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nuyjoio 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 2021

 

or

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _______ to _______.

 

Commission file number 333-190788

 

LIFE ON EARTH, INC.
(Exact name of Registrant as Specified in Its Charter)

 

Delaware   46-2552550

(State or Other Jurisdiction

of Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

1345 6th Ave. 2nd Floor, New York, NY   10105
(Address of Principal Executive Offices)   (Zip Code)

  

 

Registrant’s telephone number, including area code: (646) 844-9897

 

Securities registered pursuant to Section 12(b) of the Act: none

 

Title of each class     Name of exchange on which registered
NONE     N/A

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No  

 

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes    No ☐   

 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer ¨ Accelerated filer ¨
Non-accelerated Filer ¨ Smaller reporting company x
    Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any news or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes    No x 

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

The number of outstanding shares of the registrant’s common stock was 62,483,802 as of January 14, 2021.

 

 

 

 

 
 

 

 

 


  

 

 

Life On Earth, Inc.
 
Form 10-Q
TABLE OF CONTENTS

 

PART I - FINANCIAL INFORMATION   Page  
       
Item 1. Unaudited Financial Statements      
  Condensed Consolidated Balance Sheets   3  
  Condensed Consolidated Statements of Operations   4  
  Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficiency)   5  
  Condensed Consolidated Statements of Cash flows   7  
  Notes to Unaudited Condensed Consolidated Financial Statements   8  
Item 2. Management’s Discussions and Analysis of Financial Condition and Results of Operations   36  
Item 3. Quantitative and Qualitative Disclosures about Market Risk   44  
Item 4. Controls and Procedures   44  
         
PART II - OTHER INFORMATION      
       
Item 1. Legal Proceedings   45  
Item 1a. Risk Factors   46  
Item 2. Unregistered sales of Equity Securities and Use of Proceeds   46  
Item 3. Defaults Upon Senior Securities   46  
Item 4. Mining Safety Disclosure   46  
Item 5. Other Information   46  
Item 6. Exhibits   47  
         
SIGNATURES   48  

 

 
2
 
 

 

 

 

 

 
 

 

 

 
 

  

Life On Earth, Inc.

Condensed Consolidated Balance Sheets 

    November 30,   May 31,
    2021   2021
    (Unaudited)    
ASSETS
Current Assets                
Cash and cash equivalents   $ 42,369     $ 34,629  
Accounts receivable, net of allowance for doubtful accounts of $7,556 and $41,900 as of November 30, 2021 and May 31,  2021, respectively     31,033       5,802  
Prepaid expenses   1,679       3,226  
Other receivables              70,000  
Total current assets     75,081       113,657  
                 
Other Assets                
Furniture and fixtures, net of accumulated depreciation of $20,345 as of November 30, 2021 and May 31,  2021, respectively     3,532       3,687  
Intellectual property - Software development, net of accumulated amortization of $709,740 and $177,903 as of November 30, 2021 and May 31, 2021, respectively     4,660,925       5,102,000  
Total Assets   $ 4,739,538     $ 5,219,344  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities                
Accounts payable and accrued expenses   $ 2,302,664     $ 2,163,858  
Accrued contingent liability for the purchase cost of the SA acquisition     2,314,127       5,044,127  
Contingent liability              415,227  
Derivative liability              110,588  
Notes payable - related party,  net of unamortized deferred financing costs of $35,443 and $0 as of November 30, 2021 and May 31, 2021, respectively     87,790       58,491  
Notes payable     142,404       118,031  
Convertible notes payable, net of unamortized deferred financing costs of $18,600 and $29,633 as of November 30, 2021 and May 31, 2021, respectively     611,750       1,932,964  
Lines of credit     33,494       37,849  
  Total current liabilities     5,492,229       9,881,135  
                 
Total Liabilities     5,492,229       9,881,135  
                 
Commitments and contingencies                
                 
Stockholders' Deficiency                
Preferred stock, $0.001 par value; 10,000,000 shares authorized,                
Series A Preferred Stock, 1,300,000 and 1,200,000 shares issued and outstanding as of  November 30, 2021 and May 31, 2021, respectively     1,300       1,200  
Series B Preferred Stock, 100,000 and 100,000 shares issued and outstanding as of November 30, 2021 and May 31, 2021, respectively     100       100  
Series C Preferred Stock, 1,135,224 and 290,000 shares issued and outstanding as of November 30, 2021 and May 31, 2021, respectively     1,135       290  
Series D Preferred Stock, 210,000 and 210,000 shares issued and outstanding as of November 30, 2021 and May 31, 2021, respectively     210       210  
Common stock, $0.001 par value; 200,000,000 shares authorized, 62,483,802 and 29,548,676 shares issued and outstanding as of November 30, 2021 and May 31, 2021, respectively     62,484       29,549  
Additional paid-in capital     18,877,501       13,942,216  
Accumulated deficit     (19,695,421 )     (18,635,356 )
Total Stockholders' Deficiency     (752,691 )     (4,661,791 )
                 
Total Liabilities and Stockholders' Deficiency   $ 4,739,538     $ 5,219,344  
                 
The accompanying notes are an integral part of these condensed consolidated financial statements.

 

3

 

 

 

Life On Earth, Inc.

Unaudited Condensed Consolidated Statements of Operations

(Unaudited)

                                 
    For the three months ended November 30   For the six months ended November 30
    2021   2020   2021   2020
                 
                 
Sales, net   $ 55,776     $        $ 81,385     $ 25,000  
Cost of goods sold     1,050                1,050       25,335  
Gross profit     54,726                80,335       (335 )
                                 
Expenses:                                
Professional fees     157,040       87,531       277,057       179,744  
Officers compensation     146,250           232,500           
Officers compensation           (139,300 )               
Salaries and benefits     65,199       (12,922 )     133,754       16,935  
Other selling, general and administrative     59,592       29,926       98,470       50,615  
Amortization     267,061                531,837           
Total expenses     695,142       (34,765 )     1,273,618       247,294  
                                 
Loss from operations     (640,416 )     34,765       (1,193,283 )     (247,629 )
                                 
Other income and (expenses):                                
Change in fair value of contingent consideration              (60,136 )     352,227       (60,136 )
Change in fair value of derivative liability              (56,205 )     110,588       (56,205 )
Interest and financing costs     (171,034 )     (263,009 )     (329,597 )     (353,232 )
                                 
Net loss     (811,450 )     (344,585 )     (1,060,065 )     (717,202 )
                                 
Basic and diluted loss per share from continuing operations   $ (0.01 )   $ (0.02 )   $ (0.03 )   $ (0.04 )
                                 
Basic and diluted weighted average number                                
 Basic and diluted weighted average number of shares outstanding     55,871,144       20,728,833       39,669,805       19,670,179  
                                 
The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

4

  

 
 
 

  

Life On Earth, Inc.
Condensed Consolidated Statements of Stockholders' Deficiency
For the six months ended November 30, 2021
(Unaudited)

 

                                                     
    Series A Preferred   Series B Preferred   Series C Preferred   Series D Preferred   Common Stock   Additional   Accumulated   Total Stockholders
    Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Paid in capital   Deficit   Deficiency
                                                     
Balance - June 1, 2021     1,200,000     $ 1,200       100,000     $ 100       290,000     $ 290       210,000     $ 210       29,548,676     $ 29,549     $ 13,942,216     $ (18,635,356 )   $ (4,661,791 )
                                                                                                         
Issuance of Series A preferred shares as officer compensation     100,000     100                                                                       (100)               -  
Sale of Series C preferred shares     -       -       -       -       158,500       159       -       -                       158,341               158,500  
Issuance of Series C preferred shares for convertible debt                                     686,724       686                                       686,038               686,724  
Issuance of common shares for SA Acuisition                                                                     13,000,000       13,000       2,717,000               2,730,000  
Issuance of common shares for convertible debt                                                                     14,685,393       14,685       883,034               897,719  
Issuance of common shares as consideration shares                                                                     2,674,231       2,674       238,115               240,789  
Issuance of common shares for JCG contingency shares                                                                     572,727       573       62,427               63,000  
Issuance of common shares for services at prices ranging from $0.078 to $0.156                                                                     1,502,775       1,503       140,930               142,433  
Issuance of common shares for settlement of legal claim                                                                     500,000       500       49,500               50,000  
                                                                                                         
Net loss                                                                                             (1,060,065 )     (1,060,065 )
Balance - November 30, 2021     1,300,000     $ 1,300       100,000     $ 100       1,135,224     $ 1,135       210,000     $ 210       62,483,802     $ 62,484     $ 18,877,501     $ (19,695,421 )   $ (752,691 )

    

 

 

5

  

 
 
 

  

Life On Earth, Inc.
Condensed Consolidated Statements of Stockholders' Deficiency
For the three months ended November 30, 2021
(Unaudited)

 

                                                     
    Series A Preferred   Series B Preferred   Series C Preferred   Series D Preferred   Common Stock   Additional   Accumulated   Total Stockholders
    Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Paid in capital   Deficit   Deficiency
                                                     
Balance - September 1, 2021     1,200,000     $ 1,200       100,000     $ 100       575,833     $ 576       210,000     $ 210       46,424,344     $ 46,424     $ 17,379,173     $ (18,883,971 )   $ (1,456,288 )
                                                                                                         
Issuance of Series A preferred shares as officer compensation     100,000     100                                                                       (100)               -  
Issuance of Series C preferred shares for convertible debt                                     559,391       559                                       558,832               559,391  
Issuance of common shares for convertible debt                                                                     12,546,618       12,547       671,295               683,842  
Issuance of common shares as consideration shares                                                                     2,084,565       2,085       157,797               159,882  
Issuance of common shares for services at prices ranging from $0.078 to $0.106                                                                     928,275       928       61,004               61,932  
Issuance of common shares for settlement of legal claim                                                                     500,000       500       49,500               50,000  
                                                                                                         
Net loss                                                                                             (811,450 )     (811,450 )
Balance - November 30, 2021     1,300,000     $ 1,300       100,000     $ 100       1,135,224     $ 1,135       210,000     $ 210       62,483,802     $ 62,484     $ 18,877,501     $ (19,695,421 )   $ (752,691 )
                                                                                                         
The accompanying notes are an integral part of these condensed consolidated financial statements.

