Balance – end $ — $ — Goodwill resulting from the business acquisitions has been allocated to the financial records of the acquired entity. |
Note_9 - NOTES PAYABLE-RELATED
Note 9 - NOTES PAYABLE-RELATED PARTY | 9 Months Ended |
Feb. 28, 2021 | |
Notes to Financial Statements | |
Note 9 - NOTES PAYABLE- RELATED PARTY | Note 9 – NOTES PAYABLE – RELATED PARTY The following table summarizes the Company’s Note Payable – Related Parties as of February 28, 2021: Issue Date Maturity Date Interest Rate Original Amount Accumulated Payments as of February 28, 2021 Accumulated Accrued interest as of February 28, 2021 Balance February 28, 2021 1/23/2019 3/1/2020 20 % $ 10,000 $ — $ 4,211 $ 14,211 1/28/2020 1/28/2021 20 % $ 8,200 $ — $ 1,788 $ 9,988 2/20/2020 2/19/2021 5 % $ 45,169 $ 8,300 $ 2,050 $ 38,919 $ 63,118 The following table summarizes the Company’s Note Payable – Related Parties as of May 31, 2020: Issue Date Maturity Date Interest Rate Original Amount Accumulated Payments as of May 31, 2020 Accumulated Accrued interest as of May 31, 2020 Balance May 31, 2020 1/23/2019 3/1/2020 20.0 % $ 10,000 $ — $ 2,707 $ 12,707 1/28/2020 1/28/2021 20.0 % $ 8,200 $ — $ 557 $ 8,757 2/20/2020 2/19/2021 5.0 % $ 45,169 $ 5,300 $ 527 $ 40,396 $ 61,860 On January 23, 2019, ESD issued a demand note in the amount of $10,000 to a related party. The note is unsecured, bears interest at an annual rate of 20% and had an original maturity date of March 1, 2019. On March 12, 2019, the obligations due under the terms of the note were assigned to the Company. The maturity date on the note has been extended to March 1, 2020. During the three and nine months ended February 28, 2021 the Company recorded interest expense of $500 and $1,504, respectively. During the three and nine months ended February 29, 2020, the Company recorded interest expense of $500 and $1,500, respectively. Accrued interest on the note on February 29, 2021 amounted to $4,211. On January 28, 2020, the Company issued a demand note in the amount of $8,200 to a related party. The note is unsecured, bears interest at an annual rate of 20% and has maturity date of January 28, 2021. During the three and nine months ended February 28, 2021 the Company recorded interest expense of $410 and $1,231, respectively. During the three and nine months ended February 29, 2020, the Company recorded interest expense of $144 and $144, respectively. Accrued interest on the note on February 29, 2021 amounted to $1,788. Prior to ESD’s bankruptcy declaration, ESD became indebted to certain creditors in the total amount of $45,169 which indebtedness was personally guaranteed by Fernando Leonzo, the Company’s then CEO. The debt was not protected under the ESD bankruptcy. On February 20, 2020, the Company and Fernando Leonzo entered into an agreement under which Fernando Leonzo would discharge the indebtedness personally and directly and the Company would pay Fernando Leonzo, $3,000 per month beginning on February 21, 2020 until such time that the indebtedness is fully discharged. Interest will accrue at an annual rate of 5% on any monthly payments not made by the 21 st |
Note_10- NOTES PAYABLE
Note 10- NOTES PAYABLE | 9 Months Ended |
Feb. 28, 2021 | |
Debt Disclosure [Abstract] | |
Note 10- NOTES PAYABLE | Note 10 – NOTE PAYABLE On September 15, 2020, the Company issued a Note in the principal amount of $30,000 which had a maturity date of December 15, 2020. The Note does not bear interest. |
Note_11 - CONVERTIBLE NOTES PAY
Note 11 - CONVERTIBLE NOTES PAYABLE | 9 Months Ended |
Feb. 28, 2021 | |
Notes to Financial Statements | |
Note 11- CONVERTIBLE NOTES PAYABLE | Note 11 – CONVERTIBLE NOTES PAYABLE The following table summarizes the Company’s convertible notes payable as of February 28, 2021 and May 31, 2020: February 28, 2021 May 31, 2020 Unamortized deferred finance costs and original issue discount Principal Net Unamortized deferred finance costs and original issue discount Principal Net 2017 NPA Notes — 737,500 737,500 — 737,500 737,500 The 2nd Note Offering — 355,000 355,000 — 355,000 355,000 2020 Note Issuances — 441,400 441,400 83,277 504,300 421,023 2019 Notes — 767,384 767,384 16,406 667,381 650,975 $ — $ 2,301,284 $ 2,301,284 $ 99,683 $ 2,264,181 $ 2,164,498 As of February 28, 2021, 19 convertible notes with principal amounts aggregating $2,263,284 have passed their maturity date, of which, one convertible note with a principal of $100,000 is in default as the holder has submitted a request for payment and declared in default by the note holder. On September 12, 2019 the Company was served with a summons from the Supreme Court of the State of New York to answer a complaint filed by the Gankaku Living Trust (“Gankaku”) Gankaku Living Trust v. Life on Earth Inc. , Supreme Court of New York, No.655189/2019) claiming a breach of contract and default upon the Note. The Note was issued to the Gankaku Living Trust (“Gankaku”) by the Company on May 24, 2018 with an original maturity date of May 24, 2019. This maturity date of this note was extended on May 24, 2019 until June 24, 2019. The Company paid the outstanding interest on the note of $7,000 as part of this extension. On June 25, 2019, Gankaku’s legal counsel sent a demand letter to the Company requesting payment in full. Under the terms of the convertible note, the Company had 10 business days to pay the outstanding balance or the note would be in default. Under the terms of the note, upon default, the Holder shall be issued the number of common stock equal to the outstanding balance multiplied by 125%, divided by the average price, as defined. On July 17, 2019 the Gankaku’s counsel sent the Company’s counsel an official notice of default for the note and demanded the immediate issuance of Common Stock per the convertible note agreement and also demanded that the Company make all of its assets available to the Gankaku Living Trust as collateral. The Company retained counsel to represent it in this case. On July 1, 2020, the Court granted Gankaku’s Motion for Summary Judgment (the July 1, 2020 Order) in the amount of $100,000, with 7% interest per annum from June 24, 2019, $722 of court costs, and $8,040 of attorney fees (the “Judgment Amount”), and that the Company shall pay the Judgment Amount by issuing Gankaku the Company’s Common Stock equivalent to said amount as provided for in Section 5 of the Note. The Company then moved to vacate the Court’s July 1, 2020 Order, which the Court denied on November 17, 2020. The Court issued a declaratory judgment requiring the Company to pay the Judgment Amount by issuing its Common Stock Shares to Gankaku as had been provided in the July 1, 2020 Order. On February 3, 2021, the Company filed an appeal from the Court’s Order denying the Motion to Vacate the July 1, 2020 Order, which the Court has not yet ruled upon. The 2017 NPA Note 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 had an original maturity date of March 25, 2019. As additional consideration for the issuance of the SPN, the Company issued 300,000 restricted shares of the Company’s common stock at $1.00 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 had an original maturity date of May 3, 2019. As additional consideration for the issuance of the $175K Note, the Company issued 160,000 restricted shares of the Company’s common stock at $2.10 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, 86,667 shares of the Company’s common stock, which shares were issued at $2.00 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 an 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 had an original maturity date of 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. In January 2019, the $125,000 note which was issued on January 26, 2018 plus accrued and unpaid interest amounting to $8,654 was converted into 178,205 shares of the Company’s common stock at $0.75 per share. As of May 31, 2020, and May 31, 2019, the outstanding balance was $0, respectively. 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 $1.50, 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. The Note Amendment was treated as an extinguishment of the old notes and an issuance of new notes (the “New Notes”). As a result of this transaction, the Company expensed the unamortized deferred financing costs of $557,462 as of the date of the extinguishment and recorded deferred financing costs on the New Notes, and the $125,000 note purchase, of $538,335, which has been fully amortized as of May 31, 2020. In July 2018, the Company (i) issued 100,000 common shares to note holder at a conversion price of $0.875 per share, to cancel $87,500 of principal amount due by the Company regarding the $175K Note; (ii) issued 60,000 shares at $0.875 per share to the note holder representing 20,000 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 39,333 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 this transaction, the Company recorded finance costs of $151,250 during the year ended May 31, 2019. The Company recorded interest expense of $12,729 and $38,613 for three and nine months ended February 28, 2021, respectively. The Company recorded interest expense of $12,906 and $25,813 for three and nine months ended February 29, 2020, respectively. The total amount of accrued and unpaid interest expense on the NPA as of February 28, 2021 and May 31, 2020 was $146,247 and $107,635, respectively. As of February 28, 2021, and May 31, 2020, the outstanding balance was $737,500 and 737,500, respectively. The Second Note offering In May 2018, the Company offered an NPA, in the aggregate amount of up to $500,000 (the “2nd Note Offering”) and, as of February 28, 2021, issued secured convertible promissory notes to eighteen (18) investors under the terms of the 2nd Note Offering in the aggregate amount of $830,000. Notes issued under the 2 nd nd As a result of this transaction, the Company recorded deferred finance costs in the aggregate amount of $612,644, all of which has been fully amortized as of May 31, 2020. During the year ended May 31, 2020, one (1) investor converted $100,000 of notes plus $10,088 of interest into 166,667 shares of common stock at $0.75 per share. As a result of this transaction, the Company recorded a finance cost of $14,917. During the year ended May 31, 2019, 13 investors converted an aggregate amount of $375,000 of notes issued under the 2 nd The Company recorded interest expense of $6,448 and $19,559 for three and nine months ended February 28, 2021, respectively. The Company recorded interest expense of $6,520 and $19,630 for three and nine months ended February 29, 2020, respectively. The total amount of accrued and unpaid interest expense on the NPA as of February 28, 2021 and May 31, 2020 was $66,028 and $46,469, respectively. As of February 28, 2021 and May 31, 2020 the outstanding balance was $355,000 and $355,000, respectively. The 2020 Notes On September 10, 2019, the Company issued a Convertible Promissory Note, in the principal amount of $110,000 which matures on September 9, 2020. The note bears interest at an annual rate of 10% and is due on maturity. The note was issued with a 10% original issue discount. On or after the maturity date, the note may be converted into the Company’s common stock at a conversion price equal to $0.75 per share or 70% of the average closing price on the primary trading market on which the Company’s