 

6
 

  

 
 

 

Condensed Consolidated Statements of Stockholders' Deficiency
For the six months ended November 30, 2020
(Unaudited)

 

                                     
    Series A Preferred   Series B Preferred   Common Stock   Additional   Accumulated   Total Stockholders
    Shares   Amount   Shares   Amount   Shares   Amount   Paid in capital   Deficit   Deficiency
                                     
Balance - June 1, 2020     1,200,000     $ 1,200       —       $          13,081,380     $ 13,081     $ 12,901,158     $ (17,201,283 )   $ (4,285,844 )
                                                                         
Sale of Series B preferred shares     -       -       100,000       100                       99,900               100,000  
Issuance of common shares for convertible debt                                     7,647,453       7,648       66,671               74,319  
Net loss                                                             (717,202 )     (717,202 )
                                                                         
Balance - November 30, 2020     1,200,000     $ 1,200       100,000     $ 100       20,728,833     $ 20,729     $ 13,067,729     $ (17,918,485 )   $ (4,828,727 )
                                                                         
The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

Life On Earth, Inc.
Condensed Consolidated Statements of Stockholders' Deficiency
For the three months ended November 30, 2020
(Unaudited)

 

                                     
    Series A Preferred   Series B Preferred   Common Stock   Additional   Accumulated   Total Stockholders
    Shares   Amount   Shares   Amount   Shares   Amount   Paid in capital   Deficit   Deficiency
                                     
Balance - September 1, 2020     1,200,000     $ 1,200       100,000     $ 100       20,728,833     $ 20,729     $ 13,067,729     $ (17,573,900 )   $ (4,484,142 )
                                                                         
Net loss                                                             (344,585 )     (344,585 )
                                                                         
Balance - November 30, 2020     1,200,000     $ 1,200       100,000     $ 100       20,728,833     $ 20,729     $ 13,067,729     $ (17,918,485 )   $ (4,828,727 )
                                                                         
The accompanying notes are an integral part of these condensed consolidated financial statements.

 

  

 
7
 

 

 

 
 

 

Life On Earth, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED) 

                 
    For the six months ended November 30,
    2021   2020
Cash Flows From Operating Activities                
Net loss   $ (1,060,065 )   $ (717,202 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:                
Stock based compensation     142,433           
Depreciation and amortization     536,553           
Amortization of interest and financing costs     27,453       211,105  
Share based finance costs     240,790           
Provision for bad debts              26,000  
Change in fair value of contingent liability     (352,227 )     60,136  
Change in fair value of derivative liability     (110,588 )     56,205  
Changes in operating assets and liabilities:                
(Increase) decrease in:                
Accounts receivable     (25,231 )     (26,000 )
Prepaid expenses and other current assets     1,547           
Other receivable     70,000           
Increase (decrease) in:                
Accounts payable, accrued expenses and contingent liability     449,601       254,600  
Cash used by operating activities     (79,734 )     (135,156 )
                 
Cash Flows From Investing Activities                
Purchase of furniture and fixtures     (4,561 )         
Purchase of capitalized software     (90,762 )         
Cash used by investing activities     (95,323 )         
                 
Cash Flows From Financing Activities                
Proceeds of notes payable - related party     57,699           
Repayment of notes payable - related party     (2,000 )         
Proceeds of notes payable     75,000       30,000  
Repayment of notes payable     (50,627 )        
Proceeds of convertible notes payable     48,580          
Repayment of convertible notes payable     (100,000 )        
Proceeds from lines of credit     2,768       6,003  
Payment of lines of credit     (7,123 )     (1,699 )
Proceeds from sales of Series C preferred stock     158,500           
Purchase of treasury stock              100,000  
Cash provided by financing activities     182,797       134,304  
                 
                 
Net Increase (decrease) in Cash and Cash Equivalents   $ 7,740     $ (852 )
                 
Cash and Cash Equivalents - beginning     34,629       3,831  
                 
Cash and Cash Equivalents - end   $ 42,369     $ 2,979  
                 
Supplemental Disclosures of Cash Flow Information                
Noncash investing and financing activities:                
                 
Common stock issued for convertible debt   $ 897,719     $ 74,319  
                 
Common stock issued with convertible debt as financing cost   $ 240,789     $     
                 
Common stock issued for settlement of legal claim   $ 50,000     $     
                 
Derivative liability associated with convertible debt   $        $ 202,920  
                 
Common stock issued for JCG acquisition contingency shares   $ 63,000     $     
                 
Common stock issued for SA Acquisition   $ 2,730,000     $     
                 
The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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Life On Earth, Inc.

Notes to Condensed Consolidated Financial Statements

November 30, 2021

(Unaudited)

 

Note 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Nature of Operations and Basis of Presentation

 

Life On Earth, Inc. is a cloud enterprise software developer/ provider that enables rapid innovation to keep enterprise operations safe, compliant and manageable. The Company’s products offered are designed to help organizations innovate and modernize legacy systems while minimizing cost and risk of business disruptions and ensure regulatory compliance. Through its recent acquisition of SmartAxiom, Inc., the Company now has the capabilities of offering software that manages and secures the Internet-of-Things (IoT) through patented, lite blockchain technology running among those devices at the edge of the Internet and enabling them to defend themselves. Our peer-to-peer distributed ledgers improve security, latency, reliability and manageability. We have uniquely created, through our SmartAxiom subsidiary, an endpoint-to-cloud blockchain solution, while our IoT Smart Contracts allow for process intelligence and management of the processes. The SmartAxiom technology is proving value in verticals such as smart buildings, manufacturing lines and shipment tracking. It interoperates with enterprise systems such as IBM Blockchain and Microsoft Azure and is proven on many ARM and Intel based microcontrollers such as those from Intel, NXP, Renesas, Marvell, and Broadcom. The Company was a brand accelerator and incubator Company that was focused on building and scaling concepts in the natural consumer products category. The Company’s previous business model focused and long-term forward-looking vision to consumers in the health, wellness and lifestyle spaces through superior branding, product quality, and direct to consumer and retail experience within the CPG industry.

 

The accompanying consolidated financial statements include the financial statements of the Company and its wholly owned subsidiaries, Smart Axiom Inc. (“SA”), Victoria’s Kitchen, LLC (“VK”) and The Chill Group, LLC (“JC”). All intercompany transactions and balances have been eliminated in consolidation.

 

LFER was incorporated in Delaware in April 2013 and acquired SA in May 2021, VK in October 2017, and JC in August 2018.

 

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).  

 

 

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.  

 

 

 

9

  

 
 

 

 

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.

 

 

10

  

 
 

 

Reverse Stock Split

 

On November 11, 2019, the Company’s Board of Directors (the “Board”) and a majority of 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 (the “Effective Date”), pursuant to approval from the Financial Industry Regulatory Authority (“FINRA”), whereupon the shares of our common stock will begin 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 November 30, 2021, and May 31, 2021, respectively, warrants and convertible notes payable could be converted into approximately 2,284,000 and 3,088,000 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 May 31, 2021, and does not expect this to change significantly over the next 12 months.

 

Accounting for Equity Awards

 

The cost of services received in exchange for an award of equity instruments related to employees and non-employees is based on the grant-date fair value of the award and allocated over the requisite service period of the award.

  

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.

 

On November 30, 2021, and May 31, 2020, respectively, the Company had cash and cash equivalents of $42,369 and $34,629 respectively. On November 30, 2021, and May 31, 2020, cash equivalents were comprised of funds in checking accounts, savings accounts and money market funds.  

 

 

 

11

  

 
 

 

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 November 30, 2021, and May 31, 2021, the allowance for doubtful accounts was $7,556 and $41,900, respectively.

 

Intangible Assets

 

The Company's intangible assets include developed technology, customer relationships and tradenames and were acquired in a purchase business combination. The Company carries these intangibles at cost, less accumulated amortization. Amortization is recorded on a straight-line basis over the estimated useful lives of the respective assets, which is estimated to be 5 years.

 

Costs that are related to the conceptual formulation and design of licensed software programs are expensed as incurred to research, development and engineering expense; costs that are incurred to produce the finished product after technological feasibility has been established are capitalized as an intangible asset. Capitalized amounts are amortized on a straight-line basis over periods ranging up to five years. The Company performs periodic reviews to ensure that unamortized program costs remain recoverable from future revenue.

 

There were no indefinite-lived intangible assets as of November 30, 2021 or May 31, 2021.

 

The Company reviews its finite-lived intangible and other long-lived assets whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The carrying amount of an asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Fair value of finite-lived intangible assets and property and equipment is based on various valuation techniques. If the carrying amount of an asset or group of assets exceeds its net realizable value, the asset will be written down to its fair value.

 

Advertising

 

Advertising and promotion costs are expensed as incurred. Advertising and promotion expense amounted to approximately $33,830 and $895 for the years ended November 30, 2021 and 2020, respectively.

 

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.

 

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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, auditors, regulators, and so on. Since these payments do not generate future benefits, they are treated as a contra debt account. The costs are capitalized, reflected in the balance sheet as a contra long-term liability, and amortized using the effective interest method or over the finite life of the underlying debt instrument, if below de minimis.

 

 

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 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 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.

 

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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 does 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 become effective for fiscal years beginning after December 15, 2019. and must be adopted using a modified retrospective transition approach. The Company adopted ASU 2016-13 which 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 is required to take effect in the Company’s first quarter (August 2020) of our fiscal year ending May 31, 2021. 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 an 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.

 

 

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Note 2 - BASIS OF REPORTING AND GOING CONCERN

 

The accompanying 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 $19,700,000, has a working capital deficiency of approximately $5,400,000 and a net capital deficiency of approximately $750,000, which, among other factors, raises substantial doubt about the Company's ability to continue as a going concern. As of November 30, 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 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

 

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 six months ended November 30, 2021, sales to 2 customers accounted for approximately 98% of the Company’s net sales, and, during the six months ended November 30, 2020, sales to 1 customer accounted for approximately 100% of the Company’s net sales. 

 

Two customers accounted for approximately 100% of the Company’s accounts receivable as of November 30, 2021, and one customer accounted for 100% of the Company’s accounts receivable as of May 31, 2020. 

 

Note 4 – FAIR VALUE MEASUREMENTS

 

We follow the provisions of ASC 820-10, Fair Value Measurements and Disclosures Topic, or ASC 820-10, for our financial assets and liabilities. ASC 820-10 provides a framework for measuring fair value under GAAP and requires expanded disclosures regarding fair value measurements. ASC 820-10 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820-10 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs, where available, and minimize the use of unobservable inputs when measuring fair value.

 

 

15
 

  

 
 

 

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 May 31, 2021 in considering Level 1 inputs within the hierarchy.