common stock is quoted for the last thirty (30) trading days immediately prior to but not including the conversion date, whichever is lower (the “Conversion Price”). Upon the occurrence of any Event of Default, as defined by the note, then the conversion price shall be reduced to a price of $0.60 per share or 56% of the average closing price on the primary trading market on which the Company’s common stock is quoted for the last thirty (30) trading days, whichever is lower. As additional consideration for the funding of the note, the Company has issued an aggregate of 33,000 restricted shares of the Company’s common stock as of the date of the note at $0.54 per share. As a result of this transaction, the Company recorded deferred finance costs totaling $28,820, which is being amortized over the life of the note, of which $0 and $10,808 was amortized during the three and nine months ended February 28, 2021, respectively, and, $6,004 and $12,008 was amortized during the three and nine months ended February 29, 2020, respectively. The Company received a notice of default and breach of contract notice from the Note Holder. The default annual interest rate is 20%. The Company recorded interest expense of $12,838 and $18,353 during the three and nine months ended February 28,2021, respectively, and, the Company recorded interest expense of $2,743 and $5,184 during the three and nine months ended February 29, 2020, respectively. As of February 28, 2021 and May 31, 2020, the outstanding balance was $110,000 and $110,000, respectively. On December 14, 2020, the Company received a Complaint from the note holder, L & H, Inc. (“L&H”) filed in the First Judicial District Court of Nevada, Carson City, alleging breaches of contract regarding the Company’s failure to repay amounts due or failing to issuing shares upon demand and breach of implied covenant of good faith and fair dealing in connection with the $110,000 September 10, 2019 Convertible Promissory Note between L&H and the Company. The Complaint seeks an unspecified amount of damages representing the balance of the unconverted debt and penalties. Prior to the Complaint, the Company attempted to negotiate a settlement with L&H. The Company will answer the Complaint and attempt to negotiate a settlement with L&H but cannot assure the outcome of any attempted settlement, or the litigation. On September 23, 2019, the Company issued a 10% Convertible Redeemable Note, in the principal amount of $287,500 which matures on September 23, 2020. The note bears interest at an annual rate of 10% and is due on maturity but may be paid during the term of the note in Company common stock. Any portion of the principal amount note may be converted into the Company’s common stock at a conversion price equal to 60% of average of 2 lowest closing days with 15-day lookback, based on conversion notice date. The proceeds of the note were reduced by $37,500 to pay for management fees and legal services. As a result of this transaction, the Company recorded a derivative liability of $122,174 and a deferred finance costs totaling $159,674, which is being amortized over the life of the note, of which $0 and $33,265 was amortized during the three months ended February 28, 2021 and February 29, 2020, respectively, and, $59,879 and $66,530 was amortized during the nine months ended February 28, 2021 and February 29, 2020, respectively. Also, the Company recorded a change in the fair value of the derivative liability of ($54,961) and $6,108 during the three and nine months ended February 29, 2021. The Company recorded interest expense of $6,811 and $19,786 during the three and nine months ended February 28, 2021, respectively. The Company recorded interest expense of $7,168 and $12,524 during the three and nine months ended February 29, 2020, respectively. On May 28, 2020, the note holder converted $6,500 of principal and $438 of accrued interest into 564,072 shares of the Company’s common stock at $0.0123 per share, and, on June 15, 2020, the note holder converted $5,500 of principal into 666,590 shares of the Company’s common stock at $0.0103 per share. As of February 28, 2021, and May 31, 2020, the outstanding balance was $275,500 and $281,000, respectively. On October 25, 2019, the Company issued a Convertible Promissory Note, in the principal amount of $68,000 which matures on October 25, 2020. Under the terms of the Note, in the event of a default, the principal amount of the note shall increase by 150%. Because the Company failed to timely deliver shares of its common stock to the Note Holder upon receipt of the Note Holder’s notice of exercise of conversion, the note was placed in default. As a result, the Company recorded a finance expense of $34,000 during the year ended May 31, 2020. The note bears interest at an annual rate of 10% and is due on maturity. Any portion of the principal amount note may be converted into the Company’s common stock at a conversion price equal to 65% of average of 2 lowest closing days with a 15-day lookback based on the conversion notice date. The proceeds of the note were reduced by $7,760 to pay for management fees and legal services. As a result of this transaction, the Company recorded a derivative liability of $25,815 and deferred finance costs totaling $33,575, which is being amortized over the life of the note, of which $0 and $12,590 was amortized during the three and nine months ended February 28, 2021, respectively, and, $6,995 and $13,990 was amortized during the three and nine months ended February 29, 2020, respectively. The Company also recorded a change in the fair value of the derivative liability of ($3,868) and ($20,620) during the three and nine months ended February 18, 2021. The Company recorded interest expense of $1,113 and $1,722 during the three and nine months ended February 28, 2021, respectively, and, $1,695 and $2,366 during the three and nine months ended February 29, 2020, respectively. During the nine months ended February 28, 2021, the note holder converted $57,400 of principal into an aggregate of 5,407,042 shares of the Company’s common stock at conversion prices ranging from $0.0101-$0.0121 per share. During the year ended May 31, 2020, the note holder converted $26,700 of principal into an aggregate of 2,438,112 shares of the Company’s common stock at conversion prices ranging from $0.0069-$0.0136 per share. As of February 28, 2021, and May 31, 2020, the outstanding balance was $17,900 and $41,300, respectively. On March 23, 2021, the Company and the note holder reached a settlement and, as of that date, The Company no longer owes the note holder any further consideration. On March 5, 2020, the Company issued a Convertible Promissory Note, in the principal amount of $38,000 which matures on March 5, 2021. The note bears interest at an annual rate of 10% and is due on maturity. After 180 days of the issuance of the Note, the note may be converted into the Company’s common stock at a conversion price equal to 61% of the average closing price on the primary trading market on which the Company’s common stock is quoted for the last twenty (20) trading days immediately prior to but not including the conversion date. As a result of this transaction, the Company recorded a derivative liability of $7,637 during the year ended May 31, 2020 and the Company recorded a change in the fair value of the derivative liability of ($7,573) and $4,315 during the three and nine months ended February 28, 2021, respectively. The Company recorded interest expense of $937 and $2,842 during the three and nine months ended February 28, 2021, respectively. As of February 28, 2021, and May 31, 2020, the outstanding balance was $38,000 and $38.000, respectively. On March 23, 2021, the Company and the note holder reached a settlement and, as of that date, the Company no longer owes the note holder any further consideration. The 2019 Notes On October 29, 2018, the Company issued a Secured Promissory Note (“SPN”), in the principal amount of $131,250 which had an original maturity date of November 15, 2019. The SPN does not bear interest. The SPN was issued with a 5% original issue discount. Under the terms of the Note, the Company shall repay the SPN note holder in 12 equal monthly installments of $10,938 beginning December 15, 2018. As additional consideration for the funding of the SPN, the Company has issued an aggregate of 20,000 restricted shares of the Company’s common stock as of the date of the SPN at $1.60 per share and is obligated to issue an additional 20,000 shares, 180 days from the date of the SPN and an additional 20,000 shares, 270 days from the date of the SPN. As a result of this transaction, the Company recorded a deferred finance cost of $102,250, which is being amortized over the life of the SPN. On November 29, 2019, the maturity date of the note was extended to November 15, 2020. All other terms of the note remain the same. In consideration for the extension of the maturity date, the Company issued 131,250 shares of the Company’s restricted common stock, at $0.25 per share, the closing market price per share. As a result, the Company has recorded an additional deferred finance cost of $32,813. During the three months ended February 28, 2021 and February 29, 2020, the Company recorded amortization of deferred finance costs of $0 and $8,203 respectively. During the nine months ended February 28, 2021 and February 29, 2020, the Company recorded amortization of deferred finance costs of $16,406 and $50,313, respectively. As of February 28, 2021, the Company had not paid any of the monthly installments. On February 27, 2019, the Company issued a Secured Note (“SN”), in the principal amount of $312,500 which had an original maturity date of February 27, 2020. The SN does not bear interest. The SN was issued with a 20% original issue discount. Under the terms of the SN, the Company shall repay the SN note holder in 12 equal monthly installments of $26,042, beginning in March 2019. As additional consideration for the funding of the SPN, the Company has issued an aggregate of 50,000 restricted shares of the Company’s common stock as of the date of the SN at $2.0495, and the Company recorded a charge to finance expense in the amount of $102,475. In addition, as a result of this transaction, the Company recorded a deferred finance cost of $62,500, which has been fully amortized as of May 31, 2020. On December 23, 2019, the Company and a Note Holder agreed to amend the Secured Note dated February 27, 2019 because of three amortization payment failures that have occurred since the original date of the Secured Note. As a result of the amendment, (1) the Company shall issue 50,000 restricted common stock shares to the Note Holder; (2) Through January 31, 2020 (the “30 Day Period), the Note Holder will not issue any notices, demands, or otherwise or file any lawsuits regarding any alleged breach of the Secured Note or the SPA; (3) During the 30 Day Period, the Note Holder shall have the right to convert up to $39,063 (which amount equals the Monthly Principal Amortization Amount, as defined in the Secured Note times 1.5 (plus a conversion fee of $750 for each conversion amount) at a conversion price of $0.10 per share; (4) The Company shall bring the Note current during the 30 Day Period; (5) Should the Company fail to bring the Note current