 

The carrying value of our derivative liability as of May 31, 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 year ended May 31, 2021 the following input were utilized to derive the fair value of our derivative liability:

 

    May 31,  
    2021  
Risk free interest rate   0.14% - 0.13 %
Expected dividend yield     0  
Expected term (in years)     1  
Expected volatility   16.95% - 38.84 %

 

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The following tables set forth by level, within the fair value hierarchy, the Company’s financial instruments carried at fair value as of May 31, 2021:

 

    May 31, 2021
    Level 1   Level 2   Level 3   Total
Contingent liability   $ 415,227     $ —       $ —       $ 415,227  
Derivative liability     —         —         110,588       110,588  
Total   $ 415,227     $ —       $ 110,588     $ 525,815  

 

In July 2021, the Company issued 572,727 shares to the JCG Group and is no longer liable for the JCG Contingency. Also during July 2021, a note holder converted their note into 2,138,775 shares of the Company’s common stock and the Company is no longer liable for the contingent liability. 

 

Note 5 – SA ACQUISITION

On April 16, 2021, the Company entered into a stock purchase agreement with SmartAxiom, Inc. (“SA”) and its shareholders providing for the Company to purchase of all the outstanding common stock shares of SA. The Agreement was supplemented by First and Second Addendum Agreements, dated April 30, 2021, and May 11, 2021, respectively.

The SA Acquisition Agreement and the First and Second addendum agreements provide for the purchase of 100% of the SA’s issued and outstanding shares, providing for the Company’s acquisition of SA with consideration consisting of 13,000,000 shares of the Company’s common stock; 210,000 shares of the Company’s new Series D Convertible Preferred Shares, convertible, over an eighteen month earn out schedule, into our common stock shares with a floor price of twenty cents, and an earn-out, as defined, by SA to be paid in our common stock. The SA Agreement also specifies that the liabilities acquired by the Company will be limited to $75,000. We will also provide an additional $2,000,000 in working capital from the public or private markets by no later than 18 months from the close of the SA Acquisition. On May 11, 2021, we closed on the SA Acquisition.

The acquisition of SA supports the Company’s strategic initiatives. SmartAxiom’s patented software technology manages and secures IoT systems through patented, lite blockchain and cyber security technologies.

The following table summarizes the purchase price as of May 11, 2021, the date of acquisition:

         
Issuance of 13,000,000 shares of the Company’s common stock  per share   $ 2,730,000  
Issuance of 210,000 Series 'D" Preferred convertible stock, each share is convertible into 10 common shares     203,613  
A maximum of $2,200,000 of LFER common shares to be issued, subject to an earn-out, as defined, by SA over 18 month period from closing date of the acquisition.     2,221,777  
Excess of SA liabilities over the $75,000 acquired by the Company     (111,263 )
         Total purchase consideration   $ 5,044,127  

 

 
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The following table summarizes the allocation of the purchase price to the fair values of the assets acquired and liabilities assumed on May 11, 2021, the date of acquisition:

         
Cash   $ 39,878  
Accounts receivable, net of an allowance for doubtful account of $7,554     5,802  
Prepaid expenses and other current assets     3,375  
Furniture and fixture, net     3,687  
Intangible assets - Capitalized software development costs, patents, customer lists net of accumulated amortization of 98,630;     5,177,643  
Accounts payable and accrued expenses     (73,533 )
Line of credit     (23,406 )
Notes payable     (89,319 )
Total purchase consideration    $ 5,044,127  

 

The intangibles consist of capitalized software development costs, patents and customer lists and are being trademarks amortized over a 5-year period from the date of acquisition. For the period ended May 31, 2021, the Company recorded amortization expense of $39,708. We performed an analysis of the intellectual property acquired from SA. This analysis involved a net present value (“NPV”) calculation over the current 5-year projections for the intellectual property. Based on our analysis, no impairment is required as of May 31, 2021.

 

Estimated future amortization of the intangible assets as of November 30, 2021 are as follows:

 

           
2022     $ 484,000  
2023       968,000  
2024       968,000  
2025       968,000  
2026       968,000  
2027 and after       304,925  
      $ 4,660,925  

 

During the three and six months ended November 30, 2021, SA generated $81,385 and $26,000 net sales, respectively, and incurred approximately $765,000 of operating expenses, including approximately $532,000 of amortization, and a net loss of approximately $688,000.

 

From the date of acquisition through May 31, 2021, SA generated approximately $0 net sales, incurred approximately $89,000 of operating expenses, including approximately $79,000 of amortization, and a net loss of approximately $89,000.

 

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The following table presents the Unaudited pro forma consolidated statements of operations for the year ended May 31, 2021:

 

    LFER   SA   Proforma Combined
             
Sales, net   $ 36,028     $ 38,300     $ 74,328  
Cost of goods sold     25,335       5,714       31,048  
Gross profit     10,693       32,586       43,280  
                         
Operating expenses     611,297       1,218,609       1,829,906  
                         
Net loss before other expenses     (600,604 )     (1,186,022 )     (1,786,626 ))
                         
Other expenses, net     (745,374 )     (3,963 )     (749,337 ))
                         
Net loss from continuing operations   $ (1,345,978 )   $ (1,189,986 )   $ (2,535,964 )

 

 

The following table presents the unaudited pro forma consolidated statements of operations for the year ended May 31, 2020:

 

    LFER   SA   Proforma Combined
             
Sales, net   $ 64,407     $ 63,415     $ 127,822  
Cost of goods sold     166,681       31,679       198,360  
Gross profit     (102,274 )     31,736       (70,538 )
                         
Operating expenses     2,618,373       1,193,797       3,812,170  
                         
Net loss before other expenses     (2,720,647 )     (1,162,061 )     (3,882,708 ))
                         
Other expenses, net     (417,937 )     (5,679 )     (423,616 ))
                         
Net loss from continuing operations   $ (3,138,584 )   $ (1,167,740 )   $ (4,306,324 )

 

  

 

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Note 6 – INTANGIBLE ASSETS

 

Intangible assets as of November 30, 2021 and May 31, 2021 were as follows:

 

    November 30, 2021   May 31, 2021
Intangible assets:                
Intangible assets to be amortized:                
Brand recognition, business relationships and customer lists   $ 5,181,272     $ —    
Software development, patents, business relationships and customer lists acquired from SA     —         5,181,272  
      Capitalized software development costs     189,393          
Less: accumulated amortization:                
Intangible assets to be amortized:                
Brand recognition, business relationships and customer lists     —         —    
Software development, patents, business relationships and customer lists     709,740       79,272  
                 
Less: Impairment     —         —    
                 
Net book value at the end of period   $ 4,660,925     $ 5,102,000  

 

Amortization expense for the three and six months ended November 30, 2021 was $267,061 and $531,837, respectively.  

 

  

Note 7 – NOTES PAYABLE – RELATED PARTY 

The following table summarizes the Company’s Note Payable – Related Parties as of November 30, 2021: 

Issue Date   Maturity Date   Interest Rate   Original Amount   Accumulated Payments as of November 30, 2021   Accumulated Accrued interest on Note   Conversion into Common & Preferred C shares   Unamortized Deferred Financing Costs as of November 30, 2021   Balance November 30, 2021
                                 
1/23/2019   3/1/2020     20 %   $ 10,000     $ —       $ 5,419     $ (15,419 )           $ —    
                                                             
1/28/2020   1/28/2021     20 %   $ 8,200     $ —       $ 2,781     $ (10,981 )           $ —    
                                                             
2/20/2020   2/19/2021     5 %   $ 45,169     $ 16,300     $ 3,325                     $ 32,194  
                                                             
6/15/2021   6/29/2021     8 %   $ 60,976     $ —       $ 2,245                     $ 63,221  
                                                             
10/6/2021   10/6/2022     10 %   $ 10,000     $ —       $ 151             $ 14,367     $ (4,216 )
                                                             
10/6/2021   10/6/2022     10 %   $ 7,500     $ —       $ 113             $ 14,367     $ (6,754 )
                                                             
11/10/2021   11/10/2022     10 %   $ 10,000     $ —       $ 54             $ 6,709     $ 3,345  
                                                             
                                                $ 35,443     $ 87,790  

 

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The following table summarizes the Company’s Note Payable – Related Parties as of May 31, 2021: 

Issue Date   Maturity Date   Interest Rate   Original Amount   Accumulated Payments as of November 30, 2021   Accumulated Accrued interest on Note   Conversion into Common & Preferred C shares   Unamortized Deferred Financing Costs as of May 31, 2021   Balance May 31, 2021
                                 
1/23/2019   3/1/2020     20 %   $ 10,000     $ —       $ 4,707     $ —       $ —       $ 14,707  
                                                             
1/28/2020   1/28/2021     20 %   $ 8,200     $ —       $ 2,197     $ —       $ —       $ 10,397  
                                                             
2/20/2020   2/19/2021     5 %   $ 45,169     $ 14,300     $ 2,518     $ —       $ —       $ 33,387  
                                                             
                                                $ —       $ 58,491  

 

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 six months ended November 30, 2021, the Company recorded interest expense of $208 and $712, respectively, and during the three and six months ended November 30, 2020, the Company recorded interest expense of $500 and $1,004, respectively. On October 8, 2021, the Note holder converted the full balance of the Note of $15,419, including accrued interest of $5,419, into 77,100 shares of the Company’s common stock at $0.10 per share, and 7,710 of the Company’s Preferred C shares. The Note has been considered paid in full by the conversions.

 

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 six months ended November 30, 2021 the Company recorded interest expense of $171 and $584, respectively, and, during the three and six months ended November 30, 2020 the Company recorded interest expense of $409 and $821, respectively. On October 8, 2021, the Note holder converted the full balance of the Note of $10,981, including accrued interest of $2,781, into 54,910 shares of the Company’s common stock at $0.10 per share, and 5,498 of the Company’s Preferred C shares. The Note has been considered paid in full by the conversions.

 

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 Chairman. 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 21st of the month. As of November 30, 2021, the Company paid a total of $16,300 to Fernando Leonzo in accordance with this agreement. During the three and six months ended November 30, 2021, the Company recorded interest expense of $399 and $408, respectively, and, during the three and six months ended November 30, 2020, the Company recorded interest expense of $510 and $1,019, respectively. On November 30, 2021 accrued interest on the note amounted to $3,325.

 

On June 15, 2021, the Company issued Mahmood Kahn, the Company’s CEO, a note in the amount of $121,976. The note bears interest at 8% per annum and a Maturity date of June 29, 2021. Also on June 15, 2021, the note holder converted $61,000 of the note into 61,000 Shares of Series C Preferred to the Holder at $1.00 per Series C Preferred Share, which upon said issuance reduced the Principal Amount of the note $60,976. During the three and six months ended November 30, 2021, the Company recorded interest expense of $1,216 and $2,245, respectively. On November 30, 2021, accrued interest on the note amounted to $2,245. On December 31, 2021, the Note holder converted the full balance of the Note of $63,635, including accrued interest of $2,659, into 909,075 shares of the Company’s common stock at $0.07 per share. As of December 31, 2021, the Note was considered paid in full by the conversion.