within the 30 Day Period, the Note Holder may elect to exercise its conversion rights for an additional 30 day period of between January 31, 2020 to February 28, 2020 (the “Second 30 Day Period”) as a follow on conversion after the 30 Day Period for the principal amount equal to or greater than $39,063, each such conversion of which shall reduce the principal amount then owed; and, (6) Should the Note Holder elect to proceed with the Second 30 Day Period, the Note Holder agrees to extend the Forbearance for the Second 30 Day Period. As of February 28, 2021, the 50,000 shares of restricted common stock have not been issued, and, the Note Holder has not exercised his conversion rights. In October 2020, the Company received notice from the Note Holder that, under the terms of the Note, the Note Holder is entitled to default principal and fees aggregating $111,422, which has been recorded as a finance expense during the three and nine months ended February 28, 2021. During the three and nine months ended February 28, 2021, the Company recorded interest expense on the note of $11,472 and $65,614. On March 21, 2019, the Company issued a 2nd Secured Note (“2-SN”), in the principal amount of $312,500 which had an original maturity date of March 21, 2020. The 2-SN does not bear interest. The 2-SN was issued with a 20% original issue discount. Under the terms of the SN, the Company shall repay the 2-SN note holder in 12 equal monthly installments of $26,042 beginning in April 2019. As additional consideration for the funding of the S,N, the Company has issued an aggregate of 50,000 restricted shares of the Company’s common stock as of the date of the 2-SN at $1.825, and, as a result of this transaction, the Company recorded a charge to finance expense in the amount of $91,250. In addition, as a result of this transaction, the Company recorded a deferred finance cost of $62,500, all of which has been amortized as of May 31, 2020. Since execution date of the 2-SN, the Company made two scheduled payments aggregating $52,083. On October 30, 2019, in order to avoid default under the note for any further missed payments, the Company and the 2-SN note holder have agreed to a series of amendments to the 2-SN which, (i) increase the principal due under the 2-SN by a total of $55,000, which has been recorded as a finance cost during the year ended February 28, 2021, (ii) the Company paid $28,000, and (iii) the Company shall repay the remaining unpaid principal due on the 2-SN note in 7 equal monthly installments of $41,059 beginning on November 30, 2019. As of February 28,2021 , the Company has not made an installment payment. The series of amendments to the 2-SN was treated as an extinguishment of the old 2-SN and an issuance of a new 2-SN. As a result of the extinguishment of the old 2-S, the Company has recorded an additional charge to finance expense in the amount of $19,121, during the year ended May 31, 2020, the amount of which represents the remaining balance of the unamortized 20% original issue discount as of October 30, 2019, the date of the most recent amendment. On December 18, 2019, the Note Holder converted $20,000 of the outstanding debt into 307,692 shares of the Company’s common stock at $0.065 per share and the maturity date of the Note was extended to May 31, 2020. On March 20, 2020, the Note Holder converted $22,500 of the outstanding debt into 450,000 shares of the Company’s common stock at $0.05 per share, on May 28, 2020, the Note Holder converted $5,130 of the outstanding debt into 570,000 shares of the Company’s common stock at $0.009 per share, on June 15, 2020, the Note Holder converted $4,894 of the outstanding debt into 675,000 shares of the Company’s common stock at $0.0073 per share, and, on July 7, 2020, the Note Holder converted $6,525 of the outstanding debt into 900,000 shares of the Company’s common stock at $0.00725 per share. During the three and nine months ended February 28, 2021, the Company recorded interest expense on the note of $10,136 and $26,803. On May 16, 2019, the Company issued a Second Secured Promissory Note (“2-SPN”), in the principal amount of $75,000 which had an original maturity date of February 16, 2020. The 2-SPN bears interest at an annual rate of 7% and is due on maturity. As additional consideration for the funding of the 2-SPN, the Company has issued an aggregate of 7,500 restricted shares of the Company’s common stock as of the date of the 2-SPN at $2.00 per share and is obligated to issue an additional 7,500 shares, 180 days from the date of the 2-SPN and an additional 7,500 shares, at maturity. The Company recorded interest expense of $1,295 and $3,927 during the three and nine months ended February 28, 2021, respectively. The Company recorded interest expense of $1,309 and $4,157 during the three and nine months ended February 29, 2020, respectively. As a result of this transaction, the Company recorded a deferred finance cost of $60,679, all of which has been amortized over the life of the 2-SPN, as of May 31, 2020. As of February 28, 2021, future principal payments of the convertible notes payable were approximately as follows: For the twelve months ending February 28, 2022 $ 2,301,284 |
Note 12 - LINES OF CREDIT
Note 12 - LINES OF CREDIT | 9 Months Ended |
Feb. 28, 2021 | |
Notes to Financial Statements | |
Note 12 - LINES OF CREDIT | Note 12 – LINES OF CREDIT In April 2017, the Company entered into three credit lines with a small business lender that allows the Company to borrow up to $35,000 and bears interest at 6% per annum. The facilities require monthly payments of principal and interest. On February 28, 2021 the aggregate outstanding balance was $25,302. On May 31, 2020 the aggregate outstanding balance was $26,124. |
Note 13 - CAPITAL STOCK
Note 13 - CAPITAL STOCK | 9 Months Ended |
Feb. 28, 2021 | |
Equity [Abstract] | |
Note 13 - CAPITAL STOCK | Note 13 – CAPITAL STOCK As of February 28, 2021, the authorized common stock of the Company was 200,000,000 shares of common stock, $0.001 par value per share, and 10,000,000 shares of preferred stock, $0.001 par value per share. On February 28, 2021 and May 31, 2020, respectively, there were 1,200,000 shares of Series A preferred stock outstanding; on February 28, 2021 and May 31, 2020, respectively, there were 100,000 shares of Series B preferred stock outstanding; and, on February 28, 2021 and May 31, 2020, respectively, there were 150,000 shares of Series C preferred stock outstanding. On November 11, 2019, the Board of Directors and a majority of the voting power approved a resolution to effectuate a 5:1 Reverse Stock Split. Under this Reverse Stock Split each 5 shares of our Common Stock were automatically converted into 1 share of Common Stock. To avoid the issuance of fractional shares of Common Stock, the Company issued an additional share to all holders of fractional shares. In addition, as discussed below, the Board of Directors and the holders of a majority of the voting power approved a resolution to effectuate an increase in authorized Shares of Common Stock from One Hundred million (100,000,000) to Two Hundred million (200,000,000) shares of common stock, $0.001 par value. The Company received approval from FINRA on March 25, 2020 an, on that date, the reverse stock split became effective The number of authorized, issued, and outstanding, and available shares of common shares as of March 25, 2020, immediately after the reverse stock split was approved by FINRA are disclosed in the table below: Authorized Shares of Common Stock Number of Issued and Outstanding Shares of Common Stock Number of Shares of Common Stock Available in Treasury for Issuance As of March 25, 2020, Pre-Increase in Authorized and Reverse Stock Split 100,000,000 shares of Common Stock 46,937,678 shares of Common Stock 53,062,322 shares of Common Stock As of March 25, 2020, Post- Increase in Authorized and Reverse Stock Split 200,000,000 shares of Common Stock 9,387,536 shares of Common Stock 190,612,464 shares of Common Stock Preferred Stock On April 22, 2020, the Company, pursuant to the provisions of Section 151 of the Delaware General Corporation Law, created a new Preferred Series class of shares designated as Series B out of the already 10 million shares of Preferred Stock authorized in the Company’s Certificate of Incorporation. The Company already, since its inception, had designated and issued a Class A Series of Preferred Stock consisting of one million two hundred thousand shares (1,200,000), $0.001 par value share. The new Series B Preferred are for a total of two hundred fifty thousand shares (250,000), $0.001 par value per share, to be designated as Series B Preferred Stock. Series A Preferred Stock The Series A Preferred Stock has the following rights and privileges: Voting – One share of Series A Preferred Stock has the equivalent voting rights as 50 shares of common stock. February 28, 2021 Shares Outstanding Fernando Oswaldo Leonzo 600,000 Robert Gunther 300,000 Jerry Gruenbaum 100,000 John Romagosa 200,000 Total 1,200,000 The Series A Preferred Shares do not have liquidation preferences but have 50-1 preferred voting rights. Series B Preferred Stock Holders of Series B Preferred Shares have the following rights and privileges: Voting - The Series B Preferred Shares shall have no voting rights. Conversion - The holders of Series B Preferred Shares shall have the rights to convert their Series B Preferred Shares into Common Stock shares, once, no sooner than the sixth month anniversary after the Closing of the Offering . Dividends - The Company shall pay the holders of Series B Preferred Stock a 10% annual cash dividend paid quarterly. In June 2020, the Company issued 100,000 Series B Preferred Shares, 50,000 Shares each to two unrelated third parties for an aggregate amount of $100,000. On January 20, 2021, John Romagosa purchased 25,000 shares from an original owner in a private transaction. During the three and nine months ended February 28, 2021, the Company recorded an accrued dividend of $2,500 and $7,250 which has recorded as interest and financing costs in the accompanying condensed consolidated statements of operations. There were no Series B Preferred Share issued or outstanding on May 31, 2020. The number of Preferred Series B shares outstanding as of February 28, 2021 were: Holder Number of Shares J.Craig Holding Corp. 50,000 Axon Capital Management, Inc. 25,000 John Romagosa 25,000 Total 100,000 Series C Preferred Stock Holders of Series C Preferred Shares have the following rights and privileges: Voting - The Series C Preferred Shares shall have no voting rights. Conversion - The holders of Series C Preferred Shares shall have the rights to convert their Series C Preferred Shares into Common Stock shares, once, no sooner than the sixth month anniversary after the Closing of the Offering . The number of Preferred Series C shares outstanding as of February 28, 2021 were: Holder Number of Shares Dr. Anshu Sharma, M.D. 150,000 Total 150,000 Common Stock Shares of common stock have the following rights and privileges: Voting – The holder of each share of common stock is entitled to one vote per share held. The holders of common stock are entitled to elect members of the Board of Directors. Dividends – Common stockholders are entitled to receive dividends, if, and when, dividends are declared by the Board of Directors. The Company has not declared dividends since inception. Shares of common stock issued for services The Company issues shares of common stock in exchange for financing and services provided by select individuals and or vendors. During the nine months ended February 28, 2021 and February 29, 2020 the Company issued 7,647,453 and 1,560,631 shares, respectively. During the nine months ended February 29, 2020, the Company retired and cancelled 291,000 common shares. Warrants Warrants outstanding 9 months ended February 28, 2021 9 months ended February 29, 2020 Weighted Weighted Average Average Warrants Exercise price Warrants Exercise price Exercisable – begining of period 149,000 $ 4.25 349,000 $ 4.25 Granted – JCG acquisition — — — Exercised — — — — Expired — — 200,000 4.25 Outstanding 149,000 $ 4.25 149,000 $ 4.25 Exercisable – at end of period 149,000 $ 4.25 149,000 $ 4.25 Warrants Strike Underlying Shares Expiration Price 80,000 September 30, 2021 $ 4.25 33,000 October 7, 2021 $ 4.25 6,000 September 20, 2021 $ 4.25 30,000 September 29, 2021 $ 4.25 149,000 |