 

On October 6, 2021, the Company issued a demand note in the amount of $10,000 to Mahmood Kahn, the Company’s CEO. The note is unsecured, bears interest at an annual rate of 10% and has maturity date of October 6, 2022. As consideration for the Note, the Company issued 200,000 of the Company’s common stock at $0.821. As a result of this transaction, Company recorded $16,420 as a capitalized deferred financing cost and during the three and six months ended November 30, 2021, the Company recorded amortization expense of $2,053 and $2,053, respectively. During the three and six months ended November 30, 2021, the Company recorded interest expense of $151 and $151, respectively. On November 30, 2021, accrued interest on the note amounted to $151.

 

On October 6, 2021, the Company issued a demand note in the amount of $7,500 to John Romagosa, the Company’s President. The note is unsecured, bears interest at an annual rate of 10% and has maturity date of October 6, 2022. As consideration for the Note, the Company issued 200,000 of the Company’s common stock at $0.821. As a result of this transaction, Company recorded $16,420 as a capitalized deferred financing cost and during the three and six months ended November 30, 2021, the Company recorded amortization expense of $2,053 and $2,053, respectively. During the three and six months ended November 30, 2021, the Company recorded interest expense of $113 and $113, respectively. On November 30, 2021, accrued interest on the note amounted to $113.

 

 

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On November 10, 2021, the Company issued a demand note in the amount of $10,000 to Mahmood Kahn, the Company’s CEO. The note is unsecured, bears interest at an annual rate of 10% and has maturity date of November, 2022. As consideration for the Note, the Company issued 100,000 of the Company’s common stock at $0.07. As a result of this transaction, Company recorded $7,000 as a capitalized deferred financing cost and during the three and six months ended November 30, 2021, the Company recorded amortization expense of $292 and $292, respectively. During the three and six months ended November 30, 2021, the Company recorded interest expense of $55 and $55, respectively. On November 30, 2021, accrued interest on the note amounted to $54.

 

Note 8 – NOTES PAYABLE

 

The following table summarizes the Company’s Notes Payable as of November 30, 2021:

 

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 was note repaid by the maturity date and thus bears interest at an annual rate of 6% from the date of maturity. During the three and six months ended November 30, 2021, the Company recorded interest expense of $449 and $902, respectively. On November 30, 2021, accrued interest on the note amounted to $1,731. 

 

As part of the SA Acquisition, the Company has the following loans outstanding as of November 30, 2021:

 

    Date of note   Amount   Maturity date   Annual interest Rate   Accrued Interest November 30, 2021
PayPal Loan     11/23/21     $ 75,000     11/23/22     6.9 %   $ 100  
SBA PPP Loan     5/2/2021       12,937     05/02/26     1.0 %   $ —    
SBA PPP Loan     4/16/2020       3,500     None     Waived        Waived  
SBA EIDL Loan     10/6/2020       11,500     10/06/50     3.75 %   $ —    
Short Term Loan             9,467     Demand     0.0 %   $ —    
Total           $ 112,404                 $ 100  

 

The Company has applied for forgiveness from the SBA for the outstanding PPP loans.

 

The aggregate balance of the Company’s notes outstanding as of November 30, 2021 and May 31, 2021, was $142,404 and $118,031, respectively.

 

As of November 30, 2021, future principal payments of the notes payable were approximately as follows:

 

Future principal payments        
For the twelve months ending November 30,    
         
2022   $ 142,404  

 

The following table summarizes the Company’s Notes Payable as of May 31, 2021:

 

As part of the SA Acquisition, the Company has the following loans outstanding:

 

    Date of note   Amount   Maturity date   Annual interest Rate   Interest exp 5/11-5/31/21
PayPal Loan     04/22/21     $ 50,000     04/22/22     6.9 %   $ 253  
SBA PPP Loan     5/2/2021       12,937     05/02/26     1.0 %   $ —    
SBA PPP Loan     4/16/2020       3,500     None     Waived        Waived  
SBA EIDL Loan     10/6/2020       11,500     10/06/50     3.75 %   $ —    
Short Term Loan             10,094     Demand     0.0 %   $ —    
Total           $ 88,031                 $ 253  

 

 

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Note 9 – CONVERTIBLE NOTES PAYABLE

 

The following table summarizes the Company’s convertible notes payable as of November 30, 2021 and May 31, 2021:

 

    November 30, 2021   May 31, 2021
    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  
The 2nd Note Offering     —         27,002       27,002       —         280,000       280,000  
2022 Note Issuances     14,367       65,000       50,633       —         —         —    
2021 Note Issuances     4,233       77,000       72,767       29,633       77,000       47,367  
2020 Note Issuances     —         110,000       110,000       —         385,500       385,500  
2019 Note Issuances     —         351,348       351,348       —         482,597       482,597  
                                               
    $ 18,600     $ 630,350     $ 611,750     $ 29,633     $ 1,962,597     $ 1,932,964  

 

 

The 2017 NPA Notes:

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 November 30, 2021, and May 31, 2021, the outstanding balance was $0, respectively.

 

 

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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 November 30, 2021.

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 $5,125 and $13,012 and $13,012 during the three and six months ended November 30, 2021, respectively, and, $12,871 and $25,754 during the three and six months ended November 30, 2020, respectively on the 2017 NPA Notes.

 

On October 8, 2021, the Note holder converted the full balance of the 2017 NPA Notes of $914,896, including accrued interest of $177,396, into 9,148,960 shares of the Company’s common stock at $0.05 per share, and 457,448 of the Company’s Preferred C shares. The Note has been considered paid in full by the conversions.

 

As of November 30, 2021, and May 31, 2021, the outstanding principal balance of the 2017 NPA Notes was $0 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 2nd Note Offering shall mature one year from the date of issuance (the “Maturity Date”), shall accrue interest at the simple rate of 7% per annum, and are convertible, at the holder’s option, prior to the Maturity Date into that number of shares of the Company’s common stock, equal to the lower of (i) $1.50 per share of common stock, or (ii) that number of shares of common stock equal to the average closing price of the Company’s common stock as reported on the OTC Markets for the preceding 30 trading days prior to the date of conversion, multiplied by 0.65 (the “Conversion Price”); provided, however, in the event the Conversion Price is calculated based on (ii) above, the Conversion Price shall not be lower than $1.00 per share of common stock. All amounts due under the terms of the Notes shall be secured by a continuing security interest in substantially all of the assets of the Company. As additional consideration for the issuance of the notes issued under the 2nd Note Offering, the Company issued one (1) restricted share of the Company’s common stock to each note holder for each $1 invested, which was recorded as deferred finance cost.

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  

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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. 

Effective as of June 17, 2021, The Company settled litigation with Gankaku Living Trust (“Gankaku”), Gankaku Living Trust v. Life on Earth, Inc., Case No. 655189/2019 (New York Supreme Court) (the “Settlement”) in connection with Gankaku’s complaint on September 12, 2019, claiming a breach of contract and default upon a Note. The Settlement provides that Gankaku file with the Court a Satisfaction of Judgment and Stipulation of Discontinuance, which stipulation was filed by Gankaku on June 24, 2021. This Settlement does not involve the issuance of any additional shares to Gankaku as part of the settlement amount.  The Settlement settles all matters pertaining to the Gankaku complaint and litigation, and we no longer owe Gankaku any further consideration. As per the Settlement Agreement, both parties mutually released one another from any and all claims. As a result of this settlement, the Company paid Gankaku $100,000 of principal and $21,976 of accrued interest.

The Company recorded interest expense of $1,447 and $4,950 for the three and six months ended November 30, 2021, and 2020, respectively, and, $6,520 and $13,111 for the three and six months ended November 30, 2020, respectively. The total amount of accrued and unpaid interest expense on the Second Note Offering as of November 30, 2021 and May 31, 2021 was $0 and $40,693, respectively.

 

On October 8, 2021, the Second Offering Note holders converted the full balance of their Notes of $225,643, including accrued interest of $45,643, into an aggregate of 2,098,181 shares of the Company’s common stock at prices ranging from $0.05 per share to $0.10 per share, 43,102 of the Company’s Preferred C shares and cash payments totaling $27,002. As a result of this transaction, the Company recorded finance costs of $8,791. The Second Offering Notes have been considered paid in full by the conversions. As of January 14, 2022, the Company has not paid the cash payment due under the conversion agreements.

 

As of November 30, 2021, and May 31, 2021, the outstanding principal balance of the Second Note Offering Notes was $27,002 and $280,000, respectively.  

 

The 2022 Notes:

 

On June 7, 2021, the Company issued a Convertible Promissory Note, in the principal amount of $55,000 which matures on June 7, 2023. The note bears interest at an annual rate of 8% which is due on maturity. The note was issued with a 10% original issue discount. The note may be converted into the Company’s common stock at a conversion price equal to $0.10 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 ten (10) trading days immediately prior to but not including the conversion date, whichever is lower (the “Conversion Price”). The Company recorded interest expense of $1,097 and $1,025 during the three and months ended November 30, 2021, respectively.

 

On October 6, 2021, the Company issued a Convertible Promissory Note, in the principal amount of $10,000 which matures on October 6, 2022. The note is unsecured, bears interest at an annual rate of 10% and has maturity date of October 6, 2022. As consideration for the Note, the Company issued 200,000 of the Company’s common stock at $0.821. As a result of this transaction, Company recorded $16,420 as a capitalized deferred financing cost and during the three and six months ended November 30, 2021, the Company recorded amortization expense of $2,053 and $2,053, respectively. During the three and six months ended November 30, 2021, the Company recorded interest expense of $151 and $151, respectively. On November 30, 2021, accrued interest on the note amounted to $151.

 

As of November 30, 2021, and May 31, 2021, the outstanding principal balance of the 2022 Notes was $65,000 and $0, respectively.  

 

The 2021 Notes:

On March 19, 2021, the Company issued three (3) convertible Notes to three (3) investors. The aggregate principal amount of the Notes is $77,000, which includes an original issue discount (“OID”) amount that totals $7,000. The OID was recorded as a finance cost on the date the Note were issued.

The 2021 Notes bear interest at an annual rate of 8% and each has a maturity date of December 19, 2021. As consideration for the 2021 Notes, the Company issued 450,000 shares of the Company’s common stock at prices ranging from $0.84-$0.85 per share. As a result of this transaction the Company recorded deferred finance costs of $38,100 during the year ended May 31, 2021, which is being amortized over the life of the note. The Company recorded amortization expense of $12,700 and $25,4000 during the three and six months ended November 30, 2021, respectively. As of November 30, 2021 and May 31, 2021, the amount of unamortized capitalized finance costs amounted to $4,233 and $29,633, respectively. As of November 30, 2021 and May 31, 2021, the outstanding balance of the 2021 Notes was $77,000 and $77,000, respectively. 