Note 14 - COMMITMENTS AND CONTI
Note 14 - COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Feb. 28, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
Note 14 - COMMITMENTS AND CONTINGENCIES | Note 14 - COMMITMENTS AND CONTINGENCIES As part of the acquisition of ESD, the Company had 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. During June 2019, the Company shut down ESD’s operations. ESD has successfully filed for Bankruptcy on November 4, 2019 and the previous landlord was named as creditor in the Bankruptcy proceedings. On October 12, 2020, the Company received a notice of complaint against it by a previous creditor for one of its wholly owned subsidiaries, Energy Source Distributors, Inc (ESD) for a total of $43,400. This creditor was the previous landlord for the Company's ESD subsidiary which ultimately filed for Chapter 7 bankruptcy on November 4, 2019 and in which the previous landlord was named as one of the unsecured creditors. The Company has retained legal counsel to represent it in this matter and feels it will successfully prevail in this complaint due to the frivolous nature of the suit under California Bankruptcy laws. No other creditor named in that bankruptcy filing has filed a complaint against the Company. Rent expense for the three and nine months ended February 28, 2021, respectively, totaled $267 and $832, respectively, and $576 and $2,042, respectively, the three and nine months ended February 29, 2020. On November 20, 2019, a Complaint was filed with the Superior Court-Judicial District of New Haven by a former employee, naming the Company as Defendant. The Complaint claims that the Company owes the former employee back wages of $60,000 and unpaid expenses of $20,000, which were due to be paid to the former employee upon his termination from the Company on November 1, 2019, in accordance with an employment agreement dated November 18, 2018. The Company has responded that the employee was terminated for cause and, as such, no longer obligated under the terms of the employment agreement. As of October 12, 2020, the parties have not engaged in extensive discovery or any substantial motion practice and no trial date has been set. In addition to the back wages of $60,000, severance of $45,000 and unpaid expenses of $20,000, the Company has recorded legal expenses of $15,000 during the year ended May 31, 2020, because of receiving the Complaint. On July 15, 2020, RedStart Holdings, (“Redstart”),the holder of two convertible notes of the Company, filed a lawsuit against the Company in Supreme Court, Nassau County, New York. The Complaint sets forth six causes of action and seeks relief consisting of (1) money damages in the amounts (i) of the greater of $111,800 and the “parity value”, as defined in the Notes and $2,000 per day until the issuance of the Company common stock (calculated in accord with the terms set forth in the Notes and corresponding Agreements) and (ii) $55,900 arising from the original unpaid balance of the Notes, (2) liquidated damages arising from the lost profits that would have been realized if the Company common stock was provided to Redstart in an amount to be calculated, (3) reasonable legal fees and costs in an amount yet to be determined, (4) an order of specific performance, and (5) injunctive relief. All of the claims stem from the Company’s refusal to honor Redstart’s exercise notice in connection with a common stock conversion right that the Company had granted it under certain Convertible Promissory Notes and accompanying Securities Purchase Agreements. On July 21, 2020, Redstart obtained an order, temporarily restraining the Company’s new transfer agent from delivering any new shares of the Company to anyone other than Redstart. On August 7, 2020, the Company filed a Motion to Vacate the temporary restraining order, granted by the Court on July 23, 2020. Therein, the Company asserted that the Notes are, in fact, loan agreement that each charged interest rates in excess of 25% and, therefore, the Notes should be deemed void under New York’s criminal usury laws. The Court scheduled a hearing on the Company’s Motion for August 17, 2020. Following arguments, the Court rendered its decision from the bench and ordered the Company to hold in reserve the shares of the Company’s common stock that Redstart, allegedly, is entitled to, and that the Company will be required to file its opposition to Redstart’s Motion for Preliminary Injunction within Three (3) weeks. Accordingly, the Company will continue to vigorously defend itself in this action. Further, as of October 12, 2020, the Court has not yet rendered its decision. On March 23, 2021, the Company and Redstart Holdings Corp (“Redstart”) settled the litigation between the Company and Redstart; in connection therewith, Redstart filed a motion to dismiss their complaint against the Company with prejudice, which settles all matters pertaining to the Redstart litigation and complaint. Under the terms of the agreement, The Company and Redstart agree that the Debt Obligations shall be paid by the Company paying Redstart $70,000 and issuing Redstart 700,000 Common Stock Shares, which payment and issuance were made. On December 14, 2020, the Company received a Complaint from the note holder, L & H, Inc. (“L&H”) filed in the First Judicial District Court of Nevada, Carson City, , alleging breaches of contract regarding the Company’s failure to repay amounts due or failing to issuing shares upon demand and breach of Implied covenant of good faith and fair dealing in connection with the $110,000 September 10, 2019 Convertible Promissory Note between L&H and the Company. The Complaint seeks an unspecified amount of damages representing the balance of the unconverted debt and penalties. Prior to the Complaint, the Company attempted to negotiate a settlement with L&H. The Company will answer the Complaint and attempt to negotiate a settlement with L&H but cannot assure the outcome of any attempted settlement, or the litigation. |
Note 15 - INCOME TAXES
Note 15 - INCOME TAXES | 9 Months Ended |
Feb. 28, 2021 | |
Income Tax Disclosure [Abstract] | |
Note 15 - INCOME TAXES | Note 15 - INCOME TAXES The deferred tax attributes consist of the following: February 28, 2021 May 31, 2020 Net operating loss carryforward $ 4,596,000 $ 4,356,000 Stock based compensation 1,319,000 1,319,000 Valuation allowance (5,915,000 ) (5,675,000 ) Deferred tax asset, net $ — $ — For the nine months ended February 28, 2021, the valuation allowance increased by approximately $240,000. 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: Effective Income Tax Rate Reconciliation 2021 2020 Federal Rate 21 % 21 % State Rate 6 % 6 % Valuation Allowance (27 )% (27 )% Effective income tax rate 0 % 0 % As of February 28, 2021, the Company has net operating loss carryforwards of approximately $16,000,000 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. |
Note 16 - SUBSEQUENT EVENTS
Note 16 - SUBSEQUENT EVENTS | 9 Months Ended |
Feb. 28, 2021 | |
Subsequent Events [Abstract] | |
Note 16 - SUBSEQUENT EVENTS | Note 16 - SUBSEQUENT EVENTS On March 23, 2021, the Company and Redstart Holdings Corp (“Redstart”) settled the litigation between the Company and Redstart; in connection therewith, Redstart filed a motion to dismiss their complaint against the Company with prejudice, which settles all matters pertaining to the Redstart litigation and complaint. Under the terms of the agreement, the Company and Redstart agree that the Debt Obligations shall be paid by the Company paying Redstart $70,000 and issuing Redstart 700,000 Common Stock Shares, which payment and issuance were made. On February 25, 2021, the Company entered into a Binding Letter of Intent to acquire 100% of the outstanding shares of SmartAxion, Inc. of Irvine, CA. On January 7, 2021, the Company filed a Form 8-K disclosing that on December 31, 2020, we, as the Buyer, entered into an Asset Purchase Agreement (“APA) with KloudGaze, Inc., a Delaware corporation, designated as the Seller in the APA, providing for our purchase of the Seller’s assets and intellectual property in return for our payment to the Buyer of 15,827,613 Restricted Common Shares upon the Closing of the APA leaving maximum remaining consideration of 29,393,802 Common Stock Shares to be paid by the Buyer to the Seller based upon a three year earn out schedule in accordance with revenue performance goals. On February 26, 2021, the Company notified the Seller that the APA is null and void. No deliverables or consideration was issued or exchanged by the Company between or with the Seller. On March 16, 2021, we received a complaint filed by Anshu Sharma and Aditya Sharma against the Company and the Company's officers/directors in the County of Hennepin, Minnesota (District Court; Fourth Judicial District) in connection with our agreement regarding an investment by the Plaintiffs in our Preferred C Shares. On March 29, 2021, we filed “Defendant’s Joint Motion to Dismiss” to dismiss the complaint. The Company believes that there is no merit to the complaint and it intends to vigorously defend this matter. |
Note 1. NATURE OF OPERATIONS _2
Note 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Feb. 28, 2021 | |
Accounting Policies [Abstract] | |