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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 has been fully amortized over the life of the note. 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 $5,485 and $11,030 during the three and six months ended November 30, 2021, respectively, and $4,804 and $10,808 during the three and six months ended November 30, 2020, and 2020. As of November 30, 2021, and May 31, 2021, the outstanding balance of the Note 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 cost totaling $159,674, which is being amortized over the life of the note. During the years ended May 31, 2021, and 2020, the Company recorded amortization of the deferred finance cost of $59,879 and $99,795, respectively. Also, the Company recorded credit changes in the fair value of the derivative liability of $1,070 and $10,516 during the years ended May 31, 2021 and 2020, respectively. The Company recorded interest expense of $26,713 and $19,765 during the years ended May 31, 2021 and 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.

On July 19, 2021, The Company and the note holder agreed to settle the outstanding balance of the 10% Convertible Redeemable Note whereby the note holder converted $213,878 of the note at the note’s applicable conversion price (10%) into 2,138,775 shares of the Company’s common stock and the remaining balance of the note ($111,665) was satisfied via the Company’s cash payment of $45,331 to be paid upon the closing of the borrower’s Series C Preferred financing and the Company issued the note holder, 66,333 shares of the Company’s Series C Preferred Shares. As of January 14, 2022, the company has not paid the cash payment due under the conversions, the amount due has been recorded in accrued expenses as of November 20, 2021.

As of November 30, 2021, and May 31, 2010, the outstanding balance was $0 and $275,500, respectively. 

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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, all of which has been fully amortized over the life of the note. As of November 30, 2021, the Company had not paid any of the monthly installments.

On October 8, 2021, the Note holder converted the full balance of the Note of $131,350 into an aggregate of 1,312,500 shares of the Company’s common stock at $0.05 per share, and 65,625 of the Company’s Preferred C shares. The Note has been considered paid in full by the conversions.

 

As of November 30, 2021 and May 31, 2021, the outstanding balance of the note was $0 and $131,250, respectively.

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 November 30, 2021.

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 year ended May 31, 2021. On May 20, 2021, the Company and the noteholder reached a settlement agreement whereby the Company agreed to pay the noteholder $24,000 and the noteholder would convert $260,000 of the principal and accrued interest of the note into 2,600,000 shares of the Company’s common stock. The shares were issued on June 2, 2021, and as of November 30, 2021, the Company has not paid the $24,000 due under the agreement. The outstanding balance of the note at November 30, 2021 and May 31, 2021 was $122,980 and $122,980, respectively.

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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 SN, 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 fully amortized as of August 31, 2021.

 

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 represented 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 six months ended November 30, 2021, the Company recorded interest expense of $10,248 and $20,609, respectively. As of November 30, 2021 and May 31, 2021, the outstanding balance of the note was $228,368 and $228,368, respectively.

 

As of November 30, 2021, future principal payments of the convertible notes payable were approximately as follows:

 

For the twelve months ending November 30,    
         
2022   $ 630,350  

 

 

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Note 12 – LINES OF CREDIT

 

In April 2017, the Company entered 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 November 30, 2021, the aggregate outstanding balance was $33,494. On May 31, 2021 the aggregate outstanding balance was $37,849.

 

Note 13 – CAPITAL STOCK

 

As of November 30, 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. At November 30, 2021 there were 1,300,000 shares of Series A preferred stock outstanding; 100,000 shares of shares of Series B preferred stock outstanding; and, 1,135,224 shares of Series C preferred stock outstanding and, pursuant to the SA acquisition agreement, 210,000 shares of the Company’s preferred D shares were issued and 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 and, 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

 

Pursuant to the provisions of Section 151 of the Delaware General Corporation Law, the Company created new Preferred Series classes of shares 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 three hundred thousand shares (1,300,000), $0.001 par value share. On April 22, 2020, the Company designated a 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. On December 8, 2020, the Company designated a new Series C Preferred are for a total of three million shares (3,000,000), $0.001 par value per share, to be designated as Series C Preferred Stock. On May 10, 2021, the Company designated a new Series D Preferred are for a total of two hundred ten thousand shares (210,000), $0.001 par value per share, to be designated as Series D Preferred Stock. 

 

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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.

 

 

Preferred shares outstanding
Preferred Shares
  November 30, 2020
    Shares Outstanding
Fernando Oswaldo Leonzo     600,000  
Robert Gunther     300,000  
Jerry Gruenbaum     100,000  
John Romagosa     200,000  
Mahmood Kahn     100,000  
Total     1,300,000  

 

 

 

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.

 

Dividends - The Company shall pay the holders of Series B Preferred Stock a 10% annual cash dividend paid quarterly.

 

         
The number of Preferred Series B shares outstanding as of November 30, 2021, were:
Holder   Number of Shares
J.Craig Holding Corp.     50,000  
Massoud Toghraie     25,000  
John Romagosa     25,000  
Total     100,000  

  

 

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Series C Preferred Stock

 

The Company has designated 3,000,000 shares of Series C Preferred Stock, par value $0.001 per share.

 

The Series C Preferred Stock does not have liquidation preferences. The Series C Preferred Stock has no voting rights except to the extent that they hold Common Stock Shares from conversion, in which case each Common Stock share will be equal to one vote. The Company shall pay the holders of Series C Preferred Stock a 10% annual cash dividend paid quarterly., $1,135,224 of our Series C Preferred Stock are issued and outstanding.

 

 

Preferred C Shares - Outstanding as of November 30, 2021:    
Holder:    
Dr. Anshu Sharma, M.D.     150,000  
Mahmood Kahn, Company CEO     111,000  
Rafael Collado     50,000  
Axon Capital Management, Inc.     28,000  
W. S. Gamble     20,000  
Quick Capital     100,000  
Odyssey Funding LLC     66,333  
Juan Romagosa, Company President     43,708  
Shircoo     481,804  
Robert Ley     9,612  
Jesus Rodriguez     9,142  
Masoud Toghraie     65,625  
 Total     1,135,224  

   

Series D Preferred Stock

 

We have designated 210,000 shares of Series D Preferred Stock, par value $0.001 per share. As of November 30, 2021, 210,000 shares of our Series D Preferred Stock are issued and outstanding.

 

The Series D Preferred Stock does not have liquidation preferences. The Series D Preferred Stock has no voting rights except to the extent that they hold Common Stock Shares from conversion, in which case each Common Stock share will be equal to one vote. Each share of the Series D preferred stock converts into 10 shares of the Company’s common stock. The Series D Preferred Stock pays no dividend.   

 

The number of Preferred Series D shares outstanding as of November 30, 2021 were:        
Holder   Number of Shares
Amit Biyana     128,822  
Twenty-two (22) minority shareholders of Smart Axiom, as a group     81,178  
Total     210,000  

  

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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 six months ended November 30, 2021 and 2020 the Company issued 1,502,775 and 0 shares, respectively.

 

 

Warrants

 

Warrants outstanding

        November 30, 2021       November 30, 2020
        Weighted       Weighted
        Average       Average
    Warrants   Exercise price   Warrants   Exercise price
Exercisable – June 1,     149,000     $                4.25       349,000     $ 4.25  
Exercised              —         —         —    
Expired     149,000     4.25        —         —    
Outstanding     -        -       349,000     $ 4.25  
                                 
Exercisable – at end of period     -               349,000     $ 4.25  

 

  

 

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Note 14 - COMMITMENTS AND CONTINGENCIES

 

In connection with the acquisition of ESD, the Company assumed a lease for approximately 13,000 square feet of warehouse space located in Gilroy, California at a base rent of $5,248 per month. The lease terminates on June 30, 2021. In addition, the Company entered into an employment agreement with a general manager, for a period of one year at a cost of $58,000. The employment agreement expired in July 2017. During the year ended May 31, 2020, the Company shut down ESD’s operations. As part of this shut down, the Company and the landlord agreed to find a new tenant for the facility. The landlord has leased the property to a third party and the Company’s obligation under the lease ended effective August 1, 2019.

 

Rent expense for the six months ended November 30, 2021 and 2020, respectively, totaled $10,550 and $565, respectively.

 

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 August 17, 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, as a result of receiving the Complaint.  

 

On October 21, 2021, a judgement was entered against the Company and in favor of the former employee. Under the terms of the judgement, the Company shall, (i) pay the former employee a total of $60,000 of scheduled payments, (ii) issue the former employee 500,000 shares of the Company’s common stock at $0.10 per share and, (iii) pay legal fees of up to $8,923 in scheduled payment to the former employee’s attorney. The 500,000 shares of the Company’s common stock were issued to the former employee on October 21, 2021 and as of November 30, 2021, the Company is current in their payments with respect to the judgement.

 

On March 23, 2021, the Company and Redstart Holdings Corp (“Redstart”) settled litigation in connection with a complaint by Redstart in the Supreme Court of Nassau County, New York alleging events of default under the terms of 2 Convertible Notes of which Redstart was the Holder. In connection with settlement of the litigation, Redstart filed a motion to dismiss their complaint against the Company with prejudice, which settles all matters pertaining to the Redstart litigation and complaint. The Company no longer owes Redstart any further consideration. As per the Settlement Agreement, both parties mutually released one another from any and all claims.

 

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. 

  

 

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Note 15 - INCOME TAXES

 

The deferred tax attributes consist of the following:

 

    November 30, 2021   May 31, 2021
Net operating loss carryforward   $ 5,029,000     $ 4,743,000  
Stock based compensation     1,392,000       1,327,000  
Valuation allowance     (6,421,000 )     (6,070,000 )
Deferred tax asset, net   $        $     

 

During the six months ended November 30, 2021, the valuation allowance increased by approximately $351,000.

 

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        
    November 30, 2021   May 31, 2021
Federal Rate     21 %     21 %
State Rate     6 %     6 %
Valuation Allowance     (27 )%     (27 )%
Effective income tax rate     0 %     0 %

 

As of November 30, 2021, the Company has net operating loss carryforwards of approximately $17,800,000 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 - RELATED PARTY TRANSACTIONS

 

In October 2013, the Company signed a distribution agreement with Gran Nevada Beverage, Inc. (“Gran Nevada”), an entity related through common management and ownership. During the six months ended November 30, 2021, and 2020, the Company sold $0 and $0 respectively. These products were produced by a third party copacker and were not purchased from Gran Nevada. The availability of third party copackers that can produce an Horchata are limited, and it directly impacts sales. As there is currently no co-packing available for this product the Company does not know if they will be able to produce this product again in the future.