Nature of Operations and Basis of Presentation | Nature of Operations and Basis of Presentation Life On Earth, Inc. was a brand accelerator and incubator focused on building and scaling concepts in the natural Consumer Packaged Goods (CPG) category but recently announced its change in business model to that of a software development and cloud enterprise company. The accompanying consolidated financial statements include the financial statements of the Company’s wholly owned subsidiaries, Victoria’s Kitchen, LLC (“VK”) and The Chill Group, LLC (“JC”) as well as activities in the software development industry. On June 21, 2019, the Company made the determination to shut down and discontinue its direct distribution operations namely that of its Energy Source Distributors, Inc. (“ESD”) and focus primarily on its branded portfolio. Effective November 4, 2019, ESD filed for Chapter 7 bankruptcy protection. On December 11, 2019, the Company received a final decree from the United States Bankruptcy Court ruling that a Chapter 7 bankruptcy estate for ESD had been fully administered. The results of operations of ESD for the years ended May 31, 2020 and 2019 are included herein as discontinued operations in the financial statements. The Company has recognized a gain on the disposal of ESD in the amount of $893,515 for the year ended May 31, 2020. On October 3, 2019, the Company announced its intention to expand its business as a Consumer-Packaged Goods (“CPG”) Company, and on November 2020 it has determine to pursue a change in business strategy to include the software, cloud enterprise and IoT space of the technology industry. The Company decided to pursue businesses in the software industry because it believed that it is where it would find better opportunities for its shareholders. LFER was incorporated in Delaware in April 2013 and acquired VK in October 2017, and JC in August 2018. The Company currently owns those brands though it does not currently market and sell those beverages through third party distributors although it still receives inquiries for its products primarily through online sales. The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). |
Basis of Presentation | Basis of Presentation The accompanying interim unaudited 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. Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period financial statements. These reclassifications had no effect on the previously reported net loss. 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, 2020. 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. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods and services transferred to the customer. The following five steps are applied to achieve that core principle: Step 1: Identify the contract with the customer Step 2: Identify the performance obligations in the contract Step 3: Determine the transaction price Step 4: Allocate the transaction price to the performance obligations in the contract Step 5: Recognize revenue when the company satisfies a performance obligation Because the Company’s agreements generally have an expected duration of one year or less, the Company has elected the practical expedient in ASC 606-10-50-14(a) to not disclose information about its remaining performance obligations. The Company’s performance obligations are satisfied at the point in time when products are received by the customer, which is when the customer has title and the significant risks and rewards of ownership. Therefore, the Company’s contracts have a single performance obligation (shipment of product). The Company primarily receives fixed consideration for sales of product. Shipping and handling amounts are included in cost of goods sold. Sales tax and other similar taxes are excluded from net sales. Sales are recorded net of provisions for discounts, slotting fees payable by us to retailers to stock our products and promotion allowances, which are typically agreed to upfront with the customer and do not represent variable consideration. Discounts, slotting fees and promotional allowances vary from customer to customer. The consideration the Company is entitled to in exchange for the sale of products to distributors. The Company estimates these discounts, slotting fees and promotional allowances in the same period that the revenue is recognized for products sales to customers. The amount of revenue recognized represents the amount that will not be subject to a significant future reversal of revenue. All sales to distributors and customers are generally final. In limited instances the Company may accept returned product due to quality issues or distributor terminations, in which situations the Company would have variable consideration. To date, returns have not been material. The Company’s customers generally pay within 30 days from the receipt of a valid invoice. The Company offers prompt pay discounts of up to 2% to certain customers typically for payments made within 15 days. Prompt pay discounts are estimated in the period of sale based on experience with sales to eligible customers. Early pay discounts are recorded as a deduction to the accounts receivable balance presented on the consolidated balance sheets. |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity 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. |
Reclassification | Reclassifications Certain reclassifications have been made in prior year’s financial statements to conform to classifications used in the current year. |
Reverse stock split | Reverse Stock Split On November 11, 2019, the Company’s Board of Directors (the “Board”) and a majority of voting shareholders approved a reverse stock split at a ratio of one-for-five shares of common stock, without changing the par value, rights, terms, conditions, and limitations of such shares of common stock, (the “Reverse Stock Split”). The Reverse Stock Split became effective on March 25, 2020, pursuant to approval from the Financial Industry Regulatory Authority (“FINRA”), whereupon the shares of our common stock began trading on a split adjusted basis. All share and per share information has been retroactively adjusted to reflect the impact of this reverse stock split. |
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 February 28, 2021, and May 31, 2020, warrants and convertible notes payable could be converted into approximately 5,638,000 and 2,779,000 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 February 28, 2021 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 only those investments which are highly liquid, readily convertible to cash, and that mature within three months from date of purchase to be cash equivalents. At February 28, 2021 and May 31, 2020, the Company had cash and cash equivalents of $65,499 and $3,831 respectively. At February 28, 2021 and May 31, 2020, cash equivalents were comprised of funds in checking accounts, savings accounts and money market funds. |
Accounts Receivable | Accounts Receivable Our accounts receivable balance primarily includes balances from trade sales to distributors and retail customers. The allowance for doubtful accounts is our best estimate of the amount of probable credit losses in our existing accounts receivable. We determine the allowance for doubtful accounts based primarily on historical write-off experience. Account balances that are deemed uncollectible, are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company extends credit to its customers in the normal course of business and performs ongoing credit evaluations of its customers. A significant change in demand for certain products as compared to forecasted amounts may result in recording additional provisions for obsolete inventory. Provisions for obsolete or excess inventory are recorded as cost of goods sold. As of February 28, 2021 and May 31, 2020, the allowance for doubtful accounts was $59,356 and $33,356, respectively. |
Inventory | Inventory Inventory consists of finished goods and raw material which are stated at the lower of cost (first-in, first-out) and net realizable value and include adjustments for estimated obsolete or excess inventory. A significant change in demand for certain products as compared to forecasted amounts may result in recording additional provisions for obsolete inventory. During the year ended May 31, 2020, the Company recorded and provision for obsolete and excess inventory of $96,000, which was recorded as cost of goods sold. As of February28, 2021 and May 31, 2020, there was approximately $0 and $0 of inventory on hand, respectively. |
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 approximately $2,566 and $36,642 for the nine months ended February 28, 2021 and February 29, 2020, 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. |
Deferred Finance Cost | Deferred Finance Cost Deferred financing costs or debt issuance costs are costs associated with issuing debt, such as various fees and commissions paid to investment banks, law firms , |
Derivative Liability | Derivative Liability The Company accounts for certain instruments, which do not have fixed settlement provisions, as derivative instruments in accordance with FASB ASC 815-40, Derivative and Hedging – Contracts in Entity’s Own Equity. This is due to the conversion features of certain convertible notes payable being tied to the market value of our common stock. As such, our derivative liabilities are initially measured at fair value on the contract date and are subsequently re-measured to fair value at each reporting date. Changes in estimated fair value are recorded as non-cash adjustments within other income (expenses), in the Company’s accompanying Unaudited Condensed Consolidated Statements of Operations. |
Fair Value Measurements | Fair Value Measurements In August 2018, the FASB issued a new guidance which modifies the disclosure requirements on fair value measurements. We categorize our financial instruments into a three-level fair value hierarchy that prioritize the inputs to valuation techniques used to measure fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument. Financial assets recorded at fair value on our condensed consolidated balance sheets are categorized as follows: Level 1 inputs—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2 inputs—Significant other observable inputs (e.g., quoted prices for similar items in active markets, quoted prices for identical or similar items in markets that are not active, inputs other than quoted prices that are observable such as interest rate and yield curves, and market-corroborated inputs). Level 3 inputs—Unobservable inputs for the asset or liability, which are supported by little or no market activity and are valued based on management’s estimates of assumptions that market participants would use in pricing the asset or liability. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements On February 25, 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-2, "Leases" (Topic 842), which is intended to improve financial reporting for lease transactions. This ASU requires organizations that lease assets, such as real estate and manufacturing equipment, to recognize assets and liabilities on their balance sheets for the rights to use those assets for the lease term and obligations to make lease payments created by those leases that have terms of greater than 12 months. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. This ASU also requires disclosures to help investors and other financial statement users better understand the amount and timing of cash flows arising from leases. These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. This ASU became effective for public entities beginning the first quarter 2019. During 2019 the Company sold the Giant Beverage Company which resulted in elimination of the company’s lease obligation related to that operation. The remaining lease obligation related to Energy Source Distributors which was terminated on July 31, 2019 reducing the remaining terms of the lease to 2 months. The Company has adopted ASU 2016-2 Leases which did not have material impact on Company’s financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments: Credit Losses (“ASU 2016-13”), which changes the impairment model for most financial instruments, including trade receivables from an incurred loss method to a new forward-looking approach, based on expected losses. The estimate of expected credit losses will require entities to incorporate considerations of historical information, current information and reasonable and supportable forecasts. This ASU became effective for fiscal years beginning after December 15, 2019. and must be adopted using a modified retrospective transition approach. The adoption of ASU 2016-13 did not have a material impact on Company’s 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 took effect in the Company’s first quarter (August 2020) of our fiscal year ending May 31, 2021. The adoption of this new guidance did not have a material impact on our financial statements. In November 2018, the FASB issued new guidance to clarify the interaction between the authoritative guidance for collaborative arrangements and revenue from contracts with customers. The new guidance clarifies that, when the collaborative arrangement participant is a customer in the context of a unit-of-account, revenue from contracts with customers guidance should be applied, adds unit-of-account guidance to collaborative arrangements guidance, and requires, that in a transaction with a collaborative arrangement participant who is not a customer, presenting the transaction together with revenue recognized under contracts with customers is precluded. The Company does not have any collaborative arrangements or revenue from contracts and therefore Topic 808 does not have a material impact on our consolidated 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. |