 

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Note 17 - SUBSEQUENT EVENTS

 

During the period December 1, 2021, through January 14, 2021, the Company issued 0 shares of its common stock.

 

On December 17, 2021, the Company entered into a Stock Purchase Agreement (the “Agreement”) with CareClix Holdings, Inc., a Florida corporation (“SOLI”). On December 31, 2031, under the terms of a Management Operating Agreement, we agreed to a partial closing of the transaction set forth in the SPA (the “Transaction”) with the final closing to occur on the effectiveness of a registration statement for the Company’s shares to be issued as part of the consideration.

 

In the partial closing, the Company acquired 100% ownership of the operating subsidiaries of SOLI, which include CareClix, Inc., a Virginia corporation, CareClix Services, Inc., a Florida corporation, MyCareClix, Inc., a Florida corporation, and CareClix RPM, Inc., a Florida corporation (collectively, the “CareClix Group”), in exchange we will issue the following securities to the common shareholders of SOLI:

 

50,000,000 shares of the Company’s common stock; and shares of a new class of preferred stock to be designated as Series E Preferred Stock. The shares of Series E Preferred stock to be designated and issued to the shareholders of CareClix shall be up to approximately 2,100,000 Series E Preferred shares with a convertibility ratio, under the current share structure, of 100 to 1 into our shares of common stock with conversion occurring automatically when our Articles of Incorporation have been amended to authorize sufficient common shares for the conversion.

 

4,000,000 shares of the Company’s Series A Preferred Stock, over a period of time, to Mr. Charles Scott, the Chairman and majority shareholder of SOLI, with 2,500,000 shares issued at the December 31, 2021 partial closing, 600,000 shares to be issued 45 days after closing, and 900,000 shares to be issued 90 days after closing. Shares of the Company’s Series A Preferred Stock, which are not convertible and do not receive dividends, are entitled to cast 50 votes per share on all matters submitted to the vote or consent of the Company’s shareholders.

 

Upon the final closing of the Transaction, the former shareholders of SOLI will hold approximately seventy percent of the Company’s issued and outstanding common equity on a fully diluted basis and will hold the majority of the Company’s total shareholder voting power.

 

The final closing of the Transaction is subject to the effectiveness of a registration statement on Form S-4 to be filed registering the issuance of the Company’s shares of common stock and issuance of the Company’s shares of Series E Preferred Stock to the common shareholders of CareClix. The Company is undertaking to file the S-4 registration statement, which will be filed as soon as a pending audit of the financial statements of the acquired CareClix companies is completed.

 

Pending the final Closing, SOLI and the Company will complete the operational changes under a Management Operating Agreement effective December 31, 2021, so that the CareClix Group and the Company can begin acting as a unit pending the effective date of the S-4 registration statement and issuance by the Company of the remainder of the agreed consideration. In the event that the final closing is not completed by May 31, 2022, unless extended by agreement, then the partial closing will be rescinded, and the CareClix Group will be returned to SOLI.

 

As part of the partial closing of the transaction, 2,500,000 shares of Series A voting preferred stock of LFER were issued to the current majority shareholder of the Company as part of the consideration.  

 

 

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ITEM 2. MANAGEMENT’S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD LOOKING STATEMENTS

 

This Form 10-Q contains forward-looking statements rather than historical facts that involve risks and uncertainties. You can identify these statements by the use of forward- looking words such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue” or other similar words. Such forward-looking statements discuss our current expectations of future results of operations or financial condition. However, there may be events in the future that we are unable to accurately predict or control and there may be risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements, which could have a material adverse effect on our business, operating results and financial condition. The forward-looking statements included herein are only made as of the date of the filing of this Form 10-Q, and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

 

BASIS OF PRESENTATION

 

The unaudited condensed consolidated financial statements of Life On Earth, Inc. (the “Company,” “our” or “we”), should be read in conjunction with the notes thereto. In the opinion of management, the unaudited condensed consolidated financial statements presented herein reflect all adjustments (consisting only of normal recurring adjustments) necessary for fair presentation. Interim results are not necessarily indicative of results to be expected for the entire year.

 

We prepare our financial statements in accordance with accounting principles generally accepted in the United States of America, which require that management make estimates and assumptions that affect reported amounts. Actual results could differ from these estimates.

 

COMPANY OVERVIEW

 

Life On Earth, Inc. is a cloud enterprise software developer/ provider that enables rapid innovation to keep enterprise operations safe, compliant and manageable. The Company’s products offered are designed to help organizations innovate and modernize legacy systems while minimizing cost and risk of business disruptions and ensure regulatory compliance. Through its recent acquisition of SmartAxiom, Inc., the Company now has the capabilities of offering software that manages and secures the Internet-of-Things (IoT) through patented, lite blockchain technology running among those devices at the edge of the Internet and enabling them to defend themselves. Our peer-to-peer distributed ledgers improve security, latency, reliability and manageability. We have uniquely created, through our SmartAxiom subsidiary, the endpoint-to-cloud blockchain solution, while our IoT Smart Contracts allow for process intelligence and management of the process. The SmartAxiom technology is proving value in verticals such as smart buildings, manufacturing lines and shipment tracking. It interoperates with enterprise systems such as IBM Blockchain and Microsoft Azure and is proven on many ARM and Intel based microcontrollers such as those from Intel, NXP, Renesas, Marvell, and Broadcom.

 

The Company previously was a brand accelerator and incubator Company that was focused on building and scaling concepts in the natural consumer products category (“CPG”). During the year ended May 31, 2021, the Company discontinued the wholesale beverage distribution operations, and the Company announced its intention divest away from its business as a Consumer-Packaged Goods (“CPG”) Company. Accordingly, the Company’s results of operations for the year ended May 31, 2020, reflect a charge in the aggregate amount of $786,436,

 

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. and 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 and, on that date, the reverse stock split became effective. All share and per share information has been retroactively adjusted to reflect the impact of this reverse stock split.  

 

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Life On Earth, Inc. was incorporated in April 2013. 

 

On May 11, 2021, LFER acquired SmartAxiom with all their assets including intellectual properties, Patents and core Internet of Things (IoT) software that enables securing sensor devices and communication to the cloud-based software. The agreed purchase price was $6,250,000 paid as follows: (a) $1,950,000 by issuing 13,000,000 shares of the Company’s common stock, upon closing; (b) $2,100,000 by issuing 210,000 shares of the Company’s Series D convertible preferred shares (each share of the Company’s Series D convertible preferred is convertible into 10 shares of the Company’s common stock); and, (c) $2,200,000 to be paid pursuant to a full earnout based on SmartAxiom GAAP revenue recognition in the amount of $1,500,000 within the first eighteen months after closing date of the acquisition. The earnout will be prorated based on the SmartAxiom revenues received over an eighteen-month period.  

 

Pending Acquisition of the CareClix Group

On December 17, 2021, we entered into a Stock Purchase Agreement (the “Agreement”) with CareClix Holdings, Inc., a Florida corporation (“SOLI”). On December 31, 2031, under the terms of a Management Operating Agreement, we agreed to a partial closing of the transaction set forth in the SPA (the “Transaction”) with the final closing to occur on the effectiveness of a registration statement for the shares to be issued as part of the consideration.

In the partial closing, we acquired 100% ownership of the operating subsidiaries of SOLI, which include CareClix, Inc., a Virginia corporation, CareClix Services, Inc., a Florida corporation, MyCareClix, Inc., a Florida corporation, and CareClix RPM, Inc., a Florida corporation (collectively, the “CareClix Group”). In exchange for ownership of the CareClix Group, we will issue the following securities to the common shareholders of SOLI:

· 50,000,000 shares of our common stock; and shares of a new class of preferred stock to be designated as Series E Preferred Stock. The shares of Series E Preferred stock to be designated and issued to the shareholders of CareClix shall be up to approximately 2,100,000 Series E Preferred shares with a convertibility ratio, under the current share structure, of 100 to 1 into our shares of common stock with conversion occurring automatically when our Articles of Incorporation have been amended to authorize sufficient common shares for the conversion.
· 4,000,000 shares of our Series A Preferred Stock, over a period of time, to Mr. Charles Scott, the Chairman and majority shareholder of SOLI, with 2,500,000 shares issued at the December 31, 2021 partial closing, 600,000 shares to be issued 45 days after closing, and 900,000 shares to be issued 90 days after closing. Shares of our Series A Preferred Stock, which are not convertible and do not receive dividends, are entitled to cast 50 votes per share on all matters submitted to the vote or consent of our shareholders.

Upon the final closing of the Transaction, the former shareholders of SOLI will hold approximately seventy percent of our issued and outstanding common equity on a fully diluted basis and will hold the majority of our total shareholder voting power.

The final closing of the Transaction is subject to the effectiveness of a registration statement on Form S-4 to be filed registering the issuance of our shares of common stock and shares of Series E Preferred Stock to the common shareholders of CareClix. We are undertaking to file the S-4 registration statement, which will be filed as soon as a pending audit of the financial statements of the acquired CareClix companies is completed.

Pending the final Closing, SOLI and LFER will complete the operational changes under the Management Operating Agreement effective December 31, 2021, so that the CareClix Group and LFER can begin acting as a unit pending the effective date of the S-4 registration statement and issuance by LFER of the remainder of the agreed consideration. In the event that the final closing is not completed by May 31, 2022, unless extended by agreement, then the partial closing will be rescinded and the CareClix Group will be returned to SOLI. Following the final Closing, there will be no affiliation, as shareholder, debtor, creditor or otherwise, between SOLI and LFER.

As part of the partial closing of the transaction, 2,500,000 shares of Series A voting preferred stock of LFER were issued to the current majority shareholder of the Company as part of the consideration.

We are acquiring the CareClix Group in order to expand into the Telemedicine and Medical Software Services industry. The group of companies under the CareClix Group will operate as our wholly owned subsidiaries and include a telemedicine medical services company, a direct-to-consumer company, a software-as-a-platform company, and an RPM (remote patient monitoring) company.

 

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Our principal executive offices are located at 1345 6th Ave. 2nd Floor, New York NY 10022 and our telephone number (646) 844-9897.

 

Coronavirus Risks 

 

In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China, which has and is continuing to spread throughout China and other parts of the world, including the United States. On January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease (COVID-19) a “Public Health Emergency of International Concern.” On January 31, 2020, U.S. Health and Human Services Secretary Alex M. Azar II declared a public health emergency for the United States to aid the U.S. healthcare community in responding to COVID-19, and on March 11, 2020 the World Health Organization characterized the outbreak as a “pandemic”.

 

The ultimate extent of the impact of any epidemic, pandemic or other health crisis on our business, financial condition and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of such epidemic, pandemic or other health crisis and actions taken to contain or prevent their further spread, among others. The significant outbreak of COVID-19 has resulted in a widespread health crisis that has adversely affected the economies and financial markets worldwide, and may continue to do so, which could adversely affect our business, results of operations and financial condition. 

Sales and Distribution

 

The Company markets and sells its logistics solutions based on proprietary patented technologies. The logistics solution consists of a multi-tenant cloud system managing BlockTracker cellular tracking devices, which sense location, temperature, vibration, pressure and light level. The device can also act as a gateway and connect to additional nearby sensors via Bluetooth Low Energy (BLE). It has one temperature logger per box and reports to one BlockTracker per installed box. The management system, built with SmartAxiom’s Tenacious cloud backend, shows shipment location and condition, and notifies by short messaging service (SMS) when monitored parameters like temperature, humidity, light, vibration etc. exceed configured parameter, has geofencing and tools to activate devices and assemble shipments. The company has developed complete end-to-end solution for multiple industries with Supply Chain Management, Warehouse and Asset Management, and Industrial IoT solutions. These solutions are targeted to serve the fastest-growing IoT base edge computing, mobility (tracking and visualizing distributed assets) and manufacturing industry IoT solution markets. The Company also provides custom solution services to adopt and integrate its standard solution to customer environments and specification through its consulting, integration and support services group. The custom solutions focus is solving customers’ cyber security and vulnerabilities in their IoT business environment with patented IoT technologies. 

  

Production and Distribution

 

The Company strategy is to create end-to-end solution and partner with platform technologies providers and system integrators. Our focus is to develop solutions and provide customization, integration and support to our partners. We have a small team of highly technical and experienced personnel to support our various partners that include Renesas (our IoT platform partner), Amazon & Microsoft (our Cloud platform partners), IBM (Block Chain software partner) and several system integrators and technologies providers. Our primary software development is conducted in California, USA. We also have an offshore development and support center in India. In addition, we have expert resources in Dublin, Ireland.

 

Competition 

 

Our SmartAxiom product line has multiple competitors for Internet of things (IoT) security technologies, which include Mocana, DeviceAuthority, Xage and Atonomy. However, these vendors do not address the distributed block chain technologies, nor do they have any rival patents in this space. In the logistics industry there are literally hundreds of competitors. Our competitors have greater operational histories, financial resources and personnel than we do. On the other hand, we have a comprehensive solution protected by our patented technologies such as the edge security software with distributed blockchain security for IoT devices.

 

The Company’s solution differentiators and advantage of our technologies-based solution is the robust end-to-end solution.

 

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Government Regulation

 

There are no government regulations that we need to adhere to support IoT solutions.

 

Employees

 

The Company currently has three full-time employees, as follows: a CEO, COO, and President, and its wholly owned subsidiary, SmartAxiom, Inc., has 6 full-time employees and 8 subcontractors and services providers.

 

Certain positions, such as senior sales executives, solution architects and customer support for both the Company and its wholly owned subsidiary, are being filled with paid independent contractors or insider owners who do not receive cash compensation but may receive stock compensation. In certain regions of the United States, we utilize the services of direct sales and distribution companies. The Company also outsources its logistics to third parties, which can reduce the need for employees in these roles.

 

Intellectual Property Protection

The Company has secured a registered trademark for its name and logo. The Company also has trademarks registered for the Victoria’s Kitchen and Just Chill brands. No Trademarks have been filed to date with respect to SmartAxiom.  SmartAxiom owns two issued patents U.S. Patent No. 10,924,466 (System and method for IOT security) and 11,032,293 (System and method for managing and securing a distributed ledger for a decentralized peer-to-peer network).  These patents will expire at on May 2, 2039 and December 8, 2039.

 

The Company has secured a registered trademark for its name and logo. The Company also has trademarks registered for the Victoria’s Kitchen and Just Chill brands.

 

Issued Patents

The Company has 3 currently pending patent applications and 2 issued patents as stated below:

1.       Patent No. 11,032,293 – June 8, 2021 (same as application no. 16/272,358 and publication no. 2019-0253434 A1 published 8/15/2019).  Title –
SYSTEM AND METHOD FOR MANAGING AND SECURING A DISTRIBUTED LEDGER FOR A DECENTRALIZED PEER-TO-PEER NETWORK

a.     Currently pending Continuation application of above issued patent - 17/340,928 – filed 6/7/2021 Title –
SYSTEM AND METHOD FOR MANAGING AND SECURING A DISTRIBUTED LEDGER FOR A DECENTRALIZED PEER-TO-PEER NETWORK

 

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2.      Patent No.: US 10,924,466 B2, Pub. Date of Patent: Feb.16,2021 (same as application no. 16/048,140 and publication no. 2029-0036906 A1 Published 1/31/2019)

a.    Currently pending Continuation application of above issued patent – Application No. 17/169,356 (same as publication no. 2021-0160233 A1 published February 5, 2021) title - SYSTEM AND METHODS FOR IOT SECURITY

 

Published not issued yet patent applications.

 

3.    Published Patent Number: US 2019/0273623 Al, Pub. Date: Sep. 5, 2019 – currently pending no issued.  Title - Systems and Methods for a Blockchain Multi-Chain Smart Contract Time Envelope.  

 

GOING CONCERN QUALIFICATION

 

Several conditions and events cast substantial doubt about the Company’s ability to continue as a going concern. The Company incurred net losses from inception of approximately $19,700,000, has limited revenues, and requires additional financing in order to finance its business activities on an ongoing basis. The Company’s future capital requirements will depend on numerous factors including, but not limited to, whether it successfully acquires revenue generating companies or assumes new businesses that generate material revenues.

 

At November 30, 2021, we had cash on hand of approximately $42,000 and an accumulated deficit of approximately $19,700,000. See “Liquidity and Capital Resources.”

 

CRITICAL ACCOUNTING POLICIES AND ESTIMATES 

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make judgments, assumptions and estimates that affect the amounts reported in our financial statements and accompanying notes. The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form our basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, or if management made different judgments or utilized different estimates. Many of our estimates or judgments are based on anticipated future events or performance, and as such are forward-looking in nature, and are subject to many risks and uncertainties, including those discussed below and elsewhere in this Report. We do not undertake any obligation to update or revise this discussion to reflect any future events or circumstances. There are certain critical accounting estimates that we believe require significant judgment in the preparation of our consolidated financial statements. We have identified below our accounting policies that we use in arriving at key estimates that we consider critical to our business operations and the understanding of our results of operations. This is not a complete list of all of our accounting policies, and there may be other accounting policies that are significant to us. For a detailed discussion on the application of these and our other accounting policies, see Note 1 to Consolidated Financial Statements of this Report.

 

 

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Revenue Recognition

 

The Company recognizes revenue under ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” (“ASC 606”). The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Company only applies the five-step model (as described in Note 1 to the Consolidated Financial Statements of this Report) 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.

Revenue consists of the gross sales price, less allowances for which provisions are made at the time of sale, and less certain other discounts, allowances, and rebates that are accounted for as a reduction from gross revenue. Costs incurred by the Company for shipping and handling charges are included in cost of goods sold.

Goodwill and Intangible Assets

 

Goodwill represents the excess of the purchase price of acquired businesses over the estimated fair value of the identifiable net assets acquired. Goodwill and other intangibles are reviewed for impairment annually or more frequently when events or circumstances indicates that the carrying value of a reporting unit more likely than not exceeds its fair value. The goodwill impairment test is applied by performing a qualitative assessment before calculating the fair value of the asset. If, on the basis of qualitative factors, it is considered more likely than not that the fair value of the asset is greater than the carrying amount, further testing of goodwill for impairment is not required. If the carrying amount of the asset exceeds the asset’s fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that asset. Identifiable intangible assets acquired in business combinations are recorded at the estimated acquisition date fair value. Finite lived intangible assets are amortized over the shorter of the contractual life or their estimated useful life using the straight-line method, which is determined by identifying the period over which the cash flows from the asset are expected to be generated. As part of the Company’s annual review of goodwill and intangibles we performed a detail analysis of the intangibles recorded as they relate to the acquisitions of JC and VK. Based on this analysis, the Company recorded an impairment charge of $299,000 related to the JC acquisition as of May 31, 2020. The Company also wrote off the goodwill recorded in the VK acquisition, in the amount of $195,000.

 

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Off-Balance Sheet Arrangements

 

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

  

Inflation

 

The amounts presented in the financial statements do not provide for the effect of inflation on our operations or financial position. The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.

 

RESULTS OF OPERATIONS

 

FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND NOVEMBER 30, 2020:

 

Sales

 

Sales for the three months ended November 30, 2021 were approximately $55,000 compared to $0 for the three months ended November 30, 2020, as a result of sales by our SA subsidiary.

 

Operating Expenses

 

Operating expenses totaled approximately $695,000 for the three months ended November 30, 2021 as compared to approximately ($35,000) for the three months ended November 30, 2020. The increase in operating expenses of $730,000 was primarily related to the acquisition of SA and consisted of several factors, including, increased professional fees of $70,000, increased salaries and benefits of $78,000, increased other selling, general and administrative expenses of $30,000 and increased amortization of $267,000, and, increased officers compensation of $285,000.

 

Other Expense

 

During the three months ended November 30, 2021, the Company recorded interest and financing costs of approximately $171,000 as compared to approximately $263,000 during the three months ended November 30, 2020. Interest and financing costs primarily result from the amortization of deferred financing balances that were incurred by the Company to finance operations.

 

Net Loss

 

For the three months ended November 30, 2021, we incurred a net loss of $811,450, compared to a net loss of $344,585 for the three months ended November 30, 2020. 

 

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FOR THE SIX MONTHS ENDED NOVEMBER 30, 2021 AND NOVEMBER 30, 2020:

 

Sales

 

Sales for the six months ended November 30, 2021 were approximately $81,000 compared to $25,000 for the six months ended November 30, 2020, as a result of increased sales by our SA subsidiary.

 

Operating Expenses

 

Operating expenses totaled approximately $1,274,000 for the six months ended November 30, 2021 as compared to approximately $247,000 for the six months ended November 30, 2020. The increase in operating expenses of $1,027,000 was primarily related to the acquisition of SA and consisted of several factors, including, increased professional fees of $99,000, increased officers’ compensation of $233,000, increased salaries and benefits of $117,000, increased other selling, general and administrative expenses of $48,000 and increased amortization of $532,000.