Note 4 - FAIR VALUE MEASUREME_2
Note 4 - FAIR VALUE MEASUREMENTS (Tables) | 9 Months Ended |
Feb. 28, 2021 | |
Fair Value Disclosures [Abstract] | |
Fair Value of Convertible Notes | February 28, 2021 Risk free interest rate 0.05 % Expected dividend yield 0 Expected term (in years) 1 Expected volatility 18.25 % |
Fair Value hierarchy | February 28, 2021 Level 1 Level 2 Level 3 Total Contingent liability $ 220,500 $ — $ — $ 220,500 Derivative liability — — 136,518 136,518 Total $ 220,500 $ — $ 136,518 $ 357,018 May 31, 2020 Level 1 Level 2 Level 3 Total Contingent liability $ 57,273 $ — $ — $ 57,273 Derivative liability — — 146,715 146,715 Total $ 57,273 $ — $ 146,715 $ 203,988 |
Note 5 - ESD DISCONTINUED OPE_2
Note 5 - ESD DISCONTINUED OPERATIONS (Tables) | 9 Months Ended |
Feb. 28, 2021 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Discontinued Operations | For the three months ended February 28, For the three months ended February 29, For the nine months ended February 28, For the nine months ended February 29, 2021 2020 2021 2020 Sales, net $ — $ — $ — $ 5,911 Cost of goods sold — — — 16,303 Gross profit — — — (10,392 ) Operating expenses — — — 33,321 Loss from operations — — — (43,713 ) Other expenses: Interest and finance costs — — — (8,075 ) Loss on sale of fixed assets — — — (29,050 ) Net loss $ — $ — $ — $ (80,838 ) |
Discontinued operations net assets | Liabilities Accounts payable and accrued expenses $ 851,481 Lines of credit 42,034 Total Liabilities $ 893,515 |
Note 6 - JCG ACQUISITION (Table
Note 6 - JCG ACQUISITION (Tables) | 9 Months Ended |
Feb. 28, 2021 | |
Business Combinations [Abstract] | |
Purchase Price of JCG | Issuance of 327,293 shares of common stock with an estimated fair value of $1.95 per share $ 638,182 Contingent consideration for additional shares (included in additional paid-in capital) 684,641 Warrants to purchase additional shares 37,177 Total purchase consideration $ 1,360,000 Cash $ 265 Accounts receivable 167,700 Inventory 72,035 Accounts payable (65,000 ) Intangibles - Trademarks and copyrights 1,185,000 Total consideration $ 1,360,000 |
Note 7 -_INTANGIBLE ASSETS (Tab
Note 7 - INTANGIBLE ASSETS (Tables) | 9 Months Ended |
Feb. 28, 2021 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets | February 28, 2021 May 31, 2020 Intangible assets: Trademarks and copyrights $ — $ 460,000 Less: accumulated amortization: Trademarks and copyrights (1) — 161,000 Less: Impairment — 299,000 Net book value at the end of the year $ — $ — |
Note 8 - GOODWILL (Tables)
Note 8 - GOODWILL (Tables) | 9 Months Ended |
Feb. 28, 2021 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill | February 28, 2021 May 31, 2020 Balance – beginning $ — $ 195,000 Less-impairment — 195,000 Balance – end $ — $ — |
Note_9 - NOTES PAYABLE-RELATE_2
Note 9 - NOTES PAYABLE-RELATED PARTY (Tables) | 9 Months Ended |
Feb. 28, 2021 | |
Note9 - Notes Payable-related Party | |
Note 9 - NOTES PAYABLE-RELATED PARTY | The following table summarizes the Company’s Note Payable – Related Parties as of February 28, 2021: Issue Date Maturity Date Interest Rate Original Amount Accumulated Payments as of February 28, 2021 Accumulated Accrued interest as of February 28, 2021 Balance February 28, 2021 1/23/2019 3/1/2020 20 % $ 10,000 $ — $ 4,211 $ 14,211 1/28/2020 1/28/2021 20 % $ 8,200 $ — $ 1,788 $ 9,988 2/20/2020 2/19/2021 5 % $ 45,169 $ 8,300 $ 2,050 $ 38,919 $ 63,118 The following table summarizes the Company’s Note Payable – Related Parties as of May 31, 2020: Issue Date Maturity Date Interest Rate Original Amount Accumulated Payments as of May 31, 2020 Accumulated Accrued interest as of May 31, 2020 Balance May 31, 2020 1/23/2019 3/1/2020 20.0 % $ 10,000 $ — $ 2,707 $ 12,707 1/28/2020 1/28/2021 20.0 % $ 8,200 $ — $ 557 $ 8,757 2/20/2020 2/19/2021 5.0 % $ 45,169 $ 5,300 $ 527 $ 40,396 $ 61,860 |
Note_11 - CONVERTIBLE NOTES P_2
Note 11 - CONVERTIBLE NOTES PAYABLE (Tables) | 9 Months Ended |
Feb. 28, 2021 | |
Notes to Financial Statements | |
Convertible Debt | February 28, 2021 May 31, 2020 Unamortized deferred finance costs and original issue discount Principal Net Unamortized deferred finance costs and original issue discount Principal Net 2017 NPA Notes — 737,500 737,500 — 737,500 737,500 The 2nd Note Offering — 355,000 355,000 — 355,000 355,000 2020 Note Issuances — 441,400 441,400 83,277 504,300 421,023 2019 Notes — 767,384 767,384 16,406 667,381 650,975 $ — $ 2,301,284 $ 2,301,284 $ 99,683 $ 2,264,181 $ 2,164,498 |
Note 13 - CAPITAL STOCK (Tables
Note 13 - CAPITAL STOCK (Tables) | 9 Months Ended |
Feb. 28, 2021 | |
Equity [Abstract] | |
Common Stock | Authorized Shares of Common Stock Number of Issued and Outstanding Shares of Common Stock Number of Shares of Common Stock Available in Treasury for Issuance As of March 25, 2020, Pre-Increase in Authorized and Reverse Stock Split 100,000,000 shares of Common Stock 46,937,678 shares of Common Stock 53,062,322 shares of Common Stock As of March 25, 2020, Post- Increase in Authorized and Reverse Stock Split 200,000,000 shares of Common Stock 9,387,536 shares of Common Stock 190,612,464 shares of Common Stock |
Preferred Stock | February 28, 2021 Shares Outstanding Fernando Oswaldo Leonzo 600,000 Robert Gunther 300,000 Jerry Gruenbaum 100,000 John Romagosa 200,000 Total 1,200,000 |
Dividends | The number of Preferred Series B shares outstanding as of February 28, 2021 were: Holder Number of Shares J.Craig Holding Corp. 50,000 Axon Capital Management, Inc. 25,000 John Romagosa 25,000 Total 100,000 The number of Preferred Series C shares outstanding as of February 28, 2021 were: Holder Number of Shares Dr. Anshu Sharma, M.D. 150,000 Total 150,000 |
Warrants | Warrants Warrants outstanding 9 months ended February 28, 2021 9 months ended February 29, 2020 Weighted Weighted Average Average Warrants Exercise price Warrants Exercise price Exercisable – begining of period 149,000 $ 4.25 349,000 $ 4.25 Granted – JCG acquisition — — — Exercised — — — — Expired — — 200,000 4.25 Outstanding 149,000 $ 4.25 149,000 $ 4.25 Exercisable – at end of period 149,000 $ 4.25 149,000 $ 4.25 Warrants Strike Underlying Shares Expiration Price 80,000 September 30, 2021 $ 4.25 33,000 October 7, 2021 $ 4.25 6,000 September 20, 2021 $ 4.25 30,000 September 29, 2021 $ 4.25 149,000 |
Note 16 - INCOME TAXES (Tables)
Note 16 - INCOME TAXES (Tables) | 9 Months Ended |
Feb. 28, 2021 | |
Income Tax Disclosure [Abstract] | |
Deferred Tax | February 28, 2021 May 31, 2020 Net operating loss carryforward $ 4,596,000 $ 4,356,000 Stock based compensation 1,319,000 1,319,000 Valuation allowance (5,915,000 ) (5,675,000 ) Deferred tax asset, net $ — $ — |
Effective Income Tax | Effective Income Tax Rate Reconciliation 2021 2020 Federal Rate 21 % 21 % State Rate 6 % 6 % Valuation Allowance (27 )% (27 )% Effective income tax rate 0 % 0 % |
Note 1. NATURE OF OPERATIONS _3
Note 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Feb. 28, 2021 | Feb. 29, 2020 | May 31, 2020 | May 31, 2019 | |
Accounting Policies [Abstract] | ||||
Gain on disposal of subsidiary | $ 893,515 | |||
Common stock equivalents, outstanding | 5,638,000 | 2,779,000 | ||
Cash and cash equivalents | $ 65,499 | $ 8,837 | $ 3,831 | $ 156,156 |
Allowance for doubful accounts | 59,356 | 33,356 | ||
Inventory | 0 | 0 | ||
Provision for obsolete and excess inventory | $ 96,000 | |||
Advertising and promotion expense | $ 2,566 | $ 36,642 |
Note 2 - BASIS OF REPORTING A_2
Note 2 - BASIS OF REPORTING AND GOING CONCERN (Details Narrative) | 77 Months Ended |
Feb. 28, 2021USD ($) | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Net loss from inception | $ 18,100,000 |
Working capital deficiency | 4,800,000 |
Net capital deficit | $ 4,800,000 |
Note 3 - CONCENTRATIONS (Detail
Note 3 - CONCENTRATIONS (Details Narrative) | 3 Months Ended | 9 Months Ended | |
Feb. 29, 2020Integer | Feb. 28, 2021USD ($)Integer | Feb. 29, 2020Integer | |
FDIC Insured amount | $ | $ 250,000 | ||
Sales [Member] | |||
Number of customers | 1 | 1 | |
Sales Concentration risk | 100.00% | 100.00% | |
Accounts receivable | 68.00% | ||
Accounts Receivable [Member] | |||
Number of customers | 5 | 3 | 5 |
Sales Concentration risk | 70.00% | 87.00% | |
Customer 1 [Member] | |||
Accounts receivable | 19.00% | 44.00% | 38.00% |
Customer 2 [Member] | |||
Accounts receivable | 17.00% | 13.00% | 13.00% |
Customer 3 [Member] | |||
Accounts receivable | 13.00% | 11.00% | 12.00% |
Customer 4 [Member] | |||
Accounts receivable | 11.00% | 12.00% | |
Customer 5 [Member] | |||
Accounts receivable | 10.00% | 12.00% |
Note 4 - FAIR VALUE MEASUREME_3
Note 4 - FAIR VALUE MEASUREMENTS - Fair Value of Convertible Notes (Details 1) | 9 Months Ended |
Feb. 28, 2021 | |
Risk interest rate [Member] | |
Risk free interest rate | 5.00% |
Expected dividend yield [Member] | |
Expected dividend yield | 0.00% |
Expected term [Member] | |
Expected term (in years) | 1 year |
Expected volatility [Member] | |
Expected volatility | 18.25% |
Note 4 - FAIR VALUE MEASUREME_4
Note 4 - FAIR VALUE MEASUREMENTS - Fair Value hierarchy (Details) - USD ($) | Feb. 28, 2021 | May 31, 2020 |
Contingent liability | $ 220,500 | $ 57,273 |
Derivatve liability | 136,518 | 146,715 |
Total | 357,018 | 203,988 |
Level 1 [Member] | ||
Contingent liability | 220,500 | 57,273 |
Total | 57,273 | |
Level 2 [Member] | ||
Contingent liability | ||
Total | ||
Level 3 [Member] | ||
Contingent liability | ||
Derivatve liability | 136,518 | 146,715 |
Total | $ 136,518 | $ 146,715 |
Note 5 - ESD DISCONTINUED OPE_3
Note 5 - ESD DISCONTINUED OPERATIONS - Discontinued Operations (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Feb. 28, 2021 | Feb. 29, 2020 | Feb. 28, 2021 | Feb. 29, 2020 | |
Sales, net | $ 11,218 | $ 25,000 | $ 64,407 | |
Cost of goods sold | (26,852) | 25,335 | 156,089 | |
Gross profit | 38,070 | (335) | (91,682) | |
Loss from operations | (63,595) | (218,839) | (311,223) | (2,054,654) |
Interest and finance costs | (69,821) | (212,358) | (423,053) | (640,833) |
Loss from discontinued operations - ESD | $ (80,838) | |||
ESD [Member] | ||||
Sales, net | 5,911 | |||
Cost of goods sold | 16,303 | |||
Gross profit | (10,392) | |||
Operating expenses | 33,321 | |||
Loss from operations | (43,713) | |||
Interest and finance costs | (8,075) | |||
Loss on sale of fixed assets | (29,050) | |||
Loss from discontinued operations - ESD | $ (80,838) |
Note 5 - ESD DISCONTINUED OPE_4
Note 5 - ESD DISCONTINUED OPERATIONS - Discontinued operations net assets (Details) - USD ($) | 12 Months Ended | |
May 31, 2020 | Feb. 29, 2020 | |
Gain on disposal of subsidiary | $ 893,515 | |
ESD [Member] | ||
Gain on disposal of subsidiary | $ 891,000 | |
Accounts payable and accrued expenses | $ 851,481 | |
Lines of credit | 42,034 | |
Total current liabilities | $ 893,515 |
Note 6 - JCG ACQUISITION - Purc
Note 6 - JCG ACQUISITION - Purchase Price of JCG (Details) - JCG [Member] - USD ($) | 2 Months Ended | 12 Months Ended |
Aug. 02, 2018 | May 31, 2019 | |
Issuance of common shares for acquisition,amount | $ 638,182 | |
Issuance of common shares for acquisition,shares | 327,293 | |
Business Acquisition Share Price | $ 1.95 | |
Contingent consideration for additional shares related to the acquisition of JCG, amount | $ 684,641 | $ 327,293 |
Warrant to purchase additional shares | 37,177 | |
Cash | 265 | |
Accounts receivable | 167,700 | |
Inventory and work in process | 72,035 | |
Accounts payable | (65,000) | |
Intangibles-Trademarks and copyrights | 1,185,000 | |
Net assets acquired | $ 1,360,000 |
Note 6 - JCG ACQUISITION - Pu_2
Note 6 - JCG ACQUISITION - Purchase Price of JCG (Details) (Parenthetical) | 12 Months Ended |
May 31, 2020 | |
JCG [Member] | |
Terms | The JCG Agreement also provides for the issuance of a warrant for 200,000 shares of common stock with a two-year term and an exercise price of $4.25 with a value of approximately $9,400. The JCG Agreement also provides for an additional 218,182 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 further 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 327,293 shares, to be approximately $722,000, for a total purchase price value of approximately $1,360,000. The warrants expired on August 2, 2020. |
Note 6 - JCG ACQUISITION (Detai
Note 6 - JCG ACQUISITION (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Feb. 28, 2021 | Feb. 29, 2020 | May 31, 2020 | May 31, 2019 | |
Intangible assets | ||||
Change in fair value of contingent liability | $ 163,227 | $ (325,309) | ||
JCG [Member] | ||||
Amortization Expense | $ 145,000 | $ 145,000 | ||
Impairment charge | $ 299,000 | $ 725,000 |
Note 7 - INTANGIBLE ASSETS- Int
Note 7 - INTANGIBLE ASSETS- Intangible Assets (Details) | 12 Months Ended |
May 31, 2020USD ($) | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Trademarks and copyrights | $ 460,000 |
Accumulated Amortization | 161,000 |
Less: Impairment | 299,000 |
Net book value at the end of the year |
Note 7 -INTANGIBLE ASSETS (Deta
Note 7 -INTANGIBLE ASSETS (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Feb. 28, 2021 | Feb. 29, 2020 | Feb. 28, 2021 | Feb. 29, 2020 | |
Intangible Assets [Member] | ||||
Amortization Expense | $ 0 | $ 23,000 | $ 0 | $ 69,000 |
Note 8 - GOODWILL - Goodwill (D
Note 8 - GOODWILL - Goodwill (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Feb. 28, 2021 | Feb. 29, 2020 | Feb. 28, 2021 | Feb. 29, 2020 | May 31, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |||||
Balance - beginning | $ 195,000 | ||||
Less-impairment | $ 145,000 | $ 195,000 | |||
Balance - end | $ 195,000 |
Note_9 - NOTES PAYABLE-RELATE_3
Note 9 - NOTES PAYABLE-RELATED PARTY (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended |
Feb. 28, 2021 | May 31, 2020 | |
Note Payable - related party | $ 63,118 | $ 61,860 |
Notes Payable [Member] | ||
Issue date | Jan. 23, 2019 | |
Maturity date | Mar. 1, 2020 | |
Interest rate | 20.00% | |
Note payable - original amount | $ 10,000 | |
Accrued interest | 4,211 | 2,707 |
Note Payable - related party | $ 17,211 | 12,707 |
Note Payable 2 [Member} | ||
Issue date | Jan. 28, 2020 | |
Maturity date | Jan. 28, 2021 | |
Interest rate | 20.00% | |
Note payable - original amount | $ 8,200 | |
Accrued interest | 1,788 | 557 |
Note Payable - related party | $ 9,988 | 8,757 |
Note Payable 3 [Member} | ||
Issue date | Feb. 20, 2020 | |
Maturity date | Feb. 19, 2021 | |
Interest rate | 5.00% | |
Note payable - original amount | $ 45,169 | |
Payment to related party | 8,300 | 5,300 |
Accrued interest | 2,050 | 527 |
Note Payable - related party | $ 38,919 | $ 40,396 |
Note_9 - NOTES PAYABLE-RELATE_4
Note 9 - NOTES PAYABLE-RELATED PARTY (Details Narrative) (Parenthetical) - USD ($) | Feb. 12, 2021 | Jan. 12, 2021 | Feb. 28, 2021 | Feb. 29, 2020 | Feb. 28, 2021 | Feb. 29, 2020 | Feb. 21, 2020 | Mar. 26, 2020 |
Notes Payable [Member] | ||||||||
Interest expense | $ 500 | $ 1,504 | $ 1,500 | $ 500 | ||||
Note Payable 2 [Member} | ||||||||
Interest expense | 1,231 | 410 | 144 | 144 | ||||
Note Payable 3 [Member} | ||||||||
Interest expense | $ 1,523 | $ 504 | $ 0 | $ 0 | ||||
Periodic payment | $ 2,000 | $ 1,000 | $ 3,000 | $ 2,300 |
Note_10 - NOTES PAYABLE (Detail
Note 10 - NOTES PAYABLE (Details Narrative) - USD ($) | Feb. 28, 2021 | May 31, 2020 |
Debt Disclosure [Abstract] | ||
Note payable | $ 30,000 |
Note_11 - CONVERTIBLE NOTES P_3
Note 11 - CONVERTIBLE NOTES PAYABLE - Convertible Debt (Details) - USD ($) | Feb. 28, 2021 | May 31, 2020 |
Convertible notes payable | $ 2,301,284 | $ 2,164,498 |
Convertible Note [Member] | ||
Unamortized deferred financing costs | 99,683 | |
Principal | 2,301,284 | 2,264,181 |
Convertible notes payable | 2,301,284 | 2,164,498 |
2017 NPA Notes [Member] | ||
Unamortized deferred financing costs | ||
Principal | 737,500 | 737,500 |
Convertible notes payable | 737,500 | 737,500 |
The 2nd Note Offering [Member] | ||
Unamortized deferred financing costs | ||
Principal | 355,000 | 355,000 |
Convertible notes payable | 355,000 | 355,000 |
2020 Note Issuances [Member] | ||
Unamortized deferred financing costs | 37,013 | 83,277 |
Principal | 441,400 | 504,300 |
Convertible notes payable | 441,400 | 421,023 |
The 2019 Notes [Member] | ||
Unamortized deferred financing costs | 16,406 | |
Principal | 767,384 | 667,381 |
Convertible notes payable | $ 767,384 | $ 650,975 |
Note_11 - CONVERTIBLE NOTES P_4
Note 11 - CONVERTIBLE NOTES PAYABLE - Convertible Debt (DetailsNarrative) - USD ($) | Nov. 03, 2017 | Jun. 15, 2020 | Jul. 31, 2018 | Jan. 26, 2018 | Feb. 28, 2021 | May 31, 2020 | Feb. 29, 2020 | Oct. 29, 2018 | Nov. 29, 2019 | Feb. 28, 2021 | Feb. 29, 2020 | Feb. 27, 2019 | Mar. 21, 2019 | May 31, 2020 | May 31, 2019 | May 16, 2019 | Feb. 09, 2020 | Sep. 23, 2019 | May 31, 2018 | Sep. 25, 2017 |
Proceed from convertible debt | $ 409,240 | |||||||||||||||||||
Stock repurchased and cancelled | 291,000 | |||||||||||||||||||
Derivatve liability | $ 136,518 | $ 146,715 | 136,518 | $ 146,715 | ||||||||||||||||
Change in fair value of derivative liability | 66,402 | $ 92,060 | 10,197 | $ 57,130 | ||||||||||||||||
Convertible Note Payable [Member] | ||||||||||||||||||||
Default notes payable | 100,000 | 100,000 | ||||||||||||||||||
Convertible debt, original amount | $ 2,263,284 | $ 2,263,284 | ||||||||||||||||||
Description | 19 notes | |||||||||||||||||||
Gankaku [Member] | ||||||||||||||||||||
Interest rate | 7.00% | 7.00% | ||||||||||||||||||
Issuance of common stock for debt, amount | $ 150,000 | |||||||||||||||||||
Interest Expense | 7,000 | |||||||||||||||||||
Legal Judgment | 100,000 | |||||||||||||||||||
2017 NPA Notes [Member] | ||||||||||||||||||||
Convertible debt, original amount | $ 175,000 | $ 125,000 | $ 650,000 | |||||||||||||||||
Interest rate | 7.00% | 7.00% | ||||||||||||||||||
Issuance of common stock for debt, shares | 60,000 | 178,205 | ||||||||||||||||||
Issuance of common stock for debt, amount | $ 87,500 | $ 125,000 | ||||||||||||||||||
Share Price | $ .0875 | $ 0.875 | $ 0.75 | $ 1.50 | $ 1.50 | $ 1 | ||||||||||||||
Warrant price per share | $ 2.10 | |||||||||||||||||||
Shares per registration rights | 160,000 | 300,000 | ||||||||||||||||||
Shares authorized | 39,333 | |||||||||||||||||||
Payment on loans | $ 737,500 | |||||||||||||||||||
Interest Expense | 4,302 | $ 12,729 | 38,613 | 12,883 | 25,813 | |||||||||||||||
Convertible debt | 0 | 0 | ||||||||||||||||||
Accrued and unpaid interest | $ 19,250 | $ 8,654 | 146,247 | $ 107,635 | ||||||||||||||||
Consulting fee | $ 65,000 | |||||||||||||||||||
Issuance of common stock for consulting fees, shares | 86,667 | |||||||||||||||||||
Deferred Finance cost | $ 151,250 | 151,250 | ||||||||||||||||||
Unamortized deferred financing costs | $ 557,462 | 538,335 | $ 0 | 538,335 | $ 0 | |||||||||||||||
The 2nd Note Offering [Member] | ||||||||||||||||||||
Convertible debt, original amount | $ 830,000 | $ 830,000 | $ 500,000 | |||||||||||||||||
Description | 18 investors | 17 investors | ||||||||||||||||||
Interest rate | 7.00% | 7.00% | ||||||||||||||||||
Issuance of common stock for debt, shares | 166,667 | 258,322 | ||||||||||||||||||
Issuance of common stock for debt, amount | $ 100,000 | $ 375,000 | ||||||||||||||||||
Conversion price per share | $ 0.75 | $ 0.75 | $ 1.50 | |||||||||||||||||
Interest Expense | $ 6,448 | 6,520 | $ 19,559 | 19,630 | 10,088 | |||||||||||||||
Convertible debt | 355,000 | 355,000 | ||||||||||||||||||
Accrued and unpaid interest | 66,028 | 46,469 | $ 12,483 | |||||||||||||||||
Deferred Finance cost | 14,917 | 14,917 | ||||||||||||||||||
Unamortized deferred financing costs | 612,644 | 612,644 | ||||||||||||||||||
Amortization of interest expense | $ 80,302 | |||||||||||||||||||
2020 Note Issuances [Member] | ||||||||||||||||||||
Convertible debt, original amount | $ 110,000 | $ 110,000 | ||||||||||||||||||
Interest rate | 20.00% | 10.00% | 20.00% | 10.00% | ||||||||||||||||
Original issue discount, percentage | 10.00% | |||||||||||||||||||
Issuance of common stock for debt, shares | 33,000 | |||||||||||||||||||
Conversion price per share | $ 0.75 | $ 0.75 | ||||||||||||||||||
Share Price | $ 0.54 | $ 0.54 | ||||||||||||||||||
Interest Expense | $ 12,838 | 2,743 | $ 18,353 | 5,184 | ||||||||||||||||
Deferred Finance cost | 28,820 | 28,820 | ||||||||||||||||||
Amortization of interest expense | 0 | 6,004 | 10,808 | 12,008 | ||||||||||||||||
2020 Note Issuances 1 [Member] | ||||||||||||||||||||
Convertible debt, original amount | $ 275,500 | $ 281,000 | $ 275,500 | $ 281,000 | $ 287,500 | |||||||||||||||
Interest rate | 10.00% | 10.00% | ||||||||||||||||||
Issuance of common stock for debt, shares | 666,590 | 564,072 | ||||||||||||||||||
Issuance of common stock for debt, amount | $ 5,500 | $ 6,500 | ||||||||||||||||||
Conversion price per share | $ 0.0103 | $ 0.123 | $ 0.123 | |||||||||||||||||
Interest Expense | $ 6,811 | 7,168 | $ 12,975 | 12,524 | ||||||||||||||||
Accrued and unpaid interest | 438 | |||||||||||||||||||
Consulting fee | 37,500 | |||||||||||||||||||
Unamortized deferred financing costs | 159,674 | 159,674 | ||||||||||||||||||
Amortization of interest expense | 0 | 33,265 | 59,879 | 66,530 | ||||||||||||||||
Derivatve liability | 122,174 | 122,174 | ||||||||||||||||||