 

Other Expense

 

During the six months ended November 30, 2021, the Company recorded interest and financing costs of approximately $330,000 as compared to approximately $353,000 during the six months ended November 30, 2020. Interest and financing costs primarily result from the amortization of deferred financing balances that were incurred by the Company to finance operations. During the six months ended November 30, 2021, the Company recorded a credit for the fair value of contingent consideration of $352,000 as compared to charge of $60,000 during the three months ended November 30, 2020, related to the acquisition of Just Chill, which had arisen from the measurement of LFER stock on the 12-month anniversary of the acquisition and subsequent Balance Sheet reporting dates. The contingency shares were issued to the JCG Group during the six months ended November 30, 2021. During the six months ended November 30, 2021, the Company recorded a credit for the fair value of derivative liability of $111,000 as compared to a charge of $56,000 during the six months ended November 30, 2020. During the six months ended November 30, 2021, the underlying note of the derivative liability has been converted to 2,138,775 shares of the Company’s common stock and the Company no longer has an obligation for the derivative liability. 

 

Net Loss

 

For the six months ended November 30, 2021, we incurred a net loss of $1,060,065, compared to a net loss of $717,202 for the six months ended November 30, 2020.   

 

LIQUIDITY AND CAPITAL RESOURCES  

 

As of November 30, 2021, we held current assets in the amount of $75,081 consisting of cash and cash equivalents in the amount of $42,369, accounts receivable of $31,033, and prepaid expenses of $1,679. Our current liabilities as of November 30, 2021 totaled $5,492,229, and consisted of accounts payable and accrued expenses in the amount of $2,302,664, an accrued contingent liability related to our acquisition of Smart Axiom in the amount of $2,314,127, notes payable of $87,790, convertible notes of payable of $611,750, and lines of credit in the amount of $33,494. Our working capital deficit as of November 30, 2021 was $5,417,148. Our recent financings have consisted primarily of private issuances of convertible notes and preferred stock.

During the six months ended November 30, 2021, the Company received $158,500 from the sale of 158,500 shares of Series C Preferred Stock and received $88,000 from the issuance of a notes payable to related parties, $61,000 from the sale of Series C Preferred Stock to a related party, and, $65,000 from the issuance of a convertible note payable.

During the year ended May 31, 2021, the Company received $100,000 from the issuance of 100 shares of the Company’s Series B Preferred Stock., and, received $220,000 from the issuance of the 220 shares of the Company’s Series C Preferred Stock. During June 2021, the Company received $170,000 from the issuance of 170 shares of the Company’s Series C Preferred Stock. During the year ended May 31, 2021, the Company received $70,000 from the issuance of convertible notes payable and $30,000 from the issuance of a term note and paid $9,000 of notes payable to related parties.

For the six months ended November 30, 2021, our operating activities used $79,734 in cash, compared to $135,156 during the six months ended November 30, 2020. For the six months ended November 30, 2021, financing activities provided a net $182,797 in cash, compared to a net $134,304 in cash for the six months ended November 30, 2020. Investing activities used $95,323 in cash during the six months ended November 30, 2021, compared to $0 for the six months ended November 30, 2020. Our cash and cash equivalents increased by a net $7,740 during the six months ended November 30, 2021. 

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

ITEM 4. CONTROLS AND PROCEDURES

 

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

 

We maintain disclosure controls and procedures that are designed to ensure the information required to be disclosed in our reports filed pursuant to the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and that such information is accumulated and communicated to our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 

As of November 30, 2021, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and our principal financial officer of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report.

 

The determination that our disclosure controls and procedures were not effective as of November 30, 2021, is a result of not having adequate staffing and supervision within the accounting operations of our Company. The Company plans to expand its accounting operations as the business of the Company expands.

 

MANAGEMENT’S QUARTERLY REPORT ON INTERNAL CONTROLS OVER FINANCIAL REPORTING CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING

 

There have been no changes in our internal controls over financial reporting during the quarter ended November 30, 2021 that have materially affected or are reasonably likely to materially affect our internal controls.

 

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PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

Settlement of Gankaku Litigation

 

Effective as of June 17, 2021, we settled litigation with Gankaku Living Trust (“Gankaku”), Gankaku Living Trust v. Life on Earth, Inc., Case No. 655189/2019 (New York Supreme Court) (the “Settlement”) in connection with Gankaku’s complaint on September 12, 2019 claiming a breach of contract and default upon a Note. The Settlement provides that Gankaku file with the Court a Satisfaction of Judgment and Stipulation of Discontinuance, which stipulation was filed by Gankaku on June 24, 2021. This Settlement does not involve the issuance of any additional shares to Gankaku as part of the settlement amount.  The Settlement settles all matters pertaining to the Gankaku complaint and litigation, and we no longer owe Gankaku any further consideration. As per the Settlement Agreement, both parties mutually released one another from any and all claims.

 

Settlement of Redstart Litigation

 

On March 23, 2021, the Company and Redstart Holdings Corp (“Redstart”) settled litigation in connection with a complaint by Redstart in the Supreme Court of Nassau County, New York alleging events of default under the terms of 2 Convertible Notes of which Redstart was the Holder. In connection with settlement of the litigation, Redstart filed a motion to dismiss their complaint against the Company with prejudice, which settles all matters pertaining to the Redstart litigation and complaint. The Company no longer owes Redstart any further consideration. As per the Settlement Agreement, both parties mutually released one another from any and all claims. 

 

Complaint by Anshu Sharma and Aditya Sharma

 

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.  

 

Complaint by Note Holder

 

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.   

 

Complaint by Former Employee

 

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 is no longer obligated under the terms of the employment agreement. As of August 31, 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, as a result of receiving the Complaint.

 

On October 21, 2021, a judgement was entered against the Company and in favor of the former employee. Under the terms of the judgement, the Company shall, (i) pay the former employee a total of $60,000 of scheduled payments, (ii) issue the former employee 500,000 shares of the Company’s common stock at $0.10 per share and, (iii) pay legal fees of up to $8,923 in scheduled payment to the former employee’s attorney. The 500,000 shares of the Company’s common stock were issued to the former employee on October 21, 2021, and as of November 30, 2021, the Company is current in their payments with respect to the judgement.

 

There are no other legal or governmental proceedings that are presently pending or, to our knowledge, threatened, to which we are a party.  

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ITEM 1A RISK FACTORS

 

As a smaller reporting company, we are not required to include risk factors.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

None.

 

ITEM 4. MINING SAFETY DISCLOSURE

 

None.

 

ITEM 5. OTHER INFORMATION

 

None.

 

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ITEM 6. EXHIBITS

 

Exhibit Number Description
31.1 Certification of the Chief Executive Officer and Chief Financial Officer Pursuant to Rule 13a-14 or 15d-14 of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of the Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS * XBRL Instance Document
101.SCH* XBRL Taxonomy Extension Schema Document
101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF* XBRL Taxonomy Extension Definition Linkbase Document
101.LAB* XBRL Taxonomy Extension Label Linkbase Document
101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document

 

*Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of the registration statement or prospectus for purposes of Sections 11 and 12 of the Securities Act of 1933 or Section 18 of the Securities Act of 1934 and otherwise are not subject to liability.

 

 
47
 

  

 
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  Life On Earth, Inc.  
       
Date: January 14, 2022 By: /s/ Mahmood Alam Khan  
   

Mahmood Alam Khan

Chief Executive Officer and Board of Director

(Principal Executive Officer)

 

 

 

 

 

 

 

 

 

 
48

 

 

EXHIBIT 31.1 – Certification

 

CERTIFICATION PURSUANT TO RULE 13A-14(a) OF THE SECURITIES

EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION

302 OF THE SARBANES OXLEY ACT OF 2002

 

 

I, Mahmood Khan, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Life On Earth, Inc. for the quarter ended November 30, 2021;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact

necessary to make the statements made, in light of the circumstances under which such statements were made,

not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this amended report,

fairly present in all material respects the financial condition, results of operations and cash flows of the small business

issuer as of, and for, the periods presented in this report;

 

4.

The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and

procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting

(as defined in Exchange Act Rules 13a -15(f) and 15d-15(f)) for the registrant and have:

 

  a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed

under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries,

is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be

designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the

preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our

conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during

the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that

has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;

and

 

5.

The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control

over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors

(or persons performing the equivalent functions):

 

  a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial

reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and

report financial information; and

 

  b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in t

he registrant's internal control over financial reporting.

 

  Life On Earth, Inc.  
       
Date: January 14, 2022 By: /s/ Mahmood Khan  
    Mahmood Khan  
    Chief Executive Officer  

 

 

 

EXHIBIT 31.2 – Certification

 

CERTIFICATION PURSUANT TO RULE 13A-14(a) OF THE SECURITIES

EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION

302 OF THE SARBANES OXLEY ACT OF 2002

 

 

I, Fernando Oswaldo Leonzo, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Life On Earth, Inc. for quarter ended November 30, 2021;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material

fact necessary to make the statements made, in light of the circumstances under which such statements were made,

not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this amended report,

fairly present in all material respects the financial condition, results of operations and cash flows of the small business

issuer as of, and for, the periods presented in this report;

 

4.

The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and

procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting

(as defined in Exchange Act Rules 13a -15(f) and 15d-15(f)) for the registrant and have:

 

  a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed

under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries,

is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be

designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the

preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our

conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by

this report based on such evaluation; and

 

  d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the

registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has

materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5.

The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control

over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors

(or persons performing the equivalent functions):

 

  a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial

reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and

report financial information; and

 

  b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the

registrant's internal control over financial reporting.

  

 

  Life On Earth, Inc.  
       
Date: January 14, 2022 By: /s/ Fernando Oswaldo Leonzo  
    Fernando Oswaldo Leonzo  
    Principle Financial Officer  

 

 

EXHIBIT 32.1 – 906 Certification

 

CERTIFICATION PURSUANT TO 18 U.S.C., SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

 

    In connection with the quarterly report on Form 10-Q of Life on Earth, Inc. (the "Company") for the quarter ended November 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

    1.     The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

    2.     The information contained in the Report fairly presents in all material respects the financial condition and results of operations of the Company as of and for the period covered by the Report.

 

  Life On Earth, Inc  
       
Date: January 14, 2022 By: /s/ Mahmood Khan  
    Mahmood Khan  
    Chief Executive Officer  

 

 

  Life On Earth, Inc.  
       
Date: January 14, 2022 By: /s/ Fernando Oswaldo Leonzo  
    Fernando Oswaldo Leonzo  
    Principle Financial Officer  

 

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 ("Section 906"), or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Life on Earth, Inc., and will be retained by Life on Earth, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.