Change in fair value of derivative liability | (54,961) | 6,108 | ||||||||||||||||||
Fees | 37,500 | |||||||||||||||||||
2020 Note Issuances 2[Member] | ||||||||||||||||||||
Convertible debt, original amount | $ 68,000 | $ 68,000 | ||||||||||||||||||
Interest rate | 10.00% | 10.00% | ||||||||||||||||||
Issuance of common stock for debt, shares | 2,438,112 | 5,407,042 | ||||||||||||||||||
Issuance of common stock for debt, amount | $ 26,700 | $ 57,400 | ||||||||||||||||||
Conversion price per share | $ .0101 | $ .0069 | $ .0101 | $ .0069 | ||||||||||||||||
Interest Expense | $ 1,113 | 1,695 | $ 1,722 | 2,366 | ||||||||||||||||
Convertible debt | 17,900 | $ 41,300 | 17,900 | $ 41,300 | ||||||||||||||||
Consulting fee | 7,760 | |||||||||||||||||||
Deferred Finance cost | 34,000 | 34,000 | ||||||||||||||||||
Unamortized deferred financing costs | 33,575 | 33,575 | ||||||||||||||||||
Amortization of interest expense | 0 | 6,995 | 12,590 | 13,990 | ||||||||||||||||
Derivatve liability | 25,815 | 25,815 | ||||||||||||||||||
Change in fair value of derivative liability | (3,868) | (20,620) | ||||||||||||||||||
2020 Note Issuances 3[Member] | ||||||||||||||||||||
Convertible debt, original amount | $ 38,000 | $ 38,000 | ||||||||||||||||||
Interest rate | 10.00% | 10.00% | ||||||||||||||||||
Interest Expense | $ 937 | 0 | $ 2,842 | 0 | ||||||||||||||||
Convertible debt | 38,000 | $ 38,000 | 38,000 | $ 38,000 | ||||||||||||||||
Derivatve liability | 7,637 | 7,637 | ||||||||||||||||||
Change in fair value of derivative liability | (7,573) | 4,315 | ||||||||||||||||||
2019 Note Issuances[Member] | ||||||||||||||||||||
Convertible debt, original amount | $ 131,250 | |||||||||||||||||||
Original issue discount, percentage | 5.00% | |||||||||||||||||||
Issuance of common stock for debt, shares | 20,000 | 131,250 | ||||||||||||||||||
Share Price | $ 1.60 | $ 0.25 | ||||||||||||||||||
Payment on loans | $ 10,938 | |||||||||||||||||||
Finance cost | 0 | 8,203 | ||||||||||||||||||
Unamortized deferred financing costs | $ 102,250 | $ 32,813 | ||||||||||||||||||
Amortization of interest expense | 16,406 | 50,313 | ||||||||||||||||||
2019 Note Issuances SN[Member] | ||||||||||||||||||||
Convertible debt, original amount | $ 312,500 | |||||||||||||||||||
Original issue discount, percentage | 20.00% | |||||||||||||||||||
Issuance of common stock for debt, shares | 50,000 | |||||||||||||||||||
Share Price | $ 2.0495 | |||||||||||||||||||
Payment on loans | $ 26,042 | |||||||||||||||||||
Interest Expense | 11,472 | 65,614 | ||||||||||||||||||
Finance cost | 111,422 | 102,475 | ||||||||||||||||||
Unamortized deferred financing costs | $ 62,500 | |||||||||||||||||||
2019 Note Issuances 2-SN[Member] | ||||||||||||||||||||
Convertible debt, original amount | $ 312,500 | |||||||||||||||||||
Original issue discount, percentage | 20.00% | |||||||||||||||||||
Issuance of common stock for debt, shares | 50,000 | |||||||||||||||||||
Share Price | $ 1.825 | |||||||||||||||||||
Payment on loans | 28,000 | 41,059 | $ 52,083 | |||||||||||||||||
Interest Expense | 10,136 | 26,803 | ||||||||||||||||||
Finance cost | 19,121 | 55,000 | 91,250 | |||||||||||||||||
Unamortized deferred financing costs | $ 62,500 | |||||||||||||||||||
2019 Note Issuances 2-SPN[Member] | ||||||||||||||||||||
Convertible debt, original amount | $ 75,000 | |||||||||||||||||||
Interest rate | 7.00% | |||||||||||||||||||
Issuance of common stock for debt, shares | 7,500 | |||||||||||||||||||
Share Price | $ 2 | |||||||||||||||||||
Interest Expense | $ 1,295 | $ 1,309 | $ 3,927 | $ 4,157 | ||||||||||||||||
Deferred Finance cost | $ 60,679 |
Note 12 - LINES OF CREDIT (Deta
Note 12 - LINES OF CREDIT (Details Narrative) - USD ($) | 9 Months Ended | |
Feb. 28, 2021 | May 31, 2020 | |
Notes to Financial Statements | ||
Credit Line facility capacity | $ 35,000 | |
Interest rate | 6.00% | |
Lines of credit | $ 25,302 | $ 26,124 |
Note 13 - CAPITAL STOCK - Commo
Note 13 - CAPITAL STOCK - Common Stock (Details) - shares | Feb. 28, 2021 | May 31, 2020 | Mar. 25, 2020 | Mar. 24, 2019 |
Equity [Abstract] | ||||
Common stock, authorized | 200,000,000 | 200,000,000 | 200,000,000 | 100,000,000 |
Common stock, issued and outsanding | 20,728,833 | 13,081,380 | 9,387,536 | 46,937,678 |
Common stock available for Treasury stock | 190,612,464 | 53,062,322 |
Note 13 - CAPITAL STOCK - Prefe
Note 13 - CAPITAL STOCK - Preferred Stock (Details) - shares | 9 Months Ended | |
Feb. 28, 2021 | May 31, 2020 | |
Perferred stock voting rights | 50-1 preferred voting rights | |
Series A Preferred Stock [Member] | ||
Preferred stock, authorized shares | 10,000,000 | 10,000,000 |
Preferred stock, outstanding shares | 1,200,000 | 1,200,000 |
Series B Preferred Stock [Member] | ||
Preferred stock, authorized shares | 250,000 | 250,000 |
Preferred stock, outstanding shares | 100,000 | |
Fernando Oswaldo Leonzo [Member] | ||
Preferred stock, outstanding shares | 600,000 | |
Robert Gunther [Member] | ||
Preferred stock, outstanding shares | 300,000 | |
Jerry Gruenbaum [Member] | ||
Preferred stock, outstanding shares | 100,000 | |
John Romagosa [Member] | ||
Preferred stock, outstanding shares | 200,000 |
Note 13 - CAPITAL STOCK - Warra
Note 13 - CAPITAL STOCK - Warrants (Details 1) - $ / shares | 9 Months Ended | |
Feb. 28, 2021 | Feb. 29, 2020 | |
Warrants | ||
Outstanding | 149,000 | 349,000 |
Granted - JC acquisition | ||
Exercised | ||
Expired | 200,000 | |
Outstanding and exercisable | 149,000 | 149,000 |
Exercise price | ||
Outstanding | $ 4.25 | $ 4.25 |
Granted - JC acquisition | ||
Exercised | ||
Expired | 4.25 | |
Outstanding and exercisable | $ 4.25 | $ 4.25 |
Note 13 - CAPITAL STOCK - War_2
Note 13 - CAPITAL STOCK - Warrants (Details 2) - $ / shares | Oct. 07, 2021 | Sep. 30, 2021 | Sep. 29, 2021 | Sep. 20, 2021 | Feb. 28, 2021 |
Note 13 - Capital Stock - Warrants | |||||
Warrants | 33,000 | 80,000 | 30,000 | 6,000 | 149,000 |
Strike price, per share | $ 4.25 | $ 4.25 | $ 4.25 | $ 4.25 |
Note 13 - CAPITAL STOCK (Detail
Note 13 - CAPITAL STOCK (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||||
Feb. 28, 2021 | Feb. 28, 2021 | Feb. 29, 2020 | May 31, 2020 | Mar. 25, 2020 | Mar. 24, 2019 | |
STOCKHOLDERS' EQUITY (DEFICIT) | ||||||
Perferred stock voting rights | 50-1 preferred voting rights | |||||
Common stock, par value | $ 0.001 | $ 0.001 | $ 0.001 | |||
Common stock, Authorized | 200,000,000 | 200,000,000 | 200,000,000 | 200,000,000 | 100,000,000 | |
Common stock, Issued | 20,728,833 | 20,728,833 | 13,081,380 | 9,387,536 | 46,937,678 | |
Common stock, outstanding | 20,728,833 | 20,728,833 | 13,081,380 | |||
Reverse stock split | 5:1 | |||||
Common stock for services, shares | 7,647,453 | 1,252,939 | ||||
Common shares retired and cancelled, shares | 291,000 | |||||
Issuance of Preferred shares, amount | $ 100,000 | |||||
Series B Preferred Stock [Member] | ||||||
STOCKHOLDERS' EQUITY (DEFICIT) | ||||||
Preferred stock, par value | $ 0.001 | $ 0.001 | $ 0.001 | |||
Preferred stock, authorized shares | 250,000 | 250,000 | 250,000 | |||
Preferred stock, issued shares | 100,000 | 100,000 | ||||
Preferred stock, outstanding shares | 100,000 | 100,000 | ||||
Common stock for services, shares | 100,000 | |||||
Common stock for services, amount | $ 100,000 | |||||
Accrued Dividend | $ 2,500 | $ 7,250 | ||||
Series B Preferred Stock [Member] | J.Craig Holding Corp. [Member] | ||||||
STOCKHOLDERS' EQUITY (DEFICIT) | ||||||
Preferred stock, issued shares | 50,000 | 50,000 | ||||
Preferred stock, outstanding shares | 50,000 | 50,000 | ||||
Series B Preferred Stock [Member] | Axon Capital Management, Inc. [Member] | ||||||
STOCKHOLDERS' EQUITY (DEFICIT) | ||||||
Preferred stock, issued shares | 25,000 | 25,000 | ||||
Preferred stock, outstanding shares | 25,000 | 25,000 | ||||
Series B Preferred Stock [Member] | John Romagosa [Member] | ||||||
STOCKHOLDERS' EQUITY (DEFICIT) | ||||||
Preferred stock, issued shares | 25,000 | 25,000 | ||||
Preferred stock, outstanding shares | 25,000 | 25,000 | ||||
Series C Preferred Stock [Member] | ||||||
STOCKHOLDERS' EQUITY (DEFICIT) | ||||||
Preferred stock, par value | $ 0.001 | $ 0.001 | ||||
Preferred stock, authorized shares | 250,000 | 250,000 | ||||
Preferred stock, issued shares | 150,000 | 150,000 | ||||
Preferred stock, outstanding shares | 150,000 | 150,000 | ||||
Series C Preferred Stock [Member] | Dr. Anshu Sharma, M.D. [Member] | ||||||
STOCKHOLDERS' EQUITY (DEFICIT) | ||||||
Preferred stock, issued shares | 150,000 | 150,000 | ||||
Preferred stock, outstanding shares | 150,000 | 150,000 |
Note 14 - COMMITMENTS AND CON_2
Note 14 - COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | 4 Months Ended | 6 Months Ended | 9 Months Ended | |||
Jul. 15, 2020 | Feb. 28, 2021 | Feb. 29, 2020 | Oct. 12, 2020 | Dec. 14, 2020 | Feb. 28, 2021 | Feb. 29, 2020 | ||
Commitments and Contingencies Disclosure [Abstract] | ||||||||
Rent Expense, monthly | $ 5,248 | $ 5,248 | ||||||
Rent expense. paid | $ 267 | $ 832 | 576 | $ 2,042 | ||||
Employment agreement | $ 58,000 | |||||||
Legal Actions sought | RedStart Holdings, (“Redstart”),the holder of two convertible notes | ESD | Failing to issuing shares upon demand and breach of Implied covenant of good faith and fair dealing in connection with the $110,000 September 10, 2019 Convertible Promissory Note between L&H and the Company. | The Complaint claims that the Company owes the former employee back wages of $60,000 and unpaid expenses of $20,000, which were due to be paid to the former employee upon his termination from the Company on November 1, 2019, in accordance with an employment agreement dated November 18, 2018. The Company has responded that the employee was terminated for cause and, as such, no longer obligated under the terms of the employment agreement. In addition to the back wages of $60,000, severance of $45,000 and unpaid expenses of $20,000, | ||||
Legal expenses | $ 15,000 | |||||||
Legal Action | $ 111,800 | [1] | $ 43,400 | |||||
[1] | Defined in the Notes and $2,000.00 per day until the issuance of the Company common stock (calculated in accord with the terms set forth in the Notes and corresponding Agreements) and (ii) $55,900.00 arising from the original unpaid balance of the Notes |
Note 15 - INCOME TAXES - Deferr
Note 15 - INCOME TAXES - Deferred Tax (Details) - USD ($) | Feb. 28, 2021 | May 31, 2020 |
Income Tax Disclosure [Abstract] | ||
Net operating loss carryforward | $ 4,596,000 | $ 4,356,000 |
Stock based compensation | 1,319,000 | 1,319,000 |
Valuation allowance | (5,915,000) | (5,675,000) |
Deferred tax asset, net |
Note 15 - INCOME TAXES - Effect
Note 15 - INCOME TAXES - Effective Income Tax (Details) | 9 Months Ended | 12 Months Ended |
Feb. 28, 2021 | May 31, 2020 | |
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% |
Note 15 - INCOME TAXES (Details
Note 15 - INCOME TAXES (Details Narrative) | 9 Months Ended |
Feb. 28, 2021USD ($) | |
Income Tax Disclosure [Abstract] | |
Valuation allowance | $ 194,000 |
Net operating loss carry forward | $ 16,000,000 |
Note 17 - SUBSEQUENT EVENTS (De
Note 17 - SUBSEQUENT EVENTS (Details) - Subsequent Event [Member] - shares | 1 Months Ended | 13 Months Ended |
Mar. 23, 2021 | Jan. 01, 2022 | |
Legal Actions | paying Redstart $70,000 and issuing Redstart 700,000 Common Stock Shares | |
Issuance of common shares for acquisition,shares | 15,827,613 | 29,393,802 |